1
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT, dated as of April 15, 1999, among ValueVision
International, Inc., a Minnesota corporation (together with its successors, the
"Company"), and GE Capital Equity Investments, Inc., a Delaware corporation
(together with its successors, "GE Capital Equity Investments") and National
Broadcasting Company, Inc., a Delaware corporation (together with its
successors, "NBC").
WITNESSETH:
WHEREAS, the Company and GE Capital Equity Investments have entered into an
Investment Agreement dated as of March 8, 1999, as amended by the First
Amendment and Agreement, dated as the date hereof (as amended, the "Investment
Agreement"), pursuant to which the Investor (as defined below) has agreed to
purchase shares of Series A Redeemable Convertible Preferred Stock (the
"Preferred Stock") and a warrant to purchase Common Stock of the Company (the
"Purchase Warrant");
WHEREAS; the Company and NBC, an Affiliate of the Investor as of the date
hereof, have entered into the Distribution Agreement (as defined below),
pursuant to which the Company has agreed to issue to NBC or its designee (i)
warrants to purchase 1,450,000 shares of Common Stock of the Company (the
"Initial Distributor Warrants") and (ii) at agreed upon times and subject to the
satisfaction of certain conditions contained therein, additional warrants to
purchase Common Stock of the Company (the "Bonus Distributor Warrants"); and
WHEREAS, the parties hereto deem it in their best interests and in the best
interests of the Company to provide for certain matters with respect to the
governance of the Company and desire to enter into this Agreement in order to
effectuate that purpose.
NOW, THEREFORE, in consideration of the mutual agreements and
understandings set forth herein, the parties hereto hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 Definitions. As used in this Agreement, the following terms
shall have the meanings set forth below:
"Adjusted Outstanding Common Stock" shall mean, at any time, the total
number of shares of outstanding Common Stock at such time; provided that
for purposes of such calculation (a) all shares of Common Stock issuable
upon conversion of the then outstanding Preferred Stock shall be considered
outstanding, (b) all shares of Common Stock issuable upon exercise of the
outstanding Initial Distributor Warrants (whether such Initial Distributor
Warrants are vested or unvested) shall be considered outstanding, (c) to
the extent that Bonus Distributor Warrants have been issued and are
outstanding (and only to such extent), all shares of Common Stock issuable
upon the exercise of such issued and outstanding Bonus Distributor Warrants
(whether such Bonus Distributor Warrants are vested or unvested) shall be
considered outstanding and (d) if Shareholder Approval has been
obtained(and only in such case) the maximum number of shares of Common
Stock then issuable upon exercise of the Purchase Warrant shall be
considered outstanding.
"Affiliate" shall mean, with respect to any Person, any other Person
that directly or indirectly controls, is controlled by, or is under common
control with, such Person. As used in this definition, "control" (including
its correlative meanings, "controlled by" and "under common control with")
shall mean the possession, directly or indirectly, of power to direct or
cause the direction of management or policies (whether through ownership of
securities or partnership or other ownership interests, by contract or
otherwise).
1
2
"Agreement" shall mean this Agreement as in effect on the date hereof
and as hereafter from time to time amended, modified or supplemented in
accordance with the terms hereof.
"Beneficially Own" shall have the meaning set forth in Rule 13d-3
under the Exchange Act, except that a Person shall be deemed to
"Beneficially Own" all securities that such Person has a right to acquire,
whether such right is exercisable immediately or only after the passage of
time (and without any additional condition), provided that a Person shall
not be deemed to "Beneficially Own" any shares of Common Stock which are
issuable upon exercise of any Bonus Distributor Warrants unless and until
such Bonus Distributor Warrants are actually issued and outstanding (at
which time such Person shall be deemed to Beneficially Own all shares of
Common Stock which are issuable upon exercise of such Bonus Distributor
Warrants, whether or not they are vested or unvested)and, provided further,
except as expressly provided in this Agreement no Person shall be deemed to
"Beneficially Own" any securities issuable upon exercise of the Purchase
Warrant unless and until the Shareholder Approval is obtained. In the event
that the Shareholder Approval is obtained, when calculating Beneficial
Ownership on any particular date after receipt of such Shareholder
Approval, the Purchase Warrant will be deemed to represent Beneficial
Ownership of the maximum number of shares of Common Stock that could be
acquired upon exercise of the Purchase Warrant on such date.
"Board of Directors" shall mean the Board of Directors of the Company
as from time to time hereafter constituted.
"Business Day" shall mean any day, other than a Saturday, Sunday or a
day on which commercial banks in New York, New York are authorized or
obligated by law or executive order to close.
"Certificate of Designation" shall mean the Certificate of Designation
of the Preferred Stock, filed with the Secretary of State of the State of
Minnesota on or prior to the date hereof.
"Change in Control of the Company" shall mean any of the following:
(i) a merger, consolidation or other business combination or transaction to
which the Company is a party if the shareholders of the Company immediately
prior to the effective date of such merger, consolidation or other business
combination or transaction, as a result of such merger, consolidation or
other business combination or transaction, do not have Beneficial Ownership
of voting securities representing 50% or more of the Total Current Voting
Power of the surviving corporation following such merger, consolidation or
other business combination or transaction; (ii) an acquisition by any
Person (other than the Restricted Parties and their Affiliates or any 13D
Group to which any of them is a member) of Beneficial Ownership of Voting
Stock of the Company representing 25% or more of the Total Current Voting
Power of the Company, (iii) a sale of all or substantially all the
consolidated assets of the Company to any Person or Persons (other than
Restricted Parties and their Affiliates or any 13D Group to which any of
them is a member); or (iv) a liquidation or dissolution of the Company.
"Common Stock" shall mean the common stock, par value $0.01 per share,
of the Company and any securities of the Company into which such Common
Stock may be reclassified, exchanged or converted.
"Company" shall have the meaning set forth in the preamble hereto.
"Designee" shall have the meaning set forth in Section 2.1(d).
"Disinterested Shareholders" shall mean any shareholder of the Company
who is not a Restricted Party or an Affiliate of a Restricted Party or a
member of a 13D Group in which a Restricted Party or an Affiliate of a
Restricted Party is also a member.
"Distribution Agreement" shall mean the Distribution and Marketing
Agreement dated March 8, 1999 between the Company and NBC pursuant to which
NBC has agreed to distribute certain programing of the Company, as such
agreement may be amended from time to time.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
2
3
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"GE Capital" shall mean General Electric Capital Corporation, a New
York corporation, together with its successors by operation of law.
"Independent Expert" shall mean an investment banking firm mutually
acceptable to the Company and the Investor.
"Investor" shall mean GE Capital Equity Investments, a wholly-owned
Subsidiary of GE Capital as of the date hereof and an Affiliate of NBC as
of the date hereof, together with its permitted assigns pursuant to Section
5.6.
"Investment Agreement" shall have the meaning set forth in the
recitals hereto, as such agreement may be amended from time to time.
"Investor Tender Offer" shall mean a bona fide public tender offer
subject to the provisions of Regulation 14d under the Exchange Act, by a
Restricted Party (or any 13D Group that includes a Restricted Party) to
purchase or exchange for cash or other consideration any Voting Stock and
which consists of an offer to acquire 100% of the Total Current Voting
Power of the Company then in effect (other than Voting Stock owned by
Restricted Parties or any Affiliate of a Restricted Party) and is
conditioned (which condition may not be waived) on a majority of the shares
of Voting Stock held by Disinterested Shareholders being tendered and not
withdrawn with respect to such offer.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
encumbrance, lien (statutory or other) or security agreement of any kind or
nature whatsoever (including, without limitation, any conditional sale or
other title retention agreement or any financing lease having substantially
the same effect as any of the foregoing).
"Market Capitalization" shall mean the aggregate Market Price of the
outstanding capital stock of the Company.
"Market Price" shall mean, with respect to a share of capital stock on
any day, except as set forth below in the case that the shares of such
capital stock are not publicly held or listed, the average of the "quoted
prices" of such capital stock for 30 consecutive Trading Days commencing 45
Trading Days before the date in question. The term "quoted prices" of
capital stock shall mean the last reported sale price on that day or, in
case no such reported sale takes place on such day, the average of the last
reported bid and asked prices, regular way, on that day, in either case, as
reported in the consolidated transaction reporting system with respect to
securities quoted on Nasdaq or, if shares of such capital stock are not
quoted on Nasdaq, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal
national securities exchange on which shares of such capital stock are
listed or admitted to trading or, if shares of such capital stock are not
quoted on Nasdaq and not listed or admitted to trading on any national
securities exchange, the last quoted price or, if not so quoted, the
average of the high bid and low asked prices on such other nationally
recognized quotation system then in use, or, if on any such day shares of
such capital stock are not quoted on any such quotation system, the average
of the closing bid and asked prices as furnished by a professional market
maker selected by the Board of Directors making a market in the shares of
such capital stock. Notwithstanding the foregoing, if shares of such
capital stock are not publicly held or so listed, quoted or publicly
traded, the "Market Price" shall mean the fair market value of a share of
such capital stock, as determined in good faith by the Board of Directors;
provided, however, that if the Investor shall dispute the fair market value
as determined by the Board of Directors, the Investor and the Company shall
retain an Independent Expert. The determination of fair market value by the
Independent Expert shall be final, binding and conclusive on the Company
and the Investor. All costs and expenses of the Independent Expert shall be
borne by the Investor unless the determination of fair market value is more
favorable to such Investor by 5% or more, in which case, all such costs and
expenses shall be borne by the Company.
3
4
"Material Agreement" shall mean any contract, lease, restriction,
agreement, instrument or commitment to which the Company or any Subsidiary
of the Company is a party or by which its properties are bound (i) which
provides a benefit to the Company or any of its Subsidiaries of, or commits
the Company or any Subsidiary of the Company to expend, $500,000 or more
(or, in the case of any agreement with any customer of the Company or any
Company Subsidiary of the Company, $50,000 or more), (ii) which if breached
by any party thereto would result in liability or loss to the Company and
its Subsidiaries of $500,000 or more (or in the case of any agreement with
any customer of the Company or any Subsidiary of the Company, $50,000 or
more) or (iii) which provides for the distribution of programming of the
Company to more than 250,000 full-time equivalent homes by any multichannel
video programming distributor, including without limitation, by a cable
television system, MATV and SMATV systems, MMDS, TVRO and other wireline,
wireless or direct broadcast satellite delivery methods.
"Material Subsidiaries" shall mean those Subsidiaries of the Company
that constitute "significant subsidiaries" as defined in Rule 1-02 of
Regulation S-X under the Securities Act.
"Material Transaction" shall mean (i) the direct or indirect
acquisition or purchase of 5% or more of the assets (based on the fair
market value thereof) of the Company and its Subsidiaries, taken as a
whole, or of 5% or more of any class of equity securities of the Company or
any of its Subsidiaries or any tender offer or exchange offer (including by
the Company or its Subsidiaries) that if consummated would result in any
person beneficially owning 5% or more of any class of equity securities of
the Company or any of its Subsidiaries, or (ii) any merger, consolidation,
business combination, sale of all or substantially all assets,
recapitalization, liquidation, dissolution or similar transaction involving
the Company or any of its Subsidiaries other than the transactions
contemplated by the Investment Agreement or this Agreement.
"NBC" shall mean National Broadcasting Company, Inc., a Delaware
corporation and Affiliate of the Investor as of the date hereof and a
wholly-owned Subsidiary of General Electric Company as of the date hereof,
together with its successors by operation of law
"NBC Restricted Person" shall mean each of the Persons listed on Annex
A hereto together with their respective Affiliates.
"Options" shall mean stock options to purchase Common Stock.
"Permitted Liens" shall mean (i) mechanics', carriers', repairmen's or
other like Liens arising or incurred in the ordinary course of business,
(ii) Liens arising under original purchase price conditioned sales
contracts and equipment leases with third parties entered into in the
ordinary course of business consistent with past practice, (iii) statutory
Liens for Taxes not yet due and payable and (iv) other encumbrances or
restrictions or imperfections of title which do not materially impair the
continued use and operation of the assets to which they relate.
"Person" shall mean an individual, corporation, unincorporated
association, partnership, group (as defined in Section 13(d)(3) of the
Exchange Act), trust, joint stock company, joint venture, business trust or
unincorporated organization, limited liability company, any governmental
entity or any other entity of whatever nature.
"Preferred Stock" shall mean the Series A Redeemable Convertible
Preferred Stock, par value $0.01 per share, of the Company.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement dated as of the date hereof between the Company and the Investor,
as it may be amended from time to time.
"Representatives" shall mean, with respect to any Person, such
Person's directors, officers, employees, agents and other representatives
acting in such capacity.
"Restricted Parties" shall mean each of (i) NBC, its Ultimate Parent
Entity (if any), each Subsidiary of NBC and each Subsidiary of its Ultimate
Parent Entity, (ii) GE Capital, its Ultimate Parent Entity (if any), each
Subsidiary of GE Capital and each Subsidiary of its Ultimate Parent Entity
4
5
and (iii) any Affiliate of any Person that is a Restricted Party if (and
only if) such Restricted Party has the right or power (acting alone or
solely with other Restricted Parties) to either cause such Affiliate to
comply with or prevent such Affiliate from not complying with all of the
terms of this Agreement that are applicable to Restricted Parties.
"SEC" shall mean the United States Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Shareholder Approval" shall mean the approval at the Shareholder
Meeting by the Company's shareholders of the Purchase Warrant.
"Shareholders Meeting" shall mean the meeting of shareholders of
Company, which meeting the Company shall hold and convene promptly after
the date hereof in order to vote on certain matters including, but not
limited to, the Purchase Warrant.
"Shareholders Vote" shall mean the vote of the shareholders of the
Company taken at the Shareholders Meeting.
"Standstill Limit" means Beneficial Ownership of 39.9% of the Adjusted
Outstanding Common Stock.
"Standstill Period" shall mean the period beginning on the date hereof
and ending on the occurrence of a Standstill Termination Event, provided
that the Standstill Period shall recommence immediately upon the occurrence
of a Standstill Reinstatement Event.
"Standstill Reinstatement Event" shall mean the occurrence of any of
the following (a) the Standstill Period has terminated pursuant to clause
(iii) of the definition of "Standstill Termination Event" and such Third
Party Tender Offer is withdrawn or terminated (without having been
consummated) at any time during which an Investor Tender Offer is not then
pending (unless the party that commenced such Investor Tender Offer
determines to terminate such Investor Tender Offer in accordance with
Section 4.1(f), in which event a Standstill Reinstatement Event shall occur
at the time of such termination), or (b) the Standstill Period has
terminated pursuant to clause (iv) of the definition of "Standstill
Termination Event" due to a Change of Control identified in clause (ii) of
the definition thereof and, within twelve months after the occurrence of
such Change in Control, the Person whose Beneficial Ownership of Voting
Stock triggered such Change of Control no longer Beneficially Owns 25% or
more of the Total Current Voting Power of the Company or (c) the Standstill
Period has terminated pursuant to clause (ii) of the definition of
"Standstill Termination Event," the relevant agreement that would have
otherwise resulted in a Change of Control has been terminated without a
Change of Control having occurred and subsequent to the occurrence of such
Standstill Termination Event but prior to the termination of such agreement
(x) the Restricted Parties have not acquired actual ownership of Voting
Stock representing in the aggregate a majority of the Total Current Voting
Power of the Company, (y) no Restricted Party has made any proposal or
offer to the Company regarding a Takeover Proposal (other than any such
proposal or offer that has been withdrawn by the party making such proposal
or offer or is no longer being pursued) and (z) no Restricted Party has
commenced any tender or exchange offer that is pending when such agreement
is terminated and that, if completed, would result in the Restricted
Parties having actual ownership of Voting Stock representing in the
aggregate a majority of the Total Current Voting Power of the Company.
Notwithstanding the foregoing, a Standstill Reinstatement Event will not
occur if prior to the occurrence of the event specified in clause (a), (b)
or (c) above that would otherwise result in a Standstill Reinstatement
Event, another Standstill Termination Event occurs for which there has not
been a related Standstill Reinstatement Event.
"Standstill Revised Limit" shall mean the percentage of the Adjusted
Outstanding Common Stock Beneficially Owned by the Restricted Parties as of
the occurrence of a Standstill Reinstatement Event.
5
6
"Standstill Termination Event" shall mean the earliest to occur of the
following: (i) the tenth anniversary of the date of this Agreement, (ii)
the date the Company enters into an agreement relating to a transaction
that if consummated will result in a Change in Control of the Company,
(iii) a Third Party Tender Offer, (iv) any Change in Control of the Company
occurs, or (v) the six month anniversary of the date on which the Investor
is no longer entitled to designate any nominees to the Board of Directors
pursuant to Section 2.1; provided, that the Standstill Period will be
immediately reinstated upon the occurrence of a Standstill Reinstatement
Event; provided further that, upon a Standstill Reinstatement Event, if the
Standstill Revised Limit is greater than the Standstill Limit, then the
Standstill Revised Limit and not the Standstill Limit shall thereafter be
deemed the Standstill Limit for all purposes hereunder.
"Subsidiary" shall mean, as to any Person, a corporation, partnership,
limited liability company, joint venture or other entity of which shares of
stock or other ownership interests having ordinary voting power (other than
stock or such other ownership interests having such power only by reason of
the happening of a contingency) to elect a majority of the board of
directors or other managers of such corporation, partnership or other
entity are at the time owned, directly or indirectly through one or more
intermediaries (including, without limitation, other Subsidiaries), or
both, by such Person.
"Takeover Transaction" shall mean (A) any of the matters set forth in
clause (i) of the definition of Material Transaction but replacing "5%"
with "50%" each place "5%" is used in such definition, (B) a sale of all or
substantially all of the assets of the Company and its Subsidiaries or (C)
a merger or consolidation of the Company.
"Third Party Tender Offer" shall mean a bona fide public offer subject
to the provisions of Regulation 14D under the Exchange Act, by a Person
(which is not made by and does not include any of the Company, a Restricted
Party or any Affiliate of any of them or any 13D Group that includes the
Company, a Restricted Party or any Affiliate of them) to purchase or
exchange for cash or other consideration any Voting Stock and which
consists of an offer to acquire 25% or more of the then Total Current
Voting Power of the Company.
"13D Group" means any "group" (within the meaning of Section 13(d) of
the Exchange Act) formed for the purpose of acquiring, holding, voting or
disposing of Voting Stock.
"Total Current Voting Power" shall mean, with respect to any
corporation the total number of votes which may be cast in the election of
members of the Board of Directors of the corporation if all securities
entitled to vote in the election of such directors (excluding shares of
preferred stock that are entitled to elect directors only upon the
occurrence of customary events of default) are present and voted (it being
understood that the Preferred Stock will be included on an as converted
basis in the calculation of Total Current Voting Power of the Company).
"Transfer" shall have the meaning set forth in Section 4.2.
"Ultimate Parent Entity" shall mean, with respect to any Person (the
"Subject Person"), the Person (if any) that (i) owns, directly or
indirectly through one or more intermediaries, or both, shares of stock or
other ownership interests having ordinary voting power (other than stock or
such other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the board of directors
or other managers of the Subject Person and (ii) is not itself a Subsidiary
of any other Person or is a natural person.
"Voting Stock" shall mean shares of the Common Stock and Preferred
Stock and any other securities of the Company having the ordinary power to
vote in the election of members of the Board of Directors of the Company.
"Warrants" shall mean the Purchase Warrant, the Initial Distributor
Warrants and the Bonus Distributor Warrants.
6
7
ARTICLE II
CORPORATE GOVERNANCE
Section 2.1 Board of Directors.
(a) The Company shall immediately expand the size of the Board of Directors
to seven directors and, pursuant to the terms of the Certificate of Designation,
appoint to the Board of Directors two individuals designated by the Investor as
the holder of a majority of the outstanding shares of Preferred Stock. The
directors designated by the Investor shall be subject to the reasonable approval
of a majority of the members of the Board of Directors and shall continue to
serve as directors until the next election of directors.
(b) If the Shareholder Approval is obtained, (i) as long as the Restricted
Parties continue to Beneficially Own an aggregate number of shares of Common
Stock equal to or greater than 50% of the number of shares of Common Stock which
the Restricted Parties Beneficially Own on the date hereof (making equitable
adjustments for any conversions, reclassifications, reorganizations, stock
dividends, stock splits, reverse splits and similar events which occur with
respect to the Common Stock), the Investor shall be entitled to designate two
individuals to be nominated to the Board of Directors or (ii) if the condition
in clause (i) of this paragraph (b) is not satisfied, then as long as the
Restricted Parties shall continue to Beneficially Own at least 10% of the
Adjusted Outstanding Common Stock, the Investor shall be entitled to designate
one individual to be nominated to the Board of Directors. For purpose of clause
(i) above, the Preferred Stock and the Purchase Warrant will be treated as
outstanding and exercisable as of the date hereof.
(c) If the Shareholder Approval is not obtained, (i) as long as the
Restricted Parties continue to Beneficially Own an aggregate number of shares of
Common Stock equal to or greater than 75% of the number of shares of Common
Stock which the Restricted Parties Beneficially Own on the date hereof (making
equitable adjustments for any conversions, reclassifications, reorganizations,
stock dividends, stock splits, reverse splits and similar events which occur
with respect to the Common Stock), the Investor shall be entitled to designate
two individuals to be nominated to the Board of Directors or (ii) if the
condition in clause (i) of this paragraph (c) is not satisfied, then as long as
the Restricted Parties shall continue to Beneficially Own an aggregate number of
shares of Common Stock equal to or greater than 50% of the number of shares of
Common Stock which the Restricted Parties Beneficially Own on the date hereof
(making equitable adjustments for any conversions, reclassifications,
reorganizations, stock dividends, stock splits, reverse splits and similar
events which occur with the respect to Common Stock), the Investor shall be
entitled to designate one individual to be nominated to the Board of Directors.
For purposes of this paragraph (c), the Purchase Warrant will not be deemed to
be outstanding on the date hereof.
(d) Any individual so designated by the Investor pursuant to paragraphs (b)
or (c) of this Section 2.1 (each a "Designee") that has not previously served as
a member of the Board of Directors shall be subject to the reasonable approval
of a majority of the members of the Board of Directors.
(e) As long as a majority of the outstanding shares of Preferred Stock are
owned by the Restricted Parties and the Investor is otherwise entitled to
designate nominee(s) for election as director(s) pursuant to Section 2.1, the
Designee(s) will be elected to the Board of Directors by the holders of the
Preferred Stock voting separately as a class, as provided in the Certificate of
Designation. If the Restricted Parties no longer own a majority of the
outstanding shares of Preferred Stock (or no shares of Preferred Stock are
outstanding) but the Investor is otherwise entitled to designate nominee(s) for
election as director(s) pursuant to Section 2.1, the Company shall nominate each
such Designee for election as a director as part of the management slate that is
included in the proxy statement (or consent solicitation or similar document) of
the Company relating to the election of directors, and shall provide the same
support for the election of each such Designee as it provides to other persons
standing for election as directors of the Company as part of the Company's
management slate.
(f) Subject to applicable law, in the event that any Designee on the Board
of Directors shall cease to serve as a director for any reason (other than the
failure of the shareholders of the Company to elect such person as director),
the vacancy resulting therefrom shall be filled by another Designee.
7
8
(g) For the avoidance of doubt, nothing in this Section 2.1 or elsewhere in
this Agreement is intended to prohibit the Restricted Parties from nominating
and electing a majority of the members of the Board of Directors if the
Restricted Parties have actual ownership of Voting Stock representing in the
aggregate a majority of the Total Current Voting Power and the Standstill Period
is no longer in effect.
(h) For as long as the Investor can designate nominee(s) for election as
director(s) pursuant to Section 2.1 and the Company has otherwise complied with
the terms of this Section 2.1, the Restricted Parties will vote (or execute a
written consent in lieu of) in each shareholder vote (or written consent in lieu
of) for the election of directors of the Company all of their Voting Stock
(other than shares of Preferred Stock that vote for directors as a separate
class from the Common Stock and other than the Common Stock issued pursuant to
the conversion of the Preferred Stock) (i) if there is no bona fide proxy
contest for the election of directors, in favor of the management slate that is
included in the proxy statement (or consent solicitation or similar document) of
the Company relating to the election of directors or (ii) if there is a bona
fide proxy contest for the election of directors, at the election of each
Restricted Party either (x) in favor of the management slate that is included in
the proxy statement (or consent solicitation or other similar document) of the
Company relating to the election of directors or (y) in the same proportion as
all votes cast by Disinterested Shareholders. The Restricted Parties'
obligations hereunder will terminate on the earlier to occur of (A) the
termination of the Standstill Period, or (B) the five year anniversary of the
date hereof.
(i) As long as the Investor is entitled to designate two persons for
nomination as directors, the then current Investor may assign pursuant to
Section 5.6 the right to designate pursuant to the terms and conditions hereof
one of such nominees to any other Restricted Party (such that two Restricted
Parties each have the right to designate one nominee; it being understood that
in such a case for all purposes of this Agreement where rights or obligations of
the Investor or the Restricted Parties are determined by the number of nominees
the Investor is entitled to designate, the Investor will be deemed to have the
right to designate two nominees).
(j) For so long as the Restricted Parties own a majority of outstanding
Preferred Stock and the Designees are entitled to be elected to the Board of
Directors by the holders of the Preferred Stock voting separately as a class
pursuant to Section VII(b) of the Certificate of Designation, any shares of
Common Stock owned by the Restricted Parties that were issued pursuant to the
conversion of shares of Preferred Stock (but no other shares of Common Stock
owned by the Restricted Parties) shall not be voted by the Restricted Parties in
any shareholder vote (or written consent in lieu thereof) for the election of
directors of the Company.
Section 2.2 Board Committees. As long as the Investor has the right to
designate at least one nominee to the Board of Directors, unless otherwise
agreed to by the Investor, (a) each of the Audit Committee and the Compensation
Committee of the Board of Directors shall contain at least one Designee and (b)
each other committee of the Board of Directors shall contain a number of
Designees (to the extent available), rounded upward to the nearest whole number,
equal to the total number of directors on such committee multiplied by the
percentage of the entire Board of Directors who are Designees.
Section 2.3 Reimbursement of Expenses; Attendance at Board Meetings;
Indemnification. The Company will reimburse each Designee that serves as a
director for all reasonable costs and expenses (including travel expenses)
incurred in connection with such director's attendance at meetings of the Board
or any committee of the Board upon which such director serves. The Company will
not pay such director annual fees and fees for attending Board or committee
meetings. The Company shall indemnify each such director to the same extent it
indemnifies its other directors pursuant to its organizational documents and
applicable law.
Section 2.4 Consultation and Other Rights. As long as the Investor has the
right to designate at least one nominee to the Board of Directors, it shall
have: (i) the right to examine the books and records of the Company and (ii) the
right to have its representative consult with the Company's executive officers
regarding business strategies, operating priorities and other major corporate
issues.
8
9
ARTICLE III
CERTAIN AGREEMENTS
Section 3.1 Financial Statements and Other Reports. As long as the Investor
has the right to designate at least one person to be nominated for election to
the Board of Directors pursuant to Section 2.1, the Company will deliver, or
cause to be delivered to the Investor:
(a) between 30 days prior to and 60 days after the end of each fiscal
year, a budget (on a monthly basis) for the Company and its Subsidiaries
for the following fiscal year (including consolidating and consolidated
statements of operations);
(b) as soon as available and in any event within 45 days after the end
of each month, consolidating and consolidated statements of operations of
the Company and its Subsidiaries for such month and for the period from the
beginning of the current fiscal year to the end of such month and a
consolidated balance sheet of the Company and its Subsidiaries as at the
end of such period and setting forth, in each case, in comparative form,
figures for the corresponding month and period in the preceding fiscal year
and the budget for such month and for the period from the beginning of the
current fiscal year to the end of such month, all in reasonable detail and
certified by an authorized financial officer of the Company as fairly
presenting in all material respects the financial condition and results of
operations of the Company and its Subsidiaries on a consolidated basis in
accordance with GAAP;
(c) as soon as practicable and in any event within 45 days after the
end of each fiscal quarter of the Company, consolidating and consolidated
statements of operations and cash flow of the Company and its Subsidiaries
for such quarter and for the period from the beginning of the current
fiscal year to the end of such quarter and a consolidated balance sheet of
the Company and its Subsidiaries as at the end of such quarter, setting
forth, in each case, in comparative form, figures for the corresponding
quarter in the preceding fiscal year and the budget for such quarter, all
in reasonable detail, and certified by an authorized financial officer of
the Company as fairly presenting in all material respects the financial
condition and results of operations of the Company and its Subsidiaries on
a consolidated basis in accordance with GAAP;
(d) as soon as available and in any event within 120 days after the
end of each fiscal year, consolidating and consolidated statements of
operations, shareholders' equity and cash flow of the Company and its
Subsidiaries for such fiscal year, and the related consolidating and
consolidated balance sheets of the Company and its Subsidiaries as at the
end of such fiscal year, setting forth, in each case, in comparative form,
corresponding consolidated and consolidating figures from the preceding
fiscal year, all in reasonable detail and accompanied (i) in the case of
such consolidated statements and balance sheet of the Company, by an
opinion thereon of independent certified public accountants of recognized
national standing (which shall be generally recognized as one of the "Big
Five" independent public accounting firms), which opinion shall state that
such consolidated financial statements fairly present the consolidated
financial condition and results of operations of the Company and its
Subsidiaries as at the end of, and for, such fiscal year in accordance with
GAAP, and (ii) in the case of such consolidating statements and balance
sheets, by a certificate of an authorized financial officer of the Company,
which certificate shall state that such consolidating financial statements
fairly present, in all material respects, the respective individual
unconsolidated financial condition and results of operations of the Company
and of each of its Subsidiaries, in each case in accordance with GAAP,
consistently applied, as at the end of, and for, such fiscal year;
(e) promptly upon transmission thereof to the shareholders of the
Company generally or to any other security holder of the Company,
including, without limitation, any holder of debt, copies of all financial
statements, notices, certificates, annual reports and proxy statements so
transmitted;
(f) promptly upon receipt thereof, a copy of each other report
submitted to the Company or any of its Subsidiaries by independent
accountants in connection with any annual, interim or special audit of the
books of the Company or any of its Subsidiaries made by such accountants,
or any management letters or similar document submitted to the Company or
any of its Subsidiaries by such accountants;
9
10
(g) promptly upon any material revision to the budgets referred to in
paragraph (a) above, such monthly budgets, as revised;
(h) promptly upon any officer of the Company obtaining knowledge
thereof, notice of any event of default under any credit agreement, loan
agreement or indenture that the Company is party to; and
(i) with reasonable promptness, such other information and data with
respect to the Company or any of its Subsidiaries as the Investor may
reasonably request.
Section 3.2 Certain Transactions with NBC Restricted Persons. (a) The
Company agrees for the benefit of the Restricted Parties that except with the
prior written consent of the Investor and except as may be expressly permitted
by this Agreement, the Company and its Subsidiaries shall not, directly or
indirectly:
(i) issue or sell to any NBC Restricted Person, or authorize or
propose the issuance or sale to any NBC Restricted Person of, any capital
stock, partnership or limited liability company interests or other equity
securities of the Company or any Subsidiary of the Company or any options,
warrants or other rights (including, without limitation, any convertible or
exchangeable securities) to acquire, any such capital stock, partnership or
limited liability interests or other equity securities;
(ii) form, enter into or join any partnership or joint venture with,
sell or dispose of any business or any assets (other than inventory and any
other assets disposed of in the ordinary course consistent with past
practice of such business) to, or make any investment in any NBC Restricted
Person;
(iii) enter into any transaction involving the incurrence of
indebtedness (other than in the ordinary course of business consistent with
past practice) involving any NBC Restricted Person;
(iv) authorize, enter into or approve any Material Transaction with
any NBC Restricted Person or enter into any discussions or negotiations
relating to any inquiry, proposal or offer relating thereto;
(v) enter into any joint marketing or co-branding arrangement with any
NBC Restricted Person, license or otherwise grant to any NBC Restricted
Person the right to utilize any trademark, tradename or brand of the
Company or any Subsidiary of the Company or grant to any NBC Restricted
Person any rights to have a branded presence on any media of the Company or
its Subsidiaries or rights to cross-promote home shopping transactions; or
(vi) authorize or commit or agree to take any of the foregoing
actions.
(b) The provisions of this Section 3.2 shall terminate and be of no further
force or effect at such time as the Investor is no longer entitled to designate
at least one person to be nominated for election to the Board of Directors
pursuant to Section 2.1. In addition, the provisions of this Section 3.2 shall
terminate and be of no further force or effect with respect to those NBC
Restricted Persons (and their Affiliates) set forth on Annex B hereto
(collectively, the "Annex B Entities") in the event that (i) NBC or any of its
Subsidiaries or Affiliates enters into a significant transaction with any Annex
B Entity (the "Relevant Entity") that precludes NBC and its Subsidiaries from
entering into a significant transaction with any one of the other Annex B
Entities and (ii) during the period ending six months after the occurrence of an
event specified in clause (i), neither the Company nor any of its Subsidiaries
has entered into an agreement providing for a significant transaction with the
Relevant Entity or its Affiliate.
Section 3.3 Certain Other Transactions.
For as long as the Investor is entitled to designate two persons to be
nominated for election to the Board of Directors pursuant to Section 2.1, the
Company agrees that except with the prior written consent of the Investor, the
Company and its Subsidiaries shall not, directly or indirectly:
(a) issue or sell, or authorize or propose the issuance or sale, of
any capital stock of the Company, or any options, warrants or other rights
(including, without limitation, any convertible or exchangeable securities)
to acquire capital stock of the Company other than (i) pursuant to Options
outstanding on the date hereof or issued pursuant to clause (ii) below,
(ii) Options to be issued to officers, directors, employees or consultants
of the Company pursuant to any plan or arrangement approved by the
10
11
Company's shareholders, (iii) upon conversion of the Preferred Stock
outstanding on the date hereof or pursuant to the Warrants, (iv) the
issuance of Common Stock and other Voting Stock in an aggregate amount not
to exceed (x) during any twelve month period 15% of the Total Voting Power
of the Company as of the first day of such twelve month period and (y)
during any twenty-four month period 25% of the Total Voting Power of the
Company as of the first day of such twenty-four month period, provided that
no issuance will be made to any Person pursuant to this clause (iv) who,
together with its Affiliates, to the knowledge of the Company after
reasonable inquiry, would Beneficially Own securities representing 10% or
more of the Total Voting Power of the Company following such issuance and
(v) issuances of non-voting capital stock that does not violate the terms
of the Preferred Stock;
(b) declare or pay any dividends or distributions to holders of Common
Stock in any fiscal quarter exceeding in the aggregate 5% of the Market
Capitalization of the Company as of the first day of such fiscal quarter or
repurchase or redeem any Common Stock except (i) repurchases and redemption
of Common Stock from officers, directors, employees or consultants of the
Company and its Subsidiaries and (ii) repurchases and redemptions of Common
Stock in any fiscal quarter that, when aggregated with all distributions
and dividends on the Common Stock in such fiscal quarter, do not exceed 5%
of the Market Capitalization of the Company as of the first day of such
fiscal quarter;
(c) enter into or effect any single or related series of acquisitions
of businesses or assets or investments therein (including, without
limitation, forming, entering into or joining any joint venture), other
than money market instruments and trade receivables, pursuant to which the
fair market value of the aggregate purchase price paid, or investment made,
by the Company and its Subsidiaries will exceed the greater of (x) $35
million or (y) 10% of the Market Capitalization of the Company at the time
the Company or its Subsidiaries enter into an agreement to effect such
acquisition or investment;
(d) enter into or effect any single or related series of sales, leases
or other dispositions of assets having a Fair Market Value in excess of the
greater of (x) $35 million or (y) 10% of the Market Capitalization of the
Company at the time the Company or its Subsidiaries enter into an agreement
to effect such sale, lease or other disposition;
(e) incur indebtedness for borrowed money that would cause the
Company's consolidated indebtedness to exceed the greater of (x) $40
million and (y) an amount equal to 30% of the Company's total
capitalization; for purposes of this clause (e) "total capitalization"
means the sum of consolidated shareholders equity and consolidated
indebtedness;
(f) issue any series or class of capital stock having (i) voting
rights that are disproportionate relating to its economic interest or (ii)
a separate class vote on any Takeover Transaction;
(g) enter into any business, either directly or indirectly, except for
those businesses in which the Company and/or its Subsidiaries and/or its
Affiliates are engaged in on the date hereof and those businesses which are
ancillary, complementary or reasonably related thereto;
(h) amend the Articles of Incorporation so as to adversely affect the
Restricted Parties (it being understood that increases in the authorized
capital stock of the Company and/or creation of a staggered Board of
Directors will not be deemed to adversely affect the Restricted Parties);
or
(i) authorize or commit or agree to take any of the foregoing actions.
Section 3.4 Other Covenants. (a) The Company agrees that except with the
prior written consent of the Investor and except as otherwise expressly
permitted by this Agreement, it and its Subsidiaries shall not, directly or
indirectly:
(i) adopt any shareholders rights plan, or amend any of its
organizational documents or enter into any Material Agreement with a third
party or issue any capital stock or other securities, the provisions of
which, upon the acquisition of all of the outstanding Common Stock or any
portion thereof by any Restricted Party would be violated or breached, or
which would require a consent, approval or notice thereunder, or which
would result in a default thereof (or an event which, with notice or lapse
of time or both, would constitute a default), or which would result in the
termination thereof or accelerate the
11
12
performance required thereby, or would result in a right of termination or
acceleration thereunder, or result in the creation of any Lien (except
Permitted Liens) upon any of the properties or assets of the Company or
Material Subsidiaries thereunder or disadvantage the Restricted Parties
relative to other shareholders on the basis of the size of their
shareholdings or otherwise restrict or impede the ability of the Restricted
Parties to acquire additional shares of Voting Stock or dispose of such
Voting Stock in any manner permitted by Section 4.2 to any Restricted Party
or to any Person that would Beneficially Own (together with such Person's
Ultimate Parent Entity, Subsidiaries and Affiliates) less than 10% of the
Adjusted Outstanding Common Stock;
(ii) Take any action that would cause any ownership interest in any of
the following to be attributable to any Restricted Party for purposes of
FCC regulations: (i) a U.S. broadcast radio or television station, (ii) a
U.S. cable television system, (iii) a U.S. "daily newspaper" (as such term
is defined in Section 73.3555 of the rules and regulations of the Federal
Communications Commission, as the same may be amended from time to time),
(iv) any U.S. communications facility operated pursuant to a license
granted by the Federal Communications Commission ("FCC") and subject to the
provisions of Section 310(b) of the Communications Act of 1934, as amended,
or (v) any other business which is subject to FCC regulations under which
the ownership of a Person may be subject to limitation or restriction as a
result of the interest in such business being attributed to such Person.
(b) The provisions of Section 3.4(a)(i) shall terminate and be of no
further force or effect at such time as the Investor is no longer entitled to
designate at least one person to be nominated for election to the Board of
Directors pursuant to Section 2.1.
Section 3.5 Houston Station. The Company and its Subsidiaries shall use all
commercially reasonable efforts to dispose of their interests in KVVV-TV Channel
▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ as soon as practicable.
Section 3.6 No Reinstatement of Rights. Anything in this Agreement to the
contrary notwithstanding, to the extent the Restricted Parties fail to satisfy
any ownership threshold set forth herein so that any rights of the Investor
under this Agreement and/or obligations of the Company under this Agreement
terminate, such terminated rights and/or obligations will not be reinstated if
the Restricted Parties thereafter satisfy such ownership threshold.
ARTICLE IV
STANDSTILL AGREEMENTS
Section 4.1 Standstill Agreement.
(a) During the Standstill Period (and during the Standstill Period only),
no Restricted Party will, directly or indirectly, nor will it authorize or
direct any of its Representatives to (and will take appropriate action against
such Representatives to discourage), in each case unless specifically requested
to do so in writing in advance by the Board of Directors:
(i) acquire or agree, offer, seek or propose to acquire, or cause to
be acquired, ownership of any assets or businesses of the Company or any of
its Subsidiaries having a fair market value in excess of 10% of the fair
market value of all of the Company's and its Subsidiaries' assets, or any
rights or options to acquire any such ownership (including from a third
party);
(ii) acquire or agree, offer, seek or propose to acquire, or cause to
be acquired, Beneficial Ownership of any Common Stock of the Company or any
of its Subsidiaries, or any options, warrants or other rights (including,
without limitation, any convertible or exchangeable securities) to acquire
any such Voting Stock, in any case other than the Preferred Stock, the
Warrants and any Voting Stock issuable upon conversion or exercise of the
Preferred Stock or Warrants; provided, however, that after the Shareholder
Meeting (or if earlier August 31, 1999) the Restricted Parties may acquire
or agree, offer, seek or propose to acquire, or cause to be acquired,
shares of Voting Stock of the Company (or any convertible or exchangeable
securities) to acquire any such Voting Stock if such acquisition would not
increase the Restricted Parties' aggregate Beneficial Ownership of shares
of Common Stock to more than the
12
13
Standstill Limit (other than due to the issuance of additional Bonus
Distributor Warrants; provided that if the issuance of additional Bonus
Distributor Warrants results in the Restricted Parties' aggregate
Beneficial Ownership of shares of Common Stock exceeding the Standstill
Limit, then at any time during the Standstill Period (and only during the
Standstill Period) when the Standstill Limit is so exceeded, the Restricted
Parties shall not exercise any Bonus Distributor Warrants unless (A) such
exercise occurs during the six months prior to the expiration or
termination of such Bonus Distributor Warrants or (B) immediately upon such
exercise, the Restricted Parties' aggregate actual ownership of outstanding
shares of Common Stock would not exceed 39.9% of the total outstanding
shares of Common Stock, treating as outstanding and actually owned for such
purpose shares of Common Stock issuable upon conversion of the Preferred
Stock or upon the exercise of the Initial Distributor Warrants, but no
shares of Common Stock issuable upon exchange or conversion of any other
rights, warrants, options or other securities). Notwithstanding the
foregoing, during the Standstill Period, the holder of a Warrant will not
disclaim Beneficial Ownership of such Warrant and for as long as the
Purchase Warrant is outstanding and exercisable, no Restricted Party will
acquire actual ownership of any shares of Common Stock other than (x)
through exercise of the Warrants or conversion of the Preferred Stock and
(y) other acquisitions of shares of Common Stock at a price per share equal
to or greater than the applicable price set forth in Section 8(a)(ii) of
the Purchase Warrant (during the period prior to the second anniversary of
the Issue Date under the Warrant) or Section 8(b)(ii) of the Purchase
Warrant (during the period on and after the second anniversary of such
Issue Date and prior to the fifth anniversary of such Issue Date).
(iii) make, or in any way participate in, any "solicitation" of
"proxies" (as such terms are used in the proxy rules of the SEC) with
respect to the voting of any securities of the Company or any of its
Subsidiaries, provided that the limitation contained in this clause (iii)
shall not apply to any Takeover Transaction to be voted on by the Company's
shareholders that is not instituted or proposed by any Restricted Party or
any Affiliate of a Restricted Party or any 13D Group of which any
Restricted Party or any Affiliate of a Restricted Party is a member;
(iv) deposit any securities of the Company or any of its Subsidiaries
in a voting trust or subject any such securities to any arrangement or
agreement with any Person (other than one or more Restricted Parties);
(v) form, join, or in any way become a member of a 13D Group with
respect to any voting securities of the Company or any of its Subsidiaries
(other than a "group" consisting solely of Restricted Parties);
(vi) arrange any financing for, or provide any financing commitment
specifically for, the purchase of any voting securities or securities
convertible or exchangeable into or exercisable for any voting securities
or assets of the Company or any of its Subsidiaries, except for such assets
as are then being offered for sale by the Company or such Subsidiary;
(vii) otherwise act, whether alone or in concert with others, to seek
to propose to the Company any tender or exchange offer, merger, business
combination, restructuring, liquidation, recapitalization or similar
transaction involving the Company or any of its Subsidiaries, or nominate
any person as a director of the Company who is not nominated by the then
incumbent directors, or propose any matter to be voted upon by the
shareholders of the Company; provided that the Restricted Entities may
nominate directors in accordance with Section 2.1 and, provided further,
the provisions of this clause(vii) will not prohibit or restrict any
Restricted Party from entering into any agreement, arrangement or
understanding relating to the Transfer of any securities in accordance with
Section 4.2 or engaging in an discussion or negotiations relating to any
potential Transfer of any securities in accordance with Section 4.2;
(viii) solicit, initiate, encourage or knowingly or intentionally
facilitate the taking of any action by any Affiliate of a Restricted Party
(that is not itself a Restricted Party) that would be prohibited by this
Section 4.1 if that Affiliate were a Restricted Party; or
(ix) publicly announce or disclose any intention, plan or arrangement
inconsistent with the foregoing.
13
14
(b) In addition, during the Standstill Period (and only during the
Standstill Period), no Restricted Party will, nor will they authorize or direct
any of their respective Representatives to, take any action that they reasonably
believe based on the advice of outside counsel would require the Company to make
a public announcement regarding any of the matters set forth in Section 4.1(a)
(other than in connection with the transactions contemplated by the Investment
Agreement).
(c) If, at any time during the Standstill Period, (i) any Person other than
a Restricted Party or any Affiliate thereof or any 13D Group of which any
Restricted Party is a member has made any inquiry, proposal or offer relating to
a Takeover Transaction or Change in Control of the Company which has not been
rejected by the Board of Directors, (ii) the Board of Directors has determined
to pursue a Takeover Transaction or other Change in Control of the Company and
the Board of Directors has not resolved to stop pursuing such Takeover
Transaction or other Change in Control of the Company or (iii) the Board of
Directors or the Company has engaged in any discussions or negotiations with, or
provided any information to, any Person other than a Restricted Party or any
Affiliate thereof or any 13D Group of which any Restricted Party is a member
with respect to a potential Takeover Transaction or other Change in Control of
the Company or any potential inquiry, proposal or offer relating thereto and the
Board of Directors has not resolved to terminate all such discussions,
negotiations and provision of information, then, for so long as such condition
continues to apply, the limitation on the actions described in clause (a)(vii)
above shall not be applicable to the Restricted Parties (but all other
provisions of this Agreement will, subject to Section 4.1(d), continue to
apply).
(d) Anything in this Section 4.1 to the contrary notwithstanding, this
Section 4.1 shall not prohibit or restrict any of the following: (x) actions
taken by the Investor's nominees on the Board of Directors in such capacity, (y)
the exercise by the Restricted Parties of their voting rights (i.e., their right
to vote their shares but not their right to make nominations, to the extent
prohibited by this Agreement, or take other related actions otherwise prohibited
by this Section 4.1) with respect to any shares of Voting Stock they
Beneficially Own and (z) any disclosure pursuant to Section 13(d) of the
Exchange Act which a Restricted Party reasonably believes, based on the advice
of outside counsel, is required in connection with any action taken by a
Restricted Party pursuant to Section 4.1(c).
(e) Following the expiration of the Standstill Period pursuant to clause
(i) of the definition of Standstill Termination Event and for two years
following the expiration of the Standstill Period pursuant to clause (v) of the
definition of Standstill Termination Event, no Restricted Party will purchase or
otherwise acquire any shares of Common Stock if such acquisition would increase
the Restricted Parties' aggregate Beneficial Ownership of shares of Common Stock
to more than 39.9% of the Adjusted Outstanding Common Stock except (x) increases
in Beneficial Ownership resulting from issuance of the Warrants or the exercise
of the Warrants or (y) pursuant to a Purchaser Tender Offer.
(f) If the Standstill Period terminates pursuant to clause (iii) of the
definition of "Standstill Termination Event" and the subject Third Party Tender
Offer is terminated at any time during which an Investor Tender Offer is then
pending, unless otherwise agreed by the Company, the Restricted Party that
commenced such Investor Tender Offer (the "Tendering Restricted Party") will not
complete such Investor Tender Offer until at least the sixth business day after
the termination of such Third Party Tender Offer. If, within two business days
after termination of the subject Third Party Tender Offer, the Company requests
in writing that the Tendering Restricted Party terminate its Investor Tender
Offer and by the end of the second business day after the receipt of such
request the Tendering Restricted Party has not terminated its Investor Tender
Offer, then the provisions of Section 3.4(a)(i) shall no longer prohibit the
Company from amending its then existing shareholders rights plan or adopting a
shareholders rights plan that could be triggered by the Restricted Parties if
(and, only if) they subsequently acquired Beneficial Ownership of additional
Voting Securities that would increase the Restricted Parties' aggregate
Beneficial Ownership of shares of Common Stock to more than the Standstill Limit
(determined for these purposes as if a Standstill Reinstatement Event had
occurred on such date) other than as a result of the acquisition of Beneficial
Ownership of additional shares of Common Stock upon the issuance or exercise of
additional Bonus Distributer Warrants.
14
15
Section 4.2 Transfer Restrictions.
(a) Unless the Restricted Parties Beneficially Own in the aggregate less
than 5% of the Adjusted Outstanding Common Stock or until the Restricted Parties
Beneficially Own in the aggregate at least 90% of the Adjusted Outstanding
Common Stock, the Restricted Parties shall not, directly or indirectly, sell,
transfer or otherwise dispose of (collectively, "Transfer") any of the Preferred
Stock, Warrants or shares of Common Stock Beneficially Owned by such Persons,
except for Transfers: (i) to Restricted Parties or to Affiliates who agree to be
Restricted Parties bound by the provisions of this Agreement, (ii) which have
been consented to by the Company, (iii) pursuant to a Third Party Tender Offer,
provided that the Restricted Parties may not Transfer pursuant to this clause
(iii) any shares of Common Stock acquired upon exercise of the Purchase Warrant
on or after the date of commencement of such Third Party Tender Offer or the
public announcement by the offeror thereof or that such offeror intends to
commence such Third Party Tender Offer, (iv) pursuant to a merger, consolidation
or reorganization to which the Company is a party, (v) in a bona fide public
distribution or bona fide underwritten public offering, (vi) pursuant to Rule
144 of the Securities Act or (vii) in a private sale or pursuant to Rule 144A of
the Securities Act; provided that, in the case of any Transfer pursuant to
clause (v) or (vii), such Transfer does not result in, to the knowledge of the
Restricted Parties after reasonable inquiry, any other Person acquiring, after
giving effect to such Transfer, Beneficial Ownership, individually or in the
aggregate with such Person's Ultimate Parent Entity, Subsidiaries and
Affiliates, of more than 10% of the Adjusted Outstanding Common Stock.
(b) Subject to the provisions of Section 4.2(a), if any Restricted Party
decides to dispose of any of the Preferred Stock (or the Common Stock issuable
upon conversion of the Preferred Stock) or the Warrants (or the Common Stock
issuable upon exercise of the Warrants), each Restricted Party understands and
agrees that it may do so only pursuant to an effective registration statement
under the Securities Act or pursuant to an exemption from registration under the
Securities Act. Each Restricted Party agrees to the imprinting, so long as
appropriate, of substantially the following legends on certificates representing
any of the securities referenced in the preceding sentence:
NEITHER THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES ISSUABLE UPON EXERCISE OF THE SECURITIES REPRESENTED HEREBY HAVE
BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAW, AND SUCH SECURITIES MAY NOT
BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT OR PURSUANT TO AN EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF A SHAREHOLDER
AGREEMENT, DATED AS OF APRIL 15, 1999, AMONG VALUEVISION INTERNATIONAL,
INC., GE CAPITAL EQUITY INVESTMENTS, INC., AND NATIONAL BROADCASTING
COMPANY, INC.
THE RESTATED ARTICLES OF INCORPORATION OF THE COMPANY, AS AMENDED,
PROVIDE THAT, EXCEPT AS OTHERWISE PROVIDED BY LAW, SHARES OF STOCK IN THE
COMPANY SHALL NOT BE TRANSFERRED TO "ALIENS" UNLESS, AFTER GIVING EFFECT TO
SUCH TRANSFER, THE AGGREGATE NUMBER OF SHARES OF STOCK OWNED BY OR FOR THE
ACCOUNT OF "ALIENS" WILL NOT EXCEED 20% OF THE NUMBER OF SHARES OF
OUTSTANDING STOCK OF THE COMPANY, AND THE AGGREGATE VOTING POWER OF SUCH
SHARES WILL NOT EXCEED 20% OF THE AGGREGATE VOTING POWER OF ALL OUTSTANDING
SHARES OF VOTING STOCK OF THE COMPANY. NOT MORE THAN 20% OF THE AGGREGATE
VOTING POWER OF ALL SHARES OUTSTANDING ENTITLED TO VOTE MAY BE VOTED BY OR
FOR THE ACCOUNT OF "ALIENS." IF, NOTWITHSTANDING SUCH RESTRICTION ON
TRANSFERS TO "ALIENS," THE AGGREGATE NUMBER OF SHARES OF STOCK OWNED BY OR
FOR THE ACCOUNT OF "ALIENS" EXCEEDS 20% OF THE NUMBER OF SHARES OF
OUTSTANDING STOCK OF THE COMPANY OR IF THE AGGREGATE VOTING POWER OF
15
16
SUCH SHARES EXCEEDS 20% OF THE AGGREGATE VOTING POWER OF ALL OUTSTANDING
SHARES OF VOTING STOCK OF THE COMPANY, THE COMPANY HAS THE RIGHT TO REDEEM
SHARES OF ALL CLASSES OF CAPITAL STOCK, AT THEIR THEN FAIR MARKET VALUE, ON
A PRO RATA BASIS, OWNED BY OR FOR THE ACCOUNT OF ALL "ALIENS" IN ORDER TO
REDUCE THE NUMBER OF SHARES AND/OR PERCENTAGE OF VOTING POWER HELD BY OR
FOR THE ACCOUNT OF "ALIENS" TO THE MAXIMUM NUMBER OR PERCENTAGE ALLOWED
UNDER THE RESTATED ARTICLES OF INCORPORATION, AS AMENDED, OR AS OTHERWISE
REQUIRED BY APPLICABLE FEDERAL LAW. AS USED HEREIN, "ALIENS" MEANS ALIENS
AND THEIR REPRESENTATIVES, FOREIGN GOVERNMENTS AND THEIR REPRESENTATIVES,
AND CORPORATIONS ORGANIZED UNDER THE LAW OF A FOREIGN COUNTRY, AND THEIR
REPRESENTATIVES. THE COMPANY WILL FURNISH TO ANY SHAREHOLDER UPON REQUEST
AND WITHOUT CHARGE, A FULL STATEMENT OF THE DESIGNATIONS, PREFERENCES,
LIMITATIONS, AND RELATIVE RIGHTS OF THE SHARES OF EACH CLASS OR SERIES
AUTHORIZED TO BE ISSUED, SO FAR AS THEY HAVE BEEN DETERMINED, AND THE
AUTHORITY OF THE BOARD TO DETERMINE THE RELATIVE RIGHTS AND PREFERENCES OF
SUBSEQUENT CLASSES OR SERIES.
The first legend set forth above shall be removed if and when (i) the
securities represented by such certificate are disposed of pursuant to an
effective registration statement under the Securities Act or (ii) the Investor
delivers to the Company an opinion of counsel reasonably acceptable to the
Company to the effect that such legends are no longer necessary.
Section 4.3 Certain Permitted Transactions and
Communications. Notwithstanding the foregoing, this Agreement shall not prohibit
(i) the acquisition or holding of securities or rights in the ordinary course of
business by any employee benefit plan whose trustees, investment managers or
similar advisors are not Affiliates of any Restricted Party, (ii) the
consummation of any transaction expressly provided for in the Investment
Agreement or the Operating Agreement including the acquisition and/or exercise
of the Warrants or any purchase of shares of Common Stock upon conversion of
Preferred Stock or (iii) officers and employees of the Restricted Parties from
communicating with officers of the Company or its Affiliates on matters related
to or governed by the Distribution Agreement, the Operating Agreement or other
operational matters, or the Restricted Parties from communicating with the Board
of Directors, the Chairman of the Board of Directors, the Chief Executive
Officer or the Chief Financial Officer of the Company, so long as such
communication is conveyed in confidence, does not require public disclosure by
the Restricted Parties or, in the reasonable belief (based on the advice of
outside counsel) of the Restricted Party making such communication, by the
Company, and is not intended to (A) elicit, and, in the reasonable belief (based
on the advice of outside counsel) of the Restricted Party making such
communication, does not require the issuance of, a public response by the
Company or (B) otherwise circumvent the provisions of Section 4.1.
ARTICLE V
MISCELLANEOUS
Section 5.1 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given, if delivered
personally, by telecopier or sent by overnight courier as follows:
(a) If to the Investor, to:
GE Capital Equity Investments, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
16
17
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to NBC, to:
National Broadcasting Company, Inc.
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Executive Vice President and Managing
Director, Worldwide Business Development
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(c) If to the Company, to:
ValueVision International, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address or addresses as shall be designated in writing. All
notices shall be effective when received.
Section 5.2 Entire Agreement; Amendment. This Agreement sets forth the
entire agreement between the parties hereto with respect to the transactions
contemplated by this Agreement. Any provision of this Agreement may be amended
or modified in whole or in part at any time by an agreement in writing between
the parties hereto executed in the same manner as this Agreement. No failure on
the part of any party to exercise, and no delay in exercising, any right shall
operate as a waiver thereof nor shall any single or partial exercise by any
party of any right preclude any other or future exercise thereof or the exercise
of any other right.
Section 5.3 Severability. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or
17
18
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement or any other such
instrument.
Section 5.4 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original, but all
of which together shall constitute one and the same document.
Section 5.5 Governing Law; Jurisdiction; Waiver of Jury Trial. This
Agreement shall be governed and construed in accordance with the laws of the
State of New York applicable to contracts executed and performed within such
state, and each party hereby submits to the jurisdiction of any state or U.S.
federal court sitting within the County of New York, New York or the County of
Hennepin, Minnesota. The parties hereto waive all right to trial by jury in any
action, suit or proceeding brought to enforce or defend any rights or remedies
under this Agreement.
Section 5.6 Successors and Assigns; Third Party Beneficiaries. Subject to
applicable law, (i) GE Capital Equity Investments may assign its rights under
this Agreement in whole or in part only to a Restricted Party, but no such
assignment shall relieve GE Capital Equity Investments of its obligations
hereunder unless GE Capital Equity Investments' obligations hereunder are
assumed by NBC and/or GE Capital in a written agreement reasonably acceptable to
the Company delivered to the Company (in which case GE Capital Equity
Investments will be released from its obligations hereunder except for its
obligations as a Restricted Party to comply with the terms hereof) and (ii) NBC
may assign its rights under this Agreement in whole or in part only to a
Restricted Party, but no such assignment shall relieve NBC of its obligations
hereunder unless NBC's obligations hereunder are assumed by GE Capital in a
written agreement reasonably acceptable to the Company delivered to the Company
(in which case NBC will be released from its obligations hereunder except for
its obligations as a Restricted Party to comply with the terms hereof). The
Company may not assign any of its rights or delegate any of its duties under
this Agreement without the prior written consent of the Investor. Any purported
assignment in violation of this Section shall be void. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any Person
other than the Restricted Parties (who shall be third party beneficiaries of
this Agreement entitled to the benefit of, and to enforce, its terms) and the
Company and their respective successors, any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision herein contained.
This Agreement and all conditions and provisions hereof are intended to be for
the sole and exclusive benefit of the Restricted Parties and the Company and
their respective successors, and for the benefit of no other Person. No
purchaser of Preferred Stock, Warrants or Common Stock from a Restricted Party
(other than another Restricted Party) shall be deemed to be a successor or
assignee by reason merely of such purchase.
Section 5.7 Arbitration. Any controversy, dispute or claim arising out of,
in connection with or in relation to the interpretation, performance or breach
of this Agreement, shall be determined, at the request of any party, by
arbitration in a city mutually agreeable to the parties to such controversy,
dispute or claim before and in accordance with the then-existing Rules for
Commercial Arbitration of the American Arbitration Association, and any judgment
or award rendered by the arbitrator will be final, binding and unappealable and
judgment may be entered by any state or Federal court having jurisdiction
thereof. The pretrial discovery procedures of the Federal Rules of Civil
Procedure shall apply to any arbitration under this Section 5.7. Any controversy
concerning whether a dispute is an arbitrable dispute or as to the
interpretation or enforceability of this Section 5.7 shall be determined by the
arbitrator. The arbitrator shall be a retired or former United States District
Judge or other person acceptable to each of the parties, provided such
individual has substantial professional experience with regard to corporate or
partnership legal matters. The parties intend that this agreement to arbitrate
be valid, enforceable and irrevocable.
Section 5.8 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this Agreement in
addition to any other remedy to which they are entitled at law or in equity.
18
19
Section 5.9 Headings, Captions and Table of Contents. The section headings,
captions and table of contents contained in this Agreement are for reference
purposes only, are not part of this Agreement and shall not affect the meaning
or interpretation of this Agreement.
Section 5.10 Confidentiality. The provisions of Sections 1, 2 and 8 of the
confidentiality agreement dated June 24, 1998 between the Company and the
Investor (the "Investor Confidentiality Agreement") shall continue and be in
full force and effect and apply to each Restricted Party as if it were the
Investor until the later to occur of the termination of the Distribution
Agreement and termination of the Investor's rights to designate at least one
director for nomination to the Board of Directors of the Company pursuant to
Section 2.1. All other provisions of the Investor Confidentiality Agreement and
the confidentiality agreement dated January 28, 1999 (as amended on February 28,
1999) between the Company and NBC are hereby terminated.
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
or by their respective duly authorized representatives, all as of the date first
above written.
VALUEVISION INTERNATIONAL, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer and
President
GE CAPITAL EQUITY INVESTMENTS, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Senior Vice President
NATIONAL BROADCASTING COMPANY, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Executive Vice President,
Worldwide Business Development
19
