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Exhibit 99.33
[CONFORMED COPY]
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GOVERNANCE AGREEMENT
among
HSN, Inc.,
Universal Studios, Inc.,
Liberty Media Corporation
and
Xxxxx Xxxxxx
dated as of October 19, 1997
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TABLE OF CONTENTS
Page
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ARTICLE I STANDSTILL AND VOTING.................................. 2
Section 1.01 Acquisition of Voting Securities....................... 2
Section 1.02. Restrictions on Transfer............................... 6
Section 1.03. Further Restrictions on Conduct........................ 9
Section 1.04. Reports................................................ 11
Section 1.05. Transferees............................................ 11
ARTICLE II BOARD OF DIRECTORS AND RELATED MATTERS................. 12
Section 2.01. Initial Composition of Board of Directors.............. 12
Section 2.02. Proportionate Representation........................... 12
Section 2.03. Management of the Business............................. 16
Section 2.04. Fundamental Changes.................................... 16
Section 2.05. Notice of Events....................................... 20
ARTICLE III REPRESENTATIONS AND WARRANTIES......................... 21
Section 3.01. Representations and Warranties of the Company.......... 21
Section 3.02. Representations and Warranties of the Stockholders..... 22
ARTICLE IV DEFINITIONS............................................ 23
Section 4.01. "Affiliate"............................................ 23
Section 4.02. "Assumptions".......................................... 3
Section 4.03 "BDTV Entities"........................................ 2
Section 4.04. "Beneficial Ownership or Beneficially Own"...... ...... 23
Section 4.05. "CEO".................................................. 24
Section 4.06 "CEO Termination Date"................................. 2
Section 4.07. "Commission"........................................... 24
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Section 4.08. "Consenting Party"..................................... 2
Section 4.09. "Demand Registration".................................. 25
Section 4.10. "Disabled"............................................. 25
Section 4.11. "Equity Securities".................................... 25
Section 4.12. "Exchange Act"......................................... 25
Section 4.13. "Exchange Agreement"................................... 25
Section 4.14 "FCC Regulations"...................................... 26
Section 4.15. "Independent Director"................................. 26
Section 4.16. "Liberty Director"..................................... 26
Section 4.17. "Ownership Percentage"................................. 26
Section 4.18. "Permitted Business Combination"....................... 27
Section 4.19. "Permitted Investment Percentage"...................... 27
Section 4.20. "Permitted Transferee"................................. 27
Section 4.21. "Person"............................................... 27
Section 4.22. "Public Stockholder"................................... 27
Section 4.23. "Right of First Refusal"............................... 28
Section 4.24. "Satisfactory Nominee"................................. 29
Section 4.25. "Seagram".............................................. 29
Section 4.26. "Securities Act"....................................... 29
Section 4.27. "Shares"............................................... 29
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Section 4.28. "Stockholders Agreement"............................... 29
Section 4.29. "Stockholders Group"................................... 30
Section 4.30. "Subsidiary"........................................... 30
Section 4.31. "Third Party Transferee"............................... 30
Section 4.32. "13D Group"............................................ 30
Section 4.33. "Total Equity Securities".............................. 30
Section 4.34. "Transfer"............................................. 31
Section 4.35. "Universal Director"................................... 31
ARTICLE V MISCELLANEOUS.......................................... 32
Section 4.39. Amendments; No Waivers................................. 34
Section 5.3. Successors and Assigns................................. 34
Section 5.4. Governing Law; Consent to Jurisdiction................. 35
Section 5.5. Counterparts; Effectiveness............................ 36
Section 5.6. Specific Performance................................... 36
Section 5.7. Registration Rights.................................... 36
Section 5.8. Termination............................................ 38
Section 5.10. Severability........................................... 38
Section 5.11. Cooperation............................................ 38
Section 5.12. Entire Agreement....................................... 38
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GOVERNANCE AGREEMENT
Agreement dated as of October 19, 1997 among HSN, Inc., a Delaware
corporation ("HSNi" or the "Company"), Universal Studios, Inc., for itself and
on behalf of the members of its Stockholders Group ("Universal"), Liberty Media
Corporation, for itself and on behalf of the members of its Stockholders Group
("Liberty"), and Mr. Xxxxx Xxxxxx ("Xx. Xxxxxx") for himself and on behalf of
the members of his Stockholders Group. Capitalized terms used herein without
definition have the meanings ascribed to such terms in the Transaction Agreement
(as hereinafter defined).
WHEREAS, HSNi, Universal and Liberty are parties to an Investment
Agreement dated as of the date hereof (the "Transaction Agreement") pursuant to
which, among other things, subject to the terms and conditions contained in the
Transaction Agreement, Universal will acquire Beneficial Ownership (as defined
in Article IV hereof) of Parent Common Shares and LLC Shares (together, the
"Shares"), representing 45% (or such greater percentage as may result under
Section 1.5(e) or 1.5(f) of the Transaction Agreement) of the Total Equity
Securities immediately following the Closing (such percentage, the "Initial
Percentage") (the Initial Percentage or such Ownership Percentage as may be
permitted under the terms of this Agreement to be Beneficially Owned by
Universal from time to time being referred to herein as the "Permitted
Investment Percentage"), in exchange for the transfer of the UT Contributed
Business and the Partnership;
WHEREAS, under the terms of the Transaction Agreement, Liberty may
at the Closing (or from time to time thereafter) acquire additional LLC Shares
and/or Parent Common Stock; and
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WHEREAS, HSNi, Universal, Liberty and Xx. Xxxxxx desire to establish
in this Agreement certain terms and conditions concerning the acquisition and
disposition of securities of the Company by Universal, and certain additional
provisions concerning Universal's, Liberty's and Xx. Xxxxxx'x relationships with
the Company, none of which shall become effective until the Closing.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the Company, Universal, Liberty and Xx. Xxxxxx hereby agree, effective
as of the Closing, as follows:
ARTICLE I
STANDSTILL AND VOTING
Section 1.01. Acquisition of Voting Securities. (a) Until the fourth
anniversary of the Closing (the "Standstill Termination Date"), Universal
covenants and agrees that, except with the prior approval of the HSNi Board of
Directors (or the CEO so long as Xx. Xxxxxx is the CEO), neither Universal nor
its Affiliates will Beneficially Own any Equity Securities except for (i) the
Shares and (ii) additional Equity Securities of the Company acquired in
accordance with Article 1 of the Transaction Agreement. Notwithstanding anything
to the contrary contained in this Agreement (including the definition of
Permitted Investment Percentage), any Equity Securities purchased from Liberty
and Xx. Xxxxxx not in violation of the Stockholders Agreement shall be excluded
from the calculation of Universal's Ownership Percentage for purposes of
determining whether the Permitted Investment Percentage has been exceeded.
(b) Following the Standstill Termination Date, subject to applicable
law (including FCC Regulations), the Permitted Investment Percentage shall be
increased to 50.1
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percent, and Universal may acquire Beneficial Ownership of an additional amount
of Equity Securities so long as its Ownership Percentage does not exceed the
Permitted Investment Percentage as so increased.
(c) In addition to the foregoing, subject to compliance with
applicable law (including FCC Regulations), (i) on the first anniversary of the
Standstill Termination Date, the Permitted Investment Percentage shall be
increased to 57.5 percent, and Universal may acquire Beneficial Ownership of an
additional amount of Equity Securities so long as its Ownership Percentage does
not exceed the Permitted Investment Percentage as so increased (but in no event
shall Universal acquire more than 1.5 percent of the Total Equity Securities in
any 12-month period) and (ii) at any time following the CEO Termination Date,
Universal may propose to the Company's Board of Directors (and, subject to
Section 2.04, thereafter effect) the acquisition by Universal or its Affiliates
of the then outstanding Equity Securities not owned by Universal in a Permitted
Business Combination.
(d) Except as expressly provided herein, neither Universal nor any
Affiliate thereof shall permit any entity in which it Beneficially Owns,
directly or indirectly, in excess of 50% of the outstanding voting securities
(regardless of whether Universal or such Affiliate acquires Beneficial Ownership
of such entity after the date of this Agreement) to Beneficially Own any Equity
Securities. Notwithstanding the foregoing, the acquisition (whether by merger,
consolidation or otherwise) by Universal or an Affiliate thereof of any entity
that Beneficially Owns Equity Securities shall not constitute a violation of the
Permitted Investment Percentage; provided that a significant purpose of any such
transaction is not to avoid the provisions of this Agreement; and provided
further that the provisions of paragraph (e) below are complied with.
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(e) Except as set forth in the next sentence, if at any time
Universal becomes aware that it and its Affiliates Beneficially Own more than
the Permitted Investment Percentage (including by virtue of acquisitions
referred to in paragraph (d) above), then Universal shall as soon as is
reasonably practicable (but in no manner that would require Universal to incur
liability under Section 16(b) of the Exchange Act) take all action necessary to
reduce the amount of Equity Securities Beneficially Owned by such Persons to an
amount not greater than the Permitted Investment Percentage. If the Ownership
Percentage of Universal and its Affiliates exceeds the Permitted Investment
Percentage solely by reason of repurchases of Equity Securities by the Company,
then, subject to the provisions of the Transaction Agreement, Universal shall
not be required to reduce the amount of Equity Securities Beneficially Owned by
such Persons.
(f) If prior to the Standstill Termination Date, Xx. Xxxxxx no
longer serves as CEO (provided that if Xx. Xxxxxx no longer serves as CEO but
continues to hold a proxy from Universal in respect of Parent Common Shares
under the Stockholders Agreement, Xx. Xxxxxx shall not be deemed to no longer
serve as CEO until the later of (i) such time as he no longer serves as CEO and
(ii) such time as Xx. Xxxxxx no longer holds the Universal proxy, with the later
of such times being referred to as the "CEO Termination Date") or becomes
Disabled, the Standstill Termination Date shall be deemed to occur effective as
of the CEO Termination Date or such date that Xx. Xxxxxx becomes Disabled.
(g) The restrictions on additional purchases of Equity Securities
described in this Section 1.01 shall terminate: (i) if any Person or group
(other than Universal or its Affiliates) Beneficially Owns more than 33-1/3% of
the outstanding Total Equity Securities; provided that this clause (i) shall not
apply (x) to Beneficial Ownership by Liberty and its Affiliates, if
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Universal amends, modifies or waives the standstill obligations of Liberty under
Section 2.1 of the Stockholders Agreement in a manner that would cause such
Beneficial Ownership by Liberty and its Affiliates not to be a violation of
Liberty's standstill obligations under Section 2.1 of the Stockholders Agreement
or Universal does not attempt in good faith to enforce such standstill
provisions, (y) to any Equity Securities Beneficially Owned by Xx. Xxxxxx but in
which he does not have a pecuniary interest or (z) if such Equity Securities
were acquired from the Company; and provided, however, that in calculating the
33-1/3% of the Total Equity Securities of any Person or group, any Equity
Securities transferred to such Person or group by Universal, Liberty or Xx.
Xxxxxx in accordance with the terms of the Stockholders Agreement shall be
disregarded if Universal elected not to purchase such Equity Securities after
being provided a reasonable opportunity to buy such Equity Securities or (ii) if
any Person or group (other than the Company, Universal or its Affiliates)
commences a tender or exchange offer for more than a majority of the outstanding
Total Equity Securities, provided that such termination of the foregoing
restriction shall only occur if (x) the Company's Board of Directors does not
recommend against the tender or exchange offer within the time frame under the
Exchange Act that the Board of Directors must legally respond and (y) in the
case of a tender or exchange offer by Liberty or its Affiliates in breach of its
or their standstill obligations under Section 2.1 of the Stockholders Agreement,
in addition to (x) above, Universal is unsuccessful after good faith efforts in
enforcing its rights against Liberty under Section 2.1 of the Stockholders
Agreement and, then, the foregoing restriction shall terminate only to the
extent necessary to permit Universal to commence a competing tender or exchange
offer; provided that if Universal has used such good faith efforts, such
restriction shall terminate no later than six business days prior to the
expiration date of a tender offer or exchange offer that has a reasonable
possibility of being consummated.
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(h) The Company agrees that to the extent that regulatory
restrictions prevent Universal from acquiring the levels of ownership permitted
under Article I of this Agreement, the Company will cooperate in good faith with
Universal in order to permit Universal to increase its Ownership Percentage.
Such cooperation may include without limitation exchanging additional LLC Shares
with Universal for Parent Common Shares. Notwithstanding the foregoing, the
Company shall not be required to take any action that would or could reasonably
be expected to have substantial adverse tax, accounting or financial
consequences to the Company or its Subsidiaries (including the LLC).
Section 1.02. Restrictions on Transfer. (a) Prior to the Standstill
Termination Date, subject to the terms of the Stockholders Agreement, Universal
will not Transfer any Equity Securities except for: (i) Transfers of Parent
Common Stock in a widely dispersed public offering pursuant to exercise of the
registration rights set forth in Section 5.07 hereof; (ii) Transfers of Parent
Common Stock pursuant to Rule 144 under the Securities Act, provided that no
such Transfers under this clause (ii) are made to any Person (including its
Affiliates and any Person or entities which are, to Universal's knowledge after
inquiry of the Company, part of any 13D Group that includes such transferee or
any of its Affiliates) that, after giving effect to such Transfer, would, to the
knowledge of Universal, Beneficially Own Equity Securities representing more
than 5% of the Total Equity Securities (other than a Permitted Transferee);
(iii) Transfers of Equity Securities and/or LLC Shares (x) in accordance with
Sections 6.1(c) and 6.1(e) of the Transaction Agreement or the terms of the
Exchange Agreement pursuant to any tender or exchange offer to acquire Parent
Common Stock that the Company's Board of Directors does not recommend against
within the time frame under the Exchange Act that the Board of Directors must
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gally respond or (y) as contemplated by Section 6.1(b) of the Transaction
Agreement or the terms of the Exchange Agreement; (iv) Transfers of Parent
Common Stock to Matsushita Electric Industrial Co., Ltd. and to the public
stockholders of Seagram by means of a pro rata dividend or other pro rata
distribution; (v) Transfers of Parent Common Stock to any Permitted Transferee;
(vi) Transfers of Parent Common Stock in an aggregate amount up to 5% of the
Total Equity Securities to any institutional or financial investors, not
exercisable more often than on two occasions in any six-month period, under an
exemption from the Securities Act or pursuant to registration rights from the
Company; (vii) Transfers of Equity Securities and/or LLC Shares to the Company
or a Subsidiary of the Company pursuant to a self tender offer or otherwise by
the Company; (viii) pledges of (or granting security interests in) Parent Common
Stock in connection with bona fide financings with a financial institution
(provided that such financial institution agrees that, upon exercise of its
rights, the Parent Common Stock would continue to be subject to the restrictions
on transfer contained herein); and (ix) Transfers of Equity Securities and/or
LLC Shares by Universal to any of its controlled Affiliates, provided that such
Affiliate becomes a signatory to this Agreement.
(b) If the CEO Termination Date has occurred or Xx. Xxxxxx becomes
Disabled, the Universal transfer restrictions set forth in paragraph (a) of this
Section 1.02 shall terminate immediately, subject to a Right of First Refusal in
favor of the Company (which Right of First Refusal shall apply so long as
Universal Beneficially Owns, directly or indirectly, Equity Securities
representing 20% or more of the Total Equity Securities irrespective of the
occurrence of the Standstill Termination Date and Xx. Xxxxxx'x status with the
Company but secondary to the rights of first refusal provided for in the
Stockholders Agreement), provided that the Right of First Re-
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fusal shall not be applicable to any Transfers that would be permitted prior to
the Standstill Termination Date.
(c) No Transfers of the LLC Shares by Universal or Liberty to
non-Affiliates thereof shall be permitted, except as permitted pursuant to
Section 6.1 of the Transaction Agreement and the Exchange Agreement or between
each other and their respective Affiliates (subject to the terms of the
Stockholders Agreement). Universal and Liberty, as the case may be, must
exchange LLC Shares for Parent Common Shares prior to permitted Transfers,
except (i) as permitted pursuant to Section 6.1 of the Transaction Agreement and
the terms of the Exchange Agreement and (ii) for Transfers between Liberty and
Universal and their respective Affiliates not in violation of the Stockholders
Agreement to the extent that the applicable Transferee could not in accordance
with applicable law directly own the Parent Common Shares into which such LLC
Shares are exchangeable. To the extent provided for by the Stockholders
Agreement, (x) so long as the CEO Termination Date has not occurred and Xx.
Xxxxxx has not become Disabled, prior to permitted Transfers, Universal and
Liberty must offer Xx. Xxxxxx (or his designee) the opportunity to exchange
Parent Class B Stock owned by Universal or Liberty, as the case may be, for
Parent Common Stock, and (y) to the extent that, in accordance with the
Stockholders Agreement or otherwise, Xx. Xxxxxx (or his designee) does not
exchange Parent Common Stock for Parent Class B Stock (or if the CEO Termination
Date has occurred or Xx. Xxxxxx is Disabled), Parent Class B Stock to be
transferred by Universal must be converted into Parent Common Stock unless the
transferee agrees to be bound by the restrictions contained in Article I herein
then applicable to Universal to the extent that the transferee Beneficially Owns
at least 10% of the voting power of the outstanding Voting Securities.
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Section 1.3. Further Restrictions on Conduct. Universal covenants
and agrees that until the CEO Termination Date or such time as Xx. Xxxxxx
becomes Disabled:
(a) except by virtue of Universal's representation on the Board of
Directors of the Company and as otherwise contemplated under this
Agreement and the other agreements contemplated by the Transaction
Agreement or as otherwise permitted by the Board of Directors of the
Company or the CEO so long as Xx. Xxxxxx is CEO, neither Universal nor any
Affiliate thereof will otherwise act, alone or in concert with others, to
seek to affect or influence the control of the management or Board of
Directors of the Company or the business, operations or policies of the
Company (it being agreed that this paragraph shall not prohibit Universal,
its Affiliates and their respective employees from engaging in ordinary
course business activities with the Company);
(b) other than to a Permitted Transferee, neither Universal nor any
Affiliate thereof shall deposit any Equity Securities or LLC Shares in a
voting trust or subject any Equity Securities or LLC Shares to any proxy,
arrangement or agreement with respect to the voting of such securities or
other agreement having similar effect, except for agreements or
arrangements with a Permitted Designee reasonably acceptable to the other
Stockholders and not inconsistent with or for the purpose of evading the
terms of this Agreement or the Stockholders Agreement;
(c) other than as is permitted by this Agreement, neither Universal
nor any Affiliate thereof shall propose any merger, tender offer or other
business combination involving the Company or any of its Affiliates
(including the LLC); provided, that discus-
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sions relating to the possibility of such a proposal in which Xx. Xxxxxx
participates shall not be deemed to be a breach of this covenant;
(d) neither Universal nor any Affiliate thereof shall initiate or
propose any stockholder proposal or make, or in any way participate in,
directly or indirectly, any "solicitation" of "proxies" to vote, or seek
to influence any Person with respect to the voting of, any Equity
Securities, or became a "participant" in a "solicitation" (as such terms
are defined in Regulation 14A under the Exchange Act) in opposition to the
recommendation of the majority of the directors of the Company with
respect to any matter except (i) in response to a solicitation by a third
party and (ii) to facilitate a tender or exchange offer by Universal or an
Affiliate permitted under Section 1.01(g)(ii) of this Agreement;
(e) other than as is contemplated by this Agreement, the Transaction
Agreement, the Stockholders Agreement and the other agreements
contemplated by the Transaction Agreement, neither Universal nor any
Affiliate thereof shall join a partnership, limited partnership, syndicate
or other group, or otherwise act in concert with any other Person (other
than a Permitted Transferee), for the purpose of acquiring, holding,
voting or disposing of Equity Securities or LLC Shares, or otherwise
become a "person" within the meaning of Section 13(d)(3) of the Exchange
Act; and
(f) neither Universal nor any Affiliate thereof shall, directly or
indirectly, request that the Company or its Board of Directors amend or
waive any of the provisions of this Section 1.03.
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Section 1.04. Reports. Universal shall deliver to the Company,
promptly after any acquisition or Transfer of Equity Securities representing
more than a 1% change in the Ownership Percentage, an accurate written report
specifying the amount and class of Equity Securities acquired or Transferred in
such transaction and the amount of each class of Equity Securities owned by
Universal and its Affiliates after giving effect to such transaction; provided,
however, that no such report need be delivered with respect to any such
acquisition or Transfer of Equity Securities by Universal or its Affiliates that
is reported in a statement on Schedule 13D filed with the Commission and
delivered to the Company by Universal in accordance with Section 13(d) of the
Exchange Act. The Company shall be entitled to rely on such reports and
statements on Schedule 13D for all purposes of this Agreement.
Section 1.05. Transferees. No Third Party Transferee shall have any
rights or obligations under this Agreement, except as specifically provided for
in this Agreement and except that if such Third Party Transferee shall acquire
Beneficial Ownership of more than 5% of the outstanding Total Equity Securities
upon consummation of any Transfer or series of related Transfers from a
Stockholder, to the extent such Stockholder assigns such right in connection
with a Transfer, such Third Party Transferee shall have the right to initiate
one or more Demand Registrations pursuant to Section 5.07 or any registration
rights agreement that replaces or supersedes Section 5.07 (and shall be entitled
to such other rights that a Stockholder would have applicable to such Demand
Registration), subject to the obligations of such Stockholder applicable to such
demand (and the number of Demand Registrations to which such Stockholder is
entitled under Section 5.07 hereof shall be correspondingly decreased).
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ARTICLE II
BOARD OF DIRECTORS AND RELATED MATTERS
Section 2.01. Initial Composition of Board of Directors. Prior to
the Closing, the HSNi Board of Directors shall take such action as is required
under applicable law to cause to be elected to the HSNi Board of Directors,
effective upon the Closing, four Satisfactory Nominees, of whom no more than
one shall be an Independent Director proposed by Universal and the remainder
of whom shall be Universal Directors, each of whom shall be identified by
Universal prior to the mailing of the proxy statement referred to in Section
9.1 of the Transaction Agreement.
Section 2.02. Proportionate Representation. (a) Following the
Closing, the Company shall use its best efforts to cause the composition of the
HSNi Board to continue to reflect the proportionate representation of Universal
Directors and Independent Director set forth in Section 2.02(b).
(b) Following the Closing, the Company shall take such action as may
be required under applicable law to include in the slate of nominees recommended
by the HSNi Board of Directors and to otherwise cause to be elected to the HSNi
Board of Directors the number of Satisfactory Nominees that Universal shall be
entitled to nominate pursuant to this paragraph (b). The number of Satisfactory
Nominees which Universal shall be entitled to nominate at any annual meeting of
the Company's stockholders following the Closing shall be as follows:
(i) X = the amount of Equity Securities Beneficially
Owned by Universal and its controlled Affiliates
as of the record date for such annual meeting
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Y = Total Equity Securities as of such date
Number of
Satisfactory
Nominees
If X is equal to or more
than .40Y = 4
If X is less than .40Y but
equal to or more than .30Y = 3
If X is less than .30Y but
equal to or more than .20Y = 2
If X is less than .20Y but
equal to or more than .10Y = 1
If X is less than .10Y = 0
; provided, that following the CEO Termination Date or such time as Xx. Xxxxxx
becomes Disabled, the number of Satisfactory Nominees (without regard to the
proviso in the definition thereof) that Universal shall have the right to
nominate at any meeting of the Company's stockholders at which directors are to
be elected shall be at least the number of Satisfactory Nominees (without regard
to the proviso in the definition thereof) resulting from the provisions set
forth above.
Whenever necessary to maintain the proportionality required by the
formulas set forth above, one or more, as appropriate, Satisfactory Nominees who
would otherwise stand for election at the next annual meeting of the Company's
stockholders (as agreed to by Universal and HSNi) shall not be included as a
nominee on the HSNi Board of Directors' slate of directors.
(c) Other than as set forth in paragraph (b) above, the Company
shall cause each Satisfactory Nominee to be included in the slate of nominees
recommended by the Board of Directors to the Company's stockholders for election
as directors at each annual meeting of the
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stockholders of the Company and shall use all reasonable efforts to cause the
election of each such Satisfactory Nominee, including soliciting proxies in
favor of the election of such persons. Within a reasonable time prior to the
filing with the Commission of its proxy statement or information statement with
respect to each meeting of stockholders at which directors are to be elected,
the Company shall, to the extent such Person is entitled to representation on
the Company's Board of Directors in accordance with this Agreement, provide
Universal and Liberty, as applicable, with the opportunity to review and comment
on the information contained in such proxy or information statement applicable
to the director nominees designated by such Person.
(d) In the event that a vacancy is created at any time by the death,
disability, retirement, resignation or removal (with or without cause) of any
Satisfactory Nominee or Liberty Director, Universal or Liberty, as the case may
be, shall have the right to designate a replacement Satisfactory Nominee or
Liberty Director to fill such vacancy, and the Company agrees to use its best
efforts to cause such vacancy to be filled with the replacement Satisfactory
Nominee or Liberty Director so designated. Upon the written request of Universal
or Liberty, each Stockholder shall vote (and cause each of the members of its
Stockholders Group (as defined in the Stockholders Agreement) to vote, if
applicable), or act by written consent with respect to, all Equity Securities
Beneficially Owned by it and otherwise take or cause to be taken all actions
necessary to remove the director designated by such requesting party and to
elect any replacement director designated by such party as provided in the first
sentence of this Section 2.02(d).
(e) Except as permitted by the HSNi Board of Directors, the parties
agree that the HSNi directors who are Satisfactory Nominees shall not
participate in any action taken by the HSNi Board of Directors or the Company
relating to any business transaction between the Com-
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pany and Universal (including its Affiliates), or relating to this Agreement or
the Transaction Agreement, including, without limitation, any amendment,
modification or waiver hereof or thereof.
(f) Following the Closing, the parties agree that, at such time as
representation on the HSNi Board of Directors by representatives of Liberty is
not prohibited, the Company shall take such action as may be required under
applicable law and the HSNi Certificate of Incorporation and By-laws to include
two Liberty Directors in the slate of nominees recommended by the Board of
Directors and to otherwise cause to be elected to the HSNi Board of Directors
two Liberty Directors and, thereafter, to use all reasonable efforts to cause
the election of two Liberty Directors, with the provisions of paragraphs (c) and
(d) of this Section 2.02 applicable to Universal to apply, mutatis mutandis, to
Liberty. Liberty shall have the right to nominate up to two Liberty Directors so
long as the number of Equity Securities Beneficially Owned by Liberty is at
least equal to 100% of the number of Equity Securities Beneficially Owned by
Liberty immediately prior to the Closing (appropriately adjusted to reflect any
stock splits and the like) (so long as the Ownership Percentage of Liberty is at
least equal to the lesser of (x) 17% of the Total Equity Securities and (y) the
percentage that is five percentage points less than the percentage of the Total
Equity Securities Beneficially owned by Liberty immediately following the
Closing). Liberty shall have the right to nominate one Liberty Director so long
as Liberty Beneficially Owns a number of Equity Securities at least equal to
two-thirds of the number of Equity Securities Beneficially Owned by it
immediately prior to the Closing (appropriately adjusted to reflect any stock
splits and the like) (so long as Liberty's Ownership Percentage is at least
equal to 5% of the Total Equity Securities).
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Section 2.03. Management of the Business. Following the Closing and
except as indicated in Section 2.04 below, as required by Delaware law or the
Certificate of Incorporation of the Company and the By-Laws or as contemplated
by the Transaction Agreement and the agreements contemplated thereby, Xx.
Xxxxxx, so long as he is CEO and has not become Disabled, will continue to have
full authority to operate the day-to-day business affairs of the Company to the
same extent as prior to the Closing. The Executive Committee (or any similar
committee) of the Board will not be used in a manner that usurps the overall
responsibility of the Company's Board of Directors under Delaware law to manage
or direct the business and affairs of the Company.
Section 2.04. Fundamental Changes. So long as (a) in the case of
Universal, the Ownership Percentage of Universal is at least 20 percent (or, in
the event that Universal has not transferred to a non-Affiliate Equity
Securities representing more than one-half of the Initial Percentage, 15
percent), (b) in the case of Liberty, Liberty Beneficially Owns at least
two-thirds of the number of Equity Securities Beneficially Owned by it
(including the Contingent Shares, the Exchange Shares and through its equity
ownership of BDTV Entities) immediately prior to the Closing (appropriately
adjusted to reflect any stock splits and the like) (so long as such Ownership
Percentage equals at least 5% of the Total Equity Securities), and (c) in the
case of Xx. Xxxxxx, Xx. Xxxxxx Beneficially Owns at least five million Parent
Common Shares with respect to which he has a pecuniary interest (appropriately
adjusted to reflect any stock splits and the like) and the CEO Termination Date
has not occurred and Xx. Xxxxxx has not become Disabled, neither the Company nor
any Subsidiary (including the LLC) shall take any of the actions set forth be-
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low without the prior approval of Xx. Xxxxxx, Universal and/or Liberty (each, a
"Stockholder"), as applicable:
(i) Any transaction not in the ordinary course of business,
launching new or additional channels or engaging in any new field of
business, in any case, which will result in, or will have a reasonable
likelihood of resulting in, such Stockholder or any Affiliate thereof
being required under law to divest itself of all or any part of its Equity
Securities or LLC Shares, or interests therein, or any other material
assets of such Person, or which will render such Person's continued
ownership of such securities, shares, interests or assets illegal or
subject to the imposition of a fine or penalty or which will impose
material additional restrictions or limitations on such Person's full
rights of ownership (including, without limitation, voting) thereof or
therein.
(ii) Acquisition or disposition (including pledges), directly or
indirectly, by the Company or any of its Subsidiaries (including the LLC)
of any assets (including debt and/or equity securities) or business (by
merger, consolidation or otherwise), provided that the transactions
contemplated by the Transaction Agreement, including the matters
contemplated by Section 9.14 thereof (to the extent conducted in all
material respects in accordance with the letter agreement relating to such
matters dated as of the date hereof among Liberty, Universal and the
Company, as such agreement may be amended or modified), shall not require
the prior approval of Liberty pursuant to this Section 2.04, the grant or
issuance of any debt or equity securities of the Company or any of its
Subsidiaries (including the LLC, other than, in any of the foregoing, as
contemplated by the Transaction Agreement and the Exchange Agreement or
the Contingent Shares and the Ex-
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change Shares), the redemption, repurchase or reacquisition of any debt or
equity securities of the Company or any of its Subsidiaries (including the
LLC, other than as contemplated by the Transaction Agreement and the
Exchange Agreement or the Contingent Shares and the Exchange Shares) by
the Company or any such Subsidiary (including the LLC), or the incurrence
of any indebtedness, or any combination of the foregoing, in any such
case, in one transaction or a series of transactions in a six-month
period, with a value of 10% or more of the market value of the Total
Equity Securities at the time of such transaction, provided that the
prepayment, redemption, repurchase or conversion of prepayable, callable,
redeemable or convertible securities (including LLC Shares) in accordance
with the terms thereof shall not be a transaction subject to this
paragraph.
(iii) For a five-year period following the Closing, disposition of
any interest in the Partnership or, other than in the ordinary course of
business, its assets, directly or indirectly (by merger, consolidation or
otherwise), provided that matters set forth in this clause (iii) will not
constitute a "Fundamental Change" with respect to Liberty and shall not
require its approval unless it otherwise would constitute a "Fundamental
Change" under one of the other items of this Section 2.04 with respect to
which Liberty's consent is required.
(iv) Disposition or issuance (including pledges), directly or
indirectly, by the Company of any LLC Shares except as contemplated by the
Transaction Agreement, the Governance Agreement, the Stockholders
Agreement and the Exchange Agreement or pledges in connection with
financings.
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(v) Voluntarily commencing any liquidation, dissolution or winding
up of the Company or any material Subsidiary (including the LLC).
(vi) Any material amendments (other than as contemplated by the
Transaction Agreement and the Stockholders Agreement) to the Certificate
of Incorporation or Bylaws of the Company (including the issuance of blank
check preferred stock containing super voting rights or class votes on any
matter (except to the extent such class vote is required by Delaware law
or to the extent the holder of such preferred stock may have the right to
elect directors upon the occurrence of a default in payment of dividends
or a redemption price)) or to the operating agreement or bylaws of the
LLC.
(vii) Engagement by the Company or the LLC in any line of business
other than media, communications and entertainment products, services and
programming, and electronic retailing, or other businesses engaged in by
the Company as of the date hereof or as contemplated by the Transaction
Agreement, provided, that neither the Company nor the LLC shall engage in
theme park, arcade or film exhibition businesses so long as Universal is
restricted from competing in such lines of business under non-compete or
similar agreements in effect on the date hereof and such agreements would
be applicable to the Company and/or the LLC, as the case may be, by virtue
of Universal's ownership therein, provided that the matters set forth in
the foregoing proviso shall not constitute a "Fundamental Change" with
respect to Liberty and shall not require its approval.
(viii) Settlement of any litigation, arbitration or other proceeding
which is other than in the ordinary course of business and which involves
any material restriction on the
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conduct of business by the Company or such Stockholder or any of their
respective Affiliates or the continued ownership of assets by the Company
or such Stockholder or any of their respective Affiliates.
(ix) Engagement in any transaction (other than those contemplated by
the Transaction Agreement) between the Company and its Affiliates
(excluding Xx. Xxxxxx, Universal and Liberty), on the one hand, and
Xx. Xxxxxx, Universal or Liberty, and their respective Affiliates, on the
other hand, subject to exceptions relating to the size of the proposed
transaction and except for those transactions which are otherwise on an
arm's-length basis.
(x) Adopting any stockholder rights plan (or any other plan or
arrangement that could reasonably be expected to disadvantage any
stockholder on the basis of the size or voting power of its shareholding)
that would adversely affect such Stockholder.
(xi) Entering into any agreement with any holder of Equity
Securities or LLC Shares in such stockholder's or interest holder's
capacity as such, as the case may be, which grants such stockholder
approval rights similar in type and magnitude to those set forth in this
Section 2.04.
(xii) Entering into any transaction that could reasonably be
expected to impede the Company's ability to engage in the Spinoff or cause
it to be taxable.
Section 2.05. Notice of Events. In the event that (a) the Company
intends to engage in a transaction of a type that is described in any of
paragraphs (i) through (xii) of Section
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2.04, and (b) the Company does not intend to seek consent from those parties
that are required to consent to a Fundamental Change (a "Consenting Party") due
to the Company's good faith belief that the specific provisions of such
paragraphs do not require such consent but that reasonable people acting in good
faith could differ as to whether consent is required pursuant to such
paragraphs, the Company shall notify the Consenting Parties as to the material
terms of the transaction (including the Company's estimate of the timing
thereof) by written notice delivered as far in advance of engaging in such
transaction as is reasonably practicable unless such transaction was previously
publicly disclosed.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties of the Company. The
Company represents and warrants to Xx. Xxxxxx, Universal and Liberty that
(a) the Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder, (b) the execution and delivery of this Agreement by the Company and
the consummation by the Company of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Company and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or any of the transactions contemplated
hereby, (c) this Agreement has been duly executed and delivered by the Company
and constitutes a valid and binding obligation of the Company, and, assuming
this Agreement constitutes a valid and binding obligation of each Stockholder,
is enforceable against the Company in accordance with its terms, (d) neither the
execution, delivery or performance of
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this Agreement by the Company constitutes a breach or violation of or conflicts
with the Company's Certificate of Incorporation or By-laws or any material
agreement to which the Company is a party and (e) none of such material
agreements would impair in any material respect the ability of the Company to
perform its obligations hereunder.
Section 3.02. Representations and Warranties of the Stockholders.
Each Stockholder, as to itself (and, in the case of Xx. Xxxxxx, as applicable),
represents and warrants to the Company and the other Stockholders that (a) it is
a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization and he or it, as the case may be, has
the power and authority (corporate or otherwise) to enter into this Agreement
and to carry out his or its obligations hereunder, (b) the execution and
delivery of this Agreement by such Stockholder and the consummation by such
Stockholder of the transactions contemplated hereby have been duly authorized by
all necessary action on the part of such Stockholder and no other proceedings on
the part of such Stockholder are necessary to authorize this Agreement or any of
the transactions contemplated hereby, (c) this Agreement has been duly executed
and delivered by the Stockholder and constitutes a valid and binding obligation
of the Stockholder, and, assuming this Agreement constitutes a valid and binding
obligation of the Company, is enforceable against the Stockholder in accordance
with its terms, (d) neither the execution, delivery or performance of this
Agreement by such Stockholder constitutes a breach or violation of or conflicts
with its certificate of incorporation or by-laws (or similar governing
documents) or any material agreement to which such Stockholder is a party and
(e) none of such material agreements would impair in any material respect the
ability of such Stockholder to perform its obligations hereunder.
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ARTICLE IV
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
following meanings:
Section 4.01. "Affiliate" shall have the meaning set forth in Rule
12b-2 under the Exchange Act (as in effect on the date of this Agreement). For
purposes of this definition, Matsushita Electric Industrial Co., Ltd. ("MEI")
shall not be considered an Affiliate of Universal or any Subsidiary of Universal
so long as MEI does not materially increase its influence over Universal
following the date hereof, and natural persons (other than, in the case of
Universal, any descendant of Xxxxxx Xxxxxxxx who is a director or executive
officer of Seagram) shall not be deemed to be Affiliates.
Section 4.02. "Assumptions" shall have the meaning set forth in the
definition of Total Equity Securities.
Section 4.03. "BDTV Entities" shall have the meaning specified in
the Stockholders Agreement.
Section 4.04. "Beneficial Ownership" or "Beneficially Own" shall
have the meaning given such term in Rule 13d-3 under the Exchange Act and a
Person's Beneficial Ownership of Parent Common Shares or LLC Shares shall be
calculated in accordance with the provisions of such Rule; provided, however,
that for purposes of determining Beneficial Ownership, (a) a Person shall be
deemed to be the Beneficial Owner of any Equity Securities (including any
Contingent Shares or Exchange Shares) which may be acquired by such Person
(disregarding any
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legal impediments to such Beneficial Ownership), whether within 60 days or
thereafter, upon the conversion, exchange or exercise of any warrants, options
(which options held by Xx. Xxxxxx shall be deemed to be exercisable), rights or
other securities (including LLC Shares) issued by the Company or any Subsidiary
thereof, (b) no Person shall be deemed to Beneficially Own any Equity Securities
solely as a result of such Person's execution of this Agreement (including by
virtue of holding a proxy with respect to such Equity Securities), the
Transaction Agreement or the Stockholders Agreement, or with respect to which
such Person does not have a pecuniary interest, and (c) Liberty shall be deemed
to be the Beneficial Owner of the proportionate number of Parent Common Shares
represented by Liberty's equity interest in a BDTV Entity (as defined in the
Stockholders Agreement); provided, further, that for purposes of calculating
Beneficial Ownership, the number of outstanding Parent Common Shares shall be
deemed to include the number of Parent Common Shares that would be outstanding
if all outstanding LLC Shares were exchanged for Parent Common Shares pursuant
to the Exchange Agreement and all Contingent Shares and Exchange Shares were
issued.
Section 4.05. "CEO" shall mean the Chief Executive Officer of HSNi
or any successor entity.
Section 4.06. "CEO Termination Date" shall have the meaning
specified in Section 1.01(f) of this Agreement.
Section 4.07. "Commission" shall mean the Securities and Exchange
Commission.
Section 4.08. "Consenting Party" shall have the meaning set forth in
Section 2.05 of this Agreement.
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Section 4.09. "Demand Registration" shall have the meaning set forth
in Section 5.07(b) of this Agreement.
Section 4.10. "Disabled" shall mean the disability of Xx. Xxxxxx
after the expiration of more than 180 consecutive days after its commencement
which is determined to be total and permanent by a physician selected by
Universal (or, if the Universal Termination Date has occurred, by Liberty) and
reasonably acceptable to Xx. Xxxxxx, provided that Xx. Xxxxxx shall be deemed to
be disabled only following the expiration of 90 days following receipt of a
written notice from the Company and such physician specifying that a disability
has occurred if within such 90-day period he fails to return to managing the
business affairs of the Company. Total disability shall mean mental or physical
incapacity that prevents Xx. Xxxxxx from managing the business affairs of the
Company.
Section 4.11. "Equity Securities" shall mean the equity securities
of the Company calculated on a Parent Common Stock equivalent basis, including
the Parent Common Shares, the Contingent Shares and the Exchange Shares and
those shares issuable upon exchange of the LLC Shares and upon exercise,
conversion or redemption of other securities of the Company not otherwise
included in this definition.
Section 4.12. "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended, and the rules and regulations of the Commission promulgated
thereunder.
Section 4.13. "Exchange Agreement" shall mean the Exchange Agreement
dated as of October 19, 1997 by and among the Company, Universal and Liberty.
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Section 4.14. "FCC Regulations" shall mean as of any date, all
applicable federal communications statutes and all rules, regulations, orders,
decrees and written policies (including opinions and orders of the Federal
Communications Commission applicable to the stockholder or the Company and its
subsidiaries) as then in effect, and any interpretations or waivers thereof or
modifications thereto.
Section 4.15. "Independent Director" shall mean a person independent
of and not an affiliate of Universal or Seagram, who is not an officer or
director of Universal or Seagram. No person proposed as an Independent Director
shall serve as a director unless such individual has such business or technical
experience, stature and character as is commensurate with service on the board
of a publicly held enterprise.
Section 4.16. "Liberty Director" shall mean (a) any officer or
director of either Telecommunications, Inc. ("TCI") or Liberty designated by
Liberty to serve on the Company's Board of Directors, provided that the
Company's Board of Directors is not unable, in the exercise of its fiduciary
responsibilities, to recommend that the Company's stockholders elect such
individual to serve on the Company's Board of Directors, or (b) any other Person
designated by Liberty who is reasonably acceptable to the Company.
Section 4.17. "Ownership Percentage" means, with respect to any
Stockholder, at any time, the ratio, expressed as a percentage, of (i) the Total
Equity Securities Beneficially Owned by such Stockholder (disregarding any legal
impediments to such Beneficial Ownership) and its Affiliates to (ii) the sum of
(x) the Total Equity Securities and (y) with respect to such Stockholder, any
Parent Common Shares included in clause (i) that are issuable upon conversion,
exchange or exercise of Equity Securities that are not included in clause (x).
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Section 4.18. "Permitted Business Combination" shall mean (x) a
tender or exchange offer by Universal or an Affiliate for all Parent Common
Shares that is accepted by a majority of the Company's Public Stockholders or
(y) a merger (other than a merger following a tender or exchange offer complying
with (x) above) involving the Company and Universal or any Affiliate thereof or
successor thereto that is approved, in addition to any vote required by law, by
a majority of the Company's Public Stockholders so long as, in the case of (x)
and (y) above, a committee of HSNi directors (excluding any Persons who are
Satisfactory Nominees and Liberty Directors pursuant to the terms of this
Agreement, as it may be amended, modified or waived from time to time, and any
other directors who have a conflict of interest) determines that the tender
offer, exchange offer or merger, as the case may be, is fair to the Company's
stockholders (other than Universal and its Affiliates).
Section 4.19. "Permitted Investment Percentage" shall have the
meaning set forth in the preambles to this Agreement.
Section 4.20. "Permitted Transferee" shall mean Liberty or Xx.
Xxxxxx and the members of their respective Stockholder Groups.
Section 4.21. "Person" shall mean any individual, partnership, joint
venture, corporation, trust, unincorporated organization, government or
department or agency of a government.
Section 4.22. "Public Stockholder" shall mean any stockholder of the
Company that, together with its Affiliates (a) has sole or shared voting power
with respect to Voting Securities representing no more than 10% of the voting
power on the applicable vote or (b) has sole or shared power to dispose of
Equity Securities representing no more than 10% of the Equity
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Securities to be tendered or exchanged in any applicable tender or exchange
offer, as the case may be.
Section 4.23. "Right of First Refusal" shall mean the right of the
Company (or its designee) to purchase Equity Securities Beneficially Owned by
Universal under the circumstances and upon the terms described below and in
Section 1.02(b) of this Agreement. In the event that Universal desires to sell
Equity Securities Beneficially Owned by it to which the Right of First Refusal
applies and it has received a bona fide offer from a third party to purchase
such Equity Securities, Universal shall provide the Company with written notice
(the "Sales Notice") of the terms of such third party offer (including price,
conditions, the identity of such third party and the written contract providing
for such sale). The Company (or its designee) shall be entitled to, by written
notice delivered by the Company to Universal within 10 business days following
receipt of the Sales Notice (or in the case of a third party tender offer or
exchange offer, not later than five business days prior to the expiration date
of such offer, provided that all conditions to such offer (other than with
respect to the number of Equity Securities tendered) shall have been satisfied
or waived and the Sales Notice shall have been provided at least ten business
days prior to the expiration date of such offer), agree to purchase the Equity
Securities that are the subject of the Sales Notice for cash on the terms of the
third party offer if such offer is for cash or, if not for cash, the Fair Market
Value of the consideration to be paid pursuant to such third party offer, which
notice shall include the date scheduled for the closing of such purchase, which
date shall be no later than 60 days following delivery of such election notice.
If the Company does not deliver to Universal the written notice required
hereunder, agreeing to the purchase of the Equity Securities subject to the
Sales Notice, Universal shall be entitled to consummate the sale to the
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third party identified in, and on the terms and subject to the conditions set
forth in, the Sales Notice, provided such sale is consummated within 90 days
after the latest of (a) the expiration of the foregoing response time periods or
(b) the receipt by Universal of the election notice or, in the case of (a) or
(b), if later (i) five business days following receipt of all required
regulatory approvals; provided that the closing shall only be delayed pending
receipt of required regulatory approvals if (x) Universal and the proposed third
party transferee are using all reasonable efforts to obtain the required
regulatory approvals and (y) there is a reasonable prospect of receiving such
regulatory approvals or (ii) the expiration or termination of a third party
tender or exchange offer if the intended method of sale set forth in the Sales
Notice were such third party tender or exchange offer.
Section 4.24. "Satisfactory Nominee" shall mean each person who is
either a Universal Director or an Independent Director proposed by Universal,
provided that in no case shall there be more than one Independent Director.
Section 4.25. "Seagram" shall mean The Seagram Company Ltd.
Section 4.26. "Securities Act" shall mean the Securities Act of
1933, as amended, and the rules and regulations of the Commission promulgated
thereunder.
Section 4.27. "Shares" shall have the meaning set forth in the
preambles to this Agreement.
Section 4.28. "Stockholders Agreement" shall mean the stockholders
agreement dated as of the date hereof among Liberty, Universal and Xx. Xxxxxx.
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Section 4.29. "Stockholders Group" shall mean (a) in respect of
Universal, the Universal Stockholders Group (as defined in the Stockholders
Agreement), (b) in respect of Liberty, the Liberty Stockholders Group (as
defined in the Stockholders Agreement) and (c) in respect of Xxxxxx, the Xxxxxx
Stockholders Group (as defined in the Stockholders Agreement).
Section 4.30. "Subsidiary" shall mean, as to any Person, any
corporation at least a majority of the shares of stock of which having general
voting power under ordinary circumstances to elect a majority of the Board of
Directors of such corporation (irrespective of whether or not at the time stock
of any other class or classes shall have or might have voting power by reason of
the happening of any contingency) is, at the time as of which the determination
is being made, owned by such Person, or one or more of its Subsidiaries or by
such Person and one or more of its Subsidiaries.
Section 4.31. "Third Party Transferee" shall have the meaning
ascribed to such term in the Stockholders Agreement.
Section 4.32. "13D Group" shall mean any group of Persons acquiring,
holding, voting or disposing of Voting Securities which would be required under
Section 13(d) of the Exchange Act and the rules and regulations thereunder (as
in effect, and based on legal interpretations thereof existing, on the date
hereof) to file a statement on Schedule 13D with the Commission as a "person"
within the meaning of Section 13(d)(3) of the Exchange Act if such group
Beneficially Owned Voting Securities representing more than 5% of any class of
Voting Securities then outstanding.
Section 4.33. "Total Equity Securities" at any time shall mean,
subject to the next sentence, the total number of the Company's outstanding
equity securities calculated on a
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Parent Common Stock equivalent basis (assuming (the "Assumptions") that all
Contingent Shares, Exchange Shares and Parent Common Shares issuable in respect
of the LLC Shares have been issued). Any Equity Securities Beneficially Owned by
a Person that are not outstanding Voting Securities but that, upon exercise,
conversion or exchange, would become Voting Securities (other than the
Contingent Shares, the Exchange Shares and the LLC Shares, which shall be deemed
to be outstanding Equity Securities for all purposes), shall be deemed to be
outstanding for the purpose of computing Total Equity Securities and the
percentage of the Equity Securities owned by such Person but shall not be deemed
to be outstanding for the purpose of computing Total Equity Securities and the
percentage of the Equity Securities owned by any other Person.
Section 4.34. "Transfer" shall mean, directly or indirectly, to
sell, transfer, assign, pledge, encumber, hypothecate or similarly dispose of,
either voluntarily or involuntarily, or to enter into any contract, option or
other arrangement or understanding with respect to the sale, transfer,
assignment, pledge, encumbrance, hypothecation or similar disposition of, any
Parent Common Shares Beneficially Owned by such Stockholder or any interest in
any Parent Common Shares Beneficially Owned by such Stockholder, provided,
however, that, a merger or consolidation in which a Stockholder is a constituent
corporation shall not be deemed to be the Transfer of any Parent Common Shares
Beneficially Owned by such Stockholder (provided, that a significant purpose of
any such transaction is not to avoid the provisions of this Agreement). For
purposes of this Agreement, the conversion of Parent Class B Stock into Parent
Common Stock shall not be deemed to be a Transfer.
Section 4.35. "Universal Director" shall mean any officer or
director of Universal or Seagram designated by Universal to
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serve on the Company's Board of Directors, provided that the Company's Board of
Directors is not unable, in the exercise of its fiduciary responsibilities to
the Company's stockholders, to recommend that the Company's stockholders elect
such individual to serve on the Company's Board of Directors.
Section 4.36. "Voting Securities" shall mean at any particular time
the shares of any class of capital stock of the Company which are then entitled
to vote generally in the election of directors.
ARTICLE V
MISCELLANEOUS
Section 5.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including telecopy)
and shall be given,
if to Universal, to:
Universal Studios, Inc.
000 Xxxxxxxxx Xxxx Xxxxx
Xxxxxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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if to Liberty, to:
Liberty Media Corporation
0000 Xxxx Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attention: President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxx & Xxxxx, L.L.P.
000 Xxxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxxxx X. XxXxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
if to Xx. Xxxxxx, to:
Xxxxx Xxxxxx
0000 Xxxxxxxxx Xxxxxx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
if to the Company, to:
HSN, Inc.
0 XXX Xxxxx
Xx. Xxxxxxxxxx, Xxxxxxx 00000
Attention: General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or such address or facsimile number as such party may hereafter specify for the
purpose by notice to the other parties hereto. Each such notice, request or
other communication shall be effec-
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tive when delivered personally, telegraphed, or telecopied, or, if mailed, five
business days after the date of the mailing.
Section 5.02. Amendments; No Waivers. (a) Any provision of this
Agreement may be amended or waived if, and only if, such amendment or waiver is
in writing and signed, in the case of an amendment, by the party whose rights or
obligations hereunder are affected by such amendment, or in the case of a
waiver, by the party or parties against whom the waiver is to be effective.
Approval by Liberty of any amendment to this Agreement (or any waiver of any
provision hereof) shall be required only if it relates to Section 1.05, Article
II or, provided Liberty Beneficially Owns at least 12 1/2% of the Total Equity
Securities, Sections 1.01 and 1.03(c) of this Agreement, or if such amendment or
waiver would adversely affect any rights of Liberty provided hereunder or under
the Stockholders Agreement. Any amendment or waiver by the Company shall be
authorized by a majority of the Board of Directors (excluding for this purpose
any director who is a Satisfactory Nominee or Liberty Director as provided for
in this Agreement).
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 5.03. Successors and Assigns. Except as provided in Section
1.05, neither this Agreement nor any of the rights or obligations under this
Agreement shall be assigned, in whole or in part (except by operation of law
pursuant to a merger of Universal or Lib-
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erty with another Person a significant purpose of which is not to avoid the
provisions of this Agreement), by any party without the prior written consent of
the other parties hereto. Subject to the foregoing, the provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
Section 5.04. Governing Law; Consent to Jurisdiction. This Agreement
shall be construed in accordance with and governed by the internal laws of the
State of Delaware, without giving effect to the principles of conflicts of laws.
Each of the parties hereto hereby irrevocably and unconditionally consents to
submit to the non-exclusive jurisdiction of the courts of the State of Delaware,
for any action, proceeding or investigation in any court or before any
governmental authority ("Litigation") arising out of or relating to this
Agreement and the transactions contemplated hereby and further agrees that
service of any process, summons, notice or document by U.S. mail to its
respective address set forth in this Agreement shall be effective service of
process for any Litigation brought against it in any such court. Each of the
parties hereto hereby irrevocably and unconditionally waives any objection to
the laying of venue of any Litigation arising out of this Agreement or the
transactions contemplated hereby in the courts of the State of Delaware, and
hereby further irrevocably and unconditionally waives and agrees not to plead or
claim in any such court that any such Litigation brought in any such court has
been brought in an inconvenient forum. Each of the parties irrevocably and
unconditionally waives, to the fullest extent permitted by applicable law, any
and all rights to trial by jury in connection with any Litigation arising out of
or relating to this Agreement or the transactions contemplated hereby.
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Section 5.05. Counterparts; Effectiveness. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts thereof signed by the other parties hereto.
Section 5.06. Specific Performance. The Company, Xx. Xxxxxx,
Universal and Liberty each acknowledges and agrees that the parties' respective
remedies at law for a breach or threatened breach of any of the provisions of
this Agreement would be inadequate and, in recognition of that fact, agrees
that, in the event of a breach or threatened breach by the Company, Universal or
Liberty of the provisions of this Agreement, in addition to any remedies at law,
Xx. Xxxxxx, Universal, Liberty and the Company, respectively, without posting
any bond shall be entitled to obtain equitable relief in the form of specific
performance, a temporary restraining order, a temporary or permanent injunction
or any other equitable remedy which may then be available.
Section 5.07. Registration Rights. (a) Universal, Liberty and Xx.
Xxxxxx shall be entitled to customary registration rights relating to Parent
Common Stock (including the ability to transfer registration rights in
connection with the sale or other disposition of Parent Common Stock as set
forth in this Agreement).
(b) If requested by a Stockholder, the Company shall be required
promptly to cause the Parent Common Stock owned by such Stockholder or its
Affiliates to be registered under the Securities Act in order to permit such
Stockholder or such Affiliate to sell such shares in one or more (but not more
than (i) in the case of Universal, six, (ii) in the case of Liberty, four
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and (iii) in the case of Xx. Xxxxxx, two) registered public offerings (each, a
"Demand Registration"). Each Stockholder shall also be entitled to customary
piggyback registration rights. If the amount of shares sought to be registered
by a Stockholder and its Affiliates pursuant to any Demand Registration is
reduced by more than 25% pursuant to any underwriters' cutback, then such
Stockholder may elect to request the Company to withdraw such registration, in
which case, such registration shall not count as one of such Stockholder's
Demand Registrations. If a Stockholder requests that any Demand Registration be
an underwritten offering, then such Stockholder shall select the underwriter(s)
to administer the offering, provided that such underwriter(s) shall be
reasonably satisfactory to the Company. If a Demand Registration is an
underwritten offering and the managing underwriter advises the Stockholder
initiating the Demand Registration in writing that in its opinion the total
number or dollar amount of securities proposed to be sold in such offering is
such as to materially and adversely affect the success of such offering, then
the Company will include in such registration, first, the securities of the
initiating Stockholder, and, thereafter, any securities to be sold for the
account of others who are participating in such registration (as determined on a
fair and equitable basis by the Company). In connection with any Demand
Registration or inclusion of a Stockholder's or its Affiliate's shares in a
piggyback registration, the Company, such Stockholder and/or its Affiliates
shall enter into an agreement containing terms (including representations,
covenants and indemnities by the Company and such Stockholder), and shall be
subject to limitations, conditions, and blackout periods, customary for a
secondary offering by a selling stockholder. The costs of the registration
(other than underwriting discounts, fees and commissions) shall be paid by the
Company. The Company shall not be required to register such shares if a
Stockholder would be permitted to sell the Parent Com-
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mon Stock in the quantities proposed to be sold and at such time within a
three-month period under Rule 144 of the Securities Act or under another
comparable exemption therefrom.
(c) If the Company and a Stockholder cannot agree as to what
constitutes customary terms within 10 days of such Stockholder's request for
registration (whether in a Demand Registration or a piggyback registration),
then such determination shall be made by a law firm of national reputation
mutually acceptable to the Company and such Stockholder.
Section 5.9. Termination. Except as otherwise provided in this
Section, this Agreement shall terminate (a) prior to the Closing upon any
termination of the Transaction Agreement in accordance with its terms and (b)
thereafter, (i) as to Universal, at such time that Universal Beneficially Owns
Equity Securities representing less than 10% of the Total Equity Securities,
(ii) as to Liberty, at such time that Liberty Beneficially Owns Equity
Securities representing less than 5% of the Total Equity Securities and (iii) as
to Xx. Xxxxxx, at such time that the CEO Termination Date has occurred or at
such time as he becomes Disabled. In respect of "Fundamental Changes," such
provisions shall terminate as to Xx. Xxxxxx, Universal and Liberty as set forth
therein, and a Stockholder's registration rights shall terminate when such
Stockholder can sell all its shares under Rule 144 under the Securities Act,
except as provided in Section 1.05 of this Agreement.
Section 5.10. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, provided that
the
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parties hereto shall negotiate in good faith to attempt to place the parties in
the same position as they would have been in had such provision not been held to
be invalid, void or unenforceable.
Section 5.11. Cooperation. Each of Universal, Liberty and Xx. Xxxxxx
covenants and agrees with the other to use its reasonable best efforts to cause
the Company to fulfill the Company's obligations under this Agreement.
Section 5.12. Entire Agreement. Except as otherwise expressly set
forth herein, this Agreement, the Stockholders Agreement, the Liberty Exchange
Agreement, the agreement relating to the Contingent Shares, the Transaction
Agreement and each of the other agreements contemplated by the Transaction
Agreement (including the letter agreement referenced in Section 2.04 hereof)
embody the complete agreement and understanding among the parties hereto with
respect to the subject matter hereof and supersede and preempt any prior
understandings, agreements or representations by or among the parties, written
or oral, that may have related to the subject matter hereof in any way
(including, without limitation, effective upon the Closing, all stockholders
agreements relating to HSNi (other than the Stockholders Agreement) between
Liberty and Xx. Xxxxxx). Without limiting the generality of the foregoing, to
the extent that any of the terms hereof are inconsistent with the rights or
obligations of any party under any other agreement with any other party, the
terms of this Agreement shall govern.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
HSN, INC.
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------------
Title: Office of the Chairman
UNIVERSAL STUDIOS, INC.
By: /s/ Xxxxx X. Xxxxxxxx
-------------------------------------
Title: Senior Vice President
LIBERTY MEDIA CORPORATION
By: Xxxxxx X. Xxxxxxx
-------------------------------------
Title: President and CEO
/s/ Xxxxx Xxxxxx
----------------------------------------
Xxxxx Xxxxxx
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