UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Quarterly Period Ended:
MARCH 31, 1995
OR
( ) Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Transition Period from ________ to ________.
Commission File Number 0-6983
COMCAST CORPORATION
[GRAPHIC OMITTED]
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-1709202
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1500 Market Street, Philadelphia, PA 19102-2148
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (215) 665-1700
--------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such requirements
for the past 90 days.
Yes X No
--------------------------
As of March 31, 1995, there were 191,804,470 shares of Class A Special Common
Stock, 39,045,601 shares of Class A Common Stock and 8,786,250 shares of Class B
Common Stock outstanding.
<PAGE>
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1995
TABLE OF CONTENTS
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance
Sheet at March 31, 1995 and December 31,
1994 (Unaudited)...........................................2
Condensed Consolidated Statement of
Operations and Accumulated Deficit for
the Three Months Ended March 31, 1995
and 1994 (Unaudited).......................................3
Condensed Consolidated Statement of Cash
Flows for the Three Months Ended March 31, 1995
and 1994 (Unaudited).......................................4
Notes to Condensed Consolidated
Financial Statements (Unaudited)......................5 - 11
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations...........................................12 - 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.........................................19
Item 6. Exhibits and Reports on Form 8-K..........................19
<PAGE>2
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1995
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands)
March 31, December 31,
1995 1994
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents............................................. $415,881 $335,320
Short-term investments, at cost which approximates fair value......... 25,355 130,134
Accounts receivable, less allowance for doubtful accounts
of $81,487 and $11,272............................................ 285,298 108,245
Inventories, Net...................................................... 193,665 18,553
Prepaid charges and other............................................. 28,165 16,254
Deferred income taxes................................................. 52,114
---------- ----------
Total Current Assets.............................................. 1,000,478 608,506
---------- ----------
INVESTMENTS, principally in affiliates.................................... 792,174 797,075
---------- ----------
PROPERTY AND EQUIPMENT.................................................... 2,120,595 2,081,256
Accumulated depreciation.............................................. (822,455) (823,570)
---------- ----------
Property and equipment, Net........................................... 1,298,140 1,257,686
---------- ----------
DEFERRED CHARGES.......................................................... 6,291,970 4,945,613
Accumulated amortization.............................................. (922,641) (845,896)
---------- ----------
Deferred charges, Net................................................. 5,369,329 4,099,717
---------- ----------
$8,460,121 $6,762,984
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable and accrued expenses................................. $602,389 $402,869
Accrued interest...................................................... 70,155 60,219
Subscribers' advance payments and other............................... 21,664 14,637
Current portion of long-term debt..................................... 262,206 182,913
---------- ----------
Total Current Liabilities......................................... 956,414 660,638
---------- ----------
LONG-TERM DEBT, Less current portion...................................... 6,025,763 4,810,541
---------- ----------
DEFERRED INCOME TAXES.................................................... 1,400,544 1,390,849
---------- ----------
MINORITY INTEREST AND OTHER............................................... 803,616 627,745
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY
Class A Special Common Stock, $1 par value - authorized, 500,000,000
shares; issued, 191,804,470 and 191,230,684....................... 191,804 191,231
Class A Common Stock, $1 par value - authorized, 200,000,000
shares; issued, 39,045,601 and 39,019,809......................... 39,046 39,020
Class B Common Stock, $1 par value - authorized, 50,000,000
shares; issued, 8,786,250......................................... 8,786 8,786
Additional capital.................................................... 881,049 875,501
Accumulated deficit................................................... (1,833,858) (1,827,647)
Unrealized (losses) gains on marketable securities.................... (740) 3,862
Cumulative translation adjustments.................................... (12,303) (17,542)
---------- ----------
Total Stockholders' Deficiency.................................... (726,216) (726,789)
---------- ----------
$8,460,121 $6,762,984
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>3
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1995
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
(Unaudited)
<TABLE>
<CAPTION>
(Amounts in thousands, except per share data)
Three Months Ended March 31,
1995 1994
<S> <C> <C>
REVENUE
Service income...................................................... $436,587 $328,703
Net sales from electronic retailing................................. 227,019
---------- ----------
663,606 328,703
---------- ----------
COSTS AND EXPENSES
Operating............................................................... 171,467 100,899
Cost of goods sold from electronic retailing............................ 138,074
Selling, general and administrative..................................... 136,869 86,284
Depreciation and amortization........................................... 243,477 77,245
---------- ----------
689,887 264,428
---------- ----------
OPERATING (LOSS) INCOME..................................................... (26,281) 64,275
INVESTMENT (INCOME) EXPENSE
Interest expense........................................................ 117,587 79,387
Investment income....................................................... (155,234) (5,273)
Equity in net losses of affiliates...................................... 16,417 9,646
Minority interest and other............................................. (8,358) (3,042)
---------- ----------
(29,588) 80,718
---------- ----------
INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT) AND
EXTRAORDINARY ITEMS .................................................... 3,307 (16,443)
INCOME TAX EXPENSE (BENEFIT)................................................ 3,935 (666)
---------- ----------
LOSS BEFORE EXTRAORDINARY ITEMS............................................. (628) (15,777)
EXTRAORDINARY ITEMS......................................................... (11,580)
---------- ----------
NET LOSS.................................................................... (628) (27,357)
ACCUMULATED DEFICIT
Beginning of period .................................................... (1,827,647) (1,717,931)
Dividends declared - $.02333 per share.................................. (5,583) (5,991)
---------- ----------
End of period........................................................... ($1,833,858) ($1,751,279)
=========== ===========
LOSS PER SHARE
Loss before extraordinary items......................................... ($.07)
Extraordinary items..................................................... (.05)
---------- ----------
Net Loss........................................................ ($.12)
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING DURING THE PERIOD.................................... 239,408 228,467
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>4
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1995
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(Dollars in thousands)
Three Months Ended March 31,
1995 1994
<S> <C> <C>
OPERATING ACTIVITIES
Net loss.............................................................. ($628) ($27,357)
Noncash items included in net loss:
Depreciation and amortization..................................... 243,477 77,245
Interest expense.................................................. 13,487 13,582
Equity in net losses of affiliates................................ 16,417 9,646
Gain on sale of division.......................................... (5,825)
Gain on sale of long-term investment.............................. (140,968)
Extraordinary items............................................... 11,580
Deferred income taxes, minority interest and other................ (3,211) 1,624
--------- --------
128,574 80,495
Decrease (increase) in accounts receivable, net....................... 39,983 (1,379)
(Increase) decrease in inventories, net............................... (15,295) 357
Increase in prepaid charges and other................................ (3,630) (1,314)
Decrease in accounts payable and accrued expenses
and subscribers' advance payments and other....................... (86,137) (11,784)
Increase (decrease) in accrued interest............................... 9,344 (4,183)
--------- --------
Net cash provided by operating activities..................... 72,839 62,192
--------- --------
FINANCING ACTIVITIES
Proceeds from borrowings.............................................. 1,319,621 928
Retirement and repayment of debt...................................... (43,854) (194,953)
Issuance of common stock, net......................................... 626 1,055
Equity contribution to a subsidiary................................... 6,556
Dividends............................................................. (5,583) (5,991)
Other................................................................. 2,072 (1,638)
--------- --------
Net cash provided by (used in) financing activities........... 1,279,438 (200,599)
--------- --------
INVESTING ACTIVITIES
Acquisitions, net of cash acquired.................................... 1,310,767 13,019
Sales of short-term investments, net.................................. (104,779) (340,044)
Increase in investments, principally in affiliates.................... 137,273 14,226
Proceeds from sale of long-term investment............................ (188,096)
Additions to property and equipment................................... 109,618 29,380
Proceeds from sale of division........................................ (28,183)
Other................................................................. 6,933 3,188
--------- --------
Net cash used in (provided by) investing activities........... 1,271,716 (308,414)
--------- --------
INCREASE IN CASH AND CASH EQUIVALENTS.................................... 80,561 170,007
Cash and Cash Equivalents, Beginning of Period........................ 335,320 160,434
--------- --------
CASH AND CASH EQUIVALENTS, End of Period.................................. $415,881 $330,441
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>5
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1995
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The condensed consolidated balance sheet at December 31, 1994 has been
condensed from the audited balance sheet at that date. The condensed
consolidated balance sheet at March 31, 1995 and the condensed consolidated
statements of operations and accumulated deficit and of cash flows for the
three months ended March 31, 1995 and 1994 have been prepared by Comcast
Corporation (the "Company") and have not been audited by the Company's
Independent Auditors. In the opinion of management, all adjustments (which
include only normal recurring adjustments and the adjustment described in
Note 3) necessary to present fairly the financial position, results of
operations and cash flows at March 31, 1995 and for all periods presented
have been made.
Certain information and note disclosures normally included in the Company's
annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These condensed
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's December
31, 1994 Annual Report on Form 10-K filed with the Securities and Exchange
Commission. The results of operations for the period ended March 31, 1995
are not necessarily indicative of operating results for the full year.
Net Loss Per Share
Net loss per share is based on the weighted average number of common shares
outstanding during the period. For the three months ended March 31, 1995
and 1994, all of the common stock equivalents have an antidilutive effect
on the loss per share and, therefore, have not been used in determining the
total weighted average number of common shares outstanding.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
New Accounting Pronouncements
Effective January 1, 1995, the Company adopted the provisions of Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." There was no cumulative effect of the adoption of SFAS No. 121.
As a result of the acquisition of QVC (see Note 3), the Company adopted the
following accounting policies:
Inventories
Inventories, consisting primarily of products held for sale, are stated at
the lower of cost or market. Cost is determined by the first-in, first-out
method.
Net Sales and Returns
Net sales from electronic retailing are recognized at the time of shipment
to customers. An allowance for returned merchandise is provided as a
percentage of sales based on historical experience.
3. ACQUISITIONS AND OTHER SIGNIFICANT EVENTS
QVC
In February 1995, the Company and Tele-Communications, Inc. ("TCI")
acquired all of the outstanding stock of QVC, Inc. ("QVC") for $46, in
cash, per share. The total cost of acquiring the outstanding shares of QVC
not previously owned by the Company and TCI (approximately 65% of such
shares on a fully diluted basis) was approximately $1.4 billion. Following
the acquisition, the Company and TCI own, through their respective
subsidiaries, 57.45% and 42.55%, respectively, of QVC. The Company has
accounted for the QVC acquisition
<PAGE>6
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1995
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
under the purchase method of accounting and QVC has been consolidated with
the Company beginning in February 1995. The allocation of the purchase
price to the assets and liabilities of QVC is preliminary pending receipt
of a final appraisal.
The acquisition of QVC, including the exercise of certain warrants held by
the Company, was financed with cash contributions from the Company and TCI
of $296.3 million and $6.6 million, respectively, borrowings of $1.1
billion under a $1.2 billion QVC credit facility and existing cash and cash
equivalents held by QVC.
Liberty Media Corporation, a wholly owned subsidiary of TCI, may, at
certain times following February 9, 2000, trigger the exercise of certain
exit rights.
Maclean Hunter
On December 22, 1994, the Company, through Comcast MHCP Holdings, L.L.C.
(the "LLC"), acquired the U.S. cable television and alternate access
operations of Maclean Hunter Limited ("Maclean Hunter") from Rogers
Communications Inc. ("RCI") and all of the outstanding shares of Barden
Communications, Inc. ("BCI," and collectively, such acquisitions are
referred to as the "Maclean Hunter Acquisition") for approximately $1.2
billion (subject to certain adjustments) in cash. The Company and the
California Public Employees' Retirement System ("CalPERS") invested
approximately $305.0 million and $250.0 million, respectively, in the LLC,
which is owned 55% by a wholly owned subsidiary of the Company and 45% by
CalPERS, and is managed by the Company. The Maclean Hunter Acquisition,
including certain transaction costs, was financed with cash contributions
from the LLC of $555.0 million and borrowings of $715.0 million under an
$850.0 million Maclean Hunter credit facility. At any time after December
18, 2001, CalPERS may elect to liquidate its interest in the LLC at a price
based upon the fair value of CalPERS' interest in the LLC, adjusted, under
certain circumstances, for certain performance criteria relating to the
fair value of the LLC or to the Company's common stock. Except in certain
limited circumstances, the Company, at its option, may satisfy this
liquidity arrangement by purchasing CalPERS' interest for cash, through the
issuance of the Company's common stock (subject to certain limitations) or
by selling the LLC. The Maclean Hunter Acquisition was accounted for under
the purchase method of accounting and Maclean Hunter is consolidated with
the Company as of December 31, 1994.
The allocation of the purchase price to the assets and liabilities of
Maclean Hunter is preliminary pending, among other things, the final
purchase price adjustment between the Company and RCI. The terms of the
Maclean Hunter Acquisition provide for, among other things, the
indemnification of the Company by RCI for certain liabilities, including
tax liabilities, relating to Maclean Hunter prior to the acquisition date.
Telecommunications Joint Venture
On March 28, 1995, subsidiaries of the Company, TCI, Sprint Corporation
("Sprint") and Cox Communications, Inc. ("Cox") formed several partnerships
to engage in the business of providing wireless and wireline telephony
services. The principal partnership is known as MajorCo, L.P. ("MajorCo").
The parties have agreed that MajorCo and its subsidiary partnerships will
be the exclusive vehicle for their respective investments in certain
specified telecommunications activities, subject to certain limited
exceptions. MajorCo and the parties will cross-promote telecommunications
products and services using the "Sprint" brand name with cable services and
products branded by Cox, TCI or the Company in their cable television
systems. A partnership owned entirely by subsidiaries of the Company, known
as Comcast Telephony Services, owns 15% of MajorCo and, indirectly, each of
MajorCo's subsidiary partnerships.
<PAGE>7
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1995
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
MajorCo will engage in the business of providing wireless communications
services, primarily personal communication services ("PCS"), through a
partnership known as WirelessCo. Cox, TCI, Sprint and the Company formed
WirelessCo on October 24, 1994 and contributed all of their respective
interests in WirelessCo to MajorCo and an affiliated partnership on March
28, 1995. Through WirelessCo, the partners propose to create and operate a
seamless, integrated, nationwide wireless communications network. During
the term of a trademark license from an affiliate of Sprint, the
partnership's services will be marketed under the "Sprint" trademark.
WirelessCo was the successful bidder for 29 broadband PCS licenses in the
auction conducted by the Federal Communications Commission ("FCC") from
December 1994 through mid-March 1995. The purchase price for the licenses
is approximately $2.11 billion, of which $422 million has already been paid
to the FCC. The balance of the purchase price will be paid to the FCC when
the licenses are issued, which is expected to occur in mid-1995. WirelessCo
may also elect to bid in subsequent auctions for broadband PCS licenses. In
addition, WirelessCo may invest in other entities that are awarded
broadband PCS licenses, may acquire PCS licenses after the auctions from
the successful bidders for those licenses and may affiliate with other
successful bidders for licenses.
Through May 1, 1995, the Company has made total cash capital contributions
to WirelessCo of approximately $75 million. The partners' capital
contributions to WirelessCo have been used to make payments to the FCC in
connection with the PCS auction and to acquire interests in certain
entities that hold PCS licenses. Additional equity requirements of
WirelessCo will be funded by the partners through capital contributions to
MajorCo in proportion to their ownership interests in WirelessCo. The
Company anticipates that MajorCo's capital requirements over the next
several years will be significant. These requirements are planned to be
funded by external financing in addition to capital contributions by the
partners. The partners have committed to contribute $4.4 billion in cash to
the venture during the next three years, of which the Company's share would
be $660 million, subject to reduction resulting from the method of
crediting in-kind contributions to MajorCo by the partners. Although it is
anticipated that external financing will be available to MajorCo on
acceptable terms and conditions, no assurances can be given as to such
availability.
MajorCo will also engage in the business of providing local wireline
telephone service for both business and residential customers, primarily
through the cable networks of cable television operators that affiliate
with the partnership in exchange for agreed upon compensation. Cox, TCI and
the Company have agreed to affiliate their cable systems with the
partnership to the extent that their systems are located in markets
designated in MajorCo's initial business plan. The MajorCo partners propose
to complete the initial business plan, which will also specify the
partners' expected capital contributions, within the next few months. The
offering of local wireline telephone services by the partnership will
require the removal of existing regulatory and legislative barriers to
local telephone competition.
The MajorCo partners intend that the partnership will succeed to the
business currently conducted by Cox, TCI and the Company, together with
Continental Cablevision, Inc. ("Continental"), through Teleport
Communications Group Inc. and TCG Partners (collectively, "TCG"). TCG is
one of the largest competitive access providers in the United States.
Pursuant to a contribution agreement entered into on March 28, 1995, Cox,
TCI and the Company have agreed, subject to the satisfaction of certain
conditions, to contribute to MajorCo their respective interests in TCG and
in the local joint ventures among local cable operators and TCG. Such
contributions will be subject to the receipt of necessary regulatory
approvals and the satisfaction of other conditions. In addition, the cable
partners intend to negotiate with Continental, which owns that portion of
TCG that is not owned by Cox, TCI or the Company, regarding the acquisition
of its interest by such cable partners.
<PAGE>8
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1995
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Cellular Rebuild
The Company's cellular division has entered into an agreement to purchase
approximately $172.0 million of switching and cell site equipment. This
equipment will replace existing switching and cell site equipment. The
Company expects the rebuild to be completed in the third quarter of 1995.
In accordance with the provisions of SFAS No. 121, the Company has charged
to its results of operations approximately $110.0 million which represents
the difference between the net book value of the equipment to be replaced
and the residual value expected to be realized upon its disposal. This
charge has been reflected in the Company's condensed consolidated statement
of operations and accumulated deficit as a component of depreciation and
amortization expense.
Ocean County
In May 1995, the Company completed the initial phase of its exchange
agreement with McCaw Cellular Communications, Inc. whereby the Company
acquired a 75% interest in the entity that holds the Ocean County, NJ RSA
cellular license (the "Ocean County Licensee") in exchange for the
Company's Hunterdon County, NJ RSA license and $37.8 million in cash. The
Company expects to close the remaining portion of the exchange agreement
whereby it will acquire the remaining 25% interest in the Ocean County
Licensee before the end of 1995.
Nextel
In April 1995, the Company exercised certain preemptive rights under
previously existing agreements with Nextel Communications, Inc. ("Nextel")
whereby the Company has elected to purchase approximately 10 million newly
issued Nextel shares at a $12.25 per share price for a total cost of $122.5
million. The purchase is contingent on the closing of certain contemplated
transactions by Nextel which are expected by Nextel to occur no earlier
than the fourth quarter of 1995.
Pro forma Results
The Company would have reported unaudited revenues of $794.1 million and
$703.2 million, unaudited loss before extraordinary items of $5.4 million
and $32.5 million, unaudited net loss of $5.4 million and $44.1 million and
unaudited net loss per share of $.02 and $.19 for the three months ended
March 31, 1995 and 1994, respectively, had the acquisitions of QVC and
Maclean Hunter occurred at the beginning of each period. This unaudited pro
forma information is based on historical results of operations, adjusted
for acquisition costs, and is not necessarily indicative of what the
results would have been had the Company operated the acquired entities
since the beginning of 1994.
4. INVESTMENTS
The Company holds unrestricted equity investments in certain publicly
traded companies with an historical cost of $186.7 million and $186.6
million as of March 31, 1995 and December 31, 1994, respectively. The
Company has recorded these investments, which are classified as available
for sale, at their estimated fair value of $185.5 million as of March 31,
1995 and $192.6 million as of December 31, 1994. The unrealized pre-tax
(loss) gain of ($1.2) million and $6.0 million, respectively, have been
reported in the Company's condensed consolidated balance sheet as an
(increase) decrease in stockholders' deficiency, net of related deferred
income taxes.
In January 1995, the Company exchanged its interest in Heritage
Communications, Inc. with TCI for Class A common shares of TCI with a fair
market value of approximately $290 million. Shortly thereafter, the Company
sold certain of these shares for total proceeds of approximately $188
million which were used to fund, in part,
<PAGE>9
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1995
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
the acquisition of QVC. As a result of these transactions, the Company
recognized a pre-tax gain of $141 million in the first quarter of 1995.
As a result of the QVC acquisition, the Company commenced consolidating the
financial results of QVC on a current basis. In the first quarter of 1995,
the Company recorded its proportionate interest in QVC's net income for the
period from November 1, 1994 through January 31, 1995. Such results were
not previously recorded by the Company since QVC was accounted for under
the equity method of accounting and its proportionate interest in QVC's
results of operations were recorded two months in arrears. The effect of
this one-time adjustment was not significant to the Company's results of
operations.
The difference between the Company's recorded investment and its
proportionate interests in the book value of its equity investees' net
assets is being amortized to equity in net income or loss, primarily over a
period of twenty years, which is consistent with the estimated lives of the
underlying assets.
Summarized financial information for investments accounted for under the
equity method of accounting is as follows (Dollars in thousands):
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
January 31, 1995 March 31, 1995
QVC Other Combined
<S> <C> <C> <C>
Combined Results of Operations
Revenue................................... $425,921 $140,386 $566,307
Depreciation and amortization............. 12,992 11,479 24,471
Operating income (loss)................... 58,247 (48,955) 9,292
Net income (loss) as reported
by affiliates...................... $28,333 ($67,191) ($38,858)
Company's Equity in Net Income (Loss)
Equity in current period net income
(loss) ................................ $4,286 ($19,978) ($15,692)
Amortization income (expense)............. 1,194 (1,919) (725)
-------- -------- --------
Total equity in net income (loss)......... $5,480 ($21,897) ($16,417)
====== ======== ========
</TABLE>
<TABLE>
<CAPTION>
March 31,1995
Combined (1)
<S> <C>
Combined Financial Position
Current assets........................... $388,007
Noncurrent assets........................ 2,416,577
Current liabilities...................... 287,868
Noncurrent liabilities................... 1,428,410
<FN>
(1) Excludes the financial position of QVC which is consolidated with the
Company as of March 31, 1995.
</FN>
</TABLE>
<PAGE>10
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1995
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
January 31, 1994 March 31, 1994
QVC Other Combined
<S> <C> <C> <C>
Combined Results of Operations
Revenue................................... $372,489 $76,894 $449,383
Depreciation and amortization............. 10,814 25,052 35,866
Operating income (loss)................... 53,166 (24,788) 28,378
Net income (loss) as reported
by affiliates...................... $2,846 ($33,524) ($30,678)
Company's Equity in Net Income (Loss)
Equity in current period net income
(loss) ................................ $421 ($9,954) ($9,533)
Amortization income (expense)............. 1,291 (1,404) (113)
-------- ------- --------
Total equity in net income (loss)......... $1,712 ($11,358) ($9,646)
====== ======== =======
</TABLE>
5. LONG-TERM DEBT
The Company paid premiums and expensed unamortized debt acquisition costs
totalling $17.8 million in the first quarter of 1994, primarily as a result
of the redemption of its $150.0 million, 11-7/8% Senior subordinated
debentures due 2004, resulting in the Company recording an extraordinary
loss, net of tax, of $11.6 million or $.05 per share.
6. STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION
The Company made interest payments of approximately $94.8 million and $70.0
million for the three months ended March 31, 1995 and 1994, respectively.
The Company redeemed its 7% Convertible subordinated debentures due 2001 on
February 27, 1994 (accreted value $152.1 million). In connection with such
redemption, substantially all of the debentures were converted into 13.5
million shares of Class A Special Common Stock of the Company.
7. CONTINGENCIES
The Company is subject to claims which arise in the ordinary course of its
business and other legal proceedings. In the opinion of management, the
amount of ultimate liability with respect to these actions will not
materially affect the financial position or results of operations of the
Company.
The Company currently is seeking to justify existing rates for regulated
services in certain of its cable systems in the States of New Jersey and
Connecticut on the basis of cost-of-service showings. A tentative
settlement, subject to documentation and regulatory approval, has been
reached with the State of New Jersey with respect to rates for basic cable
services and equipment. The State of Connecticut has ordered the Company to
reduce rates for basic cable services and equipment and to make refunds to
subscribers. The Connecticut decision has been appealed to the FCC. The FCC
also is currently reviewing the Company's rates for cable programming
services in the same systems in New Jersey and Connecticut. The interim
cost-of-service regulations promulgated by the FCC do not support positions
taken by the Company in its cost-of-service filings to date. The Company
has not changed its estimate of the effects of rate regulation from
December 31, 1994. The Company is seeking reconsideration by the FCC of the
interim cost-of-service regulations and, if unsuccessful in justifying
existing rates under cost-of-service regulations, intends to seek judicial
relief. However, no assurance can be given that
<PAGE>11
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1995
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
(Unaudited)
the Company will be successful in cost-of-service proceedings. If the
Company is not successful in such efforts, and there is no legislative,
administrative or judicial relief in these matters, the FCC regulations
will continue to adversely affect the Company's results of operations.
8. QUARTERLY FINANCIAL DATA BY BUSINESS SEGMENT
(Dollars in thousands)
<TABLE>
<CAPTION>
Domestic
Cable Electronic Cellular Corporate
Communications Retailing Communications and Other (1) Total
<S> <C> <C> <C> <C> <C>
1995
Revenue..................................... $347,122 $227,019 $82,153 $7,312 $663,606
Depreciation and amortization............... 89,498 14,272 134,482 5,225 243,477
Operating income (loss)..................... 75,636 21,990 (103,296) (20,611) (26,281)
Interest expense............................ 61,583 12,645 17,470 25,889 117,587
Assets...................................... 4,502,336 1,925,775 1,107,588 924,422 8,460,121
Long-term debt.............................. 2,889,608 1,106,337 764,415 1,265,403 6,025,763
Capital expenditures and acquisitions....... 43,862 1,310,357 50,253 15,913 1,420,385
Equity in net (losses) income of
affiliates.............................. (2,969) 1,058 (264) (14,242) (16,417)
1994
Revenue..................................... $260,882 $ $60,878 $6,943 $328,703
Depreciation and amortization............... 52,391 21,607 3,247 77,245
Operating income (loss)..................... 74,521 3,859 (14,105) 64,275
Interest expense............................ 36,720 13,856 28,811 79,387
Capital expenditures and acquisitions....... 34,651 5,103 2,645 42,399
Equity in net (losses) income of
affiliates.............................. (2,337) 1,712 (9,021) (9,646)
<FN>
- ---------------
(1) Corporate and other includes certain elimination entries related to
the segments presented.
</FN>
</TABLE>
<PAGE>12
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1995
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
The Company has experienced significant growth in recent years both through
strategic acquisitions and growth in its existing businesses. The Company has
historically met its cash needs for operations through its cash flows from
operating activities. Cash requirements for acquisitions and capital
expenditures have been provided through the Company's financing activities as
well as its existing cash and cash equivalents and short-term investments.
General Developments of Business
QVC
In February 1995, the Company and Tele-Communications, Inc. ("TCI") acquired all
of the outstanding stock of QVC, Inc. ("QVC") for $46, in cash, per share. The
total cost of acquiring the outstanding shares of QVC not previously owned by
the Company and TCI (approximately 65% of such shares on a fully diluted basis)
was approximately $1.4 billion. Following the acquisition, the Company and TCI
own, through their respective subsidiaries, 57.45% and 42.55%, respectively, of
QVC. The Company has accounted for the QVC acquisition under the purchase method
of accounting and QVC has been consolidated with the Company beginning in
February 1995. The allocation of the purchase price to the assets and
liabilities of QVC is preliminary pending receipt of a final appraisal.
The acquisition of QVC, including the exercise of certain warrants held by the
Company, was financed with cash contributions from the Company and TCI of $296.3
million and $6.6 million, respectively, borrowings of $1.1 billion under a $1.2
billion QVC credit facility and existing cash and cash equivalents held by QVC.
Liberty Media Corporation, a wholly owned subsidiary of TCI, may, at certain
times following February 9, 2000, trigger the exercise of certain exit rights.
Maclean Hunter
On December 22, 1994, the Company, through Comcast MHCP Holdings, L.L.C. (the
"LLC"), acquired the U.S. cable television and alternate access operations of
Maclean Hunter Limited ("Maclean Hunter") from Rogers Communications Inc.
("RCI") and all of the outstanding shares of Barden Communications, Inc. ("BCI,"
and collectively, such acquisitions are referred to as the "Maclean Hunter
Acquisition") for approximately $1.2 billion (subject to certain adjustments) in
cash. The Company and the California Public Employees' Retirement System
("CalPERS") invested approximately $305.0 million and $250.0 million,
respectively, in the LLC, which is owned 55% by a wholly owned subsidiary of the
Company and 45% by CalPERS, and is managed by the Company. The Maclean Hunter
Acquisition, including certain transaction costs, was financed with cash
contributions from the LLC of $555.0 million and borrowings of $715.0 million
under an $850.0 million Maclean Hunter credit facility. At any time after
December 18, 2001, CalPERS may elect to liquidate its interest in the LLC at a
price based upon the fair value of CalPERS' interest in the LLC, adjusted, under
certain circumstances, for certain performance criteria relating to the fair
value of the LLC or to the Company's common stock. Except in certain limited
circumstances, the Company, at its option, may satisfy this liquidity
arrangement by purchasing CalPERS' interest for cash, through the issuance of
the Company's common stock (subject to certain limitations) or by selling the
LLC. The Maclean Hunter Acquisition was accounted for under the purchase method
of accounting and Maclean Hunter is consolidated with the Company as of December
31, 1994.
<PAGE>13
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1995
The allocation of the purchase price to the assets and liabilities of Maclean
Hunter is preliminary pending, among other things, the final purchase price
adjustment between the Company and RCI. The terms of the Maclean Hunter
Acquisition provide for, among other things, the indemnification of the Company
by RCI for certain liabilities, including tax liabilities, relating to Maclean
Hunter prior to the acquisition date.
Telecommunications Joint Venture
On March 28, 1995, subsidiaries of the Company, TCI, Sprint Corporation
("Sprint") and Cox Communications, Inc. ("Cox") formed several partnerships to
engage in the business of providing wireless and wireline telephony services.
The principal partnership is known as MajorCo, L.P. ("MajorCo"). The parties
have agreed that MajorCo and its subsidiary partnerships will be the exclusive
vehicle for their respective investments in certain specified telecommunications
activities, subject to certain limited exceptions. MajorCo and the parties will
cross-promote telecommunications products and services using the "Sprint" brand
name with cable services and products branded by Cox, TCI or the Company in
their cable television systems. A partnership owned entirely by subsidiaries of
the Company, known as Comcast Telephony Services, owns 15% of MajorCo and,
indirectly, each of MajorCo's subsidiary partnerships.
MajorCo will engage in the business of providing wireless communications
services, primarily personal communication services ("PCS"), through a
partnership known as WirelessCo. Cox, TCI, Sprint and the Company formed
WirelessCo on October 24, 1994 and contributed all of their respective interests
in WirelessCo to MajorCo and an affiliated partnership on March 28, 1995.
Through WirelessCo, the partners propose to create and operate a seamless,
integrated, nationwide wireless communications network. During the term of a
trademark license from an affiliate of Sprint, the partnership's services will
be marketed under the "Sprint" trademark.
WirelessCo was the successful bidder for 29 broadband PCS licenses in the
auction conducted by the Federal Communications Commission ("FCC") from December
1994 through mid-March 1995. The purchase price for the licenses is
approximately $2.11 billion, of which $422 million has already been paid to the
FCC. The balance of the purchase price will be paid to the FCC when the licenses
are issued, which is expected to occur in mid-1995.WirelessCo may also elect to
bid in subsequent auctions for broadband PCS licenses. In addition, WirelessCo
may invest in other entities that are awarded broadband PCS licenses, may
acquire PCS licenses after the auctions from the successful bidders for those
licenses and may affiliate with other successful bidders for licenses.
MajorCo will also engage in the business of providing local wireline telephone
service for both business and residential customers, primarily through the cable
networks of cable television operators that affiliate with the partnership in
exchange for agreed upon compensation. Cox, TCI and the Company have agreed to
affiliate their cable systems with the partnership to the extent that their
systems are located in markets designated in MajorCo's initial business plan.
The MajorCo partners propose to complete the initial business plan, which will
also specify the partners' expected capital contributions, within the next few
months. The offering of local wireline telephone services by the partnership
will require the removal of existing regulatory and legislative barriers to
local telephone competition.
The MajorCo partners intend that the partnership will succeed to the business
currently conducted by Cox, TCI and the Company, together with Continental
Cablevision, Inc. ("Continental"), through Teleport Communications Group Inc.
and TCG Partners (collectively, "TCG"). TCG is one of the largest competitive
access providers in the United States. Pursuant to a contribution agreement
entered into on March 28, 1995, Cox, TCI and the Company have agreed, subject to
the satisfaction of certain conditions, to contribute to MajorCo their
respective interests in TCG and in the local joint ventures among local cable
operators and TCG. Such contributions will be subject to the receipt of
necessary regulatory approvals and the satisfaction of other conditions. In
addition, the cable partners intend to
<PAGE>14
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1995
negotiate with Continental, which owns that portion of TCG that is not owned by
Cox, TCI or the Company, regarding the acquisition of its interest by such cable
partners.
--------------------
Liquidity and Capital Resources
Cash and cash equivalents and short-term investments as of March 31, 1995 and
December 31, 1994 were $441.2 million and $465.5 million, respectively. The
majority of the cash and cash equivalents is held by subsidiaries of the Company
and is restricted to the use by these subsidiaries under contractual or other
arrangements.
The Company's cash and cash equivalents and short-term investments are recorded
at cost which approximates their fair value. At March 31, 1995, the Company's
short-term investments of $25.4 million had a weighted average maturity of
approximately 13 months. However, due to the high degree of liquidity and the
intent of management to use these investments as needed to fund its commitments,
the Company considers these as current assets.
In January 1995, the Company exchanged its interest in Heritage Communications,
Inc. with TCI for Class A common shares of TCI with a fair market value of
approximately $290 million (the "Heritage Transaction"). Shortly thereafter, the
Company sold certain of these shares for total proceeds of approximately $188
million which were used to fund, in part, the acquisition of QVC. As a result of
these transactions, the Company has recognized a pre-tax gain of $141 million in
the first quarter of 1995.
In April 1995, the Company exercised certain preemptive rights under previously
existing agreements with Nextel Communications, Inc. ("Nextel") whereby the
Company has elected to purchase approximately 10 million newly issued Nextel
shares at a $12.25 per share price for a total cost of $122.5 million. The
purchase is contingent on the closing of certain contemplated transactions by
Nextel which are expected by Nextel to occur no earlier than the fourth quarter
of 1995.
In May 1995, the Company completed the initial phase of its exchange agreement
with McCaw Cellular Communications, Inc. whereby the Company acquired a 75%
interest in the entity that holds the Ocean County, NJ RSA cellular license (the
"Ocean County Licensee") in exchange for the Company's Hunterdon County, NJ RSA
license and $37.8 million in cash. The Company expects to close the remaining
portion of the exchange agreement whereby it will acquire the remaining 25%
interest in the Ocean County Licensee before the end of 1995.
Through May 1, 1995, the Company has made total cash capital contributions to
WirelessCo of approximately $75 million. The partners' capital contributions to
WirelessCo have been used to make payments to the FCC in connection with the PCS
auction and to acquire interests in certain entities that hold PCS licenses.
Additional equity requirements of WirelessCo will be funded by the partners
through capital contributions to MajorCo in proportion to their ownership
interests in WirelessCo. The Company anticipates that MajorCo's capital
requirements over the next several years will be significant. These requirements
are planned to be funded by external financing in addition to capital
contributions by the partners. The partners have committed to contribute $4.4
billion in cash to the venture during the next three years, of which the
Company's share would be $660 million, subject to reduction resulting from the
method of crediting in-kind contributions to MajorCo by the partners. Although
it is anticipated that external financing will be available to MajorCo on
acceptable terms and conditions, no assurances can be given as to such
availability.
As of March 31, 1995, certain subsidiaries of the Company had unused lines of
credit of $545 million, of which $50.0 million was utilized through May 4, 1995.
The Company expects to continue to recognize significant losses and to continue
to pay dividends; therefore, it anticipates that it will continue to have a
deficiency in stockholders' equity that will increase for the foreseeable
<PAGE>15
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1995
future. The telecommunications industry, including cable and cellular
communications, is experiencing increasing competition and rapid technological
changes. The Company's future results of operations will be affected by its
ability to react to changes in the competitive environment and by its ability to
implement new technologies. However, management believes that competition,
technological changes and its deficiency in stockholders' equity will not
significantly affect its ability to obtain financing.
The Company believes that it will be able to meet its current and long-term
liquidity and capital requirements, including its fixed charges, through its
cash flows from operating activities, existing cash and cash equivalents,
short-term investments, sales of assets, lines of credit and other external
financing.
Statement of Cash Flows
Cash and cash equivalents increased $80.6 million as of March 31, 1995 from
December 31, 1994 and increased $170.0 million as of March 31, 1994 from
December 31, 1993. Changes in cash and cash equivalents resulted from cash flows
from operating, financing and investing activities which are explained below.
Net cash provided by operating activities amounted to $72.8 million and $62.2
million for the three months ended March 31, 1995 and 1994, respectively. The
increase of $10.6 million is due to the effects of the acquisitions of QVC and
Maclean Hunter, offset by changes in working capital as a result of the timing
of receipts and disbursements.
Net cash provided by (used in) financing activities, which includes the
issuances of securities as well as borrowings, was $1.3 billion and ($200.6)
million for the three months ended March 31, 1995 and 1994, respectively. For
the three months ended March 31, 1995, the Company borrowed $1.3 billion
consisting principally of funds borrowed in connection with the acquisition of
QVC. For the three months ended March 31, 1994, the Company repurchased or
redeemed and retired $195.0 million of its long-term debt including the
Company's $150.0 million, 11-7/8% Senior subordinated debentures due 2004.
Net cash used in (provided by) investing activities was $1.3 billion and
($308.4) million for the three months ended March 31, 1995 and 1994,
respectively. For the three months ended March 31, 1995, net cash used in
investing activities includes the acquisition of QVC, net of cash acquired, of
$1.3 billion, additional investments in affiliates of $137.3 million and
additions to property and equipment of $109.6 million. Such amounts were offset
by proceeds from sales of short-term and long-term investments of $292.9
million. Net proceeds of $340.0 million from the sale of short-term investments
for the three months ended March 31, 1994 were used to redeem and retire
long-term debt and to purchase cash equivalents.
Results of Operations
The effects of the QVC and Maclean Hunter acquisitions has been to increase
significantly the Company's revenues and expenses resulting in substantial
increases in its operating income before depreciation and amortization,
depreciation and amortization expense and net interest expense. However, it is
expected that because of the increases in depreciation and amortization and
interest expense associated with these acquisitions and their financing, the
Company will continue to realize substantial losses for the foreseeable future.
For the three months ended March 31, 1995 and 1994, the Company realized
operating income before depreciation and amortization (commonly referred to in
the Company's businesses as "operating cash flow") of $217.2 million and 141.5
million, respectively, representing an increase of $75.7 million or 53%. This
increase is a result of the items discussed below. Operating cash flow is a
measure of a company's ability to generate cash to service its obligations,
including debt service obligations, and to finance capital and other
expenditures. In part due to the capital intensive nature of the Company's
businesses and the resulting significant level of non-cash depreciation and
<PAGE>16
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1995
amortization expense, operating cash flow is frequently used as one of the bases
for comparing the Company's businesses. Operating cash flow does not purport to
represent net income or net cash provided by operating activities, as those
terms are defined under generally accepted accounting principles, and should not
be considered as an alternative to such measurements as an indicator of the
Company's performance. See "Statement of Cash Flows" above for a discussion of
net cash provided by operating activities.
The Company realized revenue of $663.6 million and $328.7 million for the three
months ended March 31, 1995 and 1994, respectively, representing an increase of
$334.9 million or 102%. For the three months ended March 31, 1995, approximately
52% of such revenue represents service income related to the Company's cable
division, approximately 34% represents net sales from electronic retailing as a
result of the consolidation of QVC and approximately 12% represents service
income related to the Company's cellular division. For the three months ended
March 31, 1994, approximately 79% of such revenue represents service income
related to the Company's cable division and approximately 19% represents service
income related to the Company's cellular division.
Cost of goods sold from electronic retailing was $138.1 million for the two
months ended March 31, 1995 representing approximately 61% of net sales from
electronic retailing for that period.
Operating, selling, general and administrative expenses were $308.3 million and
$187.2 million for the three months ended March 31, 1995 and 1994, respectively,
representing an increase of $121.1 million or 65%. For the three months ended
March 31, 1995, approximately 59% of such expenses relate to the Company's cable
division, approximately 17% relate to the consolidation of QVC and approximately
17% relate to the Company's cellular division. For the three months ended March
31, 1994, approximately 72% of such expenses related to the Company's cable
division and approximately 19% related to the Company's cellular division.
Depreciation and amortization was $243.5 million and $77.2 million for the three
months ended March 31, 1995 and 1994, respectively, representing an increase of
$166.3 million. The increase is due to the effects of the rebuild of certain of
the Company's cellular equipment, as described below, as well as depreciation
and amortization resulting from the acquisitions of QVC and Maclean Hunter.
Interest expense was $117.6 million and $79.4 million for the three months ended
March 31, 1995 and 1994, respectively, representing an increase of $38.2 million
or 48%. The increase is primarily due to increased levels of debt associated
with the acquisitions of QVC and Maclean Hunter.
For the three months ended March 31, 1995 and 1994, the Company's earnings
before extraordinary items, income tax expense (benefit), equity in net losses
of affiliates and fixed charges (interest expense) were $137.3 million and $72.6
million, respectively. Excluding the pre-tax gain of $141 million realized in
the first quarter of 1995 in connection with the Heritage Transaction, these
earnings were not adequate to cover the Company's fixed charges of $117.6
million and $79.4 million for the three months ended March 31, 1995 and 1994,
respectively. Fixed charges include non-cash interest of $13.5 million and $13.6
million for the three months ended March 31, 1995 and 1994, respectively. The
inadequacy of these earnings to cover fixed charges is primarily due to the
substantial non-cash charges for depreciation and amortization expense,
including a pre-tax charge associated with the rebuild of certain of the
Company's cellular equipment, of $243.5 million and $77.2 million for the three
months ended March 31, 1995 and 1994, respectively.
The Company believes that its losses and inadequacy of earnings to cover fixed
charges will not significantly affect the performance of its normal business
activities because of its existing cash and cash equivalents, short-term
investments, its ability to generate operating income before depreciation and
amortization and its ability to obtain external financing.
<PAGE>17
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1995
The Company anticipates that, for the foreseeable future, interest expense will
be a significant cost to the Company and will have a significant adverse effect
on the Company's ability to realize net earnings. The Company believes it will
continue to be able to meet its obligations through its ability both to generate
operating income before depreciation and amortization and to obtain external
financing.
The Company recognized income tax expense (benefit) of $3.9 million and
($666,000) for the three months ended March 31, 1995 and 1994, respectively.
The Company paid premiums and expensed unamortized debt acquisition costs
totalling $18.0 million during 1994, primarily as a result of the redemption of
its $150.0 million, 11-7/8% Senior subordinated debentures due 2004, resulting
in the Company recording an extraordinary loss, net of tax, of $11.6 million or
$.05 per share.
The Company believes that its operations are not materially affected by
inflation.
Cable Communications
The Company's cable division realized service income of $347.1 million and
$260.9 million for the three months ended March 31, 1995 and 1994, respectively,
representing an increase of $86.2 million or 33%. The Maclean Hunter acquisition
accounted for $64.5 million of the increase. The remaining increase of $21.7
million is attributable to subscriber growth of $12.0 million, new product
offerings of $2.7 million and a $7.0 million change in the estimated effects of
cable rate regulation.
Operating, selling, general and administrative expenses for the Company's cable
division were $182.0 million and $134.0 million for the three months ended March
31, 1995 and 1994, respectively, representing an increase of $48.0 million or
36%. The Maclean Hunter acquisition accounted for $36.1 million of the increase.
The remaining increase of $11.9 million is attributable to increases in the
costs of labor, billing and cable programming as a result of subscriber growth
and rate increases. It is anticipated that the Company's cost of cable
programming will increase in the future as cable programming rates increase and
additional sources of cable programming become available.
Electronic Retailing
As a result of the QVC acquisition, effective February 1995, the Company
commenced consolidating the financial results of QVC on a current basis.
Comparative quarterly financial information for the three months ended March 31,
1995 and 1994 is presented herein for purposes of analysis and may not reflect
what actual results of operations would have been had the Company owned QVC
since January 1, 1994.
QVC recognized net sales from electronic retailing of $358.5 million and $311.9
million for the three months ended March 31, 1995 and 1994, respectively,
representing an increase of $46.6 million or 15%. The increase in the net sales
from electronic retailing includes the effects of a 7% increase in the average
number of homes receiving QVC services, an increase of 7% in net sales per full
time equivalent home and other revenue sources.
QVC recognized operating, selling, general and administrative expenses of $83.8
million and $75.0 million for the three months ended March 31, 1995 and 1994,
respectively, representing an increase of $8.8 million or 12%. This increase is
attributable to higher advertising costs and additional costs associated with
secondary channel services.
QVC recognized cost of goods sold from electronic retailing of $216.1 million
and $190.3 million for the three months ended March 31, 1995 and 1994,
respectively. Such costs have remained consistent as a percentage of sales,
representing 60% of net sales from electronic retailing for the three months
ended March 31, 1995 and 61% of net sales from electronic retailing for the
three months ended March 31, 1994.
<PAGE>18
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1995
Cellular Communications
The Company's cellular division realized service income of $82.2 million and
$60.9 million for the three months ended March 31, 1995 and 1994, respectively,
representing an increase of $21.3 million or 35%. The increase is attributable
to subscriber growth, partially offset by the effects of a decrease in the
average minutes-of-use per cellular subscriber. The Company expects the decrease
in average minutes-of-use per cellular subscriber to continue in the future.
Operating, selling, general and administrative expenses for the Company's
cellular division were $51.0 million and $35.4 million for the three months
ended March 31, 1995 and 1994, respectively, representing an increase of $15.6
million or 44%. This increase is primarily due to increases in commissions and
marketing expense as a result of subscriber growth.
The Company's cellular division has entered into an agreement to purchase
approximately $172.0 million of switching and cell site equipment. This
equipment will replace existing switching and cell site equipment. The Company
expects the rebuild to be completed in the third quarter of 1995. In accordance
with the provisions of Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," the Company has charged to its results of operations
approximately $110.0 million which represents the difference between the net
book value of the equipment to be replaced and the residual value expected to be
realized upon its disposal. This charge has been reflected in the Company's
condensed consolidated statement of operations and accumulated deficit as a
component of depreciation and amortization expense.
Cable Rate Regulation Developments
The Company currently is seeking to justify existing rates for regulated
services in certain of its cable systems in the States of New Jersey and
Connecticut on the basis of cost-of-service showings. A tentative settlement,
subject to documentation and regulatory approval, has been reached with the
State of New Jersey with respect to rates for basic cable services and
equipment. The State of Connecticut has ordered the Company to reduce rates for
basic cable services and equipment and to make refunds to subscribers. The
Connecticut decision has been appealed to the FCC. The FCC also is currently
reviewing the Company's rates for cable programming services in the same systems
in New Jersey and Connecticut. The interim cost-of-service regulations
promulgated by the FCC do not support positions taken by the Company in its
cost-of-service filings to date. The Company has not changed its estimate of the
effects of rate regulation from December 31, 1994. The Company is seeking
reconsideration by the FCC of the interim cost-of-service regulations and, if
unsuccessful in justifying existing rates under cost-of-service regulations,
intends to seek judicial relief. However, no assurance can be given that the
Company will be successful in cost-of-service proceedings. If the Company is not
successful in such efforts, and there is no legislative, administrative or
judicial relief in these matters, the FCC regulations will continue to adversely
affect the Company's results of operations.
<PAGE>19
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1995
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
1. In May 1994, the Company filed an appeal with the U.S. Court of
Appeals for the District of Columbia Circuit challenging the
legality of various Federal Communications Commission ("FCC") rate
regulation Orders. The Company has also intervened in similar
pending actions. The Company intends to continue to assess the
impact of the FCC's rate regulations and to develop additional
strategies to minimize the adverse impact of such regulations and
the other provisions of the Cable Television Consumer Protection
and Competition Act of 1992 on the Company's business.
2. In May 1995, the eight state attorneys general, who in June 1994
filed civil actions in state courts challenging the processes used
by the Company to implement changes in cable rates on September 1,
1993, agreed to dismiss such actions. The Company also agreed to
dismiss its claims and counterclaims filed in these matters. All
such dismissals are subject to judicial approval.
3. In April 1995, Bell Atlantic Corp. requested that the FCC suspend,
until further notice, consideration of applications to provide
video dialtone facilities in portions of its telephone service
area, including areas served by the Company's cable communications
systems. The Company cannot predict if and when Bell Atlantic
Corp. will renew its video dialtone applications, the form of any
such revised applications, or the actions to be taken by the FCC
in response thereto.
4. In March 1995, the Company entered into agreements to settle
various disputes pending in the courts and at the FCC regarding
the ownership, operation and transfer of the license for the
cellular telephone system in the Atlantic City, New Jersey MSA. In
conjunction with the proposed settlement, the Company agreed to
purchase the license for the cellular telephone system in the
Vineland, New Jersey RSA. The settlement is subject to a favorable
determination at the FCC of proceedings concerning the status of
the current Atlantic City cellular licensee, approval by the FCC
of the transfers to the Company of the cellular licenses, other
regulatory approvals and consents of third parties.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits required to be filed by Item 601 of Regulation S-K:
10.1 Agreement of Limited Partnership of MajorCo, L.P., a Delaware
Limited Partnership, dated as of March 28, 1995, among Sprint
Spectrum, L.P., TCI Network Services, Comcast Telephony Services
and Cox Telephony Partnership (incorporated by reference to
exhibit 5.1 to the Company's Current Report on Form 8-K filed on
April 13, 1995).
10.2 Contribution Agreement by and among TCI Network Services, Comcast
Telephony Services, Cox Telephony Partnership, MajorCo, L.P. and
NewtelCo, L.P., dated as of March 28, 1995, (incorporated by
reference to exhibit 5.2 to the Company's Current Report on Form
8-K filed on April 13, 1995).
10.3 Agreement of Limited Partnership of MinorCo, L.P., a Delaware
Limited Partnership, dated as of March 28, 1995, among Sprint
Spectrum, L.P., TCI Network Services, Comcast Telephony Services
and Cox Telephony Partnership (incorporated by reference to
exhibit 5.3 to the Company's Current Report on Form 8-K filed on
April 13, 1995).
<PAGE>20
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1995
10.4 Amendment to Stock Purchase Agreement between Comcast
Corporation, Comcast FCI, Inc. and Nextel Communications, Inc.,
dated as of April 3, 1995 (incorporated by reference to exhibit
5.4 to the Company's Current Report on Form 8-K filed on April
13, 1995).
10.5 Amended and Restated Stockholders Agreement, dated as of February
9, 1995, among Comcast Corporation, Comcast QVC, Inc., QVC
Programming Holdings, Inc., Liberty Media Corporation, QVC
Investment, Inc. and Liberty QVC, Inc.
27 Financial Data Schedule.
(b) Reports on Form 8-K
(i) The Company filed a Current Report on Form 8-K under Item 2 on
January 6, 1995 relating to the acquisition of the U.S. Cable
Television Operations of Maclean Hunter Limited which included
the Company's Unaudited Pro Forma Condensed Consolidated
Financial Statements as of and for the nine months ended
September 30, 1994 and the Unaudited Combined Financial
Statements for the U.S. Cable Television Operations of Maclean
Hunter as of and for the three and nine months ended September
30, 1994 as well as the Unaudited Consolidated Financial
Statements for QVC, Inc. (formerly, QVC Network, Inc.) for the
quarter ended July 31, 1994, which were incorporated by reference
to QVC, Inc.'s Quarterly Report on Form 10-Q for that period.
(ii) The Company filed a Current Report on Form 8-K under Item 2 on
February 23, 1995 relating to the acquisition of QVC, Inc.
<PAGE>21
COMCAST CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1995
SIGNATURE
Pursuant to the Requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
COMCAST CORPORATION
/s/ LAWRENCE S. SMITH
Lawrence S. Smith
Senior Vice President
Accounting and Administration
(Chief Accounting Officer)
Date: May 15, 1995
EXHIBIT 10.5
AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT
dated as of
February 9, 1995
among
COMCAST CORPORATION
COMCAST QVC, INC.
QVC PROGRAMMING HOLDINGS, INC.
LIBERTY MEDIA CORPORATION
QVC INVESTMENT, INC.
and
LIBERTY QVC, INC.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS
1.1. Definitions................................................... 2
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF COMCAST AND CQI
2.1. Due Organization.............................................. 11
2.2. Authority Relative to This Agreement.......................... 11
2.3. No Conflict; Required Filings and Consents.................... 11
2.4. No Other Agreements; No Obligations under
July Stockholders Agreement................................... 12
2.5. QVC Shares; Good Title........................................ 13
2.6. Public Disclosure............................................. 13
2.7. Litigation.................................................... 13
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF LIBERTY AND LIBERTY SUB
3.1. Due Organization.............................................. 14
3.2. Authority Relative to This Agreement.......................... 14
3.3. No Conflict; Required Filings and Consents.................... 14
3.4. No Other Agreements; No Obligations under
July Stockholders Agreement................................... 15
3.5. QVC Shares; Good Title........................................ 15
3.6. Public Disclosure............................................. 16
3.7. Litigation.................................................... 16
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF QPH
4.1. Due Organization.............................................. 16
4.2. Authority Relative to This Agreement.......................... 16
4.3. No Conflict; Required Filings and Consents.................... 17
4.4. Capitalization................................................ 17
4.5. Litigation.................................................... 18
<PAGE>
Page
ARTICLE 5
CERTAIN OBLIGATIONS OF THE PARTIES
5.1. Contributions to QPH...........................................18
5.2. Reasonable Efforts; Cooperation................................19
5.3. Certain Notices................................................20
5.4. Publicity......................................................20
5.5. QVC Repurchase Rights and Registration
Rights; Waiver.................................................20
5.6. Certain Liberty Rights; Waiver.................................21
5.7. Fees and Expenses..............................................21
5.8. Future Business Opportunities..................................21
5.9. Certain Agreements.............................................22
5.10. Capital Restructuring......................................... 22
ARTICLE 6
CORPORATE GOVERNANCE
6.1. Management; Composition of the Board.......................... 23
6.2. Management Committee; Certain Approval
Rights........................................................ 25
6.3. Notice to Liberty............................................. 29
6.4. Transfer of Management Functions.............................. 30
6.5. Changes in Stockholders' Percentage
Ownership..................................................... 30
ARTICLE 7
RESTRICTIONS ON TRANSFER; LEGENDS
7.1. General....................................................... 31
7.2. Legend on Securities.......................................... 32
ARTICLE 8
RIGHT OF FIRST REFUSAL
8.1. Right of First Refusal........................................ 33
<PAGE>
Page
ARTICLE 9
CERTAIN EXIT RIGHTS
9.1. Registration Rights........................................... 40
9.2. Initiation of Exit Rights..................................... 40
9.3. Appraisal Process............................................. 41
9.4. Comcast's Purchase Rights..................................... 42
9.5. Liberty's Purchase Rights..................................... 44
9.6. Compulsory Sale............................................... 47
9.6A. Exclusive Remedy.............................................. 47
9.7. Change of Control Purchase Rights............................. 47
9.8. .............................................................. 50
9.9. Tag-Along Rights.............................................. 51
9.10. Right to Compel Sale.......................................... 53
9.11. Qualifying Securities Limitation.............................. 56
ARTICLE 10
MISCELLANEOUS
10.1. Agreement to be Bound......................................... 56
10.2. Undertaking................................................... 56
10.3. Entire Agreement.............................................. 57
10.4. Binding Effect; Benefit....................................... 57
10.5. Assignability................................................. 57
10.6. Amendment; Waiver; Termination................................ 57
10.7. Notices....................................................... 57
10.8. Headings...................................................... 59
10.9. Counterparts.................................................. 59
10.10. Applicable Law................................................ 59
10.11. No Inconsistent Agreements; Specific
Enforcement................................................... 60
10.12. Survival...................................................... 60
SCHEDULES; EXHIBITS
Schedule I QVC Securities held by Comcast Group and
Liberty Group
Schedule II Calculation of Attributable Interest
Exhibit A Registration Rights
Exhibit B Form of Charter
Exhibit C Form of Bylaws
<PAGE>
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT dated as of April
21, 1995 among QVC Programming Holdings, Inc., a Delaware corporation ("QPH"),
Comcast Corporation, a Pennsylvania corporation, Comcast QVC, Inc., a Delaware
corporation ("CQI"), Liberty Media Corporation, a Delaware corporation, QVC
Investment, Inc., a Colorado corporation ("QII"), and Liberty QVC, Inc., a
Colorado corporation ("LQI", and, together with QII, "Liberty Sub").
W I T N E S S E T H
WHEREAS, Comcast (as defined below) and TCI Cable Investments,
Inc. ("Old Liberty") entered into a letter agreement dated August 4, 1994 (the
"Joint Bidding Agreement") with respect to the joint acquisition (the
"Acquisition") of QVC, Inc., a Delaware corporation ("QVC"), on the terms
described in the Merger Agreement (as amended from time to time, the "Merger
Agreement") dated as of August 4, 1994 among Comcast, Old Liberty, Comcast
QMerger, Inc. (now QPH) and QVC;
WHEREAS, Old Liberty assigned all of its rights under the
Merger Agreement to Liberty (as defined below), a new wholly-owned subsidiary of
Tele-Communications, Inc.
("TCI");
WHEREAS, Liberty agreed by letter dated October 13, 1994 to be
bound by all of the provisions of the Joint Bidding Agreement and, subject to
the terms and conditions set forth therein, to perform all liabilities and
obligations of Old Liberty under the Joint Bidding Agreement;
WHEREAS, simultaneously with the execution of the Joint
Bidding Agreement, Comcast, Arrow Investments, L.P. ("Arrow") and Barry Diller
entered into a letter agreement relating to certain matters in connection with
the Acquisition;
WHEREAS, QPH made a tender offer (the "Offer") to purchase all
of the outstanding shares (collectively, the "QVC Shares") of common stock, par
value $.01 per share, Series B Preferred Stock and Series C Preferred Stock,
each par value $.10 per share, of QVC, for $46 per share of common stock and
$460 per share of preferred stock, net to the seller in cash, on the terms and
subject to the
<PAGE>
conditions set forth in the Offer to Purchase and Letter of Transmittal in the
respective forms filed with the Securities and Exchange Commission (the
"Commission") on August 11, 1994 (in each case, as amended and supplemented
through the date hereof);
WHEREAS, the Joint Bidding Agreement requires that certain of
its provisions will be included in a definitive stockholders agreement to be
executed by the parties thereto prior to the consummation of the Offer;
WHEREAS, each of the Liberty Group and the Comcast Group
(each, as defined below) owns the number and type of outstanding securities of
QVC set forth below the name of such Stockholder Group (as defined below) on
Schedule I hereto; and
WHEREAS, the parties hereto desire to enter into this
Agreement in order to set forth their respective agreements with respect to (i)
the Company Securities now held or hereafter acquired by each Stockholder (as
defined below) and (ii) certain other matters regarding the Company.
NOW, THEREFORE, for and in consideration of the mutual
representations, covenants and agreements contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1. Definitions. (a) The following terms, as used herein,
have the following meanings:
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under common
control with such Person; provided that no member of a Stockholder Group shall
be deemed an Affiliate of any of the members of the other Stockholder Group
solely by reason of any investment in the Company; and provided further that
neither the Company nor any of its Subsidiaries shall be deemed an Affiliate of
any member of the Comcast Group or the Liberty Group. For the purpose of this
definition, the term "control" (including its correlative meanings, the terms
"controlling", "controlled by" and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through
2
<PAGE>
the ownership of voting securities, by contract or otherwise.
"Associate" shall have the meaning set forth in Rule 12b-2
promulgated under the Exchange Act.
"Attributable Interest" shall mean, with respect to either
Comcast or Liberty, as the case may be, the sum of, without duplication, (i)
such Person's direct equity economic interest in Shares and (ii) to the extent
such Person owns Shares indirectly, the sum of such Person's indirect equity
economic interest in Shares through one or more unbroken chains of Subsidiaries,
which interest shall be quantified in amount by a series of percentage
multiplications commencing with the equity interest in shares of the Subsidiary
of such Person which holds the Shares directly and multiplying that by the next
most proximate equity interest in the Person which is the parent entity of such
Subsidiary and multiplying in turn each succeeding equity interest in the order
of their progression away from the entity directly holding Shares by the result
of the immediately preceding multiplication until the percentage interest of
Comcast or Liberty, as the case may be, in the Shares is determined; provided
that, except for purposes of Section 6.5, Shares acquired by such Person from
any Person other than (x) a member of the Liberty Group or the Comcast Group or
(y) the Company (except to the extent such Shares are issued as a stock dividend
or other pro rata distribution to stockholders of the Company) shall not be
included in any calculation of Attributable Interest hereunder. In the event
that any Person issues Derivative Securities, the Shares or the amount of the
equity interest in the applicable Subsidiary of such Person, as the case may be,
subject to such Derivative Securities, shall be excluded from any calculation of
such Person's Attributable Interest hereunder. For purposes of clarification,
Attributable Interest shall be calculated in a manner consistent with the
example set forth on Schedule II.
"Bankruptcy Act" means the Bankruptcy Reform Act of 1978, as
amended.
"Board" means the board of directors of the Company.
"Business Day" means any day except a Saturday, Sunday or
other day on which commercial banking institutions in New York City are
authorized by law or executive order to be closed.
3
<PAGE>
"Bylaws" means the bylaws of the Company, in substantially the
form attached as Exhibit C hereto, as amended from time to time in accordance
herewith.
"CFC" means Comcast Financial Corporation, a Pennsylvania
corporation.
"Charter" means the Articles of Incorporation of the Company,
in substantially the form attached as Exhibit B hereto, as amended from time to
time in accordance herewith.
"Comcast" means Comcast Corporation and any successor (by
merger, consolidation, sale of all or substantially all of its business and
assets or otherwise) to all or substantially all of its business and assets.
"Comcast Change of Control" means any event that results in a
Comcast Stockholder ceasing to be a Subsidiary of Comcast; provided that no
Comcast Change of Control shall be deemed to occur with respect to the granting
of any Lien permitted pursuant to Section 7.1.(d).
"Comcast Group" shall mean Comcast and its Subsidiaries.
"Comcast Stockholder" means any Stockholder which is a member
of the Comcast Group.
"Comcast Subject Entity" means a Comcast Stockholder which
ceases to be a Subsidiary of Comcast.
"Common Stock" means the common stock of the Company.
"Company" means, (i) prior to the Merger, QPH and (ii)
following the Merger, QVC, as the surviving corporation in the Merger; provided,
however, that in the event that, pursuant to the provisions of Section 5.10, (x)
Holdco becomes the owner of the Company Securities held by the Comcast Group and
the Liberty Group, with the Comcast Group and the Liberty Group receiving
securities of Holdco in exchange therefor, then the term "Company" shall be
deemed to refer to Holdco, or (y) substantially all of the assets and
liabilities of QVC are transferred to a wholly-owned Subsidiary of QVC and no
change in the capital stock of QVC occurs as a result of such transfer, then the
term "Company" shall be deemed to refer to QVC.
"Company Securities" means (i) shares of capital stock of the
Company, (ii) securities of the Company convertible into or exercisable or
exchangeable for shares
4
<PAGE>
of capital stock of the Company and (iii) options, warrants or other rights to
acquire from the Company, or other obligations of the Company to issue, any
shares of capital stock of the Company or securities convertible into or
exercisable or exchangeable for shares of capital stock of the Company.
"Derivative Securities" means any securities, other than
common equity securities, which are by their terms linked to the value of the
Shares or to the performance of the Company, (x) the value or performance of
which is primarily dependent upon the value of the Shares or the performance of
the Company or (y) where the terms of such securities grant to the holder
thereof the right or a preference to acquire the Shares held by such Person, or
the securities of a Subsidiary of such Person which directly or indirectly holds
Shares, to the exclusion of all other assets held by such issuing Person.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Fully Diluted Shares" means all outstanding Shares and,
without duplication, all Shares issuable in respect of outstanding securities
convertible into or exercisable or exchangeable for Shares (including vested
(and excluding unvested) options, warrants and other irrevocable rights to
purchase or subscribe for Shares or securities convertible into or exercisable
or exchangeable for Shares), without regard to the applicability of the QVC
Repurchase Rights to any such Shares, to the extent that the per share
conversion, exercise or exchange price with respect to each such convertible,
exercisable or exchangeable security, when added to the applicable purchase
price or acquisition cost of such security, if any, is less than or equal to the
fair market value of one Share.
"Holdco" means any Person (i) of which substantially all the
capital securities following an exchange with the holders of the Company
Securities then existing are owned by the former holders of Company Securities
in substantially the same proportion as in effect immediately prior to such
exchange and (ii) which, immediately following such exchange, owns all of the
capital securities of the Company.
"HSR Act" shall mean the Hart-Scott Rodino Antitrust
Improvements Act of 1976, as amended.
5
<PAGE>
"Liberty" means Liberty Media Corporation and any successor
(by merger, consolidation, sale of all or substantially all of its business and
assets or otherwise) to all or substantially all of its business and assets.
"Liberty Change of Control" means any event that results in a
Liberty Stockholder ceasing to be a Subsidiary of Liberty; provided that no
Liberty Change of Control shall be deemed to occur with respect to the granting
of any Lien permitted pursuant to Section 7.1.(d).
"Liberty Group" shall mean Liberty and its Subsidiaries.
"Liberty Parent" means Liberty or, if Liberty is a Subsidiary,
the ultimate corporate parent entity of Liberty.
"Liberty Stockholder" means any Stockholder which is a member
of the Liberty Group.
"Liberty Subject Entity" means a Liberty Stockholder which
ceases to be a Subsidiary of Liberty.
"Lien" shall mean any lien, mortgage, pledge, security
interest, encumbrance or other similar security arrangement which grants to any
Person any security interest in any Company Securities, securities of any
Subsidiary of Comcast or Liberty which directly or indirectly owns or holds
Company Securities or, with respect to Sections 2.5 and 3.5, QVC Securities.
"Management Transfer Event" means the first to occur of (i)
the delivery of the Liberty Notice, (ii) a Comcast Purchase Default and (iii)
the time at which the Attributable Interest of Liberty is in excess of the
Attributable Interest of Comcast; provided that, the Attributable Interest of
Comcast or Liberty, as the case may be, shall not be deemed to exceed the
Attributable Interest of Liberty or Comcast, respectively, if such excess exists
solely as a result of (A) one or more Indirect Transfers of Company Securities
by a Stockholder Group (that, taken together, do not result in a Stockholder
Change of Control involving such Stockholder Group) which taken alone and
without giving effect to any other Direct Transfers or any issuance of equity
securities by QVC, would not result in the Attributable Interest of Comcast or
Liberty, as the case may be, declining to or below 50% of its Attributable
Interest on the date hereof and (B) one or more Direct Transfers made pursuant
to Section 7.1(a)(I)(z).
6
<PAGE>
"Merger" means the merger whereby QPH will merge with and into
QVC as contemplated by the Merger Agreement.
"Person" means an individual, estate, corporation, limited
liability company, partnership, joint venture, association, trust or
unincorporated organization or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Preferred Stock" means, collectively, the Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock, each par value
$.10 per share, of QVC.
"Public Company": the Company shall be deemed to be a "Public
Company" at such time as its Common Stock is (i) registered under Section 12(b)
or 12(g), or the Company is required to file reports pursuant to Section 15(d),
of the Exchange Act (or any successor or comparable provisions of the federal
securities laws) and (ii) actively traded.
"Public Offering" means any public offering of Company
Securities pursuant to an effective registration statement under the Securities
Act other than pursuant to a registration statement on Form S-8 or any successor
or similar form.
"Qualified Independent Appraiser" shall mean a nationally
recognized investment banking firm with substantial experience in evaluating
significant communications properties, including cable television programming
businesses, that is not directly or indirectly affiliated with, and has not
performed any substantial services during the previous two years for, the Person
proposing such Qualified Independent Appraiser and such Person's Affiliates and
which has no interest (other than the receipt of customary fees) in any of the
transactions contemplated hereby.
"QVC Common Stock" means the common stock, par value $.01 per
share, of QVC.
"QVC Designated Agreements" means (i) the Equity Participation
Agreement, dated as of June 12, 1987, between QVC and Satellite, (ii) the Equity
Participation Agreement in Conjunction with 10-year Extension to Affiliation
Agreement(s) dated as of October 27, 1989, between QVC and Satellite, (iii) the
Addendum to CVN Affiliation Agreement, dated as of October 27, 1989, among QVC,
QVC Acquisition Corporation and Satellite, (iv) the Equity Participation
Agreement, dated as of June 26, 1987 between QVC and CFC,
7
<PAGE>
(v) the Equity Participation Agreement in Conjunction with 10-year Extension to
Affiliation Agreement, dated October 31, 1989 between QVC and Comcast
Cablevision Communications, Inc., (vi) the Letter Agreement, dated July 26, 1993
between QVC and Old Liberty (the "July Letter") and (vii) any other agreement or
instrument in effect on the date hereof between Comcast or its Affiliates or
Liberty or its Affiliates, on the one hand, and QVC, on the other hand, which
instrument or agreement provides for the repurchase of QVC Securities by QVC or
its successors.
"QVC Repurchase Rights" means the rights of QVC to repurchase
QVC Securities pursuant to the QVC Designated Agreements.
"QVC Securities" means, collectively, all outstanding (i) QVC
Shares, (ii) securities of QVC convertible into or exercisable or exchangeable
for QVC Shares or (iii) options, warrants or other rights to acquire from QVC,
or other obligations of QVC to issue, any QVC Shares or securities convertible
into or exercisable or exchangeable for QVC Shares.
"Securities Act" means the Securities Act of 1933, as amended
(or any successor statute or law) and the rules and regulations promulgated
thereunder.
"Securities Laws" means all federal, state, local and foreign
securities laws and regulations of governmental and other regulatory
authorities, and all rules and regulations of any stock exchange or
self-governing body, in each such case that are applicable to the offering and
sale of Company Securities.
"Shareholders Litigation" means In Re QVC, Inc. Shareholders
Litigation, Consolidated Civil Action No. 13590 in the Court of Chancery of the
State of Delaware in and for New Castle County.
"Shares" means shares of the Common Stock.
"Specified Amount" means, with respect to the Shares of any
Stockholder Group, the portion of the Fair Market Value of the Fully Diluted
Shares attributable to such Shares as determined by the Qualified Independent
Appraisers pursuant to Section 9.3.
"Stockholder" means each Person (other than the Company) who
is or becomes a party to this Agreement, whether in connection with the
execution and delivery hereof as of the date hereof or otherwise in accordance
herewith,
8
<PAGE>
so long as such Person shall beneficially own any Company Securities.
"Stockholder Change of Control" means either a Liberty Change
of Control or a Comcast Change of Control.
"Stockholder Group" means either of the Comcast Group or the
Liberty Group.
"Subject Entity" means a Comcast Subject Entity or a Liberty
Subject Entity.
"Subsidiary" means at any time:
(a) with respect to Comcast or any Subsidiary of Comcast, for
so long as Comcast is then entitled to designate the Board pursuant to the
provisions hereof, any entity in which Comcast and/or one or more of its
Subsidiaries, individually or collectively, owns and controls (x) in excess of
50% of the voting power for the election of directors (including but not limited
to ordinary voting power) and (y) in excess of 50% of the outstanding economic
equity interests; provided that neither the Company nor any of its Subsidiaries
shall be deemed a Subsidiary of Comcast or its Subsidiaries;
(b) with respect to Liberty or any Subsidiary of Liberty, at
any time (and with respect to Comcast and any Subsidiary of Comcast, following
such time as Comcast ceases to be entitled to designate the Board pursuant to
the terms hereof), any entity with respect to which such Person and/or one or
more of its Subsidiaries, individually or collectively, owns in excess of 50% of
the outstanding economic equity interests; provided that neither the Company nor
any of its Subsidiaries shall be deemed a Subsidiary of any member of the
Stockholder Group of such Person;
(c) with respect to any Person other than any member of the
Comcast Group or the Liberty Group at any time, any entity of which securities
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time directly or indirectly beneficially owned by such Person.
"Transaction Documents" means, together, this Agreement and
the Merger Agreement.
(b) Each of the following terms is defined in the Section set
forth opposite such term:
9
<PAGE>
Term Section
16(b) Event 8.1.(h)
Alternate Structure 9.8
Average Market Price 9.4.(b)
Buy Notice 9.10.(a)
Change of Control Purchase Price 9.7.(a)
Change of Control Determination Date 9.7.(e)
Comcast Exit Price 9.5.(a)
Comcast Qualifying Securities 9.4.(b)
Comcast Determination Date 9.5.(e)
Comcast Purchase Default 9.5.(a)
Company Material Adverse Effect 2.3.(a)
Compelled Sales 9.10.(a)
Control Block Buyer 9.10.(a)
Control Block Transaction 9.10.(a)
Control Sale Notice 9.10.(a)
CQI Additional Contribution 4.4.(b)
Designated Corporate Opportunity 5.8
Designated Persons 5.8
Direct Transfer 7.1.(a)
Electing Stockholder 9.7.(a)
Election Period 9.4.(a)
Excluded Repurchase Rights 5.5.(a)(ii)
Exit Notice 9.2
Fair Market Value 9.3
Indirect Transfer 7.1
Initial Seller 8.1.(j)
July Stockholders Agreement 2.4.(b)
Liberty Determination Date 9.4.(e)
Liberty Exit Price 9.4.(a)
Liberty Sub Additional Contribution 5.1.(b)
Liberty Qualifying Securities 9.5.(b)
Liberty Purchase Default 9.6
Liberty Notice 9.5.(a)
Liberty Rights Termination Date 9.10.(a)
Non-Electing Stockholder 9.7.(a)
Non-Selling Stockholder 8.1.(a)
Notice Delivery Date 9.3
Offer Period 8.1.(c)
Primary Business 6.2.(b)(i)
Projected Offering Price 8.1.(a)(iii)
Proposed Structure 9.8
Purchasing Party 9.8
QVC Designees 6.1.(d)
Restricted Person 6.2.(b)(i)
Satellite Agreement 5.6
Satellite 5.6
Section 8.1 Transaction Price 8.1.(a)
Section 8.1 Transaction Notice 8.1.(a)
Section 8.1 Transaction 8.1.(a)
10
<PAGE>
Term Section
Selling Party 9.8
Selling Stockholder 8.1.(a)
Stockholder Qualifying Securities 9.7.(b)
Subsequent Seller 8.1.(j)
Tag-along Sale Notice 9.9.(b)
Tender Offer Statement 2.6
Third Party 8.1.(a)
Transaction Statement 2.6
Transaction Completion Period 8.1.(e)
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF COMCAST AND CQI
Each of Comcast and CQI represents and warrants to Liberty on
the date hereof that:
2.1. Due Organization. Each of Comcast and CQI is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary, except for those jurisdictions where the
failure to be so qualified would not, individually or in the aggregate, have a
material adverse effect on the business, results of operations or financial
condition of Comcast and its Subsidiaries, taken as a whole. CQI is an indirect
Subsidiary of Comcast.
2.2. Authority Relative to This Agreement. Each of Comcast and
CQI has all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. This Agreement has been duly authorized,
executed and delivered by Comcast and CQI and, assuming the due execution and
delivery hereof by the other parties hereto (other than QPH), is a valid and
binding obligation of Comcast and CQI, enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the rights of
creditors generally and by general principles of equity.
2.3. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement and the performance of Comcast's and
CQI's obligations hereunder in connection with the consummation of the Offer,
the Merger
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and the transactions contemplated pursuant to Section 5.1 do not require the
consent, approval or authorization of, or any registration, qualification or
filing with, any governmental agency or authority or any other Person, except
(i) for (A) applicable requirements, if any, of the Exchange Act, and (B) filing
and recordation of appropriate merger and similar documents as required by
Delaware law, (ii) where previously obtained or (iii) where the failure to
obtain such consents, approvals or authorizations, or to make such
registrations, qualifications or filings, would not prevent or delay the
consummation of the transactions contemplated by the Transaction Documents in
any material respect, or otherwise prevent Comcast or CQI from performing its
obligations under any of the Transaction Documents in any material respect, and
would not, individually or in the aggregate, be reasonably likely to have a
material adverse effect on the business, results of operations or financial
condition of the Company, QVC and their respective Subsidiaries taken as a whole
("Company Material Adverse Effect").
(b) The execution and delivery of this Agreement and the
performance of Comcast's and CQI's obligations hereunder do not conflict with or
result in a breach or violation of (A) the certificate of incorporation or
bylaws of Comcast or CQI, respectively, (B) any material agreement to which
Comcast or CQI, respectively, is a party, except in the case of Comcast for such
conflicts, breaches or violations which would not prevent or delay the
consummation of the transactions contemplated by the Transaction Documents in
any material respect or otherwise prevent Comcast from performing its
obligations under the Transaction Documents in any material respect and would
not, individually or in the aggregate, be reasonably likely to have a Company
Material Adverse Effect or (C) any applicable law or regulation, except for such
conflicts, breaches or violations which would not prevent or delay the
consummation of the transactions contemplated by the Transaction Documents in
any material respect, or otherwise prevent Comcast or CQI from performing its
obligations under any of the Transaction Documents in any material respect, and
would not, individually or in the aggregate, be reasonably likely to have a
Company Material Adverse Effect.
2.4. No Other Agreements; No Obligations under July
Stockholders Agreement. (a) None of Comcast, CQI or any of their Subsidiaries is
bound by any agreement or understanding relating to its ownership, transfer or
voting of the QVC Securities or the Company Securities other than this
Agreement.
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(b) Neither Comcast nor any of its Affiliates has any
remaining obligations under the Stockholders Agreement (the "July Stockholders
Agreement") dated July 16, 1993 among Comcast, Old Liberty, Barry Diller and
Arrow (or any successor or other similar agreement).
(c) No member of the Comcast Group has any preemptive or other
similar rights to purchase with respect to securities of QVC.
2.5. QVC Shares; Good Title. Comcast and/or Comcast's
Subsidiaries (i) are the record and beneficial owner of the QVC Securities set
forth below the name of the Comcast Group on Schedule I hereto, free and clear
of any Lien or other restriction on ownership, transfer or voting and (ii) CFC
will transfer and deliver to the Company pursuant to Section 5.1 below valid
title to such QVC Shares free and clear of any Lien or other restriction on
ownership, transfer or voting, in each case other than the QVC Repurchase
Rights. The aggregate exercise price of the warrants set forth on Schedule I is
$29,319,312.50. Such warrants are validly issued and presently exercisable in
accordance with their terms and upon the payment of the exercise price thereof
will entitle the holder thereof to receive the indicated number of shares of QVC
Common Stock. No consideration is payable upon conversion of the preferred stock
set forth below the name of the Comcast Group on Schedule I hereto.
2.6. Public Disclosure. All information concerning Comcast and
its Affiliates in any statements filed with the Commission by Comcast in
connection with the transactions contemplated by the Transaction Documents,
including the Tender Offer Statement, as amended, on Schedule 14D-1 pursuant to
Rule 14d-3 promulgated by the Commission under the Exchange Act and the Offer to
Purchase and related Letter of Transmittal, each, as amended (collectively, the
"Tender Offer Statement") and the Transaction Statement, as amended, on Schedule
13E-3 pursuant to Rule 13e-3 promulgated by the Commission under the Exchange
Act (the "Transaction Statement"), complies in all material respects with the
provisions of the Exchange Act and does not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
2.7. Litigation. Other than the Shareholders Litigation, there
is no action, suit, investigation or proceeding, pending or, to the best
knowledge of Comcast and CQI, threatened against Comcast, any Affiliate of
Comcast or
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any of their respective properties before any court or arbitrator or any
governmental body, agency, or official relating to the transactions contemplated
by the Transaction Documents.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF LIBERTY AND LIBERTY SUB
Each of Liberty and Liberty Sub represents and warrants to
Comcast on the date hereof that:
3.1. Due Organization. Each of Liberty and Liberty Sub is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary, except for those jurisdictions where the
failure to be so qualified would not, individually or in the aggregate, have a
material adverse effect on the business, results of operations or financial
condition of Liberty and its Subsidiaries, taken as a whole. Liberty Sub is an
indirect wholly-owned Subsidiary of Liberty.
3.2. Authority Relative to This Agreement. Each of Liberty and
Liberty Sub has all necessary corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby. This Agreement has been duly authorized,
executed and delivered by Liberty and Liberty Sub and, assuming the due
execution and delivery hereof by the other parties to this Agreement, is a valid
and binding obligation of Liberty and Liberty Sub, enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting the
rights of creditors generally and by general principles of equity.
3.3. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement and the performance of Liberty's and
Liberty Sub's obligations hereunder in connection with the consummation of the
Offer, the Merger and the transactions contemplated pursuant to Section 5.1 do
not require the consent, approval or authorization of, or any registration,
qualification or filing with, any governmental agency or authority or any other
Person, except (i) for (A) applicable requirements, if any, of the Exchange Act,
and (B) filing and recordation of
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appropriate merger and similar documents as required by Delaware law, (ii) where
previously obtained or (iii) where the failure to obtain such consents,
approvals or authorizations, or to make such registrations, qualifications or
filings, would not prevent or delay the consummation of the transactions
contemplated by the Transaction Documents in any material respect, or otherwise
prevent Liberty or Liberty Sub from performing its obligations under any of the
Transaction Documents in any material respect, and would not, individually or in
the aggregate, be reasonably likely to have a Company Material Adverse Effect.
(b) The execution and delivery of this Agreement and the
performance of Liberty's and Liberty Sub's obligations hereunder do not conflict
with or result in a breach or violation of (A) the certificate of incorporation
or bylaws of Liberty or Liberty Sub, respectively, (B) any material agreement to
which Liberty or Liberty Sub, respectively, is a party, except, in the case of
Liberty, for such conflicts, breaches or violations which would not prevent or
delay the consummation of the transactions contemplated by the Transaction
Documents in any material respect or otherwise prevent Liberty from performing
its obligations under the Transaction Documents in any material respect and
would not, individually or in the aggregate, be reasonably likely to have a
Company Material Adverse Effect or (C) any applicable law or regulation, except
for such conflicts, breaches or violations which would not prevent or delay the
consummation of the transactions contemplated hereunder in any material respect,
or otherwise prevent Liberty or Liberty Sub from performing its obligations
under this Agreement in any material respect, and would not, individually or in
the aggregate, be reasonably likely to have a Company Material Adverse Effect.
3.4. No Other Agreements; No Obligations under July
Stockholders Agreement. Assuming that the July Stockholders Agreement has been
terminated, none of Liberty, Liberty Sub nor any of their Subsidiaries is bound
by any agreement or understanding relating to its ownership, transfer or voting
of the QVC Securities or the Company Securities other than this Agreement.
3.5. QVC Shares; Good Title. Liberty and/or Liberty Sub (i)
are the record and beneficial owner of the QVC Securities set forth below the
name of the Liberty Group on Schedule I hereto, free and clear of any Lien or
restriction on ownership, transfer or voting, and (ii) will transfer and deliver
to the Company pursuant to Section 5.1 below valid title to such QVC Shares free
and clear of any
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Lien or restriction on ownership, transfer or voting, in each case other than
the QVC Repurchase Rights. No consideration is payable upon conversion of the
preferred stock set forth below in the name of the Liberty Group on Schedule I
hereto.
3.6. Public Disclosure. All information concerning Liberty and
its Affiliates in any statements filed with the Commission by Liberty in
connection with the transactions contemplated by the Transaction Documents,
including the Tender Offer Statement and the Transaction Statement, complies in
all material respects with the provisions of the Exchange Act and does not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
3.7. Litigation. Other than the Shareholders Litigation, there
is no action, suit, investigation or proceeding, pending or, to the best
knowledge of Liberty and Liberty Sub, threatened against Liberty, any Affiliate
of Liberty or any of their respective properties before any court or arbitrator
or any governmental body, agency or official relating to the transactions
contemplated by the Transaction Documents.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF QPH
Comcast, on behalf of QPH, represents and warrants to Liberty
on the date hereof that:
4.1. Due Organization. QPH is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
4.2. Authority Relative to This Agreement. QPH has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. This Agreement has been duly authorized, executed and
delivered by QPH and, assuming the due execution and delivery hereof by the
other parties to this Agreement other than Comcast and CQI, is a valid and
binding obligation of QPH, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting the rights of creditors generally
and by general principles of equity.
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4.3. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement and the performance of QPH's
obligations hereunder in connection with the consummation of the Offer, the
Merger and the transactions contemplated by Section 5.1 do not require the
consent, approval or authorization of, or any registration, qualification or
filing with, any governmental agency or authority or any other Person, except
(i) for (A) applicable requirements, if any, of the Exchange Act, and (B) filing
and recordation of appropriate merger and similar documents as required by
Delaware Law, (ii) where previously obtained or (iii) where the failure to
obtain such consents, approvals or authorizations, or to make such
registrations, qualifications or filings, would not prevent or delay the
consummation of the transactions contemplated by the Transaction Documents in
any material respect, or otherwise prevent QPH from performing its obligations
under the Transaction Documents in any material respect, and would not,
individually or in the aggregate, be reasonably likely to have a Company
Material Adverse Effect.
(b) The execution and delivery of this Agreement and the
performance of QPH's obligations hereunder do not conflict with or result in a
breach or violation of (A) the certificate of incorporation or bylaws of QPH,
(B) any material agreement to which QPH is a party or (C) any applicable law or
regulation, except in the case of clauses (B) and (C) for such conflicts,
breaches or violations which would not prevent or delay the consummation of the
transactions contemplated hereunder in any material respect, or otherwise
prevent QPH from performing its obligations under this Agreement in any material
respect, and would not, individually or in the aggregate, be reasonably likely
to have a Company Material Adverse Effect.
4.4. Capitalization. (a) The authorized capital stock of QPH
consists solely of 100,000 shares of Common Stock. As of the date hereof and
immediately prior to the consummation of the transactions contemplated by
Section 5.1, there were outstanding 574 shares of Common Stock, all of which are
owned by CQI free and clear of any Lien or restriction on ownership, transfer or
voting. All outstanding shares of Common Stock of QPH have been duly authorized
and validly issued and are fully paid and non-assessable. The Shares to be
issued by QPH to Liberty and/or one of more Subsidiaries of Liberty pursuant to
Section 5.1 have been duly authorized and, when issued and delivered in
accordance with the terms of this Agreement, will be validly issued, fully paid
and non-assessable, and the issuance of such Shares will not be subject to any
preemptive or similar rights. Except as stated above, there
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are no outstanding Company Securities. Except as otherwise provided herein,
there are no outstanding obligations of QPH or any Subsidiary of QPH to
repurchase, redeem or otherwise acquire, or to issue or sell, any Company
Securities.
(b) On or prior to the date hereof, Comcast has, or has
caused, an amount in cash equal to the sum of (x) $29,319,312.50 (representing
the aggregate exercise price of all warrants to purchase QVC Common Stock in the
name of the Comcast Group on Schedule I hereto) and (y) $267,000,000 (the amount
set forth in clause (y) of this Section 4.4.(b), the "CQI Additional
Contribution") to be contributed to QPH.
(c) As of the close of business on the date hereof and
immediately prior to the consummation of the transactions contemplated by
Section 5.1, QPH had assets consisting of $296,319,312.50 in cash and had no
liabilities, whether contingent or fixed or otherwise (other than as may arise
pursuant to the Joint Bidding Agreement and the Merger Agreement or the
transactions specifically contemplated thereby (including without limitation the
Offer) or as a result of the Shareholders Litigation). Prior to the date hereof,
QPH has not entered into any transactions or agreements or otherwise engaged in
any business other than pursuant to the Joint Bidding Agreement and the Merger
Agreement or the transactions specifically contemplated thereby.
4.5. Litigation. Other than the Shareholders Litigation, there
is no action, suit, investigation or proceeding pending or, to the best
knowledge of QPH, threatened against QPH or any of its properties before any
court or arbitrator or any governmental body, agency or official relating to the
transactions contemplated by the Transaction Documents.
ARTICLE 5
CERTAIN OBLIGATIONS OF THE PARTIES
5.1. Contributions to QPH. Simultaneously with QPH's
acceptance for payment of QVC shares tendered pursuant to the Offer:
(a) Comcast shall, or shall cause CFC to, contribute, assign,
and transfer to QPH the QVC Securities set forth on Schedule I hereto below the
name of the Comcast Group. In consideration of the foregoing, QPH shall issue
and sell to CQI 56,872.6 duly authorized and validly issued
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Shares and delivery to CQI certificates representing such Shares.
(b) Liberty shall, or shall cause Liberty Sub to contribute,
assign and transfer to QPH: (i) the QVC Securities set forth on Schedule I
hereto below the name of the Liberty Group and (ii) $6,556,040 in cash (the
amount in clause (ii), the "Liberty Sub Additional Contribution"). In
consideration of the foregoing, QPH shall issue and sell to Liberty Sub 42,553.4
duly authorized and validly issued Shares and delivery to Liberty Sub
certificates representing such Shares.
5.2. Reasonable Efforts; Cooperation. (a) The parties hereto
shall use all commercially reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary or desirable under
applicable laws and regulation to consummate the transactions contemplated
hereby. The parties hereto agree to execute and deliver such other documents,
certificates, agreements and other writings and to take such other actions as
may be necessary or desirable in order to consummate or implement expeditiously
the transactions contemplated by the Transaction Documents.
(b) The parties hereto shall use their reasonable best efforts
to cooperate with one another (i) in determining whether any action by or in
respect of, or filing with, any governmental body, agency, official or authority
is required in connection with the consummation of the transactions contemplated
by this Agreement and (ii) in taking such actions or making any such filings,
furnishing information required in connection therewith. Comcast or Liberty, as
the case may be, agrees that for so long as it controls the Board and the
Management Committee pursuant to Sections 6.1 and 6.4, it shall use its
reasonable best efforts to cause the Company to comply with the provisions of
this Section.
(c) The parties shall cooperate in good faith to take such
actions and cause the Company to take such actions as may be reasonably
necessary prior to its initial secondary Public Offering (or, subject to
Liberty's rights pursuant to Section 6.2.(b)), its initial primary Public
Offering) to effect a reclassification, stock split or other similar adjustment
affecting the Stockholders pro rata, as the managing underwriter of such
offering shall reasonably request, which reclassification, stock split or other
similar adjustment will preserve, to the extent applicable, the rights of the
parties pursuant to Section 6.2.
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5.3. Certain Notices. (a) Each party hereto shall promptly
notify the other parties of (i) any notice or other communication from any
Person alleging that the consent of such Person is or may be required in
connection with the transactions contemplated by the Transaction Documents, (ii)
any notice or other communication from any governmental or regulatory agency or
authority in connection with and material to the transactions contemplated by
the Transaction Documents and (iii) any actions, suits, claims investigations or
proceedings commenced or, to its knowledge threatened, against, relating to or
involving or otherwise affecting such party or any of its Affiliates that relate
to the transactions contemplated by the Transaction Documents.
(b) Each of Liberty and Comcast shall notify one another as
soon as practicable but in no event later than five (5) Business Days following
the occurrence of any Liberty Change of Control or Comcast Change of Control,
respectively.
5.4. Publicity. Each party hereto agrees to consult with the
other parties and to coordinate the issuance of any press release or similar
public announcement or communication relating to the transactions contemplated
hereby; provided that none of the parties hereto shall be restrained, after
notice, and after reasonable commercial efforts are made to consult with the
other parties, from making such disclosure as it shall be advised by its outside
legal counsel that it is required to make by law, administrative regulation or
by the regulations of any stock exchange or interdealer quotation system.
5.5. QVC Repurchase Rights and Registration Rights; Waiver.
(a) In connection with the consummation of the Merger, Comcast and Liberty agree
to cause the Company (i) to irrevocably and permanently waive any rights that
QVC or the Company may have pursuant to the QVC Repurchase Rights (or any
similar contingent right of QVC to reacquire QVC Shares) with respect to all QVC
Shares (or rights to acquire such QVC Shares) theretofore held by Liberty,
Comcast or any of their respective Affiliates and (ii) to agree that all of such
QVC Shares (and related rights) were vested at the time of the contribution
pursuant to Section 5.1 and were thereafter no longer subject to the QVC
Repurchase Rights or any other such repurchase rights. Notwithstanding anything
herein to the contrary, except as specifically provided above with respect to
the QVC Repurchase Rights, neither Liberty, Comcast nor the Company agrees to
waive any rights or remedies pursuant to any of the QVC Designated Agreements.
Each of Comcast and Liberty agrees that prior to the Merger, it shall not take
any
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action or attempt to cause QVC to take any action, against or with respect to
Comcast, Liberty or their respective Affiliates to enforce in any way the QVC
Repurchase Rights. Notwithstanding the foregoing, the parties agree that the QVC
Repurchase Rights provided for in the July Letter (the "Excluded Repurchase
Rights") shall not be included among the rights to be waived by the Company as
provided above.
(b) Other than those rights granted pursuant to this
Agreement, Comcast and Liberty, on behalf of themselves and their respective
Affiliates, hereby irrevocably and permanently waive any rights they may have
pursuant to any contract or agreement existing on the date hereof with respect
to the registration of securities of QVC.
5.6. Certain Liberty Rights; Waiver. Liberty agrees and agrees
to cause Satellite Services, Inc., a Delaware corporation ("Satellite"), to
waive prior to the consummation of the Merger any and all rights granted to
Satellite pursuant to Section 2 (which Section relates to future issuances of
securities of QVC) of the Agreement (the "Satellite Agreement") dated June 12,
1987 by and between QVC (formerly QVC Network, Inc.) and Satellite. Other than
any rights created or existing under this Agreement, Liberty, on behalf of
itself and its Affiliates, hereby waives all of its preemptive and other similar
rights to purchase with respect to securities of QVC.
5.7. Fees and Expenses. All costs and expenses incurred on or
after July 8, 1994 in connection with the Offer and the negotiation and
execution of the Transaction Documents and the Joint Bidding Agreement and the
consummation of the transactions contemplated thereby (including, without
limitation, costs and expenses incurred in connection with the parties' due
diligence investigations, compliance with the notification and filing
requirements of the HSR Act, fees and costs of financial printers, legal fees
and expenses, investment banking fees and costs and expenses of obtaining
financing (other than any costs and expenses relating to the CQI Additional
Contribution or the Liberty Sub Additional Contribution, which costs and
expenses shall be paid by Comcast and Liberty, respectively)) shall be paid or
reimbursed, or be caused to be paid or reimbursed, by the Company simultaneously
with the Merger or as soon thereafter as practicable.
5.8. Future Business Opportunities. Notwithstanding anything
contained in this Agreement to the contrary, following consummation of the
Merger, none of (i) Comcast, (ii) Liberty, (iii) their respective Subsidiaries
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or Affiliates or (iv) the officers, directors or employees of
Comcast, Liberty or their respective Subsidiaries or Affiliates (clauses (i)
through (iv) collectively, the "Designated Persons"), shall be obligated
(legally or otherwise) to present or make available any corporate opportunity
(other than any Designated Corporate Opportunity (as defined below)) to the
Company or its Subsidiaries, any other party to this Agreement or any of their
respective Affiliates; and each Designated Person shall be free to pursue any
such opportunity (other than a Designated Corporate Opportunity) for its sole
benefit. In furtherance of the foregoing, none of the Designated Persons shall
be liable to the Company or its Subsidiaries, any other party to this Agreement
or any of their respective Affiliates for breach of fiduciary duty in connection
with any such opportunity not presented to the Company or its Subsidiaries, any
other party to this Agreement or any of their respective Affiliates, or in
connection with any such opportunity (other than a Designated Corporate
Opportunity) pursued by such Person, in each case pursuant to this Section 5.8.
As used herein, "Designated Corporate Opportunity" means any business
opportunity relating to the Primary Business (i) which is first presented to an
officer, director or employee of the Company who is not also a director,
officer, employee or agent of Comcast, Liberty or any of their respective
Subsidiaries or Affiliates or (ii) of which any Designated Person first becomes
aware during any meeting of the Board or the Management Committee or as a result
of a communication between such Designated Person and management personnel or an
employee of the Company or any of its Subsidiaries.
5.9. Certain Agreements. (a) Comcast and Liberty agree to
proceed with the transactions contemplated by the Merger Agreement jointly and
to use all reasonable efforts to cause the transactions contemplated by the
Merger Agreement to be consummated as promptly as practicable. Until the Merger
is consummated, all material decisions with respect to the Offer and the Merger
shall be unanimous and Comcast shall not permit QPH to take any actions in
contravention of this Section. Comcast and Liberty agree to use all reasonable
efforts, acting in good faith, to resolve, on a mutually acceptable basis, any
disagreements they may have with respect to such material decisions.
(b) The parties hereto agree that the Joint Bidding Agreement
be terminated and of no further force and effect as of the date hereof.
5.10. Capital Restructuring. Upon the request of Comcast or
Liberty, the parties agree to use their
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commercially reasonable best efforts to reorganize the capital stock and/or
assets of the Company into a holding company structure, which shall be achieved
by either (x) causing QVC to transfer all or substantially all of its assets and
liabilities to a wholly owned subsidiary of QVC (including, but not limited to
all indebtedness under the Credit Agreement among the Company, The Bank of New
York, as Administrative Agent and the Managing Agents and Banks parties thereto)
or (y) transferring and requiring all other Stockholders to transfer, all
Company Securities to a corporation to be jointly owned by the Stockholders in
exchange for securities of like tenor of such corporation, in which case such
securities shall become "Company Securities" for all purposes of this Agreement
and the ownership and disposition of such securities, and the management of such
corporation, shall be subject to the terms and conditions of this Agreement, and
the newly formed entity shall become a party hereto and be bound by the terms
hereof; provided, however, that no such restructuring shall be effected without
the prior written consent of Liberty or Comcast, which consent shall not be
withheld unless the proposed restructuring would, in the good faith judgment of
Liberty or Comcast, as the case may be, be reasonably likely to have an adverse
effect on such Person, the Company or any of their respective Affiliates.
ARTICLE 6
CORPORATE GOVERNANCE
6.1. Management; Composition of the Board. (a) Subject to the
terms of this Agreement, the Company and each of its Subsidiaries will be
managed following the Merger and until the occurrence of a Management Transfer
Event on a day-to-day basis by Comcast. Subject to the other provisions of this
Agreement, Comcast shall use reasonable efforts to manage the Company in the
best interests of the Company.
(b) Subject to the provisions of Sections 6.1.(c), 6.1.(d),
6.1.(e) and 6.4, until the occurrence of a Management Transfer Event, Comcast
shall have the right to appoint every member of the Board and the board of
directors (or entity performing similar functions) of each Subsidiary of the
Company (other than any such Subsidiary in which a stockholder other than the
Company or a Subsidiary of the Company has a right to appoint members of the
board of directors). Each other Stockholder agrees that, upon the written
request of Comcast, it will vote all of its Shares or execute a written consent,
as the case may be, and use its best efforts to take all other necessary
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action (including using its best efforts to cause the Company to call a special
meeting of stockholders), in order to give effect to the provisions of this
Section 6.1.(b). The Company agrees that it will take all actions that are
necessary and within its power in order to give effect to the provisions of this
Section 6.1.(b).
(c) Subject to Sections 6.1.(d), 6.1.(e) and 6.4, upon the
occurrence of a Management Transfer Event, Liberty shall thereafter have the
right to appoint every member of the Board. Each other Stockholder agrees that,
upon the written request of Liberty, it will vote all of its Shares or execute a
written consent, as the case may be, and use its best efforts to take all other
necessary action (including using its best efforts to cause the Company to call
a special meeting of stockholders), in order to give effect to the provisions of
this Section 6.1.(c). The Company agrees that it will take all actions that are
necessary and within its power in order to give effect to the provisions of this
Section 6.1.(c).
(d) If QPH exercises its right pursuant to Section 1.03 of the
Merger Agreement, which exercise, if made, shall be made pursuant to Section
5.9.(a) hereof, to designate members of (w) the QVC board of directors, (x) each
committee of such board (other than any committee of such board established to
take action under the Joint Bidding Agreement), (y) each board of directors of
each QVC Subsidiary (as defined in Section 3.01 of the Merger Agreement) or (z)
each committee of each such Subsidiary board (collectively, the "QVC
Designees"), QPH agrees that, commencing on the date hereof and ending at the
effective time of the Merger, one-half of the QVC Designees shall be comprised
of individuals designated by Liberty in writing to QPH and one-half of the QVC
Designees shall be comprised of individuals designated by Comcast in writing to
QPH; provided that if the number of QVC Designees is not divisible by two, the
additional director shall be a Person designated by mutual agreement of Comcast
and Liberty; provided that if Liberty elects not to designate any such QVC
Designees, all such QVC Designees shall be designated by Comcast.
(e) Notwithstanding anything herein to the contrary, upon the
occurrence of a Liberty Purchase Default (or, the failure of Liberty to deliver
the Liberty Notice within the period specified in Section 9.5.(a)), each of
Liberty and Comcast shall have the right to appoint one half of the members of
the Board. Following such time, the Company and its Subsidiaries will be managed
jointly by Comcast and Liberty. Each other Stockholder agrees that it
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will vote all of its Shares or execute a written consent, as the case may be,
and use its best efforts to take all other necessary action (including using its
best efforts to cause the Company to call a special meeting of stockholders), in
order to give effect to the provisions of this Section 6.1.(e). The Company
agrees that it will take all actions that are necessary and within its power in
order to give effect to the provisions of this Section 6.1.(e).
6.2. Management Committee; Certain Approval Rights. (a) The
Company shall have a Management Committee, comprised of five individuals who
shall be Stockholder representatives, until the occurrence of a Liberty Purchase
Default, at which time the Management Committee shall terminate. Subject to
Sections 6.4 and 6.5, three of the members of the Management Committee shall be
appointed by Comcast and two of such members shall be appointed by Liberty;
provided that each individual appointed by Comcast or Liberty shall be
reasonably acceptable to the other party. The Company shall be required to
submit to a vote of the Management Committee every matter submitted (or required
to be submitted by applicable law, the Bylaws or otherwise) to a vote of the
Board; provided that, for so long as Liberty or any of its Affiliates
beneficially owns securities of Home Shopping Network, Inc. or its successors
entitling it to cast at least 5% of the votes entitled to be cast in any
election of directors of Home Shopping Network, Inc. or its successors in no
event shall the Company be required to submit any such matter which the Board in
its reasonable good faith judgment believes is competitively sensitive or would
necessitate the disclosure to the Management Committee of competitively
sensitive information. Any matter submitted to the Management Committee for
approval pursuant to the foregoing sentence shall be approved if such matter
receives the affirmative vote of the majority of its members. The Stockholders
shall use their best efforts to cause the Company to follow the direction of any
such resolution of the Management Committee. Immediately following the Merger,
the initial Management Committee shall be appointed by Comcast's and Liberty's
delivering written notice to the other of their Management Committee designees.
Notice of the meetings of the Management Committee shall be given at least
twenty-four hours before the time of the meeting in such manner as is reasonably
determined by the Board. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting. The presence of a majority of the members of
the Management Committee shall constitute a quorum for the transaction of
business. Members of the Management Committee may participate in a meeting of
the Management Committee by means of conference telephone and such
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participation shall constitute presence in person at the meeting. Any member of
the Management Committee may be removed and replaced at any time with or without
cause at the discretion of the party which appointed such member. Each member of
the Management Committee shall, if so requested by the Company, enter into a
confidentiality agreement in form and substance reasonably acceptable to the
Company.
(b) Notwithstanding the foregoing, but subject to any
applicable requirements of law, the Company shall not, and shall cause each of
its Subsidiaries not to, engage in any of the following transactions or take any
of the following actions (including but not limited to any action by their
respective stockholders or boards of directors or any committee thereof) without
the prior approval of Liberty:
(i) any transaction or action which
would result in the Company, directly or indirectly, (x) conducting or
engaging in any business other than the Primary Business, (y)
participating (whether by means of a management, advisory, operating,
consulting or similar agreement or arrangement) in a business other
than the Primary Business or (z) having any record or beneficial equity
interest, either as a principal, trustee, stockholder, partner, joint
venturer or otherwise, in any Person not primarily engaged in the
Primary Business (a "Restricted Person"); provided that the beneficial
ownership for investment purposes of ten percent (10%) or less of the
equity of any such Restricted Person shall not constitute a violation
of this clause (i); as used herein, the term "Primary Business" shall
mean the business of (x) marketing of goods or services over any
electronic media (other than principally entertainment programming) and
(y) any activities ancillary thereto or vertically integrated therewith
(including without limitation manufacturing, production, warehousing
and distribution of such goods and services and customer financing);
(ii) any transaction not in the ordinary
course of business, launching new or additional channels or engaging in
any new field of business, in each case, which would result in, or
would have a reasonable likelihood of resulting in, Liberty or any of
its Affiliates being required (pursuant to any law, statute, rule,
regulation, order or judgment promulgated or issued by any court of
competent jurisdiction or the United States government or any
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Federal governmental, regulatory, or administrative authority or agency
or tribunal) to divest itself of all or any part of its Company
Securities, or interests therein, or any other assets of such entity,
or which would render such entity's continued ownership of such stock
or assets illegal or subject to the imposition of a fine or penalty or
which would impose material restrictions or limitations on such
entity's full rights of ownership (including, without limitation,
voting) thereof or therein;
(iii) the disposition, directly or
indirectly, by the Company or any Subsidiary thereof in one transaction
or series of transactions not in the ordinary course of business of the
Company or any such Subsidiary, of assets of the Company or any such
Subsidiary having a fair market value constituting more than 10% of the
assets of the Company and its Subsidiaries, taken as a whole, as
determined in good faith by the Board at the time of such disposition,
except for liens securing bona fide indebtedness;
(iv) the merger or consolidation of the
Company (other than (A) a merger between a wholly-owned Subsidiary of
the Company and the Company, in which the Company is the surviving
entity of such merger and in which there is no change in any class or
series of outstanding capital stock of the Company or (B) as provided
in the Merger Agreement) or the dissolution or liquidation of the
Company; provided that for purposes of this clause (iv), "Company"
shall mean, together, the Company and, if applicable, Holdco or any
Subsidiary of the Company referred to in clause (y) of the defined term
"Company";
(v) any amendments to the Charter or
Bylaws;
(vi) the issuance, grant, offer, sale,
acquisition, redemption or purchase by the Company of any shares of its
capital stock or other equity securities, or any securities convertible
into or exercisable or exchangeable for, or options, warrants or rights
of any kind to subscribe to or acquire, any shares of its capital stock
or other equity securities, or any split-up, combination or
reclassification of the capital stock of the Company or the entering
into of any contract, agreement, commitment or arrangement with respect
to any of the foregoing, in each case other than (A) the issuance (from
time to time) by the Company of Company Securities equal to not more
than up
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to 1% of the Fully Diluted Shares pursuant to employee stock options or
other warrants or rights to acquire or grants of Company Securities
pursuant to employee benefit plans on or after the date hereof and the
repurchase of stock or options from present or former employees and (B)
as contemplated by the Merger Agreement; provided that for purposes of
this clause (vi), "Company" shall mean, together, the Company and, if
applicable, Holdco or any Subsidiary of the Company referred to in
clause (y) of the defined term "Company";
(vii) the amendment or modification of any
outstanding options, warrants or rights to acquire, or securities
convertible into or exercisable or exchangeable for, shares of the
capital stock or other securities of the Company or QVC or of any
outstanding stock option or stock purchase plans or agreements;
provided that for purposes of this clause (vii), "Company" shall mean,
together, the Company and, if applicable, Holdco or any Subsidiary of
the Company referred to in clause (y) of the defined term "Company";
(viii) the filing by the Company or any of
its Significant Subsidiaries (as defined in Regulation S-X) of a
petition under the Bankruptcy Act or any other insolvency law, or the
admission in writing of its bankruptcy, insolvency or general inability
to pay its debts;
(ix) except with the consent of Liberty
(such consent not to be unreasonably withheld), the commencement or
settlement of litigation or arbitration which is other than in the
ordinary course of business and is likely to have a material impact on
the Company and its Subsidiaries, taken as a whole, other than any such
litigation or arbitration involving Liberty or any of its Affiliates or
any other Person in which Liberty or any of its Affiliates has any
material financial interest;
(x) the entering into by the Company or
any of its Subsidiaries of any material contract, agreement or
obligation, except any such contract, agreement or obligation which is
connected with carrying on the Primary Business; and
(xi) any transactions between the Company or
any of its Affiliates, on the one hand, and Comcast or any of its
Affiliates or Associates, on the other
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hand, other than: (A) transactions consented to be Liberty (whose
consent shall not be unreasonably withheld), (B) transactions between
Comcast and its Affiliates or Associates, and the Company and its
Affiliates that are on arm's-length terms (provided that Comcast has
previously notified Liberty of any such material transaction and the
terms thereof prior thereto), or (C) agreements between the Company or
any of its Affiliates, on the one hand, and Comcast or any of its
Affiliates or Associates, on the other hand, relating to carriage of
the Primary Business that are on terms no more favorable to Comcast
than those granted or offered to Liberty or any of its Affiliates.
The parties agree that prior to any Person which is not a member of the Comcast
Group or the Liberty Group becoming a stockholder (except as contemplated by
Section 6.2.(b)(vi)(A)), the parties shall cause the Charter to be amended as
they shall reasonably agree so as to include the provisions of this Agreement
with respect to the rights pursuant to this Article (including without
limitation the provisions relating to the termination of such rights) and to
provide that any Person entitled at any time to such rights be issued a new
class of capital stock which shall be identical in all other respects to the
Shares, except that such class of capital stock shall be entitled to vote
separately as a class to authorize any of the actions or transactions enumerated
above and that such class of capital stock shall be convertible at any time for
equivalent securities without such special rights.
(c) The Company shall deliver to the Management Committee (i)
as soon as available and in any event within 120 days after the end of each
fiscal year of the Company, an audited consolidated balance sheet of the Company
and its Subsidiaries as of the end of each fiscal year and the related audited
consolidated statements of income and cash flow for such fiscal year, and (ii)
as soon as available and in any event within 60 days after the end of each of
the first three fiscal quarters of each fiscal year of the Company, a
consolidated balance sheet of the Company and its Subsidiaries as of the end of
such fiscal quarter and the related consolidated statements of income and cash
flow for such fiscal quarter and for the portion of the Company's fiscal year
then ended, in each case prepared in accordance with generally accepted
accounting principles.
6.3. Notice to Liberty. If QPH, QVC or any of its Subsidiaries
intends to pursue any action or engage in any transaction which may not be taken
without the prior consent of Liberty pursuant to Section 6.2(b) above, then
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QPH, QVC or such Subsidiary, as the case may be, shall provide Liberty with
notice of its desire to pursue such action or engage in such transaction.
Liberty shall have 30 days following receipt of such notice within which to
disapprove of such action. If, at the end of such period, Liberty has not
disapproved of such action by written notice to the Company, then Liberty shall
be deemed to have consented to the proposed action.
6.4. Transfer of Management Functions. Upon the occurrence of
a Management Transfer Event, Liberty shall thereafter be entitled to appoint
three representatives of the Management Committee and Comcast shall be entitled
to appoint two such representatives and all decisions of the Board, regardless
of competitive sensitivity, shall be presented to the full Management Committee
for its approval prior to the consideration thereof by the Board. From and after
the date on which the Management Transfer Event has occurred, (i) any right to
consent to the taking of any action theretofore granted to Liberty, including
but not limited to the right to approve certain actions under Section 6.2.(b)
shall become the right of Comcast, mutatis mutandis, (ii) any right to appoint
members of the Board and the board of directors of Subsidiaries of the Company
theretofore granted to Comcast, including but not limited to the right granted
to Comcast pursuant to Section 6.1 shall become the right of Liberty, mutatis
mutandis, and (iii) each Comcast Stockholder shall have the obligation of each
other Stockholder pursuant to the second sentence of Section 6.1.(b).
6.5. Changes in Stockholders' Percentage Ownership. (a) Any
right to consent to the taking of any action theretofore granted to Liberty,
including but not limited to the right to appoint members of the Management
Committee under Section and the right to approve certain actions by the Company
under Section 6.2.(b), shall terminate if Liberty's Attributable Interest is
reduced below 19.9%.
(b) Any right to consent to the taking of any action
theretofore granted to Comcast, including but not limited to the right to
appoint members of the Management Committee under Section 6.2.(a) and the right
to approve certain actions by the Company under Section 6.2.(b), shall terminate
if Comcast's Attributable Interest is reduced below 19.9%.
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ARTICLE 7
RESTRICTIONS ON TRANSFER; LEGENDS
7.1. General. (a) (I) On or prior to the fifth anniversary of
the date hereof, subject to Section 7.1.(c), no Stockholder may offer, sell,
assign, transfer or otherwise directly dispose of the Company Securities (or any
interest therein pursuant to Derivative Securities) (including without
limitation the exercise of remedies pursuant to a Lien the granting of which was
permitted pursuant to Section 7.1.(d) but excluding any Indirect Transfer)
(each, a "Direct Transfer") all or any portion of its Company Securities other
than (v) pursuant to a Public Offering subject to Section 8.1, (w) to any member
of the Stockholder Group of such Stockholder, (x) pursuant to Section 7.1.(d),
(y) in the case of any member of the Comcast Group, in connection with the
Direct Transfer of all, but not less than all, of the Company Securities owned
by the Comcast Group subject to Sections 8.1 and 9.9 and (z) in the case of any
member of the Comcast Group, in one or more bona fide Direct Transfers to a
Third Party subject to Section 8.1; provided that in the case of clause (z)
above, the Attributable Interest of Comcast remains, after giving effect to any
such Direct Transfer, but without giving effect to (i) any Indirect Transfers by
any member of the Comcast Group that do not result in a Comcast Change of
Control or (ii) any issuance of equity securities by QVC, in excess of 50% and
(II) on or prior to the fifth anniversary of the date hereof, Comcast shall not
permit to occur any Indirect Transfer which would result in a Comcast Change of
Control unless following such Change of Control, the Comcast Group shall cease
to own any Company Securities. As used herein, "Indirect Transfer" shall mean,
with respect to the Company Securities, the offer, sale, assignment, transfer or
other disposition (including without limitation pursuant to the exercise of
remedies pursuant to a Lien permitted by Section 7.1.(d)), directly or
indirectly through one or more Subsidiaries, of an equity interest in the
Stockholder (or any interest therein pursuant to Derivative Securities) which
owns such Company Securities.
(b) Following the fifth anniversary of the date hereof,
subject to the provisions of this Agreement (including without limitation
Sections 7.1(c), 7.1.(d), 8.1, 9.7 or 9.9), each Stockholder may effect a Direct
Transfer or Indirect Transfer of all or any portion of its Company Securities or
any interest therein.
(c) Notwithstanding anything herein to the contrary, each
Direct or Indirect Transfer of Company Securities shall be made in compliance
with applicable
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Securities Laws and in accordance with the provisions of this
Agreement, including without limitation Section 10.1. Notwithstanding anything
herein to the contrary, no Stockholder may effect a Direct or Indirect Transfer
of any of its Company Securities (i) in the case of any member of the Liberty
Group only, to Home Shopping Network, Inc. or any of its Subsidiaries or
successors, (ii) to any Affiliate of such Stockholder (other than a member of
the Stockholder Group of such Stockholder) other than in a bona fide transaction
on arm's-length terms or (iii) in the case of any Direct Transfer to a Person
other than a member of the Stockholder Group of such Person, for consideration
other than cash. Any attempt to transfer any Company Securities not in
compliance with this Agreement shall be null and void and neither the Company
nor any transfer agent shall give any effect in the Company's records to such
attempted transfer.
(d) Each of Comcast and Liberty agrees that it will not in any
way hypothecate or create or permit to exist any Lien other than a Lien securing
bona fide indebtedness of any member of its Stockholder Group and any Lien
pursuant to the principal senior financing of the Company in place after the
Merger or any refinancings thereof; provided that (i) Comcast or Liberty, as the
case may be, shall have notified the other as to the existence of such Lien and
the terms thereof, (ii) the holder of such indebtedness to be secured by such
Lien (other than any Lien pursuant to the principal senior financing of the
Company in place after the Merger or any refinancings thereof) shall have agreed
in writing, in form and substance reasonably satisfactory to the Stockholder
Group other than the Stockholder Group to which the Person granting, creating or
permitting such Lien belongs, to become bound by the obligations (but not the
rights) hereunder of the pledgor and (iii) nothing in this Section 7.1.(d) shall
prohibit any Lien on the securities of any Subsidiary of Comcast or Liberty that
(pursuant to the creation of such Lien, the exercise of remedies thereunder or
otherwise) would not result in any Comcast Change of Control or Liberty Change
of Control. Notwithstanding the foregoing, any exercise of remedies under such
Lien shall immediately constitute a Direct or Indirect Transfer, as applicable,
of the Company Securities subject to such Lien.
7.2. Legend on Securities. (a) Each Company Security that is
held by any Stockholder shall bear a legend in substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED, OR ANY OTHER APPLICABLE
SECURITIES
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LAWS AND MAY NOT BE SOLD OR OFFERED FOR SALE UNLESS REGISTERED
UNDER SAID ACT AND ANY OTHER APPLICABLE SECURITIES LAWS OR
UNLESS AN EXEMPTION FROM SUCH REGISTRATION AND SUCH OTHER
SECURITIES LAWS IS AVAILABLE. THIS SECURITY IS ALSO SUBJECT TO
AND HAS THE BENEFIT OF A STOCKHOLDERS AGREEMENT DATED AS OF
FEBRUARY 9, 1995, AMONG COMCAST CORPORATION, COMCAST QVC,
INC., QVC PROGRAMMING HOLDINGS, INC., LIBERTY MEDIA
CORPORATION, QVC INVESTMENT, INC. AND LIBERTY QVC, INC. AS MAY
BE AMENDED FROM TIME TO TIME, A COPY OF WHICH IS ON FILE WITH
THE COMPANY."
(b) If any Company Securities shall cease to be Registrable
Securities (as defined in Exhibit A hereto), the Company shall, upon the written
request of the holder thereof, issue to such holder a new certificate evidencing
such securities, which certificate shall not contain a legend to the effect of
the first sentence of the legend in Section 7.2.(a) thereon. If any Company
Securities cease to be subject to any restrictions on transfer set forth in this
Agreement, the Company shall, upon the written request of the holder thereof,
issue to such holder a new certificate evidencing such Company Securities
without any legend to the effect of the second sentence of the legend in Section
7.2.(a) thereon.
ARTICLE 8
RIGHT OF FIRST REFUSAL
8.1. Right of First Refusal. (a) Except as provided in Section
8.1.(b), if any Liberty Stockholder or Comcast Stockholder (each, a "Selling
Stockholder") intends to pursue a Direct Transfer of any or all of the Company
Securities or any interest therein owned or held by such Stockholder (a "Section
8.1 Transaction") pursuant to (i) a bona fide offer received from or negotiated
with any Person (a "Third Party") in a private transaction or (ii) a Public
Offering or an open market sale, such Selling Stockholder shall provide written
notice of such Section 8.1 Transaction (a "Section 8.1 Transaction Notice") to
the Comcast Stockholders (if the Selling Stockholder is a member of the Liberty
Group) or the Liberty Stockholders (if the Selling Stockholder is a member of
the Comcast Group) (such Liberty Stockholders or Comcast Stockholders
hereinafter referred to collectively as the "Non-Selling Stockholder"). If such
Section 8.1 Transaction Notice is given by 6:00 p.m., New York City time, on a
Business Day, it shall be deemed given
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on such date; if such Section 8.1 Transaction Notice is given after 6:00 p.m.,
New York City time, on a Business Day or on any day other than a Business Day,
it shall be deemed given on the next Business Day. With respect to any Direct
Transfer proposed to be made pursuant to a Public Offering, the Selling
Stockholder shall provide the Section 8.1 Transaction Notice to the Non-Selling
Stockholder at the time the Selling Stockholder notifies the Company of its
intention to make such Direct Transfer pursuant to the provisions of Exhibit A
or otherwise. The Section 8.1 Transaction Notice shall identify the number and
type of Company Securities subject to the Section 8.1 Transaction, the Section
8.1 Transaction Price and all other material terms and conditions of the Section
8.1 Transaction. As used herein, the "Section 8.1 Transaction Price" means (i)
with respect to any bona fide offer received from or negotiated with a Third
Party other than any Affiliate of the Selling Stockholder, the cash price per
Company Security at which a Direct Transfer is proposed to be made, (ii) with
respect to any offer received from or negotiated with any Affiliate of the
Selling Stockholder, the price per Company Security determined in accordance
with the procedure set forth in Section 9.3, (iii) with respect to any Direct
Transfer proposed to be made pursuant to a Public Offering or any open market
sale prior to the Company being a Public Company, the projected cash price per
Company Security to be sold in such Public Offering or open market sale
(together with the price referred to in clause (ii), the "Projected Offering
Price"), determined in the manner described below, (iv) with respect to any
Direct Transfer proposed to be made pursuant to a Public Offering following the
date the Company becomes a Public Company, the Average Market Price per Company
Security as of the date of delivery of the Section 8.1 Notice, and (v) with
respect to any Direct Transfer proposed to be made pursuant to an open market
sale following the date the Company becomes a Public Company, the closing price
per Company Security (or, if no closing price is reported, the last reported
sales price in the over-the-counter market, as reported by NASDAQ, or if listed
on a national securities exchange, as reported on the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which such securities are listed or admitted for
trading) for the trading day prior to the date on which the Section 8.1 Notice
was delivered. Each of the Liberty Stockholders, on the one hand, and the
Comcast Stockholders, on the other hand, shall, within 15 days after the
delivery of a Section 8.1 Transaction Notice with respect to a Direct Transfer
pursuant to a Public Offering or an open market sale prior to the Company being
a Public Company, retain, at their own expense, a Qualified Independent
Appraiser to
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determine the Projected Offering Price. Each such Qualified Independent
Appraiser shall submit its report determining the Projected Offering Price
within 30 days after the date of such retention. If the Projected Offering Price
set forth in one report is within 10% of the Projected Offering Price set forth
in the other report, the final Projected Offering Price shall be the average of
the two. If the amount of the higher of the two Projected Offering Prices is
greater than 110% of the amount of the lower Projected Offering Price, then a
third Qualified Independent Appraiser designated by the first two Qualified
Independent Appraisers shall be retained promptly by the Liberty Stockholders
and the Comcast Stockholders (at their joint expense) and shall deliver its
written report determining the Projected Offering Price within 30 days after the
date of such retention, which Projected Offering Price shall not be less than
the amount determined by the lower of the first two reports nor more than the
amount determined by the higher of the first two reports. If one party fails to
retain a Qualified Independent Appraiser within time period specified above, the
Projected Offering Price shall be determined by the Qualified Independent
Appraiser retained by the other party. If any Projected Offering Price is
determined pursuant to such appraisal process, the amount to be determined shall
be the average of the first two appraisals, if only two appraisals are required,
or if three appraisals are required, the average of two appraisals closest in
value (or if there are not two closest appraisals, the average of all three such
appraisals).
(b) Notwithstanding anything in this Agreement to the
contrary, the provisions of this Section 8.1 will not be applicable to (i)
Direct Transfers made by a Selling Stockholder to any member of the Stockholder
Group of which such Selling Stockholder is a member or pursuant to the creation
of a Lien granted pursuant to Section 7.1.(d) (but not including the exercise of
remedies thereunder) or (ii) any Indirect Transfer.
(c) The receipt of a Section 8.1 Transaction Notice by the
Non-Selling Stockholder from any Selling Stockholder shall constitute an offer
by such Selling Stockholder to sell to the Non-Selling Stockholder at the
Section 8.1 Transaction Price for cash all of such Selling Stockholder's Company
Securities which are the subject of such Section 8.1 Transaction. Such offer
shall be irrevocable during the Offer Period. During the Offer Period, the
Non-Selling Stockholder shall have the right to accept such offer. The Section
8.1 Transaction may be accepted by giving a written irrevocable notice of
acceptance to such Selling Stockholder prior to the
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expiration of the Offer Period. As used herein, "Offer Period" means, with
respect to any Section 8.1 Transaction Notice, the period of (i) with respect to
any open market sale, the corresponding time on the next succeeding Business
Day, (ii) with respect to any Direct Transfer pursuant to a Public Offering, 15
Business Days and (iii) with respect to any Direct Transfer to a Third Party, 20
Business Days, in each case following receipt of such Section 8.1 Transaction
Notice by the Non-Selling Stockholder or, in the case of any Direct Transfer to
an Affiliate of the Selling Stockholder or pursuant to an open market sale or
Public Offering prior to the date on which the Company is a Public Company,
following the date on which the Projected Offering Price is determined.
(d) Unless otherwise provided herein, the Non- Selling
Stockholder shall purchase for cash at the Section 8.1 Transaction Price and pay
for all Company Securities set forth in the Section 8.1 Transaction Notice
within a 30-day period following its acceptance of the Selling Stockholder's
offer pursuant to such Section 8.1 Transaction Notice, or as soon as practicable
thereafter following receipt of all consents, orders, approvals and
authorizations of any governmental or regulatory entities and the expiration or
termination of any applicable waiting period under the HSR Act applicable to
such purchase; provided that any such purchase originally proposed to be made
pursuant to an open market sale shall be made by the Non-Selling Stockholder
within a 5-Business Day Period following acceptance of such Section 8.1
Transaction. Each such Stockholder Group agrees, and Comcast agrees to cause the
Company, to use its reasonable best efforts to obtain such consents, order,
approvals and authorizations and to cause the consummation of such purchase and
sale. Notwithstanding the foregoing, if the purchase and sale of such Company
Securities is subject to any prior regulatory approval, the time period during
which such purchase and sale may be consummated shall be extended until the
expiration of five Business Days after all such approvals shall have been
received but in no event shall such time period exceed 120 days.
(e) Upon the rejection or deemed rejection of the Section 8.1
Transaction by the Non-Selling Stockholder following the expiration of the Offer
Period, the Selling Stockholder shall have the right, during the Transaction
Completion Period, to consummate the Direct Transfer of the Company Securities
subject to the Section 8.1 Transaction at a price not less than the Section 8.1
Transaction Price; provided, however, that an open market sale shall not be
subject to any such minimum price requirement. Any such Direct Transfer shall be
consummated pursuant to the terms
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of this Agreement. Notwithstanding the foregoing, if the Direct Transfer of such
Company Securities is subject to any prior regulatory approval, the time period
during which such Direct Transfer may be consummated shall be extended until the
expiration of five Business Days after all such approvals shall have been
received but in no event shall such time period exceed 120 days or, in the case
of any Direct Transfer pursuant to a Public Offering, 180 days without the
consent of the Non-Selling Stockholder. If such Selling Stockholder does not
consummate the Direct Transfer of any Company Securities subject to the Section
8.1 Transaction in accordance with the foregoing time limitations, such Selling
Stockholder may not sell any Company Securities without repeating the foregoing
procedures. As used herein, "Transaction Completion Period" means (i) with
respect to any Direct Transfer pursuant to any open market sale, a period of 5
Business Days, (ii) with respect to any Direct Transfer pursuant to a Public
Offering, a period of 120 days and (iii) with respect to any Direct Transfer to
a Third Party (including a Transfer to an Affiliate of Comcast or Liberty which
is not a member of the Comcast Group or Liberty Group, as the case may be), a
period of 60 Business Days, in each case following expiration of the Offer
Period.
(f) In connection with any Direct Transfer of Company
Securities between the Liberty Group, on the one hand, and the Comcast Group, on
the other hand, hereunder, Liberty (if the seller of such Company Securities is
a member of the Liberty Group) or Comcast (if the seller of such Company
Securities is a member of the Comcast Group) shall represent and warrant to the
purchaser thereof as of the closing date of such transaction that:
(i) (A) such seller is such an entity
duly organized, validly existing, and in good standing under the laws
of the state of its organization and (B) such seller has the full power
and authority to sell, transfer and assign to the purchaser all of its
right, title and interest in and to such Company Securities;
(ii) there are no consents, approvals or
authorizations required under any law, rule, regulation, agreement or
instrument applicable to the seller or its Affiliates (other than (x)
such as have previously been obtained and are in full force and effect
as of such closing date and (y) those which result from the identity or
status of the purchaser) required in order to consummate its sale of
such Company Securities to the purchaser (other than any consents,
approvals or authorizations required to be
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obtained by the purchaser in connection with such
purchase);
(iii) there is no action, suit,
investigation or proceeding pending against such seller, its Affiliates
or any of their respective properties before any court or arbitrator or
any governmental body, agency or official relating to the sale of the
Company Securities by such seller and there is no provision of any
applicable law or regulation and no judgment, injunction, order or
decree which prohibits the consummation of the purchase; and
(iv) immediately after the sale, transfer
and assignment thereof, the purchaser will have good title to such
Company Securities free and clear of all Liens or other restrictions on
ownership, transfer or voting (other than any arising pursuant to this
Agreement or under the Securities Laws or created by the purchaser or
arising by reason of its purchase or ownership of such Company
Securities).
(g) In connection with any purchase and sale of Company
Securities between the Liberty Group, on the one hand, and the Comcast Group, on
the other hand, hereunder, each purchaser of such Company Securities shall
represent and warrant to the seller thereof as of the closing date of such
transaction that:
(i) (A) such purchaser is such an
entity duly organized, validly existing, and in good standing under the
laws of the state of its organization and (B) such purchaser has the
full power and authority to purchase, acquire and accept from the
seller all of its right, title and interest in and to such Company
Securities;
(ii) there are no consents, approvals or
authorizations required under any law, rule, regulation, agreement or
instrument applicable to the purchaser or its Affiliates (other than
(x) such as have previously been obtained and are in full force and
effect as of such closing date and (y) those which result from the
identity or status of seller) required in order to consummate its
purchase of such Company Securities from the seller (other than any
consents, approvals or authorizations required to be obtained by the
seller in connection with such sale); and
(iii) there is no action, suit, investigation
or proceeding pending against such
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purchaser, its Affiliates or any of their respective properties before
any court or arbitrator or any governmental body, agency or official
relating to the purchase of Common Stock by such purchaser and there is
no provision of any applicable law or regulation and no judgment,
injunction, order or decree which prohibits the consummation of the
purchase.
(h) Notwithstanding anything in this Agreement to the
contrary, no rights or obligations arising out of or relating to any process for
the purchase and/or sale of Company Securities under this Agreement shall accrue
or become fixed and the event which would otherwise cause the same to occur
shall automatically be delayed for a period up to six months from the date such
process otherwise would have been commenced if such process or any possible
conclusion thereof would cause any member of a Stockholder's Group to be subject
to liability under Section 16(b) of the Exchange Act (a "16b Event"); provided
that such period shall not exceed the minimum period necessary for any such
member to be exempt from such liability; and provided further that from and
after the date that the Stockholders first receive notice that such a process is
to be commenced no member of any Stockholder Group may take any affirmative
action to engage in a purchase and/or sale that would result in subjecting any
Person to liability under Section 16(b) of the Exchange Act or extending the
minimum period necessary for any such Person to be exempt from liability. Within
five Business Days of receipt by any Stockholder of any notice that a purchase
and/or sale of Company Securities under this Agreement will occur, such
Stockholder, at its option, shall, if true, notify the other Stockholders that
such purchases and/or sales would create a 16b Event, in which case such
purchase and/or sale process shall be delayed as set forth herein, except to the
extent that one or more of such other Stockholders agrees to indemnify the
Stockholder providing such notice from any liability (and related expenses)
arising out of such Section 16(b) event, which indemnity shall be in form and
substance reasonably satisfactory to such Stockholder. Failure by any
Stockholder to give notice of the 16(b) Event within the time period specified
above shall preclude such Stockholder from exercising its rights under this
Section 8.1 notwithstanding that a 16(b) Event will or has occurred. Under the
circumstances specified in this Section 8.1, the process shall instead be
commenced on the first Business Day following the expiration of the last day
that Section 16(b) liability would be applicable.
(i) The purchase price for such Company Securities shall be
paid in the appropriate amount by
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certified check or by wire transfer of immediately available funds to the
account specified by the seller thereof, against receipt of certificates
representing the Company Securities so purchased.
(j) Notwithstanding the provisions of Exhibit A or Section
8.1, in the event that a Liberty Stockholder or Comcast Stockholder, as the case
may be (the "Initial Seller"), elects to exercise its demand registration rights
pursuant to Section 2.1 of Exhibit A, then (x) a member of the other Stockholder
Group (the "Subsequent Seller") may exercise any incidental registration rights
available to it in connection with such demand registration only if such
Subsequent Seller has not theretofore elected to exercise its rights under
Section 8.1 with respect to the applicable Direct Transfer by the Initial
Seller, and (y) if the Subsequent Seller so elects to exercise its incidental
registration rights in connection therewith, then the Initial Seller shall not
be entitled to exercise its rights under Section 8.1 to purchase the Company
Securities held by the Subsequent Seller, unless the number of Company
Securities proposed to be sold by such Subsequent Seller pursuant to such
registration exceeds the number of Company Securities proposed to be sold by
such Initial Seller, in which case such Initial Seller may, at its election,
either (x) terminate its demand registration (subject to payment of Registration
Expenses if required by the provisions of Exhibit A) and pursue its rights under
Section 8.1 as to all Company Securities proposed to be sold by such Subsequent
Seller or (y) continue with the registration pursuant to such demand
registration.
ARTICLE 9
CERTAIN EXIT RIGHTS
9.1. Registration Rights. The Company hereby grants to each
Liberty Stockholder and Comcast Stockholder the registration rights set forth on
Exhibit A hereto.
9.2. Initiation of Exit Rights. So long as the Liberty Group
or any of its Permitted Transferees (as defined in Exhibit A), through the
exercise of its demand registration rights set forth in Exhibit A hereto, shall
not have been the party which first caused the Company Securities to be
registered under the Exchange Act, or if none of the Company Securities are
registered under the Exchange Act, then Liberty shall have the right,
exercisable at any time during the 60-day period following the fifth anniversary
of the Merger (or if not previously exercised, at any time during the 60-day
period following each of the
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sixth, seventh, eighth and ninth anniversaries of the Merger) to trigger the
provisions set forth in Sections 9.3 through 9.6 by delivering written notice of
such exercise (the "Exit Notice") to the Comcast Stockholders.
9.3. Appraisal Process. Liberty and Comcast shall seek in good
faith to agree upon the Fair Market Value of the Fully Diluted Shares and the
Specified Amounts of the Liberty Group and the Comcast Group promptly following
(i) receipt by Comcast of the Exit Notice or (ii) the written request of Liberty
or Comcast following a Comcast Change of Control or a Liberty Change of Control,
as the case may be, which request shall be given not more than 30 days following
receipt of notice of such Change of Control pursuant to Section 5.3.(b). As used
herein, the "Fair Market Value" of the Fully Diluted Shares shall mean the fair
market value of the Fully Diluted Shares, as of the date of delivery of the
notice referred to in clause (i) or (ii) above (the "Notice Delivery Date"), on
a going concern or liquidation basis, whichever method would yield the higher
valuation. The Fair Market Value of the Fully Diluted Shares on a going concern
basis shall take into account such considerations as would customarily affect
the price at which a willing seller would sell and a willing buyer would buy the
Fully Diluted Shares as a going concern in an arm's-length transaction in which
such buyer purchases all of the Fully Diluted Shares. The Fair Market Value of
the Fully Diluted Shares on a liquidation basis shall take into account tax
liabilities that would be incurred on a liquidation assuming the most tax
efficient and practical plan of liquidation. If Liberty and Comcast are unable
to agree upon Fair Market Value and the Specified Amounts within 30 days
following the Notice Delivery Date, then such amount shall be determined
pursuant to the appraisal process described below. In such event Liberty and
Comcast shall, within 15 days after the expiration of such 30-day period, each
retain, at their own expense, a Qualified Independent Appraiser to determine
Fair Market Value and the Specified Amounts. Each such Qualified Independent
Appraiser shall submit its written appraisal to each of Liberty and Comcast not
later than 75 days after the Notice Delivery Date. If the amount of the higher
of the two appraisals is greater than 110% of the amount determined by the lower
appraisal, then a third Qualified Independent Appraiser designated by the first
two Qualified Independent Appraisers shall be retained promptly by Liberty and
Comcast (at their joint expense) and shall deliver its written appraisal within
30 days after the date of such retention. In connection with its retention, such
third Qualified Independent Appraiser shall be instructed that such appraisal
shall not be less than the amount determined by the lower of the first two
appraisals nor more than the
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amount determined by the higher of the first two appraisals. If any valuation is
made pursuant to such appraisal process, the amount to be determined shall be
the average of the first two appraisals, if only two appraisals are required, or
if three appraisals are required, the average of the two appraisals closest in
value (or if there are not two closest appraisals, the average of all three such
appraisals). Notwithstanding anything herein to the contrary, if, as a result of
any transaction which results in the issuance to any member of either
Stockholder Group of securities of the Company other than Shares, the parties
hereto agree to cooperate in good faith to appropriately amend the provisions of
this (including without limitation the manner in which the Fair Market Value is
determined) to reflect such issuance.
9.4. Comcast's Purchase Rights. (a) Comcast shall have the
right, exercisable by notice in writing to the Liberty Stockholders (which
notice shall be irrevocable), within 30 days after the determination of Fair
Market Value pursuant to clause (i) of Section 9.3 (the "Election Period") to
purchase (or to cause any of its Subsidiaries to purchase) all, but not less
than all, of the Company Securities held by the Liberty Stockholders for an
aggregate amount (the "Liberty Exit Price") equal to the Specified Amount. Such
written notice shall indicate Comcast's intended method of payment as provided
below. Notwithstanding anything herein to the contrary, but subject to the
provisions of Section 9.8, any purchase of Company Securities by Comcast
pursuant to this Section 9.4 may, at the election of Comcast, instead be
structured as a redemption of such Company Securities by the Company.
(b) If Comcast exercises its right pursuant to Section
9.4.(a), it shall have the right to pay the Liberty Exit Price in (at its
election, but subject to paragraph (c) below) one or more of the following: (i)
cash; (ii) a promissory note of Comcast which matures not later than three years
after issuance and which has an interest rate that, taking into account the
terms of such note, would cause such note to trade at par immediately following
its issuance (determined by appraisal by the Qualified Independent Appraisers if
the parties cannot agree); provided that Comcast may only pay the Liberty Exit
Price with such a promissory note if the interest rate thereon does not exceed
500 basis points over the three-year United States treasury note rate on the
date of issuance of such note; or (iii) shares of Comcast common stock (of any
class or classes of its choosing) or other equity securities having an aggregate
Average Market Price as of the date of the delivery of the Exit Notice, equal to
the Liberty Exit
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Price; provided, that Comcast securities of the same class and type as the
common stock or other equity securities to be used as such consideration shall
then be listed or traded on a national securities exchange or quoted on an
inter-dealer quotation system (such Comcast common stock, the "Comcast
Qualifying Securities"). As used herein, the term "Average Market Price" shall
mean the average closing sale price for the period consisting of the twenty
trading days (or, in the case of Section 8.1, the ten trading days) immediately
prior to the date of determination of the Average Market Price or, if no closing
price is reported, the last reported sales price of such security in the
over-the-counter market, as reported by NASDAQ, or if listed on a national
securities exchange, as reported on the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which such securities are listed or admitted for trading.
The Average Market Price shall be appropriately adjusted for stock splits,
recapitalizations, stock dividends and other events occurring (including the
occurrence of any record date therefor) during such twenty trading day period.
(c) Notwithstanding the foregoing subsection (b), the Liberty
Stockholders may within 5 days of receipt of the notice referred to in
subsection (a) above, require that Comcast pay the amount of the Liberty Exit
Price by delivering to it Comcast Qualifying Securities (of any class or classes
of Comcast's choosing) having an aggregate Average Market Price as of the date
of the delivery of the Exit Notice equal to the Liberty Exit Price; provided
that Comcast shall not be obligated to issue or deliver such stock to the extent
that (i) such stock would represent more than 4.9% of the outstanding common
stock of Comcast or more than 4.9% of the power to vote for the election of
directors of Comcast or (ii) such issuance would result in, or would have a
reasonable likelihood of resulting in, Comcast or any of its Affiliates being
required (pursuant to any law, statute, rule, regulation, order or judgment
promulgated or issued by any court of competent jurisdiction or the United
States government or any Federal governmental, regulatory, or administrative
authority or agency or tribunal) to divest itself of any of its assets, or would
render its continued ownership of such assets illegal or subject to the
imposition of a fine or penalty or would impose material restrictions or
limitations on its full rights of ownership of its assets; and provided further
that to the extent that, as a result of the limitations imposed by the
immediately preceding proviso, Comcast common stock having an aggregate Average
Market Price as of the date of the delivery of the Exit Notice less than the
Liberty Exit Price was delivered
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to the Liberty Stockholders, Comcast shall deliver the balance of the Liberty
Exit Price to the Liberty Stockholders in (at Comcast's election) one or more or
the following: (i) cash, (ii) a promissory note of the type referred to in
clause (ii) of Section 9.4.(b) or (iii) other equity securities of Comcast of
the type referred to in clause (iii) of Section 9.4.(b).
(d) In the event that Comcast elects to deliver Comcast
Qualifying Securities to the Liberty Stockholders in payment of the Liberty Exit
Price as aforesaid, it shall also grant to the Liberty Stockholders rights
substantially equivalent to the registration rights set forth in Section 2.1 of
Exhibit A hereto with respect to the registration of such Comcast Qualifying
Securities; provided that the number of demand registrations available to such
Liberty Stockholders shall equal the number of remaining demand registrations
not yet requested by the Liberty Stockholders pursuant to Section 9.1.
(e) Any closing of the purchase of the Company Securities held
by the Liberty Stockholders pursuant to this Section 9.4 shall be consummated as
soon as practicable after receipt of all applicable regulatory approvals, but in
any event not later than the 135th day following the date upon which the form of
the consideration to be paid to the Liberty Stockholders in payment of the
Liberty Exit Price shall have been determined in accordance with this Section
9.4 (the "Liberty Determination Date"); provided that in the event that Comcast
is prohibited from consummating such purchase by such date because of the entry
of any injunction, order, or decree or the enactment of any law or regulation,
in each case subsequent to the date of delivery of the Exit Notice, then the
date by which such purchase was to be consummated pursuant to the foregoing
clause shall be extended for an additional period ending on the earlier to occur
of (x) the 10th day following the date such purchase is no longer prohibited as
aforesaid and (y) the 195th day following the Liberty Determination Date.
9.5. Liberty's Purchase Rights. (a) In the event that Comcast
(x) shall fail to elect to purchase the Company Securities of the Liberty
Stockholders within the Election Period or (y) following an election to so
purchase, shall fail to consummate such purchase by the applicable date set
forth in Section 9.4(e) (the event specified in clause (y) of this Section 9.5,
is hereinafter referred to as the "Comcast Purchase Default"), then Liberty
shall have the right exercisable by notice ("Liberty Notice") in writing to the
Comcast Stockholders (which notice shall be irrevocable) within 30 days after
the earliest to occur of
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(i) receipt of a written notice by Comcast that it is not exercising its
election to purchase the Liberty Stockholders' Company Securities, (ii)
expiration of the Election Period, or (iii) a Comcast Purchase Default, to
purchase all, but not less than all, of the Company Securities held by the
Comcast Stockholders for an aggregate amount (the "Comcast Exit Price") equal to
the applicable Specified Amount. Notwithstanding anything herein to the contrary
but subject to the provisions of Section 9.8, any purchase of Company Securities
by Liberty pursuant to this Section 9.5 may, at the election of Liberty, instead
be structured as a redemption of such Company Securities by the Company.
(b) If Liberty exercises such right, Liberty shall have the
right to pay such purchase price in (at its election, but subject to paragraph
(c) below) one or more of the following: (i) cash; (ii) a promissory note issued
by Liberty which matures not later than three years after issuance and which has
an interest rate that, taking into account the terms of such note, would cause
such note to trade at par immediately following its issuance (determined by
appraisal by the Qualified Independent Appraisers if the parties cannot agree);
provided that Liberty may only pay the Comcast Exit Price with such a promissory
note if the interest rate thereon does not exceed 500 basis points over the
three-year United States treasury note rate on the date of issuance of such
note; or (iii) shares of Liberty Parent common stock (of any class or classes of
its choosing) or other equity securities of Liberty Parent having an aggregate
Average Market Price as of the delivery of the Exit Notice equal to the Comcast
Exit Price; provided that securities of the same class and type as the Liberty
Parent common stock or other equity securities to be used as consideration shall
then be listed or traded on a national securities exchange or quoted on an
inter-dealer quotation system (such Liberty Parent common stock, the "Liberty
Qualifying Securities").
(c) Notwithstanding the foregoing subsection (b), the Comcast
Stockholders may within 5 days of receipt of the notice referenced in subsection
(a) above, require that Liberty pay such amount by delivering to them Liberty
Qualifying Securities (of any class or classes of its choosing) having an
aggregate Average Market Price as of the date of the delivery of the Exit Notice
equal to the Comcast Exit Price; provided that, Liberty Parent shall not be
obligated to issue stock to the extent that (i) such stock would represent more
than 4.9% of the outstanding common stock of Liberty Parent or more than 4.9% of
the power to vote for the election of directors of Liberty Parent or (ii)
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if such issuance would result in, or would have a reasonable likelihood of
resulting in, Liberty Parent or any of its Affiliates being required (pursuant
to any law, statute, rule, regulation, order or judgment promulgated or issued
by any court of competent jurisdiction or the United States government or any
Federal governmental, regulatory, or administrative authority or agency or
tribunal) to divest itself of any of its assets or would render its continued
ownership of such stock or assets illegal or subject to the imposition of a fine
or penalty or would impose material restrictions or limitations on its full
rights of ownership of its assets; and provided further that to the extent that,
as a result of the limitations imposed by the immediately preceding proviso,
Liberty Parent common stock having an aggregate Average Market Price as of the
date of the delivery of the Exit Notice less than the Comcast Exit Price was
delivered to the Comcast Stockholders, Liberty shall deliver the balance of the
Comcast Exit Price to the Comcast Stockholders in (at Liberty's election) one or
more of the following: (i) cash, (ii) a promissory note of the type referred to
in clause (ii) of Section 9.5.(b) or (iii) other equity securities of Liberty
Parent of the type referred to in clause (iii) of Section 9.5.(b).
(d) In the event that Liberty elects to deliver Liberty
Qualifying Securities to the Comcast Stockholders in payment of the Comcast Exit
Price as aforesaid, it shall also grant to the Comcast Stockholders rights
substantially equivalent to the registration rights set forth in Section 2.1 of
Exhibit A hereto with respect to the registration of such Liberty Qualifying
Securities; provided that the number of demand registrations available to such
Comcast Stockholders shall equal the number of remaining demand registrations
not yet requested by the Comcast Stockholders pursuant to Section 9.1.
(e) Any closing of the purchase of the Company Securities held
by the Comcast Stockholders pursuant to this Section 9.5 shall be consummated as
soon as practicable after receipt of all applicable regulatory approvals, but in
any event not later than the 135th day following the date upon which the form of
the consideration to be paid to the Comcast Stockholders in payment of the
Comcast Exit Price shall have been determined in accordance with this Section
9.5 (the "Comcast Determination Date"); provided that in the event Liberty is
prohibited from consummating such purchase by such date because of the entry of
any injunction, order, or decree or the enactment of any law or regulation, in
each case subsequent to the date of delivery of the written notice referred to
in Section 9.7.(a), then the date by which such purchase was to be consummated
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pursuant to the foregoing clause shall be extended for an additional period
ending on the earlier to occur of (x) the 10th day following the date such
purchase is no longer prohibited as aforesaid and (y) the 195th day following
the Comcast Determination Date.
9.6. Compulsory Sale. In the event that Liberty (x) shall fail
to elect to purchase the Company Securities of the Comcast Stockholders within
the period specified in Section 9.5.(a) or (y) following an election to so
purchase, shall fail to consummate such purchase by the applicable date set
forth in Section 9.5.(e)(the event specified in clause (y) of this Section 9.6
is hereinafter referred to as the "Liberty Purchase Default"), then Liberty and
Comcast shall use their best efforts to sell the Company and distribute the
proceeds of such sale to the Stockholders. Liberty, Comcast or any of their
respective Affiliates may be purchasers (individually or as part of a group) in
any such sale; provided that the relationship between any such Affiliate and
Comcast or Liberty, as the case may be, is disclosed to the other parties hereto
simultaneous with any bid by or involving such Person or its Affiliates.
9.6A. Exclusive Remedy. The parties agree that the exclusive
remedy for any Comcast Purchase Default or Liberty Purchase Default shall be as
enumerated pursuant to Article .
9.7. Change of Control Purchase Rights. (a) Within 30 days
following the determination of Fair Market Value initiated pursuant to clause
(ii) of Section 9.3, either the Liberty Group, in the case of a Comcast Change
in Control, or the Comcast Group, in the case of a Liberty Change in Control
(such Stockholder Group, an "Electing Stockholder") shall have the right,
exercisable by notice in writing to the Subject Entity which was a member of the
Stockholder Group undergoing such Stockholder Change in Control (the
"Non-Electing Stockholder") to purchase (or to cause any of its Subsidiaries to
purchase) all Company Securities owned by the Subject Entity or, in the case of
any such determination initiated with respect to a Liberty Change of Control
occurring prior to the fifth anniversary of the date hereof, owned by the
Liberty Group for an aggregate amount (the "Change of Control Purchase Price")
equal to the portion of the Fair Market Value of the Fully Diluted Shares
attributable to such Company Securities as determined by the Qualified
Independent Appraisers pursuant to Section 9.3. Such written notice shall
indicate the Electing Stockholder's intended method of payment as provided
below. Notwithstanding anything herein to the contrary but subject to the
provisions of Section 9.8, any
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purchase of Company Securities by the Electing Stockholder pursuant to this
Section 9.7 may, at the election of the Electing Stockholder, instead be
structured as a redemption of such Company Securities by the Company.
(b) If the Electing Stockholder exercises its rights pursuant
to Section 9.7, the Electing Stockholder shall have the right to pay the Change
of Control Purchase Price in (at the election of the Electing Stockholder but
subject to paragraph (c) below) one or more of the following: (i) cash, (ii) a
promissory note of Comcast (if the Electing Stockholder is a Comcast
Stockholder) or Liberty (if the Electing Stockholder is a Liberty Stockholder)
which matures not later than three years after issuance and which has an
interest rate that, taking into account the terms of such note, would cause such
note to trade at par immediately following its issuance (determined by appraisal
by the Qualified Independent Appraisers if the parties cannot agree); provided
that, the Electing Stockholder may only pay the Change of Control Purchase Price
with such a promissory note if the interest rate thereon does not exceed 500
basis points over the three-year United States treasury note rate on the date of
issuance of such note or (iii) shares of common stock of Comcast or Liberty
Parent, as the case may be (of any class or classes of Comcast's or Liberty's
choosing, respectively), or other equity securities of Comcast or Liberty
Parent, as the case may be, having an aggregate Average Market Price as of the
date of the written request referred to in clause (ii) of Section 9.3 equal to
the Change of Control Purchase Price; provided, that securities of the same
class and type as such common stock or other equity securities to be used as
such consideration shall then be listed or traded on a national securities
exchange or quoted on an inter-dealer quotation system (such common stock, the
"Stockholder Qualifying Securities").
(c) Notwithstanding the foregoing subsection (b), the
Non-Electing Stockholder may within 5 days of receipt of the notice referenced
in subsection (a) above specifying a different form of payment, require that the
Electing Stockholder pay the amount of the Change of Control Purchase Price by
delivering to it Stockholder Qualifying Securities of Comcast or Liberty Parent,
as the case may be (of any class or classes of the Electing Stockholder's
choosing), having an aggregate Average Market Price as of the date of the
delivery of the notice referred to in clause (ii) of Section 9.3 equal to the
Change of Control Purchase Price; provided that the Electing Stockholder shall
not be obligated to issue or deliver such stock to the extent (i) such stock
would represent more than 4.9% of the
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outstanding common stock of Comcast or Liberty Parent, as the
case may be, or more than 4.9% of the power to vote for the election of
directors of Comcast or Liberty Parent, as the case may be or (ii) such issuance
would result in, or would have a reasonable likelihood of resulting in, Comcast
or Liberty Parent, as the case may be, or any of their respective Affiliates
being required (pursuant to any law, statute, rule, regulation, order or
judgment promulgated or issued by any court of competent jurisdiction or the
United States government or any Federal governmental, regulatory, or
administrative authority or agency or tribunal) to divest itself of any of its
assets, or would render its continued ownership of such assets illegal or
subject to the imposition of a fine or penalty or would impose material
restrictions or limitations on its full rights of ownership of its assets; and
provided further that to the extent that, as a result of the limitations imposed
by the immediately preceding proviso, common stock of Liberty Parent or Comcast,
as the case may be, having an aggregate Average Market Price as of the date of
the delivery of the notice referred to in clause (ii) of Section 9.3 less than
the Change of Control Purchase Price was delivered to the Non- Electing
Stockholder, the Electing Stockholder shall deliver the balance of the Change of
Control Purchase Price to the Non-Electing Stockholder in (at the election of
the Electing Stockholder) one or more or the following: (i) cash, (ii) a
promissory note of the type referred to in clause (ii) of Section 9.7.(b) or
(iii) other equity securities of Comcast or Liberty Parent, as the case may be,
of the type referred to in clause (iii) of Section 9.7.(b).
(d) In the event that the Electing Stockholder elects to
deliver Stockholder Qualifying Securities to the Non-Electing Stockholder in
payment of the Change of Control Purchase Price as aforesaid, it shall also
grant to the Non- Electing Stockholder rights substantially equivalent to the
registration rights set forth in Section 2.1 of Exhibit A hereto with respect to
the registration of such Stockholder Qualifying Securities; provided that the
number of demand registrations available to the Non-Electing Stockholder shall
equal the number of remaining demand registrations not yet requested by the
Non-Electing Stockholder pursuant to Section 9.1 and provided further that, in
the event the former Stockholder Group of the Subject Entity continues to hold
an Attributable Interest following such Stockholder Change in Control, the
registration rights granted pursuant to this Section 9.3 and the registration
rights of the Stockholder Group pursuant to Section 9.1 shall be apportioned
equitably.
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(e) Any closing of the purchase of the Company Securities
pursuant to this Section 9.7.(a) shall be consummated as soon as practicable
after receipt of all applicable regulatory approvals, but in any event not later
than the 135th day following the date upon which the form of the consideration
to be paid to the Non-Electing Stockholder in payment of the Change of Control
Purchase Price shall have been determined in accordance with this Section
9.7.(a) (the "Change of Control Determination Date"); provided that in the event
that the Electing Stockholder is prohibited from consummating such purchase by
such date because of the entry of any injunction, order, or decree or the
enactment of any law or regulation, in each case subsequent to the date of the
notice referred to in Section 9.7, then the date by which such purchase was to
be consummated the foregoing clause shall be extended for an additional period
ending on the earlier to occur of (x) the 10th day following the date such
purchase is no longer prohibited as aforesaid and (y) the 195th day following
the Change of Control Determination Date.
9.8. Tax Considerations. Subject to the limitations of
Sections 9.4.(c), 9.5.(c) and 9.7.(c) the parties agree to use all reasonable
efforts to consummate any such purchase and sale pursuant to this Article (other
than under Section 9.1) in a tax-free transaction or, if not available, most tax
efficient method available. In the event that the party whose Company Securities
are to be purchased pursuant to this Article (the "Selling Party") notifies the
party purchasing the Selling Party's Company Securities (the "Purchasing Party")
within 10 days after the Comcast Determination Date, the Liberty Determination
Date or the Change of Control Determination Date, as the case may be, as to a
structure of the transactions contemplated by Section 9.4, 9.5 or 9.7.(a) that
is otherwise in accordance with the provisions of Section 9.4, 9.5 or 9.7.(a)
above (as applicable) and which such Selling Party reasonably believes to be
tax-free or the most tax efficient structure for such transaction (the "Proposed
Structure"), and if requested by the Purchasing Party within 10 days of receipt
of notice of the Proposed Structure, such Selling Party shall deliver an opinion
of counsel (such counsel to be reasonably acceptable to the Purchasing Party)
reasonably confirming the tax free or tax efficient nature of the Proposed
Structure, then such sale shall be consummated in accordance with the Proposed
Structure unless, within 15 days of the last to occur of the notice as to the
Proposed Structure or such opinion of counsel, the Purchasing Party delivers to
the Selling Party a notice setting forth an alternate structure for such
transaction (the "Alternate Structure"), which is no less favorable from a tax
standpoint to the Selling Party than
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<PAGE>
the Proposed Structure (as evidenced by an opinion of counsel
addressed to and reasonably acceptable to the Selling Party) and which does not
result in the creation of restrictions or limitations applicable to the Selling
Party which are, in the good faith, reasonable judgment of the Selling Party,
more onerous to it than those that would result in the Proposed Structure, then
the parties shall proceed to consummate such transaction in accordance with the
Alternate Structure on the applicable timetable set forth in Section 9.4, 9.5 or
9.7.(a) such longer period as may be required to obtain any tax ruling the
parties may mutually decide to seek pursuant to this Section 9.8; provided,
however, that any extension necessary to seek a ruling shall not exceed the time
period that is one year from the Comcast Determination Date, the Liberty
Determination Date or the Change of Control Determination Date, as applicable.
9.9. Tag-Along Rights. (a) If (i) prior to the fifth
anniversary of the date hereof, the Comcast Group proposes to transfer all of
its Company Securities in a transaction referred to in Section 7.1 (I)(y) or
(II) or (ii) following the fifth anniversary of the date hereof, the Comcast
Group proposes a Direct Transfer or an Indirect Transfer of Company Securities
in a Tag Block Transaction (as defined below) (in each case, the "Tag-Along
Transaction") then Comcast shall provide written notice thereof to Liberty (the
"Sale Notice") simultaneously with the notice required under Section 8.1 or 9.7,
as applicable. Such notice shall describe the amount and type of consideration
to be paid to the Comcast Group, the form of acquisition agreement the Comcast
Group proposes to enter into in connection with such Tag-Along Transaction and
all other material terms and conditions thereof (and following delivery of the
Sale Notice, Comcast shall promptly update information contained in the Sale
Notice to include any material changes to the foregoing information.)
Thereafter, Liberty shall have the right, exercisable within 15 days following
the conclusion of any period (the "Tag Election Period") during which Liberty
could elect to purchase the Company Securities directly or indirectly
beneficially owned by the Comcast Group which are the subject of such Tag-Along
Transaction, to require that the Person which has offered to purchase such
Company Securities from the Comcast Group (the "Tag-Along Buyer") in the
Tag-Along Transaction purchase all, but not less than all, of the Company
Securities owned by all members of the Liberty Group for (x) in the case of a
Direct Transfer of Company Securities to Persons other than any Affiliate of any
member of the Comcast Group, the same consideration per Company Security as is
to be received by the members of the Comcast Group in such Direct Sale or (y)
51
<PAGE>
in the case of any other Direct Transfer or any Indirect
Transfer of Company Securities, the consideration per Company Security having
the value determined in accordance with the procedure set forth in Section 9.3
(but taking into consideration the portion of the price paid by the Tag-Along
Buyer in connection with such transfer which is attributable to the Company
Securities which are the subject of such Tag- Along Transaction and the other
terms and conditions of the Tag-Along Transaction) and, in the case of both (x)
and (y) otherwise upon the same terms and conditions as the Comcast Group has
proposed or agreed to Transfer its Company Securities to the Tag-Along Buyer. As
used herein, the term "Tag Block Transaction" means a Direct or Indirect
Transfer in one transaction or a series of related transactions between the
applicable Tag-Along Buyer or its Affiliates, on the one hand, and Comcast and
its Subsidiaries, on the other hand, the result of which, together with the
Company Securities beneficially owned by the Tag-Along Buyer and its Affiliates
gives the Tag-Along Buyer and its Affiliates the effective right or power
(whether or not exercised) to elect a majority of the Board.
(b) The Liberty Group may exercise its rights pursuant to this
Section 9.9, by delivering to Comcast a written notice thereof (a "Tag-Along
Sale Notice") within 15 days following the termination of the Tag Election
Period. Following the delivery of any such Tag-Along Sale Notice, Liberty shall
agree to become a party to or otherwise become bound by the applicable terms and
conditions of the contract, agreement or instrument pursuant to which the
Comcast Group has agreed to sell its Company Securities, the terms and
conditions of which shall be no less favorable to the Liberty Group than the
terms and conditions applicable to Comcast, subject to appropriate changes
necessary to reflect any differences in the securities or assets being
transferred or sold by the Comcast Group in such Tag-Along Transaction and any
differences in the consideration to be paid in such transaction pursuant to
clause (y) of Section 9.9.(a).
(c) Any closing of the purchase of the Company Securities held
by the Liberty Stockholders pursuant to this Section 9.9 shall be consummated as
soon as practicable after receipt of all applicable regulatory approvals, but in
any event not later than the 135th day following the date of the Tag-Along Sale
Notice; provided, that in the event that the Tag-Along Buyer is prohibited from
consummating such purchase by such date because of the entry of any injunction,
order, or decree or the enactment of any law or regulation, in each case
subsequent to the date of delivery of the Tag-Along Notice, then the date by
which such
52
<PAGE>
purchase was to be consummated pursuant to the foregoing clause shall be
extended for an additional period ending on the earlier to occur of (x) the 10th
day following the date such purchase is no longer prohibited as aforesaid and
(y) the 195th day following the date of the Tag-Along Notice. If, at the end of
the applicable period described above, the Comcast Group has not completed the
sale contemplated by the Tag-Along Notice, this Section 9.9 shall again apply in
its entirety; provided, however, that in the event Comcast's failure to complete
such sale is the result of any failure to receive a governmental approval or
consent or other matter, and if all other conditions to Liberty's obligations to
close have been satisfied, then Liberty may, but shall not be obligated to, with
the agreement of the Tag-Along Buyer, consummate such sale on the terms and
conditions applicable to it without theretofore complying with the provisions of
this Agreement (including, without limitation, Sections 8.1 and 9.7).
9.10. Right to Compel Sale. (a) If the Comcast Group proposes
to effect a Direct or Indirect Transfer of all of its Company Securities in a
Control Block Transaction (as defined below) in which Comcast would like to
reserve its right to cause the Liberty Group to participate as provided in this
Section, then Comcast shall provide written notice thereof to Liberty (the
"Control Sale Notice"), which shall include the amount and type of the
consideration to be paid to the Comcast Group, the form of acquisition agreement
Comcast is prepared to enter into in connection with such Control Block
Transaction and all other material terms thereof, and shall also include such
information as may be reasonably necessary in connection with Liberty's
determination of the tax free nature of the transaction) simultaneously with the
notice required under Section 8.1 or 9.7, as applicable. Upon the failure of the
Liberty Group to exercise any such rights within the exercise period specified
in this Agreement or written notice of Liberty's earlier determination not to
exercise such rights (the expiration of such period or the date of such notice,
the "Liberty Rights Termination Date"), Comcast shall then have the right,
exercisable by written notice to Liberty given within 15 days of the Liberty
Rights Termination Date (the "Buy Notice", which shall reconfirm and/or update
the information contained in the Control Sale Notice) to require that each
Liberty Stockholder sell (the "Compelled Sale") to the Person which has offered
to purchase the Comcast Group's Company Securities in the Control Block
Transaction (the "Control Block Buyer", which Person shall not be an Affiliate
of Comcast), all of the Company Securities beneficially owned by the Liberty
Group for (x) in the case of Direct Transfer of Company Securities, the same
53
<PAGE>
consideration per Company Security as is to be received by the members of the
Comcast Group or (y) in the case of an Indirect Transfer of Company Securities,
consideration per Company Security having the value determined in accordance
with the procedure set forth in Section 9.3 (but taking into consideration the
portion of the price paid by the Control Block Buyer in connection with such
transfer which is attributable to the Company Securities held by the Comcast
Group and the other terms and conditions of the Control Block Transaction) and,
in each case otherwise upon the same terms and conditions as the Comcast Group
has proposed or agreed to Transfer its Company Securities to such Control Block
Buyer; provided, however, that the Comcast Group's right to require any Liberty
Stockholder to effect a Direct or Indirect Transfer of its Company Securities in
such Compelled Sale shall be subject to Liberty's good faith determination (i)
that the proposed Control Block Transaction will not cause Liberty or its
Affiliates to recognize any taxable income, and (ii) that such Control Block
Transaction would not result in, and would not have a reasonable likelihood of
resulting in, Liberty Parent or any of its Affiliates being required (pursuant
to any law, statute, rule, regulation, order or judgment promulgated or issued
by any court of competent jurisdiction or the United States government or any
Federal governmental, regulatory, or administrative authority or agency or
tribunal) to divest itself of any of its assets, or would render its continued
ownership of its assets (including any consideration to be received by Liberty
Parent or its Affiliates in the Control Block Transaction) illegal or subject to
the imposition of a fine or penalty or would impose material restrictions or
limitations on its full rights or ownership of its assets. As used herein, the
term "Control Block Transaction" shall mean a Direct or Indirect Transfer in one
transaction or a series of related transactions between the Control Block Buyer
or its Affiliates, on the one hand, and Comcast and its Subsidiaries, on the
other hand, of all Company Securities beneficially owned by the Comcast Group
which Company Securities, together with the Company Securities and any other
securities of the Company beneficially owned by the Control Block Buyer and its
Affiliates, gives the Control Block Buyer the effective right or power (whether
or not such Person exercises such right) to elect a majority of the Board.
(b) Subject to the terms of this Agreement, upon delivery to
it of the Buy Notice, Liberty agrees to become a party to or otherwise become
bound by the applicable terms and conditions of the contract, agreement or
instrument pursuant to which the Comcast Group has agreed to sell its Company
Securities in the Control Block
54
<PAGE>
Transaction, the terms and conditions of which shall be no less favorable to the
Liberty Group than the terms and conditions applicable to Comcast, subject to
appropriate changes necessary to reflect any other securities or assets being
transferred or sold by the Comcast Group in such Control Block Transaction.
(c) Any closing of the purchase of the Company Securities held
by the Liberty Stockholders pursuant to this Section 9.10 shall be consummated
as soon as practicable after receipt of all applicable regulatory approvals, but
in any event not later than the 135th day following the later of the date of the
Buy Notice and the determination of the Fair Market Value; provided that in the
event that the Control Block Buyer is prohibited from consummating such purchase
by such date because of the entry of any injunction, order, or decree or the
enactment of any law or regulation, in each case subsequent to the delivery of
the Buy Notice, then the date by which such purchase was to be consummated
pursuant to the foregoing clause shall be extended for an additional period
ending on the earlier to occur of (x) the 10th day following the date such
purchase is no longer prohibited as aforesaid and (y) the 195th day following
the date of the Buy Notice.
If, at the end of the applicable period described above, the
Comcast Group has not completed the sale contemplated by the Control Sale
Notice, this Section 9.10 shall again apply in its entirety, except that Comcast
shall not be permitted to exercise its rights under this Section more than one
time in any twelve consecutive months; provided, however, that in the event
Comcast's failure to complete such sale is the result of any failure to receive
a governmental approval or consent or other matter, and if all other conditions
to Liberty's obligations to close have been satisfied, then Liberty may, but
shall not be obligated to, with the agreement of the Control Block Buyer,
consummate such sale on the terms and conditions applicable to it without
theretofore complying with the provisions of this Agreement (including, without
limitation, Sections 7.1, 8.1 and 9.7).
(d) Notwithstanding anything contained herein, (i) delivery of
the Control Sale Notice shall not prohibit or restrict Liberty from its ability
to consummate a sale pursuant to Section 9.2 so long as the Exit Notice was
delivered by Liberty prior to the date of the Control Sale Notice, and (ii)
Comcast shall not be entitled to exercise its rights under this Section 9.10 if
following the making of a demand for registration or a request for an incidental
registration pursuant to its rights under Exhibit A, unless
55
<PAGE>
Comcast shall have agreed in writing to pay any and all Registration Expenses
for which Liberty may become liable pursuant to Exhibit A.
9.11. Qualifying Securities Limitation. For purposes of
Sections 9.4.(c), 9.5.(c) and 9.7.(c), if the classes of securities which may be
Comcast Qualifying Securities or Liberty Qualifying Securities include more than
one class of voting securities, Comcast and Liberty shall not be permitted to
choose any class with a vote per share in excess of 1 vote per share.
ARTICLE 10
MISCELLANEOUS
10.1. Agreement to be Bound. No Direct or Indirect Transfer of
Company Securities shall be effective unless such Transfer is made in compliance
with the terms of this Agreement. Any transferee (other than a transferee which
is a member of a Stockholder Group) which acquires Company Securities or any
interest therein pursuant to a Direct Transfer in accordance with the terms of
this Agreement, shall not be required to become a party to this Agreement and
shall have no rights or obligations hereunder. No Direct Transfer of Company
Securities between any two or more members of a Stockholder Group shall be
effective unless prior to such transfer the transferee agrees in writing, in
form and substance reasonably satisfactory to the other Stockholder Group, to
become bound as a Stockholder pursuant to the terms of this Agreement.
10.2. Undertaking. TCI hereby covenants and undertakes to
cause Liberty and each Liberty Stockholder to comply with each of its
representations, warranties, covenants, agreements and obligations under this
Agreement to the same extent as if such representations, warranties, covenants,
agreements and obligations were binding upon TCI; provided, that TCI makes no
covenant or undertaking and shall have no obligation with respect to any
promissory note issued by Liberty pursuant to Article ; and provided further,
that TCI's obligations under this paragraph shall terminate (to the extent not
fixed and accrued) at such time as (i)(A) equity securities of Liberty are
publicly traded or (B) shares of a "tracking stock" or "target stock" primarily
relating, directly or indirectly, to the performance or value of Liberty are
publicly traded and (ii) based upon the trading price of such publicly traded
securities or shares and the proportion of the total value of Liberty
represented by such publicly traded Liberty
56
<PAGE>
securities or shares of "tracking" or "target" stock, the total market value of
Liberty is at least $2 billion.
10.3. Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto and supersedes all prior agreements
(including without limitation the Joint Bidding Agreement but excluding the
Merger Agreement) and understandings, oral and written, among all of the parties
hereto with respect to the subject matter hereof.
10.4. Binding Effect; Benefit. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
heirs, successors by operation of law and legal representatives. Nothing in this
Agreement, expressed or implied, is intended to confer on any Person (other
than, pursuant to Section 5.8, any Designated Representative) other than the
parties hereto and their respective heirs, successors, legal representatives and
permitted assigns, any rights, remedies or liabilities under or by reason of
this Agreement.
10.5. Assignability. The benefits of this Agreement shall not
be assignable by any party hereto.
10.6. Amendment; Waiver; Termination. (a) No provision of this
Agreement may be waived except by an instrument in writing executed by the party
against whom the waiver is to be effective. No provision of this Agreement may
be amended or otherwise modified except by an instrument in writing executed by
the Company and each Stockholder.
(b) In addition, no provision of this Agreement that is
specifically applicable to any Stockholder may be amended or otherwise modified
or terminated except with the consent of such Stockholder.
(c) Each member of any Stockholder Group, which Stockholder
Group ceases to beneficially own in the aggregate at least 5% of the Fully
Diluted Shares then outstanding, shall cease to be bound by the terms hereof and
shall cease to be entitled to any rights granted to such Stockholder Group and
such Stockholder hereunder.
(d) Following compliance with the procedures set forth in
Section 9.7.(a), each Subject Entity shall be released from its obligations and
shall not be entitled to any rights hereunder.
10.7. Notices. All notices and other facsimile communications
given or made pursuant hereto or pursuant to
57
<PAGE>
any other agreement among the parties, unless otherwise specified, shall be in
writing and shall be deemed to have been duly given or made if sent by facsimile
(with confirmation in writing), delivered personally or sent by registered or
certified mail (postage prepaid, return receipt requested) to the parties at the
facsimile number or address set forth below and such notice or communication
shall be deemed to have been given or made upon receipt:
if to Comcast, CFC or CQI, to:
Comcast Corporation
1500 Market Street, East Tower - 35th Floor
Philadelphia, Pennsylvania 19102-4735
Attention: General Counsel
Fax: 215-981-7744
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Phillip Mills, Esq.
Fax: 212-450-4800
if to Liberty or Liberty Sub, to:
Liberty Media Corporation
8101 East Prentice Avenue
Suite 500
Englewood, Colorado 80111
Attention: Robert R. Bennett
Fax: 303-721-5415
with a copy to:
Baker & Botts
885 Third Avenue, 19th Floor
New York, New York 10022
Attention: Jerome Kern, Esq.
Fax: 212-705-5125
58
<PAGE>
if to the Company, to:
QVC Programming Holdings, Inc.
(or, following the Merger: QVC, Inc.)
c/o Comcast Corporation
1500 Market Street, East Tower - 35th Floor
Philadelphia, Pennsylvania 19102-4735
Attention: General Counsel
Fax: 215-981-7744
with copies to:
Liberty Media Corporation
8101 East Prentice Avenue
Englewood, Colorado 80111
Attention: Robert R. Bennett
Fax: 303-721-5415
Baker & Botts
885 Third Avenue, 19th Floor
New York, New York 10022
Attention: Jerome Kern, Esq.
Fax: 212-705-5125
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Phillip Mills, Esq.
Fax: 212-450-4800
Any Person who becomes a Stockholder shall provide its address
and fax number to the Company, which shall promptly provide such information to
each other Stockholder. Each member of a Stockholder Group may rely upon any
notice or communication of a member of the other Stockholder Group with respect
to any matter relating to such other Stockholder Group.
10.8. Headings. The headings contained in this Agreement are
for convenience only and shall not affect the meaning or interpretation of this
Agreement.
10.9. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which together shall be deemed to be one and the same instrument.
10.10. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT
REGARD TO THE CONFLICTS OF LAW RULES OF SUCH STATE.
59
<PAGE>
10.11. No Inconsistent Agreements; Specific Enforcement. (a)
Each party hereto agrees not to take, or cause or permit (assuming such Person
had the power to cause such action not to be taken) to be taken indirectly, any
action which if taken, caused or permitted to be taken by such Person directly
would constitute a violation of this Agreement.
(b) The parties hereto acknowledge and agree that in the event
of any breach of this Agreement, the parties would be irreparably harmed and
could not be made whole by monetary damages. Each party hereto accordingly
agrees (i) not to assert by way of defense or otherwise that a remedy at law
would be adequate, and (ii) that the parties agree, in addition to any other
remedy to which they may be entitled, that the remedy of specific performance of
this Agreement is appropriate, in addition to any other remedies that they may
have at law or in equity.
10.12. Survival. The representations and warranties contained
herein shall survive the execution and delivery of this Agreement.
60
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
COMCAST CORPORATION
By:/s/ Arthur R. Block
Name: Arthur R. Block
Title: Vice President
LIBERTY MEDIA CORPORATION
By:/s/ Stephen M. Brett
Name: Stephen M. Brett
Title: Vice President
QVC PROGRAMMING HOLDINGS, INC.
By:/s/ Arthur R. Block
Name: Arthur R. Block
Title: Vice President
COMCAST QVC, INC.
By:/s/ Arthur R. Block
Name: Arthur R. Block
Title: Vice President
LIBERTY QVC, INC.
By:/s/ Stephen M. Brett
Name: Stephen M. Brett
Title: Vice President
61
<PAGE>
QVC INVESTMENT, INC.
By:/s/ Stephen M. Brett
Name: Stephen M. Brett
Title: Vice President
The undersigned is executing and
delivering this Agreement solely for the
purpose of agreeing to the provisions of
Section 10.2.
TELE-COMMUNICATIONS, INC.
By:/s/ Stephen M. Brett
Name: Stephen M. Brett
Title: Executive Vice President
62
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated statement of operations and consolidated balance sheet and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000022301
<NAME> COMCAST CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 415,881
<SECURITIES> 25,355
<RECEIVABLES> 366,785
<ALLOWANCES> (81,487)
<INVENTORY> 193,665
<CURRENT-ASSETS> 1,000,478
<PP&E> 2,120,595
<DEPRECIATION> (822,455)
<TOTAL-ASSETS> 8,460,121
<CURRENT-LIABILITIES> 956,414
<BONDS> 6,025,763
<COMMON> 239,636
0
0
<OTHER-SE> (965,852)
<TOTAL-LIABILITY-AND-EQUITY> 8,460,121
<SALES> 663,606
<TOTAL-REVENUES> 663,606
<CGS> (138,074)
<TOTAL-COSTS> (689,887)
<OTHER-EXPENSES> (16,417)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (117,587)
<INCOME-PRETAX> 3,307
<INCOME-TAX> (3,935)
<INCOME-CONTINUING> (628)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (628)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
