<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-20243
VALUEVISION INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-1673770
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6740 Shady Oak Road, Minneapolis, MN 55344
(Address of principal executive offices)
612-947-5200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
-------------- ----------------
As of September 8, 1999, there were 37,017,684 shares of the Registrant's
common stock, $.01 par value, outstanding.
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VALUEVISION INTERNATIONAL, INC. AND SUBSIDIARIES
FORM 10-Q TABLE OF CONTENTS
JULY 31, 1999
<TABLE>
<CAPTION>
Page of
Form 10-Q
-----------
<S> <C> <C>
Part I FINANCIAL INFORMATION
Item 1. Financial Statements
- Condensed Consolidated Balance Sheets as of July 31, 1999 and 3
January 31, 1999
- Condensed Consolidated Statements of Operations for the Three and Six 4
Months Ended July 31, 1999 and 1998
- Condensed Consolidated Statement of Shareholders' Equity for the Six 5
Months Ended July 31, 1999
- Condensed Consolidated Statements of Cash Flows for the Six Months 6
Ended July 31, 1999 and 1998
- Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of 13
Operations
Part II OTHER INFORMATION
Item 2. Changes in Securities 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 23
SIGNATURES 25
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VALUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
July 31, January 31,
1999 1999
---------- ----------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 211,797 $ 44,264
Short-term investments 54,368 2,606
Accounts receivable, net 28,922 19,466
Inventories, net 23,421 21,101
Prepaid expenses and other 8,614 8,576
Income taxes receivable 4,237 500
Deferred income taxes 1,703 1,807
--------- ---------
Total current assets 333,062 98,320
Property and equipment, net 13,252 14,069
Federal Communications Commission licenses, net 1,969 2,019
Cable distribution and marketing agreement, net 6,740 --
Montgomery Ward operating agreement and licenses, net 1,778 1,876
Investment in Paxson Communications Corporation 11,937 9,713
Goodwill and other intangible assets, net 5,751 5,962
Investments and other assets, net 11,082 9,160
Deferred income taxes 49 651
--------- ---------
$ 385,620 $ 141,770
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations $ 181 $ 393
Accounts payable 25,606 20,736
Accrued liabilities 12,719 11,555
--------- ---------
Total current liabilities 38,506 32,684
Long-term obligations -- 675
Series A Redeemable Convertible Preferred Stock, $.01 par value, 5,339,500
shares authorized; 5,339,500
and 0 shares issued and outstanding 41,484 --
Shareholders' equity:
Common stock, $.01 par value, 100,000,000 shares authorized;
36,992,684 and 25,865,466 shares issued and outstanding 370 259
Common stock purchase warrants;
1,450,000 and 0 shares 6,931 --
Additional paid-in capital 253,108 72,715
Accumulated other comprehensive losses (1,463) (2,841)
Notes receivable from shareholders -- (1,059)
Retained earnings 46,684 39,337
--------- ---------
Total shareholders' equity 305,630 108,411
--------- ---------
$ 385,620 $ 141,770
========= =========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated balance sheets.
3
<PAGE> 4
VALUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
July 31, July 31,
-------------------------------- --------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 57,875 $ 44,082 $ 111,016 $ 87,758
Cost of sales 35,361 25,952 66,023 50,974
------------ ------------ ------------ ------------
Gross profit 22,514 18,130 44,993 36,784
------------ ------------ ------------ ------------
Margin % 38.9% 41.1% 40.5% 41.9%
Operating expenses:
Distribution and selling 18,161 16,856 36,392 33,674
General and administrative 2,738 3,136 5,493 5,990
Depreciation and amortization 1,304 1,275 2,455 2,546
------------ ------------ ------------ ------------
Total operating expenses 22,203 21,267 44,340 42,210
------------ ------------ ------------ ------------
Operating income (loss) 311 (3,137) 653 (5,426)
------------ ------------ ------------ ------------
Other income (expense):
Gain on sale of broadcast stations -- -- 9,980 19,750
Gain on sale of property and investments 136 3,653 136 3,639
Unrealized loss on trading securities (342) -- (794) --
National Media Corporation
terminated acquisition costs -- (2,350) -- (2,350)
Interest income 1,638 782 2,227 1,565
Other, net (14) (110) (31) (145)
------------ ------------ ------------ ------------
Total other income 1,418 1,975 11,518 22,459
------------ ------------ ------------ ------------
Income (loss) before income taxes 1,729 (1,162) 12,171 17,033
Income tax provision (benefit) 681 (441) 4,755 6,474
------------ ------------ ------------ ------------
Net income (loss) 1,048 (721) 7,416 10,559
Accretion of redeemable
preferred stock (69) -- (69) --
------------ ------------ ------------ ------------
Net income (loss) available to
common shareholders $ 979 $ (721) $ 7,347 $ 10,559
============ ============ ============ ============
Net income (loss) per common share $ 0.03 $ (0.03) $ 0.26 $ 0.40
============ ============ ============ ============
Net income (loss) per common share
---assuming dilution $ 0.03 $ (0.03) $ 0.22 $ 0.40
============ ============ ============ ============
Weighted average number of common shares outstanding:
Basic 29,650,710 25,979,193 27,833,139 26,379,986
============ ============ ============ ============
Diluted 38,908,296 25,979,193 33,761,760 26,488,418
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
4
<PAGE> 5
VALUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the Six Months Ended July 31, 1999
(Unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
Common Stock Common
------------------------------ Stock Additional
Comprehensive Number Par Purchase Paid-In
Income of Shares Value Warrants Capital
--------------- ---------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
BALANCE, January 31, 1999 25,865,466 $ 259 $ - $ 72,715
Comprehensive income:
Net income $ 7,416 - - - -
Other comprehensive income, net of tax:
Unrealized gains on securities, net
of tax of $ 846 1,378 - - - -
=======
Comprehensive income $ 8,794
=======
Value assigned to common stock
purchase warrants - - 6,931 -
Proceeds received on officer notes - - - -
Exercise of stock warrants 10,674,418 107 - 178,263
Exercise of stock options 452,800 4 - 2,130
Accretion of redeemable preferred stock - - - -
---------- ----- ------- ----------
BALANCE, July 31, 1999 36,992,684 $ 370 $ 6,931 $ 253,108
========== ===== ======= ==========
</TABLE>
<TABLE>
<CAPTION>
Accumulated Notes
Other Receivable Total
Comprehensive From Retained Shareholders'
Income (Losses) Officers Earnings Equity
---------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
BALANCE, January 31, 1999 $ (2,841) $ (1,059) $ 39,337 $ 108,411
Comprehensive income:
Net income - - 7,416 7,416
Other comprehensive income, net of tax:
Unrealized gains on securities, net
of tax of $ 846 1,378 - - 1,378
Comprehensive income
Value assigned to common stock
purchase warrants - - - 6,931
Proceeds received on officer notes - 1,059 - 1,059
Exercise of stock warrants - - - 178,370
Exercise of stock options - - - 2,134
Accretion of redeemable preferred stock - - (69) (69)
-------- -------- -------- ---------
BALANCE, July 31, 1999 $ (1,463) $ - $ 46,684 $ 305,630
======== ======== ======== =========
</TABLE>
The accompanying notes are an integral part of this condensed
consolidated financial statement.
5
<PAGE> 6
VALUEVISION INTERNATIONAL, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
For the Six Months Ended July 31,
---------------------------------
1999 1998
--------------- ----------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 7,416 $ 10,559
Adjustments to reconcile net income to net cash
provided by (used for) operating activities-
Depreciation and amortization 2,455 2,546
Deferred taxes (140) (4)
Gain on sale of broadcast stations (9,980) (19,750)
Gain on sale of property and investments (136) (3,639)
Unrealized loss on trading securities 794 --
Equity in losses of affiliates 5 139
National Media Corporation terminated acquisition costs -- 2,350
Changes in operating assets and liabilities:
Accounts receivable, net (9,456) (6,250)
Inventories, net (2,320) 198
Prepaid expenses and other 20 789
Accounts payable and accrued liabilities 2,496 600
Income taxes payable (receivable), net (3,737) 2,687
--------- ---------
Net cash used for operating activities (12,583) (9,775)
--------- ---------
INVESTING ACTIVITIES:
Property and equipment additions, net of retirements (589) (638)
Proceeds from sale of investments and property 10 9,427
Proceeds from sale of broadcast stations 10,000 24,483
Loan to National Media Corporation -- (3,000)
Purchase of short-term investments (60,449) (3,449)
Proceeds from sale of short-term investments 8,038 11,227
Payment for investments and other assets (2,814) (2,386)
Proceeds from notes receivable 1,254 --
--------- ---------
Net cash provided by (used for) investing activities (44,550) 35,664
--------- ---------
FINANCING ACTIVITIES:
Proceeds from issuance of Series A Preferred Stock 44,265 --
Proceeds from exercise of stock options and warrants 180,504 8
Payment of long-term obligations (103) (313)
Payments for repurchases of common stock -- (5,324)
--------- ---------
Net cash provided by (used for) financing activities 224,666 (5,629)
--------- ---------
Net increase in cash and cash equivalents 167,533 20,260
BEGINNING CASH AND CASH EQUIVALENTS 44,264 17,198
--------- ---------
ENDING CASH AND CASH EQUIVALENTS $ 211,797 $ 37,458
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 32 $ 71
========= =========
Income taxes paid $ 8,375 $ 3,826
========= =========
SUPPLEMENTAL NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Issuance of 1,450,000 warrants in connection with the
signing of a Distribution and Marketing Agreement
with NBC $ 6,931 $ --
========= =========
Accretion on redeemable preferred stock $ 69 $ --
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
6
<PAGE> 7
VALUEVISION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1999
(Unaudited)
(1) GENERAL
ValueVision International, Inc. and Subsidiaries ("ValueVision" or the
"Company") is an integrated direct marketing company which markets its products
directly to consumers through electronic and print media.
The Company's principal electronic media activity is its television home
shopping business which uses recognized on-air television home shopping
personalities to market brand name merchandise and proprietary and private label
consumer products at competitive or discount prices. The Company's live 24-hour
per day television home shopping programming is distributed primarily through
long-term cable affiliation agreements and the purchase of month-to-month full-
and part-time block lease agreements of cable and broadcast television time. In
addition, the Company distributes its programming through a Company owned full
power Ultra-High Frequency ("UHF") broadcast television station, low power
television ("LPTV") stations and to satellite dish owners. The Company also
complements its television home shopping business by the sale of merchandise
through its Internet shopping website (www.vvtv.com).
The Company, through its wholly-owned subsidiary, ValueVision Direct
Marketing Company, Inc. ("VVDM"), is a direct-mail marketer of a broad range of
general merchandise which is sold to consumers through direct-mail catalogs and
other direct marketing solicitations. Through VVDM's wholly-owned subsidiary,
Catalog Ventures, Inc. ("CVI"), the Company sells a variety of fashion jewelry,
health and beauty aids, books, audio and video cassettes and other related
consumer merchandise through the publication of five consumer specialty
catalogs. The Company also manufactures and markets, via direct-mail, women's
foundation undergarments and other women's apparel through VVDM's wholly-owned
subsidiary Beautiful Images, Inc. ("BII").
(2) BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. The information furnished in the interim condensed
consolidated financial statements includes normal recurring adjustments and
reflects all adjustments which, in the opinion of management, are necessary for
a fair presentation of such financial statements. Although management believes
the disclosures and information presented are adequate to make the information
not misleading, it is suggested that these interim condensed consolidated
financial statements be read in conjunction with the Company's most recent
audited financial statements and notes thereto included in its fiscal 1999
Annual Report on Form 10-K. Operating results for the six-month period ended
July 31, 1999, are not necessarily indicative of the results that may be
expected for the fiscal year ending January 31, 2000.
(3) NET INCOME PER COMMON SHARE
The Company calculates earnings per share ("EPS") in accordance with the
provisions of Statement of Financial Accounting Standards No. 128, "Earnings per
Share" ("SFAS No. 128"). Basic EPS is computed by dividing reported earnings by
the weighted average number of common shares outstanding for the reported
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock of the Company during reported periods.
7
<PAGE> 8
VALUEVISION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1999
(Unaudited)
A reconciliation of EPS calculations under SFAS No. 128 is as follows:
<TABLE>
<CAPTION>
Three Months Ended July 31, Six Months Ended July 31,
---------------------------- ----------------------------------
1999 1998 1999 1998
------------- ----------- --------------- --------------
<S> <C> <C> <C> <C>
Net income available to
common shareholders $ 979,000 $ (721,000) $ 7,347,000 $ 10,559,000
============= =========== =============== ==============
Weighted average number of common
shares outstanding - Basic 29,651,000 25,979,000 27,833,000 26,380,000
Dilutive effect of convertible preferred
stock 4,765,000 - 2,698,000 -
Dilutive effect of stock options and
warrants 4,492,000 - 3,231,000 108,000
------------- ----------- --------------- --------------
Weighted average number of common
shares outstanding - Diluted 38,908,000 25,979,000 33,762,000 26,488,000
============= =========== =============== ==============
Net income per common share $ 0.03 $ (0.03) $ 0.26 $ 0.40
============= =========== =============== ==============
Net income per common share -
assuming dilution $ 0.03 $ (0.03) $ 0.22 $ 0.40
============= =========== =============== ==============
</TABLE>
For the quarters ended July 31, 1999 and 1998, respectively, 850,000 and
4,090,000 potentially dilutive common shares have been excluded from the
computation of diluted earnings per share as the effect of their inclusion would
be antidilutive.
(4) COMPREHENSIVE INCOME
The Company reports comprehensive income in accordance with Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
No. 130"). SFAS No. 130 establishes standards for reporting in the financial
statements all changes in equity during a period, except those resulting from
investments by and distributions to owners. For the Company, comprehensive
income includes net income and other comprehensive income (loss) which consists
of unrealized holding gains and losses from equity investments classified as
"available-for-sale". Total comprehensive income (loss) was $1,299,000 and
($3,975,000) for the three months ended July 31, 1999 and 1998, respectively.
Total comprehensive income was $8,794,000 and $10,292,000 for the six months
ended July 31, 1999 and 1998, respectively.
(5) SEGMENT DISCLOSURES
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS No. 131") requires the
disclosure of certain information about operating segments in financial
statements. The Company's reportable segments are based on the Company's method
of internal reporting, which generally segregates the strategic business units
into two segments: electronic media, consisting primarily of the Company's
television home shopping business, and print media, whereby merchandise is sold
to consumers through direct-mail catalogs and other direct marketing
solicitations. Segment information included in the accompanying consolidated
balance sheets as of July 31 and included in the consolidated statements of
operations for the three and six-month periods then ended is as follows (in
thousands):
8
<PAGE> 9
VALUEVISION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Electronic Print
Media Media Corporate Total
----- ----- --------- -----
<S> <C> <C> <C> <C>
Three Months Ended July 31, 1999
Revenues $ 51,999 $ 5,876 $ - $ 57,875
Operating income (loss) 646 (335) - 311
Net income (loss) 1,404 (356) - 1,048
Identifiable assets 348,233 18,365 19,022 (a) 385,620
Three Months Ended July 31, 1998
Revenues 34,721 9,361 - 44,082
Operating loss (1,332) (1,805) - (3,137)
Net income (loss) 609 (1,330) - (721)
Six Months Ended July 31, 1999
Revenues 96,374 14,642 - 111,016
Operating income (loss) 790 (137) - 653
Net income (loss) 7,792 (376) - 7,416
Identifiable assets 348,233 18,365 19,022 (a) 385,620
Six Months Ended July 31, 1998
Revenues 63,860 23,898 - 87,758
Operating loss (3,714) (1,712) - (5,426)
Net income (loss) 12,046 (1,487) - 10,559
</TABLE>
(a) Corporate assets consists of long-term investment assets not directly
assignable to a business segment.
(6) NBC AND GE EQUITY STRATEGIC ALLIANCE
On March 8, 1999, the Company entered into a strategic alliance with the
National Broadcasting Company, Inc. ("NBC") and G.E. Capital Equity Investments,
Inc. ("GE Equity"). Pursuant to the terms of the transaction, GE Equity acquired
5,339,500 shares of the Company's Series A Redeemable Convertible Preferred
Stock (the "Preferred Stock"), and NBC was issued a warrant to acquire 1,450,000
shares of Common Stock (the "Distribution Warrant") under a "Distribution and
Marketing Agreement" as discussed below. The Preferred Stock was sold for
aggregate consideration of approximately $44.0 million (or approximately $8.29
per share) and the Company will receive an additional approximately $12.0
million upon exercise of the Distribution Warrant. In addition, the Company
agreed to issue to GE Equity a warrant to increase its potential aggregate
equity stake (together with its affiliates, including NBC) to 39.9%. NBC also
has the exclusive right to negotiate on behalf of the Company for the
distribution of its television home shopping service.
9
<PAGE> 10
VALUEVISION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1999
(Unaudited)
INVESTMENT AGREEMENT
Pursuant to the Investment Agreement by and between the Company and GE
Equity dated March 8, 1999 (the "Investment Agreement"), the Company sold to GE
Equity 5,339,500 shares of Series A Redeemable Convertible Preferred Stock, $.01
par value (the "Preferred Stock") for an aggregate of $44,265,000. The Preferred
Stock is convertible into an equal number of shares of the Company's Common
Stock, $.01 par value ("Common Stock"), subject to customary anti-dilution
adjustments, has a mandatory redemption on the 10th anniversary of its issuance
or upon a "change of control" at its stated value ($8.29 per share),
participates in dividends on the same basis as the Common Stock and has a
liquidation preference over the Common Stock and any other junior securities. So
long as NBC or GE Equity is entitled to designate a nominee to the Board of
Directors (the "ValueVision Board") of the Company (see discussion under
"Shareholder Agreement" below), the holders of the Preferred Stock are entitled
to a separate class vote on the directors subject to nomination by NBC and GE
Equity. During such period of time, such holders will not be entitled to vote in
the election of any other directors, but will be entitled to vote on all other
matters put before shareholders of the Company. Consummation of the sale of
3,739,500 shares of the Preferred Stock was completed on April 15, 1999. Final
consummation of the transaction regarding the sale of the remaining 1,600,000
Preferred Stock shares was completed on June 2, 1999. The Preferred Stock was
recorded at fair value on the date of issuance less issuance costs of
$2,850,000. The excess of the redemption value over the carrying value is being
accreted by periodic charges to retained earnings over the ten year redemption
period.
The Investment Agreement also provided that the Company issue GE Equity a
common stock purchase warrant (the "Investment Warrant") to acquire the number
of shares of the Common Stock that would result in the combined beneficial
ownership by GE Equity and NBC of 39.9% of the Common Stock outstanding from
time to time subject to certain limitations as set forth in the Investment
Warrant. On July 6, 1999, GE Equity exercised the Investment Warrant allowing
them to acquire an additional 10,674,000 shares of the Company's Common Stock
for an aggregate of $178,370,000, or $16.71 per share, representing the 45- day
average closing price of the underlying Common Stock ending on the trading day
prior to exercise. Following the exercise of the Investment Warrant, the
combined ownership of the Company by GE Equity and NBC was approximately 39.9%.
SHAREHOLDER AGREEMENT
Pursuant to the Investment Agreement, the Company and GE Equity entered
into a Shareholder Agreement (the "Shareholder Agreement") which provides for
certain corporate governance and standstill matters. The Shareholder Agreement
(together with the Certificate of Designation of the Preferred Stock) provides
that GE Equity and NBC will be entitled to designate nominees for an aggregate
of 2 out of 7 board seats so long as their aggregate beneficial ownership is at
least equal to 50% of their initial beneficial ownership, and 1 out of 7 board
seats so long as their aggregate beneficial ownership is at least 10% of the
"adjusted outstanding shares of Common Stock". GE Equity and NBC have also
agreed to vote their shares of Common Stock in favor of the Company's nominees
to the ValueVision Board in certain circumstances.
All committees of the ValueVision Board will include a proportional number
of directors nominated by GE Equity and NBC. The Shareholder Agreement also
requires the consent of GE Equity prior to the Company entering into any
substantial agreements with certain restricted parties (broadcast networks and
internet portals in certain limited circumstances, as defined), as well as
taking any of the following actions: (i) issuance of more than 15% of the total
voting shares of the Company in any 12-month period (25% in any 24-month
period), (ii) payment of quarterly dividends in excess of 5% of the Company's
market capitalization (or repurchases and redemption of Common Stock with
certain exceptions), (iii) entry by the Company into any business not ancillary,
complementary or reasonably related to the Company's current business, (iv)
acquisitions (including investments and joint ventures) or dispositions
exceeding the greater of $35.0 million or 10% of the Company's total market
capitalization, or (v) incurrence of debt exceeding the greater of $40.0 million
or 30% of the Company's total capitalization.
Pursuant to the Shareholder Agreement, so long as GE Equity and NBC have the
right to name at least one nominee to the ValueVision Board, the Company will
provide them with certain monthly, quarterly and annual financial reports and
budgets. In addition, the Company has agreed not to take actions which would
cause the Company to be in breach of or default under any of its material
contracts (or otherwise require a consent thereunder) as a result of
acquisitions of the Common Stock by GE Equity or NBC. The Company is also
prohibited from taking any action that would cause any ownership interest of
certain FCC regulated entities from being attributable to GE Equity, NBC or
their affiliates.
10
<PAGE> 11
VALUEVISION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1999
(Unaudited)
The Shareholder Agreement provides that during the Standstill Period (as
defined in the Shareholder Agreement), and with certain limited exceptions, GE
Equity and NBC shall be prohibited from: (i) any asset/business purchases from
the Company in excess of 10% of the total fair market value of the Company's
assets, (ii) increasing their beneficial ownership above 39.9% of the Company's
shares, (iii) making or in any way participating in any solicitation of proxies,
(iv) depositing any securities of the Company in a voting trust, (v) forming,
joining, or in any way becoming a member of a 13D Group with respect to any
voting securities of the Company, (vi) arranging any financing for, or providing
any financing commitment specifically for, the purchase of any voting securities
of the Company, (vii) otherwise acting, whether alone or in concert with others,
to seek to propose to the Company any tender or exchange offer, merger, business
combination, restructuring, liquidation, recapitalization or similar transaction
involving the Company, or nominating any person as a director of the Company who
is not nominated by the then incumbent directors, or proposing any matter to be
voted upon by the shareholders of the Company. If during the Standstill Period
any inquiry has been made regarding a "takeover transaction" or "change in
control" which has not been rejected by the ValueVision Board, or the
ValueVision Board pursues such a transaction, or engages in negotiations or
provides information to a third party and the ValueVision Board has not resolved
to terminate such discussions, then GE Equity or NBC may propose to the Company
a tender offer or business combination proposal.
In addition, unless GE Equity and NBC beneficially own less than 5% or more
than 90% of the adjusted outstanding shares of Common Stock, GE Equity and NBC
shall not sell, transfer or otherwise dispose of any securities of the Company
except for transfers: (i) to certain affiliates who agree to be bound by the
provisions of the Shareholder Agreement, (ii) which have been consented to by
the Company, (iii) pursuant to a third party tender offer, provided that no
shares of Common Stock may be transferred pursuant to this clause (iv) to the
extent such shares were acquired upon exercise of the Investment Warrant on or
after the date of commencement of such third party tender offer or the public
announcement by the offeror thereof or that such offeror intends to commence
such third party tender offer, (v) pursuant to a merger, consolidation or
reorganization to which the Company is a party, (vi) in a bona fide public
distribution or bona fide underwritten public offering, (vii) pursuant to Rule
144 of the Securities Act, or (viii) in a private sale or pursuant to Rule 144A
of the Securities Act; provided that, in the case of any transfer pursuant to
clause (vi) or (viii), such transfer does not result in, to the knowledge of the
transferor after reasonable inquiry, any other person acquiring, after giving
effect to such transfer, beneficial ownership, individually or in the aggregate
with such person's affiliates, of more than 10% of the adjusted outstanding
shares of the Common Stock.
The Standstill Period will terminate on the earliest to occur of (i) the 10
year anniversary of the Shareholder Agreement, (ii) the entering into by the
Company of an agreement that would result in a "change in control" (subject to
reinstatement), (iii) an actual "change in control," (iv) a third party tender
offer (subject to reinstatement), and (v) six months after GE Equity and NBC can
no longer designate any nominees to the ValueVision Board. Following the
expiration of the Standstill Period pursuant to clause (i) or (v) above
(indefinitely in the case of clause (i) and two years in the case of clause
(v)), GE Equity and NBC's beneficial ownership position may not exceed 39.9% of
the Company on fully-diluted outstanding stock, except pursuant to issuance or
exercise of any warrants or pursuant to a 100% tender offer for the Company.
REGISTRATION RIGHTS AGREEMENT
Pursuant to the Investment Agreement, ValueVision and GE Equity entered into
a Registration Rights Agreement providing GE Equity, NBC and their affiliates
and any transferees and assigns, an aggregate of four demand registrations and
unlimited piggyback registration rights.
DISTRIBUTION AND MARKETING AGREEMENT
NBC and the Company have entered into the Distribution and Marketing
Agreement dated March 8, 1999 (the "Distribution Agreement") which provides that
NBC shall have the exclusive right to negotiate on behalf of the Company for the
distribution of its home shopping television programming service. The agreement
has a 10-year term and NBC has committed to delivering an additional 10 million
full-time equivalent ("FTE") subscribers over the first 42 months of the term.
In compensation for such services, the Company will pay NBC an annual fee of
$1.5 million (increasing no more than 5% annually) and issue NBC the
Distribution Warrant. The exercise price of the Distribution Warrant is
approximately $8.29 per share and vests 200,000 shares immediately, with the
remainder of the Distribution Warrant vesting 125,000 shares annually over the
10-year term of the Distribution Agreement. The Distribution Warrant is
exercisable for five years after vesting. The value assigned to the Distribution
11
<PAGE> 12
VALUEVISION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1999
(Unaudited)
and Marketing Agreement and Distribution Warrant of $6,931,000 was determined
pursuant to an independent appraisal and is being amortized on a straight-line
basis over the term of the agreement. Assuming certain performance criteria
above the 10 million FTE homes are met, NBC will be entitled to additional
warrants to acquire Common Stock at the then current market price. The Company
has a right to terminate the Distribution Agreement after the twenty-fourth,
thirty-sixth and forty-second month anniversary if NBC is unable to meet the
performance targets. If terminated by the Company in such circumstance, the
unvested portion of the Distribution Warrant will expire. In addition, the
Company will be entitled to a $2.5 million payment from NBC if the Company
terminates the Distribution Agreement as a result of NBC's failure to meet the
24 month performance target.
NBC may terminate the Distribution Agreement if the Company enters into
certain "significant affiliation" agreements or a transaction resulting in a
"change of control."
LETTER AGREEMENT
The Company, GE Equity and NBC have also entered into a non-binding letter
of intent dated March 8, 1999 providing for certain cooperative business
activities which the parties contemplate pursuing, including but not limited to,
development of a private label credit card, development of electronic commerce
and other internet strategies, development of programming concepts for the
Company and cross channel promotion.
(7) GAIN ON SALE OF BROADCAST STATIONS
On April 12, 1999, the Company received a contingent payment of $10 million
relating to the sale of its KBGE-TV, Channel 33, television station in Seattle,
Washington, and two low-power television stations to Paxson Communications in
March 1998. As a result, the Company recognized a $10 million pre-tax gain, net
of applicable closing fees, in the quarter ended April 30, 1999. The $10 million
contingent payment finalizes the agreement between the two companies.
(8) SALE OF BROADCAST STATION
On May 3, 1999, the Company signed a definitive agreement to sell its
KVVV-TV full-power television broadcast station, Channel 33, and K53 FV low
power station, serving the Houston, Texas market, for a total of $28 million to
Visalia, California- based Pappas Telecasting Companies. The transaction is
anticipated to close in the third quarter of fiscal 2000 and is subject to
obtaining certain consents and regulatory approval. The effects of the
disposition will be reflected in the financial statements at the date of
closing. Management believes that the sale will not have a significant impact on
the operations of the Company.
(9) SUBSEQUENT EVENT
On September 13, 1999, the Company entered into a new strategic alliance
with Snap! LLC and Xoom.com, Inc. whereby the parties entered into major
re-branding and electronic commerce agreements, spanning television home
shopping, Internet shopping and direct e-commerce initiatives. Under the terms
of the agreements, ValueVision International Inc.'s television home shopping
network, currently called ValueVision, will be re-branded as SnapTV ("Snap TV").
The re-branding will be phased in during late 1999 and in the first half of
2000. The network, which will continue to be owned and operated by ValueVision,
will continue to feature its present product line as well as offer new
categories of products and brands. The Company along with Snap.com, NBC's
Internet portal services company, will roll-out a new companion Internet
shopping service, SnapTV.com -- featuring online purchasing opportunities that
spotlight products offered on-air along with online-only e-commerce
opportunities offered by Snap TV and its merchant partners. The new SnapTV.com
online store will be owned and operated by ValueVision and be featured
prominently within SnapTV.com's shopping area. Xoom.com, a leading direct
e-commerce services company, will become the exclusive direct electronic
commerce partner for SnapTV, managing all such initiatives, including database
management, e-mail marketing and other sales endeavors. Direct online shopping
offers will include SnapTV merchandise, as well as Xoom.com products and
services. See Item 5. "Other Information" for further discussion of this
strategic alliance and the agreements entered into by the Company, Snap LLC and
Xoom.com, Inc.
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<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
The following discussion and analysis of financial condition and results of
operations should be read in conjunction with the Company's accompanying
unaudited condensed consolidated financial statements and notes thereto included
elsewhere herein and the audited consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the fiscal year
ended January 31, 1999.
SELECTED CONDENSED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
Dollar Amounts as a Dollar Amounts as a
Percentage of Net Sales For the Percentage of Net Sales For the
Three Months Six Months
Ended July 31, Ended July 31,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
======= ======= ======= =======
Gross margin 38.9% 41.1% 40.5% 41.9%
------- ------- ------- -------
Operating expenses:
Distribution and selling 31.4% 38.2% 32.8% 38.4%
General and administrative 4.7% 7.1% 4.9% 6.8%
Depreciation and amortization 2.3% 2.9% 2.2% 2.9%
------- ------- ------- -------
38.4% 48.2% 39.9% 48.1%
------- ------- ------- -------
Operating income (loss) 0.5% (7.1%) 0.6% (6.2)%
======= ======= ======= =======
</TABLE>
13
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
ValueVision International, Inc. and Subsidiaries ("ValueVision" or the
"Company") is an integrated direct marketing company which markets its products
directly to consumers through electronic and print media.
The Company's principal electronic media activity is its television home
shopping business which uses recognized on-air television home shopping
personalities to market brand name and proprietary and private label consumer
products at competitive or discount prices. The Company's live 24-hour per day
television home shopping programming is distributed primarily through long-term
cable affiliation agreements and the purchase of month-to-month full- and
part-time block lease agreements of cable and broadcast television time. In
addition, the Company distributes its programming through a Company owned full
power Ultra-High Frequency ("UHF") broadcast television station, Company owned
low power television ("LPTV") stations and to satellite dish owners. The Company
also complements its television home shopping business by the sale of
merchandise through its Internet shopping website (www.vvtv.com).
The Company, through its wholly-owned subsidiary, ValueVision Direct
Marketing Company, Inc. ("VVDM"), is a direct-mail marketer of a broad range of
general merchandise which is sold to consumers through direct-mail catalogs and
other direct marketing solicitations. Through VVDM's wholly-owned subsidiary,
Catalog Ventures, Inc. ("CVI"), the Company sells a variety of fashion jewelry
and other related consumer merchandise through the publication of five consumer
specialty catalogs. The Company also manufactures and markets, via direct-mail,
women's foundation undergarments and other women's apparel through its
wholly-owned subsidiary, Beautiful Images, Inc. ("BII").
NBC AND GE EQUITY STRATEGIC ALLIANCE
On March 8, 1999 the Company entered into a strategic alliance with the
National Broadcasting Company, Inc. ("NBC") and G.E. Capital Equity Investments,
Inc. ("GE Equity"). Pursuant to the terms of the transaction, GE Equity acquired
5,339,500 shares of Series A Redeemable Convertible Preferred Stock (the
"Preferred Stock"), and NBC was issued a warrant to acquire 1,450,000 shares of
common stock (the "Distribution Warrant") under a Distribution and Marketing
Agreement. The Preferred Stock was sold for aggregate consideration of
approximately $44.0 million and the Company will receive an additional
approximately $12.0 million upon exercise of the Distribution Warrant. In
addition, the Company issued to GE Equity a warrant to increase its potential
aggregate equity stake (together with the Distribution Warrant issued to NBC) to
39.9% (the "Investment Warrant"). NBC has the exclusive right to negotiate on
behalf of ValueVision for the distribution of its television home shopping
service. Consummation of the sale of 3,739,500 shares of the Preferred Stock was
completed on April 15, 1999. Final consummation of the transaction regarding the
sale of the remaining 1,600,000 Preferred Stock shares and the exercisability of
the Investment Warrant was completed on June 2, 1999. On July 6, 1999, GE Equity
exercised the Investment Warrant allowing them to acquire an additional
10,674,000 shares of the Company's Common Stock for an aggregate of
$178,370,000, or $16.71 per share, representing the 45-day average closing price
of the underlying Common Stock ending on the trading day prior to exercise.
Proceeds received from the issuance of the Preferred Stock and the Investment
Warrant (and to be received from the exercise of the Distribution Warrant) are
for general corporate purposes. Following the exercise of the Investment
Warrant, the combined ownership of the Company by GE Equity and NBC was
approximately 39.9%. See Note 6 of Notes to Condensed Consolidated Financial
Statements for further discussion of the Company's strategic alliance with NBC
and GE Equity.
SNAP.COM, XOOM. COM RE-BRANDING AND ELECTRONIC COMMERCE ALLIANCE
Effective September 13, 1999, the Company entered into a new strategic
alliance with Snap! LLC and Xoom.com, Inc. whereby the parties entered into
major re-branding and electronic commerce agreements, spanning television home
shopping, Internet shopping and direct e-commerce initiatives. Under the terms
of the agreements, ValueVision International Inc.'s television home shopping
network, currently called ValueVision, will be re-branded as SnapTV ("Snap TV").
The re-branding will be phased in during late 1999 and in the first half of
2000. The network, which will continue to be owned and operated by ValueVision,
will continue to feature its present product line as well as offer new
categories of products and brands. The Company along with Snap.com, NBC's
Internet portal services company, will roll-out a new companion Internet
shopping service, SnapTV.com -- featuring online purchasing opportunities that
spotlight products offered on-air along with online-only e-commerce
opportunities offered by Snap TV and its merchant partners. The new SnapTV.com
online store will be owned and operated by ValueVision and be featured
prominently within
14
<PAGE> 15
SnapTV.com's shopping area. Xoom.com, a leading direct e-commerce services
company, will become the exclusive direct electronic commerce partner for
SnapTV, managing all such initiatives, including database management, e-mail
marketing and other sales endeavors. Direct online shopping offers will include
SnapTV merchandise, as well as Xoom.com products and services. See Item 5.
"Other Information" for further discussion of this strategic alliance and the
agreements entered into by the Company, Snap LLC and Xoom.com, Inc.
RESULTS OF OPERATIONS
NET SALES
Net sales for the three months ended July 31, 1999 (fiscal 2000), were
$57,875,000 compared with net sales of $44,082,000 for the three months ended
July 31, 1998 (fiscal 1999), a 31% increase. Net sales for the six months ended
July 31, 1999 were $111,016,000 compared with $87,758,000 for the six months
ended July 31, 1998, a 27% increase. The increase in net sales is directly
attributable to the continued improvement and increased sales from the Company's
television home shopping operations, which have reported greater than 30% sales
increases for the past five quarters in a row and reported its largest revenue
quarter in the Company's history. Sales attributed to the Company's television
home shopping business increased 50% to a record $51,999,000 for the quarter
ended July 31, 1999 from $34,721,000 for the comparable prior year period on a
36% increase in average full-time equivalent homes able to receive the Company's
television home shopping programming. On a year-to-date basis, sales attributed
to the Company's television home shopping programming increased 51% to
$96,374,000 for the six months ended July 31, 1999 from $63,860,000 for the
comparable prior year period on a 33% increase in average full-time equivalent
subscriber homes. The growth in home shopping net sales is also the result of a
strengthened merchandising effort under the leadership of ValueVision - TV's new
general management. The improvement in television home shopping net sales is
also due, in part, to various sales initiatives that emphasized, among other
things, the increased use of the Company's ValuePay installment payment program.
During the 12-month period ended July 31, 1999 the Company added approximately
6.4 million full-time equivalent subscriber homes, a 53% increase. In addition
to new full-time equivalent homes, television home shopping sales increased due
to the continued addition of new customers from households already receiving the
Company's television home shopping programming, as well as an increase in repeat
sales to existing customers. The increase in repeat sales to existing customers
experienced during the first six months of fiscal 2000 was due, in part, to the
effects of continued testing of certain merchandising and programming
strategies. Certain changes were made to the Company's merchandising and
programming strategies in the first half of fiscal 2000 that contributed to an
improvement in television home shopping sales. The Company intends to continue
to test and change its merchandising and programming strategies with the intent
of improving its television home shopping sales results. However, while the
Company is optimistic that results will continue to improve, there can be no
assurance that such changes in strategy will achieve the intended results. Sales
attributed to direct-mail marketing operations totaled $5,876,000 or 10% of
total net sales for the quarter ended July 31, 1999 and totaled $9,361,000 or
21% of total net sales for the quarter ended July 31, 1998. On a year-to-date
basis, sales attributed to direct-mail marketing operations totaled $14,642,000
or 13% of total net sales for the six months ended July 31, 1999 and totaled
$23,898,000, or 27% of total net sales for the six months ended July 31, 1998.
The decrease in catalog revenues is a result of the fiscal 1999 divestiture of
the Company's unprofitable HomeVisions (formerly known as Montgomery Ward
Direct) mail order catalog operations.
GROSS PROFITS
Gross profits for the second quarter ended July 31, 1999 and 1998 were
$22,514,000 and $18,130,000, respectively, an increase of $4,384,000 or 24%.
Gross margins for the three months ended July 31, 1999 and 1998 were 38.9% and
41.1%, respectively. Gross profits for the six months ended July 31, 1999 and
1998 were $44,993,000 and $36,784,000, respectively, an increase of $8,209,000
or 22%. Gross margins for the six months ended July 31, 1999 were 40.5% compared
to 41.9% for the same period last year. The principal reason for the increase in
gross profits was the increased sales volume from the Company's television home
shopping business offset by a decrease in direct mail-order gross profits
resulting from the fiscal 1999 divestiture of the HomeVisions catalog
operations. Television gross margins for the three and six months ended July 31,
1999 were 36.8% and 38.0%, respectively. Gross margins for the Company's direct
mail-order operations were 57.9% and 57.0% for the same respective periods.
Television gross margins for the three and six months ended July 31, 1998 was
38.2% and 38.1%, respectively. Gross margins for the Company's direct mail-order
operations were 52.1% and 52.0% for the same respective periods. Television home
shopping gross margin percentages decreased as a direct result of changes in the
Company's merchandising mix. Specifically, television home shopping gross
margins between comparable periods decreased from prior year primarily as a
result of an increase in the sales volume of lower margin electronics
merchandise along with decreased gross margin percentages in the electronic and
jewelry product categories offset by an increase in the mix of jewelry and
slight increases
15
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
in the overall gross margin percentages for giftware and seasonal merchandise.
Also, and as a result of the mix change, additional inventory reserves were
established during the second quarter, which further reduced television home
shopping margins. During the first six months of fiscal 2000, the Company has
attempted to balance its merchandise mix between jewelry and non-jewelry items
as compared to the same period last year in order to increase television home
shopping sales while at the same time maintaining margins and increasing
inventory turns. Jewelry products accounted for approximately 79% of airtime
during the first six months of fiscal 2000 compared with 66% for the same period
last year. Gross margins for the Company's direct mail-order operations
increased primarily as a result of the decrease in HomeVisions sales due to the
fiscal 1999 divestiture of the Company's HomeVisions catalog operations which
had considerably lower margins than CVI or BII.
OPERATING EXPENSES
Total operating expenses for the three and six months ended July 31, 1999
were $22,203,000 and $44,340,000, respectively, versus $21,267,000 and
$42,210,000 for the comparable prior year periods. Distribution and selling
expense increased $1,305,000 or 8% to $18,161,000 or 31% of net sales during the
second quarter of fiscal 2000 compared to $16,856,000 or 38% for the comparable
prior-year period. Distribution and selling expense increased $2,718,000 or 8%
to $36,392,000 or 33% of net sales for the six months ended July 31, 1999
compared to $33,674,000 or 38% for the comparable prior-year period.
Distribution and selling costs increased primarily as a result of increases in
net cable access fees due to a 33% year-to-date increase in the number of
average FTE's over prior year, an increase in the rate per full-time equivalent
cable home, increased marketing and advertising fees, and increased costs
associated with credit card processing, telemarketing and the Company's ValuePay
program, offset by decreases in distribution and selling expenses associated
with the divestiture of the HomeVisions catalog operations. Distribution and
selling expenses decreased as a percentage of net sales over prior year
primarily due to the Company's focus on cost efficiencies and the increase in
television home shopping net sales over prior year.
General and administrative expenses for the three months ended July 31, 1999
decreased $398,000 or 13% to $2,738,000 compared to $3,136,000 for the three
months ended July 31, 1998. For the six months ended July 31, 1999 general and
administrative expenses decreased $497,000 or 8% to $5,493,000 compared to
$5,990,000 for the comparable prior year period. General and administrative
expenses as a percentage of net sales were 5% versus 7% for the three and six
months ended July 31, 1999 and 1998, respectively. General and administrative
costs decreased from prior year as a result of general cost containment and
decreased as a percentage of net sales as a result of the increase in net sales
from period to period.
Depreciation and amortization costs for the three months ended July 31, 1999
was $1,304,000 versus $1,275,000 representing a increase of $29,000 or 2% from
the comparable prior-year period. Depreciation and amortization expense for the
six months ended July 31, 1999 was $2,455,000 versus $2,546,000 representing a
decrease of $91,000 or 4% from the comparable prior-year period. Depreciation
and amortization costs as a percentage of net sales were 2% for the three and
six months ended July 31, 1999 versus 3% for the comparable prior-year periods.
The year-to-date dollar decrease is primarily due to a reduction in depreciation
expense in connection with the divestiture of the Company's HomeVisions catalog
operations and reduced amortization with respect to cable launch fees and FCC
licenses offset by increased amortization associated with the Company's NBC
cable distribution and marketing agreement.
OPERATING INCOME (LOSS)
For the three months ended July 31, 1999, the Company reported operating
income of $311,000 compared to an operating loss of $3,137,000 for the three
months ended July 31, 1998, an improvement of $3,448,000. For the six months
ended July 31, 1999, the Company reported operating income of $653,000 compared
to an operating loss of $5,426,000 for the six months ended July 31, 1998, an
improvement of $6,079,000. The improvement in quarterly and year-to-date
operating income over prior year is directly attributed to the overall operating
improvements of the Company's television home shopping business which improved
by approximately $1,978,000 and $4,504,000 for the three and six months ended
July 31, 1999, respectively. The Company also experienced a modest improvement
in operating income over prior year from its catalog operations primarily
resulting from the fiscal 1999 divestiture of its unprofitable HomeVisions
catalog operations. Overall, operating income increased as a result of increased
sales volumes and gross profits, decreases in general and administrative costs
resulting from general cost containment and a reduction in year-to-date
depreciation and amortization expense over prior year offset by increases in
distributing and selling costs and increased amortization associated with the
Company's NBC cable distribution and marketing agreement.
16
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NET INCOME
For the three months ended July 31, 1999, the Company reported net income
available to common shareholders of $979,000 or $.03 per share on 38,908,000
diluted weighted average common shares outstanding ($.03 per share on 29,651,000
basic shares) compared with a net loss of $721,000 or $.03 per basic and diluted
share on 25,979,000 weighted average common shares outstanding for the quarter
ended July 31, 1998. Net income available to common shareholders for the quarter
ended July 31, 1999 includes a net pre-tax loss of approximately $206,000
relating primarily to the sale and holdings of the Company's trading security
investments. Results for the quarter ended July 31, 1998 included a $2,350,000
write-off related to terminated acquisition costs and included pre-tax gains on
the sale of property of $3,653,000. Excluding the net gains/losses recorded on
the sale and holdings of property and investments and other one-time charges,
the Company achieved net income available to common shareholders of $1,111,000,
or $.03 per diluted share ($.04 per basic share) for the quarter ended July 31,
1999, compared with a net loss of $1,529,000, or $.06 per basic and diluted
share for the quarter ended July 31, 1998, an increase of approximately
$2,640,000 over fiscal 1999.
For the six months ended July 31, 1999, the Company reported net income
available to common shareholders of $7,347,000 or $.22 per share on 33,762,000
diluted weighted average common shares outstanding ($.26 per share on 27,833,000
basic shares) compared with net income of $10,559,000 or $.40 per share on
26,488,000 diluted weighted average common shares outstanding ($.40 per share on
26,380,000 basic shares) for the six months ended July 31, 1998. Net income for
the six months ended July 31, 1999 includes a pre-tax gain of approximately
$10,000,000 relating to the receipt of a contingent payment in connection with
the Company's sale of a television broadcast station and two low-power
television stations to Paxson Communications Corporation in March 1998 and a net
pre-tax loss of $658,000 recorded on the sale and holdings of the Company's
trading security investments. Net income for the six months ended July 31, 1998
included a pre-tax gain of $19,750,000 relating to the sale of its television
broadcast station, KBGE-TV and two low-power television stations, a pre-tax gain
of $3,639,000 relating to the sale of property and a $2.4 million write-off
related to terminated acquisition costs. Excluding the net gains/losses recorded
on the sale and holdings of property and investments and other one-time charges,
the Company achieved net income available to common shareholders of $1,669,000,
or $.05 per diluted share ($.06 per basic share) for the six months ended July
31, 1999, compared to a net loss of $2,483,000, or $.09 per basic and diluted
share for the six months ended July 31, 1998, an improvement of approximately
$4,152,000 over fiscal 1999. For the three and six months ended July 31, 1999,
net income reflects an income tax provision at an effective tax rate of 39%.
PROGRAM DISTRIBUTION
The Company's television home-shopping programming was available to
approximately 25.7 million homes as of July 31, 1999, as compared to 21.8
million homes as of January 31, 1999 and to 17.3 million homes as of July 31,
1998. The Company's programming is currently available through affiliation and
time-block purchase agreements with approximately 350 cable systems and one
wholly-owned full power television broadcast station. In addition, the Company's
programming is broadcast full-time over twelve owned low power television
stations in major markets, and is available unscrambled to homes equipped with
satellite dishes. As of July 31, 1999 and 1998, the Company's programming was
available to approximately 18.4 million and 12.0 million full-time equivalent
("FTE") households, respectively. As of January 31, 1999, the Company's
programming was available to 14.9 million FTE households. Approximately 11.5
million and 9.3 million households at July 31, 1999 and 1998, respectively,
received the Company's programming on a full-time basis. Homes that receive the
Company's television home shopping programming 24 hours per day are counted as
one FTE each and homes that receive the Company's programming for any period
less than 24 hours are counted based upon an analysis of time of day and day of
week.
CIRCULATION
With respect to the Company's direct-mail marketing operations,
approximately 6.9 million CVI catalogs were mailed in the second quarter of
fiscal 2000. At July 31, 1999, CVI had approximately 566,000 "active" customers
(defined as individuals that have purchased from the Company within the
preceding 12 months) and combined customer and prospect files that totaled
approximately 4.1 million names. During the second quarter of fiscal 2000, BII
had approximately 129.1 million space advertisements or "impressions" circulated
in national and regional newspapers and magazines and at July 31, 1999, BII had
approximately 210,000 active customers and approximately 750,000 customer names
in its customer list database.
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<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
YEAR 2000 CONSIDERATIONS
The Year 2000 issue is the result of computer programs using only the last
two digits to indicate the calendar year. If uncorrected, such computer programs
may be unable to interpret dates correctly beyond the year 1999, which in turn,
may cause computer system failure or other computer errors disrupting
operations. The Company has reviewed the implications of its Year 2000
compliance issues and has formed a Year 2000 Compliance Project team to
establish and take steps to ensure that the Company's information systems and
software applications will manage dates beyond 1999. The scope of the Company's
Year 2000 readiness effort includes the review of and taking remedial action as
necessary, regarding (i) information technology ("IT") such as software and
hardware; (ii) non-IT systems or embedded technology; and (iii) readiness of key
third parties, including significant vendors and service providers and the
electronic data interchange (EDI) with third parties.
With respect to information systems, management presently believes that a
combination of software modification, upgrades and replacements will be
necessary to mitigate the Company's Year 2000 issues. However, if such
modifications are not made, or not completed on a timely basis, the Year 2000
issue could have a materially adverse effect on the Company's business,
financial condition and results of operations. The Company expects to implement
successfully the systems and programming changes necessary to be Year 2000
compliant in a timely manner. The target month for final remediation of its
information systems is December 1999. The Company does not expect the cost of
addressing its Year 2000 issues to have a material effect on the Company's
results of operations, financial position or liquidity and is funding such costs
with operating cash flows. Total costs are expected to be less than $500,000.
In addition to internal Year 2000 remediation activities, the Company has
also implemented a plan to communicate to its key suppliers, vendors and service
providers the expectation that they attain Year 2000 compliance in a timely
manner. While the Company expects its internal IT and non-IT systems to be Year
2000 compliant by the date specified, the Company is working on a contingency
plan specifying what the Company will do if it or important third parties are
not Year 2000 compliant by the required dates. The Company expects to have such
a contingency plan finalized in 1999.
The Company believes that it has allocated adequate resources to address and
achieve Year 2000 compliance in a timely manner, however, no assurances can be
given that these efforts or the efforts of key third parties will be successful.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
As of July 31, 1999, cash and cash equivalents and short-term investments
were $266,165,000, compared to $46,870,000 as of January 31, 1999, a
$219,295,000 increase. For the six months ended July 31, 1999, working capital
increased $228,920,000 to $294,556,000. The current ratio was 8.6 at July 31,
1999 compared to 3.0 at January 31, 1999. At July 31, 1999 all short-term
investments and cash equivalents classified as trading securities were invested
in commercial paper with original maturity dates of less than two hundred and
seventy (270) days and investment grade corporate bonds with maturity dates
ranging from two months to two years.
Total assets at July 31, 1999 were $385,620,000, compared to $141,770,000 at
January 31, 1999. Shareholders' equity was $305,630,000 at July 31, 1999,
compared to $108,411,000 at January 31, 1999, a $197,219,000 increase. The
increase in shareholders' equity for the six month period ended July 31, 1999
resulted primarily from the issuance of approximately 10,674,000 shares of
common stock at $16.71 per share, or $178,370,000, to GE Equity upon the
exercise of their Investment Warrant, net income of $7,416,000 for the six-month
period, the issuance of 1,450,000 common stock purchase warrants valued at
$6,931,000 in connection with the NBC and GE Equity strategic alliance, other
comprehensive income on investments available-for-sale of $1,378,000, proceeds
received of $2,134,000 related to the exercise of stock options and proceeds
received of $1,059,000 on the pay down of shareholder notes.
For the six-month period ended July 31, 1999, net cash used for operating
activities totaled $12,583,000 compared to net cash used for operating
activities of $9,775,000 for the six-month period ended July 31, 1998. Cash
flows from operations before consideration of changes in working capital items
and investing and financing activities was a positive $3,108,000 for the six
months ended July 31 1999, compared to a negative $2,880,000 for the same
prior-year period. Net cash used for operating activities for the six months
ended July 31, 1999 reflects net income, as adjusted for depreciation and
amortization, equity in losses of affiliates, unrealized losses on trading
securities, gains on the sale of property and investments and gains on the sale
of
18
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
broadcast television stations. In addition, net cash used for operating
activities for the six months ended July 31, 1999 reflects increases in accounts
receivable, inventories and income taxes receivable, offset by increases in
accounts payable and accrued liabilities. Accounts receivable increased
primarily due to increased receivables due from customers for merchandise sales
made pursuant to the "ValuePay" installment program, the timing of credit card
receivable payments and increased interest receivable resulting from higher cash
balances. Inventories increased from year end to support increased sales volume,
offset by decreases resulting from the divestiture of the HomeVisions catalog
operations. Income taxes receivable increased as a result of making estimated
tax payments for fiscal 2000. The increase in accounts payable and accrued
liabilities is a direct result of the increase in inventory levels and the
timing of vendor payments.
Net cash used for investing activities totaled $44,550,000 for the six
months ended July 31, 1999 compared to net cash provided by investing activities
of $35,664,000 for the same period of fiscal 1999. For the six months ended July
31, 1999 and 1998, expenditures for property and equipment were $589,000 and
$638,000, respectively. Expenditures for property and equipment during the
periods ended July 31, 1999 and 1998 include (i) the upgrade of computer
software, related computer equipment and other office equipment and (ii)
expenditures on leasehold improvements for the Company's corporate offices.
Principal future capital expenditures will be for upgrading television
production and transmission equipment, the upgrade of computer software and
related technical equipment associated with e-commerce initiatives and
improvements to the Company's corporate offices. During the first half of fiscal
2000, the Company received a contingent payment of $10,000,000 relating to the
sale of its KBGE-TV, Channel 33, television station in Seattle, Washington, and
two low-power television stations to Paxson Communications in March 1998. During
the first half of fiscal 2000, the Company also invested $60,449,000 in various
short-term investments, received proceeds of $8,038,000 from the sale of
short-term investments, received $1,254,000 in connection with the repayment of
outstanding notes receivable and made disbursements of $2,814,000 for certain
investments and other long-term assets. For the six months ended July 31, 1998,
the Company received $24,483,000 in proceeds from the sale of its broadcast
television station KBGE-TV and received $9,427,000 of proceeds from the sale of
property. In addition, during the first half of fiscal 1999, the Company
invested $3,449,000 in various short-term investments, received proceeds of
$11,227,000 from the sale of short-term investments, disbursed $2,386,000
relating to certain strategic investments and other long-term assets and granted
a $3.0 million working capital loan to National Media Corporation.
Net cash provided by financing activities totaled $224,667,000 for the three
months ended July 31, 1999 and primarily related to $178,370,000 of proceeds
received from GE Equity on the issuance of 10,674,000 shares of common stock in
conjunction with the exercise of their Investment Warrant and $44,265,000 of
proceeds received from the issuance of Series A Redeemable Convertible Preferred
Stock in conjunction with the Company's new strategic alliance with GE Equity.
In addition, the Company also received proceeds of $2,134,000 from the exercise
of stock options and made payments of $102,000 in connection with its capital
lease obligations. Net cash used for financing activities totaled $5,628,000 for
the six months ended July 31, and primarily related to repurchases of the
Company's common stock under its stock repurchase program and capital lease
obligation payments.
Management believes that funds currently held by the Company will be
sufficient to fund the Company's operations, anticipated capital expenditures or
strategic acquisitions and cable launch fees through fiscal 2000.
19
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Information contained in this Form 10-Q and in other materials filed by the
Company with the Securities and Exchange Commission (as well as information
included in oral statements or other written statements made or to be made by
the Company) contain various "forward looking statements" within the meaning of
federal securities laws which represent management's expectations or beliefs
concerning future events. Such "forward looking statements" include, but are not
limited to, improved and growing television home shopping operations, general
expansion and profitability of the Company, consummation of the sale of its
Houston television station, new initiatives and the continuing success in
developing new strategic alliances (including the GE Equity and NBC alliance),
the Company's success in developing its e-commerce business, the expected target
date of the completion and the materiality of total costs associated with the
Company's Year 2000 readiness effort, capital spending requirements, potential
future acquisitions and the effects of regulation and competition. These, and
other forward looking statements made by the Company, must be evaluated in the
context of a number of important factors that may affect the Company's financial
position, results of operations and the ability to remain profitable, including:
the ability of the Company to continue improvements in its home shopping
operations, the ability to develop new initiatives or enter new strategic
relationships, the ability of the Company to meet all conditions necessary for
the Houston television sale, the rate at which customers accept solicitations
for club membership, the ability of the Company to develop a successful e-
commerce business, consumer spending and debt levels, interest rate
fluctuations, seasonal variations in consumer purchasing activities, increases
in postal, paper and outbound shipping costs, competition in the retail and
direct marketing industries, continuity of relationships with or purchases from
major vendors, product mix, competitive pressure on sales and pricing, the
ability of the Company to manage growth and expansion, changes in the regulatory
framework affecting the Company, increases in cable access fees and other costs
which cannot be recovered through improved pricing and the identification and
availability of potential acquisition targets at prices favorable to the
Company. Investors are cautioned that all forward looking statements involve
risk and uncertainty.
In addition to any specific risks and uncertainties discussed in this Form
10-Q, the risks and uncertainties discussed in detail in the Company's Form 10-K
for the fiscal year ended January 31, 1999, specifically under the caption
entitled "Risk Factors", provide information which should be considered in
evaluating any of the Company's forward looking statements. In addition, the
facts and circumstances which exist when any forward looking statements are made
and on which those forward looking statements are based, may significantly
change in the future, thereby rendering obsolete the forward looking statements
on which such facts and circumstances were based.
20
<PAGE> 21
VALUEVISION INTERNATIONAL, INC. AND SUBSIDIARIES
PART II OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
On June 2, 1999, the Company sold an additional 1,600,000 shares
of Series A Redeemable Convertible Preferred Stock for an
aggregate of $13,265,000. On July 6, 1999, GE Equity exercised
their Investment Warrant allowing them to acquire an additional
10,674,000 shares of the Company's Common Stock for an aggregate
of $178,370,000, or $16.71 per share, representing the 45-day
average closing price of the underlying Common Stock ending on the
trading day prior to exercise. Following the exercise of the
Investment Warrant, the combined ownership of the Company by GE
Equity and NBC was approximately 39.9%.
These securities were issued in private placements to accredited
investors and were exempt from registration pursuant to section
4(2) of The Securities Act of 1933, as amended. Proceeds from the
sale of the Preferred Stock and upon exercise of the warrants are
available for general corporate purposes.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A joint special/annual meeting of shareholders of ValueVision
International, Inc. pursuant to due call by the Board of Directors
was held on June 2, 1999. Shareholders holding 27,467,365 shares
(common and preferred shares), or approximately 92.14% of the
outstanding shares, were represented at the meeting by proxy or in
person. Matters submitted at the meeting for vote by the
shareholders were as follows:
(a) Election of Directors
On March 8, 1999, pursuant to the terms of the Shareholder
Agreement and the Certificate of Designation for the Series A
Redeemable Convertable Preferred Stock (the "Preferred Stock")
between the Company and GE Capital Equity Investments, Inc. ("GE
Equity"), the Company increased the number of directors
constituting the Board from five to seven directors and, on April
26, 1999, named two persons, namely Mr. Stuart Goldfarb and Mr.
Jeffrey H. Coats, designated by GE Equity, to fill the newly
created directorships. Effective July 27, 1999, Mr. Coats resigned
from the ValueVision Board and was replaced by Mr. John Flannery,
Managing Director of GE Equity. The Board currently has one
vacancy which will remains unfilled. Four directors were elected
at the meeting by the holders of common stock voting seperately as
a class and two were elected by the holders of the Preferred Stock
voting seperately as a class.
The following nominees were elected with the following votes to
serve as members of the Board of Directors until the next annual
meeting of shareholders in 2000 or until such time as a successor
may be elected:
<TABLE>
<CAPTION>
Shares Shares
Voted For Withheld
--------- --------
<S> <C> <C>
Gene McCaffery 22,490,488 1,237,377
Robert J. Korkowski 22,490,488 1,237,377
Marshall S. Geller 22,490,388 1,237,477
Paul D. Tosetti 22,490,488 1,237,377
Stuart Goldfarb 5,339,500 --
Jeffrey H. Coats 5,339,500 --
</TABLE>
21
<PAGE> 22
(b) Approval of the issuance of 1,600,000 shares of Series A
Redeemable Convertible Preferred Stock to G.E. Equity
Investments, Inc. (GE Equity)
Shareholders approved the issuance of 1,600,000 shares of Series A
Redeemable Convertible Preferred Stock to GE Equity by a vote of
18,429,940 shares in favor, 145,934 shares against, 36,156 shares
abstained, and 8,855,335 shares representing broker non-votes.
(c) Approval of the issuance to GE Equity of ValueVision
common stock issuable upon exercise of the Investment
Warrant
Shareholders approved the issuance to GE Equity of ValueVision
common stock issuable upon exercise of the Investment Warrant by a
vote of 18,439,348 shares in favor, 135,403 shares against, 37,279
shares abstained, and 8,855,335 shares representing broker
non-votes.
(d) Ratification of the issuance to NBC of 1,450,000
Performance Distributor Warrants, and the share of
ValueVision common stock issuable thereunder
Shareholders approved the ratification of the issuance to NBC of
1,450,000 Performance Distributor Warrants by a vote of 18,509,191
shares in favor, 70,334 shares against, 32,505 shares abstained,
and 8,855,335 shares representing broker non-votes.
(e) Approval of Amendment No. 6 to the Second Amended
ValueVision International, Inc. 1990 Stock Option Plan
Shareholders approved the amendment to the Second Amended
ValueVision International, Inc. 1990 Stock Option Plan by a vote
of 25,597,071 shares in favor, 1,820,836 shares against, and
49,458 shares abstained. The Amendment increased the number of
shares issuable under such plan from 2,150,000 to 3,250,000.
ITEM 5. OTHER INFORMATION
Effective September 13, 1999, the Company entered into a new
strategic alliance with Snap! LLC and Xoom.com, Inc. whereby the
parties entered into major re-branding and electronic commerce
agreements, spanning television home shopping, Internet shopping
and direct e-commerce initiatives. Under the terms of the
agreements, ValueVision International Inc.'s television home
shopping network, currently called ValueVision, will be re-branded
as SnapTV ("Snap TV"). The re-branding will be phased in during
late 1999 and in the first half of 2000. The network, which will
continue to be owned and operated by ValueVision, will continue to
feature its present product line as well as offer new categories
of products and brands. The Company along with Snap.com, NBC's
Internet portal services company, will roll-out a new companion
Internet shopping service, SnapTV.com -- featuring online
purchasing opportunities that spotlight products offered on-air
along with online-only e-commerce opportunities offered by Snap TV
and its merchant partners. The new SnapTV.com online store will be
owned and operated by ValueVision and be featured prominently
within SnapTV.com's shopping area. Xoom.com, a leading direct
e-commerce services company, will become the exclusive direct
electronic commerce partner for SnapTV, managing all such
initiatives, including database management, e-mail marketing and
other sales endeavors. Direct online shopping offers will include
SnapTV merchandise, as well as Xoom.com products and services.
Pursuant to this new strategic alliance, the following agreements
were executed:
Trademark License Agreement
Snap!LLC, a Delaware limited liability company ("Snap") and the
Company have entered into a ten-year Trademark License Agreement
dated as of September 13, 1999 (the "Trademark Agreement").
Pursuant to the agreement, Snap granted the Company an exclusive
license to Snap's "SnapTV" trademark (the "SnapTV Mark") for the
purpose of operating a television home shopping service and for
the purpose of operating an Internet website at "www.snaptv.com"
(the "SnapTV Site"). The agreement also obligates the Company to
rebrand its television home shopping service using the SnapTV
Mark. In compensation for the license, the
22
<PAGE> 23
Company will pay to Snap a royalty of 2% of revenues received from
Internet users in connection with commerce transactions on the
SnapTV Site.
Interactive Promotion Agreement
Snap! LLC, Xoom.com, Inc., a Delaware corporation, ("Xoom") and
the Company have entered into a ten-year Interactive Promotion
Agreement dated as of September 13, 1999 (the "interactive
Promotion Agreement"). Pursuant to the agreement: (a) the Company
will pay Snap or Xoom, as applicable, 20% of the gross revenue
received from advertising on the Company's television home
shopping service where Snap or Xoom referred the advertiser to the
Company or materially assisted the Company with respect to the
sale of such advertising; (b) the Company will pay Xoom 50% of the
gross revenue received from e-mail campaigns conducted by Xoom on
behalf of the Company for the Company's products; and (c) the
Company will pay Snap 20% of the gross revenue generated from
airtime on the Company's television home shopping service which
promotes any uniform resource locater ("URL") (excluding up to 15%
of such airtime to the extent used to promote URL's which do not
include the "www.snaptv.com" URL). Also under the agreement, Snap
and Xoom shall have an exclusive right to use the Company's user
data for the purpose of conducting e-mail marketing campaigns.
Snap or Xoom, as applicable, will pay the Company 50% of the gross
revenue generated from such campaigns. Snap will also be granted
the exclusive right to use or sell all Internet advertising on the
SnapTV Site, and Snap will pay the Company 50% of the gross
revenue generated from such use or sales. The agreement also
provides that Snap and the Company will provide certain cross
promotional activities. Specifically, commencing when the
Company's television home shopping program reaches 30 million
full-time equivalent subscribers and continuing through the fourth
anniversary of the effective date of the agreement, Snap will
spend $1 million per quarter promoting the SnapTV Mark on NBC's
television network, and the Company will spend $1 million per
quarter promoting Snap, Snap's products or "www.snaptv.com" on
cable television advertising other than on the Company's
television home shopping program.
Warrant Purchase Agreement and Warrants
Effective September 13, 1999, in connection with the transactions
contemplated under the Interactive Promotion Agreement, dated as
of September 13, 1999, between Snap, Xoom and the Company, the
Company issued a warrant (the "ValueVision Warrant") to Xoom to
acquire ten million dollars worth of the Company's common stock,
$.01 par value (the "ValueVision Common Stock"), at an exercise
price per share of $24.706, which calculated to 404,760 shares of
ValueVision Common Stock. In consideration, Xoom issued a warrant
(the "Xoom Warrant," and collectively with the ValueVision
Warrant, the "Warrants") to the Company to acquire ten million
dollars worth of Xoom's common stock, $.0001 par value ("Xoom
Common Stock"), at an exercise price per share of $40.983, which
calculated to 244,004 shares of Xoom Common Stock. Both Warrants
are subject to customary antidilution features and have a five (5)
year term.
Registration Rights Agreement
In connection with the issuance of the ValueVision Warrant to Xoom
to purchase up to 404,760 shares of ValueVision Common Stock, the
Company agreed to provide Xoom certain customary piggyback
registration rights with no demand registration rights. Xoom also
provided the Company with similar customary piggyback registration
rights with no demand registration rights with respect to the Xoom
Warrant.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Employment Agreement between the Registrant and Steve
Jackel dated June 4, 1999. (A)
10.2 Employment Agreement between the Registrant and Stuart
Goldfarb dated July 28, 1999. (A)
10.3 Option Agreement between the Registrant and Stuart
Goldfarb dated July 28, 1999. (A)
10.4 Option Agreement between the Registrant and Stuart
Goldfarb dated July 28, 1999. (A)
10.5 Interactive Promotion Agreement, between the Registrant,
Snap!LLC, a Delaware limited liability company and Xoom.com,
Inc., a Delaware corporation, dated September 13, 1999. (A)
10.6 Trademark License Agreement, between the Registrant
and Snap!LLC, a Delaware limited liability company, dated
September 13, 1999. (A)
10.7 Warrant Purchase Agreement, between the Registrant,
Snap!LLc, a Delaware limited liability company and Xoom.com,
Inc. a Delaware corporation, dated September 13, 1999. (A)
10.8 Common Stock Purchase Warrant to purchase shares of
the Registrant, held by Xoom.com, a Delaware corporation,
dated September 13, 1999. (A)
23
<PAGE> 24
10.9 Registration Rights Agreement, between the Registrant
and Xoom.com, Inc. a Delaware corporation, regarding
Xoom.com's warrant to purchase shares of the Registrant,
dated September 13, 1999. (A)
27 Financial Data Schedule (for SEC use only).
(A) Filed herewith
(b) Reports on Form 8-K
i. The Company filed a Form 8-K on May 7, 1999 reporting
under Item 5 that on May 3, 1999, the Company's
wholly-owned subsidiaries VVI Baytown, Inc. and VVILPTV,
Inc. entered into an agreement with an entity wholly
owned by Pappas Telecasting Companies ("Pappas"),
whereby the Company has agreed to sell its full power
television station, KVVV-TV, Channel 57, and its low
power television station, K53 FV, each serving the
Houston, Texas market to Pappas for an aggregate
purchase price of approximately $28 million.
ii. The Company filed a Form 8-K on August 3, 1999 reporting
under Item 5, that (a) on July 5, 1999, the Company
announced a multi-year agreement with EchoStar
Communications Corp. to carry ValueVision programming on
EchoStar's Digital Television Service increasing
carriage of ValueVision to an additional 3.6 million
homes, (b) on July 6, 1999, the Company announced a
multi-year agreement with Direct TV, Inc. to carry
ValueVision programming on Direct TV's Digital
Television Service increasing carriage of ValueVision to
an additional 7.0 million homes, (c) on July 7, 1999,
the Company announced that NBC and GE Equity increased
their stake in the Company to 39.9% by exercising their
warrants and purchasing approximately $175 million of
ValueVision common stock.
iii. The Company filed a Form 8-K on August 5, 1999 reporting
under Item 5, that on August 3, 1999, the Company
announced the appointment of Stuart Goldfarb as Vice
Chairman of ValueVision International, Inc., the
promotion of Cary Deacon to President of ValueVision
Interactive and the promotion of Steve Jackel to
President of ValueVision -- TV Home Shopping Operations.
On August 6, 1999 the Company filed an amendment to this
8-K to correct a typographical error in the number of
full-time equivalent homes presently reached by the
Company's home shopping channel.
24
<PAGE> 25
SIGNATURES
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.
VALUEVISION INTERNATIONAL, INC. AND SUBSIDIARIES
/s/ Gene McCaffery
------------------------------------------
Gene McCaffery
Chief Executive Officer
(Principal Executive Officer)
/s/ Edwin G. Pohlmann
------------------------------------------
Edwin Pohlmann
Executive Vice President, Chief Operating
Officer and Chief Financial Officer
(Principal Financial and Accounting Officer)
September 14, 1999
25
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the 4th day of June, 1999, by and between
ValueVision International, Inc., a Minnesota corporation (hereinafter referred
to as "Employer"), and Steve Jackel (hereinafter referred to as "Employee").
WITNESSETH:
WHEREAS, Employer desires to obtain the services of Employee and
Employee desires to be employed by Employer as an employee on the terms and
conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual promises
contained in this Agreement, the parties hereto agree as follows:
1. EMPLOYMENT. Employer agrees to employ Employee and Employee agrees to
be employed by Employer on the terms and conditions set forth in this
Agreement.
2. TERM. The term of Employee's employment hereunder shall commence on the
date hereof and shall continue on a full-time basis for two years (the
"Term"). The "Employment Period" for purposes of this Agreement shall
be the period beginning on the date hereof and ending at the time
Employee shall cease to act as an employee of Employer.
3. DUTIES. Employee shall serve as Executive Vice President/General
Manager of Employer reporting to Employer's Chief Executive Officer and
shall perform the duties as assigned by Employer, from time to time,
and shall faithfully, and to the best of his ability, perform such
reasonable duties and services of an active, executive, administrative
and managerial nature as shall be specified and designated,from time to
time, by Employer. Employee agrees to devote his full time and skills
to such employment while he is so employed, subject to a vacation
allowance of not less than three (3) weeks during the Term, or such
additional vacation allowance as may be granted in the sole discretion
of Employer. Employee agrees to spend four and one-half (4.5) days each
week during the Term at Employer's corporate offices.
4. COMPENSATION. Employee's compensation for the services performed under
this Agreement shall be as follows:
a. Base Salary. Employee shall receive a base salary of at
least Two Hundred Thousand and No/100 Dollars ($200,000.00) per year
for the Term of this Agreement and Two Hundred Fifty Thousand and
No/100 Dollars ($250,000) per year ("Base Salary").
b. Bonus Salary. Employee shall receive bonus salary ("Bonus
Salary") within 90 days after each of Employers's fiscal years during
the Term of this Agreement of up to $150,000 based on the following
calculation: $50,000 if ValueVision obtains an operating profit equal
to at least 1% of net sales, an additional $50,000 if ValueVision
obtains a net operating profit of at least 2% of net sales, and an
additional $50,000 if ValueVision obtains a net operating
<PAGE> 2
profit of at least 3% of net sales, unless prior to such date,
Employee's employment shall be terminated pursuant to Sections 6.c. or
6.d. hereof. The first $50,000 of the Bonus Salary shall be guaranteed
for the first year of the Term and the second year of the Term.
c. Apartment and Automobile. Employer shall provide Employee
with an automobile and apartment to use in Minnesota during the Term
("Apartment and Auto Allowance").
5. OTHER BENEFITS DURING THE EMPLOYMENT PERIOD.
a. Employee shall receive all other benefits made available to
executive officers of Employer, from time to time, at its discretion
("Benefits"). It is understood and agreed that Employer may terminate
such Benefits or change any benefit programs at its sole discretion, as
they are not contractual for the term hereof.
b. Employer shall reimburse Employee for all reasonable and
necessary out-of-pocket business expenses incurred during the regular
performance of services for Employer, including, but not limited to,
entertainment and related expenses so long as Employer has received
proper documentation of such expenses from Employee.
c. Employer shall furnish Employee with such working
facilities and other services as are suitable to Employee's position
with Employer and adequate to the performance of his duties under this
Agreement.
6. TERMINATION OF EMPLOYMENT.
a. Death. In the event of Employee's death, this Agreement
shall terminate and Employee shall cease to receive Base Salary, Bonus
Salary, Apartment and Auto Allowance, and Benefits as of the date on
which his death occurs, except that, Employee shall receive Bonus
Salary prorated for the number of months to date of death.
b. Disability. If Employee becomes disabled such that Employee
cannot perform the essential functions of his job, and the disability
shall have continued for a period of more than one hundred twenty (120)
consecutive days, then Employer may, in its sole discretion, terminate
this Agreement and Employee shall then cease to receive Base Salary,
Bonus Salary, Apartment and Auto Allowance, and all other Benefits, on
the date this Agreement is so terminated except that, Employee shall
receive Bonus Salary prorated for the number of months to date of
disability; provided however, Employee shall then be entitled to such
disability, medical, life insurance, and other benefits as may be
provided generally for disabled employees of Employer when payments and
benefits hereunder ceases.
c. Voluntary Termination. In the event that Employee
voluntarily terminates his employment, he shall cease to receive Base
Salary, Bonus Salary, Apartment and Auto Allowance, and all other
Benefits as of the date of such termination.
2
<PAGE> 3
d. Termination With Cause. Employer shall be entitled to
terminate this Agreement and Employee's employment hereunder for Cause
(as herein defined), and in the event that Employer elects to do so,
Employee shall cease to receive Base Salary, Bonus Salary, Apartment
and Auto Allowance, and Benefits as of the date of such termination
specified by Employer. For purposes of this Agreement, "Cause" shall
mean: (i) a material act or act of fraud which results in or is
intended to result in Employee's personal enrichment at the direct
expense of Employer, including without limitation, theft or
embezzlement from Employer; (ii) public conduct by Employee
substantially detrimental to the reputation of Employer, (iii) material
violation by Employee of any Employer policy, regulation or practice;
(iv) conviction of a felony; or (v) habitual intoxication, drug use or
chemical substance use by any intoxicating or chemical substance.
Notwithstanding the forgoing, Employee shall not be deemed to have been
terminated for Cause unless and until Employee has received thirty (30)
days' prior written notice (a "Dismissal Notice") of such termination.
In the event Employee does not dispute such determination within thirty
(30) days after receipt of the Dismissal Notice, Employee shall not
have the remedies provided pursuant to Section 6.g. of this Agreement.
e. By Employee for Employer Cause. Employee may terminate this
Agreement upon thirty (30) days written notice to Employer (the
"Employee Notice") upon the occurrences without Employee's express
written consent, of any one or more of the following events, provided,
however, that Employee shall not have the right to terminate this
Agreement if Employer is able to cure such event within thirty (30)
days (ten (10) days with regard to Subsection (ii) hereof) following
delivery of such notice:
(i) Employer substantially diminishes Employee's duties
such that they are no longer of an executive nature as contemplated by
Section 3 hereof or
(ii) Employer materially breaches its obligations to pay
Employee as provided for herein and such failure to pay is not a result
of a good faith dispute between Employer and Employee.
f. Other. If Employer terminates this Agreement for any reason
other than as set forth in Sections 6.a, 6.b., 6.c or 6.d. above, or if
Employee terminates this Agreement pursuant to Section 6.e. above,
Employer shall immediately pay Employee in a lump sum payment, an
amount equal to Base Salary and Bonus Salary which would otherwise be
payable until the end of the Term (collectively, the "Severance
Payment"). In addition, Employer shall continue to provide Employee
with Benefits until the end of the Term. For purposes of calculating
Bonus Salary payable pursuant to this Section 6.f., Employee shall
receive Bonus Salary equal the Bonus Salary earned through the date of
termination.
g. Arbitration. In the event that Employee disputes a
determination that Cause exists for terminating his employment pursuant
to Section 6.d. of this Agreement, or Employer disputes the
determination that cause exists for Employee's termination of his
employment pursuant to Section 6.e of this Agreement, either such
disputing party may, in accordance with the Rules of the American
Arbitration Association ("AAA"), and within 30 days of receiving a
Dismissal Notice or Employee Notice, as applicable, file a petition
with
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the AAA for arbitration of the dispute, the costs thereof (including
legal fees and expenses) to be shared equally by the Employer and
Employee unless an order of the AAA provides otherwise. Such proceeding
shall also determine all other items then in dispute between the
parties relating to this Agreement, and the parties covenant and agree
that the decision of the AAA shall be final and binding and hereby
waive their rights to appeal thereof.
7. CONFIDENTIAL INFORMATION. Employee acknowledges that the confidential
information and data obtained by him during the course of his
performance under this Agreement concerning the business or affairs of
Employer, or any entity related thereto, are the property of Employer
and will be confidential to Employer. Such confidential information
may include, but is not limited to, specifications, designs, and
processes, product formulae, manufacturing, distributing, marketing or
selling processes, systems, procedures, plans, know-how, services or
material, trade secrets, devices (whether or not patented or
patentable), customer or supplier lists, price lists, financial
information including, without limitation, costs of materials,
manufacturing processes and distribution costs, business plans,
prospects or opportunities, and software and development or research
work, but does not include Employee's general business or direct
marketing knowledge (the "Confidential Information"). All the
Confidential Information shall remain the property of Employer and
Employee agrees that he will not disclose to any unauthorized persons
or use for his own account or for the benefit of any third party any
of the Confidential Information without Employer's written consent.
Employee agrees to deliver to Employer at the termination of this
employment, all memoranda, notes, plans, records, reports, video and
audio tapes and any and all other documentation (and copies thereof)
relating to the business of Employer, or any entity related thereto,
which he may then possess or have under his direct or indirect
control. Notwithstanding any provision herein to the contrary, the
Confidential Information shall specifically exclude information which
is publicly available to Employee and others by proper means, readily
ascertainable from public sources known to Employee at the time the
information was disclosed or which is rightfully obtained from a third
party, information required to be disclosed by law provided Employee
provides notice to Employer to seek a protective order, or information
disclosed by Employee to his attorney regarding litigation with
Employer.
8. INVENTIONS AND PATENTS. Employee agrees that all inventions,
innovations or improvements in the method of conducting Employer's
business or otherwise related to Employer's business (including new
contributions, improvements, ideas and discoveries, whether patentable
or not) conceived or made by him during the Employment Period belong to
Employer. Employee will promptly disclose such inventions, innovations
and improvements to Employer and perform all actions reasonably
requested by Employer to establish and confirm such ownership.
9. NONCOMPETE AND RELATED AGREEMENTS.
a. Employee agrees that during the Noncompetition Period
(as herein defined), he will not: (i) directly or indirectly own,
manage, control, participate in, lend his name to,
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act as consultant or advisor to or render services alone or in
association with any other person, firm, corporation or other business
organization for any other person or entity engaged in the television
home shopping and infomercial business, any mail order or internet
business that directly competes with Employer or any of its affiliates
by selling merchandise primarily of the type offered in and using a
similar theme as any of Employer's or its affiliates' catalogs or
internet sites during the Term of this Agreement or any business which
Employer (upon authorization of its board of directors) has invested
significant research and development funds or resources and
contemplates entering into during the next twelve (12) months (the
"Restricted Business"), anywhere that Employer or any of its affiliates
operates during the Term of this Agreement within the continental
United States (the "Restricted Area"); (ii) have any interest directly
or indirectly in any business engaged in the Restricted Business in the
Restricted Area other than Employer (provided that nothing herein will
prevent Employee from owning in the aggregate not more than one percent
(1%) of the outstanding stock of any class of a corporation engaged in
the Restricted Business in the Restricted Area which is publicly
traded, so long as Employee has no participation in the management or
conduct of business of such corporation), (iii) induce or attempt to
induce any employee of Employer or any entity related to Employer to
leave his, her or their employ, or in any other way interfere with the
relationship between Employer or any entity related to Employer and any
other employee of Employer or any entity related to Employer, or (iv)
induce or attempt to induce any customer, supplier, franchisee,
licensee, other business relation of any member of Employer or any
entity related to Employer to cease doing business with Employer or any
entity related to Employer, or in any way interfere with the
relationship between any customer, franchisee or other business
relation and Employer or any entity related to Employer, without the
prior written consent of Employer. For purposes of this Agreement,
"Noncompetition Period" shall mean the period commencing as of the date
hereof and ending on the last day of the sixth (6th) month following
the Employment Period.
b. If, at the time of enforcement of any provisions of
Section 9, a court of competent jurisdiction holds that the
restrictions stated therein are unreasonable under circumstances then
existing, the parties hereto agree that the maximum period, scope or
geographical area reasonable under such circumstances will be
substituted for the stated period, scope or area.
c. Employee agrees that the covenants made in this Section
9 shall be construed as an agreement independent of any other
provision of this Agreement and shall survive the termination of this
Agreement.
d. Employee represents and warrants to Employer that he is
not subject to any existing noncompetition or confidentiality
agreements which would in any way limit him from working in the
television home shopping, catalog, infomercial or internet businesses,
or from performing his duties hereunder or subject Employer to any
liability as a result of his employment hereunder. Employee agrees to
indemnify and hold Employer and its affiliates harmless from and
against any and all claims, liabilities, losses, costs, damages and
expenses
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(including reasonable attorneys' fees) arising as a result of any
noncompete or confidentiality agreements applicable to Employee.
10. TERMINATION OF EXISTING AGREEMENTS. This Agreement supersedes and
preempts any prior understandings, agreements or representations,
written or oral, by or between Employee and Employer, which may have
related to the employment of Employee, Employee's Agreement Not to
Compete with Employer, or the payment of salary or other compensation
by Employer to Employee (including, but not limited to, that certain
agreement dated April 16, 1999, and upon this Agreement becoming
effective, all such understandings, agreements and representations
shall terminate and shall be of no further force or effect.
11. SPECIFIC PERFORMANCE. Employee and Employer acknowledge that in the
event of a breach of this Agreement by either party, money damages
would be inadequate and the nonbreaching party would have no adequate
remedy at law. Accordingly, in the event of any controversy concerning
the rights or obligations under this Agreement, such rights or
obligations shall be enforceable in a court of equity by a decree of
specific performance. Such remedy, however, shall be cumulative and
nonexclusive and shall be in addition to any other remedy to which the
parties may be entitled.
12. SALE, CONSOLIDATION OR MERGER. In the event of a sale of the stock, or
substantially all of the stock, of Employer, or consolidation or merger
of Employer. with or into another corporation or entity, or the sale of
substantially all of the operating assets of Employer to another
corporation, entity or individual, Employer may assign its rights and
obligations under this Agreement to its successor-in-interest and such
successor-in-interest shall be deemed to have acquired all rights and
assumed all obligations of Employer hereunder.
13. STOCK OPTIONS. Employee is being granted incentive stock options in
accordance with the 1990 Stock Option Plan of Employer (the "Plan")
for 50,000 shares of ValueVision International, Inc. common stock
("Stock Options") with an exercise price equal to the last sale price
per share on the last trading day immediately prior to the date
hereof, subject to the provisions thereof and exercisable at the time
or times established by the stock option agreement representing the
Stock Options (the "Stock Option Agreement"). The Stock Options vest
in equal amounts as follows: one-half on the first anniversary of the
date of grant, and one-half on the second anniversary of the date of
grant provided Employee remains an employee of Employer on the vesting
date. All such Stock Options shall automatically vest upon a
termination of this Agreement prior to the end of the Term (unless
pursuant to Sections 6.c or 6.d.).
14. NO OFFSET - NO MITIGATION. Employee shall not be required to mitigate
damages under this Agreement by seeking other comparable employment.
The amount of any payment or benefit provided for in this Agreement,
including welfare benefits, shall not be reduced by any compensation or
benefits earned by or provided to Employee as the result of employment
by another employer.
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15. WAIVER. The failure of either party to insist, in any one or more
instances, upon performance of the terms or conditions of this
Agreement shall not be construed as a waiver or relinquishment of any
right granted hereunder or of the future performance of any such term,
covenant or condition.
16. ATTORNEY'S FEES. In the event of any action for breach of, to enforce
the provisions of, or otherwise arising out of or in connection with
this Agreement, the prevailing party in such action, as determined by a
court of competent jurisdiction in such action, shall be entitled to
receive its reasonable attorney fees and costs from the other party. If
a party voluntarily dismisses an action it has brought hereunder, it
shall pay to the other party its reasonable attorney fees and costs.
17. NOTICES. Any notice to be given hereunder shall be deemed sufficient if
addressed in writing, and delivered by registered or certified mail or
delivered personally: (I) in the case of Employer, to Employer's
principal business office; and (ii) in the case of Employee, to his
address appearing on the records of Employer, or to such other address
as he may designate in writing to Employer.
18. SEVERABILITY. In the event that any provision shall be held to be
invalid or unenforceable for any reason whatsoever, it is agreed such
invalidity or unenforceability shall not affect any other provision of
this Agreement and the remaining covenants, restrictions and provisions
hereof shall remain in full force and effect and any court of competent
jurisdiction may so modify the objectionable provisions as to make it
valid, reasonable and enforceable.
19. AMENDMENT. This Agreement may be amended only by an agreement in
writing signed by the parties hereto.
20. BENEFIT. This Agreement shall be binding upon and inure to the benefit
of and shall be enforceable by and against Employee's heirs,
beneficiaries and legal representatives. It is agreed that the rights
and obligations of Employee may not be delegated or assigned except as
specifically set forth in this Agreement.
21. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of Minnesota
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IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed as of the day, month and year first above written.
EMPLOYER: VALUEVISION INTERNATIONAL, INC.
By /s/ Gene McCaffery
------------------------------
Gene McCaffery
Its: Chief Executive Officer
EMPLOYEE:
By /s/ Steve Jackel
------------------------------
Steve Jackel
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EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the 28th day of July, 1999, by and among
ValueVision International, Inc., a Minnesota corporation ("Employer") and Stuart
Goldfarb ("Employee").
WITNESSETH:
WHEREAS, Employer desires to obtain the services of Employee and
Employee desires to be employed by Employer as an employee on the terms and
conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual promises
contained in this Agreement, the parties hereto agree as follows:
1. EMPLOYMENT. Employer agrees to employ Employee and Employee agrees to
be employed by Employer on the terms and conditions set forth in this
Agreement.
2. TERM. The term of Employee's employment hereunder shall commence on
the date of this Agreement and shall continue on a full-time basis for
a period of three (3) years (such period, the "Term"), unless earlier
terminated as hereinafter provided. The "Employment Period" for
purposes of this Agreement shall be the period beginning on the date
hereof and ending at the time Employee shall cease to act as an
employee of Employer.
3. DUTIES. Employee shall serve as the Vice Chairman of Employer,
responsible for New Business and Programming Development, Internet
Commerce and Cable Affiliations. Employee shall continue to be
nominated by the Board to serve as a member of the Board of Directors
of Employer (the "Board") during the Term, which nomination shall be
subject to approval by the shareholders of Employer at its annual
meetings of shareholders held subsequent to the date hereof, provided
that if Employee's employment with Employer is earlier terminated,
Employee shall immediately resign from the Board upon request by
Employer. Employee shall report to the Chief Executive Officer of the
Employer (the "CEO") and shall perform the duties as assigned by the
CEO and Board from time to time and shall faithfully and to the best of
his ability perform such reasonable duties and services of an active,
executive, administrative and managerial nature as shall be specified
and designated, from time to time, by the CEO and the Board. Employee
agrees to devote his full time and skills to such employment while he
is so employed (spending approximately 4.5 days each week in Employer's
corporate headquarters or traveling on Employer's business), subject to
a vacation allowance of not less than three (3) weeks during each year
of the Term, or such additional vacation allowance as may be granted to
other senior executives of Employer.
<PAGE> 2
4. COMPENSATION. During the Employment Period, Employee's compensation
for the services performed under this Agreement shall be as follows:
a. Base Salary. Employee shall receive a base salary of at least Four
Hundred Fifty Thousand and No/100 Dollars ($450,000.00) per year for
the for the first year of the Term, Five Hundred Thousand and No/100
Dollars ($500,000.00) per year for the second year of the Term, and
Five Hundred Fifty Thousand and No/100 Dollars ($550,000.00) per year
for the last year of the Term (the "Base Salary").
b. Bonus Salary. Employee shall receive bonus salary ("Bonus
Salary") within 90 days after each of Employers's fiscal years during
the term of this Agreement of up to $200,000 based on the following
calculation: $50,000 if ValueVision obtains an operating profit equal
to at least 1% of net sales, an additional $50,000 if ValueVision
obtains a net operating profit of at least 2% of net sales, an
additional $50,000 if ValueVision obtains a net operating profit of at
least 3% of net sales, and an additional $50,000 if ValueVision obtains
a net operating profit of at least 4% of net sales, unless prior to
such date, Employee's employment shall be terminated pursuant to
Sections 6.c. or 6.d. hereof. No Bonus Salary shall be payable if
ValueVision's net operating profit is less than 1% of net sales.
c. Apartment and Automobile. Employer shall provide Employee with an
automobile and apartment to use in Minnesota during the Term
("Apartment and Auto Allowance").
d. Stock Options. As of the date hereof, Employer shall grant
to Employee, employee stock options to purchase an aggregate of 550,000
shares of the common stock, par value $.01 per share (the "Common
Stock") of Employer (collectively, the "Options"). The Options shall be
granted under an option agreement between Employer and Employee dated
as of the date hereof, which option agreement shall be on terms
consistent with the terms of this Agreement. The Options shall vest
one-third upon issuance, one-third on the first anniversary of their
date of grant and one-third on the second anniversary of their date of
grant. The Options shall have a per share exercise price equal to the
closing price of one share of common stock of Employer as of the date
immediately preceeding the date of grant. All such Options shall
automatically vest upon a termination of this Agreement prior to the
end of the Term (unless pursuant to Sections 6.c or 6.d.) or upon a
Change of Control.
5. OTHER BENEFITS DURING THE EMPLOYMENT PERIOD. During the Employment
Period, Employer shall provide Employee with the following benefits:
a. Employee shall receive all benefits made available to executive
officers of Employer, from time to time, at its discretion
("Benefits"). It is understood and agreed that Employer may terminate
such Benefits or change any benefit programs at its sole discretion, as
they are not contractual for the term hereof.
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b. Employer shall reimburse Employee for all reasonable and necessary
out-of-pocket business expenses incurred during the regular performance
of services for Employer, including, but not limited to, entertainment
and related expenses so long as Employer has received proper
documentation of such expenses from Employee.
c. Employer shall furnish Employee with such working facilities and
other services as are suitable to Employee's position with Employer and
adequate to the performance of his duties under this Agreement.
6. TERMINATION OF EMPLOYMENT.
a. Death. In the event of Employee's death, the Employment Period
shall terminate and Employee shall cease to receive Base Salary, Bonus
Salary, Apartment and Auto Allowance, and Benefits as of the date on
which his death occurs.
b. Disability. If Employee becomes disabled such that Employee cannot
perform the essential functions of his job, and the disability shall
have continued for a period of more than one hundred twenty (120)
consecutive days, then Employer may, in its sole discretion, terminate
the Employment Period, provided that a physician to be selected by
Employer, subject to the reasonable satisfaction of Employee, shall
have determined the existence of such disability. Upon the date of such
termination, Employee shall then cease to receive Base Salary, Bonus
Salary, Apartment and Auto Allowance, and all other Benefits, on the
date this Agreement is so terminated; provided however, Employee shall
then be entitled to such disability, medical, life insurance, and other
benefits as may be provided generally for disabled employees of
Employer when payments and benefits hereunder ceases.
c. Voluntary Termination. In the event that Employee voluntarily
terminates his employment other than pursuant to Section 6.e, the
Employment Period shall terminate and Employee shall cease to receive
Base Salary, Bonus Salary, Apartment and Auto Allowance, and all other
Benefits as of the date of such termination. Employee shall be entitled
to receive any payments or Benefits provided herein that have accrued
(but have not been paid) prior to the date of such termination (but no
unvested Options shall accelerate as a result of such termination).
d. Termination With Cause. Employer shall be entitled to terminate
the Employment Period and Employee's employment hereunder for Cause
(as defined below), and in the event that Employer elects to do so,
Employee shall cease to receive Base Salary, Bonus Salary, Apartment
and Auto Allowance, and Benefits as of the date of such termination
specified by Employer. For purposes of this Agreement, "Cause" shall
mean: (i) a material improper act or act of fraud which results in or
is intended to result in Employee's personal enrichment at the direct
expense of Employer, including without limitation, theft or
embezzlement from Employer; (ii) material violation by Employee of any
material policy, regulation or practice or Employer; (iii) conviction
of a felony; or (iv) habitual intoxication, drug use or chemical
substance abuse by any intoxicating or chemical substance.
Notwithstanding the forgoing, Employee shall not
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be deemed to have been terminated for Cause unless and until (A)
Employee has received thirty (30) days' prior written notice (a
"Dismissal Notice") of such termination and (B) if such "Cause" event
is capable of being cured, Employee has not cured such "Cause" event
within ten (10) days following delivery of such notice. In the event
Employee does not dispute such determination within thirty (30) days
after receipt of the Dismissal Notice, Employee shall not have the
remedies provided pursuant to Section 6.g. of this Agreement. Employee
shall be entitled to receive any payments or Benefits provided herein
that have accrued (but have not been paid) prior to the date of such
termination (but no unvested Options shall accelerate as a result of
such termination).
e. By Employee for Employer Cause. Employee may terminate the
Employment Period upon thirty (30) days written notice to Employer (the
"Employee Notice") upon the occurrences without Employee's express
written consent, of any one or more of the following events, provided,
however, that Employee shall not have the right to terminate the
Employment Period if Employer is able to cure such event within thirty
(30) days (ten (10) days with regard to Subsection (ii) hereof)
following delivery of such notice:
(i) Employer substantially diminishes Employee's duties such
that they are no longer of an executive nature as contemplated by
Section 3 hereof or
(ii) Employer materially breaches its obligations to pay
Employee as provided for herein and such failure to pay is not a result
of a good faith dispute between Employer and Employee.
(iii) Any purported termination of this Agreement by Employer
not effected in accordance with the provisions set forth herein,
provided that Employee has delivered thirty (30) days' prior written
notice of such termination and Employer has not cured such event within
thirty (30) days following delivery of such notice by Employee.
In the event of a termination of Employee's employment with Employer
under this Section 6.e, Employee shall be entitled to receive the
payments and Benefits as set forth in Section 6.g.
f. Termination After Change of Control. If Employee is terminated by
Employer without Cause after the consummation of a transaction
constituting a Change of Control, Employee shall receive a payment in
an amount equal to Base Salary and Bonus Salary (based upon the last
paid Bonus Salary received or accrued for in the previous year, if any,
and pro rated for the number of remaining months until the end of the
Term) which would otherwise be payable until the end of the Term. Any
payments made by Employer to Employee under this Section 6.f shall be
paid on a pro rata basis over the Non-Competition Period (as defined
below). In addition, during the 30 day period immediately following the
six month
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anniversary of the consummation of a transaction constituting a Change
of Control, Employee may terminate this Agreement for any reason by
providing written notice to Employer and receive the benefits provided
in the immediately preceding sentence, provided that any such
termination by Employee under this Section 6.f shall not also be deemed
to be a termination by Employee under Section 6.c. In the event that
Employee's employment with Employer is terminated by either Employer or
Employee pursuant to this Section 6.f, Employee shall be entitled to
any payments or Benefits provided in this Agreement that have accrued
(but have not been paid) prior to the date of such termination,
provided that any acceleration of any unvested Options shall be in
accordance with the provisions of Section 4.d).
g. Other Termination. Employer reserves the right to terminate the
Employment Period and Employee's employment hereunder at any time (and
without Cause), in its sole and absolute discretion. If Employer
terminates the Employment Period under this Section 6.g or if Employee
terminates this Agreement pursuant to Section 6.e. above, Employer
shall immediately pay Employee in a lump sum payment an amount equal to
Base Salary which would otherwise be payable until the end of the Term
(the "Severance Payment"), provided that if such remaining Term exceeds
12 months, the Severance Payment attributable to the last twelve months
of the Term shall not be included in the lump sum payment and instead
shall be paid over the Noncompetition Period (as defined below) on a
pro rata basis in accordance with Employer's normal payment schedule
for its executive employees. In addition, Employer shall continue to
provide Employee with Benefits until the end of the Term. Employee
shall be entitled to receive any payments or Benefits provided herein
that have accrued (but have not been paid) prior to the date of such
termination (including the acceleration of any unvested Options
pursuant to Section 4.d).
h. Arbitration. In the event that Employee disputes a determination
that Cause exists for terminating his employment pursuant to Section
6.d. of this Agreement, or Employer disputes the determination that
Cause exists for Employee's termination of his employment pursuant to
Section 6.e of this Agreement, either such disputing party may, in
accordance with the Rules of the American Arbitration Association
("AAA"), and within 30 days of receiving a Dismissal Notice or Employee
Notice, as applicable, file a petition with the AAA in any city in
which Employer's corporate executive offices are located for
arbitration of the dispute, the costs thereof (including legal fees and
expenses) to be shared equally by Employer and Employee unless an order
of the AAA provides otherwise. Such proceeding shall also determine all
other items then in dispute between the parties relating to this
Agreement, except with respect to enforcement of the agreements
contained in Sections 7 and 9 if either party seeks injunctive relief,
and the parties covenant and agree that the decision of the AAA shall
be final and binding and hereby waive their rights to appeal thereof.
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7. CONFIDENTIAL INFORMATION. Employee acknowledges that the
confidential information and data obtained by him during the course of
his performance under this Agreement concerning the business or affairs
of Employer, or any entity related thereto, are the property of
Employer and will be confidential to Employer. Such confidential
information may include, but is not limited to, specifications,
designs, and processes, product formulae, manufacturing, distributing,
marketing or selling processes, systems, procedures, plans, know-how,
services or material, trade secrets, devices (whether or not patented
or patentable), customer or supplier lists, price lists, financial
information including, without limitation, costs of materials,
manufacturing processes and distribution costs, business plans,
prospects or opportunities, and software and development or research
work, but does not include Employee's general business or direct
marketing knowledge (the "Confidential Information"). All the
Confidential Information shall remain the property of Employer and
Employee agrees that he will not disclose to any unauthorized persons
or use for his own account or for the benefit of any third party any of
the Confidential Information without Employer's written consent.
Employee agrees to deliver to Employer at the termination of this
employment, all memoranda, notes, plans, records, reports, video and
audio tapes and any and all other documentation (and copies thereof)
relating to the business of Employer, or any entity related thereto,
which he may then possess or have under his direct or indirect control.
Notwithstanding any provision herein to the contrary, the Confidential
Information shall specifically exclude information which is publicly
available to Employee and others by proper means, readily ascertainable
from public sources known to Employee at the time the information was
disclosed or which is rightfully obtained from a third party,
information required to be disclosed by law provided Employee provides
notice to Employer to seek a protective order, or information disclosed
by Employee to his attorney regarding litigation with Employer.
8. INVENTIONS AND PATENTS. Employee agrees that all inventions,
innovations or improvements in the method of conducting Employer's
business or otherwise related to Employer's business (including new
contributions, improvements, ideas and discoveries, whether patentable
or not) conceived or made by him during the Employment Period belong to
Employer. Employee will promptly disclose such inventions, innovations
and improvements to Employer and perform all actions reasonably
requested by Employer to establish and confirm such ownership.
9. NONCOMPETE AND RELATED AGREEMENTS.
a. Employee agrees that during the Noncompetition Period, he will
not: (i) directly or indirectly own, manage, control, participate in,
lend his name to, act as consultant or advisor to or render services
(alone or in association with any other person, firm, corporation or
other business organization) for any other person or
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entity engaged in (a) the television home shopping business, (b) any
mail order or internet business that directly competes with Employer or
any of its affiliates by selling merchandise primarily of the type
offered in and using a similar theme as any of Employer's or its
affiliates' catalogs or internet businesses during the term of this
Agreement or (c) any business which Employer (upon authorization of its
board of directors) has invested significant research and development
funds or resources and contemplates entering into during the next
twelve (12) months (the "Restricted Business"), in any country that
Employer or any of its affiliates operates during the term of this
Agreement (the "Restricted Area"); (ii) have any interest directly or
indirectly in any business engaged in the Restricted Business in the
Restricted Area other than Employer (provided that nothing herein will
prevent Employee from owning in the aggregate not more than one percent
(1%) of the outstanding stock of any class of a corporation engaged in
the Restricted Business in the Restricted Area which is publicly
traded, so long as Employee has no participation in the management or
conduct of business of such corporation), (iii) induce or attempt to
induce any employee of Employer or any entity related to Employer to
leave his, her or their employ, or in any other way interfere with the
relationship between Employer or any entity related to Employer and any
other employee of Employer or any entity related to Employer, or (iv)
induce or attempt to induce any customer, supplier, franchisee,
licensee, other business relation of any affiliate of Employer or any
entity related to Employer to cease doing business with Employer or any
entity related to Employer, or in any way interfere with the
relationship between any customer, franchisee or other business
relation and Employer or any entity related to Employer, without the
prior written consent of Employer. For purposes of this Agreement, the
"Noncompetition Period" shall commence as of the date hereof and end on
the last day of the period that is equal to twelve (12) months
following the date on which Employee's employment is terminated under
this Agreement for any reason.
b. If, at the time of enforcement of any provisions of this Section
9, a court of competent jurisdiction holds that the restrictions
stated herein are unreasonable under circumstances then existing, the
parties hereto agree that the maximum period, scope or geographical
area reasonable under such circumstances will be substituted for the
stated period, scope or area.
c. Employee agrees that the covenants made in this Section 9 shall be
construed as an agreement independent of any other provision of this
Agreement and shall survive the termination of this Agreement.
10. TERMINATION OF EXISTING AGREEMENTS. This Agreement, effective as of
the date hereof, supersedes and preempts any prior understandings,
agreements or representations, written or oral, by or between Employee
and Employer.
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11. SPECIFIC PERFORMANCE. Employee and Employer acknowledge that in the
event of a breach of this Agreement by either party, money damages
would be inadequate and the nonbreaching party would have no adequate
remedy at law. Accordingly, in the event of any controversy concerning
the rights or obligations under this Agreement, such rights or
obligations shall be enforceable in a court of equity by a decree of
specific performance. Such remedy, however, shall be cumulative and
nonexclusive and shall be in addition to any other remedy to which the
parties may be entitled.
12. SALE, CONSOLIDATION OR MERGER. In the event of a sale of the stock,
or substantially all of the stock, of Employer or consolidation or
merger of Employer with or into another corporation or entity, or the
sale of substantially all of the operating assets of Employer to
another corporation, entity or individual, Employer may assign its
rights and obligations under this Agreement to its
successor-in-interest and such successor-in-interest shall be deemed to
have acquired all rights and assumed all obligations of Employer
hereunder.
13. CHANGE OF CONTROL. For purposes of this Agreement, a "Change of
Control" shall mean an event as a result of which: (i) any "person" (as
such term is used in Sections 13(d) and 14(d) of the Securities and
Exchange Act of 1934 (the "Exchange Act"), but excluding Snyder Capital
Management, L.P.), is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act, except that a person shall be deemed
to have "beneficial ownership" of all securities that such person has a
right to acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of more than 20% of
the total voting power of the voting stock of Employer (or their
successors and assigns), provided, however, that in the case of General
Electric Company, G.E. Capital Equity Investments, Inc., National
Broadcasting Company, Inc., or any wholly-owned affiliate of any of the
foregoing (the "GE Entities"), the threashold shall be 50% of the total
voting power of the voting stock of Employer (or their successors and
assigns), provided further, that for purposes of calculating beneficial
ownership, the beneficial ownership of the GE Entities shall not be
aggregated with any non-wholly owned affiliate of the GE Entitites, nor
shall the beneficial ownership of any non-wholly owned affiliate of the
GE Entities be aggregated with the GE Entities; (ii) Employer
consolidates with, or merges with or into another corporation or sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any person or any corporation
consolidates with, or merges with or into, Employer, in any such event
pursuant to a transaction in which the outstanding voting stock of
Employer is changed into or exchanged for cash, securities or other
property, other than any such transaction where (A) the outstanding
voting stock of Employer is changed into or exchanged for (x) voting
stock of the surviving or transferee corporation or (y) cash,
securities (whether or not including voting stock) or other property,
and (B) the holders of the voting
8
<PAGE> 9
stock of Employer immediately prior to such transaction own, directly
or indirectly, not less than 80% of the voting power of the voting
stock of the surviving corporation immediately after such transaction;
or (iii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors of
Employer (together with any new directors whose election by such Board
or whose nomination for election by the stockholders of Employer was
approved by a vote of 66-2/3% of the directors then still in office who
were either directors at the beginning of such period or whose election
or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Employer then in
office, or (iv) Employer is liquidated or dissolved or adopts a plan of
liquidation or (v) Gene McCaffery is no longer the CEO and Employee
does not report to the Board.
14. NO OFFSET - NO MITIGATION. Employee shall not be required to
mitigate damages under this Agreement by seeking other comparable
employment. The amount of any payment or benefit provided for in this
Agreement, including welfare benefits, shall not be reduced by any
compensation or benefits earned by or provided to Employee as the
result of employment by another employer.
15. WAIVER. The failure of either party to insist, in any one or more
instances, upon performance of the terms or conditions of this
Agreement shall not be construed as a waiver or relinquishment of any
right granted hereunder or of the future performance of any such term,
covenant or condition.
16. INDEMNIFICATION. Employee shall be entitled to indemnification to
the fullest extent permitted under the laws of the State of Minnesota.
17. NOTICES. Any notice to be given hereunder shall be deemed
sufficient if addressed in writing, and delivered by registered or
certified mail or delivered personally: (i) in the case of Employer, to
Employer's principal business office; and (ii) in the case of Employee,
to his address appearing on the records of Employer, or to such other
address as he may designate in writing to Employer.
18. SEVERABILITY. In the event that any provision shall be held to be
invalid or unenforceable for any reason whatsoever, it is agreed such
invalidity or unenforceability shall not affect any other provision of
this Agreement and the remaining covenants, restrictions and provisions
hereof shall remain in full force and effect and any court of competent
jurisdiction may so modify the objectionable provisions as to make it
valid, reasonable and enforceable.
19. AMENDMENT. This Agreement may be amended only by an agreement in
writing signed by the parties hereto.
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<PAGE> 10
20. BENEFIT. This Agreement shall be binding upon and inure to the
benefit of and shall be enforceable by and against Employee's heirs,
beneficiaries and legal representatives. It is agreed that the rights
and obligations of Employee may not be delegated or assigned except as
specifically set forth in this Agreement.
21. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of Minnesota.
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<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed as of the day, month and year first above written.
EMPLOYER: VALUEVISION INTERNATIONAL, INC.
/s/ Edwin Pohlmann
----------------------------------------
Edwin Pohlmann, Executive Vice President
EMPLOYEE: /s/ Stuart Goldfarb
----------------------------------------
Stuart Goldfarb
11
<PAGE> 1
EXHIBIT 10.3
OPTION AGREEMENT
VALUEVISION INTERNATIONAL, INC.
TO
STUART GOLDFARB
OPTION AGREEMENT made as of the 28th day of July, 1999, between
ValueVision International, Inc., a Minnesota corporation ("ValueVision"), Stuart
Goldfarb, an employee of ValueVision ("Employee").
WHEREAS, ValueVision desires, by affording Employee an opportunity to
purchase its shares of Common Stock, $0.01 par value ("Shares"), as hereinafter
provided, to carry out the resolutions of the Board of Directors of ValueVision
granting a non-qualified stock option to Employee as partial compensation for
his efforts on behalf of ValueVision as an employee.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Grant of Option. ValueVision hereby irrevocably grants to Employee
the right and option, hereinafter called the Option, to purchase all or any part
of an aggregate of two hundred thousand (200,000) Shares (such number
being subject to adjustment as provided in paragraph 7 hereof) on the terms and
conditions herein set forth.
2. Purchase Price. The purchase price of the Shares covered by the
Option shall be $24.00, which is equal to the last price on the NASDAQ System of
one share of ValueVision's Common Stock on the last trade date prior to the date
hereof day first written above.
<PAGE> 2
3. Exercise of Option. The right to exercise the Option in whole or in
part, shall be effective, except as otherwise specifically limited herein, as
follows: on and after July 28, 1999, Employee may purchase up to 66,666 Shares;
and on and after July 28, 2000, Employee may purchase up to an additional 66,667
Shares; and on and after July 28, 2001, Employee may purchase up to an
additional 66,667 Shares. Each of the rights to purchase Shares granted in the
preceding sentence shall expire five (5) years after the right to purchase the
Shares became effective, except as otherwise specifically limited herein. The
purchase price of Shares acquired through exercise of any part of the Option
shall be paid in full in cash at the time of exercise. Employee, as holder of
the Option, shall not have any of the rights of a Shareholder with respect to
the Shares covered by the Option except to the extent that one or more
certificates for such Shares shall be delivered to him upon the due exercise of
all or any part of the Option.
4. Non-Transferability. The Option shall not be transferable otherwise
than by will or the laws of descent and distribution, and the Option may be
exercised, during the lifetime of Employee, only by Employee. More particularly
(but without limiting the generality of the foregoing), the Option may not be
assigned, transferred (except as provided above), pledged, or hypothecated in
any way, shall not be assignable by operation of law, and shall not be subject
to execution, attachment, or similar process. Any attempted assignment,
transfer, pledge, hypothecation, or other disposition of the Option contrary to
the provisions hereof, and the levy of any execution, attachment, or similar
process upon the Option shall be null and void and without effect.
5. Exercise Upon Termination. If Employee ceases to serve as an
employee of ValueVision, while the Option remains in effect, whether as a result
of resignation or termination,
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<PAGE> 3
with or without cause, the Option may only be exercised (to the extent that
Employee shall have been entitled to do so on the last day in which he served as
an employee of ValueVision) by Employee at anytime within ninety (90) days of
the day in which he ceased to serve as an employee of ValueVision. Upon the
expiration of such ninety (90) day period, or, if earlier, upon the expiration
date of the Option as set forth in Paragraph 3 hereof, the Option shall become
null and void.
6. Exercise Upon Death. If Employee dies while the Option remains in
effect, with or without cause, the Option may be exercised (to the extent that
Employee shall have been entitled to do so on the day of his death) by the
legatee or legatees of Employee under his will, or by his personal
representatives or distributees, at anytime within ninety (90) days after his
death. Upon the expiration of such ninety (90) day period, or, if earlier, upon
the expiration date of the Option as set forth in Paragraph 3 hereof, the Option
shall become null and void.
7. Changes in Capital Structure. If all or any portion of the Option
shall be exercised subsequent to any Share dividend, split-up, recapitalization,
merger, consolidation, combination or exchange of Shares, separation,
reorganization, or liquidation occurring after the date hereof, as a result of
which Shares of any class shall be issued in respect of outstanding Shares, or
Shares shall be changed into the same or a different number of Shares of the
same or another class or classes, the person or persons so exercising the Option
shall receive, for the aggregate price paid upon such exercise, the aggregate
number and class of Shares which, if Shares (as authorized at the date hereof)
had been purchased at the date hereof for the same aggregate price (on the basis
of the price per Share set forth in paragraph 2 hereof) and had not been
disposed of, such person or persons would be holding, at the time of such
exercise, as a result of such purchase and all such shared dividends, split-ups,
recapitalizations, mergers, consolidations, combinations or exchanges of Shares,
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<PAGE> 4
separations, reorganizations, or liquidations; provided, however, that no
fractional Share shall be issued upon any such exercise, and the aggregate price
paid shall be appropriately reduced on account of any fractional Share not
issued.
8. Method of Exercising Option. Subject to the terms and conditions of
this Agreement, the Option may only be exercised by written notice to
ValueVision. Such notice shall state the election to exercise the Option and the
number of Shares in respect of which it is being exercised, and shall be signed
by the person or person so exercising the Option. Such notice shall either: (a)
be accompanied by payment of the full purchase price of such Shares, in which
event ValueVision shall deliver a certificate or certificates representing such
Shares as soon as practicable after the notice shall be received; or (b) fix a
date (not less than five (5) nor more than ten (10) business days from the date
such notice shall be received by ValueVision) for the payment of the full
purchase price of such Shares against delivery of a certificate or certificates
representing such Shares. Payment of such purchase price shall, in either case,
be made by wire transfer or certified or cashier's check payable to the order of
ValueVision. All Shares that shall be purchased upon the exercise of the Option
as provided herein shall be fully paid and non-assessable.
9. Immediate Acceleration of Options Upon Change in Control.
Notwithstanding any provision contained herein, or any other agreement relating
hereto to the contrary, the Option granted hereby will become exercisable
immediately in accordance with section 4.d. of that certain Employment Agreement
dated July 28, 1999 between Valuevision and Employee, unless and to the extent
that the exercise of the Option would result in the application of the
provisions of Section 280G of the Internal Revenue Code of 1986, as amended.
4
<PAGE> 5
10. Investment Certificate and Registration. Prior to the receipt of
the certificates pursuant to the exercise of the Option granted hereunder,
Employee shall agree to hold the Shares acquired by exercise of the Option for
investment and not with a view to resale or distribution thereof to the public,
and shall deliver to ValueVision a certificate to that effect. Nothing in this
Agreement shall require ValueVision to register the Option or the Shares
purchased upon the exercise of said Option.
11. General. ValueVision shall at all times during the term of the
Option reserve and keep available such number of Shares as will be sufficient to
satisfy the requirements of this Option Agreement. This Option shall be
construed in accordance with the laws of the State of Minnesota.
[signatures on following page]
5
<PAGE> 6
IN WITNESS WHEREOF, ValueVision and Employee have executed this
Agreement as of the date first written above.
VALUEVISION INTERNATIONAL, INC.
By /s/ Gene McCaffery
----------------------------------
Gene McCaffery,
Chief Executive Officer
Employee:
/s/ Stuart Goldfarb
------------------------------------
Stuart Goldfarb
<PAGE> 1
EXHIBIT 10.4
OPTION AGREEMENT
VALUEVISION INTERNATIONAL, INC.
TO
STUART GOLDFARB
OPTION AGREEMENT made as of the 28th day of July, 1999, between
ValueVision International, Inc., a Minnesota corporation ("ValueVision"), Stuart
Goldfarb, an employee of ValueVision ("Employee").
WHEREAS, ValueVision desires, by affording Employee an opportunity to
purchase its shares of Common Stock, $0.01 par value ("Shares"), as hereinafter
provided, to carry out the resolutions of the Board of Directors of ValueVision
granting a non-qualified stock option to Employee as partial compensation for
his efforts on behalf of ValueVision as an employee.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Grant of Option. ValueVision hereby irrevocably grants to Employee
the right and option, hereinafter called the Option, to purchase all or any part
of an aggregate of three hundred fifty thousand (350,000) Shares (such number
being subject to adjustment as provided in paragraph 7 hereof) on the terms and
conditions herein set forth.
2. Purchase Price. The purchase price of the Shares covered by the
Option shall be $24.00, which is equal to the last price on the NASDAQ System of
one share of ValueVision's Common Stock on the last trade date prior to the date
hereof day first written above.
<PAGE> 2
3. Exercise of Option. The right to exercise the Option in whole or in
part, shall be effective, except as otherwise specifically limited herein, as
follows: on and after July 28, 1999, Employee may purchase up to 116,666 Shares;
and on and after July 28, 2000, Employee may purchase up to an additional
116,667 Shares; and on and after July 28, 2001, Employee may purchase up to an
additional 116,667 Shares. Each of the rights to purchase Shares granted in the
preceding sentence shall expire five (5) years after the right to purchase the
Shares became effective, except as otherwise specifically limited herein. The
purchase price of Shares acquired through exercise of any part of the Option
shall be paid in full in cash at the time of exercise. Employee, as holder of
the Option, shall not have any of the rights of a Shareholder with respect to
the Shares covered by the Option except to the extent that one or more
certificates for such Shares shall be delivered to him upon the due exercise of
all or any part of the Option.
4. Non-Transferability. The Option shall not be transferable otherwise
than by will or the laws of descent and distribution, and the Option may be
exercised, during the lifetime of Employee, only by Employee. More particularly
(but without limiting the generality of the foregoing), the Option may not be
assigned, transferred (except as provided above), pledged, or hypothecated in
any way, shall not be assignable by operation of law, and shall not be subject
to execution, attachment, or similar process. Any attempted assignment,
transfer, pledge, hypothecation, or other disposition of the Option contrary to
the provisions hereof, and the levy of any execution, attachment, or similar
process upon the Option shall be null and void and without effect.
5. Exercise Upon Termination. If Employee ceases to serve as an
employee of ValueVision, while the Option remains in effect, whether as a result
of resignation or termination,
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<PAGE> 3
with or without cause, the Option may only be exercised (to the extent that
Employee shall have been entitled to do so on the last day in which he served as
an employee of ValueVision) by Employee at anytime within ninety (90) days of
the day in which he ceased to serve as an employee of ValueVision. Upon the
expiration of such ninety (90) day period, or, if earlier, upon the expiration
date of the Option as set forth in Paragraph 3 hereof, the Option shall become
null and void.
6. Exercise Upon Death. If Employee dies while the Option remains in
effect, with or without cause, the Option may be exercised (to the extent that
Employee shall have been entitled to do so on the day of his death) by the
legatee or legatees of Employee under his will, or by his personal
representatives or distributees, at anytime within ninety (90) days after his
death. Upon the expiration of such ninety (90) day period, or, if earlier, upon
the expiration date of the Option as set forth in Paragraph 3 hereof, the Option
shall become null and void.
7. Changes in Capital Structure. If all or any portion of the Option
shall be exercised subsequent to any Share dividend, split-up, recapitalization,
merger, consolidation, combination or exchange of Shares, separation,
reorganization, or liquidation occurring after the date hereof, as a result of
which Shares of any class shall be issued in respect of outstanding Shares, or
Shares shall be changed into the same or a different number of Shares of the
same or another class or classes, the person or persons so exercising the Option
shall receive, for the aggregate price paid upon such exercise, the aggregate
number and class of Shares which, if Shares (as authorized at the date hereof)
had been purchased at the date hereof for the same aggregate price (on the basis
of the price per Share set forth in paragraph 2 hereof) and had not been
disposed of, such person or persons would be holding, at the time of such
exercise, as a result of such purchase and all such shared dividends, split-ups,
recapitalizations, mergers, consolidations, combinations or exchanges of Shares,
3
<PAGE> 4
separations, reorganizations, or liquidations; provided, however, that no
fractional Share shall be issued upon any such exercise, and the aggregate price
paid shall be appropriately reduced on account of any fractional Share not
issued.
8. Method of Exercising Option. Subject to the terms and conditions of
this Agreement, the Option may only be exercised by written notice to
ValueVision. Such notice shall state the election to exercise the Option and the
number of Shares in respect of which it is being exercised, and shall be signed
by the person or person so exercising the Option. Such notice shall either: (a)
be accompanied by payment of the full purchase price of such Shares, in which
event ValueVision shall deliver a certificate or certificates representing such
Shares as soon as practicable after the notice shall be received; or (b) fix a
date (not less than five (5) nor more than ten (10) business days from the date
such notice shall be received by ValueVision) for the payment of the full
purchase price of such Shares against delivery of a certificate or certificates
representing such Shares. Payment of such purchase price shall, in either case,
be made by wire transfer or certified or cashier's check payable to the order of
ValueVision. All Shares that shall be purchased upon the exercise of the Option
as provided herein shall be fully paid and non-assessable.
9. Immediate Acceleration of Options Upon Change in Control.
Notwithstanding any provision contained herein, or any other agreement relating
hereto to the contrary, the Option granted hereby will become exercisable
immediately in accordance with section 4.d. of that certain Employment Agreement
dated July 28, 1999 between Valuevision and Employee, unless and to the extent
that the exercise of the Option would result in the application of the
provisions of Section 280G of the Internal Revenue Code of 1986, as amended.
4
<PAGE> 5
10. Investment Certificate and Registration. Prior to the receipt of
the certificates pursuant to the exercise of the Option granted hereunder,
Employee shall agree to hold the Shares acquired by exercise of the Option for
investment and not with a view to resale or distribution thereof to the public,
and shall deliver to ValueVision a certificate to that effect. Nothing in this
Agreement shall require ValueVision to register the Option or the Shares
purchased upon the exercise of said Option.
11. General. ValueVision shall at all times during the term of the
Option reserve and keep available such number of Shares as will be sufficient to
satisfy the requirements of this Option Agreement. This Option shall be
construed in accordance with the laws of the State of Minnesota.
[signatures on following page]
5
<PAGE> 6
IN WITNESS WHEREOF, ValueVision and Employee have executed this
Agreement as of the date first written above.
VALUEVISION INTERNATIONAL, INC.
By /s/ Gene McCaffery
-----------------------------
Gene McCaffery,
Chief Executive Officer
Employee:
/s/ Stuart Goldfarb
-------------------------------
Stuart Goldfarb
<PAGE> 1
EXHIBIT 10.5
SNAP/XOOM INTERACTIVE PROMOTION AGREEMENT
VALUEVISION INTERNATIONAL, INC.
This Interactive Promotion Agreement (the "Agreement") is made and
entered into as of September 13, 1999 (the "Effective Date") between Snap! LLC,
a Delaware limited liability company, with its principal place of business at
One Beach Street, San Francisco, California 94133 ("Snap"); Xoom.com, Inc., a
Delaware corporation with its principal place of business at 300 Montgomery
Street, Suite 300, San Francisco, California 94104 ("Xoom"); and ValueVision
International, Inc., a Minnesota corporation, with its principal place of
business at 6740 Shady Oak Road, Minneapolis, Minnesota 55344 (the "Company").
Pursuant to this Agreement and the Trademark License Agreement (as defined
below), the Company wishes to rebrand its Internet site with a Snap service mark
and Snap wishes to provide various services to the Company to assist the Company
in promoting its Internet site and the products and services offered through its
Internet site. Accordingly, the parties hereby agree as follows:
1. Background.
1.1. The Company operates a 24 hours a day/7 days a week television
program service consisting primarily of home shopping and
transactional television, which may include the presentation
of products and services for sale as well as product
information (the "Television Home Shopping Service") presently
known as "ValueVision Television" to multichannel video
programming distributors for distribution, exhibition and
transmission by Television;
1.2. Snap operates a search and aggregation "portal" site on the
Web.
1.3. Xoom operates a direct marketing site on the Web.
1.4. Snap has entered into an Agreement and Plan of Contribution
and Merger, dated as of May 9, 1999 with Xoom and others, and
the Second Amended and Restated Agreement and Plan of
Contribution, Investment and Merger dated as of July 8, 1999
with National Broadcasting Company, Inc. ("NBC") and others
(collectively, as such agreements may be amended, the "Merger
Agreements") pursuant to which the existing businesses of
Xoom, Snap and other assets of NBC will be combined to form
NBC Internet, Inc. ("NBCi"). The closing of the transactions
contemplated by the Merger Agreements is expected to occur
prior to December 31, 1999 (the "NBCi Closing"). Following the
NBCi Closing, Snap and Xoom may assign their rights and
obligations hereunder to NBCi. If the NBCi Closing does not
occur, Snap and Xoom shall remain as separate parties under
this Agreement, unless this Agreement is terminated by one of
the parties as provided herein.
2. Definitions.
2.1. "Above the Fold" means that a particular item on a Web page is
viewable on a computer screen at an 800 x 600 pixels
resolution when the User first accesses such Web page, without
scrolling down to view more of the Web page.
2.2. "Anchor Tenant" (and cognitives thereof) means a preferred Web
content provider whose position is greater in size and
prominence than that of any non-affiliated third party within
the relevant Snap Sites' page or area of a page.
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<PAGE> 2
2.3. "Commerce Opportunity" means any text, content, links or
promotions providing a direct or indirect opportunity for
Users on the Snap Sites or the SnapTV Site to engage in a
commerce, purchase, trade, exchange, or sale transaction,
whether paid or unpaid, or any registration or membership
opportunity for Users to provide User Profile Data, including,
without limitation, content purchase opportunities,
registration or membership sign-up opportunities, for-fee or
subscription-based content or services, other purchase or sale
opportunities for products or services offered by the Company
directly or indirectly, links to any such opportunities
presented to Users on the Snap Sites or the SnapTV Site, or
other content areas of the Snap Sites or SnapTV Site.
2.4. "Company Content" means the Company's and its licensors' text
links, logos, graphic links, audio and video clips of the
Television Home Shopping Service, and other materials, tools,
content, or text that are delivered by the Company to Snap
hereunder.
2.5. "Company Database" means User Profile Data and any other
information relating to Users of the ValueVision Site or the
SnapTV Site or other customers of the Company or purchasers of
Company Products who have had information about them collected
or otherwise obtained by the Company, or for the Company's use
or benefit, including information obtained through telephone
operators and the Company's catalogue business, and all
updates or additional information that may be added to such
database during the Term. Notwithstanding the foregoing, the
Company Database shall not include any information which, if
provided by the Company to Snap or Xoom, (a) would violate any
law, rule or regulation, or (b) would be contrary to the
express, unprompted preference of the person to whom the data
pertains (if such preferences are followed by the Company with
respect to all other third parties having access to such
data), provided however, that if the Company Database contains
data subject to this subsection (b), the Company shall notify
Snap and Xoom of such preferences and Snap and Xoom agree to
comply with such preferences.
2.6. "Company Marks" means the Company's and its licensors'
trademarks, trade names, service marks and logos that may be
delivered by the Company to Snap hereunder.
2.7. "Company Products" means all products and services offered
through the SnapTV Site or sold by or through the Company's
Television Home Shopping Service, whether by the Company or a
third-party.
2.8. "Conflicting Contract" means (i) any contract to which Snap is
a party that would result in a breach of such contract by the
Company's actions in Section 3.11 or (ii) any contract to
which Snap is a party that would result in a breach of such
contract by the Company's action in Section 3.11 if the
Company were deemed to be the party to the contract instead of
Snap.
2.9. "Content Portal(s)" means, as applicable, the specific
aggregations of linked content within the Jewelry Shop, or on
the "front page" of the Shopping Channel, which are organized
around the Company Content, and, on the Jewelry Shop, relate
to jewelry products and services, and on the "As Seen on
SnapTV" Content Portal, relate to Company Products.
2.10. "Enhanced Sites" has the meaning set forth in Section 6.2
below.
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2.11. "FTE Subscriber" means a household that receives the Company's
Television Home Shopping Service from a multichannel video
programming distributor which operates one or more
distribution systems, including, without limitation, cable
television systems, MATV and SMATV systems, MMDS, TVRO and
other wireline, wireless and direct broadcast satellite
delivery methods, in all cases, whether analog or digital
(each, a "Distribution System"), on a full-time basis. In the
case of multiple dwelling units which receive the Company's
Television Home Shopping Service pursuant to bulk rate
arrangements, the number of FTE Subscribers shall be equal to
100% of all residential dwelling units in the multiple
dwelling unit complex that receive the Company's Television
Home Shopping Service on a full-time basis. The term "FTE
Subscriber" shall not include commercial subscribers (i.e.,
subscribers receiving the Company's Television Home Shopping
Service in the course of their business, including, without
limitation, commercial establishments, hospitals, nursing
homes, hotels, motels, universities, offices, bars and
restaurants). For Distribution Systems carrying the Company's
Television Home Shopping Service other than on a full-time
basis, the number of FTE Subscribers shall be computed by
adding, for each hour during each day on which the Company's
Television Home Shopping Service is carried in the
Distribution System, the product of (a) the sum of the
applicable FTE Factors set forth on Exhibit A attached hereto
for each such hour on each such day, multiplied by (b) the
number of subscribers in the Distribution System.
2.12. "Fulfillment Services" has the meaning set forth in Section
4.2 below.
2.13. "International Editions" has the meaning set forth in Section
6.3 below.
2.14. "Internet Advertising" has the meaning set forth in Section
3.9 below.
2.15. "Jewelry Shop" means the Web page within the Shopping Channel,
which in Snap's sole discretion may also be a sub-shop, that
will feature a variety of jewelry-related goods and related
services to be purchased by Users.
2.16. "Launch Date" has the meaning set forth in the Trademark
License Agreement.
2.17. "Look and Feel" means the look and feel, User interface and
flow of User experience of an Internet site.
2.18. "NBCi Competitor" has the meaning set forth in the Trademark
License Agreement.
2.19. "Portal-like Features" means those features in a "Portal
Service" (as defined in the Trademark License Agreement).
2.20. "Product Comparison Engine" means a product comparison engine
featuring a searchable interface through which the User may
select a category (e.g., videos), enters one or more words
into a search box to search for a particular product (e.g.,
Disney), and may select a product from a listing on the
product selection page (e.g., Lion King video).
2.21. "Promotions" means (i) banners, buttons, windows, portals,
text links, and other promotions that are offered now or in
the future on Web sites; and/or (ii) text links within email
newsletters distributed by Snap and/or Xoom (including,
without limitation, Snap Wires and Xoom Wires) and other
promotions that are offered by Snap and/or Xoom now or in the
future and link directly to the SnapTV Site.
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2.22. "Shopping Channel" means the Shopping Channel on the Snap
Sites (other than the Xoom Site).
2.23. "Snap Marks" means the Exclusive Marks and Non-Exclusive Marks
as defined in the Trademark License Agreement.
2.24. "Snap Member" means a User who has registered to become a
member of one of Snap's registration based services, including
without limitation, the Snap Sites and the free email service
available at www.email.com.
2.25. "Snap Product Manager" means a Snap employee or independent
contractor holding editorial authority and responsibility for
a portal, site, collection, area, center or page on the Snap
Sites.
2.26. "Snap Sites" means: (i) subject to the "Distributor" (as
defined in Section 6.1 below) exclusion in Section 6.1, any
and all search and aggregation "portal," direct marketing, and
commerce sites, whether operated by Snap or a third party
under the "Snap" brand, including, without limitation, the
sites located at http://www.snap.com, http://www.xoom.com,
http://www.nbc.com, http://www.videoseeker.com, and
http://www.nbcin.com, together with any mirror sites, any
co-branded editions of such site that have been or may be
developed for Distributors, and successors to the foregoing
(but not the SnapTV Site); and (ii) if Snap so elects within
its sole discretion, the Enhanced Site and/or the
International Editions, subject to Sections 6.2 and 6.3.
2.27. "SnapTV Domain Name" means the URL http://www.snaptv.com.
2.28. "SnapTV Site" means the Internet site operated by the Company
at http://www.snaptv.com, and successors to the foregoing,
that is created pursuant to Section 3 below.
2.29. "Snap Wire" means Snap's weekly email newsletter sent by Snap
to Snap Members.
2.30. "Television" has the meaning set forth in the Trademark
License Agreement.
2.31. "Term" means the term of this Agreement as defined in Section
10.1 below.
2.32. "Trademark License Agreement" means the Trademark License
Agreement dated as of the date hereof between Snap and the
Company, as may be amended from time to time.
2.33. "User" means any end-user of the Web.
2.34. "User Profile Data" means data regarding a User provided by
the User on the Snap Sites or the SnapTV Site or otherwise to
Snap or the Company, including without limitation the User's
name, e-mail address, telephone number, shipping address,
credit card information (to the extent permissible by law),
and other information about the User.
2.35. "ValueVision Site" means the Internet site operated by the
Company at http://www.vvtv.com.
2.36. "Web" means the World Wide Web part of the Internet.
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2.37. "Xoom Marks" means any trademarks, trade names, service marks
and logos delivered by Xoom to the Company hereunder.
2.38. "Xoom Member" means a User who has registered to become a
member of one of Xoom registration based services, including
without limitation, the Xoom Site.
2.39. "Xoom Site" means the direct marketing Web site operated by
Xoom located at http://www.xoom.com and any successor sites
thereto.
2.40. "Xoom Wire" means Xoom's periodic email newsletter sent by
Xoom to Xoom Members
3. SnapTV Site.
3.1. Ownership of SnapTV Site. Subject to the terms of this
Agreement and the Trademark License Agreement, the Company
will own the SnapTV Site and will be responsible for the
development, operation and maintenance of the SnapTV Site,
including the Look and Feel and technical requirements for the
SnapTV Site. Snap acknowledges that the Company may change the
design and functionality of the SnapTV Site from time to time,
as determined by the Company, subject to the requirements
herein and in the Trademark License Agreement. Notwithstanding
the foregoing and pursuant to the terms and conditions of the
Trademark License Agreement, the Company will ensure the
SnapTV Site maintains the SnapTV branding and other features
reasonably agreed upon by the parties and the Company agrees
to consult with Snap in connection with the development,
operation and maintenance of the SnapTV Site, including all
changes in the design and functionality thereof, and, to the
extent commercially reasonable, minimize the additional costs
to Snap resulting from any such changes.
3.2. SnapTV Site Described. The Company will transfer the content
and functionality of the ValueVision Site (including, in the
Company's discretion, corporate and investor communications
which may also remain on the ValueVision Site) to the SnapTV
Site in accordance with this Section 3 and the terms of the
Trademark License Agreement, and Snap will provide reasonable
assistance in connection therewith. The Company will develop
and operate the SnapTV Site as a live, Web site that will
include "SnapTV" branding and Company Content related to the
Company's Television Home Shopping Service. The SnapTV Site
will be a separate and distinct Web site linked to from the
Snap Sites and will serve as the entrance point for all Users
who wish to purchase Company Products. The SnapTV Site will
provide, at a minimum, all of the features and functionality
(including, in the Company's discretion, corporate and
investor communications) provided by, and will perform in a
manner no less effective than the ValueVision Site immediately
prior to the Effective Date.
3.3. Placement of Snap Search Engine. The Company will place a
functional search tool box linked to the Snap search engine on
the front door of the SnapTV Site, but the exact location will
be at the reasonable discretion of the Company. Snap shall
design such search tool box (which shall not be less than 90
pixels wide by 60 pixels high) so that it provides Users with
the option to search either the SnapTV Site or the Internet,
with the SnapTV Site being the default. Snap shall provide
such search tool box to the Company subject to Snap's standard
terms and conditions and Snap may include a "Powered by Snap"
logo in the search tool box. The Company shall not place any
other search functionality on the front door of the SnapTV
Site.
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3.4. Community Features. If the Company elects to provide any
community features (i.e., free home pages, chat, greetings
cards, MightyMail, email, as well as any community features
provided by Snap or Xoom in the future on their respective Web
Sites) within the SnapTV Site, the Company will offer such
community features exclusively through links on the SnapTV
Site to the Xoom Site, or, following the NBCi Closing, to the
Snap Sites, with all resulting pages being on a Snap Site.
Such links shall be branded in a manner reasonably determined
by Snap and Xoom in conjunction with the Company.
3.5. Portal-Like Features. If the Company elects to provide any
Portal-like Features within the SnapTV Site, the Company will
use such Portal-like Features exclusively through links on the
SnapTV Site to the Snap Sites, with all resulting pages being
on a Snap Site. SnapTV shall have the right to incorporate
features provided by its Company Affiliates; provided that
such features shall be subject to the approval of Snap, which
approval shall not be unreasonably withheld.
3.6. Hosting. The Company will host the SnapTV Site on its servers
(or on servers within its control or servers of a third party
under contract with the Company) and will provide all computer
hardware, software and personnel necessary to operate and
maintain the SnapTV Site as a functional site accessible to
Users.
3.7. SnapTV Domain Name. The URL for the SnapTV Site will be the
SnapTV Domain Name. Snap will register and own the SnapTV
Domain Name and will exclusively license the SnapTV Domain
Name to the Company pursuant to the terms and conditions of
the Trademark License Agreement. The Company agrees that Snap
will be entitled to count all page views, unique users, reach,
frequency, etc. of the SnapTV Site towards Snap's traffic as
measured by Media Metrix and other Internet traffic-auditing
firms.
3.8. Launch Date. The Company will use its best efforts to achieve
a Launch Date for the SnapTV Site as soon as practicable
following the Effective Date; provided, however, that if the
Launch Date occurs after June 1, 2000, or does not occur due
to the fault of the Company, then such failure will be deemed
a material breach of this Agreement by Company. Snap shall
provide the Company with reasonable assistance to launch the
SnapTV Site to the extent that such assistance can be provided
at no additional out of pocket cost to Snap. The Company shall
give Snap at least thirty (30) days prior written notice of
any projected Launch Date.
3.9. Advertisements. Subject to Section 3.10, Snap shall own and
have the exclusive right to use or sell all of the advertising
(including all Promotions and sponsorships, integrated third
party links and email advertisements to the SnapTV email
database) ("Internet Advertising") on the SnapTV Site;
provided, however, that Snap shall pay to the Company fifty
percent (50%) of all gross revenue (net of agency fees Snap
pays for such Internet Advertising) from such Internet
Advertising. The Company shall incorporate all Internet
Advertising into the SnapTV Site on a timely basis. To the
extent Internet Advertising is available on the SnapTV Site,
Snap shall use reasonable commercial efforts to sell Company
inventory in every Internet Advertising transaction on the
Xoom Site and http://www.snap.com, and if such Internet
Advertising is sold, will provide the Company with a pro rata
share of such transaction based on the SnapTV Site's available
Internet Advertising inventory; provided further that the
Company and Snap agree on reasonable terms for content
standards and the pricing of a Snap/Company Internet
Advertising package and that, following such agreement, Snap
may enter into such transactions without any further approval
or consent from the Company for transactions
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consistent with such agreement. The parties hereto will
discuss, and if mutually agreed, reprice such Internet
Advertising packages annually or as otherwise agreed to ensure
that such package is always competitive with the Internet
Advertising market. The Company shall serve Internet
Advertising on the SnapTV Site using the same system as Snap
(which as of the Effective Date is Accipiter); provided,
however, that the Company shall not be required to change the
manner it serves Internet Advertising more than two times
every five years.
3.10. Company Right to Commit Internet Advertising Inventory.
Notwithstanding Section 3.9 hereof, the Company shall have the
right to commit up to 40% of the Internet Advertising for each
type and category of Internet Advertising (e.g. untargeted vs.
targeted, entertainment vs. shopping) to entities other than
NBCi Competitors, in which the Company has made investments in
excess of $1,000,000 ("Company Affiliates"). For the purposes
of the pro-rata distribution of revenue and advertising on a
given Internet Advertising transaction, the actual amount up
to the 40% hold back referenced above in this section will not
be included in the calculation of the revenue distribution.
3.11. Company Affiliate Promotions. The Company can place Promotions
of Company Affiliates on the SnapTV Site, which shall be
included within the 40% hold back referenced in Section 3.10,
provided that Snap does not have a Conflicting Contract.
Before doing so, the Company must inform Snap of its
intentions to make such an investment in a Company Affiliate
and make commercially reasonable efforts to allow Snap to
participate in the investment. If Snap reasonably objects to
the placement due to a conflict in a pending "network wide"
Anchor Tenancy (in the same category) that will include
exclusive or most prominent placement on the SnapTV Site as
well (a "Anchor Tenancy Contract"), and Snap passes on the
investment, or Snap is not invited to participate in the
investment, then the Company will have the right to place such
Company Affiliate's Promotion on the SnapTV Site exclusively
or on a most prominent basis for a period of 90 days. During
that 90-day period, Snap may make commercially reasonable
efforts to sell the Promotions pursuant to an Anchor Tenancy
Contract (which may include the Snap Sites and the SnapTV
Site, but may exclude NBC.com, NBC-Interactive Neighborhood
and Videoseeker.com) and in the same category. If Snap enters
into such an Anchor Tenancy Contract that includes SnapTV
Site, the Company will remove the Promotions for such Company
Affiliate. However, if Snap does not enter into such an Anchor
Tenancy Contract during that 90-day period, the Company shall
have the right to keep the Promotions for such Company
Affiliate on the SnapTV Site. If the Company is required to
remove the Promotions for such Company Affiliate from the
SnapTV Site, the Company shall have the right to continue
selling merchandise on the SnapTV Site from that Company
Affiliate. Once any such Anchor Tenancy Contract terminates,
Snap shall have the right to renew such Anchor Tenancy or sell
such Anchor Tenancy to any third party. In the absence of such
renewal or resale within 90 days after the expiration of such
Anchor Tenancy Contract, the Company may then include the
Promotions for such Company Affiliate on the SnapTV Site.
3.12. Company's Right to Sell Company Products. Snap acknowledges
that it has no authority to prohibit the Company from selling
Company Products on the SnapTV Site; provided that the Company
acknowledges that Snap may limit (e.g., through a
non-exclusive Anchor Tenancy Contract) the placement of
Internet Advertising on the SnapTV Site. To clarify, if Snap
brings an exclusive Anchor Tenancy to the online "network"
(which would include the SnapTV Site), Snap must create an
appropriate carve out which allows the Company and the SnapTV
Site to continue to sell Company Products, subject to any
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Anchor Tenancy (e.g., the Anchor Tenant's merchandise may be
more prominently featured than the Company Products) but not
subject to any exclusivity.
3.13. Quality Standards. The Company agrees that the SnapTV Site
will comply with the quality standards set forth in Section
3.3 of the Trademark License Agreement throughout the Term. If
the SnapTV Site fails to operate fully and functionally in any
material respect for at least 99% of the time during any 30
day period, even if otherwise in compliance with the
performance standards, Snap may immediately remove any or all
links to the SnapTV Site, at Snap's sole discretion, until
such time as the Company notifies Snap that the SnapTV Site
has resumed acceptable operation and the SnapTV Site has
actually resumed acceptable operation. These remedies are for
Snap's editorial purposes and in no way limit Snap's ability
to terminate this contract or pursue any other remedies
hereunder in the event the performance standards set forth
herein are not met.
4. Harvesting, Fulfillment Services and Account Management.
4.1. Harvesting. The Company shall, beginning on the Launch Date,
provide all Company Content as required herein in connection
with the Content Portals pursuant to Snap's then current,
standard technical specification policies for harvesting
required of third parties with content portals to be harvested
with similar functionality, as updated from time to time in
Snap's sole discretion. Harvested Company Content will
maintain the applicable Snap Site's Look and Feel and will
include branding for the Company using Company Marks, in such
form and placement as a Snap Product Manager shall determine
in his or her sole discretion, subject to Section 12 of this
Agreement. The Company shall ensure that all Company Content
remains at all times current by continually providing Snap
with timely updates to the Company Content. Furthermore, under
no circumstances shall Company Content include any content of
an NBCi Competitor or reference an NBCi Competitor.
4.2. Fulfillment Services. The Company will be responsible for
developing all systems and entering into any arrangements and
relationships required to accept the purchasing information
collected from Users of the SnapTV Site for Company Products
and finalize and fufill the relevant sales. The Company will
accept and process the purchasing information collected on
SnapTV Site, and will provide all fulfillment services in a
timely and professional manner, including but not limited to,
email confirmation of orders, email confirmation of shipping,
online customer order checking, prompt customer service via
email, establishing and maintaining a single point for data
delivery by Snap, order fulfillment, credit management and
inventory maintenance. At a minimum, Company will establish an
order transmittal and fulfillment process that meets
reasonable online industry standards for fulfillment services.
In addition, the Company shall be responsible for any customer
communication (via email, phone, fax, etc.) related to
customer service, fulfillment, complaints, returns, etc.
related to purchases made on the SnapTV Site. All services
described in this section shall be deemed to be "Fulfillment
Services."
4.3. Account Management.
4.3.1. Account and Contact Managers. For the purposes of
this Agreement, Rita Han shall be Snap's account
manager for the Company and Cary Deacon shall be the
Company's contact manager for Snap (collectively, the
"Managers"). Subject to Section 18.12, the Managers
shall be the primary points of contact for inquiries
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and requests, and each Manager shall provide the
other with such information and assistance as may be
reasonably requested by the other from time to time.
Either party to this Agreement may change its
designated Manager by giving the other party written
notice of such change.
4.3.2. Steering Committee. Each party shall appoint three
members of a committee (the "Steering Committee") to
review strategic plans, projected fees payable under
this Agreement and the Trademark License Agreement,
marketing, brand positioning and other relevant
issues of the SnapTV Site on a quarterly basis;
provided, however, after the NBCi Closing Snap and
Xoom shall together appoint three members. The
Steering Committee shall make such decisions and take
such actions as may be necessary or desirable to
carry out the purpose of this Agreement and the
Trademark License Agreement, and all such decisions
and actions shall be made by a unanimous consensus of
the Steering Committee, which shall include at least
one member appointed by each party. The Steering
Committee shall meet at least once per quarter at a
mutually agreed time and place. Steering Committee
meetings may take place in person and/or via
telephone, videoconference, or other two-way
communications device. Notice of the time and place
of each meeting of the Steering Committee shall be
given to each member of the Steering Committee not
less than seven (7) days before the time when the
meeting is to be held by personal delivery, facsimile
transmission, or email to such member's business
address. A member of the Steering Committee may, in
any manner, waive notice of a meeting. The attendance
of a member of the Steering Committee at a meeting of
the Steering Committee shall constitute a waiver of
notice of the meeting, unless such member is
attending for the sole purpose of disputing notice.
5. Anchor Tenancy.
5.1. Creation of Jewelry Shop. Snap will create the Jewelery Shop
on a schedule determined by Snap in its sole discretion, but
in no event later than the Launch Date.
5.2. Anchor Tenant of Jewlery Shop. After the Launch Date and
during the Term, Snap will feature the Company as the Anchor
Tenant within the Jewelry Shop. Subject to this Section 5,
Snap may, in the exercise of its reasonable discretion, make
changes to the design and functionality of the Jewelry Shop.
In the Jewelry Shop, the Company will have the right to
program one Content Portal that begins Above the Fold that
measures approximately 150 x 400 pixels with relevant content
and links to the Jewelry Shop. The Company will provide the
appropriate Company Content, subject to the reasonable
discretion of a Snap Product Manager, for the Content Portal,
which shall be harvested as set forth in Section 4.1. The Snap
Product Manager may provide the Company with reasonable
assistance to enable the Company to effectively design the
Content Portal. Subject to this Section 5.2, the Snap Product
Manager will determine the size and location of the Content
Portal. Snap may, in the exercise of its reasonable
discretion, make changes to the design and functionality of
the Jewelry Shop.
5.3. "As Seen on SnapTV" Advertising. After the Launch Date and
during the Term, an "As Seen on SnapTV" Content Portal, a mock
up of which is attached hereto as Exhibit B, will be
prominently displayed on the "front page" of the Shopping
Channel, which is one click or link away from the "front door"
of the applicable Snap Site. This Content Portal will be
displayed with not less than 50% of the unit appearing Above
the Fold. The size
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of the Content Portal will be not less than 120 pixels wide by
60 pixels high on an 800 x 600 pixel screen. Snap will deliver
a mock up of the location and size of this Content Portal for
approval by the Company, whose approval shall not be
unreasonably withheld. Snap agrees that at a minimum, the
words "As Seen on SnapTV" will appear fully Above the Fold.
The Company will provide the appropriate Company Content,
subject to the reasonable discretion of a Snap Product
Manager, for the Content Portal, which shall be harvested as
set forth in Section 4.1. The Snap Product Manager may provide
the Company with reasonable assistance to enable the Company
to effectively design the Content Portal. Subject to this
Section 5.3, the Snap Product Manager will determine the size
and location of the Content Portal. Snap may, in the exercise
of its reasonable discretion, make changes to the design and
functionality of the "As Seen on SnapTV" Content Portal in
connection with changes being made to all or substantially all
content portals throughout http:///www.snap.com and the
Shopping Channel.
5.4. Hosting. Snap will host the Jewelry Shop and the Content
Portals on its servers (or on servers within its control or
servers of a third party under contract with the Company) and
will provide all computer hardware, software and personnel
necessary to operate and maintain the Jewelry Shop and the
Content Portals as functional pages accessible to Users.
5.5. Internet Advertising. Snap shall own and have the right to use
or sell all of the Internet Advertising inventory on the
Jewelry Shop and may keep all revenue derived therefrom. The
Company acknowledges that Internet Advertising, Promotions and
third party content for and/or links to other sites similar to
or in competition with the Company may exist in the Jewlery
Shop. Notwithstanding anything in this Agreement to the
contrary, any third party content or links may exist on any
area of the Jewelry Shop. Moreover, other than as expressly
set forth herein, Snap shall have the right to display any
third party links, media, banner advertisements, other
Promotions, and/or paid or unpaid editorial content anywhere
on the Snap Sites and to market and promote jewelry and
related promotions on television using Snap as the Internet
fulfillment provider.
5.6. Comparison Engine. Snap shall have the right to create a
Product Comparison Engine on the Snap Sites that provides the
User with a page that compares prices of several vendors for a
particular product. The User has the option of clicking
through on the product link, which may deliver the User to the
selected vendor's Web page, where the User can purchase the
product. The Snap Product Comparison Engine, if created, will
be implemented in accordance with a schedule determined by
Snap in its sole discretion. Following its launch, the Snap
Product Comparison Engine shall be featured on and throughout
the Shopping Channel. To the extent technically feasible, the
Snap Product Comparison Engine shall consider ("crawl") the
Company's Products in its comparison of prices for a
particular product, provided that Company's Products include
such product, and shall also consider products from
competitors of the Company.
5.7. Wallet-Enabling SnapTV Site. On a schedule mutually agreed by
all the parties hereto, Xoom will use its Liquid Market
technology to "Wallet-enable" the SnapTV Site to enable Users
on the Shopping Channel to purchase Company Products.
"Wallet-enable" shall mean: (i) the User enters a credit card
and related personnel data once on the Shopping Channel; (ii)
this financial information is stored within the Shopping
Channel and associated with a unique User number; and (iii)
the User does not have to reenter such information each time
the User purchases a Company Product on the Shopping
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Channel. The Company will provide reasonable assistance to
Xoom to "Wallet-enable" the SnapTV Site.
6. Co-Branded, Enhanced, and International Editions.
6.1. Co-Branded Editions. Company acknowledges that Snap produces
co-branded editions of the Snap Sites for various resellers,
distributors, other licensees and/or joint venture partners
(collectively the "Distributors"). In some cases, such
Distributors are entitled to replace Snap's default content
with other content within their own co-branded editions of any
Snap Site. Notwithstanding any other provisions of this
Agreement, if any such Distributor has exercised its right to
replace Company Content with other content, then Snap will not
be required to display the Promotions or Company Content
within such Distributor's co-branded edition of the Snap
Sites.
6.2. High-Speed Editions. Snap has created an enhanced, high-speed
version of the Snap Site focused on rich media content
(together with any successor service(s) or site(s) thereof and
any co-branded editions of such service that have been or may
be developed for Snap's third party distribution partners and
licensees, the "Enhanced Site") and may desire to include
appropriate rich media content from the Company within the
Enhanced Site. At Snap's sole discretion, all terms and
conditions contained in the Agreement related to the "Snap
Sites" may also apply to the Enhanced Site. The Company hereby
acknowledges that Snap, in its sole discretion, may use
appropriate Company Content within the Enhanced Site, and all
licenses set forth in the Agreement are hereby expanded to
include the Enhanced Site. Further, Snap shall have the
exclusive right, at its sole discretion, to take video and/or
audio clips (e.g., product demonstrations) from the Company's
Television Home Shopping Service and include them on the
Shopping Channel within the Enhanced Site; it being understood
that the Company shall have the right to transmit, exhibit,
display and stream the Company's Television Home Shopping
Service on a full-time (24 hour/7 day) basis and/or audio
and/or video clips of such service on any Computer Service (as
such term is defined in the Trademark License Agreement). The
Company acknowledges that the look and feel of the Enhanced
Site will be designed for a high-bandwidth audience and
therefore may substantially differ from the look and feel of
the primary Snap Site.
6.3. International Editions. Snap is currently considering creating
one or more international editions of the Snap Site to reflect
appropriate localized and local partner content
("International Editions") and may desire to include localized
media content from Company within an International Site. At
Snap's sole discretion, Snap may include Company Content in
any International Edition, subject to the Company's reasonable
approval. The Company shall use its reasonable commercial
efforts to provide Fulfillment Services for such International
Editions. All terms and conditions contained in the Agreement
related to the "Snap Site" shall also apply to such
International Editions. Snap, in its sole discretion, may use
appropriate Company Content within such International
Editions, and all licenses set forth in the Agreement are
hereby expanded to include such International Editions.
Further, the Company hereby grants Snap a license to create
derivative works (including translations) of the Company
Content solely for the purpose of adapting such International
Editions to the relevant target audience. The Company
acknowledges that the look and feel of the International
Editions will be localized for the relevant target audience
(e.g., in terms of language, culture, and ethnicity) and
therefore may substantially differ from the look and feel of
the primary Snap Site.
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7. On-Air Promotion.
7.1 Provided by Snap. Snap will promote the Snap TV brand,
including the SnapTV Domain Name using $4 million per year of
NBC Television Network advertising commencing upon receipt of
written notification by Snap from Company that the Company's
Television Home Shopping Service has obtained an overall reach
of at least 30 million FTE Subscribers and then only to the
extent of $1 million for each three-month period remaining
from receipt of such notification until the fourth anniversary
of the Effective Date. Snap shall use such time to promote
principally the SnapTV brand, including the SnapTV Domain
Name. The Company acknowledges that Snap's on-air promotions
may also contain promotion of the Snap Sites and the Shopping
Channel; provided, however, that the SnapTV brand presence
will be more prominent than Snap's brand presence. Snap shall
prepare the relevant creative material for such advertising
and shall place such advertising on NBC Television Network,
subject to the Company's approval over the advertising and the
placement thereof (such approval not to be unreasonably
withheld or delayed).
7.2 Provided by the Company. Commencing upon delivery of the
written notification from Company to Snap that the Company's
Television Home Shopping Service has obtained an overall reach
of at least 30 million FTE Subscribers, the Company will use
$4 million per year of any "run-of-network" cable television
advertising (other than advertising appearing on the Company's
Television Home Shopping Service) to promote Snap or Snap's
products or services and then only to the extent of $1 million
for each three-month period remaining from the receipt of such
notification until the fourth anniversary of the Effective
Date. The Company shall use such time to promote principally
the Snap brand, including the SnapTV Domain Name. Snap
acknowledges that the Company's contractual obligations
require that this cross-channel promotion must contain SnapTV
promotion as well; provided, however the SnapTV brand presence
will be less prominent than Snap's brand presence. Snap shall
prepare the relevant creative material for such advertising,
subject to the Company's approval (such approval not to be
unreasonably withheld or delayed), and the Company shall place
such advertising on cable television networks (other than the
Company's Television Home Shopping Service) in accordance with
the Company's affiliation agreements with such networks and
subject to Snap's approval, which approval shall not be
unreasonably withheld or delayed.
7.3 Company Promotion of SnapTV URL. With respect to third party
merchandise sold on the Company's Television Home Shopping
Service, the Company shall use commercially reasonable efforts
to always promote a URL that incorporates the SnapTV Domain
Name for any on-air promotion that leads a User to the SnapTV
Site. This obligation is dependent on Snap's ability to
promptly deliver a reasonably easy to remember and
commercially appropriate SnapTV URL for each on-air merchant
(e.g., SnapTV.com/victoria for Victoria's Secret). Following
such commercially reasonable efforts, if the Company cannot
convince its on-air merchant to use a URL that incorporates
the SnapTV Domain Name, then the Company can use 15% of the
Company's airtime promoting non-SnapTV URLs with no amounts
paid to Snap. Any airtime used, which includes a URL of any
kind, over the above 15% which does not refer to a URL that
incorporates the SnapTV Domain Name, whether or not the
Company has made an equity investment, the Company shall pay
Snap a 20% commission based on the rate card, should one
exist, or calculated based on the average revenue for all
airtime that the Company receives or derives for all airtime
that does not incorporates the SnapTV Domain Name.
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7.4 Valuation of Advertising. The advertising provided to the
Company or Snap pursuant to Section 7.1 or 7.2 hereof shall be
valued at the rate actually charged to the Company by cable
operators or to Snap by NBC Television Network; it being
understood that the Company and Snap shall each use their
commercially reasonable efforts to obtain the lowest rate for
such advertising.
8. User Profile Data, Commerce Opportunities, and Direct Marketing.
8.1. Data Ownership. Snap will be the sole owner of any information
that Snap collects from Users through the Snap Sites,
including, without limitation, any data derived from User
Profile Data and Users of the SnapTV Site that become a Snap
Member or a Xoom Member. Snap, Xoom and the Company will
co-own the User Profile Data for purchases made over the Web
resulting from the direct email marketing described in Section
8.4, which co-ownership will survive the Term and/or
termination of this Agreement. Snap and Xoom shall co-own all
data collected through the use of the Liquid Market technology
described in Sections 5.6 and 5.7. Snap and the Company will
use their good faith efforts to develop a common registration
and password for new Users to simultaneously become Snap
Members and SnapTV Members; if such common registration is
developed, Snap and the Company will co-own such User Data
Profile, which co-ownership will survive the Term and/or
termination of this Agreement.
8.2. Use of Information and Confidentiality. Snap and Xoom shall
each have access to the Company Database at all times during
the Term of this Agreement. Each party will have the right to
use any information provided by the other party pursuant to
Section 11 subject to the confidentiality restrictions set
forth in Section 18.4. Unless otherwise clearly disclosed to
Users on the respective site, all data collected from Users
through the SnapTV Site will be kept confidential and not
disclosed to third parties in accordance with the published
privacy policy of Snap and Xoom and, following the NBCi
Closing, NBCi.
8.3. Commerce Opportunity. If any Company Content accessed through
links appearing on the Snap Sites contains any Commerce
Opportunity that requires the User to register or submit any
User Profile Data, then Snap has the right in its sole
discretion to cause any of the following: (i) the Web page
that requests the User Profile Data, (ii) any other page
relating to the Commerce Opportunity, or (iii) a separate Snap
Member registration page, to present the User with an
opportunity to register to become a Snap Member.
8.4. Direct Marketing. During the Term, Xoom and Snap and,
following the NBCi Closing, NBCi, shall have the exclusive
right to use (or allow an affiliate entity to use, in which
case all references to "Xoom" in this Section 8 shall refer to
such affiliate entity) the information contained in the
Company Database for email direct marketing purposes as set
forth in this Section, and all ancillary activities related
thereto. Snap and Xoom shall have the co-exclusive right to
execute, or cause to be executed, the same number of
promotional email offers per month that Snap and Xoom execute
or cause to be executed to their respective members,
promotional email offers, to all or some of the Users in the
Company Database other than those who have opted not to
receive such email offers. Such email offers shall be drafted
by Xoom, approved by Company (and such approval shall not be
unreasonably withheld) and will appear to come from "SnapTV
and Xoom" (and after the NBCi Merger, as NBCi determines in
its sole discretion). Such email messages may have links to
the Snap Sites or the SnapTV Site, as Xoom shall decide in
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its sole discretion. Products offered in such emails may
include Xoom's products or services or third party products
and/or services that Xoom has the right to offer, and Xoom
shall select all of such products to be offered in its sole
discretion; provided that the Company will have the right to
approve such products, and shall not unreasonably withhold or
delay such approval (it being understood that the Company may
reject products that directly compete with Company Products).
Xoom may choose to distribute emails to some or all Users in
the Company Database, and may choose to send the emails itself
or to direct that the Company or another party (i.e.
agent/outsourcer) send the emails. Xoom shall also have the
option to create and host "sell" pages for any marketing
campaign, and Xoom shall arrange for purchase orders to be
processed and fulfilled (other than for Company Products which
shall be processed and fulfilled by the Company), and for
customer service and inventory matters to be coordinated in
relation to the products offered in emails distributed
pursuant to this Section, as Xoom shall determine in its sole
discretion. Xoom shall send a copy of the email offer to the
Company at least forty-eight hours prior to the time at which
the email messages are to be sent. The Company may reject, but
not unreasonably, promotional email offers proposed by Xoom
that include products or services that compete with Company
Products then offered by the Company on the Company Sites.
Xoom shall, in all such direct marketing activities permitted
in this section, comply with all laws, rules, regulations and
orders applicable to such activities.
8.5. Company Database Management. Within two weeks of the Effective
Date, the Company will electronically send Xoom and Snap all
User Profile Data then contained in the Company Database to
one or more FTP addresses designated by Xoom and Snap. In
addition, the Company shall: (a) initially process User names
to create a clean ASCII text file, (b) filter known bad domain
names and false email addresses, (c) process requests for
unsubscription and remove from the Company Database such
entries for subsequent direct market activities, and (d)
update Snap's and Xoom's copies of the Company Database by
sending to the designated FTP addresses information on new
member additions and unsubscribe requests at least one time
each month during the Term. The Company has the right to
request from Snap and Xoom a copy of their current Company
Database text files and receive such data at least one time
per month during the Term.
8.6. Company Offers. Snap shall, if the Company requests, make a
reasonable number of promotional email offers per month
containing a Company Product offer to Users described in the
Company Database, provided that such email messages will be
sent by Snap, Xoom or a third party outsourcer in consultation
with the Company. Snap may reject promotional email offers
proposed by the Company that include products or services
which compete with products or services then offered to Users
of the Snap Sites (other than Company Products offered through
the SnapTV Site or harvested Company Content), or if such
offer otherwise conflicts with a Snap contractual agreement or
Snap's privacy or merchandising philosophy.
8.7. Exclusivity. The Company shall not enter into any agreement
with any NBCi Competitor to make, or otherwise permit any NBCi
Competitor to make on its behalf, any promotional e-mail
offers regarding the Company or the Company Products.
9. Payments and Credits.
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9.1. Commission from Program Sales. The Company will pay Snap or
Xoom, as appropriate, 20% of the gross revenue actually
received by the Company, less third party sales commissions,
without any other adjustment of any kind, of all Advertising
(as defined in the Trademark License Agreement) or program
sales on the Company's Television Home Shopping Service for
each sale in which the purchaser of such Advertising or
program was referred to the Company by Snap or Xoom or Snap or
Xoom materially assisted with respect to such sale.
9.2. Commissions from Email Marketing. The Company will receive 50%
of the gross revenue actually received by Snap or Xoom, as
applicable, generated from the email marketing described in
Sections 8.4, less third party sales commissions, cost of
goods, shipping and handling, gift wrapping, credit card
processing fees, returns, fraud, and chargebacks. Xoom will
receive 50% of the gross revenue actually received by the
Company generated from the email marketing described in
Sections 8.4 relating to Company Products and Section 8.6,
less third party sales commissions, cost of goods, shipping
and handling, gift wrapping, credit card processing fees,
returns, fraud, and chargebacks.
9.3. Internet Advertising Revenue. Snap will pay the Company the
amounts referenced in Section 3.9 derived from Internet
Advertising as being due the Company, and the Company will pay
Snap the commissions referenced in Section 7.3 as being due
Snap.
9.4. Payment. Payments under this Agreement will be made by check
or wire transfer of immediately available funds. All amounts
due from one party to another party hereunder shall be due and
payable quarterly by the 45th day of the month following the
quarter in which such amount can be reasonably calculated.
9.5. Audit Rights. Each party agrees to keep accurate books of
account and records at its principal place of business
covering all transactions relating to this Agreement. Each
party or any duly authorized representative shall have the
right, at all reasonable hours of the day, to audit each of
the other party's books of account and records and all other
documents and material in the possession or under the control
of such other party with respect to the subject matter and the
terms of this Agreement and to make copies and extracts
thereof. In the event that any such audit reveals an
underpayment by the audited party, the audited party shall
immediately remit payment to appropriate party in the amount
of such underpayment plus interest calculated at a rate of one
and one-half (11/2%) per month, or the maximum rate allowed by
law, compounded daily, calculated from the date such payments
were actually due until the date when such payment is in fact
actually made. Further, in the event that any such
underpayment is greater than five percent (5%) of the amount
due for the period being audited, the audited party shall
reimburse the party conducting the audit for the reasonable
costs and expenses of such audit. All books of account and
records of each party covering all transactions relating to
this Agreement shall be retained by such party for at least
three (3) years after the expiration or termination of this
Agreement, as the case may be, for possible inspection and/or
audit by the other parties.
10. Term; Termination.
10.1. Term. The term of this Agreement will begin on the Effective
Date and end on the tenth (10th) anniversary of the Effective
Date, unless otherwise terminated or extended as set forth in
this Agreement (the "Term").
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10.2. Termination of the Trademark License Agreement. Any party may
terminate this Agreement upon any termination of the Trademark
License Agreement, which termination will be effective as of
the effective date of the termination of the Trademark License
Agreement.
10.3. Termination for Cause. Either Snap or the Company may
terminate this Agreement at any time by giving written notice
of termination to the other parties if any other party commits
a material breach of its obligations hereunder that is not
cured within 30 days after notice thereof from a non-breaching
party; provided, however, Snap may not terminate this
Agreement pursuant to this section due to a breach of Xoom and
Xoom may not terminate this Agreement pursuant to this section
due to a breach of Snap.
10.4. Termination Upon Insolvency. Any party may immediately
terminate this Agreement in the event that (a) another party
files any petition for bankruptcy or is adjudicated a bankrupt
or insolvent under the bankruptcy laws of any jurisdiction;
(b) a petition in bankruptcy is filed against another party
and such petition is not dismissed within 60 days; (c) another
party becomes insolvent or makes an assignment for the benefit
of its creditors or an arrangement for its creditors pursuant
to any bankruptcy law; (d) another party discontinues its
business; or (e) a receiver or trustee is appointed for
another party, which appointment is not contested by that
party within 60 days; provided, however, Snap may not
terminate this Agreement pursuant to this section based on
Xoom's triggering this section and Xoom may not terminate this
Agreement pursuant to this section based on Snap's triggering
this section.
10.5. Consequences of Termination. Upon the termination or
expiration of this Agreement, all licenses granted hereunder
shall immediately terminate and each party shall return or
destroy all Confidential Information of the other party in its
possession, including the Company Database and User Profile
Data which the party in possession does not own or have rights
to possess after the termination of this Agreement.
Termination of this Agreement by a party hereto shall result
in the complete termination of this Agreement with respect to
all parties.
11. Reports, Records, and Accounts.
11.1. Company Reports. Within 15 days after the end of each month
during the Term, the Company, to the extent the Company has
such information, and the Company agrees to use commercially
reasonable efforts to obtain such information, will provide to
Snap a complete and detailed report that includes, at a
minimum, for such month: (i) the total page views on the
SnapTV Site, (ii) the number of unique Users to the SnapTV
Site from the Jewelry Shop, (iii) the number of click thrus
and the conversion rate resulting from such click thrus, (iv)
the type, price, and number of goods sold by the Company
pursuant to Sections 8.4 and 8.6, the number of Snap Users who
bought such items, and number of click thrus pursuant to
Sections 8.4 and 8.6, and (v) the number of Users and User
Profile Data for Users who click through from the Snap Sites
to the SnapTV Site, (vi) the number of Users and User Profile
Data for Users who click through from the Snap Sites to the
SnapTV Site and order Company Products, and (vii) the
aggregate statistical and demographic characteristics of Users
in (ii), (iii), (iv), (v), and (vi). Snap will, to the extent
commercially feasible, tag each such User originating from the
Snap Site using a cookie or other similar technology to assist
the Company in obtaining the foregoing data. Furthermore, the
Company shall furnish whatever additional information Snap may
reasonably prescribe from time to time to enable Snap to
verify the calculation of the
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monies due pursuant to Section 8. The Company shall make
commercially reasonable efforts to collect buyer information,
including email addresses, from its customers ordering by
phone or any other means. The Company will also provide Snap
and Xoom with historical buyer data on the Company's
customers, which will allow Snap and Xoom to maximize the
economic benefit to all parties.
11.2. Records and Accounts. Each party agrees to keep, on a
continuing basis, full and accurate records and accounts,
including, without limitation all logs and reports, sufficient
to permit the other parties to verify the accuracy of all
reports submitted by the party as hereinabove required. Each
party shall have the right, at their sole expense, to examine
such books and records, whether in electronic format or
otherwise, to the extent that such examination is necessary
and pertinent to the foregoing verification, during reasonable
business hours, using its employees or principals, or through
outside, authorized representatives.
12. License for Company Marks and Content. The Company hereby grants to
Snap and Xoom a non-exclusive, non-transferable, royalty-free license,
effective throughout the Term, to use, display and publish the Company
Marks and Company Content as permitted hereunder. In the event the
Enhanced Sites and/or the International Editions are deemed included
within this Agreement pursuant to Section 6.2 or 6.3 above, the Company
hereby further grants to Snap and Xoom a non-exclusive,
non-transferable, royalty-free license, effective throughout the Term,
to modify and create derivative works of the Company Content solely as
permitted in Sections 6.2 or 6.3. In the event the International
Editions are deemed included within this Agreement pursuant to Section
6.3 above, the Company shall in good faith modify the Company Marks to
incorporate changes reasonably suggested by Snap for the relevant
target audience (e.g., complying with local laws or avoiding the use of
offensive terms in the local language). Any use of the Company Marks or
the Company Content by Snap or Xoom must comply with any reasonable
usage guidelines communicated by the Company to Snap and Xoom from time
to time and the Design Standards and Standards and Practices (as such
terms are defined in the Trademark License Agreement). Nothing
contained in this Agreement will give Snap or Xoom any right, title or
interest in or to the Company Content and any derivative works thereof,
the Company Marks or the goodwill associated therewith, except for the
limited usage rights expressly provided above. Snap and Xoom
acknowledge and agree that, as between the Company and Snap and Xoom,
the Company is the sole owner of all rights in and to the Company Marks
and the Company Content and any derivative works thereof.
13. Responsibility for the Sites and Products.
13.1. The Company acknowledges and agrees that, as between the
Company, on the one hand, and Snap and Xoom, on the other
hand, the Company will be solely responsible for any claims or
other losses associated with or resulting from the marketing
or operation of the SnapTV Site, or the offer or sale of any
Company Products by the Company, or through emails delivered
by Xoom for Company Products, including, but not limited to
customer claims, vendor claims, product liability, and damage
in transit. Snap and Xoom are not authorized to make, and
agree not to make, any representations or warranties
concerning the Company Products, except to the extent (if any)
contained within Promotions delivered to Snap or Xoom by the
Company.
13.2. Snap and Xoom acknowledge and agree that, as between the
Company, on the one hand, and Snap and Xoom, on the other
hand, Snap or Xoom will be solely responsible for any claims
or other losses associated with or resulting from emails sent
by Snap or Xoom
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(other than pursuant to Section 8.6) or from products (other
than Company Products) sold by Snap or Xoom pursuant to
Section 8.4, including, but not limited to customer claims,
vendor claims, product liability, and damage in transit. The
Company is not authorized to make, and agrees not to make, any
representations or warranties concerning such products.
14. Representations, Warranties and Covenants.
14.1. Compliance with Law. The Company shall comply with all
truth-in-advertising, consumer credit, consumer product safety
and other laws, rules, regulations and orders applicable to
the Company's Television Home Shopping Service or to the
advertising and sale of products or services. Snap and Xoom
shall have no responsibility or liability with respect to any
products or services or the use thereof. The Company
represents and warrants that all data in the Company Database
has been gathered in compliance with all applicable laws,
rules regulations and orders and that the Company will advise
Snap and Xoom, in a timely manner, of all limitations on the
use of such data requested by the person to whom the data
pertains.
14.2. Product Warranties. The Company warrants that Company Products
delivered to customers hereunder (a) will be free from defects
in workmanship and material, (b) shall be of merchantable
quality and in good working order, and (c) will comply with
all specifications and documentation relating thereto
(including but not limited to the relevant description and
specification included on the SnapTV Site).
14.3. Insurance Requirements. The Company shall at all times during
the Term maintain with a reputable insurance company or
companies (i) errors and omissions insurance in an amount not
less than $2 million combined single limit, naming Snap and
Xoom and their respective affiliates as additional insured
thereunder; and (ii) adequate general comprehensive public
liability insurance coverage against all types of public
liability (including product liability, bodily injury,
property damage and personal injury), in such amounts as are
customary in accordance with sound business practices. Such
policies shall not be subject to cancellation or material
modification upon less than 30 days' prior written notice to
Snap and Xoom. The Company shall provide Snap and Xoom with
certificates evidencing such insurance within 30 days after
the date hereof.
14.4. Fulfillment Services. The Company represents and warrants that
(i) no part of the Fulfillment Services violates or infringes
upon any common law or statutory rights of any person,
including, without limitation, rights relating to defamation,
contractual rights, copyrights, trade secret rights, patent
rights and rights of privacy or publicity; (ii) the
Fulfillment Services will be Year 2000 compliant at the time
of delivery and at all times thereafter and in all subsequent
updates or revisions of any kind, and shall not be materially
interrupted, delayed, decreased, or otherwise affected by
dates/times prior to, on, after or spanning January 1, 2000;
(iii) the Company has received no notice, written or oral,
alleging any such violation or infringement or demanding or
suggesting that the Company enter into a license agreement
with any third party with respect to any part of the
Fulfillment Services; (iv) all employees, independent
contractors, agents, consultants and other persons or entities
used by the Company to develop the Fulfillment Services have
assigned all of their rights in and to the Fulfillment
Services, and any related improvements, to the Company; and
(v) the Company's ownership and/or use of all necessary rights
in and to the Fulfillment Services is free of all liens,
claims, encumbrances and rights of others.
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15. LIMITATION OF DAMAGES. NO PARTY WILL BE LIABLE TO ANOTHER PARTY FOR ANY
SPECIAL, INDIRECT, CONSEQUENTIAL OR INCIDENTAL DAMAGES ARISING OUT OF
OR RELATED TO THIS AGREEMENT, HOWEVER CAUSED AND ON ANY THEORY OF
LIABILITY (INCLUDING NEGLIGENCE), AND EVEN IF SUCH PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
16. NO WARRANTIES. EXCEPT AS OTHERWISE SET FORTH HEREIN, THE JEWELRY SHOP,
CONTENT PORTALS AND SNAPTV SITE ARE PROVIDED "AS IS" AND THE
INFORMATION CONTAINED THEREIN IS NOT WARRANTED TO BE FREE FROM ERROR.
SNAP, XOOM AND THE COMPANY DISCLAIM ALL WARRANTIES, EITHER EXPRESS OR
IMPLIED, INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO
THE JEWELRY SHOP, CONTENT PORTALS AND SNAPTV SITE.
17. Mutual Indemnification.
17.1. Indemnification by Snap. Snap shall indemnify, defend and hold
the Company harmless from and against any costs, losses,
liabilities and expenses, including all court costs,
reasonable expenses and reasonable attorney's fees
(collectively, "Losses") that the Company may suffer, incur or
be subjected to by reason of any legal action, proceeding,
arbitration or other claim by a third party, whether commenced
or threatened, to the extent arising out of or as a result of
(i) any breach of this Agreement by Snap, (ii) any claim that
the intellectual property of Snap or provided by Snap
hereunder infringes a patent, copyright, trade secret or other
intellectual property right of any third party; or (iii)
except to the extent the Company is required to indemnify Snap
under Section 17.3 or where Xoom is required to indemnify the
Company under Section 17.2, the operation of the Snap Sites
(other than the Xoom Site) or the use of the Company Database
by Snap.
17.2. Indemnification by Xoom. Xoom shall indemnify, defend and hold
the Company harmless from and against any Losses that the
Company may suffer, incur or be subjected to by reason of any
legal action, proceeding, arbitration or other claim by a
third party, whether commenced or threatened, to the extent
arising out of or as a result of (i) any breach of this
Agreement by Xoom; (ii) any claim that intellectual property
of Xoom or provided by Xoom hereunder infringes a patent,
copyright, trade secret or other intellectual property right
of any third party; or (iii) except to the extent the Company
is required to indemnify Xoom under Section 17.3, (A) the
emails sent by Xoom or a third party pursuant to Section 8.4
or 8.6, (B) the products, other than Company Products, sold by
Xoom pursuant to Section 8.4, (C) the operation of the Xoom
Site, or (D) the use of the Company Database by Xoom.
17.3. Indemnification by Company. The Company shall indemnify,
defend and hold each of Snap and Xoom harmless from and
against any Losses that Snap or Xoom may suffer, incur or be
subjected to by reason of any legal action, proceeding,
arbitration or other claim by a third party, whether commenced
or threatened, to the extent arising out of or as a result of
(i) any breach of this Agreement by the Company, including,
without limitation, a breach of the warranties,
representations and covenants described in Section 14, (ii)
the use of Company Content by Snap in accordance with this
Agreement; (iii) the operation of the SnapTV Site, the
Company's Television Home Shopping Service or the Fulfillment
Services; (iv) any claim that the intellectual property of the
Company or provided by the Company hereunder, the SnapTV Site
or the Company Content infringes
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a patent, copyright, trade secret or other intellectual
property right of any third party; or (v) the offer or sale of
Company Products by the Company on or through the Company's
Television Home Shopping Service, SnapTV Site or any emails
sent by Xoom or a third party pursuant to Section 8.4 or 8.6.
17.4. Indemnification Procedures. If any party entitled to
indemnification under this Section (an "Indemnified Party")
makes an indemnification request to the other, the Indemnified
Party shall permit the other party (the "Indemnifying Party")
to control the defense, disposition or settlement of the
matter at its own expense; provided that the Indemnifying
Party shall not, without the consent of the Indemnified Party
enter into any settlement or agree to any disposition that
imposes an obligation on the Indemnified Party that is not
wholly discharged or dischargeable by the Indemnifying Party,
or imposes any conditions or obligations on the Indemnified
Party other than the payment of monies that are readily
measurable for purposes of determining the monetary
indemnification or reimbursement obligations of Indemnifying
Party. The Indemnified Party shall notify the Indemnifying
Party promptly of any claim for which Indemnifying Party is
responsible and shall cooperate with the Indemnifying Party in
every commercially reasonable way to facilitate defense of any
such claim; provided that the Indemnified Party's failure to
notify Indemnifying Party shall not diminish Indemnifying
Party's obligations under this Section except to the extent
that Indemnifying Party is materially prejudiced as a result
of such failure. An Indemnified Party shall at all times have
the option to participate in any matter or litigation through
counsel of its own selection and at its own expense.
18. Miscellaneous.
18.1. Subject to the following sentences, this Agreement shall be
binding upon, shall inure to the benefit of and shall be
enforceable by the respective successors and assigns of the
parties hereto. No party may assign or otherwise transfer this
Agreement, except in connection with a merger, reorganization,
or transfer of all or substantially all of the assets of such
party to which this Agreement relates, provided that the
assignee or transferee shall agree in writing to be bound by
this Agreement; provided, however, that Snap and Xoom may
assign this Agreement to NBC Internet, Inc. or any of its
direct or indirect subsidiaries in connection with the
reorganization of Snap and Xoom provided that NBC Internet,
Inc. or such subsidiary signs a counterpart to this Agreement
and agrees to be bound by it. Any purported assignment made in
contravention of this Section 18.1 shall be null and void from
its inception.
18.2. Relationship of Parties. This Agreement will not be construed
to create a joint venture, partnership or the relationship of
principal and agent between any of the parties hereto, nor to
impose upon any party any obligations for any losses, debts or
other obligations incurred by another party except as
expressly set forth herein. In no event will Snap, Xoom or the
Company be liable for the actions, omissions, duties or
obligations of any other party under this Agreement.
18.3. Applicable Law; Forum. This Agreement shall be governed by and
construed in accordance with the laws of the State of New
York, applicable to contracts executed and to be performed
entirely in such state. Each party irrevocably and
unconditionally submits, to the exclusive jurisdiction of any
state or federal court sitting in the County of New York, New
York, in any suit, action or proceeding arising out of or
relating to this Agreement and for recognition or enforcement
of any judgment relating thereto. Each party irrevocably and
unconditionally (i) waives any objection which it may now or
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hereafter have to the laying of venue in such jurisdiction of
any such suit, action or proceeding and (ii) accepts, with
regard to any such action or proceeding, the personal
jurisdiction of such New York courts and waives any defense or
objection that it might otherwise have to such courts'
exercise of personal jurisdiction with respect to it. Any and
all service of process shall be effective against any party if
given by registered or certified mail, return receipt
requested, or by any other means of mail which requires a
signed receipt, postage prepaid.
18.4. Confidentiality. In connection with the activities
contemplated by this Agreement, each party may have access to
confidential or proprietary technical or business information
of another party, including without limitation (i) proposals,
ideas or research related to possible new products or
services; (ii) financial statements and other financial
information; (iii) any reporting information in Section 11
herein; and (iv) the terms of this Agreement and the
relationship among the parties (collectively, "Confidential
Information"). Each party will take reasonable precautions to
protect the confidentiality of each of the other party's
Confidential Information, which precautions will be at least
equivalent to those taken by such party to protect its own
Confidential Information. Except as required by law or as
necessary to perform under this Agreement, no party will
knowingly disclose the Confidential Information of any other
party or use such Confidential Information for its own benefit
or for the benefit of any third party. Each party's
obligations in this Section with respect to any portion of
another party's Confidential Information shall terminate when
the party seeking to avoid its obligation under such Section
can document that: (i) it was in the public domain at or
subsequent to the time it was communicated to the receiving
party ("Recipient") by the disclosing party ("Discloser")
through no fault of Recipient; (ii) it was rightfully in
Recipient's possession free of any obligation of confidence at
or subsequent to the time it was communicated to Recipient by
Discloser; (iii) it was developed by employees or agents of
Recipient independently of and without reference to any
information communicated to Recipient by Discloser; (iv) it
was communicated by the Discloser to an unaffiliated third
party free of any obligation of confidence; or (v) the
communication was in response to a valid order by a court or
other governmental body, was otherwise required by law or was
necessary to establish the rights of either party under this
Agreement.
18.5. Press Release. No party will make any public statement or
other announcement (including without limitation, issuing a
press release) or pre-briefing any member of the press or
other third party relating to the terms or existence of this
Agreement without the prior written approval of the other
parties. Notwithstanding the foregoing and Section 18.4, the
parties may issue an initial joint press release, the timing
and wording of which will be subject to each party's
reasonable approval, regarding the relationship between the
parties.
18.6. Injunctive Relief. Each party agrees that in the event of a
breach or alleged breach of Sections 18.4 or 18.5 above that
the other parties shall not have an adequate remedy at law,
including monetary damages, and that the other parties shall
consequently be entitled to seek a temporary restraining
order, injunction, or other form of equitable relief against
the continuance of such breach, in addition to any and all
remedies to which any other party shall be entitled.
18.7. Headings. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
21
<PAGE> 22
18.8. Survival. Termination or expiration of this Agreement for any
reason shall not release any party from any liabilities or
obligations set forth in this Agreement which (i) the parties
have expressly agreed shall survive any such termination or
expiration, or (ii) remain to be performed or by their nature
would be intended to be applicable following any such
termination or expiration.
18.9. Taxes. Each party will be responsible for any and all taxes,
duties and similar costs imposed upon, due to, or arising from
the payments hereunder to such party, including those properly
imposed upon each party's net income by any state, local,
federal or foreign taxing authority having all necessary
jurisdiction over such party.
18.10. Force Majeure. If any party shall be delayed in its
performance of any obligation hereunder or be prevented
entirely from performing any such obligation due to causes or
events beyond its reasonable control, including without
limitation any act of God, fire, strike or other labor
problem, such delay or non-performance shall be excused. A
party may terminate this Agreement if another party's
performance is delayed or prevented entirely for any such
reason for more than 30 days.
18.11. Dispute Resolution. In the event that any dispute arises
hereunder, the parties agree that prior to commencing
litigation, arbitration, or any other legal proceeding, each
party shall send an officer of such party to negotiate a
resolution of the dispute in good faith at a time and place as
may be mutually agreed. Each officer shall have the power to
bind its respective party in all material respects related to
the dispute. If the parties cannot agree on a time or place,
upon written notice from either party to the other, the
negotiations shall be held at the principal executive offices
of Snap twenty one days following such notice (or on the next
succeeding business day, if the twenty first day is a weekend
or holiday).
18.12. Notices. All notices and other communications provided for
hereunder shall be in writing and delivered by hand or sent by
first class mail or overnight courier or sent by facsimile
(with such facsimile to be confirmed promptly in writing sent
by first class mail or overnight courier) sent as follows:
If to Snap, addressed to:
SNAP! LLC
One Beach Street
San Francisco, California 94133
Attention: Mark Markunas
Telecopier: 415-392-9088
With a copy to:
National Broadcasting Company, Inc.
30 Rockefeller Plaza
New York, New York 10112
Attention: Vice President, Corporate Law
Group
Fax: (212) 977-7165
If to Xoom, addressed to:
22
<PAGE> 23
Xoom.com, Inc.
300 Montgomery Street, Suite 300
San Francisco, California 94104
Attention: General Counsel
Telecopier: 415-288-2578
If to the Company, addressed to:
ValueVision International, Inc.
6740 Shady Oak Road
Eden Prairie, Minnesota 55344-3433
Attention: Chief Financial Officer
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 or facsimile number or
numbers as any of the parties hereto may most recently have
designated in writing to the other parties hereto by such
notice. All such communications shall be deemed to have been
given or made when so delivered by hand or sent by facsimile
or one business day after being sent by overnight courier or
three business days after being sent by first class mail.
18.13. Cumulative Remedies. The rights and remedies provided by this
Agreement are cumulative and the use of any one right or
remedy by any party shall not preclude or waive its right to
seek any or all other remedies. Said rights and remedies are
given in addition to any other rights the parties may have by
law, statute, ordinance or otherwise.
18.14. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed a duplicate
original and all of which, when taken together, shall
constitute one and the same document.
18.15. Amendment; Waiver. This Agreement may be amended only by a
written instrument duly executed by all parties. Except as
otherwise provided in this Agreement, any failure of any of
the parties to comply with any obligation, covenant, agreement
or condition herein may be waived by the party entitled to the
benefits thereof only by a written instrument signed by the
party granting such waiver, but such waiver or failure to
insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure.
18.16. Severability. In the event that any of the provisions of this
Agreement are held to be unenforceable or invalid by any court
of competent jurisdiction, the validity and enforceability of
the remaining provisions will not be affected thereby.
23
<PAGE> 24
18.17. Entire Agreement. This Agreement, the Trademark License
Agreement, the Warrant Purchase Agreement dated as of the date
hereof among Snap, the Company and Xoom and the exhibits and
schedules hereto and thereto contain the entire agreement
between the parties hereto with respect to the subject matter
hereof and supersedes all prior oral and written agreements
and understandings between the parties hereto with regard to
such subject matter.
24
<PAGE> 25
IN WITNESS WHEREOF, the parties have caused this Interactive Promotion Agreement
to be executed by their duly authorized representatives on the dates indicated
below.
<TABLE>
<CAPTION>
SNAP! LLC VALUEVISION INTERNATIONAL, INC.
<S> <C>
By: /s/ Edmond Sanctis By: /s/ Gene McCaffery
-------------------------------------------- -----------------------------------------
(Signature) (Signature)
Name: Edmond Sanctis Name: Gene McCaffery
------------------------------------------ ---------------------------------------
(Please print) (Please print)
Title: C.O.O. Title: Chief Executive Officer
----------------------------------------- --------------------------------------
Date: September 13, 1999 Date: September 13, 1999
------------------------------------------ ---------------------------------------
XOOM.COM, INC.
By: /s/ Chris Kitze
-----------------------------
(Signature)
Name: Chris Kitze
---------------------------
(Please print)
Title: Chairman
-----------------------------
Date: September 13, 1999
-----------------------------
</TABLE>
25
<PAGE> 26
<TABLE>
<CAPTION>
EXHIBIT A
FTE Factors
By Hour and By Day
HOURS MON TUE WED THU FRI SAT SUN TOTAL
<S> <C> <C> <C> <C> <C> <C> <C> <C>
12M - 1A 0.17 0.21 0.23 0.24 0.25 0.30 0.26 1.66
1A - 2A 0.17 0.14 0.16 0.17 0.21 0.34 0.24 1.43
2A - 3A 0.15 0.10 0.15 0.14 0.19 0.41 0.17 1.31
3A - 4A 0.09 0.08 0.11 0.11 0.12 0.18 0.13 0.82
4A - 5A 0.10 0.10 0.13 0.12 0.12 0.10 0.11 0.78
5A - 6A 0.17 0.17 0.19 0.17 0.18 0.18 0.16 1.22
6A - 7A 0.29 0.30 0.49 0.34 0.37 0.55 0.30 2.64
7A - 8A 0.42 0.48 0.55 0.59 0.65 1.36 0.50 4.55
8A - 9A 0.51 0.68 0.62 0.61 0.79 1.57 0.68 5.46
9A - 10A 0.61 0.70 0.72 0.72 1.14 1.74 1.03 6.66
10A - 11A 0.65 0.74 0.70 0.77 1.15 1.83 1.16 7.00
11A - 12N 0.76 0.73 0.71 0.66 1.02 1.33 1.21 6.42
12N - 1P 0.46 0.49 0.58 0.48 0.56 0.93 1.04 4.54
1P - 2P 0.50 0.47 0.54 0.60 0.57 0.99 1.09 4.76
2P - 3P 0.50 0.56 0.57 0.48 0.55 0.95 0.74 4.35
3P - 4P 0.49 0.53 0.53 0.54 0.69 0.82 0.72 4.32
4P - 5P 0.48 0.53 0.50 0.58 0.80 0.89 0.65 4.43
5P - 6P 0.44 0.48 0.49 0.51 0.77 0.85 0.79 4.33
6P - 7P 0.47 0.45 0.69 1.01 0.79 1.70 0.81 5.92
7P - 8P 0.69 0.58 0.83 1.03 0.84 1.90 0.88 6.75
8P - 9P 0.55 0.92 0.75 1.03 0.98 1.55 0.96 6.74
9P - 10P 0.62 0.92 0.85 1.03 0.95 1.69 0.65 6.71
10P - 11P 0.53 0.70 0.52 0.52 0.54 0.77 0.60 4.18
11P - 12M 0.34 0.45 0.39 0.37 0.47 0.58 0.42 3.02
- --------------------------------------------------------------------------------------------------------------------
TOTAL 10.16 11.51 12.00 12.82 14.70 23.51 15.30 100.00
</TABLE>
26
<PAGE> 27
EXHIBIT B
MOCK UP OF THE "AS SEEN ON SNAPTV" CONTENT PORTAL
27
<PAGE> 1
EXHIBIT 10.6
TRADEMARK LICENSE AGREEMENT
DATED
SEPTEMBER 13, 1999
BY AND BETWEEN
SNAP! LLC
AND
VALUEVISION INTERNATIONAL, INC.
<PAGE> 2
[EXECUTION COPY]
TRADEMARK LICENSE AGREEMENT
This Trademark LICENSE AGREEMENT (the "Agreement") dated as of
September 13, 1999 by and between Snap! L.L.C., a Delaware limited liability
company ("Snap"), and ValueVision International, Inc., a Minnesota corporation
("VV").
RECITALS:
WHEREAS, Snap is the owner of certain trademarks, service marks and
tradenames, which have been used by Snap to promote its Internet portal and
various online services;
WHEREAS, Snap has filed an intent to use application for the service
mark "SNAPTV" (the "Exclusive Mark") and is the owner of the URL
http://www.snaptv.com (the "URL");
WHEREAS, VV operates a 24 hour/7 day television program service,
consisting primarily of home shopping and transactional television, which may
include the presentation of products and services for sale as well as product
information (the "Television Home Shopping Service") presently known as
"ValueVision Television" to multichannel video programming distributors for
distribution, exhibition and transmission by Television, which the parties wish
to rebrand using the Exclusive Mark;
WHEREAS, VV intends to develop, own and operate an Internet website for
Commerce Opportunities (the "Online Home Shopping Service") which carries some
or all of the same products advertised on the Television Home Shopping Service
which will be branded exclusively using the Exclusive Mark, and will be operated
exclusively at the URL;
WHEREAS, Snap desires to grant, and VV desires to obtain, a license to
use the Exclusive Mark, the URL, and Snap trademarks, service marks, tradenames
and logos set forth in Schedule 1 hereto (such Snap trademarks, service marks
and tradenames being referred to as the "Non-Exclusive Marks") for VV's
Television Home Shopping Service distributed, exhibited and transmitted by
Television and for the operation of the Online Home Shopping Service, subject to
the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing premises and the
agreements and covenants herein set forth and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties do hereby agree as follows:
<PAGE> 3
-2-
AGREEMENT:
SECTION 1. DEFINITIONS
1.1 Certain Definitions. As used in this Agreement, the following terms
shall have the following meanings:
(a) Advertising. Communications designed to raise consumer or trade
awareness and disseminated by any means of advertising, marketing, publicity,
promotion, or identification, whether on a paid basis or free of charge,
including, without limitation: (i) magazines, newspapers, point of purchase,
outdoor and transit billboards, standees, speaker podiums, packaging, and direct
mail materials; (ii) commercials, public relations materials, publicity
materials and press kits and other print materials; (iii) building and other
signage; (iv) Television,- radio and other multi-channel video programming
sources and audio, video and other outlets; (v) Computer Services and any other
global, national or local computer networks, including public and private
networks; (vi) theatre; (vii) home video; (viii) any on-air graphics, including
but not limited to channel identification, interstitial elements, including all
suitable artwork, music, logos and any other audio or visual works or materials
used in connection therewith, regardless of the form, format or medium in which
they are created, stored or embodied; and (ix) any other medium or vehicle used
for advertisement, publicity or promotion now known or hereafter created.
(b) Affiliate. With respect to any Person, any Person, directly or
indirectly, Controlling, Controlled by or under common Control with such first
Person.
(c) Business Day. Any calendar day other than a Saturday or a
Sunday , or a day on which the commercial banks in New York City, New York are
required or authorized by law to be closed.
(d) Change of Control. Any of the following: (i) a merger,
consolidation or other business combination or transaction to which a Person is
a party if the shareholders of such Person immediately prior to the effective
date 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 voting power of the surviving corporation or its parent immediately
following such merger, consolidation or other business combination or
transaction; (ii) any Person shall have beneficial ownership of 50% or more of
the total voting power of another Person; (iii) a sale of all or substantially
all of the consolidated assets of a Person to another Person; or (iv) a
liquidation or dissolution of a Person, other than in the case of any of the
foregoing subsections (i)-(iv), the party acquiring control is General Electric
Company, National Broadcasting Company, Inc., NBC Internet, Inc. or any of their
respective Affiliates.
(e) Commerce Opportunity. Any opportunity for Users or Television
viewers to engage in a commerce, purchase, trade, exchange, or sale transaction,
including, purchase, trade, exchange or sale opportunities for goods and
services, content purchase opportunities, registration or membership sign-up
opportunities, and for-fee or subscription-based content or services.
<PAGE> 4
-3-
(f) Computer Service. Any service or network primarily intended to
deliver programs, content, or other information, to computer terminals or
similar devices, including the Internet and any other packet-switched networks.
(g) Contract. Any agreement, contract, commitment, indenture, lease,
license, instrument, note, bond, security, agreement in principle, letter of
intent, undertaking, promise, covenant, arrangement or understanding, whether
written or oral.
(h) Control. Having the power to direct the affairs of a Person by
reason of any of the following: (A) having the power to elect or appoint,
through ownership, membership or otherwise, either directly or indirectly, a
majority of the governing body of such Person, (B) owning or controlling the
right to vote a majority number of the shares of voting stock or other voting
interest of such Person, or (C) having the right to direct the general
management of the affairs of such Person by contract or otherwise.
(i) Design Standards. Parameters for the use and exploitation of the
Exclusive Mark as developed by Snap and attached hereto as Schedule 1.1(i), as
updated from time to time; provided that any such updates shall apply to Snap's
use of the Exclusive Mark and shall apply, to the extent applicable, to Snap's
use of the Non-Exclusive Marks.
(j) Governmental Authority. Any government, any governmental entity,
department, commission, board, agency or instrumentality, and any court,
tribunal or judicial or arbitral body, whether federal, state, local or foreign.
(k) Gross Revenues. All fees, charges, and other amounts received by
VV or its agents in connection with any Commerce Opportunity on the Online Home
Shopping Service, less shipping and handling, gift wrapping, fraud, taxes
(sales, use, excise and other taxes), third party sales commissions and amounts
actually paid or credited for returns, exchanges, and chargebacks, but without
any other adjustments of any kind.
(l) Interactive Agreement. The Interactive Promotion Agreement,
dated as of date hereof by and between Snap and VV pursuant to which VV shall
operate an Online Home Shopping Service at the URL.
(m) Interactive Delivery. The delivery of content for use by an end
user to a monitor or viewing screen, whereby such delivery occurs by means of
telephone lines, cable television systems, optical fiber connections, cellular
phones, satellites, wireless broadcast or other means of transmission now known
or hereafter devised, provided that the end user has the ability to selectively
manipulate the presentation to effect substantive content changes during its use
(e.g., a user can select the Internet page which such user will view). For
purposes of clarity, it is understood that Interactive Delivery will not include
transmission of any kind, now or hereafter devised, which makes programs and
other audio and/or visual recordings of any length, available for viewing in a
linear predetermined presentation (e.g., broadcast television, cable television,
pay-per-view, video-on-demand) with selective manipulation available to the
viewer, for example, time delay viewing of a program, color adjustment, volume
control, choice of
<PAGE> 5
-4-
camera feeds, or textual and/or visual and/or audio material which enhances or
provides additional information supplementary to and related to the subject
matter of the linear predetermined presentation or presentations, such as (i) a
separate stream of material with no return path, (ii) a separate stream of
material with a return path that is not integrated or connected with the device
delivering the linear presentation, or (iii) a separate stream of material with
a return path that permits responses (e.g., polling) that do not effect
sufficient content change to or manipulation of the linear presentation so as to
constitute Interactive Delivery (as an example of an insufficient change,
acknowledging poll results); provided, however, that Interactive Delivery shall
not include the delivery of audio and/or visual recordings of seven minutes or
more in length. In addition, Interactive Delivery shall not include the delivery
of content to the end user which occurs principally by transporting a physical
object incorporating the content, such as magnetic disks or optical disks (for
example, CD-ROM).
(n) Launch Date. The date on which VV commences operation of the
Television Home Shopping Service branded, advertised and identified by the
Exclusive Mark and the Online Home Shopping Service functions properly and is
made accessible to Users in non-beta (test) version.
(o) Licensed Advertising. Advertising created or developed, or
caused to be created or developed by or on behalf of VV or any authorized third
party, that bears the Exclusive Mark or any Non-Exclusive Mark and is approved
or deemed approved by Snap in accordance with Section 3.4 and the other
provisions of this Agreement, unless and until the approval is withdrawn or the
license to use any such Licensed Advertising is terminated. Each item of
Licensed Advertising shall be an item of Licensed Advertising only during the
period from the date such item of Licensed Advertising is approved or deemed
approved by Snap until, if applicable, the approval is terminated, and
thereafter during any period such approval is reinstated and remains in effect.
(p) Lien. (i) Any security agreement, financing statement,
conditional sale or other title retention agreement; (ii) any lease, consignment
or bailment given for security purposes; and (iii) any lien, charge, limitation,
restrictive agreement, mortgage, pledge, option, encumbrance, adverse possessory
interest, constructive trust or other trust, claim, attachment, exception to or
defect in title or other ownership interest (including reservations, rights of
entry, possibilities of reverter, encroachments, easements, rights of way,
restrictive covenants, leases and licenses) of any kind, which conditionally or
unconditionally: (a) creates or confers, or purports to create or confer, an
interest in property to secure payment or performance of a liability, obligation
or claim, or which retains or reserves or purports to retain or reserve such an
interest for such purpose; (b) grants to any Person the right to purchase or
otherwise acquire, or obligates any Person to sell or otherwise dispose of, or
otherwise results in any Person acquiring, any property or interest therein; (c)
restricts the transfer of, or the exercise of any rights or the enjoyment of any
benefits arising by reason of ownership of, any property; or (d) otherwise
constitutes, or upon the occurrence of any event or with notice or lapse of time
or both would constitute, an interest or a purported charge or claim against
property, whether arising pursuant to any Requirement of Law, any Contract or
otherwise.
(q) NBC. National Broadcasting Company, Inc., a Delaware
corporation.
<PAGE> 6
-5-
(r) NBC Competitor. A Person, division or operation in which NBC
does not have direct or indirect ownership of 5% or more and whose primary
business is the distribution of broad-based audio and/or visual content for
viewing through Television, other than on the Internet and whether on one or
more channels, across several types of content, such as: comedies, dramas, talk
shows, news, sports, movies and children's programming and all direct and
indirect Subsidiaries of such Person, division or operations. The NBC
Competitors include, without limitation, as of the date hereof, Disney/ABC, CBS
Corporation, News Corporation/Fox, Viacom (UPN), Time Warner (WB), Paxson and
USA Network.
(s) NBCi Competitor. A Person whose primary business is (a) an
information, navigation and content aggregation service distributed, all or
substantially all, through the Internet that provides, across more than six
topics of general interest that do not relate to each other or to a common
topic, a combination of all or substantially all of the following: Internet
searching, content aggregation, topical interest categories and web directories
(a "Portal Service"), (b) a broad-based community service distributed, all or
substantially all, through the Internet that offers its members homepages,
e-mail and chat rooms and may offer, in some cases, message boards, clip art,
software libraries and/or online greeting cards (a "Community Service"); or (c)
a service of direct marketing a broad range of third party products and services
through Internet e-mail to registered members of such service (an "e-Commerce
Service"). For the avoidance of doubt, the term "NBCi Competitor " does not
include any Vertical Internet Business or any service that is not conducted, all
or substantially all, on the Internet. Portal Services include, as of the date
hereof, Microsoft Start, MSN, Netscape Netcenter, AOL, Yahoo, Excite, Lycos,
Infoseek, Go Network, LookSmart and Alta Vista. Community Services include, as
of the date hereof, Tripod, WhoWhere, Angelfire, GeoCities, Homestead, TalkCity,
FortuneCity and theglobe.com. e-Commerce Services include, as of the date
hereof, Buy.com, Xoom and Onsale.
(t) Person. Any individual, corporation, limited liability company,
general or limited partnership, joint venture, association, joint stock company,
trust, unincorporated business or organization, government or agency or
political subdivision thereof, or other entity, whether acting in an individual,
fiduciary or other capacity.
(u) Requirement of Law. Any foreign, federal, state and local law,
rule, regulation, injunction, standard, code, limitation, restriction,
condition, prohibition, notice, demand or other requirement, determination,
decision, order or ruling of a court or other Governmental Authority or an
arbitrator, applicable to or binding upon a Person, any of its property or any
business conducted by it or to which such Person, any of its property or any
business conducted by it is subject.
(v) Standards and Practices. NBC's Broadcast Standards and Practices
as in effect from time to time and as determined by NBC in its sole and absolute
discretion, in each case as NBC would apply to any material broadcast on NBC
Television Network or delivered over the Internet, as the case may be; NBC's
current Broadcast Standards and Practices are as annexed hereto in Schedule
1.1(v).
(w) Television. Any transmission of video and audio signals of two
minutes or more to individual or multiple television receivers by all means of
technology, whether now
<PAGE> 7
-6-
existing or hereafter developed, including, without limitation, cable, wire or
fiber of any material, superstation, cable television, master antenna ("MATV"),
satellite master antenna ("SMATV"), multi-channel multi-point distribution
services ("MMDS") or microwave system, or direct-to-home ("DTH") or direct
broadcast satellite ("DBS") services, or digital terrestrial service; UHF or VHF
television or LPTV broadcast station so that such signals are receivable by the
public without charge by means of standard, roof-top or built-in television
antennas; provided, however, that the term "Television" expressly shall not
include: (i) any so-called "pay-per-view", "video on demand" or "video dialtone"
network or service whereby a per program fee is paid by the viewer for the right
to select a particular program for exhibition or whereby a fee is paid by the
viewer for the right to select one or more programs for exhibition; (ii) any
retransmission of an original broadcast of materials exhibited by any Television
after 24 hours of the original exhibition; and (iii) Interactive Delivery.
(x) Territory. United States of America and its possessions and
territories. Should VV obtain the rights and satisfy the regulatory requirements
for VV's Television Home Shopping Service to be distributed in Canada and decide
to pursue such distribution, then VV and Snap will negotiate in good faith the
terms for application of this Agreement to Canada and its possessions and
territories.
(y) User. Any end user of the World Wide Web part of the Internet.
(z) Vertical Internet Business. Any information, navigation and
content aggregation service, community service or e-commerce service that is
designed to organize a specific type of content that is limited in scope or by
topic -- for example, an Internet service that provides content aggregation for
money, business and financial services (e.g., CBS Marketwatch), an Internet
service that provides community services limited to certain topics (e.g., Launch
Media, a music community) or that is limited to certain groups (e.g., iVillage,
a women's community) or an Internet service that markets and sells a limited
type or category of product or service (e.g., consumer electronics --
Egghead.com or mail - Mail.com).
1.2 General Rules of Interpretation. Whenever the context requires, any
pronoun shall include the corresponding masculine, feminine and neuter forms.
The words "include", "includes" and "including" shall be deemed to be followed
by the phrase "without limitation." All references to "party" and "parties"
shall be deemed references to the parties of this Agreement unless the context
shall otherwise require. Unless otherwise expressly provided herein or unless
the context shall otherwise require, any provision of this Agreement using an
undefined term in connection with the production, co-production, distribution,
exhibition, broadcast, transmission or other activity related to television
programming shall have the meaning customarily ascribed to such term in the
television industry in the Territory.
SECTION 2. GRANT OF LICENSE AND USE OF THE EXCLUSIVE MARK AND THE NON-EXCLUSIVE
MARKS
2.1 Grant of Exclusive License for Television Home Shopping Service.
Subject to the terms and conditions contained herein and for the Term specified
herein, Snap hereby grants to VV, and VV hereby accepts from Snap, an exclusive,
non-transferable license to use the Exclusive Mark and the URL in the Territory:
(a) in connection with the operation, distribution,
<PAGE> 8
-7-
exhibition and transmission of a Television Home Shopping Service by means of
Television and Commerce Opportunities by means of Television; and (b) in
conjunction with Licensed Advertising distributed by VV to advertise such
Television Home Shopping Service, consistent with the terms and conditions
hereof.
2.2 Grant of Exclusive License for Online Home Shopping Service.
Subject to the terms and conditions contained herein, Snap hereby grants to VV,
and VV hereby accepts from Snap, an exclusive, non-transferable license to use
the Exclusive Mark and the URL: (a) in connection with the development,
operation, distribution, exhibition and transmission of an Online Home Shopping
Service at the URL pursuant to the Interactive Agreement, the Interactive
Delivery of audio and/or video excerpts of the Television Home Shopping Service
described in Section 2.1 hereof and the transmission and streaming of the
Television Home Shopping Service described in Section 2.1 hereof, or excerpts
thereof, by any Computer Service; and (b) in conjunction with Licensed
Advertising distributed by VV to advertise such Online Home Shopping Service,
consistent with the terms and conditions hereof.
2.3 Grant of Non-Exclusive License for Television Home Shopping Service
and a Single Retail Store.
(a) Subject to the terms and conditions contained herein, Snap
hereby grants to VV, and VV hereby accepts from Snap, a non-exclusive,
non-transferable license to use the Non-Exclusive Marks: (i) in connection with
the operation, distribution, exhibition and transmission of a Television Home
Shopping Service by means of Television, and (ii) in conjunction with Licensed
Advertising distributed by VV to advertise such Television Home Shopping
Service, consistent with the terms and conditions hereof.
(b) Subject to the terms and conditions contained herein, Snap
hereby grants to VV, and VV hereby accepts from Snap, a non-exclusive,
non-transferable license to the Exclusive Mark in connection with the operation
of a single retail "bricks and mortar" outlet store located at or near VV's
corporate headquarters.
2.4 Grant of Non-Exclusive License for Online Home Shopping Service.
Subject to the terms and conditions contained herein, Snap hereby grants to VV,
and VV hereby accepts from Snap, an non-exclusive, non-transferable license to
use the Non-Exclusive Marks: (a) in connection with the development, operation
distribution, exhibition and transmission of an Online Home Shopping Service at
the URL pursuant to the Interactive Agreement, the Interactive Delivery of audio
and/or video excerpts of the Television Home Shopping Service described in
Section 2.1 hereof and the transmission and streaming of the Television Home
Shopping Service described in Section 2.1 hereof, or excerpts thereof, by any
Computer Service; and (b) in conjunction with Licensed Advertising distributed
by VV to advertise such Online Home Shopping Service, consistent with the terms
and conditions hereof.
2.5 Authority to Sublicense. Only VV is granted the license to use the
Exclusive Mark by Snap, under the authority provided herein. VV shall have no
right to grant, and shall not grant, to any other Person, including any
Affiliate thereof, any license, sublicense or right to use, or otherwise
authorize the use of the Exclusive Mark for any purpose whatsoever; provided,
however, that VV is hereby granted the right to license or permit (without the
right to sublicense): (i) the use of the Exclusive Mark by third parties in
connection with Licensed Advertising of the Television Home Shopping Service or
the Online Home Shopping Service
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developed by or for VV; and (ii) cable system operators and other operators of
Television that distribute, exhibit, transmit or retransmit VV's Television Home
Shopping Service to display, transmit and exhibit (A) the Exclusive Mark or the
Non-Exclusive Marks without any changes or alterations thereto, for the purpose
of Advertising the Home Shopping Service alone or in conjunction with other
television program services, consistent with the terms and conditions hereof and
the policies set forth in the Standards and Practices, and (B) the Exclusive
Mark in any program guide or other channel listing containing VV's Television
Home Shopping Service. Such licenses shall be in writing, approved by
appropriate legal counsel acting for Snap in advance of such use and as
protective of the Exclusive Mark and the Non-Exclusive Marks as this Agreement.
VV shall notify Snap sufficiently in advance of the granting of any such license
(or any generic type thereof) to provide Snap a full opportunity to exercise its
rights of approval in a deliberate manner. Following such notification, should
Snap request a full review of any such proposed license, VV shall not purport to
grant any such license to use the Exclusive Mark without the prior written
consent of Snap, and any such purported grant made without such consent shall
have no effect and shall be null and void from their inception. Notwithstanding
the foregoing, VV may provide Snap, for its full review and approval, with a
form of sublicense agreement which shall be as protective of the Exclusive Mark
and the Non-Exclusive Marks as this Agreement; following Snap's written approval
of such form (and prior to Snap's revocation of such approval), VV may grant
sublicenses to third parties using such form without any further approval by
Snap; provided that, promptly after the grant of any such sublicense, VV
provides Snap with a complete executed copy of such sublicense.
2.6 Exclusivity.
(a) Restrictions on Use of Mark by Snap. Notwithstanding any other
provision in this Agreement to the contrary, Snap shall not use or exploit, or
license any Person, including, without limitation, Snap and its Affiliates, to
use or exploit the Exclusive Mark in connection with (i) the operation,
distribution, exhibition or transmission of: (A) a Television Home Shopping
Service by means of Television in the Territory during the Term or any Commerce
Opportunity by means of Television in the Territory or (B) an Online Home
Shopping Service in the Territory (ie, at a universal resource locator allocated
only to entities in the Territory) during the Term, except as set forth in this
Agreement or (ii) the operation of a single retail "bricks and mortar" outlet
store located at or near VV's corporate headquarters.
(b) Uses Permitted to Snap. Notwithstanding any other provision in
this Agreement to the contrary, Snap and its Affiliates shall have the right to
(i) distribute, transmit, exhibit and use the Exclusive Mark, by any means or
media, in conjunction with Advertising of Snap or Snap's own products and
services; (ii) use the Non-Exclusive Marks to produce, develop, transmit,
distribute, sublicense and exhibit online or interactive programming in
connection with Computer Services, Commerce Opportunities or e-commerce or
online home shopping services; (iii) use the Non-Exclusive Marks and the
Exclusive Mark, for Advertising of VV's Television Home Shopping Service or
Online Home Shopping Service in consultation with VV; (iv) use the Non-Exclusive
Marks in conjunction with other online services, "brick and mortar" retail
services, and television programming; (v) use the Non-Exclusive Marks or the
Exclusive Mark, for non-Commerce Opportunities, including, without limitation,
interactive Television and (vi) for all purposes outside the Territory.
<PAGE> 10
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(c) Except as expressly set forth in this Agreement, all rights
granted herein by Snap to VV with respect to the Exclusive Mark are
non-exclusive.
2.7 Conditions of VV's Use.
(a) VV agrees that its Television Home Shopping Services during the
Term in the Territory shall consist of at least one 24 hour/7 day television
programming service branded using the Exclusive Mark (and on an exclusive basis
no later than June 1, 2000), and that the URL shall be the exclusive Internet
sales outlet for VV's Television Home Shopping Service(s) and other Commerce
Opportunities offered by VV by means of Television in the Territory.
(b) VV and its direct and indirect Subsidiaries will not (i)
authorize or permit NBC Competitors or NBCi Competitors (other than Snap, NBC
Internet, Inc. and their respective direct and indirect Subsidiaries) to
co-brand any of its properties, products or services with the Exclusive Mark or
any Non-Exclusive Mark, (ii) Control or operate a Portal Service or a Community
Service, (iii) Control or operate an e-Commerce Service that competes in scope
and range with Xoom.com, Inc.'s e-Commerce Service as of the Effective Date ,
other than in connection with this Agreement and the Interactive Agreement, or
(iv) invest in, purchase or loan money to an NBCi Competitor.
(c) Except as expressly set forth in Section 2.7(d) hereof, nothing
contained herein shall permit VV to use the Non-Exclusive Marks, or the
Exclusive Mark, or any other words, terms or designs which but for this
Agreement VV would not be permitted to use as, or as part of, a corporate name
or business name, in any filing or recordation with a Governmental Authority or
in executing any Contract without the prior written approval of Snap.
(d) VV shall have the right to use the Exclusive Mark in a trade
name or trade dress and can include the Exclusive Mark in any filing or
recordation with a Governmental Authority, only to the extent: (i) such filing
or recordation with such Governmental Authority requires VV to disclose or
otherwise use such trade name or trade dress; and (ii) such use does not assign,
transfer or otherwise convey to VV any rights or title to, or interest in the
Exclusive Mark.
2.8 Reservation of Rights to the Exclusive Mark and the Non-Exclusive
Marks.
(a) As between Snap and VV, all rights in and to any of the
Exclusive Mark and the Non-Exclusive Marks not expressly licensed to VV
hereunder are expressly reserved to Snap, including without limitation, (i) the
right to use the Exclusive Mark for any purpose whatsoever outside the Territory
and, within the Territory, in conjunction with other online services, "brick and
mortar" retail services (other than the retail store described in Section 2.3(b)
hereof), and television programming not providing Television Home Shopping
Services or Commerce Opportunities and (ii) the right to use any Non-Exclusive
Mark for any purpose whatsoever, whether within or outside the Territory. As
between Snap and VV, all rights in and to all other trademarks, service marks,
trade names, trading styles and fictitious business names of Snap, or any of its
Affiliates, regardless of whether the Exclusive Mark or the Non-Exclusive Marks
are a part thereof, are reserved to Snap and its Affiliates.
<PAGE> 11
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(b) As between the parties, VV shall retain all rights in and to all
trademarks, service marks, trade names, trading styles and fictitious business
names of VV, or any of its Affiliates, which do not contain or otherwise
incorporate the Exclusive Mark, the URL or any Non-Exclusive Mark, in whole or
in part.
2.9 Mandatory Use of the Exclusive Mark During the Term and in the
Territory.
(a) Television Home Shopping Service. Subject to compliance with the
Standards and Practices and the other terms and conditions hereof, VV shall have
the right to use, and following the Launch Date shall use, exclusively and
predominantly, the Exclusive Mark for the branding, Advertising and identifying
of VV's Television Home Shopping Service as it is distributed, exhibited and
transmitted on Television during the Term and in the Territory. VV shall promote
the URL on its Television Home Shopping Service in substantially the same amount
as VV's 1-800 (or similar) telephone number. VV agrees that it shall commence
the use of the Exclusive Mark on its Television Home Shopping Service and Online
Home Shopping Service as soon as practicable following the Effective Date and
that the Launch Date shall be no later than June 1, 2000.
(b) Online Home Shopping Service. Subject to compliance with the
Standards and Practices and the other terms and conditions hereof, VV shall have
the right to use, and following the Launch Date shall use, exclusively and
predominantly, the Exclusive Mark for the branding, Advertising and identifying
of VV's Online Home Shopping Service as it is developed, implemented,
distributed exhibited and transmitted by any Computer Service during the Term
and shall operate such Online Home Shopping Service exclusively at the URL;
provided, however, that with respect to third party merchandise sold on the
Television Home Shopping Service, VV shall use commercially reasonable efforts
to always promote the URL or an alternate Non-Exclusive Mark URL for any on air
promotion that leads a User to a website, with such obligation dependant on
Snap's delivery of an appropriate, easily memorable Non-Exclusive Mark URL
(e.g., Snap.com\victoria for Victoria's Secret) for each third party merchant.
(c) Advertising. Subject to compliance with the Standards and
Practices and the other terms and conditions hereof, VV shall have the right to
use, and following the Launch Date shall use, exclusively and predominantly, the
Exclusive Mark, on all of the Advertising produced, distributed or otherwise
used by VV for the Advertising of VV's Television Home Shopping Service and
Online Home Shopping Service, subject to pre-approval or automatic approval by
Snap pursuant to Section 3.4 and the other terms and conditions hereof.
(d) Removal. Notwithstanding anything contained herein to the
contrary, during the Term and in the Territory, VV shall not remove the
Exclusive Mark from its Television Home Shopping Service or Online Home Shopping
Service and the Licensed Advertising approved or deemed approved by Snap, as the
case may be, except as required pursuant to Section 7.3 or 7.4 hereof.
2.10 Permissive Use of the Exclusive Mark. Subject to compliance with
the Standards and Practices and the other terms and conditions hereof, VV shall
have the right, but not the obligation, to create and develop, or cause to be
created and developed, Licensed Advertising
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and corporate communications materials, such as stationary, business cards,
building signage (interior and exterior) and trade materials for use in
connection with the distribution, exhibition or transmission of its Television
Home Shopping Service and Online Home Shopping Service featuring the Exclusive
Mark. The Licensed Advertising shall be created, developed and produced by or
under the control of VV, with the guidance and input of Snap, at VVs sole cost
and expense, subject to the terms and conditions contained herein, including
Section 3.4 hereof.
SECTION 3. QUALITY CONTROL
3.1 Maintenance of Quality Television Home Shopping Services. VV agrees
to maintain the quality of its Television Home Shopping Service at a level that
is at least commensurate with the services as offered by VV today. VV and Snap
agree that the parties shall work together to develop a cohesive marketing and
advertising strategy consistent with the Interactive Agreement, and that Snap
shall be involved in the development of Licensed Advertising for VV's Television
Home Shopping Service and Online Home Shopping Service.
3.2 Correction of Non-Compliant Uses. VV shall comply with the Standards
and Practices, the Design Standards and any other guidelines reasonably provided
by Snap, and shall correct any deficiencies in the use of the Exclusive Mark or
any Non-Exclusive Mark upon notice from Snap, within a reasonable period that
shall not exceed thirty days.
3.3 Quality Standards for Online Home Shopping Services In connection
with the development, implementation, operation and transmittal of the Online
Home Shopping Service, the following standards shall be met or exceeded:
(a) Operations. The Online Home Shopping Service (i) will be
operational and fully functional in all material respects (i.e. capable of
displaying information and conducting transactions as contemplated in the
ordinary course of business) at least 99% of the time during any 30 day period;
(ii) the average time required to start displaying the HTML for text and
graphics on a page of the Online Home Shopping Service after a link from any
site shall not exceed a daily average of five seconds, the average time required
to deliver an entire page of the Online Home Shopping Service over the open
Internet shall not exceed a daily average of six seconds, where VV may assume
standard fractional T1 connectivity from the desktop to the Internet and the
average time required to start displaying, or to deliver an entire page of, the
HTML for any audio or video on a page of the Online Home Shopping Service after
a link from any site shall not exceed the daily average for audio or video for
Portal Services over the open Internet; (iii) VV shall provide to users on the
Online Home Shopping Service at least the same level of service as is offered to
Users on Snap.com; and (iv) VV shall use reasonable commercial efforts to notify
Snap at least three (3) days in advance of planned outage periods for system
maintenance, etc.
(b) Online Policies and Customer Support. The Online Home Shopping
Service (i) will comply with Snap's security and privacy policy standards for
online commerce; and (ii) VV shall provide commercially reasonable maintenance
and technical support to all end users, with prompt response times defined as:
electronic mail: eight (8) hours; telephone: M-Fri 8AM-7PM P.S.T.; and Pager
response to technical support inquiries from Snap: 120 Minutes.
<PAGE> 13
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(c) Quality of Content. The Online Home Shopping Service will offer
products and services featured on the Television Home Shopping Service, as well
as other products and services and links to various resources. All products or
services offered on, and all content contained on the Online Home Shopping
Services shall (i) be of a quality at least equal to the products, services and
content available on Snap; (ii) shall comply with the Standards and Practices;
(iii) not contain defamatory or libelous material or material which discloses
private or personal matters concerning any person, without such person's
consent; (iv) not permit to appear or be uploaded any messages, data, images or
programs which are illegal, contain nudity or sexually explicit content or are,
by law, obscene, profane or pornographic; or (v) not permit to appear or be
uploaded any messages, data, images or programs that would knowingly or
intentionally (which includes imputed intent) violate the property rights of
others, including unauthorized copyrighted text, images or programs, trade
secrets or other confidential proprietary information, or trademarks or service
marks used in an infringing fashion.
Notwithstanding anything to the contrary contained in this Section
3.3, Snap shall have the right to update the quality standards contained in this
Section 3.3 from time to time to meet the average commercial quality standards
contained in Snap's other Internet transactions at that time, subject to VV's
approval (such approval not to be unreasonably withheld or delayed).
3.4 Licensed Advertising.
(a) New Advertising Approval Process. VV shall submit for Snap's
approval or disapproval following the procedures set forth in this Section
3.4(a), any uses of the Exclusive Mark or any Non-Exclusive Mark in connection
with "New Advertising," which for the purposes of this section shall mean new
Advertising campaigns, i.e. a series or group of advertisements or promotions
directed at either consumers or the trade, media kits that are new, new
electronic press kits, new sales presentations or templates for sales
presentations, and new collateral materials, i.e. trade gifts, sales sheets,
binders, folders, etc., connected with any new Advertising campaign.
(i) Materials to be Submitted. VV shall submit for Snap's
approval or disapproval, the following (all proposals, materials and information
submitted to Snap pursuant to this Section 3.4(b) shall be collectively referred
to as the "Materials"):
(A) if the particular artwork, music or film to be used in
the Advertising has not yet been completed, the rough cut, the final cut and the
final script, as and when they become available, of such Advertising, and if
such Advertising has been completed, a VHS copy of such Advertising and the
final script thereof;
(B) proofs or other representations of any such
Advertising, including, as applicable or available, scripts, story boards,
television and radio commercials, print advertisements, publicity releases,
promotional materials and other materials, specifications or information; and
(C) any other materials, specifications or information as
Snap may reasonably request to verify compliance with the standards and
specifications required
<PAGE> 14
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hereunder and the representations, warranties, covenants and agreements of VV
hereunder, which VV has in its possession or can obtain without unreasonable
expense or effort.
(ii) Approval. To the extent practicable, VV and Snap shall
agree on a schedule by which Snap shall review and approve or disapprove, which
approval or disapproval shall not be unreasonably withheld or given (it being
understood that it shall be unreasonable for Snap to withhold approval of New
Advertising that complies with the Design Standards and the Standards and
Practices and also follows the branding and themes of Snap's then-current
advertising campaign), the Materials submitted by VV to Snap in connection with
Advertising as required by this Section 3.4; provided, however, that Snap shall
advise VV of Snap's approval or disapproval of any Advertising no later than
five (5) Business Days following Snap's receipt of the Materials. If Snap
approves any Advertising, such Advertising shall become Licensed Advertising,
subject to VV's compliance with the terms and conditions of this Agreement. Snap
shall designate, from time to time, an adequate number of representatives who
shall have full authority to approve or disapprove, on behalf of Snap, all
Advertising submitted by VV to Snap for approval pursuant to this section.
(iii) Deemed Approval. If Snap fails to approve or disapprove
the Materials within the time period set forth above, the Advertising, shall be
deemed approved by Snap, provided that VV's uses of such Advertising are
consistent with the proposed uses of the Materials (i.e., media and audience)
and comply with the terms and conditions hereof, including the Design Standards
and the Standards and Practices.
(b) Automatic Approval. If VV or an authorized third party desires
to use the Exclusive Mark in connection with Advertising (other than New
Advertising) which complies with the Design Standards and the Standards and
Practices and also follows the branding and themes of either (x) Snap's
then-current advertising campaign or (y) VV's then most-recent New Advertising
approved or deemed approved by Snap, then such Advertising shall be deemed
Licensed Advertising without the need to submit Materials to Snap.
(c) Duration of Approval. Once Licensed Advertising is approved (or
deemed approved, as applicable), VV may repeatedly use such Licensed Advertising
without the need for further approvals, unless such approval is revoked by Snap
which revocation, unless required pursuant to Sections 7.3, shall not be
retroactive and shall not be effective until ten (10) Business Days after VV
receives written notice of the revocation.
(d) Specifications. Notwithstanding anything contained herein to the
contrary, Licensed Advertising shall comply with, and be produced in accordance
with, the standards adopted by Snap for its own Advertising, following Snap's
written notification to VV from time to time.
(e) Samples of Licensed Advertising. Upon Snap's written request
from time to time, VV, at its sole cost and expense, deliver within five (5)
Business Days to Snap a reasonable number of true, correct and complete samples
of any requested Licensed Advertising, in the form in which such Licensed
Advertising is most commonly distributed; provided, however, that VV shall
deliver such samples to Snap within three (3) Business Days of receipt of
written notice from Snap if such written notice states that Snap reasonably
believes that such
<PAGE> 15
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Licensed Advertising does not comply with the terms and conditions of this
Agreement, the Design Standards, the Standards and Practices, the Interactive
Agreement or a Requirement of Law.
(f) Representations, Warranties, Covenants and Agreements.
(i) VV shall obtain all reasonably necessary documentation,
consents, approvals and permissions of the performers, labor organizations,
rights holders and all other Persons whose consent, approval or permission is
required for the Licensed Advertising to be exploited as provided in this
Agreement prior to using such Licensed Advertising in conjunction with or for
advertising the Television Home Shopping Service or Online Home Shopping
Service. Without limitation of the foregoing, VV shall provide Snap, upon Snap's
reasonable request from time to time with copies of any documentation obtained
or acquired by VV pursuant hereto.
(ii) Unless the parties agree otherwise, to the extent VV, its
Affiliates or permitted distributors or sublicensees acquire by operation of law
or otherwise, any rights, or title to, or interests in any Non-Exclusive Mark or
the Exclusive Mark, or any trademark, service mark, tradename or logo that
includes the word "Snap", VV shall automatically assign, and hereby
automatically assigns all such rights relating to such Non-Exclusive Mark, the
Exclusive Mark or any trademark, service mark, tradename or logo that includes
the word "Snap" to Snap. Upon Snap's request from time to time, VV shall execute
any documents, transfers, assignments, recordations or filings to effectuate the
intent of this provision.
(iii) Notwithstanding anything contained in this Agreement to
the contrary, (A) VV shall have no right to seek, and shall not seek, any
registration or intellectual property or proprietary rights in any Licensed
Advertising that bears the Exclusive Mark or any Non-Exclusive Mark, in whole or
in part; and (B) Snap shall have the right to seek registration and intellectual
property and proprietary rights in any Licensed Advertising that bears the
Exclusive Mark or any Non-Exclusive Mark, in whole or in part.
(iv) VV shall have no right to seek, and shall not seek, any
registration or license of any universal resource locator or high-level domain
name including the letters "Snap" anywhere in the world, including, for example,
"SnapShopping.com", "AsSeenOnSnapTV.com", "SnapTV.co.uk", "Snap.co.uk", etc. VV
shall assign all such universal resource locators or high-level domain names
that it has registered prior to the date hereof, including those locators or
domain names listed in Schedule 3.4 hereof, to Snap as soon as practicable
following the date hereof, and Snap shall reimburse VV for all out-of-pocket
costs paid by VV to Network Solutions in respect of such registrations. To the
extent that VV desires to have any such universal resource locator or high-level
domain name registered, VV may enter into good faith negotiations with Snap
concerning such registration or license and the allocation of costs and revenues
arising or derived from such registration or license.
(v) Upon Snap's request from time to time, VV shall take all
reasonable steps to assist Snap to register or protect any Licensed Advertising
which incorporate the Exclusive Mark or any Non-Exclusive Mark, pursuant to the
copyright, trademark, and other applicable laws and regulations.
<PAGE> 16
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3.5 General.
(a) VV acknowledges and agrees that the rights and licenses granted
by Snap to VV herein are expressly conditioned upon VV's continued adherence to
the terms and conditions of this Agreement, including: (i) the Standards and
Practices, Design Standards and the other standards and specifications contained
herein; and (ii) VV's representations, warranties, covenants and agreements
contained herein.
(b) VV acknowledges that from time to time, Snap may alter the
appearance of the Non-Exclusive Marks, and agrees to change the Exclusive Mark
to conform to the then-current appearance of the Non-Exclusive Marks, as they
may be altered from time to time. Snap undertakes that it shall provide VV with
reasonable notice of such changes so that VV can implement any changes required
to ensure that the branding of VV's Television Home Shopping Services and Online
Home Shopping Service remain consistent with the branding of Snap; provided,
however, that to the extent VV has already paid for or committed to pay for any
Licensed Advertising incorporating the Exclusive Mark prior to Snap's change, VV
shall be entitled to utilize such Licensed Advertising for a reasonably limited
period to be agreed on by Snap and VV.
(c) VV shall, at all times, in accordance with the Standards and
Practices, the Design Standards and any requests by Snap: (i) make appropriate
use of the trademark and service mark symbols in conjunction with the use of the
Exclusive Mark and the Non-Exclusive Marks, including the use of the letters
"TM" or "SM", or the designation"(R)" to the extent applicable; and (ii)
indicate appropriation of the Exclusive Mark and the Non-Exclusive Marks by
Snap.
(d) To the extent applicable, VV shall at all times include in the
Television Home Shopping Service, the Online Home Shopping Service and all of
the Licensed Advertising, an appropriate copyright notice, in the form provided
and in the manner required by Snap as the owner of the copyright in the
Exclusive Mark and the Non-Exclusive Marks.
(e) VV shall not produce, manufacture, use, distribute or exhibit
anyLicensed Advertising, or any other materials bearing the Exclusive Mark or
any Non-Exclusive Mark, except as expressly permitted in this Agreement, without
Snap's prior written approval.
(f) Except as expressly permitted in the Standards and Procedures or
Section 3 hereof, no changes may be made by VV to the Licensed Advertising,
including modifications, edits or other changes thereto, without Snap's prior
written approval.
(g) VV shall operate its Television Home Shopping Service and Online
Home Shopping Service and shall use the Exclusive Marks and the Non-Exclusive
Marks in compliance with the Standards and Practices, the guidelines of the
Direct Marketing Association as well as any applicable Requirement of Law or
regulations of any applicable jurisdiction.
(h) VV shall use the approved Licensed Advertising solely in a
manner consistent with the proposed uses of the Materials submitted for approval
to Snap.
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(i) Any work done by VV in creating, manufacturing, promoting,
distributing, transmitting or exhibiting the Licensed Advertising shall be done
entirely at VV's own risk and expense.
(j) All documents, contracts, instruments, certificates, notices,
consents, affidavits, letters, telegrams, telexes, facsimiles, statements,
schedules and any other papers (collectively, "Documents") delivered by or on
behalf of VV to Snap in connection with any request for Snap's approval
hereunder shall be true and correct copies of the originals. VV shall use
commercially reasonable efforts to cause all responses to Document requests
furnished by or on behalf of VV to Snap pursuant to this Agreement to be
complete in all material respects, and VV shall notify Snap in writing if any
such response is not complete in all material respects.
(k) Notwithstanding any right of Snap to investigate the affairs of
VV or verify VV's compliance with the terms and conditions of this Agreement,
Snap has the right to rely exclusively and fully upon the representations,
warranties, covenants and agreements of VV contained in this Agreement and in
any Documents delivered by VV to Snap.
3.6 Association With Other Marks. Subject to the Standards and Practices
and the restrictions contained in Section 2.7(b) hereof, VV shall be permitted
to engage in co-promotions, tie-ins or similar arrangements with respect to the
Licensed Advertising and the Exclusive Mark (but not any Non-Exclusive Mark) and
to use the trademark, service mark, trade name or logo of any other Person on or
in connection with the Licensed Advertising or the Exclusive Mark (but not any
Non-Exclusive Mark) without Snap's prior written approval, and may use third
party trademarks, trade names or logos to identify the sponsor of a program on
the Television Home Shopping Service, provided, however, that any such use does
not create a composite mark with respect to the Exclusive Mark; and provided,
further, that notwithstanding anything to the contrary contained herein, any
such co-promotion, tie-in or similar arrangement does not involve any NBC
Competitor or NBCi Competitor and that the trademark, service mark, tradename or
logo of any NBC Competitor or NBCi Competitor is not used on or in connection
with the Licensed Advertising, the Exclusive Mark or any Non-Exclusive Mark.
Uses not in compliance with the Standards and Practices and the restrictions
contained in Section 2.7(b) or this Section 3.6 must be approved by Snap in
writing.
3.7 Restriction on Composite Marks. VV shall not use any new or
additional trademarks, service marks, tradenames, trading styles, or fictitious
business names in conjunction with the Exclusive Mark or any Non-Exclusive Mark
that create or result in any composite marks using the Exclusive Mark or any
Non-Exclusive Mark without the prior written approval (or deemed approval, in
accordance with the terms and conditions of Section 3.4 hereof) of Snap.
<PAGE> 18
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SECTION 4. USE OF THE EXCLUSIVE MARK AND THE NON-EXCLUSIVE MARKS
4.1 Use of the Exclusive Mark. VV covenants and agrees that:
(a) it shall not use the Exclusive Mark or any Non-Exclusive Mark or
any variation on the Exclusive Mark or Non-Exclusive Mark in violation of the
terms of this Agreement, any applicable Requirement of Law, or the requirements
of the Standards and Practices;
(b) it shall not alter, mutilate, dilute, create derivative forms
of, or otherwise change the format of the Exclusive Mark or any Non-Exclusive
Mark in any way or for any purpose, except as expressly permitted herein;
(c) it shall not assign, transfer, permit any Lien against, or
otherwise encumber the Exclusive Mark or any Non-Exclusive Mark, or its rights
hereunder in any way, except as expressly permitted herein;
(d) it shall not use the Exclusive Mark or any Non-Exclusive Mark,
or any other materials contemplated by this Agreement in conjunction with any
activity, facility or publication which is in violation of any applicable
Requirement of Law or the Standards and Practices, or which holds Snap, or any
Affiliate thereof, up to potential embarrassment, contempt, scandal, or ridicule
or otherwise compromises the reputation, goodwill or value associated with the
Exclusive Mark or the Non-Exclusive Marks, provided, however, VV shall not be
deemed to be in breach of this Section 4.1(d) if Snap has approved, pursuant to
Section 3.4, the use of the Exclusive Mark of such Non-Exclusive Mark in
connection with any Licensed Advertising and VV has provided Snap all relevant
information and all samples requested in accordance herewith in connection with
such use as required herein;
(e) it shall not adopt or use, or encourage any Person to adopt or
use, any trademark, service mark, tradename, trading style, fictitious business
name, logo or design which, but for this Agreement, VV would not be permitted to
use, except as expressly permitted herein; and
(f) it shall ensure that the quality of the Licensed Advertising
manufactured, produced, created or distributed by or on behalf of VV are in
compliance with the Standards and Practices and will not in any way diminish the
Exclusive Mark or any Non-Exclusive Mark and the goodwill, value and reputation
pertaining thereto.
4.2 Ownership of the Exclusive Mark and the Non-Exclusive Mark.
(a) The Exclusive Mark and the Non-Exclusive Marks , together with
the value and goodwill of the business symbolized thereby, are and shall remain
the sole and exclusive property of Snap throughout the world.
(b) VV shall not at any time during or after the Term hereof:
<PAGE> 19
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(i) challenge the title or any other rights of Snap or their
Affiliates, as the case may be, in or to the Exclusive Mark or any Non-Exclusive
Mark or any variations thereof or any parts or derivative works thereof;
(ii) contest the validity of the Exclusive Mark or any
Non-Exclusive Mark or any registrations or protection thereof held by Snap or
their designees, as the case maybe;
(iii) claim any rights, or title to, or interests in the
Exclusive Mark or any Non-Exclusive Mark or any variations thereof, or any parts
or derivative works thereof;
(iv) register or apply for registration or protection of the
Exclusive Mark or any Non-Exclusive Mark or any works containing or
incorporating Exclusive Mark or any Non-Exclusive Mark;
(c) Except for the rights granted herein, any and all uses of the
Exclusive Marks and the Non-Exclusive Marks shall inure exclusively to the
benefit of Snap; and
(d) Upon Snap's request from time to time, VV shall execute and
deliver to Snap any assignments, declarations, governmental filings or other
documents that Snap or deems to be reasonably necessary to protect Snap's rights
and title to, and interests in the Exclusive Marks or the Non-Exclusive Marks
and the intellectual property and proprietary rights related thereto.
4.3 Infringement of the Exclusive Mark or the Non-Exclusive Marks. VV
shall promptly notify Snap of any acts, claims, demands or causes of action of
which it learns, based upon, relating to, or arising from any attempt by any
other Person to use any element of the Exclusive Mark or any Non-Exclusive Mark
or any colorable imitation thereof of which VV becomes aware, in each case that
would result in a material diminution or impairment of Snap's rights in such
marks or content; it being understood that any infringement of the Exclusive
Mark or any Non-Exclusive Mark would result in a material diminution or
impairment of Snap's rights in such marks. Snap shall promptly notify VV of any
acts, claims, demands or causes of action of which it learns, based upon,
relating to, or arising from any attempt by any other Person to use the
Exclusive Mark (but not any Non-Exclusive Mark) or any colorable imitation
thereof of which Snap becomes aware, in each case that would result in a
material diminution or impairment of VV's rights in such marks or content; it
being understood that any use of the Exclusive Mark for Commerce Opportunities
would result in a material diminution or impairment of VV's rights in the
Exclusive Mark. VV shall notify Snap promptly of any litigation or arbitration
instituted or threatened by any Person against VV involving the Exclusive Mark
or any Non-Exclusive Mark. Snap also shall notify VV promptly of any litigation
or arbitration instituted or threatened by any Person against Snap involving
VV's use of the Exclusive Mark. Snap shall have the sole right to decide whether
or not proceedings alleging infringement of the Exclusive Mark and/or the
Non-Exclusive Marks shall be brought against third parties and to control any
litigation or arbitration involving the Exclusive Mark and/or the Non-Exclusive
Marks. If Snap does not exercise its rights pursuant to the preceding sentence
with respect to VV's use of the Exclusive Mark, VV shall have the right to bring
such proceedings; provided, however, that Snap shall have the right to determine
and adopt (or, in the
<PAGE> 20
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case of a proposal by VV or the alleged infringer, to approve) a settlement of
such matter in its reasonable discretion, except that Snap need not consent to
any settlement that (a) imposes any monetary or nonmonetary obligation on Snap
or (b) diminishes or adversely effects Snap's rights in or to the Exclusive
Mark. Subject to the preceding sentence, Snap shall have the sole right to
defend the Exclusive Mark and the Non-Exclusive Marks , at its expense, against
imitation, infringement or any claim of prior use.
SECTION 5. ROYALTIES
5.1 Royalty Rate. In consideration for the rights granted herein, VV will
pay Snap a royalty of two percent (2%) of Gross Revenue.
5.2. Statements and Payments. (a) VV shall deliver to Snap, within
forty-five (45) days after the end of each calendar quarter following the Launch
Date during the entire Term of this Agreement, a complete and accurate
statement, certified to be accurate by an officer of VV, showing the number,
description and gross sale price of all Commerce Opportunities distributed or
sold or otherwise exploited that generated Gross Revenues during the preceding
calendar quarter ("Reporting Period") together with any returns or other
chargebacks made (i) during such Reporting Period or (i) any preceding Reporting
Period that were not included in the statement for such preceding Reporting
Period. Such statements shall be furnished to Snap whether or not any Commerce
Opportunity occurred during the Reporting Period for which such statement is
due. VV shall pay to Snap within forty-five (45) days after the end of each
calendar quarter during the entire Term of this Agreement, all Royalties earned
under the terms hereof for the Reporting Period, less any returns or chargebacks
for any preceding Reporting Period for which Gross Revenues were already paid to
Snap. The receipt or acceptance by Snap of any statement or of any Royalty paid
hereunder shall not preclude Snap from questioning the correctness thereof at
any time, and in the event that any inconsistencies or mistakes are discovered
in connection therewith, they shall immediately be rectified and the appropriate
payment made by VV to Snap.
(b) Time is of the essence with respect to all payments to be made
hereunder by VV. Interest at a rate of the lesser of one and one-half percent (1
1/2%) per month, or the maximum rate allowed by law, shall accrue on any amount
due Snap hereunder from and after the date on which the payment is due until the
date of receipt of payment.
(c) All transactions under this Agreement, including without
limitation, all payments of royalties shall be with or made payable in the name
of Snap, or its designated assigns, if applicable.
5.3 Books and Records/Audit
(a) VV agrees to keep accurate books of account and records at its
principal place of business covering all transactions relating to the license
being granted herein. Snap or any duly authorized representative shall have the
right, at all reasonable hours of the day, to audit VV's books of account and
records and all other documents and material in the possession or under the
control of VV with respect to the subject matter and the terms of this Agreement
and to
<PAGE> 21
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make copies and extracts thereof. In the event that any such audit reveals an
underpayment by VV, VV shall immediately remit payment to Snap in the amount of
such underpayment plus interest calculated at a rate of one and one-half (1
1/2%) per month, or the maximum rate allowed by law, compounded daily,
calculated from the date such payments were actually due until the date when
such payment is in fact actually made. Further, in the event that any such
underpayment is greater than five percent (5%) of the Royalties due for any
Reporting Period, VV shall reimburse Snap for the reasonable costs and expenses
of such audit.
(b) All books of account and records of VV covering all transactions
relating to the Online Home Shopping Service shall be retained by VV for at
least three (3) years after the expiration or termination of this Agreement, as
the case may be, for possible inspection and/or audit by Snap.
SECTION 6. INDEMNITY
6.1 Snap Indemnification Obligation. Subject to VV's material
compliance with the terms and conditions of this Agreement, Snap shall
indemnify, defend, and hold harmless VV and its respective successors and
assigns and the directors, officers, employees, and agents of each ("VV
Indemnified Group") from and against any claims, actions, assessments, losses,
damages, liabilities, costs, expenses of litigation (including reasonable
attorneys' fees), and settlement amounts, together with interest and penalties
(collectively, a "Loss" or "Losses"), asserted against, resulting to, imposed
upon, or incurred by a member of the VV Indemnified Group, to the extent arising
from any of the following: (i) any claim by a third party that VV's use or
exercise of the rights licensed or assigned herein infringes any third party's
rights; or (ii) any breach of Snap's representations, warranties, covenants or
agreements contained in this Agreement.
6.2 VV Indemnification Obligation. Subject to Snap's material compliance
with the terms and conditions of this Agreement, VV shall indemnify, defend, and
hold harmless Snap, its Affiliates and their respective successors and assigns
and the directors, officers, employees, and any agents of each ("Snap
Indemnified Group") from and against any Losses, asserted against, resulting to,
imposed upon, or incurred by a member of the Snap's Indemnified Group, to the
extent arising from any breach of VV's representations, warranties, covenants or
agreements contained in this Agreement.
6.3 Notice of Claim. The party entitled to indemnification hereunder (the
"Claimant") shall promptly deliver to the party liable for such indemnification
hereunder (the "Obligor") notice in writing (the "Required Notice") of any claim
for recovery under Section 6.1 or 6.2, specifying in reasonable detail the
nature of the Loss (the "Claim"); provided, however, that the failure to provide
such notice shall not limit the Claimant's right to indemnification hereunder
except to the extent that the Obligor is materially prejudiced hereunder. The
Claimant shall provide to the Obligor as promptly as practicable thereafter
information and documentation in its possession and reasonably requested by the
Obligor to support, verify and defend against the claim asserted, provided that,
in so doing, it may restrict or condition any disclosure in the interest of
preserving privileges that it may assert in any foreseeable litigation.
<PAGE> 22
-21-
6.4 Defense. The Claimant shall permit the Obligor to assume the
defense of such Claim and any litigation resulting therefrom (and to prosecute
by way of counterclaim or third party complaint any claim against such third
party arising out of or relating to the Claim in question) upon receipt by the
Claimant of the Obligor's written acknowledgment of its obligation to indemnify
the Claimant with respect to the Claim and its agreement to assume the defense
of such Claim. After giving such notice of assumption, the Obligor shall not be
liable under this Agreement for any legal or other expenses subsequently
incurred by the Claimant in connection with such defense but the Obligor shall
be responsible for all such expenses incurred by the Claimant in connection with
the Claim prior to such assumption. Notwithstanding the foregoing, any Claimant
shall be entitled to conduct its own defense at the cost and expense of the
Obligor if the Claimant can establish, by reasonable evidence, that the conduct
of its defense by the Obligor would reasonably be likely to prejudice the
Claimant due to the nature of any claims or counterclaims presented or by virtue
of a conflict between the interest of the Claimant and the Obligor. Claimant may
participate in such defense at its own expense. Counsel selected by the Obligor
or by the Claimant to defend any Claim shall be subject to the reasonable
approval of the other party. If the Obligor fails to assume the defense of any
such Claim as provided above within a reasonable time (which shall be such
period of time as will not, in the reasonable judgment of the Claimant, result
in prejudice to the rights of the Claimant) after due notice has been given of a
Claim, then until such time as the Obligor shall make such assumption, the
Claimant shall have the right to prosecute and conduct its own defense by
counsel of its choice, and in connection therewith shall have full right to
conduct the defense thereof and to enter into any compromise or settlement
thereof without the consent of the Obligor. Such defense shall be at the cost
and expense of the Obligor if the Obligor subsequently assumes such defense as
provided above, or if it is subsequently determined that the Obligor is or was
obligated to defend or indemnify the Claimant with respect to such Claim.
Whether or not the Obligor chooses to so defend or prosecute such claim, all the
parties hereto shall provide reasonable cooperation in the defense or
prosecution thereof.
6.5 Settlement. The Claimant shall have the right to determine and
adopt (or, in the case of a proposal by Obligor, to approve) a settlement of
such matter in its reasonable discretion, except that Claimant need not consent
to any settlement that (a) imposes any nonmonetary obligation or (b) Obligor
does not agree to pay in full. The Obligor shall not be liable for any
settlement of any such claim effected without its prior written consent, which
shall not be unreasonably delayed or withheld, except in the case where Obligor
has not acknowledged liability hereunder.
SECTION 7. TERM AND TERMINATION
7.1 Term. The term of this Agreement will begin on the date hereof and
end on the tenth (10th) anniversary of the date hereof, unless otherwise
terminated in accordance with this Agreement.
7.2 Grounds for Termination. The provisions of this Agreement may be
terminated as follows:
<PAGE> 23
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(a) by either Snap or VV, upon any termination of the Interactive
Agreement, which termination will be effective as of the effective date of the
termination of the Interactive Agreement;
(b) by either VV or Snap, in the event that (i) the other party
files any petition for bankruptcy or is adjudicated a bankrupt or insolvent
under the bankruptcy laws of any jurisdiction; (ii) a petition in bankruptcy is
filed against the other party and such petition is not dismissed within 60 days;
(iii) the other party becomes insolvent or makes an assignment for the benefit
of its creditors or an arrangement for its creditors pursuant to any bankruptcy
law; (iv) the other party discontinues its business; or (v) a receiver or
trustee is appointed for the other party, which appointment is not contested by
that party within 60 days;
(c) by Snap, in the event of a Change of Control of VV;
(d) by VV, in the event of a Change of Control of Snap;
(e) by either party, in the event of any material breach by the
other party of this Agreement or any breach by such other party of any material
representation, warranty, covenant or agreement contained in this Agreement (it
being understood that the substantive quality controls contained in Sections 3
and 4 hereof are material covenants and agreements of VV); provided, however,
that if such breach is of such a nature that it can reasonably be cured within
30 days following written notice from the non-breaching party to the breaching
party of such breach, then such right of termination may not be exercised unless
such breach shall not have been cured within 30 days of the breaching party
receiving such written notice; or
(f) by Snap, in the event (x) of any breach by VV of any of the
substantive quality controls contained in Sections 3 and 4 hereof, (y) (i) if
such breach is of such a nature than it cannot reasonably be cured or (ii) if
such breach is cured within the time period specified in subsection 7.2(e)
above, and (z) VV repeatedly breaches the substantive quality controls contained
in Sections 3 and 4 hereof following written notice from Snap to VV of such
breach and such breaches could dilute or otherwise render material harm to the
Exclusive Mark or any Non-Exclusive Mark, provided that Snap shall give written
notice of each instance of claimed breach on which Snap bases its claim of
termination under this subparagraph.
7.3 Termination of Rights and Obligations. Subject to Section 7.4 below,
upon termination of this Agreement for any reason, all rights and obligations of
both parties under this Agreement shall terminate. VV shall return to Snap all
master files, samples and exemplars received from Snap, and arrange to have such
materials destroyed.
7.4 Effects of Termination. Upon termination of this Agreement for any
reason VV shall take all reasonably necessary actions to eliminate the use of
the Exclusive Mark and the Non-Exclusive Marks upon the expiration of the term
of this Agreement and, in the event of any termination prior to such time, as
promptly as reasonably practical, but in no event later than one hundred eighty
(180) days after such early termination; provided, however, that in the event of
early termination of this Agreement by Snap in connection with Section 7.2(e) or
7.2(f), VV shall eliminate all use of the Exclusive Mark and the Non-Exclusive
Marks within ninety (90) days after such early termination; provided, further,
that during any such transition period, VV
<PAGE> 24
-23-
may cause the URL to automatically forward Users to VV's new Online Home
Shopping Service so long as such Online Home Shopping Service is not Controlled
by an NBCi Competitor.
SECTION 8. MISCELLANEOUS
8.1 Exclusion of Remedies; Limitation on Liability. To the extent allowed
by applicable law, in no event shall either party be liable for any special,
consequential, incidental, indirect, or punitive damages of any kind, or any
lost profits, lost revenues, or lost business arising from or relating to this
Agreement, even if a party has been advised of the possibility of such damages,
however caused.
8.2 Successors and Assigns. Subject to the following sentences, this
Agreement shall be binding upon, shall inure to the benefit of and shall be
enforceable by the respective successors and assigns of the parties hereto.
Neither party may assign or otherwise transfer this Agreement, except in
connection with a merger, reorganization, or transfer of all or substantially
all of the assets of such party to which this Agreement relates, provided that
the assignee or transferee shall agree in writing to be bound by this Agreement;
provided, however, that Snap may assign this Agreement to NBC Internet, Inc. or
any of its direct or indirect Subsidiaries in connection with the reorganization
of Snap and Xoom.com, Inc. provided that NBC Internet, Inc. or such Subsidiary
signs a counterpart to this Agreement and agrees to be bound by it. Any
purported assignment made in contravention of this Section 8.2 shall be null and
void from its inception.
8.3 Amendment; Waiver. This Agreement may be amended only by a written
instrument duly executed by Snap and VV. Except as otherwise provided in this
Agreement, any failure of any of the parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the party entitled to
the benefits thereof only by a written instrument signed by the party granting
such waiver, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure.
8.4 Notices. All notices and other communications provided for hereunder
shall be in writing and delivered by hand or sent by first class mail or
overnight carrier or sent by facsimile (with such facsimile to be confirmed
promptly in writing sent by first class mail or overnight carrier), sent as
follows:
If to Snap, addressed to:
SNAP! LLC
One Beach Street
San Francisco, California 94133
Attention: Chief Financial Officer
Fax: 415-392-9088
<PAGE> 25
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With a copy to:
National Broadcasting Company, Inc.
30 Rockefeller Plaza
New York, New York 10112
Attention: Trademark Counsel
Fax: (212) 664-
If to VV, addressed to:
ValueVision International, Inc.
6740 Shady Oak Road
Eden Prairie, Minnesota 55344-3433
Attention: General Counsel
Fax: (612) 947-0188
With a copy to:
Latham & Watkins
633 West Fifth Street
Suite 4000
Los Angeles, CA 90071
Attention: Michael W. Sturrock
Fax: (213) 891-8763
or to such other address or addresses or facsimile number or numbers as any of
the parties hereto may most recently have designated in writing to the other
parties hereto by such notice. All such communications shall be deemed to have
been given or made when so delivered by hand or sent by facsimile or one
business day after being sent by an overnight carrier or three business days
after being sent by first class mail.
8.5 Entire Agreement. This Agreement, the Interactive Agreement, the
Warrant Purchase Agreement dated as of the date hereof among Snap, VV and
Xoom.com, Inc. and the exhibits and schedules hereto and thereto contain the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior oral and written agreements and understandings
between the parties hereto with regard to such subject matter.
8.6 Confidentiality. In connection with the activities contemplated by
this Agreement, each party may have access to confidential or proprietary
technical or business information of the other party disclosed during the Term,
including without limitation (i) proposals, ideas or research related to
possible new products or services; (ii) financial statements and other financial
information; (iii) any reporting information herein; (iv) any non-public
information; (v) any information marked as confidential; and (vi) the material
terms of this Agreement and the relationship between the parties (collectively,
"Confidential Information"). Each party will take reasonable precautions to
protect the confidentiality of the other party's Confidential Information, which
precautions will be at least equivalent to those taken by such party to protect
its own Confidential Information. Except as required by law or as necessary to
perform under
<PAGE> 26
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this Agreement, neither party will knowingly disclose the Confidential
Information of the other party or use such Confidential Information for its own
benefit or for the benefit of any third party. Each party's obligations in this
Section with respect to any portion of the other party's Confidential
Information shall terminate when the party seeking to avoid its obligation under
such Section can document that: (i) it was in the public domain before, at or
subsequent to the time it was communicated to the receiving party ("Recipient")
by the disclosing party ("Discloser") through no fault of Recipient; (ii) it was
rightfully in Recipient's possession free of any obligation of confidence
before, at or subsequent to the time it was communicated to Recipient by
Discloser; (iii) it is or was developed by employees or agents of Recipient
independently of and without reference to any information communicated to
Recipient by Discloser; (iv) it was communicated by the Discloser to an
unaffiliated third party free of any obligation of confidence; or (v) the
communication was in response to a valid order by a court or other governmental
body, was otherwise required by law or was necessary to establish the rights of
either party under this Agreement.
8.7 Specific Performance. The parties hereto agree that irreparable
damage that cannot adequately be addressed by monetary relief will occur in the
event any provision of this Agreement is not performed in accordance with the
terms hereof and that the parties shall be entitled to specific performance of
the Section 7 hereof and interlocutory injunctions preventing misuse of the
Exclusive Mark or any Non-Exclusive Mark or any further violation of this
Agreement, in addition to any other remedy at law or in equity.
8.8 Cumulative Remedies. The rights and remedies provided by this
Agreement are cumulative and the use of any one right or remedy by any party
shall not preclude or waive its right to seek any or all other remedies. Said
rights and remedies are given in addition to any other rights the parties may
have by law, statute, ordinance or otherwise.
8.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, applicable to contracts
executed and to be performed entirely in such state. Each party irrevocably and
unconditionally submits, to the exclusive jurisdiction of any state or federal
court sitting in the County of New York, New York, in any suit, action or
proceeding arising out of or relating to this Agreement and for recognition or
enforcement of any judgment relating thereto. Each party irrevocably and
unconditionally (i) waives any objection which it may now or hereafter have to
the laying of venue in such jurisdiction of any such suit, action or proceeding
and (ii) accepts, with regard to any such action or proceeding, the personal
jurisdiction of such New York courts and waives any defense or objection that it
might otherwise have to such courts' exercise of personal jurisdiction with
respect to it. Any and all service of process shall be effective against any
party if given by registered or certified mail, return receipt requested, or by
any other means of mail which requires a signed receipt, postage prepaid.
8.10 Severability. In the event that any of the provisions of this
Agreement are held to be unenforceable or invalid by any court of competent
jurisdiction, the validity and enforceability of the remaining provisions will
not be affected thereby.
<PAGE> 27
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8.11 Headings. The Section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
8.12 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE> 28
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
VALUEVISION INTERNATIONAL, INC.
By: /s/ Gene McCaffery
---------------------------------
Name: Gene McCaffery
Title: Chief Executive Officer
SNAP! LLC
By: /s/ Edmond Sanctis
--------------------------------
Name: Edmond Sanctis
Title: Chief Operating Officer
[TRADEMARK LICENSE AGREEMENT]
<PAGE> 29
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SCHEDULE 1
NON-EXCLUSIVE MARKS
Snap
[more to come]
<PAGE> 30
-29-
SCHEDULE 3.4
"SNAP" UNIVERSAL RESOURCE LOCATORS AND HIGH-LEVEL DOMAIN NAMES
snapcooks.com
snapbytes.com
snaptravels.com
snapwoman.com
snapticks.com
snaprocks.com
snaprolls.com
snapkids.com
snapman.com
snapdiamonds.com
getsnappedup.com
extremelysnapped.com
realsnappy.com
snap4rap.com
snapvalues.com
snapaway.com
snap4deals.com
snapglitters.com
snapdeals.com
snapzap.com
snap2zap.com
snaprap.com
snap2rap.com
1800snaptv.com
snap2buy.com
snap2get.com
snapfit.com
snapwellness.com
snapshape.com
snaptvbucks.com
looksnappy.com
snapgold.com
snapsilver.com
snaptreasures.com
snapjewelry.com
snapbaby.com
snapmagnets.com
1800getsnap.com
snapbuys.com
snapjewels.com
1800callsnap.com
snapdiet.com
feelsnappy.com
<PAGE> 1
EXHIBIT 10.7
WARRANT PURCHASE AGREEMENT
By and Among
VALUEVISION INTERNATIONAL, INC.,
XOOM.COM, INC.
AND
SNAP! LLC
Dated as of September 13, 1999
<PAGE> 2
[EXECUTION COPY]
WARRANT PURCHASE AGREEMENT
WARRANT PURCHASE AGREEMENT, dated as of September 13, 1999
(this "Agreement"), by and among ValueVision International, Inc., a Minnesota
corporation ("ValueVision"), Xoom.com, Inc., a Delaware corporation ("Xoom"),
and Snap! LLC, a Delaware limited liability company ("Snap"). Capitalized terms
not otherwise defined where used shall have the meanings ascribed thereto in
Article I.
WHEREAS, Xoom has agreed to purchase from ValueVision, and
ValueVision has agreed to sell to Xoom, subject to the terms and conditions of
this Agreement, a warrant to purchase shares of common stock, $.01 par value, of
ValueVision ("ValueVision Common Stock");
WHEREAS, ValueVision has agreed to purchase from Xoom, and
Xoom has agreed to sell to ValueVision, subject to the terms and conditions of
this Agreement, a warrant to purchase shares of common stock, $.0001 par value,
of Xoom ("Xoom Common Stock"); and
WHEREAS, Xoom and Snap have entered into a series of
agreements dated as of May 9, 1999, June 11, 1999 and July 8, 1999 concerning
the reorganization of Xoom and Snap (the "Reorganization");
NOW THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained and intending to be
legally bound hereby, the parties hereby agree as follows:
ARTICLE I
Definitions
Section 1.1. Definitions. As used in this Agreement, the
following terms shall have the meanings set forth below:
"Affiliate" shall mean, with respect to any Person, any other
Person that directly or indirectly controls, is controlled by, or is under
common control with, such Person. As used in this definition, "control"
(including its correlative meanings, "controlled by" and "under common control
with") shall mean the possession, directly or indirectly, of power to direct or
cause the direction of management or policies (whether through ownership of
securities or partnership or other ownership interests, by contract or
otherwise).
"Ancillary Documents" shall mean the Interactive Agreement,
the Trademark License Agreement, the ValueVision Warrant, the Xoom Warrant, the
ValueVision Registration Rights Agreement and the Xoom Registration Rights
Agreement.
<PAGE> 3
2
"Closing" shall have the meanings set forth in Section 2.2(a).
"Contractual Obligation" shall mean, as to any Person, any
provision of any note, bond or security issued by such Person, or of any
mortgage, indenture, deed of trust, lease, license, franchise, contract,
agreement, instrument or undertaking to which such Person is a party or by which
it or any of its property is subject.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"GAAP" shall mean generally accepted accounting principles in
the United States of America in effect from time to time.
"Governmental Entity" shall mean any nation or government, any
state or other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government and any self-regulating organization, securities exchange or
securities trading system.
"Interactive Agreement" shall mean the Interactive Promotion
Agreement dated as of the date hereof between ValueVision and Snap pursuant to
which ValueVision shall operate an online home shopping service at
www.snaptv.com.
"Lien" shall mean any mortgage, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other) or security agreement of any
kind or nature whatsoever (including, without limitation, any conditional sale
or other title retention agreement or any financing lease having substantially
the same effect as any of the foregoing).
"Material Adverse Effect" shall mean a material adverse effect
on (i) the assets, business condition, results of operations or financial
condition of a party and its Subsidiaries taken as a whole or (ii) with respect
to any party, the ability of such party to timely perform its obligations under
this Agreement or any Ancillary Document to which it is a party.
"NBC" shall mean National Broadcasting Company, Inc., a
Delaware corporation.
"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.
"Requirement of Law" shall mean, as to any Person, the
certificate of incorporation and by-laws or other organizational documents of
such Person, and any law, statute, order, treaty, rule or regulation, or
judgment, decree, determination or order of any arbitrator, court or other
Governmental Entity, applicable to or binding upon such Person or any of its
property.
"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.
<PAGE> 4
3
"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, or the management of which is otherwise controlled, directly or
indirectly through one or more intermediaries, or both, by such Person.
"Xoom" shall have the meaning set forth in the preamble
hereto.
"Xoom Registration Rights Agreement" shall mean the
registration rights agreement to be executed by Xoom and ValueVision with
respect to the common stock of Xoom, which shall be substantially in the form
attached as Exhibit A hereto.
"Xoom SEC Documents" shall have the meaning set forth in
Section 3.2(e).
"Xoom Warrant" shall mean the warrant to purchase shares of
common stock, par value $.0001, of Xoom, which shall be substantially in the
form of Exhibit B hereto.
"ValueVision" shall have the meaning set forth in the preamble
hereto.
"ValueVision Registration Rights Agreement" shall mean the
registration rights agreement to be executed by Xoom and ValueVision with
respect to the common stock of ValueVision, which shall be substantially in the
form attached as Exhibit C hereto.
"ValueVision SEC Documents" shall have the meaning set forth
in Section 3.1(e).
"ValueVision Warrant" shall mean the warrant to purchase
shares of common stock, par value $.01, of ValueVision, which shall be
substantially in the form of Exhibit D hereto.
ARTICLE II
Sale and Purchase of the Securities
Section 2.1. Agreement to Sell and Purchase. (a) Upon and
subject to the terms and conditions set forth in this Agreement, ValueVision
agrees to issue, sell and deliver to Xoom, and Xoom agrees to purchase from
ValueVision, the ValueVision Warrant.
(b) Upon and subject to the terms and conditions of this
Agreement, Xoom agrees to issue, sell and deliver to ValueVision, and
ValueVision agrees to purchase from Xoom, the Xoom Warrant.
Section 2.2. Closing. (a) The purchase and sale of the
ValueVision Warrant and the Xoom Warrant pursuant to Section 2.1 (the "Closing")
shall occur upon the execution and delivery of this Agreement.
<PAGE> 5
4
(b) At the Closing: ValueVision shall deliver to Xoom the
ValueVision Warrant and Xoom shall deliver to ValueVision the Xoom Warrant, and
each party shall execute and deliver to the other parties each of the Ancillary
Agreements to which it is a party. The purchase price for the ValueVision
Warrant shall be the Xoom Warrant, and the purchase price for the Xoom Warrant
shall be the ValueVision Warrant.
Section 2.3 Standstill and Transfer Restrictions. (a)
ValueVision agrees that the ValueVision Warrant and any shares of ValueVision
Common Stock acquired thereunder, whether acquired by Xoom, Snap, NBC, General
Electric Company or any of their respective Affiliates, shall not be subject to
the restrictions contained in Article IV of the Shareholder Agreement, dated as
of April 15, 1999 among ValueVision, NBC and GE Capital Equity Investments, Inc.
(b) Xoom agrees that the Xoom Warrant and any shares of Xoom
Common Stock acquired thereunder, whether acquired by ValueVision, NBC, General
Electric Company or any of their respective Affiliates, shall not be subject to
the restrictions contained in Article II and Section 3.1 of the Governance and
Investors Rights Agreement between NBC and NBC Internet, Inc. to be entered into
pursuant to the consummation of the Agreement and Plan of Contribution,
Investment and Merger dated as of May 9, 1999, as amended and restated on June
11, 1999 and July 8, 1999, among NBC, Xoom, GE Investments Subsidiary, Inc.,
Neon Media Corporation and Xenon 2, Inc.
ARTICLE III
Representations and Warranties
Section 3.1. Representations and Warranties of ValueVision.
ValueVision represents and warrants to Xoom and Snap as of the date hereof as
follows:
(a) Organization and Good Standing of ValueVision. ValueVision
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Minnesota and has all requisite corporate power and
authority to own, operate and lease its properties and to carry on its
businesses as they are now being conducted. ValueVision is duly licensed or
qualified as a foreign corporation for the transaction of business and is in
good standing under the laws of each other jurisdiction in which its ownership
or leasing of properties, or the conduct of its businesses requires such
licensing or qualification and good standing, except where the failure to be so
licensed or qualified or in good standing in any such jurisdiction would not
have a Material Adverse Effect on ValueVision.
(b) Authorization; No Conflicts. ValueVision has full
corporate power and authority to enter into this Agreement and the Ancillary
Documents and to perform its obligations hereunder and thereunder. The
execution, delivery and performance by ValueVision of this Agreement and each
Ancillary Document and the consummation of ValueVision's obligations hereunder
and thereunder have been duly authorized by all necessary corporate action. This
Agreement has been, and on or prior to the Closing Date each Ancillary Document
will be, duly and validly executed and delivered by ValueVision. This Agreement
constitutes,
<PAGE> 6
5
and upon its execution and delivery on or prior to the Closing Date, each
Ancillary Document will constitute, a valid and legally binding obligation of
ValueVision enforceable against ValueVision 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 for the consent of NBC and GE Capital
Equity Investments, Inc. (which has been obtained), the execution, delivery and
performance of this Agreement and the Ancillary Documents by ValueVision, the
consummation of the transactions by ValueVision contemplated hereby and thereby
and the compliance by ValueVision with the provisions hereof and thereof will
not conflict with, violate or result in a breach of any provision of, require a
consent, approval or notice under, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination of or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
creation of any Lien upon any of the properties or assets of ValueVision or
Material Subsidiaries under, (i) the articles of incorporation, by-laws or other
governing instrument of ValueVision, (ii) any Contractual Obligation of
ValueVision or (iii) any Requirement of Law applicable to ValueVision, 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 on ValueVision.
(c) Consents. No consent, approval, order or authorization of,
registration, declaration or filing with, or notice to, any Governmental Entity
is required on the part of ValueVision or any of its Subsidiaries in connection
with the execution and delivery by ValueVision of this Agreement and the
Ancillary Documents, the consummation by ValueVision of the transactions
contemplated hereby and thereby or the performance by ValueVision of its
obligations hereunder and thereunder, except for (i) such filings as may be
required under the blue sky laws of the various states, (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 on ValueVision.
(d) Capitalization. (i) As of September 2, 1999, the
authorized capital stock of ValueVision consisted of 100,000,000 shares of
undesignated capital stock. As of such date, 37,017,684 shares of ValueVision
Common Stock were issued and outstanding, no shares of ValueVision Common Stock
were held in treasury, and no shares of Common Stock werer reserved for issuance
upon exercise of outstanding stock options except for 6,515,385 shares reserved
in respect of options. As of such date, 5,339,500 shares of ValueVision
preferred stock werer designated Series A Redeemable Convertible Preferred Stock
(the "Preferred Stock"), and 5,339,500 shares were issued and outstanding. All
of the issued and outstanding shares of ValueVision's capital stock have been
duly and validly authorized and issued and are fully paid and nonassessable and
not subject to preemptive rights.
(ii) Upon delivery of the ValueVision Warrant on the Closing
Date as provided herein, the ValueVision Warrant will be duly and
validly authorized and issued, fully paid and nonassessable and not
subject to preemptive rights, and Xoom will acquire good title thereto,
free and clear of all Liens (other than any Lien created by Xoom). The
shares of ValueVision Common Stock issuable upon exercise of the
ValueVision Warrant have been reserved for issuance and, when issued
upon exercise of the ValueVision Warrant, will be duly and validly
authorized and issued, fully paid and nonassessable and not subject to
preemptive rights, and the owner of such shares will
<PAGE> 7
6
acquire good title thereto, free and clear of all Liens (other than any
Lien created by such owner).
(iii) The consummation of the transactions contemplated by
this Agreement will not trigger the anti-dilution provisions or other
price adjustment mechanisms of any outstanding subscriptions, options,
warrants, calls, contracts, preemptive rights, demands, commitments,
conversion rights or other agreements or arrangements of any character
or nature whatsoever under which ValueVision is or may be obligated to
issue or acquire its capital stock.
(e) SEC Filings, Financial Information, Liabilities.
ValueVision has filed and made available to Xoom and Snap a true and complete
copy of each report, schedule, registration statement and definitive proxy
statement required to be filed with the SEC since January 1, 1998 (the
"ValueVision SEC Documents"). As of their respective dates, the ValueVision SEC
Documents, after giving effect to any amendments and supplements thereto filed
prior to the date hereof, complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be,
applicable to such ValueVision SEC Documents. None of the ValueVision SEC
Documents when filed, after giving effect to any amendments and supplements
thereto filed prior to the date hereof, contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of ValueVision included in the ValueVision SEC Documents comply as to
form in all material respect with the applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto, have
been prepared in accordance with GAAP during the period involved (except as may
be indicated in the notes thereto or, in the case of the unaudited statements,
as permitted by Form 10-Q of the SEC, or for normal year-end adjustments) and
fairly present in all material respects the consolidated financial position of
ValueVision and its consolidated Subsidiaries as at the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended. Except as set forth in the ValueVision SEC Documents (including any item
accounted for in the financial statements contained in the ValueVision SEC
Documents or set forth in the notes thereto) as of July 31, 1999, neither
ValueVision nor any of its Subsidiaries had, and since such date neither
ValueVision nor any of its Subsidiaries has incurred, any claims, liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
which, individually or in the aggregate, would have a Material Adverse Effect on
ValueVision (other than claims, liabilities or obligations contemplated by this
Agreement or the Ancillary Documents or expressly permitted to be incurred
pursuant to this Agreement or the Ancillary Documents). In addition, since July
31, 1999, there has not been any declaration, setting aside or payment of a
dividend or other distribution with respect to shares of capital stock of
ValueVision or any material change in accounting methods or practices by
ValueVision or any of its Subsidiaries.
(f) Absence of Certain Changes. Since July 31, 1999, the
business of ValueVision has been operated in the usual and ordinary course
consistent with past practice (except as disclosed in the ValueVision SEC
Documents filed prior to the date hereof and the negotiation, execution,
delivery and performance of this Agreement and the Ancillary Documents and the
transactions contemplated hereby and thereby) and there has been no event,
condition or change that has had a Material Adverse Effect on ValueVision.
<PAGE> 8
7
(g) Securities Act. (i) ValueVision (A) is acquiring the Xoom
Warrant solely for the purpose of investment and not with a view to, or for
resale in connection with, any distribution thereof in violation of the
Securities Act; (B) has had the opportunity to ask questions of the officers and
directors of, and has had access to information concerning, Xoom and the Xoom
Warrant; (C) is an "accredited investor" as defined in Rule 501(a) under the
Securities Act; (D) has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the investment in Xoom and the Xoom Warrant; (E) has so evaluated the
merits and risks of such investment; (F) is able to bear the economic risk of
such investment; and (G) is able to afford a complete loss of such investment.
(ii) Subject to and based in part upon the truth and
accuracy of the representations and warranties of Xoom in Section
3.2(g)(i) hereof, the offering, sale and purchase of the ValueVision
Warrant contemplated hereby are exempt from registration under the
Securities Act and are exempt from registration under any applicable
state securities or "blue sky" laws.
(h) Brokers and Finders. ValueVision has not utilized any
broker, finder, placement agent or financial advisor or incurred any liability
for any fees or commissions in connection with any of the transactions
contemplated hereby or by the Ancillary Documents.
Section 3.2. Representations and Warranties of Xoom. Xoom
represents and warrants to ValueVision as of the date hereof as follows:
(a) Organization and Good Standing of Xoom. Xoom is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
own, operate and lease its properties and to carry on its businesses as they are
now being conducted. Xoom is duly licensed or qualified as a foreign corporation
for the transaction of business and is in good standing under the laws of each
other jurisdiction in which its ownership or leasing of properties, or the
conduct of its businesses requires such licensing or qualification and good
standing, except where the failure to be so licensed or qualified or in good
standing in any such jurisdiction would not have a Material Adverse Effect on
Xoom.
(b) Authorization; No Conflicts. Xoom has full corporate power
and authority to enter into this Agreement and the Ancillary Documents and to
perform its obligations hereunder and thereunder. The execution, delivery and
performance by Xoom of this Agreement and each Ancillary Document and the
consummation of Xoom's obligations hereunder and thereunder have been duly
authorized by all necessary corporate action. This Agreement has been, and on or
prior to the Closing Date each Ancillary Document will be, duly and validly
executed and delivered by Xoom. This Agreement constitutes, and upon its
execution and delivery on or prior to the Closing Date, each Ancillary Document
will constitute, a valid and legally binding obligation of Xoom enforceable
against Xoom 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 for the consent of NBC (which has been obtained), the execution, delivery
and performance of this Agreement and the Ancillary Documents by Xoom, the
consummation of the transactions by Xoom contemplated hereby and thereby and the
compliance by Xoom with
<PAGE> 9
8
the provisions hereof and thereof will not conflict with, violate or result in a
breach of any provision of, require a consent, approval or notice under, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of or accelerate
the performance required by, or result in a right of termination or acceleration
under, or result in the creation of any Lien upon any of the properties or
assets of Xoom or its Material Subsidiaries under, (i) the certificate of
incorporation, by-laws or other governing instrument of Xoom, (ii) any
Contractual Obligation of Xoom or (iii) any Requirement of Law applicable to
Xoom, 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 on Xoom.
(c) Consents. No consent, approval, order or authorization of,
registration, declaration or filing with, or notice to, any Governmental Entity
is required on the part of Xoom or any of its Subsidiaries in connection with
the execution and delivery by Xoom of this Agreement and the Ancillary
Documents, the consummation by Xoom of the transactions contemplated hereby and
thereby or the performance by Xoom of its obligations hereunder and thereunder,
except for (i) such filings as may be required under the blue sky laws of the
various states, (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 on Xoom.
(d) Capitalization. (i) As of the date hereof, the authorized
capital stock of Xoom consists of 80,000,000 shares of Xoom Common Stock and
5,000,000 shares of Xoom Preferred Stock. As of the date hereof, 19,485,418
shares of Xoom Common Stock are issued and outstanding, no shares of Common
Stock are held in treasury, and 5,724,703 shares of Xoom Common Stock are
reserved for issuance upon exercise of outstanding stock options and pursuant to
Xoom's 1998 Stock Incentive Plan. As of the date hereof, no shares of Xoom
Preferred Stock are designated, and no shares of Xoom Preferred Stock are issued
and outstanding. All of the issued and outstanding shares of Xoom's capital
stock have been duly and validly authorized and issued and are fully paid and
nonassessable and not subject to preemptive rights.
(ii) Upon delivery of the Xoom Warrant on the Closing
Date as provided herein, the Xoom Warrant will be duly and validly
authorized and issued, fully paid and nonassessable and not subject to
preemptive rights, and ValueVision will acquire good title thereto,
free and clear of all Liens (other than any Lien created by
ValueVision). The shares of Common Stock issuable upon exercise of the
Xoom Warrant have been reserved for issuance and, when issued upon
exercise of the Xoom Warrant, will be duly and validly authorized and
issued, fully paid and nonassessable and not subject to preemptive
rights, and the owner of such shares will acquire good title thereto,
free and clear of all Liens (other than any Lien created by such
owner).
(iii) The consummation of the transactions contemplated by
this Agreement will not trigger the anti-dilution provisions or other
price adjustment mechanisms of any outstanding subscriptions, options,
warrants, calls, contracts, preemptive rights, demands, commitments,
conversion rights or other agreements or arrangements of any character
or nature whatsoever under which Xoom is or may be obligated to issue
or acquire its capital stock.
<PAGE> 10
9
(e) SEC Filings, Financial Information, Liabilities. Xoom has
filed and made available to ValueVision a true and complete copy of each report,
schedule, registration statement and definitive proxy statement required to be
filed with the SEC since December 9, 1998 and the registration statement on Form
S-4 filed by NBC Internet, Inc. (including amendments thereto) (collectively,
the "Xoom SEC Documents"). As of their respective dates, the Xoom SEC Documents,
after giving effect to any amendments and supplements thereto filed prior to the
date hereof, complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, applicable to such Xoom
SEC Documents. None of the Xoom SEC Documents when filed, after giving effect to
any amendments and supplements thereto filed prior to the date hereof, contained
any untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of Xoom included in the Xoom SEC Documents
comply as to form in all material respect with the applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP during the period
involved (except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Form 10-Q of the SEC, or for normal
year-end adjustments) and fairly present in all material respects the
consolidated financial position of Xoom and its consolidated Subsidiaries as at
the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended. Except as set forth in the Xoom SEC Documents
(including any item accounted for in the financial statements contained in the
Xoom SEC Documents or set forth in the notes thereto) as of June 30, 1999,
neither Xoom nor any of its Subsidiaries had, and since such date neither Xoom
nor any of its Subsidiaries has incurred, any claims, liabilities or obligations
of any nature (whether accrued, absolute, contingent or otherwise) which,
individually or in the aggregate, would have a Material Adverse Effect on Xoom
(other than claims, liabilities or obligations contemplated by this Agreement or
the Ancillary Documents or expressly permitted to be incurred pursuant to this
Agreement or the Ancillary Documents). In addition, since June 30, 1999, there
has not been any declaration, setting aside or payment of a dividend or other
distribution with respect to shares of capital stock of Xoom or any material
change in accounting methods or practices by Xoom or any of its Subsidiaries.
(f) Absence of Certain Changes. Since June 30, 1999, the
business of Xoom has been operated in the usual and ordinary course consistent
with past practice (except as disclosed in the Xoom SEC Documents filed prior to
the date hereof and the negotiation, execution, delivery and performance of this
Agreement and the Ancillary Documents and the transactions contemplated hereby
and thereby) and there has been no event, condition or change that has had a
Material Adverse Effect on Xoom.
(g) Securities Act. (i) Xoom (A) is acquiring the ValueVision
Warrant solely for the purpose of investment and not with a view to, or for
resale in connection with, any distribution thereof in violation of the
Securities Act; (B) has had the opportunity to ask questions of the officers and
directors of, and has had access to information concerning, ValueVision and the
ValueVision Warrant; (C) is an "accredited investor" as defined in Rule 501(a)
under the Securities Act; (D) has such knowledge, sophistication and experience
in business and financial matters so as to be capable of evaluating the merits
and risks of the investment in ValueVision and the ValueVision Warrant; (E) has
so evaluated the merits and
<PAGE> 11
10
risks of such investment; (F) is able to bear the economic risk of such
investment; and (G) is able to afford a complete loss of such investment.
(ii) Subject to and based in part upon the truth and
accuracy of the representations and warranties of ValueVision in
Section 3.1(g)(i) hereof, the offering, sale and purchase of the Xoom
Warrant contemplated hereby are exempt from registration under the
Securities Act and are exempt from registration under any applicable
state securities or "blue sky" laws.
(h) Brokers and Finders. Xoom has not utilized any broker,
finder, placement agent or financial advisor or incurred any liability for any
fees or commissions in connection with any of the transactions contemplated
hereby or by the Ancillary Documents.
Section 3.3. Representations and Warranties of Snap. Snap
represents and warrants to ValueVision as of the date hereof as follows:
(a) Organization and Good Standing of Snap. Snap is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware and has all requisite corporate power and
authority to own, operate and lease its properties and to carry on its
businesses as they are now being conducted. Snap is duly licensed or qualified
as a foreign corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which its ownership or leasing of
properties, or the conduct of its businesses requires such licensing or
qualification and good standing, except where the failure to be so licensed or
qualified or in good standing in any such jurisdiction would not have a Material
Adverse Effect on Snap.
(b) Authorization; No Conflicts. Snap has full corporate power
and authority to enter into this Agreement and the Ancillary Documents and to
perform its obligations hereunder and thereunder. The execution, delivery and
performance by Snap of this Agreement and each Ancillary Document and the
consummation of Snap's obligations hereunder and thereunder have been duly
authorized by all necessary corporate action. This Agreement has been, and on or
prior to the Closing Date each Ancillary Document will be, duly and validly
executed and delivered by Snap. This Agreement constitutes, and upon its
execution and delivery on or prior to the Closing Date, each Ancillary Document
will constitute, a valid and legally binding obligation of Snap enforceable
against Snap 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 for the consent of NBC (which has been obtained), the execution, delivery
and performance of this Agreement and the Ancillary Documents by Snap, the
consummation of the transactions by Snap contemplated hereby and thereby and the
compliance by Snap with the provisions hereof and thereof will not conflict
with, violate or result in a breach of any provision of, require a consent,
approval or notice under, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination of or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of any
Lien upon any of the properties or assets of Snap under (i) the limited
liability company agreement, the operating agreement, by-laws or other governing
instrument of Snap, (ii) any Contractual Obligation of Snap or (iii) any
Requirement of Law applicable to Snap, except, in the case of clauses (ii) and
(iii) above, such conflicts, violations,
<PAGE> 12
11
breaches, consents, approvals, notices, defaults, terminations, accelerations or
Liens which would not have a Material Adverse Effect on Snap.
(c) Consents. No consent, approval, order or authorization of,
registration, declaration or filing with, or notice to, any Governmental Entity
is required on the part of Snap or any of its Subsidiaries in connection with
the execution and delivery by Snap of this Agreement and the Ancillary
Documents, the consummation by Snap of the transactions contemplated hereby and
thereby or the performance by Snap of its obligations hereunder and thereunder,
except for 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 on Snap.
(d) Brokers and Finders. Snap has not utilized any broker,
finder, placement agent or financial advisor or incurred any liability for any
fees or commissions in connection with any of the transactions contemplated
hereby or by the Ancillary Documents.
ARTICLE IV
Other Agreements
Section 4.1. Public Statements. Before any party or any
Affiliate of such party shall release any information concerning this Agreement
or the Ancillary Documents or the matters contemplated hereby or thereby which
is intended for or may result in public dissemination thereof, such party shall
cooperate with the other parties and NBC, shall furnish drafts of all documents
or proposed oral statements to the other parties and NBC, provide the other
parties and NBC the opportunity to review and comment upon any such documents or
statements and shall not release or permit release of any such information
without the consent of the other parties and NBC, except (following compliance
with this Section 4.1) to the extent required by applicable law or the rules of
any securities exchange or automated quotation system on which its securities or
those of its Affiliate are traded.
Section 4.2. Reservation of Shares. (a) ValueVision agrees to
keep reserved for issuance at all times prior to the exercise of the ValueVision
Warrant the aggregate number of shares of ValueVision Common Stock issuable upon
exercise of the ValueVision Warrant.
(b) Xoom agrees to keep reserved for issuance at all times
prior to the exercise of the Xoom Warrant the aggregate number of shares of Xoom
Common Stock issuable upon exercise of the Xoom Warrant.
Section 4.3. Further Assurances. Each party shall execute and
deliver such additional instruments and other documents and shall take such
further actions as may be necessary or appropriate to effectuate, carry out and
comply with all of the terms of this Agreement and the transactions contemplated
hereby, including without limitation making application as soon as practicable
for all consents and approvals required in connection with the transactions
contemplated hereby and diligently pursuing the receipt of such consents and
approvals in good faith.
<PAGE> 13
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ARTICLE V
Miscellaneous
Section 5.1. Survival of Representations and Warranties. All
representations and warranties made herein or in any certificates delivered in
connection with the Closing shall survive for a period of eighteen months after
the Closing.
Section 5.2. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given, if
delivered personally, by telecopier or sent by overnight courier as follows:
(a) If to Xoom, to:
Xoom.com, Inc.
300 Montgomery Street
Suite 300
San Francisco, CA 94104
Attention: Chris Kitze
Fax: (415) 288-2580
with copies to:
Morrison & Foerster LLP
425 Market Street
San Francisco, California 94105
Attention: Bruce Alan Mann, Esq.
Telecopier: 415-268-7522
(b) If to Snap, to:
SNAP! LLC
One Beach Street
San Francisco, California 94133
Attention: Chief Financial Officer
Telecopier: 415-392-9088
with copies to:
National Broadcasting Company, Inc.
30 Rockefeller Plaza
New York, New York 10112
Attention: Vice President, Corporate Law
Group
Fax: (212) 977-7165
(c) If to ValueVision, to:
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ValueVision International, Inc.
6740 Shady Oak Road
Eden Prairie, Minnesota 55344-3433
Attention: Chief Financial Officer
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 5.3. Entire Agreement; Amendment. This Agreement, the
Ancillary Documents and the documents described herein and therein or attached
or delivered pursuant hereto or thereto set forth the entire agreement between
the parties hereto with respect to the transactions contemplated by this
Agreement. Any provision of this Agreement may be amended or modified in whole
or in part at any time by an agreement in writing between the parties hereto
executed in the same manner as this Agreement. No failure on the part of any
party to exercise, and no delay in exercising, any right shall operate as a
waiver thereof nor shall any single or partial exercise by any party of any
right preclude any other or future exercise thereof or the exercise of any other
right.
Section 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. 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. Public Announcements. Each of ValueVision, Xoom
and Snap agrees to hold in strict confidence and not to disclose to others the
status of any discussions or relations among the parties with respect to the
subject matter of this Agreement or the Ancillary Documents until such time as
the parties mutually agree to publicly disclose such information or are legally
obligated to disclose such information or are obligated by applicable Nasdaq
rules to disclose such information.
<PAGE> 15
14
Section 5.7. Fees and Expenses. Each party shall bear its own
costs and expenses incurred in connection with this Agreement and the Ancillary
Documents and the transactions contemplated hereby, including the fees and
expenses of their respective accountants and counsel.
Section 5.8. Successors and Assigns; Third Party
Beneficiaries. Subject to applicable law and the following sentence, either
party may assign its rights and obligations under this Agreement in whole or in
part only to any Affiliate of such party, but no such assignment shall relieve
the assigning party of its obligations hereunder. No party shall assign any
rights or obligations under this Agreement to any Affiliate if such Affiliate
does not expressly assume pursuant to a document in form and substance
reasonably satisfactory to the other party all of the obligations of the
assigning party hereunder.
Section 5.9. Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties shall
be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions of this Agreement
in addition to any other remedy to which they are entitled at law or in equity.
Section 5.10. Headings and Captions. The section headings and
captions 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.
<PAGE> 16
15
IN WITNESS WHEREOF, this Warrant Purchase 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
XOOM.COM, INC.
By: /s/ Chris Kitze
----------------------------------
Name: Chris Kitze
Title: Chairman
SNAP! LLC
By:/s/ Edmond Sanctis
----------------------------------
Name: Edmond Sanctis
Title: Chief Operating Officer
[WARRANT PURCHASE AGREEMENT]
<PAGE> 1
EXHIBIT 10.8
COMMON STOCK PURCHASE WARRANT
TO PURCHASE 404,760 SHARES OF COMMON STOCK, $0.01 PAR VALUE OF
VALUEVISION INTERNATIONAL, INC.
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 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 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
<PAGE> 2
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.
WARRANT NO. NBCI-1
ISSUE DATE: September 13, 1999
THIS CERTIFIES that, for value received, Xoom.com, Inc., a Delaware
corporation (the "Holder"), is entitled, upon the terms and subject to the
conditions hereinafter set forth, at any time on or after the closing of the
NBCi Reorganization (as defined below) and on or before the Final Expiration
Date (as defined below), to subscribe for and purchase from ValueVision
International, Inc., a Minnesota corporation (the "Company"), up to 404,760
fully paid and non-assessable shares ("Shares") of the Company's Common Stock,
$.01 par value, ("Common Stock") at a purchase price per share of $24.706 (the
"Purchase Price"). This Warrant (the "Warrant") is being issued pursuant to the
Warrant Purchase Agreement dated as of September 13, 1999 (the "Effective Date")
by and among the Holder, the Company and Snap! LLC, a Delaware limited liability
company (the "Warrant Purchase Agreement").
1. Transfer of Warrant. This Warrant may be transferred or assigned
by the Holder hereof in whole or in part, provided that (a) the transfer
complies with the Articles of Incorporation of the Company, as partially
described in the legend set forth above and (b) transferor provides, at the
Company's request, an opinion of counsel reasonably satisfactory to the Company
that such transfer does not require registration under the Securities Act of
1933, as amended, and the securities laws applicable with respect to any other
applicable jurisdiction. Notwithstanding the foregoing, no opinion of counsel
shall be necessary for (i) a transfer not involving a change in beneficial
ownership or (ii) a transfer by the Holder to any of its affiliates or (iii)
transfers in compliance with Rule 144, so long as the Company is furnished with
reasonably satisfactory evidence of compliance with such Rule.
2. Exercise of Warrant.
2.1 The term of this Warrant shall commence on the closing of
the Agreement and Plan of Contribution, Investment and Merger (the "NBCi
Contribution Agreement") among National Broadcasting Company, Inc., GE
Investments Subsidiary, Inc., Neon Media Corporation, Xenon 2, Inc. and
Xoom.com, Inc. dated as of May 9, 1999, as amended and restated on July 8, 1999
(the "NBCi Reorganization"), and, subject to the terms below, shall expire in
its entirety on September 12, 2004 at 5 p.m., New York standard time (the "Final
Expiration Date").
2.2 This Warrant may be exercised for all or part of the
Shares for which it is then exercisable, in whole or in part, at any time or
from time to time from the closing of the NBCi
-2-
<PAGE> 3
Reorganization until the Final Expiration Date by the surrender of this Warrant
and a Notice of Warrant Exercise in the form of Exhibit 1 duly executed to the
office of the Company at 6740 Shady Oak Road, Minneapolis, Minnesota 55344 (or
such other office or agency of the Company as it may designate by notice in
writing to the Holder at the address of the Holder for notices under the Warrant
Purchase Agreement), and upon payment of the Purchase Price of the shares
thereby purchased (by wire transfer, cash or by certified check or bank draft
payable to the order of the Company in an amount equal to the Purchase Price of
the shares thereby purchased); whereupon the Company shall promptly issue and
deliver to the person or persons entitled to receive the same a certificate for
the number of shares of Common Stock so purchased dated as of the close of
business on the date on which such exercise occurred.
2.3 The Company covenants that all shares of Common Stock that
may be issued upon the exercise of rights represented by this Warrant will, upon
exercise, be fully paid and nonassessable and free from all taxes, liens and
charges in respect of the issue (other than taxes in respect of any transfer
occurring contemporaneously with such issue). The Company shall pay all taxes
and any and all United States federal, state and local taxes and other charges
that may be payable in connection with the preparation, issuance and delivery of
the certificates representing shares of Common Stock issued hereunder.
2.4 If this Warrant is exercised, in part, the Company will
promptly return a new warrant (dated the date hereof) of like tenor, exercisable
for a number of Shares equal (without giving effect to any adjustment therein)
to the number of Shares for which this Warrant is exercisable minus the number
of Shares for which this Warrant is then exercised.
2.5 In the event that the closing of the NBCi Reorganization
does not occur by December 31, 1999 or the NBCi Contribution Agreement is
terminated before such date, then this Warrant shall immediately terminate, and
the Holder shall not be entitled to exercise this Warrant, whether in whole or
in part.
3. Net Exercise.
3.1 In lieu of exercising this Warrant in accordance with
Section 2.2 above, the Holder may elect to receive Shares equal to the value of
this Warrant (or the portion thereof being exercised) by surrender of this
Warrant at the principal office of the Company together with notice of such
election in which event the Company shall issue to the Holder a number of Shares
computed using the following formula:
X = Y times (A-B)
-----------------
A
Where X = the number of Shares to be issued to the Holder.
Y = the number of Shares for which this Warrant is being exercised.
-3-
<PAGE> 4
A = the Market Price of one Share on the date of delivery of the
notice pursuant to this Section 3.
B = the Purchase Price.
3.2 For purposes of this Section 3 and Section 4, "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 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 Holder shall dispute the fair market value as determined by the Board, the
Holder and the Company may retain an independent expert mutually agreed upon in
good faith by the Holder and the Board (an "Independent Expert"). The
determination of fair market value by the Independent Expert shall be final,
binding and conclusive on the Company and the Holder. All costs and expenses of
the Independent Expert shall be borne by the Holder unless the determination of
fair market value is more favorable to such Holder by 5% or more, in which case,
all such costs and expenses shall be borne by the Company.
3.3 Notwithstanding anything to the contrary contained herein,
the Holder may elect to receive a net issuance of shares of Common Stock
pursuant to this Section 3 when exercising this Warrant in part.
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. If a fractional share interest arises upon any exercise or conversion
of the Warrant, the Company shall eliminate such fractional share interest by
paying the Holder an amount computed by multiplying the fractional interest by
the Market Price of a full share.
-4-
<PAGE> 5
5. Adjustments. The purchase rights set forth are subject to
adjustment as provided below.
5.1 Stock Splits, Stock Dividends and Combinations. If the
Company shall at any time subdivide the outstanding shares of Common Stock or
shall issue a stock dividend with respect to the Common Stock, then the number
of shares of Common Stock for which this Warrant is exercisable immediately
prior to that subdivision shall be proportionately increased and the Purchase
Price proportionately decreased, and if the Company shall at any time combine
the outstanding shares of Common Stock, then the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to that
combination shall be proportionately decreased and the Purchase Price
proportionately increased and, in the event of a stock dividend, the Purchase
Price shall be proportionately decreased. Any adjustment under this Section 5.1
shall become effective at the close of business on the date the subdivision,
stock dividend or combination becomes effective.
5.2 Reclassification, Exchange, Substitution and In-Kind
Distribution. If the Common Stock issuable on exercise of this Warrant shall be
changed into the same or a different number of shares of any other class or
classes of stock, whether by capital reorganization, reclassification, or
otherwise (other than a subdivision or combination of shares provided for above)
or upon the payment of a dividend in cash, securities or property other than
Common Stock, then the holder of this Warrant shall, upon its exercise, be
entitled to receive, in lieu of the Common Stock that the holder would have
become entitled to receive but for such change, that number of shares of such
other class or classes of stock that is equivalent to the number of shares of
Common Stock that the holder would have received had the holder exercised this
Warrant immediately prior to that change. Following any reclassification,
exchange, substitution or in-kind distribution, the Company shall promptly issue
to Holder a new Warrant for such new securities or other property. The new
Warrant shall provide for adjustments which shall be nearly equivalent as may be
practicable to the adjustments provided for in this Section 5 including, without
limitation, adjustments to the Purchase Price and to the number of securities or
property issuable upon exercise of the new Warrant. The provisions of this
Section 5.2 shall similarly apply to successive reclassifications, exchanges,
substitutions or other events and successive dividends.
5.3 Reorganizations, Mergers, Consolidations or Sale of Assets.
In case of any merger of the Company with or into another corporation (other
than a merger with another corporation in which the Company is a continuing
corporation and which does not result in any reclassification or change of
outstanding securities issuable upon exercise of this Warrant), consolidation or
in case of any sale of all or substantially all of the assets of the Company,
the Company shall, as condition precedent to such transaction, execute a new
Warrant or cause such successor or purchasing corporation, as the case may be,
to execute a new Warrant, providing that the holder of this Warrant shall have
the right to exercise such new Warrant and upon such exercise to receive, in
lieu of each share of Common Stock theretofore issuable upon exercise of this
Warrant, the kind and amount of shares of stock, other securities, money and
property issuable or payable, as the case may be, upon such merger,
consolidation, sale of assets or other change to a holder of one share of Common
Stock. Such new Warrant shall provide for adjustments that shall be as nearly
equivalent
-5-
<PAGE> 6
as may be practicable to the adjustments provided for in this paragraph 5. The
provisions of this subparagraph 5.3 shall similarly apply to successive mergers,
consolidations, sale of assets and other changes and transfers.
5.4 Notice of Adjustments. The Company shall promptly give
written notice of each adjustment or readjustment of the number of shares of
Common Stock or other securities issuable upon exercise of this Warrant, by
first class mail, postage prepaid, to the registered holder of this Warrant at
the holder's address for notices in the Warrant Purchase Agreement. This notice
shall state that adjustment or readjustment and show in reasonable detail the
facts on which that adjustment or readjustment is based. The Company further
agrees to notify the Holder in writing of a reorganization, merger or sale in
accordance with Section 5.3 hereof at least thirty (30) days prior to the
effective date thereof.
5.5 No Change Necessary. The form of this Warrant need not be
changed because of any adjustment in the number of shares of Common Stock
issuable upon its exercise. A Warrant issued after any adjustment on exercise or
upon replacement may continue to express the same number of shares of Common
Stock as are stated on this Warrant as initially issued, and such number of
shares shall be considered to have been so changed as of the close of business
on the date of adjustment.
5.6 Reservation of Stock. The Company covenants that it will at
all times reserve and keep available, solely for issuance upon exercise of this
Warrant, all shares of its Common Stock from time to time issuable upon exercise
of this Warrant, and if at any time the number of authorized but unissued shares
of Common Stock shall not be sufficient to effect the exercise of this Warrant,
the Company will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose. Issuance
of this Warrant shall constitute full authority to the Company's officers who
are charged with the duty of executing stock certificates to execute and issue
the necessary certificates for shares of Common Stock issuable upon the exercise
of conversion of this Warrant.
5.7 Notices of Record Date. In the event the Company intends to
declare a record date for the holders of Common Stock for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, the Company shall mail to the holder of this Warrant at
least ten days prior to the proposed record date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend or distribution.
5.8 No Impairment. The Company shall not, by amendment of its
Articles of Incorporation or through a reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed under this Warrant by the Company, but
shall at all time in good faith assist in carrying out of all the provisions of
this Section 5 and in taking all such action as may be necessary or appropriate
to protect the Holder's rights under this Section 5 against impairment. If the
Company takes any action affecting the Common Stock other than as described
above that adversely affects the Holder's rights under this
-6-
<PAGE> 7
Warrant, the Purchase Price shall be adjusted downward.
6. No Rights as Stockholders. This Warrant, by itself, as
distinguished from any shares purchased hereunder, does not entitle the holder
to any voting rights or other rights as a stockholder of the Company prior to
the exercise of this Warrant.
7. Investment Representations. The holder of this Warrant by
receiving this Warrant makes the representations contained in Section 3.2(g)(i)
of the Warrant Purchase Agreement.
8. Legends.
8.1 Inclusion of Legends. Each certificate representing Shares
shall be endorsed with the a legend substantially similar to the legend set
forth in this Warrant (in addition to any legend required by applicable state
securities laws). The Company need not register a transfer of Shares unless the
conditions specified in the foregoing legend are satisfied. The Company may also
instruct its transfer agent not to register the transfer of any of the Shares
unless the conditions specified in the foregoing legend are satisfied.
8.2 Removal of Legends and Transfer Restrictions. The legend
relating to the Securities Act of 1933, as amended (the "Act") endorsed on a
stock certificate pursuant to Section 8.1 and the stop transfer instructions
with respect to the Shares represented by such certificate shall be removed and
the Company shall issue a certificate without such legend to the holder of such
Shares if such Shares are registered under the Act and a prospectus meeting the
requirements of Section 10 of the Act is available, or if such holder provides
to the Company an opinion of counsel for such holder of the Shares reasonably
satisfactory to the Company or a no-action letter or interpretive opinion of the
staff of the Securities and Exchange Commission to the effect that a public
sale, transfer or assignment of such Shares may be made without registration and
without compliance with any restriction such as those contained in Rule 144.
9. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt
by the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor and dated as of such cancellation
or delivery, in lieu of this Warrant.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day
for the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday in New York,
then such action may be taken or such right may be exercised on the next
succeeding day not a legal holiday in New York.
-7-
<PAGE> 8
11. Miscellaneous. The provisions of this Warrant shall be construed
and shall be given effect in all respects as if it had been issued and delivered
by the Company on the date of this Warrant. This Warrant shall be binding upon
any successors or assigns of the Company. This Warrant shall constitute a
contract under the laws of the State of New York and for all purposes shall be
construed in accordance with and governed by the laws of said state.
IN WITNESS WHEREOF, ValueVision International, Inc. has caused this
Warrant to be executed by its duly authorized officer.
Dated: September 13, 1999
VALUEVISION INTERNATIONAL, INC.
By /s/ Gene McCaffery
-------------------------------------
Name:
Title: Chief Executive Officer
[SIGNATURE PAGE TO NBCI WARRANT]
-8-
<PAGE> 9
Exhibit 1
NOTICE OF WARRANT EXERCISE
To: VALUEVISION INTERNATIONAL, INC.
(1) The undersigned hereby elects to exercise the attached Warrant
with respect to shares of Common Stock of ValueVision International,
Inc. pursuant to the terms of the attached Warrant, and
[ ] (a) tenders herewith payment of the purchase price in full or
[ ] (b) elects to exercise this Warrant using the Net Exercise
provisions of Section 3 of the Warrant
(CHECK ONE)
(2) Please issue a certificate or certificates representing said
shares of Common Stock in the name of the under-signed:
-------------------------------
(Name)
-------------------------------
(Address)
- ----------------------------- -------------------------------
(Date) (Signature)
<PAGE> 1
Registration Rights Agreement
between
Xoom.com, Inc.
and
ValueVision International, Inc.
Dated: September 13, 1999
<PAGE> 2
Registration Rights Agreement
EXHIBIT 10.9
[EXECUTION COPY]
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of September 13, 1999, by and between ValueVision International,
Inc., a Minnesota corporation (together with its successors and assigns, the
"Company"), and Xoom.com, Inc., a Delaware corporation (together with its
successors and assigns, "Xoom").
RECITALS
WHEREAS, pursuant to a Warrant Purchase Agreement, dated as of the
date hereof (the "Warrant Purchase Agreement"), among the Company, Snap! LLC
and Xoom, Xoom will acquire a warrant to purchase shares of common stock, par
value $0.01 per share, of the Company (the "Common Stock");
WHEREAS, in consideration of the Warrant Purchase Agreement, the
Company has agreed to provide to Xoom certain registration rights under the
Securities Act (as defined below).
NOW, THEREFORE, in consideration of the Warrant Purchase Agreement,
the mutual promises and agreements set forth herein and therein, and other
valuable consideration, the receipt and sufficiency of 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:
"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 issued or
issuable to Xoom upon the consummation of the Warrant Purchase Agreement.
Registrable Securities shall also include any shares of Common Stock or other
securities (or shares of Common Stock underlying such other securities) that
may be received by Xoom (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.
"Registration Expenses": All expenses, except as otherwise stated
in the definition of Selling Expenses, incurred by the Company in complying with
Section 2 hereof, including, without limitation, all registration,
qualification and filing fees, printing expenses, escrow fees, fees and
disbursements of counsel for the Company, blue sky fees and expenses, the
expense of
<PAGE> 3
Registration Rights Agreement 2
any special audits incident to or required by any such registration (but
excluding the compensation of regular employees of the Company which shall be
paid in any event by the Company) and the reasonable fees and disbursements of
one counsel for all selling shareholders in the event of participation by such
selling shareholders.
"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.
"Selling Expenses": All underwriting discounts, selling commissions
and stock transfer taxes applicable to the securities registered by Xoom and,
except as set forth in the definition of Registration Expenses, all reasonable
fees and disbursements of counsel for Xoom.
"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. 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 Xoom, written notice of such proposed
filing at least fifteen (15) days before the anticipated filing. The notice
referred to in the preceding sentence shall offer Xoom the opportunity to
register such amount of Registrable Securities as Xoom may request (a
"Piggyback Registration"). If the registration of which the Company gives
notice is for an Underwritten Offering, the right of Xoom to registration
pursuant to this Section 2 shall be conditioned upon Xoom's participation in
such underwriting and the inclusion of Registrable Securities in the
underwriting to the extent provided herein. If Xoom elects to participate in
such Underwritten Offering, Xoom shall (together with the Company and other
selling shareholders) enter into an underwriting agreement in customary form
with the managing underwriter selected for such underwriting by the Company.
Subject to Section 2(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. Xoom 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. Unless otherwise provided herein, the Company will not be
obligated to effect any registration of Registrable Securities under this
Section 2 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 Common Stock,
rights offerings or option or other employee benefit plans.
<PAGE> 4
Registration Rights Agreement 3
(b) Priority of Piggyback Registrations. The Company will cause the
managing underwriter or underwriters of a proposed Underwritten Offering on
behalf of the Company to permit Xoom 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. Notwithstanding the foregoing, if
the managing underwriter or underwriters of such Underwritten Offering
determines that marketing factors require a limitation of the number of shares
to be underwritten then the number of Registrable Securities to be included in
such registration shall be limited to the number of Registrable Securities
that, in the written opinion of such managing underwriter or underwriters, can
be sold without materially and adversely affecting the success of such
Underwritten Offering provided that the securities of any holder or holders of
securities who have registration rights which are superior to those of Xoom
shall receive priority in such Underwritten Offering to the full extent of the
securities such holder or holders desire to sell and the remaining allocation
available for sale, if any, shall be allocated pro rata among all other
holders, including Xoom, on the basis of the amount of securities requested to
be included therein by each such holders. The managing underwriter or
underwriters, applying the same standard, may also exclude entirely from such
offering all Registrable Securities proposed to be included such offering to the
extent the Registrable Securities are not of the same class as securities of the
Company included in such offering.
(c) Limitations on Subsequent Piggyback Registration Rights. From and
after the date of this Agreement, the Company shall not enter into any
agreement granting any holder or prospective holder of any securities of the
Company any piggyback registration rights with respect to such securities
unless the priority for such new piggyback registration rights are on a pari
passu basis with the piggyback registration rights granted to Xoom hereunder.
(d) Expenses of Registration. All Registration Expenses incurred in
connection with all registrations pursuant to Section 2 shall be borne by the
Company. Unless otherwise stated, all Selling Expenses relating to securities
registered on behalf of Xoom shall be borne by Xoom pro rata on the basis of
the number of shares registered.
(e) Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 2,
in which Xoom elects to participate, the Company will keep Xoom advised in
writing as to the initiation of each registration, qualification and compliance
and as to the completion thereof. At its expense the Company will:
(i) Prepare and file with the Commission a registration statement
with respect to such securities and use its best efforts to cause
such registration statement to become and remain effective for at
least ninety (90) days; and
(ii) Furnish to Xoom (if Xoom is participating in such registration)
and to the underwriters of the securities being registered such
reasonable number of copies of the registration statement,
preliminary prospectus, final prospectus and such other documents
as such underwriters may reasonably request in order to facilitate
the public offering of such securities.
Section 5. Indemnification.
<PAGE> 5
Registration Rights Agreement 5
(a) Indemnification by the Company. The Company will, without limitation
as to time, indemnify and hold harmless, to the fullest extent permitted by
law, Xoom, the officers, directors and agents and employees of Xoom, each
person who controls Xoom (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
that any such Losses arise out of or are based upon an untrue statement or as
the same are based upon information furnished in writing to the Company by Xoom
expressly for use therein; provided, however, that the Company will not be
liable to Xoom to the extent alleged untrue statement or omission or alleged
omission made in any Registration Statement, Prospectus or preliminary
prospectus if either (A)(i) Xoom failed to send or deliver a copy of the
Prospectus with or prior to the delivery of written confirmation of the sale by
Xoom 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, 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
Xoom 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. Further the Company will not
be liable to Xoom to the extent that any such Losses arise out of or are 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, to the extent, but only to the extent, that such untrue statement
or omission is contained in any information so furnished in writing by Xoom to
the Company expressly for use in such Registration Statement, Prospectus or
preliminary prospectus and was used by the Company in the preparation of such
Registration Statement, Prospectus or preliminary prospectus.
(b) Indemnification by Xoom. In connection with any Registration Statement
in which Xoom is participating, Xoom 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, 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, to the extent, but only to the extent, that
such untrue statement or omission is contained in any information so furnished
in writing by Xoom to the Company expressly for use in such Registration
Statement, Prospectus or preliminary prospectus and was used by the Company in
the preparation of such Registration Statement, Prospectus or preliminary
prospectus. In no
<PAGE> 6
Registration Rights Agreement 5
event will the liability of ValueVision hereunder be greater in amount than the
dollar amount of the proceeds (net of payment of all expenses) received by Xoom
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. The indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party (together with all other indemnified parties
which may be represented without conflict by one counsel) shall have the right
to retain one separate counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interest between such indemnified party and any other party
represented by such counsel in such proceeding. All 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 to
the indemnifying party), 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 8, unless such judgment, settlement or other termination includes
as an unconditional term thereof the giving by the claimant or 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
5 is unavailable to an indemnified party under Section 5(a) or 5(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
<PAGE> 7
Registration Rights Agreement 6
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 5(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 5(d), Xoom will not be
required to contribute any amount in excess of the amount by which the net
proceeds 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 5 will
survive so long as Registrable Securities remain outstanding, notwithstanding
any permitted transfer of the Registrable Securities by Xoom thereof or any
termination of this Agreement.
Section 6. Underwritten Registrations. 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. Each party hereto agrees that, in connection with any Underwritten
Offering hereunder, it shall undertake to offer customary indemnification to
the participating underwriters.
Section 7. Miscellaneous.
(a) Remedies. In the event of a breach by the Company of its
obligations under this Agreement, Xoom, 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. The
Company 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 Xoom.
(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 facsimile, registered or certified mail (return receipt requested),
postage prepaid or courier or overnight delivery service to the Company and
Xoom at the addresses listed in the Warrant Purchase 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).
<PAGE> 8
Registration Rights Agreement 7
(d) Successors and Assigns. Any transferee of all or a portion of the
Registrable Securities shall succeed to Xoom's rights and obligations hereunder
to the extent it agrees in writing, to be bound by all of the provisions
applicable hereunder to Xoom. Subject to the requirements of this Section 7(d),
this Agreement shall inure to the benefit of and be binding upon the successors
and assigns of the parties hereto. Xoom shall not assign any of its rights
hereunder to any third party except in connection with the transfer of
beneficial ownership of a number of shares equal to at least 50% of the Shares
issuable to Xoom pursuant to the Warrant Purchase Agreement which transferee
shall have agreed in writing to be bound by all of the provisions applicable
hereunder to Xoom. Upon consummation of the Reorganization (as such term is
defined in the Warrant Purchase Agreement), Xoom may assign its rights and
obligations under this Agreement to NBCi in connection with the transfer of its
Registrable Securities to NBCi.
(e) 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.
(f) Headings. The headings in this Agreement are for convenience of
reference only and will not limit or otherwise affect the meaning.
(g) Governing Law. This agreement will be governed by 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. The parties hereto waive all rights to trial by jury in any
action, suit or proceeding brought to enforce or defend any rights or remedies
under this Agreement.
(h) 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.
(i) Termination. This Agreement shall terminate upon the date upon which
Xoom shall be able to dispose of all of its remaining Registrable Securities in
any one day without registration pursuant to Rule 144 of the Securities Act.
(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.
<PAGE> 9
Registration Rights Agreement 8
[Signature page follows]
<PAGE> 10
Registration Rights Agreement 9
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
VALUEVISION INTERNATIONAL, INC.
By: /s/ Gene McCaffrey
--------------------------------------
Name: Gene McCaffrey
Title: Chief Executive Officer
XOOM.COM, INC.
By: /s/ Chris Kitze
----------------------------------------
Name: Chris Kitze
Title: Chairman
[VALUE VISION REGISTRATION RIGHTS AGREEMENT]
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VALUEVISION
INTERNATIONAL, INC.'S CONSOLIDATED BALANCE SHEET AS OF JULY 31, 1999 AND
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX-MONTH PERIOD ENDED JULY 31,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED
FINANCIAL STATEMENTS AS FILED ON FORM 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-START> FEB-01-1999
<PERIOD-END> JUL-31-1999
<CASH> 211,797
<SECURITIES> 54,368
<RECEIVABLES> 28,922<F1>
<ALLOWANCES> 0
<INVENTORY> 23,421
<CURRENT-ASSETS> 333,062
<PP&E> 13,252<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 385,620
<CURRENT-LIABILITIES> 38,506
<BONDS> 0
41,484
0
<COMMON> 370
<OTHER-SE> 305,260
<TOTAL-LIABILITY-AND-EQUITY> 385,620
<SALES> 111,016
<TOTAL-REVENUES> 111,016
<CGS> 66,023
<TOTAL-COSTS> 110,363
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 12,171
<INCOME-TAX> 4,755
<INCOME-CONTINUING> 7,416
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,416
<EPS-BASIC> .26
<EPS-DILUTED> .22
<FN>
<F1>Accounts Receivable represents amounts net of allowances for doubtful accounts.
<F2>Property and equipment represents amounts net of accumulated depreciation.
</FN>
</TABLE>
