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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE YEAR ENDED DECEMBER 31, 1993
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NO. 1-9118
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HOME SHOPPING NETWORK, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 59-2649518
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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2501 118TH AVENUE NORTH, ST. PETERSBURG, FLORIDA
(Address of registrant's principal executive offices)
33716
(Zip Code)
(813) 572-8585
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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TITLE OF NAME OF EXCHANGE
EACH CLASS REGISTERED
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Common Stock $.01 Par Value...................................... NYSE
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Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
As of March 18, 1994, there were outstanding 73,920,285 shares of Common
Stock (net of shares held in treasury) and 20,000,000 shares of Class B common
stock. The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 18, 1994 was $732,596,579.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes / / No / /
DOCUMENTS INCORPORATED BY REFERENCE:
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DOCUMENTS FORM 10-K REFERENCE
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1993 Annual Report................................................... Part II Items 5-8
Proxy Statement dated March 29, 1994................................. Part III Items 10-13
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HOME SHOPPING NETWORK, INC.
FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
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PART I
Item 1 Business................................................................ 1
Item 2 Properties.............................................................. 8
Item 3 Legal Proceedings....................................................... 9
Item 4 Submission of Matters to a Vote of Security-Holders..................... 16
PART II
Item 5 Market for Registrant's Common Equity and Related Stockholder Matters... 17
Item 6 Selected Financial Data................................................. 17
Item 7 Management's Discussion and Analysis of Financial Condition and Results 17
of Operations...........................................................
Item 8 Consolidated Financial Statements and Supplementary Data................ 17
Item 9 Changes in and Disagreements with Accountants on Accounting and 17
Financial Disclosure....................................................
PART III
Item 10 Directors and Executive Officers of the Registrant...................... 18
Item 11 Executive Compensation.................................................. 18
Item 12 Security Ownership of Certain Beneficial Owners and Management.......... 18
Item 13 Certain Relationships and Related Transactions.......................... 18
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K......... 19
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PART I
ITEM 1 -- BUSINESS
GENERAL
Home Shopping Network, Inc. ("HSN" or the "Company") is a holding company,
the subsidiaries of which conduct the day-to-day operations of the Company's
various business activities. The Company's primary business, and principal
source of revenue, is electronic retail sales by Home Shopping Club, Inc.
("HSC"), a wholly-owned subsidiary of the Company and a leader in the electronic
retailing industry.
On July 13, 1993, the Company elected to change its annual reporting period
from a year ending August 31 to a year ending December 31, effective January 1,
1993. The change in year end was made following the acquisition of voting
control of the Company (the "Acquisition") by a wholly-owned subsidiary of
Liberty Media Corporation, a Delaware corporation ("Liberty"), which reports its
financial position and results of operations using a December 31 year end.
HOME SHOPPING CLUB, INC.
HSC sells a variety of consumer goods and services by means of HSC's live,
customer-interactive retail sales programs which are transmitted twenty-four
hours a day, seven days per week, via satellite to cable television systems,
affiliated broadcast television stations and satellite dish receivers. HSC
produces three separate retail sales programming networks, HSN 1, HSN 2, and HSN
Spree. HSN 1 is carried by cable television systems throughout the country and
is the original HSC programming network. HSN 2 is carried by broadcast
television stations which are affiliated with HSC. HSN 2 is also carried by
cable television systems which primarily retransmit the broadcast television
signal of one of the independent broadcast television stations carrying HSN 2.
HSN Spree is carried primarily on a part-time basis by both cable television
systems and broadcast television stations. This provides system operators and
broadcasters with income producing programming during portions of the day in
which programming may not otherwise be scheduled.
As of December 31, 1993, there were approximately 93.7 million homes in the
United States with a television set, 60.0 million basic cable television
subscribers and 3.1 million homes with satellite dish receivers. As of December
31, 1993, approximately 21.8 million homes throughout the United States were
able to receive HSN 1 via over 1,526 cable systems. HSN 2 was broadcast at the
same date via 35 full power and 9 low power broadcast television stations in
areas with a total viewership of approximately 25.9 million households. In
addition, approximately 19.7 million households were able to receive HSN 2 via
over 770 cable systems. See "Broadcast Television Affiliations -- Cable
Re-regulation Law." As of December 31, 1993, HSN Spree was carried on a full-or
part-time basis by 112 broadcast television stations, including certain stations
that are in areas also served by cable television systems or broadcast
television stations which carry HSN 1 and/or HSN 2. Approximately 3.1 million
additional households also were able to receive HSN 1, HSN 2 or HSN Spree by
means of satellite dish receivers.
Approximately 7.8 million of the cable television households receiving HSC
programming are considered multiple service households which receive HSN 1 and
HSN 2. In addition, an indeterminate number of television households which are
capable of receiving HSN 1 or HSN 2 by means of broadcast television stations or
cable may also receive HSN Spree and, in certain markets, HSN Spree is carried
by cable television systems located within the coverage area of broadcast
television stations which broadcast HSN Spree. Each of HSC's three programming
services may be received by households with satellite dish receivers which
households may also be located within areas served by cable television systems
or broadcast television stations which carry HSC programming.
HSC'S RETAIL SALES PROGRAMMING
HSC's electronic retail marketing and programming concept is the "Home
Shopping Club" (the "Club"). The distinctive format of the Club is intended to
promote sales through a combination of product information, price information,
entertainment and the creation of confidence in HSC and its products, thus
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promoting customer loyalty and repeat purchases. HSC programming is divided into
segments. Each segment is televised live with an experienced show host. The show
host presents merchandise one product at a time and conveys to the viewer
information relating to the product, including price, quality, uses and
attributes. Viewers place orders for products by calling a toll-free telephone
number. Show hosts engage callers in spontaneous on-the-air discussions
regarding the Club, the currently featured product or the caller's previous
experience with the Club and its products. This distinctive format creates a
spontaneous and entertaining program. First-time purchasers of merchandise
receive a complimentary membership in the Club. HSC attempts to stimulate Club
member loyalty by providing Club members with incentives to purchase additional
items from the Club using, for example, the "Bargaineer" magazine which, among
other features, offers discounts on HSC purchases. The Club format is used on
HSN 1, HSN 2 and HSN Spree.
MEMBER SERVICES AND RETURN POLICY
HSC believes that satisfied Club members will be loyal and will purchase
merchandise from HSC on a regular basis. To help ensure Club member
satisfaction, HSC has member services personnel and voice response units
available to handle calls relating to member inquiries. The member services
department maintains toll-free lines operating on weekdays from 8:00 a.m. to 12
midnight, Eastern Time, to assist Club members.
As part of HSC's member service policy, a Club member may, generally within
thirty days, return for any reason any item purchased from HSC, except certain
special sale items, for a full refund of the purchase price, including the
original shipping and handling charges.
PRODUCT PURCHASING AND LIQUIDATION
The Company believes that a primary factor contributing to the success of
its business is its ability to locate and take advantage of opportunities to
purchase, and to have manufactured to its specifications, large quantities of
quality merchandise at favorable prices. HSC principally purchases merchandise
made to its specifications and also purchases merchandise from manufacturers'
lines, overproduction closeouts and the overstock inventories of wholesalers.
The mix of products and source of such merchandise depends upon a variety of
factors including price and availability.
HSC has no long-term commitments with any of its vendors, and historically,
there have been various sources of supply available for each category of
merchandise sold by HSC. HSC's product offerings include: jewelry; hardgoods,
which include consumer electronics, housewares and toys; softgoods, which
consist primarily of clothing; and other product categories which include
collectibles, cosmetics and consumables. For calendar 1993, jewelry, hardgoods,
softgoods and other categories accounted for approximately 49%, 34%, 15% and 2%,
respectively, of HSC's sales.
The Company liquidates merchandise through its six outlet stores. The
Company opened the fifth outlet store in the second quarter of 1993 and the
sixth outlet store in the fourth quarter of 1993. Merchandise that becomes
damaged and is unsuitable for sale via the Club or the outlet stores is
liquidated by the Company through traditional channels. For the first five
months of calendar 1993, the Company liquidated merchandise through Western
Hemisphere Sales, Inc. ("Western"), a company owned by a former related party.
See "Legal Proceedings" and "Certain Relationships and Related Transactions."
Sales of damaged merchandise by Western were less than .5% of the total
sales of the Company for the year ended December 31, 1993. Merchandise also is
disposed of from time to time through charitable contributions.
TRANSMISSION AND PROGRAMMING
HSC produces retail sales programs in its studios located in St.
Petersburg, Florida. These programs are distributed to cable television systems,
broadcast television stations and satellite dish receivers by means of HSN's
satellite uplink facilities to satellite transponders leased by HSN which
retransmit the signals received from HSN. Any cable television system, broadcast
television station or individual satellite dish owner in the
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United States and the Caribbean Islands equipped with standard satellite
receiving facilities is capable of receiving HSC programming.
HSN has lease agreements securing full time use of three transponders on
three domestic communications satellites, Satcom C-3, Satcom C-4, and Satcom
F2R. The three Satcom transponders are located on domestic communications
satellites owned by GE American Communications, Inc. ("GE"). Two lease
agreements which relate to Satcom C-3 used by HSN 1 and Satcom C-4 used by HSN 2
grant HSN "protected" rights. The lease agreement which relates to Satcom F2R
used for HSN Spree provides HSN with "transponder protected" rights.
Domestic communication satellite transponders may be leased full-or
part-time on a "protected," "transponder protected" or "unprotected" basis. When
the carrier provides services to a customer on a "protected" basis, replacement
transponders are reserved on board the satellite for use in the event the
"protected" transponder fails. Should there be no reserve transponders
available, the "protected" customer will displace an "unprotected" transponder
customer on the same satellite. The carrier also maintains a protection
satellite and should a satellite fail completely, all lessors' "protected"
transponders would be moved to the protection satellite. The customer who leases
a "transponder protected" transponder has the same level of protection as the
"protected" customer except for the availability of the back-up protection
satellite. The customer who leases an "unprotected" transponder has no reserve
transponders available, and may have its service interrupted for indefinite
periods when its transponder is required to restore a "protected" service.
GE provides one (1) back-up transponder for every four (4) transponders,
and one (1) back-up satellite for all their satellites. A transponder failure
that would necessitate a move to another transponder on the same satellite would
not result in any significant interruptions of service to the cable systems
and/or television stations which receive HSC's programming. However, a failure
that would necessitate a move to another satellite may temporarily affect the
number of cable systems and/or television stations which receive HSC's
programming because of the need to reorient earth stations to the substitute
satellite transponder.
Satcom C-3 and Satcom C-4 were launched in September and August 1992,
respectively. The terms of the contracts are for the life of the satellites,
which are projected to be 12 years. The transponder agreement for Satcom F2R has
been extended to December 31, 1994. HSN has commenced negotiations to secure a
replacement transponder. HSN anticipates that it will be able to negotiate a
transponder lease to replace the lease on Satcom F2R.
Although HSN believes it is taking every reasonable measure to ensure its
continued satellite transmission capability, there can be no assurance that
termination or interruption of satellite transmissions will not occur. HSN's
access to three transponders pursuant to long-term agreements would enable HSC
to continue transmission of its two primary programming services, HSN 1 and HSN
2, should any one of the satellites fail. Such a termination or interruption of
service by one or more of these satellites could have a material adverse effect
on the operation and financial condition of HSN. See "Federal Government
Regulation of Satellite Transmissions."
The availability of replacement satellites and transponder time beyond
current leases is dependent on a number of factors over which HSN has no
control, including competition among prospective users for available
transponders and the availability of satellite launching facilities for
replacement satellites.
FEDERAL GOVERNMENT REGULATION OF SATELLITE TRANSMISSIONS
The Federal Communications Commission ("FCC") grants licenses to construct
and operate satellite uplink facilities which transmit signals to satellites.
These licenses are generally issued without a hearing if suitable frequencies
are available. HSN has been granted two (2) licenses for operation of C-band
satellite transmission facilities and two (2) licenses for operation of KU-band
satellite transmission facilities on a permanent basis in Clearwater and St.
Petersburg, Florida.
The FCC has jurisdiction over satellite service and facility providers.
Under current FCC policy, domestic satellite service and facility providers are
not subject to the market exit provisions of Section 214 of the Communications
Act of 1934 (the "Communications Act"). Thus, FCC policies would not preclude GE
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from ceasing to provide communication services to customers on short notice, and
the Company would need to rely principally upon protections in its lease
agreements described above. See "Transmission and Programming." HSN has not
received notification that GE has any intention to cease providing transmission
services. GE is required by the FCC to provide services on terms and conditions
that are just, reasonable and non-discriminatory, and are subject to complaints
filed with the FCC pursuant to the Communications Act.
CABLECASTING HOME SHOPPING CLUB PROGRAMMING
HSC has entered into affiliation agreements with a number of cable system
operators to carry HSN 1, HSN 2 or both HSN 1 and HSN 2. HSC's standard
affiliation agreement provides that the cable operator will receive a commission
of 5% of the net sales of merchandise sold to Club members located within the
cable operator's franchise area in return for distributing to its customers
HSC's sales programs as part of the cable operator's cable service. Cable
operators which have executed affiliation agreements to carry HSN 2 are
compensated for all sales on HSN 2 of merchandise within their franchise areas,
regardless of whether a customer's order results from watching the program via
cable, satellite dish, or on a broadcast television station within the cable
operator's franchise area.
Although there is some variation among affiliation agreements with cable
operators, the current standard affiliation agreement provides for an initial
term of five years which is automatically renewable for subsequent one year
terms. The agreement may be terminated, however, by either party ninety days
prior to the end of the term. The agreements obligate a cable operator to assist
the promotional efforts of HSC by carrying commercials regarding the Home
Shopping Club and distributing HSC's marketing materials to their subscribers.
HSC also purchases advertising availabilities from many cable operators on
programming networks other than the Club as an incentive to the cable operators
to carry HSC programming and as a marketing device to increase awareness of HSC
programming among viewers in a given cable system. To further promote cable
carriage of HSC programming, HSC has, in certain markets, guaranteed a minimum
level of commissions to cable operators which agree to carry the HSC programming
or offered additional compensation based upon the sales performance of HSC
programming in the cable operator's franchise area.
HSC has also increased cable carriage of HSN 2 and HSN Spree as a result of
the cable re-regulation law. See "BROADCAST TELEVISION AFFILIATIONS -- Cable
Re-regulation Law."
The Company has entered into agreements with broadcast television stations
to carry HSN Spree on both a part-time and full-time basis. Cable operators
within the coverage areas of such broadcast television stations may carry a
station's broadcast signal of HSN Spree and, if under contract, receive a
commission on all sales made during the hours between 12 midnight and 9:00 a.m.,
Eastern Time, via HSN Spree within the cable operator's wired franchise area.
HSN Spree is also carried by "superstation" WWOR, from 3 a.m. to 6 a.m., Eastern
Time, which is transmitted to approximately 17.0 million cable subscribers.
1987 CABLE OPERATORS STOCK OPTION PLAN
During fiscal 1987, the Company offered certain cable operators the
opportunity to participate in the 1987 Cable Operators Stock Option Plan (the
"1987 Plan"). The special affiliation agreement executed by participants in the
1987 Plan provided that a cable operator would carry HSN 1, HSN 2 or both HSN 1
and HSN 2 for a period of five years beginning no later than January 31, 1988.
In exchange for the commitment to carry HSC programming for five years, cable
operators received (1) options to purchase the Company's common stock,
exercisable over a five year period which expired July 1, 1992, and (2) the
standard commission of 5% on sales of the Company's merchandise via television
in the cable operator's territory. The exercise price for the options was $13.00
per share, and none were exercised prior to expiration. For each subscriber to
which a cable operator agreed to transmit HSN 1 or HSN 2, the cable operator was
granted an option to purchase $10.00 worth of the Company's common stock. The
Company granted an option to purchase $20.00 worth of its common stock for each
subscriber to which a cable operator agreed to transmit both HSN 1 and HSN 2.
Under the 1987 Plan, cable operators were granted certain piggyback and
mandatory registration rights with respect to the shares into which the options
are exercisable.
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In December 1987, the Company re-opened the offering of the 1987 Plan to
additional cable operators and provided cable operators already participating in
the 1987 Plan with the opportunity to reduce the exercise price of options
previously granted under the 1987 Plan. The Company offered cable operators not
participating in the 1987 Plan the opportunity to receive an option to purchase
77 shares of common stock for every 100 subscribers to which the cable operator
agreed to transmit HSN 1 and HSN 2 for up to seven years. Cable operators which
agreed to carry HSN 1 and HSN 2 for a period of five years received options
exercisable in five equal annual installments with an exercise price of $7.00
per share. Cable operators which agreed to carry HSN 1 and HSN 2 for a period of
seven years received options exercisable in three equal annual installments with
an exercise price of $6.00 per share. The options issued to five year
participants expired in 1993, and the options issued to seven year participants
will expire in June 1994.
Cable operators already participating in the 1987 Plan were able to reduce
the exercise price of options granted under the 1987 Plan to $7.00 per share
exercisable in five equal annual installments, provided they agreed to carry HSN
1 or HSN 2 for a total of five years. In addition, cable operators holding
options under the 1987 Plan were able to further reduce the exercise price of
options granted under the 1987 Plan to $6.00 per share exercisable in three
equal annual installments provided they agreed to carry HSN 1 or HSN 2 for a
total of seven years. As a result of the distribution by the Company of the
capital stock of its former wholly-owned subsidiary, Precision Systems, Inc., in
1992, the exercise prices of these options were adjusted from $7.00 to $6.651
and from $6.00 to $5.701, respectively and were further adjusted from $6.651 to
$6.491 and from $5.701 to $5.564, respectively as a result of the distribution
by the Company of the capital stock of its former wholly-owned subsidiary,
Silver King Communications, Inc. ("SKC").
Under the 1987 Plan, the Company may cancel options issued to a cable
operator if the cable operator fails to carry the Company's programming to the
agreed upon number of cable system subscribers. The number of shares subject to
options, therefore, may be reduced from time to time to reflect the number of
cable system subscribers actually receiving HSC programming under the 1987 Plan.
During fiscal 1993, cable operators exercised options for approximately 3.3
million shares contributing approximately $20.4 million to the Company's
Stockholders' Equity under the 1987 Plan. As of December 31, 1993, options to
purchase approximately .5 million shares of common stock were outstanding under
the 1987 Plan.
The Company may, in the future, issue options to purchase the Company's
common stock in order to help secure cable carriage.
DISTRIBUTION, DATA PROCESSING AND TELECOMMUNICATIONS
The Company's fulfillment subsidiaries ship merchandise purchased by Club
members from warehouses located in St. Petersburg, Florida; Salem, Virginia;
Waterloo, Iowa; and Reno, Nevada. Substantially all inventory resides at the
Company's four fulfillment centers prior to being offered for sale. Merchandise
typically is delivered to customers within 7 to 10 business days of placing an
order with HSC. HSN currently operates several Unisys main frame computers and
has extensive proprietary data processing and order processing systems which
facilitate the timely delivery of merchandise to customers. HSN's computerized
systems track purchase orders, inventory, member orders, shipping records, and
member payments and also enhance credit verification and authorization. The
Company believes these software systems, which would be difficult for
competitors to duplicate, have been a primary factor in HSC's ability to meet
the demands of its sales growth.
To further facilitate the delivery of merchandise to Club members, HSC
installed a state-of-the-art fiber optic telephone system and switching complex
which was developed for the Company in fiscal 1988. HSC also utilizes a
computerized voice response phone answering system (the "VRU system") capable of
handling incoming sales calls. The VRU system provides callers with the option
to place their order by means of touch tone input or to be transferred, in the
case of new members or if the member requires personal service, to an operator.
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BROADCAST TELEVISION AFFILIATIONS
AFFILIATION WITH BROADCASTERS
In July 1986, the Company initiated a program to broaden the viewership of
HSC's programming services by acquiring broadcast television stations in
principal television markets through SKC. On December 28, 1992, the Company
distributed the capital stock of SKC (the "Distribution") to the Company's
shareholders of record as of December 24, 1992, in the form of a pro rata stock
dividend. Intercompany indebtedness in an amount of $135.2 million owed by SKC
was converted into a secured long-term senior loan between SKC and a
wholly-owned subsidiary of the Company pursuant to a loan agreement (the "Loan
Agreement"), evidenced by a promissory note (the "Note"), bearing interest on
the unpaid principal amount at a rate of 9.5% per annum. The terms of the Note
are governed by the Loan Agreement and the liability evidenced thereby is
secured by substantially all of SKC's assets. The Note is payable in equal
monthly installments of principal and interest over fifteen years. The Note
provides that the principal amount and the payment schedule of the loan may be
adjusted to increase or decrease payments over the remaining term of the loan to
reflect certain liabilities pursuant to a Tax Sharing Agreement, which was
entered into in connection with the distribution of the capital stock of SKC.
The Loan Agreement contains certain restrictive covenants and default
provisions. The balance of the Note, including interest receivable, at December
31, 1993, was $132.3 million. So long as any indebtedness is outstanding under
the Loan Agreement, each SKC station is required to maintain an affiliation
agreement with HSC to carry HSC's programming. HSC pays an affiliation fee to
SKC based on hourly rates and, upon reaching certain sales levels, commissions
on net sales. Certain of the SKC stations have realized additional compensation
during the second year, and those stations, and possibly others, are expected to
continue to receive additional compensation during subsequent years of their
affiliation agreements if "must carry" survives legal challenge. See "Cable
Re-regulation Law."
SKC, through its subsidiaries, owns twelve broadcast television stations,
including one television satellite station, located in many of the top markets
in the United States. These stations exclusively broadcast HSC programming,
except for a portion of broadcast time which is used to provide public affairs
and other non-entertainment programming and advertising inserts.
SKC also owns 14 low power television ("LPTV") stations that broadcast
HSC's programming services. LPTV stations have lower power transmitters than
conventional television stations, and therefore, the broadcast signal of an LPTV
station does not cover as broad a geographical area as conventional broadcast
stations.
In addition to affiliation agreements with the SKC broadcast television and
LPTV stations, HSC has entered into affiliation agreements with other broadcast
television stations and LPTV stations to carry either HSN 2 or HSN Spree for a
predetermined number of hours per day. The broadcast station affiliation
agreements may generally be terminated upon proper notice and specify the
payment of fixed fees for the carriage of HSC programming.
HSN Spree programming is available in one hour segments twenty-four hours
per day which allow broadcast and cable affiliates to distribute HSN Spree in
available daytime, evening, or overnight time slots that would not otherwise
produce revenue.
As of December 31, 1993, HSC had entered into either full-or part-time
affiliation agreements with 35 broadcast television stations to carry HSN 2
(including broadcast television stations owned by SKC), 70 television stations
to carry HSN Spree and 51 LPTV stations to carry HSN 2 or HSN Spree. The Company
may also affiliate with additional broadcast television stations and LPTV
stations in the coming year.
CABLE RE-REGULATION LAW
On October 5, 1992, the Cable Television Consumer Protection and
Competition Act of 1992 was enacted into law. Among the many provisions of this
new cable re-regulation law is one that mandates that cable systems carry the
signals of local commercial television stations ("must carry") or, at the
station's option, that cable systems and television stations negotiate a fee to
be paid by cable systems for the
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retransmission by such cable systems of the local television station's broadcast
signal. HSC's full-time broadcast affiliates have all requested "must carry"
status in lieu of a retransmission fee.
On July 2, 1993, the FCC ruled that stations predominantly used for the
transmission of sales presentations or program-length commercials operate in the
public interest and are entitled to "must carry" status. A petition for
reconsideration of the FCC's ruling currently is pending before the FCC. The
Company has filed an opposition to that petition. Also, the Supreme Court of the
United States has heard oral arguments regarding a decision by the United States
District Court for the District of Columbia upholding "must carry" generally. A
ruling is expected in mid-1994. As a result of "must carry," HSC has experienced
increased cable distribution of its programming due to an increase in the number
of cable systems that carry HSC programming.
On September 23, 1993, the FCC adopted a Notice of Inquiry initiating a
proceeding to evaluate the commercial programming practices of broadcast
television stations (including stations with shop at home formats) and seeking
comment on whether the public interest would be served by establishing limits on
the amount of commercial matter broadcast by television stations. The FCC has
received comments and reply comments. Although the FCC is only seeking comments
at this time and has not made any proposals to limit the amount of
commercialization on television stations, there can be no assurance whether or
when such proposals will be forthcoming, what the nature of such proposals might
be, whether they will be implemented, and thus what impact, if implemented, they
would have on the Company.
ADDITIONAL SUBSIDIARY BUSINESSES
In addition to the electronic retailing business, the Company's
subsidiaries are involved in mail order, insurance and other businesses
complementary to electronic retailing.
HSN Mail Order, Inc. ("Mail Order") markets a variety of merchandise
through four mail order catalogs distributed to individuals on mailing lists
developed by Mail Order or rented from agents. The catalogs include Home
Shopping Values(TM), Bargaineer Shopping Values(TM), Private Showing Jewelry
Values By Mail, and Stuart McGuire Men's Footwear and Accessories. Mail Order
also markets a variety of products by inserting marketing materials, including
its catalogs, in packages containing products shipped to Club members.
HSN Insurance, Inc. ("HSI") is a full-service insurance agency marketing a
wide range of insurance products such as life, health, auto, homeowners and
commercial policies to the public and Club members locally. Mass-marketing of
other insurance and service-related products such as a private-label auto club,
a legal services plan, a dental insurance plan, an extended services plan for
electronics, and an appliance protection plan are also offered to the Club
members nationally. HSI also handles the placement of all property and liability
insurance for HSN and its subsidiaries as well as employee benefits insurance
products.
HSN Mistix Corporation serves as a computerized ticketing and campground
reservations company.
HSN Lifeway Health Products, Inc. markets natural vitamin and mineral
supplements, over-the-counter items, health and wellness merchandise and a
complete line of skin and hair products. More than 280 products are offered
under the Lifeway(R) line and are marketed via HSC's programming services, mail
order catalogs and continuity-based outbound telemarketing.
COMPETITION
The Company operates in a highly competitive environment. It is in direct
competition with businesses which are engaged in retail merchandising and
competes most intensely with other electronic retailers, direct marketing
retailers such as mail order companies, companies that sell from catalogs, and
other discount volume retail outlets. The Company also competes for access to
its customers with broadcasters and alternative forms of entertainment and
information, such as programming for network and independent broadcast
television stations, basic and pay cable television services, satellite master
antenna systems, home satellite dishes and home entertainment centers. In
particular, the price and availability of programming for
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cable television systems affects the availability of these channels for the
Company's programs and the compensation which must be paid to the cable
operators for carriage of HSC programming. In addition, the Company believes
that due to a number of factors, including the development by cable operators of
alternative sources of cable operator owned programming, the competition for
channel capacity has substantially increased. With the advent of new compression
technologies on the horizon, this competition for channel capacity may
substantially decrease, although additional competitors may have the opportunity
to enter the marketplace. No predictions can be made with respect to the
viability of these technologies or the extent to which they will ultimately
impact the availability of channel capacity.
The Company was the first specialty retailer to market merchandise by means
of live, nationally televised sales programs. The Company's principal competitor
in the electronic retail industry is QVC, Inc ("QVC"). The Company and QVC
account for the majority of sales in the electronic retail industry. Within the
last year, new electronic retailers have commenced or enhanced operations, and
several others have announced their intention to enter the business. There are
other companies, some having an affiliation or common ownership with cable
operators, that now market merchandise by means of live television. A number of
other entities are engaged in direct retail sales businesses which utilize
television in some form and which target the same markets in which the Company
operates. Some of the Company's competitors are larger and more diversified than
the Company, or are affiliated with cable operators which have a substantial
number of subscribers. The Company cannot predict the degree of success with
which it will meet competition in the future.
In addition to the above factors, the Company's affiliation with broadcast
television stations creates another set of competitive conditions. These
stations compete for television viewers primarily within local markets. The
Company's affiliated broadcast television stations are located in highly
competitive markets and compete against both VHF and UHF stations. Due to
technical factors, a UHF television station generally requires greater power and
a higher antenna to secure substantially the same geographical coverage as a VHF
television station. Under present FCC regulations, additional UHF commercial
television broadcasting stations may be operated in all such markets, with the
possible exception of New York City. The Company cannot quantify the competitive
effect of the foregoing or any other sources of video programming on any of the
Company's affiliated television stations, nor can it predict whether such
competition will have a material adverse effect on its operations.
In summary, the Company operates in a highly competitive environment in
which, among other things, technological change, changes in distribution
patterns, media innovations, data processing improvements and new entrants make
the competitive position of both the Company and its competitors extremely
difficult to predict.
TRADEMARKS, TRADENAMES AND COPYRIGHTS
The Company has registered and continues to register, when appropriate, its
trade and service marks as they are developed and used, and the Company
vigorously protects its trade and service marks. The Company believes that its
marks are a primary marketing tool.
EMPLOYEES
At December 31, 1993, the Company had 4,266 full-time employees and 752
part-time employees. The Company believes it has generally good employee
relationships.
ITEM 2 -- PROPERTIES
During fiscal 1986, the Company purchased a 165,000 square foot facility
located at 1529 U.S. Highway 19 South in Clearwater, Florida, which housed its
corporate headquarters, studios and certain of its administrative offices. The
Company occupies approximately 82,000 square feet of this facility and leases
approximately 83,000 square feet to third parties. The Company operates out of a
campus facility at 2501 118th Avenue North, St. Petersburg, Florida, containing
in excess of 580,000 square feet which, since
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September 30, 1987, has housed television studios, broadcast facilities and most
of the Company's administrative offices and training facilities.
In fiscal 1986, the Company purchased a 160,000 square foot warehouse
located in Waterloo, Iowa, and leased a 200,000 square foot warehouse located
near Reno, Nevada, with an option to purchase the property. The lease expires
September 30, 2002. Both facilities are used as fulfillment centers.
The Company operates a 450,000 square foot warehouse and fulfillment center
with administrative offices located in Salem, Virginia, which is leased from the
City of Salem Industrial Development Authority. At the end of the term of such
lease, on November 1, 1999, the Company will have the option to purchase the
property for $1. In fiscal 1991, the Company completed a 215,000 square foot
expansion of this facility, at an approximate cost of $4.2 million.
In December 1986, the Company purchased a 43,200 square foot fulfillment
center located in St. Petersburg, Florida.
In July and September 1991, the Company purchased three properties, which
it formerly leased, from a former related party. The properties, consisting of
approximately 90,000 square feet in Clearwater and St. Petersburg, Florida, are
currently used for warehouse space.
The Company's subsidiaries also lease office and/or warehouse space in
several states to operate its businesses.
The Company considers its properties suitable and adequate for its present
needs.
ITEM 3 -- LEGAL PROCEEDINGS
On February 12, 1993, a class action complaint titled Arazie v. Malone, et
al. was filed by a shareholder of the Company in the Court of Chancery of the
State of Delaware, in and for the County of New Castle (the "Delaware Court"),
against the Company, John C. Malone, Peter R. Barton, Robert R. Bennett, John M.
Draper, Roy M. Speer and Liberty. Shortly thereafter, four other class action
complaints were filed with the Delaware Court by shareholders of the Company;
certain of these actions also named as defendants Les R. Wandler and RMS Limited
Partnership, a Nevada Limited Partnership ("RMS") in addition to the defendants
named in Arazie. On February 19, 1993, the five Delaware actions were
consolidated for all purposes in an action titled In re: Home Shopping Network,
Inc. Shareholders Litigation, Civil Action No. 12868 (the "Delaware Action"). On
March 15, 1993, three additional class action complaints were consolidated into
the Delaware Action. On April 26, 1993, the plaintiffs in the Delaware Action
filed a consolidated amended and supplemental class action complaint (the
"Supplemental Complaint"). The Supplemental Complaint was brought on behalf of
all public stockholders of the Company (other than defendants) as of February
12, 1993, and their successors in interest, and names as defendants the persons
and entities named in the prior pending complaint in the Delaware Action, as
well as Liberty, Liberty Program Investments, Inc. ("LPI") and three current or
former directors of the Company (Gerald F. Hogan, J. Anthony Forstmann and John
J. McNamara). In the Supplemental Complaint, the plaintiffs allege, among other
things, that (i) Mr. Speer and RMS breached their fiduciary duties in agreeing
to the Acquisition, and that Liberty aided and abetted the supposed wrongdoing
by Mr. Speer and RMS; (ii) Liberty and LPI have breached their fiduciary duties
by commencing an unfairly priced, improperly timed, coercive and manipulative
tender offer (the "Tender Offer"); (iii) the offer to purchase disseminated by
Liberty and LPI in connection with the Tender Offer contains several
misrepresentations and omits material information; and (iv) the members of the
Board of Directors of the Company have breached their fiduciary duties of
loyalty, due care and candor by failing to protect the public stockholders of
the Company from the Tender Offer. Plaintiffs seek to rescind the Acquisition,
to enjoin consummation of the Tender Offer and to enjoin the defendants from
taking any action to eliminate the separate class voting rights of the holders
of the Shares and the Class B Shares on any future proposal relating to a merger
or other business combination involving the Company. On May 10, 1993, the
plaintiffs filed a Second Consolidated Amended and Supplemental Class Action
Complaint (the "Second Supplemental Complaint"). In addition to the parties and
allegations contained in the Supplemental Complaint that plaintiffs filed on
April 26, 1993, the Second Supplemental
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Complaint contains allegations, among other things, that the Tender Offer is
false, misleading and coercive. On July 14, 1993, the Delaware Chancery Court
granted the plaintiffs leave to file a third consolidated amended and
supplemental class action complaint (the "Third Supplemental Complaint"). In
addition to the parties and allegations contained in the Second Supplemental
Complaint, the Third Supplemental Complaint adds claims and allegations and adds
QVC as an additional party defendant. The Third Supplemental Complaint alleges
that the QVC merger proposal of July 12, 1993 to form a business combination
with the Company (the "QVC Merger Proposal") was inadequate and grossly unfair
to the Company's minority stockholders. It asserts class action claims against
all defendants other than QVC for breach of fiduciary duty, and against QVC for
aiding and abetting Liberty's alleged breaches of fiduciary duty in connection
with the QVC Merger Proposal. In addition to the relief sought in the Second
Supplemental Complaint, the Third Supplemental Complaint seeks to rescind the
Tender Offer or obtain damages in connection therewith. On November 5, 1993, QVC
withdrew the QVC Merger Proposal.
On April 26, 1993, four stockholders of the Company filed with the Delaware
Court a purported class action complaint, styled as 7547 Corp. V. Liberty Media
Corp., C.A. No. 12956, on behalf of an unspecified class of stockholders of the
Company (the "Delaware State Law Action"). The defendants including Liberty,
LPI, the Company, and certain current and former directors of the Company
(Messrs. Speer, Forstmann, McNamara, Wandler, Chu, James, Ramsey and Roberts).
Plaintiffs contend, among other things, that (i) the Board of Directors of the
Company failed to approve the Agreement in Principle between RMS and Liberty
relating to purchase of a controlling interest in the Company by Liberty before
RMS and Liberty reached an agreement, arrangement or understanding regarding the
Acquisition; (ii) any approval of the Agreement in Principle by the Board of
Directors of the Company on December 4, 1992, was ineffective to exempt Liberty
from the restrictions of Section 203 of the Delaware General Corporation Law;
and (iii) the Tender Offer is a prohibited "business combination" under Section
203. Plaintiffs sought an injunction hearing prohibiting consummation of the
Tender Offer and sought a declaratory judgment prohibiting Liberty from engaging
in a "business combination," as defined in Section 203 of the Delaware General
Corporation Law (including a business combination with the Company) until
December 3, 1995.
On May 17, 1993, a hearing was held in the Delaware Court on the motions
for preliminary injunction filed by the plaintiffs in the Delaware Action and in
the Delaware State Law Action. On May 19, 1993, the Delaware Court issued an
Order denying plaintiffs' motions for preliminary injunction, ruling that
plaintiffs in the Delaware Action had not demonstrated a reasonable probability
of success on the merits of their disclosure claims, and that plaintiffs in the
Delaware State Law Action had not demonstrated a reasonable probability of
success on their claim that the proposed tender offer was in violation of the
Delaware Business Combinations Act, 8 Del. C. Section 203.
On July 19, 1993, certain named plaintiffs filed a Class Action Complaint
styled Bartnik, et al. V. Home Shopping Network, Inc., Liberty Media Corp., QVC
Network, Inc., Roy M. Speer, Les R. Wandler, John C. Malone, Peter R. Barton,
Robert R. Bennett, Gerald F. Hogan, J. Anthony Forstmann, and John J. McNamara,
Civil Action No. 93-336, in the United States District Court for the District of
Delaware (the "Bartnik Complaint"). The Bartnik Complaint alleges class action
claims against Roy M. Speer, Liberty, Gerald F. Hogan, John C. Malone, Peter R.
Barton, and Robert R. Bennett for violations of Section 10(b) of the Exchange
Act and Rule 10b-5 promulgated thereunder in connection with an alleged scheme
to maintain an artificially low market price for the common stock of the Company
and to induce class members to sell the Company's common stock during the class
period at artificially depressed prices. The Bartnik Complaint contains a class
action claim against QVC for aiding and abetting the defendants in their alleged
violations of Section 10(b) and Rule 10b-5. The Bartnik Complaint also alleges
class action claims against defendants Liberty, Hogan, Malone, Barton, and
Bennett for violating Sections 20 and 20A of the Exchange Act through their
alleged control over the Company and its disclosures during the class period.
The Bartnik Complaint further alleges class action claims against all defendants
except QVC, alleging that Liberty's Offer to Purchase and 14D-1 dated on or
about April 22, 1993, and the Company's 14D-9 dated on or about May 6, 1993,
were materially false and misleading in violation of Section 14(e) of the
Exchange Act. The Bartnik Complaint also alleges claims against all defendants
except QVC for negligent misrepresentation.
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On or about July 22, 1993, plaintiff Meny Beriro filed a purported class
action complaint, Beriro V. Home Shopping Network, Inc., et al., No. 93-347, in
the United States District Court for the District of Delaware (the "Beriro
Complaint"). On or about August 17, 1993, plaintiff Lawrence G. Metzger filed a
purported class action complaint, Metzger V. Home Shopping Network, Inc. et al.,
No. 93-406, in the United States District Court for the District of Delaware
(the "Metzger Complaint"). The Beriro and Metzger Complaints name the same
defendants and contain substantially the same claims as the Bartnik Complaint.
On September 14, 1993, the United States District Court for the District of
Delaware entered an order consolidating the Beriro Complaint and the Metzger
Complaint into the Bartnik Complaint as the Complaint for the consolidated
action.
On December 16, 1993, four actions that had been filed in, consolidated by
and transferred from the United States District Court for the District of
Colorado were consolidated with the Bartnik Complaint (the "Delaware Federal
Action"). On February 15, 1994, plaintiffs filed a consolidated and amended
complaint. The action seeks unspecified damages on behalf of a purported class
consisting of all purchasers of the Company's common stock prior to April 9,
1993 who thereafter sold such shares on public exchanges prior to July 12, 1993
or in the Tender Offer. The defendants include Liberty, LPI, John C. Malone,
Peter R. Barton and Robert R. Bennett (collectively, the "Liberty Defendants"),
QVC, the Company, Gerald F. Hogan, J. Anthony Forstmann, John J. McNamara, Roy
M. Speer and Les R. Wandler. Plaintiffs allege that, between March 30, 1993 and
July 12, 1993, the Liberty Defendants failed to disclose their supposed "plans
and expectations" for a merger of the Company and QVC. Plaintiffs also allege
that (i) defendants supposedly made misleading and overly negative disclosures
between April-July 1993 regarding the business activities and prospects of the
Company which had the effect of artificially depressing the price of the
Company's shares; (ii) defendants allegedly misled sellers of the Company's
shares by failing to disclose defendants' expectations regarding a July 1993
ruling by the Federal Communications Commission which improved the business
prospects of the Company; and (iii) Liberty and the Company supposedly misled
the Company's stockholders by making incorrect disclosures (particularly in
connection with the Tender Offer) regarding Liberty's ability to control the
Company's stockholder vote on certain fundamental corporate transactions.
Plaintiffs assert that the foregoing alleged acts and omissions violated the
federal securities laws and state law.
On December 31, 1993, an agreement in principle was reached to settle the
Delaware Action and the Delaware Federal Action. The Company does not anticipate
having to contribute to the settlement of these actions or pay any of the
plaintiffs' attorneys' fees or expenses therein. The settlement of these actions
is conditioned on, among other things, court approval after notice to the
shareholders and a hearing on the fairness of the settlement.
On February 12, 1993, a class action complaint entitled Mizell et al. V.
Speer et al., C.A. No. 93-000494-CI-020, was filed in the Circuit Court for
Pinellas County, Florida against Roy M. Speer, Les R. Wandler, Franklin J. Chu,
J. Anthony Forstmann, Thomas A. James, John J. McNamara, William J. Ramsey,
Michael V. Roberts and Liberty ("Mizell "). On February 19, 1993, plaintiffs in
Mizell filed an amended complaint adding the Company as an additional defendant.
The Mizell plaintiffs allege, among other things, that the Liberty merger
proposal delivered to the Board of Directors of the Company following the
closing of the Acquisition (the "Liberty Merger Proposal") was fundamentally
unfair to the Company's public stockholders; did not represent the current value
of the Company's Common Stock, assets and business; and that certain of the
defendants breached their fiduciary duties to plaintiffs and to the Company's
other shareholders. The plaintiffs seek, inter alia, an injunction enjoining any
merger or other business combination resulting from the Liberty Merger Proposal
and unspecified monetary damages. Liberty and the other defendants in the Mizell
action have filed motions to dismiss the amended complaint on various grounds
or, in the alternative, to stay that proceeding in favor of the prior-filed
Delaware action.
On January 19, 1994, the Mizell plaintiffs voluntarily dismissed the Mizell
lawsuit without prejudice.
On April 13 and 14, 1993, seven purported class action lawsuits were filed
in the United States District Court for the Middle District of Florida, Tampa
Division (the "Court") against the Company and Roy M. Speer and, in two of the
cases, current or former officers and directors of the Company. RMS is also
named as a defendant in two of the actions. The complaints filed in four of the
suits are virtually identical and allege that
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certain statements made by Roy Speer and the Company in press releases and in an
information statement dated March 11, 1993, failed to disclose material facts
relating to the Company's business practices. Goldstein V. Roy M. Speer, et al.
and Home Shopping Network, Inc., Civil Action No. 93-602-CIV-T-23B; Milton
Partners, L.P. V. Roy M. Speer, et al. and Home Shopping Network, Inc., Civil
Action No. 93-608-CIV-T-15C; Kirsch V. Roy M. Speer, et al. and Home Shopping
Network, Inc., Civil Action No. 93-623-CIV-T-23A; and Greenwald V. Roy M. Speer,
et al. and Home Shopping Network, Inc., Civil Action No. 93-624-CIV-T-17B. In
particular, these suits allege that employees of the Company improperly accepted
compensation from vendors; that the Company paid Nando DiFilippo, former
executive vice-president, general counsel and secretary of the Company, to
prevent him from disclosing such vendor bribes; and that the Company had failed
to properly disclose certain related party transactions in its filings with the
SEC. These suits allege that the failure to disclose these matters violated
Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder, and
Section 20 of the Exchange Act and constituted common law fraud.
In International Gemmological Institute, Inc. et al. V. Home Shopping
Network, Inc. et al., Civil Action No. 93-610-CIV-T-21B, another of the
purported class action suits, the plaintiffs assert that Speer and the Company
misstated material facts or omitted to state material facts in certain public
filings and announcements, that certain insiders of the Company (Franklin Chu,
John McNamara, Michael Roberts, and Edward Vaughn) traded securities of the
Company while in the possession of material nonpublic information and that Speer
and the Company engaged in certain activities which amount to common law fraud
and deceit and negligent misrepresentation. This purported class action seeks
damages, including punitive damages, interest, costs and fees. The allegations
in this complaint are similar to those in the class action suits described
above. Likewise, in Arnold Jerome Sussman, et al. V. Home Shopping Network,
Inc., Civil Action No. 93-613-CIV-T-17B the plaintiffs assert violations of
Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder based
upon a failure to properly disclose certain bribes allegedly paid by unspecified
vendors to Mr. Speer and Lowell W. Paxson, a former president of the Company,
the fact that certain payments to Mr. DiFilippo allegedly were to cover-up
financial wrongdoing, that corporate assets were purportedly transferred to
Western and that an improper loan was made to a consultant of the Company. The
plaintiffs in this action seek damages, prejudgment interest, costs, expenses
and attorneys' fees and other unspecified relief. The plaintiff in one of the
putative class actions, Kas V. Home Shopping Network Inc., et al., Civil Action
No. 93-621-CIV-T-15A, voluntarily dismissed his claims without prejudice.
On or about April 23, 1993, plaintiffs Mike and Natalie Magula filed
another purported class action in the Court titled Magula V. Home Shopping
Network, Inc., Civil Action No. 93-679-CIV-T-21C. The defendants in this action
are the Company, Roy M. Speer, Les R. Wandler, Franklin J. Chu, Fernando
DiFilippo, Jr., Lowell W. Paxson and RMS. The plaintiffs allege violations of
Section 10 of the Exchange Act, Rule 10b-5 promulgated thereunder and Section
20(a) of the Exchange Act as well as a Florida statute relating to commercial
bribery in seeking an unspecified amount of damages, including punitive damages,
prejudgment interest, costs and attorneys' fees. The complaint alleges that (i)
the Company failed to properly disclose the nature of certain payments made by
Mr. Speer and Mr. Paxson to Mr. DiFilippo; (ii) the Company knew or recklessly
disregarded the fact that certain vendors to the Company allegedly paid bribes
to certain employees of the Company; (iii) that the Company's Annual Report on
Form 10-K for the year ended August 31, 1992, and Report on Form 10-Q for the
period ended November 30, 1992, contained misleading financial statements
because they failed to disclose the payments to Mr. DiFilippo and that certain
employees of the Company had allegedly been paid bribes; (iv) that the Company
failed to disclose certain information regarding its inventory levels and a
recent change in management's policies which resulted in an increase in the
Company's inventory reserve; and (v) that the Company failed to accurately
disclose the existence of a known trend that would have a material impact on the
business of the Company.
On or about April 28, 1993, another purported class action lawsuit, Newborn
V. Home Shopping Network, Inc., et al., Civil Action No. 93 681 CIV T 17A was
filed in the Court against the Company, Mr. Speer and RMS. The plaintiff alleges
violations of Section 10(b) of the Exchange Act and Rule 10b-5 promulgated
thereunder, and the plaintiff seeks an unspecified amount of damages, including
prejudgment interest, plus costs, expenses and attorneys' fees. The plaintiff
alleges that the defendants engaged in improper activities including (i)
improper payments to Mr. Speer, Mr. Paxson, and possibly other senior executives
of the
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Company; (ii) diversion of Company funds to Western; (iii) a cover-up of the
alleged improper payments, including payments to Mr. DiFilippo and an alleged
improper loan to a financial advisor to the Company; and (iv) issuance of
materially false and misleading statements to the investing public.
Plaintiffs have moved to consolidate all of the pending class action suits
filed in April 1993 in the Court against the Company and various defendants (the
"Florida Federal Securities Actions").
On December 30, 1993, the counsel for both the Company and the plaintiffs
in the Florida Federal Securities Actions, entered into an agreement in
principle to settle the Florida Federal Securities Actions.
Pursuant to the terms of the agreement in principle to settle the Florida
Federal Securities Actions, the Company agreed to pay $9,600,000 in full
settlement of any and all claims whatsoever which have been or could have been
made in the Florida Federal Securities Actions by any members of a plaintiff
class consisting of all purchasers of the Company's common stock (other than the
defendants) from June 1, 1992 through and including April 12, 1993 (collectively
the "Purchaser Class"). Any attorneys' fees awarded by the Court to the
plaintiffs' attorneys will be paid out of the $9,600,000 settlement fund. The
settlement of the Florida Federal Securities Actions is conditioned on, among
other things, Court approval after notice to the Purchaser Class and a hearing
on the fairness of the settlement.
On December 15, 1992, a shareholder derivative lawsuit was filed by 7457
Corp., a Colorado corporation, against certain current and former officers and
directors of the Company (Roy M. Speer, Les Wandler, Franklin J. Chu, J. Anthony
Forstmann, Thomas A. James, John J. McNamara, William J. Ramsey, and Michael R.
Roberts) (the "Named Directors"), and against the Company as a nominal defendant
in the United States District Court for the Middle District of Florida, Tampa
Division, Case No. 92-1966-CIV-T-15A. Another shareholder derivative suit was
filed in the Court against the Named Directors and the Company as a nominal
defendant on December 31, 1992, by Isaac Fillosov and Claire Rand. On February
23, 1993, the Court granted a motion to consolidate these two actions as 7547
Corp. et al. V. Speer et al. (the "Derivative Action") with leave to file a
consolidated amended complaint. On April 16, 1993, the plaintiffs filed a
consolidated amended complaint. On May 24, 1993, the court granted plaintiffs
leave to file a second consolidated amended complaint (the "Second Amended
Complaint"). The amendments add Richard Speer, Western, Liberty and LPI as
defendants and add Ricky Werbosky as plaintiff. The Company is named as a
nominal defendant in a derivative capacity with respect to one of the claims
asserted in the Second Amended Complaint. The suit alleges a breach of fiduciary
duties owed to the Company and its stockholders by the Named Directors and a
failure to exercise due care and diligence in the management and administration
of the affairs of the Company. Western and Richard Speer are alleged to have
aided and abetted such breaches. The suit challenges the validity of a license
agreement with Western pursuant to which the Company was given the exclusive
rights to certain software and alleges that the Company wrongfully made, and
continues to make, payments to Western pursuant to a computer services agreement
which was allegedly terminated. The suit alleges that the Company wrongfully
made payments to Western of $3,502,000, $3,286,000 and $3,084,000 during the
Company's 1992, 1991 and 1990 fiscal years, respectively, pursuant to the
agreement. Merchandise that is unsuitable for sale via the Company's programs or
outlet stores was sold by Western, which received a commission of 15% on the
amount realized upon disposition. Western received $1,469,000, $1,615,000 and
$1,427,000 and through this arrangement during the Company's 1992, 1991 and 1990
fiscal years, respectively. The suit also alleges that this 15% commission was
commercially unreasonable. The sole stockholder of Western is Richard Speer, the
son of Roy M. Speer. The suit alleges that the above-described arrangements
would not have been entered into by the Company with an unrelated third party
and that Roy and Richard Speer owned undisclosed interests in unspecified firms
which sell merchandise to the Company. The Second Amended Complaint also asserts
a class action claim relating to certain alleged misstatements or omissions of
material facts in the Company's proxy statements for 1990, 1991 and 1992. In
particular, the suit alleges that the proxy statements (i) did not disclose
certain unspecified interests of Roy and Richard Speer in vendors which did
business with the Company; (ii) mischaracterized certain payments made to Mr.
DiFilippo as consulting fees rather than as amounts paid to DiFilippo to secure
his silence concerning certain alleged, unspecified misconduct by Speer; (iii)
failed to properly disclose the Western arrangements and the fact that the Audit
Committee of the Board of Directors had not approved related party transactions,
and (iv) that one of the Named Directors was the President of a company alleged
to have been controlled by Roy Speer. The
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suit seeks findings that the Named Directors, Richard Speer and Western breached
their fiduciary duties to the Company and its stockholders or aided and abetted
such breaches; that the Named Directors, Richard Speer and Western must account
to the Company for any losses, plus interest; that the plaintiffs be awarded all
costs for the action; that the Named Directors return to the Company all
compensation received by them during the relevant time periods; that certain
defendants be enjoined from paying additional money or delivering valuable
assets to Richard Speer or Western and that certain of the Named Directors take
corrective action with respect to the Company's alleged disclosure violations.
The Second Amended Complaint alleges class action claims against Liberty and LPI
for violations of Section 13(e) and 14(e) of the Exchange Act and Rules 13e-3
and 13e-4 promulgated thereunder in connection with the Offer to Purchase. The
Second Amended Complaint also contains a class action claim against Liberty and
LPI alleging that Liberty controlled the contents of the
Solicitation/Recommendation section of the Schedule 14D-9 the Company filed on
May 6, 1993, and that the 14D-9 is materially false and misleading in violation
of Sections 14(d) and 14(e) of the Exchange Act and Rule 14e-2 promulgated
thereunder.
On or about February 8, 1994, counsel for the Company, with the approval of
the special litigation committee of its Board of Directors, signed an agreement
in principle to settle the Derivative Action. Pursuant to the terms of this
agreement, Roy M. Speer has agreed to pay the Company $2,000,000 and to pay the
Company an additional $1,000,000 to partially fund the $9,600,000 settlement in
the Florida Federal Securities Actions. The Company has agreed to pay Western,
the successor to Pioneer Data Processing, Inc. ("Pioneer"), $4,500,000 in
exchange for releases and cancellation or acquisition of a 1985 license
agreement involving the Company and Pioneer. This agreement in principle also
provides for certain limitations on the rights of Roy M. Speer to seek
indemnification for the advancement of expenses from the Company and that the
parties to the Derivative Action agree to release certain claims against each
other. The Company also has agreed to pay such attorneys' fees as may be awarded
by the Court to the plaintiffs' counsel. The settlement of the Derivative Action
is conditioned on, among other things, Court approval after notice to the
shareholders and a hearing on the fairness of the settlement.
On April 1, 1993, Mr. Allen P. Allweiss, a former executive vice president
and general counsel of the Company, filed a lawsuit styled Allweiss V. HSN,
et al., in the Circuit Court of the Sixth Judicial Circuit of the State of
Florida for Pinellas County, Case No. 93-1176CI13, against the Company, Roy M.
Speer, Francis Santangelo, Liberty, Gerald F. Hogan and John M. Draper
complaining about, among other things, his February 24, 1993, termination from
the Company (the "Allweiss Suit").
The Allweiss Suit asserted that the defendants violated certain provisions
of Florida law relating to stock options and restricted stock (the "Stock
Rights") issued to Allweiss under the Company's 1986 Stock Option Plan for
Employees (the "Employee Plan") and the Company's 1990 Executive Stock Award
Program (the "Award Program"). Additional allegations against one or more of the
defendants relating to Mr. Allweiss' Stock Rights include securities fraud, an
alleged fraudulent scheme to deprive him of the value of such rights, theft,
conversion, breach of contract, interference with a business or contractual
relationship and deprivation of unpaid wages. In addition, Mr. Allweiss alleged
that his discharge was in retaliation for bringing to the attention of the
Company certain alleged improprieties by Mr. Speer, Mr. Santangelo and certain
former officers and directors of the Company. The Allweiss Suit is seeking an
unspecified amount of damages for losses associated with his Stock Rights and
lost benefits and wages, treble damages against the Company, Speer and
Santangelo for an alleged pattern of criminal activities that allegedly injured
Mr. Allweiss and relief for intentional infliction of emotional distress. During
his tenure with the Company, Mr. Allweiss was granted certain stock options and
restricted stock under the Company's Employee Plan and the Award Program.
Following his dismissal, the Company notified Allweiss that all of the options
granted under the Employee Plan had vested and were exercisable at $8.229 per
share, the exercise price set upon the initial grant of the options. Mr.
Allweiss maintains that the exercise price had been amended following the
initial grant date and that the correct exercise price is $4.753 per share. The
Award Program provides that nonvested shares of stock are forfeited upon the
termination of a participant's employment with the Company unless such
termination results from a change in control of the Company. Mr. Allweiss
alleges that the Company has violated certain of his rights by failing to notify
him of the status of the stock granted to him under the Award Program. In
addition to the counts relating to the Stock Rights, the Allweiss Suit refers to
a variety of allegedly improper
14
<PAGE> 17
transactions and purportedly inaccurate or incomplete disclosures involving (i)
the severance arrangements between the Company, Mr. Speer and Mr. Paxson, and
Mr. DiFilippo; (ii) transactions between the Company and Pioneer and Western;
(iii) the failure of the Company's Audit Committee to approve certain related
party transactions; (iv) disclosures to the IRS relating to payments to Pioneer
and a proposed reorganization of Western; (v) the independence of a former
member of the Audit Committee of the Board of Directors; (vi) disclosures
contained in certain documents filed with the FCC; (vii) transactions between
the Company and Francis Santangelo; and (viii) certain additional matters. The
Allweiss Suit maintains, among other things, that Mr. Allweiss' efforts to
disclose or rectify these matters caused him to be dismissed.
On August 30, 1993, Mr. Allweiss filed an amended complaint (the "Amended
Complaint") in the Circuit Court of the Sixth Judicial Circuit of the State of
Florida for Pinellas County, Case No. 93-1176CI13. The Amended Complaint
restates several of the causes of action in the original complaint and contains
essentially the same allegations of purported wrongdoing as the original
complaint but no longer includes several counts including the claims for
securities fraud, common law fraud, deprivation for unpaid wages, and
intentional infliction of emotional distress. The Amended Complaint also adds
counts for conspiracy to commit theft, conversion, and retaliatory discharge.
The Amended Complaint also includes a claim for civil remedies for alleged
criminal practices against the Company, Mr. Speer and Mr. Santangelo, along with
a claim for interference with business and contractual relations against
Santangelo only. On October 26, 1993, the court denied the defendants' motions
to dismiss the Amended Complaint except that the court dismissed the retaliatory
discharge count with prejudice as to all of the defendants except the Company.
Plaintiff also filed on August 30, 1993, a notice of appeal as to those claims
dismissed without leave to amend by the court's July 29, 1993, order in the
Allweiss Suit. The appeal was dismissed on October 15, 1993, as premature.
On December 2, 1993, the Company filed a counterclaim against Mr. Allweiss
alleging breach of fiduciary duties, legal malpractice and breach of a
confidentiality agreement. The Company believes it has meritorious defenses and
intends to vigorously defend this action.
On December 27, 1990, a customer of HSC filed an amended class action
complaint against the Company styled Mauger V. Home Shopping Network, Inc., in
the Court of Common Pleas, Philadelphia County, Pennsylvania. Plaintiff alleged
violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law
in relation to the Company's pricing practices with respect to diamond and
imitation diamond jewelry. Plaintiff seeks certification of the class,
compensatory damages or $100 per class member, treble damages, attorney's fees,
costs, interest and other relief. Plaintiff claims that the diamond ring she
purchased from HSC was not of the same value stated in an appraisal provided to
the customer.
On June 22, 1991, another customer of HSC filed a class action complaint
against the Company, styled Powell V. Home Shopping Network, Inc., making
similar allegations concerning jewelry purchased from HSC and seeking similar
relief.
On April 19, 1993, the Mauger and Powell cases were consolidated in the
Court of Common Pleas of Bucks County, Pennsylvania, (Case No. 91-6152-20-1). On
May 4, 1993, the Court entered an order granting the plaintiffs' motion for
class certification and declared the plaintiffs to be class representatives and
the class to be "all Pennsylvania residents who purchased any jewelry containing
diamonds or imitation diamonds from Home Shopping Network, Inc's subsidiary Home
Shopping Club, Inc. between December 27, 1984 and May 20, 1991." On July 23,
1993 the court denied the Company's motion for interlocutory appeal of the May
4, 1993 order. The Company believes that it has meritorious defenses and intends
to continue vigorously defending this action.
The Company has been informed that the Securities and Exchange Commission
has entered a formal order of investigation involving matters relating to, among
other things, certain of the Company's SEC filings and other public disclosures.
The Company has furnished documents in connection with this formal investigation
and is cooperating in the investigation while maintaining its legal privileges,
including the attorney/client privilege. This is a nonpublic investigation and
the scope of the investigation is confidential. The Company has been advised
that this inquiry should not be construed as an indication by the Commission or
its staff that any violations of law have occurred, nor should it be considered
a reflection upon any person, entity or security.
15
<PAGE> 18
The Company has been informed that a federal grand jury impaneled in the
Middle District of Florida is investigating matters relating to the Company. The
Company has furnished documents in connection with this investigation and has
taken action to protect its legal privileges in these proceedings, including the
attorney/client privilege. Information related to the scope of matters occurring
before the grand jury is confidential. The Company was advised by the federal
government that the Company is not a target, at this time, of the Grand Jury
investigation.
Pursuant to existing indemnification agreements with current and former
officers and directors, the Company has paid in 1993 approximately $1,983,000 in
attorneys' fees and expenses of its current and former officers and directors in
connection with the foregoing described litigation.
On March 4, 1993, the Company's Board of Directors formed a Special
Committee to investigate the allegations in the Derivative Action and certain
other matters and to take such action in response to the Derivative Action and
other litigation as the Committee determined to be in the interests of the
Company and its stockholders. The members of the Special Committee are Messrs.
Hindery, Draper and Bennett. Both Messrs. Draper and Bennett are officers of
Liberty. The Special Committee has retained legal counsel to assist in its
investigation. The Special Committee is finalizing their review in connection
with the settlement of the matters.
In conjunction with the proposed settlement of the Delaware Federal Action,
the Delaware Action, the Derivative Action and the Florida Federal Securities
Actions, certain defendants in those lawsuits agreed through their attorneys on
February 8, 1994 that, upon the final consummation of the proposed settlements
in all such actions, all such parties will release each other as to any claims
for contribution relating to the claims actually asserted in those proceedings
(the "Release Agreement"). The parties to the Release Agreement are the Company,
Roy M. Speer, Les R. Wandler, Franklin J. Chu, J. Anthony Forstmann, Gerald F.
Hogan, Thomas A. James, John J. McNamara, William J. Ramsey, Michael V. Roberts,
RMS, Liberty, LPI, John C. Malone, Peter R. Barton, Robert R. Bennett and John
M. Draper.
The foregoing descriptions of these actions and the proposed settlements of
the Delaware Action, the Delaware Federal Action, the Derivative Action and the
Florida Federal Securities Actions do not purport to be a complete summary
thereof and are qualified in their entirety by reference to the complaints and
other pleadings in these actions and the documents associated with the proposed
settlements.
The Company has determined that the publicity surrounding the legal
proceedings referenced above has not, and is not expected to, materially
adversely affect the Company's business operations.
ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
16
<PAGE> 19
PART II
ITEM 5 -- MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information set forth under the caption "Price Range of Common Stock"
on page 61 of the 1993 Annual Report, is incorporated herein by reference.
The total number of stockholders of record as of March 18, 1994, was 8,804.
The Company has paid no cash dividends on its common stock to date and does
not anticipate that it will pay cash dividends in 1994. Any payment of future
dividends and the amounts thereof will be dependent upon the Company's earnings,
financial requirements and other factors deemed relevant by the Board of
Directors.
On December 28, 1992, the Company distributed the capital stock of SKC to
the Company's stockholders of record on December 24, 1992, in the form of a pro
rata stock dividend. The distribution also included Telemation, Inc., formerly a
wholly-owned subsidiary of the Company that operates video production and
post-production facilities, the capital stock of which was contributed to SKC
prior to the distribution.
The distribution of the capital stock of SKC was a taxable transaction. The
Company recognized a gain for income tax purposes in the amount equal to the
difference between the fair market value of the SKC capital stock distributed
and the Company's basis in such SKC capital stock. This gain resulted in
additional income tax expense of approximately $1.5 million which was recorded
during the four months ended December 31, 1992.
ITEM 6 -- SELECTED FINANCIAL DATA
The information set forth under the caption "Summary Financial Data" on
page 60 of the 1993 Annual Report, is incorporated herein by reference.
ITEM 7 --MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information set forth under the caption "Management's Discussion and
Analysis" on pages 21 through 34 of the 1993 Annual Report, is incorporated
herein by reference.
ITEM 8 -- CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the Registrant and
Independent Auditors' Reports set forth on pages 35 through 59 of the 1993
Annual Report are incorporated herein by reference:
Independent Auditors' Reports for the year ended December 31, 1993,
the four months ended December 31, 1992, and the years ended August 31,
1992 and 1991.
Consolidated Balance Sheets as of December 31, 1993, and 1992 and
August 31, 1992.
Consolidated Statements of Operations for the year ended December 31,
1993, the four months ended December 31, 1992, and the years ended August
31, 1992 and 1991.
Consolidated Statements of Stockholders' Equity for the year ended
December 31, 1993, the four months ended December 31, 1992, and the years
ended August 31, 1992 and 1991.
Consolidated Statements of Cash Flows for the years ended December 31,
1993, the four months ended December 31, 1992, and the years ended August
31, 1992 and 1991.
Notes to Consolidated Financial Statements.
ITEM 9 --CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
A report was filed on Form 8-K for the event occurring February 23, 1993,
reflecting the change in accountants from Deloitte & Touche to KPMG Peat
Marwick.
17
<PAGE> 20
PART III
ITEM 10 --DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth under the caption "Election of Directors" in the
Proxy Statement dated March 29, 1994, for the Annual Meeting of Stockholders to
be held May 4, 1994, is incorporated herein by reference.
ITEM 11 -- EXECUTIVE COMPENSATION
The information set forth under the captions "Summary Compensation Table"
and "Employment Agreements" in the Proxy Statement dated March 29, 1994, for the
Annual Meeting of Stockholders to be held May 4, 1994, is incorporated herein by
reference.
ITEM 12 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security ownership by management as outlined under the caption "Security
Ownership of Certain Beneficial Owners and Management" in the Proxy Statement
dated March 29, 1994, for the Annual Meeting of Stockholders to be held May 4,
1994, is incorporated herein by reference.
ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the captions "Compensation of Directors and
Executive Officers" and "Certain Transactions and Business Relationships" in the
Proxy Statement dated March 29, 1994, for the Annual Meeting of Stockholders to
be held on May 4, 1994, is incorporated herein by reference.
18
<PAGE> 21
PART IV
ITEM 14 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) List of Documents filed as part of this Report
(1) Financial Statements
Independent Auditors' Report -- KPMG Peat Marwick.
Independent Auditors' Report -- Deloitte & Touche.
Consolidated Balance Sheets as of December 31, 1993 and 1992, and August
31, 1992.
Consolidated Statements of Operations for the year ended December 31,
1993, the four months ended December 31, 1992, and the years ended
August 31, 1992 and 1991.
Consolidated Statements of Stockholders' Equity for the year ended
December 31, 1993, the four months ended December 31, 1992, and the
years ended August 31, 1992 and 1991.
Consolidated Statements of Cash Flows for the year ended December 31,
1993, the four months ended December 31, 1992, and the years ended
August 31, 1992 and 1991.
Notes to Consolidated Financial Statements.
(2) Financial Statement Schedules
<TABLE>
<CAPTION>
SCHEDULE PAGE
NUMBER NUMBER
- -------- ------
<C> <S> <C> <C>
II -- Amounts Receivable from Related Parties and Underwriters, Promoters, and 29
Employees other than Related Parties....................................
V -- Property, Plant and Equipment........................................... 30
VI -- Accumulated Depreciation and Amortization of Property, Plant and 31
Equipment...............................................................
VIII -- Valuation and Qualifying Accounts....................................... 32
X -- Supplementary Income Statement Information.............................. 33
</TABLE>
The reports of the Company's independent auditors with respect to the above
listed financial statement schedules appears on pages 27 and 28.
All other financial statements and schedules not listed have been omitted
since the required information is included in the Consolidated Financial
Statements or the notes thereto, or is not applicable or required.
(3) Exhibits (numbered in accordance with Item 601 of Regulation S-K)
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------------------------------------------------------------------------------
<C> <S> <C>
3.1 -- Restated Certificate of Incorporation of the Company filed as Exhibit 3.1 to the
Company's Annual Report on Form 10-K for the year ended August 31, 1987, is hereby
incorporated by reference.
3.2 -- Amendment to Restated Certificate of Incorporation of the Company filed as Exhibit
3.2 to the Company's Annual Report on Form 10-K for the year ended August 31, 1987,
is hereby incorporated by reference.
3.3 -- Amendment filed December 17, 1986, to the Restated Certificate of Incorporation of
the Company filed as Exhibit 3.3 to the Company's Annual Report on Form 10-K is
hereby incorporated by reference.
3.4 -- Amended Bylaws of the Company.
10.1 -- Agreement for Computer Services dated June 21, 1985, by and between Pioneer Data,
Inc. and the Company filed as Exhibit 10.17 to the Company's Form S-1 Registration
Statement #33-4356, dated May 13, 1986, is incorporated herein by reference.
</TABLE>
19
<PAGE> 22
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------------------------------------------------------------------------------
<C> <S> <C>
*10.2 -- Employment Agreement dated March 5, 1986, by and between Roy M. Speer and the
Company, filed as Exhibit 10.10 to the Company's Form S-1 Registration Statement
#33-4356, dated May 13, 1986, is incorporated herein by reference.
*10.3 -- Amended 1986 Stock Option Plan for Outside Directors dated August 1, 1986, filed as
Exhibit 10.32 to the Company's Form S-1 Registration Statement #33-8560, dated
October 15, 1986, is incorporated herein by reference.
*10.4 -- 1986 Stock Option Plan for Employees dated August 1, 1986, filed as Exhibit 10.33
to the Company's Form S-1 Registration Statement #33-8560, dated October 15, 1986,
is incorporated herein by reference.
10.5 -- Form of 1987 Cable Operators Stock Option Plan, filed as Exhibit 10.48 to the
Company's Form S-1 Registration Statement #33-12527, dated May 4, 1987, is
incorporated herein by reference.
10.6 -- Form of Affiliation Agreement by and between the Company and Cable Operators under
the 1987 Cable Operators Stock Option Plan, filed as Exhibit 10.49 to the Company's
Form S-1 Registration Statement #33-12527, dated May 4, 1987, is incorporated
herein by reference.
10.7 -- Form of Cable Operators Stock Option Agreement by and between the Company and Cable
Operators under the 1987 Cable Operators Stock Option Plan, filed as Exhibit 10.50
to the Company's Form S-1 Registration Statement #33-12527, dated May 4, 1987, is
incorporated herein by reference.
10.8 -- Lease Agreement dated December 1, 1986, by and between G&M Properties, a Nevada
partnership and Home Shopping Network Realty, Inc., a subsidiary of the Company
filed as Exhibit 10.53 to the Company's Form S-1 Registration Statement #33-12527,
dated May 4, 1987, is incorporated herein by reference.
10.9 -- Option Agreement dated December 1, 1986, by and between G&M Properties, a Nevada
partnership and Home Shopping Network Realty, Inc., a subsidiary of the Company
filed as Exhibit 10.54 to the Company's Form S-1 Registration Statement #33-12527,
dated May 4, 1987, is incorporated herein by reference.
10.10 -- Lease Agreement dated January 30, 1987, by and between G&M Properties, a Nevada
partnership and Home Shopping Network Realty, Inc., a subsidiary of the Company
filed as Exhibit 10.55 to the Company's Form S-1 Registration Statement #33-12527,
dated May 4, 1987, is incorporated herein by reference.
10.11 -- Lease Agreement dated January 30, 1987, by and between G&M Properties, a Nevada
partnership and Home Shopping Network Realty, Inc., a subsidiary of the Company
filed as Exhibit 10.56 to the Company's Form S-1 Registration Statement #33-12527,
dated May 4, 1987, is incorporated herein by reference.
10.12 -- License Agreement dated as of July 16, 1986, between Home Shopping Network, Inc.,
and Canadian Home Shopping Network, Ltd., filed as Exhibit 10.61 to the Company's
Form S-1 Registration Statement #33-12527, dated May 4, 1987, is incorporated
herein by reference.
*10.13 -- Form of 1990 Executive Stock Award Program dated October 17, 1990, as amended,
filed as Exhibit 10.23 to the Company's Annual Report on Form 10-K for the year
ended August 31, 1991, is hereby incorporated by reference.
*10.14 -- Third and Fourth Amendments to 1986 Stock Option Plan for Outside Directors, filed
as Exhibit 10.30 to the Company's Annual Report on Form 10-K for the year ended
August 31, 1991, is hereby incorporated by reference.
10.15 -- Distribution Agreement by and between Home Shopping Network, Inc. and Precision
Systems, Inc. dated as of July 31, 1992 filed as Exhibit 10.1 to the Precision
Systems, Inc. Form 10, Registration Statement No. 0-20068 and filed April 14, 1992,
is incorporated herein by reference.
</TABLE>
20
<PAGE> 23
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------------------------------------------------------------------------------
<C> <S> <C>
10.16 -- Tax Sharing Agreement by and between Home Shopping Network, Inc. and Precision
Systems, Inc. dated as of July 31, 1992 filed as Exhibit 10.3 to the Precision
Systems, Inc. Form 10, Registration Statement No. 0-20068 and filed April 14, 1992,
is incorporated herein by reference.
10.17 -- Software License Agreement by and between Home Shopping Network, Inc. and Precision
Systems, Inc. dated as of July 31, 1992 filed as Exhibit 10.4 to the Precision
Systems, Inc. Form 10, Registration Statement No. 0-20068 and filed April 14, 1992,
is incorporated herein by reference.
10.18 -- Software Development Agreement by and between Home Shopping Network, Inc. and
Precision Systems, Inc. dated as of July 31, 1992 filed as Exhibit 10.6 to the
Precision Systems, Inc. Form 10, Registration Statement No. 0-20068 and filed April
14, 1992, is incorporated herein by reference.
10.19 -- Stock Purchase Agreement by and between Home Shopping Network, Inc. and The
National Registry Inc. dated April 28, 1992 filed as Exhibit 10.29 to the Company's
Annual Report on Form 10-K for the year ended August 31, 1992, is incorporated
herein by reference.
10.20 -- Form of Distribution Agreement between Home Shopping Network, Inc. and Silver King
Communications, Inc. ("SKC") dated as of December 28, 1992 filed as Exhibit 10.1 to
the SKC Registration Statement on Form 10, as amended, Registration Statement No.
0-20570, is incorporated herein by reference.
10.21 -- Form of Affiliation Agreements between Home Shopping Club, Inc. and SKC dated as of
December 28, 1992 filed as Exhibit 10.2 to the SKC Registration Statement on Form
10, as amended, Registration Statement No. 0-20570, is incorporated herein by
reference.
10.22 -- Form of Corporate Services Agreement between Home Shopping Network, Inc. and SKC
dated as of December 28, 1992 filed as Exhibit 10.3 to the SKC Registration
Statement on Form 10, as amended, Registration Statement No. 0-20570, is
incorporated herein by reference.
10.23 -- Form of Tax Sharing Agreement between Home Shopping Network, Inc. and SKC dated as
of December 28, 1992 filed as Exhibit 10.4 to the SKC Registration Statement on
Form 10, as amended, Registration Statement No. 0-20570, is incorporated herein by
reference.
10.24 -- Loan Agreement, as amended, and Promissory Note between HSN Capital Corporation and
SKC dated as of December 28, 1992.
10.25 -- Term Loan Agreement, dated as of December 18, 1992, among Home Shopping Network,
Inc., Home Shopping Club, Inc., the signatory banks, LTCB Trust Company and Bank of
Montreal as Co-Agents and LTCB Trust Company as Administrative Agents, as amended.
10.26 -- Amended and Restated Credit Agreement, dated as of December 18, 1992 among Home
Shopping Network, Inc., Home Shopping Club, Inc., the signatory banks, LTCB Trust
Company and Bank of Montreal as Co-Agents and LTCB Trust Company as Administrative
Agent, as amended.
10.27 -- Term Loan Agreement, dated as of February 4, 1993, among Home Shopping Network,
Inc. Home Shopping Club, Inc., the signatory banks, LTCB Trust Company as Agent,
Bank of Montreal and The Bank of New York, each as a Co-Agent, and LTCB Trust
Company as Administrative Agent, as amended.
10.28 -- Amended and Restated System Maintenance and Support Agreement effective as of
February 2, 1993 between Home Shopping Network, Inc. and Precision Systems, Inc.
10.29 -- MCI Special Customer Arrangement between MCI Telecommunications Corporation and
Home Shopping Network, Inc.
10.30 -- Credit Card Program Agreement, dated as of February 16, 1994, by and among Home
Shopping Network, Inc., participating subsidiaries and General Electric Capital
Corporation.
*10.31 -- First, Second, Third and Fourth Amendments to the 1986 Stock Option Plan for
Employees.
*10.32 -- Employment Agreement between Home Shopping Network, Inc. and Gerald F. Hogan, dated
as of February 23, 1993.
</TABLE>
21
<PAGE> 24
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------------------------------------------------------------------------------
<C> <S> <C>
*10.33 -- Home Shopping Network, Inc. Retirement Savings and Employee Stock Ownership Plan
and Trust Agreement.
11 -- Computation of net earnings (loss) per share.
13 -- Annual Report to Stockholders.
21 -- List of Subsidiaries of the Company.
</TABLE>
- ---------------
* Reflects management contracts and compensatory plans.
(b) Reports on Form 8-K
Report dated November 5, 1993, reporting the termination of merger
negotiations with QVC, Inc.
22
<PAGE> 25
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
March 25, 1994
HOME SHOPPING NETWORK, INC.
By: /s/ GERALD F. HOGAN
----------------------------------
Gerald F. Hogan
President and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES AND EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES INDICATED ON MARCH 25, 1994.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------------------- --------------------------------------------
<S> <C>
/s/ GERALD F. HOGAN President and Chief Executive Officer and
- ----------------------------------------------- Director
Gerald F. Hogan
/s/ KEVIN J. McKEON Senior Vice President of Accounting and
- ----------------------------------------------- Finance and Treasurer (Principal Financial
Kevin J. McKeon and Accounting Officer)
/s/ ROBERT R. BENNETT Director
- -----------------------------------------------
Robert R. Bennett
/s/ JOHN M. DRAPER Director
- -----------------------------------------------
John M. Draper
/s/ J. ANTHONY FORSTMANN Director
- -----------------------------------------------
J. Anthony Forstmann
/s/ LEO J. HINDERY, JR. Director
- -----------------------------------------------
Leo J. Hindery, Jr.
/s/ GEORGE C. McNAMEE Director
- -----------------------------------------------
George C. McNamee
</TABLE>
23
<PAGE> 26
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Home Shopping Network, Inc.
Under date of February 15, 1994, we reported on the consolidated balance
sheets of Home Shopping Network, Inc. and subsidiaries as of December 31, 1993
and 1992 and the related consolidated statements of operations, stockholders'
equity, and cash flows for the year ended December 31, 1993 and the four months
ended December 31, 1992 as contained in the Company's 1993 Annual Report. These
consolidated financial statements and our report thereon are incorporated by
reference in the annual report on Form 10-K for the year 1993. In connection
with our audits of the aforementioned consolidated financial statements, we also
have audited the related financial statement schedules as listed in Item 14.
These financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
KPMG Peat Marwick
St. Petersburg, Florida
February 15, 1994
27
<PAGE> 27
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Home Shopping Network, Inc.
We have audited the consolidated financial statements of Home Shopping Network,
Inc. and subsidiaries (the "Company") as of August 31, 1992 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the two years in the period ended August 31, 1992, and have issued our
report thereon dated October 15, 1992 (February 15, 1994 as to Note H to the
consolidated financial statements); such consolidated financial statements and
report are included in your 1993 Annual Report and are incorporated herein by
reference. Our audits also included the financial statement schedules of the
Company, listed in Item 14. These financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such financial statement schedules,
when considered in relation to the basic consolidated financial statements taken
as a whole, present fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE
Tampa, Florida
October 15, 1992
(February 15, 1994 as to
Note H to the consolidated
financial statements)
28
<PAGE> 28
SCHEDULE II
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
<TABLE>
<CAPTION>
DEDUCTIONS BALANCE AT END
BALANCE ------------------------------- OF PERIOD
AT AMOUNTS -------------------
BEGINNING AMOUNTS WRITTEN NOT
NAME OF DEBTOR OF PERIOD ADDITIONS COLLECTED OFF OTHER CURRENT CURRENT
- ------------------------------------ --------- --------- --------- ------- ----- ------- -------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1993
Vernon J. Troupe(2)............... $ 316 $ 16(5) $(332) $ -- $ -- $ -- $ --
Roy M. Speer(6)................... -- 3,000 -- -- -- 3,000 --
Rene Aiu.......................... -- 107(3) -- -- -- 107 --
--------- --------- --------- ------- ----- ------- -------
$ 316 $ 3,123 $(332) $ -- $ -- $3,107 $ --
--------- --------- --------- ------- ----- ------- -------
--------- --------- --------- ------- ----- ------- -------
Four months ended December 31, 1992
Roberts Broadcasting(1)........... $ 432 $ 157 $(138) $ -- $(451)(4) $ -- $ --
Vernon J. Troupe(2)............... 315 8(5) (7) -- -- 316 --
--------- --------- --------- ------- ----- ------- -------
$ 747 $ 165 $(145) $ -- $(451) $ 316 $ --
--------- --------- --------- ------- ----- ------- -------
--------- --------- --------- ------- ----- ------- -------
Year ended August 31, 1992
Roberts Broadcasting(1)........... $ 380 $ 432 $(380) $ -- $ -- $ 432 $ --
Vernon J. Troupe(2)............... 287 28(5) -- -- -- 315 --
--------- --------- --------- ------- ----- ------- -------
$ 667 $ 460 $(380) $ -- $ -- $ 747 $ --
--------- --------- --------- ------- ----- ------- -------
--------- --------- --------- ------- ----- ------- -------
Year ended August 31, 1991
Roberts Broadcasting(1)........... $ -- $ 525 $(145) $ -- $ -- $ 380 $ --
Vernon J. Troupe(2)............... -- 287(3) -- -- -- 287 --
--------- --------- --------- ------- ----- ------- -------
$ -- $ 812 $(145) $ -- $ -- $ 667 $ --
--------- --------- --------- ------- ----- ------- -------
--------- --------- --------- ------- ----- ------- -------
</TABLE>
- ---------------
(1) Amounts lent in April 1989 to Roberts Broadcasting Corporation, of which
Michael V. Roberts is Chairman of the Board, were not considered as a
related party transaction until his election to the Company's Board in
September 1990. Michael V. Roberts resigned from the Company's Board on
February 11, 1993.
(2) Amount renewable annually which bears an interest rate of 10%.
(3) Amount includes loan plus accrued interest.
(4) Deduction relating to subsidiary spin-off.
(5) Represents accrued interest.
(6) Company's former Chairman of the Board of Directors and CEO was a related
party until his resignation in August 1993. Receivable originated on
December 30, 1993, in connection with lawsuit settlements.
29
<PAGE> 29
SCHEDULE V
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
BALANCE OTHER BALANCE
AT CHANGES -- AT
BEGINNING ADDITIONS ADD (DEDUCT) -- END
CLASSIFICATION OF PERIOD AT COST RETIREMENTS DESCRIBE OF PERIOD
- ----------------------------------- --------- --------- ----------- --------------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993
Computer and broadcast
equipment..................... $ 98,403 $ 8,414 $ (694) $ 1,316 $ 107,439
Buildings and leasehold
improvements.................. 70,012 566 (20) 725 71,283
Furniture and other equipment.... 43,866 3,610 (930) 1,545 48,091
Land............................. 16,417 87 -- 1,204 17,708
Construction in progress......... 3,219 4,882 (685) (4,790) 2,626
--------- --------- ----------- --------------- ---------
$ 231,917 $17,559 $(2,329) $ --(4) $ 247,147
--------- --------- ----------- --------------- ---------
--------- --------- ----------- --------------- ---------
Four months ended December 31, 1992
Computer and broadcast
equipment..................... $ 151,359 $ 2,380 $ (360) $ (54,976) $ 98,403
Buildings and leasehold
improvements.................. 89,686 106 (4) (19,776) 70,012
Furniture and other equipment.... 45,529 345 (127) (1,881) 43,866
Land............................. 19,650 49 -- (3,282) 16,417
Construction in progress......... 18,678 7,063 -- (22,522) 3,219
--------- --------- ----------- --------------- ---------
$ 324,902 $ 9,943 $ (491) $(102,437)(3) $ 231,917
--------- --------- ----------- --------------- ---------
--------- --------- ----------- --------------- ---------
Year ended August 31, 1992
Computer and broadcast
equipment..................... $ 145,528 $12,687 $ (998) $ (5,858) $ 151,359
Buildings and leasehold
improvements.................. 84,662 688 (90) 4,426 89,686
Furniture and other equipment.... 43,343 2,253 (224) 157 45,529
Land............................. 19,602 533 (14) (471) 19,650
Construction in progress......... 16,849 19,812 -- (17,983) 18,678
--------- --------- ----------- --------------- ---------
$ 309,984 $35,973 $(1,326) $ (19,729)(2) $ 324,902
--------- --------- ----------- --------------- ---------
--------- --------- ----------- --------------- ---------
Year ended August 31, 1991
Computer and braodcast
equipment..................... $ 135,914 $ 8,320 $(1,234) $ 2,528 $ 145,528
Buildings and leasehold
improvements.................. 57,038 3,995 (93) 23,722 84,662
Furniture and other equipment.... 33,022 4,306 (644) 6,659 43,343
Land............................. 17,233 1,729 -- 640 19,602
Construction in progress......... 17,883 35,168 (2) (36,200) 16,849
--------- --------- ----------- --------------- ---------
$ 261,090 $53,518 $(1,973) $ (2,651)(1) $ 309,984
--------- --------- ----------- --------------- ---------
--------- --------- ----------- --------------- ---------
</TABLE>
- ---------------
(1) Represents equipment traded with no gain or loss in connection with a new
lease.
(2) Assets relating to subsidiary spin-off of $18.3 million. Land and Buildings
of $1.4 million were transferred to other assets held for sale.
(3) Represents assets relating to subsidiary spin-off.
(4) Represents reclassifications of amounts among property and equipment
classifications.
30
<PAGE> 30
SCHEDULE VI
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
ACCUMULATED DEPRECIATION AND AMORTIZATION OF
PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
ADDITIONS
BALANCE CHARGED OTHER BALANCE
AT TO COSTS CHANGES -- AT
BEGINNING AND ADD (DEDUCT) -- END
CLASSIFICATION OF PERIOD EXPENSES RETIREMENTS DESCRIBE OF PERIOD
- -------------------------------------- --------- --------- ----------- --------------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993
Computer and broadcast equipment.... $ 54,726 $13,021 $(1,361) $ (2) $ 66,384
Buildings and leasehold
improvements..................... 11,098 2,863 (6) (94) 13,861
Furniture and other equipment....... 19,724 5,755 (691) 94 24,882
Land improvements................... 376 272 -- 2 650
--------- --------- ----------- --------------- ---------
$ 85,924 $21,911 $(2,058) $ --(4) $ 105,777
--------- --------- ----------- --------------- ---------
--------- --------- ----------- --------------- ---------
Four months ended December 31, 1992
Computer and broadcast equipment.... $ 103,458 $ 6,790 $ (292) $ (55,230) $ 54,726
Buildings and leasehold
improvements..................... 14,519 1,193 (2) (4,612) 11,098
Furniture and other equipment....... 19,158 1,688 (48) (1,074) 19,724
Land improvements................... 346 35 -- (5) 376
--------- --------- ----------- --------------- ---------
$ 137,481 $ 9,706 $ (342) $ (60,921)(3) $ 85,924
--------- --------- ----------- --------------- ---------
--------- --------- ----------- --------------- ---------
Year ended August 31, 1992
Computer and broadcast equipment.... $ 82,910 $24,102 $ (656) $ (2,898) $ 103,458
Buildings and leasehold
improvements..................... 11,384 3,467 (2) (330) 14,519
Furniture and other equipment....... 14,642 4,945 (134) (295) 19,158
Land improvements................... 244 139 -- (37) 346
--------- --------- ----------- --------------- ---------
$ 109,180 $32,653 $ (792) $ (3,560)(2) $ 137,481
--------- --------- ----------- --------------- ---------
--------- --------- ----------- --------------- ---------
Year ended August 31, 1991
Computer and braodcast equipment.... $ 62,924 $21,912 $ (772) $ (1,154) $ 82,910
Buildings and leasehold
improvements..................... 8,277 3,005 (32) 134 11,384
Furniture and other equipment....... 11,187 4,132 (261) (416) 14,642
Land improvements................... 160 84 -- -- 244
--------- --------- ----------- --------------- ---------
$ 82,548 $29,133 $(1,065) $ (1,436)(1) $ 109,180
--------- --------- ----------- --------------- ---------
--------- --------- ----------- --------------- ---------
</TABLE>
- ---------------
(1) Represents equipment traded with no gain or loss in connection with new
lease.
(2) Accumulated depreciation related to subsidiary spin-off of $3.2 million.
Accumulated depreciation related to building transferred to other assets
held for sale of $.3 million.
(3) Represents accumulated depreciation related to subsidiary spin-off.
(4) Represents reclassifications of amounts among property and equipment
classifications.
31
<PAGE> 31
SCHEDULE VIII
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
-----------------------
BALANCE CHARGED CHARGED BALANCE
AT TO TO OTHER AT
BEGINNING COSTS AND ACCOUNTS -- DEDUCTIONS -- END
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE(1) OF PERIOD
- -------------------------------------------- --------- --------- ----------- ------------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1993.............. $ 1,798 $ 2,025 $ -- $(2,196) $ 1,627
--------- --------- ----------- ------------- ---------
--------- --------- ----------- ------------- ---------
Four months ended December 31, 1992....... $ 2,233 $ 645 $ -- $(1,080) $ 1,798
--------- --------- ----------- ------------- ---------
--------- --------- ----------- ------------- ---------
Year ended August 31, 1992................ $ 2,180 $ 2,177 $ -- $(2,124) $ 2,233
--------- --------- ----------- ------------- ---------
--------- --------- ----------- ------------- ---------
Year ended August 31, 1991................ $ 1,487 $ 3,557 $ -- $(2,864) $ 2,180
--------- --------- ----------- ------------- ---------
--------- --------- ----------- ------------- ---------
Allowance for doubtful other current assets:
Year ended December 31, 1993.............. $ 6,200 $ -- $ -- $ -- $ 6,200
--------- --------- ----------- ------------- ---------
--------- --------- ----------- ------------- ---------
Four months ended December 31, 1992....... $ 6,200 $ -- $ -- $ -- $ 6,200
--------- --------- ----------- ------------- ---------
--------- --------- ----------- ------------- ---------
Year ended August 31, 1992................ $ 6,200 $ -- $ -- $ -- $ 6,200
--------- --------- ----------- ------------- ---------
--------- --------- ----------- ------------- ---------
Year ended August 31, 1991................ $ -- $ 6,200 $ -- $ -- $ 6,200
--------- --------- ----------- ------------- ---------
--------- --------- ----------- ------------- ---------
</TABLE>
- ---------------
(1) Accounts written off as uncollectible.
32
<PAGE> 32
SCHEDULE X
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
<TABLE>
<CAPTION>
CHARGED TO COSTS
AND EXPENSES
ITEM ----------------
- ------------------------------------------------------------------------------ (In thousands)
<S> <C>
Year ended December 31, 1993
Amortization of intangible assets(2)........................................ $ 2,261
Advertising costs(1)........................................................ 9,753
Four months ended December 31, 1992
Amortization of intangible assets........................................... $ 4,660
Advertising costs(1)........................................................ 3,310
Year ended August 31, 1992
Amortization of intangible asssets.......................................... $ 14,241
Advertising costs(1)........................................................ 7,314
Year ended August 31, 1991
Amortization of intangible assets........................................... $ 22,107
Advertising costs(1)........................................................ 12,522
</TABLE>
- ---------------
(1) Represents all costs related to the Company's marketing department.
(2) Decrease is primarily due to the stock distribution of SKC in December 1992.
33
<PAGE> 1
EXHIBIT 3.4
BY-LAWS
OF
HOME SHOPPING NETWORK, INC.
ARTICLE I
OFFICES
SECTION 1. PRINCIPAL OFFICE. The registered office of the
corporation shall be located in the City of Wilmington, County of New Castle,
State of Delaware.
SECTION 2. OTHER OFFICES. The corporation may also have offices at
such other place, both within and without the State of Delaware, as the Board
of Directors may from time to time determine or the business of the corporation
may require.
ARTICLE II
STOCKHOLDERS
SECTION 1. PLACE OF MEETING. Meetings of stockholders may be held at
such place, either within or without the State of Delaware, as may be
designated by the Board of Directors. If no designation is made, the place of
the meeting shall be the principal office of the corporation.
SECTION 2. ANNUAL MEETING. The annual meeting of the stockholders
shall be held following the end of the corporation's fiscal year at a date and
time determined by the Board of Directors for the purpose of electing directors
and for the transaction of such other business as may come before the meeting.
If the
<PAGE> 2
2
election of directors shall not be held on the day designated by the Board of
Directors for any annual meeting, or at any adjournment thereof, the Board of
Directors shall cause the election to be held at a meeting of the stockholders
as soon thereafter as is convenient.
SECTION 3. SPECIAL MEETING. Special meetings of the stockholders may
be called by the Chairman of the Board of Directors, the Board of Directors, or
at the request in writing of stockholders owning a majority in amount of the
shares of either the Common Stock or Class B Common Stock as of the date of
such request.
SECTION 4. NOTICE. Written notice stating the date, time and place
of the meeting, and in case of a special meeting, the purpose or purposes
thereof, shall be given to each stockholder entitled to vote thereat not less
than ten (10) nor more than sixty (60) days prior thereto, either personally or
by mail or telegraph, addressed to each stockholder at his address as it
appears on the records of the corporation. If mailed, such notice shall be
deemed to be delivered three (3) days after being deposited in the United
States mail so addressed, with postage thereon prepaid. If notice be by
telegram, such notice shall be deemed to be delivered when the telegram is
delivered to the telegraph company.
SECTION 5. ADJOURNED MEETINGS. When a meeting is adjourned to
another time or place, notice of the adjourned meeting need not be given if the
time and place thereof are announced at the meeting at which the adjournment is
taken, if the adjournment is for not
<PAGE> 3
3
more than thirty (30) days, and if no new record date is fixed for the
adjourned meeting. At the adjourned meeting the corporation may transact any
business which might have been transacted at the original meeting.
SECTION 6. QUORUM. The holders of a majority of the Voting
Securities (as hereinafter defined) issued and outstanding and entitled to
vote thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the transaction of business
provided, however, that in the event the holders of the Common Stock and Class
B Common Stock are not then voting as a single class, the holders of a majority
of each class of stock issued and outstanding and entitled to vote thereat,
present in person or represented by proxy, shall constitute such a quorum. If,
however, such quorum shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from time to
time, without notice other than announcement at the meeting at which a quorum
shall be present or represented any business may be transacted which might have
been transacted at the meeting as originally notified. When a quorum is
present at any meeting, the vote of the holders of a majority of Voting
Securities having voting power present in person or represented by proxy shall
decide any question brought before such meeting, unless the question is one
upon which by express provision of the Delaware General Corporation Law or of
the certificate of incorporation, a
<PAGE> 4
4
different vote is required in which case such express provision shall govern
and control the decision of such question.
SECTION 7. VOTING. Each holder of Common Stock shall at every
meeting of the stockholders be entitled to one (1) vote in person or by proxy
for each share of stock held by such stockholder, each holder of Class B Common
Stock, when voting as a single class with the holders of Common Stock, shall be
entitled to ten (10) votes in person or by proxy for each share of stock held
by such stockholder and each holder of Class B Common Stock, when voting as a
separate class of Class B Common Stock, shall be entitled to one (1) vote in
person or by proxy for each share of stock held by such stockholder, but no
proxy shall be voted after three (3) years from its date, unless the proxy
provides for a longer period, and, except where the transfer books of the
corporation have been closed or a date has been fixed as a record date for the
determination of its stockholders entitled to vote, no share of stock shall be
voted at any election for directors which has been transferred on the books of
the corporation within ten (10) days next preceding such election of directors.
When a quorum is present at any meeting, the affirmative vote of a majority of
the total voting power represented by the outstanding Voting Securities
entitled to vote, present in person or represented by proxy, shall decide any
matter brought before such meeting, unless the laws of the State of Delaware or
the Restated Certificate of Incorporation require a different vote, in which
case such provision shall govern and control the decision of such
<PAGE> 5
5
question. Election of directors need not be by written ballot. The term
"Voting Securities" shall include the Company's Common Stock and the Class B
Common Stock.
SECTION 8. ACTION WITHOUT MEETING. Any action required or permitted
to be taken at any annual or special meeting of stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all the
shares entitled to vote thereon were present and voted, provided that prompt
notice of such action shall be given to those stockholders who have not so
consented in writing to such action without a meeting.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND TENURE. The business and affairs of the
corporation shall be managed by a board of seven (7) directors, unless a
different number shall be established by amendment to these By-Laws, subject to
the limitation established by the certificate of incorporation. Each director
shall serve for a term of one year from the date of his election and until his
successor is elected. Directors need not be stockholders.
SECTION 2. RESIGNATION OR REMOVAL. Any director may at any time
resign by delivering to the Board of Directors his resignation
<PAGE> 6
6
in writing, to take effect no later than ten days thereafter. Any director may
at any time be removed effective immediately, with or without cause, by the
vote, either in person or represented by proxy, of a majority of the holders of
the Voting Securities issued and outstanding and entitled to vote at a special
meeting held for such purpose or by the written consent of the holders of a
majority of the Voting Securities issued and outstanding provided, however,
that any director elected by the holders of the Common Stock pursuant to
Article Fourth of the Corporation's Restated Certificate of Incorporation may
be removed only by the majority vote, either in person or represented by proxy,
of the holders of the Common Stock issued and outstanding and entitled to vote
at a special meeting held for such purpose or by the written consent of the
holders of a majority of such class of Common Stock issued and outstanding.
SECTION 3. VACANCIES. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
the sole remaining director, and the directors so chosen shall hold office
until the next annual election and until their respective successors are duly
elected.
SECTION 4. REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held quarterly at a date, time and place set by the Board of
Directors or the Chairman.
SECTION 5. SPECIAL MEETINGS. Special meetings of the Board
<PAGE> 7
7
of Directors may be called by or at the request of the Chairman of the Board of
Directors or any three (3) directors. The Chairman of the Board of Directors
may fix a place within or without the State of Florida for holding any special
meeting of the Board of Directors.
SECTION 6. NOTICE. Written notice of any regular meeting shall be
given at least five (5) days prior thereto, either personally or by mail or
telegraph, addressed to each director at his address as it appears on the
records of the corporation; provided however, that written notice of any
special meeting or any regular meeting or a special meeting to be conducted by
conference telephone, shall be given at least two (2) days prior thereto,
either personally or by telegraph. If mailed, such notice shall be deemed to
be delivered when deposited in the United States mail so addressed, with
postage thereon prepaid. If notice be by telegram, such notice shall be deemed
to be delivered when the telegram is delivered to the telegraph company.
SECTION 7. QUORUM. At all meetings of the Board of Directors a
majority of the total number of directors shall constitute a quorum for the
transaction of business and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the Board of
Directors. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting, until a
quorum shall be present. A director present at a meeting shall be counted in
determining the presence of a quorum, regardless of whether a
<PAGE> 8
8
contract or transaction between the corporation and such director or between
the corporation and any other corporation, partnership, association, or other
organization in which such director is a director or officer, or has a
financial interest, is authorized or considered at such meeting.
SECTION 8. ACTION WITHOUT MEETING. Any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee
thereof may be taken without a meeting if all members of the Board or such
committee, as the case may be, consent thereto in writing and such written
consent is filed with the minutes of proceedings of the Board or committee.
SECTION 9. ACTION BY CONFERENCE TELEPHONE. Members of the Board of
Directors or any committee thereof may participate in a meeting of such Board
or committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at such meeting.
SECTION 10. COMMITTEES. The Board of Directors, by resolution
adopted by the majority of the whole Board, may designate one (1) or more
committees, each committee to consist of two (2) or more directors. The Board
may designate one (1) or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of any member of a committee,
the member or members thereof present at any meeting and not
<PAGE> 9
9
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in such resolution, shall have and may
exercise all of the powers of the Board of Directors in the management of the
business and affairs of the corporation and may authorize the seal of the
corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
certificate of incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, recommending to the
stockholders a dissolution of the corporation or a revocation of a dissolution,
or amending the by-laws of the corporation; nor shall such committee have the
power or authority to declare a dividend or to authorize the issuance of stock.
SECTION 11. CHAIRMAN. The directors shall elect from among their
number a Chairman of the Board following the stockholders' annual meeting to
serve for a term of one (1) year and until a successor is elected by the Board.
The Chairman shall preside at all meetings of the Board of Directors and
perform such other duties as may be directed by the Board.
SECTION 12. COMPENSATION OF DIRECTORS. The directors may be paid
their expenses, if any, of attendance at each meeting of the Board of Directors
and may be paid a fixed sum for attendance at
<PAGE> 10
10
each meeting of the Board of Directors or a stated salary as director. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor. Members of committees may be
allowed like compensation for attending committee meetings.
ARTICLE IV
OFFICERS
SECTION 1. NUMBER AND SALARIES. The officers of the corporation
shall consist of a President, a Chief Executive Officer, a Chief Operating
Officer, one (1) or more Vice Presidents (the number thereof to be determined
by the Board of Directors), a Secretary, and a Treasurer. Such other officers
and assistant officers and agents as may be deemed necessary by the Board of
Directors may be elected or appointed by the Board. Any two (2) or more
offices may be held by the same person. The salaries of all officers and
agents of the corporation shall be fixed by the Board of Directors.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the
corporation shall be appointed by the Board of Directors following the
stockholders' annual meeting for a term of one (1) year and until a successor
is appointed by the Board. Any officer appointed by the Board may be removed,
with or without cause, at any time by the President. An officer may resign at
any time upon written notice to the corporation. Each officer shall hold his
office until his or her successor is appointed or until his or her
<PAGE> 11
11
earlier resignation or removal.
SECTION 3. THE PRESIDENT. The President shall have general and
active supervision of the business of the corporation subject to the direction
of the Board of Directors and in the absence of a Chairman of the Board, the
President shall preside at all meetings of the stockholders and of the Board of
Directors; shall be empowered to sign or countersign all certificates,
contracts or other instruments; and the President shall perform any and all
duties assigned to him by the Board of Directors or as are incident to the
office of the President of a corporation.
SECTION 4. THE CHIEF EXECUTIVE OFFICER. The Chief Executive Officer
shall be the chief executive officer of the Company and shall have general and
active management of the business of the corporation, subject to the direction
of the Board of Directors, and shall see that all orders and resolutions of the
Board of Directors are carried into effect; the Chief Executive Officer shall
be empowered to sign or countersign all certificates, contracts or other
instruments; and the Chief Executive Officer shall perform any and all duties
assigned to him by the Board of Directors or as are incident to the Office of
Chief Executive Officer of a corporation.
SECTION 5. THE CHIEF OPERATING OFFICER. The Chief Operating Officer
shall have general and active management and supervision of the business
operations of the Company subject to the direction of the Board of Directors;
the Chief Operating Officer shall be empowered to sign or countersign all
certificates, contracts or
<PAGE> 12
12
other instruments; and the Chief Operating Officer shall perform any and all
duties assigned to him by the Board of Directors or as are incident to the
office of the Chief Operating Officer of a corporation.
SECTION 6. THE VICE PRESIDENTS. In the absence of the President or
in the event of his inability or refusal to act, the Vice President (or in the
event there be more than one Vice President, the Vice Presidents in the order
designated, or in the absence of any designation, then in the order of their
election) shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. The Vice President shall perform such other duties as from time to
time may be assigned to him by the Board of Directors.
SECTION 7. THE SECRETARY. The Secretary shall keep the minutes of
the proceedings of the shareholders and the Board of Directors; the Secretary
shall give, or cause to be given, all notices in accordance with the provisions
of these By-Laws or as required by law; the Secretary shall be custodian of the
corporate records and of the seal of the corporation; the Secretary shall keep
at the registered office or principal place of business of the corporation a
record of the stockholders of the corporation, giving the names and addresses
of all such stockholders (which addresses shall be furnished to the Secretary
by such stockholders) and the number and class of the shares held by each; the
Secretary shall have general charge of the stock transfer books of the
corporation;
<PAGE> 13
13
and in general the Secretary shall perform all duties as from time to time may
be assigned to him by the Board of Directors.
SECTION 8. TREASURER. The Treasurer shall act as the chief financial
officer of the corporation and shall have the custody of the corporate funds
and securities and shall keep, or cause to be kept, correct and complete books
and records of account, including full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all
monies and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the Board of
Directors; and in general shall perform all the duties incident to the office
of Treasurer and such other duties as from time to time may be assigned to him
by the Board of Directors.
SECTION 9. ASSISTANT SECRETARIES. The Assistant Secretaries, if any,
in general shall perform such duties as from time to time may be assigned to
them by the Secretary, or by the Board of Directors, and shall in the absence
of the Secretary perform his functions.
ARTICLE V
CERTIFICATES OF STOCK
SECTION 1. SIGNATURE BY OFFICERS. Every holder of stock in the
corporation shall be entitled to have a certificate signed by or in the name of
the corporation by the the President or a Vice President, and by the Secretary
or an Assistant Secretary of the
<PAGE> 14
14
corporation, certifying the number of shares owned by the stockholder in the
corporation.
SECTION 2. FACSIMILE SIGNATURES. The signature of the President,
Vice President, Treasurer, Secretary or Assistant Secretary may be a facsimile.
In case any officer or officers who have signed, or whose facsimile signature
or signatures have been used on any such certificate or certificates shall
cease to be such officer or officers of the corporation, whether because of
death, resignation or otherwise, before such certificate or certificates have
been delivered by the corporation, such certificate or certificates may
nevertheless be adopted by the corporation and be issued and delivered as
though the person or persons who signed such certificate or certificates or
whose facsimile signature or signatures have been used thereon had not ceased
to be such officer or officers of the corporation.
SECTION 3. LOST CERTIFICATES. The Board of Directors may direct a
new certificate or certificates to be issued by the corporation alleged to have
been lost or destroyed, upon the making of an affidavit of that fact by the
person claiming the certificate of stock to be lost or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost or destroyed certificate or
certificates, or his or her legal representative, to advertise the same in such
manner as it shall require and/or to give the corporation a bond in such sum as
it may direct as indemnity
<PAGE> 15
15
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost or destroyed.
SECTION 4. TRANSFER OF STOCK. Upon surrender to the corporation or
the transfer agent of the corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
SECTION 5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The
Board of Directors may close the stock transfer books of the corporation for a
period of no more than sixty (60) nor less than ten (10) days preceding the
date of any meeting of stockholders or the date for payment of any dividend or
the date for the allotment of rights or the date when any change or conversion
or exchange of capital stock shall go into effect or for a period of no more
than sixty (60) nor less than ten (10) days in connection with obtaining the
consent of stockholders for any purpose. In lieu of closing the stock transfer
books as aforesaid, the Board of Directors may fix in advance a date of no more
than sixty (60) nor less than ten (10) days preceding the date of any dividend,
or the date for the allotment of rights, or the date when any change or
conversion or exchange of capital stock shall go into effect, or a date in
connection with obtaining such consent, as a record date for the determination
of the stockholders entitled to notice of, and to vote at, any such meeting,
and any adjournment
<PAGE> 16
16
thereof, or entitled to receive payment of any such dividend, or to any such
allotment of rights, or to exercise the rights in respect of any change,
conversion or exchange of capital stock, or to give such consent, and in such
case such stockholders and only such stockholders as shall be stockholders of
record on the date so fixed shall be entitled to such notice of, and to vote
at, such meeting and any adjournment thereof, or to receive payment of such
dividend, or to receive such allotment of rights, or to exercise such rights,
or to give such consent as the case may be notwithstanding any transfer of any
stock on the books of the corporation after any such record date fixed as
aforesaid.
ARTICLE VI
CONTRACT, LOANS, CHECKS AND DEPOSITS
SECTION 1. CONTRACTS. When the execution of any contract or other
instrument has been authorized by the Board of Directors without specification
of the executing officers, the President, or any Vice President, Treasurer, and
the Secretary, or any Assistant Secretary, may execute the same in the name of
and on behalf of the corporation and may affix the corporate seal thereto.
SECTION 2. LOANS. No loans shall be contracted on behalf of the
corporation and no evidence of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors.
SECTION 3. CHECKS. All checks or demands for money and notes
<PAGE> 17
17
of the corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
ARTICLE VII
DIVIDENDS
SECTION 1. DECLARATION OF DIVIDENDS. Dividends upon the capital
stock of the corporation, subject to the provisions of the certificate of
incorporation, if any, may be declared by the Board of Directors at any regular
or special meeting, pursuant to law. Dividends may be paid in cash, in
property or contractual rights, or in shares of the capital stock, subject to
the provisions of the certificate of incorporation.
SECTION 2. RESERVES. Before payment of any dividend, there may be
set aside out of any funds of the corporation available for dividends such sum
or sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the directors shall think conducive to the interest
of the corporation, and the directors may modify or abolish any such reserve in
the manner in which it was created.
<PAGE> 18
18
ARTICLE VIII
FISCAL YEAR
The fiscal year of the corporation shall be determined by the Board of
Directors.
ARTICLE IX
WAIVER OF NOTICE
Whenever any notice whatever is required to be given by law, the
certificate of incorporation or these By-Laws, a written waiver thereof, signed
by the person or persons entitled to such notice, whether before or after the
time stated therein, shall be deemed equivalent to the giving of such notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting.
ARTICLE X
SEAL
The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization, and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced otherwise.
ARTICLE XI
AMENDMENTS
These By-Laws may be altered, amended, or repealed and new By-
Laws adopted at any regular or special meeting of the Board of
<PAGE> 19
19
Directors by an affirmative vote of 60% of all directors; provided, however,
that at least ten (10) days advance written notice of the meeting is given to
the directors, describing the proposed amendment or alteration of these
By-Laws.
<PAGE> 1
EXHIBIT 10.24
LOAN AGREEMENT
THIS LOAN AGREEMENT (the "Agreement"), dated as of this 28th day of
December, 1992, by and between HSN CAPITAL CORPORATION, a Nevada corporation
having its principal offices at 4910 Longley Lane, Reno, Nevada 89502,
("Lender), a wholly-owned subsidiary of Home Shopping Network, Inc., a Delaware
Corporation ("HSN"), and Silver King Communications, Inc., a Delaware
corporation having its principal offices at 12425 28th Street North, St.
Petersburg, FL 33716 ("Borrower").
W I T N E S S E T H
WHEREAS, HSN is planning to distribute all of the capital shares of
Borrower to shareholders of HSN in a tax-free distribution (the
"Distribution");
WHEREAS, Borrower has incurred substantial debt to Lender in
connection with the acquisition of full power television broadcast stations
(the "Stations") owned by the Borrower;
WHEREAS, the Federal Communications Commission ("FCC") has authorized
the transfer of control of television companies holding FCC licenses from HSN's
subsidiaries to Borrower's subsidiaries;
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained, the Lender and Borrower agree as follows:
<PAGE> 2
2
ARTICLE I
AMOUNT AND TERMS OF THE LOAN
Section 1.01. The Loan. The Lender has loaned to the Borrower One
Hundred Thirty-Five Million, One Hundred Seventy-One Thousand, Eight Hundred
Seventy-Five Dollars ($135,171,875) in principal amount (the "Loan").
Section 1.02. The Promissory Note. As of the effective date of the
Distribution (the "Distribution Date"), the Loan shall be evidenced by and
subject to the terms of a promissory note, dated of even date herewith,
substantially in the form set forth as Exhibit "1" hereto (the "Note") payable
to the order of the Lender and representing the obligation of the Borrower to
pay the Lender the principal amount of the Loan, with interest thereon, as
prescribed therein and in Section 1.04.
Section 1.03. Interest. The Note shall bear interest on the unpaid
principal amount thereof at a rate per annum at all times equal to 9.5%, except
in the event of late payments under paragraph 4 of the Note, in which case late
payments shall bear interest at the rate of 15%. Interest shall be computed on
the basis of a year of three hundred sixty (360) days and actual days elapsed
(including the first day but excluding the last day) occurring in the period
for which such interest is payable. Interest shall begin to accrue on the
principal amount of the Loan on the Distribution Date. The rate of interest
payable on the Note from time to time shall in no event exceed the maximum
rate, if any, permissible under applicable law. If the rate of interest
payable
<PAGE> 3
3
on the Note is ever reduced as a result of the preceding sentence and any time
thereafter the maximum rate permitted by applicable law shall exceed the rate
of interest provided for on the Note, then the rate provided for on the Note
shall be increased to the maximum rate permitted by applicable law for such
period as is required so that the total amount of interest received by Lender
is that which would have been received by Lender but for the operation of the
preceding sentence.
Section 1.04. Repayment of the Loan. On the second day of
the second full calendar month following the Distribution Date, Borrower shall
begin repayment to the Lender of the principal amount of the Loan in One
Hundred Eighty (180) equal monthly installments and shall continue payment on
the second day of each month thereafter with a final payment of all outstanding
principal and accrued interest due on January 2, 2008. Each such monthly
payment shall be referred to as a "Loan Payment."
Section 1.05. Adjustments Pursuant to Tax Sharing Agreement.
Pursuant to Sections 3.03 and 3.04 of the Tax Sharing Agreement, HSN and
Borrower have agreed that if, as a result of certain adjustments to HSN's tax
position for periods prior to the Distribution Date, there would have been a
corresponding increase or decrease in the deferred tax liability account of
Borrower as of the Distribution Date, then Borrower will receive a cash payment
from HSN (or make a cash payment to HSN) in the amount of such increase (or
decrease) to its deferred tax liability account as recalculated as of the
Distribution Date. If the Borrower is
<PAGE> 4
4
required to pay HSN pursuant to the Tax Sharing Agreement, then at the
election of Borrower pursuant to Section 3.05(d) of the Tax Sharing Agreement,
the principal amount and payment schedule of this Loan shall be adjusted to
reflect the amount of such payment required to be made by Borrower so that
during the then remaining term of the Note, all principal and interest accrued
thereon shall be paid in equal monthly installments. If HSN is required to pay
Borrower pursuant to the Tax Sharing Agreement, then at the request of the
Lender and with the consent of Borrower pursuant to Section 3.05(d) of the Tax
Sharing Agreement, which consent shall not be unreasonably withheld, the
principal amount and payment schedule of the Loan shall be adjusted to reflect
the amount of such payment required to be made by HSN so that during the then
remaining term of the Note, all principal and interest accrued thereon shall be
paid in equal monthly installments.
Section 1.06. Prepayment. The Borrower may prepay the Note in whole
at any time, or from time to time in part, with accrued interest to the date of
prepayment on the amount prepaid, without penalty, provided that each payment,
other than for the full amount of the outstanding balance, shall be in the
principal amount of One Hundred Thousand Dollars ($100,000.00) or an integral
multiple thereof, unless such payment in accordance with Section 5.02(c)
relates to the extinguishment of that portion of the Loan related to one or
more of the Stations in which case the prepayment shall consist of such portion
of the Loan so related. Each prepayment on the Note shall be applied to
installments of principal payable on the Note in the inverse order of maturity.
<PAGE> 5
5
Section 1.07. Payment and Grace Period. Whenever payment to be made
hereunder or under the Note shall become due on a Saturday, Sunday or bank
holiday in the State of Florida, such payment may be made on the next
succeeding day which is not a Saturday, Sunday or bank holiday.
ARTICLE II
CLOSING
Section 2.01. Closing Date. Closing of this transaction shall occur
on December 28, 1992, or such other date agreed upon by the parties hereto (the
"Closing Date"), at the offices of Home Shopping Network, Inc., 11831 30th
Court North, St. Petersburg, Florida 33716.
Section 2.02. Related Transactions. On the Closing Date, in addition
to the documents to be delivered pursuant to this Agreement, Borrower and
Lender shall execute the Note, the Security Agreement and any mortgages, deeds
of trust or other documents required by Section 3.03 below.
ARTICLE III
SECURITY
Section 3.01. Security Interest. As security for the Loan,
the Borrower and each of its subsidiaries shall execute and deliver and cause
each of its subsidiaries to execute and deliver to the Lender, on or before the
Closing Date, a security agreement substantially in the form of Exhibit "2"
hereto granting to Lender a perfected first priority security interest in each
and every
<PAGE> 6
6
asset of Borrower to the fullest extent permitted by applicable law (the
"Security Agreement").
Section 3.02. Assignment of Leases. At such time as Borrower or any
of its subsidiaries enters into any leases, Borrower or such subsidiary shall
execute an Assignment of Lease, in form and substance satisfactory to Lender
permitting Lender to receive lease payments on behalf of the Borrower or such
subsidiary in the event of default by Borrower. Any such payments made to the
Lender shall be treated as payments hereunder in accordance with the terms of
this Agreement.
Section 3.03 Mortgages. As security for the Loan, the Borrower and
each of its subsidiaries shall execute and deliver to the Lender, on or before
the Closing Date, a first mortgage ("Mortgage") or deed of trust ("Deed of
Trust") on each parcel of real estate owned by the Borrower or its
subsidiaries.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01. Representations and Warranties of Borrower. In order
to induce the Lender to enter into this agreement, the Borrower represents and
warrants as follows:
(a) Existence and Standing. Borrower is a corporation duly
incorporated, validity existing and in good standing under the laws of the
State of Delaware and is qualified to do business under the laws of any
jurisdiction in which it conducts its business, and has all requisite power and
authority, corporate or otherwise, to conduct its business, to own its
properties and to execute and
<PAGE> 7
7
deliver, and to perform all of its obligations under this Agreement, the Note,
the Security Agreement, the Collateral Assignment of Leases and the Mortgages.
(b) Authorizations. The execution, delivery and performance by
the Borrower of this Agreement, the Note,the Security Agreement, the Collateral
Assignment of Leases and the Mortgages have been duly authorized by all
necessary corporate action.
(c) No Consent. No authorization, consent, approval, release,
exemption from or filing or registration with any court or governmental
department or agency will be necessary to the valid execution, delivery and
performance by the Borrower of this Agreement, the Note, the Security
Agreement, the Collateral Assignment of Leases or any of the Mortgages, deeds
of trust or other documents required by Section 3.03.
(d) Binding Obligations. This Agreement, the Note, Mortgages,
Deeds of Trust, the Security Agreement, the Collateral Assignment of Leases and
the Mortgages have been or will be executed and delivered by duly authorized
officers of the Borrower and constitute or will constitute, legal, valid and
binding obligations of the Borrower enforceable in accordance with their
respective terms.
ARTICLE V
COVENANTS OF THE BORROWER
Section 5.01. Affirmative Covenants. So long as the Note shall
remain unpaid and the events described in Article VII have not occurred, the
Borrower hereby covenants and agrees that it will
<PAGE> 8
8
and it will cause each subsidiary to, unless the Lender shall otherwise consent
in writing:
(a) Payment of Obligations. Pay punctually and discharge when
due: (i) all indebtedness heretofore or hereafter incurred; (ii) all taxes,
assessments and governmental charges or fines imposed upon it or its income or
profits, or upon any of the properties belonging to it; (iii) claims or demands
of materialmen, mechanics, carriers, warehousemen, landlords and other like
persons which, if unpaid, might become a lien or charge on its property;
provided that this covenant shall not require the payment of any of the matters
set forth in (i), (ii) and (iii) above if the same shall be contested in good
faith and by proper proceedings diligently pursued and as to which adequate
reserves have been set aside on the books of the Borrower in accordance with
Generally Accepted Accounting Principles ("GAAP").
(b) Corporate Existence, Etc. The Borrower will, and will cause
each of its subsidiaries to:
(i) preserve and maintain its corporate existence and all of
its material rights, privileges and franchises;
(ii) pay and discharge all taxes, assessments and governmental
charges or levies imposed on it or on its income or profits or on any
of its property prior to the date on which penalties attach thereto,
except for any such tax, assessment, charge or levy the payment of
which is being contested in good faith and by proper proceedings and
against which adequate reserves are being maintained; and
<PAGE> 9
9
(iii) upon 72 hours notice to Borrower by Lender, permit
representatives of the Lender, during normal business hours, to
examine, on a quarterly basis, copy and make extracts from its books
and records, to inspect its properties, and to discuss its business
and financial condition with its officers provided, however, that the
Lender shall not divulge, and shall cause its representatives not to
divulge, any information obtained as a result of the examination of
the books and records of the Borrower pursuant to this subsection to a
competitor of the Borrower.
(c) Maintenance of Properties. Maintain and preserve and cause
each of its subsidiaries to maintain and preserve all of its properties
necessary or useful in the proper conduct of its business in good working order
and condition, ordinary wear and tear excepted.
(d) Compliance with Laws. Comply and cause each of its
subsidiaries to comply in all material respects with the requirements of all
applicable laws, rules, regulations and orders of any governmental authority.
(e) Maintenance of Insurance. Maintain and cause each of its
subsidiaries to maintain policies with financially sound, responsible and
reputable insurance companies on all of their properties and covering such
risks, including property, casualty, liability and worker's compensation, in
such amounts as are usually carried by companies engaged in similar businesses
and owning similar properties as the Borrower or such subsidiary, and promptly
<PAGE> 10
10
upon execution thereof provide to the Lender copies of all such policies and
any riders or amendments thereto. The policies of insurance required hereunder
shall provide that the Lender shall receive at least thirty (30) days' written
notice prior to the cancellation, termination or material alteration of any
such policy.
(f) Maintenance of Affiliated Relationship. Except as otherwise
provided in this Agreement, as long as any amounts are owed to Lender pursuant
to the terms of this Agreement as it may be amended from time to time, ensure
that each of the Stations currently owned by Borrower or any of its
subsidiaries shall maintain its affiliation agreement (the "Affiliation
Agreements") with Home Shopping Club, Inc. ("HSC") or its successors, unless
such affiliation is terminated pursuant to Section 6(b), (c) or (d) or 21 of
the applicable Affiliation Agreement or unless otherwise consented to in
writing by the Lender.
(g) Funded Debt Coverage Test. Provide that Consolidated Funded
Debt of Borrower as of the close of any fiscal quarter shall not exceed
Consolidated Operating Cash Flow for the preceding consecutive four fiscal
quarter periods as shown below:
<TABLE>
<CAPTION>
Funded Debt
From Through Coverage Test
---- ------- -------------
<S> <C> <C>
9/1/92 8/31/93 6.50
9/1/93 8/31/94 6.40
9/1/94 8/31/95 6.30
9/1/95 8/31/96 6.20
9/1/96 8/31/97 6.10
9/1/97 And Beyond 6.00
</TABLE>
<PAGE> 11
11
Funded Debt shall mean the sum of (i) any and all obligations and
indebtedness under this Agreement, (ii) the principal portion of any and all
obligations under a lease which is treated as a capitalized lease under GAAP,
and (iii) any other indebtedness incurred for borrowed money whether current or
long term. Operating Cash Flow shall mean the sum of (i) operating profit
(earnings before interest and taxes), (ii) depreciation, and (iii)
amortization, all determined in accordance with GAAP. With respect to each of
the first three (3) fiscal quarters closed immediately after the date hereof,
Operating Cash Flow, for the twelve (12) month period closed as of such
quarter, shall be the Operating Cash Flow for the period(s) closed as of the
end of such first, second and third fiscal quarter multiplied by 4, 2 and 1.33,
respectively. The Funded Debt Coverage Test report shall be furnished by
Borrower to Lender on a quarterly basis within sixty (60) days after the end of
each of the first three (3) fiscal quarters of each fiscal year and within one
hundred twenty (120) days after the end of each fiscal year.
(h) Fixed Charge Coverage Test. Provide that Operating Cash Flow
(as defined in 5.01(g) above) for any four consecutive fiscal quarter periods
cannot be less than 95 percent of Consolidated Fixed Charges, which shall
consist of the sum of (i) all interest expense net of interest income, (ii) all
capital expenditures and intangible additions, (iii) principal payments with
respect to any Funded Debt (as defined in paragraph 5.01(g)) made or scheduled
to be made in a particular fiscal quarter excluding prepayments under
<PAGE> 12
12
this Agreement net of principal payments received on notes receivable and (iv)
all cash outflows from equity (i.e., dividends of cash or cash equivalents plus
any payment on account of the purchase, redemption or other retirement of any
capital stock of the Borrower or any other payment or distribution made in
respect thereof, either directly or indirectly) net of all cash inflows to
equity, for any consecutive four (4) fiscal quarter period. With respect to
each of the first three (3) fiscal quarters closed immediately after the date
hereof, the fixed charge coverage test will be computed after the end of each
of the first three (3) fiscal quarters. The computation shall be cumulative
for each of the first three (3) fiscal quarters after the first quarterly
fiscal period. The Fixed Charge Coverage Test report shall be furnished by
Borrower to Lender on a quarterly basis within sixty (60) days after the end of
each of the first three (3) fiscal quarters of each fiscal year and within one
hundred twenty (120) days after the end of each fiscal year.
(i) Cash Maintenance Test. On August 31, 1993, the Borrower, in
recognition of deferred taxes that may be required to be paid by Borrower in
future periods, shall maintain cash and cash equivalents in the amount of Two
Million Dollars ($2,000,000) and shall increase such amount by Two Million
Dollars ($2,000,000) per year for each of the next four (4) years. Such
required amounts shall be reviewed and may be revised downward with the consent
of the Lender and upward with the consent of the Borrower on an annual basis.
Consent hereunder shall not be unreasonably withheld. The
<PAGE> 13
13
Cash Maintenance Test report shall be furnished by Borrower to Lender on an
annual basis one hundred twenty (120) days after the end of each fiscal year.
(j) Financial Statements. The Borrower shall deliver to the
Lender:
(i) as soon as available and in any event within sixty
(60) days after the end of each of the first three (3) fiscal quarters
of each fiscal year of the Borrower, consolidated statements of
operations, stockholders' equity and cash flows of the Borrower and
its consolidated subsidiaries for such period and for the period from
the beginning of such fiscal year to the end of such period, and the
related consolidated balance sheet as at the end of such period,
setting forth in each case in comparative form the corresponding
figures for the corresponding period in the preceding fiscal year,
accompanied by a certificate of the Chief Financial Officer of the
Borrower, which certificate shall state that such financial statements
present fairly the consolidated financial position of the Borrower and
its consolidated subsidiaries and results of their operations and cash
flows in accordance with GAAP, consistently applied, as at the end of,
and for, such period (subject to normal year-end audit adjustments).
(ii) as soon as available and in any event within one hundred
twenty (120) days after the end of each fiscal year of the Borrower,
consolidated statements of operations, stockholders' equity, retained
earnings and cash flows of the
<PAGE> 14
14
Borrower for such year and the related consolidated balance sheet as
at the end of such year, setting forth in each case in comparative
form the corresponding figures for the preceding fiscal year, and
accompanied by an opinion thereon of independent certified public
accountants of recognized standing, which opinion shall state that
such consolidated financial statements present fairly in all material
respects, the financial position of the Borrower and results of its
operations and its cash flows as at the end of, and for, such fiscal
years.
(iii) promptly upon their becoming available, copies of all
registration statements and SEC Reports other than financial
statements, if any, which the Borrower shall have filed with the
Securities and Exchange Commission (or any governmental agency
substituted therefor) or any national securities exchange.
(k) Financial Certification. The financial statements
required by this Section and the Funded Debt Coverage Report, Fixed Charge
Coverage Report and Cash Maintenance Report in accordance with the provisions
of Section 5.01(g), (h) and (i), respectively, shall be accompanied by a
Certificate from the Chief Financial Officer of the Borrower certifying that
(i) no Event of Default or event which with the passage of time or the giving
of notice or both would constitute an Event of Default has occurred, or if any
such Event of Default has occurred, a statement describing the actions that the
Borrower proposes to take in connection therewith,
<PAGE> 15
15
and (ii) and that the tests set forth in 5.01(g), (h) and (i) have been
satisfied.
(l) Litigation. The Borrower shall notify Lender within
ten (10) business days of receipt of notice by Borrower of all court or
arbitral proceedings and investigations, and of all proceedings and
investigations before any governmental or regulatory authority or agency,
affecting the Borrower or any of its subsidiaries, except proceedings or
investigations which, if adversely determined, would not have a material
adverse effect on the consolidated financial condition or operations, or the
business taken as a whole, of the Borrower. Notwithstanding the foregoing, the
Borrower shall notify Lender with respect to the aforesaid litigation, as
appropriate, prior to ten (10) business days of receipt of notice by Borrower
if the circumstances require earlier action by Borrower.
(m) Payment of Obligations. Without limiting the
obligations of the Borrower under Section 5.01(b), the Borrower will, and will
cause each of its subsidiaries to, pay and discharge at or before the date when
due (including any grace period allowed therefor), all of their respective
obligations and other liabilities, including, without limitation, tax and
pension liabilities, except where such obligations or liabilities are being
contested in good faith and by appropriate proceedings, and maintain, in
accordance with GAAP, appropriate reserves for the accrual of all of the
foregoing.
(n) Perfection of Liens. Borrower shall do all things
requested by Lender to preserve and perfect the liens and security
<PAGE> 16
16
interests of Lender arising pursuant hereto and pursuant to the Security
Agreement, Collateral Assignment of Leases and Mortgages as first liens and
security interests, except as expressly permitted in Section 5.02(b) hereof.
If Borrower should purchase any real property, or should lease any real
property, it shall notify Lender and execute, deliver and cause to be recorded
any mortgage or leasehold mortgage requested by Lender in connection therewith,
which shall be a first lien, except as expressly permitted herein. Any such
mortgage or leasehold mortgage shall be accompanied by an ALTA mortgagee's
policy of title insurance (Form 1970) (at Borrower's expense) insuring the lien
of such mortgage or leasehold mortgage as being the first lien on such real
property, subject to liens permitted herein, and by the consent of the lessor,
if necessary.
(o) FCC Approval. Borrower acknowledges that certain transactions
contemplated by this Agreement or the documents entered into in connection
herewith, and certain actions which may be taken by Lender in the exercise of
its rights under this Agreement or such other documents may require the consent
of the FCC. If counsel to Lender reasonably determines that the consent of the
FCC is required in connection with the execution, delivery and performance of
any of the aforesaid documents or any documents delivered to Lender in
connection therewith or as a result of any action which may be taken pursuant
thereto, then Borrower, at its sole cost and expense, agrees to use its best
efforts to secure such consent and to cooperate with Lender in any action
commenced
<PAGE> 17
17
by Lender to secure such consent. Borrower shall not take any action which
interferes with the exercise or completion of any such action taken by Lender.
(p) Environmental Compliance. Borrower shall comply in all
material respects with any and all Environmental Laws (as that term is defined
below), including, without limitation, all Environmental Laws in jurisdictions
in which Borrower owns or operates a facility or site, arranges for disposal or
treatment of hazardous substances, solid waste or other wastes, accepts for
transport any hazardous substances, solid wastes or other wastes or holds any
interest in real property or otherwise. Borrower will furnish to Lender
promptly after receipt thereof a copy of any notice Borrower may receive from
any governmental authority, private person or entity or otherwise that any
litigation or proceeding pertaining to any environmental, health or safety
matter has been filed or is threatened against Borrower, any real property in
which Borrower holds any interest or any past or present operation of Borrower.
Borrower will not allow the release or disposal of hazardous waste, solid waste
or other wastes on, under or to any real property in which Borrower holds any
interest or performs any of its operations, in violation of any Environmental
Law. Borrower shall notify Lender of any material spill, release or disposal
of a hazardous material on, under or adjacent to the real property in which
Borrower holds or has held an interest. As used in this Section "litigation or
proceeding" means any demand, claim, notice, suit, suit in equity, action,
administrative action, investigation
<PAGE> 18
18
or inquiry whether brought by any governmental authority, private person or
entity or otherwise. "Environmental Laws" means all provisions of law,
statutes, ordinances, rules, regulations, permits licenses, concessions,
grants, franchises, judgments, writs, injunctions, decrees, orders, awards and
standards or other governmental restrictions promulgated by the government of
the United States of America or by any state or municipality thereof or by any
court, agency, instrumentality, regulatory authority or commission of any of
the foregoing concerning health, safety and protection of, or regulation of the
emission, release or discharge of substances into, the environment.
(q) Indemnification. Solely with respect to events arising after
the Distribution Date, Borrower shall defend, indemnify and hold Lender, and
its officers, directors, shareholders, employees, agents, affiliates,
successors and assigns harmless from and against all costs, expenses, claims,
demands, damages, penalties and liabilities of every kind or nature whatsoever
(including reasonable attorneys fees) arising out of, resulting from or
relating to (i) the noncompliance of Borrower or any property owned or leased
by Borrower with any Environmental Law, or (ii) any investigatory or remedial
action involving Borrower or any property owned or leased by Borrower and
required by Environmental Laws or by order of any governmental authority having
jurisdiction under any Environmental Laws, or (iii) any injury to any person
whatsoever or damage to any property arising out of, in connection with or in
any way relating to the breach of any of the
<PAGE> 19
19
environmental warranties or covenants contained in this Agreement or any facts
or circumstances that cause any of the environmental representations or
warranties contained in this Agreement to cease to be true, or (iv) the
existence, treatment, storage, disposal, release, spill, generation,
transportation, removal, manufacture or other handling of any hazardous
material on any property owned or leased by Borrower or on any property
adjacent to such property or (v) the presence of any asbestos-containing
material or underground storage tanks, whether in use or closed, under or on
any property owned or leased by Borrower.
(r) Committed Projects List. Borrower agrees to allocate
approximately Five Million Dollars ($5,000,000) of Loan proceeds toward the
projects identified on Exhibit "3" attached hereto. The Board of Directors of
Borrower or the Executive Committee thereof may, from time to time, add, change
or delete projects contained on such list and shall forward a copy of such
revised list to Lender if an individual addition, deletion or change exceeds
Twenty-Five Thousand Dollars ($25,000).
(s) Capital Expenditures. Borrower agrees that the Executive
Committee of Borrower shall establish and provide the Lender, not later than
thirty (30) days after the commencement of any fiscal year or from the Date of
Distribution, an itemized list of proposed expenditures for Borrower for that
fiscal year. Any additions, deletions or changes that exceed Twenty-Five
Thousand Dollars ($25,000) to that list during the fiscal year must be approved
by the Executive Committee of Borrower and provided to the Lender.
<PAGE> 20
20
Section 5.02. Negative Covenants. So long as the Note shall
remain unpaid, the Borrower hereby covenants that neither it nor any of its
subsidiaries will, without the Lender's prior written consent:
(a) Indebtedness. Create or incur, assume or suffer to exist any
indebtedness, obligation or liability, whether matured or unmatured, liquidated
or unliquidated, direct or contingent, joint or several which, on a pro forma
basis, as of the last day of the preceding fiscal quarter would place the
Borrower in violation of the covenants described in Paragraphs 5.01(g) and (h)
above.
(b) Liens. Except as otherwise provided in this Agreement,
create, assume or suffer to exist, directly or indirectly, any security
interest, mortgage, deed of trust, pledge, lien, charge or other encumbrance,
of any nature whatsoever upon any of its properties or assets, now owned or
hereafter acquired, excluding, however, from the operation of this covenant:
(i) any security interest or lien created pursuant to this
Agreement.
(ii) liens for taxes or assessments either not delinquent or
the validity of which is being contested in good faith by appropriate
legal or administrative proceedings and as to which adequate reserves
shall have been set aside on its books, in conformity with GAAP.
(iii) materialmen's, mechanics', carriers', workmen's,
repairmen's, warehousemen's or other like liens arising in the
ordinary course of business, which are either not delinquent
<PAGE> 21
21
or are being contested in good faith by appropriate legal
proceedings and as to which adequate reserves shall have been set
aside on its books, in conformity with GAAP.
(iv) deposits or pledges to secure payment of worker's
compensation, unemployment insurance or other social security benefits
or obligations;
(v) any judgment lien, provided the judgment it secures
shall, within thirty (30) days after the entry thereof, have been
discharged, vacated, reversed, or execution thereof stayed pending
appeal, or shall have been discharged, vacated or reversed within
thirty (30) days after the expiration of such stay; or
(vi) encumbrances consisting of zoning restrictions,
easements, licenses, reservations, provisions, covenants, conditions,
waivers, restrictions on the use of property or minor irregularities
of title, provided that none of such encumbrances, in the reasonable
opinion of Lender, materially impairs the use or value of any property
in the operation of Borrower's business; or
(vii) liens or security interests securing conditional
sale, rental or purchase money obligations to the extent the
indebtedness secured is permitted under Section 5.02(a), but only in
the property which is the subject of such obligations.
(c) Disposition of Assets. Except as provided in subparagraphs (ii) and
(iii) below, sell, transfer, assign, lease, convey or otherwise transfer or
dispose of, whether in a single
<PAGE> 22
22
transaction or in a series of related transactions, all or any material part of
its assets, including but not limited to any one or more of its Stations and
licenses therefor, other than in the ordinary course of business, unless the
disposition is in exchange for collateral of like value which is satisfactory
to the Lender in which the Lender shall have a security interest. If the
Lender has given consent to the Borrower for the sale of collateral, Borrower
shall have up to twelve (12) months to replace the collateral in a manner
satisfactory to the Lender. In the case of a sale of a Station, the portion of
the proceeds attributable to the pro rata debt of the Station sold in
accordance with the formula set forth in Exhibit "4" attached hereto shall be
placed in an escrow account for a period not to exceed twelve (12) months from
the date of sale unless the Lender and Borrower agree otherwise. Borrower
shall have the right to withdraw the escrowed amount at any time if Borrower
immediately, upon such withdrawal, pays Lender the full amount of indebtedness
so relating to such Station. In the event that like collateral is not found at
any time up to twelve months, the pro rata debt of the Station sold in
accordance with the formula set forth in Exhibit "4" shall be paid to Lender as
a prepayment governed by Section 1.06 of this Agreement.
(i) The foregoing limitation on the disposition of assets shall
not apply to the Borrower's Telemation subsidiary and Low Power television
stations.
(ii) Notwithstanding the foregoing, the Borrower may sell any of
its Stations serving a market other than New York,
<PAGE> 23
23
Los Angeles or Chicago without the consent of Lender if the proceeds of
the sale are applied to extinguish the pro rata debt of the Station
sold in accordance with the formula set forth in Exhibit "4" attached
hereto. The formula, which is based on the previous twelve (12) months'
performance by such station, shall be applied on a monthly basis and the
results of the application of such formula shall be furnished to the
Lender on a quarterly basis, except that the formula shall be promptly
furnished on a monthly basis in the event of a proposed disposition of a
Station until such disposition occurs or is no longer intended.
(iii) Notwithstanding the foregoing, in the event that the
Borrower elects to sell one or more of the Stations serving the New
York, Los Angeles or Chicago markets, such sale may occur without the
consent of the Lender, but in the absence of such consent, the balance of
the Loan attributable to such Station in accordance with the formula set
forth in Exhibit "4" shall become immediately due and payable to the
Lender upon the sale, and the balance of the Loan shall become due and
payable six (6) months from the date of closing of the sale of such
Station.
(d) Remove Assets. Remove from their location as of the date of
this Agreement any of the assets procured with the proceeds of the borrowings
provided for herein, or any replacements for such assets, other than in the
ordinary course of business.
<PAGE> 24
24
(e) Dividend Restriction. No dividends shall be paid unless the
debt owed to Lender is less than 50% of the book value of the consolidated
assets of the Borrower after giving effect to the dividend. For purposes of
this paragraph, a "dividend" shall mean any distribution, dividend or the
incurrence of any liability to make any other payment or distribution of cash
or other property or assets in respect of any capital stock of the Borrower.
(f) Change of Business. Change, in any material respect, the
nature or character of its television broadcast business as conducted, or
engage in any activity not reasonably related to such television broadcast
business, as conducted on the date of this Agreement.
Section 5.03. Reporting Requirements. So long as the Note shall
remain unpaid the Borrower shall, unless the Lender shall otherwise consent in
writing, furnish to the Lender:
(a) Default Certificate. As soon as possible and in any event
within ten business days after the occurrence of each Event of Default (as
defined in Section 6.01) of which Borrower has knowledge, the statement from
the Chief Financial Officer of the Borrower setting forth details of such Event
of Default and the action which the Borrower proposes to take with respect
thereto.
(b) Financial Statements. Financial statements in accordance with
the provisions of Section 5.01(j) above and Funded Debt Coverage Report, Fixed
Charge Coverage Report and Cash Maintenance Report in accordance with the
provisions of Sections 5.01(g), (h) and (i), respectively.
<PAGE> 25
25
(c) Notice of Litigation. Written notice of any litigation in
accordance with the provisions of Section 5.01(l) above.
ARTICLE VI
EVENTS OF DEFAULT
Section 6.01. Events of Default. Under this Agreement, an Event of
Default shall be any of the following except where they have been predominately
caused by the breach by Lender (or any entity controlled by it) of any
agreement between it and Borrower:
(a) Except as may be permitted pursuant to Article VII below,
Borrower shall fail to pay any installment of principal or interest under the
Note, or any other obligation to the Lender when due whether at the due date
thereof or by acceleration or otherwise, and such default shall remain
unremedied for a period of five (5) business days after the due date thereof.
(b) The security interest or lien of the Lender in any material
portion of the collateral covered by the Security Agreement, the Collateral
Assignment of Leases and/or the Mortgages shall at any time be reasonably
determined by the Lender not to constitute a legal, valid and enforceable first
priority security interest or lien.
(c) Any representation or warranty made by Borrower (or any of its
officers) herein, in the Security Agreement, the Collateral Assignment of
Leases and/or the Mortgages or by Borrower (or any of its officers) in any
certificate, agreement, instrument or statement contemplated by or made or
delivered pursuant to or in
<PAGE> 26
26
connection with this Agreement, or the Note shall prove to have been incorrect
in any material respect when made; or
(d) Borrower shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement, the Note, the Security
Agreement, the Collateral Assignment of Leases and/or the Mortgages and any
such failure remains unremedied for thirty (30) days after written notice
thereof shall have been given to Borrower by Lender; or
(e) Borrower shall (i) file a petition commencing a voluntary case
concerning it under any Chapter of the United States Code entitled "Bankruptcy"
or similar state statute; or (ii) Borrower shall apply for or consent to the
appointment of any receiver, trustee, custodian, or similar officer for it or
for all or any substantial part of its property; or (iii) such receiver,
trustee, custodian, or similar officer shall be appointed without the
application or consent of Borrower and such appointment shall continue
undischarged for a period of thirty (30) days; or (iv) an involuntary case is
commenced against the Borrower under any Chapter of the United States Code
entitled "Bankruptcy" or similar state statute and an order for relief under
any such Chapter or state statute is entered or the petition commencing the
case is controverted but is not dismissed within thirty (30) days after the
commencement of the case; or (v) Borrower shall institute (by petition,
application, answer, consent or otherwise) any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debt, dissolution, liquidation or
similar proceeding relating to
<PAGE> 27
27
it under the laws of any jurisdiction; or (vi) any such proceeding shall be
instituted against Borrower and shall remain undismissed for a period of thirty
(30) days; or (vii) Borrower shall take any action for the purpose of
effectuating the foregoing; or
(f) There shall be an irrevocable and unappealable denial or
revocation of any broadcast license for any one or more of the Stations which
is not attributable in whole or in substantial part to the actions of the
Lender or its subsidiaries.
(g) Borrower shall default under any agreement governing or securing
any liability or indebtedness of Borrower, any promissory note or any other
evidence of indebtedness in excess of $250,000 if the holder of such liability
or indebtedness has the right to accelerate the maturity thereof as a result of
such default or if such liability or indebtedness is automatically accelerated
as a result of such default.
(h) Borrower shall incur final judgments for the payment of money
aggregating at any one time in excess of $250,000 and shall not discharge the
same within a period of thirty days unless, pending further proceedings,
execution thereon has been effectively stayed.
(i) A creditor of Borrower shall obtain possession of any of the
collateral for the obligations owed to Lender by any means, including, without
limitation, levy, distraint, replevin or self-help, or any creditor shall
establish or obtain any right in such collateral which is equal or senior to a
security interest or lien of Lender in such collateral.
<PAGE> 28
28
(j) Any court, government or governmental agency shall condemn,
seize, or otherwise appropriate, or take custody or control of any substantial
portion of the assets of Borrower pursuant to a final, non-appealable order.
(k) Borrower's on-the-air broadcast operations at any Station
shall be interrupted at any time for more than forty- eight hours, whether or
not consecutive, during any period of seven consecutive days, unless (a) the
broadcasting operations of all or substantially all of the television stations
in the relevant market also are interrupted for a like period of time, or (b)
Borrower shall be receiving during such period of interruption insurance
sufficient to assure that its per diem cash flow during such period is at least
equal to its per diem cash flow for the month immediately preceding the initial
date of interruption.
Section 6.02. Effect of Event of Default. Should any Event of
Default occur, the Lender may at its option declare the entire unpaid principal
amount of the Note, together with all unpaid interest and all other amounts
payable under this Agreement and every other obligation of the Borrower to the
Lender, immediately due and payable, whereupon the Note and all such
obligations shall become and be forthwith due and payable, without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived by the Borrower, anything contained herein or in the Note or in such
other note or evidence of indebtedness to the contrary notwithstanding. The
Lender shall have, in addition to all other rights and remedies allowed by law,
the rights and
<PAGE> 29
29
remedies of a secured party under the Uniform Commercial Code and, without
limiting the generality of the foregoing, the rights and remedies provided for
in the Security Agreement, the Collateral Assignment of Leases and the
Mortgages dated of even date herewith executed by Borrower, which provisions
are hereby incorporated by reference.
Section 6.03 Affiliation Payment Offset. In the event that the
Borrower fails to make one or more Loan Payment(s) in full under this
Agreement, Lender shall have the right to direct that HSC make payments due to
Borrower under the Affiliation Agreements to Lender in an amount equal to such
missed payments to the full amount of such missed payment or payments from any
subsequent Affiliation Payment made to the Stations on a pro rata basis among
the Stations.
Section 6.04 Compliance with Law. Any sale or cessation of operations
by Borrower with respect to a Station (including any LPTV Station) which
results from compliance with applicable Federal or State law shall not
constitute an Event of Default hereunder.
ARTICLE VII
ASSIGNMENT OF LOAN REPAYMENTS
Section 7.01. Missed Affiliation Payments. If HSC fails to make any
portion of any payment when due and payable under any Affiliation Agreement
then all of the following (a) through (e) shall occur:
(a) As of the close of business on the date such unpaid amount was
due and payable under such Affiliation Agreement, Lender
<PAGE> 30
30
shall be deemed, without any further action by any party hereto, to have
received from Borrower an assignment of Borrower's right to receive any and all
amounts unpaid by HSC under such Affiliation Agreement; provided, however, the
amount so assigned shall not exceed the amount of the next monthly installment
otherwise due from Borrower to Lender pursuant to Section 1.04;
(b) As of the close of business on the date such unpaid amount was
due and payable under such Affiliation Agreement, Borrower shall be deemed,
without any further action by any party hereto, to have made a payment to
Lender equal to the amount assigned from Borrower to Lender in accordance with
Section 7.01(a), which shall be applied to Borrower's obligations hereunder and
under the Note with exactly the same effect as if Borrower had made to Lender a
cash payment of such amount at such time;
(c) Borrower shall be obligated to pay Lender as the next monthly
installment due from Borrower to Lender pursuant to Section 1.04 an amount
equal to the difference between (i) the amount otherwise due from Borrower to
Lender pursuant to Section 1.04, and (ii) the amount assigned from Borrower to
Lender in accordance with Section 7.01(a); and
(d) HSC shall have no obligation to Borrower with respect to any and
all amounts assigned from Borrower to Lender in accordance with Section
7.01(a), but, in accordance with such assignment, HSC shall be obligated to pay
such assigned amount to Lender.
Nothing in this Section 7.01 shall amend, alter or diminish HSC's
obligation under any such Affiliation Agreement to pay to
<PAGE> 31
31
Borrower or its Subsidiaries, as appropriate, the difference between (i) all
amounts not paid when due and payable under any such Affiliation Agreement and
(ii) all amounts assigned from Borrower to Lender in accordance with Section
7.01(a). Failure by HSC to pay to Borrower or its Subsidiaries, as
appropriate, such difference on or prior to the earliest date in the
immediately succeeding calendar month on which any payment under any
Affiliation Agreement is due and payable shall constitute a failure by HSC to
make any portion of any payment when due and payable under any Affiliation
Agreement during such succeeding calendar month.
7.02. Subordination of Portions of Loan. In the event that Section
7.01 shall be applicable, then, notwithstanding any other provision of this
Agreement, including without limitation Section 5.01 or 5.02, Borrower may
borrow from any source or other lender an amount equal at the time of such
borrowing to twice the amount of the difference between (i) all amounts not
paid when due and payable under any Affiliation Agreement and (ii) all amounts
assigned from Borrower to Lender in accordance with Section 7.01 but in no
event at any time in excess of the product determined by multiplying Three
Million Dollars ($3,000,000) by the number (but not more than 18) of months
during which HSC has not made all payments required under the Affiliation
Agreements.
Lender hereby agrees to subordinate all repayment rights it has under
this Agreement and the Note to all such borrowings made under this Section 7.02
up to but not in excess of Fifty-Four
<PAGE> 32
32
Million Dollars ($54,000,000). Borrowings made by Borrower under this Section
7.02 shall not be considered an indebtedness, obligation or liability of
Borrower for purposes of the application of Section 5.01 or 5.02.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. No Waiver; Cumulative Remedies. No failure or delay
on the part of the Lender in exercising any right, power or remedy hereunder
shall operate as a waiver, nor shall any single or partial exercise of any such
right, power or remedy hereunder preclude any further or other exercise
thereof. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
Section 8.02. Amendments. No amendment, modification, termination
or waiver of any provision of this Agreement, the Note, the Security Agreement,
the Collateral Assignment of Leases and the Mortgages nor consent to any
departure by the Borrower therefrom, shall in any event be effective unless in
writing, signed by the Lender and then only in the specific instance and for
the specific purpose for which given. No notice to or demand on the Borrower
in any case shall entitle it to any other or further notice or demand in
similar or other circumstances.
Section 8.03. Conflicts. In the event of any conflict or
inconsistency between any provision of this Agreement and a provision of the
Note, the Security Agreement, the Collateral
<PAGE> 33
33
Assignment of Leases and/or the Mortgages the provisions of this Agreement
shall control.
Section 8.04. Address for Notices. All notices and other
communications under this Agreement shall be in writing and shall be served by
personal service or by mailing a copy thereof by first class mail, postage
prepaid to the applicable party at the addresses indicated below:
If to the Borrower, to:
Jeffrey M. McGrath
President
Silver King Communications, Inc.
100 South Sangamon Street
Suite 300
Chicago, Illinois 60607
with an additional copy (which shall not constitute notice) to:
Steven H. Grant
Chief Financial Officer
Silver King Communications, Inc.
12425 28th Street North
St. Petersburg, Florida 33716
If to the Lender, to:
John S. True, President
HSN Capital Corporation
4910 Longley Lane
Reno, Nevada 89502
and to:
Legal Department
Home Shopping Network, Inc.
P.O. Box 9090
Clearwater, FL 34618-9090
or at such other address as may be designated by either party in a written
notice to the other complying as to delivery with the terms
<PAGE> 34
34
of this Section. All such notices and other communications shall be effective
when deposited in the mails.
Section 8.05. Expenses. The Borrower agrees to pay on demand all
costs and expenses incurred directly in connection with the enforcement of this
Agreement, the Note, the Security Agreement, Collateral Assignment of Leases
and the Mortgages and other instruments and documents to be delivered
hereunder, including, without limitation, the reasonable fees and expenses of
any attorney to whom the Note is referred for collection (whether or not
litigation is commenced) or for representation in proceedings under any
bankruptcy or insolvency law. In addition, the Borrower shall pay any and all
taxes and fees payable or determined to be payable in connection with the
execution, delivery and recordation of any instruments and documents to be
delivered hereunder, including but not limited to documentary stamps.
Section 8.06. Binding Effect; Assignment. This Agreement shall
become effective when executed and thereafter shall be binding upon and inure
to the benefit of the Borrower, the Lender and their respective successors and
assigns, except that the Borrower shall not have the right to assign any rights
or obligations hereunder without the prior written consent of the other.
Section 8.07. Governing Law. This Agreement, the Note, the
Security Agreement, and related documents shall be governed by, and construed
in accordance with, the laws of the State of Nevada with the exception of its
conflicts of laws provisions; provided that
<PAGE> 35
35
the effect of any recordation shall be determined by the state thereof.
Section 8.08. Severability of Provisions. Any provision of this
Agreement, the Note, the Security Agreement, the Collateral Assignment, and the
Mortgages which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions or affecting the
validity or enforceability of any provisions in any other jurisdiction.
Section 8.09. Headings. Article and Section headings in this
Agreement are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
Section 8.10. Rights Affected by Extensions. The rights of the
Lender and its assigns shall not be impaired by any indulgence, release,
renewal, extension or modification which the Lender may grant with respect to
the indebtedness or any part thereof, or with respect to any endorser,
guarantor, or surety without notice or consent of the Borrower or any endorser,
guarantee, or surety.
Section 8.11. Survival of Representations and Warranties. All
representations and warranties made in this Agreement and in any documents or
certificates delivered pursuant hereto or thereto shall survive the execution
and delivery of this Agreement and the Note and the making of the Loan
hereunder and continue in full force and effect, as of the respective dates as
of which they were made, until all of the obligations of the Borrower to the
Lender hereunder have been paid in full.
<PAGE> 36
36
(a) From time to time, Borrower shall execute and deliver to Lender
such additional documents as Lender may reasonably require to carry out the
purposes of this Agreement or any of the documents entered into in connection
herewith, or to preserve and protect the rights of the Lender hereunder or
thereunder.
(b) Borrower hereby indemnifies and holds harmless Lender and its
directors, officers, shareholders, employees, agents, counsel, subsidiaries and
affiliates (the "Indemnified Persons") from and against any and all losses,
liabilities, obligations, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against any Indemnified Person in any way relating
to or arising out of this Agreement, the documents entered into in connection
herewith, or any of them or any of the transactions contemplated hereby or
thereby; provided, however, that Borrower shall not be liable to any
Indemnified Person, if there is a judicial determination that such losses,
liabilities, obligations, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from the gross negligence or willful
misconduct of such Indemnified Person.
(c) Notwithstanding anything herein or in any of the related
documents to the contrary, but without limiting or waiving Borrower's
obligations hereunder or under any of the related documents, Lender's remedies
hereunder and under the related documents are subject to compliance with the
Communications Act of 1934, as amended, and to all applicable rules,
regulations and
<PAGE> 37
37
policies of the FCC, and Lender will not take any action pursuant to this
Agreement or any of the related documents that will constitute or result in any
assignment of an FCC license or any change of control of any Station if such
assignment of license or change of control would require under then existing
law (including the written rules and regulations promulgated by the FCC), the
prior approval of the FCC, without first obtaining such approval of the FCC.
This Agreement, the related documents and the transactions contemplated hereby
and thereby do not and will not constitute, create, or have the effect of
constituting or creating, directly or indirectly, actual or practical ownership
of Borrower by Lender or control, affirmative or negative, direct or indirect,
of Borrower by Lender, over the programming, management, or any other aspect of
the operation of Borrower, which ownership and control remains exclusively and
at all times in the shareholders and the Board of Directors of Borrower until
such time as Lender has complied with such law, rules, regulations and
policies.
BORROWER AND LENDER EACH WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, BETWEEN
LENDER AND BORROWER ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS
AGREEMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.
<PAGE> 38
38
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers, as of the date first
above written.
ATTEST: HSN CAPITAL CORPORATION
/s/ Stuart A. Sheldon By: /s/ John A. True
- ---------------------- -----------------------
John True President
ATTEST: HOME SHOPPING CLUB, INC.
/s/ Stuart A. Sheldon By: /s/ Les R. Wandler
- ---------------------- ------------------------
Les R. Wandler
Secretary/ Treasurer
President and CEO
ATTEST: SILVER KING COMMUNICATIONS, INC.
/s/ Stuart A. Sheldon By: /s/ Steven H. Grant
- ---------------------- -----------------------------
Steven H. Grant, Vice President,
Chief Financial Officer,
Secretary/Treasurer
<PAGE> 39
HSN CAPITAL CORPORATION
4910 Longley Lane
Reno, Nevada 89502
January 25, 1993
Silver King Communications, Inc.
12425 28th Street North
St. Petersburg, Florida 33716
Attention: Steven H. Grant, Vice President,
Chief Financial Officer and Secretary/Treasurer
RE: Loan Agreement (the "Loan Agreement") dated December 28, 1992,
by and between HSN Capital Corporation, A Nevada corporation
("Lender"), and Silver King Communications, Inc. a Delaware
corporation ("Borrower")
Gentlemen:
Reference is made to the Loan Agreement identified above. Unless otherwise
defined herein, capitalized terms used herein shall have the meaning assigned
to such terms in the Loan Agreement.
You have requested that we waive the requirement of Section 5.01(s) of the Loan
Agreement that the Executive Committee of the Borrower established and provide
the Lender, not later than thirty (30) days from the Date of Distribution, an
itemized list of expenditures for the Borrower for its fiscal year 1993.
Subject to the conditions set forth below, the Lender hereby waives its right
to exercise any remedies available to the Lender under the Loan Agreement, or
any other document executed in connection therewith, related to the requirement
of Section 5.01(s) set forth in the immediately preceding sentence.
The waiver by the Lender set forth in the immediately preceding paragraph is
expressly conditioned upon and subject to the Executive Committee of the
Borrower establishing and providing to the Lender, not later than thirty (30)
days from the effective date thereof, an itemized list of proposed expenditures
for Borrower for its fiscal year 1993.
If the Borrower agrees to the foregoing, please evidence such agreement by
executing at least two (2) counterparts of this letter in the space provided
below and by returning said executed counterparts to HSN Capital Corporation at
4910 Longley Lane, Reno, Nevada 89502, Attention: John True, President.
<PAGE> 40
Silver King Communications, Inc.
January 25, 1993
Page 2
Effective upon the execution and delivery by the Borrower of counterparts of
this letter as provided above, this letter shall be a binding agreement between
the parties hereto.
Very truly yours,
HSN CAPITAL CORPORATION
By: /s/ John A. True
-----------------------
Name: John A. True
---------------------
Title: President
AGREED AND ACCEPTED:
SILVER KING COMMUNICATIONS, INC.
By: /s/ Steven H. Grant
---------------------------
Name: Steven H. Grant
------------------------
Title: Vice President, Chief
Financial Officer, Secretary/Treasurer
<PAGE> 41
February 26, 1993
Silver King Communications, Inc.
12425 28th Street North
St. Petersburg, Florida 33716
Attention: Steven H. Grant, Vice President
Chief Financial Officer & Secretary/Treasurer
RE: Loan Agreement (the "Loan Agreement") dated December 28, 1992,
by and between HSN Capital Corporation, a Nevada corporation
("Lender"), and Silver King Communications, Inc., a Delaware
corporation ("Borrower")
Gentlemen:
This letter concerns the above-referenced Loan Agreement. All
capitalized terms used herein, unless otherwise defined, shall have the same
meaning as assigned to such terms in the Loan Agreement.
On January 25, 1993, by letter agreement, Lender and Borrower waived
the requirement of Section 5.01(s) of the Loan Agreement that the Executive
Committee of the Borrower establish and provide the Lender, no later than
thirty (30) days from the Date of Distribution, an itemized list of
expenditures for the Borrower for its fiscal year 1993. In so doing, the
parties extended the date for the provision of such list an additional thirty
(30) days until February 26, 1993.
As a result of a change in the ownership of Lender's parent company,
Lender hereby requests that the deadline for providing such itemized list of
expenditures be extended until May 1, 1993 (hereinafter "the additional
extension period") and that during the additional extension period no capital
expenditures be made outside the ordinary course of business and all capital
expenditures within the ordinary course of business which exceed Ten Thousand
Dollars ($10,000) be subject to approval by the Executive Committee of Borrower
on a case by case basis.
Further, during the additional extension period, Lender requests that
the expenditure of any Loan proceeds towards any of the committed projects
identified in Exhibit 3 to the Loan Agreement and described in Section 5.01(r)
thereof, other than the Urban Broadcasting Corporation project, be subject to
approval by the Executive Committee of Borrower on a case by case basis.
<PAGE> 42
Silver King Communications, Inc.
February 26, 1993
Page 2
Further, by the last day of the additional extension period, Lender
requests that Borrower complete and provide to Lender an operating budget for
the remainder of fiscal year 1993 approved by the Executive Committee of
Borrower.
If Borrower agrees to the foregoing, please evidence this agreement by
executing at least two (2) counterparts of this letter in the space provided
below and return at least one (1) of said executed counterparts to HSN Capital
Corporation, 4910 Longley Lane, Reno, Nevada 89502 Attention: John A. True,
President.
Very truly yours,
HSN CAPITAL CORPORATION
By: /s/ John A. True
-------------------------
Name: John A. True
Title: President
AGREED AND ACCEPTED:
SILVER KING COMMUNICATIONS, INC.
By: /s/ Steven H. Grant
--------------------------
Name: Steven H. Grant
Title: Vice President, Chief Financial
Officer & Secretary/Treasurer
<PAGE> 43
HSN CAPITAL CORPORATION
4910 Longley Lane
Reno, Nevada 89502
April 29, 1993
Silver King Communications, Inc.
12425 28th Street North
St. Petersburg, Florida 33716
Attention: Steven H. Grant, Vice President
Chief Financial Officer & Secretary/Treasurer
RE: Loan Agreement (the "Loan Agreement") dated December 28, 1992,
by and between HSN Capital Corporation, a Nevada corporation
("Lender"), and Silver King Communications, Inc., a Delaware
corporation ("Borrower")
Gentlemen:
This letter concerns the above-referenced Loan Agreement. All
capitalized terms used herein, unless otherwise defined, shall have the same
meaning as assigned to such terms in the Loan Agreement.
On January 25, 1993, by letter agreement, Lender and Borrower waived
the requirement of Section 5.01(s) of the Loan Agreement that the Executive
Committee of the Borrower establish and provide the Lender, no later than
thirty (30) days from the Date of Distribution, an itemized list of
expenditures for the Borrower for its fiscal year 1993. In so doing, the
parties extended the date for the provision of such list an additional thirty
(30) days until February 26, 1993.
As a result of a change in the ownership of Lender's parent company,
at Lender's request, on February 26, 1993, by letter agreement, Lender and
Borrower extended the deadline for providing such itemized list of expenditures
until May 1, 1993 (hereinafter "the additional extension period"). Lender and
Borrower agreed that during the additional extension period no capital
expenditures be made outside the ordinary course of business which exceed Ten
Thousand Dollars ($10,000) be subject to approval by the Executive Committee of
Borrower on a case by case basis.
Further, Lender and Borrower agreed that during the additional
extension period the expenditure of any Loan proceeds towards any of the
committed projects identified in Exhibit 3 to the Loan Agreement and described
in Section 5.01(r) thereof, other than the
<PAGE> 44
Silver King Communications, Inc.
April 29, 1993
Page 2
Urban Broadcasting Corporation project, be subject to approval by the Executive
Committee of Borrower on a case by case basis.
Finally, Lender and Borrower agreed that by the last day of the
additional extension period, Borrower would complete and provide to Lender an
operating budget for the remainder of fiscal year 1993 approved by the
Executive Committee of Borrower.
By this letter, Lender hereby requests that Borrower agree to meet with
Lender and Home Shopping Network, Inc. ("HSN"), the parent company of Lender,
at the corporate headquarters of HSN on May 17, 1993, and provide the itemized
list of expenditures and the operating budget of Borrower for the remainder of
its fiscal year 1993. Accordingly, Borrower shall not be required to provide
the itemized list of expenditures and the operating budget by May 1, 1993. The
Executive Committee approval requirements established in the February 26, 1993
letter agreement shall be extended and remain in force until May 17, 1993.
If Borrower agrees to the foregoing, please evidence this agreement by
executing at least two (2) counterparts of this letter in the space provided
below and return at least one (1) of said executed counterparts to HSN Capital
Corporation, 4910 Longley Lane, Reno, Nevada 89502 Attention: John A. True,
President.
Very truly yours,
HSN CAPITAL CORPORATION
By: /s/ John A. True
-----------------------
Name: John A. True
Title: President
<PAGE> 45
Silver King Communications, Inc.
April 29, 1993
Page 3
AGREED AND ACCEPTED:
SILVER KING COMMUNICATIONS, INC.
By: /s/ Steven H. Grant
-------------------------
Name: Steven H. Grant
Title: Vice President, Chief Financial
Officer & Secretary/Treasurer
<PAGE> 46
HSN CAPITAL CORPORATION
4910 Longley Lane
Reno, Nevada 89502
May 17, 1993
Silver King Communications, Inc.
12425 28th Street North
St. Petersburg, Florida 33716
Attention: Steven H. Grant, Vice President,
Chief Financial Officer & Secretary/Treasurer
RE: Loan Agreement (the "Loan Agreement") dated December 28, 1992,
by and between HSN Capital Corporation, a Nevada corporation
("Lender"), and Silver King Communications, Inc., a Delaware
corporation ("Borrower")
Gentlemen:
This letter concerns the above-referenced Loan Agreement. All
capitalized terms used herein, unless otherwise defined, shall have the same
meaning as assigned to such terms in the Loan Agreement.
Lender requests that Section 5.01(r) of the Loan Agreement be amended
by deleting its current language and replacing it with the following:
(r) Committed Projects List. Borrower agrees to allocate
approximately Five Million Dollars ($5,000,000) of Loan
proceeds toward the projects identified on Exhibit "3"
attached hereto; provided, however, that Borrower may
reallocate to the "Denver" project funds earmarked for any of
the other projects identified on Exhibit "3" so that the funds
allocated to the "Denver" project equal up to Two and One-Half
Million Dollars ($2,500,000). Except as otherwise provided
with respect to the reallocation of funds to the "Denver"
project, the Board of Directors of Borrower or the Executive
Committee thereof may, from time to time, add, change or
delete projects contained on such list and shall forward a
copy of such revised list to Lender if an individual addition,
deletion or change exceeds Twenty-Five Thousand Dollars
($25,000).
<PAGE> 47
Silver King Communications, Inc.
May 17, 1993
Page 2
If Borrower agrees to the foregoing amendment, please evidence this
agreement by executing at least two (2) counterparts of this letter in the
space provided below and return at least one (1) of said executed counterparts
to HSN Capital Corporation, 4910 Longley Lane, Reno, Nevada 89502 Attention:
John A. True, President.
Very truly yours,
HSN CAPITAL CORPORATION
By: /s/ John A. True
------------------------
Name: John A. True
Title: President
AGREED AND ACCEPTED:
SILVER KING COMMUNICATIONS, INC.
By: /s/ Steven H. Grant
-------------------------
Name: Steven H. Grant
Title: Vice President, Chief Financial
Officer & Secretary/Treasurer
<PAGE> 48
HSN CAPITAL CORPORATION
4910 Longley Lane
Reno, Nevada 89502
June 16, 1993
Silver King Communications, Inc.
12425 28th Street North
St. Petersburg, Florida 33716
Attention: Steven H. Grant, Vice President,
Chief Financial Officer & Secretary/Treasurer
RE: Loan Agreement (the "Loan Agreement") dated December 28, 1992,
as amended, by and between HSN Capital Corporation, a Nevada
corporation ("Lender"), and Silver King Communications, Inc.,
a Delaware corporation ("Borrower")
Gentlemen:
This letter concerns the above-referenced Loan Agreement. All
capitalized terms used herein, unless otherwise defined, shall have the same
meaning as assigned to such terms in the Loan Agreement.
Lender requests that Section 5.01(r) of the Loan Agreement, as
amended, be further amended by deleting its current language and replacing it
with the following:
r) Committed Projects List. Borrower agrees to allocate
approximately Five Million Dollars ($5,000,000) of Loan
proceeds toward the projects identified on Exhibit "3"
attached hereto; provided, however, that Borrower may
reallocate to the "Denver" project funds earmarked for any of
the other projects identified on Exhibit "3" so that the funds
allocated to the "Denver" project equal up to Two and One-Half
Million Dollars ($2,500,000) and Borrower may reallocate to
the "Urban Broadcasting" project identified on Exhibit "3" so
that the funds allocated to the "Urban Broadcasting" project
equal up to One Million Eight Hundred Thousand Dollars
($1,800,000). Except as otherwise provided with respect to
the reallocation of funds to the "Denver" and "Urban
Broadcasting" projects, the Board of Directors of Borrower or
the Executive Committee thereof may,
<PAGE> 49
Silver King Communications, Inc.
June 16, 1993
Page 2
from time to time, add, change or delete projects contained on
such list and shall forward a copy of such revised list to
Lender if an individual addition, deletion or change exceeds
Twenty-Five Thousand Dollars ($25,000).
If Borrower agrees to the foregoing amendment, please evidence this
agreement by executing at least two (2) counterparts of this letter in the
space provided below and return at least one (1) of said executed counterparts
to HSN Capital Corporation, 4910 Longley Lane, Reno, Nevada 89502 Attention:
John A. True, President.
Very truly yours,
HSN CAPITAL CORPORATION
By: /s/ John A. True
----------------
Name: John A. True
Title: President
AGREED AND ACCEPTED:
SILVER KING COMMUNICATIONS, INC.
By: /s/ Steven H. Grant
-------------------
Name: Steven H. Grant
Title: Vice President, Chief Financial
Officer & Secretary/Treasurer
<PAGE> 50
HSN CAPITAL CORPORATION
September 24, 1993
Silver King Communications, Inc.
12425 28th Street North
St. Petersburg, Florida 33716
Attention: Steven H. Grant, Executive Vice President,
Chief Financial/Administrative Officer &
Treasurer
RE: Loan Agreement (the "Loan Agreement") dated December
28, 1992, by and between HSN Capital Corporation, a
Nevada corporation ("Lender"), and Silver King
Communications, Inc., a Delaware corporation
("Borrower")
Gentlemen:
This letter concerns the above-referenced Loan Agreement. All capitalized
terms used herein, unless otherwise defined, shall have the same meaning as
assigned to such terms in the Loan Agreement.
Section 5.01(s) of the Loan Agreement provides that the Executive Committee of
the Borrower shall establish and provide the Lender, not later than thirty (30)
days after the commencement of any fiscal year an itemized list of proposed
expenditures for Borrower for that fiscal year. By this letter, Lender hereby
proposes that Section 5.01(s) of the Loan Agreement be amended to provide
that the Executive Committee of the Borrower shall establish and provide the
Lender, no later than thirty (30) days after the commencement of any fiscal
year or ten (10) days after Borrower's first Executive Committee of the fiscal
year, whichever is later, an itemized list of proposed expenditures for Borrower
for that fiscal year.
P.O. BOX 70548 - Reno, Nevada 89570 - 702-826-4919
<PAGE> 51
Silver King Communications, Inc.
September 24, 1993
Page 2
If Borrower agrees to the foregoing, please evidence this agreement by
executing at least two (2) counterparts of this letter in the space provided
below and return at least one (1) of said executed counterparts to HSN Capital
Corporation, 4910 Longley Lane, Reno, Nevada 89502 Attention: John A. True,
President.
Very truly yours,
HSN CAPITAL CORPORATION
By: /s/ John A. True
----------------
Name: John A. True
Title: President
AGREED AND ACCEPTED:
SILVER KING COMMUNICATIONS, INC.
By: /s/ Steven H. Grant
-------------------
Name: Steven H. Grant
Title: Executive Vice President, Chief
Financial/Administrative Officer
& Treasurer
<PAGE> 52
PROMISSORY NOTE
$135,171,875 December 28, 1982
Reno, Nevada
FOR VALUE RECEIVED, SILVER KING COMMUNICATIONS, INC., a
Delaware corporation (the "Borrower"), hereby promises to pay to the order of
HSN CAPITAL CORPORATION, a Nevada corporation (the "Lender"), at the office of
the Lender at 4910 Longley Lane, Reno, Nevada 89502 or at such other place as
the Lender may specify from time to time, in lawful money of the United States
of America, in immediately available funds, the principal sum of One Hundred
Thirty-Five Million One Hundred Seventy-One Thousand Eight Hundred Seventy-Five
Dollars ($135,171,875), plus interest thereon and any other charges applicable
thereto all as set forth more fully in that certain Loan Agreement, dated as
of the date hereof, by and between the Lender and the Borrower (the "Loan
Agreement").
This Note shall bear interest as provided in the Loan
Agreement. Interest and principal shall be payable and principal shall be
prepayable as provided in the Loan Agreement. The principal amount shall be
subject to adjustment under certain circumstances as provided in the Loan
Agreement. This Note shall mature on January 2, 2008 on which date all unpaid
principal and interest accrued thereon, together with any other applicable
charges, shall be due and payable in full.
The outstanding principal amount of this Note and all accrued
and unpaid interest thereon, together with any other applicable charges, shall
be and become immediately due and payable in full upon the terms and subject to
the conditions of Article VI of the Loan Agreement.
If any suit or action is instituted or attorneys are employed
to collect this Note or any part thereof, the Borrower promises and agrees to
pay all costs of collection, including court costs and reasonable attorneys'
fees.
Presentment for payment, demand, notice of dishonor, protest,
notice of protest and all other demands and notices in connection with the
delivery, performance and enforcement of this Note are hereby waived, except as
specifically otherwise provided in the Loan Agreement.
This Note shall be binding upon the Borrower, its successors
and assigns, and shall inure to the benefit of the successors and assigns of
the Lender.
This Note shall be governed by and construed in accordance
with the laws of the State of Nevada with the exception of its conflicts of law
provisions.
<PAGE> 53
-2-
IN WITNESS WHEREOF, the Borrower has executed this Note as of the day
and year first written above.
SILVER KING COMMUNICATIONS, INC.
By: /s/ Steven H. Grant
--------------------------
Steven H. Grant
Vice President
<PAGE> 1
EXHIBIT 10.25
************************************************************
HOME SHOPPING NETWORK, INC.,
as Borrower
HOME SHOPPING CLUB, INC.,
as Guarantor
__________
TERM LOAN AGREEMENT
Dated as of December 18, 1992
__________
LTCB TRUST COMPANY,
as Administrative Agent
__________
LTCB TRUST COMPANY and
BANK OF MONTREAL, as Co-Agents
__________
THE BANKS NAMED HEREIN
************************************************************
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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Section 1. Definitions and Accounting Matters . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Certain Accounting Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2. Commitments and Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.1. Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.2. Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.3. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.4. Lending Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.5. Several Obligations; Remedies Independent . . . . . . . . . . . . . . . . . . . 18
2.6. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3. Payments of Principal and Interest . . . . . . . . . . . . . . . . . . . . . . . 19
3.1. Repayment of Principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.2. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.3. Prepayments and Conversions of the Loans . . . . . . . . . . . . . . . . . . . . 21
Section 4. Payments and Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.1. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.2. Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.3. Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.4. Minimum Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.5. Certain Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.6. Non-Receipt of Funds by the
Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.7. Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5. Yield Protection and Illegality . . . . . . . . . . . . . . . . . . . . . . . . 27
5.1. Additional Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.2. Limitation on Types of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.3. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.4. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.5. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6. Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.1. Unconditional Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.2. Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.3. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.4. Subordination and Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.5. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.6. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.1. Basic Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.2. Additional Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
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Section 8. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.1. Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.2. Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.3. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.4. No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.5. Corporate Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.6. Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.7. Use of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.8. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.9. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.10. Credit Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.11. Ownership of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.12. Pari Passu Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.13. Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.14. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9. Covenants of the Company and the Guarantor . . . . . . . . . . . . . . . . . . . 41
9.1. Financial Statements; Reports and Other
Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.2. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.3. Corporate Existence, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.4. Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.5. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.6. Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.7. Dispositions of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.8. Ranking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.9. Business; Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.10. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.11. Fixed Charges Coverage Test . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.12. Debt Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.13. Consolidated Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.14. Notification of Incurrence of Debt or Making
of Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.15. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.16. Ownership of Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.17. Indebtedness of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.18. Interest Rate Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 10. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 11. The Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
11.1. Appointment, Powers and Immunities . . . . . . . . . . . . . . . . . . . . . . . 60
11.2. Reliance by the Administrative Agent . . . . . . . . . . . . . . . . . . . . . . 60
11.3. Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
11.4. Rights as a Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
11.5. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
11.6. Non-Reliance on Administrative Agent, Co-agents
and other Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
</TABLE>
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11.7. Failure to Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
11.8. Resignation or Removal of Administrative Agent . . . . . . . . . . . . . . . . . 63
11.9. Administrative Agent's Office . . . . . . . . . . . . . . . . . . . . . . . . . . 63
11.10. Co-Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 12. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
12.1. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
12.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
12.3. Expenses, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
12.4. Amendments, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
12.5. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
12.6. Assignments and Participation . . . . . . . . . . . . . . . . . . . . . . . . . . 66
12.7. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
12.8. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
12.9. Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
12.10. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
12.11. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
12.12. JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
12.13. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Schedule 1: Existing Credit Agreements and Liens
Schedule 2: Calculations of Sample Financial Terms
Schedule 3: List of Broadcast Subsidiaries
Exhibit A: Form of Note
Exhibit B: Form of Opinion of Counsel to the Company and the Guarantor
Exhibit C: Form of Compliance Certificate
Exhibit D-1: Form of Funded Debt Ratio Notice
Exhibit D-2: Form of Total Debt Ratio Notice
Exhibit E: Form of Assignment and Assumption Agreement
Annex A: Press release of Liberty Media Corporation of December 7, 1992
Annex B: Form 10 of Silver King Communications, Inc.
Annex C: Interest Rate Protection Agreements
</TABLE>
(iii)
<PAGE> 5
TERM LOAN AGREEMENT, dated as of December 18, 1992 (as the same may be
amended or modified from time to time, this "Agreement"), among HOME SHOPPING
NETWORK, INC., a Delaware corporation (the "Company"); HOME SHOPPING CLUB,
INC., a Delaware corporation (the "Guarantor"); each of the banks which is a
signatory hereto (individually, a "Bank" and, collectively, the "Banks"); LTCB
TRUST COMPANY, a New York trust company, and Bank of Montreal, each as a
Co-Agent for the Banks (in such capacity, together with its successors in such
capacity, each a "Co-Agent"); and LTCB TRUST COMPANY, a New York trust company,
as Administrative Agent for the Banks (in such capacity, together with its
successors in such capacity, the "Administrative Agent").
WHEREAS, the Company has requested the Banks to make term loans to the
Company, under the guarantee of the Guarantor, in an aggregate principal
amount up to but not exceeding $60,000,000 for the purpose of refinancing
certain existing indebtedness, as more fully described in this Agreement;
and
WHEREAS, the Banks are willing to make such loans to the Company on
the terms and subject to the conditions of this Agreement; and
WHEREAS, the Administrative Agent has been requested to act as agent for
the Banks, and the Administrative Agent is willing to act as such agent on
the terms and subject to the conditions of this Agreement,
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto hereby agree as follows:
Section 1. Definitions and Accounting Matters.
1.1. Certain Defined Terms. As used herein, the following terms
shall have the following meanings (all terms defined in this Section 1 or
in other provisions of this Agreement in the singular to have the same
meanings when used in the plural and vice versa):
"Adjusted Operating Cash Flow" shall mean, for any period, the sum of
the following for the Company and its Subsidiaries (including, without
limitation, the Guarantor) on a consolidated basis: (a) Operating Cash Flow
for such period, plus (or minus) (b) cash inflows to (or outflows from)
equity (including, without limitation, cash dividends on capital stock) for
such period, all as shown on the consolidated
<PAGE> 6
financial statements, including the notes thereto, of the Company for such
period. Adjusted Operating Cash Flow for the four-Fiscal Quarter period
ended August 31, 1992 is as set forth in Schedule 2 hereto.
"Affiliate" shall mean, with respect to any Person, any other Person
(other than a Wholly-Owned Subsidiary of such Person) directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. A Person shall be deemed to control another
Person if such Person (x) is an officer or director of such other Person,
(y) possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such other Person, whether
through the ownership of voting securities, by contract or otherwise, or
(z) directly or indirectly owns or controls 10% or more of such other
Person's capital stock.
"Applicable Lending Office" shall mean, for each Bank and for each type
of Loan, the Lending Office of such Bank (or of an affiliate of such Bank)
designated for such type of Loan on the signature pages hereof or such
other office of such Bank (or of an affiliate of such Bank) as such Bank
may from time to time specify to the Administrative Agent and the Company
as the office by which its Loans of such type are to be made and
maintained.
"Applicable Margin" shall mean, at any time: (a) with respect to LIBOR
Loans, 2.00% minus the Margin Adjustment (if any) in effect at such time;
and (b) with respect to Prime Rate Loans, 1.00% minus the Margin Adjustment
(if any) in effect at such time.
"Bankruptcy Code" shall mean the federal Bankruptcy Code of the United
States, 11 U.S.C. Section 101 et seq.
"Broadcast Subsidiary" shall mean, with respect to any Person, a
Wholly-Owned Subsidiary of such Person which owns one or more television
broadcast stations, but in any event shall include Telemation, Inc., a Delaware
corporation, and its respective successors. As of the date hereof, Broadcast
Subsidiaries are each company set forth on Schedule 3 attached hereto.
"Broadcast Subsidiary Group" shall mean a Material Subsidiary Group,
each constituent Subsidiary of which is a Broadcast Subsidiary.
"Business Day" shall mean any day on which commercial banks are not
authorized or required to close in New York
-2-
<PAGE> 7
City and dealings in Dollar deposits are carried out in the London
interbank market.
"Capital Lease" shall mean any lease or other contractual arrangement
which under GAAP has been or should be recorded as a capital lease.
"Change of Control" shall mean any of the following events: (i) the
acquisition by any "person" or "group" of persons of the "beneficial
ownership" (as such terms are defined within the meaning of Section 13(d)
or 14(d) of the Securities Exchange Act of 1934, as amended) of outstanding
shares of the Company's capital stock, or any sale or other disposition by
Roy M. Speer (other than an involuntary disposition by reason of death or
disability), or, following the consummation of the Liberty Media
Transaction, Liberty Media, of any of the capital stock of the Company
owned by Mr. Speer, or, following the consummation of the Liberty Media
Transaction, Liberty Media, or any other event such that, after giving
effect to such acquisition, sale, disposition or other event, Mr. Speer,
or, following the consummation of the Liberty Media Transaction, Liberty
Media, would no longer (A) own, directly or indirectly, or otherwise
control at least 51% of the outstanding shares of any class of the
Company's common stock the approval of which is required for any
fundamental corporate action (including, without limitation, any merger,
reorganization, recapitalization, liquidation, distribution, winding-up,
sale, transfer or hypothecation of substantially all or a substantial
portion of the Company's assets), or (B) possess the ability to elect at
least a majority of the Board of Directors of the Company, or (ii) any
person or group of persons shall acquire all or substantially all of the
assets of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commitment" shall mean, with respect to any Bank, the amount set
forth opposite such Bank's name on the signature pages hereof under the caption
"Commitment".
"Commitment Termination Date" shall mean February 6, 1993, or such
earlier date on which the Commitments shall terminate in accordance with this
Agreement.
"Consolidated Net Worth" shall mean, at any date, all amounts which, in
conformity with GAAP, would be included under stockholder's equity on a
consolidated balance sheet of the Company and its Subsidiaries at such time.
-3-
<PAGE> 8
"Convertible Subordinated Debentures" shall mean the Company's 5-1/2%
Convertible Subordinated Debentures due April 22, 2002, issued under the
Convertible Subordinated Debenture Indenture.
"Convertible Subordinated Debenture Indenture" shall mean the
Indenture, dated as of April 22, 1987, between the Company and Bankers
Trust Company, as trustee.
"Default" shall mean an Event of Default or an event which with notice
or lapse of time or both would become an Event of Default.
"Dollars" and "$" shall mean lawful money of the United States of
America.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"ERISA Affiliate" shall mean any corporation or trade or business which
is a member of the same controlled group of corporations (within the
meaning of Section 414(b) of the Code) as the Company or the Guarantor or
is under common control (within the meaning of Section 414(c) of the Code)
with the Company or the Guarantor.
"Event of Default" shall have the meaning assigned to that term in
Section 10 hereof.
"Federal Funds Rate" shall mean, (i) for Overnight Federal Funds Rate
Loans, for any day, the rate per annum (rounded upwards, if necessary, to
the nearest 1/100th of 1%) equal to the weighted average of the rates on
overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers on such day, as published by the
Federal Reserve Bank of New York on the Business Day next succeeding such
day, and (ii) for Term Federal Funds Rate Loans (if requested by the
Company and agreed to by the Administrative Agent and the Banks), for any
Interest Period, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100th of 1%) equal to the weighted average of the rates on term
Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on the first day of such Interest Period
for a period equal to such Interest Period, as published by the Federal
Reserve Bank of New York on the Business Day next succeeding such day and
as determined by the Administrative Agent, provided that (x) if the day for
which such rate is to be determined is not a Business Day, the Federal
Funds Rate for such day shall be such rate on such transactions on the
-4-
<PAGE> 9
next preceding Business Day as so published on the next succeeding Business
Day, and (y) if such rate is not so published for any day, the Federal
Funds Rate for such day shall be the average rate charged to LTCB on such
day on such transactions as determined by the Administrative Agent.
"Federal Funds Rate Loans" shall mean the Loans (or any portion
thereof) when they bear interest at rates based upon the Federal Funds
Rate, and in any event shall be either an Overnight Federal Funds Rate Loan
or a Term Federal Funds Rate Loan.
"Fiscal Quarter" shall mean a period of three consecutive calendar
months commencing on any of the following dates in any Fiscal Year: March
1; June 1, September 1 and December 1.
"Fiscal Year" shall mean, for the Company, the Guarantor or any
Subsidiary, the twelve consecutive calendar month period commencing on
September 1 of each calendar year and ending on August 31 of the next
following calendar year; and "Fiscal 1992", "Fiscal 1993", and any other
year so designated shall mean the Fiscal Year ending on August 31 of the
indicated calendar year.
"Fixed Charges" shall mean, for any Person and for any period, the sum
(without duplication) of:
(a) all capital expenditures and increases in intangible
assets of such Person for such period,
plus
(b) the sum (without duplication) of (i) all interest
expense of such Person for such period, (ii) all payments of principal of
all Indebtedness of such Person that were scheduled for payment during such
period, whether or not paid (unless cancelled or forgiven for, or prepaid
in advance of, such period), (iii) any increase in total current assets and
any decrease in total current liabilities (net of the change in cash and
cash equivalents and the change in Short-Term Debt) of such Person for such
period, (iv) any cash increase in long-term investments (excluding periods
prior to September 1, 1992), and (v) any cash increase in long-term notes
receivable (excluding periods prior to September 1, 1992),
minus
-5-
<PAGE> 10
(c) the sum (without duplication) of (i) all interest
income, other than interest income related to the Silver King Notes, of
such Person for such period, (ii) any decrease in total current assets and
any increase in total current liabilities (net of the change in cash and
cash equivalents and the change in Short-Term Debt) of such Person for such
period, (iii) any cash decrease in long-term investments (excluding periods
prior to September 1, 1992), (iv) any cash decrease in long-term notes
receivable (excluding periods prior to September 1, 1992), and (v) the
amounts accrued at August 31, 1991 for litigation settlements,
in each case as reflected on the consolidated quarterly or annual
financial statements, including the notes thereto, of the Company most
recently delivered to the Administrative Agent pursuant to Section 9.1 (or
referred to in Section 8.2) hereof. Fixed Charges for the four-Fiscal
Quarter period ended August 31, 1992 are as set forth in Schedule 2 hereto.
"Funded Debt Ratio" shall mean, at any time, the ratio of (a) Total
Funded Debt of the Company and its consolidated Subsidiaries as
at the end of the Company's four-Fiscal Quarter period most
recently ended as of such time, to (b) Operating Cash Flow for
the same period, as shown in the Funded Debt Ratio Notice for such
period.
"Funded Debt Ratio Notice" shall mean each notice provided for in
Section 9.1(g) (or Section 7.1(f)) hereof.
"GAAP" shall mean generally accepted accounting principles in the
United States of America, consistently applied, as in effect
(unless otherwise specified in this Agreement) from time to time.
"Indebtedness" shall mean, for any Person (but without
duplication):
(a) all indebtedness and other obligations of such Person
for borrowed money or for the deferred purchase price of property or
services (other than trade payables incurred in the ordinary course of
business and not overdue by more than 180 days), including, without
limitation, all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments;
(b) all obligations of such Person under interest rate or
currency swaps, caps, collars, floors, options, forward exchange contracts
and similar hedging arrangements;
-6-
<PAGE> 11
(c) the stated amount of all letters of credit issued for
the account of such Person and (without duplication) all drafts drawn
thereunder, and the aggregate face amount of all banker's acceptances as to
which such Person is obligated, other than trade letters of credit issued
for the account of such Person in the ordinary course of business pursuant
to the terms of which (i) such Person is obligated to reimburse the issuer
thereof for any drawing thereunder on the date of such drawing and (ii) no
other credit shall be extended thereunder to such Person by such issuer;
(d) all obligations of such Person under any Capital
Leases;
(e) all obligations of such Person in connection with
employee benefit or similar plans;
(f) all obligations of such Person in respect of
guarantees, whether direct or indirect (including, without limitation,
agreements to "keep well" or otherwise ensure a creditor against loss) with
respect to any indebtedness or other obligation of any other Person of the
type described in any of clauses (a) through (e) above; and
(g) all indebtedness or other obligations referred to in
any of clauses (a) through (f) above secured by any Lien upon property
owned by such Person, whether or not such Person is liable on any such
obligation.
"Interest Payment Date" shall mean, (i) for any Loan, the last
day of the Interest Period relating thereto, and (ii) for any Federal Funds Rate
Loan or Prime Rate Loan, the last day of any month which occurs during the
Interest Period related thereto, and in any case if such day is not a
Business Day, the next succeeding Business Day.
"Interest Period" shall mean with respect to any (1) LIBOR Loan,
each period commencing on the date such Loan is made or converted from a Loan of
another type or the last day of the immediately preceding Interest Period
for such Loan and ending on the numerically corresponding day in the first,
second, third or sixth calendar month thereafter, as the Company may select
as provided in Section 2.2 hereof (or such period of less than one month as
the Company may select in accordance with clause (ii) or (iii) of the next
paragraph below), except that each such Interest Period which commences on
the last Business Day of a calendar month (or on any day for which there is
no numerically corresponding day in the
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<PAGE> 12
appropriate subsequent calendar month) shall end on the last Business Day
of the appropriate subsequent calendar month, (2) Overnight Federal Funds
Rate Loan, each period of one Business Day, (3) Term Federal Funds Rate
Loan, each period commencing on the date such Loan is made or converted
from a Loan of another type or the last day of the immediately preceding
Interest Period for such Loan and ending on the last day for which the
Federal Funds Rate for such Loan applies, as agreed between the Company and
the Administrative Agent with the consent of the Banks prior to the
commencement of such Interest Period and (4) Prime Rate Loan, each period
commencing on the date such Loan is made or converted from a Loan of
another type or the last day of the immediately preceding Interest Period
for such Loan and ending on the date 30 days later.
Notwithstanding the foregoing, (i) each Interest Period which would
otherwise end on a day that is not a Business Day shall end on the next
succeeding Business Day (or if such next succeeding Business Day falls in
the next succeeding calendar month, on the next preceding Business Day);
(ii) if the Company selects an Interest Period that would begin before and
end after any Maturity Date, the Administrative Agent may notify the
Company and the Banks that the Company must select a shorter Interest
Period that will end on or prior to such Maturity Date, in which case such
shorter period selected by the Company shall (subject to clauses (i) and
(ii) above) be the relevant Interest Period; and (iii) the Company must
select the duration of Interest Periods so that, notwithstanding clause (i)
above, no Interest Period for LIBOR Loans shall have a duration of less
than one month (except as provided in clause (ii) above), and so that no
more than six Interest Periods with respect to LIBOR Loans shall be in
effect at any one time.
"Interest Rate Protection Agreement" shall mean any interest rate
protection agreement, interest rate future, interest rate option, interest
rate swap, interest rate cap, interest rate collar or other forward
exchange contract or similar interest rate hedge or arrangement under which
the Company or a Subsidiary is a party or a beneficiary.
"Investment" shall mean, for any Person, (a) the acquisition (whether
for cash, property, services or securities or otherwise) of capital stock,
bonds, notes, debentures, partnership or other ownership interests or other
securities or obligations of any other Person or any agreement to make any
such acquisition (including, without limitation, any "short sale" or any
sale of any securities at a time when such securities are not owned by the
Person entering into such
-8-
<PAGE> 13
short sale); (b) the making of any deposit with, or advance, or loan or
other extension of credit to, any other Person (including the purchase of
property from another Person subject to an understanding or agreement,
contingent or otherwise, to resell such property to such Person, but
excluding any such advance, loan or other extension of credit to customers
of the Company or to customers of the Company's Subsidiaries having a term
not exceeding 90 days arising in the ordinary course of business); (c) the
entering into of any guarantee of, or other contingent obligation with
respect to, Indebtedness or other liability of any other Person and
(without duplication) any amount committed to be advanced, lent or extended
to such person; or (d) the entering into of any interest rate or currency
swaps, caps, collars, floors, options, forward exchange contracts and
similar hedging arrangements.
"Liberty Media" shall mean Liberty Media Corporation, a Delaware
corporation.
"Liberty Media Transaction" shall mean the acquisition by Liberty Media
of an aggregate of 20,000,000 shares of Class B Common Stock of the Company
from RMS Limited Partnership, on substantially the terms outlined in
Liberty Media's press release of December 7, 1992, attached hereto as Annex
A.
"LIBOR" shall mean, with respect to any LIBOR Loan for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/16 of 1%) quoted by the London office of LTCB at approximately
11:00 a.m. London time (or as soon thereafter as practicable) or if such
rate is not quoted to LTCB, the rate per annum appearing on the display
designated as page "LIBO" on the Reuter Monitor Money Rates Service (or
such other page as may replace the LIBO page of that service for the
purpose of displaying London interbank offered rates of major banks) two
Business Days prior to the first day of such Interest Period for the
offering by such office to leading banks in the London interbank market of
Dollar deposits having a term comparable to such Interest Period and in an
amount comparable to the principal amount of the LIBOR Loan scheduled to be
outstanding during such Interest Period from LTCB Trust.
"LIBOR Loans" shall mean the Loans (or any portion thereof) when they
bear interest at rates determined on the basis of LIBOR.
"Lien" shall mean, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of
such asset, any agreement to
-9-
<PAGE> 14
grant any of the foregoing with respect to such asset, and the filing of a
financing statement or similar recording in any jurisdiction with respect
to such asset. For all purposes hereunder, the Company, the Guarantor or
any Subsidiary shall be deemed to own subject to a Lien (i) any asset which
it has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title
retention agreement relating to such asset and (ii) any account receivable
transferred by it with recourse (including any such transfer subject to a
holdback or similar arrangement that effectively imposes the risk of
collectibility on the transferor).
"Loans" shall mean the loans provided for by Section 2.1 hereof.
"LTCB" shall mean The Long-Term Credit Bank of Japan, Limited, a
banking corporation duly organized and validly existing under the laws of
Japan, and its successors.
"LTCB Trust" shall mean LTCB Trust Company, a trust company duly
organized and validly existing under the laws of the State of New York, and
its successors.
"Majority Banks" shall mean Banks having not less than 51% of the
aggregate amount of the Loans outstanding, or if no Loans are then
outstanding, Banks holding not less than 51% of the Commitments then in
effect, or, if no Loans are then outstanding nor Commitments in effect,
Banks which held not less than 51% of the Commitments when most recently in
effect or, if later, which held not less than 51% of the aggregate
principal amount of the Loans when most recently outstanding.
"Margin Adjustment" shall mean, at any time of determination thereof
commencing after the first anniversary of the date of the initial funding
of the Loans, when the Funded Debt Ratio, as set forth in the Funded Debt
Ratio Notice most recently delivered to the Administrative Agent (which
Notice shall be effective on the date of the Administrative Agent's receipt
thereof in accordance with Section 12.2 hereof), is at each of the
following levels, a subtraction from any Applicable Margin, as set forth
below:
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<PAGE> 15
Effective Subtraction from
Funded Debt Ratio Applicable Margin
----------------- -----------------
Greater than 1.25 to 1 0
1.25 to 1 or less, but
greater than 1.00 to 1 (0.375%)
1.00 to 1 or less (0.75%).
"Material Subsidiary" shall mean, at any time, a Subsidiary the book
value of whose tangible assets at such time exceeds 10% of the book value
of the total tangible assets of the Company and the Subsidiaries (on a
consolidated basis), but in any event shall include each of the Guarantor,
HSN Capital Corporation, a Nevada corporation, and HSN Fulfillment, Inc.,
HSN Mail Order, Inc. and HSN Realty, Inc., each a Delaware corporation, and
their respective successors.
"Material Subsidiary Group" shall mean, at any time, a group of any two
or more Subsidiaries which at such time has a combined aggregate book value
of tangible assets in excess of 10% of the book value of the total tangible
assets of the Company and the Subsidiaries (on a consolidated basis).
"Maturity Date" shall mean any date on which an installment of principal
due to the Banks under Section 3.1 hereof is scheduled to become due.
"Multiemployer Plan" shall mean a plan defined as such in Section 3(37)
of ERISA to which contributions have been made by the Company or any ERISA
Affiliate and which is covered by Title IV of ERISA.
"Non-Material Subsidiary" shall mean, at any time, a Subsidiary which
is not a Material Subsidiary.
"Notes" shall mean the promissory notes provided for by Section 2.6
hereof.
"Obligations" shall mean all obligations and liabilities of the Company
to the Administrative Agent, the Co-Agents and the Banks (or any of the
foregoing) now or in the future existing under or in connection with this
Agreement, any of the Notes or any related document (as any of the
foregoing Agreement, Notes or documents may from time to time be
respectively amended, modified, substituted, extended or renewed), direct
or indirect, absolute or contingent, due or to become due, now or hereafter
existing, including without
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<PAGE> 16
limitation, any payment of principal, interest, fees or expenses due at any
time under this Agreement.
"Operating Cash Flow" shall mean, for any period, the sum of the
following for the Company and its Subsidiaries (including, without
limitation, the Guarantor) on a consolidated basis: (a) operating profit of
such Persons for such period; plus (to the extent already deducted in
arriving at operating profit) (b) depreciation and amortization expense for
such Persons for such period; plus (c) commencing September 1, 1992,
non-cash compensation expense related to the Company's executive stock
award program; plus (d) all cash interest (if any), other cash income (if
any) or cash principal repayments (if any) received by the Company or any
Subsidiaries in connection with the Silver King Notes, and, for the twelve
months immediately following the delivery of any such Silver King Note,
accrued interest income on such note for no more than one month, all as
shown on the consolidated financial statements, including the notes
therreto, of the Company for such period or, with respect to clause (d)
above, if such financial statements do not present information in
sufficient detail to derive the amount specified in clause (d) of this
definition, as shown on the certificate to be delivered to the
Administrative Agent pursuant to the last paragraph of Section 9.1 hereof.
Operating Cash Flow for the four-Fiscal Quarter period ended August 31, 1992
is as set forth in Schedule 2 hereto.
"Overnight Federal Funds Rate Loans" shall mean Loans (or any portion
thereof) when they bear interest at an overnight Federal Funds Rate.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" shall mean an individual, a corporation, a company, a voluntary
association, a partnership, a trust, an unincorporated organization or a
government or any agency, instrumentality or political subdivision thereof.
"Plan" shall mean an employee benefit or other plan established or
maintained by the Company or any ERISA Affiliate and which is covered by Title
IV of ERISA, other than a Multiemployer Plan.
"Post-Default Rate" shall mean a rate per annum, during the period
commencing on the date on which any Obligation is not paid in full when due
(whether at stated maturity, by acceleration or otherwise) and ending on the
date on which
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<PAGE> 17
all such overdue Obligations are paid in full, equal to 2.00% plus the
higher of (x) the Prime Rate as in effect from time to time and (y) the
interest rate in effect from time to time for Overnight Federal Funds Rate
Loans hereunder (including the Applicable Margin in effect for such Loans
at each such time); provided that, if any such unpaid Obligation is
principal of a LIBOR Loan or of a Term Federal Funds Rate Loan and the due
date thereof is a day other than the last day of the Interest Period
therefor, the "Post-Default Rate" for such principal shall be, for the
period commencing on the due date and ending on the last day of the then
current Interest Period therefor, 2.00% plus the interest rate for such
Loan as provided in Section 3.2(a) or (b) hereof and, thereafter, the rate
otherwise provided for above in this definition.
"Prime Rate" shall mean the rate of interest from time to time
announced by LTCB at its office in New York, New York as its prime commercial
lending rate, which rate is not necessarily the lowest rate of interest
charged or received by LTCB. Each change in the Prime Rate resulting from a
change in such prime commercial lending rate shall take effect when such prime
commercial lending rate changes.
"Prime Rate Loans" shall mean the Loans (or any portion thereof) when
they bear interest at rates based upon the Prime Rate.
"Regulation A" shall mean Regulation A of the Board of Governors of the
Federal Reserve System (or any successor), as the same may be amended or
supplemented from time to time.
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System (or any successor), as the same may be amended or
supplemented from time to time.
"Regulatory Change" shall mean, with respect to any Bank, any change
after the date of this Agreement in United States Federal, state or foreign
law or regulations (including Regulation D) or the adoption or making after
such date of any interpretations, directives or requests applying to a
class of banks including such Bank of or under any United States Federal,
State or foreign law or regulations (whether or not having the force of
law) by any court or governmental or monetary authority charged with the
interpretation or administration thereof.
"Revolving Credit Agreement" shall mean the Amended and Restated
Revolving Credit Agreement, dated December 18, 1992, among the Company, the
Guarantor, the Co-Agents, the Administrative Agent and the financial
institutions party
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<PAGE> 18
thereto, as the same may be amended or modified from time to time.
"SEC Report" shall mean, with respect to any Person, any document
filed, or deemed filed, at any time with the Securities and Exchange
Commission (or any successor thereto) by or on behalf of such Person and
available to the public.
"Senior Notes" shall mean the Company's 11-3/4% Senior Notes due
October 15, 1996, issued under the Senior Note Indenture.
"Senior Note Indenture" shall mean the Indenture, dated October 15,
1986, between the Company and First Union National Bank of Florida
(successor-in-interest to Southeast Bank, N.A.), as trustee.
"Short-Term Debt" shall mean, for any Person, all Indebtedness of such
Person which would be short term debt, whether direct or contingent, under
GAAP as in effect on the date of this Agreement.
"Silver King Notes" shall mean all notes in favor of the Company
delivered in connection with the disposition of stock of any of the
Broadcast Subsidiaries as permitted by Section 9.7 hereof.
"Subsidiary" shall mean any corporation, partnership or other Person of
which at least a majority of the outstanding shares of capital stock or
other ownership interests ordinarily having, in the absence of
contingencies, by the terms thereof voting power to elect a majority of the
board of directors or similar governing body of such Person is at the time
directly or indirectly owned or controlled by the Company, the Guarantor or
by the Company and/or the Guarantor, and in any event shall include the
Guarantor and its subsidiaries. "Wholly-Owned Subsidiary" shall mean any
Person of which all of such ownership interests, other than directors'
qualifying shares, are so owned or controlled.
"Term Federal Funds Rate Loan" shall mean any Federal Funds Rate Loan
other than an Overnight Federal Funds Rate Loan.
"Total Debt" shall mean, for any Person at any time, all Indebtedness
of such Person at such time (including, without limitation, all long-term
senior and subordinated Indebtedness, all Short-Term Debt, the stated
amount of all letters of credit issued for the account of such Person and
(without duplication) all unreimbursed draws thereunder), as
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<PAGE> 19
shown on the consolidated quarterly or annual financial statements,
including the notes thereto, of the Company delivered for such period
pursuant to Section 9.1 (or referred to in Section 8.2) hereof. Total Debt
of the Company and its consolidated Subsidiaries as at the end of the
four-Fiscal Quarter period ended August 31, 1992 is as set forth on
Schedule 2 hereto.
"Total Debt Ratio" shall mean, at any time, the ratio of (a) Total Debt
of the Company and its consolidated Subsidiaries as at the end of the
Company's four-Fiscal Quarter period most recently ended as of such time,
to (b) Operating Cash Flow for the same period, as shown in the Total Debt
Ratio Notice for such period.
"Total Debt Ratio Notice" shall mean each notice provided for in
Section 9.1(g) (or Section 7.1(f)) hereof.
"Total Funded Debt" shall mean, for any Person at any time, (a) all
Indebtedness of such Person outstanding at such time (other than the
aggregate of all unsecured borrowings of such Person having a scheduled
maturity of less than twelve months from the date of incurrence thereof in
an aggregate principal amount not in excess of $5,000,000 at such time),
minus (b) the stated amount available to be drawn of all letters of credit
issued for the account of such Person, as shown on the consolidated
quarterly or annual financial statements, including the notes thereto, of
the Company delivered for such period pursuant to Section 9.1 (or referred
to in Section 8.2) hereof. Total Funded Debt of the Company and its
consolidated Subsidiaries as at the end of the four-Fiscal Quarter period
ended August 31, 1992 is as set forth on Schedule 2 hereto.
1.2. Certain Accounting Matters.
(a) Unless otherwise disclosed to the Banks in writing at the time
of delivery thereof in the manner described in subsection (b) below, all
financial statements and certificates and reports as to financial matters
required to be delivered to the Administrative Agent on behalf of itself
and the Banks hereunder shall be prepared in accordance with GAAP applied
on a basis consistent with those used in the preparation of the latest
financial statements furnished to the Banks hereunder after the date
hereof(or, prior to the delivery of the first financial statements
furnished to the Banks hereunder, used in the preparation of the audited
financial statements referred to in Section 8.2 hereof). All calculations
made for the purposes of determining compliance with the terms of Sections
9.11, 9.12 and 9.13 hereof shall,
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<PAGE> 20
except as otherwise expressly provided herein, be made by application of
GAAP applied on a basis consistent with those used in the preparation of
the annual or quarterly financial statements then most recently furnished
to the Banks pursuant to Section 9.1 (or referred to in Section 8.2) hereof
unless (i) the Company shall have objected to determining such compliance
on such basis at the time of delivery of such financial statements or (ii)
the Majority Banks shall so object in writing within 30 days after delivery
of such financial statements, in either of which cases such calculations
shall be made on a basis consistent with those used in the preparation of
the most recent financial statements as to which such objection shall not
have been made.
(b) The Company shall deliver to the Administrative Agent, with
sufficient copies for delivery to the Banks, contemporaneously with
delivery of any annual or quarterly financial statement under Section 9.1
hereof a description in reasonable detail of any material variation between
the application of accounting principles employed in the preparation of
such statement and the application of accounting principles employed in the
preparation of the most recently preceding annual or quarterly financial
statements as to which no objection shall have been made in accordance with
the last sentence of subsection (a) above, and reasonable estimates of the
difference between such statements arising as a consequence thereof.
Section 2. Commitments and Loans.
2.1. Loans. Each Bank severally agrees, on the terms and subject
to the conditions of this Agreement, to make one Loan to the Company on a
Business Day on or prior to the Commitment Termination Date in a principal
amount not to exceed the amount of such Bank's Commitment, and further
agrees that such Loan may be comprised of Federal Funds Rate Loans, Prime
Rate Loans, LIBOR Loans, or any combination thereof, in accordance with
Section 3.2(c) hereof. The Loans shall be made by the Banks pro rata in
accordance with their respective Commitments.
2.2. Borrowing. The Company shall give the Administrative Agent
(which shall promptly notify the Banks) notice of the borrowing hereunder
as provided in Section 4.5 hereof. Not later than 10:00 a.m., or, in the
case of a borrowing of Overnight Federal Funds Rate Loans or Prime Rate
Loans, 12:00 p.m., New York time on the date specified for such borrowing,
each Bank shall make available the amount of the Loan to be made by it on
such date to the Administrative
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<PAGE> 21
Agent, at account number 04203606 maintained by the Administrative Agent
with Bankers Trust Company (ABA No. 021001033), One Bankers Trust Plaza,
New York, New York 10006 (reference: "Home Shopping Network - Term Loan
Facility"), attention: Robert Pacifici, in immediately available funds.
The amount so received by the Administrative Agent shall, subject to the
terms and conditions of this Agreement, be made available to or for the
benefit of the Company by depositing the same, in immediately available
funds, either (i) in the account of the trustee for the Senior Notes
designated by the Company in the related notice of borrowing, or (ii) in
the account of the Company designated by the Company in the related notice
of borrowing, to the extent and only to the extent that the Company has
repurchased Senior Notes in the open market and is entitled to
reimbursement therefor in accordance with Section 9.15 hereof. Each of the
Company and the Guarantor acknowledges and agrees that any Loans disbursed
to the trustee of the Senior Notes as contemplated in clause (i) of the
preceding sentence shall be deemed for all purposes to have been disbursed
to the Company. References in this Agreement to the date on which a Loan
is made shall be to the date on which funds borrowed pursuant to such Loan
shall have been made available to the Company pursuant to this Section 2.2.
The borrowing of the Loans shall terminate the Commitments.
2.3. Fees.
(a) The Company shall pay to the Administrative Agent for account
of each Bank a commitment fee on the daily average unused amount of such
Bank's outstanding Commitment, for the period from and including the date
of this Agreement to and including the earlier of the day prior to the date
such Commitment is terminated or the day prior to the Commitment
Termination Date for such Bank, at a rate per annum equal to 1/4 of 1%;
provided, however, that no such fee shall be payable to any Bank with
respect to the portion (if any) of such Bank's Commitment corresponding to
the principal amount of Loans which such Bank shall not have made in
accordance with (i) a notice of borrowing properly and timely given and
(ii) the terms and conditions of this Agreement, and with respect to which
all conditions precedent thereto shall have been satisfied. All
outstanding accrued commitment fees of each Bank shall be due and payable
on the earlier of the date the Commitment of such Bank is terminated or the
Commitment Termination Date.
(b) The Company shall pay to LTCB Trust, as a Co-Agent, for its
own account a facility fee in the amount and at the times set forth in the
fee letter, dated September 28,
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<PAGE> 22
1992, as amended, among the Company, the Guarantor and LTCB Trust, as a
Co-Agent, and shall pay to Bank of Montreal, as a Co-Agent, for its own
account a facility fee in the amount and at the times set forth in the fee
letter, dated October 8, 1992, as amended, among the Company, the Guarantor
and Bank of Montreal, as a Co-Agent.
(c) The Company shall pay to the Administrative Agent for its own
account an annual Agency Fee in the amount and at the times set forth in
the fee letter, dated September 28, 1992, among the Company, the Guarantor
and the Administrative Agent.
2.4. Lending Offices. The Loans made by each Bank shall be made
and maintained at such Bank's Applicable Lending Office for Loans of such
type.
2.5. Several Obligations; Remedies Independent. The failure of any
Bank to make the Loan to be made by it on the date specified therefor shall
not relieve any other Bank of its obligation to make its Loan on such date,
but no Bank shall be responsible for the failure of any other Bank to make
the Loan to be made by such other Bank. The amounts payable by the Company
or the Guarantor at any time hereunder and under the Notes to each Bank
shall be a separate and independent debt and each Bank shall be entitled to
protect and enforce its rights arising out of this Agreement and the Notes,
and it shall not be necessary for any other Bank or any Co-Agent or the
Administrative Agent to consent to, or be joined as an additional party in,
any proceedings for such purposes.
2.6. Notes.
(a) The Loan made by each Bank on the occasion of the borrowing
pursuant to Section 2.2 hereof shall be evidenced by a single promissory
note of the Company in substantially the form of Exhibit A hereto, dated
the date of such borrowing, payable to the order of such Bank in a
principal amount equal to the principal amount of its Loan and otherwise
duly completed. The Loan made by each Bank, and all payments and
prepayments made on account of the principal thereof, and all conversions
of such Loan, shall be recorded by such Bank on its books and, prior to any
transfer of the Note held by it, endorsed by such Bank on the schedule
attached to such Note or any continuation thereof; provided, that no
failure by any Bank to make such recording or endorsement shall affect the
obligations of the Company or the Guarantor under this Agreement to such
Bank or the holder of such Note.
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<PAGE> 23
(b) Each Bank shall be entitled to have its Note subdivided in
connection with an assignment of all or any portion of its Commitment,
Loans and Note pursuant to Section 12.6(b) hereof.
Section 3. Payments of Principal and Interest.
3.1. Repayment of Principal. The Company shall pay to the
Administrative Agent for account of the Banks the aggregate principal
amount of the Loans in three installments on the dates set forth below,
each such installment to be in the amount equal to the lesser of the
corresponding "Principal Amount" set forth below and the remaining
aggregate principal amount of such installment:
Date Principal Amount
---- ----------------
June 15, 1994 $25,000,000
June 15, 1995 $25,000,000
December 15, 1995 $10,000,000.
Each payment of principal of the Loans shall be applied pro rata to each
Bank according to the principal amounts of their respective
Loans.
3.2. Interest.
(a) The Company shall pay to the Administrative Agent for account
of each Bank interest on the unpaid principal amount of each installment of
the Loan made by such Bank for the period commencing on the date of such
Loan to but excluding the date such installment shall be paid in full, at
the following rates per annum:
(i) during such periods as such Loan (or any portion
thereof) is a LIBOR Loan, for each Interest Period relating thereto, the
LIBOR for such Loan for such Interest Period plus the Applicable Margin in
effect for each day during such Interest Period; and
(ii) during such periods as such Loan (or any portion
thereof) is a Federal Funds Rate Loan, for each Interest Period relating
thereto, the Federal Funds Rate (as in effect for such Interest Period)
plus 2.50% per annum;
(iii) during such periods as such Loan (or any portion thereof)
is a Prime Rate Loan, for each Interest Period relating thereto, the Prime
Rate (as in effect for
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<PAGE> 24
such Interest Period) plus the Applicable Margin in effect for each day
during such Interest Period.
Notwithstanding the foregoing, at any time during the period commencing on
the date on which any Obligation is not paid in full when due (whether at
stated maturity, by acceleration or otherwise) and ending on the date on
which all such overdue Obligations are paid in full, the Company shall pay
to the Administrative Agent for account of each Bank interest on the
principal of all Loans and (to the fullest extent permitted by law) on any
unpaid interest or any other amount payable by the Company hereunder or
under the Note held by such Bank at the Post-Default Rate.
(b) Accrued interest on each Loan shall be payable (i) on each
Interest Payment Date for such Loan and (ii) in any case, on the date on
which any principal amount thereof is paid or prepaid or converted to a
Loan of another type on the portion thereof being so paid, prepaid or
converted, except that interest on any principal, interest or other amount
payable at the Post-Default Rate shall be payable from time to time on
demand.
If the Company shall fail to timely deliver a Funded Debt Ratio Notice
in respect of any four-Fiscal Quarter period in accordance with Section
9.1(g) hereof, and it transpires that the Funded Debt Ratio has changed
from that which was in effect with respect to the previous four-Fiscal
Quarter period such that any interest rate hereunder would increase, the
Company agrees that the interest rate on the Loans shall, by operation of
the definition of Applicable Margin, automatically increase on the date
such Funded Debt Ratio Notice is duly given in accordance with Section 12.2
hereof. In addition, (i) such increase shall be retroactive to the date on
which such Funded Debt Ratio Notice should have been delivered in
accordance with Section 9.1(g) hereof and (ii) the incremental interest for
the retroactive period shall be payable on the next date on which interest
is payable under this Agreement and the Notes (or, if no further interest
is payable, immediately on demand by the Administrative Agent or any Bank).
If the Company shall fail to timely deliver a Funded Debt Ratio Notice in
respect of any four-Fiscal Quarter period, and it transpires that the
Funded Debt Ratio has changed from that which was in effect with respect to
the previous four-Fiscal Quarter period such that any interest rate
hereunder would decrease, then such decrease shall be effective from the
date on which such Funded Debt Ratio Notice is received by the
Administrative Agent, and shall have no retroactive effect.
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<PAGE> 25
No provision of this Agreement or the Notes or any other document
delivered in connection with either thereof and no transaction contemplated
hereby or thereby shall be construed or shall operate so as to require the
Company, the Guarantor or any other Person liable for payment of any of the
Obligations to pay interest in an amount or at a rate greater than the
maximum allowed from time to time by applicable law. Should any interest
or other charges paid by the Company, the Guarantor or any such other
Person under any such document result in a computation or earning of
interest in excess of the maximum rate of interest permitted under
applicable law in effect while such interest is being earned, then such
excess shal be and hereby is waived by each Bank and all such excess
shall be automatically credited against and in reduction of the principal
balance of such amounts payable under such documents and any portion of
such excess received by any Bank shall be paid over by such Bank to the
Company, the Guarantor or such other Person, as the case may be, it being
the intent of the parties hereto that under no circumstances shall the
Company, the Guarantor or such other Person be required to pay interest in
excess of the maximum rate allowed by such applicable law.
(c) The Company shall select the duration of the initial Interest
Period (or Interest Periods) for the Loans and the interest type of the
Loans for such Interest Period (or Interest Periods) by giving notice to
the Administrative Agent as provided in Section 4.5 hereof, and may select
the duration of each subsequent Interest Period (or Interest Periods) for
the Loans and the interest type of the Loans for such Interest Period (or
Interest Periods), by giving notice as provided in Section 4.5 hereof,
provided, however, that no more than three (3) Interest Periods shall apply
to all Loans then outstanding with respect to any particular Bank.
3.3. Prepayments and Conversions of the Loans.
(a) The Company shall have the right to prepay Loans, or to
convert Loans of one type into Loans of another type, at any time or from
time to time; provided that: (i) the Company shall give the Administrative
Agent notice of each such prepayment or conversion as provided in Section
4.5 hereof, (ii) Loans may be prepaid or converted only on the last day of
an Interest Period for such Loans; and (iii) prepayments and conversions of
Loans shall be subject to the indemnity provisions of Section 5.4 hereof.
(b) In the event that the Company receives a payment of principal
of the Silver King Notes prior to the date on which such amount was
scheduled to be paid, the
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<PAGE> 26
Company shall, on the first Business Day after receipt of the proceeds of
such prepayment, prepay the Loans in an amount equal to the excess of such
proceeds over $5,000,000 (cumulatively since the date hereof).
(c) Any prepayment made to the Banks in accordance with Section
3.3(a) or (b) shall be applied to reduce the installments of principal due
to the Banks under Section 3.1 hereof and under the Notes pro rata to all
remaining installments due to the Banks. The Administrative Agent shall
promptly notify the Banks of each notice of prepayment.
(d) Any portion of the Loans prepaid, whether pursuant to this
Section 3.3, Section 5.3 hereof or otherwise, may not be reborrowed.
Section 4. Payments and Computations.
4.1. Payments.
(a) Except to the extent otherwise provided herein, all payments
of Obligations shall be made in Dollars, in immediately available funds and
without set-off, counterclaim or deduction of any kind, to the
Administrative Agent at account number 04203606 maintained by the
Administrative Agent at Bankers Trust Company (ABA No. 021001033), One
Bankers Trust Plaza, New York, New York 10006 (reference: "Home Shopping
Network - Term Loan Facility"), attention: Robert Pacifici (or at such
other account or at such other place as the Administrative Agent may notify
the Company from time to time), not later than 11:00 a.m. New York time on
the date on which such payment shall become due (each such payment made
after such time on such due date to be deemed to have been made on the next
succeeding Business Day). Any Bank for whose account any such payment is
to be made may (but shall not be obligated to) debit the amount of any such
payment which is not made by such time to any ordinary deposit account of
the Company or the Guarantor with such Bank or any affiliate of such Bank
(with subsequent notice to the Company or the Guarantor, as the case may
be, provided that such Bank's failure to give such notice shall not affect
the validity of such debit). The Company or the Guarantor, as the case may
be, shall at the time of making a payment under this Agreement or any Note
specify to the Administrative Agent (i) the account from which the payment
funds will be transmitted and the manner and approximate time of such
transmission and (ii) the Loans or other amounts payable by the Company
hereunder to which such payment shall be applied, and in the event that it
shall have failed so to specify, or
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<PAGE> 27
if an Event of Default shall have occurred and be continuing, the
Administrative Agent may distribute such payment to the Banks in such
manner as it or the Majority Banks may deem appropriate, subject to Section
4.2 hereof.
Each payment received by the Administrative Agent under this Agreement
or any Note for account of a Bank shall be paid promptly to such Bank, in
immediately available funds, for account of such Bank's Applicable Lending
Office for the Loan in respect of which such payment is made.
(b) If the due date of any payment to be made hereunder or under
any Note would otherwise fall on a day which is not a Business Day, such
date shall be extended to the next succeeding Business Day and interest
shall be payable for any principal so extended for the period of such
extension.
4.2. Pro Rata Treatment. Except to the extent otherwise provided
herein:
(a) the borrowing from the Banks under Section 2.1 hereof shall be
made from the Banks and each payment of commitment fee under Section 2.3
hereof shall be made for account of the Banks pro rata according to the
amounts of their respective unused Commitments;
(b) each conversion of Loans (or portions thereof) of a particular
type (other than conversions provided for by Section 5.1 hereof) shall be
made pro rata among the Banks holding Loans of such type according to the
respective principal amounts of such Loans (or portions thereof) held by
such Banks; and
(c) each payment and prepayment by the Company of principal of or
interest on Loans (or portions thereof) of a particular type shall be made
to the Administrative Agent for account of the Banks holding Loans of such
type pro rata in accordance with the respective unpaid principal amounts of
such Loans (or portions thereof) held by such Banks.
4.3. Computations. Interest on all Loans and the commitment fee
shall be computed on the basis of a year of 360 days and actual days
elapsed (including the first day but excluding the last day) occurring in
the period for which payable.
4.4. Minimum Amounts. Except for conversions or prepayments made
pursuant to Section 5.1 hereof, each borrowing, conversion and prepayment
of principal of Loans shall be in an aggregate amount at least equal to
$5,000,000, provided that borrowings, prepayments or conversions of or into
Loans of different types or, in the case of LIBOR Loans, having different
Interest Periods, at the same time hereunder shall each be deemed separate
bor
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<PAGE> 28
rowings, conversions or prepayments, as the case may be. Notwithstanding
anything in this Agreement to the contrary, the aggregate principal amount
of LIBOR Loans having the same Interest Period shall be at least equal to
$5,000,000 and, if any LIBOR Loans would otherwise be in a lesser principal
amount for any period, such Loans shall be Prime Rate Loans during such
period.
4.5. Certain Notices. Notices by the Company to the Administrative
Agent of the borrowing of the Loans, of conversions and prepayments of
Loans and of the duration of Interest Periods shall be irrevocable and
shall be effective only if received by the Administrative Agent not later
than 10:00 a.m. New York time on the number of Business Days prior to the
date of the borrowing, conversion or prepayment or the first day of such
Interest Period specified below:
Number of
Business
Notice Days Prior
------ ----------
Borrowing of Overnight Federal Funds
Rate Loans; or conversion of Term Federal
Funds Rate Loans or Prime Rate Loans into
Overnight Federal Funds Rate Loans same day
Borrowing or prepayment of LIBOR Loans;
conversion of LIBOR Loans into any other
type of Loans; conversion of any type of
Loans into LIBOR Loans; or duration of
Interest Period for LIBOR Loans 3
Borrowing or prepayment of Term Federal
Funds Rate Loans; conversion of any type
of Loans into Term Federal Funds Rate
Loans; or duration of Interest Period for
Term Federal Funds Rate Loans 3
Borrowing or prepayment of Prime Rate
Loans; or conversion of Federal Funds
Rate Loans into Prime Rate Loans same day
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<PAGE> 29
In addition:
(a) Each such notice of borrowing, conversion or prepayment shall
specify the Loans to be borrowed, converted or prepaid and the amount
(subject to Section 4.4 hereof) and type of the Loans to be borrowed,
converted or prepaid and the date of borrowing, conversion or prepayment
(which shall be a Business Day).
(b) Each such notice of the duration of an Interest Period shall
specify the Loans to which such Interest Period is to relate.
The Administrative Agent shall promptly notify the Banks of the
contents of each such notice.
In the event that the Company fails to select the duration of any
Interest Period for any LIBOR Loans or Term Federal Funds Rate Loans within
the time period and otherwise as provided in this Section 4.5, or if the
Company and the Administrative Agent with the consent of the Banks fail to
agree upon a term for any requested Term Federal Funds Rate Loans, such
Loans (if outstanding as LIBOR Loans) will be automatically converted into
Overnight Federal Funds Rate Loans on the last day of the then current
Interest Period for such Loans or (if outstanding as Overnight Federal
Funds Rate Loans or Prime Rate Loans) will remain as Overnight Federal
Funds Rate Loans or Prime Rate Loans, as the case may be, or (if not then
outstanding) will be made as Overnight Federal Funds Rate Loans.
4.6. Non-Receipt of Funds by the Administrative Agent. Unless the
Administrative Agent shall have been notified by a Bank or the Company or
the Guarantor prior to the date on which such Bank or the Company or the
Guarantor is scheduled to make payment to the Administrative Agent of (in
the case of a Bank) the proceeds of a Loan to be made by it hereunder or
(in the case of the Company or the Guarantor) a payment to the
Administrative Agent for account of one or more of the Banks hereunder
(such payment being herein called the "Required Payment"), which notice
shall be effective upon receipt, that it does not intend to make the
Required Payment to the Administrative Agent, the Administrative Agent may
assume that the Required Payment has been made and may, in reliance upon
such assumption (but shall not be required to), make the amount thereof
available to the intended recipient(s) on such date and, if such Bank or
the Company or the Guarantor (as the case may be) has not in fact made the
Required Payment to the Administrative Agent, the recipient(s) of such
payment shall, on demand, repay to the Administrative Agent the amount
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so made available together with interest thereon in respect of each day
during the period commencing on the date such amount was so made available
by the Administrative Agent until the date the Administrative Agent
recovers such amount at a rate per annum equal to the overnight Federal
Funds Rate for such day (as determined by the Administrative Agent).
4.7. Sharing of Payments, Etc. Each of the Company and the
Guarantor agrees that, in addition to (and without limitation of) any right
of setoff, bankers' lien or counterclaim a Bank may otherwise have, each
Bank shall be entitled, at its option, to offset balances held by it in
ordinary deposit accounts of the Company or the Guarantor at any of its
offices, in Dollars or in any other currency, against any principal of or
interest on any of such Bank's Loans, or any other amount payable to such
Bank hereunder, which is not paid when due (regardless of whether such
balances are then due to the Company or the Guarantor), in which case it
shall promptly notify the Company or the Guarantor, as the case may be, and
the Administrative Agent thereof, provided that such Bank's failure to give
such notice shall not affect the validity thereof. If any Bank shall
obtain payment of any principal of or interest on any Loan made by it to
the Company, or any other amount payable to such Bank, under this Agreement
through the exercise of any right of setoff, banker's lien or counterclaim
or similar right or otherwise, and, as a result of such payment, such Bank
shall have received a greater percentage of the principal, interest or such
other amount then due hereunder by the Company to such Bank than the
percentage received by any other Banks, it shall promptly purchase from
such other Banks participations in (or, if and to the extent specified by
such Bank, direct interests in) the Loans made by such other Banks (or in
interest due thereon, as the case may be) in such amounts, and make such
other adjustments from time to time as shall be equitable, to the end that
all the Banks shall share the benefit of such excess payment (net of any
expenses which may be incurred by such Bank in obtaining or preserving such
excess payment) pro rata in accordance with the unpaid principal and/or
interest on the Loans held by each of the Banks or such other amount due to
the Banks hereunder. To such end all the Banks shall make appropriate
adjustments among themselves (by the resale of participations sold or
otherwise) if such payment is rescinded or must otherwise be restored.
Each of the Company and the Guarantor agrees that any Bank so purchasing a
participation (or direct interest) in the Loans made by other Banks (or in
interest due thereon, as the case may be) may exercise all rights of
setoff, bankers' lien, counterclaim or similar rights with respect to such
participation as fully as if such Bank were a direct holder of Loans in the
amount of such par-
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<PAGE> 31
ticipation. Nothing contained herein shall require any Bank to exercise
any such right or shall affect the right of any Bank to exercise, and
retain the benefits of exercising, any such right with respect to any other
indebtedness or obligation of the Company or the Guarantor; provided that
to the extent any such Bank exercises any such right with respect to any
other indebtedness or obligation of the Company or the Guarantor, it shall
also exercise its rights under this Section 4.7 and agrees that the
benefits of exercising any such rights shall be shared with the Banks pro
rata in the proportion that the unpaid obligations of the Company and the
Guarantor owing to such Bank hereunder bear to such other indebtedness or
obligation. If under any applicable bankruptcy, insolvency or other
similar law, any Bank receives a secured claim in lieu of a setoff to which
this Section 4.7 applies, such Bank shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent
with the rights of the Banks entitled under this Section 4.7 to share in
the benefits of any recovery on such secured claim.
Section 5. Yield Protection and Illegality.
5.1. Additional Costs.
(a) The Company shall pay directly to each Bank from time to time
such amounts as such Bank may determine to be necessary to compensate it
for any costs which such Bank determines are attributable to its making or
maintaining of any LIBOR Loans to the Company or its obligation to make any
LIBOR Loans to the Company hereunder, or any reduction in any amount
receivable by the Bank hereunder in respect of any of such Loans or such
obligation (such increases in costs and reductions in amounts receivable
being herein called "Additional Costs"), resulting from any Regulatory
Change which (i) changes the basis of taxation of any amounts payable to
such Bank by the Company or the Guarantor under this Agreement or the Notes
in respect of any of such Loans (other than taxes imposed on the overall
net income of such Bank or of its Applicable Lending Office for any of such
Loans by the jurisdiction in which such Bank has its principal office or
such Applicable Lending Office); or (ii) imposes or modifies any reserve,
special deposit, minimum capital, capital ratio or similar requirements
relating to any extensions of credit or other assets of, or any deposits
with or other liabilities of, such Bank (including any of such Loans or any
deposits referred to in the definition of "LIBOR" in Section 1.1 hereof),
or the Commitment of such Bank; or (iii) imposes any other condition
affecting this Agreement or the Notes (or any
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of such extensions of credit or liabilities) or the Commitments.
(b) Without limiting the effect of the provisions of Section
5.1(a) hereof, in the event that, by reason of any Regulatory Change, any
Bank either (i) incurs Additional Costs based on or measured by the excess
above a specified level of the amount of a category of deposits or other
liabilities of such Bank which includes deposits by reference to which the
interest rate on LIBOR Loans is determined as provided in this Agreement or
a category of extensions of credit or other assets of such Bank which
includes LIBOR Loans or (ii) becomes subject to restrictions on the amount
of such a category of liabilities or assets which it may hold, then, if
such Bank so elects by notice to the Company, the obligation of such Bank
to make, and to convert Federal Funds Rate Loans or Prime Rate Loans into,
LIBOR Loans hereunder shall be suspended until such Regulatory Change
ceases to be in effect (and all LIBOR Loans held by such Bank shall be
automatically converted into Overnight Federal Funds Rate Loans at the end
of the then current Interest Period for each of them, or on such earlier
date as such Bank may specify in writing as being the last permissible date
for such prepayment under applicable law, rules or regulations); provided
that in such event such Bank shall use its best efforts to obtain a Federal
Funds Rate offered for deposits made for a period of time longer than
overnight (to the extent such a rate is then obtainable), but any failure
to obtain such a rate shall in no way affect the rights of the Banks to
receive interest on such Loans at the Federal Funds Rate otherwise
obtainable.
(c) Without limiting the effect of the foregoing provisions of
this Section 5.1 (but without duplication), the Company shall pay to each
Bank from time to time on request such amounts as such Bank may determine
to be necessary to compensate such Bank for any costs which it determines
are attributable to the maintenance by such Bank (or any Applicable Lending
Office), pursuant to any law or regulation or any interpretation, directive
or request (whether or not having the force of law) of any court or
governmental or monetary authority, of capital in respect of such Bank's
Commitment (such compensation to include, without limitation, an amount
equal to any reduction of the rate of return on assets or equity of such
Bank (or any Applicable Lending Office) to a level below that which such
Bank (or any Applicable Lending Office) could have achieved but for such
law, regulation, interpretation, directive or request).
(d) Determinations and allocations by any Bank for purposes of
this Section 5.1 of the effect of any Regulatory
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Change pursuant to Section 5.1(a) or (b) hereof, or of the effect of
capital maintained pursuant to Section 5.1(c) hereof, on its costs or rate
of return of maintaining Loans or its obligation to make Loans, or on
amounts receivable by it in respect of Loans, and of the amounts required
to compensate such Bank under this Section 5.1, shall be conclusive absent
manifest error.
5.2. Limitation on Types of Loans. Anything herein to the contrary
notwithstanding, if, on or prior to the determination of any interest rate
for any LIBOR Loan for any Interest Period therefore:
(a) the Administrative Agent determines (which determination shall
be conclusive) that quotations of interest rates for the deposits referred to
in the definition of "LIBOR" in Section 1.1 hereof are not being provided in
the relevant amounts or for the relevant maturities for purposes of
determining rates of interest for such Loans as provided herein; or
(b) any Bank determines (which determination shall be conclusive),
and so notifies the Administrative Agent, that the rates of interest referred
to in the definition of "LIBOR" in Section 1.1 hereof upon the basis of which
the rate of interest for LIBOR Loans for such Interest Period is to be
determined do not adequately cover the cost to such Bank of making or
maintaining such LIBOR Loans for such Interest Period;
then the Administrative Agent shall give the Company prompt notice thereof,
and so long as such condition remains in effect, the Banks shall be under
no obligation to make additional LIBOR Loans or to convert Federal Funds
Rate Loans or Prime Rate Loans into LIBOR Loans and the Company shall, on
the last day(s) of the then current Interest Period(s) for the outstanding
LIBOR Loans, either repay such Loans as provided in Section 3.1 hereof or
convert such Loans into Federal Funds Rate Loans or Prime Rate Loans in
accordance with Section 3.3 hereof.
5.3. Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Bank or its
Applicable Lending Office to honor its obligation to make or maintain LIBOR
Loans hereunder, then such Bank shall promptly notify the Administrative
Agent and the Company and such Bank's obligation to make LIBOR Loans shall
be suspended until such time (prior to the Commitment Termination Date) as
such Bank may again make and maintain LIBOR Loans and such Bank's
outstanding LIBOR Loans shall be
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automatically converted into Federal Funds Rate Loans or Prime Rate Loans,
as such Bank may select, at the end of the then current Interest Period for
each of them, or on such earlier date as such Bank may specify in writing
as being the last permissible date for such prepayment under applicable
laws, rules or regulations.
5.4. Compensation. The Company shall pay to each Bank, upon the
request of such Bank, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Bank) to compensate it for any loss, cost or
expense (including, without limitation, costs arising from premature
termination of such Bank's obligations under interest rate swaps, caps,
collars, floors, options, forward exchange contracts and similar hedging
arrangements) which such Bank determines are attributable to:
(a) any payment, prepayment or conversion of a Loan for any reason
(including, without limitation, the acceleration of the Loans pursuant to
Section 10 hereof) on a date other than the last day of an Interest Period
for such Loan; or
(b) any failure by the Company for any reason (including, without
limitation, the failure of any of the conditions precedent specified in
Section 7 hereof to be satisfied) to borrow or convert into a LIBOR Loan or
a Term Federal Funds Rate Loan on the date for such borrowing or conversion
specified in the relevant notice of borrowing given pursuant to Section 2.2
hereof or notice of conversion given pursuant to Section 2.8 hereof.
Such Bank shall deliver to the Company, promptly upon such request, a
certificate setting forth in reasonable detail the basis for calculation of
such amounts, the contents of such certificate being, in the absence of
manifest error therein, conclusive evidence of such amounts; provided that
the failure of such Bank to deliver such certificate shall in no way affect
such Bank's rights to such compensation. The failure of any Bank to
request the compensation provided for in this Section 5.4 in any instance
shall not affect such rights of such Bank in any other instance or of any
other such Bank in any instance.
5.5. Taxes. All payments of Obligations (as used in this Section
5.5, "Payments") shall be made free and clear of, and without deduction by
reason of, any and all taxes, duties, assessments, withholdings, retentions
or other similar charges whatsoever imposed, levied, collected, withheld or
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assessed by any jurisdiction or any agency or taxing authority thereof or
therein (as used in this Section 5.5, "Taxes"), all of which shall be paid
by the Company for its own account not later than the date when due. If
the Company is required by law to deduct or withhold any Taxes from any
Payment, the Company shall: (a) make such deduction or withholding; (b) pay
the amount so deducted or withheld to the appropriate taxing authority not
later than the date when due (irrespective of the rate of such deduction or
withholding); (c) deliver to such Bank, promptly and in any event within 30
days after the date on which such Taxes become due, original tax receipts
and other evidence satisfactory to such Bank of the payment when due of the
full amount of such Taxes; and (d) pay to the respective Bank, forthwith
upon any request by such Bank therefor from time to time, such additional
amounts as may be necessary so that such Bank receives, free and clear of
all Taxes, the full amount of such Payment stated to be due under this
Agreement or the Notes as if no such deduction or withholding had been
made.
Each Bank that is not organized under the laws of the United States or
of any political subdivision thereof agrees that it will deliver to the
Company on the date of its Loan and thereafter as may be required from time
to time by applicable law or regulation United States Internal Revenue
Service Form 4224 or 1001 (or any successor form) or such other form as
from time to time may be required to demonstrate that payments made by the
Company to such Bank under this Agreement or such Note either are exempt
from United States Federal withholding taxes or are payable at a reduced
rate (if any) specified in any applicable tax treaty or convention.
Each Bank agrees to use reasonable efforts to transfer its Commitment
or Loans to another Applicable Lending Office of such Bank if such transfer
would avoid the need for or mitigate the amount of any deduction or
withholding of Taxes on payments of interest to such Bank under this
Agreement, but no Bank shall be required to make such transfer if such Bank
determines that such Bank would suffer any legal, economic or regulatory
disadvantage.
Without limiting the survival of any other provisions of this Agreement
or the Notes, the obligations of the Company under this Section shall
survive the repayment of the Loans and the Notes.
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Section 6. Guarantee.
6.1. Unconditional Guarantee. For valuable consideration, receipt
of which is hereby acknowledged, and to induce the Banks to make Loans to
the Company, the Guarantor hereby unconditionally and irrevocably
guarantees to the Administrative Agent, the Co-Agents and each of the Banks
the payment in full when due (whether at stated maturity, by acceleration
or otherwise) of all principal of and interest on each Loan and all other
amounts payable by the Company hereunder and under the Notes and all other
documents referred to herein or therein, in accordance with the terms
hereof and thereof, and, in the case of any extension of time of payment,
in whole or in part, that all such amounts shall be paid in full when due
(whether at stated maturity, by acceleration or otherwise) in accordance
with the terms of such extension. The Guarantor hereby unconditionally
agrees that upon default in the payment when due (whether at stated
maturity, by acceleration or otherwise) of any of such principal, interest
or other amounts, the Guarantor shall forthwith pay and perform the same in
the money and funds, at the time, in the place and in the manner provided
for such payment in this Agreement, the Notes or other applicable document.
6.2. Validity. The Guarantor hereby agrees that the guarantee
provided by this Section 6 is a continuing guarantee of payment and not
merely of collection, that it is a primary, independent obligation of the
Guarantor and that the Guarantor's obligations hereunder shall be absolute,
unconditional and irrevocable, irrespective of (a) any invalidity,
illegality, irregularity or unenforceability of, or defect in or any change
in this Agreement, the Notes or any other document referred to herein or
therein, (b) any amendment, modification or waiver of any term or condition
of this Agreement or the Notes or any such other document, or any waiver or
consent by the Administrative Agent or any Bank to any departure from the
terms hereof or thereof, (c) any sale, exchange, release, surrender,
realization upon or other dealings with any security or guarantee for any
of the obligations guaranteed hereby (whether now or hereafter granted),
(d) any settlement or compromise of such obligations, (e) the absence of
any action to demand or enforce any of such obligations against the
Company, (f) the recovery of any judgment against the Company or any other
Person, or any action to enforce the same, (g) the recovery of any claim
under any other guarantee of or security for such obligations or under
any applicable insurance, or (h) any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a
guarantor or surety (other
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than full and strict compliance with and satisfaction of such liabilities).
6.3. Waivers. The Guarantor hereby waives notice of acceptance of
the guarantee provided by this Section 6, notice of the extension of any
credit or financial accommodation, notice of the making of any Loan or the
incurrence of any other Obligations, notice of any extension of any
Commitment Termination Date, demand of payment, filing of claims with a
court in the event of bankruptcy of the Company or any other Person, any
right to require a proceeding or the filing of a claim first against the
Company, any other guarantor, any other Person, any letter of credit, or
any security for any of the Obligations, presentment, protest, notice of
default, dishonor or nonpayment and any other notice and all demands
whatsoever. The Guarantor hereby further waives all setoffs and
counterclaims against the Company, the Administrative Agent, the Co-Agents
and each of the Banks.
6.4. Subordination and Subrogation. The Guarantor hereby
subordinates all present and future claims, now held or hereafter acquired,
against the Company as a creditor or contributor of capital, or otherwise, to
the prior and final payment in full to the Banks of all of the Obligations.
If, without reference to the provisions of this Section 6.4, the Guarantor
would at any time be or become entitled to receive any payment on account of
any claim against the Company, whether in insolvency, bankruptcy, liquidation
or reorganization proceedings, or otherwise, the Guarantor shall and does
hereby irrevocably direct that all such payments shall be made directly to the
Administrative Agent on account of the Banks until all Obligations shall be
paid in full. Should the Guarantor receive any such payment, the Guarantor
shall receive such amount in trust for the Banks and shall immediately pay over
to the Administrative Agent such amount as provided in the preceding sentence.
Anything contained in this Section 6 to the contrary notwithstanding,
the obligations of the Guarantor hereunder shall be limited to a maximum
aggregate amount equal to the largest amount that would not render its
obligations hereunder subject to avoidance as a fraudulent transfer or
conveyance under Section 548 of Title 11 of the United States Code or any
applicable provisions of comparable state law (collectively, the
"Fraudulent Transfer Laws"), in each case after giving effect to all
other liabilities of the Guarantor, contingent or otherwise, that are
relevant under the Fraudulent Transfer Laws (specifically excluding,
however, any liabilities of the Guarantor in respect of intercompany
indebtedness to the Company or other Affiliates of the Company to the
extent that
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such indebtedness would be discharged in an amount equal to the amount paid
by the Guarantor hereunder) and after giving effect as assets to the value
(as determined under the applicable provisions of the Fraudulent Transfer
Laws) of any rights to subrogation or contribution of the Guarantor
pursuant to (i) applicable law or (ii) any agreement providing for an
equitable allocation among the Guarantor and other Affiliates of Company of
obligations arising under guaranties by such parties.
The Guarantor further agrees that any rights of subrogation the
Guarantor may have against the Company, and any rights of contribution the
Guarantor may have against Company, and any rights of contribution the
Guarantor may have against any other guarantor of the Obligations
hereunder, shall be junior and subordinate to any rights the Administrative
Agent or the Banks may have against such other guarantor.
6.5. Acceleration. The Guarantor agrees that, as between the
Company on the one hand, and the Administrative Agent, the Co-Agents and
the Banks, on the other hand, the obligations of the Company guaranteed
under this Section 6 may be declared to be forthwith due and payable, or
may be deemed automatically to have been accelerated, as provided in
Section 10 hereof for purposes of this Section 6, notwithstanding any stay,
injunction or other prohibition (whether in a bankruptcy proceeding
affecting the Company or otherwise) preventing such declaration as against
the Company and that, in the event of such declaration or automatic
acceleration, such obligations (whether or not due and payable by the
Company) shall forthwith become due and payable by the Guarantor for
purposes of this Section 6.
6.6. Reinstatement. The Guarantor covenants that the guarantee
provided by this Section 6 will not be discharged except by complete and
final payment of all of the Obligations and all obligations of the
Guarantor arising out of this guarantee. In the event that any payment is
made by the Company hereunder or by the Guarantor under this guarantee, and
is thereafter required to be rescinded or otherwise restored or paid over
to the Company, the Guarantor or any other person (whether upon the
insolvency or bankruptcy of the Company or the Guarantor or otherwise), the
Guarantor's obligations hereunder shall immediately and automatically be
reinstated as though such payment had not been made.
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Section 7. Conditions Precedent.
7.1. Basic Conditions. The obligation of the Banks to make the
Loans hereunder on the occasion of the borrowing pursuant to Section 2.2
hereof is subject to the receipt by the Administrative Agent, on or before
December 18, 1992, of each of the following documents, each of which shall
be satisfactory to the Administrative Agent in form and substance:
(a) Certified copies of the certificate of incorporation
and bylaws of the Company and the Guarantor and all corporate action and
(if necessary) stockholder action taken by the Company and the Guarantor
approving this Agreement and the Notes and borrowings by the Company
hereunder and the guarantee by the Guarantor hereunder (including, without
limitation, a certificate setting forth the resolutions of the Boards of
Directors of the Company and the Guarantor adopted in respect of the
transactions contemplated hereby).
(b) A certificate of each of the Company and the Guarantor
in respect of each of the officers (i) who is authorized to sign this
Agreement or the Notes on its behalf and (ii) who will, until replaced by
another officer or officers duly authorized for that purpose, act as its
representative for the purposes of signing documents and giving notices and
other communications in connection with this Agreement and the transactions
contemplated hereby. The Administrative Agent, the Co-Agents and the Banks
may conclusively rely on such certificate until the Administrative Agent
receives notice in writing from the Company or the Guarantor, respectively,
to the contrary.
(c) Certificates, as of a recent date, from the
appropriate authorities for each jurisdiction in which the Company and the
Guarantor are incorporated or qualified to do business, as to the good
standing of the Company and the Guarantor, respectively, in each such
jurisdiction.
(d) A certificate of a senior officer of each of the
Company and the Guarantor to the effect set forth in the first sentence of
Section 7.2 hereof.
(e) An opinion of Allen P. Allweiss, Esq., General Counsel
to the Company and the Guarantor, substantially in the form of Exhibit B
hereto.
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(f) The Funded Debt Ratio Notice and the Total Debt Ratio
Notice for the Company's four-Fiscal Quarter period ended August 31, 1992
(or, if the initial Loans hereunder are made more than 60 days after the
end of any succeeding Fiscal Quarter, for the four-Fiscal Quarter period
ended as of the end of the most recent such succeeding Fiscal Quarter).
(g) The Notes, duly executed and delivered by the Company
to the order of each Bank and otherwise appropriately completed, bearing
the executed guarantee of the Guarantor.
(h) Evidence of the payment of all fees and expenses then
payable pursuant to Sections 2.3 and 12.3 hereof.
(i) The execution and delivery by all necessary parties
to, and the simultaneous effectiveness of, the Revolving Credit Agreement.
(j) Such other documents as the Administrative Agent or
any Bank may reasonably request including, without limitation, all
requisite governmental approvals and filings.
7.2. Additional Conditions. The obligation of the Banks to make
the Loans to the Company shall be subject to the further conditions that,
as of the date of the making of such Loans and after giving effect thereto:
(a) no Default or Event of Default shall have occurred and
be continuing;
(b) the representations and warranties made by the Company
and the Guarantor in Section 8 hereof and in any other certificate or other
document delivered in connection with this Agreement shall be true in all
material respects on and as of the date of the making of such Loans with
the same force and effect as if made on and as of such date (including,
without limitation, that there shall have occurred no material adverse
change since August 31, 1992 in the consolidated financial condition or
operations, or the business taken as a whole, of the Company and its
consolidated Subsidiaries from that set forth in their financial statements
dated as of August 31, 1992, except as disclosed to the Banks in writing
prior to the date of this Agreement);
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(c) the Company shall have furnished evidence satisfactory
to the Banks either (i) that it has committed to redeem Senior Notes by
furnishing proper notice to the trustee thereof or (ii) that it has
repurchased Senior Notes in the open market following the date hereof, in
either case in an aggregate principal amount not less than the aggregate
principal amount of the Loans to be made on such date;
(d) the Company shall be in compliance with the financial
covenants under the Revolving Credit Agreement and this Agreement both
before and immediately after the making of such Loan on both an historical
and a pro forma basis; and
(e) payment in full of all fees and expenses payable
pursuant to Sections 2.3 and 12.3 hereof.
The notice of borrowing made pursuant to Section 2.2 hereof shall
constitute a certification by the Company and the Guarantor as to the
circumstances specified in paragraphs (a), (b), (c) and (d) above (both as
of the date of such notice and, unless the Company or the Guarantor
otherwise notifies the Administrative Agent prior to the date of
suchborrowing, as of the date of such borrowing).
Upon the satisfaction of all the conditions set forth in Sections 7.1 and
7.2 hereof, (i) the obligations (if any) of the Co-Agents, the
Administrative Agent or the Banks under the commitment letter and term
sheet, dated September 28, 1992, as amended, of LTCB Trust, as a Co-Agent,
and (ii) the obligations (if any) of the Co-Agents, the Administrative
Agent or the Banks under the commitment letter and term sheet, dated
October 8, 1992, as amended, of Bank of Montreal, as a Co-Agent, shall
cease to be of any force or effect.
Section 8. Representations and Warranties. Each of the Company
and the Guarantor represents and warrants to the Administrative Agent and
the Banks that:
8.1. Corporate Existence. Each of the Company and the Guarantor
and each of the other Material Subsidiaries (a) is a corporation duly
organized and validly existing under the laws of the jurisdiction of its
incorporation; (b) has all requisite corporate power, and has all material
governmental licenses, authorizations, consents and approvals, necessary to
own its assets and carry on its business as presently conducted, and
conducts its business in compliance with the requirements set forth in
Section 9.3(b) hereof; and (c) is
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qualified to do business in all jurisdictions in which the nature of the
business conducted by it makes such qualification necessary and where
failure so to qualify would have a material adverse effect on its business,
financial condition or operations.
8.2. Financial Condition. The consolidated balance sheet of the
Company and its consolidated Subsidiaries (including, without limitation,
the Guarantor) as at August 31, 1992 and the related consolidated
statements of income, retained earnings and changes in financial position
of the Company and its consolidated Subsidiaries (including, without
limitation, the Guarantor) for the fiscal year ended on such date, with the
opinion thereon of Deloitte & Touche, the independent auditors of the
Company, heretofore furnished to the Administrative Agent and each of the
Banks, are complete and correct and fairly present the consolidated
financial condition of the Company and its consolidated Subsidiaries
(including, without limitation, the Guarantor) as at such date and the
consolidated results of their operations for such Fiscal Year ended on such
date, all in accordance with GAAP applied on a consistent basis. Neither
the Company nor any of its consolidated Subsidiaries (including, without
limitation, the Guarantor) had on such date any material contingent
liabilities, liabilities for taxes, unusual forward or long-term
commitments or unrealized or anticipated losses from any unfavorable
commitments, except as referred to or reflected or provided for in such
balance sheets as at such date. Since August 31, 1992, there has been no
material adverse change in the consolidated financial condition or
operations, or the business taken as a whole, of the Company and its
consolidated Subsidiaries (including, without limitation, the Guarantor)
from that set forth in such financial statements as at such date, except as
disclosed to the Banks in writing prior to the date of
this Agreement.
8.3. Litigation. Except as heretofore disclosed to the Banks in
writing or in any SEC Report of the Company delivered to the Banks prior to
the date hereof, there is no action, proceeding or investigation by or
before any court or any arbitral, governmental or regulatory authority or
agency, pending or (to the knowledge of the Company or the Guarantor)
threatened against the Company or the Guarantor or any Subsidiary of either
thereof which, if adversely determined, could have a material adverse
effect on the consolidated financial condition or business of the Company
and its consolidated Subsidiaries (including, without limitation, the
Guarantor).
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8.4. No Breach. Neither the execution and delivery of this
Agreement and the Notes, nor the consummation of the transactions contemplated
hereby, nor the compliance by the Company or the Guarantor with the terms and
provisions hereof or thereof, will (a) conflict with or result in a breach of,
or require any consent or vote of any Person under, the certificate of
incorporation or bylaws of either the Company or the Guarantor, or any
agreement or instrument to which the Company, the Guarantor or any Subsidiary
of either thereof is a party or to which it is subject, (b) violate any
applicable law, regulation, order, write, injunction or decree of any court or
governmental authority or agency, or (c) constitute a default or result in the
imposition of any Lien on any of the assets, revenues or other properties of
the Company, the Guarantor or any Subsidiary of either thereof under any such
agreement or instrument.
8.5. Corporate Action. The execution, delivery and performance by
each of the Company and the Guarantor of this Agreement and the Notes, and
the consummation of the transactions contemplated hereby, are within the
scope of its corporate power, and have been duly authorized by all
necessary corporate action on the part of each of them. This Agreement
constitutes, and each of the Notes, when duly executed and delivered will
constitute, the legal, valid and binding obligation of the Company and the
Guarantor, enforceable against each of them in accordance with their
respective terms, except as such enforceability may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium or other similar laws of
general applicability affecting the enforcement of creditors' rights and
(b) the application of general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
8.6. Approvals. No authorizations, approvals or consents of, and
no filings or registrations with, any governmental or regulatory authority or
agency are necessary for the execution, delivery or performance by the Company
or the Guarantor of this Agreement or the Notes or for the validity or
enforceability thereof, or for the consummation of the transactions
contemplated hereby.
8.7. Use of Loans. Neither the Company, the Guarantor nor any
Subsidiary of either of them is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose, whether
immediate, incidental or ultimate, of buying or carrying margin stock (within
the meaning of Regulation U or X of the Board of Governors of the Federal
Reserve System) and no part of the
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proceeds of any Loan will be used to buy or carry any margin stock.
8.8. ERISA. Each of the Company and the Guarantor and the ERISA
Affiliates have fulfilled its obligations under the minimum funding
standards of ERISA and the Code with respect to each Plan, are in
compliance in all material respects with the presently applicable
provisions of ERISA and the Code and have not incurred any liability to the
PBGC or any Plan or Multiemployer Plan.
8.9. Taxes. (a) United States Federal income tax returns of the
Company, the Guarantor and the Subsidiaries have been examined and closed
through Fiscal 1985, have been examined for Fiscal 1986 and Fiscal 1987 and
are under examination for Fiscal 1988 and Fiscal 1989. (b) Each of the
Company, the Guarantor and the Subsidiaries has filed all United States
Federal income tax returns and all other material tax returns which are
required to be filed by it and has paid all taxes due pursuant to such
returns or pursuant to any assessment received by the Company, the
Guarantor or any Subsidiary. The charges, accruals and reserves on the
books of the Company, the Guarantor and the Subsidiaries in respect of
taxes and other governmental charges are, in the opinion of the Company and the
Guarantor, adequate.
8.10. Credit Agreements. Schedule 1 hereto and all SEC Reports of
the Company completely and correctly disclose each credit agreement, loan
agreement, indenture, purchase agreement, guarantee or other arrangement
providing for or otherwise relating to any extension of credit or
commitment for any extension of credit (other than pursuant to any letter
of credit excepted from the definition of Indebtedness herein under
paragraph (c) thereof) to, or guarantee by, the Company, the Guarantor or
any other Material Subsidiary the aggregate principal or face amount of
which equals or exceeds (or may equal or exceed) $10,000,000 and accurately
describes the aggregate principal or face amount outstanding and which may
become outstanding under each thereof.
8.11. Ownership of Assets. Each of the Company, the Guarantor and
each other Material Subsidiary has good and marketable title to all assets
reflected on the audited consolidated balance sheet as of August 31, 1992
referred to in Section 8.2 hereof, subject to no Liens other than the Liens
specified in Footnotes D and G to such balance sheet and, on the date
hereof, such additional Liens as are listed on Schedule 1 hereto, and on
any date here after, additional Liens permitted by Section 9.5 hereof and
listed in Footnotes
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<PAGE> 45
to the financial statements delivered pursuant to Section 9.1(a) or (b)
hereof.
8.12. Pari Passu Obligations. The obligations of the Company and
the Guarantor under this Agreement and the Notes rank and will rank at
least pari passu in all respects with all other unsubordinated Indebtedness
of the Company and the Guarantor, respectively, except for Indebtedness
that is senior solely by operation of applicable law, and except that
Indebtedness of the Company and the Guarantor secured as permitted by
Section 9.5 hereof ranks senior in right of security with respect to the
collateral therefor. Without limiting the generality of the foregoing, all
principal of and interest (including post-petition interest allowable in
any proceeding under any bankruptcy law) on and other amounts payable
inconnection with this Agreement constitute "Senior Indebtedness" as
defined in, and for all purposes of, the Convertible Subordinated
Debentures (and is entitled to the benefit of the subordination provisions
relating thereto).
8.13. Investment Company Act. Neither the Company nor the Guarantor
is, and neither is "controlled by," an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
8.14. Environmental Matters. To the best of the knowledge of the
Company and the Guarantor, all operations and conditions at or in the
premises in which the Company and the Guarantor conduct their business
comply in all material respects with all Federal, state and local laws,
rules and regulations relating to environmental matters, pollution, waste
disposal or industrial hygiene including, without limitation, such laws,
rules and regulations relating to asbestos (collectively, "Environmental
Laws"). None of the operations of either the Company or the Guarantor is
subject to any judicial or administrative proceeding alleging the violation
of or liability under any Environmental Law.
Section 9. Covenants of the Company and the Guarantor. Each of
the Company and the Guarantor agrees that, so long as any of the
Commitments are in effect and until payment in full of all Obligations:
9.1. Financial Statements; Reports and Other Information. The
Company shall deliver to the Administrative Agent, with sufficient copies
for each of the Banks:
(a) as soon as available and in any event within 60 days
after the end of each of the first three Fiscal
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Quarters of each Fiscal Year of the Company, consolidated statements of
income, retained earnings and changes in financial position of the Company
and its consolidated Subsidiaries (including, without limitation, the
Guarantor) for such period and for the period from the beginning of such
Fiscal Year to the end of such period, and the related consolidated balance
sheet as at the end of such period, setting forth in each case in
comparative form the corresponding figures for the corresponding period in
the preceding Fiscal Year, accompanied by a certificate of a senior
financial officer of the Company, which certificate shall state that such
financial statements fairly present the consolidated financial condition
and results of operations of the Company and its consolidated Subsidiaries
in accordance with GAAP, consistently applied, as at the end of, and for,
such period (subject to normal year-end audit adjustments);
(b) as soon as available and in any event within 120 days
after the end of each Fiscal Year of the Company, consolidated statements
of income, retained earnings and changes in financial position of the
Company and its consolidated Subsidiaries (including, without limitation,
the Guarantor) for such year and the related consolidated balance sheet as
at the end of such year, setting forth in each case in comparative form the
corresponding figures for the preceding Fiscal Year, and accompanied by an
opinion thereon of independent certified public accountants of recognized
national standing, which opinion shall state that such financial statements
fairly present the consolidated financial condition and results of
operations of the Company and its consolidated Subsidiaries (including,
without limitation, the Guarantor) as at the end of, and for, such Fiscal
Year, and a certificate of the chief financial officer of the Company that,
in examining the financial condition of the Company and its Subsidiaries
for such Fiscal Year, he or she obtained no knowledge, except as
specifically stated, of any Default arising from the breach of the
covenants provided for in Sections 9.4, 9.6, 9.7, 9.11, 9.12, 9.13 or 9.17
hereof;
(c) promptly upon their becoming available, copies of all
registration statements and regular SEC Reports, if any, which the Company
shall have filed with the Securities and Exchange Commission (or any
governmental agency substituted therefor) or any national securities
exchange;
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(d) promptly upon the mailing thereof to the shareholders of
the Company generally, copies of all financial statements, reports and proxy
statements so mailed;
(e) as soon as possible, and in any event within ten days
after either the Company or the Guarantor knows or has reason to know that
any of the events or conditions specified below with respect to any Plan or
Multiemployer Plan has occurred or exists, a statement signed by a senior
financial officer of the Company or the Guarantor setting forth details
respecting such event or condition and the action, if any, which the
Company, the Guarantor or their ERISA Affiliate proposes to take with
respect thereto (and a copy of any report or notice required to be filed
with or given to PBGC by the Company, the Guarantor or an ERISA Affiliate
with respect to such event or condition):
(i) any reportable event, as defined in
Section 4043(b) of ERISA and the regulations issued thereunder,
with respect to a Plan, as to which PBGC has not by regulation
waived the requirement of Section 4043(a) of ERISA that it be
notified within 30 days of the occurrence of such event (provided
that a failure to meet the minimum funding standard of Section 412
of the Code or Section 302 of ERISA shall be a reportable event
regardless of the issuance of any waivers in accordance with
Section 412(d) of the Code);
(ii) the filing under Section 4041 of ERISA of
a notice of intent to terminate any Plan or the termination of
any Plan;
(iii) the institution by PBGC of proceedings
under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the receipt
by the Company or any ERISA Affiliate of a notice from a
Multiemployer Plan that such action has been taken by PBGC with
respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal by
the Company, the Guarantor or any ERISA Affiliate under Section
4201 or 4204 of ERISA from a Multiemployer Plan, or the receipt
by the Company, the Guarantor or any ERISA Affiliate of notice
from a Multiemployer Plan that is in reorganization or insolvency
pursuant to Section 4241 or 4245 of ERISA
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or that it intends to terminate or has terminated under Section
4041A of ERISA; and
(v) the institution of a proceeding by a
fiduciary of any Multiemployer Plan against the Company, the
Guarantor or any ERISA Affiliate to enforce Section 515 of ERISA,
which proceeding is not dismissed within 30 days;
(f) promptly after either the Company or the Guarantor
knows or has reason to know that any Default has occurred, a notice of such
Default, describing the same in reasonable detail;
(g) not later than (i) 60 days after the last day of each
of the first three Fiscal Quarters of each of the Company's Fiscal Years
and (ii) 120 days after the last Fiscal Quarter of each such Fiscal Year, a
notice, substantially in the form of Exhibit D-1 hereto (the "Funded Debt
Ratio Notice"), setting forth the Funded Debt Ratio for the four-Fiscal
Quarter period ended on the last day of such Fiscal Quarter and a notice,
substantially in the form of Exhibit D-1 hereto (the "Total Debt Ratio
Notice"), setting forth the Total Debt Ratio for the four-Fiscal Quarter
period ended on the last day of such Fiscal Quarter, which notices shall
set forth calculations and computations in sufficient detail to show the
amount and nature of each of the components of the Funded Debt Ratio and
the Total Debt Ratio, respectively, for such four-Fiscal Quarter period;
provided that in the case of the Funded Debt Ratio Notice and the Total
Debt Ratio Notice delivered with respect to each Fiscal Quarter specified
in clause (ii) above, the Company shall (if the final form of either of
such Notices is not yet available) deliver such Notice in a preliminary
form within 60 days of the end of such Fiscal Quarter setting forth all
matters required by this paragraph (g) to be included in the final form
thereof as accurately as shall be possible based upon information available
to the Company at such time; and
(h) from time to time such other information regarding the
business or financial condition of the Company or any of the Subsidiaries
(including, without limitation, any Plan or Multiemployer Plan and any
reports or other information required to be filed under ERISA) as any Bank
or the Administrative Agent may reasonably request.
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Each of the Company and the Guarantor will furnish to the Administrative
Agent, with sufficient copies for the Banks, at the time it furnishes each
set of financial statements pursuant to paragraph (a) or (b) above, a
certificate of a senior financial officer of the Company and the Guarantor,
substantially in the form of Exhibit C hereto (i) to the effect that, to
the best of his or her knowledge, after full inquiry, no Default has
occurred and is continuing (or, if any Default has occurred and is
continuing, describing the same in reasonable detail), (ii) setting forth
in reasonable detail the computations necessary to determine whether
the Company and the Guarantor are in compliance with Sections 9.11, 9.12
and 9.13 hereof as at the end of the respective Fiscal Quarter or Fiscal
Year and (iii) setting forth additions to the list of Subsidiaries that are
Material Subsidiaries contained in the certificate most recently delivered
pursuant to this provision and containing either (A) a representation that
all other Subsidiaries combined do not constitute a Material Subsidiary
Group as at such date or (B) a representation that all other Subsidiaries
do constitute a Material Subsidiary Group as at such date and identifying
any such Subsidiary whose aggregate book value of tangible assets exceeds
$10,000,000 as at such date. In addition, each of the Company and the
Guarantor hereby agrees to furnish the Administrative Agent with an updated
notice with respect to the information specified in clause (iii) of the
preceding sentence upon the occurrence of any event either that has
resulted or could result in a Subsidiary becoming a Material Subsidiary or
a group of Subsidiaries becoming a Material Subsidiary Group or that could
make the representation contained in the most recently delivered
certificate furnished pursuant to this Section 9.1 no longer accurate.
9.2. Litigation. Without limiting the obligations of the Company
under Section 9.1(h) hereof, each of the Company and the Guarantor shall
promptly give to each Bank notice of all court or arbitral proceedings and
investigations, and of all proceedings and investigations before any
governmental or regulatory authority or agency, affecting the Company, the
Guarantor or any Subsidiary, except proceedings or investigations which, if
adversely determined, would not have a material adverse effect on the
consolidated financial condition or operations, or the business taken as a
whole, of the Company and its consolidated Subsidiaries (including, without
limitation, the Guarantor).
9.3. Corporate Existence, Etc. Each of the Company and the
Guarantor will, and will cause each of their respective Subsidiaries (but
in the case of paragraphs (a), (d) and
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<PAGE> 50
(e) of this Section 9.3, only those Subsidiaries which are Material
Subsidiaries) to:
(a) preserve and maintain its corporate existence and all
of its material rights, privileges, licenses and franchises;
(b) comply with the requirements of all applicable laws,
rules, regulations and orders of governmental or regulatory authorities if
failure to comply with such requirements would materially and adversely
affect the consolidated financial condition or operations, or the business
taken as a whole, of the Company and its consolidated Subsidiaries;
(c) pay and discharge all taxes, assessments and
governmental charges or levies imposed on it or on its income or profits or
on any of its property prior to the date on which penalties attach thereto,
except for any such tax, assessment, charge or levy the payment of which is
being contested in good faith and by proper proceedings and against which
adequate reserves are being maintained in accordance with GAAP;
(d) maintain all of its properties used or useful in its
business in good working order and condition, ordinary wear and tear
excepted;
(e) permit representatives of any Bank or the
Administrative Agent, during normal business hours, to examine, copy and
make extracts from its books and records, to inspect its properties, and to
discuss its business and financial condition with its officers, all to the
extent reasonably requested by such Bank or the Administrative Agent (as
the case may be); and
(f) keep insured by financially sound and reputable
insurers all property of a character usually insured by corporations
engaged in the same or similar business similarly situated against loss or
damage of the kinds and in the amounts customarily insured against by such
corporations and carry such other insurance as is usually carried by such
corporations.
9.4. Payment of Obligations. Without limiting the obligations of
the Company and the Guarantor under Section 9.3 hereof, each of the Company
and the Guarantor will, and will cause each of their respective
Subsidiaries to, pay and discharge at or before the date when due, all of
their respective material obligations and other liabilities, including,
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without limitation, tax and pension liabilities, except where such
obligations or liabilities are being contested in good faith and by
appropriate proceedings, and maintain, in accordance with GAAP, appropriate
reserves for the accrual of all of the foregoing.
9.5. Liens. Neither the Company nor the Guarantor will, nor will
either of them permit any of their respective Subsidiaries to, create,
incur, assume or suffer to exist any Lien on any asset, revenue or other
property now or hereafter owned or acquired by it (including, without
limitation, the stock of Subsidiaries other than Broadcast Subsidiaries at
the time of disposition thereof as permitted by Section 9.7 hereof) except:
(a) Liens existing on the date hereof securing Indebtedness outstanding
on such date and identified in Footnote D and G to the Company's audited
consolidated balance sheet as of August 31, 1992 or on Schedule 1 hereto;
(b) any purchase money security interest hereafter created on any
property of the Company, the Guarantor or such Subsidiary securing
Indebtedness incurred solely for the purpose of financing all or a portion
of the purchase price of such property; provided that: (i) such Lien (A) is
created within six months of the acquisition of such property, (B) extends
to no other property and (C) secures no other Indebtedness; (ii) the
principal amount of Indebtedness secured by such Lien shall at no time
exceed the lesser of (A) the cost to such Person of the property subject
thereto or (B) the fair value of such property (as determined in good faith
by the Board of Directors of such Person) at the time of the acquisition
thereof; (iii) such Lien does not extend to or in any way encumber any
inventory of the Guarantor purchased in the ordinary course of business;
and (iv) the aggregate principal amount of all Indebtedness secured by all
such Liens shall not exceed at any time $15,000,000 less the aggregate
principal amount of all Indebtedness secured by Liens permitted under
Section 9.5(i) hereof;
(c) carriers', warehousemen's, mechanics', materialmen's and
repairmen's liens arising in the ordinary course of business of the Company,
the Guarantor or such Subsidiary and not overdue for a period of more than
30 days or which are being contested in good faith and by appropriate
proceedings;
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(d) Liens created in connection with the lease by the
Company, the Guarantor or any of their respective Subsidiaries of any
property (whether real, personal or mixed) (i) now or hereafter owned by
the Company, the Guarantor or any such Subsidiary which has been sold or
otherwise transferred by any thereof to any other Person within six months
of the acquisition thereof or (ii) which any of the Company, the Guarantor
or any such Subsidiary, as the case may be, intends to use for
substantially the same purpose as any property described in clause (i)
above;
(e) Liens in favor of consignors against inventory being sold
on consignment in the ordinary course of business by the Company, the Guarantor
or any Subsidiary;
(f) Liens created in substitution for any Liens permitted by
paragraphs (a), (b) and (d) of this Section 9.5, provided that (i) any such
newly-created Lien does not extend to any other or additional property and
(ii) (A) if permitted by such paragraph (a) or (b), does not secure any
other (or additional principal amount of) Indebtedness and (B) if permitted
by such paragraph (d) does not secure any other obligations under such
lease or any obligations under any other lease;
(g) Liens existing on assets at the time of acquisition
thereof by the Company, the Guarantor or the respective Subsidiary and not
incurred in anticipation of or in connection with such acquisition;
(h) operating leases and Capital Leases, to the extent the
same would constitute Liens, pursuant to which the Company, the Guarantor
or the respective Subsidiary is lessee, and incurred by such Person in the
ordinary course of its business; and
(i) in addition to Liens otherwise permitted by this
Section 9.5, Liens on property of the Company, the Guarantor or any of
their respective Subsidiaries (i) which secure Indebtedness having an
aggregate principal amount not exceeding at any time $15,000,000 less the
aggregate principal amount of all Indebtedness secured by Liens permitted
under Section 9.5(b) hereof and (ii) each of which shall be limited to
specified items of collateral (and not a general Lien on all assets of such
Person) having a book value not greater than 150% of the aggregate
principal amount of the Indebtedness secured by such Lien;
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provided, however, that (A) all capital stock of all Subsidiaries (other
than the Broadcast Subsidiaries at the time of disposition thereof as
permitted by Section 9.7 hereof) and (B) all promissory notes and other
securities acquired by the Company in connection with the disposition of
the Broadcast Subsidiaries will in any event be maintained free and clear
of all Liens whatsoever.
9.6. Mergers. Neither the Company nor the Guarantor will, and
neither of them will permit any other Material Subsidiary or Subsidiaries
constituting a Material Subsidiary Group or a Broadcast Subsidiary Group
to,
(a) consolidate or merge with or into any other Person, except that a
Wholly-Owned Subsidiary of the Company or the Guarantor (other than the
Guarantor) may merge with or consolidate into the Company or the Guarantor
(provided that the Company or the Guarantor, as the case may be, shall be
the survivor of such merger or consolidation) or another Wholly-Owned
Subsidiary of the Company or the Guarantor, or
(b) sell, assign, convey, lease, sublet, transfer or otherwise dispose
of all or substantially all of its assets to any Person, whether in a single
transaction or in a series of related transactions, except that a
Wholly-Owned Subsidiary of the Company or the Guarantor (other than the
Guarantor) may sell, assign, convey, lease, sublet, transfer or otherwise
dispose of all or substantially all of its assets to the Company or to
another Wholly-Owned Subsidiary of the Company or the Guarantor;
provided, however, that none of the foregoing transactions shall be
permitted if a Default or an Event of Default has occurred and is
continuing or would result from the consummation of any such transaction.
It is understood and agreed that:
(i) any consolidation, merger, sale, assignment,
conveyance, letting, subletting, transfer or other disposition of all or
substantially all of the assets of a Broadcast Subsidiary shall be
permitted under this Section 9.6, so long as such Broadcast Subsidiary,
together with all other Broadcast Subsidiaries with respect to which there
has been, since the date hereof, a consolidation, merger, sale, assignment,
conveyance, letting, subletting, transfer or other disposition
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of all or substantially all of its assets, does not constitute a
Broadcast Subsidiary Group, and
(ii) any consolidation, merger, sale, assignment,
conveyance, letting, subletting, transfer or other disposition of
all or substantially all of the assets of a Non-Material Subsidiary
shall be permitted under this Section 9.6, so long as such
Non-Material Subsidiary, together with all other Non-Material
Subsidiaries with respect to which there has been, since the date
hereof, a consolidation, merger sale, assignment, conveyance,
letting, subletting, transfer or other disposition of all or
substantially all of its assets, does not constitute a Material
Subsidiary Group.
It is further understood and agreed that the distribution or
arms'-length sale of the Company's shares of capital stock of the Broadcast
Subsidiaries as permitted under Section 9.7 hereof will not constitute all
or substantially all of the assets or liabilities of the Company, the
Guarantor or any Subsidiary for purposes of this Section 9.6 nor shall the
value thereof be aggregated with other assets of the Company for purposes
of determining the Company's compliance with this Section 9.6.
9.7. Dispositions of Assets. Neither the Company nor the Guarantor
will, and neither of them will permit any other Material Subsidiary or any
Broadcast Subsidiary to, sell, assign, convey, lease, sublet, transfer or
otherwise dispose of any of the assets, business or other properties of the
Company, the Guarantor or any such Material Subsidiary or Broadcast
Subsidiary to any Person, whether in a single transaction or in a series of
related transactions, except for:
(i) sales of inventory (but not of accounts
receivable) in the ordinary course of business of the Company, the
Guarantor or any such Subsidiary;
(ii) dispositions of assets in the ordinary course
of business in arm's-length transactions by the Company, the
Guarantor or any such Subsidiary to the extent such assets either
are no longer used or useful to the Company, the Guarantor or such
Subsidiary or are promptly replaced by other assets of at least
equal usefulness;
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(iii) the sale or distribution of shares of capital
stock held by the Company or any Subsidiary in any Broadcast
Subsidiary; provided that (i) all requisite consents and approvals
with respect to such sale or distribution have been obtained, (ii)
any such transaction is on substantially the same terms and
conditions specified in the Form 10 filed by Silver King
Communications, Inc., a Subsidiary of the Company, with the
Securities and Exchange Commission on August 27, 1992, as amended
through December 11, 1992, attached hereto as Annex B (including,
without limitation, the provision that the Company shall retain a
broadcast affiliation relationship with each of the Broadcast
Subsidiaries after such transaction), and the Banks shall have
reviewed all final documentation with respect to each such sale or
distribution and have confirmed to their satisfaction that the
terms and conditions set forth in such Form 10 have been complied
with, and (ii) the aggregate amount of the Company's interest in
the capital stock of such Broadcast Subsidiaries (whether directly
or by distribution of the shares of capital stock of any
corporation directly or indirectly holding such Broadcast
Subsidiaries' capital stock) that is distributed by the Company as
a dividend to its stockholders in connection with all such
transactions cumulatively after the date hereof does not exceed
$15,000,000; and
(iv) any such disposition by the Company, the
Guarantor or any Wholly-Owned Subsidiary to the Company, the
Guarantor or any Wholly-Owned Subsidiary, as the case may be;
provided, however, that the Company and the Guarantor shall
maintain their respective assets and operations substantially in
accordance with their respective assets and operations as of the
date hereof, and that in the case of any such disposition by the
Company or the Guarantor to a Wholly-Owned Subsidiary, each of the
Company and the Guarantor agree that such disposition shall be in
the ordinary course of business consistent with past practice and
shall be accomplished upon fair and reasonable terms to the Company
or the Guarantor;
provided that all promissory notes and other securities acquired by the
Company in connection with the disposition of the Broadcast Subsidiaries
will in any event be maintained free and clear of all dispositions
whatsoever.
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9.8. Ranking. (a) Each of the Company and the Guarantor will cause
its obligations under this Agreement, the Notes and each other document now
or hereafter entered into with respect hereto or thereto to rank at least
pari passu in right of payment and of security with all other
unsubordinated Indebtedness of the Company or the Guarantor, as the case
may be, except that Indebtedness secured by any Lien permitted by Section
9.5 hereof may rank senior in right of security with respect to the
collateral subject to such Lien. Without limiting the generality of the
foregoing, the Company covenants, and will take all steps necessary to
assure, that its obligations under this Agreement will at all times
constitute "Senior Indebtedness" as defined in, and for all purposes of,
the Convertible Subordinated Debentures (and will be entitled to the
benefits of the subordination provisions relating thereto).
(b) Each of the Company and the Guarantor will cooperate with the
Administrative Agent and the Banks and execute such further instruments and
documents as any Bank may reasonably request to carry out the intentions of
this Section 9.8. Without limiting the generality of the foregoing, if the
Company or the Guarantor hereafter issues or otherwise incurs any subordinated
Indebtedness, each of them will execute and cause to be executed such further
documents as any Bank may reasonably request to ensure that the obligations of
the Company and the Guarantor under this Agreement and the Notes at all times
rank senior to such subordinated Indebtedness.
(c) Nothing in this Section 9.8 shall be construed so as to limit
the ability of the Company or the Guarantor to incur any Indebtedness
(consistent with paragraphs (a) and (b) above and otherwise permitted by
this Agreement) on a basis pari passu with their respective Indebtedness
under this Agreement and the Notes.
9.9. Business; Fiscal Year. Neither the Company nor the Guarantor
will make any material change in the nature of its business from that in
which it is engaged on the date of this Agreement, and neither the Company
nor the Guarantor shall cause, or permit any of their respective
Subsidiaries to cause, any other Subsidiary to conduct business or
operations substantially similar to the business or operations conducted by
the Guarantor on the date of this Agreement. Neither the Company nor the
Guarantor will change its fiscal year from that currently in effect on the
date hereof, as set forth in the definition of "Fiscal Year" in Section 1.1
hereof.
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9.10. Transactions with Affiliates. Neither the Company nor the
Guarantor will, and neither will permit any of its respective Subsidiaries
to, enter into or be a party to any transaction (including but not limited
to any merger, consolidation or sale of substantially all assets) with any
Affiliate of the Company or the Guarantor, except upon fair and reasonable
terms no less favorable to the Company or the Guarantor or such Subsidiary
than would obtain in a comparable arm's-length transaction with a Person not
an Affiliate of the Company or the Guarantor.
9.11. Fixed Charges Coverage Test. The Company will maintain the
ratio of Adjusted Operating Cash Flow to Fixed Charges for the Company and
its Subsidiaries on a consolidated basis, for each four-Fiscal Quarter period
ending in each of the following Fiscal Years, to be not less than the following
ratios:
Fiscal Year Minimum Ratio
----------- -------------
Fiscal 1993 1.70:1
Fiscal 1994 1.35:1
Fiscal 1995 1.40:1
Fiscal 1996 1.70:1.
9.12. Debt Ratio. The Company will not permit the ratio of Total
Debt to Operating Cash Flow for the Company and its Subsidiaries on a
consolidated basis, for each four-Fiscal Quarter period ending in each of
the following Fiscal Years, to be greater than the following ratios:
Fiscal Year Maximum Ratio
----------- -------------
Fiscal 1993 1.90:1
Fiscal 1994 1.60:1
Fiscal 1995 1.35:1
Fiscal 1996 1.15:1.
9.13. Consolidated Net Worth. The Company shall not permit
Consolidated Net Worth at any time prior to August 30, 1993, to be less
than $125,000,000, and at any time during the following periods to be less
than the following amounts:
Period Amount
------ ------
August 31, 1993 to August 30, 1994 $135,000,000
August 31, 1994 to August 30, 1995 $145,000,000
August 31, 1995 to August 30, 1996 $155,000,000
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and, commencing on August 31, 1996, $10,000,000 above the minimum amount of
Consolidated Net Worth required pursuant to this Section 9.13 on the last
day of the preceding Fiscal Year.
9.14. Notification of Incurrence of Debt or Making of Investment.
Prior to the incurrence by the Company or any of its Subsidiaries of
Indebtedness (other than Indebtedness under the Revolving Credit Agreement
or this Agreement), or upon obtaining commitments for Indebtedness, or the
making of any Investment of cash, property or other assets in an aggregate
principal amount of $20,000,000 (per incurrence or cumulatively since
September 1, 1992 or since the last time incurrence compliance was required
to be tested pursuant to this Section 9.14) or more, the Company shall
deliver notice to the Administrative Agent and the Banks, certifying, on
the basis of its financial statements for the four Fiscal Quarters most
recently ended, the Company's compliance with the financial covenants under
the Revolving Credit Agreement and this Agreement both before and
immediately after the incurrence of such Indebtedness or Investment on both
an historical and pro forma basis; provided, that in the event any cash
change in long-term investments or cash change in long-term notes
receivable triggers notification of the incurrence of Indebtedness and
certification of compliance with financial covenants pursuant to this
Section 9.14, the calculation to determine pro forma compliance with the
Fixed Charges Coverage Test set forth in Section 9.11 hereof shall be
performed after excluding the smallest amount of any cash increase in
long-term investments and cash increase in long-term notes receivable for
any Fiscal Quarter included in such test.
9.15. Use of Proceeds. The Company shall use the proceeds of the
Loans solely for the purpose of refinancing a portion of its outstanding
Senior Notes either by redeeming Senior Notes in accordance with the Senior
Note Indenture or by repurchasing Senior Notes in the open market following
the date hereof, and in any event in compliance with all applicable legal
and regulatory requirements, including, without limitation, Regulations G,
T, U and X of the Board of Governors of the Federal Reserve System and
the Securities Act of 1933, as amended, and the Securities Exchange Act of
1934, as amended, and the regulations thereunder. Neither the
Administrative Agent nor any Bank shall have any responsibility for any use
of the proceeds of the Loans.
9.16. Ownership of Guarantor. The Company agrees at all times to
own, both beneficially and of record and free and
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clear of all Liens, and control 100% of the capital shares of the Guarantor.
9.17. Indebtedness of Subsidiaries. The Company will not permit any
of its Subsidiaries to create, incur, assume, suffer to exist or otherwise
become obligated for or under any Indebtedness whatsoever, except for:
(i) Indebtedness owed to the Company;
(ii) trade Indebtedness incurred by such
Subsidiary in the ordinary course of its business;
(iii) Capital Leases; and
(iv) Indebtedness of the Guarantor under this
Agreement and the Revolving Credit Agreement.
9.18. Interest Rate Protection. No later than 90 days after the
date on which the Loans are made on the occasion of the borrowing under
Section 2.2 hereof, the Company shall enter into Interest Rate Protection
Agreements covering the lesser of (i) 100% of the aggregate principal
amount of the Loans or (ii) at least $25,000,000 of the aggregate principal
amount of the Loans. Such agreements, attached hereto as Annex C, are with
parties and have terms and conditions satisfactory to the Co-Agents, as
evidenced by their signature hereto. The Company shall use its best
efforts to maintain in full force and effect each Interest Rate Agreement
to which it is a party or under which it is a beneficiary for a period of
not less than 24 months from the date of such agreement, without any sale,
assignment, transfer or conveyance by it thereof, and shall not default
(beyond any applicable grace period) in the performance of any of its
obligations thereunder.
Section 10. Events of Default. If one or more of the following
events (herein called "Events of Default" shall occur and be continuing:
(a) The Company or the Guarantor shall fail to pay the principal of
any Loan when due; or the Company or the Guarantor shall fail to pay any
interest on any Loan or any other amount payable by it hereunder more than
two Business Days after the date when any such amount shall be due; or
(b) There shall have occurred a default or event of default under
the Revolving Credit Agreement, the
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Senior Note Indenture or the Convertible Subordinated Debenture
Indenture; or
(c) The Company or the Guarantor or any Subsidiary shall
default in the payment when due (after giving effect to all applicable
grace periods provided for in the documents relating to such Indebtedness,
without regard to any waiver thereof) of any principal of or interest on or
any other amount payable in connection with any of its Indebtedness not
specified in Section 10(a) or 10(b) hereof in an aggregate principal
amount of $5,000,000 or more; or any event specified in any note, agreement,
indenture or other document evidencing or relating to any such Indebtedness
shall occur if (after giving effect to all applicable grace periods provided
for in the documents relating to such Indebtedness, without regard to any
waiver thereof) the effect of such event is to cause, or to permit the holder
or holders of such Indebtedness (or a trustee or agent on behalf of such
holder or holders) to cause, such Indebtedness becoming due prior to its
stated maturity; or
(d) Any representation, warranty or certification made or deemed
made herein by the Company or the Guarantor, or any certificate furnished to
any Bank or the Administrative Agent pursuant to the provisions hereof, shall
prove to have been false or misleading as of the time made or deemed made or
furnished in any material respect and, if the Company, the Guarantor and the
Majority Banks agree that the effects of such false or misleading
representation, warranty or certification are curable, such effects shall not
have been cured to the satisfaction of the Majority Banks within 10 days after
the earlier of (x) the date on which the Company or the Guarantor obtained
knowledge that such representation, warranty or certification was so false or
misleading or (y) the date of notice by the Administrative Agent to the Company
or the Guarantor that such representation, warranty or certification was so
false or misleading; or
(e) The Company or the Guarantor shall default in the
performance of any of its obligations under Section 9 (other than under any of
Sections 9.1(a), 9.1(b), 9.1(c), 9.1(d), 9.1(g), 9.1(h), 9.2, 9.3(b), 9.3(c)
and 9.4 hereof); or the Company or the Guarantor shall default in the
performance of any of its other obligations in this Agreement, including,
without limitation, any of Sections 9.1(a), 9.1(b), 9.1(c), 9.1(d), 9.1(g),
9.1(h), 9.2,
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9.3(b), 9.3(c) and 9.4 hereof (not governed by any other provision in
this Section 10), and such default shall continue unremedied for a period
of 10 days after the earlier of (x) the date on which the Company or the
Guarantor obtained knowledge of such default or (y) the date of notice by
the Administrative Agent to the Company or the Guarantor of the occurrence
of such default; or
(f) The Company, the Guarantor, any other Material
Subsidiary or Subsidiaries constituting a Material Subsidiary Group shall
admit in writing its inability to, or be generally unable to, pay its debts
as such debts become due; or
(g) The Company, the Guarantor, any other Material Subsidiary
or Subsidiaries constituting a Material Subsidiary Group shall (i) apply for
or consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or of all or a
substantial part of its assets, (ii) make a general assignment for the
benefit of its creditors, (iii) commence a voluntary case under the
Bankruptcy Code (as now or hereafter in effect), (iv) file a petition
seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, creditor or debtor rights, winding-up, or
composition or readjustment of debts, (v) take any corporate action for the
purpose of effecting any of the foregoing; provided that an event specified
in clauses (i) through (v) above shall be deemed to have occurred (whether
at one time or cumulatively over a period of time after the date hereof)
with respect to a Material Subsidiary Group at the time when such an event
shall have occurred with respect to all Subsidiaries constituting such
Material Subsidiary Group; or
(h) A proceeding or case shall be commenced, without the
application or consent of the Company, the Guarantor, any other Material
Subsidiary or all Subsidiaries constituting a Material Subsidiary Group in
any court of competent jurisdiction, seeking (i) its liquidation,
reorganization, dissolution or winding-up, or the composition or e
readjustment of its debts, including the filing of an involuntary petition
under the Bankruptcy Code, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of the Company, the Guarantor or such
Subsidiary or of all or any substantial part of its assets, or (iii)
similar relief in respect of the Company, the Guarantor or such Subsidiary
under any law relating to bankruptcy, insolvency, reorganization, creditor
or debtor rights,
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winding-up, or composition or adjustment of debts, and such proceeding or
case shall continue undismissed, or an order, judgment or decree approving
or ordering any of the foregoing shall be entered and shall not be vacated
or dismissed within 60 days; or an order for relief against the Company,
the Guarantor or such Subsidiary shall be entered in an involuntary case
under any applicable bankruptcy code; provided that an event specified in
clauses (i) through (iii) above or the preceding subclause shall be deemed
to have occurred with respect to a Material Subsidiary Group at the time
when such an event shall have occurred (whether at one time or cumulatively
over a period of time after the date hereof) with respect to all
Subsidiaries constituting such Material Subsidiary Group; or
(i) A judgment or judgments for the payment of money in
excess of $1,000,000 in the aggregate shall be rendered by a court or
courts against the Company, the Guarantor and/or any of their respective
Subsidiaries and the same shall not be discharged (or provision shall not
be made for such discharge), or a stay of execution thereof shall not be
procured, within 30 days from the date of entry thereof and the Company,
the Guarantor or the relevant Subsidiary shall not, within said period of
30 days, or such longer period during which execution of the same shall
have been stayed, appeal therefrom and cause the execution thereof to be
stayed during such appeal; or
(j) An event or condition specified in Section 9.1(e)
hereof shall occur or exist with respect to any Plan or Multiemployer Plan
and, as a result of such event or condition, together with all other such
events or conditions, the Company, the Guarantor or any ERISA Affiliate
shall incur or in the opinion of the Majority Banks shall be reasonably
likely to incur a liability to a Plan, a Multiemployer Plan or PBGC (or any
combination of the foregoing) which is, in the determination of the
Majority Banks, material in relation to the consolidated financial position
of the Company and its consolidated Subsidiaries; or
(k) There shall occur a Change of Control; provided that
any such Change of Control shall not constitute an Event of Default for
purposes of this Section 10(k) if (i)(A) such Change of Control arises
solely in connection with the Liberty Media Transaction, and (B) as of the
date the Liberty Media Transaction is consummated and after giving effect
thereto, no other
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Default or Event of Default shall have occurred and be continuing, or
(ii)(A) such Change of Control arises solely by reason of the merger or
consolidation of the Company with another corporation which is organized
under the laws of a state in the United States and the Company is the
surviving corporation in such merger or consolidation, (B) as of the date
of such merger or consolidation and after giving effect thereto, no other
Default or Event of Default shall have occurred and be continuing, and (C)
the Company has delivered a notice to the Administrative Agent and the
Banks not less than 30 days prior to the consummation of any such merger or
consolidation that sets forth in reasonable detail information indicating
compliance with the terms of clause (ii) of this paragraph (k); or
(l) Following the disposition of any of the Broadcast
Subsidiaries as permitted by Section 9.7 hereof, an event or condition
that constitutes (i) a default or breach by any such Broadcast Subsidiary
that is party to a Silver King Note or any other agreement, including
without limitation, an affiliation agreement, which had been entered into
in connection with such disposition and pursuant to which such Broadcast
Subsidiary and the Company continued a business relationship, and such
default or breach shall continue unremedied for a period of 30 days after
the Company obtained knowledge of such default or breach or (ii) a default
or breach by the Company of any agreement, including without limitation, an
affiliation agreement, which had been entered into in connection with such
disposition and pursuant to which such Broadcast Subsidiary and the Company
continued a business relationship.
THEREUPON: (i) in the case of an Event of Default other than one referred
to in clause (f), (g) or (h) of this Section 10, the Administrative Agent,
with the consent of the Majority Banks, may and, upon request of the
Majority Banks, shall, by notice to the Company, terminate the Commitments
and/or declare the principal amount then outstanding of, and the accrued
interest on, the Loans and all other amounts payable by the Company and the
Guarantor hereunder and under the Notes to be forthwith due and payable,
whereupon such amounts shall be immediately due and payable without
presentment, demand, diligence, protest or other formalities of any kind,
all of which are hereby expressly waived by the Company and the Guarantor;
and (ii) in the case of the occurrence of an Event of Default referred to
in clause (f), (g) or (h) of this Section 10, the Commitments shall be
automatically terminated and the principal amount then outstanding of, and
the accrued
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interest on, the Loans and all other amounts payable by the Company and the
Guarantor hereunder and under the Notes shall become automatically
immediately due and payable without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by the
Company and the Guarantor.
Section 11. The Administrative Agent.
11.1. Appointment, Powers and Immunities. Each Bank hereby
irrevocably appoints and authorizes the Administrative Agent to act as its
agent hereunder with such powers as are specifically delegated to the
Administrative Agent by the terms of this Agreement, together with such
other powers as are reasonably incidental thereto. The Administrative
Agent (which term as used in this sentence and in Section 11.5 and the
first sentence of Section 11.6 hereof shall include reference to its
affiliates and each of the officers, directors, employees and agents of
itself and of its affiliates): (a) shall have no duties or
responsibilities except those expressly set forth in this Agreement, and
shall not by reason of this Agreement be a trustee for any Bank; (b) shall
not be responsible to the Banks for any recitals, statements,
representations or warranties contained in this Agreement, or in any
certificate or other document referred to or provided for in, or received
by any of them under, this Agreement, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this
Agreement, any Note or any other document referred to or provided for
herein or for any failure by the Company or any other Person to perform any
of its obligations hereunder or thereunder; (c) shall not be required to
initiate or conduct any litigation or collection proceedings hereunder,
except as provided for under Section 11.3 hereof; and (d) shall not be
responsible for any action taken or omitted to be taken by it hereunder or
under any other document or instrument referred to or provided for herein
or in connection herewith, except for its own gross negligence or willful
misconduct. The Administrative Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or
misconduct of any such agents or attorneys-in-fact selected by it in good
faith. The Administrative Agent may deem and treat the payee of any Note
as the holder thereof for all purposes hereof unless and until a written
notice of the assignment or transfer thereof shall have been filed with the
Administrative Agent.
11.2. Reliance by the Administrative Agent. The Administrative
Agent shall be entitled to rely upon any certification, notice or other
communication (including any
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thereof by telephone, telex, telegram or cable) reasonably believed by it
to be genuine and correct and to have been signed or sent by or on behalf
of the proper Person or Persons, and upon advice and statements of legal
counsel, independent accountants and other experts selected by the
Administrative Agent. As to any matters not expressly provided for by this
Agreement, the Administrative Agent shall in all cases be fully protected
in acting, or in refraining from acting, hereunder in accordance with
instructions signed by the Majority Banks, and such instructions of the
Majority Banks and any action taken or failure to act pursuant thereto
shall be binding on all of the Banks.
11.3. Defaults. The Administrative Agent shall not be deemed to
have knowledge of the occurrence of a Default (other than the nonpayment of
principal of or interest on Loans or of commitment fees) unless the
Administrative Agent has received notice from a Bank or the Company
specifying such Default and stating that such notice is a "Notice of
Default". In the event that the Administrative Agent receives such a
notice of the occurrence of a Default, the Administrative Agent shall give
prompt notice thereof to the Banks (and shall give each Bank prompt notice
of each such nonpayment). The Administrative Agent shall (subject to
Section 11.7 and Section 12.4 hereof) take such action with respect to such
Default as shall be directed by the Majority Banks, provided that, unless
and until the Administrative Agent shall have received such directions, the
Administrative Agent may (but shall not be obligated to) take such action,
or refrain from taking such action, with respect to such Default as it
shall deem advisable in the best interest of the Banks.
11.4. Rights as a Bank. With respect to its Commitment and the
Loans made by it, LTCB Trust (and any successor acting as Administrative
Agent) in its capacity as a Bank hereunder shall have the same rights and
powers hereunder as any other Bank and may exercise the same as though it
were not acting as the Administrative Agent, and the term "Bank" or "Banks"
shall, unless the context otherwise indicates, include the Administrative
Agent in its individual capacity. LTCB Trust (and any successor acting as
Administrative Agent) and its affiliates may (without having to account
therefor to any Bank) accept deposits from, lend money to and generally
engage in any kind of banking, trust or other business with the Company
(and any of its Affiliates) as if it were not acting as the Administrative
Agent, and LTCB, LTCB Trust and their affiliates may accept fees and other
consideration from the Company and the Guarantor for services in connection
with this Agreement or otherwise without having to account for the same to
the Banks.
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11.5. Indemnification. The Banks agree to indemnify the
Administrative Agent (to the extent not reimbursed under Section 12.3 hereof,
but without limiting the obligations of the Company under said Section 12.3),
ratably in accordance with the aggregate principal amount of the Loans made by
the Banks (or, if no Loans are at the time outstanding, ratably in accordance
with their respective Commitments), for any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against the Administrative Agent in any way relating to
or arising out of this Agreement or any other documents contemplated by or
referred to herein or the transactions contemplated hereby (including, without
limitation, the costs and expenses which the Company is obligated to pay under
Section 12.3 hereof but excluding, unless a Default has occurred and is
continuing, normal administrative costs and expenses incident to the
performance of its agency duties hereunder) or the enforcement of any of the
terms hereof or of any such other documents, provided that no Bank shall be
liable for any of the foregoing to the extent they arise from the gross
negligence or willful misconduct of the party to be indemnified.
11.6. Non-Reliance on Administrative Agent, Co-Agents and other
Banks. Each Bank agrees that it has, independently and without reliance on the
Administrative Agent, either Co-Agent or any other Bank, and based on such
documents and information as it has deemed appropriate, made its own credit
analysis of the Company, the Guarantor and their respective Subsidiaries and
its own decision to enter into this Agreement and that it will, independently
and without reliance upon the Administrative Agent, either Co-Agent or any
other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement, the Notes or any other
related documents. The Administrative Agent shall not be required to keep
itself informed as to the performance or observance by the Company or the
Guarantor of this Agreement or any other document referred to or provided for
herein or to inspect the properties or books of the Company, the Guarantor or
any of their respective Subsidiaries. Except for notices, reports and other
documents and information expressly required to be furnished to the Banks by
the Administrative Agent hereunder, the Administrative Agent shall not have any
duty or responsibility to provide any Co-Agent or any Bank with any credit or
other information concerning the affairs, financial condition or business of
the Company or any Subsidiary (or any
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of their affiliates) which may come into the possession of the Administrative
Agent or any of its affiliates.
11.7. Failure to Act. Except for action expressly required of the
Administrative Agent hereunder, the Administrative Agent shall in all cases be
fully justified in failing or refusing to act hereunder unless it shall be
indemnified to its satisfaction by the Banks against any and all liability and
expense (other than that arising from gross negligence or willful misconduct)
which may be incurred by it by reason of taking or continuing to take any such
action.
11.8. Resignation or Removal of Administrative Agent. Subject to
the appointment and acceptance of a successor Administrative Agent as provided
below, the Administrative Agent may resign at any time by giving notice thereof
to the Banks, the Company and the Guarantor, and the Administrative Agent may
be removed at any time with or without cause by the Majority Banks. Upon any
such resignation or removal, the Majority Banks shall have the right to appoint
a successor Administrative Agent. If no successor Administrative Agent shall
have been so appointed by the Majority Banks and shall have accepted such
appointment within 30 days after the retiring Administrative Agent's giving of
notice of resignation or the Majority Banks' removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of
the Banks, appoint a successor Administrative Agent, which shall be a bank
which has an office in New York, New York with a combined capital and surplus
of at least $100,000,000. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, such
successor Administrative Agent shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations hereunder. After any retiring Administrative
Agent's resignation or removal hereunder as Administrative Agent, the
provisions of this Section 11 shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting
as the Administrative Agent.
11.9. Administrative Agent's Office. The Administrative Agent acts
initially through its office designated on the signature pages hereof, but may
transfer its functions as Administrative Agent to any other office, branch or
affiliate of LTCB at any time by giving prompt, subsequent written notice to
each of the other parties to this Agreement.
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11.10. Co-Agents. Each of the parties acknowledges and agrees that
the Co-Agents, in their capacity as such, have no obligations, duties or
liabilities whatsoever under or in respect of this Agreement or the Notes.
Section 12. Miscellaneous.
12.1. Waiver. No failure on the part of the Administrative Agent,
either Co-Agent or any Bank to exercise, no delay in exercising, and no course
of dealing with respect to, any right, power or privilege under this Agreement
or any Note shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege under this Agreement or any Note
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law.
12.2. Notices. All notices and other communications provided for
herein (including, without limitation, any modifications of, or waivers or
consents under, this Agreement) shall be given or made by telex, telecopy,
telegraph, cable or in writing and telexed, telecopied, telegraphed, cabled,
mailed or delivered to the intended recipient at the "Address for Notices"
specified below its name on the signature pages hereof; or, as to any party, at
such other address as shall be designated by such party in a notice to each
other party. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by
telex or telecopier (with receipt confirmed either mechanically or in writing
by a person at the office of the recipient), personally delivered or, in the
case of a mailed notice, upon receipt, in each case given or addressed as
aforesaid.
12.3. Expenses, Etc. The Company and the Guarantor jointly and
severally agree to pay or reimburse each of the Banks and the Administrative
Agent for paying:
(a) all costs and expenses of the Administrative Agent (including,
without limitation, the reasonable fees and expenses of all special counsel
to the Administrative Agent, the Co-Agents and the Banks, in connection with
(i) the preparation, negotiation, execution and delivery of this Agreement
and the Notes and any related documents and the making of the initial Loans
hereunder, subject to limitations set forth in letters dated the date hereof
between the Company and LTCB Trust and Bank of Montreal, respectively, and
(ii) any amendment, modification or
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waiver of any of the terms of this Agreement or any of the Notes or any
related documents (whether or not any such amendment, modification or
waiver is signed or becomes effective);
(b) all reasonable costs and expenses of each Bank, each Co-Agent
and the Administrative Agent (including reasonable counsels' fees and
expenses) in connection with the enforcement of this Agreement or any of the
Notes and the protection of the rights of each Bank, each Co-Agent and the
Administrative Agent against the Company, the Guarantor or any of their
respective assets; and
(c) all transfer, stamp, documentary and other similar taxes,
assessments or charges (including, without limitation, penalties and interest)
levied by any governmental or revenue authority in respect of this Agreement,
any of the Notes or any other document referred to herein.
The Company hereby agrees to indemnify the Administrative Agent, each
Co-Agent and each Bank and their respective Affiliates, directors, officers,
employees and agents from, and hold each of them harmless against, any and
all losses, liabilities, claims, damages or expenses incurred by any of them
arising out of or by reason of any investigation or litigation or other
proceedings (including any threatened investigation or litigation or other
proceedings) relating to or arising out of this Agreement, the statements
contained in the commitment letter and term sheet, dated September 28, 1992,
as amended, of LTCB Trust, as a Co-Agent, and the commitment letter and term
sheet, dated October 8, 1992, as amended, of Bank of Montreal, as a
Co-Agent, or any aspect thereof, the Banks' agreement to make the Loans
hereunder or from any actual or proposed use by the Company, the Guarantor
or any Subsidiary of either thereof of the proceeds of any of the Loans or
from an alleged breach of this Agreement, including, without limitation, the
reasonable fees and disbursements of counsel incurred in connection with any
such investigation or litigation or other proceedings (but excluding any
such losses, liabilities, claims, damages or expenses incurred by reason of
the gross negligence or willful misconduct of the Person to be indemnified).
12.4. Amendments, Etc. Neither this Agreement nor any Note nor any
terms hereof or thereof may be amended, supplemented or modified except in
accordance with the provisions of this subsection. With the prior written
consent of the Majority Banks, the Administrative Agent, the Company
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and the Guarantor may, from time to time, enter into written amendments,
supplements or modifications hereto for the purpose of adding any
provisions to this Agreement or the Notes or changing in any manner the
rights of the Banks or of the Company and the Guarantor hereunder or
thereunder or waiving, on such terms and conditions as the Administrative
Agent (with the consent of the Majority Banks) may specify in such
instrument, any of the requirements of this Agreement or the Notes or any
Default or Event of Default and its consequences; provided, however, that
no such waiver and no such amendment, supplement or modification shall (a)
extend the maturity of any installment of principal of any Loan or Note, or
reduce the rate or extend the time of payment of interest thereon, or
reduce or extend the time of payment of any fee payable to the Banks
hereunder, or reduce the principal amount of any Loan, or increase the
amount of any Bank's Commitment, or release the Guarantor from any of its
obligations hereunder, or amend, modify or waive any provision of this
subsection, or reduce the percentage specified in the definition of
"Majority Banks" in Section 1.1 hereof, or consent to the assignment or
transfer by the Company or the Guarantor of any of its rights and
obligations under this Agreement or the Notes, in each case without the
prior written consent of all the Banks, or (b) amend, modify or waive
any provision of Section 11 hereof without the written consent of the
Administrative Agent. Any such waiver and any such amendment, supplement
or modification shall apply equally to each of the Banks and shall be
binding upon the Company, the Guarantor, the Banks, the Administrative
Agent, the Co-Agents and all future holders of the Notes. In the case of
any waiver, the Company, the Guarantor, the Banks and the Administrative
Agent shall be restored to their former position and rights hereunder and
under the outstanding Notes, and any Default or Event of Default waived
shall be deemed to be cured and not continuing; but no such waiver shall
extend to any subsequent or other Default or Event of Default, or impair
any right subsequent thereon.
12.5. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
12.6. Assignments and Participation.
(a) Neither the Company nor the Guarantor may assign its rights or
obligations hereunder or under the Notes without the prior consent of all of
the Banks and the Administrative Agent.
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(b) Any Bank may assign any of its Loan, its Note or its
Commitment without the prior consent of the Company, the Guarantor, the
Administrative Agent or any other Bank, provided that (i) assignments of
less than all of a Bank's Commitment and Loan shall be in a principal amount
of not less than $10,000,000 (or such lesser amount as may be agreed upon by
the Company) and (ii) any such assignment shall be made pursuant to an
assignment and assumption agreement substantially in the form of Exhibit E
hereto (an "Assignment Agreement"). Upon written notice to the Company and
the Administrative Agent of an assignment, identifying in detail reasonably
satisfactory to the Administrative Agent the assignee Bank and the amount of
the assignor Bank's Commitment and Loans assigned, the assignee shall have,
as of the date of effectiveness of such assignment and to the extent of such
assignment, the obligations, rights and benefits of, and shall be deemed for
all purposes hereunder, a Bank party hereto holding the Commitment and Loans
(or portions thereof) assigned to it (in addition to the Commitment and
Loans, if any, theretofore held by such assignee) and the assignor shall be
released from such obligations to such extent.
(c) Any Bank may sell to one or more other Persons a participation
in all or any part of the Commitment or the Loan held by it, in which event
each such participant shall be entitled to the rights and benefits of the
provisions of Sections 5 and 9.1(h) hereof with respect to its participation
in such Loan as if (and the Company and the Guarantor shall be directly
obligated to such participant under such provisions as if) such participant
were a "Bank" for purposes of said Sections, but shall not have any other
rights or benefits under this Agreement or any Note (the participant's rights
against such Bank in respect of such participation to be those set forth in
the agreement (the "Participation Agreement") executed by such Bank in favor
of such participant); provided, that all amounts payable by the Company or
the Guarantor to any Bank and any participant under Section 5 hereof in
respect of any Loan shall be determined as if such Bank had not sold any
participations in such Loan and as if such Bank were funding all of such Loan
in the same way that it is funding the portion of such Loan in which no
participations have been sold. In no event shall a Bank that sells a
participation be obligated to any participant under the Participation
Agreement to take or refrain from taking any action hereunder or under such
Bank's Note except that such Bank may agree in the Participation Agreement
-67-
<PAGE> 72
that it will not, without the consent of the participant, agree to (i)
the extension of any date fixed for the payment of principal of or interest
on the related Loan or Loans, (ii) the reduction of any payment of
principal thereof, (iii) the reduction of the rate at which either interest
is payable thereon or (if the participant is entitled to any part thereof)
commitment fee is payable hereunder to a level below the rate at which the
participant is entitled to receive interest or commitment fee (as the case
may be) in respect of such participation, or (iv) any release of the
Guarantor from any of its obligations under this Agreement or the Notes.
(d) In addition to the assignments and participations permitted under
the foregoing provisions of this Section 12.6, any Bank may assign and
pledge all or any portion of its Loan and its Note to any Federal Reserve
Bank as collateral security pursuant to Regulation A and any Operating
Circular issued by such Federal Reserve Bank. No such assignment shall
release the assigning Bank from its obligations hereunder.
(e) A Bank may furnish any information concerning the Company, the
Guarantor or any of their respective Subsidiaries in the possession of such
Bank from time to time to assignees and participants (including prospective
assignees and participants).
12.7. Confidentiality. The Administrative Agent, the Co-Agents,
and each of the Banks hereby acknowledge that certain of the information to
be furnished to them pursuant to this Agreement may be non-public
information. The Administrative Agent, each Co-Agent, and each Bank hereby
agrees that it will keep all information so furnished to it pursuant hereto
confidential in accordance with its normal banking procedures and, except
in accordance with such procedures, will make no disclosure to any other
Person of such information until the same shall have become public, except
(i) in connection with matters involving this Agreement (including, without
limitation, litigation involving the Company, the Guarantor, the Co-Agents,
the Administrative Agent or the Banks) and with the obligations of any of
the Administrative Agent, such Co-Agent or such Bank under law or
regulation, (ii) pursuant to subpoenas or similar process, (iii) to
Governmental Authorities or examiners, (iv) to independent auditors or
counsel, (v) to any parent or corporate Affiliate of any of the
Administrative Agent, such Co-Agent or such Bank, or (vi) to any
participant or proposed participant or assignee or proposed assignee
hereunder so long as such participant or proposed participant or assignee
or
-68-
<PAGE> 73
proposed assignee (a) is not in the same general type of business as the
Company on the date of such disclosure and (b) agrees in writing to accept
such information subject to the restrictions provided in this Section 12.7;
provided that in no event shall any of the Administrative Agent, such
Co-Agent or such Bank be obligated or required to return any materials
furnished by the Company or any of its Subsidiaries.
12.8. Survival. Without limiting the survival of any other
obligations of the Company, the Guarantor and the Banks hereunder, the
obligations of the Company and the Guarantor under Sections 2.5, 5.1, 5.4,
5.5 and 12.3 hereof and the obligations of the Banks under Sections 4.7,
11.5 and 12.7 hereof, shall survive the repayment of the Loans and the
termination of the Commitments.
12.9. Captions. Captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
12.10. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
12.11. GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
12.12. JURISDICTION. EACH OF THE COMPANY AND THE GUARANTOR HEREBY
AGREES THAT:
(A) ANY SUIT, ACTION OR PROCEEDING AGAINST THE COMPANY OR THE GUARANTOR
WITH RESPECT TO THIS AGREEMENT, THE LOANS, THE NOTES OR ANY DOCUMENTS RELATED
HERETO OR ANY JUDGMENT ENTERED BY ANY COURT IN RESPECT THEREOF MAY BE BROUGHT
IN THE SUPREME COURT OF THE STATE OF NEW YORK, COUNTY OF NEW YORK, IN THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, OR IN
ANY STATE OR FEDERAL COURT SITTING IN THE STATE OF FLORIDA (COLLECTIVELY,
THE "SUBJECT COURTS"), AS THE ADMINISTRATIVE AGENT, EITHER CO-AGENT OR ANY
BANK MAY ELECT IN ITS SOLE DISCRETION AND EACH OF THE COMPANY AND THE
GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF
EACH OF THE SUBJECT COURTS FOR THE PURPOSE OF ANY SUCH SUIT, ACTION,
PROCEEDING OR JUDGMENT. EACH OF THE COMPANY AND THE GUARANTOR HEREBY
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS IN ANY SUIT, ACTION OR
PROCEEDING
-69-
<PAGE> 74
IN ANY OF THE SUBJECT COURTS BY THE MAILING THEREOF BY THE ADMINISTRATIVE
AGENT, THE RESPECTIVE CO-AGENT OR THE RESPECTIVE BANK BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO THE COMPANY OR THE GUARANTOR, AS THE
CASE MAY BE, ADDRESSED AS PROVIDED IN SECTION 12.2 HEREOF. NOTHING HEREIN
SHALL IN ANY WAY BE DEEMED TO LIMIT THE ABILITY OF THE ADMINISTRATIVE AGENT,
EITHER CO-AGENT OR ANY BANK TO SERVE ANY SUCH WRITS, PROCESS OR SUMMONSES IN
ANY OTHER MANNER PERMITTED BY APPLICABLE LAW OR TO BRING PROCEEDINGS AGAINST
THE COMPANY OR THE GUARANTOR IN ANY COMPETENT COURT OF ANY OTHER JURISDICTION
OR JURISDICTIONS, AND IN SUCH MANNER, AS MAY BE PERMITTED BY APPLICABLE LAW.
(B) EACH OF THE COMPANY AND THE GUARANTOR HEREBY WAIVES ANY RIGHT TO
TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING IN RESPECT OF THIS AGREEMENT,
THE NOTES OR ANY OTHER DOCUMENTS IN CONNECTION HEREWITH, ANY OBJECTION TO THE
LAYING OF VENUE IN ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY OF THE
SUBJECT COURTS, AND, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY CLAIM THAT
SUCH SUIT, ACTION OR PROCEEDING IN ANY OF THE SUBJECT COURTS HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM.
12.13. Severability. Any provision of this Agreement or the Notes
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
thereof or affecting the validity or enforceability of such provision in
any other jurisdiction.
-70-
<PAGE> 75
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
HOME SHOPPING NETWORK, INC.,
as the Company
By
------------------------------
Title: Chief Financial Officer
2501 118th Avenue North
St. Petersburg, Florida 33716
Telecopier No.: (813) 539-6505
Telephone No.: (813) 572-8585
Attention: Les R. Wandler
with a copy to:
"Legal Department"
Telecopier No.: (813) 573-0866
HOME SHOPPING CLUB, INC.,
as Guarantor
By
------------------------------
Title: Treasurer
2501 118th Avenue North
St. Petersburg, Florida 33716
Telecopier No.: (813) 539-6505
Telephone No.: (813) 572-8585
Attention: Les R. Wandler
with a copy to:
"Legal Department"
Telecopier No.: (813) 573-0866
-71-
<PAGE> 76
The Banks
Commitment
$13,500,000 LTCB TRUST COMPANY, as a Bank
and a Co-Agent
By
------------------------------
Title:
Lending Office for Federal Funds
Rate Loans and Prime Rate Loans:
165 Broadway
New York, New York 10006
Lending Office for LIBOR Loans:
165 Broadway
New York, New York 10006
Address for Notices:
165 Broadway
New York, New York 10006
Telex No.: 425722
Telecopier No.: (212) 608-3081
Telephone No.: (212) 335-4854
Attention:
---------------------
-72-
<PAGE> 77
$13,500,000 BANK OF MONTREAL, as a Bank
and a Co-Agent
By
------------------------------
Title:
Lending Office for Federal Funds
Rate Loans and Prime Rate Loans:
115 South LaSalle Street
11th Floor
Chicago, Illinois 60603
Lending Office for LIBOR Loans:
115 South LaSalle Street
11th Floor
Chicago, Illinois 60603
Address for Notices:
430 Park Avenue
15th Floor, Account
Administration
New York, New York 10022
Telecopier No.: (212) 605-1525
Telephone No.: (212) 605-1436
or (212) 605-1458
Attention: Prescilla Quinones or
John Decoufle
-73-
<PAGE> 78
$9,000,000 THE BANK OF NEW YORK
By
------------------------------
Title:
Lending Office for Federal Funds
Rate Loans and Prime Rate Loans:
One Wall Street
New York, New York 10286
Lending Office for LIBOR Loans:
One Wall Street
New York, New York 10286
Address for Notices:
One Wall Street
22nd Floor
New York, New York 10286
Telecopier No.: (212) 635-6399
or (212) 635-6877
Telephone No.: (212) 635-6780
Attention: Ramona McCottrie
-74-
<PAGE> 79
$6,000,000 CITIZENS FIDELITY BANK & TRUST
COMPANY
By
------------------------------
Title:
Lending Office for Federal Funds
Rate Loans and Prime Rate Loans:
500 West Jefferson Street
Louisville, Kentucky 40202
Lending Office for LIBOR Loans:
500 West Jefferson Street
Louisville, Kentucky 40202
Address for Notices:
PNC Commercial Corp.
201 South Orange Avenue
Suite 750
Orlando, Florida 32801
Telecopier No.: (407) 843-8263
Telephone No.: (407) 841-3585
Attention: James Neil or
Diane Tyre
-75-
<PAGE> 80
$6,000,000 THE DAIWA BANK, LIMITED
By
------------------------------
Title:
By
------------------------------
Title:
Lending Office for Federal
Funds Rate Loans and Prime Rate Loans:
233 South Wacker Dr., Suite 5400
Chicago, Illinois 60606
Lending Office for LIBOR Loans:
233 South Wacker Dr., Suite 5400
Chicago, Illinois 60606
Address for Notices:
100 South Ashley Drive
Suite 1780
Tampa, Florida 33602
Telecopier No.: (813) 229-6372
Telephone No.: (813) 229-6002
Attention: Sybil Weldon, Vice
President
-76-
<PAGE> 81
$6,000,000 FIRST UNION NATIONAL BANK OF
FLORIDA
By
------------------------------
Title:
Lending Office for Federal Funds
Rate Loans and Prime Rate Loans:
214 Hogan Street
Jacksonville, Florida 33202
Lending Office for LIBOR Loans:
214 Hogan Street
Jacksonville, Florida 33202
Address for Notices:
410 Central Avenue
St. Petersburg, Florida 33701
---------------------------
Telecopier No.: (813) 892-7254
Telephone No.: (813) 892-7297
Attention: J. Gregory Olivier,
Vice President
-77-
<PAGE> 82
$6,000,000 SUN BANK OF TAMPA BAY
By
------------------------------
Title:
Lending Office for Federal
Funds Rate Loans and Prime Rate
Loans:
315 East Madison
Tampa, Florida 33601
Lending Office for LIBOR Loans:
315 East Madison
Tampa, Florida 33601
Address for Notices:
3601 34th Street, North
3rd Floor, Corporate Banking
St. Petersburg, Florida
33713
Telecopier No.: (813) 892-4810
Telephone No.: (813) 892-4951
Attention: Peggy Scarborough
- -------------------
Total: $60,000,000
-78
<PAGE> 83
The Administrative Agent
LTCB TRUST COMPANY,
as Administrative Agent
By
------------------------------
Title:
Address for Notices to
Administrative Agent:
165 Broadway
New York, New York 10006
Telex No.: 425722
Telecopier No.: (212) 608-3081
Telephone No.: (212) 335-4854
Attention:
----------------------
-79-
<PAGE> 84
EXHIBIT A
PROMISSORY NOTE
$______________ ___________, 1992
New York, New York
FOR VALUE RECEIVED, HOME SHOPPING NETWORK, INC., a Delaware corporation
(the "Company"), hereby promises to pay to the order of ___________________
(the "Bank"), for account of its respective Applicable Lending Offices provided
for by the Term Loan Agreement referred to below, by paying to account no.
04203606 of LTCB Trust Company (the "Administrative Agent") at the principal
offices of Bankers Trust Company, New York, New York (reference: "Home Shopping
Network - Term Loan Facility") (or at such other place as the Administrative
Agent may notify the Company from time to time) the principal sum of
______________ Dollars ($_____________), in lawful money of the United States
of America and in immediately available funds, without set-off, counterclaim or
deduction of any kind, which sum shall be due and payable in three installments
on the dates set forth below, each installment to be in the amount equal to the
lesser of the amount set forth opposite the applicable installment below and
the remaining aggregate principal amount of the installment:
Date Principal Amount
---- ----------------
June 15, 1994 $
June 15, 1995 $
December 15, 1995 $ .
The Company further agrees to pay interest on the unpaid principal amount
of this Note, at such office, in like money and funds and in such manner,
for the period commencing on the date of this Note until this Note shall be
paid in full, at the rates per annum and on the dates provided in the Term
Loan Agreement.
The amount and type of, and the duration of each Interest Period (if
applicable) for, the Loan evidenced hereby, the date such Loan is made or
converted from a Loan of another type, and the amount of each payment or
prepayment made on account of the principal thereof, shall be recorded by
the Bank on its books and, prior to any transfer of this Note, endorsed by
the Bank on the schedule attached hereto or any continuation thereof;
provided that no failure of the Bank to make any such endorsement shall
affect the obligations of the Company under the Term Loan Agreement or this
Note.
This Note is one of the Notes referred to in the Term Loan Agreement,
dated as of December 18, 1992 (as in effect from time to time, the "Term
Loan Agreement"), among
<PAGE> 85
the Company, Home Shopping Club, Inc., a Delaware corporation, as guarantor
(the "Guarantor"), the Banks named therein (including the Bank), LTCB Trust
Company and Bank of Montreal, each as a Co-Agent for the Banks, and the
Administrative Agent, and evidences the Loan made by the Bank thereunder,
is entitled to the benefits thereof and is subject to the optional and
mandatory prepayment provisions contained therein. Capitalized terms used
in this Note have the respective meanings assigned to them in the Term Loan
Agreement.
The Term Loan Agreement provides for the acceleration of the maturity
of this Note upon the occurrence of certain events and for prepayments of
Loans upon the terms and conditions specified therein.
No provision of the Term Loan Agreement or this Note or any other
document delivered in connection with either thereof and no transaction
contemplated hereby or thereby shall be construed or shall operate so as to
require the Company or the Guarantor to pay interest hereunder in an amount
or at a rate greater than the maximum allowed from time to time by
applicable law. Should any interest or other charges paid by the Company
or the Guarantor hereunder result in a computation or earning of interest
in excess of the maximum rate of interest permitted under applicable law in
effect while such interest is being earned, then such excess shall be
waived by the Bank and all such excess shall be automatically credited
against and in reduction of the principal balance of such amounts payable
hereunder and any portion of such excess received by the Bank shall be paid
over by the Bank to the Company or the Guarantor, as the case may be, it
being the intent of the Company and the Guarantor and the other parties to
the Term Loan Agreement that under no circumstances shall the Company or
the Guarantor or any other Person be required to pay interest in excess of
the maximum rate allowed by such applicable law.
The Company hereby waives diligence, presentment, protest, notice of
default, dishonor or nonpayment and any other notice and all demands
whatsoever. The Company hereby further waives all setoffs and
counterclaims against the Company, the Administrative Agent, the Co-Agents
and each of the Banks.
<PAGE> 86
THIS NOTE HAS BEEN EXECUTED AND DELIVERED IN, AND SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF, THE STATE OF NEW YORK.
HOME SHOPPING NETWORK, INC.
By
-------------------------
Title:
GUARANTEE
The undersigned HOME SHOPPING CLUB, INC., a Delaware corporation (the
"Guarantor"), hereby unconditionally and irrevocably guarantees the payment in
full when due (whether at stated maturity, by acceleration or otherwise) of the
principal of and interest on this Note and all other amounts payable hereunder,
in accordance with the terms hereof and of Section 6 of the Term Loan Agreement,
and, in the case of any extension of time of payment, in whole or in part, that
all such amounts shall be paid in full when due (whether at stated maturity,
by acceleration or otherwise) in accordance with the terms of such extension.
In addition, the Guarantor hereby unconditionally agrees that upon default in
the payment when due (whether at stated maturity, by acceleration or otherwise)
of any of such principal, interest or other amounts, the Guarantor shall
forthwith pay and perform the same in the money and funds, at the time, in the
place and in the manner provided for such payment in the Term Loan Agreement.
This guarantee is a continuing guarantee of payment and not merely of
collection; it is a primary, independent obligation of the Guarantor; and the
Guarantor's obligations hereunder shall be absolute, unconditional and
irrevocable, irrespective of any and all circumstances whatsoever. The
Guarantor hereby waives diligence, presentment, protest, notice of default,
dishonor or nonpayment and any other notice and all demands whatsoever. The
Guarantor hereby further waives all setoffs and counterclaims against the
Company, the Administrative Agent, the Co-Agents and each of the Banks.
HOME SHOPPING CLUB, INC.
By
-------------------------
Title:
<PAGE> 87
<TABLE>
<CAPTION>
LOANS
Date
Loan Principal Type Amount Unpaid
Made or Amount of Interest Paid or Principal Notation
Converted of Loan Loan Period Prepaid Amount Made By
--------- -------- ---- -------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE> 88
FIRST AMENDMENT, dated as of January 15, 1993, to the Term
Loan Agreement, dated as of December 18, 1992 (the "Term Loan Agreement"),
among HOME SHOPPING NETWORK, INC. (the "Company"), HOME SHOPPING CLUB, INC.
(the "Guarantor"), the banks signatory thereto (the "Banks"), LTCB TRUST
COMPANY and BANK OF MONTREAL, each as a Co-Agent for the Banks (each in such
capacity, a "Co- Agent"), and LTCB TRUST COMPANY, as Administrative Agent for
the Banks (in such capacity, the "Administrative Agent").
WHEREAS, the Company and the Guarantor have requested, and the
Banks, the Co-Agents and the Administrative Agent have agreed, to amend certain
provisions of the Term Loan Agreement;
NOW, THEREFORE, in consideration of the foregoing, and for
other good and valuable consideration the receipt of which is hereby
acknowledged, the parties hereby agree as follows:
SECTION 1. CERTAIN DEFINED TERMS. Except as expressly set
forth in this First Amendment, terms defined in the Term Loan Agreement and
used herein shall have their respective defined meanings when used herein.
SECTION 2. AMENDMENTS TO THE TERM LOAN AGREEMENT.
(a) The Term Loan Agreement is hereby amended by
replacing the date "February 6, 1993" in the definition of "Commitment
Termination Date" in Section 1.1 of the Term Loan Agreement with the date
"February 19, 1993".
(b) The definition of "Silver King Notes" in Section 1.1 of
the Term Loan Agreement is hereby amended by inserting the words "or any of its
Subsidiaries" after the word "Company" in such definition.
(c) Paragraph (b) of Section 3.3 of the Term Loan Agreement is
hereby amended by inserting the words "or any of its Subsidiaries" after the
word "Company" in the first line of such paragraph.
(d) Clause (B) of the final proviso to Section 9.5 of the Term
Loan Agreement is hereby amended by inserting the words "or any of its
Subsidiaries" after the word "Company" appearing therein.
<PAGE> 89
(e) The final proviso to Section 9.7 of the Term Loan
Agreement is hereby amended by inserting the words "or any of its Subsidiaries"
after the word "Company" appearing therein.
(f) Clause (ii) of Section 9.17 of the Term Loan Agreement is
hereby amended by inserting the words ", provided that in the case of any
Subsidiary that holds any of the Silver King Notes and any other Subsidiary
that owns shares of capital stock of any such Subsidiary, such trade
Indebtedness does not at any time and with respect to all such Subsidiaries
collectively exceed $1,000,000 in an aggregate principal amount" after the word
"business" at the end of such clause.
(g) Paragraph (l) of Section 10 of the Term Loan Agreement is
hereby amended by (A) inserting the words "or any of its Subsidiaries" after
the word "Company" in each of the ninth and thirteenth lines of such paragraph,
and (B) inserting the words "or any such Subsidiary" after the word "Company"
in each of the eleventh and sixteenth lines of such paragraph.
(h) Each reference in the Term Loan Agreement to "this
Agreement" and the words "hereof", "hereto", "herein" and the like, shall,
except where the context otherwise requires, refer to the Term Loan Agreement
as amended by this First Amendment.
SECTION 3. REPRESENTATIONS AND WARRANTIES. Each of the
Company and the Guarantor represents and warrants to the Administrative Agent
and the Banks that the representations and warranties made by the Company and
the Guarantor in Section 8 of the Term Loan Agreement and in any other
certificate or other document delivered in connection with the Term Loan
Agreement shall be true in all material respects on and as of the date of the
effectiveness of this First Amendment with the same force and effect as if made
on and as of such date (including, without limitation, that there shall have
occurred no material adverse change since August 31, 1992 in the consolidated
financial condition or operations, or the business taken as a whole, of the
Company and its consolidated Subsidiaries from that set forth in their
financial statements dated as of August 31, 1992, except as disclosed to the
Banks in writing prior to the date of this Amendment.
SECTION 4. CONDITIONS TO EFFECTIVENESS. This First Amendment
shall become effective as of the date first above written when (a) counterparts
hereof shall have been duly executed and delivered by each of the parties
provision for
-2-
<PAGE> 90
whose signature is made on the signature pages hereof, and (b) the Company
shall have paid to the Administrative Agent for the ratable account of the
Banks an aggregate fee of $12,500 to be paid to each Bank on a pro rata basis
in proportion to such Bank's respective Commitment.
SECTION 5. MISCELLANEOUS.
A. This First Amendment may be executed in any number of
counterparts, all of which taken together and when delivered to the
Administrative Agent shall constitute one and the same instrument, and any of
the parties hereto may execute this First Amendment by signing any such
counterpart.
B. THIS FIRST AMENDMENT AND THE TERM LOAN AGREEMENT AS
AMENDED HEREBY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK.
C. Except as expressly set forth in this First Amendment, the
Term Loan Agreement shall remain unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be duly executed as of the date first above written.
HOME SHOPPING NETWORK, INC.,
as the Company
By /s/ LES R. WANDLER
----------------------------
Title: Executive Vice
President
HOME SHOPPING CLUB, INC.,
as Guarantor
By /s/ LES R. WANDLER
----------------------------
Title: Treasurer
-3-
<PAGE> 91
The Banks
LTCB TRUST COMPANY, as a Bank
and a Co-Agent
By /s/ JOHN A. KROB
-------------------------------
Title: Senior Vice President
BANK OF MONTREAL, as a Bank
and a Co-Agent
By /s/ PATRICK SULLIVAN
-------------------------------
Title: Director
THE BANK OF NEW YORK
By /s/ ALAN LYSTER, JR.
-------------------------------
Title: Vice President
CITIZENS FIDELITY BANK & TRUST
COMPANY
By /s/ JAMES D. NEIL
-------------------------------
Title: Assistant Vice
President
THE DAIWA BANK, LIMITED
By /s/ SYBIL H. WELDON
-------------------------------
Title: Vice President &
Manager
By /s/ ALLEN L. HARVELL, JR.
-------------------------------
Title: Vice President
FIRST UNION NATIONAL BANK OF
FLORIDA
By /s/ ROBERT E. HASTINGS
-------------------------------
Title: Vice President
SUN BANK OF TAMPA BAY
By /s/ ROBERT J. WILLSEA
-------------------------------
Title: Corporate Banking
Officer
-4-
<PAGE> 92
The Administrative Agent
LTCB TRUST COMPANY,
as Administrative Agent
By /s/ JOHN A. KROB
----------------------------
Title: Senior Vice President
-5-
<PAGE> 93
SECOND AMENDMENT, dated as of February 4, 1993, to the Term Loan
Agreement, dated as of December 18, 1992, as amended by the First Amendment,
dated as of January 15, 1993 (as so amended, the "Term Loan Agreement"), among
HOME SHOPPING NETWORK, INC. (the "Company"), HOME SHOPPING CLUB, INC. (the
"Guarantor"), the banks signatory thereto (the "Banks"), LTCB TRUST COMPANY and
BANK OF MONTREAL, each as a Co-Agent for the Banks (each in such capacity, a
"Co-Agent"), and LTCB TRUST COMPANY, as Administrative Agent for the Banks (in
such capacity, the "Administrative Agent").
WHEREAS, the Company and the Guarantor have requested, and the Banks,
the Co-Agents and the Administrative Agent are willing, to amend certain
provisions of the Term Loan Agreement;
NOW, THEREFORE, in consideration of the foregoing, and for other
good and valuable consideration the receipt of which is hereby acknowledged,
the parties hereby agree as follows:
SECTION 1. CERTAIN DEFINED TERMS. Except as expressly set forth
in this Second Amendment, terms defined in the Term Loan Agreement and used
herein shall have their respective defined meanings when used herein.
SECTION 2. AMENDMENTS TO THE TERM LOAN AGREEMENT.
(a) Section 1.1 of the Term Loan Agreement is hereby amended
by inserting the following definition at the beginning of the list of defined
terms in such Section:
"'1993 Term Loan Agreement' shall mean the Term Loan
Agreement, dated as of February 4, 1993, among the Company, the
Guarantor, the banks signatory thereto, LTCB Trust Company, as agent
for such banks, Bank of Montreal and The Bank of New York, each as a
co-agent for such banks, and LTCB Trust Company, as administrative
agent for such banks, as the same may be amended or modified from
time to time in accordance with the terms thereof."
(b) Section 8.11 of the Term Loan Agreement is hereby amended by
deleting all of the text in such Section following the word "hereof" in the
fifth line of such Section and inserting the following: "(other than the
assets which were disposed of in connection with the distribution of the
<PAGE> 94
capital stock of Silver King Communications, Inc., a Wholly-Owned
Subsidiary of the Company, as reflected in Note 6.c to the Condensed
Consolidated Financial Statements contained in the Company's Quarterly Report
on Form 10-Q for the Fiscal Quarter ended November 30, 1992), subject to:
(a) no Liens other than the Liens specified in Footnotes D and
G to such balance sheet and, on the date hereof, such additional Liens
as are listed on Schedule 1 hereto, and on any date hereafter,
additional Liens permitted by Section 9.5 hereof and either (i) listed
in Footnotes to the financial statements delivered pursuant to Section
9.1(a) or (b) hereof or (ii) otherwise communicated to the Banks in
writing, and
(b) on any date hereafter, dispositions permitted by Section
9.7 hereof and either (i) described in the financial statements,
including any notes thereto, delivered pursuant to Section 9.1(a) or
(b) hereof or (ii) otherwise communicated to the Banks in writing."
(c) Section 9.14 of the Term Loan Agreement is hereby amended by
inserting after the words "Revolving Credit Agreement" in each of the fourth
and fourteenth lines of such Section the following: ", the 1993 Term Loan
Agreement".
(d) Clause (iv) of Section 9.17 of the Term Loan Agreement is
hereby amended by deleting such clause in its entirety and replacing it with the
following:
"Indebtedness of the Guarantor under this Agreement, the Revolving
Credit Agreement and the 1993 Term Loan Agreement."
SECTION 3. REPRESENTATIONS AND WARRANTIES. Each of the Company and
the Guarantor represents and warrants to the Administrative Agent and the Banks
that (a) no Default or Event of Default has occurred and is continuing, and (b)
the representations and warranties made by the Company and the Guarantor in
Section 8 of the Term Loan Agreement, as amended hereby, and in any other
certificate or other document delivered in connection with the Term Loan
Agreement shall be true in all material respects on and as of the date of the
effectiveness of this Second Amendment with the same force and effect as if
made on and as of such date (including, without limitation, that there shall
have occurred no material adverse change since August 31, 1992 in the
consolidated financial condition or operations, or the business taken as a
whole, of the Company and its consolidated Subsidiaries from that set forth in
their financial statements dated as of August 31,
-2-
<PAGE> 95
1992, except as disclosed to the Banks in writing prior to the date of this
Amendment).
SECTION 4. CONDITIONS TO EFFECTIVENESS. This Second Amendment shall
become effective as of the date first above written when counterparts hereof
shall have been duly executed and delivered by the Majority Banks.
SECTION 5. MISCELLANEOUS.
A. This Second Amendment may be executed in any number of
counterparts, all of which taken together and when delivered to the
Administrative Agent shall constitute one and the same instrument, and any of
the parties hereto may execute this Second Amendment by signing any such
counterpart.
B. THIS SECOND AMENDMENT AND THE TERM LOAN AGREEMENT AS AMENDED HEREBY
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK.
C. Except as expressly set forth in this Second Amendment, the Term
Loan Agreement shall remain unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be duly executed as of the date first above written.
HOME SHOPPING NETWORK, INC.,
as the Company
By /s/ LES R. WANDLER
-------------------
Title: Executive Vice
President
HOME SHOPPING CLUB, INC.,
as Guarantor
By /s/ LES R. WANDLER
-------------------
Title: Treasurer
-3-
<PAGE> 96
The Banks
LTCB TRUST COMPANY, as a Bank
and a Co-Agent
By /s/ RIKUICHI YOSHISUE
----------------------
Title: Executive Vice
President
BANK OF MONTREAL, as a Bank
and a Co-Agent
By /s/ PATRICK J. SULLIVAN
------------------------
Title: Director
THE BANK OF NEW YORK
By /s/ ALAN LYSTER, JR.
---------------------
Title: Vice President
CITIZENS FIDELITY BANK & TRUST
COMPANY
By /s/ H. JOSEPH BRENNER
----------------------
Title: Vice President
THE DAIWA BANK, LIMITED
By
----------------------
Title:
By
----------------------
Title:
FIRST UNION NATIONAL BANK OF
FLORIDA
By /s/ ROBERT E. HASTINGS
----------------------
Title: Vice President
SUN BANK OF TAMPA BAY
By
-----------------------
Title:
-4-
<PAGE> 97
The Administrative Agent
LTCB TRUST COMPANY,
as Administrative Agent
By /s/ RIKUICHI YOSHISUE
---------------------
Title: Executive Vice
President
-5-
<PAGE> 98
THIRD AMENDMENT, dated as of May 28, 1993, to the Term Loan Agreement,
dated as of December 18, 1992, as amended by the First Amendment, dated as of
January 15, 1993, the Second Amendment, dated as of February 4, 1993, and
paragraph number 2 of the letter dated April 14, 1993 from LTCB Trust
Company, as Administrative Agent, to Home Shopping Network, Inc. (as so
amended, the "1992 Term Loan Agreement"), among HOME SHOPPING NETWORK, INC.
(the "Company"), HOME SHOPPING CLUB, INC. (the "Guarantor"), the banks
signatory thereto (the "Banks"), LTCB TRUST COMPANY and BANK OF MONTREAL, each
as a Co-Agent for the Banks (each in such capacity, a "Co-Agent"), and LTCB
TRUST COMPANY, as Administrative Agent for the Banks (in such capacity, the
"Administrative Agent").
WHEREAS, the Company and the Guarantor have requested, and the Banks,
the Co-Agents and the Administrative Agent are willing, to amend certain
provisions of the 1992 Term Loan Agreement;
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration the receipt of which is hereby acknowledged, the
parties hereby agree as follows:
SECTION 1. CERTAIN DEFINED TERMS. Except as expressly set forth in
this Third Amendment, terms defined in the 1992 Term Loan Agreement and used
herein shall have their respective defined meanings when used herein.
SECTION 2. AMENDMENTS TO THE 1992 TERM LOAN AGREEMENT.
(a) Section 9.11 of the 1992 Term Loan Agreement is hereby amended by
deleting such Section in its entirety and replacing it with the following:
"9.11. Fixed Charges Coverage Test. The Company will maintain
the ratio of Adjusted Operating Cash Flow to Fixed Charges for the
Company and its Subsidiaries on a consolidated basis, (a) for each
four-Fiscal Quarter period ending with each of the following Fiscal
Quarters, to be not less than the following ratios:
<PAGE> 99
Fiscal Quarter
Ended Minimum Ratio
----------------- -------------
February 28, 1993 1.70:1
May 31, 1993 1.70:1
August 31, 1993 1.70:1
November 30, 1993 1.35:1
February 28, 1994 1.45:1
May 31, 1994 1.35:1
August 31, 1994 1.35:1,
and (b) for each four-Fiscal Quarter period ending in each of the
following Fiscal Years, to be not less than the following ratios:
Fiscal Year Minimum Ratio
----------- -------------
Fiscal 1995 1.40:1
Fiscal 1996 1.70:1."
(b) Section 9.12 of the 1992 Term Loan Agreement is hereby
amended by deleting such Section in its entirety and replacing
it with the following:
"9.12. Debt Ratio. The Company will not permit the ratio of
Total Debt to Operating Cash Flow for the Company and its Subsidiaries
on a consolidated basis, (a) for each four-Fiscal Quarter period
ending with each of the following Fiscal Quarters, to be greater than
the following ratios:
Fiscal Quarter
Ended Maximum Ratio
---------------- -------------
February 28, 1993 1.90:1
May 31, 1993 1.90:1
August 31, 1993 2.15:1
November 30, 1993 1.95:1
February 28, 1994 1.65:1
May 31, 1994 1.60:1
August 31, 1994 1.60:1,
and (b) for each four-Fiscal Quarter period ending in each of the
following Fiscal Years, to be greater than the following ratios:
-2-
<PAGE> 100
Fiscal Year Maximum Ratio
----------- -------------
Fiscal 1995 1.35:1
Fiscal 1996 1.15:1."
SECTION 3. REPRESENTATIONS AND WARRANTIES. Each of the Company and
the Guarantor represents and warrants to the Administrative Agent and the Banks
that (a) no Default or Event of Default has occurred and is continuing, and (b)
the representations and warranties made by the Company and the Guarantor in
Section 8 of the 1992 Term Loan Agreement, as amended hereby, and in any other
certificate or other document delivered in connection with the 1992 Term Loan
Agreement shall be true in all material respects on and as of the date of the
effectiveness of this Third Amendment with the same force and effect as if made
on and as of such date (including, without limitation, that there shall have
occurred no material adverse change since August 31, 1992 in the consolidated
financial condition or operations, or the business taken as a whole, of the
Company and its consolidated Subsidiaries from that set forth in their
financial statements dated as of August 31, 1992, except as disclosed to the
Banks in writing prior to the date of this Third Amendment).
SECTION 4. CONDITIONS TO EFFECTIVENESS. This Third Amendment shall
become effective as of the date first above written when (a) counterparts
hereof shall have been duly executed and delivered by the Majority Banks and
(b) the Company shall have paid to the Administrative Agent, for the account of
the Banks, a fee in accordance with the terms and conditions set forth in the
Company's letter, dated May 24, 1993, to the Administrative Agent, as modified
by the Administrative Agent's notices, dated June 3, 1993 and June 14, 1993, to
the Banks.
SECTION 5. MISCELLANEOUS.
A. This Third Amendment may be executed in any number of counterparts,
all of which taken together and when delivered to the Administrative Agent
shall constitute one and the same instrument, and any of the parties hereto may
execute this Third Amendment by signing any such counterpart.
-3-
<PAGE> 101
B. THIS THIRD AMENDMENT AND THE 1992 TERM LOAN AGREEMENT AS AMENDED
HEREBY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.
C. Except as expressly set forth in this Third Amendment, the 1992
Term Loan Agreement shall remain unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment
to be duly executed as of the date first above written.
HOME SHOPPING NETWORK, INC.,
as the Company
By /s/ LES R. WANDLER
-------------------
Title: Executive Vice
President and Chief
Financial Officer
HOME SHOPPING CLUB, INC.,
as Guarantor
By /s/ LES R. WANDLER
------------------
Title: Treasurer
-4-
<PAGE> 102
The Banks
LTCB TRUST COMPANY, as a Bank
and a Co-Agent
By /s/ PHILIP A. MARSDEN
-------------------------
Title: Senior Vice President
BANK OF MONTREAL, as a Bank
and a Co-Agent
By /s/ PATRICK J. SULLIVAN
-------------------------
Title: Director
THE BANK OF NEW YORK
By /s/ KALPANA RAINA
-------------------------
Title: Vice President
PNC BANK, KENTUCKY, INC.
(formerly known as Citizens
Fidelity Bank & Trust Company)
By /s/ JAMES D. NEIL
-------------------------
Title: Vice President
THE DAIWA BANK, LIMITED
By /s/ SYBIL H. WELDON
-------------------------
Title: Vice President and
Manager
By /s/ ALLEN L. HARVELL, JR.
-------------------------
Title: Vice President
FIRST UNION NATIONAL BANK OF
FLORIDA
By /s/ JOHN T. WATTS
-------------------------
Title: Vice President
-5-
<PAGE> 103
SUN BANK OF TAMPA BAY
By /s/ ROBERT J. WILLSEA
-------------------------
Title: Corporate Banking
Officer
The Administrative Agent
------------------------
LTCB TRUST COMPANY,
as Administrative Agent
By PHILIP A. MARSDEN
-------------------------
Title: Senior Vice President
-6-
<PAGE> 104
FOURTH AMENDMENT, dated as of September 20, 1993, to the Term Loan
Agreement, dated as of December 18, 1992, as amended by the First Amendment,
dated as of January 15, 1993, the Second Amendment, dated as of February 4,
1993, paragraph number 2 of the letter dated April 14, 1993 from LTCB Trust
Company, as Administrative Agent, to Home Shopping Network, Inc. and the Third
Amendment, dated as of May 28, 1993 (as so amended, the "1992 Term Loan
Agreement"), among HOME SHOPPING NETWORK, INC., as borrower (the "Company"),
HOME SHOPPING CLUB, INC., as guarantor (the "Guarantor"), the banks signatory
thereto (the "Banks"), LTCB TRUST COMPANY and BANK OF MONTREAL, each as a
Co-Agent for the Banks (each in such capacity, a "Co-Agent"), and LTCB TRUST
COMPANY, as Administrative Agent for the Banks (in such capacity, the
"Administrative Agent").
WHEREAS, the Company and the Guarantor have requested, and the Banks,
the Co-Agents and the Administrative Agent are willing, to amend certain
provisions of the 1992 Term Loan Agreement;
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration the receipt of which is hereby acknowledged, the
parties hereby agree as follows:
SECTION 1. CERTAIN DEFINED TERMS. Except as expressly set forth in
this Fourth Amendment, terms defined in the 1992 Term Loan Agreement and used
herein shall have their respective defined meanings when used herein.
SECTION 2. AMENDMENTS TO THE 1992 TERM LOAN AGREEMENT.
(a) Section 1.1 of the 1992 Term Loan Agreement is hereby amended by
(i) deleting the definition of "Fiscal Quarter" set forth in such Section in
its entirety and replacing it with the following:
"Fiscal Quarter" shall mean, (i) for the period ending on
August 31, 1993, a period of three consecutive calendar months
commencing on any of the following dates in any Fiscal Year: March 1,
June 1, September 1 and December 1, and (ii) for the period commencing
on July 1, 1993, a period of three consecutive calendar months
commencing on any of the
<PAGE> 105
following dates in any Fiscal Year: January 1, April 1, July 1 and
October 1; provided, however, that during the period commencing on
September 1, 1993 and ending on June 30, 1994, in the event any
provision of this Agreement requires any calculation or determination
with respect to a four-Fiscal Quarter period ending on a particular
date, such period shall refer to the four immediately preceding three
consecutive calendar months periods ending on such date."
and (ii) deleting the definition of "Fiscal Year" set forth in such Section in
its entirety and replacing it with the following:
"Fiscal Year" shall mean, for the Company, the Guarantor or
any Subsidiary, (i) for the period ending on August 31, 1993, the
twelve consecutive calendar month period commencing on September 1,
1992 and ending on August 31, 1993, (ii) for the period commencing on
September 1, 1993 and ending on December 31, 1993, the four
consecutive calendar month period commencing on September 1, 1993, and
(iii) for the period commencing on January 1, 1994, the twelve
consecutive calendar month period commencing on such date and on
January 1 of each calendar year thereafter and ending on December 31
of such calendar year; and "Fiscal 1992", "Fiscal 1993", and any other
year so designated shall mean the Fiscal Year ending on August 31 or
December 31, as the case may be, of the indicated calendar year;
provided, however, that the Fiscal Year defined in clause (ii) above
shall be known as "Fiscal Stub 1993" and, provided, further, that no
provision of this Agreement shall be construed to require presentation
of Fiscal Stub 1993 in the financial statements of the Company or the
Guarantor except as would be required by the rules and regulations of
the Securities and Exchange Commission and in accordance with GAAP
with respect to such transition periods."
(b) Section 9.11 of the 1992 Term Loan Agreement is hereby amended by
deleting the dates November 30, 1993 through August 31, 1994 and the related
ratios that appear in paragraph (a) of such Section and replacing such dates
and ratios with the following:
-2-
<PAGE> 106
"September 30, 1993 1.70:1
December 31, 1993 1.35:1
March 31, 1994 1.45:1
June 30, 1994 1.35:1
September 30, 1994 1.35:1
December 31, 1994 1.40:1,".
(c) Section 9.12 of the 1992 Term Loan Agreement is hereby amended by
deleting the dates November 30, 1993 through August 31, 1994 and the related
ratios that appear in paragraph (a) of such Section and replacing such dates
and ratios with the following:
"September 30, 1993 2.125:1
December 31, 1993 1.85:1
March 31, 1994 1.65:1
June 30, 1994 1.60:1
September 30, 1994 1.60:1
December 31, 1994 1.35:1,".
(d) Section 9.13 of the 1992 Term Loan Agreement is hereby amended by
(i) deleting all references to "August 30" in such Section and replacing them
in each case with "September 29" and (ii) deleting all references to "August
31" in such Section and replacing them in each case with "September 30".
SECTION 3. REPRESENTATIONS AND WARRANTIES. Each of the Company and
the Guarantor represents and warrants to the Administrative Agent and the Banks
that (a) no Default or Event of Default has occurred and is continuing, and (b)
the representations and warranties made by the Company and the Guarantor in
Section 8 of the 1992 Term Loan Agreement, as amended hereby, and in any other
certificate or other document delivered in connection with the 1992 Term Loan
Agreement shall be true in all material respects on and as of the date of the
effectiveness of this Fourth Amendment with the same force and effect as if
made on and as of such date (including, without limitation, that there shall
have occurred no material adverse change since August 31, 1992 in the
consolidated financial condition or operations, or the business taken as a
whole, of the Company and its consolidated Subsidiaries from that set forth in
their financial statements dated as of August 31, 1992, except as disclosed to
the Banks in writing prior to the date of this Fourth Amendment).
SECTION 4. CONDITIONS TO EFFECTIVENESS. This Fourth Amendment shall
become effective as of July 13, 1993 when counterparts hereof shall have been
duly executed and
-3-
<PAGE> 107
delivered by the Majority Banks, the Company and the Guarantor.
SECTION 5. MISCELLANEOUS.
A. This Fourth Amendment may be executed in any number of
counterparts, all of which taken together and when delivered to the
Administrative Agent shall constitute one and the same instrument, and any of
the parties hereto may execute this Fourth Amendment by signing any such
counterpart.
B. THIS FOURTH AMENDMENT AND THE 1992 TERM LOAN AGREEMENT AS AMENDED
HEREBY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.
C. Except as expressly set forth in this Fourth Amendment, the 1992
Term Loan Agreement shall remain unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Fourth
Amendment to be duly executed as of the date first above written.
HOME SHOPPING NETWORK, INC.,
as the Company
By /s/ LES R. WANDLER
---------------------------------
Title: Executive Vice
President
HOME SHOPPING CLUB, INC.,
as Guarantor
By /s/ LES R. WANDLER
----------------------------------
Title: Treasurer
-4-
<PAGE> 108
The Banks
LTCB TRUST COMPANY, as a Bank
and a Co-Agent
By /s/ PHILIP A. MARSDEN
-----------------------------
Title: Senior Vice President
BANK OF MONTREAL, as a Bank
and a Co-Agent
By /s/ PATRICK J. SULLIVAN
-----------------------------
Title: Director
THE BANK OF NEW YORK
By /s/ KALPANA RAINA
-----------------------------
Title: Vice President
PNC BANK, KENTUCKY, INC.
(formerly known as Citizens
Fidelity Bank & Trust Company)
By /s/ JAMES D. NEIL
----------------------------
Title: Vice President
THE DAIWA BANK, LIMITED
By /s/ SYBIL H. WELDON
-----------------------------
Title: Vice President &
Manager
By /s/ ALLEN L. HARVELL, JR.
------------------------------
Title: Vice President
FIRST UNION NATIONAL BANK OF
FLORIDA
By /s/ ROBERT E. HASTINGS, JR.
-------------------------------
Title: Vice President
-5-
<PAGE> 109
SUN BANK OF TAMPA BAY
By /s/ ROBERT J. WILLSEA
------------------------
Title: Corporate Banking
Officer
The Administrative Agent
LTCB TRUST COMPANY,
as Administrative Agent
By /s/ PHILIP A. MARSDEN
-----------------------------
Title: Senior Vice President
-6-
<PAGE> 110
FIFTH AMENDMENT
TO TERM LOAN AGREEMENT,
DATED AS OF DECEMBER 18, 1992
FIFTH AMENDMENT, dated as of January 7, 1994, to the Term Loan Agreement,
dated as of December 18, 1992, as amended by the First Amendment, dated as of
January 15, 1993, the Second Amendment, dated as of February 4, 1993, paragraph
number 2 of the letter dated April 14, 1993 from LTCB Trust Company, as
Administrative Agent, to Home Shopping Network, Inc. and the Third Amendment,
dated as of May 28, 1993 and the Fourth Amendment, dated as of September 20,
1993 (as so amended, the "1992 Term Loan Agreement"), among HOME SHOPPING
NETWORK, INC., as borrower (the "Company"), HOME SHOPPING CLUB, INC., as
guarantor (the "Guarantor"), the banks signatory thereto (the "Banks"), LTCB
TRUST COMPANY and BANK OF MONTREAL, each as a Co-Agent for the Banks (each in
such capacity, a "Co-Agent"), and LTCB TRUST COMPANY, as Administrative Agent
for the Banks (in such capacity, the "Administrative Agent").
WHEREAS, the Company and the Guarantor have requested that certain
provisions of the 1992 Term Loan Agreement be amended, as set forth below; and
WHEREAS, the Banks, the Co-Agents and the Administrative Agent are willing
to amend such provisions;
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration the receipt of which is hereby acknowledged, the parties
hereby agree as follows:
SECTION 1. CERTAIN DEFINED TERMS. Except as expressly set forth in this
Fifth Amendment, terms defined in the 1992 Term Loan Agreement and used herein
shall have their respective defined meanings when used herein.
SECTION 2. AMENDMENTS TO THE 1992 TERM LOAN AGREEMENT.
(a) Section 1.1 of the 1992 Term Loan Agreement is hereby amended by
inserting the following definitions in alphabetical order in the list of
definitions in such Section:
"Bell Atlantic Transaction" shall mean the combination of Liberty
Media and Tele-Communications, Inc., a Delaware corporation, with Bell
Atlantic Corporation, a Delaware corporation, on substantially the terms
outlined in Liberty Media's Current Report on Form 8-K dated October 27,
1993
<PAGE> 111
(including the exhibits thereto), copies of which have been furnished to
the Banks by the Company.
"Lawsuit" shall mean any of the legal proceedings described in the
Company's Amended and Restated Proxy Statement, dated August 23, 1993,
under the caption "Legal Proceedings", as such description of such
proceedings may be updated by the Company in subsequent SEC Reports, and
includes, without limitation, the proceedings relating to the termination
of the Company's or the Guarantor's contractual relationship with Western
Hemisphere Sales, Inc. (as successor to Pioneer Data Processing, Inc.).
"Lawsuit Settlement Accrual Amount" shall mean, for any period, the
aggregate amount that has been charged against earnings and either (i)
accrued as liabilities for such period or (ii) paid during such period, in
each case with respect to estimated settlement payments in connection with
the Lawsuits (including, without limitation, in connection with the
termination of the contractual relationship with Western Hemisphere Sales,
Inc. (as successor to Pioneer Data Processing, Inc.), which is the subject
of one of the Lawsuits).
"Lawsuit Settlement Payment Amount" shall mean, for any period, the
sum of (a) the aggregate amount of settlement payments made by the Company
during such period (and reductions in accrued liabilities, if any, in
respect of such settlement payments) to parties asserting claims in
connection with the Lawsuits, and (b) any payments made by the Company,
the Guarantor or any Subsidiary during such period (and reductions in
accrued liabilities, if any, in respect of such settlement payments) in
connection with the termination of the contractual relationship with
Western Hemisphere Sales, Inc. (as successor to Pioneer Data Processing,
Inc.), which is the subject of one of the Lawsuits.
"Tax Settlement Payment Amount" shall mean, for any period, the
aggregate amount of payments made by the Company to the Internal Revenue
Service during such period (and reductions in accrued liabilities related
to such payments) to settle federal tax liabilities described in the note
captioned "Income Taxes" to the consolidated quarterly financial
statements of the Company contained in the Company's
-2-
<PAGE> 112
Quarterly Report on Form 10-Q for the Quarter Ended
September 30, 1993.
"TCI Transaction" shall mean the combination of Liberty Media and
Tele-Communications, Inc., a Delaware corporation, through the exchange of
Class A and Class B shares of both companies for like shares of a holding
company, on substantially the terms outlined in Liberty Media's Current
Report on Form 8-K dated October 27, 1993 (including the exhibits
thereto), copies of which have been furnished to the Banks by the Company.
(b) Section 1.1 of the 1992 Term Loan Agreement is hereby further
amended by deleting the definition of "Fixed Charges" in its entirety and by
replacing it with the following:
"'Fixed Charges' shall mean, for any Person and for any period, the
sum (without duplication) of:
(a) all capital expenditures and increases in intangible assets of
such Person for such period,
plus
(b) the sum (without duplication) of (i) all interest expense of such
Person for such period, (ii) all payments of principal of all
Indebtedness of such Person that were scheduled for payment during
such period, whether or not paid (unless any such payment (x) was
cancelled or forgiven for, or prepaid in advance of, such period or
(y) represents the June 15, 1994 principal installment due pursuant
to Section 3.1 of this Agreement), (iii) any increase in total
current assets and any decrease in total current liabilities (net of
the change in cash and cash equivalents and the change in Short-Term
Debt, and without giving effect to:
(A) that portion, if any, of the Tax Settlement Payment Amount
paid (and any reductions in accrued liabilities related thereto)
in such period which, when aggregated with all other Tax
Settlement Payment Amounts paid (or such reductions) in all
previous periods, does not exceed $20,947,000, or
(B) that portion, if any, of the Lawsuit Settlement Accrual
Amount recognized in such
-3-
<PAGE> 113
period which, when aggregated with all other Lawsuit Settlement
Accrual Amounts recognized in all previous periods, does not
exceed $25,000,000, or
(C) that portion, if any, of the Lawsuit Settlement Payment
Amount paid (and any reductions in accrued liabilities related
thereto) in such period which, when aggregated with all other
Lawsuit Settlement Payment Amounts paid (or such reductions) in
all previous periods, does not exceed $25,000,000),
(iv) any cash increase in long-term investments (excluding periods
prior to September 1, 1992) of such Person for such period, and (v)
any cash increase in long-term notes receivable (excluding periods
prior to September 1, 1992) of such Person for such period,
minus
(c) the sum (without duplication) of (i) all interest income, other
than interest income related to the Silver King Notes, of such
Person for such period, (ii) any decrease in total current assets
and any increase in total current liabilities (net of the change
in cash and cash equivalents and the change in Short-Term Debt,
and without giving effect to:
(A) that portion, if any, of the Tax Settlement Payment Amount
paid (and any reductions in accrued liabilities related thereto)
in such period which, when aggregated with all other Tax
Settlement Payment Amounts paid (or such reductions) in all
previous periods, does not exceed $20,947,000, or
(B) that portion, if any, of the Lawsuit Settlement Accrual
Amount recognized in such period which, when aggregated with all
other Lawsuit Settlement Accrual Amounts recognized in all
previous periods, does not exceed $25,000,000, or
(C) that portion, if any, of the Lawsuit Settlement Payment
Amount paid (and any reductions in accrued liabilities related
thereto) in such period which, when aggregated
-4-
<PAGE> 114
with all other Lawsuit Settlement Payment Amounts paid (or such
reductions) in all previous periods, does not exceed
$25,000,000),
(iii) any cash decrease in long-term investments (excluding periods
prior to September 1, 1992) of such Person for such period, and (iv)
any cash decrease in long-term notes receivable (excluding periods
prior to September 1, 1992) of such Person for such period,
in each case as reflected on the consolidated quarterly or annual
financial statements, including the notes thereto, of the Company most
recently delivered to the Administrative Agent pursuant to Section 9.1 (or
Section 8.2) hereof. Fixed Charges for the four-Fiscal Quarter period
ended August 31, 1992 are as set forth in Schedule 2 hereto."
(c) Section 1.1 of the 1992 Term Loan Agreement is hereby further
amended by deleting the definition of "Operating Cash Flow" in its entirety and
by replacing it with the following:
"'Operating Cash Flow' shall mean, for any period, the sum of the
following for the Company and its Subsidiaries (including, without
limitation, the Guarantor) on a consolidated basis:
(a) operating profit of such Persons for such period; plus
(b) (to the extent already deducted in arriving at operating profit)
depreciation and amortization expense for such Persons for such
period; plus
(c) (to the extent already deducted in arriving at operating profit)
commencing September 1, 1992, non-cash compensation expense related
to the Company's executive stock award program; plus
(d) all cash interest (if any), other cash income (if any) or cash
principal repayments (if any) received by the Company or any
Subsidiaries in connection with the Silver King Notes, and, for the
twelve months immediately following the delivery of any such Silver
King Note, accrued interest income on such note for no more than one
month; plus
-5-
<PAGE> 115
(e) (to the extent already deducted in arriving at operating profit)
the lesser of (x) the Lawsuit Settlement Accrual Amount for such
period (whether or not paid) and (y) that portion, if any, of such
Lawsuit Settlement Accrual Amount that when aggregated with all other
Lawsuit Settlement Accrual Amounts accrued in previous periods
(whether or not paid) does not exceed $25,000,000,
all as shown on the consolidated financial statements, including the notes
thereto, of the Company and its consolidated Subsidiaries for such period
or, with respect to clause (d) above, if such financial statements do not
present information in sufficient detail to derive the amount specified in
clause (d) of this definition, as shown on the certificate to be delivered
to the Administrative Agent pursuant to the last paragraph of Section 9.1
hereof. Operating Cash Flow for the four-Fiscal Quarter period ended
August 31, 1992 is as set forth in Schedule 2 hereto."
(d) Section 9.11 of the 1992 Term Loan Agreement is hereby amended
by deleting the dates March 31, 1994 through September 30, 1994 and the
related ratios that appear in paragraph (a) of such Section and replacing such
dates and ratios with the following:
"March 31, 1994 1.40:1
June 30, 1994 1.40:1
September 30, 1994 1.40:1,".
(e) Section 9.12 of the 1992 Term Loan Agreement is hereby amended by
deleting the dates December 31, 1993 through December 31, 1994 and the related
ratios that appear in paragraph (a) of such Section and replacing such dates
and ratios with the following:
"December 31, 1993 2.125:1
March 31, 1994 2.50:1
June 30, 1994 2.50:1
September 30, 1994 2.25:1
December 31, 1994 2.25:1,".
(f) Section 10 of the 1992 Term Loan Agreement is hereby amended by
inserting the following immediately before the semi-colon at the end of such
paragraph (k):
", or (iii) (A) such Change of Control arises solely in connection with
the TCI Transaction, and (B) as of the date the TCI Transaction is
consummated and
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<PAGE> 116
after giving effect thereto, no other Default or Event of Default
shall have occurred and be continuing, or (iv) with respect to any date on
or following the date the TCI Transaction is consummated, (A) such Change
of Control arises solely in connection with the Bell Atlantic Transaction,
and (B) as of the date the Bell Atlantic Transaction is consummated and
after giving effect thereto, no other Default or Event of Default shall
have occurred and be continuing".
(g) Each reference in the 1992 Term Loan Agreement to "this
Agreement" and the words "hereof", "hereto" and "herein" and the like shall,
except where the context otherwise requires, refer to the 1992 Term Loan
Agreement as amended by, and through the effective date of, this Fifth
Amendment.
SECTION 3. REPRESENTATIONS AND WARRANTIES. Each of the
Company and the Guarantor represents and warrants to the Administrative Agent
and the Banks as of the date of this Fifth Amendment and as of the date on
which it becomes effective that (a) no Default or Event of Default has occurred
and is continuing, and (b) the representations and warranties made by the
Company and the Guarantor in Section 8 of the 1992 Term Loan Agreement, as
amended hereby, and in any other certificate or other document delivered in
connection with the 1992 Term Loan Agreement are true in all material respects
on the date hereof and are hereby restated on and as of the date of the
effectiveness of this Fifth Amendment with the same force and effect as if made
on and as of such date (including, without limitation, that there has occurred
no material adverse change since August 31, 1992 in the consolidated financial
condition or operations, or the business taken as a whole, of the Company and
its consolidated Subsidiaries from that set forth in their financial statements
dated as of August 31, 1992, except as disclosed to the Banks in writing prior
to the date of this Fifth Amendment).
SECTION 4. CONDITIONS TO EFFECTIVENESS. This Fifth Amendment
shall become effective as of December 31, 1993 when (a) counterparts hereof
shall have been duly executed and delivered by the Majority Banks and (b) the
Company shall have paid to LTCB Trust Company a fee in accordance with the
terms and conditions set forth in the Amendment Fee Letter, dated December 9,
1993, among LTCB Trust Company, the Company and the Guarantor.
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<PAGE> 117
SECTION 5. MISCELLANEOUS.
(a) This Fifth Amendment may be executed in any number of
counterparts, all of which taken together and when delivered to the
Administrative Agent shall constitute one and the same instrument, and any of
the parties hereto may execute this Fifth Amendment by signing any such
counterpart.
(b) Upon the effectiveness of this Fifth Amendment, LTCB Trust
Company, as Administrative Agent, shall pay fees to the Banks in accordance
with the terms and conditions of its notice to the Banks dated December 10,
1993.
(c) THIS FIFTH AMENDMENT AND THE 1992 TERM LOAN AGREEMENT AS
AMENDED HEREBY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.
(d) Except as expressly set forth in this Fifth Amendment, the
1992 Term Loan Agreement shall remain unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Fifth
Amendment to be duly executed as of the date first above written.
HOME SHOPPING NETWORK, INC.,
as the Company
By /s/ KEVIN J. MCKEON
----------------------------
Title: Senior Vice President
of Accounting &
Finance
HOME SHOPPING CLUB, INC.,
as Guarantor
By /s/ R. JOSEPH RILEY
-----------------------------
Title: Assistant Treasurer
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<PAGE> 118
The Banks
LTCB TRUST COMPANY, as a Bank
and a Co-Agent
By /s/ JOHN A. KROB
-----------------------------
Title: Senior Vice President
BANK OF MONTREAL, as a Bank
and a Co-Agent
By /s/ PATRICK J. SULLIVAN
-----------------------
Title: Director
THE BANK OF NEW YORK
By /s/ KALPANA RAINA
----------------------
Title: Vice President
PNC BANK, KENTUCKY, INC.
(formerly known as Citizens
Fidelity Bank & Trust Company)
By /s/ JAMES D. NEIL
----------------------
Title: Vice President
THE DAIWA BANK, LIMITED
By /s/ SYBIL H. WELDON
---------------------------
Title: Vice President &
Manager
By /s/ ALLEN L. HARVELL, JR.
------------------------------
Title: Vice President
FIRST UNION NATIONAL BANK OF
FLORIDA
By /s/ ROBERT E. HASTINGS, JR.
---------------------------
Title: Vice President
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<PAGE> 119
TORONTO DOMINION (TEXAS), INC.
By /s/ CAROLE A. CLAUSE
-----------------------------
Title: Vice President
The Administrative Agent
LTCB TRUST COMPANY,
as Administrative Agent
By /s/ JOHN A. KROB
-----------------------------
Title: Senior Vice President
-10-
<PAGE> 1
EXHIBIT 10.26
************************************************************
HOME SHOPPING NETWORK, INC.,
as Borrower
HOME SHOPPING CLUB, INC.,
as Guarantor
__________
AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of December 18, 1992
__________
LTCB TRUST COMPANY,
as Administrative Agent
__________
LTCB TRUST COMPANY and
BANK OF MONTREAL, as Co-Agents
__________
THE BANKS NAMED HEREIN
************************************************************
<PAGE> 2
TABLE OF CONTENTS
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Section 1. Definitions and Accounting Matters . . . . . . . . . . . . . . . . . . . . . . . 2
1.1. Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2. Certain Accounting Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2. Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.1. Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.2. Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.3. Changes of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.4. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.5. Lending Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.6. Several Obligations; Remedies Independent . . . . . . . . . . . . . . . . . . . . 19
2.7. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.8. Prepayments and Conversions of Loans . . . . . . . . . . . . . . . . . . . . . . 20
2.9. Extension of Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3. Payments of Principal and Interest . . . . . . . . . . . . . . . . . . . . . . . 23
3.1. Repayment of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.2. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4. Payments; Pro Rata Treatment;
Computations, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.1. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.2. Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.3. Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.4. Minimum Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.5. Certain Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.6. Non-Receipt of Funds by the Administrative Agent . . . . . . . . . . . . . . . . 29
4.7. Sharing of Payments, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 5. Yield Protection and Illegality . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.1. Additional Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.2. Limitation on Types of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.3. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.4. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.5. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 6. Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.1. Unconditional Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.2. Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.3. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.4. Subordination and Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.5. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.6. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 7. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
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<PAGE> 3
<TABLE>
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7.1. Initial Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.2. Initial and Subsequent Loans. . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8. Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . . 41
8.1. Corporate Existence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.2. Financial Condition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.3. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.4. No Breach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.5. Corporate Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.6. Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.7. Use of Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.8. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.9. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.10. Credit Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.11. Ownership of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.12. Pari Passu Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.13. Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.14. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9. Covenants of the Company and the Guarantor. . . . . . . . . . . . . . . . . . . 45
9.1. Financial Statements; Reports and Other
Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.2. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.3. Corporate Existence, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.4. Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.5. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.6. Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.7. Dispositions of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.8. Ranking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.9. Business; Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.10. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.11. Fixed Charges Coverage Test . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.12. Debt Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.13. Consolidated Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
9.14. Notification of Incurrence of Debt or Making
of Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
9.15. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.16. Ownership of Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.17. Indebtedness of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 10. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 11. The Administrative Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
11.1. Appointment, Powers and Immunities. . . . . . . . . . . . . . . . . . . . . . . 63
11.2. Reliance by the Administrative Agent. . . . . . . . . . . . . . . . . . . . . . 64
11.3. Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
11.4. Rights as a Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
11.5. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
</TABLE>
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<TABLE>
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11.6. Non-Reliance on Administrative Agent, Co-Agents and other Banks . . . . . . . . . 65
11.7 Failure to Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
11.8. Resignation or Removal of Administrative Agent . . . . . . . . . . . . . . . . . 66
11.9. Administrative Agent's Office . . . . . . . . . . . . . . . . . . . . . . . . . 67
11.10. Co-Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 12. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
12.1. Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
12.2. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
12.3. Expenses, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
12.4. Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
12.5. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
12.6. Assignments and Participation. . . . . . . . . . . . . . . . . . . . . . . . . . 70
12.7. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
12.8. Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
12.9. Captions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
12.10. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
12.11. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
12.12. JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
12.13. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Schedule 1: Existing Credit Agreements and Liens
Schedule 2: Calculations of Sample Financial Terms
Schedule 3: List of Broadcast Subsidiaries
Exhibit A: Form of Note
Exhibit B: Form of Opinion of Counsel to the Company and
the Guarantor
Exhibit C: Form of Compliance Certificate
Exhibit D-1: Form of Funded Debt Ratio Notice
Exhibit D-2: Form of Total Debt Ratio Notice
Exhibit E: Form of Assignment and Assumption Agreement
Annex A: Press release of Liberty Media Corporation of December 7, 1992
Annex B: Form 10 of Silver King Communications, Inc.
</TABLE>
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<PAGE> 5
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of December 18, 1992
(as the same may be amended or modified from time to time, this "Agreement"),
among HOME SHOPPING NETWORK, INC., a Delaware corporation (the "Company"); HOME
SHOPPING CLUB, INC., a Delaware corporation (the "Guarantor"); each of the
banks which is a signatory hereto (individually, a "Bank" and, collectively,
the "Banks"); LTCB TRUST COMPANY, a New York trust company, and Bank of
Montreal, each as a Co-Agent for the Banks (in such capacity, together with its
successors in such capacity, each a "Co-Agent"); and LTCB TRUST COMPANY, a New
York trust company, as Administrative Agent for the Banks (in such capacity,
together with its successors in such capacity, the "Administrative Agent").
The Company, the Guarantor, the Co-Agents, as "Banks", and LTCB Trust
Company, as "Agent", are parties to a Credit Agreement, dated as of June 20,
1991 (as amended, the "1991 Revolving Credit Agreement"), pursuant to which the
Co-Agents, as "Banks", have made available to the Company, under the guarantee
of the Guarantor, a revolving credit facility providing for loans in an
aggregate principal amount not exceeding $50,000,000 at any one time
outstanding.
The Company has requested that the revolving credit facility under the
1991 Revolving Credit Agreement be decreased to $40,000,000, and that a
separate term loan facility, providing for term loans in an aggregate principal
amount not exceeding $60,000,000 for the purpose of refinancing existing
indebtedness, be established. Each of the Banks other than the Co-Agents
(collectively, the "New Banks") wishes to become a party to the 1991 Revolving
Credit Agreement, as amended and restated hereby, and to have all of the rights
and obligations of "Banks" hereunder. Accordingly, the Banks are willing to
make loans to the Company, under the guarantee of the Guarantor, in an
aggregate principal amount not exceeding $40,000,000 at any one time
outstanding upon the terms hereof. In addition, the banks party to the Term
Loan Agreement (as hereinafter defined) are willing to make term loans to the
Company in an aggregate principal amount not exceeding $60,000,000 upon the
terms of the Term Loan Agreement, which is being entered into simultaneous
herewith.
Accordingly, the parties hereto hereby agree that, effective on the
Amendment Effective Date (as hereinafter defined), the 1991 Revolving Credit
Agreement is hereby amended and restated in its entirety as follows:
Section 1. Definitions and Accounting Matters.
1.1. Certain Defined Terms. As used herein, the following terms
shall have the following meanings (all terms defined in this Section 1 or in
other provisions of this Agreement in the singular to have the same meanings
when used in the plural and vice versa):
<PAGE> 6
"Adjusted Operating Cash Flow" shall mean, for any period, the sum of
the following for the Company and its Subsidiaries (including, without
limitation, the Guarantor) on a consolidated basis: (a) Operating Cash Flow for
such period, plus (or minus) (b) cash inflows to (or outflows from) equity
(including, without limitation, cash dividends on capital stock) for such
period, all as shown on the consolidated financial statements, including the
notes thereto, of the Company for such period. Adjusted Operating Cash Flow
for the four-Fiscal Quarter period ended August 31, 1992 is as set forth in
Schedule 2 hereto.
"Affiliate" shall mean, with respect to any Person, any other Person
(other than a Wholly-Owned Subsidiary of such Person) directly or indirectly
controlling, controlled by, or under direct or indirect common control with,
such Person. A Person shall be deemed to control another Person if such Person
(x) is an officer or director of such other Person, (y) possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such other Person, whether through the ownership of voting
securities, by contract or otherwise, or (z) directly or indirectly owns or
controls 10% or more of such other Person's capital stock.
"Amendment Effective Date" shall mean the date on which this Agreement
shall have been executed and delivered by each of the parties provision for
whose signature has been made on the signature pages hereof, and each of the
conditions precedent set forth in Section 7.1 hereof has been satisfied.
"Anniversary Date" shall mean the Fee Payment Date falling on or about
each anniversary date of this Agreement.
"Applicable Lending Office" shall mean, for each Bank and for each type
of Loan, the Lending Office of such Bank (or of an affiliate of such Bank)
designated for such type of Loan on the signature pages hereof or such other
office of such Bank (or of an affiliate of such Bank) as such Bank may from
time to time specify to the Administrative Agent and the Company as the office
by which its Loans of such type are to be made and maintained.
"Applicable Margin" shall mean, at any time: (a) with respect to LIBOR
Loans, 2.00% minus the Margin Adjustment (if any) in effect at such time; and
(b) with respect to Prime Rate Loans, 1.00% minus the Margin Adjustment (if
any) in effect at such time.
"Bankruptcy Code" shall mean the federal Bankruptcy Code of the United
States, 11 U.S.C. Section 101 et seq.
-2-
<PAGE> 7
"Broadcast Subsidiary" shall mean, with respect to any Person, a
Wholly-Owned Subsidiary of such Person which owns one or more television
broadcast stations, but in any event shall include Telemation, Inc., a Delaware
corporation, and its respective successors. As of the date hereof, Broadcast
Subsidiaries are each company set forth on Schedule 3 attached hereto.
"Broadcast Subsidiary Group" shall mean a Material Subsidiary Group,
each constituent Subsidiary of which is a Broadcast Subsidiary.
"Business Day" shall mean any day on which commercial banks are not
authorized or required to close in New York City and dealings in Dollar
deposits are carried out in the London interbank market.
"Capital Lease" shall mean any lease or other contractual arrangement
which under GAAP has been or should be recorded as a capital lease.
"Change of Control" shall mean any of the following events: (i) the
acquisition by any "person" or "group" of persons of the "beneficial ownership"
(as such terms are defined within the meaning of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended) of outstanding shares of the
Company's capital stock, or any sale or other disposition by Roy M. Speer
(other than an involuntary disposition by reason of death or disability), or,
following the consummation of the Liberty Media Transaction, Liberty Media, of
any of the capital stock of the Company owned by Mr. Speer, or, following the
consummation of the Liberty Media Transaction, Liberty Media, or any other
event such that, after giving effect to such acquisition, sale, disposition or
other event, Mr. Speer, or, following the consummation of the Liberty Media
Transaction, Liberty Media, would no longer (A) own, directly or indirectly, or
otherwise control at least 51% of the outstanding shares of any class of the
Company's common stock the approval of which is required for any fundamental
corporate action (including, without limitation, any merger, reorganization,
recapitalization, liquidation, distribution, winding-up, sale, transfer or
hypothecation of substantially all or a substantial portion of the Company's
assets), or (B) possess the ability to elect at least a majority of the Board
of Directors of the Company, or (ii) any person or group of persons shall
acquire all or substantially all of the assets of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
-3-
<PAGE> 8
"Commitment" shall mean, with respect to any Bank, the amount set
forth opposite such Bank's name on the signature pages hereof under the caption
"Commitment" (as reduced from time to time pursuant to Section 2.3 hereof or
otherwise).
"Commitment Termination Date" shall mean (a) initially, the Fee Payment
Date falling on or immediately prior to December 18, 1995, and (b) in the event
that the Administrative Agent and the Banks agree to extend the facility
provided for by this Agreement in accordance with Section 2.9 hereof, then with
respect to the Banks agreeing to any such extension, the Commitment Termination
Date as so extended, and with respect to the Banks not agreeing to such
extension, the Commitment Termination Date as in effect without regard to such
extension.
"Consolidated Net Worth" shall mean, at any date, all amounts which, in
conformity with GAAP, would be included under stockholder's equity on a
consolidated balance sheet of the Company and its Subsidiaries at such time.
"Convertible Subordinated Debentures" shall mean the Company's 5-1/2%
Convertible Subordinated Debentures due April 22, 2002, issued under the
Convertible Subordinated Debenture Indenture.
"Convertible Subordinated Debenture Indenture" shall mean the
Indenture, dated as of April 22, 1987, between the Company and Bankers Trust
Company, as trustee.
"Default" shall mean an Event of Default or an event which with notice
or lapse of time or both would become an Event of Default.
"Dollars" and "$" shall mean lawful money of the United States of
America.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"ERISA Affiliate" shall mean any corporation or trade or business which
is a member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Company or the Guarantor or is under common
control (within the meaning of Section 414(c) of the Code) with the Company or
the Guarantor.
"Extension Date" shall mean, for each extension of the Commitment
Termination Date requested by the Company under Section 2.9 hereof, the
Anniversary Date falling two years
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prior to such Commitment Termination Date. Accordingly, the first
Extension Date shall be the Anniversary Date on or about December 18, 1993; and
each subsequent such date shall be the corresponding Anniversary Date in the
appropriate subsequent calendar year.
"Event of Default" shall have the meaning assigned to that term in
Section 10 hereof.
"Federal Funds Rate" shall mean, (i) for Overnight Federal Funds Rate
Loans, for any day, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100th of 1%) equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers on such day, as published by the Federal Reserve Bank
of New York on the Business Day next succeeding such day, and (ii) for Term
Federal Funds Rate Loans (if requested by the Company and agreed to by the
Administrative Agent and the Banks), for any Interest Period, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) equal to
the weighted average of the rates on term Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on the
first day of such Interest Period for a period equal to such Interest Period,
as published by the Federal Reserve Bank of New York on the Business Day next
succeeding such day and as determined by the Administrative Agent, provided
that (x) if the day for which such rate is to be determined is not a Business
Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on the next
succeeding Business Day, and (y) if such rate is not so published for any day,
the Federal Funds Rate for such day shall be the average rate charged to LTCB
on such day on such transactions as determined by the Administrative Agent.
"Federal Funds Rate Loans" shall mean Loans which bear interest at
rates based upon the Federal Funds Rate, and in any event shall be either an
Overnight Federal Funds Rate Loan or a Term Federal Funds Rate Loan.
"Fee Payment Date" shall mean the 18th day of each March, June,
September and December in each year, the first of which shall be the first such
day after the date of this Agreement; provided, that if any such day is not a
Business Day, then such Fee Payment Date shall be the next succeeding Business
Day (unless such Business Day falls in a subsequent calendar month, in which
case such Fee Payment Date shall be the next preceding Business Day).
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"Fiscal Quarter" shall mean a period of three consecutive calendar
months commencing on any of the following dates in any Fiscal Year: March 1;
June 1, September 1 and December 1.
"Fiscal Year" shall mean, for the Company, the Guarantor or any
Subsidiary, the twelve consecutive calendar month period commencing on
September 1 of each calendar year and ending on August 31 of the next following
calendar year; and "Fiscal 1992", "Fiscal 1993", and any other year so
designated shall mean the Fiscal Year ending on August 31 of the indicated
calendar year.
"Fixed Charges" shall mean, for any Person and for any period, the sum
(without duplication) of:
(a) all capital expenditures and increases in intangible assets of such
Person for such period,
plus
(b) the sum (without duplication) of (i) all interest expense of such
Person for such period, (ii) all payments of principal of all Indebtedness
of such Person that were scheduled for payment during such period, whether
or not paid (unless cancelled or forgiven for, or prepaid in advance of,
such period), (iii) any increase in total current assets and any decrease
in total current liabilities (net of the change in cash and cash
equivalents and the change in Short-Term Debt) of such Person for such
period, (iv) any cash increase in long-term investments (excluding periods
prior to September 1, 1992), and (v) any cash increase in long-term notes
receivable (excluding periods prior to September 1, 1992),
minus
(c) the sum (without duplication) of (i) all interest income, other than
interest income related to the Silver King Notes, of such Person for such
period, (ii) any decrease in total current assets and any increase in total
current liabilities (net of the change in cash and cash equivalents and the
change in Short-Term Debt) of such Person for such period, (iii) any cash
decrease in long-term investments (excluding periods prior to September 1,
1992), (iv) any cash decrease in long-term notes receivable (excluding
periods prior to September 1, 1992), and (v) the amounts accrued at August
31, 1991 for litigation settlements,
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<PAGE> 11
in each case as reflected on the consolidated quarterly or annual
financial statements, including the notes thereto, of the Company most recently
delivered to the Administrative Agent pursuant to Section 9.1 (or Section 8.2)
hereof. Fixed Charges for the four-Fiscal Quarter period ended August 31, 1992
are as set forth in Schedule 2 hereto.
"Funded Debt Ratio" shall mean, at any time, the ratio of (a) Total
Funded Debt of the Company and its consolidated Subsidiaries as at the end of
the Company's four-Fiscal Quarter period most recently ended as of such time,
to (b) Operating Cash Flow for the same period, as shown in the Funded Debt
Ratio Notice for such period.
"Funded Debt Ratio Notice" shall mean each notice provided for in
Section 9.1(g) (or Section 7.1(f)) hereof.
"GAAP" shall mean generally accepted accounting principles in the
United States of America, consistently applied, as in effect (unless otherwise
specified in this Agreement) from time to time.
"Indebtedness" shall mean, for any Person (but without duplication):
(a) all indebtedness and other obligations of such Person for
borrowed money or for the deferred purchase price of property or services
(other than trade payables incurred in the ordinary course of business and
not overdue by more than 180 days), including, without limitation, all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments;
(b) all obligations of such Person under interest rate or
currency swaps, caps, collars, floors, options, forward exchange contracts
and similar hedging arrangements;
(c) the stated amount of all letters of credit issued for the
account of such Person and (without duplication) all drafts drawn
thereunder, and the aggregate face amount of all banker's acceptances as to
which such Person is obligated, other than trade letters of credit issued
for the account of such Person in the ordinary course of business pursuant
to the terms of which (i) such Person is obligated to reimburse the issuer
thereof for any drawing thereunder on the date of such drawing and (ii) no
other credit shall be extended thereunder to such Person by such issuer;
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<PAGE> 12
(d) all obligations of such Person under any Capital Leases;
(e) all obligations of such Person in connection with employee
benefit or similar plans;
(f) all obligations of such Person in respect of guarantees,
whether direct or indirect (including, without limitation, agreements to
"keep well" or otherwise ensure a creditor against loss) with respect to
any indebtedness or other obligation of any other Person of the type
described in any of clauses (a) through (e) above; and
(g) all indebtedness or other obligations referred to in any
of clauses (a) through (f) above secured by any Lien upon property owned by
such Person, whether or not such Person is liable on any such obligation.
"Interest Payment Date" shall mean, (i) for any Loan, the last day of
the Interest Period relating thereto, and (ii) for any Federal Funds Rate Loan
or Prime Rate Loan, the last day of any month which occurs during the Interest
Period related thereto, and in any case if such day is not a Business Day, the
next succeeding Business Day.
"Interest Period" shall mean with respect to any (1) LIBOR Loan, each
period commencing on the date such Loan is made or converted from a Loan of
another type or the last day of the immediately preceding Interest Period for
such Loan and ending on the numerically corresponding day in the first, second,
third or sixth calendar month thereafter, as the Company may select as provided
in Section 2.2 hereof (or such period of less than one month as the Company may
select in accordance with clause (ii) or (iii) of the next paragraph below),
except that each such Interest Period which commences on the last Business Day
of a calendar month (or on any day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall end on
the last Business Day of the appropriate subsequent calendar month, (2)
Overnight Federal Funds Rate Loan, each period of one Business Day, (3) Term
Federal Funds Rate Loan, each period commencing on the date such Loan is made
or converted from a Loan of another type or the last day of the immediately
preceding Interest Period for such Loan and ending on the last day for which
the Federal Funds Rate for such Loan applies, as agreed between the Company and
the Administrative Agent with the consent of the Banks prior to the
commencement of such Interest Period and (4) Prime Rate Loan, each period
commencing on the date such Loan is made or converted from a Loan of another
type or the last day of the immediately
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<PAGE> 13
preceding Interest Period for such Loan and ending on the date 30 days later.
Notwithstanding the foregoing, (i) each Interest Period which would
otherwise end on a day that is not a Business Day shall end on the next
succeeding Business Day (or if such next succeeding Business Day falls in the
next succeeding calendar month, on the next preceding Business Day); (ii) each
Interest Period which would otherwise commence before and end after any
Commitment Termination Date then in effect for any Bank shall end on such
Commitment Termination Date; (iii) if the Company selects an Interest Period
that would begin before and end after any Anniversary Date, the Administrative
Agent may notify the Company and the Banks that the Company must select a
shorter Interest Period that will end on or prior to such Anniversary Date, in
which case such shorter period selected by the Company shall (subject to
clauses (i) and (ii) above) be the relevant Interest Period; and (iv) the
Company must select the duration of Interest Periods so that, notwithstanding
clause (i) above, no Interest Period for LIBOR Loans shall have a duration of
less than one month (except as provided in clause (ii) or (iii) above), and so
that no more than six Interest Periods with respect to LIBOR Loans shall be in
effect at any one time.
"Investment" shall mean, for any Person, (a) the acquisition (whether
for cash, property, services or securities or otherwise) of capital stock,
bonds, notes, debentures, partnership or other ownership interests or other
securities or obligations of any other Person or any agreement to make any
such acquisition (including, without limitation, any "short sale" or any sale
of any securities at a time when such securities are not owned by the Person
entering into such short sale); (b) the making of any deposit with, or
advance, or loan or other extension of credit to, any other Person (including
the purchase of property from another Person subject to an understanding or
agreement, contingent or otherwise, to resell such property to such Person, but
excluding any such advance, loan or other extension of credit to customers of
the Company or to customers of the Company's Subsidiaries having a term not
exceeding 90 days arising in the ordinary course of business); (c) the entering
into of any guarantee of, or other contingent obligation with respect to,
Indebtedness or other liability of any other Person and (without duplication)
any amount committed to be advanced, lent or extended to such person; or (d)
the entering into of any interest rate or currency swaps, caps, collars,
floors, options, forward exchange contracts and similar hedging arrangements.
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"Liberty Media" shall mean Liberty Media Corporation, a Delaware
corporation.
"Liberty Media Transaction" shall mean the acquisition by Liberty Media
of an aggregate of 20,000,000 shares of Class B Common Stock of the Company
from RMS Limited Partnership, on substantially the terms outlined in Liberty
Media's press release of December 7, 1992, attached hereto as Annex A.
"LIBOR" shall mean, with respect to any LIBOR Loan for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/16 of 1%) quoted by the London office of LTCB at approximately 11:00
a.m. London time (or as soon thereafter as practicable) or if such rate is not
quoted to LTCB, the rate per annum appearing on the display designated as page
"LIBO" on the Reuter Monitor Money Rates Service (or such other page as may
replace the LIBO page of that service for the purpose of displaying London
interbank offered rates of major banks) two Business Days prior to the first
day of such Interest Period for the offering by such office to leading banks in
the London interbank market of Dollar deposits having a term comparable to such
Interest Period and in an amount comparable to the principal amount of the
LIBOR Loan scheduled to be outstanding during such Interest Period from LTCB
Trust.
"LIBOR Loans" shall mean Loans the interest rates on which are
determined on the basis of LIBOR.
"Lien" shall mean, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, any agreement to grant any of the foregoing with respect to such asset,
and the filing of a financing statement or similar recording in any
jurisdiction with respect to such asset. For all purposes hereunder, the
Company, the Guarantor or any Subsidiary shall be deemed to own subject to a
Lien (i) any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such asset and (ii) any account
receivable transferred by it with recourse (including any such transfer subject
to a holdback or similar arrangement that effectively imposes the risk of
collectibility on the transferor).
"Loans" shall mean the loans provided for by Section 2.1 hereof.
"LTCB" shall mean The Long-Term Credit Bank of Japan, Limited, a
banking corporation duly organized and validly existing under the laws of
Japan, and its successors.
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<PAGE> 15
"LTCB Trust" shall mean LTCB Trust Company, a trust company duly
organized and validly existing under the laws of the State of New York, and its
successors.
"Majority Banks" shall mean Banks having not less than 51% of the
aggregate amount of the Loans outstanding, or if no Loans are then outstanding,
Banks holding not less than 51% of the Commitments then in effect, or, if no
Loans are then outstanding nor Commitments in effect, Banks which held not less
than 51% of the Commitments when most recently in effect; provided that solely
for purposes of determining whether or not the Banks have agreed to each
requested extension of the Commitment Termination Date pursuant to Section 2.9
hereof or amendments or waivers of Section 2.9 with respect to any particular
extension, "Majority Banks" shall not include any Bank whose Commitment, by
reason of such Bank having been a Dissenting Bank for any previous extension,
is scheduled to expire or has expired at any time prior to the Commitment
Termination Date that is the subject of such extension request.
"Margin Adjustment" shall mean, at any time of determination thereof
commencing after the first anniversary of the date of the initial funding of
the Term Loans, when the Funded Debt Ratio, as set forth in the Funded Debt
Ratio Notice most recently delivered to the Administrative Agent (which Notice
shall be effective on the date of the Administrative Agent's receipt thereof in
accordance with Section 12.2 hereof), is at each of the following levels, a
subtraction from any Applicable Margin, as set forth below:
Effective Subtraction from
Funded Debt Ratio Applicable Margin
----------------- -----------------
Greater than 1.25 to 1 0
1.25 to 1 or less, but
greater than 1.00 to 1 (0.375%)
1.00 to 1 or less (0.75%).
"Material Subsidiary" shall mean, at any time, a Subsidiary the book
value of whose tangible assets at such time exceeds 10% of the book value of
the total tangible assets of the Company and the Subsidiaries (on a
consolidated basis), but in any event shall include each of the Guarantor, HSN
Capital Corporation, a Nevada corporation, and HSN Fulfillment, Inc., HSN Mail
Order, Inc. and HSN Realty, Inc., each a Delaware corporation, and their
respective successors.
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<PAGE> 16
"Material Subsidiary Group" shall mean, at any time, a group of any two
or more Subsidiaries which at such time has a combined aggregate book value of
tangible assets in excess of 10% of the book value of the total tangible assets
of the Company and the Subsidiaries (on a consolidated basis).
"Multiemployer Plan" shall mean a plan defined as such in Section 3(37)
of ERISA to which contributions have been made the Company or any ERISA
Affiliate and which is covered by Title IV of ERISA.
"Non-Material Subsidiary" shall mean, at any time, a Subsidiary which
is not a Material Subsidiary.
"Notes" shall mean the promissory notes provided for by Section 2.7
hereof.
"Obligations" shall mean all obligations and liabilities of the Company
to the Administrative Agent, the Co-Agents and the Banks (or any of the
foregoing) now or in the future existing under or in connection with this
Agreement, any of the Notes or any related document (as any of the foregoing
Agreement, Notes or documents may from time to time be respectively amended,
modified, substituted, extended or renewed), direct or indirect, absolute or
contingent, due or to become due, now or hereafter existing, including without
limitation, any payment of principal, interest, fees or expenses due at any
time under this Agreement.
"Operating Cash Flow" shall mean, for any period, the sum of the
following for the Company and its Subsidiaries (including, without limitation,
the Guarantor) on a consolidated basis: (a) operating profit of such Persons
for such period; plus (to the extent already deducted in arriving at operating
profit) (b) depreciation and amortization expense for such Persons for such
period; plus (c) commencing September 1, 1992, non-cash compensation expense
related to the Company's executive stock award program; plus (d) all cash
interest (if any), other cash income (if any) or cash principal repayments (if
any) received by the Company or any Subsidiaries in connection with the Silver
King Notes, and, for the twelve months immediately following the delivery of
any such Silver King Note, accrued interest income on such note for no more
than one month, all as shown on the consolidated financial statements,
including the notes thereto, of the Company for such period or, with respect to
clause (d) above, if such financial statements do not present information in
sufficient detail to derive the amount specified in clause (d) of this
definition, as shown on the certificate to be delivered to the Administrative
Agent pursuant to the last paragraph of Section 9.1 hereof.
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<PAGE> 17
Operating Cash Flow for the four-Fiscal Quarter period ended August 31, 1992
is as set forth in Schedule 2 hereto.
"Overnight Federal Funds Rate Loan" shall mean a Loan which bears
interest at an overnight Federal Funds Rate.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Person" shall mean an individual, a corporation, a company, a
voluntary association, a partnership, a trust, an unincorporated organization
or a government or any agency, instrumentality or political subdivision
thereof.
"Plan" shall mean an employee benefit or other plan established or
maintained by the Company or any ERISA Affiliate and which is covered by Title
IV of ERISA, other than a Multiemployer Plan.
"Post-Default Rate" shall mean a rate per annum, during the period
commencing on the date on which any Obligation is not paid in full when due
(whether at stated maturity, by acceleration or otherwise) and ending on the
date on which all such overdue Obligations are paid in full, equal to 2.00%
plus the higher of (x) the Prime Rate as in effect from time to time and (y)
the interest rate in effect from time to time for Overnight Federal Funds Rate
Loans hereunder (including the Applicable Margin in effect for such Loans at
each such time); provided that, if any such unpaid Obligation is principal of a
LIBOR Loan or of a Term Federal Funds Rate Loan and the due date thereof is a
day other than the last day of the Interest Period therefor, the "Post-Default
Rate" for such principal shall be, for the period commencing on the due date
and ending on the last day of the then current Interest Period therefor, 2.00%
plus the interest rate for such Loan as provided in Section 3.2(a) or (b)
hereof and, thereafter, the rate otherwise provided for above in this
definition.
"Prime Rate" shall mean the rate of interest from time to time
announced by LTCB at its office in New York, New York as its prime commercial
lending rate, which rate is not necessarily the lowest rate of interest charged
or received by LTCB. Each change in the Prime Rate resulting from a change in
such prime commercial lending rate shall take effect when such prime commercial
lending rate changes.
"Prime Rate Loans" shall mean Loans which bear interest at rates based upon
the Prime Rate.
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<PAGE> 18
"Regulation A" shall mean Regulation A of the Board of Governors of the
Federal Reserve System (or any successor), as the same may be amended or
supplemented from time to time.
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System (or any successor), as the same may be amended or
supplemented from time to time.
"Regulatory Change" shall mean, with respect to any Bank, any change
after the date of this Agreement in United States Federal, state or foreign law
or regulations (including Regulation D) or the adoption or making after such
date of any interpretations, directives or requests applying to a class of
banks including such Bank of or under any United States Federal, State or
foreign law or regulations (whether or not having the force of law) by any
court or governmental or monetary authority charged with the interpretation or
administration thereof.
"SEC Report" shall mean, with respect to any Person, any document
filed, or deemed filed, at any time with the Securities and Exchange Commission
(or any successor thereto) by or on behalf of such Person and available to the
public.
"Senior Notes" shall mean the Company's 11-3/4% Senior Notes due
October 15, 1996, issued under the Senior Note Indenture.
"Senior Note Indenture" shall mean the Indenture, dated October 15,
1986, between the Company and First Union National Bank of Florida
(successor-in-interest to Southeast Bank, N.A.), as trustee.
"Short-Term Debt" shall mean, for any Person, all Indebtedness of such
Person which would be short term debt, whether direct or contingent, under GAAP
as in effect on the date of this Agreement.
"Silver King Notes" shall mean all notes in favor of the Company
delivered in connection with the disposition of stock of any of the Broadcast
Subsidiaries as permitted by Section 9.7 hereof.
"Subsidiary" shall mean any corporation, partnership or other Person of
which at least a majority of the outstanding shares of capital stock or other
ownership interests ordinarily having, in the absence of contingencies, by the
terms thereof voting power to elect a majority of the board of directors or
similar governing body of such Person is at the time directly or indirectly
owned or controlled by the Company, the Guarantor or by the Company and/or the
Guarantor,
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<PAGE> 19
and in any event shall include the Guarantor and its subsidiaries.
"Wholly-Owned Subsidiary" shall mean any Person of which all of such ownership
interests, other than directors' qualifying shares, are so owned or controlled.
"Term Federal Funds Rate Loan" shall mean any Federal Funds Rate Loan
other than an Overnight Federal Funds Rate Loan.
"Term Loan Agreement" shall mean the Term Loan Agreement, dated
December 18, 1992, among the Company, the Guarantor, the Co-Agents, the
Administrative Agent and the financial institutions party thereto, as the same
may be amended or modified from time to time.
"Term Loans" shall mean any of the loans made in accordance with the
Term Loan Agreement.
"Total Debt" shall mean, for any Person at any time, all Indebtedness
of such Person at such time (including, without limitation, all long-term
senior and subordinated Indebtedness, all Short-Term Debt, the stated amount of
all letters of credit issued for the account of such Person and (without
duplication) all unreimbursed draws thereunder), as shown on the consolidated
quarterly or annual financial statements, including the notes thereto, of the
Company delivered for such period pursuant to Section 9.1 (or referred to in
Section 8.2) hereof. Total Debt of the Company and its consolidated
Subsidiaries as at the end of the four-Fiscal Quarter period ended August 31,
1992 is as set forth on Schedule 2 hereto.
"Total Debt Ratio" shall mean, at any time, the ratio of (a) Total Debt
of the Company and its consolidated Subsidiaries as at the end of the Company's
four-Fiscal Quarter period most recently ended as of such time, to (b)
Operating Cash Flow for the same period, as shown in the Total Debt Ratio
Notice for such period.
"Total Debt Ratio Notice" shall mean each notice provided for in
Section 9.1(g) (or Section 7.1(f)) hereof.
"Total Funded Debt" shall mean, for any Person at any time, (a) all
Indebtedness of such Person outstanding at such time (other than the aggregate
of all unsecured borrowings of such Person having a scheduled maturity of less
than twelve months from the date of incurrence thereof in an aggregate
principal amount not in excess of $5,000,000 at such time), minus (b) the
stated amount available to be drawn of all letters of credit issued for the
account of such Person, as shown on the consolidated quarterly or annual
financial
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<PAGE> 20
statements, including the notes thereto, of the Company delivered for
such period pursuant to Section 9.1 (or referred to in Section 8.2) hereof.
Total Funded Debt of the Company and its consolidated Subsidiaries as at the
end of the four-Fiscal Quarter period ended August 31, 1992 is as set forth on
Schedule 2 hereto.
1.2. Certain Accounting Matters.
(a) Unless otherwise disclosed to the Banks in writing at the time of
delivery thereof in the manner described in subsection (b) below, all financial
statements and certificates and reports as to financial matters required to be
delivered to the Administrative Agent on behalf of itself and the Banks
hereunder shall be prepared in accordance with GAAP applied on a basis
consistent with those used in the preparation of the latest financial
statements furnished to the Banks hereunder after the date hereof (or, prior to
the delivery of the first financial statements furnished to the Banks
hereunder, used in the preparation of the audited financial statements referred
to in Section 8.2 hereof). All calculations made for the purposes of
determining compliance with the terms of Sections 9.11, 9.12 and 9.13 hereof
shall, except as otherwise expressly provided herein, be made by application of
GAAP applied on a basis consistent with those used in the preparation of the
annual or quarterly financial statements then most recently furnished to the
Banks pursuant to Section 9.1 (or referred to in Section 8.2) hereof unless (i)
the Company shall have objected to determining such compliance on such basis at
the time of delivery of such financial statements or (ii) the Majority Banks
shall so object in writing within 30 days after delivery of such financial
statements, in either of which cases such calculations shall be made on a basis
consistent with those used in the preparation of the most recent financial
statements as to which such objection shall not have been made.
(b) The Company shall deliver to the Administrative Agent, with
sufficient copies for delivery to the Banks, contemporaneously with delivery of
any annual or quarterly financial statement under Section 9.1 hereof a
description in reasonable detail of any material variation between the
application of accounting principles employed in the preparation of such
statement and the application of accounting principles employed in the
preparation of the most recently preceding annual or quarterly financial
statements as to which no objection shall have been made in accordance with the
last sentence of subsection (a) above, and reasonable estimates of the
difference between such statements arising as a consequence thereof.
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Section 2. Commitments.
2.1. Loans. Each Bank severally agrees, on the terms and subject to
the conditions of this Agreement, to make Loans to the Company from time to
time during the period from and including the date hereof to but not including
the Commitment Termination Date (as from time to time in effect for such Bank)
in principal amounts not to exceed in the aggregate at any time outstanding the
amount of such Bank's Commitment as in effect from time to time. Subject to
the terms and conditions of this Agreement, during such period the Company may
borrow, repay and reborrow the amount of the Commitments by means of LIBOR
Loans, Federal Funds Rate Loans or Prime Rate Loans, and during such period the
Company may convert Loans of one type into Loans of another type (as provided
in Section 2.8 hereof); provided, that no more than six LIBOR Loans may be
outstanding from each Bank at any time.
On the Amendment Effective Date, any loans in an aggregate principal amount
of not more than $40,000,000 then outstanding under the 1991 Revolving Credit
Agreement shall be deemed to be a Loan under this Agreement, and the
Administrative Agent, on behalf of the Company, is hereby authorized and
directed to make a borrowing from all of the Banks to reimburse the Co-Agents
in such amounts as may be required so that the aggregate principal amount of
the loans that were outstanding under the 1991 Revolving Credit Agreement shall
be Loans held pro rata by the Banks hereunder in accordance with their
respective Commitments. On the Amendment Effective Date, any loans in an
aggregate principal amount in excess of $40,000,000 then outstanding under the
1991 Revolving Credit Agreement shall be prepaid in full, together with
interest accrued thereon to the date of prepayment and all fees, expenses and
other amounts owing in connection therewith.
2.2. Borrowings. The Company shall give the Administrative Agent
(which shall promptly notify the Banks) notice of each borrowing hereunder as
provided in Section 4.5 hereof. Not later than 10:00 a.m., or, in the case of
a borrowing of Overnight Federal Funds Rate Loans or Prime Rate Loans, 12:00
p.m., New York time on the date specified for each such borrowing, each Bank
shall make available the amount of the Loan to be made by it on such date to
the Administrative Agent, at account number 04203606 maintained by the
Administrative Agent with Bankers Trust Company (ABA No. 021001033), One
Bankers Trust Plaza, New York, New York 10006 (reference: "Home Shopping
Network - 1992 Revolving Credit Facility"), attention: Robert Pacifici, in
immediately available funds. The amount so received by the Administrative
Agent shall, subject to the terms and conditions of this Agreement, be made
available to the Company by depositing the
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<PAGE> 22
same, in immediately available funds, in an account of the Company designated
by the Company in the related notice of borrowing. References in this
Agreement to the date on which a Loan is made shall be to the date on which
funds borrowed pursuant to such Loan shall have been made available to the
Company pursuant to this Section 2.2.
2.3. Changes of Commitments. The Company shall have the right to
terminate or reduce the amount of the Commitments at any time or from time to
time; provided that (i) the Company shall give notice of each such termination
or reduction as provided in Section 4.5 hereof; (ii) each partial reduction
shall be in an aggregate amount at least equal to $5,000,000; and (iii) the
Commitments may not be reduced below the aggregate principal amount of all
Loans then outstanding. Commitments once terminated or reduced may not be
reinstated.
2.4. Fees.
(a) The Company shall pay to the Administrative Agent for account of
each Bank a commitment fee on the daily average unused amount of such Bank's
outstanding Commitment, for the period from and including the date of this
Agreement to and including the earlier of the date such Commitment is
terminated or the day prior to the Commitment Termination Date for such Bank,
at a rate per annum equal to 1/2 of 1%; provided, however, that no such fee
shall be payable to any Bank with respect to the portion (if any) of such
Bank's Commitment corresponding to the principal amount of Loans which such
Bank shall not have made in accordance with (i) a notice of borrowing properly
and timely given and (ii) the terms and conditions of this Agreement, and with
respect to which all conditions precedent thereto shall have been satisfied.
All outstanding accrued commitment fees of each Bank shall be due and payable
on each Fee Payment Date and on the earlier of the date the Commitment of such
Bank is terminated or the Commitment Termination Date for such Bank.
(b) The Company shall pay to the Administrative Agent for its own
account an annual Agency Fee in the amount and at the times set forth in the
fee letter, dated September 28, 1992, among the Company, the Guarantor and the
Administrative Agent.
2.5. Lending Offices. The Loans made by each Bank shall be made and
maintained at such Bank's Applicable Lending Office for Loans of such type.
2.6. Several Obligations; Remedies Independent. The failure of any
Bank to make any Loan to be made by it on the date specified therefor shall not
relieve any other Bank
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<PAGE> 23
of its obligation to make its Loan on such date, but no Bank shall be
responsible for the failure of any other Bank to make a Loan to be made by such
other Bank. The amounts payable by the Company or the Guarantor at any time
hereunder and under the Notes to each Bank shall be a separate and independent
debt and each Bank shall be entitled to protect and enforce its rights arising
out of this Agreement and the Notes, and it shall not be necessary for any
other Bank or any Co-Agent or the Administrative Agent to consent to, or be
joined as an additional party in, any proceedings for such purposes.
2.7. Notes.
(a) The Loans made by each Bank shall be evidenced by a single
promissory note of the Company in substantially the form of Exhibit A hereto,
dated the date of this Agreement, payable to the order of such Bank in a
principal amount equal to the amount of its Commitment as originally in effect
and otherwise duly completed. Each Loan made by each Bank, and all payments
and prepayments made on account of the principal thereof, and all conversions
of such Loans, shall be recorded by such Bank on its books and, prior to any
transfer of the Note held by it, endorsed by such Bank on the schedule attached
to such Note or any continuation thereof; provided, that no failure by any Bank
to make such recording or endorsement shall affect the obligations of the
Company or the Guarantor under this Agreement to such Bank or the holder of
such Note.
(b) Each Bank shall be entitled to have its Note subdivided in
connection with an assignment of all or any portion of its Commitment, Loans
and Note pursuant to Section 12.6(b) hereof.
2.8. Prepayments and Conversions of Loans. The Company shall have the
right to prepay Loans, or to convert Loans of one type into Loans of another
type, at any time or from time to time, it being understood that any such
conversion constitutes the simultaneous repayment of a Loan in accordance with
Section 3.1 hereof and the making of a new Loan in accordance with Section 2.1
hereof; provided that (a) the Company shall give the Administrative Agent
notice of each such prepayment or conversion as provided in Section 4.5 hereof;
(b) Loans may be prepaid or converted only on the last day of an Interest
Period for such Loans; (c) prepayments and conversions of Loans shall be
subject to the indemnity provisions of Section 5.4 hereof.
2.9. Extension of Facility. The Company shall be entitled to request,
by written notice to be given to the Administrative Agent not less than 45 days
prior to any Exten-
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<PAGE> 24
sion Date (of which request the Administrative Agent shall promptly notify the
Banks), that the Commitment Termination Date then in effect be extended for a
period of one year to the Fee Payment Date that is one year after such
Commitment Termination Date and:
(i) if all the Banks shall have notified the Administrative
Agent that they agree to such request by not later than the date (the
"Cut-Off Date") 15 days prior to such Extension Date, the definition
of "Commitment Termination Date" in Section 1.1 shall, so long as no
Default shall have occurred and be continuing on such Extension Date,
be extended to the Fee Payment Date which is one year beyond the date
that would otherwise have been the Commitment Termination Date;
(ii) if such notifications are not received from the Majority
Banks or if the Administrative Agent does not so agree, then no such
extension shall be made, and the facility provided for hereunder shall
terminate on the then scheduled Commitment Termination Date (or Dates)
then in effect; and
(iii) if such notifications are not received from all the
Banks, but are received from a Bank or Banks ("Assenting Banks") whose
Commitments constitute not less than 51 percent of the aggregate
Commitments at such time and from the Administrative Agent, the
Commitments of the Bank or Banks ("Dissenting Banks") who do not so
notify shall be reduced to zero on the Commitment Termination Date
then in effect and, solely for purposes of the Administrative Agent
and the Assenting Banks (and the obligations of the Company and the
Guarantor with respect thereto), the Commitment Termination Date shall
be extended as provided in (i) above in respect of the Assenting Banks
provided that no Default shall have occurred and be continuing on such
Extension Date.
Each of the Banks and the Administrative Agent agrees to use its reasonable
efforts to timely respond (either to consent or to withhold consent) to a
request to extend the Commitment Termination Date pursuant to this Section 2.9
on or before the relevant Cut-Off Date. If the Administrative Agent or any
Bank fails to timely respond in accordance with the previous sentence, the
Administrative Agent or such Bank, as the case may be, shall be deemed to have
rejected such request.
In the event that clause (iii) above of this Section 2.9 is applicable, the
following additional provisions shall apply:
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<PAGE> 25
(1) If, at any time after the Cut-Off Date for any
extension but prior to the corresponding Extension Date (15 dayslater), any
Dissenting Bank notifies the Administrative Agent that it has changed its
decision and that it agrees to the requested extension, the Administrative
Agent may, with the consent of the Company (which consent shall not be
unreasonably withheld), include or not include such Bank as an Assenting Bank
in the proposed extension, and if such Bank is included as an Assenting Bank
and if the provisions of clause (i) or (iii) of this Section 2.9 become
effective, the Commitment of such Bank shall not be reduced to zero as provided
in clause (iii).
(2) At any time during the period commencing on the Cut-Off
Date for any extension pursuant to Section 2.9(i) to but not including the
Commitment Termination Date as then in effect for the Dissenting Banks for such
Cut-Off Date (without regard to any extension thereof) (the "Replacement
Period," such period being approximately two years plus 15 days), the Company
may give a written request to the Administrative Agent (each such request a
"Commitment Reinstatement Request") requesting that the Administrative Agent
assist the Company in arranging with any financial institution or institutions
(which may or may not be a Bank hereunder at such time) selected by the Company
to assume that portion of the Commitments of all of the Dissenting Banks for
such extension (the "Available Commitment Interests") as the Company may
request in such Commitment Reinstatement Request.
If the Administrative Agent receives a Commitment Reinstatement Request
on or prior to the last day of such Replacement Period, the Administrative
Agent may, but shall not be obligated to, assist the Company in making such
arrangements. If any financial institution or institutions agree to assume any
portion of the Available Commitment Interests (each such institution being
called a "Replacement Bank") on or prior to the last day of such Replacement
Period, the Administrative Agent shall allocate the portion of the Available
Commitment Interests to be so assumed pro rata among the Commitments and Loans
of all Dissenting Banks for such Replacement Period. Each such Dissenting Bank
hereby agrees, immediately upon request therefor by the Administrative Agent
and in any event on the last day of an Interest Period and no later than the
last day of such Replacement Period, to assign to such Replacement Bank the
portion of its Commitment and outstanding Loans so allocated for a purchase
price equal to the principal amount of each such Loan plus all accrued interest
thereon to the date of purchase. Such
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<PAGE> 26
assignment shall be effected by the execution and delivery to
the Administrative Agent of an Assignment and Assumption Agreement
substantially in the form of Exhibit E hereto. Upon execution and
delivery of an Assignment and Assumption Agreement by the Dissenting
Banks and each Replacement Bank and the effectiveness thereof as
provided therein, such Replacement Bank shall be treated as a "Bank"
for all purposes of this Agreement and, without limiting the
foregoing, shall perform all of the obligations, and be entitled to
the full benefit, of this Agreement to the same extent as if it were
an original party to this Agreement in respect of the rights and/or
obligations assigned or transferred to it. Solely for the purposes of
determining the rights and obligations of any Replacement Bank with
respect to the portion of the Commitments so assigned to it, each
Dissenting Bank shall, upon the effectiveness of each such assignment,
be deemed to have assented to the previously proposed extension of the
Commitment Termination Date pursuant to this Section 2.9.
The giving of any Commitment Reinstatement Request shall
constitute the Company's and the Guarantor's authorization to the
Administrative Agent to effect the transactions contemplated thereby,
and no revocation thereof shall be effective unless received by the
Administrative Agent from the Company at least five Business Days
prior to the effectiveness of any assignment arranged by the
Administrative Agent in response to such Commitment Reinstatement
Request. Each request or notice from the Company under this Section
2.9, and each action taken by the Administrative Agent in response to
such request or notice, shall bind the Guarantor.
It is expressly agreed that the Administrative Agent and each
Bank may from time to time grant or withhold its consent to any extension of the
Commitment Termination Date at its sole discretion and based on such criteria
and subject to such terms or conditions as the Administrative Agent or such
Bank may deem appropriate at the time; provided that amendments to the terms
and conditions of this Agreement shall require the prior consent of the
Company, the Guarantor and some or all of the Banks, as provided in Section
12.4 hereof. Nothing in this Agreement or any related document shall be
construed to constitute a commitment by the Administrative Agent or any Bank to
effect any such extension, and none of the Administrative Agent, any Co-Agent
or any Bank shall be liable to the Company, the Guarantor or any other Person
for any consequences arising from the failure to effect any such extension.
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<PAGE> 27
Section 3. Payments of Principal and Interest.
3.1. Repayment of Loans. The Company shall pay to the
Administrative Agent for account of each Bank (i) the principal of each of such
Bank's Loans on the last day of each Interest Period for such Loan and (ii) on
the Commitment Termination Date for each Bank, the principal then outstanding
of all Loans of such Bank.
3.2. Interest. The Company shall pay to the Administrative Agent
for account of each Bank interest on the unpaid principal amount of each Loan
made by such Bank for the period commencing on the date of such Loan to but
excluding the date such Loan shall be paid in full, at the following rates per
annum:
(a) during such periods as such Loan is a LIBOR Loan, for each
Interest Period relating thereto, the LIBOR for such Loan for such Interest
Period plus the Applicable Margin in effect for each day during such
Interest Period; and
(b) during such periods as such Loan is a Federal Funds Rate
Loan, for each Interest Period relating thereto, the Federal Funds Rate (as
in effect for such Interest Period) plus 2.50% per annum;
(c) during such periods as such Loan is a Prime Rate Loan, for
each Interest Period relating thereto, the Prime Rate (as in effect for
such Interest Period) plus the Applicable Margin in effect for each day
during such Interest Period.
Notwithstanding the foregoing, at any time during the period commencing on the
date on which any Obligation is not paid in full when due (whether at stated
maturity, by acceleration or otherwise) and ending on the date on which all
such overdue Obligations are paid in full, the Company shall pay to the
Administrative Agent for account of each Bank interest on the principal of all
Loans and (to the fullest extent permitted by law) on any unpaid interest or
any other amount payable by the Company hereunder or under the Note held by
such Bank at the Post-Default Rate.
Accrued interest on each Loan shall be payable (i) on each Interest
Payment Date for such Loan and (ii) in any case, on the date on which any
principal amount thereof is paid or prepaid or converted to a Loan of another
type on the portion thereof being so paid, prepaid or converted, except that
interest on any principal, interest or other amount
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<PAGE> 28
payable at the Post-Default Rate shall be payable from time to time on demand.
If the Company shall fail to timely deliver a Funded Debt Ratio Notice
in respect of any four-Fiscal Quarter period in accordance with Section 9.1(g)
hereof, and it transpires that the Funded Debt Ratio has changed from that
which was in effect with respect to the previous four-Fiscal Quarter period
such that any interest rate hereunder would increase, the Company agrees that
the interest rate on the Loans shall, by operation of the definition of
Applicable Margin, automatically increase on the date such Funded Debt Ratio
Notice is duly given in accordance with Section 12.2 hereof. In addition, (i)
such increase shall be retroactive to the date on which such Funded Debt Ratio
Notice should have been delivered in accordance with Section 9.1(g) hereof and
(ii) the incremental interest for the retroactive period shall be payable on
the next date on which interest is payable under this Agreement and the Notes
(or, if no further interest is payable, immediately on demand by the
Administrative Agent or any Bank). If the Company shall fail to timely deliver
a Funded Debt Ratio Notice in respect of any four-Fiscal Quarter period, and it
transpires that the Funded Debt Ratio has changed from that which was in effect
with respect to the previous four-Fiscal Quarter period such that any interest
rate hereunder would decrease, then such decrease shall be effective from the
date on which such Funded Debt Ratio Notice is received by the Administrative
Agent, and shall have no retroactive effect.
No provision of this Agreement or the Notes or any other document
delivered in connection with either thereof and no transaction contemplated
hereby or thereby shall be construed or shall operate so as to require the
Company, the Guarantor or any other Person liable for payment of any of the
Obligations to pay interest in an amount or at a rate greater than the maximum
allowed from time to time by applicable law. Should any interest or other
charges paid by the Company, the Guarantor or any such other Person under any
such document result in a computation or earning of interest in excess of the
maximum rate of interest permitted under applicable law in effect while such
interest is being earned, then such excess shall be and hereby is waived by
each Bank and all such excess shall be automatically credited against and in
reduction of the principal balance of such amounts payable under such documents
and any portion of such excess received by any Bank shall be paid over by such
Bank to the Company, the Guarantor or such other Person, as the case may be, it
being the intent of the parties hereto that under no circumstances shall the
Company, the Guarantor or such other Person be required to pay
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<PAGE> 29
interest in excess of the maximum rate allowed by such applicable law.
Section 4. Payments; Pro Rata Treatment; Computations, Etc.
4.1. Payments. Except to the extent otherwise provided herein, all
payments of Obligations shall be made in Dollars, in immediately available
funds and without set-off, counterclaim or deduction of any kind, to the
Administrative Agent at account number 04203606 maintained by the
Administrative Agent at Bankers Trust Company (ABA No. 021001033), One Bankers
Trust Plaza, New York, New York 10006 (reference: "Home Shopping Network -
1992 Revolving Credit Facility"), attention: Robert Pacifici (or at such other
account or at such other place as the Administrative Agent may notify the
Company from time to time), not later than 11:00 a.m. New York time on the date
on which such payment shall become due (each such payment made after such time
on such due date to be deemed to have been made on the next succeeding Business
Day). Any Bank for whose account any such payment is to be made may (but shall
not be obligated to) debit the amount of any such payment which is not made by
such time to any ordinary deposit account of the Company or the Guarantor with
such Bank or any affiliate of such Bank (with subsequent notice to the Company
or the Guarantor, as the case may be, provided that such Bank's failure to give
such notice shall not affect the validity of such debit). The Company or the
Guarantor, as the case may be, shall at the time of making a payment under this
Agreement or any Note specify to the Administrative Agent (i) the account from
which the payment funds will be transmitted and the manner and approximate time
of such transmission and (ii) the Loans or other amounts payable by the Company
hereunder to which such payment shall be applied, and in the event that it
shall have failed so to specify, or if an Event of Default shall have occurred
and be continuing, the Administrative Agent may distribute such payment to the
Banks in such manner as it or the Majority Banks may deem appropriate, subject
to Section 4.2 hereof.
Each payment received by the Administrative Agent under this Agreement
or any Note for account of a Bank shall be paid promptly to such Bank, in
immediately available funds, for account of such Bank's Applicable Lending
Office for the Loan in respect of which such payment is made.
If the due date of any payment to be made hereunder or under any Note
would otherwise fall on a day which is not a Business Day, such date shall be
extended to the next succeed-
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<PAGE> 30
ing Business Day and interest shall be payable for any principal so
extended for the period of such extension.
4.2. Pro Rata Treatment. Except to the extent otherwise
provided herein:
(a) each borrowing from the Banks under Section 2.1 hereof
shall be made from the Banks, each payment of commitment fee under Section
2.4 hereof shall be made for account of the Banks and each termination or
reduction of the amount of the Commitments under Section 2.3 hereof shall
be applied to the Commitments of the Banks, pro rata according to the
amounts of their respective unused Commitments;
(b) each conversion of Loans of a particular type (other than
conversions provided for by Section 5.1 hereof) shall be made pro rata
among the Banks holding Loans of such type according to the respective
principal amounts of such Loans held by such Banks; and
(c) each payment and prepayment by the Company of principal of
or interest on Loans of a particular type shall be made to the
Administrative Agent for account of the Banks holding Loans of such type
pro rata in accordance with the respective unpaid principal amounts of such
Loans held by such Banks.
4.3. Computations. Interest on all Loans and the commitment
fee shall be computed on the basis of a year of 360 days and actual days
elapsed (including the first day but excluding the last day) occurring in the
period for which payable.
4.4. Minimum Amounts. Except for conversions or prepayments
made pursuant to Section 5.1 hereof, each borrowing, conversion and prepayment
of principal of Loans shall be in an aggregate amount at least equal to
$5,000,000, provided that borrowings, prepayments or conversions of or into
Loans of different types or, in the case of LIBOR Loans, having different
Interest Periods, at the same time hereunder shall each be deemed separate
borrowings, conversions or prepayments, as the case may be. Notwithstanding
anything in this Agreement to the contrary, the aggregate principal amount of
LIBOR Loans having the same Interest Period shall be at least equal to
$5,000,000 and, if any LIBOR Loans would otherwise be in a lesser principal
amount for any period, such Loans shall be Prime Rate Loans during such period.
4.5. Certain Notices. Notices by the Company to the
Administrative Agent of terminations or reductions of
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<PAGE> 31
Commitments, of borrowings, conversions and prepayments of Loans and of
the duration of Interest Periods shall be irrevocable and shall be effective
only if received by the Administrative Agent not later than 10:00 a.m. New York
time on the number of Business Days prior to the date of the relevant
termination, reduction, borrowing, conversion or prepayment or the first day of
such Interest Period specified below:
<TABLE>
<CAPTION>
Number of
Business
Notice Days Prior
------ -----------
<S> <C>
Termination or reduction of Commitments 10
Borrowing of Overnight Federal Funds Rate Loans; or conversion of Term
Federal Funds Rate Loans or Prime Rate Loans into Overnight Federal Funds
Rate Loans same day
Borrowing or prepayment of LIBOR Loans; conversion of LIBOR Loans into
any other type of Loans; conversion of any type of Loans into LIBOR
Loans; or duration of Interest Period for LIBOR Loans 3
Borrowing or prepayment of Term Federal Funds Rate Loans; conversion of
any type of Loans into Term Federal Funds Rate Loans; or duration of
Interest Period for Term Federal Funds Rate Loans 3
Borrowing or prepayment of Prime Rate Loans; or conversion of Federal
Funds Rate Loans into Prime Rate Loans same day
</TABLE>
In addition:
(a) Each such notice of termination or reduction shall specify
the amount of the Commitments to be terminated or reduced.
(b) Each such notice of borrowing, conversion or prepayment
shall specify the Loans to be borrowed, converted or prepaid and the amount
(subject to Section 4.4 hereof) and type of the Loans to be borrowed,
converted or prepaid and the date of borrowing, conversion or prepayment
(which shall be a Business Day).
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<PAGE> 32
(c) Each such notice of the duration of an Interest Period
shall specify the Loans to which such Interest Period is to relate.
The Administrative Agent shall promptly notify the Banks of the
contents of each such notice.
In the event that the Company fails to select the duration of any
Interest Period for any LIBOR Loans or Term Federal Funds Rate Loans within
the time period and otherwise as provided in this Section 4.5, or if the
Company and the Administrative Agent with the consent of the Banks fail to
agree upon a term for any requested Term Federal Funds Rate Loans, such Loans
(if outstanding as LIBOR Loans) will be automatically converted into Overnight
Federal Funds Rate Loans on the last day of the then current Interest Period
for such Loans or (if outstanding as Overnight Federal Funds Rate Loans or
Prime Rate Loans) will remain as Overnight Federal Funds Rate Loans or Prime
Rate Loans, as the case may be, or (if not then outstanding) will be made as
Overnight Federal Funds Rate Loans.
4.6. Non-Receipt of Funds by the Administrative Agent.
Unless the Administrative Agent shall have been notified by a Bank or
the Company or the Guarantor prior to the date on which such Bank or the
Company or the Guarantor is scheduled to make payment to the Administrative
Agent of (in the case of a Bank) the proceeds of a Loan to be made by it
hereunder or (in the case of the Company or the Guarantor) a payment to the
Administrative Agent for account of one or more of the Banks hereunder (such
payment being herein called the "Required Payment"), which notice shall be
effective upon receipt, that it does not intend to make the Required Payment to
the Administrative Agent, the Administrative Agent may assume that the Required
Payment has been made and may, in reliance upon such assumption (but shall not
be required to), make the amount thereof available to the intended recipient(s)
on such date and, if such Bank or the Company or the Guarantor (as the case may
be) has not in fact made the Required Payment to the Administrative Agent, the
recipient(s) of such payment shall, on demand, repay to the Administrative
Agent the amount so made available together with interest thereon in respect of
each day during the period commencing on the date such amount was so made
available by the Administrative Agent until the date the Administrative Agent
recovers such amount at a rate per annum equal to the overnight Federal Funds
Rate for such day (as determined by the Administrative Agent).
4.7. Sharing of Payments, Etc. Each of the Company and the
Guarantor agrees that, in addition to (and without limitation of) any right of
setoff, bankers' lien or
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<PAGE> 33
counterclaim a Bank may otherwise have, each Bank shall be entitled, at
its option, to offset balances held by it in ordinary deposit accounts of the
Company or the Guarantor at any of its offices, in Dollars or in any other
currency, against any principal of or interest on any of such Bank's Loans, or
any other amount payable to such Bank hereunder, which is not paid when due
(regardless of whether such balances are then due to the Company or the
Guarantor), in which case it shall promptly notify the Company or the
Guarantor, as the case may be, and the Administrative Agent thereof, provided
that such Bank's failure to give such notice shall not affect the validity
thereof. If any Bank shall obtain payment of any principal of or interest on
any Loan made by it to the Company, or any other amount payable to such Bank,
under this Agreement through the exercise of any right of setoff, banker's lien
or counterclaim or similar right or otherwise, and, as a result of such
payment, such Bank shall have received a greater percentage of the principal,
interest or such other amount then due hereunder by the Company to such Bank
than the percentage received by any other Banks, it shall promptly purchase
from such other Banks participations in (or, if and to the extent specified by
such Bank, direct interests in) the Loans made by such other Banks (or in
interest due thereon, as the case may be) in such amounts, and make such other
adjustments from time to time as shall be equitable, to the end that all the
Banks shall share the benefit of such excess payment (net of any expenses which
may be incurred by such Bank in obtaining or preserving such excess payment)
pro rata in accordance with the unpaid principal and/or interest on the Loans
held by each of the Banks or such other amount due to the Banks hereunder. To
such end all the Banks shall make appropriate adjustments among themselves (by
the resale of participations sold or otherwise) if such payment is rescinded or
must otherwise be restored. Each of the Company and the Guarantor agrees that
any Bank so purchasing a participation (or direct interest) in the Loans made
by other Banks (or in interest due thereon, as the case may be) may exercise
all rights of setoff, bankers' lien, counterclaim or similar rights with
respect to such participation as fully as if such Bank were a direct holder of
Loans in the amount of such participation. Nothing contained herein shall
require any Bank to exercise any such right or shall affect the right of any
Bank to exercise, and retain the benefits of exercising, any such right with
respect to any other indebtedness or obligation of the Company or the
Guarantor; provided that to the extent any such Bank exercises any such right
with respect to any other indebtedness or obligation of the Company or the
Guarantor, it shall also exercise its rights under this Section 4.7 and agrees
that the benefits of exercising any such rights shall be shared with the Banks
pro rata in the proportion that the unpaid obligations of the Company and the
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<PAGE> 34
Guarantor owing to such Bank hereunder bear to such other indebtedness or
obligation. If under any applicable bankruptcy, insolvency or other similar
law, any Bank receives a secured claim in lieu of a setoff to which this
Section 4.7 applies, such Bank shall, to the extent practicable, exercise its
rights in respect of such secured claim in a manner consistent with the rights
of the Banks entitled under this Section 4.7 to share in the benefits of any
recovery on such secured claim.
Section 5. Yield Protection and Illegality.
5.1. Additional Costs.
(a) The Company shall pay directly to each Bank from time to
time such amounts as such Bank may determine to be necessary to compensate
it for any costs which such Bank determines are attributable to its
making or maintaining of any LIBOR Loans to the Company or its obligation to
make any LIBOR Loans to the Company hereunder, or any reduction in any amount
receivable by the Bank hereunder in respect of any of such Loans or such
obligation (such increases in costs and reductions in amounts receivable being
herein called "Additional Costs"), resulting from any Regulatory Change which
(i) changes the basis of taxation of any amounts payable to such Bank by the
Company or the Guarantor under this Agreement or the Notes in respect of any of
such Loans (other than taxes imposed on the overall net income of such Bank or
of its Applicable Lending Office for any of such Loans by the jurisdiction in
which such Bank has its principal office or such Applicable Lending Office); or
(ii) imposes or modifies any reserve, special deposit, minimum capital, capital
ratio or similar requirements relating to any extensions of credit or other
assets of, or any deposits with or other liabilities of, such Bank (including
any of such Loans or any deposits referred to in the definition of "LIBOR" in
Section 1.1 hereof), or the Commitment of such Bank; or (iii) imposes any other
condition affecting this Agreement or the Notes (or any of such extensions of
credit or liabilities) or the Commitments.
(b) Without limiting the effect of the provisions of Section
5.1(a) hereof, in the event that, by reason of any Regulatory Change,
any Bank either (i) incurs Additional Costs based on or measured by the excess
above a specified level of the amount of a category of deposits or other
liabilities of such Bank which includes deposits by reference to which the
interest rate on LIBOR Loans is determined as provided in this Agreement or a
category of extensions of credit or other assets of such Bank which includes
LIBOR Loans or (ii) becomes
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subject to restrictions on the amount of such a category of liabilities
or assets which it may hold, then, if such Bank so elects by notice to the
Company, the obligation of such Bank to make, and to convert Federal Funds Rate
Loans or Prime Rate Loans into, LIBOR Loans hereunder shall be suspended until
such Regulatory Change ceases to be in effect (and all LIBOR Loans held by such
Bank shall be automatically converted into Overnight Federal Funds Rate Loans
at the end of the then current Interest Period for each of them, or on such
earlier date as such Bank may specify in writing as being the last permissible
date for such prepayment under applicable law, rules or regulations); provided
that in such event such Bank shall use its best efforts to obtain a Federal
Funds Rate offered for deposits made for a period of time longer than overnight
(to the extent such a rate is then obtainable), but any failure to obtain such
a rate shall in no way affect the rights of the Banks to receive interest on
such Loans at the Federal Funds Rate otherwise obtainable.
(c) Without limiting the effect of the foregoing provisions
of this Section 5.1 (but without duplication), the Company shall pay to
each Bank from time to time on request such amounts as such Bank may determine
to be necessary to compensate such Bank for any costs which it determines are
attributable to the maintenance by such Bank (or any Applicable Lending
Office), pursuant to any law or regulation or any interpretation, directive or
request (whether or not having the force of law) of any court or governmental
or monetary authority, of capital in respect of such Bank's Commitment (such
compensation to include, without limitation, an amount equal to any reduction
of the rate of return on assets or equity of such Bank (or any Applicable
Lending Office) to a level below that which such Bank (or any Applicable
Lending Office) could have achieved but for such law, regulation,
interpretation, directive or request).
(d) Determinations and allocations by any Bank for purposes
of this Section 5.1 of the effect of any Regulatory Change pursuant to
Section 5.1(a) or (b) hereof, or of the effect of capital maintained pursuant
to Section 5.1(c) hereof, on its costs or rate of return of maintaining Loans
or its obligation to make Loans, or on amounts receivable by it in respect of
Loans, and of the amounts required to compensate such Bank under this Section
5.1, shall be conclusive absent manifest error.
5.2. Limitation on Types of Loans. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of any interest
rate for any LIBOR Loan for any Interest Period therefor:
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<PAGE> 36
(a) the Administrative Agent determines (which determination
shall be conclusive) that quotations of interest rates for the deposits
referred to in the definition of "LIBOR" in Section 1.1 hereof are not
being provided in the relevant amounts or for the relevant maturities for
purposes of determining rates of interest for such Loans as provided
herein; or
(b) any Bank determines (which determination shall be
conclusive), and so notifies the Administrative Agent, that the rates of
interest referred to in the definition of "LIBOR" in Section 1.1 hereof
upon the basis of which the rate of interest for LIBOR Loans for such
Interest Period is to be determined do not adequately cover the cost to
such Bank of making or maintaining such LIBOR Loans for such Interest
Period;
then the Administrative Agent shall give the Company prompt notice thereof, and
so long as such condition remains in effect, the Banks shall be under no
obligation to make additional LIBOR Loans or to convert Federal Funds Rate
Loans or Prime Rate Loans into LIBOR Loans and the Company shall, on the last
day(s) of the then current Interest Period(s) for the outstanding LIBOR Loans,
either repay such Loans as provided in Section 3.1 hereof or convert such Loans
into Federal Funds Rate Loans or Prime Rate Loans in accordance with Section
2.8 hereof.
5.3. Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Bank or its Applicable
Lending Office to honor its obligation to make or maintain LIBOR Loans
hereunder, then such Bank shall promptly notify the Administrative Agent and
the Company and such Bank's obligation to make LIBOR Loans shall be suspended
until such time (prior to the Commitment Termination Date) as such Bank may
again make and maintain LIBOR Loans and such Bank's outstanding LIBOR Loans
shall be automatically converted into Federal Funds Rate Loans or Prime Rate
Loans, as such Bank may select, at the end of the then current Interest Period
for each of them, or on such earlier date as such Bank may specify in writing
as being the last permissible date for such prepayment under applicable laws,
rules or regulations.
5.4. Compensation. The Company shall pay to each Bank, upon
the request of such Bank, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Bank) to compensate it for any loss, cost or expense
(including, without limitation, costs arising from premature termination of
such Bank's obligations under interest rate swaps, caps, collars, floors,
options, forward exchange contracts and
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similar hedging arrangements) which such Bank determines are attributable to:
(a) any payment, prepayment or conversion of a Loan for any
reason (including, without limitation, the acceleration of the Loans
pursuant to Section 10 hereof) on a date other than the last day of an
Interest Period for such Loan; or
(b) any failure by the Company for any reason (including,
without limitation, the failure of any of the conditions precedent
specified in Section 7 hereof to be satisfied) to borrow or convert into a
LIBOR Loan or a Term Federal Funds Rate Loan on the date for such borrowing
or conversion specified in the relevant notice of borrowing given pursuant
to Section 2.2 hereof or notice of conversion given pursuant to Section 2.8
hereof.
Such Bank shall deliver to the Company, promptly upon such request, a
certificate setting forth in reasonable detail the basis for calculation of
such amounts, the contents of such certificate being, in the absence of
manifest error therein, conclusive evidence of such amounts; provided that the
failure of such Bank to deliver such certificate shall in no way affect such
Bank's rights to such compensation. The failure of any Bank to request the
compensation provided for in this Section 5.4 in any instance shall not affect
such rights of such Bank in any other instance or of any other such Bank in any
instance.
5.5. Taxes. All payments of Obligations (as used in this
Section 5.5, "Payments") shall be made free and clear of, and without
deduction by reason of, any and all taxes, duties, assessments, withholdings,
retentions or other similar charges whatsoever imposed, levied, collected,
withheld or assessed by any jurisdiction or any agency or taxing authority
thereof or therein (as used in this Section 5.5, "Taxes"), all of which shall
be paid by the Company for its own account not later than the date when due.
If the Company is required by law to deduct or withhold any Taxes from any
Payment, the Company shall: (a) make such deduction or withholding; (b) pay the
amount so deducted or withheld to the appropriate taxing authority not later
than the date when due (irrespective of the rate of such deduction or
withholding); (c) deliver to such Bank, promptly and in any event within 30
days after the date on which such Taxes become due, original tax receipts and
other evidence satisfactory to such Bank of the payment when due of the full
amount of such Taxes; and (d) pay to the respective Bank, forthwith upon any
request by such Bank therefor from time to time, such additional amounts as may
be
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necessary so that such Bank receives, free and clear of all Taxes, the
full amount of such Payment stated to be due under this Agreement or the Notes
as if no such deduction or withholding had been made.
Each Bank that is not organized under the laws of the United
States or of any political subdivision thereof agrees that it will deliver
to the Company on the date of its initial Loan and thereafter as may be
required from time to time by applicable law or regulation United States
Internal Revenue Service Form 4224 or 1001 (or any successor form) or such
other form as from time to time may be required to demonstrate that payments
made by the Company to such Bank under this Agreement or such Note either are
exempt from United States Federal withholding taxes or are payable at a reduced
rate (if any) specified in any applicable tax treaty or convention.
Each Bank agrees to use reasonable efforts to transfer its
Commitment or Loans to another Applicable Lending Office of such Bank
if such transfer would avoid the need for or mitigate the amount of any
deduction or withholding of Taxes on payments of interest to such Bank under
this Agreement, but no Bank shall be required to make such transfer if such
Bank determines that such Bank would suffer any legal, economic or regulatory
disadvantage.
Without limiting the survival of any other provisions of this
Agreement or the Notes, the obligations of the Company under this Section
shall survive the repayment of the Loans and the Notes.
Section 6. Guarantee.
6.1. Unconditional Guarantee. For valuable consideration,
receipt of which is hereby acknowledged, and to induce the Banks to make Loans
to the Company, the Guarantor hereby unconditionally and irrevocably guarantees
to the Administrative Agent, the Co-Agents and each of the Banks the payment
in full when due (whether at stated maturity, by acceleration or otherwise) of
all principal of and interest on each Loan and all other amounts payable
by the Company hereunder and under the Notes and all other documents referred
to herein or therein, in accordance with the terms hereof and thereof, and, in
the case of any extension of time of payment, in whole or in part, that all
such amounts shall be paid in full when due (whether at stated maturity, by
acceleration or otherwise) in accordance with the terms of such extension. The
Guarantor hereby unconditionally agrees that upon default in the payment when
due (whether at stated maturity, by
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acceleration or otherwise) of any of such principal, interest or other
amounts, the Guarantor shall forthwith pay and perform the same in the money
and funds, at the time, in the place and in the manner provided for such
payment in this Agreement, the Notes or other applicable document.
6.2. Validity. The Guarantor hereby agrees that the
guarantee provided by this Section 6 is a continuing guarantee of payment
and not merely of collection, that it is a primary, independent obligation
of the Guarantor and that the Guarantor's obligations hereunder shall be
absolute, unconditional and irrevocable, irrespective of (a) any invalidity,
illegality, irregularity or unenforceability of, or defect in or any change
in this Agreement, the Notes or any other document referred to herein or
therein, (b) any amendment, modification or waiver of any term or
condition of this Agreement or the Notes or any such other document, or any
waiver or consent by the Administrative Agent or any Bank to any departure from
the terms hereof or thereof, (c) any sale, exchange, release, surrender,
realization upon or other dealings with any security or guarantee for any of
the obligations guaranteed hereby (whether now or hereafter granted), (d) any
settlement or compromise of such obligations, (e) the absence of any action to
demand or enforce any of such obligations against the Company, (f) the recovery
of any judgment against the Company or any other Person, or any action to
enforce the same, (g) the recovery of any claim under any other guarantee of or
security for such obligations or under any applicable insurance, or (h) any
other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a guarantor or surety (other than full and strict
compliance with and satisfaction of such liabilities).
6.3. Waivers. The Guarantor hereby waives notice of
acceptance of the guarantee provided by this Section 6, notice of the
extension of any credit or financial accommodation, notice of the making of any
Loan or the incurrence of any other Obligations, notice of any extension of any
Commitment Termination Date, demand of payment, filing of claims with a court
in the event of bankruptcy of the Company or any other Person, any right to
require a proceeding or the filing of a claim first against the Company, any
other guarantor, any other Person, any letter of credit, or any security for
any of the Obligations, presentment, protest, notice of default, dishonor or
nonpayment and any other notice and all demands whatsoever. The Guarantor
hereby further waives all setoffs and counterclaims against the Company, the
Administrative Agent, the Co-Agents and each of the Banks.
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6.4. Subordination and Subrogation. The Guarantor hereby
subordinates all present and future claims, now held or hereafter acquired,
against the Company as a creditor or contributor of capital, or otherwise,
to the prior and final payment in full to the Banks of all of the
Obligations. If, without reference to the provisions of this Section 6.4, the
Guarantor would at any time be or become entitled to receive any payment on
account of any claim against the Company, whether in insolvency, bankruptcy,
liquidation or reorganization proceedings, or otherwise, the Guarantor shall
and does hereby irrevocably direct that all such payments shall be made
directly to the Administrative Agent on account of the Banks until all
Obligations shall be paid in full. Should the Guarantor receive any such
payment, the Guarantor shall receive such amount in trust for the Banks and
shall immediately pay over to the Administrative Agent such amount as provided
in the preceding sentence.
Anything contained in this Section 6 to the contrary
notwithstanding, the obligations of the Guarantor hereunder shall be
limited to a maximum aggregate amount equal to the largest amount that would
not render its obligations hereunder subject to avoidance as a fraudulent
transfer or conveyance under Section 548 of Title 11 of the United States Code
or any applicable provisions of comparable state law (collectively, the
"Fraudulent Transfer Laws"), in each case after giving effect to all other
liabilities of the Guarantor, contingent or otherwise, that are relevant under
the Fraudulent Transfer Laws (specifically excluding, however, any liabilities
of the Guarantor in respect of intercompany indebtedness to the Company or
other Affiliates of the Company to the extent that such indebtedness would be
discharged in an amount equal to the amount paid by the Guarantor hereunder)
and after giving effect as assets to the value (as determined under the
applicable provisions of the Fraudulent Transfer Laws) of any rights to
subrogation or contribution of the Guarantor pursuant to (i) applicable law or
(ii) any agreement providing for an equitable allocation among the Guarantor
and other Affiliates of Company of obligations arising under guaranties by such
parties.
The Guarantor further agrees that any rights of subrogation the
Guarantor may have against the Company, and any rights of contribution the
Guarantor may have against Company, and any rights of contribution the
Guarantor may have against any other guarantor of the Obligations hereunder,
shall be junior and subordinate to any rights the Administrative Agent or the
Banks may have against such other guarantor.
6.5. Acceleration. The Guarantor agrees that, as between the
Company on the one hand, and the Administrative
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Agent, the Co-Agents and the Banks, on the other hand, the obligations
of the Company guaranteed under this Section 6 may be declared to be forthwith
due and payable, or may be deemed automatically to have been accelerated, as
provided in Section 10 hereof for purposes of this Section 6, notwithstanding
any stay, injunction or other prohibition (whether in a bankruptcy proceeding
affecting the Company or otherwise) preventing such declaration as against the
Company and that, in the event of such declaration or automatic acceleration,
such obligations (whether or not due and payable by the Company) shall
forthwith become due and payable by the Guarantor for purposes of this Section
6.
6.6. Reinstatement. The Guarantor covenants that the guarantee
provided by this Section 6 will not be discharged except by complete and final
payment of all of the Obligations and all obligations of the Guarantor arising
out of this guarantee. In the event that any payment is made by the Company
hereunder or by the Guarantor under this guarantee, and is thereafter required
to be rescinded or otherwise restored or paid over to the Company, the
Guarantor or any other person (whether upon the insolvency or bankruptcy of the
Company or the Guarantor or otherwise), the Guarantor's obligations hereunder
shall immediately and automatically be reinstated as though such payment had
not been made.
Section 7. Conditions Precedent.
7.1. Initial Loan. The occurrence of the Amendment Effective
Date, the accession of each New Bank to this Agreement and the obligation
of the Banks to make the initial Loans hereunder are subject to the receipt by
the Administrative Agent, on or before December 18, 1992, of each of the
following documents, each of which shall be satisfactory to the Administrative
Agent in form and substance:
(a) Certified copies of the certificate of incorporation and
bylaws of the Company and the Guarantor and all corporate action and (if
necessary) stockholder action taken by the Company and the Guarantor
approving this Agreement and the Notes and borrowings by the Company
hereunder and the guarantee by the Guarantor hereunder (including, without
limitation, a certificate setting forth the resolutions of the Boards of
Directors of the Company and the Guarantor adopted in respect of the
transactions contemplated hereby).
(b) A certificate of each of the Company and the Guarantor
in respect of each of the officers (i) who is authorized to sign this
Agreement or the Notes on its
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behalf and (ii) who will, until replaced by another officer or officers
duly authorized for that purpose, act as its representative for the
purposes of signing documents and giving notices and other communications
in connection with this Agreement and the transactions contemplated hereby.
The Administrative Agent, the Co-Agents and the Banks may conclusively rely
on such certificate until the Administrative Agent receives notice in
writing from the Company or the Guarantor, respectively, to the contrary.
(c) Certificates, as of a recent date, from the appropriate
authorities for each jurisdiction in which the Company and the Guarantor
are incorporated or qualified to do business, as to the good standing of
the Company and the Guarantor, respectively, in each such jurisdiction.
(d) A certificate of a senior officer of each of the Company
and the Guarantor to the effect set forth in the first sentence of Section
7.2 hereof.
(e) An opinion of Allen P. Allweiss, Esq., General Counsel to
the Company and the Guarantor, substantially in the form of Exhibit B
hereto.
(f) The Funded Debt Ratio Notice and the Total Debt Ratio
Notice for the Company's four-Fiscal Quarter period ended August 31, 1992
(or, if the initial Loans hereunder are made more than 60 days after the
end of any succeeding Fiscal Quarter, for the four-Fiscal Quarter period
ended as of the end of the most recent such succeeding Fiscal Quarter).
(g) The Notes, dated the date hereof and duly executed and
delivered by the Company to the order of each Bank and otherwise
appropriately completed, bearing the executed guarantee of the Guarantor.
(h) Evidence of the payment of all fees and expenses then
payable pursuant to Sections 2.4 and 12.3 hereof.
(i) The Company shall have prepaid the principal amount and
all accrued interest and fees with respect to any loans in an aggregate
principal amount in excess of $40,000,000 under the 1991 Revolving Credit
Agreement as of the Amendment Effective Date together with interest accrued
thereon to the date of prepayment and all other amounts then payable under
the 1991 Revolving Credit Agreement.
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(j) The execution and delivery by all necessary parties to,
and the simultaneous effectiveness of, the Term Loan Agreement.
(k) Such other documents as the Administrative Agent or any
Bank may reasonably request including, without limitation, all requisite
governmental approvals and filings.
Upon the occurrence of the Amendment Effective Date, (i) each of the promissory
notes heretofore delivered to the Co-Agents as "Banks" under the 1991 Revolving
Credit Agreement, (ii) the obligations (if any) of the Co-Agents, the
Administrative Agent or the Banks under the commitment letter and term sheet,
dated September 28, 1992, as amended, of LTCB Trust, as a Co-Agent, and (iii)
the obligations (if any) of the Co-Agents, the Administrative Agent or the
Banks under the commitment letter and term sheet, dated October 8, 1992, as
amended, of Bank of Montreal, as a Co-Agent, shall cease to be of any force or
effect, except with respect to any unpaid amounts incurred under the 1991
Revolving Credit Agreement prior to the Amendment Effective Date.
7.2. Initial and Subsequent Loans. The obligation of the
Banks to make each Loan to the Company (including the initial Loans) shall
be subject to the further conditions that, as of the date of the making of
such Loans and after giving effect thereto:
(a) no Default or Event of Default shall have occurred and be
continuing;
(b) the representations and warranties made by the Company and
the Guarantor in Section 8 hereof and in any other certificate or other
document delivered in connection with this Agreement shall be true in all
material respects on and as of the date of the making of such Loans with
the same force and effect as if made on and as of such date (including,
without limitation, that there shall have occurred no material adverse
change since August 31, 1992 in the consolidated financial condition or
operations, or the business taken as a whole, of the Company and its
consolidated Subsidiaries from that set forth in their financial statements
dated as of August 31, 1992, except as disclosed to the Banks in writing
prior to the date of this Agreement);
(c) the Company shall be in compliance with the financial
covenants under the Term Loan Agreement and this Agreement both before and
immediately after the
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making of such Loan on both an historical and a pro forma basis; and
(d) payment in full of all fees and expenses payable pursuant to
Sections 2.4 and 12.3 hereof.
Each notice of borrowing made pursuant to Section 2.2 hereof shall constitute a
certification by the Company and the Guarantor as to the circumstances
specified in paragraphs (a), (b) and (c) above (both as of the date of such
notice and, unless the Company or the Guarantor otherwise notifies the
Administrative Agent prior to the date of such borrowing, as of the date of
such borrowing).
Section 8. Representations and Warranties. Each of the Company and the
Guarantor represents and warrants to the Administrative Agent and the Banks
that:
8.1. Corporate Existence. Each of the Company and the Guarantor
and each of the other Material Subsidiaries (a) is a corporation duly organized
and validly existing under the laws of the jurisdiction of its incorporation;
(b) has all requisite corporate power, and has all material governmental
licenses, authorizations, consents and approvals, necessary to own its assets
and carry on its business as presently conducted, and conducts its business in
compliance with the requirements set forth in Section 9.3(b) hereof; and (c) is
qualified to do business in all jurisdictions in which the nature of the
business conducted by it makes such qualification necessary and where failure
so to qualify would have a material adverse effect on its business, financial
condition or operations.
8.2 Financial Condition. The consolidated balance sheet of the
Company and its consolidated Subsidiaries (including, without limitation, the
Guarantor) as at August 31, 1992 and the related consolidated statements of
income, retained earnings and changes in financial position of the Company and
is consolidated Subisdiaries (including, without limitation, the Guarantor) for
the fiscal year ended on such date, with the opinion thereon of Deloitte &
Touche, the independent auditors of the Company, heretofore furnished to the
Administrative Agent and each of the Banks, are complete and correct and
fairly present the consolidated financial condition of the Company and its
consolidated Subsidiaries (including, without limitation, the Guarantor) as at
such date and the consolidated results of their operations for such Fiscal
Year ended on such date, all in accordance with GAAP applied on a consistent
basis. Neither the Company nor any of its consolidated Subsidiaries (including,
without limitation, the
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Guarantor) had on such date any material contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments or unrealized
or anticipated losses from any unfavorable commitments, except as referred to
or reflected or provided for in such balance sheets as at such date. Since
August 31, 1992, there has been no material adverse change in the consolidated
financial condition or operations, or the business taken as a whole, of the
Company and its consolidated Subsidiaries (including, without limitation, the
Guarantor) from that set forth in such financial statements as at such date,
except as disclosed to the Banks in writing prior to the date of this
Agreement.
8.3. Litigation. Except as heretofore disclosed to the Banks
in writing or in any SEC Report of the Company delivered to the Banks
prior to the date hereof, there is no action, proceeding or investigation by or
before any court or any arbitral, governmental or regulatory authority or
agency, pending or (to the knowledge of the Company or the Guarantor)
threatened against the Company or the Guarantor or any Subsidiary of either
thereof which, if adversely determined, could have a material adverse effect on
the consolidated financial condition or business of the Company and its
consolidated Subsidiaries (including, without limitation, the Guarantor).
8.4. No Breach. Neither the execution and delivery of this
Agreement and the Notes, nor the consummation of the transactions contemplated
hereby, nor the compliance by the Company or the Guarantor with the terms and
provisions hereof or thereof, will (a) conflict with or result in a breach of,
or require any consent or vote of any Person under, the certificate of
incorporation or bylaws of either the Company or the Guarantor, or any
agreement or instrument to which the Company, the Guarantor or any Subsidiary
of either thereof is a party or to which it is subject, (b) violate any
applicable law, regulation, order, writ, injunction or decree of any court or
governmental authority or agency, or (c) constitute a default or result in the
imposition of any Lien on any of the assets, revenues or other properties of
the Company, the Guarantor or any Subsidiary of either thereof under any such
agreement or instrument.
8.5. Corporate Action. The execution, delivery and
performance by each of the Company and the Guarantor of this Agreement and the
Notes, and the consummation of the transactions contemplated hereby, are within
the scope of its corporate power, and have been duly authorized by all
necessary corporate action on the part of each of them. This Agreement
constitutes, and each of the Notes, when duly executed and delivered will
constitute, the legal, valid and binding obli-
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gation of the Company and the Guarantor, enforceable against each of
them in accordance with their respective terms, except as such enforceability
may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or
other similar laws of general applicability affecting the enforcement of
creditors' rights and (b) the application of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
8.6. Approvals. No authorizations, approvals or consents of,
and no filings or registrations with, any governmental or regulatory authority
or agency are necessary for the execution, delivery or performance by the
Company or the Guarantor of this Agreement or the Notes or for the validity or
enforceability thereof, or for the consummation of the transactions
contemplated hereby.
8.7. Use of Loans. Neither the Company, the Guarantor nor any
Subsidiary of either of them is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose, whether
immediate, incidental or ultimate, of buying or carrying margin stock (within
the meaning of Regulation U or X of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan will be used to buy or
carry any margin stock.
8.8. ERISA. Each of the Company and the Guarantor and the
ERISA Affiliates have fulfilled its obligations under the minimum funding
standards of ERISA and the Code with respect to each Plan, are in compliance
in all material respects with the presently applicable provisions of ERISA and
the Code and have not incurred any liability to the PBGC or any Plan or
Multiemployer Plan.
8.9. Taxes. (a) United States Federal income tax returns of
the Company, the Guarantor and the Subsidiaries have been examined and closed
through Fiscal 1985, have been examined for Fiscal 1986 and Fiscal 1987 and are
under examination for Fiscal 1988 and Fiscal 1989. (b) Each of the Company,
the Guarantor and the Subsidiaries has filed all United States Federal income
tax returns and all other material tax returns which are required to be filed
by it and has paid all taxes due pursuant to such returns or pursuant to any
assessment received by the Company, the Guarantor or any Subsidiary. The
charges, accruals and reserves on the books of the Company, the Guarantor and
the Subsidiaries in respect of taxes and other governmental charges are, in the
opinion of the Company and the Guarantor, adequate.
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8.10. Credit Agreements. Schedule 1 hereto and all SEC Reports
of the Company completely and correctly disclose each credit agreement, loan
agreement, indenture, purchase agreement, guarantee or other arrangement
providing for or otherwise relating to any extension of credit or commitment
for any extension of credit (other than pursuant to any letter of credit
excepted from the definition of Indebtedness herein under paragraph (c)
thereof) to, or guarantee by, the Company, the Guarantor or any other Material
Subsidiary the aggregate principal or face amount of which equals or exceeds
(or may equal or exceed) $10,000,000 and accurately describes the aggregate
principal or face amount outstanding and which may become outstanding under
each thereof.
8.11. Ownership of Assets. Each of the Company, the Guarantor
and each other Material Subsidiary has good and marketable title to all assets
reflected on the audited consolidated balance sheet as of August 31, 1992
referred to in Section 8.2 hereof, subject to no Liens other than the Liens
specified in Footnotes D and G to such balance sheet and, on the date hereof,
such additional Liens as are listed on Schedule 1 hereto, and on any date
hereafter, additional Liens permitted by Section 9.5 hereof and listed in
Footnotes to the financial statements delivered pursuant to Section 9.1(a) or
(b) hereof.
8.12. Pari Passu Obligations. The obligations of the Company
and the Guarantor under this Agreement and the Notes rank and will rank at
least pari passu in all respects with all other unsubordinated Indebtedness of
the Company and the Guarantor, respectively, except for Indebtedness that is
senior solely by operation of applicable law, and except that Indebtedness of
the Company and the Guarantor secured as permitted by Section 9.5 hereof ranks
senior in right of security with respect to the collateral therefor. Without
limiting the generality of the foregoing, all principal of and interest
(including post-petition interest allowable in any proceeding under any
bankruptcy law) on and other amounts payable in connection with this Agreement
constitute "Senior Indebtedness" as defined in, and for all purposes of, the
Convertible Subordinated Debentures (and is entitled to the benefit of the
subordination provisions relating thereto).
8.13. Investment Company Act. Neither the Company nor the
Guarantor is, and neither is "controlled by," an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
8.14. Environmental Matters. To the best of the knowledge of
the Company and the Guarantor, all operations and conditions at or in the
premises in which the Company and the
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Guarantor conduct their business comply in all material respects with
all Federal, state and local laws, rules and regulations relating to
environmental matters, pollution, waste disposal or industrial hygiene
including, without limitation, such laws, rules and regulations relating to
asbestos (collectively, "Environmental Laws"). None of the operations of
either the Company or the Guarantor is subject to any judicial or
administrative proceeding alleging the violation of or liability under any
Environmental Law.
Section 9. Covenants of the Company and the Guarantor. Each
of the Company and the Guarantor agrees that, so long as any of the Commitments
are in effect and until payment in full of all Obligations:
9.1. Financial Statements; Reports and Other Information. The
Company shall deliver to the Administrative Agent, with sufficient copies for
each of the Banks:
(a) as soon as available and in any event within 60 days after
the end of each of the first three Fiscal Quarters of each Fiscal Year of
the Company, consolidated statements of income, retained earnings and
changes in financial position of the Company and its consolidated
Subsidiaries (including, without limitation, the Guarantor) for such period
and for the period from the beginning of such Fiscal Year to the end of
such period, and the related consolidated balance sheet as at the end of
such period, setting forth in each case in comparative form the
corresponding figures for the corresponding period in the preceding Fiscal
Year, accompanied by a certificate of a senior financial officer of the
Company, which certificate shall state that such financial statements
fairly present the consolidated financial condition and results of
operations of the Company and its consolidated Subsidiaries in accordance
with GAAP, consistently applied, as at the end of, and for, such period
(subject to normal year-end audit adjustments);
(b) as soon as available and in any event within 120 days
after the end of each Fiscal Year of the Company, consolidated statements
of income, retained earnings and changes in financial position of the
Company and its consolidated Subsidiaries (including, without limitation,
the Guarantor) for such year and the related consolidated balance sheet as
at the end of such year, setting forth in each case in comparative form the
corresponding figures for the preceding Fiscal Year, and accompanied by an
opinion thereon of independent certified public accountants of recognized
national standing, which
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opinion shall state that such financial statements fairly present the
consolidated financial condition and results of operations of the Company
and its consolidated Subsidiaries (including, without limitation, the
Guarantor) as at the end of, and for, such Fiscal Year, and a certificate
of the chief financial officer of the Company that, in examining the
financial condition of the Company and its Subsidiaries for such Fiscal
Year, he or she obtained no knowledge, except as specifically stated, of
any Default arising from the breach of the covenants provided for in
Sections 9.4, 9.6, 9.7, 9.11, 9.12, 9.13 or 9.17 hereof;
(c) promptly upon their becoming available, copies of all
registration statements and regular SEC Reports, if any, which the Company
shall have filed with the Securities and Exchange Commission (or any
governmental agency substituted therefor) or any national securities
exchange;
(d) promptly upon the mailing thereof to the shareholders of
the Company generally, copies of all financial statements, reports and
proxy statements so mailed;
(e) as soon as possible, and in any event within ten days
after either the Company or the Guarantor knows or has reason to know that
any of the events or conditions specified below with respect to any Plan or
Multiemployer Plan has occurred or exists, a statement signed by a senior
financial officer of the Company or the Guarantor setting forth details
respecting such event or condition and the action, if any, which the
Company, the Guarantor or their ERISA Affiliate proposes to take with
respect thereto (and a copy of any report or notice required to be filed
with or given to PBGC by the Company, the Guarantor or an ERISA Affiliate
with respect to such event or condition):
(i) any reportable event, as defined in
Section 4043(b) of ERISA and the regulations issued
thereunder, with respect to a Plan, as to which PBGC has
not by regulation waived the requirement of Section
4043(a) of ERISA that it be notified within 30 days of the
occurrence of such event (provided that a failure to meet
the minimum funding standard of Section 412 of the Code or
Section 302 of ERISA shall be a reportable event
regardless of the issuance of any waivers in accordance
with Section 412(d) of the Code);
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(ii) the filing under Section 4041 of ERISA of
a notice of intent to terminate any Plan or the
termination of any Plan;
(iii) the institution by PBGC of proceedings
under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the
receipt by the Company or any ERISA Affiliate of a notice
from a Multiemployer Plan that such action has been taken
by PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal by the
Company, the Guarantor or any ERISA Affiliate under
Section 4201 or 4204 of ERISA from a Multiemployer Plan,
or the receipt by the Company, the Guarantor or any ERISA
Affiliate of notice from a Multiemployer Plan that is in
reorganization or insolvency pursuant to Section 4241 or
4245 of ERISA or that it intends to terminate or has
terminated under Section 4041A of ERISA; and
(v) the institution of a proceeding by a
fiduciary of any Multiemployer Plan against the Company,
the Guarantor or any ERISA Affiliate to enforce Section
515 of ERISA, which proceeding is not dismissed within 30
days;
(f) promptly after either the Company or the Guarantor knows
or has reason to know that any Default has occurred, a notice of such
Default, describing the same in reasonable detail;
(g) not later than (i) 60 days after the last day of each of
the first three Fiscal Quarters of each of the Company's Fiscal Years and
(ii) 120 days after the last Fiscal Quarter of each such Fiscal Year, a
notice, substantially in the form of Exhibit D-1 hereto (the "Funded Debt
Ratio Notice"), setting forth the Funded Debt Ratio for the four-Fiscal
Quarter period ended on the last day of such Fiscal Quarter and a notice,
substantially in the form of Exhibit D-2 hereto (the "Total Debt Ratio
Notice"), setting forth the Total Debt Ratio for the four-Fiscal Quarter
period ended on the last day of such Fiscal Quarter, which notices shall
set forth calculations and computations in sufficient detail to show the
amount and nature of each of the components of the Funded Debt Ratio and
the Total Debt Ratio, respectively, for such four-Fiscal Quarter period;
provided that in the case of the Funded Debt Ratio Notice and the Total
Debt Ratio Notice delivered with respect to
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each Fiscal Quarter specified in clause (ii) above, the Company shall (if
the final form of either of such Notices is not yet available) deliver such
Notice in a preliminary form within 60 days of the end of such Fiscal
Quarter setting forth all matters required by this paragraph (g) to be
included in the final form thereof as accurately as shall be possible based
upon information available to the Company at such time; and
(h) from time to time such other information regarding the
business or financial condition of the Company or any of the Subsidiaries
(including, without limitation, any Plan or Multiemployer Plan and any
reports or other information required to be filed under ERISA) as any Bank
or the Administrative Agent may reasonably request.
Each of the Company and the Guarantor will furnish to the Administrative Agent,
with sufficient copies for the Banks, at the time it furnishes each set of
financial statements pursuant to paragraph (a) or (b) above, a certificate of a
senior financial officer of the Company and the Guarantor, substantially in the
form of Exhibit C hereto (i) to the effect that, to the best of his or her
knowledge, after full inquiry, no Default has occurred and is continuing (or,
if any Default has occurred and is continuing, describing the same in
reasonable detail), (ii) setting forth in reasonable detail the computations
necessary to determine whether the Company and the Guarantor are in compliance
with Sections 9.11, 9.12 and 9.13 hereof as at the end of the respective Fiscal
Quarter or Fiscal Year and (iii) setting forth additions to the list of
Subsidiaries that are Material Subsidiaries contained in the certificate most
recently delivered pursuant to this provision and containing either (A) a
representation that all other Subsidiaries combined do not constitute a
Material Subsidiary Group as at such date or (B) a representation that all
other Subsidiaries do constitute a Material Subsidiary Group as at such date
and identifying any such Subsidiary whose aggregate book value of tangible
assets exceeds $10,000,000 as at such date. In addition, each of the Company
and the Guarantor hereby agrees to furnish the Administrative Agent with an
updated notice with respect to the information specified in clause (iii) of the
preceding sentence upon the occurrence of any event either that has resulted or
could result in a Subsidiary becoming a Material Subsidiary or a group of
Subsidiaries becoming a Material Subsidiary Group or that could make the
representation contained in the most recently delivered certificate furnished
pursuant to this Section 9.1 no longer accurate.
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9.2. Litigation. Without limiting the obligations of the
Company under Section 9.1(h) hereof, each of the Company and the Guarantor
shall promptly give to each Bank notice of all court or arbitral proceedings
and investigations, and of all proceedings and investigations before any
governmental or regulatory authority or agency, affecting the Company, the
Guarantor or any Subsidiary, except proceedings or investigations which, if
adversely determined, would not have a material adverse effect on the
consolidated financial condition or operations, or the business taken as a
whole, of the Company and its consolidated Subsidiaries (including, without
limitation, the Guarantor).
9.3. Corporate Existence, Etc. Each of the Company and the
Guarantor will, and will cause each of their respective Subsidiaries (but in
the case of paragraphs (a), (d) and (e) of this Section 9.3, only those
Subsidiaries which are Material Subsidiaries) to:
(a) preserve and maintain its corporate existence and all of
its material rights, privileges, licenses and franchises;
(b) comply with the requirements of all applicable laws,
rules, regulations and orders of governmental or regulatory authorities if
failure to comply with such requirements would materially and adversely
affect the consolidated financial condition or operations, or the business
taken as a whole, of the Company and its consolidated Subsidiaries;
(c) pay and discharge all taxes, assessments and governmental
charges or levies imposed on it or on its income or profits or on any of
its property prior to the date on which penalties attach thereto, except
for any such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and against which
adequate reserves are being maintained in accordance with GAAP;
(d) maintain all of its properties used or useful in its
business in good working order and condition, ordinary wear and tear
excepted;
(e) permit representatives of any Bank or the Administrative
Agent, during normal business hours, to examine, copy and make extracts
from its books and records, to inspect its properties, and to discuss its
business and financial condition with its officers, all to the extent
reasonably requested by such Bank or the Administrative Agent (as the case
may be); and
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(f) keep insured by financially sound and reputable insurers
all property of a character usually insured by corporations engaged in the
same or similar business similarly situated against loss or damage of the
kinds and in the amounts customarily insured against by such corporations
and carry such other insurance as is usually carried by such corporations.
9.4. Payment of Obligations. Without limiting the
obligations of the Company and the Guarantor under Section 9.3 hereof, each of
the Company and the Guarantor will, and will cause each of their respective
Subsidiaries to, pay and discharge at or before the date when due, all of
their respective material obligations and other liabilities, including,
without limitation, tax and pension liabilities, except where such obligations
or liabilities are being contested in good faith and by appropriate
proceedings, and maintain, in accordance with GAAP, appropriate reserves for
the accrual of all of the foregoing.
9.5. Liens. Neither the Company nor the Guarantor will, nor
will either of them permit any of their respective Subsidiaries to, create,
incur, assume or suffer to exist any Lien on any asset, revenue or other
property now or hereafter owned or acquired by it (including, without
limitation, the stock of Subsidiaries other than Broadcast Subsidiaries at the
time of disposition thereof as permitted by Section 9.7 hereof) except:
(a) Liens existing on the date hereof securing Indebtedness
outstanding on such date and identified in Footnote D and G to the
Company's audited consolidated balance sheet as of August 31, 1992 or on
Schedule 1 hereto;
(b) any purchase money security interest hereafter created on
any property of the Company, the Guarantor or such Subsidiary securing
Indebtedness incurred solely for the purpose of financing all or a portion
of the purchase price of such property; provided that: (i) such Lien (A) is
created within six months of the acquisition of such property, (B) extends
to no other property and (C) secures no other Indebtedness; (ii) the
principal amount of Indebtedness secured by such Lien shall at no time
exceed the lesser of (A) the cost to such Person of the property subject
thereto or (B) the fair value of such property (as determined in good faith
by the Board of Directors of such Person) at the time of the acquisition
thereof; (iii) such Lien does not extend to or in any way encumber any
inventory of the Guarantor purchased in the ordinary course of business;
and (iv)
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the aggregate principal amount of all Indebtedness secured by all such Liens
shall not exceed at any time $15,000,000 less the aggregate principal
amount of all Indebtedness secured by Liens permitted under Section 9.5(i)
hereof;
(c) carriers', warehousemen's, mechanics', materialmen's and
repairmen's liens arising in the ordinary course of business of the
Company, the Guarantor or such Subsidiary and not overdue for a period of
more than 30 days or which are being contested in good faith and by
appropriate proceedings;
(d) Liens created in connection with the lease by the Company,
the Guarantor or any of their respective Subsidiaries of any property
(whether real, personal or mixed) (i) now or hereafter owned by the
Company, the Guarantor or any such Subsidiary which has been sold or
otherwise transferred by any thereof to any other Person within six months
of the acquisition thereof or (ii) which any of the Company, the Guarantor
or any such Subsidiary, as the case may be, intends to use for
substantially the same purpose as any property described in clause (i)
above;
(e) Liens in favor of consignors against inventory being sold
on consignment in the ordinary course of business by the Company, the
Guarantor or any Subsidiary;
(f) Liens created in substitution for any Liens permitted by
paragraphs (a), (b) and (d) of this Section 9.5, provided that (i) any such
newly-created Lien does not extend to any other or additional property and
(ii) (A) if permitted by such paragraph (a) or (b), does not secure any
other (or additional principal amount of) Indebtedness and (B) if permitted
by such paragraph (d) does not secure any other obligations under such
lease or any obligations under any other lease;
(g) Liens existing on assets at the time of acquisition
thereof by the Company, the Guarantor or the respective Subsidiary and not
incurred in anticipation of or in connection with such acquisition;
(h) operating leases and Capital Leases, to the extent the
same would constitute Liens, pursuant to which the Company, the Guarantor
or the respective Subsidiary is lessee, and incurred by such Person in the
ordinary course of its business; and
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(i) in addition to Liens otherwise permitted by this Section
9.5, Liens on property of the Company, the Guarantor or any of their
respective Subsidiaries (i) which secure Indebtedness having an aggregate
principal amount not exceeding at any time $15,000,000 less the aggregate
principal amount of all Indebtedness secured by Liens permitted under
Section 9.5(b) hereof and (ii) each of which shall be limited to specified
items of collateral (and not a general Lien on all assets of such Person)
having a book value not greater than 150% of the aggregate principal amount
of the Indebtedness secured by such Lien;
provided, however, that (A) all capital stock of all Subsidiaries (other than
the Broadcast Subsidiaries at the time of disposition thereof as permitted by
Section 9.7 hereof) and (B) all promissory notes and other securities acquired
by the Company in connection with the disposition of the Broadcast Subsidiaries
will in any event be maintained free and clear of all Liens whatsoever.
9.6. Mergers. Neither the Company nor the Guarantor will,
and neither of them will permit any other Material Subsidiary or Subsidiaries
constituting a Material Subsidiary Group or a Broadcast Subsidiary Group to,
(a) consolidate or merge with or into any other Person, except
that a Wholly-Owned Subsidiary of the Company or the Guarantor (other than
the Guarantor) may merge with or consolidate into the Company or the
Guarantor (provided that the Company or the Guarantor, as the case may be,
shall be the survivor of such merger or consolidation) or another
Wholly-Owned Subsidiary of the Company or the Guarantor, or
(b) sell, assign, convey, lease, sublet, transfer or otherwise
dispose of all or substantially all of its assets to any Person, whether in
a single transaction or in a series of related transactions, except that a
Wholly-Owned Subsidiary of the Company or the Guarantor (other than the
Guarantor) may sell, assign, convey, lease, sublet, transfer or otherwise
dispose of all or substantially all of its assets to the Company or to
another Wholly-Owned Subsidiary of the Company or the Guarantor;
provided, however, that none of the foregoing transactions shall be permitted
if a Default or an Event of Default has occurred and is continuing or would
result from the consummation of any such transaction.
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It is understood and agreed that:
(i) any consolidation, merger, sale, assignment, conveyance,
letting, subletting, transfer or other disposition of all or substantially
all of the assets of a Broadcast Subsidiary shall be permitted under this
Section 9.6, so long as such Broadcast Subsidiary, together with all other
Broadcast Subsidiaries with respect to which there has been, since the date
hereof, a consolidation, merger, sale, assignment, conveyance, letting,
subletting, transfer or other disposition of all or substantially all of
its assets, does not constitute a Broadcast Subsidiary Group, and
(ii) any consolidation, merger, sale, assignment, conveyance,
letting, subletting, transfer or other disposition of all or substantially
all of the assets of a Non-Material Subsidiary shall be permitted under
this Section 9.6, so long as such Non-Material Subsidiary, together with
all other Non-Material Subsidiaries with respect to which there has been,
since the date hereof, a consolidation, merger, sale, assignment,
conveyance, letting, subletting, transfer or other disposition of all or
substantially all of its assets, does not constitute a Material Subsidiary
Group.
It is further understood and agreed that the distribution or
arms'-length sale of the Company's shares of capital stock of the Broadcast
Subsidiaries as permitted under Section 9.7 hereof will not constitute all or
substantially all of the assets or liabilities of the Company, the Guarantor
or any Subsidiary for purposes of this Section 9.6 nor shall the value thereof
be aggregated with other assets of the Company for purposes of determining the
Company's compliance with this Section 9.6.
9.7. Dispositions of Assets. Neither the Company nor the
Guarantor will, and neither of them will permit any other Material Subsidiary
or any Broadcast Subsidiary to, sell, assign, convey, lease, sublet, transfer or
otherwise dispose of any of the assets, business or other properties of the
Company, the Guarantor or any such Material Subsidiary or Broadcast Subsidiary
to any Person, whether in a single transaction or in a series of related
transactions, except for:
(i) sales of inventory (but not of accounts
receivable) in the ordinary course of business of the Company, the
Guarantor or any such Subsidiary;
(ii) dispositions of assets in the ordinary course of
business in arm's-length transactions by
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the Company, the Guarantor or any such Subsidiary to the extent
such assets either are no longer used or useful to the Company,
the Guarantor or such Subsidiary or are promptly replaced by
other assets of at least equal usefulness;
(iii) the sale or distribution of shares of capital
stock held by the Company or any Subsidiary in any Broadcast
Subsidiary; provided that (i) all requisite consents and approvals
with respect to such sale or distribution have been obtained, (ii)
any such transaction is on substantially the same terms and
conditions specified in the Form 10 filed by Silver King
Communications, Inc., a Subsidiary of the Company, with the
Securities and Exchange Commission on August 27, 1992, as amended
through December 11, 1992, attached hereto as Annex B (including,
without limitation, the provision that the Company shall retain a
broadcast affiliation relationship with each of the Broadcast
Subsidiaries after such transaction), and the Banks shall have
reviewed all final documentation with respect to each such sale or
distribution and have confirmed to their satisfaction that the
terms and conditions set forth in such Form 10 have been complied
with, and (ii) the aggregate amount of the Company's interest in
the capital stock of such Broadcast Subsidiaries (whether directly
or by distribution of the shares of capital stock of any
corporation directly or indirectly holding such Broadcast
Subsidiaries' capital stock) that is distributed by the Company as
a dividend to its stockholders in connection with all such
transactions cumulatively after the date hereof does not exceed
$15,000,000; and
(iv) any such disposition by the Company, the
Guarantor or any Wholly-Owned Subsidiary to the Company, the
Guarantor or any Wholly-Owned Subsidiary, as the case may be;
provided, however, that the Company and the Guarantor shall
maintain their respective assets and operations substantially in
accordance with their respective assets and operations as of the
date hereof, and that in the case of any such disposition by the
Company or the Guarantor to a Wholly-Owned Subsidiary, each of the
Company and the Guarantor agree that such disposition shall be in
the ordinary course of business consistent with past practice and
shall be accomplished upon fair and reasonable terms to the
Company or the Guarantor;
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provided that all promissory notes and other securities acquired by the Company
in connection with the disposition of the Broadcast Subsidiaries will in any
event be maintained free and clear of all dispositions whatsoever.
9.8. Ranking. (a) Each of the Company and the Guarantor will
cause its obligations under this Agreement, the Notes and each other document
now or hereafter entered into with respect hereto or thereto to rank at least
pari passu in right of payment and of security with all other unsubordinated
Indebtedness of the Company or the Guarantor, as the case may be, except that
Indebtedness secured by any Lien permitted by Section 9.5 hereof may rank
senior in right of security with respect to the collateral subject to such
Lien. Without limiting the generality of the foregoing, the Company covenants,
and will take all steps necessary to assure, that its obligations under this
Agreement will at all times constitute "Senior Indebtedness" as defined in, and
for all purposes of, the Convertible Subordinated Debentures (and will be
entitled to the benefits of the subordination provisions relating thereto).
(b) Each of the Company and the Guarantor will cooperate
with the Administrative Agent and the Banks and execute such further
instruments and documents as any Bank may reasonably request to carry out the
intentions of this Section 9.8. Without limiting the generality of the
foregoing, if the Company or the Guarantor hereafter issues or otherwise
incurs any subordinated Indebtedness, each of them will execute and cause to
be executed such further documents as any Bank may reasonably request to
ensure that the obligations of the Company and the Guarantor under this
Agreement and the Notes at all times rank senior to such subordinated
Indebtedness.
(c) Nothing in this Section 9.8 shall be construed so as to
limit the ability of the Company or the Guarantor to incur any Indebtedness
(consistent with paragraphs (a) and (b) above and otherwise permitted by this
Agreement) on a basis pari passu with their respective Indebtedness under
this Agreement and the Notes.
9.9. Business; Fiscal Year. Neither the Company nor the
Guarantor will make any material change in the nature of its business from
that in which it is engaged on the date of this Agreement, and neither the
Company nor the Guarantor shall cause, or permit any of their respective
Subsidiaries to cause, any other Subsidiary to conduct business or operations
substantially similar to the business or operations conducted by the Guarantor
on the date of this Agreement. Neither the Company nor the Guarantor will
change its fiscal year from
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that currently in effect on the date hereof, as set forth in the
definition of "Fiscal Year" in Section 1.1 hereof.
9.10. Transactions with Affiliates. Neither the Company nor the
Guarantor will, and neither will permit any of its respective Subsidiaries to,
enter into or be a party to any transaction (including but not limited to any
merger, consolidation or sale of substantially all assets) with any Affiliate
of the Company or the Guarantor, except upon fair and reasonable terms no less
favorable to the Company or the Guarantor or such Subsidiary than would obtain
in a comparable arm's-length transaction with a Person not an Affiliate of the
Company or the Guarantor.
9.11. Fixed Charges Coverage Test. The Company will maintain
the ratio of Adjusted Operating Cash Flow to Fixed Charges for the Company and
its Subsidiaries on a consolidated basis, for each four-Fiscal Quarter period
ending in each of the following Fiscal Years, to be not less than the following
ratios:
Fiscal Year Minimum Ratio
----------- -------------
Fiscal 1993 1.70:1
Fiscal 1994 1.35:1
Fiscal 1995 1.40:1
Fiscal 1996 1.70:1.
9.12. Debt Ratio. The Company will not permit the ratio of
Total Debt to Operating Cash Flow for the Company and its Subsidiaries on a
consolidated basis, for each four-Fiscal Quarter period ending in each of the
following Fiscal Years, to be greater than the following ratios:
Fiscal Year Maximum Ratio
----------- -------------
Fiscal 1993 1.90:1
Fiscal 1994 1.60:1
Fiscal 1995 1.35:1
Fiscal 1996 1.15:1.
9.13. Consolidated Net Worth. The Company shall not permit
Consolidated Net Worth at any time prior to August 30, 1993, to be less than
$125,000,000, and at any time during the following periods to be less than
the following amounts:
Period Amount
------ ------
August 31, 1993 to August 30, 1994 $135,000,000
August 31, 1994 to August 30, 1995 $145,000,000
August 31, 1995 to August 30, 1996 $155,000,000
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and, commencing on August 31, 1996, $10,000,000 above the minimum amount of
Consolidated Net Worth required pursuant to this Section 9.13 on the last day
of the preceding Fiscal Year.
9.14. Notification of Incurrence of Debt or Making of
Investment. Prior to the incurrence by the Company or any of its Subsidiaries
of Indebtedness (other than Indebtedness under the Term Loan Agreement or this
Agreement), or upon obtaining commitments for Indebtedness, or the making of
any Investment of cash, property or other assets in an aggregate principal
amount of $20,000,000 (per incurrence or cumulatively since September 1, 1992
or since the last time incurrence compliance was required to be tested
pursuant to this Section 9.14) or more, the Company shall deliver notice to
the Administrative Agent and the Banks, certifying, on the basis of its
financial statements for the four Fiscal Quarters most recently ended, the
Company's compliance with the financial covenants under the Term Loan
Agreement and this Agreement both before and immediately after the incurrence
of such Indebtedness or Investment on both an historical and pro forma basis;
provided, that in the event any cash change in long-term investments or cash
change in long-term notes receivable triggers notification of the incurrence
of Indebtedness and certification of compliance with financial covenants
pursuant to this Section 9.14, the calculation to determine pro forma
compliance with the Fixed Charges Coverage Test set forth in Section 9.11
hereof shall be performed after excluding the smallest amount of any cash
increase in long-term investments and cash increase in long-term notes
receivable for any Fiscal Quarter included in such test.
9.15. Use of Proceeds. The Company shall use the proceeds of
the Loans solely for its general corporate purposes and in any event in
compliance with all applicable legal and regulatory requirements, including,
without limitation, Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System and the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, and the regulations thereunder.
Neither the Administrative Agent nor any Bank shall have any responsibility
for any use of the proceeds of the Loans.
9.16. Ownership of Guarantor. The Company agrees at all times
to own, both beneficially and of record and free and clear of all Liens, and
control 100% of the capital shares of the Guarantor.
9.17. Indebtedness of Subsidiaries. The Company will not
permit any of its Subsidiaries to create, incur,
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assume, suffer to exist or otherwise become obligated for or under any
Indebtedness whatsoever, except for:
(i) Indebtedness owed to the Company;
(ii) trade Indebtedness incurred by such Subsidiary in the
ordinary course of its business;
(iii) Capital Leases; and
(iv) Indebtedness of the Guarantor under this Agreement and
the Term Loan Agreement.
Section 10. Events of Default. If one or more of the
following events (herein called "Events of Default" shall occur and be
continuing:
(a) The Company or the Guarantor shall fail to pay the
principal of any Loan when due (provided that, other than with
respect to any principal payment due on the Commitment Termination
Date or on such earlier date on which all principal of the Loans
shall have become due, if the Company or the Guarantor has
transmitted payment of such principal by wire transfer to the
Administrative Agent not later than 11:00 a.m. New York time on the
date when due and has delivered to the Administrative Agent a written
acknowledgement by the remitting bank that such bank has been
instructed to transfer such payment to the Administrative Agent and
that there are sufficient funds available in the Company's account with
such remitting bank to make such payment, then if the Administrative
Agent shall have failed to receive such payment of principal by 11:00
a.m. New York time on the Business Day after the date when due); or
the Company or the Guarantor shall fail to pay any interest on any
Loan or any other amount payable by it hereunder more than two
Business Days after the date when any such amount shall be due; or
(b) There shall have occurred a default or event of default
under the Term Loan Agreement, the Senior Note Indenture or the
Convertible Subordinated Debenture Indenture; or
(c) The Company or the Guarantor or any Subsidiary shall
default in the payment when due (after giving effect to all applicable
grace periods provided for in the documents relating to such
Indebtedness, without regard to any waiver thereof) of any principal
of or interest on or any other amount payable in connection with any
of its Indebtedness not specified in
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Section 10(a) or 10(b) hereof in an aggregate principal amount of
$5,000,000 or more; or any event specified in any note, agreement,
indenture or other document evidencing or relating to any such
Indebtedness shall occur if (after giving effect to all applicable
grace periods provided for in the documents relating to such
Indebtedness, without regard to any waiver thereof) the effect of
such event is to cause, or to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or
holders) to cause, such Indebtedness becoming due prior to its stated
maturity; or
(d) Any representation, warranty or certification made or
deemed made herein by the Company or the Guarantor, or any certificate
furnished to any Bank or the Administrative Agent pursuant to the
provisions hereof, shall prove to have been false or misleading as of
the time made or deemed made or furnished in any material respect and,
if the Company, the Guarantor and the Majority Banks agree that the
effects of such false or misleading representation, warranty or
certification are curable, such effects shall not have been cured to
the satisfaction of the Majority Banks within 10 days after the
earlier of (x) the date on which the Company or the Guarantor
obtained knowledge that such representation, warranty or
certification was so false or misleading or (y) the date of notice by
the Administrative Agent to the Company or the Guarantor that such
representation, warranty or certification was so false or misleading;
or
(e) The Company or the Guarantor shall default in the
performance of any of its obligations under Section 9 (other than
under any of Sections 9.1(a), 9.1(b), 9.1(c), 9.1(d), 9.1(g), 9.1(h),
9.2, 9.3(b), 9.3(c) and 9.4 hereof); or the Company or the Guarantor
shall default in the performance of any of its other obligations in
this Agreement, including, without limitation, any of Sections 9.1(a),
9.1(b), 9.1(c), 9.1(d), 9.1(g), 9.1(h), 9.2, 9.3(b), 9.3(c) and 9.4
hereof (not governed by any other provision in this Section 10), and
such default shall continue unremedied for a period of 10 days after
the earlier of (x) the date on which the Company or the Guarantor
obtained knowledge of such default or (y) the date of notice by the
Administrative Agent to the Company or the Guarantor of the
occurrence of such default; or
(f) The Company, the Guarantor, any other Material Subsidiary
or Subsidiaries constituting a Material Subsidiary Group shall admit in
writing its inability to, or
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be generally unable to, pay its debts as such debts become due; or
(g) The Company, the Guarantor, any other Material Subsidiary
or Subsidiaries constituting a Material Subsidiary Group shall (i)
apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its assets, (ii) make a
general assignment for the benefit of its creditors, (iii) commence
a voluntary case under the Bankruptcy Code (as now or hereafter in
effect), (iv) file a petition seeking to take advantage of any other
law relating to bankruptcy, insolvency, reorganization, creditor or
debtor rights, winding-up, or composition or readjustment of debts,
(v) take any corporate action for the purpose of effecting any of
the foregoing; provided that an event specified in clauses (i)
through (v) above shall be deemed to have occurred (whether at one
time or cumulatively over a period of time after the date hereof)
with respect to a Material Subsidiary Group at the time when such an
event shall have occurred with respect to all Subsidiaries
constituting such Material Subsidiary Group; or
(h) A proceeding or case shall be commenced, without the
application or consent of the Company, the Guarantor, any other
Material Subsidiary or all Subsidiaries constituting a Material
Subsidiary Group in any court of competent jurisdiction, seeking (i)
its liquidation, reorganization, dissolution or winding-up, or the
composition or readjustment of its debts, including the filing of an
involuntary petition under the Bankruptcy Code, (ii) the appointment
of a trustee, receiver, custodian, liquidator or the like of the
Company, the Guarantor or such Subsidiary or of all or any
substantial part of its assets, or (iii) similar relief in respect
of the Company, the Guarantor or such Subsidiary under any law
relating to bankruptcy, insolvency, reorganization, creditor or
debtor rights, winding-up, or composition or adjustment of debts, and
such proceeding or case shall continue undismissed, or an order,
judgment or decree approving or ordering any of the foregoing shall
be entered and shall not be vacated or dismissed within 60 days; or
an order for relief against the Company, the Guarantor or such
Subsidiary shall be entered in an involuntary case under any
applicable bankruptcy code; provided that an event specified in
clauses (i) through (iii) above or the preceding subclause shall be
deemed to have occurred with respect to a Material Subsidiary Group
at the time when such an event shall have occurred (whether at one
time or cumulatively over a period of
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time after the date hereof) with respect to all Subsidiaries
constituting such Material Subsidiary Group; or
(i) A judgment or judgments for the payment of money in excess
of $1,000,000 in the aggregate shall be rendered by a court or courts
against the Company, the Guarantor and/or any of their respective
Subsidiaries and the same shall not be discharged (or provision shall
not be made for such discharge), or a stay of execution thereof shall
not be procured, within 30 days from the date of entry thereof and
the Company, the Guarantor or the relevant Subsidiary shall not,
within said period of 30 days, or such longer period during which
execution of the same shall have been stayed, appeal therefrom and
cause the execution thereof to be stayed during such appeal; or
(j) An event or condition specified in Section 9.1(e) hereof
shall occur or exist with respect to any Plan or Multiemployer Plan
and, as a result of such event or condition, together with all other
such events or conditions, the Company, the Guarantor or any ERISA
Affiliate shall incur or in the opinion of the Majority Banks shall
be reasonably likely to incur a liability to a Plan, a Multiemployer
Plan or PBGC (or any combination of the foregoing) which is, in the
determination of the Majority Banks, material in relation to the
consolidated financial position of the Company and its consolidated
Subsidiaries; or
(k) There shall occur a Change of Control; provided that any
such Change of Control shall not constitute an Event of Default for
purposes of this Section 10(k) if (i) (A) such Change of Control arises
solely in connection with the Liberty Media Transaction, and (B) as
of the date the Liberty Media Transaction is consummated and after
giving effect thereto, no other Default or Event of Default shall
have occurred and be continuing, or (ii) (A) such Change of Control
arises solely by reason of the merger or consolidation of the Company
with another corporation which is organized under the laws of a state
in the United States and the Company is the surviving corporation in
such merger or consolidation, (B) as of the date of such merger or
consolidation and after giving effect thereto, no other Default or
Event of Default shall have occurred and be continuing, and (C) the
Company has delivered a notice to the Administrative Agent and the
Banks not less than 30 days prior to the consummation of any such
merger or consolidation that sets forth in reasonable detail
information
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indicating compliance with the terms of clause (ii) of this paragraph
(k); or
(1) Following the disposition of any of the Broadcast
Subsidiaries as permitted by Section 9.7 hereof, an event or
condition that constitutes (i) a default or breach by any such
Broadcast Subsidiary that is party to a Silver King Note or any other
agreement, including without limitation, an affiliation agreement,
which had been entered into in connection with such disposition and
pursuant to which such Broadcast Subsidiary and the Company continued
a business relationship, and such default or breach shall continue
unremedied for a period of 30 days after the Company obtained
knowledge of such default or breach or (ii) a default or breach by
the Company of any agreement, including without limitation, an
affiliation agreement, which had been entered into in connection with
such disposition and pursuant to which such Broadcast Subsidiary and
the Company continued a business relationship.
THEREUPON: (i) in the case of an Event of Default other than one referred to
in clause (f), (g) or (h) of this Section 10, the Administrative Agent, with
the consent of the Majority Banks, may and, upon request of the Majority Banks,
shall, by notice to the Company, terminate the Commitments and/or declare the
principal amount then outstanding of, and the accrued interest on, the Loans
and all other amounts payable by the Company and the Guarantor hereunder and
under the Notes to be forthwith due and payable, whereupon such amounts shall
be immediately due and payable without presentment, demand, diligence, protest
or other formalities of any kind, all of which are hereby expressly waived by
the Company and the Guarantor; and (ii) in the case of the occurrence of an
Event of Default referred to in clause (f), (g) or (h) of this Section 10, the
Commitments shall be automatically terminated and the principal amount then
outstanding of, and the accrued interest on, the Loans and all other amounts
payable by the Company and the Guarantor hereunder and under the Notes shall
become automatically immediately due and payable without presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by the Company and the Guarantor.
Section 11. The Administrative Agent.
11.1. Appointment, Powers and Immunities. Each Bank hereby
irrevocably appoints and authorizes the Administrative Agent to act as its
agent hereunder with such powers as are specifically delegated to the
Administrative Agent by the
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terms of this Agreement, together with such other powers as are reasonably
incidental thereto. The Administrative Agent (which term as used in this
sentence and in Section 11.5 and the first sentence of Section 11.6 hereof
shall include reference to its affiliates and each of the officers, directors,
employees and agents of itself and of its affiliates): (a) shall have no
duties or responsibilities except those expressly set forth in this Agreement,
and shall not by reason of this Agreement be a trustee for any Bank; (b) shall
not be responsible to the Banks for any recitals, statements, representations
or warranties contained in this Agreement, or in any certificate or other
document referred to or provided for in, or received by any of them under, this
Agreement, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, any Note or any other document
referred to or provided for herein or for any failure by the Company or any
other Person to perform any of its obligations hereunder or thereunder; (c)
shall not be required to initiate or conduct any litigation or collection
proceedings hereunder, except as provided for under Section 11.3 hereof; and
(d) shall not be responsible for any action taken or omitted to be taken by it
hereunder or under any other document or instrument referred to or provided for
herein or in connection herewith, except for its own gross negligence or
willful misconduct. The Administrative Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact selected by it in good faith. The
Administrative Agent may deem and treat the payee of any Note as the holder
thereof for all purposes hereof unless and until a written notice of the
assignment or transfer thereof shall have been filed with the Administrative
Agent.
11.2. Reliance by the Administrative Agent. The Administrative
Agent shall be entitled to rely upon any certification, notice or other
communication (including any thereof by telephone, telex, telegram or cable)
reasonably believed by it to be genuine and correct and to have been signed or
sent by or on behalf of the proper Person or Persons, and upon advice and
statements of legal counsel, independent accountants and other experts selected
by the Administrative Agent. As to any matters not expressly provided for by
this Agreement, the Administrative Agent shall in all cases be fully protected
in acting, or in refraining from acting, hereunder in accordance with
instructions signed by the Majority Banks, and such instructions of the
Majority Banks and any action taken or failure to act pursuant thereto shall be
binding on all of the Banks.
11.3. Defaults. The Administrative Agent shall not be deemed
to have knowledge of the occurrence of a Default
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(other than the nonpayment of principal of or interest on Loans or of
commitment fees) unless the Administrative Agent has received notice from a
Bank or the Company specifying such Default and stating that such notice is a
"Notice of Default". In the event that the Administrative Agent receives such
a notice of the occurrence of a Default, the Administrative Agent shall give
prompt notice thereof to the Banks (and shall give each Bank prompt notice of
each such nonpayment). The Administrative Agent shall (subject to Section 11.7
and Section 12.4 hereof) take such action with respect to such Default as shall
be directed by the Majority Banks, provided that, unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default as it shall deem advisable in
the best interest of the Banks.
11.4. Rights as a Bank. With respect to its Commitment and the
Loans made by it, LTCB Trust (and any successor acting as Administrative Agent)
in its capacity as a Bank hereunder shall have the same rights and powers
hereunder as any other Bank and may exercise the same as though it were not
acting as the Administrative Agent, and the term "Bank" or "Banks" shall,
unless the context otherwise indicates, include the Administrative Agent in its
individual capacity. LTCB Trust (and any successor acting as Administrative
Agent) and its affiliates may (without having to account therefor to any Bank)
accept deposits from, lend money to and generally engage in any kind of
banking, trust or other business with the Company (and any of its Affiliates)
as if it were not acting as the Administrative Agent, and LTCB, LTCB Trust and
their affiliates may accept fees and other consideration from the Company and
the Guarantor for services in connection with this Agreement or otherwise
without having to account for the same to the Banks.
11.5. Indemnification. The Banks agree to indemnify the
Administrative Agent (to the extent not reimbursed under Section 12.3 hereof,
but without limiting the obligations of the Company under said Section 12.3),
ratably in accordance with the aggregate principal amount of the Loans made
by the Banks (or, if no Loans are at the time outstanding, ratably in
accordance with their respective Commitments), for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind and nature whatsoever which may be imposed
on, incurred by or asserted against the Administrative Agent in any way relating
to or arising out of this Agreement or any other documents contemplated by or
referred to herein or the transactions contemplated hereby (including, without
limitation, the costs and expenses which the Company is obligated to pay under
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Section 12.3 hereof but excluding, unless a Default has occurred and is
continuing, normal administrative costs and expenses incident to the
performance of its agency duties hereunder) or the enforcement of any of the
terms hereof or of any such other documents, provided that no Bank shall be
liable for any of the foregoing to the extent they arise from the gross
negligence or willful misconduct of the party to be indemnified.
11.6. Non-Reliance on Administrative Agent, Co-Agents and other
Banks. Each Bank agrees that it has, independently and without reliance on the
Administrative Agent, either Co-Agent or any other Bank, and based on such
documents and information as it has deemed appropriate, made its own credit
analysis of the Company, the Guarantor and their respective Subsidiaries and
its own decision to enter into this Agreement and that it will, independently
and without reliance upon the Administrative Agent, either Co-Agent or any
other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement, the Notes or any other
related documents. The Administrative Agent shall not be required to keep
itself informed as to the performance or observance by the Company or the
Guarantor of this Agreement or any other document referred to or provided for
herein or to inspect the properties or books of the Company, the Guarantor or
any of their respective Subsidiaries. Except for notices, reports and other
documents and information expressly required to be furnished to the Banks by
the Administrative Agent hereunder, the Administrative Agent shall not have any
duty or responsibility to provide any Co-Agent or any Bank with any credit or
other information concerning the affairs, financial condition or business of
the Company or any Subsidiary (or any of their affiliates) which may come into
the possession of the Administrative Agent or any of its affiliates.
11.7. Failure to Act. Except for action expressly required of
the Administrative Agent hereunder, the Administrative Agent shall in all cases
be fully justified in failing or refusing to act hereunder unless it shall be
indemnified to its satisfaction by the Banks against any and all liability and
expense (other than that arising from gross negligence or willful misconduct)
which may be incurred by it by reason of taking or continuing to take any such
action.
11.8. Resignation or Removal of Administrative Agent. Subject
to the appointment and acceptance of a successor Administrative Agent as
provided below, the Administrative Agent may resign at any time by giving
notice thereof to the Banks, the Company and the Guarantor, and the
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Administrative Agent may be removed at any time with or without cause by the
Majority Banks. Upon any such resignation or removal, the Majority Banks shall
have the right to appoint a successor Administrative Agent. If no successor
Administrative Agent shall have been so appointed by the Majority Banks and
shall have accepted such appointment within 30 days after the retiring
Administrative Agent's giving of notice of resignation or the Majority Banks'
removal of the retiring Administrative Agent, then the retiring Administrative
Agent may, on behalf of the Banks, appoint a successor Administrative Agent,
which shall be a bank which has an office in New York, New York with a combined
capital and surplus of at least $100,000,000. Upon the acceptance of any
appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the
retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder. After any retiring
Administrative Agent's resignation or removal hereunder as Administrative
Agent, the provisions of this Section 11 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as the Administrative Agent.
11.9. Administrative Agent's Office. The Administrative Agent
acts initially through its office designated on the signature pages hereof, but
may transfer its functions as Administrative Agent to any other office, branch
or affiliate of LTCB at any time by giving prompt, subsequent written notice to
each of the other parties to this Agreement.
11.10. Co-Agents. Each of the parties acknowledges and agrees
that the Co-Agents, in their capacity as such, have no obligations, duties or
liabilities whatsoever under or in respect of this Agreement or the Notes.
Section 12. Miscellaneous.
12.1. Waiver. No failure on the part of the Administrative
Agent, either Co-Agent or any Bank to exercise, no delay in exercising, and no
course of dealing with respect to, any right, power or privilege under this
Agreement or any Note shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, power or privilege under this Agreement or
any Note preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
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12.2. Notices. All notices and other communications provided
for herein (including, without limitation, any modifications of, or waivers or
consents under, this Agreement) shall be given or made by telex, telecopy,
telegraph, cable or in writing and telexed, telecopied, telegraphed, cabled,
mailed or delivered to the intended recipient at the "Address for Notices"
specified below its name on the signature pages hereof; or, as to any party, at
such other address as shall be designated by such party in a notice to each
other party. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by
telex or telecopier (with receipt confirmed either mechanically or in writing
by a person at the office of the recipient), personally delivered or, in the
case of a mailed notice, upon receipt, in each case given or addressed as
aforesaid.
12.3. Expenses, Etc. The Company and the Guarantor jointly and
severally agree to pay or reimburse each of the Banks and the Administrative
Agent for paying:
(a) all costs and expenses of the Administrative Agent
(including, without limitation, the reasonable fees and expenses of all
special counsel to the Administrative Agent, the Co-Agents and the
Banks, in connection with (i) the preparation, negotiation, execution
and delivery of this Agreement and the Notes and any related documents
and the making of the initial Loans hereunder, subject to limitations
set forth in letters dated the date hereof between the Company and LTCB
Trust and Bank of Montreal, respectively, and (ii) any amendment,
modification or waiver of any of the terms of this Agreement or any of
the Notes or any related documents (whether or not any such amendment,
modification or waiver is signed or becomes effective);
(b) all reasonable costs and expenses of each Bank, each
Co-Agent and the Administrative Agent (including reasonable counsels'
fees and expenses) in connection with the enforcement of this Agreement
or any of the Notes and the protection of the rights of each Bank, each
Co-Agent and the Administrative Agent against the Company, the Guarantor
or any of their respective assets; and
(c) all transfer, stamp, documentary and other similar taxes,
assessments or charges (including, without limitation, penalties and
interest) levied by any governmental or revenue authority in respect of
this Agreement, any of the Notes or any other document referred to
herein.
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The Company hereby agrees to indemnify the Administrative Agent, each Co-Agent
and each Bank and their respective Affiliates, directors, officers, employees
and agents from, and hold each of them harmless against, any and all losses,
liabilities, claims, damages or expenses incurred by any of them arising out of
or by reason of any investigation or litigation or other proceedings (including
any threatened investigation or litigation or other proceedings) relating to or
arising out of this Agreement, the statements contained in the commitment
letter and term sheet, dated September 28, 1992, as amended, of LTCB Trust, as
a Co-Agent, and the commitment letter and term sheet, dated October 8, 1992, as
amended, of Bank of Montreal, as a Co-Agent, or any aspect thereof, the Banks'
agreement to make the Loans hereunder or from any actual or proposed use by the
Company, the Guarantor or any Subsidiary of either thereof of the proceeds of
any of the Loans or from an alleged breach of this Agreement, including,
without limitation, the reasonable fees and disbursements of counsel incurred
in connection with any such investigation or litigation or other proceedings
(but excluding any such losses, liabilities, claims, damages or expenses
incurred by reason of the gross negligence or willful misconduct of the Person
to be indemnified).
12.4. Amendments, Etc. Neither this Agreement nor any Note
nor any terms hereof or thereof may be amended, supplemented or modified
except in accordance with the provisions of this subsection. With the prior
written consent of the Majority Banks, the Administrative Agent, the Company
and the Guarantor may, from time to time, enter into written amendments,
supplements or modifications hereto for the purpose of adding any provisions
to this Agreement or the Notes or changing in any manner the rights of the
Banks or of the Company and the Guarantor hereunder or thereunder or waiving,
on such terms and conditions as the Administrative Agent (with the consent of
the Majority Banks) may specify in such instrument, any of the requirements of
this Agreement or the Notes or any Default or Event of Default and its
consequences; provided, however, that no such waiver and no such amendment,
supplement or modification shall (a) extend the maturity of any Note, or
reduce the rate or extend the time of payment of interest thereon, or reduce
or extend the time of payment of any fee payable to the Banks hereunder, or
reduce the principal amount of any Loan, or increase the amount of any Bank's
Commitment, or release the Guarantor from any of its obligations hereunder, or
amend, modify or waive any provision of this subsection, or reduce the
percentage specified in the definition of "Majority Banks" in Section 1.1
hereof, or consent to the assignment or transfer by the Company or the
Guarantor of any of its rights and obligations under this Agreement or the
Notes, in each case without the
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prior written consent of all the Banks, or (b) amend, modify or waive any
provision of Section 11 hereof without the prior written consent of the
Administrative Agent. Any such waiver and any such amendment, supplement or
modification shall apply equally to each of the Banks and shall be binding upon
the Company, the Guarantor, the Banks, the Administrative Agent, the Co-Agents
and all future holders of the Notes. In the case of any waiver, the Company,
the Guarantor, the Banks and the Administrative Agent shall be restored to
their former position and rights hereunder and under the outstanding Notes, and
any Default or Event of Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent or other Default
or Event of Default, or impair any right subsequent thereon.
12.5. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
12.6. Assignments and Participation.
(a) Neither the Company nor the Guarantor may assign its
rights or obligations hereunder or under the Notes without the prior
consent of all of the Banks and the Administrative Agent.
(b) Any Bank may assign any of its Loans, its Note or its
Commitment without the prior consent of the Company, the Guarantor, the
Administrative Agent or any other Bank, provided that (i) assignments of
less than all of a Bank's Commitment and Loans shall be in a principal
amount of not less than $10,000,000 (or such lesser amount as may be
agreed upon by the Company) and (ii) any such assignment shall be made
pursuant to an assignment and assumption agreement substantially in
the form of Exhibit E hereto (an "Assignment Agreement"). Upon
written notice to the Company and the Administrative Agent of an
assignment, identifying in detail reasonably satisfactory to the
Administrative Agent the assignee Bank and the amount of the assignor
Bank's Commitment and Loans assigned, the assignee shall have, as of
the date of effectiveness of such assignment and to the extent of such
assignment, the obligations, rights and benefits of, and shall be
deemed for all purposes hereunder, a Bank party hereto holding the
Commitment and Loans (or portions thereof) assigned to it (in addition
to the Commitment and Loans, if any, theretofore held by such assignee)
and the assignor shall be released from such obligations to such extent.
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(c) Any Bank may sell to one or more other Persons a
participation in all or any part of the Commitment or any Loan held by it,
in which event each such participant shall be entitled to the rights and
benefits of the provisions of Sections 5 and 9.1(h) hereof with respect to
its participation in such Loan as if (and the Company and the Guarantor
shall be directly obligated to such participant under such provisions as
if) such participant were a "Bank" for purposes of said Sections, but shall
not have any other rights or benefits under this Agreement or any Note (the
participant's rights against such Bank in respect of such participation to
be those set forth in the agreement (the "Participation Agreement")
executed by such Bank in favor of such participant); provided, that all
amounts payable by the Company or the Guarantor to any Bank and any
participant under Section 5 hereof in respect of any Loan shall be
determined as if such Bank had not sold any participations in such Loan and
as if such Bank were funding all of such Loan in the same way that it is
funding the portion of such Loan in which no participations have been sold.
In no event shall a Bank that sells a participation be obligated to any
participant under the Participation Agreement to take or refrain from
taking any action hereunder or under such Bank's Note (including, without
limitation, the extension of such Bank's Commitment pursuant to Section 2.9
hereof) except that such Bank may agree in the Participation Agreement that
it will not, without the consent of the participant, agree to (i) the
extension of any date fixed for the payment of principal of or interest on
the related Loan or Loans, (ii) the reduction of any payment of principal
thereof, (iii) the reduction of the rate at which either interest is
payable thereon or (if the participant is entitled to any part thereof)
commitment fee is payable hereunder to a level below the rate at which the
participant is entitled to receive interest or commitment fee (as the case
may be) in respect of such participation or (iv) any release of the
Guarantor from any of its obligations under this Agreement or the Notes.
(d) In addition to the assignments and participations
permitted under the foregoing provisions of this Section 12.6, any Bank may
assign and pledge all or any portion of its Loans and its Note to any
Federal Reserve Bank as collateral security pursuant to Regulation A and
any Operating Circular issued by such Federal Reserve Bank. No such
assignment shall release the assigning Bank from its obligations hereunder.
(e) A Bank may furnish any information concerning the Company,
the Guarantor or any of their respective
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Subsidiaries in the possession of such Bank from time to time to
assignees and participants (including prospective assignees and
participants).
12.7. Confidentiality. The Administrative Agent, the Co-Agents, and
each of the Banks hereby acknowledge that certain of the information to be
furnished to them pursuant to this Agreement may be non-public information. The
Administrative Agent, each Co-Agent, and each Bank hereby agrees that it will
keep all information so furnished to it pursuant hereto confidential in
accordance with its normal banking procedures and, except in accordance with
such procedures, will make no disclosure to any other Person of such
information until the same shall have become public, except (i) in connection
with matters involving this Agreement (including, without limitation,
litigation involving the Company, the Guarantor, the Co-Agents, the
Administrative Agent or the Banks) and with the obligations of any of the
Administrative Agent, such Co-Agent or such Bank under law or regulation, (ii)
pursuant to subpoenas or similar process, (iii) to Governmental Authorities or
examiners, (iv) to independent auditors or counsel, (v) to any parent or
corporate Affiliate of any of the Administrative Agent, such Co-Agent or such
Bank, or (vi) to any participant or proposed participant or assignee or
proposed assignee hereunder so long as such participant or proposed participant
or assignee or proposed assignee (a) is not in the same general type of
business as the Company on the date of such disclosure and (b) agrees in
writing to accept such information subject to the restrictions provided in this
Section 12.7; provided that in no event shall any of the Administrative Agent,
such Co-Agent or such Bank be obligated or required to return any materials
furnished by the Company or any of its Subsidiaries.
12.8. Survival. Without limiting the survival of any other
obligations of the Company, the Guarantor and the Banks hereunder, the
obligations of the Company and the Guarantor under Sections 2.6, 5.1, 5.4, 5.5
and 12.3 hereof and the obligations of the Banks under Sections 4.7, 11.5 and
12.7 hereof, shall survive the repayment of the Loans and the termination of
the Commitments.
12.9. Captions. Captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.
12.10. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the
-70-
<PAGE> 75
parties thereto may execute this Agreement by signing any such counterpart.
12.11. GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
12.12. JURISDICTION. EACH OF THE COMPANY AND THE GUARANTOR HEREBY
AGREES THAT:
(A) ANY SUIT, ACTION OR PROCEEDING AGAINST THE COMPANY OR THE
GUARANTOR WITH RESPECT TO THIS AGREEMENT, THE LOANS, THE NOTES OR ANY
DOCUMENTS RELATED HERETO OR ANY JUDGMENT ENTERED BY ANY COURT IN RESPECT
THEREOF MAY BE BROUGHT IN THE SUPREME COURT OF THE STATE OF NEW YORK,
COUNTY OF NEW YORK, IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK, OR IN ANY STATE OR FEDERAL COURT SITTING IN THE
STATE OF FLORIDA (COLLECTIVELY, THE "SUBJECT COURTS"), AS THE
ADMINISTRATIVE AGENT, EITHER CO-AGENT OR ANY BANK MAY ELECT IN ITS SOLE
DISCRETION AND EACH OF THE COMPANY AND THE GUARANTOR HEREBY IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF EACH OF THE SUBJECT COURTS
FOR THE PURPOSE OF ANY SUCH SUIT, ACTION, PROCEEDING OR JUDGMENT. EACH
OF THE COMPANY AND THE GUARANTOR HEREBY IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS IN ANY SUIT, ACTION OR PROCEEDING IN ANY OF THE
SUBJECT COURTS BY THE MAILING THEREOF BY THE ADMINISTRATIVE AGENT, THE
RESPECTIVE CO-AGENT OR THE RESPECTIVE BANK BY REGISTERED OR CERTIFIED
MAIL, POSTAGE PREPAID, TO THE COMPANY OR THE GUARANTOR, AS THE CASE MAY
BE, ADDRESSED AS PROVIDED IN SECTION 12.2 HEREOF. NOTHING HEREIN SHALL
IN ANY WAY BE DEEMED TO LIMIT THE ABILITY OF THE ADMINISTRATIVE AGENT,
EITHER CO-AGENT OR ANY BANK TO SERVE ANY SUCH WRITS, PROCESS OR
SUMMONSES IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW OR TO BRING
PROCEEDINGS AGAINST THE COMPANY OR THE GUARANTOR IN ANY COMPETENT COURT
OF ANY OTHER JURISDICTION OR JURISDICTIONS, AND IN SUCH MANNER, AS MAY
BE PERMITTED BY APPLICABLE LAW.
(B) EACH OF THE COMPANY AND THE GUARANTOR HEREBY WAIVES ANY
RIGHT TO TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING IN RESPECT OF
THIS AGREEMENT, THE NOTES OR ANY OTHER DOCUMENTS IN CONNECTION HEREWITH,
ANY OBJECTION TO THE LAYING OF VENUE IN ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY OF THE SUBJECT COURTS, AND, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY CLAIM THAT SUCH SUIT, ACTION OR PROCEEDING
IN ANY OF THE SUBJECT COURTS HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
-71-
<PAGE> 76
12.13. Severability. Any provision of this Agreement or the Notes
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
thereof or affecting the validity or enforceability of such provision in any
other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the date first above written.
HOME SHOPPING NETWORK, INC.,
as the Company
By
------------------------------
Title: Chief Financial Officer
2501 118th Avenue North
St. Petersburg, Florida 33716
Telecopier No.: (813) 539-6505
Telephone No.: (813) 572-8585
Attention: Les R. Wandler
with a copy to:
"Legal Department"
Telecopier No.: (813) 573-0866
HOME SHOPPING CLUB, INC.,
as Guarantor
By
------------------------------
Title: Treasurer
2501 118th Avenue North
St. Petersburg, Florida 33716
Telecopier No.: (813) 539-6505
Telephone No.: (813) 572-8585
Attention: Les R. Wandler
with a copy to:
"Legal Department"
Telecopier No.: (813) 573-0866
-72-
<PAGE> 77
The Banks
Commitment
$9,000,000 LTCB TRUST COMPANY, as a Bank
and a Co-Agent
By
------------------------------
Title:
Lending Office for Federal Funds
Rate Loans and Prime Rate Loans:
165 Broadway
New York, New York 10006
Lending Office for LIBOR Loans:
165 Broadway
New York, New York 10006
Address for Notices:
165 Broadway
New York, New York 10006
Telex No.: 425722
Telecopier No.: (212) 608-3081
Telephone No.: (212) 335-4854
Attention:
---------------------
-73-
<PAGE> 78
$9,000,000 BANK OF MONTREAL, as a Bank
and a Co-Agent
By
-------------------------------
Title:
Lending Office for Federal Funds Rate
Loans and Prime Rate Loans:
115 South LaSalle Street
11th Floor
Chicago, Illinois 60603
Lending Office for LIBOR Loans:
115 South LaSalle Street
11th Floor
Chicago, Illinois 60603
Address for Notices:
430 Park Avenue
15th Floor, Account
Administration
New York, New York 10022
Telecopier No.: (212) 605-1525
Telephone No.: (212) 605-1436
or (212) 605-1458
Attention: Prescilla Quinones or
John Decoufle
-74-
<PAGE> 79
$6,000,000 THE BANK OF NEW YORK
By
------------------------------
Title:
Lending Office for Federal Funds
Rate Loans and Prime Rate Loans:
One Wall Street
New York, New York 10286
Lending Office for LIBOR Loans:
One Wall Street
New York, New York 10286
Address for Notices:
One Wall Street
22nd Floor
New York, New York 10286
Telecopier No.: (212) 635-6399
or (212) 635-6877
Telephone No.: (212) 635-6780
Attention: Ramona McCottrie
-75-
<PAGE> 80
$4,000,000 CITIZENS FIDELITY BANK & TRUST
COMPANY
By
------------------------------
Title:
Lending Office for Federal Funds
Rate Loans and Prime Rate Loans:
500 West Jefferson Street
Louisville, Kentucky 40202
Lending Office for LIBOR Loans:
500 West Jefferson Street
Louisville, Kentucky 40202
Address for Notices:
PNC Commercial Corp.
201 South Orange Avenue
Suite 750
Orlando, Florida 32801
Telecopier No.: (407) 843-8263
Telephone No.: (407) 841-3585
Attention: James Neil or
Diane Tyre
-76-
<PAGE> 81
$4,000,000 THE DAIWA BANK, LIMITED
By
-----------------------------
Title:
By
-----------------------------
Title:
Lending Office for Federal Funds
Rate Loans and Prime Rate Loans:
233 South Wacker Dr., Suite 5400
Chicago, Illinois 60606
Lending Office for LIBOR Loans:
233 South Wacker Dr., Suite 5400
Chicago, Illinois 60606
Address for Notices:
100 South Ashley Drive
Suite 1780
Tampa, Florida 33602
Telecopier No.: (813) 229-6372
Telephone No.: (813) 229-6002
Attention: Sybil Weldon, Vice
President
-77-
<PAGE> 82
$4,000,000 FIRST UNION NATIONAL BANK OF
FLORIDA
By
------------------------------
Title:
Lending Office for Federal Funds
Rate Loans and Prime Rate Loans:
214 Hogan Street
Jacksonville, Florida 33202
Lending Office for LIBOR Loans:
214 Hogan Street
Jacksonville, Florida 33202
Address for Notices:
410 Central Avenue
St. Petersburg, Florida 33701
Telecopier No.: (813) 892-7254
Telephone No.: (813) 892-7297
Attention: J. Gregory Olivier,
Vice President
-78-
<PAGE> 83
$4,000,000 SUN BANK OF TAMPA BAY
By
------------------------------
Title:
Lending Office for Federal Funds
Rate Loans and Prime Rate Loans:
315 East Madison
Tampa, Florida 33601
Lending Office for LIBOR Loans:
315 East Madison
Tampa, Florida 33601
Address for Notices:
3601 34th Street, North
3rd Floor, Corporate Banking
St. Petersburg, Florida 33713
Telecopier No.: (813) 892-4810
Telephone No.: (813) 892-4951
- ------------------- Attention: Peggy Scarborough
Total: $40,000,000
-79-
<PAGE> 84
The Administrative Agent
LTCB TRUST COMPANY,
as Administrative Agent
By
-----------------------------
Title:
Address for Notices to
Administrative Agent:
165 Broadway
New York, New York 10006
Telex No.: 425722
Telecopier No.: (212) 608-3081
Telephone No.: (212) 335-4854
Attention:
---------------------
-80-
<PAGE> 85
EXHIBIT A
PROMISSORY NOTE
$______________ December 18, 1992
New York, New York
FOR VALUE RECEIVED, HOME SHOPPING NETWORK, INC., a
Delaware corporation (the "Company"), hereby promises to pay to the order of
___________________ (the "Bank"), for account of its respective Applicable
Lending Offices provided for by the Credit Agreement referred to below, by
paying to account no. 04203606 of LTCB Trust Company (the "Administrative
Agent") at the principal offices of Bankers Trust Company, New York, New York
(reference: "Home Shopping Network-1992 Revolving Credit Facility") (or at such
other place as the Administrative Agent may notify the Company from time to
time) the principal sum of ______________ Dollars ($_____________) (or such
lesser amount as shall equal the aggregate unpaid principal amount of the Loans
made by the Bank to the Company under the Credit Agreement), in lawful money of
the United States of America and in immediately available funds, without
set-off, counterclaim or deduction of any kind, on the dates and in the
principal amounts provided in the Credit Agreement, and to pay interest on the
unpaid principal amount of each such Loan, at such office, in like money and
funds and in such manner, for the period commencing on the date of such Loan
until such Loan shall be paid in full, at the rates per annum and on the dates
provided in the Credit Agreement.
The amount and type of, and the duration of each Interest
Period (if applicable) for, each Loan made by the Bank to the Company under the
Credit Agreement, the date such Loan is made or converted from a Loan of
another type, and the amount of each payment or prepayment made on account of
the principal thereof, shall be recorded by the Bank on its books and, prior to
any transfer of this Note, endorsed by the Bank on the schedule attached hereto
or any continuation thereof; provided that no failure of the Bank to make any
such endorsement shall affect the obligations of the Company under the Credit
Agreement or this Note.
This Note is one of the Notes referred to in the Amended
and Restated Credit Agreement, dated as of December 18, 1992 (as in effect from
time to time, the "Credit Agreement"), among the Company, Home Shopping Club,
Inc., a Delaware corporation, as guarantor (the "Guarantor"), the Banks named
therein (including the Bank), LTCB Trust Company and Bank of Montreal, each as
a Co-Agent for the Banks, and the Administrative Agent, and evidences Loans
made by the Bank thereunder and is entitled to the benefits thereof.
Capitalized terms used in this Note have the respective meanings assigned to
them in the Credit Agreement.
A-1
<PAGE> 86
The Credit Agreement provides for the acceleration of the
maturity of this Note upon the occurrence of certain events and for prepayments
of Loans upon the terms and conditions specified therein.
No provision of the Credit Agreement or this Note or any
other document delivered in connection with either thereof and no transaction
contemplated hereby or thereby shall be construed or shall operate so as to
require the Company or the Guarantor to pay interest hereunder in an amount or
at a rate greater than the maximum allowed from time to time by applicable law.
Should any interest or other charges paid by the Company or the Guarantor
hereunder result in a computation or earning of interest in excess of the
maximum rate of interest permitted under applicable law in effect while such
interest is being earned, then such excess shall be waived by the Bank and all
such excess shall be automatically credited against and in reduction of the
principal balance of such amounts payable hereunder and any portion of such
excess received by the Bank shall be paid over by the Bank to the Company or
the Guarantor, as the case may be, it being the intent of the Company and the
Guarantor and the other parties to the Credit Agreement that under no
circumstances shall the Company or the Guarantor or any other Person be
required to pay interest in excess of the maximum rate allowed by such
applicable law.
The Company hereby waives diligence, presentment, protest,
notice of default, dishonor or nonpayment and any other notice and all demands
whatsoever. The Company hereby further waives all setoffs and counterclaims
against the Company, the Administrative Agent, the Co-Agents and each of the
Banks.
THIS NOTE HAS BEEN EXECUTED AND DELIVERED IN, AND SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF, THE STATE OF NEW
YORK.
HOME SHOPPING NETWORK, INC.
By
-------------------------
Title:
A-2
<PAGE> 87
GUARANTEE
The undersigned HOME SHOPPING CLUB, INC., a Delaware
corporation (the "Guarantor"), hereby unconditionally and irrevocably
guarantees the payment in full when due (whether at stated maturity, by
acceleration or otherwise) of the principal of and interest on this Note and
all other amounts payable hereunder, in accordance with the terms hereof and of
Section 6 of the Credit Agreement, and, in the case of any extension of time of
payment, in whole or in part, that all such amounts shall be paid in full when
due (whether at stated maturity, by acceleration or otherwise) in accordance
with the terms of such extension. In addition, the Guarantor hereby
unconditionally agrees that upon default in the payment when due (whether at
stated maturity, by acceleration or otherwise) of any of such principal,
interest or other amounts, the Guarantor shall forthwith pay and perform the
same in the money and funds, at the time, in the place and in the manner
provided for such payment in the Credit Agreement. This guarantee is a
continuing guarantee of payment and not merely of collection; it is a primary,
independent obligation of the Guarantor; and the Guarantor's obligations
hereunder shall be absolute, unconditional and irrevocable, irrespective of any
and all circumstances whatsoever. The Guarantor hereby waives diligence,
presentment, protest, notice of default, dishonor or nonpayment and any other
notice and all demands whatsoever. The Guarantor hereby further waives all
setoffs and counterclaims against the Company, the Administrative Agent, the
Co-Agents and each of the Banks.
HOME SHOPPING CLUB, INC.
By
---------------------
Title:
A-3
<PAGE> 88
<TABLE>
<CAPTION>
LOANS
Date
Loan Principal Type Amount Unpaid
Made or Amount of Interest Paid or Principal Notation
Converted of Loan Loan Period Prepaid Amount Made By
--------- -------- ---- -------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
A-4
<PAGE> 89
EXHIBIT 10.26
FIRST AMENDMENT, dated as of January 15, 1993, to the Amended and
Restated Credit Agreement, dated as of December 18, 1992 (the "Credit
Agreement"), among HOME SHOPPING NETWORK, INC. (the "Company"), HOME SHOPPING
CLUB, INC. (the "Guarantor"), the banks signatory thereto (the "Banks"), LTCB
TRUST COMPANY and BANK OF MONTREAL, each as a Co-Agent for the Banks (each in
such capacity, a "Co-Agent"), and LTCB TRUST COMPANY, as Administrative Agent
for the Banks (in such capacity, the "Administrative Agent").
WHEREAS, the Company and the Guarantor have requested, and the Banks,
the Co-Agents and the Administrative Agent have agreed, to amend certain
provisions of the Credit Agreement;
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration the receipt of which is hereby acknowledged, the
parties hereby agree as follows:
SECTION 1. CERTAIN DEFINED TERMS. Except as expressly set forth in
this First Amendment, terms defined in the Credit Agreement and used herein
shall have their respective defined meanings when used herein.
SECTION 2. AMENDMENTS TO THE CREDIT AGREEMENT.
(a) The definition of "Silver King Notes" in Section 1.1 of the Credit
Agreement is hereby amended by inserting the words "or any of its Subsidiaries"
after the word "Company" in such definition.
(b) Clause (B) of the final proviso to Section 9.5 of the Credit
Agreement is hereby amended by inserting the words "or any of its Subsidiaries"
after the word "Company" appearing therein.
(c) The final proviso to Section 9.7 of the Credit Agreement is hereby
amended by inserting the words "or any of its Subsidiaries" after the word
"Company" appearing therein.
(d) Clause (ii) of Section 9.17 of the Credit Agreement is hereby
amended by inserting the words ", provided that in the case of any Subsidiary
that holds any of the Silver King Notes and any other Subsidiary that owns
shares of capital stock of any such Subsidiary, such trade Indebtedness does
not at any time and with respect to all such Subsidiaries
<PAGE> 90
collectively exceed $1,000,000 in an aggregate principal amount "after the word
"business" at the end of such clause.
(e) Paragraph (l) of Section 10 of the Credit Agreement is hereby
amended by (A) inserting the words "or any of its Subsidiaries" after the word
"Company" in each of the ninth and thirteenth lines of such paragraph, and (B)
inserting the words "or any such Subsidiary" after the word "Company" in each
of the eleventh and sixteenth lines of such paragraph.
(f) Each reference in the Credit Agreement to "this Agreement" and
the words "hereof", "hereto", "herein" and the like, shall, except where the
context otherwise requires, refer to the Credit Agreement as amended by this
First Amendment.
SECTION 3. REPRESENTATIONS AND WARRANTIES. Each of the Company and
the Guarantor represents and warrants to the Administrative Agent and the Banks
that the representations and warranties made by the Company and the Guarantor
in Section 8 of the Credit Agreement and in any other certificate or other
document delivered in connection with the Credit Agreement shall be true in all
material respects on and as of the date of the effectiveness of this First
Amendment with the same force and effect as if made on and as of such date
(including, without limitation, that there shall have occurred no material
adverse change since August 31, 1992 in the consolidated financial condition or
operations, or the business taken as a whole, of the Company and its
consolidated Subsidiaries from that set forth in their financial statements
dated as of August 31, 1992, except as disclosed to the Banks in writing prior
to the date of this Amendment.
SECTION 4. CONDITIONS TO EFFECTIVENESS. This First Amendment shall
become effective as of the date first above written when counterparts hereof
shall have been duly executed and delivered by each of the parties provision
for whose signature is made on the signature pages hereof.
SECTION 5. MISCELLANEOUS.
A. This First Amendment may be executed in any number of counterparts,
all of which taken together and when delivered to the Administrative Agent
shall constitute one and the same instrument, and any of the parties hereto may
execute this First Amendment by signing any such counterpart.
B. THIS FIRST AMENDMENT AND THE CREDIT AGREEMENT AS AMENDED HEREBY
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK.
-2-
<PAGE> 91
C. Except as expressly set forth in this First Amendment, the Credit
Agreement shall remain unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to be duly executed as of the date first above written.
HOME SHOPPING NETWORK, INC.,
as the Company
By /s/ LES R. WANDLER
------------------
Title: Executive Vice
President
HOME SHOPPING CLUB, INC.,
as Guarantor
By /s/ LES R. WANDLER
------------------
Title: Treasurer
-3-
<PAGE> 92
The Banks
LTCB TRUST COMPANY, as a Bank
and a Co-Agent
By /s/ JOHN A. KROB
----------------
Title: Senior Vice President
BANK OF MONTREAL, as a Bank
and a Co-Agent
By /s/ PATRICK SULLIVAN
--------------------
Title: Director
THE BANK OF NEW YORK
By /s/ ALAN LYSTER, JR.
--------------------
Title: Vice President
CITIZENS FIDELITY BANK & TRUST
COMPANY
By /s/ JAMES D. NEIL
-----------------
Title: Assistant Vice
President
THE DAIWA BANK, LIMITED
By /s/ SYBIL H. WELDON
-------------------
Title: Vice President &
Manager
By /s/ ALLEN L. HARVELL, JR.
-------------------------
Title: Vice President
FIRST UNION NATIONAL BANK OF
FLORIDA
By /s/ ROBERT E. HASTINGS
----------------------
Title: Vice President
SUN BANK OF TAMPA BAY
By /s/ ROBERT J. WILLSEA
---------------------
Title: Corporate Banking
Officer
-4-
<PAGE> 93
The Administrative Agent
LTCB TRUST COMPANY,
as Administrative Agent
By /s/ JOHN A. KROB
----------------
Title: Senior Vice President
-5-
<PAGE> 94
SECOND AMENDMENT, dated as of February 4, 1993, to the Amended and
Restated Credit Agreement, dated as of December 18, 1992, as amended by the
First Amendment, dated as of January 15, 1993 (as so amended, the "Credit
Agreement"), among HOME SHOPPING NETWORK, INC. (the "Company"), HOME SHOPPING
CLUB, INC. (the "Guarantor"), the banks signatory thereto (the "Banks"), LTCB
TRUST COMPANY and BANK OF MONTREAL, each as a Co-Agent for the Banks (each in
such capacity, a "Co-Agent"), and LTCB TRUST COMPANY, as Administrative Agent
for the Banks (in such capacity, the "Administrative Agent").
WHEREAS, the Company and the Guarantor have requested, and the Banks,
the Co-Agents and the Administrative Agent are willing, to amend certain
provisions of the Credit Agreement;
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration the receipt of which is hereby acknowledged, the
parties hereby agree as follows:
SECTION 1. CERTAIN DEFINED TERMS. Except as expressly set forth in
this Second Amendment, terms defined in the Credit Agreement and used herein
shall have their respective defined meanings when used herein.
SECTION 2. AMENDMENTS TO THE CREDIT AGREEMENT.
(a) Section 1.1 of the Credit Agreement is hereby amended by
inserting the following definition at the beginning of the list of defined
terms in such Section:
"'1993 Term Loan Agreement' shall mean the Term Loan Agreement,
dated as of February 4, 1993, among the Company, the Guarantor, the
banks signatory thereto, LTCB Trust Company, as agent for such banks, Bank
of Montreal and The Bank of New York, each as a co-agent for such banks,
and LTCB Trust Company, as administrative agent for such banks, as the
same may be amended or modified from time to time in accordance with the
terms thereof."
(b) Section 8.11 of the Credit Agreement is hereby amended by
deleting all of the text in such Section following the word "hereof" in the
fifth line of such Section and inserting the following: "(other than the assets
which were
<PAGE> 95
disposed of in connection with the distribution of the capital stock of
Silver King Communications, Inc., a Wholly-Owned Subsidiary of the Company, as
reflected in Note 6.c to the Condensed Consolidated Financial Statements
contained in the Company's Quarterly Report on Form 10-Q for the Fiscal Quarter
ended November 30, 1992), subject to:
(a) no Liens other than the Liens specified in Footnotes D and
G to such balance sheet and, on the date hereof, such additional Liens
as are listed on Schedule 1 hereto, and on any date hereafter,
additional Liens permitted by Section 9.5 hereof and either (i) listed
in Footnotes to the financial statements delivered pursuant to Section
9.1(a) or (b) hereof or (ii) otherwise communicated to the Banks in
writing, and
(b) on any date hereafter, dispositions permitted by Section
9.7 hereof and either (i) described in the financial statements,
including any notes thereto, delivered pursuant to Section 9.1(a) or
(b) hereof or (ii) otherwise communicated to the Banks in writing."
(c) Section 9.14 of the Credit Agreement is hereby amended by
inserting after the words "Term Loan Agreement" in each of the fourth and
fourteenth lines of such Section the following: ", the 1993 Term Loan
Agreement".
(d) Clause (iv) of Section 9.17 of the Credit Agreement is
hereby amended by deleting such clause in its entirety and replacing it with
the following:
"Indebtedness of the Guarantor under this Agreement, the
Term Loan Agreement and the 1993 Term Loan Agreement.
SECTION 3. REPRESENTATIONS AND WARRANTIES. Each of the Company and
the Guarantor represents and warrants to the Administrative Agent and the Banks
that (a) no Default or Event of Default has occurred and is continuing, and (b)
the representations and warranties made by the Company and the Guarantor in
Section 8 of the Credit Agreement, as amended hereby, and in any other
certificate or other document delivered in connection with the Credit Agreement
shall be true in all material respects on and as of the date of the
effectiveness of this Second Amendment with the same force and effect as if
made on and as of such date (including, without limitation, that there shall
have occurred no material adverse change since August 31, 1992 in the
consolidated financial condition or operations, or the business taken as a
whole, of the Company and its consolidated Subsidiaries from that set forth in
their financial statements dated as of August 31,
-2-
<PAGE> 96
1992, except as disclosed to the Banks in writing prior to the date of
this Amendment).
SECTION 4. CONDITIONS TO EFFECTIVENESS. This Second Amendment shall
become effective as of the date first above written when counterparts hereof
shall have been duly executed and delivered by the Majority Banks.
SECTION 5. MISCELLANEOUS.
A. This Second Amendment may be executed in any number of
counterparts, all of which taken together and when delivered to the
Administrative Agent shall constitute one and the same instrument, and any of
the parties hereto may execute this Second Amendment by signing any such
counterpart.
B. THIS SECOND AMENDMENT AND THE CREDIT AGREEMENT AS AMENDED HEREBY
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK.
C. Except as expressly set forth in this Second Amendment, the Credit
Agreement shall remain unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be duly executed as of the date first above written.
HOME SHOPPING NETWORK, INC.,
as the Company
By /s/ LES R. WANDLER
------------------
Title: Executive Vice
President
HOME SHOPPING CLUB, INC.,
as Guarantor
By /s/ LES R. WANDLER
------------------
Title: Treasurer
-3-
<PAGE> 97
The Banks
LTCB TRUST COMPANY, as a Bank
and a Co-Agent
By /s/ RIKUICHI YOSHISUE
---------------------
Title: Executive Vice
President
BANK OF MONTREAL, as a Bank
and a Co-Agent
By /s/ PATRICK J. SULLIVAN
-----------------------
Title: Director
THE BANK OF NEW YORK
By /s/ ALAN LYSTER, JR.
--------------------
Title: Vice President
CITIZENS FIDELITY BANK & TRUST
COMPANY
By /s/ H. JOSEPH BRENNER
---------------------
Title: Vice President
THE DAIWA BANK, LIMITED
By
------------------------
Title:
By
-------------------------
Title:
FIRST UNION NATIONAL BANK OF
FLORIDA
By /s/ ROBERT E. HASTINGS
----------------------
SUN BANK OF TAMPA BAY
By
----------------------
Title:
-4-
<PAGE> 98
The Administrative Agent
LTCB TRUST COMPANY,
as Administrative Agent
By /s/ RIKUICHI YOSHISUE
---------------------
Title: Executive Vice
President
-5-
<PAGE> 99
THIRD AMENDMENT, dated as of May 28, 1993, to the Amended and Restated
Credit Agreement, dated as of December 18, 1992, as amended by the First
Amendment, dated as of January 15, 1993, the Second Amendment, dated as of
February 4, 1993, and paragraph number 2 of the letter dated April 14, 1993
from LTCB Trust Company, as Administrative Agent, to Home Shopping Network,
Inc. (as so amended, the "Credit Agreement"), among HOME SHOPPING NETWORK, INC.
(the "Company"), HOME SHOPPING CLUB, INC. (the "Guarantor"), the banks
signatory thereto (the "Banks"), LTCB TRUST COMPANY and BANK OF MONTREAL, each
as a Co-Agent for the Banks (each in such capacity, a "Co-Agent"), and LTCB
TRUST COMPANY, as Administrative Agent for the Banks (in such capacity, the
"Administrative Agent").
WHEREAS, the Company and the Guarantor have requested, and the Banks,
the Co-Agents and the Administrative Agent are willing, to amend certain
provisions of the Credit Agreement;
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration the receipt of which is hereby acknowledged, the
parties hereby agree as follows:
SECTION 1. CERTAIN DEFINED TERMS. Except as expressly set forth in
this Third Amendment, terms defined in the Credit Agreement and used herein
shall have their respective defined meanings when used herein.
SECTION 2. AMENDMENTS TO THE CREDIT AGREEMENT.
(a) Section 9.11 of the Credit Agreement is hereby amended by deleting
such Section in its entirety and replacing it with the following:
"9.11. Fixed Charges Coverage Test. The Company will
maintain the ratio of Adjusted Operating Cash Flow to Fixed Charges
for the Company and its Subsidiaries on a consolidated basis,
(a) for each four-Fiscal Quarter period ending with each of the
following Fiscal Quarters, to be not less than the following ratios:
<PAGE> 100
Fiscal Quarter
Ended Minimum Ratio
-------------- -------------
February 28, 1993 1.70:1
May 31, 1993 1.70:1
August 31, 1993 1.70:1
November 30, 1993 1.35:1
February 28, 1994 1.45:1
May 31, 1994 1.35:1
August 31, 1994 1.35:1,
and (b) for each four-Fiscal Quarter period ending in each of the following
Fiscal Years, to be not less than the following ratios:
Fiscal Year Minimum Ratio
----------- -------------
Fiscal 1995 1.40:1
Fiscal 1996 1.70:1."
(b) Section 9.12 of the Credit Agreement is hereby amended by
deleting such Section in its entirety and replacing it with
the following:
"9.12. Debt Ratio. The Company will not permit the ratio
of Total Debt to Operating Cash Flow for the Company and its Subsidiaries
on a consolidated basis, (a) for each four-Fiscal Quarter period ending
with each of the following Fiscal Quarters, to be greater than the
following ratios:
Fiscal Quarter
Ended Maximum Ratio
-------------- -------------
February 28, 1993 1.90:1
May 31, 1993 1.90:1
August 31, 1993 2.15:1
November 30, 1993 1.95:1
February 28, 1994 1.65:1
May 31, 1994 1.60:1
August 31, 1994 1.60:1,
and (b) for each four-Fiscal Quarter period ending in each of the following
Fiscal Years, to be greater than the following ratios:
-2-
<PAGE> 101
Fiscal Year Maximum Ratio
----------- -------------
Fiscal 1995 1.35:1
Fiscal 1996 1.15:1."
SECTION 3. REPRESENTATIONS AND WARRANTIES. Each of the Company and
the Guarantor represents and warrants to the Administrative Agent and the Banks
that (a) no Default or Event of Default has occurred and is continuing, and (b)
the representations and warranties made by the Company and the Guarantor in
Section 8 of the Credit Agreement, as amended hereby, and in any other
certificate or other document delivered in connection with the Credit Agreement
shall be true in all material respects on and as of the date of the
effectiveness of this Third Amendment with the same force and effect as if made
on and as of such date (including, without limitation, that there shall have
occurred no material adverse change since August 31, 1992 in the consolidated
financial condition or operations, or the business taken as a whole, of the
Company and its consolidated Subsidiaries from that set forth in their
financial statements dated as of August 31, 1992, except as disclosed to the
Banks in writing prior to the date of this Third Amendment).
SECTION 4. CONDITIONS TO EFFECTIVENESS. This Third Amendment
shall become effective as of the date first above written when (a)
counterparts hereof shall have been duly executed and delivered by the
Majority Banks and (b) the Company shall have paid to the Administrative
Agent, for the account of the Banks, a fee in accordance with the terms and
conditions set forth in the Company's letter, dated May 24, 1993, to the
Administrative Agent, as modified by the Administrative Agent's notices,
dated June 3, 1993 and June 14, 1993, to the Banks.
SECTION 5. MISCELLANEOUS.
A. This Third Amendment may be executed in any number of
counterparts, all of which taken together and when delivered to the
Administrative Agent shall constitute one and the same instrument, and any
of the parties hereto may execute this Third Amendment by signing any such
counterpart.
-3-
<PAGE> 102
B. THIS THIRD AMENDMENT AND THE CREDIT AGREEMENT AS AMENDED
HEREBY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
C. Except as expressly set forth in this Third Amendment, the Credit
Agreement shall remain unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Third
Amendment to be duly executed as of the date first above written.
HOME SHOPPING NETWORK, INC.,
as the Company
By /s/ LES R. WANDLER
---------------------------
Title: Executive Vice
President and Chief
Financial Officer
HOME SHOPPING CLUB, INC.,
as Guarantor
By /s/ LES R. WANDLER
---------------------------
Title: Treasurer
-4-
<PAGE> 103
The Banks
LTCB TRUST COMPANY, as a Bank
and a Co-Agent
By /s/ PHILIP A. MARSDEN
-------------------------------
Title: Senior Vice President
BANK OF MONTREAL, as a Bank
and a Co-Agent
By /s/ PATRICK J. SULLIVAN
-------------------------------
Title: Director
THE BANK OF NEW YORK
By /s/ KALPANA RAINA
-------------------------------
Title: Vice President
PNC BANK, KENTUCKY, INC.
(formerly known as Citizens
Fidelity Bank & Trust Company)
By /s/ JAMES D. NEIL
-------------------------------
Title: Vice President
THE DAIWA BANK, LIMITED
By /s/ SYBIL H. WELDON
-------------------------------
Title: Vice President and
Manager
By /s/ ALLEN L. HARVELL, JR.
-------------------------------
Title: Vice President
FIRST UNION NATIONAL BANK OF
FLORIDA
By /s/ JOHN T. WATTS
-------------------------------
Title: Vice President
-5-
<PAGE> 104
SUN BANK OF TAMPA BAY
By /s/ ROBERT J. WILLSEA
-------------------------------
Title: Corporate Banking
Officer
The Administrative Agent
LTCB TRUST COMPANY,
as Administrative Agent
By /s/ PHILIP A. MARSDEN
-------------------------------
Title: Senior Vice President
-6-
<PAGE> 105
FOURTH AMENDMENT, dated as of September 20, 1993, to the Amended and
Restated Credit Agreement, dated as of December 18, 1992, as amended by the
First Amendment, dated as of January 15, 1993, the Second Amendment, dated as
of February 4, 1993, paragraph number 2 of the letter dated April 14, 1993 from
LTCB Trust Company, as Administrative Agent, to Home Shopping Network, Inc. and
the Third Amendment, dated as of May 28, 1993 (as so amended, the "Credit
Agreement"), among HOME SHOPPING NETWORK, INC., as borrower (the "Company"),
HOME SHOPPING CLUB, INC., as guarantor (the "Guarantor"), the banks signatory
thereto (the "Banks"), LTCB TRUST COMPANY and BANK OF MONTREAL, each as a
Co-Agent for the Banks (each in such capacity, a "Co-Agent"), and LTCB TRUST
COMPANY, as Administrative Agent for the Banks (in such capacity, the
"Administrative Agent").
WHEREAS, the Company and the Guarantor have requested, and the Banks,
the Co-Agents and the Administrative Agent are willing, to amend certain
provisions of the Credit Agreement;
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration the receipt of which is hereby acknowledged, the
parties hereby agree as follows:
SECTION 1. CERTAIN DEFINED TERMS. Except as expressly set forth in
this Fourth Amendment, terms defined in the Credit Agreement and used herein
shall have their respective defined meanings when used herein.
SECTION 2. AMENDMENTS TO THE CREDIT AGREEMENT.
(a) Section 1.1 of the Credit Agreement is hereby amended by (i)
deleting the definition of "Fiscal Quarter" set forth in such Section in its
entirety and replacing it with the following:
"Fiscal Quarter" shall mean, (i) for the period ending on August
31, 1993, a period of three consecutive calendar months commencing on any
of the following dates in any Fiscal Year: March 1, June 1, September
1 and December 1, and (ii) for the period commencing on July 1, 1993,
a period of three consecutive calendar months commencing on any of the
following dates in any Fiscal Year: January 1,
<PAGE> 106
April 1, July 1 and October 1; provided, however, that during the
period commencing on September 1, 1993 and ending on June 30, 1994, in
the event any provision of this Agreement requires any calculation or
determination with respect to a four-Fiscal Quarter period ending on a
particular date, such period shall refer to the four immediately preceding
three consecutive calendar month periods ending on such date."
and (ii) deleting the definition of "Fiscal Year" set forth in such Section
in its entirety and replacing it with the following:
"Fiscal Year" shall mean, for the Company, the Guarantor or any
Subsidiary, (i) for the period ending on August 31, 1993, the twelve
consecutive calendar month period commencing on September 1, 1992 and
ending on August 31, 1993, (ii) for the period commencing on September
1, 1993 and ending on December 31, 1993, the four consecutive calendar
month period commencing on September 1, 1993, and (iii) for the period
commencing on January 1, 1994, the twelve consecutive calendar month
period commencing on such date and on January 1 of each calendar year
thereafter and ending on December 31 of such calendar year; and "Fiscal
1992", "Fiscal 1993", and any other year so designated shall mean the
Fiscal Year ending on August 31 or December 31, as the case may be, of
the indicated calendar year; provided, however, that the Fiscal Year
defined in clause (ii) above shall be known as "Fiscal Stub 1993" and,
provided, further, that no provision of this Agreement shall be construed
to require presentation of Fiscal Stub 1993 in the financial statements
of the Company or the Guarantor except as would be required by the rules
and regulations of the Securities and Exchange Commission and in accordance
with GAAP with respect to such transition periods."
(b) Section 9.11 of the Credit Agreement is hereby amended by
deleting the dates November 30, 1993 through August 31, 1994 and the
related ratios that appear in paragraph (a) of such Section and replacing such
dates and ratios with the following:
-2-
<PAGE> 107
"September 30, 1993 1.70:1
December 31, 1993 1.35:1
March 31, 1994 1.45:1
June 30, 1994 1.35:1
September 30, 1994 1.35:1
December 31, 1994 1.40:1,".
(c) Section 9.12 of the Credit Agreement is hereby amended by deleting
the dates November 30, 1993 through August 31, 1994 and the related ratios that
appear in paragraph (a) of such Section and replacing such dates and ratios
with the following:
"September 30, 1993 2.125:1
December 31, 1993 1.85:1
March 31, 1994 1.65:1
June 30, 1994 1.60:1
September 30, 1994 1.60:1
December 31, 1994 1.35:1,".
(d) Section 9.13 of the Credit Agreement is hereby amended by (i)
deleting all references to "August 30" in such Section and replacing them in
each case with "September 29" and (ii) deleting all references to "August 31"
in such Section and replacing them in each case with "September 30".
SECTION 3. REPRESENTATIONS AND WARRANTIES. Each of the Company and
the Guarantor represents and warrants to the Administrative Agent and the Banks
that (a) no Default or Event of Default has occurred and is continuing, and (b)
the representations and warranties made by the Company and the Guarantor in
Section 8 of the Credit Agreement, as amended hereby, and in any other
certificate or other document delivered in connection with the Credit Agreement
shall be true in all material respects on and as of the date of the
effectiveness of this Fourth Amendment with the same force and effect as if
made on and as of such date (including, without limitation, that there shall
have occurred no material adverse change since August 31, 1992 in the
consolidated financial condition or operations, or the business taken as a
whole, of the Company and its consolidated Subsidiaries from that set forth in
their financial statements dated as of August 31, 1992, except as disclosed to
the Banks in writing prior to the date of this Fourth Amendment).
SECTION 4. CONDITIONS TO EFFECTIVENESS. This Fourth Amendment shall
become effective as of July 13, 1993 when counterparts hereof shall have been
duly executed and delivered by the Majority Banks, the Company and the
Guarantor.
-3-
<PAGE> 108
SECTION 5. MISCELLANEOUS.
A. This Fourth Amendment may be executed in any number of
counterparts, all of which taken together and when delivered to the
Administrative Agent shall constitute one and the same instrument, and any of
the parties hereto may execute this Fourth Amendment by signing any such
counterpart.
B. THIS FOURTH AMENDMENT AND THE CREDIT AGREEMENT AS AMENDED HEREBY
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK.
C. Except as expressly set forth in this Fourth Amendment, the Credit
Agreement shall remain unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Fourth
Amendment to be duly executed as of the date first above written.
HOME SHOPPING NETWORK, INC.,
as the Company
By /s/ LES R. WANDLER
------------------------------
Title: Executive Vice
President
HOME SHOPPING CLUB, INC.,
as Guarantor
By /s/ LES R. WANDLER
------------------------------
Title: Treasurer
-4-
<PAGE> 109
The Banks
LTCB TRUST COMPANY, as a Bank
and a Co-Agent
By /s/ PHILIP A. MARSDEN
------------------------------
Title: Senior Vice President
BANK OF MONTREAL, as a Bank
and a Co-Agent
By /s/ PATRICK J. SULLIVAN
------------------------------
Title: Director
THE BANK OF NEW YORK
By /s/ KALPANA RAINA
------------------------------
Title: Vice President
PNC BANK, KENTUCKY, INC.
(formerly known as Citizens
Fidelity Bank & Trust Company)
By /s/ JAMES D. NEIL
------------------------------
Title: Vice President
THE DAIWA BANK, LIMITED
By /s/ SYBIL H. WELDON
------------------------------
Title: Vice President &
Manager
By /s/ ALLEN L. HARVELL, JR.
------------------------------
Title: Vice President
FIRST UNION NATIONAL BANK OF
FLORIDA
By /s/ ROBERT E. HASTINGS, JR.
------------------------------
Title: Vice President
-5-
<PAGE> 110
SUN BANK OF TAMPA BAY
By /s/ ROBERT J. WILLSEA
------------------------------
Title: Corporate Banking
Officer
The Administrative Agent
LTCB TRUST COMPANY,
as Administrative Agent
By /s/ PHILIP A. MARSDEN
------------------------------
Title: Senior Vice President
-6-
<PAGE> 111
FIFTH AMENDMENT
TO AMENDED AND RESTATED CREDIT AGREEMENT,
DATED AS OF DECEMBER 18, 1992
FIFTH AMENDMENT, dated as of January 7, 1994, to the Amended and
Restated Credit Agreement, dated as of December 18, 1992, as amended by the
First Amendment, dated as of January 15, 1993, the Second Amendment, dated as
of February 4, 1993, paragraph number 2 of the letter dated April 14, 1993 from
LTCB Trust Company, as Administrative Agent, to Home Shopping Network, Inc.,
the Third Amendment, dated as of May 28, 1993 and the Fourth Amendment, dated
as of September 20, 1993 (as so amended, the "Credit Agreement"), among HOME
SHOPPING NETWORK, INC., as borrower (the "Company"), HOME SHOPPING CLUB, INC.,
as guarantor (the "Guarantor"), the banks signatory thereto (the "Banks"), LTCB
TRUST COMPANY and BANK OF MONTREAL, each as a Co-Agent for the Banks (each in
such capacity, a "Co-Agent"), and LTCB TRUST COMPANY, as Administrative Agent
for the Banks (in such capacity, the "Administrative Agent").
WHEREAS, the Company and the Guarantor have requested that certain
provisions of the Credit Agreement be amended, as set forth below; and
WHEREAS, the Banks, the Co-Agents and the Administrative Agent are
willing to amend such provisions;
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration the receipt of which is hereby acknowledged, the
parties hereby agree as follows:
SECTION 1. CERTAIN DEFINED TERMS. Except as expressly set forth in
this Fifth Amendment, terms defined in the Credit Agreement and used herein
shall have their respective defined meanings when used herein.
SECTION 2. AMENDMENTS TO THE CREDIT AGREEMENT.
(a) Section 1.1 of the Credit Agreement is hereby amended by inserting
the following definitions in alphabetical order in the list of definitions in
such Section:
"Bell Atlantic Transaction" shall mean the combination of Liberty
Media and Tele-Communica-tions, Inc., a Delaware corporation, with
Bell Atlantic Corporation, a Delaware corporation, on
<PAGE> 112
substantially the terms outlined in Liberty Media's Current Report on
Form 8-K dated October 27, 1993 (including the exhibits thereto),
copies of which have been furnished to the Banks by the Company.
"Lawsuit" shall mean any of the legal proceedings described in the
Company's Amended and Restated Proxy Statement, dated August 23, 1993,
under the caption "Legal Proceedings", as such description of such
proceedings may be updated by the Company in subsequent SEC Reports,
and includes, without limitation, the proceedings relating to the
termination of the Company's or the Guarantor's contractual
relationship with Western Hemisphere Sales, Inc. (as successor to
Pioneer Data Processing, Inc.).
"Lawsuit Settlement Accrual Amount" shall mean, for any period, the
aggregate amount that has been charged against earnings and either (i)
accrued as liabilities for such period or (ii) paid during such
period, in each case with respect to estimated settlement payments in
connection with the Lawsuits (including, without limitation, in
connection with the termination of the contractual relationship with
Western Hemisphere Sales, Inc. (as successor to Pioneer Data
Processing, Inc.), which is the subject of one of the Lawsuits).
"Lawsuit Settlement Payment Amount" shall mean, for any period, the sum
of (a) the aggregate amount of settlement payments made by the Company
during such period (and reductions in accrued liabilities, if any, in
respect of such settlement payments) to parties asserting claims in
connection with the Lawsuits, and (b) any payments made by the Company,
the Guarantor or any Subsidiary during such period (and reductions in
accrued liabilities, if any, in respect of such settlement payments) in
connection with the termination of the contractual relationship with
Western Hemisphere Sales, Inc. (as successor to Pioneer Data Processing,
Inc.), which is the subject of one of the Lawsuits.
"Tax Settlement Payment Amount" shall mean, for any period, the
aggregate amount of payments made by the Company to the Internal Revenue
Service during such period (and reductions in accrued liabilities related
to such payments) to settle federal tax liabilities described in the note
captioned "Income
-2-
<PAGE> 113
Taxes" to the consolidated quarterly financial statements of the
Company contained in the Company's Quarterly Report on Form 10-Q for
the Quarter Ended September 30, 1993.
"TCI Transaction" shall mean the combination of Liberty Media and
Tele-Communications, Inc., a Delaware corporation, through the
exchange of Class A and Class B shares of both companies for like
shares of a holding company, on substantially the terms outlined in
Liberty Media's Current Report on Form 8-K dated October 27, 1993
(including the exhibits thereto), copies of which have been furnished
to the Banks by the Company.
(b) Section 1.1 of the Credit Agreement is hereby further amended by
deleting the definition of "Fixed Charges" in its entirety and by replacing it
with the following:
"'Fixed Charges' shall mean, for any Person and for any period, the
sum (without duplication) of:
(a) all capital expenditures and increases in intangible assets of
such Person for such period,
plus
(b) the sum (without duplication) of (i) all interest expense
of such Person for such period, (ii) all payments of principal of
all Indebtedness of such Person that were scheduled for payment
during such period, whether or not paid (unless any such payment (x)
was cancelled or forgiven for, or prepaid in advance of, such period
or (y) represents the June 15, 1994 principal installment due
pursuant to Section 3.1 of the Term Loan Agreement), (iii) any
increase in total current assets and any decrease in total current
liabilities (net of the change in cash and cash equivalents and the
change in Short-Term Debt, and without giving effect to:
(A) that portion, if any, of the Tax Settlement Payment Amount
paid (and any reductions in accrued liabilities related thereto)
in such period which, when aggregated with all other Tax
Settlement Payment Amounts paid (or such reductions) in all
previous periods, does not exceed $20,947,000, or
-3-
<PAGE> 114
(B) that portion, if any, of the Lawsuit Settlement Accrual
Amount recognized in such period which, when aggregated with all
other Lawsuit Settlement Accrual Amounts recognized in all
previous periods, does not exceed $25,000,000, or
(C) that portion, if any, of the Lawsuit Settlement Payment
Amount paid (and any reductions in accrued liabilities related
thereto) in such period which, when aggregated with all other
Lawsuit Settlement Payment Amounts paid (or such reductions) in
all previous periods, does not exceed $25,000,000),
(iv) any cash increase in long-term investments (excluding periods
prior to September 1, 1992) of such Person for such period, and (v)
any cash increase in long-term notes receivable (excluding periods
prior to September 1, 1992) of such Person for such period,
minus
(c) the sum (without duplication) of (i) all interest income, other
than interest income related to the Silver King Notes, of such Person
for such period, (ii) any decrease in total current assets and any
increase in total current liabilities (net of the change in cash and
cash equivalents and the change in Short-Term Debt, and without
giving effect to:
(A) that portion, if any, of the Tax Settlement Payment Amount
paid (and any reductions in accrued liabilities related thereto)
in such period which, when aggregated with all other Tax
Settlement Payment Amounts paid (or such reductions) in all
previous periods, does not exceed $20,947,000, or
(B) that portion, if any, of the Lawsuit Settlement Accrual
Amount recognized in such period which, when aggregated with all
other Lawsuit Settlement Accrual Amounts recognized in all
previous periods, does not exceed $25,000,000, or
(C) that portion, if any, of the Lawsuit Settlement Payment
Amount paid (and any
-4-
<PAGE> 115
reductions in accrued liabilities related thereto) in such
period which, when aggregated with all other Lawsuit
Settlement Payment Amounts paid (or such reductions) in all
previous periods, does not exceed $25,000,000),
(iii) any cash decrease in long-term investments (excluding periods
prior to September 1, 1992) of such Person for such period, and
(iv) any cash decrease in long-term notes receivable (excluding
periods prior to September 1, 1992) of such Person for such period,
in each case as reflected on the consolidated quarterly or annual financial
statements, including the notes thereto, of the Company most recently
delivered to the Administrative Agent pursuant to Section 9.1 (or Section
8.2) hereof. Fixed Charges for the four-Fiscal Quarter period ended August
31, 1992 are as set forth in Schedule 2 hereto."
(c) Section 1.1 of the Credit Agreement is hereby further amended by
deleting the definition of "Operating Cash Flow" in its entirety and by
replacing it with the following:
"'Operating Cash Flow' shall mean, for any period, the sum of the
following for the Company and its Subsidiaries (including, without
limitation, the Guarantor) on a consolidated basis:
(a) operating profit of such Persons for such period; plus
(b) to the extent already deducted in arriving at operating profit)
depreciation and amortization expense for such Persons for such
period; plus
(c) (to the extent already deducted in arriving at operating profit)
commencing September 1, 1992, non-cash compensation expense related
to the Company's executive stock award program; plus
(d) all cash interest (if any), other cash income (if any) or cash
principal repayments (if any) received by the Company or any
Subsidiaries in connection with the Silver King Notes, and, for the
twelve months immediately following the delivery of any such Silver
King Note, accrued interest income on such note for no more than one
month; plus
-5-
<PAGE> 116
(e) (to the extent already deducted in arriving at operating
profit) the lesser of (x) the Lawsuit Settlement Accrual Amount for
such period (whether or not paid) and (y) that portion, if any, of
such Lawsuit Settlement Accrual Amount that when aggregated with all
other Lawsuit Settlement Accrual Amounts accrued in previous periods
(whether or not paid) does not exceed $25,000,000,
all as shown on the consolidated financial statements, including the
notes thereto, of the Company and its consolidated Subsidiaries for
such period or, with respect to clause (d) above, if such financial
statements do not present information in sufficient detail to derive
the amount specified in clause (d) of this definition, as shown on the
certificate to be delivered to the Administrative Agent pursuant to
the last paragraph of Section 9.1 hereof. Operating Cash Flow for the
four-Fiscal Quarter period ended August 31, 1992 is as set forth in
Schedule 2 hereto."
(d) Section 9.11 of the Credit Agreement is hereby amended by
deleting the dates March 31, 1994 through September 30, 1994 and the
related ratios that appear in paragraph (a) of such Section and replacing
such dates and ratios with the following:
"March 31, 1994 1.40:1
June 30, 1994 1.40:1
September 30, 1994 1.40:1,".
(e) Section 9.12 of the Credit Agreement is hereby amended by
deleting the dates December 31, 1993 through December 31, 1994 and the
related ratios that appear in paragraph (a) of such Section and replacing
such dates and ratios with the following:
"December 31, 1993 2.125:1
March 31, 1994 2.50:1
June 30, 1994 2.50:1
September 30, 1994 2.25:1
December 31, 1994 2.25:1,".
(f) Section 10 of the Credit Agreement is hereby amended by
inserting the following immediately before the semi-colon at the end of
such paragraph (k):
", or (iii) (A) such Change of Control arises solely in connection
with the TCI Transaction, and (B) as of the date the TCI Transaction
is consummated and
-6-
<PAGE> 117
after giving effect thereto, no other Default or Event of Default
shall have occurred and be continuing, or (iv) with respect to any
date on or following the date the TCI Transaction is consummated, (A)
such Change of Control arises solely in connection with the Bell
Atlantic Transaction, and (B) as of the date the Bell Atlantic
Transaction is consummated and after giving effect thereto, no other
Default or Event of Default shall have occurred and be continuing".
(g) Each reference in the Credit Agreement to "this Agreement"
and the words "hereof", "hereto" and "herein" and the like shall, except
where the context otherwise requires, refer to the Credit Agreement as
amended by, and through the effective date of, this Fifth Amendment.
SECTION 3. REPRESENTATIONS AND WARRANTIES. Each of the Company
and the Guarantor represents and warrants to the Administrative Agent and
the Banks as of the date of this Fifth Amendment and as of the date on
which it becomes effective that (a) no Default or Event of Default has
occurred and is continuing, and (b) the representations and warranties made
by the Company and the Guarantor in Section 8 of the Credit Agreement, as
amended hereby, and in any other certificate or other document delivered in
connection with the Credit Agreement are true in all material respects on
the date hereof and are hereby restated on and as of the date of the
effectiveness of this Fifth Amendment with the same force and effect as if
made on and as of such date (including, without limitation, that there has
occurred no material adverse change since August 31, 1992 in the
consolidated financial condition or operations, or the business taken as a
whole, of the Company and its consolidated Subsidiaries from that set forth
in their financial statements dated as of August 31, 1992, except as
disclosed to the Banks in writing prior to the date of this Fifth
Amendment).
SECTION 4. CONDITIONS TO EFFECTIVENESS. This Fifth Amendment
shall become effective as of December 31, 1993 when (a) counterparts hereof
shall have been duly executed and delivered by the Majority Banks and (b)
the Company shall have paid to LTCB Trust Company a fee in accordance with
the terms and conditions set forth in the Amendment Fee Letter, dated
December 9, 1993, among LTCB Trust Company, the Company and the Guarantor.
-7-
<PAGE> 118
SECTION 5. MISCELLANEOUS.
(a) This Fifth Amendment may be executed in any number of
counterparts, all of which taken together and when delivered to the
Administrative Agent shall constitute one and the same instrument, and any of
the parties hereto may execute this Fifth Amendment by signing any such
counterpart.
(b) Upon the effectiveness of this Fifth Amendment, LTCB Trust
Company, as Administrative Agent, shall pay fees to the Banks in accordance
with the terms and conditions of its notice to the Banks dated December 10,
1993.
(c) THIS FIFTH AMENDMENT AND THE CREDIT AGREEMENT AS AMENDED HEREBY
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK.
(d) Except as expressly set forth in this Fifth Amendment, the Credit
Agreement shall remain unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Fifth
Amendment to be duly executed as of the date first above written.
HOME SHOPPING NETWORK, INC.,
as the Company
By /s/ KEVIN J. MCKEON
--------------------------------
Title: Senior Vice President
of Accounting & Finance
HOME SHOPPING CLUB, INC.,
as Guarantor
By /s/ R. JOSEPH RILEY
--------------------------------
Title: Assistant Treasurer
-8-
<PAGE> 119
The Banks
LTCB TRUST COMPANY, as a Bank
and a Co-Agent
By /s/ JOHN A. KROB
--------------------------------
Title: Senior Vice President
BANK OF MONTREAL, as a Bank
and a Co-Agent
By /s/ PATRICK J. SULLIVAN
--------------------------------
Title: Director
THE BANK OF NEW YORK
By /s/ KALPANA RAINA
--------------------------------
Title: Vice President
PNC BANK, KENTUCKY, INC.
(formerly known as Citizens
Fidelity Bank & Trust Company)
By /s/ JAMES D. NEIL
--------------------------------
Title: Vice President
THE DAIWA BANK, LIMITED
By /s/ SYBIL H. WELDON
--------------------------------
Title: Vice President &
Manager
By /s/ ALLEN L. HARVELL, JR.
--------------------------------
Title: Vice President
FIRST UNION NATIONAL BANK OF
FLORIDA
By /s/ ROBERT E. HASTINGS, JR.
--------------------------------
Title: Vice President
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TORONTO DOMINION (TEXAS), INC.
By /s/ CAROLE A. CLAUSE
-----------------------------
Title: Vice President
The Administrative Agent
LTCB TRUST COMPANY,
as Administrative Agent
By /s/ JOHN A. KROB
-----------------------------
Title: Senior Vice President
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EXHIBIT 10.27
************************************************************
HOME SHOPPING NETWORK, INC.,
as Borrower
HOME SHOPPING CLUB, INC.,
as Guarantor
__________
TERM LOAN AGREEMENT
Dated as of February 4, 1993
__________
LTCB TRUST COMPANY,
as Administrative Agent
__________
LTCB TRUST COMPANY,
as Agent
__________
BANK OF MONTREAL and
THE BANK OF NEW YORK,
as Co-Agents
__________
THE BANKS NAMED HEREIN
************************************************************
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TABLE OF CONTENTS
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Section 1. Definitions and Accounting Matters. . . . . . . . . . . . . . . . . . . . . 1
1.1. Certain Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Certain Accounting Matters. . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2. Commitments and Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.1. Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.2. Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.3. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.4. Lending Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.5. Several Obligations; Remedies Independent. . . . . . . . . . . . . . . . . . 19
2.6. Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3. Payments of Principal and Interest . . . . . . . . . . . . . . . . . . . . . 19
3.1. Repayment of Principal . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.2. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.3. Prepayments and Conversions of the Loans . . . . . . . . . . . . . . . . . . 22
Section 4. Payments and Computations . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.1. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.2. Pro Rata Treatment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.3. Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.4. Minimum Amounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.5. Certain Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.6. Non-Receipt of Funds by the Administrative Agent . . . . . . . . . . . . . . 26
4.7. Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 5. Yield Protection and Illegality. . . . . . . . . . . . . . . . . . . . . . . 28
5.1. Additional Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.2. Limitation on Types of Loans. . . . . . . . . . . . . . . . . . . . . . . . 30
5.3. Illegality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.4. Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.5. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6. Guarantee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.1. Unconditional Guarantee. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.2. Validity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.3. Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.4. Subordination and Subrogation. . . . . . . . . . . . . . . . . . . . . . . . 34
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6.5. Acceleration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.6. Reinstatement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 7. Conditions Precedent. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.1. Basic Conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.2. Additional Conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 8. Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . 38
8.1. Corporate Existence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.2. Financial Condition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.3. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.4. No Breach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.5. Corporate Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.6. Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.7. Use of Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.8. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.9. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.10. Credit Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.11. Ownership of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.12. Pari Passu Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.13. Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.14. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 9. Covenants of the Company and the Guarantor. . . . . . . . . . . . . . . . . 43
9.1. Financial Statements; Reports and Other Information. . . . . . . . . . . . . 43
9.2. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.3. Corporate Existence, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.4. Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.5. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.6. Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.7. Dispositions of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.8. Ranking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.9. Business; Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.10. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . 53
9.11. Fixed Charges Coverage Test . . . . . . . . . . . . . . . . . . . . . . . . 53
9.12. Debt Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.13. Consolidated Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.14. Notification of Incurrence of Debt or Making of Investment . . . . . . . . . 54
9.15. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.16. Ownership of Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.17. Indebtedness of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 55
9.18. Interest Rate Protection . . . . . . . . . . . . . . . . . . . . . . . . . . 56
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Section 10. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 11. The Administrative Agent. . . . . . . . . . . . . . . . . . . . . . . . . . 61
11.1. Appointment, Powers and Immunities. . . . . . . . . . . . . . . . . . . . . 61
11.2. Reliance by the Administrative Agent. . . . . . . . . . . . . . . . . . . . 62
11.3. Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
11.4. Rights as a Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
11.5. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
11.6. Non-Reliance on Administrative Agent, Agent, Co-Agents and other Banks. . . 63
11.7. Failure to Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
11.8. Resignation or Removal of Administrative Agent . . . . . . . . . . . . . . . 64
11.9. Administrative Agent's Office . . . . . . . . . . . . . . . . . . . . . . . 65
11.10. Agent and Co-Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 12. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
12.1. Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
12.2. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
12.3. Expenses, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
12.4. Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
12.5. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . . . 68
12.6. Assignments and Participation. . . . . . . . . . . . . . . . . . . . . . . . 68
12.7. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
12.8. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
12.9. Captions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
12.10. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
12.11. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
12.12. JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
12.13. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Schedule 1: Existing Credit Agreements and Liens
Schedule 2: Calculations of Sample Financial Terms
Exhibit A: Form of Note
Exhibit B: Form of Opinion of Counsel to the Company and
the Guarantor
Exhibit C: Form of Compliance Certificate
Exhibit D-1: Form of Funded Debt Ratio Notice
Exhibit D-2: Form of Total Debt Ratio Notice
Exhibit E: Form of Assignment and Assumption Agreement
Annex A: Press Release of Liberty Media Corporation of December 7, 1992
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TERM LOAN AGREEMENT, dated as of February 4, 1993 (as the same may be
amended or modified from time to time, this "Agreement"), among HOME SHOPPING
NETWORK, INC., a Delaware corporation (the "Company"); HOME SHOPPING CLUB,
INC., a Delaware corporation (the "Guarantor"); each of the banks which is a
signatory hereto (individually, a "Bank" and, collectively, the "Banks"); LTCB
TRUST COMPANY, a New York trust company, as Agent for the Banks (in such
capacity, the "Agent"); Bank of Montreal and The Bank of New York, each as a
Co-Agent for the Banks (in such capacity, together with its successors in such
capacity, each a "Co- Agent"); and LTCB TRUST COMPANY, a New York trust
company, as Administrative Agent for the Banks (in such capacity, together with
its successors in such capacity, the "Administrative Agent").
WHEREAS, the Company has requested the Banks to make term loans to the
Company, under the guarantee of the Guarantor, in an aggregate principal amount
up to but not exceeding $50,000,000 for the purpose of refinancing certain
existing indebtedness, as more fully described in this Agreement; and
WHEREAS, the Banks are willing to make such loans to the Company on
the terms and subject to the conditions of this Agreement; and
WHEREAS, the Administrative Agent has been requested to act as agent
for the Banks, and the Administrative Agent is willing to act as such agent on
the terms and subject to the conditions of this Agreement,
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto hereby agree as follows:
Section 1. Definitions and Accounting Matters.
1.1. Certain Defined Terms. As used herein, the following terms
shall have the following meanings (all terms defined in this Section 1 or in
other provisions of this Agreement in the singular to have the same meanings
when used in the plural and vice versa):
"1992 Term Loan Agreement" shall mean the Term Loan Agreement, dated
as of December 18, 1992, among the Company, the Guarantor, LTCB Trust and Bank
of Montreal, each as a co-agent, LTCB Trust, as the administrative agent, and
the financial institutions party thereto, as the same may be amended or modified
from time to time.
<PAGE> 6
"Adjusted Operating Cash Flow" shall mean, for any period, the sum of the
following for the Company and its Subsidiaries (including, without limitation,
the Guarantor) on a consolidated basis: (a) Operating Cash Flow for such
period, plus (or minus) (b) cash inflows to (or outflows from) equity
(including, without limitation, cash dividends on capital stock) for such
period, all as shown on the consolidated financial statements, including the
notes thereto, of the Company for such period. Adjusted Operating Cash Flow
for the four-Fiscal Quarter period ended November 30, 1992 is as set forth in
Schedule 2 hereto.
"Affiliate" shall mean, with respect to any Person, any other Person (other
than a Wholly-Owned Subsidiary of such Person) directly or indirectly
controlling, controlled by, or under direct or indirect common control with,
such Person. A Person shall be deemed to control another Person if such Person
(x) is an officer or director of such other Person, (y) possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such other Person, whether through the ownership of voting
securities, by contract or otherwise, or (z) directly or indirectly owns or
controls 10% or more of such other Person's capital stock.
"Applicable Lending Office" shall mean, for each Bank and for each type of
Loan, the Lending Office of such Bank (or of an affiliate of such Bank)
designated for such type of Loan on the signature pages hereof or such other
office of such Bank (or of an affiliate of such Bank) as such Bank may from
time to time specify to the Administrative Agent and the Company as the office
by which its Loans of such type are to be made and maintained.
"Applicable Margin" shall mean (a) with respect to any date prior to the
date on which the Liberty Media Transaction is consummated: (i) with respect to
LIBOR Loans, 2.375% minus the Margin Adjustment (if any) in effect at such
time; and (ii) with respect to Prime Rate Loans, 1.375% minus the Margin
Adjustment (if any) in effect at such time, and (b) with respect to any date on
or following the date on which the Liberty Media Transaction is consummated:
(i) with respect to LIBOR Loans, 2.125% minus the Margin Adjustment (if any) in
effect at such time; and (ii) with respect to Prime Rate Loans, 1.125% minus
the Margin Adjustment (if any) in effect at such time.
"Bankruptcy Code" shall mean the federal Bankruptcy Code of the United
States, 11 U.S.C. Section 101 et seq.
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"Business Day" shall mean any day on which commercial banks are not
authorized or required to close in New York City and dealings in Dollar
deposits are carried out in the London interbank market.
"Capital Lease" shall mean any lease or other contractual arrangement which
under GAAP has been or should be recorded as a capital lease.
"Change of Control" shall mean any of the following events: (i) the
acquisition by any "person" or "group" of persons of the "beneficial ownership"
(as such terms are defined within the meaning of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended) of outstanding shares of the
Company's capital stock, or any sale or other disposition by Roy M. Speer
(other than an involuntary disposition by reason of death or disability), or,
following the consummation of the Liberty Media Transaction, Liberty Media, of
any of the capital stock of the Company owned by Mr. Speer, or, following the
consummation of the Liberty Media Transaction, Liberty Media, or any other
event such that, after giving effect to such acquisition, sale, disposition or
other event, Mr. Speer, or, following the consummation of the Liberty Media
Transaction, Liberty Media, would no longer (A) own, directly or indirectly, or
otherwise control at least 51% of the outstanding shares of any class of the
Company's common stock the approval of which is required for any fundamental
corporate action (including, without limitation, any merger, reorganization,
recapitalization, liquidation, distribution, winding-up, sale, transfer or
hypothecation of substantially all or a substantial portion of the Company's
assets), or (B) possess the ability to elect at least a majority of the Board
of Directors of the Company, or (ii) any person or group of persons shall
acquire all or substantially all of the assets of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commitment" shall mean, with respect to any Bank, the amount set forth
opposite such Bank's name on the signature pages hereof under the caption
"Commitment".
"Commitment Letters" shall mean, collectively, (i) the commitment letter
and term sheet, dated December 17, 1992, among LTCB Trust, as Agent, the Company
and the Guarantor, (ii) the letter, dated January 11, 1993, among Bank of
Montreal, as a Co-Agent, the Company and the Guarantor and (iii) the letter,
dated January 6, 1993, between The Bank of New York, as a Co-Agent, and the
Company.
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"Commitment Termination Date" shall mean April 15, 1993, or such earlier
date on which Loans in an aggregate principal amount equal to 100% of the
Commitments shall have been made by the Banks in accordance with this
Agreement.
"Consolidated Net Worth" shall mean, at any date, all amounts which, in
conformity with GAAP, would be included under stockholder's equity on a
consolidated balance sheet of the Company and its Subsidiaries at such time.
"Convertible Subordinated Debentures" shall mean the Company's 5-1/2%
Convertible Subordinated Debentures due April 22, 2002, issued under the
Convertible Subordinated Debenture Indenture.
"Convertible Subordinated Debenture Indenture" shall mean the Indenture,
dated as of April 22, 1987, between the Company and Bankers Trust Company, as
trustee.
"Default" shall mean an Event of Default or an event which with notice or
lapse of time or both would become an Event of Default.
"Dollars" and "$" shall mean lawful money of the United States of America.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" shall mean any corporation or trade or business which is
a member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Company or the Guarantor or is under common
control (within the meaning of Section 414(c) of the Code) with the Company or
the Guarantor.
"Event of Default" shall have the meaning assigned to that term in Section
10 hereof.
"Federal Funds Rate" shall mean, (i) for Overnight Federal Funds Rate
Loans, for any day, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100th of 1%) equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers on such day, as published by the Federal Reserve Bank
of New York on the Business Day next succeeding such day, and (ii) for Term
Federal Funds Rate Loans (if requested by the Company and agreed to by the
Administrative Agent and the Banks), for any Interest Period, the rate per annum
(rounded upwards, if
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necessary, to the nearest 1/100th of 1%) equal to the weighted average of
the rates on term Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on the first day of such
Interest Period for a period equal to such Interest Period, as published by the
Federal Reserve Bank of New York on the Business Day next succeeding such day
and as determined by the Administrative Agent, provided that (x) if the day for
which such rate is to be determined is not a Business Day, the Federal Funds
Rate for such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and (y) if
such rate is not so published for any day, the Federal Funds Rate for such day
shall be the average rate charged to LTCB on such day on such transactions as
determined by the Administrative Agent.
"Federal Funds Rate Loans" shall mean the Loans (or any portion thereof)
when they bear interest at rates based upon the Federal Funds Rate, and in any
event shall be either an Overnight Federal Funds Rate Loan or a Term Federal
Funds Rate Loan.
"Fiscal Quarter" shall mean a period of three consecutive calendar months
commencing on any of the following dates in any Fiscal Year: March 1; June 1,
September 1 and December 1.
"Fiscal Year" shall mean, for the Company, the Guarantor or any Subsidiary,
the twelve consecutive calendar month period commencing on September 1 of each
calendar year and ending on August 31 of the next following calendar year; and
"Fiscal 1993", "Fiscal 1994", and any other year so designated shall mean the
Fiscal Year ending on August 31 of the indicated calendar year.
"Fixed Charges" shall mean, for any Person and for any period, the sum
(without duplication) of:
(a) all capital expenditures and increases in intangible
assets of such Person for such period,
plus
(b) the sum (without duplication) of (i) all interest expense
of such Person for such period, (ii) all payments of principal of all
Indebtedness of such Person that were scheduled for payment during such
period, whether or not paid (unless cancelled or forgiven for, or prepaid in
advance of, such period), (iii) any increase in total current assets and any
decrease in total current
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<PAGE> 10
liabilities (net of the change in cash and cash equivalents and the
change in Short-Term Debt) of such Person for such period, (iv) any cash
increase in long-term investments of such Person for such period (excluding
periods prior to September 1, 1992), and (v) any cash increase in long-
term notes receivable of such Person for such period (excluding periods
prior to September 1, 1992),
minus
(c) the sum (without duplication) of (i) all interest income,
other than interest income related to the Silver King Note, of such Person
for such period, (ii) any decrease in total current assets and any increase
in total current liabilities (net of the change in cash and cash
equivalents and the change in Short-Term Debt) of such Person for such
period, (iii) any cash decrease in long-term investments of such Person for
such period (excluding periods prior to September 1, 1992), and (iv) any
cash decrease in long-term notes receivable of such Person for such period
(excluding periods prior to September 1, 1992),
in each case as reflected on the consolidated quarterly or annual financial
statements, including the notes thereto, of the Company most recently delivered
to the Administrative Agent pursuant to Section 9.1 (or referred to in Section
8.2) hereof. Fixed Charges for the four-Fiscal Quarter period ended November
30, 1992 are as set forth in Schedule 2 hereto.
"Funded Debt Ratio" shall mean, at any time, the ratio of (a) Total Funded
Debt of the Company and its consolidated Subsidiaries as at the end of the
Company's four-Fiscal Quarter period most recently ended as of such time, to
(b) Operating Cash Flow for the same period, as shown in the Funded Debt Ratio
Notice for such period.
"Funded Debt Ratio Notice" shall mean each notice provided for in Section
9.1(g) (or Section 7.1(f)) hereof.
"GAAP" shall mean generally accepted accounting principles in the United
States of America, consistently applied, as in effect (unless otherwise
specified in this Agreement) from time to time.
"HSN Capital" shall mean HSN Capital Corporation, a Nevada corporation and
a Wholly-Owned Subsidiary of the Company, and its successors.
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"Indebtedness" shall mean, for any Person (but without duplication):
(a) all indebtedness and other obligations of such Person for
borrowed money or for the deferred purchase price of property or services
(other than trade payables incurred in the ordinary course of business and
not overdue by more than 180 days), including, without limitation, all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments;
(b) all obligations of such Person under interest rate or
currency swaps, caps, collars, floors, options, forward exchange contracts
and similar hedging arrangements;
(c) the stated amount of all letters of credit issued for the
account of such Person and (without duplication) all drafts drawn
thereunder, and the aggregate face amount of all banker's acceptances as to
which such Person is obligated, other than trade letters of credit issued
for the account of such Person in the ordinary course of business pursuant
to the terms of which (i) such Person is obligated to reimburse the issuer
thereof for any drawing thereunder on the date of such drawing and (ii) no
other credit shall be extended thereunder to such Person by such issuer;
(d) all obligations of such Person under any Capital Leases;
(e) all obligations of such Person in connection with employee
benefit or similar plans;
(f) all obligations of such Person in respect of guarantees,
whether direct or indirect (including, without limitation, agreements to
"keep well" or otherwise ensure a creditor against loss) with respect to
any indebtedness or other obligation of any other Person of the type
described in any of clauses (a) through (e) above; and
(g) all indebtedness or other obligations referred to in any
of clauses (a) through (f) above secured by any Lien upon property owned
by such Person, whether or not such Person is liable on any such obligation.
"Interest Payment Date" shall mean, (i) for any Loan, the last day of the
Interest Period relating thereto, and (ii) for any Federal Funds Rate Loan or
Prime Rate Loan,
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<PAGE> 12
the last day of any month which occurs during the Interest Period related
thereto, and in any case if such day is not a Business Day, the next
succeeding Business Day.
"Interest Period" shall mean with respect to any (1) LIBOR Loan, each
period commencing on the date such Loan is made or converted from a Loan of
another type or the last day of the immediately preceding Interest Period for
such Loan and ending on the numerically corresponding day in the first, second,
third or sixth calendar month thereafter, as the Company may select as provided
in Section 2.2 hereof (or such period of less than one month as the Company may
select in accordance with clause (ii) or (iii) of the next paragraph below),
except that each such Interest Period which commences on the last Business Day
of a calendar month (or on any day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall end on
the last Business Day of the appropriate subsequent calendar month, (2)
Overnight Federal Funds Rate Loan, each period of one Business Day, (3) Term
Federal Funds Rate Loan, each period commencing on the date such Loan is made
or converted from a Loan of another type or the last day of the immediately
preceding Interest Period for such Loan and ending on the last day for which
the Federal Funds Rate for such Loan applies, as agreed between the Company and
the Administrative Agent with the consent of the Banks prior to the
commencement of such Interest Period and (4) Prime Rate Loan, each period
commencing on the date such Loan is made or converted from a Loan of another
type or the last day of the immediately preceding Interest Period for such Loan
and ending on the date 30 days later.
Notwithstanding the foregoing, (i) each Interest Period which would
otherwise end on a day that is not a Business Day shall end on the next
succeeding Business Day (or if such next succeeding Business Day falls in the
next succeeding calendar month, on the next preceding Business Day); (ii) if the
Company selects an Interest Period that would begin before and end after any
Maturity Date, the Administrative Agent may notify the Company and the Banks
that the Company must select a shorter Interest Period that will end on or prior
to such Maturity Date, in which case such shorter period selected by the Company
shall (subject to clause (i) above) be the relevant Interest Period; and (iii)
the Company must select the duration of Interest Periods so that,
notwithstanding clause (i) above, no Interest Period for LIBOR Loans shall have
a duration of less than one month (except as provided in clause (ii) above), and
so that no more than six Interest Periods with respect to LIBOR Loans shall be
in effect at any one time.
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"Interest Rate Protection Agreement" shall mean any interest rate
protection agreement, interest rate future, interest rate option, interest rate
swap, interest rate cap, interest rate collar or other forward exchange
contract or similar interest rate hedge or arrangement under which the Company
or a Subsidiary is a party or a beneficiary.
"Investment" shall mean, for any Person, (a) the acquisition (whether for
cash, property, services or securities or otherwise) of capital stock, bonds,
notes, debentures, partnership or other ownership interests or other securities
or obligations of any other Person or any agreement to make any such
acquisition (including, without limitation, any "short sale" or any sale of any
securities at a time when such securities are not owned by the Person entering
into such short sale); (b) the making of any deposit with, or advance, or loan
or other extension of credit to, any other Person (including the purchase of
property from another Person subject to an understanding or agreement,
contingent or otherwise, to resell such property to such Person, but excluding
any such advance, loan or other extension of credit to customers of the Company
or to customers of the Company's Subsidiaries having a term not exceeding 90
days arising in the ordinary course of business); (c) the entering into of any
guarantee of, or other contingent obligation with respect to, Indebtedness or
other liability of any other Person and (without duplication) any amount
committed to be advanced, lent or extended to such person; or (d) the entering
into of any interest rate or currency swaps, caps, collars, floors, options,
forward exchange contracts and similar hedging arrangements.
"Liberty Media" shall mean Liberty Media Corporation, a Delaware
corporation.
"Liberty Media Transaction" shall mean the acquisition by Liberty Media
of an aggregate of 20,000,000 shares of Class B Common Stock of the Company from
RMS Limited Partnership pursuant to an Agreement in Principle, dated December 4,
1992, between RMS Limited Partnership and Liberty Media, on substantially the
terms outlined in Liberty Media's press release of December 7, 1992, attached
hereto as Annex A.
"LIBOR" shall mean, with respect to any LIBOR Loan for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/16 of 1%) quoted by the London office of LTCB at approximately 11:00 a.m.
London time (or as soon thereafter as practicable) or if such rate is not
quoted to LTCB, the rate per annum appearing on the display designated as page
"LIBO" on the Reuter Monitor Money
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<PAGE> 14
Rates Service (or such other page as may replace the LIBO page of that
service for the purpose of displaying London interbank offered rates of major
banks) two Business Days prior to the first day of such Interest Period for the
offering by such office to leading banks in the London interbank market of
Dollar deposits having a term comparable to such Interest Period and in an
amount comparable to the principal amount of the LIBOR Loan scheduled to be
outstanding during such Interest Period from LTCB Trust.
"LIBOR Loans" shall mean the Loans (or any portion thereof) when they bear
interest at rates determined on the basis of LIBOR.
"Lien" shall mean, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
any agreement to grant any of the foregoing with respect to such asset, and the
filing of a financing statement or similar recording in any jurisdiction with
respect to such asset. For all purposes hereunder, the Company, the Guarantor
or any Subsidiary shall be deemed to own subject to a Lien (i) any asset which
it has acquired or holds subject to the interest of a vendor or lessor under
any conditional sale agreement, capital lease or other title retention
agreement relating to such asset and (ii) any account receivable transferred by
it with recourse (including any such transfer subject to a holdback or similar
arrangement that effectively imposes the risk of collectibility on the
transferor).
"Loans" shall mean the loans provided for by Section 2.1 hereof.
"LTCB" shall mean The Long-Term Credit Bank of Japan, Limited, a banking
corporation duly organized and validly existing under the laws of Japan, and
its successors.
"LTCB Trust" shall mean LTCB Trust Company, a trust company duly organized
and validly existing under the laws of the State of New York, and its
successors.
"Majority Banks" shall mean Banks having not less than 60% of the aggregate
principal amount of the Loans outstanding, or if no Loans are then outstanding,
Banks holding not less than 60% of the Commitments then in effect, or, if no
Loans are then outstanding nor Commitments in effect, Banks which held not less
than 60% of the Commitments when most recently in effect or, if later, which
held not less than 60% of the aggregate principal amount of the Loans when most
recently outstanding.
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"Margin Adjustment" shall mean, at any time of determination thereof
commencing after the first anniversary of the date of the initial funding of
the Loans, when the Funded Debt Ratio, as set forth in the Funded Debt Ratio
Notice most recently delivered to the Administrative Agent (which Notice shall
be effective on the date of the Administrative Agent's receipt thereof in
accordance with Section 12.2 hereof), is at each of the following levels, a
subtraction from any Applicable Margin, as set forth below:
Effective Subtraction from
Funded Debt Ratio Applicable Margin
----------------- -----------------
Greater than 1.00 to 1 0
1.00 to 1 or less For LIBOR Loans: (0.500%)
For Prime Rate Loans: (0.625%)
"Material Subsidiary" shall mean, at any time, a Subsidiary the book value
of whose tangible assets at such time exceeds 10% of the book value of the
total tangible assets of the Company and the Subsidiaries (on a consolidated
basis), but in any event shall include each of the Guarantor, HSN Capital, HSN
Fulfillment, Inc., a Delaware corporation, HSN Mail Order, Inc., a Delaware
corporation, and HSN Realty, Inc., a Delaware corporation, and their respective
successors.
"Material Subsidiary Group" shall mean, at any time, a group of any two or
more Subsidiaries which at such time has a combined aggregate book value of
tangible assets in excess of 10% of the book value of the total tangible assets
of the Company and the Subsidiaries (on a consolidated basis).
"Maturity Date" shall mean any date on which an installment of principal
due to the Banks under Section 3.1 hereof is scheduled to become due.
"Multiemployer Plan" shall mean a plan defined as such in Section 3(37) of
ERISA to which contributions have been made by the Company or any ERISA
Affiliate and which is covered by Title IV of ERISA.
"Non-Material Subsidiary" shall mean, at any time, a Subsidiary which is
not a Material Subsidiary.
"Notes" shall mean the promissory notes provided for by Section 2.6 hereof.
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"Obligations" shall mean all obligations and liabilities of the Company to
the Administrative Agent, the Agent, the Co-Agents and the Banks (or any of the
foregoing) now or in the future existing under or in connection with this
Agreement, any of the Notes or any related document (as any of the foregoing
Agreement, Notes or documents may from time to time be respectively amended,
modified, substituted, extended or renewed), direct or indirect, absolute or
contingent, due or to become due, now or hereafter existing, including without
limitation, any payment of principal, interest, fees or expenses due at any
time under this Agreement.
"Operating Cash Flow" shall mean, for any period, the sum of the
following for the Company and its Subsidiaries (including, without limitation,
the Guarantor) on a consolidated basis: (a) operating profit of such Persons for
such period; plus (to the extent already deducted in arriving at operating
profit) (b) depreciation and amortization expense for such Persons for such
period; plus (c) commencing September 1, 1992, non-cash compensation expense
related to the Company's executive stock award program; plus (d) all cash
interest (if any), other cash income (if any) or cash principal repayments (if
any) received by HSN Capital in connection with the Silver King Note, and, for
the twelve months immediately following the delivery of such Silver King Note,
accrued interest income on such note for no more than one month, all as shown on
the consolidated financial statements, including the notes thereto, of the
Company for such period or, with respect to clause (d) above, if such financial
statements do not present information in sufficient detail to derive the amount
specified in clause (d) of this definition, as shown on the certificate to be
delivered to the Administrative Agent pursuant to the last paragraph of Section
9.1 hereof. Operating Cash Flow for the four-Fiscal Quarter period ended
November 30, 1992 is as set forth in Schedule 2 hereto.
"Overnight Federal Funds Rate Loans" shall mean Loans (or any portion
thereof) when they bear interest at an overnight Federal Funds Rate.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" shall mean an individual, a corporation, a company, a voluntary
association, a partnership, a trust, an unincorporated organization or a
government or any agency, instrumentality or political subdivision thereof.
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"Plan" shall mean an employee benefit or other plan established or
maintained by the Company or any ERISA Affiliate and which is covered by Title
IV of ERISA, other than a Multiemployer Plan.
"Post-Default Rate" shall mean a rate per annum, during the period
commencing on the date on which any Obligation is not paid in full when due
(whether at stated maturity, by acceleration or otherwise) and ending on the
date on which all such overdue Obligations are paid in full, equal to 2.00%
plus the higher of (x) the Prime Rate as in effect from time to time and (y)
the interest rate in effect from time to time for Overnight Federal Funds Rate
Loans hereunder (including the Applicable Margin in effect for such Loans at
each such time); provided that, if any such unpaid Obligation is principal of a
LIBOR Loan or of a Term Federal Funds Rate Loan and the due date thereof is a
day other than the last day of the Interest Period therefor, the "Post-Default
Rate" for such principal shall be, for the period commencing on the due date
and ending on the last day of the then current Interest Period therefor, 2.00%
plus the interest rate for such Loan as provided in Section 3.2(a) or (b)
hereof and, thereafter, the rate otherwise provided for above in this
definition.
"Prime Rate" shall mean the rate of interest from time to time announced by
LTCB at its office in New York, New York as its prime commercial lending rate,
which rate is not necessarily the lowest rate of interest charged or received
by LTCB. Each change in the Prime Rate resulting from a change in such prime
commercial lending rate shall take effect when such prime commercial lending
rate changes.
"Prime Rate Loans" shall mean the Loans (or any portion thereof) when they
bear interest at rates based upon the Prime Rate.
"Qualifying U.S. Corporation" shall mean, at any date of determination, any
corporation (a) that is organized under the laws of a state in the United
States, and (b)(i) that is at such date of determination and has been for the
twelve months preceding such date of determination a business enterprise
consistently operating for profit with a majority of its operations, and at
least $100,000,000 of its assets, located in the United States or (ii) that is
at such date of determination part of a group of companies any one of which is
at such date of determination and has been for the twelve months preceding such
date of determination a business enterprise consistently operating for profit
with a majority of the operations of, and at least $100,000,000 of assets of,
any such company, located in the United States.
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"Regulation A" shall mean Regulation A of the Board of Governors of the
Federal Reserve System (or any successor), as the same may be amended or
supplemented from time to time.
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System (or any successor), as the same may be amended or
supplemented from time to time.
"Regulatory Change" shall mean, with respect to any Bank, any change after
the date of this Agreement in United States Federal, state or foreign law or
regulations (including Regulation D) or the adoption or making after such date
of any interpretations, directives or requests applying to a class of banks
including such Bank of or under any United States Federal, State or foreign law
or regulations (whether or not having the force of law) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.
"Revolving Credit Agreement" shall mean the Amended and Restated Credit
Agreement, dated December 18, 1992, among the Company, the Guarantor, LTCB
Trust and Bank of Montreal, each as a co-agent, LTCB Trust, as the
administrative agent, the financial institutions party thereto, as the same may
be amended or modified from time to time.
"SEC Report" shall mean, with respect to any Person, any document filed, or
deemed filed, at any time with the Securities and Exchange Commission (or any
successor thereto) by or on behalf of such Person and available to the public.
"Senior Notes" shall mean the Company's 11-3/4% Senior Notes due October
15, 1996, issued under the Senior Note Indenture.
"Senior Note Indenture" shall mean the Indenture, dated October 15, 1986,
between the Company and First Union National Bank of Florida
(successor-in-interest to Southeast Bank, N.A.), as trustee.
"Short-Term Debt" shall mean, for any Person, all Indebtedness of such
Person which would be short term debt, whether direct or contingent, under GAAP
as in effect on the date of this Agreement.
"Silver King" shall mean Silver King Communications, Inc., a Delaware
corporation, and its successors.
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<PAGE> 19
"Silver King Distribution" shall mean the distribution by the Company on
December 28, 1992 of shares of capital stock of Silver King held by the
Company.
"Silver King Note" shall mean the note, dated December 28, 1992, in the
aggregate principal amount of $135,171,875, made by Silver King in favor of HSN
Capital and delivered in connection with the Silver King Distribution.
"Subsidiary" shall mean any corporation, partnership or other Person of
which at least a majority of the outstanding shares of capital stock or other
ownership interests ordinarily having, in the absence of contingencies, by the
terms thereof voting power to elect a majority of the board of directors or
similar governing body of such Person is at the time directly or indirectly
owned or controlled by the Company, the Guarantor or by the Company and/or the
Guarantor, and in any event shall include the Guarantor and its subsidiaries.
"Wholly-Owned Subsidiary" shall mean any Person of which all of such ownership
interests, other than directors' qualifying shares, are so owned or controlled.
"Term Federal Funds Rate Loan" shall mean any Federal Funds Rate Loan other
than an Overnight Federal Funds Rate Loan.
"Total Debt" shall mean, for any Person at any time, all Indebtedness of
such Person at such time (including, without limitation, all long-term senior
and subordinated Indebtedness, all Short-Term Debt, the stated amount of all
letters of credit issued for the account of such Person and (without
duplication) all unreimbursed draws thereunder), as shown on the consolidated
quarterly or annual financial statements, including the notes thereto, of the
Company delivered for such period pursuant to Section 9.1 (or referred to in
Section 8.2) hereof. Total Debt of the Company and its consolidated
Subsidiaries as at the end of the four-Fiscal Quarter period ended November 30,
1992 is as set forth on Schedule 2 hereto.
"Total Debt Ratio" shall mean, at any time, the ratio of (a) Total Debt of
the Company and its consolidated Subsidiaries as at the end of the Company's
four-Fiscal Quarter period most recently ended as of such time, to (b)
Operating Cash Flow for the same period, as shown in the Total Debt Ratio
Notice for such period.
"Total Debt Ratio Notice" shall mean each notice provided for in Section
9.1(g) (or Section 7.1(f)) hereof.
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"Total Funded Debt" shall mean, for any Person at any time, (a) all
Indebtedness of such Person outstanding at such time (other than the aggregate
of all unsecured borrowings of such Person having a scheduled maturity of less
than twelve months from the date of incurrence thereof in an aggregate
principal amount not in excess of $5,000,000 at such time), minus (b) the
stated amount available to be drawn of all letters of credit issued for the
account of such Person, as shown on the consolidated quarterly or annual
financial statements, including the notes thereto, of the Company and its
Subsidiaries delivered for such period pursuant to Section 9.1 (or referred to
in Section 8.2) hereof. Total Funded Debt of the Company and its consolidated
Subsidiaries as at the end of the four-Fiscal Quarter period ended November 30,
1992 is as set forth on Schedule 2 hereto.
1.2. Certain Accounting Matters.
(a) Unless otherwise disclosed to the Banks in writing at the time of
delivery thereof in the manner described in subsection (b) below, all
financial statements and certificates and reports as to financial matters
required to be delivered to the Administrative Agent on behalf of itself and the
Banks hereunder shall be prepared in accordance with GAAP applied on a basis
consistent with those used in the preparation of the latest financial statements
furnished to the Banks hereunder after the date hereof (or, prior to the
delivery of the first financial statements furnished to the Banks hereunder,
used in the preparation of the audited financial statements referred to in
Section 8.2 hereof). All calculations made for the purposes of determining
compliance with the terms of Sections 9.11, 9.12 and 9.13 hereof shall, except
as otherwise expressly provided herein, be made by application of GAAP applied
on a basis consistent with those used in the preparation of the annual or
quarterly financial statements then most recently furnished to the Banks
pursuant to Section 9.1 (or referred to in Section 8.2) hereof unless (i) the
Company shall have objected to determining such compliance on such basis at the
time of delivery of such financial statements or (ii) the Majority Banks shall
so object in writing within 30 days after delivery of such financial statements,
in either of which cases such calculations shall be made on a basis consistent
with those used in the preparation of the most recent financial statements as to
which such objection shall not have been made.
(b) The Company shall deliver to the Administrative Agent, with
sufficient copies for delivery to the Banks, contemporaneously with delivery of
any annual or quarterly financial statement under Section 9.1 hereof a
description in
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reasonable detail of any material variation between the application of
accounting principles employed in the preparation of such statement and the
application of accounting principles employed in the preparation of the most
recently preceding annual or quarterly financial statements as to which no
objection shall have been made in accordance with the last sentence of
subsection (a) above, and reasonable estimates of the difference between such
statements arising as a consequence thereof.
Section 2. Commitments and Loans.
2.1. Loans. Each Bank severally agrees, on the terms and subject to
the conditions of this Agreement, to make one or more Loans to the Company on
any Business Day on or prior to the Commitment Termination Date in an aggregate
principal amount not to exceed the amount of such Bank's Commitment, and
further agrees that such Loans may be comprised of Federal Funds Rate Loans,
Prime Rate Loans, LIBOR Loans, or any combination thereof, in accordance with
Section 3.2(c) hereof. The Loans shall be made by the Banks pro rata in
accordance with their respective Commitments.
2.2. Borrowing. The Company shall give the Administrative Agent (which
shall promptly notify the Banks) notice of each borrowing hereunder as
provided in Section 4.5 hereof. Not later than 10:00 a.m., or, in the case of a
borrowing of Overnight Federal Funds Rate Loans or Prime Rate Loans, 12:00 noon,
New York time on the date specified for such borrowing, each Bank shall make
available the amount of the Loan to be made by it on such date to the
Administrative Agent, at account number 04203606 maintained by the
Administrative Agent with Bankers Trust Company (ABA No. 021001033), One Bankers
Trust Plaza, New York, New York 10006 (reference: "Home Shopping Network - 1993
Term Loan Facility"), attention: Robert Pacifici, in immediately available
funds. The amount so received by the Administrative Agent shall, subject to the
terms and conditions of this Agreement, be made available to or for the benefit
of the Company by depositing the same, in immediately available funds, either
(i) in the account of the trustee for the Senior Notes designated by the Company
in the related notice of borrowing, or (ii) in the account of the Company
designated by the Company in the related notice of borrowing, to the extent and
only to the extent that the Company has repurchased Senior Notes in the open
market and is entitled to reimbursement therefor in accordance with Section 9.15
hereof. Each of the Company and the Guarantor acknowledges and agrees that any
Loans disbursed to the trustee of the Senior Notes as contemplated in clause (i)
of
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the preceding sentence shall be deemed for all purposes to have been
disbursed to the Company. References in this Agreement to the date on which a
Loan is made shall be to the date on which funds borrowed pursuant to such Loan
shall have been made available to the Company pursuant to this Section 2.2.
Each borrowing of the Loans shall reduce the Commitments by an amount equal to
the aggregate principal amount of such Loans.
2.3. Fees.
(a) The Company shall pay to the Administrative Agent for account of
each Bank a commitment fee on the daily average unused amount of such Bank's
outstanding Commitment, for the period from and including the date of this
Agreement to and including the earlier of the day prior to the date such
Commitment is terminated or the day prior to the Commitment Termination Date,
at a rate per annum equal to 1/4 of 1%; provided, however, that no such fee
shall be payable to any Bank with respect to the portion (if any) of such
Bank's Commitment corresponding to the principal amount of Loans which such
Bank shall not have made in accordance with (i) a notice of borrowing properly
and timely given and (ii) the terms and conditions of this Agreement, and with
respect to which all conditions precedent thereto shall have been satisfied.
All outstanding accrued commitment fees of each Bank shall be due and payable
on the earlier of (i) the date on which each borrowing is made under Section
2.2 hereof or (ii) the Commitment Termination Date.
(b) The Company (i) shall pay to LTCB Trust, as the Agent, for its own
account a facility fee in the amount and at the times set forth in the fee
letter, dated December 17, 1992, among the Company, the Guarantor and LTCB
Trust, as the Agent, (ii) shall pay to Bank of Montreal, as a Co-Agent, for its
own account a facility fee in the amount and at the times set forth in its
Commitment Letter, and (iii) shall pay to The Bank of New York, as a Co-Agent,
for its own account a facility fee in the amount and at the times set forth in
its Commitment Letter.
(c) The Company shall pay to the Administrative Agent for its own
account an annual Agency Fee in the amount and at the times set forth in the
fee letter, dated December 17, 1992, among the Company, the Guarantor and the
Administrative Agent.
2.4. Lending Offices. The Loans made by each Bank shall be made and
maintained at such Bank's Applicable Lending Office for Loans of such type.
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<PAGE> 23
2.5. Several Obligations; Remedies Independent. The failure of any
Bank to make the Loan to be made by it on the date specified therefor shall not
relieve any other Bank of its obligation to make its Loan on such date, but no
Bank shall be responsible for the failure of any other Bank to make the Loan to
be made by such other Bank. The amounts payable by the Company or the
Guarantor at any time hereunder and under the Notes to each Bank shall be a
separate and independent debt and each Bank shall be entitled to protect and
enforce its rights arising out of this Agreement and the Notes, and it shall
not be necessary for any other Bank or the Agent or either Co-Agent or the
Administrative Agent to consent to, or be joined as an additional party in, any
proceedings for such purposes.
2.6. Notes.
(a) All of the Loans made by each Bank shall be evidenced by a single
promissory note of the Company in substantially the form of Exhibit A
hereto, dated the date of this Agreement, payable to the order of such Bank in a
principal amount equal to the aggregate principal amount of such Bank's
Commitment and otherwise duly completed. Each Loan made by each Bank, and all
payments and prepayments made on account of the principal thereof, and all
conversions of such Loan, shall be recorded by such Bank on its books and, prior
to any transfer of the Note held by it with respect to such Loan, endorsed by
such Bank on the schedule attached to such Note or any continuation thereof;
provided, that no failure by any Bank to make such recording or endorsement
shall affect the obligations of the Company or the Guarantor under this
Agreement to such Bank or the holder of such Note.
(b) Each Bank shall be entitled to have its Note subdivided in
connection with an assignment of all or any portion of its Commitment, Loans
and Note pursuant to Section 12.6(b) hereof.
Section 3. Payments of Principal and Interest.
3.1. Repayment of Principal. The Company shall pay to the
Administrative Agent for account of the Banks the aggregate principal amount of
the Loans in two installments on the dates set forth below, each such
installment to be in the
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<PAGE> 24
amount equal to the corresponding "Principal Amount" set forth below
or, in the event prepayments have been made pursuant to Section 3.3 hereof,
such lesser amount as is equal to the remaining outstanding aggregate principal
amount of such installment:
Date Principal Amount
---- ----------------
January 31, 1997 $25,000,000
January 31, 1998 $25,000,000.
Each payment of principal of the Loans shall be applied pro rata to each Bank
according to the principal amounts of each of their respective Loans. In the
event that 100% of the Commitments is not utilized by the Company, the
aggregate amount not utilized shall be applied to reduce the principal amounts
of the installments set forth above in inverse order of maturity.
3.2. Interest.
(a) The Company shall pay to the Administrative Agent for account of
each Bank interest on the unpaid principal amount of each installment of each
Loan made by such Bank for the period commencing on the date of such Loan to
but excluding the date such installment shall be paid in full, at the following
rates per annum:
(i) during such periods as such Loan (or any portion thereof)
is a LIBOR Loan, for each Interest Period relating thereto, the LIBOR
for such Loan for such Interest Period plus the Applicable Margin in effect
for each day during such Interest Period; and
(ii) during such periods as such Loan (or any portion thereof)
is a Federal Funds Rate Loan, for each Interest Period relating thereto,
the Federal Funds Rate (as in effect for such Interest Period) plus 2.75%
per annum;
(iii) during such periods as such Loan (or any portion thereof)
is a Prime Rate Loan, for each Interest Period relating thereto, the
Prime Rate (as in effect from time to time during such Interest Period) plus
the Applicable Margin in effect for each day during such Interest Period.
Notwithstanding the foregoing, at any time during the period commencing on the
date on which any Obligation is not paid in full when due (whether at stated
maturity, by acceleration or
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<PAGE> 25
otherwise) and ending on the date on which all such overdue Obligations
are paid in full, the Company shall pay to the Administrative Agent for account
of each Bank interest on the principal of all Loans and (to the fullest extent
permitted by law) on any unpaid interest or any other amount payable by the
Company hereunder or under the Note held by such Bank at the Post-Default Rate.
(b) Accrued interest on each Loan shall be payable (i) on each
Interest Payment Date for such Loan and (ii) in any case, on the date on which
any principal amount thereof is paid or prepaid or converted to a Loan of
another type on the portion thereof being so paid, prepaid or converted, except
that interest on any principal, interest or other amount payable at the
Post-Default Rate shall be payable from time to time on demand.
If the Company shall fail to timely deliver a Funded Debt Ratio Notice
in respect of any four-Fiscal Quarter period in accordance with Section 9.1(g)
hereof, and it transpires that the Funded Debt Ratio has changed from that which
was in effect with respect to the previous four-Fiscal Quarter period such that
any interest rate hereunder would increase, the Company agrees that the interest
rate on the Loans shall, by operation of the definition of Applicable Margin,
automatically increase on the date such Funded Debt Ratio Notice is duly given
in accordance with Section 12.2 hereof. In addition, (i) such increase shall be
retroactive to the date on which such Funded Debt Ratio Notice should have been
delivered in accordance with Section 9.1(g) hereof and (ii) the incremental
interest for the retroactive period shall be payable on the next date on which
interest is payable under this Agreement and the Notes (or, if no further
interest is payable, immediately on demand by the Administrative Agent or any
Bank). If the Company shall fail to timely deliver a Funded Debt Ratio Notice
in respect of any four-Fiscal Quarter period, and it transpires that the Funded
Debt Ratio has changed from that which was in effect with respect to the
previous four-Fiscal Quarter period such that any interest rate hereunder would
decrease, then such decrease shall be effective from the date on which such
Funded Debt Ratio Notice is received by the Administrative Agent, and shall have
no retroactive effect.
No provision of this Agreement or the Notes or any other document delivered
in connection with either thereof and no transaction contemplated hereby or
thereby shall be construed or shall operate so as to require the Company, the
Guarantor or any other Person liable for payment of any of the Obligations to
pay interest in an amount or at a rate greater
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<PAGE> 26
than the maximum allowed from time to time by applicable law. Should
any interest or other charges paid by the Company, the Guarantor or any such
other Person under any such document result in a computation or earning of
interest in excess of the maximum rate of interest permitted under applicable
law in effect while such interest is being earned, then such excess shall be and
hereby is waived by each Bank and all such excess shall be automatically
credited against and in reduction of the principal balance of such amounts
payable under such documents and any portion of such excess received by any Bank
shall be paid over by such Bank to the Company, the Guarantor or such other
Person, as the case may be, it being the intent of the parties hereto that under
no circumstances shall the Company, the Guarantor or such other Person be
required to pay interest in excess of the maximum rate allowed by such
applicable law.
(c) The Company shall select the duration of the initial Interest
Period (or Interest Periods) for the Loans and the interest type of the Loans
for such Interest Period (or Interest Periods) by giving notice to the
Administrative Agent as provided in Section 4.5 hereof, and may select the
duration of each subsequent Interest Period (or Interest Periods) for the Loans
and the interest type of the Loans for such Interest Period (or Interest
Periods), by giving notice as provided in Section 4.5 hereof, provided,
however, that no more than three (3) Interest Periods shall apply to all Loans
then outstanding with respect to any particular Bank.
3.3. Prepayments and Conversions of the Loans.
(a) The Company shall have the right to prepay Loans, or to convert
Loans of one type into Loans of another type, at any time or from time to time;
provided that: (i) the Company shall give the Administrative Agent notice of
each such prepayment or conversion as provided in Section 4.5 hereof, (ii)
Loans may be prepaid or converted only on the last day of an Interest Period
for such Loans; and (iii) prepayments and conversions of Loans shall be subject
to the indemnity provisions of Section 5.4 hereof.
(b) In the event that HSN Capital receives a payment of principal of
the Silver King Note prior to the date on which such amount was scheduled to be
paid, the Company shall, on the first Business Day after receipt of the
proceeds of such prepayment, prepay the Loans in an amount equal to the
difference between (i) the excess of such proceeds over $5,000,000
(cumulatively since the date hereof) less (ii) any amount the Company is
obligated to pay under the 1992 Term
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<PAGE> 27
Loan Agreement as a consequence of such prepayment to HSN Capital.
(c) Any prepayment made to the Banks in accordance with Section 3.3(a)
or (b) shall be applied to reduce the installments of principal due to the
Banks under Section 3.1 hereof and under the Notes pro rata to all remaining
installments due to the Banks and pro rata in accordance with the respective
unpaid principal amounts of all Loans held by each Bank. The Administrative
Agent shall promptly notify the Banks of each notice of prepayment.
(d) Any portion of the Loans prepaid, whether pursuant to this Section
3.3, Section 5.3 hereof or otherwise, may not be reborrowed.
Section 4. Payments and Computations.
4.1. Payments.
(a) Except to the extent otherwise provided herein, all payments of
Obligations shall be made in Dollars, in immediately available funds and
without set-off, counterclaim or deduction of any kind, to the Administrative
Agent at account number 04203606 maintained by the Administrative Agent at
Bankers Trust Company (ABA No. 021001033), One Bankers Trust Plaza, New York,
New York 10006 (reference: "Home Shopping Network - 1993 Term Loan Facility"),
attention: Robert Pacifici (or at such other account or at such other place as
the Administrative Agent may notify the Company from time to time), not later
than 11:00 a.m. New York time on the date on which such payment shall become due
(each such payment made after such time on such due date to be deemed to have
been made on the next succeeding Business Day). Any Bank for whose account any
such payment is to be made may (but shall not be obligated to) debit the amount
of any such payment which is not made by such time to any ordinary deposit
account of the Company or the Guarantor with such Bank or any affiliate of such
Bank (with subsequent notice to the Company or the Guarantor, as the case may
be, provided that such Bank's failure to give such notice shall not affect the
validity of such debit). The Company or the Guarantor, as the case may be,
shall at the time of making a payment under this Agreement or any Note specify
to the Administrative Agent (i) the account from which the payment funds will be
transmitted and the manner and approximate time of such transmission and (ii)
the Loans or other amounts payable by the Company hereunder to which such
payment shall be applied, and in the event that it shall have failed so to
specify, or
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<PAGE> 28
if an Event of Default shall have occurred and be continuing, the Administrative
Agent may distribute such payment to the Banks in such manner as it or the
Majority Banks may deem appropriate, subject to Section 4.2 hereof.
Each payment received by the Administrative Agent under this Agreement or
any Note for account of a Bank shall be paid promptly to such Bank, in
immediately available funds, for account of such Bank's Applicable Lending
Office for the Loan in respect of which such payment is made.
(b) If the due date of any payment to be made hereunder or under any
Note would otherwise fall on a day which is not a Business Day, such due date
shall be extended to the next succeeding Business Day and interest shall be
payable for any principal so extended for the period of such extension.
4.2. Pro Rata Treatment. Except to the extent otherwise provided
herein:
(a) each borrowing from the Banks under Section 2.1 hereof
shall be made from the Banks and each payment of commitment fee under
Section 2.3 hereof shall be made for account of the Banks pro rata
according to the amounts of their respective unused Commitments;
(b) each conversion of Loans (or portions thereof) of a
particular type (other than conversions provided for by Section 5.1 hereof)
shall be made pro rata among the Banks holding Loans of such type according
to the respective principal amounts of such Loans (or portions thereof)
held by such Banks; and
(c) each payment and prepayment by the Company of principal of
or interest on Loans (or portions thereof) of a particular type shall be
made to the Administrative Agent for account of the Banks holding Loans of
such type pro rata in accordance with the respective unpaid principal
amounts of such Loans (or portions thereof) held by such Banks.
4.3. Computations. Interest on all Loans and the commitment fee shall
be computed on the basis of a year of 360 days and actual days elapsed
(including the first day but excluding the last day) occurring in the period
for which payable.
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<PAGE> 29
4.4. Minimum Amounts. Except for conversions or prepayments made
pursuant to Section 5.1 hereof, each borrowing, conversion and prepayment of
principal of Loans shall be in an aggregate amount at least equal to
$5,000,000, provided that borrowings, prepayments or conversions of or into
Loans of different types or, in the case of LIBOR Loans, having different
Interest Periods, at the same time hereunder shall each be deemed separate
borrowings, conversions or prepayments, as the case may be. Notwithstanding
anything in this Agreement to the contrary, the aggregate principal amount of
LIBOR Loans having the same Interest Period shall be at least equal to
$5,000,000 and, if any LIBOR Loans would otherwise be in a lesser principal
amount for any period, such Loans shall be Prime Rate Loans during such period.
4.5. Certain Notices. Notices by the Company to the Administrative
Agent of borrowings, conversions and prepayments of Loans and of the duration
of Interest Periods shall be irrevocable and shall be effective only if
received by the Administrative Agent not later than 10:00 a.m. New York time on
the number of Business Days prior to the date of the borrowing, conversion or
prepayment or the first day of such Interest Period specified below:
<TABLE>
<CAPTION>
Number of
Business
Notice Days Prior
------ ----------
<S> <C>
Borrowing of Overnight Federal Funds Rate Loans; or conversion of Term
Federal Funds Rate Loans or Prime Rate Loans into Overnight Federal Funds
Rate Loans same day
Borrowing or prepayment of LIBOR Loans; conversion of LIBOR Loans into
any other type of Loans; conversion of any type of Loans into LIBOR
Loans; or duration of Interest Period for LIBOR Loans 3
Borrowing or prepayment of Term Federal Funds Rate Loans; conversion of
any type of Loans into Term Federal Funds Rate Loans; or duration of
Interest Period for Term Federal Funds Rate Loans 3
Borrowing or prepayment of Prime Rate Loans; or conversion of Federal
Funds Rate Loans into Prime Rate Loans same day
</TABLE>
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<PAGE> 30
In addition:
(a) Each such notice of borrowing, conversion or prepayment
shall specify the Loans to be borrowed, converted or prepaid and the amount
(subject to Section 4.4 hereof) and type of the Loans to be borrowed,
converted or prepaid and the date of borrowing, conversion or prepayment
(which shall be a Business Day).
(b) Each such notice of the duration of an Interest Period
shall specify the Loans to which such Interest Period is to relate.
The Administrative Agent shall promptly notify the Banks of the contents of
each such notice.
In the event that the Company fails to select the duration of any
Interest Period for any LIBOR Loans or Term Federal Funds Rate Loans within the
time period and otherwise as provided in this Section 4.5, or if the Company and
the Administrative Agent with the consent of the Banks fail to agree upon a term
for any requested Term Federal Funds Rate Loans, such Loans (if outstanding as
LIBOR Loans) will be automatically converted into Overnight Federal Funds Rate
Loans on the last day of the then current Interest Period for such Loans or (if
outstanding as Overnight Federal Funds Rate Loans or Prime Rate Loans) will
remain as Overnight Federal Funds Rate Loans or Prime Rate Loans, as the case
may be, or (if not then outstanding) will be made as Overnight Federal Funds
Rate Loans.
4.6. Non-Receipt of Funds by the Administrative Agent. Unless the
Administrative Agent shall have been notified by a Bank or the Company or the
Guarantor prior to the date on which such Bank or the Company or the Guarantor
is scheduled to make payment to the Administrative Agent of (in the case of a
Bank) the proceeds of a Loan to be made by it hereunder or (in the case of the
Company or the Guarantor) a payment to the Administrative Agent for account of
one or more of the Banks hereunder (such payment being herein called the
"Required Payment"), which notice shall be effective upon receipt, that it does
not intend to make the Required Payment to the Administrative Agent, the
Administrative Agent may assume that the Required Payment has been made and
may, in reliance upon such assumption (but shall not be required to), make the
amount thereof available to the intended recipient(s) on such date and, if such
Bank or the Company or the Guarantor (as the case may be) has not in fact made
the Required Payment to the Administrative Agent, the recipient(s) of such
payment shall, on demand, repay to the Administrative Agent the amount
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<PAGE> 31
so made available together with interest thereon in respect of each day
during the period commencing on the date such amount was so made available by
the Administrative Agent until the date the Administrative Agent recovers such
amount at a rate per annum equal to the overnight Federal Funds Rate for such
day (as determined by the Administrative Agent).
4.7. Sharing of Payments, Etc. Each of the Company and the Guarantor
agrees that, in addition to (and without limitation of) any right of setoff,
bankers' lien or counterclaim a Bank may otherwise have, each Bank shall be
entitled, at its option, to offset balances held by it in ordinary deposit
accounts of the Company or the Guarantor at any of its offices, in Dollars or in
any other currency, against any principal of or interest on any of such Bank's
Loans, or any other amount payable to such Bank hereunder, which is not paid
when due (regardless of whether such balances are then due to the Company or the
Guarantor), in which case it shall promptly notify the Company or the Guarantor,
as the case may be, and the Administrative Agent thereof, provided that such
Bank's failure to give such notice shall not affect the validity thereof. If
any Bank shall obtain payment of any principal of or interest on any Loan made
by it to the Company, or any other amount payable to such Bank, under this
Agreement through the exercise of any right of setoff, banker's lien or
counterclaim or similar right or otherwise, and, as a result of such payment,
such Bank shall have received a greater percentage of the principal, interest or
such other amount then due hereunder by the Company to such Bank than the
percentage received by any other Banks, it shall promptly purchase from such
other Banks participations in (or, if and to the extent specified by such Bank,
direct interests in) the Loans made by such other Banks (or in interest due
thereon, as the case may be) in such amounts, and make such other adjustments
from time to time as shall be equitable, to the end that all the Banks shall
share the benefit of such excess payment (net of any expenses which may be
incurred by such Bank in obtaining or preserving such excess payment) pro rata
in accordance with the unpaid principal and/or interest on the Loans held by
each of the Banks or such other amount due to the Banks hereunder. To such end
all the Banks shall make appropriate adjustments among themselves (by the resale
of participations sold or otherwise) if such payment is rescinded or must
otherwise be restored. Each of the Company and the Guarantor agrees that any
Bank so purchasing a participation (or direct interest) in the Loans made by
other Banks (or in interest due thereon, as the case may be) may exercise all
rights of setoff, bankers' lien, counterclaim or similar rights with respect to
such participation as fully as if such Bank were a direct holder of Loans in the
amount of such par-
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<PAGE> 32
ticipation. Nothing contained herein shall require any Bank to exercise
any such right or shall affect the right of any Bank to exercise, and retain the
benefits of exercising, any such right with respect to any other indebtedness or
obligation of the Company or the Guarantor; provided that to the extent any such
Bank exercises any such right with respect to any other indebtedness or
obligation of the Company or the Guarantor, it shall also exercise its rights
under this Section 4.7 and agrees that the benefits of exercising any such
rights shall be shared with the Banks pro rata in the proportion that the unpaid
obligations of the Company and the Guarantor owing to such Bank hereunder bear
to such other indebtedness or obligation. If under any applicable bankruptcy,
insolvency or other similar law, any Bank receives a secured claim in lieu of a
setoff to which this Section 4.7 applies, such Bank shall, to the extent
practicable, exercise its rights in respect of such secured claim in a manner
consistent with the rights of the Banks entitled under this Section 4.7 to share
in the benefits of any recovery on such secured claim.
Section 5. Yield Protection and Illegality.
5.1. Additional Costs.
(a) The Company shall pay directly to each Bank from time to time such
amounts as such Bank may determine to be necessary to compensate it for any
costs which such Bank determines are attributable to its making or maintaining
of any LIBOR Loans to the Company or its obligation to make any LIBOR Loans to
the Company hereunder, or any reduction in any amount receivable by the Bank
hereunder in respect of any of such Loans or such obligation (such increases in
costs and reductions in amounts receivable being herein called "Additional
Costs"), resulting from any Regulatory Change which (i) changes the basis of
taxation of any amounts payable to such Bank by the Company or the Guarantor
under this Agreement or the Notes in respect of any of such Loans (other than
taxes imposed on the overall net income of such Bank or of its Applicable
Lending Office for any of such Loans by the jurisdiction in which such Bank has
its principal office or such Applicable Lending Office); or (ii) imposes or
modifies any reserve, special deposit, minimum capital, capital ratio or
similar requirements relating to any extensions of credit or other assets of,
or any deposits with or other liabilities of, such Bank (including any of such
Loans or any deposits referred to in the definition of "LIBOR" in Section 1.1
hereof), or the Commitment of such Bank; or (iii) imposes any other condition
affecting this Agreement or the Notes (or any
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<PAGE> 33
of such extensions of credit or liabilities) or the Commitments.
(b) Without limiting the effect of the provisions of Section 5.1(a)
hereof, in the event that, by reason of any Regulatory Change, any Bank
either (i) incurs Additional Costs based on or measured by the excess above a
specified level of the amount of a category of deposits or other liabilities of
such Bank which includes deposits by reference to which the interest rate on
LIBOR Loans is determined as provided in this Agreement or a category of
extensions of credit or other assets of such Bank which includes LIBOR Loans or
(ii) becomes subject to restrictions on the amount of such a category of
liabilities or assets which it may hold, then, if such Bank so elects by notice
to the Company, the obligation of such Bank to make, and to convert Federal
Funds Rate Loans or Prime Rate Loans into, LIBOR Loans hereunder shall be
suspended until such Regulatory Change ceases to be in effect (and all LIBOR
Loans held by such Bank shall be automatically converted into Overnight Federal
Funds Rate Loans at the end of the then current Interest Period for each of
them, or on such earlier date as such Bank may specify in writing as being the
last permissible date for such prepayment under applicable law, rules or
regulations); provided that in such event such Bank shall use its best efforts
to obtain a Federal Funds Rate offered for deposits made for a period of time
longer than overnight (to the extent such a rate is then obtainable), but any
failure to obtain such a rate shall in no way affect the rights of the Banks to
receive interest on such Loans at the Federal Funds Rate otherwise obtainable.
(c) Without limiting the effect of the foregoing provisions of this
Section 5.1 (but without duplication), the Company shall pay to each Bank from
time to time on request such amounts as such Bank may determine to be necessary
to compensate such Bank for any costs which it determines are attributable to
the maintenance by such Bank (or any Applicable Lending Office), pursuant to
any law or regulation or any interpretation, directive or request (whether or
not having the force of law) of any court or governmental or monetary
authority, of capital in respect of such Bank's Commitment (such compensation
to include, without limitation, an amount equal to any reduction of the rate of
return on assets or equity of such Bank (or any Applicable Lending Office) to a
level below that which such Bank (or any Applicable Lending Office) could have
achieved but for such law, regulation, interpretation, directive or request).
(d) Determinations and allocations by any Bank for purposes of this
Section 5.1 of the effect of any Regulatory
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<PAGE> 34
Change pursuant to Section 5.1(a) or (b) hereof, or of the effect of
capital maintained pursuant to Section 5.1(c) hereof, on its costs or rate of
return of maintaining Loans or its obligation to make Loans, or on amounts
receivable by it in respect of Loans, and of the amounts required to compensate
such Bank under this Section 5.1, shall be conclusive absent manifest error.
5.2. Limitation on Types of Loans. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of any interest
rate for any LIBOR Loan for any Interest Period therefor:
(a) the Administrative Agent determines (which determination
shall be conclusive) that quotations of interest rates for the deposits
referred to in the definition of "LIBOR" in Section 1.1 hereof are not
being provided in the relevant amounts or for the relevant maturities for
purposes of determining rates of interest for such Loans as provided
herein; or
(b) any Bank determines (which determination shall be
conclusive), and so notifies the Administrative Agent, that the rates of
interest referred to in the definition of "LIBOR" in Section 1.1 hereof
upon the basis of which the rate of interest for LIBOR Loans for such
Interest Period is to be determined do not adequately cover the cost to
such Bank of making or maintaining such LIBOR Loans for such Interest
Period;
then the Administrative Agent shall give the Company prompt notice thereof, and
so long as such condition remains in effect, the Banks shall be under no
obligation to make additional LIBOR Loans or to convert Federal Funds Rate
Loans or Prime Rate Loans into LIBOR Loans and the Company shall, on the last
day(s) of the then current Interest Period(s) for the outstanding LIBOR Loans,
either repay such Loans as provided in Section 3.1 hereof or convert such Loans
into Federal Funds Rate Loans or Prime Rate Loans in accordance with Section
3.3 hereof.
5.3. Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Bank or its Applicable
Lending Office to honor its obligation to make or maintain LIBOR Loans
hereunder, then such Bank shall promptly notify the Administrative Agent and
the Company and such Bank's obligation to make LIBOR Loans shall be suspended
until such time (prior to the Commitment Termination Date) as such Bank may
again make and maintain LIBOR Loans and such Bank's outstanding LIBOR Loans
shall be
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<PAGE> 35
automatically converted into Federal Funds Rate Loans or Prime Rate
Loans, as such Bank may select, at the end of the then current Interest Period
for each of them, or on such earlier date as such Bank may specify in writing
as being the last permissible date for such prepayment under applicable laws,
rules or regulations.
5.4. Compensation. The Company shall pay to each Bank, upon the
request of such Bank, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Bank) to compensate it for any loss, cost or expense
(including, without limitation, costs arising from premature termination of
such Bank's obligations under interest rate swaps, caps, collars, floors,
options, forward exchange contracts and similar hedging arrangements) which
such Bank determines are attributable to:
(a) any payment, prepayment or conversion of a Loan for any
reason (including, without limitation, the acceleration of the Loans
pursuant to Section 10 hereof) on a date other than the last day of an
Interest Period for such Loan; or
(b) any failure by the Company for any reason (including,
without limitation, the failure of any of the conditions precedent
specified in Section 7 hereof to be satisfied) to borrow or convert into a
LIBOR Loan or a Term Federal Funds Rate Loan on the date for such borrowing
or conversion specified in the relevant notice of borrowing given pursuant
to Section 2.2 hereof or notice of conversion given pursuant to Section 2.8
hereof.
Such Bank shall deliver to the Company, promptly upon such request, a
certificate setting forth in reasonable detail the basis for calculation of
such amounts, the contents of such certificate being, in the absence of
manifest error therein, conclusive evidence of such amounts; provided that the
failure of such Bank to deliver such certificate shall in no way affect such
Bank's rights to such compensation. The failure of any Bank to request the
compensation provided for in this Section 5.4 in any instance shall not affect
such rights of such Bank in any other instance or of any other such Bank in any
instance.
5.5. Taxes. All payments of Obligations (as used in this
Section 5.5, "Payments") shall be made free and clear of, and without
deduction by reason of, any and all taxes, duties, assessments, withholdings,
retentions or other similar charges whatsoever imposed, levied, collected,
withheld or
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<PAGE> 36
assessed by any jurisdiction or any agency or taxing authority thereof
or therein (as used in this Section 5.5, "Taxes"), all of which shall be paid by
the Company for its own account not later than the date when due. If the
Company is required by law to deduct or withhold any Taxes from any Payment, the
Company shall: (a) make such deduction or withholding; (b) pay the amount so
deducted or withheld to the appropriate taxing authority not later than the date
when due (irrespective of the rate of such deduction or withholding); (c)
deliver to such Bank, promptly and in any event within 30 days after the date on
which such Taxes become due, original tax receipts and other evidence
satisfactory to such Bank of the payment when due of the full amount of such
Taxes; and (d) pay to the respective Bank, forthwith upon any request by such
Bank therefor from time to time, such additional amounts as may be necessary so
that such Bank receives, free and clear of all Taxes, the full amount of such
Payment stated to be due under this Agreement or the Notes as if no such
deduction or withholding had been made.
Each Bank that is not organized under the laws of the United States or of
any political subdivision thereof agrees that it will deliver to the Company on
the date of its Loan and thereafter as may be required from time to time by
applicable law or regulation United States Internal Revenue Service Form 4224
or 1001 (or any successor form) or such other form as from time to time may be
required to demonstrate that payments made by the Company to such Bank under
this Agreement or such Note either are exempt from United States Federal
withholding taxes or are payable at a reduced rate (if any) specified in any
applicable tax treaty or convention.
Each Bank agrees to use reasonable efforts to transfer its Commitment or
Loans to another Applicable Lending Office of such Bank if such transfer would
avoid the need for or mitigate the amount of any deduction or withholding of
Taxes on payments of interest to such Bank under this Agreement, but no Bank
shall be required to make such transfer if such Bank determines that such Bank
would suffer any legal, economic or regulatory disadvantage.
Without limiting the survival of any other provisions of this Agreement or
the Notes, the obligations of the Company under this Section shall survive the
repayment of the Loans and the Notes.
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Section 6. Guarantee.
6.1. Unconditional Guarantee. For valuable consideration, receipt of
which is hereby acknowledged, and to induce the Banks to make Loans to
the Company, the Guarantor hereby unconditionally and irrevocably guarantees to
the Administrative Agent, the Agent, the Co-Agents and each of the Banks the
payment in full when due (whether at stated maturity, by acceleration or
otherwise) of all principal of and interest on each Loan and all other amounts
payable by the Company hereunder and under the Notes and all other documents
referred to herein or therein, in accordance with the terms hereof and thereof,
and, in the case of any extension of time of payment, in whole or in part, that
all such amounts shall be paid in full when due (whether at stated maturity, by
acceleration or otherwise) in accordance with the terms of such extension. The
Guarantor hereby unconditionally agrees that upon default in the payment when
due (whether at stated maturity, by acceleration or otherwise) of any of such
principal, interest or other amounts, the Guarantor shall forthwith pay and
perform the same in the money and funds, at the time, in the place and in the
manner provided for such payment in this Agreement, the Notes or other
applicable document.
6.2. Validity. The Guarantor hereby agrees that the guarantee provided
by this Section 6 is a continuing guarantee of payment and not merely of
collection, that it is a primary, independent obligation of the Guarantor and
that the Guarantor's obligations hereunder shall be absolute, unconditional and
irrevocable, irrespective of (a) any invalidity, illegality, irregularity or
unenforceability of, or defect in or any change in this Agreement, the Notes or
any other document referred to herein or therein, (b) any amendment,
modification or waiver of any term or condition of this Agreement or the Notes
or any such other document, or any waiver or consent by the Administrative
Agent or any Bank to any departure from the terms hereof or thereof, (c) any
sale, exchange, release, surrender, realization upon or other dealings with any
security or guarantee for any of the obligations guaranteed hereby (whether now
or hereafter granted), (d) any settlement or compromise of such obligations,
(e) the absence of any action to demand or enforce any of such obligations
against the Company, (f) the recovery of any judgment against the Company or
any other Person, or any action to enforce the same, (g) the recovery of any
claim under any other guarantee of or security for such obligations or under
any applicable insurance, or (h) any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a guarantor or surety
(other
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than full and strict compliance with and satisfaction of such liabilities).
6.3. Waivers. The Guarantor hereby waives notice of acceptance of the
guarantee provided by this Section 6, notice of the extension of any credit or
financial accommodation, notice of the making of any Loan or the incurrence of
any other Obligations, notice of any extension of any Commitment Termination
Date, demand of payment, filing of claims with a court in the event of
bankruptcy of the Company or any other Person, any right to require a
proceeding or the filing of a claim first against the Company, any other
guarantor, any other Person, any letter of credit, or any security for any of
the Obligations, presentment, protest, notice of default, dishonor or
nonpayment and any other notice and all demands whatsoever. The Guarantor
hereby further waives all setoffs and counterclaims against the Company, the
Administrative Agent, the Agent, the Co-Agents and each of the Banks.
6.4. Subordination and Subrogation. The Guarantor hereby subordinates
all present and future claims, now held or hereafter acquired, against the
Company as a creditor or contributor of capital, or otherwise, to the prior and
final payment in full to the Banks of all of the Obligations. If, without
reference to the provisions of this Section 6.4, the Guarantor would at any
time be or become entitled to receive any payment on account of any claim
against the Company, whether in insolvency, bankruptcy, liquidation or
reorganization proceedings, or otherwise, the Guarantor shall and does hereby
irrevocably direct that all such payments shall be made directly to the
Administrative Agent on account of the Banks until all Obligations shall be
paid in full. Should the Guarantor receive any such payment, the Guarantor
shall receive such amount in trust for the Banks and shall immediately pay over
to the Administrative Agent such amount as provided in the preceding sentence.
Anything contained in this Section 6 to the contrary notwithstanding, the
obligations of the Guarantor hereunder shall be limited to a maximum aggregate
amount equal to the largest amount that would not render its obligations
hereunder subject to avoidance as a fraudulent transfer or conveyance under
Section 548 of Title 11 of the United States Code or any applicable provisions
of comparable state law (collectively, the "Fraudulent Transfer Laws"), in each
case after giving effect to all other liabilities of the Guarantor, contingent
or otherwise, that are relevant under the Fraudulent Transfer Laws
(specifically excluding, however, any liabilities of the Guarantor in respect
of intercompany indebtedness to the
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Company or other Affiliates of the Company to the extent that such
indebtedness would be discharged in an amount equal to the amount paid by the
Guarantor hereunder) and after giving effect as assets to the value (as
determined under the applicable provisions of the Fraudulent Transfer Laws) of
any rights to subrogation or contribution of the Guarantor pursuant to (i)
applicable law or (ii) any agreement providing for an equitable allocation
among the Guarantor and other Affiliates of Company of obligations arising
under guaranties by such parties.
The Guarantor further agrees that any rights of subrogation the Guarantor
may have against the Company, and any rights of contribution the Guarantor may
have against Company, and any rights of contribution the Guarantor may have
against any other guarantor of the Obligations hereunder, shall be junior and
subordinate to any rights the Administrative Agent or the Banks may have
against such other guarantor.
6.5. Acceleration. The Guarantor agrees that, as between the Company
on the one hand, and the Administrative Agent, the Agent, the Co-Agents and the
Banks, on the other hand, the obligations of the Company guaranteed under this
Section 6 may be declared to be forthwith due and payable, or may be deemed
automatically to have been accelerated, as provided in Section 10 hereof for
purposes of this Section 6, notwithstanding any stay, injunction or other
prohibition (whether in a bankruptcy proceeding affecting the Company or
otherwise) preventing such declaration as against the Company and that, in the
event of such declaration or automatic acceleration, such obligations (whether
or not due and payable by the Company) shall forthwith become due and payable
by the Guarantor for purposes of this Section 6.
6.6. Reinstatement. The Guarantor covenants that the guarantee
provided by this Section 6 will not be discharged except by complete and final
payment of all of the Obligations and all obligations of the Guarantor arising
out of this guarantee. In the event that any payment is made by the Company
hereunder or by the Guarantor under this guarantee, and is thereafter required
to be rescinded or otherwise restored or paid over to the Company, the
Guarantor or any other person (whether upon the insolvency or bankruptcy of the
Company or the Guarantor or otherwise), the Guarantor's obligations hereunder
shall immediately and automatically be reinstated as though such payment had
not been made.
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Section 7. Conditions Precedent.
7.1. Basic Conditions. The obligation of the Banks to make the Loans
hereunder on the occasion of the initial borrowing pursuant to Section 2.2
hereof is subject to the receipt by the Administrative Agent, on or before
February 15, 1993, of each of the following documents, each of which shall be
satisfactory to the Administrative Agent in form and substance:
(a) Certified copies of the certificate of incorporation and
bylaws of the Company and the Guarantor and all corporate action and (if
necessary) stockholder action taken by the Company and the Guarantor
approving this Agreement and the Notes and borrowings by the Company
hereunder and the guarantee by the Guarantor hereunder (including, without
limitation, a certificate setting forth the resolutions of the Boards of
Directors of the Company and the Guarantor adopted in respect of the
transactions contemplated hereby).
(b) A certificate of each of the Company and the Guarantor in
respect of each of the officers (i) who is authorized to sign this
Agreement or the Notes on its behalf and (ii) who will, until replaced by
another officer or officers duly authorized for that purpose, act as its
representative for the purposes of signing documents and giving notices and
other communications in connection with this Agreement and the transactions
contemplated hereby. The Administrative Agent, the Agent, the Co-Agents
and the Banks may conclusively rely on such certificate until the
Administrative Agent receives notice in writing from the Company or the
Guarantor, respectively, to the contrary.
(c) Certificates, as of a recent date, from the appropriate
authorities for each jurisdiction in which the Company and the Guarantor
are incorporated or qualified to do business, as to the good standing of
the Company and the Guarantor, respectively, in each such jurisdiction.
(d) A certificate of a senior officer of each of the Company
and the Guarantor to the effect set forth in the first sentence of Section
7.2 hereof.
(e) An opinion of Allen P. Allweiss, Esq., General Counsel to
the Company and the Guarantor, substantially in the form of Exhibit B
hereto.
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(f) The Funded Debt Ratio Notice and the Total Debt Ratio
Notice for the Company's four-Fiscal Quarter period ended November 30, 1992
(or, if the initial Loans hereunder are made more than 60 days after the
end of any succeeding Fiscal Quarter, for the four-Fiscal Quarter period
ended as of the end of the most recent such succeeding Fiscal Quarter).
(g) The Notes, duly executed and delivered by the Company to
the order of each Bank and otherwise appropriately completed, bearing the
executed guarantee of the Guarantor.
(h) Evidence of the payment of all fees and expenses then
payable pursuant to Sections 2.3 and 12.3 hereof.
(i) Such other documents as the Administrative Agent or any
Bank may reasonably request including, without limitation, all requisite
governmental approvals and filings.
7.2. Additional Conditions. The obligation of the Banks to
make Loans to the Company on the occasion of each borrowing (including,
without limitation, the initial borrowing) shall be subject to the further
conditions that, as of the date of the making of such Loans and after giving
effect thereto:
(a) no Default or Event of Default shall have occurred and be
continuing;
(b) the representations and warranties made by the Company and
the Guarantor in Section 8 hereof and in any other certificate or other
document delivered in connection with this Agreement shall be true in all
material respects on and as of the date of the making of such Loans with
the same force and effect as if made on and as of such date (including,
without limitation, that there shall have occurred no material adverse
change since August 31, 1992 in the consolidated financial condition or
operations, or the business taken as a whole, of the Company and its
consolidated Subsidiaries from that set forth in their financial statements
dated as of August 31, 1992, except as disclosed to the Banks in writing
prior to the date of this Agreement);
(c) the Company shall have furnished evidence satisfactory to
the Banks either (i) that it has committed to redeem Senior Notes by
furnishing proper
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notice to the trustee thereof or (ii) that it has repurchased Senior
Notes in the open market following the date hereof, in either case in an
aggregate principal amount not less than the aggregate principal amount of
the Loans to be made on such date;
(d) the Company shall be in compliance with the financial
covenants under the Revolving Credit Agreement, the 1992 Term Loan
Agreement and this Agreement both before and immediately after the making
of such Loan on both an historical and a pro forma basis; and
(e) payment in full of all fees and expenses payable pursuant
to Sections 2.3 and 12.3 hereof.
Each notice of borrowing made pursuant to Section 2.2 hereof shall
constitute a certification by the Company and the Guarantor as to the
circumstances specified in paragraphs (a), (b), (c) and (d) above (both as of
the date of such notice and, unless the Company or the Guarantor otherwise
notifies the Administrative Agent prior to the date of such borrowing, as of
the date of such borrowing).
Upon the execution of this Agreement by each of the Administrative
Agent, the Agent, the Co-Agents and the Banks, the obligations (if any) of the
Agent, the Co-Agents, the Administrative Agent or the Banks under any of the
Commitment Letters shall cease to be of any force or effect, except for
provisions (if any) of the Commitment Letters that limit the amount for which
the Agent and the Co-Agents may seek reimbursement by the Company for expenses
incurred by them in connection with the negotiation, preparation and review of
this Agreement and related documents.
Section 8. Representations and Warranties. Each of the Company and
the Guarantor represents and warrants to the Administrative Agent and the Banks
that:
8.1. Corporate Existence. Each of the Company and the Guarantor
and each of the other Material Subsidiaries (a) is a corporation duly
organized and validly existing under the laws of the jurisdiction of its
incorporation; (b) has all requisite corporate power, and has all material
governmental licenses, authorizations, consents and approvals, necessary to own
its assets and carry on its business as presently conducted, and conducts its
business in compliance with the requirements set forth in Section 9.3(b) hereof;
and (c) is qualified to do business in all jurisdictions in which the nature of
the business conducted by it makes such
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qualification necessary and where failure so to qualify would have a
material adverse effect on its business, financial condition or
operations.
8.2. Financial Condition. The consolidated balance sheet of the
Company and its consolidated Subsidiaries (including, without limitation, the
Guarantor) as at August 31, 1992, and the unaudited consolidated balance sheet
of the Company and its consolidated Subsidiaries (including without limitation,
the Guarantor) as at November 30, 1992, and the related consolidated statements
of income, retained earnings and changes in financial position of the Company
and its consolidated Subsidiaries (including, without limitation, the
Guarantor) for the Fiscal Year, or Fiscal Quarter, respectively, ended on such
date, with the opinion thereon (in the case of such year-end financial
statements) of Deloitte & Touche, the independent auditors of the Company,
heretofore furnished to the Administrative Agent and each of the Banks,
are complete and correct and fairly present the consolidated financial
condition of the Company and its consolidated Subsidiaries (including, without
limitation, the Guarantor) as at such dates and the consolidated results of
their operations for such Fiscal Year or Fiscal Quarter, respectively, ended on
such dates, all in accordance with GAAP applied on a consistent basis (subject,
in the case of such quarterly financial statements, to normal year-end audit
adjustments). Neither the Company nor any of its consolidated Subsidiaries
(including, without limitation, the Guarantor) had on such dates any material
contingent liabilities, liabilities for taxes, unusual forward or long-term
commitments or unrealized or anticipated losses from any unfavorable
commitments, except as referred to or reflected or provided for in such balance
sheets as at such dates. Since August 31, 1992, there has been no material
adverse change in the consolidated financial condition or operations, or the
business taken as a whole, of the Company and its consolidated Subsidiaries
(including, without limitation, the Guarantor) from that set forth in such
financial statements as at such date, except as disclosed to the Banks in
writing prior to the date of this Agreement.
8.3. Litigation. Except as heretofore disclosed to the Banks in
writing or in any SEC Report of the Company delivered to the Banks prior to the
date hereof, there is no action, proceeding or investigation by or before any
court or any arbitral, governmental or regulatory authority or agency, pending
or (to the knowledge of the Company or the Guarantor) threatened against the
Company or the Guarantor or any Subsidiary of either thereof which, if
adversely determined, could have a material adverse effect on the consolidated
financial condition or business of the Company and its con-
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solidated Subsidiaries (including, without limitation, the Guarantor).
8.4. No Breach. Neither the execution and delivery of this Agreement
and the Notes, nor the consummation of the transactions contemplated hereby,
nor the compliance by the Company or the Guarantor with the terms and
provisions hereof or thereof, will (a) conflict with or result in a breach of,
or require any consent or vote of any Person under, the certificate of
incorporation or bylaws of either the Company or the Guarantor, or any
agreement or instrument to which the Company, the Guarantor or any Subsidiary
of either thereof is a party or to which it is subject, (b) violate any
applicable law, regulation, order, writ, injunction or decree of any court or
governmental authority or agency, or (c) constitute a default or result in the
imposition of any Lien on any of the assets, revenues or other properties of
the Company, the Guarantor or any Subsidiary of either thereof under any such
agreement or instrument.
8.5. Corporate Action. The execution, delivery and performance by each
of the Company and the Guarantor of this Agreement and the Notes, and the
consummation of the transactions contemplated hereby, are within the scope of
its corporate power, and have been duly authorized by all necessary corporate
action on the part of each of them. This Agreement constitutes, and each of
the Notes, when duly executed and delivered will constitute, the legal, valid
and binding obligation of the Company and the Guarantor, enforceable against
each of them in accordance with their respective terms, except as such
enforceability may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or other similar laws of general applicability affecting the
enforcement of creditors' rights and (b) the application of general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
8.6. Approvals. No authorizations, approvals or consents of, and no
filings or registrations with, any governmental or regulatory authority or
agency are necessary for the execution, delivery or performance by the Company
or the Guarantor of this Agreement or the Notes or for the validity or
enforceability thereof, or for the consummation of the transactions
contemplated hereby.
8.7. Use of Loans. Neither the Company, the Guarantor nor any
Subsidiary of either of them is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose, whether
imme-
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<PAGE> 45
diate, incidental or ultimate, of buying or carrying margin stock (within
the meaning of Regulation U or X of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan will be used to buy or
carry any margin stock.
8.8. ERISA. Each of the Company and the Guarantor and the ERISA
Affiliates have fulfilled its obligations under the minimum funding standards
of ERISA and the Code with respect to each Plan, are in compliance in all
material respects with the presently applicable provisions of ERISA and the
Code and have not incurred any liability to the PBGC or any Plan or
Multiemployer Plan.
8.9. Taxes.
(a) United States Federal income tax returns of the Company, the Guarantor
and the Subsidiaries have been examined and closed through Fiscal 1985, have
been examined for Fiscal 1986 and Fiscal 1987 and are under examination for
Fiscal 1988 and Fiscal 1989.
(b) Each of the Company, the Guarantor and the Subsidiaries has filed all
United States Federal income tax returns and all other material tax returns
which are required to be filed by it and has paid all taxes due pursuant to
such returns or pursuant to any assessment received by the Company, the
Guarantor or any Subsidiary. The charges, accruals and reserves on the books
of the Company, the Guarantor and the Subsidiaries in respect of taxes and
other governmental charges are, in the opinion of the Company and the
Guarantor, adequate.
8.10. Credit Agreements. Schedule 1 hereto and all SEC Reports of the
Company completely and correctly disclose each credit agreement, loan
agreement, indenture, purchase agreement, guarantee or other arrangement
providing for or otherwise relating to any extension of credit or commitment
for any extension of credit (other than pursuant to any letter of credit
excepted from the definition of Indebtedness herein under paragraph (c)
thereof) to, or guarantee by, the Company, the Guarantor or any other Material
Subsidiary the aggregate principal or face amount of which equals or exceeds
(or may equal or exceed) $10,000,000 and accurately describes the aggregate
principal or face amount outstanding and which may become outstanding under
each thereof.
8.11. Ownership of Assets. Each of the Company, the Guarantor and each
other Material Subsidiary has good and marketable title to all assets reflected
on the audited
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consolidated balance sheet as of August 31, 1992 referred to in
Section 8.2 hereof (other than the assets which were disposed of in connection
with the Silver King Distribution, as reflected in Note 6.c to the Condensed
Consolidated Financial Statements contained in the Company's Quarterly Report
on Form 10-Q for the Fiscal Quarter ended November 30, 1992), subject to:
(a) no Liens other than the Liens specified in Footnotes D and G
to such balance sheet and, on the date hereof, such additional Liens as are
listed on Schedule 1 hereto, and on any date hereafter, additional Liens
permitted by Section 9.5 hereof and either (i) listed in Footnotes to the
financial statements delivered pursuant to Section 9.1(a) or (b) hereof or
(ii) otherwise communicated to the Banks in writing, and
(b) on any date hereafter, dispositions permitted by Section 9.7
hereof and either (i) described in the financial statements, including any
notes thereto, delivered pursuant to Section 9.1(a) or (b) hereof or (ii)
otherwise communicated to the Banks in writing.
8.12. Pari Passu Obligations. The obligations of the Company and the
Guarantor under this Agreement and the Notes rank and will rank at least pari
passu in all respects with all other unsubordinated Indebtedness of the Company
and the Guarantor, respectively, except for Indebtedness that is senior solely
by operation of applicable law, and except that Indebtedness of the Company and
the Guarantor secured as permitted by Section 9.5 hereof ranks senior in right
of security with respect to the collateral therefor. Without limiting the
generality of the foregoing, all principal of and interest (including
post-petition interest allowable in any proceeding under any bankruptcy law) on
and other amounts payable in connection with this Agreement constitute "Senior
Indebtedness" as defined in, and for all purposes of, the Convertible
Subordinated Debentures (and is entitled to the benefit of the subordination
provisions relating thereto).
8.13. Investment Company Act. Neither the Company nor the Guarantor is,
and neither is "controlled by," an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
8.14. Environmental Matters. To the best of the knowledge of the
Company and the Guarantor, all operations and conditions at or in the premises
in which the Company and the Guarantor conduct their business comply in all
material respects with all Federal, state and local laws, rules and
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regulations relating to environmental matters, pollution, waste disposal
or industrial hygiene including, without limitation, such laws, rules and
regulations relating to asbestos (collectively, "Environmental Laws"). None of
the operations of either the Company or the Guarantor is subject to any judicial
or administrative proceeding alleging the violation of or liability under any
Environmental Law.
Section 9. Covenants of the Company and the Guarantor. Each of the
Company and the Guarantor agrees that, so long as any of the Commitments are
in effect and until payment in full of all Obligations:
9.1. Financial Statements; Reports and Other Information. The Company
shall deliver to the Administrative Agent, with sufficient copies for each of
the Banks:
(a) as soon as available and in any event within 60 days after
the end of each of the first three Fiscal Quarters of each Fiscal Year of
the Company, consolidated statements of income, retained earnings and
changes in financial position of the Company and its consolidated
Subsidiaries (including, without limitation, the Guarantor) for such period
and for the period from the beginning of such Fiscal Year to the end of
such period, and the related consolidated balance sheet as at the end of
such period, setting forth in each case in comparative form the
corresponding figures for the corresponding period in the preceding Fiscal
Year, accompanied by a certificate of a senior financial officer of the
Company, which certificate shall state that such financial statements
fairly present the consolidated financial condition and results of
operations of the Company and its consolidated Subsidiaries in accordance
with GAAP, consistently applied, as at the end of, and for, such period
(subject to normal year-end audit adjustments);
(b) as soon as available and in any event within 120 days
after the end of each Fiscal Year of the Company, consolidated statements
of income, retained earnings and changes in financial position of the
Company and its consolidated Subsidiaries (including, without limitation,
the Guarantor) for such year and the related consolidated balance sheet as
at the end of such year, setting forth in each case in comparative form the
corresponding figures for the preceding Fiscal Year, and accompanied by an
opinion thereon of independent certified public accountants of recognized
national standing, which opinion shall state that such financial statements
fairly
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present the consolidated financial condition and results of operations
of the Company and its consolidated Subsidiaries (including, without
limitation, the Guarantor) as at the end of, and for, such Fiscal Year, and
a certificate of the chief financial officer of the Company that, in
examining the financial condition of the Company and its Subsidiaries for
such Fiscal Year, he or she obtained no knowledge, except as specifically
stated, of any Default arising from the breach of the covenants provided for
in Sections 9.4, 9.6, 9.7, 9.11, 9.12, 9.13 or 9.17 hereof;
(c) promptly upon their becoming available, copies of all
registration statements and regular SEC Reports, if any, which the Company
shall have filed with the Securities and Exchange Commission (or any
governmental agency substituted therefor) or any national securities
exchange;
(d) promptly upon the mailing thereof to the shareholders of
the Company generally, copies of all financial statements, reports and
proxy statements so mailed;
(e) as soon as possible, and in any event within ten days
after either the Company or the Guarantor knows or has reason to know that
any of the events or conditions specified below with respect to any Plan or
Multiemployer Plan has occurred or exists, a statement signed by a senior
financial officer of the Company or the Guarantor setting forth details
respecting such event or condition and the action, if any, which the
Company, the Guarantor or their ERISA Affiliate proposes to take with
respect thereto (and a copy of any report or notice required to be filed
with or given to PBGC by the Company, the Guarantor or an ERISA Affiliate
with respect to such event or condition):
(i) any reportable event, as defined in
Section 4043(b) of ERISA and the regulations issued
thereunder, with respect to a Plan, as to which PBGC has
not by regulation waived the requirement of Section
4043(a) of ERISA that it be notified within 30 days of the
occurrence of such event (provided that a failure to meet
the minimum funding standard of Section 412 of the Code or
Section 302 of ERISA shall be a reportable event
regardless of the issuance of any waivers in accordance
with Section 412(d) of the Code);
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(ii) the filing under Section 4041 of ERISA of
a notice of intent to terminate any Plan or the
termination of any Plan;
(iii) the institution by PBGC of proceedings
under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Plan, or
the receipt by the Company or any ERISA Affiliate of a
notice from a Multiemployer Plan that such action has
been taken by PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal by the
Company, the Guarantor or any ERISA Affiliate under
Section 4201 or 4204 of ERISA from a Multiemployer Plan,
or the receipt by the Company, the Guarantor or any ERISA
Affiliate of notice from a Multiemployer Plan that is in
reorganization or insolvency pursuant to Section 4241 or
4245 of ERISA or that it intends to terminate or has
terminated under Section 4041A of ERISA; and
(v) the institution of a proceeding by a
fiduciary of any Multiemployer Plan against the Company,
the Guarantor or any ERISA Affiliate to enforce Section
515 of ERISA, which proceeding is not dismissed within 30
days;
(f) promptly after either the Company or the Guarantor knows
or has reason to know that any Default has occurred, a notice of such
Default, describing the same in reasonable detail;
(g) not later than (i) 60 days after the last day of each of
the first three Fiscal Quarters of each of the Company's Fiscal Years and
(ii) 120 days after the last Fiscal Quarter of each such Fiscal Year, a
notice, substantially in the form of Exhibit D-1 hereto (the "Funded Debt
Ratio Notice"), setting forth the Funded Debt Ratio for the four-Fiscal
Quarter period ended on the last day of such Fiscal Quarter and a notice,
substantially in the form of Exhibit D-2 hereto (the "Total Debt Ratio
Notice"), setting forth the Total Debt Ratio for the four-Fiscal Quarter
period ended on the last day of such Fiscal Quarter, which notices shall
set forth calculations and computations in sufficient detail to show the
amount and nature of each of the components of the Funded Debt Ratio and
the Total Debt Ratio, respectively, for such four-Fiscal Quarter period;
provided that in the case of the Funded Debt Ratio Notice
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and the Total Debt Ratio Notice delivered with respect to each Fiscal
Quarter specified in clause (ii) above, the Company shall (if the final form
of either of such Notices is not yet available) deliver such Notice in a
preliminary form within 60 days of the end of such Fiscal Quarter setting
forth all matters required by this paragraph (g) to be included in the final
form thereof as accurately as shall be possible based upon information
available to the Company at such time; and
(h) from time to time such other information regarding the
business or financial condition of the Company or any of the Subsidiaries
(including, without limitation, any Plan or Multiemployer Plan and any
reports or other information required to be filed under ERISA) as any Bank
or the Administrative Agent may reasonably request.
Each of the Company and the Guarantor will furnish to the Administrative Agent,
with sufficient copies for the Banks, at the time it furnishes each set of
financial statements pursuant to paragraph (a) or (b) above, a certificate of a
senior financial officer of the Company and the Guarantor, substantially in the
form of Exhibit C hereto (i) to the effect that, to the best of his or her
knowledge, after full inquiry, no Default has occurred and is continuing (or,
if any Default has occurred and is continuing, describing the same in
reasonable detail), (ii) setting forth in reasonable detail the computations
necessary to determine whether the Company and the Guarantor are in compliance
with Sections 9.11, 9.12 and 9.13 hereof as at the end of the respective Fiscal
Quarter or Fiscal Year and (iii) setting forth additions to the list of
Subsidiaries that are Material Subsidiaries contained in the certificate most
recently delivered pursuant to this provision and containing either (A) a
representation that all other Subsidiaries combined do not constitute a
Material Subsidiary Group as at such date or (B) a representation that all
other Subsidiaries do constitute a Material Subsidiary Group as at such date
and identifying any such Subsidiary whose aggregate book value of tangible
assets exceeds $10,000,000 as at such date. In addition, each of the Company
and the Guarantor hereby agrees to furnish the Administrative Agent with an
updated notice with respect to the information specified in clause (iii) of the
preceding sentence upon the occurrence of any event either that has resulted or
could result in a Subsidiary becoming a Material Subsidiary or a group of
Subsidiaries becoming a Material Subsidiary Group or that could make the
representation contained in the most recently delivered certificate furnished
pursuant to this Section 9.1 no longer accurate.
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9.2. Litigation. Without limiting the obligations of the Company under
Section 9.1(h) hereof, each of the Company and the Guarantor shall promptly
give to each Bank notice of all court or arbitral proceedings and
investigations, and of all proceedings and investigations before any
governmental or regulatory authority or agency, affecting the Company, the
Guarantor or any Subsidiary, except proceedings or investigations which, if
adversely determined, would not have a material adverse effect on the
consolidated financial condition or operations, or the business taken as a
whole, of the Company and its consolidated Subsidiaries (including, without
limitation, the Guarantor).
9.3. Corporate Existence, Etc. Each of the Company and the Guarantor
will, and will cause each of their respective Subsidiaries (but in the case of
paragraphs (a), (d) and (e) of this Section 9.3, only those Subsidiaries which
are Material Subsidiaries) to:
(a) preserve and maintain its corporate existence and all of
its material rights, privileges, licenses and franchises;
(b) comply with the requirements of all applicable laws,
rules, regulations and orders of governmental or regulatory authorities if
failure to comply with such requirements would materially and adversely
affect the consolidated financial condition or operations, or the business
taken as a whole, of the Company and its consolidated Subsidiaries;
(c) pay and discharge all taxes, assessments and governmental
charges or levies imposed on it or on its income or profits or on any of
its property prior to the date on which penalties attach thereto, except
for any such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and against which
adequate reserves are being maintained in accordance with GAAP;
(d) maintain all of its properties used or useful in its
business in good working order and condition, ordinary wear and tear
excepted;
(e) permit representatives of any Bank or the Administrative
Agent, during normal business hours, to examine, copy and make extracts
from its books and records, to inspect its properties, and to discuss its
business and financial condition with its officers, all
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to the extent reasonably requested by such Bank or the Administrative Agent
(as the case may be); and
(f) keep insured by financially sound and reputable insurers
all property of a character usually insured by corporations engaged in the
same or similar business similarly situated against loss or damage of the
kinds and in the amounts customarily insured against by such corporations
and carry such other insurance as is usually carried by such corporations.
9.4. Payment of Obligations. Without limiting the obligations of the
Company and the Guarantor under Section 9.3 hereof, each of the Company and the
Guarantor will, and will cause each of their respective Subsidiaries to, pay
and discharge at or before the date when due, all of their respective material
obligations and other liabilities, including, without limitation, tax and
pension liabilities, except where such obligations or liabilities are being
contested in good faith and by appropriate proceedings, and maintain, in
accordance with GAAP, appropriate reserves for the accrual of all of the
foregoing.
9.5. Liens. Neither the Company nor the Guarantor will, nor will
either of them permit any of their respective Subsidiaries to, create, incur,
assume or suffer to exist any Lien on any asset, revenue or other property now
or hereafter owned or acquired by it (including, without limitation, the stock
of Subsidiaries) except:
(a) Liens existing on the date hereof securing Indebtedness
outstanding on such date and identified in Footnote D and G to the
Company's audited consolidated balance sheet as of August 31, 1992 or on
Schedule 1 hereto;
(b) any purchase money security interest hereafter created on
any property of the Company, the Guarantor or such Subsidiary securing
Indebtedness incurred solely for the purpose of financing all or a portion
of the purchase price of such property; provided that: (i) such Lien (A) is
created within six months of the acquisition of such property, (B) extends
to no other property and (C) secures no other Indebtedness; (ii) the
principal amount of Indebtedness secured by such Lien shall at no time
exceed the lesser of (A) the cost to such Person of the property subject
thereto or (B) the fair value of such property (as determined in good faith
by the Board of Directors of such Person) at the time of the acquisition
thereof; (iii) such Lien does not extend to
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or in any way encumber any inventory of the Guarantor purchased in the
ordinary course of business; and (iv) the aggregate principal amount of
all Indebtedness secured by all such Liens shall not exceed at any time
$15,000,000 less the aggregate principal amount of all Indebtedness secured
by Liens permitted under Section 9.5(i) hereof;
(c) carriers', warehousemen's, mechanics', materialmen's and
repairmen's liens arising in the ordinary course of business of the
Company, the Guarantor or such Subsidiary and not overdue for a period of
more than 30 days or which are being contested in good faith and by
appropriate proceedings;
(d) Liens created in connection with the lease by the Company,
the Guarantor or any of their respective Subsidiaries of any property
(whether real, personal or mixed) (i) now or hereafter owned by the
Company, the Guarantor or any such Subsidiary which has been sold or
otherwise transferred by any thereof to any other Person within six months
of the acquisition thereof or (ii) which any of the Company, the Guarantor
or any such Subsidiary, as the case may be, intends to use for
substantially the same purpose as any property described in clause (i)
above;
(e) Liens in favor of consignors against inventory being sold
on consignment in the ordinary course of business by the Company, the
Guarantor or any Subsidiary;
(f) Liens created in substitution for any Liens permitted by
paragraphs (a), (b) and (d) of this Section 9.5, provided that (i) any such
newly-created Lien does not extend to any other or additional property and
(ii) (A) if permitted by such paragraph (a) or (b), does not secure any
other (or additional principal amount of) Indebtedness and (B) if permitted
by such paragraph (d) does not secure any other obligations under such
lease or any obligations under any other lease;
(g) Liens existing on assets at the time of acquisition
thereof by the Company, the Guarantor or the respective Subsidiary and not
incurred in anticipation of or in connection with such acquisition;
(h) operating leases and Capital Leases, to the extent the
same would constitute Liens, pursuant to which the Company, the Guarantor
or the respective Subsidiary
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is lessee, and incurred by such Person in the ordinary course of its
business; and
(i) in addition to Liens otherwise permitted by this Section
9.5, Liens on property of the Company, the Guarantor or any of their
respective Subsidiaries (i) which secure Indebtedness having an aggregate
principal amount not exceeding at any time $15,000,000 less the aggregate
principal amount of all Indebtedness secured by Liens permitted under
Section 9.5(b) hereof and (ii) each of which shall be limited to specified
items of collateral (and not a general Lien on all assets of such Person)
having a book value not greater than 150% of the aggregate principal amount
of the Indebtedness secured by such Lien;
provided, however, that (A) all capital stock of all Subsidiaries and (B) the
Silver King Note will in any event be maintained free and clear of all Liens
whatsoever.
9.6. Mergers. Neither the Company nor the Guarantor will, and neither
of them will permit any other Material Subsidiary or Subsidiaries constituting
a Material Subsidiary Group to,
(a) consolidate or merge with or into any other Person, except that
(i) a Wholly-Owned Subsidiary of the Company or the
Guarantor (other than the Guarantor) may merge with or consolidate
into the Company or the Guarantor (provided that the Company or
the Guarantor, as the case may be, shall be the survivor of such
merger or consolidation) or another Wholly-Owned Subsidiary of the
Company or the Guarantor, and
(ii) the Company may merge with or consolidate into
another corporation that is organized under the laws of a state in
the United States, provided that (A) the Company is the surviving
corporation in such merger or consolidation, and (B) the Company
has delivered a notice to the Administrative Agent and the Banks
not less than 30 days prior to the consummation of any such merger
or consolidation that sets forth in reasonable detail information
indicating compliance with the terms of this clause (ii) to
Section 9.6(a), or
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(b) sell, assign, convey, lease, sublet, transfer or otherwise
dispose of all or substantially all of its assets to any Person, whether in
a single transaction or in a series of related transactions, except that a
Wholly-Owned Subsidiary of the Company or the Guarantor (other than the
Guarantor) may sell, assign, convey, lease, sublet, transfer or otherwise
dispose of all or substantially all of its assets to the Company or to
another Wholly-Owned Subsidiary of the Company or the Guarantor;
provided, however, that none of the foregoing transactions shall be permitted
if a Default or an Event of Default has occurred and is continuing or would
result from the consummation of any such transaction.
It is understood and agreed that any consolidation, merger, sale,
assignment, conveyance, letting, subletting, transfer or other disposition of
all or substantially all of the assets of a Non-Material Subsidiary shall be
permitted under this Section 9.6, so long as such Non-Material Subsidiary,
together with all other Non-Material Subsidiaries with respect to which there
has been, since December 18, 1992, a consolidation, merger, sale, assignment,
conveyance, letting, subletting, transfer or other disposition of all or
substantially all of its assets, does not constitute a Material Subsidiary
Group.
It is further understood and agreed that the value of the Silver King
Distribution shall not be aggregated with other assets of the Company for
purposes of determining the Company's compliance with this Section 9.6.
9.7. Dispositions of Assets. Neither the Company nor the Guarantor
will, and neither of them will permit any other Material Subsidiary to, sell,
assign, convey, lease, sublet, transfer or otherwise dispose of any of the
assets, business or other properties of the Company, the Guarantor or any such
Material Subsidiary to any Person, whether in a single transaction or in a
series of related transactions, except for:
(i) sales of inventory (but not of accounts
receivable) in the ordinary course of business of the Company, the
Guarantor or any such Subsidiary;
(ii) dispositions of assets in the ordinary course of
business in arm's-length transactions by the Company, the
Guarantor or any such Subsidiary to the extent such assets either
are no longer used or
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useful to the Company, the Guarantor or such Subsidiary or are
promptly replaced by other assets of at least equal usefulness;
and
(iii) any such disposition by the Company, the
Guarantor or any Wholly-Owned Subsidiary to the Company, the
Guarantor or any Wholly-Owned Subsidiary, as the case may be;
provided, however, that the Company and the Guarantor shall
maintain their respective assets and operations substantially in
accordance with their respective assets and operations as of the
date hereof, and that in the case of any such disposition by the
Company or the Guarantor to a Wholly-Owned Subsidiary, each of the
Company and the Guarantor agree that such disposition shall be in
the ordinary course of business consistent with past practice and
shall be accomplished upon fair and reasonable terms to the
Company or the Guarantor;
provided that the Silver King Note will in any event be maintained free and
clear of all dispositions whatsoever.
9.8. Ranking. (a) Each of the Company and the Guarantor will cause
its obligations under this Agreement, the Notes and each other document now or
hereafter entered into with respect hereto or thereto to rank at least pari
passu in right of payment and of security with all other unsubordinated
Indebtedness of the Company or the Guarantor, as the case may be, except that
Indebtedness secured by any Lien permitted by Section 9.5 hereof may rank
senior in right of security with respect to the collateral subject to such
Lien. Without limiting the generality of the foregoing, the Company covenants,
and will take all steps necessary to assure, that its obligations under this
Agreement will at all times constitute "Senior Indebtedness" as defined in, and
for all purposes of, the Convertible Subordinated Debentures (and will be
entitled to the benefits of the subordination provisions relating thereto).
(b) Each of the Company and the Guarantor will cooperate with the
Administrative Agent and the Banks and execute such further instruments and
documents as any Bank may reasonably request to carry out the intentions of
this Section 9.8. Without limiting the generality of the foregoing, if the
Company or the Guarantor hereafter issues or otherwise incurs any subordinated
Indebtedness, each of them will execute and cause to be executed such further
documents as any Bank may reasonably request to ensure that the obligations of
the Company and the Guarantor under this
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Agreement and the Notes at all times rank senior to such subordinated
Indebtedness.
(c) Nothing in this Section 9.8 shall be construed so as to limit the
ability of the Company or the Guarantor to incur any Indebtedness (consistent
with paragraphs (a) and (b) above and otherwise permitted by this Agreement) on
a basis pari passu with their respective Indebtedness under this Agreement and
the Notes.
9.9. Business; Fiscal Year. Neither the Company nor the Guarantor will
make any material change in the nature of its business from that in which it is
engaged on the date of this Agreement, and neither the Company nor the
Guarantor shall cause, or permit any of their respective Subsidiaries to cause,
any other Subsidiary to conduct business or operations substantially similar to
the business or operations conducted by the Guarantor on the date of this
Agreement. Neither the Company nor the Guarantor will change its fiscal year
from that currently in effect on the date hereof, as set forth in the
definition of "Fiscal Year" in Section 1.1 hereof; provided, however, that
following the consummation of the Liberty Media Transaction, the Company may
change its fiscal year to coincide with Liberty Media's fiscal year upon notice
to the Administrative Agent and, upon receipt of such notice by the
Administrative Agent, the definitions of "Fiscal Quarter" and of "Fiscal Year"
in Section 1.1 hereof shall be modified to reflect such change in fiscal year,
and the covenants contained in Sections 9.11, 9.12 and 9.13 shall be adjusted
in the reasonable discretion of the Administrative Agent so that the ratios and
amounts specified in such Sections at all times, notwithstanding such
adjustment, are equivalent to the ratios and amounts that would have been in
effect if such change in fiscal year had not been made.
9.10. Transactions with Affiliates. Neither the Company nor the
Guarantor will, and neither will permit any of its respective Subsidiaries to,
enter into or be a party to any transaction (including but not limited to any
merger, consolidation or sale of substantially all assets) with any Affiliate
of the Company or the Guarantor, except upon fair and reasonable terms no less
favorable to the Company or the Guarantor or such Subsidiary than would obtain
in a comparable arm's-length transaction with a Person not an Affiliate of the
Company or the Guarantor.
9.11. Fixed Charges Coverage Test. The Company will maintain the ratio
of Adjusted Operating Cash Flow to Fixed Charges for the Company and its
Subsidiaries on a consolidated
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basis, for each four-Fiscal Quarter period ending in each of the following
Fiscal Years, to be not less than the following ratios:
Fiscal Year Minimum Ratio
----------- -------------
Fiscal 1993 1.70:1
Fiscal 1994 1.35:1
Fiscal 1995 1.40:1
Fiscal 1996 1.70:1
Fiscal 1997 1.70:1
Fiscal 1998 1.90:1.
9.12. Debt Ratio. The Company will not permit the ratio of Total Debt
to Operating Cash Flow for the Company and its Subsidiaries on a consolidated
basis, for each four-Fiscal Quarter period ending in each of the following
Fiscal Years, to be greater than the following ratios:
Fiscal Year Maximum Ratio
----------- -------------
Fiscal 1993 1.90:1
Fiscal 1994 1.60:1
Fiscal 1995 1.35:1
Fiscal 1996 1.15:1
Fiscal 1997 1.00:1
Fiscal 1998 0.80:1.
9.13. Consolidated Net Worth. The Company shall not permit Consolidated
Net Worth at any time prior to August 30, 1993, to be less than $125,000,000,
and at any time during the following periods to be less than the following
amounts:
Period Amount
------ ------
August 31, 1993 to August 30, 1994 $135,000,000
August 31, 1994 to August 30, 1995 $145,000,000
August 31, 1995 to August 30, 1996 $155,000,000
August 31, 1996 to August 30, 1997 $165,000,000
August 31, 1997 to August 30, 1998 $175,000,000
and, commencing on August 31, 1998, $10,000,000 above the minimum amount of
Consolidated Net Worth required pursuant to this Section 9.13 on the last day
of the preceding Fiscal Year.
9.14. Notification of Incurrence of Debt or Making of Investment.
Prior to the incurrence by the Company or any of its Subsidiaries of
Indebtedness (other than Indebtedness under the Revolving Credit Agreement,
the 1992 Term Loan
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Agreement or this Agreement), or upon obtaining commitments for
Indebtedness, or the making of any Investment of cash, property or other assets
in an aggregate principal amount of $20,000,000 (per incurrence or cumulatively
since September 1, 1992 or since the last time incurrence compliance was
required to be tested pursuant to this Section 9.14) or more, the Company shall
deliver notice to the Administrative Agent and the Banks, certifying, on the
basis of its financial statements for the four Fiscal Quarters most recently
ended, the Company's compliance with the financial covenants under the
Revolving Credit Agreement, the 1992 Term Loan Agreement and this Agreement
both before and immediately after the incurrence of such Indebtedness or
Investment on both an historical and pro forma basis; provided, that in the
event any cash change in long-term investments or cash change in long-term
notes receivable triggers notification of the incurrence of Indebtedness and
certification of compliance with financial covenants pursuant to this Section
9.14, the calculation to determine pro forma compliance with the Fixed Charges
Coverage Test set forth in Section 9.11 hereof shall be performed after
excluding the smallest amount of any cash increase in long-term investments and
cash increase in long-term notes receivable for any Fiscal Quarter included in
such test.
9.15. Use of Proceeds. The Company shall use the proceeds of the Loans
solely for the purpose of refinancing a portion of its outstanding Senior Notes
either by redeeming Senior Notes in accordance with the Senior Note Indenture
or by repurchasing Senior Notes in the open market following the date hereof,
and in any event in compliance with all applicable legal and regulatory
requirements, including, without limitation, Regulations G, T, U and X of the
Board of Governors of the Federal Reserve System and the Securities Act of
1933, as amended, and the Securities Exchange Act of 1934, as amended, and the
regulations thereunder. Neither the Administrative Agent nor any Bank shall
have any responsibility for any use of the proceeds of the Loans.
9.16. Ownership of Guarantor. The Company agrees at all times to own,
both beneficially and of record and free and clear of all Liens, and control
100% of the capital shares of the Guarantor.
9.17. Indebtedness of Subsidiaries. The Company will not permit any of
its Subsidiaries to create, incur, assume, suffer to exist or otherwise become
obligated for or under any Indebtedness whatsoever, except for:
(i) Indebtedness owed to the Company;
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(ii) trade Indebtedness incurred by such Subsidiary in
the ordinary course of its business, provided that in the case of
any Subsidiary that holds the Silver King Note and any other
Subsidiary that owns shares of capital stock of any such
Subsidiary, such trade Indebtedness does not at any time and with
respect to all such Subsidiaries collectively exceed $1,000,000 in
an aggregate principal amount;
(iii) Capital Leases; and
(iv) Indebtedness of the Guarantor under this
Agreement, the Revolving Credit Agreement and the 1992 Term Loan
Agreement.
9.18. Interest Rate Protection. No later than 90 days after the date on
which the Loans are made on the occasion of each borrowing under Section 2.2
hereof, the Company shall enter into Interest Rate Protection Agreements
covering at least 50% of the aggregate principal amount of the Loans. Such
agreements shall be with parties and have terms and conditions satisfactory to
the Administrative Agent. The Company shall use its best efforts to maintain
in full force and effect each Interest Rate Agreement to which it is a party or
under which it is a beneficiary for a period of not less than 30 months from
the date of such agreement, without any sale, assignment, transfer or
conveyance by it thereof, and shall not default (beyond any applicable grace
period) in the performance of any of its obligations thereunder.
Section 10. Events of Default. If one or more of the following events
(herein called "Events of Default" shall occur and be continuing:
(a) The Company or the Guarantor shall fail to pay the
principal of any Loan when due; or the Company or the Guarantor shall fail
to pay any interest on any Loan or any other amount payable by it hereunder
more than two Business Days after the date when any such amount shall be
due; or
(b) There shall have occurred a default or event of default
under the Revolving Credit Agreement, the 1992 Term Loan Agreement, the
Senior Note Indenture or the Convertible Subordinated Debenture Indenture;
or
(c) The Company or the Guarantor or any Subsidiary shall
default in the payment when due (after giving
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effect to all applicable grace periods provided for in the documents
relating to such Indebtedness, without regard to any waiver thereof) of any
principal of or interest on or any other amount payable in connection with
any of its Indebtedness not specified in Section 10(a) or 10(b) hereof in
an aggregate principal amount of $5,000,000 or more; or any event specified
in any note, agreement, indenture or other document evidencing or relating
to any such Indebtedness shall occur if (after giving effect to all
applicable grace periods provided for in the documents relating to such
Indebtedness, without regard to any waiver thereof) the effect of such
event is to cause, or to permit the holder or holders of such Indebtedness
(or a trustee or agent on behalf of such holder or holders) to cause, such
Indebtedness becoming due prior to its stated maturity; or
(d) Any representation, warranty or certification made or
deemed made herein by the Company or the Guarantor, or any certificate
furnished to any Bank or the Administrative Agent pursuant to the
provisions hereof, shall prove to have been false or misleading as of the
time made or deemed made or furnished in any material respect and, if the
Company, the Guarantor and the Majority Banks agree that the effects of
such false or misleading representation, warranty or certification are
curable, such effects shall not have been cured to the satisfaction of the
Majority Banks within 10 days after the earlier of (x) the date on which
the Company or the Guarantor obtained knowledge that such representation,
warranty or certification was so false or misleading or (y) the date of
notice by the Administrative Agent to the Company or the Guarantor that
such representation, warranty or certification was so false or misleading;
or
(e) The Company or the Guarantor shall default in the
performance of any of its obligations under Section 9 (other than under
any of Sections 9.1(a), 9.1(b), 9.1(c), 9.1(d), 9.1(g), 9.1(h), 9.2,
9.3(b), 9.3(c) and 9.4 hereof); or the Company or the Guarantor shall
default in the performance of any of its other obligations in this
Agreement, including, without limitation, any of Sections 9.1(a), 9.1(b),
9.1(c), 9.1(d), 9.1(g), 9.1(h), 9.2, 9.3(b), 9.3(c) and 9.4 hereof (not
governed by any other provision in this Section 10), and such default shall
continue unremedied for a period of 10 days after the earlier of (x) the
date on which the Company or the Guarantor obtained knowledge of such
default or (y) the
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date of notice by the Administrative Agent to the Company or the Guarantor
of the occurrence of such default; or
(f) The Company, the Guarantor, any other Material Subsidiary
or Subsidiaries constituting a Material Subsidiary Group shall admit in
writing its inability to, or be generally unable to, pay its debts as such
debts become due; or
(g) The Company, the Guarantor, any other Material Subsidiary
or Subsidiaries constituting a Material Subsidiary Group shall (i) apply
for or consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or of all or a
substantial part of its assets, (ii) make a general assignment for the
benefit of its creditors, (iii) commence a voluntary case under the
Bankruptcy Code (as now or hereafter in effect), (iv) file a petition
seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, creditor or debtor rights, winding-up, or
composition or readjustment of debts, (v) take any corporate action for the
purpose of effecting any of the foregoing; provided that an event specified
in clauses (i) through (v) above shall be deemed to have occurred (whether
at one time or cumulatively over a period of time after the date hereof)
with respect to a Material Subsidiary Group at the time when such an event
shall have occurred with respect to all Subsidiaries constituting such
Material Subsidiary Group; or
(h) A proceeding or case shall be commenced, without the
application or consent of the Company, the Guarantor, any other Material
Subsidiary or all Subsidiaries constituting a Material Subsidiary Group in
any court of competent jurisdiction, seeking (i) its liquidation,
reorganization, dissolution or winding-up, or the composition or
readjustment of its debts, including the filing of an involuntary petition
under the Bankruptcy Code, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of the Company, the Guarantor or such
Subsidiary or of all or any substantial part of its assets, or (iii)
similar relief in respect of the Company, the Guarantor or such Subsidiary
under any law relating to bankruptcy, insolvency, reorganization, creditor
or debtor rights, winding-up, or composition or adjustment of debts, and
such proceeding or case shall continue undismissed, or an order, judgment
or decree approving or ordering any of the foregoing shall be entered and
shall not be vacated or dismissed within 60 days; or an order for relief
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against the Company, the Guarantor or such Subsidiary shall be entered in
an involuntary case under any applicable bankruptcy code; provided that an
event specified in clauses (i) through (iii) above or the preceding
subclause shall be deemed to have occurred with respect to a Material
Subsidiary Group at the time when such an event shall have occurred
(whether at one time or cumulatively over a period of time after the date
hereof) with respect to all Subsidiaries constituting such Material
Subsidiary Group; or
(i) A judgment or judgments for the payment of money in excess
of $1,000,000 in the aggregate shall be rendered by a court or courts
against the Company, the Guarantor and/or any of their respective
Subsidiaries and the same shall not be discharged (or provision shall not
be made for such discharge), or a stay of execution thereof shall not be
procured, within 30 days from the date of entry thereof and the Company,
the Guarantor or the relevant Subsidiary shall not, within said period of
30 days, or such longer period during which execution of the same shall
have been stayed, appeal therefrom and cause the execution thereof to be
stayed during such appeal; or
(j) An event or condition specified in Section 9.1(e) hereof
shall occur or exist with respect to any Plan or Multiemployer Plan and, as
a result of such event or condition, together with all other such events or
conditions, the Company, the Guarantor or any ERISA Affiliate shall incur
or in the opinion of the Majority Banks shall be reasonably likely to incur
a liability to a Plan, a Multiemployer Plan or PBGC (or any combination of
the foregoing) which is, in the determination of the Majority Banks,
material in relation to the consolidated financial position of the Company
and its consolidated Subsidiaries; or
(k) There shall occur a Change of Control; provided that any
such Change of Control shall not constitute an Event of Default for
purposes of this Section 10(k) if:
(i) (A) such Change of Control arises solely in
connection with the Liberty Media Transaction, and (B) as of
the date the Liberty Media Transaction is consummated and after
giving effect thereto, no other Default or Event of Default shall
have occurred and be continuing, or
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(ii) with respect to any date prior to the date the
Liberty Media Transaction is consummated, (A) such Change of
Control arises solely by reason of either (1) the merger or
consolidation of the Company with a Qualifying U.S. Corporation
and the Company is the surviving corporation in such merger or
consolidation, or (2) a sale of capital stock to a Qualifying U.S.
Corporation, (B) as of the date of such merger, consolidation or
sale and after giving effect thereto, no other Default or Event of
Default shall have occurred and be continuing, and (C) the Company
has delivered a notice to the Administrative Agent and the Banks
not less than 30 days prior to the consummation of any such merger
or consolidation that sets forth in reasonable detail information
indicating compliance with the terms of clause (ii) of this
paragraph (k), or
(iii) with respect to any date on or following the date
the Liberty Media Transaction is consummated, (A) such Change of
Control arises solely by reason of the merger or consolidation of
the Company with another corporation which is organized under the
laws of a state in the United States and the Company is the
surviving corporation in such merger or consolidation, (B) as of
the date of such merger or consolidation and after giving effect
thereto, no other Default or Event of Default shall have occurred
and be continuing, and (C) the Company has delivered a notice to
the Administrative Agent and the Banks not less than 30 days prior
to the consummation of any such merger or consolidation that sets
forth in reasonable detail information indicating compliance with
the terms of clause (iii) of this paragraph (k); or
(l) An event or condition that constitutes (i) a default or
breach by Silver King or any of its subsidiaries under the Silver King Note
or any other agreement, including without limitation, any affiliation
agreement, which had been entered into in connection with the Silver King
Distribution and pursuant to which Silver King, or such subsidiary, as the
case may be, and the Company or any of its Subsidiaries continued a business
relationship, and such default or breach shall continue unremedied for a
period of 30 days after the Company or any such Subsidiary obtained
knowledge of such default or breach or (ii) a default or breach by the
Company or any of its Subsidiaries of any agreement, including without
limitation, any affiliation agreement, which had been
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entered into in connection with the Silver King Distribution and
pursuant to which Silver King, or such subsidiary, as the case may be, and
the Company or any such Subsidiary continued a business relationship.
THEREUPON: (i) in the case of an Event of Default other than one referred to
in clause (f), (g) or (h) of this Section 10, the Administrative Agent, with
the consent of the Majority Banks, may and, upon request of the Majority Banks,
shall, by notice to the Company, terminate the Commitments and/or declare the
principal amount then outstanding of, and the accrued interest on, the Loans
and all other amounts payable by the Company and the Guarantor hereunder and
under the Notes to be forthwith due and payable, whereupon such amounts shall
be immediately due and payable without presentment, demand, diligence, protest
or other formalities of any kind, all of which are hereby expressly waived by
the Company and the Guarantor; and (ii) in the case of the occurrence of an
Event of Default referred to in clause (f), (g) or (h) of this Section 10, the
Commitments shall be automatically terminated and the principal amount then
outstanding of, and the accrued interest on, the Loans and all other amounts
payable by the Company and the Guarantor hereunder and under the Notes shall
become automatically immediately due and payable without presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by the Company and the Guarantor.
Section 11. The Administrative Agent.
11.1. Appointment, Powers and Immunities. Each Bank hereby irrevocably
appoints and authorizes the Administrative Agent to act as its agent hereunder
with such powers as are specifically delegated to the Administrative Agent by
the terms of this Agreement, together with such other powers as are reasonably
incidental thereto. The Administrative Agent (which term as used in this
sentence and in Section 11.5 and the first sentence of Section 11.6 hereof
shall include reference to its affiliates and each of the officers, directors,
employees and agents of itself and of its affiliates): (a) shall have no
duties or responsibilities except those expressly set forth in this Agreement,
and shall not by reason of this Agreement be a trustee for any Bank; (b) shall
not be responsible to the Banks for any recitals, statements, representations or
warranties contained in this Agreement, or in any certificate or other document
referred to or provided for in, or received by any of them under, this
Agreement, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, any Note or any
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other document referred to or provided for herein or for any failure by
the Company or any other Person to perform any of its obligations hereunder or
thereunder; (c) shall not be required to initiate or conduct any litigation or
collection proceedings hereunder, except as provided for under Section 11.3
hereof; and (d) shall not be responsible for any action taken or omitted to be
taken by it hereunder or under any other document or instrument referred to or
provided for herein or in connection herewith, except for its own gross
negligence or willful misconduct. The Administrative Agent may employ agents
and attorneys-in-fact and shall not be responsible for the negligence or
misconduct of any such agents or attorneys-in-fact selected by it in good
faith. The Administrative Agent may deem and treat the payee of any Note as
the holder thereof for all purposes hereof unless and until a written notice of
the assignment or transfer thereof shall have been filed with the
Administrative Agent.
11.2. Reliance by the Administrative Agent. The Administrative Agent
shall be entitled to rely upon any certification, notice or other communication
(including any thereof by telephone, telex, telegram or cable) reasonably
believed by it to be genuine and correct and to have been signed or sent by or
on behalf of the proper Person or Persons, and upon advice and statements of
legal counsel, independent accountants and other experts selected by the
Administrative Agent. As to any matters not expressly provided for by this
Agreement, the Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder in accordance with instructions
signed by the Majority Banks, and such instructions of the Majority Banks and
any action taken or failure to act pursuant thereto shall be binding on all of
the Banks.
11.3. Defaults. The Administrative Agent shall not be deemed to
have knowledge of the occurrence of a Default (other than the nonpayment of
principal of or interest on Loans or of commitment fees) unless the
Administrative Agent has received notice from a Bank or the Company specifying
such Default and stating that such notice is a "Notice of Default". In the
event that the Administrative Agent receives such a notice of the occurrence of
a Default, the Administrative Agent shall give prompt notice thereof to the
Banks (and shall give each Bank prompt notice of each such nonpayment). The
Administrative Agent shall (subject to Section 11.7 and Section 12.4 hereof)
take such action with respect to such Default as shall be directed by the
Majority Banks, provided that, unless and until the Administrative Agent shall
have received such directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from
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taking such action, with respect to such Default as it shall deem
advisable in the best interest of the Banks.
11.4. Rights as a Bank. With respect to its Commitment and the Loans
made by it, LTCB Trust (and any successor acting as Administrative Agent) in
its capacity as a Bank hereunder shall have the same rights and powers
hereunder as any other Bank and may exercise the same as though it were not
acting as the Administrative Agent, and the term "Bank" or "Banks" shall,
unless the context otherwise indicates, include the Administrative Agent in its
individual capacity. LTCB Trust (and any successor acting as Administrative
Agent) and its affiliates may (without having to account therefor to any Bank)
accept deposits from, lend money to and generally engage in any kind of
banking, trust or other business with the Company (and any of its Affiliates)
as if it were not acting as the Administrative Agent, and LTCB, LTCB Trust and
their affiliates may accept fees and other consideration from the Company and
the Guarantor for services in connection with this Agreement or otherwise
without having to account for the same to the Banks.
11.5. Indemnification. The Banks agree to indemnify the Administrative
Agent (to the extent not reimbursed under Section 12.3 hereof, but without
limiting the obligations of the Company under said Section 12.3), ratably in
accordance with the aggregate principal amount of the Loans made by the Banks
(or, if no Loans are at the time outstanding, ratably in accordance with their
respective Commitments), for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind and nature whatsoever which may be imposed on, incurred by or
asserted against the Administrative Agent in any way relating to or arising out
of this Agreement or any other documents contemplated by or referred to herein
or the transactions contemplated hereby (including, without limitation, the
costs and expenses which the Company is obligated to pay under Section 12.3
hereof but excluding, unless a Default has occurred and is continuing, normal
administrative costs and expenses incident to the performance of its agency
duties hereunder) or the enforcement of any of the terms hereof or of
any such other documents, provided that no Bank shall be liable for any of the
foregoing to the extent they arise from the gross negligence or willful
misconduct of the party to be indemnified.
11.6. Non-Reliance on Administrative Agent, Agent, Co-Agents and other
Banks. Each Bank agrees that it has, independently and without reliance on the
Administrative Agent, the Agent, either Co-Agent or any other Bank, and based
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on such documents and information as it has deemed appropriate, made its own
credit analysis of the Company, the Guarantor and their respective Subsidiaries
and its own decision to enter into this Agreement and that it will,
independently and without reliance upon the Administrative Agent, the Agent,
either Co-Agent or any other Bank, and based on such documents and information
as it shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under this Agreement, the Notes or any
other related documents. The Administrative Agent shall not be required to
keep itself informed as to the performance or observance by the Company or the
Guarantor of this Agreement or any other document referred to or provided for
herein or to inspect the properties or books of the Company, the Guarantor or
any of their respective Subsidiaries. Except for notices, reports and other
documents and information expressly required to be furnished to the Banks by
the Administrative Agent hereunder, the Administrative Agent shall not have any
duty or responsibility to provide the Agent, either Co-Agent or any Bank with
any credit or other information concerning the affairs, financial condition or
business of the Company or any Subsidiary (or any of their affiliates) which
may come into the possession of the Administrative Agent or any of its
affiliates.
11.7. Failure to Act. Except for action expressly required of the
Administrative Agent hereunder, the Administrative Agent shall in all cases be
fully justified in failing or refusing to act hereunder unless it shall be
indemnified to its satisfaction by the Banks against any and all liability and
expense (other than that arising from gross negligence or willful misconduct)
which may be incurred by it by reason of taking or continuing to take any such
action.
11.8. Resignation or Removal of Administrative Agent. Subject to
the appointment and acceptance of a successor Administrative Agent as provided
below, the Administrative Agent may resign at any time by giving notice thereof
to the Banks, the Company and the Guarantor, and the Administrative Agent may
be removed at any time with or without cause by the Majority Banks. Upon any
such resignation or removal, the Majority Banks shall have the right to appoint
a successor Administrative Agent. If no successor Administrative Agent shall
have been so appointed by the Majority Banks and shall have accepted such
appointment within 30 days after the retiring Administrative Agent's giving of
notice of resignation or the Majority Banks' removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of
the Banks, appoint a successor Administrative Agent, which shall be a bank
which
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has an office in New York, New York with a combined capital and surplus
of at least $100,000,000. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, such
successor Administrative Agent shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations hereunder. After any retiring Administrative
Agent's resignation or removal hereunder as Administrative Agent, the
provisions of this Section 11 shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting
as the Administrative Agent.
11.9. Administrative Agent's Office. The Administrative Agent acts
initially through its office designated on the signature pages hereof, but may
transfer its functions as Administrative Agent to any other office, branch or
affiliate of LTCB at any time by giving prompt, subsequent written notice to
each of the other parties to this Agreement.
11.10. Agent and Co-Agents. Each of the parties acknowledges and agrees
that the Agent and the Co-Agents, in their respective capacities as such, have
no obligations, duties or liabilities whatsoever under or in respect of this
Agreement or the Notes.
Section 12. Miscellaneous.
12.1. Waiver. No failure on the part of the Administrative Agent, the
Agent, either Co-Agent or any Bank to exercise, no delay in exercising, and no
course of dealing with respect to, any right, power or privilege under this
Agreement or any Note shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, power or privilege under this Agreement or
any Note preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
Each of the parties acknowledges that the Company, the Guarantor, the
Administrative Agent, the Agent, the Co-Agents and certain of the Banks are or
from time to time may be parties to the 1992 Term Loan Agreement and the
Revolving Credit Agreement, and that certain terms and conditions of this
Agreement now or hereafter may differ from the corresponding terms and
conditions of the 1992 Term Loan Agreement or the Revolving Credit Agreement.
The Company and the Guarantor agree that this Agreement, the 1992 Term Loan
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Agreement and the Revolving Credit Agreement are separate and independent
agreements and that the execution and delivery of this Agreement (and any
future waiver, amendment or modification hereof) shall not be deemed to affect
any of the terms and conditions of, or constitute any waiver, amendment or
modification of, the 1992 Term Loan Agreement or the Revolving Credit
Agreement, either now or hereafter.
12.2. Notices. All notices and other communications provided for herein
(including, without limitation, any modifications of, or waivers or consents
under, this Agreement) shall be given or made by telex, telecopy, telegraph,
cable or in writing and telexed, telecopied, telegraphed, cabled, mailed or
delivered to the intended recipient at the "Address for Notices" specified
below its name on the signature pages hereof; or, as to any party, at such
other address as shall be designated by such party in a notice to each other
party. Except as otherwise provided in this Agreement, all such communications
shall be deemed to have been duly given when transmitted by telex or telecopier
(with receipt confirmed either mechanically or in writing by a person at the
office of the recipient), personally delivered or, in the case of a mailed
notice, upon receipt, in each case given or addressed as aforesaid.
12.3. Expenses, Etc. The Company and the Guarantor jointly and
severally agree to pay or reimburse each of the Banks and the Administrative
Agent for paying:
(a) all costs and expenses of the Administrative Agent
(including, without limitation, the reasonable fees and expenses of all
special counsel to the Administrative Agent, the Agent, the Co-Agents and
the Banks, in connection with (i) the preparation, negotiation, execution
and delivery of this Agreement and the Notes and any related documents and
the making of the initial Loans hereunder, subject to limitations set forth
in the Commitment Letters, and (ii) any amendment, modification or waiver
of any of the terms of this Agreement or any of the Notes or any related
documents (whether or not any such amendment, modification or waiver is
signed or becomes effective);
(b) all reasonable costs and expenses of each Bank, the Agent,
each Co-Agent and the Administrative Agent (including reasonable counsels'
fees and expenses) in connection with the enforcement of this Agreement or
any of the Notes and the protection of the rights of each Bank, the Agent,
each Co-Agent and the Administrative
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Agent against the Company, the Guarantor or any of their respective assets;
and
(c) all transfer, stamp, documentary and other similar taxes,
assessments or charges (including, without limitation, penalties and
interest) levied by any governmental or revenue authority in respect of
this Agreement, any of the Notes or any other document referred to herein.
The Company hereby agrees to indemnify the Administrative Agent, the Agent,
each Co-Agent and each Bank and their respective Affiliates, directors,
officers, employees and agents from, and hold each of them harmless against,
any and all losses, liabilities, claims, damages or expenses incurred by any of
them arising out of or by reason of any investigation or litigation or other
proceedings (including any threatened investigation or litigation or other
proceedings) relating to or arising out of this Agreement, the statements
contained in the Commitment Letters, or any aspect thereof, the Banks'
agreement to make the Loans hereunder or from any actual or proposed use by the
Company, the Guarantor or any Subsidiary of either thereof of the proceeds of
any of the Loans or from an alleged breach of this Agreement, including,
without limitation, the reasonable fees and disbursements of counsel incurred
in connection with any such investigation or litigation or other proceedings
(but excluding any such losses, liabilities, claims, damages or expenses
incurred by reason of the gross negligence or willful misconduct of the Person
to be indemnified).
12.4. Amendments, Etc. Neither this Agreement nor any Note nor any
terms hereof or thereof may be amended, supplemented or modified except in
accordance with the provisions of this subsection. With the prior written
consent of the Majority Banks, the Administrative Agent, the Company and the
Guarantor may, from time to time, enter into written amendments, supplements or
modifications hereto for the purpose of adding any provisions to this Agreement
or the Notes or changing in any manner the rights of the Banks or of the
Company and the Guarantor hereunder or thereunder or waiving, on such terms and
conditions as the Administrative Agent (with the consent of the Majority Banks)
may specify in such instrument, any of the requirements of this Agreement or
the Notes or any Default or Event of Default and its consequences; provided,
however, that no such waiver and no such amendment, supplement or modification
shall (a) extend the maturity of any installment of principal of any Loan or
Note, or reduce the rate or extend the time of payment of interest thereon, or
reduce or extend the time of payment of
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any fee payable to the Banks hereunder, or reduce the principal amount of any
Loan, or increase the amount of any Bank's Commitment, or release the Guarantor
from any of its obligations hereunder, or amend, modify or waive any provision
of this subsection, or reduce the percentage specified in the definition of
"Majority Banks" in Section 1.1 hereof, or consent to the assignment or
transfer by the Company or the Guarantor of any of its rights and obligations
under this Agreement or the Notes, in each case without the prior written
consent of all the Banks, or (b) amend, modify or waive any provision of
Section 11 hereof without the written consent of the Administrative Agent. Any
such waiver and any such amendment, supplement or modification shall apply
equally to each of the Banks and shall be binding upon the Company, the
Guarantor, the Banks, the Administrative Agent, the Agent, the Co-Agents and
all future holders of the Notes. In the case of any waiver, the Company, the
Guarantor, the Banks and the Administrative Agent shall be restored to their
former position and rights hereunder and under the outstanding Notes, and any
Default or Event of Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent or other Default
or Event of Default, or impair any right subsequent thereon.
12.5. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
12.6. Assignments and Participation.
(a) Neither the Company nor the Guarantor may assign its
rights or obligations hereunder or under the Notes without the prior
consent of all of the Banks and the Administrative Agent.
(b) Any Bank may assign any of its Loans, its Note or its
Commitment without the prior consent of the Company, the Guarantor, the
Administrative Agent or any other Bank, provided that (i) assignments of
less than all of a Bank's Commitment and Loans shall be in a principal
amount of not less than $10,000,000 (or such lesser amount as may be agreed
upon by the Company), except that LTCB Trust shall be permitted to make an
assignment in a principal amount of not less than $5,000,000 on one
occasion, and (ii) any such assignment shall be made pursuant to an
assignment and assumption agreement substantially in the form of Exhibit E
hereto (an "Assignment Agreement"). Upon written notice to the Company and
the Administrative Agent of an assignment, identifying in detail reasonably
satisfactory to the
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Administrative Agent the assignee Bank and the amount of the assignor
Bank's Commitment and Loans assigned, the assignee shall have, as of the
date of effectiveness of such assignment and to the extent of such
assignment, the obligations, rights and benefits of, and shall be deemed
for all purposes hereunder, a Bank party hereto holding the Commitment and
Loans (or portions thereof) assigned to it (in addition to the Commitment
and Loans, if any, theretofore held by such assignee) and the assignor
shall be released from such obligations to such extent.
(c) Any Bank may sell to one or more other Persons a participation
in all or any part of the Commitment or any Loan held by it, in which event
each such participant shall be entitled to the rights and benefits of the
provisions of Sections 5 and 9.1(h) hereof with respect to its
participation in such Loan as if (and the Company and the Guarantor shall
be directly obligated to such participant under such provisions as if) such
participant were a "Bank" for purposes of said Sections, but shall not have
any other rights or benefits under this Agreement or any Note (the
participant's rights against such Bank in respect of such participation to
be those set forth in the agreement (the "Participation Agreement")
executed by such Bank in favor of such participant); provided, that all
amounts payable by the Company or the Guarantor to any Bank and any
participant under Section 5 hereof in respect of any Loan shall be
determined as if such Bank had not sold any participations in such Loan and
as if such Bank were funding all of such Loan in the same way that it is
funding the portion of such Loan in which no participations have been sold.
In no event shall a Bank that sells a participation be obligated to any
participant under the Participation Agreement to take or refrain from
taking any action hereunder or under such Bank's Note except that such Bank
may agree in the Participation Agreement that it will not, without the
consent of the participant, agree to (i) the extension of any date fixed
for the payment of principal of or interest on the related Loan or Loans,
(ii) the reduction of any payment of principal thereof, (iii) the reduction
of the rate at which either interest is payable thereon or (if the
participant is entitled to any part thereof) commitment fee is payable
hereunder to a level below the rate at which the participant is entitled to
receive interest or commitment fee (as the case may be) in respect of such
participation, or (iv) any release of the Guarantor from any of its
obligations under this Agreement or the Notes.
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(d) In addition to the assignments and participations
permitted under the foregoing provisions of this Section 12.6, any Bank may
assign and pledge all or any portion of its Loans and its Note to any
Federal Reserve Bank as collateral security pursuant to Regulation A and
any Operating Circular issued by such Federal Reserve Bank. No such
assignment shall release the assigning Bank from its obligations hereunder.
(e) A Bank may furnish any information concerning the Company,
the Guarantor or any of their respective Subsidiaries in the possession of
such Bank from time to time to assignees and participants (including
prospective assignees and participants).
12.7. Confidentiality. The Administrative Agent, the Agent, the
Co-Agents, and each of the Banks hereby acknowledge that certain of the
information to be furnished to them pursuant to this Agreement may be
non-public information. The Administrative Agent, the Agent, each Co-Agent,
and each Bank hereby agrees that it will keep all information so furnished to
it pursuant hereto confidential in accordance with its normal banking
procedures and, except in accordance with such procedures, will make no
disclosure to any other Person of such information until the same shall have
become public, except (i) in connection with matters involving this Agreement
(including, without limitation, litigation involving the Company, the
Guarantor, the Agent, the Co-Agents, the Administrative Agent or the Banks) and
with the obligations of any of the Administrative Agent, the Agent, such
Co-Agent or such Bank under law or regulation, (ii) pursuant to subpoenas or
similar process, (iii) to Governmental Authorities or examiners, (iv) to
independent auditors or counsel, (v) to any parent or corporate Affiliate of
any of the Administrative Agent, the Agent, such Co-Agent or such Bank, or (vi)
to any participant or proposed participant or assignee or proposed assignee
hereunder so long as such participant or proposed participant or assignee or
proposed assignee (a) is not in the same general type of business as the
Company on the date of such disclosure and (b) agrees in writing to accept such
information subject to the restrictions provided in this Section 12.7; provided
that in no event shall any of the Administrative Agent, the Agent, such
Co-Agent or such Bank be obligated or required to return any materials
furnished by the Company or any of its Subsidiaries.
12.8. Survival. Without limiting the survival of any other obligations
of the Company, the Guarantor and the Banks hereunder, the obligations of the
Company and the Guarantor under Sections 2.5, 5.1, 5.4, 5.5 and 12.3 hereof
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and the obligations of the Banks under Sections 4.7, 11.5 and 12.7
hereof, shall survive the repayment of the Loans and the termination of the
Commitments.
12.9. Captions. Captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.
12.10. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
12.11. GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
12.12. JURISDICTION. EACH OF THE COMPANY AND THE GUARANTOR HEREBY AGREES
THAT:
(A) ANY SUIT, ACTION OR PROCEEDING AGAINST THE COMPANY OR THE
GUARANTOR WITH RESPECT TO THIS AGREEMENT, THE LOANS, THE NOTES OR ANY
DOCUMENTS RELATED HERETO OR ANY JUDGMENT ENTERED BY ANY COURT IN RESPECT
THEREOF MAY BE BROUGHT IN THE SUPREME COURT OF THE STATE OF NEW YORK,
COUNTY OF NEW YORK, IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK, OR IN ANY STATE OR FEDERAL COURT SITTING IN THE STATE
OF FLORIDA (COLLECTIVELY, THE "SUBJECT COURTS"), AS THE ADMINISTRATIVE
AGENT, THE AGENT, EITHER CO-AGENT OR ANY BANK MAY ELECT IN ITS SOLE
DISCRETION AND EACH OF THE COMPANY AND THE GUARANTOR HEREBY IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF EACH OF THE SUBJECT COURTS FOR
THE PURPOSE OF ANY SUCH SUIT, ACTION, PROCEEDING OR JUDGMENT. EACH OF THE
COMPANY AND THE GUARANTOR HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS IN ANY SUIT, ACTION OR PROCEEDING IN ANY OF THE SUBJECT COURTS BY
THE MAILING THEREOF BY THE ADMINISTRATIVE AGENT, THE AGENT, THE RESPECTIVE
CO-AGENT OR THE RESPECTIVE BANK BY REGISTERED OR CERTIFIED MAIL, POSTAGE
PREPAID, TO THE COMPANY OR THE GUARANTOR, AS THE CASE MAY BE, ADDRESSED AS
PROVIDED IN SECTION 12.2 HEREOF. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED
TO LIMIT THE ABILITY OF THE ADMINISTRATIVE AGENT, THE AGENT, EITHER
CO-AGENT OR ANY BANK TO SERVE ANY SUCH WRITS, PROCESS OR SUMMONSES IN ANY
OTHER MANNER PERMITTED BY APPLICABLE LAW OR TO BRING PROCEEDINGS AGAINST
THE COMPANY OR THE GUARANTOR IN ANY COMPETENT COURT OF ANY
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OTHER JURISDICTION OR JURISDICTIONS, AND IN SUCH MANNER, AS MAY BE
PERMITTED BY APPLICABLE LAW.
(B) EACH OF THE COMPANY AND THE GUARANTOR HEREBY WAIVES ANY
RIGHT TO TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING IN RESPECT OF THIS
AGREEMENT, THE NOTES OR ANY OTHER DOCUMENTS IN CONNECTION HEREWITH, ANY
OBJECTION TO THE LAYING OF VENUE IN ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY OF THE SUBJECT COURTS, AND, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY CLAIM THAT SUCH SUIT, ACTION OR PROCEEDING IN ANY OF THE
SUBJECT COURTS HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
12.13. Severability. Any provision of this Agreement or the Notes that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
HOME SHOPPING NETWORK, INC.,
as the Company
By /s/ LES R. WANDLER
-----------------------------
Title: Chief Financial Officer
2501 118th Avenue North
St. Petersburg, Florida 33716
Telecopier No.: (813) 539-6505
Telephone No.: (813) 572-8585
Attention: Les R. Wandler
with a copy to:
"Legal Department"
Telecopier No.: (813) 573-0866
HOME SHOPPING CLUB, INC.,
as Guarantor
By /s/ LES R. WANDLER
-----------------------------
Title: Treasurer
2501 118th Avenue North
St. Petersburg, Florida 33716
Telecopier No.: (813) 539-6505
Telephone No.: (813) 572-8585
Attention: Les R. Wandler
with a copy to:
"Legal Department"
Telecopier No.: (813) 573-0866
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The Banks
Commitment
- ----------
$20,000,000 LTCB TRUST COMPANY, as a Bank
and the Agent
By /s/ RIKUICHI YOSHISUE
---------------------------
Title: Executive Vice President
Lending Office for Federal Funds
Loans and Prime Rate Loans:
165 Broadway
New York, New York 10006
Lending Office for LIBOR Loans:
165 Broadway
New York, New York 10006
Address for Notices:
165 Broadway
New York, New York 10006
Telex No.: 425722
Telecopier No.: (212) 608-3081
Telephone No.: (212) 335-4854
Attention: Robert Pacifici
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<PAGE> 79
$12,500,000 BANK OF MONTREAL, as a Bank
and a Co-Agent
By /s/ PATRICK J. SULLIVAN
-------------------------------
Title: Director
Lending Office for Federal Funds
Rate Loans and Prime Rate Loans:
115 South LaSalle Street
11th Floor
Chicago, Illinois 60603
Lending Office for LIBOR Loans:
115 South LaSalle Street
11th Floor
Chicago, Illinois 60603
Address for Notices:
430 Park Avenue
15th Floor, Account
Administration
New York, New York 10022
Telecopier No.: (212) 605-1525
Telephone No.: (212) 605-1436
or (212) 605-1458
Attention: Prescilla Quinones or
John Decoufle
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<PAGE> 80
$12,500,000 THE BANK OF NEW YORK, as a Bank
and a Co-Agent
By /s/ ALAN LYSTER, JR.
-----------------------------
Title: Vice President
Lending Office for Federal Fund
Rate Loans and Prime Rate Loans:
One Wall Street
New York, New York 10286
Lending Office for LIBOR Loans:
One Wall Street
New York, New York 10286
Address for Notices:
One Wall Street
22nd Floor
New York, New York 10286
Telecopier No.: (212) 635-6399
or (212) 635-6877
Telephone No.: (212) 635-6780
Attention: Ramona McCottrie
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<PAGE> 81
$5,000,000 CITIZENS FIDELITY BANK & TRUST
COMPANY
By /s/ H. JOSEPH BRENNER
------------------------------
Title: Vice President
Lending Office for Federal Funds
Rate Loans and Prime Rate Loans:
500 West Jefferson Street
Louisville, Kentucky 40202
Lending Office for LIBOR Loans:
500 West Jefferson Street
Louisville, Kentucky 40202
Address for Notices:
PNC Commercial Corp.
201 South Orange Avenue
Suite 750
Orlando, Florida 32801
Telecopier No.: (407) 843-8263
Telephone No.: (407) 841-3585
Attention: James Neil or
Diane Tyre
- -------------------
Total: $50,000,000
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The Administrative Agent
LTCB TRUST COMPANY,
as Administrative Agent
By /s/ RIKUICHI YOSHISUE
-----------------------------
Title: Executive Vice President
Address for Notices to
Administrative Agent:
165 Broadway
New York, New York 10006
Telex No.: 425722
Telecopier No.: (212) 608-3081
Telephone No.: (212) 335-4854
Attention: Robert Pacifici
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<PAGE> 83
EXHIBIT A
PROMISSORY NOTE
$______________ ___________, 1993
New York, New York
FOR VALUE RECEIVED, HOME SHOPPING NETWORK, INC., a
Delaware corporation (the "Company"), hereby promises to pay to the order of
___________________ (the "Bank"), for account of its respective Applicable
Lending Offices provided for by the Term Loan Agreement referred to below, by
paying to account no. 04203606 of LTCB Trust Company (the "Administrative
Agent") at the principal offices of Bankers Trust Company, New York, New York
(reference: "Home Shopping Network - 1993 Term Loan Facility") (or at such
other place as the Administrative Agent may notify the Company from time to
time) the principal sum of ______________ Dollars ($_____________) (or such
lesser amount as shall equal the aggregate unpaid principal amount of the Loans
made by the Bank to the Company under the Term Loan Agreement), in lawful money
of the United States of America and in immediately available funds, without
set-off, counterclaim or deduction of any kind, which sum shall be due and
payable in two installments on the dates set forth below, each installment to
be in the amount equal to the amount set forth opposite the applicable
installment below or, in the event prepayments have been made pursuant to
Section 3.3 of the Term Loan Agreement, such lesser amount as is equal to the
remaining outstanding aggregate principal amount of such installment:
Date Principal Amount
---- ----------------
January 31, 1997 $
January 31, 1998 $ .
In the event that the aggregate principal amount of the Loans made by the Bank
to the Company is less than the maximum aggregate principal amount of Loans the
Company is permitted to borrow from such Bank under the Term Loan Agreement,
the aggregate amount not borrowed from such Bank shall be applied to reduce the
principal amounts of the installments set forth above in inverse order of
maturity. The Company further agrees to pay interest on the unpaid principal
amount of this Note, at such office, in like money and funds and in such
manner, for the period commencing on the date of this Note until this Note
shall be paid in full, at the rates per annum and on the dates provided in the
Term Loan Agreement.
The amount and type of, and the duration of each Interest
Period (if applicable) for, the Loan evidenced hereby, the date such Loan
is made or converted from a Loan of another type, and the amount of each
payment or prepayment made on account of the principal thereof, shall be
recorded by the
A-1
<PAGE> 84
Bank on its books and, prior to any transfer of this Note, endorsed by
the Bank on the schedule attached hereto or any continuation thereof; provided
that no failure of the Bank to make any such endorsement shall affect the
obligations of the Company under the Term Loan Agreement or this Note.
This Note is one of the Notes referred to in the Term Loan
Agreement, dated as of February 4, 1993 (as in effect from time to time, the
"Term Loan Agreement"), among the Company, Home Shopping Club, Inc., a Delaware
corporation, as guarantor (the "Guarantor"), the Banks named therein (including
the Bank), LTCB Trust Company, as the Agent for the Banks, Bank of Montreal and
The Bank of New York, each as a Co-Agent for the Banks, and the Administrative
Agent, and evidences the Loan made by the Bank thereunder, is entitled to the
benefits thereof and is subject to the optional and mandatory prepayment
provisions contained therein. Capitalized terms used in this Note have the
respective meanings assigned to them in the Term Loan Agreement.
The Term Loan Agreement provides for the acceleration of
the maturity of this Note upon the occurrence of certain events and for
prepayments of Loans upon the terms and conditions specified therein.
No provision of the Term Loan Agreement or this Note or
any other document delivered in connection with either thereof and no
transaction contemplated hereby or thereby shall be construed or shall operate
so as to require the Company or the Guarantor to pay interest hereunder in an
amount or at a rate greater than the maximum allowed from time to time by
applicable law. Should any interest or other charges paid by the Company or
the Guarantor hereunder result in a computation or earning of interest in
excess of the maximum rate of interest permitted under applicable law in effect
while such interest is being earned, then such excess shall be waived by the
Bank and all such excess shall be automatically credited against and in
reduction of the principal balance of such amounts payable hereunder and any
portion of such excess received by the Bank shall be paid over by the Bank to
the Company or the Guarantor, as the case may be, it being the intent of the
Company and the Guarantor and the other parties to the Term Loan Agreement that
under no circumstances shall the Company or the Guarantor or any other Person
be required to pay interest in excess of the maximum rate allowed by such
applicable law.
The Company hereby waives diligence, presentment, protest,
notice of default, dishonor or nonpayment and any other notice and all demands
whatsoever. The Company hereby
A-2
<PAGE> 85
further waives all setoffs and counterclaims against the Company, the
Administrative Agent, the Agent, the Co-Agents and each of the Banks.
THIS NOTE HAS BEEN EXECUTED AND DELIVERED IN, AND SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF, THE STATE OF NEW
YORK.
HOME SHOPPING NETWORK, INC.
By
---------------------------
Title:
GUARANTEE
The undersigned HOME SHOPPING CLUB, INC., a Delaware
corporation (the "Guarantor"), hereby unconditionally and irrevocably
guarantees the payment in full when due (whether at stated maturity, by
acceleration or otherwise) of the principal of and interest on this Note and
all other amounts payable hereunder, in accordance with the terms hereof and of
Section 6 of the Term Loan Agreement, and, in the case of any extension of time
of payment, in whole or in part, that all such amounts shall be paid in full
when due (whether at stated maturity, by acceleration or otherwise) in
accordance with the terms of such extension. In addition, the Guarantor hereby
unconditionally agrees that upon default in the payment when due (whether at
stated maturity, by acceleration or otherwise) of any of such principal,
interest or other amounts, the Guarantor shall forthwith pay and perform the
same in the money and funds, at the time, in the place and in the manner
provided for such payment in the Term Loan Agreement. This guarantee is a
continuing guarantee of payment and not merely of collection; it is a primary,
independent obligation of the Guarantor; and the Guarantor's obligations
hereunder shall be absolute, unconditional and irrevocable, irrespective of any
and all circumstances whatsoever. The Guarantor hereby waives diligence,
presentment, protest, notice of default, dishonor or nonpayment and any other
notice and all demands whatsoever. The Guarantor hereby further waives all
setoffs and counterclaims against the Company, the Administrative Agent, the
Agent, the Co-Agents and each of the Banks.
HOME SHOPPING CLUB, INC.
By
----------------------------
Title:
A-3
<PAGE> 86
<TABLE>
<CAPTION>
LOANS
Date
Loan Principal Type Amount Unpaid
Made or Amount of Interest Paid or Principal Notation
Converted of Loan Loan Period Prepaid Amount Made By
--------- ------- ---- -------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
A-4
<PAGE> 87
FIRST AMENDMENT, dated as of May 28, 1993, to the Term Loan Agreement,
dated as of February 4, 1993, as amended by paragraph number 2 of the letter
dated April 14, 1993 from LTCB Trust Company, as Administrative Agent, to Home
Shopping Network, Inc. (as so amended, the "1993 Term Loan Agreement"), among
HOME SHOPPING NETWORK, INC. (the "Company"), HOME SHOPPING CLUB, INC. (the
"Guarantor"), the banks signatory thereto (the "Banks"), LTCB TRUST COMPANY, as
Agent for the Banks (in such capacity, the "Agent"), BANK OF MONTREAL and THE
BANK OF NEW YORK, each as a Co-Agent for the Banks (each in such capacity, a
"Co-Agent"), and LTCB TRUST COMPANY, as Administrative Agent for the Banks (in
such capacity, the "Administrative Agent").
WHEREAS, the Company and the Guarantor have requested, and the Banks, the
Agent, the Co-Agents and the Administrative Agent are willing, to amend certain
provisions of the 1993 Term Loan Agreement;
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration the receipt of which is hereby acknowledged, the parties
hereby agree as follows:
SECTION 1. CERTAIN DEFINED TERMS. Except as expressly set forth in this
First Amendment, terms defined in the 1993 Term Loan Agreement and used herein
shall have their respective defined meanings when used herein.
SECTION 2. AMENDMENTS TO THE 1993 TERM LOAN AGREEMENT.
(a) Section 9.11 of the 1993 Term Loan Agreement is hereby amended by
deleting such Section in its entirety and replacing it with the following:
"9.11. Fixed Charges Coverage Test. The Company will maintain the
ratio of Adjusted Operating Cash Flow to Fixed Charges for the Company and
its Subsidiaries on a consolidated basis, (a) for each four-Fiscal Quarter
period ending with each of the following Fiscal Quarters, to be not less
than the following ratios:
<PAGE> 88
Fiscal Quarter
Ended Minimum Ratio
--------------- -------------
February 28, 1993 1.70:1
May 31, 1993 1.70:1
August 31, 1993 1.70:1
November 30, 1993 1.35:1
February 28, 1994 1.45:1
May 31, 1994 1.35:1
August 31, 1994 1.35:1,
and (b) for each four-Fiscal Quarter period ending in each of the
following Fiscal Years, to be not less than the following ratios:
Fiscal Year Minimum Ratio
----------- -------------
Fiscal 1995 1.40:1
Fiscal 1996 1.70:1
Fiscal 1997 1.70:1
Fiscal 1998 1.90:1."
(b) Section 9.12 of the 1993 Term Loan Agreement is hereby amended by
deleting such Section in its entirety and replacing it with the following:
"9.12. Debt Ratio. The Company will not permit the ratio of Total
Debt to Operating Cash Flow for the Company and its Subsidiaries on a
consolidated basis, (a) for each four-Fiscal Quarter period ending with
each of the following Fiscal Quarters, to be greater than the following
ratios:
Fiscal Quarter
Ended Maximum Ratio
-------------- -------------
February 28, 1993 1.90:1
May 31, 1993 1.90:1
August 31, 1993 2.15:1
November 30, 1993 1.95:1
February 28, 1994 1.65:1
May 31, 1994 1.60:1
August 31, 1994 1.60:1,
and (b) for each four-Fiscal Quarter period ending in each of the
following Fiscal Years, to be greater than the following ratios:
-2-
<PAGE> 89
Fiscal Year Maximum Ratio
----------- -------------
Fiscal 1995 1.35:1
Fiscal 1996 1.15:1
Fiscal 1997 1.00:1
Fiscal 1998 0.80:1."
SECTION 3. REPRESENTATIONS AND WARRANTIES. Each of the Company and the
Guarantor represents and warrants to the Administrative Agent and the Banks
that (a) no Default or Event of Default has occurred and is continuing, and (b)
the representations and warranties made by the Company and the Guarantor in
Section 8 of the 1993 Term Loan Agreement, as amended hereby, and in any other
certificate or other document delivered in connection with the 1993 Term Loan
Agreement shall be true in all material respects on and as of the date of the
effectiveness of this Third Amendment with the same force and effect as if made
on and as of such date (including, without limitation, that there shall have
occurred no material adverse change since August 31, 1992 in the consolidated
financial condition or operations, or the business taken as a whole, of the
Company and its consolidated Subsidiaries from that set forth in their
financial statements dated as of August 31, 1992, except as disclosed to the
Banks in writing prior to the date of this First Amendment).
SECTION 4. CONDITIONS TO EFFECTIVENESS. This First Amendment shall
become effective as of the date first above written when (a) counterparts
hereof shall have been duly executed and delivered by the Majority Banks and
(b) the Company shall have paid to the Administrative Agent, for the account of
the Banks, a fee in accordance with the terms and conditions set forth in the
Company's letter, dated May 24, 1993, to the Administrative Agent, as modified
by the Administrative Agent's notices, dated June 3, 1993 and June 14, 1993, to
the Banks.
-3-
<PAGE> 90
SECTION 5. MISCELLANEOUS.
A. This First Amendment may be executed in any number of counterparts,
all of which taken together and when delivered to the Administrative Agent
shall constitute one and the same instrument, and any of the parties hereto may
execute this First Amendment by signing any such counterpart.
B. THIS FIRST AMENDMENT AND THE 1993 TERM LOAN AGREEMENT AS AMENDED
HEREBY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.
C. Except as expressly set forth in this First Amendment, the 1993 Term
Loan Agreement shall remain unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
be duly executed as of the date first above written.
HOME SHOPPING NETWORK, INC.,
as the Company
By /s/ LES R. WANDLER
-------------------------
Title: Executive Vice
President and Chief
Financial Officer
HOME SHOPPING CLUB, INC.,
as Guarantor
By /s/ LES R. WANDLER
-------------------------
Title: Treasurer
-4-
<PAGE> 91
The Banks
LTCB TRUST COMPANY, as a Bank
and the Agent
By /s/ PHILIP A. MARSDEN
-------------------------
Title: Senior Vice President
BANK OF MONTREAL, as a Bank
and a Co-Agent
By /s/ PATRICK J. SULLIVAN
-------------------------
Title: Director
THE BANK OF NEW YORK, as a Bank
and a Co-Agent
By /s/ KALPANA RAINA
-------------------------
Title: Vice President
PNC BANK, KENTUCKY, INC.
(formerly known as Citizens
Fidelity Bank & Trust Company)
By /s/ JAMES D. NEIL
-------------------------
Title: Vice President
The Administrative Agent
LTCB TRUST COMPANY,
as Administrative Agent
By /s/ PHILIP A. MARSDEN
-------------------------
Title: Senior Vice President
-5-
<PAGE> 92
SECOND AMENDMENT, dated as of September 20, 1993, to the Term Loan
Agreement, dated as of February 4, 1993, as amended by paragraph number 2 of
the letter dated April 14, 1993 from LTCB Trust Company, as Administrative
Agent, to Home Shopping Network, Inc. and the First Amendment, dated as of May
28, 1993 (as so amended, the "1993 Term Loan Agreement"), among HOME SHOPPING
NETWORK, INC., as borrower (the "Company"), HOME SHOPPING CLUB, INC., as
guarantor (the "Guarantor"), the banks signatory thereto (the "Banks"), LTCB
TRUST COMPANY, as Agent for the Banks (in such capacity, the "Agent"), BANK OF
MONTREAL and THE BANK OF NEW YORK, each as a Co-Agent for the Banks (each in
such capacity, a "Co-Agent"), and LTCB TRUST COMPANY, as Administrative Agent
for the Banks (in such capacity, the "Administrative Agent").
WHEREAS, the Company and the Guarantor have requested, and the Banks, the
Agent, the Co-Agents and the Administrative Agent are willing, to amend certain
provisions of the 1993 Term Loan Agreement;
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration the receipt of which is hereby acknowledged, the parties
hereby agree as follows:
SECTION 1. CERTAIN DEFINED TERMS. Except as expressly set forth in this
Second Amendment, terms defined in the 1993 Term Loan Agreement and used herein
shall have their respective defined meanings when used herein.
SECTION 2. AMENDMENTS TO THE 1993 TERM LOAN AGREEMENT.
(a) Section 1.1 of the 1993 Term Loan Agreement is hereby amended by (i)
deleting the definition of "Fiscal Quarter" set forth in such Section in its
entirety and replacing it with the following:
"Fiscal Quarter" shall mean, (i) for the period ending on August 31,
1993, a period of three consecutive calendar months commencing on any of
the following dates in any Fiscal Year: March 1, June 1, September 1 and
December 1, and (ii) for the period commencing on July 1, 1993, a period
of three consecutive calendar months commencing on any of the following
dates in any Fiscal Year: January 1,
<PAGE> 93
April 1, July 1 and October 1; provided, however, that during the
period commencing on September 1, 1993 and ending on June 30,
1994,in the event any provision of this Agreement requires any
calculation or determination with respect to a four-Fiscal
Quarter period ending on a particular date, such period shall
refer to the four immediately preceding three consecutive
calendar month periods ending on such date."
and (ii) deleting the definition of "Fiscal Year" set forth in such Section in
its entirety and replacing it with the following:
"Fiscal Year" shall mean, for the Company, the Guarantor or any
Subsidiary, (i) for the period ending on August 31, 1993, the
twelve consecutive calendar month period commencing on September
1, 1992 and ending on August 31, 1993, (ii) for the period
commencing on September 1, 1993 and ending on December 31, 1993,
the four consecutive calendar month period commencing on
September 1, 1993, and (iii) for the period commencing on January
1, 1994, the twelve consecutive calendar month period commencing
on such date and on January 1 of each calendar year thereafter
and ending on December 31 of such calendar year; and "Fiscal
1992", "Fiscal 1993", and any other year so designated shall mean
the Fiscal Year ending on August 31 or December 31, as the case
may be, of the indicated calendar year; provided, however, that
the Fiscal Year defined in clause (ii) above shall be known as
"Fiscal Stub 1993" and, provided, further, that no provision of
this Agreement shall be construed to require presentation of
Fiscal Stub 1993 in the financial statements of the Company or
the Guarantor except as would be required by the rules and
regulations of the Securities and Exchange Commission and in
accordance with GAAP with respect to such transition periods."
(b) Section 9.11 of the 1993 Term Loan Agreement is hereby amended by
deleting the dates November 30, 1993 through August 31, 1994 and the related
ratios that appear in paragraph (a) of such Section and replacing such dates
and ratios with the following:
-2-
<PAGE> 94
"September 30, 1993 1.70:1
December 31, 1993 1.35:1
March 31, 1994 1.45:1
June 30, 1994 1.35:1
September 30, 1994 1.35:1
December 31, 1994 1.40:1,".
(c) Section 9.12 of the 1993 Term Loan Agreement is hereby amended by
deleting the dates November 30, 1993 through August 31, 1994 and the related
ratios that appear in paragraph (a) of such Section and replacing such dates
and ratios with the following:
"September 30, 1993 2.125:1
December 31, 1993 1.85:1
March 31, 1994 1.65:1
June 30, 1994 1.60:1
September 30, 1994 1.60:1
December 31, 1994 1.35:1,".
(d) Section 9.13 of the 1993 Term Loan Agreement is hereby amended by (i)
deleting all references to "August 30" in such Section and replacing them in
each case with "September 29" and (ii) deleting all references to "August 31"
in such Section and replacing them in each case with "September 30".
SECTION 3. REPRESENTATIONS AND WARRANTIES. Each of the Company and the
Guarantor represents and warrants to the Administrative Agent and the Banks
that (a) no Default or Event of Default has occurred and is continuing, and (b)
the representations and warranties made by the Company and the Guarantor in
Section 8 of the 1993 Term Loan Agreement, as amended hereby, and in any other
certificate or other document delivered in connection with the 1993 Term Loan
Agreement shall be true in all material respects on and as of the date of the
effectiveness of this Second Amendment with the same force and effect as if
made on and as of such date (including, without limitation, that there shall
have occurred no material adverse change since August 31, 1992 in the
consolidated financial condition or operations, or the business taken as a
whole, of the Company and its consolidated Subsidiaries from that set forth in
their financial statements dated as of August 31, 1992, except as disclosed to
the Banks in writing prior to the date of this Second Amendment).
SECTION 4. CONDITIONS TO EFFECTIVENESS. This Second Amendment shall
become effective as of July 13, 1993 when counterparts hereof shall have been
duly executed and
-3-
<PAGE> 95
delivered by the Majority Banks, the Company and the Guarantor.
SECTION 5. MISCELLANEOUS.
A. This Second Amendment may be executed in any number of counterparts,
all of which taken together and when delivered to the Administrative Agent
shall constitute one and the same instrument, and any of the parties hereto may
execute this Second Amendment by signing any such counterpart.
B. THIS SECOND AMENDMENT AND THE 1993 TERM LOAN AGREEMENT AS AMENDED
HEREBY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.
C. Except as expressly set forth in this Second Amendment, the 1993 Term
Loan Agreement shall remain unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment
to be duly executed as of the date first above written.
HOME SHOPPING NETWORK, INC.,
as the Company
By /s/ LES R. WANDLER
-------------------------
Title: Executive Vice
President
HOME SHOPPING CLUB, INC.,
as Guarantor
By /s/ LES R. WANDLER
-------------------------
Title: Treasurer
-4-
<PAGE> 96
The Banks
LTCB TRUST COMPANY, as a Bank
and Agent
By /s/ PHILIP A. MARSDEN
-------------------------
Title: Senior Vice President
BANK OF MONTREAL, as a Bank
and a Co-Agent
By /s/ PATRICK J. SULLIVAN
-------------------------
Title: Director
THE BANK OF NEW YORK, as a Bank
and a Co-Agent
By /s/ KALPANA RAINA
-------------------------
Title: Vice President
PNC BANK, KENTUCKY, INC.
(formerly known as Citizens
Fidelity Bank & Trust Company)
By /s/ JAMES D. NEIL
-------------------------
Title: Vice President
The Administrative Agent
LTCB TRUST COMPANY,
as Administrative Agent
By /s/ PHILIP A. MARSDEN
-------------------------
Title: Senior Vice President
-5-
<PAGE> 97
THIRD AMENDMENT
TO TERM LOAN AGREEMENT,
DATED AS OF FEBRUARY 4, 1993
THIRD AMENDMENT, dated as of January 7, 1994, to the Term Loan Agreement,
dated as of February 4, 1993, as amended by paragraph number 2 of the letter
dated April 14, 1993 from LTCB Trust Company, as Administrative Agent, to Home
Shopping Network, Inc., the First Amendment, dated as of May 28, 1993 and the
Second Amendment, dated as of September 20, 1993 (as so amended, the "1993 Term
Loan Agreement"), among HOME SHOPPING NETWORK, INC., as borrower (the
"Company"), HOME SHOPPING CLUB, INC., as guarantor (the "Guarantor"), the banks
signatory thereto (the "Banks"), LTCB TRUST COMPANY, as Agent for the Banks (in
such capacity, the "Agent"), BANK OF MONTREAL and THE BANK OF NEW YORK, each as
a Co-Agent for the Banks (each in such capacity, a "Co-Agent"), and LTCB TRUST
COMPANY, as Administrative Agent for the Banks (in such capacity, the
"Administrative Agent").
WHEREAS, the Company and the Guarantor have requested that certain
provisions of the 1993 Term Loan Agreement be amended, as set forth below; and
WHEREAS, the Banks, the Agent, the Co-Agents and the Administrative Agent
are willing to amend such provisions;
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration the receipt of which is hereby acknowledged, the parties
hereby agree as follows:
SECTION 1. CERTAIN DEFINED TERMS. Except as expressly set forth in this
Third Amendment, terms defined in the 1993 Term Loan Agreement and used herein
shall have their respective defined meanings when used herein.
SECTION 2. AMENDMENTS TO THE 1993 TERM LOAN AGREEMENT.
(a) Section 1.1 of the 1993 Term Loan Agreement is hereby amended by
inserting the following definitions in alphabetical order in the list of
definitions in such Section:
"Bell Atlantic Transaction" shall mean the combination of Liberty
Media and Tele-Communications, Inc., a Delaware corporation, with Bell
Atlantic Corporation, a Delaware corporation, on
<PAGE> 98
substantially the terms outlined in Liberty Media's Current Report on Form 8-K
dated October 27, 1993 (including the exhibits thereto), copies of which have
been furnished to the Banks by the Company.
"Lawsuit" shall mean any of the legal proceedings described in the
Company's Amended and Restated Proxy Statement, dated August 23, 1993, under
the caption "Legal Proceedings", as such description of such proceedings may be
updated by the Company in subsequent SEC Reports, and includes, without
limitation, the proceedings relating to the termination of the Company's or the
Guarantor's contractual relationship with Western Hemisphere Sales, Inc. (as
successor to Pioneer Data Processing, Inc.).
"Lawsuit Settlement Accrual Amount" shall mean, for any period, the
aggregate amount that has been charged against earnings and either (i) accrued
as liabilities for such period or (ii) paid during such period, in each case
with respect to estimated settlement payments in connection with the Lawsuits
(including, without limitation, in connection with the termination of the
contractual relationship with Western Hemisphere Sales, Inc. (as successor to
Pioneer Data Processing, Inc.), which is the subject of one of the Lawsuits).
"Lawsuit Settlement Payment Amount" shall mean, for any period, the
sum of (a) the aggregate amount of settlement payments made by the Company
during such period (and reductions in accrued liabilities, if any, in respect
of such settlement payments) to parties asserting claims in connection with the
Lawsuits, and (b) any payments made by the Company, the Guarantor or any
Subsidiary during such period (and reductions in accrued liabilities, if any,
in respect of such settlement payments) in connection with the termination of
the contractual relationship with Western Hemisphere Sales, Inc. (as successor
to Pioneer Data Processing, Inc.), which is the subject of one of the Lawsuits.
"Tax Settlement Payment Amount" shall mean, for any period, the
aggregate amount of payments made by the Company to the Internal Revenue
Service during such period (and reductions in accrued liabilities related to
such payments) to settle federal tax liabilities described in the note
captioned "Income
-2-
<PAGE> 99
Taxes" to the consolidated quarterly financial statements of the
Company contained in the Company's Quarterly Report on Form 10-Q for the
Quarter Ended September 30, 1993.
"TCI Transaction" shall mean the combination of Liberty Media and
Tele-Communications, Inc., a Delaware corporation, through the exchange of
Class A and Class B shares of both companies for like shares of a holding
company, on substantially the terms outlined in Liberty Media's Current
Report on Form 8-K dated October 27, 1993 (including the exhibits thereto),
copies of which have been furnished to the Banks by the Company.
(b) Section 1.1 of the 1993 Term Loan Agreement is hereby further
amended by deleting the definition of "Fixed Charges" in its entirety and by
replacing it with the following:
"'Fixed Charges' shall mean, for any Person and for any period, the
sum (without duplication) of:
(a) all capital expenditures and increases in intangible assets of
such Person for such period,
plus
(b) the sum (without duplication) of (i) all interest expense of such
Person for such period, (ii) all payments of principal of all
Indebtedness of such Person that were scheduled for payment during
such period, whether or not paid (unless any such payment (x) was
cancelled or forgiven for, or prepaid in advance of, such period or
(y) represents the June 15, 1994 principal installment due pursuant
to Section 3.1 of the 1992 Term Loan Agreement), (iii) any increase
in total current assets and any decrease in total current liabilities
(net of the change in cash and cash equivalents and the change in
Short-Term Debt, and without giving effect to:
(A) that portion, if any, of the Tax Settlement Payment Amount paid
(and any reductions in accrued liabilities related thereto) in such
period which, when aggregated with all other Tax Settlement Payment
Amounts paid (or such reductions) in all previous periods, does not
exceed $20,947,00, or
-3-
<PAGE> 100
(B) that portion, if any, of the Lawsuit Settlement Accrual
Amount recognized in such period which, when aggregated with all
other Lawsuit Settlement Accrual Amounts recognized in all
previous periods, does not exceed $25,000,000, or
(C) that portion, if any, of the Lawsuit Settlement Payment
Amount paid (and any reductions in accrued liabilities related
thereto) in such period which, when aggregated with all other
Lawsuit Settlement Payment Amounts paid (or such reductions) in
all previous periods, does not exceed $25,000,000),
(iv) any cash increase in long-term investments (excluding periods
prior to September 1, 1992) of such Person for such period, and (v)
any cash increase in long-term notes receivable (excluding periods
prior to September 1, 1992) of such Person for such period,
minus
(c) the sum (without duplication) of (i) all interest income, other
than interest income related to the Silver King Notes, of such Person
for such period, (ii) any decrease in total current assets and any
increase in total current liabilities (net of the change in cash and
cash equivalents and the change in Short-Term Debt, and without
giving effect to:
(A) that portion, if any, of the Tax Settlement Payment Amount
paid (and any reductions in accrued liabilities related thereto)
in such period which, when aggregated with all other Tax
Settlement Payment Amounts paid (or such reductions) in all
previous periods, does not exceed $20,947,000, or
(B) that portion, if any, of the Lawsuit Settlement Accrual
Amount recognized in such period which, when aggregated with all
other Lawsuit Settlement Accrual Amounts recognized in all
previous periods, does not exceed $25,000,000, or
(C) that portion, if any, of the Lawsuit Settlement Payment
Amount paid (and any
-4-
<PAGE> 101
reductions in accrued liabilities related thereto) in such period
which, when aggregated with all other Lawsuit Settlement Payment
Amounts paid (or such reductions) in all previous periods, does
not exceed $25,000,000),
(iii) any cash decrease in long-term investments (excluding periods
prior to September 1, 1992) of such Person for such period, and (iv)
any cash decrease in long-term notes receivable (excluding periods
prior to September 1, 1992) of such Person for such period,
in each case as reflected on the consolidated quarterly or annual
financial statements, including the notes thereto, of the Company most
recently delivered to the Administrative Agent pursuant to Section 9.1 (or
Section 8.2) hereof. Fixed Charges for the four-Fiscal Quarter period
ended August 31, 1992 are as set forth in Schedule 2 hereto."
(c) Section 1.1 of the 1993 Term Loan Agreement is hereby further
amended by deleting the definition of "Operating Cash Flow" in its entirety
and by replacing it with the following:
"'Operating Cash Flow' shall mean, for any period, the sum of
the following for the Company and its Subsidiaries (including, without
limitation, the Guarantor) on a consolidated basis:
(a) operating profit of such Persons for such period; plus
(b) (to the extent already deducted in arriving at operating profit)
depreciation and amortization expense for such Persons for such period;
plus
(c) (to the extent already deducted in arriving at operating profit)
commencing September 1, 1992, non-cash compensation expense related to
the Company's executive stock award program; plus
(d) all cash interest (if any), other cash income (if any) or cash
principal repayments (if any) received by the Company or any
Subsidiaries in connection with the Silver King Notes, and, for the
twelve months immediately following the delivery of any such Silver
King Note, accrued interest income on such note for no more than one
month; plus
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<PAGE> 102
(e) (to the extent already deducted in arriving at operating profit)
the lesser of (x) the Lawsuit Settlement Accrual Amount for such
period (whether or not paid) and (y) that portion, if any, of such
Lawsuit Settlement Accrual Amount that when aggregated with all other
Lawsuit Settlement Accrual Amounts accrued in previous periods
(whether or not paid) does not exceed $25,000,000,
all as shown on the consolidated financial statements, including the notes
thereto, of the Company and its consolidated Subsidiaries for such period
or, with respect to clause (d) above, if such financial statements do not
present information in sufficient detail to derive the amount specified in
clause (d) of this definition, as shown on the certificate to be delivered
to the Administrative Agent pursuant to the last paragraph of Section 9.1
hereof. Operating Cash Flow for the four-Fiscal Quarter period ended
August 31, 1992 is as set forth in Schedule 2 hereto."
(d) Section 9.11 of the 1993 Term Loan Agreement is hereby amended by
deleting the dates March 31, 1994 through September 30, 1994 and the related
ratios that appear in paragraph (a) of such Section and replacing such dates
and ratios with the following:
"March 31, 1994 1.40:1
June 30, 1994 1.40:1
September 30, 1994 1.40:1,".
(e) Section 9.12 of the 1993 Term Loan Agreement is hereby amended by
deleting the dates December 31, 1993 through December 31, 1994 and the related
ratios that appear in paragraph (a) of such Section and replacing such dates
and ratios with the following:
"December 31, 1993 2.125:1
March 31, 1994 2.50:1
June 30, 1994 2.50:1
September 30, 1994 2.25:1
December 31, 1994 2.25:1,".
(f) Section 10 of the 1993 Term Loan Agreement is hereby amended by
(i) deleting "; or" at the end of clause (iii) of paragraph (k) of such Section
and replacing it with ", or" and (ii) inserting the following at the end of such
paragraph (k):
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<PAGE> 103
"(iv) (A) such Change of Control arises solely in connection
with the TCI Transaction, and (B) as of the date the TCI Transaction
is consummated and after giving effect thereto, no other Default or
Event of Default shall have occurred and be continuing, or
"(v) with respect to any date on or following the date the TCI
Transaction is consummated, (A) such Change of Control arises solely
in connection with the Bell Atlantic Transaction, and (B) as of the
date the Bell Atlantic Transaction is consummated and after giving
effect thereto, no other Default or Event of Default shall have
occurred and be continuing; or".
(g) Each reference in the 1993 Term Loan Agreement to "this
Agreement" and the words "hereof", "hereto" and "herein" and the like shall,
except where the context otherwise requires, refer to the 1993 Term Loan
Agreement as amended by, and through the effective date of, this Third
Amendment.
SECTION 3. REPRESENTATIONS AND WARRANTIES. Each of the Company and the
Guarantor represents and warrants to the Administrative Agent and the Banks as
of the date of this Third Amendment and as of the date on which it becomes
effective that (a) no Default or Event of Default has occurred and is
continuing, and (b) the representations and warranties made by the Company and
the Guarantor in Section 8 of the 1993 Term Loan Agreement, as amended hereby,
and in any other certificate or other document delivered in connection with the
1993 Term Loan Agreement are true in all material respects on the date hereof
and are hereby restated on and as of the date of the effectiveness of this
Third Amendment with the same force and effect as if made on and as of such
date (including, without limitation, that there has occurred no material
adverse change since August 31, 1992 in the consolidated financial condition or
operations, or the business taken as a whole, of the Company and its
consolidated Subsidiaries from that set forth in their financial statements
dated as of August 31, 1992, except as disclosed to the Banks in writing prior
to the date of this Third Amendment).
SECTION 4. CONDITIONS TO EFFECTIVENESS. This Third Amendment shall
become effective as of December 31, 1993 when (a) counterparts hereof shall
have been duly executed and delivered by the Majority Banks and (b) the Company
shall have paid to LTCB Trust Company a fee in accordance with the terms and
conditions set forth in the Amendment Fee Letter, dated December 9, 1993, among
LTCB Trust Company, the Company and the Guarantor.
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<PAGE> 104
SECTION 5. MISCELLANEOUS.
(a) This Third Amendment may be executed in any number of
counterparts, all of which taken together and when delivered to the
Administrative Agent shall constitute one and the same instrument, and any of
the parties hereto may execute this Third Amendment by signing any such
counterpart.
(b) Upon the effectiveness of this Third Amendment, LTCB Trust Company,
as Administrative Agent, shall pay fees to the Banks in accordance with the
terms and conditions of its notice to the Banks dated December 10, 1993.
(c) THIS THIRD AMENDMENT AND THE 1993 TERM LOAN AGREEMENT AS AMENDED
HEREBY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.
(d) Except as expressly set forth in this Third Amendment, the 1993 Term
Loan Agreement shall remain unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to
be duly executed as of the date first above written.
HOME SHOPPING NETWORK, INC.,
as the Company
By /s/ KEVIN J. MCKEON
-----------------------------
Title: Senior Vice President
of Accounting & Finance
HOME SHOPPING CLUB, INC.,
as Guarantor
By /s/ R. JOSEPH RILEY
-----------------------------
Title: Assistant Treasurer
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<PAGE> 105
The Banks
LTCB TRUST COMPANY, as a Bank
and Agent
By /s/ JOHN A. KROB
-----------------------------
Title: Senior Vice President
BANK OF MONTREAL, as a Bank
and a Co-Agent
By /s/ PATRICK J. SULLIVAN
-----------------------------
Title: Director
THE BANK OF NEW YORK, as a Bank
and a Co-Agent
By /s/ KALPANA RAINA
-----------------------------
Title: Vice President
PNC BANK, KENTUCKY, INC.
(formerly known as Citizens
Fidelity Bank & Trust Company)
By /s/ JAMES D. NEIL
-----------------------------
Title: Vice President
TORONTO DOMINION [TEXAS], INC.
By /s/ CAROLE A. CLAUSE
-----------------------------
Title: Vice President
The Administrative Agent
LTCB TRUST COMPANY,
as Administrative Agent
By /s/ JOHN A. KROB
-----------------------------
Title: Senior Vice President
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<PAGE> 1
EXHIBIT 10.28
AMENDED AND RESTATED
SYSTEM MAINTENANCE AND SUPPORT AGREEMENT
This System Maintenance and Support Agreement (the "Agreement") is made
effective as of February 1, 1993 by and between Precision Systems, Inc., a
Delaware corporation ("PSi"), and Home Shopping Network, Inc., a Delaware
corporation ("HSN").
WITNESSETH:
WHEREAS, PSi and HSN entered into that certain PSi System Maintenance and
Support Agreement executed as of July 31, 1992, pursuant to which PSi has
provided maintenance and support for the Total Call Processor system and all
associated equipment, firmware and software; and
WHEREAS, PSi and HSN desire to amend and restate the terms of such
Maintenance and Support Agreement as provided herein;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions.
As used in this Agreement, the following terms have the meaning set forth
below:
"Confidential Information" has the meaning specified in Section 9.3.
"Cost of Performance" means the direct costs for labor and materials
incurred by PSi in performing its obligations hereunder (excluding (i) any
overhead costs, (ii) any expenses incurred by PSi in causing the Lead Capture
System to become operational in accordance with Section 6.1, and (iii) any
expenses or other amounts reimbursed or paid by HSN in accordance with the
terms of
<PAGE> 2
this Agreement or any other agreement (such as the Software Development
Agreement).
"Custom Work Product" means, solely with respect to this Agreement, the
resulting software updates, releases, corrections and enhancements, if any
(including all functional and technical designs, programs, modules, code,
algorithms, flowcharts, data diagrams, documentation and the like) created by
PSi after the effective date of this Agreement on behalf of HSN and in the
course of rendering Maintenance and Support Services hereunder. Custom Work
Product does not include any Third Party Software or any Embedded Software.
"Documentation" means textual and/or graphical material perceivable
directly by humans relating to the computer programs comprising the Software,
together with hardware design documentation. Such documentation shall include
(i) documentation describing data flows, data structures and control logic of
the computer programs, programmers' notes and all other documentation, as well
as hardware design documentation, all of which shall exist in sufficient detail
to enable competent programmers to maintain, support, enhance and redesign the
System, and (ii) user documentation describing the function and use of the
Software in sufficient detail to permit use of the Software, and operating
manuals which facilitate operation and use of the System.
"Documentation Maintenance" means maintenance and updating of the
Documentation from time to time during the term hereof (and no less often than
every three (3) months) as necessary to reflect modifications or fixes to the
System, as well as new releases or updates to the Software to keep the
Documentation current.
"Embedded Software" means pre-existing software owned by PSi or any
thirdr party and incorporated or "embedded" into Custom Work Product.
"Enhancement" means any modification to the System requested by HSN and
agreed to by PSi that materially exceeds the level of functionality or
performance provided for in the Specifications for the System.
"Equipment" means computer hardware, telecommunications hardware,
peripheral equipment and other equipment included in the System, as described
in Exhibit A-1 hereto, and shall include Third Party Equipment and additional
equipment acquired by HSN from PSi after the date hereof and added to the
System.
"Fee" means the fee for Maintenance and Support Services payable by HSN
in accordance with the terms of Section 4.1 below.
"Firmware" means microcode imbedded in read-only memory (ROM) included
in the System.
"Lead Capture Subsystem" means the lead capture platform to be
developed and installed by PSi as part of the System pursuant to Article VI
below. The Lead Capture Subsystem will expand the
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<PAGE> 3
existing System to provide HSN with an operating environment which permits HSN
to create and execute lead capture applications. The specifications for the
Lead Capture Subsystem are set forth in the Lead Capture Subsystem
Specifications attached to the Specifications (Exhibit A) as Annex I. The Lead
Capture Subsystem shall be included as part of the System for purposes of this
Agreement.
"Lead Capture Subsystem Specifications" means the specifications for
the Lead Capture Subsystem set forth in Annex I to the Specifications (Exhibit
A).
"Maintenance and Support Services" means all services and materials and
supplies to be provided by PSi for the System pursuant to this Agreement, and
includes, without limitation, technical advice and assistance, repair and/or
replacement of defective Equipment and Software, maintenance and support of
Equipment and Software, including Third Party Equipment and Third Party
Software, provision of updates and new releases for the Software, when and if
made by PSi, and review and evaluation of System modifications. The
Maintenance and Support Services to be provided by PSi are specified in Exhibit
B hereto. The Maintenance and Support Services will also include Documentation
Maintenance.
"Object Code" means the Software in a form which is directly executable
by a computer (i.e., executable code).
"Prime Rate" means the Prime Rate of Interest, as published in the
"Money Rates" column of the Wall Street Journal from time to time (or, if the
Wall Street Journal ceases publication of such rate, a similar published rate
intended to reflect the base rate on corporate loans posted by a representative
sample of the largest U.S. banks).
"Principal Site" means the principal location at which HSN locates and
operates the System, which shall be in the Hillsborough, Pinellas or Pasco
counties in Florida.
"Prior Agreement" means the PSi System Maintenance and Support
Agreement dated as of July 31, 1992 between PSi and HSN relating to the
maintenance and support of the System.
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<PAGE> 4
"Remote Site" means any site at which Equipment is located other than
the Principal Site.
"Software" means the computer programs included in the System, in both
Source Code and Object Code forms. A complete list of the current Software is
set forth on Exhibit A-2. For purposes hereof, Software shall include all
Firmware, Third Party Software, Custom Work Product, Embedded Software, and
software created after the date hereof by PSi pursuant to the terms of the
Software Development Agreement, and, in all cases, shall include both software
and firmware in existence on the date hereof and software and firmware
hereafter furnished to HSN.
"Software Development Agreement" means the Software Development
Agreement between HSN and PSi dated as of July 31, 1992.
"Software License Agreement" means the Software License Agreement dated
as of July 31, 1992 between PSi and HSN, relating to the Software (as amended
pursuant hereto).
"Source Code" means Documentation and the version of the Software
written in higher level computer language(s) which may be read by humans and
which may be translated into Object Code form by compiling. Source Code shall
be internally documented with programmer's comments in sufficient detail to
enable competent computer software programmers to maintain, support, enhance
and redesign the Software.
"Source Code Escrow Agreement" means the Source Code Escrow Agreement
between HSN and PSi, dated as of January ___, 1994, pursuant to which PSi has
delivered the Source Code, Object Code and Documentation for the System to the
Escrow Agent thereunder.
"Specifications" means the specifications for the System, as set forth
in Exhibit A, and as updated from time to time pursuant hereto.
"System" means the Total Call Processor platform ("TCP") which provides
an operating environment which permits HSN to create, execute and maintain
various interactive voice response applications, including, without limitation,
applications which allow HSN to accept telephone calls and callers to place
orders for HSN merchandise, to place orders for pay per view or other services,
or to obtain information. With the addition of the Lead Capture Subsystem,
the System will also permit HSN to create, execute and maintain lead capture
applications in accordance with the functional specifications. The System is
described more fully in Exhibit A and is comprised of the Software (including
Firmware) and Hardware. The System will also include any Hardware or Software
added to the System after the date hereof, including additional ports.
"Third Party Equipment" means computer hardware and related equipment
included in the System which is fabricated or supplied by third parties, as
identified in Exhibit A-3.
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<PAGE> 5
"Third Party Software" means the computer software programs included in
the System which are not owned by PSi but are supplied to HSN under license
from a third party to PSi, as identified in Exhibit A-4.
"Warranty Period" means the period during which new ports or Equipment
added after the date hereof shall continue under warranty for purposes hereof.
The Warranty Period with respect to Equipment will be one (1) year from the
date of installation of the Equipment, unless the manufacturer or supplier of
Third Party Equipment provides a longer warranty period for such Equipment, in
which case the Warranty Period will be extended as long as the third party
manufacturer's (or supplier's) warranty continues, or (ii) PSi offers a longer
warranty on the same or similar equipment to any other customer, in which case
the Warranty Period will be equal to the warranty offered to such other
customer.
ARTICLE II
TECHNICAL SUPPORT
2.1 Maintenance and Support Services.
In consideration of payment by HSN of the fee specified in Section 4.1
during the term of this Agreement, PSi will provide Maintenance and Support
Services specified in Exhibit B and in accordance with the terms hereof. In
order to facilitate the provision of such services, PSi will maintain a
Technical Service Center in accordance with the provisions of Exhibit B.
2.2 Excluded Services.
PSi's maintenance and support obligations pursuant to this Agreement do
not include the following:
(a) Any maintenance and support services for equipment or software
that is not part of the System. Without limiting the generality of the
foregoing, PSi is not responsible for maintenance and repair of the software or
hardware for PC-based VRU systems owned by HSN.
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<PAGE> 6
(b) Repair of damage resulting from any of the following: neglect,
misuse or improper operation of the System by HSN or by persons not authorized
by PSi, the introduction of any software virus by HSN, failure to provide
appropriate operating facilities or environment as required by Exhibit C
(Client Responsibilities) fire, lightning, water damage, loss of power,
fluctuation of power beyond the tolerances specified in Exhibit C (Client
Responsibilities), or modifications or repairs to the System performed by
persons not authorized by PSi.
(c) Any services which constitute Enhancements to the System (as
defined in Section 1.1). Any such services would be rendered pursuant to the
Software Development Agreement as contemplated by Section 2.4(a) below.
However, it is understood and agreed that, if PSi does make any Enhancements to
the System pursuant to the Software Development Agreement or other agreement
between the parties, the hardware and software added to the System in
connection with such Enhancements will be considered Hardware and Software for
purposes of this Agreement, and PSi will be required to maintain such Hardware
and Software in accordance with the terms of this Agreement.
2.3 Third Party Equipment and Software.
PSi may from time to time subcontract its maintenance and support
obligations with respect to Third Party Equipment and Third Party Software to
qualified third party vendors of such services, and HSN hereby consents
thereto. PSi shall supervise and coordinate the provision of Maintenance and
Support Services by any such subcontractors. Any costs of such maintenance and
support services provided by subcontractors (including, without limitation,
license fees, rental fees and maintenance and support or other service fees
payable to such third party vendors) will be borne solely by PSi and will not
be subject to reimbursement by HSN. PSi has provided HSN with a true, correct
and complete list of the names and addresses of all such third party vendors
currently providing such services, and will promptly provide the names and
addresses of any such third party vendors hereafter engaged by PSi to provide
such services to support PSi's performance hereunder; provided, however, that
PSi shall not be required to list (or hereafter to provide information with
respect to) any such vendor if payments to that vendor relating to HSN work
over the preceding twelve (12) month period did not exceed $10,000, and
payments to that vendor during the next succeeding twelve (12) month period
cannot reasonably be expected to exceed $10,000. Upon termination of this
Agreement for any reason (other than termination pursuant to Section 3.2(b)(ii)
below as a result of a material breach of this Agreement by HSN) or delivery of
Source Code to HSN in accordance with the terms hereof, at the written request
of HSN, PSi will promptly cause all license agreements, leases, maintenance and
support agreements and other service agreements with third party vendors
relating to the System to be assigned to HSN, to the extent such agreements are
assignable. In the event of any such assignments, PSi reserves the right to
collect from such third parties a refund of any prepaid fees to which PSi may
be entitled pursuant to such agreements.
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<PAGE> 7
2.4 Additional Services.
(a) Additional Development Services. PSi and HSN may, from time to
time, agree that PSi will provide services and materials outside of the scope
of the Maintenance and Support Services provided for hereunder. For example,
such services and materials could include additional site preparation,
development of new software or firmware, or other Enhancements to the System.
Any such services and materials will be provided in accordance with, and
subject to the terms and conditions of, the Software Development Agreement.
(b) Additional Maintenance and Support Services. In the event that
the System suffers any damage resulting from any of the causes identified in
Section 2.2(b) above (the repair of which is excluded from PSi's maintenance
and support obligations hereunder in accordance with the provisions of Section
2.2(b)), then PSi agrees that it will furnish HSN with any and all assistance
required in an effort to repair such damage as quickly as possible and in an
effort to restore the System to normal working order, including, without
limitation, coordination and supervision of third-party vendors required in an
effort to effect such repairs. PSi shall be entitled to be reimbursed for any
services rendered by it pursuant to this Section 2.4(b) at a rate equal to the
lesser of (i) PSi's then-current published rates for such services, or (ii)
$100 per hour.
ARTICLE III
TERM AND TERMINATION
3.1 Term.
(a) Initial Term. The initial term of this Agreement shall commence
effective as of February 1, 1993 and shall continue through December 31, 1994.
(b) Automatic Renewal for Additional One-Year Terms. Upon expiration
of the initial term provided for in Section 3.1(a) above, this Agreement shall
thereafter automatically renew for up to four (4) successive terms of one (1)
year each, unless (i) notice of non-renewal is given by one of the parties
pursuant
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<PAGE> 8
to Section 3.2(a)(i) or 3.2(b)(i) below; or (ii) HSN elects to extend the term
hereof for an additional term of either three years or five years pursuant to
Section 3.1(c) below.
(c) Election to Extend for Additional Three-Year or Five Year
Term.
Subject to PSi's right to terminate this Agreement upon expiration of
the initial term as set forth in Section 3.2(b)(i) below (and in lieu of the
automatic extension of the term hereof for one or more additional one year
terms pursuant to Section 3.1(b) above), HSN shall have the option to renew
this Agreement for an additional term of either (i) three (3) years, beginning
January 1, 1995 and ending December 31, 1997; or (ii) five (5) years, beginning
January 1, 1995 and ending December 31, 1999. Such option must be exercised by
HSN, if at all, on or before September 30, 1994 by delivery of written notice
to PSi by HSN, which notice shall specify the period of the extended term.
Failure by HSN to provide such notice of its exercise of the option to renew
this Agreement pursuant to this Section 3.1(c) shall constitute, on the part of
HSN, an election to allow this Agreement to automatically renew in accordance
with the provisions of Section 3.1(b), unless HSN has given written notice of
an election not to renew this Agreement in accordance with Section 3.2(a).
Except for the new term as governed by the option to renew and the adjustment
to the Maintenance and Support Fees provided for in Section 4.1(a), such
renewal shall be on the same terms and conditions as set forth in this
Agreement.
3.2 Termination.
(a) Termination by HSN. This Agreement may be terminated by
HSN as follows:
(i) Election Not to Renew. This Agreement may be
terminated by HSN at the end of the initial term specified in Section 3.1(a) or
at the end of any subsequent one (1) year renewal term provided for in Section
3.1(b), for any reason. Such termination pursuant to this Section 3.2(a)(i)
shall be effected by delivery of written notice of non-renewal to PSi at least
ninety (90) days prior to the end of the initial term or any additional
one-year renewal term.
(ii) Termination Upon Event of Default. HSN may
terminate this Agreement at any time, by providing written notice of
termination to PSi upon the occurrence of one of the following Events of
Default:
(1) The Arbitrator provided for in Section 5.2
determines that an Event of Default exists with
respect to PSi's performance of its obligations to
provide Maintenance and Support Services hereunder;
or
(2) PSi materially breaches any of its other
obligations hereunder (other than the obligation to
provide Maintenance and Support Services) and fails
to cure such breach within thirty (30) days of
receipt of written
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<PAGE> 9
notice from HSN of the existence of such
breach; or
(3) PSi fails to continue to operate as
a going concern, or refuses to provide, or
otherwise ceases to provide, Maintenance and
Support Services in accordance with the
terms hereof.
(b) Termination by PSi.
(i) Election not to Renew. This Agreement may be
terminated by PSi at the end of the initial term specified in Section 3.1(a) or
at the end of any subsequent automatic one (1) year renewal term provided for
in Section 3.1(b) (but PSi shall not have the right to terminate pursuant to
this Section 3.2(b)(i) during any three year or five year term extension
elected by HSN pursuant to Section 3.1(c)); provided, that PSi's documented
Cost of Performance of its obligations under this Agreement over a running
twelve (12) month period has exceeded the amount of the Fees paid hereunder
during such twelve (12) month period; provided, further, that PSi has satisfied
the conditions specified below in this Section 3.2(b)(i). Such termination
pursuant to this Section 3.2(b)(i) shall be effected by delivery of written
notice of non-renewal to HSN at least ninety (90) days prior to the end of the
initial term specified in Section 3.1(a) or the end of any automatic one-year
renewal period provided for in Section 3.1(b).
(1) PSi's right to terminate
pursuant to this Section 3.2(b)(i) is
subject to the obligation of PSi to:
(aa) deliver to HSN a complete and
current copy of all Source Code and Object
Code for the Software, together with all
Documentation, and, in accordance with
Section 7.1(a), HSN shall thereafter be
deemed to have a fully-paid, perpetual,
non-exclusive, irrevocable right and
license to use such Source Code and
Documentation to maintain and support
(or to permit
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<PAGE> 10
technically qualified third parties
to maintain and support) the System
and to modify and enhance the
System, but HSN shall not have the
right to develop, nor shall it
develop a new product with the same
or similar functionality or
intended for the same or similar
purposes for sale, lease or
distribution to any third party,
(bb) make available to HSN, for a
period of up to three (3) months,
qualified personnel of PSi selected
by PSi and reasonably acceptable to
HSN for the purpose of training HSN
personnel (or third party vendors
selected by HSN) in the maintenance,
support, operation and enhancement
of the System and making the HSN
personnel (or the selected third
party vendors) fully and
independently functional with the
Source Code and, if PSi makes its
employees available to HSN as
contemplated by this clause (bb) at
the request of HSN, then HSN will
continue to pay the monthly Fee
provided for in Section 4.1 during
such period,
(cc) make available to HSN a
complete and accurate list of the
names and last known addresses or
phone numbers of all programming
personnel (including independent
contractors) known to PSi who
designed or wrote any portions of
the Software,
(dd) at the request of HSN, PSi
will promptly cause all license
agreements, leases, maintenance and
support agreements and other service
agreements with third party vendors
relating to the System to be
assigned to HSN, to the extent such
agreements are assignable. In the
event of any such assignments, PSi
reserves the right to collect from
such third parties a refund of any
prepaid fees to which PSi may be
entitled pursuant to such
agreements, and
(ee) Allow HSN, upon receipt of
notice of termination by PSi
pursuant to this Section 3.2(b)(i),
to cause PSi's outside auditors to
audit the books and records of PSi
in order to confirm that PSi's Cost
of Performance in fact exceeds the
Fees paid hereunder during the
relevant twelve (12) month period, as
contemplated hereunder, and such
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<PAGE> 11
auditors shall provide HSN with a
certificate to such effect. PSi
shall be required to provide complete
and detailed records as will permit
such auditors to confirm the actual
amount of such Cost of Performance.
(2) The rights of HSN under this Section
3.2(b)(i) to obtain the Source Code, Object
Code and Documentation from PSi are intended
to be in addition to, and not in lieu of,
HSN's rights under the Source Code Escrow
Agreement or any other agreement between the
parties relating to the Source Code, Object
Code or Documentation.
(ii) Breach by HSN. This Agreement may be terminated by PSi, upon
delivery of written notice of such termination to HSN, if HSN is in material
default with respect to any of its obligations under this Agreement (including
the failure to pay PSi the Fee when due in accordance with the terms of this
Agreement), and such breach is not cured within thirty (30) days after PSi
delivers written notice of such breach to HSN. If HSN fails to pay PSi the Fee
when due, such late payment will bear interest at the Prime Rate, plus two
percent (2%) per annum, from the date of HSN's receipt of written notice of the
breach, until paid.
3.3 HSN's Rights to Obtain Source Code. HSN's rights to receive
the Source Code from escrow shall be as specifically set forth under the terms
of the Source Code Escrow Agreement provided for in Article VIII of this
Agreement. HSN acknowledges that, in the event of any default by PSi under
this Agreement which would not result in a release of the Source Code from
escrow under the terms of the Source Code Escrow Agreement, HSN would have
adequate remedies for such breach hereunder without recourse to the escrowed
Source Code.
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ARTICLE IV
FEES
4.1 Maintenance and Support Fees.
(a) Maintenance and Support Fees shall be payable by HSN as
follows:
(i) For the period beginning on the Effective Date
hereof (February 1, 1993) and ending January 31, 1994,
HSN shall pay to PSi a Fee, in the amount of Two Hundred
Eighty Thousand Dollars ($280,000) per month (that is,
$14 per port per month), for the Maintenance and Support
Services. For the period beginning February 1, 1994 and
ending December 31, 1994, HSN shall pay to PSi a Fee, in
the amount of One Hundred Ninety Five Thousand Five
Hundred Dollars ($195,500) per month (that is, $9.78 per
port per month), for such Maintenance and Support
Services.
(ii) In the event that the term hereof is
automatically extended beyond December 31, 1994 for one
or more additional one year terms pursuant to Section
3.1(b) above, then, during the period beginning January
1, 1995 and ending upon termination of this Agreement,
the Fee shall be an amount equal to One Hundred Ninety
Five Thousand Five Hundred Dollars ($195,500) per month
(that is, $9.78 per port per month) throughout such
renewal term (or terms).
(iii) In the event that HSN elects to extend the term
hereof beyond December 31, 1994 for an additional three
(3) year term pursuant to Section 3.1(c)(i) above, then,
during the three (3) year period beginning on January 1,
1995 and ending December 31, 1997, the monthly Fee will
be an amount equal to One Hundred Fifty Thousand Dollars
($150,000) per month (that is, $7.50 per port per month)
throughout such additional three year term. In the
event that HSN elects to extend the term hereof beyond
December 31, 1994 for an additional five year period
pursuant to Section 3.1(c)(ii) above, then, during the
five year period beginning January 1, 1995 and ending
December 31, 1999, the monthly Fee will be an amount
equal to One Hundred Twenty Thousand Dollars ($120,000)
per month (that is, $6.00 per port per month) throughout
such additional five year term.
The Fee, as specified above in this Section 4.1(a), will not be increased
during the initial term or any renewal term provided for hereunder (except as
specifically provided in Section 4.1(b) below).
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(b) In the event that HSN requests that PSi add any additional ports
to the System beyond the 20,016 ports currently in existence and PSi consents
thereto, the Fee will be increased by an amount equal to $117.36 per year
($9.78 per month) for each such additional port added to the System; provided,
however, that if HSN elects to extend the term hereof beyond December 31, 1994
for an additional three (3) year term pursuant to Section 3.1(c)(i) above,
then, during the three (3) year period beginning on January 1, 1995 and ending
December 31, 1997, such increase in the monthly Fee will be equal to $7.50 per
additional port per month, or $90 per annum, throughout such additional three
year term, and if HSN elects to extend the term hereof beyond December 31, 1994
for an additional five year period pursuant to Section 3.1(c)(ii) above, then,
during the five year period beginning January 1, 1995 and ending December 31,
1999, such increase in the monthly Fee will be equal to $6.00 per port per
month, or $72 per annum, throughout such additional five year term. It is
specifically understood and agreed that the ports to be used as a part of the
Lead Capture Subsystem are included in the 20,016 ports that are already part
of the System, and the completion of the Software relating to the Lead Capture
Subsystem will not result in an increase in the Fee. Additionally, it is agreed
that any additions to the System (such as Enhancements) that do not result in
the addition of any Equipment to the System will not result in any adjustment
to the Fee. If Enhancements made to the System do result in the addition of
Equipment to the System, the parties will negotiate concerning the effect, if
any, that such Enhancements would have on the Fee at the time that the
Enhancements are agreed upon by the parties. Notwithstanding the foregoing, no
adjustment under this paragraph (b) will be effective with respect to any
additional ports added to the System until the Warranty Period with respect to
the related additional Equipment expires. It is understood and agreed that the
provisions of this Section 4.1(b) are not intended to alter the provisions of
Section 2.2(c) hereof, which confirm that services which constitute
Enhancements are excluded from PSi's obligations hereunder and would be
rendered at HSN's request, and with PSi's consent, pursuant to the Software
Development Agreement.
(c) In the event that PSi is required to provide
Maintenance and Support Services at a Remote Site, HSN shall reimburse PSi for
all direct, out-of-pocket travel related
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expenses (the "Reimbursable Expenses"), including airfare, hotel, ground
transportation and meal expenses. The Reimbursable Expenses shall be
reimbursed in accordance with the rules specified in Exhibit K to this
Agreement, and all PSi invoices therefor shall include receipts and other
supporting documentation.
4.2 Taxes.
HSN shall, in addition to the payments specified in Section 4.1, pay or
reimburse PSi for all sales, use, transfer or other taxes or duties, whether
national, state or local, however designated, which are levied or imposed by
reason of the transactions defined in this Agreement; provided, however that
HSN shall not be required to pay or reimburse PSi for taxes on the net income
of PSi.
4.3 Payment Terms.
HSN shall pay the Fee to PSi on a monthly basis. PSi will
invoice between the 1st and 5th day of the month for the Fee for that month,
together with any Reimbursable Expenses, payable net thirty (30) days after
receipt.
4.4 "Most Favored Nations" Pricing.
(a) PSi agrees that at no time during the term hereof
will HSN be required to pay Fees for the Maintenance and Support Services
provided hereunder in excess of the fees charged by PSi to any customer for
similar products or services or functions (whether such charges to such
customer are determined on a per port or other charge basis). In the event
that PSi offers to charge a customer lower fees for such similar services or
products or functions, the Fee provided for in Section 4.1 shall be reduced to
the amount charged to such other customer, retroactive to the date on which
such lower amount was first charged to such other customer. In determining
whether the amount charged to another customer is less than the Fees provided
for hereunder, the Fees payable by HSN should be compared only to those fees
received (or to be received) by PSi from such other customer which are
attributable to the same or similar products or services or functions furnished
to HSN; charges to such other customer that are attributable to products or
services or functions which are not similar to those furnished to HSN hereunder
shall be excluded and shall not be taken into account. In the event that the
provisions of this Section 4.4(a) result in a retroactive reduction in Fees
already paid to PSi, the difference between the amounts already paid by HSN
after the effective date for such reduction provided for above, over the
reduced price provided for above, shall be promptly refunded by PSi within
sixty (60) days following receipt of an invoice therefor from HSN (or, at the
option of HSN, may be offset by HSN against the Fees payable by HSN under
Section 4.1, as adjusted pursuant to this Section 4.4).
(b) PSi will provide a duly executed certificate of PSi's
outside auditors, not more than once in any calendar year, after receiving
written request for such certificate from HSN,
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certifying either (i) that PSi has not offered similar products, services or
functions to a customer at prices lower than the prices provided for hereunder
as contemplated in Section 4.4(a) above, or (ii) advising HSN of the amount of
the adjustment to the Fee required in accordance with Section 4.4(a) above.
Such certificate shall also be executed by the President of PSi. HSN will only
request such certificate in the event that HSN has tangible evidence to believe
that PSi has added a new customer, or amended the terms of an existing customer
contract, for the same or similar products, services or functions furnished to
HSN by PSi.
ARTICLE V
WARRANTY AND INDEMNIFICATION
5.1 Warranty and Limitation of Liability.
(a) PSi warrants that all parts repaired or replaced and all Equipment
furnished to HSN during the term of this Agreement shall be free of defects in
manufacture or materials for a period of one (1) year from installation. All
services provided by PSi pursuant to this Agreement shall be performed in a
good and workmanlike manner. In addition, PSi warrants that each of its
employees, agents or representatives assigned to perform hereunder shall have
the proper skill, training and background so as to be able to perform in a
competent and professional manner, and that all work will be so performed, and
performed in a manner that does not unreasonably disrupt HSN's business
operations at its premises.
(b) The warranties set forth in Section 5.1(a) above do not apply to
defects that arise from neglect, misuse or improper operation of the System by
HSN or by persons not authorized by PSi, power failure, fluctuation of power
beyond the tolerances specified in Exhibit C (Client Responsibilities),
environmental control failure, failure of equipment that is not part of the
System or unauthorized modifications or other causes beyond PSi's control.
(c) THE WARRANTIES PROVIDED FOR IN THIS AGREEMENT ARE IN LIEU OF ALL
OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING
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BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, IF APPLICABLE.
(d) PSi's liability and HSN's exclusive remedy for breach of the
warranties stated in Section 5.1(a) above shall be limited to the repair or
replacement of the defective Equipment or repair parts provided by PSi under
this Agreement or correction of the problems resulting from inadequate service.
In no event shall PSi be liable under this Section 5.1(d) for any indirect,
incidental, special, consequential or punitive damages, including loss of
profit, revenue, data or use, incurred by HSN or any third party, whether in
contract or tort, even if PSi has been advised of the possibility of such
damage, except to the extent that any such loss, cost, damage or expense arises
from or is attributable to the gross negligence or willful misconduct of PSi.
Notwithstanding the foregoing sentence, PSi's liability under this Section
5.1(d) shall not exceed $18,000,000, except in cases of willful misconduct by
PSi.
5.2 Warranty of Performance; Default.
(a) PSi represents and warrants that the System will conform in all
respects to the Specifications for the System set forth in Exhibit A. The
parties acknowledge that:
(i) ISDN support for the MCI Circuits is currently limited to 47B + 1D
configuration, while the Specifications require ISDN support in 94B + 2D
configuration. HSN has agreed that the failure to provide the required ISDN
support for the MCI Circuits in accordance with the Specifications will not be
deemed to constitute a breach of the foregoing representation and warranty at
the present time. However, PSi agrees that it will submit a high level design
for this functionality for HSN's approval by May 1, 1994 and, at the written
request of HSN, PSi will thereafter promptly implement such design by making
such modifications to the System as are necessary to provide ISDN support for
the MCI Circuits in 94B + 2D configuration, in accordance with the
Specifications, at the sole cost and expense of PSi, and the failure to do so
will constitute a breach of the representation and warranty specified in the
first sentence of this Section 5.2(a);
(ii) The System currently has only a portion of the Enhanced Fail-Over
Capability required by the Specifications (that is, in the event of an SCP or
SCP-MCP communications link failure, new calls are correctly sent to a
functional MCF but, all calls in progress at the time of the Fail-Over are
disconnected). However PSi agrees that it will deliver this capability to HSN
in accordance with the Specifications, at the sole cost and expense of PSi, and
the failure to do so will constitute a breach of the representations and
warranties specified in the first sentence of this Section 5.2(a);
(iii) The System does not currently provide a Process Watcher as
required in the Specifications, and the failure to provide the Process Watcher
in accordance with the Specifications will not be deemed to constitute a breach
of the foregoing representations and warranties at the present time.
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However, PSi agrees that it will, as provided in the Specifications, make such
modifications to the Software as are necessary to provide the Process Watcher
in accordance with the Specifications, at the sole cost and expense of PSi, and
the failure to do so will constitute a breach of the representations and
warranties specified in the first sentence of this Section 5.2(a);
(iv) The parties acknowledge and agree that, as of the date of
execution of this Agreement, Documentation for all aspects of the Software has
not yet been completed, and the failure to complete such documentation will not
be deemed to constitute a breach of the foregoing representations and
warranties at the present time. However, PSi has agreed that it will complete
all such Documentation on or before December 31, 1994. Upon completion of each
module of the Documentation, PSi will notify HSN in writing, and will promptly
deposit the additional Documentation with the Escrow Agent under the Source
Code Escrow Agreement.
(b) In the event that there exists any Performance Default (as
defined in Section 5.2(d) below), then HSN shall provide a written notice to
PSi (the "Default Notice") describing the Performance Default, and demanding
that a cure be made within thirty (30) days. HSN shall continue to pay the
Fees due hereunder during this thirty (30) day cure period.
In the event that HSN delivers a Default Notice to PSi, the parties
shall promptly select an Arbitrator in accordance with the provisions of
Section 5.2(c) below. Such Arbitrator shall determine whether the Performance
Default exists. The Arbitrator shall render its decision on the thirty-first
(31st) day from the date on which HSN delivers the Default Notice.
(i) On the thirtieth (30th) day following PSi's receipt of HSN's
Default Notice, if the Performance Default has been cured, the parties shall
continue in accordance with the terms of this Agreement. If the Arbitrator
determines that the Performance Default still exists, or the Arbitrator is not
able to make a determination, the Arbitrator shall deliver to the Escrow Agent
under the Escrow Agreement written notice (an "Arbitrator's Performance Default
Notice," in the form attached as Exhibit E-1) that an uncured Performance
Default exists,
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directing the Escrow Agent to turn over to HSN such portion of the materials
being held by the Escrow Agent (including Source Code and Documentation) as is
necessary in the judgment of the Arbitrator to effect a cure (and, if the
Arbitrator is unable to determine what portion of such Escrow Materials is
required in order to effect a cure, then the Arbitrator shall instruct the
Escrow Agent to turn all of such Escrow Materials over to HSN). During days
thirty-one (31) through sixty (60) following PSi's receipt of HSN's Default
Notice, employees of PSi and HSN shall work together continuously and
diligently with the Source Code to attempt to effect a cure to the System.
During days thirty-one (31) through sixty (60), HSN shall not be obligated to
pay PSi any Fees hereunder or otherwise.
(ii) If by day sixty (60) the Performance Default is cured, as
determined by the Arbitrator, then all Escrow Materials previously delivered to
HSN shall be returned to Escrow and the parties shall recommence to perform
their respective obligations hereunder. If the parties cannot agree whether a
cure has been effected, the arbitration process described in the foregoing
paragraph shall again be commenced on day sixty (60), with a decision rendered
by the Arbitrator ten (10) days later. If by day sixty (60) the Performance
Default is still not cured, as determined by the Arbitrator, then, for purposes
of this Agreement (including, without limitation, the provisions of Section
3.2(a)(ii)(1) regarding Termination of this Agreement) and the Source Code
Escrow Agreement, an Event of Default shall be deemed to exist with respect to
PSi's performance of its obligations to provide Maintenance and Support
Services hereunder. The Arbitrator shall thereupon immediately deliver to the
Escrow Agent under the Source Code Escrow Agreement written notice (an
"Arbitrator's Event of Default Notice," in the form attached hereto as Exhibit
E-2) of the existence of such Event of Default with respect to PSi's
performance of its obligation to provide Maintenance and Support Services
hereunder, directing the Escrow Agent to deliver to HSN all of the Escrow
Materials (including, without limitation, the Source Code and Documentation),
and PSi shall thereafter continue to work with HSN for an additional sixty (60)
days, during which time PSi then shall train HSN individuals (or third party
vendors selected by HSN) on the Source Code and the System to make HSN
independently functional. During days sixty (60) through one hundred twenty
(120), HSN shall pay PSi for HSN requisitioned training costs in the amount of
$100.00 per hour, but HSN will not be required to pay the Fees provided for
hereunder. If the last day of any time period falls on Saturday, Sunday or
holiday, such time period shall be extended to the next following business day.
In the case of trouble tickets in existence on the date of execution
and delivery of this Agreement (rather than the effective date of this
Agreement), such trouble tickets shall be deemed new trouble tickets open on
the date of execution of this Agreement (not the effective date), and the cure
periods specified in Section 5.2(d) shall not begin to run unless and until
notice has been given with respect to such trouble tickets in accordance with
the provisions of Section 5.2(d) on or after the date of execution and delivery
of this Agreement (not the effective date). Copies of all trouble tickets in
existence on
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the date of execution and delivery of this Agreement have been attached hereto
as Exhibit L and a priority has been ascribed on each ticket to the particular
trouble which is the subject matter of that ticket.
(c) Arbitration. All disputes under Section 5.2 concerning the
issue of whether the System conforms to the Specifications shall be settled by
arbitration in accordance with the provisions of this Section 5.2. All
arbitration proceedings hereunder shall be conducted in St. Petersburg,
Florida. All such proceedings shall be conducted at a site, date and time
mutually acceptable to the parties. Arbitration proceedings hereunder shall
be conducted by one (1) arbitrator chosen in the manner specified in this
Section. The Arbitrator selected hereunder shall be a partner in a "Big-Six"
accounting firm with which neither party has had any dealings within the past
five (5) years and shall have a background or training in either computer
software or computer systems. The party electing arbitration hereunder (the
"Initiating Party") shall notify the other party (the "Responding Party") of
such election in writing. Such notice shall include the name of the arbitrator
meeting the criteria specified above proposed by the Initiating Party. Within
two (2) days of receipt of the notice from the Initiating Party, the Responding
Party will notify the Initiating Party either that the Responding Party accepts
the arbitrator proposed by the Initiating Party or, alternatively, specifying
the name of an arbitrator proposed by the Responding Party. If the parties
have not identified a single arbitrator from the arbitrators proposed by each
side, then, within two (2) days of the proposal of two arbitrators in
accordance with the preceding provisions, the two arbitrators so proposed will
select a third arbitrator meeting the criteria specified above, and the
arbitrator so selected by the first two arbitrators shall act at the Arbitrator
hereunder (the "Arbitrator"). The parties hereto agree to facilitate the
arbitration proceeding by making available to each other and to the Arbitrator
for inspection and copying necessary documents, books and records directly
related to the dispute and those personnel under their control as the
Arbitrator shall determine to be relevant to the dispute. Information
disclosed during the arbitration proceeding that is confidential or
competitively sensitive will be disclosed in confidence to the Arbitrator (who
shall agree in writing to maintain such
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confidence). The costs of any arbitration pursuant hereto will be split
equally by the parties.
(d) Definition of Performance Default. For purposes of this
Agreement, a "Performance Default" shall mean:
(i) the existence of a Priority 1 Defect and the failure of
PSi to cure such defect within twenty-four (24) hours of receipt of notice of
such defect from HSN. For purposes of this Section 5.2, a "Priority 1 Defect"
means (1) any critical problem which causes a reduction of 50% or more in the
operational capacity of any application using 500 or more ports; or (2) any
Priority 1 Defect or Priority 2 Defect which occurs more than three (3) times
in any two (2) consecutive twenty-four (24) hour periods; or, (3) any problem
which results in a complete loss of the operational capacity of any
application (regardless of the number of ports which such application is
using).
(ii) the existence of a Priority 2 Defect and the failure
of PSi to cure such defect within thirty days after receipt of written notice
of the defect from HSN. For purposes of this Section 5.2, a "Priority 2" Defect
means any other problems (other than a Priority 1 Defect) causing the System
to operate in a degraded mode.
(iii) the existence of a Priority 3 Defect and the failure
of PSi to cure such defect within sixty (60) days after receipt of written
notice of the defect from HSN. For purposes of this Section 5.2, a "Priority
3" Defect means System operational problems or other nonconformity with System
Specifications which do not directly affect System performance.
The Lead Capture Subsystem and Generic Database shall be excluded from the
definition of a Priority Defect until after there has been acceptance of the
Lead Capture Subsystem and the Generic Database by HSN.
5.3 Intellectual Property Warranty and Indemnification.
(a) Warranties by PSi. PSi warrants that it is the (i)
sole author or owner by assignment of all works comprising the Software (other
than the Third Party Software) and (ii) licensee authorized to use and
distribute (as envisioned in this Agreement and the Software License
Agreement) the Third Party Software. PSi warrants that it has and will have
full and sufficient rights to grant the licenses granted to HSN herein and in
the Software License Agreement, on the terms and conditions set forth herein
and in the Software License Agreement. PSi warrants that neither the Equipment
nor the Software infringes any patent, copyright, trade secret or other
intellectual property right of any third party, and that no claim alleging
any such infringement is currently pending or threatened.
(b) Indemnification by PSi - Infringement of Intellectual
Property Rights. PSi shall indemnify, defend and
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hold harmless HSN against all claims and actions (or threats thereof) asserting
that the Software or Equipment infringes any patent, copyright, trademark,
trade secret or other intellectual property rights of a third party and PSi
will pay all costs (including court costs), damages (including punitive or
enhanced damages), and attorney fees awarded by a court of competent
jurisdiction arising from or in connection with any such claim. PSi shall bear
all expenses of defending HSN against any such claim or proceeding by reason of
the alleged infringement. PSi further agrees to submit to personal
jurisdiction in any forum in which an action has been brought against HSN on
any claim subject to indemnification. PSi shall have no obligation to defend
HSN or to pay any such costs, damages, and attorney fees for any claim (i)
based upon the combination, operation or use of the Software with any computer
code or other information or device (other than the Hardware) not manufactured
or supplied by PSi if such infringement would have been avoided by the
combination, operation or use of the Software without such code, information or
device (unless the Software was combined, used or operated with such code,
information or device at the direction of PSi), or (ii) based upon facts or
circumstances in existence as of July 31, 1992 (unless PSi had actual knowledge
of such facts or circumstances on the date of execution and delivery of this
Agreement (not the effective date)).
(c) Conditions to Indemnification. The foregoing indemnities are
conditioned on HSN furnishing to PSi prompt written notice of any known claim
or proceeding subject to indemnity. If the facts pertaining to an indemnified
loss arise out of the claim of any third party, or if there is any claim
against a third party available by virtue of the circumstances of the loss,
PSi may assume the defense or prosecution thereof, including the employment of
counsel reasonably acceptable to HSN, at the cost and expense of PSi. HSN
hereby represents and warrants that, to the best of its knowledge, as of the
Effective Date of this Agreement, no such claims are pending or are
threatened. HSN shall have the right to participate in the defense of any such
action being defended by PSi, but the fees and expenses of counsel employed by
HSN shall be HSN's responsibility. PSi shall not be liable for any settlement
of any such claim giving rise to indemnification without the prior written
approval of PSi, which will not be unreasonably withheld. PSi will not agree
to any settlement of a claim which provides
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for relief other than the payment of monetary damages without HSN's written
consent, which will not be unreasonably withheld. HSN will cooperate with PSi
in the defense of such claim or proceeding, at the expense of PSi.
ARTICLE VI
LEAD CAPTURE SUBSYSTEM
6.1 Completion of Lead Capture Subsystem.
The parties acknowledge that, as the date hereof, PSi has not
completed development and implementation of the Lead Capture Subsystem. PSi
agrees to use its best efforts to complete the implementation of the Lead
Capture Subsystem on 2,880 ports of the System on or about March 31, 1994.
PSi warrants that, upon completion of such implementation, the Lead Capture
Subsystem will conform in all respects to the Lead Capture Subsystem
Specifications set forth in Annex I to the Specifications (Exhibit A).
All costs incurred by PSi in completing the Lead Capture
Subsystem (including, without limitation, labor costs, subcontractor costs,
and materials) shall be the responsibility of PSi, and HSN will not be
responsible for, or be required to reimburse, any such expenses, nor shall
such expenses be included in PSi's Cost of Performance.
6.2 Failure to Complete Lead Capture Subsystem.
The Fee has been reduced in an amount equal to $40,320, plus
applicable tax, per month ($14 per port per month for 2,880 ports), effective
for the period beginning on July 1, 1993 through January 31, 1994, and, from
and after February 1, 1994, such Fee shall continue to be reduced by an amount
equal to $28,166 per month, plus applicable tax ($9.78 per port per month for
2,880 ports) until the Lead Capture Subsystem is completed in accordance with
the Lead Capture Subsystem Specifications.
In the event that PSi fails to complete the Lead Capture Subsystem in
accordance with the provisions of Section 6.1 above, the reduction in the Fee
provided for in Section 6.1 will continue in effect, and, in addition, PSi
will pay to HSN an amount in cash equal to $1,950,000 (which amount the
parties agree represents the sole damages that will be suffered by HSN as a
result of PSi's failure to complete the Lead Capture Subsystem as required
hereunder). Such amount shall be payable by PSi in twelve (12) equal monthly
installments over a one year period, beginning July 1, 1994, by offset of such
amounts by HSN against the monthly Maintenance and Support Fees payable to PSi
hereunder. In the event that this Agreement terminates before all such
installments have been paid by offset as contemplated in the preceding
sentence, any remaining installments shall become immediately due and payable
in full by PSi, in a single lump sum, within thirty (30) days following the
date of termination of this Agreement (and such amount shall bear interest at
a rate equal to
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the Prime Rate, plus two percent (2%) per annum from the date of termination
of this Agreement until paid in full). The foregoing provisions shall
constitute HSN's exclusive remedy for PSi's failure to complete the Lead
Capture Subsystem in accordance with Section 6.1, it being understood and
agreed that such failure will not be considered a default by PSi for other
purposes of this Agreement.
ARTICLE VII
7.1 Rights to Use Source Code and Object Code.
Notwithstanding the provisions of the Software License
Agreement, the parties hereby agree as follows:
(a) In the event that PSi is not maintaining the System in
accordance with the terms of this Agreement for any reason (whether as a
result of termination of this Agreement, a breach by PSi of its obligations
hereunder or otherwise), or HSN otherwise receives a copy of the Source Code
pursuant to the terms hereof or the Source Code Escrow Agreement, HSN shall
have the right to alter, modify, revise or enhance, or to cause a third party
vendor to alter, modify, revise or enhance, the Software for purposes of
maintaining, supporting, or enhancing the Software and the System, and HSN
will retain title to any such revisions, modifications or enhancements to the
Software (provided that HSN shall be entitled to use any such revisions,
modifications or enhancements for internal purposes only and not for purposes
of sale, lease or any other form of distribution). In addition, upon receipt
of the Source Code, as contemplated hereunder, or under the Source Code Escrow
Agreement, HSN shall have a non-exclusive, perpetual, irrevocable, fully-paid
right and license to use (or to permit third party vendors to use) the Source
Code for purposes contemplated under this paragraph (subject to the limitations
on use set forth herein). In the event that HSN furnishes Source Code to any
third party vendor providing maintenance or support services as contemplated
hereunder, HSN will require that such third party vendor execute a
confidentiality agreement restricting the use and disclosure of such Source
Code.
(b) HSN shall have the right to make appropriate copies of all
Software for backup purposes.
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(c) HSN shall have the right to make an appropriate number of
copies of all user documentation included in the Software.
(d) The Software License Agreement and the various rights and
obligations arising thereunder shall inure to the benefit of and be binding
upon the parties thereto and their respective successors and assigns. No
assignment of HSN's rights under the Software License Agreement shall be made
by HSN without the prior written consent of PSi which shall not be
unreasonably withheld; provided, however, that HSN shall be entitled to assign
its rights and obligations under the Software License Agreement, without the
consent of PSi, to any subsidiary or affiliated entity, to any purchaser of
all or substantially all of the assets of HSN, or to any successor by merger;
provided, however, that any such transferee agrees in writing to be bound by
the terms and conditions of the Software License Agreement (including without
limitation confidentiality obligations).
(e) As consideration for the payments provided for under this
Agreement, the Software License Agreement and the Software Development
Agreement, PSi agrees that during the term of this Agreement and for a period
of twelve (12) months after the termination of this Agreement, PSi will not:
(i) sell, lease, license, or otherwise make available a
TCP Platform (as defined in the Software License
Agreement) or other voice processing system which
processes ingoing and outgoing telephone calls or license
the Software or the Patented Technology to any entity
principally engaged in the televised electronic retail
sales industry as of the date of this Agreement (or any
successor to the business of any such entity);
(ii) sell, lease, license or otherwise make available
a TCP Platform or other voice processing system which
processes ingoing or outgoing telephone calls to any
retailer who is engaged in, or who has announced an
intention to enter into, the televised electronic retail
sales business; provided, if PSi has entered into
substantive communications with another party with
respect to such sale, lease or license prior to such
announcement and PSi had no knowledge of the intent to
make such announcement, PSi shall not be precluded from
concluding such sale, lease or license with such party;
or
(iii) sell, lease, license, develop, distribute, promote
or otherwise make available any televised electronic
retail sales computer software application, or consult
with or assist any party with, the design, development or
implementation of any such televised electronic retail
sales computer software application.
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(f) The provisions of this Section 7.1 shall be deemed to
constitute amendments to the relevant provisions of the Software License
Agreement and the Software Development Agreement (and shall survive the
termination of this Agreement, but with respect to Section 7.1(e) only to the
extent set forth therein).
7.2 Limitations on the Use of Source Code.
Upon receipt by HSN of the Source Code, whether pursuant to
the terms of this Agreement, the Source Code Escrow Agreement, or otherwise,
HSN agrees that it will not use the Source Code other than for the purposes
specified in Section 7.1(a) above and in the Software License Agreement; that
HSN shall not obtain any ownership rights in the Source Code; and that HSN
will protect the confidentiality thereof in the same manner that HSN protects
its own confidential information. In the event of a breach of this Section
7.2, PSi shall be entitled to appropriate remedies, including, but not limited
to, liquidated damages, injunctive relief and specific performance. In the
event of a knowing and willful breach by HSN of the provisions of this Section
7.2 by HSN, PSi will be entitled to liquidated damages in the amount of
$9,000,000.
ARTICLE VIII
SOURCE CODE ESCROW AGREEMENT
8.1 Source Code Escrow Agent.
Contemporaneously with the execution of this Agreement, and
as a condition to the execution and delivery of this Agreement by HSN, the
parties have executed and delivered the Source Code Escrow Agreement, in the
form attached hereto as Exhibit D, pursuant to which PSi has delivered the
current Source Code and Object Code and Documentation for the System to the
Escrow Agent thereunder. The rights of HSN to receive the Source Code and
Documentation pursuant to the Source Code Escrow Agreement shall be as
expressly set forth in Section 2.1 of the Source Code Escrow Agreement, and it
is specifically understood and agreed that such Section 2.1 does not give HSN
the right to receive the Source Code from escrow if this Agreement merely
terminates upon expiration of the term hereof.
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8.2 Escrow Fees.
The escrow fees payable under the Source Code Agreement shall
be split equally by the parties.
ARTICLE XI
MISCELLANEOUS PROVISIONS
9.1 Notice.
Any notice, demand, claim, or other communication required or
permitted to be given under this Agreement shall be in writing and may be
personally served, provided a receipt is obtained therefor, or may be sent by
certified mail, return receipt requested, postage prepaid, to the parties at
the following addresses (or at such other address as one party may specify by
notice to the other party):
HSN
Original to: Home Shopping Network, Inc.
11831 30th Court North
St. Petersburg, Florida 33716
Telephone Number - (813) 572-8585
Facsimile Number - (813) 539-6505
(Attn: General Counsel)
And a copy to: National Call Center, Inc.
11831 30th Court North
St. Petersburg, Florida 33716
Telephone Number - (813) 572-8585
Facsimile Number - (813) 572-8941
(Attn: President)
And a copy to: Home Shopping Network, Inc.
11831 30th Court North
St. Petersburg, Florida 33716
Telephone Number - (813) 572-8585
Facsimile Number - (813) 539-6505
(Attn: Executive Vice President - MIS)
PSi
Original to: Precision Systems, Inc.
11800 30th Court North
St. Petersburg, Florida 33716
Telephone Number - (813) 572-9300
Facsimile Number - (813) 573-9577
(Attn: President)
And a copy to: Robbins, Gaynor & Bronstein, P.A.
150 2nd Avenue No., Suite 1700
St. Petersburg, Florida 33701
Telephone Number - (813) 895-1971
Facsimile Number - (813) 823-8978
(Attn: David L. Robbins)
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A notice which is delivered personally shall be deemed given
and received as of the date specified on the written receipt thereof. A
notice mailed by certified mail as provided herein shall be deemed given and
received on the third business day following the date so mailed. Notification
of a change of address may be given by either party to the other as provided
in this Section.
9.2 Compliance.
The parties shall, in the performance of this Agreement, comply with
all applicable laws, regulations, orders, and decrees; obtain all required
consents and approvals; make all required filings with any governmental
agency, other regulatory or administrative agency, commission or similar
authority and promptly provide the other party with all such information as
they may reasonably request in order to be able to comply with the provisions
of this Section.
9.3 Confidential Information.
(a) Acknowledgment of Confidentiality. Each party hereby
acknowledges that it may be exposed to confidential and proprietary information
of the other party including, without limitation, technical information
(including functional and technical specifications, designs, drawings,
analysis, research, processes, computer programs, methods, ideas, "know how"
and the like), business information (sales and marketing research, materials,
plans, accounting and financial information, personnel records and the like)
and other information designated as confidential expressly or by the
circumstances in which it is provided ("Confidential Information").
Confidential Information does not include (i) information already known or
independently developed by the recipient; (ii) information in the public
domain through no wrongful acts of the recipient, (iii) information received
by the recipient from a third party who was free to disclose it, or (iv)
information which is required to be disclosed by court order or by an order
arising out of an administrative proceeding.
(b) Covenant Not to Disclose. With respect to the other
party's Confidential Information, the recipient hereby
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agrees that during the Term of this Agreement and at all times thereafter it
shall not use, commercialize or disclose such Confidential Information to any
person or entity, except its own employees having a "need to know" (and who are
themselves bound by similar nondisclosure restrictions), and to such other
recipients as the other party may approve in writing (provided, however, that
HSN will not be required to obtain the consent of PSi to the disclosure by HSN
of the Source Code to third party vendors as necessary in order to obtain
maintenance, support and enhancement services for the Software and System as
contemplated in Section 7.1(a) above; provided, that all such recipients shall
have first executed a confidentiality agreement in a form acceptable to the
owner of such information. PSi shall be responsible for obtaining
confidentiality agreements from all third party vendors who provide Maintenance
and Support Services pursuant hereto. Neither party nor any recipient may
alter or remove from any hardware, software, or associated documentation owned
or provided by the other party and proprietary, copyright, trademark or trade
secret legend. Each party shall use at least the same degree of care in
safeguarding the other party's Confidential Information as it uses in
safeguarding its own confidential information.
(c) Injunctive Relief. The parties acknowledge that
violation by one party of the provisions of this Section 9.3 ("Confidential
Information") would cause irreparable harm to the other party and may not
adequately be compensable by monetary damages. In addition to other relief,
it is agreed that injunctive relief shall be available to prevent any actual
or threatened violation of such provisions.
9.4 Proprietary Rights.
(a) Third Party Software. Third Party Software provided
by PSi pursuant hereto shall be subject to the terms and conditions of the
license agreement accompanying or otherwise applicable to such Third Party
Software. PSi has provided HSN with true, correct and complete copies of all
license agreements with respect to Third Party Software supplied to HSN
hereunder. If PSi provides any Third Party Software after the date hereof,
such license must be in the form attached as Exhibit I (Form of Third Party
Software License).
(b) License to Custom Work Product. PSi shall own all right,
title and interest to all Custom Work Product. HSN expressly acknowledges and
agrees that none of the Custom Work Product shall be deemed to constitute
"work made for hire" under the Federal copyright laws (17 U.S.C. Sec 101) and,
alternatively, HSN hereby irrevocably assigns all ownership or other rights it
might have in Custom Work Product to PSi. HSN is hereby granted a license to
use the Custom Work Product and Embedded Software strictly as an integral part
of, in conjunction with, and for so long as HSN continues to use the System
and HSN is not in breach under the Software License Agreement. The Custom
Work Product and Embedded Software are made available under such license in
object code form, but Source Code materials and Documentation related to
Custom Work Product and Embedded
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<PAGE> 29
Software will be placed in escrow pursuant to the terms of the Source Code
Escrow Agreement.
9.5 Recommended Spares.
(a) PSi recommends that HSN procure and maintain certain
recommended current, nonobsolete spare parts as set forth in Exhibit F (the
"Recommended Spares"), other than spare parts relating to the Lead Capture
Subsystem. It is acknowledged that HSN does not have the spare parts listed
on Exhibit F which relate to the Lead Capture Subsystem and will not be
required to obtain those spare parts even after the Lead Capture Subsystem has
been completed and is operational. In the event that HSN fails to obtain and
maintain Spare Parts relating to the Lead Capture Subsystem and such failure
adversely impact's PSi's ability to satisfy its Maintenance and Support
Obligations hereunder, then PSi's obligation to perform will be tolled until
PSi is able to obtain the replacement part (so long as PSi uses its good faith
efforts to obtain such parts).
(b) The Spare Parts maintained in HSN's spare parts
inventory are the property of HSN. In the event that PSi is required to use
any of such Spare Parts in order to effect repairs to the System, PSi will be
required to promptly replace such spare parts, at the sole cost and expense of
PSi. If PSi fails to promptly replace such spare parts as required above, HSN
shall be entitled, at its option, to replace such spare parts itself and to
bill PSi directly for the cost thereof (or to offset such amount against the
amount of Fees payable by HSN to PSi pursuant to Section 4.1 above).
9.6 Amendments; Waiver.
(a) This Agreement may be amended if, and only if, such
amendment is in writing and signed by authorized officers of both parties. No
waiver shall be effective unless it is in writing and signed by the party
against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof not
shall any single or partial exercise thereof preclude
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<PAGE> 30
any other or further exercise thereof or the exercise of any other right, power
or privilege.
9.7 Governing Law and Interpretation.
This Agreement shall be governed by and construed in
accordance with the laws of the United States and the State of Florida
applicable to agreements made and to be performed in the State of Florida
without application of its conflicts of laws provisions. The parties agree
that any suit arising out of this Agreement must be brought in a court of
competent jurisdiction in Pinellas County, Florida, except that if it is
determined that the federal courts would have jurisdiction over such matter,
then such suit must be brought in the federal courts for the Middle District of
Florida located in Tampa, Florida.
9.8 Titles and Headings.
Titles and headings are inserted for convenience of reference
only and are not intended to be a part of or to affect the meaning or intent
of this Agreement.
9.9 Counterparts.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original, but all of which together
shall constitute one and the same instrument.
9.10 Severability.
The parties hereby agree that, if any provision of this
Agreement should be adjudicated to be invalid or unenforceable, such provision
shall be deemed deleted herefrom with respect, and only with respect, to the
operation of said provision in the particular jurisdiction in which such
adjudication was made, and only to the extent of the invalidity, and any such
invalidity or unenforceability in a particular jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
All other remaining provisions of this Agreement shall remain in full force and
effect for the particular jurisdiction and all other jurisdictions.
9.11 Entire Agreement; Termination of Prior Agreements.
This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes all prior
agreements, whether or not written, with respect to the subject matter hereof,
including, without limitation the Prior Agreement and the Letter Agreement
between HSN and PSi dated May 28, 1993 relating to the execution of this
Agreement and the Source Code Escrow Agreement (provided, however, that
Paragraph 9 of such Letter Agreement shall survive the execution and delivery
hereof and is incorporated herein by this reference). Notwithstanding the
foregoing, this Section 9.11 is not intended to affect any agreement entered
into contemporaneously with this Agreement (including, without limitation, the
Source Code Escrow Agreement).
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9.12 Exhibits.
The Exhibits attached hereto and referred to herein are
incorporated and made a part of this Agreement. In the event of any conflict
between the terms of this Agreement and the terms of the Exhibits, the terms
of this Agreement shall prevail.
9.13 Assignability.
This Agreement and the various rights and obligations arising
hereunder shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and assigns. Notwithstanding the foregoing,
no assignment of rights or delegation of duties shall be made by either party
without the prior written consent of the other party, which shall not be
unreasonably withheld provided, however, that HSN shall be entitled to assign
its rights and obligations hereunder, without the consent of PSi, to any
subsidiary or affiliated entity, to any purchaser of all or substantially all
of the assets of HSN, or to any successor by merger. In the event of an
assignment, the assignee must execute a written assumption agreement expressly
assuming all of the obligations of HSN under this Agreement.
9.14 Force Majeure.
PSi shall not be liable for any delay or failure of PSi to
perform its obligations under this Agreement if such delay or failure is caused
by an Act of God, flood, fire, war or public enemy, natural disaster, actions
or decrees of governmental bodies or other acts beyond PSi's control.
9.15 Customer Demonstrations.
Subject to HSN's prior consent (which shall not be unreasonably
withheld) and satisfaction of HSN's requirements concerning confidentiality,
PSi shall be entitled to bring customers to HSN's Principal Office in order to
show them the System during the hours of 9:00am to 5:00pm, Monday through
Friday. Any such customers shall be accompanied by an authorized
representative of HSN and PSi and shall be subject to HSN's normal security
procedures. HSN personnel will, at all times, retain control over the
operations of the System and will not be
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required to perform any special demonstrations for any such customers of PSi.
PSi shall use its best efforts to provide HSN with seven (7) days' advance
notice (but in any event not less than two (2) days' advance notice) of PSi's
desire to conduct such a demonstration.
9.16 Publicity.
PSi and its employees, agents and representatives will not,
without HSN's prior written consent in each instance, use in advertising,
publicity or otherwise the name of HSN or any HSN affiliate, or any officer or
employee of HSN, or any trade name, trademark, trade device, service mark,
symbol or any abbreviation, contraction or simulation thereof wned by HSN or
its affiliates, or represent, directly or indirectly, that any product or
service by PSi has been approved or endorsed by HSN, or refer to the existence
of this Agreement in press releases, advertising or materials distributed to
prospective customers, beyond a statement that HSN is a customer of PSi. This
paragraph shall survive termination of this Agreement.
9.17 Independent Contractor.
PSi, in performance of this Agreement, is acting as an independent
contractor and shall have the exclusive control of the manner and means of
performing the work. Personnel supplied by PSi hereunder are not HSN's
employees or agents, and PSi assumes full responsibility for their acts.
9.18 Insurance.
PSi shall maintain adequate insurance coverage as required
by Exhibit J and shall provide HSN with certificates of insurance at the
request of HSN.
9.19 Regulations Regarding Hourly Compensation.
In the event that any employees, consultants or other representatives
of PSi provide services to HSN which are subject to reimbursement by HSN
(whether pursuant to the Software Development Agreement or otherwise), PSi will
be required to comply with the procedures specified in Exhibit G.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the day and year first above written.
HOME SHOPPING NETWORK INC.
By:
---------------------------
Name:
-------------------------
Title:
------------------------
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PRECISION SYSTEMS, INC.
By:
-------------------------
Name:
-------------------------
Title:
-------------------------
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<PAGE> 34
EXHIBIT A
1.0 Definition:
The defined System means the Total Call Processor platform ("TCP")
which provides an operating environment which permits HSN to create, execute
and maintain various interactive voice response applications, including,
without limitation, applications which allow HSN to accept telephone calls and
callers to place orders for HSN merchandise, to place orders for pay per view
or other services, or to obtain information. With the addition of the Lead
Capture Subsystem, the System will also permit HSN to create, execute and
maintain lead capture applications. The System is comprised of the Software
(including Firmware) and Hardware. The System will also include any Hardware
or Software added to the System after the date hereof, including additional
ports, and includes the following three subsystems:
(a) Tootie II Application Platform
(b) Services Bureau Platform (including the Lead
Capture Platform)
(c) Development Platform.
2.0 Inventory for "System":
The list of Hardware included in the System is attached hereto as
Exhibit A-1. A list of all Software and Firmware included in the System is
attached hereto as Exhibit A-2. A list of Third Party Hardware is attached as
Exhibit A-3. A list of Third Party Software is attached as Exhibit A-4.
3.0 Additions to the System:
Additions purchased by HSN shall become part of the System.
4.0 Specifications
The Specifications for the System are attached to this Exhibit A.
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EXHIBIT 10.29
MCI SPECIAL CUSTOMER ARRANGEMENT
THIS MCI SPECIAL CUSTOMER ARRANGEMENT (the "Agreement") is Made and
entered into as of the dates set forth below by and between MCI
Telecommunications Corporation ("MCI") and Home Shopping Network, Inc.
("Customer"), effective as of (i) the first day of the first full month after
the tariff governing the offering under this Agreement becomes effective; (ii)
the first day of the month if the tariff effective date is the same date; or
(iii) in the event that MCI determines that applicable law does not require the
filing of a specific tariff implementing this Agreement, such earlier date as
the parties may agree but in no event any date before the date of execution and
delivery of this Agreement by Customer to MCI (such date is hereinafter
referred to as the "Effective Date").
WITNESSETH:
WHEREAS, Customer is desirous of receiving telecommunications services
from MCI and MCI is desirous of providing said services to Customer, pursuant
to the terms and conditions more particularly described herein;
NOW, THEREFORE, for and in consideration of the premises, the terms and
conditions herein and for other good and valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, MCI and Customer
hereby agree as follows:
1. DEFINITIONS CONTAINED IN MCI TARIFF FCC NO. 1.
All capitalized terms used herein and not expressly defined herein
shall have the respective meanings given to such terms in the MCI Tariff FCC
No. 1 ("Tariff") on file with the Federal Communications Commission ("FCC").
2. DEFINITION OF BASE RATES.
"Base Rates" shall mean rates and discounts for which Customer
qualifies under the Tariff for services described in the Tariff, or if not
in the Tariff, in standard price lists, all calculated without application
of the discounts provided by this Agreement; provided, however, that: (i)
the Base Rates for private line services subject to Network Pricing Plans
("NPP") shall be the month to month rates under the Tariff after application
of applicable discounts provided under the Tariff; (ii) the Base Rates for
interstate Vnet service shall b determined by dividing the applicable "Vnet
Rate" (as hereinafter defined) by and (iii) the Base Rates for
interstate 800 service shall be determined by dividing the applicable "800
Rate" (as hereinafter defined) by .
3. SERVICE PROVISIONING AND RECEIPT.
MCI will provide to Customer, and Customer will receive from MCI, interstate
and international telecommunications service(s) provided pursuant to the
Tariff, MCI Tariff FCC No. 8, WUI Tariff FCC No. 27, and any other interstate
and international tariff of MCI and its affiliates, each as supplemented by
this Agreement, and intrastate telecommunications services provided pursuant
to MCI's state tariffs governing such
MCI CONFIDENTIAL
<PAGE> 2
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services, This Agreement incorporates by reference the terms of each
such tariff. MCI may modify its tariffs from time to time in accordance
with law and thereby affect the service(s) furnished Customer.
In the event tariff revisions that may be required to implement the terms
of this Agreement are suspended or rejected, then either party may elect
to terminate this Agreement without liability on thirty (30) days' written
notice given not later than thirty (30) days after the event giving rise
to the termination right.
MCI will use its best efforts to maintain its tariffs in a manner
consistent with the terms of this Agreement. In the event that MCI revises
any tariff in a manner inconsistent in any material respect with the
provisions of this Agreement and MCI does not effect revisions that remedy
such inconsistency within thirty (30) days after receipt of written notice
from Customer, then Customer may, as its sole remedy, elect to terminate
this Agreement without liability on thirty (30) days'written notice given
not later than thirty (30) days after the event giving rise to the
termination right.
This Agreement is a Specialized Customer Arrangement as such term is
defined in Section B-17.03 of the Tariff and the services hereunder are
being provided to Customer pursuant to the provisions of the Tariff
applicable to such arrangements.
4. MINIMUM CHARGES.
(A) As used herein "Monthly Minimum" shall mean per month,
and "Quarterly Minimum" shall mean per calendar quarter
(collectively referred to as "Minimum Amount"). MCI
calculates the Monthly Minimum and the Quarterly Minimum by
adding recurring and usage charges at Base Rates for all
common carrier service furnished to Customer by MCI, but
excluding the following items: (i) taxes and tax related
surcharges; (ii) charges for any enhanced services, including
MCI Mail, MCI Fax, and Global Communications Services; (iii)
charges for equipment and collocation; (iv) charges incurred
where MCI or an MCI affiliate acts as agent for Customer in
the acquisition of goods or services; and (v) charges
incurred by third parties using pay phones or room phones
controlled by Customer. However, charges for service
furnished by MCI affiliates shall not be eligible for the
rates or discounts provided in this Agreement. MCI affiliates
are Telecom*USA, Inc., Western Union International, MCI
International, Inc. and MCI/OTI Corporation.
(B) In order to be entitled to the rates and discounts provided
by this Agreement, Customer must use not less than the
Monthly Minimum of MCI services described in this Agreement,
calculated at Base Rates, during each MCI monthly billing
period of the "Service Term" (as hereinafter defined).
MCI CONFIDENTIAL
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(C) If Customer's use of such services during any month of
the Service Term results in charges at Base Rates of
less than the Monthly Minimum, Customer will pay: (1)
Customer's actual amount of usage and other charges
calculated at Base Rates; plus (2) an underutilization charge
(which Customer agrees is reasonable) equal to twenty five
percent (25%) of the difference between the Monthly Minimum
and the combined actual amount of usage and other charges
calculated at Base Rates.
(D) If Customer's use of such services during any calendar
quarter of the Service Term results in charges at Base
Rates of less than the Quarterly Minimum, Customer will pay:
(i) Customer's actual amount of usage and other charges
calculated at Base Rates for the calendar quarter; plus (ii)
an underutilization charge (which Customer agrees is
reasonable) equal to twenty five percent (25%) of the
difference between the Quarterly Minimum and the combined
actual amount of usage and other charges calculated at Base
Rates; minus (iii) an amount equal to any underutilization
charges paid by Customer pursuant to Section 4(C) for failing
to satisfy the Monthly Minimum in any month of the calendar
quarter.
5. RATES AND DISCOUNTS FOR MCI SERVICES.
If the Minimum Amount is satisfied in any given month of the
Service Term, Customer will receive the rates and discounts set forth
below during such month:
(A) VNET SERVICE, INCLUDING VNET CARD.
(i) For domestic intrastate services, Customer shall pay
standard tariffed rates less the discount associated
with Network Savings Plan Option 4,
(ii) For domestic interstate services, Customer will receive
the following fixed rates per minute depending on mileage band,
time of day, length of call, and traffic type:
MCI CONFIDENTIAL
<PAGE> 4
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a. Dedicated/Dedicated
Day Evening/Night/Weekend
Each Additional Each Additional
Mileage First 18 Increment of First 18 Increment of
Band Seconds 6 Seconds or Less Seconds 6 Seconds or Less
---- -------- ----------------- ---------- -----------------
b. Dedicated/Switched
Switched/Dedicated
Day Evening/Night/Weekend
Each Additional Each Additional
Mileage First 18 Increment of First 18 Increment of
Band Seconds 6 Seconds or Less Seconds 6 Seconds or Less
---- -------- ----------------- ---------- -----------------
c. Switched/Switched
Day Evening/Night/Weekend
Each Additional Each Additional
Mileage First 18 Increment of First 18 Increment of
Band Seconds 6 Seconds or Less Secondss 6 Seconds or Less
---- -------- ----------------- ---------- -----------------
MCI CONFIDENTIAL
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(iii) The above referenced rates and discounts shall not apply to
pass-through access/egress (or related) charges imposed by third
parties (such as local exchange carriers); access or egress charges
for Vnet Service, any non-recurring charge imposed in the Tariff,
charges for intrastate and international service, charges for
directory assistance, taxes and surcharges.
(B) MCI 800.
(i) For domestic intrastate services, Customer shall pay
standard tariffed rates less the discounts associated with the
MCI which discounts are currently
for Dedicated Access Line ("DAL") and
Common Business Line ("CBL"). After application of the VIP Option
discounts, the MCI Multi-Option Discount shall be applied to
Customer's monthly usage charges.
(ii) For domestic interstate services, Customer will receive
the following fixed, non-distance sensitive, postalized rates per
minute depending on call type and time of day:
Night/
Day Evening Weekend
--- ------- -------
CBL $ $. $
DAL $ $. $
(iii) MCI agrees to waive each month the following feature
charges sociated with specific MCI 800 Service number not to exceed
per month:
Tailored Call Coverage (Section C-3.0881 of the Tariff), Point of
Call Routing (Section C-3.0882 of the Tariff), Day of Week
Routing (Section C-3.0883 of the Tariff), Holiday Routing
(Section C-3.0884 of the Tariff), Time Internal Routing (Section
C-3. 0885 of the Tariff), Percentage Allocation Routing (Section
C-3.0886 of the Tariff) and Alternate Routing (Section C-3.0887
of the Tariff).
(iv) For international MCI 800 service calls that originate in
Canada and terminate to a Customer location in the continental United
States, Customer will receive the following fixed, non-distance
sensitive, postalized rates per minute depending on call type and time
of day:
Night/
Day Evening Weekend
---- ------- -------
CBL $ $. $
DAL $ $. $
MCI CONFIDENTIAL
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(v) The above referenced rates and discounts shall apply to usage
and recurring charges, but shall not apply to pass through
access/egress (or related) charges imposed by third parties (such as
LECs), any non-recurring charge imposed in the Tariff, charges for
intrastate and international service, charges for directory
assistance, taxes and surcharges.
(C) MCI 900 SERVICE.
(i) For MCI 900 Service, provided that Customer's usage of
MCI's 900 Service in a given month of the Service Term is less than
minutes, Customer shall pay tariffed rates plus any
applicable tariff surcharges less: (i) the tariff discount,
which is (ii) after discount.
(ii) In the event that Customer's usage of MCI's 900 Service in an
given month of the Service Term is minutes, Customer shall pay a
fixed, postalized rate per minute of for MCI 900 Service.
(D) PRIVATE LINE DISCOUNTS.
For private line services, Customer shall be entitled to the
benefit of the NPP discounts for Dedicated Lease Line Services
associated with specified in the Tariff, which discounts will
remain fixed during the "Initial Term" (as hereinafter defined) and
are for DDS service, for T-1 service,
for fractional T-1 service and for T-3 service.
Services provided with such NPP discount shall not be
subject to separate minimum revenue and term requirements,
notwithstanding the Tariff.
(E) VNET INTERNATIONAL TERM PLAN.
Customer subscribes to the Vnet International Term Plan ("ITP")
under Section C 3.091918 of the Tariff and shall receive a
discount on International Direct Distance Dial ("IDDD") services
thereunder, after application of the standard tariffed discount on
IDDD services.
(F) FORUM CONFERENCE CALLING SERVICE.
The rates applicable to Customer for Intercity Facilities Usage
charges pursuant to Section C-3.17211 of the Tariff for calls which
both originate and terminate in the U.S. mainland, Alaska, Hawaii,
Puerto Rico or U.S. Virgin Islands shall be $ per minute per
bridge port for attended calls. The per call and per leg charges set
forth in the Tariff shall not apply to Customer. Forum service shall
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not be subject to any other discounts, whether set forth in
this Agreement or in the Tariff.
(G) ACCESS COORDINATION AND CENTRAL OFFICE CONNECTION.
For each T-1 utilized by Customer, Customer shall pay Central
Office Connection ("COC") and Access Coordination,
which charges shall remain fixed during the Initial Term hereof.
(H) 800 TRAFFICVIEW.
Customer will receive a discount of off the
standard tariffed rates for the TrafficView product.
(I) 800 MULTIMANAGER.
Customer will receive a discount of off the standard tariffed
rates for the 800 MultiManager product and MCI agrees to waive
all installation charges associated with said product.
(J) D-CHANNEL SERVICE DISCOUNT.
During any month of the Initial Term in which Customer meets the
Minimum Amount and Customer's combined monthly MCI T-1 access COC
charges and MCI Integrated Services Digital Network ("ISDN") D-Channel
surcharge Customer shall receive a discount
in such month off the surcharges associated with the monthly recurring
charges for MCI ISDN D-Channel service.
(K) 800 ECR FEATURES.
Customer will receive discounts on the Enhanced Call Router
("ECR") feature usage charges for "ECR Menu Routing" (Tariff Section
C-3.088151) and "Takeback and Transfer" (Tariff Section C-3.0881570)
in accordance with the following schedule based on the percentage of
ECR calls in that month which utilize the ECR features:
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Percentage of ECR Calls in be applied to Monthly
Month Utilizing Feature Usage Charges for Feature
----------------------- -------------------------
Less than or equal to 25%
Greater than 25%
but less than or equal to 50%
Greater than 50%
but less than or equal to 75%
Greater than 75%
6. Exclusivity.
(A) Customer agrees it shall use MCI exclusively as its
interexchange carrier ("IXC") during the Service Term hereof for
all IXC services, including, without limitation, virtual network
services, 800 services, data services and international
services, at all times during the Service Term during which MCI
is technically able to offer "Intelligent Call Routing",
"Customer Provided Service Control Point" and "Call Transfer
Capability" (as such terms are defined on Schedule 1 attached
hereto and incorporated herein by this reference) to Customer.
During periods of the service Term in which MCI is not
technically able to offer Intelligent Call Routing, Customer
Provided Service Control Point and Call Transfer Capability,
Customer agrees it shall use MCI exclusively for all its IXC
services, including, without limitation, virtual network
services, data services, international services and all 800
services which do not require Intelligent Call Routing, Customer
Provided Service Control or Call Transfer Capability. For
definitional purposes of this Agreement only, Customer shall
mean Customer and all majority-owned subsidiaries. Exclusivity
shall mean not less than of all IXC traffic, based on a
dollar volume.
(B) After the Effective Date of this Agreement, but not more than
once annually, upon significant changes in Customer's traffic
patterns or upon a public statement by Customer (including
advertisements) indicating a significant migration of traffic,
MCI may request, and Customer shall provide to MCI in writing,
Customer records, data and invoices pertaining to its to its
total IXC service usage for the most recent twelve (12) month
period preceding the request. MCI may review this information
for the sole purpose of determining Customer's compliance with
the exclusivity covenant set forth in Section 6(A) above.
7. INSTALLATION CREDIT.
Provided that Customer achieves the Minimum Amount throughout the
Initial Term, Customer shall receive a credit of up to
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for the one-time installation and other one-time non-recurring charges
associated with the implementation of MCI service under this Agreement. Such
credits will be issued from time to time throughout the Initial Term as MCI
services are installed.
8. PAYMENT.
Customer shall pay MCI for service(s) within twenty-five (25) days of
Customer's receipt of MCI's detailed invoice. If Customer should default in
any payment required hereunder on the date when due, the outstanding
balance shall bear simple interest at the rate of fifteen (15%) per annum,
until paid in full.
9. PROVISIONS FOR SERVICE INTERRUPTIONS.
(A) CREDIT ALLOWANCE FOR SERVICE INTERRUPTIONS.
Customer shall be entitled to Credit Allowances for Service
Interruptions in accordance with Section B.15 of the Tariff. A
Service Interruption begins when Customer reports the interruption to
MCI and releases the "Service Element" (as hereinafter defined) for
testing and repair and ends when MCI retenders the Service Element to
Customer in good working condition. For the purpose of determining the
Quarterly Minimum and the Monthly Minimum only, MCI will not reduce
monthly charges by the amount of Credit Allowances applied. For
purposes of this Agreement, "Service Element" refers to the specific
MCI service affected at the specific geographic Customer location
affected.
(B) PARTIAL DISCONTINUANCE WITHOUT LIABILITY.
Customer may discontinue receipt of service on a Service Element at any
time without liability except as otherwise expressly provided
for in the Tariff or this Agreement (an example of such a provision
might be where a private line installation charge is waived but is to
be assessed if the line is not in place for a minimum period). If
Customer discontinues receipt of service on a Service Element having
chronic Service Interruptions and does not take substitute service from
MCI, the Minimum Amount for purposes of assessing underutilization
charges shall be reduced by the average monthly charges for the
discontinued Service Element measured over the last three (3) billing
months prior to discontinuation. A Service Element with chronic Service
Interruptions is one on which there have been three or more Service
Interruptions, each consisting of thirty (30) or more minutes, totaling
twenty-four (24) or more hours within three (3) consecutive calendar
months.
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10. TERM AND TERMINATION.
(A) INITIAL TERM.
The initial term (the "Initial Term") shall begin on the
Effective Date and end upon the completion of thirty six
(36) months thereafter.
(B) ADDITIONAL TERM.
The service term hereof (the "Service Term") shall
include the Initial Term and shall continue on a
month-to-month basis thereafter until either party provides
the other with at least ninety (90) days prior written notice
of its intent to terminate this Agreement. Nothing in this
Agreement shall modify or be deemed to modify MCI's right to
terminate service(s) as provided for in Section B-11.01 of the
Tariff or in any other MCI tariff.
(C) TERMINATION OF AGREEMENT.
After termination of this Agreement, service received
by Customer shall be subject to the terms and conditions,
including rates, of MCI's filed and effective tariffs.
11. TERMINATION LIABILITY.
If Customer terminates this Agreement during the Initial Term, for
reasons other than for "Cause" (as hereinafter defined) or to take service
under another arrangement with MCI having equal or greater term and volume
requirements, Customer will pay within thirty (30) days after such
termination: (i) a
that would have been applicable for the remaining unexpired portion of the
Initial Term; and (ii) the Interstate 800 Credit in full, without setoff
or deduction. As used herein, "Cause" shall mean a failure of MCI to
perform a material obligation under this Agreement which failure is not
remedied by MCI within thirty (30) days after receipt of written notice.
12. REPRESENTATION AND WARRANTY.
Customer represents and warrants that it has the full right, power and
authority to enter into this Agreement, to perform its obligations
hereunder and that the execution, delivery and performance by Customer of
this Agreement will not conflict with, result in the breach of or
constitute a default under any contract, agreement or other document of
whatever kind or nature to which Customer is a party or by which Customer
may be bound or affected.
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13. NONDISCLOSURE.
Customer shall not disclose to any third party (excluding attorneys and
accountants retained by Customer, who shall be deemed agents of Customer
under the provisions of this Section) during the Service Term or during the
three-year period after termination of this Agreement any of the material
terms and conditions set forth in this Agreement (including but not limited
to price-related terms), unless such disclosure is lawfully required by any
federal governmental agency or is otherwise required to be disclosed by law
or is necessary in any legal proceeding establishing rights and obligations
under this Agreement, or unless Customer obtains MCI's written consent
which shall not be unreasonably withheld prior to such disclosure. Customer
agrees to use its best efforts to ensure the continued confidentiality of
such information and all proprietary information known, disclosed, or made
available to it, or any of its employees or agents as a result of this
agreement or its relationship with MCI. Customer further agrees to
cooperate with MCI's reasonable confidentiality and other requirements
which may be established from time to time, and immediately notify MCI of
any unauthorized disclosure or use of such confidential information of
which customer becomes aware. MCI reserves the right, as its sole remedy,
to terminate this Agreement immediately upon delivering written notice to
Customer if there has been any unpermitted third party disclosure
hereunder.
14. OVERLAPPING DISCOUNTS.
If MCI amends the Tariff to provide a discount applicable to combined
usage of services (as opposed to a discount on any individual service) that
is similar in nature but not necessary similar in amount to that provided
in this Agreement, Customer may elect either to receive the benefit of such
discount or continue to receive the discount provided hereunder, but shall
not be entitled to receive the benefit of both discounts.
The discounts provided for herein are in lieu of, not in addition to,
any discounts or commissions to which Customer is or would otherwise be
entitled to receive by application of Tariff discounts applicable to
Qualified Commercial Affinity Group members, Qualified Industry Affinity
Group members, Qualified Residential Affinity Group members (all as the
same are defined in the Tariff), and recipients of discounts or commissions
under these or any other similar or related programs (e.g. NASD, IVANS,
etc.).
15. NOTICE.
All notices, requests, or other communications (excluding invoices)
hereunder shall be in writing and hand delivered or addressed and sent by
certified or registered mall, Postage prepaid and return receipt requested
to the parties as follows:
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If to MCI: MCI Telecommunications Corporation
6 Concourse Parkway
Atlanta, Georgia 30329
Attn: Vice President
National Accounts
with a copy to: MCI Telecommunications Corporation
5 International Drive
Rye Brook, New York 10573
Attn: Director, Legal Affairs
If to Customer: Home Shopping Network, Inc.
P.O. Box 9090
Clearwater, Florida 33606-9090
Attn: Executive Vice President, MIS
with a copy to: Home Shopping Network, Inc.
P.O. Box 9090
Clearwater, Florida 33606-9090
Attn: General Counsel
If either party wishes to alter the recipient or address to which
communications to it are sent, it may do so by providing the name of the new
recipient or a new address, in writing, to the other party. All notices,
requests or other communications addressed in accordance with this Agreement
shall be effective when received if delivered by mail or if personally
delivered, the date on which delivery is made.
16. GOVERNING LAW/ARBITRATION.
Customer acknowledges and agrees that MCI, in conducting its business
in the manner set forth herein, is subject to the Communications Act of
1934, as amended and as interpreted and applied by the FCC. This Agreement
shall be governed and construed in accordance with the laws of the State of
New York without regard to the conflict of law provisions thereof. MCI and
Customer hereby stipulate and agree that any and all disputes between the
parties arising out of or relating to this Agreement, except those disputes
as may be preempted by the original jurisdiction afforded the Federal
Communications Commission, shall be submitted for resolution by arbitration
before a single arbitrator in accordance with the Commercial Rules of
Arbitration of the American Arbitration Association then in effect. Such
arbitration shall be held at an office of the American Arbitration
Association in New York, New York. To the fullest extentpermitted by law,
the parties irrevocably submit to the jurisdiction of the arbitrator, waive
any objection to the venue of the arbitration, and enforced in any court of
competent jurisdiction. The arbitrator shall have no power or authority to
make awards or issue orders of any kind except as expressly permitted by
this Agreement, applicable MCI Tariffs and substantive law. In particular
and without limiting the generality of the
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foregoing, if this Agreement or applicable MCI tariffs limit the relief
available to one or both parties (e.g., by prohibiting awards of incidental
or consequential damages or otherwise limits the liability of any party in
any respect), then the arbitrator shall have no power or authority to make
any award that provides for any such relief. In addition, the arbitrator
shall have no power or authority to make any award that provides for any
element of punitive or exemplary damages. MCI and Customer hereby further
stipulate and agree that each party to such arbitration proceedings shall
pay its own costs of participating in the arbitration, and that the losing
party shall pay the fees and expenses of the arbitrator. Notwithstanding
the foregoing, both parties shall have the right to seek and obtain from
any court of competent jurisdiction any equitable or provisional relief or
remedy enforcing any right it may have in connection with this Agreement or
applicable MCI tariffs. No such judicial action permitted by the foregoing
sentence shall waive or limit either parties right to adjudicate the merits
of the dispute by arbitration.
17. COMPLETE AGREEMENT; AMENDMENTS.
This Agreement, together with the Tariff, is the complete agreement of
the parties concerning its subject matter and supersedes all other prior
agreements and representations, oral or in writing, concerning its subject
matter, including, without limitation, that certain Agreement for
Telecommunications Services dated March 26, 1991, as amended by that
certain Amendment dated March 30, 1992. Any amendments (except amendments
of the Tariff) must be in writing and signed by both parties to this
Agreement. No waiver of any of the provisions of this Agreement shall be
binding unless it is in writing and signed by the party making the waiver.
No waiver shall be deemed, or shall constitute, a waiver of any other
provision, whether or not similar, and no waiver shall be deemed, or shall
constitute, a continuing waiver.
All sections and subsections of this Agreement are severable and the
unenforceability or invalidity of any of the sections or subsections of
this Agreement shall not, unless Customer is deprived of an economic
benefit hereunder as a result of such unenforceability or invalidity,
affect the validity or enforceability of the remaining sections or
subsections of this Agreement, but such remaining sections or subsections
will be interpreted or construed in such a manner as to carry out fully the
intention of the parties. In the event the unenforceability or invalidity
of any of the sections or subsections of this Agreement deprive the
Customer of an economic benefit hereunder, the Customer may elect to
terminate this Agreement without liability on thirty (30) days' written
notice.
18. SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and inure to the benefit of the
successors and permitted assigns of the parties hereto, as provided below.
Neither this Agreement, nor any rights or obligations of Customer herein
shall be transferable or assignable by Customer without MCI's prior written
consent and any attempted transfer or assignment hereof by Customer not in
accordance herewith shall be null and void.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the dates set forth
below, effective as of the Effective Date.
MCI TELECOMMUNICATIONS CORPORATION
By: A. B.
Name: Alan B.
Title: Vice President
Date: 12/29/93
HOME SHOPPING NETWORK, INC.
By: Stella L. Tavilla
Name: Stella L. Tavilla
Title: EVP - MIS
Date: 11/11/93
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SCHEDULE 1
"Intelligent Call Routing" shall mean database intelligent
(origination, termination or both) call routing that incorporates load
balancing between call centers (automatic call distribution sites) with a
caller recognition routing feature for call by call routing and other industry
standard peripheral features.
"Customer Provided Service Control Point" shall mean a gateway to the MCI data
access point to serve as an external interface to MCI for database routing and
intelligence. The specifications for such interface are to be provided to
Customer by MCI.
"Call Transfer Capability" shall mean the ability for Customer provided
equipment to send an MCI specified protocol to the MCI network for purposes of
transferring an originating call to a second destination, which ability
includes network management features.
MCI CONFIDENTIAL
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EXHIBIT 10.30
CREDIT CARD PROGRAM AGREEMENT, dated as of February ___, 1994 by and among
HOME SHOPPING NETWORK, INC. ("HSN") a Delaware corporation with its principal
place of business at 2501 118th Avenue North, St. Petersburg, Florida 33716;
the Participating Subsidiaries (as defined below); and GENERAL ELECTRIC CAPITAL
CORPORATION ("GE Capital"), a New York corporation having an office at 260 Long
Ridge Road, Stamford, Connecticut 06927.
W I T N E S S E T H :
WHEREAS, HSN, through one or more of its Participating Subsidiaries is
engaged, among other activities, in the business of selling Merchandise from
Stores and through television or other electronic media; and
WHEREAS, GE Capital has agreed (i) to purchase qualifying Accounts and
Indebtedness and (ii) to provide certain credit-related services to HSN all
pursuant to the terms and conditions hereinafter set forth; and
WHEREAS, to induce GE Capital to make such purchases and perform such
services, HSN and the Participating Subsidiaries have each agreed to make
certain undertakings, covenants, representations, and warranties;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Generally. As used in this Agreement, the following terms
shall have the respective meanings set forth below:
"Account" shall mean any account, account receivable, other receivable,
contract right, chose in action, general intangible, chattel paper, instrument,
document, note, and proceeds thereof (as each of those terms which is defined
in the applicable UCC is so defined), whether now owned or hereafter acquired
by either HSN, any Participating Subsidiary or GE Capital, and wherever
located, arising out of the sale of Merchandise by HSN or any of the
Participating Subsidiaries to an Account Debtor pursuant to a Credit Agreement
entered into between HSN and/or any Participating Subsidiary and an Account
Debtor pursuant
<PAGE> 2
to this Program together with (a) all of the instruments and Account
Documentation evidencing the same, the receivables therefrom (including all
Indebtedness), and the proceeds thereof, (b) all of HSN's and the Participating
Subsidiaries's rights as to any Merchandise, goods, or other property which is
represented thereby or is security or collateral therefor, and (c) all
guarantees, claims, security interests, or other security held by or granted to
HSN and/or the Participating Subsidiaries to secure payment by any Person with
respect thereto.
"Account Debtor" shall mean any natural person who is or who may become
obligated under, with respect to, or on account of, an Account.
"Account Documentation" shall mean any and all documentation relating to
an Account, including, without limitation, Credit Applications, Credit
Agreements, sales slips, credit slips, Credit Cards, delivery receipts, billing
statements, checks and stubs, and all correspondence, memoranda, magnetic
tapes, disks, or hardcopy formats, or any other computer-readable data
transmissions or software related thereto, all other written material relating
to an Account, and any microfilm or microfiche copy of any of the foregoing.
"Active Account" shall mean, with respect to a Billing Cycle, an Account
owned by GE Capital which Account has a debit or credit balance or to which a
debit or credit has been posted.
"Aggregate Investment" shall mean, at any time, the aggregate of all
Indebtedness owned by GE Capital as calculated on the relevant date (excluding
the total of any amounts written-off by GE Capital on the Accounts or
Indebtedness repurchased by HSN).
"Agreement" shall mean this Credit Card Program Agreement, including all
amendments, modifications, supplements, exhibits, and schedules hereto, and
shall refer to this Agreement as the same may be in effect at the time such
reference becomes operative.
"Average Account Balance" shall mean for any period consisting of one or
more consecutive Billing Cycles, the sum for all such Billing Cycles of the
Average Aggregate Investment on the relevant Billing Date during each such
Billing Cycle, divided by the sum of the number of Active Accounts during each
such Billing Cycle.
"Average Aggregate Investment" shall mean, for any period, the sum of all
Indebtedness owned by GE Capital on each day during such period, divided by the
number of days in such period.
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<PAGE> 3
"Average Commercial Paper Rate" shall mean, for any period, the sum of the
Commercial Paper Rates for each Business Day on which such rate is published,
divided by the number of Business Days on which such rate is published during
such period.
"Average Periodic Aggregate Investment" shall mean for any period, the sum
of the Average Aggregate Investments as of each date during such period,
divided by the number of days during such period.
"Average Reserve Balance" shall mean, with respect to any period, an
amount equal to the sum of the Reserve Balances for each day in the period
divided by the number of days in such period.
"Bad Debt" shall mean Indebtedness pursuant to an Account, (i) on which
eight (8) or more payments are due as calculated on a contractual basis, (ii)
where the Account Debtor (a) has filed a petition for relief under the
Bankruptcy Code, (b) had filed against it any petition or other application for
relief under such Bankruptcy Code (c) or has suffered a receiver or trustee to
be appointed for all or a significant portion of its assets, (iii) where the
Account Debtor has died and GE Capital has deemed the Indebtedness
uncollectible, (iv) where an Account Debtor has asserted that the Indebtedness
was fraudulently incurred and the claim of fraud is not frivolous, provided
that such fraudulent incurrence does not arise in connection with a fraudulent
Credit Application, (v) where the Account Debtor is no longer located at the
address stated in the Account Documentation and GE Capital has endeavored but
has been unable to find a forwarding address, or (vi) which is deemed by GE
Capital in its good faith judgment after applying reasonable standards to be
uncollectible, and which GE Capital therefore determines to be Bad Debt prior
to such Account being eight (8) payments due.
"Bankruptcy Code" shall mean the Bankruptcy Reform Act of 1978, as
amended, 11 U.S.C. Section 1101 et seq., as the same may be amended from time
to time, and any similar successor statute that may be in effect from time to
time.
"Billing Cycle" shall mean the time interval between regular periodic
Billing Dates for an Account.
"Billing Date" shall mean the last day of a Billing Cycle for an Account.
"Business Day" shall mean any day, except Saturday, Sunday or a legal
holiday, on which HSN and GE Capital are open for business.
"Collection Policy" shall mean the collection policy applied by GE Capital
in accordance with its usual standards in the context of its retail
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<PAGE> 4
accounts receivable business which are attached to this Agreement as
Exhibit A and may be modified from time to time by GE Capital in its sole
discretion.
"Commercial Paper Rate" shall mean the rate for so-called sixty (60) day
high-grade unsecured notes sold through dealers by major corporations in
multiples of $1000 as published by The Wall Street Journal in its "Money Rates"
section under the heading "Commercial Paper" (or if such publication is
discontinued, such other publication of similar type designated by GE Capital)
on any Business Day (that such publication is published), whether or not such
rate is actually charged or paid by an entity.
"Confidential Information" shall have the meaning assigned to it in
Section 14.10 hereof.
"Credit Agreement" shall mean an open-end revolving credit agreement
entered into pursuant to this Program pursuant to which an Account Debtor may
be permitted to purchase, from time to time, Merchandise from HSN or a
Participating Subsidiary on credit, whether or not there is a finance charge
computed from time to time, and includes, without limitation, revolving charge
plans, extended payment plans, and interest free plans.
"Credit Application" shall mean a credit application which must be
completed by individuals who wish to become Account Debtors and which must be
submitted to GE Capital for review.
"Credit Card" shall mean the plastic card or temporary card issued under
the Program, which evidences an Account Debtor's right to purchase Merchandise
under the Program.
"Credit Sales Turnover" shall mean, with respect to any period, (i) the
aggregate Net Credit Sales for such period divided by (ii) the Average Periodic
Aggregate Indebtedness for such period.
"Customer Service Policy" shall mean the customer service policy applied
by GE Capital in accordance with its usual standards in the context of its
retail accounts receivable business which are attached to this Agreement as
Exhibit B, and may be modified from time to time by GE Capital in its
reasonable discretion (provided that any such modification shall not impair the
quality and level of service set forth in Exhibit B).
"Effective Date" means February 16, 1994.
"Event of Default" shall have the meaning assigned to it in Article XIII
hereof.
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<PAGE> 5
"GAAP" shall mean generally accepted accounting principles in the United
States of America as from time to time in effect.
"GE Capital's Accounting Practices" shall mean the general accounting
practices followed uniformly by GE Capital (as such accounting practices may be
modified from time to time) with respect to consumer credit indebtedness
purchased by GE Capital, including, without limitation, GE Capital's practices
for assessing finance charges and insurance charges with respect to Accounts
and for reversing such charges.
"HSN Marks" means the name, logo, trademarks and service marks or similar
proprietary designations claimed owned or used by HSN as set forth on Exhibit C
attached hereto.
"HSN Payment" shall mean any payment on an Account made by an Account
Debtor (or any other Person acting on behalf of such Account Debtor) at any HSN
or any Participating Subsidiary location (other than a Store).
"Indebtedness" shall mean any obligation incurred by an Account Debtor in
respect of an Account, whether or not billed, including, without limitation,
any charges for Merchandise, finance charges, charges for Credit Insurance and
any other charges in respect of an Account as such charges are accrued pursuant
to GE Capital's Accounting Practices.
"Lien" shall mean any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security interest
(including, without limitation, any interest of a buyer of accounts or chattel
paper which is subject to Article 9 of the UCC), easement or encumbrance,
preference, priority, or other security agreement or preferential arrangement
of any kind or nature whatsoever (including, without limitation, any lease or
title retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of, or agreement to
file, any financing statement pursuant to the UCC).
"Loss(es)" shall mean any losses, liabilities, expenses (including
reasonable attorneys' fees and court costs), judgments, damages, claims,
demands, offsets, defenses, counterclaims, settlements, actions, proceedings or
other costs reasonably incurred by any party to this Agreement, as the case may
be.
"Maximum Indebtedness" shall mean One Hundred Fifty Million Dollars
($150,000,000) or such greater amount as GE Capital, in its sole discretion
shall, from time to time, specify to HSN.
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<PAGE> 6
"Merchandise" shall mean those goods and services sold at retail by HSN
and the Participating Subsidiaries in Stores or through mail order, television
or other electronic media to the general public for personal, family, or
household use.
"Net Billed Insurance Charges" shall mean the sum of all Credit Insurance
charges billed on Accounts (excluding Credit Insurance charges reversed in
connection with a credit-based promotion or a cancellation of the insurance)
each month.
"Net Credit Sales" shall have the meaning assigned to it in Section 4.01
hereof.
"Obligations" shall mean any and all liabilities, obligations, covenants,
and duties owing by HSN or any Participating Subsidiary to GE Capital arising
under this Agreement (or any modification, alteration or amendment hereof), of
any kind or nature, present or future, whether or not evidenced by any note,
guarantee, or other instrument, whether or not for the payment of money,
whether arising by reason of an extension of credit, loan, guarantee, letter of
credit, indemnification, or in any other manner, whether direct or indirect
(including those acquired by assignment), absolute or contingent, due or to
become due, now existing or hereafter arising, and however acquired. The term
includes, without limitation, any fee, charge, expense, attorney's fee or other
sum chargeable to HSN or any affiliate of HSN pursuant to this Agreement, as
the same may be modified, altered or amended.
"Operating Procedures" shall mean the instructions and procedures
established by GE Capital and delivered to HSN that are to be followed by HSN
and the Participating Subsidiaries in connection with the Program and attached
hereto as Exhibit D, and as the same may from time to time be amended or
modified by GE Capital in its sole reasonable discretion.
"Participating Subsidiaries" shall mean Home Shopping Club, Inc., HSN
Tours, Inc., HSN Mail Order, Inc., World Rez, Inc., Home Shopping Club Outlet
of Clearwater, Inc., Home Shopping Club Outlet of Tampa, Inc., Home Shopping
Club Outlet of Orlando, Inc., Home Shopping Club Outlet of South Orlando, Inc.,
Home Shopping Club Outlet of St. Petersburg, Inc., Home Shopping Club Outlet of
West Tampa, Inc., Home Shopping Club Outlet of Brandon, Inc. and such other
wholly-owned Subsidiaries of HSN as HSN and GE Capital shall from time to time
agree upon (it being understood, that any such wholly-owned subsidiary shall be
added to and become a party and signatory of, this Agreement).
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, entity, or government (whether
federal,
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<PAGE> 7
state, county, city, municipal, or otherwise, including, without
limitation, any instrumentality, division, agency, body, or department
thereof).
"POS Network" shall mean the electronic communication interchange system
(including without limitation any electronic network) utilized by HSN, the
Participating Subsidiaries and GE Capital to administer the Program.
"Program" shall mean the credit card program, including the Regular
Program, the Special Program, and the Recourse Program established by GE
Capital in furtherance of this Agreement and made available to Account Debtors
for the purchase of Merchandise. The term "Program" includes the assignment of
Accounts and Indebtedness and extension of credit in connection therewith,
billings, collections, accounting between the parties and all aspects of the
credit card program contemplated herein.
"Program Year" shall mean the twelve (12) month period commencing with the
date on which this Agreement is executed, and each successive twelve month
period during the Initial Term and Renewal Term(s).
"Regular Program" shall mean the program under which GE Capital purchases
Accounts and Indebtedness from HSN or any Participating Subsidiary not subject
to the terms of the Special Program or the Recourse Program.
"Required Reserve" shall mean, an amount equal to the product of (x) the
difference between Targeted Loss Rate and five percent (5%) and (y) two and
six-tenths (2.6), multiplied by the SP Aggregate Investment.
"Reserve Account" shall have the meaning assigned to it in Section 7.02(a)
hereof.
"Reserve Balance" shall mean, at any time, the net amount of all debits
and credits to the Reserve Account at such time.
"Reserve Percentage" shall mean, for a period of twenty-four (24) months
commencing with the end of the first full month next following the SP Effective
Date (the "24 Month Period") an amount equal to the product of (x) the amount
by which the Targeted Loss Rate exceeds five percent (5%) multiplied by (y) two
and six-tenths (2.6), divided by two (2).
"RP Annual Loss Rate" shall mean, for any Program Year, an amount equal to
the quotient derived by dividing (x) the sum of the RP Net Bad Debt for such
Program Year by (y) the RP Average Aggregate Investment for such Program Year.
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"RP Average Aggregate Investment" shall mean, in respect of Indebtedness
(other than Indebtedness created under the Special Program or the Recourse
Program), for any period, the sum of all such Indebtedness owned by GE
Capital on each day during such period, divided by the number of days in such
period.
"RP Net Bad Debt" shall mean, in respect of all Indebtedness (other than
Indebtedness created under the Special Program or the Recourse Program), the
amount of Bad Debt first becoming Bad Debt during the period in question less
the gross amount of cash recoveries received during such period in question
(less deductions for attorney's fees, collection agency fees or other
collection costs) in respect of Bad Debt (regardless of when such Bad Debt was
incurred).
"RPR Indebtedness" shall mean any Indebtedness incurred pursuant to an
Account (a) as to which the Account Debtor has, in apparent good faith, made a
claim of (i) a breach of a representation or warranty (either express or
implied) by HSN or any Participating Subsidiary, (ii) a violation of a local,
state, or federal law or regulation by HSN or any Participating Subsidiary or
(iii) failure by HSN or any Participating Subsidiary to provide the Account
Debtor with the agreed-upon goods or services, (b) as to which HSN or any
Participating Subsidiary has accepted a return of Merchandise from an Account
Debtor or has granted a partial credit with respect to Merchandise purchased
pursuant thereto other than in the ordinary course of business, (c) with
respect to which the Account Documentation has not been forwarded to GE Capital
in accordance with Section 3.05 hereof, (d) as to which there is a breach of
any representation, warranty or covenant of HSN or any Participating Subsidiary
hereunder relating to an Account, or there would be such a breach if such
representation or warranty did not contain a requirement of materiality, (e)
where an Account Debtor has asserted that the Indebtedness was fraudulently
incurred and the claim of fraud is not frivolous, provided that such fraudulent
incurrence does not arise in connection with a fraudulent Credit Application
(f) as to which any charges have been made which have not been authorized by GE
Capital pursuant to Section 3.01(b) hereof. With respect to subsection (c)
above, such event shall not be considered RPR Indebtedness if cured or resolved
by HSN within two (2) Business Days after receiving notice from GE Capital
thereof.
"SP Aggregate Investment" shall mean, at any time, the aggregate of
Indebtedness owned by GE Capital and created under the Special Program.
"SP Annual Loss Rate" shall mean, for any Special Program Year, an amount
equal to the quotient derived by dividing (x) the sum of the SP Net Bad Debt
for such Special Program Year by (y) the SP Average Aggregate Investment for
such Special Program Year.
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"SP Average Aggregate Investment" shall mean, in respect of Indebtedness
created under the Special Program, for any period, the sum of all
such Indebtedness owned by GE Capital on each day during such period, divided
by the number of days in such period.
"SP Effective Date" shall mean the date upon which GE Capital first
purchases Accounts and Indebtedness under the terms of the Special Program.
"SP Loss Rate" shall mean, for any period, an amount equal to the quotient
derived by dividing (x) the SP Net Bad Debt for such period by (y) the SP
Average Aggregate Investment for such period.
"SP Net Bad Debt" shall mean, in respect of Indebtedness created under the
Special Program or the Recourse Program, Indebtedness identified by GE Capital
as Bad Debt during the period in question less the gross amount of cash
recoveries received during such period (less deductions for attorney's fees,
collection agency fees or other collection costs) in question in respect of
such Bad Debt (regardless of when such Bad Debt was incurred).
"SP Net Credit Sales" shall mean, in respect of Indebtedness created under
the Special Program, the amount shown as the total of purchases on charge slips
submitted by HSN and the Participating Subsidiaries to GE Capital (gross credit
sales) less the total amount of any credit slips submitted by HSN and the
Participating Subsidiaries to GE Capital.
"SP Required Loss Payments" shall mean, for any Special Program Year, the
difference derived from subtracting (x) the product of the SP Average Periodic
Aggregate Investment for such period and five percent (5%) from (y) the sum of
the SP Net Bad Debt for such Special Program Year.
"Solvent" means, when used with respect to an entity on a particular date,
that on such date (a) that the assets of such entity are greater than the total
amount of its liabilities ("assets" and "liabilities" shall have the meanings
assigned to them in accordance with GAAP), (b) such entity is able to realize
upon its assets and pay its debts and other liabilities, contingent obligations
and other commitments as they mature in the normal course of business, (c) such
entity does not intend to, and does not believe that it will, incur debts or
liabilities beyond such entity's ability to pay as such debts and liabilities
mature, and (d) such entity is not engaged in business or a transaction, and is
not about to engage in business or a transaction, for which such entity's
property would constitute unreasonably small capital after giving due
consideration to the prevailing practice in the industry in which such entity
is engaged. In computing the amount of contingent liabilities at any time, it
is intended that such liabilities will be computed at the amount which,
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in light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability.
"Special Program" shall have the meaning assigned to it in Section 7.01(a)
hereof.
"Special Program Year" shall mean the twelve-month period commencing on
the SP Effective Date, and each successive twelve-month period after such
initial twelve-month period.
"Stores" shall mean those stores operated by HSN and/or the Participating
Subsidiaries on the date hereof or hereafter.
"Targeted Loss Rate" shall mean a rate established by HSN and GE Capital
from time to time as the targeted rate of losses computed as a percentage of
the SP Aggregate Investment under the Special Program.
"UCC" shall mean the Uniform Commercial Code (or similar law) of the
jurisdiction with respect to which such term is used, as in effect from time to
time.
"Unidentifiable Media" shall mean media that does not have a valid account
number, or media with an account number that is illegibly imprinted, or media
that contains any illegible content.
Section 1.02. Miscellaneous.
(a) The words "herein," "hereof," "hereunder," and other words of
similar import refer to this Agreement as a whole, including the Exhibits
hereto, as the same may from time to time be amended or supplemented, and not
to any particular section, subsection, or clause contained in this Agreement.
(b) The parties hereto acknowledge and agree that the specification of
any dollar amount in the representations and warranties included in this
Agreement or the inclusion of any specific item in the Exhibits there is not
intended to imply that such amounts or higher or lower amounts, or the items so
included or other items, are or are not material, and neither party hereto
shall use the specification of any such dollar amount or the inclusion of any
such item in any dispute or controversy between the parties as to whether any
obligation, item or matter not described herein or included in an Exhibit
hereto is or is not material for the purposes of this Agreement.
(c) It is the intent of the parties to this Agreement that for purposes
of calculating the various measurements contained herein, and unless otherwise
specified, if there is generally one Billing Cycle per calendar month, any
reference
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to a "period" or "month" shall mean a "Billing Cycle" and any reference
to a "date" shall mean a "Billing Date". In the event that there is more than
one Billing Cycle per calendar month, the relevant data used in the various
calculations contained herein shall be aggregated as of the last Billing Date
that appears in such calendar month.
(d) Wherever from the context it appears appropriate, each term stated
in either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine, feminine, or neuter gender shall include the
masculine, the feminine, and the neuter.
ARTICLE II
ESTABLISHMENT OF PROGRAM
Section 2.01. HSN to Honor Credit Card. HSN and each of the
Participating Subsidiaries hereby agrees to participate in the Program and to
honor the Credit Card so that Account Debtors may make purchases of
Merchandise. HSN and each of the Participating Subsidiaries shall honor the
Credit Card only in accordance with the Operating Procedures.
Section 2.02. Purchase of Accounts and Indebtedness.
(a) Subject to the limitations set forth in this Section 2.02(a) and
Section 7.01(f), HSN and each of its Participating Subsidiaries agrees to offer
to sell, assign, and transfer to GE Capital in accordance with the terms and
provisions of this Agreement all Accounts and Indebtedness originated from time
to time by HSN and each of its Participating Subsidiaries in connection with
this Program and GE Capital agrees to purchase and acquire from HSN all such
Accounts and Indebtedness offered which meet the requirements of this
Agreement. GE Capital may, but shall not be obligated to, purchase any
Accounts and Indebtedness from HSN and/or any of the Participating Subsidiaries
at any time during which the Aggregate Investment equals or exceeds the Maximum
Indebtedness; provided, however, that notwithstanding the foregoing, GE Capital
shall be obligated to purchase all Indebtedness incurred in connection with a
specific purchase of Merchandise authorized by GE Capital under the Program.
(b) HSN and the Participating Subsidiaries hereby transfer, convey and
assign to GE Capital, effective as of the date of payment of the purchase
price, all of HSN's and the Participating Subsidiaries right, title and
interest in, to and under the Accounts and Indebtedness for which GE Capital
has paid the purchase price pursuant to Section 2.03 or Section 2.08(c)
(including, without limitation, the right to receive finance charges and all
other income and profits derived from the relevant Accounts and Indebtedness),
free and clear of any Lien by HSN or any
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Participating Subsidiary, subject only to the limited repurchase rights
specified in Sections 2.04, 7.03, 12.05 and 12.06 of this Agreement (it being
understood that it is not the intent of the parties that such repurchase rights
result in the characterization of the transactions contemplated by this
Agreement as a financing).
(c) In the event that as of any month-end, the Aggregate Investment
equals or exceeds eighty percent (80%) of the Maximum Indebtedness, GE Capital
shall within ninety (90) days elect any one of the following options and give
HSN written notice of such election within said ninety (90) day period:
(i) GE Capital will, in its sole discretion, increase the Maximum
Indebtedness to an amount GE Capital deems acceptable, but in any event to a
sum equal to or higher than the amount which, at the time of the election of
this option, would not trigger the provisions of Section 2.02(c). If GE
Capital elects this option, then GE Capital's written notice to HSN shall
include the amount of the increased Maximum Indebtedness.
(ii) GE Capital may elect not to increase the Maximum Indebtedness and in
such event, HSN shall be entitled to terminate this Agreement in accordance
with the provisions of Section 12.02(b).
(d) HSN and the Participating Subsidiaries expressly acknowledges GE
Capital's right to establish the Maximum Indebtedness as described in Section
2.02 and, in this regard, hereby releases GE Capital from any and all Losses
incurred as a result of GE Capital's failure to purchase Accounts or
Indebtedness in excess of the Maximum Indebtedness (other than Indebtedness of
the type specified in the proviso in Section 2.02(a)) or to increase the
Maximum Indebtedness or as a result of any other action contemplated under
Section 2.02, including but not limited to, any losses relating to a lender
liability claim.
Section 2.03. Purchase Price. The purchase price (sales price,
shipping and handling and taxes) for all Indebtedness purchased pursuant to
Section 2.02 hereof shall be one hundred percent (100%) of the face amount of
such Indebtedness. HSN shall provide to GE Capital each day an electronic data
transmission or daily computer tape from HSN reflecting Indebtedness and Net
Credit Sales for the preceding day. GE Capital shall forward to HSN (on its
own behalf and as agent for the Participating Subsidiaries) the purchase price
for Indebtedness purchased hereunder, net of any (a) amount or fee referred to
in Section 4.01 and (b) other adjustments with respect to Merchandise returns
and/or credits, such as discounts and adjustments, by initiating a wire
transfer of funds for the purchase price by 3:00 p.m. Eastern Time on the same
Business Day after receipt by GE Capital of the electronic data transmissions
or daily computer tape reflecting such Indebtedness, provided that such
transmission or tape is received
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by 8:00 a.m. Eastern Time on such Business Day. Electronic data
transmissions or daily computer tapes received after 8:00 a.m. Eastern Time on
any Business Day shall be deemed received by 8:00 a.m. Eastern Time the
following Business Day. Any amounts paid to HSN as agent for the Participating
Subsidiaries shall be deemed paid by GE Capital to the relevant Participating
Subsidiary.
Section 2.04. RPR Indebtedness. If any Indebtedness becomes RPR
Indebtedness, GE Capital shall have the right to require HSN to repurchase such
RPR Indebtedness from GE Capital subject only to HSN's right to cure conditions
pursuant to Section 2.04(c).
(a) Repurchase Price and Payment. The repurchase price payable for RPR
Indebtedness shall be 100% of the amount of such RPR Indebtedness and any
unpaid finance charges that have accrued on such RPR Indebtedness during the
first Billing Cycle in which finance charges are assessed. Until such time as
GE Capital exercises its right to have HSN repurchase RPR Indebtedness, GE
Capital shall continue to attempt to collect such RPR Indebtedness from the
relevant Account Debtor. The payment of the purchase price for such RPR
Indebtedness shall, in GE Capital's discretion, be (a) deducted from the
amounts owing from GE Capital to HSN and the Participating Subsidiaries
pursuant to Section 2.03 or (b) paid directly by HSN to GE Capital within ten
(10) Business Days after receipt of notice that such amount is due and the
computation of such amount.
(b) Assignment and Servicing. Upon any such repurchase, GE Capital
shall assign to HSN all of GE Capital's right, title, and interest in and to
such RPR Indebtedness, without any warranty or recourse, and, if all
Indebtedness with respect to an Account is repurchased, such Account, without
any warranty or recourse, and the ownership interest of GE Capital in such
Indebtedness and related Account, if any, shall be terminated. After HSN has
repurchased such RPR Indebtedness, (i) GE Capital's obligation to service such
RPR Indebtedness, as set forth in Section 3.01 hereof, shall be terminated,
(ii) all payments in respect to such RPR Indebtedness shall be forwarded by GE
Capital to HSN, but shall be subject to GE Capital's right of setoff as set
forth in Section 6.08 hereof, and (iii) upon HSN's request, GE Capital shall
deliver to HSN all evidences of Indebtedness and copies (or, upon HSN's
reasonable request, GE Capital will make reasonable efforts to obtain and
deliver originals) of Account Documentation with respect to such RPR
Indebtedness then in GE Capital's possession.
(c) Cure of RPR Claims or Conditions by HSN. In the event that
Indebtedness has become RPR Indebtedness (collectively a "Claim or Condition"),
GE Capital shall use its best efforts to provide oral or written notice to HSN
within five (5) Business Days of receipt of such Claim or Condition that such
Indebtedness has become RPR Indebtedness and the reason therefor. Upon receipt
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of such notice from GE Capital, HSN shall have with respect to such RPR
Indebtedness (other than if such Indebtedness is classified as RPR Indebtedness
pursuant to clause (c) of the definition of the term RPR Indebtedness), a
period of twenty-five (25) days within which to cure or resolve the Claim or
Condition which gave rise to the Indebtedness becoming RPR Indebtedness; if HSN
cures or resolves the Claim or Condition within such twenty-five (25) day
period to the reasonable satisfaction of GE Capital to the extent that such
Indebtedness should no longer be classified as RPR Indebtedness, then GE
Capital will remove such Indebtedness from the classification of RPR
Indebtedness. If such Claim or Condition is not cured or resolved by HSN
within such twenty-five (25) day period (or, if such Indebtedness is classified
as RPR Indebtedness pursuant to clause (c) of the definition of the term RPR
Indebtedness), then GE Capital shall have the unqualified right to require HSN
to repurchase such RPR Indebtedness.
(d) HSN's Obligations Unconditional. Any obligation of HSN to
repurchase RPR Indebtedness pursuant to this Agreement shall be unconditional
and shall not be waived, released or affected by any settlement, extension,
compromise, variation in terms, forbearance or other indulgence or agreement
made or granted by GE Capital with or to any Account Debtor or other Persons
obligated for an Account to the extent that the settlement, extension,
compromise, variation in terms, forbearance or other indulgence or agreement
complies with GE Capital's Collection Policy; provided, however, that the
repurchase price to be paid by HSN to GE Capital for RPR Indebtedness pursuant
to Section 2.04(a) above shall be adjusted and reduced by an amount equivalent
to any settlement, compromise or agreement made or granted by GE Capital with
respect thereto which results in a reduction of the amount originally owed by
the Account Debtor or other persons obligated for an Account with respect to
such RPR Indebtedness. GE Capital shall not be required to exhaust its
remedies against Account Debtors, other Persons or Merchandise as a condition
precedent to requiring performance by HSN of its repurchase obligation.
Without hereby waiving HSN's rights to notice of release, compromise,
settlement, extension or renewal, HSN hereby expressly waives notice of
nonpayment and nonperformance, demand, protest, notice of presentment,
dishonor, default, maturity, notice of intent to accelerate and notice of
acceleration, of any or all Accounts and guarantees at any time held by GE
Capital to the fullest extent permitted by applicable law.
Section 2.05. Monthly Statements. GE Capital shall provide to HSN a
monthly statement, as of each Billing Date, of the calculations, for any
Billing Cycle, of the fees and charges payable pursuant to Article IV together
with such supporting information as may reasonably be requested by HSN. Each
and every monthly statement shall be deemed final, binding, and conclusive upon
HSN in all respects as to all matters reflected therein, except as to clear
error, unless HSN, within thirty (30) days after the date the statement is
received by HSN, notifies GE Capital of any objections which HSN may have to
any such monthly
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statement, describing the basis for each such objection with specificity.
In that event, all matters reflected in such statement, other than those items
expressly objected to in such notice, shall be deemed final, binding and
conclusive on HSN.
Section 2.06. Payments. GE Capital may, at its option and following
reasonable prior notice to HSN, apply any amounts due from GE Capital to HSN or
any Participating Subsidiary pursuant to this Agreement against amounts past
due from HSN or any Participating Subsidiary to GE Capital hereunder,
including, but not limited to, the return of the unearned portion, if any, of
the Commitment Fee paid by GE Capital pursuant to Section 4.02.
Section 2.07. Credit Insurance. (a) Subject to applicable state law
and regulation, GE Capital shall have (i) the exclusive right to arrange the
solicitation and offering to Account Debtors of credit life and credit
disability insurance, provided that prior to the distribution of materials to
be used in connection with such solicitation and offering, such materials shall
first be submitted to HSN for approval (which approval shall not be
unreasonably withheld) and (ii) subject to the mutual agreement of HSN and GE
Capital, the non-exclusive right to arrange the solicitation and offering to
Account Debtors credit property or other types of credit insurance
(collectively "Credit Insurance") on the Accounts under a credit insurance
program. The Credit Insurance will be under a master group plan with GE
Capital or an affiliate of GE Capital underwritten by an insurer selected by GE
Capital, provided that such underwriter shall have a Best's rating of no less
than A- unless HSN and GE Capital agree otherwise. GE Capital shall service
and bill Account Debtors who have purchased Credit Insurance under Accounts.
The insurance offers may be in direct mail or statement inserts and, subject to
the mutual consent of the parties to this Agreement, Credit Applications or
Credit Card carrier enrollments. The monthly charges incurred by an Account
Debtor under an Account for such Credit Insurance shall be charged as an
insurance service transaction to the applicable Account Debtor's Account.
Compensation or fees shall be paid to HSN (or offset by GE Capital against
monies owed to GE Capital by HSN hereunder) at least monthly in the amount
which is the equivalent of thirty percent (30%) of Net Billed Insurance
Charges. If required by the insurer in accordance with applicable law, HSN or
a subsidiary shall obtain insurance licensing necessary for GE Capital to pay
to HSN the fees provided for hereunder. If the insurer requires such license
of HSN, GE Capital shall not be permitted to offset monies due HSN under this
Section 2.07 against amounts owed to GE Capital. All payments to HSN under
this Section 2.07 shall cease upon a termination of this Agreement pursuant to
Section 12.03(b) or (c) whether or not GE Capital is liquidating the Accounts.
Notwithstanding anything herein to the contrary, nothing in this Agreement
shall preclude HSN Insurance, Inc., a wholly-owned subsidiary of HSN, from
offering its insurance products (other than credit life and credit disability
insurance) to Account Debtors.
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(b) GE Capital shall process through the insurance carrier all claims
received from Account Debtors having Credit Insurance on their Accounts.
(c) GE Capital, HSN and the Participating Subsidiaries understand that
Credit Insurance, including the compensation and fees that may be paid to each
of them, is regulated under applicable state laws and regulations. GE Capital
makes no representations or warranties with respect to the availability of
Credit Insurance on any Account(s) nor with respect to any compensation or
fees. Prior to GE Capital offering any such insurance products to Account
Debtors, it shall cause the underwriter of such insurance product to directly
indemnify HSN, to HSN's satisfaction, for all Losses incurred by HSN as a
result of the underwriter's acts and omissions and/or the insurance product
itself.
Section 2.08. Interim Provisions. (a) Notwithstanding anything to the
contrary in this Agreement, up and until the conditions specified in Section
5.01(e) shall have been satisfied, GE Capital shall not be obligated to
purchase Accounts and Indebtedness pursuant to this Agreement and GE Capital
shall service accounts and indebtedness of HSN and Participating Subsidiaries
in accordance with the provisions of this Section 2.08.
(b) GE Capital, HSN and the Participating Subsidiaries hereby agree that
for the periods (i) from the date hereof through the date on which the
conditions specified in Section 5.01(e) shall have been satisfied and (ii) from
and after the date this Agreement shall terminate pursuant to Section 12.03(d)
hereof as a consequence of those conditions set forth in Section 5.01(e) not
being satisfied until the earlier to occur of the date (A) one hundred eighty
(180) days after the date of such termination and (B) on which HSN shall have
notified GE Capital that HSN has an alternative to the Program in effect, GE
Capital shall provide to HSN and the Participating Subsidiaries the services
specified in Article III hereof, (y) all of the provisions of this Agreement
shall be equally applicable and shall be in full force and effect with respect
to both the accounts and indebtedness for which GE Capital provides services
pursuant to Article III and such services provided by GE Capital, except that
(A) Sections 2.02, 2.03, 2.04, 2.07, 3.01(i), 3.06, 4.02, 12.05, 12.07 and
14.14 and Articles V (other than Section 5.01(a)) and VII shall not be
applicable to such accounts and indebtedness, (B) HSN and the Participating
Subsidiaries shall not be deemed to have breached any representation, warranty
or covenant as a result of such account and/or indebtedness not being
transferred to and owned by GE Capital and (C) HSN's failure to satisfy Section
5.01(e)(ii) and (iii) shall not be deemed to be an Event of Default or material
breach under this Agreement but shall give rise to the rights set forth herein,
including those set forth in this Section 2.08 and 12.03(d) and (z) subject to
clause (y) above, such accounts and indebtedness shall be deemed to be Accounts
and Indebtedness for all purposes of this Agreement. In the event this
Agreement
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shall have been terminated pursuant to Section 12.03(d), during the period in
which GE Capital will provide services pursuant to this Section 2.08(b), GE
Capital and HSN will reasonably cooperate to facilitate the transfer to HSN of
the service responsibilities provided by GE Capital pursuant to this Section
2.08(b), at the end of the period specified in this Section 2.08(b).
(c) Upon satisfaction of the conditions specified in Section 5.01(e) of
this Agreement, subject to the satisfaction of the other conditions specified
in Article V of this Agreement, GE Capital shall purchase all accounts and
indebtedness for which GE Capital provided all services specified in Section
2.08(a) of this Agreement, (including, without limitation, the services
specified in Section 3.01(b), free and clear of any and all Liens created by or
through HSN or any Participating Subsidiary, for a purchase price equal to one
hundred percent (100%) of the amount of the accounts and indebtedness so
purchased (including, without limitation, unpaid finance charges thereon) net
of any (a) amount or fee referred to in Section 4.01 and (b) other adjustments
with respect to merchandise returns and/or credits, such as discounts and
adjustments. On and subsequent to such purchase, such accounts and
indebtedness shall become Accounts and Indebtedness for all purposes of this
Agreement and all of the provisions of this Agreement relating to Accounts and
Indebtedness shall be equally applicable to such Accounts and Indebtedness.
(d) During the period in which GE Capital shall provide services to HSN
and the Participating Subsidiaries pursuant to Section 2.08(b), HSN and the
Participating Subsidiaries shall pay GE Capital the following service fee:
(i) for the period commencing with the date hereof and ending with the
earlier to occur of (A) the date thirty (30) days after the date hereof (or,
such later date to which GE Capital shall agree to extend the satisfaction of
the conditions specified in Section 5.01(e)) and (B) the date on which GE
Capital shall purchase the Accounts and Indebtedness pursuant to Section
2.08(c), the Service Fee specified in Section 4.01 of the Agreement; and
(ii) for the period commencing with the later of the date thirty one (31)
days after the date hereof or the date one day after the date to which GE
Capital has agreed to extend the satisfaction of the conditions specified in
Section 5.01(e) and ending on the date on which GE Capital shall cease to
provide services to HSN and the Participating Subsidiaries with respect to the
Accounts (as specified in Section 2.08(b)), a service fee in the amount of
$2.75 per account serviced by GE Capital (and HSN shall not be required to pay
the Service Fee specified in Section 4.01).
The Service Fee due and payable pursuant to clause (i) above shall be paid
in the following manner:
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(A) in the event GE Capital shall purchase the Accounts pursuant to
Section 2.08(c), the Service Fee due and payable pursuant to clause (i) above
shall be paid by netting the aggregate amount of such Service Fee from the
purchase price (as specified in Section 2.08(c)) and
(B) in the event GE Capital shall not purchase the Accounts pursuant to
Section 2.08(c), the Service Fee due and payable pursuant to clause (i) above
shall be paid by GE Capital deducting the aggregate amount of such Service Fee
from amounts GE Capital is required to transfer to HSN pursuant to Section
2.08(e) and, after any such deduction, GE Capital shall provide notice to HSN
of any such deduction and the calculation thereof.
The service fee due and payable pursuant to clause (ii) above shall be due
and payable for each Special Services Period (as defined below) for each
account which has a debit or credit balance or to which a debit or credit has
been posted, in each case during the applicable Special Services Period, on the
last day of the applicable Special Services Period, and shall be paid to GE
Capital by GE capital deducting the amount of such service fee due and payable
from amounts GE Capital is required to transfer to HSN pursuant to Section
2.08(e) and, after any such deduction, GE Capital shall provide notice to HSN
of any such deduction and the calculation thereof. In the event the service
fee due and payable to GE Capital on the last day of the last Special Services
Period is greater than the amount GE Capital is required to transfer to HSN
pursuant to Section 2.08(e) on such day, GE Capital shall invoice HSN for the
amount of such deficiency and HSN shall pay the amount of such deficiency to GE
Capital within ten (10) Business Days after its receipt of such invoice. The
term "Special Services Period" means a period commencing with the later of the
31st day after the date hereof or the date one day after the date to which GE
Capital has agreed to extend the satisfaction of the conditions specified in
Section 5.01(e) and ending on the first monthly anniversary of the date thereof
and, thereafter, commencing with the date immediately succeeding the last day
of the immediately preceding Special Services Period and ending on the earlier
to occur of (i) the monthly anniversary of the first day of such period and
(ii) the date on which GE Capital shall cease to provide to HSN and the
Participating Subsidiaries the services specified in Section 2.08(b).
(e) During the periods specified in clauses (i) and (ii) of Section
2.08(d) of this Agreement, GE Capital will post and then forward to HSN (on its
own behalf and as agent for the Participating Subsidiaries) all payments
received by GE Capital from account debtors relating to accounts (including,
without limitation, all finance charges and late fees) in the manner specified
in this paragraph (e). GE Capital shall have no right, title or interest in
such payments except those rights specified in this Section 2.08. GE Capital
shall be deemed to hold the funds in trust for HSN until such payments are
delivered to HSN. Payments received by GE Capital on any Business Day will be
paid by GE Capital to
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HSN through GE Capital initiating a wire transfer of funds in the amount of
such payment on or before 3:00 p.m. Eastern Time on the immediately succeeding
Business Day; provided, however, that in the event the amount required to be
paid by transfer to HSN on any Business Day is in an amount equal to or less
than Ten Thousand Dollars ($10,000.00), such amount shall not be wire
transferred to HSN on the Business Day such amount shall be required to be
transferred to HSN pursuant to this paragraph (e) (but for this provisio) and
such amount shall be transferred to HSN on the immediately succeeding Business
Day on which the amount required to be wire transferred to HSN pursuant to this
paragraph (e) on such Business Day together with the amount held by GE Capital
pursuant to provisio exceeds Ten Thousand Dollars ($10,000.00). Amounts
received by GE Capital after 12:00 p.m. Eastern Time on any Business Day shall
be deemed received by GE Capital on the next succeeding Busies Day. GE Capital
shall have the right to deduct from any amounts due and payable to HSN pursuant
to this paragraph (e), amounts then owing to GE Capital by HSN or any
Participating Subsidiary pursuant to this Agreement. GE Capital shall promptly
notify HSN of any such deduction.
ARTICLE III
SERVICING
Section 3.01. GE Capital's Responsibilities. In connection with its
purchase and continued ownership of Accounts and Indebtedness GE Capital shall
perform the following:
(a) Forms. GE Capital shall be responsible for the costs of printing
billing statements, Credit Card carriers, collection notices, adverse action
notices and other internal Account Documentation as may be required to
administer the Program.
(b) Credit Processing. GE Capital will review all Credit Applications.
Except in the case of Credit Applications submitted to GE Capital under the
Special Program or the Recourse Program, GE Capital will (i) approve for
purchase the Accounts of those applicants which GE Capital deems creditworthy
in accordance with credit standards and other reasonable criteria as
established by GE Capital from time to time and (ii) set credit standards and
otherwise use its reasonable best efforts to achieve and maintain an RP Annual
Loss Rate of five percent (5%) during the term of this Program. GE Capital
shall develop routines and procedures with respect to application processing
and authorizations in connection with Stores, mail order and through television
or other electronic media. As to each applicant who is found to be
creditworthy by GE Capital in accordance with the above-referenced standards
and criteria, GE Capital will from time to time establish the maximum amount of
credit it shall purchase with respect to such applicant,
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which amount may be changed from time to time. Specific credit approval shall
be obtained from GE Capital by HSN or the relevant Participating Subsidiary
prior to each purchase on an Account by an Account Debtor. GE Capital may
furnish credit information and other information concerning creditworthiness
with respect to any applicant or Account Debtor to Transunion, TRW and Equifax
or such other credit bureaus, credit interchanges and other persons reasonably
utilized by GE Capital in evaluating the creditworthiness of the applicant or
Account Debtor or for collection purposes, provided that GE Capital shall use
its reasonable best efforts to assist HSN in obtaining confidentiality
agreements from such entities that are furnished the aforementioned
information. The standards of acceptability and eligibility as may be revised
and used from time to time by GE Capital in reviewing applications for credit
and determining creditworthiness of applicants or Account Debtors will at all
times comply with applicable consumer protection laws. With respect to Credit
Applications submitted to GE Capital under the Special Program, GE Capital
shall follow the procedures and standards specified in Article VII of this
Agreement.
(c) Customer Service. Customer service matters shall be performed by GE
Capital personnel acting in accordance with the Customer Service Policy. This
notwithstanding, HSN shall have the option to assume responsibility for
performing certain of the services provided by GE Capital under this Agreement,
provided that GE Capital and HSN mutually agree that HSN is capable of
performing such services. In the event GE Capital and HSN shall agree that
certain services provided by GE Capital pursuant to this clause (c) shall cease
to be performed by GE Capital and be performed by HSN, GE Capital and HSN shall
mutually agree upon an appropriate adjustment to the fees due and payable by
HSN to GE Capital pursuant to Section 4.01.
(d) Collections. Collection activity on delinquent accounts shall be
performed by GE Capital personnel in accordance with the Collection Policy.
(e) Billing/Payment Processing. GE Capital shall prepare and mail
billing statements to Account Debtors and process corresponding mailed payments
at GE Capital's expense. GE Capital shall include as inserts with such billing
statements any legal notices as required by law, and such notices shall have
priority with respect to any other inserts to be mailed with such billing
statements supplied by HSN. GE Capital shall also include with said billing
statements up to six (6) inserts per customer billing statement per month,
which inserts shall be supplied by HSN (at the address stated by GE Capital and
using GE Capital's insert requirements as outlined in the Operating
Procedures), provided that HSN must reimburse GE Capital for any extra postage
paid as a result of such insertion. In addition, GE Capital shall also include
with said billing statements up to two (2) customized promotional messages per
month provided by HSN which GE Capital shall include in such space as may
reasonably be available in billing statements,
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subject to any limitations imposed by GE Capital's reasonable needs, including
by way of example and without limitation, GE Capital's billing statement
systems configuration and GE Capital's needs to comply with applicable law. GE
Capital agrees that, except for such inserts that constitute legal notices as
required by law, no inserts shall be included with the billing statements
without HSN's prior consent.
(f) Reporting. GE Capital shall establish and maintain accurate records
for Account Debtors and all Accounts owned by GE Capital and shall provide to
HSN reports thereof in accordance with GE Capitals' normal operating
procedures, and/or such other reports thereof, at no expense to HSN, as may be
reasonably requested by HSN. A list of such reports is attached to this
Agreement as Exhibit E and may be modified from time to time.
(g) Credit Cards. GE Capital shall emboss, encode and mail Credit Cards
to Account Debtors at GE Capital's expense.
(h) Use of Marks. GE Capital shall operate the Program as a separate
private label revolving credit plan, utilizing the HSN Marks from time to time.
HSN hereby grants to GE Capital a non-exclusive license to use the HSN Marks in
connection with the Program, subject to the limitations set forth herein. Such
license shall be irrevocable as long as this Agreement remains in effect and
shall continue in effect after the expiration or any termination of this
Agreement as provided, and subject to the limitations contained, herein. GE
Capital acknowledges and agrees that the grant of the foregoing license shall
not be construed as the grant of any right, title or interest in the HSN Marks
(except the right to use the HSN Marks in connection with the Program) and that
the HSN Marks are the sole and exclusive property of HSN. HSN shall have the
right to approve the use and manner of use of the HSN Marks by GE Capital,
which such approval shall not unreasonably be denied. HSN shall have the right
to impose or prescribe any reasonable requirements with respect to the use of
the HSN Marks in connection with the Program. HSN shall be responsible for the
validity of any HSN Marks used in connection with the Program. Notwithstanding
the expiration or any termination of this Agreement for any reason, the license
granted to GE Capital pursuant to this Section 3.01(h) shall continue in effect
after the effective date of the expiration or any termination of the Program
for a period of two (2) years after termination so long as GE Capital owns any
Account, except that GE Capital may continue to use the HSN name (but not the
remainder of the HSN Marks) in accordance with Section 12.07(iii) hereof. GE
Capital may use its name in connection with the operation of the credit program
described herein in accordance with its usual standards in the context of its
retail accounts receivable business to the extent deemed reasonably necessary
by GE Capital to protect its interest hereunder.
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(i) Marketing Programs. GE Capital shall make available to HSN for
consideration by it, from time to time during the term of the Agreement,
various marketing programs and promotions relating to Accounts in accordance
with its usual standards in the context of its retail accounts receivable
business. Beginning on the first anniversary date of the Program, GE Capital
shall contribute an amount equal to .0208% of Average Aggregate Investment per
month to a promotion fund for the creation and use of Accounts; provided, that
each such promotion shall be mutually agreed upon by the parties hereto and;
provided further, that HSN shall contribute an amount equal to fifty percent
(50%) of the cost for each such promotion.
(j) Program Manager. Throughout the term of this Agreement, GE Capital
shall provide a qualified and dedicated Program Manager at no cost to HSN, who
will administer GE Capital's obligations under this Agreement and serve as
HSN's primary contact for all matters relating to this Agreement. The Program
Manager will not work on or otherwise directly or indirectly assist GE Capital
with regard to accounts of direct competitors of HSN (e.g., QVC) without
consent from HSN, provided that the Program Manager may serve in such capacity
for other GE Capital programs during the term of this Program.
(k) Merchandise Returns. GE Capital shall not advertise or otherwise
promote the fact that Account Debtors may return Merchandise to GE Capital.
If, notwithstanding the foregoing, any Merchandise is returned to GE Capital,
GE Capital shall forward such Merchandise to HSN within five (5) Business Days
of receipt. The cost of such shipment to HSN shall be borne solely by HSN.
(l) Training. GE Capital shall provide up to four (4) training sessions
to HSN personnel at no cost to HSN. HSN shall pay GE Capital for all
out-of-pocket expenses incurred by GE Capital as a result of any additional
training requested by HSN. HSN shall be authorized to make copies of manuals
and written information provided for training purposes by GE Capital for HSN's
use, subject to compliance with Section 14.10.
(m) Advice and Counsel. GE Capital shall advise HSN promptly on an
on-going basis about federal, state and local laws, ordinances, rules,
regulations, judicial decisions and administrative rulings applicable to (i)
limitations on finance charges and other charges for Accounts, (ii) the forms
to be used in connection with the Program pursuant to this Article III and
(iii) all communications by HSN made at the request of GE Capital with current
or prospective Account Debtors pursuant to this Agreement. With respect to
other material acts required by GE Capital to be performed by HSN, GE Capital
shall use reasonable efforts to consult with HSN on such matters. In addition,
GE Capital shall assist HSN in complying with all such laws, ordinances, rules,
regulations, judicial decisions, administrative rulings or similar governmental
pronouncements, including, but not limited to,
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those laws and regulations which require certain credit disclosures to be made
in connection with written and telephonic requests for credit and certain
notices to be given of changes in certain terms.
Section 3.02. GE Capital's Liabilities. The rejection for credit of
any applicant, or any number of applicants, shall not give rise to any claim,
liability, demand, offset, defense, or counterclaim (each a "Claim") by HSN or
any Participating Subsidiary against GE Capital for lost sales, lost profits or
consequential damages and HSN and each Participating Subsidiary hereby waives
and releases any such Claim that it may have against GE Capital. The
provisions of this Section 3.02 shall not limit any right of HSN to
indemnification pursuant to Section 11.02.
Section 3.03. HSN's Responsibilities. HSN and the Participating
Subsidiaries shall, at no additional cost to GE Capital unless specifically
stated in this Agreement, comply with the following with respect to Accounts
purchased by GE Capital or submitted to GE Capital by HSN or any Participating
Subsidiary for purchase in connection with this Agreement:
(a) Forms. No Account Documentation shall be utilized unless GE Capital
has expressly approved its form and content, such approval not to be
unreasonably withheld. HSN shall be responsible for costs of (i) printing and
customization expenses associated with sales slips, Credit Applications and
Credit Agreements and (ii) providing Credit Cards (other than embossing and
mailing). HSN shall indemnify GE Capital with respect to any and all losses
incurred as a result of all unauthorized changes and/or omissions in such
Account Documentation.
(b) Sales Slips. Each sale pursuant to this Agreement shall be
evidenced by a sales slip or other form of media which shall include the total
cash price including any applicable taxes and shipping and handling fees
indicated thereon; shall be signed by the Account Debtor (unless the sale is by
way of television or other electronic media, mail order or catalog); and shall
contain the Account Debtor's name and account number from the Account Debtor's
Credit Card. Every sales slip or the corresponding sales invoice shall
adequately describe the Merchandise sold. HSN agrees to obtain authorization
before completing the transaction and record the authorization number on the
sales slips or other form of media.
(c) Retained Cards. HSN and each Participating Subsidiary shall use its
best efforts, by reasonable and peaceful means, to retain a Credit Card when
requested by GE Capital to do so for any reason in accordance with GE Capital's
usual standards in the context of its retail accounts receivable business.
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(d) Dates. HSN shall date all sales slips with the date of the
transaction which, for the purposes of electronic retailing, shall be deemed to
be the date the item of Merchandise purchased was televised and the Account
Debtor placed the order (the "Show Date"), and shall date all credit forms with
the date the credit is allowed.
(e) Deductions. GE Capital shall deduct from any obligations it owes to
HSN or any of the Participating Subsidiaries under this Agreement, including
the purchase price for an Account, the full amount of any adjustments GE
Capital properly makes for errors and adjustments made by HSN or any
Participating Subsidiary in sales slips, credit slips, sales summaries, credit
summaries, and other documents and computations used in computing settlements
under this Agreement. If such obligations are insufficient to satisfy such
adjustments, HSN shall pay GE Capital the excess amount on demand in same day
funds (i) during the first Program Year following execution of this Agreement,
on the fifth Business Day and (ii) during each Program Year after the first
Program Year, on the third Business Day, in each case, after such demand is
made. GE Capital shall add to amounts due in the next available transmission
of funds to HSN hereunder any adjustments made in HSN's favor.
(f) All Credit Applications submitted to GE Capital by HSN and/or the
Participating Subsidiaries shall accurately contain the information as
submitted to HSN and/or the Participating Subsidiaries by applicants and
Account Debtors.
Section 3.04. Promotion. HSN and the Participating Subsidiaries
collectively agree to actively promote the credit program and will promote the
purchase of Merchandise on credit to create Accounts for submission to GE
Capital. Acceptable credit promotions and advertising projects, subject to
applicable law, may include but not be limited to the following: credit-based
promotions, insurance (as described in Section 2.07 hereof), and such other
products as GE Capital and HSN may mutually determine. During the first
Program Year following execution of this Agreement, HSN shall pay GE Capital
monthly an amount equal to ninety percent (90%) of the finance charges which
otherwise would have been assessed by GE Capital for any "same as cash" or
other no- finance charge or reduced finance charge promotion on any Account for
Indebtedness subject to such promotion if such finance charges were not waived
as part of a promotion. For each subsequent Program Year, the percentage
referenced above will be reviewed by the parties and will be adjusted to
reflect the actual performance of the Program, provided that in no event will
the percentage be adjusted below eighty-five percent (85%). HSN shall submit
to GE Capital all such advertising and promotional material stating any
consumer credit terms and/or conditions and all HSN and/or Participating
Subsidiary promotional programs which propose to change or affect credit terms
and/or conditions in respect of the Program for prior written approval by GE
Capital. In the event HSN or any
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Participating Subsidiary proceeds with any such material or program without the
prior written approval by GE Capital, HSN shall indemnify GE Capital for any
and all liabilities, costs and expenses (including reasonable attorneys' fees
and expenses), judgments, damages, claims, demands, offsets, defenses,
counterclaims, actions or proceedings arising from such material or program.
Neither of HSN nor any Participating Subsidiary shall, without GE Capital's
prior consent, use GE Capital's name or logo type in any advertisement or
promotional materials except as may be otherwise required by applicable law.
Section 3.05. Records. With respect to each Account sold by HSN or any
Participating Subsidiary to GE Capital, HSN and/or the relevant Participating
Subsidiary will (a) cause accounting entries to be made on its books of account
and other records reflecting the sale of such Account to GE Capital, (b) except
as provided in clause (d) below, promptly after the purchase by an Account
Debtor creating the Account, deliver to GE Capital Account Documentation for
such Account as required by GE Capital, (c) execute and deliver to GE Capital
such written assignment, financing statements, and other written matter and, at
the expense of GE Capital, take any action reasonably requested by GE Capital
to perfect and maintain GE Capital's interest in the Accounts and other
security granted to it herein, and (d) except as otherwise requested by GE
Capital, retain sales slips and delivery receipts. HSN and/or the relevant
Participating Subsidiary shall submit to GE Capital completed Credit
Applications. GE Capital shall be entitled to retain all Accounts and Account
Documentation (including, without limitation, any completed Credit Applications
and sales slips), shall retain such Account Documentation, and shall not
otherwise destroy original Account Documentation other than in the ordinary
course of business pursuant to GE Capital's records retention policy. In the
event HSN and/or the relevant Participating Subsidiary shall retain certain
Account Documentation, HSN and/or the relevant Participating Subsidiary will
store such Account Documentation in an orderly and secure manner and deliver
such Account Documentation to GE Capital within five (5) Business Days of GE
Capital's request to HSN (HSN will promptly give notice to the relevant
Participating Subsidiary of such request); provided, however, that if such
Account Documentation is not available because it is being microfilmed, HSN
and/or the relevant Participating Subsidiary shall provide the Account
Documentation to GE Capital as soon as practicable, but in no event more than
eight (8) days from GE Capital's request. GE Capital will maintain Account
Documentation received by it in accordance with its customary business practice
and in an orderly and secure manner. Each party hereto agrees that the other
party may store Account Documentation in such other party's possession on
microfilm or other media in accordance with such other party's customary
business practice, and may, in the normal course of business, destroy original
Account Documentation once such Account Documentation has been microfilmed or
otherwise recorded. In the event of a repurchase by HSN of any Indebtedness,
and related Accounts, if any, pursuant to the terms of this Agreement, GE
Capital
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will provide to HSN Account Documentation relating to such repurchased Accounts
or items of Indebtedness to the extent that (i) it is required to do so
pursuant to Section 2.04 hereof or has otherwise maintained such Account
Documentation and (ii) GE Capital has received full payment of the purchase
price of such repurchased Accounts or items of Indebtedness. If such Account
Documentation has been maintained by GE Capital in a computer-readable format,
GE Capital will provide to HSN copies thereof in such format.
Section 3.06. Ownership of Accounts; Finance Charges. GE Capital shall
be the sole and exclusive owner of all Accounts, Indebtedness, sale slips,
receipts or evidences of payment for purchases by Account Debtors and other
Account Documentation and each of HSN and each Participating subsidiary
acknowledges and agrees that it has no right, title or interest therein. It is
expressly understood that HSN has the right to establish the finance charge
rates and other charges with respect to Accounts. If GE Capital is of the
opinion that the rate of finance charge does not comply with state and/or
federal law, GE Capital may require HSN to supply, at HSN's expense, an opinion
of outside counsel satisfactory to GE Capital that the rate of finance charge
complies with state and/or federal law. As a condition precedent to any change
in the finance charge rates with respect to Accounts during the term of this
Agreement, HSN and GE Capital shall agree on an appropriate change in the
Service Fee set forth in Section 4.01 hereof. GE Capital shall be entitled to
receive payments made by Account Debtors on all Accounts and to retain for its
account all finance charges, returned check fees, late fees and all other fees
and income, if any, collected with respect to Accounts.
Section 3.07. HSN Payments. HSN and the Participating Subsidiaries
shall not advertise or otherwise promote the fact that Account Debtors (or
other Persons acting on behalf of Account Debtors) may make HSN Payments. If,
notwithstanding the foregoing, any HSN Payments are made, HSN and/or the
relevant Participating Subsidiary receiving such payment shall, (a) forward all
such HSN Payments received to GE Capital within one (1) Business Day of
receipt, (b) not deposit any HSN Payments received and (c) hold any payments
received in the form of cash in trust for GE Capital. HSN Payments shall be
credited to the Account of the relevant Account Debtor as of the date of actual
receipt by GE Capital.
Section 3.08. Authorization Line Expense. HSN shall be responsible for
expenses associated with the installation and on- going usage of authorization
processes exclusively on HSN's or any Participating Subsidiaries' property,
including but not limited to telephone lines to connect the authorization
system from GE Capital to HSN's or any Participating Subsidiaries' associated
equipment. The items associated with these expenses are listed on Exhibit F of
this Agreement and shall be charged to HSN at GE Capital's actual costs.
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ARTICLE IV
PAYMENTS; SETTLEMENT
Section 4.01. Service Fee. (a) During the Initial Term and any Renewal
Term(s) hereof a service fee ("the Service Fee") shall be calculated and paid
by HSN. The Service Fee shall be equal to .85% of Net Credit Sales for the
first Program Year, and for each month commencing with the first month after
the first Program Year, shall be equal to a percentage of Net Credit Sales (the
"Service Fee Percentage") set forth in the matrix attached as Schedule 4.01(a)
hereto (the "Matrix") which appears (i) in the row appearing opposite the
amount of the Average Account Balance calculated for the twelve (12)
consecutive months ending on the last day of the immediately preceding month
(rounded up or down to the nearest Average Account Balance shown on the Matrix)
and (ii) in the column appearing under the amount of Credit Sales Turnover
shown on the Matrix calculated for the twelve (12) consecutive months ending on
the last day of the immediately preceding month (rounded up or down to the
nearest Credit Sales Turnover amount shown on the Matrix) As used herein "Net
Credit Sales" means the amount shown as the total of purchases on charge slips
submitted by HSN and/or the Participating Subsidiaries to GE Capital (gross
credit sales) less the total amount of any credit slips submitted by HSN and/or
the Participating Subsidiaries to GE Capital.
(b) If United States first class postage rates exceed $.29 per one-ounce
item as of any date during the term of this Agreement, HSN shall pay GE Capital
an amount equal to (x) such increase in the first class postage rate plus
$0.005 multiplied by (y) the number of Active Accounts as of such date.
(c) If, as of any date, the Average Commercial Paper Rate for that month
exceeds three and one-tenth percent (3.10%), HSN shall pay to GE Capital an
amount equal to the product of (x) the amount by which Average Commercial Paper
Rate for that month exceeds three and one-tenth percent (3.10%) and (y)
eight-nine percent (89%), multiplied by the Average Aggregate Investment for
such period, divided by twelve (12).
(d) If, as of any date, the Average Commercial Paper Rate for that
month is less than three and one-tenth percent (3.10%), GE Capital shall pay to
HSN an amount equal to the product of (x) the amount by which three and
one-tenth percent (3.10%) exceeds the Average Commercial Paper Rate for that
month and (y) eight-nine percent (89%), multiplied by the Average Aggregate
Investment for such period, divided by twelve (12).
Section 4.02. Commitment Fee. In consideration for HSN's agreement to
a term of five (5) years hereunder, GE Capital shall pay to HSN
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within thirty (30) days after the date on which the conditions specified in
Section 5.01(e) of this Agreement shall have been satisfied, a commitment fee
of Two Hundred Fifty Thousand Dollars ($250,000) ("Commitment Fee") to promote
the creation and use of Accounts. In the event that this Agreement is
terminated for any reason at any time prior to the end of such five (5) year
period, other than a termination of this Agreement by HSN pursuant to Section
12.02(b), (c), or (d) hereof, GE Capital shall be entitled to a return of the
unearned portion of the Commitment Fee paid by GE Capital in the amount of
one-sixtieth (1/60th) of the amount of the Commitment Fee paid by GE Capital
times the number of whole calendar months remaining in such five (5) year
period. In the event HSN terminates this Agreement pursuant to Section
12.02(b), (c), or (d) hereof, HSN shall be entitled to retain such unearned
portion of the Commitment Fee and GE Capital shall have no right therein.
Section 4.03. Application Fee. HSN shall reimburse GE Capital for each
Credit Application processed pursuant to Section 3.01(b) as shown on GE
Capital's Application Processing Report an amount equal to (i) $1.45 for each
Credit Application submitted to GE Capital directly by electronic means, (ii)
$2.15 for each Credit Application submitted to GE Capital by mail, (iii) $5.45
for each Credit Application submitted to GE Capital by telephone and (iv) $3.80
for each Credit Application submitted to GE Capital by facsimile means. HSN
acknowledges and agrees that the amounts payable pursuant to this Section 4.03
do not include any postage costs on applications for which postage has been
prepaid, which postage costs shall be separately billed to HSN and are subject
to change from time to time as provided for in Section 4.01(b) above.
Section 4.04. Authorization Processing Fee. HSN shall reimburse GE
Capital for each credit authorization as shown on GE Capital's Authorization
Processing Report an amount equal to (i) $.04 for each authorization by GE
Capital processed by electronic means or by telephone if the authorization
system is not in operation and such inoperation is not attributable to HSN or
any Participating Subsidiary and (ii) $2.19 for each authorization processed by
GE Capital by telephone in the event that such authorization system is in
operation.
Section 4.05. Payment Terms and Rights of Set Off and Recoupment. Unless
specifically provided for in another Section of this Agreement, any amount(s)
payable by HSN or any Participating Subsidiary to GE Capital under this
Agreement shall be paid within ten (10) Business Days of HSN's receipt of a
bill rendered by GE Capital. In the event HSN or any Participating Subsidiary
fails to make payment within such ten (10) Business Day period, GE Capital may
deduct such amount due from Net Credit Sales.
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ARTICLE V
CONDITIONS PRECEDENT
Section 5.01. Conditions Precedent to Purchase Obligation.
Notwithstanding any other provision of this Agreement, GE Capital shall not be
obligated to purchase Accounts and Indebtedness from HSN or any Participating
Subsidiary unless, as of the date of each purchase hereunder, the requirements
below shall be satisfied:
(a) Appropriate financing statements (form UCC-1 or others) in the form
attached hereto as Schedule 5.01(a) shall have been executed, delivered and
filed and shall be in full force and effect; provided, however, that this
condition shall be deemed satisfied in the event appropriate financing
statements shall have been executed and delivered to GE Capital (provided that
HSN shall have provided to GE Capital the information contained in Section
8.03) and GE Capital shall not have filed such financing statements in the
appropriate filing offices specified by HSN within three (3) Business Days
after receipt by GE Capital of such financing statements.
(b) All of the representations and warranties of HSN and the
Participating Subsidiaries contained in this Agreement shall be correct in all
material respects on and as of the date of such purchase as though made on and
as of such date, subject to the introductory paragraph set forth in Article
VIII.
(c) No event shall have occurred and be continuing, or would result from
such purchase, which constitutes an Event of Default under Section 13.01
hereof.
(d) GE Capital shall have received an Officer's Certificate, certified
by the Senior Vice President of Finance of HSN, stating that to the best of his
knowledge, after due inquiry, the representations and warranties of HSN and
such Participating Subsidiary specified in Section 8.10 of this Agreement, are
true and correct.
(e) It shall be a condition precedent to GE Capital's obligations to
purchase Accounts or Indebtedness pursuant to this Agreement that, (i) HSN and
the Participating Subsidiaries comply with the covenants specified in Section
8.11(r) of this Agreement, (ii) HSN shall obtain the confirmation, consent
and/or waiver of the required financial institutions party to the LTCB Credit
Agreement (as defined in Section 8.11(r))(the number of required financial
institutions will be the number required by the LTCB Credit Agreement as
necessary to approve such confirmation, consent and/or waiver) to the
transactions contemplated by this Agreement, in form, scope and substance
reasonably satisfactory to GE Capital, within thirty (30) days of the Effective
Date (or such later date as HSN shall
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request and GE Capital shall agree to in its sole discretion) and (iii) with
respect to other Material Credit Agreements (other than the LTCB Credit
Agreement), GE Capital shall have either (A) determined, in its sole
discretion, within thirty (30) days of the Effective Date, that the provisions
of such Material Credit Agreement, if any, do not require the consent or
approval of any party to any such Material Credit Agreement to consummate the
transactions contemplated by this Agreement or (B) GE Capital shall have
received the confirmation, consent and/or waiver (in form, scope and substance
reasonably satisfactory to GE Capital) of the relevant parties to such Material
Credit Agreements to the transactions contemplated by this Agreement.
ARTICLE VI
SECURITY
Section 6.01. Security Interest. The parties hereto intend that the
transactions contemplated herein shall be treated as a purchase and sale of
Accounts and Indebtedness for all purposes and not as a lending transaction,
and shall file UCC-1 or comparable statements in order to perfect the interests
created thereby. Such filing shall also perfect in GE Capital a present and
continuing security interest in the Accounts and Indebtedness, in the event the
transactions contemplated hereby are not considered a purchase and sale of
Accounts and Indebtedness despite the intentions of the parties. To secure all
Obligations, whether now existing or hereafter created or acquired, including
liabilities and obligations that may be deemed to exist in the event of the
applicability of Article 9 of the UCC to, and any recharacterization of, any
transactions contemplated hereby, HSN and its Participating Subsidiaries hereby
grant to GE Capital for GE Capital's benefit a present and continuing security
interest in and lien upon together with the proceeds thereof in any form
whatsoever, all of HSN's and its Participating Subsidiaries right, title and
interest in and to: (a) all Accounts and Indebtedness which are purchased by
GE Capital and not repurchased by HSN hereunder; (b) all Account Documentation
relating to any Account in which GE Capital has an interest hereunder; (c) all
general intangibles but only to the extent of guarantees, claims, security
interests or other security now held by or hereafter granted to HSN or any
Participating Subsidiary to secure payment by any Person who is or may become
obligated to HSN or any Participating Subsidiary with respect to or on account
of any of the items listed in (a) above, and all proceeds thereof; (d) all
general intangibles consisting of credit balances and reserves of whatever type
or description created or established by GE Capital in favor of or with respect
to HSN or any Participating Subsidiary including, without limitation, the
Reserve Account and Reserve Balance; (e) all accounts, accounts receivable,
other receivables, all contract rights, commercial paper, choses in action,
instruments, documents, chattel paper, general intangibles (as each of
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those terms which is defined in the applicable UCC is so defined) and writings
or property, relating to Accounts and Indebtedness purchased by GE Capital
hereunder which is not repurchased by HSN, in each case whether now existing or
in which HSN or any Participating Subsidiary now has or hereafter acquires and
interest, and wherever the same may be located; and (f) all Merchandise
purchased by Account Debtors pursuant to Accounts in which GE Capital has an
interest hereunder, to the extent of the Lien, if any, of HSN or any
Participating Subsidiary thereon.
Section 6.02. Returns of Merchandise. HSN and the Participating
Subsidiaries may settle or adjust any dispute or claim, grant any discount,
credit, or allowance, or accept any return of Merchandise purchased pursuant to
an Account, in the ordinary course of business. HSN shall notify GE Capital,
as soon as practical, of all credits issued to Account Debtors by HSN with
respect to such Merchandise. Each such notification shall indicate the Account
and Indebtedness to which it relates and the amount of credit issued to the
Account Debtor. The amount of all such credits shall be paid to GE Capital
pursuant to Section 2.03 hereof or, at GE Capital's option, in accordance with
Section 4.05 hereof. When HSN or any Participating Subsidiary receives
property in respect of Accounts owned by GE Capital by reason of transactions
between HSN or any Participating Subsidiary and Account Debtors, HSN or the
relevant Participating subsidiary shall hold the same in trust for the benefit
of GE Capital, as property forming part of the Accounts, and subject to GE
Capital's Lien until GE Capital receives payment from HSN with respect to the
Account pursuant to which the Merchandise was purchased. Notwithstanding
anything contained herein to the contrary, nothing shall preclude HSN from
treating returned Merchandise in accordance with its customary business
practices.
Section 6.03. Notices to GE Capital. Upon request from GE Capital, HSN
shall promptly (a) inform GE Capital in writing of any delay in the performance
by HSN or any Participating Subsidiary of any of its obligations to Account
Debtors and (b) furnish to GE Capital and inform GE Capital of any information
known to HSN or any Participating Subsidiary personnel whose job functions
involve Accounts relating to any Account Debtor, including, without limitation,
information regarding changes of address of Account Debtors and notices of
filings under the Bankruptcy Code with respect to Account Debtors, to the
extent that HSN or any Participating Subsidiary may lawfully provide such
information to GE Capital and that such information shall be used by GE Capital
in connection with the Program.
Section 6.04. Further Assurances. In addition to the undertakings
specifically provided for in this Agreement, HSN and the Participating
Subsidiaries shall, at the expense of GE Capital, do all other things and sign
and deliver all other documents and instruments reasonably requested and
required by GE Capital to
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perfect, protect, maintain, and enforce the Liens of GE Capital and the first
priority of such Liens, and all other rights granted pursuant to this
Agreement. Each of HSN and the Participating Subsidiaries irrevocably
authorize GE Capital to execute and file on its own behalf any financing
statement (with or without the signature of HSN or the relevant Participating
Subsidiary) or any other document or instrument which may be required to
perfect, protect, or enforce any right or Lien granted to GE Capital pursuant
to this Agreement.
Section 6.05. Attorney-in-Fact. Each of HSN and each of the
Participating Subsidiaries appoints GE Capital or GE Capital's designee, as its
attorney-in-fact, and at GE Capital's sole cost and expense, (a) to endorse its
name on any checks, notes, acceptances, money orders, drafts, or other forms of
payment of or security for any Account or Indebtedness that may come into GE
Capital's possession and in which GE Capital has an interest pursuant to the
provisions hereof; (b) to sign its name on any invoice or bill of lading
relating to any such Account or Indebtedness, on drafts against Account Debtors
relating to any such Account or Indebtedness, schedules and assignments of any
such Account or Indebtedness, on notices of assignment or other public records,
verifications, and notices to any Account Debtor of such an Account; (c) to
send requests for verification of any such Account or Indebtedness to Account
Debtors of such Accounts; (d) to sue Account Debtors of such Accounts for the
collection of such Indebtedness in its name and (e) to do all things reasonable
and necessary to carry out or enforce the obligations of Account Debtors and to
preserve GE Capital's Lien in and to Accounts and Indebtedness in which GE
Capital has an interest hereunder. This power, being coupled with an interest,
is irrevocable until there shall no longer be any Indebtedness owned by GE
Capital and all Obligations shall have been fully satisfied.
Section 6.06. Continued Liability. Anything herein to the contrary
notwithstanding, (a) except with respect to payment and credit obligations,
each of HSN shall remain liable under any contracts and agreements with any
Account Debtor included in any Account to the extent set forth therein to
perform all of its duties and obligations pursuant thereto to the same extent
as if this Agreement had not been executed; (b) the exercise by GE Capital of
any rights pursuant to this Agreement shall not release HSN and the
Participating Subsidiaries from any of its duties or obligations under the
contracts and agreements relating to any Account; and (c) except to the extent
specifically set forth herein, GE Capital shall not have any obligation or
liability with respect to any Account by reason of this Agreement or be
obligated to perform any of the obligations or duties of HSN or any
Participating Subsidiary pursuant to this Agreement.
Section 6.07. Access. GE Capital (by any of its approved officers,
employees and/or agents, each of which, in each instance, shall be necessary
for the purposes hereof), shall have the right, during normal business hours
and in
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such a manner as to minimize interference with HSN's normal business
operations, and the normal business operations of the Participating
Subsidiaries, to examine, audit, inspect, make extracts and meet with the
appropriate officers and/or other personnel of HSN -(collectively "review"), at
GE Capital's sole cost and expense, all of the records, files and books of
account of HSN and the Participating Subsidiaries, limited, however, to the
extent to which same relate to Accounts in which GE Capital has an interest
hereunder, and HSN shall use its best efforts to facilitate GE Capital's
exercise of the review right created hereunder, including, where applicable,
the assignment of such personnel of HSN for the assistance of GE Capital as GE
Capital shall reasonably request. HSN shall deliver any document or instrument
necessary for GE Capital to obtain records relating to Accounts and
Indebtedness in which GE Capital has an interest hereunder from any Person
maintaining records for HSN and shall maintain records or media pursuant to its
regular record retention policy, including, without limitation, computer tapes
and discs owned entirely by HSN or the Participating Subsidiaries. HSN shall
make available information from banking and other financial institutions, to GE
Capital, at GE Capital's reasonable request, limited, however, to the extent
that same relate to Accounts in which GE Capital has an interest hereunder. No
information as to which GE Capital has been given access, pursuant hereto shall
be used or disclosed for any purpose other than to determine HSN's compliance
with the terms of this Agreement.
Section 6.08. Right of Setoff. In addition to any other rights of GE
Capital hereunder, and without limiting any of the set-off or other provisions
herein, GE Capital shall, upon the occurrence of any Event of Default have the
right to appropriate and apply to the payment of Obligations any and all money
or property of HSN or any Participating Subsidiary then held by GE Capital or
amounts owing to HSN or any Participating Subsidiary by GE Capital.
Section 6.09. Losses. Except as specifically provided for in Article
VII in connection with the Special Program and the Recourse Program, all Bad
Debt on Accounts shall be solely borne by GE Capital and shall not be passed on
to HSN except for an RPR Indebtedness allowed pursuant to Section 2.04.
Section 6.10 Limited Guarantee.
(a) Each of HSN and each Participating Subsidiary hereby unconditionally
and irrevocably jointly and severally guarantee, as primary obligor and not as
surety only, and promises to pay to GE Capital when due, any amounts due and
payable to GE Capital by HSN or any Participating Subsidiary (other than the
applicable guarantor) pursuant to this Agreement. This guarantee is a
guarantee of payment when due and not of collection.
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(b) Each guarantor pursuant to Section 6.10(a) waives any subrogation or
similar type right or claim it may have for any payment made pursuant to
Section 6.10(a) and waives (i) presentment, demand, protest, notice of protest,
notice of dishonor and notice of nonpayment with respect to claims guaranteed
by such guarantor pursuant to Section 6.10(a) and (ii) the right to require GE
Capital to proceed against the party whose obligations are being guaranteed by
such guarantor or to pursue any other remedy against such party.
ARTICLE VII
SPECIAL PROGRAM; RECOURSE PROGRAM
Section 7.01. Special Program. (a) HSN shall have the right, at any
time during the term of this Agreement (so long as at such time there is no
Event of Default) to request GE Capital to add a feature to the Program (the
"Special Program") to implement special credit standards designed to permit the
approval of certain credit applicants who would otherwise fail to qualify for
an Account. In order to implement the Special Program, HSN shall, as set forth
in this Article VII, provide additional funds to GE Capital on a monthly basis
(a) to compensate GE Capital for losses in the Special Program in excess of
five percent (5%) and (b) to establish a reserve over a two year period and
thereafter to maintain the reserve. The mechanism for implementing the Special
Program shall be as follows: (a) HSN shall provide a list of individuals to GE
Capital for possible consideration for inclusion in a Special Program; (b) GE
Capital shall prescreen and credit score the list provided to GE Capital by
HSN; (c) within five (5) Business Days after completion of the prescreen and
scoring, GE Capital shall submit to HSN a list of eligible individuals given
various expected loss rates; (d) the Targeted Loss Rate shall be established
and (e) the Special Program shall be implemented including such individuals
whose inclusion would be expected to result in the Special Program meeting the
Targeted Loss Rate. From time to time, GE Capital and HSN may mutually agree
to modify and/or amend the procedures specified in clauses (b) and (c) of the
immediately preceding sentence. This notwithstanding, an individual shall be
eligible to participate in the Special Program only if such individual is a
customer, in good standing, of HSN or one of the Participating Subsidiaries.
Except as specifically provided in this Article VII, the Special Program shall
be on the same terms as the Program.
(b) If, as of any date, the SP Loss Rate for that month or, in the case
more than one Billing Cycle ends during a calendar month, for the Billing
Cycles ending during such calendar month, exceeds forty two one-hundredths
percent (.42%), HSN shall pay to GE Capital an amount equal to the product
derived by multiplying (x) the amount by which the SP Loss Rate for that month
or, in the case more than one Billing Cycle ends during a calendar month, for
the
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Billing Cycles ending during such calendar month, exceeds forty two
one-hundredths percent (.42%) by (y) the SP Average Aggregate Investment for
that month, or, in the case more than one Billing Cycle ends during a calendar
month, for the Billing Cycles ending during such calendar month. This amount
shall be known herein as the "SP Periodic Loss Payment".
(c) If, at the end of each Special Program Year the SP Annual Loss Rate
is less than or equal to five percent (5%), within thirty (30) days following
the end of such Special Program Year, GE Capital shall refund to HSN any and
all SP Periodic Loss Payments made during such Special Program Year.
(d) If, at the end of a Special Program Year, (i) the SP Annual Loss
Rate exceeds five percent (5%) and (ii) the sum of the SP Periodic Loss
Payments made during such Special Program Year exceed the SP Required Loss
Payments, then within thirty (30) days following the end of such Special
Program Year, GE Capital shall pay to HSN an amount equal to the difference
between the sum of such SP Periodic Loss Payments and such SP Required Loss
Payments. If, at the end of any Special Program Year, (i) the SP Annual Loss
Rate exceeds five percent (5%) and (ii) the sum of the SP Periodic Loss
Payments made during such Special Program Year is less than the SP Required
Loss Payments made by HSN during such Special Program Year, then within thirty
(30) days following the end of such Special Program Year, HSN shall pay to GE
Capital an amount equal to the difference between such SP Required Loss
Payments and the sum of such SP Periodic Loss Payments.
(e) Any payments pursuant to Section 7.01(b), (c) or (d) may be made by
deducting or adding to the daily settlement payments with respect to the
purchase of Indebtedness created under the Special Program.
(f) Notwithstanding anything to the contrary in this Article VII, GE
Capital shall not be required to purchase Indebtedness created under the
Special Program to the extent the Aggregate Investment pursuant to the Special
Program on the date of such proposed purchase exceeds the greater of (i) the
lesser of (A) Ten Million Dollars ($10,000,000) and (B) fifty percent (50%) of
the Aggregate Investment as of the date of such purchase and (ii) twenty
percent (20%) of the Aggregate Investment as of the date of such proposed
purchase.
Section 7.02. Reserve Account. (a) GE Capital shall create, on its
books, a record known as the "Reserve Account." Amounts on deposit in the
Reserve Account shall be applied solely in accordance with the provisions of
this Section 7.02.
(b) Beginning on the SP Effective Date, and for a period of twenty-four
(24) months commencing with the end of the first full month next following the
SP
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Effective Date (the "24 Month Period"), GE Capital shall deduct the Reserve
Percentage from SP Net Credit Sales and credit such amounts to the Reserve
Account. As of every date commencing with the date coinciding with the end of
the 24 Month Period, the Reserve Balance shall be required to equal the
Required Reserve.
(c) If, on any date commencing with the date coinciding with the end
of the 24 Month Period, the Reserve Balance is less than the Required Reserve,
GE Capital shall notify HSN of such deficiency and, at GE Capital's option, (i)
withhold the amount of such deficiency from SP Net Credit Sales until such
deficiency is eliminated and/or (ii) request that HSN pay GE Capital the amount
of such deficiency, in which event payment shall be due within ten (10)
Business Days after receipt by HSN of such notice. Any amounts paid in cash by
HSN hereunder shall be credited to the Reserve Balance upon receipt of good
funds.
(d) If, on any date commencing with the date coinciding with the end of
the 24 Month Period, (and unless this Agreement has been terminated or there
has been any Event of Default by HSN that has occurred and is continuing at
that time), the Reserve Balance exceeds the Required Reserve, GE Capital shall
pay HSN the amount of such excess and deduct such amount from the Reserve
Balance.
(e) During the period in which there shall be a Reserve Balance, GE
Capital shall pay HSN on a monthly basis a fee equal to the product of (x) the
Average Reserve Balance for such month multiplied by the Average Commercial
Paper Rate for such month and (x) eighty-nine percent (89%), divided by twelve
(12).
(f) GE Capital shall have the right, in its sole discretion, from time
to time, to withdraw from the Reserve Account amounts past due and payable to
GE Capital from HSN or any Participating Subsidiary with respect to Accounts
which are part of the Special Program or the Recourse Program.
Section 7.03. Termination. (a) Upon termination of this Agreement, if
HSN purchases all of the Accounts and Indebtedness from GE Capital,
simultaneously with such purchase, (i) GE Capital shall pay to HSN all amounts
in the Reserve Account (provided that all Obligations then owing have been
satisfied) and (ii) the parties hereto shall make such payment as is necessary
to effect the settlement required pursuant to Section 7.01(d) with appropriate
adjustment for the fact that the purchase date is not the last day of a Special
Program Year.
(b) Upon termination of this Agreement, if HSN does not purchase all of
the Accounts and Indebtedness: (i) in the event the Reserve Balance shall be
less than the Required Reserve (whether or not the 24 Month Period shall have
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elapsed), HSN shall promptly pay to GE Capital, for credit to the Reserve
Account, the amount of such deficiency; (ii) if on any date, the Reserve
Balance is greater than the SP Aggregate Investment, GE Capital shall promptly
pay such excess amount to HSN (provided that all Obligations then owing shall
have been satisfied) (iii) at such time as all Indebtedness created under the
Special Program has either been collected, liquidated or classified by GE
Capital as Bad Debt (the "Settlement Date"), the parties shall calculate what
payment is necessary to effect the settlement required pursuant to Section
7.01(d) with appropriate adjustment for the fact that the Settlement Date is
not the last day of a Special Program Year (the "Settlement Payment") and if
(A) a Settlement Payment is payable by HSN to GE Capital, HSN shall promptly
make the Settlement Payment to GE Capital or (B) a Settlement Payment is
payable by GE Capital to HSN, GE Capital shall promptly make the Settlement
Payment to HSN (provided that all Obligations then owing have been satisfied)
(iv) on the Settlement Date, GE Capital shall pay the balance in the Reserve
Account to HSN (provided that all Obligations then owing have been satisfied).
Section 7.04. Recourse Program. (a) HSN shall have the right at any time
during the term of this Agreement (so long as at such time there is no Event of
Default), to request GE Capital to add a feature to the Program (the "Recourse
Program") pursuant to which certain credit applicants who would otherwise fail
to qualify for an Account under the Regular Program or the Special Program will
qualify for an account. To qualify for the Recourse Program, (i) an applicant
must have notified HSN or a Participating Subsidiary that such applicant's
application for the Program has been denied and such applicant requests HSN or
a Participating Subsidiary to intervene and approve such an applicant for the
Program, (ii) the Senior Vice President of Finance of HSN shall have provided
written request and authorization to GE Capital to approve such applicant for
the Recourse Program and (iii) the aggregate of the maximum amount of credit
available and/or approved for (A) any individual applicant approved pursuant to
the Recourse Program shall not exceed $750.00 and (B) all applicants approved
pursuant to Recourse Program (prior to the receipt by GE Capital of such
request for qualification for the Recourse Program (after giving effect to the
approval of such application)) shall not exceed $150,000. Except as
specifically provided in this Section 7.04, the Recourse Program shall be on
the same terms as the Program.
(b) In consideration of GE Capital agreeing to purchase Accounts subject
to the Recourse Program, each of HSN and the Participating Subsidiary from whom
GE Capital purchases an Account subject to the Recourse Program, if any (each a
"Guarantor" and collectively the "Guarantors"), unconditionally and irrevocably
jointly and severally guarantee, as primary obligor and not as surety only, and
promises to pay to GE Capital when such Account subject to the Recourse Program
becomes Bad Debt, any amounts due to GE Capital pursuant to Accounts subject to
the Recourse Program which are purchased by GE Capital.
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The foregoing guarantees are guarantees of payment and shall remain in full
force and effect until all amounts owed to GE Capital pursuant to such Accounts
are paid in full. The Guarantors agree that the foregoing guarantees shall
remain in full force and effect notwithstanding any extension, forebearance, or
amendment or acceptance agreed to by GE Capital with respect to any Account
subject to the Recourse Program. To the extent that a Guarantor makes payment
to GE Capital with respect to an Account, such Guarantor shall be subrogated to
the rights of GE Capital against the relevant Account Debtor to the extent of
such payment.
ARTICLE VIII
REPRESENTATIONS, WARRANTIES AND COVENANTS OF HSN
To induce GE Capital to purchase Accounts and Indebtedness, each of HSN
and the Participating Subsidiaries jointly and severally make the following
representations, warranties and covenants to GE Capital as pertains to them, as
of the date hereof each and all of which shall survive the execution and
delivery of this Agreement, and each and all of such representatives and
warranties which are set forth in Sections 8.01, 8.02, 8.03, 8.04, 8.05, 8.09
and 8.10 shall be deemed to be restated and remade on each date on which GE
Capital purchases Accounts and Indebtedness:
Section 8.01. Corporate Existence. Each of HSN and the Participating
Subsidiaries (a) is a corporation duly organized, validly existing, and in good
standing under the laws of the state of its incorporation, with its principal
place of business as indicated in the first paragraph of this Agreement; (b) is
duly qualified as a foreign corporation and in good standing under the laws of
each jurisdiction where its ownership or lease of property or the conduct of
its business requires such qualification and where the failure to so qualify
would have a material adverse effect on its business operations; (c) has the
requisite corporate power and authority and the legal right to own, pledge,
mortgage, and operate its properties, to lease the properties it operates under
lease, and to conduct its business as now, heretofore, and proposed to be
conducted; (d) has all necessary licenses, permits, consents, or approvals
from or by, and has made all necessary filings with, and has given all
necessary notices to, all governmental authorities having jurisdiction, to the
extent required for such ownership, lease, operation, and conduct and where the
failure to obtain such licenses, permits, consents, approvals or filings would
have a material adverse effect on its business operations; and (e) is in
compliance with its articles of incorporation, bylaws or other similar
organizational documents.
Section 8.02. Corporate Power; Authorization; Enforceable Obligations.
The execution, delivery, and performance of this Agreement by HSN and each
Participating Subsidiary and all instruments and documents to be
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delivered by HSN and each Participating Subsidiary pursuant to this Agreement,
and the creation of all Liens provided for herein: (a) are within HSN's or the
applicable Participating Subsidiary's corporate power; (b) have been duly
authorized by all necessary or proper corporate action, including the consent
of shareholders where required; (c) are not in contravention of any provision
of HSN's or the applicable Participating Subsidiary's articles of
incorporation, bylaws or other similar organizational documents; (d) will not
violate any law or regulation or any order or decree of any court or
governmental instrumentality applicable to HSN or the applicable Participating
Subsidiary; (e) will not conflict with or result in the breach of, or
constitute a default under, any indenture, mortgage, deed of trust, lease,
agreement, or other instrument to which HSN or any Participating Subsidiary is
a party or by which HSN or any Participating Subsidiary or any of their
respective properties are bound; and (f) do not require of HSN or any
Participating Subsidiary any filing or registration with or the consent or
approval of any governmental body, agency, authority, or any other Person which
has not been made or obtained previously. This Agreement has been duly
executed and delivered by HSN and each Participating Subsidiary and constitutes
the legal, valid, and binding obligation of HSN and each Participating
Subsidiary, enforceable against HSN and each Participating Subsidiary in
accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, moratorium, reorganization, or other laws affecting the
rights of creditors generally or by general principles of equity (whether or
not a proceeding is brought in a court of law or equity).
Section 8.03. Executive Offices and Stores. (a) The chief executive
office of HSN and each of the Participating Subsidiaries is, at 2501 118th
Avenue North, St. Petersburg, Florida 33716, (b) the chief executive office of
HSN and the Participating Subsidiaries will during the term of this Agreement
be located at such location or at such other location as HSN and Participating
Subsidiaries shall, from time to time, specify upon at least forty-five (45)
days prior written notice to GE Capital, (c) all records relating to Accounts
and Indebtedness owned by GE Capital and maintained by HSN and/or the
Participating Subsidiaries are maintained at such location, at HSN's, its
Participating Subsidiaries or such other locations as are set forth on Schedule
8.03 annexed hereto, as such schedule may be amended by HSN from time to time
upon forty-five (45) days prior written notice to GE Capital, and (d) Schedule
8.03 contains a complete and correct listing of the addresses of all of HSN's
Stores, as such schedule may be amended by HSN from time to time at least
forty-five (45) days prior to the commencement, or ten (10) days prior to a
termination, of a Store's operations.
Section 8.04. Solvency. Each of HSN and the Participating Subsidiaries
is Solvent.
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Section 8.05. No Default. Neither HSN nor any of the Participating
Subsidiaries is not in default with respect to any material contract,
agreement, document, lease, or other instrument to which it or any subsidiary
of it is a party or by which HSN, any Participating Subsidiary or any of their
respective properties may be bound, where such default would have a material
adverse effect on the business, operations, property, or financial or other
condition of HSN, the Accounts or the value thereof, the Indebtedness or the
value thereof, GE Capital's Lien in and to the Accounts and Indebtedness, or
the priority of such Lien.
Section 8.06. No Burdensome Restrictions. No contract, lease,
agreement, or other instrument to which HSN or any of the Participating
Subsidiaries is a party or is bound and no provision of applicable law or
governmental regulation materially and adversely affects or may be reasonably
likely to so affect the business, operations, property, or financial or other
condition of HSN or any Participating Subsidiary, the Accounts or the value
thereof, the Indebtedness or the value thereof, GE Capital's Lien in and to the
Accounts and Indebtedness, or the priority of such Lien.
Section 8.07. No Litigation. Except as shown in Schedule 8.07 or as
included by HSN in written notification to GE Capital pursuant to Section 8.11
(e), to the best of HSN's knowledge, no action, claim, or proceeding is now
pending against HSN, at law, in equity, or otherwise, before any court, board,
commission, agency, or instrumentality of any federal, state, or local
government or of any agency or subdivision thereof or before any arbitrator or
panel of arbitrators which, if adversely determined, would result in a
liability of HSN in an amount greater than five percent (5%) of HSN's
consolidated tangible net worth, nor, to the knowledge of HSN, does a state of
facts exist which might give rise to any such proceedings.
Section 8.08. Full Disclosure. No information contained in this
Agreement or any other agreement or writing executed or issued by HSN or any
statement furnished by or on behalf of HSN or any Participating Subsidiary in
connection with this Agreement or any other agreement or writing executed or
issued in connection with this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary to make the
statements contained herein or therein not misleading, which would have a
material adverse effect on HSN's business, operations, or financial or other
condition, the Accounts or the value thereof, the Indebtedness or the value
thereof, GE Capital's Lien in and to the Accounts and the Indebtedness, or the
priority of such Lien.
Section 8.09. Conflicts; Defaults; Etc.. Neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby by HSN or any Participating Subsidiary will (i) conflict
with, violate, result in the breach of, constitute an event which would, or
with the lapse of time or action
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by a third party or both would result in a default under, or accelerate HSN's
performance required by, the terms of any material contracts, instrument or
agreement to which HSN is a party or by which it is bound, or by which HSN's
assets are bound, except for conflicts, breaches and defaults which would not
have material adverse effect upon HSN or any Participating Subsidiary, the
Program or HSN's or any Participating Subsidiary's ability to perform its
obligations under this Agreement, (ii) conflict with or violate the articles of
incorporation or by-laws, or any other equivalent organizational document(s) of
HSN, (iii) except for any lien that may be created by this Agreement, result in
the creation of any lien, restriction, charge or encumbrance upon any of the
Accounts, (iv) violate any Law or conflict with, or require any consent or
approval under, any judgment, order, writ, decree, permit or license, to which
HSN is a party or by which it is bound or affected, except to the extent that
such violation or the failure to obtain such consent or approval would not have
a material or adverse effect upon HSN, the Program or HSN's obligations under
this Agreement, (v) require the consent or approval of any party to any
material contract, instrument or commitment to which HSN is a party or by which
it is bound, other than the approvals of regulatory authorities which will be
applied for, or (vi) except for the filing of UCC-1 financing statements and
notices, if any, require any filing with, notice to, consent or approval of, or
any other action to be taken with respect to, any regulatory authority, other
than the approvals of regulatory authorities which have been previously
obtained.
Section 8.10. True Sale. HSN and each Participating Subsidiary
represents and warrants that it is the intent of each of them that (a) the sale
and transfer to GE Capital by HSN or any Participating Subsidiary of the
Accounts and Indebtedness pursuant to this Agreement and (b) the payment by GE
Capital to HSN or any Participating Subsidiary of the purchase price pursuant
to Section 2.03 of this Agreement, should be characterized as a sale
transaction (and not as a loan transaction). In addition, each of HSN and each
Participating Subsidiary represents and warrants that it shall account for the
transactions contemplated pursuant to this Agreement as a sale transaction and
not a loan transaction.
Section 8.11. HSN Covenants. HSN and each Participating Subsidiary
covenants and agrees that, until the end of the term of this Agreement:
(a) Compliance with Law. With respect to each Account and Indebtedness,
except where such failure to comply would not have a material adverse effect on
HSN's and/or any Participating Subsidiary's business, operations, or financial
or other condition, the Accounts or the value thereof, the Indebtedness or the
value thereof, GE Capital's Lien in and to the Accounts and the Indebtedness,
or the priority of such Lien (i) every action taken by HSN or a Participating
Subsidiary, (ii) every action taken by HSN or a Participating Subsidiary in
connection with each sale of Merchandise resulting in an Account or
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Indebtedness, (iii) every contract, agreement, or other action of HSN or a
Participating Subsidiary with respect to insurance (including, without
limitation, credit insurance), and (iv) all Account Documentation, complies
with all federal, state, and local statutes, regulations, ordinances, or
administrative rulings.
(b) Accounts. Each item of Indebtedness purchased by GE Capital (and, to
the extent applicable, each Account pursuant to which such Indebtedness is
incurred) (i) is owned by HSN or the relevant Participating Subsidiary free and
clear of any and all Liens in favor of any Person other than GE Capital; (ii)
arises in connection with a bona fide final sale (subject only to HSN's return
policy and customer guarantee policy) and delivery of Merchandise by HSN or the
relevant Participating Subsidiary in the ordinary course of its business; (iii)
is for a liquidated amount as stated in the Account Documentation relating
thereto; (iv) is authorized and created in accordance with this Agreement and
the Operating Procedures; (v) is valid and enforceable against the Account
Debtor in accordance with its terms, except as such enforcement may be limited
by applicable bankruptcy, moratorium, reorganization, or other laws affecting
the rights of creditors generally or by general principles of equity (whether
or not a proceeding is brought in a court of law or equity); (vi) is not
subject to any defense, deduction, offset, or counterclaim, other than as
contemplated by clause (v) above, (vii) is for Merchandise which includes items
that are new and unused, are otherwise covered by a manufacturer's warranty as
if new at the time of sale or that are returned to any Participating Subsidiary
and restored to such Participating Subsidiary's inventory for resale as new and
unused to the extent permitted by law or are inventory items that have been
refurbished in accordance with such Participating Subsidiary's normal policy
and are not covered by a manufacturer's warranty; (viii) is not in excess of
the amount of credit approved and authorized by GE Capital for such Account
Debtor; and (ix) is not evidenced by Unidentifiable Media.
(c) Maintenance of Existence and Conduct of Business. HSN and each
Participating Subsidiary shall do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence.
(d) Books and Records. HSN shall keep adequate records and books of
account with respect to its business activities, in which proper entries,
reflecting all of HSN's and each Participating Subsidiary's financial
transactions, are made in accordance with GAAP.
(e) Litigation. HSN shall notify GE Capital in writing, promptly upon
learning thereof, of any litigation involving amounts in excess of five percent
(5%) of HSN's consolidated tangible net worth in the aggregate for related
claims, against HSN, whether or not the claims shall be considered by HSN to be
covered by insurance if HSN has determined that there is a reasonable
likelihood that the
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claims will succeed on the merits, and of the institution of any suit or
administrative proceeding against any Person that, if adversely determined,
would have a material adverse effect on HSN's business, operations, or
financial or other condition, the Accounts or the value thereof, the
Indebtedness or the value thereof, GE Capital's Lien in and to the Accounts and
the Indebtedness, or the priority of such Lien.
(f) Adverse Transactions. Except in the ordinary course of business and
in accordance with HSN's previous practices, neither HSN nor any Participating
Subsidiary shall permit or agree to any extension, compromise, or settlement,
or make any changes or modification of any kind or nature with respect to any
Account, including any of the terms relating thereto. Neither HSN nor any
Participating Subsidiary shall enter into any agreement, which at the time such
agreement is entered into, has a material adverse effect on the business,
operations, property, or financial or other condition of HSN the Accounts or
the value thereof, the Indebtedness or the value thereof, GE Capital's Lien in
and to the Accounts and Indebtedness, or the priority of such Lien.
(g) Liens. Upon the purchase by GE Capital of Accounts and Indebtedness
pursuant to Section 2.02, GE Capital shall have good and marketable title to
such Accounts and Indebtedness. Neither HSN nor any Participating Subsidiary
shall not create or permit any Lien, in and to the Accounts or Indebtedness in
which GE Capital has an interest hereunder, except presently existing or
hereafter created Liens in favor of GE Capital and Liens created by or through
GE Capital.
(h) Sales of Accounts and Indebtedness. Except as specifically provided
in Section 2.02 neither HSN nor any Participating Subsidiary shall not sell,
transfer, convey, or otherwise dispose of any Accounts or Indebtedness other
than Accounts and Indebtedness that GE Capital declines to purchase hereunder.
(i) Delivery. A Participating Subsidiary has delivered all Merchandise
covered by each Account, and the Account Debtor has accepted or is willing to
accept such delivery, unless the Account Debtor has specifically requested that
an item of Merchandise in such Participating Subsidiary's inventory not be
delivered, subject to such Participating Subsidiary's return and direct
delivery policies.
(j) Services. Such Participating Subsidiary shall provide and maintain
reasonable services, in accordance with its customary practices, with respect
to the Merchandise covered by an Account and shall comply with all of its
warranties and other obligations with respect to the Merchandise, the sale of
which has been charged to an Account.
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(k) Adjustments. Each credit adjustment slip delivered by HSN to GE
Capital represents a bona fide adjustment by a Participating Subsidiary of a
credit sale for which GE Capital has accepted the sales slip.
(l) No Surcharge. A Participating Subsidiary has not, by reason of the
credit nature of the sale provided by the Program, charged such customer a
greater total sale price for any purchase that is described on a Charge Slip
than Merchant would have charged, and the customer would have paid, if the
customer had paid the total sale price in full at the time of purchase.
(m) Obligations. A Participating Subsidiary has fulfilled all of its
obligations to Account Debtors under the terms of all credit card sales of
Merchandise.
(n) Advertisements. A Participating Subsidiary's advertisements that
refer to credit terms and payment terms are in conformity with standard credit
card regulations and promotional programs approved by GE Capital as provided
for pursuant to Section 3.04 hereof.
(o) Insurance. HSN maintains insurance policies with insurers in such
amounts and insuring it against such types of loss or damage as are customarily
maintained by corporations engaged in similar businesses with respect to its
property.
(p) No Defaults. HSN shall be and shall remain current and not in a
condition of default which creates a right of acceleration in any lender or
creditor on or under any material loan, credit agreement or instrument of
indebtedness, including but not limited to lines of credit, and no event shall
occur or shall have occurred which will result in HSN being in a condition of
default which creates a right of acceleration in any lender or creditor on or
under any such loans, credit agreement or instrument.
(q) Reports. HSN shall provide to GE Capital, as soon as available but
not less than ninety (90) days after the end of the relevant account period in
the case of reports for quarterly periods other than year end and one hundred
twenty (120) days after the end of the relevant account period for year end
reports, (i) unaudited consolidated quarterly financial reports and (ii)
audited consolidated annual financial reports, which financial reports shall be
prepared in accordance with GAAP.
(r) Credit Instruments. HSN and each Participating Subsidiary
acknowledges and agrees that due to time constraints, GE Capital has not had
the opportunity to review credit agreements, indentures, notes and other debt
instruments to which the aggregate amount of funds outstanding from HSN and/or
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a Participating Subsidiary under each such credit agreement, indenture, note or
other debt instrument individually equals or exceeds Two Million Dollars
($2,000,000), if any, to which any of HSN and/or the Participating Subsidiaries
is a party (the "Material Credit Agreements"). Accordingly, HSN and each
Participating Subsidiary covenants and agrees that it will promptly (but in no
event later than three (3) days after the date hereof) provide GE Capital with
true and correct copies of all Material Credit Agreements, including, without
limitations, that certain credit agreement dated as of February 4, 1993 among
HSN Home Shopping Club, Inc., LTCB Trust Company, as Agent, and the Banks named
therein (the "LTCB Credit Agreement").
ARTICLE IX
REPRESENTATIONS AND WARRANTIES OF GE CAPITAL
To induce HSN and the Participating Subsidiaries to sell Accounts and
Indebtedness, GE Capital makes the following representations, warranties and
covenants to HSN and the Participating Subsidiaries, each and all of which
shall survive the execution and delivery of this Agreement, and each and all of
which shall be deemed to be restated and remade on each date on which HSN
and/or the Participating Subsidiaries sells Accounts and/or Indebtedness:
Section 9.01. Corporate Existence. GE Capital (a) is a corporation
duly organized, validly existing, and in good standing under the laws of the
state of its incorporation, with its principal place of business as indicated
in the first paragraph of this Agreement; (b) is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
ownership or lease of property or the conduct of its business requires such
qualification; (c) has the requisite corporate power and authority and the
legal right to own, pledge, mortgage, and operate its properties, to lease the
properties it operates under lease, and to conduct its business as now,
heretofore, and proposed to be conducted; (d) has all necessary licenses,
permits, consents, or approvals from or by, and has made all necessary filings
with, and has given all necessary notices to, all governmental authorities
having jurisdiction, to the extent required for such ownership, lease,
operation, and conduct; and (e) is in compliance with its articles of
incorporation, bylaws or other similar organizational documents.
Section 9.02. Corporate Power; Authorization; Enforceable Obligations.
The execution, delivery, and performance of this Agreement by GE Capital and
all instruments and documents to be delivered by GE Capital pursuant to this
Agreement, and the creation of all Liens provided for herein: (a) are within
GE Capital's corporate power; (b) have been duly authorized by all necessary or
proper corporate action, including the consent of shareholders where required;
(c) are not in contravention of any provision of GE Capital's articles of
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incorporation, bylaws or other similar organizational documents; (d) will not
violate any law or regulation or any order or decree of any court or
governmental instrumentality applicable to GE Capital; (e) will not conflict
with or result in the breach of, or constitute a default under, any indenture,
mortgage, deed of trust, lease, agreement, or other instrument to which GE
Capital is a party or by which GE Capital or any of its property is bound; and
(f) do not require of GE Capital any filing or registration with or the consent
or approval of any governmental body, agency, authority, or any other Person
which has not been made or obtained previously. This Agreement has been duly
executed and delivered by GE Capital and constitutes the legal, valid, and
binding obligation of GE Capital, enforceable against GE Capital in accordance
with its terms, except as such enforcement may be limited by applicable
bankruptcy, moratorium, reorganization, or other laws affecting the rights of
creditors generally or by general principles of equity (whether or not a
proceeding is brought in a court of law or equity).
Section 9.03. Solvency. GE Capital is Solvent.
Section 9.04. No Default. GE Capital is not in default with respect to
any material contract, agreement, document, lease, or other instrument to which
it or any subsidiary of it is a party or by which GE Capital or any or its
property may be bound, where such default would have a material adverse effect
on the business, operations, property, or financial or other condition of GE
Capital.
Section 9.05. No Burdensome Restrictions. No contract, lease,
agreement, or other instrument to which GE Capital is a party or is bound and
no provision of applicable law or governmental regulation materially and
adversely affects or may be reasonably likely to so affect the business,
operations, property, or financial or other condition of GE Capital.
Section 9. 06 Full Disclosure. No information contained in this
Agreement or any other agreement or writing executed or issued by GE Capital or
any statement furnished by or on behalf of GE Capital in connection with this
Agreement or any other agreement or writing executed or issued in connection
with this Agreement contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements contained herein or
therein not misleading, which would have a material adverse effect on GE
Capital's business, operations, or financial or other condition.
Section 9.07. GE Capital Covenants. GE Capital covenants and agrees
that, until the end of the term of this Agreement:
(a) Maintenance of Existence and Conduct of Business. GE Capital shall
do or cause to be done all things necessary to preserve and keep in full force
and effect its corporate existence.
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(b) Compliance with Law. GE Capital's own actions and the actions of
Persons on its behalf (or failures to act where any of the foregoing has a duty
to act under this Agreement), shall comply with all federal, state, and local
laws, statutes, ordinances, rules, regulations, orders and rulings. Without
limiting the generality of the foregoing, GE Capital shall additionally be
obligated to cause all Accounts, Indebtedness, Credit Agreements, periodic
billing statements, other Account Documentation, any other documents utilized
by GE Capital, insurance (to the extent of limitations on finance charges
thereon), finance charges, and credit procedures to comply with those laws,
statutes, ordinances, rules, regulations, orders and rulings during the term of
this Agreement, including, but not limited to, so-called truth-in-lending or
usury laws that may from time to time be effect, which obligation shall include
from time to time providing HSN with revisions to credit procedures, Credit
Agreements, periodic billing statements, other Account Documentation and any
other documents utilized by GE Capital so that they so comply. GE Capital
shall not be responsible for noncompliance pursuant to this Section 9.07 where
noncompliance is a result of HSN's or any Participating Subsidiary's failure to
comply with any such matters, to the extent HSN or any Participating Subsidiary
is required by this Agreement to so comply.
(c) Books and Records. GE Capital shall keep adequate records and books
of account with respect to its business activities, in which proper entries,
reflecting all of GE Capital's financial transactions, are made in accordance
with GAAP.
ARTICLE X
FINANCIAL STATEMENTS AND INFORMATION
Section 10.01. Reports and Notices. As long as this Agreement remains
in effect, (i) HSN (x) shall deliver to GE Capital in addition to the financial
reports required pursuant to this Agreement such other information respecting
the Accounts or the value thereof, the Indebtedness or the value thereof as GE
Capital may, from time to time, reasonably request and (y) upon request, meet
with the appropriate personnel of GE Capital on not more than a quarterly basis
to discuss information contained in HSN's unaudited consolidated quarterly
financial reports, audited annual financial reports and any additional
information relating to such documents as GE Capital may reasonably request and
(ii) in the event that the debt rating of GE Capital's senior debt from both
Moody's and Standard & Poor's is less than A, GE Capital shall (x) deliver to
HSN such information respecting the Accounts or the value thereof and the
Indebtedness or the value thereof as HSN may, from time to time, reasonably
request and (y) meet with the appropriate personnel of HSN on not more than a
quarterly basis to discuss information contained in GE Capital's unaudited
consolidated quarterly financial reports,
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audited annual financial reports and any additional information relating to
such documents as HSN may reasonably request.
ARTICLE XI
INDEMNIFICATION
Section 11.01. Indemnification by HSN. HSN agrees to protect,
indemnify, and hold harmless GE Capital, its subsidiaries, and affiliated
companies, and the employees, officers, and directors thereof, against any and
all liabilities, costs, and expenses (including reasonable attorneys' fees and
expenses), judgments, damages, claims, demands, offsets, defenses,
counterclaims, actions, or proceedings by whomsoever asserted, including, but
not limited to, (i) the Account Debtors or other Persons responsible for the
payment of Accounts sold by HSN or any Participating Subsidiary hereunder, (ii)
any person or persons who prosecute or defend any proceedings as
representatives of or on behalf of a class or interest group, (iii) any
governmental instrumentality, or (iv) any other third party, arising out of,
connected with or resulting from: (a) credit card sales of Merchandise; (b)
any transaction, contract, understanding, promise, representation, or any other
relationship, actual, asserted, or alleged, between HSN, any Participating
Subsidiary and any Account Debtor relating to an Account; (c) any Merchandise
the purchase of which was financed by an Account; (d) any other act by HSN or
any Participating Subsidiary or its employees, officers, directors,
shareholders, agents or any independent contractors hired by HSN, or omission
by HSN where there was a duty to act, relating to an Account or items of
Indebtedness sold under an Account; (e) any claim, demand, allegation, offset,
defense, or counterclaim which, if true or proven, would constitute a breach
under (a)-(d) of this Section 11.01; (f) any communication (written or
otherwise) with any Account Debtor or otherwise, which communication
inaccurately describes any term of this Agreement or the status of this
Agreement; or (g) any breach by HSN or any Participating Subsidiary of any of
the terms, covenants, representations, warranties, conditions precedent, or
other provisions contained in this Agreement or any other instrument or
document delivered by HSN or any Participating Subsidiary to GE Capital in
connection herewith or therewith, or any event, act or omission that would be
such a breach if any term, covenant, representation, warranty, condition
precedent, or other provision did not contain a requirement of materiality;
provided, however, that excluded from the foregoing indemnity shall be any
liability, cost, expense, judgment, damage, claim, demand, offset, defense,
counterclaim, action or proceeding, to the extent the same arises out of or
results from any violation by GE Capital, its subsidiaries or affiliated
companies of law, this Agreement, any Credit Agreement or any agreement,
understanding or promise
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between GE Capital and any Account Debtor relating to such Account Debtor's
Account.
Section 11.02. Indemnification by GE Capital. GE Capital agrees to
protect, indemnify, and hold harmless HSN, its subsidiaries, and affiliated
companies, and the employees, officers, and directors thereof, against any and
all liabilities, costs, and expenses (including reasonable attorneys' fees and
expenses), judgments, damages, claims, demands, offsets, defenses,
counterclaims, actions, or proceedings by whomsoever asserted, including, but
not limited to, (i) the Account Debtors or other Persons responsible for the
payment of Accounts sold by HSN or any Participating Subsidiary hereunder, (ii)
any person or persons who prosecute or defend any proceedings as
representatives of or on behalf of a class or interest group, (iii) any
governmental instrumentality, or (iv) any other third party, arising out of,
connected with or resulting from: (a) any breach by GE Capital of any of the
terms, representations, warranties, covenants or other provisions of this
Agreement, or any event, act or omission that would be such a breach if any
term, covenant, representation, warranty, or other provision did not contain a
requirement of materiality, including without limitation in connection with the
performance of GE Capital's duties pursuant to Section 3.01 hereof, (b) any
communication (written or otherwise) with any Account Debtor or otherwise,
which communication inaccurately describes any term of this Agreement or the
status of this Agreement or (c) any act by GE Capital or its employees,
officers, directors, shareholders, agents or licensees or any independent
contractors hired by GE Capital, or omission by GE Capital where there was a
duty to act, including without limitation acts or omissions by GE Capital as
attorney-in-fact for HSN and/or the Participating Subsidiaries and any
violation of insurance laws arising from documentation or procedures provided
by GE Capital and any regulatory investigations or proceedings in connection
therewith relating to an Account or items of Indebtedness sold under an
Account, or any claim, demand, allegations, offset, defense, or counterclaim
which, if true or proven, would constitute such act or omission or a violation
of applicable law hereof, or if there would be such a violation if such
covenant, representation, or warranty did not contain a requirement of
materiality; provided, however, that excluded from the foregoing indemnity
shall be any liability, cost, expense, judgment, damage, claim, demand, offset,
defense, counterclaim, action or proceeding to the extent the same arises out
of or results from any violation by HSN, its subsidiaries and affiliated
companies of law, this Agreement, any Credit Agreement or any agreement,
understanding or promise between HSN or its Participating Subsidiaries and any
Account Debtor relating to such Account Debtor's Account.
Section 11.03. Defense of Claims. In the event that any legal
proceeding shall be instituted or that any claim or demand shall be asserted by
any Person in respect of which payment may be sought by one party hereto from
another pursuant to this Article XI, the party seeking indemnification shall
promptly
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cause written notice of the assertion of any such claim or demand of which it
has knowledge to be forwarded to the other party, which shall have the right,
to the extent of its indemnification, at its option and at its own expense, to
be represented by counsel of its choice and to defend against, negotiate,
settle, or otherwise deal with any proceeding, claim, or demand which is
related to any loss, liability, damage, or deficiency indemnified against
hereunder. The parties hereto agree to cooperate fully with the defense,
negotiation, or settlement of any such legal proceeding, claim or demand.
Section 11.04. Payment of Indemnified Amounts. After any final judgment
or award shall have been rendered by a court, arbitration board, or
administrative agency of competent jurisdiction, or a settlement agreed to by
both parties shall have been consummated, the party seeking indemnification
shall forward to the other party notice of any sums due and owing by it with
respect to such matter with reasonable itemized support documentation therefor,
and such party shall be required to pay all of the sums so owing to the party
seeking indemnification within thirty (30) days after the date of such notice.
ARTICLE XII
TERM/TERMINATION
Section 12.01. Term. This Agreement shall continue in full
force and effect until five (5) years from the date of the full execution
hereof (the "Initial Term") and shall be automatically renewed for successive
two (2) year terms ("Renewal Term(s)"), unless terminated as provided in other
provisions of this Agreement.
Section 12.02. Termination by HSN.
(a) HSN, in its individual capacity, may terminate this Agreement,
such termination to be effective as of the final day of the Initial Term or any
Renewal Term, by giving GE Capital at least one hundred eighty (180) days
written notice prior to the final day of the Initial Term or any Renewal Term.
(b) Notwithstanding anything to the contrary contained in Section
2.02, HSN may terminate this Agreement by giving GE Capital written notice
within ninety (90) days of receipt of notification under Section 2.02(c)(ii)
that GE Capital elected not to increase the Maximum Indebtedness, and such
termination shall be effective four (4) months after the date of such
termination notice.
(c) HSN may terminate this Agreement without notice if an Event of
Default as provided in Section 13.04 hereof shall occur and continue past the
applicable grace period, if any.
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(d) In the event GE Capital materially breaches its obligations
under this Agreement, and after notice to GE Capital and such breach remains
uncured for a period of thirty (30) days, then HSN may terminate this Agreement
by giving GE Capital ten (10) days written notice.
Section 12.03. Termination by GE Capital.
(a) GE Capital may terminate this Agreement as of the final day of
the Initial Term or any Renewal Term, by giving HSN at least one hundred eighty
(180) days written notice prior to the final day of the Initial Term or any
Renewal Term.
(b) GE Capital may terminate this Agreement without notice if an
Event of Default as provided in Section 13.01 hereof shall occur and continue
past the applicable grace period if any, including that set forth in Section
13.02 hereof.
(c) In the event HSN materially breaches its obligations under this
Agreement, and after notice to HSN and such breach remains uncured for a period
of thirty (30) days, then GE Capital may terminate this Agreement by giving HSN
ten (10) days written notice.
(d) Subject to the provisions of Section 2.08, GE Capital shall
terminate this Agreement in the event the conditions specified in Section
5.01(e) shall not have been satisfied within the time period specified in such
Section 5.01(e).
Section 12.04. Survival of Obligations Upon Termination of Financing
Arrangement. Except as otherwise expressly provided herein, no termination or
cancellation (regardless of cause or procedure) of this Agreement shall in any
way affect or impair the powers, obligations, duties, rights and liabilities of
HSN, any Participating Subsidiary or GE Capital relating to any transaction or
event occurring prior to such termination. All undertakings, agreements,
covenants, warranties, representations, and indemnities contained herein shall
survive such termination or cancellation, except as specifically provided
herein to the contrary. Without in any way limiting the generality of the
foregoing, upon such termination, HSN shall continue to be liable for the fees
provided for or referred to in Section 12.07 hereof, for RPR Indebtedness to
the extent specified in Section 2.04 hereof until such time as (i) there is no
Indebtedness owned by GE Capital or (ii) HSN repurchases Accounts and
Indebtedness from GE Capital pursuant to Sections 12.05 and 12.06 hereof,
whichever shall occur earlier and for the fees provided for in Article VII
hereof.
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Section 12.05. Repurchase of Accounts. Upon any termination (other
than a termination pursuant to Section 12.02(b), (c) or (d)) HSN shall have the
option to repurchase on the date of termination, after having given sixty (60)
days' prior written notice, all Accounts and Indebtedness existing on the date
of such repurchase for an amount in cash equal to one hundred two percent
(102%) of the Aggregate Investment then outstanding (including accrued and
unpaid finance charges thereon) together with all other amounts then due GE
Capital under this Agreement. In the event of a termination pursuant to
Section 12.02(b), (c) or (d) HSN shall have the option to repurchase all
Accounts and Indebtedness existing on the date of such repurchase for an amount
in cash equal to one hundred percent (100%) of the Aggregate Investment then
outstanding (including accrued and unpaid finance charges thereon), together
with all other amounts then due GE Capital under this Agreement. If HSN
repurchases as set forth above, GE Capital's obligation to perform the
servicing activities specified in Article III hereof shall be terminated as of
the date of such repurchase. Upon any such repurchase, GE Capital shall assign
to HSN all of its right, title, and interest in and to such Accounts and
Indebtedness, free and clear of any and all Liens created by or through GE
Capital, and with a warranty from GE Capital to such effect, but without any
other warranty or recourse, and the ownership interest of GE Capital in such
Indebtedness shall be terminated. GE Capital shall provide to HSN such
information as is reasonable and customary in order to assist HSN in
determining whether or not to exercise such option. In addition, upon such
exercise the parties hereto agree to reasonably cooperate and take any
reasonable action to facilitate such transfer of Accounts and Indebtedness. The
option granted by this Section shall terminate on the earlier of (i) the
effective date of any expiration or termination of this Agreement or (ii) the
date on which HSN delivers to GE Capital a notice that HSN does not intend to
exercise such option. GE Capital shall, upon receipt of full payment of the
purchase price for the Accounts, provide to any purchaser of Accounts under
this Section a master file computer tape listing all purchased Accounts.
Section 12.06. Services Only Option. Beginning with the thirty-first
month after the Effective Date, HSN shall have the option upon six (6) months
written notice to GE Capital, to repurchase, and GE Capital will service, all
Accounts and Indebtedness existing on the date of such repurchase for an amount
in cash equal to one hundred percent (100%) of the Aggregate Investment then
outstanding (including accrued and unpaid finance charges thereon), together
with all amounts then due GE Capital under this Agreement. If HSN exercises its
option under this Section 12.06, GE Capital shall continue to perform all of
its servicing activities specified in Article III hereof as requested by HSN
and HSN shall pay to GE Capital a fee for such services to be determined by the
parties hereto. Upon such exercise, GE Capital shall assign to HSN all of its
right, title and interest in and to the Accounts and Indebtedness, free and
clear of any and all Liens created by or through GE Capital, and with a
warranty from GE Capital to such effect, but
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<PAGE> 53
without any other warranty or recourse, and the ownership interest of GE
Capital in such Indebtedness shall be terminated. GE Capital shall provide to
HSN such information as is reasonable and customary in order to assist HSN in
determining whether or not to exercise such option. In addition, upon such
exercise the parties hereto agree to reasonably cooperate and take any
reasonable action to facilitate such transfer of Accounts and Indebtedness.
The option granted by this Section shall terminate on the earlier of (i) the
effective date of any expiration or termination of this Agreement or (ii) the
date on which HSN delivers to GE Capital a notice that HSN does not intend to
exercise such option. GE Capital shall, upon receipt of full payment of the
purchase price for the Accounts, provide to any purchaser of Accounts under
this Section a master file computer tape listing all purchased Accounts.
Section 12.07. Liquidation. If this Agreement terminates and HSN
chooses not to repurchase all Accounts and Indebtedness from GE Capital
pursuant to Section 12.05 or 12.06, (i) HSN shall continue to pay or be
credited for (as applicable) amounts due to GE Capital pursuant to Sections
4.01(b), (c) and (d), 7.01(b), (c) and (d),and 7.02(c)(ii) hereof until such
time as GE Capital no longer owns any Accounts, (ii) GE Capital shall have the
right, in addition to and retaining all other rights it may have under this
Agreement or applicable law, to liquidate the Accounts in any lawful manner
including, without limitation, transferring the Accounts or any part thereof to
a third party and/or issuing a replacement or substitute card, provided,
however, the Accounts shall not be transferred to a third party that is a
competitor of HSN and, provided further that any such third party agrees to be
bound by the confidentiality provision of this Agreement as if it was a party
hereto and (iii) during such liquidation, GE Capital may use HSN's name in
communicating with existing Account Debtors that the Account is not owned by
HSN and that GE Capital or some third party is the owner of such Account
provided that such usage shall be made in accordance with this Agreement. HSN
agrees to cooperate with GE Capital and take any action reasonably requested by
GE Capital to effectuate such liquidation in an orderly manner. In addition,
HSN shall pay to GE Capital as of each month-end until such time as all
Accounts are liquidated, a fee in the amount of (i) $1.65 times the number of
Active Accounts for that month plus (ii) .81% of Average Aggregate Investment,
provided that HSN shall not be obligated to pay such fee to GE Capital in the
event that HSN terminates this Agreement pursuant to Section 12.02(b), (c) or
(d) hereof.
ARTICLE XIII
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
Section 13.01. Events of Default, HSN. The occurrence of any one or
more of the following events (regardless of the reason therefor) shall
constitute an "Event of Default" hereunder:
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<PAGE> 54
(a) HSN or any Participating Subsidiary shall fail to make any
payment of any amount due pursuant to this Agreement when due and payable, and
the same shall remain unremedied for a period of five (5) days after HSN shall
have received written demand therefor from GE Capital.
(b) HSN or any Participating Subsidiary shall fail or neglect to
perform, keep, or observe any of the terms, provisions, conditions, or
covenants contained in this Agreement and such failure or neglect shall remain
unremedied for a period of thirty (30) days (ten (10) days with respect to
Section 8.12) after notice thereof from GE Capital is received by HSN.
(c) Any representation, warranty or statement made or delivered by
HSN, any of the Participating Subsidiaries or any of their officers, employees,
or agents to GE Capital under or pursuant to this Agreement, shall not be true
and correct in any material respect as of the date when made or if applicable,
restated and remade, and HSN or any of the Participating Subsidiaries (as the
case may be), fails within thirty (30) days after notice thereof by GE Capital
to HSN or any of the Participating Subsidiaries (as the case may be), to
correct the underlying basis which causes the representation, warranty or
statement to be untrue (and cures any losses incurred by GE Capital as a result
of its reliance on such false representation or warranty), provided that in the
case of Section 8.04, the thirty (30) day cure period shall not apply.
(d) (i) Any of the Accounts, Indebtedness or Account Documentation
in which GE Capital has an interest hereunder shall be lost, stolen, damaged,
destroyed, sold, encumbered, attached, seized, levied upon, or subjected to a
writ or distress warrant, other than by, through, or while in the possession of
GE Capital, and such action shall have a material adverse effect on the
business operations, property, or financial or other condition of HSN, the
Accounts or the value thereof, the Indebtedness or the value thereof, GE
Capital's Lien in and to the Accounts or Indebtedness, or the priority of such
Liens' (ii) any of the Accounts or Indebtedness shall come within the
possession of any receiver, trustee, custodian, or assignee for the benefit of
creditors of HSN or any Participating Subsidiary that has generated at least
ten percent (10%) of HSN's total sales for the immediately preceding twelve
(12) month period (a "Material Participating Subsidiary"); (iii) any Person
shall apply for the appointment of a receiver, trustee or custodian for the
Accounts, the Indebtedness, or any other assets of HSN or any Material
Participating Subsidiary and such application shall not have been dismissed
within thirty (30) days; provided, however, that from the time such application
is filed until such time, if any, as it may be dismissed, GE Capital shall be
relieved of its obligation to purchase Accounts and Indebtedness pursuant to
Section 2.01 hereof; (iv) HSN or any Material Participating Subsidiary shall
have concealed, removed, or permitted to be concealed or removed, any part of
its property, with intent to hinder, delay, or
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<PAGE> 55
defraud its creditors or made or suffered a transfer of any of its material
property which is fraudulent under bankruptcy, fraudulent conveyance, or other
similar law; or (v) any dissolution, termination of existence, or lack of
Solvency shall occur with respect to HSN or any Material Participating
Subsidiary.
(e) A case or proceeding shall have been commenced against HSN or
any Material Participating Subsidiary in a court having jurisdiction in the
premises seeking a decree or order (i) for relief in respect of HSN or any
Material Participating Subsidiary pursuant to the Bankruptcy Code or any other
applicable state or foreign bankruptcy or other similar law, (ii) appointing
custodian, receiver, liquidator, assignee, trustee, or sequestrator (or similar
official) of HSN or any Material Participating Subsidiary or of any substantial
part of their respective properties, (iii) ordering the winding-up or
liquidation of the affairs of HSN or any Material Participating Subsidiary,
(iv) enjoining, restraining, or in any way preventing HSN or any Material
Participating Subsidiary from conducting all or any material part of its
business affairs in the ordinary course, or concerning failure to pay any
federal, state or local tax or other debt of HSN shall be entered and shall not
be vacated, discharged, stayed or dismissed within thirty (30) days from the
date of entry thereof.
(f) HSN or any Material Participating Subsidiary shall (i) file a
petition seeking relief pursuant to the Bankruptcy Code or any other applicable
state or foreign bankruptcy or other similar law, (ii) consent to the
institution of proceedings pursuant thereto or to the filing of any such
petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, or sequestrator (or similar official)
of HSN or any Material Participating Subsidiary or of any substantial part of
its properties, (iii) fail generally to pay its debts as such debts become due,
or (iv) take corporate action in furtherance of any such action.
(g) Except for a voluntary settlement of those claims as shown in
Schedule 13.01(g) of this Agreement in an aggregate amount not in excess of
Sixteen Million Dollars ($16,000,000), final judgment or judgments for the
payment of money in excess of five percent (5%) of the consolidated tangible
net worth of HSN shall be rendered against HSN or any Participating Subsidiary
and the same shall not be, either (i) covered by insurance or the insurer shall
not have accepted liability therefor or (ii) vacated, stayed, bonded, paid, or
discharged for a period of thirty (30) days.
(h) There shall be any material adverse change in the operations,
assets, condition (financial or otherwise), or business of HSN, the Accounts or
the value thereof, the Indebtedness or the value thereof, GE Capital's Lien in
and to the Accounts or the Indebtedness, or the priority of such Lien.
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<PAGE> 56
Section 13.02. Remedies, GE Capital. If any Event of Default set forth
in Section 13.01 above shall have occurred and be continuing: (a) GE Capital,
in its discretion, upon ten (10) days' notice to HSN may (i) terminate this
Agreement with respect to further sales of Accounts and Indebtedness (in which
case those provisions of Article XII applicable to termination shall become
effective) and/or (ii) declare all Obligations to be forthwith due and payable,
whereupon all Obligations shall become due and payable, without presentment,
demand, protest, or further notice of any kind, all of which are expressly
waived by HSN and the Participating Subsidiaries, in which case GE Capital
shall have the right, at any time and from time to time thereafter, in its
discretion, without notice thereof to HSN or any Participating Subsidiary, (A)
to enforce payment of the Obligations and collect, by legal proceedings or
otherwise, the Accounts and Indebtedness in the name of GE Capital and/or HSN
or any Participating Subsidiary and (B) to take control, in any manner, of any
item of payment for, or proceeds of, the Accounts or Indebtedness.
Notwithstanding the foregoing, in the event of an Event of Default under
Section 13.01(e) or (f) hereof, this Agreement shall be deemed to be
automatically terminated with respect to further sales of Accounts and
Indebtedness, and all Obligations shall be automatically deemed forthwith due
and payable, without any further action by GE Capital.
(b) In addition to remedies available to a secured party under the
UCC, GE Capital, in its discretion, may exercise any one or more of the rights
and remedies accruing to a secured party under the UCC of the relevant state or
states and any other applicable law upon default by a debtor.
(c) Any notice required to be given by GE Capital of a sale, lease,
or other disposition of the Accounts and Indebtedness, or any other intended
action by GE Capital, deposited in the United States mail, postage prepaid and
duly addressed to HSN at its principal place of business set forth in Section
14.08 hereof not less than fifteen (15) days prior to action, shall constitute
commercially reasonable and fair notice to HSN thereof. GE Capital may, in its
sole discretion, postpone or adjourn any sale of the Accounts or Indebtedness,
or any part thereof, from time to time by an announcement at the time and place
of sale or by announcement at the time and place of such postponed or adjourned
sale, without being required to give a new notice of sale. Each of HSN and the
Participating Subsidiaries agrees that GE Capital has no obligation to preserve
rights against prior parties to the Accounts and Indebtedness.
Section 13.03. Waivers by HSN. Except as otherwise provided for in
this Agreement, HSN and each Participating Subsidiary waives (a) presentment,
demand, and protest, and notice of presentment, dishonor, protest, default,
nonpayment, maturity, release, compromise, settlement, extension, or renewal of
any or all commercial paper, accounts, accounts receivable, contract rights,
documents, choses in action, instruments, chattel paper, commercial paper and
56
<PAGE> 57
guarantees at any time held by GE Capital on which HSN or any Participating
Subsidiary may in any way be liable or any bond or security which might be
required by any court prior to allowing GE Capital to exercise any of GE
Capital's remedies, and (c) the benefit of all valuation, appraisal, and
exemption laws. HSN and each Participating Subsidiary acknowledges that it has
been advised by counsel of its choice with respect to this Agreement and the
transactions evidenced by this Agreement.
Section 13.04. Events of Default, GE Capital. The occurrence of any
one or more of the following events (regardless of the reason therefor) shall
constitute an "Event of Default" hereunder:
(a) GE Capital shall fail to make any payment of any amount due
pursuant to this Agreement when due and payable, and the same shall remain
unremedied for a period of five (5) days after HSN shall have made written
demand therefor.
(b) GE Capital shall fail or neglect to perform, keep, or observe
any of the terms, provisions, conditions, or covenants contained in this
Agreement and such failure or neglect shall remain unremedied for a period of
thirty (30) days after notice thereof by HSN to GE Capital.
(c) Any representation or warranty by GE Capital in this Agreement
shall not be true and correct in any material respect as of the date when made
or reaffirmed and GE Capital fails within thirty (30) days after notice thereof
by HSN to GE Capital, to correct the underlying basis which causes the
representation or warranty to be untrue, provided that in the case of Section
9.03, the thirty (30) day cure period shall not apply.
(d) (i) Any Person shall apply for the appointment of a receiver,
trustee or custodian for GE Capital and such application shall not have been
dismissed within thirty (30) days, or (ii) any dissolution, termination of
existence, or insolvency shall occur with respect to GE Capital.
(e) A case or proceeding shall have been commenced against GE
Capital in a court having jurisdiction in the premises seeking a decree or
order (i) for relief in respect of GE Capital pursuant to the Bankruptcy Code
or any other applicable state or foreign bankruptcy or other similar law, (ii)
appointing custodian, receiver, liquidator, assignee, trustee, or sequestrator
(or similar official) of GE Capital or of any substantial part of its
properties, (iii) ordering the winding-up or liquidation of the affairs of GE
Capital, (iv) enjoining, restraining, or in any way preventing GE Capital from
conducting all or any material part of its business affairs in the ordinary
course, or concerning failure to pay any federal, state or local
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<PAGE> 58
tax or other debt of GE Capital shall be entered and shall not be vacated,
discharged, or stayed within thirty (30) days from the date of entry thereof.
(f) GE Capital shall (i) file a petition seeking relief pursuant to
the Bankruptcy Code or any other applicable state or foreign bankruptcy or
other similar law, (ii) consent to the institution of proceedings pursuant
thereto or to the filing of any such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee, trustee, or
sequestrator (or similar official) of GE Capital or of any substantial part of
its properties, (iii) fail generally to pay its debts as such debts become due,
or (iv) take corporate action in furtherance of any such action.
(g) Final judgment or judgments for the payment of money in excess
of five percent (5%) of the consolidated tangible net worth of GE Capital shall
be rendered against GE Capital and the same shall not be, either (i) covered by
insurance or the insurer shall not have accepted liability therefor or (ii)
vacated, stayed, bonded, paid, or discharged for a period of (30) days.
(h) There shall any material adverse change in the operations,
assets, condition (financial or otherwise) or business of GE Capital.
Section 13.05. Remedies, HSN. If any Event of Default set forth in
Section 13.04 above shall have occurred and be continuing past any applicable
grace period, if any, HSN, in its discretion, without notice, may terminate
this Agreement with respect to further sales of Accounts and Indebtedness (in
which case those provisions of Article XII applicable to termination shall
become effective).
ARTICLE XIV
MISCELLANEOUS
Section 14.01. Complete Agreement; Modification of Agreement; Sale of
Interest. This Agreement constitutes the complete agreement between the
parties with respect to the subject matter hereof and may not be modified,
altered, or amended, except by an agreement in writing duly executed by
authorized representatives of GE Capital and HSN. No party hereto may sell,
assign, transfer or delegate any of its rights, titles, interests, remedies,
powers and duties hereunder without the prior written consent of the other
parties hereto, which consent shall not be unreasonably withheld. Each of the
Participating Subsidiaries agree that any modification, alteration, amendment
or approval agreed to or provided by HSN with respect to this Agreement shall
be deemed agreed to or provided by each such Participating Subsidiary.
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<PAGE> 59
Section 14.02. No Waiver. Either party's failure, at any time or
times, to require performance by the other party of any provisions of this
Agreement shall not waive, affect, or diminish any right of such party
thereafter to demand strict compliance and performance therewith. Any
suspension or waiver by GE Capital of an Event of Default shall not suspend,
waive, or affect any other Event of Default, whether the same is prior or
subsequent thereto and whether of the same or of a different type. None of
the undertakings, agreements, warranties, covenants, and representations of HSN
or any Participating Subsidiary contained in this Agreement and no Event of
Default pursuant to this Agreement shall be deemed to have been suspended or
waived by GE Capital, unless such suspension or waiver is by an instrument in
writing signed by an officer of GE Capital and directed to the appropriate
Person specifying such suspension or waiver.
Section 14.03. Remedies. Each party's rights and remedies pursuant to
this Agreement shall be cumulative and nonexclusive of any other rights and
remedies which such party may have pursuant to any other agreement, by
operation of law, or otherwise.
Section 14.04. Waiver of Jury Trial. The parties hereto waive all
right to trial by jury in any action or proceeding to enforce or defend any
rights hereunder.
Section 14.05. Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law; if any provision of this Agreement shall be prohibited by
or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
Section 14.06. Parties. This Agreement shall be binding upon, and
inure to the benefit of, the successors of each party hereto and the permitted
assigns of GE Capital and HSN.
Section 14.07. Governing Law. This Agreement and the obligations
arising pursuant hereto shall, in all respects, including all matters of
construction, validity, and performance, be governed by, and construed in
accordance with, the laws of the State of New York (other than conflicts of law
provisions thereof) applicable to contracts made and performed in such state
and any applicable laws of the United States of America. HSN and each
Participating Subsidiary agrees to submit to personal jurisdiction and to waive
any objection as to venue of the federal or state courts in the County of New
York, State of New York. Service of process on HSN or any Participating
Subsidiary in any action arising out of or relating to this Agreement shall be
effective upon receipt thereof if sent or
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delivered to HSN in accordance with Section 14.08 hereof. Nothing herein shall
preclude either party from bringing suit or taking other legal action in any
other jurisdiction.
Section 14.08. Notices. Except as otherwise provided herein, whenever
it is provided herein that any notice, demand, request, consent, approval,
declaration, or other communication shall or may be given to or served upon any
of the parties by another, or whenever any of the parties desires to give or
serve upon another communication with respect to this Agreement, each such
notice, demand, request, consent, approval, declaration, or other communication
shall be in writing and either shall be delivered in person with receipt
acknowledged or by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows (and if notice is transmitted by mail, a
copy thereof shall be transmitted by electronic facsimile to the telephone
number indicated below):
(a) If to GE Capital, at:
General Electric Capital Corporation
1221 Post Road East
Westport, Connecticut 06880
Attention: Manager, Northern Business Group
Facsimile: (203) 226-8634
With copies to:
General Electric Capital Corporation
260 Long Ridge Road
Stamford, Connecticut 06927
Attention: Counsel, Retailer Financial Services
Facsimile: (203) 961-5149
(b) If to HSN, or any Participating Subsidiary at:
Home Shopping Network, Inc.
2501 118th Avenue North
St. Petersburg, Florida 33716
Attention: Senior Vice President-Finance
Facsimile: (813) 539-6505
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with copies to:
Home Shopping Network, Inc.
2501 118th Avenue North
St. Petersburg, Florida 33716
Attention: General Counsel
Facsimile: (813) 573-0866
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required pursuant hereto may be waived in
writing by the party entitled to receive such notice. Every notice, demand,
request, consent, approval, declaration, or other communication pursuant hereto
shall be deemed to have been duly given or served on the date on which
personally delivered, with receipt acknowledged, or five (5) Business Days
after the same shall have been deposited in the United States mail (and a copy
sent by electronic facsimile). Failure or delay in delivering copies of any
notice, demand, request, consent, approval, declaration, or other communication
to the Persons designated above to receive copies shall in no way adversely
effect the effectiveness of such notice, demand, request, consent, approval,
declaration, or other communication.
Section 14.09. Securitization/Participation. Subject to the rights of
HSN under this Agreement, including but not limited to Sections 12.05 and
12.06, GE Capital shall have the right to securitize or participate all or any
portion of the Accounts at any time.
Section 14.10. Confidentiality. All material and information supplied
by one party to the other party hereunder or supplied to either party by
Account Debtors or applicants for credit, including but not limited to the
terms and provisions of this Agreement, information concerning either party's
market plans, objectives, financial results, customer or Account Debtor names
or buying patterns, addresses, financial character and proposed store locations
are confidential and proprietary ("Confidential Information"). Confidential
Information shall be used by each party solely in the exercise of its rights
and performance of its obligations pursuant to the Agreement, except that HSN
may use information about its customers in the ordinary conduct of its
business. Specifically, GE Capital shall not solicit, advertise to or
otherwise promote products, goods or services to HSN customers except as
specifically permitted in this Agreement. Each party shall receive
Confidential Information in confidence and not disclose Confidential
Information to any third party, except as may be necessary to exercise its
rights and perform its obligations pursuant to this Agreement, and except as
may be agreed upon in writing by the other party, or as otherwise as required
by
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law or required to be made to governmental agencies, and except that HSN may
use information about its customers in the ordinary conduct of its business.
Upon written request specifying the materials to be returned or upon the
termination of this Agreement, each party shall use its best efforts to return
to the other party such Confidential Information in its possession or control.
Confidential Information shall not include information in the public domain
(other than as a result of a breach in the foregoing restriction) and
information lawfully obtained from a third party.
Section 14.11. Section Titles. The Section Titles contained in this
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
Section 14.12. Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument.
Section 14.13. Failures to Perform. In the event that either HSN or
any Participating Subsidiary or GE Capital is obligated under this Agreement to
do an act on a particular date or within a particular number of days and, after
taking reasonable precautions, as a result of a circumstance beyond the
reasonable precautions, as a result of a circumstance beyond the reasonable
control of such party (e.g., computer or telecommunications breakdown), such
party is unable to perform such act when due, such party shall not be deemed in
breach of this Agreement if such party shall in lieu thereof do such act as
promptly as practicable, provided that such party shall take all reasonable
steps to perform such act by alternate means and shall use its best efforts to
cure such circumstances which are within its control.
Section 14.14. Customized Credit Programs. Each of HSN and each
Participating Subsidiary agrees that it will not make available, or enter into
the provisions of any customized private label credit program other than (i)
credit provided in connection with the Program hereunder, (ii) credit provided
by generally accepted multipurpose or charge cards such as American Express,
Mastercard, Visa and Discover and (iii) secured cards and debit cards. In
addition, each of HSN and each Participating Subsidiary agrees that (i) during
a period of fifteen (15) months following the termination of the Program it
shall not sponsor, endorse or replicate a customized private label credit
program, whether internal or external and (ii) during a period of twelve (12)
months following such termination will not communicate with any Account Debtor
regarding any proposed customized private label credit program.
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Section 14.15 Participating Subsidiaries. A Participating Subsidiary
shall become subject to, and have the rights and obligations provided to
Participating Subsidiaries pursuant to this Agreement, when (i) GE Capital and
HSN shall have mutually agreed to include such Participating Subsidiary in this
Agreement, (ii) GE Capital shall have received from such Participating
Subsidiary a copy of this Agreement executed and delivered by such
Participating Subsidiary and (iii) GE Capital shall have a perfected first
priority security interest in the collateral provided to GE Capital by such
Participating Subsidiary pursuant to Article VI of this Agreement. Each
Participating Subsidiary agrees (i) to the appointment of HSN as its agent for
all purposes of this Agreement, (ii) any action taken by HSN with respect to
this Agreement shall be deemed taken by such Participating Subsidiary and (iii)
to reimburse HSN its pro-rata portion of any fees or amounts paid by HSN to GE
Capital pursuant to the terms of this Agreement. HSN hereby subordinates any
claim it may have against any Participating Subsidiary pursuant to the
immediately preceding sentence to the payment in full of all Obligations.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first above written.
GENERAL ELECTRIC CAPITAL CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
HOME SHOPPING NETWORK, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
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<PAGE> 64
HSN TOURS, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
HSN MAIL ORDER, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
WORLD REZ, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
HOME SHOPPING CLUB, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
64
<PAGE> 65
HOME SHOPPING CLUB OUTLET OF CLEARWATER,
INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
HOME SHOPPING CLUB OUTLET OF TAMPA, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
HOME SHOPPING CLUB OUTLET OF ORLANDO,
INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
HOME SHOPPING CLUB OUTLET OF SOUTH ORLANDO
INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
65
<PAGE> 66
HOME SHOPPING CLUB OUTLET OF ST. PETERSBURG
INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
HOME SHOPPING CLUB OUTLET OF WEST TAMPA,
INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
HOME SHOPPING CLUB OUTLET OF BRANDON,
INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
66
<PAGE> 1
EXHIBIT 10.31
<PAGE> 2
HOME SHOPPING NETWORK, INC.
FIRST AMENDMENT TO THE
1986 STOCK OPTION PLAN FOR EMPLOYEES
This is the First Amendment to the 1986 Stock Option Plan for Employees
(the "Plan") of Home Shopping Network, Inc. (the "Corporation"), a Delaware
corporation with its principal offices in Clearwater, Florida.
Paragraph IV of the Plan is hereby amended to read as follows:
IV Shares Subject to the Plan
The aggregate number of shares of Common Stock with respect to which
Options and SARs may be granted shall not exceed 2,200,000 shares of
Common Stock (the "Reserved Shares"), subject to the adjustment in
accordance with Section IX of the Plan. In the event that any Option or
SAR expires, lapses or otherwise terminates prior to being fully
exercised, any shares of Common Stock allocable to the unexercised
portion of such Option or SAR may again be made subject to an Option or
SAR.
Dated this 21st day of November, 1986.
<PAGE> 3
HOME SHOPPING NETWORK, INC.
SECOND AMENDMENT TO THE
1986 STOCK OPTION PLAN FOR EMPLOYEES
This is the Second Amendment to the 1986 Stock Option Plan for Employees
(the "Plan") of Home Shopping Network, Inc. (the "Corporation"), a Delaware
corporation with its principal offices in Clearwater, Florida.
Paragraph IV of the Plan is hereby amended to read as follows:
IV Shares Subject to the Plan
The aggregate number of shares of Common Stock with respect to which
Options and SARs may be granted shall not exceed 10,000,000 shares of
Common Stock (the "Reserved Shares"), subject to the adjustment in
accordance with Section IX of the Plan. In the event that any Option or
SAR expires, lapses or otherwise terminates prior to being fully
exercised, any shares of Common Stock allocable to the unexercised
portion of such Option or SAR may again be made subject to an Option or
SAR.
Dated this 14th day of July, 1987.
<PAGE> 4
HOME SHOPPING NETWORK, INC.
THIRD AMENDMENT TO THE
1986 STOCK OPTION PLAN FOR EMPLOYEES
This is the Third Amendment to the 1986 Stock Option Plan for Employees
("the Plan") of Home Shopping Network, Inc., a Delaware corporation (the
"Corporation"), with its principal offices in St. Petersburg, Florida.
Section (vi) of Paragraph (b) of Article VI of the Plan is
hereby amended to read as follows:
(vi) The Committee may, in its sole discretion, cancel options granted
to an employee whose employment has been terminated for cause. Upon the
termination of employment other than for cause, options granted under the
Plan shall be cancelled only to the extent that such options were not
exercisable as of the date of such termination.
The effective date of this amendment shall be August 1, 1986, the
effective date of the Plan.
Adopted this 26th day of September 1988 by the Compensation/Benefits
Committee of the Board of Directors of Home Shopping Network, Inc.
<PAGE> 5
EXHIBIT 10.31
HOME SHOPPING NETWORK, INC.
FOURTH AMENDMENT TO THE
1986 STOCK OPTION PLAN FOR EMPLOYEES
This is the Fourth Amendment to the 1986 Stock Option Plan for Employees
(the "Plan") of Home Shopping Network, Inc., a Delaware corporation (the
"Corporation"), with its principal offices in St. Petersburg, Florida.
1. All references in the Plan to Section 422A of the Code shall be
changed to Section 422 of the Code.
2. Section (iii) of Paragraph (d) of Article VI of the Plan is hereby
amended to read as follows:
(iii) An Incentive Stock Option shall not be exercisable while there is
outstanding (within the meaning of former Subsection 422A(c)(7) of the
Code) any other "Incentive Stock Option," within the meaning of
Subsection 422(b) of the Code, which was granted before the granting of
the Incentive Stock Option to the grantee to purchase stock in the
Corporation; provided, however, that the foregoing clause requiring that
Incentive Stock Options be exercised sequentially shall not apply to
Incentive Stock options granted after the date of this Fourth Amendment,
which Incentive Stock Options may be exercised without regard to
previously granted and still outstanding Incentive Stock Options.
3. Section (iv) of Paragraph (d) of Article VI of the Plan is hereby
amended to read as follows:
(iv) An optionee may hold and exercise more than one Incentive Stock
Option, but only on the terms and subject to the restrictions hereafter
set forth. The aggregate fair market value (determined as of the time
an Incentive Stock Option is granted) of the Common Stock with respect to
which Incentive Stock Options are exercisable for the first time by any
employee in any calendar year under the Plan and under all other
Incentive Stock Option plans of the Corporation and any parent and
subsidiary corporations of the Corporation (as those terms are defined in
Section 425 of the Internal Revenue Code of 1986, as amended) shall not
exceed $100,000.
<PAGE> 6
The effective date of this amendment shall be the date
adopted.
Adopted this 16th day of June, 1992 by the Compensation/Benefits
Committee of Home Shopping Network, Inc.
<PAGE> 1
EXHIBIT A
EXHIBIT 10.32
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of February 23, 1993 between HOME
SHOPPING NETWORK, INC., a Delaware corporation (the "Company"), and GERALD F.
HOGAN ("Executive").
This Agreement sets forth the terms and conditions of Executive's
employment by the Company as the Company's President and Chief Executive
Officer.
In consideration of the mutual covenants and agreements herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties, intending to be
legally bound, do hereby agree as follows:
1. Term and Termination.
(a) Term. The term of Executive's employment under this
Agreement (the "Employment Term") shall commence on the date hereof (the
"Effective Date") and end on the fourth anniversary of such date. The
Employment Term shall be automatically extended beyond the original four year
term for successive one year terms unless at least one hundred eighty (180)
days prior to the expiration of the original Employment Term or any subsequent
renewal thereof, either party notifies the other party in writing that it is
electing to terminate this Agreement at the expiration of the then current
term. During the Employment Term, the Company agrees to employ Executive and
Executive agrees to serve the Company upon and subject to the terms and
conditions set forth in this Agreement.
(b) Termination by the Company. Executive's employment by the
Company may be terminated by the Company only as provided in clauses (i), (ii),
(iii) and (iv) below.
(i) Upon the death of Executive.
(ii) Upon six (6) months' prior written notice from the
Company to Executive (the "Notice Period"), in the event of an illness
or other disability which has incapacitated Executive from performing
his duties hereunder, as determined in good faith by the Board of
Directors of the Company, for an aggregate of one hundred eighty (180)
consecutive days during the twelve calendar months preceding the month
in which such notice is given; provided, however, that in the event
that prior to the end of the Notice Period, Executive recovers from
such illness or other disability to an extent permitting him to perform
his duties hereunder, the notice of termination pursuant to this clause
(ii) shall be of no further force and effect.
<PAGE> 2
(iii) At any time upon giving written notice of such
termination to Executive and by paying Executive in a lump sum upon such
termination an amount equal to (x) Annual Base Salary (as hereinafter
defined) that would have been payable to Executive had his employment by
the Company continued until the expiration of the Employment Agreement
plus (y) the amount of Annual Bonus (as hereinafter defined) that
Executive would have been entitled to receive had his employment by the
Company continued until the end of the fiscal year in which such
termination occurred (such amount of Annual Bonus is hereinafter
referred to as the "Remainder Bonus").
(iv) At any time for "Cause", which for purposes of this
Agreement shall be deemed to have occurred only on the happening of any
of the following:
(A) the plea of guilty to, or conviction for, the
commission of a felony offense by Executive; provided,
however, that after indictment, the Company may suspend
Executive from the rendition of services, but without
limiting or modifying in any other way the Company's
obligations under this Agreement,
(B) a material breach by Executive of a material
fiduciary duty owed to the Company;
(C) a material breach by Executive of any of the
covenants made by him in Sections 6 and 7 hereof; or
(D) the willful and gross neglect by Executive of
the material duties specifically and expressly required by
this Agreement;
provided, however, that any claim that "Cause", within the meaning of
clauses (B), (C) or (D) above, exists for the termination of Executive's
employment may be asserted on behalf of the Company only by a resolution
duly adopted by two-thirds of the total number of members of the Board
of Directors of the Company, and on]y after 15 days prior written notice
to Executive during which period he may cure the breach or neglect that
is the basis of any such claim, if curable; provided, further, that no
state of facts that, with or without notice to Executive or the passage
of time or both, would give rise to the right of the Company to
terminate Executive's employment pursuant to clause (ii) of this Section
1(b) may, directly or indirectly, in whole or in part, be the basis for a
claim that Cause, within the meaning of clause (D) above, exists for the
termination of Executive's employment; provided, further, that during
the period of twelve (12) months following a Change in Control (as
hereinafter defined), Cause shall be deemed to have occurred only upon
the happening of an event referred to in clause (A) above; and provided,
further, that the term "material" as used in clauses (B), (C) and (D)
above and in Section 10 hereof shall be construed by reference to the
effect of the relevant action or omission on the Company and its
subsidiaries taken as a whole.
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<PAGE> 3
(c) Effect of Termination by the Company. If Executive's
employment is terminated by the Company pursuant to Section 1 (b) hereof, all
Annual Base Salary and Annual Bonus (to the extent not otherwise included in
Remainder Bonus) that has accrued in favor of Executive as of the date of such
termination, to the extent unpaid or delivered, shall be paid or delivered to
Executive on the date of termination. If Executive dies while employed by the
Company or during the period that he is receiving payments pursuant to the
immediately succeeding sentence and, in either case, prior to the expiration of
the Employment Term, the Company shall, as promptly as practicable following
Executive's death, pay to Executive's designated beneficiary or beneficiaries
in a lump sum an amount equal to the Annual Base Salary that would have been
payable to Executive had his employment by the Company continued until the
expiration of the Employment Term plus the Remainder Bonus. If Executive's
employment is terminated pursuant to Section 1(b)(ii) of this Agreement, the
Company shall (i) continue to pay to Executive his Annual Base Salary as and
when the same would otherwise be due in accordance with Section 4 of this
Agreement until the first to occur of the expiration of the Employment Term or
the date of Executive's death and (ii) pay the Remainder Bonus to Executive on
the date of such termination. The amounts payable by the Company pursuant to
the foregoing two sentences shall be reduced by the amount of any long term
disability benefits paid directly to Executive pursuant to any benefit or
welfare plans maintained by the Company for Executive's benefit. The phrase
"designated beneficiary or beneficiaries" shall mean the person or persons
named from time to time by Executive in a signed instrument filed for this
purpose with the Company. If the designation made in any such signed
instrument shall for any reason be ineffective, the phrase "designated
beneficiary or beneficiaries" shall mean Executive's estate. With respect to
the payment of Annual Base Salary in respect of time periods subsequent to the
date of termination of Executive's employment with the Company, such amount
shall be calculated at the annual rate of Executive's Annual Base Salary in
effect at the time of termination and the calculation of the remaining
Employment Term shall be made without consideration of any renewal thereof,
unless at the time of such termination such renewal would otherwise be
automatic. With respect to the payment of the Remainder Bonus, such amount
shall be the amount which would have been payable to Executive as his Annual
Bonus in accordance with the applicable Company plan or program had Executive's
employment continued until the end of the fiscal year of the Company in which
such termination occurred, but without regard to any requirement in such plan
that Executive be employed by the Company at any time following the conclusion
of such succeeding fiscal year in order to receive his Annual Bonus; provided
however, that in the event Executive's employment is terminated as a result of
his death or disability, the amount of the Remainder Bonus shall be not less
than the amount paid or payable to Executive in respect of the immediately
preceding fiscal year of the Company.
(d) Termination by Executive. The Executive's employment may
be terminated during the Employment Term by the Executive (i) for Good Reason
or (ii) without any reason during the twelve (12) month period immediately
following a Change in Control. For purposes of this Agreement, "Good Reason"
shall mean
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting
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<PAGE> 4
requirements), authority, duties or responsibilities as
contemplated by Section 2 of this Agreement, or any other action by
the Company which results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose
an isolated, insubstantial and inadvertent action not taken in bad
faith and which is remedied by the Company promptly after receipt
of notice thereof given by the Executive;
(ii) any material breach of this Agreement by the
Company which is not remedied by the Company promptly after receipt
of notice thereof given by the Executive;
(iii) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this
Agreement;
(iv) any failure by the Company to comply with and
satisfy Section 13 of this Agreement; or
(v) failure to reelect Executive as a member of the
Board of Directors or the removal of Executive as a member of such
Board.
For purposes of this subsection (d), a determination of "Good Reason" by the
Executive which is reasonable and is made in good faith shall be conclusive.
(c) Effect of Termination by the Executive. If Executive
terminates his employment with the Company pursuant to Section 1(d) of this
Agreement, or if the Company terminates the Executive's employment under this
Agreement in any way that is breach of this Agreement by the Company, the
Company shall pay to Executive in a lump sum upon such termination an amount in
cash equal to (i) all Annual Base Salary that has accrued in favor of Executive
as of the date of termination, to the extent unpaid or delivered, (ii) the
Annual Base Salary that would have been payable to Executive had his employment
by the Company continued until the expiration of the Employment Term and (iii)
the Remainder Bonus.
(f) Survival. Upon termination of Executive's employment and
payment of the amounts due Executive pursuant to Section 1 of this Agreement,
the obligations of the Company and the Executive under this Agreement shall
terminate, except that the Company's obligations with respect to the payment of
amounts upon the death or disability of Executive set forth in the second and
third sentences of Section 1(c) (if and to the extent applicable), Section 1(h)
(Continuation of Benefits), Section 4(e) (Indemnification), Section 5
(Reimbursement of Expenses) (as it relates to the expenses incurred prior to
such termination, including, without limitation, relocation expense incurred
pursuant to Section 5(c) and Schedule 5(c)), Section 12 (SARs) and Section 13
(Successors), and the Executive's obligations under Sections 6
(Noncompetition), 7 (Confidentiality), 8 (Delivery of Materials) and 9
(Noninterference), will survive (in accordance with the terms and conditions
thereof) any such termination.
(g) Change of Control. For purposes of this Agreement, a
"Change of Control" shall be deemed to have occurred as of the date upon which
either (x) Liberty Media Corporation
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<PAGE> 5
("Liberty", which term shall include any successor corporation, partnership or
other entity formed as a result of or in connection with any pro rata
distribution of securities or the right to acquire securities to the holders of
securities of Liberty, provided that the condition of clause (y) of this
Section 1(g) hereof continues to be satisfied) ceases to be the sole
"beneficial owner" (within the meaning of Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of Voting
Securities (as hereinafter defined) having a majority of the outstanding Voting
Power (as hereinafter defined) of the Company or (y) the individuals and
entities beneficially own Voting Securities of Liberty on the date of this
Agreement cease to beneficially own Voting Securities having a majority of
the outstanding Voting Power of Liberty. As used herein, the following terms
shall have the following meanings: (i) "Voting Securities" shall mean any
securities of the Company or Liberty, as the case may be, entitled, or which
may be entitled, to vote on matters submitted to stockholders generally
(whether or not entitled to vote generally in the election of directors), or
securities which are convertible into, or exercisable or exchangeable for such
Voting Securities, whether or not subject to the passage of time or any
contingency; and (ii) "Voting Power" shall mean the number of votes available
to be cast (determined by reference to the maximum number of votes entitled to
be cast by the holders of such Voting Securities (or by the holders of any
other Voting Securities into which such Voting Securities may be convertible,
exercisable or exchangeable for, whichever yields the highest number of votes)
upon any matter submitted to stockholders where the holders of all Voting
Securities vote together as a single class) by the holders of Voting
Securities.
(h) Continuation of Certain Benefits. In the event
Executive's employment is terminated for any reason other than for Cause, then
for the remainder of the Employment Term the Company shall continue benefits to
the Executive and/or the Executive's family at least equal to those which would
have been provided to them in accordance with this Agreement if the Executive's
employment had not been terminated, in accordance with the most favorable
plans, practices, programs or policies of the Company as in effect and
applicable generally to other executives and their families; provided, however,
that the Company may terminate such benefits if the Executive becomes
reemployed with another employer and is eligible to receive similar benefits
under such subsequent employer's benefit plans. For purposes of determining
eligibility of the Executive for retiree benefits pursuant to the Company's
plans, practices, programs and policies, the Executive shall be considered to
have remained employed until the end of the Employment Term and to have retired
on the last day of such period.
(2) Services to be Rendered by Executive. the Company and
Executive agree that Executive will serve the Company as its President and
Chief Executive Officer and shall have the rights, powers, duties and
obligations relating to such offices as is specified in the By-laws of the
Company as in effect on the date of this Agreement. In such capacity,
Executive shall perform all reasonable acts customarily associated with such
positions, or necessary or desirable to protect and advance the best interests
of the Company. Executive shall perform such acts and carry out such duties,
and shall in all other respects serve the Company faithfully and to the best
of his ability.
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<PAGE> 6
3. Time to be Devoted by Executive. Executive agrees to
devote substantially all of his business time, attention, efforts and abilities
to the business of the Company and to use his best efforts to promote the
interests of the Company. During the Employment Term it shall not be a
violation of this Agreement for the Executive to (i) serve on corporate, civic
or charitable boards or committees, (ii) fulfill speaking engagement and (iii)
manage personal investments, so long as such activities do not significantly
interfere with the performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement.
4. Compensation.
(a) Salary. During the Employment Term, the
Executive shall receive an annual base salary of not less than $500,000
("Annual Base Salary"), which shall be paid on a semi-monthly basis.
(b) Annual Bonus. In addition to Annual Base
Salary, if the Compensation Committee of the Board of Directors of the Company
adopts an annual bonus program for its executive employees generally, the
Executive shall be entitled to participate in such program and be paid on an
annual basis such bonus amount ("Annual Bonus") as determined by such
Committee.
(c) Benefits. During the Employment Term, the
Executive (including, where applicable, Executive's family) shall be entitled
to benefits in accordance with the welfare benefit and incentive plans,
practices, programs and policies of the Company (including, but not limited to,
retirement, savings, incentive and stock compensation plans, employee stock
purchase plans, medical, death and disability, and life and other insurance
plans and policies).
(d) Vacation. During the Employment Term, the
Executive shall be entitled to four weeks of paid vacation per year or such
longer period as may be provided by the Company in accordance with the plans,
policies, programs and practices of the Company applicable to executives of the
Company generally.
(e) Indemnification.
(i) In addition to any separate agreements
between Executive and the Company relating to indemnification,
the Company will indemnify and hold harmless Executive, to the
fullest extent permitted by applicable law, in respect of any
liability, damage, cost or expense (including reasonable counsel
fees) incurred in connection with the defense of any claim, action,
suit or proceeding to which he is a party, or threat thereof, by
reason of his being or having been an officer or director of the
Company or any subsidiary or affiliate of the Company, or his
serving or having served at the request of the Company as a director,
officer, employee or agent of another corporation or of a partnership,
joint venture, trust, business organization, enterprise or other
entity, including service with respect to employee benefit plans.
Without limiting the generality of the foregoing, the Company will
pay the expenses (including reasonable counsel fees) of
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<PAGE> 7
defending any such claim, action, suit or proceeding in advance of its final
disposition, upon receipt of an undertaking by Executive to repay all amounts
advanced if it should ultimately be determined that Executive is not entitled
to be indemnified under this Section.
(ii) In addition to the foregoing, the Company agrees to
pay promptly as incurred, to the full extent permitted by law, all legal fees
and expenses incurred by Executive in connection with the defense (including
in connection with the defense of counterclaims or cross-claims) of any claim,
action, suit or proceeding relating to the enforcement by the Company (including
claims, actions, suits or proceedings brought in the right of the Company) of
the provisions of Sections 6, 7, 8 or 9 of this Agreement; provided, however,
that in the event that the Company (or any person asserting the Company's
right) is the prevailing party in such enforcement action (as determined by a
court of competent jurisdiction in a final adjudication not subject to appeal),
the Executive shall reimburse the Company for all payments made by it pursuant
to this Section 4(e)(ii).
(iii) Except as otherwise provided in Section 4(e)(ii)
above, the Company agrees to pay promptly as incurred, to the full extent
permitted by law, all legal fees and expenses which Executive may reasonably
incur as a result of any contest (regardless of the outcome thereof) by the
Company, Executive or of the validity or enforceability of, or liability under
any provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by Executive about the amount of any
payment pursuant to this Agreement), plus in each case interest on any delayed
payment at the applicable Federal rate provided for in Section 7872(f)(2)(A)
of the Code (as hereinafter defined).
(f) Certain Reduction of Payments by the Company.
(i) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of the Executive (whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any reduction
required under this Section 4(f) (a "Payment") would be nondeductible by the
Company for Federal income tax purposes because of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code"), then the aggregate
present value of all Payments shall be reduced (but not below zero) such that
such aggregate present value of Payments equals the Reduced Amount. The
"Reduced Amount" shall be an amount expressed in present value which maximizes
the aggregate present value of Payments without causing any Payment to be
nondeductible by the Company because of Section 280G of the Code. For purposes
of this Section 4(f), present value shall be determined in accordance with
Section 280G(d)(4) of the Code.
(ii) All determinations required to be made
under this Section 4(f) shall be made by the Company's regular independent
accounting and auditing firm (the
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"Accounting Firm") which shall provide detailed supporting calculations both
to the Company and the Executive within 15 business days of the Date of
Termination. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the Change of Control,
the Executive shall appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). Any such determination by the
Accounting Firm shall be binding upon the Company and the Executive. All fees
and expenses of the Accounting Firm shall be borne by the Company. The
Executive shall determine which and how much of the Payments shall be
eliminated or reduced consistent with the requirements of this Section 4(f),
provided that, if the Executive does not make such determination within ten
business days of the receipt of the calculations made by the Accounting Firm,
the Company shall elect which and how much of the Payments shall be eliminated
or reduced consistent with the requirements of this Section 4(f) and shall
notify the Executive promptly of such election. Within Five business days
thereafter, the Company shall pay to or distribute to or for the benefit of the
Executive such Payments as are then due to the Executive and shall promptly pay
to or distribute to or for the benefit of the Executive such Payments as become
due to the Executive.
(iii) As a result of the uncertainty in the application
of Section 280G of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Payments will have been made by
the Company which should have not been made ("Overpayment") or that additional
Payments which will have not been made by the Company could have been made
("Underpayment"), in each case, consistent with the calculations required to
be made hereunder. In the event that the Accounting Firm determines that an
Overpayment has been made, any such Overpayment shall be treated for all
purposes as a loan to the Executive which the Executive shall repay to the
Company together with interest at the applicable Federal rate provided for in
Section 7872(f)(2) of the Code; provided, however, that no amount shall be
payable by the Executive to the Company (or if paid by the Executive to the
Company shall be returned to the Executive) if an to the extent such payment
would not reduce the amount which is subject to taxation under Section 4999 of
the Code. In the event that the Accounting Firm determines that an
Underpayment has occurred, any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive together with interest at the
applicable Federal rate provided for in section 7872(f)(2) of the Code.
5. Expenses; Relocation Expenses.
(a) During the Employment Term, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expense incurred
by the Executive in accordance with the policies, practices and procedures of
the Company.
(b) In addition, the Company shall reimburse
Executive for the costs and expenses relating to the temporary and permanent
relocation of Executive and his family to the
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Tampa, Florida area, including, but not limited to, reimbursement of Executive
for all reasonable temporary housing expenses for Executive and his family
during the period of their temporary relocation.
(c) The Company shall provide Executive with the
benefits (financial and otherwise) of the Company's relocation policy (a
description of which is set forth in Schedule 5(c) to this Agreement) with
respect to the sale of Executive's principle residence occupied prior to his
relocation to the Tampa, Florida area.
6. Noncompetition. Executive agrees that while in the
employ of the Company and, if Executive terminates his employment with the
Company prior to the expiration of the Employment Term in breach of his
obligations hereunder, for the period beginning on the date Executive
terminates his employment and ending on the date the Employment Term was
otherwise schedule to expire (the "Subject Period"), Executive will not,
directly or indirectly, as principal or agent, or in any other capacity, own,
manage, operate, participate in or be employed by or otherwise be interested
in, or connected in any manner with, any person, firm, corporation or other
enterprise which directly competes in a material respect with the business of
the Company or any of its majority-owned subsidiaries as it is conducted while
Executive is employed by the Company, except as provided in Schedule 6 hereto.
Nothing herein contained shall be construed as denying Executive the right to
own securities of any such corporation which is listed on a national securities
exchange or quoted in the National Association of Security Dealers, Inc.
Automated Quotation System (the "NASDAQ System") to the extent of an aggregate
of 5% of the amount of such securities outstanding.
7. Confidentiality. Executive agrees that while in the
employ of the Company (otherwise than in the performance of his duties
hereunder) and during the period of two years following the scheduled
expiration of the Employment Term, he shall not, directly or indirectly, make
use of, or divulge to any person, firm, corporation, entity or business
organization, and shall use his best efforts to prevent the publication or
disclosure of, any Confidential Information (as hereinafter defined) concerning
the Company, but this Section 7 shall not prevent Executive from responding to
any subpoena, court order or threat of other legal duress, provided Executive
notifies the Company thereof with reasonable promptness so that the Company may
seek a protective order or other appropriate relief. The term "Confidential
Information" shall mean information disclosed to Executive by the Company in
connection with his employment relating to the business of the Company,
including its accounts and finances, customers and customer lists, and its
future plans and proposals, to the extent that the foregoing matters are
considered proprietary by the Company; provided, however, that the following
shall not be deemed to be Confidential Information:
(a) information which is or becomes publicly known
other than as a result of a breach of this provision by Executive;
(b) information lawfully in the possession of
Executive prior to disclosure to him by the Company;
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(c) information disclosed to Executive by any third party;
or
(d) information developed independently by Executive
subsequent to Executive's employment by the Company.
8. Delivery of Materials. Executive agrees that upon the
termination of his employment he will deliver to the Company all documents,
papers, materials and other property of the Company relating to its affairs
which may then be in his possession or under his control.
9. Noninterference. Executive agrees that he will not,
while in the employ of the Company and, in the event Executive terminates his
employment with the Company prior to the expiration of the Employment Term in
breach of his obligations hereunder, during the Subject Period, solicit the
employment of any employee of the Company on behalf of any other person, firm,
corporation, entity or business organization, or otherwise interfere with the
employment relationship between any employee or officer of the Company and the
Company.
10. Remedies of the Company. Executive agrees that, in the
event of a material breach by Executive of this Agreement, in addition to any
other rights that the Company may have pursuant to this Agreement, the Company
shall be entitled, if it so elects, to institute and prosecute proceedings at
law or in equity to obtain damages with respect to such breach or to enforce
the specific performance of this Agreement by Executive or to enjoin Executive
from engaging in any activity in violation hereof. Executive agrees that
because Executive's services to the Company are of such a unique and
extraordinary character, a suit at law may be an inadequate remedy with respect
to a breach by Executive of Sections 6, 7, 8 and 9 hereof, and that upon any
such breach or threatened breach by him of such Sections the Company shall be
entitled, in addition to any other lawful remedies that may be available to it,
to injunctive relief.
11. Notices. all notices to be given hereunder shall be
deemed duly given when delivered personally in writing or mailed, certified
mail, return receipt requested, postage prepaid and addressed as follows:
(a) If to be given to the Company:
Home Shopping Network, Inc.
2501 118th Avenue North
St. Petersburg, Florida 33716
Attention: Legal Department
(b) If to be given to Executive:
1416 Brightwaters Boulevard., N.E.
St. Petersburg, Florida 33704
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With a separate copy to:
Baker & Botts, L.L.P.
885 Third Avenue
New York, New York 10020
Attention: Jerome H. Kern, Esq.
or to such other address as a party may request by notice given in accordance
with this Section 11.
12. Stock Appreciation Rights.
(a) The Company hereby grants to Executive Stock
Appreciation Rights ("SARs") with respect to 984,876 (the "Total Number of
SARs") shares of the Company's common stock, par value $.01 per share (the
"Common Stock", which term shall include the Common Stock of the Company as it
exists on the date hereof and any class or series into which it may hereafter
have been changed). The SARs granted hereunder shall vest over a four-year
period as follows: one-fourth of the Total Number of SARs shall vest and
become exercisable by Executive on each anniversary of the Effective Date,
commencing with February 23, 1994, such that the Total Number of SARs will be
fully vested on February 23, 1997, unless such vesting is accelerated pursuant
to Section 12(c) hereof. The SARs granted to Executive hereunder are not
granted under, and are not subject to the provisions of, any stock incentive,
bonus or other plan of the Company.
(b) SARs granted hereunder may be exercised, in
whole or in part and at any time or from time to time, during the period
commencing with the vesting of such SARs and ending on February 23, 2003,
unless earlier terminated in accordance with Section 12(c) hereof. SARs may be
exercised by delivery to the Company of a written notice specifying the whole
number of shares of Common Stock as to which SARs are being exercised;
provided, however, that in the event the Company ceases to be a Public Company
(as hereinafter defined) Executive may not exercise SARs on more than three
separate occasions, and SARs may not be exercised more than once in any fiscal
year of the Company during the period in which the Company is not a Public
Company. Upon the valid exercise of SARs, Executive shall be entitled to
receive from the Company cash or, so long as the Company is a Public Company,
shares of the Company's Common Stock (valued at the Fair Market Value (as
hereinafter defined) thereof) equal to the excess of (i) the Fair Market Value
of each share of Common Stock with respect to which such SARs have been
exercised over (ii) $8.25 per share (the "Strike Price").
(c) Upon termination of Executive's employment
hereunder, all SARs that have theretofore vested and not been exercised shall
remain exercisable for a period of one year after the effective date of the
termination of Executive's employment with the Company (the "Termination
Date") and shall thereafter terminate to the extent not exercised. In the
event of the termination of Executive's employment by the Company other than
for Cause, or termination of Executive's employment by Executive for Good
Reason, all unvested SARs shall vest
11
<PAGE> 12
immediately upon such termination and shall remain exercisable for a period of
one year following the Termination Date, and shall thereafter terminate to the
extent not exercised. In the event of a Change in Control, whether or not
Executive has elected to terminate his employment hereunder pursuant to
Section 1 (d) hereof, all vested SARs shall vest immediately prior to such
Change in Control, such that Executive may exercise all such SARs no later
than the time at which the Change in Control becomes effective, and such SARs
shall remain exercisable for a period of one year following termination of
Executive's employment (provided that Executive terminates his employment
within the twelve-month period referred to in Section 1(d)), and shall
thereafter terminate to the extent not exercised. In the event Executive's
employment is terminated as a result of his death or disability, all SARS that
become vested upon such event or that have theretofore vested shall remain
exercisable by Executive or his designated beneficiary or beneficiaries for a
period of one year after the Termination Date and notice of such expiration to
Executive, his designated beneficiary, if any, or his executor, as the case may
be, and shall thereafter terminate to the extent not exercised.
Notwithstanding anything contained in this subsection (c), no SAR shall be
exercisable after February 23, 2003.
(d) the Fair Market Value of a share of Common Stock
shall be determined on the date of exercise of an SAR, and the date of exercise
of such SAR shall mean the date on which the Company shall have received
written notice from Executive of the exercise of such SAR; provided, however,
that any such notice given by Executive by personal delivery or facsimile
transmission shall be deemed received by the Company at the time of such
delivery or transmission. The "Fair Market Value" of a share of Common Stock
shall be either (x) if the Company is a Public Company on the date of exercise,
the Reference Price (as hereinafter defined) of a share of Common Stock,
determined for the trading day preceding such date, or (y) if the Company is
not a Public Company on the date of exercise, the Per Share Value (as
hereinafter defined) of a share of Common Stock as of the date of exercise.
The "Reference Price" of a share of Common Stock shall be (i) the closing price
of a share of Common Stock for such trading day on the principal exchange on
which the Common Stock is listed, or (ii) if the Common Stock is not listed on
any national securities exchange, the closing price (or if none, the average of
the high and low bid prices) of a share of Common Stock on such trading day in
the over-the-counter market, as reported by the NASDAQ system. The "Per Share
Value" of a Share of Common Stock shall be determined as of the applicable
Appraisal Date (as hereinafter defined) and shall equal the quotient of the
Appraised Value (as hereinafter defined) of the Company divided by the sum of
(x) the total number of shares of Common Stock outstanding on such Appraisal
Date on a Fully Diluted Basis (as hereinafter defined) and (y) the total number
of SARs.
The Appraised Value of the Company shall be as agreed to by the
Company and Executive prior to the 31st day following the applicable Appraisal
Date. In the event that they have not reached agreement by such date
notwithstanding their respective good faith efforts to do so (each being
required to negotiate in good faith with the other at least for five (5)
business days), then the Company and Executive shall each designate a Qualified
Appraiser (as hereinafter defined) as promptly as practicable, but in no event
more than ten (10) days thereafter, which Qualified Appraisers shall be retained
by the Company to determine the Appraised Value of the
12
<PAGE> 13
Company as of the applicable Appraisal Date. Each Qualified Appraiser shall
submit its written determination of the Appraised Value of the Company to the
Company and Executive within 45 days after the date of its retention. If the
higher determination of the two Qualified Appraisers is not greater than 110%
of the lower determination, the Appraised Value of the Company shall be the
average of such two determinations. If the higher determination is greater
than 110% of the lower determination, then such two Qualified Appraisers
shall jointly select within ten (10) days after the date on which the later of
such two determinations was delivered a third Qualified Appraiser to be
retained by the Company. Such third Qualified Appraiser shall deliver its
written determination of the Appraised Value of the Company as of the applicable
Appraisal Date within 30 days after its retention, and the Appraised Value of
the Company shall be the average of the two closest determinations or, if there
are not two closest determinations, the average of all three determinations.
The Company shall pay all fees and expenses relating to the determination of
the Appraised Value, including the fees and expenses of all Qualified
Appraisers (including the Qualified Appraiser selected by Executive).
For purposes of this Section 12(d), the following terms shall have
the following meanings.
(i) "Appraisal Date": The date of exercise of the SARs.
(ii) "Appraised Value": As of the applicable Appraisal
Date, the fair market value of the Company on a going concern
(whether as a sale of stock or assets) or liquidation basis
(whichever method would yield the highest valuation). The fair
market value of the Company on a going concern basis shall take
into account such considerations (including but not limited to tax
considerations which are specific to a sale of assets versus a
sale of stock) as would customarily affect the price at which a
willing seller would sell and a willing buyer would buy a
comparable business as a going concerning in an arm's length
transaction. The fair market value of the Company on a liquidation
basis shall take into account tax liabilities that would be
incurred on liquidation assuming the most tax efficient and
practical plan of liquidation.
(iii) "Fully Diluted Basis": All shares of Common Stock
outstanding on the date of determination, together with shares of
Common Stock issuable upon the conversion, exercise or exchange of
securities of the Company which are convertible into, or
exercisable or exchangeable for, Common Stock, without regard to
whether such securities have vested or are then convertible,
exercisable or exchangeable.
(iv) "Public Company": The Company shall be deemed
to be a Public Company for so long as (i) the Common Stock is
registered under Section 12 of the Exchange Act and (ii) the
Common Stock is regularly traded on a national securities exchange
or quoted by the NASDAQ System.
(v) "Qualified Appraiser": A nationally recognized
investment banking firm with substantial experience as of the
applicable Appraisal Date in valuing significant communications
properties including cable television programming entities.
13
<PAGE> 14
(e) In the event of a stock dividend,
recapitalization, reorganization, split-up, spin-off, combination, exchange of
shares, warrants or rights offering to purchase Common Stock, or other similar
corporate event affecting the Common Stock such that an adjustment is required
in order to preserve the benefits of this Section 12, an adjustment shall be
made to increase or decrease any or all of (i) the number and kind of shares
subject to the SARs granted hereunder and/or (ii) the Strike Price, in such
manner as the Board of Directors may deem reasonable and appropriate, provided,
however, that the number of shares subject to the SARs granted hereunder shall
always be a whole number.
(f) The grant of SARs hereunder shall not affect in
any way the right or power of the Company to make reclassification,
reorganizations or other changes of or to its capital or business structure or
to merge, consolidate, liquidate, sell or otherwise dispose of all or any part
of its business or assets.
(g) The amount of cash payable at any time by the
Company upon the valid exercise of SARs granted hereunder shall not in any way
be reserved or held in trust by the Company. Executive shall not have any
rights against the Company in respect of payment of such amount of cash other
than the rights of an unsecured general creditor of the Company. The amount of
cash payable upon the valid exercise of SARs hereunder shall not be subject in
any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge, and shall not in any manner be liable or subject to the
debts, contracts, liabilities, engagements or torts of Executive or of any
designated beneficiary or personal representative.
(h) The SARs granted to Executive hereunder are not
transferable, except to a designated beneficiary or beneficiaries upon
Executive's death, and may only be exercised by Executive during his lifetime.
Without limiting the generality of the foregoing and except as provided herein,
the SARs granted hereunder may not be assigned, transferred, pledged or
hypothecated in any way (whether by operation of law or otherwise) and are not
subject to execution, attachment or similar process. Except as provided
herein, any attempted assignment, transfer, pledge of hypothecation of, or
levy, attachment or similar process upon, any SARs shall be null and void and
without force or effect.
13. Successors.
(a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and
be binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially of the business and/or
14
<PAGE> 15
assets of the Company to assume expressly and agree to perform this Agreement
in the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any successor to
its business and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
14. Miscellaneous.
(a) This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and replaces and
supersedes as of the date hereof any and all prior agreements and
understandings with respect to Executive's employment by the Company, whether
oral or written, between the parties hereto. This Agreement may not be changed
nor may any provision hereof be waived except by an instrument in writing duly
signed by the party to be charged. This Agreement shall be interpreted,
governed and controlled by the law of the State of Florida, without reference
to principles of conflict of laws.
(b) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
(c) The Company may withhold from any amounts
payable under this Agreement such Federal, state or local taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
(d) The Executive's or the Company's failure to
insist upon strict compliance with any provision hereof or any other provision
of this agreement or the failure to assert any right the Executive or the
Company may have hereunder, including, without limitation, the right
15
<PAGE> 16
of the Executive to terminate employment for Good Reason pursuant to Section
1(d) of this Agreement, shall not be deemed to be a waiver of such provision or
right or any other provision or right of this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and
year first above written.
<TABLE>
<CAPTION>
ATTEST: HOME SHOPPING NETWORK, INC.
<S> <C>
- ---------------- By: /s/ VIVIAN J. CARR
Name: ------------------
Title: Name: Vivian Carr
Title: Secretary
----------------------
Gerald F. Hogan
</TABLE>
16
<PAGE> 17
of the Executive to terminate employment for Good Reason pursuant to Section
1(d) of this Agreement, shall not be deemed to be a waiver of such provision or
right or any other provision or right of this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and year
first above written.
<TABLE>
<CAPTION>
ATTEST: HOME SHOPPING NETWORK, INC.
<S> <C>
By:
- ------------------- ------------------------
Name: Name:
Title: Title:
/s/ Gerald F. Hogan
---------------------------
Gerald F. Hogan
</TABLE>
16
<PAGE> 18
Schedule 5(c)
In accordance with the Home Shopping Network, Inc. ("HSN") policy and practice
in such matters, the following will apply in the sale of Executive's home at
3801 Topside Road, Knoxville, Tennessee:
<TABLE>
<S> <C>
1. The Guaranteed Sales Price, based on appraised value, shall be $1,100,000.00. HSN will guarantee Executive this price.
HSN reserves the right to review and approve/disapprove or modify any offers received by the realtor, Dean Smith Realty
of Knoxville, TN. If HSN accepts or directs Executive to accept an offer which is less than the appraised value, HSN
will reimburse Executive for the amount of the difference between the Guaranteed Sales Price and offer price, less the
monies it has paid towards the amortization of Executive's mortgage.
2. Monthly mortgage payments = $7,465.00. HSN will remit these payments to the first mortgage holder by the fifth day of
each month. Upon the sale of Executive's property, HSN will be reimbursed by Executive for any mortgage amortization
occurring during the period that HSN made such payments.
3. Maintenance. It is recognized that the property must be properly maintained while for sale. HSN will reimburse
Executive for this expense at the rate of $250.00 per month.
4. Insurance which provides appropriate protection against loss from fire, theft, vandalism, weather, etc. will be
maintained in Executive's name, and HSN will reimburse Executive for such amounts during the period prior to sale.
The annual cost of $2,836.00 will be paid by HSN. Executive will reimburse HSN for any insurance refunds made at the
closing.
5. Mr. Edward Vaughn will serve as agent on behalf of HSN to receive and review with Executive all offers presented by
Executive's realtors and, if appropriate, to adjust the asking price for the property.
6. The foregoing agreements shall remain in effect during the Employment Term and shall survive termination of the
Agreement; provided, however, that in the event Executive terminated his employment other than in accordance with
Section 1(d) of the Agreement, Executive shall be required to reimburse HSN for the amounts paid on Executive's behalf
pursuant to Sections 2, 3 and 4 of this Schedule 5(c).
</TABLE>
17
<PAGE> 1
EXHIBIT 10.33
HOME SHOPPING NETWORK, INC.
RETIREMENT SAVINGS AND EMPLOYEE STOCK OWNERSHIP PLAN
<PAGE> 2
3.3 EFFECTIVE DATE OF PARTICIPATION 28
3.4 DETERMINATION OF ELIGIBILITY 28
3.5 TERMINATION OF ELIGIBILITY 29
3.6 OMISSION OF ELIGIBLE EMPLOYEE 29
3.7 INCLUSION OF INELIGIBLE EMPLOYEE 29
3.8 ELECTION NOT TO PARTICIPATE 30
ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION 30
4.2 PARTICIPANT'S SALARY REDUCTION ELECTION 31
4.3 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION 36
4.4 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS 36
4.5 ACTUAL DEFERRAL PERCENTAGE TESTS 43
4.6 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS 46
4.7 ACTUAL CONTRIBUTION PERCENTAGE TESTS 48
4.8 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS 51
4.9 MAXIMUM ANNUAL ADDITIONS 54
4.10 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS 60
4.11 TRANSFERS FROM QUALIFIED PLANS 61
4.12 DIRECTED INVESTMENT ACCOUNT 64
<PAGE> 3
ARTICLE V
FUNDING AND INVESTMENT POLICY
5.1 INVESTMENT POLICY 65
5.2 APPLICATION OF CASH 66
5.3 LOANS TO THE TRUST 66
ARTICLE VI
VALUATIONS
6.1 VALUATION OF THE TRUST FUND 68
6.2 METHOD OF VALUATION 68
ARTICLE VII
DETERMINATION AND DISTRIBUTION OF BENEFITS
7.1 DETERMINATION OF BENEFITS UPON RETIREMENT 68
7.2 DETERMINATION OF BENEFITS UPON DEATH 69
7.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY 70
7.4 DETERMINATION OF BENEFITS UPON TERMINATION 71
7.5 DISTRIBUTION OF BENEFITS 75
7.6 HOW PLAN BENEFIT WILL BE DISTRIBUTED 79
7.7 DISTRIBUTION FOR MINOR BENEFICIARY 80
7.8 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN 80
7.9 RIGHT OF FIRST REFUSALS 81
7.10 STOCK CERTIFICATE LEGEND 82
7.11 PUT OPTION 83
<PAGE> 4
7.12 NONTERMINABLE PROTECTIONS AND RIGHTS 85
7.13 PRE-RETIREMENT DISTRIBUTION 85
7.14 ADVANCE DISTRIBUTION FOR HARDSHIP 86
7.15 LIMITATIONS ON BENEFITS AND DISTRIBUTIONS 88
ARTICLE VIII
AMENDMENT, TERMINATION AND MERGERS
8.1 AMENDMENT 88
8.2 TERMINATION 89
8.3 MERGER OR CONSOLIDATION 90
ARTICLE IX
MISCELLANEOUS
9.1 PARTICIPANT'S RIGHTS 90
9.2 ALIENATION 90
9.3 CONSTRUCTION OF PLAN 91
9.4 GENDER AND NUMBER 91
9.5 LEGAL ACTION 92
9.6 PROHIBITION AGAINST DIVERSION OF FUNDS 92
9.7 BONDING 92
9.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE 93
9.9 INSURER'S PROTECTIVE CLAUSE 93
9.10 RECEIPT AND RELEASE FOR PAYMENTS 93
9.11 ACTION BY THE EMPLOYER 93
<PAGE> 5
9.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY 94
9.13 HEADINGS 94
9.14 APPROVAL BY INTERNAL REVENUE SERVICE 95
9.15 UNIFORMITY 95
9.16 SECURITIES AND EXCHANGE COMMISSION APPROVAL 95
9.17 VOTING COMPANY STOCK 96
<PAGE> 6
HOME SHOPPING NETWORK, INC.
RETIREMENT SAVINGS AND EMPLOYEE STOCK OWNERSHIP PLAN
THIS PLAN, hereby adopted this 19th day of October, 1990, by Home
Shopping Network, Inc. (herein referred to as the "Employer").
W I T N E S S E T H:
WHEREAS, the Employer heretofore established a Profit
Sharing Plan effective February 1, 1990 (hereinafter called the
"Effective Date"), known as Home Shopping Network, Inc. Retirement
Savings Plan and which Plan shall hereinafter be known as Home
Shopping Network, Inc. Retirement Savings and Employee Stock
Ownership Plan in recognition of the contribution made to its
successful operation by its employees and for the exclusive benefit
of its eligible employees; and
WHEREAS, under the terms of the Profit Sharing Plan,
the Employer has the ability to amend the Profit Sharing Plan,
provided the Trustee joins in such amendment if the provisions of
the Profit Sharing Plan affecting the Trustee are amended; and
WHEREAS, the Employer desires to amend the Profit
Sharing Plan to enable its eligible employees to acquire a proprietary
interest in capital stock of the Employer; and
WHEREAS, contributions to the Plan will be made by the
Employer and such contributions made to the trust will be invested
primarily in the capital stock of the Employer;
NOW, THEREFORE, effective February 1, 1990, except as otherwise
provided, the Employer in accordance with the provisions of the Profit
Sharing Plan pertaining to amendments thereof, hereby modify, amend and
restate the Profit Sharing Plan in its entirety as an Employee Stock
Ownership Plan (ESOP) as defined in Section 4975(e) (7) of the Internal
Revenue Code, known as Home Shopping Network, Inc. Retirement Savings and
Employee Stock Ownership Plan (hereinafter referred to as the "Plan"), to
provide as follows:
i
<PAGE> 7
ARTICLE I
DEFINITIONS
1.1 "Act" means the Employee Retirement Income Security Act
of 1974, as it may be amended from time to time.
1.2 "Administrator" means the person designated by the Employer
pursuant to Section 2.4 to administer the Plan on behalf of the Employer.
1.3 "Affiliated Employer" means the Employer and any
corporation which is a member of a controlled group of corporations
(as defined in Code Section 414(b)) which includes the Employer; any trade
or business (whether or not incorporated) which is under common control
(as defined in Code Section 414(c)) with the Employer; any organization
(whether or not incorporated) which is a member of an affiliated service
group (as defined in Code Section 414(m)) which includes the Employer; and
any other entity required to be aggregated with the Employer pursuant to
Regulations under Code Section 414 (o).
1.4 "Aggregate Account" means, with respect to each Participant, the
value of all accounts maintained on behalf of a Participant, whether
attributable to Employer or Employee contributions, subject to the provisions
of Section 2.2.
1.5 "Anniversary Date" means December 31.
1.6 "Authorized Leave of Absence" means an unpaid temporary cessation
from active employment with the Employer pursuant to a nondiscriminatory
policy, whether occasioned by illness, military service, or any other reason.
1.7 "Beneficiary" means the person to whom the share of a deceased
Participant's total account is payable, subject to the restrictions of
Sections 7.2 and 7.5.
1.8 "Code" means the Internal Revenue Code of 1986, as amended or
replaced from time to time.
1.9 "Company Stock" means common stock issued by the Employer (or by a
corporation which is a member of the controlled group of corporations of
which the Employer is a member) which is readily tradeable on an established
securities market. If there is no common stock which meets the foregoing
requirement, the term "Company Stock" means common stock issued by the
Employer (or by a corporation which is a member of the same controlled
group) having a combination of voting power and dividend rights equal to
or in excess of: (A) that class of common stock of the Employer (or of any
other such corporation) having the greatest voting power, and (B) that class
of stock of the Employer (or of any other such corporation) having the
greatest dividend rights.
1
<PAGE> 8
Noncallable preferred stock shall be deemed to be "Company Stock" if such
stock is convertible at any time into stock which constitutes "Company Stock"
hereunder and if such conversion is at a conversion price which (as of the
date of the acquisition by the Trust) is reasonable. For purposes of the
preceding sentence, pursuant to Regulations, preferred stock shall be treated
as noncallable if after the call there will be a reasonable opportunity for
a conversion which meets the requirements of the preceding sentence.
1.10 "Company Stock Account" means the account established pursuant to
Section 4.1(b) to receive matching contributions and which is intended to be
invested primarily in Company Stock.
A separate accounting shall be maintained with respect to that
portion of the Company Stock Account attributable to Elective Contributions
and Non-Elective Contributions.
1.11 "Compensation" with respect to any Participant means such
Participant's regular salary and wages paid by the Employer for a Plan Year,
but excluding overtime, commissions and bonuses. Amounts contributed by the
Employer under the within Plan, except for an Employee's Compensation that
is deferred pursuant to Section 4.2, and any non-taxable fringe benefits
shall not be considered as Compensation.
For purposes of this Section, the determination of
Compensation shall be made by including salary reduction contributions made
on behalf of an Employee to a plan maintained under Code Section 125.
For a Participant's initial year of participation,
Compensation shall be recognized for the entire Plan Year.
Compensation in excess of $200,000 shall be disregarded. Such
amount shall be adjusted at the same time and in such manner as permitted
under Code Section 415(d). In applying this limitation, the family group of a
Highly Compensated Participant who is subject to the Family Member
aggregation rules of Code Section 414(q) (6) because such Participant is
either a "five percent owner" of the Employer or one of the ten (10) Highly
Compensated Employees paid the greatest "415 Compensation" during the year,
shall be treated as a single Participant, except that for this purpose Family
Members shall include only the affected Participant's spouse and any
lineal descendants who have not attained age nineteen (19) before the close
of the year. If, as a result of the application of such rules the adjusted
$200,000 limitation is exceeded, then the
2
<PAGE> 9
limitation shall be prorated among the affected Family Members in
proportion to each such Family Member's Compensation prior to the
application of this limitation.
For Plan Years beginning prior to January 1, 1989, the $200,000
limit (without regard to Family Member aggregation) shall apply only for
Top Heavy Plan Years and shall not be adjusted.
1.12 "Contract" or "Policy" means a life insurance policy or annuity
contract (group or individual) issued by the insurer as elected.
1.13 "Current Obligations" means Trust obligations arising from
extension of credit to the Trust and payable in cash within (1) year from
the date an Employer contribution is due.
1.14 "Deferred Compensation" with respect to any Participant
means that portion of the Participant's total Compensation which
has been contributed to the Plan in accordance with the Participant's
deferral election pursuant to Section 4.2.
1.15 "Early Retirement Date" means the first day of the month
(prior to the Normal Retirement Date) coinciding with or following the
date on which a Participant or Former Participant attains age 55 and
has completed at least a 7-year period of service.
A Former Participant who terminates employment after satisfying
the service requirement for Early Retirement and who thereafter reaches
the age requirement contained herein shall be entitled to receive his
benefits under this Plan.
1.16 "Elective Contribution" means the Employer's contributions to the
Plan that are made pursuant to the Participant's deferral election provided
in Section 4.2. In addition, any Employer Qualified Non-Elective Contribution
made pursuant to Section 4.6 shall be considered an Elective Contribution for
purposes of the Plan. Any such contributions deemed to be Elective
Contributions shall be subject to the requirements of Sections 4.2(b) and
4.2(c) and shall further be required to satisfy the discrimination
requirements of Regulation 1.401(k)-1(b) (3), the provisions of which are
specifically incorporated herein by reference.
3
<PAGE> 10
1.17 "Eligible Employee" means any full-time Employee working 30
hours or more per week.
Employees whose employment is governed by the terms of a
collective bargaining agreement between Employee representatives (within
the meaning of Code Section 7701(a) (46)) and the Employer under which
retirement benefits were the subject of good faith bargaining between the
parties, unless such agreement expressly provides for such coverage in this
Plan, will not be eligible to participate in this Plan.
1.18 "Employee" means any person who is employed by the Employer or
Affiliated Employer, but excludes any person who is an independent contractor.
Employee shall include Leased Employees within the meaning of Code Sections
414(n) (2) and 414(o) (2) unless such Leased Employees are covered by a plan
described in Code Section 414(n) (5) and such Leased Employees do
not constitute more than 20% of the recipient's non-highly compensated work
force.
1.19 "Employer" means Home Shopping Network, Inc. and any successor
which shall maintain this Plan; and any predecessor which has maintained this
Plan. The Employer is a corporation with principal offices in the State of
Florida.
1.20 "Excess Aggregate Contributions" means, with respect to any Plan
Year, the excess of the aggregate amount of the Employer matching
contributions made pursuant to Section 4.1(b) and any qualified non-elective
contributions or elective deferrals taken into account pursuant to Section
4.7(c) on behalf of Highly Compensated Participants for such Plan Year, over
the maximum amount of such contributions permitted under the limitations of
Section 4.7(a).
1.21 "Excess Contributions" means, with respect to a Plan Year, the
excess of Elective Contributions made on behalf of Highly Compensated
Participants for the Plan Year over the maximum amount of such contributions
permitted under Section 4.5(a). Excess Contributions shall be treated as an
"annual addition" pursuant to Section 4.9(b).
1.22 "Excess Deferred Compensation" means, with respect to any taxable
year of a Participant, the excess of the aggregate amount of such
Participant's Deferred Compensation and the elective deferrals pursuant to
Section 4.2(f) actually made on behalf of such Participant for such taxable
year, over the dollar limitation provided for in Code Section 402(g), which is
incorporated herein by reference. Excess Deferred Compensation shall be
treated as an "annual addition" pursuant to Section
4
<PAGE> 11
4.9(c).
1.23 "ESOP" means an employee stock ownership plan that
meets the requirements of Code Section 4975(e) (7) and Regulation
54.4975-11.
1.24 "Exempt Loan" means a loan made to the Plan by a
disqualified person or a loan to the Plan which is guaranteed by
a disqualified person and which satisfies the requirements of Section
2550.408b-3 of the Department of Labor Regulations, Section 54.4975-7(b)
of the Treasury Regulations and Section 5.3 hereof.
1.25 "Family Member" means, with respect to an affected
Participant, such Participant's spouse, such Participant's lineal
descendants and ascendants and their spouses, all as described in
Code Section 414 (q) (6) (B).
1.26 "Fiduciary" means any person who (a) exercises any
discretionary authority or discretionary control respecting management of
the Plan or exercises any authority or control respecting management or
disposition of its assets, (b) renders investment advice for a fee or other
compensation, direct or indirect, with respect to any monies or other
property of the Plan or has any authority or responsibility to do so, or (c)
has any discretionary authority or discretionary responsibility in the
administration of the Plan, including, but not limited to, the Trustee, the
Employer and its representative body, and the Administrator.
1.27 "Fiscal Year" means the Employer's accounting year of
12 months commencing on September 1st of each year and ending the
following August 31st.
1.28 "Forfeiture" means that portion of a Participant's
Account that is not Vested, and occurs on the earlier of:
(a) the distribution of the entire Vested
portion of a Participant's Account, or
(b) the last day of the Plan Year in which the
Participant incurs a five-year Period of Severance.
Furthermore, for purposes of paragraph (a) above, in the case of
a Terminated Participant whose Vested benefit is zero, such Terminated
Participant shall be deemed to have received a distribution of his Vested
benefit upon his termination of employment. Restoration of such amounts shall
occur pursuant to Section 7.4. In addition, the term Forfeiture shall also
include amounts deemed to be Forfeitures pursuant to any other provision of
this Plan.
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<PAGE> 12
1.29 "Former Participant" means a person who has been a
Participant, but who has ceased to be a Participant for any
reason.
1.30 "415 Compensation" means compensation as defined in
Section 4.9(d).
1.31 "414(s) Compensation" with respect to any Employee
means his Deferred Compensation plus "415 Compensation" paid
during a Plan Year. The amount of "414(s) Compensation" with
respect to any Employee shall include "414(s) Compensation"
during the entire twelve (12) month period ending on the last day
of such Plan Year.
For purposes of this Section, the determination of
"414(s) Compensation" shall be made by including salary reduction
contributions made on behalf of an Employee to a plan maintained
under Code Section 125.
"414(s) Compensation" in excess of $200,000 shall be
disregarded. Such amount shall be adjusted at the same time and
in such manner as permitted under Code Section 415(d). However,
for Plan Years beginning prior to January 1, 1989, the $200,000
limit shall apply only for Top Heavy Plan Years and shall not be
adjusted.
1.32 "Highly Compensated Employee" means an Employee
described in Code Section 414(q) and the Regulations thereunder,
and generally means an Employee who performed services for the
Employer during the "determination year" and is in one or more of
the following groups:
(a) Employees who at any time during the
"determination year" or "look-back year" were "five
percent owners" as defined in Section 1.38(c).
(b) Employees who received "415 Compensation"
during the "look-back year" from the Employer in excess
of $75,000.
(c) Employees who received "415 Compensation"
during the "look-back year" from the Employer in excess
of $50,000 and were in the Top Paid Group of Employees
for the Plan Year.
(d) Employees who during the "look-back year"
were officers of the Employer (as that term is defined
within the meaning of the Regulations under Code
Section 416) and received "415 Compensation" during the
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<PAGE> 13
"look-back year" from the Employer greater than 50
percent of the limit in effect under Code Section
415(b) (1) (A) for any such Plan Year. The number of
officers shall be limited to the lesser of (i) 50
employees; or (ii) the greater of 3 employees or 10
percent of all employees. For the purpose of
determining the number of officers, Employees described
in Section 1.63(a), (b), (c) and (d) shall be excluded,
but such Employees shall still be considered for the
purpose of identifying the particular Employees who are
officers. If the Employer does not have at least one
officer whose annual "415 Compensation" is in excess of
50 percent of the Code Section 415(b) (1) (A) limit, then
the highest paid officer of the Employer will be
treated as a Highly Compensated Employee.
(e) Employees who are in the group consisting of
the 100 Employees paid the greatest "415 Compensation"
during the "determination year" and are also described
in (b), (c) or (d) above when these paragraphs are
modified to substitute "determination year" for
"look-back year".
The "look-back year" shall be the calendar year ending
with or within the Plan Year for which testing is being
performed, and the "determination year" (if applicable) shall be
the period of time, if any, which extends beyond the "look-back
year" and ends on the last day of the Plan Year for which testing
is being performed (the "lag period"). If the "lag period" is
less than twelve months long, the dollar threshold amounts
specified in (b), (c) and (d) above shall be prorated based upon
the number of months in the "lag period".
For purposes of this Section, the determination of "415
Compensation" shall be based only on "415 Compensation" which is
actually paid and shall be made by including amounts that would
otherwise be excluded from a Participant's gross income by reason
of the application of Code Sections 125, 402(a) (8), 402(h) (1) (B)
and, in the case of Employer contributions made pursuant to a
salary reduction agreement, by including amounts that would
otherwise be excluded from a Participant's gross income by reason
of the application of Code Section 403(b). Additionally, the
dollar threshold amounts specified in (b) and (c) above shall be
adjusted at such time and in such manner as is provided in
Regulations. In the case of such an adjustment, the dollar limits
which shall be applied are those for the calendar year in which
the "determination year" or "look-back year" begins.
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<PAGE> 14
In determining who is a Highly Compensated Employee,
Employees who are non-resident aliens and who received no earned
income (within the meaning of Code Section 911(d) (2)) from the
Employer constituting United States source income within the
meaning of Code Section 861(a) (3) shall not be treated as
Employees. Additionally, all Affiliated Employers shall be taken
into account as a single employer and Leased Employees within the
meaning of Code Sections 414(n) (2) and 414(o) (2) shall be
considered Employees unless such Leased Employees are covered by
a plan described in Code Section 414 (n) (5) and are not covered in
any qualified plan maintained by the Employer. The exclusion of
Leased Employees for this purpose shall be applied on a uniform
and consistent basis for all of the Employer's retirement plans.
Highly Compensated Former Employees shall be treated as Highly
Compensated Employees without regard to whether they performed
services during the "determination year".
1.33 "Highly Compensated Former Employee" means a former
Employee who had a separation year prior to the "determination
year" and was a Highly Compensated Employee in the year of
separation from service or in any "determination year" after
attaining age 55. Notwithstanding the foregoing, an Employee who
separated from service prior to 1987 will be treated as a Highly
Compensated Former Employee only if during the separation year
(or year preceding the separation year) or any year after the
Employee attains age 55 (or the last year ending before the
Employee's 55th birthday), the Employee either received "415
Compensation" in excess of $50,000 or was a "five percent owner".
For purposes of this Section, "determination year", "415
Compensation" and "five percent owner" shall be determined in
accordance with Section 1.32. Highly Compensated Former Employees
shall be treated as Highly Compensated Employees. The method set
forth in this Section for determining who is a "Highly
Compensated Former Employee" shall be applied on a uniform and
consistent basis for all purposes for which the Code Section
414(q) definition is applicable.
1.34 "Highly Compensated Participant" means any Highly
Compensated Employee who is eligible to participate in the Plan.
1.35 "Hour of Service" means each hour for which an Employee
is directly or indirectly compensated or entitled to compensation
by the Employer for the performance of duties within the meaning
of Department of Labor Regulation 2530.200b-2(a) (1).
1.36 "Income" means the income allocable to "excess amounts"
which shall equal the sum of the allocable gain or loss for the
"applicable computation period" and the allocable gain or loss
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<PAGE> 15
for the period between the end of the "applicable computation
period" and the date of distribution ("gap period"). The income
allocable to "excess amounts" for the "applicable computation
period" and the "gap period" is calculated separately and is
determined by multiplying the income for the "applicable
computation period" or the "gap period" by a fraction. The
numerator of the fraction is the "excess amount" for the
"applicable computation period". The denominator of the fraction
is the total "account balance" attributable to "Employer
contributions" as of the end of the "applicable computation
period" or the "gap period", reduced by the gain allocable to
such total amount for the "applicable computation period" or the
"gap period" and increased by the loss allocable to such total
amount for the "applicable computation period" or the "gap
period". The provisions of this Section shall be applied:
(a) For purposes of Section 4.2(f), by
substituting:
(1) "Excess Deferred Compensation" for "excess
amounts";
(2) "taxable year of the Participant" for
"applicable computation period";
(3) "Deferred Compensation" for "Employer
contributions"; and
(4) "Participant's Elective Account" for
"account balance".
(b) For purposes of Section 4.6(a), by
substituting:
(1) "Excess Contributions" for "excess amount";
(2) "Plan Year" for "applicable computation
period'' ;
(3) "Elective Contributions" for "Employer
contributions"; and
(4) "Participant's Elective Account" for
"account balance".
(c) For purposes of Section 4.8(a), by
substituting:
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<PAGE> 16
(1) "Excess Aggregate Contributions" for "excess
amounts";
(2) "Plan Year" for "applicable computation
period";
(3) "Employer matching contributions made
pursuant to Section 4.1(b) and any qualified
non-elective contributions or elective deferrals
taken into account pursuant to Section 4.7(c)"
for "Employer contributions"; and
(4) "Participant's Account" for "account
balance".
In lieu of the "fractional method" described above, a
"safe harbor method" may be used to calculate the allocable
Income for the "gap period". Under such "safe harbor method",
allocable Income for the "gap period" shall be deemed to equal
ten percent (10%) of the Income allocable to "excess amounts" for
the "applicable computation period" multiplied by the number of
calendar months in the "gap period". For purposes of determining
the number of calendar months in the "gap period", a distribution
occurring on or before the fifteenth day of the month shall be
treated as having been made on the last day of the preceding
month and a distribution occurring after such fifteenth day shall
be treated as having been made on the first day of the next
subsequent month.
Income allocable to any distribution of Excess Deferred
Compensation on or before the last day of the taxable year of the
Participant shall be calculated from the first day of the taxable
year of the Participant to the date on which the distribution is
made pursuant to either the "fractional method" or the "safe
harbor method".
Notwithstanding the above, for "applicable computation
periods" which began in 1987, Income during the "gap period"
shall not be taken into account.
1.37 "Investment Manager" means an entity that (a) has the
power to manage, acquire, or dispose of Plan assets and (b)
acknowledges fiduciary responsibility to the Plan in writing.
Such entity must be a person, firm, or corporation registered as
an investment adviser under the Investment Advisers Act of 1940,
a bank, or an insurance company.
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<PAGE> 17
1.38 "Key Employee" means an Employee as defined in Code
Section 416(i) and the Regulations thereunder. Generally, any
Employee or former Employee (as well as each of his
Beneficiaries) is considered a Key Employee if he, at any time
during the Plan Year that contains the "Determination Date" or
any of the preceding four (4) Plan Years, has been included in
one of the following categories:
(a) an officer of the Employer (as that term is
defined within the meaning of the Regulations under
Code Section 416) having annual "415 Compensation"
greater than 50 percent of the amount in effect under
Code Section 415(b) (1) (A) for any such Plan Year.
(b) one of the ten employees having annual "415
Compensation" from the Employer for a Plan Year greater
than the dollar limitation in effect under Code Section
415(c) (1) (A) for the calendar year in which such Plan
Year ends and owning (or considered as owning within
the meaning of Code Section 318) both more than
one-half percent interest and the largest interests in
the Employer.
(c) a "five percent owner" of the Employer.
"Five percent owner" means any person who owns (or is
considered as owning within the meaning of Code Section
318) more than five percent (5%) of the outstanding
stock of the Employer or stock possessing more than
five percent (5%) of the total combined voting power of
all stock of the Employer or, in the case of an
unincorporated business, any person who owns more than
five percent (5%) of the capital or profits interest in
the Employer. In determining percentage ownership
hereunder, employers that would otherwise be aggregated
under Code Sections 414(b), (c), (m) and (o) shall be
treated as separate employers.
(d) a "one percent owner" of the Employer having
an annual "415 Compensation" from the Employer of more
than $150,000. "One percent owner" means any person who
owns (or is considered as owning within the meaning of
Code Section 318) more than one percent (1%) of the
outstanding stock of the Employer or stock possessing
more than one percent (1%) of the total combined voting
power of all stock of the Employer or, in the case of
an unincorporated business, any person who owns more
than one percent (1%) of the capital or profits
interest in the Employer. In determining percentage
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<PAGE> 18
ownership hereunder, employers that would otherwise be
aggregated under Code Sections 414(b), (c), (m) and (o)
shall be treated as separate employers. However, in
determining whether an individual has "415 Compensation"
of more than $150,000, "415 Compensation" from each
employer required to be aggregated under Code Sections
414(b), (c), (m) and (o) shall be taken into account.
For purposes of this Section, the determination of "415
Compensation" shall be based only on "415 Compensation" which is
actually paid and shall be made by including amounts that would
otherwise be excluded from a Participant's gross income by reason
of the application of Code Sections 125, 402(a) (8), 402(h) (1) (B)
and, in the case of Employer contributions made pursuant to a
salary reduction agreement, by including amounts that would
otherwise be excluded from a Participant's gross income by reason
of the application of Code Section 403(b).
1.39 "Late Retirement Date" means the first day of the month
coinciding with or next following a Participant's actual
Retirement Date after having reached his Normal Retirement Date.
1.40 "Leased Employee" means any person (other than an
Employee of the recipient) who pursuant to an agreement between
the recipient and any other person ("leasing organization") has
performed services for the recipient (or for the recipient and
related persons determined in accordance with Code Section
414(n) (6)) on a substantially full time basis for a period of at
least one year, and such services are of a type historically
performed by employees in the business field of the recipient
employer. Contributions or benefits provided a Leased Employee by
the leasing organization which are attributable to services
performed for the recipient employer shall be treated as provided
by the recipient employer. A Leased Employee shall not be
considered an Employee of the recipient if:
(a) such employee is covered by a money purchase
pension plan providing:
(1) a non-integrated employer contribution rate
of at least 10% of compensation, as defined in
Code Section 415(c) (3), but including amounts
contributed pursuant to a salary reduction
agreement which are excludable from the
employee's gross income under Code Sections 125,
402(a) (8), 402(h) or 403(b);
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<PAGE> 19
(2) immediate participation; and
(3) full and immediate vesting.
(b) Leased Employees do not constitute more than
20% of the recipient's non-highly compensated work
force.
1.41 "Maternity or Paternity Leave of Absence" means, for
Plan Years beginning after December 31, 1984, an absence from
work for any period by reason of the Employee's pregnancy,
adoption of such child, or any absence for the purpose of caring
for such child for a period immediately following such birth or
placement.
1.42 "Net Profit" means with respect to any Fiscal Year the
Employer's net income or profit for such Fiscal Year determined
upon the basis of the Employer's books of account in accordance
with generally accepted accounting principles, without any
reduction for taxes based upon income, or for contributions made
by the Employer to this Plan.
1.43 "Non-Elective Contribution" means the Employer's
contributions to the Plan excluding, however, contributions made
pursuant to the Participant's deferral election provided for in
Section 4.2 and any Qualified Non-Elective Contribution.
1.44 "Non-Highly Compensated Participant" means any
Participant who is neither a Highly Compensated Employee nor a
Family Member.
1.45 "Non-Key Employee" means any Employee or former
Employee (and his Beneficiaries) who is not a Key Employee.
1.46 "Normal Retirement Date" means the first day of the
month coinciding with or next following the Participant's Normal
Retirement Age (65th birthday). A Participant shall become fully
Vested in his Account upon attaining his Normal Retirement Age.
1.47 "Other Investments Account" means the account of a
Participant which is credited with his share of the net gain (or
loss) of the Plan and Employer contributions in other than
Company Stock and which is debited with payments made to pay for
Company Stock.
A separate accounting shall be maintained with respect
to that portion of the Other Investments Account attributable to
Elective Contributions and Non-Elective Contributions.
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<PAGE> 20
1.48 "Participant" means any Eligible Employee who participates
in the Plan as provided in Sections 3.2 and 3.3, and has not for
any reason become ineligible to participate further in the Plan.
1.49 "Participant's Account" means the account established
and maintained by the Administrator for each Participant with
respect to his total interest in the Plan and Trust resulting
from the Employer's Non-Elective Contributions.
A separate accounting shall be maintained with respect
to that portion of the Participant's Account attributable to
Employer matching contributions made pursuant to Section 4.1(b)
and Employer discretionary contributions made pursuant to Section
4.1(c).
1.50 "Participant's Combined Account" means the total
aggregate amount of each Participant's Elective Account and
Participant's Account.
1.51 "Participant's Elective Account" means the account
established and maintained by the Administrator for each
Participant with respect to his total interest in the Plan and
Trust resulting from the Employer's Elective Contributions. A
separate accounting shall be maintained with respect to that
portion of the Participant's Elective Account attributable to
Elective Contributions pursuant to Section 4.2 and any Employer
Qualified Non-Elective Contributions.
1.52 "Period of Service"
(a) Special Definitions
(1) "Employment Commencement Date" means the date
on which the Employee first performs an Hour of
Service for the Employer.
(2) "Date of Absence" means the first date of a
period in which the Employee remains absent from
service with the Employer (with or without pay)
for any reason other than a quit, discharge,
retirement, or death. For example, such absence
may be due to vacation, holiday, sickness, disability,
Authorized Leave of Absence, Maternity or Paternity
Leave of Absence, or layoff.
(3) "Severance from Service Date" means the earlier
of (a) the date the Employee quits, retires, is
discharged, or dies, or (b) the first anniversary
of a Date of Absence. However, in the case of a
Maternity or Paternity Absence, if the Employee is
absent beyond the first anniversary of his first
14
<PAGE> 21
Date of Absence, his Severance from Service
Date shall mean the second anniversary of
such date of Absences. The period between the
first and second anniversaries is neither a
period of service nor a Period of Severance.
This rule applies to Maternity and Paternity
Absences beginning on or after the first day
of the first Plan Year after December 31,
1984.
(4) "Period of Severance" means the period of
time commencing on the Severance from Service
Date and ending on the date on which the
Employee again performs an Hour of Service
for the Employer.
(5) "Reemployment Commencement Date" means
the first date, following a Period of
Severance which is not required to be taken
into account as a Period of Service, on which
the Employee performs an Hour of Service for
the Employer.
(6) "Adjusted Employment Commencement Date"
means the date reached by counting forward
from the initial Employment Commencement Date
by the number of days contained in the
aggregated Periods of Severance which are not
required to be taken into account as a Period
of Service.
(b) "Period of Service" shall mean a period
of service, assuming 365 days equal one year,
commencing on the Employee's Adjusted Employment
Commencement Date and ending on his Severance from
Service Date. Days of Service shall include all
days within a Period of Severance if the Employee:
(1) Severs from service by reason of a quit,
discharge, or retirement and then performs an Hour
of Service within 12 months of his Severance from
Service Date; or (2) Severs from service by reason
of a quit, discharge, or retirement within 12
months of a Date of Absence and then performs an
Hour of Service also within 12 months of that Date
of Absence.
Service with any Affiliated Employer shall be
recognized.
1.53 "Plan means this instrument, including all
amendments thereto.
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<PAGE> 22
1.54 "Plan Year" means the Plan's accounting year of twelve
(12) months commencing on January 1st of each year and ending the
following December 31st, except for the first Plan Year which
commenced February 1, 1990.
1.55 "Qualified Non-Elective Contribution" means the
Employer's contributions to the Plan that are made pursuant
to Section 4.6. Such contributions shall be considered an Elective
Contribution for the purposes of the Plan and used to satisfy
the "Actual Deferral Percentage" tests.
In addition, the Employer's contributions to the Plan
that are made pursuant to Section 4.8(g) which are used to satisfy
the "Actual Contribution Percentage" tests shall be considered
Qualified Non-Elective Contributions and be subject to the
provisions of Sections 4.2(b) and 4.2(c).
1.56 "Regulation" means the Income Tax Regulations as
promulgated by the Secretary of the Treasury or his delegate, and
as amended from time to time.
1.57 "Retired Participant" means a person who has been a
Participant, but who has become entitled to retirement benefits
under the Plan.
1.58 "Retirement Date" means the date as of which a Participant
retires for reasons other than Total and Permanent Disability,
whether such retirement occurs on a Participant's Normal Retirement
Date, Early or Late Retirement Date (see Section 7.1).
1.59 "Super Top Heavy Plan" means a plan described in
Section 2.2(b).
1.60 "Terminated Participant" means a person who has been a
Participant, but whose employment has been terminated other than
by death, Total and Permanent Disability or retirement.
1.61 "Top Heavy Plan" means a plan described in Section 2.2(a).
1.62 "Top Heavy Plan Year" means a Plan Year commencing
after December 31, 1983 during which the Plan is a Top Heavy Plan.
1.63 "Top Paid Group" means the top 20 percent of Employees
who performed services for the Employer during the applicable
year, ranked according to the amount of "415 Compensation"
(determined for this purpose in accordance with Section 1.32)
received from the Employer during such year. All Affiliated
Employers shall be taken into account as a single employer, and
Leased Employees within the meaning of Code Sections 414(n) (2)
and 414 (o) (2) shall be considered Employees unless such Leased
Employees are covered by a plan described in Code Section
414(n) (5) and are not covered in any qualified plan maintained by
the Employer. Employees who are non-resident aliens and who
received no earned income (within the meaning of Code Section
911(d) (2)) from the Employer constituting United States source
16
<PAGE> 23
income within the meaning of Code Section 861 (a) (3) shall not be
treated as Employees. Additionally, for the purpose of
determining the number of active Employees in any year, the
following additional Employees shall also be excluded; however,
such Employees shall still be considered for the purpose of
identifying the particular Employees in the Top Paid Group:
(a) Employees with less than six (6) months of
service;
(b) Employees who normally work less than 17 1/2
hours per week;
(c) Employees who normally work less than six
(6) months during a year; and
(d) Employees who have not yet attained age 21.
In addition, if 90 percent or more of the Employees of
the Employer are covered under agreements the Secretary of Labor
finds to be collective bargaining agreements between Employee
representatives and the Employer, and the Plan covers only
Employees who are not covered under such agreements, then
Employees covered by such agreements shall be excluded from both
the total number of active Employees as well as from the
identification of particular Employees in the Top Paid Group.
The foregoing exclusions set forth in this Section shall
be applied on a uniform and consistent basis for all purposes for
which the Code Section 414(q) definition is applicable.
1.64 "Total and Permanent Disability" means a physical or
mental condition of a Participant resulting from bodily injury,
disease, or mental disorder which renders him incapable of
continuing his usual and customary employment with the Employer.
The disability of a Participant shall be determined by a licensed
physician chosen by the Administrator. The determination shall be
applied uniformly to all Participants.
1.65 "Trustee" means the person or entity named as trustee
herein or in any separate trust forming a part of this Plan, and
any successors.
1.66 "Trust Fund" means the assets of the Plan and Trust as
the same shall exist from time to time.
1.67 "Unallocated Company Stock Suspense Account" means an
account containing Company Stock acquired with the proceeds of an
Exempt Loan and which has not been released from such account and
allocated to the Participants' Company Stock Accounts.
1.68 "Vested" means the nonforfeitable portion of any
account maintained on behalf of a Participant.
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<PAGE> 24
ARTICLE II
TOP HEAVY AND ADMINISTRATION
2.1 TOP HEAVY PLAN REQUIREMENTS
For any Top Heavy Plan Year, the Plan shall provide the special
vesting requirements of Code Section 416(b) pursuant to Section 7.4 of the
Plan and the special minimum allocation requirements of Code Section 416(c)
pursuant to Section 4.4 of the Plan.
2.2 DETERMINATION OF TOP HEAVY STATUS
(a) This Plan shall be a Top Heavy Plan for any
Plan Year commencing after December 31, 1983 in which,
as of the Determination Date, (1) the Present Value of
Accrued Benefits of Key Employees and (2) the sum of
the Aggregate Accounts of Key Employees under this Plan
and all plans of an Aggregation Group, exceeds sixty
percent (60%) of the Present Value of Accrued Benefits
and the Aggregate Accounts of all Key and Non-Key
Employees under this Plan and all plans of an
Aggregation Group.
If any Participant is a Non-Key Employee for
any Plan Year, but such Participant was a Key Employee
for any prior Plan Year, such Participant's Present
Value of Accrued Benefit and/or Aggregate Account
balance shall not be taken into account for purposes of
determining whether this Plan is a Top Heavy or Super
Top Heavy Plan (or whether any Aggregation Group which
includes this Plan is a Top Heavy Group). In addition,
for Plan Years beginning after December 31, 1984, if a
Participant or Former Participant has not performed any
services for any Employer maintaining the Plan at any
time during the five year period ending on the
Determination Date, any accrued benefit for such
Participant or Former Participant shall not be taken
into account for the purposes of determining whether
this Plan is a Top Heavy or Super Top Heavy Plan.
(b) This Plan shall be a Super Top Heavy Plan
for any Plan Year commencing after December 31, 1983 in
which, as of the Determination Date, (1) the Present
Value of Accrued Benefits of Key Employees and (2) the
sum of the Aggregate Accounts of Key Employees under
this Plan and all plans of an Aggregation Group,
exceeds ninety percent (90%) of the Present Value of
Accrued Benefits and the Aggregate Accounts of all Key
and Non-Key Employees under this Plan and all plans of
an Aggregation Group.
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<PAGE> 25
(c) Aggregate Account: A Participant's Aggregate
Account as of the Determination Date is the sum of:
(1) his Participant's Combined Account balance as
of the most recent valuation occurring within a
twelve (12) month period ending on the
Determination Date;
(2) an adjustment for any contributions due as of
the Determination Date. Such adjustment shall be
the amount of any contributions actually made
after the valuation date but due on or before the
Determination Date, except for the first Plan Year
when such adjustment shall also reflect the amount
of any contributions made after the Determination
Date that are allocated as of a date in that first
Plan Year;
(3) any Plan distributions made within the Plan
Year that includes the Determination Date or
within the four (4) preceding Plan Years. However,
in the case of distributions made after the
valuation date and prior to the Determination
Date, such distributions are not included as
distributions for top heavy purposes to the extent
that such distributions are already included in
the Participant's Aggregate Account balance as of
the valuation date. Notwithstanding anything
herein to the contrary, all distributions,
including distributions made prior to January 1,
1984, and distributions under a terminated plan
which if it had not been terminated would have
been required to be included in an Aggregation
Group, will be counted. Further, distributions
from the Plan (including the cash value of life
insurance policies) of a Participant's account
balance because of death shall be treated as a
distribution for the purposes of this paragraph.
(4) any Employee contributions.
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(c) Aggregate Account: A Participant's Aggregate
Account as of the Determination Date is the sum of:
(1) his Participant's Combined Account balance
as of the most recent valuation occurring within
a twelve (12) month period ending on the
Determination Date;
(2) an adjustment for any contributions due as
of the Determination Date. Such adjustment shall
be the amount of any contributions actually made
after the valuation date but due on or before the
Determination Date, except for the first Plan
Year when such adjustment shall also reflect the
amount of any contributions made after the
Determination Date that are allocated as of a
date in that first Plan Year;
(3) any Plan distributions made within the Plan
Year that includes the Determination Date or
within the four (4) preceding Plan Years.
However, in the case of distributions made after
the valuation date and prior to the Determination
Date, such distributions are not included as
distributions for top heavy purposes to the
extent that such distributions are already
included in the Participant's Aggregate Account
balance as of the valuation date. Notwithstanding
anything herein to the contrary, all
distributions, including distributions made prior
to January 1, 1984, and distributions under a
terminated plan which if it had not been
terminated would have been required to be
included in an Aggregation Group, will be
counted. Further, distributions from the Plan
(including the cash value of life insurance
policies) of a Participant's account balance
because of death shall be treated as a
distribution for the purposes of this paragraph.
(4) any Employee contributions. However,
amounts attributable to tax deductible qualified
voluntary employee contributions shall not be
considered to be a part of the Participant's
Aggregate Account balance.
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<PAGE> 27
(5) with respect to unrelated rollovers and
plan-to-plan transfers (ones which are both
initiated by the Employee and made from a plan
maintained by one employer to a plan maintained
by another employer), if this Plan provides the
rollovers or plan-to-plan transfers, it shall
always consider such rollovers or plan-to-plan
transfers as a distribution for the purposes of
this Section. If this Plan is the plan accepting
such rollovers or plan-to-plan transfers, it
shall not consider such rollovers or plan-to-plan
transfers accepted after December 31, 1983 as
part of the Participant's Aggregate Account
balance. However, rollovers or plan-to-plan
transfers accepted prior to January 1, 1984 shall
be considered as part of the Participant's
Aggregate Account balance.
(6) with respect to related rollovers and
plan-to-plan transfers (ones either not initiated
by the Employee or made to a plan maintained by
the same employer), if this Plan provides the
rollover or plan-to-plan transfer, it shall not
be counted as a distribution for purposes of this
Section. If this Plan is the plan accepting such
rollover or plan-to-plan transfer, it shall
consider such rollover or plan-to-plan transfer
as part of the Participant's Aggregate Account
balance, irrespective of the date on which such
rollover or plan-to-plan transfer is accepted.
(7) For the purposes of determining whether two
employers are to be treated as the same employer
in (5) and (6) above, all employers aggregated
under Code Section 414(b), (c), (m) and (o) are
treated as the same employer.
(d) "Aggregation Group" means either a Required
Aggregation Group or a Permissive Aggregation Group as
hereinafter determined.
(1) Required Aggregation Group: In determining a
Required Aggregation Group hereunder, each plan
of the Employer in which a Key Employee is a
participant in the Plan Year containing the
Determination Date or any of the four preceding
Plan Years, and each other plan of the Employer
which enables any plan in which a Key Employee
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<PAGE> 28
participates to meet the requirements of Code
Sections 401(a) (4) or 410, will be required to be
aggregated. Such group shall be known as a
Required Aggregation Group.
In the case of a Required Aggregation Group, each
plan in the group will be considered a Top Heavy
Plan if the Required Aggregation Group is a Top
Heavy Group. No plan in the Required Aggregation
Group will be considered a Top Heavy Plan if the
Required Aggregation Group is not a Top Heavy
Group.
(2) Permissive Aggregation Group: The Employer
may also include any other plan not required to
be included in the Required Aggregation Group,
provided the resulting group, taken as a whole,
would continue to satisfy the provisions of Code
Sections 401(a) (4) and 410. Such group shall be
known as a Permissive Aggregation Group.
In the case of a Permissive Aggregation Group,
only a plan that is part of the Required
Aggregation Group will be considered a Top Heavy
Plan if the Permissive Aggregation Group is a Top
Heavy Group. No plan in the Permissive
Aggregation Group will be considered a Top Heavy
Plan if the Permissive Aggregation Group is not a
Top Heavy Group.
(3) Only those plans of the Employer in which
the Determination Dates fall within the same
calendar year shall be aggregated in order to
determine whether such plans are Top Heavy Plans.
(4) An Aggregation Group shall include any
terminated plan of the Employer if it was
maintained within the last five (5) years ending
on the Determination Date.
(e) "Determination Date" means (a) the last day
of the preceding Plan Year, or (b) in the case of the
first Plan Year, the last day of such Plan Year.
(f) Present Value of Accrued Benefit: In the
case of a defined benefit plan, the Present Value of
Accrued Benefit for a Participant other than a Key
Employee, shall be as determined using the single
accrual method used for all plans of the Employer and
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Affiliated Employers, or if no such single method
exists, using a method which results in benefits
accruing not more rapidly than the slowest accrual rate
permitted under Code Section 411 (b) (1) (C). The
determination of the Present Value of Accrued Benefit
shall be determined as of the most recent valuation
date that falls within or ends with the 12-month period
ending on the Determination Date except as provided in
Code Section 416 and the Regulations thereunder for the
first and second plan years of a defined benefit plan.
(g) "Top Heavy Group" means an Aggregation Group
in which, as of the Determination Date, the sum of:
(1) the Present Value of Accrued Benefits of Key
Employees under all defined benefit plans
included in the group, and
(2) the Aggregate Accounts of Key Employees
under all defined contribution plans included in
the group,
exceeds sixty percent (60%) of a similar sum
determined for all Participants.
2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER
(a) The Employer shall be empowered to appoint
and remove the Trustee and the Administrator from time
to time as it deems necessary for the proper
administration of the Plan to assure that the Plan is
being operated for the exclusive benefit of the
Participants and their Beneficiaries in accordance with
the terms of the Plan, the Code, and the Act.
(b) The Employer shall establish a "funding
policy and method", i.e., it shall determine whether
the Plan has a short run need for liquidity (e.g., to
pay benefits) or whether liquidity is a long run goal
and investment growth (and stability of same) is a more
current need, or shall appoint a qualified person to do
so. The Employer or its delegate shall communicate such
needs and goals to the Trustee, who shall coordinate
such Plan needs with its investment policy. The
communication of such a "funding policy and method"
shall not, however, constitute a directive to the
Trustee as to investment of the Trust Funds. Such
"funding policy and method" shall be consistent with
the objectives of this Plan and with the requirements
of Title I of the Act.
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<PAGE> 30
(c) The Employer shall periodically review the
performance of any Fiduciary or other person to whom
duties have been delegated or allocated by it under the
provisions of this Plan or pursuant to procedures
established hereunder. This requirement may be
satisfied by formal periodic review by the Employer or
by a qualified person specifically designated by the
Employer, through day-to-day conduct and evaluation, or
through other appropriate ways.
(d) The Employer will furnish Plan Fiduciaries
and Participants with notices and information
statements when voting rights must be exercised
pursuant to Section 9.17.
2.4 DESIGNATION OF ADMINISTRATIVE AUTHORITY
The Employer shall appoint one or more Administrators.
Any person, including, but not limited to, the Employees of the
Employer, shall be eligible to serve as an Administrator. Any
person so appointed shall signify his acceptance by filing
written acceptance with the Employer. An Administrator may resign
by delivering his written resignation to the Employer or be
removed by the Employer by delivery of written notice of removal,
to take effect at a date specified therein, or upon delivery to
the Administrator if no date is specified.
The Employer, upon the resignation or removal of an
Administrator, shall promptly designate in writing a successor to
this position. If the Employer does not appoint an Administrator,
the Employer will function as the Administrator.
2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES
If more than one person is appointed as Administrator,
the responsibilities of each Administrator may be specified by
the Employer and accepted in writing by each Administrator. In
the event that no such delegation is made by the Employer, the
Administrators may allocate the responsibilities among themselves,
in which event the Administrators shall notify the Employer and
the Trustee in writing of such action and specify the
responsibilities of each Administrator. The Trustee thereafter
shall accept and rely upon any documents executed by the appropriate
Administrator until such time as the Employer or the Administrators
file with the Trustee a written revocation of such designation.
2.6 POWERS AND DUTIES OF THE ADMINISTRATOR
The primary responsibility of the Administrator is to
administer the Plan for the exclusive benefit of the Participants
and their Beneficiaries, subject to the specific terms of the
23
<PAGE> 31
Plan. The Administrator shall administer the Plan in accordance
with its terms and shall have the power and discretion to
construe the terms of the Plan and to determine all questions
arising in connection with the administration, interpretation,
and application of the Plan. Any such determination by the
Administrator shall be conclusive and binding upon all persons.
The Administrator may establish procedures, correct any defect,
supply any information, or reconcile any inconsistency in such
manner and to such extent as shall be deemed necessary or
advisable to carry out the purpose of the Plan; provided,
however, that any procedure, discretionary act, interpretation or
construction shall be done in a nondiscriminatory manner based
upon uniform principles consistently applied and shall be
consistent with the intent that the Plan shall continue to be
deemed a qualified plan under the terms of Code Section 401(a),
and shall comply with the terms of the Act and all regulations
issued pursuant thereto. The Administrator shall have all powers
necessary or appropriate to accomplish his duties under this
Plan.
The Administrator shall be charged with the duties of
the general administration of the Plan, including, but not
limited to, the following:
(a) the discretion to determine all questions
relating to the eligibility of Employees to participate
or remain a Participant hereunder and to receive
benefits under the Plan;
(b) to compute, certify, and direct the Trustee
with respect to the amount and the kind of benefits to
which any Participant shall be entitled hereunder;
(c) to authorize and direct the Trustee with
respect to all nondiscretionary or otherwise directed
disbursements from the Trust;
(d) to maintain all necessary records for the
administration of the Plan;
(e) to interpret the provisions of the Plan and
to make and publish such rules for regulation of the
Plan as are consistent with the terms hereof;
(f) to determine the size and type of any
Contract to be purchased from any insurer, and to
designate the insurer from which such Contract shall be
purchased;
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<PAGE> 32
(g) to compute and certify to the Employer and
to the Trustee from time to time the sums of money
necessary or desirable to be contributed to the Plan;
(h) to consult with the Employer and the Trustee
regarding the short and long-term liquidity needs of
the Plan in order that the Trustee can exercise any
investment discretion in a manner designed to
accomplish specific objectives;
(i) to prepare and implement a procedure to
notify Eligible Employees that they may elect to have a
portion of their Compensation deferred or paid to them
in cash;
(j) to establish and communicate to Participants
a procedure, which includes at least three (3) investment
options pursuant to Regulations, for allowing each Participant
to direct the Trustee as to the investment of his Company
Stock Account pursuant to Section 4.12;
(k) to establish and communicate to Participants
a procedure and method to insure that each Participant
will vote Company Stock allocated to such Participant's
Company Stock Account pursuant to Section 9.17;
(l) to assist any Participant regarding his rights,
benefits, or elections available under the Plan.
2.7 RECORDS AND REPORTS
The Administrator shall keep a record of all actions
taken and shall keep all other books of account, records, and
other data that may be necessary for proper administration of the
Plan and shall be responsible for supplying all information and
reports to the Internal Revenue Service, Department of Labor,
Participants, Beneficiaries and others as required by law.
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<PAGE> 33
2.8 APPOINTMENT OF ADVISERS
The Administrator, or the Trustee with the consent of
the Administrator, may appoint counsel, specialists, advisers,
and other persons as the Administrator or the Trustee deems
necessary or desirable in connection with the administration of
this Plan.
2.9 INFORMATION FROM EMPLOYER
To enable the Administrator to perform his functions,
the Employer shall supply full and timely information to the
Administrator on all matters relating to the Compensation of all
Participants, their Hours of Service, their Years of Service,
their retirement, death, disability, or termination of employment,
and such other pertinent facts as the Administrator may require;
and the Administrator shall advise the Trustee of such of the
foregoing facts as may be pertinent to the Trustee's duties under
the Plan. The Administrator may rely upon such information as is
supplied by the Employer and shall have no duty or responsibility
to verify such information.
2.10 PAYMENT OF EXPENSES
All expenses of administration may be paid out of the
Trust Fund unless paid by the Employer. Such expenses shall include
any expenses incident to the functioning of the Administrator, including,
but not limited to, fees of accountants, counsel, and other specialists
and their agents, and other costs of administering the Plan. Until paid,
the expenses shall constitute a liability of the Trust Fund. However, the
Employer may reimburse the Trust Fund for any administration expense
incurred. Any administration expense paid to the Trust Fund as a
reimbursement shall not be considered an Employer contribution.
2.11 MAJORITY ACTIONS
Except where there has been an allocation and
delegation of administrative authority pursuant to Section 2.5,
if there shall be more than one Administrator, they shall act by
a majority of their number, but may authorize one or more of them
to sign all papers on their behalf.
2.12 CLAIMS PROCEDURE
Claims for benefits under the Plan may be filed with
the Administrator on forms supplied by the Employer. Written
notice of the disposition of a claim shall be furnished to the
claimant within 90 days after the application is filed. In the
event the claim is denied, the reasons for the denial shall be
specifically set forth in the notice in language calculated to be
understood by the claimant, pertinent provisions of the Plan
26
<PAGE> 34
shall be cited, and, where appropriate, an explanation as to how
the claimant can perfect the claim will be provided. In addition,
the claimant shall be furnished with an explanation of the Plan's
claims review procedure.
2.13 CLAIMS REVIEW PROCEDURE
Any Employee, former Employee, or Beneficiary of
either, who has been denied a benefit by a decision of the
Administrator pursuant to Section 2.12 shall be entitled to
request the Administrator to give further consideration to his
claim by filing with the Administrator (on a form which may be
obtained from the Administrator) a request for a hearing. Such
request, together with a written statement of the reasons why the
claimant believes his claim should be allowed, shall be filed
with the Administrator no later than 60 days after receipt of the
written notification provided for in Section 2.12. The
Administrator shall then conduct a hearing within the next 60
days, at which the claimant may be represented by an attorney or
any other representative of his choosing and at which the
claimant shall have an opportunity to submit written and oral
evidence and arguments in support of his claim. At the hearing
(or prior thereto upon 5 business days written notice to the
Administrator) the claimant or his representative shall have an
opportunity to review all documents in the possession of the
Administrator which are pertinent to the claim at issue and its
disallowance. Either the claimant or the Administrator may cause
a court reporter to attend the hearing and record the
proceedings. In such event, a complete written transcript of the
proceedings shall be furnished to both parties by the court
reporter. The full expense of any such court reporter and such
transcripts shall be borne by the party causing the court
reporter to attend the hearing. A final decision as to the
allowance of the claim shall be made by the Administrator within
60 days of receipt of the appeal (unless there has been an
extension of 60 days due to special circumstances, provided the
delay and the special circumstances occasioning it are
communicated to the claimant within the 60 day period). Such
communication shall be written in a manner calculated to be
understood by the claimant and shall include specific reasons for
the decision and specific references to the pertinent Plan
provisions on which the decision is based.
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ARTICLE III
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY
Any Eligible Employee who has completed 12 Months of
Service and has attained age 21 shall be eligible to participate
hereunder as of the date he has satisfied such requirements.
However, any Employee who was a Participant in the Plan prior to
the effective date of this amendment and restatement shall
continue to participate in the Plan. The Employer shall give each
prospective Eligible Employee written notice of his eligibility
to participate in the Plan prior to the close of the Plan Year in
which he first becomes an Eligible Employee.
For purposes of this Section, an Eligible Employee will
be deemed to have completed 12 Months of Service if he is in the
employ of the Employer at any time 12 months after his employment
commencement date. Employment commencement date shall be the
first day that he is entitled to be credited with an Hour of
Service for the performance of duty.
3.2 APPLICATION FOR PARTICIPATION
In order to become a Participant in the 401(k) Profit
Sharing Plan portion hereunder, each Eligible Employee shall
make application to the Employer for participation in the Plan
and agree to the terms hereof. Upon the acceptance of any benefits
under this Plan, such Employee shall automatically be deemed to
have made application and shall be bound by the terms and
conditions of the Plan and all amendments hereto.
3.3 EFFECTIVE DATE OF PARTICIPATION
An Eligible Employee shall become a Participant
effective as of the earlier of the first day of the Plan Year or
the first day of the seventh month of such Plan Year coinciding
with or next following the date such Employee met the eligibility
requirements of Section 3.1, provided said Employee was still
employed as of such date (or if not employed on such date, as of
the date of rehire).
3.4 DETERMINATION OF ELIGIBILITY
The Administrator shall determine the eligibility of
each Employee for participation in the Plan based upon
information furnished by the Employer. Such determination shall
be conclusive and binding upon all persons, as long as the same
is made pursuant to the Plan and the Act. Such determination
shall be subject to review per Section 2.13.
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<PAGE> 36
3.5 TERMINATION OF ELIGIBILITY
(a) In the event a Participant shall go from a
classification of an Eligible Employee to an ineligible
Employee, such Former Participant shall continue to
vest in his interest in the Plan according to his total
Period of Service, completed while a noneligible
Employee, until such time as his Participant's Account
shall be forfeited or distributed pursuant to the terms
of the Plan. Additionally, his interest in the Plan
shall continue to share in the earnings of the Trust
Fund.
(b) In the event a Participant is no longer a
member of an eligible class of Employees and becomes
ineligible to participate but has not incurred a 1-Year
Period of Severance, such Employee will participate
immediately upon returning to an eligible class of
Employees. If such Participant incurs a 1-Year Period
of Severance, eligibility will be determined under the
break in service rules of the Plan.
(c) In the event an Employee who is not a member
of an eligible class of Employees becomes a member of
an eligible class, such Employee will participate
immediately if such Employee has satisfied the minimum
age and service requirements and would have otherwise
previously become a Participant.
3.6 OMISSION OF ELIGIBLE EMPLOYEE
If, in any Plan Year, any Employee who should be
included as a Participant in the Plan is erroneously omitted and
discovery of such omission is not made until after a contribution
by his Employer for the year has been made, the Employer shall
make a subsequent contribution with respect to the omitted
Employee in the amount which the said Employer would have
contributed with respect to him had he not been omitted. Such
contribution shall be made regardless of whether or not it is
deductible in whole or in part in any taxable year under
applicable provisions of the Code.
3.7 INCLUSION OF INELIGIBLE EMPLOYEE
If, in any Plan Year, any person who should not have
been included as a Participant in the Plan is erroneously
included and discovery of such incorrect inclusion is not made
until after a contribution for the year has been made, the
Employer shall not be entitled to recover the contribution made
with respect to the ineligible person regardless of whether or
not a deduction is allowable with respect to such contribution.
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<PAGE> 37
In such event, the amount contributed with respect to the
ineligible person shall constitute a Forfeiture (except for
Deferred Compensation which shall be distributed to the
ineligible person) for the Plan Year in which the discovery is
made.
3.8 ELECTION NOT TO PARTICIPATE
An Employee may, subject to the approval of the
Employer, elect voluntarily not to participate in the Plan. The
election not to participate must be communicated to the Employer,
in writing, at least thirty (30) days before the beginning of a
Plan Year.
ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 FORMULA FOR DETERMINING EMPLOYER' S CONTRIBUTION
For each Plan Year, the Employer shall contribute to
the Plan:
(a) The amount of the total salary reduction
elections of all Participants made pursuant to Section
4.2(a), which amount shall be deemed an Employer's
Elective Contribution.
(b) On behalf of each Participant who is eligible
to share in matching contributions for the Plan Year:
(1) Before January 1, 1991, a matching
contribution equal to 25% of each such Participant's
Deferred Compensation, which amount shall be deemed an
Employer's Non-Elective Contribution. Except, however,
in applying the matching contribution percentage
specified above, only salary reductions up to 6% of
Compensation shall be considered, provided that the
Employer shall not make a matching contribution which
exceeds $500 for any Participant in a Plan Year.
(2) On and after January 1, 1991, a matching
contribution equal to 100% of each such Participant's
Deferred Compensation, which amount shall be deemed an
Employer's Non-Elective Contribution. Except, however,
in applying the matching contribution percentage
specified above, only salary reductions up to $520
shall be considered.
Notwithstanding the above, no matching contribution
shall be made with respect to a participant's (1) Excess
Deferred Compensation or (2) Excess Contributions, except
for recharacterized amounts. Furthermore, no matching
contributions shall be credited or allocated to a Participant
to the extent such amount would exceed the maximum allowed
under the Actual Contribution Percentage Test of Code Section
401 (m).
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(c) A discretionary amount out of its current or
accumulated Net Profit, which amount shall be deemed an
Employer's Non-Elective Contribution.
(d) Notwithstanding the foregoing, however, the
Employer's contributions for any Plan Year shall not
exceed the maximum amount allowable as a deduction to
the Employer under the provisions of Code Section 404.
All contributions by the Employer shall be made in
cash, Company Stock or in such property as is
acceptable to the Trustee.
(e) Except, however, to the extent necessary to
provide the top heavy minimum allocations, the Employer
shall make a contribution even if it exceeds current or
accumulated Net Profit or the amount which is deductible
under Code Section 404.
4.2 PARTICIPANT'S SALARY REDUCTION ELECTION
(a) Each Participant may elect to defer from 1%
to 16% of his Compensation which would have been
received in the Plan Year, but for the deferral
election. A deferral election (or modification of an
earlier election) may not be made with respect to
Compensation which is currently available on or before
the date the Participant executed such election.
Additionally, each Participant may elect to
defer and have allocated for a Plan Year all or a
portion of any cash bonus attributable to services
performed by the Participant for the Employer during
such Plan Year and which would have been received by
the Participant on or before two and one half months
following the end of the Plan Year but for the deferral
election. A deferral election may not be made with
respect to cash bonuses which are currently available
on or before the date the Participant executed such
election. Notwithstanding the foregoing, cash bonuses
attributable to services performed by the Participant
during a Plan Year but which are to be paid to the
Participant later than two and one-half months after
the close of such Plan Year will be subjected to
whatever deferral election is in effect at the time
such cash bonus would have otherwise been received.
The amount by which Compensation and/or cash
bonuses are reduced shall be that Participant's Deferred
Compensation and be treated as an Employer Elective
Contribution and allocated to that Participant's Elective
Account.
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(b) The balance in each Participant's Elective
Account shall be fully Vested at all times and shall
not be subject to Forfeiture for any reason.
(c) Amounts held in the Participant's Elective
Account may not be distributable earlier than:
(1) a Participant's termination of employment,
Total and Permanent Disability, or death;
(2) a Participant's attainment of age 59 1/2;
(3) the termination of the Plan without the
existence at the time of Plan termination of
another defined contribution plan (other than an
employee stock ownership plan as defined in Code
Section 4975(e) (7)) or the establishment of a
successor defined contribution plan (other than
an employee stock ownership plan as defined in
Code Section 4975(e) (7)) by the Employer or an
Affiliated Employer within the period ending
twelve months after distribution of all assets
from the Plan maintained by the Employer;
(4) the date of disposition by the Employer to
an entity that is not an Affiliated Employer of
substantially all of the assets (within the
meaning of Code Section 409(d) (2)) used in a
trade or business of such corporation if such
corporation continues to maintain this Plan after
the disposition with respect to a Participant who
continues employment with the corporation
acquiring such assets;
(5) the date of disposition by the Employer or
an Affiliated Employer who maintains the Plan of
its interest in a subsidiary (within the meaning
of Code Section 409(d) (3)) to an entity which is
not an Affiliated Employer but only with respect
to a Participant who continues employment with
such subsidiary; or
(6) the proven financial hardship of a Participant,
subject to the limitations of Section 7.14.
(d) In any Plan Year beginning after December 31, 1987,
a Participant's Deferred Compensation made under this Plan and
all other plans,
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<PAGE> 40
contracts or arrangements of the Employer maintaining
this Plan shall not exceed, during any taxable year,
the limitation imposed by Code Section 402(g), as in
effect at the beginning of such taxable year. This
dollar limitation shall be adjusted annually pursuant
to the method provided in Code Section 415(d) in
accordance with Regulations.
(e) In the event a Participant has received a
hardship distribution from his Participant's Elective
Account pursuant to the "Safe Harbor Resources Test" of
Section 6.11 or pursuant to Regulation 1.401(k)-1(d)(2)
(iii) (B) from any other plan maintained by the Employer,
then such Participant shall not be permitted to elect to
have Deferred Compensation contributed to the Plan on his
behalf for a period of twelve (12) months following the
receipt of the distribution. Furthermore, the dollar
limitation under Code Section 402 (g) shall be reduced,
with respect to the Participant's taxable year following
the taxable year in which the hardship distribution was
made, by the amount of such Participant's Deferred
Compensation, if any, pursuant to this Plan (and any
other plan maintained by the Employer) for the taxable
year of the hardship distribution.
(f) If a Participant's Deferred Compensation
under this Plan together with any elective deferrals
(as defined in Regulation 1.402(g)-1(b)) under another
qualified cash or deferred arrangement (as defined in
Code Section 401(k)), a simplified employee pension (as
defined in Code Section 408(k)), a salary reduction
arrangement (within the meaning of Code Section
3121 (a) (5) (D)), a deferred compensation plan under Code
Section 457, or a trust described in Code Section
501(c) (18) cumulatively exceed the limitation imposed
by Code Section 402(g) (as adjusted annually in
accordance with the method provided in Code Section
415(d) pursuant to Regulations) for such Participant's
taxable year, the Participant may, not later than
March 1 following the close of his taxable year, notify
the Administrator in writing of such excess and request
that his Deferred Compensation under this Plan be
reduced by an amount specified by the Participant. In
such event, the Administrator may direct the Trustee to
distribute such excess amount (and any Income allocable
to such excess amount) to the Participant not later
than the first April 15th following the close of the
Participant's taxable year. Distributions in accordance
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with this paragraph may be made for any taxable year of
the Participant which begins after December 31, 1986.
Any distribution of less than the entire amount of
Excess Deferred Compensation and Income shall be
treated as a pro rata distribution of Excess Deferred
Compensation and Income. The amount distributed shall
not exceed the Participant's Deferred Compensation
under the Plan for the taxable year. Any distribution
on or before the last day of the Participant's taxable
year must satisfy each of the following conditions:
(1) the Participant shall designate the
distribution as Excess Deferred Compensation;
(2) the distribution must be made after the date
on which the Plan received the Excess Deferred
Compensation; and
(3) the Plan must designate the distribution as a
distribution of Excess Deferred Compensation.
(g) Notwithstanding Section 4.2(f) above, a
Participant's Excess Deferred Compensation shall be
reduced, but not below zero, by any distribution of
Excess Contributions pursuant to Section 4.6(a) for the
Plan Year beginning with or within the taxable year of
the Participant.
(h) At Normal Retirement Date, or such other date
when the Participant shall be entitled to receive
benefits, the fair market value of the Participant's
Elective Account shall be used to provide additional
benefits to the Participant or his Beneficiary.
(i) All amounts allocated to a Participant's
Elective Account shall be maintained in a separate
Directed Investment Account as provided in Section 4.12
(c).
(j) Employer Elective Contributions made pursuant
to this Section may be segregated into a separate
account for each Participant in a federally insured
savings account, certificate of deposit in a bank or
savings and loan association, money market certificate,
or other short-term debt security acceptable to the
Trustee until such time as the allocations pursuant to
Section 4.4 have been made.
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(k) The Employer and the Administrator shall
implement the salary reduction elections provided for
herein in accordance with the following:
(1) A Participant may commence making elective
deferrals to the Plan only after first satisfying
the eligibility and participation requirements
specified in Article III. However, the
Participant must make his initial salary deferral
election within a reasonable time, not to exceed
thirty (30) days, after entering the Plan
pursuant to Section 3.3. If the Participant fails
to make an initial salary deferral election
within such time, then such Participant may
thereafter make an election in accordance with
the rules governing modifications. The
Participant shall make such an election by
entering into a written salary reduction
agreement with the Employer and filing such
agreement with the Administrator. Such election
shall initially be effective beginning with the
pay period following the acceptance of the salary
reduction agreement by the Administrator, shall
not have retroactive effect and shall remain in
force until revoked.
(2) A Participant may modify a prior election
during the Plan Year and concurrently make a new
election by filing a written notice with the
Administrator within a reasonable time before the
pay period for which such modification is to be
effective. However, modifications to a salary
deferral election shall only be permitted
semi-annually, during election periods
established by the Administrator prior to the
first day of a Plan Year and the first day of the
seventh month of a Plan Year. Any modification
shall not have retroactive effect and shall
remain in force until revoked.
(3) A Participant may elect to prospectively
revoke his salary reduction agreement in its
entirety at any time during the Plan Year by
providing the Administrator with thirty (30) days
written notice of such revocation (or upon such
shorter notice period as may be acceptable to the
Administrator). Such revocation shall become
effective as of the beginning of the first pay
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<PAGE> 43
period coincident with or next following the
expiration of the notice period. Furthermore, the
termination of the Participant's employment, or
the cessation of participation for any reason,
shall be deemed to revoke any salary reduction
agreement then in effect, effective immediately
following the close of the pay period within
which such termination or cessation occurs.
4.3 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION
Employer contributions will be paid in cash, Company
Stock or other property as the Employer may from time to time
determine. Company Stock and other property will be valued at
their then fair market value. The Employer shall generally pay to
the Trustee its contribution to the Plan for each Plan Year,
within the time prescribed by law, including extensions of time,
for the filing of the Employer's federal income tax return for
the Fiscal Year.
However, Employer Elective Contributions accumulated
through payroll deductions shall be paid to the Trustee as of the
earliest date on which such contributions can reasonably be
segregated from the Employer's general assets, but in any event
within ninety (90) days from the date on which such amounts would
otherwise have been payable to the Participant in cash. The
provisions of Department of Labor regulations 2510.3-102 are
incorporated herein by reference. Furthermore, any additional
Employer contributions which are allocable to the Participant's
Elective Account for a Plan Year shall be paid to the Plan no
later than the twelve-month period immediately following the
close of such Plan Year.
4.4 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS
(a) The Administrator shall establish and
maintain an account in the name of each Participant to
which the Administrator shall credit as of each
Anniversary Date all amounts allocated to each such
Participant as set forth herein.
(b) The Employer shall provide the Administrator
with all information required by the Administrator to
make a proper allocation of the Employer's contributions
for each Plan Year. Within a reasonable period of time
after the date of receipt by the Administrator of such
information, the Administrator shall allocate such
contribution as follows:
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<PAGE> 44
(1) With respect to the Employer's Elective
Contribution made pursuant to Section 4.1(a), to
each Participant's Elective Account in an amount
equal to each such Participant's Deferred
Compensation for the year.
(2) With respect to the Employer's Non-Elective
Contribution made pursuant to Section 4.1(b), to
each Participant's Account in accordance with
Section 4.1(b).
Any Participant actively employed during the Plan
Year shall be eligible to share in the matching
contribution for the Plan Year.
(3) With respect to the Employer's Non-Elective
Contribution made pursuant to Section 4.1(c), to
each Participant's Account in the same proportion
that each such Participant's Compensation for the
year bears to the total Compensation of all
Participants for such year.
Only Participants who are actively employed on
the last day of the Plan Year shall be eligible
to share in the discretionary contribution for
the year.
(c) The Company Stock Account of each
Participant shall be credited as of each Anniversary
Date with his allocable share of Company Stock
(including fractional shares) purchased and paid for by
the Plan or contributed in kind by the Employer. Stock
dividends on Company Stock held in his Company Stock
Account shall be credited to his Company Stock Account
when paid. Cash dividends on Company Stock held in his
Company Stock Account shall, in the sole discretion of
the Administrator, either be credited to his Other
Investments Account when paid or be used to repay an
Exempt Loan; provided, however, that when cash
dividends are used to repay an Exempt Loan, Company
Stock shall be released from the Unallocated Company
Stock Suspense Account and allocated to the
Participant's Company Stock Account pursuant to Section
4.4(e) and, provided further, that Company Stock
allocated to the Participant's Company Stock Account
shall have a fair market value not less than the amount
of cash dividends which would have been allocated to
such Participant's Other Investments Account for the
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<PAGE> 45
year.
Company Stock acquired by the Plan with the
proceeds of an Exempt Loan shall only be allocated to
each Participant's Company Stock Account upon release
from the Unallocated Company Stock Suspense Account as
provided in Section 4.4(e) herein. Company Stock
acquired with the proceeds of an Exempt Loan shall be
an asset of the Trust Fund and maintained in the
Unallocated Company Stock Suspense Account.
(d) As of each Anniversary Date or other
valuation date, before allocation of Employer
contributions, any earnings or losses (net appreciation
or net depreciation) of the Trust Fund shall be
allocated to each Participant's and Former Participant's
nonsegregated accounts (other than each Participant's
Company Stock Account) in proportion to the following
allocation base: (1) the account balance as of the last
valuation date, less (2) withdrawals since the last
valuation date, plus (3) one-half of the total salary
reduction elections contributed since the last valuation
date. Cash dividends on Company Stock allocated to each
Participant's or Former Participant's nonsegregated
accounts after the first month of the Plan Year shall
not share in any earnings or losses of the Trust Fund
for such year. However, the Administrator may direct
that cash dividends on Company Stock allocated to each
Participant's or Former Participant's Company Stock
Account made after a valuation date be segregated into
a separate account for each Participant in a federally
insured savings account, certificate of deposit in a
bank or savings and loan association, money market
certificate, or other short term debt security acceptable
to the Trustee until such time as the allocations pursuant
to this Plan have been made, at which time they may remain
segregated or be invested as part of the general Trust
Fund, or such cash dividends be distributed pursuant to
Section 7.5(c). Earnings or losses include the increase
(or decrease) in the fair market value of assets of the
Trust Fund (other than Company Stock in the Participants'
Company Stock Accounts) since the preceding Anniversary Date.
Earnings or losses do not include the
interest paid under any installment contract for the
purchase of Company Stock by the Trust Fund or on any
loan used by the Trust Fund to purchase Company Stock,
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<PAGE> 46
nor does it include income received by the Trust Fund
with respect to Company Stock acquired with the
proceeds of an Exempt Loan to the extent such income is
used to repay the loan; all income received by the
Trust Fund from Company Stock acquired with the
proceeds of an Exempt Loan may, at the discretion of
the Administrator, be used to repay such loan.
Participants' transfers from other qualified
plans deposited in the general Trust Fund after a
valuation date shall not share in any earnings and
losses (net appreciation or net depreciation) of the
Trust Fund for such period. Each segregated account
maintained on behalf of a Participant shall be credited
or charged with its separate earnings and losses.
(e) All Company Stock acquired by the Plan with
the proceeds of an Exempt Loan must be added to and
maintained in the Unallocated Company Stock Suspense
Account. Such Company Stock shall be released and
withdrawn from that account as if all Company Stock in
that account were encumbered. For each Plan Year during
the duration of the loan, the number of shares of
Company Stock released shall equal the number of
encumbered shares held immediately before release for
the current Plan Year multiplied by a fraction, the
numerator of which is the amount of principal and
interest paid for the Plan Year and the denominator of
which is the sum of the numerator plus the principal
and interest to be paid for all future Plan Years. As
of each Anniversary Date, the Plan must consistently
allocate to each Participant's Account, in the same
manner as Employer discretionary contributions pursuant
to Section 4.1(c) are allocated, non-monetary units
(shares and fractional shares of Company Stock)
representing each Participant's interest in Company
Stock withdrawn from the Unallocated Company Stock
Suspense Account. However, Company Stock released from
the Unallocated Company Stock Suspense Account with
cash dividends pursuant to Section 4.4(c) shall be
allocated to each Participant's account in the same
proportion that each such Participant's number of
shares of Company Stock sharing in such cash dividends
bears to the total number of shares of all
Participants' Company Stock sharing in such cash
dividends. Income earned with respect to Company Stock
in the Unallocated Company Stock Suspense Account shall
be used, at the discretion of the Administrator, to
repay the Exempt Loan used to purchase such Company
39
<PAGE> 47
Stock. Company Stock released from the Unallocated
Company Stock Suspense Account with such income, and
any income which is not so used, must be allocated as
income of the Plan.
(f) As of each Anniversary Date any amounts
which became Forfeitures since the last Anniversary
Date shall first be made available to reinstate
previously forfeited account balances of Former
Participants, if any, in accordance with Section
7.4(g). The remaining Forfeitures, if any, shall be
used to reduce the contribution of the Employer
hereunder for the Plan Year in which such Forfeitures
occur in the following manner:
(1) Forfeitures attributable to Employer
matching contributions made pursuant to Section
4.1(b) shall be used to reduce the Employer's
contribution for the Plan Year in which such
Forfeitures occur.
(2) Forfeitures attributable to Employer
discretionary contributions made pursuant to
Section 4.1(c) shall be used to reduce the
Employer's contribution for the Plan Year in
which such Forfeitures occur.
(g) For any Top Heavy Plan Year, Non-Key
Employees not otherwise eligible to share in the
allocation of contributions as provided above, shall
receive the minimum allocation provided for in Section
4.4(i) if eligible pursuant to the provisions of
Section 4.4(k).
(h) Notwithstanding the foregoing, Participants
who are not actively employed on the last day of the
Plan Year due to Retirement (Early, Normal or Late),
Total and Permanent Disability or death shall share in
the allocation of contributions for that Plan Year.
(i) Minimum Allocations Required for Top Heavy
Plan Years: Notwithstanding the foregoing, for any Top
Heavy Plan Year, the sum of the Employer's contributions
allocated to the Participant's Combined Account of each
Non-Key Employee shall be equal to at least three percent
(3%) of such Non-Key Employee's "415 Compensation"
(reduced by contributions and forfeitures, if any, allocated
to each Non-Key Employee in any defined contribution plan
included with this
40
<PAGE> 48
plan in a Required Aggregation Group). However, if
(i) the sum of the Employer's contributions allocated
to the Participant's Combined Account of each Key
Employee for such Top Heavy Plan Year is less than
three percent (3%) of each Key Employee's "415
Compensation" and (ii) this Plan is not required to be
included in an Aggregation Group to enable a defined
benefit plan to meet the requirements of Code Section
401(a) (4) or 410, the sum of the Employer's
contributions allocated to the Participant's Combined
Account of each Non-Key Employee shall be equal to the
largest percentage allocated to the Participant's
Combined Account of any Key Employee. However, in
determining whether a Non-Key Employee has received the
required minimum allocation, such Non-Key Employee's
Deferred Compensation and matching contributions needed
to satisfy the "Actual Contribution Percentage" tests
pursuant to Section 4.7(a) shall not be taken into
account.
However, no such minimum allocation shall be
required in this Plan for any Non-Key Employee who
participates in another defined contribution plan
subject to Code Section 412 providing such benefits
included with this Plan in a Required Aggregation
Group.
(j) For purposes of the minimum allocations set
forth above, the percentage allocated to the
Participant's Combined Account of any Key Employee
shall be equal to the ratio of the sum of the
Employer's contributions allocated on behalf of such
Key Employee divided by the "415 Compensation" for such
Key Employee.
(k) For any Top Heavy Plan Year, the minimum
allocations set forth above shall be allocated to the
Participant's Combined Account of all Non-Key Employees
who are Participants and who are employed by the
Employer on the last day of the Plan Year, including
Non-Key Employees who have (1) failed to complete a
Year of Service; and (2) declined to make mandatory
contributions (if required) or, in the case of a cash
or deferred arrangement, elective contributions to the
Plan.
(1) For the purposes of this Section, "415
Compensation" shall be limited to $200,000 (unless
adjusted in such manner as permitted under Code Section
415 (d)). However, for Plan Years beginning prior to
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<PAGE> 49
January 1, 1989, the $200,000 limit shall apply only
for Top Heavy Plan Years and shall not be adjusted.
(m) Notwithstanding anything herein to the
contrary, Participants who terminated employment for
any reason during the Plan Year shall share in the
salary reduction contributions made by the Employer for
the year of termination without regard to the Hours of
Service credited.
(n) If a Former Participant is reemployed after
a five-year Period of Severance, then separate accounts
shall be maintained as follows:
(1) one account for nonforfeitable benefits
attributable to service before the Period of
Severance; and
(2) one account representing his status in the
Plan attributable to service after the Period of
Severance.
(o) Notwithstanding anything to the contrary,
for Plan Years beginning after December 31, 1989, if
this is a Plan that would otherwise fail to meet the
requirements of Code Sections 401 (a) (26), 410 (b) (1) or
410(b) (2) (A) (i) and the Regulations thereunder because
Employer contributions have not been allocated to a
sufficient number or percentage of Participants for a
Plan Year, then the following rules shall apply:
(1) The group of Participants eligible to share
in the Employer's contribution for the Plan Year
shall be expanded to include the minimum number
of Participants who would not otherwise be
eligible as are necessary to satisfy the
applicable test specified above. The specific
Participants who shall become eligible under the
terms of this paragraph shall be those who are
actively employed on the last day of the Plan
Year and, when compared to similarly situated
Participants, have completed the greatest number
of Hours of Service in the Plan Year.
(2) If after application of paragraph (1) above,
the applicable test is still not satisfied, then
the group of Participants eligible to share in
the Employer's contribution for the Plan Year
shall be further expanded to include the minimum
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<PAGE> 50
number of Participants who are not actively
employed on the last day of the Plan Year as are
necessary to satisfy the applicable test. The
specific Participants who shall become eligible
to share shall be those Participants, when
compared to similarly situated Participants, who
have completed the greatest number of Hours of
Service in the Plan Year before terminating
employment.
(3) Nothing in this Section shall permit the
reduction of a Participant's accrued benefit.
Therefore any amounts that have previously been
allocated to Participants may not be reallocated
to satisfy these requirements. In such event, the
Employer shall make an additional contribution
equal to the amount such affected Participants
would have received had they been included in the
allocations, even if it exceeds the amount which
would be deductible under Code Section 404. Any
adjustment to the allocations pursuant to this
paragraph shall be considered a retroactive
amendment adopted by the last day of the Plan
Year.
4.5 ACTUAL DEFERRAL PERCENTAGE TESTS
(a) Maximum Annual Allocation: For each Plan
Year beginning after December 31, 1986, the annual
allocation derived from Employer Elective Contributions
to a Participant's Elective Account shall satisfy one
of the following tests:
(1) The "Actual Deferral Percentage" for the
Highly Compensated Participant group shall not be
more than the "Actual Deferral Percentage" of the
Non-Highly Compensated Participant group
multiplied by 1.25, or
(2) The excess of the "Actual Deferral
Percentage" for the Highly Compensated
Participant group over the "Actual Deferral
Percentage" for the Non-Highly Compensated
Participant group shall not be more than two
percentage points. Additionally, the "Actual
Deferral Percentage" for the Highly Compensated
Participant group shall not exceed the "Actual
Deferral Percentage" for the Non-Highly
Compensated Participant group multiplied by 2.
The provisions of Code Section 401 (k) (3) and
Regulation 1.401(k)-1(b) are incorporated herein
by reference.
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<PAGE> 51
However, for Plan Years beginning after
December 31, 1988, in order to prevent the
multiple use of the alternative method described
in (2) above and in Code Section 401(m) (9) (A),
any Highly Compensated Participant eligible to
make elective deferrals pursuant to Section 4.2
and to make Employee contributions or to receive
matching contributions under this Plan or under
any other plan maintained by the Employer or an
Affiliated Employer shall have his actual
contribution ratio reduced pursuant to Regulation
1.401(m)-2, the provisions of which are
incorporated herein by reference.
(b) For the purposes of this Section "Actual
Deferral Percentage" means, with respect to the Highly
Compensated Participant group and Non-Highly
Compensated Participant group for a Plan Year, the
average of the ratios, calculated separately for each
Participant in such group, of the amount of Employer
Elective Contributions allocated to each Participant's
Elective Account for such Plan Year (including all or
any portion of cash bonuses which may be deferred
pursuant to Section 4.2(a)), to such Participant's
"414(s) Compensation" for such Plan Year. The actual
deferral ratio for each Participant and the "Actual
Deferral Percentage" for each group shall be calculated
to the nearest one-hundredth of one percent for Plan
Years beginning after December 31, 1988. Employer
Elective Contributions allocated to each Non-Highly
Compensated Participant's Elective Account shall be
reduced by Excess Deferred Compensation to the extent
such excess amounts are made under this Plan or any
other plan maintained by the Employer.
(c) For the purpose of determining the actual
deferral ratio of a Highly Compensated Employee who is
subject to the Family Member aggregation rules of Code
Section 414 (q) (6) because such Participant is either a
"five percent owner" of the Employer or one of the ten
(10) Highly Compensated Employees paid the greatest
"415 Compensation" during the year, the following shall
apply:
(1) The combined actual deferral ratio for the
family group (which shall be treated as one
Highly Compensated Participant) shall be the
greater of: (i) the ratio determined by
aggregating Employer Elective Contributions and
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<PAGE> 52
"414(s) Compensation" of all eligible Family
Members who are Highly Compensated Participants
without regard to family aggregation; and
(ii) the ratio determined by aggregating Employer
Elective Contributions and "414(s) Compensation"
of all eligible Family Members (including Highly
Compensated Participants). However, in applying
the $200,000 limit to "414(s) Compensation", for
Plan Years beginning after December 31, 1988,
Family Members shall include only the affected
Employee's spouse and any lineal descendants who
have not attained age 19 before the close of the
Plan Year.
(2) The Employer Elective Contributions and
"414(s) Compensation" of all Family Members shall
be disregarded for purposes of determining the
"Actual Deferral Percentage" of the Non-Highly
Compensated Participant group except to the
extent taken into account in paragraph (1) above.
(3) If a Participant is required to be
aggregated as a member of more than one family
group in a plan, all Participants who are members
of those family groups that include the
Participant are aggregated as one family group in
accordance with paragraphs (1) and (2) above.
(d) For the purposes of Sections 4.5(a) and 4.6,
a Highly Compensated Participant and a Non-Highly
Compensated Participant shall include any Employee
eligible to make a deferral election pursuant to
Section 4.2, whether or not such deferral election was
made or suspended pursuant to Section 4.2.
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<PAGE> 53
4.6 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS
In the event that the initial allocations of the
Employer's Elective Contributions made pursuant to Section 4.4 do
not satisfy one of the tests set forth in Section 4.5(a) for Plan
Years beginning after December 31, 1986, the Administrator shall
adjust Excess Contributions pursuant to the opt ions set forth
below:
(a) On or before the fifteenth day of the third
month following the end of each Plan Year, the
Highly Compensated Participant having the highest
actual deferral ratio shall have his portion of
Excess Contributions distributed to him until one
of the tests set forth in Section 4.5(a) is
satisfied, or until his actual deferral ratio
equal the actual deferral ratio of the Highly
Compensated Participant having the second highest
actual deferral ratio. This process shall continue
until one of the tests set forth in Section 4.5(a)
is satisfied. For each Highly Compensated
Participant, the amount of Excess Contributions is
equal to the Elective Contributions on behalf of
such Highly Compensated Participant determined
prior to the application of this paragraph) minus
the amount determined by multiplying the Highly
Compensated Participant's actual deferral ratio
(determined after application of this paragraph
by his "414(s) Compensation". However, in
determining the amount of
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<PAGE> 54
4.6 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS
In the event that the initial allocations of the
Employer's Elective Contributions made pursuant to Section 4.4 do
not satisfy one of the tests set forth in Section 4.5(a) for Plan
Years beginning after December 31, 1986, the Administrator shall
adjust Excess Contributions pursuant to the opt ions set forth
below:
(a) On or before the fifteenth day of the third
month following the end of each Plan Year, the
Highly Compensated Participant having the highest
actual deferral ratio shall have his portion of
Excess Contributions distributed to him until one
of the tests set forth in Section 4.5(a) is
satisfied, or until his actual deferral ratio
equals the actual deferral ratio of the Highly
Compensated Participant having the second highest
actual deferral ratio. This process shall continue
until one of the tests set forth in Section 4.5(a)
is satisfied. For each Highly Compensated
Participant, the amount of Excess Contributions is
equal to the Elective Contributions on behalf of
such Highly Compensated Participant (determined
prior to the application of this paragraph) minus
the amount determined by multiplying the Highly
Compensated Participant's actual deferral ratio
(determined after application of this paragraph
by his "414(s) Compensation". However, in
determining the amount of
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<PAGE> 55
Excess Contributions to be distributed with respect to
an affected Highly Compensated Participant as
determined herein, such amount shall be reduced by any
Excess Deferred Compensation previously distributed to
such affected Highly Compensated Participant for his
taxable year ending with or within such Plan Year.
(1) With respect to the distribution of Excess
Contributions pursuant to (a) above, such
distribution:
(i) may be postponed but not later than the
close of the Plan Year following the Plan
Year to which they are allocable;
(ii) shall be made first from unmatched
Deferred Compensation and, thereafter,
simultaneously from Deferred Compensation
which is matched and matching contributions
which relate to such Deferred Compensation.
However, any such matching contributions
which are not Vested shall be forfeited in
lieu of being distributed;
(iii) shall be adjusted for Income; and
(iv) shall be designated by the Employer as
a distribution of Excess Contributions (and
Income).
(2) Any distribution of less than the entire
amount of Excess Contributions shall be treated
as a pro rata distribution of Excess
Contributions and Income.
(3) The determination and correction of Excess
Contributions of a Highly Compensated Participant
whose actual deferral ratio is determined under
the family aggregation rules shall be
accomplished as follows:
(i) If the actual deferral ratio for the
Highly Compensated Participant is determined
in accordance with Section 4.5(c) (1) (ii),
then the actual deferral ratio shall be
reduced as required herein and the Excess
Contributions for the family unit shall be
allocated among the Family Members in
proportion to the Elective Contributions of
each Family Member that were combined to
determine the group actual deferral ratio.
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<PAGE> 56
(ii) If the actual deferral ratio for the
Highly Compensated Participant is determined
under Section 4.5(c) (1) (i), then the actual
deferral ratio shall first be reduced as
required herein, but not below the actual
deferral ratio of the group of Family
Members who are not Highly Compensated
Participants without regard to family
aggregation. The Excess Contributions
resulting from this initial reduction shall
be allocated (in proportion to Elective
Contributions) among the Highly Compensated
Participants whose Elective Contributions
were combined to determine the actual
deferral ratio. If further reduction is
still required, then Excess Contributions
resulting from this further reduction shall
be determined by taking into account the
contributions of all Family Members and
shall be allocated among them in proportion
to their respective Elective Contributions.
(b) Within twelve (12) months after the end of
the Plan Year, the Employer may make a special
Qualified Non-Elective Contribution on behalf of
Non-Highly Compensated Participants in an amount
sufficient to satisfy one of the tests set forth in
Section 4.5(a). Such contribution shall be allocated to
the Participant's Elective Account of each Non-Highly
Compensated Participant in the same proportion that
each Non-Highly Compensated Participant's Compensation
for the year bears to the total Compensation of all
Non-Highly Compensated Participants.
4.7 ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) The "Actual Contribution Percentage" for
Plan Years beginning after December 31, 1986 for the
Highly Compensated Participant group shall not exceed
the greater of:
(1) 125 percent of such percentage for the
Non-Highly Compensated Participant group; or
(2) the lesser of 200 percent of such percentage
for the Non-Highly Compensated Participant group,
or such percentage for the Non-Highly Compensated
Participant group plus 2 percentage points.
However, for Plan Years beginning after December 31,
1988, to prevent the multiple use of
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<PAGE> 57
the alternative method described in this
paragraph and Code Section 401 (m) (9) (A), any
Highly Compensated Participant eligible to make
elective deferrals pursuant to Section 4.2 or any
other cash or deferred arrangement maintained by
the Employer or an Affiliated Employer and to
make Employee contributions or to receive
matching contributions under this Plan or under
any other plan maintained by the Employer or an
Affiliated Employer shall have his actual
contribution ratio reduced pursuant to Regulation
1.401(m)-2. The provisions of Code Section 401(m)
and Regulations 1.401(m)-1(b) and 1.401(m)-2 are
incorporated herein by reference.
(b) For the purposes of this Section and Section
4.8, "Actual Contribution Percentage" for a Plan Year
means, with respect to the Highly Compensated
Participant group and Non-Highly Compensated
Participant group, the average of the ratios
(calculated separately for each Participant in each
group) of:
(1) the sum of Employer matching contributions
made pursuant to Section 4.1(b) on behalf of each
such Participant for such Plan Year; to
(2) the Participant's "414(s) Compensation" for
such Plan Year.
(c) For purposes of determining the "Actual
Contribution Percentage" and the amount of Excess
Aggregate Contributions pursuant to Section 4.8(d),
only Employer matching contributions contributed to the
Plan prior to the end of the succeeding Plan Year shall
be considered. In addition, the Administrator may elect
to take into account, with respect to Employees
eligible to have Employer matching contributions
pursuant to Section 4.1(b) allocated to their accounts,
elective deferrals (as defined in Regulation
1.402(g)-1(b)) and qualified non-elective contributions
(as defined in Code Section 401 (m) (4) (C)) contributed
to any plan maintained by the Employer. Such elective
deferrals and qualified non-elective contributions
shall be treated as Employer matching contributions
subject to Regulation 1.401(m)-1(b)(2) which is
incorporated herein by reference. However, for Plan
Years beginning after December 31, 1988, the Plan Year
must be the same as the plan year of the plan to which
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<PAGE> 58
the elective deferrals and the qualified non-elective
contributions are made.
(d) For the purpose of determining the actual
contribution ratio of a Highly Compensated Employee who
is subject to the Family Member aggregation rules of
Code Section 414(q) (6) because such Employee is either
a "five percent owner" of the Employer or one of the
ten (10) Highly Compensated Employees paid the greatest
"415 Compensation" during the year, the following shall
apply:
(1) The combined actual contribution ratio for
the family group (which shall be treated as one
Highly Compensated Participant) shall be the
greater of: (i) the ratio determined by
aggregating Employer matching contributions made
pursuant to Section 4.1(b) and "414(s)
Compensation" of all eligible Family Members who
are Highly Compensated Participants without
regard to family aggregation; and (ii) the ratio
determined by aggregating Employer matching
contributions made pursuant to Section 4.1(b) and
"414(s) Compensation" of all eligible Family
Members (including Highly Compensated
Participants). However, in applying the $200,000
limit to "414(s) Compensations for Plan Years
beginning after December 31, 1988, Family Members
shall include only the affected Employee's spouse
and any lineal descendants who have not attained
age 19 before the close of the Plan Year.
(2) The Employer matching contributions made
pursuant to Section 4.1(b) and "414(s)
Compensation" of all Family Members shall be
disregarded for purposes of determining the
"Actual Contribution Percentage" of the
Non-Highly Compensated Participant group except
to the extent taken into account in paragraph (1)
above.
(3) If a Participant is required to be
aggregated as a member of more than one family
group in a plan, all Participants who are members
of those family groups that include the
Participant are aggregated as one family group in
accordance with paragraphs (1) and (2) above.
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<PAGE> 59
4.8 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) In the event that, for Plan Years beginning
after December 31, 1986, the "Actual Contribution
Percentage" for the Highly Compensated Participant
group exceeds the "Actual Contribution Percentage" for
the Non-Highly Compensated Participant group by more
than the amount permitted by Section 4.7(a), the
Administrator (on or before the fifteenth day of the
third month following the end of the Plan Year, but in
no event later than the close of the following Plan
Year) shall direct the Trustee to distribute to the
Highly Compensated Participant having the highest
actual contribution ratio, his Vested
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<PAGE> 60
4.8 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) In the event that, for Plan Years beginning
after December 31, 1986, the "Actual Contribution
Percentage" for the Highly Compensated Participant
group exceeds the "Actual Contribution Percentage" for
the Non-Highly Compensated Participant group pursuant
to Section 4.7(a), the Administrator (on or before the
fifteenth day of the third month following the end of
the Plan Year, but in no event later than the close of
the following Plan Year) shall direct the Trustee to
distribute to the Highly Compensated Participant having
the highest actual contribution ratio, his Vested
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<PAGE> 61
portion of Excess Aggregate Contributions (and Income
allocable to such contributions) or, if forfeitable,
forfeit such non-Vested Excess Aggregate Contributions
attributable to Employer matching contributions (and
Income allocable to such Forfeitures) until either one
of the tests set forth in Section 4.7(a) is satisfied,
or until his actual contribution ratio equals the
actual contribution ratio of the Highly Compensated
Participant having the second highest actual
contribution ratio. This process shall continue until
one of the tests set forth in Section 4.7(a) is
satisfied. The distribution and/or Forfeiture of Excess
Aggregate Contributions shall be made in the following
order:
(1) Employer matching contributions distributed
and/or forfeited pursuant to Section 4.6(a) (1);
(2) Remaining Employer matching contributions.
(b) Any distribution and/or Forfeiture of less
than the entire amount of Excess Aggregate
Contributions (and Income) shall be treated as a
pro rata distribution and/or Forfeiture of Excess
Aggregate Contributions and Income. Distribution of
Excess Aggregate Contributions shall be designated by
the Employer as a distribution of Excess Aggregate
Contributions (and Income). Forfeitures of Excess
Aggregate Contributions shall be treated in accordance
with Section 4.4.
(c) Excess Aggregate Contributions, including
forfeited matching contributions, shall be treated as
Employer contributions for purposes of Code Sections
404 and 415 even if distributed from the Plan.
(d) For each Highly Compensated Participant, the
amount of Excess Aggregate Contributions is equal to
the total Employer matching contributions made pursuant
to Section 4.1(b) and any qualified non-elective
contributions or elective deferrals taken into account
pursuant to Section 4.7(c) on behalf of the Highly
Compensated Participant (determined prior to the
application of this paragraph) minus the amount
determined by multiplying the Highly Compensated
Participant's actual contribution ratio (determined
after application of this paragraph) by his "414(s)
Compensation". The actual contribution ratio must be
rounded to the nearest one-hundredth of one percent for
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<PAGE> 62
Plan Years beginning after December 31, 1988. In no
case shall the amount of Excess Aggregate Contribution
with respect to any Highly Compensated Participant
exceed the amount of Employer matching contributions
made pursuant to Section 4.1(b) and any qualified
non-elective contributions or elective deferrals taken
into account pursuant to Section 4.7(c) on behalf of
such Highly Compensated participant for such Plan Year.
(e) The determination of the amount of Excess
Aggregate Contributions with respect to any Plan Year
shall be made after first determining the Excess
Contributions, if any, to be treated as voluntary
Employee contributions due to recharacterization for
the plan year of any other qualified cash or deferred
arrangement (as defined in Code Section 401(k))
maintained by the Employer that ends with or within the
Plan Year.
(f) The determination and correction of Excess
Aggregate Contributions of a Highly Compensated
Participant whose actual contribution ratio is
determined under the family aggregation rules shall be
accomplished as follows:
(1) If the actual contribution ratio for the
Highly Compensated Participant is determined in
accordance with Section 4.7(d) (1) (ii), then the
actual contribution ratio shall be reduced and
the Excess Aggregate Contributions for the family
unit shall be allocated among the Family Members
in proportion to the sum of Employer matching
contributions made pursuant to Section 4.1(b) and
any qualified non-elective contributions or
elective deferrals taken into account pursuant to
Section 4.7(c) of each Family Member that were
combined to determine the group actual
contribution ratio.
(2) If the actual contribution ratio for the
Highly Compensated participant is determined
under,Section 4.7(d) (1) (i), then the actual
contribution ratio shall first be reduced, as
required herein, but not below the actual
contribution ratio of the group of Family Members
who are not Highly Compensated participants
without regard to family aggregation. The Excess
Aggregate Contributions resulting from this
initial reduction shall be allocated among the
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<PAGE> 63
Highly Compensated Participants whose Employer
matching contributions made pursuant to Section
4.1(b) and any qualified non-elective
contributions or elective deferrals taken into
account pursuant to Section 4.7(c) were combined
to determine the actual contribution ratio. If
further reduction is still required, then Excess
Aggregate Contributions resulting from this
further reduction shall be determined by taking
into account the contributions of all Family
Members and shall be allocated among them in
proportion to their respective Employer matching
contributions made pursuant to Section 4.1(b) and
any qualified non-elective contributions or
elective deferrals taken into account pursuant to
Section 4.7(c).
(g) Notwithstanding the above, within twelve (12)
months after the end of the Plan Year, the Employer may
make a special Qualified Non-Elective Contribution on
behalf of Non-Highly Compensated Participants in an
amount sufficient to satisfy one of the tests set forth
in section 4.7(a). Such contribution shall be allocated
to the Participant's Elective Account of each Non-
Highly Compensated Participant in the same proportion
that each Non-Highly Compensated Participant's
Compensation for the year bears to the total
Compensation of all Non-Highly Compensated
Participants. A separate accounting shall be maintained
for the purpose of excluding such contributions from
the "Actual Deferral Percentage" tests pursuant to
Section 4.5(a).
4.9 MAXIMUM ANNUAL ADDITIONS
(a) Notwithstanding the foregoing, the maximum "annual
additions" credited to a Participant's accounts for any
"limitation year" shall equal the lesser of: (1)
$30,000 (or, if greater, one-fourth of the dollar
limitation in effect under Code Section 415(b) (1) (A))
or (2) twenty-five percent (25%) of the Participant's
"415 Compensation" for such "limitation year".
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<PAGE> 64
(b) For purposes of applying the limitations of
Code Section 415, "annual additions" means the sum
credited to a Participant's accounts for any
"limitation year" of (1) Employer contributions, (2)
Employee contributions for "limitation years" beginning
after December 31, 1986, (3) forfeitures, (4) amounts
allocated, after March 31, 1984, to an individual
medical account, as defined in Code Section 415(1) (2)
which is part of a pension or annuity plan maintained
by the Employer and (5) amounts derived from
contributions paid or accrued after December 31, 1985,
in taxable years ending after such date, which are
attributable to post-retirement medical benefits
allocated to the separate account of a key employee (as
defined in Code Section 419A(d) (3)) under a welfare
benefit plan (as defined in Code Section 419(e))
maintained by the Employer. Except, however, the "415
Compensation" percentage limitation referred to in
paragraph (a) (2) above shall not apply to: (1) any
contribution for medical benefits (within the meaning
of Code Section 419A(f) (2)) after separation from
service which is otherwise treated as an "annual
addition", or (2) any amount under Code Section
415(1) (1).
(c) For purposes of applying the limitations of
Code Section 415, the following are not "annual
additions": (1) the transfer of funds from one
qualified plan to another and (2) provided no more than
one-third of the Employer contributions for the year
are allocated to Highly Compensated Participants,
Forfeitures of Company Stock purchased with the
proceeds of an Exempt Loan and Employer contributions
applied to the payment of interest on an Exempt Loan.
In addition, the following are not Employee
contributions for the purposes of Section 4.9(c) (2):
(1) rollover contributions (as defined in Code Sections
402 (a) (5), 403(a) (4) , 403(b) (8) and 408 (d) (3); (2)
repayments of loans made to a participant from the
Plan; (3) repayments of distributions received by an
Employee pursuant to Code Section 411(a) (7) (B) (cash-
outs); (4) repayments of distributions received
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<PAGE> 65
one-third of the Employer's contributions for the year
are allocated to Highly Compensated Participants. In
applying this limitation, the family group of a Highly
Compensated Participant who is subject to the Family
Member aggregation rules of Code Section 414(q) (6)
shall be determined pursuant to Regulations.
(b) For purposes of applying the limitations of
Code Section 415, "annual additions" means the sum
credited to a Participant's accounts for any
"limitation year" of (1) Employer contributions,
(2) Employee contributions for "limitation years"
beginning after December 31, 1986, (3) forfeitures,
(4) amounts allocated, after March 31, 1984, to an
individual medical account, as defined in Code Section
415(1) (2) which is part of a pension or annuity plan
maintained by the Employer and (5) amounts derived from
contributions paid or accrued after December 31, 1985,
in taxable years ending after such date, which are
attributable to post-retirement medical benefits
allocated to the separate account of a key employee (as
defined in Code Section 419A(d) (3)) under a welfare
benefit plan (as defined in Code Section 419(e))
maintained by the Employer. Except, however, the "415
Compensation" percentage limitation referred to in
paragraph (a) (2) above shall not apply to: (1) any
contribution for medical benefits (within the meaning
of Code Section 419A(f) (2)) after separation from
service which is otherwise treated as an "annual
addition", or (2) any amount otherwise treated as an
"annual addition" under Code Section 415(1) (1).
(c) For purposes of applying the limitations of
Code Section 415, the following are not "annual
additions": (1) the transfer of funds from one
qualified plan to another and (2) provided no more than
one-third of the Employer contributions for the year
are allocated to Highly Compensated Participants,
Forfeitures of Company Stock purchased with the
proceeds of an Exempt Loan and Employer contributions
applied to the payment of interest on an Exempt Loan.
In addition, the following are not Employee
contributions for the purposes of Section 4.9(c) (2):
(1) rollover contributions (as defined in Code Sections
402 (a) (5), 403(a) (4) , 403 (b) (8) and 408 (d) (3));
(2) repayments of loans made to a Participant from the
Plan; (3) repayments of distributions received by an
Employee pursuant to Code Section 411 (a) (7) (B)
(cash-outs); (4) repayments of distributions received
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<PAGE> 66
by an Employee pursuant to Code Section 411(a) (3) (D)
(mandatory contributions); and (5) Employee
contributions to a simplified employee pension
excludable from gross income under Code Section
408 (k) (6)
(d) For purposes of applying the limitations of
Code Section 415, "415 Compensation" shall include the
Participant's wages, salaries, fees for professional
service and other amounts for personal services
actually rendered in the course of employment with an
Employer maintaining the Plan (including, but not
limited to, commissions paid salesmen, compensation for
services on the basis of a percentage of profits,
commissions on insurance premiums, tips and bonuses and
in the case of a Participant who is an Employee within
the meaning of Code Section 401(c) (1) and the
regulations thereunder, the Participant's earned income
(as described in Code Section 401(c) (2) and the
regulations thereunder)) paid during the "limitation
year".
"415 Compensation" shall exclude
(1) (A) contributions made by the Employer to a plan of
deferred compensation to the extent that, before the
application of the Code Section 415 limitations to the
Plan, the contributions are not includable in the gross
income of the Employee for the taxable year in which
contributed, (B) contributions made by the Employer to
a plan of deferred compensation to the extent that all
or a portion of such contributions are recharacterized
as a voluntary Employee contribution, (C) Employer
contributions made on behalf of an Employee to a
simplified employee pension plan described in Code
Section 408(k) to the extent such contributions are
excludable from the Employee's gross income, (D) any
distributions from a plan of deferred compensation
regardless of whether such amounts are includable in
the gross income of the Employee when distributed
except any amounts received by an Employee pursuant to
an unfunded non-qualified plan to the extent such
amounts are includable in the gross income of the
Employee; (2) amounts realized from the exercise of a
non-qualified stock option or when restricted stock (or
property) held by an Employee either becomes freely
transferable or is no longer subject to a substantial
risk of forfeiture; (3) amounts realized from the sale,
exchange or other disposition of stock acquired under a
qualified stock option; and (4) other amounts which
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<PAGE> 67
receive special tax benefits, such as premiums for
group term life insurance (but only to the extent that
the premiums are not includable in the gross income of
the Employee), or contributions made by the Employer
(whether or not under a salary reduction agreement)
towards the purchase of any annuity contract described
in Code Section 403(b) (whether or not the
contributions are excludable from the gross income of
the Employee). For the purposes of this Section, the
determination of "415 Compensation" shall be made by
not including amounts that would otherwise be excluded
from a Participant's gross income by reason of the
application of Code Sections 125, 402 (a) (8),
402(h) (1) (B) and, in the case of Employer contributions
made pursuant to a salary reduction agreement, Code
Section 403(b).
(e) For purposes of applying the limitations of
Code Section 415, the "limitation year" shall be the
Plan Year.
(f) The dollar limitation under Code Section
415(b) (1) (A) stated in paragraph (a) (1) above shall be
adjusted annually as provided in Code Section 415(d)
pursuant to the Regulations. The adjusted limitation is
effective as of January 1st of each calendar year and
is applicable to "limitation years" ending with or
within that calendar year.
(g) For the purpose of this Section, all
qualified defined benefit plans (whether terminated or
not) ever maintained by the Employer shall be treated
as one defined benefit plan, and all qualified defined
contribution plans (whether terminated or not) ever
maintained by the Employer shall be treated as one
defined contribution plan.
(h) For the purpose of this Section, if the
Employer is a member of a controlled group of
corporations, trades or businesses under common control
(as defined by Code Section 1563(a) or Code Section
414(b) and (c) as modified by Code Section 415(h)), is
a member of an affiliated service group (as defined by
Code Section 414(m)), or is a member of a group of
entities required to be aggregated pursuant to
Regulations under Code Section 414(o), all Employees of
such Employers shall be considered to be employed by a
single Employer.
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<PAGE> 68
(i) For the purpose of this Section, if this
Plan is a Code Section 413(c) plan, all Employers of a
Participant who maintain this Plan will be considered
to be a single Employer.
(j) (1) If a Participant participates in more
than one defined contribution plan maintained by the
Employer which have different Anniversary Dates, the
maximum "annual additions" under this Plan shall equal
the maximum "annual additions" for the "limitation
year" minus any "annual additions" previously credited
to such Participant's accounts during the "limitation
year".
(2) If a Participant participates in both a
defined contribution plan subject to Code Section
412 and a defined contribution plan not subject
to Code Section 412 maintained by the Employer
which have the same Anniversary Date, "annual
additions" will be credited to the Participant's
accounts under the defined contribution plan
subject to Code Section 412 prior to crediting
"annual additions" to the Participant's accounts
under the defined contribution plan not subject
to Code Section 412.
(3) If a Participant participates in more than
one defined contribution plan not subject to Code
Section 412 maintained by the Employer which have
the same Anniversary Date, the maximum "annual
additions" under this Plan shall equal the
product of (A) the maximum "annual additions" for
the "limitation year" minus any "annual
additions" previously credited under
subparagraphs (1) or (2) above, multiplied by
(B) a fraction (i) the numerator of which is the
"annual additions" which would be credited to
such Participant's accounts under this Plan
without regard to the limitations of Code Section
415 and (ii) the denominator of which is such
"annual additions" for all plans described in
this subparagraph.
(k) If an Employee is (or has been) a
Participant in one or more defined benefit plans and
one or more defined contribution plans maintained by
the Employer, the sum of the defined benefit plan
fraction and the defined contribution plan fraction for
any "limitation year" may not exceed 1.0.
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<PAGE> 69
(1) The defined benefit plan fraction for any
"limitation year" is a fraction, the numerator of which
is the sum of the Participant's projected annual
benefits under all the defined benefit plans (whether
or not terminated) maintained by the Employer, and the
denominator of which is the lesser of 125 percent of
the dollar limitation determined for the "limitation
year" under Code Sections 415(b) and (d) or 140 percent
of the highest average compensation, including any
adjustments under Code Section 415(b).
Notwithstanding the above, if the
Participant was a Participant as of the first day of
the first "limitation year" beginning after
December 31, 1986, in one or more defined benefit plans
maintained by the Employer which were in existence on
May 6, 1986, the denominator of this fraction will not
be less than 125 percent of the sum of the annual
benefits under such plans which the Participant had
accrued as of the close of the last "limitation year"
beginning before January 1, 1987, disregarding any
changes in the terms and conditions of the plan after
May 5, 1986. The preceding sentence applies only if the
defined benefit plans individually and in the aggregate
satisfied the requirements of Code Section 415 for all
"limitation years" beginning before January 1, 1987.
(m) The defined contribution plan fraction for
any "limitation year" is a fraction, the numerator of
which is the sum of the annual additions to the
Participant's Account under all the defined
contribution plans (whether or not terminated)
maintained by the Employer for the current and all
prior "limitation years" (including the annual
additions attributable to the Participant's
nondeductible Employee contributions to all defined
benefit plans, whether or not terminated, maintained by
the Employer, and the annual additions attributable to
all welfare benefit funds, as defined in Code Section
419(e), and individual medical accounts, as defined in
Code Section 415(1) (2), maintained by the Employer),
and the denominator of which is the sum of the maximum
aggregate amounts for the current and all prior
"limitation years" of service with the Employer
(regardless of whether a defined contribution plan was
maintained by the Employer). The maximum aggregate
amount in any "limitation year" is the lesser of 125
percent of the dollar limitation determined under Code
Sections 415(b) and (d) in effect under Code Section
415(c) (1) (A) or 35 percent of the Participant's
Compensation for such year.
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<PAGE> 70
If the Employee was a Participant as of the
end of the first day of the first "limitation year"
beginning after December 31, 1986, in one or more
defined contribution plans maintained by the Employer
which were in existence on May 6, 1986, the numerator
of this fraction will be adjusted if the sum of this
fraction and the defined benefit fraction would
otherwise exceed 1.0 under the terms of this Plan.
Under the adjustment, an amount equal to the product of
(1) the excess of the sum of the fractions over 1.0
times (2) the denominator of this fraction, will be
permanently subtracted from the numerator of this
fraction. The adjustment is calculated using the
fractions as they would be computed as of the end of
the last "limitation year" beginning before January 1,
1987, and disregarding any changes in the terms and
conditions of the Plan made after May 6, 1986, but
using the Code Section 415 limitation applicable to the
first "limitation year" beginning on or after
January 1, 1987. The annual addition for any
"limitation year" beginning before January 1, 1987
shall not be recomputed to treat all Employee
contributions as annual additions.
(n) Notwithstanding the foregoing, for any
"limitation year" in which the Plan is a Top Heavy
Plan, 100% shall be substituted for 125% in Sections
4.9(1) and 4.9(m) unless the extra minimum allocation
is being provided pursuant to Section 4.4# However, for
any "limitation year" in which the Plan is a Super Top
Heavy Plan, 100% shall be substituted for 125% in any
event.
(o) Notwithstanding anything contained in this
Section to the contrary, the limitations, adjustments
and other requirements prescribed in this Section shall
at all times comply with the provisions of Code Section
415 and the Regulations thereunder, the terms of which
are specifically incorporated herein by reference.
4.10 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS
(a) If, as a result of a reasonable error in
estimating a Participant's Compensation or other facts
and circumstances to which Regulation 1.415-6(b) (6)
shall be applicable, the "annual additions" under this
Plan would cause the maximum "annual additions" to be
exceeded for any Participant, the Administrator shall
(1) return any voluntary Employee contributions
credited for the "limitation year" to the extent that
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<PAGE> 71
the return would reduce the "excess amount" in the
Participant's accounts (2) hold any "excess amount"
remaining after the return of any voluntary Employee
contributions in a "Section 415 suspense account"
(3) use the "Section 415 suspense account" in the next
"limitation year" (and succeeding "limitation years" if
necessary) to reduce Employer contributions for that
Participant if that Participant is covered by the Plan
as of the end of the "limitation year", or if the
Participant is not so covered, allocate and reallocate
the "Section 415 suspense account" in the next
"limitation year" (and succeeding "limitation years" if
necessary) to all Participants in the Plan before any
Employer or Employee contributions which would
constitute "annual additions" are made to the Plan for
such. "limitation year" (4) reduce Employer
contributions to the Plan for such "limitation year" by
the amount of the "Section 415 suspense account"
allocated and reallocated during such "limitation
year".
(b) For purposes of this Article, "excess
amount" for any Participant for a "limitation year"
shall mean the excess, if any, of (1) the "annual
additions" which would be credited to his account under
the terms of the Plan without regard to the limitations
of Code Section 415 over (2) the maximum "annual
additions" determined pursuant to Section 4.9.
(c) For purposes of this Section, "Section 415
suspense account" shall mean an unallocated account
equal to the sum of "excess amounts" for all
Participants in the Plan during the "limitation year".
The "Section 415 suspense account" shall not share in
any earnings or losses of the Trust Fund.
(d) The Plan may not distribute "excess
amounts", other than voluntary Employee contributions,
to Participants or Former Participants.
4.11 TRANSFERS FROM QUALIFIED PLANS
(a) With the consent of the Administrator,
amounts may be transferred from other qualified plans
by Employees, provided that the trust from which such
funds are transferred permits the transfer to be made
and the transfer will not jeopardize the tax exempt
status of the Plan or Trust or create adverse tax
consequences for the Employer. The amounts transferred
shall be set up in a separate account herein referred
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to as a "Participant's Rollover Account". Such account
shall be fully Vested at all times and shall not be
subject to Forfeiture for any reason.
(b) Amounts in a Participant's Rollover Account
shall be held by the Trustee pursuant to the provisions
of this Plan and may not be withdrawn by, or
distributed to the Participant, in whole or in part,
except as provided in Paragraphs (c) and (d) of this
Section.
(c) Except as permitted by Regulations
(including Regulation 1.411 (d) -4), amounts attributable
to elective contributions (as defined in Regulation
1.401(k)-1(g) (4)), including amounts treated as
elective contributions, which are transferred from
another qualified plan in a plan-to-plan transfer shall
be subject to the distribution limitations provided for
in Regulation 1.401(k)-1(d).
(d) At Normal Retirement Date, or such other
date when the Participant or his Beneficiary shall be
entitled to receive benefits, the fair market value of
the Participant's Rollover Account shall be used to
provide additional benefits to the Participant or his
Beneficiary. Any distributions of amounts held in a
Participant's Rollover Account shall be made in a
manner which is consistent with and satisfies the
provisions of Section 7.5, including, but not limited
to, all notice and consent requirements of Code
Section 411(a) (11) and the Regulations thereunder.
Furthermore, such amounts shall be considered as part
of a Participant's benefit in determining whether an
involuntary cash-out of benefits without Participant
consent may be made.
(e) The Administrator may direct that employee
transfers made after a valuation date be segregated
into a separate account for each Participant in a
federally insured savings account, certificate of
deposit in a bank or savings and loan association,
money market certificate, or other short term debt
security acceptable to the Trustee until such time as
the allocations pursuant to this Plan have been made,
at which time they may remain segregated or be invested
as part of the general Trust Fund, to be determined by
the Administrator.
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(f) For purposes of this Section, the term
"qualified plan" shall mean any tax qualified plan
under Code Section 401 (a). The term "amounts
transferred from other qualified plans" shall mean:
(i) amounts transferred to this Plan directly from
another qualified plan; (ii) lump-sum distributions
received by an Employee from another qualified plan
which are eligible for tax free rollover to a qualified
plan and which are transferred by the Employee to this
Plan within sixty (60) days following his receipt
thereof; (iii) amounts transferred to this Plan from a
conduit individual retirement account provided that the
conduit individual retirement account has no assets
other than assets which (A) were previously distributed
to the Employee by another qualified plan as a lump-sum
distribution (B) were eligible for tax-free rollover to
a qualified plan and (C) were deposited in such conduit
individual retirement account within sixty (60) days of
receipt thereof and other than earnings on said assets;
and (iv) amounts distributed to the Employee from a
conduit individual retirement account meeting the
requirements of clause (iii) above, and transferred by
the Employee to this Plan within sixty (60) days of his
receipt thereof from such conduit individual retirement
account.
(g) Prior to accepting any transfers to which
this Section applies, the Administrator may require the
Employee to establish that the amounts to be
transferred to this Plan meet the requirements of this
Section and may also require the Employee to provide an
opinion of counsel satisfactory to the Employer that
the amounts to be transferred meet the requirements of
this Section.
(h) This Plan shall not accept any direct or
indirect transfers (as that term is defined and
interpreted under Code Section 401(a) (11) and the
Regulations thereunder) from a defined benefit plan,
money purchase plan (including a target benefit plan),
stock bonus or profit sharing plan which would
otherwise have provided for a life annuity form of
payment to the Participant.
(i) Notwithstanding anything herein to the
contrary, a transfer directly to this Plan from another
qualified plan (or a transaction having the effect of
such a transfer) shall only be permitted if it will not
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result in the elimination or reduction of any "Section
411(d) (6) protected benefit" as described in Section
8.1.
4.12 DIRECTED INVESTMENT ACCOUNT
(a) Each "Qualified Participant", for Plan Years
beginning after December 31, 1986, may elect within
ninety (90) days after the close of each Plan Year
during the "Qualified Election Period" to direct the
Trustee in writing as to the investment of 25 percent
of the total number of shares of Company Stock acquired
by or contributed to the Plan that have ever been
allocated to such "Qualified Participant's" Company
Stock Account (reduced by the number of shares of
Company Stock previously invested pursuant to a prior
election). In the case of the election year in which
the Participant can make his last election, the
preceding sentence shall be applied by substituting "50
percent" for "25 percent". If the "Qualified
Participant" elects to direct the Trustee as to the
investment of his Company Stock Account, such direction
shall be effective no later than 180 days after the
close of the Plan Year to which such direction applies.
Notwithstanding the above, if the fair
market value (determined pursuant to Section 6.1 at the
Plan valuation date immediately preceding the first day
on which a "Qualified Participant" is eligible to make
an election) of Company Stock acquired by or
contributed to the Plan and allocated to a "Qualified
Participant's" Company Stock Account is $500 or less,
then such Company Stock shall not be subject to this
paragraph. For purposes of determining whether the fair
market value exceeds $500, Company Stock held in
accounts of all employee stock ownership plans (as
defined in Code Section 4975(e) (7)) and tax credit
employee stock ownership plans (as defined in Code
Section 409(a)) maintained by the Employer or any
Affiliated Employer shall be considered as held by the
Plan.
(b) For the purposes of this Section the
following definitions shall apply:
(1) "Qualified Participant" means any
Participant or Former Participant who has
completed ten (10) Plan Years of Service as a
Participant and has attained age 55.
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<PAGE> 75
(2) "Qualified Election Period" means the six
(6) Plan Year period beginning with the later of
(i) the first Plan Year in which the Participant
first became a "Qualified Participant", or
(ii) the first Plan Year beginning after
December 31, 1986.
(c) A separate Directed Investment Account shall
be established for each Participant who has directed an
investment. Transfers between the Participant's regular
account and his Directed Investment Account shall be
charged and credited as the case may be to each
account. The Directed Investment Account shall not
share in Trust Fund earnings, but it shall be charged
or credited as appropriate with the net earnings,
gains, losses and expenses as well as any appreciation
or depreciation in market value during each Plan Year
attributable to such account.
ARTICLE V
FUNDING AND INVESTMENT POLICY
5.1 INVESTMENT POLICY
(a) The Plan is designed to invest primarily in
Company Stock.
(b) With due regard to subparagraph (a) above,
the Administrator may also direct the Trustee to invest
funds under the Plan in other property described in the
Trust or in life insurance policies to the extent
permitted by subparagraph (c) below, or the Trustee may
hold such funds in cash or cash equivalents.
(c) With due regard to subparagraph (a) above,
the Administrator may also direct the Trustee to invest
funds under the Plan in insurance policies on the life
of any "keyman" Employee. The proceeds of a "keyman"
insurance policy may not be used for the repayment of
any indebtedness owed by the Plan which is secured by
Company Stock. In the event any "keyman" insurance is
purchased by the Trustee, the premiums paid thereon
during any Plan Year, net of any policy dividends and
increases in cash surrender values, shall be treated as
the cost of Plan investment and any death benefit or
cash surrender value received shall be treated as
proceeds from an investment of the Plan.
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<PAGE> 76
(d) The Plan may not obligate itself to acquire
Company Stock from a particular holder thereof at an
indefinite time determined upon the happening of an
event such as the death of the holder.
(e) The Plan may not obligate itself to acquire
Company Stock under a put option binding upon the Plan.
However, at the time a put option is exercised, the
Plan may be given an option to assume the rights and
obligations of the Employer under a put option binding
upon the Employer.
(f) All purchases of Company Stock shall be made
at a price which, in the judgment of the Administrator,
does not exceed the fair market value thereof. All
sales of Company Stock shall be made at a price which,
in the judgment of the Administrator, is not less than
the fair market value thereof. The valuation rules set
forth in Article VI shall be applicable.
5.2 APPLICATION OF CASH
Employer contributions in cash and other cash received
by the Trust Fund shall first be applied to pay any Current
Obligations of the Trust Fund.
5.3 LOANS TO THE TRUST
(a) The Plan may borrow money for any lawful
purpose, provided the proceeds of an Exempt Loan are
used within a reasonable time after receipt only for
any or all of the following purposes:
(1) To acquire Company Stock.
(2) To repay such loan.
(3) To repay a prior Exempt Loan.
(b) All loans to the Trust which are made or
guaranteed by a disqualified person must satisfy all
requirements applicable to Exempt Loans including but
not limited to the following:
(1) The loan must be at a reasonable rate of
interest;
(2) Any collateral pledged to the creditor by
the Plan shall consist only of the Company Stock
purchased with the borrowed funds;
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<PAGE> 77
(3) Under the terms of the loan, any pledge of
Company Stock shall provide for the release of
shares so pledged on a pro-rata basis pursuant to
Section 4.4(e);
(4) Under the terms of the loan, the creditor
shall have no recourse against the Plan except
with respect to such collateral, earnings
attributable to such collateral, Employer
contributions (other than contributions of
Company Stock) that are made to meet Current
Obligations and earnings attributable to such
contributions;
(5) The loan must be for a specific term and may
not be payable at the demand of any person,
except in the case of default;
(6) In the event of default upon an Exempt Loan,
the value of the Trust Fund transferred in
satisfaction of the Exempt Loan shall not exceed
the amount of default. If the lender is a
disqualified person, an Exempt Loan shall provide
for a transfer of Trust Funds upon default only
upon and to the extent of the failure of the Plan
to meet the payment schedule of the Exempt Loan;
(7) Exempt Loan payments during a Plan Year must
not exceed an amount equal to: (A) the sum, over
all Plan Years, of all contributions and cash
dividends paid by the Employer to the Plan with
respect to such Exempt Loan and earnings on such
Employer contributions and cash dividends, less
(B) the sum of the Exempt Loan payments in all
preceding Plan Years. A separate accounting shall
be maintained for such Employer contributions,
cash dividends and earnings until the Exempt Loan
is repaid.
(c) For purposes of this Section, the term
"disqualified person " means a person who is a
Fiduciary, a person providing services to the Plan, an
Employer any of whose Employees are covered by the
Plan, an employee organization any of whose members are
covered by the Plan, an owner, direct or indirect, of
50% or more of the total combined voting power of all
classes of voting stock or of the total value of all
classes of the stock, or an officer, director, 10% or
more shareholder, or a highly compensated Employee.
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<PAGE> 78
ARTICLE VI
VALUATIONS
6.1 VALUATION OF THE TRUST FUND
The Administrator shall direct the Trustee, as of each
Anniversary Date, and at such other date or dates deemed
necessary by the Administrator, herein called "valuation date",
to determine the net worth of the assets comprising the Trust
Fund as it exists on the "valuation date" prior to taking into
consideration any contribution to be allocated for that Plan
Year. In determining such net worth, the Trustee shall value the
assets comprising the Trust Fund at their fair market value as of
the "valuation date" and shall deduct all expenses for which the
Trustee has not yet obtained reimbursement from the Employer or
the Trust Fund.
6.2 METHOD OF VALUATION
Valuations must be made in good faith and based on all
relevant factors for determining the fair market value of
securities. In the case of a transaction between a Plan and a
disqualified person, value must be determined as of the date of
the transaction. For all other Plan purposes, value must be
determined as of the most recent "valuation date" under the Plan.
An independent appraisal will not in itself be a good faith
determination of value in the case of a transaction between the
Plan and a disqualified person. However, in other cases, a
determination of fair market value based on at least an annual
appraisal independently arrived at by a person who customarily
makes such appraisals and who is independent of any party to the
transaction will be deemed to be a good faith determination of
value. Company Stock not readily tradeable on an established
securities market shall be valued by an independent appraiser
meeting requirements similar to the requirements of the
Regulations prescribed under Code Section 170 (a) (1).
ARTICLE VII
DETERMINATION AND DISTRIBUTION OF BENEFITS
7.1 DETERMINATION OF BENEFITS UPON RETIREMENT
Every Participant may terminate his employment with the
Employer and retire for the purposes hereof on his Normal
Retirement Date or Early Retirement Date. Upon such Normal
Retirement Date or Early Retirement Date, all amounts credited to
such Participant's Combined Account shall become distributable.
However, a Participant may postpone the termination of his
employment with the Employer to a later date, in which event the
participation of such Participant in the Plan, including the
right to receive allocations pursuant to Section 4.4, shall
continue until his Late Retirement Date. Upon a Participant's
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<PAGE> 79
Retirement Date, or as soon thereafter as is practicable, the
Trustee shall distribute all amounts credited to such
Participant's Combined Account in accordance with Sections 7.5
and 7.6.
7.2 DETERMINATION OF BENEFITS UPON DEATH
(a) Upon the death of a Participant before his
Retirement Date or other termination of his employment,
all amounts credited to such Participant's Combined
Account shall become fully Vested. The Administrator
shall direct the Trustee, in accordance with the
provisions of Sections 7.5 and 7.6, to distribute the
value of the deceased Participant's accounts to the
Participant's Beneficiary. Distribution to the
Participant's Beneficiary shall commence not later than
one (1) year after the close of the Plan Year in which
such Participant's death occurs.
(b) Upon the death of a Former Participant, the
Administrator shall direct the Trustee, in accordance
with the provisions of Sections 7.5 and 7.6, to
distribute any remaining amounts credited to the
accounts of a deceased Former Participant to such
Former Participant's Beneficiary.
(c) The Administrator may require such proper
proof of death and such evidence of the right of any
person to receive payment of the value of the account
of a deceased Participant or Former Participant as the
Administrator may deem desirable. The Administrator's
determination of death and of the right of any person
to receive payment shall be conclusive.
(d) The Beneficiary of the death benefit payable
pursuant to this Section shall be the Participant's
spouse. Except, however, the Participant may designate
a Beneficiary other than his spouse if:
(1) the spouse has waived the right to be the
Participant's Beneficiary, or
(2) the Participant is legally separated or has
been abandoned (within the meaning of local law)
and the Participant has a court order to such
effect (and there is no "qualified domestic
relations order" as defined in Code Section
414(p) which provides otherwise), or
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<PAGE> 80
(3) the Participant has no spouse, or
(4) the spouse cannot be located.
In such event, the designation of a
Beneficiary shall be made on a form satisfactory to the
Administrator. A Participant may at any time revoke his
designation of a Beneficiary or change his Beneficiary
by filing written notice of such revocation or change
with the Administrator. However, the Participant's
spouse must again consent in writing to any change in
Beneficiary unless the original consent acknowledged
that the spouse had the right to limit consent only to
a specific Beneficiary and that the spouse voluntarily
elected to relinquish such right. In the event no valid
designation of Beneficiary exists at the time of the
Participant's death, the death benefit shall be payable
to his estate.
(e) Any consent by the Participant's spouse to
waive any rights to the death benefit must be in
writing, must acknowledge the effect of such waiver,
and be witnessed by a Plan representative or a notary
public. Further, the spouse's consent must be
irrevocable and must acknowledge the specific nonspouse
Beneficiary.
7.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY
In the event of a Participant's Total and Permanent
Disability prior to his Retirement Date or other termination of
his employment, all amounts credited to such Participant's
Combined Account shall become fully Vested. In the event of a
Participant's Total and Permanent Disability, the Trustee, in
accordance with the provisions of Sections 7.5 and 7.6, shall
distribute to such Participant all amounts credited to such
Participant's Combined Account as though he had retired.
Distribution to such Participant shall commence not later than
one (1) year after the close of the Plan Year in which such
Participant's Total and Permanent Disability occurs.
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<PAGE> 81
7.4 DETERMINATION OF BENEFITS UPON TERMINATION
(a) On or before the Anniversary Date coinciding
with or subsequent to the termination of a
Participant's employment for any reason other than
death, Total and Permanent Disability or retirement,
the Administrator may direct the Trustee to segregate
the amount of the Vested portion of such Terminated
Participant's Combined Account and invest the aggregate
amount thereof in a separate, federally insured savings
account, certificate of deposit, common or collective
trust fund of a bank or a deferred annuity. In the
event the Vested portion of a Participant's Combined
Account is not segregated, the amount shall remain in a
separate account for the Terminated Participant and
share in allocations pursuant to Section 4.4 until such
time as a distribution is made to the Terminated
Participant.
If a portion of a Participant's Account is
forfeited, Company Stock allocated to the Participant's
Company Stock Account must be forfeited only after the
Participant's Other Investments Account has been
depleted. If interest in more than one class of Company
Stock has been allocated to a Participant's Account,
the Participant must be treated as forfeiting the same
proportion of each such class.
Distribution of the funds due to a
Terminated Participant shall be made on the occurrence
of an event which would result in the distribution had
the Terminated Participant remained in the employ of
the Employer (upon the Participant's death, Total and
Permanent Disability, Early or Normal Retirement).
However, at the election of the Participant, the
Administrator shall direct the Trustee to cause the
entire Vested portion of the Terminated Participant's
Combined Account to be payable to such Terminated
Participant. Distribution to a Participant shall not
include any Company Stock acquired with the proceeds of
an Exempt Loan until the close of the Plan Year in
which such loan is repaid in full. Any distribution
under this paragraph shall be made in a manner which is
consistent with and satisfies the provisions of
Sections 7.5 and 7.6, including, but not limited to,
all notice and consent requirements of Code Section
411(a) (11) and the Regulations thereunder. The
Participant may choose to have the Vested amount
determined as either the amount valued as of the
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<PAGE> 82
preceding valuation date plus deferrals made after that
date or as the balance in his account as of the
subsequent valuation date.
If the value of a Terminated Participant's
Vested benefit derived from Employer and Employee
contributions does not exceed $3,500 and has never
exceeded $3,500 at the time of any prior distribution,
the Administrator shall direct the Trustee to cause the
entire Vested benefit to be paid to such Participant in
a single lump sum.
For purposes of this Section 7.4, if the
value of a Terminated Participant's Vested benefit is
zero, the Terminated Participant shall be deemed to
have received a distribution of such Vested benefit.
(b) The Vested portion of any Participant's
Account shall be a percentage of the total amount
credited to his Participant's Account determined on the
basis of the Participant's number of Years of Service
according to the following schedule:
<TABLE>
<CAPTION>
Vesting Schedule
Period of Service (Years) Percentage
<S> <C>
3 20 %
4 40 %
5 60 %
6 80 %
7 100 %
</TABLE>
(c) Notwithstanding the vesting schedule
provided for in paragraph (b) above, for any Top Heavy
Plan Year, the Vested portion of the Participant's
Account of any Participant who has an Hour of Service
after the Plan becomes top heavy shall be a percentage
of the total amount credited to his Participant's
Account determined on the basis of the Participant's
number of Years of Service according to the following
schedule:
<TABLE>
<CAPTION>
Vesting Schedule
Period of Service (Years) Percentage
<S> <C>
2 20 %
3 40 %
4 60 %
5 80 %
6 100 %
</TABLE>
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<PAGE> 83
If in any subsequent Plan Year, the Plan
ceases to be a Top Heavy Plan, the Administrator shall
revert to the vesting schedule in effect before this
Plan became a Top Heavy Plan. Any such reversion shall
be treated as a Plan amendment pursuant to the terms of
the Plan.
(d) Notwithstanding the vesting schedule above,
the Vested percentage of a Participant's Account shall
not be less than the Vested percentage attained as of
the later of the effective date or adoption date of
this amendment and restatement.
(e) Notwithstanding the vesting schedule above,
upon the complete discontinuance of the Employer's
contributions to the Plan or upon any full or partial
termination of the Plan, all amounts credited to the
account of any affected Participant shall become 100%
Vested and shall not thereafter be subject to
Forfeiture.
(f) The computation of a Participant's
nonforfeitable percentage of his interest in the Plan
shall not be reduced as the result of any direct or
indirect amendment to this Article. In the event that
the Plan is amended to change or modify any vesting
schedule, a Participant with at least a three-year
Period of Service as of the expiration date of the
election period may elect to have his nonforfeitable
percentage computed under the Plan without regard to
such amendment. If a Participant fails to make such
election, then such Participant shall be subject to the
new vesting schedule. The Participant's election period
shall commence on the adoption date of the amendment
and shall end 60 days after the latest of:
(l) the adoption date of the amendment,
(2) the effective date of the amendment, or
(3) the date the Participant receives written
notice of the amendment from the Employer or
Administrator.
(g) (1) If any Former Participant shall be
reemployed by the Employer, he shall continue to
participate in the Plan in the same manner as if such
termination had not occurred.
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<PAGE> 84
(2) If any Former Participant shall be
reemployed by the Employer before a five-year
Period of Severance occurs, and such Former
Participant had received, or was deemed to have
received, a distribution of his entire Vested
interest prior to his reemployment, his forfeited
account shall be reinstated only if he repays the
full amount distributed to him before the earlier
of five (5) years after the first date on which
the Participant is subsequently reemployed by the
Employer or the close of the first five-year
Period of Severance commencing after the
distribution, or in the event of a deemed
distribution, upon the reemployment of such
Former Participant. If a distribution occurs for
any reason other than a separation from service,
the time for repayment may not end earlier than
five (5) years after the date of separation. In
the event the Former Participant does repay the
full amount distributed to him, or in the event
of a deemed distribution, the undistributed
portion of the Participant's Account must be
restored in full, unadjusted by any gains or
losses occurring subsequent to the Anniversary
Date or valuation date coinciding with or
preceding his termination. The source for such
reinstatement shall first be any Forfeitures
occurring during the year. If such source is
insufficient, then the Employer shall contribute
an amount which is sufficient to restore any such
forfeited Accounts provided, however, that if a
discretionary contribution is made for such
year pursuant to Section 4.1(c), such
contribution shall first be applied to restore
any such Accounts and the remainder shall be
allocated in accordance with Section 4.4.
(3) If any Former Participant is reemployed
after a 1-year Period of Severance has occurred,
his Period of Service shall include service prior
to his 1-year Period of Severance subject to the
following rules:
(i) If a Former Participant has a 1-year
Period of Severance, his service before and
after the Period of Severance shall be used
for computing his Period of Service only
after he has been employed for a 1-year
Period of Service following the date of his
reemployment with the Employer;
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<PAGE> 85
(ii) Any Former Participant who under the
Plan does not have a nonforfeitable right to
any interest in the Plan resulting from
Employer contributions shall lose credits
otherwise allowable under (i) above if the
number of consecutive 1-year Periods of
Severance equal or exceed the greater of
(A) five (5) or (B) the aggregate number of
years in his Period of Service before such
Severance;
(iii) After a five-year Period of
Severance, a Former Participant's Vested
Account balance attributable to service
before that Period of Severance shall not be
increased as a result of service after that
Period of Severance.
7.5 DISTRIBUTION OF BENEFITS
(a) The Administrator, pursuant to the election
of the Participant (or if no election has been made
prior to the Participant's death, by his Beneficiary),
shall direct the Trustee to distribute to a Participant
or his Beneficiary any amount to which he is entitled
under the Plan in one lump-sum payment.
(b) Any distribution to a Participant who has a
benefit which exceeds, or has ever exceeded, $3,500 at
the time of any prior distribution shall require such
Participant's consent if such distribution occurs prior
to the later of his Normal Retirement Age or age 62.
With regard to this required consent:
(1) The Participant must be informed of his
right to defer receipt of the distribution. If a
Participant fails to consent, it shall be deemed
an election to defer the distribution of any
benefit. However, any election to defer the
receipt of benefits shall not apply with respect
to distributions which are required under Section
7.5(e).
(2) Notice of the rights specified under this
paragraph shall be provided no less than 30 days
and no more than 90 days before the first day on
which all events have occurred which entitle the
Participant to such benefit.
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<PAGE> 86
(3) Written consent of the Participant to the
distribution must not be made before the
Participant receives the notice and must not be
made more than 90 days before the first day on
which all events have occurred which entitle the
Participant to such benefit.
(4) No consent shall be valid if a significant
detriment is imposed under the Plan on any
Participant who does not consent to the
distribution.
(c) Notwithstanding anything herein to the
contrary, cash dividends on shares of Company Stock
allocable to Participants' Company Stock Accounts may
be paid pursuant to Section 4.4(d) to Participants or
their Beneficiaries within 90 days after the close of
the Plan Year in which the dividend is paid.
(d) Any part of a Participant's benefit which is
retained in the Plan after the Anniversary Date on
which his participation ends will continue to be
treated as a Company Stock Account or as an Other
Investments Account (subject to Section 7.4(a)) as
provided in Article IV. However, neither account will
be credited with any further Employer contributions.
(e) Notwithstanding any provision in the Plan to
the contrary, the distribution of a Participant's
benefits made on or after January 1, 1985 shall be made
in accordance with the following requirements and shall
otherwise comply with Code Section 401(a) (9) and the
Regulations thereunder (including Regulation
1.401(a) (9)-2), the provisions of which are
incorporated herein by reference:
(1) A Participant's benefits shall be
distributed to him not later than April 1st of
the calendar year following the later of (i) the
calendar year in which the Participant attains
age 70 1/2 or (ii) the calendar year in which the
Participant retires, provided, however, that this
clause (ii) shall not apply in the case of a
Participant who is a "five (5) percent owner" at
any time during the five (5) Plan Year period
ending in the calendar year in which he attains
age 70 1/2 or, in the case of a Participant who
becomes a "five (5) percent owner" during any
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<PAGE> 87
subsequent Plan Year, clause (ii) shall no longer
apply and the required beginning date shall be
the April 1st of the calendar year following the
calendar year in which such subsequent Plan Year
ends. Notwithstanding the foregoing, clause (ii)
above shall not apply to any Participant unless
the Participant had attained age 70 1/2 before
January 1, 1988 and was not a "five (5) percent
owner" at any time during the Plan Year ending
with or within the calendar year in which the
Participant attained age 66 1/2 or any subsequent
Plan Year.
(2) Distributions to a Participant and his
Beneficiaries shall only be made in accordance
with the incidental death benefit requirements of
Code Section 401(a) (9) (G) and the Regulations
thereunder.
(f) Notwithstanding any provision in the Plan to
the contrary, distributions upon the death of a
Participant made on or after January l, 1985 shall be
made in accordance with the following requirements and
shall otherwise comply with Code Section 401(a) (9) and
the Regulations thereunder. If it is determined
pursuant to Regulations that the distribution of a
Participant's interest has begun and the Participant
dies before his entire interest has been distributed to
him, the remaining portion of such interest shall be
distributed at least as rapidly as under the method of
distribution selected pursuant to Section 7.5 as of his
date of death. If a Participant dies before he has
begun to receive any distributions of his interest
under the Plan or before distributions are deemed to
have begun pursuant to Regulations, then his death
benefit shall be distributed to his Beneficiaries by
December 31st of the calendar year in which the fifth
anniversary of his date of death occurs.
(g) Except as limited by Sections 7.5 and 7.6,
whenever the Trustee is to make a distribution on or as
of an Anniversary Date, the distribution may be made on
such date or as soon thereafter as is practicable, but
in no event later than 180 days after the Anniversary
Date. However, unless a Former Participant elects in
writing to-defer the receipt of benefits (such election
may not result in a death benefit that is more than
incidental), the payment of benefits shall occur not
later than the 60th day after the close of the Plan
Year in which the latest of the following events
occurs:
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<PAGE> 88
(1) the date on which the Participant attains
the earlier of age 65 or the Normal Retirement
Age specified herein;
(2) the 10th anniversary of the year in which
the Participant commenced participation in the
Plan; or
(3) the date the Participant terminates his
service with the Employer.
(h) The restrictions imposed by this Section
shall not apply if a Participant has, prior to
January 1, 1984, made a written designation to have his
retirement benefit paid in an alternative method
acceptable under Code Section 401(a) as in effect prior
to the enactment of the Tax Equity and Fiscal
Responsibility Act of 1982. Any such written
designation made by a Participant shall be binding upon
the Plan Administrator notwithstanding any contrary
provision of Section 7.5.
(i) Subject to the spouse's right of consent
afforded under the Plan, the restrictions imposed by
this Section shall not apply if a Participant has,
prior to January 1, 1984, made a written designation to
have his death benefits paid in an alternative method
acceptable under Code Section 401(a) as in effect prior
to the enactment of the Tax Equity and Fiscal
Responsibility Act of 1982.
(j) If a distribution is made at a time when a
Participant is not fully Vested in his Participant's
Account and the Participant may increase the Vested
percentage in such account:
(1) a separate account shall be established for
the Participant's interest in the Plan as of the
time of the distribution; and
(2) at any relevant time, the Participant's
Vested portion of the separate account shall be
equal to an amount ("X") determined by the
formula:
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X equals P(AB plus (R x D)) - (R x D)
For purposes of applying the formula: P is the
Vested percentage at the relevant time, AB is the
account balance at the relevant time, D is the
amount of distribution, and R is the ratio of the
account balance at the relevant time to the
account balance after distribution.
7.6 HOW PLAN BENEFIT WILL BE DISTRIBUTED
(a) Distribution of a Participant's benefit may
be made in cash or Company Stock or both, provided,
however, that if a Participant or Beneficiary so
demands, such benefit (other than Company Stock
reinvested pursuant to Section 4.12(a)) shall be
distributed only in the form of Company Stock. Prior to
making a distribution of benefits, the Administrator
shall advise the Participant or his Beneficiary, in
writing, of the right to demand that benefits be
distributed solely in Company Stock.
(b) If a Participant or Beneficiary demands that
benefits be distributed solely in Company Stock,
distribution of a Participant's benefit will be made
entirely in whole shares or other units of Company
Stock. Any balance in a Participant's Other Investments
Account will be applied to acquire for distribution the
maximum number of whole shares or other units of
Company Stock at the then fair market value. Any
fractional unit value unexpended will be distributed in
cash. If Company Stock is not available for purchase by
the Trustee, then the Trustee shall hold such balance
until Company Stock is acquired and then make such
distribution, subject to Sections 7.5(g) and 7.5(e).
(c) The Trustee will make distribution from the
Trust only on instructions from the Administrator.
(d) Notwithstanding anything contained herein to
the contrary, if the Employer's charter or by-laws
restrict ownership of substantially all shares of
Company Stock to Employees and the Trust Fund, as
described in Code Section 409(h) (2), the Administrator
shall distribute a Participant's Combined Account
entirely in cash without granting the Participant the
right to demand distribution in shares of Company
Stock.
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(e) Except as otherwise provided herein, Company
Stock distributed by the Trustee may be restricted as
to sale or transfer by the by-laws or articles of
incorporation of the Employer, provided restrictions
are applicable to all Company Stock of the same class.
If a Participant is required to offer the sale of his
Company Stock to the Employer before offering to sell
his Company Stock to a third party, in no event may the
Employer pay a price less than that offered to the
distributee by another potential buyer making a bona
fide offer and in no event shall the Trustee pay a
price less than the fair market value of the Company
Stock.
(f) If Company Stock acquired with the proceeds
of an Exempt Loan (described in Section 5.3 hereof) is
available for distribution and consists of more than
one class, a Participant or his Beneficiary must
receive substantially the same proportion of each such
class.
7.7 DISTRIBUTION FOR MINOR BENEFICIARY
In the event a distribution is to be made to a minor,
then the Administrator may direct that such distribution be paid
to the legal guardian, or if none, to a parent of such
Beneficiary or a responsible adult with whom the Beneficiary
maintains his residence, or to the custodian for such Beneficiary
under the Uniform Gift to Minors Act or Gift to Minors Act, if
such is permitted by the laws of the state in which said
Beneficiary resides. Such a payment to the legal guardian,
custodian or parent of a minor Beneficiary shall fully discharge
the Trustee, Employer, and Plan from further liability on account
thereof.
7.8 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN
In the event that all, or any portion, of the
distribution payable to a Participant or his Beneficiary
hereunder shall, at the later of the Participant's attainment of
age 62 or his Normal Retirement Age, remain unpaid solely by
reason of the inability of the Administrator, after sending a
registered letter, return receipt requested, to the last known
address, and after further diligent effort, to ascertain the
whereabouts of such Participant or his Beneficiary, the amount so
distributable shall be treated as a Forfeiture pursuant to the
Plan. In the event a Participant or Beneficiary is located
subsequent to his benefit being reallocated, such benefit shall
be restored.
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7.9 RIGHT OF FIRST REFUSALS
(a) If any Participant, his Beneficiary or any
other person to whom shares of Company Stock are
distributed from the Plan (the "Selling Participant")
shall, at any time, desire to sell some or all of such
shares (the "Offered Shares") to a third party (the
"Third Party"), the Selling Participant shall give
written notice of such desire to the Employer and the
Administrator, which notice shall contain the number of
shares offered for sale, the proposed terms of the sale
and the names and addresses of both the Selling
Participant and Third Party. Both the Trust Fund and
the Employer shall each have the right of first refusal
for a period of fourteen (14) days from the date the
Selling Participant gives such written notice to the
Employer and the Administrator (such fourteen (14) day
period to run concurrently against the Trust Fund and
the Employer) to acquire the Offered Shares. As between
the Trust Fund and the Employer, the Trust Fund shall
have priority to acquire the shares pursuant to the
right of first refusal. The selling price and terms
shall be the same as offered by the Third Party.
(b) If the Trust Fund and the Employer do not
exercise their right of first refusal within the
required fourteen (14) day period provided above, the
Selling Participant shall have the right, at any time
following the expiration of such fourteen (14) day
period, to dispose of the Offered Shares to the Third
Party; provided, however, that (i) no disposition shall
be made to the Third Party on terms more favorable to
the Third Party than those set forth in the written
notice delivered by the Selling Participant above, and
(ii) if such disposition shall not be made to a third
party on the terms offered to the Employer and the
Trust Fund, the offered Shares shall again be subject
to the right of first refusal set forth above.
(c) The closing pursuant to the exercise of the
right of first refusal under Section 7.9(a) above shall
take place at such place agreed upon between the
Administrator and the Selling Participant, but not
later than ten (10) days after the Employer or the
Trust Fund shall have notified the Selling Participant
of the exercise of the right of first refusal. At such
closing, the Selling Participant shall deliver
certificates representing the Offered Shares duly
endorsed in blank for transfer, or with stock powers
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attached duly executed in blank with all required
transfer tax stamps attached or provided for, and the
Employer or the Trust Fund shall deliver the purchase
price, or an appropriate portion thereof, to the
Selling Participant.
(d) Except as provided in this paragraph (d), no
Company Stock acquired with the proceeds of an Exempt
Loan complying with the requirements of Section 5.3
hereof shall be subject to a right of first refusal.
Company Stock acquired with the proceeds of an Exempt
Loan, which is distributed to a Participant or
Beneficiary, shall be subject to the right of first
refusal provided for in paragraph (a) of this Section
only so long as the Company Stock is not publicly
traded. The term "publicly traded" refers to a
securities exchange registered under Section 6 of the
Securities Exchange Act of 1934 (15 U.S.C. 78f) or that
is quoted on a system sponsored by a national
securities association registered under Section 15A (b)
of the Securities Exchange Act (15 U.S.C. 780). In
addition, in the case of Company Stock which was
acquired with the proceeds of a loan described in
Section 5.3, the selling price and other terms under
the right must not be less favorable to the seller than
the greater of the value of the security determined
under Regulation 54.4975-11(d) (5), or the purchase
price and other terms offered by a buyer (other than
the Employer or the Trust Fund), making a good faith
offer to purchase the security. The right of first
refusal must lapse no later than fourteen (14) days
after the security holder gives notice to the holder of
the right that an offer by a third party to purchase
the security has been made. The right of first refusal
shall comply with the provisions of paragraphs (a), (b)
and (c) of this Section, except to the extent those
provisions may conflict with the provisions of this
paragraph.
7.10 STOCK CERTIFICATE LEGEND
Certificates for shares distributed pursuant to the
Plan shall contain the following legend:
"The shares represented by this certificate are
transferable only upon compliance with the terms of HOME SHOPPING
NETWORK, INC. RETIREMENT SAVINGS AND EMPLOYEE STOCK OWNERSHIP
PLAN effective as of February 1, 1990, which grants to Home
Shopping Network, Inc. a right of first refusal, a copy of said
Plan being on file in the office of the Company."
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7.11 PUT OPTION
(a) If Company Stock which was not acquired with
the proceeds of an Exempt Loan is distributed to a
Participant and such Company Stock is not readily
tradeable on an established securities market, a
Participant has a right to require the Employer to
repurchase the Company Stock distributed to such
Participant under a fair valuation formula. Such Stock
shall be subject to the provisions of Section 7.11(c).
(b) Company Stock which is acquired with the
proceeds of an Exempt Loan and which is not publicly
traded when distributed, or if it is subject to a
trading limitation when distributed, must be subject to
a put option. For purposes of this paragraph, a
"trading limitation" on a Company Stock is a
restriction under any Federal or State securities law
or any regulation thereunder, or an agreement (not
prohibited by Section 7.12) affecting the Company Stock
which would make the Company Stock not as freely
tradeable as stock not subject to such restriction.
(c) The put option must be exercisable only by a
Participant, by the Participant's donees, or by a
person (including an estate or its distributee) to whom
the Company Stock passes by reason of a Participant's
death. (Under this paragraph Participant or Former
Participant means a Participant or Former Participant
and the beneficiaries of the Participant or Former
Participant under the Plan.) The put option must permit
a Participant to put the Company Stock to the Employer.
Under no circumstances may the put option bind the
Plan. However, it shall grant the Plan an option to
assume the rights and obligations of the Employer at
the time that the put option is exercised. If it is
known at the time a loan is made that Federal or State
law will be violated by the Employer's honoring such
put option, the put option must permit the Company
Stock to be put, in a manner consistent with such law,
to a third party (e.g., an affiliate of the Employer or
a shareholder other than the Plan) that has substantial
net worth at the time the loan is made and whose net
worth is reasonably expected to remain substantial.
The put option shall commence as of the day
following the date the Company Stock is distributed to
the Former Participant and end 60 days thereafter and
if not exercised within such 60-day period, an
additional 60-day option shall commence on the first
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day of the fifth month of the Plan Year next following the date
the stock was distributed to the Former Participant (or such
other 60-day period as provided in regulations promulgated by the
Secretary of the Treasury). However, in the case of Company Stock
that is publicly traded without restrictions when distributed but
ceases to be so traded within either of the 60-day periods
described herein after distribution, the Employer must notify
each holder of such Company Stock in writing on or before the
tenth day after the date the Company Stock ceases to be so traded
that for the remainder of the applicable 60-day period the
Company Stock is subject to the put option. The number of days
between the tenth day and the date on which notice is actually
given, if later than the tenth day, must be added to the
duration of the put option. The notice must inform distributees
of the term of the put options that they are to hold. The terms
must satisfy the requirements of this paragraph.
The put option is exercised by the holder notifying
the Employer in writing that the put option is being exercised;
the notice shall state the name and address of the holder and
the number of shares to be sold. The period during which a put
option is exercisable does not include any time when a
distributee is unable to exercise it because the party bound by
the put option is prohibited from honoring it by applicable
Federal or State law. The price at which a put option must be
exercisable is the value of the Company Stock determined in
accordance with Section 6.2. Payment under the put option
involving a "Total Distribution" shall be paid in substantially
equal monthly, quarterly, semiannual or annual installments
over a period certain beginning not later than thirty (30) days
after the exercise of the put option and not extending beyond (5)
years. The deferral of payment is reasonable if adequate
security and a reasonable interest rate on the unpaid amounts
are provided. The amount to be paid under the put option
involving installment distributions must be paid not later than
thirty (30) days after the exercise of the put option.
Payment under a put option must not be restricted by the
provisions of a loan or any other arrangement, including the
terms of the Employer's articles of incorporation, unless so
required by applicable state law.
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For purposes of this Section, "Total
Distribution" means a distribution to a Participant or
his Beneficiary within one taxable year of the entire
Vested Participant's Combined Account.
(d) An arrangement involving the Plan that
creates a put option must not provide for the issuance
of put options other than as provided under this
Section. The Plan (and the Trust Fund) must not
otherwise obligate itself to acquire Company Stock from
a particular holder thereof at an indefinite time
determined upon the happening of an event such as the
death of the holder.
7.12 NONTERMINABLE PROTECTIONS AND RIGHTS
No Company Stock, except as provided in Section 7.9(d)
and Section 7.11(b), acquired with the proceeds of a loan
described in Section 5.3 hereof may be subject to a put, call, or
other option, or buy-sell or similar arrangement when held by and
when distributed from the Trust Fund, whether or not the Plan is
then an ESOP. The protections and rights granted in this Section
are nonterminable, and such protections and rights shall continue
to exist under the terms of this Plan so long as any Company
Stock acquired with the proceeds of a loan described in Section
5.3 hereof is held by the Trust Fund or by any Participant or
other person for whose benefit such protections and rights have
been created, and neither the repayment of such loan nor the
failure of the Plan to be an ESOP, nor an amendment of the Plan
shall cause a termination of said protections and rights.
7.13 PRE-RETIREMENT DISTRIBUTION
At such time as a Participant shall have attained the
age of 59 1/2 years, the Administrator, at the election of the
Participant, shall direct the Trustee to distribute all or a
portion of the amount then credited to the accounts maintained on
behalf of the Participant. However, no distribution from the
Participant's Account shall occur prior to 100% vesting. In the
event that the Administrator makes such a distribution, the
Participant shall continue to be eligible to participate in the
Plan on the same basis as any other Employee. Any distribution
made pursuant to this Section shall be made in a manner
consistent with Sections 7.5 and 7.6, including, but not limited
to, all notice and consent requirements of Code Section
411(a) (11) and the Regulations thereunder.
Notwithstanding the above, pre-retirement distributions
from a Participant's Elective Account shall not be permitted
prior to the Participant attaining age 59 1/2 except as otherwise
permitted under the terms of the Plan.
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7.14 ADVANCE DISTRIBUTION FOR HARDSHIP
(a) The Administrator, at the election of the
Participant, shall direct the Trustee to distribute to
any Participant in any one Plan Year up to the lesser
of 100% of his Participant's Elective Account valued as
of the last Anniversary Date or other valuation date or
the amount necessary to satisfy the immediate and heavy
financial need of the Participant. Any distribution
made pursuant to this Section shall be deemed to be
made as of the first day of the Plan Year or, if later,
the valuation date immediately preceding the date of
distribution, and the Participant's Elective Account
shall be reduced accordingly. The determination of
whether an immediate and heavy financial need exists
shall be based on all relevant facts and circumstances.
A need shall not be disqualified because it was
reasonably foreseeable or voluntarily incurred.
Withdrawal under this Section shall be authorized, for
example, if the distribution is on account of:
(1) Medical expenses described in Code Section
213(d) incurred by the Participant, his spouse,
or any of his dependents (as defined in Code
Section 152);
(2) Funeral expenses for a member of the
Participant's family;
(3) The purchase (excluding mortgage payments)
of a principal residence for the Participant;
(4) Payment of tuition for the next semester or
quarter of post-secondary education for the
Participant, his spouse, children, or dependents;
or
(5) The need to prevent the eviction of the
Participant from his principal residence or
foreclosure on the mortgage of the Participant's
principal residence.
(b) No distribution shall be made pursuant to
this Section unless the Administrator determines that
either the "Safe Harbor Resources Test" or the "Facts
and Circumstances Resources Test" is satisfied. The
"Safe Harbor Resources Test" is not satisfied unless
the Administrator, based upon the Participant's
representation and such other facts as are known to the
Administrator, determines that all of the following
conditions are satisfied:
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(1) The distribution is not in excess of the
amount of the immediate and heavy financial need
of the Participant;
(2) The Participant has obtained all
distributions, other than hardship distributions,
and all nontaxable loans currently available
under all plans maintained by the Employer;
(3) The Plan, and all other plans maintained by
the Employer, provide that the Participant's
elective deferrals and voluntary Employee
contributions will be suspended for at least
twelve (12) months after receipt of the hardship
distribution; and
(4) The Plan, and all other plans maintained by
the Employer, provide that the Participant may
not make elective deferrals for the Participant's
taxable year immediately following the taxable
year of the hardship distribution in excess of
the applicable limit under Code Section 402(g)
for such next taxable year less the amount of
such Participant's elective deferrals for the
taxable year of the hardship distribution.
(c) The "Facts and Circumstances Resources Test"
is not satisfied unless the Administrator determines,
based upon all relevant facts and circumstances, that
the amount to be distributed is not in excess of the
amount required to relieve the financial need and that
such need cannot be satisfied from other resources
reasonably available to the Participant. For this
purpose, the Participant's resources shall be deemed to
include those assets of his spouse and minor children
that are reasonably available to the Participant. A
distribution may be treated as necessary to satisfy a
financial need if the Administrator relies upon the
Participant's representation that the need cannot be
relieved:
(1) Through reimbursement or compensation by
insurance or otherwise;
(2) By reasonable liquidation of the
Participant's assets, to the extent such
liquidation would not itself cause an immediate
and heavy financial need;
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(3) By cessation of elective deferrals under the
Plan; or
(4) By other distributions or loans from any
other qualified retirement plan, or by borrowing
from commercial sources on reasonable commercial
terms.
(d) Notwithstanding the above, for Plan Years
beginning after December 31, 1988, distributions from
the Participant's Elective Account pursuant to this
Section shall be limited solely to the Participant's
Deferred Compensation and any income allocable thereto
credited to the Participant's Elective Account as of
December 31, 1988.
(e) Any distribution made pursuant to this
Section shall be made in a manner which is consistent
with and satisfies the provisions of Sections 7.5 and
7.6, including, but not limited to, all notice and
consent requirements of Code Section 411(a) (11) and the
Regulations thereunder.
7.15 LIMITATIONS ON BENEFITS AND DISTRIBUTIONS
All rights and benefits, including elections, provided
to a Participant in this Plan shall be subject to the rights
afforded to any "alternate payee" under a "qualified domestic
relations order." Furthermore, a distribution to an "alternate
payee" shall be permitted if such distribution is authorized by a
"qualified domestic relations order," even if the affected
Participant has not reached the "earliest retirement age" under
the Plan. For the purposes of this Section, "alternate payee,"
"qualified domestic relations order" and "earliest retirement
age" shall have the meaning set forth under Code Section 414 (p).
ARTICLE VIII
AMENDMENT, TERMINATION AND MERGERS
8.1 AMENDMENT
(a) The Employer shall have the right at any
time to amend the Plan, subject to the limitations of
this Section. However, any amendment which affects the
rights, duties or responsibilities of the Trustee and
Administrator may only be made with the Trustee's and
Administrator's written consent. Any such amendment
shall become effective as provided therein upon its
execution. The Trustee shall not be required to execute
any such amendment unless the Trust provisions
contained herein are a part of the Plan and the
amendment affects the duties of the Trustee hereunder.
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(b) No amendment to the Plan shall be effective
if it authorizes or permits any part of the Trust Fund
(other than such part as is required to pay taxes and
administration expenses) to be used for or diverted to
any purpose other than for the exclusive benefit of the
Participants or their Beneficiaries or estates; or
causes any reduction in the amount credited to the
account of any Participant; or causes or permits any
portion of the Trust Fund to revert to or become
property of the Employer.
(c) Except as permitted by Regulations, no Plan
amendment or transaction having the effect of a Plan
amendment (such as a merger, plan transfer or similar
transaction) shall be effective if it eliminates or
reduces any "Section 411(d) (6) protected benefit" or
adds or modifies conditions relating to "Section
411(d) (6) protected benefits" the result of which is a
further restriction on such benefit unless such
protected benefits are preserved with respect to
benefits accrued as of the later of the adoption date
or effective date of the amendment. "Section 411(d) (6)
protected benefits" are benefits described in Code
Section 411 (d) (6) (A), early retirement benefits and
retirement-type subsidies, and optional forms of
benefit.
In addition, no such amendment shall have
the effect of terminating the protections and rights
set forth in Section 7.12, unless such termination
shall then be permitted under the applicable provisions
of the Code and Regulations; such a termination is
currently expressly prohibited by Regulation
54.4975-11(a) (3) (ii).
8.2 TERMINATION
(a) The Employer shall have the right at any
time to terminate the Plan by delivering to the Trustee
and Administrator written notice of such termination.
Upon any full or partial termination, all amounts
credited to the affected Participants' Combined
Accounts shall become 100% Vested as provided in
Section 7.4 and shall not thereafter be subject to
forfeiture, and all unallocated amounts shall be
allocated to the accounts of all Participants in
accordance with the provisions hereof.
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(b) Upon the full termination of the Plan, the
Employer shall direct the distribution of the assets of
the Trust Fund to Participants in a manner which is
consistent with and satisfies the provisions of
Sections 7.5 and 7.6. Except as permitted by
Regulations, the termination of the Plan shall not
result in the reduction of "Section 411(d) (6) protected
benefits" in accordance with Section 8.1(c).
8.3 MERGER OR CONSOLIDATION
This Plan and Trust may be merged or consolidated with,
or its assets and/or liabilities may be transferred to any other
plan and trust only if the benefits which would be received by a
Participant of this Plan, in the event of a termination of the
plan immediately after such transfer, merger or consolidation,
are at least equal to the benefits the Participant would have
received if the Plan had terminated immediately before the
transfer, merger or consolidation, and such transfer, merger or
consolidation does not otherwise result in the elimination or
reduction of any "Section 411(d) (6) protected benefits" in
accordance with Section 8.1(c).
ARTICLE IX
MISCELLANEOUS
9.1 PARTICIPANT'S RIGHTS
This Plan shall not be deemed to constitute a contract
between the Employer and any Participant or to be a consideration
or an inducement for the employment of any Participant or
Employee. Nothing contained in this Plan shall be deemed to give
any Participant or Employee the right to be retained in the
service of the Employer or to interfere with the right of the
Employer to discharge any Participant or Employee at any time
regardless of the effect which such discharge shall have upon him
as a Participant of this Plan.
9.2 ALIENATION
(a) Subject to the exceptions provided below, no
benefit which shall be payable out of the Trust Fund to
any person (including a Participant or his Beneficiary)
shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge,
encumbrance, or charge, and any attempt to anticipate,
alienate, sell, transfer, assign, pledge, encumber, or
charge the same shall be void; and no such benefit
shall in any manner be liable for, or subject to, the
debts, contracts, liabilities, engagements, or torts of
any such person, nor shall it be subject to attachment
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or legal process for or against such person, and the
same shall not be recognized by the Trustee, except to
such extent as may be required by law.
(b) This provision shall not apply to the extent
a Participant or Beneficiary is indebted to the Plan,
as a result of a loan from the Plan. At the time a
distribution is to be made to or for a Participant's or
Beneficiary's benefit, such proportion of the amount
distributed as shall equal such loan indebtedness shall
be paid by the Trustee to the Trustee or the
Administrator, at the direction of the Administrator,
to apply against or discharge such loan indebtedness.
Prior to making a payment, however, the Participant or
Beneficiary must be given written notice by the
Administrator that such loan indebtedness is to be so
paid in whole or part from his Participant's Combined
Account. If the Participant or Beneficiary does not
agree that the loan indebtedness is a valid claim
against his Vested Participant's Combined Account, he
shall be entitled to a review of the validity of the
claim in accordance with procedures provided in
Sections 2.12 and 2.13.
(c) This provision shall not apply to a
"qualified domestic relations order" defined in Code
Section 414(p), and those other domestic relations
orders permitted to be so treated by the Administrator
under the provisions of the Retirement Equity Act of
1984. The Administrator shall establish a written
procedure to determine the qualified status of domestic
relations orders and to administer distributions under
such qualified orders. Further, to the extent provided
under a "qualified domestic relations order", a former
spouse of a Participant shall be treated as the spouse
or surviving spouse for all purposes under the Plan.
9.3 CONSTRUCTION OF PLAN
This Plan and Trust shall be construed and enforced
according to the Act and the laws of the State of Florida, other
than its laws respecting choice of law, to the extent not
preempted by the Act.
9. 4 GENDER AND NUMBER
Wherever any words are used herein in the masculine,
feminine or neuter gender, they shall be construed as though they
were also used in another gender in all cases where they would so
apply, and whenever any words are used herein in the singular or
plural form, they shall be construed as though they were also
used in the other form in all cases where they would so apply.
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9.5 LEGAL ACTION
In the event any claim, suit, or proceeding is brought
regarding the Trust and/or Plan established hereunder to which
the Trustee or the Administrator may be a party, and such claim,
suit, or proceeding is resolved in favor of the Trustee or
Administrator, they shall be entitled to be reimbursed from the
Trust Fund for any and all costs, attorney's fees, and other
expenses pertaining thereto incurred by them for which they shall
have become liable.
9.6 PROHIBITION AGAINST DIVERSION OF FUNDS
(a) Except as provided below and otherwise
specifically permitted by law, it shall be impossible
by operation of the Plan or of the Trust, by
termination of either, by power of revocation or
amendment, by the happening of any contingency, by
collateral arrangement or by any other means, for any
part of the corpus or income of any trust fund
maintained pursuant to the Plan or any funds
contributed thereto to be used for, or diverted to,
purposes other than the exclusive benefit of
Participants, Retired Participants, or their
Beneficiaries.
(b) In the event the Employer shall make an
excessive contribution under a mistake of fact pursuant
to Act Section 403(c) (2) (A), the Employer may demand
repayment of such excessive contribution at any time
within one (1) year following the time of payment and
the Trustees shall return such amount to the Employer
within the one (1) year period. Earnings of the Plan
attributable to the excess contributions may not be
returned to the Employer but any losses attributable
thereto must reduce the amount so returned.
9.7 BONDING
Every Fiduciary, except a bank or an insurance company,
unless exempted by the Act and regulations thereunder, shall be
bonded in an amount not less than 10% of the amount of the funds
such Fiduciary handles; provided, however, that the minimum bond
shall be $1,000 and the maximum bond, $500,000. The amount of
funds handled shall be determined at the beginning of each Plan
Year by the amount of funds handled by such person, group, or
class to be covered and their predecessors, if any, during the
preceding Plan Year, or if there is no preceding Plan Year, then
by the amount of the funds to be handled during the then current
year. The bond shall provide protection to the Plan against any
loss by reason of acts of fraud or dishonesty by the Fiduciary
alone or in connivance with others. The surety shall be a
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corporate surety company (as such term is used in Act Section
412(a) (2)), and the bond shall be in a form approved by the
Secretary of Labor. Notwithstanding anything in the Plan to the
contrary, the cost of such bonds shall be an expense of and may,
at the election of the Administrator, be paid from the Trust Fund
or by the Employer.
9.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE
Neither the Employer nor the Trustee, nor their
successors, shall be responsible for the validity of any Contract
issued hereunder or for the failure on the part of the insurer to
make payments provided by any such Contract, or for the action of
any person which may delay payment or render a Contract null and
void or unenforceable in whole or in part.
9.9 INSURER'S PROTECTIVE CLAUSE
Any insurer who shall issue Contracts hereunder shall
not have any responsibility for the validity of this Plan or for
the tax aspects of this Plan. The insurer shall be protected in
acting in accordance with any written direction of the Trustee,
and shall have no duty to see to the application of any funds
paid to the Trustee, nor be required to question any actions
directed by the Trustee. Regardless of any provision of this
Plan, the insurer shall not be required to take or permit any
action or allow any benefit or privilege contrary to the terms of
any Contract which it issues hereunder, or the rules of the
insurer.
9.10 RECEIPT AND RELEASE FOR PAYMENTS
Any payment to any Participant, his legal
representative, Beneficiary, or to any guardian or committee
appointed for such Participant or Beneficiary in accordance with
the provisions of the Plan, shall, to the extent thereof, be in
full satisfaction of all claims hereunder against the Trustee and
the Employer, either of whom may require such Participant, legal
representative, Beneficiary, guardian or committee, as a
condition precedent to such payment, to execute a receipt and
release thereof in such form as shall be determined by the
Trustee or Employer.
9.11 ACTION BY THE EMPLOYER
Whenever the Employer under the terms of the Plan is
permitted or required to do or perform any act or matter or
thing, it shall be done and performed by a person duly authorized
by its legally constituted authority.
93
<PAGE> 104
9.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY
The "named Fiduciaries" of this Plan are (1) the
Employer, (2) the Administrator and (3) the Trustee. The named
Fiduciaries shall have only those specific powers, duties,
responsibilities, and obligations as are specifically given them
under the Plan. In general, the Employer shall have the sole
responsibility for making the contributions provided for under
Section 4.1; and shall have the sole authority to appoint and
remove the Trustee and the Administrator; to formulate the Plan's
"funding policy and method"; and to amend or terminate, in whole
or in part, the Plan. The Administrator shall have the sole
responsibility for the administration of the Plan, which
responsibility is specifically described in the Plan. The Trustee
shall have the sole responsibility of management of the assets
held under the Trust, except those assets, the management of
which has been assigned to an Investment Manager, who shall be
solely responsible for the management of the assets assigned to
it, all as specifically provided in the Plan. Each named
Fiduciary warrants that any directions given, information
furnished, or action taken by it shall be in accordance with the
provisions of the Plan, authorizing or providing for such
direction, information or action. Furthermore, each named
Fiduciary may rely upon any such direction, information or action
of another named Fiduciary as being proper under the Plan, and is
not required under the Plan to inquire into the propriety of any
such direction, information or action. It is intended under the
Plan that each named Fiduciary shall be responsible for the
proper exercise of its own powers, duties, responsibilities and
obligations under the Plan. No named Fiduciary shall guarantee
the Trust Fund in any manner against investment loss or
depreciation in asset value. Any person or group may serve in
more than one Fiduciary capacity. In the furtherance of their
responsibilities hereunder, the "named Fiduciaries" shall be
empowered to interpret the Plan and Trust and to resolve
ambiguities, inconsistencies and omissions, which findings shall
be binding, final and conclusive.
9.13 HEADINGS
The headings and subheadings of this Plan have been
inserted for convenience of reference and are to be ignored in
any construction of the provisions hereof.
94
<PAGE> 105
9.14 APPROVAL BY INTERNAL REVENUE SERVICE
(a) Notwithstanding anything herein to the
contrary, contributions to this Plan are conditioned
upon the initial qualification of the Plan under Code
Section 401. If the Plan receives an adverse
determination with respect to its initial
qualification, then the Plan may return such
contributions to the Employer within one year after
such determination, provided the application for the
determination is made by the time prescribed by law for
filing the Employer's return for the taxable year in
which the Plan was adopted, or such later date as the
Secretary of the Treasury may prescribe.
(b) Notwithstanding any provisions to the
contrary, except Sections 3.6, 3.7, and 4.1(e), any
contribution by the Employer to the Trust Fund is
conditioned upon the deductibility of the contribution
by the Employer under the Code and, to the extent any
such deduction is disallowed, the Employer may, within
one (1) year following the disallowance of the
deduction, demand repayment of such disallowed
contribution and the Trustee shall return such
contribution within one (1) year following the
disallowance. Earnings of the Plan attributable to the
excess contribution may not be returned to the
Employer, but any losses attributable thereto must
reduce the amount so returned.
9.15 UNIFORMITY
All provisions of this Plan shall be interpreted and
applied in a uniform, nondiscriminatory manner. In the event of
any conflict between the terms of this Plan and any Contract
purchased hereunder, the Plan provisions shall control.
9.16 SECURITIES AND EXCHANGE COMMISSION APPROVAL
The Employer may request an interpretative letter from
the Securities and Exchange Commission stating that the transfers
of Company Stock contemplated hereunder do not involve
transactions requiring a registration of such Company Stock under
the Securities Act of 1933. In the event that a favorable
interpretative letter is not obtained, the Employer reserves the
right to amend the Plan and Trust retroactively to their
Effective Dates in order to obtain a favorable interpretative
letter or to terminate the Plan.
95
<PAGE> 106
9.17 VOTING COMPANY STOCK
The Trustee shall vote all Company Stock held by it as
part of the Plan assets. Provided, however, that if any agreement
entered into by the Trust provides for voting of any shares of
Company Stock pledged as security for any obligation of the Plan,
then such shares of Company Stock shall be voted in accordance
with such agreement. The Trustee shall not vote Company Stock
which a Participant or Beneficiary is authorized to vote,
pursuant to this Section, but which right he fails to exercise.
Notwithstanding the foregoing, if the Employer has a
registration-type class of securities, each Participant or
Beneficiary shall be entitled to direct the Trustee as to the
manner in which the Company Stock which is allocated to the
Company Stock Account of such Participant or Beneficiary is to be
voted. If the Employer does not have a registration-type class of
securities, each Participant or Beneficiary in the Plan shall be
entitled to direct the Trustee as to the manner in which voting
rights on shares of Company Stock which are allocated to the
Company Stock Account of such Participant or Beneficiary are to
be exercised with respect to any corporate matter which involves
the voting of such shares with respect to the approval or
disapproval of any corporate merger or consolidation,
recapitalization, reclassification, liquidation, dissolution,
sale of substantially all assets of a trade or business, or such
similar transaction as prescribed in Regulations. For purposes of
this Section the term "registration-type class of securities"
means: (A) a class of securities required to be registered under
Section 12 of the Securities Exchange Act of 1934; and (B) a
class of securities which would be required to be so registered
except for the exemption from registration provided in subsection
(g) (2) (H) of such Section 12.
If the Employer does not have a registration-type class
of securities and the by-laws of the Employer require the Plan to
vote on an issue in a manner that reflects a one-man, one-vote
philosophy, each Participant or Beneficiary shall be entitled to
cast one vote on an issue and the Trustee shall vote the shares
held by the Plan in proportion to the results of the votes cast
on the issue by the Participants and Beneficiaries.
96
<PAGE> 107
9.17 VOTING COMPANY STOCK
The Trustee shall vote all Company Stock held by it as
part of the Plan assets. Provided, however, that if any agreement
entered into by the Trust provides for voting of any shares of
Company Stock pledged as security for any obligation of the Plan,
then such shares of Company Stock shall be voted in accordance
with such agreement. The Trustee shall not vote Company Stock
which a Participant or Beneficiary, pursuant to this Section,
fails to exercise.
Notwithstanding the foregoing, if the Employer has a
registration-type class of securities, each Participant or
Beneficiary shall be entitled to direct the Trustees as to the
manner in which the Company Stock which is allocated to the
Company Stock Account of such Participant or Beneficiary is to be
voted. If the Employer does not have a registration-type class of
securities, each Participant or Beneficiary in the Plan shall be
entitled to direct the Trustee as to the manner in which voting
rights on shares of Company Stock which are allocated to the
Company Stock Account of such Participant or Beneficiary are to
be exercised with respect to any corporate matter which involves
the voting of such shares with respect to the approval or
disapproval of any corporate merger or consolidation,
recapitalization, reclassification, liquidation, dissolution,
sale of substantially all assets of a trade or business, or such
similar transaction as prescribed in Regulations. For purposes of
this Section the term "registration-type class of securities"
means: (A) a class of securities required to be registered under
Section 12 of the Securities Exchange Act of 1934; and (B) a
class of securities which would be required to be so registered
except for the exemption from registration provided in subsection
(g) (2) (H) of such Section 12.
If the Employer does not have a registration-type class
of securities and the by-laws of the Employer require the Plan to
vote an issue in a manner that reflects a one-man, one-vote
philosophy, each Participant or Beneficiary shall be entitled to
cast one vote on an issue and the Trustee shall vote the shares
held by the Plan in proportion to the results of the votes cast
on the issue by the Participants and Beneficiaries.
96
<PAGE> 108
IN WITNESS WHEREOF, this Plan has been executed the day
and year first above written.
Home Shopping Network, Inc.
By
------------------------
EMPLOYER
ATTEST
--------------------
97
<PAGE> 109
First Amendment
To
Home Shopping Network, Inc.
Retirement Savings and Employee Stock ownership Plan
THIS First Amendment to the Home Shopping Network, Inc.
Retirement Savings and Employee Stock ownership Plan is hereby
entered into by Home Shopping Network, Inc., a Delaware
corporation, as Employer.
WHEREAS, by Agreement effective February 1, 1990, the Employer
did adopt the Home Shopping Network, Inc. Retirement Savings and
Employee Stock ownership Plan; and
WHEREAS, the Employer now desires to amend the Plan to include
overtime in the definition of compensation, to change the
definition of "Eligible Employee," to allow Rollover Accounts to
be available for hardship withdrawals, to clarify how a Terminated
Participants accounts will be valued upon condition that such
amendment does not cause the tax-exempt status of the Plan to be
revoked by the Internal Revenue service.
NOW THEREFORE, in consideration of the premises and the
covenants and conditions hereinafter set forth, it is agreed as
follows:
Pages 2, 4, 71, 72 and 86 shall be removed and replaced by the
revised pages 2, 4, 71, 72, and 86 attached hereto.
IN WITNESS WHEREOF, this First Amendment to Home Shopping
Network, Inc. Retirement Savings and Employee Stock Ownership Plan
has been executed on the date indicated below, but effective for
all purposes as of January 1, 1992.
Home Shopping Network, Inc. Employer
Attest: By:
-------------------
By: Date: 3/17/92
------------------------ -------------------
Secretary
<PAGE> 110
Noncallable preferred stock shall be deemed to be "Company
Stock" if such stock is convertible at any time into stock
which constitutes "Company Stock" hereunder and If such
conversion is at a conversion price which (as of the date
of the acquisition by the Trust) is reasonable. For
purposes of the preceding sentence, pursuant to
Regulations, preferred stock shall be treated as
noncallable if after the call there will be a reasonable
opportunity for a conversion which meets the requirements
of the preceding sentence.
1.10 "Company Stock Account" means the account
established pursuant to Section 4.1(b) to receive matching
contributions and which is intended to be invested
primarily in Company Stock.
A separate accounting shall be maintained with
respect to that portion of the Company Stock Account
attributable to Elective Contributions and Non-Elective
Contributions.
1.11 "Compensation" with respect to any Participant
means such Participant's total salary and wages paid by the
Employer for a Plan Year, including overtime, but excluding
commissions and bonuses. Amounts contributed by the
Employer under the within Plan, except for an Employee's
Compensation that is deferred pursuant to Section 4.2, and
any non-taxable fringe benefits shall not be considered as
Compensation.
For purposes of this Section, the determination
of Compensation shall be made by including salary reduction
contributions made on behalf of an Employee to a plan
maintained under Code Section 125.
For a Participant's initial year of
participation, Compensation shall be recognized for the
entire Plan Year.
Compensation in excess of $200,000 shall be
disregarded. Such amount shall be adjusted at the same
time and in such manner as permitted under Code Section
415(d). In applying this limitation, the family group of a
Highly Compensated Participant who is subject to the Family
Member aggregation rules of Code Section 414 (q)(6) because
such Participant is either a "five percent owner" of the
Employer or one of the ten (10) Highly Compensated
Employees paid the greatest "415 compensation" during the
year, shall be treated as a single Participant, except that
for this purpose Family Members shall include only the
affected Participant's spouse and any lineal descendants
who have not attained age nineteen (19) before the close of
the year. If, as a result of the application of such rules
the adjusted $200,000 limitation is exceeded, then the
First Amendment
Effective: January 1, 1992 2
<PAGE> 111
1.17 "Eligible Employee" means any Employee.
Employees whose employment is governed by the
terms of a collective bargaining agreement between
Employee representatives (within the meaning of code
section 7701(a)(46) and the Employer under which
retirement benefits were the subject of good faith
bargaining between the parties, unless such agreement
expressly provides for such coverage in this Plan, will
not be eligible to participate in this Plan.
1.18 "Employee" means any person who is employed by
the Employer or affiliated Employer, but excludes any
person who is an independent contractor. Employee shall
include Leased Employees within the meaning of code
sections 414(n)(2) and 414(o)(2) unless such Leased
Employees are covered by a plan described in Code section
414(n)(5) and such Leased Employees do not constitute more
than 20% of the recipient's non-highly compensated work
force.
1.19 "Employer" means Home shopping Network, Inc. and
any successor which shall maintain this Plan; and any
predecessors which has maintained this Plan. The Employer
is a corporation with principal offices in the state of
Florida.
1.20 "Excess Aggregate Contributions" means, with
respect to any Plan Year, the excess of the aggregate
amount of the Employer matching contributions made
pursuant to Section 4.1(b) and any qualified non-elective
contributions or elective deferrals taken into account
pursuant to Section 4.7(c) on behalf of Highly compensated
participants for such Plan Year, over the maximum amount
of such contributions permitted under the limitations of
Section 4.7(a).
1.21 "Excess Contributions" means, with respect to a
Plan Year, the excess of Elective contributions made on
behalf of Highly compensated Participants for the Plan
Year over the maximum amount of such contributions
permitted under section 4.5(a). Excess contributions
shall be treated as an "annual addition" pursuant to
section 4.9(b).
1.22 "Excess Deferred Compensation" means, with
respect to any taxable year of a participant, the excess
of the aggregate amount of such participant's Deferred
compensation and the elective deferrals pursuant to
Section 4.2(f) actually made on behalf of such participant
for such taxable year, over the dollar limitation provided
for in Code Section 402(g), which is incorporated herein
by reference. Excess deferred compensation shall be
treated as an "annual addition" pursuant to Section
First Amendment
Effective: January 1, 1992 4
<PAGE> 112
7.4 DETERMINATION OF BENEFITS UPON TERMINATION
(a) On or before the Anniversary Date coinciding
with or subsequent to the termination of a Participant's
employment for any reason other than death, Total and
Permanent Disability or retirement, the Administrator may
direct the Trustee to segregate the amount of the Vested
portion of such Terminated Participant's Combined Account
and invest the aggregate amount thereof in a separate,
federally insured savings account, certificate of
deposit, common or collective trust fund of a bank or a
deferred annuity. In the event the Vested portion of a
Participant's Combined Account is not segregated, the
amount shall remain in a separate account for the
Terminated Participant and share in allocations pursuant
to Section 4.4 until such time as a distribution is made
to the Terminated Participant.
If a portion of a Participant's Account is
forfeited, Company Stock allocated to the Participant's
Company Stock Account must be forfeited only after the
Participant's Other Investment Account has been depleted.
If interest in more than one class of Company Stock has
been allocated to a Participant's Account, the
Participant must be treated as forfeiting the same
proportion of each such class.
Distribution of the funds due to a Terminated
Participant shall be made on the occurrence of an event
which would result in the distribution had the Terminated
Participant remained in the employ of the Employer (upon
the Participant's death, Total and Permanent Disability,
Early or Normal Retirement). However, at the election of
the Participant, the Administrator shall direct the
Trustee to cause the entire Vested portion of the
Terminated Participant's Combined Account to be payable
to such Terminated Participant. Distribution to a
Participant shall not include any Common Stock acquired
with the proceeds of an Exempt Loan until the close of
the Plan Year in which such loan is repaid in full. Any
distribution under this paragraph shall be made in a
manner which is consistent with and satisfies the
provisions of Section 7.5 and 7.6, including, but not
limited to, all notice and consent requirements of Code
Section 411(a)(11) and the Regulations thereunder. The
Participant will be entitled to the Vested balance of his
account valued as of the valuation date following his
date of termination. However, in the event of a hardship
by the Terminated Participant or his Beneficiary, the
Administrator may authorize a distribution of the
Terminated Participant's Vested account valued as of
First Amendment
Effective: January 1, 1992 71
<PAGE> 113
the preceding valuation date plus deferrals made after
that date.
If the value of a Terminated Participant's
Vested benefit derived from Employer and Employee
contributions does not exceed $3,500 and has never
exceeded $3,500 at the time of any prior distribution,
the Administrator shall direct the Trustee to cause the
entire Vested benefit to be paid to such Participant in
a single lump sum.
For purposes of this Section 7.4, if the value
of a Terminated Participant's Vested benefit is zero, the
Terminated Participant shall be deemed to have received
a distribution of such Vested benefit.
(b) The Vested portion of any Participant's Account
shall be a percentage of the total amount credited to his
Participant's Account determined on the basis of the
Participant's number of Years of Service according to the
following schedule:
<TABLE>
<CAPTION>
Vesting Schedule
Period of Service (Years) Percentage
<S> <C>
3 20 %
4 40 %
5 60 %
6 80 %
7 100 %
</TABLE>
(c) Notwithstanding the vesting schedule provided
for in paragraph (b) above, for any Top Heavy Plan Year,
the Vested portion of the Participant's Account of any
Participant who has an Hour of Service after the Plan
becomes top heavy shall be a percentage of the total
amount credited to his Participant's Account determined
on the basis of the Participant's number of Years of
Service according to the following schedule:
<TABLE>
<CAPTION>
Vesting Schedule
Period of Service (Years) Percentage
<S> <C>
2 20 %
3 40 %
4 60 %
5 80 %
</TABLE>
First Amendment
Effective: January 1, 1992 72
<PAGE> 114
7.14 ADVANCE DISTRIBUTION FOR HARDSHIP
(a) The Administrator, at the election of the
Participant, shall direct the Trustee to distribute to any
Participant in any one Plan Year up to the lesser of 100% of
his Participant's Elective Account and participant's Rollover
Account valued as of the last Anniversary Date or other
valuation date or the amount necessary to satisfy the
immediate and heavy financial need of the Participant. Any
distribution made pursuant to this section shall be deemed to
be made as of the first day of the Plan Year or, if later, the
valuation date immediately preceding the date of the
distribution, and the Participant's Elective Account and
Participant'S Rollover Account shall be reduced accordingly.
The determination of whether an immediate and heavy financial
need exists shall be based on all relevant facts and
circumstances. A need shall not be disqualified because it
was reasonably foreseeable or voluntarily incurred.
withdrawal under this Section shall be authorized, for
example, if the distribution is on account of:
(1) Medical expenses described in Code Section
213(d) incurred by the participant, his spouse, or
any of his dependents (as defined in Code Section
152);
(2) Funeral expenses for a member of the
Participant's family;
(3) The purchase (excluding mortgage payments) of
a principal resident for participant;
(4) Payment of tuition for the next semester or
quarter of post-secondary education for the
participant, his spouse, children, or dependents,
or
(5) The need to prevent the eviction of the
participant from his principal residence or
foreclosure on the mortgage of the participant's
principal residence.
(b) No distribution shall be made pursuant to this
section unless the Administrator determines that either
the "Safe Harbor Resources Test" or the "Facts and
Circumstances Resources Test" is satisfied. The "Safe
Harbor Resources Test" is not satisfied unless the
Administrator, based upon the participant's
representation and such other facts as are known to the
Administrator, determines that all of the following
conditions are satisfied:.
First Amendment
Effective: January 1, 1992 86
<PAGE> 115
Second Amendment
To
Home Shopping Network, Inc.
Retirement Savings and Employee Stock Ownership Plan
THIS Second Amendment to the Home Shopping Network, Inc.
Retirement Savings and Employee Stock Ownership Plan is hereby
entered into by Home Shopping Network, Inc., a Florida
corporation, as Employer.
WHEREAS, by Agreement effective February 1, 1990, the
Employer did adopt the Home Shopping Network, Inc. Retirement
Savings and Employee Stock Ownership Plan; and
WHEREAS, by First Amendment effective January 1, 1992, the
Employer amended the Plan to include overtime in the definition
of compensation, to change the definition of "Eligible Employee,"
to allow Rollover Accounts to be available for hardship
withdrawals, and to clarify how a Terminated participant's
accounts will be valued; and
WHEREAS, the Employer now desires to amend the Plan to
provide a "safe-harbor" definition of "414(s) Compensation, to
clarify that the Employer matching contribution and ESOP
contribution will be allocated in Company Stock and to clarify
that Voting Rights will be extended only to the ESOP portion of
the Employer Contribution, upon condition that such amendment
does not cause the tax-exempt status of the Plan to be revoked by
the internal Revenue Service.
NOW THEREFORE, in consideration of the premises and the
covenants and conditions hereinafter set forth, it is agreed as
follows:
Pages 2, 6 and 96 shall be removed and replaced by the
revised pages 2, 6 and 96, attached hereto.
IN WITNESS WHEREOF, this Second Amendment to the Home
Shopping Network, Inc. Retirement Savings and Employee Stock
ownership Plan has been executed on the date indicated below, but
effective for all purposes as of January 1, 1992.
Home Shopping Network, Inc.
Employer
Attest:
By:
--------------------------
By: /s/ H. Steven Holtzman Date: January 1, 1992
-------------------------- ------------------------
Secretary
H. Steven Holtzman,
Assistant Secretary
<PAGE> 116
1.29 "Former Participant" means a person who has been a
Participant, but who has ceased to be a Participant for any reason.
1.30 "415 Compensation" means compensation as defined in
section 4.9(d).
1.31 "414(s) Compensation" with respect to any Employee means:
(a) his Deferred Compensation; (b) "415 Compensation" paid during a
Plan Year; (c) amounts described in Code Section 104(a)(3)1 105(a)
105(h) (relating to medical reimbursements), to the extent
these are includable in gross income; (d) amounts paid or
reimbursed by the Employer for moving expenses, but only to the
extent that, at the time of the payment, it is reasonable to
believe that these amounts are not deductible by the Employee under
Code Section 217; (e) the value of a nonqualified stock option
granted to an Employee, but only to the extent that the value of
option is includible in the gross income of the Employee for
taxable year in which granted; (f) the amount includable in the
gross income of an Employee upon making the election described in
Code Section 83(b); and (g) the amount includable in the gross
income of an Employee by reason of the granting of stock or lapsing
of restrictions on such stock pursuant to Code Section 83(a).
For purposes of this Section, the determination of
"414(s) Compensation" shall be made by including salary reduction
contributions made on behalf of an Employee to a plan maintained
under Code Section 125.
"414(s) Compensation" in excess of $200,000 shall be
disregarded. Such amount shall be adjusted at the same time and in
such manner as permitted under Code Section 415 (d). However, for
such Plan Years beginning prior to January 1, 1989, the $200,000
limit shall apply only for Top Heavy Plan Years and shall not be
adjusted.
1.32 "Highly Compensated Employee" means an Employee described
in Code Section 414(q) and the Regulations thereunder, and
generally means an Employee who performs services for the Employer
during the "determination year" and is in one or more of the
following groups:
(a) Employees who at any time during the
"determination-year" or "look-back year" were "five
percent owners as defined in Section 1.38(c).
(b) Employees who received "415 Compensation"
during the "look-back year" from the Employer in excess
of $75,000.
(c) Employees who received "415 Compensation"
during the "look-back year" from the Employer in excess
of $50,000 and were in the Top Paid Group of Employees
for the Plan Year.
(d) Employees who during the "look-back year" were
officers of the Employer (as that term is defined within
the meaning of the Regulations under Code Section 416)
and received "415 Compensation" during the
Second Amendment
Effective: January 1, 1992 6
<PAGE> 117
9.17 VOTING COMPANY STOCK
The Trustee shall vote all Company Stock held by it
as part of the Plan assets. Provided, however, that if any
agreement entered into by the Trust provides for voting of any
shares of Company Stock pledged as security for any obligation of
the Plan, then such shares of Company Stock shall be voted in
accordance with such agreement. The Trustee shall not vote
Company Stock which a participant or Beneficiary is authorized to
vote, pursuant to this Section, but which right he fails to
exercise.
Notwithstanding the foregoing, if the Employer has a
registration-type class of securities, each Participant or
Beneficiary shall be entitled to direct the Trustee as to the
manner in which the Company Stock which is allocated to the ESOP
portion of the Company Stock Account of such Participant or
Beneficiary is to be voted. If the Participant or Beneficiary
does not exercise his right to vote, then the Trustee shall vote
these shares allocated to the ESOP portion of the Company Stock
Account pro rata to the voted shares. The Trustee shall vote all
Company Stock allocated to the matching portion of the Company
Stock Account. If the Employer does not have a registration-type
class of securities, each Participant or Beneficiary in the Plan
shall be entitled to direct the Trustee as to the manner in which
voting rights on shares of Company Stock which are allocated to
the ESOP portion of the Company Stock Account of such Participant
or Beneficiary are to be exercised with respect to any corporate
matter which involves the voting of such shares allocated to the
ESOP portion of the Company Stock Account with respect to the
approval or disapproval of any corporate merger or consolidation,
recapitalization, reclassification, liquidation, dissolution.
sale of substantially all assets of a trade or business, or such
similar transaction as prescribed in Regulations. For purposes of
this Section the term "registration-type class of securities"
means: (A) a class of securities required to be registered under
Section 12 of the Securities Exchange Act of 1934; and (B) a
class of securities which would be required to be so registered
except for the exemption from registration provided in subsection
(g) (2) (H) of such Section 12.
If the Employer does not have a registration-type class
of securities and the by-laws of the Employer require the Plan to
vote on an issue in a manner that reflects a one-man, one-vote
philosophy, each Participant or Beneficiary shall be entitled to
cast one vote on an issue and the Trustee shall vote the shares
held by the Plan in proportion to the results of the votes cast
on the issue by the Participants and Beneficiaries, except that
the Trustee shall vote all Company Stock allocated to the
matching portion of the Company Stock Account.
Second Amendment
Effective: January 1, 1992 96
<PAGE> 118
SECOND AMENDMENT
TO
HOME SHOPPING NETWORK, INC.
RETIREMENT SAVINGS AND EMPLOYEE STOCK OWNERSHIP PLAN
ThIS SECOND AMENDMENT TO THE HOME SHOPPING NETWORK, INC.
RETIREMENT SAVINGS AND EMPLOYEE STOCK OWNERSHIP PLAN is hereby
entered into by Home Shopping Network, Inc., a Florida corporation,
as Employer.
WHEREAS, by Agreement effective February 1, 1990, the Employer
did adopt the Home Shopping Network, Inc. Retirement Savings and
Stock Ownership Plan, which Plan was amended effective January 1,
1992, by that certain First Amendment to Home Shopping Network,
Inc. Retirement Savings and Employee Stock Ownership Plan; and
WHEREAS, the Employer now desires to further amend the Plan to
provide for certain limitations to amendments to the Contribution
and Allocation provisions of Article IV.
NOW, THEREFORE, in consideration of the premises and the
covenants and conditions hereinafter set forth, it is agreed as
follows:
"4.13 SPECIAL PROVISION REGARDING AMENDMENTS TO THIS
ARTICLE IV
Notwithstanding any provision in this Plan to the
contrary, no amendment to this Article IV may be made more
often than once every six months, other than to comport with
changes in the Code, the Employee Retirement Income Security
Act, or the rules thereunder."
IN WITNESS WHEREOF, this Second Amendment to the Home Shopping
Network, Inc. Retirement Savings and Employee Stock Ownership Plan
has been executed on the date indicated below, and shall be
effective for all purposes as of such date.
ATTEST: HOME SHOPPING NETWORK, INC.
Employer
By: By:
---------------------- ----------------------
Secretary
Date: June 26, 1992
--------------------
<PAGE> 119
Third Amendment
To
Home Shopping Network, Inc.
Retirement Savings and Employee Stock Ownership Plan
THIS Third Amendment to the Home Shopping Network, Inc.
Retirement Savings and Employee Stock Ownership Plan is hereby
entered into by Home Shopping Network, Inc., a Florida corporation,
as Employer.
WHEREAS, by Agreement effective February 1, 1990, the Employer
did adopt the Home Shopping Network, Inc. Retirement Savings and
Employee Stock Ownership Plan; and
WHEREAS, by First Amendment effective January 1, 1992, the
Employer amended the Plan to include overtime in the definition of
Compensation, to change the definition of "Eligible Employee," to
allow Rollover Accounts to be available for hardship withdrawals,
and to clarify how a Terminated Participant's accounts will be
valued; and
WHEREAS, by Second Amendment effective January 1, 1992, the
Employer amended the Plan to provide a "safe-harbor" definition of
"414(s) Compensation, to clarify that the Employer matching
contribution and ESOP contribution will be allocated in Company
Stock and to clarify that Voting Rights will be extended only to
the ESOP portion of the Employer Contribution, and
WHEREAS, the Employer-now desires to further amend the Plan by
adopting the Model Language under Revenue Procedure 93-12, upon
condition that such amendment does not cause the tax-exempt status
of the Plan to be revoked by the Internal Revenue Service.
NOW THEREFORE, in consideration of the premises and the
covenants and conditions hereinafter set forth, it is agreed as
follows:
The Model Language wider Revenue Procedure 93-12 shall be
appended hereto and made part of the Plan.
IN WITNESS WHEREOF, this Third Amendment to the Home Shopping
Network, Inc. Retirement Savings and Employee Stock Ownership Plan
has been executed on the date indicated below, but effective for
all purposes as of January 1, 1993.
<PAGE> 120
EXHIBIT 10.33
CONTINUED
TRUST AGREEMENT
<PAGE> 121
HOME SHOPPING NETWORK, INC.
RETIREMENT SAVINGS PROGRAM
TRUST AGREEMENT
<PAGE> 122
TABLE OF CONTENTS
ARTICLE I
TRUSTEES AND TRUST FUND
1.1 NAME OF TRUST 1
ARTICLE II
PLAN
2.1 DELIVERY OF PLAN TO TRUSTEE 2
ARTICLE III
ADMINISTRATOR
3.1 NOTIFICATION OF NAME OF ADMINISTRATOR 2
ARTICLE IV
CONTRIBUTIONS
4.1 RECEIPT OF CONTRIBUTION 3
ARTICLE V
TRUSTEE
5.1 BASIC RESPONSIBILITIES OF THE TRUSTEE 3
5.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE 4
5.3 OTHER POWERS OF THE TRUSTEE 4
5.4 DUTIES OF THE TRUSTEE REGARDING PAYMENTS 7
<PAGE> 123
5.5 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES 7
5.6. ANNUAL REPORT OF THE TRUSTEE 8
5.7 AUDIT 8
5.8 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE 9
5.9 TRANSFER OF INTEREST 10
5.10 EMPLOYER SECURITIES AND REAL PROPERTY 11
ARTICLE VI
AMENDMENT, TERMINATION AND MERGERS
6.1 AMENDMENT 11
6.2 TERMINATION 12
6.3 MERGER OR CONSOLIDATION 12
ARTICLE VII
MISCELLANEOUS
7.1 QUALIFIED TRUST 12
7.2 CONSTRUCTION OF AGREEMENT 12
7.3 GENDER AND NUMBER 13
7.4 LEGAL ACTION 13
7.5 BONDING 13
7.6 HEADINGS 13
7.7 IRREVOCABILITY OF TRUST 13
<PAGE> 124
HOME SHOPPING NETWORK, INC.
RETIREMENT SAVINGS PROGRAM
TRUST AGREEMENT
THIS AGREEMENT, hereby made and entered into this
31 day of January, 1990, by and between Home Shopping Network,
Inc. (herein referred to as the "Employer") and Leslie R.
Wandler, James N. Lawless, J. Michael Reardon, Debra K. Neighbers,
and Ronald J. DiDonato (herein referred to as the "Trustee").
W I T N E S S E T H:
WHEREAS, the Employer has concurrently herewith adopted
a Profit Sharing Plan known as the Home shopping Network, Inc.
Retirement Savings Program (herein referred to as the Plan); and
WHEREAS, under the terms of the Plan, funds will from
time to time be contributed to the Trustees (herein referred to
as the "Trustee"), which funds as and when received by the
Trustee, will constitute a trust fund to be held by said Trustee
under the Plan for the benefit of the participantS or their
Beneficiaries; and
WHEREAS, the Employer desires the Trustee to hold and
administer such funds and the Trustee is willing to hold and
administer such funds pursuant to the terms of this Agreement;
NOW, THEREFORE, for and in consideration of the
premises and of the mutual covenants herein contained, the
Employer and the Trustee do hereby covenant and agree as follows:
ARTICLE I
TRUSTEES AND TRUST FUND
1.1 NAME OF TRUST
(a) This Trust shall be entitled the "Home
Shopping Network, Inc. Retirement Savings Program,
Trust Agreement" (hereinafter referred to as the
"Trust"), and shall carry into effect the provisions of
the Plan created concurrently herewith and forming a
part hereof. All of the definitions in such Plan are
hereby incorporated herein by reference. The Trustee
hereby agrees to act as Trustee of the Trust, and to
take, hold, invest, administer and distribute in
accordance with the following provisions, any and all
contributions and assets paid or delivered to the
Trustee pursuant to the Plan.
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(b) All of the assets at any time held hereunder
by the Trustee are hereinafter referred to collectively
as the "Trust Fund". All right, title and interest in.
and to the assets of the Trust Fund shall be at all
times, vested exclusively in the Trustee.
(c) The Trustee shall receive, take and hold any
contributions paid to the Trustee by the Employer in
cash or in other property acceptable to the Trustee.
All contributions so received together with the income
therefrom and any other increment thereon shall be held
managed and administered by the Trustee pursuant to the
terms of this Agreement without distinction between
principal and income and without liability for the
payment of interest thereon. The Trustee shall not be
responsible for the collection of any contributions to
the Plan.
ARTICLE II
PLAN
2.1 DELIVERY OF PLAN TO TRUSTEE
The Employer shall deliver to the Trustee a copy of the
Plan and of any amendment thereto for convenience of reference,
but rights, powers, titles, duties, discretions and immunities of
the Trustee shall be governed solely by this instrument without
reference to the Plan.
ARTICLE III
ADMINISTRATOR
3.1 NOTIFICATION OF NAME OF ADMINISTRATOR
(a) The Plan provides for the appointment of an
Administrator or Administrators (herein referred to as
the "Administrator"), to administer the Plan. The
Employer shall notify the Trustee in writing of the
name of the Administrator, and of any change in the
identity of such Administrator. Until notified of the
change, the Trustee shall be fully protected in acting
upon the assumption that the identity of the
Administrator has not been changed.
(b) All directions by the Administrator to the
Trustee shall be in writing signed by such
Administrator.
(c) The Employer shall furnish to the Trustee a
specimen signature of the Administrator or
Administrators at the time he or they are appointed.
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<PAGE> 126
(d) The Administrator shall have sole
responsibility for determining the existence,
non-existence, nature and amount of the rights and
interests of all persons, in the Trust Fund.
ARTICLE IV
CONTRIBUTIONS
4.1 RECEIPT OF CONTRIBUTION
The Trustee shall receive all contributions paid in
cash or other property acceptable to the Trustee, and all
contributions so received together with the income therefrom and
any increment thereon shall be held, managed and administered by
the Trustee pursuant to this Agreement without distinction
between principal and income. The Trustee shall have no duty to
require any contributions to be made to the Trustee by the
Employer or to determine that the amounts received comply with
the Plan, or to determine that the Trust Fund is adequate to
provide the benefits payable pursuant to the Plan.
ARTICLE V
TRUSTEE
5.1 BASIC RESPONSIBILITIES OF THE TRUSTEE
The Trustee shall have the following categories of
responsibilities:
(a) Consistent with the "funding policy and
method" determined by the Employer, to invest, manage,
and control the Plan assets subject, however, to the
direction of an Investment Manager if the Employer
should appoint such manager as to all or a portion of
the assets of the Plan in accordance with the
provisions of the Plan;
(b) At the direction of the Administrator, to
pay benefits required under the Plan to be paid to
Participants, or, in the event of their death, to their
Beneficiaries;
(c) To maintain records of receipts and
disbursements and furnish to the Employer and/or
Administrator for each Plan Year a written annual
report per Section 5.6; and
(d) If there shall be more than one Trustee,
they shall act by a majority of their number, but may
authorize one or more of them to sign papers on their
behalf.
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<PAGE> 127
5.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE
(a) The Trustee shall invest and reinvest the
Trust Fund to keep the Trust Fund invested without
distinction between principal and income and in such
securities or property, real or personal, wherever
situated, as the Trustee shall deem advisable,
including, but not limited to, stocks, common or
preferred, bonds and other evidences of indebtedness or
ownership, and real estate or any interest therein. The
Trustee shall at all times in making investments of the
Trust Fund consider, among other factors, the short and
long-term financial needs of the Plan on the basis-of
information furnished by the Employer. In making such
investments, the Trustee shall not be restricted to
securities or other property of the character expressly
authorized by the applicable law for trust investments;
however, the Trustee shall give due regard to any
limitations imposed by the Code or the Act so that at
all times the Plan may qualify as a qualified Profit
Sharing Plan and Trust.
(b) The Trustee may employ a bank or trust
company pursuant to the terms of its usual and
customary bank agency agreement, under which the duties
of such bank or trust company shall be of a custodial,
clerical and record-keeping nature.
(c) The Trustee may from time to time with the
consent of the Employer transfer to a common
collective, or pooled trust fund maintained by any
corporate Trustee hereunder, all or such part of the
Trust Fund as the Trustee may deem advisable, and such
part or all of the Trust Fund so transferred shall be
subject to all the terms and provisions of the common,
collective, or pooled trust fund which contemplate the
commingling for investment purposes of such trust
assets with trust assets of other trusts. The Trustee
may, from time to time with the consent of the
Employer, withdraw from such common, collective, or
pooled trust fund all or such part of the Trust Fund as
the Trustee may deem advisable.
5.3 OTHER POWERS OF THE TRUSTEE
The Trustee, in addition to all powers and authorities
under common law, statutory authority, including the Act, and
other provisions of the Plan, shall have the following powers and
authorities, to be exercised in the Trustee's sole discretion:
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<PAGE> 128
(a) To purchase, or subscribe for, any
securities or other property and to retain the same. In
conjunction with the purchase of securities, margin
accounts may be opened and maintained;
(b) To sell, exchange, convey, transfer, grant
options to purchase, or otherwise dispose of any
securities or other property held by the Trustee, by
private contract or at public auction. No person
dealing with the Trustee shall be bound to see to the
application of the purchase money or to inquire into
the validity, expediency, or propriety of any such sale
or other disposition, with or without advertisement;
(c) To vote upon any stocks, bonds, or other
securities; to give general or special proxies or
powers of attorney with or without power of
substitution; to exercise any conversion privileges,
subscription rights or other options, and to make any
payments incidental thereto; to oppose, or to consent
to, or otherwise participate in, corporate
reorganizations or other changes affecting corporate
securities, and to delegate discretionary powers, and
to pay any assessments or charges in connection
therewith; and generally to exercise any of the powers
of an owner with respect to stocks, bonds, securities,
or other property;
(d) To cause any securities or other property to
be registered in the Trustee' s own name or in the name
of one or more of the Trustee's nominees, and to hold
any investments in bearer form, but the books and
records of the Trustee shall at all times show that all
such investments are part of the Trust Fund;
(e) To borrow or raise money for the purposes of
the Plan in such amount, and upon such terms and
conditions, as the Trustee shall deem advisable; and
for any sum so borrowed, to issue a promissory note as
Trustee, and to secure the repayment thereof by
pledging all, or any part, of the Trust Fund; and no
person lending money to the Trustee shall be bound to
see to the application of the money lent or to inquire
into the validity, expediency, or propriety of any
borrowing;
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<PAGE> 129
(f) To keep such portion of the Trust Fund in
cash or cash balances as the Trustee may, from time to
time, deem to be in the best interests of the Plan,
without liability for interest thereon;
(g) To accept and retain for such time as the
Trustee may deem advisable any securities or other
property received or acquired as Trustee hereunder,
whether or not such securities or other property would
normally be purchased as investments hereunder;
(h) To make, execute, acknowledge, and deliver
any and all documents of transfer and conveyance and
any and all other instruments that may be necessary or
appropriate to carry out the powers herein granted;
(i) To settle, compromise, or submit to
arbitration any claims, debts, or damages due or owing
to or from the Plan, to commence or defend suits or
legal or administrative proceedings, and to represent
the Plan in all suits and legal and administrative
proceedings;
(j) To employ suitable agents and counsel and to
pay their reasonable expenses and compensation, and
such agent or counsel may or may not be agent or
counsel for the Employer;
(k) To apply for and procure from responsible
insurance companies, to be selected by the
Administrator, as an investment of the Trust Fund such
annuity, or other Contracts (on the life of any
participant) as the Administrator shall deem proper; to
exercise, at any time or from time to time, whatever
rights and privileges may be granted under such
annuity, or other Contracts; to collect, receive, and
settle for the proceeds of all such annuity or other
Contracts as and when entitled to do so under the
provisions thereof;
(1) To invest funds of the Trust in time deposits
or savings accounts bearing a reasonable rate of interest
in the Trustee'S bank;
(m) To invest in Treasury Bills and other forms of
United States government obligations;
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<PAGE> 130
(n) To sell, purchase and acquire put or call
options if the options are traded on and purchased
through a national securities exchange registered under
the securities Exchange Act of 1934, as amended, or, if
the options are not traced on a national securities
exchange, are guaranteed by a member firm of the New
York Stock Exchange;
(o) To deposit monies in federally insured
savings accounts or certificates of deposit in banks or
savings and loan associations;
(p) To pool all or any of the Trust Fund, from
time to time, with assets belonging to any other
qualified employee pension benefit trust created by the
Employer or an affiliated company of the Employer, and
to commingle such assets and make joint or common
investments and carry joint accounts on behalf of this
Plan and such other trust or trusts, allocating
undivided shares or interests in such investments or
accounts or any pooled assets of the two or more trusts
in accordance with their respective interests;
(q) To do all such acts and exercise all such
rights and privileges, although not specifically
mentioned herein, as the Trustee may deem necessary to
carry out the purposes of the Plan.
5.4 DUTIES OF THE TRUSTEE REGARDING PAYMENTS
At the direction of the Administrator, the Trustee
shall, from time to time, in accordance with the terms of the
Plan, make payments out of the Trust Fund. The Trustee shall not
be responsible in any way for the application of such payments.
5.5 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES
The Trustee shall be paid such reasonable compensation
as shall from time to time be agreed upon in writing by the
Employer and the Trustee. An individual serving as Trustee who
already receives full-time pay from the Employer shall not
receive compensation from the Plan. In addition, the Trustee
shall be reimbursed for any reasonable expenses, including
reasonable counsel fees incurred by it as Trustee. Such
compensation and expenses shall be paid from the Trust Fund
unless paid or advanced by the Employer. All taxes of any kind
and all kinds whatsoever that may be levied or assessed under
existing or future laws upon, or in respect of, the Trust Fund or
the income thereof, shall be paid from the Trust Fund.
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<PAGE> 131
5. 6 ANNUAL REPORT OF THE TRUSTEE
Within a reasonable period of time after the later of
the Anniversary Date or receipt of the Employer's contribution
for each Plan Year, the Trustee shall furnish to the Employer and
Administrator a written statement of account with respect to the
Plan Year for which such contribution was made setting forth:
(a) the net income, or loss, of the Trust Fund;
(b) the gains, or losses, realized by the Trust
Fund upon sales or other disposition of the assets;
(c) the increase, or decrease, in the value of
the Trust Fund;
(d) all payments and distributions made from the
Trust Fund; and
(e) such further information as the Trustee
and/or Administrator deems appropriate. The Employer,
forthwith upon its receipt of each such statement of
account, shall acknowledge receipt thereof in writing
and advise the Trustee and/or Administrator of its
approval or disapproval thereof. Failure by the
Employer to disapprove any such statement of account
within thirty (30) days after its receipt thereof shall
be deemed an approval thereof. The approval by the
Employer of any statement of account shall be binding
as to all matters embraced therein as between the
Employer and the Trustee to the same extent as if the
account of the Trustee had been settled by judgment or
decree in an action for a judicial settlement of its
account in a court of competent jurisdiction in which
the Trustee, the Employer and all persons having or
claiming an interest in the Plan were parties;
provided, however, that nothing herein contained shall
deprive the Trustee of its right to have its accounts
judicially settled if the Trustee so desires.
5.7 AUDIT
(a) If an audit of the Plan's records shall be
required by the Act and the regulations thereunder for
any Plan Year, the Administrator shall direct the
Trustee to engage on behalf of all Participants an
independent qualified public accountant for that
purpose. Such accountant shall, after an audit of the
books and records of the Plan in accordance with
generally accepted auditing standards, within a
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<PAGE> 132
reasonable period after the close of the Plan Year,
furnish to the Administrator and the Trustee a report
of his audit setting forth his opinion as to whether
any statements, schedulers or lists that are required by
Act Section 103 or the Secretary of Labor to be filed
with the Plan's annual report, are presented fairly in
conformity with generally accepted accounting
principles applied consistently. All auditing and
accounting fees shall be an expense of and may, at the
election of the Administrator, be paid from the Trust
Fund.
(b) If some or all of the information necessary
to enable the Administrator to comply with Act Section
103 is maintained by a bank, insurance company, or
similar institution, regulated and supervised and
subject to periodic examination by a state or federal
agency, it shall transmit and certify the accuracy of
that information to the Administrator as provided in
Act Section 103(b) within one hundred twenty (120) days
after the end of the Plan Year or by such other date as
may be prescribed under regulations of the Secretary of
Labor.
5.8 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE
(a) The Trustee may resign at any time by
delivering to the Employer, at least thirty (30) days
before its effective date, a written notice of his
resignation.
(b) The Employer may remove the Trustee by
mailing by registered or certified mail, addressed to
such Trustee at his last known address, at least thirty
(30) days before its effective date, a written notice
of his removal.
(c) Upon the death, resignation, incapacity, or
removal of any Trustee, a successor may be appointed by
the Employer; and such successor, upon accepting such
appointment in writing and delivering same to the
Employer, shall, without further act, become vested
with all the estate, rights, powers, discretions, and
duties of his predecessor with like respect as if he
were originally named as a Trustee herein. Until such a
successor is appointed, the remaining Trustee or
Trustees shall have full authority to act under the
terms of the Plan.
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<PAGE> 133
(d) The Employer may designate one or more
successors prior to the death, resignation, incapacity,
or removal of a Trustee. In the event a successor is so
designated by the Employer and accepts such designation,
the successor shall, without further act, become vested
with all the estate, rights, powers, discretions, and
duties of his predecessor with the like effect as if he
were originally named as Trustee herein immediately upon
the death, resignation, incapacity, or removal of his
predecessor.
(e) Whenever any Trustee hereunder ceases to
serve as such, he shall furnish to the Employer and
Administrator a written statement of account with
respect to the portion of the Plan Year during which he
served as Trustee. This statement shall be either
(i) included as part of the annual statement of account
for the Plan Year required under section 5.6 or
(ii) set forth in a special statement. Any such special
statement of account should be rendered to the Employer
no later than the due date of the annual statement of
account for the Plan Year. The procedures set forth in
section 5.6 for the approval by the Employer of annual
statements of account shall apply to any special
statement of account rendered hereunder and approval by
the Employer of any such special statement in the
manner provided in Section 5.6 shall have the same
effect upon the statement as the Employer's approval of
an annual statement of account. No successor to the
Trustee shall have any duty or responsibility to
investigate the acts or transactions of any predecessor
who has rendered all statements of account required by
section 5.6 and this subparagraph.
5. 9 TRANSFER OF INTEREST
The Trustee, on behalf of any participant, may accept
funds transferred from another trust forming part of a pension,
profit sharing, or stock bonus plan meeting the requirements of
Code section 401(a) or a "conduit" Individual Retirement Account
for the account of a participant under this Plan, provided the
conditionS precedent to such transfer set forth in the Plan are
satisfied. In the event of such a transfer under this Plan, the
Trustee shall maintain a separate, nonforfeitable "Participant's
Rollover Account" for the amount transferred. In addition, any
such transfer may only be made if it does not result in the
elimination of any "Section 411(d) (6) protected benefits" as
described in section 6.1. The Trustee may act upon the direction
of the Administrator without determining the facts concerning a
transfer.
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<PAGE> 134
5.10 EMPLOYER SECURITIES AND REAL PROPERTY
The Trustee shall be empowered to acquire and hold
"qualifying Employer securities" and "qualifying Employer real
property," as those terms are defined in the Act, provided,
however, that the Trustee shall not be permitted to acquire any
qualifying Employer securities or qualifying Employer real
property if, immediately after the acquisition of such securities
or property, the fair market value of all qualifying Employer
securities and qualifying Employer real property held by the
Trustee hereunder should amount to more than 100% of the fair
market value of all the assets in the Trust Fund.
ARTICLE VI
AMENDMENT, TERMINATION AND MERGERS
6.1 AMENDMENT
(a) The Employer shall have the right at any
time to amend this Agreement. However, no such
amendment which affects the rights, duties or
responsibilities of the Trustee and Administrator may.
be made without the Trustee's and Administrator's
written consent. Any such amendment shall become
effective as provided therein upon its execution. The
Trustee shall not be required to execute any such
amendment unless the amendment affects the duties of
the Trustee hereunder.
(b) No amendment to this Agreement shall be
effective if it authorizes or permits any part of the
Trust Fund (other than such part as is required to pay
taxes and administration expenses) to be used for or
diverted to any purpose other than for the exclusive
benefit of the participants or their Beneficiaries or
estates; or cause any reduction in the amount credited
to the account of any participant; or cause or permit
any portion of the Trust Fund to revert to or become
property of the Employer.
(c) Except as permitted by Regulations
(including Regulation 1.411 (d)-4), no amendment to this
Agreement or transaction having the effect of an
amendment to this Agreement (such as a merger, plan
transfer or similar transaction) shall be effective if
it eliminates or reduces any Section 411(d) (6)
protected benefit. or adds or modifies conditions
relating to "section 411 (d) (6) protected benefits" the
result of which is a further restriction on such
benefit unless such protected benefits are preserved
with respect to benefits accrued as of the later of the
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<PAGE> 135
execution date or effective date of the amendment.
"Section 411(d) (6) protected benefits are benefits
described in Code section 411 (d) (6) (A), early
retirement benefits and, retirement-type subsidies, and
optional forms of benefit.
6.2 TERMINATION
This Agreement and the Trust created hereby will
terminate as to the Employer in the case of complete distribution
of the Trust Fund held for the benefit of the Participants
pursuant to the Plan. Such distribution will be at the time and
manner determined by the Administrator pursuant to the
requirements of the Plan with written instructions to the
Trustee. Except as permitted by Regulations, the termination of
the Plan shall not result in the reduction of "Section 411(d) (6)
protected benefits" in accordance with section 6.1 (c).
6.3 MERGER OR CONSOLIDATION
This Trust may be merged or consolidated with, or its
assets and/or liabilities may be transferred to any other trust
only if the benefits which would be received by a participant of
the Employer Plan, in the event of a termination of the Plan
immediately after such transfer, merger or consolidation are at
least equal to the benefits the Participant would have received
if the Plan had terminated immediately before the transfer,
merger or consolidation, and such transfer, merger or
consolidation does not otherwise result in the elimination or
reduction of any "Section 411(d) (6) protected benefits" in
accordance with Section 6.1(c).
ARTICLE VII
MISCELLANEOUS
7.1 QUALIFIED TRUST
The Trust is hereby designated as constituting a part
of the Plan which is intended to continue to qualify and to be
tax exempt under Section 401(a) and section 501(a), respectively,
of the Code, and of the Act, as amended from time to time. Until
advised otherwise, the Trustee may conclusively presume that this
Trust is qualified under section 501(a) of the Code as amended
from time to time, and that this Trust is exempt from federal
income taxes.
7.2 CONSTRUCTION OF AGREEMENT
This Trust shall be construed and enforced according to
the Act and the laws of the State of Florida, other than its laws
respecting choice of law, to the extent not pre-empted by the
Act.
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7.3 GENDER AND NUMBER
Wherever any words are used herein in the masculine,
feminine or neuter gender, they shall be construed as though they
were also used in another gender in all cases where they would so
apply, and whenever any words are used herein in the singular
or plural form, they shall be construed as though they were also
used in the other form in all cases where they would so apply.
7.4 LEGAL ACTION
In the event any claim, suit, or proceeding is brought
regarding the Trust and/or Plan established hereunder to which
Trustee or tee Administrator may be a party, and such claim, for any
and all costs, attorney's fees, and other expenses pertaining thereto
incurred by them for which they shall have become liable.
7.5 BONDING
Every Fiduciary, except a bank or an insurance company,
exempted by the Act and regulations thereunder, shall be bonded in an
amount not less than 10% of the amount of the funds fiduciary handles;
provided, however, that the minimum bond shall be $1,000 and the maximum
bond, $500,000. The amount of funds handled shall be determined at the
beginning of each Plan Year by the amount of funds handled by such person,
group, or class to be covered and their predecessors, if any, during the
preceding Plan Year, or if there is no preceding Plan Year, then the amount
of the funds to be handled during the then current year. The bond shall
provide protection to the Plan against any loss by reason of acts of fraud
or dishonesty by the Fiduciary alone or in connivance with others. The
surety shall be a corporate surety company (as such term is used in Act
section 412(a) (2)), and the bond shall be in a form approved by-the
Secretary of Labor. Notwithstanding anything in the Plan to the contrary,
the cost of such bonds shall be an expense of and may, at the election of
the Administrator, be paid from the Trust Fund or by the Employer.
7.6 HEADINGS
The headings and Subheadings of this Plan have been
inserted for convenience of reference and are to be ignored in
any construction of the provisions hereof.
7.7 IRREVOCABILITY OF TRUST
All contributions made by the Employer shall be
irrevocable, and no part of the corpus of the Trust Fund nor any
income therefrom shall revert to the Employer or be used for or
13
<PAGE> 137
diverted to purposes other than for the exclusive benefit of the
Participants and their Beneficiaries, except as provided by law,
as provided in the Plan.
14
<PAGE> 138
IN WITNESS WHEREOF, this Trust has been executed the
day and year first above written.
Home Shopping Network, Inc.
By
-----------------------
Employer
ATTEST
-------------------
-----------------------
TRUSTEE
-----------------------
TRUSTEE
-----------------------
TRUSTEE
-----------------------
TRUSTEE
-----------------------
TRUSTEE
15
<PAGE> 139
INVESTMENT MANAGEMENT AGREEMENT
HOME SHOPPING NETWORK, INC. RETIREMENT SAVINGS PROGRAM
SHORT TERM FIXED INCOME FUND
The undersigned, presently acting as Trustees ("Trustees")
under a certain instrument dated the 31st day of January
1990 ("Instrument") establishing the Home Shopping
Network, Inc. Retirement Savings Program Short Term Fixed
Income Fund's ("Fund") wish to open and maintain an account
with Chase Bank of Florida, N.A. ("Bank") and to appoint the
Bank as Investment Manager to advise, invest and reinvest
the assets held therein. The Bank will act under the
following terms and conditions:
1. The Bank will open an Investment Management
Account ("Account") in the name of the Fund and
hold therein upon the teas herein set forth, all
such cash, securities and other property as shall
be received and accepted from time to time by the
Bank for the Account subject to its authority as
Investment Manager as hereinafter provided.
2. The Bank, as Investment Manager, shall advise the
Trustees regarding the investment of the
securities and cash in the account in such
securities or other property in which the Trustees
are permitted to invest under the provisions of
<PAGE> 140
the Instrument; provided, however, that the
Trustees may, at any time and from time to time,
direct the approximate percentage or percentages
of the Account to be invested in any one or more
classes of securities. No Options, Futures,
Puts/Calls, commodities or Margin accounts are
permitted.
3. Without limitation of the foregoing provisions of
this Agreement, the Bank is authorized and
empowered, with the consent of the trustees:
A. To collect and receive all monies and other
property paid or distributed in respect of
the property held in the Account or realized
on the sale or other disposition of such
property.
B. To purchase, receive or subscribe for any
securities or other property and to retain
such securities or other property.
C. To sell for cash, convert, redeem, exchange
for other securities or other property, to
enter into standby agreements for future
investment, either with or without a standby
fee, or otherwise to dispose of any
<PAGE> 141
securities or other property at any time held
by it.
D. To exercise any conversion privilege and/or
subscription right available in connection
with any securities or other property at any
time held by it; to oppose or to consent to
the reorganization, consolidation, merger, or
readjustment of the finances of any
corporation, company or association, or to
the sale, mortgage, pledge or lease of the
property of any corporation, company or
association any of the securities of which
may at any time be held by it and to do any
act with reference thereto, including the
exercise of options, the making of agreements
or subscriptions and the payment of expenses,
assessments or subscriptions, which may be
necessary or advisable in connection
therewith, and to hold and retain any
securities or other property which it may so
acquire; and to deposit any property with any
protective; reorganization or similar
committee, and to pay or agree to pay part of
the expenses and compensation of any such
committee and any assessments levied with
respect to property so deposited.
<PAGE> 142
E. To exercise, personally or by general or by
limited power of attorney, any right,
including the right to vote, appurtenant to
any securities or other property held by it
at any time.
F. To hold part or all of the Account in cash or
cash equivalents.
G. To transfer, at any time and from time to
time, such part or all of the Account as it
shall deem advisable to THE CHASE BANK OF
FLORIDA, N.A. (National Association) as
trustee of any trust "Collective Trust")
which has been qualified under section 401(a)
and is exempt under Section 501 (a) of the
Internal Revenue Code of 1954, now or
hereafter maintained by it as a medium for
the collective investment of funds of
pension, profit sharing or other employee
benefit plans, and to withdraw any part or
all of thee Account so transferred. To the
extent of the interest of the Account in any
Collective Trust the terms of the agreement
or declaration of trust establishing such
Collective Trust shall be a part of this
<PAGE> 143
Account and of the Instrument as if set forth
in full herein, and any assets transferred to
any Collective Trust shall be held, invested
and administered in accordance with such
agreement or declaration of trust, which
shall be controlling notwithstanding any
contrary provision of this Agreement or the
Instrument. Without limitation of the
foregoing, the time and manner of withdrawals
from any Collective Trust shall be
established in the discretion of the trustee
of the Collective Trust.
H. To register any securities held by it
hereunder in its own name or in the name of a
nominee with or without the addition of words
indicating that such securities are held in a
fiduciary capacity and to hold any securities
in bearer form and to deposit any securities
or other property in a depository or a
clearing corporation.
I. To deposits funds with the Bank in interest
bearing accounts subject to the Trustee's
directions.
<PAGE> 144
j. To employ suitable agents, counsel and
advisors. Including investment advisors which
may, but need not be, affiliates of The
Chase Manhattan Bank, N.A.
K. Generally to do all reasonable acts, whether
or not expressly authorized, which the Bank
may reasonably deem necessary or desirable
for the protection of the Account.
L. To open a noninterest bearing account for the
purpose of depositing those funds withheld
for payment of taxes as authorized by the
beneficiaries at time of distribution, monies
to be forwarded to IRS.
4. With respect to those securities and transactions
as to which the Bank offers this service, the
proceeds from the sale of securities will be
credited to the Account on the contractual
settlement date and the cost of such securities
purchased will be debited to the Account on the
contractual settlement date. The Bank may reverse
any such credits and debits if the transaction
with respect to which they were made fails to
settle within a reasonable period, determined by
the Bank in its discretion, after the contractual
<PAGE> 145
settlement date, except that if the Bank delivers
securities which are returned by the recipient
thereof, the Bank may reverse any such credit: and
debits at any time. With respect to securities or
transactions as to which the Bank does not offer
this service, the proceed: from the sale of
securities will be credited to the Account on the
date such proceeds are received by the Bank, and
the cost of such securities purchased will be
debited to the Account on the date securities are
received by the Bank. As to both sales and
purchases, funds availability will be based on the
type of funds that were utilized in the trade
settlement, including, but not limited to, same
day availability for federal funds and next
business day availability for clearing house
funds.
5. The Bank shall be paid compensation in accordance
with its published schedule of compensation in
effect from time to time.
6. The Bank shall render from time to time to the
Trustees, but at least monthly and within 90 days
after the termination of the Account, a statement
of the transactions with respect to the Account
and if no written objection to any such statement
<PAGE> 146
is made by the Trustee: within 60 days after the
mailing of such statement by the Bank, the
Trustees shall be deemed irrevocably to have
approved such statement as an "Account stated" and
all matters set forth therein.
7. This Agreement may be amended at any time or from
time to time by a written agreement between the
Bank and the Trustees.
8. The Bank shall from time to time make payments out
of the Account to such persons, including the
Trustees or any one of them, in such amounts and
for such purposes as may be specified in the
directions of the Trustees or of such one or more
of them as may be permitted to give such
directions pursuant to the Instrument. The Bank
shall be fully protected in relying upon a
certification of any Trustee or Trustees so
authorized under the instrument with respect to
any instruction, direction or approval of the
Trustees, and protected also in relying upon a
certification of the Trustees, as to the identity
of the Trustee or Trustees so authorized, and in
continuing to rely upon such certification until a
subsequent certification is filed with the Bank.
The Bank shall be fully protected in acting upon
any instrument, certificate, or paper believed by
<PAGE> 147
it to be genuine and to be signed or presented by
the proper person or persons, and the Bank shall
be under no duty to make any investigation or
inquiry as to any statement contained in any such
writing but may accept the same as conclusive
evidence of the truth and accuracy of the
statements therein contained. The bank may also
in its discretion accept instructions or
directives from the Trustee or Trustees so
authorized, orally, or by telephone, telegraph or
cable, which the Bank believes to be genuine and
on which the Bank shall act in "good faith". The
Bank shall not be liable for executing, failing to
execute, or for any mistake in the execution of
any such directions or instruction, on which it
has acted in good faith. The Bank shall not be
liable for the proper application of any part of
the Account if payments are made in accordance
with the written directions of the Trustees as
herein provided.
9. The Trustees and the Fund agree to hold the Bank
harmless from all liability, loss, and expenses
arising from claims of third parties that may be
asserted, and from taxes and other governmental
charges and related expenses that may be assessed
or imposed with respect to the Account or any
<PAGE> 148
property in it or against the Bank by reason of
any action taken or omitted by it pursuant to
written instructions or written authorizations
received from the Trustees.
10. The Account may be terminated at any time by the
Trustees or the Bank and upon such termination,
the Bank shall transfer and deliver to the
Trustees or on their order the assets then held in
the Account, after reserving such funds for any
outstanding fees and liabilities (including those
for purchases and sales directed by the Trustees)
which it may have incurred in connection with the
Account according to it's fee schedule then in
effect.
11. The rights, powers and authorities and the duties
and responsibilities of the Bank as custodian and
as provided in this Agreement, and the Bank shall
have only such duties with respect to the Fund a:
are specified herein and under EISA and Florida
law.
12. The Bank hereby acknowledges that it is an
Investment Manager as defined under the Employee
Retirement Income Security Act of 1974 ("ERISA")
and acknowledges that, as such Investment Manager
<PAGE> 149
acting under this Agreement, it is a fiduciary
with respect to the Fund. The Trustees shall
provide the Bank with such written instructions
regarding the funding policy and investment policy
of the Fund as shall be necessary or appropriate
in order to permit the Bank to beet its fiduciary
responsibilities as such Investment Manager under
ERISA, and to the extent permitted by ERISA the
Bank shall have no liability or responsibility for
any act or omission by it on the basis of such
instructions.
13. This Agreement and the Account created hereby
shall be construed, regulated and administered
under the laws of the State of Florida or the laws
of the United States, as applicable.
14. This account shall be known as the Home Shopping
Network, Inc. Retirement Savings Program Short
Term Fixed Income Fund.
15. This Agreement shall be executed in any number of
counterparts, each one of which shall be deemed to
be the original although the others shall not be
produced.
<PAGE> 150
IN WITNESS WHEREOF, this Agreement has been duly executed a:
of _____ day of ____________ 1990.
Trustees of the Fund
- ----------------------------
- ----------------------------
- ----------------------------
- ----------------------------
The Chase Bank of Florida
(National Association)
By
----------------------
Vice President
Dated
-------------------
<PAGE> 151
I, the undersigned duly elected, qualified and acting Secretary of Home
Shopping Network, Inc. Corporation organized and existing under the laws
of the State of Florida hereby certify that a meeting of the Home Retirement
Savings Plan said Corporation duly held January 31st, 1990 the following
resolutions were duly adopted:
BE IT RESOLVED, that
The form of the ERISA Investment Advisory Agreement with The Chase Bank of
Florida, N.A. presented to this meeting hereby is approved:
Any * one of the following duly authorized officers of agents of this
Corporation (is) are authorized to execute said Agreement on behalf of this
Corporation and to give instructions to said Bank pursuant to said Agreement,
namely:
** Chief Financial Officer & ;
-------------------------
Treasurer
*Insert the word "one" or "two" as desired.
**Insert title or titles of the officer (or officers) and
the agent (or agents) authorized.
The Secretary of this Corporation is authorized to certify
to said Bank under the seal of this Corporation (a) a copy
of these resolutions together with the names and signatures
of the officer(s) or the agent(s) of this Corporation
authorized to execute said Agreement and to give
instructions pursuant thereto; and (b) in case of each
<PAGE> 152
subsequent change in the individual holding any such office
or authority, such fact and the name and signature of the
new officer(s) or agent(s), and until said Bank has actually
received such written notice and has had a reasonable
opportunity to act upon it, said Bank shall be authorized to
act in pursuance of these resolutions even though these
resolutions may have been changed. I further certify that
1. The following are officers or agents of this
Corporation and have their signatures placed
opposite their respective names:
Name Office Signature
------------ ------------ ------------
Executive VP/
J. Michael Reardon Chief Operating /s/ J. Michael Reardon
------------------ Officer ----------------------
---------------
Edward Vaughn, Jr. Senior VP, /s/ Edward Vaughn, Jr.
------------------ Human Resources ----------------------
---------------
Nando DiFilippo, Jr. Secretary /s/ Nando DiFilippo, Jr.
-------------------- ----------------------
Leslie R. Wandler Agent /s/ Leslie R. Wandler
-------------------- ----------------------
2. The foregoing resolutions are in full force and
effect and are not contrary to' the Charter or By-
Laws of this Corporation and the annexed ERISA
Investment Advisory Agreement is identical with
the form of the Corporate Investment Advisory
Agreement Presented to said meeting and approved
by the AFORESAID RESOLUTION.
<PAGE> 153
IN WITNESS WHEREOF, I have hereunto set my hand and affixed
the Corporate Seal of this Corporation this 31st day of
January , 1990
Secretary
-----------------------
*Other Officer
------------------
(CORPORATE SEAL)
*If the Secretary is himself authorized to sign instructions
the above certification must also be signed by an additional
officer of the Corporation.
(This form of affidavit is for use in the United States.)
State of Florida )
) ss.:
County of Pinellas )
On this 31st day of January, 1990, in said County of
Pinellas before me, personally came Nando DiFilippo, Jr.
before me, personally came Leslie R. Wandler to me known
to be the person described in and who executed the foregoing
certificate, and acknowledged to me that he/she executed the
same; and being by me duly sworn, did depose and say that
he/she is
<PAGE> 154
Secretary of Home Shopping Network. Inc; that as such officer he
keeps the corporate minute books and seal of said
corporation and that the foregoing certificate is true to
his/her own knowledge.
------------------------
(NOTORIAL SEAL)
N0TARY PUBLIC, STATE OF FLORIDA
MY COMMISSION EXPIRES: AUG. 11. 1993
BONDED THRU NOTARY PUBLIC UNDERWRITERS;
<PAGE> 155
January 25, 1990
GUIDELINES FOR INVESTMENT OF HOME SHOPPING NETWORK
401K PLAN FUNDS
FIRST QUARTER 1990
This policy guideline has been approved by
------------------------
EMPLOYER CONTRIBUTION
<TABLE>
<CAPTION>
Current Objectives Long Term Ranges
<S> <C> <C>
Home Shopping Network (HSN) 90% 85 - 90%
Treasury stock
U.S. Gov't. Money Market Fund 10% 10 - 15%
</TABLE>
If, through market changes, the Borne Shopping Network stock
represents (more than _____% reduce to _____%
(less than _____% raise to _____%
<TABLE>
<CAPTION>
EMPLOYEE CONTRIBUTION
Current Objectives Long Term Ranges
<S> <C> <C>
Short Term Fixed Income 100% 100%
(Fund A)
</TABLE>
DEPOSIT AND WITHDRAWAL PRIORITIES
Deposits: All deposits should be made under the following
priorities:
Withdrawals: All withdrawals should be made under the following
priorities:
<PAGE> 156
DEPOSIT TIMING
<TABLE>
<CAPTION>
Employer Employee
<S> <C> <C>
Initial Contribution: HSN Fund A
When Received 85% 100%
Following Quarter 5%
</TABLE>
Monthly and Semi-Monthly Contributions: Fully deposit as received
in order to bring in line with current policy objectives.
Note: The guidelines will as heretofore be reviewed quarterly for
both appropriateness and adjustments.
<PAGE> 1
EXHIBIT 11
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
COMPUTATION OF NET EARNINGS (LOSS) PER SHARE
<TABLE>
<CAPTION>
FOUR MONTHS YEARS ENDED AUGUST
YEAR ENDED ENDED 31,
DECEMBER 31, DECEMBER 31, -------------------
1993 1992 1992 1991
------------ ------------ ------- -------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
PRIMARY EARNINGS (LOSS) PER SHARE:
Weighted average shares outstanding
Common Stock.......................................... 67,802 63,698 63,394 63,292
Class B Common Stock.................................. 23,390 24,160 24,160 24,160
Shares assumed to be issued upon the exercise of common
stock options under the treasury stock method......... -- 728 274 --
Shares assumed to be issued upon the conversion of
Convertible Debentures................................ -- 2,529 2,427 --
------------ ------------ ------- -------
91,192 91,115 90,255 87,452
------------ ------------ ------- -------
------------ ------------ ------- -------
Earnings (loss) before extraordinary item............... $(15,539) $ 5,140 $37,405 $(9,599)
Interest expense adjustment(2).......................... -- 191 575 --
------------ ------------ ------- -------
Earnings (loss) before extraordinary item............... (15,539) 5,331 37,980 (9,599)
Extraordinary item, net of taxes........................ (7,242) -- (112) 654
------------ ------------ ------- -------
Net earnings (loss)..................................... $(22,781) $ 5,331 $37,868 $(8,945)
------------ ------------ ------- -------
------------ ------------ ------- -------
Earnings (loss) per share before extraordinary item..... $ (.18) $ .06 $ .42 $ (.11)
Extraordinary item per share, net of taxes.............. (.08) -- -- .01
------------ ------------ ------- -------
Net earnings (loss) per share........................... $ (.26) $ .06 $ .42 $ (.10)
------------ ------------ ------- -------
------------ ------------ ------- -------
FULLY DILUTED EARNINGS (LOSS) PER SHARE:(1)
Weighted average shares outstanding
Common Stock.......................................... 67,802 63,698 63,394 63,292
Class B Common Stock.................................. 23,390 24,160 24,160 24,160
Shares assumed to be issued upon the exercise of common
stock options under the treasury stock or modified
treasury stock method................................. 2,182 2,033 376 248
Shares assumed to be issued upon the conversion of
Convertible Debentures................................ 938 2,529 2,427 2,794
------------ ------------ ------- -------
94,312 92,420 90,357 90,494
------------ ------------ ------- -------
------------ ------------ ------- -------
Earnings (loss) before extraordinary item............... $(15,539) $ 5,140 $37,405 $(9,599)
Interest expense adjustment(2).......................... 205 191 575 665
------------ ------------ ------- -------
Earnings (loss) before extraordinary item............... (15,334) 5,331 37,980 (8,934)
Extraordinary item, net of taxes........................ (7,242) -- (112) 654
------------ ------------ ------- -------
Net earnings (loss)..................................... $(22,576) $ 5,331 $37,868 $(8,280)
------------ ------------ ------- -------
------------ ------------ ------- -------
Earnings (loss) per share before extraordinary item..... $ (.16) $ .06 $ .42 $ (.10)
Extraordinary item per share, net of taxes.............. (.08) -- -- .01
------------ ------------ ------- -------
Net earnings (loss) per share........................... $ (.24) $ .06 $ .42 $ (.09)
------------ ------------ ------- -------
------------ ------------ ------- -------
</TABLE>
- ---------------
(1) The amounts in earnings (loss) per share on the fully diluted basis are
solely shown in this exhibit. Because the amounts are the same as the
primary calculation for the four months ended December 31, 1992 and the
year ended August 31, 1992 and are antidilutive for the years ended
December 31, 1993 and August 31, 1991 (decrease the loss per share), they
are not required to be presented elsewhere in this Form 10-K.
(2) Interest expense, net of taxes, that would not have been incurred had
conversion of the Convertible Debentures taken place at the beginning of
the period.
24
<PAGE> 1
Management's Discussion and
Analysis of Financial Condition
and Results of Operations
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
GENERAL
Home Shopping Network, Inc. (the "Company") is a holding company, the
subsidiaries of which conduct the day-to-day operations of the Company's various
business activities. The Company's primary business is electronic retailing
conducted by Home Shopping Club, Inc. ("HSC"), a wholly-owned subsidiary of the
Company.
As discussed in Note A to the Consolidated Financial Statements, included
herein, on July 13, 1993, the Company elected to change its year end from August
31 to December 31. This change was made effective January 1, 1993.
The following discussion presents the material changes in the consolidated
results of operations of the Company which have occurred between the year ended
December 31, 1993, and the fiscal year ended August 31, 1992, along with
material changes between the four months ended December 31, 1992 and 1991 and
the fiscal years ended August 31, 1992 and 1991. Reference should also be made
to the Consolidated Financial Statements and Summary Financial Data included
herein.
As discussed in Note I to the Consolidated Financial Statements, included
herein, on July 31, 1992 and December 28, 1992, the Company distributed the
capital stock of its former wholly-owned subsidiaries, Precision Systems, Inc.
("PSi") and Silver King Communications, Inc. ("SKC"), respectively, as stock
dividends to the Company's stockholders. As noted below, these distributions
affect the comparison of revenues and expenses for the year ended December 31,
1993 versus the fiscal year ended August 31, 1992 and for the four months ended
December 31, 1992 versus the four months ended December 31, 1991. In addition,
the distribution of SKC affects the comparison of financial position, liquidity
and capital resources at December 31, 1993 versus August 31, 1992.
All tables and discussion included herein calculate the percentage changes using
actual dollar amounts, versus rounded dollar amounts.
YEAR ENDED DECEMBER 31, 1993 VS. FISCAL YEAR ENDED AUGUST 31, 1992
NET SALES
HSC's retail sales programs are transmitted twenty-four hours a day, seven days
a week, via satellite to cable television systems, affiliated broadcast
television stations and satellite dish receivers. HSC produces three separate
retail sales programs, HSN 1, HSN 2, and HSN Spree. HSN 1 is carried by cable
television systems throughout the country and is the original HSC programming
network. HSN 2 is carried by independent broadcast television stations. HSN 2 is
also carried by cable television systems which primarily retransmit the
broadcast television signal of one of the broadcast television stations carrying
HSN 2. HSN Spree is carried primarily on a part-time basis by both cable
television systems and broadcast television stations.
For the year ended December 31, 1993, net sales decreased $51.2 million, or
4.6%, to $1.047 billion from $1.098 billion for the fiscal year ended August 31,
1992. Net sales of HSC decreased $43.8 million, or 4.3%, for the year ended
December 31, 1993, reflecting a 22.7% decrease in the number of packages shipped
while the average price per unit sold increased 29.4% compared to the fiscal
year ended August 31, 1992. On a consolidated basis, $20.4 million of the net
sales decrease was due to the distribution by the Company of the capital stock
of PSi and SKC. These declines were somewhat offset by an increase in sales
attributable to the Company's mail order subsidiary, HSN Mail Order, Inc. ("Mail
Order") of $3.5 million and a $6.9 million increase in sales through the
Company's retail outlets for the year ended December 31, 1993. After
consideration of the distributions of SKC and PSi, net sales for the year ended
December 31, 1993, declined 2.9% compared to the fiscal year ended August 31,
1992. The decline in sales for the year ended December 31, 1993, primarily
occurred during the first quarter of the year. Management believes that this
decline was attributable to the same factors that resulted in lower sales in the
latter part of 1992, including the weak economy and a possible decline in
viewership due to programming competition. The Company also made certain format
and policy changes beginning in September 1992 which also may have contributed
to this decline. These changes included, among other things, the visual display
of shipping and handling charges on the television screen, greater program
segmentation, higher priced merchandise in categories
21
<PAGE> 2
which typically carry a higher return percentage, changes in merchandise
offerings, and other show format changes.
During April 1993, the Company held a week long "Big Top" sales event, primarily
to liquidate certain merchandise. See "Cost of Sales." While additional sales
volume was generated during this event, sales levels were lower in the second
quarter of 1993 than in 1992 and this trend continued through the beginning of
the third quarter of 1993. In the latter part of the third quarter through the
end of 1993, however, sales levels increased, and these sales increases have
continued in the early part of 1994. A significant reason for the sales increase
during this period was the addition of new cable subscribers beginning in
September 1993 as a result of the "must carry" provisions of the cable
re-regulation law, as further discussed below. Although sales increased in the
latter part of 1993 and early 1994, they are compared to a period which
reflected a sales decrease. Nonetheless, management believes that recent sales
levels have been positively affected by improvements initiated during 1993 in
the merchandising management and sales philosophy of HSC. Although there can be
no assurance that this trend will continue, management is maintaining its
efforts to stimulate sales through ongoing programs which include increased
availability of the "FlexPay" program to customers, as further discussed in Note
A3 to the Consolidated Financial Statements included herein, changes in show
host training and scheduling, enhanced use of promotional selling events, and
the introduction of a private label credit card in early 1994.
For the year ended December 31, 1993, the merchandise return percentage
increased to 22.4% from 20.3%, compared to the fiscal year ended August 31,
1992. In addition, the higher rate of returns has continued into the early part
of 1994. The primary reason for the higher return percentage was increased sales
in higher priced jewelry and electronics merchandise categories which typically
experience higher rates of return than other merchandise categories. Management
is currently evaluating the product mix in an attempt to reduce the merchandise
return rate. However, a change in product mix, if and when implemented, could
also have an effect on sales volume.
The Company believes that future levels of net sales of HSC will be dependent,
in large part, on increases in program carriage, market penetration and further
improvements in merchandising management. Program carriage is defined as the
number of cable systems and broadcast television stations that carry HSC
programming. Market penetration represents the level of active purchasers within
a market.
Cable television systems and affiliated broadcast television stations broadcast
HSC programming under affiliation agreements with varying original terms. The
Company seeks to increase the number of cable television systems and broadcast
television stations that televise HSC programming while evaluating the expected
profitability of each contract. During the twelve months ended December 31,
1993, cable television households capable of receiving HSC programming increased
by approximately 6.3 million, or 22.9%, to approximately 33.8 million
unduplicated cable households. This growth was achieved primarily through
increased cable system carriage of signals transmitted by the Company's
broadcast affiliates due to the implementation of the "must carry" provisions of
the cable re-regulation law beginning in September 1993. As a result, the number
of homes classified as cable television households increased and the number of
broadcast households declined. Because HSC programming is now on a cable channel
line-up, these former broadcast households can now more easily access the HSC
programming. During the same period, broadcast television households, in areas
unduplicated by HSC cable television households, decreased by approximately 3.7
million, or 12.5%, to 25.9 million households. This decrease was primarily
attributable to the shift in classification of 5.8 million households from
broadcast to cable. This decrease was offset by an increase of 1.7 million
broadcast television households due to changes in the composition of HSC's
affiliated broadcast television station group and an increase of .4 million
households in the updated Nielsen household counts in the areas in which HSC
broadcasts. Broadcast affiliation agreements generally call for fixed hourly
payments to stations for broadcasting HSC's programming and, with proper notice,
with the exception of SKC, are generally cancelable or provide for adjustments
in the hourly rate paid, at HSC's or the affiliated station's option. In
addition, as of December 31, 1993, HSC's programming was available to
approximately 3.1 million households with satellite dish receivers.
Approximately 6.3 million cable subscribers, or approximately 18.8% of the total
number of unduplicated cable households receiving HSC programming, are subject
to termination or renewal during 1994. The Company is pursuing both renewals and
additional cable television system contracts, but channel availability,
competition, cost of carriage and cable re-regulation are some of the factors
affecting cable television system contracts. Although management cannot
determine the percentage of expiring contracts that will be renewed or the
number of
22
<PAGE> 3
households that will be added through new contracts, management is optimistic
that a majority of the contracts will be renewed.
During the year ended December 31, 1993, the Company continued several incentive
programs designed to increase the total number of cable subscribers able to
receive HSC programming and to increase penetration in both cable and broadcast
television markets. Overall, as a result of these incentive programs and the
"must carry" provisions of the cable re-regulation law, as discussed below,
program carriage levels increased during 1993, however, market penetration
levels weakened somewhat. Management believes that one reason for the weakened
market penetration is that market penetration typically lags behind increases in
program carriage. As most of the increase in program carriage levels occurred
during the latter part of 1993, management expects some improvement in market
penetration in 1994.
Programs to increase carriage included the placement of advertising with cable
operators. Management believes that providing advertising revenue or other forms
of incentive compensation to cable operators is a factor in securing program
carriage. The purchases of cable advertising time resulted in an increase in
marketing payments for the year ended December 31, 1993, compared to the fiscal
year ended August 31, 1992. Programs to increase market penetration included
buyer incentives which provide Club Members with discounts on merchandise
purchased from HSC. For example, the Company targets existing Club Members
through the "Bargaineer" magazine which, among other features, offers discounts
on HSC purchases and provides a schedule of HSC's retail sales television
programs.
On October 5, 1992, Congress enacted a cable re-regulation law which, among
other things, contains "must carry" provisions which mandate that cable
companies within a broadcast television station's reach, retransmit its signal.
The new law was challenged in the courts, and the United States Supreme Court
has heard arguments but has not yet ruled on the constitutionality of the law.
On July 2, 1993, the Federal Communications Commission voted to extend "must
carry" rules to broadcast television stations with shop-at-home formats. "Must
carry" requirements went into effect on October 6, 1993, and the Company has
experienced a growth in carriage as previously discussed. If "must carry" is
ruled unconstitutional, a portion of this growth in cable carriage may be
reversed.
The Company is considering a variety of strategies to further increase carriage
of HSC programming and is evaluating the impact of the "must carry" provisions
on its broadcast relationships. The cable re-regulation act and its
interpretation, which is still forthcoming, will have a broad impact upon the
Company and its ability to contract new program carriage. The Company is
aggressively pursuing new contracts for program carriage in the event "must
carry" is ruled unconstitutional. The Company is engaged in discussions with
programming and cable entities to explore other new business opportunities. The
pursuit of these potential business opportunities may include the creation of
new business entities, development and distribution of broadcast and cable
television programming, changes in the Company's broadcast relationships and/or
expansion in the carriage of the Company's programming by operators of cable
television systems. There can be no assurances that the Company will be able to
reach agreements with the necessary parties to pursue these business
opportunities.
As in the past, the Company intends to continue to explore ways to develop and
enhance its business. Accordingly, it will continue to discuss various business
opportunities with media, cable programming, broadcast television, cable
television, retail and entertainment entities.
COST OF SALES
For the year ended December 31, 1993, cost of sales increased $12.7 million, or
1.8%, to $704.0 million from $691.3 million for the fiscal year ended August 31,
1992. As a percentage of net sales, cost of sales increased to 67.3% from 63.0%
for the year ended December 31, 1993, compared to the fiscal year ended August
31, 1992. Cost of sales of HSC increased $21.0 million for the year ended
December 31, 1993. The increases in consolidated and HSC's cost of sales and
cost of sales percentage relate primarily to the liquidation of certain
inventory at less than cost, due to a change in management's merchandising
philosophy as further discussed below. In addition, consolidated cost of sales
was affected by a decrease of $15.4 million as a result of the distribution by
the Company of the capital stock of SKC and PSi, as previously discussed. The
remaining change in cost of sales for the year ended December 31, 1993, compared
to the fiscal year ended August 31, 1992, is primarily attributable to Mail
Order and the Company's retail outlets, which had an increase in cost of sales
of $2.4 million and $5.0 million, respectively.
23
<PAGE> 4
In connection with the change in management's merchandising philosophy, the
Company made an additional provision of $20.1 million to HSC's inventory reserve
in February 1993. During April 1993, the Company held a week long "Big Top"
sales event, primarily featuring products sold on a liquidation basis, which
provided additional sales volume. Due to the promotional nature of this event,
the cost of sales percentage for products featured during this event was higher
than typically experienced. The liquidation of this merchandise continued during
the second and third quarters resulting in higher than usual cost of sales
percentages during these periods.
The above mentioned liquidation and an increase in the inventory reserve during
1993 adversely affected cost of sales. As a result of changes instituted by new
management and ownership, with the aid of outside retail consultants, along with
the growth in cable households as previously discussed, the Company realized
improvements in sales and gross profits in the latter part of 1993 and the
beginning of 1994.
OPERATING EXPENSES
For the year ended December 31, 1993, operating expenses increased $25.2
million, or 7.8%, to $349.5 million from $324.3 million for the fiscal year
ended August 31, 1992. As a percentage of net sales, these expenses increased to
33.4% from 29.5% compared to the fiscal year ended August 31, 1992.
The following table highlights the operating expense section from the Company's
Consolidated Statements of Operations, including the dollar and percentage
changes for the year ended December 31, 1993, compared to the fiscal year ended
August 31, 1992:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
OPERATING EXPENSES
YEARS ENDED
------------------------------------------------
DECEMBER 31, AUGUST 31, $ %
1993 1992 CHANGE CHANGE
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------
(In millions, except %)
Selling and marketing................... $138.1 $135.8 $ 2.3 1.7 %
Engineering and programming............. 93.7 54.5 39.2 71.9
General and administrative.............. 93.5 87.1 6.4 7.4
Depreciation and amortization........... 24.2 46.9 (22.7 ) (48.4 )
------------ ---------- ------
$349.5 $324.3 $25.2
------------ ---------- ------
------------ ---------- ------
</TABLE>
"Must carry" legislation, as discussed in "Net Sales," is expected to result in
increases in certain operating expenses related to cable and broadcast carriage
in dollars, however, as a percentage of sales, the effect is not currently
determinable.
SELLING AND MARKETING
For the year ended December 31, 1993, selling and marketing expenses increased
$2.3 million, or 1.7%, to $138.1 million from $135.8 million for the fiscal year
ended August 31, 1992. As a percentage of net sales, these expenses increased to
13.2% from 12.4% compared to the fiscal year ended August 31, 1992.
The major components of selling and marketing expenses are detailed below,
including the dollar and percentage changes for the year ended December 31, 1993
compared to the fiscal year ended August 31, 1992:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
CERTAIN SELLING AND MARKETING EXPENSES
YEARS ENDED
----------------------------------------------
DECEMBER 31, AUGUST 31, $ %
1993 1992 CHANGE CHANGE
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------
(In millions, except %)
Telephone, operator and customer
service................................ $ 48.5 $ 47.0 $1.5 3.2 %
Commissions to cable system operators.... 33.9 34.4 (.5) (1.4 )
Marketing payments for cable
advertising............................ 30.7 26.8 3.9 14.5
</TABLE>
24
<PAGE> 5
Telephone, operator and customer service expenses are typically related to sales
and order volume. However, for the year ended December 31, 1993 compared to the
fiscal year ended August 31, 1992, these expenses were higher primarily due to
telephone credits totaling $2.1 million received from the Company's long
distance carrier and lower salary costs in the fiscal year ended August 31,
1992. These expenses are expected to fluctuate in relation to sales and order
volume in future periods.
For the year ended December 31, 1993, commissions to cable system operators
decreased as a result of lower sales volume, compared to the fiscal year ended
August 31, 1992, and are expected generally to fluctuate in relation to sales in
future periods.
Marketing payments for cable advertising increased for the year ended December
31, 1993, due to previous contractual commitments for cable advertising
purchases in conjunction with the Company's attempt to increase market
penetration. However, as discussed in "Net Sales," market penetration weakened
somewhat during 1993. The Company is seeking other alternatives to cable
advertising to increase market penetration in the future.
In addition, selling and marketing expenses for the year ended December 31, 1993
decreased as a result of the curtailment of the inhouse production portion of
the Company's infomercial operations which had selling and marketing expenses of
$2.1 million for the fiscal year ended August 31, 1992.
The remaining net decrease in selling and marketing expenses is attributable to
the Company's other subsidiary operations. Management believes that total
selling and marketing expenses in future periods will be at higher levels as the
Company maintains its efforts to increase the number of cable systems carrying
HSC programming, increase market penetration and develop new electronic
retailing opportunities. In addition, these expenses will increase as program
carriage increases, as discussed in "Net Sales."
ENGINEERING AND PROGRAMMING
For the year ended December 31, 1993, engineering and programming expenses
increased $39.2 million, or 71.9%, to $93.7 million from $54.5 million for the
fiscal year ended August 31, 1992. As a percentage of net sales, these expenses
increased to 9.0% from 5.0% compared to the fiscal year ended August 31, 1992.
The increase was primarily attributable to the expense of $41.1 million incurred
under the affiliation agreement with SKC during the year ended December 31,
1993. After the SKC stock distribution, as previously discussed, SKC continues
to broadcast HSC's retail sales programs under affiliation agreements. HSC pays
an affiliation fee to SKC, as previously discussed, based on hourly rates and,
upon reaching certain sales levels, commissions on net sales. Accordingly,
broadcast costs will continue to be at these higher levels in 1994. Moreover, as
the Company develops new programming and telemarketing opportunities and
attempts to expand its broadcast television reach for existing programming,
these expenses are expected to increase in future periods.
GENERAL AND ADMINISTRATIVE
For the year ended December 31, 1993, general and administrative expenses
increased $6.4 million, or 7.4%, to $93.5 million from $87.1 million for the
fiscal year ended August 31, 1992. As a percentage of net sales, these expenses
increased to 8.9% from 7.9% compared to the fiscal year ended August 31, 1992.
For the year ended December 31, 1993, legal, accounting, consulting and
stockholder relations expenses increased $12.5 million primarily in connection
with recent litigation, the acquisition, in February 1993, of a controlling
interest in the Company by a wholly-owned subsidiary of Liberty Media
Corporation, and the merger proposal by QVC, Inc. Additional expenses of $12.7
million, in connection with the Company's executive stock award program, stock
appreciation rights granted in 1993, increased salary expense, repairs and
maintenance and administrative expenses, were incurred in the year ended
December 31, 1993, compared to the fiscal year ended August 31, 1992. Management
expects general and administrative expenses to decrease in 1994.
The above increases were partially offset by decreases in certain general and
administrative expenses primarily attributable to the distribution of the
capital stock of SKC and PSi, as previously discussed, which reduced general and
administrative expenses by $15.1 million for the year ended December 31, 1993,
compared to the fiscal year ended August 31, 1992. In addition, equipment rental
expense decreased $3.6 million for the year ended December 31, 1993, compared to
the fiscal year ended August 31, 1992, relating to new operating leases for
computer equipment with more favorable terms.
25
<PAGE> 6
DEPRECIATION AND AMORTIZATION
For the year ended December 31, 1993, depreciation and amortization decreased
$22.7 million, or 48.4%, to $24.2 million from $46.9 million for the fiscal year
ended August 31, 1992. The decrease was primarily attributable to the
distribution of the capital stock of SKC and PSi, as previously discussed, which
resulted in a reduction of depreciation and amortization of $23.4 million for
the year ended December 31, 1993, compared to the fiscal year ended August 31,
1992. Depreciation and amortization is expected to be somewhat higher in 1994.
OTHER INCOME (EXPENSE)
For the year ended December 31, 1993, net other expense decreased $5.1 million
to $12.6 million from $17.7 million for the fiscal year ended August 31, 1992.
Interest income increased $12.8 million for the year ended December 31, 1993,
relating to a note receivable as a result of the distribution of the capital
stock of SKC, as discussed in Note B to the Consolidated Financial Statements
included herein. Interest income relating to this note receivable will decrease
slightly in 1994. This increase was offset by a $3.5 million decrease in
interest earned on available cash due to lower cash balances and interest rates.
Interest expense decreased $11.4 million for the year ended December 31, 1993,
primarily relating to the redemption and refinancing of the Company's 11 3/4%
Senior Notes (the "Senior Notes"), as discussed in "Financial Position,
Liquidity and Capital Resources." As a result of the redemptions and
refinancings, interest expense is expected to remain at this lower level in
1994, and in subsequent years, subject to interest rate fluctuations.
The above mentioned decreases in net other expense are partially offset by
litigation settlements totalling $13.0 million during 1993 and an increase in
miscellaneous expense for the quarter ended March 31, 1993, primarily due to
nonrecurring costs which include $2.6 million of inventory contributed to
charity as a result of the change in management's merchandising philosophy
regarding the types of merchandise sold on HSC.
INCOME TAXES
The Company's effective tax rate was a benefit of (20.6)% for the year ended
December 31, 1993, and an expense of 42.0% for the fiscal year ended August 31,
1992. The Company's effective tax rate for these periods differed from the
statutory rate due primarily to the amortization of goodwill and other acquired
intangible assets relating to acquisitions from prior years, state income taxes
and the provision for interest on adjustments proposed by the Internal Revenue
Service ("IRS"), as discussed in Note E to the Consolidated Financial Statements
included herein. The Company's effective tax rate is expected to vary from the
statutory rate in 1994, primarily for the above mentioned reasons.
EXTRAORDINARY ITEM -- LOSS ON EARLY EXTINGUISHMENT OF LONG-TERM OBLIGATIONS
As discussed in "Financial Position, Liquidity and Capital Resources," and Note
D to the Consolidated Financial Statements included herein, the Company
refinanced and retired $100.0 million and $43.3 million of the outstanding
balance of the Senior Notes on February 19, 1993, and April 15, 1993,
respectively. In addition, the Company also retired the remaining $16.9 million
principal balance of its 5 1/2% Convertible Subordinated Debentures (the
"Debentures") on May 11, 1993. The Company also purchased and retired $4.0
million and $.1 million of Senior Notes and Debentures, respectively, during the
fiscal year ended August 31, 1992. These transactions resulted in an
extraordinary item -- loss on early extinguishment of long-term obligations, net
of taxes for the year ended December 31, 1993, and the fiscal year ended August
31, 1992.
NET EARNINGS (LOSS)
The Company had a net loss of $(22.8) million, or $(.26) per share, for the year
ended December 31, 1993, compared to net earnings of $37.3 million, or $.42 per
share, for the fiscal year ended August 31, 1992. The loss for the year ended
December 31, 1993, was primarily attributable to the following factors: decrease
in net sales of $51.2 million compared to the fiscal year ended August 31, 1992;
the liquidation of a portion of the Company's inventory at less than cost, the
increase in the inventory reserve, as discussed in "Cost of Sales" and the
litigation settlements, as discussed in "Other Income (Expense)" and Note H to
the Consolidated Financial Statements
26
<PAGE> 7
included herein. For the year ended December 31, 1993, the results include an
extraordinary loss of $(7.2) million, or $(.08) per share, compared to an
extraordinary loss of $(.1) million, with no per share effect, for the fiscal
year ended August 31, 1992.
FOUR MONTHS ENDED DECEMBER 31, 1992 (AUDITED) VS. FOUR MONTHS
ENDED DECEMBER 31, 1991 (UNAUDITED)
NET SALES
For the four months ended December 31, 1992, net sales decreased $29.4 million,
or 7.6%, to $357.2 million from $386.6 million for the four months ended
December 31, 1991. Net sales of HSC decreased $26.2 million, or 7.4%, for the
four months ended December 31, 1992. This decline reflected a decrease in the
number of packages shipped while the average price per unit sold increased
slightly compared to the four months ended December 31, 1991. Management
believes this decline in sales was attributable to the weak economy, uncertainty
in buyers' confidence levels caused by the November 1992 elections and a
possible decline in viewership due to programming competition. The Company also
made certain format and policy changes in the beginning of the four month period
in 1992, which also may have contributed to this decline. These changes
included, among other factors, the visual display of shipping and handling
charges on the television screen, greater program segmentation, higher priced
merchandise in categories which typically carry a higher return percentage,
changes in merchandise offerings, and other format changes. In an effort to
stimulate merchandise sales during the four months, the Company instituted HSC
customer incentive programs, which included increased sales discounts and
reduced shipping and handling charges. These programs which may have stimulated
sales for the period, nevertheless resulted in a net sales and gross profit
decrease of approximately $8.3 million. These programs were subsequently
curtailed. In addition, net sales decreased $5.9 million due to the distribution
by the Company of the capital stock of PSi. The above net sales decreases were
offset in part by increases in sales relating to the Company's other subsidiary
operations.
Merchandise returns for the four months ended December 31, 1992, remained
relatively constant as a percentage of sales decreasing to 20.0% from 20.3%
compared to the four months ended December 31, 1991.
COST OF SALES
For the four months ended December 31, 1992, cost of sales decreased $12.0
million, or 4.9%, to $232.5 million from $244.5 million for the four months
ended December 31, 1991. As a percentage of net sales, cost of sales increased
to 65.1% from 63.2% compared to the same period last year. Cost of sales of HSC
decreased $6.4 million. In addition, consolidated cost of sales was affected by
a decrease of $4.9 million for the four months ended December 31, 1992, as a
result of the distribution by the Company of the capital stock of PSi. The
balance of the change in cost of sales compared to the same period last year
relates to the Company's other subsidiary operations. The increase in cost of
sales percentage and the corresponding decrease in gross profit as a percentage
of net sales is primarily attributable to an increase in cost of sales
percentage of HSC which was related to the institution of incentive programs,
offering increased sales discounts and reduced shipping and handling charges,
which had a negative impact on gross profit and net sales of HSC, as discussed
in "Net Sales."
OPERATING EXPENSES
For the four months ended December 31, 1992, operating expenses decreased $2.0
million, or 1.8%, to $107.1 million from $109.1 million for the four months
ended December 31, 1991. As a percentage of net sales, these expenses increased
to 30.0% from 28.2% compared to the four months ended December 31, 1991.
27
<PAGE> 8
The following table highlights the operating expense section from the Company's
Consolidated Statements of Operations, including the dollar and percentage
changes for the four months ended December 31, 1992, compared to the four months
ended December 31, 1991:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
OPERATING EXPENSES
FOUR MONTHS ENDED DECEMBER 31,
-------------------------------------------
1991 $ %
1992 UNAUDITED CHANGE CHANGE
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(In millions, except %)
Selling and marketing......................... $ 45.3 $ 45.0 $ .3 0.6%
Engineering and programming................... 18.1 17.8 .3 2.0
General and administrative.................... 29.3 31.3 (2.0 ) (6.3)
Depreciation and amortization................. 14.4 15.0 (.6 ) (4.2)
------ --------- ------
$107.1 $ 109.1 $(2.0 )
------ --------- ------
------ --------- ------
</TABLE>
SELLING AND MARKETING
For the four months ended December 31, 1992, selling and marketing expenses
increased $.3 million, or 0.6%, to $45.3 million from $45.0 million for the four
months ended December 31, 1991. As a percentage of net sales, these expenses
increased to 12.7% from 11.6% compared to the four months ended December 31,
1991.
The major components of selling and marketing expenses are detailed below
including the dollar and percentage changes for the four months ended December
31, 1992, compared to the four months ended December 31, 1991:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
CERTAIN SELLING AND MARKETING EXPENSES
FOUR MONTHS ENDED DECEMBER 31,
------------------------------------------
1991 $ %
1992 UNAUDITED CHANGE CHANGE
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(In millions, except %)
Telephone, operator and customer service....... $16.2 $14.2 $2.0 14.1%
Commissions to cable system operators.......... 11.2 12.1 (.9) (7.4)
Marketing payments for cable advertising....... 9.0 8.9 .1 1.1
</TABLE>
Telephone, operator and customer service expenses are typically related to sales
and order volume. However, for the four months ended December 31, 1992, compared
to the same period last year, these expenses were higher due to a rate reduction
and a volume discount credit totaling $2.1 million received from the Company's
long distance carrier in the four months ended December 31, 1991 and increased
rates during the four months ended December 31, 1992.
Commissions to cable system operators decreased as a result of lower sales
volume.
Marketing payments for cable advertising increased slightly for the four months
ended December 31, 1992.
The remaining changes in selling and marketing expenses for the four months
ended December 31, 1992, primarily relate to the in-house production portion of
its infomercial operations which had selling and marketing expenses of $.8
million for the four months ended December 31, 1991, and which were discontinued
in May 1992. The remaining change relates primarily to other subsidiary
operations.
ENGINEERING AND PROGRAMMING
For the four months ended December 31, 1992, engineering and programming
expenses increased $.3 million, or 2.0%, to $18.1 million from $17.8 million for
the four months ended December 31, 1991. As a percentage of net sales, these
expenses increased to 5.1% from 4.6% compared to the four months ended December
31, 1991.
28
<PAGE> 9
GENERAL AND ADMINISTRATIVE
For the four months ended December 31, 1992, general and administrative expenses
decreased $2.0 million, or 6.3%, to $29.3 million from $31.3 million for the
four months ended December 31, 1991. As a percentage of net sales, these
expenses increased to 8.2% from 8.1% compared to the four months ended December
31, 1991.
Equipment rent expense decreased $.9 million compared to the same period in 1991
relating to new operating leases for computer equipment with more favorable
terms. Additional savings of $.9 million were realized as a result of the
curtailment of subsidiary operations in the infomercial and 800/900
telemarketing businesses in May 1992.
DEPRECIATION AND AMORTIZATION
For the four months ended December 31, 1992, depreciation and amortization
decreased $.6 million, or 4.2%, to $14.4 million from $15.0 million for the four
months ended December 31, 1991. The decrease was primarily attributable to a
decrease in depreciation expense of $.6 million due to the distribution by the
Company of the capital stock of PSi.
OTHER INCOME (EXPENSE)
For the four months ended December 31, 1992, net other expense increased $.2
million to $6.1 million from $5.9 million for the four months ended December 31,
1991. The increase was primarily attributable to an increase in charitable
contributions of $.1 million relating to disaster relief efforts. In addition,
miscellaneous expenses, primarily related to other subsidiary operations,
increased approximately $.6 million. These expense increases were offset by a
decrease in interest expense of approximately $.9 million related to the
redemption of $37.5 million of Senior Notes on October 15, 1992, as discussed in
"Financial Position, Liquidity and Capital Resources."
INCOME TAXES
The Company's effective tax rate was 55.1% for the four months ended December
31, 1992, and 42.0% for the four months ended December 31, 1991. The Company's
effective tax rate for the four months ended December 31, 1992, differed from
the statutory rate due primarily to the distribution of the capital stock of
SKC, as discussed in Note I to the Consolidated Financial Statements included
herein, the amortization of goodwill and other acquired intangible assets
relating to acquisitions from prior years, state income taxes and the provision
for interest on adjustments proposed by the IRS, as discussed in Note E to the
Consolidated Financial Statements included herein.
NET EARNINGS
The Company had net earnings of $5.1 million, or $.06 per share, for the four
months ended December 31, 1992, compared to net earnings of $15.7 million, or
$.18 per share, for the four months ended December 31, 1991. The decrease in net
earnings was primarily attributable to a decrease in net sales of $29.4 million
compared to the four months ended December 31, 1991, as discussed in "Net
Sales."
FISCAL YEAR ENDED AUGUST 31, 1992 VS. FISCAL YEAR ENDED AUGUST 31, 1991
NET SALES
For the year ended August 31, 1992, net sales increased $19.2 million, or 1.8%,
to $1.098 billion from $1.079 billion in fiscal 1991. Net sales of HSC increased
$24.8 million for the year ended August 31, 1992 primarily due to an increase in
the average price per unit sold while the number of packages shipped remained
relatively constant compared to fiscal 1991. In addition, sales of the Company's
former subsidiary, PSi, increased $2.6 million to $13.0 million for the year
ended August 31, 1992 primarily relating to a contract for the purchase of its
proprietary voice processing platform.
The above net sales increases were reduced by a decrease in sales by Mail Order
of $8.7 million for the year ended August 31, 1992. This decrease in sales
volume relates to the discontinuance of two catalogs during the fourth quarter
of fiscal 1991. See "Depreciation and Amortization." The balance of the change
in sales compared to fiscal 1991 relates to the Company's other subsidiary
operations. Merchandise returns for the year ended August 31,
29
<PAGE> 10
1992, increased as a percentage of sales to 20.3% from 19.6% compared to fiscal
1991. This increase primarily relates to a change in product mix to categories
which typically have a higher merchandise return percentage and a higher gross
profit percentage, as discussed below.
COST OF SALES
For the year ended August 31, 1992, cost of sales increased $2.2 million, or
0.3%, to $691.3 million from $689.1 million for fiscal 1991. As a percentage of
net sales, cost of sales in fiscal 1992 decreased to 63.0% from 63.9% compared
to fiscal 1991. This decrease in cost of sales percentage and the corresponding
increase in gross profit as a percentage of net sales was primarily attributable
to an increase in sales by HSC of products in categories which typically carry a
higher gross profit. The volume of merchandise liquidated through wholesale
channels and the Company's retail outlets increased $2.1 million, or 12.8%, in
fiscal 1992 but cost of sales for liquidated merchandise decreased $3.6 million
to $38.8 million compared to $42.4 million in fiscal 1991 resulting in higher
margins. In addition, cost of sales for PSi increased $4.1 million in fiscal
1992 resulting in a decrease in gross margin of $1.5 million. The above changes
in cost of sales amounts were offset by a decrease in cost of sales of Mail
Order of $6.7 million and a corresponding decrease in gross margin of $2.0
million in fiscal 1992 compared to fiscal 1991 which relates to the
discontinuance of two catalogs during the fourth quarter of fiscal 1991 as
previously discussed. The remaining increase was attributable to the Company's
other subsidiaries.
OPERATING EXPENSES
For the year ended August 31, 1992, operating expenses decreased $.5 million, or
0.2%, to $324.3 million from $324.8 million for fiscal 1991. As a percentage of
net sales, these expenses decreased to 29.5% from 30.1% compared to fiscal 1991.
The following table highlights the operating expense section from the Company's
Consolidated Statements of Operations, including the dollar and percentage
changes for the year ended August 31, 1992, compared to the year ended August
31, 1991:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
OPERATING EXPENSES
YEARS ENDED AUGUST 31,
-----------------------------------------
$ %
1992 1991 CHANGE CHANGE
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(In millions, except %)
Selling and marketing........................... $135.8 $132.0 $ 3.8 2.9%
Engineering and programming..................... 54.5 50.5 4.0 7.8
General and administrative...................... 87.1 91.1 (4.0 ) (4.4)
Depreciation and amortization................... 46.9 51.2 (4.3 ) (8.5)
------ ------ ------
$324.3 $324.8 $( .5 )
------ ------ ------
------ ------ ------
</TABLE>
SELLING AND MARKETING
For the year ended August 31, 1992, selling and marketing expenses increased
$3.8 million, or 2.9%, to $135.8 million from $132.0 million for fiscal 1991. As
a percentage of net sales, these expenses increased to 12.4% from 12.2% compared
to fiscal 1991.
30
<PAGE> 11
The major components of selling and marketing expenses are detailed below
including the dollar and percentage changes for the year ended August 31, 1992
compared to the year ended August 31, 1991:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
CERTAIN SELLING
AND MARKETING EXPENSES
YEARS ENDED AUGUST 31,
---------------------------------------
$ %
1992 1991 CHANGE CHANGE
-------------------------------------------------------------------------------------------
(In millions, except %)
<S> <C> <C> <C> <C>
Telephone, operator and customer service.......... $47.0 $46.4 $ .6 1.3%
Commissions to cable system operators............. 34.4 32.8 1.6 4.9
Marketing payments for cable advertising.......... 26.8 23.6 3.2 13.6
</TABLE>
Telephone, operator and customer service expenses are typically related to sales
and order volume. For the year ended August 31, 1992 compared to fiscal 1991,
these expenses increased at a rate lower than the sales increase primarily
because customer call volume increases were offset by telephone rate reductions
from the Company's long distance carrier and lower salary costs in fiscal 1992.
These cost comparisons were relatively unaffected by the telephone credits
received from the Company's long distance carrier of $2.1 million and $2.2
million in fiscal 1992 and fiscal 1991, respectively.
Commissions to cable system operators increased at a lower rate than in fiscal
1991.
Marketing payments for cable advertising increased at a higher rate than sales
for the year ended August 31, 1992, primarily due to cable contracts negotiated
over the previous three years in a highly competitive environment. However,
these payments increased at a lower rate than in fiscal 1991.
The remaining changes in selling and marketing expenses for the year ended
August 31, 1992, primarily related to the Company's infomercial operations which
commenced during the fourth quarter of fiscal 1991. In the third quarter of
fiscal 1992, the Company substantially curtailed the in-house production portion
of its infomercial operations which had selling and marketing expenses of $2.1
million for the year ended August 31, 1992. Additional decreases in selling and
marketing of $2.4 million resulted from more focused efforts in direct mail and
print media advertising including reduced costs relating to certain subsidiary
companies.
ENGINEERING AND PROGRAMMING
For the year ended August 31, 1992, engineering and programming expenses
increased $4.0 million, or 7.8%, to $54.5 million from $50.5 million for fiscal
1991. As a percentage of net sales, these expenses increased to 5.0% from 4.7%
compared to fiscal 1991.
The primary cause for this increase was additional satellite and operating costs
relating to the Company's 24-hour infomercial channel, and the costs associated
with the curtailment of the in-house production of infomercials. These costs
totaled $3.1 million for the year ended August 31, 1992. By the end of calendar
year 1992, the lease for the infomercial transponder expired and all
broadcasting of infomercials ceased. In addition, engineering and programming
expenses increased $2.7 million, compared to fiscal 1991, as a result of
increased costs to support technological upgrades and develop new telemarketing
opportunities. These increases were partially offset by decreases related to
payments to broadcast television stations under affiliation agreements of $1.8
million for the year ended August 31, 1992 compared to fiscal 1991.
GENERAL AND ADMINISTRATIVE
For the year ended August 31, 1992, general and administrative expenses
decreased $4.0 million, or 4.4%, to $87.1 million from $91.1 million for fiscal
1991. As a percentage of net sales, these expenses decreased to 7.9% from 8.4%
compared to fiscal 1991.
For the year ended August 31, 1992, legal fees decreased $1.8 million compared
to fiscal 1991. Additional legal fees were incurred in fiscal 1991 in connection
with litigation that was settled in that year. Mail Order general and
administrative expenses decreased $2.4 million, compared to fiscal 1991, as a
result of the discontinuance of two catalogs in the fourth quarter of fiscal
1991. A further reduction of $1.5 million related to the disposition of the
31
<PAGE> 12
Company's remaining pharmacy operations, $.8 million of which resulted from its
sale in the first quarter of fiscal 1991.
The above decreases were partially offset by increases in equipment rent expense
of $.8 million for the year ended August 31, 1992. Additional expenses were
incurred by subsidiary operations in the infomercial and 800/900 telemarketing
businesses which totaled $1.3 million for the year ended August 31, 1992. These
subsidiary operations were substantially curtailed during the third quarter of
fiscal 1992. The remaining difference in general and administrative expenses
relates primarily to the Company's other subsidiary operations.
DEPRECIATION AND AMORTIZATION
For the year ended August 31, 1992, depreciation and amortization decreased $4.3
million, or 8.5%, to $46.9 million from $51.2 million for fiscal 1991. The
decrease was primarily attributable to the discontinuance of two catalogs by
Mail Order in the fourth quarter of fiscal 1991. This resulted in decreased
mailing list amortization of $9.3 million for the year ended August 31, 1992.
This decrease was partially offset by increased depreciation expense of $3.5
million for the year ended August 31, 1992, compared to fiscal 1991, primarily
due to capital asset additions.
OTHER INCOME (EXPENSE)
For the year ended August 31, 1992, net other expense decreased $40.7 million to
$17.7 million for the year ended August 31, 1992 from $58.4 million for fiscal
1991. The decrease was primarily attributable to litigation settlements
amounting to $33.0 million recorded in the second quarter of fiscal 1991.
Additionally, in the fourth quarter of fiscal 1991, the Company established a
reserve of $6.2 million representing the entire amount lent to Skypix
Corporation and Northwest Starscan Limited Partnership. These are more fully
discussed in Notes H and A5, to the Consolidated Financial Statements included
herein.
INCOME TAXES
The Company's effective tax rate was 42.0% for the year ended August 31, 1992,
compared to 256.9% for fiscal 1991. For both fiscal years, the Company's
effective tax rate was higher than the statutory rate due primarily to the
amortization of goodwill and other acquired intangible assets relating to
acquisitions from prior years. In addition, during fiscal 1991 the Company
increased its income tax provision by $10.4 million to account for the potential
impact of certain adjustments proposed by the IRS as discussed in Note E to the
Consolidated Financial Statements included herein.
EXTRAORDINARY ITEM -- EXTINGUISHMENT OF LONG-TERM OBLIGATIONS
During the years ended August 31, 1992 and 1991, the Company purchased and
retired long-term obligations prior to scheduled maturity and recognized
extraordinary gains and losses as detailed in Note D to the Consolidated
Financial Statements included herein.
NET EARNINGS (LOSS)
The Company had net earnings of $37.3 million, or $.42 per share, for the year
ended August 31, 1992, compared to a net loss of $(8.9) million, or $(.10) per
share, for fiscal 1991. The loss for the year ended August 31, 1991 was the
result of the factors discussed above, primarily: the litigation settlements;
additions to the income tax reserve; provision to reserve all amounts lent to
Skypix Corporation and Northwest Starscan Limited Partnership; and increased
amortization of mailing lists relating to the discontinuance of two Mail Order
catalogs. For the year ended August 31, 1992, the results included an
extraordinary after-tax loss of $(.1) million, with no per share effect, while
the results for the year ended August 31, 1991 included an extraordinary
after-tax gain of $.7 million, or $.01 per share from the purchase and
retirement of long-term obligations prior to scheduled maturity.
SEASONALITY
The Company believes that seasonality does impact its business but not to the
same extent it impacts the retail industry in general.
32
<PAGE> 13
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
The following table highlights various balances and ratios from the Consolidated
Financial Statements included herein:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
DECEMBER 31, AUGUST 31, DECEMBER 31,
1992 1992 1993
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Working capital (millions)............... $ 8.1 $ 38.5 $ 47.0
Current ratio............................ 1.04:1 1.28:1 1.30:1
Inventories, net (millions).............. $ 110.9 $ 119.1 $ 113.7
Annual inventory turnover................ 6.12 5.56 6.06
</TABLE>
The decrease in working capital from December 31, 1992, to December 31, 1993,
primarily relates to the net loss, adjusted for non-cash items, of $31.0 million
which was offset by a net reduction of $78.3 million in long-term obligations,
capital expenditures and increases in intangible assets of $17.5 million. The
decrease in working capital from August 31, 1992 to December 31, 1993, primarily
relates to the net loss adjusted for non-cash items of $52.6 million which was
offset by a net reduction of $91.6 million of long-term obligations, capital
expenditures and increases in intangible assets of $27.9 million and $5.2
million in cash contributed to SKC as part of the distribution. In the twelve
and sixteen month periods mentioned above, decreases were partially offset by
proceeds of $31.9 million and $33.7 million, respectively, from the issuance of
common stock upon the exercise of employee and cable operator stock options.
Inventories decreased to $110.9 million at December 31, 1993, from $119.1
million at December 31, 1992, and from $113.7 million at August 31, 1992. The
inventory balance is net of a reserve of $25.2 million at December 31, 1993,
which represents an increase from $13.1 million and $13.3 million at December
31, 1992 and August 31, 1992, respectively. This increase relates primarily to
the change in management's sales and merchandising philosophy as discussed in
"Cost of Sales." The increase in the gross inventory balance at December 31,
1993, over December 31, 1992 was not considered significant, and generally lower
levels are expected in the early part of 1994.
Capital expenditures for the year ended December 31, 1993, were approximately
$17.6 million. These expenditures were primarily for additional
telecommunications equipment, technological upgrades and development of
telemarketing opportunities. The Company estimates capital expenditures will
range between $10.0 and $15.0 million in 1994.
The Company provided the remaining $2.8 million of the $10.0 million investment
in The National Registry Inc. during 1993.
The Company's working capital needs and capital expenditure requirements for the
year ended December 31, 1993, were met from funds provided by operations.
Surplus funds were invested in short-term investments.
In accordance with the terms of the indenture governing the Senior Notes, the
Company redeemed, as a mandatory sinking fund payment, $37.5 million principal
amount of Senior Notes on October 15, 1992. This payment was satisfied by a cash
redemption at 100 percent of the principal amount, plus accrued interest to the
redemption date. Management used available cash from internally generated funds
of $27.5 million and borrowed $10.0 million, at a 4.75% interest rate, from
available unsecured bank credit facilities to satisfy this requirement. This
$10.0 million borrowing was repaid on December 16, 1992.
On December 18, 1992, the Company entered into a $60.0 million unsecured senior
term loan facility, $25.0 million of which matures on each of June 15, 1994, and
June 15, 1995, and $10.0 million of which matures on December 15, 1995. On the
same date, the Company also entered into a $40.0 million unsecured senior
revolving credit facility having a three year term. This three year facility
amended and restated in its entirety the Company's previous $50.0 million senior
unsecured revolving credit facility. On February 4, 1993, the Company entered
into a $50.0 million senior unsecured term loan facility, $25.0 million of which
matures on each of January 31, 1997, and January 31, 1998. Both term loans and
the revolver carry an interest rate on borrowings tied to the London Interbank
Offered Rate ("LIBOR"), the Federal Funds Rate, or the Prime Rate, plus an
applicable margin, at the Company's option.
33
<PAGE> 14
As discussed in Note D to the Consolidated Financial Statements included herein,
during 1993, the Company redeemed and refinanced the remaining balances of
Senior Notes and Debentures through use of available working capital and $140.0
million of the above mentioned bank financing agreements. These early
retirements of the Senior Notes and Debentures reduced interest expense in 1993
compared to the fiscal year ended August 31, 1992, by reducing the interest rate
on the outstanding balances mentioned above.
In addition to the $150.0 million bank financing described above, as of February
28, 1994, the Company had $25.0 million of bank credit lines which back letters
of credit and which are used exclusively to facilitate inventory importation.
Presentation of letters of credit by vendors results in an immediate charge to
the Company's account with no interest charges incurred. Outstanding letters of
credit amounted to $14.3 million at February 28, 1994, leaving $10.7 million
available.
Although the Company had an operating loss for the year ended December 31, 1993
compared to an operating profit for the fiscal year ended August 31, 1992, the
Company believes that its recurring working capital needs and capital
expenditure requirements will continue to be met primarily through internally
generated funds. In addition, the Company's portion of litigation settlements,
for which $13.0 million has been accrued, is expected to be paid in 1994 from
internally generated funds. The Company also intends to use available cash or
bank facilities to meet the $25.0 million senior term loan principal payment due
on June 15, 1994. At February 28, 1994, the Company had available $40.0 million
of unsecured bank facilities, as discussed above.
For the year ended December 31, 1993, the Company did not pay any cash
dividends. However, on December 28, 1992, the Company distributed the capital
stock of SKC to the Company's stockholders, in the form of a pro rata stock
dividend. The distribution also included Telemation, Inc., formerly a
wholly-owned subsidiary of the Company that operates video production and
post-production facilities, the capital stock of which was contributed to SKC
prior to the distribution. On the distribution date, intercompany indebtedness
in the amount of $135.2 million owed by SKC to the Company was converted into a
secured long-term senior loan, bearing interest at 9.5%. The transaction
resulted in a stock dividend with a book value of $10.0 million. Prior to the
distribution, SKC accounted for less than 1% of the Company's consolidated net
sales and approximately 30% of consolidated total assets. However, after the
distribution, the Company's consolidated total assets decreased less than 4.5%.
This distribution did not materially affect the liquidity position of the
Company.
At February 28, 1994, approximately 1.2 million options to purchase the
Company's common stock were outstanding and exercisable at prices ranging
between $3.25 and $14.75. The exercise of such stock options, would result in a
cash inflow of $7.2 million to the Company.
34
<PAGE> 15
INDEPENDENT
AUDITORS'
REPORTS
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
The Board of Directors
Home Shopping Network, Inc.
We have audited the accompanying consolidated balance sheets of Home Shopping
Network, Inc. and subsidiaries as of December 31, 1993 and 1992 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year ended December 31, 1993 and the four months ended December 31, 1992.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Home Shopping
Network, Inc. and subsidiaries as of December 31, 1993 and 1992, and the results
of their operations and their cash flows for the year ended December 31, 1993
and the four months ended December 31, 1992 in conformity with generally
accepted accounting principles.
February 15, 1994
St. Petersburg, Florida
The Board of Directors
Home Shopping Network, Inc.
We have audited the accompanying consolidated balance sheet of Home Shopping
Network, Inc. and subsidiaries (the "Company") as of August 31, 1992 and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the two years in the period ended August 31, 1992. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at August 31, 1992 and
the results of its operations and its cash flows for each of the two years in
the period ended August 31, 1992 in conformity with generally accepted
accounting principles.
As discussed in Note H to the consolidated financial statements, the Company is
a defendant in a lawsuit styled Allweiss v. HSN, et.al. and has been asked to
provide documents in connection with investigations of matters relating to the
Company by the Securities and Exchange Commission and a federal grand jury. The
ultimate outcome of these matters cannot presently be determined. Accordingly,
no provision for any loss, if any, that may result upon resolution of these
matters has been made in the accompanying consolidated financial statements.
Tampa, Florida
October 15, 1992
(February 15, 1994 as to
Note H to the consolidated
financial statements)
35
<PAGE> 16
Consolidated
Balance
Sheets
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
DECEMBER 31,
-------------------------- August 31,
ASSETS 1993 1992 1992
- ------------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents.......................................... $ 35,566 $ 19,421 $ 53,548
Accounts receivable (net of an allowance for doubtful accounts of
$1,627, $1,798 and $2,233, respectively)......................... 27,849 13,140 11,444
Note and interest receivable from related party.................... 5,707 4,211 --
Inventories, net................................................... 110,930 119,053 113,651
Deferred income taxes.............................................. 29,279 15,605 16,149
Other, net......................................................... 8,070 6,895 7,094
---------- -------- ----------
Total current assets....................................... 217,401 178,325 201,886
PROPERTY, PLANT AND EQUIPMENT, AT COST
Computer and broadcast equipment................................... 107,439 98,403 151,359
Buildings and leasehold improvements............................... 71,283 70,012 89,686
Furniture and other equipment...................................... 48,091 43,866 45,529
---------- -------- ----------
226,813 212,281 286,574
Less accumulated depreciation and amortization............. 105,777 85,924 137,481
---------- -------- ----------
121,036 126,357 149,093
Land............................................................... 17,708 16,417 19,650
Construction in progress........................................... 2,626 3,219 18,678
---------- -------- ----------
141,370 145,993 187,421
OTHER ASSETS
Note receivable from related party (net of current maturity)....... 126,597 130,961 --
Long-term investments.............................................. 10,000 7,225 10,845
Intangible assets, net............................................. 2,658 8,022 100,969
Other assets and notes receivable.................................. 3,117 7,387 18,549
---------- -------- ----------
142,372 153,595 130,363
---------- -------- ----------
$ 501,143 $477,913 $519,670
---------- -------- ----------
---------- -------- ----------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term obligations........................ $ 25,345 $ 3,564 $ 27,979
Accounts payable................................................... 88,858 62,175 48,725
Income taxes payable............................................... 15,586 22,252 20,115
Accrued liabilities:
Litigation settlements........................................... 16,000 -- --
Sales returns.................................................... 13,632 12,338 11,416
Sales taxes...................................................... 9,481 9,137 8,959
Interest......................................................... 1,210 4,219 8,405
Other............................................................ 39,236 26,147 29,283
---------- -------- ----------
Total current liabilities.................................. 209,348 139,832 154,882
LONG-TERM OBLIGATIONS (net of current maturities).................. 86,927 159,190 172,856
DEFERRED INCOME TAXES.............................................. 8,314 8,742 21,603
COMMITMENTS AND CONTINGENCIES...................................... -- -- --
STOCKHOLDERS' EQUITY
Preferred stock -- $.01 par value; authorized 500,000 shares, no
shares issued and outstanding.................................... -- -- --
Common stock -- $.01 par value; authorized 150,000,000 shares,
issued 76,172,890 and 67,148,326 at December 31, 1993 and 1992,
respectively, and 66,740,955 at August 31, 1992.................. 762 671 667
Class B -- convertible common stock -- $.01 par value; authorized,
issued and outstanding, 20,559,456 shares at December 31, 1993
and 24,159,456 shares at both December 31, 1992, and August 31,
1992............................................................. 206 242 242
Additional paid-in capital......................................... 160,371 115,846 112,254
Retained earnings.................................................. 52,783 75,564 80,424
Treasury stock -- 3,105,700 common shares, at cost................. (14,027) (14,027) (14,027)
Unearned compensation.............................................. (3,541) (8,147) (9,231)
---------- -------- ----------
196,554 170,149 170,329
---------- -------- ----------
$ 501,143 $477,913 $519,670
---------- -------- ----------
---------- -------- ----------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
36
<PAGE> 17
Consolidated
Statements
of Operations
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
FOUR MONTHS
YEAR ENDED ENDED YEARS ENDED AUGUST 31,
DECEMBER 31, DECEMBER 31, -----------------------
1993 1992 1992 1991
- ---------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
NET SALES........................................ $ 1,046,580 $357,166 $1,097,787 $1,078,547
Cost of sales.................................... 704,040 232,530 691,328 689,149
------------ ------------ ---------- ----------
Gross profit............................ 342,540 124,636 406,459 389,398
------------ ------------ ---------- ----------
Operating expenses:
Selling and marketing.......................... 138,092 45,248 135,794 131,960
Engineering and programming.................... 93,686 18,144 54,501 50,564
General and administrative..................... 93,539 29,309 87,068 91,064
Depreciation and amortization.................. 24,172 14,366 46,894 51,240
------------ ------------ ---------- ----------
349,489 107,067 324,257 324,828
------------ ------------ ---------- ----------
Operating profit (loss)................. (6,949 ) 17,569 82,202 64,570
Other income (expense):
Interest income................................ 13,655 1,142 4,384 4,750
Interest expense............................... (10,863 ) (6,651) (22,299) (23,176)
Miscellaneous.................................. (2,410 ) (614) 205 (7,028)
Litigation settlements......................... (13,000 ) -- -- (33,000)
------------ ------------ ---------- ----------
(12,618 ) (6,123) (17,710) (58,454)
------------ ------------ ---------- ----------
Earnings (loss) before income taxes and
extraordinary item............................. (19,567 ) 11,446 64,492 6,116
Income tax expense (benefit)..................... (4,028 ) 6,306 27,087 15,715
------------ ------------ ---------- ----------
Earnings (loss) before extraordinary item........ (15,539 ) 5,140 37,405 (9,599)
Extraordinary item -- gain (loss) on early
extinguishment of long-term obligations (net of
tax expense (benefit) of $(4,395), $-0-, $(82)
and $451, respectively)........................ (7,242 ) -- (112) 654
------------ ------------ ---------- ----------
NET EARNINGS (LOSS).............................. $ (22,781 ) $ 5,140 $ 37,293 $ (8,945)
------------ ------------ ---------- ----------
------------ ------------ ---------- ----------
Earnings (loss) per common share:
Earnings (loss) before extraordinary item...... $ (.18 ) $ .06 $ .42 $ (.11)
Extraordinary item, net........................ (.08 ) -- -- .01
------------ ------------ ---------- ----------
Net earnings (loss)............................ $ (.26 ) $ .06 $ .42 $ (.10)
------------ ------------ ---------- ----------
------------ ------------ ---------- ----------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
37
<PAGE> 18
Consolidated Statements
of Stockholders' Equity
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
CLASS B
CONVERTIBLE ADDITIONAL UNEARNED
COMMON COMMON PAID-IN RETAINED TREASURY COMPEN-
STOCK STOCK CAPITAL EARNINGS STOCK SATION TOTAL
- ---------------------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT AUGUST 31, 1990............. $ 661 $ 242 $ 91,841 $ 88,655 $ (3,918) $ -- $ 177,481
Issuance of common stock upon exercise
of stock options..................... -- -- 256 -- -- -- 256
Issuance of common stock upon
conversion of debentures............. -- -- 5 -- -- -- 5
Issuance of common stock in connection
with employee stock bonus plan....... -- -- 11 -- -- -- 11
Unearned compensation related to
executive stock award program........ -- -- 15,299 -- -- (15,299 ) --
Income tax benefit related to stock
options exercised.................... -- -- 294 -- -- -- 294
Expense related to executive stock
award program........................ -- -- -- -- -- 2,846 2,846
Purchases of treasury stock, at cost... -- -- -- -- (10,109) -- (10,109)
Net loss for the year ended August 31,
1991................................. -- -- -- (8,945) -- -- (8,945)
----- ----- --------- --------- --------- ------- ---------
BALANCE AT AUGUST 31, 1991............. 661 242 107,706 79,710 (14,027) (12,453 ) 161,839
Issuance of common stock upon exercise
of stock options..................... 6 -- 3,555 -- -- -- 3,561
Issuance of common stock upon
conversion of debentures............. -- -- 146 -- -- -- 146
Issuance of common stock in connection
with employee stock bonus plan....... -- -- 9 -- -- -- 9
Unearned compensation related to
executive stock award program........ -- -- 232 -- -- (232 ) --
Income tax benefit related to executive
stock award program and stock options
exercised............................ -- -- 606 -- -- -- 606
Expense related to executive stock
award program........................ -- -- -- -- -- 3,454 3,454
Dividend issued in the form of common
stock of a wholly-owned subsidiary... -- -- -- (36,579) -- -- (36,579)
Net earnings for the year ended August
31, 1992............................. -- -- -- 37,293 -- -- 37,293
------ ----- ---------- --------- --------- -------- ---------
BALANCE AT AUGUST 31, 1992............. 667 242 112,254 80,424 (14,027) (9,231 ) 170,329
Issuance of common stock upon exercise
of stock options..................... 4 -- 1,854 -- -- -- 1,858
Income tax benefit related to executive
stock award program, stock options
exercised and stock dividends........ -- -- 1,738 -- -- -- 1,738
Expense related to executive stock
award program........................ -- -- -- -- -- 1,084 1,084
Dividend issued in the form of common
stock of a wholly-owned subsidiary... -- -- -- (10,000) -- -- (10,000)
Net earnings for the four months ended
December 31, 1992.................... -- -- -- 5,140 -- -- 5,140
------ ----- ---------- --------- --------- -------- ---------
BALANCE AT DECEMBER 31, 1992........... 671 242 115,846 75,564 (14,027) (8,147 ) 170,149
Issuance of common stock upon exercise
of stock options..................... 55 -- 31,796 -- -- -- 31,851
Issuance of common stock upon
conversion of debentures............. -- -- 15 -- -- -- 15
Unearned compensation related to
executive stock award program........ -- -- 1,009 -- -- (1,009 ) --
Income tax benefit related to executive
stock award program and stock options
exercised............................ -- -- 11,705 -- -- -- 11,705
Expense related to executive stock
award program........................ -- -- -- -- -- 5,615 5,615
Conversion of Class B common stock to
common stock......................... 36 (36) -- -- -- -- --
Net loss for the year ended December
31, 1993............................. -- -- -- (22,781) -- -- (22,781)
------ ----- ---------- --------- --------- -------- ---------
BALANCE AT DECEMBER 31, 1993........... $762 $206 $160,371 $52,783 $(14,027) $(3,541 ) $196,554
------ ----- ---------- --------- --------- -------- ---------
------ ----- ---------- --------- --------- -------- ---------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
38
<PAGE> 19
Consolidated
Statements of
Cash Flows
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
FOUR MONTHS
YEAR ENDED ENDED YEARS ENDED AUGUST 31,
DECEMBER 31, DECEMBER 31, -------------------------
1993 1992 1992 1991
- ------------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss)................................. $ (22,781) $ 5,140 $ 37,293 $ (8,945)
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities:
Depreciation and amortization..................... 24,172 14,366 46,894 51,240
Provision for losses on accounts and note
receivable...................................... (171) (436) 34 6,893
(Gain) loss on sale of assets..................... (277) 56 124 411
Non-cash interest income.......................... -- -- (968) --
Loss (gain) on retirement of long-term
obligations..................................... 11,637 -- 194 (1,105)
Inventory reserve................................. 12,179 (257) 5,171 2,210
Deferred income taxes............................. (14,102) (479) 11,902 (18,771)
Common stock issued for services provided......... 8,449 1,084 3,463 2,857
Liquidation of joint venture operation............ 722 -- -- --
Equity in losses of unconsolidated affiliates..... 589 31 99 --
Change in current assets and liabilities:
Increase in accounts receivable................. (15,753) (2,569) (11,529) (2,756)
Increase in interest receivable from related
party......................................... (1,039) -- -- --
(Increase) decrease in inventories.............. (4,056) (5,179) (5,467) 24,476
(Increase) decrease in other current assets..... (1,175) (351) 1,840 (5,819)
Increase (decrease) in accounts payable......... 26,683 13,450 (17,362) (7,622)
Increase (decrease) in accrued liabilities and
income taxes payable.......................... 29,923 (2,037) (26,583) 48,707
------------ ------------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES..... 55,000 22,819 45,105 91,776
------------ ------------- -------- --------
Cash flows from investing activities:
Capital expenditures................................ (15,491) (9,939) (35,973) (52,936)
Proceeds from sale of assets........................ 548 93 410 497
Increase in intangible assets....................... (2,057) (433) (1,830) (6,439)
Increase in long-term investments................... (2,775) (1,515) (5,710) --
(Increase) decrease in notes receivable and other... 683 (4,439) (3,432) (4,507)
Proceeds from long-term notes receivable............ 4,892 454 2,231 653
------------ ------------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES......... (14,200) (15,779) (44,304) (62,732)
------------ ------------- -------- --------
Cash flows from financing activities:
Principal payments on and redemptions of long-term
obligations....................................... (206,506) (47,776) (7,432) (16,230)
Proceeds from unsecured credit facilities........... 150,000 10,000 -- --
Proceeds from issuance of common stock.............. 31,851 1,858 3,561 256
Cash portion of dividend............................ -- (5,249) (4,971) --
Purchases of treasury stock......................... -- -- -- (10,109)
------------ ------------- -------- --------
NET CASH USED IN FINANCING ACTIVITIES......... (24,655) (41,167) (8,842) (26,083)
------------ ------------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS......................................... 16,145 (34,127) (8,041) 2,961
Cash and cash equivalents at beginning of period...... 19,421 53,548 61,589 58,628
------------ ------------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............ $ 35,566 $ 19,421 $ 53,548 $ 61,589
------------ ------------- -------- --------
------------ ------------- -------- --------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
39
<PAGE> 20
Notes to
Consolidated
Financial
Statements
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Home Shopping Network, Inc. (the "Company" or "HSN") is a holding company, the
subsidiaries of which conduct the day-to-day operations of the Company's various
business activities. The Company's primary business is electronic retailing
conducted by Home Shopping Club, Inc. ("HSC"), a wholly-owned subsidiary of the
Company.
On July 13, 1993, the Company elected to change its annual reporting period from
a year ending August 31 to a year ending December 31, effective January 1, 1993.
The change in year end was made following the acquisition of voting control of
the Company by a wholly-owned subsidiary of Liberty Media Corporation, a
Delaware corporation ("Liberty"), which reports its financial position and
results of operations using a December 31 year end.
The following is a summary of the significant accounting policies of the Company
consistently applied in the preparation of the accompanying consolidated
financial statements.
1. CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
all wholly-owned subsidiaries. All significant intercompany transactions and
accounts have been eliminated. Certain amounts in the consolidated financial
statements for the fiscal years ended August 31, 1992 and 1991 have been
reclassified to conform to the 1993 presentation.
2. CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents include cash and
short-term investments. Short-term investments consist primarily of commercial
paper, auction preferred shares, repurchase agreements and certificates of
deposit with original maturities of less than 91 days.
3. ACCOUNTS RECEIVABLE
In October 1992, HSN implemented a sales program with a deferred payment
arrangement, "FlexPay," which allows customers to charge their purchases to
third party credit cards in installments, generally over three consecutive
months. FlexPay receivables totalled $15,547,000 and $4,673,000 at December 31,
1993 and 1992, respectively.
4. INVENTORIES, NET
Inventories, consisting of products held for sale, are valued at the lower of
cost or market, cost being determined using the first-in, first-out method. Cost
includes freight, certain warehousing costs and other allocable overhead. Market
is determined on the basis of replacement cost or net realizable value, giving
consideration to obsolescence and other factors. Inventories are presented net
of a reserve of $25,246,000, $13,067,000 and $13,324,000 at December 31, 1993,
December 31, 1992 and August 31, 1992, respectively.
5. OTHER CURRENT ASSETS, NET
The Company lent $6,200,000 to Skypix Corporation and Northwest Starscan Limited
Partnership during the fiscal year ended August 31, 1991. The promissory note
evidencing the loan was due August 31, 1992, and was in default, prompting legal
action by the Company in fiscal 1992. The provision to reserve the note was
included in miscellaneous expense in the fiscal year ended August 31, 1991
Consolidated Statement of Operations.
40
<PAGE> 21
6. PROPERTY, PLANT AND EQUIPMENT, AND DEPRECIATION
Property, plant and equipment, including significant improvements, are stated at
cost. Repairs and maintenance and any gains or losses on dispositions are
included in operations.
Depreciation is provided on a straight-line basis to allocate the cost of
depreciable assets to operations over their estimated service lives as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
ORIGINAL PERIOD
ASSET CATEGORY OF DEPRECIATION
- -------------------------------------------------------------------------------------------------
<S> <C>
Computer and broadcast equipment............................................... 6 to 13 Years
Buildings...................................................................... 30 to 40 Years
Leasehold improvements......................................................... 4 to 13 Years
Furniture and other equipment.................................................. 3 to 10 Years
</TABLE>
Depreciation expense was $21,911,000 for the year ended December 31, 1993.
Depreciation expense for the four months ended December 31, 1992, and the fiscal
years ended August 31, 1992 and 1991, was $9,706,000, $32,653,000 and
$29,133,000, respectively.
For income tax purposes, certain assets are depreciated using allowable
accelerated methods which result in different depreciation amounts than would be
calculated for financial statement purposes.
7. INTANGIBLE ASSETS AND AMORTIZATION
Intangible assets include the historical costs associated with the acquisition
of the following assets which are amortized using the straight-line method over
their estimated lives:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
DECEMBER 31, ORIGINAL
------------------- AUGUST 31, PERIOD OF
ASSET CATEGORY 1993 1992 1992 AMORTIZATION
- ----------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Mailing lists................................... $ 9,938 $ 7,883 $ 21,225 2 to 4 Years
Goodwill........................................ 3,900 3,900 13,630 30 Years
Satellite transponder rights.................... 3,508 3,508 3,508 5 to 7 Years
Other........................................... 1,789 1,787 4,089 2 to 10 Years
Long-term obligations' issue costs.............. -- 9,895 9,895 10 to 15 Years
Identified intangibles acquired................. -- -- 68,427 10 Years
Federal Communications Commission ("FCC")
licenses...................................... -- -- 65,794 30 Years
------- ------- -----------
19,135 26,973 186,568
Accumulated Amortization........................ 16,477 18,951 85,599
------- ------- -----------
$ 2,658 $ 8,022 $ 100,969
------- ------- -----------
------- ------- -----------
</TABLE>
All identified intangibles and FCC licenses were assets of Silver King
Communications, Inc. ("SKC"), formerly a wholly-owned subsidiary of the Company.
The capital stock of SKC was distributed to the Company's shareholders in
December 1992. See Note I.
In 1993, in connection with the refinancing and retirement of the Company's
11 3/4% Senior Notes ("Senior Notes") and 5 1/2% Convertible Subordinated
Debentures ("Debentures"), the long-term obligations' issue costs were included
in the calculation of the extraordinary loss on early extinguishment of
long-term obligations. See Note D.
Amortization expense was $2,261,000 for the year ended December 31, 1993.
Amortization expense for the four months ended December 31, 1992, and the fiscal
years ended August 31, 1992 and 1991, was $4,660,000, $14,241,000 and
$22,107,000, respectively.
8. NET SALES
Revenues include merchandise sales and shipping and handling revenues, and are
reduced by incentive discounts and sales returns to arrive at net sales. The
Company's sales policy allows merchandise to be returned at the customers'
discretion, generally up to 30 days. An allowance for returned merchandise is
provided based upon past experience.
41
<PAGE> 22
9. INCOME TAXES
In the consolidated financial statements as of and prior to December 31, 1992,
deferred income taxes have been provided using the deferred method for those
items of revenue and expense which were recognized for financial reporting
purposes in different periods than for income tax purposes.
Effective January 1, 1993, the Company adopted Statement of Financial Accounting
Standard No. 109, "Accounting for Income Taxes" ("Statement 109"). The
cumulative effect of this change in method of accounting for income taxes was
immaterial and was included as a reduction of income tax expense in the
Consolidated Statement of Operations for the year ended December 31, 1993. The
valuation allowance on the date of adoption of Statement 109 was $744,000. Prior
years' consolidated financial statements were not restated to apply the
provisions of Statement 109. The current year effect of the accounting change
was immaterial.
10. EARNINGS (LOSS) PER SHARE
Weighted average common shares outstanding were 91,192,000 for the year ended
December 31, 1993. Weighted average shares for the four months ended December
31, 1992, and the fiscal years ended August 31, 1992 and 1991, were 91,115,000,
90,255,000 and 87,452,000, respectively. The weighted average shares outstanding
have been increased by the dilutive effect of certain stock options and
convertible debt for the four months ended December 31, 1992 and the year ended
August 31, 1992. For the years ended December 31, 1993 and August 31, 1991, the
loss per common share is calculated by dividing the net loss by the weighted
average number of all shares of common stock outstanding. The stock options and
convertible debt are not considered in these calculations due to their
antidilutive effect.
The number of common shares outstanding at December 31, 1993 and 1992, and
August 31, 1992, net of 3,105,700 common shares held in treasury, was
73,067,190, 64,042,626 and 63,635,255, respectively.
NOTE B - NOTE RECEIVABLE FROM RELATED PARTY
On December 28, 1992, intercompany indebtedness in an amount of $135,172,000
owed by SKC was converted into a secured long-term senior loan between SKC and a
wholly-owned subsidiary of the Company pursuant to a loan agreement (the "Loan
Agreement"), evidenced by a promissory note (the "Note"), bearing interest on
the unpaid principal amount at a rate of 9.5% per annum. The terms of the Note
are governed by the Loan Agreement and the liability evidenced thereby is
secured by substantially all of SKC's assets. The Note is payable in equal
monthly installments of principal and interest over fifteen years. The Note
provides that the principal amount and the payment schedule of the loan may be
adjusted to increase or decrease payments over the remaining term of the loan to
reflect certain liabilities pursuant to a Tax Sharing Agreement, which was
entered into in connection with the distribution of the capital stock of SKC, as
discussed in Note I. The Loan Agreement contains certain restrictive covenants
and default provisions. So long as any indebtedness is outstanding under the
Loan Agreement, each SKC station is required to maintain an affiliation
agreement with HSC to carry the Company's programming, as discussed in Note G.
Interest income earned on the Note was $12,765,000 for the year ended December
31, 1993.
NOTE C - LONG-TERM INVESTMENTS
Long-term investments accounted for under the cost method at December 31, 1993
and 1992 and August 31, 1992 consisted of 100,000 shares of Series A Preferred
Stock, $.01 par value, of The National Registry Inc. ("NRI"), a public company
involved in developing technology and advanced applications for identity
verification systems. NRI is a related party. The total purchase price of the
NRI shares was $10,000,000. See Note L. The Series A Preferred Stock is
non-voting, convertible to 6,000,000 shares of NRI common stock upon the
occurrence of certain events, and contains certain liquidation preferences. At
August 31, 1992, long-term investments also included $5,135,000 of non-voting
common and preferred stock in three privately held broadcast television
companies which televise the Company's programs on a full-time basis. These
shares were transferred to SKC in connection with the distribution of the
capital stock of SKC during 1992, as discussed in Note I.
42
<PAGE> 23
NOTE D - LONG-TERM OBLIGATIONS AND CREDIT FACILITIES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
DECEMBER 31,
--------------------- AUGUST 31,
1993 1992 1992
- ----------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Unsecured Senior Term Loan ("Senior Term Loan"), with
$25,000,000 due on both June 15, 1994 and 1995, and
$10,000,000 due December 15, 1995. The interest rate, which
was 5.4375%, is tied to the London Interbank Offered Rate
("LIBOR") plus an applicable margin adjustment.............. $ 60,000 $ -- $ --
Unsecured Senior Term Loan ("Senior Term Loan"), with
$25,000,000 due on both January 31, 1997 and 1998. The
interest rate, which was 5.5%, is tied to LIBOR plus an
applicable margin adjustment................................ 50,000 -- --
Unsecured $40,000,000 Revolving Credit Facility ("Revolving
Credit Facility"), dated December 18, 1992, which expires
December 18, 1995. Amounts borrowed can be used for any
general corporate purposes, and the interest rate is tied to
LIBOR, Federal Funds Rate or the Prime Rate, plus an
applicable margin, at the Company's option.................. -- -- --
Unsecured 11 3/4% Senior Notes due October 15, 1996, with
interest payable semi-annually with mandatory sinking fund
payments sufficient to retire the principal amount of
$37,500,000 annually, commencing October 15, 1992. The
balance of Senior Notes was redeemed by the Company in 1993,
as discussed below.......................................... -- 143,252 180,752
Unsecured 5 1/2% Convertible Subordinated Debentures due April
22, 2002, with interest payable annually with mandatory
sinking fund payments sufficient to retire the principal
amount of $10,000,000 annually, commencing April 22, 1995.
The balance of Debentures was redeemed by the Company in
1993, as discussed below.................................... -- 16,915 16,915
Industrial development revenue bonds financed through a third
party with payments ranging from $313,000 to $316,000 per
year including interest at 8%, due semi-annually in May and
November through 1999....................................... 1,455 1,640 1,810
Capitalized lease obligations and other long-term
obligations................................................. 817 947 1,358
-------- -------- ------------
Total long-term obligations.............................. 112,272 162,754 200,835
Less current portion................................... 25,345 3,564 27,979
-------- -------- ------------
$ 86,927 $159,190 $172,856
-------- -------- ------------
-------- -------- ------------
</TABLE>
Aggregate contractual maturities of long-term obligations are as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
YEARS ENDING DECEMBER 31,
-------------------------------------------------------------------------------
(In thousands)
<S> <C>
1994........................................................... $ 25,345
1995........................................................... 35,252
1996........................................................... 244
1997........................................................... 25,871
1998........................................................... 25,270
Thereafter..................................................... 290
--------------
$112,272
--------------
--------------
</TABLE>
43
<PAGE> 24
During the year ended December 31, 1993, $15,000 of Debentures were converted
into 2,293 shares of common stock. During the year ended August 31, 1992 and
1991, $150,000 and $5,000 of Debentures were converted into 21,276 and 709
shares of common stock, respectively.
The Company recognized extraordinary gains (losses) on the early extinguishment
of its long-term obligations as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
YEARS ENDED AUGUST
YEAR ENDED 31,
DECEMBER 31, --------------------
1993 1992 1991
- ----------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Total extinguished........................................... $160,152 $4,050 $17,141
-------------- ------ -------
-------------- ------ -------
Pre-tax gain (loss) net of discounts......................... $(11,637) $ (194) $ 1,105
Income tax expense (benefit)................................. (4,395) (82) 451
-------------- ------ -------
Extraordinary gain (loss).................................... $ (7,242) $ (112) $ 654
-------------- ------ -------
-------------- ------ -------
</TABLE>
There was no early extinguishment of long-term obligations during the four
months ended December 31, 1992.
The Company also has an additional $25,000,000 of unsecured bank credit lines,
which back letters of credit, used exclusively to facilitate inventory
importation. Presentation of these letters of credit by vendors results in an
immediate charge to the Company's account with no interest charges incurred. At
December 31, 1993, outstanding letters of credit amounted to $8,921,000 leaving
$16,079,000 of these bank credit lines available.
In December 1992 and February 1993, the Company entered into a $60,000,000
Senior Term Loan, a $50,000,000 Senior Term Loan and a $40,000,000 Revolving
Credit Facility. Under these Senior Term Loans and Revolving Credit Facility,
the interest rate on borrowings is tied to LIBOR, the Federal Funds Rate, or the
Prime Rate, plus an applicable margin, at the Company's option.
Restrictions contained in the Senior Term Loans and Revolving Credit Facility
include, but are not limited to, limitations on the encumbrance and disposition
of assets and the maintenance of various financial covenants and ratios.
In 1993, the Company entered into interest rate exchange agreements with certain
financial institutions to limit its exposure from interest rate volatility.
These agreements have notional principal amounts totalling $115,000,000, of
which $25,000,000, $35,000,000 and $30,000,000 of the Senior Term Loans, have
interest rate caps if LIBOR exceeds 6% until June 1994, 6% until June 1995 and
7% until October 1995, respectively. The interest rate exchange agreement
relating to the Revolving Credit Facility has a notional principal amount of
$25,000,000 capped if LIBOR exceeds 6% until April 1994. The three month LIBOR
rate at December 31, 1993 was 3.3125%.
In February and April 1993, the Company drew $140,000,000 under the above
mentioned bank financing agreements. These proceeds, together with available
working capital, were used to retire $143,252,000 principal amount of the Senior
Notes at 104%, plus accrued interest to the redemption date. During August and
September 1993, the Company repaid $30,000,000 of the outstanding balance on the
Revolving Credit Facility.
On May 11, 1993, the Company retired the remaining $16,900,000 principal balance
of the Debentures at 101.83% of the principal amount, plus accrued interest to
the redemption date using available working capital.
44
<PAGE> 25
NOTE E - INCOME TAXES
A reconciliation of total income tax expense (benefit) to the amounts computed
by applying the statutory federal income tax rate to earnings (loss) before
income tax expense (benefit) and extraordinary item is shown as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
FOUR MONTHS YEARS ENDED
YEAR ENDED ENDED AUGUST 31,
DECEMBER 31, DECEMBER 31, ---------------------
1993 1992 1992 1991
- -------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Income tax expense (benefit) at the federal statutory
rate of 35% for 1993 and 34% for all other periods
(effect of rate change in 1993 to 35% was
$(196))............................................ $ (6,848) $ 3,892 $21,927 $ 2,079
Amortization and write-off of goodwill and other
acquired intangibles and interest on adjustments
proposed by the Internal Revenue Service ("IRS")... 1,582 503 2,923 2,751
State income taxes, net of effect of federal tax
benefit............................................ 71 275 1,728 378
Executive compensation in excess of $1 million....... 688 -- -- --
Distribution of SKC capital stock.................... -- 1,500 -- --
Provision recorded for adjustments proposed by the
IRS................................................ -- -- -- 10,382
Other, net........................................... 479 136 509 125
------------ ------------ ------- -------
$ (4,028) $ 6,306 $27,087 $15,715
------------ ------------ ------- -------
------------ ------------ ------- -------
</TABLE>
The Company's effective tax expense (benefit) rate was (20.6)% for the year
ended December 31, 1993; 55.1% for the four months ended December 31, 1992; and
42.0% and 256.9% for the years ended August 31, 1992 and 1991, respectively.
The components of income tax expense (benefit) attributable to operations are as
follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
FOUR MONTHS YEARS ENDED
YEAR ENDED ENDED AUGUST 31,
DECEMBER 31, DECEMBER 31, -----------------------
1993 1992 1992 1991
- -------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
INCOME TAXES CURRENTLY PAYABLE:
Federal............................................. $ 8,753 $ 6,392 $14,065 $ 32,723
State............................................... 870 594 1,727 2,057
------------ ------------ ------- --------
9,623 6,986 15,792 34,780
------------ ------------ ------- --------
DEFERRED INCOME TAXES:
Depreciation for tax in excess of (less than)
financial statements.............................. 55 (1,221) (1,538) 1,587
Sales returns and allowances........................ (471) (314) 264 (341)
Amortization of acquired intangible assets.......... 47 322 1,048 950
Provision for accrued liabilities................... (1,363) 218 (472) (1,897)
Inventory costing................................... (4,057) (22) 427 (1,071)
Litigation settlements.............................. (4,550) -- 11,399 (11,399)
Deferred compensation............................... (907) 310 (561) (968)
State income taxes.................................. (618) (45) 588 (979)
Installment sales................................... (5) (35) (47) 144
Amortization of long-term obligation
issue costs....................................... (718) 236 20 617
Capitalized costs of mailing lists.................. 38 (70) (161) (1,851)
Sales tax accrual................................... 24 (77) (1) 151
Provision for uncollectible amounts................. (351) (17) (18) (3,936)
Deferred start up costs............................. -- 9 5 181
Charitable contribution carryover................... (910) -- -- --
Valuation allowance................................. 135 -- -- --
Other, net.......................................... -- 26 342 (253)
------------ ------------ ------- --------
(13,651) (680) 11,295 (19,065)
------------ ------------ ------- --------
$ (4,028) $ 6,306 $27,087 $ 15,715
------------ ------------ ------- --------
------------ ------------ ------- --------
</TABLE>
Additionally, the Company recorded an extraordinary item, gain (loss) on early
extinguishment of long-term obligations, net of the income tax effect. See Note
D.
45
<PAGE> 26
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities are presented below:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
DECEMBER 31,
1993
- -----------------------------------------------------------------------------------------------
(In
thousands)
<S> <C>
Deferred tax assets:
Inventory costing............................................................. $ 7,248
Provision for accrued liabilities............................................. 4,731
Sales returns and allowances.................................................. 4,669
Litigation settlements........................................................ 4,550
Provision for uncollectible amounts........................................... 3,193
Deferred compensation......................................................... 2,100
Sales tax reserve............................................................. 1,549
Charitable contribution carryover............................................. 910
Other......................................................................... 329
-------------
Net deferred tax assets.................................................... $29,279
-------------
-------------
Deferred tax liabilities (assets):
State income taxes............................................................ $ (958)
Investment in unconsolidated subsidiaries..................................... (238)
Installment sale.............................................................. (182)
Other......................................................................... (685)
-------------
(2,063)
Less valuation allowance...................................................... 879
-------------
(1,184)
Depreciation for tax in excess of financial statements........................ 6,933
Amortization of acquired intangible assets.................................... 1,622
Capitalized costs of mailing lists............................................ 535
Other......................................................................... 408
-------------
Net deferred tax liabilities............................................... $ 8,314
-------------
-------------
</TABLE>
The Company had taxable income and pre-tax book income (loss) for the periods
presented as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOUR MONTHS YEARS ENDED AUGUST
YEAR ENDED ENDED 31,
DECEMBER 31, DECEMBER 31, -------------------
1993 1992 1992 1991
- --------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Taxable income............................. $ 8,207 $ 17,591 $34,740 $60,249
Pre-tax book income (loss)................. (31,204) 11,446 64,298 7,221
</TABLE>
The primary differences between taxable income and pre-tax book income (loss)
are detailed above. In addition to these reconciling items, the Company
recognized income tax deductions relating to the issuance of common stock
pursuant to the executive stock award program and the exercise of stock options
("Common Stock Deductions"), the income tax benefit of which was recorded as an
increase to additional paid-in capital. During the year ended December 31, 1993,
the Company incurred Common Stock Deductions of $31,697,000. Common Stock
Deductions for the four months ended December 31, 1992, and the fiscal years
ended August 31, 1992 and 1991, were $4,718,000, $1,696,000 and $820,000,
respectively.
Except for the effects of the reversal of net deductible temporary differences
and the effects of future Common Stock Deductions, the Company is not currently
aware of any factors which would cause any significant differences between
taxable income and pre-tax book income in future years. There can be no
assurances that
46
<PAGE> 27
there will be no significant differences in the future between taxable income
and pre-tax book income if circumstances change (for example, changes in tax
laws or the Company's financial condition or performance).
Management believes the existing net deductible temporary differences will
reverse during periods in which the Company generates net taxable income or a
net operating loss that would be carried back to prior taxable years. There can
be no assurance, however, that the Company will generate any earnings or any
specific level of continuing earnings.
During fiscal 1991, the IRS completed its examination of the Company's federal
income tax returns for fiscal years 1987 and 1986. The IRS proposed various
adjustments, the most significant of which include the Company's amortization of
acquired FCC broadcast licenses and other broadcasting related intangible
assets.
During 1993, the IRS completed its examination of the Company's federal income
tax returns for fiscal years 1989 and 1988, proposing adjustments amounting to
$10,886,000, not including interest thereon. The IRS did not propose any
significant adjustments other than those relating to the issues currently under
protest for fiscal years 1987 and 1986, including the Company's amortization of
acquired FCC broadcast licenses and other broadcasting related intangible assets
and the deduction of royalty payments to a related party. The IRS asserted that
such royalty payments were not reasonable and were not made on the basis of
arm's length dealings.
Management believes that the Company has valid positions relating to its
exposure and intends to vigorously defend its interests. The Company has
protested all proposed adjustments to the Appellate Division of the IRS.
Management of the Company believes that the ultimate resolution of these matters
will not have a material effect on the results of operations of the Company,
although the Company's cash position may be adversely affected.
During fiscal 1991, the Company increased its income tax provision by
$10,382,000 to reflect management's estimate of the potential liability relating
to the proposed IRS adjustments for all fiscal years through 1991. Subsequently,
the Company has accrued additional amounts to reflect management's estimate of
the Company's potential liability which relate to all proposed adjustments,
including the acquired intangibles, through December 31, 1993. The IRS'
position, if upheld to the full extent of the proposed adjustments, would exceed
the Company's accrual and, thus, would impact future results of operations of
the Company by $18,233,000.
On February 9, 1994, the IRS announced a comprehensive settlement initiative
covering most of the intangibles issues currently being contested by taxpayers.
The offer will not be made to all affected taxpayers and taxpayers to whom the
offer is extended will not be required to accept the offer.
The intangibles issues currently being protested by the Company are subject to
this settlement initiative. At this time, it is not certain whether the IRS will
make a settlement offer to the Company, nor whether the Company would accept
such an offer if made. If such an offer is made and accepted by the Company,
management believes the resulting assessment would not exceed the accrual for
such proposed adjustments.
NOTE F - DEFINED CONTRIBUTION RETIREMENT PLAN
The Company offers a plan pursuant to Section 401(k) of the Internal Revenue
Code covering substantially all full-time employees. Matching employer
contributions are set at the discretion of the Board of Directors. The Company's
contributions for the year ended December 31, 1993, were $667,000. Contributions
for the four months ended December 31, 1992 and the fiscal years ended August
31, 1992 and 1991, were $300,000, $618,200 and $279,300, respectively.
In October 1990, the Board of Directors authorized the adoption of the Employee
Stock Ownership Plan ("ESOP") which provides for contributions of shares of
common stock to the ESOP in amounts as authorized by the Board of Directors. To
date, no common stock has been contributed to the ESOP.
47
<PAGE> 28
NOTE G - COMMITMENTS AND CONTINGENCIES
The Company leases warehouse space, computer and broadcast equipment, and
equipment used in connection with its operations under various operating leases.
Future minimum payments under noncancellable operating leases are as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
YEARS ENDING DECEMBER 31,
------------------------------------------------------------------------------
(In thousands)
<S> <C>
1994......................................................... $12,919
1995......................................................... 11,051
1996......................................................... 10,712
1997......................................................... 10,646
1998......................................................... 6,214
Thereafter................................................... 32,064
---------------
$83,606
---------------
---------------
</TABLE>
Rent and lease expenses charged to operations were $15,185,000 for the year
ended December 31, 1993. Rent and lease expense for the four months ended
December 31, 1992, and the fiscal years ended August 31, 1992 and 1991, were
$6,611,000, $20,278,000 and $18,603,000, respectively.
During March 1986, the Company entered into a five-year employment agreement, as
amended, with the former Chairman of the Board, which was automatically renewed
in 1991 for a three-year term. The employment agreement provided for a minimum
base salary, which as of December 31, 1992, was set at $500,000, and the use of
a Company car. On August 11, 1993, upon resignation as Chairman of the Board and
as a Director of the Company, prior to the scheduled termination of employment
under the agreement, the former Chairman commenced a five-year consultancy and
non-competition arrangement with the Company during which period he will be paid
his minimum base annual salary of $500,000 per year.
In 1990, the Company entered into a four-year consulting and noncompetition
agreement with a former President, effective upon his resignation on December
31, 1990, which calls for payments of $300,000 per year.
During February 1993, the Company entered into a four-year employment agreement
with the Company's President and Chief Executive Officer, which is automatically
renewable for successive one year terms unless either party provides 180 days
written notice. The employment agreement provides for an annual base salary of
not less than $500,000, inclusion in any bonus program established for
executives of the Company, and inclusion in any benefit programs provided to
employees of the Company. Termination of the agreement by the Company other than
for cause will result in payment of the annual base salary amount that would
have been payable had employment continued until the expiration of the
employment term plus any annual bonus for the year of termination. The
employment agreement also provides for annual paid vacation, reimbursement for
relocation expenses and a minimum sales price for the officer's prior residence
and Stock Appreciation Rights ("SARs") as further discussed in Note K. In
addition, termination of employment following a change in control of the Company
may result in entitlement to all unpaid compensation through the term of the
contract.
In connection with capital improvements, the Company had commitments for capital
expenditures of $4,500,000 at December 31, 1993.
On December 28, 1992, HSC entered into affiliation agreements with SKC which
provide for SKC's stations to broadcast HSC programming on a full-time basis.
The agreements have an original term of five years, and are renewable for two
successive five year terms; however, as long as any indebtedness is outstanding
under the Loan Agreement between SKC and HSN, SKC is required to maintain
affiliation agreements with HSC. See Note B. The affiliation agreements are
cancellable with eighteen months written notice prior to the end of any
scheduled term. HSC pays an affiliation fee to SKC based on hourly rates and,
upon reaching certain sales levels, commissions on net sales. Affiliation
payments made to SKC for the year ended December 31, 1993, were $41,135,000.
The Company entered into license and maintenance agreements with its former
wholly-owned subsidiary, Precision Systems, Inc. ("PSi") beginning in 1993.
Under the agreements HSN paid PSi $3,545,000 for
48
<PAGE> 29
maintenance services in 1993 and a one-time license fee of $2,000,000. The
maintenance agreement, which was amended in 1994, has a term through December
31, 1994, but can be renewed at HSN's option for additional one, three or five
year periods. The Company has also provided a $5,000,000 unsecured line of
credit to PSi. The line of credit bears interest at the rate of prime plus 1%,
and is due three years from the distribution date, July 31, 1992, or one year
from the date of the first draw, whichever is earlier. No draws were made under
this agreement through December 1993. Restrictions in the line of credit
include, but are not limited to, payment of dividends on, or the redemption of,
capital stock of PSi and the incurrence of senior debt.
The Company has entered into an agreement for telephone services with MCI
Telecommunications Corporation ("MCI") for a term of three years ending in
November 1996. The agreement calls for monthly and quarterly minimum payments of
$800,000 and $3,150,000, respectively, to be entitled to discounted rates. If
the Company terminates the agreement for reasons other than cause, payment of
50% of the aggregate of the minimum amounts for the remainder of the unexpired
term will be due 30 days after the termination. The Company made payments of
$18,418,000 to MCI for phone services during the year ended December 31, 1993
and would have exceeded the above mentioned minimums.
The Company uses the same policies in making the above commitments as it does
for on-balance sheet instruments. The Company controls its risk through
approvals, limits, covenants and monitoring procedures.
NOTE H - LITIGATION
On April 1, 1993, Mr. Allen P. Allweiss, a former executive vice president and
general counsel of the Company, filed a lawsuit styled Allweiss v. HSN, et.al.,
in the Circuit Court of the Sixth Judicial Circuit of the State of Florida for
Pinellas County (Case No. 93-1176CI13), against the Company, Roy M. Speer,
Francis Santangelo, Liberty, Gerald F. Hogan and John M. Draper complaining
about, among other things, his February 24, 1993 termination from the Company
(the "Allweiss Suit"). The Allweiss Suit as amended alleges violation of the
Florida retaliatory discharge statute, civil theft, conversion, breach of
contract, and conspiracy related to his termination from the Company and his
rights under the Company's 1986 Stock Option Plan for employees and the
Company's 1990 Executive Stock Award Program. Mr. Allweiss also alleges that he
was injured by reason of a pattern of criminal activities. Mr. Allweiss seeks
unspecified damages, including treble damages. The Company has filed a
counterclaim against Mr. Allweiss alleging breach of fiduciary duty, legal
malpractice, and breach of a confidentiality agreement. Discovery began in late
1993. No evaluation of the likelihood of an unfavorable outcome can be made at
this time. No range of potential loss or recovery has been included in the
consolidated financial statements. The Company believes that it has meritorious
defenses and intends to continue vigorously defending this action and pursuing
its counterclaim.
On December 27, 1990, a customer of HSC filed an amended class action complaint
against the Company styled Mauger v. Home Shopping Network, Inc., in the Court
of Common Pleas, Philadelphia County, Pennsylvania. Plaintiff alleged violation
of the Pennsylvania Unfair Trade Practices and Consumer Protection Law in
relation to the Company's pricing practices with respect to diamond and
imitation diamond jewelry. Plaintiff seeks certification of the class,
compensatory damages or $100 per class member, treble damages, attorney's fees,
costs, interest and other relief. Plaintiff claims that the diamond ring she
purchased from HSC was not of the same value stated in an appraisal provided to
the customer.
On June 22, 1991, another customer of HSC filed a class action complaint against
the Company, styled Powell v. Home Shopping Network, Inc., making similar
allegations concerning jewelry purchased from HSC and seeking similar relief.
On April 19, 1993, the Mauger and Powell cases were consolidated in the Court of
Common Pleas of Bucks County, Pennsylvania (Case No. 91-6152-20-1). On May 4,
1993, the Court entered an order granting the plaintiffs' motion for class
certification and declared the plaintiffs to be class representatives and the
class to be "all Pennsylvania residents who purchased any jewelry containing
diamonds or imitation diamonds from Home Shopping Network, Inc.'s subsidiary
Home Shopping Club, Inc. between December 27, 1984 and May 20, 1991." On July
23, 1993 the court denied the Company's motion for interlocutory appeal of the
May 4, 1993 order. The Company believes that it has meritorious defenses and
intends to continue vigorously defending this action.
49
<PAGE> 30
The Company has been informed that the Securities and Exchange Commission has
entered a formal order of investigation involving matters relating to, among
other things, certain of the Company's SEC filings and other public disclosures.
The Company has furnished documents in connection with this investigation and is
cooperating in the investigation while maintaining its legal privileges,
including the attorney/client privilege. This is a nonpublic investigation and
the scope of the investigation is confidential. The Company has been advised
that this inquiry should not be construed as an indication by the Commission or
its staff that any violations of law have occurred, nor should it be considered
a reflection upon any person, entity or security.
The Company has been informed that a federal grand jury impaneled in the Middle
District of Florida is investigating matters relating to the Company. The
Company has furnished documents in connection with this investigation and has
taken action to protect its legal privileges in these proceedings, including the
attorney/client privilege. Information related to the scope of matters occurring
before the grand jury is confidential. The Company has been advised by the
federal government that the Company is not a target, at this time, of the grand
jury investigation.
On December 30, 1993, the parties to the following lawsuits (the "Florida
Federal Securities Actions"), which assert claims relating to, among other
things, the adequacy of HSN disclosures in certain public filings in 1992 and
1993, reached an agreement in principle to settle these cases:
Michael Goldstein v. Roy M. Speer and Home Shopping Network, Inc.,
United States District Court for the Middle District of Florida, Tampa
Division, Civil Action No. 93-602-CIV-T-23B
Milton Partners, L.P. v. Roy M. Speer and Home Shopping Network, Inc.,
United States District Court for the Middle District of Florida, Tampa
Division, Civil Action No. 93-608-CIV-T-15C
International Gemmological Institute, Inc., et al. v. Home Shopping
Network, Inc., Roy M. Speer, Franklin J. Chu, John J. McNamara, Michael V.
Roberts, and Edward Vaughn, United States District Court for the Middle
District of Florida, Tampa Division, Civil Action No. 93-610-CIV-T-21B
Arnold Jerome Sussman, et al. v. Home Shopping Network, Inc., Roy M.
Speer and RMS Limited Partnership, United States District Court for the
Middle District of Florida, Tampa Division, Civil Action No.
93-613-CIV-T-17B
Irving Kas, on behalf of himself and all others similarly situated v.
Home Shopping Network, Inc., Roy M. Speer, individually and as a General
Partner of RMS Limited Partnership, Les R. Wandler, Franklin J. Chu,
Fernando DiFilippo, Lowell Paxson, and RMS Limited Partnership, United
States District Court for the Middle District of Florida, Tampa Division,
Civil Action No. 93-621-CIV-T-15A
Benjamin Kirsch v. Roy M. Speer and Home Shopping Network, Inc.,
United States District Court for the Middle District of Florida, Tampa
Division, Civil Action No. 93-623-CIV-T-23A
Jonathan Greenwald v. Roy M. Speer and Home Shopping Network, Inc.,
United States District Court for the Middle District of Florida, Tampa
Division, Civil Action No. 93-624-CIV-T-17B
Sherwin Newborn, on behalf of himself and all others similarly
situated v. Home Shopping Network, Inc., Roy M. Speer and RMS Limited
Partnership, United States District Court for the Middle District of
Florida, Tampa Division, Civil Action No. 93-681-CIV-T-17A
Mike and Natalie Magula v. Home Shopping Network, Inc., Roy M. Speer,
individually and as a General Partner of RMS Limited Partnership, Les R.
Wandler, Franklin J. Chu, Fernando DiFilippo, Lowell Paxson, and RMS
Limited Partnership, United States District Court for the Middle District
of Florida, Tampa Division, Civil Action No. 93-679-CIV-T-21C
Pursuant to the terms of the settlement of the Florida Federal Securities
Actions, the Company will make a net contribution of $8,600,000 toward a total
settlement fund of $9,600,000. Any attorneys' fees awarded by the Court to the
plaintiffs' attorneys will be paid out of the $9,600,000 settlement fund. The
settlement of the Florida Federal Securities Actions is conditioned on, among
other things, Court approval after notice to the shareholders and a hearing on
the fairness of the settlement.
50
<PAGE> 31
On December 31, 1993, an agreement in principle was reached to settle the
following lawsuits in which the Company, Liberty and others are parties:
In re Home Shopping Network, Inc. Shareholders Litigation, Court of
Chancery of the State of Delaware in and for the County of New Castle,
Civil Action No. 12868 (consolidated)
Bartnik, et al. v. Home Shopping Network, Inc., et al., United States
District Court for the District of Delaware, C.A. No.
93-336/347/406/480-MMS-Consolidated
The actions concern, among other things, breaches of fiduciary duty relating to
the change in control, tender offers and merger proposal relating to the
Company. The Company does not anticipate having to contribute to the settlement
fund or pay any of the plaintiffs' attorneys' fees or expenses. The settlement
of these actions is conditioned on, among other things, Court approval after
notice to the shareholders and a hearing on the fairness of the settlement.
On January 19, 1994, the plaintiffs dismissed without prejudice the lawsuit
entitled Mizell, et al. v. Speer, et al., C.A. No. 93-000494-CI-020, which at
the time was pending in the Circuit Court for Pinellas County, Florida.
On or about February 8, 1994, the Company, with the approval of the special
litigation committee of its Board of Directors, signed an agreement in principle
to settle the lawsuit entitled 7547 Corp., et al. v. Roy M. Speer, et al., Case
Nos. 92-1966-CIV-T-15A and 92-2045-CIV-T-99C (consolidated), currently pending
in the United States District Court for the Middle District of Florida. Pursuant
to the terms of the settlement, Roy M. Speer, the Company's former Chairman of
the Board and Chief Executive Officer, has agreed to pay the Company $2,000,000
and to pay the Company an additional $1,000,000 to partially fund the $9,600,000
settlement in the Florida Federal Securities Actions. The Company has agreed to
pay Western Hemisphere, Inc. ("Western"), the successor to Pioneer Data
Processing, Inc. ("Pioneer"), $4,500,000 in exchange for releases and
cancellation or acquisition of a 1985 license agreement involving the Company
and Pioneer. The Company also has agreed to pay such attorneys' fees as may be
awarded by the Court to the plaintiffs' counsel. This settlement is conditioned
on, among other things, Court approval after notice to the shareholders and a
hearing on the fairness of the settlement.
The Company has accrued $13,000,000, at December 31, 1993, to cover anticipated
costs and expenses related to the above matters as well as the costs and
expenses associated with the settlement of an unrelated claim.
The Company and certain of its officers and directors were defendants in certain
class actions suits filed in connection with the issuance of statements
regarding its common stock. On October 15, 1991, the Court approved the
settlement of $18,000,000 to be paid by the Company.
On September 15, 1991, the court approved the settlement of $15,000,000 to be
paid by the Company in connection with two separate purported class action suits
that had been filed against the Company in the Court of Chancery of the State of
Delaware. The complaints concerned actions taken by the Company in connection
with a suit pending against Drexel Burnham Lambert, Incorporated regarding the
Company's Debentures.
During fiscal 1992, the balance of all amounts accrued in fiscal 1991 totaling
$33,000,000 relating to the two settlements mentioned above was paid.
The Company is engaged in various other lawsuits either as plaintiff or
defendant. In the opinion of management, the ultimate outcome of these various
lawsuits should not have a material impact on the Company's financial condition
or results of operations.
NOTE I - STOCKHOLDERS' EQUITY
The holders of both classes of the Company's common stock are entitled to
receive ratably such dividends, if any, as may be declared by the Board of
Directors out of funds legally available for the payment of dividends. In the
event of the liquidation, dissolution or winding up of the Company, the holders
of both classes of common stock are entitled to share ratably in all assets of
the Company remaining after provision for payment of liabilities. Shares of
Class B common stock are convertible at the option of the holder into shares of
common stock of the Company on a share-for-share basis. Upon conversion of the
Class B common stock, the Class B shares so converted are retired and not
subject to reissue.
51
<PAGE> 32
In October 1993, RMS Limited Partnership, a Nevada limited partnership ("RMS"),
converted 3,600,000 shares of Class B common stock into shares of common stock,
on a share-for-share basis. After the conversion, there were 20,559,456 shares
of Class B common stock outstanding. Because there are less than 22,800,000
shares of Class B common stock outstanding after this conversion, the holders of
the Class B common stock will now vote together with the holders of common stock
on all matters submitted to stockholders. The Class B common stock shareholders
are entitled to cast ten votes per share on all matters, except that they have
no vote in the election of 25% of the Board of Directors to be elected by the
common stock shareholders. Subsequent to December 31, 1993, RMS converted
559,456 additional shares of Class B common stock to shares of common stock.
On December 28, 1992, the Company distributed the capital stock of SKC to the
Company's stockholders of record on December 24, 1992, in the form of a pro rata
stock dividend. The distribution also included Telemation, Inc., formerly a
wholly-owned subsidiary of HSN that operates video production and
post-production facilities, the capital stock of which was contributed to SKC
prior to the distribution. The stockholders' of HSN received one share of SKC
common stock for each ten shares of HSN common stock held at the close of
business on December 24, 1992. In connection with this distribution,
intercompany indebtedness in the amount of $135,172,000 was converted into a
secured long-term Senior Loan, as discussed in Note B, and remaining
intercompany indebtedness in the amount of $93,120,000 was forgiven resulting in
SKC having a net book value at the date of distribution of $10,000,000. The
distribution reduced stockholders' equity at December 31, 1992, by $10,000,000,
consisting of net operating assets of $4,751,000 and cash and cash equivalents
of $5,249,000. Property, plant and equipment with a net book value of
$41,516,000 and identified intangible assets and FCC licenses, as discussed in
Note A7, with a net book value of $88,720,000 were the major assets held by SKC
at the time of the stock distribution. SKC's assets and capabilities were an
integral part of HSC's operations and were used almost exclusively for HSC
programming. Accordingly, at the time of the distribution, HSC and SKC entered
into affiliation agreements, as discussed in Note G providing, among other
things, parameters for SKC's carriage of HSC programming, HSC's payment to SKC
for such carriage and renewal or extension of the affiliation agreements.
Payments made by HSC under the affiliation agreements provide SKC sufficient
cash flow to fund the payments of principal and interest on the Note evidencing
the secured long-term Senior Loan, as discussed in Note B.
The distribution of the capital stock of SKC was a taxable transaction. The
Company recognized a gain for income tax purposes in an amount equal to the
difference between the fair market value of the SKC capital stock distributed
and the Company's basis in such SKC capital stock. This gain resulted in
additional income tax expense of $1,500,000 which was recorded during the four
months ended December 31, 1992. This gain will be affected by the final
settlement of the IRS examination, as discussed in Note E.
In accordance with a Tax Sharing Agreement, entered into in connection with the
distribution of SKC, HSN is responsible for paying all taxes related to SKC's
operations for periods through December 28, 1992. Accordingly, any liability
associated with the IRS examination through that date, as discussed in Note E,
will be the responsibility of HSN and not SKC.
On July 31, 1992, the Company distributed the capital stock of PSi to the
Company's stockholders of record on July 30, 1992, in the form of a tax-free,
pro rata stock dividend. The stockholders of HSN received one share of PSi
common stock for each ten shares of HSN common stock held at the close of
business on July 30, 1992. The distribution reduced stockholders' equity in the
year ended August 31, 1992, by $36,579,000, consisting of net operating assets
of $31,579,000 and cash of $5,000,000.
The Company's Board of Directors has authorized the repurchase of up to
$20,000,000 of its common stock. To date, the Company has purchased 3,105,700
shares at a total cost of $14,027,000. The Company, subject to market conditions
and cash availability, may continue to repurchase its shares within the limits
adopted by the Board.
NOTE J - CHANGE IN CONTROL
On February 11, 1993, Liberty acquired 20,000,000 shares of the Company's Class
B common stock, from RMS in exchange for $58,000,000 in cash and 8,000,000
shares (adjusted for a 2 for 1 stock dividend), of Liberty Class A common stock,
par value $1.00 per share (the "Liberty Class A Common Stock"). In addition, on
the acquisition date, RMS granted an irrevocable assignable option (the
"Option") to Liberty to purchase from RMS
52
<PAGE> 33
2,000,000 shares ("Subject Shares") of Class B common stock of SKC for
$2,000,000 plus interest from February 11, 1993. The Option may be exercised, in
whole but not in part, within 2 years and may be extended upon certain
conditions requiring government approvals. Upon exercise of the Option and
purchase of the Subject Shares, Liberty or any assignee under the Option would
effectively control SKC by virtue of the voting power of the Subject Shares.
The 20,000,000 shares of Class B common stock purchased by Liberty, in addition
to the 616,300 shares of HSN common stock acquired by Liberty prior to February
11, 1993, represented approximately 23.3% of the beneficial ownership interest
in the Company's equity at February 28, 1993. In addition, because the Class B
common stock is generally entitled to ten votes per share, the aggregate of all
such shares represented approximately 65.6% of the beneficial ownership interest
in the voting rights of the Company. These percentage amounts do not reflect the
common stock purchased in the tender offer or the conversion of the Class B
common stock discussed below.
On April 23, 1993, Liberty commenced a tender offer to purchase up to 15,000,000
shares of HSN common stock at $7.00 per share. During the period of the tender
offer, which expired on May 20, 1993, 23,266,306 shares of HSN common stock were
tendered. Consistent with its rights under the federal securities laws, Liberty
elected to purchase an additional 1,296,602 of these shares. This acquisition of
16,296,602 shares of HSN common stock increased Liberty's beneficial ownership
interest in HSN's equity to approximately 41.5% and in its voting rights to
approximately 70.8% at May 21, 1993.
In connection with Liberty's acquisition, RMS agreed to convert its remaining
4,159,456 shares of Class B common stock into shares of common stock, 3,600,000
of which were converted prior to December 31, 1993, the remainder of which were
converted to common stock subsequent to year end. After taking into account the
conversions prior to December 31, 1993, Liberty's beneficial ownership and
voting rights were approximately 39.4% and 77.8%, respectively, at December 31,
1993.
NOTE K - STOCK OPTIONS AND AWARDS
The Company has granted options to purchase common stock under option plans as
follows:
The 1986 Cable Operators Stock Option Plan, as amended, provided for the
issuance of options to purchase common stock at the fair market value at date of
grant in exchange for entering into affiliation agreements to carry the
Company's programming for up to seven years. During 1992, all options under the
1986 plan expired.
The 1987 Cable Operators Stock Option Plan, as amended, provides for the
issuance of options to purchase common stock at or above the fair market value
at the date of grant in exchange for entering into affiliation agreements to
carry the Company's programming for up to seven years. The options vest and
expire over various periods with all options expiring by June 1, 1994.
The 1986 Stock Option Plan for Employees, as amended, provides for the grant of
options to purchase common stock at the fair market value at date of grant. The
options vest and become exercisable annually and equally over five years
beginning one year from the date of grant, and expire five years from the date
they vest and become exercisable.
The 1986 Stock Option Plan for Outside Directors, as amended, provides for the
grant of options to purchase common stock at fair market value as of the date of
grant. The options vest and become exercisable equally over two years beginning
on the date of grant. All options expire five years from the date they vest and
become exercisable. During 1992, the Board of Directors and shareholders
approved certain amendments to the plan. The amendments provide for additional
option grants after five years of service and, in addition, the number of shares
of common stock subject to option under the plan was increased to 1,630,000
shares.
53
<PAGE> 34
A summary of changes in outstanding options, under the stock option plans are as
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
STOCK OPTION PLANS
----------------------------------------------------
CABLE OUTSIDE
OPERATORS EMPLOYEES DIRECTORS TOTAL
- --------------------------------------------------------------------------------------------------------
(In thousands, except exercise price)
<S> <C> <C> <C> <C>
Authorized -- September 1, 1986................... 15,000 2,400 630 18,030
Authorized -- Year ended August 31, 1987.......... 12,500 7,600 -- 20,100
Authorized -- Year ended August 31, 1992.......... -- -- 1,000 1,000
---------- ----------- ----------- -----------
Total authorized........................ 27,500 10,000 1,630 39,130
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
Outstanding -- August 31, 1990.................... 7,236 2,922 450 10,608
Granted......................................... -- 1,155 180 1,335
Exercised....................................... -- (46) -- (46)
Canceled........................................ (2,234 ) (737) (120) (3,091)
---------- ----------- ----------- -----------
Outstanding -- August 31, 1991.................... 5,002 3,294 510 8,806
Granted......................................... -- 540 180 720
Exercised....................................... (234 ) (286) (60) (580)
Canceled........................................ (432 ) (543) -- (975)
---------- ----------- ----------- -----------
Outstanding -- August 31, 1992.................... 4,336 3,005 630 7,971
Granted......................................... -- 145 -- 145
Exercised....................................... (11 ) (66) (330) (407)
Canceled........................................ -- (150) -- (150)
---------- ----------- ----------- -----------
Outstanding -- December 31, 1992.................. 4,325 2,934 300 7,559
Granted......................................... 49 1,063 180 1,292
Exercised....................................... (3,305 ) (1,781) (216) (5,302)
Canceled........................................ (524 ) (115) (54) (693)
---------- ----------- ----------- -----------
Outstanding -- December 31, 1993.................. 545 2,101 210 2,856
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
Options exercisable............................... 545 691 60 1,296
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
Exercise price.................................... $5.56-6.49 $3.25-14.63 $5.45-14.75
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
As of December 31, 1993, the Company had 29,533,000 shares of common stock
available for grant under the above option plans. During the year ended December
31, 1993, 5,302,000 shares of common stock were issued in connection with the
exercise of these stock options for which the Company received $31,197,000 in
cash.
During 1993 the Company issued 120,000 shares of common stock in connection with
the exercise of stock options for outside consultants not included in the above
chart, for which the Company received $654,000 in cash. In addition, at December
31, 1993, stock options for 120,000 shares were outstanding and exercisable by
two former outside consultants.
All of the exercise prices were adjusted as of July 31, 1992 and December 28,
1992, for options outstanding at such dates, to reflect the distributions of PSi
and SKC, respectively, to the stockholders of the Company as more fully
discussed in Note I.
In October 1990, the Company adopted the 1990 Executive Stock Award Program (the
"Program") pursuant to which 2,990,000 shares of common stock were granted to
certain key employees and consultants. The Program was funded exclusively by the
contribution of shares of common stock owned by the former Chairman of the Board
and a former President of the Company. The Company will not issue any additional
shares of stock in connection with the Program. The rights of such individuals
in shares granted under the Program vest over a five year period and are
distributed in five equal annual installments commencing one year from the grant
date. Participants in the program are entitled to receive dividends, if
declared, on their unvested shares and certain officers are entitled to voting
rights with respect to their unvested shares. Forfeitures are reissued at the
discretion of the Compensation/Benefits Committee of the Board of Directors.
54
<PAGE> 35
In fiscal 1991, in consideration of past performance and contributions to the
Company, and a non-compete and confidentiality agreement, the former Chairman of
the Board and a former President of the Company transferred 2,200,000 shares of
common stock, owned by them individually, to a former officer and director of
the Company, who resigned in September 1990. No shares of common stock were
issued by the Company to the former officer and director. A portion of the
shares was transferred to an escrow account which will be distributed to the
former officer and director pursuant to an escrow agreement which was
subsequently amended.
In connection with both of these programs funded by the former Chairman of the
Board and a former President of the Company, the Company recorded $15,299,000 of
unearned compensation in fiscal 1991 and a corresponding amount to additional
paid-in capital based on the price of the shares at the grant dates. The amount
amortized and expensed relating to the compensation earned was $5,615,000 for
the year ended December 31, 1993, $1,084,000 for the four months ended December
31, 1992, and $3,454,000 and $2,846,000 for the years ended August 31, 1992 and
1991, respectively.
In 1993, the President and Chief Executive Officer of HSN received SARs with
respect to 984,876 shares of the Company's common stock at an exercise price of
$8.25 per share. The SARs vest over a four year period and are exercisable until
February 23, 2003. The SARs will vest upon termination of employment other than
for cause and will be exercisable for up to one year following the termination
of employment. In the event of a change in ownership control of the Company, all
unvested SARs will vest immediately prior to the change in control and shall
remain exercisable for a one year period. SARs not exercised will expire to the
extent not exercised. The SARs may be exercised for cash or, so long as the
Company is a public company, for shares of the Company's common stock equal to
the excess of the fair market value of each share of common stock over $8.25 at
the exercise date. The SARs also will vest in the event of death or disability.
Compensation expense recognized by the Company for the SARs during the year
ended December 31, 1993 was $2,800,000.
NOTE L - RELATED PARTY TRANSACTIONS
The Company received a variety of products and services from entities related
through common ownership and management with the former Chairman of the
Company's Board of Directors and his immediate family members. These
transactions are considered related party transactions until the resignation of
the former Chairman of the Company's Board of Directors in August 1993.
Subsequent to his resignation, these transactions are no longer considered
related party, but are included for disclosure purposes. Transactions with these
entities are summarized as follows:
1. Computer software license agreement: In 1985, the Company entered into a
license agreement for computer software with Western, which provided for
continuing monthly payments of 1% of HSC's gross profit, as defined.
2. Property: The Company leased three properties from a partnership controlled
by the former Chairman and a former President of the Company. Payments were
$26,000 per month, plus sales tax. In July and September of 1991, the Company
purchased these properties for a total of $2,300,000.
3. Commissions on inventory: Certain inventory in the form of returned
merchandise, rejects and small lot saleable inventory were disposed of through
Western for a 15% commission. Sales by the related party were less than 1% of
total sales. The Company also provided certain equipment and space located at or
in close proximity to each of the Company's four fulfillment centers, free of
charge. The Company terminated this arrangement in 1993.
55
<PAGE> 36
The following summarizes these transactions:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
FOUR MONTHS YEARS ENDED
YEAR ENDED ENDED AUGUST 31,
DECEMBER 31, DECEMBER 31, ----------------
1993 1992 1992 1991
- --------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Computer software license agreement.............. $297 $ 1,176 $3,502 $3,286
Commissions on inventory......................... 561 456 1,469 1,615
Property:
Lease payments................................. -- -- -- 311
Purchase price................................. -- -- 250 2,050
</TABLE>
As of December 31, 1993, in connection with a litigation settlement as discussed
in Note H, the Company has a $4,500,000 liability recorded to Western. This
amount relates to cancellation of the computer software license agreement, the
arrangement pursuant to which Western provided certain liquidation and related
services, as noted above, and all other existing agreements and arrangements
excluding certain assignment, secrecy and non-compete agreements. In connection
with this and other litigation settlements, the former Chairman of the Company's
Board of Directors has agreed to pay HSN $3,000,000, which is recorded in
accounts receivable, as of December 31, 1993.
Prior to the SKC distribution, the Company was a non-voting common stockholder
in a corporation which owns a television station that carries HSN programming. A
former member of the Company's Board of Directors is a significant owner of this
same corporation. During fiscal 1989, the Company funded construction of the
television station through a 12.8% interest-bearing note, to be amortized over
seven years beginning in April 1991, with monthly payments of $69,000. The
amount due under this note was $3,294,000 at August 31, 1992. In connection with
the distribution of the capital stock of SKC, the note and the Company's
investment in the corporation were transferred to SKC prior to December 31,
1992. See Note I. Also, the Company paid $1,549,000, $504,300, $1,553,000 and
$1,596,000 under an affiliation agreement with the television station for the
year ended December 31, 1993, the four months ended December 31, 1992 and the
fiscal years ended August 31, 1992 and 1991, respectively.
During 1991, the Company engaged two firms in consulting capacities which had
one officer each that was on the Company's Board of Directors until February
1993. Fees paid pursuant to these engagements totaled $126,000 for the year
ended December 31, 1993, $34,000 for the four months ended December 31, 1992,
and $100,000 for each of the years ended August 31, 1992 and 1991.
On April 28, 1992, the Company purchased 100,000 shares of Series A Preferred
Stock of NRI. Pursuant to the purchase of these shares, HSN provided office
space to NRI which was valued at $200,000 for the year ended December 31, 1993.
The Chairman and Chief Executive Officer of NRI was appointed to the Board of
Directors of the Company on April 30, 1992. HSN and NRI also share two other
common board members. See Note C.
The Company has entered into an agreement with PSi that provides for the Company
to extend a $5,000,000 line of credit, as discussed in Note G. The Company
purchased certain equipment and paid license and system maintenance fees related
to this equipment of $1,316,000 and $3,545,000, respectively, for the year ended
December 31, 1993 and $1,521,300 and $2,250,000, respectively, for the four
months ended December 31, 1992. The former Chairman of HSN owns a controlling
position in PSi's outstanding stock as of December 31, 1993. Until August 1993
HSN and PSI also shared a common board member, and officer. Subsequent to August
11, 1993, PSi is no longer considered a related party due to the resignation of
certain members of PSi's Board of Directors, and the resignation of the former
Chairman of the Company.
HSC has entered into certain affiliation agreements with cable operators which
are wholly or partially owned by either Liberty or Tele-Communications, Inc.
Certain officers of these companies served, or continue to serve, on the
Company's Board of Directors. Payments made under the affiliation agreements
were $4,053,000 for the year ended December 31, 1993.
56
<PAGE> 37
In addition, the general partner of certain cable systems which carry the
Company's programming, was appointed to HSN's Board of Directors in July 1993.
Liberty also has an ownership interest in these cable systems. A total of
$247,000 was paid for the year ended December 31, 1993 for such cable
agreements.
NOTE M - CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplemental disclosure of cash flow information:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
FOUR MONTHS YEARS ENDED AUGUST
YEAR ENDED ENDED 31,
DECEMBER 31, DECEMBER 31, -------------------
1993 1992 1992 1991
- --------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Cash paid during the period for:
Interest..................................... $ 13,872 $ 10,837 $22,995 $24,709
Income taxes................................. 515 4,648 14,854 20,330
</TABLE>
Supplemental information of non-cash investing and financing activities:
- - On December 28, 1992, the Company distributed the common stock of SKC to the
Company's stockholders, in the form of a taxable pro rata stock dividend. See
Note I.
- - On July 31, 1992, the Company distributed the common stock of PSi to the
Company's stockholders in the form of a tax-free, pro rata stock dividend. See
Note I.
- - As more fully discussed in Note K, the Company recorded the constructive
receipt of common stock valued at $15,299,000 from the former Chairman of the
Board and a former President of the Company to be used in conjunction with
various stock award plans.
- - Additional shares of common stock were issued upon the conversion of
Debentures, as more fully discussed in Note D.
57
<PAGE> 38
NOTE N - QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
QUARTER QUARTER QUARTER QUARTER
ENDED ENDED ENDED ENDED
MARCH 31,(A) JUNE 30,(A) SEPTEMBER 30, DECEMBER 31,
- -------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993
Net sales................................... $239,421 $ 250,264 $ 260,462 $296,433
Gross profit................................ 61,540(c) 87,541 90,122 103,337
Earnings (loss) before extraordinary item... (16,980) 2,001 1,115 (1,675)(d)
Net earnings (loss)......................... (23,823) 1,602 1,115 (1,675)
Earnings (loss) per common share:
Before extraordinary item................. (.19) .02 .01 (.02)
Net earnings (loss)....................... (.27) .02 .01 (.02)
YEAR ENDED DECEMBER 31, 1992(A)
Net sales................................... $275,442 $ 257,499 $ 261,662 $273,768
Gross profit................................ 102,723 94,913 97,323 94,034
Earnings before extraordinary item.......... 8,999 6,518 6,969 4,297
Net earnings................................ 9,000 6,471 6,969 4,297
Earnings per common share:
Before extraordinary item................. .10 .07 .08 .05
Net earnings.............................. .10 .07 .08 .05
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
QUARTER
MONTH ENDED
QUARTER QUARTER QUARTER ENDED AUGUST
ENDED ENDED ENDED JUNE 30, 31,
NOVEMBER 30, FEBRUARY 28, MAY 31, 1993(B) 1992
- --------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
PERIODS SUBSEQUENT TO AUGUST 31, 1992
Net sales................................ $265,796 $ 244,044 $ 260,157 $76,854 --
Gross profit............................. 94,829 60,529(c) 93,052 25,307 --
Earnings before extraordinary item....... 5,828 (20,040) 6,158 (1,785 ) --
Net earnings (loss)...................... 5,828 (26,883) 5,759 (1,785 ) --
Earnings (loss) per common share:
Before extraordinary item.............. .07 (.23) .07 (.02 ) --
Net earnings (loss).................... .07 (.31) .07 (.02 ) --
YEAR ENDED AUGUST 31, 1992
Net sales................................ $291,756 $ 275,460 $ 269,315 -- $261,256
Gross profit............................. 107,849 101,134 101,119 -- 96,357
Earnings before extraordinary item....... 13,095 7,881 9,013 -- 7,416
Net earnings............................. 13,095 7,816 8,966 -- 7,416
Earnings per common share:
Before extraordinary item.............. .15 .09 .10 -- .08
Net earnings........................... .15 .09 .10 -- .08
</TABLE>
(a) The quarters in the year ended December 31, 1992 and the quarters ended
March 31, 1993 and June 30, 1993 are shown for comparative purposes only.
(b) The month ended June 30, 1993 is shown in connection with the transition for
the change in year end from August 31 to December 31, as discussed in Note
A.
(c) During February 1993, the Company established an inventory reserve of
$22,700,000. Of this reserve, $20,100,000 affected gross profit and
$2,600,000 was charged to miscellaneous expense.
(d) In the fourth quarter of 1993, the Company charged $13,000,000 to other
income (expense) for the settlement of various lawsuits. See Note H.
The difference between earnings (loss) before extraordinary item and net
earnings (loss) in each quarter represents gains (losses) from early
extinguishment of long-term obligations. See Note D.
58
<PAGE> 39
The Company believes that seasonality does impact its business, but not to the
same extent it impacts the retail industry in general.
NOTE O - FINANCIAL INSTRUMENTS
As discussed in Note G, the Company is obligated to provide PSi with a
$5,000,000 unsecured line of credit. If the Company funds this line of credit
and PSi fails to perform according to the terms of the contract, the Company is
exposed to certain losses.
The additional disclosure below of the estimated fair value of financial
instruments was made in accordance with the requirements of Statements of
Financial Accounting Standards No. 107. The estimated fair value amounts have
been determined by the Company using available market information and
appropriate valuation methodologies.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
DECEMBER 31, 1993 DECEMBER 31, 1992
--------------------- ---------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Cash and cash equivalents............................ $ 35,566 $ 35,566 $ 19,421 $ 19,421
Note and interest receivable from related party...... 132,304 132,304 135,172 135,172
Other assets and notes receivable.................... 3,117 3,117 7,387 7,387
Long-term investment................................. 10,000 18,000 7,225 24,000
Long-term obligations................................ (112,272) (112,272) (162,754) (168,778)
</TABLE>
The carrying value of cash and cash equivalents, note and interest receivable
from related party, and other assets and notes receivable are a reasonable
estimate of their fair value. The estimate of the fair value of the long-term
investment was based on quoted market prices of NRI's common stock. The Company
owns a large percentage of the outstanding equity in NRI. The dilutive effect on
the quoted market rate has not been factored into the fair market value of the
investment, and as such, the fair market value may not equal liquidation value.
The fair value of the Company's long-term obligations at December 31, 1993
approximates the carrying value, as interest rates for similar issues of debt,
have not changed substantially during 1993. At December 31, 1992, the fair value
is estimated based on the actual amount paid to retire the debt during the
refinancing and retirement of the debt as discussed in Note D.
59
<PAGE> 40
- --------------------------------------------------------------------------------
SUMMARY FINANCIAL DATA
(In thousands, except per share data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOUR MONTHS
SUMMARY CONSOLIDATED YEAR ENDED ENDED YEARS ENDED AUGUST 31,
STATEMENTS OF OPERATIONS DECEMBER 31, DECEMBER 31, ------------------------------------------------------
DATA 1993 1992 1992 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales.................. $1,046,580 $357,166 $1,097,787 $1,078,547 $1,008,272 $774,342
Gross profit............... 342,540(4) 124,636 406,459 389,398 374,908 293,433
Operating profit (loss).... (6,949) 17,569 82,202 64,570(2) 74,720 9,199(1)
Earnings (loss) before
extraordinary item....... (15,539)(5) 5,140 37,405 (9,599)(2) 32,464 (22,075)(1)
Net earnings (loss)........ (22,781) 5,140 37,293 (8,945)(2) 38,754 (14,939)(1)
Earnings (loss) per common
share:
Earnings (loss) before
extraordinary item....... (.18) .06 .42 (.11)(2) .35 (.25)(1)
Net earnings (loss)........ (.26) .06 .42 (.10)(2) .42 (.17)(1)
Weighted average common
shares outstanding....... 91,192 91,115 90,255 87,452 95,736 89,483
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
DECEMBER 31, AUGUST 31,
SUMMARY CONSOLIDATED --------------------- -------------------------------------------
BALANCE SHEET DATA 1993 1992 1992 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Working capital.......................... $ 8,053 $ 38,493 $ 47,004 $ 52,868 $ 98,006 $115,545
Total assets............................. 501,143 477,913 519,670 565,036 556,236 533,929
Unsecured Senior Term Loans.............. 85,000(3) -- -- -- -- --
11% Senior Notes due October 15, 1996.... -- 140,000(3) 153,252(3) 184,752 190,678 223,300
5% Convertible Subordinated Debentures
due April 22, 2002..................... -- 16,915 16,915 17,115 28,335 54,745
Other long-term obligations.............. 1,927 2,276 2,689 3,175 6,096 6,760
Stockholders' equity..................... 196,554 170,149 170,329 161,839 177,481 139,885
</TABLE>
(1) During the fourth quarter of fiscal 1989, the Company recorded $28,000,000
in pre-tax non-recurring special charges.
(2) During fiscal 1991, the Company recorded $44,500,000 in pre-tax
non-recurring special charges as discussed in Notes A-5 and H. Additionally,
the Company increased its income tax provision $10,382,000 relating to
certain adjustments proposed by the Internal Revenue Service as discussed in
Note E.
(3) At December 31, 1993 and 1992, $25,000,000 and $3,200,000, respectively, and
$27,500,000 at August 31, 1992, was classified as current reflecting
management's ability and intent to satisfy a portion of the debt from funds
provided from operations. See Note D.
(4) The gross profit declined from 37.0%, for the fiscal year ended August 31,
1992, to 32.7%, for the year ended December 31, 1993. This was primarily due
to the liquidation of inventory at less than cost.
(5) In the fourth quarter of 1993, the Company charged $13,000,000 to other
income (expense) for the settlement of various lawsuits. See Note H.
60
<PAGE> 41
- --------------------------------------------------------------------------------
PRICE RANGE OF COMMON STOCK
- --------------------------------------------------------------------------------
The following table sets forth, for the quarterly periods indicated, the high
and low sales prices of the Company's common stock on the New York Stock
Exchange (Symbol: HSN).
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
HIGH LOW
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1993
Quarter ended November 30....................................................... $ 6.38 $ 4.25
Quarter ended February 28....................................................... 9.00 4.88
Quarter ended May 31............................................................ 8.63 4.13
Month ended June 30............................................................. 12.88 7.50
Quarter ended September 30...................................................... 14.75 10.63
Quarter ended December 31....................................................... 15.38 10.50
YEAR ENDED AUGUST 31, 1992
Quarter ended November 30....................................................... 7.13 5.00
Quarter ended February 28....................................................... 8.88 4.88
Quarter ended May 31............................................................ 8.63 5.25
Quarter ended August 31......................................................... 6.38 5.13
YEAR ENDED AUGUST 31, 1991
Quarter ended November 30....................................................... 5.75 3.00
Quarter ended February 28....................................................... 5.25 3.38
Quarter ended May 31............................................................ 7.63 4.50
Quarter ended August 31......................................................... 6.50 4.25
</TABLE>
The closing price per share as of February 28, 1994 was $13.25 and there were
8,836 stockholders of record as of that date.
61
<PAGE> 42
BOARD OF
DIRECTORS:
Gerald F. Hogan
President and Chief Executive Officer
Home Shopping Network, Inc.
Robert R. Bennett, Chairman
Senior Vice President,
Treasurer and Secretary
Liberty Media Corporation
Englewood, Colorado
John M. Draper
Senior Vice President and General Counsel
Liberty Media Corporation
Englewood, Colorado
Leo J. Hindery, Jr.
Managing General Partner
InterMedia Partners
San Francisco, California
J. Anthony Forstmann
Chairman of the Board
The National Registry Inc.
St. Petersburg, Florida
George C. McNamee
Chairman
First Albany Companies, Inc.
Albany, New York
OFFICERS:
Gerald F. Hogan
President and Chief Executive Officer
Honore A. LeBrun, III
Executive Vice President
Affiliate Sales and Marketing
J. Michael Reardon
Executive Vice President
Operations
Stella L. Tavilla
Executive Vice President
Management Information Systems
Peter M. Kern
Senior Vice President
Strategic Development and Corporate Finance
Kevin J. McKeon
Senior Vice President
Accounting and Finance
and Treasurer
Edward M. Vaughn, Jr.
Senior Vice President
Human Resources
Michael W.D. McMullen
President
HSN International Division
Robert F. Buccos
Vice President
Budgeting and Strategic Planning
Todd Cralley
Vice President
Broadcast Affiliates
M. Wade Downs
Vice President
Corporate Research and Analysis
Peter J. Hardy
Vice President
New Business Development
Judith K. Jourdan
Vice President
Application Services
David W. Swanson
Vice President
Technical Services
Brian J. Feldman
Controller
HOME SHOPPING CLUB, INC.
L. Douglas Bailey
President
HOME SHOPPING CLUB OUTLETS, INC.
J. Michael Reardon
President
HSN CREDIT CORPORATION
P. A. Bauer
President
HSN FULFILLMENT, INC.
Ronald J. DiDonato
President
HSN INSURANCE, INC.
Suzanne B. Morrow
President
HSN MAIL ORDER, INC.
John W. Pence
President
CORPORATE
INFORMATION:
CORPORATE HEADQUARTERS
2501 - 118th Avenue North
St. Petersburg, Florida 33716-1900
The Company's main telephone number is (813)572-8585.
STOCK EXCHANGE
Home Shopping Network, Inc. is listed on the New York Stock Exchange. The ticker
symbol is HSN.
TRANSFER AGENT/
REGISTRAR
Bank of New York
101 Barclay Street
New York, New York 10286
INDEPENDENT AUDITORS
KPMG Peat Marwick
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES OF HOME SHOPPING NETWORK, INC.
A DELAWARE CORPORATION
AS OF MARCH 1, 1994
<TABLE>
<CAPTION>
STATE OF
SUBSIDIARY INCORPORATION
- ----------------------------------------------------------------------------------------- -------------
<S> <C>
Cable Call Center, Inc................................................................... Delaware
Citrus Office Supply, Inc................................................................ Florida
Home Shopping Club, Inc.................................................................. Delaware
d/b/a Home Shopping Club Telemation
Home Shopping Club Outlet of Brandon, Inc................................................ Delaware
Home Shopping Club Outlet of Clearwater, Inc............................................. Delaware
Home Shopping Club Outlet of New Port Richey, Inc........................................ Delaware
Home Shopping Club Outlet of Orlando, Inc................................................ Delaware
Home Shopping Club Outlet of South Orlando, Inc.......................................... Delaware
Home Shopping Club Outlet of St. Petersburg, Inc......................................... Delaware
Home Shopping Club Outlet of Tampa, Inc.................................................. Delaware
Home Shopping Club Outlet of West Tampa, Inc............................................. Delaware
Home Shopping Club Outlets, Inc.......................................................... Delaware
Home Shopping Network Entertainment, Inc................................................. Delaware
Home Shopping Services, Inc.............................................................. Delaware
d/b/a Home Shopping Services of Delaware, Inc.
Home Shopping Showcase, Inc.............................................................. Delaware
d/b/a Innovations in Hiring
HSN Auto Mart, Inc....................................................................... Florida
HSN Aviation, Inc........................................................................ Delaware
HSN Brokers, Inc......................................................................... Delaware
HSN Capital Corporation.................................................................. Nevada
HSN Cosmetics, Inc....................................................................... Delaware
HSN Credit Corporation................................................................... Delaware
HSN Entertainment Events, Inc............................................................ Delaware
HSN Entertainment Holding Company, Inc................................................... Delaware
HSN Entertainment Joint Ventures, Inc.................................................... Delaware
d/b/a Star Product Group
HSN Entertainment Joint Ventures II, Inc................................................. Delaware
d/b/a Pacific Media Ventures
HSN Financial Corporation, Inc........................................................... Delaware
HSN Fulfillment, Inc..................................................................... Delaware
HSN Fulfillment of Iowa, Inc............................................................. Delaware
HSN Fulfillment of Nevada, Inc........................................................... Delaware
HSN Fulfillment of Virginia, Inc......................................................... Delaware
HSN Health Assist, Inc................................................................... Delaware
HSN Health Services, Inc................................................................. Delaware
HSN Holdings, Inc........................................................................ Delaware
HSN Insurance, Inc....................................................................... Florida
HSN Lifeway Health Products, Inc......................................................... Delaware
d/b/a Interactive Merchandising
HSN Liquidation, Inc..................................................................... Delaware
HSN Liquidation, Inc. of Florida......................................................... Delaware
HSN Liquidation, Inc. of Iowa............................................................ Delaware
HSN Liquidation, Inc. of Nevada.......................................................... Delaware
HSN Liquidation, Inc. of Virginia........................................................ Delaware
HSN Mail Order, Inc...................................................................... Delaware
d/b/a Designer Direct
Thomas Oak & Sons
Ortho-Vent Division, Inc.
Home Shopping Values
Private Showing -- Jewelry Values by Mail
HSN Media Merchandise
Heroes Collector's Club
</TABLE>
25
<PAGE> 2
<TABLE>
<CAPTION>
STATE OF
SUBSIDIARY INCORPORATION
- ----------------------------------------------------------------------------------------- -------------
<S> <C>
HSN Mistix Corporation................................................................... Delaware
d/b/a HSN Teleseat
Rocky Mountain Teleseat
HSN Products, Inc........................................................................ Delaware
HSN Realty, Inc.......................................................................... Delaware
d/b/a HSN Realty of Delaware, Inc.
HSN Redi-Med, Inc........................................................................ Delaware
HSN Technology Center, Inc............................................................... Delaware
HSN Tours, Inc........................................................................... Delaware
d/b/a Home Shopping Tours
HSN Transportation, Inc.................................................................. Delaware
HSN Travel, Inc.......................................................................... Delaware
HSN Trucking, Inc........................................................................ Delaware
MarkeTechs Services, Inc................................................................. Delaware
Vela Research, Inc....................................................................... Delaware
National Call Center, Inc................................................................ Delaware
National Ticket Network, Inc............................................................. Colorado
Ortho-Vent, Inc.......................................................................... Delaware
World Rez, Inc........................................................................... Delaware
d/b/a Home Shopping Travel
World Rez, Inc. of Delaware
</TABLE>
26
