Attached files
file | filename |
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10-K - FORM 10-K - iMedia Brands, Inc. | c57448e10vk.htm |
EX-23 - EX-23 - iMedia Brands, Inc. | c57448exv23.htm |
EX-21 - EX-21 - iMedia Brands, Inc. | c57448exv21.htm |
EX-32 - EX-32 - iMedia Brands, Inc. | c57448exv32.htm |
EX-31.2 - EX-31.2 - iMedia Brands, Inc. | c57448exv31w2.htm |
EX-31.1 - EX-31.1 - iMedia Brands, Inc. | c57448exv31w1.htm |
EX-10.16 - EX-10.16 - iMedia Brands, Inc. | c57448exv10w16.htm |
EX-10.17 - EX-10.17 - iMedia Brands, Inc. | c57448exv10w17.htm |
Exhibit 3.1
ARTICLES OF INCORPORATION
OF
VALUEVISION MEDIA, INC.
OF
VALUEVISION MEDIA, INC.
(Conformed Copy Includes all amendments through April 1, 2010)
ARTICLE 1
NAME
NAME
The name of the Corporation is ValueVision Media, Inc.
ARTICLE 2
REGISTERED OFFICE
REGISTERED OFFICE
The address of the registered office of the Corporation is 6740 Shady Oak Road, Minneapolis,
Minnesota 55344-3433.
ARTICLE 3
CAPITAL
CAPITAL
A. | The Corporation is authorized to issue One Hundred Million (100,000,000) shares of capital stock, having a par value of one cent ($.01) per share in the case of common stock, and having a par value as determined by the Board of Directors in the case of preferred stock, to be held, sold and paid for at such times and in such manner as the Board of Directors may from time to time determine in accordance with the laws of the State of Minnesota. | ||
B. | In addition to any and all powers conferred upon the Board of Directors by the laws of the State of Minnesota, the Board of Directors shall have the authority to establish by resolution more than one class or series of shares, either preferred or common, and to fix the relative rights, restrictions and preferences of any such different classes or series, and the authority to issue shares of a class or series to another class or series to effectuate share dividends, splits or conversion of the Corporations outstanding shares. | ||
C. | The Board of Directors shall also have the authority to issue rights to convert any of the Corporations securities into shares of stock of any class or classes, the authority to issue options to purchase or subscribe for shares of stock of any class or classes, and the authority to issue share purchase or subscription warrants or any other evidence of such option rights which set forth the terms, provisions and conditions thereof, including the price or prices at which such shares may be subscribed for or purchased. Such options, warrants and rights, may be transferable or nontransferable and separable or inseparable from other securities of the Corporation. The Board of Directors is authorized to fix the terms, provisions and conditions of such options, warrants and rights, including the conversion basis or bases and the option price or prices at which shares may be subscribed for or purchased. | ||
D. | Any provisions herein to the contrary notwithstanding, except as otherwise provided by law, not more than twenty percent (20%) of the aggregate voting power of all shares outstanding entitled to vote on any matter shall be at any time voted by or for the account of aliens or their representatives, or by or for the account of a foreign government or representative thereof, or by or for the account of any corporation organized under the laws of foreign country. | ||
The Board of Directors shall make such rule and regulations as it shall deem necessary or appropriate to enforce the provisions of this paragraph D. | |||
E. | Except as otherwise provided by law, aliens, foreign governments, or corporations organized under the laws of a foreign country, or the representatives of such aliens, foreign governments, or corporations organized under the laws of a foreign country, shall not own, directly or through a third party who holds the stock for the account of such alien, foreign government, or corporation organized under the laws of a foreign country: (1) more than twenty percent (20%) of the number of shares of outstanding stock of the Corporation, or (2) shares representing more than twenty |
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percent (20%) of the aggregate voting power of all outstanding shares of voting stock of the Corporation. | |||
Shares of stock shall not be transferable on the books of the Corporation to aliens, foreign governments, or corporations organized under the laws of foreign countries, or to the representatives of, or persons holding for the account of, such aliens, foreign governments, or corporations organized under the laws of foreign countries, unless, after giving effect to such transfer, the aggregate number of shares of stock owned by or for the account of aliens, foreign governments, and corporations organized under the laws of foreign countries, and any representatives thereof, will not exceed twenty percent (20%) of the number of shares of outstanding stock of the Corporation, and the aggregate voting power of such shares will not exceed twenty percent (20%) of the aggregate voting power of all outstanding shares of voting stock of the Corporation. | |||
If, notwithstanding the restriction on transfer set forth in this Article 3E, the aggregate number of shares of stock owned by or for the account of aliens, foreign governments, and corporations organized under the laws of foreign countries, exceed twenty percent (20%) of the number of shares of outstanding stock of the Corporation, or if the aggregate voting power of such shares exceed twenty percent (20%) of the aggregate voting power of all outstanding shares of voting stock of the Corporation, the Corporation shall have 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, foreign governments, and corporations organized under the laws of foreign countries, in order to reduce the number of shares and/or percentage of voting power held by or for the account of aliens, foreign governments, and corporations organized under the laws of foreign countries, and their representatives to the maximum number or percentage allowed under these Articles of Incorporation or as otherwise required by applicable federal law. | |||
The Board of Directors shall make such rules and regulations as it deems necessary or appropriate to enforce the foregoing provisions of this Article 3E. |
ARTICLE 4
SHAREHOLDER RIGHTS
SHAREHOLDER RIGHTS
A. | No shareholder of the Corporation shall have any preemptive rights. | ||
B. | No shareholder of the Corporation shall have any cumulative voting rights. |
ARTICLE 5
WRITTEN ACTION BY LESS THAN ALL OF THE DIRECTORS
WRITTEN ACTION BY LESS THAN ALL OF THE DIRECTORS
Any action required or permitted to be taken at a Board meeting, other than an action
requiring shareholder approval, may be taken by written action of the Board of Directors if signed
by the number of directors that would be required to take the same action at a meeting at which all
directors were present.
ARTICLE 6
LIMITED LIABILITY OF DIRECTORS
LIMITED LIABILITY OF DIRECTORS
To the fullest extent permitted by law, a director shall have no personal liability to the
Corporation or its shareholders for breach of fiduciary duty as a director. Any amendment to or
repeal of this Article 6 shall not adversely affect any right or protection of a director of the
Corporation for or with respect to any acts or omissions of such director occurring prior to such
amendment or repeal.
ARTICLE 7
No officer or director of the Corporation shall be an alien, or a representative of a foreign
government.
The term alien as used in these Articles of Incorporation shall have the meaning assigned to
such term in the Communications Act of 1934, as amended.
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CERTIFICATE OF DESIGNATION OF
SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK
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.
(a) 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 Corporations now or hereafter issued
Common Stock, par value $0.01 per share (Common Stock), and to all of the Corporations 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).
(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 Corporations 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 Corporations 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.
(a) 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 Corporations 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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(c) No dividends shall be declared, paid or set apart for payment on shares of any class or
series of the Corporations 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 Corporations 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 Corporations 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
Corporations 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.
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 Corporations 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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(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
holders 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. (i) 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
holders 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 holders 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 Preferred Stock, such holder shall
deliver, within 20 days of the mailing to it of the Corporations notice described in this Section
V(c)(ii), a written notice stating such holders 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 Corporations 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 Corporations 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 Corporations 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
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shall continue until the redemption price is paid), such shares shall no longer be 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.
(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 payments 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
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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 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 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 even
ts 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 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
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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 Experts 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 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 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
8
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 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
Corporations 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 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.
9
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 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 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
10
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 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. (a) 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 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
11
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 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).
(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
12
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.
(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 Corporations 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 Corporations 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 Corporations 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, 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.
13
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 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. (a) 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 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.
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(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.
15
CERTIFICATE OF DESIGNATION OF
SERIES B REDEEMABLE PREFERRED STOCK
SERIES B REDEEMABLE PREFERRED STOCK
Pursuant to Section 302A.401 of the Minnesota Business Corporation Act, ValueVision Media,
Inc., a Minnesota corporation (the Corporation), hereby certifies that the following resolutions
were duly adopted by its Board of Directors on February 25, 2009, to set forth the powers,
designations, preferences and relative, participating, optional or other rights of its Series B
Redeemable 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 having the following designations, relative rights and preferences:
I. Designation of Series and Number of Shares. This series of the preferred stock shall be
designated the Series B Redeemable Preferred Stock (the Preferred Stock) and shall consist of
4,929,266 shares, par value $0.01 per share. The stated value of the Preferred Stock shall be
$8.288 per share (subject to appropriate adjustment in the event of any stock dividend, stock
split, combination or other similar recapitalization with respect to the Preferred Stock) (as
adjusted, the Stated Value). The number of shares of Preferred Stock may be decreased from time
to time, as such shares are redeemed as provided herein or otherwise reacquired by the Corporation,
by a resolution of the Board of Directors filed with the Secretary of State of the State of
Minnesota.
II. Rank.
(a) All shares of 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 Corporations now or hereafter issued Common Stock, par
value $0.01 per share (Common Stock), and to all of the Corporations now existing or hereafter
issued capital stock which by its terms ranks junior to the 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).
(b) Except as expressly permitted by Section 3.03(a)(ii)(B)(3) of the Shareholder Agreement
(as defined below), no payment on account of the purchase, redemption, retirement or other
acquisition of shares of Junior Stock or any class or series of the Corporations capital stock
which by its terms ranks junior to the 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 Corporations capital stock being herein
referred to as Junior Liquidation Stock), shall be made directly or indirectly by the Corporation
unless and until all the Preferred Stock shall have been redeemed as provided for herein or
otherwise reacquired by the Corporation.
III. Dividends.
(a) From and after the date of the issuance of any shares of Preferred Stock (the Issue
Date), dividends shall accrue at the rate of 12.0% per annum (compounded quarterly) (the Standard
Rate) (or at the Default Rate (as hereinafter defined), if, and to the extent, applicable) of the
Base Amount (as hereinafter defined) on such shares of Preferred Stock (the Accruing Dividends).
Notwithstanding the previous sentence, dividends shall accrue at the rate of 15.0% per annum
(compounded quarterly) (the Default Rate) of the Base Amount from and after the date of any
Default (as hereinafter defined) through and including the date on which the Corporation has cured
any Default. Accruing Dividends shall accrue and be declared by the Board of the Corporation on
February 25, May 25, August 25, and November 25 of each year (commencing with the first such date
to occur after the Issue Date) and shall be cumulative (whether or not declared and whether or not
the Corporation has funds legally available therefor); provided however, the Accruing Dividends
shall only be payable as set forth in this Section III(a) or in Sections IV or V. The Corporation
shall not declare, pay or set aside any dividends on shares of any Junior Stock, other than
dividends payable solely in shares of Junior Stock, so long as any shares of Preferred Stock are
outstanding. Holders of 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). All
dividends paid with respect to shares of Preferred Stock pursuant to this Section III shall be paid
pro rata to the holders entitled thereto. The Base Amount means the aggregate Stated Value of all
outstanding shares of Preferred Stock plus the Accruing Dividends to date on such shares (to the
extent not previously paid in cash); Default means failure by the Corporation to pay in cash
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when due any of the redemption payments required under Sections V(a) or V(c) (without regard to the
Companys failure to provide a redemption notice as provided in Section V), notwithstanding for
this purpose the requirement that funds be legally available therefor; and cure of any Default
refers to the date on which the Corporation has paid in cash any and all amounts otherwise required
to be paid, notwithstanding for this purpose the requirement that funds be legally available
therefor, under Sections V(a) or V(c).
(b) No dividends shall be declared, paid or set apart for payment on shares of any class or
series of the Corporations capital stock whether now existing or hereafter issued which by its
terms ranks, as to dividends, on a parity with the Preferred Stock (any such class or series of the
Corporations 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 Preferred Stock. No dividends shall be paid on Parity Dividend Stock except on dates on which
dividends are paid on the Preferred Stock. All dividends paid or declared and set apart for payment
on the 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 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 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
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 in cash equal to the Accruing Dividends on such shares on the date of
final distribution to such holders (to the extent not previously paid in cash) 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 Preferred Stock and any
class or series of the Corporations capital stock which by its terms ranks on a parity with the
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 Corporations
capital stock being herein referred to as Parity Liquidation Stock) shall be distributed ratably
among the holders of the 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 Preferred Stock, the holders of such shares shall not
be entitled to any further participation in any distribution of assets by the Corporation.
V. Redemption.
(a) Mandatory Redemption. The Corporation shall redeem for cash, out of any source of funds
legally available therefor, at a redemption price in each case equal to 100% of the Stated Value
per share, plus an amount in cash equal to all Accruing Dividends thereon outstanding to the
applicable redemption date (to the extent not previously paid in cash) (the Redemption Price),
shares of Preferred Stock in such amounts and at such dates as set forth below in this
Section V(a):
(i) On the fourth anniversary of the Issue Date, the Corporation shall pay an amount equal to
(A) $19,667,495, plus (B) an amount in cash equal to 30% of any additional Accruing Dividends that
have accrued since the Issue Date (to the extent not previously paid in cash) as a result of the
Default Rate (rather than the Standard Rate) being in effect, less (C) any amounts previously paid
by the Corporation under Sections V(a)(iii), V(a)(iv), V(b) and V(c), which amount shall be applied
first to all Accruing Dividends not previously paid in cash on outstanding shares of Preferred
Stock (pro rata with respect to all shares of Preferred Stock then outstanding), and then to redeem
shares of Preferred Stock at the Redemption Price.
(ii) On the fifth anniversary of the Issue Date, the Corporation shall redeem any and all
remaining outstanding shares of Preferred Stock as of such date at the Redemption Price;
(iii) Within 90 calendar days following the end of each fiscal year of the Corporation
(commencing with the fiscal year ending January 31, 2010), the Corporation shall, in the following
priority order, (1) apply any Excess Cash Balance as of the end of such fiscal year to pay any
Accruing Dividends on outstanding shares of Preferred Stock not previously paid in cash (pro rata
with respect to all shares of Preferred Stock then outstanding), and (2) redeem that number of
shares of Preferred Stock obtained by dividing any remaining Excess Cash Balance as of the end of
such fiscal year (after the payments required by clause (1) of this Section V(a)(iii)) by the
Redemption Price. Excess Cash Balance as of the end of any fiscal period means an amount equal to
(1) the
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cash and cash equivalents and marketable securities (the Cash Balance) reported on the
Corporations audited, if at fiscal year-end, or unaudited, if at fiscal quarter-end, balance sheet
as of the end of such fiscal period (the Balance Sheet), less (2) the amount included in such
Cash Balance attributable to any securities held by the Corporation that are characterized as
auction rate securities (or similar term), less (3) the amount obtained (whether positive or
negative) from subtracting (i) the accounts payable that would have been reported on the Balance
Sheet had all accounts payable been paid on stated terms (and no earlier or later), from (ii) the
accounts payable reported on the Balance Sheet, less (4) the bona fide estimated additional cash
required to fund operations, as reasonably determined and reflected in an operating budget approved
by the Corporations Board of Directors for the next four fiscal quarters following the end of such
fiscal period (the Additional Cash Amount), less (5) the amount included in the Cash Balance that
is attributable to cash pledged to vendors and other similar entities to secure the purchase price
of inventory acquired in the ordinary course of business, less (6) $20,000,000.
(iv) Within 45 calendar days following the end of any fiscal quarter of the Corporation
(except the fourth fiscal quarter of the Corporation, in which case Section V(a)(iii) shall be
applicable) during which an ARS Event (as defined below), an Asset Sale Event (as defined below) or
a Financing Event (as defined below) occurs, the Corporation shall, in the following priority
order, (1) apply any Excess Cash Balance as of the end of such fiscal quarter to pay any Accruing
Dividends on outstanding shares of Preferred Stock not previously paid in cash (pro rata with
respect to all shares of Preferred Stock then outstanding), and (2) redeem that number of shares of
Preferred Stock obtained by dividing any remaining Excess Cash Balance as of the end of such fiscal
quarter (after the payments required by clause (1) of this Section V(a)(iv)) by the Redemption
Price. ARS Event means the receipt of any net cash proceeds from the sale or other disposition of
any securities held by the Corporation that are characterized as auction rate securities (or
similar term). Asset Sale Event means a sale or other disposition for cash by the Corporation of
fixed assets outside of the ordinary course of business and Financing Event means the issuance by
the Corporation of indebtedness for borrowed money outside of the ordinary course of business;
provided that an Asset Sale Event or Financing Event shall not be deemed to occur for purposes of
the first sentence of this Section V(a)(iv) unless such Asset Sale Event or Financing Event,
together with any prior Asset Sale Events and Financing Events, generates net cash proceeds to the
Corporation in excess of (x) $500,000 in the current fiscal year or (y) $2,500,000 since the Issue
Date; provided, however, that the $500,000 limit in clause (x) shall be increased to the extent
such $500,000 limit was not entirely utilized in any prior fiscal year since the Issue Date.
(b) Redemption at Option of the Corporation. At any time and from time to time, at the option
of the Corporation and upon five calendar days prior written notice to the record holders of the
Preferred Stock, the Corporation may redeem for cash, out of any source of funds legally available
therefor, all or any of the outstanding shares of Preferred Stock, at the Redemption Price;
provided, however, that no share of Preferred Stock may be redeemed pursuant to this Section V(b)
until all Accruing Dividends on outstanding shares of Preferred Stock not previously paid in cash
have been fully paid in cash.
(c) Redemption Upon Change in Control. Upon the occurrence of a Change in Control, the
Preferred Stock shall be redeemable at the option of the holders thereof, in whole or in part, at
the Redemption Price. The Corporation shall redeem the number of shares specified in the holders
notices of election to redeem pursuant to Section V(e) 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 Corporations 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
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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).
(d) Procedure for Mandatory or Optional Redemption; Notices.
(i) In the event that the Corporation shall redeem shares of Preferred Stock pursuant to
Section V(a) or V(b) hereof, notice of such redemption shall be mailed by first-class mail, postage
prepaid, and mailed (1) in the case of a mandatory redemption under Section V(a)(i) or V(a)(ii),
not less than 30 days nor more than 90 days prior to the redemption date, (2) in the case of a
mandatory redemption under Section V(a)(iii) or V(a)(iv), not less than 10 days nor more than
90 days prior to the redemption date, and (iii) in the case of an optional redemption under Section
V(b), not less than 5 days nor more than 90 days prior to the redemption date, in any case 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 of the Corporation 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 amount of Accruing Dividends to be
paid; (C) the number of shares of Preferred Stock to be redeemed; (D) the Redemption Price; and
(E) 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). In the
event the Corporation does not have sufficient funds legally available to redeem for cash at the
Redemption Price on any mandatory redemption date all shares of Preferred Stock required to be
redeemed on such redemption date, such failure to redeem all such shares shall constitute a Default
(notwithstanding for this purpose the requirement that funds be legally available therefor), the
Corporation shall redeem for cash at the Redemption Price the maximum number of shares that can be
redeemed by the Corporation out of any source of funds legally available therefor, and shall redeem
for cash at the Redemption Price the remaining shares to have been redeemed as soon as the
Corporation has sufficient funds legally available therefor.
(ii) The Corporation agrees that in the event that its Board of Directors determines that
there are insufficient funds legally available (in accordance with the Minnesota Business
Corporation Act) for any redemption (in whole or in part) of the Preferred Stock pursuant to
Section V, the Corporation shall provide a notice to each holder of Series B Preferred Stock within
5 calendar days of such determination, signed by the Chief Financial Officer of the Corporation.
Such notice shall disclose the most recent financial information (including all underlying
assumptions, calculations and other information related thereto), provided to the Board of
Directors for purposes of making such determination as well as the amount of funds legally
available to the Corporation, as determined by the Board of Directors.
(iii) Within 5 calendar days after the determination by the Corporations Board of Directors
of whether the Corporation has an Excess Cash Balance, the Corporation shall provide a notice,
signed by the Chief Financial Officer of the Corporation, to each holder of Series B Preferred
Stock setting forth in reasonable detail the calculation of the Excess Cash Balance, if any, as
well as the Additional Cash Amount, if any, and shall include the most recent financial information
(including all underlying assumptions, calculations and other information related thereto) provided
to the Board of Directors for reviewing and approving such determinations, and a confirmation that
the Corporations Board of Directors has approved such determinations.
(e) Procedure for Change in Control Redemption.
(i) 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
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 holders right to require the Corporation to redeem for cash shares
of 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); and (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). In the event a holder of shares of Preferred Stock
shall elect to require the Corporation to redeem any or all of such shares of Preferred Stock, such
holder shall deliver, within 20 days of the mailing to it of the Corporations notice described in
this
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Section V(e), a written notice stating such holders election and specifying the number of shares
to be redeemed pursuant to Section V(c) hereof.
(ii) In the case of any redemption pursuant to Section V(c) 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 Corporations 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 Corporations 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 Corporations most
current report, schedule, registration statement, definitive proxy statement or other document on
file with the United States Securities and Exchange Commission.
(f) Notice by the Corporation having been mailed as provided in Section V(d) hereof, or notice
of election having been mailed by the holders as provided in Section V(e) 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 deemed to be outstanding and shall not
have the status of shares of Preferred Stock, and all rights of the holders thereof as shareholders
of the Corporation 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 for cash at the 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. No Conversion Rights.
(a) No Conversion. The Preferred Stock is not convertible into shares of Common Stock or any
other securities, and is entitled solely to the designations, relative rights and preferences set
forth in this certificate.
(b) 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 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 holders of Preferred Stock shall thereafter continue to be
applicable, and any such resulting or surviving corporation shall expressly assume the obligation
to pay dividends on and redeem the Preferred Stock as set forth herein. The above provisions shall
similarly apply to successive transactions of the foregoing type.
(c) Prior Notice of Certain Events. In case:
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(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 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; or
(iv) of the voluntary or involuntary dissolution, liquidation or winding up of the
Corporation;
then the Corporation shall cause to be filed with the Transfer Agent for the Preferred Stock, and
shall cause to be mailed to the holders of record of the 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).
VII. Voting Rights.
(a) General. Subject to Sections VII(b), VII(c) and XI(b) and except as set forth below or as
otherwise from time to time required by law, the holders of shares of 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
Preferred Stock shall be entitled to one vote per share. Any shares of 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) Limitations on Voting Rights. Notwithstanding Section VII(a), no share of Preferred Stock
shall have any right to vote as a class together with the holders of the Common Stock on any matter
pursuant to Section VII(a) if (1) such share is transferred to any third party other than a
Restricted Party (as defined in the Shareholder Agreement), or (2) to the extent that shares of
Common Stock are issued pursuant to the exercise of the Warrant (as hereinafter defined), on a one
share of Common Stock so issued per one share of Preferred Stock outstanding basis (subject to
appropriate adjustment in the event of any stock dividend, stock split, combination or other
similar recapitalization). Warrant means that certain Warrant to purchase 6,000,000 shares of
Common Stock dated February 25, 2009 issued to GE Capital Equity Investments, Inc.
(c) Voting Rights for Directors.
(i) For so long as the Restricted Parties own a majority of the outstanding shares of
Preferred Stock and the Investor (as defined in the Shareholder Agreement) is entitled to designate
at least two nominees (each, a Designee) for election to the Board of Directors of the
Corporation pursuant to Section 2.01 of the Shareholder Agreement, subject to Section XI(b), the
holders of the outstanding shares of 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 three directors (who are reasonably acceptable to the Corporation) and
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(B) thereafter, as long as the Investor is entitled to designate at least two Designees for
election to the Board of Directors pursuant to Section 2.01 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 Preferred
Stock voting separately as a class are entitled to elect two or more directors pursuant to this
Section VII(c)(i), holders of the outstanding 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(c)(i) hereof may be exercised at
any annual meeting of shareholders held for the purpose of electing directors or by the written
consent of the holders of Preferred Stock without a meeting pursuant to Section 302A.441 of the
Minnesota Business Corporation Act. For so long as the Restricted Parties own a majority of the
outstanding shares of Preferred Stock and the Investor is entitled to designate at least two
Designees for election to the Board of Directors of the Corporation pursuant to Section 2.01 of the
Shareholder Agreement and subject to Section XI(b) hereof, such voting right shall continue until
such time as all outstanding shares of Preferred Stock shall have been redeemed or otherwise
retired. If the Restricted Parties own less than a majority of the outstanding shares of Preferred
Stock or if the Investor is no longer entitled to designate at least two Designees for election to
the Board of Directors pursuant to Section 2.01 of the Shareholder Agreement, the holders of the
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 Preferred Stock will be
entitled to one vote per share, except as provided in Section VII(b).
(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 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 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 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 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 Preferred Stock to be called pursuant to the provisions of this Section VII(c)(iii).
(iv) At any meeting held for the purpose of electing directors at which the holders of
Preferred Stock shall have the right to elect directors as a class as provided in this
Section VII(c), the presence in person or by proxy of the holders of a majority of the then
outstanding shares of 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 Preferred Stock shall not prevent the election of
directors other than the directors to be elected by the holders of 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 Preferred
Stock, and (y) in the absence of a quorum of the holders of Preferred Stock, a majority of the
holders of 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(b) hereof and this paragraph (v), the term of office of
any director elected by the holders of Preferred Stock pursuant to Section VII(c)(i) hereof shall
terminate upon the expiration of his term and the election of his successor. Directors elected by
the holders of Preferred Stock pursuant to Section VII(c) may be removed with or without cause by
the holders of a majority of the outstanding shares of Preferred Stock and shall not otherwise be
subject to removal other than upon election of their successor or the 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 Preferred Stock are entitled, voting separately as a class,
to elect at least two members of the Board of Directors and the Restricted Parties own a majority
of the
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outstanding Preferred Stock, in case of a vacancy occurring in the office of any director so
elected pursuant to Section VII(c)(i) hereof, the holders of a majority of the 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.
(vii) Unless otherwise agreed to by the holders of a majority of the outstanding shares of
Preferred Stock, for so long as the holders of Preferred Stock are entitled, voting separately as a
class, to elect at least two members of the Board of Directors and the Restricted Parties own a
majority of the outstanding Preferred Stock, (A) the number of directors constituting the Board of
Directors shall remain at nine, (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 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 Preferred Stock shall, at all times, be at
least equal to the percentage of the Board of Directors elected by the holders of Preferred Stock;
provided, that, if under applicable law or the rules and regulations of the securities exchange or
automated quotation system upon which the Common Stock is listed, such director elected by the
holders of Preferred Stock is not permitted to serve on any such Committee, then the provisions of
clauses (B) and (C) shall not apply to the holders of the Preferred Stock.
(d) Class Voting. So long as any shares of 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 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
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 Corporations 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 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 Preferred Stock of the Corporation as to dividends and upon
liquidation, 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 Section VI(b), shall give rise to any such voting right;
(iii) issue any additional shares of Preferred Stock.
(e) Additional Class Voting. Unless otherwise agreed to by the holders of a majority of the
outstanding shares of Preferred Stock, for so long as the Restricted Parties own a majority of the
outstanding shares of 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 3.02, 3.03 or 3.04 of the Shareholder
Agreement. The provisions of this paragraph (d) will terminate with respect to such Sections 3.02,
3.03 or 3.04, 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 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. Subject to
the Board of Directors right to reduce the shares of Preferred Stock pursuant to Section I, shares
of Preferred Stock redeemed by the Corporation 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 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 Preferred Stock, (b) reduce the
Stated Value or liquidation preference of, or dividend on, the Preferred Stock, (c) change the
place or currency of payment of the Stated Value or liquidation preference of, or dividend on, the
Preferred Stock or (d) reduce the percentage of outstanding Preferred Stock necessary to modify or
amend the terms thereof or to grant waivers in respect thereto.
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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 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.
(a) 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 Preferred Stock
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 Preferred Stock in a name other than that in which the
shares of Preferred Stock with respect to which such shares are issued or delivered were
registered, or in respect of any payment to any entity with respect to any such shares 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) Shareholder Agreement. Reference is made to the Amended and Restated Shareholder
Agreement, dated as of February 25, 2009 (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 NBC Universal, Inc. The 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.
(c) Documents on File. Copies of the 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.
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