____________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
SCHEDULE 14D-1
(Tender Offer Statement Pursuant to
Section 14(d)(1) of the Securities Exchange Act of 1934)
(Amendment No. 37)
PARAMOUNT COMMUNICATIONS INC.
(Name of Subject Company)
QVC NETWORK, INC.
COMCAST CORPORATION
BELLSOUTH CORPORATION
(Bidders)
Common Stock, Par Value $1.00 Per Share
(Including the Associated Common Stock Purchase Rights)
(Title of Class of Securities)
699216 10 7
(CUSIP Number of Class of Securities)
<TABLE>
<S> <C> <C>
Neal S. Grabell Stanley L. Wang Walter H. Alford
QVC Network, Inc. Comcast Corporation BellSouth Corporation
Goshen Corporate Park 1234 Market Street 1155 Peachtree Street, N.E.
West Chester, PA 19380 Philadelphia, PA 19107 Atlanta, GA 30367
(215) 430-1000 (215) 981-7510 (404) 249-2050
</TABLE>
(Names, Addresses and Telephone Numbers of Persons Authorized
to Receive Notices and Communications on Behalf of Bidders)
Copy to:
<TABLE>
<S> <C> <C>
Pamela S. Seymon Dennis S. Hersch Alan Stephenson
Wachtell, Lipton, Rosen & Katz Davis Polk & Wardwell Cravath, Swaine & Moore
51 West 52nd Street 450 Lexington Avenue One Worldwide Plaza
New York, NY 10019 New York, NY 10017 825 Eighth Avenue
(212) 403-1000 (212) 450-4000 New York, NY 10022
(212) 474-1000
</TABLE>
<PAGE>
<PAGE>
This Statement amends and supplements the Tender Of-
fer Statement on Schedule 14D-1 filed with the Securities and
Exchange Commission (the "Commission") on October 27, 1993, as
previously amended and supplemented (the "Schedule 14D-1"), by
QVC Network, Inc., a Delaware corporation ("QVC"), Comcast Cor-
poration, a Pennsylvania corporation ("Comcast"), and BellSouth
Corporation, a Georgia corporation ("BellSouth"). This State-
ment relates to a tender offer to purchase 61,657,432 of the
outstanding shares of Common Stock, par value $1.00 per share
(the "Shares"), of Paramount Communications Inc., a Delaware
corporation ("Paramount"), or such greater number of Shares as
equals 50.1% of the Shares outstanding plus the Shares issuable
upon the exercise of the then exercisable stock options, as of
the expiration of the Offer, and the associated Rights, at a
price of $104 per Share (and associated Right), net to the
seller in cash, without interest thereon, upon the terms and
subject to the conditions set forth in the Offer to Purchase,
dated October 27, 1993 (the "Offer to Purchase"), as amended
and supplemented by the Supplement thereto, dated November 12,
1993 (the "First Supplement"), the Second Supplement thereto,
dated December 23, 1993 (the "Second Supplement"), the Third
Supplement thereto, dated February 1, 1994 (the "Third Supple-
ment"), the amendments thereto and the related original and
revised Letters of Transmittal (which together constitute the
"Offer"), which have been annexed to and filed with the Sched-
ule 14D-1 as Exhibits (a)(1), (a)(17), (a)(46), (a)(67),
(a)(2), (a)(18), (a)(47) and (a)(68), respectively. Capital-
ized terms used and not defined herein shall have the meanings
assigned such terms in the Offer and the Schedule 14D-1.
Item 7. Contracts, Arrangements, Understandings or
Relationships With Respect to the Subject Company's
Securities.
By letter dated February 4, 1994, Paramount sent to
QVC a revised Proposed QVC Merger Agreement (as revised, the
"Proposed QVC Merger Agreement") to reflect certain changes in
the Offer and typographical and conforming changes. A copy of
the Proposed QVC Merger Agreement is attached hereto as Exhibit
(c)(32), and the foregoing summary description is qualified in
its entirety by reference to such exhibit.
Item 10. Additional Information.
(e) On February 4, 1994, the Delaware Supreme Court
issued its opinion in the Delaware Litigation, affirming the
order of the Delaware Chancery Court preliminarily enjoining
Paramount from taking any action to facilitate the previous
<PAGE>
<PAGE>
Viacom Offer or the previous Proposed Viacom Merger and the
Viacom Lockup Option. The Delaware Supreme Court held that the
Paramount Board had breached its fiduciary duties and that
Viacom had no vested contract right in the Viacom Lockup
Option. The Delaware Supreme Court remanded the Delaware
Litigation for proceedings consistent with its opinion. A copy
of the opinion is attached hereto as Exhibit (c)(33), and the
foregoing summary description is qualified in its entirety by
reference to such exhibit.
(f) According to a Paramount press release dated
February 4, 1994, on that date the Paramount Board unanimously
recommended that Paramount stockholders accept the Third
Viacom-Blockbuster Offer and tender their shares pursuant
thereto and reject the Offer by not tendering any Shares to
QVC.
Item 11. Material to be Filed as Exhibits.
(a)(1) -- Offer to Purchase, dated October 27, 1993.*
(a)(2) -- Letter of Transmittal.*
(a)(3) -- Notice of Guaranteed Delivery.*
(a)(4) -- Form of Letter to Brokers, Dealers, Commercial
Banks, Trust Companies and Nominees.*
(a)(5) -- Form of Letter to Clients for Use by Brokers,
Dealers, Commercial Banks, Trust Companies and
Nominees.*
(a)(6) -- Guidelines of the Internal Revenue Service for
Certification of Taxpayer Identification Number
on Substitute Form W-9.*
(a)(7) -- Press release issued by QVC on October 21,
1993.*
(a)(8) -- Form of Summary Advertisement, dated October 27,
1993.*
(a)(9) -- Text of Letter from QVC to Paramount, dated Oc-
tober 29, 1993.*
(a)(10) -- Press release issued by QVC on October 29,
1993.*
____________________
* Previously filed
-1-
<PAGE>
<PAGE>
(a)(11) -- Form of Letter to Participants in the Dividend
Reinvestment Plan of Paramount Communications
Inc.*
(a)(12) -- Text of Letter from Paramount to QVC, dated Oc-
tober 29, 1993.*
(a)(13) -- Text of Letter from Paramount to QVC advisor,
dated November 1, 1993.*
(a)(14) -- Text of Letter from QVC advisor to Paramount,
dated November 2, 1993.*
(a)(15) -- Press release issued by QVC on November 5,
1993.*
(a)(16) -- Press release issued by QVC on November 5,
1993.*
(a)(17) -- Supplement to the Offer to Purchase, dated No-
vember 12, 1993.*
(a)(18) -- Revised Letter of Transmittal.*
(a)(19) -- Revised Notice of Guaranteed Delivery.*
(a)(20) -- Revised Form of Letter to Brokers, Dealers, Com-
mercial Banks, Trust Companies and Nominees.*
(a)(21) -- Revised Form of Letter to Clients for use by
Brokers, Dealers, Commercial Banks, Trust Compa-
nies and Nominees.*
(a)(22) -- Press release issued by QVC on November 11,
1993.*
(a)(23) -- Press release issued by QVC on November 12,
1993.*
(a)(24) -- Revised Form of Letter to Participants in the
Dividend Reinvestment Plan of Paramount Com-
munications, Inc.*
(a)(25) -- Press release issued by QVC on November 16,
1993.*
(a)(26) -- Amended Complaint in Viacom International Inc.
v. Tele-Communications, Inc., et al., dated No-
vember 9, 1993, and filed in the United States
____________________
* Previously filed
-2-
<PAGE>
<PAGE>
District Court for the Southern District of New
York.*
(a)(27) -- Text of letter from QVC to Paramount, dated No-
vember 19, 1993.*
(a)(28) -- Press release issued by QVC on November 20,
1993.*
(a)(29) -- Press release issued by QVC on November 22,
1993.*
(a)(30) -- Press release issued by QVC on November 23,
1993.*
(a)(31) -- Press release issued by QVC on November 23,
1993.*
(a)(32) -- Press release issued by QVC on November 24,
1993.*
(a)(33) -- Press release issued by QVC on December 1,
1993.*
(a)(34) -- Press release issued by QVC on December 9,
1993.*
(a)(35) -- Press release issued by QVC on December 10,
1993.*
(a)(36) -- Press release issued by QVC on December 14,
1993.*
(a)(37) -- Text of letter from Paramount advisor to QVC,
dated December 14, 1993.*
(a)(38) -- Text of letter from QVC advisor to Paramount
advisor, dated December 14, 1993.*
(a)(39) -- Press release issued by QVC on December 15,
1993.*
(a)(40) -- Press release issued by QVC on December 16,
1993.*
(a)(41) -- Text of letter from Paramount advisor to QVC
advisor, dated December 17, 1993.*
(a)(42) -- Text of letter from QVC advisor to Viacom advi-
sor, dated December 17, 1993.*
____________________
* Previously filed
-3-
<PAGE>
<PAGE>
(a)(43) -- Text of letter from QVC to Paramount, dated De-
cember 20, 1993.*
(a)(44) -- Press release issued by QVC on December 20,
1993.*
(a)(45) -- Press release issued by QVC on December 20,
1993.*
(a)(46) -- Second Supplement to the Offer to Purchase,
dated December 23, 1993.*
(a)(47) -- Second Revised Letter of Transmittal.*
(a)(48) -- Second Revised Notice of Guaranteed Delivery.*
(a)(49) -- Second Revised Form of Letter to Brokers, Deal-
ers, Commercial Banks, Trust Companies and Nomi-
nees.*
(a)(50) -- Second Revised Form of Letter to Clients for use
by Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees.*
(a)(51) -- Second Revised Form of Letter to Participants in
the Dividend Reinvestment Plan of Paramount Com-
munications Inc.*
(a)(52) -- Press release issued by QVC on December 22,
1993.*
(a)(53) -- Press release issued by QVC on December 27,
1993.*
(a)(54) -- Press release issued by QVC on January 7, 1994.*
(a)(55) -- Press release issued by QVC on January 10,
1994.*
(a)(56) -- Text of letter from QVC advisor to Paramount,
dated January 11, 1994.*
(a)(57) -- Text of letter from Paramount to QVC advisor,
dated January 13, 1994.*
(a)(58) -- Text of letter from Paramount advisor to QVC
advisor, dated January 13, 1994.*
____________________
* Previously filed
-4-
<PAGE>
<PAGE>
(a)(59) -- Text of letter from QVC advisor to Paramount
advisor, dated January 14, 1994.
(a)(60) -- Text of letter from Paramount advisor to QVC
advisor, dated January 18, 1994.*
(a)(61) -- Text of letter from Paramount advisor to QVC
advisor, dated January 18, 1994.*
(a)(62) -- Press release issued by QVC on January 19,
1994.*
(a)(63) -- Text of letter from QVC advisor to Paramount,
dated January 20, 1994.*
(a)(64) -- Text of letter from Paramount to QVC, dated Jan-
uary 21, 1994.*
(a)(65) -- Text of letter from QVC advisor to Paramount,
dated January 24, 1994.*
(a)(66) -- Text of letter from Paramount advisor to QVC
advisor, dated January 27, 1994.*
(a)(67) -- Third Supplement to the Offer to Purchase, dated
February 1, 1994.*
(a)(68) -- Third Revised Letter of Transmittal.*
(a)(69) -- Third Revised Notice of Guaranteed Delivery.*
(a)(70) -- Third Revised Form of Letter to Brokers, Deal-
ers, Commercial Banks, Trust Companies and Nomi-
nees.*
(a)(71) -- Third Revised Form of Letter to Clients for use
by Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees.*
(a)(72) -- Third Revised Form of Letter to Participants in
the Dividend Reinvestment Plan of Paramount Com-
munications Inc.*
(a)(73) -- Press release issued by QVC on February 1,
1994.*
(a)(74) -- Press release issued by QVC on February 1,
1994.*
____________________
* Previously filed
-5-
<PAGE>
<PAGE>
(a)(75) -- Memorandum from QVC advisor to Paramount
advisor, dated February 3, 1994.*
(b)(1) -- Commitment Letters, dated September 30, 1993, by
and between QVC and certain banks.*
(b)(2) -- Commitment Letters, dated November 19, 1993, by
and between QVC and certain banks.*
(b)(3) -- Bank Credit Agreement, dated as of January 7,
1994, by and between QVC and certain banks.*
(b)(4) -- Amendment to Bank Credit Agreement, dated as of
February 1, 1994, by and between QVC and certain
banks.*
(c)(1) -- Commitment Letter, dated October 15, 1993, by
and among QVC and certain investors named there-
in.*
(c)(2) -- Stockholders Agreement, dated July 16, 1993,
among Liberty Media Corporation, Comcast Cor-
poration, Arrow Investments, L.P. and certain
affiliates and subsidiaries of such parties.*
(c)(3) -- Agreement Among Stockholders, dated October 15,
1993.*
(c)(4) -- Proposed form of merger agreement delivered by
QVC to Paramount.*
(c)(5) -- First Amended and Supplemental Complaint in QVC
Network, Inc. v. Paramount Communications Inc.
filed October 28, 1993 in the Delaware Chancery
Court.*
(c)(6) -- Voting Trust Agreement, dated as of October 28,
1993, between QVC and G. William Miller.*
(c)(7) -- Informational request from QVC to Paramount,
dated November 1, 1993.*
(c)(8) -- Fair bidding procedures delivered by QVC to Par-
amount on November 1, 1993.*
(c)(9) -- Proposed form of merger agreement delivered by
QVC to Paramount on November 1, 1993.*
____________________
* Previously filed
-6-
<PAGE>
<PAGE>
(c)(10) -- Commitment Letter, dated November 11, 1993, by
and among QVC and certain investors named there-
in.*
(c)(11) -- Memorandum of Understanding, dated November 11,
1993, by and between QVC and BellSouth.*
(c)(12) -- Liberty-QVC Agreement, dated November 11, 1993,
by and between QVC and Liberty.*
(c)(13) -- Agreement Among Stockholders, dated November 11,
1993, among QVC, Advance, Arrow, BellSouth, Com-
cast and Cox.*
(c)(14) -- Understanding Among Stockholders, dated November
11, 1993, among Arrow, BellSouth, Comcast and
Liberty.*
(c)(15) -- Agreement Containing Consent Order and Interim
Agreement, dated November 12, 1993, among the
FTC, Liberty, and TCI.*
(c)(16) -- BellSouth Commitment Letter, dated November 19,
1993, by and between BellSouth and QVC.*
(c)(17) -- Memorandum Opinion and Preliminary Injunction
Order in QVC Network, Inc. v. Paramount Com-
munications, Inc., C.A. No. 13208, both dated
November 24, 1993, entered by Delaware Chancery
Court.*
(c)(18) -- Revised Memorandum Opinion, dated November 26,
1993, in QVC Network, Inc. v. Paramount Communi-
cations, Inc., C.A. No. 13208, entered by Dela-
ware Chancery Court.*
(c)(19) -- Order, dated December 9, 1993, in Paramount Com-
munications Inc. v. QVC Network, Inc., C.A. No.
13208, entered by Delaware Supreme Court.*
(c)(20) -- Proposed form of merger agreement delivered by
Paramount to QVC on December 14, 1993.*
(c)(21) -- Text of letter from QVC advisor to Paramount
advisor, dated December 10, 1993.*
(c)(22) -- Text of letter from Paramount advisor to QVC
advisor, dated December 14, 1993.*
____________________
* Previously filed
-7-
<PAGE>
<PAGE>
(c)(23) -- Agreement and Plan of Merger, between Paramount
and QVC, dated as of December 22, 1993.*
(c)(24) -- Exemption Agreement, between Paramount and QVC,
dated December 22, 1993.*
(c)(25) -- Voting Agreement, dated December 22, 1993, among
BellSouth, Comcast, Cox, Advance and Arrow.*
(c)(26) -- First Amendment, dated as of December 27, 1993,
to Agreement and Plan of Merger, between Para-
mount and QVC.*
(c)(27) -- Letter Agreement, dated as of December 20, 1993,
by and among QVC, Comcast, Cox, Advance and
BellSouth.*
(c)(28) -- Text of Letter, dated January 5, 1994, from
Paramount and agreed to by QVC.*
(c)(29) -- First Amendment, dated as of January 27, 1994,
to QVC Exemption Agreement.*
(c)(30) -- Proposed Form of Agreement and Plan of Merger
between QVC and Paramount, delivered by Para-
mount on January 27, 1994.*
(c)(31) -- Letter Agreement, dated as of February 1, 1994,
by and among QVC, Comcast, Cox, Advance and
BellSouth.*
(c)(32) -- Proposed QVC Merger Agreement, as revised,
delivered by Paramount on February 4, 1994.
(c)(33) -- Opinion, dated February 4, 1994, in Paramount
Communications Inc. v. QVC Network, Inc., C.A.
No. 13208, entered by Delaware Supreme Court.
____________________
* Previously filed
-8-
<PAGE>
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this state-
ment is true, complete and correct.
QVC NETWORK, INC.
By: /s/ Neal S. Grabell
Neal S. Grabell
Senior Vice President,
General Counsel and
Corporate Secretary
Dated: February 7, 1994
-9-
<PAGE>
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this state-
ment is true, complete and correct.
COMCAST CORPORATION
By: /s/ Julian A. Brodsky
Julian A. Brodsky
Vice Chairman
Dated: February 7, 1994
-10-
<PAGE>
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this state-
ment is true, complete and correct.
BELLSOUTH CORPORATION
By: /s/ Charles C. Miller, III
Charles C. Miller, III
Vice President --
Strategic Planning and Corporate
Development
Dated: February 7, 1994
-11-
<PAGE>
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
(a)(1) -- Offer to Purchase, dated October 27, 1993.*
(a)(2) -- Letter of Transmittal.*
(a)(3) -- Notice of Guaranteed Delivery.*
(a)(4) -- Form of Letter to Brokers, Dealers, Commercial
Banks, Trust Companies and Nominees.*
(a)(5) -- Form of Letter to Clients for Use by Brokers,
Dealers, Commercial Banks, Trust Companies and
Nominees.*
(a)(6) -- Guidelines of the Internal Revenue Service for
Certification of Taxpayer Identification Number
on Substitute Form W-9.*
(a)(7) -- Press release issued by QVC on October 21,
1993.*
(a)(8) -- Form of Summary Advertisement, dated October 27,
1993.*
(a)(9) -- Text of Letter from QVC to Paramount, dated Oc-
tober 29, 1993.*
(a)(10) -- Press release issued by QVC on October 29,
1993.*
(a)(11) -- Form of Letter to Participants in the Dividend
Reinvestment Plan of Paramount Communications
Inc.*
(a)(12) -- Text of Letter from Paramount to QVC, dated Oc-
tober 29, 1993.*
(a)(13) -- Text of Letter from Paramount to QVC advisor,
dated November 1, 1993.*
(a)(14) -- Text of Letter from QVC advisor to Paramount,
dated November 2, 1993.*
(a)(15) -- Press release issued by QVC on November 5,
1993.*
____________________
* Previously filed
<PAGE>
<PAGE>
(a)(16) -- Press release issued by QVC on November 5,
1993.*
(a)(17) -- Supplement to the Offer to Purchase, dated No-
vember 12, 1993.*
(a)(18) -- Revised Letter of Transmittal.*
(a)(19) -- Revised Notice of Guaranteed Delivery.*
(a)(20) -- Revised Form of Letter to Brokers, Dealers, Com-
mercial Banks, Trust Companies and Nominees.*
(a)(21) -- Revised Form of Letter to Clients for use by
Brokers, Dealers, Commercial Banks, Trust Compa-
nies and Nominees.*
(a)(22) -- Press release issued by QVC on November 11,
1993.*
(a)(23) -- Press release issued by QVC on November 12,
1993.*
(a)(24) -- Revised Form of Letter to Participants in the
Dividend Reinvestment Plan of Paramount Com-
munications, Inc.*
(a)(25) -- Press release issued by QVC on November 16,
1993.*
(a)(26) -- Amended Complaint in Viacom International Inc.
v. Tele-Communications, Inc., et al., dated No-
vember 9, 1993, and filed in the United States
District Court for the Southern District of New
York.*
(a)(27) -- Text of letter from QVC to Paramount, dated No-
vember 19, 1993.*
(a)(28) -- Press release issued by QVC on November 20,
1993.*
(a)(29) -- Press release issued by QVC on November 22,
1993.*
(a)(30) -- Press release issued by QVC on November 23,
1993.*
(a)(31) -- Press release issued by QVC on November 23,
1993.*
____________________
* Previously filed
-2-
<PAGE>
<PAGE>
(a)(32) -- Press release issued by QVC on November 24,
1993.*
(a)(33) -- Press release issued by QVC on December 1,
1993.*
(a)(34) -- Press release issued by QVC on December 9,
1993.*
(a)(35) -- Press release issued by QVC on December 10,
1993.*
(a)(36) -- Press release issued by QVC on December 14,
1993.*
(a)(37) -- Text of letter from Paramount advisor to QVC,
dated December 14, 1993.*
(a)(38) -- Text of letter from QVC advisor to Paramount
advisor, dated December 14, 1993.*
(a)(39) -- Press release issued by QVC on December 15,
1993.*
(a)(40) -- Press release issued by QVC on December 16,
1993.*
(a)(41) -- Text of letter from Paramount advisor to QVC
advisor, dated December 17, 1993.*
(a)(42) -- Text of letter from QVC advisor to Viacom advi-
sor, dated December 17, 1993.*
(a)(43) -- Text of letter from QVC to Paramount, dated De-
cember 20, 1993.*
(a)(44) -- Press release issued by QVC on December 20,
1993.*
(a)(45) -- Press release issued by QVC on December 20,
1993.*
(a)(46) -- Second Supplement to the Offer to Purchase,
dated December 23, 1993.*
(a)(47) -- Second Revised Letter of Transmittal.*
(a)(48) -- Second Revised Notice of Guaranteed Delivery.*
____________________
* Previously filed
-3-
<PAGE>
<PAGE>
(a)(49) -- Second Revised Form of Letter to Brokers, Deal-
ers, Commercial Banks, Trust Companies and Nomi-
nees.*
(a)(50) -- Second Revised Form of Letter to Clients for use
by Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees.*
(a)(51) -- Second Revised Form of Letter to Participants in
the Dividend Reinvestment Plan of Paramount Com-
munications Inc.*
(a)(52) -- Press release issued by QVC on December 22,
1993.*
(a)(53) -- Press release issued by QVC on December 27,
1993.*
(a)(54) -- Press release issued by QVC on January 7, 1994.*
(a)(55) -- Press release issued by QVC on January 10,
1994.*
(a)(56) -- Text of letter from QVC advisor to Paramount,
dated January 11, 1994.*
(a)(57) -- Text of letter from Paramount to QVC advisor,
dated January 13, 1994.*
(a)(58) -- Text of letter from Paramount advisor to QVC
advisor, dated January 13, 1994.*
(a)(59) -- Text of letter from QVC advisor to Paramount
advisor, dated January 14, 1994.
(a)(60) -- Text of letter from Paramount advisor to QVC
advisor, dated January 18, 1994.*
(a)(61) -- Text of letter from Paramount advisor to QVC
advisor, dated January 18, 1994.*
(a)(62) -- Press release issued by QVC on January 19,
1994.*
(a)(63) -- Text of letter from QVC advisor to Paramount,
dated January 20, 1994.*
(a)(64) -- Text of letter from Paramount to QVC, dated
January 21, 1994.*
____________________
* Previously filed
-4-
<PAGE>
<PAGE>
(a)(65) -- Text of letter from QVC advisor to Paramount,
dated January 24, 1994.*
(a)(66) -- Text of letter from Paramount advisor to QVC
advisor, dated January 27, 1994.*
(a)(67) -- Third Supplement to the Offer to Purchase, dated
February 1, 1994.*
(a)(68) -- Third Revised Letter of Transmittal.*
(a)(69) -- Third Revised Notice of Guaranteed Delivery.*
(a)(70) -- Third Revised Form of Letter to Brokers, Deal-
ers, Commercial Banks, Trust Companies and Nomi-
nees.*
(a)(71) -- Third Revised Form of Letter to Clients for use
by Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees.*
(a)(72) -- Third Revised Form of Letter to Participants in
the Dividend Reinvestment Plan of Paramount Com-
munications Inc.*
(a)(73) -- Press release issued by QVC on February 1,
1994.*
(a)(74) -- Press release issued by QVC on February 1,
1994.*
(a)(75) -- Memorandum from QVC advisor to Paramount
advisor, dated February 3, 1994.*
(b)(1) -- Commitment Letters, dated September 30, 1993, by
and between QVC and certain banks.*
(b)(2) -- Commitment Letters, dated November 19, 1993, by
and between QVC and certain banks.*
(b)(3) -- Bank Credit Agreement, dated as of January 7,
1994, by and between QVC and certain banks.*
(b)(4) -- Amendment to Bank Credit Agreement, dated as of
February 1, 1994, by and between QVC and certain
banks.*
(c)(1) -- Commitment Letter, dated October 15, 1993, by
and among QVC and certain investors named there-
in.*
____________________
* Previously filed
-5-
<PAGE>
<PAGE>
(c)(2) -- Stockholders Agreement, dated July 16, 1993,
among Liberty Media Corporation, Comcast Cor-
poration, Arrow Investments, L.P. and certain
affiliates and subsidiaries of such parties.*
(c)(3) -- Agreement Among Stockholders, dated October 15,
1993.*
(c)(4) -- Proposed form of merger agreement delivered by
QVC to Paramount.*
(c)(5) -- First Amended and Supplemental Complaint in QVC
Network, Inc. v. Paramount Communications Inc.
filed October 28, 1993 in the Delaware Chancery
Court.*
(c)(6) -- Voting Trust Agreement, dated as of October 28,
1993, between QVC and G. William Miller.*
(c)(7) -- Informational request from QVC to Paramount,
dated November 1, 1993.*
(c)(8) -- Fair bidding procedures delivered by QVC to Par-
amount on November 1, 1993.*
(c)(9) -- Proposed form of merger agreement delivered by
QVC to Paramount on November 1, 1993.*
(c)(10) -- Commitment Letter, dated November 11, 1993, by
and among QVC and certain investors named
therein.*
(c)(11) -- Memorandum of Understanding, dated November 11,
1993, by and between QVC and BellSouth.*
(c)(12) -- Liberty-QVC Agreement, dated November 11, 1993,
by and between QVC and Liberty.*
(c)(13) -- Agreement Among Stockholders, dated November 11,
1993, among QVC, Advance, Arrow, BellSouth, Com-
cast and Cox.*
(c)(14) -- Understanding Among Stockholders, dated November
11, 1993, among Arrow, BellSouth, Comcast and
Liberty.*
(c)(15) -- Agreement Containing Consent Order and Interim
Agreement, dated November 12, 1993, among the
FTC, Liberty, and TCI.*
____________________
* Previously filed
-6-
<PAGE>
<PAGE>
(c)(16) -- BellSouth Commitment Letter, dated November 19,
1993, by and between BellSouth and QVC.*
(c)(17) -- Memorandum Opinion and Preliminary Injunction
Order in QVC Network, Inc. v. Paramount Com-
munications, Inc., C.A. No. 13208, both dated
November 24, 1993, entered by Delaware Chancery
Court.*
(c)(18) -- Revised Memorandum Opinion, dated November 26,
1993, in QVC Network, Inc. v. Paramount Communi-
cations, Inc., C.A. No. 13208, entered by Dela-
ware Chancery Court.*
(c)(19) -- Order, dated December 9, 1993, in Paramount Com-
munications Inc. v. QVC Network, Inc., C.A. No.
13208, entered by Delaware Supreme Court.*
(c)(20) -- Proposed form of merger agreement delivered by
Paramount to QVC on December 14, 1993.*
(c)(21) -- Text of letter from QVC advisor to Paramount
advisor, dated December 10, 1993.*
(c)(22) -- Text of letter from Paramount advisor to QVC
advisor, dated December 14, 1993.*
(c)(23) -- Agreement and Plan of Merger, between Paramount
and QVC, dated as of December 22, 1993.*
(c)(24) -- Exemption Agreement, between Paramount and QVC,
dated December 22, 1993.*
(c)(25) -- Voting Agreement, dated December 22, 1993, among
BellSouth, Comcast, Cox, Advance and Arrow.*
(c)(26) -- First Amendment, dated as of December 27, 1993,
to Agreement and Plan of Merger, between Para-
mount and QVC.*
(c)(27) -- Letter Agreement, dated as of December 20, 1993,
by and among QVC, Comcast, Cox, Advance and
BellSouth.*
(c)(28) -- Text of Letter, dated January 5, 1994, from
Paramount and agreed to by QVC.*
(c)(29) -- First Amendment, dated as of January 27, 1994,
to QVC Exemption Agreement.*
____________________
* Previously filed
-7-
<PAGE>
<PAGE>
(c)(30) -- Proposed Form of Agreement and Plan of Merger
between QVC and Paramount, delivered by Para-
mount on January 27, 1994.*
(c)(31) -- Letter Agreement, dated as of February 1, 1994,
by and among QVC, Comcast, Cox, Advance and
BellSouth.*
(c)(32) -- Proposed QVC Merger Agreement, as revised,
delivered by Paramount on February 4, 1994.
(c)(33) -- Opinion, dated February 4, 1994, in Paramount
Communications Inc. v. QVC Network, Inc., C.A.
No. 13208, entered by Delaware Supreme Court.
____________________
* Previously filed
-8-
<PAGE>
Exhibit (c)(32)
AGREEMENT AND PLAN OF MERGER
between
QVC NETWORK, INC.
and
PARAMOUNT COMMUNICATIONS INC.
Dated as of , 1994
<PAGE>
<PAGE>
Exhibit (c)(32)
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER
1.1. The Merger.................................... 3
1.2. Closing....................................... 4
1.3. Effective Time................................ 4
1.4. Effect of the Merger.......................... 4
1.5. Certificate of Incorporation; By-Laws......... 4
1.6. Conversion of Securities...................... 5
1.7. Exchange of Certificates and Cash............. 11
1.8. Stock Transfer Books.......................... 14
1.9. Stock Options; Payment Rights................. 14
1.10. Dissenting Shares............................. 15
ARTICLE II
THE OFFER
2.1. The Offer..................................... 16
2.2. Action by Paramount........................... 19
2.3. Receipt of Common Stock....................... 20
2.4. Completion Certificate........................ 20
2.5. Termination of the Offer...................... 20
2.6. Board of Directors; Section 14(f)............. 22
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARAMOUNT
3.1. Organization and Qualification; Subsidiaries.. 23
3.2. Certificate of Incorporation and By-Laws...... 23
3.3. Capitalization................................ 24
3.4. Authority Relative to This Agreement.......... 25
3.5. No Conflict; Required Filings and Consents.... 25
3.6. Compliance.................................... 26
3.7. SEC Filings; Financial Statements............. 27
3.8. Absence of Certain Changes or Events.......... 28
3.9. Absence of Litigation......................... 29
3.10. Employee Benefit Plans........................ 29
3.11. Trademarks, Patents and Copyrights............ 30
3.12. Taxes......................................... 30
(i)
<PAGE>
<PAGE>
3.13. Amendment to Rights Agreement................. 31
3.14. Opinion of Financial Advisor.................. 32
3.15. Vote Required................................. 32
3.16. Brokers....................................... 32
3.17. Purchases of Securities....................... 32
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF QVC
4.1. Organization and Qualification; Subsidiaries.. 33
4.2. Certificate of Incorporation and By-Laws...... 33
4.3. Capitalization................................ 34
4.4. Authority Relative to This Agreement.......... 35
4.5. No Conflict; Required Filings and Consents.... 36
4.6. Compliance.................................... 37
4.7. SEC Filings; Financial Statements............. 38
4.8. Absence of Certain Changes or Events.......... 39
4.9. Absence of Litigation......................... 39
4.10. Employee Benefit Plans........................ 40
4.11. Trademarks, Patents and Copyrights............ 41
4.12. Taxes......................................... 41
4.13. Opinion of Financial Advisor.................. 42
4.14. Vote Required................................. 42
4.15. Ownership of Paramount Common Stock........... 42
4.16. Brokers....................................... 43
4.17. Financing..................................... 43
4.18. Purchases of Securities....................... 43
ARTICLE V
CONDUCT OF BUSINESSES PENDING THE MERGER
5.1. Conduct of Respective Businesses by Paramount
and QVC Pending the Merger.................. 43
ARTICLE VI
ADDITIONAL COVENANTS
6.1. Access to Information; Confidentiality........ 46
6.2. Directors' and Officers' Indemnification and
Insurance................................... 47
6.3. Notification of Certain Matters............... 48
6.4. Tax Treatment................................. 49
6.5. Registration Statement; Joint Proxy Statement;
Offer Documents and Schedule 14D-9.......... 49
(ii)
<PAGE>
<PAGE>
6.6. Stockholders' Meetings........................ 51
6.7. Letters of Accountants........................ 52
6.8. Employee Benefits............................. 52
6.9. Further Action; Reasonable Best Efforts....... 53
6.10. Debt Instruments.............................. 53
6.11. Public Announcements.......................... 54
6.12. Listing of QVC Shares......................... 54
6.13. Affiliates of Paramount....................... 54
6.14. Conveyance Taxes.............................. 54
6.15. Rights Agreement.............................. 55
6.16. Assumption of Debt and Leases................. 55
6.17. Gains Tax..................................... 55
6.18. Reverse Merger................................ 56
6.19. Post-Offer Agreements......................... 56
ARTICLE VII
CLOSING CONDITIONS
7.1. Conditions to Obligations of Each Party to
Effect the Merger........................... 56
7.2. Additional Conditions to Obligations of QVC... 57
7.3. Additional Conditions to Obligations of
Paramount................................... 58
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1. Termination................................... 59
8.2. Effect of Termination......................... 62
8.3. Amendment..................................... 62
8.4. Intentionally Omitted......................... 63
8.5. Fees and Expenses............................. 63
ARTICLE IX
GENERAL PROVISIONS
9.1. Effectiveness of Representations, Warranties
and Agreements.............................. 63
9.2. Notices....................................... 63
9.3. Certain Definitions........................... 64
9.4. Time Period................................... 66
9.5. Headings...................................... 66
9.6. Severability.................................. 66
9.7. Entire Agreement.............................. 66
(iii)
<PAGE>
<PAGE>
9.8. Assignment.................................... 66
9.9. Parties in Interest........................... 66
9.10. Specific Performance.......................... 67
9.11. Governing Law................................. 67
9.12. Counterparts.................................. 67
(iv)
<PAGE>
<PAGE>
ANNEX A Conditions to the Offer
ANNEX B Terms of QVC Merger Preferred Stock
ANNEX C Terms of Warrants
EXHIBIT 6.13 Form of Affiliate Letter
Exhibit A Amended and Restated Agreement and Plan of
Merger between Viacom and Paramount, dated
as of October 24, 1993.
Exhibit B Form of Exemption Agreement
(v)
<PAGE>
<PAGE>
Exhibit (c)(32)
Index of Defined Terms
Section
Affiliate SECTION 9.3
Agreement PREAMBLE
AMEX SECTION 1.7
Beneficial owner SECTION 9.3
Blue Sky Laws SECTION 3.5
Business Combination SECTION 8.5
business day SECTION 9.3
Cash Election SECTION 1.6
Cash Election Number SECTION 1.6
Cash Election Shares SECTION 1.6
Cash Fraction SECTION 1.6
Certificate of Merger SECTION 1.3
Certificates SECTION 1.7
Claim SECTION 6.2
Code RECITALS
Common Stock Exchange Ratio SECTION 1.6
Communications Act SECTION 3.5
Competing Transaction SECTION 8.1
Confidentiality Agreements SECTION 6.1
Control SECTION
Controlled SECTION 9.3
Controlled by SECTION 9.3
Debentures SECTION 4.3
Delaware Law RECITALS
Dissenting Shares SECTION 1.10
ERISA SECTION 3.10
Effective Time SECTION 1.3
Exchange Act SECTION 2.2
Exchange Agent SECTION 1.7
Exchange Cash Consideration SECTION 1.7
Exchange Fund SECTION 1.7
Exchange Ratios SECTION 1.6
Expenses SECTION 8.5
Expiration Date SECTION 2.1
FCC SECTION 2.6
Financing SECTION 4.17
Form of Election SECTION 1.6
Forward Merger RECITALS
fully diluted basis SECTION 9.3
Gains Tax SECTION 6.17
Governmental Entity SECTION 3.5
HSR Act SECTION 4.5
Incentive Stock Option SECTION 1.9
Indemnified Parties SECTION 6.2
Indenture SECTION 4.3
IRS SECTION 3.10
-1-
<PAGE>
<PAGE>
Index of Defined Terms (cont'd)
Material Paramount Subsidiary SECTION 3.1
Material QVC Subsidiary SECTION 4.1
Merger RECITALS
Merger Consideration SECTION 1.7
Merger Subsidiary RECITALS
Minimum Condition SECTION 2.1
National RECITALS
Non-Election SECTION 1.6
Non-Election Fraction SECTION 1.6
Non-Election Shares SECTION 1.6
Offer RECITALS
Offer Documents SECTION 2.1
Offer to Purchase SECTION 2.1
Original Merger Agreement PREAMBLE
Original QVC Merger Agreement RECITALS
Paramount PREAMBLE
Paramount 1992 Balance Sheet SECTION 3.12
Paramount Common Stock RECITALS
Paramount Disclosure Schedule SECTION 3.3
Paramount Indentures SECTION 6.16
Paramount Material Adverse Effect SECTION 3.1
Paramount Plans SECTION 3.10
Paramount Preferred Stock SECTION 3.3
Paramount SEC Reports SECTION 3.7
Paramount Subsidiary SECTION 3.1
Paramount Triggering Event SECTION 6.8
Per Share Amount RECITALS
Per Share Cash Amount SECTION 1.6
Preferred Stock Exchange Ratio SECTION 1.6
Proxy Statement SECTION 6.6
QVC 1992 Balance Sheet SECTION 4.12
QVC Certificate Amendments SECTION 4.4
QVC Common Stock SECTION 1.6
QVC Disclosure Schedule SECTION 4.3
QVC Material Adverse Effect SECTION 4.1
QVC Merger Preferred Stock SECTION 1.6
QVC Plans SECTION 4.10
QVC Preferred Stock SECTION 4.3
QVC SEC Reports SECTION 4.7
QVC Subsidiary SECTION 4.1
QVC Triggering Event SECTION 6.8
QVC Vote Matter SECTION 4.4
Registration Statement SECTION 6.6
Representatives SECTION 1.6
Respective Representatives SECTION 6.1
Reverse Merger RECITALS
Revised Viacom Merger Agreement RECITALS
Rights SECTION 3.13
-2-
<PAGE>
<PAGE>
Index of Defined Terms (cont'd)
Rights Agreement SECTION 3.13
Rights Condition SECTION 2.1
Schedule 14D-1 SECTION 2.1
Schedule 14D-9 SECTION 2.2
SEC SECTION 2.1
Securities Act SECTION 3.5
Stock Election SECTION 1.6
Stock Election Number SECTION 1.6
Stock Election Shares SECTION 1.6
Stock Fraction SECTION 1.6
Stock Option SECTION 3.3
Stockholders' Meetings SECTION 6.7
Subsidiaries SECTION 9.3
Subsidiary SECTION 9.3
Surviving Corporation SECTION 1.1
Transactions SECTION 3.4
Transfer Taxes SECTION 6.17
Trustee SECTION 4.3
under common control with SECTION 9.3
Viacom PREAMBLE
Voting Agreement RECITALS
-3-
<PAGE>
<PAGE>
Exhibit (c)(32)
AGREEMENT AND PLAN OF MERGER, dated as of
, 1994 (this "Agreement"), between QVC NETWORK, INC., a Dela-
ware corporation ("QVC"), and PARAMOUNT COMMUNICATIONS INC., a
Delaware corporation ("Paramount").
W I T N E S S E T H:
WHEREAS, on September 12, 1993, Viacom Inc.
("Viacom") and Paramount entered into an Agreement and Plan of
Merger (the "Original Merger Agreement"), pursuant to which
Viacom and Paramount agreed to enter into a business combina-
tion transaction pursuant to which Paramount would merge with
and into Viacom;
WHEREAS, on October 21, 1993, QVC announced its in-
tention to commence, and on October 27, 1993 QVC commenced, a
cash tender offer, as amended, to acquire shares of Paramount
Common Stock;
WHEREAS, on October 24, 1993, Paramount and Viacom
entered into an Amended and Restated Agreement and Plan of
Merger (the "Viacom Merger Agreement") and, on October 25,
1993, Viacom commenced a cash tender offer to acquire shares of
Paramount Common Stock;
WHEREAS, on December 9, 1993, the Delaware Supreme
Court issued an order affirming the Court of Chancery's order
preliminarily enjoining the Stock Option Agreement entered into
between Viacom and Paramount on September 12, 1993 (the "Stock
Option Agreement");
WHEREAS, on December 22, 1993, Paramount terminated
the Viacom Merger Agreement and entered into an agreement and
plan of merger with QVC (the "Original QVC Merger Agreement");
WHEREAS, on January 21, 1994, Paramount terminated
the Original QVC Merger Agreement and entered into an agreement
and plan of merger with Viacom (the "Revised Viacom Merger
Agreement");
WHEREAS, on , 1994, Paramount terminated
the Revised Viacom Merger Agreement;
WHEREAS, QVC and Paramount conducted negotiations
relating to the acquisition by QVC of Paramount, and QVC and
Paramount have determined that it is in the best interest of
their respective shareholders to enter into this Agreement to
facilitate the business combination of the two companies
through a first-step cash tender offer and a second-step
<PAGE>
<PAGE>
merger, while preserving the ability to proceed with a
single-step merger in appropriate circumstances;
WHEREAS, QVC and Paramount wish to provide that, upon
the terms and subject to the conditions of this Agreement and
in accordance with the General Corporation Law of the State of
Delaware ("Delaware Law"), Paramount and QVC will enter into a
business combination transaction pursuant to which Paramount
will merge with and into QVC or a subsidiary of QVC (the "For-
ward Merger") or alternatively, a subsidiary of QVC ("Merger
Subsidiary") will merge with and into Paramount (the "Reverse
Merger" and, together with the Forward Merger, the "Merger");
WHEREAS, in furtherance of the Merger, QVC shall
amend and supplement its outstanding tender offer (as amended
and supplemented in accordance with this Agreement, the "Of-
fer") to acquire 61,657,432 shares of common stock, par value
$1.00 per share, of Paramount ("Paramount Common Stock") or
such greater number of shares representing 50.1% of the out-
standing shares of Paramount Common Stock on a fully diluted
basis (as herein defined), upon the terms and subject to the
conditions of this Agreement;
WHEREAS, the Board of Directors of Paramount has de-
termined that the Merger and the Offer are fair to, and in the
best interests of, Paramount and the holders of Paramount Com-
mon Stock and has approved and adopted this Agreement and has
approved the Merger and the other transactions contemplated
hereby (including, without limitation, the Offer) and recom-
mended approval and adoption of this Agreement and approval of
the Merger by the stockholders of Paramount and agreed to rec-
ommend that stockholders of Paramount tender their shares of
Paramount Common Stock pursuant to the Offer;
WHEREAS, the Board of Directors of QVC has determined
that the Merger and the Offer are consistent with and in fur-
therance of the long-term business strategy of QVC and are fair
to, and in the best interests of, QVC and its stockholders and
has approved and adopted this Agreement and has approved the
Merger and the other transactions contemplated hereby (includ-
ing, without limitation, the amendment of the Offer) and recom-
mended approval and adoption of this Agreement and approval of
the Merger by the holders of the Common Stock, par value $.01
per share, of QVC (the "QVC Common Stock") and the Preferred
Stock, par value $.10 per share, of QVC (the "QVC Preferred
Stock");
<PAGE>
<PAGE>
WHEREAS, for federal income tax purposes, it is in-
tended that the Forward Merger qualify as a reorganization un-
der the provisions of Section 368(a) of the United States In-
ternal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, concurrently with the execution of this
Agreement and as an inducement to Paramount to enter into this
Agreement, each of Comcast Corporation ("Comcast"), Advance
Publications Inc. ("Advance"), Cox Enterprises Inc. ("Cox"),
Arrow Investments, L.P. ("Arrow") and, if it owns any QVC vot-
ing Stock, BellSouth Corporation ("BellSouth") (Comcast, Ad-
vance, Cox, Arrow and BellSouth are referred to herein as the
"QVC Stockholder Group") and Paramount agreed (the "Voting
Agreement") that the QVC Stockholder Group shall, among other
things, vote its shares of QVC Common Stock and QVC Preferred
Stock in favor of the Merger and the other transactions contem-
plated by this Agreement that require the approval of the QVC
stockholders;
NOW, THEREFORE, in consideration of the foregoing and
the respective representations, warranties, covenants and
agreements set forth in this Agreement, the parties hereto
agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. The Merger. Upon the terms and subject
to the conditions set forth in this Agreement, and in ac-
cordance with Delaware Law, at the Effective Time (as defined
in Section 1.3), Paramount shall be merged with and into QVC or
a subsidiary thereof; provided, however, that if, after con-
sulting with Paramount and its professional advisors in good
faith, Wachtell, Lipton, Rosen & Katz, special counsel to QVC,
is unable to deliver an opinion in form and substance reason-
ably satisfactory to QVC (such opinion to be based on customary
assumptions and representations) that the Forward Merger will
qualify as a reorganization under Section 368(a) of the Code,
QVC may elect to cause a subsidiary of QVC to merge with and
into Paramount. As a result of the Forward Merger, the sepa-
rate corporate existence of Paramount (or, in the case of the
Reverse Merger, Merger Subsidiary) shall cease and QVC or a
subsidiary thereof, as the case may be (or, in the case of the
Reverse Merger, Paramount), shall continue as the surviving
corporation of the Merger (the "Surviving Corporation") and, in
the case of the Forward Merger, shall continue under the name
"Paramount QVC Inc."
<PAGE>
<PAGE>
SECTION 1.2. Closing. Unless this Agreement shall
have been terminated and the transactions herein contemplated
shall have been abandoned pursuant to Section 8.1 and subject
to the satisfaction or waiver of the conditions set forth in
Article VII, the consummation of the Merger will take place as
promptly as practicable (and in any event within two business
days) after satisfaction or waiver of the conditions set forth
in Article VII, at the offices of Wachtell, Lipton, Rosen &
Katz, New York, New York, unless another date, time or place is
agreed to in writing by the parties hereto.
SECTION 1.3. Effective Time. As promptly as practi-
cable after the satisfaction or, if permissible, waiver of the
conditions set forth in Article VII, the parties hereto shall
cause the Merger to be consummated by filing a certificate of
merger (the "Certificate of Merger") with the Secretary of
State of the State of Delaware in such form as required by, and
executed in accordance with the relevant provisions of, Dela-
ware Law (the date and time of such filing, or such later date
or time as set forth therein, being the "Effective Time").
SECTION 1.4. Effect of the Merger. At the Effective
Time, the effect of the Merger shall be as provided in the ap-
plicable provisions of Delaware Law. Without limiting the gen-
erality of the foregoing, and subject thereto, at the Effective
Time, except as otherwise provided herein, all the property,
rights, privileges, powers and franchises of QVC (or, in the
case of the Reverse Merger, Merger Subsidiary) and Paramount
shall vest in the Surviving Corporation, and all debts, li-
abilities and duties of QVC or a subsidiary thereof, as the
case may be (or, in the case of the Reverse Merger, Merger Sub-
sidiary), and Paramount shall become the debts, liabilities and
duties of the Surviving Corporation.
SECTION 1.5. Certificate of Incorporation; By-Laws.
(a) At the Effective Time of the Forward Merger, the Certifi-
cate of Incorporation and the By-Laws of QVC, or a subsidiary
thereof, as the case may be, as in effect immediately prior to
the Effective Time, shall be the Certificate of Incorporation
and the By-Laws of the Surviving Corporation; provided, how-
ever, that at the Effective Time of the Forward Merger, Article
I of the Certificate of Incorporation of the Surviving Corpora-
tion shall be amended to read in its entirety as follows:
"The name of this Corporation is Paramount QVC Inc."
(b) Alternatively, at the Effective Time of the Re-
verse Merger, the Certificate of Incorporation and By-Laws,
respectively, of the Surviving Corporation shall be amended and
<PAGE>
<PAGE>
restated in their entirety to read as the Certificate of Incor-
poration and By-Laws of Merger Subsidiary.
SECTION 1.6. Conversion of Securities. At the Ef-
fective Time, by virtue of the Merger and without any action on
the part of QVC, Paramount or the holders of any of the follow-
ing securities:
(a) In the event that the Offer has been consummated
prior to the Effective Time, each share of Paramount Com-
mon Stock issued and outstanding immediately prior to the
Effective Time (other than any shares of Paramount Common
Stock to be canceled pursuant to Section 1.6(c)) shall be
converted into the right to receive 1.2361 shares of QVC
Common Stock, .2386 shares of a new series of cumulative
non-convertible exchangeable preferred stock, par value
$.10 per share ("QVC Merger Preferred Stock"), of QVC hav-
ing the principal terms described in Annex B and .32 War-
rants ("Warrants") of QVC having the principal terms de-
scribed in Annex C; provided, however, that, in any event,
if between the date of this Agreement and the Effective
Time the outstanding shares of QVC Common Stock, QVC
Merger Preferred Stock and Warrants or Paramount Common
Stock shall have been changed into a different number of
shares or a different class, by reason of any stock divi-
dend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares, the amounts of
QVC Common Stock and QVC Merger Preferred Stock (and, if
appropriate, the Warrants) specified above shall be cor-
respondingly adjusted to reflect such stock dividend, sub-
division, reclassification, recapitalization, split, com-
bination or exchange of shares. All such shares of Para-
mount Common Stock shall no longer be outstanding and
shall automatically be canceled and retired and shall
cease to exist, and each certificate previously evidencing
any such shares shall thereafter represent the right to
receive, upon the surrender of such certificate in ac-
cordance with the provisions of Section 1.7 certificates
evidencing such number of whole shares of QVC Common Stock
and QVC Merger Preferred Stock and such number of whole
Warrants into which such Paramount Common Stock was con-
verted in accordance herewith. The holders of such cer-
tificates previously evidencing such shares of Paramount
Common Stock outstanding immediately prior to the Effec-
tive Time shall cease to have any rights with respect to
such shares of Paramount Common Stock except as otherwise
provided herein or by law. No fractional share of QVC
Common Stock, QVC Merger Preferred Stock or fractional
Warrants shall be issued and, in lieu thereof, a cash pay-
ment shall be made pursuant to Section 1.7(d).
<PAGE>
<PAGE>
(b) In the event that the Offer has not been consum-
mated prior to the Effective Time:
(i) subject to the further provisions of
this Section 1.6, each share of Paramount Common
Stock issued and outstanding immediately prior to the
Effective Time (other than any shares of Paramount
Common Stock to be canceled pursuant to Section
1.6(c) and any Dissenting Shares (as defined in Sec-
tion 1.10)), shall be converted, subject to Section
1.7(d), into the right to receive (A) 1.2361 shares
of QVC Common Stock (the "Common Stock Exchange Ra-
tio"), .2386 shares of QVC Merger Preferred Stock
(the "Preferred Stock Exchange Ratio") and .32 War-
rants (the "Warrant Exchange Ratio" and, together
with the Common Stock Exchange Ratio and the Pre-
ferred Stock Exchange Ratio, the "Exchange Ratios"),
(B) $104 in cash (the "Per Share Cash Amount") or (C)
a combination of shares of QVC Common Stock and QVC
Merger Preferred Stock, Warrants and cash determined
in accordance with Sections 1.6(b)(iv),(v) and (vi);
provided, however, that, in any event, if between the
date of this Agreement and the Effective Time the
outstanding shares of QVC Common Stock, QVC Merger
Preferred Stock or Paramount Common Stock shall have
been changed into a different number of shares or a
different class, by reason of any stock dividend,
subdivision, reclassification, recapitalization,
split, combination or exchange of shares, the Ex-
change Ratios and Per Share Cash Amount shall be cor-
respondingly adjusted to reflect such stock dividend,
subdivision, reclassification, recapitalization,
split, combination or exchange of shares. All such
shares of Paramount Common Stock shall no longer be
outstanding and shall automatically be canceled and
retired and shall cease to exist, and each certifi-
cate previously evidencing any such shares shall
thereafter represent the right to receive, upon the
surrender of such certificate in accordance with the
provisions of Section 1.7 and in accordance with the
allocation procedures set forth in this Section 1.6,
(i) certificates evidencing such number of whole
shares of QVC Common Stock and QVC Merger Preferred
Stock and such number of whole Warrants into which
such Paramount Common Stock was converted in ac-
cordance with the Exchange Ratios, (ii) the Per Share
Cash Amount multiplied by the number of shares of
Paramount Common Stock previously evidenced by the
canceled certificate or (iii) a combination thereof
<PAGE>
<PAGE>
as provided in this Section 1.6. The holders of such
certificates previously evidencing such shares of
Paramount Common Stock outstanding immediately prior
to the Effective Time shall cease to have any rights
with respect to such shares of Paramount Common Stock
except as otherwise provided herein or by law. No
fractional share of QVC Common Stock, QVC Merger Pre-
ferred Stock or fractional Warrants shall be issued
and, in lieu thereof, a cash payment shall be made
pursuant to Section 1.7(d).
(ii) Subject to the election and allocation
procedures set forth in this Section 1.6, each holder
of record of shares of Paramount Common Stock as of
the record date for the meeting of stockholders of
Paramount referred to in Section 6.6 will be entitled
to (A) elect to receive certificates evidencing such
number of whole shares of QVC Common Stock and QVC
Merger Preferred Stock and such number of Warrants
into which such number of shares of Paramount Common
Stock would be converted in accordance with the Ex-
change Ratios (a "Stock Election"), (B) elect to re-
ceive the Per Share Cash Amount multiplied by such
number of shares of Paramount Common Stock (a "Cash
Election"), or (C) indicate that such holder has no
preference as to the receipt of cash or shares of QVC
Common Stock and QVC Merger Preferred Stock and War-
rants in exchange for such shares of Paramount Common
Stock (a "Non-Election"). All such elections shall
be made on a form designed for that purpose and mutu-
ally acceptable to QVC and Paramount (a "Form of
Election") and mailed to holders of record of shares
of Paramount Common Stock as of the record date for
the meeting of stockholders of Paramount referred to
in Section 6.6. Holders of record of shares of Para-
mount Common Stock who hold such shares as nominees,
trustees or in other representative capacities ("Rep-
resentatives") may submit multiple Forms of Election,
provided that such Representative certifies that each
such Form of Election covers all the shares of Para-
mount Common Stock held by such Representative for a
particular beneficial owner entitled to so elect pur-
suant to the first sentence of this Section
1.6(b)(ii). Elections shall be made by holders of
Paramount Common Stock by mailing to the Exchange
Agent (as defined in Section 1.7) properly completed
and signed Forms of Election. In order to be effec-
tive, a Form of Election must be received by the Ex-
change Agent no later than the close of business on
the last business day prior to the Effective Time.
<PAGE>
<PAGE>
All elections may be revoked until the last business
day prior to the Effective Time. QVC shall have the
discretion, which it may delegate in whole or in part
to the Exchange Agent, to determine whether Forms of
Election have been properly completed and signed and
properly and timely submitted or revoked and to dis-
regard immaterial defects in Forms of Election, and
any good faith decision of QVC or the Exchange Agent
in such matters shall be binding and conclusive.
Neither QVC nor the Exchange Agent shall be under any
obligation to notify any person of any defect in a
Form of Election. Any holder of shares of Paramount
Common Stock who fails to make an election and any
holder who fails to submit to the Exchange Agent a
properly completed and signed and properly and timely
submitted Form of Election shall be deemed to have
made a Non-Election.
(iii) The aggregate number of shares of
Paramount Common Stock to be converted into the right
to receive cash in the Merger (the "Cash Election
Number") shall be equal to 51% of the number of
shares of Paramount Common Stock outstanding im-
mediately prior to the Effective Time, and the ag-
gregate number of shares of Paramount Common Stock to
be converted into the right to receive shares of QVC
Common Stock and QVC Merger Preferred Stock and War-
rants in the Merger (the "Stock Election Number")
shall be equal to 49% of the number of shares of
Paramount Common Stock outstanding immediately prior
to the Effective Time.
(iv) If the aggregate number of shares of
Paramount Common Stock with respect to which Cash
Elections have been made plus Dissenting Shares (as
defined in Section 1.10) (the "Cash Election Shares")
exceeds the Cash Election Number, all shares of Para-
mount Common Stock with respect to which Stock Elec-
tions have been made (the "Stock Election Shares")
and all shares of Paramount Common Stock with respect
to which Non-Elections have been made (the "Non-
Election Shares") shall be converted into the right
to receive QVC Common Stock, QVC Merger Preferred
Stock and Warrants, and the Cash Election Shares
(other than Dissenting Shares) shall be converted
into the right to receive QVC Common Stock, QVC
Merger Preferred Stock, Warrants and cash in the fol-
lowing manner:
<PAGE>
<PAGE>
each Cash Election Share (other than Dissenting
Shares) shall be converted into the right to
receive (i) an amount in cash, without interest,
equal to the product of (x) the Per Share Cash
Amount and (y) a fraction (the "Cash Fraction"),
the numerator of which shall be the Cash Elec-
tion Number and the denominator of which shall
be the total number of Cash Election Shares,
(ii) a number of shares of QVC Common Stock
equal to the product of (x) the Common Stock
Exchange Ratio and (y) a fraction equal to one
minus the Cash Fraction, (iii) a number of
shares of QVC Merger Preferred Stock equal to
the product of (x) the Preferred Stock Exchange
Ratio and (y) a fraction equal to one minus the
Cash Fraction and (iv) a number of Warrants
equal to the product of (x) the Warrant Exchange
Ratio and (y) a fraction equal to one minus the
Cash Fraction.
(v) If the aggregate number of Stock Elec-
tion Shares exceeds the Stock Election Number, all
Cash Election Shares (other than Dissenting Shares)
and all Non-Election Shares shall be converted into
the right to receive cash, and all Stock Election
Shares shall be converted into the right to receive
QVC Common Stock, QVC Merger Preferred Stock, War-
rants and cash in the following manner:
each Stock Election Share shall be converted
into the right to receive (i) a number of shares
of QVC Common Stock equal to the product of (x)
the Common Stock Exchange Ratio and (y) a frac-
tion (the "Stock Fraction"), the numerator of
which shall be the Stock Election Number and the
denominator of which shall be the total number
of Stock Election Shares, (ii) a number of
shares of QVC Merger Preferred Stock equal to
the product of (x) the Preferred Stock Exchange
Ratio and (y) the Stock Fraction, (iii) a number
of Warrants equal to the product of (x) the War-
rant Exchange Ratio and (y) the Stock Fraction
and (iv) an amount in cash, without interest,
equal to the product of (x) the Per Share Cash
Amount and (y) a fraction equal to one minus the
Stock Fraction.
(vi) In the event that neither Section
1.6(b)(iv) nor Section 1.6(b)(v) above is applicable,
all Cash Election Shares shall be converted into the
<PAGE>
<PAGE>
right to receive cash, all Stock Election Shares
shall be converted into the right to receive QVC Com-
mon Stock, QVC Merger Preferred Stock and Warrants,
and the Non-Election Shares, if any, shall be con-
verted into the right to receive QVC Common Stock,
QVC Merger Preferred Stock, Warrants and cash in the
following manner:
each Non-Election Share shall be converted into
the right to receive (i) an amount in cash,
without interest, equal to the product of (x)
the Per Share Cash Amount and (y) a fraction
(the "Non-Election Fraction"), the numerator of
which shall be the excess of the Cash Election
Number over the total number of Cash Election
Shares and the denominator of which shall be the
excess of (A) the number of shares of Paramount
Common Stock outstanding immediately prior to
the Effective Time over (B) the sum of the total
number of Cash Election Shares and the total
number of Stock Election Shares, (ii) a number
of shares of QVC Common Stock equal to the prod-
uct of (x) the Common Stock Exchange Ratio and
(y) a fraction equal to one minus the Non-
Election Fraction, (iii) a number of shares of
QVC Merger Preferred Stock equal to the product
of (x) the Preferred Stock Exchange Ratio and
(y) a fraction equal to one minus the
Non-Election Fraction and (iv) a number of War-
rants equal to the product of (x) the Warrant
Exchange Ratio and (y) a fraction equal to one
minus the Non-Election Fraction.
(vii) The Exchange Agent shall make all com-
putations contemplated by this Section 1.6 and all
such computations shall be binding and conclusive on
the holders of Paramount Common Stock.
(c) Each share of Paramount Common Stock held
in the treasury of Paramount and each share of Paramount
Common Stock owned by QVC or any direct or indirect wholly
owned subsidiary of QVC or of Paramount immediately prior
to the Effective Time shall automatically be canceled and
extinguished without any conversion thereof and no payment
shall be made with respect thereto.
(d) In the Reverse Merger, each share of common
stock of Merger Subsidiary issued and outstanding im-
mediately prior to the Effective Time shall be converted
into and exchanged for one validly issued, fully paid and
<PAGE>
<PAGE>
nonassessable share of common stock of the Surviving Cor-
poration.
(e) If the Forward Merger is consummated
through a subsidiary of QVC, each share of common stock of
such subsidiary issued and outstanding immediately prior
to the Effective Time shall be converted into and ex-
changed for one validly issued, fully paid and nonassess-
able share of common stock of the surviving corporation.
SECTION 1.7. Exchange of Certificates and Cash. (a)
Exchange Agent. As of the Effective Time (in the case of a
Merger to which Section 1.6(a) applies) or promptly after
completion of the allocation procedures set forth in Section
1.6 (in the case of a Merger to which Section 1.6(b) applies),
QVC shall deposit, or shall cause to be deposited, with or for
the account of a bank or trust company designated by QVC, which
shall be reasonably satisfactory to Paramount (the "Exchange
Agent"), for the benefit of the holders of shares of Paramount
Common Stock (other than Dissenting Shares), for exchange in
accordance with this Article I, through the Exchange Agent, (i)
certificates evidencing the shares of QVC Common Stock and QVC
Merger Preferred Stock and Warrants issuable pursuant to Sec-
tion 1.6 in exchange for outstanding shares of Paramount Common
Stock and (ii) cash, if any, in the aggregate amount required
to be exchanged for shares of Paramount Common Stock pursuant
to Section 1.6 (the "Exchange Cash Consideration") (such cer-
tificates for shares of QVC Common Stock and QVC Merger Pre-
ferred Stock and Warrants, together with any dividends or dis-
tributions with respect thereto, and the Exchange Cash Con-
sideration, if any, being hereafter collectively referred to as
the "Exchange Fund"). The Exchange Agent shall, pursuant to
irrevocable instructions, deliver the QVC Common Stock, QVC
Merger Preferred Stock, Warrants and cash, if any, contemplated
to be issued pursuant to Section 1.6 out of the Exchange Fund
to holders of shares of Paramount Common Stock. Except as con-
templated by Section 1.7(d) hereof, the Exchange Fund shall not
be used for any other purpose. Any interest, dividends or
other income earned on the investment of cash or other property
held in the Exchange Fund shall be for the account of QVC.
(b) Exchange Procedures. As soon as reasonably
practicable after the Effective Time, QVC will instruct the
Exchange Agent to mail to each holder of record of a certifi-
cate or certificates which immediately prior to the Effective
Time evidenced outstanding shares of Paramount Common Stock
(other than Dissenting Shares) (the "Certificates"), (i) a let-
ter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall
<PAGE>
<PAGE>
pass, only upon proper delivery of the Certificates to the Ex-
change Agent and shall be in such form and have such other pro-
visions as QVC may reasonably specify) and (ii) instructions to
effect the surrender of the Certificates in exchange for the
certificates evidencing shares of QVC Common Stock and QVC
Merger Preferred Stock, Warrants and cash. Upon surrender of a
Certificate for cancellation to the Exchange Agent together
with such letter of transmittal, duly executed, and such other
customary documents as may be required pursuant to such in-
structions, the holder of such Certificate shall be entitled to
receive in exchange therefor (A) certificates evidencing that
number of whole shares of QVC Common Stock and QVC Merger Pre-
ferred Stock and that number of whole Warrants which such
holder has the right to receive in accordance with Section 1.6
in respect of the shares of Paramount Common Stock formerly
evidenced by such Certificate, (B) cash, if any, which such
holder has the right to receive in accordance with Section 1.6,
(C) any dividends or other distributions to which such holder
is entitled pursuant to Section 1.7(c), and (D) cash in lieu of
fractional shares of QVC Common Stock, QVC Merger Preferred
Stock and Warrants to which such holder is entitled pursuant to
Section 1.7(d) (the shares of QVC Common Stock, QVC Merger Pre-
ferred Stock, Warrants, dividends, distributions and cash de-
scribed in clauses (A), (B), (C) and (D) being, collectively,
the "Merger Consideration"), and the Certificate so surrendered
shall forthwith be canceled. In the event of a transfer of
ownership of shares of Paramount Common Stock which is not reg-
istered in the transfer records of Paramount, shares of QVC
Common Stock and QVC Merger Preferred Stock, Warrants and cash
may be issued and paid in accordance with this Article I to a
transferee if the Certificate evidencing such shares of Para-
mount Common Stock is presented to the Exchange Agent, ac-
companied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer
taxes have been paid. Until surrendered as contemplated by
this Section 1.7, each Certificate shall be deemed at any time
after the Effective Time to evidence only the right to receive
upon such surrender the Merger Consideration.
(c) Distributions With Respect to Unexchanged Shares
of QVC Common Stock and QVC Merger Preferred Stock and War-
rants. No dividends or other distributions declared or made
after the Effective Time with respect to QVC Common Stock, QVC
Merger Preferred Stock or Warrants with a record date after the
Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of QVC Common Stock or
QVC Merger Preferred Stock they are entitled to receive until
the holder of such Certificate shall surrender such Certifi-
cate.
<PAGE>
<PAGE>
(d) Fractional Shares and Warrants. No fraction of
a share of QVC Common Stock or QVC Merger Preferred Stock or
fraction of a Warrant shall be issued in the Merger. In lieu
of any such fractional shares or fractional Warrants, each
holder of Paramount Common Stock entitled to receive shares of
QVC Common Stock and QVC Merger Preferred Stock and Warrants in
the Merger, upon surrender of a Certificate for exchange pursu-
ant to this Section 1.7, shall be paid (1) an amount in cash
(without interest), rounded to the nearest cent, determined by
multiplying (i) the reported last sale price per share on the
National Association of Securities Dealers Automated Quotation
System/ National Market System ("NASDAQ") of QVC Common Stock
on the date of the Effective Time (or, if shares of QVC Common
Stock do not trade on the NASDAQ on such date, the first date
of trading of such QVC Common Stock on the NASDAQ after the
Effective Time) by (ii) the fractional interest in QVC Common
Stock to which such holder would otherwise be entitled (after
taking into account all shares of Paramount Common Stock then
held of record by such holder) plus (2) an amount in cash
(without interest), rounded to the nearest cent, determined by
multiplying (i) $50.00 by (ii) the fractional interest in QVC
Merger Preferred Stock to which such holder would otherwise be
entitled (after taking into account all shares of Paramount
Common Stock then held of record by such holder) plus (3) an
amount in cash (without interest), rounded to the nearest cent,
determined by multiplying (i) the fair market value of one War-
rant, as determined by reference to a five day average trading
price, if available, or if not available, in the reasonable
judgment of the QVC Board of Directors by (ii) the fractional
interest in a Warrant to which such holder would otherwise be
entitled (after taking into account all shares of Paramount
Common Stock then held of record by such holder).
(e) Termination of Exchange Fund. Any portion of
the Exchange Fund which remains undistributed to the holders of
Paramount Common Stock for six months after the Effective Time
shall be delivered to QVC, upon demand, and any holders of
Paramount Common Stock who have not theretofore complied with
this Article I shall thereafter look only to QVC for the Merger
Consideration to which they are entitled pursuant to this
Article I.
(f) No Liability. Neither QVC nor Paramount shall
be liable to any holder of shares of Paramount Common Stock for
any such shares of QVC Common Stock or QVC Merger Preferred
Stock (or dividends or distributions with respect thereto) or
Warrants or cash from the Exchange Fund delivered to a public
official pursuant to any applicable abandoned property, escheat
or similar law.
<PAGE>
<PAGE>
(g) Withholding Rights. QVC or the Exchange Agent
shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of
shares of Paramount Common Stock such amounts as QVC or the Ex-
change Agent is required to deduct and withhold with respect to
the making of such payment under the Code, or any provision of
state, local or foreign tax law. To the extent that amounts
are so withheld by QVC or the Exchange Agent, such withheld
amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the shares of Paramount Com-
mon Stock in respect of which such deduction and withholding
was made by QVC or the Exchange Agent.
SECTION 1.8. Stock Transfer Books. At the Effective
Time, the stock transfer books of Paramount shall be closed,
and there shall be no further registration of transfers of
shares of Paramount Common Stock thereafter on the records of
Paramount. On or after the Effective Time, any Certificates
presented to the Exchange Agent or QVC for any reason shall be
converted into the Merger Consideration.
SECTION 1.9. Stock Options; Payment Rights. (i) At
the Effective Time, Paramount's obligations with respect to
each outstanding Stock Option (as defined in Section 3.3) to
purchase shares of Paramount Common Stock, as amended in the
manner described in the following sentence, shall be assumed by
QVC. The Stock Options so assumed by QVC shall continue to
have, and be subject to, the same terms and conditions as set
forth in the stock option plans and agreements pursuant to
which such Stock Options were issued as in effect immediately
prior to the Effective Time, except that each such Stock Option
shall be exercisable for (i) that number of whole shares of QVC
Common Stock equal to the product of the number of shares of
Paramount Common Stock covered by such Stock Option immediately
prior to the Effective Time multiplied by the Common Stock Ex-
change Ratio and rounded up to the nearest whole number of
shares of QVC Common Stock, (ii) that number of whole shares of
QVC Merger Preferred Stock equal to the product of the number
of shares of Paramount Common Stock covered by such Stock Op-
tion immediately prior to the Effective Time multiplied by the
Preferred Stock Exchange Ratio and rounded up to the nearest
whole number of shares of QVC Merger Preferred Stock and (iii)
that number of whole Warrants equal to the product of the num-
ber of shares of Paramount Common Stock covered by such Stock
Option immediately prior to the Effective Time multiplied by
the Warrant Exchange Ratio and rounded up to the nearest whole
number of Warrants; provided that there shall be no such round-
ing up with respect to Incentive Stock Options (as defined be-
low). QVC shall (i) reserve for issuance the number of shares
of QVC Common Stock, QVC Merger Preferred Stock and Warrants
<PAGE>
<PAGE>
that will become issuable upon the exercise of such Stock Op-
tions pursuant to this Section 1.9 and (ii) promptly after the
Effective Time issue to each holder of an outstanding Stock
Option a document evidencing the assumption by QVC of
Paramount's obligations with respect thereto under this Section
1.9. Nothing in this Section 1.9 shall affect the schedule of
vesting with respect to the Stock Options to be assumed by QVC
as provided in this Section 1.9. In the case of any Stock Op-
tion to which Section 421 of the Code applies by reason of its
qualification under Section 422 of the Code (an "Incentive
Stock Option"), the option price, the number of shares purchas-
able pursuant to such Incentive Stock Option and the terms and
conditions of exercise of such Incentive Stock Option shall be
determined immediately after the Effective Time in such manner
as to comply with Section 424(a) of the Code. To preserve the
qualification of all Incentive Stock Options under Section 422
of the Code, in lieu of all Warrants or QVC Merger Preferred
Stock for which an Incentive Stock Option would otherwise be-
come exercisable pursuant to the foregoing provisions of this
Section 1.9, such Incentive Stock Option shall become exercis-
able for that number of shares of QVC Common Stock equal to the
fair market value of such Warrants or QVC Merger Preferred
Stock (determined, at the time of the Merger, by reference to a
five-day average trading price of such securities, if avail-
able, or, if not available, in the reasonable judgment of the
Board of Directors of QVC).
SECTION 1.10. Dissenting Shares. (a) Notwithstand-
ing any other provision of this Agreement to the contrary, if
the Offer has not been consummated prior to the Effective Time,
shares of Paramount Common Stock that are outstanding im-
mediately prior to the Effective Time and which are held by
stockholders who shall have not voted in favor of the Merger or
consented thereto in writing and who shall have demanded prop-
erly in writing appraisal for such shares in accordance with
Section 262 of Delaware Law and who shall not have withdrawn
such demand or otherwise have forfeited appraisal rights (col-
lectively, the "Dissenting Shares") shall not be converted into
or represent the right to receive the Merger Consideration.
Such stockholders shall be entitled to receive payment of the
appraised value of such shares of Paramount Common Stock held
by them in accordance with the provisions of such Section 262,
except that all Dissenting Shares held by stockholders who
shall have failed to perfect or who effectively shall have
withdrawn or lost their rights to appraisal of such shares of
Paramount Common Stock under such Section 262 shall thereupon
be deemed to have been converted into and to have become ex-
changeable, as of the Effective Time, for the right to receive,
without any interest thereon, the Merger Consideration (as if
such shares were Non-Election Shares in the case of a Merger to
<PAGE>
<PAGE>
which Section 1.6(b) applies), upon surrender, in the manner
provided in Section 1.7, of the certificate or certificates
that formerly evidenced such shares of Paramount Common Stock.
(b) Paramount shall give QVC (i) prompt notice of
any demands for appraisal received by Paramount, withdrawals of
such demands, and any other instruments served pursuant to
Delaware Law and received by Paramount and (ii) the opportunity
to direct all negotiations and proceedings with respect to de-
mands for appraisal under Delaware Law. Paramount shall not,
except with the prior written consent of QVC, make any payment
with respect to any demands for appraisal, or offer to settle,
or settle, any such demands.
2.
ARTICLE II
THE OFFER
SECTION 2.1. The Offer. (a) QVC has amended and
supplemented the Offer to (i) increase the purchase price of-
fered for shares pursuant to the Offer to the Per Share Cash
Amount, (ii) provide that the obligation of QVC to accept for
payment and pay for Shares tendered pursuant to the Offer shall
be subject to the condition (such condition as it may be
amended from time to time in accordance with the terms hereof,
the "Minimum Condition") that at least 61,657,432 shares of
Paramount Common Stock (or such greater number of shares repre-
senting 50.1% of the outstanding number of shares of Paramount
Common Stock on a fully diluted basis) shall have been validly
tendered and not withdrawn prior to the expiration of the Of-
fer, that the Board of Directors of Paramount, in accordance
with Section 3.13 of this Agreement, shall have amended the
Rights Agreement to make the Rights (such terms being used as
defined in Section 3.13) inapplicable to the Offer and the
Merger as contemplated by Section 3.13 or the Rights shall be
otherwise inapplicable to the Offer and the Merger (the "Rights
Condition"), and also shall be subject to the satisfaction of
the other conditions set forth in Annex A hereto and (iii) ex-
tend the expiration date of the Offer until Midnight on the
tenth business day following the date of the amendment to the
Offer referred to above. QVC expressly reserves the right to
waive any such condition (other than the Minimum Condition), to
increase the aggregate cash consideration to be paid pursuant
to the Offer by not less than $60 million, and to increase the
number of shares of Paramount Common Stock sought in the Offer
by not less than 2% of the outstanding shares of Paramount Com-
mon Stock; provided, however, that no change may be made with-
out the prior written consent of Paramount which decreases the
<PAGE>
<PAGE>
number of shares of Paramount Common Stock sought in the Offer
to a number representing less than 50.1% of the then outstand-
ing shares of Paramount Common Stock on a fully diluted basis;
provided, however, that the number of shares of Paramount Com-
mon Stock sought in the Offer can be decreased to not less than
50.1% of the then outstanding shares of Paramount Common Stock
on a fully diluted basis; so long as the aggregate cash consid-
eration payable in the Offer is not decreased, which decreases
the aggregate cash consideration payable in the Offer or
changes the form of consideration payable in the Offer (except
in each case referred to in this proviso to the extent the
Other Offeror (as defined below) has made such changes with the
consent of Paramount) or makes any other change in the terms of
the Offer which is reasonably deemed by Paramount to be adverse
to Paramount stockholders or which imposes conditions to the
Offer in addition to those set forth in Annex A hereto. The
Per Share Amount shall, subject to applicable withholding of
taxes, be net to the seller in cash, upon the terms and subject
to the conditions of the Offer. Subject to the terms and con-
ditions of the Offer (including, without limitation, the Mini-
mum Condition) and the terms of this Agreement, QVC shall pay,
as promptly as practicable after expiration of the Offer, for
all shares of Paramount Common Stock validly tendered and not
withdrawn at the earliest such time following expiration of the
Offer that all conditions to the Offer shall have been waived
or satisfied by QVC.
(b) QVC has filed with the Securities and Exchange
Commission (the "SEC") an amendment to its Tender Offer State-
ment on Schedule 14D-1 (together with all amendments and
supplements thereto, the "Schedule 14D-1") with respect to the
Offer. The Schedule 14D-1 contains or incorporates by refer-
ence an amendment and supplement to the offer to purchase (the
"Offer to Purchase") and forms of the related letter of trans-
mittal and any related summary advertisement (the Schedule 14D-
1, the Offer to Purchase and such other documents, together
with all supplements and amendments thereto, being referred to
herein collectively as the "Offer Documents"). QVC and Para-
mount agree to correct promptly any information provided by any
of them for use in the Offer Documents which shall have become
false or misleading, and QVC further agrees to take all steps
necessary to cause the Schedule 14D-1 as so corrected to be
filed with the SEC and the other Offer Documents as so cor-
rected to be disseminated to holders of shares of Paramount
Common Stock, in each case as and to the extent required by
applicable federal securities laws.
(c) Notwithstanding the amendment of the Offer, QVC
shall be free to terminate the Offer at any time subject to its
continuing obligations to consummate the Merger, including
<PAGE>
<PAGE>
without limitation pursuant to Sections 6.5 and 6.9, provided
that prior to such termination of the Offer, QVC shall have
determined in good faith that either (i) terminating the Offer
will facilitate the earlier consummation of the Merger in ac-
cordance with the terms of this Merger Agreement or (ii) the
conditions to the Offer (other than the Minimum Condition and
the Rights Condition) are unlikely to be satisfied. Notwith-
standing the foregoing, QVC hereby agrees that, without the
written consent of Paramount, it may not terminate the Offer
unless required to terminate pursuant to Section 2.5 hereof, or
extend the Expiration Date (as defined below) except for fail-
ure to satisfy a condition at the Expiration Date, at any time
that all of the conditions to the Offer have been satisfied or
that there exists no material risk that the conditions will not
be satisfied by such Expiration Date provided, QVC may extend
the Expiration Date pursuant to this Section 2.1(c) and Sec-
tions 2.1(a), 2.1(d) and 2.3 hereof or any such extension re-
quired by federal securities law.
No extension of the expiration date (such expiration
date as extended from time to time shall be defined herein to
mean the "Expiration Date") permitted pursuant to this Agree-
ment shall be for a period of less than three business days,
and the Expiration Date shall not be extended for any reason
beyond 12:00 midnight on February 14, 1994, or such later date
in accordance with the last parenthetical in Section
2.1(d)(ii), Section 2.3, or as required by the federal securi-
ties law to the extent that the extension arises due to an
event outside the control of QVC (those events not deemed to be
outside the control of the Offeror shall include, without limi-
tation, any change in the terms of the Offer or the Merger)
(the "Final Expiration Date"). QVC agrees that it will not
increase the price per share of Paramount Common Stock payable
in the Offer or the Merger or otherwise amend the Offer or the
terms of the Merger primarily to extend the expiration date of
the tender offer by Viacom (the "Other Offeror") to purchase
the outstanding shares of Paramount Common Stock (the "Other
Offer"). Any amendment to the Offer or any change in the con-
sideration offered to the Paramount stockholders in the Merger
that results in an extension of the Expiration Date shall be
publicly announced by 5:00 p.m on the date of such amendment or
change. QVC hereby agrees that it shall not (a) seek to amend
or waive any provision of this Agreement that is substantially
identical to the provisions relating to the bidding procedures
contained in the Other Exemption Agreement (the "Bidding Proce-
dures") or (b) publicly announce an intention to take an action
which is not otherwise permitted, or refrain from taking an
action which is required, under the terms of this Agreement
relating to the Bidding Procedures.
<PAGE>
<PAGE>
(d) In order to cause the Offer and the Other Offer
to remain on the same time schedule, QVC hereby agrees that (i)
if the Other Offeror remains subject to an agreement (the
"Other Exemption Agreement"), containing terms for the benefit
of Paramount substantially similar to the form of exemption
agreement attached hereto, as amended (the "Exemption Agree-
ment"), and extends the expiration date of the Other Offer
(such expiration date, as extended from time to time, the
"Other Expiration Date") in accordance with the Other Exemption
Agreement, then the Expiration Date shall be extended (as soon
as practicable, but not later than one business day following
the announcement of the extension of the Other Expiration Date)
by QVC to the Other Expiration Date, or (ii) if upon notifica-
tion to Paramount by QVC and the Other Offeror of the results
of their respective offers (which notification shall be re-
quired to be delivered by QVC and the Other Offeror no later
than promptly following the expiration of their respective of-
fers), Paramount has notified QVC and the Other Offeror (which
notification shall be required to be delivered by Paramount
promptly) that a number of shares of Paramount Common Stock
that would satisfy the Minimum Condition or the minimum condi-
tion (the "Other Minimum Condition") as defined in the Other
Offer (which will be deemed not satisfied if such Other Offer
seeks a number of shares consisting of less than 50.1% of the
outstanding shares of Paramount Common Stock on a fully diluted
basis) shall not have been validly tendered (and not withdrawn)
pursuant to either the Offer or the Other Offer, respectively,
at the Expiration Date (or a number of shares of Paramount Com-
mon Stock that would satisfy the Minimum Condition and the
Other Minimum Condition shall have been validly tendered and
not withdrawn pursuant to the Offer and the Other Offer at the
Expiration Date), then QVC shall extend the Expiration Date of
the Offer for a period of 10 business days.
(e) QVC shall be subject to the obligations of Sec-
tions 2.1(c)(ii), 2.1(d) and 2.5 for so long as the Other Of-
feror remains subject to the obligations set forth in the Other
Exemption Agreement; provided, however, that QVC shall not be
subject to Sections 2.1(c)(ii), 2.1(d) and 2.5 in the event
that the Other Offeror has not performed or complied in all
material respects with the Other Exemption Agreement.
SECTION 2.2. Action by Paramount. (a) Paramount
hereby approves of and consents to the making of the Offer and
represents that (i) the Board of Directors of Paramount, at a
meeting duly called and held on , 1994, has unani-
mously (A) determined that the Offer and the Merger, taken to-
gether, are fair to and in the best interests of the holders of
shares of Paramount Common Stock, (B) approved and adopted this
<PAGE>
<PAGE>
Agreement and the transactions contemplated hereby and (C) rec-
ommended that the stockholders of Paramount approve and adopt
this Agreement and the transactions contemplated hereby and
accept the Offer, and (ii) Lazard Freres & Co. has delivered to
the Board an opinion, to the effect that, as of such date, the
consideration to be received by the holders of shares of Para-
mount Common Stock pursuant to the Offer and the Merger, taken
together, is fair to the holders of shares of Paramount Common
Stock from a financial point of view. Subject to the fiduciary
duties of the Board of Directors of Paramount under applicable
law as advised by independent legal counsel (who may be such
party's regularly engaged legal counsel), Paramount hereby con-
sents to the inclusion in the Offer Documents prepared in con-
nection with the Offer of the recommendation of the Board of
Directors of Paramount described in the immediately preceding
sentence.
(b) As soon as reasonably practicable after the date
hereof, Paramount shall file with the SEC an amendment to its
Solicitation/Recommendation Statement on Schedule 14D-9 (to-
gether with all amendments and supplements thereto, the "Sched-
ule 14D-9") containing, subject to the fiduciary duties of the
Board of Directors of Paramount under applicable law as advised
by independent legal counsel (who may be such party's regularly
engaged legal counsel), the recommendation of the Board of Di-
rectors of Paramount described in Section 2.2(a) and shall dis-
seminate the Schedule 14D-9 to the extent required by Rule 14e-
2 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and any other applicable federal
securities laws. Paramount and QVC agree to correct promptly
any information provided by any of them for use in the Schedule
14D-9 which shall have become false or misleading, and Para-
mount further agrees to take all steps necessary to cause the
Schedule 14D-9 as so corrected to be filed with the SEC and
disseminated to holders of shares of Paramount Common Stock, in
each case as and to the extent required by applicable federal
securities laws.
(c) Paramount shall promptly furnish QVC with mail-
ing labels containing the names and addresses of all record
holders of shares of Paramount Common Stock and with security
position listings of shares of Paramount Common Stock held in
stock depositories, each as of a recent date, together with all
other available listings and computer files containing names,
addresses and security position listings of record holders and
beneficial owners of shares of Paramount Common Stock. Para-
mount shall furnish QVC with such additional information, in-
cluding, without limitation, updated listings and computer
files of stockholders, mailing labels and security position
listings, and such other assistance as QVC or its agents may
<PAGE>
<PAGE>
reasonably request. Subject to the requirements of applicable
law, and except for such steps as are necessary to disseminate
the Offer Documents and any other documents necessary to con-
summate the Merger or the Offer, QVC shall hold in confidence
the information contained in such labels, listings and files,
shall use such information only in connection with the Merger
and the Offer, and, if this Agreement shall be terminated in
accordance with Section 8.1, shall deliver to Paramount all
copies of such information then in its possession.
SECTION 2.3. Receipt of Common Stock. Unless the
event referred to in the last parenthetical of Section
2.1(d)(ii) occurs, in the event that a number of shares of
Paramount Common Stock that would satisfy the Minimum Condition
shall have been validly tendered and not withdrawn in the Offer
at the Expiration Date and, as of such Expiration Date, QVC has
waived all conditions to the Offer (other than the Minimum Con-
dition and the conditions relating to the Rights Agreement,
Article XI of the Paramount Certificate of Incorporation, Sec-
tion 203 of Delaware Law and judicial or governmental injunc-
tion, each as set forth therein), then QVC shall extend the
Expiration Date to a date 10 business days from the then sched-
uled Expiration Date; provided, that such extension shall be
for a period of 5 business days in the event that the Other
Offer has been terminated prior to the foregoing Expiration
Date.
SECTION 2.4. Completion Certificate. At such time
as QVC has fulfilled the terms of Section 2.3 above, QVC shall
deliver to the Board of Directors of Paramount (a) a certifi-
cate (the "Completion Certificate"), executed by an authorized
officer of QVC, certifying that all the terms of Section 2.3
have been fulfilled.
SECTION 2.5. Termination of the Offer. Unless the
event referred to in the last parenthetical of Section
2.1(d)(ii) occurs, QVC hereby agrees to terminate the Offer at
such time as QVC has been notified pursuant to a certificate
executed by an authorized officer of Paramount that (i) a num-
ber of shares representing not less than the Other Minimum Con-
dition shall have been validly tendered to the Other Offer and
not withdrawn at the Other Expiration Date of the Other Offer,
(ii) all conditions to the Other Offer, except the Other Mini-
mum Condition and the conditions relating to the Rights Agree-
ment, Article XI of the Paramount Certificate of Incorporation,
Section 203 of Delaware Law and judicial or governmental in-
junction each as set forth therein, shall have been waived and
(iii) a completion certificate from the Other Offeror has been
delivered to Paramount; provided, however, that QVC shall not
be required to terminate the Offer in the event that the Other
<PAGE>
<PAGE>
Offeror has not performed or complied in all material respects
with the Other Exemption Agreement.
SECTION 2.6. Board of Directors; Section 14(f). (a)
If requested by QVC, Paramount shall, promptly following the
acceptance for payment of the shares of Paramount Common Stock
to be purchased pursuant to the Offer, and from time to time
thereafter, take all actions necessary to cause a majority of
directors (and of members of each committee of the Board of
Directors) of Paramount and of each subsidiary of Paramount to
be designated by QVC (whether, at the request of QVC, by means
of increasing the size of the Board of Directors of Paramount
or seeking the resignation of directors and causing QVC's des-
ignees to be elected); provided, that prior to receipt by QVC
of long-form approval by the Federal Communications Commission
(the "FCC") permitting QVC to control Paramount, Paramount
shall take all actions necessary to elect the QVC voting
trustee approved by the FCC to the Paramount Board of Directors
and to otherwise act in a manner consistent with the voting
trust agreement approved by the FCC.
(b) Paramount's obligations to cause designees of
QVC to be elected or appointed to the Board of Directors of
Paramount shall be subject to Section 14(f) of the Exchange Act
and Rule 14f-1 promulgated thereunder. Paramount shall
promptly take all actions required pursuant to Section 14(f)
and Rule 14f-1 in order to fulfill its obligations under this
Section, and shall include in the Schedule 14D-9 such informa-
tion with respect to QVC and its officers and directors as is
required under Section 14(f) and Rule 14f-1. QVC will supply
to Paramount any information with respect to it and its nomi-
nees, officers, directors and affiliates required by Section
14(f) and Rule 14f-1.
(c) Following the election or appointment of QVC's
designees pursuant to this Section and prior to the Effective
Time, any amendment or termination of this Agreement, extension
for the performance or waiver of the obligations or other acts
of QVC or waiver of Paramount's rights hereunder, will require
the concurrence of a majority of directors of Paramount then in
office who are directors on the date hereof or are designated
by a majority of the directors of Paramount who are directors
on the date hereof.
3.
<PAGE>
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARAMOUNT
Paramount hereby represents and warrants to QVC that:
SECTION 3.1. Organization and Qualification; Subsidiar-
ies. (a) Each of Paramount and each Material Paramount Subsid-
iary (as defined below) is a corporation, partnership or other
legal entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organi-
zation and has the requisite power and authority and all necessary
governmental approvals to own, lease and operate its properties
and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing or in good standing
or to have such power, authority and governmental approvals would
not, individually or in the aggregate, have a Paramount Material
Adverse Effect (as defined below). Paramount and each Material
Paramount Subsidiary is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each ju-
risdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualifica-
tion or licensing necessary, except for such failures to be so
qualified or licensed and in good standing that would not, indi-
vidually or in the aggregate, have a Paramount Material Adverse
Effect. The term "Paramount Material Adverse Effect" means any
change or effect that is or is reasonably likely to be materially
adverse to the business, results of operations or financial condi-
tion of Paramount and the Paramount Subsidiaries, taken as a
whole; provided, however, where such term qualifies a representa-
tion or warranty contained in this Article III during the period
beginning after the date hereof and until the Effective Time, then
such term shall mean any change or effect that is or is reasonably
likely to be materially adverse to the business or financial con-
dition of Paramount and the Paramount Subsidiaries, taken as a
whole.
(b) Each subsidiary of Paramount (a "Paramount Subsid-
iary") that constitutes a Significant Subsidiary of Paramount
within the meaning of Rule 1-02 of Regulation S-X of the SEC is
referred to herein as a "Material Paramount Subsidiary".
SECTION 3.2. Certificate of Incorporation and By-Laws.
Paramount has heretofore made available to QVC a complete and cor-
rect copy of the Certificate of Incorporation and the By-Laws or
equivalent organizational documents, each as amended to date, of
Paramount and each Material Paramount Subsidiary. Such Certifi-
cates of Incorporation, By-Laws and equivalent organizational
documents are in full force and effect. Neither Paramount nor any
Material Paramount Subsidiary is in violation of any provision of
<PAGE>
<PAGE>
its Certificate of Incorporation, By-Laws or equivalent organiza-
tional documents, except for such violations that would not, indi-
vidually or in the aggregate, have a Paramount Material Adverse
Effect.
SECTION 3.3. Capitalization. The authorized capital
stock of Paramount consists of 600,000,000 shares of Paramount
Common Stock and 75,000,000 shares of Preferred Stock, par value
$.01 per share ("Paramount Preferred Stock"). As of February 3,
1994, 121,937,762 shares of Paramount Common Stock were issued and
outstanding, all of which were validly issued, fully paid and non-
assessable. As of February 3, 1994, 25,924,286 shares were held
in the treasury of Paramount. As of January 31, 1994, 9,409,208
shares were reserved for future issuance pursuant to employee
stock options granted pursuant to Paramount's 1992 Stock Option
Plan and 1989 Stock Option Plan (any employee stock option issued
under any such plan being a "Stock Option") and reserved for fu-
ture issuance under the Long-Term Incentive Plan. Between August
31, 1993 and the date of this Agreement, awards have been made
under the Long-Term Performance Plan as indicated in Schedule 3.3
of the Paramount Disclosure Schedule (as defined below). As of
February 3, 1994, options to acquire 2,398,060 shares of Paramount
Common Stock were outstanding. As of the date hereof, no shares
of Paramount Preferred Stock are issued and outstanding. Except
as set forth in Section 3.3 of the Disclosure Schedule previously
delivered by Paramount to QVC (the "Paramount Disclosure Sched-
ule"), or except as set forth in this Section 3.3, and except pur-
suant to the Rights Agreement (as defined in Section 3.13) there
are no options, warrants or other rights, agreements, arrangements
or commitments of any character relating to the issued or unissued
capital stock of Paramount or any Material Paramount Subsidiary or
obligating Paramount or any Material Paramount Subsidiary to issue
or sell any shares of capital stock of, or other equity interests
in, Paramount or any Material Paramount Subsidiary. All shares of
Paramount Common Stock subject to issuance as aforesaid, upon is-
suance on the terms and conditions specified in the instruments
pursuant to which they are issuable, will be duly authorized, val-
idly issued, fully paid and nonassessable. Except as set forth in
Section 3.3 of the Paramount Disclosure Schedule, there are no
material outstanding contractual obligations of Paramount or any
Paramount Subsidiary to repurchase, redeem or otherwise acquire
any shares of Paramount Common Stock or any capital stock of any
Material Paramount Subsidiary, or make any material investment (in
the form of a loan, capital contribution or otherwise) in, any
Paramount Subsidiary or any other person. Each outstanding share
of capital stock of each Material Paramount Subsidiary is duly
authorized, validly issued, fully paid and nonassessable and each
such share owned by Paramount or another Paramount Subsidiary is
free and clear of all security interests, liens, claims, pledges,
options, rights of first refusal, agreements, limitations on
<PAGE>
<PAGE>
Paramount's or such other Paramount Subsidiary's voting rights,
charges and other encumbrances of any nature whatsoever. Set
forth in Section 3.3 of the Disclosure Schedule is Paramount's
percentage interest in the outstanding capital stock or partner-
ship interests of USA Networks, United Cinemas International Mul-
tiplex B.V., United International Pictures and Cinamerica The-
atres, L.P.
SECTION 3.4. Authority Relative to This Agreement.
Paramount has all necessary power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and
to consummate the transactions (including, without limitation, the
Offer) contemplated hereby (the "Transactions"). The execution
and delivery of this Agreement by Paramount and the consummation
by Paramount of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action and
no other corporate proceedings on the part of Paramount are neces-
sary to authorize this Agreement or to consummate the transactions
contemplated hereby (other than, with respect to the Merger, the
approval and adoption of this Agreement by the holders of a major-
ity of the then outstanding shares of Paramount Common Stock, and
the filing and recordation of appropriate merger documents as re-
quired by Delaware Law). This Agreement has been duly and validly
executed and delivered by Paramount and, assuming the due authori-
zation, execution and delivery by QVC, constitutes legal, valid
and binding obligations of Paramount, enforceable against Para-
mount in accordance with its terms. Paramount has taken all ap-
propriate actions so that the restrictions on business combina-
tions contained in Section 203 of Delaware Law and Article XI of
Paramount's Certificate of Incorporation will not apply with re-
spect to or as a result of the Transactions. Paramount has termi-
nated the Viacom Merger Agreement and Paramount has not made any
payment to Viacom in connection with such agreement (except pursu-
ant to the proviso contained in Section 8.05(a) of such agreement)
or the Stock Option Agreement and will not make any such payment
(except pursuant to the proviso contained in Section 8.05(a) de-
scribed above) unless so ordered by the Delaware Chancery Court or
Delaware Supreme Court pursuant to a final non-appealable order.
SECTION 3.5. No Conflict; Required Filings and Con-
sents. (a) Except as set forth in Section 3.5 of the Paramount
Disclosure Schedule, the execution and delivery of this Agreement
by Paramount does not, and the performance by Paramount of its
obligations under this Agreement will not, (i) conflict with or
violate the Certificate of Incorporation or By-Laws or equivalent
organizational documents of Paramount or any Material Paramount
Subsidiary, (ii) conflict with or violate any law, rule, regula-
tion, order, judgment or decree applicable to Paramount or any
Paramount Subsidiary or by which any property or asset of Para-
mount or any Paramount Subsidiary is bound or affected, or (iii)
<PAGE>
<PAGE>
result in any breach of or constitute a default (or an event which
with notice or lapse of time or both would become a default) un-
der, result in the loss of a material benefit under, or give to
others any right of termination, amendment, acceleration or can-
cellation of, or result in the creation of a lien or other encum-
brance on any property or asset of Paramount or any Paramount Sub-
sidiary pursuant to, any note, bond, mortgage, indenture, con-
tract, agreement, lease, license, permit, franchise or other in-
strument or obligation to which Paramount or any Paramount Subsid-
iary is a party or by which Paramount or any Paramount Subsidiary
or any property or asset of Paramount or any Paramount Subsidiary
is bound or affected, except, in the case of clauses (ii) and
(iii), for any such conflicts, violations, breaches, defaults or
other occurrences which would not prevent or delay consummation of
the Merger or the Offer in any material respect, or otherwise pre-
vent Paramount from performing its obligations under this Agree-
ment in any material respect, and would not, individually or in
the aggregate, have a Paramount Material Adverse Effect.
(b) The execution and delivery of this Agreement by
Paramount does not, and the performance of this Agreement by Para-
mount will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or
regulatory authority, domestic or foreign (each a "Governmental
Entity"), except (i) for (A) applicable requirements, if any, of
the Exchange Act, the Securities Act of 1933, as amended (the "Se-
curities Act"), state securities or "blue sky" laws ("Blue Sky
Laws") and state takeover laws, (B) applicable requirements of the
Communications Act of 1934, as amended (the "Communications Act"),
and of state and local governmental authorities, including state
and local authorities granting franchises to operate cable sys-
tems, (C) applicable requirements of the Investment Canada Act of
1985 and the Competition Act (Canada), (D) filing and recordation
of appropriate merger documents as required by Delaware Law and
(E) applicable requirements, if any, of any non-United States com-
petition, antitrust and investment laws and (ii) where failure to
obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or delay
consummation of the Merger or the Offer in any material respect,
or otherwise prevent Paramount from performing its obligations
under this Agreement in any material respect, and would not, indi-
vidually or in the aggregate, have a Paramount Material Adverse
Effect.
SECTION 3.6. Compliance. Except as set forth in Sec-
tion 3.6 of the Paramount Disclosure Schedule, neither Paramount
nor any Paramount Subsidiary is in conflict with, or in default or
violation of, (i) any law, rule, regulation, order, judgment or
decree applicable to Paramount or any Paramount Subsidiary or by
<PAGE>
<PAGE>
which any property or asset of Paramount or any Paramount Subsid-
iary is bound or affected, or (ii) any note, bond, mortgage, in-
denture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Paramount or any Paramount
Subsidiary is a party or by which Paramount or any Paramount Sub-
sidiary or any property or asset of Paramount or any Paramount
Subsidiary is bound or affected, except for any such conflicts,
defaults or violations that would not, individually or in the ag-
gregate, have a Paramount Material Adverse Effect.
SECTION 3.7. SEC Filings; Financial Statements. Except
as set forth in Section 3.7 of the Paramount Disclosure Schedule,
(a) Paramount has filed all forms, reports and documents required
to be filed by it with the SEC since October 31, 1990, and has
heretofore made available to QVC, in the form filed with the SEC
(excluding any exhibits thereto), (i) its Annual Reports on Form
10-K for the fiscal years ended October 31, 1990, 1991 and 1992,
respectively, (ii) its Transition Report on Form 10-K for the six
months ended April 30, 1993, as amended prior to the date hereof,
(iii) its Quarterly Reports on Form 10-Q for the periods ended
July 31, 1993 and October 31, 1993, (iv) all proxy statements re-
lating to Paramount's meetings of stockholders (whether annual or
special) held since October 31, 1990, and (v) all other forms,
reports and other registration statements (other than Quarterly
Reports on Form 10-Q not referred to in clause (iii) above and
preliminary materials) filed by Paramount with the SEC since Octo-
ber 31, 1990 (the forms, reports and other documents referred to
in clauses (i), (ii), (iii), (iv) and (v) above being referred to
herein, collectively, as the "Paramount SEC Reports"). The Para-
mount SEC Reports and any forms, reports and other documents filed
by Paramount with the SEC after the date of this Agreement (x)
were or will be prepared in accordance with the requirements of
the Securities Act and the Exchange Act, as the case may be, and
the rules and regulations thereunder and (y) did not at the time
they were filed, or will not at the time they are filed, contain
any untrue statement of a material fact or omit to state a mate-
rial fact required to be stated therein or necessary in order to
make the statements made therein, in the light of the circum-
stances under which they were made, not misleading. No Paramount
Subsidiary is required to file any form, report or other document
with the SEC.
(b) Each of the consolidated financial statements (in-
cluding, in each case, any notes thereto) contained in the Para-
mount SEC Reports was prepared in accordance with generally ac-
cepted accounting principles applied on a consistent basis
throughout the periods indicated (except as may be indicated in
the notes thereto) and each fairly presented the financial posi-
tion, results of operations and cash flows of Paramount and the
consolidated Paramount Subsidiaries as at the respective dates
<PAGE>
<PAGE>
thereof and for the respective periods indicated therein (subject,
in the case of unaudited statements, to normal and recurring year-
end adjustments which were not and are not expected, individually
or in the aggregate, to be material in amount).
(c) Except as set forth in Section 3.7 of the Paramount
Disclosure Schedule or except as and to the extent set forth in
the Paramount SEC Reports filed with the SEC prior to the date of
this Agreement, Paramount and the Paramount Subsidiaries do not
have any liability or obligation of any nature (whether accrued,
absolute, contingent or otherwise) other than liabilities and ob-
ligations which would not, individually or in the aggregate, have
a Paramount Material Adverse Effect.
SECTION 3.8. Absence of Certain Changes or Events.
Since April 30, 1993, except as set forth in Section 3.8 of the
Paramount Disclosure Schedule, contemplated by this Agreement or
disclosed in any Paramount SEC Report filed since April 30, 1993
and prior to the date of this Agreement, Paramount and the Para-
mount Subsidiaries have conducted their businesses only in the
ordinary course and in a manner consistent with past practice and,
since April 30, 1993, there has not been (i) as of the date
hereof, any change, occurrence or circumstance in the business,
results of operations or financial condition of Paramount or any
Paramount Subsidiary having, individually or in the aggregate, a
Paramount Material Adverse Effect, (ii) any damage, destruction or
loss (whether or not covered by insurance) with respect to any
property or asset of Paramount or any Paramount Subsidiary and
having, individually or in the aggregate, a Paramount Material
Adverse Effect, (iii) any change by Paramount in its accounting
methods, principles or practices, (iv) any declaration, setting
aside or payment of any dividend or distribution in respect of any
capital stock of Paramount or any Paramount Subsidiary or any re-
demption, purchase or other acquisition of any of their respective
securities other than regular quarterly dividends on the shares of
Paramount Common Stock not in excess of $.20 per share and divi-
dends by a Paramount Subsidiary to Paramount and other than to
fund pre-established Paramount Plans and dividend reinvestment
plans, or (v) other than as set forth in Section 3.3 and pursuant
to the plans, programs or arrangements referred to in Section 3.10
and other than in the ordinary course of business consistent with
past practice, any increase in or establishment of any bonus, in-
surance, severance, deferred compensation, pension, retirement,
profit sharing, stock option (including, without limitation, the
granting of stock options, stock appreciation rights, performance
awards, or restricted stock awards), stock purchase or other em-
ployee benefit plan, or any other increase in the compensation
payable or to become payable to any officers or key employees of
Paramount or any Paramount Subsidiary.
<PAGE>
<PAGE>
SECTION 3.9. Absence of Litigation. Except as set
forth in Section 3.9 of the Paramount Disclosure Schedule or ex-
cept as disclosed in the Paramount SEC Reports filed with the SEC
prior to the date of this Agreement, there is no claim, action,
proceeding or investigation pending or, to the best knowledge of
Paramount, threatened against Paramount or any Paramount Subsid-
iary, or any property or asset of Paramount or any Paramount Sub-
sidiary, before any court, arbitrator or administrative, govern-
mental or regulatory authority or body, domestic or foreign,
which, individually or in the aggregate, is reasonably likely to
have a Paramount Material Adverse Effect. Except as disclosed in
the Paramount SEC Reports filed with the SEC prior to the date of
this Agreement, neither Paramount nor any Paramount Subsidiary nor
any property or asset of Paramount or any Paramount Subsidiary is
subject to any order, writ, judgment, injunction, decree, determi-
nation or award having or reasonably likely to have, individually
or in the aggregate, a Paramount Material Adverse Effect.
SECTION 3.10. Employee Benefit Plans. With respect to
all the employee benefit plans, programs and arrangements main-
tained for the benefit of any current or former employee, officer
or director of Paramount or any Paramount Subsidiary (the "Para-
mount Plans"), except as set forth in Section 3.10 of the Para-
mount Disclosure Schedule or the Paramount SEC Reports and except
as would not, individually or in the aggregate, have a Paramount
Material Adverse Effect: (i) each Paramount Plan intended to be
qualified under Section 401(a) of the Code has received a favor-
able determination letter from the Internal Revenue Service (the
"IRS") that it is so qualified and nothing has occurred since the
date of such letter that could reasonably be expected to affect
the qualified status of such Paramount Plan; (ii) each Paramount
Plan has been operated in all respects in accordance with its
terms and the requirements of applicable law; (iii) neither Para-
mount nor any Paramount Subsidiary has incurred any direct or in-
direct liability under, arising out of or by operation of Title IV
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), in connection with the termination of, or withdrawal
from, any Paramount Plan or other retirement plan or arrangement,
and no fact or event exists that could reasonably be expected to
give rise to any such liability; and (iv) Paramount and the Para-
mount Subsidiaries have not incurred any liability under, and have
complied in all material respects with, the Worker Adjustment Re-
training Notification Act, and no fact or event exists that could
give rise to liability under such act. Except as set forth in
Section 3.10 of the Paramount Disclosure Schedule or the Paramount
SEC Reports, the aggregate accumulated benefit obligations of each
Paramount Plan subject to Title IV of ERISA (as of the date of the
most recent actuarial valuation prepared for such Paramount Plan)
do not exceed the fair market value of the assets of such Para-
mount Plan (as of the date of such valuation).
<PAGE>
<PAGE>
SECTION 3.11. Trademarks, Patents and Copyrights.
Paramount and the Paramount Subsidiaries own or possess adequate
licenses or other valid rights to use all material patents, patent
rights, trademarks, trademark rights, trade names, trade name
rights, copyrights, service marks, trade secrets, applications for
trademarks and for service marks, know-how and other proprietary
rights and information used or held for use in connection with the
business of Paramount and the Paramount Subsidiaries as currently
conducted or as contemplated to be conducted, and Paramount is
unaware of any assertion or claim challenging the validity of any
of the foregoing which, individually or in the aggregate, would
have a Paramount Material Adverse Effect. The conduct of the
business of Paramount and the Paramount Subsidiaries as currently
conducted does not conflict in any way with any patent, patent
right, license, trademark, trademark right, trade name, trade name
right, service mark or copyright of any third party that, indi-
vidually or in the aggregate, would have a Paramount Material Ad-
verse Effect. To the best knowledge of Paramount, there are no
infringements of any proprietary rights owned by or licensed by or
to Paramount or any Paramount Subsidiary which, individually or in
the aggregate, would have a Paramount Material Adverse Effect.
SECTION 3.12. Taxes. Paramount and the Paramount Sub-
sidiaries have timely filed all federal, state, local and foreign
tax returns and reports required to be filed by them through the
date hereof and shall timely file all returns and reports required
on or before the Effective Time, except for such returns and re-
ports the failure of which to file timely would not, individually
or in the aggregate, have a Paramount Material Adverse Effect.
Such reports and returns are and will be true, correct and com-
plete, except for such failure to be true, correct and complete as
would not, individually or in the aggregate, have a Paramount Ma-
terial Adverse Effect. Paramount and the Paramount Subsidiaries
have paid and discharged all federal, state, local and foreign
taxes due from them, other than such taxes that are being con-
tested in good faith by appropriate proceedings and are adequately
reserved as shown in the audited consolidated balance sheet of
Paramount dated October 31, 1992 (the "Paramount 1992 Balance
Sheet") and its most recent quarterly financial statements, except
for such failures to so pay and discharge which would not, indi-
vidually or in the aggregate, have a Paramount Material Adverse
Effect. Neither the IRS nor any other taxing authority or agency,
domestic or foreign, is now asserting or, to the best knowledge of
Paramount, threatening to assert against Paramount or any Para-
mount Subsidiary any deficiency or material claim for additional
taxes or interest thereon or penalties in connection therewith
which, if such deficiencies or claims were finally resolved
<PAGE>
<PAGE>
against Paramount and the Paramount Subsidiaries would, individu-
ally or in the aggregate, have a Paramount Material Adverse Ef-
fect. The accruals and reserves for taxes (including interest and
penalties, if any, thereon) reflected in the Paramount 1992 Bal-
ance Sheet and the most recent quarterly financial statements are
adequate in accordance with generally accepted accounting prin-
ciples, except where the failure to be adequate would not have a
Paramount Material Adverse Effect. Paramount and the Paramount
Subsidiaries have withheld or collected and paid over to the ap-
propriate governmental authorities or are properly holding for
such payment all taxes required by law to be withheld or col-
lected, except for such failures to have so withheld or collected
and paid over or to be so holding for payment which would not,
individually or in the aggregate, have a Paramount Material Ad-
verse Effect. There are no material liens for taxes upon the as-
sets of Paramount or the Paramount Subsidiaries, other than liens
for current taxes not yet due and payable and liens for taxes that
are being contested in good faith by appropriate proceedings.
Neither Paramount nor any Paramount Subsidiary has agreed to or is
required to make any adjustment under Section 481(a) of the Code.
Neither Paramount nor any Paramount Subsidiary has made an elec-
tion under Section 341(f) of the Code. For purposes of this Sec-
tion 3.12, where a determination of whether a failure by Paramount
or a Paramount Subsidiary to comply with the representations
herein has a Paramount Material Adverse Effect is necessary, such
determination shall be made on an aggregate basis with all other
failures within this Section 3.12.
SECTION 3.13. Amendment to Rights Agreement. (a) The
Board of Directors of Paramount has taken all necessary action to
amend the Rights Agreement, dated as of September 7, 1988, as
amended, between Paramount and Manufacturers Hanover Trust Com-
pany, as Rights Agent (the "Rights Agreement") so that (i) none of
the execution or delivery of this Agreement, the exchange of the
shares of Paramount Common Stock for the shares of QVC Common
Stock and QVC Merger Preferred Stock, Warrants and cash in ac-
cordance with Article II, the Merger or the making of the Offer
will cause (A) the rights (the "Rights") issued pursuant to the
Rights Agreement to become exercisable under the Rights Agreement,
(B) QVC or any of the QVC Subsidiaries (as defined in Section 4.1)
to be deemed an "Acquiring Person" (as defined in the Rights
Agreement), or (C) the "Stock Acquisition Date" (as defined in the
Rights Agreement) to occur upon any such event and (ii) the "Expi-
ration Date" (as defined in the Rights Agreement) of the Rights
shall occur immediately prior to the Effective Time. Paramount
agrees to take all necessary action to amend the Rights Agreement
so that the consummation of the Offer, on the terms permitted
hereunder, will not cause any of the effects referred to in Sec-
tion 3.13(a)(i)(A), (B) or (C) to occur; provided, however, that
Paramount shall not be required to make such amendments to the
<PAGE>
<PAGE>
Rights Agreement if (i) QVC has not performed or complied in all
material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior
to the consummation of the Offer or (ii) Paramount obtains and
there is in force from the Delaware Court of Chancery an order
permanently, preliminarily or temporarily declaring that the mak-
ing of such amendments to the Rights Agreement would be contrary
to the fiduciary duties of the Board of Directors of Paramount.
Notwithstanding anything else contained herein, in no event shall
the Board of Directors of Paramount make an amendment of the
Rights Agreement in favor of the Other Offeror or any other person
without making such amendments in favor of QVC; provided that
Paramount will not be obligated to make such amendments for QVC if
QVC has become obligated to terminate its Offer pursuant to Sec-
tion 2.5 of this Agreement.
(b) The "Distribution Date" (as defined in the Rights
Agreement) has not occurred.
SECTION 3.14. Opinion of Financial Advisor. Paramount
has received the opinion of Lazard Freres & Co., to the effect
that the consideration to be received by the stockholders of Para-
mount pursuant to the Offer and the Merger, taken together, is
fair to such stockholders from a financial point of view, a copy
of which opinion will be delivered to QVC promptly upon receipt.
SECTION 3.15. Vote Required. The affirmative vote of
the holders of a majority of the outstanding shares of Paramount
Common Stock is the only vote of the holders of any class or se-
ries of Paramount capital stock necessary to approve the Merger.
SECTION 3.16. Brokers. No broker, finder or investment
banker (other than Lazard Freres & Co.) is entitled to any broker-
age, finder's or other fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of Para-
mount. Paramount has heretofore furnished to QVC a complete and
correct copy of all agreements between Paramount and Lazard Freres
& Co. pursuant to which such firm would be entitled to any payment
relating to the Transactions.
SECTION 3.17. Purchases of Securities. Since September
12, 1993, neither Paramount nor its affiliates have purchased or
sold shares of QVC Common Stock, class A common stock of Viacom,
par value $0.01 ("Viacom Class A Common Stock"), or class B common
stock of Viacom, par value $0.01 ("Viacom Class B Common Stock"),
and neither Paramount nor its affiliates have any knowledge of any
such trading.
4.
<PAGE>
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF QVC
QVC hereby represents and warrants to Paramount
that:
SECTION 4.1. Organization and Qualification; Sub-
sidiaries. (a) Each of QVC and each Material QVC Subsidiary
(as defined below) is a corporation, partnership or other
legal entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorpora-
tion or organization and has the requisite power and author-
ity and all necessary governmental approvals to own, lease
and operate its properties and to carry on its business as it
is now being conducted, except where the failure to be so
organized, existing or in good standing or to have such
power, authority and governmental approvals would not, indi-
vidually or in the aggregate, have a QVC Material Adverse
Effect (as defined below). QVC and each Material QVC Subsid-
iary is duly qualified or licensed as a foreign corporation
to do business, and is in good standing, in each jurisdiction
where the character of the properties owned, leased or oper-
ated by it or the nature of its business makes such qualifi-
cation or licensing necessary, except for such failures to be
so qualified or licensed and in good standing that would not,
individually or in the aggregate, have a QVC Material Adverse
Effect. The term "QVC Material Adverse Effect" means any
change or effect that is or is reasonably likely to be mate-
rially adverse to the business, results of operations or fi-
nancial condition of QVC and the QVC Subsidiaries, taken as a
whole; provided, however, where such term qualifies a repre-
sentation or warranty contained in this Article IV during the
period beginning after the date hereof and until the Effec-
tive Time, then such term shall mean any change or effect
that is or is reasonably likely to be materially adverse to
the business or financial condition of QVC and the QVC Sub-
sidiaries, taken as a whole.
(b) Each subsidiary of QVC (a "QVC Subsidiary")
that constitutes a Significant Subsidiary of QVC within the
meaning of Rule 1-02 of Regulation S-X of the SEC is referred
to herein as a "Material QVC Subsidiary".
SECTION 4.2. Certificate of Incorporation and
By-Laws. QVC has heretofore made available to Paramount a
complete and correct copy of the Certificate of Incorporation
and the By-Laws or equivalent organizational documents, each
as amended to date, of QVC and each Material QVC Subsidiary.
Such Certificates of Incorporation, By-Laws and equivalent
<PAGE>
<PAGE>
organizational documents are in full force and effect. Nei-
ther QVC nor any Material QVC Subsidiary is in violation of
any provision of its Certificate of Incorporation, By-Laws or
equivalent organizational documents, except for such viola-
tions that would not, individually or in the aggregate, have
a QVC Material Adverse Effect.
SECTION 4.3. Capitalization. The authorized capi-
tal stock of QVC consists of 175,000,000 shares of QVC Common
Stock and 5,000,000 shares of QVC Preferred Stock. As of
November 30, 1993, 39,861,417 shares of QVC Common Stock were
issued and outstanding, all of which were validly issued,
fully paid and nonassessable, 5,622,090 shares of QVC Common
Stock were reserved for issuance upon conversion of the QVC
Preferred Stock, 7,882,925 shares of QVC Common Stock were
reserved for issuance upon the exercise of outstanding stock
options granted pursuant to QVC's 1986 Non-Qualified Stock
Option Plan, 1986 Incentive Stock Option Plan, 1987 Incentive
Stock Option Plan, 1988 Incentive Stock Option Plan, 1990
Non-Qualified Incentive Stock Option Plan and 1992 Qualified
Incentive Stock Option Plan and certain other stock options
not issued pursuant to stock option plans and 2,010,000
shares of QVC Common Stock were reserved for issuance upon
exercise of all outstanding warrants of QVC. As of December
10, 1993, 30,514 shares of QVC Series B Preferred Stock,
530,757 shares of QVC Series C Preferred Stock, and 938
shares of QVC Series D Preferred Stock were issued and out-
standing. Except as set forth in this Agreement or in this
Section 4.3 or in Section 4.3 of the Disclosure Schedule pre-
viously delivered by QVC to Paramount (the "QVC Disclosure
Schedule"), there are no options, warrants or other rights,
agreements, arrangements or commitments of any character re-
lating to the issued or unissued capital stock of QVC or any
Material QVC Subsidiary or obligating QVC or any Material QVC
Subsidiary to issue or sell any shares of capital stock of,
or other equity interests in, QVC or any Material QVC Subsid-
iary, except for (i) options granted since November 22, 1993
in the ordinary course consistent with past practice and (ii)
the Equity Commitment Letter, dated November 11, 1993, be-
tween QVC and each of Comcast, Advance and Cox, the BellSouth
Commitment Letter, dated November 19, 1993, by and between
BellSouth and QVC, and the other related agreements referred
to therein or contemplated thereby, including without limita-
tion, the QVC-Liberty Agreement dated November 11, 1993,
(collectively, the "Equity Investors Agreements"). All
shares of QVC Common Stock subject to issuance as aforesaid,
upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, will be duly
authorized, validly issued, fully paid and nonassessable.
Except as contemplated by this Agreement or as set forth in
<PAGE>
<PAGE>
Section 4.3 of the QVC Disclosure Schedule or in the Equity
Investors Agreements, there are no material outstanding con-
tractual obligations of QVC or any QVC Subsidiary to repur-
chase, redeem or otherwise acquire any shares of QVC Common
Stock or any capital stock of any Material QVC Subsidiary, or
make any material investment (in the form of aloan, capital
contribution or otherwise) in, any QVC Subsidiary or any
other person. Each outstanding share of capital stock of
each Material QVC Subsidiary is duly authorized, validly is-
sued, fully paid and nonassessable and each such share owned
by QVC or another QVC Subsidiary is free and clear of all
security interests, liens, claims, pledges, options, rights
of first refusal, agreements, limitations on QVC's or such
other QVC Subsidiary's voting rights, charges and other en-
cumbrances of any nature whatsoever. The shares of QVC
Merger Preferred Stock to be issued pursuant to the Merger
will be duly and validly authorized by QVC and, when issued
and delivered pursuant to the terms of this Agreement will be
duly and validly issued, fully paid and nonassessable, and
free of preemptive rights. If and when the Warrants are ex-
ercised for QVC Common Stock in accordance with the terms of
the Warrants, such shares of QVC Common Stock issued upon
such exercise will be duly authorized, validly issued, fully
paid and nonassessable, and the holders of outstanding shares
of capital stock of QVC are not entitled to any preemptive or
other rights with respect to the Warrants or the QVC Common
Stock issued upon such exercise. When QVC's 6% Junior Subor-
dinated Debentures due 2014 (the "Debentures"), initially
issuable upon exchange of the QVC Merger Preferred Stock for
such Debentures, have been duly authorized, executed, authen-
ticated, issued and delivered in exchange for the QVC Merger
Preferred Stock in accordance with the terms of the QVC
Merger Preferred Stock and the Indenture pursuant to which
they are issued (the "Indenture") between QVC and the trustee
thereunder (the "Trustee"), such Debentures will then consti-
tute valid and legal binding obligations of the Company en-
titled to the benefits provided by the Indenture. By the
date of issuance of the QVC Merger Preferred Stock, the In-
denture will have been duly authorized by QVC, duly qualified
under the Trust Indenture Act of 1939, and, when duly ex-
ecuted and delivered by QVC and the Trustee, will constitute
a valid and binding instrument of QVC enforceable in ac-
cordance with its terms.
SECTION 4.4. Authority Relative to This Agreement.
QVC has all necessary power and authority to execute and de-
liver this Agreement, to perform its obligations hereunder
and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by QVC and the con-
summation by QVC of the transactions contemplated hereby have
<PAGE>
<PAGE>
been duly and validly authorized by all necessary corporate
action and the Voting Agreement has been approved by the QVC
Board of Directors for purposes of Section 203 of Delaware
Law and no other corporate proceedings on the part of QVC are
necessary to authorize this Agreement or to consummate the
transactions contemplated hereby (other than, (i) with re-
spect to the Merger (including the issuance of the QVC Common
Stock, the QVC Merger Preferred Stock and the Warrants pursu-
ant thereto), the approval by the holders of a majority of
the then outstanding shares of QVC Common Stock and QVC Pre-
ferred Stock, voting together as a single class, of (x) this
Agreement and the Merger and (y) the amendment to QVC's Cer-
tificate of Incorporation necessary to increase the shares of
authorized QVC Common Stock to a number not less than the
number sufficient to consummate the issuance of shares of QVC
Common Stock contemplated under this Agreement (including
such shares issuable pursuant to exercise of the Warrants)
and (z) in the event that the Merger is a Reverse Merger or a
Forward Merger with a subsidiary of QVC, an amendment to
QVC's Certificate of Incorporation to change its name to
"Paramount QVC Inc." and (ii) with respect to the issuance of
voting stock to Comcast, Cox, Advance and BellSouth and to
shareholders of Paramount upon consummation of the Merger,
the approval by the holders of a majority of the QVC Common
Stock and QVC Preferred Stock, voting together as a single
class, voting at the QVC stockholder meeting (collectively,
the "QVC Vote Matter"; and the amendments to QVC's certifi-
cate of incorporation described in clause (i) and this clause
(ii) being, collectively, the "QVC Certificate Amendments"),
and the filing and recordation of the foregoing amendment to
QVC's certificate of incorporation and appropriate merger
documents as required by Delaware Law). This Agreement has
been duly and validly executed and delivered by QVC and, as-
suming the due authorization, execution and delivery by Para-
mount, constitutes legal, valid and binding obligations of
QVC, enforceable against QVC in accordance with its terms.
SECTION 4.5. No Conflict; Required Filings and
Consents. (a) The execution and delivery of this Agreement
by QVC does not, and the performance of the transactions con-
templated hereby by QVC will not, (i) conflict with or vio-
late the Certificate of Incorporation or By-Laws or equiva-
lent organizational documents of QVC or any Material QVC Sub-
sidiary, (ii) conflict with or violate any law, rule, regula-
tion, order, judgment or decree applicable to QVC or any QVC
Subsidiary or by which any property or asset of QVC or any
QVC Subsidiary is bound or affected, or (iii) result in any
breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) un-
der, result in the loss of a material benefit under or give
<PAGE>
<PAGE>
to others any right of termination, amendment, acceleration
or cancellation of, or result in the creation of a lien or
other encumbrance on any property or asset of QVC or any QVC
Subsidiary pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which QVC or any QVC Sub-
sidiary is a party or by which QVC or any QVC Subsidiary or
any property or asset of QVC or any QVC Subsidiary is bound
or affected, except in the case of clauses (ii) and (iii) of
this Section 4.5, for any such conflicts, violations,
breaches, defaults or other occurrences which would not pre-
vent or delay consummation of the Merger in any material re-
spect, or otherwise prevent QVC from performing its obliga-
tions under this Agreement in any material respect, and would
not, individually or in the aggregate, have a QVC Material
Adverse Effect.
(b) The execution and delivery of this Agreement
by QVC does not, and the performance of this Agreement by QVC
will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any Governmen-
tal Entity, except (i) for (A) applicable requirements, if
any, of the Exchange Act, Securities Act, state securities or
Blue Sky Laws and state takeover laws, (B) the pre-merger
notification requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regu-
lations thereunder (the "HSR Act"), (C) applicable require-
ments of the Communications Act, and of state and local gov-
ernmental authorities, including state and local authorities
granting franchises to operate cable systems, (D) applicable
requirements of the Investment Canada Act of 1985 and the
Competition Act (Canada), (E) filing and recordation of ap-
propriate merger documents and the QVC Certificate Amendments
as required by Delaware Law and (F) applicable requirements,
if any, of any non-United States competition, antitrust and
investment laws and (ii) where failure to obtain such con-
sents, approvals, authorizations or permits, or to make such
filings or notifications, would not prevent or delay consum-
mation of the Merger in any material respect, or otherwise
prevent QVC from performing its obligations under this Agree-
ment in any material respect, and would not, individually or
in the aggregate, have a QVC Material Adverse Effect.
SECTION 4.6. Compliance. Neither QVC nor any QVC
Subsidiary is in conflict with, or in default or violation
of, (i) any law, rule, regulation, order, judgment or decree
applicable to QVC or any QVC Subsidiary or by which any prop-
erty or asset of QVC or any QVC Subsidiary is bound or af-
fected, or (ii) any note, bond, mortgage, indenture, con-
tract, agreement, lease, license, permit, franchise or other
<PAGE>
<PAGE>
instrument or obligation to which QVC or any QVC Subsidiary
is a party or by which QVC or any QVC Subsidiary or any prop-
erty or asset of QVC or any QVC Subsidiary is bound or af-
fected, except for any such conflicts, defaults or violations
that would not, individually or in the aggregate, have a QVC
Material Adverse Effect.
SECTION 4.7. SEC Filings; Financial Statements.
(a) QVC has filed all forms, reports and documents required
to be filed by it with the SEC since January 31, 1991, and
has heretofore made available to Paramount, in the form filed
with the SEC (excluding any exhibits thereto), (i) its Annual
Reports on Form 10-K for the fiscal years ended January 31,
1991, 1992, and 1993, respectively, (ii) its Quarterly Re-
ports on Form 10-Q for the periods ended April 30, 1993, July
31, 1993 and October 31, 1993, (iii) all proxy statements
relating to QVC's meetings of stockholders (whether annual or
special) held since January 1, 1991 and (iv) all other forms,
reports and other registration statements (other than Quar-
terly Reports on Form 10-Q not referred to in clause (ii)
above and preliminary materials) filed by QVC with the SEC
since January 31, 1991 (the forms, reports and other docu-
ments referred to in clauses (i), (ii), (iii), and (iv) above
being referred to herein, collectively, as the "QVC SEC Re-
ports"). The QVC SEC Reports andany other forms, reports and
other documents filed by QVC with the SEC after the date of
this Agreement (x) were or will be prepared in accordance
with the requirements of the Securities Act and the Exchange
Act, as the case may be, and the rules and regulations there-
under and (y) did not at the time they were filed, or will
not at the time they are filed, contain any untrue statement
of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the state-
ments made therein, in the light of the circumstances under
which they were made, not misleading. No QVC Subsidiary is
required to file any form, report or other document with the
SEC.
(b) Each of the consolidated financial statements
(including, in each case, any notes thereto) contained in the
QVC SEC Reports was prepared in accordance with generally ac-
cepted accounting principles applied on a consistent basis
throughout the periods indicated (except as may be indicated
in the notes thereto) and each fairly presented the consoli-
dated financial position, results of operations and cash
flows of QVC and the consolidated QVC Subsidiaries as at the
respective dates thereof and for the respective periods indi-
cated therein (subject, in the case of unaudited statements,
to normal and recurring year-end adjustments which were not
<PAGE>
<PAGE>
and are not expected, individually or in the aggregate, to be
material in amount).
(c) Except as and to the extent set forth in the
QVC SEC Reports filed with the SEC prior to the date of this
Agreement, QVC and the QVC Subsidiaries do not have any li-
ability or obligation of any nature (whether accrued, abso-
lute, contingent or otherwise) other than liabilities and
obligations which would not, individually or in the ag-
gregate, have a QVC Material Adverse Effect.
SECTION 4.8. Absence of Certain Changes or Events.
Since January 31, 1993, except as contemplated by this Agree-
ment, as set forth in Section 4.8 of the QVC Disclosure
Schedule or disclosed in any QVC SEC Report filed since Janu-
ary 31, 1993 and prior to the date of this Agreement, QVC and
the QVC Subsidiaries have conducted their businesses only in
the ordinary course and in a manner consistent with past
practice and, since January 31, 1993 there has not been (i)
as of the date hereof, any change, occurrence or circumstance
in the business, results of operations or financial condition
of QVC or any QVC Subsidiary having, individually or in the
aggregate, a QVC Material Adverse Effect, (ii) any damage,
destruction or loss (whether or not covered by insurance)
with respect to any property or asset of QVC or any QVC Sub-
sidiary and having, individually or in the aggregate, a QVC
Material Adverse Effect, (iii) any change by QVC in its ac-
counting methods, principles or practices, (iv) any declara-
tion, setting aside or payment of any dividend or distribu-
tion in respect of any capital stock of QVC or any QVC Sub-
sidiary or any redemption, purchase or other acquisition of
any of their respective securities other than dividends by a
QVC Subsidiary to QVC or (v) other than as set forth in Sec-
tion 4.3and pursuant to the plans, programs or arrangements
referred to in Section 4.10 other than in the ordinary course
of business consistent with past practice, any increase in or
establishment of any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, stock op-
tion (including, without limitation, the granting of stock
options, stock appreciation rights, performance awards, or
restricted stock awards), stock purchase or other employee
benefit plan, or any other increase in the compensation pay-
able or to become payable to any officers or key employees of
QVC or any QVC Subsidiary.
SECTION 4.9. Absence of Litigation. Except as
disclosed in Section 4.9 of the QVC Disclosure Schedule or in
the QVC SEC Reports filed with the SEC prior to the date of
<PAGE>
<PAGE>
this Agreement, there is no claim, action, proceeding or in-
vestigation pending or, to the best knowledge of QVC, threat-
ened against QVC or any QVC Subsidiary, or any property or
asset of QVC or any QVC Subsidiary, before any court, arbi-
trator or administrative, governmental or regulatory author-
ity or body, domestic or foreign, which individually or in
the aggregate, is reasonably likely to have a QVC Material
Adverse Effect. Except as disclosed in the QVC SEC Reports
filed with the SEC prior to the date of this Agreement, nei-
ther QVC nor any QVC Subsidiary nor any property or asset of
QVC or any QVC Subsidiary is subject to any order, writ,
judgment, injunction, decree, determination or award having
or reasonably likely to have, individually or in the ag-
gregate, a QVC Material Adverse Effect.
SECTION 4.10. Employee Benefit Plans. With re-
spect to all the employee benefit plans, programs and ar-
rangements maintained for the benefit of any current or
former employee, officer or director of QVC or any QVC Sub-
sidiary (the "QVC Plans"), except as set forth in the QVC SEC
Reports and except as would not, individually or in the ag-
gregate, have a QVC Material Adverse Effect: (i) none of the
QVC Plans is a multiemployer plan within the meaning of
ERISA; (ii) none of the QVC Plans promises or provides re-
tiree medical or life insurance benefits to any person; (iii)
each QVC Plan intended to be qualified under Section 401(a)
of the Code has received a favorable determination letter
from the IRS that it is so qualified and nothing has occurred
since the date of such letter that could reasonably be ex-
pected to affect the qualified status of such QVC Plan; (iv)
each QVC Plan has been operated in all respects in accordance
with its terms and the requirements of applicable law; (v)
neither QVC nor any QVC Subsidiary has incurred any direct or
indirect liability under, arising out of or by operation of
Title IV of ERISA in connection with the termination of, or
withdrawal from, any QVC Plan or other retirement plan or
arrangement, and no fact or event exists that could reason-
ably be expected to give rise to any such liability; and (vi)
QVC and the QVC Subsidiaries have not incurred any liability
under, and have complied in all respects with, the Worker
Adjustment Retraining Notification Act, and no fact or event
exists that could give rise to liability under such act. Ex-
cept as set forth in the QVC SEC Reports, theaggregate ac-
cumulated benefit obligations of each QVC Plan subject to
Title IV of ERISA (as of the date of the most recent actu-
arial valuation prepared for such QVC Plan) do not exceed the
fair market value of the assets of such QVC Plan (as of the
date of such valuation). Neither the Merger nor any action
related thereto (including, but not limited to, stockholder
<PAGE>
<PAGE>
approval of the Merger) will have the effect of providing ad-
ditional benefits, rights or payments to any person under any
QVC Plan or any employment contract with any QVC employee.
SECTION 4.11. Trademarks, Patents and Copyrights.
QVC and the QVC Subsidiaries own or possess adequate licenses
or other valid rights to use all material patents, patent
rights, trademarks, trademark rights, trade names, trade name
rights, copyrights, service marks, trade secrets, applica-
tions for trademarks and for service marks, know-how and
other proprietary rights and information used or held for use
in connection with the business of QVC and the QVC Subsidiar-
ies as currently conducted or as contemplated to be con-
ducted, and QVC is unaware of any assertion or claim chal-
lenging the validity of any of the foregoing which, individu-
ally or in the aggregate, would have a QVC Material Adverse
Effect. The conduct of the business of QVC and the QVC Sub-
sidiaries as currently conducted does not conflict in any way
with any patent, patent right, license, trademark, trademark
right, trade name, trade name right, service mark or copy-
right of any third party that, individually or in the ag-
gregate, would have a QVC Material Adverse Effect.
SECTION 4.12. Taxes. Except as set forth in Sec-
tion 4.12 of the QVC Disclosure Schedule, QVC and the QVC
Subsidiaries have timely filed all federal, state, local and
foreign tax returns and reports required to be filed by them
through the date hereof and shall timely file all returns and
reports required on or before the Effective Time, except for
such returns and reports the failure of which to file timely
would not, individually or in the aggregate, have a QVC Mate-
rial Adverse Effect. Such reports and returns are and will
be true, correct and complete, except for such failures to be
true, correct and complete as would not, individually or in
the aggregate, have a QVC Material Adverse Effect. Except as
set forth in Section 4.12 of the QVC Disclosure Schedule, QVC
and the QVC Subsidiaries have paid and discharged all fed-
eral, state, local and foreign taxes due from them, other
than such taxes that are being contested in good faith by
appropriate proceedings and are adequately reserved as shown
in the audited consolidated balance sheet of QVC dated Janu-
ary 31, 1993 (the "QVC 1993 Balance Sheet") and its most re-
cent quarterly financial statements, except for such failures
to so pay and discharge which would not, individually or in
the aggregate, have a QVC Material Adverse Effect. Neither
the IRS nor any other taxing authority or agency, domestic or
foreign, is now asserting or, to the best knowledge of QVC,
threatening to assert against QVC or any QVC Subsidiary any
deficiency or material claim for additional taxes or interest
thereon or penalties in connection therewith which, if such
<PAGE>
<PAGE>
deficiencies orclaims were finally resolved against QVC and
the QVC Subsidiaries would, individually or in the aggregate,
have a QVC Material Adverse Effect. The accruals and re-
serves for taxes (including interest and penalties, if any,
thereon) reflected in the QVC 1993 Balance Sheet and the most
recent quarterly financial statements are adequate in ac-
cordance with generally accepted accounting principles, ex-
cept where the failure to be adequate would not have a QVC
Material Adverse Effect. QVC and the QVC Subsidiaries have
withheld or collected and paid over to the appropriate gov-
ernmental authorities or are properly holding for such pay-
ment all taxes required by law to be withheld or collected,
except for such failures to have so withheld or collected and
paid over or to be so holding for payment which would not,
individually or in the aggregate, have a QVC Material Adverse
Effect. There are no material liens for taxes upon the as-
sets of QVC or the QVC Subsidiaries, other than liens for
current taxes not yet due and payable and liens for taxes
that are being contested in good faith by appropriate pro-
ceedings. Neither QVC nor any QVC Subsidiary has agreed to
or is required to make any adjustment under Section 481(a) of
the Code. Neither QVC nor any QVC Subsidiary has made an
election under Section 341(f) of the Code. For purposes of
this Section 4.12, where a determination of whether a failure
by QVC or a QVC Subsidiary to comply with the representations
herein has a QVC Material Adverse Effect is necessary, such
determination shall be made on an aggregate basis with all
other failures within this Section 4.12.
SECTION 4.13. Opinion of Financial Advisor. QVC
has received the opinion of Allen & Company Incorporated to
the effect that the financial terms of the proposed acquisi-
tion by QVC of Paramount are fair from a financial point of
view to QVC and its stockholders. A copy of such opinion
will be delivered to Paramount promptly.
SECTION 4.14. Vote Required. The affirmative vote
of the holders of (a) a majority of the outstanding shares of
QVC Common Stock and QVC Preferred Stock entitled to vote
thereon, voting together as a single class, is the only vote
of the holders of any class or series of QVC capital stock
necessary to approve clause (i) of the QVC Vote Matter and
(b) a majority of the voting shares of QVC Common Stock and
QVC Preferred Stock entitled to vote thereon, voting together
as a single class, is the only vote of the holders of any
class or series of QVC capital stock necessary to approve
clause (ii) of the QVC Vote Matter.
SECTION 4.15. Ownership of Paramount Common Stock.
As of the date of this Agreement and based on the number of
<PAGE>
<PAGE>
issued and outstanding shares of Paramount Common Stock as of
September 3, 1993 set forth in Section 3.3, QVC and its af-
filiates beneficially own, in the aggregate, less than five
percent of the issued and outstanding shares of Paramount
Common Stock.
SECTION 4.16. Brokers. No broker, finder or in-
vestment banker (other than Allen & Company Incorporated) is
entitled to any brokerage, finder's or other fee or commis-
sion in connection with the Transactions based upon arrange-
ments made by or on behalf of QVC. QVC will make available
to Paramount a complete and correct copy of all agreements
between QVC and Allen & Company Incorporated pursuant to
which such firm would be entitled to any payment relating to
the Transactions.
SECTION 4.17. Financing. QVC has delivered to
Paramount binding commitments or agreements to obtain the
financing in contemplation of the Transactions (the "Financ-
ing") in an amount sufficient, together with the QVC Common
Stock and the QVC Merger Preferred Stock, to acquire all the
shares of Paramount Common Stock in the Offer and the Merger
and to pay all related contemplated fees and expenses. QVC
knows of no fact or circumstance (including the obligations
of QVC under this Agreement) that is reasonably likely to
result in the inability of QVC to receive the proceeds from
such Financing.
SECTION 4.18. Purchases of Securities. Except as
contemplated by the Equity Investors Agreements, since Sep-
tember 12, 1993, neither QVC nor, to QVC's knowledge, its
affiliates have purchased or sold shares of QVC Common Stock,
Viacom Class A Common Stock or Viacom Class B Common Stock
and neither QVC nor its affiliates have any knowledge of any
such trading.
5.
ARTICLE V
CONDUCT OF BUSINESSES PENDING THE MERGER
SECTION 5.1. Conduct of Respective Businesses by
Paramount and QVC Pending the Merger. Each of Paramount and
QVC covenants and agrees that, between the date of this Agree-
ment and the Effective Time, unless the other party shall have
consented in writing (such consent not to be unreasonably with-
held), the businesses of each of Paramount and QVC and their
respective subsidiaries shall, in all material respects, be
<PAGE>
<PAGE>
conducted in, and each of Paramount and QVC and their respec-
tive subsidiaries shall not take any material action except in,
the ordinary course of business, consistent with past practice;
and each of Paramount and QVC shall use its reasonable best
efforts to preserve substantially intact its business organiza-
tion, to keep available the services of its and its subsidiar-
ies' current officers, employees and consultants and to pre-
serve its and its subsidiaries' relationships with customers,
suppliers and other persons with which it or any of its subsid-
iaries has significant business relations. By way of amplifi-
cation and not limitation, except as contemplated by this
Agreement (including, without limitation, the making of the
Offer and Section 6.15) or as set forth on Section 5.1 of the
Paramount Disclosure Schedule or Section 5.1 of the QVC Disclo-
sure Schedule or pursuant to the terms of the Equity Investors
Agreements, neither QVC nor Paramount nor any of their respec-
tive subsidiaries shall, between the date of this Agreement and
the Effective Time, directly or indirectly do, or propose or
agree to do, any of the following without the prior written
consent of the other (provided, that the following restrictions
shall not apply to any subsidiaries which Paramount or QVC, as
the case may be, do not control):
(a) amend or otherwise change the Certificate of
Incorporation or By-Laws of QVC or Paramount (except, with
respect to QVC, the QVC Certificate Amendments and the
Certificate of Designations to be filed with the Secretary
of State of the State of Delaware in respect of the QVC
Preferred Stock to be issued in connection with the Equity
Investors Agreement and in respect of the QVC Merger Pre-
ferred Stock to be issued in connection with this Agree-
ment);
(b) issue, sell, pledge, dispose of, grant, encum-
ber, or authorize the issuance, sale, pledge, disposition,
grant or encumbrance of, (i) any shares of capital stock
of any class of it or any of its subsidiaries, or any op-
tions (other than the grant of options in the ordinary
course of business consistent with past practice to em-
ployees who are not executive officers of Paramount or
QVC), warrants, convertible securities or other rights of
any kind to acquire any shares of such capital stock, or
any other ownership interest (including, without limita-
tion, any phantom interest), of it or any of its subsid-
iaries (other than the issuance of shares of capital stock
(i) with respect to QVC, in connection with employment or
consulting arrangements or in exchange for carriage or
(ii) in connection with any dividend reinvestment plan or
<PAGE>
<PAGE>
by any Paramount Plan with an employee stock fund or em-
ployee stock ownership plan feature, consistent with ap-
plicable securities laws or the exercise of options, war-
rants or other similar rights, or conversion of convert-
ible preferred stock, outstanding as of the date of this
Agreement and in accordance with the terms of such op-
tions, warrants or rights in effect on the date of this
Agreement or otherwise permitted to be granted pursuant to
this Agreement) or (ii) any assets of it or any of its
subsidiaries, except for sales in the ordinary course of
business or which, individually do not exceed $10,000,000
or which, in the aggregate, do not exceed $25,000,000;
(c) declare, set aside, make or pay any dividend or
other distribution, payable in cash, stock, property or
otherwise, with respect to any of its capital stock ex-
cept, (i) in the case of QVC, with respect to the QVC Pre-
ferred Stock in accordance with its terms and in the case
of Paramount, regular quarterly dividends in amounts not
in excess of $.20 per quarter and payable consistent with
past practice; provided that, prior to the declaration of
any such dividend, Paramount shall consult with QVC as to
the timing and advisability of declaring any such dividend
and (ii) dividends declared and paid by a subsidiary of
either Paramount or QVC, each such dividend to be declared
and paid in the ordinary course of business consistent
with past practice;
(d) reclassify, combine, split, subdivide or redeem,
purchase or otherwise acquire, directly or indirectly, any
of its capital stock other than (i) with respect to QVC,
repurchase of certain shares with respect to existing re-
purchase rights or obligations and (ii) acquisitions by a
dividend reinvestment plan or by any Paramount Plan with
an employee stock fund or employee stock ownership plan
feature, consistent with applicable securities laws;
(e) (i) acquire (including, without limitation, by
merger, consolidation, or acquisition of stock or assets)
any corporation, partnership, other business organization
or any division thereof or any assets, except for such
acquisitions which, individually do not exceed $10,000,000
or which, in the aggregate, do not exceed $25,000,000;
(ii) incur any indebtedness for borrowed money or issue
any debt securities or assume, guarantee or endorse, or
otherwise as an accommodation become responsible for, the
obligations of any person, or make any loans or advances,
except (A) for any such indebtedness incurred by QVC in
<PAGE>
<PAGE>
connection with the Merger or the Offer, (B) the refinanc-
ing of existing indebtedness, (C) borrowings under com-
mercial paper programs in the ordinary course of business,
(D) borrowings under existing bank lines of credit in the
ordinary course of business, or (E) which, in the ag-
gregate, do not exceed $25,000,000; or (iii) enter into or
amend any contract, agreement, commitment or arrangement
with respect to any matter set forth in this Section
5.1(e);
(f) increase the compensation payable or to become
payable to its executive officers or employees, except for
increases in the ordinary course of business in accordance
with past practices, or grant any severance or termination
pay to, or enter into any employment or severance agree-
ment with any director or executive officer of it or any
of its subsidiaries, or establish, adopt, enter into or
amend in any material respect or take action to accelerate
any rights or benefits under any collective bargaining,
bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensa-
tion, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the ben-
efit of any director, executive officer or employee; or
(g) take any action, other than reasonable and usual
actions in the ordinary course of business and consistent
with past practice, with respect to accounting policies or
procedures.
6.
ARTICLE VI
ADDITIONAL COVENANTS
SECTION 6.1. Access to Information; Confidentiality.
(a) From the date hereof to the Effective Time, each of Para-
mount and QVC shall (and shall cause its subsidiaries and of-
ficers, directors, employees, auditors and agents to) afford
the officers, employees and agents of the other party (the "Re-
spective Representatives") reasonable access at all reasonable
times to its officers, employees, agents, properties, offices,
plants and other facilities, books and records, and shall fur-
nish such Respective Representatives with all financial, oper-
ating and other data and information as may be reasonably re-
quested.
<PAGE>
<PAGE>
(b) All information obtained by Paramount or QVC
pursuant to this Section 6.1 shall be kept confidential in ac-
cordance with the confidentiality agreements (the "Confidenti-
ality Agreements"), between Paramount and QVC.
(c) No investigation pursuant to this Section 6.1
shall affect any representation or warranty in this Agreement
of any party hereto or any condition to the obligations of the
parties hereto.
SECTION 6.2. Directors' and Officers' Indemnifica-
tion and Insurance. (a) The Certificate of Incorporation and
By-Laws of the Surviving Corporation shall contain the provi-
sions with respect to indemnification set forth in the Certifi-
cate of Incorporation and By-Laws of QVC on the date of this
Agreement, which provisions shall not be amended, repealed or
otherwise modified for a period of six years after the Effec-
tive Time in any manner that would adversely affect the rights
thereunder of individuals who at any time prior to the Effec-
tive Time were directors or officers of Paramount in respect of
actions or omissions occurring at or prior to the Effective
Time (including, without limitation, the transactions contem-
plated by this Agreement), unless such modification is required
by law.
(b) From and after the Effective Time, the Surviving
Corporation shall indemnify, defend and hold harmless the
present and former officers and directors of Paramount (col-
lectively, the "Indemnified Parties") against all losses, ex-
penses, claims, damages, liabilities or amounts that are paid
in settlement of, with the approval of the Surviving Corpora-
tion (which approval shall not unreasonably be withheld), or
otherwise in connection with any claim, action, suit, proceed-
ing or investigation (a "Claim"), based in whole or in part on
the fact that such person is or was a director or officer of
Paramount and arising out of actions or omissions occurring at
or prior to the Effective Time (including, without limitation,
the transactions contemplated by this Agreement), in each case
to the full extent permitted under Delaware Law (and shall pay
expenses in advance of the final disposition of any such action
or proceeding to each Indemnified Party to the fullest extent
permitted under Delaware Law, upon receipt from the Indemnified
Party to whom expenses are advanced of the undertaking to repay
such advances contemplated by Section 145(e) of Delaware Law).
(c) Without limiting the foregoing, in the event any
Claim is brought against any Indemnified Party (whether arising
before or after the Effective Time) after the Effective Time
(i) the Indemnified Parties may retain Paramount's regularly
engaged independent legal counsel or other independent legal
<PAGE>
<PAGE>
counsel satisfactory to them, provided that such other counsel
shall be reasonably acceptable to the Surviving Corporation,
(ii) the Surviving Corporation shall pay all reasonable fees
and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received and (iii) the Sur-
viving Corporation will use its reasonable best efforts to as-
sist in the vigorous defense of any such matter, provided that
the Surviving Corporation shall not be liable for any settle-
ment of any Claim effected without its written consent, which
consent shall not be unreasonably withheld. Any Indemnified
Party wishing to claim indemnification under this Section 6.2
upon learning of any such Claim, shall notify the Surviving
Corporation (although the failure so to notify the Surviving
Corporation shall not relieve the Surviving Corporation from
any liability which the Surviving Corporation may have under
this Section 6.2, except to the extent such failure prejudices
the Surviving Corporation), and shall deliver to the Surviving
Corporation the undertaking contemplated by Section 145(e) of
Delaware Law. The Indemnified Parties as a group may retain no
more than one law firm (in addition to local counsel) to repre-
sent them with respect to each such matter unless there is,
under applicable standards of professional conduct (as deter-
mined by counsel to the Indemnified Parties), a conflict on any
significant issue between the positions of any two or more In-
demnified Parties, in which event such additional counsel as
may be required may be retained by the Indemnified Parties.
(d) For a period of three years after the Effective
Time, the Surviving Corporation shall cause to be maintained in
effect the current policies of directors' and officers' li-
ability insurance maintained by Paramount (provided that the
Surviving Corporation may substitute therefor policies of at
least the same coverage and amounts containing terms and condi-
tions which are no less advantageous) with respect to claims
arising from facts or events which occurred before the Effec-
tive Time; provided, however, that in no event shall the Sur-
viving Corporation be required to expend pursuant to this Sec-
tion 6.2(d) more than an amount equal to 200% of current annual
premiums paid by Paramount for such insurance (which premiums
Paramount represents and warrants to be $850,000 in the ag-
gregate).
(e) This Section 6.2 is intended to be for the ben-
efit of, and shall be enforceable by, the Indemnified Parties,
their heirs and personal representatives and shall be binding
on the Surviving Corporation and its respective successors and
assigns.
SECTION 6.3. Notification of Certain Matters. Para-
mount shall give prompt notice to QVC, and QVC shall give
<PAGE>
<PAGE>
prompt notice to Paramount, of (i) the occurrence, or non-
occurrence, of any event the occurrence, or non-occurrence, of
which would be likely to cause (x) any representation or war-
ranty contained in this Agreement to be untrue or inaccurate or
(y) any covenant, condition or agreement contained in this
Agreement not to be complied with or satisfied and (ii) any
failure of Paramount or QVC, as the case may be, to comply with
or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 6.3 shall not
limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
SECTION 6.4. Tax Treatment. Each of Paramount and
QVC will use its reasonable best efforts to cause the Forward
Merger to qualify as a reorganization under the provisions of
Section 368(a) of the Code and to deliver, in connection with
the legal opinion referred to in Section 1.1, letters of repre-
sentation reasonable under the circumstances as to their
present intentions and present knowledge.
SECTION 6.5. Registration Statement; Joint Proxy
Statement; Offer Documents and Schedule 14D-9. (a) As
promptly as practicable after the execution of this Agreement,
QVC and Paramount shall prepare and file with the SEC a joint
proxy statement relating to the meetings of Paramount's stock-
holders and holders of QVC Common Stock and QVC Preferred Stock
to be held in connection with the Merger (together with any
amendments thereof or supplements thereto, the "Proxy State-
ment") and, as promptly as practicable following consummation
of the offer (or expiration or termination of the Offer without
any purchase of shares thereunder), QVC shall prepare and file
with the SEC a registration statement on Form S-4 (together
with any amendments thereto, the "Registration Statement") in
which the Proxy Statement shall be included as a prospectus, in
connection with the registration under the Securities Act of
the shares of QVC Common Stock, QVC Merger Preferred Stock and
Warrants to be issued to the stockholders of Paramount pursuant
to the Merger, the QVC Common Stock issuable upon exercise of
the Warrants and the Debentures for which such QVC Merger Pre-
ferred Stock is exchangeable. Each of Paramount and QVC shall
use all reasonable efforts to have or cause the Registration
Statement to become effective as promptly as practicable, and
shall take all or any action required under any applicable fed-
eral or state securities laws in connection with the issuance
of shares of QVC Common Stock and QVC Merger Preferred Stock
and Warrants pursuant to the Merger. Paramount shall furnish
all information concerning Paramount as QVC may reasonably re-
quest in connection with such actions and the preparation of
the Registration Statement and Proxy Statement. As promptly as
<PAGE>
<PAGE>
practicable after the Registration Statement shall have become
effective, each of QVC and Paramount shall mail the Proxy
Statement to its respective stockholders; provided that no such
mailing shall be required while the Offer remains outstanding.
The Proxy Statement shall include the recommendation of the
Board of Directors of each of QVC and Paramount in favor of the
Merger, unless otherwise necessary due to the applicable fidu-
ciary duties of the respective directors of QVC and Paramount,
as determined by such directors in good faith after consulta-
tion with and based upon the advice of independent legal coun-
sel (who may be such party's regularly engaged independent le-
gal counsel).
(b) The information supplied by QVC for inclusion in
the Registration Statement and the Proxy Statement shall not,
at (i) the time the Registration Statement is declared effec-
tive, (ii) the time the Proxy Statement (or any amendment
thereof or supplement thereto) is first mailed to the stock-
holders of QVC and Paramount, (iii) the time of each of the
Stockholders' Meetings (as defined in Section 6.6), and (iv)
the Effective Time, contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein
not misleading. If at any time prior to the Effective Time any
event or circumstance relating to QVC or any of the QVC Subsid-
iaries, or their respective officers or directors, should be
discovered by QVC which should be set forth in an amendment or
a supplement to the Registration Statement or Proxy Statement,
QVC shall promptly inform Paramount.
(c) The information supplied by Paramount for inclu-
sion in the Registration Statement and the Proxy Statement
shall not, at (i) the time the Registration Statement is de-
clared effective, (ii) the time the Proxy Statement (or any
amendment thereof or supplement thereto) is first mailed to the
stockholders of Paramount and QVC, (iii) the time of each of
the Stockholders' Meetings, and (iv) the Effective Time, con-
tain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein not misleading. If at any
time prior to the Effective Time any event or circumstance re-
lating to Paramount or any of the Paramount Subsidiaries, or
their respective officers or directors, should be discovered by
Paramount which should be set forth in an amendment or a
supplement to the Registration Statement or Proxy Statement,
Paramount shall promptly inform QVC.
(d) QVC represents and warrants to Paramount that
the Offer Documents will not, at the time the Offer Documents
are filed with the SEC or are first published, sent or given to
<PAGE>
<PAGE>
stockholders of Paramount, as the case may be, contain any un-
true statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to
make the statements made therein, in the light of the circum-
stances under which they are made, not misleading. The Offer
Documents shall comply in all material respects as to form with
the requirements of the Exchange Act and the rules and regula-
tions thereunder.
(e) Paramount represents and warrants to QVC that
neither the Schedule 14D-9 nor any information supplied by
Paramount for inclusion in the Offer Documents shall, at the
respective times the Schedule 14D-9, the Offer Documents or any
amendments or supplements thereto are filed with the SEC or are
first published, sent or given to stockholders of Paramount, as
the case may be, contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they are
made, not misleading. The Schedule 14D-9 shall comply in all
material respects as to form with the requirements of the Ex-
change Act and the rules and regulations thereunder.
SECTION 6.6. Stockholders' Meetings. Paramount
shall call and hold a meeting of its stockholders and QVC shall
call and hold a meeting of the holders of the QVC Common Stock
and QVC Preferred Stock (collectively, the "Stockholders' Meet-
ings") as promptly as practicable for the purpose of voting
upon the approval, in the case of Paramount, of the Merger and,
in the case of QVC, of the QVC Vote Matter, and QVC and Para-
mount shall use their reasonable best efforts to hold the
Stockholders' Meetings on the same day and as soon as practi-
cable after the date on which the Registration Statement be-
comes effective; provided that neither Paramount nor QVC shall
be required to call or hold a stockholders meeting while the
Offer remains outstanding. Paramount shall use its reasonable
best efforts to solicit from its stockholders proxies in favor
of the approval of the Merger, and QVC shall use its reasonable
best efforts to solicit from its stockholders proxies in favor
of the QVC Vote Matter and each of Paramount and QVC shall take
all other action necessary or advisable to secure the vote or
consent of stockholders required by Delaware Law to obtain such
approvals, unless otherwise necessary under the applicable fi-
duciary duties of the respective directors of Paramount and
QVC, as determined by such directors in good faith after con-
sultation with and based upon the advice of independent legal
counsel (who may be such party's regularly engaged independent
legal counsel).
<PAGE>
<PAGE>
SECTION 6.7. Letters of Accountants. (a) Paramount
shall use its reasonable best efforts to cause to be delivered
to QVC "comfort" letters of Ernst & Young, Paramount's indepen-
dent public accountants, dated and delivered the date on which
the Registration Statement shall become effective and as of the
Effective Time, and addressed to QVC, in form and substance
reasonably satisfactory to QVC and reasonably customary in
scope and substance for letters delivered by independent public
accountants in connection with transactions such as those con-
templated by this Agreement.
(b) QVC shall use its reasonable best efforts to
cause to be delivered to Paramount "comfort" letters of KPMG
Peat Marwick, QVC's independent public accountants, dated the
date on which the Registration Statement shall become effective
and as of the Effective Time, and addressed to Paramount, in
form and substance reasonably satisfactory to Paramount and
reasonably customary in scope and substance for letters deliv-
ered by independent public accountants in connection with
transactions such as those contemplated by this Agreement.
SECTION 6.8. Employee Benefits. The "Continuing
Directors" (as such term is defined in certain Paramount Plans,
including, without limitation, Paramount's Corporate Annual
Performance Plan, Corporate Long-Term Performance Plan, Supple-
mental Executive Retirement Plan, Non-Qualified Retirement
Plan, Retirement Plan for Non-Employee Directors, Deferred Com-
pensation Plan for Directors and employment agreements with
Messrs. Doppelt, Greenberg, Hertlein, Levinson, Meyers and
Sherman) prior to the Effective Time shall approve the transac-
tions contemplated by this Agreement, and prior to the Effec-
tive Time Paramount and its officers and directors shall take
such other actions, or shall forbear from taking any action, as
may be necessary to insure that such transactions shall not
constitute a "Change in Control" (or other similar event ac-
celerating or triggering changes to benefits or the terms of
any Paramount Plan (a "Paramount Triggering Event")) for pur-
poses of any Paramount Plan under which a Change in Control (or
other Paramount Triggering Event) may be avoided by action or
inaction, as the case may be, by Paramount or any of its offic-
ers or directors. Paramount shall not terminate either
Paramount's Corporate Annual Performance Plan or Paramount's
Long-Term Performance Plan prior to the Effective Time, and
shall (a) delay the establishment and announcement of targets
for awards under Paramount's Corporate Annual Performance Plan
with respect to Paramount's 1994 fiscal year until after the
Effective Time, and (b) delay the implementation of a new per-
formance cycle under Paramount's Corporate Long-Term Perfor-
mance Plan, in each case, until Paramount and QVC shall review
the terms of such Plans after the Effective Time and make such
<PAGE>
<PAGE>
changes as they deem appropriate taking into consideration the
effects of the Merger. QVC shall take or forbear from taking
such action as may be necessary to insure that the transactions
contemplated by this Agreement shall not constitute a change in
ownership or control (or other similar event accelerating or
triggering changes to benefits or the terms of any QVC Plan (a
"QVC Triggering Event")) for purposes of any QVC Plan under
which any such change in ownership or control (or other QVC
Triggering Event) may be avoided by action or inaction, as the
case may be, by QVC or any of its officers or directors.
SECTION 6.9. Further Action; Reasonable Best Ef-
forts. (a) Upon the terms and subject to the conditions
hereof, each of the parties hereto shall (i) make promptly any
filings with or applications to the FCC with respect to the
Transactions and (ii) use its reasonable best efforts to take,
or cause to be taken, all appropriate action, and to do, or
cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make
effective the Transactions and for BellSouth to consummate its
proposed equity investment in QVC as described in the Offer
Documents in a manner consistent with the Modification of Final
Judgment, including, without limitation, using its reasonable
best efforts to obtain all licenses, permits, consents, approv-
als, authorizations, qualifications and orders of Governmental
Entities and parties to contracts with QVC and Paramount and
their respective subsidiaries as are necessary for the consum-
mation of the Transactions and for BellSouth to consummate its
proposed equity investment in QVC as described in the Offer
Documents in a manner consistent with the Modification of Final
Judgment. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the pur-
poses of this Agreement, the proper officers and directors of
each party to this Agreement shall use their reasonable best
efforts to take all such action.
(b) Each party shall use its best efforts to not
take any action, or enter into any transaction, which would
cause any of its representations or warranties contained in
this Agreement to be untrue or result in a breach of any cov-
enant made by it in this Agreement.
SECTION 6.10. Debt Instruments. Prior to or at the
Effective Time, Paramount and each Paramount Subsidiary shall
use its reasonable best efforts to prevent the occurrence, as a
result of the Merger, the Offer and the other transactions con-
templated by this Agreement, of a change in control or any
event which constitutes a default (or an event which with no-
tice or lapse of time or both would become a default) under any
<PAGE>
<PAGE>
debt instrument of Paramount or any Paramount Subsidiary, in-
cluding, without limitation, debt securities registered under
the Securities Act.
SECTION 6.11. Public Announcements. QVC and Para-
mount shall consult with each other before issuing any press
release or otherwise making any public statements with respect
to this Agreement or any Transaction and shall not issue any
such press release or make any such public statement without
the prior consent of the other party, which shall not be unrea-
sonably withheld; provided, however, that a party may, without
the prior consent of the other party, issue such press release
or make such public statement as may be required by law or any
listing agreement with a national securities exchange to which
QVC or Paramount is a party if it has used all reasonable ef-
forts to consult with the other party and to obtain such
party's consent but has been unable to do so in a timely man-
ner.
SECTION 6.12. Listing of QVC Shares. QVC shall use
its reasonable best efforts to cause the shares of QVC Common
Stock and QVC Merger Preferred Stock to be issued in the Merger
to be approved for inclusion on the NASDAQ prior to the Effec-
tive Time.
SECTION 6.13. Affiliates of Paramount. Paramount
represents and warrants to QVC that Paramount will promptly
deliver to QVC a letter identifying all persons who may be
deemed affiliates of Paramount under Rule 145 of the Securities
Act, including, without limitation, all directors and executive
officers of Paramount, and Paramount represents and warrants to
QVC that Paramount has advised the persons identified in such
letter of the resale restrictions imposed by applicable securi-
ties laws. Paramount shall use its reasonable best efforts to
obtain from each person identified in such letter a written
agreement, substantially in the form of Exhibit 6.13. Para-
mount shall use its reasonable best efforts to obtain as soon
as practicable from any person who may be deemed to have become
an affiliate of Paramount after Paramount's delivery of the
letter referred to above and prior to the Effective Time, a
written agreement substantially in the form of Exhibit 6.13.
SECTION 6.14. Conveyance Taxes. QVC and Paramount
shall cooperate in the preparation, execution and filing of all
returns, questionnaires, applications, or other documents re-
garding any real property transfer or gains, sales, use, trans-
fer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees, and any similar taxes
<PAGE>
<PAGE>
which become payable in connection with the transactions con-
templated hereby that are required or permitted to be filed on
or before the Effective Time.
SECTION 6.15. Rights Agreement. Except as contem-
plated by this Agreement, the Board of Directors of Paramount
shall not amend or modify the Rights Agreement or redeem the
Rights prior to the Effective Time except pursuant to the Other
Exemption Agreement.
SECTION 6.16. Assumption of Debt and Leases. With
respect to debt issued by Paramount under indentures qualified
under the Trust Indenture Act of 1939 ("Paramount Indentures"),
QVC shall execute and deliver to the trustees under the respec-
tive Paramount Indentures, Supplemental Indentures, in form
satisfactory to the respective trustees, expressly assuming the
obligations of Paramount with respect to the due and punctual
payment of the principal of (and premium, if any) and interest,
if any, on all debt securities issued by Paramount under the
respective Indentures and the due and punctual performance of
all the terms, covenants and conditions of the respective Para-
mount Indentures to be kept or performed by Paramount and shall
deliver such Supplemental Indentures to the respective trustees
under the Paramount Indentures. QVC shall similarly deliver
instruments of assumption to the holders of any debt obliga-
tions of, and the lessors of any real property to, Paramount,
which debt obligations or leases expressly require such assump-
tion in order for the Merger to comply with the debt instrument
or lease.
SECTION 6.17. Gains Tax. Except as provided in Sec-
tion 1.7(b), QVC shall pay any New York State Tax on Gains De-
rived from Certain Real Property Transfers (the "Gains Tax"),
New York State Real Estate Transfer Tax and New York City Real
Property Transfer Tax (the "Transfer Taxes") and any similar
taxes in any other jurisdiction (and any penalties and interest
with respect to such taxes), which become payable in connection
with the Offer and the Merger, on behalf of the stockholders of
Paramount. QVC and Paramount shall cooperate in the prepara-
tion, execution and filing of any required returns with respect
to such taxes (including returns on behalf of the stockholders
of Paramount) and in the determination of the portion of the
consideration allocable to the real property of Paramount and
the Paramount Subsidiaries in New York State and City (or in
any other jurisdiction, if applicable). The terms of the Offer
to Purchase and of the Proxy Statement shall provide that the
stockholders of Paramount shall be deemed to have agreed to be
bound by the allocation established pursuant to this Section
6.17 in the preparation of any return with respect to the Gains
<PAGE>
<PAGE>
Tax and the Transfer Taxes and any similar taxes, if ap-
plicable.
SECTION 6.18. Reverse Merger. In the event that a
decision is made to structure the Merger as a Reverse Merger or
a Forward Merger with a subsidiary of QVC pursuant to Section
1.1, QVC agrees to form a Merger Subsidiary as promptly as
practicable following such decision and to cause a merger
agreement conforming to Section 251 of the Delaware Law and
effecting the terms hereof to be adopted by such Merger Subsid-
iary. Paramount agrees in such case to enter into such merger
agreement.
SECTION 6.19. Post-Offer Agreements. In the event
that the offer is consummated and subject to any applicable
requirements of the FCC: (a) the affirmative vote of a major-
ity of the directors of Paramount who are directors on the date
hereof and continue as directors on the date of the actions
described below will be required to amend, modify or waive any
provisions of this Agreement, or to approve any other action by
Paramount with respect to the transactions contemplated hereby
which adversely affect the interests of the stockholders of
Paramount; (b) QVC shall not directly or indirectly cause Para-
mount to breach its obligations hereunder; and (c) at the Para-
mount Stockholders' Meeting, QVC shall cause all shares of
Paramount Common Stock then owned by it or its subsidiaries to
be voted in favor of the approval and adoption of this Agree-
ment and the transactions contemplated hereby.
7.
ARTICLE VII
CLOSING CONDITIONS
SECTION 7.1. Conditions to Obligations of Each Party to
Effect the Merger. The respective obligations of each party to
effect the Merger and the other transactions contemplated herein
shall be subject to the satisfaction at or prior to the Effective
Time of the following conditions, any or all of which may be
waived, in whole or in part, to the extent permitted by applicable
law:
(a) Effectiveness of the Registration Statement. The
Registration Statement shall have been declared effective by
the SEC under the Securities Act. No stop order suspending
the effectiveness of the Registration Statement shall have
been issued by the SEC and no proceedings for that purpose
shall have been initiated or, to the knowledge of QVC or
Paramount, threatened by the SEC.
<PAGE>
<PAGE>
(b) Stockholder Approval. This Agreement and the
Merger shall have been approved and adopted by the requisite
vote of the stockholders of Paramount and the QVC Vote Matter
shall have been approved and adopted by the requisite vote of
the stockholders of QVC.
(c) No Order. No Governmental Entity or federal or
state court of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any statute, rule,
regulation, executive order, decree, injunction or other or-
der (whether temporary, preliminary or permanent) which is in
effect and which materially restricts, prevents or prohibits
consummation of the Merger or any transaction contemplated by
this Agreement; provided, however, that the parties shall use
their reasonable best efforts to cause any such decree, judg-
ment, injunction or other order to be vacated or lifted.
(d) NASDAQ Listing. The shares of QVC Common Stock and
QVC Merger Preferred Stock issuable to stockholders of Para-
mount in accordance with Article II shall have been included
for listing on the NASDAQ upon official notice of issuance.
(e) FCC Approvals. All authorizations, consents, waiv-
ers, orders or approvals required to be obtained, and all
filings, notices of declarations required to be made, by QVC
and Paramount prior to the consummation of the Merger shall
have been obtained from, and made with, the FCC except for
such authorizations, consents, waivers, orders, approvals,
filings, notices or declarations the failure to obtain or
make which would not have a material adverse effect, at or
after the Effective Time, on the business, results of opera-
tions or financial condition (as existing immediately prior
to the consummation of the Merger) of Paramount and the Para-
mount Subsidiaries, and QVC and the QVC Subsidiaries, on a
combined basis.
SECTION 7.2. Additional Conditions to Obligations of
QVC. The obligations of QVC to effect the Merger and the transac-
tions contemplated herein are also subject to the following condi-
tions:
(a) Representations and Warranties. Each of the repre-
sentations and warranties of Paramount contained in this
Agreement (including, without limitation, Section 6.5), with-
out giving effect to any notification to QVC delivered pursu-
ant to Section 6.3, shall be true and correct as of the Ef-
fective Time as though made on and as of the Effective Time,
except (i) for changes specifically permitted by this Agree-
ment and (ii) that those representations and warranties which
address matters only as of a particular date shall remain
<PAGE>
<PAGE>
true and correct as of such date, except in any case for such
failures to be true and correct which would not, individually
or in the aggregate, have a Paramount Material Adverse Ef-
fect. QVC shall have received a certificate of the Chief
Executive Officer and Chief Financial Officer of Paramount to
such effect.
(b) Agreement and Covenants. Paramount shall have per-
formed or complied in all material respects with all agree-
ments and covenants required by this Agreement to be per-
formed or complied with by it on or prior to the Effective
Time. QVC shall have received a certificate of the Chief
Executive Officer and Chief Financial Officer of Paramount to
that effect.
(c) Material Adverse Change. Since the date of this
Agreement, there shall have been no change, occurrence or
circumstance in the business, results of operations or finan-
cial condition of Paramount or any Paramount Subsidiary hav-
ing or reasonably likely to have, individually or in the ag-
gregate, a material adverse effect on the business, results
of operations or financial condition of Paramount and the
Paramount Subsidiaries, taken as a whole. QVC shall have
received a certificate of the Chief Executive Officer and
Chief Financial Officer of Paramount to such effect.
Notwithstanding the foregoing, the obligations of QVC to effect
the Merger and the other transactions contemplated herein follow-
ing prior consummation of the Offer shall not be subject to the
conditions set forth in Sections 7.2(a), (b) and (c).
SECTION 7.3. Additional Conditions to Obligations of
Paramount. The obligation of Paramount to effect the Merger and
the other transactions contemplated in this Agreement are also
subject to the following conditions:
(a) Representations and Warranties. Each of the repre-
sentations and warranties of QVC contained in this Agreement
(including, without limitation, Section 6.5), without giving
effect to any notification made by QVC to Paramount pursuant
to Section 6.3, shall be true and correct as of the Effective
Time, as though made on and as of the Effective Time, except
(i) for changes specifically permitted by this Agreement and
(ii) that those representations and warranties which address
matters only as of a particular date shall remain true and
correct as of such date, except in any case for such failures
to be true and correct which would not, individually or in
the aggregate, have a QVC Material Adverse Effect. Paramount
shall have received a certificate of the Chief Executive Of-
ficer and Chief Financial Officer of QVC to such effect.
<PAGE>
<PAGE>
(b) Agreements and Covenants. QVC shall have performed
or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or com-
plied with by it on or prior to the Effective Time. Para-
mount shall have received a certificate of the Chief Execu-
tive Officer and Chief Financial Officer of QVC to that ef-
fect.
(c) No Material Adverse Change. Since the date of this
Agreement, there shall have been no change, occurrence or
circumstance in the business, results of operations or finan-
cial condition of QVC or any QVC Subsidiary having or reason-
ably likely to have, individually or in the aggregate, a ma-
terial adverse effect on the business, results of operations
or financial condition of QVC and the QVC Subsidiaries, taken
as a whole. Paramount shall have received a certificate of
the Chief Executive Officer and Chief Financial Officer of
QVC to such effect.
(d) Amendments to QVC's Certificate of Incorporation.
QVC shall have filed with the Secretary of State of the State
of Delaware a certificate of amendment to QVC's Certificate
of Incorporation pursuant to which the QVC Certificate Amend-
ments shall have become effective.
8.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1. Termination. This Agreement may be
terminated at any time prior to the Effective Time, whether
before or after approval of this Agreement and the Merger by
the stockholders of Paramount or the approval by the stockhold-
ers of QVC of the QVC Vote Matter in accordance with Article
II:
(a) by mutual consent of Paramount and QVC;
(b) by QVC, at any time prior to the time that QVC
has consummated the Offer, upon a breach of any represen-
tation, warranty, covenant or agreement on the part of
Paramount set forth in this Agreement, or if any represen-
tation or warranty of Paramount shall have become untrue,
in either case such that the conditions set forth in Sec-
tion 7.2(a) or Section 7.2(b), as the case may be, would
be incapable of being satisfied by July 31, 1994 (or as
otherwise extended); provided, that in any case, a wilful
<PAGE>
<PAGE>
breach shall be deemed to cause such conditions to be in-
capable of being satisfied for purposes of this Section
8.1(b);
(c) by Paramount, upon a breach of any representa-
tion, warranty, covenant or agreement on the part of QVC
set forth in this Agreement, or if any representation or
warranty of QVC shall have become untrue, in either case
such that the conditions set forth in Section 7.3(a) or
Section 7.3(b), as the case may be, would be incapable of
being satisfied by July 31, 1994 (or as otherwise ex-
tended); provided, that in any case, a wilful breach shall
be deemed to cause such conditions to be incapable of be-
ing satisfied for purposes of this Section 8.1(c);
(d) by either QVC or Paramount, if any permanent
injunction or action by any Governmental Entity preventing
the consummation of the Merger shall have become final and
nonappealable;
(e) by either QVC or Paramount at any time prior to
the time that QVC has consummated the Offer, if the Merger
shall not have been consummated before July 31, 1994; pro-
vided, however, that this Agreement may be extended by
written notice of either QVC or Paramount to a date not
later than September 30, 1994, if the Merger shall not
have been consummated as a direct result of QVC or Para-
mount having failed by July 31, 1994, to receive all re-
quired regulatory approvals or consents with respect to
the Merger;
(f) by either QVC or Paramount, if this Agreement
and the Merger, or the matters set forth in clause (i) of
the QVC Vote Matter, as the case may be, shall fail to
receive the requisite vote for approval and adoption by
the stockholders of Paramount or QVC at the Stockholders'
Meetings;
(g) by QVC, if (i) the Board of Directors of Para-
mount shall withdraw, modify or change its recommendation
of this Agreement, the Merger or the Offer in a manner
adverse to QVC or shall have resolved to do any of the
foregoing; provided, that a statement by the Board of Di-
rectors of Paramount that it is neutral or unable to take
a position with respect to the Offer after the commence-
ment or amendment of a tender offer by a third party shall
not be deemed to constitute a withdrawal, modification or
change of its recommendation of this Agreement if the
Solicitation/Recommendation Statement on Schedule 14D-9
<PAGE>
<PAGE>
relating to such third party tender offer recommends re-
jection of such tender and the Board of Directors of Para-
mount reconfirms its recommendation of the Offer on the
date of the filing thereof; (ii) the Board of Directors of
Paramount shall have recommended to the stockholders of
Paramount a Competing Transaction (as defined below);
(iii) QVC has not consummated the Offer and a tender offer
or exchange offer for 30% or more of the outstanding
shares of capital stock of Paramount is commenced, and the
Board of Directors of Paramount recommends that the stock-
holders of Paramount tender their shares in such tender or
exchange offer; or (iv) QVC has not consummated the Offer
and any person shall have acquired beneficial ownership or
the right to acquire beneficial ownership of or any
"group" (as such term is defined under Section 13(d) of
the Exchange Act and the rules and regulations promulgated
thereunder) shall have been formed which beneficially
owns, or has the right to acquire "beneficial ownership"
(as defined in the Rights Plan) of, more than 30% of the
then outstanding shares of capital stock of Paramount;
(h) by Paramount, if the Board of Directors of Para-
mount (x) fails to make or withdraws or modifies its rec-
ommendation referred to in Section 2.2(a) or Section
6.5(a) if there exists at such time a tender offer or ex-
change offer or a proposal by a third party to acquire
Paramount pursuant to a merger, consolidation, share ex-
change, business combination, tender or exchange offer or
other similar transaction or (y) recommends to Paramount's
stockholders approval or acceptance of any of the forego-
ing, in each case only if the Board of Directors of Para-
mount, after consultation with and based upon the advice
of independent legal counsel (who may be such party's
regularly engaged independent legal counsel), determines
in good faith that such action is necessary for the Board
of Directors of Paramount to comply with its fiduciary
duties to stockholders under applicable law; and
(i) by Paramount, if due to the occurrence or cir-
cumstance that would result in a failure to satisfy any of
the conditions set forth in Annex A or otherwise, (A) the
Offer shall have expired without the purchase of shares of
Paramount Common Stock thereunder or QVC shall be obli-
gated to terminate the Offer pursuant to Section 2.5 or
(B) QVC shall have failed to accept for payment shares of
Paramount Common Stock pursuant to the Offer prior to 9:00
a.m. on the first business day following the Final Expira-
tion Date, unless such failure to accept for payment
shares of Paramount Common Stock shall have been caused by
or resulted from the failure of Paramount to perform in
<PAGE>
<PAGE>
any material respect its material covenants and agreements
contained in this Agreement or resulted from the termina-
tion of the Offer pursuant to Section 2.01(c).
The right of any party hereto to terminate this Agreement pur-
suant to this Section 8.1 shall remain operative and in full
force and effect regardless of any investigation made by or on
behalf of any party hereto, any person controlling any such
party or any of their respective officers or directors, whether
prior to or after the execution of this Agreement. For pur-
poses of this Agreement, "Competing Transaction" shall mean any
of the following involving Paramount or any Paramount Subsid-
iaries: (i) any merger, consolidation, share exchange, busi-
ness combination, or other similar transaction; (ii) any dispo-
sition of 30% or more of the assets of Paramount and the Para-
mount Subsidiaries, taken as a whole in a single transaction or
series of transactions; (iii) any tender offer or exchange of-
fer for 30% or more of the outstanding shares of capital stock
of Paramount or the filing of a registration statement under
the Securities Act in connection therewith; (iv) any person
having acquired beneficial ownership or the right to acquire
beneficial ownership of, or any "group" (as such term is de-
fined under Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder) having been formed which
beneficially owns or has the right to acquire beneficial owner-
ship of, 30% or more of the then outstanding shares of capital
stock of Paramount; or (v) any public announcement of a pro-
posal, plan or intention to do any of the foregoing or any
agreement to engage in any of the foregoing.
SECTION 8.2. Effect of Termination. Except as pro-
vided in Section 9.1, in the event of the termination of this
Agreement pursuant to Section 8.1, this Agreement shall forth-
with become void, there shall be no liability on the part of
Paramount or QVC or any of their respective officers or direc-
tors to the other and all rights and obligations of any party
hereto shall cease; provided, however, that (i) nothing herein
shall relieve any party from liability for the wilful breach of
any of its representations, warranties, covenants or agreements
set forth in this Agreement and (ii) if QVC or Paramount shall
terminate this Agreement in accordance with the provisions of
Section 8.1, then if QVC shall continue the Offer, the exemp-
tion agreement attached hereto as Exhibit B shall become effec-
tive.
SECTION 8.3. Amendment. This Agreement may be
amended by the parties hereto by action taken by or on behalf
of their respective Boards of Directors at any time prior to
the Effective Time; provided, further, that, after approval of
<PAGE>
<PAGE>
the Merger by the stockholders of Paramount or QVC, no amend-
ment, which under applicable law may not be made without the
approval of the stockholders of Paramount or QVC, may be made
without such approval. This Agreement may not be amended ex-
cept by an instrument in writing signed by the parties hereto.
SECTION 8.4. Intentionally Omitted.
SECTION 8.5. Fees and Expenses. All costs and ex-
penses, including, without limitation, fees and disbursements
of counsel, financial advisors and accountants, incurred by the
parties hereto shall be borne solely and entirely by the party
which has incurred such costs and expenses.
9.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1. Effectiveness of Representations, War-
ranties and Agreements. (a) Except as set forth in Section
9.1(b), the representations, warranties and agreements of each
party hereto shall remain operative and in full force and ef-
fect, regardless of any investigation made by or on behalf of
any other party hereto, any person controlling any such party
or any of their officers or directors, whether prior to or af-
ter the execution of this Agreement.
(b) The representations, warranties and agreements
in this Agreement shall terminate at the Effective Time or upon
the termination of this Agreement pursuant to Article VIII,
except that the agreements set forth in Articles I, II and IX
and Section 6.2 shall survive the Effective Time and those set
forth in Sections 2.2(c), 2.3, 6.1(b), 8.2 and Article IX
hereof shall survive termination.
SECTION 9.2. Notices. All notices and other com-
munications given or made pursuant hereto shall be in writing
and shall be deemed to have been duly given or made as of the
date delivered, mailed or transmitted, and shall be effective
upon receipt, if delivered personally, mailed by registered or
certified mail (postage prepaid, return receipt requested) to
the parties at the following addresses (or at such other ad-
dress for a party as shall be specified by like changes of ad-
dress) or sent by electronic transmission to the telecopier
number specified below:
<PAGE>
<PAGE>
(a) If to QVC:
QVC Network, Inc.
Goshen Corporate Park
West Chester, PA 19380
Attention: Corporate Secretary
Telecopier No: (215) 430-2380
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attention: Pamela S. Seymon
Telecopier No: (212) 403-1000
(b) If to Paramount:
Paramount Communications Inc.
15 Columbus Circle
New York, NY 10023
Attention: Executive Vice President and
General Counsel
Telecopier No: (212) 373-8184
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: Joel S. Hoffman
Telecopier No: (212) 455-2502
SECTION 9.3. Certain Definitions. For purposes of
this Agreement, the term:
(a) "affiliate" means a person that, directly or
indirectly, through one or more intermediaries, controls,
is controlled by, or is under common control with, the
first mentioned person;
(b) "beneficial owner" with respect to any shares of
Paramount Common Stock means, unless otherwise defined
herein, a person who shall be deemed to be the beneficial
owner of such shares (i) which such person or any of its
affiliates or associates (as such term is defined in Rule
12b-2 promulgated under the Exchange Act) beneficially
owns, directly or indirectly, (ii) which such person or
<PAGE>
<PAGE>
any of its affiliates or associates has, directly or indi-
rectly, (A) the right to acquire (whether such right is
exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or under-
standing or upon the exercise of conversion rights, ex-
change rights, warrants or options, or otherwise or (B)
the right to vote pursuant to any agreement, arrangement
or understanding or (iii) which are beneficially owned,
directly or indirectly, by any other persons with whom
such person or any of its affiliates or associates, or any
person with whom such person or any of its affiliates or
associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing
of any shares;
(c) "business day" shall have the meaning set forth
in Rule 14d-1(c)(6) as promulgated under the Exchange Act;
(d) "control" (including the terms "controlled",
"controlled by" and "under common control with") means the
possession, directly or indirectly or as trustee or execu-
tor, of the power to direct or cause the direction of the
management or policies of a person, whether through the
ownership of stock or as trustee or executor, by contrac-
tor credit arrangement or otherwise;
(e) The parties agree that the term "fully diluted
basis" as used herein, shall mean giving effect to the
shares of Paramount Common Stock then outstanding plus the
shares of Paramount Common Stock issuable upon the exer-
cise of the then exercisable stock options;
(f) The parties agree that the term "Merger", as
used herein, may refer to, consistent with the context of
such usage, each of the single step merger, the second
step merger following the Offer, or both. The parties
hereto agree to promptly amend this Agreement subsequent
to the execution and delivery thereof to provide for more
precise defined terms and usage thereof; and
(g) "subsidiary" or "subsidiaries" of Paramount,
QVC, the Surviving Corporation or any other person means
any corporation, partnership, joint venture or other legal
entity of which Paramount, QVC, the Surviving Corporation
or such other person, as the case may be (either alone or
through or together with any other subsidiary), owns, di-
rectly or indirectly, 50% or more of the stock or other
equity interests, the holders of which are generally en-
titled to vote for the election of the board of directors
<PAGE>
<PAGE>
or other governing body of such corporation or other legal
entity.
SECTION 9.4. Time Period. In computing any time
period hereunder, the computation shall be governed by Rule
14d-1(c)(6) as promulgated under the Exchange Act.
SECTION 9.5. Headings. The headings contained in
this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agree-
ment.
SECTION 9.6. Severability. If any term or other
provision of this Agreement is invalid, illegal or incapable of
being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or le-
gal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon
such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as pos-
sible to the fullest extent permitted by applicable law in an
acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the extent possible.
SECTION 9.7. Entire Agreement. This Agreement (to-
gether with the Exhibits, the Paramount Disclosure Schedule,
the QVC Disclosure Schedule and the other documents delivered
pursuant hereto) and the Confidentiality Agreements constitute
the entire agreement of the parties and supersede all prior
agreements and undertakings, both written and oral, between the
parties, or any of them, with respect to the subject matter
hereof.
SECTION 9.8. Assignment. This Agreement shall not
be assigned by operation of law or otherwise.
SECTION 9.9. Parties in Interest. This Agreement
shall be binding upon and inure solely to the benefit of each
party hereto, and nothing in this Agreement, express or implied
(other than the provisions of Section 6.2), is intended to or
shall confer upon any person any right, benefit or remedy of
any nature whatsoever under or by reason of this Agreement,
including to confer third party beneficiary rights; provided,
however, nothing in the foregoing shall be deemed to derogate
from any rights of the Other Offeror (other than as a third
<PAGE>
<PAGE>
party beneficiary) as against Paramount or its Board with re-
spect to any amendment of this Agreement or failure to enforce
the Agreement.
SECTION 9.10. Specific Performance. The parties
hereto agree that irreparable damage would occur in the event
any provision of this Agreement was not performed in accordance
with the terms hereof and that the parties shall be entitled to
specific performance of the terms hereof, in addition to any
other remedy at law or in equity.
SECTION 9.11. Governing Law. Except to the extent
that Delaware Law is mandatorily applicable to the Merger and
the rights of the stockholders of Paramount and QVC, this
Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York, regardless of the laws
that might otherwise govern under applicable principles of con-
flicts of law.
SECTION 9.12. Counterparts. This Agreement may be
executed in one or more counterparts, and by the different par-
ties hereto in separate counterparts, each of which when ex-
ecuted shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, QVC and Paramount have caused
this Agreement to be executed as of the date first written
above by their respective officers thereunto duly authorized.
ATTEST:
QVC NETWORK, INC.
By By
ATTEST: PARAMOUNT COMMUNICATIONS INC.
By By
<PAGE>
<PAGE>
Exhibit (c)(32)
ANNEX A
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, QVC
shall not be required to accept for payment or pay for any
shares of Paramount Common Stock tendered pursuant to the Of-
fer, and may terminate or amend the Offer and may postpone the
acceptance for payment of and payment for shares of Paramount
Common Stock tendered, if (i) the Minimum Condition shall not
have been satisfied, (ii) the Rights Condition shall not have
been satisfied, or (iii) at any time on or after the date of
this Agreement, and prior to the acceptance for payment of
shares of Paramount Common Stock, any of the following condi-
tions shall not exist:
(a) No Governmental Entity or federal or state court
of competent jurisdiction shall have enacted, issued, pro-
mulgated, enforced or entered any statute, rule, regula-
tion, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is in
effect and which materially restricts, prevents or prohib-
its consummation of the Offer, the Merger or any transac-
tion contemplated by the Agreement; provided that QVC
shall have used its reasonable best efforts to cause any
such decree, judgment, injunction or other order to be
vacated or lifted;
(b) Each of the representations and warranties of
Paramount contained in the Agreement (including, without
limitation, Section 6.5), without giving effect to any
notification to QVC delivered pursuant to Section 6.3,
shall be true and correct as of the date of consummation
of the Offer as though made on and as of such date, except
(i) for changes specifically permitted by the Agreement
and except that the truth and correctness of representa-
tions contained in the Agreement which relate to any
Transaction agreements (other than the Agreement) between
the parties to the Agreement which by the terms of the
Agreement terminate upon consummation of the Merger shall
not be a condition to the consummation of the Offer and
(ii) that those representations and warranties which ad-
dress matters only as of a particular date shall remain
true and correct as of such date, except in any case for
such failures to be true and correct which would not, in-
dividually or in the aggregate, have a Paramount Material
Adverse Effect;
(c) Paramount shall have performed or complied in
all material respects with all agreements and covenants
required by the Agreement to be performed or complied with
<PAGE>
<PAGE>
by it on or prior to the date of consummation of the Of-
fer;
(d) Since the date of the Agreement, there shall
have been no change, occurrence or circumstance in the
business, results of operations or financial condition of
Paramount or any Paramount Subsidiary having or reasonably
likely to have, individually or in the aggregate, a mate-
rial adverse effect on the business, results of operations
or financial condition of Paramount and the Paramount Sub-
sidiaries, taken as a whole;
(e) The Agreement shall not have been terminated in
accordance with its terms;
(f) QVC shall not have terminated the Offer under
Sections 2.1(c) or 2.5 of the Agreement;
(g) QVC and Paramount shall not have agreed that QVC
shall terminate the Offer or postpone the acceptance for
payment of or payment for shares of Paramount Common Stock
thereunder;
and, in the reasonable judgment of QVC in any such case, and
regardless of the circumstances (including any action or inac-
tion by QVC or any of its affiliates) giving rise to any such
condition, it is inadvisable to proceed with such acceptance
for payment or payments.
The foregoing conditions are for the sole benefit of
QVC and may be asserted by QVC regardless of the circumstances
giving rise to any such condition or may be waived by QVC in
whole or in part at any time and from time to time in its sole
discretion, subject to the terms of this Agreement. The fail-
ure by QVC at any time to exercise any of the foregoing rights
shall not be deemed a waiver of any such right; the waiver of
any such right with respect to particular facts and other cir-
cumstances shall not be deemed a waiver with respect to any
other facts and circumstances; and each such right shall be
deemed an ongoing right that may be asserted at any time and
from time to time.
<PAGE>
<PAGE>
Exhibit (c)(32)
ANNEX B
Description of QVC Merger Preferred Stock
Dividends Cumulative from the Effective Time
at the annual rate of $3.00 per
share of QVC Merger Preferred Stock,
payable quarterly.
Conversion Rights None
Liquidation Preference $50.00 per share of QVC Merger Pre-
ferred Stock, plus accrued and un-
paid dividends.
Redemption at the Option
of QVC The QVC Merger Preferred Stock may
not be redeemed prior to the fifth
anniversary of the Effective Time.
On and after such date, the QVC
Merger Preferred Stock may be re-
deemed in whole or in part, at the
option of QVC, initially at a per
share redemption price of $52.50 and
thereafter at prices declining to
$50.00 on and after the tenth an-
niversary of the Effective Time,
plus, in each case, all accrued and
unpaid dividends.
Mandatory Redemption None
Exchange for Debentures The QVC Merger Preferred Stock will
be exchangeable in whole, or in
part, at the option of QVC on any
dividend payment date beginning on
and after the third anniversary of
the Effective Time, for QVC's 6%
Junior Subordinated Debentures (the
"Exchange Debentures") at the rate
of $50.00 principal amount of Ex-
change Debentures for each share of
QVC Merger Preferred Stock. QVC may
effect each exchange only if all
accrued and unpaid dividends on the
QVC Merger Preferred Stock have been
paid.
Voting Rights The QVC Merger Preferred Stock will
have no voting rights except (i) as
otherwise required by law and (ii)
<PAGE>
<PAGE>
for the right to elect two ad-
ditional directors to QVC's Board of
Directors in the event that QVC has
failed to pay dividends payable on
the shares of QVC Merger Preferred
Stock for such number of dividend
periods which shall in the aggregate
contain not less than 360 days. In
any such election, the holders of
shares of QVC Merger Preferred Stock
will vote separately as a class with
the holders of shares of any one or
more other shares of preferred stock
ranking on a parity with the QVC
Merger Preferred Stock. Such right
to elect two directors will continue
until such dividend arrearages have
been paid.
General The QVC Merger Preferred Stock will
contain other customary terms.
Exchange Debentures
Interest 6% per annum, payable semi-annually.
Aggregate Principal
Amount Equal to aggregate liquidation pref-
erence of QVC Merger Preferred Stock
exchanged.
Maturity 20 years from the Effective Time.
Optional Redemption Not redeemable prior to the fifth
anniversary of the Effective Time.
On and after that date, redeemable,
in whole or in part, at the option
of QVC, at a redemption price of
105% of the principal amount thereof
and thereafter at prices declining
to 100% of the principal amount
thereof on and after the tenth an-
niversary of the Effective Time,
plus, in each case, all accrued and
unpaid interest.
Mandatory Redemption None
Conversion None
Subordination The Exchange Debentures will be sub-
ordinated in right of payment to all
Senior Indebtedness of QVC when due.
Senior Indebtedness of QVC will be
<PAGE>
<PAGE>
defined as all indebtedness or obli-
gations (including fees and expenses
with respect thereto) incurred, as-
sumed, guaranteed or otherwise cre-
ated, unless the terms of the in-
strument or instruments by which QVC
incurred, assumed, guaranteed or
otherwise created any such indebted-
ness or obligation expressly provide
that such indebtedness or obligation
is subordinate to all other indebt-
edness of QVC or that such indebted-
ness or obligation is not superior
in right of payment to the Exchange
Debentures with respect to any of
the following: (i) any indebtedness
incurred by QVC, or assumed or guar-
anteed, directly or indirectly, by
QVC (a) for money borrowed, (b) in
connection with the acquisition of
any business, property or other as-
sets (other than trade payables in-
curred in the ordinary course of
business), or (c) for advances or
progress payments in connection with
the construction or acquisition of
any building, motion picture, tele-
vision production or other enter-
tainment of any kind; (ii) any obli-
gation of QVC (or of a Subsidiary
which is guaranteed by QVC) as les-
see under a lease of real or per-
sonal property; (iii) any obligation
of QVC to purchase property at a
future date in connection with a
financing by QVC or a subsidiary;
(iv) letters of credit; (v) currency
swaps and interest rate hedges; and
(vi) any deferral, renewal, exten-
sion or refunding of any of the
foregoing. No payment on account of
principal or interest on the Ex-
change Debentures may be made if at
the time of such payment there ex-
ists a payment default with respect
to any Senior Indebtedness. Upon
any distribution of the assets of
QVC upon any dissolution, total or
partial liquidation or reorganiza-
tion of or similar proceeding relat-
ing to QVC, the holders of its Se-
nior Indebtedness will be entitled
to receive payment in full before
<PAGE>
<PAGE>
the Exchange Debenture holders are
entitled to receive any payment.
Events of Default The term "Event of Default" when
used in the indenture for the Ex-
change Indebtedness will mean any of
the following: (i) failure of QVC
to pay (whether or not prohibited by
the subordination provisions) inter-
est for sixty days on Exchange De-
bentures, (ii) failure to pay prin-
cipal for five days subsequent to
maturity on the Exchange Debentures
(iii) failure to perform any other
covenant contained in the Indenture
for ninety days after notice to QVC
by the trustee (or to QVC and the
trustee by the holders of at least
25% in aggregate principal amount of
Exchange Debentures then outstand-
ing) and (iv) certain events of
bankruptcy, insolvency or reorgani-
zation.
<PAGE>
<PAGE>
Exhibit (c)(32)
ANNEX C
WARRANTS
Each Warrant will entitle the holder thereof to purchase
one share of QVC Common Stock per whole Warrant at a price of
$70.34 per share exercisable at the option of the holder at any
time prior to the tenth anniversary of the Merger. The War-
rants will be exercisable with cash or using an equivalent
amount of liquidation preference of QVC Merger Preferred Stock
or principal amount of Exchange Debentures. The Warrants will
be callable at $15 per Warrant on and after the fifth an-
niversary of the second step merger. The Warrants will contain
customary anti-dilution and other provisions.
<PAGE>
<PAGE>
EXHIBIT 6.13
FORM OF AFFILIATE LETTER
QVC Network, Inc.
Goshen Corporate Park
West Chester, PA 19380
Gentlemen:
I have been advised that as of the date of this let-
ter I may be deemed to be an "affiliate" of Paramount Com-
munications Inc., a Delaware corporation (the "Company"), as
the term "affiliate" is defined for purposes of paragraphs (c)
and (d) of Rule 145 of the rules and regulations (the "Rules
and Regulations") of the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended
(the "Act"). Pursuant to the terms of the Agreement and Plan
of Merger dated as of , 1994, (the "Agreement"),
between QVC Network, Inc., a Delaware corporation ("QVC"), and
the Company, the Company will be merged with and into QVC (the
"Merger").
As a result of the Merger, I may receive shares of
(i) common stock, par value $.01 per share, of QVC and (ii) a
new series of convertible exchangeable preferred stock, par
value $.10 per share, of QVC (collectively, the "QVC Securi-
ties"). I would receive such shares in exchange for, respec-
tively, shares (or options for shares) owned by me of common
stock, par value $10 per share, of the Company (the "Company
Securities").
I represent, warrant and covenant to QVC that in the
event I receive any QVC Securities as a result of the Merger:
A. I shall not make any sale, transfer or other dis-
position of the QVC Securities in violation of the Act or
the Rules and Regulations.
B. I have carefully read this letter and the Agree-
ment and discussed the requirements of such documents and
other applicable limitations upon my ability to sell,
transfer or otherwise dispose of QVC Securities to the
extent I felt necessary, with my counsel or counsel for
the Company.
C. I have been advised that the issuance Of QVC Se-
curities to me pursuant to the Merger has been registered
<PAGE>
<PAGE>
with the Commission under the Act on a Registration State-
ment Form S-4. However, I have also been advised that,
because at the time the Merger is submitted for a vote of
the stockholders of the Company, (a) I may be deemed to be
an affiliate of the Company and (b) the distribution by me
of the QVC Securities has not been registered under the
Act, I may not sell, transfer or otherwise dispose of QVC
Securities issued to me in the Merger unless (i) such
sale, transfer or other disposition is made in conformity
with the volume and other limitations of Rule 145 promul-
gated by the Commission under the Act, (ii) such sale,
transfer or other disposition has been registered under
the Act or (iii) in the opinion of counsel reasonably ac-
ceptable to QVC, such sale, transfer or other disposition
is otherwise exempt from registration under the Act.
D. I understand that QVC is under no obligation to
register the sale, transfer or other disposition of the
QVC Securities by me or on my behalf under the Act or to
take any other action necessary in order to make compli-
ance with an exemption from such registration available
solely as a result of the Merger.
E. I also understand that there will be placed on
the certificates for the QVC Securities issued to me, or
any substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE IS-
SUED IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY ONLY BE TRANS-
FERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT
DATED ________ BETWEEN THE REGISTERED HOLDER HEREOF
AND QVC NETWORK, INC., A COPY OF WHICH AGREEMENT IS
ON FILE AT THE PRINCIPAL OFFICES OF QVC NETWORK,
INC."
F. I also understand that unless a sale or transfer
is made in conformity with the provisions of Rule 145, or
pursuant to a registration statement, QVC reserves the
right to put the following legend on the certificates is-
sued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
WERE ACQUIRED FROM A PERSON WHO RECEIVED SUCH SHARES
IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER
THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE
BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR
FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION
-2-
<PAGE>
<PAGE>
THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF
1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANS-
FERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
OF 1933."
It is understood and agreed that the legends set
forth in paragraphs E and F above shall be removed by delivery
of substitute certificates without such legend if the under-
signed shall have delivered to QVC a copy of a letter from the
staff of the Commission, or an opinion of counsel reasonably
satisfactory to QVC in form and substance reasonably satisfac-
tory to QVC, to the effect that such legend is not required for
purposes of the Act.
Execution of this letter should not be considered an
admission on my part that I am an "affiliate" of the Company as
described in the first paragraph of this letter, or as a waiver
of any rights I may have to object to any claim that I am such
an affiliate on or after the date of this letter.
Very truly yours,
_____________________________
Name:
Accepted this ___ day of
_____________, 1994, by
QVC NETWORK, INC.
By_______________________
Name:
Title:
-3-
<PAGE>
Exhibit (c)(33)
IN THE SUPREME COURT OF THE STATE OF DELAWARE
|
PARAMOUNT COMMUNICATIONS |
INC., VIACOM INC., MARTIN S. |
DAVIS, GRACE J. FIPPINGER, |
IRVING R. FISCHER, BENJAMIN L. |
HOOKS, FRANZ J. LUTOLF, JAMES |
A. PATTISON, IRWIN SCHLOSS, |
SAMUEL J. SILBERMAN, LAWRENCE | Nos. 427, 1993 and
M. SMALL, and GEORGE WEISSMAN, | 428, 1993 (Consolidated)
|
Defendants Below, | Court Below: Court of
Appellants, | Chancery of the State of
| Delaware in and for New
v. | Castle County
|
QVC NETWORK INC., | C.A. No. 13208
|
Plaintiff Below, |
Appellee. |
|
IN RE PARAMOUNT |
COMMUNICATIONS INC. | C.A. No. 13117
SHAREHOLDERS' LITIGATION | (Consolidated)
Submitted: December 9, 1993
Decided by Order: December 9, 1993
Opinion: February 4, 1994
Before VEASEY, Chief Justice, MOORE and HOLLAND, Justices.
Upon appeal from the Court of Chancery. AFFIRMED.
<PAGE>
<PAGE>
Charles F. Richards, Jr., Thomas A. Beck, and Anne C.
Foster, Esquires, of RICHARDS, LAYTON & FINGER, Wilmington,
Delaware; Barry R. Ostrager (Argued), Michael J. Chepiga, Rob-
ert F. Cusumano, Mary Kay Vyskocil, and Peter C. Thomas, Es-
quires, of SIMPSON THACHER & BARTLETT, New York, New York; At-
torneys for Appellants Paramount Communications Inc., and the
Individual Defendants.
A. Gilchrist Sparks, III, and William M. Lafferty,
Esquires of MORRIS, NICHOLS, ARSHT & TUNNELL, Wilmington, Dela-
ware; Stuart J. Baskin (Argued), Jeremy G. Epstein, Alan S.
Goudiss, and Seth J. Lapidow, Esquires, of SHEARMAN & STERLING,
New York, New York; Attorneys for Appellant Viacom Inc.
Bruce M. Stargatt, David C. McBride, Josy W.
Ingersoll, William D. Johnston, Bruce L. Silverstein, and James
P. Hughes, Jr., Esquires of YOUNG, CONAWAY, STARGATT & TAYLOR,
Wilmington, Delaware; Herbert M. Wachtell (Argued), Michael W.
Schwartz, Theodore N. Mirvis, Paul K. Rowe, and George T.
Conway, III, Esquires, of WACHTELL, LIPTON, ROSEN & KATZ, New
York, New York; Attorneys for Appellee QVC Network Inc.
Irving Morris, Karen L. Morris, and Abraham
Rappaport, Esquires, of MORRIS & MORRIS, Wilmington, Delaware;
Pamela S. Tikellis, Carolyn D. Mack, and Cynthia A. Calder,
Esquires, of CHIMICLES, BURT & JACOBSEN, Wilmington, Delaware;
Joseph A. Rosenthal and Norman M. Monhait, Esquires of
ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A., Wilmington, Dela-
ware; Daniel W. Krasner and Jeffrey G. Smith, Esquires, of
WOLF, HALDENSTEIN, ADLER, FREEMAN & HERZ, New York, New York;
Arthur N. Abbey (Argued) and Mark C. Gardy, Esquires, of ABBEY
& ELLIS, New York, New York; Attorneys for the Shareholder
Appellees.
VEASEY, Chief Justice
-2-
<PAGE>
<PAGE>
In this appeal we review an order of the Court of
Chancery dated November 24, 1993 (the "November 24 Order"),
preliminarily enjoining certain defensive measures designed to
facilitate a so-called strategic alliance between Viacom Inc.
("Viacom") and Paramount Communications Inc. ("Paramount") ap-
proved by the board of directors of Paramount (the "Paramount
Board" or the "Paramount directors") and to thwart an unsolic-
ited, more valuable, tender offer by QVC Network Inc. ("QVC").
In affirming, we hold that the sale of control in this case,
which is at the heart of the proposed strategic alliance, im-
plies enhanced judicial scrutiny of the conduct of the Para-
mount Board under Unocal Corp. v. Mesa Petroleum Co., Del.
Supr., 493 A.2d 946 (1985), and Revlon, Inc. v. MacAndrews &
Forbes Holdings, Inc., Del. Supr., 506 A.2d 173 (1986). We
further hold that the conduct of the Paramount Board was not
reasonable as to process or result.
QVC and certain stockholders of Paramount commenced
separate actions (later consolidated) in the Court of Chancery
seeking preliminary and permanent injunctive relief against
Paramount, certain members of the Paramount Board, and Viacom.
This action arises out of a proposed acquisition of Paramount
by Viacom through a tender offer followed by a second-step
merger (the "Paramount-Viacom transaction"), and a competing
unsolicited tender offer by QVC. The Court of Chancery granted
-3-
<PAGE>
<PAGE>
a preliminary injunction. QVC Network, Inc. v. Paramount Com-
munications Inc., Del. Ch., C.A. No. 13208, Jacobs, V.C. (Nov.
24, 1993), ____ A.2d ____ (1993) (the "Court of Chancery Opin-
ion"). We affirmed by order dated December 9, 1993 Paramount
Communications Inc. v. QVC Network Inc., Del. Supr., Nos. 427
and 428, 1993, Veasey, C.J. (Dec. 9, 1993) (the "December 9
Order").*
The Court of Chancery found that the Paramount direc-
tors violated their fiduciary duties by favoring the Paramount-
Viacom transaction over the more valuable unsolicited offer of
QVC. The Court of Chancery preliminarily enjoined Paramount
and the individual defendants (the "Paramount defendants") from
amending or modifying Paramount's stockholder rights agreement
(the "Rights Agreement"), including redemption of the Rights,
or taking other action to facilitate the consummation of the
pending tender offer by Viacom or any proposed second-step
merger, including the Merger Agreement between Paramount and
Viacom dated September 12, 1993 (the "Original Merger Agree-
ment"), as amended on October 24, 1993 (the "Amended Merger
_____________________
* We accepted this expedited interlocutory appeal on Novem-
ber 29, 1993. After briefing and oral argument in this Court
held on December 9, 1993, we issued our December 9 Order af-
firming the November 24 Order of the Court of Chancery. In our
December 9 Order, we stated, "It is not feasible, because of
the exigencies of time, for this Court to complete an opinion
setting forth more comprehensively the rationale of the Court's
decision. Unless otherwise ordered by the Court, such an opin-
ion will follow in due course." December 9 Order at 3. This
is the opinion referred to therein.
-4-
<PAGE>
<PAGE>
Agreement"). Viacom and the Paramount defendants were enjoined
from taking any action to exercise any provision of the Stock
Option Agreement between Paramount and Viacom dated September
12, 1993 (the "Stock Option Agreement"), as amended on October
24, 1993. The Court of Chancery did not grant preliminary in-
junctive relief as to the termination fee provided for the ben-
efit of Viacom in Section 8.05 of the Original Merger Agreement
and the Amended Merger Agreement (the "Termination Fee").
Under the circumstances of this case, the pending
sale of control implicated in the Paramount-Viacom transaction
required the Paramount Board to act on an informed basis to
secure the best value reasonably available to the stockholders.
Since we agree with the Court of Chancery that the Paramount
directors violated their fiduciary duties, we have AFFIRMED the
entry of the order of the Vice Chancellor granting the prelimi-
nary injunction and have REMANDED these proceedings to the
Court of Chancery for proceedings consistent herewith.
We also have attached an Addendum to this opinion
addressing serious deposition misconduct by counsel who ap-
peared on behalf of a Paramount director at the time that
director's deposition was taken by a lawyer representing QVC.*
_____________________
* It is important to put the Addendum in perspective. This
Court notes and has noted its appreciation of the outstanding
judicial workmanship of the Vice Chancellor and the profes-
sionalism of counsel in this matter in handling this expedited
(footnote continued)
-5-
<PAGE>
<PAGE>
I. FACTS
The Court of Chancery Opinion contains a detailed
recitation of its factual findings in this matter. Court of
Chancery Opinion, ____ A.2d ____ slip op. at 2-31. Only a
brief summary of the facts is necessary for purposes of this
opinion. The following summary is drawn from the findings of
fact set forth in the Court of Chancery Opinion and our inde-
pendent review of the record.*
Paramount is a Delaware corporation with its princi-
pal offices in New York City. Approximately 118 million shares
of Paramount's common stock are outstanding and traded on the
New York Stock Exchange. The majority of Paramount's stock is
publicly held by numerous unaffiliated investors. Paramount
owns and operates a diverse group of entertainment businesses,
including motion picture and television studios, book publish-
ers, professional sports teams, and amusement parks.
_____________________
(footnote continued)
litigation with the expertise and skill which characterize
Delaware proceedings of this nature. The misconduct noted in
the Addendum is an aberration which is not to be tolerated in
any Delaware proceeding.
* This Court's standard and scope of review as to facts on
appeal from a preliminary injunction is whether, after indepen-
dently reviewing the entire record, we can conclude that the
findings of the Court of Chancery are sufficiently supported by
the record and are the product of an orderly and logical deduc-
tive process. Ivanhoe Partners v. Newmont Mining Corp., Del.
Supr., 535 A.2d 1334, 1342-41 (1987).
-6-
<PAGE>
<PAGE>
There are 15 persons serving on the Paramount Board.
Four directors are officer-employees of Paramount: Martin S.
Davis ("Davis"), Paramount's Chairman and Chief Executive Of-
ficer since 1983; Donald Oresman ("Oresman"), Executive Vice-
President, Chief Administrative Officer, and General Counsel;
Stanley R. Jaffe, President and Chief Operating Officer; and
Ronald L. Nelson, Executive Vice President and Chief Financial
Officer. Paramount's 11 outside directors are distinguished
and experienced business persons who are present or former se-
nior executives of public corporations or financial institu-
tions."*
_____________________
* Grace J. Fippinger, a former Vice President, Secretary and
Treasurer of NYNEX Corporation, and director of Pfizer,
Inc., Connecticut Mutual Life Insurance Company, and "The
Bear Stearns Companies, Inc.
Irving R. Fischer, Chairman and Chief Executive Officer of
HRH Construction Corporation, Vice Chairman of the New
York City Chapter of the National Multiple Sclerosis Soci-
ety, a member of the New York City Holocaust Memorial Com-
mission, and an Adjunct Professor of Urban Planning at
Columbia University
Benjamin L. Hooks, Senior Vice President of the Chapman
Company and director of Maxima Corporation
J. Hugh Liedtke, Chairman of Pennzoil Company
Franz J. Lutolf, former General Manager and a member of
the Executive Board of Swiss Bank Corporation and director
of Grapha Holding AG, Hergiswil (Switzerland), Banco
Santander (Suisse) S.A., Geneva, Diawa Securities Bank
(Switzerland), Zurich, Cheak Coast Helarb European Acqui-
sitions S.A., Luxembourg Internationale Nederlanden Bank
(Switzerland), Zurich
(footnote continued)
-7-
<PAGE>
<PAGE>
Viacom is a Delaware corporation with its headquar-
ters in Massachusetts. Viacom is controlled by Sumner M.
Redstone ("Redstone"), its Chairman and Chief Executive Of-
ficer, who owns indirectly approximately 85.2 percent of
Viacom's voting Class A stock approximately 69.2 percent of
Viacom's nonvoting Class B stock through National Amusements,
Inc. ("NAI"), an entity 91.7 percent owned by Redstone. Viacom
_____________________
(footnote continued)
James A. Pattison, Chairman and Chief Executive Officer of
the Jim Pattison Group, and director of the Toronto-
Dominion Bank, Canadian Pacific Ltd., and Toyota's Cana-
dian subsidiary
Lester Pollack, General Partner of Lazard Freres & Co.,
Chief Executive Officer of Center Partners, and Senior
Managing Director of Corporate Partners, investment af-
filiates of Lazard Freres, director of Loews Corp., CNA
Financial Corp., Sunamerica Corp., Kaufman & Broad Home
Corp., Parlex Corp., Transco Energy Company, Polaroid
Corp., Continental Cablevision, Inc., and Tidewater Inc.,
and Trustee of New York University
Irwin Schloss, Senior Advisor, Marcus Schloss & Company,
Inc.
Samuel S. Silberman, Retired Chairman of Consolidated Ci-
gar Corporation
Lawrence M. Small, President and Chief Operating Officer
of the Federal National Mortgage Association, director of
Fannie Mae and the Chubb Corporation, and trustee of
Morehouse College and New York University Medical Center
George Weissman, Chairman and Consultant of Philip Morris
Companies, Inc., director of Avnet, Incorporated, and
Chairman of Lincoln Center for the Performing Arts, Inc.
-8-
<PAGE>
<PAGE>
has a wide range of entertainment operations, including a num-
ber of well-known cable television channels such as MTV, Nick-
elodeon, Showtime, and The Movie Channel. Viacom's equity co-
investors in the Paramount-Viacom transaction include NYNEX
Corporation and Blockbuster Entertainment Corporation.
QVC is a Delaware corporation with its headquarters
in West Chester, Pennsylvania. QVC has several large stock-
holders, including Liberty Media Corporation, Comcast Corpora-
tion, Advance Publications, Inc., and Cox Enterprises Inc.
Barry Diller ("Diller"), the Chairman and Chief Executive Of-
ficer of QVC, is also a substantial stockholder. QVC sells a
variety of merchandise through a televised shopping channel.
QVC has several equity co-investors in its proposed combination
with Paramount including BellSouth Corporation and Comcast Cor-
poration.
Beginning in the late 1980s, Paramount investigated
the possibility of acquiring or merging with other companies in
the entertainment, media, or communications industry. Para-
mount considered such transactions to be desirable, and perhaps
necessary, in order to keep pace with competitors in the rap-
idly evolving field of entertainment and communications. Con-
sistent with its goal of strategic expansion, Paramount made a
-9-
<PAGE>
<PAGE>
tender offer for Time Inc. in 1989, but was ultimately unsuc-
cessful. See Paramount Communications, Inc. v. Time Inc., Del.
Supr., 571 A.2d 1140 (1990) ("Time-Warner").
Although Paramount had considered a possible combina-
tion of Paramount and Viacom as early as 1990, recent efforts
to explore such a transaction began at a dinner meeting between
Redstone and Davis on April 20, 1993. Robert Greenhill
("Greenhill"), Chairman of Smith Barney Shearson Inc. ("Smith
Barney"), attended and helped facilitate this meeting. After
several more meetings between Redstone and Davis, serious nego-
tiations began taking place in early July.
It was tentatively agreed that Davis would be the
chief executive officer and Redstone would be the controlling
stockholder of the combined company, but the parties could not
reach agreement on the merger price and the terms of a stock
option to be granted to Viacom. With respect to price, Viacom
offered a package of cash and stock (primarily Viacom Class B
nonvoting stock) with a market value of approximately $61 per
share, but Paramount wanted at least $70 per share.
Shortly after negotiations broke down in July 1993,
two notable events occurred. First, Davis apparently learned
of QVC'S potential interest in Paramount, and told Diller over
-10-
<PAGE>
<PAGE>
lunch on July 21, 1993, that Paramount was not for sale. Sec-
ond, the market value of Viacom's Class B nonvoting stock in-
creased from $46.875 on July 6 to $57.25 on August 20. QVC
claims (and Viacom disputes) that this price increase was
caused by open market purchases of such stock by Redstone or
entities controlled by him.
On August 20, 1993, discussions between Paramount and
Viacom resumed when Greenhill arranged another meeting between
Davis and Redstone. After a short hiatus, the parties negoti-
ated in earnest in early September, and performed due diligence
with the assistance of their financial advisors, Lazard Freres
& Co. ("Lazard") for Paramount and Smith Barney for Viacom. On
September 9, 1993, the Paramount Board was informed about the
status of the negotiations and was provided information by
Lazard, including an analysis of the proposed transaction.
On September 12, 1993, the Paramount Board met again
and unanimously approved the Original Merger Agreement whereby
Paramount would merge with and into Viacom. The terms of the
merger provided that each share of Paramount common stock would
be converted into 0.10 shares of Viacom Class A voting stock,
0.90 shares of Viacom Class B nonvoting stock, and $9.10 in
cash. In addition, the Paramount Board agreed to amend its
"poison pill" Rights Agreement to exempt the proposed merger
-11-
<PAGE>
<PAGE>
with Viacom. The Original Merger Agreement also contained sev-
eral provisions designed to make it more difficult for a poten-
tial competing bid to succeed. We focus, as did the Court of
Chancery, on three of these defensive provisions: a "no-shop"
provision (the "No-Shop Provision"), the Termination Fee, and
the Stock Option Agreement.
First, under the No-Shop Provision, the Paramount
Board agreed that Paramount would not solicit, encourage, dis-
cuss, negotiate, or endorse any competing transaction unless:
(a) a third party "makes an unsolicited written, bona fide pro-
posal, which is not subject to any material contingencies re-
lating to financing"; and (b) the Paramount Board determines
that discussions or negotiations with the third party are nec-
essary for the Paramount Board to comply with its fiduciary
duties.
Second, under the Termination Fee provision, Viacom
would receive a $100 million termination fee if: (a) Paramount
terminated the Original Merger Agreement because of a competing
transaction; (b) Paramount's stockholders did not approve the
merger; or (c) the Paramount Board recommended a competing
transaction.
The third and most significant deterrent device was
the Stock Option Agreement, which granted to Viacom an option
to purchase approximately 19.9 percent (23,699,000 shares) of
-12-
<PAGE>
<PAGE>
Paramount's outstanding common stock at $69.14 per share if any
of the triggering events for the Termination Fee occurred. In
addition to the customary terms that are normally associated
with a stock option, the Stock Option Agreement contained two
provisions that were both unusual and highly beneficial to
Viacom: (a) Viacom was permitted to pay for the shares with a
senior subordinated note of questionable marketability instead
of cash, thereby avoiding the need to raise the $1.6 billion
purchase price (the "Note Feature"); and (b) Viacom could elect
to require Paramount to pay Viacom in cash a sum equal to the
difference between the purchase price and the market price of
Paramount's stock (the "Put Feature"). Because the Stock Op-
tion Agreement was not "capped" to limit its maximum dollar
value, it had the potential to reach (and in this case did
reach) unreasonable levels.
After the execution of the Original Merger Agreement
and the Stock Option Agreement on September 12, 1993, Paramount
and Viacom announced their proposed merger. In a number of
public statements, the parties indicated that the pending
transaction was a virtual certainty. Redstone described it as
a "marriage" that would "never be torn asunder" and stated that
only a "nuclear attack" could break the deal. Redstone also
called Diller and John Malone of Tele-Communications Inc., a
major stockholder of QVC to dissuade them from making a compet-
ing bid.
-13-
<PAGE>
<PAGE>
Despite these attempts to discourage a competing bid,
Diller sent a letter to Davis on September 20, 1993, proposing
a merger in which QVC would acquire Paramount for approximately
$80 per share, consisting of 0.893 shares of QVC common stock
and $30 in cash. QVC also expressed its eagerness to meet with
Paramount to negotiate the details of a transaction. When the
Paramount Board met on September 27, it was advised by Davis
that the Original Merger Agreement prohibited Paramount from
having discussions with QVC (or anyone else) unless certain
conditions were satisfied. In particular, QVC had to supply
evidence that its proposal was not subject to financing contin-
gencies. The Paramount Board was also provided information
from Lazard describing QVC and its proposal.
On October 5, 1993, QVC provided Paramount with evi-
dence of QVC's financing. The Paramount Board then held an-
other meeting on October 11, and decided to authorize manage-
ment to meet-with QVC. Davis also informed the Paramount Board
that Booz-Allen & Hamilton ("Booz-Allen"), a management con-
sulting firm, had been retained to assess, inter alia, the in-
cremental earnings potential from a Paramount-Viacom merger and
a Paramount-QVC merger. Discussion proceeded slowly, however,
due to a delay in Paramount signing a confidentiality agree-
ment. In response to Paramount's request for information, QVC
provided two binders of documents to Paramount on October 20.
-14-
<PAGE>
<PAGE>
On October 21, 1993, QVC filed this action and pub-
licly announced an $80 cash tender offer for 51 percent of
Paramount's outstanding shares (the "QVC tender offer"). Each
remaining share of Paramount common stock would be converted
into 1.42857 shares of QVC common stock in a second-step
merger. The tender offer was conditioned on, among other
things, the invalidation of the Stock Option Agreement, which
was worth over $200 million by that point.* QVC contends that
it had to commence a tender offer because of the slow pace of
the merger discussions and the need to begin seeking clearance
under federal antitrust laws.
Confronted by QVC's hostile bid, which on its face
offered over $10 per share more than the consideration provided
by the Original Merger Agreement, Viacom realized that it would
need to raise its bid in order to remain competitive. Within
hours after QVC's tender offer was announced, Viacom entered
into discussions with Paramount concerning a revised transac-
tion. These discussions led to serious negotiations concerning
a comprehensive amendment to the original Paramount-Viacom
transaction. In effect, the opportunity for a "new deal" with
_____________________
* By November 15, 1993, the value of the Stock Option Agree-
ment had increased to nearly $500 million based on the $90 QVC
bid. See Court of Chancery Opinion, ____ A.2d ____, slip op.
at 59.
-15-
<PAGE>
<PAGE>
Viacom was at hand for the Paramount Board. With the QVC hos-
tile bid offering greater value to the Paramount stockholders,
the Paramount Board had considerable leverage with Viacom.
At a special meeting on October 24, 1993, the Para-
mount Board approved the Amended Merger Agreement and an amend-
ment to the Stock Option Agreement. The Amended Merger Agree-
ment was, however, essentially the same as the Original Merger
Agreement, except that it included a few new provisions. One
provision related to an $80 per share cash tender offer by
Viacom for 51 percent of Paramount's stock, and another changed
the merger consideration so that each share of Paramount would
be converted into 0.20408 shares of Viacom Class A voting
stock, 1.08317 shares of Viacom Class B nonvoting stock, and
0.20408 shares of a new series of Viacom convertible preferred
stock. The Amended Merger Agreement also added a provision
giving Paramount the right not to amend its Rights Agreement to
exempt Viacom if the Paramount Board determined that such an
amendment would be inconsistent with its fiduciary duties be-
cause another offer constituted a "better alternative."* Fi-
nally, the Paramount Board was given the power to terminate the
_____________________
* Under the Amended Merger Agreement and the Paramount
Board's resolutions approving it, no further action of the
Paramount Board would be required in order for Paramount's
Rights Agreement to be amended. As a result, the proper offic-
ers of the company were authorized to implement the amendment
unless they were instructed otherwise by the Paramount Board.
-16-
<PAGE>
<PAGE>
Amended Merger Agreement if it withdrew its recommendation of
the Viacom transaction or recommended a competing transaction.
Although the Amended Merger Agreement offered more
consideration to the Paramount stockholders and somewhat more
flexibility to the Paramount Board than did the Original Merger
Agreement, the defensive measures designed to make a competing
bid more difficult were not removed or modified. In particu-
lar, there is no evidence in the record that Paramount sought
to use its newly-acquired leverage to eliminate or modify the
No-Shop Provision, the Termination Fee, or the Stock Option
Agreement when the subject of amending the Original Merger
Agreement was on the table.
Viacom's tender offer commenced on October 25, 1993,
and QVC's tender offer was formally launched on October 27,
1993. Diller sent a letter to the Paramount Board on October
28 requesting an opportunity to negotiate with Paramount, and
Oresman responded the following day by agreeing to meet. The
meeting, held on November 1, was not very fruitful, however,
after QVC's proposed guidelines for a "fair bidding process"
were rejected by Paramount on the ground that "auction proce-
dures" were inappropriate and contrary to Paramount's contrac-
tual obligations to Viacom.
-17-
<PAGE>
<PAGE>
On November 6, 1993, Viacom unilaterally raised its
tender offer price to $85 per share in cash and offered a com-
parable increase in the value of the securities being proposed
in the second-step merger. At a telephonic meeting held later
that day, the Paramount Board agreed to recommend Viacom's
higher bid to Paramount's stockholders.
QVC responded to Viacom's higher bid on November 12
by increasing its tender offer to $90 per share and by increas-
ing the securities for its second-step merger by a similar
amount. In response to-QVC's latest offer, the Paramount Board
scheduled a meeting for November 15, 1993. Prior to the meet-
ing, Oresman sent the members of the Paramount Board a document
summarizing the "conditions and uncertainties" of QVC's offer.
One director testified that this document gave him a very nega-
tive impression of the QVC bid.
At its meeting on November 15, 1993, the Paramount
Board determined that the new QVC offer was not in the best
interests of the stockholders. The purported basis for this
conclusion was that QVC's bid was excessively conditional. The
Paramount Board did not communicate with QVC regarding the sta-
tus of the conditions because it believed that the No-Shop Pro-
vision prevented such communication in the absence of firm fi-
nancing. Several Paramount directors also testified that they
believed the Viacom transaction would be more advantageous to
-18-
<PAGE>
<PAGE>
Paramount's future business prospects than a QVC transaction.*
Although a number of materials were distributed to the Para-
mount Board describing the Viacom and QVC transactions, the
only quantitative analysis of the consideration to be received
by the stockholders under each proposal was based on then cur-
rent market prices of the securities involved, not on the an-
ticipated value of such securities at the time when the stock-
holders would receive them.**
The preliminary injunction hearing in this case took
place on November 16, 1993. On November 19, Diller wrote to
the Paramount Board to inform it that QVC had obtained financ-
ing commitments for its tender offer and that there was no an-
titrust obstacle to the offer. On November 24, 1993, the Court
of Chancery issued its decision granting a preliminary injunc-
tion in favor of QVC and the plaintiff stockholders. This ap-
peal followed.
_____________________
* This belief may have been based on a report prepared by
Booz-Allen and distributed to the Paramount Board at its Octo-
ber 24 meeting. The report, which relied on public information
regarding QVC, concluded that the synergies of a Paramount-
Viacom merger were significantly superior to those of a
Paramount-QVC merger. QVC has labelled the Booz-Allen report
as a "joke."
** The market prices of Viacom's and QVC's stock were poor
measures of their actual values because such prices constantly
fluctuated depending upon which company was perceived to be the
more likely to acquire Paramount.
-19-
<PAGE>
<PAGE>
II. APPLICABLE PRINCIPLES OF ESTABLISHED DELAWARE LAW
The General Corporation Law of the State of Delaware
(the "General Corporation Law") and the decisions of this Court
have "repeatedly recognized the fundamental principle that the
management of the business and affairs of a Delaware corpora-
tion is entrusted to its directors, who are the duly elected
and authorized representatives of the stockholders. 8 Del. C.
141(a); Aronson v. Lewis, Del. Supr., 473 A.2d 805, 811-12
(1984); Pogostin v. Rice, Del. Supr., 480 A.2d 619, 624 (1984).
Under normal circumstances, neither the courts nor the stock-
holders should interfere with the managerial decisions of the
directors. The business judgment rule embodies the deference
to which such decisions are entitled. Aronson, 473 A.2d at
812.
Nevertheless, there are rare situations which mandate
that a court take a more direct and active role in overseeing
the decisions made and actions taken by directors. In these
situations, a court subjects the directors' conduct to enhanced
scrutiny to ensure that it is reasonable.* The decisions of
this Court have clearly established the circumstances where
_____________________
* Where actual self-interest is present and affects a ma-
jority of the directors approving a transaction, a court will
apply even more exacting scrutiny to determine whether the
transaction is entirely fair to the stockholders. E.g.,
Weinberger v. UOP, Inc., Del. Supr., 457 A.2d 701, 710-11
(1983); Nixon v. Blackwell, Del. Supr., 626 A.2d 1366, 1376
(1993).
-20-
<PAGE>
<PAGE>
such enhanced scrutiny will be applied. E.g., Unocal, 493 A.2d
946; Moran v. Household Int'l., Inc., Del. Supr., 500 A.2d 1346
(1985), Revlon, 506 A.2d 173; Mills Acquisition Co. v.
Macmillan, Inc., Del. Supr., 559 A.2d 1261 (1989); Gilbert v.
El Paso Co., Del. Supr., 575 A.2d 1131 (1990). The case at bar
implicates two such circumstances: (1) the approval of a
transaction resulting in a sale of control, and (2) the adop-
tion of defensive measures in response to a threat to corporate
control.
A. The Significance of a Sale or Change* of Control
When a majority of a corporation's voting shares are
acquired by a single person or entity, or by a cohesive group
acting together, there is a significant diminution in the vot-
ing power of those who thereby become minority stockholders.
Under the statutory framework of the General Corporation Law,
many of the most fundamental corporate changes can be imple-
mented only if they are approved by a majority vote of the
stockholders. Such actions include elections of directors,
amendments to the certificate of incorporation, mergers, con-
solidations, sales of all or substantially all of the assets of
the corporation, and dissolution. 8 Del. C. 211, 242, 251-
258, 263, 271, 275. Because of the overriding importance of
_____________________
* For purposes of our December 9 Order and this Opinion, we
have used the terms "sale of control" and "change of control"
interchangeably without intending any doctrinal distinction.
-21-
<PAGE>
<PAGE>
voting rights, this Court and the Court of Chancery have con-
sistently acted to protect stockholders from unwarranted inter-
ference with such rights.*
In the absence of devices protecting the minority
stockholders,** stockholder votes are likely to become mere
formalities where there is a majority stockholder. For ex-
ample, minority stockholders can be deprived of a continuing
equity interest in their corporation by means of a cash-out
_____________________
* See Schnell v. Chris-Craft Indus., Inc., Del. Supr., 285
A.2d 437, 439 (1971) (holding that actions taken by management
to manipulate corporate machinery "for the purpose of obstruct-
ing the legitimate efforts of dissident stockholders in the
exercise of their rights to undertake a proxy contest against
management" were "contrary to established principles of corpo-
rate democracy" and therefore invalid); Giuricich v. Emtroi
Corp., Del. Supr., 449 A.2d 232, 239 (1982) (holding that
"careful judicial scrutiny will be given a situation in which
the right to vote for the election of successor directors has
been effectively frustrated"); Centaur Partners, IV v. Nat'l
Intergroup, Del. Supr., 582 A.2d 923 (1990) (holding that
supermajority voting provisions must be clear and unambiguous
because they have the effect of disenfranchising the majority);
Stroud v. Grace, Del. Supr., 604 A.2d 75, 84 (1992) (directors'
duty of disclosure is premised on the importance of stockhold-
ers being fully informed when voting on a specific matter);
Blasius Indus., Inc. v. Atlas Corp., Del. Ch., 564 A.2d 651,
659 n. 2 (1988) ("Delaware courts have long exercised a most
sensitive and protective regard for the free and effective ex-
ercise of voting rights.").
** Examples of such protective provisions are supermajority
voting provisions, majority of the minority requirements, etc.
Although we express no opinion on what effect the inclusion of
any such stockholder protective devices would have had in this
case, we note that this Court has upheld, under different cir-
cumstances, the reasonableness of a standstill agreement which
limited a 49.9 percent stockholder to 40 percent board repre-
sentation. Ivanhoe, 535 A.2d at 1343.
-22-
<PAGE>
<PAGE>
merger. Weinberger, 457 A.2d at 703. Absent effective protec-
tive provisions, minority stockholders must rely for protection
solely on the fiduciary duties owed to them by the directors
and the majority stockholder, since the minority stockholders
have lost the power to influence corporate direction through
the ballot. The acquisition of majority status and the conse-
quent privilege of exerting the powers of majority ownership
come at a price. That price is usually a control premium which
recognizes not only the value of a control block of shares, but
also compensates the minority stockholders for their resulting
loss of voting power.
In the case before us, the public stockholders (in
the aggregate) currently own a majority of Paramount's voting
stock. Control of the corporation is not vested in a single
person, entity, or group, but vested in the fluid aggregation
of unaffiliated stockholders. In the event the Paramount-
Viacom transaction is consummated, the public stockholders will
receive cash and a minority equity voting position in the sur-
viving corporation. Following such consummation, there will be
a controlling stockholder who will have the voting power to:
(a) elect directors; (b) cause a break-up of the corporation;
(c) merge it with another company; (d) cashout the public
stockholders, (e) amend the certificate of incorporation; (f)
sell all or substantially all of the corporate assets; or (g)
otherwise alter materially the nature of the corporation and
-23-
<PAGE>
<PAGE>
the public stockholders' interests. Irrespective of the
present Paramount Board's vision of a long-term strategic alli-
ance with Viacom, the proposed sale of control would provide
the new controlling stockholder with the power to alter that
vision.
Because of the intended sale of control, the
Paramount-Viacom transaction has economic consequences of con-
siderable significance to the Paramount stockholders. Once
control has shifted, the current Paramount stockholders will
have no leverage in the future to demand another control pre-
mium. As a result, the Paramount stockholders are entitled to
receive, and should receive, a control premium and/or protec-
tive devices of significant value. There being no such protec-
tive provisions in the Viacom-Paramount transaction, the Para-
mount directors had an obligation to take the maximum advantage
of the current opportunity to realize for the stockholders the
best value reasonably available.
B. The Obligations of Directors in a Sale or Change
of Control Transaction
The consequences of a sale of control impose special
obligations on the directors of a corporation.* In particular,
_____________________
* We express no opinion on any scenario except the actual
facts before the Court, and our precise holding herein. Unso-
licited tender offers in other contexts may be governed by dif-
ferent precedent. For example, where a potential sale of con-
(footnote continued)
-24-
<PAGE>
<PAGE>
they have the obligation of acting reasonably to seek the
transaction offering the best value reasonably available to the
stockholders. The courts will apply enhanced scrutiny to en-
sure that the directors have acted reasonably. The obligations
of the directors and the enhanced scrutiny of the courts are
well-established by the decisions of this Court. The direc-
tors' fiduciary duties in a sale of control context are whose
which generally attach. In short, "the directors must act in
accordance with their fundamental duties of care and loyalty."
Barkan v. Amsted Indus., Inc., Del. Supr., 567 A.2d 1279, 1286
(1989). As we held in Macmillan:
It is basic to our law that the board
of directors has the ultimate responsibil-
ity for managing the business and affairs
of a corporation. In discharging this
function, the directors owe fiduciary du-
ties of care and loyalty to the corporation
and its shareholders. This unremitting
obligation extends equally to board conduct
in a sale of corporate control.
_____________________
(footnote continued)
trol by a corporation is not the consequence of a board's ac-
tion, this Court has recognized the prerogative of a board of
directors to resist a third party's unsolicited acquisition
proposal or offer. See Pogostin, 480 A.2d at 627; Time-Warner,
571 A.2d at 1152; Bershad v. Curtiss-Wright Corp., Del. Supr.,
535 A.2d 840, 845 (1987); Macmillan, 559 A.2d at 1285 n. 35.
The decision of a board to resist such an acquisition, like all
decisions of a properly-functioning board, must be informed.
Unocal, 493 A.2d at 954-55, and the circumstances of each par-
ticular case will determine the steps that a board must take to
inform itself, and what other action, if any, is required as a
matter of fiduciary duty.
-25-
<PAGE>
<PAGE>
559 A.2d at 1280 (emphasis supplied) (citations omit-
ted).
In the sale of control context, the directors must
focus on one primary objective -- to secure the transaction
offering the best value reasonably available for the stock-
holders and they must exercise their fiduciary duties to fur-
ther that end. The decisions of this Court have consistently
emphasized this goal. Revlon, 506 A.2d at 182 ("The duty of
the board . . . [is] the maximization of the company's value at
a sale for the stockholders' benefit."); Macmillan, 559 A.2d at
1288 ("[I]n a sale of corporate control the responsibility of
the directors is to get the highest value reasonably attainable
for the shareholders."); Barkan, 567 A.2d at 1286 ("[T]he board
must act in a neutral manner to encourage the highest possible
price for shareholders."). See also Wilmington Trust Co. v.
Coulter, Del. Supr., 200 A.2d 441, 448 (1964) (in the context
of the duty of a trustee, "[w]hen all is equal . . . it is
plain that the Trustee is bound to obtain the best price ob-
tainable").
In pursuing this objective, the directors must be
especially diligent. See Citron v. Fairchild Camera and In-
strument Corp., Del. Supr., 569 A.2d 53, 66 (1989) (discussing
"a board's active and direct role in the sale process"). In
particular, this Court has stressed the importance of the board
-26-
<PAGE>
<PAGE>
being adequately informed in negotiating a sale of control:
"The need for adequate information is central to the enlight-
ened evaluation of a transaction that a board must make."
Barkan, 567 A.2d at 1287. This requirement is consistent with
the general principle that "directors have a duty to inform
themselves, prior to making a business decision, of all mate-
rial information reasonably available to them." Aronson, 473
A.2d at 812. See also Cede & Co. v. Technicolor, Inc., Del.
Supr., 634 A.2d 345, 367 (1993); Smith v. Van Gorkom, Del.
Supr., 488 A.2d 858, 872 (1985). Moreover, the role of out-
side, independent directors becomes particularly important be-
cause of the magnitude of a sale of control transaction and the
possibility, in certain cases, that management may not neces-
sarily be impartial. See Macmillan, 559 A.2d at 1285 (requir-
ing "the intense scrutiny and participation of the independent
directors").
Barkan teaches some of the methods by which a board
can fulfill its obligation to seek the best value reasonably
available to the stockholders. 567 A.2d at 1286-87. These
methods are designed to determine the existence and viability
of possible alternatives. They include conducting an auction,
canvassing the market, etc. Delaware law recognizes that there
is "no single blueprint" that directors must follow. Id. at
1286-87; Citron 569 A.2d at 68; Macmillan, 559 A.2d at 1287.
-27-
<PAGE>
<PAGE>
In determining which alternative provides the best
value for the stockholders, a board of directors is not limited
to considering only the amount of cash involved, and is not
required to ignore totally its view of the future value of a
strategic alliance. See Macmillan, 559 A.2d at 1282 n. 29.
Instead, the directors should analyze the entire situation and
evaluate in a disciplined manner the consideration being of-
fered. Where stock or other non-cash consideration is in-
volved, the board should try to quantify its value, if fea-
sible, to achieve an objective comparison of the alternatives.*
In addition, the board may assess a variety of practical con-
siderations relating to each alternative, including:
[an offer's] fairness and feasibility; the
proposed or actual financing for the offer,
and the consequences of that financing;
questions of illegality; . . . the risk of
nonconsum[m]ation; . . . the bidder's iden-
tity, prior background and other business
venture experiences; and the bidder's busi-
ness plans for the corporation and their
effects on stockholder interests.
Macmillan, 559 A.2d at 1282 n. 29. These considerations are
important because the selection of one alternative may perma-
nently foreclose other opportunities. While the assessment of
_____________________
* When assessing the value of non-cash consideration, a
board should focus on its value as of the date it will be re-
ceived by the stockholders. Normally, such value will be de-
termined with the assistance of experts using generally ac-
cepted methods of valuation. See In re RJR Nabisco, Inc.
Shareholders Litig., Del. Ch., C.A. No. 10389, Allen, C. (Jan.
31, 1989), reprinted at 14 Del. J. Corp. L. 1132, 1161.
-28-
<PAGE>
<PAGE>
these factors may be complex, the board's goal is straightfor-
ward: Having informed themselves of all material information
reasonably available, the directors must decide which alterna-
tive is most likely to offer the best value reasonably avail-
able to the stockholders.
C. Enhanced Judicial Scrutiny of a Sale or Change
of Control Transaction
Board action in the circumstances presented here is
subject to enhanced scrutiny. Such scrutiny is mandated by:
(a) the threatened diminution of the current stockholders' vot-
ing power; (b) the fact that an asset belonging to public
stockholders (a control premium) is being sold and may never be
available again; and (c) the traditional concern of Delaware
courts for actions which impair or impede stockholder voting
rights (see supra note 11). In Macmillan, this Court held:
When Revlon duties devolve upon direc-
tors, this Court will continue to exact an
enhanced judicial scrutiny at the thresh-
old, as in Unocal, before the normal pre-
sumptions of the business judgment rule
will apply.*
_____________________
* Because the Paramount Board acted unreasonably as to pro-
cess and result in this sale of control situation, the business
judgment rule did not become operative.
-29-
<PAGE>
<PAGE>
559 A.2d at 1288. The Macmillan decision articulates a spe-
cific two-part test for analyzing board action . . . where com-
peting bidders are not treated equally:*
In the face of disparate treatment,
the trial court must first examine whether
the directors properly perceived that
shareholder interests were enhanced. In
any event the board's action must be rea-
sonable in relation to the advantage sought
to be achieved, or conversely, to the
threat which a particular bid allegedly
poses to stockholder interests.
Id. See also Roberts v. General Instrument Corp., Del. Ch.,
C.A. No. 11639, Allen, C. (Aug. 13, 1990), reprinted at 16 Del.
J. Corp. L. 1540, 1554 ("This enhanced test requires a judicial
judgment of reasonableness in the circumstances.").
The key features of an enhanced scrutiny test are:
(a) a judicial determination regarding the adequacy of the de-
cision making process employed by the directors, including the
information on which the directors based their decision; and
(b) a judicial examination of the reasonableness of the direc-
tors' action in light of the "circumstances then existing. The
directors have the burden of proving that they were adequately
informed and acted reasonably.
_____________________
* Before this test is invoked, "the plaintiff must show, and
the trial court must find, that the directors of the target
company treated one or more of the respective bidders on un-
equal terms." Macmillan, 559 A.2d at 1288.
-30-
<PAGE>
<PAGE>
Although an enhanced scrutiny test involves a review
of the reasonableness of the substantive merits of a board's
actions,* a court should not ignore the complexity of the di-
rectors' task in a sale of control. There are many business
and financial considerations implicated in investigating and
selecting the best value reasonably available. The board of
directors is the corporate decision making body best equipped
to make these judgments. Accordingly, a court applying en-
hanced judicial scrutiny should be deciding whether the direc-
tors made a reasonable decision, not a perfect decision. If a
board selected one of several reasonable alternatives, a court
should not second-guess that choice even though it might have
decided otherwise or subsequent events may have cast doubt on
the board's determination. Thus, courts will not substitute
their business judgment for that of the directors, but will
determine if the directors' decision was, on balance, within a
range of reasonableness. See Unocal, 493 A.2d at 955-56;
Macmillan, 559 A.2d at 1288, Nixon, 626 A.2d at 1378.
_____________________
* It is to be remembered that, in cases where the tradi-
tional business judgment rule is applicable and the board acted
with due care, in good faith, and in the honest belief that
they are acting in the best interests of the stockholders
(which is not this case), the Court gives great deference to
the substance of the directors' decision and will not invali-
date the decision, will not examine its reasonableness, and
"will not substitute our views for those of the board if the
latter's decision can be "attributed to any rational business
purpose." Unocal, 493 A.2d at 949 (quoting Sinclair Oil Corp.
v. Levien, Del. Supr., 280 A.2d 717, 720 (1971)). See Aronson,
473 A.2d at 812.
-31-
<PAGE>
<PAGE>
D. Revlon and Time-Warner Distinguished
The Paramount defendants and Viacom assert that the
fiduciary obligations and the enhanced judicial scrutiny dis-
cussed above are not implicated in this case in the absence of
a "break-up" of the corporation, and that the order granting
the preliminary injunction should be reversed. This argument
is based on their erroneous interpretation of our decisions in
Revlon and Time-Warner.
In Revlon, we reviewed the actions of the board of
directors of Revlon, Inc. ("Revlon"), which had rebuffed the
overtures of Pantry Pride, Inc. and had instead entered into an
agreement with Forstmann Little & Co. ("Forstmann") providing
for the acquisition of 100 percent of Revlon's outstanding
stock by Forstmann and the subsequent break-up of Revlon.
Based on the facts and circumstances present in Revlon, we held
that "[tlhe directors' role changed from defenders of the Cor-
porate bastion to auctioneers charged with getting the best
price for the stockholders at a sale of the company." 506 A.2d
at 182. We further held that "when a board ends an intense
bidding contest on an insubstantial basis, . . . [that] action
cannot withstand the enhanced scrutiny which Unocal requires of
director conduct." Id. at 184.
-32-
<PAGE>
<PAGE>
It is true that one of the circumstances bearing on
these holdings was the fact that "the break-up of the company
. . . had become a reality which even the directors embraced."
Id. at 182. It does not follow, however, that a "break-up"
must be present and "inevitable" before directors are subject
to enhanced judicial scrutiny and are required to pursue a
transaction that is calculated to produce the best value rea-
sonably available to the stockholders. In fact, we stated in
Revlon that when bidders make relatively similar offers, or
dissolution of the company becomes inevitable, the directors
cannot fulfill their enhanced Unocal duties by playing favor-
ites with the contending factions." Id. at 184 (emphasis
added). Revlon thus does not hold that an inevitable dissolu-
tion or "break-up" is necessary.
The decisions of this Court following Revlon rein-
forced the applicability of enhanced scrutiny and the direc-
tors' obligation to seek the best value reasonably available
for the stockholders where there is a pending sale of control,
regardless of whether or not there is to be a break-up of the
corporation. In Macmillan, this Court held:
We stated in Revlon, and again here, that
in a sale of corporate control the respon-
sibility of the directors is to get the
highest value reasonably attainable for the
shareholders.
-33-
<PAGE>
<PAGE>
559 A.2d at 1288 (emphasis added). In Barkan, we observed fur-
ther:
We believe that the general principles an-
nounced in Revlon, in Unocal Corp. v. Mesa
Petroleum Co., Del. Supr., 493 A.2d 946
(1985), and in Moran v, Household Interna-
tional, Inc., Del. Supr., 500 A.2d 1346
(1985) govern this case and every case in
which a fundamental change of corporate
control occurs or is contemplated.
567 A.2d at 1286 (emphasis added).
Although MacMillan and Barkan are clear in holding
that a change of control imposes on directors the obligation to
obtain the best value reasonably available to the stockholders,
the Paramount defendants have interpreted our decision in Time-
Warner as requiring a corporate break-up in order for that ob-
ligation to apply. The facts in Time-Warner, however, were
quite different from the facts of this case, and refute
Paramount's position here. In Time-Warner, the Chancellor held
that there was no change of control in the original stock-for-
stock merger between Time and Warner because Time would be
owned by a fluid aggregation of unaffiliated stockholders both
before and after the merger:
If the appropriate inquiry is whether
a change in control is contemplated, the
answer must be sought in the specific cir-
cumstances surrounding the transaction.
Surely under some circumstances a stock for
stock merger could reflect a transfer of
corporate control. That would, for ex-
ample, plainly be the case here if Warner
-34-
<PAGE>
<PAGE>
were a private company. But where, as
here, the shares of both constituent corpo-
rations are widely held, corporate control
can be expected to remain unaffected by a
stock for stock merger. This in my judg-
ment was the situation with respect to the
original merger agreement. When the spe-
cifics of that situation are reviewed, it
is seen that, aside from legal technicali-
ties and aside from arrangements thought to
enhance the prospect for the ultimate suc-
cession of [Nicholas J. Nicholas, Jr.,
president of Time], neither corporation
could be said to be acquiring the other.
Control of both remained in a large, fluid,
changeable and changing market.
The existence of a control block of
stock in the hands of a single shareholder
or a group with loyalty to each other does
have real consequences to the financial
value of "minority" stock. The law offers
some protection to such shares through the
imposition of a fiduciary duty upon con-
trolling shareholders. But here, effectua-
tion of the merger would not have subjected
Time shareholders to the risks and conse-
quences of holders of minority shares.
This is a reflection of the fact that no
control passed to anyone in the transaction
contemplated. The shareholders of Time
would have "suffered" dilution, of course,
but they would suffer the same type of di-
lution upon the public distribution of new
stock.
Paramount Communications Inc. v. Time Inc., Del. Ch., No.
10866, Allen, C. (July 17, 1989), reprinted at 15 Del. J. Corp.
L. 700, 739 (emphasis added). Moreover, the transaction actu-
ally consummated in Time-Warner was not a merger, as originally
planned, but a sale of Warner's stock to Time.
-35-
<PAGE>
<PAGE>
In our affirmance of the Court of Chancery's well-
reasoned decision, this Court held that "The Chancellor's find-
ings of fact are supported by the record and his conclusion is
correct as a matter of law." 571 A.2d at 1150 (emphasis
added). Nevertheless, the Paramount defendants here have ar-
gued that a break-up is a requirement and have focused on the
following language in our Time-Warner decision:
However, we premise our rejection of plain-
tiffs' Revlon claim on different grounds,
namely, the absence of any substantial evi-
dence to conclude that Time's board, in
negotiating with Warner, made the dissolu-
tion or break-up of the corporate entity
inevitable, as was the case in Revlon.
Under Delaware law there are, gener-
ally speaking and without excluding other
possibilities, two circumstances which may
implicate Revlon duties. The first, and
clearer one, is when a corporation ini-
tiates an active bidding process seeking to
sell itself or to effect a business reorga-
nization involving a clear breakup of the
company. However, Revlon duties may also
be triggered where, in response to a
bidder's offer, a target abandons its long-
term strategy and seeks an alternative
transaction involving the breakup of the
company.
Id. at 1150 (emphasis added) (citation and footnote omitted).
The Paramount defendants have misread the holding of
Time-Warner. Contrary to their argument, our decision in Time-
Warner expressly states that the two general scenarios dis-
cussed in the above-quoted paragraph are not the only instances
-36-
<PAGE>
<PAGE>
where "Revlon duties" may be implicated. The Paramount defen-
dants" argument totally ignores "the phrase "without excluding
other possibilities." Moreover, the instant case is clearly
within "the first general scenario set forth in Time-Warner.
The Paramount Board, albeit unintentionally, had "initiate[d]
an active bidding process seeking to "sell itself" by agreeing
to sell control of the corporation to Viacom in circumstances
where another potential acquiror (QVC) was equally interested
in being a bidder.
The Paramount defendants' position that both a change
of control and a break-up are required must be rejected. Such
a holding would unduly restrict the application of Revlon, is
inconsistent with this Court's decisions in Barkan and
Macmillan, and has no basis in policy. There are few events
that have a more significant impact on the stockholders than a
sale of control or a corporate break-up. Each event represents
a fundamental (and perhaps irrevocable) change in the nature of
the corporate enterprise from a practical standpoint. It is
the significance of each of these events that justifies: (a)
focusing on the directors' obligation to seek the best value
reasonably available to the stockholders; and (b) requiring a
close scrutiny of board action which could be contrary to the
stockholders' interests.
-37-
<PAGE>
<PAGE>
Accordingly, when a corporation undertakes a transac-
tion which will cause: (a) a change in corporate control; or
(b) a break-up of the corporate entity, the directors' obliga-
tion is to seek the best value reasonably available to the
stockholders. This obligation arises because the effect of the
Viacom-Paramount transaction, if consummated, is to shift con-
trol of Paramount from the public stockholders to a controlling
stockholder, Viacom. Neither Time-Warner nor any other deci-
sion of this Court holds that a "break-up" of the company is
essential to give rise to this obligation where there is a sale
of control.
III. BREACH OF FIDUCIARY DUTIES BY PARAMOUNT BOARD
We now turn to duties of the Paramount Board under
the facts of this case and our conclusions as to the breaches
of those duties which warrant injunctive relief.
A. The Specific Obligations of the Paramount Board
Under the facts of this case, the Paramount directors
had the obligation: (a) to be diligent and Vigilant in examin-
ing critically the Paramount-Viacom transaction and the QVC
tender offers; (b) to act in good faith; (c) to obtain, and act
with due care on, all material information reasonably avail-
able, including information necessary to compare the two offers
to determine which of these transactions, or an alternative
-38-
<PAGE>
<PAGE>
course of action, would provide the best value reasonably
available to the stockholders; and (d), to negotiate actively
and in good faith with both Viacom and QVC to that end.
Having decided to sell control of the corporation,
the Paramount directors were required to evaluate critically
whether or not all material aspects of the Paramount-Viacom
transaction (separately and in the aggregate) were reasonable
and in the best interests of the Paramount stockholders in
light of current circumstances, including: the change of con-
trol premium, the Stock Option Agreement, the Termination Fee,
the coercive nature of both the Viacom and QVC tender offers,*
the No-Shop Provision, and the proposed disparate use of the
Rights Agreement as to the Viacom and QVC tender offers, re-
spectively.
These obligations necessarily implicated various is-
sues, including the questions of whether or not those provi-
sions and other aspects of the Paramount-Viacom transaction
(separately and in the aggregate): (a) adversely affected the
value provided to the Paramount stockholders; (b) inhibited or
_____________________
* Both the Viacom and the QVC tender offers were for 51 per-
cent cash and a "back-end" of various securities, the value of
each of which depended on the fluctuating value of Viacom and
QVC stock at any given time. Thus, both tender offers were
two-tiered, front-end loaded, and coercive. Such coercive of-
fers are inherently problematic and should be expected to re-
ceive particularly careful analysis by a target board. See
Unocal, 493 A.2d at 956.
-39-
<PAGE>
<PAGE>
encouraged alternative bids; (c) were enforceable contractual
obligations in light of the directors' fiduciary duties; and
(d) in the end would advance or retard the Paramount directors
obligation to secure for the Paramount stockholders the best
value reasonably available under the circumstances.
The Paramount defendants contend that they were pre-
cluded by certain contractual provisions, including the No-Shop
Provision, from negotiating with QVC or seeking alternatives.
Such provisions, whether or not they are presumptively valid in
the abstract, may not validly define or limit the directors'
fiduciary duties under Delaware law or prevent the Paramount
directors from carrying out their fiduciary duties under Dela-
ware law. To the extent such provisions are inconsistent with
those duties, they are invalid and unenforceable. See Revlon,
506 A.2d at 184-85.
Since the Paramount directors had already decided to
sell control, they had an obligation to continue their search
for the best value reasonably available to the stockholders.
This continuing obligation included the responsibility, at the
October 24 board meeting and thereafter, to evaluate critically
both the QVC tender offers and the Paramount-Viacom transaction
to determine if: (a) the QVC tender offer was, or would con-
tinue to be, conditional; (b) the QVC tender offer could be
improved; (c) the Viacom tender offer or other aspects of the
-40-
<PAGE>
<PAGE>
Paramount-Viacom transaction could be improved; (d) each of the
respective offers would be reasonably likely to come to clo-
sure, and under what circumstances; (e) other material informa-
tion was reasonably available for consideration by the Para-
mount directors; (f) there were viable and realistic alterna-
tive courses of action; and (g) the timing constraints could be
managed so the directors could consider these matters carefully
and deliberately.
B. The Breaches of Fiduciary Duty by the Paramount
Board
The Paramount directors made the decision on Septem-
ber 12, 1993, that, in their judgment, a strategic merger with
Viacom on the economic terms of the Original Merger Agreement
was in the best interests of Paramount and its stockholders.
Those terms provided a modest change of control premium to the
stockholders. The directors also decided at that time that it
was appropriate to agree to certain defensive measures (the
Stock Option Agreement, the Termination Fee, and the No-Shop
Provision) insisted upon by Viacom as part of that economic
transaction. Those defensive measures, coupled with the sale
of control and subsequent disparate treatment of competing bid-
ders, implicated the judicial scrutiny of Unocal, Revlon,
Macmillan, and their progeny. We conclude that the Paramount
directors' process was not reasonable, and the result achieved
-41-
<PAGE>
<PAGE>
for the stockholders was not reasonable under the circum-
stances.
When entering into the Original Merger Agreement, and
thereafter, the Paramount Board clearly gave insufficient at-
tention to the potential consequences of the defensive measures
demanded by Viacom. The Stock Option Agreement had a number of
unusual and potentially "draconian"* provisions, including the
Note Feature and the Put Feature. Furthermore, the Termination
Fee, whether or not unreasonable by itself, clearly made Para-
mount less attractive to other bidders, when coupled with the
Stock Option Agreement. Finally, the No-Shop Provision inhib-
ited the Paramount Board's ability to negotiate with other po-
tential bidders, particularly QVC which had already expressed
an interest in Paramount.**
_____________________
* The Vice Chancellor so characterized the Stock Option
Agreement. Court of Chancery Opinion, ____ A.2d ____, slip op.
at 60. We express no opinion whether a stock option agreement
of essentially this magnitude, but with a reasonable "cap" and
without the Note and Put Features, would be valid or invalid
under other circumstances. See Heeco Ventures v. Sea-Land
Corp., Del. Ch., C.A. No. 8486, Jacobs, V.C. (May 19, 1986)
(21.7 percent stock option); In re Vitalink Communications
Corp. Shareholders Litig., Del. Ch., C.A. No. 12085, Chandler,
V.C. (May 16, 1990) (19.9 percent stock option).
** We express no opinion whether certain aspects of the No-
Shop Provision here could be valid in another context. Whether
or not it could validly have operated here at an early stage
solely to prevent Paramount from actively "shopping" the com-
pany, it could not prevent the Paramount directors from carry-
ing out their fiduciary duties in considering unsolicited bids
or in negotiating for the best value reasonably available to
the stockholders, Macmillan, 559 A.2d at 1287. As we said in
(footnote continued)
-42-
<PAGE>
<PAGE>
Throughout the applicable time period, and especially
from the first QVC merger proposal on September 20 through the
Paramount Board meeting on November 15, QVC's interest in Para-
mount provided the opportunity for the Paramount Board to seek
significantly higher value for the Paramount stockholders than
that being offered by Viacom, QVC persistently demonstrated its
intention to meet and exceed the Viacom offers, and frequently
expressed its willingness to negotiate possible further in-
creases.
The Paramount directors had the opportunity in the
October 23-24 time frame, when the Original Merger Agreement
was renegotiated, to take appropriate action to modify the im-
proper defensive measures as well as to improve the economic
terms of the Paramount-Viacom transaction. Under the circum-
stances existing at that time, it should have been clear to the
Paramount Board that the Stock Option Agreement, coupled with
the Termination Fee and the No-Shop Clause, were impeding the
_____________________
(footnote continued)
Barkan: "Where a board has no reasonable basis upon which to
judge the adequacy of a contemplated transaction, a no-shop
restriction gives rise to the inference that the board seeks to
forestall competing bids." 567 A.2d at 1288. See also Revlon,
506 A.2d at 184 (holding that "[t]he no-shop provision, like
the lock-up option, while not per se illegal, is impermissible
under the Unocal standards when a board's primary duty becomes
that of an auctioneer responsible for selling the company to
the highest bidder").
-43-
<PAGE>
<PAGE>
realization of the best value reasonably available to the Para-
mount stockholders. Nevertheless, the Paramount Board made no
effort to eliminate or modify these counterproductive devices,
and instead continued to cling to its vision of a strategic
alliance with Viacom. Moreover, based on advice from the Para-
mount management, the Paramount directors considered the QVC
offer to be "conditional" and asserted that they were precluded
by the No-Shop Provision from seeking more information from, or
negotiating with, QVC.
By November 12, 1993, the value of the revised QVC
offer on its face exceeded that of the Viacom offer by over
$1 billion at then current values. This significant disparity
of value cannot be justified on the basis of the directors'
vision of future strategy, primarily because the change of con-
trol would supplant the authority of the current Paramount
Board to continue to hold and implement their strategic vision
in any meaningful way. Moreover, their uninformed process had
deprived their strategic vision of much of its credibility.
See Van Gorkom, 488 A.2d at 872; Cede v. Technicolor, 634 A.2d
at 367; Hanson Trust PLC v. ML SCM Acquisition Inc., 2d Cir.,
781 F.2d 264, 274 (1986).
When the Paramount directors met on November 15 to
consider QVC's increased tender offer, they remained prisoners
-44-
<PAGE>
<PAGE>
of their own misconceptions and missed opportunities to elimi-
nate the restrictions they had imposed on themselves. Yet, it
was not "too late" to reconsider negotiating with QVC. The
circumstances existing on November 15 made it clear that the
defensive measures, taken as a whole, were problematic: (a)
the No-Shop Provision could not define or limit their fiduciary
duties; (b) the Stock Option Agreement had become "draconian";
and (c) the Termination Fee, in context with all the circum-
stances, was similarly deterring the realization of possibly
higher bids. Nevertheless, the Paramount directors remained
paralyzed by their uninformed belief that the QVC offer was
"illusory." This final opportunity to negotiate on the stock-
holders' behalf and to fulfill their obligation to seek the
best value reasonably available was thereby squandered.*
_____________________
* The Paramount defendants argue that the Court of Chancery
erred by assuming that the Rights Agreement was "pulled" at the
November 15 meeting of the Paramount Board. The problem with
this argument is that, under the Amended Merger Agreement and
the resolutions of the Paramount Board related thereto, Viacom
would be exempted from the Rights Agreement in the absence of
further action of the Paramount Board and no further meeting
had been scheduled or even contemplated prior to the closing of
the Viacom tender offer. This failure to schedule and hold a
meeting shortly before the closing date in order to make a fi-
nal decision, based on all of the information and circumstances
then existing, whether to exempt Viacom from the Rights Agree-
ment was inconsistent with the Paramount Board's responsibili-
ties and does not provide a basis to challenge the Court of
Chancery's decision.
-45-
<PAGE>
<PAGE>
IV. VIACOM'S CLAIM OF VESTED CONTRACT RIGHTS
Viacom argues that it had certain "vested" contract
rights with respect to the No-Shop Provision and the Stock Op-
tion Agreement.* In effect, Viacom's argument is that the
Paramount directors could enter into an agreement in violation
of their fiduciary duties and then render Paramount, and ulti-
mately its stockholders, liable for failing to carry out an
agreement in violation of those duties. Viacom's protestations
about vested rights are without merit. This Court has found
that those defensive measures were improperly designed to deter
potential bidders, and that such measures do not meet the rea-
sonableness test to which they must be subjected. They are
consequently invalid and unenforceable under the facts of this
case.
The No-Shop Provision could not validly define or
limit the fiduciary duties of the Paramount directors. To the
extent that a contract, or a provision thereof, purports to
require a board to act or not act in such a fashion as to limit
the exercise of fiduciary duties, it is invalid and unenforce-
able. Cf. Wilmington Trust v. Coulter, 200 A.2d at 452-54.
Despite the arguments of Paramount and Viacom to the contrary,
_____________________
* Presumably this argument would have included the Termina-
tion Fee had the Vice Chancellor invalidated that provision or
if appellees had cross-appealed from the Vice Chancellor's re-
fusal to invalidate that provision.
-46-
<PAGE>
<PAGE>
the Paramount directors could not contract away their fiduciary
obligations. Since the No-Shop Provision was invalid, Viacom
never had any vested contract rights in the provision.
As discussed previously, the Stock Option Agreement
contained several "draconian" aspects, including the Note Fea-
ture and the Put Feature. While we have held that lock-up op-
tions are not per se illegal, see Revlon, 506 A.2d at 183, no
options with similar features have ever been upheld by this
Court. Under the circumstances of this case, the Stock Option
Agreement clearly is invalid. Accordingly, Viacom never had
any vested contract rights in that Agreement.
Viacom, a sophisticated party with experienced legal
and financial advisors, knew of (and in fact demanded) the un-
reasonable features of the Stock Option Agreement. It cannot
be now heard to argue that it obtained vested contract rights
by negotiating and obtaining contractual provisions from a
board acting in violation of its fiduciary duties. As the Ne-
braska Supreme Court said in rejecting a similar argument in
ConAgra, Inc. v. Cargill, Inc., Neb. Supr., 382 N.W.2d 576,
587-88 (1986), "To so hold, it would seem, would be to get the
shareholders coming and going." Likewise, we reject Viacom's
arguments and hold that its fate must rise or fall, and in this
instance fall, with the determination that the actions of the
Paramount Board were invalid.
-47-
<PAGE>
<PAGE>
V. CONCLUSION
The realization of the best value reasonably avail-
able to the stockholders became the Paramount directors' pri-
mary obligation under these facts in light of the change of
control. That obligation was not satisfied, and the Paramount
Board's process was deficient. The directors' initial hope and
expectation for a strategic alliance with Viacom was allowed to
dominate their decision making process to the point where the
arsenal of defensive measures established at the outset was
perpetuated (not modified or eliminated) when the situation was
dramatically altered. QVC's unsolicited bid presented the op-
portunity for significantly greater value for the stockholders
and enhanced negotiating leverage for the directors. Rather
than seizing those opportunities, the Paramount directors chose
to wall themselves off from material information which was rea-
sonably available and to hide behind the defensive measures as
a rationalization for refusing to negotiate with QVC or seeking
other alternatives. Their view of the strategic alliance like-
wise became an empty rationalization as the opportunities for
higher value for the stockholders continued to develop.
It is the nature of the judicial process that we de-
cide only the case before us -- a case which, on its facts, is
-48-
<PAGE>
<PAGE>
clearly controlled by established Delaware law. Here, the pro-
posed change of control and the implications thereof were crys-
tal clear. In other cases they may be less clear. The holding
of this case on its facts, coupled with the holdings of the
principal cases discussed herein where the issue of sale of
control is implicated, should provide a workable precedent
against which to measure future cases.
For the reasons set forth herein, the November 24,
1993, Order of the Court of Chancery has been AFFIRMED, and
this matter has been REMANDED for proceedings consistent here-
with, as set forth in the December 9, 1993, Order of this
Court.
-49-
<PAGE>
<PAGE>
ADDENDUM
The record in this case is extensive. The appendix
filed in this Court comprises 15 volumes, totalling some 7251
pages. It includes substantial deposition testimony which
forms part of the factual record before the Court of Chancery
and before this Court. The members of this Court have read and
considered the appendix, including the deposition testimony, in
reaching its decision, preparing the Order of December 9, 1993,
and this opinion. Likewise, the Vice Chancellor's opinion re-
vealed that he was thoroughly familiar with the entire record,
including the deposition testimony. As noted, supra p. 6
note 2, the Court has commended the parties for their profes-
sionalism in conducting expedited discovery, assembling and
organizing the record, and preparing and presenting very help-
ful briefs, a joint appendix, and oral argument.
The Court is constrained, however, to add this Adden-
dum. Although this Addendum has no bearing on the outcome of
the case, it relates to a serious issue of professionalism in-
volving deposition practice in proceedings in Delaware trial
courts.*
_____________________
* We raise this matter sua sponte as part of our exclusive
supervisory responsibility to regulate and enforce appropriate
conduct of lawyers appearing in Delaware proceedings. See In
re Infotechnology, Inc. Shareholder Litig., Del. Supr., 582
A.2d 215 (1990); In re Nenno, Del. Supr., 472 A.2d 815, 819
(1983); In re Green, Del. Supr., 464 A.2d 881, 885 (1983);
(footnote continued)
-50-
<PAGE>
<PAGE>
The issue of discovery abuse, including lack of ci-
vility and professional misconduct during depositions, is a
matter of considerable concern to Delaware courts and courts
_____________________
(footnote continued)
Delaware Optometric Corp. v. Sherwood, Del. Supr., 128 A.2d 812
(1957); Darling Apartment Co. v. Springer, Del. Supr., 22 A.2d
397 (1941). Normally our supervision relates to the conduct of
members of the Delaware Bar and those admitted pro hac vice.
Our responsibility for supervision is not confined to lawyers
who are members of the Delaware Bar and those admitted pro hac
vice, however. See In re Metviner, Del. Supr., Misc. No. 256,
Christie, C.J. (July 7, 1989 and Aug. 22, 1989) (ORDERS). Our
concern, and our duty to insist on appropriate conduct in any
Delaware proceeding, including out-of-state depositions taken
in Delaware litigation, extends to all lawyers, litigants, wit-
nesses, and others.
-51-
<PAGE>
<PAGE>
around the nation.* One particular instance of misconduct dur-
ing a deposition in this case demonstrates such an astonishing
lack of professionalism and civility that it is worthy of spe-
cial note here as a lesson for the future -- a lesson of con-
duct not to be tolerated or repeated.
On November 10, 1993, an expedited deposition of
Paramount, through one of its directors, J. Hugh Liedtke,** was
_____________________
* Justice Sandra Day O'Connor recently highlighted the na-
tional concern about the deterioration in civility in a speech
delivered on December 14, 1993, to an American Bar Association
group on "Civil Justice Improvements."
I believe that the justice system cannot func-
tion effectively when the professionals charged with ad-
ministering it cannot even be polite to one another.
Stress and frustration drive down productivity and make
the process more time-consuming and expensive. Many of
the best people get driven away from the field. The pro-
fession and the system itself lose esteem in the public's
eyes.
. . . . .
In my view, incivility disserves the client be-
cause it wastes time and energy -- time that is billed to
the client at hundreds of dollars an hour, and energy that
is better spent working on the case than working over the
opponent.
The Honorable Sandra Day O'Connor, "Civil Justice system
Improvements," ABA at 5 (Dec. 14, 1993) (footnotes omit-
ted).
** The docket entries in the Court of Chancery show a Novem-
ber 2, 1993, "Notice of Deposition of Paramount Board" (Dkt
65). Presumably, this included Mr. Liedtke, a director of
Paramount. Under Ch. Ct. R. 32(a)(2), a deposition is admis-
sible against a party if the deposition is of an officer, di-
rector, or managing agent. From the docket entries, it appears
that depositions of third party witnesses (persons who were not
(footnote continued)
-52-
<PAGE>
<PAGE>
taken in the state of Texas. The deposition was taken by Dela-
ware counsel for QVC. Mr. Liedtke was individually represented
at this deposition by Joseph D. Jamail, Esquire, of the Texas
Bar. Peter C. Thomas, Esquire, of the New York Bar appeared
and defended on behalf of the Paramount defendants. It does
not appear that any member of the Delaware bar was present at
the deposition representing any of the defendants or the stock-
holder plaintiffs.
Mr. Jamail did not otherwise appear in this Delaware
proceeding representing any party, and he was not admitted pro
hac vice.* Under the rules of the Court of Chancery and this
Court,** lawyers who are admitted pro hac vice to represent a
_____________________
(footnote continued)
directors or officers) were taken pursuant to the issuance of
commissions.
* It does not appear from the docket entries that Mr. Thomas
was admitted pro hac vice in the Court of Chancery. In fact,
no member of his firm appears from the docket entries to have
been so admitted until Barry R. Ostrager, Esquire, who pre-
sented the oral argument on behalf of the Paramount defendants,
was admitted on the day of the argument before the Vice Chan-
cellor, November 16, 1993.
** Ch. Ct. R. 170; Supr. Ct. R. 71. There was no Delaware
lawyer and no lawyer admitted pro hac vice present at the depo-
sition representing any party, except that Mr. Johnston, a
Delaware lawyer, took the deposition on behalf of QVC. The
Court is aware that the general practice has not been to view
as a requirement that a Delaware lawyer or a lawyer already
admitted pro hac vice must be present at all depositions. Al-
though it is not as explicit as perhaps it should be, we be-
lieve that Ch. Ct. R. 170(d), fairly read, requires such pres-
ence:
(footnote continued)
-53-
<PAGE>
<PAGE>
party in Delaware proceedings are subject to Delaware Disci-
plinary Rules,* and are required to review the Delaware State
Bar Association Statement of Principles of Lawyer Conduct (the
"Statement of Principles").** During the Liedtke deposition,
_____________________
(footnote continued)
(d) Delaware counsel for any party shall appear
in the action in which the motion for admission pro hac
vice is filed and shall sign or receive service of all
notices, orders, pleadings or other papers filed in the
action, and shall attend all proceedings before the Court,
Clerk of the Court, or other officers of the Court, unless
excused by the Court. Attendance of Delaware Counsel at
depositions shall not be required unless ordered by the
Court.
See also Hoechst Celanese Corp. v. National Union Fire
Ins. Co., Del. Super., 623 A.2d 1099, 1114 (1991). (Super. Ct.
Civ. R. 90.1, which corresponds to Ch. Ct. R. 170, "merely ex-
cuses attendance of local counsel at depositions, but does not
excuse non-Delaware counsel from compliance with the pro hac
vice requirement. . . . A deposition conducted pursuant to
Court rules is a proceeding.") We believe that these short-
comings in the enforcement of proper lawyer conduct can and
should be remedied consistent with the nature of expedited pro-
ceedings.
* It appears that at least Rule 3.5(c) of the Delaware
Lawyer's Rules of Professional Conduct is implicated here. It
provides: "A lawyer shall not . . . (c) engage in conduct in-
tended to disrupt a tribunal or engage in undignified or dis-
courteous conduct which is degrading to a tribunal."
** The following are a few pertinent excerpts from the State-
ment of Principles:
The Delaware State Bar Association, for the
Guidance of Delaware lawyers, and those lawyers from other
jurisdictions who may be associated with them, adopted the
following Statement of Principles of Lawyer Conduct on
[November 15, 1991]. . . . The purpose of adopting these
Principles is to promote and foster the ideals of profes-
sional courtesy, conduct and cooperation. . . . A lawyer
(footnote continued)
-54-
<PAGE>
<PAGE>
Mr. Jamail abused the privilege of representing a witness in a
Delaware proceeding, in that he: (a) improperly directed the
witness not to answer certain questions; (b) was extraordinar-
ily rude, uncivil, and vulgar; and (c) obstructed the ability
of the questioner to elicit testimony to assist the Court in
this matter.
To illustrate, a few excerpts from the latter stages
of the Liedtke deposition follow:
A. [Mr. Liedtke] I vaguely recall [Mr.
Oresman's letter]. . . . I think I did read it,
probably.
. . . .
_____________________
(footnote continued)
should develop and maintain the qualities of integrity,
compassion, learning, civility, diligence and public ser-
vice that mark the most admired members of our profession.
. . . [A] lawyer . . . . should treat all persons, in-
cluding adverse lawyers and parties, fairly and equitably.
. . . Professional civility is conduct that shows respect
not only for the courts and colleagues, but also for all
people encountered in practice. . . . Respect for the
court requires . . . emotional self-control; [and) the
absence of scorn and superiority in words of demean-
or. . . . A lawyer should use pre-trial procedures, in-
cluding discovery, solely to develop a case for settlement
or trial. No pre-trial procedure should be used to harass
an opponent or delay a case. . . . Questions and objec-
tions at deposition should be restricted to conduct appro-
priate in the presence of a judge. . . . Before moving
the admission of a lawyer from another jurisdiction, a
Delaware lawyer should make such investigation as is re-
quired to form" an informed conviction that the lawyer to
be admitted is ethical and competent, and should furnish
the candidate for admission with a copy of this Statement.
(Emphasis supplied.)
-55-
<PAGE>
<PAGE>
Q. (By Mr. Johnston [Delaware counsel for QVC])
Okay. Do you have any idea why Mr. Oresman was call-
ing that material to your attention?
MR. JAMAIL: Don't answer that.
How would he know what was going on in Mr.
Oresman's mind?
Don't answer it.
Go on to your next question.
MR. JOHNSTON: No, Joe --
MR. JAMAIL: He's not going to answer that.
Certify it. I'm going to shut it down if you don't
go to your next question.
MR. JOHNSTON: No. Joe, Joe --
MR. JAMAIL: Don't "Joe" me, asshole. You can
ask some questions, but get off of that. I'm tired
of you. You could gag a maggot off a meat wagon.
Now, we've helped you every way we can.
MR. JOHNSTON: Let's just take it easy.
MR. JAMAIL: No, we're not going to take it
easy. Get done with this.
MR. JOHNSTON: We will go on to the next ques-
tion.
MR. JAMAIL: Do it now.
MR. JOHNSTON: We will go on to the next ques-
tion. We're not trying to excite anyone.
MR. JAMAIL: Come on. Quit talking. Ask the
question. Nobody wants to socialize with you.
MR. JOHNSTON: I'm not trying to socialize.
We'll go on to another question. We're continuing
the deposition.
MR. JAMAIL: Well, go on and shut up.
MR. JOHNSTON: Are you finished?
-56-
<PAGE>
<PAGE>
MR. JAMAIL: Yeah, you --
MR. JOHNSTON: Are you finished?
MR. JAMAIL: I may be and you may be. Now, you
want to sit here and talk to me, fine. This deposi-
tion is going to be over with. You don't know what
you're doing. Obviously someone wrote out a long
outline of stuff for you to ask. You have no concept
of what you're doing.
Now, I've tolerated you for three hours. If
you've got another question, get on with it. This is
going to stop one hour from now, period. Go.
MR. JOHNSTON: Are you finished?
MR. THOMAS: Come on, Mr. Johnston, move it.
MR. JOHNSTON: I don't need this kind of abuse.
MR. THOMAS: Then just ask the next question.
Q. (By Mr. Johnston) All right. To try to
move forward, Mr. Liedtke, . . . I'll show you what's
been marked as Liedtke 14 and it is a covering letter
dated October 29 from Steven Cohen of Wachtell,
Lipton, Rosen & Katz including QVC's Amendment Num-
ber 1 to its Schedule 14D-1, and my question --
A. No.
Q. -- to you, sir, is whether you've seen that?
A. No. Look, I don't know what your intent in
asking all these questions is, but, my God, I am not
going to play boy lawyer.
Q. Mr. Liedtke --
A. Okay. Go ahead and ask your question.
Q. -- I'm trying to move forward in this depo-
sition that we are entitled to take. I'm trying to
streamline it.
MR. JAMAIL: Come on with your next question.
Don't even talk with this witness.
-57-
<PAGE>
<PAGE>
MR. JOHNSTON: I'm trying to move forward with
it.
MR. JAMAIL: You understand me? Don't talk to
this witness except by question. Did you hear me?
MR. JOHNSTON: I heard you fine.
MR. JAMAIL: You fee makers think you can come
here and sit in somebody's office, get your meter
running, get your full day's fee by asking stupid
questions. Let's go with it.
(JA 6002-06).*
Staunch advocacy on behalf of a client is proper and
fully consistent with the finest effectuation of skill and pro-
fessionalism. Indeed, it is a mark of professionalism, not
weakness, for a lawyer zealously and firmly to protect and pur-
sue a client's legitimate interests by a professional, courte-
ous, and civil attitude toward all persons involved in the lit-
igation process. A lawyer who engages in the type of behavior
exemplified by Mr. Jamail on the record of the Liedtke deposi-
tion is not properly representing his client, and the client's
cause is not advanced by a lawyer who engages in unprofessional
conduct of this nature. It happens that in this case there was
no application to the Court, and the parties and the witness do
not appear to have been prejudiced by this misconduct.**
_____________________
* Joint Appendix of the parties on appeal.
** We recognize the practicalities of litigation practice in
our trial courts, particularly in expedited proceedings such as
this preliminary injunction motion, where simultaneous deposi-
tions are often taken in far-flung locations, and counsel have
(footnote continued)
-58-
<PAGE>
<PAGE>
Nevertheless, the Court finds this unprofessional
behavior to be outrageous and unacceptable, If a Delaware law-
yer had engaged in the kind of misconduct committed by Mr.
Jamail on this record, that lawyer would have been subject to
censure or more serious sanctions.* While the specter of dis-
ciplinary proceedings should not be used by the parties as a
litigation tactic,** conduct such as that involved here goes to
the heart of the trial court proceedings themselves. As such,
_____________________
(footnote continued)
only a few hours to question each witness. Understandably,
counsel may be reluctant to take the time to stop a deposition
and call the trial judge for relief. Trial courts are ex-
tremely busy and overburdened. Avoidance of this kind of mis-
conduct is essential. If such misconduct should occur, the
aggrieved party should recess the deposition and engage in a
dialogue with the offending lawyer to obviate the need to call
the trial judge. If all else fails and it is necessary to call
the trial judge, sanctions may be appropriate against the of-
fending lawyer or party, or against the complaining lawyer or
party if the request for court relief is unjustified. See Ch.
Ct. R. 37. It should also be noted that discovery abuse some-
times is the fault of the questioner, not the lawyer defending
the deposition. These admonitions should be read as applying
to both sides.
* See In re Ramunno, Del. Supr., 625 A.2d 248, 250 (1993)
(Delaware lawyer held to have violated Rule 3.5 of the Rules of
Professional Conduct, and therefore subject to public reprimand
and warning for use of profanity similar to that involved here
and "insulting conduct toward opposing counsel [found] . . .
unacceptable by any standard").
** See Infotechnology, 582 A.2d at 220 ("In Delaware there is
the fundamental constitutional principle that [the Supreme]
Court, alone, has the sole and exclusive responsibility over
all matters affecting governance of the Bar. . . . The Rules
are to be enforced by a disciplinary agency, and am not to be
subverted as procedural weapons.").
-59-
<PAGE>
<PAGE>
it cries out for relief under the trial court's rules, includ-
ing Ch. Ct. R. 37. Under some circumstances, the use of the
trial court's inherent summary contempt powers may be appropri-
ate. See In re Butler, Del. Supr., 609 A.2d 1080, 1082 (1992).
Although busy and overburdened, Delaware trial courts
are "but a phone call away" and would be responsive to the
plight of a party and its counsel bearing the brunt of such
misconduct.* It is not appropriate for this Court to prescribe
in the abstract any particular remedy or to provide an exclu-
sive list of remedies under such circumstances. We assume that
the trial courts of this State would consider protective orders
and the sanctions permitted by the discovery rules. Sanctions
could include exclusion of obstreperous counsel from attending
the deposition (whether or not he or she has been admitted pro
_____________________
* See Hall v. Clifton Precision, E.D. Pa., 150 F.R.D. 525
(1993) (ruling on "coaching," conferences between deposed wit-
nesses and their lawyers, and obstructive tactics):
Depositions are the factual battleground where
the vast majority of litigation actually takes
place. . . . Thus, it is particularly important that
this discovery device not be abused. Counsel should
never forget that even though the deposition may be
taking place far from a real courtroom, with no
black-robed overseer peering down upon them, as long
as the deposition is conducted under the caption of
this court and proceeding under the authority of the
rules of this court, counsel are operating as offic-
ers of this court. They should comport themselves
accordingly; should they be tempted to stray, they
should remember that this judge is but a phone call
away.
150 F.R.D. at 531.
-60-
<PAGE>
<PAGE>
hac vice), ordering the deposition recessed and reconvened
promptly in Delaware, or the appointment of a master to preside
at the deposition. Costs and counsel fees should follow.
As noted, this was a deposition of Paramount through
one of its directors. Mr. Liedtke was a Paramount witness in
every respect. He was not there either as an individual defen-
dant or as a third party witness. Pursuant to Ch. Ct. R.
170(d), the Paramount defendants should have been represented
at the deposition by a Delaware lawyer or a lawyer admitted pro
hac vice. A Delaware lawyer who moves the admission pro hac
vice of an out-of-state lawyer is not relieved of responsibil-
ity, is required to appear at all court proceedings (except
depositions when a lawyer admitted pro hac vice is present),
shall certify that the lawyer appearing pro hac vice is repu-
table and competent, and that the Delaware lawyer is in a posi-
tion to recommend the out-of-state lawyer.* Thus, one of the
principal purposes of the pro hac vice rules is to assure that,
if a Delaware lawyer is not to be present at a deposition, the
lawyer admitted pro hac vice will be there. As such, he is an
officer of the Delaware Court, subject to control of the Court
to ensure the integrity of the proceeding.
_____________________
* See, e.g., Ch. Ct. R. 170(b), (d), and (h).
-61-
<PAGE>
<PAGE>
Counsel attending the Liedtke deposition on behalf of
the Paramount defendants had an obligation to ensure the integ-
rity of that proceeding. The record of the deposition as a
whole (JA 5916-6054) demonstrates that, not only Mr. Jamail,
but also Mr. Thomas (representing the Paramount defendants),
continually interrupted the questioning, engaged in colloquies
and objections which sometimes suggested answers to questions,*
and constantly pressed the questioner for time throughout the
deposition.** As to Mr. Jamail's tactics quoted above, Mr.
Thomas passively let matters proceed as they did, and at times
even added his own voice to support the behavior of Mr. Jamail.
_____________________
* Rule 30(d)(1) of the revised Federal Rules of Civil Proce-
dure, which became effective on December 1, 1993, requires ob-
jections during depositions to be "stated concisely and in a
non-argumentative and non-suggestive manner." See Hall, 150
F.R.D. at 530. See also Rose Hall Ltd. v. Chase Manhattan
Overseas Banking Corp. D. Del., C.A. No. 79-182, Steel, J.
(Dec. 12, 1980); Cascella v. GDV, Inc., Del. Ch., C.A. No.
5899, Brown, V.C. (Jan. 15, 1981); In re Asbestos Litig., Del.
Super., 492 A.2d 256 (1985); Deutschman v. Beneficial Corp.,
Del. Del., C.A. No. 86-595 MMS, Schwartz, J. (Feb. 20, 1990).
The Delaware trial courts and this Court are evaluating the
desirability of adopting certain of the new Federal Rules, or
modifications thereof, and other possible rule changes.
** While we do not necessarily endorse everything set forth
in the Hall case, we share Judge Gawthrop's view not only of
the impropriety of coaching witnesses on and off the record of
the deposition (see supra note 34), but also the impropriety of
objections and colloquy which "tend to disrupt the question-
and-answer rhythm of a deposition and obstruct the witness's
testimony." See 150 F.R.D. at 530. To be sure, there are also
occasions when the questioner is abusive or otherwise acts im-
properly and should be sanctioned. See supra note 31. Al-
though the questioning in the Liedtke deposition could have
proceeded more crisply, this was not a case where it was the
questioner who abused the process.
-62-
<PAGE>
<PAGE>
A Delaware lawyer or a lawyer admitted pro hac vice would have
been expected to put an end to the misconduct in the Liedtke
deposition.
This kind of misconduct is not to be tolerated in any
Delaware court proceeding, including depositions taken in other
states in which witnesses appear represented by their own coun-
sel other than counsel for a party in the proceeding. Yet,
there is no clear mechanism for this Court to deal with this
matter in terms of sanctions or disciplinary remedies at this
time in the context of this case. Nevertheless, consideration
will be given to the following issues for the future: (a)
whether or not it is appropriate and fair to take into account
the behavior of Mr. Jamail in this case in the event applica-
tion is made by him in the future to appear pro hac vice in any
Delaware proceeding;* and (b) what rules or standards should be
adopted to deal effectively with misconduct by out-of-state
lawyers in depositions in proceedings pending in Delaware
courts.
_____________________
* The Court does not condone the conduct of Mr. Thomas in
this deposition. Although the Court does not view his conduct
with the gravity and revulsion with which it views Mr. Jamail's
conduct, in the future the Court expects that counsel in Mr.
Thomas's position will have been admitted pro hac vice before
participating in a deposition. As an officer of the Delaware
Court, counsel admitted pro hac vice are now clearly on notice
that they are expected to put an end to conduct such as that
perpetrated by Mr. Jamail on this record.
-63-
<PAGE>
<PAGE>
As to (a), this Court will welcome a voluntary ap-
pearance by Mr. Jamail if a request is received from him by the
Clerk of this Court within thirty days of the date of this
Opinion and Addendum. The purpose of such voluntary appearance
will be to explain the questioned conduct and to show cause why
such conduct should not be considered as a bar to any future
appearance by Mr. Jamail in a Delaware proceeding. As to (b),
this Court and the trial courts of this State will undertake to
strengthen the existing mechanisms for dealing with the type of
misconduct referred to in this Addendum and the practices re-
lating to admissions pro hac vice.
-64-
<PAGE>
