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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 35
TO
SCHEDULE 14D-9
(WITH RESPECT TO THE TENDER OFFER BY VIACOM INC.)
------------------------
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
PARAMOUNT COMMUNICATIONS INC.
(NAME OF SUBJECT COMPANY)
PARAMOUNT COMMUNICATIONS INC.
(NAME OF PERSON FILING STATEMENT)
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)
------------------------
DONALD ORESMAN, ESQ.
PARAMOUNT COMMUNICATIONS INC.
15 COLUMBUS CIRCLE
NEW YORK, NEW YORK 10023-7780
(212) 373-8000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF
OF THE PERSON FILING STATEMENT)
------------------------
COPY TO:
JOEL S. HOFFMAN, ESQ.
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 455-2000
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<PAGE>
This Amendment No. 35 supplements and amends to the extent indicated herein
the Solicitation/Recommendation Statement on Schedule 14D-9 of Paramount
Communications Inc., as amended and restated on October 27, 1993 (as
supplemented and amended through the date hereof, the "Schedule 14D-9"),
initially filed with the Securities and Exchange Commission on October 25, 1993,
with respect to the Current Viacom Offer (as described therein). Capitalized
terms used herein and not otherwise defined herein have the meanings
ascribed to such terms in the Schedule 14D-9.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
The response to Item 7(b) is hereby supplemented and amended as follows:
On February 7, 1994, Paramount and QVC agreed to the revised form of
merger agreement to be attached as Exhibit A to the QVC Exemption
Agreement. This revised form of merger agreement is substantially similar
to the prior form of merger agreement filed as Exhibit No. 98 to the
Schedule 14D-9, except that certain changes were made to reflect the
revised terms of the Current QVC Offer and the Current QVC Second-Step
Merger. A copy of the revised form of merger agreement is filed as
Exhibit No. 109 to the Schedule 14D-9 and is incorporated herein by
reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
The response to Item 9 is hereby supplemented and amended to add the
following:
Exhibit 109 - Form of Agreement and Plan of Merger between Paramount
and QVC.
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
PARAMOUNT COMMUNICATIONS INC.
By DONALD ORESMAN
...................................
Name: Donald Oresman
Title: Executive Vice President
Dated: February 8, 1994
2
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION PAGE NO.
- --------- ----------- ---------
1* Pages 5, 6 and 10-20 of Paramount's Proxy Statement dated
January 29, 1993 for its 1993 Annual Meeting of Stockholders.
2* Employment Agreement with Robert Greenberg, a senior vice
president of Paramount, dated as of April 5, 1993.
3* Amended and Restated Agreement and Plan of Merger, dated
as of October 24, 1993, between Paramount and Viacom.
4* Stock Option Agreement, dated as of September 12, 1993, as
amended on October 24, 1993, between Paramount and Viacom.
5* Voting Agreement, dated as of September 12, 1993, as amended
on October 24, 1993, between Paramount and Amusements.
6* Press Release issued on October 24, 1993.
7* Letter to Stockholders of Paramount dated October 25, 1993.
8* Press Release issued on November 6, 1993.
9* Letter to Stockholders of Paramount dated November 8, 1993
with respect to the Viacom Offer.
10* Amendment No. 1, dated as of November 6, 1993, to the Amended
and Restated Agreement and Plan of Merger, dated as of October
24, 1993, between Paramount and Viacom.
11* Letter to Stockholders of Paramount dated November 8, 1993
with respect to the QVC Offer.
12* Press Release issued by Viacom on November 12, 1993.
13* Press Release issued on November 15, 1993.
14* Letter to Stockholders of Paramount dated November 16, 1993
with respect to the QVC Offer.
15* Press Release issued by Viacom on November 19, 1993.
16* Press Release issued by QVC on November 20, 1993.
17* Press Release issued by Viacom on November 22, 1993.
18* Press Release issued by QVC on November 22, 1993.
19* Press Release issued by Viacom on November 23, 1993.
20* Press Release issued by QVC on November 23, 1993.
21* Press Release issued by Viacom on November 24, 1993.
22* Press Release issued by QVC on November 24, 1993.
23* Memorandum Opinion in QVC Network, Inc. v. Paramount Communications
Inc., et al., Civ. Action No. 13208 (Del. Ch. November 24, 1993).
24* Preliminary Injunction Order in QVC Network, Inc. v. Paramount
Communications Inc., et al., Civ. Action No. 13208 (Del. Ch.
November 24, 1993).
25* Press Release issued by Paramount on November 24, 1993.
26* Press Release issued by Viacom on November 24, 1993.
27* Press Release issued by Viacom on November 26, 1993.
28* Press Release issued by Viacom on November 29, 1993.
29* Order of the Delaware Supreme Court dated November 29, 1993.
30* Press Release issued by QVC on December 1, 1993.
31* Revised Memorandum Opinion in QVC Network, Inc. v. Paramount
Communications Inc., et al., Civ. Action No. 13208 (Del. Ch.
November 24, 1993).
32* Press Release issued by Viacom on December 9, 1993.
33* Press Release issued by Paramount on December 9, 1993.
34* Press Release issued by QVC on December 10, 1993.
35* Order in Paramount Communications Inc., et al. v. QVC Network,
Inc., Civ. Action No. 13208 (Del. December 9, 1993).
36* Press Release issued by QVC on December 9, 1993.
37* Letter from Richards, Layton & Finger to Vice Chancellor
Jack B. Jacobs of the Delaware Court of Chancery dated
December 10, 1993.
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* Previously filed.
<PAGE>
EXHIBIT DESCRIPTION PAGE NO.
- --------- ----------- ---------
38* Bidding Procedures of Paramount dated December 14, 1993.
39* Press Release issued by Paramount on December 14, 1993.
40* Letter to Stockholders of Paramount dated December 14,
1993 with respect to the Viacom Offer and the QVC Offer.
41* Press Release issued by Viacom on December 14, 1993.
42* Press Release issued by QVC on December 14, 1993.
43* Letter from Wachtell, Lipton, Rosen & Katz to Lazard
dated December 14, 1993.
44* Letter from Simpson Thacher & Bartlett to Wachtell, Lipton,
Rosen & Katz dated December 15, 1993.
45* Press Release issued by Paramount on December 15, 1993.
46* Press Release issued by QVC on December 16, 1993.
47* Letter from the Delaware Chancery Court to Young, Conaway,
Stargatt & Taylor; Richards, Layton & Finger; Morris & Morris;
and Morris, Nichols, Arsht & Tunnell dated December 14, 1993.
48* Revised pages to the Memorandum Opinion in QVC Network,
Inc. v. Paramount Communications Inc., et al., Civ. Action
No. 13208 (Del. Ch. November 24, 1993).
49* Letter from Shearman & Sterling to Lazard dated December 15, 1993.
50* Letter from Simpson Thacher & Bartlett to Shearman & Sterling
dated December 16, 1993.
51* Letter from Simpson Thacher & Bartlett to Wachtell, Lipton,
Rosen & Katz dated December 17, 1993.
52* Press Release issued by Paramount on December 20, 1993.
53* Press Release issued by Paramount on December 22, 1993.
54* Press Release issued by QVC on December 22, 1993.
55* Notice of Termination dated December 22, 1993 delivered by
Paramount to Viacom.
56* Exemption Agreement, dated as of December 22, 1993, between
Viacom and Paramount.
57* Letter to Stockholders of Paramount dated December 23, 1993
with respect to the Revised QVC Offer and the Viacom Offer.
58* Opinion of Lazard dated December 21, 1993.
59* Agreement and Plan of Merger, dated as of December 22, 1993,
between Paramount and QVC.
60* Voting Agreement dated December 22, 1993 among BellSouth
Corporation, Comcast Corporation, Cox Enterprises, Inc.,
Advance Publications, Inc. and Arrow Investments, L.P.
61* First Amendment, dated as of December 27, 1993, to Agreement
and Plan of Merger, dated as of December 22, 1993, between
Paramount and QVC.
62* Press Release issued by Viacom on January 7, 1994.
63* Press Release issued by Viacom on January 9, 1994.
64* Press Release issued by Paramount on January 7, 1994.
65* Press Release issued by QVC on January 7, 1994.
66* Press Release issued by QVC on January 10, 1994.
67* Letter from Wachtell, Lipton, Rosen & Katz to the Paramount
Board dated January 11, 1994.
68* Letter from Shearman & Sterling to the Paramount Board dated
January 12, 1994.
69* Letter from Paramount to Wachtell, Lipton, Rosen & Katz dated
January 13, 1994.
70* Press Release issued by Paramount on January 12, 1994.
71* Letter from Simpson Thacher & Bartlett to Shearman & Sterling
and Wachtell, Lipton, Rosen & Katz dated January 13, 1994.
72* Letter to Stockholders of Paramount dated January 13, 1994
with respect to the Current QVC Offer and the Revised Viacom Offer.
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* Previously filed.
<PAGE>
EXHIBIT DESCRIPTION PAGE NO.
- --------- ----------- ---------
73* Opinion of Lazard dated January 12, 1994.
74* Letter from Wachtell, Lipton, Rosen & Katz to Simpson
Thacher & Bartlett dated January 14, 1994.
75* Letter from Simpson Thacher & Bartlett to Wachtell, Lipton,
Rosen & Katz dated January 18, 1994.
76* Letter from the Commission to Simpson Thacher & Bartlett
dated January 15, 1994.
77* Press Release issued by Viacom on January 18, 1994.
78* Press Release issued by Paramount on January 18, 1994.
79* Press Release issued by QVC on January 19, 1994.
80* Agreement and Plan of Merger, dated as of January 21, 1994,
between Paramount and Viacom.
81* Voting Agreement, dated as of January 21, 1994, between
Paramount and Amusements.
82* Press Release issued by Paramount on January 21, 1994.
83* Letter to Stockholders of Paramount dated January 24, 1994
with respect to the Current QVC Offer and the Revised
Viacom Offer.
84* Opinion of Lazard dated January 21, 1994.
85* Notice of Termination dated January 21, 1994 delivered by
Paramount to QVC.
86* Exemption Agreement, dated as of January 21, 1994, between
QVC and Paramount.
87* Letter from Viacom to Paramount dated January 19, 1994.
88* Letter from Wachtell, Lipton, Rosen & Katz to Simpson Thacher
& Bartlett dated January 20, 1994.
89* Letter from Shearman & Sterling to Paramount dated
January 21, 1994.
90* Letter from Wachtell, Lipton, Rosen & Katz to Simpson Thacher &
Bartlett dated January 24, 1994.
91* Letter from Paramount to Wachtell, Lipton, Rosen & Katz dated
January 24, 1994.
92* Letter from Shearman & Sterling to Paramount dated January 25, 1994.
93* Letter from Paramount to Shearman & Sterling dated January 25, 1994.
94* First Amendment, dated as of January 27, 1994, to Agreement and
Plan of Merger, dated as of January 21, 1994, between Viacom and
Paramount.
95* First Amendment, dated as of January 27, 1994, to Exemption
Agreement, dated as of December 22, 1993, between Viacom and
Paramount.
96* Letter from Simpson Thacher & Bartlett to Shearman & Sterling
and Wachtell, Lipton, Rosen & Katz dated January 27, 1994.
97* First Amendment, dated as of January 27, 1994, to Exemption
Agreement, dated as of January 21, 1994, between QVC and Paramount.
98* Form of Agreement and Plan of Merger between QVC and Paramount.
99* Press Release issued by Viacom on February 1, 1994.
100* Press Release issued by QVC on February 1, 1994.
101* Press Release issued by Viacom on February 1, 1994.
102* Press Release issued by Viacom on February 1, 1994.
103* Press Release issued by Paramount on February 1, 1994.
104* Press Release issued by QVC on February 1, 1994.
105* Amended and Restated Agreement and Plan of Merger, dated as of
February 4, 1994, between Paramount and Viacom.
106* Press Release issued by Paramount on February 4, 1994.
107* Letter to Stockholders of Paramount dated February 7, 1994
with respect to the Current QVC Offer and the Current Viacom Offer.
108* Opinion of Lazard dated February 4, 1994.
109 Form of Agreement and Plan of Merger between Paramount and QVC.
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* Previously filed.
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AGREEMENT AND PLAN OF MERGER
between
QVC NETWORK, INC.
and
PARAMOUNT COMMUNICATIONS INC.
Dated as of , 1994
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<PAGE>
TABLE OF CONTENTS
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Page
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ARTICLE I
THE MERGER
1.1. The Merger . . . . . . . . . . . . . . . . . . . . 3
1.2. Closing . . . . . . . . . . . . . . . . . . . . . 3
1.3. Effective Time . . . . . . . . . . . . . . . . . . 3
1.4. Effect of the Merger . . . . . . . . . . . . . . . 4
1.5. Certificate of Incorporation; By-Laws . . . . . . 4
1.6. Conversion of Securities . . . . . . . . . . . . . 4
1.7. Exchange of Certificates and Cash . . . . . . . . 10
1.8. Stock Transfer Books . . . . . . . . . . . . . . . 12
1.9. Stock Options; Payment Rights . . . . . . . . . . 13
1.10. Dissenting Shares . . . . . . . . . . . . . . . . 14
ARTICLE II
THE OFFER
2.1. The Offer . . . . . . . . . . . . . . . . . . . . 14
2.2. Action by Paramount . . . . . . . . . . . . . . . 17
2.3. Receipt of Common Stock . . . . . . . . . . . . . 19
2.4. Completion Certificate . . . . . . . . . . . . . . 19
2.5. Termination of the Offer . . . . . . . . . . . . . 19
2.6. Board of Directors; Section 14(f) . . . . . . . . 19
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARAMOUNT
3.1. Organization and Qualification; Subsidiaries . . . 20
3.2. Certificate of Incorporation and By-Laws . . . . . 21
3.3. Capitalization . . . . . . . . . . . . . . . . . . 21
3.4. Authority Relative to This Agreement . . . . . . . 22
3.5. No Conflict; Required Filings and Consents . . . . 23
3.6. Compliance . . . . . . . . . . . . . . . . . . . . 24
3.7. SEC Filings; Financial Statements . . . . . . . . 24
3.8. Absence of Certain Changes or Events . . . . . . . 25
3.9. Absence of Litigation . . . . . . . . . . . . . . 26
3.10. Employee Benefit Plans . . . . . . . . . . . . . . 26
3.11. Trademarks, Patents and Copyrights . . . . . . . . 27
3.12. Taxes . . . . . . . . . . . . . . . . . . . . . . 27
3.13. Amendment to Rights Agreement . . . . . . . . . . 28
3.14. Opinion of Financial Advisor . . . . . . . . . . . 29
3.15. Vote Required . . . . . . . . . . . . . . . . . . 29
3.16. Brokers . . . . . . . . . . . . . . . . . . . . . 29
3.17. Purchases of Securities . . . . . . . . . . . . . 30
(i)
<PAGE>
Page
----
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF QVC
4.1. Organization and Qualification; Subsidiaries . . . 30
4.2. Certificate of Incorporation and By-Laws . . . . . 30
4.3. Capitalization . . . . . . . . . . . . . . . . . . 31
4.4. Authority Relative to This Agreement . . . . . . . 32
4.5. No Conflict; Required Filings and Consents . . . . 33
4.6. Compliance . . . . . . . . . . . . . . . . . . . . 34
4.7. SEC Filings; Financial Statements . . . . . . . . 34
4.8. Absence of Certain Changes or Events . . . . . . . 35
4.9. Absence of Litigation . . . . . . . . . . . . . . 36
4.10. Employee Benefit Plans . . . . . . . . . . . . . . 36
4.11. Trademarks, Patents and Copyrights . . . . . . . . 37
4.12. Taxes . . . . . . . . . . . . . . . . . . . . . . 37
4.13. Opinion of Financial Advisor . . . . . . . . . . . 38
4.14. Vote Required . . . . . . . . . . . . . . . . . . 38
4.15. Ownership of Paramount Common Stock . . . . . . . 38
4.16. Brokers . . . . . . . . . . . . . . . . . . . . . 39
4.17. Financing . . . . . . . . . . . . . . . . . . . . 39
4.18. Purchases of Securities . . . . . . . . . . . . . 39
ARTICLE V
CONDUCT OF BUSINESSES PENDING THE MERGER
5.1. Conduct of Respective Businesses by Paramount and
QVC Pending the Merger . . . . . . . . . . . . . . 39
ARTICLE VI
ADDITIONAL COVENANTS
6.1. Access to Information; Confidentiality . . . . . . 42
6.2. Directors' and Officers' Indemnification and
Insurance . . . . . . . . . . . . . . . . . . . . . 42
6.3. Notification of Certain Matters . . . . . . . . . 44
6.4. Tax Treatment . . . . . . . . . . . . . . . . . . 44
6.5. Registration Statement; Joint Proxy Statement;
Offer Documents and Schedule 14D-9 . . . . . . . . 44
6.6. Stockholders' Meetings . . . . . . . . . . . . . . 46
6.7. Letters of Accountants . . . . . . . . . . . . . . 46
6.8. Employee Benefits . . . . . . . . . . . . . . . . 47
6.9. Further Action; Reasonable Best Efforts . . . . . 47
6.10. Debt Instruments . . . . . . . . . . . . . . . . . 48
6.11. Public Announcements . . . . . . . . . . . . . . . 48
6.12. Listing of QVC Shares . . . . . . . . . . . . . . 48
6.13. Affiliates of Paramount . . . . . . . . . . . . . 49
6.14. Conveyance Taxes . . . . . . . . . . . . . . . . . 49
6.15. Rights Agreement . . . . . . . . . . . . . . . . . 49
(ii)
<PAGE>
Page
----
6.16. Assumption of Debt and Leases . . . . . . . . . . 49
6.17. Gains Tax . . . . . . . . . . . . . . . . . . . . 50
6.18. Reverse Merger . . . . . . . . . . . . . . . . . . 50
6.19. Post-Offer Agreements . . . . . . . . . . . . . . 50
ARTICLE VII
CLOSING CONDITIONS
7.1. Conditions to Obligations of Each Party to Effect
the Merger . . . . . . . . . . . . . . . . . . . . 51
7.2. Additional Conditions to Obligations of QVC . . . 52
7.3. Additional Conditions to Obligations of
Paramount . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1. Termination . . . . . . . . . . . . . . . . . . . 53
8.2. Effect of Termination . . . . . . . . . . . . . . 56
8.3. Amendment . . . . . . . . . . . . . . . . . . . . 56
8.4. Intentionally Omitted . . . . . . . . . . . . . . 56
8.5. Fees and Expenses . . . . . . . . . . . . . . . . 57
ARTICLE IX
GENERAL PROVISIONS
9.1. Effectiveness of Representations, Warranties and
Agreements . . . . . . . . . . . . . . . . . . . . 57
9.2. Notices . . . . . . . . . . . . . . . . . . . . . 57
9.3. Certain Definitions . . . . . . . . . . . . . . . 58
9.4. Time Period . . . . . . . . . . . . . . . . . . . 59
9.5. Headings . . . . . . . . . . . . . . . . . . . . . 59
9.6. Severability . . . . . . . . . . . . . . . . . . . 59
9.7. Entire Agreement . . . . . . . . . . . . . . . . . 60
9.8. Assignment . . . . . . . . . . . . . . . . . . . . 60
9.9. Parties in Interest . . . . . . . . . . . . . . . 60
9.10. Specific Performance . . . . . . . . . . . . . . . 60
9.11. Governing Law . . . . . . . . . . . . . . . . . . 60
9.12. Counterparts . . . . . . . . . . . . . . . . . . . 60
(iii)
<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
(iv)
<PAGE>
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
Material Paramount Subsidiary SECTION 3.1
Material QVC Subsidiary SECTION 4.1
Merger RECITALS
Merger Consideration SECTION 1.7
<PAGE>
2
Index of Defined Terms (cont'd)
----------------------
Section
-------
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
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
<PAGE>
3
Index of Defined Terms (cont'd)
----------------------
Section
-------
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
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of ,
--------- --
1994 (this "Agreement"), between QVC NETWORK, INC., a Delaware
---------
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 combination transaction
pursuant to which Paramount would merge with and into Viacom;
WHEREAS, on October 21, 1993, QVC announced its
intention 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 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
------------
<PAGE>
2
business combination transaction pursuant to which Paramount will
merge with and into QVC or a subsidiary of QVC (the "Forward
-------
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 "Offer") 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 outstanding 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
determined that the Merger and the Offer are fair to, and in the
best interests of, Paramount and the holders of Paramount Common
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 recommended
approval and adoption of this Agreement and approval of the
Merger by the stockholders of Paramount and agreed to recommend
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
furtherance 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 (including,
without limitation, the amendment of the Offer) and recommended
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");
-------------------
WHEREAS, for federal income tax purposes, it is
intended that the Forward Merger qualify as a reorganization
under the provisions of Section 368(a) of the United States
Internal 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 voting
Stock, BellSouth Corporation ("BellSouth") (Comcast, Advance,
---------
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
<PAGE>
3
of the Merger and the other transactions contemplated 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 accordance
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 consulting 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 reasonably 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 separate 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."
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
--------------
practicable 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, Delaware
Law (the date and time of such filing, or such later date or time
as set forth therein, being the "Effective Time").
--------------
<PAGE>
4
SECTION 1.4. Effect of the Merger. At the Effective
--------------------
Time, the effect of the Merger shall be as provided in the
applicable provisions of Delaware Law. Without limiting the
generality 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,
liabilities and duties of QVC or a subsidiary thereof, as the
case may be (or, in the case of the Reverse Merger, Merger
Subsidiary), 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 Certificate
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, however, that at
-------- -------
the Effective Time of the Forward Merger, Article I of the
Certificate of Incorporation of the Surviving Corporation 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
Reverse Merger, the Certificate of Incorporation and By-Laws,
respectively, of the Surviving Corporation shall be amended and
restated in their entirety to read as the Certificate of
Incorporation and By-Laws of Merger Subsidiary.
SECTION 1.6. Conversion of Securities. At the
------------------------
Effective Time, by virtue of the Merger and without any action on
the part of QVC, Paramount or the holders of any of the following
securities:
(a) In the event that the Offer has been consummated
prior to the Effective Time, 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)) 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 having the
--------------------------
principal terms described in Annex B and .32 Warrants
("Warrants") of QVC having the principal terms described 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 dividend, subdivision,
reclassification, recapitalization, split, combination or
<PAGE>
5
exchange of shares, the amounts of QVC Common Stock and QVC
Merger Preferred Stock (and, if appropriate, the Warrants)
specified above shall be correspondingly 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 certificate 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 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 accordance herewith. 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 Preferred Stock or fractional
Warrants shall be issued and, in lieu thereof, a cash
payment shall be made pursuant to Section 1.7(d).
(b) In the event that the Offer has not been
consummated 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 Section
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 Ratio"), .2386 shares
---------------------------
of QVC Merger Preferred Stock (the "Preferred Stock
---------------
Exchange Ratio") and .32 Warrants (the "Warrant
-------------- -------
Exchange Ratio" and, together with the Common Stock
--------------
Exchange Ratio and the Preferred 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 Exchange Ratios and Per Share Cash Amount
shall be correspondingly adjusted to reflect such stock
<PAGE>
6
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 certificate 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 accordance 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 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 Preferred 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 Exchange Ratios (a
"Stock Election"), (B) elect to receive 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 Warrants 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 mutually 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 Paramount Common Stock
who hold such shares as nominees, trustees or in other
<PAGE>
7
representative capacities ("Representatives") may
---------------
submit multiple Forms of Election, provided that such
Representative certifies that each such Form of
Election covers all the shares of Paramount Common
Stock held by such Representative for a particular
beneficial owner entitled to so elect pursuant 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 effective, a Form of Election must be
received by the Exchange Agent no later than the close
of business on the last business day prior to the
Effective Time. 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 disregard 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 immediately prior to the
Effective Time, and the aggregate 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 Warrants 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
Paramount Common Stock with respect to which Stock
Elections 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
---------------
<PAGE>
8
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 following manner:
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 Election
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 Election
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, Warrants 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 fraction
(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 Warrant 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 right to
<PAGE>
9
receive cash, all Stock Election Shares shall be
converted into the right to receive QVC Common Stock,
QVC Merger Preferred Stock and Warrants, and the
Non-Election Shares, if any, shall be converted 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 product 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 Warrants 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
computations 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
immediately prior to the Effective Time shall be converted
into and exchanged for one validly issued, fully paid and
nonassessable share of common stock of the Surviving
Corporation.
(e) If the Forward Merger is consummated through
a subsidiary of QVC, each share of common stock of such
<PAGE>
10
subsidiary issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one
validly issued, fully paid and nonassessable 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 Section 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
---------------------------
certificates for shares of QVC Common Stock and QVC Merger
Preferred Stock and Warrants, together with any dividends or
distributions with respect thereto, and the Exchange Cash
Consideration, 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
contemplated 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 certificate
or certificates which immediately prior to the Effective Time
evidenced outstanding shares of Paramount Common Stock (other
than Dissenting Shares) (the "Certificates"), (i) a letter of
------------
transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only
upon proper delivery of the Certificates to the Exchange Agent
and shall be in such form and have such other provisions 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 instructions, the holder of such
Certificate shall be entitled to receive in exchange therefor (A)
<PAGE>
11
certificates evidencing that number of whole shares of QVC Common
Stock and QVC Merger Preferred 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 Preferred Stock, Warrants, dividends, distributions and
cash described 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 registered 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
Paramount Common Stock is presented to the Exchange Agent,
accompanied 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 Warrants.
- ---------------------------------------------------------------
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 Certificate.
(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 pursuant 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
<PAGE>
12
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 Warrant, 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.
(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
Exchange 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 Common 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.
<PAGE>
13
SECTION 1.9. Stock Options; Payment Rights. (a) 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 Exchange 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 Option 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 number 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 rounding up with respect to
- --------
Incentive Stock Options (as defined below). QVC shall (i)
reserve for issuance the number of shares of QVC Common Stock,
QVC Merger Preferred Stock and Warrants that will become issuable
upon the exercise of such Stock Options 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 Option 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
----------------------
purchasable 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 become
exercisable pursuant to the foregoing provisions of this Section
1.9, such Incentive Stock Option shall become exercisable 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 available, or,
if not available, in the reasonable judgment of the Board of
Directors of QVC).
<PAGE>
14
SECTION 1.10. Dissenting Shares. (a) Notwithstanding
-----------------
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 immediately
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 properly 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 (collectively, 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 exchangeable, 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 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 demands 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.
ARTICLE II
THE OFFER
SECTION 2.1. The Offer. (a) QVC has amended and
---------
supplemented the Offer to (i) increase the purchase price offered
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 representing 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 Offer, that the Board of Directors
<PAGE>
15
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) extend 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 Common
Stock; provided, however, that no change may be made without the
-------- -------
prior written consent of Paramount which decreases the number of
shares of Paramount Common Stock sought in the Offer to a number
representing less than 50.1% of the then outstanding shares of
Paramount Common Stock on a fully diluted basis; provided,
--------
however, that the number of shares of Paramount Common 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 consideration
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 conditions of
the Offer (including, without limitation, the Minimum 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 Statement
---
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 reference an amendment
and supplement to the offer to purchase (the "Offer to Purchase")
-----------------
and forms of the related letter of transmittal 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
<PAGE>
16
"Offer Documents"). QVC and Paramount 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 corrected 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) (i) 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
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 (x) terminating the Offer
will facilitate the earlier consummation of the Merger in
accordance with the terms of this Merger Agreement or (y) the
conditions to the Offer (other than the Minimum Condition and the
Rights Condition) are unlikely to be satisfied. Notwithstanding
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 failure 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 Sections
2.1(a), 2.1(d) and 2.3 hereof or any such extension required by
federal securities law.
(ii) 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 Agreement
---------------
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 securities 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 limitation, 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 consideration 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
<PAGE>
17
procedures contained in the Other Exemption Agreement (the
"Bidding Procedures") 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.
(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 Agreement"), 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 notification to Paramount by QVC
and the Other Offeror of the results of their respective offers
(which notification shall be required to be delivered by QVC
and the Other Offeror no later than promptly following the expiration
of their respective offers), 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 condition (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 Common 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
Sections 2.1(c)(ii), 2.1(d) and 2.5 for so long as the Other Offeror
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
-------- --
unanimously (A) determined that the Offer and the Merger, taken
together, are fair to and in the best interests of the holders of
<PAGE>
18
shares of Paramount Common Stock, (B) approved and adopted this
Agreement and the transactions contemplated hereby and (C)
recommended 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
Paramount 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 consents to the inclusion in the Offer Documents prepared
in connection 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 (together
with all amendments and supplements thereto, the "Schedule
--------
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
Directors of Paramount described in Section 2.2(a) and shall
disseminate 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 Paramount
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 mailing
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. Paramount shall
furnish QVC with such additional information, including, 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 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 consummate the Merger or the Offer, QVC
shall hold in confidence the information contained in such
<PAGE>
19
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 Condition and the
conditions relating to the Rights Agreement, Article XI of the
Paramount Certificate of Incorporation, Section 203 of Delaware
Law and judicial or governmental injunction, each as set forth
therein), then QVC shall extend the Expiration Date to a date 10
business days from the then scheduled 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 certificate
(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 number of
shares representing not less than the Other Minimum Condition
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
Minimum Condition and the conditions relating to the Rights
Agreement, Article XI of the Paramount Certificate of
Incorporation, Section 203 of Delaware Law and judicial or
governmental injunction 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 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
<PAGE>
20
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 designees
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 information 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 nominees, 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.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARAMOUNT
Paramount hereby represents and warrants to QVC that:
SECTION 3.1. Organization and Qualification;
-------------------------------
Subsidiaries. (a) Each of Paramount and each Material Paramount
- ------------
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 incorporation
or organization 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
<PAGE>
21
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 jurisdiction where the character
of the properties owned, leased or operated by it or the nature
of its business makes such qualification 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 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 condition of Paramount and the
Paramount Subsidiaries, taken as a whole; provided, however,
-------- -------
where such term qualifies a representation 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 condition of
Paramount and the Paramount Subsidiaries, taken as a whole.
(b) Each subsidiary of Paramount (a "Paramount
---------
Subsidiary") 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
correct 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
Certificates 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 its Certificate of Incorporation, By-Laws or
equivalent organizational documents, except for such violations
that would not, individually 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
nonassessable. 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 future 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
<PAGE>
22
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 Schedule"), or except
-----------------------------
as set forth in this Section 3.3, and except pursuant 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 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 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 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 partnership interests of USA
Networks, United Cinemas International Multiplex B.V., United
International Pictures and Cinamerica Theatres, 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 necessary 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 majority of the then outstanding
shares of Paramount Common Stock, and the filing and recordation
of appropriate merger documents as required by Delaware Law).
This Agreement has been duly and validly executed and delivered
<PAGE>
23
by Paramount and, assuming the due authorization, execution and
delivery by QVC, constitutes legal, valid and binding obligations
of Paramount, enforceable against Paramount in accordance with
its terms. Paramount has taken all appropriate actions so that
the restrictions on business combinations contained in Section
203 of Delaware Law and Article XI of Paramount's Certificate of
Incorporation will not apply with respect to or as a result of
the Transactions. Paramount has terminated the Viacom Merger
Agreement and Paramount has not made any payment to Viacom in
connection with such agreement (except pursuant 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) described
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
---------------------------------
Consents. (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, regulation, order, judgment or decree applicable to
Paramount or any Paramount Subsidiary or by which any property or
asset of Paramount or any Paramount 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) under, result in the loss of a material
benefit under, or give 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 Paramount or any Paramount Subsidiary pursuant to, any note,
bond, mortgage, indenture, 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 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 prevent Paramount
from performing its obligations under this Agreement 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
Paramount 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
<PAGE>
24
1933, as amended (the "Securities 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 systems, (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
competition, 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, individually or in the aggregate, have a Paramount
Material Adverse Effect.
SECTION 3.6. Compliance. Except as set forth in
----------
Section 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 which any property or asset of Paramount or any
Paramount Subsidiary is bound or affected, or (ii) any note,
bond, mortgage, indenture, 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 Subsidiary 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 aggregate, 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 relating 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 October 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 Paramount SEC
---------------------
<PAGE>
25
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 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 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
(including, in each case, any notes thereto) contained in the
Paramount SEC Reports was prepared in accordance with generally
accepted 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
position, results of operations and cash flows of Paramount and
the consolidated Paramount Subsidiaries as at the respective
dates 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 obligations 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
Paramount 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
<PAGE>
26
any capital stock of Paramount or any Paramount Subsidiary or any
redemption, 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 dividends 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, insurance, 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 employee 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.
SECTION 3.9. Absence of Litigation. Except as set
---------------------
forth in Section 3.9 of the Paramount Disclosure Schedule or
except 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 Subsidiary, or any property or asset of Paramount or
any Paramount Subsidiary, before any court, arbitrator or
administrative, governmental 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, determination 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
maintained for the benefit of any current or former employee,
officer or director of Paramount or any Paramount Subsidiary (the
"Paramount Plans"), except as set forth in Section 3.10 of the
---------------
Paramount 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 favorable 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 Paramount nor any Paramount Subsidiary has
<PAGE>
27
incurred any direct or indirect 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 Paramount Subsidiaries have
not incurred any liability under, and have complied in all
material respects with, the Worker Adjustment Retraining
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
Paramount Plan (as of the date of such valuation).
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, individually or in the
aggregate, would have a Paramount Material Adverse 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
-----
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 Paramount Material
Adverse Effect. Such reports and returns are and will be true,
correct and complete, except for such failure to be true, correct
and complete as would not, individually or in the aggregate, have
a Paramount Material 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
<PAGE>
28
being contested 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, individually 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 Paramount 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 against Paramount and the Paramount
Subsidiaries would, individually or in the aggregate, have a
Paramount Material Adverse Effect. The accruals and reserves for
taxes (including interest and penalties, if any, thereon)
reflected in the Paramount 1992 Balance Sheet and the most recent
quarterly financial statements are adequate in accordance with
generally accepted accounting principles, 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 appropriate
governmental authorities or are properly holding for such payment
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 Paramount Material Adverse Effect. There
are no material liens for taxes upon the assets 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
election under Section 341(f) of the Code. For purposes of this
Section 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
Company, 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
accordance 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
<PAGE>
29
the Rights Agreement), or (C) the "Stock Acquisition Date" (as
defined in the Rights Agreement) to occur upon any such event and
(ii) the "Expiration 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 Section 3.13(a)(i)(A), (B) or (C) to occur;
provided, however, that Paramount shall not be required to make
such amendments to the 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 making 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 Section 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
Paramount 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
series 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 brokerage, finder's or other fee or commission in connection
with the Transactions based upon arrangements made by or on
behalf of Paramount. 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
<PAGE>
30
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.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF QVC
QVC hereby represents and warrants to Paramount that:
SECTION 4.1. Organization and Qualification;
-------------------------------
Subsidiaries. (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 incorporation or
organization 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 QVC Material Adverse Effect (as defined below).
QVC and each Material QVC Subsidiary 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 operated by it or the nature of its
business makes such qualification 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 materially adverse to the business, results of
operations or financial condition of QVC and the QVC
Subsidiaries, taken as a whole; provided, however, where such
-------- -------
term qualifies a representation or warranty contained in this
Article IV 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 condition of QVC and the QVC
Subsidiaries, 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 organizational documents
<PAGE>
31
are in full force and effect. Neither 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 violations that would not, individually or in the
aggregate, have a QVC Material Adverse Effect.
SECTION 4.3. Capitalization. The authorized capital
--------------
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 outstanding. Except
as set forth in this Agreement or in this Section 4.3 or in
Section 4.3 of the Disclosure Schedule previously delivered by
QVC to Paramount (the "QVC Disclosure Schedule"), there are no
-----------------------
options, warrants or other rights, agreements, arrangements or
commitments of any character relating 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 Subsidiary, 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, between 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
limitation, 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 Section 4.3 of the QVC
Disclosure Schedule or in the Equity Investors Agreements, there
are no material outstanding contractual obligations of QVC or any
QVC Subsidiary to repurchase, 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 a
loan, capital contribution or otherwise) in, any QVC Subsidiary
or any other person. Each outstanding share of capital stock of
<PAGE>
32
each Material QVC Subsidiary is duly authorized, validly issued,
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 encumbrances 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 non-assessable, and free of preemptive rights. If and
when the Warrants are exercised 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 non-assessable, 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 Subordinated Debentures due 2014 (the "Debentures"),
----------
initially issuable upon exchange of the QVC Merger Preferred
Stock for such Debentures, have been duly authorized, executed,
authenticated, 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 constitute
-------
valid and legal binding obligations of the Company entitled to
the benefits provided by the Indenture. By the date of issuance
of the QVC Merger Preferred Stock, the Indenture will have been
duly authorized by QVC, duly qualified under the Trust Indenture
Act of 1939, and, when duly executed and delivered by QVC and the
Trustee, will constitute a valid and binding instrument of QVC
enforceable in accordance with its terms.
SECTION 4.4. Authority Relative to This Agreement.
------------------------------------
QVC has all necessary power and authority to execute and deliver
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 consummation by QVC
of the transactions contemplated hereby have 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 respect to the Merger
(including the issuance of the QVC Common Stock, the QVC Merger
Preferred Stock and the Warrants pursuant thereto), the approval
by the holders of a majority of the then outstanding shares of
QVC Common Stock and QVC Preferred Stock, voting together as a
single class, of (x) this Agreement and the Merger and (y) the
amendment to QVC's Certificate 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
<PAGE>
33
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 certificate 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, assuming the due authorization, execution and
delivery by Paramount, 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
contemplated hereby by QVC will not, (i) conflict with or violate
the Certificate of Incorporation or By-Laws or equivalent
organizational documents of QVC or any Material QVC Subsidiary,
(ii) conflict with or violate any law, rule, regulation, 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) under, result in the loss of a material
benefit under or give 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 Subsidiary 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 prevent or delay
consummation of the Merger in any material respect, or otherwise
prevent QVC from performing its obligations 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 Governmental Entity,
<PAGE>
34
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 regulations thereunder
(the "HSR Act"), (C) applicable requirements of the
-------
Communications Act, and of state and local governmental
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 appropriate 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 consents, approvals,
authorizations or permits, or to make such filings or
notifications, would not prevent or delay consummation
of the Merger in any material respect, or otherwise prevent QVC
from performing its obligations under this Agreement 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 property
or asset of QVC or any QVC Subsidiary is bound or affected, or
(ii) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or
obligation to which QVC or any QVC Subsidiary 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 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 Reports 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 Quarterly 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 documents referred to in clauses (i),
(ii), (iii), and (iv) above being referred to herein,
collectively, as the "QVC SEC Reports"). The QVC SEC Reports and
---------------
any 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
<PAGE>
35
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 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 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 accepted
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 consolidated 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 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 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 liability
or obligation of any nature (whether accrued, absolute,
contingent or otherwise) other than liabilities and obligations
which would not, individually or in the aggregate, have a QVC
Material Adverse Effect.
SECTION 4.8. Absence of Certain Changes or Events.
------------------------------------
Since January 31, 1993, except as contemplated by this Agreement,
as set forth in Section 4.8 of the QVC Disclosure Schedule or
disclosed in any QVC SEC Report filed since January 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 Subsidiary and having, individually or in the aggregate, a
QVC Material Adverse Effect, (iii) any change by QVC 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 QVC or any QVC
Subsidiary 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 Section 4.3
and 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
<PAGE>
36
of any bonus, insurance, 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 employee benefit plan, or any
other increase in the compensation payable 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 this
Agreement, there is no claim, action, proceeding or investigation
pending or, to the best knowledge of QVC, threatened against QVC
or any QVC Subsidiary, or any property or asset of QVC or any QVC
Subsidiary, before any court, arbitrator or administrative,
governmental or regulatory authority 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, neither 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
aggregate, a QVC Material Adverse Effect.
SECTION 4.10. Employee Benefit Plans. With respect to
----------------------
all the employee benefit plans, programs and arrangements
maintained for the benefit of any current or former employee,
officer or director of QVC or any QVC Subsidiary (the "QVC
---
Plans"), except as set forth in the QVC SEC Reports and except as
- -----
would not, individually or in the aggregate, 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 retiree 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
expected 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 reasonably 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. Except as set forth in the QVC SEC Reports, the
aggregate accumulated benefit obligations of each QVC Plan
subject to Title IV of ERISA (as of the date of the most recent
actuarial valuation prepared for such QVC Plan) do not exceed the
<PAGE>
37
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 approval of
the Merger) will have the effect of providing additional
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, 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 QVC and the QVC Subsidiaries as currently
conducted or as contemplated to be conducted, and QVC is unaware
of any assertion or claim challenging the validity of any of the
foregoing which, individually or in the aggregate, would have a
QVC Material Adverse Effect. The conduct of the business of QVC
and the QVC 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, individually or in the
aggregate, would have a QVC Material Adverse Effect.
SECTION 4.12. Taxes. Except as set forth in Section
-----
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 Material 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 federal, 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
January 31, 1993 (the "QVC 1993 Balance Sheet") and its most
----------------------
recent 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 deficiencies or
claims were finally resolved against QVC and the QVC Subsidiaries
would, individually or in the aggregate, have a QVC Material
Adverse Effect. The accruals and reserves for taxes (including
<PAGE>
38
interest and penalties, if any, thereon) reflected in the QVC
1993 Balance Sheet and the most recent quarterly financial
statements are adequate in accordance with generally accepted
accounting principles, except 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 governmental authorities or are properly holding for
such payment 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
assets 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 proceedings.
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 acquisition 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 issued
and outstanding shares of Paramount Common Stock as of
September 3, 1993 set forth in Section 3.3, QVC and its
affiliates 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
-------
investment banker (other than Allen & Company Incorporated) is
entitled to any brokerage, finder's or other fee or commission in
<PAGE>
39
connection with the Transactions based upon arrangements 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 "Financing")
---------
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 September
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.
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 Agreement and
the Effective Time, unless the other party shall have consented
in writing (such consent not to be unreasonably withheld), the
businesses of each of Paramount and QVC and their respective
subsidiaries shall, in all material respects, be conducted in,
and each of Paramount and QVC and their respective 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 organization, to keep available
the services of its and its subsidiaries' current officers,
employees and consultants and to preserve its and its
subsidiaries' relationships with customers, suppliers and other
persons with which it or any of its subsidiaries has significant
business relations. By way of amplification 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 Disclosure Schedule or pursuant to the
terms of the Equity Investors Agreements, neither QVC nor
Paramount nor any of their respective 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
<PAGE>
40
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
Preferred Stock to be issued in connection with this
Agreement);
(b) issue, sell, pledge, dispose of, grant, encumber,
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 options
(other than the grant of options in the ordinary course of
business consistent with past practice to employees 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 limitation, any
phantom interest), of it or any of its subsidiaries (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 by any
Paramount Plan with an employee stock fund or employee stock
ownership plan feature, consistent with applicable
securities laws or the exercise of options, warrants or
other similar rights, or conversion of convertible preferred
stock, outstanding as of the date of this Agreement and in
accordance with the terms of such options, 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 except,
(i) in the case of QVC, with respect to the QVC Preferred
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
<PAGE>
41
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
repurchase 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 connection with the
Merger or the Offer, (B) the refinancing of existing
indebtedness, (C) borrowings under commercial 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 aggregate, 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 agreement
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
compensation, employment, termination, severance or other
plan, agreement, trust, fund, policy or arrangement for the
benefit 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.
<PAGE>
42
ARTICLE VI
ADDITIONAL COVENANTS
SECTION 6.1. Access to Information; Confidentiality.
--------------------------------------
(a) From the date hereof to the Effective Time, each of
Paramount and QVC shall (and shall cause its subsidiaries and
officers, directors, employees, auditors and agents to) afford
the officers, employees and agents of the other party (the
"Respective Representatives") reasonable access at all reasonable
--------------------------
times to its officers, employees, agents, properties, offices,
plants and other facilities, books and records, and shall furnish
such Respective Representatives with all financial, operating and
other data and information as may be reasonably requested.
(b) All information obtained by Paramount or QVC
pursuant to this Section 6.1 shall be kept confidential in
accordance with the confidentiality agreements (the
"Confidentiality 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' Indemnification
----------------------------------------
and Insurance. (a) The Certificate of Incorporation and By-Laws
- -------------
of the Surviving Corporation shall contain the provisions with
respect to indemnification set forth in the Certificate 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 Effective Time in
any manner that would adversely affect the rights thereunder of
individuals who at any time prior to the Effective 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 contemplated 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 (collectively, the
"Indemnified Parties") against all losses, expenses, claims,
-------------------
damages, liabilities or amounts that are paid in settlement of,
with the approval of the Surviving Corporation (which approval
shall not unreasonably be withheld), or otherwise in connection
with any claim, action, suit, proceeding 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
<PAGE>
43
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 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 Surviving
Corporation will use its reasonable best efforts to assist in the
vigorous defense of any such matter, provided that the Surviving
Corporation shall not be liable for any settlement 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 represent them with respect to each such matter
unless there is, under applicable standards of professional
conduct (as determined by counsel to the Indemnified Parties), a
conflict on any significant issue between the positions of any
two or more Indemnified 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' liability
insurance maintained by Paramount (provided that the Surviving
Corporation may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are no
less advantageous) with respect to claims arising from facts or
events which occurred before the Effective Time; provided,
--------
however, that in no event shall the Surviving Corporation be
- -------
required to expend pursuant to this Section 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 aggregate).
(e) This Section 6.2 is intended to be for the benefit
of, and shall be enforceable by, the Indemnified Parties, their
<PAGE>
44
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.
-------------------------------
Paramount shall give prompt notice to QVC, and QVC shall give
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 warranty
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 representation
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 stockholders
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 Statement") 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 Preferred 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 federal 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 request in connection with such
actions and the preparation of the Registration Statement and
<PAGE>
45
Proxy Statement. As promptly as 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 fiduciary duties of the
respective directors of QVC and Paramount, as determined by such
directors in good faith after consultation with and based upon
the advice of independent legal counsel (who may be such party's
regularly engaged independent legal 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 effective,
(ii) the time the Proxy Statement (or any amendment thereof or
supplement thereto) is first mailed to the stockholders 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 Subsidiaries, 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
inclusion in the Registration Statement and the Proxy Statement
shall not, at (i) the time the Registration Statement is declared
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, 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
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
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
<PAGE>
46
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 regulations 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 Exchange 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' Meetings") 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 Paramount shall
use their reasonable best efforts to hold the Stockholders'
Meetings on the same day and as soon as practicable after the
date on which the Registration Statement becomes 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 fiduciary duties
of the respective directors of Paramount and QVC, as determined
by such directors in good faith after consultation with and based
upon the advice of independent legal counsel (who may be such
party's regularly engaged independent legal counsel).
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 independent
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
contemplated by this Agreement.
<PAGE>
47
(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 delivered 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,
Supplemental Executive Retirement Plan, Non-Qualified Retirement
Plan, Retirement Plan for Non-Employee Directors, Deferred
Compensation Plan for Directors and employment agreements with
Messrs. Doppelt, Greenberg, Hertlein, Levinson, Meyers and
Sherman) prior to the Effective Time shall approve the
transactions contemplated by this Agreement, and prior to the
Effective 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
accelerating or triggering changes to benefits or the terms of
any Paramount Plan (a "Paramount Triggering Event")) for purposes
--------------------------
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 officers 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 performance cycle under
Paramount's Corporate Long-Term Performance Plan, in each case,
until Paramount and QVC shall review the terms of such Plans
after the Effective Time and make such 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 Efforts.
---------------------------------------
(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
<PAGE>
48
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,
approvals, authorizations, qualifications and orders of
Governmental Entities and parties to contracts with QVC and
Paramount and their respective subsidiaries as are necessary for
the consummation 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
purposes 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 covenant 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
contemplated by this Agreement, of a change in control or any
event which constitutes a default (or an event which with notice
or lapse of time or both would become a default) under any debt
instrument of Paramount or any Paramount Subsidiary, including,
without limitation, debt securities registered under the
Securities Act.
SECTION 6.11. Public Announcements. QVC and Paramount
--------------------
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 unreasonably
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 efforts to
consult with the other party and to obtain such party's consent
but has been unable to do so in a timely manner.
SECTION 6.12. Listing of QVC Shares. QVC shall use
---------------------
its reasonable best efforts to cause the shares of QVC Common
<PAGE>
49
Stock and QVC Merger Preferred Stock to be issued in the Merger
to be approved for inclusion on the NASDAQ prior to the Effective
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
securities 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. Paramount
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
regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any
transfer, recording, registration and other fees, and any similar
taxes which become payable in connection with the transactions
contemplated hereby that are required or permitted to be filed on
or before the Effective Time.
SECTION 6.15. Rights Agreement. Except as
----------------
contemplated 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
respective 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 Paramount
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 obligations of, and the
lessors of any real property to, Paramount, which debt
<PAGE>
50
obligations or leases expressly require such assumption in order
for the Merger to comply with the debt instrument or lease.
SECTION 6.17. Gains Tax. Except as provided in
---------
Section 1.7(b), QVC shall pay any New York State Tax on Gains
Derived 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 preparation,
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 Tax
and the Transfer Taxes and any similar taxes, if applicable.
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 Subsidiary. 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 majority
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
Paramount to breach its obligations hereunder; and (c) at the
Paramount 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 Agreement and
the transactions contemplated hereby.
ARTICLE VII
CLOSING CONDITIONS
<PAGE>
51
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.
(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
order (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, judgment, 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
Paramount 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,
-------------
waivers, 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 operations or financial condition (as existing
immediately prior to the consummation of the Merger) of
Paramount and the Paramount Subsidiaries, and QVC and the
QVC Subsidiaries, on a combined basis.
<PAGE>
52
SECTION 7.2. Additional Conditions to Obligations of
---------------------------------------
QVC. The obligations of QVC to effect the Merger and the
- ---
transactions contemplated herein are also subject to the
following conditions:
(a) Representations and Warranties. Each of the
------------------------------
representations and warranties of Paramount contained in
this 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
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 Paramount Material
Adverse Effect. 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
-----------------------
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
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
financial condition of Paramount or any Paramount Subsidiary
having or reasonably likely to have, individually or in the
aggregate, 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
following 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
------------------------------
representations and warranties of QVC contained in this
Agreement (including, without limitation, Section 6.5),
without giving effect to any notification made by QVC to
<PAGE>
53
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
Officer and Chief Financial Officer of QVC to such effect.
(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 complied with by it on or prior to the
Effective Time. Paramount shall have received a certificate
of the Chief Executive Officer and Chief Financial Officer
of QVC to that effect.
(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
financial condition of QVC or any QVC Subsidiary having or
reasonably likely to have, individually or in the aggregate,
a material 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 Amendments shall have become effective.
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 stockholders 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 representation,
warranty, covenant or agreement on the part of Paramount set
forth in this Agreement, or if any representation or
<PAGE>
54
warranty of Paramount shall have become untrue, in either
case such that the conditions set forth in Section 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 breach shall be deemed
--------
to cause such conditions to be incapable of being satisfied
for purposes of this Section 8.1(b);
(c) by Paramount, upon a breach of any representation,
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 extended); provided, that in
--------
any case, a wilful breach shall be deemed to cause such
conditions to be incapable of being 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;
provided, 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 Paramount
having failed by July 31, 1994, to receive all required
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 Paramount
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 Directors of
--------
Paramount that it is neutral or unable to take a position
with respect to the Offer after the commencement 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
relating to such third party tender offer recommends
rejection of such tender and the Board of Directors of
<PAGE>
55
Paramount 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 stockholders 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
Paramount (x) fails to make or withdraws or modifies its
recommendation referred to in Section 2.2(a) or Section
6.5(a) if there exists at such time a tender offer or
exchange offer or a proposal by a third party to acquire
Paramount pursuant to a merger, consolidation, share
exchange, business combination, tender or exchange offer or
other similar transaction or (y) recommends to Paramount's
stockholders approval or acceptance of any of the foregoing,
in each case only if the Board of Directors of Paramount,
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
circumstance 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
obligated 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
Expiration 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 any
material respect its material covenants and agreements
contained in this Agreement or resulted from the termination
of the Offer pursuant to Section 2.01(c).
The right of any party hereto to terminate this Agreement
pursuant to this Section 8.1 shall remain operative and in full
<PAGE>
56
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 purposes of
this Agreement, "Competing Transaction" shall mean any of the
---------------------
following involving Paramount or any Paramount Subsidiaries: (i)
any merger, consolidation, share exchange, business combination,
or other similar transaction; (ii) any disposition of 30% or more
of the assets of Paramount and the Paramount Subsidiaries, taken
as a whole in a single transaction or series of transactions;
(iii) any tender offer or exchange offer 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 defined 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 ownership of, 30% or more of the then outstanding
shares of capital stock of Paramount; or (v) any public
announcement of a proposal, 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
---------------------
provided in Section 9.1, in the event of the termination of this
Agreement pursuant to Section 8.1, this Agreement shall forthwith
become void, there shall be no liability on the part of Paramount
or QVC or any of their respective officers or directors 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 exemption agreement attached
hereto as Exhibit B shall become effective.
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 the Merger by
-------- -------
the stockholders of Paramount or QVC, no amendment, 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 except by an
instrument in writing signed by the parties hereto.
SECTION 8.4. Intentionally Omitted.
---------------------
SECTION 8.5. Fees and Expenses. All costs and
-----------------
expenses, 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.
<PAGE>
57
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1. Effectiveness of Representations,
---------------------------------
Warranties 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 effect,
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 after 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
-------
communications 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 address for
a party as shall be specified by like changes of address) or sent
by electronic transmission to the telecopier number specified
below:
(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
<PAGE>
58
(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 any
of its affiliates or associates has, directly or indirectly,
(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 understanding or
upon the exercise of conversion rights, exchange 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
executor, of the power to direct or cause the direction of
<PAGE>
59
the management or policies of a person, whether through the
ownership of stock or as trustee or executor, by contractor
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 exercise of the then exercisable 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,
directly or indirectly, 50% or more of the stock or other
equity interests, the holders of which are generally
entitled to vote for the election of the board of directors
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 Agreement.
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 legal
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 possible 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
----------------
(together 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
<PAGE>
60
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 party
beneficiary) as against Paramount or its Board with respect 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 conflicts of law.
SECTION 9.12. Counterparts. This Agreement may be
------------
executed in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
<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>
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 Offer,
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 conditions shall not
exist:
(a) 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
order (whether temporary, preliminary or permanent) which is
in effect and which materially restricts, prevents or
prohibits consummation of the Offer, the Merger or any
transaction 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 representations 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 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 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
by it on or prior to the date of consummation of the Offer;
(d) Since the date of the Agreement, there shall
have been no change, occurrence or circumstance in the
<PAGE>
2
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 material
adverse effect on the business, results of operations or
financial condition of Paramount and the Paramount
Subsidiaries, 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 inaction
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 failure
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 circumstances
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>
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
Preferred Stock, plus accrued and
unpaid 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
redeemed 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 anniversary 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
Exchange 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)
for the right to elect two
additional directors to QVC's Board
of Directors in the event that QVC
<PAGE>
2
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
preference 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 anniversary of the Effective
Time, plus, in each case, all
accrued and unpaid interest.
Mandatory Redemption None
Conversion None
Subordination The Exchange Debentures will be
subordinated in right of payment to
all Senior Indebtedness of QVC when
due. Senior Indebtedness of QVC
will be defined as all indebtedness
<PAGE>
3
or obligations (including fees and
expenses with respect thereto)
incurred, assumed, guaranteed or
otherwise created, unless the terms
of the instrument or instruments by
which QVC incurred, assumed,
guaranteed or otherwise created any
such indebtedness or obligation
expressly provide that such
indebtedness or obligation is
subordinate to all other
indebtedness of QVC or that such
indebtedness 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 guaranteed, directly or
indirectly, by QVC (a) for money
borrowed, (b) in connection with
the acquisition of any business,
property or other assets (other
than trade payables incurred 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,
television production or other
entertainment of any kind; (ii) any
obligation of QVC (or of a
Subsidiary which is guaranteed by
QVC) as lessee under a lease of
real or personal 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, extension or
refunding of any of the foregoing.
No payment on account of principal
or interest on the Exchange
Debentures may be made if at the
time of such payment there exists 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
reorganization of or similar
proceeding relating to QVC, the
holders of its Senior Indebtedness
<PAGE>
4
will be entitled to receive payment
in full before 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
Exchange Indebtedness will mean any
of the following: (i) failure of
QVC to pay (whether or not
prohibited by the subordination
provisions) interest for sixty days
on Exchange Debentures, (ii)
failure to pay principal 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
outstanding) and (iv) certain
events of bankruptcy, insolvency or
reorganization.
<PAGE>
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 Warrants 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 anniversary of the second
step merger. The Warrants will contain customary anti-dilution
and other provisions.
<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 letter
I may be deemed to be an "affiliate" of Paramount Communications
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 Securities"). I
--------------
would receive such shares in exchange for, respectively, 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
disposition of the QVC Securities in violation of the Act or
the Rules and Regulations.
B. I have carefully read this letter and the Agreement
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
Securities to me pursuant to the Merger has been registered
with the Commission under the Act on a Registration
Statement 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,
<PAGE>
2
transfer or other disposition is made in conformity with the
volume and other limitations of Rule 145 promulgated 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 acceptable 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 compliance 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
ISSUED IN A TRANSACTION TO WHICH RULE 145
PROMULGATED UNDER THE SECURITIES ACT OF 1933
APPLIES. THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY ONLY BE TRANSFERRED 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 issued 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 THEREOF WITHIN
THE MEANING OF THE SECURITIES ACT OF 1933 AND MAY
NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
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 undersigned
shall have delivered to QVC a copy of a letter from the staff of
<PAGE>
3
the Commission, or an opinion of counsel reasonably satisfactory
to QVC in form and substance reasonably satisfactory 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:
