General Statement of Beneficial Ownership — Schedule 13D
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SC 13D General Statement of Beneficial Ownership 55 236K
2: EX-1 Joint Filing Agreement 1 7K
3: EX-2 Investment Agreement 44 147K
4: EX-3 Distribution Marketing Agreement 24 77K
5: EX-4 Investment Warrant 22 64K
6: EX-5 Distributor Warrant 29 84K
7: EX-6 Performance Distributor Warrant 29 87K
8: EX-7 Certificate of Designation 26 82K
9: EX-8 Shareholder Agreement 36 105K
10: EX-9 Registration Statement 25 78K
11: EX-10 Power of Attorney G.E. Co. 2 10K
12: EX-11 Power of Attorney G.E. Capital 2 9K
EX-7 — Certificate of Designation
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Exhibit 7
VALUEVISION INTERNATIONAL, INC.
CERTIFICATE OF DESIGNATION
OF
SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK
Pursuant to Section 302A.401 of the Minnesota Business Corporation
Act, ValueVision International, Inc., a Minnesota corporation (the
"Corporation"), hereby certifies that the following resolutions were duly
adopted by its Board of Directors on March 8, 1999 to set forth the powers,
designations, preferences and relative, participating, optional or other rights
of its Redeemable Convertible Preferred Stock:
RESOLVED, that, pursuant to the authority granted to the Board of
Directors in the Articles of Incorporation, there is hereby created, and the
Corporation is hereby authorized to issue, a series of Preferred Stock (as
defined in the Articles of Incorporation) having the following powers,
designations, preferences and rights:
I. Designation of Series and Number of Shares. This series of the
Preferred Stock shall be designated the "Series A Redeemable Convertible
Preferred Stock" (the "Convertible Preferred Stock") and shall consist of
5,339,500 shares, par value $.01 per share. The stated value of the Convertible
Preferred Stock shall be $8.288 per share (the "Stated Value"). The number of
shares of Convertible Preferred Stock may be decreased from time to time, as
such shares are converted or redeemed as provided herein, by a resolution of the
Board of Directors filed with the Secretary of State of the State of Minnesota.
II. Rank. All shares of Convertible Preferred Stock shall rank prior,
both as to payment of dividends and as to distributions of assets upon
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, to all of the Corporation's now or hereafter issued Common Stock,
par value $0.01 per share ("Common Stock"), and to all of the Corporation's now
existing or hereafter issued capital stock which by its terms ranks junior to
the Convertible Preferred Stock both as to the payment of dividends and as to
distributions of assets upon liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, when and if issued (the Common
Stock and any such other capital stock being herein referred to as "Junior
Stock").
Certificate of Designation
(b) No payment on account of the purchase, redemption, retirement or other
acquisition of shares of Junior Stock or any class or series of the
Corporation's capital stock which by its terms ranks junior to the Convertible
Preferred Stock as to distributions of assets upon liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary (the Junior
Stock and any such other class or series of the Corporation's capital stock
being herein referred to as "Junior Liquidation Stock"), shall be made directly
or indirectly by the Corporation unless and until all the Convertible Preferred
Stock shall have been converted into Common Stock or redeemed as provided for
herein or otherwise reacquired by the Corporation.
III. Dividends. In the event that the Corporation declares and pays
any dividend on the Common Stock while any shares of Convertible Preferred Stock
are outstanding, dividends shall be paid on the outstanding shares of
Convertible Preferred Stock on the same basis as if such Convertible Preferred
Stock had been converted to Common Stock pursuant to Section VI hereof prior to
the date fixed for determination of the holders of Common Stock entitled to such
dividend. Holders of Convertible Preferred Stock will not be entitled to any
dividends, whether payable in cash, property or stock, in excess of the
dividends provided for herein. Such dividends shall be payable to holders of
record at the close of business on the date specified by the Board of Directors
(or, to the extent permitted by applicable law, a duly authorized committee
thereof) at the time such dividend is declared (the "Dividend Payment
Date")(with such record date and Dividend Payment Date being the same as the
record date and dividend payment date, respectively, of the Common Stock), in
preference to dividends on the Junior Stock and any other capital stock of the
Corporation which by its terms ranks junior as to dividends to the Convertible
Preferred Stock (the Junior Stock and any such other class or series of the
Corporation's capital stock being herein referred to as "Junior Dividend
Stock"). All dividends paid with respect to shares of Convertible Preferred
Stock pursuant to this Section III shall be paid pro rata to the holders
entitled thereto.
(b) No dividend or other distribution, other than dividends payable
solely in shares of Junior Stock, shall be declared, paid or set apart for
payment on shares of Junior Dividend Stock, unless and until all accrued and
unpaid dividends on the Convertible Preferred Stock shall have been paid or
declared and set apart for payment and, to the extent required by paragraph
III(a), the related dividend is declared and paid on the Convertible Preferred
Stock.
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Certificate of Designation
(c) No dividends shall be declared, paid or set apart for payment on
shares of any class or series of the Corporation's capital stock whether now
existing or hereafter issued which by its terms ranks, as to dividends, on a
parity with the Convertible Preferred Stock (any such class or series of the
Corporation's capital stock being herein referred to as "Parity Dividend Stock")
for any period unless dividends have been, or contemporaneously are, paid or
declared and set apart for payment on the Convertible Preferred Stock. No
dividends shall be paid on Parity Dividend Stock except on dates on which
dividends are paid on the Convertible Preferred Stock. All dividends paid or
declared and set apart for payment on the Convertible Preferred Stock and any
Parity Dividend Stock shall be paid or declared and set apart for payment pro
rata so that the amount of dividend paid or declared and set apart for payment
per share on the Convertible Preferred Stock and the Parity Dividend Stock on
any date shall in all cases bear to each other the same ratio that accrued and
unpaid dividends on the Convertible Preferred Stock and the Parity Dividend
Stock bear to each other.
IV. Liquidation Preference. In the event of a liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, the holders
of the then outstanding shares of Convertible Preferred Stock shall be entitled
to receive out of the assets of the Corporation available for distribution to
shareholders an amount in cash equal to the Stated Value for each share
outstanding, plus an amount equal to the dividends accrued and unpaid, if any,
on such shares on the date of final distribution to such holders without
interest before any payment shall be made or any assets distributed to the
holders of shares of Junior Liquidation Stock. The entire assets of the
Corporation available for distribution to holders of Convertible Preferred Stock
and any class or series of the Corporation's capital stock which by its terms
ranks on a parity with the Convertible Preferred Stock as to distributions of
assets upon liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary (any such class or series of the Corporation's capital
stock being herein referred to as "Parity Liquidation Stock") shall be
distributed ratably among the holders of the Convertible Preferred Stock and any
Parity Liquidation Stock in proportion to the respective preferential amounts
(including accrued and unpaid dividends, if any) to which each is entitled (but
only to the extent of such preferential amounts). After payment in full of the
liquidation preferences of the shares of the Convertible Preferred Stock, the
holders of such shares shall not be entitled to any further participation in any
distribution of assets by the Corporation.
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Certificate of Designation
V. Redemption.
(a) Mandatory Redemption. On the tenth anniversary of the date of
issuance of the Convertible Preferred Stock (the "Issue Date"), the Corporation
shall redeem for cash, out of any source of funds legally available therefor,
all of the outstanding shares of Convertible Preferred Stock, at a redemption
price equal to 100% of the Stated Value per share, plus an amount in cash equal
to all declared and unpaid dividends, if any, thereon outstanding to the
redemption date.
(b) Redemption Upon Change in Control. Upon the occurrence of a Change
in Control, the Convertible Preferred Stock shall be redeemable at the option of
the holders thereof, in whole or in part, at a redemption price per share equal
to 100% of the Stated Value plus declared and unpaid dividends, if any, thereon
outstanding to the redemption date. The Corporation shall redeem the number of
shares specified in the holders' notices of election to redeem pursuant to
Section V(c)(ii) hereof on the date fixed for redemption. A "Change of Control"
shall mean (i) the consummation by the Corporation of a merger, consolidation or
other business combination in a transaction or series of transactions as a
result of which the holders of the Common Stock immediately prior to such
transaction or series of transactions will hold less than 50% of the voting
power of all outstanding voting securities of the surviving entity, (ii) the
consummation of a sale or other disposition in one or more transactions by the
Corporation or its subsidiaries of all or substantially all of the Corporation's
consolidated assets other than among the Corporation and its subsidiaries, (iii)
the acquisition by any person or entity, together with its affiliates (as
defined in Rule 12b-2 under the Exchange Act of 1934, as amended (the "Exchange
Act")), or any other group (as defined in Section 13(d) of the Exchange Act),
including through the formation of any such group or the affiliation of any such
persons or entities other than any Restricted Party (as defined in the
Shareholder Agreement) or an Affiliate thereof or any 13D Group (as defined in
the Shareholder Agreement) of which any of them is a member, of beneficial
ownership of a majority of the voting power of all the then outstanding voting
securities of the Corporation entitled to vote generally in the election of
directors or (iv) Continuing Directors no longer constitute a majority of the
Board of Directors of the Corporation. For purposes of this paragraph (b),
"Continuing Directors" shall mean (i) each director who is a member of the Board
of Directors of the Corporation on the date hereof and (ii) each other director
whose initial nomination as a director was approved by a majority of the
Continuing Directors as of the time of such nomination (including, without
limitation, director designees of the Restricted Parties pursuant to the
Shareholder Agreement).
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Certificate of Designation
(c) Procedure for Mandatory Redemption. In the event that the
Corporation shall redeem shares of Convertible Preferred Stock pursuant to
Section V(a) hereof, notice of such redemption shall be mailed by first-class
mail, postage prepaid, and mailed not less than 30 days nor more than 90 days
prior to the redemption date to the holders of record of the shares to be
redeemed at their respective addresses as they shall appear in the records of
the Corporation; provided, however, that failure to give such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
proceeding for the redemption of any shares so to be redeemed except as to the
holder to whom the Corporation has failed to give such notice or except as to
the holder to whom notice was defective. Each such notice shall state: (A) the
redemption date; (B) the number of shares of Convertible Preferred Stock to be
redeemed; (C) the redemption price; (D) the place or places where certificates
for such shares are to be surrendered for payment of the redemption price (which
place shall be the principal place of business of the Corporation); and (E) that
the holder's right to convert such shares into shares of Common Stock shall
terminate on the close of business on the tenth business day preceding such
redemption date.
(d) Procedure for Change in Control Redemption. If a Change in Control
should occur, then, in any one or more of such events the Corporation shall give
written notice by first-class mail, postage prepaid, to each holder of
Convertible Preferred Stock at its address as it appears in the records of the
Corporation, which notice shall describe such Change in Control and shall state
the date on which the Change in Control is expected to take place, and shall be
mailed within 10 business days following the occurrence of the Change in
Control. Such notice shall also set forth (in addition to the information
required by the next succeeding paragraph): (A) each holder's right to require
the Corporation to redeem shares of Convertible Preferred Stock held by such
holder as a result of such Change in Control; (B) the redemption price; (C) the
optional redemption date (which date shall be no earlier than 30 days and no
later than 90 days from the date of such Change in Control); (D) the procedures
to be followed by such holder in exercising its right of redemption, including
the place or places where certificates for such shares are to be surrendered for
payment of the redemption price (which place shall be the principal place of
business of the Corporation); and (E) that the holder's right to convert such
shares into shares of Common Stock shall terminate on the close of business on
the tenth business day preceding such redemption date with respect to any shares
of Convertible Preferred Stock with respect to which the holder thereof has
exercised its right to require the Corporation to redeem pursuant to Section
V(d). In the event a holder of shares of Convertible Preferred Stock shall elect
to require the Corporation to redeem any or all of such shares of Convertible
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Certificate of Designation
Preferred Stock, such holder shall deliver, within 20 days of the mailing to it
of the Corporation's notice described in this Section V(c)(ii), a written notice
stating such holder's election and specifying the number of shares to be
redeemed pursuant to Section V(b) hereof.
(ii) In the case of any redemption pursuant to Section V(b) hereof,
the notice by the Corporation shall describe the Change in Control, including a
description of the Surviving Person and, if applicable, the effect of the Change
in Control on the Common Stock. The notice shall be accompanied by (A) the
consolidated balance sheet of the Corporation and its Subsidiaries as of the end
of the most recent fiscal year of the Corporation for which such information is
available and the related consolidated statements of operations and cash flows
for such fiscal year, in each case setting forth the comparative figures for the
preceding fiscal year, accompanied by an opinion of independent public
accountants of nationally recognized standing selected by the Corporation as to
the fair presentation in accordance with generally accepted accounting
principles of such financial statements, and (B) a consolidated balance sheet of
the Corporation and its Subsidiaries as of the end of the most recent fiscal
quarter of the Corporation for which such information is available and the
related consolidated statements of operations and cash flows for such quarter
and for the portion of the Corporation's fiscal year ended at the end of such
fiscal quarter, in each case setting forth in comparative form the figures for
the corresponding quarter and the corresponding portion of the Corporation's
preceding fiscal year. For so long as the Corporation is subject to the periodic
reporting requirements of the Exchange Act and makes timely filings thereunder,
the delivery requirements of the preceding sentence shall be satisfied by the
Corporation's most current report, schedule, registration statement, definitive
proxy statement or other document on file with the United States Securities and
Exchange Commission.
(e) Notice by the Corporation having been mailed as provided in
Section V(c) hereof, or notice of election having been mailed by the holders as
provided in Section V(d) hereof, and provided that on or before the applicable
redemption date funds necessary for such redemption shall have been set aside by
the Corporation, separate and apart from its other funds, in trust for the pro
rata benefit of the holders of the shares so called for or entitled to
redemption, so as to be and to continue to be available therefor, then, from and
after the redemption date (unless the Corporation defaults in the payment of the
redemption price, in which case such rights shall continue until the redemption
price is paid), such shares shall no longer be
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Certificate of Designation
deemed to be outstanding and shall not have the status of shares of Convertible
Preferred Stock, and all rights of the holders thereof as shareholders of the
Corporation (except the right to receive the applicable redemption price and any
accrued and unpaid dividends, if any, from the Corporation and the right to
convert such shares into shares of Common Stock, which shall continue until the
close of business on the tenth business day preceding the date of redemption in
accordance with Section VI hereof) shall cease. Upon surrender of the
certificates for any shares so redeemed (properly endorsed or assigned for
transfer, if the Board of Directors of the Corporation shall so require and a
notice by the Corporation shall so state), such shares shall be redeemed by the
Corporation at the applicable redemption price as aforesaid. In case fewer than
all the shares represented by any such certificate are redeemed, a new
certificate or certificates shall be issued representing the unredeemed shares
without cost to the holder thereof.
VI. Conversion.
(a) Conversion. Subject to adjustments as provided herein, each full
share of Convertible Preferred Stock shall be convertible at the option of the
holder thereof, at any time (including upon a Change of Control) from the Issue
Date until the close of business on the tenth business day prior to any date
fixed for redemption of such share as herein provided, into a number of fully
paid and nonassessable shares of Common Stock equal to the Stated Value of each
full share of the Convertible Preferred Stock to be converted divided by a
conversion price (the "Conversion Price"), which initially shall be $8.288.
(b) Conversion Procedures. (i) Any holder of shares of Convertible
Preferred Stock desiring to convert any or all of such shares into Common Stock
shall surrender the certificate or certificates evidencing such shares of
Convertible Preferred Stock at the principal office of the Corporation, as
transfer agent (in such capacity, the "Transfer Agent") for the Convertible
Preferred Stock which certificate or certificates, if the Corporation shall so
require, shall be duly endorsed to the Corporation or in blank, or accompanied
by proper instruments of transfer to the Corporation or in blank, accompanied by
irrevocable written notice to the Corporation that the holder elects, as of the
date of surrender of such Convertible Preferred Stock, to convert such shares of
Convertible Preferred Stock and specifying the name or names (with address or
addresses) in which a certificate or certificates evidencing shares of Common
Stock are to be issued. Any transfer taxes shall be paid in accordance with
Section XI hereof.
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Certificate of Designation
(ii) The Corporation shall, as soon as practicable after such
surrender of certificates evidencing shares of Convertible Preferred Stock
accompanied by the written notice and compliance with any other conditions
herein contained, deliver at such office of the Transfer Agent to the holder for
whose account such shares of Convertible Preferred Stock were so surrendered, or
to the nominee of such entity, certificates evidencing the number of full shares
of Common Stock to which such holder shall be entitled as aforesaid, together
with a cash adjustment in respect of any fraction of a share of Common Stock as
hereinafter provided. Such conversion shall be deemed to have been made as of
the date of the surrender of certificates evidencing shares of Convertible
Preferred Stock accompanied by the written notice and compliance with any other
conditions herein contained and the entity or entities entitled to receive the
Common Stock deliverable upon conversion of such Convertible Preferred Stock
shall be treated for all purposes as the record holder or holders of such Common
Stock on such date (the "Conversion Date"). The holder of record of any share of
Convertible Preferred Stock on any record date for the holders entitled to
receive any dividend or distribution in respect of the Convertible Preferred
Stock will be entitled to receive such dividend or distribution on the date
specified for payment thereof notwithstanding that such share of Convertible
Preferred Stock may be converted prior to such payment's date but after such
record date.
(c) Adjustment of Conversion Price. The Conversion Price at which a
share of Convertible Preferred Stock is convertible into Common Stock shall be
subject to adjustment from time to time as follows:
(i) In case the Corporation shall, after the Issue Date, pay a
dividend or make a distribution on its Common Stock or on any other class
or series of capital stock of the Corporation which dividend or
distribution includes or is convertible (without the payment of any
consideration other than surrender of such convertible security) into
Common Stock, the Conversion Price in effect at the opening of business on
the day following the date fixed for determination of the holders of Common
Stock or capital stock entitled to such payment or distribution (the
"Record Date") shall be reduced by multiplying such Conversion Price by a
fraction of which (A) the numerator shall be the number of shares of Common
Stock outstanding at the close of business on the Record Date and (B) the
denominator shall be the sum of such number of shares and the total number
of shares constituting or included in such dividend or other distribution
(or in the case of a dividend consisting of securities convertible into
Common Stock, the number of shares of Common Stock into which such
securities are
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Certificate of Designation
convertible), such reduction to become effective immediately after the
opening of business on the day following the Record Date ; provided,
however, that if any such dividend or distribution is rescinded and not
paid, then the Conversion Price shall, as of the date when it is determined
that such dividend or distribution price will be rescinded, revert back to
the Conversion Price in effect prior to the adjustment made pursuant to
this paragraph.
(ii) In case the Corporation shall issue or sell (a) Common Stock, (b)
rights, warrants or options entitling the holders thereof to subscribe for
or purchase shares of Common Stock or (c) any security convertible into
Common Stock, in each case at a price, or having an exercise or conversion
price, per share less than the then-current Market Price per share of
Common Stock on (x) the date of such issuance or sale or (y) in the case of
a dividend or distribution of such rights, warrants, options or convertible
securities to the holders of Common Stock, the date fixed for determination
of the holders of such Common Stock entitled to such dividend or
distribution (the date specified in clause (x) or (y) being the "Relevant
Date") (excluding any issuance for which an appropriate and full adjustment
has been made pursuant to the preceding subparagraph (i)), the Conversion
Price shall be reduced by multiplying the then-current Conversion Price by
a fraction of which (A) the numerator shall be the number of shares of
Common Stock outstanding at the open of business on the Relevant Date plus
the number of shares of Common Stock which the aggregate consideration
received or receivable (I) for the total number of shares of Common Stock,
rights, warrants or options or convertible securities so issued or sold,
and (II) upon the exercise or conversion of all such rights, warrants,
options or securities, would purchase at the then-current Market Price per
share of Common Stock and (B) the denominator shall be the number of shares
of Common Stock outstanding at the close of business on the Relevant Date
plus (without duplication) the number of shares of Common Stock subject to
all such rights, warrants, options and convertible securities, such
reduction of the Conversion Price to be effective at the opening of
business on the day following the Relevant Date; provided, however, that if
any such dividend or distribution is rescinded and not paid, then the
Conversion Price shall, as of the date when it is determined that such
dividend or distribution will be rescinded, revert back to the Conversion
Price in effect prior to the adjustment made pursuant to this paragraph.
The issuance of any shares of Common Stock or other rights, warrants,
options or convertible securities pursuant to (a) any restricted stock or
stock option plan or program of the
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Certificate of Designation
Corporation involving the grant of options or rights solely to officers,
directors, employees and/or consultants of the Corporation or its
Subsidiaries at below the then-current Market Price per share of Common
Stock (provided, that any such options or rights were initially granted
with an exercise or conversion price of not less than 85% of the
then-current Market Price per share of Common Stock), (b) any option,
warrant, right, or convertible security outstanding as of the date
hereof,(c) the terms of a firmly committed bona fide underwritten public
offering, or (d) any merger, acquisition, consolidation, or similar
transaction, shall not be deemed to constitute an issuance or sale to which
this clause (ii) applies. Upon the expiration unexercised of any rights,
warrants, options or rights to convert any convertible securities for which
an adjustment has been made pursuant to this clause (ii), the adjustments
shall forthwith be reversed to effect such rate of conversion as would have
been in effect at the time of such expiration or termination had such
rights, warrants, options or rights to convertible securities, to the
extent outstanding immediately prior to such expiration or termination,
never been issued.
(iii) In case the Common Stock shall be subdivided into a greater
number of shares of Common Stock or combined into a smaller number of
shares of Common Stock, the Conversion Price in effect at the opening of
business on the day following the day upon which such subdivision or
combination becomes effective shall be adjusted so that the holder of any
shares of Convertible Preferred Stock thereafter surrendered for conversion
into shares of Common Stock shall be entitled to receive the number of
shares of Common Stock which such holder would have owned or been entitled
to receive after the happening of such events had such shares of
Convertible Preferred Stock been surrendered for conversion immediately
prior to such event. Such adjustment shall become effective at the close of
business on the day upon which such subdivision or combination becomes
effective.
(iv) Subject to the last sentence of this subparagraph (iv), in case
the Corporation shall, by dividend or otherwise, distribute to all holders
of its Common Stock evidences of its indebtedness, shares of any class or
series of capital stock, cash or assets (including securities, but
excluding any shares of Common Stock, rights, warrants, options or
convertible securities for which an appropriate and full adjustment has
been made pursuant to subparagraph (i) or (ii) above), the Conversion Price
in effect on the day immediately preceding the date fixed for the payment
of
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Certificate of Designation
such distribution (the date fixed for payment being referred to as the
"Reference Date") shall be reduced by multiplying such Conversion Price by
a fraction of which the numerator shall be the current Market Price per
share of the Common Stock on the Reference Date less the fair market value
(as determined in good faith by the Board of Directors, whose determination
shall be mailed to the holders of the Convertible Preferred Stock) on the
Reference Date of the portion of the evidences of indebtedness, shares of
capital stock, cash and assets so distributed applicable to one share of
Common Stock, and the denominator shall be such current Market Price per
share of the Common Stock, such reduction to become effective immediately
prior to the opening of business on the day following the Reference Date;
provided, however, that if such dividend or distribution is rescinded and
not paid, then the Conversion Price shall, as of the date when it is
determined that such dividend or distribution will be rescinded, revert
back to the Conversion Price in effect prior to the adjustment made
pursuant to this paragraph. If the Board of Directors determines the fair
market value of any distribution for purposes of this subparagraph (iv) by
reference to the actual or when issued trading market for any securities
comprising such distribution, it must in doing so consider, to the extent
possible, the prices in such market over the same period used in computing
the current Market Price per share of Common Stock pursuant to this Section
VI(c). Notwithstanding the foregoing, if the holders of a majority of the
outstanding Convertible Preferred Stock shall dispute the fair market
determination of the Board of Directors, an investment banking firm (an
"Independent Expert") mutually agreeable to the Corporation and such
majority holders shall be selected to determine the fair market value of
the Common Stock as of the Reference Date, and such Independent Expert's
determination shall be final, binding and conclusive. All costs and
expenses of such Independent Expert shall be borne by the holders of the
then outstanding Convertible Preferred Stock unless the determination of
fair market value is more favorable to such holders by 5% or more, in which
case, all such costs and expenses shall be borne by the Corporation. For
purposes of this subparagraph (iv), any dividend or distribution that also
includes shares of Common Stock or rights, warrants or options to subscribe
for or purchase shares of Common Stock shall be deemed to be (1) a dividend
or distribution of the evidences of indebtedness, cash, assets or shares of
capital stock other than such shares of Common Stock or rights, warrants,
options or convertible securities (making any Conversion Price reduction
required by this subparagraph (iv)) immediately followed by (2) a dividend
or distribution of
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Certificate of Designation
such shares of Common Stock or such rights, warrants, options or
convertible securities (making any further Conversion Price reduction
required by subparagraph (i) or (ii) of this Section VI(c)), except (A) the
Reference Date of such dividend or distribution as defined in this
subparagraph (iv) shall be substituted as "the date fixed for the
determination of shareholders entitled to receive such dividend or other
distribution" and the "Relevant Date" within the meaning of subparagraphs
(i) and (ii) of this Section VI(c) and (B) any shares of Common Stock
included in such dividend or distribution shall not be deemed "outstanding
at the close of business on the date fixed for such determination" within
the meaning of subparagraph (i) of this Section VI(c)).
(v) No adjustment in the Conversion Price shall be required if (A) the
holders of the outstanding Convertible Preferred Stock receive the dividend
or distribution otherwise giving rise to such adjustment or (B) such
adjustment would require an increase or decrease of less than 1% in the
Conversion Price; provided, however, that any adjustments which by reason
of this subparagraph (v)(B) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment or in any
conversion pursuant to this Section VI.
(vi) Whenever the Conversion Price is adjusted as herein provided:
(1) the Corporation shall compute the adjusted Conversion Price
and shall prepare a certificate signed by the Chief Financial Officer
of the Corporation setting forth the adjusted Conversion Price and
showing in reasonable detail the facts upon which such adjustment is
based, and such certificate shall forthwith be filed with the Transfer
Agent for the Convertible Preferred Stock; and
(2) as soon as reasonably practicable after the adjustment, the
Corporation shall mail to all record holders of Convertible Preferred
Stock at their last address as they shall appear upon the stock
transfer books of the Corporation a notice stating that the Conversion
Price has been adjusted and setting forth the adjusted Conversion
Price.
(vii) The Corporation from time to time may reduce the Conversion
Price by any amount for any period of time if the period is at least 20
days, the reduction is irrevocable during the period, subject to any
conditions that the Board
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Certificate of Designation
of Directors may deem relevant, and the Board of Directors of the
Corporation shall have made a determination that such reduction would be in
the best interest of the Corporation, which determination shall be
conclusive. Whenever the Conversion Price is reduced pursuant to the
preceding sentence, the Corporation shall mail to holders of record of the
Convertible Preferred Stock a notice of the reduction at least fifteen days
prior to the date the reduced Conversion Price takes effect, and such
notice shall state the reduced Conversion Price and the period it will be
in effect. If the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or
other distribution, and shall thereafter and before the distribution to
shareholders thereof legally abandon its plan to pay or deliver such
dividend or distribution, then thereafter no adjustment in the number of
shares of Common Stock issuable upon exercise of the right of conversion
granted by this paragraph (c) or in the Conversion Price then in effect
shall be required by reason of the taking of such record.
(viii) Anything in this Section VI(c) to the contrary notwithstanding,
in the event that a record date is established for a dividend or
distribution that gives rise to an adjustment to the Conversion Price
pursuant to this Section VI(c), if any share of Convertible Preferred Stock
is converted into shares of Common Stock between such record date and the
date such dividend or distribution is paid then (x) the number of shares of
Common Stock issued at the time of such conversion will be determined by
reference to the Conversion Price as in effect without taking into account
the adjustment resulting from such dividend or distribution and (y) on the
date that such dividend or distribution is actually paid there shall be
issued in respect of such conversion such number of additional shares of
Common Stock as is necessary to reflect the Conversion Price in effect
after taking into account the adjustment resulting from the dividend or
distribution.
(d) No Fractional Shares. No fractional shares of Common Stock shall
be issued upon conversion of Convertible Preferred Stock. If more than one
certificate evidencing shares of Convertible Preferred Stock shall be
surrendered for conversion at such time by the holder, the number of full shares
issuable upon conversion thereof shall be computed on the basis of the aggregate
number of shares of Convertible Preferred Stock so surrendered. Instead of any
fractional share of Common Stock that would otherwise be issuable to a holder
upon conversion of any shares of Convertible Preferred Stock, the Corporation
shall pay a cash adjustment in respect of such fractional share in an
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Certificate of Designation
amount equal to the fraction of the then-current Market Price per share of
Common Stock on the day of conversion or, if the day of conversion is not a
Trading Day, on the next preceding Trading Day.
(e) Reclassification, Consolidation, Merger or Sale of Assets. In the
event that the Corporation shall be a party to any transaction pursuant to which
the Common Stock is converted into the right to receive other securities, cash
or other property (including without limitation any capitalization or
reclassification of the Common Stock (other than a change in par value, or from
par value to no par value, or from no par value to par value, or as a result of
a subdivision or combination of the Common Stock), any consolidation of the
Corporation with, or merger of the Corporation into, any other entity, any
merger of another entity into the Corporation (other than a merger which does
not result in a reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock), any sale or transfer of all or
substantially all of the assets of the Corporation or any share exchange), then
lawful provisions shall be made as part of the terms of such transaction whereby
the holder of each share of Convertible Preferred Stock then outstanding shall
have the right thereafter to convert such share only into the kind and amount of
securities, cash and other property receivable upon such transaction by a holder
of the number of shares of Common Stock into which such share of Convertible
Preferred Stock might have been converted immediately prior to such transaction.
The Corporation or the entity formed by such consolidation or resulting from
such merger or which acquires such shares or which acquires the Corporation's
shares, as the case may be, shall make provisions in its certificate or articles
of incorporation or other constituting document to establish such right.
Adjustments for events subsequent to the effective date of such a consolidation,
merger, sale or transfer of assets shall be as nearly equivalent as may be
reasonably practicable to the adjustments provided for herein. In any such
event, effective provisions shall be made in the certificate or articles of
incorporation of the resulting or surviving corporation, in any contract of
sale, conveyance, lease, transfer or otherwise so that the provisions set forth
herein for the protection of the rights of the holder of Convertible Preferred
Stock shall thereafter continue to be applicable, and any such resulting or
surviving corporation shall expressly assume the obligation to pay dividends and
deliver, upon conversion, such shares of common stock, other securities, or cash
as set forth herein. The above provisions shall similarly apply to successive
transactions of the foregoing type.
(f) Reservation of Shares, Etc. The Corporation shall at all times
reserve and keep available, free from preemptive
14
Certificate of Designation
rights, out of its authorized and unissued stock, solely for the purpose of
effecting the conversion of the Convertible Preferred Stock, such number of
shares of its Common Stock as shall from time to time be sufficient to permit
the conversion of all shares of Convertible Preferred Stock from time to time
outstanding. Without limitation of the foregoing, the Corporation shall from
time to time, in accordance with the laws of the State of Minnesota, in good
faith and as expeditiously as practicable endeavor to cause the authorized
number of shares of Common Stock to be increased if at any time the number of
shares of authorized and unissued Common Stock shall not be sufficient to permit
the conversion of all the then outstanding shares of Convertible Preferred
Stock.
If any shares of Common Stock required to be reserved for purposes of
conversion of the Convertible Preferred Stock hereunder require registration
with or approval of any governmental authority under any Federal or State law
before such shares may be issued upon conversion, the Corporation will in good
faith and as expeditiously as possible endeavor to cause such shares to be duly
registered or approved as the case may be. If the Common Stock is listed on any
national securities exchange, the Corporation will, prior to the issuance of
shares of Common Stock upon conversion of the Convertible Preferred Stock, if
permitted by the rules of such exchange, list and keep listed on such exchange,
upon official notice of issuance, all shares of Common Stock issuable upon
conversion of the Convertible Preferred Stock, for so long as the Common Stock
continues to be so listed.
(g) Prior Notice of Certain Events. In case:
(i) the Corporation shall (1) declare any dividend (or any other
distribution) on its Common Stock, other than (A) a dividend payable in
shares of Common Stock or (B) a dividend payable in cash out of its
retained earnings other than any special or nonrecurring or other
extraordinary dividend or (2) declare or authorize a redemption or
repurchase of in excess of 5% of the then outstanding shares of Common
Stock;
(ii) the Corporation shall authorize the granting to all holders of
Common Stock of rights or warrants to subscribe for or purchase any shares
of stock of any class or series or of any other rights or warrants;
(iii) of any reclassification of Common Stock (other than a
subdivision or combination of the outstanding Common Stock, or a change in
par value, or from par value to no par value, or from no par value to par
value), or of any
15
Certificate of Designation
consolidation or merger to which the Corporation is a party and for which
approval of any shareholders of the Corporation shall be required, or of
the sale of all or substantially all of the assets of the Corporation or of
any share exchange whereby the Common Stock is converted into other
securities, cash or other property;
(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of the Corporation; or
(v) of any other event which would require an adjustment to the
Conversion Price under subparagraph VI(c);
then the Corporation shall cause to be filed with the Transfer Agent for the
Convertible Preferred Stock, and shall cause to be mailed to the holders of
record of the Convertible Preferred Stock, at their last addresses as they shall
appear upon the stock transfer books of the Corporation, at least ten days prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record (if any) is to be taken for the purpose
of such dividend, distribution, redemption, repurchase, or grant of rights or
warrants or, if a record is not to be taken, the date as of which the holders of
Common Stock of record to be entitled to such dividend, distribution,
redemption, repurchase, rights or warrants are to be determined or (y) the date
on which such reclassification, consolidation, merger, sale, transfer, share
exchange, dissolution, liquidation, winding up or other event is expected to
become effective, and the date as of which it is expected that holders of Common
Stock of record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation,
winding up or other event (but no failure to mail such notice or any defect
therein or in the mailing thereof shall affect the validity of the corporate
action required to be specified in such notice).
(h) Definitions. The following definitions shall apply to terms used
in this Section VI:
(i) "Closing Price" of any security on any day shall mean the last
reported sale price regular way on such day or, in case no such sale takes
place on such day, the average of the reported closing bid and asked prices
regular way of such security in each case as reported in the consolidated
transaction reporting system with respect to securities quoted on Nasdaq
or, if the shares of such security are not quoted on Nasdaq, as reported in
the principal consolidated transaction reporting system with respect to
securities listed on the principal national
16
Certificate of Designation
securities exchange on which the shares of such security are listed or
admitted to trading or, if the shares of such security are not quoted on
Nasdaq and not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the
high bid and low asked prices on such other nationally recognized quotation
system then in use, or, if on any such day the shares of such security are
not quoted on any such quotation system, the average of the closing bid and
asked prices as furnished by a professional market maker selected by the
Board of Directors making a market in the shares of such security.
Notwithstanding the foregoing, if the shares of such security are not
publicly held or so listed, quoted or publicly traded, the "Closing Price"
means the fair market value of a share of such security, as determined in
good faith by the Board of Directors, provided, however, that if the
holders of a majority of outstanding Convertible Preferred Stock shall
dispute the fair market value as determined by the Board, such majority
holders and the Corporation may retain an Independent Expert. The
determination of fair market value by the Independent Expert shall be
final, binding and conclusive. All costs and expenses of the Independent
Expert shall be borne by the holders of the outstanding Convertible
Preferred Stock unless the determination of fair market value is more
favorable to such holders by 5% or more, in which case, all such costs and
expenses shall be borne by the Corporation.
(ii) "Market Price" with respect to a share of Common Stock on any day
means, except as set forth below in the case that the shares of Common
Stock are not publicly held or listed, the average of the "quoted prices"
of the Common Stock for 30 consecutive Trading Days commencing 45 Trading
Days before the date in question; provided that if during such 30
consecutive Trading Day period (the "valuation period"), there shall occur
a record date for determining holders of Common Stock entitled to receive a
dividend or distribution on the Common Stock, the "Market Price" shall be
reduced by subtracting the amount obtained by multiplying (a) the value of
such dividend or distribution per share of Common Stock by (b) a fraction
(i) the numerator of which shall be the number of Trading Days from the
beginning of such valuation period to and including the record date for
such dividend or distribution and (ii) the denominator of which shall be
the number of Trading Days in such valuation period. The term "quoted
prices" of the Common Stock shall mean the last reported sale price on that
day or, in case no such reported sale takes place on such day, the average
of the last reported bid and asked prices, regular way, on that day, in
either case, as reported in the consolidated
17
Certificate of Designation
transaction reporting system with respect to securities quoted on Nasdaq
or, if the shares of Common Stock are not quoted on Nasdaq, as reported in
the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which
the shares of Common Stock are listed or admitted to trading or, if the
shares of Common Stock are not quoted on Nasdaq and not listed or admitted
to trading on any national securities exchange, the last quoted price or,
if not so quoted, the average of the high bid and low asked prices on such
other nationally recognized quotation system then in use, or, if on any
such day the shares of Common Stock are not quoted on any such quotation
system, the average of the closing bid and asked prices as furnished by a
professional market maker selected by the Board of Directors making a
market in the shares of Common Stock. Notwithstanding the foregoing, if the
shares of Common Stock are not publicly held or so listed, quoted or
publicly traded, the "Market Price" means the fair market value of a share
of Common Stock, as determined in good faith by the Board of Directors
provided, however, that if the holders of a majority of outstanding
Convertible Preferred Stock shall dispute the fair market value as
determined by the Board, such majority holders and the Corporation may
retain an Independent Expert. The determination of fair market value by the
Independent Expert shall final, binding and conclusive. All costs and
expenses of the Independent Expert shall be borne by the holders of the
then outstanding Convertible Preferred Stock unless the determination of
fair market value is more favorable to such holders by 5% or more, in which
case, all such costs and expenses shall be borne by the Corporation.
(iii) "Nasdaq" shall mean the National Association of Securities
Dealers Automatic Quotation System.
(iv) "Trading Day" shall mean a day on which securities are traded on
the national securities exchange or quotation system or in the
over-the-counter market used to determine the Closing Price.
VII. Voting Rights. General. Subject to Section XI(d) and except as
set forth below or as otherwise from time to time required by law, the holders
of shares of Convertible Preferred Stock shall vote as a class together with the
holders of the Common Stock on all matters with respect to which the holders of
Common Stock have the right to vote. In connection with any right to vote, each
share of Convertible Preferred Stock shall be entitled to a number of votes
which is equal to the whole number of shares of Common Stock that could be
obtained upon conversion of one share of Convertible Preferred Stock at
18
Certificate of Designation
the Conversion Price applicable on the record date set with respect to such
vote. Any shares of Convertible Preferred Stock owned, directly or indirectly,
by any entity of which the Corporation owns, directly or indirectly, a majority
of the shares entitled to vote for directors shall not have voting rights
hereunder and shall not be counted in determining the presence of a quorum.
(b) Voting Rights for Directors.
(i) On the Issue Date, the number of directors constituting the Board
of Directors shall, without further action, be increased to seven. For so
long as the Restricted Parties (as defined in the Shareholders Agreement
(as defined below)) own a majority of the outstanding shares of Convertible
Preferred Stock and the Investor (as defined in the Shareholder Agreement)
is entitled to designate at least one nominee (a "Designee") for election
to the Board of Directors of the Corporation pursuant to Section 2.1 of the
Shareholder Agreement, subject to Section XI(d), the holders of the
outstanding shares of Convertible Preferred Stock shall have the right,
voting separately as a class and to the exclusion of the holders of all
other classes of stock of the Corporation, to (A) initially elect two
directors (who are reasonably acceptable to the Corporation) and (B)
thereafter, as long as the Investor is entitled to designate at least one
Designee for election to the Board of Directors pursuant to Section 2.1 of
the Shareholder Agreement, elect that number of directors equal to the
number of Designees that the Investor is entitled to so designate (with
each Designee being reasonably acceptable to the Corporation if such
Designee has not previously been a member of the Board of Directors). For
as long as the holders of Convertible Preferred Stock voting separately as
a class are entitled to elect one or more directors pursuant to this
Section VII(b)(i), holders of the outstanding Convertible Preferred Stock
shall not be entitled to vote in the election of any other directors of the
Corporation.
(ii) The right to elect directors as described in Section VII(b)(i)
hereof may be exercised initially either at a special meeting of the
holders of Convertible Preferred Stock, called as hereinafter provided in
Section VII(b)(iii) hereof, at any annual meeting of shareholders held for
the purpose of electing directors, or by the written consent of the holders
of Convertible Preferred Stock without a meeting pursuant to Section
302A.441 of the Minnesota Business Corporation Act and thereafter at such
annual meeting (or by written consent in lieu thereof). For so long as the
Restricted Parties own a majority of the outstanding shares
19
Certificate of Designation
of Convertible Preferred Stock and the Investor is entitled to designate at
least one Designee for election to the Board of Directors of the
Corporation pursuant to Section 2.1 of the Shareholder Agreement and
subject to Section XI(d) hereof, such voting right shall continue until
such time as all outstanding shares of Convertible Preferred Stock shall
have been redeemed or otherwise retired. If the Restricted Parties own less
than a majority of the outstanding shares of Convertible Preferred Stock or
if the Investor is no longer entitled to designate at least one Designee
for election to the Board of Directors pursuant to Section 2.1 of the
Shareholder Agreement, the holders of the Convertible Preferred Stock
shall, in any election of directors, vote as a single class together with
the holders of the Common Stock for the election of directors and each
share of Convertible Preferred Stock will be entitled to the number of
votes determined pursuant to Section VII(a).
(iii) The Secretary of the Corporation may, and upon the written
request of the holders of record of at least 10% of the outstanding shares
of Convertible Preferred Stock (addressed to the Secretary of the
Corporation at the principal office of the Corporation) shall, call a
special meeting of the holders of Convertible Preferred Stock for the
election (and, if applicable, removal) of the directors to be elected by
them as herein provided. Such call shall be made by notice to each holder
by first-class mail, postage prepaid at its address as it appears in the
records of the Corporation, and such notice shall be mailed at least 10
days but no more than 20 days before the date of the special meeting, or as
required by law. Such meeting shall be held at the earliest practicable
date upon the notice required for special meetings of shareholders at the
place designated by the Secretary of the Corporation. If such meeting shall
not be called by a proper officer of the Corporation within 15 days after
receipt of such written request by the Secretary of the Corporation, then
the holders of record of at least 10% of the shares of Convertible
Preferred Stock then outstanding may call such meeting at the expense of
the Corporation, and such meeting may be called by such holders upon the
notice required for special meetings of shareholders and shall be held at
the place designated in such notice. Any holder of Convertible Preferred
Stock that would be entitled to vote at any such meeting shall have access
to the stock books of the Corporation for the purpose of causing a meeting
of holders of Convertible Preferred Stock to be called pursuant to the
provisions of this Section VII(b)(iii).
20
Certificate of Designation
(iv) At any meeting held for the purpose of electing directors at
which the holders of Convertible Preferred Stock shall have the right to
elect directors as a class as provided in this Section VII(b), the presence
in person or by proxy of the holders of a majority of the then outstanding
shares of Convertible Preferred Stock shall be required and be sufficient
to constitute a quorum of such class for the election of directors by such
class. At any such meeting or adjournment thereof, (x) the absence of a
quorum of the holders of Convertible Preferred Stock shall not prevent the
election of directors other than the directors to be elected by the holders
of Convertible Preferred Stock as a class, and the absence of a quorum or
quorums of the holders of capital stock entitled to elect such other
directors shall not prevent the election of the directors to be elected by
the holders of Convertible Preferred Stock, and (y) in the absence of a
quorum of the holders of Convertible Preferred Stock, a majority of the
holders of Convertible Preferred Stock present in person or by proxy shall
have the power to adjourn the meeting for the election of directors which
such holders are entitled to elect as a class, from time to time, without
notice (except as required by law) other than announcement at the meeting,
until a quorum shall be present.
(v) Except as provided in Section XI(d) hereof and this paragraph (v),
the term of office of any director elected by the holders of Convertible
Preferred Stock pursuant to Section VII(b)(i) hereof shall terminate upon
the expiration of his term and the election of his successor. Directors
elected by the holders of Convertible Preferred Stock pursuant to Section
VII(b) may be removed with or without cause by the holders of a majority of
the outstanding shares of Convertible Preferred Stock and shall not
otherwise be subject to removal other than upon election of their successor
or the Convertible Preferred Stock voting separately as a class no longer
being entitled to elect directors as provided herein.
(vi) For so long as the holders of Convertible Preferred Stock are
entitled, voting separately as a class, to elect at least one member of the
Board of Directors and the Restricted Parties own a majority of the
outstanding Convertible Preferred Stock, in case of a vacancy occurring in
the office of any director so elected pursuant to Section VII(b)(i) hereof,
the holders of a majority of the Convertible Preferred Stock then
outstanding may, at a special meeting of the holders or by written consent
as provided above, elect a successor to hold office for the unexpired term
of such director.
21
Certificate of Designation
(vii) Unless otherwise agreed to by the holders of a majority of the
outstanding shares of Convertible Preferred Stock, for so long as the
holders of Convertible Preferred Stock are entitled, voting separately as a
class, to elect at least one member of the Board of Directors and the
Restricted Parties own a majority of the outstanding Convertible Preferred
Stock, (A) the number of directors constituting the Board of Directors
shall remain at seven, (B) each of the Audit Committee and the Compensation
Committee of the Board of Directors shall contain at least one director
elected by the holders of Convertible Preferred Stock and (C) with respect
to each other committee of the Board of Directors, the percentage of
directors on such committee designated by the holders of Convertible
Preferred Stock shall, at all times, be at least equal to the percentage of
the Board of Directors elected by the holders of Convertible Preferred
Stock; provided, that, if under applicable law, such committee can only be
comprised of disinterested directors, then the provisions of this clause
(C) shall not apply to the holders of the Convertible Preferred Stock
unless each director so designated by such holders is a disinterested
director for purposes of such committee.
(c) Class Voting. So long as any shares of the Corporation's
Convertible Preferred Stock are outstanding the Corporation shall not, without
the affirmative vote or consent of the holders of at least a majority of all
outstanding shares of the Corporation's Convertible Preferred Stock, voting or
consenting separately as a class without regard to series:
(i) create any class of stock that by its terms ranks senior to or on
a parity with the Convertible Preferred Stock as to dividends or upon
liquidation, dissolution or winding up of the Corporation or increase the
authorized number of shares of, or issue any additional shares of or any
securities convertible into shares of, or reclassify any Junior Stock into
shares of, any such class;
(ii) alter or change any of the provisions of the Corporation's
Articles of Incorporation (whether by merger, consolidation or other
business combination with another person or by any other means) so as to
adversely affect the relative rights and preferences of any outstanding
Convertible Preferred Stock of the Corporation; provided, however, that
neither (A) the creation, amendment or reclassification of any class of
stock that following such creation, amendment or reclassification by its
terms ranks junior to shares of Convertible Preferred Stock of the
Corporation as to dividends and upon liquidation,
22
Certificate of Designation
dissolution or winding up, nor (B) an increase in the authorized number of
shares of any such class, nor (C) any merger, consolidation or other
business combination subject to the provisions of paragraph VI(e), shall
give rise to any such voting right;
(iii) issue any additional shares of Convertible Preferred Stock.
(d) Additional Class Voting. Unless otherwise agreed to by the holders
of a majority of the outstanding shares of Convertible Preferred Stock, for so
long as the Restricted Parties own a majority of the outstanding shares of
Convertible Preferred Stock, the Corporation shall not, without the express
written consent of the holders of a majority of the shares of Preferred Stock,
take any action, requiring the approval of the "Investor" pursuant to Sections
3.2, 3.3 or 3.4 of the Shareholder Agreement. The provisions of this paragraph
(d) will terminate with respect to such Sections 3.2, 3.3 or 3.4, as applicable,
when the obligations of the Corporation under such Sections terminate under the
Shareholder Agreement.
VIII. Status of Acquired Shares. For purposes hereof, all shares of
Convertible Preferred Stock owned, directly or indirectly, by any entity of
which the Corporation owns, directly or indirectly, a majority of the shares
entitled to vote for directors shall be deemed not outstanding. Shares of
Convertible Preferred Stock redeemed by the Corporation, received upon
conversion pursuant to Section VI or otherwise acquired by the Corporation shall
be restored to the status of authorized but unissued shares of capital stock,
without designation as to series, and, subject to the other provisions hereof,
may thereafter be issued, but not as shares of Convertible Preferred Stock.
IX. Modification and Waiver. The Corporation may not, without the
consent of each holder affected thereby, (a) change the stated redemption date
of the Convertible Preferred Stock, (b) reduce the Stated Value or liquidation
preference of, or dividend on, the Convertible Preferred Stock, (c) change the
place or currency of payment of the Stated Value or liquidation preference of,
or dividend on, the Convertible Preferred Stock or (d) reduce the percentage of
outstanding Convertible Preferred Stock necessary to modify or amend the terms
thereof or to grant waivers in respect thereto.
X. Severability of Provisions. Whenever possible, each provision
hereof shall be interpreted in a manner as to be effective and valid under
applicable law, but if any provision hereof is held to be prohibited by or
invalid under applicable
23
Certificate of Designation
law, such provision shall be ineffective only to the extent of such prohibition
or invalidity, without invalidating or otherwise adversely affecting the
remaining provisions hereof. If a court of competent jurisdiction should
determine that a provision hereof would be valid or enforceable if a period of
time were extended or shortened or a particular percentage were increased or
decreased, then such court may make such change as shall be necessary to render
the provision in question effective and valid under applicable law.
XI. Miscellaneous. Transfer Taxes. The Corporation shall pay any and
all stock transfer and documentary stamp taxes that may be payable in respect of
any issuance of delivery of shares of Convertible Preferred Stock or shares of
Common Stock or other securities issued on account of Convertible Preferred
Stock pursuant hereto or certificates or instruments evidencing such shares or
securities. The Corporation shall not, however, be required to pay any such tax
which may be payable in respect of any transfer involved in the issuance or
delivery of shares of Convertible Preferred Stock or Common Stock or other
securities in a name other than that in which the shares of Convertible
Preferred Stock with respect to which such shares or other securities are issued
or delivered were registered, or in respect of any payment to any entity with
respect to any such shares or securities other than a payment to the registered
holder thereof, and shall not be required to make any such issuance, delivery or
payment unless and until the entity otherwise entitled to such issuance,
delivery or payment has paid to the Corporation the amount of any such tax or
has established, to the satisfaction of the Corporation, that such tax has been
paid or is not payable.
(b) Failure to Designate Shareholder or Payee. In the event that a
holder of shares of Convertible Preferred Stock shall not by written notice
designate the name in which shares of Common Stock to be issued upon conversion
of such shares should be registered or to whom payment upon redemption of shares
of Convertible Preferred Stock should be made, or the address to which the
certificates or instruments evidencing such shares or such payment should be
sent, the Corporation shall be entitled to register such shares and or such
payment in the name of the holder of such Convertible Preferred Stock as shown
on the records of the Corporation and to send the certificates or instruments
evidencing such shares or such payment, to the address of such holder shown on
the records of the Corporation.
(c) Registration Rights Agreement. Reference is made to the
Registration Rights Agreement, dated on or about April 15, 1999 (as the same may
be amended, supplemented or modified from time to time pursuant to the terms
thereof, the "Registration
24
Certificate of Designation
Rights Agreement"), among the Corporation, the Investor and National
Broadcasting Company, Inc. So long as any shares of Convertible Preferred Stock
constitute "Registrable Securities" as defined in the Registration Rights
Agreement, each holder shall be entitled to the rights granted by the
Corporation thereunder and shall be bound by the restrictions therein.
(d) Shareholder Agreement. Reference is made to the Shareholder
Agreement, dated on or about April 15, 1999 (as the same may be amended,
supplemented or modified from time to time pursuant to the terms thereof, the
"Shareholder Agreement"), among the Corporation, the Investor and National
Broadcasting Company, Inc. The Convertible Preferred Stock shall be subject to
the terms and conditions set forth in the Shareholder Agreement, including
without limitation, the voting, transfer and standstill restrictions set forth
therein.
(e) Documents on File. Copies of each of the Registration Rights
Agreement and Shareholder Agreement shall be kept on file at the principal place
of business of the Corporation at 6740 Shady Oak Road, Eden Prairie, MN
55344-3433.
25
Certificate of Designation
IN WITNESS WHEREOF, ValueVision International, Inc. has caused this
Certificate of Designation to be signed on its behalf by Gene McCaffery, its
President, and David T. Quinby, its Secretary, this 15th day of April, 1999.
VALUEVISION INTERNATIONAL, INC.
By: /s/ Gene McCaffery
-----------------------------
Name: Gene McCaffery
Title: President
ATTEST:
/s/ David T. Quinby
-----------------------------
David T. Quinby, Secretary
Dates Referenced Herein and Documents Incorporated by Reference
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