1
Exhibit 8
SHAREHOLDER AGREEMENT
dated as of April 15, 1999
among
ValueVision International, Inc.
GE Capital Equity Investments, Inc.
and
National Broadcasting Company, Inc.
2
Exhibit 8
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT, dated as of April 15, 1999, among
ValueVision International, Inc., a Minnesota corporation (together with its
successors, the "Company"), GE Capital Equity Investments, Inc., a Delaware
corporation (together with its successors, "GE Capital Equity Investments") and
National Broadcasting Company, Inc., a Delaware corporation (together with its
successors, "NBC").
W I T N E S S E T H :
WHEREAS, the Company and GE Capital Equity Investments have
entered into an Investment Agreement dated as of March 8, 1999, as amended by
the First Amendment and Agreement, dated as of the date hereof (as amended, the
"Investment Agreement"), pursuant to which the Investor (as defined below) has
agreed to purchase shares of Series A Redeemable Convertible Preferred Stock
(the "Preferred Stock") and a warrant to purchase Common Stock of the Company
(the "Purchase Warrant");
WHEREAS; the Company and NBC, an Affiliate of the Investor as
of the date hereof, have entered into the Distribution Agreement (as defined
below), pursuant to which the Company has agreed to issue to NBC or its designee
(i) warrants to purchase 1,450,000 shares of Common Stock of the Company (the
"Initial Distributor Warrants") and (ii) at agreed upon times and subject to the
satisfaction of certain conditions contained therein, additional warrants to
purchase Common Stock of the Company (the "Bonus Distributor Warrants"); and
WHEREAS, the parties hereto deem it in their best interests
and in the best interests of the Company to provide for certain matters with
respect to the governance of the Company and desire to enter into this Agreement
in order to effectuate that purpose.
NOW, THEREFORE, in consideration of the mutual agreements and
understandings set forth herein, the parties hereto hereby agree as follows:
-1-
3
Shareholder Agreement
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 Definitions. As used in this Agreement,
the following terms shall have the meanings set forth below:
"Adjusted Outstanding Common Stock" shall mean, at any time,
the total number of shares of outstanding Common Stock at such time;
provided that for purposes of such calculation (a) all shares of Common
Stock issuable upon conversion of the then outstanding Preferred Stock
shall be considered outstanding, (b) all shares of Common Stock
issuable upon exercise of the outstanding Initial Distributor Warrants
(whether such Initial Distributor Warrants are vested or unvested)
shall be considered outstanding, (c) to the extent that Bonus
Distributor Warrants have been issued and are outstanding (and only to
such extent), all shares of Common Stock issuable upon the exercise of
such issued and outstanding Bonus Distributor Warrants (whether such
Bonus Distributor Warrants are vested or unvested) shall be considered
outstanding and (d) if Shareholder Approval has been obtained(and only
in such case) the maximum number of shares of Common Stock then
issuable upon exercise of the Purchase Warrant shall be considered
outstanding.
"Affiliate" shall mean, with respect to any Person, any other
Person that directly or indirectly controls, is controlled by, or is
under common control with, such Person. As used in this definition,
"control" (including its correlative meanings, "controlled by" and
"under common control with") shall mean the possession, directly or
indirectly, of power to direct or cause the direction of management or
policies (whether through ownership of securities or partnership or
other ownership interests, by contract or otherwise).
"Agreement" shall mean this Agreement as in effect on the date
hereof and as hereafter from time to time amended, modified or
supplemented in accordance with the terms hereof.
"Beneficially Own" shall have the meaning set forth in Rule
13d-3 under the Exchange Act, except that a Person shall be deemed to
"Beneficially Own" all securities that such Person has a right to
acquire, whether such right is exercisable immediately or only after
the passage of time (and without any additional condition), provided
that a Person shall not be deemed to "Beneficially Own" any shares of
Common Stock which are issuable upon exercise of any
-2-
4
Shareholder Agreement
Bonus Distributor Warrants unless and until such Bonus Distributor
Warrants are actually issued and outstanding (at which time such Person
shall be deemed to Beneficially Own all shares of Common Stock which
are issuable upon exercise of such Bonus Distributor Warrants, whether
or not they are vested or unvested)and, provided further, except as
expressly provided in this Agreement no Person shall be deemed to
"Beneficially Own" any securities issuable upon exercise of the
Purchase Warrant unless and until the Shareholder Approval is obtained.
In the event that the Shareholder Approval is obtained, when
calculating Beneficial Ownership on any particular date after receipt
of such Shareholder Approval, the Purchase Warrant will be deemed to
represent Beneficial Ownership of the maximum number of shares of
Common Stock that could be acquired upon exercise of the Purchase
Warrant on such date.
"Board of Directors" shall mean the Board of Directors of the
Company as from time to time hereafter constituted.
"Business Day" shall mean any day, other than a Saturday,
Sunday or a day on which commercial banks in New York, New York are
authorized or obligated by law or executive order to close.
"Certificate of Designation" shall mean the Certificate of
Designation of the Preferred Stock, filed with the Secretary of State
of the State of Minnesota on or prior to the date hereof.
"Change in Control of the Company" shall mean any of the
following: (i) a merger, consolidation or other business combination or
transaction to which the Company is a party if the shareholders of the
Company immediately prior to the effective date of such merger,
consolidation or other business combination or transaction, as a result
of such merger, consolidation or other business combination or
transaction, do not have Beneficial Ownership of voting securities
representing 50% or more of the Total Current Voting Power of the
surviving corporation following such merger, consolidation or other
business combination or transaction; (ii) an acquisition by any Person
(other than the Restricted Parties and their Affiliates or any 13D
Group to which any of them is a member) of Beneficial Ownership of
Voting Stock of the Company representing 25% or more of the Total
Current Voting Power of the Company, (iii) a sale of all or
substantially all the consolidated assets of the Company to any Person
or Persons (other than Restricted Parties and their Affiliates or any
13D Group to which any of them is a member); or (iv) a liquidation or
dissolution of the Company.
-3-
5
Shareholder Agreement
"Common Stock" shall mean the common stock, par value $0.01
per share, of the Company and any securities of the Company into which
such Common Stock may be reclassified, exchanged or converted.
"Company" shall have the meaning set forth in the
preamble hereto.
"Designee" shall have the meaning set forth in Section
2.1(d).
"Disinterested Shareholders" shall mean any shareholder of the
Company who is not a Restricted Party or an Affiliate of a Restricted
Party or a member of a 13D Group in which a Restricted Party or an
Affiliate of a Restricted Party is also a member.
"Distribution Agreement" shall mean the Distribution and
Marketing Agreement dated March 8, 1999 between the Company and NBC
pursuant to which NBC has agreed to distribute certain programing of
the Company, as such agreement may be amended from time to time.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
"GAAP" shall mean generally accepted accounting principles in
the United States of America in effect from time to time.
"GE Capital" shall mean General Electric Capital Corporation,
a New York corporation, together with its successors by operation of
law.
"Independent Expert" shall mean an investment banking firm
mutually acceptable to the Company and the Investor.
"Investor" shall mean GE Capital Equity Investments, a
wholly-owned Subsidiary of GE Capital as of the date hereof and an
Affiliate of NBC as of the date hereof, together with its permitted
assigns pursuant to Section 5.6.
"Investment Agreement" shall have the meaning set forth in the
recitals hereto, as such agreement may be amended from time to time.
"Investor Tender Offer" shall mean a bona fide public tender
offer subject to the provisions of Regulation 14d under the Exchange
Act, by a Restricted Party (or any 13D Group that includes a Restricted
Party) to purchase or
-4-
6
Shareholder Agreement
exchange for cash or other consideration any Voting Stock and which
consists of an offer to acquire 100% of the Total Current Voting Power
of the Company then in effect (other than Voting Stock owned by
Restricted Parties or any Affiliate of a Restricted Party) and is
conditioned (which condition may not be waived) on a majority of the
shares of Voting Stock held by Disinterested Shareholders being
tendered and not withdrawn with respect to such offer.
"Lien" shall mean any mortgage, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other) or security
agreement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement or
any financing lease having substantially the same effect as any of the
foregoing).
"Market Capitalization" shall mean the aggregate Market Price
of the outstanding capital stock of the Company.
"Market Price" shall mean, with respect to a share of capital
stock on any day, except as set forth below in the case that the shares
of such capital stock are not publicly held or listed, the average of
the "quoted prices" of such capital stock for 30 consecutive Trading
Days commencing 45 Trading Days before the date in question. The term
"quoted prices" of capital stock shall mean the last reported sale
price on that day or, in case no such reported sale takes place on such
day, the average of the last reported bid and asked prices, regular
way, on that day, in either case, as reported in the consolidated
transaction reporting system with respect to securities quoted on
Nasdaq or, if shares of such capital stock are not quoted on Nasdaq, as
reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities
exchange on which shares of such capital stock are listed or admitted
to trading or, if shares of such capital stock are not quoted on Nasdaq
and not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of
the high bid and low asked prices on such other nationally recognized
quotation system then in use, or, if on any such day shares of such
capital stock are not quoted on any such quotation system, the average
of the closing bid and asked prices as furnished by a professional
market maker selected by the Board of Directors making a market in the
shares of such capital stock. Notwithstanding the foregoing, if shares
of such capital stock are not publicly held or so listed, quoted or
publicly traded, the "Market Price" shall mean the fair market value of
a share of such capital stock, as determined in good faith by the Board
of Directors;
-5-
7
Shareholder Agreement
provided, however, that if the Investor shall dispute the fair market
value as determined by the Board of Directors, the Investor and the
Company shall retain an Independent Expert. The determination of fair
market value by the Independent Expert shall be final, binding and
conclusive on the Company and the Investor. All costs and expenses of
the Independent Expert shall be borne by the Investor unless the
determination of fair market value is more favorable to such Investor
by 5% or more, in which case, all such costs and expenses shall be
borne by the Company.
"Material Agreement" shall mean any contract, lease,
restriction, agreement, instrument or commitment to which the Company
or any Subsidiary of the Company is a party or by which its properties
are bound (i) which provides a benefit to the Company or any of its
Subsidiaries of, or commits the Company or any Subsidiary of the
Company to expend, $500,000 or more (or, in the case of any agreement
with any customer of the Company or any Company Subsidiary of the
Company, $50,000 or more), (ii) which if breached by any party thereto
would result in liability or loss to the Company and its Subsidiaries
of $500,000 or more (or in the case of any agreement with any customer
of the Company or any Subsidiary of the Company, $50,000 or more)
or(iii) which provides for the distribution of programming of the
Company to more than 250,000 full-time equivalent homes by any
multichannel video programming distributor, including without
limitation, by a cable television system, MATV and SMATV systems, MMDS,
TVRO and other wireline, wireless or direct broadcast satellite
delivery methods.
"Material Subsidiaries" shall mean those Subsidiaries of the
Company that constitute "significant subsidiaries" as defined in Rule
1-02 of Regulation S-X under the Securities Act.
"Material Transaction" shall mean (i) the direct or indirect
acquisition or purchase of 5% or more of the assets (based on the fair
market value thereof) of the Company and its Subsidiaries, taken as a
whole, or of 5% or more of any class of equity securities of the
Company or any of its Subsidiaries or any tender offer or exchange
offer (including by the Company or its Subsidiaries) that if
consummated would result in any person beneficially owning 5% or more
of any class of equity securities of the Company or any of its
Subsidiaries, or (ii) any merger, consolidation, business combination,
sale of all or substantially all assets, recapitalization, liquidation,
dissolution or similar transaction involving the Company or any of its
Subsidiaries other than the transactions contemplated by the Investment
Agreement or this Agreement.
-6-
8
Shareholder Agreement
"NBC" shall mean National Broadcasting Company, Inc., a
Delaware corporation and Affiliate of the Investor as of the date
hereof and a wholly-owned Subsidiary of General Electric Company as of
the date hereof, together with its successors by operation of law
"NBC Restricted Person" shall mean each of the Persons listed
on Annex A hereto together with their respective Affiliates.
"Options" shall mean stock options to purchase Common
Stock.
"Permitted Liens" shall mean (i) mechanics', carriers',
repairmen's or other like Liens arising or incurred in the ordinary
course of business, (ii) Liens arising under original purchase price
conditioned sales contracts and equipment leases with third parties
entered into in the ordinary course of business consistent with past
practice, (iii) statutory Liens for Taxes not yet due and payable and
(iv) other encumbrances or restrictions or imperfections of title which
do not materially impair the continued use and operation of the assets
to which they relate.
"Person" shall mean an individual, corporation, unincorporated
association, partnership, group (as defined in Section 13(d)(3) of the
Exchange Act), trust, joint stock company, joint venture, business
trust or unincorporated organization, limited liability company, any
governmental entity or any other entity of whatever nature.
"Preferred Stock" shall mean the Series A Redeemable
Convertible Preferred Stock, par value $0.01 per share, of the Company.
"Registration Rights Agreement" shall mean the Registration
Rights Agreement dated as of the date hereof between the Company and
the Investor, as it may be amended from time to time.
"Representatives" shall mean, with respect to any Person, such
Person's directors, officers, employees, agents and other
representatives acting in such capacity.
"Restricted Parties" shall mean each of (i) NBC, its Ultimate
Parent Entity (if any), each Subsidiary of NBC and each Subsidiary of
its Ultimate Parent Entity, (ii) GE Capital, its Ultimate Parent Entity
(if any), each Subsidiary of GE Capital and each Subsidiary of its
Ultimate Parent Entity and (iii) any Affiliate of any Person that is
-7-
9
Shareholder Agreement
a Restricted Party if (and only if) such Restricted Party has the right
or power (acting alone or solely with other Restricted Parties) to
either cause such Affiliate to comply with or prevent such Affiliate
from not complying with all of the terms of this Agreement that are
applicable to Restricted Parties.
"SEC" shall mean the United States Securities and
Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Shareholder Approval" shall mean the approval at the
Shareholder Meeting by the Company's shareholders of the Purchase
Warrant.
"Shareholders Meeting" shall mean the meeting of shareholders
of Company, which meeting the Company shall hold and convene promptly
after the date hereof in order to vote on certain matters including,
but not limited to, the Purchase Warrant.
"Shareholders Vote" shall mean the vote of the shareholders of
the Company taken at the Shareholders Meeting.
"Standstill Limit" means Beneficial Ownership of 39.9%
of the Adjusted Outstanding Common Stock.
"Standstill Period" shall mean the period beginning on the
date hereof and ending on the occurrence of a Standstill Termination
Event, provided that the Standstill Period shall recommence immediately
upon the occurrence of a Standstill Reinstatement Event.
"Standstill Reinstatement Event" shall mean the occurrence of
any of the following (a) the Standstill Period has terminated pursuant
to clause (iii) of the definition of "Standstill Termination Event" and
such Third Party Tender Offer is withdrawn or terminated (without
having been consummated) at any time during which an Investor Tender
Offer is not then pending (unless the party that commenced such
Investor Tender Offer determines to terminate such Investor Tender
Offer in accordance with Section 4.1(f), in which event a Standstill
Reinstatement Event shall occur at the time of such termination), or
(b) the Standstill Period has terminated pursuant to clause (iv) of the
definition of "Standstill Termination Event" due to a Change of Control
identified in clause (ii) of the definition thereof and,
-8-
10
Shareholder Agreement
within twelve months after the occurrence of such Change in Control,
the Person whose Beneficial Ownership of Voting Stock triggered such
Change of Control no longer Beneficially Owns 25% or more of the Total
Current Voting Power of the Company or (c) the Standstill Period has
terminated pursuant to clause (ii) of the definition of "Standstill
Termination Event," the relevant agreement that would have otherwise
resulted in a Change of Control has been terminated without a Change of
Control having occurred and subsequent to the occurrence of such
Standstill Termination Event but prior to the termination of such
agreement (x) the Restricted Parties have not acquired actual ownership
of Voting Stock representing in the aggregate a majority of the Total
Current Voting Power of the Company, (y) no Restricted Party has made
any proposal or offer to the Company regarding a Takeover Proposal
(other than any such proposal or offer that has been withdrawn by the
party making such proposal or offer or is no longer being pursued) and
(z) no Restricted Party has commenced any tender or exchange offer that
is pending when such agreement is terminated and that, if completed,
would result in the Restricted Parties having actual ownership of
Voting Stock representing in the aggregate a majority of the Total
Current Voting Power of the Company. Notwithstanding the foregoing, a
Standstill Reinstatement Event will not occur if prior to the
occurrence of the event specified in clause (a), (b) or (c) above that
would otherwise result in a Standstill Reinstatement Event, another
Standstill Termination Event occurs for which there has not been a
related Standstill Reinstatement Event.
"Standstill Revised Limit" shall mean the percentage of the
Adjusted Outstanding Common Stock Beneficially Owned by the Restricted
Parties as of the occurrence of a Standstill
Reinstatement Event.
"Standstill Termination Event" shall mean the earliest to
occur of the following: (i) the tenth anniversary of the date of this
Agreement, (ii) the date the Company enters into an agreement relating
to a transaction that if consummated will result in a Change in Control
of the Company, (iii) a Third Party Tender Offer, (iv) any Change in
Control of the Company occurs, or (v) the six month anniversary of the
date on which the Investor is no longer entitled to designate any
nominees to the Board of Directors pursuant to Section 2.1; provided,
that the Standstill Period will be immediately reinstated upon the
occurrence of a Standstill Reinstatement Event; provided further that,
upon a Standstill Reinstatement Event, if the Standstill Revised Limit
is greater than the Standstill Limit, then the Standstill Revised Limit
and not the Standstill Limit shall
-9-
11
Shareholder Agreement
thereafter be deemed the Standstill Limit for all purposes
hereunder.
"Subsidiary" shall mean, as to any Person, a corporation,
partnership, limited liability company, joint venture or other entity
of which shares of stock or other ownership interests having ordinary
voting power (other than stock or such other ownership interests having
such power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned,
directly or indirectly through one or more intermediaries (including,
without limitation, other Subsidiaries), or both, by such Person.
"Takeover Transaction" shall mean (A) any of the matters set
forth in clause (i) of the definition of Material Transaction but
replacing "5%" with "50%" each place "5%" is used in such definition,
(B) a sale of all or substantially all of the assets of the Company and
its Subsidiaries or (C) a merger or consolidation of the Company.
"Third Party Tender Offer" shall mean a bona fide public offer
subject to the provisions of Regulation 14D under the Exchange Act, by
a Person (which is not made by and does not include any of the Company,
a Restricted Party or any Affiliate of any of them or any 13D Group
that includes the Company, a Restricted Party or any Affiliate of them)
to purchase or exchange for cash or other consideration any Voting
Stock and which consists of an offer to acquire 25% or more of the then
Total Current Voting Power of the Company.
"13D Group" means any "group" (within the meaning of Section
13(d) of the Exchange Act) formed for the purpose of acquiring,
holding, voting or disposing of Voting Stock.
"Total Current Voting Power" shall mean, with respect to any
corporation the total number of votes which may be cast in the election
of members of the Board of Directors of the corporation if all
securities entitled to vote in the election of such directors
(excluding shares of preferred stock that are entitled to elect
directors only upon the occurrence of customary events of default) are
present and voted (it being understood that the Preferred Stock will be
included on an as converted basis in the calculation of Total Current
Voting Power of the Company).
"Transfer" shall have the meaning set forth in Section
4.2.
-10-
12
Shareholder Agreement
"Ultimate Parent Entity" shall mean, with respect to any
Person (the "Subject Person"), the Person (if any) that (i) owns,
directly or indirectly through one or more intermediaries, or both,
shares of stock or other ownership interests having ordinary voting
power (other than stock or such other ownership interests having such
power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of the Subject
Person and (ii) is not itself a Subsidiary of any other Person or is a
natural person.
"Voting Stock" shall mean shares of the Common Stock and
Preferred Stock and any other securities of the Company having the
ordinary power to vote in the election of members of the Board of
Directors of the Company.
"Warrants" shall mean the Purchase Warrant, the Initial
Distributor Warrants and the Bonus Distributor Warrants.
ARTICLE II
CORPORATE GOVERNANCE
Section 2.1 Board of Directors.
(a) The Company shall immediately expand the size of the Board
of Directors to seven directors and, pursuant to the terms of the Certificate of
Designation, appoint to the Board of Directors two individuals designated by the
Investor as the holder of a majority of the outstanding shares of Preferred
Stock. The directors designated by the Investor shall be subject to the
reasonable approval of a majority of the members of the Board of Directors and
shall continue to serve as directors until the next election of directors.
(b) If the Shareholder Approval is obtained, (i) as long as
the Restricted Parties continue to Beneficially Own an aggregate number of
shares of Common Stock equal to or greater than 50% of the number of shares of
Common Stock which the Restricted Parties Beneficially Own on the date hereof
(making equitable adjustments for any conversions, reclassifications,
reorganizations, stock dividends, stock splits, reverse splits and similar
events which occur with respect to the Common Stock), the Investor shall be
entitled to designate two individuals to be nominated to the Board of Directors
or (ii) if the condition in clause (i) of this paragraph (b) is not satisfied,
then as long as the Restricted Parties shall continue to Beneficially Own at
least 10% of the Adjusted Outstanding Common Stock, the Investor shall be
entitled to designate one individual to be nominated to the Board of Directors.
For purpose of clause (i) above, the
-11-
13
Shareholder Agreement
Preferred Stock and the Purchase Warrant will be treated as outstanding and
exercisable as of the date hereof.
(c) If the Shareholder Approval is not obtained, (i) as long
as the Restricted Parties continue to Beneficially Own an aggregate number of
shares of Common Stock equal to or greater than 75% of the number of shares of
Common Stock which the Restricted Parties Beneficially Own on the date hereof
(making equitable adjustments for any conversions, reclassifications,
reorganizations, stock dividends, stock splits, reverse splits and similar
events which occur with respect to the Common Stock), the Investor shall be
entitled to designate two individuals to be nominated to the Board of Directors
or (ii) if the condition in clause (i) of this paragraph (c) is not satisfied,
then as long as the Restricted Parties shall continue to Beneficially Own an
aggregate number of shares of Common Stock equal to or greater than 50% of the
number of shares of Common Stock which the Restricted Parties Beneficially Own
on the date hereof (making equitable adjustments for any conversions,
reclassifications, reorganizations, stock dividends, stock splits, reverse
splits and similar events which occur with the respect to Common Stock), the
Investor shall be entitled to designate one individual to be nominated to the
Board of Directors. For purposes of this paragraph (c), the Purchase Warrant
will not be deemed to be outstanding on the date hereof.
(d) Any individual so designated by the Investor pursuant to
paragraphs (b) or (c) of this Section 2.1 (each a "Designee") that has not
previously served as a member of the Board of Directors shall be subject to the
reasonable approval of a majority of the members of the Board of Directors.
(e) As long as a majority of the outstanding shares of
Preferred Stock are owned by the Restricted Parties and the Investor is
otherwise entitled to designate nominee(s) for election as director(s) pursuant
to Section 2.1, the Designee(s) will be elected to the Board of Directors by the
holders of the Preferred Stock voting separately as a class, as provided in the
Certificate of Designation. If the Restricted Parties no longer own a majority
of the outstanding shares of Preferred Stock (or no shares of Preferred Stock
are outstanding) but the Investor is otherwise entitled to designate nominee(s)
for election as director(s) pursuant to Section 2.1, the Company shall nominate
each such Designee for election as a director as part of the management slate
that is included in the proxy statement (or consent solicitation or similar
document) of the Company relating to the election of directors, and shall
provide the same support for the election of each such Designee as it provides
to other persons standing for election as directors of the Company as part of
the Company's management slate.
-12-
14
Shareholder Agreement
(f) Subject to applicable law, in the event that any Designee
on the Board of Directors shall cease to serve as a director for any reason
(other than the failure of the shareholders of the Company to elect such person
as director), the vacancy resulting therefrom shall be filled by another
Designee.
(g) For the avoidance of doubt, nothing in this Section 2.1 or
elsewhere in this Agreement is intended to prohibit the Restricted Parties from
nominating and electing a majority of the members of the Board of Directors if
the Restricted Parties have actual ownership of Voting Stock representing in the
aggregate a majority of the Total Current Voting Power and the Standstill Period
is no longer in effect.
(h) For as long as the Investor can designate nominee(s) for
election as director(s) pursuant to Section 2.1 and the Company has otherwise
complied with the terms of this Section 2.1, the Restricted Parties will vote
(or execute a written consent in lieu of) in each shareholder vote (or written
consent in lieu of) for the election of directors of the Company all of their
Voting Stock (other than shares of Preferred Stock that vote for directors as a
separate class from the Common Stock and other than the Common Stock issued
pursuant to the conversion of the Preferred Stock) (i) if there is no bona fide
proxy contest for the election of directors, in favor of the management slate
that is included in the proxy statement (or consent solicitation or similar
document) of the Company relating to the election of directors or (ii) if there
is a bona fide proxy contest for the election of directors, at the election of
each Restricted Party either (x) in favor of the management slate that is
included in the proxy statement (or consent solicitation or other similar
document) of the Company relating to the election of directors or (y) in the
same proportion as all votes cast by Disinterested Shareholders. The Restricted
Parties' obligations hereunder will terminate on the earlier to occur of (A) the
termination of the Standstill Period, or (B) the five year anniversary of the
date hereof.
(i) As long as the Investor is entitled to designate two
persons for nomination as directors, the then current Investor may assign
pursuant to Section 5.6 the right to designate pursuant to the terms and
conditions hereof one of such nominees to any other Restricted Party (such that
two Restricted Parties each have the right to designate one nominee; it being
understood that in such a case for all purposes of this Agreement where rights
or obligations of the Investor or the Restricted Parties are determined by the
number of nominees the Investor is entitled to designate, the Investor will be
deemed to have the right to designate two nominees).
-13-
15
Shareholder Agreement
(j) For so long as the Restricted Parties own a majority of
outstanding Preferred Stock and the Designees are entitled to be elected to the
Board of Directors by the holders of the Preferred Stock voting separately as a
class pursuant to Section VII(b) of the Certificate of Designation, any shares
of Common Stock owned by the Restricted Parties that were issued pursuant to the
conversion of shares of Preferred Stock (but no other shares of Common Stock
owned by the Restricted Parties) shall not be voted by the Restricted Parties in
any shareholder vote (or written consent in lieu thereof) for the election of
directors of the Company.
Section 2.2 Board Committees. As long as the Investor has the
right to designate at least one nominee to the Board of Directors, unless
otherwise agreed to by the Investor, (a) each of the Audit Committee and the
Compensation Committee of the Board of Directors shall contain at least one
Designee and (b) each other committee of the Board of Directors shall contain a
number of Designees (to the extent available), rounded upward to the nearest
whole number, equal to the total number of directors on such committee
multiplied by the percentage of the entire Board of Directors who are Designees.
Section 2.3 Reimbursement of Expenses; Attendance at Board
Meetings; Indemnification. The Company will reimburse each Designee that serves
as a director for all reasonable costs and expenses (including travel expenses)
incurred in connection with such director's attendance at meetings of the Board
or any committee of the Board upon which such director serves. The Company will
not pay such director annual fees and fees for attending Board or committee
meetings. The Company shall indemnify each such director to the same extent it
indemnifies its other directors pursuant to its organizational documents and
applicable law.
Section 2.4 Consultation and Other Rights. As long as the
Investor has the right to designate at least one nominee to the Board of
Directors, it shall have: (i) the right to examine the books and records of the
Company and (ii) the right to have its representative consult with the Company's
executive officers regarding business strategies, operating priorities and other
major corporate issues.
ARTICLE III
CERTAIN AGREEMENTS
Section 3.1 Financial Statements and Other Reports.
As long as the Investor has the right to designate at least one
person to be nominated for election to the Board of Directors
-14-
16
Shareholder Agreement
pursuant to Section 2.1, the Company will deliver, or cause to be
delivered to the Investor:
(a) between 30 days prior to and 60 days after the end of each
fiscal year, a budget (on a monthly basis) for the Company and its
Subsidiaries for the following fiscal year (including consolidating and
consolidated statements of operations);
(b) as soon as available and in any event within 45 days after
the end of each month, consolidating and consolidated statements of
operations of the Company and its Subsidiaries for such month and for
the period from the beginning of the current fiscal year to the end of
such month and a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such period and setting forth, in each
case, in comparative form, figures for the corresponding month and
period in the preceding fiscal year and the budget for such month and
for the period from the beginning of the current fiscal year to the end
of such month, all in reasonable detail and certified by an authorized
financial officer of the Company as fairly presenting in all material
respects the financial condition and results of operations of the
Company and its Subsidiaries on a consolidated basis in accordance with
GAAP;
(c) as soon as practicable and in any event within 45 days
after the end of each fiscal quarter of the Company, consolidating and
consolidated statements of operations and cash flow of the Company and
its Subsidiaries for such quarter and for the period from the beginning
of the current fiscal year to the end of such quarter and a
consolidated balance sheet of the Company and its Subsidiaries as at
the end of such quarter, setting forth, in each case, in comparative
form, figures for the corresponding quarter in the preceding fiscal
year and the budget for such quarter, all in reasonable detail, and
certified by an authorized financial officer of the Company as fairly
presenting in all material respects the financial condition and results
of operations of the Company and its Subsidiaries on a consolidated
basis in accordance with GAAP;
(d) as soon as available and in any event within 120 days
after the end of each fiscal year, consolidating and consolidated
statements of operations, shareholders' equity and cash flow of the
Company and its Subsidiaries for such fiscal year, and the related
consolidating and consolidated balance sheets of the Company and its
Subsidiaries as at the end of such fiscal year, setting forth, in each
case, in comparative form, corresponding consolidated and
-15-
17
Shareholder Agreement
consolidating figures from the preceding fiscal year, all in reasonable
detail and accompanied (i) in the case of such consolidated statements
and balance sheet of the Company, by an opinion thereon of independent
certified public accountants of recognized national standing (which
shall be generally recognized as one of the "Big Five" independent
public accounting firms), which opinion shall state that such
consolidated financial statements fairly present the consolidated
financial condition and results of operations of the Company and its
Subsidiaries as at the end of, and for, such fiscal year in accordance
with GAAP, and (ii) in the case of such consolidating statements and
balance sheets, by a certificate of an authorized financial officer of
the Company, which certificate shall state that such consolidating
financial statements fairly present, in all material respects, the
respective individual unconsolidated financial condition and results of
operations of the Company and of each of its Subsidiaries, in each case
in accordance with GAAP, consistently applied, as at the end of, and
for, such fiscal year;
(e) promptly upon transmission thereof to the shareholders of
the Company generally or to any other security holder of the Company,
including, without limitation, any holder of debt, copies of all
financial statements, notices, certificates, annual reports and proxy
statements so transmitted;
(f) promptly upon receipt thereof, a copy of each other report
submitted to the Company or any of its Subsidiaries by independent
accountants in connection with any annual, interim or special audit of
the books of the Company or any of its Subsidiaries made by such
accountants, or any management letters or similar document submitted to
the Company or any of its Subsidiaries by such accountants;
(g) promptly upon any material revision to the budgets
referred to in paragraph (a) above, such monthly budgets, as revised;
(h) promptly upon any officer of the Company obtaining
knowledge thereof, notice of any event of default under any credit
agreement, loan agreement or indenture that the Company is party to;
and
(i) with reasonable promptness, such other information and
data with respect to the Company or any of its Subsidiaries as the
Investor may reasonably request.
Section 3.2 Certain Transactions with NBC Restricted
Persons. (a) The Company agrees for the benefit of the
-16-
18
Shareholder Agreement
Restricted Parties that except with the prior written consent of the Investor
and except as may be expressly permitted by this Agreement, the Company and its
Subsidiaries shall not, directly or indirectly:
(i) issue or sell to any NBC Restricted Person, or
authorize or propose the issuance or sale to any NBC Restricted Person
of, any capital stock, partnership or limited liability company
interests or other equity securities of the Company or any Subsidiary
of the Company or any options, warrants or other rights (including,
without limitation, any convertible or exchangeable securities) to
acquire, any such capital stock, partnership or limited liability
interests or other equity securities;
(ii) form, enter into or join any partnership or joint
venture with, sell or dispose of any business or any assets (other than
inventory and any other assets disposed of in the ordinary course
consistent with past practice of such business) to, or make any
investment in any NBC Restricted Person;
(iii) enter into any transaction involving the incurrence
of indebtedness (other than in the ordinary course of business
consistent with past practice) involving any NBC Restricted Person;
(iv) authorize, enter into or approve any Material
Transaction with any NBC Restricted Person or enter into any
discussions or negotiations relating to any inquiry, proposal or offer
relating thereto;
(v) enter into any joint marketing or co-branding
arrangement with any NBC Restricted Person, license or otherwise grant
to any NBC Restricted Person the right to utilize any trademark,
tradename or brand of the Company or any Subsidiary of the Company or
grant to any NBC Restricted Person any rights to have a branded
presence on any media of the Company or its Subsidiaries or rights to
cross-promote home shopping transactions; or
(vi) authorize or commit or agree to take any of the
foregoing actions.
(b) The provisions of this Section 3.2 shall terminate
and be of no further force or effect at such time as the Investor is no longer
entitled to designate at least one person to be nominated for election to the
Board of Directors pursuant to Section 2.1. In addition, the provisions of this
Section 3.2 shall terminate and be of no further force or effect with respect to
those NBC Restricted Persons (and their Affiliates) set forth
-17-
19
Shareholder Agreement
on Annex B hereto (collectively, the "Annex B Entities") in the event that (i)
NBC or any of its Subsidiaries or Affiliates enters into a significant
transaction with any Annex B Entity (the "Relevant Entity") that precludes NBC
and its Subsidiaries from entering into a significant transaction with any one
of the other Annex B Entities and (ii) during the period ending six months after
the occurrence of an event specified in clause (i), neither the Company nor any
of its Subsidiaries has entered into an agreement providing for a significant
transaction with the Relevant Entity or its Affiliate.
Section 3.3 Certain Other Transactions.
For as long as the Investor is entitled to designate two
persons to be nominated for election to the Board of Directors pursuant to
Section 2.1, the Company agrees that except with the prior written consent of
the Investor, the Company and its Subsidiaries shall not, directly or
indirectly:
(a) issue or sell, or authorize or propose the issuance or
sale, of any capital stock of the Company, or any options, warrants or
other rights (including, without limitation, any convertible or
exchangeable securities) to acquire capital stock of the Company other
than (i) pursuant to Options outstanding on the date hereof or issued
pursuant to clause (ii) below, (ii) Options to be issued to officers,
directors, employees or consultants of the Company pursuant to any plan
or arrangement approved by the Company's shareholders, (iii) upon
conversion of the Preferred Stock outstanding on the date hereof or
pursuant to the Warrants, (iv) the issuance of Common Stock and other
Voting Stock in an aggregate amount not to exceed (x) during any twelve
month period 15% of the Total Voting Power of the Company as of the
first day of such twelve month period and (y) during any twenty-four
month period 25% of the Total Voting Power of the Company as of the
first day of such twenty-four month period, provided that no issuance
will be made to any Person pursuant to this clause (iv) who, together
with its Affiliates, to the knowledge of the Company after reasonable
inquiry, would Beneficially Own securities representing 10% or more of
the Total Voting Power of the Company following such issuance and (v)
issuances of non-voting capital stock that does not violate the terms
of the Preferred Stock;
(b) declare or pay any dividends or distributions to holders
of Common Stock in any fiscal quarter exceeding in the aggregate 5% of
the Market Capitalization of the Company as of the first day of such
fiscal quarter or repurchase or redeem any Common Stock except (i)
repurchases and redemption of Common Stock from officers, directors,
employees or consultants of the Company and its Subsidiaries
-18-
20
Shareholder Agreement
and (ii) repurchases and redemptions of Common Stock in any fiscal
quarter that, when aggregated with all distributions and dividends on
the Common Stock in such fiscal quarter, do not exceed 5% of the Market
Capitalization of the Company as of the first day of such fiscal
quarter;
(c) enter into or effect any single or related series of
acquisitions of businesses or assets or investments therein (including,
without limitation, forming, entering into or joining any joint
venture), other than money market instruments and trade receivables,
pursuant to which the fair market value of the aggregate purchase price
paid, or investment made, by the Company and its Subsidiaries will
exceed the greater of (x) $35 million or (y) 10% of the Market
Capitalization of the Company at the time the Company or its
Subsidiaries enter into an agreement to effect such acquisition or
investment;
(d) enter into or effect any single or related series of
sales, leases or other dispositions of assets having a Fair Market
Value in excess of the greater of (x) $35 million or (y) 10% of the
Market Capitalization of the Company at the time the Company or its
Subsidiaries enter into an agreement to effect such sale, lease or
other disposition;
(e) incur indebtedness for borrowed money that would cause the
Company's consolidated indebtedness to exceed the greater of (x) $40
million and (y) an amount equal to 30% of the Company's total
capitalization; for purposes of this clause (e) "total capitalization"
means the sum of consolidated shareholders equity and consolidated
indebtedness;
(f) issue any series or class of capital stock having (i)
voting rights that are disproportionate relating to its economic
interest or (ii) a separate class vote on any Takeover Transaction;
(g) enter into any business, either directly or indirectly,
except for those businesses in which the Company and/or its
Subsidiaries and/or its Affiliates are engaged in on the date hereof
and those businesses which are ancillary, complementary or reasonably
related thereto;
(h) amend the Articles of Incorporation so as to adversely
affect the Restricted Parties (it being understood that increases in
the authorized capital stock of the Company and/or creation of a
staggered Board of Directors will not be deemed to adversely affect the
Restricted Parties); or
-19-
21
Shareholder Agreement
(i) authorize or commit or agree to take any of the foregoing
actions.
Section 3.4 Other Covenants. (a) The Company agrees that
except with the prior written consent of the Investor and except as otherwise
expressly permitted by this Agreement, it and its Subsidiaries shall not,
directly or indirectly:
(i) adopt any shareholders rights plan, or amend any of its
organizational documents or enter into any Material Agreement with a
third party or issue any capital stock or other securities, the
provisions of which, upon the acquisition of all of the outstanding
Common Stock or any portion thereof by any Restricted Party would be
violated or breached, or which would require a consent, approval or
notice thereunder, or which would result in a default thereof (or an
event which, with notice or lapse of time or both, would constitute a
default), or which would result in the termination thereof or
accelerate the performance required thereby, or would result in a right
of termination or acceleration thereunder, or result in the creation of
any Lien (except Permitted Liens) upon any of the properties or assets
of the Company or Material Subsidiaries thereunder or disadvantage the
Restricted Parties relative to other shareholders on the basis of the
size of their shareholdings or otherwise restrict or impede the ability
of the Restricted Parties to acquire additional shares of Voting Stock
or dispose of such Voting Stock in any manner permitted by Section 4.2
to any Restricted Party or to any Person that would Beneficially Own
(together with such Person's Ultimate Parent Entity, Subsidiaries and
Affiliates) less than 10% of the Adjusted Outstanding Common Stock;
(ii) Take any action that would cause any ownership interest
in any of the following to be attributable to any Restricted Party for
purposes of FCC regulations: (i) a U.S. broadcast radio or television
station, (ii) a U.S. cable television system, (iii) a U.S. "daily
newspaper" (as such term is defined in Section 73.3555 of the rules and
regulations of the Federal Communications Commission, as the same may
be amended from time to time), (iv) any U.S. communications facility
operated pursuant to a license granted by the Federal Communications
Commission ("FCC") and subject to the provisions of Section 310(b) of
the Communications Act of 1934, as amended, or (v) any other business
which is subject to FCC regulations under which the ownership of a
Person may be subject to limitation or restriction as a result of the
interest in such business being attributed to such Person.
-20-
22
Shareholder Agreement
(b) The provisions of Section 3.4(a)(i) shall terminate and be
of no further force or effect at such time as the Investor is no longer entitled
to designate at least one person to be nominated for election to the Board of
Directors pursuant to Section 2.1.
Section 3.5 Houston Station. The Company and its Subsidiaries
shall use all commercially reasonable efforts to dispose of their interests in
KVVV-TV Channel 00 Xxxxxxx, Xxxxx 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
-21-
23
Shareholder Agreement
Warrants; provided, however, that after the Shareholder Meeting (or if
earlier August 31, 1999) the Restricted Parties may acquire or agree,
offer, seek or propose to acquire, or cause to be acquired, shares of
Voting Stock of the Company (or any convertible or exchangeable
securities) to acquire any such Voting Stock if such acquisition would
not increase the Restricted Parties' aggregate Beneficial Ownership of
shares of Common Stock to more than the Standstill Limit (other than
due to the issuance of additional Bonus Distributor Warrants; provided
that if the issuance of additional Bonus Distributor Warrants results
in the Restricted Parties' aggregate Beneficial Ownership of shares of
Common Stock exceeding the Standstill Limit, then at any time during
the Standstill Period (and only during the Standstill Period) when the
Standstill Limit is so exceeded, the Restricted Parties shall not
exercise any Bonus Distributor Warrants unless (A) such exercise occurs
during the six months prior to the expiration or termination of such
Bonus Distributor Warrants or (B) immediately upon such exercise, the
Restricted Parties' aggregate actual ownership of outstanding shares of
Common Stock would not exceed 39.9% of the total outstanding shares of
Common Stock, treating as outstanding and actually owned for such
purpose shares of Common Stock issuable upon conversion of the
Preferred Stock or upon the exercise of the Initial Distributor
Warrants, but no shares of Common Stock issuable upon exchange or
conversion of any other rights, warrants, options or other securities).
Notwithstanding the foregoing, during the Standstill Period, the holder
of a Warrant will not disclaim Beneficial Ownership of such Warrant and
for as long as the Purchase Warrant is outstanding and exercisable, no
Restricted Party will acquire actual ownership of any shares of Common
Stock other than (x) through exercise of the Warrants or conversion of
the Preferred Stock and (y) other acquisitions of shares of Common
Stock at a price per share equal to or greater than the applicable
price set forth in Section 8(a)(ii) of the Purchase Warrant (during the
period prior to the second anniversary of the Issue Date under the
Warrant) or Section 8(b)(ii) of the Purchase Warrant (during the period
on and after the second anniversary of such Issue Date and prior to the
fifth anniversary of such Issue Date).
(iii) make, or in any way participate in, any "solicitation"
of "proxies" (as such terms are used in the proxy rules of the SEC)
with respect to the voting of any securities of the Company or any of
its Subsidiaries, provided that the limitation contained in this clause
(iii) shall not apply to any Takeover Transaction to be voted on by the
Company's shareholders that is not instituted or proposed by any
Restricted Party or any Affiliate of a
-22-
24
Shareholder Agreement
Restricted Party or any 13D Group of which any Restricted
Party or any Affiliate of a Restricted Party is a member;
(iv) deposit any securities of the Company or any of its
Subsidiaries in a voting trust or subject any such securities to any
arrangement or agreement with any Person (other than one or more
Restricted Parties);
(v) form, join, or in any way become a member of a 13D Group
with respect to any voting securities of the Company or any of its
Subsidiaries (other than a "group" consisting solely of Restricted
Parties);
(vi) arrange any financing for, or provide any financing
commitment specifically for, the purchase of any voting securities or
securities convertible or exchangeable into or exercisable for any
voting securities or assets of the Company or any of its Subsidiaries,
except for such assets as are then being offered for sale by the
Company or such Subsidiary;
(vii) otherwise act, whether alone or in concert with others,
to seek to propose to the Company any tender or exchange offer, merger,
business combination, restructuring, liquidation, recapitalization or
similar transaction involving the Company or any of its Subsidiaries,
or nominate any person as a director of the Company who is not
nominated by the then incumbent directors, or propose any matter to be
voted upon by the shareholders of the Company; provided that the
Restricted Entities may nominate directors in accordance with Section
2.1 and, provided further, the provisions of this clause (vii) will not
prohibit or restrict any Restricted Party from entering into any
agreement, arrangement or understanding relating to the Transfer of any
securities in accordance with Section 4.2 or engaging in an discussion
or negotiations relating to any potential Transfer of any securities in
accordance with Section 4.2;
(viii) solicit, initiate, encourage or knowingly or
intentionally facilitate the taking of any action by any Affiliate of a
Restricted Party (that is not itself a Restricted Party) that would be
prohibited by this Section 4.1 if that Affiliate were a Restricted
Party; or
(ix) publicly announce or disclose any intention, plan or
arrangement inconsistent with the foregoing.
(b) In addition, during the Standstill Period (and only during
the Standstill Period), no Restricted Party will, nor will they authorize or
direct any of their respective
-23-
25
Shareholder Agreement
Representatives to, take any action that they reasonably believe based on the
advice of outside counsel would require the Company to make a public
announcement regarding any of the matters set forth in Section 4.1(a) (other
than in connection with the transactions contemplated by the Investment
Agreement).
(c) If, at any time during the Standstill Period, (i) any
Person other than a Restricted Party or any Affiliate thereof or any 13D Group
of which any Restricted Party is a member has made any inquiry, proposal or
offer relating to a Takeover Transaction or Change in Control of the Company
which has not been rejected by the Board of Directors, (ii) the Board of
Directors has determined to pursue a Takeover Transaction or other Change in
Control of the Company and the Board of Directors has not resolved to stop
pursuing such Takeover Transaction or other Change in Control of the Company or
(iii) the Board of Directors or the Company has engaged in any discussions or
negotiations with, or provided any information to, any Person other than a
Restricted Party or any Affiliate thereof or any 13D Group of which any
Restricted Party is a member with respect to a potential Takeover Transaction or
other Change in Control of the Company or any potential inquiry, proposal or
offer relating thereto and the Board of Directors has not resolved to terminate
all such discussions, negotiations and provision of information, then, for so
long as such condition continues to apply, the limitation on the actions
described in clause (a)(vii) above shall not be applicable to the Restricted
Parties (but all other provisions of this Agreement will, subject to Section
4.1(d), continue to apply).
(d) Anything in this Section 4.1 to the contrary
notwithstanding, this Section 4.1 shall not prohibit or restrict any of the
following: (x) actions taken by the Investor's nominees on the Board of
Directors in such capacity, (y) the exercise by the Restricted Parties of their
voting rights (i.e., their right to vote their shares but not their right to
make nominations, to the extent prohibited by this Agreement, or take other
related actions otherwise prohibited by this Section 4.1) with respect to any
shares of Voting Stock they Beneficially Own and (z) any disclosure pursuant to
Section 13(d) of the Exchange Act which a Restricted Party reasonably believes,
based on the advice of outside counsel, is required in connection with any
action taken by a Restricted Party pursuant to Section 4.1(c).
(e) Following the expiration of the Standstill Period pursuant
to clause (i) of the definition of Standstill Termination Event and for two
years following the expiration of the Standstill Period pursuant to clause (v)
of the definition of Standstill Termination Event, no Restricted Party will
purchase or otherwise acquire any shares of Common Stock if such acquisition
would increase the Restricted Parties' aggregate
-24-
26
Shareholder Agreement
Beneficial Ownership of shares of Common Stock to more than 39.9% of the
Adjusted Outstanding Common Stock except (x) increases in Beneficial Ownership
resulting from issuance of the Warrants or the exercise of the Warrants or (y)
pursuant to a Purchaser Tender Offer.
(f) If the Standstill Period terminates pursuant to clause
(iii) of the definition of "Standstill Termination Event" and the subject Third
Party Tender Offer is terminated at any time during which an Investor Tender
Offer is then pending, unless otherwise agreed by the Company, the Restricted
Party that commenced such Investor Tender Offer (the "Tendering Restricted
Party") will not complete such Investor Tender Offer until at least the sixth
business day after the termination of such Third Party Tender Offer. If, within
two business days after termination of the subject Third Party Tender Offer, the
Company requests in writing that the Tendering Restricted Party terminate its
Investor Tender Offer and by the end of the second business day after the
receipt of such request the Tendering Restricted Party has not terminated its
Investor Tender Offer, then the provisions of Section 3.4(a)(i) shall no longer
prohibit the Company from amending its then existing shareholders rights plan or
adopting a shareholders rights plan that could be triggered by the Restricted
Parties if (and, only if) they subsequently acquired Beneficial Ownership of
additional Voting Securities that would increase the Restricted Parties'
aggregate Beneficial Ownership of shares of Common Stock to more than the
Standstill Limit (determined for these purposes as if a Standstill Reinstatement
Event had occurred on such date) other than as a result of the acquisition of
Beneficial Ownership of additional shares of Common Stock upon the issuance or
exercise of additional Bonus Distributer Warrants.
Section 4.2 Transfer Restrictions.
(a) Unless the Restricted Parties Beneficially Own in the
aggregate less than 5% of the Adjusted Outstanding Common Stock or until the
Restricted Parties Beneficially Own in the aggregate at least 90% of the
Adjusted Outstanding Common Stock, the Restricted Parties shall not, directly or
indirectly, sell, transfer or otherwise dispose of (collectively, "Transfer")
any of the Preferred Stock, Warrants or shares of Common Stock Beneficially
Owned by such Persons, except for Transfers: (i) to Restricted Parties or to
Affiliates who agree to be Restricted Parties bound by the provisions of this
Agreement, (ii) which have been consented to by the Company, (iii) pursuant to a
Third Party Tender Offer, provided that the Restricted Parties may not Transfer
pursuant to this clause (iii) any shares of Common Stock acquired upon exercise
of the Purchase Warrant on or after the date of commencement of such Third Party
Tender Offer or the public announcement by the offeror thereof or that such
offeror
-25-
27
Shareholder Agreement
intends to commence such Third Party Tender Offer, (iv) pursuant to a merger,
consolidation or reorganization to which the Company is a party, (v) in a bona
fide public distribution or bona fide underwritten public offering, (vi)
pursuant to Rule 144 of the Securities Act or (vii) in a private sale or
pursuant to Rule 144A of the Securities Act; provided that, in the case of any
Transfer pursuant to clause (v) or (vii), such Transfer does not result in, to
the knowledge of the Restricted Parties after reasonable inquiry, any other
Person acquiring, after giving effect to such Transfer, Beneficial Ownership,
individually or in the aggregate with such Person's Ultimate Parent Entity,
Subsidiaries and Affiliates, of more than 10% of the Adjusted Outstanding Common
Stock.
(b) Subject to the provisions of Section 4.2(a), if any
Restricted Party decides to dispose of any of the Preferred Stock (or the Common
Stock issuable upon conversion of the Preferred Stock) or the Warrants (or the
Common Stock issuable upon exercise of the Warrants), each Restricted Party
understands and agrees that it may do so only pursuant to an effective
registration statement under the Securities Act or pursuant to an exemption from
registration under the Securities Act. Each Restricted Party agrees to the
imprinting, so long as appropriate, of substantially the following legends on
certificates representing any of the securities referenced in the preceding
sentence:
NEITHER THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES ISSUABLE UPON EXERCISE OF THE SECURITIES REPRESENTED HEREBY
HAVE BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAW, AND SUCH
SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR PURSUANT
TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO THE TERMS OF A SHAREHOLDER AGREEMENT, DATED AS OF APRIL 15,
1999, AMONG VALUEVISION INTERNATIONAL, INC., GE CAPITAL EQUITY
INVESTMENTS, INC., AND NATIONAL BROADCASTING COMPANY, INC.
THE RESTATED ARTICLES OF INCORPORATION OF THE COMPANY, AS AMENDED,
PROVIDE THAT, EXCEPT AS OTHERWISE PROVIDED BY LAW, SHARES OF STOCK IN
THE COMPANY SHALL NOT BE TRANSFERRED TO "ALIENS" UNLESS, AFTER GIVING
EFFECT TO SUCH TRANSFER, THE AGGREGATE NUMBER OF SHARES OF STOCK OWNED
BY OR FOR THE ACCOUNT OF "ALIENS" WILL NOT EXCEED 20% OF THE NUMBER OF
SHARES OF OUTSTANDING STOCK OF THE COMPANY, AND THE
-26-
28
Shareholder Agreement
AGGREGATE VOTING POWER OF SUCH SHARES WILL NOT EXCEED 20% OF THE
AGGREGATE VOTING POWER OF ALL OUTSTANDING SHARES OF VOTING STOCK OF THE
COMPANY. NOT MORE THAN 20% OF THE AGGREGATE VOTING POWER OF ALL SHARES
OUTSTANDING ENTITLED TO VOTE MAY BE VOTED BY OR FOR THE ACCOUNT OF
"ALIENS." IF, NOTWITHSTANDING SUCH RESTRICTION ON TRANSFERS TO
"ALIENS," THE AGGREGATE NUMBER OF SHARES OF STOCK OWNED BY OR FOR THE
ACCOUNT OF "ALIENS" EXCEEDS 20% OF THE NUMBER OF SHARES OF OUTSTANDING
STOCK OF THE COMPANY OR IF THE AGGREGATE VOTING POWER OF SUCH SHARES
EXCEEDS 20% OF THE AGGREGATE VOTING POWER OF ALL OUTSTANDING SHARES OF
VOTING STOCK OF THE COMPANY, THE COMPANY HAS THE RIGHT TO REDEEM SHARES
OF ALL CLASSES OF CAPITAL STOCK, AT THEIR THEN FAIR MARKET VALUE, ON A
PRO RATA BASIS, OWNED BY OR FOR THE ACCOUNT OF ALL "ALIENS" IN ORDER TO
REDUCE THE NUMBER OF SHARES AND/OR PERCENTAGE OF VOTING POWER HELD BY
OR FOR THE ACCOUNT OF "ALIENS" TO THE MAXIMUM NUMBER OR PERCENTAGE
ALLOWED UNDER THE RESTATED ARTICLES OF INCORPORATION, AS AMENDED, OR AS
OTHERWISE REQUIRED BY APPLICABLE FEDERAL LAW. AS USED HEREIN, "ALIENS"
MEANS ALIENS AND THEIR REPRESENTATIVES, FOREIGN GOVERNMENTS AND THEIR
REPRESENTATIVES, AND CORPORATIONS ORGANIZED UNDER THE LAW OF A FOREIGN
COUNTRY, AND THEIR REPRESENTATIVES. THE COMPANY WILL FURNISH TO ANY
SHAREHOLDER UPON REQUEST AND WITHOUT CHARGE, A FULL STATEMENT OF THE
DESIGNATIONS, PREFERENCES, LIMITATIONS, AND RELATIVE RIGHTS OF THE
SHARES OF EACH CLASS OR SERIES AUTHORIZED TO BE ISSUED, SO FAR AS THEY
HAVE BEEN DETERMINED, AND THE AUTHORITY OF THE BOARD TO DETERMINE THE
RELATIVE RIGHTS AND PREFERENCES OF SUBSEQUENT CLASSES OR SERIES.
The first legend set forth above shall be removed if and when
(i) the securities represented by such certificate are disposed of pursuant to
an effective registration statement under the Securities Act or (ii) the
Investor delivers to the Company an opinion of counsel reasonably acceptable to
the Company to the effect that such legends are no longer necessary.
Section 4.3 Certain Permitted Transactions and Communications.
Notwithstanding the foregoing, this Agreement shall not prohibit (i) the
acquisition or holding of securities or rights in the ordinary course of
business by any employee benefit plan whose trustees, investment managers or
similar advisors are not Affiliates of any Restricted Party, (ii) the
consummation of any transaction expressly provided for in the Investment
Agreement or the Operating Agreement including the acquisition and/or exercise
of the Warrants or any purchase of shares of Common Stock upon conversion of
Preferred Stock or (iii) officers and employees of the Restricted Parties from
communicating with officers of the Company or its Affiliates on matters related
to or governed by the Distribution Agreement, the
-27-
29
Shareholder Agreement
Operating Agreement or other operational matters, or the Restricted Parties from
communicating with the Board of Directors, the Chairman of the Board of
Directors, the Chief Executive Officer or the Chief Financial Officer of the
Company, so long as such communication is conveyed in confidence, does not
require public disclosure by the Restricted Parties or, in the reasonable belief
(based on the advice of outside counsel) of the Restricted Party making such
communication, by the Company, and is not intended to (A) elicit, and, in the
reasonable belief (based on the advice of outside counsel) of the Restricted
Party making such communication, does not require the issuance of, a public
response by the Company or (B) otherwise circumvent the provisions of Section
4.1.
ARTICLE V
Miscellaneous
Section 5.1 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given, if
delivered personally, by telecopier or sent by overnight courier as follows:
(a) If to the Investor, to:
GE Capital Equity Investments, Inc.
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Attention: Xxxx Xxxxxx
Fax: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxxxx
Fax: (000) 000-0000
(b) If to NBC, to:
National Broadcasting Company, Inc.
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Executive Vice
President and Managing Director,
Worldwide Business Development
-28-
30
Shareholder Agreement
Fax: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxxxx
Fax: (000) 000-0000
(c) If to the Company, to:
ValueVision International, Inc.
0000 Xxxxx Xxx Xxxx
Xxxx Xxxxxxx, XX 00000-0000
Attention: General Counsel
Fax: (000) 000-0000
With a copy to:
Xxxxxx & Xxxxxxx
000 Xxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx
Fax: (000) 000-0000
or to such other address or addresses as shall be designated in writing. All
notices shall be effective when received.
Section 5.2 Entire Agreement; Amendment. This Agreement sets
forth the entire agreement between the parties hereto with respect to the
transactions contemplated by this Agreement. Any provision of this Agreement may
be amended or modified in whole or in part at any time by an agreement in
writing between the parties hereto executed in the same manner as this
Agreement. No failure on the part of any party to exercise, and no delay in
exercising, any right shall operate as a waiver thereof nor shall any single or
partial exercise by any party of any right preclude any other or future exercise
thereof or the exercise of any other right.
Section 5.3 Severability. In the event that any one or more of
the provisions contained in this Agreement or in any other instrument referred
to herein, shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such
-29-
31
Shareholder Agreement
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement or any other such instrument.
Section 5.4 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to constitute an
original, but all of which together shall constitute one and the same document.
Section 5.5 Governing Law; Jurisdiction; Waiver of Jury Trial.
This Agreement shall be governed and construed in accordance with the laws of
the State of New York applicable to contracts executed and performed within such
state, and each party hereby submits to the jurisdiction of any state or U.S.
federal court sitting within the County of New York, New York or the County of
Hennepin, Minnesota. The parties hereto waive all right to trial by jury in any
action, suit or proceeding brought to enforce or defend any rights or remedies
under this Agreement.
Section 5.6 Successors and Assigns; Third Party Beneficiaries.
Subject to applicable law, (i) GE Capital Equity Investments may assign its
rights under this Agreement in whole or in part only to a Restricted Party, but
no such assignment shall relieve GE Capital Equity Investments of its
obligations hereunder unless GE Capital Equity Investments' obligations
hereunder are assumed by NBC and/or GE Capital in a written agreement reasonably
acceptable to the Company delivered to the Company (in which case GE Capital
Equity Investments will be released from its obligations hereunder except for
its obligations as a Restricted Party to comply with the terms hereof) and (ii)
NBC may assign its rights under this Agreement in whole or in part only to a
Restricted Party, but no such assignment shall relieve NBC of its obligations
hereunder unless NBC's obligations hereunder are assumed by GE Capital in a
written agreement reasonably acceptable to the Company delivered to the Company
(in which case NBC will be released from its obligations hereunder except for
its obligations as a Restricted Party to comply with the terms hereof). The
Company may not assign any of its rights or delegate any of its duties under
this Agreement without the prior written consent of the Investor. Any purported
assignment in violation of this Section shall be void. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any Person
other than the Restricted Parties (who shall be third party beneficiaries of
this Agreement entitled to the benefit of, and to enforce, its terms) and the
Company and their respective successors, any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision herein contained.
This Agreement and all conditions and provisions hereof are intended to be for
the sole and exclusive benefit of the Restricted Parties and the Company and
their respective successors, and for the benefit of no other Person. No
purchaser of Preferred Stock, Warrants or Common
-30-
32
Shareholder Agreement
Stock from a Restricted Party (other than another Restricted Party) shall be
deemed to be a successor or assignee by reason merely of such purchase.
Section 5.7 Arbitration. Any controversy, dispute or claim
arising out of, in connection with or in relation to the interpretation,
performance or breach of this Agreement, shall be determined, at the request of
any party, by arbitration in a city mutually agreeable to the parties to such
controversy, dispute or claim before and in accordance with the then-existing
Rules for Commercial Arbitration of the American Arbitration Association, and
any judgment or award rendered by the arbitrator will be final, binding and
unappealable and judgment may be entered by any state or Federal court having
jurisdiction thereof. The pre-trial discovery procedures of the Federal Rules of
Civil Procedure shall apply to any arbitration under this Section 5.7. Any
controversy concerning whether a dispute is an arbitrable dispute or as to the
interpretation or enforceability of this Section 5.7 shall be determined by the
arbitrator. The arbitrator shall be a retired or former United States District
Judge or other person acceptable to each of the parties, provided such
individual has substantial professional experience with regard to corporate or
partnership legal matters. The parties intend that this agreement to arbitrate
be valid, enforceable and irrevocable.
Section 5.8 Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties shall
be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions of this Agreement
in addition to any other remedy to which they are entitled at law or in equity.
Section 5.9 Headings, Captions and Table of Contents. The
section headings, captions and table of contents contained in this Agreement are
for reference purposes only, are not part of this Agreement and shall not affect
the meaning or interpretation of this Agreement.
Section 5.10 Confidentiality. The provisions of Sections 1, 2
and 8 of the confidentiality agreement dated June 24, 1998 between the Company
and the Investor (the "Investor Confidentiality Agreement") shall continue and
be in full force and effect and apply to each Restricted Party as if it were the
Investor until the later to occur of the termination of the Distribution
Agreement and termination of the Investor's rights to designate at least one
director for nomination to the Board of Directors of the Company pursuant to
Section 2.1. All other
-31-
33
Shareholder Agreement
provisions of the Investor Confidentiality Agreement and the confidentiality
agreement dated January 28, 1999 (as amended on February 28, 1999) between the
Company and NBC are hereby terminated.
-32-
34
Shareholder Agreement
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto or by their respective duly authorized representatives, all as of the
date first above written.
VALUEVISION INTERNATIONAL, INC.
By: /s/ Xxxx XxXxxxxxx
------------------------------------
Name: Xxxx XxXxxxxxx
Title: Chief Executive Officer
GE CAPITAL EQUITY INVESTMENTS, INC.
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx
Title: Senior Vice President
NATIONAL BROADCASTING COMPANY, INC.
By: /s/ Xxxxxx Xxxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Executive Vice President,
Worldwide Business Development
-33-
35
Shareholder Agreement
ANNEX A
NBC RESTRICTED PERSONS
CBS
Fox
Disney
Time Xxxxxx
Xxxxxx
Viacom
Yahoo
AOL
Excite
Lycos
Infoseek
Microsoft
-34-
36
Shareholder Agreement
ANNEX B
ANNEX B ENTITIES
Yahoo
AOL
Excite
Lycos
Infoseek
Microsoft
-35-
