<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Home Shopping Network, Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
(HOME SHOPPING NETWORK LOGO)
March 30, 1995
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders of
Home Shopping Network, Inc. to be held at the Holiday Inn St.
Petersburg/Clearwater International Airport Hotel, 3535 Ulmerton Road,
Clearwater, Florida, on May 10, 1995, at 10:00 a.m., Eastern Daylight Time.
Matters to be considered and acted upon at the annual meeting include: (i)
the election of directors; (ii) the appointment of independent auditors; and
(iii) such other matters as may properly come before the meeting.
Information concerning the matters to be considered and voted upon at the
annual meeting is set forth in the attached Notice of Annual Meeting of
Stockholders and Proxy Statement. We encourage you to review the attached
material carefully and complete, sign, date and promptly return the proxy card
in the enclosed self-addressed envelope.
We appreciate your cooperation and hope to see you at the annual meeting.
Sincerely,
GERALD F. HOGAN
---------------
GERALD F. HOGAN
President and Chief Executive Officer
<PAGE> 3
HOME SHOPPING NETWORK, INC.
2501 118TH AVENUE NORTH
ST. PETERSBURG, FLORIDA 33716
---------------------
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
TO BE HELD ON MAY 10, 1995
---------------------
TO STOCKHOLDERS OF HOME SHOPPING NETWORK, INC.:
Notice is hereby given that the annual meeting of stockholders of Home
Shopping Network, Inc. (the "Company") will be held at the Holiday Inn St.
Petersburg/Clearwater International Airport Hotel, 3535 Ulmerton Road,
Clearwater, Florida on May 10, 1995, at 10:00 a.m., Eastern Daylight Time for
the following purposes:
1. To elect seven directors of the Company to hold office until the
next annual meeting of stockholders or until their successors have been
duly elected;
2. To ratify the appointment by the Board of Directors of KPMG Peat
Marwick LLP as the independent auditors of the Company for the year ending
December 31, 1995; and
3. To act upon, as determined in the best judgment of the President
and Chief Executive Officer of the Company, such other matters as may
properly come before the annual meeting.
The close of business on March 13, 1995, has been fixed as the record date
(the "Record Date") for the meeting. All stockholders of record at that date are
entitled to vote at the meeting. A list of stockholders of record as of the
Record Date will be available for examination by stockholders prior to the
annual meeting at the offices of the Company, 2501 118th Avenue North, St.
Petersburg, Florida 33716.
By the Order of the Board of
Directors,
BARRY AUGENBRAUN
----------------
BARRY AUGENBRAUN
Secretary
All holders of Common Stock are urged to complete, sign and date the
enclosed proxy and promptly return it to the Company in the enclosed postage
paid envelope. If you are present at the meeting and desire to vote in person or
for any reason desire to revoke your proxy, you may do so at any time before it
is voted.
Please sign your proxy exactly as your name appears on the enclosed proxy
card.
<PAGE> 4
HOME SHOPPING NETWORK, INC.
2501 118TH AVENUE NORTH
ST. PETERSBURG, FLORIDA 33716
---------------------
PROXY STATEMENT
MARCH 30, 1995
---------------------
ANNUAL MEETING OF STOCKHOLDERS
MAY 10, 1995
---------------------
PLACE OF ANNUAL MEETING
The annual meeting (the "Annual Meeting") of stockholders of the Company
will be held at the Holiday Inn St. Petersburg/Clearwater International Airport
Hotel, 3535 Ulmerton Road, Clearwater, Florida on May 10, 1995, at 10:00 a.m.,
Eastern Daylight Time.
PURPOSE OF ANNUAL MEETING
At the Annual Meeting, stockholders will be asked to elect seven directors
to the Company's Board of Directors. Stockholders will also be asked to ratify
the appointment of KPMG Peat Marwick LLP as the Company's independent auditors
for the year ending December 31, 1995.
RECORD DATE; SHARES ENTITLED TO VOTE; QUORUM
Only holders of record of Home Shopping Network, Inc. Common Stock, $.01
par value (the "Common Stock"), and Class B Common Stock, $.01 par value (the
"Class B Common Stock"), at the close of business on March 13, 1995, will be
entitled to notice of, and to vote at, the Annual Meeting or any adjournment or
postponement thereof. As of the Record Date, there were 70,594,329 shares of
Common Stock (net of shares held in treasury), 20,000,000 shares of Class B
Common Stock outstanding and entitled to vote and 8,710 stockholders of record.
The presence, either in person or by properly executed proxy, of the holders of
a majority of the outstanding shares of Common Stock and Class B Common Stock is
necessary to constitute a quorum for the matters to be submitted to stockholders
at the Annual Meeting. See "Solicitation And Voting."
REQUIRED VOTE
Each share of Common Stock entitles its holder to one vote and each share
of Class B Common Stock entitles its holder to ten votes, voting together with
the Common Stock as one class, on the matters to be considered by stockholders
at the annual meeting. The holders of Common Stock are entitled, however, to
elect 25% of the directors voting as a separate class. Accordingly, holders of
Common Stock, voting as a separate class, shall elect two directors. The holders
of Common Stock and the holders of Class B Common Stock shall together elect
five directors.
---------------------
THE PROXY MATERIAL IS BEING MAILED TO STOCKHOLDERS COMMENCING ON OR ABOUT
APRIL 4, 1995.
<PAGE> 5
The Company's By-laws provide that when a quorum is present at any meeting
of stockholders, the vote of the holders of a majority of the voting securities
having voting power present in person or represented by proxy shall be necessary
to decide a matter brought before such meeting. Abstentions and broker non-votes
will be counted as present for purposes of determining the presence or absence
of a quorum for the transaction of business. Abstentions and broker non-votes
will have the same effect as a negative vote with respect to the matters
submitted for consideration of the Company's stockholders at the Annual Meeting.
SOLICITATION AND VOTING
The enclosed proxy to be used at the Annual Meeting is solicited by, and on
behalf of, the Board of Directors of the Company. If a proxy is properly
executed and returned in the form enclosed, shares represented thereby will be
voted in favor of Items 1 and 2 except to the extent other directions are given
in the proxy. Any other matters which may properly come before the Annual
Meeting will be considered and voted upon in the best judgment of the President
and Chief Executive Officer of the Company, Gerald F. Hogan, who will serve as
the proxy agent.
Any stockholder who executes a proxy may revoke it at any time before it is
voted by notifying the President and Chief Executive Officer of the Company in
writing of the revocation or by oral notice to the presiding officer during the
Annual Meeting.
Expenses incurred in connection with the solicitation of proxies will be
paid by the Company. Upon request, the Company will reimburse brokers, dealers
and banks or their nominees, for reasonable expenses incurred in forwarding
copies of the proxy material and annual report to the beneficial owners of
shares which such persons hold of record. Solicitation of proxies will be made
principally by mail. Proxies may also be solicited in person, by telephone or
telecopier, by officers and regular employees of the Company. The Company has
engaged the services of Corporate Investor Communications at a cost of
approximately $5,000 in connection with services to be rendered prior to the
Annual Meeting.
2
<PAGE> 6
CHANGE IN CONTROL
On August 4, 1994, Liberty Media Corporation ("Liberty") and
Tele-Communications, Inc. ("Old TCI") consummated a business combination
resulting in Old TCI and Liberty becoming wholly-owned subsidiaries of a newly
formed holding company, which has been renamed Tele-Communications, Inc.
("TCI"). As of the Record Date, there were 20,000,000 shares of Class B Common
Stock and 70,594,329 shares of Common Stock outstanding (net of shares held in
treasury) of which TCI beneficially owned 17,566,702 shares of Common Stock and
20,000,000 shares of Class B Common Stock, representing approximately 41.5% of
the outstanding equity securities of the Company and approximately 80.4% of the
voting power. Each share of Class B Common Stock is convertible into one share
of Common Stock. Because fewer than 22,800,000 shares of Class B Common Stock
are outstanding, as provided in the Company's Restated Certificate of
Incorporation, TCI will vote together with the holders of Common Stock and will
be entitled to ten votes for each share of Class B Common Stock. Accordingly,
through its ownership of the Class B shares, TCI has the ability to control the
vote on substantially all matters submitted to a vote of the Company's
stockholders. However, the holders of common stock voting alone will elect 25%
of the Board of Directors.
3
<PAGE> 7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 13, 1995, information relating
to the beneficial ownership of the Company's Common Stock by (i) each person
known by the Company to own beneficially more than 5% of the outstanding shares
of Common Stock, (ii) each director and nominee for election as a director,
(iii) the Company's Chief Executive Officer and the Executive Officers (as such
term is hereinafter defined), and (iv) all officers and directors of the Company
as a group:
<TABLE>
<CAPTION>
NAME AND ADDRESS NO. OF PERCENT
OF BENEFICIAL OWNER SHARES OF CLASS
------------------------------------------------------------------------- ---------- --------
<S> <C> <C>
Tele-Communications, Inc.(1)............................................. 17,566,702 24.9%
5619 DTC Parkway
Englewood, Colorado 80111
Dietche & Field Advisors, Inc............................................ 4,542,000 6.4
437 Madison Avenue
21st Floor
New York, New York 10022
Robert R. Bennett(2)..................................................... 0 --
John M. Draper(2)........................................................ 20,000 *
David F. Dyer(3)......................................................... 0 --
J. Anthony Forstmann..................................................... 0 --
Leo J. Hindery, Jr.(4)................................................... 60,000 *
Gerald F. Hogan(5)....................................................... 41,037 *
George C. McNamee(4)..................................................... 70,000 *
Honore A. Le Brun, III(6)................................................ 20,027 *
Michael W.D. McMullen(7)................................................. 20,043 *
L. Douglas Bailey(8)..................................................... 20,000 *
All officers and directors as a group (19 persons)(9).................... 497,179 *
</TABLE>
---------------
* Percentage of shares beneficially owned does not exceed 1% of the class.
The following table sets forth information relating to the beneficial
ownership of the Company's Class B Common Stock as of March 13, 1995:
<TABLE>
<CAPTION>
NAME AND ADDRESS NO. OF PERCENT
OF BENEFICIAL OWNER SHARES OF CLASS
------------------------------------------------------------------------- ---------- --------
<S> <C> <C>
Tele-Communications, Inc.(1)............................................. 20,000,000 100%
5619 DTC Parkway
Englewood, Colorado 80111
</TABLE>
---------------
(1) In addition to its 17,566,702 shares of Common Stock, TCI also is the
beneficial owner of 20,000,000 shares of Class B Common Stock. All or any
portion of such shares of Class B Common Stock may be converted at any time
into an equal number of shares of Common Stock. If TCI were to convert all
of its shares of Class B Common Stock into Common Stock, it would own, in
total, 37,566,702 shares of Common Stock, or 41.5% of the total number of
shares of Common Stock outstanding. Because each share of Class B Common
Stock is entitled to 10 votes per share, TCI is the beneficial owner of
shares representing approximately 80.4% of the voting power of the Company's
Common Stock. The shares reported as beneficially owned by TCI in the Common
Stock table and the
4
<PAGE> 8
Class B Common Stock table assume that none of the shares of Class B Common
Stock beneficially owned by TCI have been converted into Common Stock.
(2) Messrs. Bennett and Draper are officers of Liberty. The share ownership
totals for such persons do not include shares beneficially owned by TCI.
(3) Does not include 1,500,000 shares of Common Stock issuable upon exercise of
unvested options granted pursuant to the Company's 1986 Stock Option Plan
for Employees (the "Employee Option Plan").
(4) Includes 60,000 shares of Common Stock issuable upon exercise of vested
options granted pursuant to the Company's 1986 Stock Option Plan for Outside
Directors (the "Directors Plan"). Does not include 30,000 shares of Common
Stock issuable upon exercise of non-vested options granted pursuant to the
Directors Plan. See "COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS --
Compensation of Outside Directors."
(5) Includes 41,037 shares of Common Stock issuable upon exercise of vested
stock appreciation rights ("SARs") granted pursuant to Mr. Hogan's
employment agreement, based upon the difference between the closing price of
the Company's Common Stock on March 13, 1995, and the exercise price of the
SARs. Does not include 492,438 non-vested SARs granted pursuant to Mr.
Hogan's employment agreement. Does not include shares of Common Stock held
by Mr. Hogan solely as custodian under the 1990 Executive Stock Award
Program (the "Award Program"). See "COMPENSATION OF DIRECTORS AND EXECUTIVE
OFFICERS -- Employment Agreements."
(6) Includes 20,000 shares of Common Stock issuable upon exercise of vested
options pursuant to the Employee Option Plan and 27 shares held in the
Company's Amended and Restated 401(k) Retirement Savings Plan ("the 401(k)
Plan"). Does not include 80,000 shares of Common Stock issuable upon
exercise of non-vested options.
(7) Includes 20,000 shares of Common Stock issuable upon exercise of vested
options pursuant to the Employee Option Plan and 43 shares held by Mr.
McMullen's son. Does not include 80,000 shares of Common Stock issuable upon
exercise of non-vested options.
(8) Includes 20,000 shares of Common Stock issuable upon exercise of vested
options pursuant to the Employee Option Plan. Mr. Bailey's employment with
the Company terminated on December 31, 1994, and as a result, these vested
options will expire on March 31, 1995, if not exercised.
(9) Includes 277,600 shares of Common Stock issuable upon exercise of vested
options granted pursuant to the Directors Plan and the Employee Option Plan.
Includes 41,037 shares of Common Stock issuable upon exercise of vested
SARs, based upon the difference between the closing price of the Company's
Common Stock on March 13, 1995, and the exercise price of the SAR. Includes
2,215 shares held in the 401(k) Plan. Includes 39,000 non-vested shares of
Common Stock granted pursuant to the Award Program. Does not include
2,198,900 shares of Common Stock issuable upon exercise of non-vested
options granted pursuant to the Directors Plan and the Employee Option Plan
and 492,438 non-vested SARs.
ELECTION OF DIRECTORS
Seven directors are to be elected by the stockholders of the Company to
hold office until the Annual Meeting of stockholders for the year ending
December 31, 1995, or until their respective successors have been elected. It is
intended that proxies granted by stockholders in the form enclosed will be
voted, unless otherwise directed, in favor of electing the following persons as
directors: Messrs. Robert R. Bennett, John M. Draper, David F. Dyer, J. Anthony
Forstmann, Leo J. Hindery, Jr., Gerald F. Hogan and George C. McNamee. Messrs.
Forstmann and McNamee have been designated by the Board as nominees for the
positions on the
5
<PAGE> 9
Board to be elected by holders of Common Stock voting as a separate class.
Election of the remaining directors requires the favorable vote by the holders
of a majority of the outstanding shares of Common Stock and Class B Common
Stock, voting as a single class, present in person or represented by proxy and
entitled to vote thereon at the meeting. In the event any nominee named herein
for election as a director at the Annual Meeting is not available or willing to
serve when the election occurs, proxies in the accompanying form may be voted
for a substitute as well as for the other persons named herein.
INFORMATION REGARDING DIRECTORS
ROBERT R. BENNETT, 36, was appointed to the Board in February 1993. On
August 11, 1993, he was named acting Chairman of the Board and on September 28,
1993, was named Chairman of the Board. Mr. Bennett is Senior Vice President,
Chief Financial Officer, Treasurer and Secretary of Liberty. Mr. Bennett joined
Liberty in June 1990 as Vice President and Treasurer, was named Secretary in
October 1990 and Senior Vice President in September 1991. Prior to joining
Liberty, Mr. Bennett served as Director of Finance for TCI from 1987 until 1989
when he was appointed Vice President. Mr. Bennett resigned his position with TCI
in March 1991. From 1982 to 1989, Mr. Bennett was employed by The Bank of New
York in its Communications, Entertainment and Publishing Division.
JOHN M. DRAPER, 56, was appointed to the Board in July 1993. Mr. Draper has
served as Senior Vice President of Liberty since 1991. Prior to that time, he
was employed by TCI for more than five years, most recently as Senior Vice
President and General Counsel.
DAVID F. DYER, 45, was appointed Chief Operating Officer on August 17, 1994
and appointed to the Board on September 21, 1994. Prior to joining the Company,
Mr. Dyer served as Vice Chairman, Merchandising and Sales, and a member of the
Board of Directors for Lands' End, Inc. Prior to joining Lands' End in 1989, Mr.
Dyer was Senior Vice President, Merchandising and Marketing for Burdines, a
division of Federated Department Stores. He began his retailing career at
Burdines in 1972.
J. ANTHONY FORSTMANN, 57, was appointed to the Board in April 1992. Mr.
Forstmann is Co-Chairman of the Board of The National Registry Inc. ("NRI"). Mr.
Forstmann served as a Managing Director of J.A. Forstmann & Co., a Los
Angeles-based merchant banking firm, from October 1987 to October 1991. He co-
founded Forstmann-Leff Associates, an institutional money management firm, in
1968 and was a Managing Director thereof from its inception until October 1987.
Mr. Forstmann has been a Limited Partner of Forstmann Little & Co. since its
inception in 1978, and is also a director of Cities in Schools, a non-profit
corporation.
LEO J. HINDERY, JR., 47, was appointed to the Board in July 1993. Mr.
Hindery founded InterMedia Partners, a multi-system cable television operator,
in 1988 and has served as Managing General Partner and Chief Executive Officer
of InterMedia Partners and its affiliated entities ("InterMedia") since that
time. Prior to 1988, Mr. Hindery served as the Chief Officer for Planning and
Finance of The Chronicle Publishing Company. Prior to that, Mr. Hindery was
employed by Becker Paribas Incorporated as Chief Financial Officer and Managing
Director and earlier by Utah International Inc. Mr. Hindery is a Director of
Certus Financial Corporation, Cable Telecommunications Association,
Cabletelevision Advertising Bureau, Inc., and California Pacific Medical Center
Foundation.
GERALD F. HOGAN, 49, was appointed President and Chief Executive Officer on
February 23, 1993, and was appointed to the Board on March 25, 1993. Prior to
becoming President and Chief Executive Officer of the Company, Mr. Hogan served
as Vice-Chairman of Whittle Communications since October 1990. Prior to October
1990, Mr. Hogan was an employee of Turner Broadcasting System, Inc. ("TBS") for
19 years and
6
<PAGE> 10
became a member of its Board of Directors in 1987. Prior to leaving TBS, Mr.
Hogan was a Vice President of TBS and President of Turner Entertainment
Networks, a subsidiary of TBS.
GEORGE C. MCNAMEE, 48, was appointed to the Board in July 1993. Mr. McNamee
is Chairman of First Albany Companies, Inc., the holding company for the
investment banking firm, First Albany Corporation. Mr. McNamee has worked in the
securities business for almost 25 years. He serves as Chairman of the Committee
on Clearance and Settlement of the Securities Industry Association. Mr. McNamee
is a Director of MapInfo Corporation.
BOARD OF DIRECTORS
The Board of Directors of the Company held ten meetings during 1994 and
acted by unanimous written consent on one occasion.
AUDIT COMMITTEE
The Audit Committee, currently consisting of Messrs. Forstmann, Hindery and
McNamee, is empowered to recommend to the Board independent certified public
accounting firms for selection as auditors of the Company; make recommendations
to the Board on auditing matters; examine and make recommendations to the Board
concerning the scope of audits; and review and approve the terms of transactions
between the Company and related party entities. The Audit Committee consists of
those members of the Board who are elected by holders of Common Stock, voting as
a separate class and any other directors selected by the Board. During the year
ended 1994, the Audit Committee met five times and acted by unanimous written
consent once. KPMG Peat Marwick LLP served as the Company's auditors for the
year ended December 31, 1994.
COMPENSATION/BENEFITS COMMITTEE
The Compensation/Benefits Committee (the "Compensation Committee"),
currently consisting of Messrs. Bennett, Draper and Hindery, is authorized to
make recommendations to the Board with respect to executive salaries and bonuses
and administers the 401(k) Plan, the Employee Option Plan, the Award Program,
the Employee Stock Purchase Plans for full-time and part-time employees (the
"Stock Purchase Plans"), and the Employee Equity Participation Plan, an employee
stock ownership plan for non-executive employees of the Company (the "Equity
Plan") adopted in 1994. The Compensation Committee met six times during 1994.
EXECUTIVE COMMITTEE
The Executive Committee, currently consisting of Messrs. Bennett, Hindery
and Hogan, is authorized, subject to certain limitations under Delaware law, to
exercise all of the powers of the Board in the management of the business and
affairs of the Company while the Board is not in session. The Executive
Committee acted by unanimous written consent two times during 1994.
NOMINATING COMMITTEE
The Nominating Committee, currently consisting of Messrs. Bennett and
Hogan, is authorized to recommend nominees to fill vacancies on the Company's
Board and to recommend a slate of Directors to the stockholders of the Company
for election at the annual meeting of stockholders. The Nominating Committee
does not have a policy with respect to the consideration of nominees recommended
by security holders. The Nominating Committee acted by unanimous written consent
one time during 1994.
7
<PAGE> 11
EXECUTIVE OFFICERS
The following is a list of the current executive officers of the Company
who do not serve on the Board:
BARRY AUGENBRAUN, 55, was appointed Executive Vice President and General
Counsel of the Company in September 1994. Immediately prior to joining the
Company, he was an attorney in the law firm of Orrick, Herrington & Sutcliffe in
New York City from 1991 until September 1994. From 1974 to 1991, he served as
general counsel of the accounting firm of Laventhol & Horwath. Laventhol &
Horwath filed a petition under Chapter 11 of the Federal Bankruptcy Code in
November 1990.
ROBERT F. BUCCOS, 42, was appointed Senior Vice President of Finance and
Administration of Home Shopping Club, Inc. ("HSC") in November 1994. Prior to
this appointment, he served as Vice President of Strategic Planning and
Budgeting for the Company from 1990 to 1994. Mr. Buccos joined the Company in
1988 as Director of Financial Planning & Budgeting. Prior to joining the
Company, Mr. Buccos was Assistant Controller for Maas Brothers/Jordan Marsh from
1986 to 1988, and from 1975 to 1986, he held various control and accounting
positions with other divisions of Allied Stores Corporation.
M. WADE DOWNS, 45, was appointed Senior Vice President of Corporate
Research and Analysis for HSC in August 1994. Mr. Downs joined the Company in
February 1987 and was promoted to Vice President in March 1988.
BRIAN J. FELDMAN, 35, has served as Controller for the Company since
December 1993. He served as Deputy Controller and Assistant Controller for the
Company since May 1989.
PETER J. HARDY, 58, has been Vice President of New Business Development for
the Company since April 1993. Mr. Hardy served from 1975 through January 1993 as
President of Hardy Investment Group which dealt in commercial real estate and
personal computer merchandising. Mr. Hardy filed a petition under Chapter 7 of
the Federal Bankruptcy Code in October 1994.
PETER M. KERN, 27, has been Senior Vice President of Strategic Development
and Corporate Finance since December 1993. He served as Vice President of
Strategic Development and Assistant to the CEO for the Company from March 1993
to December 1993. Prior to joining the Company in March 1993, he served as Vice
President of Corporate Finance and Strategic Development for Whittle
Communications, L.P. Mr. Kern also worked at the New York investment banking
firm, Bear, Stearns & Co., Inc.
HONORE A. LE BRUN, III, 49, has been Executive Vice President of Affiliate
Sales and Marketing since December 1993. Prior to joining the Company, he served
as Senior Vice President of TV Food Network from January 1993 to December 1993.
Prior to that appointment, he served concurrently as General Manager and
President of Meridian Broadcasting Corporation, which filed in 1991 for
protection under the Federal Bankruptcy Code, and General Manager and Vice
President of Frey Communications South.
KEVIN J. MCKEON, 38, has been Senior Vice President of Accounting and
Finance and Treasurer since December 1993. He served as Controller of the
Company from July 1992 to December 1993. Prior to that appointment, he served as
Executive Director of Finance since May 1991. From December 1986 to September
1990, he served in various financial capacities for the Company. From September
1990 to March 1991, Mr. McKeon served as Vice President and Chief Financial
Officer of Pharmacy Management Services, Inc. of Tampa, Florida.
MICHAEL W. D. MCMULLEN, 52, has been President of the Company's
International Division since August 1993. Prior to joining the Company, he
founded Michael W.D. McMullen & Associates Inc., an international consulting
company, in 1983. Previously, he worked with The Coca-Cola Company from 1969
until 1983 in the development of its international business.
8
<PAGE> 12
STELLA L. TAVILLA, 40, was appointed Chief Information Officer and
Executive Vice President of Management Information Services in October 1994.
Prior to this appointment, Ms. Tavilla served since September 1990 as Executive
Vice President of Management Information Services. She served as Senior Vice
President of Management Information Systems from October 1987 to September 1990.
From June 1985 to October 1987, Ms. Tavilla served as Director of Management
Information Systems for the Company.
ROBERT THATCHER, 45, was appointed Senior Vice President of Fulfillment for
HSC in December 1994. Prior to joining the Company, he was employed by The
Limited, Inc. from 1978 to 1994. He served as Vice President of Victoria's
Secret Catalogue distribution center from 1989 to 1994, and from 1978 to 1989,
he served in various management capacities for Brylane Mail Order.
SECTION 16 REPORTS
JOHN M. DRAPER filed one Form 4 stock ownership report reflecting a single
transaction one day late.
9
<PAGE> 13
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION OF OUTSIDE DIRECTORS
The Company pays an annual fee of $30,000 to each director who is not
employed by the Company or an affiliate of the Company. It also pays each such
director $1,000 for each meeting of the Board which he attends or $5,000 for
each non-telephonic meeting in excess of six meetings (excluding telephonic
meetings) in a year, plus reimbursement for all reasonable expenses incurred by
such director in connection with his attendance at any meeting of the Board.
Furthermore, the Company pays each member of a committee of the Board, who is
not employed by the Company as an officer, $1,000 for each meeting of a
committee of the Board which he attends ($500 if in conjunction with a Board
meeting), plus reimbursement for any expenses incurred in connection with his
attendance at any committee meeting. Each member of the Board who is also an
employee of an affiliate is paid an annual fee of $10,000 and $1,000 for each
Board or committee meeting which he attends ($500 for a committee meeting if in
conjunction with a Board meeting) and also is reimbursed for all reasonable
expenses incurred in connection with attending any meeting of the Board.
The directors who are not employees of the Company also participate in the
Directors Plan, pursuant to which each such director has been granted an option
to purchase 90,000 shares of Common Stock. The exercise price of options granted
under the Directors Plan is equal to the closing price of the Company's Common
Stock on the date of election to the Company's Board. Such options become
exercisable in three equal, annual increments beginning on the date of grant.
Each option expires five years after it becomes exercisable. Directors
commencing a sixth year of service on the Company's Board are granted an option
to purchase an additional 90,000 shares of Common Stock, which options become
exercisable in five equal, annual increments beginning on the date of grant. The
exercise price of such options is the closing price of the Common Stock on the
date of grant. Each option expires five years after it becomes exercisable. All
options granted to a director under the Directors Plan expire 30 days after
resignation or termination as a director. Under the Directors Plan, options to
purchase 180,000 shares of Common Stock at an exercise price of $14.75 are held
by two directors. Messrs. Bennett and Draper have waived their rights to
participate in the Directors Plan.
SUMMARY OF EXECUTIVE OFFICER COMPENSATION
The following sets forth the annual and long-term compensation for services
to the Company for the years ended December 31, 1994, and 1993, of those persons
who were during the year ended December 31, 1994, (i) the Chief Executive
Officer of the Company and (ii) the other four most highly compensated officers
of the Company (the "Executive Officers").
10
<PAGE> 14
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION -------------------------
--------------------------------------- RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
YEAR SALARY BONUS COMPENSATION AWARDS OPTIONS/SARS COMPENSATION
NAME & PRINCIPAL POSITION (1) ($) ($) ($)(2) ($) (#)(3) ($)
---------------------------------------- ---- -------- ------ ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gerald F. Hogan......................... 1994 500,000 -- 98,685 -- -- 1,780(6)
President and Chief Executive 1993 432,692 -- 120,436 -- 984,876 935(5)
Officer 1992 -- -- -- -- -- --
David F. Dyer........................... 1994 653,846 -- -- -- 1,500,000 388(5)
Chief Operating Officer(7) 1993 -- -- -- -- -- --
1992 -- -- -- -- -- --
Honore A. Le Brun, III.................. 1994 199,195 75,000 -- -- -- 502(5)
Executive Vice President 1993 20,192 -- -- -- 100,000 44(5)
Affiliate Sales & Marketing 1992 -- -- -- -- -- --
Michael W. D. McMullen.................. 1994 220,000 50,000 -- -- -- 554(5)
President, HSN International 1993 91,384 -- -- -- 100,000 489(5)
Division 1992 -- -- -- -- -- --
L. Douglas Bailey....................... 1994 225,000 -- -- -- -- 1,117(6)
President, Home Shopping 1993 196,154 -- -- -- 100,000 424(5)
Club(4) 1992 -- -- -- -- -- --
</TABLE>
---------------
(1) None of the Executive Officers were employed by the Company until 1993.
(2) Disclosure of perquisites and other personal benefits, securities or
property received by an Executive Officer is required only in the event that
the aggregate amount of such compensation exceeds the lesser of $50,000 or
10% of the total of the Executive Officer's salary and bonus for the year.
The amounts set forth in this column represent reimbursements for relocation
expenses and related taxes. Does not include the purchase by the Company of
Mr. Hogan's and Mr. Dyer's homes. See "Employment Agreements."
(3) The amount listed represents the total number of shares of Common Stock
underlying the options or SARs which were granted to the Executive Officer
in that year.
(4) Mr. Bailey's employment with the Company terminated December 31, 1994. See
"Employment Agreements."
(5) Represents the premiums paid by the Company to provide term life insurance.
No cash surrender value is generated under these policies.
(6) Includes $520 which represents the purchase price of shares of Common Stock
allocated under the 401(k) Plan. The remainder of this amount represents the
premiums paid by the Company to provide term life insurance. No cash
surrender value is generated under these policies.
(7) Mr. Dyer's salary includes $153,846 in base salary and $500,000 representing
the partial forgiveness of a loan. See "Employment Agreements."
11
<PAGE> 15
OPTION AND SAR GRANTS
Set forth below is information with respect to options to purchase the
Company's Common Stock and SARs granted to the Executive Officers during 1994
under the Employee Option Plan.
OPTION AND SAR GRANTS IN LAST FISCAL YEAR (1)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
NUMBER OF % OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS/SARS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM(2)
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION ---------------------------
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---------------------------- ------------ ------------ -------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Gerald F. Hogan............. -- -- -- -- -- --
David F. Dyer............... 1,500,000 45.2% 11.5 Aug.16, 2004 10,848,432 27,492,057
Honore A. Le Brun, III...... -- -- -- -- -- --
Michael W. D. McMullen...... -- -- -- -- -- --
L. Douglas Bailey........... -- -- -- -- -- --
</TABLE>
---------------
(1) Under the terms of the Employee Option Plan, the Compensation Committee
retains discretion, subject to certain plan limitations, to modify the terms
of the outstanding options and to reprice such options. All options are
exercisable at the closing price of the Company's Common Stock on the date
prior to the grant date. The exercise price and tax withholding obligations
related to the exercise may be paid by cash or delivery of already-owned
shares, subject to certain conditions. Under the Employee Option Plan, each
option grant becomes exercisable in five equal, annual increments commencing
one year from the grant date. Each such option expires ten years from the
date of grant. In addition, each employee's option becomes fully exercisable
in the event of a termination of employment, other than for cause, by the
Company following a change in control of the Company.
(2) Potential realizable values are reported net of the option exercise price,
but before taxes. These amounts represent certain assumed rates of
appreciation and assumed holding periods. Actual gains, if any, on stock
option or SAR exercise will be dependent upon the future performance of the
Common Stock as well as the option or SAR holder's continued employment
through the vesting period. The amounts reflected in this table may not
necessarily be achieved.
12
<PAGE> 16
OPTION AND SAR EXERCISES
Set forth below is information with respect to exercises of options under
the Employee Option Plan and SARs by the Executive Officers during 1994 and the
year end value of all unexercised options and SARs held by such persons.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS/SARS AT FISCAL THE-MONEY OPTIONS/SARS AT
SHARES YEAR END (#) FISCAL YEAR END ($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------------------- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gerald F. Hogan................ 0 -- 246,219 738,657 430,883 1,292,650
David F. Dyer(2)............... 0 -- -- 1,500,000 -- --
Honore Le Brun, III(2)......... 0 -- 20,000 80,000 -- --
Michael W. D. McMullen(2)...... 0 -- 20,000 80,000 -- --
L. Douglas Bailey(3)........... 0 -- 20,000 -- 30,000 --
</TABLE>
---------------
(1) Represents the difference between the closing price of the Company's Common
Stock on December 31, 1994 and the exercise price of the option/SAR.
(2) The exercise price of the option is greater than the market closing price of
the Common Stock on December 31, 1994.
(3) Mr. Bailey's employment with the Company terminated on December 31, 1994.
Options to purchase 80,000 shares of Common Stock granted on March 15, 1993
were cancelled on December 31, 1994. Mr. Bailey's 20,000 shares of vested
options will expire on March 31, 1995, if not exercised.
EMPLOYMENT AGREEMENTS
Effective as of February 23, 1993, Mr. Hogan and the Company entered into a
four year employment agreement which is automatically renewable for successive
one year terms unless either party provides 180 days written notice to the other
party. Mr. Hogan will receive an annual base salary of not less than $500,000
and may participate in any bonus program established for executives of the
Company and in any benefits 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 his employment with
the Company continued until the expiration of the employment term plus any
annual bonus for the year of termination. He will receive a minimum of four
weeks paid vacation per year. The Company reimbursed Mr. Hogan for relocation
expenses as noted in the Summary Compensation Table. The Company purchased Mr.
Hogan's house in Knoxville, Tennessee for $1,100,000, based on an appraised
value, and agreed to pay his monthly mortgage on that residence plus certain
maintenance and insurance costs through the date of sale, which took place on
November 30, 1994. Mr. Hogan 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 control, whether or not Mr. Hogan has elected to resign,
all unvested SARs will vest immediately prior to the change in control and shall
remain exercisable for a one year period. 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
13
<PAGE> 17
the excess of the fair market value of each share of Common Stock over $8.25.
The SARs also will vest in the event of death or disability. In addition,
resignation by Mr. Hogan following a change in control may result in entitlement
to all unpaid compensation through the term of the contract. A change in control
will be deemed to occur if TCI ceases to be the sole beneficial owner of the
Company's voting securities having a majority of the outstanding voting power of
the Company or if TCI experiences a change in control, or if the assets of the
Company are sold to a non-affiliate of TCI. Mr. Hogan may not compete with the
Company during his employment term and is prohibited from disclosing information
relating to the business practices of the Company.
Effective as of August 16, 1994, Mr. Dyer and the Company entered into a
five year employment agreement which is automatically renewable for successive
one year terms unless either party provides 180 days' written notice to the
other party. Mr. Dyer will receive an annual base salary of not less than
$500,000, increased at least four percent annually, and may participate in any
bonus program established for executives of the Company and in any benefits
provided to employees of the Company. Under the employment agreement, the
Company loaned Mr. Dyer $1,000,000 at an interest rate of 5.80 percent per annum
due on the earlier of August 26, 1996 or termination of employment. In general,
the agreement provides for forgiveness of the loan during Mr. Dyer's employment
with the Company as follows: $500,000 plus accrued interest on January 1, 1995;
$250,000 plus accrued interest on July 1, 1995; and $250,000 plus accrued
interest on August 16, 1996. Termination of Mr. Dyer's employment by the Company
other than for cause will result in payment of the annual base salary amount
that would have been payable had his employment with the Company continued until
the expiration of the employment term plus any annual bonus for the year of
termination, and forgiveness of the loan. He will receive a minimum of four
weeks paid vacation per year. The Company reimbursed Mr. Dyer for relocation
expenses. The Company purchased Mr. Dyer's home in Madison, Wisconsin, for
$649,000 based on an appraised value. Mr. Dyer received stock options with
respect to 1,500,000 shares of the Company's common stock at an exercise price
of $11.50 per share. The stock options vest twenty percent per year over a five
year period and are exercisable until August 16, 2004. The stock options will
fully vest and be exercisable for a one year period upon termination of
employment (other than for cause), for certain actions or failure to act by the
Company in accordance with the contract, upon change of control of the Company,
or in the event of death. If Mr. Dyer resigns from the Company for reasons other
than change of control, or is terminated for cause, his vested options will be
exercisable for a one year period. If employment terminates as a result of
disability, the options will lapse at the earlier of the end of the ten year
term or the end of a period equal to one month for each full or partial year of
employment with the Company from the most recent date of employment. The Company
will also reimburse Mr. Dyer up to $10,000 per year for a flight training
course. In addition, resignation by Mr. Dyer following a change in control may
result in entitlement to all unpaid compensation through the term of the
contract. A change in control will be deemed to occur if TCI ceases to be the
sole beneficial owner of the Company's voting securities having a majority of
the outstanding voting power of the Company, if TCI experiences a change in
control, or if the assets of the Company are sold to a non-affiliate of TCI. Mr.
Dyer may not compete with the Company during his employment term and is
prohibited from disclosing information relating to the business practices of the
Company.
In September 1993, Mr. McMullen and the Company entered into a two year
employment arrangement. Under this arrangement, Mr. McMullen will receive a base
annual compensation of $220,000 and was guaranteed a $50,000 bonus in year one
of his employment. Mr. McMullen was also granted, under the Employee Option
Plan, options to purchase 100,000 shares of the Company's Common Stock.
In December 1993, Mr. Le Brun and the Company entered into a two year
employment arrangement. Under this arrangement, Mr. Le Brun was to receive a
base annual compensation of $175,000 and $200,000 in
14
<PAGE> 18
years one and two of his employment arrangement, respectively. Subsequently, Mr.
Le Bruns's salary was increased to $200,000 in June 1994 and $225,000 in
November 1994. Mr. Le Brun was also guaranteed a $50,000 bonus in year one of
his employment, with a maximum potential bonus of $150,000 over the term of his
employment arrangement. In January 1995, he received a $75,000 bonus. Mr. Le
Brun was also provided with $2,000 a month allowance for housing and related
taxes and was granted options to purchase 100,000 shares of the Company's Common
Stock under the Employee Option Plan.
In 1994, the Company entered into agreements with Celia H. Bachman, former
Senior Vice President, General Counsel and Secretary of the Company, and L.
Douglas Bailey relating to their separation from the Company. Under the terms of
Ms. Bachman's agreement, effective January 7, 1994, she was paid $359,238 in a
lump sum distribution and immediately vested in options for 12,000 shares of
Common Stock granted pursuant to the Employee Option Plan. Under the terms of
Mr. Bailey's agreement, effective December 31, 1994, he received $150,000 in
January 1995 and will receive $247,500 over a 12-month period.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Bennett and Draper, each of whom is an officer of Liberty, serve
with Mr. Hindery on the Compensation Committee. See "CERTAIN TRANSACTIONS AND
BUSINESS RELATIONSHIPS."
On April 28, 1992, the Company purchased 100,000 non-voting shares of
Series A Preferred Stock, par value $.01 per share, of NRI for $10,000,000 in
cash and services. The shares of Series A Preferred Stock are convertible into a
total of 6,000,000 shares of NRI Common Stock and contain certain liquidation
preferences. J. Anthony Forstmann, the Co-Chairman of NRI, was subsequently
appointed to the Board of the Company. Gerald F. Hogan and Peter M. Kern serve
on the Board of Directors of NRI. Mr. Hogan and Mr. Kern each have been granted
options to purchase 45,000 shares of common stock of NRI at an exercise price of
$3.75 per share which vest in equal installments over a three year period
commencing August 12, 1994.
In the normal course of conducting its electronic retailing business, the
Company's principal operating subsidiary, HSC, enters into agreements with the
operators of cable television systems and operators of broadcast television
stations for the carriage of HSC programming. During 1994, HSC entered into
agreements with cable operators which are affiliates of TCI. These long-term
contracts provide for a minimum subscriber guarantee and incentive payments
based on the number of subscribers. Commitments under these contracts were
approximately $34,272,000, of which $8,261,000 was paid in 1994. The balance of
$26,011,000 will be paid in 1995. Payments under these contracts for cable
commissions and advertising were $6,638,000 for the year ended December 31,
1994. Robert R. Bennett and John M. Draper, who serve on the Board, are officers
of Liberty.
HSC's programming is carried by cable systems which are operated by
InterMedia. Mr. Hindery is the managing general partner of InterMedia and TCI
has a 40% limited partnership interest in InterMedia. HSC and InterMedia entered
into agreements both prior and subsequent to Mr. Hindery's appointment to the
Board. These agreements contain terms and conditions which are consistent with
HSC's other cable agreements. During 1994, HSC entered into a new agreement with
InterMedia. Commitments under this contract for cable distribution fees of
$412,000 were incurred and paid in 1994. In addition, payments to InterMedia for
cable commissions and advertising were $631,000 in 1994.
COMPENSATION/BENEFITS COMMITTEE REPORT TO SHAREHOLDERS
The Compensation Committee is responsible for establishing the Company's
executive compensation policy, setting compensation and related performance
goals for the Company's senior executives, and
15
<PAGE> 19
administering the Company's 401(k) Plan, the Employee Option Plan, the Award
Program, the Stock Purchase Plan and the Equity Plan.
The goal of the Compensation Committee is to attract and retain highly
qualified executive officers and key employees, which if properly accomplished,
will enhance stockholder value. The Compensation Committee believes that a link
should exist between executive compensation and appreciation in the price of the
Company's common stock. The Compensation Committee believes it has followed this
strategy by developing and implementing a compensation policy which seeks to
attract talented executives and to align the financial interests of the
Company's senior executives with those of its stockholders. The Company attempts
to realize these goals by providing an aggregate competitive compensation
package consisting of cash compensation and permitting executive officers to
obtain an ownership stake in the Company commensurate with their relative levels
of experience and responsibility.
In establishing compensation for its senior executive officers, the
Compensation Committee follows its belief that the total compensation package
should be at or near median market rates in the telecommunications and retail
industries for seasoned executives with the necessary business experience and
acumen. Compensation for executives may be reviewed periodically by the
Compensation Committee and may be adjusted based on, among other things, a
subjective determination that the individual's contribution to the Company has
increased and increases in median competitive pay levels. During 1994, the
Compensation Committee increased the base salaries of certain of the Company's
senior executives. The determination to increase salary levels was based in part
on the recommendations of a national compensation consultant who completed a
competitive market survey for certain executive positions at the Company in
November 1993. The companies surveyed were in the telecommunications and retail
industries, as well as certain other industries, with sales in the $1.0 billion
to $1.2 billion range. Management relied on the survey results during 1994 as
well as its subjective judgment in determining executive compensation. The
Company has agreed to retain a national benefits consulting firm to undertake a
review of certain aspects of the Company's compensation programs with special
emphasis on the merchandising and management information systems departments to
help the Company remain competitive in attracting and retaining executives.
Periodic grants of stock options and stock to executive officers and other
key employees which vest over time, are intended to foster a long-term
commitment to the Company and motivate executives to improve long-term stock
market performance. Stock options are granted under the Employee Option Plan at
the prevailing market value and will permit the holder to participate in
increases in the Company's Common Stock price following the date of grant.
Generally, grants vest in equal amounts over five years, and executives must be
employed by the Company to vest in the options. During 1994, the Committee
elected to extend participation in the Employee Option Plan to a broader base of
employees, and increased the number of employees granted stock options from
approximately 100 employees to approximately 400 employees. During the year,
options to purchase 3,316,000 shares of Common Stock were granted with exercise
prices ranging from $10.25 to $12.25 to employees including 1,812,500 options
granted to executive officers, 1,500,000 of which were granted to Mr. Dyer as
part of his employment agreement, at an exercise price of $11.50. In determining
the number of options to grant to a particular employee, the Compensation
Committee relies heavily on recommendations of management which are based on a
number of factors, including job responsibility, salary, title, the number of
options previously granted and tenure with the Company. Then, the Committee
makes a subjective determination as to whether the recommendation of management
is appropriate.
Shares of stock have been granted to a broad spectrum of employees,
including executive officers, under the Award Program. Both management and the
Compensation Committee have from time to time in the past, and may, in the
future, make a subjective determination as to the number of shares to grant to a
particular
16
<PAGE> 20
employee. The shares granted under the Award Program vest equally over a period
of five years. No previously forfeited shares of employees were reallocated
under the Award Program during 1994.
The Compensation Committee also notes that the Company's Stock Price
Performance Graph utilizes the Standard and Poor's Retail Specialty Index as the
Company's peer group. Due to the hybrid nature of the Company's business, which
is based on the telecommunications industry as well as the retail industry, the
Compensation Committee believes that it is appropriate to consider compensation
based on comparable levels in both industries. Therefore, the management of the
Company and the Compensation Committee do not restrict compensation comparisons
to the Standard and Poor's Retail Specialty Index.
The Compensation Committee also may consider performance-based bonuses for
certain selected employees. An executive bonus program was implemented in 1994
based on the Company achieving specific operating cash flow. The bonus pool was
calculated based on a percentage of operating cash flow and provided for
possible bonuses ranging from 10 percent to 25 percent of annual base cash
compensation. Because the operating cash flow requirement was not satisfied, no
bonuses were paid under this program in 1994. The Committee has authorized
management to develop a bonus program for 1995. The specific elements of the
plan have not yet been formulated.
Mr. Hogan became President and Chief Executive Officer of the Company in
February 1993, following the change in control of the Company. Consistent with
the Company's philosophy of linking executive compensation closely to enhanced
stockholder value, Mr. Hogan's compensation is governed by the terms of a four
year employment agreement and is significantly dependent upon the market
performance of the Company's Common Stock through the grant of SARs. His base
salary is identical to that of his predecessor. The number of SARs granted to
Mr. Hogan was based on one percent of the Company's issued and outstanding
shares of Common Stock at Mr. Hogan's date of hire. The level of SARs was
determined through negotiations prior to Mr. Hogan joining the Company.
Mr. Dyer became Chief Operating Officer of the Company in August 1994. Mr.
Dyer's compensation package, including the grant of stock options to purchase
1.5 million shares of the Company's Common Stock and a $1.0 million loan which
will be forgiven over a two year period, was negotiated between the Company and
Mr. Dyer.
Generally, the Compensation Committee expects that the compensation
packages granted to executives will be consistent with the limits established by
the Internal Revenue Code Section 162(m), which generally limits the corporate
tax deduction for compensation paid to certain executive officers to $1,000,000.
However, depending upon the date of exercise and the fair market value of the
Company's Common Stock upon exercise, the SARs granted to Mr. Hogan may cause
the Company to exceed the deductibility limits of Section 162(m).
The Compensation Committee approved severance arrangements for three
executive officers during 1994. The Company does not have a formal severance
policy for executive officers. The Compensation Committee took into account the
executives' positions and relative contributions to the operation of the Company
in rendering a subjective determination as to their cash severance compensation
packages. Vesting in non-cash compensation was governed by the terms of the
Employee Option Plan and the Award Program.
COMPENSATION/BENEFITS COMMITTEE
Robert R. Bennett
John M. Draper
Leo J. Hindery, Jr.
17
<PAGE> 21
STOCK PRICE PERFORMANCE GRAPH
The Stock Price Performance Graph below shall not be deemed incorporated by
reference by a general statement incorporating by reference this proxy statement
into any filing under the Securities Act or under the Exchange Act, except to
the extent the Company specifically incorporates this information by reference,
and shall not otherwise be deemed filed under such Acts.
The graph below compares cumulative total return of the Company's Common
Stock, Standard & Poor's 500 Index and Standard & Poor's Retail Specialty Index
(the "Peer Group").
HOME SHOPPING NETWORK, INC. STOCK PRICE PERFORMANCE
COMPARATIVE FIVE-YEAR TOTAL RETURNS*
HOME SHOPPING NETWORK, S&P 500, PEER GROUP
(PERFORMANCE THROUGH DECEMBER 31, 1994)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) HSN S&P 500 PEER GROUP
<S> <C> <C> <C>
1989 100.00 100.00 100.00
1990 55.17 96.83 92.45
1991 81.03 126.41 149.67
1992 117.93 136.25 166.36
1993 229.48 150.00 169.83
1994 154.27 151.97 142.51
</TABLE>
Assumes $100 invested at the close of trading on the last trading day
preceding the first day of the fifth preceding fiscal year in HSN common stock,
S&P 500, and Peer Group.
Source: Value Line, Inc.
---------------
* Cumulative total return assumes reinvestment of dividends.
18
<PAGE> 22
CERTAIN TRANSACTIONS AND BUSINESS RELATIONSHIPS
On December 28, 1992, the Company distributed all of the shares of capital
stock of Silver King Communications, Inc. ("SKC"), its former wholly-owned
subsidiary, to the stockholders of record of the Company (the "Silver King
Distribution"). Liberty has an assignable, irrevocable option to purchase a
controlling interest in SKC which has been extended to February 11, 1999. The
exercise price of the option is $1.25 per share through February 11, 1995, with
the exercise price increasing in the amount of $.25 each year thereafter. The
exercisability of the option is subject to certain government approvals and
other conditions.
HSC has agreements with stations owned by SKC for carriage of the Company's
programming. Expense under these agreements in 1994 was approximately
$42,415,000. During 1994, SKC paid $148,156,000 to the Company under an
outstanding loan agreement, which was fully repaid on August 1, 1994.
During 1994, a subsidiary of the Company and Black Entertainment
Television, Inc. ("BET") entered into an agreement to promote a direct response
marketing program and a shop-at-home show concept known as BET Shop. The parties
continue to test the BET Shop concept. TCI beneficially owns an 18.3% interest
in BET.
See "COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS -- Compensation
Committee Interlocks and Insider Participation."
APPOINTMENT OF INDEPENDENT AUDITORS
Deloitte & Touche LLP served as the Company's independent auditor since the
fiscal year ending August 31, 1990. On February 23, 1993, the Company dismissed
Deloitte & Touche LLP as its auditors when the Board of Directors voted
unanimously to retain the services of KPMG Peat Marwick LLP as auditors to
examine the books and accounts of the Company for the fiscal year ending August
31, 1993. The decision to dismiss Deloitte & Touche LLP and engage new auditors
followed Liberty's acquisition of 20,000,000 shares of Class B Common Stock,
which represents voting control of the Company. On July 13, 1993, the Board of
Directors of the Company approved a change of the Company's fiscal year end to
December 31, effective January 1, 1993. Subsequent to the change in the
Company's fiscal year end, KPMG Peat Marwick LLP was engaged as auditors to
examine the books and records of the Company for the four months ended December
31, 1992, and the years ended December 31, 1993 and 1994.
Neither Deloitte & Touche LLP's report dated October 15, 1992 on the
Company's financial statements for the year ended August 31, 1992, nor its
report dated November 13, 1991, for the year ended August 31, 1991, contained an
adverse opinion or a disclaimer of opinion, and neither report was qualified or
modified as to uncertainty, audit scope or accounting principles.
During the Company's two fiscal years ended August 31, 1992 and 1991, and
the subsequent interim period through February 23, 1993, there were no
disagreements with Deloitte & Touche LLP on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure
which if not resolved to their satisfaction would have caused them to make
reference to the subject matter of the disagreement in connection with Deloitte
& Touche LLP's report on the Company's financial statements for such periods.
During the Company's two fiscal years ended August 31, 1992 and 1991, and
the subsequent interim period ended February 23, 1993, Deloitte & Touche LLP did
not advise the Company as to the presence of any reportable event as described
in Item 304 of Regulation S-K.
19
<PAGE> 23
The Company has not, during its two fiscal years ended August 31, 1992 and
1991 and the subsequent interim period ended February 23, 1993, consulted with
KPMG Peat Marwick LLP regarding the type of audit opinion that might be rendered
on the Company's financial statements.
Representatives of KPMG Peat Marwick LLP are expected to be present at the
Annual Meeting and will be available to respond to appropriate questions and may
make a statement if they desire to do so.
STOCKHOLDER PROPOSALS
Any proposal which a stockholder intends to present at the Annual Meeting
of stockholders in 1996 must be received by the Company prior to November 15,
1995, in order to be considered for inclusion in the proxy statement and form of
proxy relating to such meeting.
OTHER MATTERS
The Board of Directors knows of no other matters which are likely to be
brought before the Annual Meeting. If any matters are brought before the
meeting, however, Gerald F. Hogan, who is President and Chief Executive Officer
of the Company and the proxy agent named in the enclosed proxy, will vote on
such matters in accordance with his best judgment.
By Order of the Board of Directors,
BARRY AUGENBRAUN
----------------
BARRY AUGENBRAUN
Secretary
March 30, 1995
St. Petersburg, Florida
20
<PAGE> 24
(HOME SHOPPING NETWORK LOGO)
<PAGE> 25
APPENDIX A
HOME SHOPPING NETWORK, INC.
REVOCABLE PROXY FOR
MAY 10, 1995 MEETING OF STOCKHOLDERS
COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF HOME SHOPPING
NETWORK, INC.
The undersigned hereby appoints Gerald F. Hogan, President and Chief
Executive Officer of Home Shopping Network, Inc. (the "Company"), proxy with
full power of substitution, to vote all shares of Common Stock the undersigned
is entitled to vote at the Annual Meeting of Stockholders of the Company to be
held at the Holiday Inn St. Petersburg/Clearwater International Airport Hotel,
3535 Ulmerton Road, Clearwater, Florida, 10:00 a.m., Eastern Daylight Time on
May 10, 1995, or at any adjournment thereof, as follows, and to act upon such
matters as may properly come before the meeting, as determined in the best
judgment of the President and Chief Executive Officer of the Company, hereby
revoking any proxy previously given:
1. Election of directors.
<TABLE>
<S> <C> <C> <C>
/ / FOR the nominees listed below / / WITHHOLD AUTHORITY to vote (except as marked to the
contrary below) for the nominees listed below
</TABLE>
(INSTRUCTION: TO WITHHOLD authority to vote for any individual nominee, strike
a line through the nominee named in the list below.)
<TABLE>
<S> <C> <C>
Robert R. Bennett J. Anthony Forstmann Gerald F. Hogan
John M. Draper Leo J. Hindery, Jr. George C. McNamee
David F. Dyer
</TABLE>
2. To ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for 1995.
/ / FOR / / AGAINST / / ABSTAIN
(Continued on other side)
All as set out in the Notice and Proxy Statement relating to the meeting,
receipt of which is hereby acknowledged.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1 AND 2
Shares represented by this proxy will be voted as directed by the
stockholder. If no direction is supplied, the proxy will be voted "FOR"
proposals 1 and 2.
Dated
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(Please sign exactly as name
appears hereon)
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(If stock is owned by more than
one person, all owners should
sign. Persons signing as
executors, administrators,
trustees or in similar
capacities should so indicate.)
