<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D/A
Under the Securities Exchange Act of 1934*
(Amendment No. 4)
HOME SHOPPING NETWORK, INC.
______________________________________________________________________________
(Name of Issuer)
Common Stock, par value $.01 per share
______________________________________________________________________________
(Title of Class of Securities)
437351109
______________________________________________________________________________
(CUSIP Number)
Stephen M. Brett, Esq.
Senior Vice President and General Counsel
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, CO 80111
(303) 267-5500
______________________________________________________________________________
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
August 25, 1996
________________________________________________________________________________
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with this statement [ ]. (A fee
is not required only if the reporting person: (1) has a previous statement on
file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of less than five percent of such class.
See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page should be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 1 of 8 pages
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 4 to
SCHEDULE 13D
Statement Of
TELE-COMMUNICATIONS, INC.
Pursuant to Section 13(d) of the
Securities Exchange Act of 1934
in respect of
HOME SHOPPING NETWORK, INC.
This Report on Schedule 13D relates to the common stock, par value
$.01 per share (the "Common Stock"), of Home Shopping Network, Inc., a Delaware
corporation (the "Company"). The Report on Schedule 13D originally filed by
Tele-Communications, Inc., a Delaware corporation ("TCI" or the "Reporting
Person"), on August 12, 1994, as amended and supplemented by the amendments
thereto previously filed with the Commission (collectively, the "TCI Schedule
13D"), is hereby amended and supplemented to include the information contained
herein, and this Report constitutes Amendment No. 4 to the TCI Schedule 13D.
The summary descriptions contained in this Report of certain
agreements and documents are qualified in their entirety by reference to the
complete texts of such agreements and documents, filed as Exhibits hereto and
incorporated herein by reference.
ITEM 4. PURPOSE OF TRANSACTION
----------------------
Item 4 of the TCI Schedule 13D is hereby amended and supplemented by
adding the following information thereto:
As previously reported, in light of the limitations relating to
increases in TCI's percentage equity ownership of Silver King contained in the
FCC June Order, Diller and TCI had begun discussions with respect to a
restructuring of the proposed transactions contemplated by the Merger Agreement
and the Exchange Agreement or a possible alternative transaction relating to the
Company. In this regard, Diller and TCI considered a transaction which would
result in a merger of a subsidiary of Silver King into the Company (the "HSN
Merger") pursuant to which a portion of TCI's
Page 2 of 8 pages
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consideration in the HSN Merger would consist of a contingent right to acquire
Silver King shares and a portion of its interest in the Company would become an
interest in the surviving corporation in the HSN Merger. Such contingent right
and such interest in the surviving corporation would each be exchangeable into
Silver King shares, in each case, when and as permitted under applicable FCC
regulations, including the FCC June Order. On August 25, 1996, the Boards of
Directors of Silver King and the Company (based, in the case of the Company,
upon the recommendation of a special committee of independent members of the
Board of Directors of the Company) approved a merger transaction and related
transactions pursuant to which a wholly owned subsidiary of Silver King ("Sub")
would be merged with and into the Company, with the result that the Company
would be the surviving corporation and become an 80.1% owned subsidiary of
Silver King following the HSN Merger (with TCI owning the remaining 19.9%
interest in the surviving corporation). In connection with the HSN Merger,
substantially all of TCI's shares of Class B Stock of the Company would be
converted into Silver King Class B Common Stock, which would then be contributed
to an entity ("BDTV II") in which Diller owns all of the voting equity interests
and TCI owns a non-voting equity interest (which non-voting interest constitutes
substantially all the equity of BDTV II).
If the HSN Merger is consummated, the Company would become a
consolidated subsidiary of Silver King. The HSN Merger would cause the Common
Stock to be eligible for termination of registration under the Exchange Act and
to be delisted from the New York Stock Exchange. TCI would no longer have a
controlling interest in the Company. Because substantially all of the shares of
Silver King Class B Common Stock receivable by TCI in the HSN Merger will be
contributed to BDTV II, an entity which (other than with respect to certain
fundamental corporate actions) is controlled by Diller, TCI will not initially
have a controlling interest in Silver King.
In connection with the execution of the HSN Merger Agreement (as
defined below), Silver King, Liberty and certain of Liberty's subsidiaries
entered into a voting agreement, dated August 25, 1996 (the "Voting Agreement"),
pursuant to which such Liberty entities agreed to vote the TCI HSN Shares in
favor of the HSN Merger and to vote the TCI HSN Shares against any action or
agreement that would impede, delay or discourage the HSN Merger. In addition,
pursuant to such Voting Agreement, such Liberty entities agreed not to sell,
transfer or otherwise dispose of the TCI HSN Shares except pursuant to the HSN
Merger or following a termination of the HSN Merger Agreement.
TCI has not made any determination as to its plans or proposals with
respect to the securities of the Company in the event that the HSN Merger is not
consummated. In reaching any decision as to its course of action (as well as to
the specific elements thereof), TCI expects that it would take into
consideration a variety of factors, including but not limited to, the Company's
business and prospects, other developments concerning the Company and the cable
television and entertainment programming industries generally, other business
opportunities available to TCI and other developments with respect to the
business of TCI, general economic conditions and money and stock market
conditions, including the market price of the Common Stock. TCI specifically
reserves the right to change its intention with respect to any of the foregoing
matters in the event the HSN Merger is not consummated, and to take any other
available course of action, which could involve one or more of the types of
transactions or have one or more of the results described in Item 4 of Schedule
13D.
Page 3 of 8 pages
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ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
-------------------------------------
If the HSN Merger is consummated, 19,260,859 shares of Class B Stock
would be converted into 7,756,564 shares of Silver King Class B Common Stock and
the contingent right to acquire 2,644,299 shares of Silver King Class B Common
Stock. 739,141 shares of Class B would be exchanged for an equal number of
shares of the surviving corporation and 17,566,702 shares of Common Stock would
be exchanged for a like number of shares of common stock of the surviving
corporation. Such shares of the surviving corporation would be exchangeable for
shares of Silver King stock at the same ratio specified in the HSN Merger
Agreement. As a result, in the HSN Merger TCI would dispose of its entire
equity interest in the Company.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIP WITH RESPECT
--------------------------------------------------------------------
TO THE SECURITIES OF THE ISSUER
-------------------------------
Item 6 of the TCI Schedule 13D is hereby amended and supplemented by
adding the following information thereto:
The information set forth in Item 4 above is hereby incorporated by
reference herein.
Pursuant to the terms of the Agreement and Plan of Exchange and Merger
(the "HSN Merger Agreement"), dated as of August 25, 1996, by and among the
Company, Silver King, Sub and Liberty HSN, Inc. (the subsidiary of TCI which
holds the TCI HSN Shares), holders of Common Stock would receive 0.45 of a share
of Silver King Common Stock for each share of Common Stock. The Class B Stock,
which is solely held by TCI, would be converted into 0.54 of a share of Silver
King Class B Common Stock in the HSN Merger. In order to comply with the FCC
June Order (which limited TCI's percentage equity interest in Silver King to
21.37% unless prior FCC approval was obtained), TCI agreed in the HSN Merger
Agreement (i) to exchange 17,566,702 shares of Common Stock and 739,141 shares
of Class B Stock with Sub prior to the HSN Merger, which shares would become
shares of common stock and Class B common stock of the surviving corporation in
the HSN Merger and, upon TCI being entitled to own such shares in accordance
with applicable FCC regulations, would be exchanged (pursuant to an exchange
agreement to be entered into by Silver King and Liberty HSN, Inc. prior to the
HSN Merger) into Silver King Common Stock and Silver King Class B Common Stock
at the same rate such Company shares would have been converted into Silver King
shares in the HSN Merger, and (ii) approximately 2.6 million of the
approximately 10.4 million shares of Silver King Class B Common Stock to which
TCI would be entitled to receive in the HSN Merger would become "Contingent
Shares" to be issued to TCI at such time as TCI would be entitled, under
applicable FCC regulations, to own such shares. In the event that any Contingent
Shares remained to be issued after the third anniversary of the HSN Merger, such
shares would also be issuable to TCI at such time as it received FCC approval
(including an FCC approval allowing TCI to own such shares for a limited period
of time in order to effect the disposition of such shares) on or before the
fifth anniversary of the HSN Merger. If such Contingent Shares are issued to TCI
after the third anniversary of the HSN Merger and sold by it, Silver King will
be obligated to issue to TCI an additional number of shares to compensate it for
certain taxes payable as a result of such sale.
The consummation of the HSN Merger is subject to a number of
conditions, including, but not limited to, approval by the stockholders of
the Company (which will include, in addition to the stockholder approval
required under Delaware law, approval by the holders of a majority of the Common
Stock voting at the meeting at which the HSN Merger is to be considered,
excluding Liberty)
Page 4 of 8 pages
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and approval by the stockholders of Silver King of the issuance of the shares of
Silver King Common Stock and Silver King Class B Common Stock in the HSN Merger
(including the future issuances to TCI of the Contingent Shares and the shares
issuable to TCI upon the exchange of its shares of the surviving corporation),
and the receipt of certain regulatory consents and approvals, including approval
by the FCC. If the HSN Merger is not consummated by September 1, 1997, each of
the Company, Silver King and TCI have the right to terminate the transaction.
There can be no assurance that these conditions will be met.
In connection with the execution of the HSN Merger Agreement, Liberty
and Diller also entered into a letter agreement, dated as of August 25, 1996
(the "Amendment Agreement"), which amended the SK Stockholders Agreement and by
its terms superseded the amendment to the SK Stockholders Agreement entered into
by Diller and Liberty on November 27, 1995. The Amendment Agreement does not
effect a material change in the relationship between Diller and Liberty with
respect to the equity securities of Silver King as described in Amendment No. 2
to the TCI Schedule 13D, except that Diller no longer has an obligation to use
reasonable best efforts to cause a designee of TCI to serve on the Board of
Directors of the Company. As described in Amendment No. 2, Diller has the right
to exercise voting authority over all equity securities of Silver King owned by
TCI, subject to certain restrictions. The securities of Silver King acquired by
TCI in the HSN Merger, including shares acquired in connection with the
contingent interest and upon exchange of securities of the surviving corporation
in the HSN Merger, will be subject to the SK Stockholders Agreement.
The parties to the Merger Agreement, dated November 27, 1995, and the
Exchange Agreement, dated November 27, 1995, entered into a Termination
Agreement, dated as of August 25, 1996 which terminated the Merger Agreement and
the Exchange Agreement upon execution and delivery of the HSN Merger Agreement.
The foregoing summary descriptions of the HSN Merger Agreement, the
Amendment Agreement, the Voting Agreement and the Termination Agreement are
qualified in their entirety by reference to the complete texts of such
agreements, filed as Exhibits hereto and incorporated herein by reference.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
--------------------------------
1. Press Release issued by the Company and Silver King Communications,
Inc., dated August 26, 1996.
2. Agreement and Plan of Exchange and Merger, dated as of August 25, 1996,
by and among the Company, Silver King Communications, Inc., House
Acquisition Corp., and Liberty HSN, Inc.
3. Termination Agreement, dated as of August 25, 1996, among Silver King
Communications, Inc., BDTV INC, Liberty Program Investments, Inc., and
Liberty HSN, Inc.
Page 5 of 8 pages
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4. Voting Agreement, dated as of August 25, 1996, by and among Certain
Stockholders of the Company and Silver King Communications, Inc.
5. Letter Agreement, dated as of August 25, 1996, by and between Liberty
Media Corporation and Barry Diller.
Page 6 of 8 pages
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SIGNATURE
---------
After reasonable inquiry and to the best of his knowledge and belief, the
undersigned certifies that the information in this statement is true, complete
and correct.
Dated: August 28, 1996
TELE-COMMUNICATIONS, INC.
/S/ Stephen M. Brett
By:________________________________
Name: Stephen M. Brett
Title: Executive Vice President
Page 7 of 8 pages
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EXHIBIT INDEX
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<CAPTION>
Seq. Pg. No.
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1. Registration Statement on Form S-4, filed by TCI/Liberty
Holding Company on June 23, 1994, and thereafter amended
and ordered effective June 28, 1994, under Commission File
No. 33-54263, which is hereby incorporated by this
reference.*
2. Press Release dated August 4, 1994.*
3. Press Release issued by Liberty Media Corporation,
dated November 27, 1995.*
4. Press Release issued by Home Shopping Network, Inc.,
dated November 27, 1995.*
5. Letter Agreement, dated as of August 24, 1995, by and
between Liberty Media Corporation and Barry Diller.
6. Letter Agreement, dated as of November 27, 1995, by
and between Liberty Media Corporation and Barry
Diller.*
7. Agreement and Plan of Merger, dated as of November 27,
1995, by and among Silver Management Company, Liberty
Program Investments, Inc. and Liberty HSN, Inc.*
8. Exchange Agreement, dated as of November 27, 1995,
by and between Silver Management Company and
Silver King Communications, Inc.*
9. Press Release issued by the Company and Silver King
Communications, Inc., dated August 26, 1996.
10. Agreement and Plan of Exchange and Merger, dated as
of August 25, 1996, by and among the Company,
Silver King Communications, Inc., House Acquisition
Corp., and Liberty HSN, Inc.
11. Termination Agreement, dated as of August 25, 1996,
among Silver King Communications, Inc., BDTV INC,
Liberty Program Investments, Inc., and Liberty HSN, Inc.
12. Voting Agreement, dated as of August 25, 1996, by and
among Certain Stockholders of the Company and
Silver King Communications, Inc.
13. Letter Agreement, dated as of August 25, 1996, by and
between Liberty Media Corporation and Barry Diller.
</TABLE>
* Previously filed.
Page 8 of 8 pages
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EXHIBIT 9
AUGUST 26, 1996
SILVER KING COMMUNICATIONS, INC.
AND HOME SHOPPING NETWORK, INC.
ANNOUNCE AGREEMENT TO MERGE
NEW YORK NY -- Silver King Communications, Inc. (NASDAQ: SKTV) and Home Shopping
Network, Inc. (NYSE: HSN) today entered into a definitive merger agreement,
pursuant to which Home Shopping Network (HSN) will become a subsidiary of Silver
King. The merger marks the reunification of the two companies which split in
1992 and supersedes Silver King's previous agreement to purchase only Liberty
Media Corp.'s (NASDAQ: LBTYA) controlling interest in HSN.
Combined, Silver King and Home Shopping Network occupy a unique position with
cable, broadcast and electronic retailing programming interests. In addition to
HSN's pioneering electronic retailing business and Silver King's television
broadcast group, the sixth largest in the nation (with interests in 21 full-
power stations), the new company's assets will include the Internet Shopping
Network (ISN), one of the largest electronic retailers on the Internet; Vela
Research, specializing in digital video encoder/decoder technology; and, pending
consummation of Silver King's merger agreement with Savoy Pictures
Entertainment, Inc. (NASDAQ: SPEI), SF Broadcasting, which owns and operates VHF
Fox affiliates in four major markets.
<PAGE>
SILVER KING AND HSN AGREE TO MERGE
page 2 of 5
Under the terms of the merger agreement, holders of HSN Common Stock will
receive 0.45 of a share of Silver King Common Stock for each share of HSN Common
Stock. Each share of HSN Class B Stock, which has ten votes per share and is
held solely by Liberty Media Corp., will be converted into 0.54 of a share of
Silver King Class B Stock. The consideration to be received by Liberty Media
represents a premium of 10.67 percent on its aggregate holdings of HSN Common
Stock and Class B Stock. Consummation of the merger is subject to Silver King
and HSN shareholder approvals. Approval from HSN shareholders will include the
majority decision of holders of HSN Common Stock voting at the meeting,
excluding Liberty Media Corp. Approval from Silver King shareholders will
include the majority decision of holders of Silver King Common Stock.
"At no risk of overstatement, this is a complex transaction," stated Silver King
and HSN Chairman Barry Diller. "Not that it needs suggestion, but given the
interrelationships of HSN's and Silver King's businesses, its Chairman, and
Liberty Media's large shareholdings in both companies, I invite a detailed
evaluation of the proposed merger. I am confident that such scrutiny will
support the transaction's minimum criteria, i.e. that it is fair and balanced
and in the best interest of all shareholders. As to its more expansive
possibilities, I believe the combination will allow the companies the very best
way to pursue their very aggressive individual agendas with clarity and without
conflict."
<PAGE>
SILVER KING AND HSN AGREE TO MERGE
page 3 of 5
To represent the interests of Home Shopping Network's shareholders other than
Liberty Media and Barry Diller, HSN's Board of Directors formed a Special
Committee of Independent Directors, which in turn retained independent counsel
and financial advisors to negotiate the terms of the merger. The Committee
approved the transaction, which was subsequently approved by HSN's Board of
Directors based on the Committee's recommendation.
"This merger enhances the value of both Silver King Communications and Home
Shopping Network," stated HSN Board member and Chief Executive Officer James
Held. "HSN is directly on target with a realistic but aggressive revenue growth
plan while Silver King's business plan has significant upside potential.
Combined, the company can nurture its subsidiaries more efficiently and has the
proper base to support entirely new ventures that capitalize on its collective
assets."
As Liberty Media Corp. may not at this time own more than a 21.37 percent equity
interest in Silver King without further Federal Communications Commission (FCC)
approval, initially Liberty Media will not exchange 18.3 million HSN shares
(17.57 million shares of Common Stock and 0.74 million shares of Class B Stock)
for Silver King securities. Instead, Liberty Media will retain a 19.9% minority
interests in HSN, which, under the terms of the merger, must be exchanged, in a
tax-free transaction, for additional Silver King shares as soon as possible
consistent with applicable FCC guidelines.
<PAGE>
SILVER KING AND HSN AGREE TO MERGE
page 4 of 5
Additionally, approximately 2.6 million contingent shares of Silver King Class B
Stock due Liberty Media for shares of HSN Class B Stock acquired in the merger
will not be issued until such time as Liberty Media is legally permitted to own
them. Silver King management believes it highly unlikely that this exchange
will not be completed within three years of the consummation of the merger
agreement. However, if at the end of three years any of the 2.6 million Silver
King contingent shares have not been issued, Liberty Media would also have the
right during the next two years to dispose of such shares, plus additional
shares from Silver King to pay any related taxes, provided Liberty Media can
obtain FCC approval to do so.
Upon closing of the merger (prior to any conversion of Liberty Media's 19.9
percent retained interest), Home Shopping Network will become an 80.1 percent
subsidiary of Silver King Communications. Original Silver King shareholders
(other than Liberty Media) will own approximately 7.4 million Silver King
shares, former HSN Common Stock shareholders (other than Liberty Media) will own
approximately 24.5 million Silver King shares and Liberty Media Corp. will own
approximately 9.8 million Silver King shares (including approximately 2.1
million already owned). Additionally, shareholders of Savoy Pictures
Entertainment will own approximately 4.2 million Silver King shares upon
completion of that transaction. Silver King shares received by Liberty Media
under the merger agreement will be subject to the terms of an existing
stockholders agreement between Liberty Media and Barry Diller, pursuant to which
Mr.
<PAGE>
SILVER KING AND HSN AGREE TO MERGE
page 5 of 5
Diller, through BDTV INC., exercise general voting control of these securities
subject to certain extraordinary matters.
Home Shopping Network pioneered the television shopping industry in 1982. Its
24 hour programming reaches approximately 69 million households via cable and
broadcast station affiliates and satellite dish receivers.
Silver King Communications, the nation's sixth largest television station group,
owns and operates 12 independent full-power UHF broadcast stations in 11 major
markets, reaching approximately 29 million television households. The stations
serve 10 of the 16 largest markets in the United States, including New York, Los
Angeles, Chicago and Philadelphia. Silver King also owns minority interests,
ranging from 33-49 percent, in seven major market stations which reach an
additional 10 million U.S. television households.
CONTACTS:
Silver King Communications, Inc.:
Jason Stewart Director of Corporate Communications Tel:(310) 247-7234
Home Shopping Network, Inc.:
Meredith Dobbs Corporate Communications Tel:(813) 572-8585
<PAGE>
EXHIBIT 10
Conformed Copy
--------------
================================================================================
AGREEMENT AND PLAN OF EXCHANGE AND MERGER
BY AND AMONG
SILVER KING COMMUNICATIONS, INC.,
HOUSE ACQUISITION CORP.,
HOME SHOPPING NETWORK, INC.
AND
LIBERTY HSN, INC.
AS OF AUGUST 25, 1996
================================================================================
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TABLE OF CONTENTS
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ARTICLE 1 THE EXCHANGE AND THE MERGER............................. 2
Section 1.1. The Exchange....................................... 2
Section 1.2. The Merger......................................... 2
Section 1.3. Effective Time of the Merger....................... 2
Section 1.4. Closing............................................ 2
Section 1.5. Effects of the Merger.............................. 2
Section 1.6. Certificate of Incorporation and
Bylaws of Surviving Corporation.................... 3
ARTICLE 2 EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS; EXCHANGE OF
CERTIFICATES............................................ 3
Section 2.1. Effect on Capital Stock............................ 3
(a) Capital Stock of Sub.......................... 3
(b) Cancellation of Certain Shares
of Company Common Stock and
Company Class B Common Stock................ 3
(c) Exchange Ratio for Company
Common Stock................................ 3
(d) Exchange Ratio for Company
Class B Common Stock........................ 4
(e) Adjustment of Common Stock
Exchange Ratio and Class B
Common Stock Exchange Ratio................. 4
(f) Adjustment of Contingent Right and
Shares under Exchange Agreement............. 4
Section 2.2. Exchange of Certificates........................... 5
(a) Exchange Agent................................ 5
(b) Exchange Procedures........................... 5
(c) Distributions with Respect to
Unsurrendered Certificates.................. 6
(d) No Further Ownership Rights in
Company Common Stock........................ 6
(e) No Issuance of Fractional Shares.............. 7
(f) Termination of Exchange Fund.................. 8
(g) No Liability.................................. 8
(h) Lost, Stolen or Destroyed Certificates........ 8
Section 2.3. Stock Options................................. 8
Section 2.4. Taking of Necessary Action; Further Action.... 9
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ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE
COMPANY................................................. 9
Section 3.1. Organization and Qualification; Subsidiaries....... 9
Section 3.2. Certificate of Incorporation and Bylaws............ 10
Section 3.3. Capitalization..................................... 10
Section 3.4. Authority Relative to this Agreement............... 10
Section 3.5. No Conflict; Required Filings and Consents......... 11
Section 3.6. Compliance; Permits................................ 12
Section 3.7. SEC Filings; Financial Statements.................. 12
Section 3.8. Absence of Certain Changes or Events............... 13
Section 3.9. Absence of Litigation.............................. 13
Section 3.10. Registration Statement; Proxy Statement............ 14
Section 3.11. Taxes.............................................. 14
Section 3.12. Brokers............................................ 15
Section 3.13. Opinion of Financial Advisor....................... 15
Section 3.14. Board Approval..................................... 15
Section 3.15. Employee Benefit Plans............................. 15
Section 3.16. Tax Matters........................................ 16
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT
AND SUB................................................. 16
Section 4.1. Organization and Qualification; Subsidiaries....... 16
Section 4.2. Certificate of Incorporation and Bylaws............ 17
Section 4.3. Capitalization..................................... 17
Section 4.4. Authority Relative to this Agreement............... 18
Section 4.5. No Conflict; Required Filings and Consents......... 19
Section 4.6. Compliance; Permits................................ 20
Section 4.7. SEC Filings; Financial Statements.................. 20
Section 4.8. Absence of Certain Changes or Events............... 21
Section 4.9. Absence of Litigation.............................. 21
Section 4.10. Registration Statement; Proxy Statement............ 22
Section 4.11. Taxes.............................................. 22
Section 4.12. Brokers............................................ 22
Section 4.13. Opinion of Financial Advisor....................... 22
Section 4.14. Board Approval..................................... 23
Section 4.15. Interim Operations of Sub.......................... 23
Section 4.16. Employee Benefit Plans............................. 23
Section 4.17. Tax Matters........................................ 24
Section 4.18. BDTV Arrangements.................................. 24
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF LIBERTY HSN........... 24
Section 5.1. Organization and Qualification; Subsidiaries....... 24
Section 5.2. Certificate of Incorporation and Bylaws............ 24
Section 5.3. Capitalization; Business of Liberty HSN............ 25
Section 5.4. Authority Relative to this Agreement............... 25
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Section 5.5. No Conflict; Required Filings and Consents.......... 25
Section 5.6. Ownership of Company Stock.......................... 26
Section 5.7. Absence of Litigation............................... 26
Section 5.8. Brokers............................................. 26
Section 5.9. Tax Matters......................................... 26
ARTICLE 6 CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE
TIME; ADDITIONAL AGREEMENTS.............................. 26
Section 6.1. Information and Access.............................. 26
Section 6.2. Conduct of Business of the Company.................. 27
Section 6.3. Conduct of Business of Parent....................... 28
Section 6.4. Preparation of S-4, Schedule 13E-3 and
Proxy Statement; Other Filings.................... 28
Section 6.5. Letter of Independent Auditors...................... 30
Section 6.6. Stockholders' Meetings.............................. 30
Section 6.7. Agreements to Take Reasonable Action................ 30
Section 6.8. Consents............................................ 31
Section 6.9. NASDAQ Quotation.................................... 31
Section 6.10. Public Announcements................................ 31
Section 6.11. Affiliates.......................................... 31
Section 6.12. Defense of Litigation............................... 31
Section 6.13. Indemnification..................................... 31
Section 6.14. Notification of Certain Matters..................... 32
Section 6.15. The Company Debentures.............................. 32
Section 6.16. Employee Agreements................................. 32
Section 6.17. Reorganization...................................... 32
Section 6.18. Exchange Agreement.................................. 32
Section 6.19. Parent Directors.................................... 33
ARTICLE 7 CONDITIONS PRECEDENT..................................... 33
Section 7.1. Conditions to Each Party's Obligation to
Effect the Merger and the Exchange................ 33
(a) FCC Approvals; HSR Approval.................... 33
(b) Stockholder Approval........................... 33
(c) Effectiveness of the S-4....................... 34
(d) Liberty Exchange............................... 34
(e) Governmental Entity Approvals.................. 34
(f) No Injunctions or Restraints; Illegality....... 34
(g) NASDAQ Quotation............................... 34
(h) Consummation of Savoy Merger................... 34
Section 7.2. Conditions of Obligations of Parent and Sub......... 34
(a) Representations and Warranties................. 35
(b) Performance of Obligations of the Company
and Liberty HSN.............................. 35
(c) Consents....................................... 35
(d) Tax Opinion.................................... 35
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Section 7.3. Conditions of Obligations of the Company............... 35
(a) Representations and Warranties.................... 35
(b) Performance of Obligations of
Parent, Sub and Liberty HSN..................... 36
(c) Consents.......................................... 36
(d) Tax Opinion....................................... 36
Section 7.4. Conditions of Obligations of Liberty HSN............... 36
ARTICLE 8 TERMINATION................................................. 36
Section 8.1. Termination............................................ 36
Section 8.2. Effect of Termination.................................. 38
Section 8.3. Fees and Expenses...................................... 38
ARTICLE 9 GENERAL PROVISIONS.......................................... 38
Section 9.1. Failure to Consummate the Merger....................... 38
Section 9.2. Amendment.............................................. 39
Section 9.3. Extension; Waiver...................................... 39
Section 9.4. Nonsurvival of Representations, Warranties
and Agreements....................................... 39
Section 9.5. Entire Agreement....................................... 39
Section 9.6. Severability........................................... 40
Section 9.7. Notices................................................ 40
Section 9.8. Headings............................................... 41
Section 9.9. Counterparts........................................... 41
Section 9.10. Benefits; Assignment................................... 41
Section 9.11. Governing Law.......................................... 42
Section 9.12. Tax Matters............................................ 42
</TABLE>
EXHIBIT A Terms of Contingent Rights
EXHIBIT B Form of Company Affiliate Letter
EXHIBIT C Exchange Agreement Term Sheet
ANNEX A Company Stockholders Party
to Company Voting Agreement
ANNEX B Parent Stockholders Party
to Parent Voting Agreement
-iv-
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
"Agreement"................................................. Preamble
"Approvals"................................................. Section 3.1
"BDTV"...................................................... Recitals
"Blue Sky Laws"............................................. Section 4.5(b)
"Business Day".............................................. Section 1.4
"Certificate of Merger"..................................... Section 1.3
"Certificates".............................................. Section 2.2(b)
"Class B Common Stock Exchange Ratio"....................... Section 2.1(d)
"Closing"................................................... Section 1.4
"Closing Date".............................................. Section 1.4
"Code"...................................................... Recitals
"Common Shares Trust"....................................... Section 2.2(e)(iii)
"Common Stock Exchange Ratio"............................... Section 2.1(c)
"Commonly Controlled Entity"................................ Section 3.15(a)
"Company"................................................... Preamble
"Company Banker"............................................ Section 3.12
"Company Benefit Plans"..................................... Section 3.15(a)
"Company Class B Common Stock".............................. Section 2.1(d)
"Company Common Stock"...................................... Section 2.1(c)
"Company Disclosure Letter"................................. Section 3.3
"Company FCC Approval"...................................... Section 3.5(b)
"Company Option"............................................ Section 2.3
"Company Option Plans"...................................... Section 2.3
"Company Permits"........................................... Section 3.6(b)
"Company Preferred Stock"................................... Section 3.3
"Company SEC Reports"....................................... Section 3.7(a)
"Company Stock"............................................. Section 2.1(d)
"Company Voting Agreement".................................. Recitals
"Constituent Corporations".................................. Section 1.2
"Contingent Right".......................................... Section 2.1(d)
"Delaware Statute".......................................... Recitals
"Effective Time"............................................ Section 1.3
"ERISA"..................................................... Section 3.15(a)
"ERISA Plan"................................................ Section 3.15(a)
"Excess Shares"............................................. Section 2.2(e)(ii)
"Exchange".................................................. Section 1.1
"Exchange Act".............................................. Section 3.5(b)
"Exchange Agent"............................................ Section 2.2(a)
"Exchange Agreement"........................................ Section 3.4
"Exchange Fund"............................................. Section 2.2(a)
"FCC"....................................................... Section 2.1(f)
"FCC Approval".............................................. Section 4.5(b)
"FCC Regulations"........................................... Section 2.1(f)
"GAAP"...................................................... Section 3.7(b)
"Governmental Entity"....................................... Section 3.5(b)
</TABLE>
-v-
<PAGE>
<TABLE>
<S> <C>
"HSR Act"................................................... Section 6.4
"Indenture"................................................. Section 6.15
"Liberty"................................................... Section 2.1(f)
"Liberty Adverse Effect".................................... Section 5.1
"Liberty Group"............................................. Section 2.1(f)
"Liberty HSN"............................................... Preamble
"Liberty HSN Disclosure Letter"............................. Section 5.5(a)
"Liberty HSN Shares"........................................ Section 5.6
"Material Adverse Effect"................................... Section 3.1, 4.1
"Merger".................................................... Recitals
"Multiemployer Plan"........................................ Section 3.15(a)
"NASD"...................................................... Section 2.2(e)(iii)
"Other Filings"............................................. Section 6.4
"Parent".................................................... Preamble
"Parent Banker"............................................. Section 4.12
"Parent Benefit Plans"...................................... Section 4.16(a)
"Parent Class B Common Stock"............................... Section 2.1(d)
"Parent Common Stock"....................................... Section 2.1(c)
"Parent Disclosure Letter".................................. Section 4.3
"Parent ERISA Plan"......................................... Section 4.16(a)
"Parent Permits"............................................ Section 4.6(b)
"Parent Preferred Stock".................................... Section 4.3
"Parent SEC Reports"........................................ Section 4.7(a)
"Parent Stock".............................................. Section 2.1(d)
"Parent Voting Agreement"................................... Recitals
"Proxy Statement"........................................... Section 3.5(b)
"S-4"....................................................... Section 3.10
"Schedule 13E-3"............................................ Section 3.5(b)
"SEC"....................................................... Section 3.1
"Securities Act"............................................ Section 3.7(a)
"Special Committee"......................................... Section 3.14
"Stockholders Meeting"...................................... Section 3.10
"Stockholders Meetings"..................................... Section 3.10
"Sub"....................................................... Preamble
"Sub Class B Common Stock".................................. Section 4.3
"Sub Common Stock".......................................... Section 4.3
"Surviving Corporation"..................................... Section 1.2
"Surviving Corporation Class B Common Stock"................ Section 2.1(a)
"Surviving Corporation Common Stock"........................ Section 2.1(a)
"Tax Return"................................................ Section 3.11
"Taxes"..................................................... Section 3.11
"TCI"....................................................... Section 2.1(f)
"Term Sheet"................................................ Section 3.4
"Transactions:.............................................. Section 3.4
"Trustee"................................................... Section 6.15
</TABLE>
-vi-
<PAGE>
AGREEMENT AND PLAN OF EXCHANGE AND MERGER
THIS AGREEMENT AND PLAN OF EXCHANGE AND MERGER (this "Agreement") is
dated as of August 25, 1996, by and among SILVER KING COMMUNICATIONS, INC., a
Delaware corporation ("Parent"), HOUSE ACQUISITION CORP., a Delaware corporation
and a wholly owned subsidiary of Parent ("Sub"), HOME SHOPPING NETWORK, INC., a
Delaware corporation (the "Company"), and LIBERTY HSN, INC., a Colorado
corporation ("Liberty HSN").
RECITALS:
A. The Boards of Directors of Parent, Sub and the Company and the
Special Committee of the Board of Directors of the Company have each approved
the terms and conditions of the business combination between Parent and the
Company to be effected by the merger (the "Merger") of Sub with and into the
Company, pursuant to the terms and subject to the conditions of this Agreement
and the General Corporation Law of the State of Delaware (the "Delaware
Statute"), and each deems the Merger advisable and in the best interests of each
corporation.
B. Each of Parent, Sub and the Company desires to make certain
representations, warranties, covenants and agreements in connection with the
Merger.
C. Concurrently with the execution of this Agreement and as an
inducement to Parent to enter into this Agreement, each of the persons listed on
Annex A has entered into a voting agreement (the "Company Voting Agreement")
pursuant to which such person has agreed, among other things, to vote its shares
of Company Stock (as defined in Section 2.1(d)) in favor of this Agreement, the
Merger and the other transactions contemplated by this Agreement.
D. Concurrently with the execution of this Agreement and as an
inducement to the Company to enter into this Agreement, each of the persons
listed on Annex B has entered into a voting agreement (the "Parent Voting
Agreement") pursuant to which such person has agreed, among other things, to
vote its shares, or to cause BDTV INC., a Delaware corporation and the holder of
Parent Stock ("BDTV"), to vote shares that are beneficially or of record owned
by such person and are held by BDTV, of Parent Stock (as defined in Section
2.1(d)), in favor of the issuance of Parent Stock in connection with the Merger
and any other matter which requires its vote in connection with the transactions
contemplated by this Agreement.
E. For federal income tax purposes, it is intended that the Merger
and the transactions contemplated thereby (including the issuance of Parent
Stock pursuant to the Contingent Right (as defined in Section 2.1(d))) and by
the Exchange Agreement (as defined in Section 3.4) qualify as a reorganization
under the provisions of Section 368(a) of the United States Internal Revenue
Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements contained in this Agreement, the parties agree as follows:
<PAGE>
ARTICLE 1
THE EXCHANGE AND THE MERGER
SECTION 1.1. THE EXCHANGE. Upon the terms and subject to the
------------
conditions of this Agreement, immediately prior to the Effective Time (as
defined in Section 1.3) and provided that all of the conditions set forth in
Article 7 (excluding Section 7.1(d) but simultaneous with the execution of the
Exchange Agreement) to be satisfied prior to the Closing (as defined in Section
1.4) have been satisfied or duly waived, Liberty HSN shall exchange, or shall
cause its subsidiary to exchange, in the aggregate 17,566,702 shares of Company
Common Stock (as defined in Section 2.1(c)) and 739,141 shares of Company Class
B Common Stock (as defined in Section 2.1(d)) for, respectively, 17,566,702
shares of Sub Common Stock (as defined in Section 4.3) and 739,141 shares of Sub
Class B Common Stock (as defined in Section 4.3) (such actions, collectively,
the "Exchange").
SECTION 1.2. THE MERGER. Upon the terms and subject to the
----------
conditions of this Agreement and in accordance with the Delaware Statute, at the
Effective Time, Parent shall cause Sub to be merged with and into the Company.
Following the Merger, the Company shall continue as the surviving corporation
(the "Surviving Corporation") and the separate corporate existence of Sub shall
cease. Sub and the Company are collectively referred to as the "Constituent
Corporations."
SECTION 1.3. EFFECTIVE TIME OF THE MERGER. Subject to the provisions
----------------------------
of this Agreement, a certificate of merger (the "Certificate of Merger") shall
be duly prepared, executed and acknowledged by the Surviving Corporation and
thereafter delivered to the Secretary of State of the State of Delaware for
filing, as provided in the Delaware Statute, simultaneously with or as soon as
practicable following the Closing. The Merger shall become effective upon the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware (the "Effective Time").
SECTION 1.4. CLOSING. Unless this Agreement shall have been
-------
terminated pursuant to Section 8.1, the closing of the Exchange and the Merger
(the "Closing") will take place at 10:00 a.m. on a date (the "Closing Date") to
be mutually agreed upon by the parties, which date shall be no later than the
third Business Day (as defined below) after satisfaction of the latest to occur
of the conditions set forth in Sections 7.1 (other than Sections 7.1(d),
7.1(f)), 7.2(b) (other than the delivery of the officers' certificate referred
to therein), 7.2(c), 7.3(b) (other than the delivery of the officers'
certificate referred to therein), and 7.3(c), and shall be on the same day as
the satisfaction of the condition in Section 7.1(d) (provided, that all closing
--------
conditions set forth in Article 7 have been satisfied or waived at or prior to
the Closing), unless another date is agreed to in writing by the parties. The
Closing shall take place at the offices of Wachtell, Lipton, Rosen & Katz, 51
West 52nd Street, New York, New York 10019, unless another place is agreed to in
writing by the parties. As used in this Agreement, "Business Day" shall mean
any day, other than a Saturday, Sunday or legal holiday on which banks are
permitted to close in the City and State of New York and the State of Delaware.
SECTION 1.5. EFFECTS OF THE MERGER. At the Effective Time: (a) the
---------------------
separate existence of Sub shall cease and Sub shall be merged with and into the
Company, with the result that the Company shall be the Surviving Corporation,
and (b) the Merger shall have all of the effects provided by the Delaware
Statute.
-2-
<PAGE>
SECTION 1.6. CERTIFICATE OF INCORPORATION AND BYLAWS OF SURVIVING
----------------------------------------------------
CORPORATION. At the Effective Time, (a) the certificate of incorporation of the
- -----------
Company shall be the certificate of incorporation of the Surviving Corporation
until altered, amended or repealed as provided in the Delaware Statute; (b) the
bylaws of Sub shall become the bylaws of the Surviving Corporation until
altered, amended or repealed as provided in the Delaware Statute or in the
certificate of incorporation or bylaws of the Surviving Corporation; (c) the
directors of Sub shall become the initial directors of the Surviving
Corporation; such directors will hold office from the Effective Time until their
respective successors are duly elected or appointed as provided in the
certificate of incorporation and bylaws of the Surviving Corporation; and (d)
the officers of the Company shall continue as the officers of the Surviving
Corporation until such time as their respective successors are duly elected as
provided in the bylaws of the Surviving Corporation.
ARTICLE 2
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1. EFFECT ON CAPITAL STOCK. At the Effective Time, subject
-----------------------
and pursuant to the terms of this Agreement, by virtue of the Merger and without
any action on the part of the Constituent Corporations or the holders of any
shares of capital stock of the Constituent Corporations:
(a) Capital Stock of Sub. Each issued and outstanding share of the
--------------------
common stock, $.00001 par value per share, of Sub shall be converted into 1
validly issued, fully paid and nonassessable share of common stock, $.01
par value per share, of the Surviving Corporation ("Surviving Corporation
Common Stock"), and each issued and outstanding share of the Class B common
stock, $.00001 par value per share, of Sub shall be converted into 1
validly issued, fully paid and nonassessable share of Class B common stock,
$.01 par value per share, of the Surviving Corporation ("Surviving
Corporation Class B Common Stock"). Each stock certificate of Sub
evidencing ownership of any such shares shall continue to evidence
ownership of such shares of Surviving Corporation Common Stock and shares
of Surviving Corporation Class B Common Stock.
(b) Cancellation of Certain Shares of Company Common Stock and
----------------------------------------------------------
Company Class B Common Stock. Each share of Company Common Stock and
----------------------------
Company Class B Common Stock that is owned by the Company as treasury stock
and each share of Company Common Stock that is owned by Parent, Sub or any
other wholly owned subsidiary of Parent shall be cancelled and retired and
shall cease to exist, and no capital stock of Parent or other consideration
shall be delivered in exchange therefor.
(c) Exchange Ratio for Company Common Stock. Each share of common
---------------------------------------
stock, $.01 par value per share, of the Company ("Company Common Stock"),
issued and outstanding immediately prior to the Effective Time (other than
shares of Company Common Stock to be cancelled pursuant to Section 2.1(b)),
shall be converted into the right to receive 0.45 of a fully paid and
nonassessable share of common stock, $.01 par value per share, of Parent
("Parent Common Stock") (the
-3-
<PAGE>
"Common Stock Exchange Ratio"). At the Effective Time, all such shares of
Company Common Stock shall no longer be outstanding, and shall
automatically be cancelled and retired and cease to exist, and each holder
of a certificate representing any such shares shall cease to have any
rights with respect thereto, except the right to receive the shares of
Parent Common Stock to be issued in consideration therefor upon the
surrender of such certificate in accordance with Section 2.2, without
interest. No fractional shares of Parent Common Stock shall be issued; and,
in lieu thereof, a cash payment shall be made pursuant to Section 2.2(e).
(d) Exchange Ratio for Company Class B Common Stock. Each share of
-----------------------------------------------
Class B common stock, $.01 par value per share, of the Company ("Company
Class B Common Stock" and, together with the Company Common Stock, "Company
Stock"), issued and outstanding immediately prior to the Effective Time
(other than shares of Company Common Stock to be cancelled pursuant to
Section 2.1(b)), shall be converted into the right to receive at the
effective time (i) 0.54 of a fully paid and nonassessable share of Class B
common stock, $.01 par value per share, of Parent ("Parent Class B Common
Stock" and, together with the Parent Common Stock, "Parent Stock") (the
"Class B Common Stock Exchange Ratio"), and (ii) a pro rata interest in the
contingent right to receive additional shares of Parent Class B Common
Stock pursuant to the terms set forth in Exhibit A hereto (the "Contingent
Right"). At the Effective Time, all such shares of Company Class B Common
Stock shall no longer be outstanding, and shall automatically be cancelled
and retired and cease to exist, and each holder of a certificate
representing any such shares shall cease to have any rights with respect
thereto, except the right to receive the shares of Parent Class B Common
Stock to be issued in consideration therefor (including pursuant to the
Contingent Right) upon the due surrender of such certificate to Parent, and
the holder of Company Class B Common Stock shall receive a certificate
representing the number of shares of Parent Common Stock described in
clause (i) hereof, without interest. No fractional shares of Parent Class
B Common Stock shall be issued, and, in lieu thereof, a cash payment shall
be made without any interest thereon, based on the closing market price as
of the Business Day preceding such exercise on the principal national
securities exchange or interdealer system on which the Parent Common Stock
is then listed or quoted multiplied by the fractional interest.
(e) Adjustment of Common Stock Exchange Ratio and Class B Common
------------------------------------------------------------
Stock Exchange Ratio. If, between the date of this Agreement and the
--------------------
Effective Time, the outstanding shares of Parent Common Stock or Parent
Class B Common Stock shall have been changed into a different number of
shares or a different class by reason of any reclassification,
recapitalization, split-up, stock dividend, stock combination, exchange of
shares, readjustment or otherwise, then the Common Stock Exchange Ratio or
the Class B Common Stock Exchange Ratio (including the Contingent Right),
as the case may be, shall be correspondingly adjusted.
(f) Adjustment of Contingent Right and Shares under Exchange
--------------------------------------------------------
Agreement. To the extent that, immediately prior to the Effective Time,
---------
Liberty Media Corporation, a Delaware corporation ("Liberty"), Tele-
Communications, Inc., a Delaware corporation ("TCI"), and the controlled
affiliates of Liberty and TCI (collectively, including Liberty HSN, the
"Liberty Group") are legally permitted under applicable law (including
federal communications statutes and the rules, regulations, orders,
-4-
<PAGE>
decrees and policies of the Federal Communications Commission (the "FCC"),
and any interpretations or waivers thereof or modifications thereto (such
provisions collectively, "FCC Regulations")), to own, directly or
indirectly, and without limitation or restriction relating to the
continuation of such ownership following issuance, or the imposition of any
additional restrictions on the business or assets of the Liberty Group or
Parent, in excess of 9,818,194 shares of Parent Stock (the number the
Liberty Group would be permitted to own as of the date hereof), as if that
certain merger referred to in Section 7.1(h) and the Merger had been
consummated as of the date hereof, the following adjustments shall be made:
(i) the Contingent Right shall first be reduced by such excess (and the
total number of shares of Parent Class B Common Stock to be issued to the
Liberty Group at the Effective Time shall be increased pursuant to Section
2.1(d)), until such time as the number of shares of Parent Class B Common
Stock to be issued pursuant to the Contingent Right equals zero, (ii)
thereafter, the number of shares of Company Class B Common Stock to be
exchanged for shares of Sub Class B Common Stock shall be reduced (and the
number of shares of Parent Class B Common Stock to be issued to the Liberty
Group at the Effective Time shall be increased based on the Class B Common
Stock Exchange Ratio), and (iii) thereafter, the number of shares of
Company Common Stock to be exchanged for shares of Sub Common Stock shall
be reduced (and the number of shares of Parent Common Stock to be issued to
the Liberty Group at the Effective Time shall be increased, based on the
Common Stock Exchange Ratio).
SECTION 2.2. EXCHANGE OF CERTIFICATES.
------------------------
(a) Exchange Agent. Prior to the Closing Date, Parent shall select a
--------------
bank or trust company reasonably acceptable to the Company to act as exchange
agent (the "Exchange Agent") in the Merger. Prior to the Effective Time, Parent
shall deposit with the Exchange Agent, for the benefit of the holders of shares
of Company Stock, for exchange in accordance with this Article 2, certificates
representing the shares of Parent Stock (such shares of Parent Stock, together
with any dividends or distributions with respect thereto, are referred to as the
"Exchange Fund") issuable pursuant to Section 2.1(c) at the Effective Time in
exchange for outstanding shares of Company Common Stock, which shall include
such shares of Parent Common Stock to be sold by the Exchange Agent pursuant to
Section 2.2(e), but shall not include shares of Parent Stock to be issued
pursuant to the Exchange Agreement or the Contingent Right. The procedures
provided in this Section 2.2 shall not apply to such shares of Parent Stock.
(b) Exchange Procedures. As soon as practicable after the Effective
-------------------
Time, Parent shall instruct the Exchange Agent to mail to each holder of record
(other than the Company, Parent, Sub and any wholly owned subsidiary of the
Company) of a certificate or certificates which immediately prior to the
Effective Time represented issued and outstanding shares of Company Common Stock
(collectively, the "Certificates") whose shares were converted into the right to
receive Parent Common Stock or Parent Class B Common Stock pursuant to Section
2.1(c) of this Agreement, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as Parent and the Company may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for certificates representing Parent Stock and any
cash in lieu of fractional shares of Parent Stock or Parent
-5-
<PAGE>
Class B Common Stock. Upon surrender of a Certificate for cancellation to the
Exchange Agent, together with a duly executed letter of transmittal and such
other documents as may be reasonably required by the Exchange Agent, the holder
of such Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Parent Stock which such
holder has the right to receive pursuant to the provisions of this Article 2 and
any cash in lieu of fractional shares of Parent Stock, and the Certificate so
surrendered shall forthwith be cancelled. In the event of a transfer of
ownership of shares of Company Common Stock which is not registered on the
transfer records of the Company, a certificate representing the proper number of
shares of Parent Stock and any cash in lieu of fractional shares of Parent Stock
may be issued and paid to a transferee if the Certificate representing such
Company Stock is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.2, each Certificate shall be deemed, on and after
the Effective Time, to represent only the right to receive upon such surrender
the certificate representing shares of Parent Common Stock or Parent Class B
Common Stock and cash in lieu of any fractional shares of Parent Stock as
contemplated by this Article 2 and the Delaware Statute. The consideration to be
issued in the Merger will be delivered by the Exchange Agent as promptly as
practicable following surrender of a Certificate and any other required
documents. No interest will be payable on such consideration regardless of any
delay in making payments.
(c) Distributions with Respect to Unsurrendered Certificates. No
--------------------------------------------------------
dividends or other distributions declared or made after the Effective Time with
respect to Parent Common Stock with a record date after the Effective Time shall
be paid to the holder of any unsurrendered Certificate with respect to the
shares of Parent Common Stock or Parent Class B Common Stock represented
thereby, and no cash payment in lieu of fractional shares shall be paid to any
such holder pursuant to Section 2.2(e) until the holder of record of such
Certificate shall surrender such Certificate. Subject to the effect, if any, of
applicable laws, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole shares of
Parent Common Stock or Parent Class B Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of any cash
payable in lieu of a fractional share of Parent Stock to which such holder is
entitled pursuant to Section 2.2(e) and the amount of dividends or other
distributions on Parent Common Stock or Parent Class B Common Stock with a
record date after the Effective Time theretofore paid with respect to such whole
shares of Parent Stock, and (ii) at the appropriate payment date, the amount of
dividends or other distributions on Parent Common Stock or Parent Class B Common
Stock with a record date after the Effective Time but prior to surrender and a
payment date subsequent to surrender payable with respect to such whole shares
of Parent Stock.
(d) No Further Ownership Rights in Company Common Stock. All shares
---------------------------------------------------
of Parent Common Stock or Parent Class B Common Stock issued upon the surrender
for exchange of shares of Company Common Stock or Company Class B Common Stock
in accordance with the terms of this Article 2 (plus any cash paid pursuant to
Section 2.2(c) or 2.2(e)) shall be deemed to have been issued (and paid) in full
satisfaction of all rights pertaining to such shares of Company Common Stock or
Company Class B Common Stock. From and after the Effective Time, the stock
transfer books of the Company shall be closed with respect to the shares of
Company Common Stock or Company Class B Common Stock, and there shall be no
further registration of transfers on the stock transfer books of the Company or
the Surviving Corporation of the shares of Company Common Stock which
-6-
<PAGE>
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be cancelled and exchanged as provided in this Article 2.
(e) No Issuance of Fractional Shares.
--------------------------------
(i) No certificates or scrip for fractional shares of
Parent Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the
owner thereof to vote or to any rights of a stockholder of Parent.
(ii) As promptly as practicable following the Effective
Time, the Exchange Agent shall determine the excess of (A) the number of
full shares of Parent Common Stock delivered to the Exchange Agent by
Parent pursuant to Section 2.2(a) over (B) the aggregate number of full
shares of Parent Common Stock to be distributed to holders of Company
Common Stock pursuant to Section 2.2(b) (such excess being herein called
the "Excess Shares"). As soon after the Effective Time as practicable, the
Exchange Agent, as agent for the holders of Company Common Stock, shall
sell the Excess Shares at then prevailing prices in the over-the-counter
market, all in the manner provided in clause (iii) of this Section 2.2(e).
A fractional share of Parent Class B Common Stock shall be deemed to have
the same value as the same fractional share of Parent Common Stock. To the
extent that a fractional share of Parent Class B Common Stock would
otherwise be issued in the Merger, the Company shall pay directly to such
holder of Company Class B Common Stock the amount of cash, if any, in lieu
of any fractional share interests and subject to clause (v) of this Section
2.2(e).
(iii) The sale of the Excess Shares by the Exchange Agent
shall be executed in the over-the-counter market through one or more member
firms of the National Association of Securities Dealers, Inc. (the "NASD")
and shall be executed in round lots to the extent practicable. Until the
net proceeds of such sale or sales have been distributed to the holders of
Company Common Stock, the Exchange Agent will hold such proceeds in trust
for the holders of Company Common Stock (the "Common Shares Trust"). Parent
shall pay all commissions, transfer taxes and other out-of-pocket
transaction costs, including the expenses and compensation of the Exchange
Agent incurred in connection with such sale of the Excess Shares. The
Exchange Agent shall determine the portion of the Common Shares Trust to
which each holder of Company Common Stock shall be entitled, if any, by
multiplying the amount of the aggregate net proceeds comprising the Common
Shares Trust by a fraction, the numerator of which is the amount of the
fractional share interest to which such holder of Company Common Stock is
entitled and the denominator of which is the aggregate amount of fractional
share interests to which all holders of Company Common Stock are entitled.
(iv) As soon as practicable after the determination of the
amount of cash, if any, to be paid to the holders of Company Common Stock
in lieu of any fractional share interests and subject to clause (v) of this
Section 2.2(e), the Exchange Agent shall make available such amounts to
such holders of Company Common Stock.
-7-
<PAGE>
(v) Parent or the Exchange Agent shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to
this Agreement to any holder of shares of Company Common Stock such amounts
as Parent or the Exchange Agent is required to deduct and withhold with
respect to the making of such payment under the Code, or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld
by Parent or the Exchange Agent, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the holder of the
shares of Company Common Stock in respect of which such deduction and
withholding was made by Parent or the Exchange Agent.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
----------------------------
and Common Shares Trust which remains undistributed to the stockholders of the
Company for twelve months after the Effective Time shall be delivered to Parent,
upon demand, and any former stockholders of the Company who have not theretofore
complied with this Article 2 shall thereafter look only to Parent for payment of
their claim for Parent Common Stock, any cash in lieu of fractional shares of
Parent Common Stock and any dividends or distributions with respect to Parent
Common Stock.
(g) No Liability. Neither the Exchange Agent, Parent, Sub nor the
------------
Company shall be liable to any holder of shares of Company Stock or Parent
Stock, as the case may be, for shares (or dividends or distributions with
respect thereto) from the Exchange Fund or cash from the Common Shares Trust
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(h) Lost, Stolen or Destroyed Certificates. In the event any
--------------------------------------
Certificates evidencing shares of Company Stock shall have been lost, stolen or
destroyed, the holder of such lost, stolen or destroyed Certificate(s) shall
execute an affidavit of that fact upon request. The holder of any such lost,
stolen or destroyed Certificate(s) shall also deliver a reasonable indemnity
against any claim that may be made against Parent or the Exchange Agent with
respect to the Certificate(s) alleged to have been lost, stolen or destroyed.
The affidavit and any indemnity which may be required hereunder shall be
delivered to the Exchange Agent, who shall be responsible for making payment for
such lost, stolen or destroyed Certificate(s).
SECTION 2.3. STOCK OPTIONS. At the Effective Time, the Company's
-------------
obligation with respect to each outstanding option (each, a "Company Option") to
purchase shares of Company Common Stock issued pursuant to the 1996 Stock Option
Plan for Employees, the 1996 Stock Option Plan for Outside Directors, the 1986
Stock Option Plan for Employees and the 1986 Stock Option Plan for Directors
(collectively, the "Company Option Plans"), as amended in the manner described
in the following sentence, shall be assumed by Parent. The Company Options so
assumed by Parent shall continue to have, and be subject to, the same terms and
conditions as set forth in the Company Option Plans and the agreements pursuant
to which such Company Options were issued as in effect immediately prior to the
Effective Time, which plans and agreements shall be assumed by Parent, except
that (in accordance with the applicable provisions of such plans) (a) each such
Company Option shall be exercisable for that number of whole shares of Parent
Common Stock equal to the product of that number of shares of Company Common
Stock covered by such Company Option immediately prior to the Effective Time
multiplied by the Common Stock Exchange Ratio and rounded up to the nearest
whole number of shares of Parent Common Stock, and (b) the exercise price per
share of Parent Common Stock shall
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equal the exercise price per share of Company Common Stock in effect immediately
prior to the Effective Time divided by the Common Stock Exchange Ratio. Parent
shall (i) reserve for issuance the number of shares of Parent Common Stock that
will become issuable upon the exercise of such Company Options pursuant to this
Section 2.3 and (ii) promptly after the Effective Time issue to each holder of
an outstanding Company Stock Option a document evidencing the assumption by
Parent of the Company's obligations with respect thereto under this Section 2.3.
SECTION 2.4. TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any
------------------------------------------
time after the Effective Time, any such further action is necessary or desirable
to carry out the purposes of this Agreement or to vest, perfect or confirm of
record or otherwise establish in the Surviving Corporation full right, title and
interest in, to or under any of the assets, property, rights, privileges, powers
and franchises of the Company and Sub, the officers and directors of the
Surviving Corporation are fully authorized in the name and on behalf of each of
the Constituent Corporations or otherwise to take all such lawful and necessary
or desirable action.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
SECTION 3.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of
--------------------------------------------
the Company and its "Significant Subsidiaries" (as such term is defined in
Regulation S-X promulgated by the Securities and Exchange Commission (the
"SEC")) is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has the requisite
corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted. Each of
the Company and its subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits, easements, consents, certificates, approvals
and orders ("Approvals") necessary to own, lease and operate the properties it
purports to own, operate or lease and to carry on its business as it is now
being conducted, except where the failure to have such Approvals would not,
individually or in the aggregate, have a Material Adverse Effect (as defined
below). Each of the Company and its subsidiaries is duly qualified or licensed
as a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and in
good standing that would not, either individually or in the aggregate, have a
Material Adverse Effect. When used in this Article 3 or elsewhere in this
Agreement in connection with the Company or any of its subsidiaries, the term
"Material Adverse Effect" means any change, event or effect that is materially
adverse to the business, financial condition or results of operations of the
Company and its subsidiaries taken as a whole. Other than wholly owned
subsidiaries and except as disclosed in the Company SEC Reports (as defined in
Section 3.7(a)) or the Company Disclosure Letter (as defined in Section 3.3),
the Company does not directly or indirectly own any equity or similar interest
in, or any interest convertible or exchangeable or exercisable for any equity or
similar interest in, any corporation, partnership, joint venture or other
business, association or entity.
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SECTION 3.2. CERTIFICATE OF INCORPORATION AND BYLAWS. The Company
---------------------------------------
has previously furnished or made available to Parent and Liberty HSN a complete
and correct copy of its certificate of incorporation and bylaws as amended to
date. Such certificate of incorporation and bylaws are in full force and
effect. Neither the Company nor any of its Significant Subsidiaries is in
violation of any of the provisions of its certificate of incorporation or bylaws
or equivalent organizational documents.
SECTION 3.3. CAPITALIZATION. The authorized capital stock of the
--------------
Company consists of 150,000,000 shares of Company Common Stock, 20,000,000
shares of Company Class B Common Stock and 500,000 shares of preferred stock,
par value $.01 per share, of the Company (the "Company Preferred Stock"). At
the close of business on August 23, 1996, (a) 78,975,159 shares of Company
Common Stock were issued and outstanding, all of which are validly issued, fully
paid and nonassessable, and not subject to preemptive rights, (b) of the amount
referred to in clause (a), 6,986,000 shares of Company Common Stock were held in
treasury by the Company or by wholly owned subsidiaries of the Company, (c)
options to purchase 18,715,010 shares of Company Common Stock were outstanding
under the Company Option Plans, and (d) debentures issued pursuant to the
Indenture (as defined in Section 6.15) presently convertible into 8,333,333.33
shares of Company Common Stock were issued and outstanding. As of the date
hereof, no shares of Company Preferred Stock were issued or outstanding. No
change in such capitalization has occurred between June 30, 1996 and the date
hereof except (i) the issuance of shares of Company Common Stock pursuant to the
exercise of outstanding options, (ii) shares issued upon conversion of the
debentures issued pursuant to the Indenture, and (iii) as contemplated by this
Agreement. Except as set forth in this Section 3.3 or as disclosed in the
disclosure letter delivered by the Company to Parent and Liberty HSN (the
"Company Disclosure Letter"), as of the date of this Agreement, there are no
options, warrants or other rights, agreements, arrangements or commitments, in
each case to which the Company or any of its subsidiaries is a party, of any
character relating to the issued or unissued capital stock of the Company or any
of its subsidiaries or obligating the Company or any of its subsidiaries to
issue or sell any shares of capital stock of, or other equity interests in, the
Company or any of its subsidiaries. All shares of Company Common Stock subject
to issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, shall be duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights. Except as set forth in Section 3.3 of the Company Disclosure Letter,
there are no obligations, contingent or otherwise, of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any shares of Company
Stock or the capital stock of any subsidiary or to provide funds to or make any
material investment (in the form of a loan, capital contribution or otherwise)
in any such subsidiary or any other entity other than guarantees of obligations
of subsidiaries entered into in the ordinary course of business. All of the
outstanding shares of capital stock of each of the Company's subsidiaries are
duly authorized, validly issued, fully paid and nonassessable, and, except as
set forth in Section 3.3 of the Company Disclosure Letter, all such shares are
owned by the Company or another subsidiary free and clear of all security
interests, liens, claims, pledges, agreements, limitations in the Company's
voting rights, charges or other encumbrances of any nature whatsoever.
SECTION 3.4. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has
------------------------------------
all necessary corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder and, subject to obtaining the
approval of the stockholders of the Company of this Agreement, to consummate the
Transactions (as defined below). The
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execution and delivery of this Agreement by the Company and the consummation by
the Company of the Transactions have been duly and validly authorized by all
necessary corporate action on the part of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the Transactions so contemplated (other than, with respect to
the Merger, the approval and adoption of this Agreement by the stockholders of
the Company in accordance with the Delaware Statute and the Company's
certificate of incorporation and bylaws). This Agreement has been duly and
validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Parent and Sub and Liberty HSN,
constitutes the legal and binding obligation of the Company, enforceable against
the Company in accordance with its terms, subject to (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
creditors rights generally and (b) the availability of injunctive relief and
other equitable remedies. The Company has taken all appropriate actions so that
the restrictions on business combinations contained in Section 203 of the
Delaware Statute will not apply to Parent, Sub, Barry Diller or the Liberty
Group and their respective affiliates and associates with respect to or as a
result of this Agreement (including the issuance of Parent Stock pursuant to the
Contingent Right), the exchange agreement having the terms set forth on Exhibit
C hereto and otherwise in form and substance reasonably satisfactory to Parent,
Liberty HSN and the Company (the "Exchange Agreement"), the Company Voting
Agreement, the Term Sheet, dated August 25, 1996, between Liberty and Barry
Diller (the "Term Sheet") or the transactions contemplated hereby or thereby
(such transactions collectively, the "Transactions").
SECTION 3.5. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
------------------------------------------
(a) The execution and delivery of this Agreement by the Company do
not, and the performance of its obligations hereunder and the consummation of
the transactions contemplated hereby by the Company will not, (i) conflict with
or violate the certificate of incorporation, bylaws or equivalent organizational
documents of the Company or any of its subsidiaries; (ii) subject to obtaining
the approval of the Company's stockholders of this Agreement in accordance with
the Delaware Statute and the Company's certificate of incorporation and bylaws
and compliance with the requirements set forth in Section 3.5(b) below, conflict
with or violate any law, rule, regulation, order, judgment or decree applicable
to the Company or any of its subsidiaries or by which any of their respective
properties is bound or affected; or (iii) except as set forth in Section 3.5 of
the Company Disclosure Letter, result in any breach of or constitute a default
(or an event that with notice or lapse of time or both would become a default)
under, or alter the rights or obligations of any third party or the Company or
its subsidiaries under, or give to others any rights of termination, amendment,
acceleration, increased payments or cancellation of, or result in the creation
of a lien or other encumbrance on any of the properties or assets of the Company
or any of its subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or any of their respective
properties are bound or affected, except, in the case of clauses (ii) and (iii)
above, for any such conflicts, violations, breaches, defaults or other
alterations or occurrences that would not prevent or delay consummation of the
Merger or the Exchange in any material respect, or otherwise prevent the Company
from performing its obligations under this Agreement in any material respect,
and would not have, individually or in the aggregate, a Material Adverse Effect.
Section 3.5 of the Company Disclosure Letter lists all material consents,
waivers and approvals under any agreements, contracts, licenses or
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<PAGE>
leases required to be obtained by the Company or its subsidiaries in connection
with the consummation of the transactions contemplated hereby.
(b) The execution and delivery of this Agreement by the Company do
not, and the performance of its obligations hereunder and the consummation of
the transactions contemplated hereby by the Company will not, require any
consent, approval, authorization or permit of, or registration or filing with or
notification to, any court, administrative agency, commission, governmental or
regulatory authority, domestic or foreign (a "Governmental Entity"), except (i)
the filing of documents to satisfy the applicable requirements, if any, of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and state
takeover laws, (ii) the filing with the SEC of a joint proxy statement and
prospectus in definitive form relating to the meetings of the Company's and
Parent's stockholders to be held in connection with the Merger (the "Proxy
Statement") and the Rule 13e-3 Transaction Statement on Schedule 13E-3 (the
"Schedule 13E-3") relating thereto, (iii) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware, (iv) filings under
the rules and regulations of the New York Stock Exchange, Inc., (v) the approval
of the FCC relating to the transfer of control of the Company's earth stations
(the "Company FCC Approval") and (vi) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications
(A) would not prevent or delay consummation of the Merger in any material
respect or otherwise prevent or delay in any material respect the Company from
performing its obligations under this Agreement or (B) would not, individually
or in the aggregate, have a Material Adverse Effect.
SECTION 3.6. COMPLIANCE; PERMITS.
-------------------
(a) Neither the Company nor any of its subsidiaries is in conflict
with, or in default or violation (whether after the giving of notice or passage
of time or both) of, (i) any law, rule, regulation, order, judgment or decree
applicable to the Company or any of its subsidiaries or by which any of their
respective properties is bound, or (ii) any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or any of their respective
properties is bound, except for any conflicts, defaults or violations which do
not and would not have, individually or in the aggregate, a Material Adverse
Effect.
(b) The Company and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals from governmental authorities which
are material to operation of the business of the Company and its subsidiaries
taken as a whole (collectively, the "Company Permits"). The Company and its
subsidiaries are in compliance with the terms of the Company Permits, except
where the failure to so comply would not, individually or in the aggregate, have
a Material Adverse Effect.
SECTION 3.7. SEC FILINGS; FINANCIAL STATEMENTS.
---------------------------------
(a) The Company has made available to Parent a correct and complete
copy of each report, schedule, registration statement (but only such
registration statements that have become effective prior to the date hereof) and
definitive proxy statement filed by the Company with the SEC on or after January
1, 1994 and prior to the date of this Agreement (the "Company SEC Reports"),
which are all the forms, reports and documents required to be filed by the
Company with the SEC since such date. As of their respective dates, the
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Company SEC Reports and any forms, reports and other documents filed by the
Company with the SEC after the date of this Agreement (i) complied or will
comply in all material respects with the requirements of the Securities Act of
1933, as amended (the "Securities Act"), or the Exchange Act, as the case may
be, and the rules and regulations of the SEC thereunder applicable thereto, and
(ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement then on the date of such filing) or
will not at the time they are filed contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
made, in light of the circumstances under which they were made, not misleading.
None of the Company's subsidiaries is required to file any reports or other
documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Company SEC Reports complied
as to form in all material respects with applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto, had
been prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods involved (except
as may be indicated in the notes thereto or, in the case of the unaudited
statements, as permitted by Form 10-Q of the SEC), and each fairly presented the
consolidated financial position of the Company and its consolidated subsidiaries
in all material respects as at the respective dates thereof and the consolidated
results of its operations and cash flows for the periods indicated (subject, in
the case of the unaudited interim financial statements, to normal audit
adjustments which were not and are not expected, individually or in the
aggregate, to be material in amount).
(c) Neither the Company nor any of its subsidiaries has any
liabilities (absolute, accrued, contingent or otherwise) of a nature required to
be disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are, individually or
in the aggregate, material to the business, results of operations or financial
condition of the Company and its subsidiaries taken as a whole, except
liabilities (i) set forth in Section 3.7 of the Company Disclosure Letter or the
Company SEC Reports filed with the SEC prior to the date of this Agreement or
provided for in the Company's balance sheet (and related notes thereto) as of
December 31, 1995 filed in the Company SEC Reports, or (ii) incurred since
December 31, 1995 in the ordinary course of business, none of which are material
to the business, results of operations or financial condition of the Company and
its subsidiaries, taken as a whole.
SECTION 3.8. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set
------------------------------------
forth in Section 3.8 of the Company Disclosure Letter, contemplated by this
Agreement or disclosed in the Company SEC Reports, since December 31, 1995, (a)
the Company and its subsidiaries have conducted their businesses only in the
ordinary course and in a manner consistent with past practice and have not taken
any of the actions set forth in Section 6.2(b), and (b) there has not been (i)
any transaction, commitment, dispute or other event or condition (financial or
otherwise) of any character (whether or not in the ordinary course of business),
individually or in the aggregate, having or which could reasonably be expected
to have a Material Adverse Effect, or (ii) any material change by the Company in
its accounting methods, principles or practices except as required by concurrent
changes in GAAP.
SECTION 3.9. ABSENCE OF LITIGATION. Except as disclosed in the
---------------------
Company SEC Reports, there are no claims, actions, suits, investigations or
proceedings pending or,
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<PAGE>
to the best knowledge of the Company, threatened against the Company or any of
its subsidiaries, before any court, arbitrator or administrative, governmental
or regulatory authority or body, domestic or foreign, that, individually or in
the aggregate, would, or reasonably could be expected to, have a Material
Adverse Effect, nor is there any judgment, decree, injunction, rule or order of
any Governmental Entity or arbitrator outstanding against the Company or any of
its subsidiaries (i) having or which would, or reasonably could be expected to,
have a Material Adverse Effect or (ii) which seeks to restrain, enjoin or delay
consummation of any of the Transactions.
SECTION 3.10. REGISTRATION STATEMENT; PROXY STATEMENT. None of the
---------------------------------------
information supplied or to be supplied by the Company for inclusion or
incorporation by reference in (a) the registration statement on Form S-4 to be
filed with the SEC by Parent in connection with the issuance of the Parent
Common Stock in or as a result of the Merger (the "S-4") will, at the time the
S-4 is filed with the SEC and at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading; and (b) the Proxy Statement and the Schedule 13E-3 will, at the
date the Proxy Statement is mailed to the stockholders of Parent and the
Company, at the time of the stockholders meetings of Parent and the Company
(each a "Stockholders Meeting" and collectively, the "Stockholders Meetings") in
connection with the transactions contemplated hereby and as of the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made, in light of the
circumstances under which they are made, not misleading. The Proxy Statement
and the Schedule 13E-3 will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations promulgated by the
SEC thereunder.
SECTION 3.11. TAXES. The Company and each of its subsidiaries, and
-----
any consolidated, combined, unitary or aggregate group for Tax (as defined
below) purposes of which the Company or any of its subsidiaries is or has been a
member has timely filed all Tax Returns (as defined below) required to be filed
by it or requests for extensions to file such Tax Returns have been timely
filed, granted and have not expired, except to the extent that such failures to
file or to have extensions granted that remain in effect, individually and in
the aggregate would not have a Material Adverse Effect, and all such Tax Returns
were complete and accurate in all material respects. In addition, (a) no
material claim for unpaid Taxes has become a lien against the property of the
Company or any of its subsidiaries or is being asserted against the Company or
any of its subsidiaries, (b) no audit of any Tax Return of the Company or any of
its subsidiaries is being conducted by a Tax authority (i) as of the date of
this Agreement and (ii) which, as of the Closing Date, has not had and could not
reasonably be expected to have a Material Adverse Effect, (c) no extension of
the statute of limitations on the assessment of any Taxes has been granted by
the Company or any of its subsidiaries and is currently in effect (i) as of the
date of this Agreement and (ii) which, as of the Closing Date, has not had and
could not reasonably be expected to have a Material Adverse Effect and (d) there
is no agreement, contract or arrangement to which the Company or any of its
subsidiaries is a party that, by virtue of the Merger, will result in the
payment of any amount that would not be deductible under Section 162 or 404 of
the Code, or by reason of Section 280G of the Code. As used herein, "Taxes"
shall mean all taxes of any kind, including, without limitation, those on or
measured by or referred to as income, gross receipts, sales, use, ad valorem,
-- -------
franchise, profits, license, withholding,
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payroll, employment, excise, severance, stamp, occupation, premium, value added,
property or windfall profits taxes, customs, duties or similar fees, assessments
or charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any governmental authority,
domestic or foreign. As used herein, "Tax Return" shall mean any return, report
or statement required to be filed with any governmental authority with respect
to Taxes.
SECTION 3.12. BROKERS. Except as set forth on Section 3.12 of the
-------
Company Disclosure Schedule, no broker, finder or investment banker (other than
Wasserstein, Perella & Co. (the "Company Banker")) is entitled to any brokerage,
finder's or other fee or commission in connection with the Merger and the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company. The Company has heretofore furnished to Parent a
complete copy of all agreements between the Company and the Company Banker
pursuant to which such firm would be entitled to any payment relating to the
Merger and the other transactions contemplated hereby.
SECTION 3.13. OPINION OF FINANCIAL ADVISOR. The Company's Board of
----------------------------
Directors has received the written opinion of the Company Banker that, as of the
date of this Agreement, the Common Stock Exchange Ratio is fair to the
stockholders of the Company (other than the Liberty Group) from a financial
point of view, a copy of which opinion will be delivered to Parent, and such
opinion has not been withdrawn or modified in any material respect.
SECTION 3.14. BOARD APPROVAL. The Board of Directors of the Company
--------------
based on the recommendation of the Special Committee of independent directors
(the "Special Committee") (which recommendation was a condition to the approval
of the Company's Board of Directors set forth in clause (a) of this sentence)
has, prior to this Agreement, (a) approved this Agreement, the Company Voting
Agreement, the Term Sheet, the Exchange Agreement and the transactions
contemplated hereby and thereby (including for purposes of Section 203 of the
Delaware Statute), (b) determined that the Transactions are fair to and in the
best interests of the stockholders of the Company (other than the Liberty Group)
and (c) recommended that the stockholders of the Company approve this Agreement
and the Transactions. No vote of Company stockholders pursuant to (S) 203 of
the Delaware Statute is required in connection with the Transactions.
SECTION 3.15. EMPLOYEE BENEFIT PLANS.
----------------------
(a) The Company has delivered or made available to Parent prior to
the execution of this Agreement true and complete copies (or, in the case of
bonus or other incentive plans, summaries thereof) of all material pension,
retirement, profit-sharing, deferred compensation, stock option, employee stock
ownership, severance pay, vacation, bonus or other material incentive plans, all
other material written employee programs, arrangements or agreements, whether
arrived at through collective bargaining or otherwise, all material medical,
vision, dental or other health plans, all life insurance plans and all other
material employee benefit plans or fringe benefit plans, including, without
limitation, all "employee benefit plans" as that term is defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
currently adopted, maintained by, sponsored in whole or in part by, or
contributed to by the Company or any entity required to be aggregated with the
Company pursuant to Section 414 of the Code (each, a "Commonly Controlled
Entity") for the benefit of employees, retirees, dependents, spouses,
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directors, independent contractors or other beneficiaries and under which
employees, retirees, dependents, spouses, directors, independent contractors or
other beneficiaries are eligible to participate (collectively, the "Company
Benefit Plans"). Any of the Company Benefit Plans which is an "employee pension
benefit plan," as that term is defined in Section 3(2) of ERISA, is referred to
herein as an "ERISA Plan." No Company Benefit Plan is or has been a
multiemployer plan within the meaning of Section 3(37) of ERISA (a
"Multiemployer Plan").
(b) All Company Benefit Plans are in compliance with the applicable
terms of ERISA and the Code and any other applicable laws, rules and regulations
the breach or violation of which could result in a material liability to the
Company or any Commonly Controlled Entity.
(c) No ERISA Plan which is a defined benefit pension plan has any
"unfunded current liability," as that term is defined in Section 302(d)(8)(A) of
ERISA, and the present fair market value of the assets of any such plan equals
or exceeds the plan's "benefit liabilities," as that term is defined in Section
4001(a)(16) of ERISA, when determined under actuarial factors that would apply
if the plan terminated in accordance with all applicable legal requirements.
(d) Neither the execution and delivery of this Agreement nor the
consummation of the Transactions will (i) result in any material payment
(including, without limitation, severance, unemployment compensation, golden
parachute or otherwise) becoming due to any director or any employee of the
Company or any of its affiliates from the Company or any of its affiliates under
any Company Benefit Plan or otherwise, (ii) materially increase any benefits
otherwise payable under any Company Benefit Plan or (iii) result in any
acceleration of the time of payment or vesting of any such benefits to any
material extent, except as provided under the Company Option Plans or related
agreement.
SECTION 3.16. TAX MATTERS. Neither the Company nor any of its
-----------
subsidiaries has taken or agreed to take any action (including in connection
with the Transactions) that would prevent the Merger from constituting a
reorganization qualifying under the provisions of Section 368(a) of the Code.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub jointly and severally represent and warrant to the
Company, as follows:
SECTION 4.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of
--------------------------------------------
Parent and its Significant Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power and authority to own, lease
and operate its assets and properties and to carry on its business as it is now
being conducted. Each of Parent and its subsidiaries is in possession of all
Approvals necessary to own, lease and operate the properties it purports to own,
operate or lease and to carry on its business as it is now being conducted,
except where the failure to have such Approvals would not, individually or in
the aggregate, have
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a Material Adverse Effect (as defined below). Each of Parent and its
subsidiaries is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary, except for such failures to be
so duly qualified or licensed and in good standing that would not, either
individually or in the aggregate, have a Material Adverse Effect. When used in
this Article 4 or elsewhere in connection with Parent or any of its
subsidiaries, the term "Material Adverse Effect" means any change, event or
effect that is materially adverse to the business, financial condition or
results of operations of Parent and its subsidiaries taken as a whole. Other
than wholly owned subsidiaries and except as disclosed in the Parent SEC Reports
(as defined in Section 4.7(a)) or Section 6.3 of the Parent Disclosure Letter
(as defined in Section 4.3), Parent does not directly or indirectly own any
equity or similar interest in, or any interest convertible or exchangeable or
exercisable for any equity or similar interest in, any corporation, partnership,
joint venture or other business, association or entity.
SECTION 4.2. CERTIFICATE OF INCORPORATION AND BYLAWS. Parent has
---------------------------------------
previously furnished to the Company a complete and correct copy of its
certificate of incorporation and bylaws as amended to date. Such certificate of
incorporation and bylaws are in full force and effect. Neither Parent nor any
of its Significant Subsidiaries is in violation of any of the provisions of its
certificate of incorporation or bylaws or equivalent organizational documents.
SECTION 4.3. CAPITALIZATION. As of the date hereof, the authorized
--------------
capital stock of Parent consists of (a) 30,000,000 shares of Parent Common Stock
and 2,415,945 shares of Parent Class B Common Stock, and (b) 50,000 shares of
preferred stock, par value $.01 per share, of Parent (the "Parent Preferred
Stock"), none of which have been designated as to class or series. At the close
of business on August 22, 1996, (i) 7,075,332 shares of Parent Common Stock were
issued and outstanding and 2,415,945 shares of Parent Class B Common Stock were
issued and outstanding, all of which Parent Common Stock and Parent Class B
Common Stock are validly issued, fully paid and nonassessable and not subject to
any preemptive rights, (ii) no shares of Parent Common Stock were held in
treasury by Parent or by subsidiaries of Parent and (iii) options to purchase
3,040,897 shares of Parent Common Stock were outstanding under Parent's 1992
Stock Option and Restricted Stock Plan, Parent's Stock Option Plan for Outside
Directors, and under equity compensation arrangements. Except as set forth in
Section 4.3 of the Parent Disclosure Letter, no change in such capitalization
has occurred between August 22, 1996 and the date hereof except issuances of
Parent Common Stock upon exercise of outstanding options. As of the date hereof,
no shares of Parent Preferred Stock were issued or outstanding. Prior to the
Closing, Parent shall have reserved and shall thereafter at all times keep
reserved (i) such number of shares of Parent Class B Common Stock issuable
pursuant to the Contingent Right and pursuant to the Exchange Agreement and (ii)
such number of shares of Parent Common Stock issuable pursuant to the Exchange
Agreement and issuable upon conversion of the shares of Parent Class B Common
Stock issued pursuant to the Contingent Right and the Exchange Agreement, and
upon such issuance of such shares pursuant to the Contingent Right and the
Exchange Agreement and upon conversion of such shares of Parent Class B Common
Stock issued pursuant thereto, such shares will be duly authorized, validly
issued, fully paid and non-assessable and free and clear of all security
interests, liens, claims, pledges, agreements, limitations in the holder's
voting rights, charges or other encumbrances of any nature whatsoever (in each
case to which Parent is a party). The authorized capital stock of Sub consists
of 150,000,000 shares of common stock, par value
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$0.00001 per share ("Sub Common Stock"), and 20,000,000 shares of Class B common
stock, par value $0.00001 per share ("Sub Class B Common Stock"). As of the date
hereof, 54,422,457 shares of Sub Common Stock and 19,260,859 shares of Sub Class
B Common Stock are issued and outstanding. Immediately prior to the Effective
Time, Parent will own shares of Sub Common Stock and Sub Class B Common Stock
equal to, respectively, the number of shares of Company Common Stock and Company
Class B Common Stock that are exchanged for shares of Parent Common Stock or
Parent Class B Common Stock at the Effective Time. All of the outstanding shares
of Parent's and Sub's respective capital stock have been duly authorized and
validly issued and are fully paid and nonassessable, and the shares of Sub
Common Stock and shares of Sub Class B Common Stock to be issued to Parent or
Liberty as contemplated by this Agreement shall, upon issuance, be duly
authorized, validly issued, fully paid and non-assessable. Except as set forth
in this Section 4.3 or as disclosed in the disclosure letter delivered by Parent
to the Company and Liberty HSN (the "Parent Disclosure Letter"), as of the date
of this Agreement, there are no options, warrants or other rights, agreements,
arrangements or commitments, in each case to which Parent or any of its
subsidiaries is a party, of any character relating to the issued or unissued
capital stock of Parent or any of its subsidiaries or obligating Parent or any
of its subsidiaries to issue or sell any shares of capital stock of, or other
equity interests in, Parent or any of its subsidiaries. All shares of Parent
Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
shall, and the shares of Parent Stock to be issued pursuant to the Merger will
be, duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. Except as set forth in Section 4.3 of the Parent
Disclosure Letter, there are no obligations, contingent or otherwise, of Parent
or any of its subsidiaries to repurchase, redeem or otherwise acquire any shares
of Parent Stock or the capital stock of any subsidiary or to provide funds to or
make any material investment (in the form of a loan, capital contribution or
otherwise) in any such subsidiary or any other entity other than guarantees of
obligations of subsidiaries entered into in the ordinary course of business.
Except as the result of the Exchange, all of the outstanding shares of capital
stock (other than directors' qualifying shares) of each of Parent's subsidiaries
is duly authorized, validly issued, fully paid and nonassessable and all such
shares (other than directors' qualifying shares) are owned by Parent or another
subsidiary. The shares of Surviving Corporation Common Stock and Surviving
Corporation Class B Common Stock to be issued in the Merger shall, upon
issuance, be validly issued, fully paid, nonassessable and free and clear of all
security interests, liens, claims, pledges, agreements, limitations in the
holder's voting rights, charges or other encumbrances of any nature whatsoever
(in each case to which the Surviving Corporation is a party).
SECTION 4.4. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent
------------------------------------
and Sub has all necessary corporate power and authority to execute and deliver
this Agreement, and to perform its obligations hereunder and, subject to
obtaining the approval of Parent's stockholders of the issuance of Parent Stock
in the Merger, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Parent and Sub and the consummation by Parent
and Sub of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of Parent and Sub and
no other corporate proceedings on the part of Parent or Sub are necessary to
authorize this Agreement, or to consummate the transactions so contemplated
(other than with respect to the issuance of shares of Parent Common Stock in the
Merger as set forth in Section 4.4 of the Parent Disclosure Letter in accordance
with the applicable rules of the NASD and
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Parent's certificate of incorporation and bylaws). This Agreement has been duly
and validly executed and delivered by Parent and Sub and, assuming the due
authorization, execution and delivery by the Company and Liberty HSN,
constitutes the legal and binding obligations of Parent and Sub, enforceable
against Parent and Sub in accordance with its terms, subject to (a) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to creditors rights generally and (b) the availability of injunctive
relief and other equitable remedies. Parent has taken all appropriate actions so
that the restrictions on business combinations contained in Section 203 of the
Delaware Statute will not apply to any member of the Liberty Group, Barry Diller
or their respective affiliates or associates with respect to or as a result of
this Agreement, the Parent Voting Agreement, the Term Sheet, the Exchange
Agreement, or the Transactions.
SECTION 4.5. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
-------------------------------------------
(a) The execution and delivery of this Agreement by Parent and Sub do
not, and the performance of their respective obligations hereunder and the
consummation of the transactions contemplated hereby by Parent and Sub will not,
(i) conflict with or violate the certificate of incorporation, bylaws or
equivalent organizational documents of Parent or any of its subsidiaries; (ii)
subject to obtaining approval of Parent's stockholders of the issuance of the
shares of Parent Stock in the Merger and compliance with the requirements set
forth in Section 4.5(b) below, conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to Parent or any of its
subsidiaries or by which their respective properties are bound or affected; or
(iii) result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or alter the
rights or obligations of any third party or Parent or its subsidiaries under, or
give to others any rights of termination, amendment, acceleration, increased
payments or cancellation of, or result in the creation of a lien or other
encumbrance on any of the properties or assets of Parent or any of its
subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Parent or any of its subsidiaries is a party or by which Parent or any
of its subsidiaries or any of their respective properties are bound or affected,
except in the cases of clauses (ii) and (iii) above, for any such conflicts,
violations, breaches, defaults or other alterations or occurrences that would
not prevent or delay consummation of the Merger or the Exchange in any material
respect, or otherwise prevent Parent and Sub from performing their respective
obligations under this Agreement in any material respect, and would not have,
individually or in the aggregate, a Material Adverse Effect. Section 4.5(a) of
the Parent Disclosure Letter lists all material consents, waivers and approvals
under any agreements, contracts, licenses or leases required to be obtained by
Parent or its subsidiaries in connection with the consummation of the
transactions contemplated by this Agreement.
(b) The execution and delivery of this Agreement by Parent and Sub do
not, and the performance of their respective obligations hereunder and the
consummation of the transactions contemplated hereby by Parent and Sub will not,
require any consent, approval, authorization or permit of, or registration or
filing with or notification to, any Governmental Entity except (i) the filing of
documents to satisfy the applicable requirements, if any, of the Exchange Act
and state takeover laws, (ii) the filing with the SEC of the Proxy Statement and
Schedule 13E-3 and the declaration of effectiveness of the S-4 by the SEC, (iii)
the filing of the Certificate of Merger with the Secretary of State of the State
of Delaware, (iv) the reporting to or approval by the FCC of the matters set
forth on Section 4.5(b) of the Parent Disclosure Letter pursuant to the
Memorandum Opinion and Order
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and Notice of Apparent Liability, In re Applications of Roy M. Speer, FCC 96-258
----------------------------------
(released June 19, 1996), which approval is reasonably satisfactory to Liberty
HSN and does not impose additional restrictions on the Liberty Group or the
ownership of its assets or businesses (provided, that for purposes of the
--------
foregoing, a condition, restriction or limitation arising out of such approval
shall be deemed to be a restriction or limitation on the Liberty Group
(regardless of whether such person is a party to or otherwise legally obligated
by the terms of such approval) to the extent that the taking of an action or the
consummation of a transaction by the Liberty Group would result in BDTV, Parent,
or any of their respective subsidiaries being in breach or violation of such
consent or approval or otherwise causing such consent or approval to terminate
or expire) (the "FCC Approval"), (v) the Company FCC Approval, (vi) filings
under the rules and regulations of the NASD, (vii) filings under state
securities laws ("Blue Sky Laws"), and (viii) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications (A) would not prevent or delay consummation of the Merger in any
material respect or otherwise prevent or delay in any material respect Parent or
Sub from performing their respective obligations under this Agreement or (B)
would not, individually or in the aggregate, have a Material Adverse Effect.
SECTION 4.6. COMPLIANCE; PERMITS.
-------------------
(a) Neither Parent nor any of its subsidiaries is in conflict with,
or in default or violation (whether after the giving of notice or passage of
time or both) of, (i) any law, rule, regulation, order, judgment or decree
applicable to Parent or any of its subsidiaries or by which any of their
respective properties is bound, or (ii) any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Parent or any of its subsidiaries is a party or by which
Parent or any of its subsidiaries or any of their respective properties is
bound, except for any such conflicts, defaults or violations which do not and
would not have, individually or in the aggregate, a Material Adverse Effect.
(b) Parent and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals from governmental authorities which
are material to the operation of the business of Parent and its subsidiaries
taken as a whole (collectively, the "Parent Permits"). Parent and its
subsidiaries are in compliance with the terms of the Parent Permits, except
where the failure to so comply would not, individually or in the aggregate, have
a Material Adverse Effect.
SECTION 4.7. SEC FILINGS; FINANCIAL STATEMENTS.
---------------------------------
(a) Parent has made available to the Company a correct and complete
copy of each report, schedule, registration statement and definitive proxy
statement filed by Parent with the SEC on or after January 1, 1994 and prior to
the date of this Agreement (the "Parent SEC Reports"), which are all the forms,
reports and documents required to be filed by Parent with the SEC since January
1, 1994. As of their respective dates, the Parent SEC Reports and any forms,
reports and other documents filed by Parent and Sub after the date of this
Agreement (i) complied or will comply in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations of the SEC thereunder applicable thereto, and (ii) did
not at the time they were filed (or if amended or superseded by a filing prior
to the date of this Agreement then on the date of such filing) or will not at
the time they are filed contain any untrue statement of
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a material fact or omit to state a material fact necessary in order to make the
statements made, in light of the circumstances under which they were made, not
misleading. None of Parent's subsidiaries is required to file any reports or
other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Parent SEC Reports complied as
to form in all material respects with applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto, had
been prepared in accordance with GAAP applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes thereto or, in the
case of the unaudited statements, as permitted by Form 10-Q of the SEC) and each
fairly presented the consolidated financial position of Parent and its
consolidated subsidiaries in all material respects as at the respective dates
thereof and the consolidated results of its operations and cash flows for the
periods indicated (subject, in the case of the unaudited interim financial
statements, to normal audit adjustments which were not and are not expected,
individually or in the aggregate, to be material in amount).
(c) Except as disclosed in Section 4.7 of the Parent Disclosure
Letter, neither Parent nor any of its subsidiaries has any liabilities
(absolute, accrued, contingent or otherwise) of a nature required to be
disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are, individually or
in the aggregate, material to the business, results of operations or financial
condition of Parent and its subsidiaries taken as a whole, except liabilities
(i) set forth in the Parent SEC Reports filed with the SEC prior to the date of
this Agreement or provided for in Parent's balance sheet (and related notes
thereto) as of December 31, 1995 filed in the Parent SEC Reports or (ii)
incurred since December 31, 1995 in the ordinary course of business, none of
which are material to the business, results of operations or financial condition
of Parent and its subsidiaries, taken as a whole.
SECTION 4.8. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
------------------------------------
disclosed in the Parent SEC Reports or in Section 4.8 of the Parent Disclosure
Letter or as contemplated by this Agreement, since December 31, 1995, (a) Parent
and its subsidiaries have conducted their businesses only in the ordinary course
and in a manner consistent with past practice and have not taken any of the
actions set forth in Section 5.3(b), and (b) there has not been (i) any
transaction, commitment, dispute or other event or condition (financial or
otherwise) of any character (whether or not in the ordinary course of business),
individually or in the aggregate, having or which could reasonably be expected
to have a Material Adverse Effect or (ii) any material change by Parent in its
accounting methods, principles or practices except as required by concurrent
changes in GAAP.
SECTION 4.9. ABSENCE OF LITIGATION. Except as disclosed in Section
---------------------
4.9 of the Parent Disclosure Letter, there are no claims, actions, suits,
investigations or proceedings pending or, to the best knowledge of Parent,
threatened against Parent or any of its subsidiaries before any court,
arbitrator or administrative, governmental or regulatory authority or body,
domestic or foreign, that, individually or in the aggregate, would, or could
reasonably be expected to, have a Material Adverse Effect, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against Parent or any of its subsidiaries (i) having or
which would, or could reasonably be expected to, have a Material Adverse Effect
or (ii) which seeks to restrain, enjoin or delay consummation of any of the
Transactions.
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SECTION 4.10. REGISTRATION STATEMENT; PROXY STATEMENT. None of the
---------------------------------------
information supplied or to be supplied by Parent for inclusion or incorporation
by reference in (a) the S-4 will, at the time the S-4 is filed with the SEC and
at the time it becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading; and (b) the Proxy
Statement and the Schedule 13E-3 will, at the date the Proxy Statement is mailed
to the stockholders of Parent and the Company, at the times of the Stockholders
Meetings and as of the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made, in light of the circumstances under which they are made, not
misleading. The Proxy Statement and the Schedule 13E-3 will comply as to form
in all material respects with the provisions of the Exchange Act and the rules
and regulations promulgated by the SEC thereunder, and the S-4 will comply as to
form in all material respects with the provisions of the Securities Act and the
rules and regulations promulgated by the SEC thereunder.
SECTION 4.11. TAXES. Parent and each of its subsidiaries, and any
-----
consolidated, combined, unitary or aggregate group for Tax purposes of which
Parent or any of its subsidiaries is or has been a member has timely filed all
Tax Returns required to be filed by it or requests for extensions to file such
returns have been timely filed, granted and have not expired, except to the
extent that such failures to file or to have extensions granted that remain in
effect individually and in the aggregate, would not have a Material Adverse
Effect, and all such returns were complete and accurate in all material
respects. In addition, (a) no material claim for unpaid Taxes has become a lien
against the property of Parent or any of its subsidiaries or is being asserted
against Parent or any of its subsidiaries, (b) no audit of any Tax Return of
Parent or any of its subsidiaries is being conducted by a Tax authority (i) as
of the date of this Agreement and (ii) which, as of the Closing Date, has not
had and could not reasonably be expected to have, a Material Adverse Effect, (c)
no extension of the statute of limitations on the assessment of any Taxes has
been granted by Parent or any of its subsidiaries and is currently in effect (i)
as of the date of this Agreement and (ii) which, as of the Closing Date, has not
had and could not reasonably be expected to have a Material Adverse Effect and
(d) except as disclosed in the Parent SEC Reports, there is no agreement,
contract or arrangement to which Parent or any of its subsidiaries is a party
that will, by virtue of the Merger, result in the payment of any amount that
would not be deductible under Section 162 or 404 of the Code or by reason of
Section 280G of the Code.
SECTION 4.12. BROKERS. Except as set forth in Section 4.12 of the
-------
Parent Disclosure Letter, no broker, finder or investment banker (other than CS
First Boston ("Parent Banker")) is entitled to any brokerage, finder's or other
fee or commission in connection with the Merger and the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent or Sub. Parent has heretofore furnished to the Company a complete copy
of all agreements between Parent and Parent Banker pursuant to which such firm
would be entitled to any payment relating to the Merger and the other
transactions contemplated hereby.
SECTION 4.13. OPINION OF FINANCIAL ADVISOR. Parent's Board of
----------------------------
Directors has received the written opinion of Parent Banker that, as of the date
of this Agreement, the consideration to be paid by Parent in the Transactions is
fair to Parent from a financial point
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of view, a copy of which opinion will be delivered to the Company, and such
opinion has not been withdrawn or modified in any material respect.
SECTION 4.14. BOARD APPROVAL. The Board of Directors of Parent has,
--------------
prior to this Agreement, (a) approved this Agreement, the Parent Voting
Agreement, the Term Sheet, the Exchange Agreement and the transactions
contemplated hereby and thereby (including for purposes of Section 203 of the
Delaware Statute), (b) determined that the Transactions are fair to and in the
best interests of the stockholders of Parent (other than the Liberty Group), and
(c) recommended that the stockholders of Parent approve the issuance of Parent
Common Stock and Parent Class B Common Stock in connection with the
Transactions. No vote of Parent stockholders pursuant to (S) 203 of the
Delaware Statute is required in connection with the Transactions.
SECTION 4.15. INTERIM OPERATIONS OF SUB. Sub is a direct wholly
-------------------------
owned subsidiary of Parent and was formed solely for the purpose of engaging in
the transactions contemplated hereby, has engaged in no other business
activities and has conducted its operations only as contemplated hereby.
SECTION 4.16. EMPLOYEE BENEFIT PLANS.
----------------------
(a) Parent has delivered or made available to the Company prior to
the execution of this Agreement true and complete copies (or, in the case of
bonus or other incentive plans, summaries thereof) of all material pension,
retirement, profit-sharing, deferred compensation, stock option, employee stock
ownership, severance pay, vacation, bonus or other material incentive plans, all
other material written employee programs, arrangements or agreements, whether
arrived at through collective bargaining or otherwise, all material medical,
vision, dental or other health plans, all life insurance plans and all other
material employee benefit plans or fringe benefit plans, including, without
limitation, all "employee benefit plans" as that term is defined in Section 3(3)
of ERISA, currently adopted, maintained by, sponsored in whole or in part by, or
contributed to by Parent or any Commonly Controlled Entity of Parent for the
benefit of employees, retirees, dependents, spouses, directors, independent
contractors or other beneficiaries and under which employees, retirees,
dependents, spouses, directors, independent contractors or other beneficiaries
are eligible to participate (collectively, the "Parent Benefit Plans"). Any of
the Parent Benefit Plans which is an "employee pension benefit plan," as that
term is defined in Section 3(2) of ERISA, is referred to herein as a "Parent
ERISA Plan." No Parent Benefit Plan is or has been a Multiemployer Plan within
the meaning of Section 3(37) of ERISA.
(b) All Parent Benefit Plans are in compliance with the applicable
terms of ERISA and the Code and any other applicable laws, rules and regulations
the breach or violation of which could result in a material liability to Parent
or any Commonly Controlled Entity of Parent.
(c) No Parent ERISA Plan which is a defined benefit pension plan has
any "unfunded current liability," as that term is defined in Section
302(d)(8)(A) of ERISA, and the present fair market value of the assets of any
such plan equals or exceeds the plan's "benefit liabilities," as that term is
defined in Section 4001(a)(16) of ERISA, when determined under actuarial factors
that would apply if the plan terminated in accordance with all applicable legal
requirements.
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(d) Except as disclosed in Section 4.16 of the Parent Disclosure
Letter, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
material payment (including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due to any director or any
employee of Parent or any of its affiliates from Parent or any of its affiliates
under any Parent Benefit Plan or otherwise, (ii) materially increase any
benefits otherwise payable under any Parent Benefit Plan, or (iii) result in any
acceleration of the time of payment or vesting of any such benefits to any
material extent, except as provided under the option plans referred to in clause
(iii) of the second sentence of Section 4.3 hereof (other than options granted
on August 24, 1995).
SECTION 4.17. TAX MATTERS. Neither Parent nor any of its affiliates
-----------
has taken or agreed to take any action (including in connection with the
Transactions) that would prevent the Merger from constituting a reorganization
qualifying under the provisions of Section 368(a) of the Code.
SECTION 4.18. BDTV ARRANGEMENTS. Except as set forth in Section 4.18
-----------------
of the Parent Disclosure Letter or as disclosed in the Parent SEC Reports, there
exist no other contracts, agreements or understandings (whether oral or written)
between or among (a) Parent, on the one hand, and Barry Diller, on the other
hand, or (b) Parent and/or BDTV and/or Barry Diller, on the one hand, and the
Liberty Group, on the other hand, other than such contracts, agreements and
understandings relating to the ordinary course of business operations of Parent.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF LIBERTY HSN
Liberty HSN represents and warrants to the Company, Parent and Sub as
follows, provided, that Liberty HSN makes no representation with respect to the
--------
Company or its subsidiaries:
SECTION 5.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Liberty
--------------------------------------------
HSN is a corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation and has the requisite
corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted. Liberty
HSN is duly qualified or licensed as a foreign corporation to do business, and
is in good standing, in each jurisdiction where the character of the properties
owned, leased or operated by it or the nature of its business makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing that would not, either individually
or in the aggregate, have a Liberty Adverse Effect (as defined below). When
used in this Article 5 or elsewhere in this Agreement in connection with Liberty
HSN, the term "Liberty Adverse Effect" means any change, event or effect that
would materially impair, prevent or delay the ability of Liberty HSN to
consummate the Transactions.
SECTION 5.2. CERTIFICATE OF INCORPORATION AND BYLAWS. Liberty HSN
---------------------------------------
has previously furnished to Parent and the Company a complete and correct copy
of its certificate of incorporation and bylaws as amended to date. Such
certificate of incorporation and
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bylaws are in full force and effect. Liberty HSN is not in violation of any of
the provisions of its certificate of incorporation or bylaws or equivalent
organizational documents.
SECTION 5.3. CAPITALIZATION; BUSINESS OF LIBERTY HSN. All of the
---------------------------------------
outstanding capital stock of Liberty HSN is beneficially owned by a member of
the Liberty Group. No shares of the capital stock of Liberty HSN are reserved
for issuance upon exercise of outstanding options or otherwise. Liberty HSN
does not have any material liabilities or business other than in connection with
the ownership of the Liberty HSN Shares (as defined in Section 5.6).
SECTION 5.4. AUTHORITY RELATIVE TO THIS AGREEMENT. Liberty HSN has
------------------------------------
all necessary corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Liberty HSN and the consummation by Liberty HSN of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of Liberty HSN and no other corporate proceedings
on the part of Liberty HSN are necessary to authorize this Agreement or to
consummate the transactions so contemplated. This Agreement has been duly and
validly executed and delivered by Liberty HSN and, assuming the due
authorization, execution and delivery by the Company, Parent and Sub,
constitutes the legal and binding obligation of Liberty HSN, enforceable against
Liberty HSN in accordance with its terms, subject to (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
creditors rights generally and (b) the availability of injunctive relief and
other equitable remedies.
SECTION 5.5. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
------------------------------------------
(a) The execution and delivery of this Agreement by Liberty HSN do
not, and the performance of its obligations hereunder and the consummation of
the transactions contemplated hereby by Liberty HSN will not, (i) conflict with
or violate the certificate of incorporation, bylaws or equivalent organizational
documents of Liberty HSN or any of its subsidiaries; or (ii) conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to
Liberty HSN or any of its subsidiaries or by which any of their respective
properties is bound or affected, except, in the case of clause (ii), for any
such conflicts or violations that would not prevent or delay consummation of the
Transactions in any material respect, or otherwise prevent Liberty HSN from
performing its obligations under this Agreement in any material respect, and
would not have, individually or in the aggregate, a Liberty Adverse Effect,
except as disclosed in the Liberty HSN Disclosure Letter (as defined below).
Section 5.5 of the disclosure letter delivered by Liberty HSN to the Company and
Parent (the "Liberty HSN Disclosure Letter") lists all material consents,
waivers and approvals under any agreements, contracts, licenses or leases
required to be obtained by Liberty HSN in connection with the consummation of
the transactions contemplated hereby.
(b) The execution and delivery of this Agreement by Liberty HSN do
not, and the performance of its obligations hereunder and the consummation of
the transactions contemplated hereby by Liberty HSN will not, require any
consent, approval, authorization or permit of, or registration or filing with or
notification to, any Governmental Entity, except (i) as disclosed in the Liberty
HSN Disclosure Letter, (ii) the filing with the SEC of the Schedule 13E-3, (iii)
the FCC Approval, and (iv) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications (A)
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would not prevent or delay consummation of the Exchange or the Merger in any
material respect or otherwise prevent or delay in any material respect Liberty
HSN from performing its obligations under this Agreement or (B) would not,
individually or in the aggregate, have a Liberty Adverse Effect.
SECTION 5.6. OWNERSHIP OF COMPANY STOCK. As of the date hereof,
--------------------------
Liberty HSN is the record and beneficial owner of 17,566,702 shares of Company
Common Stock and 20,000,000 shares of Company Class B Common Stock (the "Liberty
HSN Shares"), and such shares are held by Liberty HSN free of any liens,
charges, security interests, pledges, voting or stockholder agreements,
encumbrances or equities, other than pursuant to this Agreement, the Company
Voting Agreement, the Term Sheet, the Exchange Agreement and as set forth in
Section 5.6 of the Liberty HSN Disclosure Letter. Except for such matters and
the Transactions, there are no agreements, arrangements, warrants, options,
puts, calls, rights or other commitments or understandings of any character to
which any member of the Liberty Group is a party or by which any of them is
bound and relating to the sale, purchase, redemption, conversion, exchange,
registration, voting or transfer of any of the Liberty HSN Shares. As of the
Effective Time, Liberty HSN will be the record and beneficial owner of all the
Liberty HSN Shares and will hold such shares as described in the first sentence
of this Section, other than shares exchanged for shares of the capital stock of
Sub immediately prior to the Effective Time.
SECTION 5.7. ABSENCE OF LITIGATION. Except as disclosed in Section
---------------------
5.7 of the Liberty HSN Disclosure Letter, there are no claims, actions, suits,
investigations or proceedings pending or, to the best knowledge of Liberty HSN,
threatened against Liberty HSN or any of its subsidiaries before any court,
arbitrator or administrative, governmental or regulatory authority or body,
domestic or foreign, that, individually or in the aggregate, would, or could
reasonably be expected to, have a Liberty Adverse Effect, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against Liberty HSN or any of its subsidiaries (a) having
or which would, or could reasonably be expected to have a Liberty Adverse
Effect, or (b) which seeks to restrain, enjoin or delays consummation of any of
the Transactions.
SECTION 5.8. BROKERS. No broker, finder or investment banker is
-------
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger and the other transactions contemplated by this Agreement based
upon arrangements made by or on behalf of Liberty HSN.
SECTION 5.9. TAX MATTERS. As of the date hereof, the historical tax
-----------
basis of the shares of Company Class B Common Stock owned by Liberty HSN and to
be converted in the Merger is not less than $154,000,000.
ARTICLE 6
CONDUCT AND TRANSACTIONS PRIOR TO
EFFECTIVE TIME; ADDITIONAL AGREEMENTS
SECTION 6.1. INFORMATION AND ACCESS. From the date of this Agreement
----------------------
and continuing until the Effective Time, the Company and Parent each agrees as
to itself and its subsidiaries that it shall afford and, with respect to clause
(b) below, shall cause its independent auditors to afford, (a) to the officers,
independent auditors, counsel and other
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<PAGE>
representatives of the other reasonable access to its and its subsidiaries'
properties, books, records (including Tax Returns filed and those in
preparation) and personnel in order that the other may have a full opportunity
to make such investigation as it reasonably desires to make of the other, and
(b) to the independent auditors of the other, reasonable access to the audit
work papers and other records of its independent auditors. No investigation
pursuant to this Section 6.1 shall affect or otherwise obviate or diminish any
representations and warranties of any party or conditions to the obligations of
any party. Except as required by law or stock exchange or NASD regulation, any
information furnished pursuant to this Section 6.1 shall be treated
confidentially by such party, its officers, independent accountants and other
representatives and advisors (except for such information as has otherwise been
made public (other than by reason of a violation of this Section 6.1)).
SECTION 6.2. CONDUCT OF BUSINESS OF THE COMPANY. Except as
----------------------------------
contemplated by this Agreement (including the Company Disclosure Letter), during
the period from the date of this Agreement and continuing until the Effective
Time or until the termination of this Agreement pursuant to Section 8.1, (a) the
Company and its subsidiaries shall conduct their respective businesses in the
ordinary and usual course consistent with past practice and (b) neither the
Company nor any of its subsidiaries shall without the prior written consent of
Parent:
(i) declare, set aside or pay any dividends on or make any other
distribution in respect of any of its capital stock, except dividends or
distributions declared and paid by a subsidiary of the Company only to the
Company or another subsidiary of the Company;
(ii) split, combine or reclassify any of its capital stock or issue
or authorize or propose the issuance or authorization of any other
securities in respect of, in lieu of, or in substitution for shares of its
capital stock or repurchase, redeem or otherwise acquire any shares of its
capital stock;
(iii) issue, deliver, pledge, encumber or sell, or authorize or
propose the issuance, delivery, pledge, encumbrance or sale of, or purchase
or propose the purchase of, any shares of its capital stock or securities
convertible into, or rights, warrants or options to acquire, any such
shares of capital stock or other convertible securities (other than the
issuance of such capital stock upon the exercise or conversion of options
or warrants in accordance with the Company Option Plans in effect on the
date of this Agreement, or the conversion of debentures issued pursuant to
the Indenture outstanding on the date of this Agreement, in each case in
accordance with their respective present terms), authorize or propose any
change in its equity capitalization, or, except as contemplated by this
Agreement (including the Company Disclosure Letter), or amend any of the
financial or other economic terms of such securities or the financial or
other economic terms of any agreement relating to such securities;
(iv) amend its certificate of incorporation or bylaws in any manner;
(v) take any action that would or could reasonably be expected to
result in any of its representations and warranties set forth in this
Agreement being untrue or in any of the conditions to the Merger set forth
in Article 7 not being satisfied; or
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<PAGE>
(vi) authorize or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
SECTION 6.3. CONDUCT OF BUSINESS OF PARENT. Except as contemplated
-----------------------------
by this Agreement (including the Parent Disclosure Letter), during the period
from the date of this Agreement and continuing until the Effective Time or until
the termination of this Agreement pursuant to Section 8.1, (a) Parent and its
subsidiaries shall conduct their respective businesses in the ordinary and usual
course consistent with past practice, and (b) neither Parent nor any of its
subsidiaries shall without the prior written consent of the Company:
(i) declare, set aside or pay any dividends on or make any other
distribution in respect of any of its capital stock, except dividends or
distributions declared and paid by a subsidiary of Parent only to Parent or
another subsidiary of Parent;
(ii) split, combine or reclassify any of its capital stock or issue
or authorize or propose the issuance or authorization of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock or repurchase, redeem or otherwise acquire any shares of its
capital stock;
(iii) issue, deliver, pledge, encumber or sell, or authorize or
propose the issuance, delivery, pledge, encumbrance or sale of, or purchase
or propose the purchase of, any shares of its capital stock or securities
convertible into, or rights, warrants or options to acquire, any such
shares of capital stock or other convertible securities (other than (A) the
issuance of such capital stock upon the exercise or conversion of options
outstanding on the date of this Agreement in accordance with their present
terms and identified in Section 4.3 hereof, (B) the granting of options or
stock to employees in the ordinary course of business and the issuance of
Parent Common Stock upon exercise thereof or (C) pursuant to the terms of
the Retirement Savings and Employment Stock Option Plan) or authorize or
propose any change in its equity capitalization, or, except as contemplated
by this Agreement (including the Parent Disclosure Letter), amend any of
the financial or other economic terms of such securities or the financial
or other economic terms of any agreement (including the Exchange Agreement
described in the Parent Disclosure Letter) relating to such securities;
(iv) amend its certificate of incorporation or bylaws in any manner;
(v) take any action that would or could reasonably be expected to
result in any of its representations and warranties set forth in this
Agreement being untrue or in any of the conditions to the Merger set forth
in Article 7 not being satisfied; or
(vi) authorize or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
SECTION 6.4. PREPARATION OF S-4, SCHEDULE 13E-3 AND PROXY STATEMENT;
-------------------------------------------------------
OTHER FILINGS. As promptly as practicable after the date of this Agreement,
- -------------
Parent and the Company (and, in the case of the Schedule 13E-3, the Liberty
Group) shall prepare and file with the SEC a preliminary Proxy Statement and
Schedule 13E-3 in form and substance reasonably satisfactory to each of Parent
and the Company and Parent shall prepare and file
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with the SEC the S-4, in which the Proxy Statement will be included as a
prospectus. Each of Parent and the Company shall use its reasonable best efforts
to respond to any comments of the SEC, to have the S-4 declared effective under
the Securities Act as promptly as practicable after such filing and, subject to
fiduciary duties, to cause the Proxy Statement approved by the SEC to be mailed
to its respective stockholders at the earliest practicable time. As promptly as
practicable after the date of this Agreement, Parent and the Company shall
prepare and file any other filings required under the Exchange Act, the
Securities Act or any other federal or Blue Sky Laws relating to the Merger and
the transactions contemplated by this Agreement, including, without limitation,
under state takeover laws or in connection with the FCC Approval (the "Other
Filings"). The Company and Parent (and, in the case of the Schedule 13E-3, the
Liberty Group) will notify the other parties promptly of the receipt of any
comments from the SEC or its staff and of any request by the SEC or its staff or
any other government officials for amendments or supplements to the S-4, the
Schedule 13E-3, the Proxy Statement or any Other Filing or for additional
information and will supply the other with copies of all correspondence between
it or any of its representatives, on the one hand, and the SEC, or its staff or
any other government officials, on the other hand, with respect to the S- 4, the
Schedule 13E-3, the Proxy Statement, the Merger or any Other Filing. The Proxy
Statement, the Schedule 13E-3, the S-4 and the Other Filings shall comply in all
material respects with all applicable requirements of law. Whenever any event
occurs which is required to be set forth in an amendment or supplement to the
Proxy Statement, the Schedule 13E-3, the S-4 or any Other Filing, Parent or the
Company (and, in the case of the Schedule 13E-3, the Liberty Group), as the case
may be, shall promptly inform the other parties of such occurrence and cooperate
in filing with the SEC or its staff or any other government officials, and/or
mailing to stockholders of Parent and the Company, such amendment or supplement.
Subject to the fiduciary duties of the directors in accordance with applicable
law, the Proxy Statement shall include the recommendations of the Board of
Directors of Parent in favor of the issuance of Parent Common Stock and Parent
Class B Common Stock in connection with the Transactions and of the Board of
Directors of the Company in favor of approval of this Agreement and the
Transactions; provided, that the Board of Directors of the Company will not
--------
recommend approval of this Agreement and the Transactions without the
recommendation of the Special Committee. The Company and Parent acknowledge and
agree that the Proxy Statement will also include information relating to the
matters disclosed in the Parent Disclosure Letter and any required vote of the
stockholders of Parent relating thereto, consistent with applicable requirements
of law. The Company and Parent each shall promptly provide the other (or its
counsel) copies of all filings made by it with any Governmental Entity in
connection with this Agreement and the transactions contemplated hereby. To the
extent information is required from Liberty HSN in connection with the Proxy
Statement and the S-4, Liberty HSN shall comply with the covenants of Parent and
the Company contained in this Section. In the event that the Merger is not
consummated on or prior to January 3, 1997, the covenants in this Section shall
apply to the filing by Parent, Sub, the Company and Liberty HSN of a pre-merger
notification report under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), and responding to any further informational
requests in connection with the receipt of termination or expiration of the
applicable waiting period under the HSR Act. Parent shall take all necessary
actions to cause the shares of Parent Common Stock issuable in connection with
the Company Option Plans to be registered under the Securities Act. Prior to the
Effective Time, the Company shall take appropriate action so that Parent's
assumption of the Company Option Plans as of the Effective Time shall be
effective.
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<PAGE>
SECTION 6.5. LETTER OF INDEPENDENT AUDITORS. The Company and Parent
------------------------------
shall use all reasonable efforts to cause to be delivered to the other "comfort"
letters of KPMG Peat Marwick LLP, the Company's independent auditors, and of
Parent's independent auditors, in each case dated and delivered the date on
which the S-4 shall become effective and as of the Effective Time, and addressed
to the Boards of Directors of the Company and Parent, in form and substance
reasonably satisfactory to the other and customary in scope and substance for
letters delivered by independent auditors in connection with registration
statements similar to the S-4.
SECTION 6.6. STOCKHOLDERS' MEETINGS. Parent and the Company each
----------------------
shall call its respective Stockholders Meeting to be held as promptly as
practicable for the purpose of voting upon, in the case of Parent, the issuance
of Parent Common Stock in connection with the Transactions as well as the other
matters referred to in Section 6.3 of the Parent Disclosure Letter and, in the
case of the Company, this Agreement. Parent and the Company shall coordinate
and cooperate with respect to the timing of the Stockholders Meetings and shall
use their respective reasonable best efforts to hold the Stockholders Meetings
on the same day as soon as practicable after the date on which the S-4 becomes
effective.
SECTION 6.7. AGREEMENTS TO TAKE REASONABLE ACTION.
------------------------------------
(a) Except as otherwise set forth in the Liberty HSN Disclosure
Letter, the parties, including Liberty HSN, shall take, and shall cause their
respective subsidiaries to take, all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed on it with respect to
the Merger (including furnishing the information required under the HSR Act or
in connection with receipt of the FCC Approval) and shall take all reasonable
actions necessary to cooperate promptly with and furnish information to the
other parties in connection with any such requirements imposed upon it or any of
its subsidiaries in connection with the Merger. Except as otherwise set forth
in the Liberty HSN Disclosure Letter, each party, including Liberty HSN, shall
take, and shall cause its subsidiaries to take, all reasonable actions necessary
(i) to obtain (and will take all reasonable actions necessary to promptly
cooperate with the other parties in obtaining) any clearance, consent,
authorization, order or approval of, or any exemption by, any Governmental
Entity, or other third party, required to be obtained or made by it (or by the
other parties or any of their respective subsidiaries) in connection with the
Transactions or the taking of any action contemplated by this Agreement; (ii) to
lift, rescind or mitigate the effect of any injunction or restraining order or
other order adversely affecting its ability to consummate the transactions
contemplated hereby; (iii) to fulfill all conditions applicable to the parties
pursuant to this Agreement; and (iv) to prevent, with respect to a threatened or
pending temporary, preliminary or permanent injunction or other order, decree or
ruling or statute, rule, regulation or executive order, the entry, enactment or
promulgation thereof, as the case may be; provided, however, that with respect
-------- -------
to clauses (i) through (iv) above, the parties, including Liberty HSN, will take
only such curative measures (such as licensing and divestiture) as the parties
determine to be reasonable.
(b) Except as otherwise set forth in the Liberty HSN Disclosure
Letter, subject to the terms and conditions of this Agreement, each of the
parties, including Liberty HSN, shall use all reasonable efforts to take, or
cause to be taken, all actions and to do, or
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<PAGE>
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective as promptly as practicable
the Transactions, subject to the appropriate approval of the stockholders of
Parent and the Company.
SECTION 6.8. CONSENTS. Except as otherwise set forth in the Liberty
--------
HSN Disclosure Letter, Parent, Sub, the Company and Liberty HSN shall each use
all reasonable efforts to obtain the consent and approval of, or effect the
notification of or filing with, each person or authority whose consent or
approval is required in order to permit the consummation of the Merger and the
transactions contemplated by this Agreement and to enable the Surviving
Corporation to conduct and operate the business of the Company and its
subsidiaries substantially as presently conducted and as contemplated to be
conducted.
SECTION 6.9. NASDAQ QUOTATION. Parent shall use its reasonable best
----------------
efforts to cause the shares of Parent Common Stock issuable to the stockholders
of the Company in the Merger to be eligible for quotation on the NASD National
Market (or other national market or exchange on which Parent Common Stock is
then traded or quoted) prior to the Effective Time.
SECTION 6.10. PUBLIC ANNOUNCEMENTS. Parent, Sub and the Company
--------------------
shall consult with each other before issuing any press release or otherwise
making any public statements with respect to the Merger and shall not issue any
such press release or make any such public statement prior to such consultation
except as may be required by law.
SECTION 6.11. AFFILIATES. At least ten Business Days prior to the
----------
date of the Stockholders Meetings, the Company shall deliver to Parent a list of
names and addresses of those persons who were, at the record date for the
Company Stockholders Meeting, "affiliates" of the Company within the meaning of
Rule 145 under the Securities Act. The Company shall use its reasonable efforts
to deliver or cause to be delivered to Parent, prior to the Effective Time, from
each of the affiliates of the Company identified in the foregoing list,
agreements substantially in the form attached to this Agreement as Exhibit B.
SECTION 6.12. DEFENSE OF LITIGATION. Each of Parent, Sub, the
---------------------
Company and Liberty HSN agrees to vigorously defend against all actions, suits
or proceedings in which such party is named as a defendant which seek to enjoin,
restrain or prohibit the transactions contemplated hereby or seek damages with
respect to such transactions. Neither Parent, Sub, the Company nor Liberty HSN
shall settle any such action, suit or proceeding or fail to perfect on a timely
basis any right to appeal any judgment rendered or order entered against such
party therein without the consent of the other parties (which consent shall not
be withheld unreasonably). Each of Parent, Sub, the Company and Liberty HSN
shall notify the other parties of any such initiated actions, suits or
proceedings.
SECTION 6.13. INDEMNIFICATION. Upon the Effective Time, Parent shall
---------------
assume all of the obligations of the Company under the Company's existing
indemnification agreements with each of the directors and officers of the
Company, as such agreements relate to the indemnification of such persons for
expenses and liabilities arising from facts or events which occurred on or
before the Effective Time or relating to the Merger or transactions contemplated
by this Agreement. Notwithstanding the foregoing, Parent agrees to provide to
the current directors and officers of the Company the maximum indemnification
protection permitted under the Delaware Statute and the certificate of
incorporation and bylaws of the Company. Parent's directors and officers
insurance policy in effect on the
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date hereof provides coverage of a scope and amount that is, in the aggregate,
at least as extensive as the Company's directors and officers insurance policy
in effect on the date hereof.
SECTION 6.14. NOTIFICATION OF CERTAIN MATTERS. Each of the Company,
-------------------------------
Parent, Sub and Liberty HSN shall give prompt notice to the other such parties
of the occurrence, or failure to occur, of any event, which occurrence or
failure to occur would be likely to cause (a) any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
at any time from the date of this Agreement to the Effective Time, or (b) any
material failure of the Company, Parent, Sub or Liberty HSN, as the case may be,
or of any officer, director, employee or agent thereof, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement. Notwithstanding the foregoing, the delivery of any
notice pursuant to this Section shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
SECTION 6.15. THE COMPANY DEBENTURES. The Company shall comply with
----------------------
all notice requirements arising as a consequence of this Agreement and the
transactions contemplated hereby under that certain indenture, dated as of March
1, 1996 (as amended or supplemented, the "Indenture"), between the Company and
United States Trust Company of New York as trustee thereunder (the "Trustee"),
pursuant to which the Company's 5-7/8% Convertible Subordinated Debentures, due
March 1, 2006 are issued and outstanding. At the Effective Time, the Company
and Parent, if required, shall execute and deliver to the Trustee a supplemental
indenture pursuant to, and satisfying the requirements of the Indenture, which
supplemental indenture shall be in form and substance reasonably satisfactory to
Parent and the Trustee. Parent shall make reasonable efforts to become jointly
liable with the Company or to guarantee the obligations of the Company under the
Indenture as of the Effective Time. At or prior to the Effective Time, Parent
shall reserve a sufficient number of shares of Parent Common Stock for issuance
as required by the Indenture (and, if required pursuant to the Indenture or
applicable law, shall include such shares of Parent Common Stock in the shares
to be registered pursuant to the S-4).
SECTION 6.16. EMPLOYEE AGREEMENTS. From and after the Effective
-------------------
Time, Parent shall cause the Surviving Corporation to fulfill all employment,
severance, termination, consulting and retirement agreements, as in effect on
the date hereof, to which the Company or any of its subsidiaries is a party,
pursuant to the terms thereof and applicable law.
SECTION 6.17. REORGANIZATION. From and after the date hereof, each
--------------
of Parent and the Company and their respective subsidiaries shall not, and shall
use reasonable efforts to cause their affiliates not to, take any action, or
fail to take any action, that would jeopardize qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code or enter into
any contract, agreement, commitment or arrangement that would have such effect.
SECTION 6.18. EXCHANGE AGREEMENT. Immediately prior to the Effective
------------------
Time, Parent and Liberty shall enter into the Exchange Agreement having the
terms set forth in Exhibit C hereto and otherwise in form and substance
reasonably satisfactory to Parent, Liberty HSN and the Company. Prior to the
Effective Time and other than pursuant to Section 2.1(f) of this Agreement,
without the approval of the Special Committee,
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Parent and Sub shall not materially amend the Exchange Agreement and shall not
amend in any respect the economic terms thereof.
SECTION 6.19. PARENT DIRECTORS. Promptly following the Effective
----------------
Time, in accordance with applicable law and Parent's certificate of
incorporation and bylaws, three current directors of the Company who are legally
permitted to serve as directors of Parent shall become members of the Board of
Directors of Parent.
ARTICLE 7
CONDITIONS PRECEDENT
SECTION 7.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
---------------------------------------------------
MERGER AND THE EXCHANGE. The respective obligations of each party (including
- -----------------------
Liberty HSN) to effect the Merger and the Exchange are subject to the
satisfaction prior to the Closing Date of the following conditions:
(a) FCC Approvals; HSR Approval.
---------------------------
(i) The FCC Approval, to the extent requiring affirmative action by
the FCC, (A) shall have been obtained; (B) the time for filing a request
for administrative or judicial review, or for instituting administrative
review sua sponte, of any such FCC Approval shall have expired without any
----------
such filing having been made or notice of such review having been issued;
or, in the event of such filing or review sua sponte, such filing or review
----------
shall have been disposed favorably to the grant and the time for seeking
further relief with respect thereto shall have expired without any request
for such further relief having been filed; and (C) such approval shall not
impose any additional restrictions or limitations (in addition to those
imposed by laws and regulations of general applicability as in effect from
time to time) on Parent or the Liberty Group in the ownership of their
respective assets or the operation of their respective businesses. There
shall be no order of the FCC requiring any changes to the Term Sheet. The
Company FCC Approval shall have been obtained, or the FCC shall have issued
special temporary authority to allow the Company to proceed with the
Merger.
(ii) Any waiting period applicable to the consummation of the
Transactions under the HSR Act shall have expired or been terminated, and
no action shall have been instituted by the Department of Justice or
Federal Trade Commission challenging or seeking to enjoin the consummation
of the Transactions, which action shall not have been withdrawn or
terminated.
(b) Stockholder Approval. The issuance of Parent Common Stock and
--------------------
Parent Class B Common Stock in connection with the Merger and the other
Transactions including pursuant to the Contingent Right and the Exchange
Agreement shall have been approved by the requisite vote of the
stockholders of Parent, and this Agreement shall have been approved and
adopted by the requisite vote of the stockholders of the Company, in each
case in accordance with applicable law; provided, that with respect to such
--------
vote of the stockholders of the Company, this Agreement
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<PAGE>
shall also have been approved and adopted by stockholders of the Company
(who are neither members of the Liberty Group nor affiliates of any member
of the Liberty Group) holding a majority of the outstanding shares of
Company Common Stock (other than shares of Company Common Stock held by
members of the Liberty Group or any of their affiliates) present and voting
at the Company's Stockholders Meeting.
(c) Effectiveness of the S-4. The S-4 shall have been declared
------------------------
effective by the SEC under the Securities Act and shall not be the subject
of any stop order or proceeding by the SEC seeking a stop order.
(d) Liberty Exchange. Immediately prior to the Merger, Liberty HSN
----------------
shall have exchanged certain of its shares of Company Common Stock and
Company Class B Common Stock pursuant to Article 1 of this Agreement
(subject to adjustment pursuant to Section 2.1(f)), and Parent and Liberty
HSN shall have entered into the Exchange Agreement.
(e) Governmental Entity Approvals. All other material
-----------------------------
authorizations, consents, orders or approvals of, or declarations or
filings with, or expiration of waiting periods imposed by, any Governmental
Entity necessary for the Merger and the consummation of the transactions
contemplated by this Agreement shall have been filed, expired or been
obtained, other than those that, individually or in the aggregate, the
failure to be filed, expired or obtained would not, in the reasonable
opinion of Parent, have a Material Adverse Effect on the Company or Parent.
(f) No Injunctions or Restraints; Illegality. No temporary
----------------------------------------
restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Merger or the other
Transactions shall be in effect, nor shall any proceeding brought by an
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, seeking any of the foregoing be
pending or threatened; and there shall not be any action taken, or any
statute, rule, regulation or order (whether temporary, preliminary or
permanent) enacted, entered or enforced which makes the consummation of the
Merger or the other Transactions illegal or prevents or prohibits the
Merger or the other Transactions.
(g) NASDAQ Quotation. The shares of Parent Common Stock issuable to
----------------
the holders of the Company Stock pursuant to the Merger shall have been
authorized for quotation on the NASD National Market (or other national
market or exchange on which Parent Common Stock is then traded or quoted),
upon official notice of issuance.
(h) Consummation of Savoy Merger. The merger of a subsidiary of
----------------------------
Parent with and into Savoy Pictures Entertainment, Inc., a Delaware
corporation, pursuant to the Agreement and Plan of Merger, dated November
27, 1995 (as amended as of August 13, 1996) shall have been consummated.
SECTION 7.2. CONDITIONS OF OBLIGATIONS OF PARENT AND SUB. The
-------------------------------------------
obligations of Parent and Sub to effect the Merger and the Exchange are subject
to the satisfaction of the following additional conditions, unless waived in
writing by Parent:
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<PAGE>
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Company and Liberty HSN set forth in this Agreement shall
be true and correct or, in the case of representations and warranties not
containing any materiality qualifier, including, without limitation,
"Material Adverse Effect," shall be true and correct in all material
respects (i) as of the date hereof and (ii) as of the Closing Date, as
though made on and as of the Closing Date (provided, that in the cases of
--------
clauses (i) and (ii), any such representation and warranty made as of a
specific date shall be true and correct as of such specific date), and
Parent shall have received certificates to such effect signed by the Chief
Executive Officer or the Chief Financial Officer of the Company with
respect to Company matters and by a senior executive officer of Liberty HSN
with respect to Liberty HSN matters.
(b) Performance of Obligations of the Company and Liberty HSN. Each
---------------------------------------------------------
of the Company and Liberty HSN shall have performed in all material
respects all of their respective obligations and covenants, taken as a
whole, required to be performed by such party under this Agreement prior to
or as of the Closing Date (but, in the case of Liberty HSN, subject to any
conditions relating to the Exchange Agreement), and Parent shall have
received certificates to such effect signed by the Chief Executive Officer
or the Chief Financial Officer of the Company with respect to Company
matters and by a senior executive officer of Liberty HSN with respect to
Liberty HSN matters.
(c) Consents. Parent and Sub shall have received duly executed
--------
copies of all material third-party consents and approvals contemplated by
this Agreement or the Company Disclosure Letter to be obtained by the
Company in form and substance reasonably satisfactory to Parent and Sub,
except those consents the failure to so receive would not, individually or
in the aggregate, have a Material Adverse Effect on the Company.
(d) Tax Opinion. Parent and Sub shall have received the opinion,
-----------
dated the Closing Date, of Wachtell, Lipton, Rosen & Katz, special counsel
to Parent, based upon customary representations, to the effect that the
Merger will be treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code, and that each of the
Company, Sub and Parent will be a party to that reorganization within the
meaning of Section 368(b) of the Code.
SECTION 7.3. CONDITIONS OF OBLIGATIONS OF THE COMPANY. The
----------------------------------------
obligation of the Company to effect the Merger is subject to the satisfaction of
the following conditions, unless waived in writing by the Company:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Parent and Sub and Liberty HSN set forth in this Agreement
shall be true and correct or, in the case of representations and warranties
not containing any materiality qualifier, including, without limitation,
"Material Adverse Effect," shall be true and correct in all material
respects (i) as of the date hereof and (ii) as of the Closing Date, as
though made on and as of the Closing Date (provided, that in the cases of
--------
clauses (i) and (ii), any such representation and warranty made as of a
specific date shall be true and correct as of such specific date), and the
Company shall have received certificates to such effect signed by a senior
executive officer of Parent and the President of Sub to such effect with
respect to Parent matters and Sub matters,
-35-
<PAGE>
respectively, and by a senior executive officer of Liberty HSN with respect
to Liberty HSN matters.
(b) Performance of Obligations of Parent, Sub and Liberty HSN. Each
---------------------------------------------------------
of Parent and Sub and Liberty HSN shall have performed in all material
respects all of their respective obligations and covenants, taken as a
whole, required to be performed by such party under this Agreement prior to
or as of the Closing Date (but, in the case of Liberty HSN, subject to any
conditions relating to the Exchange Agreement), and the Company shall have
received certificates to such effect signed by the Chief Financial Officer
of Parent and the President of Sub with respect to Parent and Sub matters,
respectively, and by a senior executive officer of Liberty HSN with respect
to Liberty HSN matters.
(c) Consents. The Company shall have received duly executed copies
--------
of all material third-party consents and approvals contemplated by this
Agreement and the Parent Disclosure Letter to be obtained by Parent in form
and substance reasonably satisfactory to the Company, except those consents
the failure to so receive, would not, individually or in the aggregate,
have a Material Adverse Effect on Parent.
(d) Tax Opinion. The Company shall have received the opinion, dated
-----------
the Closing Date, of Howard, Darby & Levin, special counsel to the Company,
based upon customary representations, to the effect that the Merger will be
treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code, and that each of the Company, Sub
and Parent will be a party to that reorganization within the meaning of
Section 368(b) of the Code.
SECTION 7.4. CONDITIONS OF OBLIGATIONS OF LIBERTY HSN. Without the
----------------------------------------
prior written consent of Liberty HSN, the conditions set forth in Sections
7.2(a) (with respect to the representations and warranties in Section 3.14 and
3.16 only), 7.2(d), 7.3(a) (with respect to the representations and warranties
in Sections 4.3, 4.9, 4.14 and 4.17), 7.3(b) (with respect to Sections 6.3(b)
(except to the extent permitted without the consent of Liberty under the
stockholders agreement relating to Parent Stock between Barry Diller and Liberty
or to which Liberty consents thereunder), 6.4, 6.5, 6.7, 6.8, 6.12, 6.13, 6.14,
6.17, and 6.18), 7.3(c) and 7.3(d) may not be waived by any of the parties. As
of the Effective Time, there shall be no law, rule or regulation in effect or
formally introduced in Congress which would prevent the exchange of shares of
Surviving Corporation Common Stock and Surviving Corporation Class B Stock for
shares of Parent Common Stock and Parent Class B Common Stock pursuant to the
Exchange Agreement or the contribution of Parent Stock to BDTV II (as defined in
the Term Sheet) from being tax-free exchanges for federal income tax purposes.
ARTICLE 8
TERMINATION
SECTION 8.1. TERMINATION. This Agreement may be terminated at any
-----------
time prior to the Effective Time of the Merger, whether before or after approval
of the Merger by the stockholders of Parent and the Company:
-36-
<PAGE>
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent and the Company based on the recommendation of the
Special Committee;
(b) by either Parent, the Company or Liberty HSN if the Merger shall
not have been consummated by September 1, 1997 (provided, that the right to
--------
terminate this Agreement under this Section 8.1(b) shall not be available
to any party whose action or failure to act has been the cause of or
resulted in the failure of the Merger to occur on or before such date and
such action or failure to act constitutes a breach of this Agreement);
(c) by either Parent or the Company, if (i) a court of competent
jurisdiction or other Governmental Entity shall have issued an order,
decree or ruling or taken any other action, in any case having the effect
of permanently restraining, enjoining or otherwise prohibiting the Merger,
which order, decree or ruling is final and nonappealable or (ii) a
governmental, regulatory or administrative agency or commission shall seek
to enjoin the Merger and the terminating party reasonably believes that the
time period required to resolve such governmental action and the related
uncertainty is reasonably likely to have a Material Adverse Effect on
either Parent or the Company;
(d) by either Parent or the Company, if the required approvals of the
stockholders of Parent or the Company contemplated by this Agreement shall
not have been obtained by reason of the failure to obtain the required vote
upon a vote taken at a Stockholders Meeting or at any adjournment thereof
(provided, that the right to terminate this Agreement under this Section
---------
8.1(d) shall not be available to any party where the failure to obtain
stockholder approval of such party shall have been caused by the action or
failure to act of such party in breach of this Agreement);
(e) by Parent, if the Board of Directors of the Company acting on the
recommendation of the Special Committee shall have withdrawn or modified
its recommendation concerning the Merger referred to in Section 3.14 and
such action or inaction shall not be due to a breach by Parent of the
nature described in Section 6.2(a) or 6.2(b);
(f) by the Company, if the Board of Directors of Parent shall have
withdrawn or modified the recommendation referred to in Section 4.14(c) and
such action or inaction shall not be due to a breach by the Company of the
nature described in Section 6.3(a) or 6.3(b);
(g) by the Company, upon a breach of any representation, warranty,
covenant or agreement on the part of Parent set forth in this Agreement, or
if any representation or warranty of Parent shall have become untrue, in
either case such that the conditions set forth in Section 6.3(a) or Section
6.3(b) would not be satisfied as of the time of such breach or as of the
time such representation or warranty shall have become untrue, provided,
--------
that if such inaccuracy in Parent's representations and warranties or
breach by Parent is curable by Parent through the exercise of its
reasonable efforts and for so long as Parent continues to exercise such
reasonable efforts, the Company may not terminate this Agreement under this
Section 8.1(g); or
-37-
<PAGE>
(h) by Parent, upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this
Agreement, or if any representation or warranty of the Company shall have
become untrue, in either case such that the conditions set forth in Section
6.2(a) or Section 6.2(b) would not be satisfied as of the time of such
breach or as of the time such representation or warranty shall have become
untrue, provided, that if such inaccuracy in the Company's representations
--------
and warranties or breach by the Company is curable by the Company through
the exercise of its reasonable efforts and for so long as the Company
continues to exercise such reasonable efforts, Parent may not terminate
this Agreement under this Section 8.1(h);
(i) by the Special Committee (or, if any member of the Special
Committee is no longer serving in such capacity, any successor committee
consisting of independent directors of the Company), if, at any time prior
to the Effective Time, the arithmetic average of the mean of the closing
bid and ask prices of Parent Common Stock on the NASD National Market (or
other national market or exchange on which Parent Common Stock is then
traded or quoted) for the 20 trading days immediately preceding such time
is less than $22.125; or
(j) by Parent, if at any time prior to the Effective Time, the
arithmetic average of the mean of the closing bid and ask prices of Parent
Common Stock on the NASD National Market (or other national market or
exchange on which Parent Common Stock is then traded or quoted) for the 20
trading days immediately preceding such time is more than $36.875.
SECTION 8.2. EFFECT OF TERMINATION. In the event of the termination
---------------------
of this Agreement as provided in Section 8.1, this Agreement shall be of no
further force or effect, except (a) as set forth in the last sentence of Section
6.1, this Section 8.2, Section 8.3, and Article 9, each of which shall survive
the termination of this Agreement, and (b) nothing herein shall relieve any
party from liability for any breach of this Agreement.
SECTION 8.3. FEES AND EXPENSES. Except as set forth in this Section
-----------------
8.3, all fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses, whether or not the Merger is consummated; provided, however, that
-------- -------
Parent and the Company shall share equally all fees and expenses, other than
attorneys' fees, incurred in relation to the printing, filing and mailing of the
Proxy Statement (including any preliminary materials related thereto), the
Schedule 13E-3 and the S-4 (including financial statements and exhibits) and any
amendments or supplements thereto, but only to the extent such fees and expenses
relate to the Merger or the issuance of Parent Stock in the Transactions.
ARTICLE 9
GENERAL PROVISIONS
SECTION 9.1. FAILURE TO CONSUMMATE THE MERGER. In the event that the
--------------------------------
Exchange contemplated in Section 1.1 is consummated, but, for any reason
whatsoever, the Merger is not consummated immediately thereafter and on the same
date (and in accordance with this Agreement), then, notwithstanding any
provision of this Agreement apparently to
-38-
<PAGE>
the contrary, in addition to any other rights or remedies which Liberty HSN may
have pursuant hereto or at law or in equity, Liberty HSN shall have the
unconditional right to rescind the transactions consummated pursuant to this
Agreement, in which event Parent and Sub shall take all such actions as may be
necessary to make such rescission fully effective, including, but not limited
to, upon the request of Liberty HSN, transferring the shares of Company Common
Stock and Company Class B Common Stock transferred to Sub by Liberty HSN
pursuant to Section 1.1 and held by Sub to Liberty HSN upon proper delivery by
Liberty HSN of the shares of Sub Common Stock and Sub Class B Common Stock
received in the Exchange.
SECTION 9.2. AMENDMENT. This Agreement (including the Exhibits,
---------
Annexes and disclosure letters hereto) may be amended prior to the Effective
Time by the parties, by action taken by the Board of Directors of Parent and the
Board of Directors of the Company (provided, that no amendment shall be approved
--------
by the Board of Directors of the Company unless such amendment shall have been
recommended by the Special Committee), at any time before or after approval of
the Merger by the stockholders of Parent and the Company but, after any such
approval, no amendment shall be made which by law requires further approval by
such stockholders without such further approval. The foregoing notwithstanding,
this Agreement (including the Exhibits, Annexes and disclosure letters hereto)
may not be amended in any manner that affects the rights, obligations,
representations or warranties of Liberty HSN hereunder without the written
consent of Liberty HSN. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties.
SECTION 9.3. EXTENSION; WAIVER. At any time prior to the Effective
-----------------
Time (whether before or after approval of the stockholders of Parent and the
Company), Parent and the Company may (a) extend the time for the performance of
any of the obligations or other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties contained in this Agreement
or in any document delivered pursuant to this Agreement and (c) waive compliance
with any of the agreements or conditions contained in this Agreement, except
that no such extension or waivers may be effected that affects the rights,
obligations, representations or warranties of Liberty HSN hereunder without the
written consent of Liberty HSN. Any extension or waiver on behalf of the
Company shall be taken only upon the recommendation of the Special Committee.
Any agreement on the part of a party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
SECTION 9.4. NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND
----------------------------------------------
AGREEMENTS. All representations, warranties and agreements in this Agreement or
- ----------
in any instrument or certificate delivered pursuant to this Agreement shall be
deemed to be conditions to the Merger and shall not survive the Merger, except
for the agreements contained in Sections 2.1(d) (relating to Contingent Right),
2.2 (exchange of Certificates), 2.3 (Company Options), 2.4 (further assurances),
6.12 (defense of litigation), 6.13 (indemnification), 6.15 (Company debentures),
6.16 (employee benefits), 6.17 (reorganization) and 8.3 (regarding the payment
of fees and expenses), each of which shall survive the Merger.
SECTION 9.5. ENTIRE AGREEMENT. This Agreement (including the
----------------
Exhibits, Annexes and disclosure letters hereto) and the other documents
referenced herein contain the entire agreement between the parties (except that
a member of the Liberty Group is a party to the August Agreement and the Silver
Stockholders Agreement (each as defined in
-39-
<PAGE>
the Term Sheet) and the Term Sheet, none of which alters the obligations
provided for hereunder) with respect to the subject matter hereof and supersede
all prior arrangements and understandings, both written and oral, with respect
thereto.
SECTION 9.6. SEVERABILITY. It is the desire and intent of the
------------
parties, including Liberty HSN, that the provisions of this Agreement be
enforced to the fullest extent permissible under the law and public policies
applied in each jurisdiction in which enforcement is sought. Accordingly, in
the event that any provision of this Agreement would be held in any jurisdiction
to be invalid, prohibited or unenforceable for any reason, such provision, as to
such jurisdiction, shall be ineffective, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction. Notwithstanding the foregoing, if such
provision could be more narrowly drawn so as not to be invalid, prohibited or
unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so
narrowly drawn, without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 9.7. NOTICES. All notices and other communications pursuant
-------
to this Agreement shall be in writing and shall be deemed to be sufficient if
contained in a written instrument and shall be deemed given if delivered
personally, telecopied, sent by nationally recognized, overnight courier or
mailed by registered or certified mail (return receipt requested), postage
prepaid, to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
(a) if to Parent or Sub, to:
Silver King Communications, Inc.
12425 28th Street North
St. Petersburg, FL 33716
Attention: Michael Drayer, Esq.
Telecopier: (813) 572-1488;
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019-5150
Attention: Pamela S. Seymon, Esq.
Telecopier: (212) 403-2000.
(b) if to the Company, to:
Home Shopping Network, Inc.
11831 30th Court North
St. Petersburg, FL 33716
Attention: Kevin J. McKeon
Telecopier: (813) 539-8137;
-40-
<PAGE>
with a copy to:
Howard, Darby & Levin
1330 Avenue of the Americas
New York, NY 10019
Attention: Thomas J. Kuhn, Esq.
Telecopier: (212) 841-1010.
(c) if to Liberty HSN, to:
Liberty HSN, Inc.
8101 East Prentice Avenue
Suite 500
Englewood, CO 80111
Attention: Peter R. Barton
Telecopier: (303) 721-5415
with a copy to:
Baker & Botts, L.L.P.
599 Lexington Avenue
Suite 2900
New York, NY 10022-6030
Attention: Frederick H. McGrath, Esq.
Telecopier: (212) 705-5125
All such notices and other communications shall be deemed to have been received
(a) in the case of personal delivery, on the date of such delivery, (b) in the
case of a telecopy, when the party receiving such telecopy shall have confirmed
receipt of the communication, (c) in the case of delivery by nationally
recognized overnight courier, on the Business Day following dispatch and (d) in
the case of mailing, on the third Business Day following such mailing.
SECTION 9.8. HEADINGS. The headings contained in this Agreement are
--------
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.9. COUNTERPARTS. This Agreement may be executed in one or
------------
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
SECTION 9.10. BENEFITS; ASSIGNMENT. This Agreement is not intended
--------------------
to confer upon any person other than the parties any rights or remedies
hereunder and shall not be assigned by operation of law or otherwise; provided,
--------
however, that the officers and directors of the Company are intended
- -------
beneficiaries of the covenants and agreements contained in Section 6.13, the
Company employees having the agreements described in Section 6.16 and the
holders of Company Options described in Section 2.3, provided, that such
--------
-41-
<PAGE>
assignment shall not alter the treatment of the Merger under the Code for
Company stockholders, and the Company shall execute any amendment to this
Agreement necessary to provide the benefits of this Agreement to any such
assignee. References to "the parties" herein shall not be deemed to include
Liberty HSN or the Liberty Group unless specifically provided therein.
SECTION 9.11. GOVERNING LAW. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed therein, without giving effect to laws that
might otherwise govern under applicable principles of conflicts of law.
SECTION 9.12. TAX MATTERS. Whenever it is necessary for purposes of
-----------
this Agreement (including the Exhibits, Annexes and disclosure letters hereto)
to determine whether an exchange is tax-free, such determination shall be made
without regard to any interest imputed pursuant to Section 483 of the Code.
-42-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
signed by their respective officers thereinto duly authorized, as of the date
first written above.
SILVER KING COMMUNICATIONS, INC.
By:/s/ Michael Drayer
-----------------------------------
Name: Michael Drayer
-------------------------------
Title: Executive Vice President
-------------------------------
_____________________________
_____________________________
HOUSE ACQUISITION CORP.
By:/s/ Michael Drayer
-----------------------------------
Name: Michael Drayer
-------------------------------
Title: President
-------------------------------
_____________________________
_____________________________
HOME SHOPPING NETWORK, INC.
By:/s/ Kevin J. McKeon
-----------------------------------
Name: Kevin J. McKeon
-------------------------------
Title: Executive Vice President
-------------------------------
and Chief Financial Officer
-----------------------------
_____________________________
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF EXCHANGE AND MERGER]
-43-
<PAGE>
LIBERTY HSN, INC.
By:/s/ Robert R. Bennett
----------------------------------
Name: Robert R. Bennett
------------------------------
Title: Executive Vice President
------------------------------
____________________________
____________________________
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF EXCHANGE AND MERGER]
-44-
<PAGE>
EXHIBIT A
TERMS AND CONDITIONS REGARDING ISSUANCE
---------------------------------------
OF CONTINGENT PARENT SHARES TO LIBERTY HSN, INC.
------------------------------------------------
The following provisions set forth the terms and conditions pursuant
to which, as part of the consideration to be received by Liberty HSN in the
Merger in respect of its shares of Company Class B Common Stock, Parent will
issue to Liberty HSN, from time to time upon the occurrence of certain events
(or as circumstances otherwise permit), additional shares of Parent Class B
Common Stock in satisfaction of Parent's obligation to issue to Liberty HSN (or
a wholly owned subsidiary thereof to which the Contingent Right has been
assigned) the shares of Parent Class B Common Stock which are not issued to it
at the time of the Merger (such shares, the "Contingent Parent Shares").
Capitalized terms not defined herein shall have the meanings ascribed to such
terms in the merger and exchange agreement to which this Exhibit A is attached
(the "Agreement").
Number of Contingent
Parent Shares: 2,644,299 shares of Parent Class B Common Stock, less any
additional shares of Parent Class B Common Stock issued
at the Effective Time of the Merger, in accordance with
any adjustments required pursuant to Section 2.1(f) of
the Agreement, but subject to increase in connection with
the issuance of Extra Shares (as defined below).
Parent Obligation: Upon the occurrence of, or in the event of the existence
of circumstances constituting, at any time subsequent to
the Effective Time and on or before the fifth anniversary
of the Effective Time, a Contingent Issuance Event (as
defined below), Parent shall issue to Liberty HSN a
number of Contingent Parent Shares (such additional
Contingent Parent Shares, the "Additional Shares") equal
to the Available Share Amount (as defined below)
determined at such time of, and after giving effect to,
the occurrence or existence of such Contingent Issuance
Event (and any share issuances resulting therefrom).
Parent shall issue any Additional Shares to Liberty HSN
simultaneously with or immediately following the
occurrence of a Contingent Issuance Event; subject,
-------
however, to (i) the receipt of any and all
-------
consents, approvals or authorizations of any governmental
or regulatory entities, and the expiration or termination
of any waiting periods under the HSR Act required in
connection with the issuance of
<PAGE>
such Additional Shares, and (ii) such issuance not being
taxable to Liberty HSN; provided, however, that the
-------- -------
condition to issuance of the Contingent Parent Shares set
forth in this clause (ii) shall be deemed satisfied to
the extent that (x) the taxability of such issuance to
Liberty HSN is a result of (1) any action or inaction by
Liberty HSN or a member of the Liberty Group (other than
due to an action or inaction specifically contemplated or
required by the Agreement, the Exchange Agreement, the
Term Sheet or the August Agreement (as defined in the
Term Sheet)) or (2) the nature of the Contingent Right
under laws and regulations in effect at the Effective
Time, or (y) the taxes applicable to such issuance would
have accrued or been payable by Liberty HSN had all of
the Contingent Parent Shares been issued to Liberty HSN
in the Merger at the Effective Time. Each of Parent and
Liberty HSN shall use their reasonable best efforts to
obtain any such required consent or approval, and to file
and cause the expiration or termination of any waiting
period required in accordance with the HSR Act, in each
case as promptly as practicable. At or after the
Effective Time, Liberty HSN shall have the right to
assign the Contingent Right, in whole or in part, to one
or more wholly owned subsidiaries of Liberty HSN; and
following such assignment the term "Liberty HSN" shall
for purposes of the Contingent Right be deemed to refer
to such assignee.
Contingent Issuance
Event: The term "Contingent Issuance Event" shall mean any
event, including without limitation, any transaction,
stock issuance, change in law, rule, or regulation,
order, decree or policy and/or the existence or change in
any other circumstance(s), which results in Liberty HSN
being permitted under applicable FCC Regulations to own
(without limitation or restriction relating to the
continuation of such ownership following issuance, or the
imposition of any restriction or limitation of the type
referred to in clause (i) of the first sentence of the
last paragraph opposite the caption "Parent Covenants" or
any requirement to dispose or divest of any Parent
Securities (including any interest in BDTV, BDTV II or
any BDTV Entity (as defined in the Term Sheet)) or other
assets or businesses in connection with such Contingent
Issuance Event (any of the foregoing restrictions or
limitations, a "Restrictive Condition")) directly or
indirectly, a greater number of equity securities of
Parent, including any securities exercisable or
exchangeable for or convertible into equity securities of
Parent (collectively, the "Parent Securities"), than the
Adjusted Base
2
<PAGE>
Amount (as defined below) as of the date of the
occurrence or first existence of such Contingent Issuance
Event; provided, however, that a sale or other
-------- -------
disposition by the Liberty Group of Parent Securities or
Exchange Securities (as defined in Exhibit C to the
Agreement) shall not constitute or result in the
occurrence of a Contingent Issuance Event and such
securities shall not be considered in determining the
number of Parent Securities issuable in connection with a
subsequent Contingency Event. The "Base Amount" shall be
an amount equal to the number of Parent Securities owned,
directly or indirectly, by the Liberty Group immediately
prior to the Merger (including the 2 million shares of
Parent Class B Common Stock held by BDTV) together with
all Parent Securities actually issued to Liberty HSN in
the Merger (including any Parent Stock issued pursuant to
the adjustment contemplated by Section 2.1(f) of the
Merger Agreement, but excluding any Contingent Parent
Shares or any Parent Securities issuable pursuant to the
Exchange Agreement). The "Adjusted Base Amount" shall be
the Base Amount plus the number of Contingent Parent
Shares issued to Liberty HSN subsequent to the Merger and
prior to such Contingent Issuance Event by Parent. For
purposes of this Exhibit A, Liberty HSN shall be deemed
to be entitled to own Additional Shares indirectly to the
extent that Liberty HSN would, following its receipt of
such Additional Shares, be entitled to contribute such
shares to a BDTV Entity on a tax free basis.
The term Contingent Issuance Event would include, but
would not be limited to, the occurrence of one of the
following events, or the existence of any of the
following circumstances:
(i) a Change in Law (as defined in the Term Sheet)
(including, but not limited to, as a result of any
change in FCC Regulations or a Restructuring
Transaction (as defined in the Term Sheet) but not
including any Change in Law resulting from any
transaction as a result of which either Liberty or
Liberty HSN is no longer a direct or indirect
subsidiary of TCI);
(ii) the effectiveness of any amendment to or
modification of, or supplement to, the FCC orders
released March 11, 1996 and June 14, 1996 relating
to the transfer of control of Parent (the "FCC
Orders"), or any subsequent order or
3
<PAGE>
ruling of the FCC (or any interpretation by the
FCC) having the effect of superceding or modifying
the FCC Orders, or any waiver of the restriction or
limit on the Liberty Group's ownership of equity
securities of Parent granted by the FCC, in each
case which has the effect of increasing the
aggregate percentage equity interest in Parent or
the number of Parent Securities which the members
of the Liberty Group are entitled to own (directly
or indirectly); provided, however, that any of
foregoing which contains a Restrictive Condition
shall not constitute or qualify as a Contingent
Issuance Event;
(iii) the issuance of additional Parent Securities to any
person or entity (including, but not limited to,
upon the conversion, exercise or exchange of any
options, warrants, convertible securities or other
rights to acquire equity securities of Parent, but
excluding Parent Securities issued to a member of
the Liberty Group upon the exchange of Exchange
Securities pursuant to the Exchange Agreement),
other than issuances resulting from stock splits,
stock dividends and similar events which do not
result in a change in the Liberty Group's
proportionate equity interest in Parent; or
(iv) any merger, consolidation, binding share exchange
(or other similar transaction) involving Parent or
any tender or exchange offer for the outstanding
Parent Securities (but only to the extent that
Liberty HSN would be permitted under FCC
Regulations to hold directly or indirectly the
securities issuable to holders of Parent Securities
in connection with any such transaction or offer).
Calculation of
Available
Share Amount: The number of Additional Shares issuable to Liberty HSN
upon the occurrence of a Contingent Issuance Event shall
be equal to the "Available Share Amount," which shall be
calculated in accordance with the following formula:
A = (MP * OS) - ABA
---------------
1-MP
4
<PAGE>
where:
-----
A = the Available Share Amount.
MP = 21.37% or such greater percentage equity interest
in Parent which the Liberty Group is then permitted
to own (directly or indirectly) in accordance with
FCC Regulations (as amended, modified or otherwise
changed to the date thereof) or any subsequent
order or determination by the FCC which supersedes
or modifies the FCC Orders or any waiver of or
exception to the prohibitions or requirements of
any of the foregoing, the effect of which would be
to permit the Liberty Group to increase its
percentage equity interest in Parent (including,
but not limited to, after giving effect to any
"control premium" or other adjustment to the
percentage equity interest of the Liberty Group
required by the FCC Regulations).
OS = the aggregate number of shares of Parent Securities
issued and outstanding after giving effect to any
issuances of Parent Securities resulting in or
contributing to the occurrence of the Contingent
Issuance Event, but excluding (i) the issuance of
the Additional Shares to Liberty HSN as a result of
such Contingent Issuance Event and (ii) any shares
issued to a member of the Liberty Group (or its
permitted transferee) pursuant to the terms of the
Exchange Agreement. .
ABA = the Adjusted Base Amount immediately prior to the
occurrence of the Contingent Issuance Event.
Notwithstanding the foregoing, Parent shall not be
required to issue Contingent Parent Shares to Liberty HSN
unless the number of Additional Shares then issuable
(together with any Contingent Parent Shares that have
previously become issuable to Liberty HSN pursuant to
this Exhibit A but for the application of this sentence)
exceeds 5,000; provided, however, that any such
-------- -------
Additional Shares so not required to be issued as a
result of the provisions of this sentence shall
accumulate until such time as the accumulated number of
Contingent Parent Shares exceeds such
5
<PAGE>
number, at which point such accumulated number of
Additional Shares shall be issued to Liberty HSN.
Approved Issuance: In the event that there are any Remaining Shares Issuable
(as defined below) which cannot be issued solely due to a
required approval, consent or waiver from the FCC on the
third anniversary of the Merger, then on and after such
third anniversary until such time as there are no
Remaining Shares Issuable, Liberty HSN shall have the
right to make application to the FCC for such consent or
approval as may be necessary to permit the issuance to it
of some or all of the Remaining Shares Issuable for the
purpose of the disposition of such securities by Liberty
HSN in an orderly manner over a specified period of time
or by a date certain (such consent or approval of the
FCC, the "FCC Issuance Approval"). Liberty HSN shall be
entitled to seek such FCC Issuance Approval from time to
time following the third anniversary of the Merger and to
make all applicable determinations relating to the form
and substance of the consent or approval sought,
including, without limitation, the number of Remaining
Shares Issuable for which such consent or approval is to
be sought. The right to seek the FCC Issuance Approval
shall not limit Liberty HSN's right to have Contingent
Parent Shares issued to it upon the occurrence of a
Contingent Issuance Event subsequent to such third
anniversary, nor shall it limit Parent's obligations
regarding its efforts to cause all Remaining Shares
Issuable to be issued consistent with the terms hereof,
and in this regard Parent and Liberty HSN agree to
cooperate in good faith in order to provide for the
orderly issuance of Contingent Parent Shares and Approved
Shares pursuant to the Contingent Issuance Right.. Parent
agrees that it will use its reasonable best efforts to
support any request or application for a FCC Issuance
Approval made by Liberty HSN .
Following the receipt of any FCC Issuance Approval Parent
shall, upon the request of Liberty HSN and upon the date
reasonably specified by Liberty, issue to it up to the
number of Contingent Parent Shares for which such
approval has been granted, including therein a number of
shares of Parent Class B Common Stock equal to the Extra
Share Amount; subject, however, to any limitation
------- -------
contained in the FCC Issuance Approval as to the
aggregate number of shares to be so issued. Upon each
issuance of Contingent Parent Shares pursuant to a FCC
Issuance Approval and the subsequent taxable sale of such
shares, Parent shall issue to
6
<PAGE>
Liberty HSN an additional number of shares (the "Extra
Share Amount," and such shares, the "Extra Shares") of
Parent Class B Common Stock such that after such taxable
sale of all Contingent Parent Shares and Extra Shares so
issued (collectively, the "Approved Shares"), Liberty HSN
(or its permitted assignee) would have net after-tax
proceeds equal to the total fair market value of the
Contingent Parent Shares as of the date of receipt of
such shares. Prior to the first issuance of shares
pursuant to the FCC Issuance Approval, Parent and Liberty
HSN shall enter into a registration rights agreement
providing to Liberty HSN customary terms for the
registration of the Approved Shares issuable, including,
but not limited to, reasonable demand and piggyback
registration rights, minimum amounts of shares to be
offered, and other customary and reasonable provisions,
in light of the number of Remaining Shares Issuable. Such
agreement shall provide that Liberty HSN shall have a
single special demand right which shall entitle it to
require Parent to use its commercially reasonable best
efforts to register the full amount of shares requested
to be registered and shall require Parent to use its best
efforts to cause such registration to become effective on
or as near as possible, to the date of an FCC Issuance
Approval. Parent agrees that upon the request of Liberty
HSN it will file a registration statement relating to the
sale by Liberty HSN of such Approved Shares (upon
conversion thereof to shares of Parent Common Stock)
under the Securities Act of 1933, as amended, and shall
use its best efforts to cause such registration statement
to become effective upon the date of issuance, or to
register such shares for sale pursuant to a "shelf"
registration statement, and to use its reasonable best
efforts to cause such registration to remain effective
during the distribution period therefor.
Notwithstanding the above, the total number of Contingent
Parent Shares issued or shares otherwise issuable
pursuant to this Exhibit A cannot exceed the number of
shares of Parent Class B Common Stock issued in the
Merger at the Effective Time. The previous sentence shall
be applied by taking into account the effect of stock
splits, recapitalizations and similar transactions. The
"Remaining Shares Issuable" as of any date shall be equal
to the number of Contingent Parent Shares issuable to
Liberty HSN immediately following the Effective Time of
the Merger less the number of Contingent Parent Shares
which have been issued to Liberty HSN as of such date
(and shall exclude any Extra Shares issued to it).
7
<PAGE>
Anti-Dilution
Adjustments: The number of Remaining Shares Issuable shall be subject
to adjustment upon the occurrence of certain events
involving Parent including, without limitation: (i) the
payment by Parent of dividends (and other distributions)
on outstanding shares of Parent Securities in cash (or
other property) or shares of Parent's capital stock; (ii)
subdivisions or combinations of Parent Securities; (iii)
the issuance by Parent, in reclassification of its
outstanding shares of Parent Securities, of any other
shares of capital stock of Parent; and (iv) the
distribution by Parent to the holders of Parent
Securities of any assets, properties or debt securities
or any rights, warrants or options to purchase
securities.
Disputes Concerning
Occurrence of
Contingent Issuance
Events: The determination of whether or not a Contingent Issuance
Event exists or has occurred, and the determination of
the number of Additional Shares issuable as a result
thereof, shall be made in the good faith reasonable
determination of Parent based upon FCC Regulations (as
then in effect). In the event of any dispute between
Parent and Liberty HSN with respect to the existence or
occurrence of a Contingent Issuance Event, or the
determination of the number of Additional Shares issuable
in connection therewith, such dispute may be resolved by
means of the delivery to Parent and Liberty HSN of a
written opinion addressed to each of Parent and Liberty
HSN (which opinion shall be in form and substance
reasonably satisfactory to Parent and Liberty HSN and
shall not be subject to material qualifications or
limitations) of counsel to Parent specializing in FCC
matters as to the matters that are the subject of any
such dispute.
Transferability: Liberty HSN will not be permitted to assign or transfer
the Contingent Right or its rights with respect to any
Remaining Shares Issuable, other than any such assignment
or transfer to a wholly owned subsidiary of Liberty HSN.
Parent Covenants: i) Parent at all times shall reserve for issuance to
Liberty HSN a number of shares of Parent Class B
Common Stock equal to the total number of
Remaining Shares Issuable and a number of shares
of Parent Common Stock issuable upon the
conversion of the Parent Class B Common Stock
issuable pursuant to the Contingent Right.
8
<PAGE>
ii) Parent shall use commercially reasonable efforts
to cause all Remaining Shares Issuable to have
been issued to Liberty HSN prior to the third
anniversary of the closing of the Merger and in
any event prior to the expiration of the
Contingent Right.
iii) Parent shall not dissolve or liquidate or take any
action resulting in the voluntary dissolution or
liquidation of Parent or initiate any proceedings
relating to the voluntary bankruptcy of Parent.
Notwithstanding any other provision of the Agreement
(including this Exhibit A), but excluding the
transactions specifically contemplated hereby and
thereby, and in addition to the foregoing rights and any
other rights of Liberty HSN under the Agreement, until
such time as there are no longer any Remaining Shares
Issuable, without the consent of Liberty HSN, Parent will
not (and will not cause or permit any of its subsidiaries
to) take any action that would, or could reasonably be
expected to, or fail to take any action which failure
would or could reasonably be expected to, (i) make the
ownership by the Liberty Group of the Contingent Right,
the Contingent Parent Shares issuable in respect thereof,
or any other material assets thereof, or the creation,
existence or continuation of Liberty HSN's Contingent
Right, unlawful or result in a violation of any law,
rule, regulation, order or decree (including the FCC
Regulations) or impose material additional restrictions
or limitations on the Liberty Group's full rights of
ownership of the Contingent Parent Shares or the
existence or continuation of the Contingent Right or the
ownership by the Liberty Group of its other material
assets or the operation of its businesses (provided, that
--------
for purposes of the foregoing, to the extent that a
condition, restriction or limitation upon Parent or the
Surviving Corporation or their respective subsidiaries
relates to or is based upon or would arise as a result of
any action or the consummation of a transaction by the
Liberty Group, such condition, restriction or limitation
shall be deemed to be such a condition, restriction or
limitation on the Liberty Group (regardless of whether it
is a party to or otherwise would be legally obligated
thereby) to the extent that the taking of an action or
the consummation of a transaction by the Liberty Group
would result in BDTV, Parent, or any of their respective
subsidiaries being in breach or violation of any law,
rule, regulation, order or decree or otherwise causing
such rule,
9
<PAGE>
regulation, order or decree to terminate or expire or
would otherwise result in Liberty HSN's ownership of the
Contingent Right, the Contingent Parent Shares or any
other material assets being illegal or in violation of
any law, rule, regulation, order or decree) (ii) cause
the creation, existence or continuation of the Contingent
Right to be taxable to Liberty HSN, (iii) cause the
issuance of any of the Contingent Parent Shares to be
taxable to Liberty HSN or any member of the Liberty
Group; provided, however, that with respect to clauses
-------- -------
(ii) and (iii) hereof, if (x) such creation, existence,
continuation or issuance is taxable to Liberty HSN as a
result of (1) any action or failure to act by Liberty HSN
or a member of the Liberty Group (other than due to an
action or inaction specifically contemplated or required
by the Agreement, the Exchange Agreement, the Term Sheet
or the August Agreement) or (2) the nature of the
Contingent Right under the laws and regulations in effect
at the Effective Time or (y) the taxes applicable to such
Contingent Right or issuance would have accrued or been
payable by Liberty HSN had all of the Contingent Parent
Shares been issued to Liberty HSN in the Merger at the
Effective Time, then the covenants set forth in such
clause (ii) or (iii) shall not be effective or (iv)
otherwise restrict, impair, limit or otherwise adversely
affect Liberty HSN's right or ability to receive the
Contingent Parent Shares at any time. In addition to the
foregoing, so long as there are any Remaining Shares
Issuable, Parent shall not (a) declare or pay any cash
dividends, or make any distribution of its properties or
assets to the holders of the Parent Securities (other
than a distribution that is tax-free to the holders of
Parent Securities), unless prior thereto, Parent shall
have made arrangements reasonably acceptable to Liberty
HSN to protect it with respect to any adverse tax
consequence incurred by Liberty HSN (other than its
obligation to pay tax solely because of and to the extent
of the holder's receipt of such dividend or distribution)
resulting from the declaration and payment of such
dividend or the making of such distribution, or (b)(i)
merge with or into any person, or consolidate with any
person, (ii) sell or transfer to another corporation or
other person the property of Parent as an entirety or
substantially as an entirety, or (iii) engage in any
statutory exchange of Parent Securities with another
corporation or other person (other than in connection
with a merger or acquisition), in each case as a result
of which shares of Parent Securities would be
reclassified or converted into the right to receive
stock, securities or other property (including cash) or
any combination thereof, unless in
10
<PAGE>
connection with any such transaction (and immediately
prior to the consummation thereof) all Remaining Shares
Issuable are issuable (and are issued) to Liberty HSN and
Liberty HSN would be entitled to own and exercise full
rights of ownership of such Parent Securities following
such transaction or Liberty HSN would be entitled to own
and exercise full rights of ownership of the stock,
securities or other property receivable by a holder of
the number and kind of Parent Securities receivable by it
upon the issuance to it of such Remaining Shares
Issuable. Parent shall not become a party and shall not
permit any of its subsidiaries to become a party to any
transaction with respect to the foregoing unless the
terms of the agreements relating to such transaction
include obligations of the applicable parties consistent
with the foregoing. If the issuance of Contingent Parent
Shares is taxable to Liberty HSN as a result of a change
in law after the Effective Time (but not due to an action
or unreasonable inaction by Liberty HSN or the Liberty
Group referred to in clause (ii)(x)(1) of the second
sentence under "Parent Obligation"), Parent acknowledges
and agrees that it shall be obligated to provide to
Liberty HSN upon each issuance of Contingent Parent
Shares, a number of additional shares sufficient on an
after-tax basis to pay any such resulting tax.
Expiration: Parent's obligation to issue Contingent Parent Shares,
Remaining Shares Issuable or Extra Shares shall terminate
at the close of business on the fifth anniversary of the
Effective Time.
Miscellaneous: Whenever it is necessary for purposes of this Exhibit to
determine whether an issuance of Contingent Parent Shares
is taxable or tax-free, such determination shall be made
without regard to any interest imputed pursuant to
Section 483 of the Code.
11
<PAGE>
EXHIBIT B
FORM OF COMPANY AFFILIATE LETTER
Silver King Communications, Inc.
12425 28th Street North
St. Petersburg, FL 33716
Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of Home Shopping Network, Inc., a Delaware corporation (the
"Company"), as the term "affiliate" is defined for purposes of paragraphs (c)
-------
and (d) of Rule 145 of the rules and regulations (the "Rules and Regulations")
---------------------
of the Securities and Exchange Commission (the "Commission") under the
----------
Securities Act of 1933, as amended (the "Act"). Pursuant to the terms of the
---
Agreement and Plan of Merger dated as of November 27, 1995 (the "Agreement"), by
---------
and among Silver King Communications, Inc., a Delaware corporation ("Parent"),
------
House Acquisition Corp., a Delaware corporation ("Sub"), and the Company, Sub
---
will be merged with and into the Company (the "Merger").
------
As a result of the Merger, I may receive shares of common stock, par
value $.01 per share, of Parent (the "Parent Securities"). I would receive such
-----------------
shares in exchange for shares (or options for shares) owned by me of common
stock, par value $.01 per share, of the Company (the "Company Securities").
------------------
I represent, warrant and covenant to Parent that in the event I
receive any Parent Securities as a result of the Merger:
1. I shall not make any sale, transfer, assignment or other
disposition of the Parent Securities in violation of the Act or the Rules
and Regulations.
2. I have carefully read this letter and the Agreement and discussed
the requirements of such documents and other applicable limitations upon my
ability to sell, transfer, assign or otherwise dispose of Parent Securities
to the extent I felt necessary, with my counsel or counsel for the Company.
3. I have been advised that the issuance of Parent Securities to me
pursuant to the Merger has been registered with the Commission under the
Act on a Registration Statement on Form S-4. However, I have also been
advised that, because at the time the Merger is submitted for a vote of the
stockholders of the Company, (a) I may be deemed to be an affiliate of the
Company and (b) the distribution by me of the Parent Securities has not
been registered under the Act, I may not sell, transfer, assign or
otherwise dispose of Parent Securities issued to me in the Merger unless
(i) such sale, transfer, assignment or other disposition is made in
conformity with the volume and other limitations of Rule 145 promulgated by
the Commission under the Act, (ii) such sale, transfer, assignment or other
disposition has been registered under the Act or (iii) in the opinion of
counsel reasonably acceptable to Parent, such
-1-
<PAGE>
sale, transfer, assignment or other disposition is otherwise exempt from
registration under the Act.
4. I understand that Parent is under no obligation to register the
sale, transfer, assignment or other disposition of the Parent Securities by
me or on my behalf under the Act or to take any other action necessary in
order to make compliance with an exemption from such registration available
solely as a result of the Merger.
5. I also understand that there will be placed on the certificates
for the Parent Securities issued to me or any substitutions therefor, a
legend stating in substance:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933 APPLIED. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE
TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED AUGUST
25, 1996 BETWEEN THE REGISTERED HOLDER HEREOF AND SILVER KING
COMMUNICATIONS, INC., A COPY OF WHICH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICES OF SILVER KING COMMUNICATIONS, INC.
6. I also understand that unless a sale or transfer is made in
conformity with the provisions of Rule 145, or pursuant to a registration
statement, Parent reserves the right to put the following legend on
certificates issued to any transferee:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIED. THE SHARES HAVE BEEN
ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION
WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES
ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933.
It is understood and agreed that the legends set forth in paragraphs 5
and 6 above shall be removed by delivery of substitute certificates without such
legend if the undersigned shall have delivered to Parent a copy of a letter from
the staff of the Commission, or an opinion of counsel reasonably satisfactory to
Parent in form and substance reasonably satisfactory to Parent, to the effect
that such legend is not required for purposes of the Act.
-2-
<PAGE>
Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of the Company as described in the first paragraph
of this letter, or as a waiver of any rights I may have to object to any claim
that I am such an affiliate on or after the date of this letter.
Very truly yours,
_________________________________________
Name:
Accepted this __ day of
_____, 1996, by
SILVER KING COMMUNICATIONS, INC.
By______________________
Name:
Title:
-3-
<PAGE>
EXHIBIT C
TERMS AND CONDITIONS REGARDING EXCHANGE AGREEMENT
--------------------------------------------------
BETWEEN SILVER KING COMMUNICATIONS, INC. AND LIBERTY HSN, INC.
--------------------------------------------------------------
The following provisions are intended to summarize the terms and
conditions of the Exchange Agreement to be entered into between Parent and
Liberty HSN. The merger and exchange agreement to which this Exhibit C is
attached (the "Agreement") contemplates that the agreements contained herein
will be superseded by a definitive Exchange Agreement which will contain
provisions incorporating and expanding upon the agreements set forth herein,
together with other provisions customary in the case of transactions of this
type, and such other provisions as are reasonable and appropriate in the context
of the transactions contemplated hereby. Parent and Liberty HSN shall use
commercially reasonable efforts to consummate the transactions contemplated
hereby, including, without limitation, the satisfaction of the respective
conditions to the parties' obligations to consummate such transactions and the
completion of such definitive agreements. Capitalized terms not defined herein
shall have the meanings ascribed to such terms in the Agreement.
Exchange Right: In connection with the consummation of the Merger, the
Liberty Group (or any permitted transferee) shall receive
739,141 shares of Surviving Corporation Class B Common Stock
and 17,566,702 shares of Surviving Corporation Common Stock,
subject to adjustment as provided in Section 2.1(f) of the
Merger Agreement (such shares issued to the Liberty Group,
the "Liberty Surviving Common" and the "Liberty Surviving
Class B", respectively, in each case including any other
securities or rights for which such shares of Liberty
Surviving Common or Liberty Surviving Class B, as the case
may be, are exchanged or into which such shares are
converted prior to the exchange of such shares for Parent
Securities). "Parent Securities" shall mean, collectively,
all equity securities of Parent, including any securities
exercisable or exchangeable for or convertible into equity
securities of Parent. Pursuant to the Exchange Agreement,
the members of the Liberty Group (or any transferee) will
have the right to exchange such shares of Liberty Surviving
Class B for shares of Parent Class B Common Stock and such
shares of Surviving Corporation Common Stock for shares of
Parent Common Stock from time to time as provided below.
The Liberty Group shall have the right to exchange from time
to time, a number of shares of Liberty Surviving Common or
Liberty Surviving Class B (with the holder entitled to elect
the class of Surviving
1
<PAGE>
Corporation stock to be so exchanged), which would result in
the issuance to such holder of a number of Parent Securities
equal to the then Available Parent Amount. The "Available
Parent Amount" will equal the difference between (x) the
maximum number of Parent Securities which the holder of the
Liberty Surviving Common or Liberty Surviving Class B
(collectively, the "Exchange Securities") would, under the
FCC Regulations then in effect, then be entitled to own, and
(y) the number of Parent Securities then owned (for purposes
of the FCC Regulations) by such holder of Exchange
Securities; provided, that in determining the foregoing, a
--------
holder shall not be deemed to be permitted to own shares
pursuant to the FCC Regulations to the extent that such
exchange would result in any limitation or restriction
relating to the continuation of such ownership following the
exchange of such Exchange Securities, or the imposition of
any restriction or limitation of the type referred to in
clause (i) of the first sentence of the last paragraph
opposite the caption "Parent Covenants" or any requirement
to dispose or divest of any Parent Securities (including any
interest in BDTV, BDTV II or any BDTV Entity (each as
defined in the Term Sheet)) in connection with or as a
result of such exchange (any of the foregoing restrictions
or limitations a "Restrictive Condition")). The Exchange
Agreement will provide that (A) each share of Liberty
Surviving Common will be exchangeable into 0.45 shares of
Parent Common Stock (the "Common Stock Exchange Ratio") and
(B) each share of Liberty Surviving Class B will be
exchangeable into 0.54 shares of Parent Class B Common Stock
(the "Class B Common Stock Exchange Ratio"), in each case,
rounded down to the nearest whole number and subject to
adjustment as provided herein.
Notwithstanding the foregoing, the parties' obligations to
exchange Exchange Securities for Parent Securities shall be
deferred to the extent that the number of Parent Securities
which would then otherwise be required to be issued upon
such exchange is less than 25,000; provided, however, that
any such Exchange Securities not then required to be
exchanged as a result of the provisions of this paragraph
shall be exchanged at such time as such number of Parent
Securities issuable upon the exchange of all Exchange
Securities then required to be exchanged equals or exceeds
such number, at which time, subject to the other conditions
herein, the parties shall execute such exchange.
Conditions to
Exchange: The obligation of the holder of Exchange Securities to
consummate any such exchange pursuant to the Exchange
Agreement shall be subject to customary conditions of
closing, including but not limited to, (i) the receipt of
any and all consents, approvals or authorizations of any
governmental or regulatory entities, and the expiration or
termination of
2
<PAGE>
any waiting periods under the HSR Act required in connection
with the exchange of such Exchange Securities, and (ii) such
exchange not being taxable to Liberty HSN; provided,
--------
however, that the condition to exchange Exchange Securities
-------
set forth in this clause (ii) shall be deemed satisfied to
the extent that (x) the taxability of such exchange to
Liberty HSN is a result of (1) any action or inaction by
Liberty HSN or a member of the Liberty Group (other than due
to an action or inaction specifically contemplated or
required by the Merger Agreement, the Exchange Agreement,
the Term Sheet or the August Agreement (as defined in the
Term Sheet)) or (2) the laws and regulations in effect at
the Effective Time, or (y) the taxes applicable to such
exchange would have accrued or been payable by Liberty HSN
had all of the Exchange Securities been issued to Liberty
HSN in the Merger at the Effective Time. Each of Parent and
Liberty HSN shall use their reasonable best efforts to
obtain any such required consent or approval, and to file
and cause the expiration or termination of any waiting
period required in accordance with the HSR Act, in each case
as promptly as practicable.
Assignment: The rights of the Liberty Group under the Exchange Agreement
shall be assignable to any person acquiring Exchange
Securities (or any interest therein (including an interest
in any BDTV Entity) in a transfer made pursuant to the
August Agreement (treating the Exchange Securities as though
they were Silver Securities (as defined in the August
Agreement)).
Anti-Dilution
Adjustments: The Common Stock Exchange Ratio and the Class B Common Stock
Exchange Ratio shall be subject to adjustment upon the
occurrence of certain events involving Parent including,
without limitation: (i) the payment by Parent of dividends
(and other distributions) on outstanding shares of Parent
Securities in cash or shares of Parent's capital stock; (ii)
subdivisions or combinations of Parent Securities; (iii) the
issuance by Parent, in reclassification of its outstanding
shares of Parent Securities, of any other shares of capital
stock of Parent, and (iv) the distribution by Parent to
holders of Parent Securities of any assets, properties or
debt securities or any rights, warrants or options to
purchase securities.
Adjustments Upon
Certain Fundamental
Transactions: The Exchange Agreement will also provide that in the event
of any merger, consolidation, statutory exchange of
securities or other recapitalization or reclassification of
the securities of the Surviving
3
<PAGE>
Corporation, or a sale or transfer of all or substantially
all of the assets of the Surviving Corporation, the
securities or other property receivable by the holder of the
Exchange Securities in such transaction will be exchangeable
for shares of Parent Common Stock or Parent Class B Common
Stock upon the same terms and conditions as such shares of
Liberty Surviving Common and Liberty Surviving Class B
(including, without limitation, any adjustments to the
Common Stock Exchange Ratio and the Class B Common Stock
Exchange Ratio).
Except as provided in the next sentence, the terms of the
Exchange Agreement shall provide that no shares of Liberty
Surviving Common or Liberty Surviving Class B shall be
exchanged with a member of the Liberty Group under the
Exchange Agreement until all Contingent Parent Shares
issuable to Liberty HSN pursuant to the Contingent Right
(each as defined in Exhibit A to the Agreement) have been so
issued. Notwithstanding the foregoing, and in addition to
its right to assign its rights under the Exchange Agreement
to any permitted transferee of Exchange Securities (or
interests therein), the Exchange Agreement shall also
provide that any member of the Liberty Group shall be
permitted to exchange the applicable amount of Exchange
Securities held by it in connection with any direct or
indirect transfer of Parent Securities issuable upon such
exchange by such member of the Liberty Group to one or more
third parties in accordance with the Silver Stockholders
Agreement (including in connection with a public offering of
Parent Securities effected pursuant to the Liberty Group's
demand and piggyback registration rights under the Silver
Stockholders Agreement).
Parent Covenants: In the Exchange Agreement, Parent shall agree that so long
as any Exchange Securities remain outstanding it shall
provide to Liberty HSN quarterly and annual financial
statements and reports (including a balance sheet and
related income statement and the notes related thereto)
prepared with respect to the Surviving Corporation and such
additional financial and other information with respect to
the Surviving Corporation and its subsidiaries as Liberty
HSN may from time to time reasonably request.
Notwithstanding any other provision of the Exchange
Agreement or the Agreement to the contrary (but excluding
actions specifically contemplated by the Exchange Agreement
and the Agreement), and in addition to the foregoing rights
and any other voting rights granted by law to the holders of
the Exchange Securities, without the consent of Liberty HSN
(which consent, in the case of clauses (ii) through (v)
below, will not be unreasonably withheld), Parent will not
(and will not cause or permit
4
<PAGE>
any of its subsidiaries to) cause or permit the Surviving
Corporation or any of its subsidiaries to take any action
that would, or could reasonably be expected to, or fail to
take any action which failure would or could reasonably be
expected to, (i) make the ownership by the Liberty Group of
the Exchange Securities or any other material assets thereof
unlawful or result in a violation of any law, rule,
regulation, order or decree (including the FCC Regulations)
or impose material additional restrictions or limitations on
the Liberty Group's full rights of ownership of the Exchange
Securities or the ownership of its other material assets or
the operation of its businesses (provided, that for purposes
--------
of the foregoing, to the extent that a condition,
restriction or limitation upon Parent or the Surviving
Corporation or their respective subsidiaries relates to or
is based upon or would arise as a result of, any action or
the consummation of a transaction by the Liberty Group, such
condition, restriction or limitation shall be deemed to be
such a condition, restriction or limitation on the Liberty
Group (regardless of whether it is a party to or otherwise
would be legally obligated thereby) to the extent that the
taking of an action or the consummation of a transaction by
the Liberty Group would result in BDTV, Parent, or any of
their respective subsidiaries being in breach or violation
of any law, rule, regulation, order or decree or otherwise
causing such rule, regulation, order or decree to terminate
or expire or would otherwise result in Liberty HSN's
ownership of the Exchange Securities or any other material
assets being illegal or in violation of any law, rule,
regulation, order or decree), (ii) cause the acquisition or
ownership by the Liberty Group of any Exchange Securities
(upon the Exchange pursuant to Section 1.1 of the Agreement
immediately prior to the Effective Time or upon any
subsequent exchange or conversion of Liberty Surviving
Common or Liberty Surviving Class B) to be taxable to such
holder; (iii) cause the exchange of Exchange Securities for
Parent Securities to be a taxable transaction to the holder
thereof; provided, however, that with respect to clauses
-------- -------
(ii) and (iii) hereof, if (x) such acquisition, ownership or
exchange is taxable to Liberty HSN as a result of (1) any
action or failure to act by Liberty HSN or a member of the
Liberty Group (other than due to an action or inaction
specifically contemplated or required by the Agreement, the
Exchange Agreement, the Term Sheet or the August Agreement)
or (2) the laws and regulations in effect at the Effective
Time or (y) the taxes applicable to such acquisition,
ownership or exchange would have accrued or been payable by
Liberty HSN had all of the Exchange Securities been issued
to Liberty HSN in the Merger at the Effective Time, then the
covenants set forth in such clause (ii) or (iii) shall not
be effective; (iv) result in the Surviving Corporation being
unable to pay its debts as they become due or becoming
insolvent, or (v) otherwise
5
<PAGE>
restrict, impair, limit or otherwise adversely affect the
right or ability of a holder of Exchange Securities at any
time to exercise the exchange rights under the Exchange
Agreement. In addition to the foregoing, the Exchange
Agreement will provide that so long as any Exchange
Securities are outstanding, Parent shall not declare or pay
any cash dividends, or make any distribution of its
properties or assets to the holders of Parent Securities
(other than a distribution which is tax free to the holders
of Parent Securities), unless prior thereto Parent shall
have made arrangements reasonably acceptable to the holders
of the Exchange Securities to protect such holders with
respect to any adverse tax consequence incurred by such
holder (other than the obligation of such holder to pay tax
solely because of the holder's receipt of such dividend or
distribution) resulting from the declaration and payment of
such dividend or the making of such distribution. In
addition, the Exchange Agreement will provide that, so long
as any Exchange Securities are outstanding, Parent will not
(i) merge with or into any person, or consolidate with any
person, (ii) sell or transfer to another corporation or
other person the property of Parent as an entirety or
substantially as an entirety, or (iii) engage in any
statutory exchange of Parent Securities with another
corporation or other person (other than in connection with a
merger or acquisition), in each case as a result of which
shares of Parent Securities would be reclassified or
converted into the right to receive stock, securities or
other property (including cash) or any combination thereof,
unless in connection with any such transaction (and
immediately prior to the consummation thereof) the holder of
the Exchange Securities would be entitled to exchange all
Exchange Securities for Parent Securities (and own and
exercise full rights of ownership of such Parent Securities
following such transaction) or the holder of such Exchange
Securities would be entitled to own and exercise full rights
of ownership of the stock, securities or other property
receivable by a holder of the number and kind of Parent
Securities receivable by such holder upon such exchange of
Exchange Securities. Parent shall not become a party and
shall not permit any of its subsidiaries to become a party
to any transaction with respect to the foregoing unless the
terms of the agreements relating to such transaction include
obligations of the applicable parties consistent with the
foregoing.
6
<PAGE>
Transfer of
Surviving
Corporation's
Assets and
Liabilities to
Subsidiary: Parent agrees that as soon as reasonably practicable
following the Merger, it will use its reasonable best
efforts to take and cause any of its subsidiaries to take
any actions necessary in order to assign to a wholly owned
subsidiary of the Surviving Corporation ("Surviving Sub")
all of the material assets (other than the capital stock of
Surviving Sub) and material liabilities of the Surviving
Corporation and to cause Surviving Sub to assume or
guarantee all such material liabilities and to obtain the
release of the Surviving Corporation from all such material
liabilities. Following such transfer, Parent shall not
permit the Surviving Corporation to own any assets other
than the capital stock of the Surviving Sub, and shall not
permit the Surviving Corporation to be or become subject to
any material liabilities.
Certain Obligations
Upon Insolvency or
Bankruptcy of
Surviving
Corporation: In the event that the Surviving Corporation should become
insolvent or, within the meaning of any federal or state
bankruptcy law, commence a voluntary case or consent to the
entry of any order of relief or for the appointment of any
custodian for its property or a court of competent
jurisdiction enters an order or decree for relief against
the Surviving Corporation appointing a custodian or ordering
its liquidation, and Liberty HSN determines in good faith
that the equity of the Surviving Corporation is reasonably
likely to be impaired or extinguished, then upon the request
of Liberty HSN, its rights under the Exchange Agreement
shall be converted into the deferred right to receive from
Parent the number of shares of Parent Common Stock and
Parent Class B Common Stock which Liberty HSN would then
have had the right to acquire upon the exchange of all
Exchange Securities then outstanding (such deferred right,
the "Additional Contingent Right"). The terms and conditions
of the Additional Contingent Right shall be identical to
those of the Contingent Right, except that the Remaining
Shares Issuable (as defined in Exhibit A to the Agreement)
pursuant to the Additional Contingent Right shall
automatically become issuable, subject to regulatory
approval, on the fifth anniversary of the date the
Additional Contingent Right is granted.
7
<PAGE>
In connection with the grant of the Additional Contingent
Right, Parent shall thereafter be obligated to use all
reasonable efforts to consummate a Restructuring Transaction
(as defined below) on or before the third anniversary of the
date of the grant of the Additional Contingent Right. In the
event that such Restructuring Transaction has not been
consummated by such fifth anniversary and the Additional
Contingent Right has not been satisfied in full by such
date, Parent shall thereafter be required to use its best
efforts to cause all Parent Securities issuable in respect
of the Additional Contingent Right to be issued prior to the
seventh anniversary thereof. Such efforts shall include,
without limitation (but subject to applicable fiduciary
obligations) engaging in a Restructuring Transaction,
completing an equity offering, or other corporate
restructuring or causing all of the equity interests in
Parent to be acquired by a third party in a transaction
which is tax free to the stockholders of Parent, in any case
which would result in all Contingent Parent Shares issuable
to Liberty HSN pursuant to the Additional Contingent Right
being issued to it and Liberty HSN being entitled to hold
such Parent Securities or other properties receivable by it
in such transaction free of any governmental or regulatory
restrictions and to exercise full rights of ownership with
respect thereto. A "Restructuring Transaction" is a
transaction pursuant to which Parent shall take such actions
as may be reasonably necessary, including, but not limited
to, to file any required applications with the FCC and any
other governmental or regulatory agency, to obtain any
required FCC or other governmental or regulatory consents
and approvals, and to undertake any restructuring of
Parent's assets, liabilities and businesses, in order that
Liberty or Liberty HSN, as the case may be, would (subject
to its obligations under the August Agreement, the Term
Sheet and the Silver Stockholders Agreement) be permitted to
exercise full ownership rights (including voting rights)
with respect to the Parent Securities owned by it (including
its pro rata interest in any Parent Securities held by BDTV,
BDTV II or a BDTV Entity).
Miscellaneous: If the exchange of Exchange Securities is taxable to Liberty
HSN as a result of a change in law (but not due to an action
or unreasonable inaction by Liberty HSN or a member of the
Liberty Group referred to in clause (ii)(x)(1) of the first
sentence of "Conditions to Exchange") after the Effective
Time, Parent acknowledges and agrees that it shall be
obligated to provide to Liberty HSN upon each exchange of
Exchange Securities, a number of additional shares
sufficient on an after-tax basis to pay any such resulting
tax.
8
<PAGE>
Whenever it is necessary for purposes of this Exhibit to
determine whether an exchange is taxable or tax-free, such
determination shall be made without regard to any interest
imputed pursuant to Section 483 of the Code.
Parent at all times shall reserve for issuance to Liberty
HSN a number of shares of Parent Class B Common Stock and
Parent Common Stock equal to the number of shares issuable
upon exchange of the remaining shares of Liberty Surviving
Class B and Liberty Surviving Common, respectively, and
shall reserve an additional number of shares of Parent
Common Stock equal to the number of shares issuable upon the
conversion of shares of Parent Class B Common Stock issuable
pursuant to the Exchange Agreement.
The Exchange Agreement will provide that Parent will grant
to the holder of Parent Securities issuable upon the
exchange of Exchange Securities certain rights relating to
the registration of such securities under the Securities Act
upon customary terms and conditions, including demand and
piggyback registration rights.
9
<PAGE>
ANNEX A
COMPANY STOCKHOLDERS PARTY TO COMPANY VOTING AGREEMENT
Liberty Media Corp.
Liberty Program Investments, Inc.
Liberty HSN, Inc.
-1-
<PAGE>
ANNEX B
PARENT STOCKHOLDERS PARTY TO PARENT VOTING AGREEMENT
BDTV INC.
Barry Diller
Arrow Holdings, LLC
Liberty Media Corp.
-1-
<PAGE>
EXHIBIT 11
Conformed Copy
--------------
TERMINATION AGREEMENT
THIS TERMINATION AGREEMENT (this "Agreement") is dated as of August
25, 1996, by and among SILVER KING COMMUNICATIONS, INC., a Delaware corporation
("Silver King"), BDTV INC., a Delaware corporation formerly named Silver
Management Company ("BDTV"), LIBERTY PROGRAM INVESTMENTS, INC., a Wyoming
corporation ("Liberty Program"), and LIBERTY HSN, INC., a Colorado corporation
and a wholly owned subsidiary of Liberty Program Investments, Inc. ("Liberty
HSN").
RECITALS:
WHEREAS, Liberty HSN owns 17,566,702 shares of the Common Stock, par
value $.01 per share (the "Company Common Stock"), of Home Shopping Network,
Inc., a Delaware corporation (the "Company"), and 20,000,000 shares of the Class
B Common Stock, par value $.01 per share (the "Company Class B Stock") of the
Company (collectively, the "Company Shares");
WHEREAS, BDTV, Liberty Program and Liberty HSN are parties to an
agreement and plan of merger, dated as of November 27, 1995 (the "BDTV-Liberty
Merger Agreement"), pursuant to which Liberty HSN would be merged with and into
BDTV, as a result of which BDTV would be the surviving corporation (the "BDTV-
Liberty Merger");
WHEREAS, Silver King and BDTV are parties to an exchange agreement,
dated as of November 27, 1995 (the "Exchange Agreement"), pursuant to which,
simultaneously with the consummation of the BDTV-Liberty Merger, BDTV would
acquire the Company Shares and, in exchange therefor, would issue to BDTV
4,855,436 shares of Common Stock, par value $.01 per share, of Silver King, and
6,082,000 shares of Class B Common Stock, par value $.01 per share, of Silver
King;
WHEREAS, the Boards of Directors of Silver King, House Acquisition
Corp., a Delaware corporation and a wholly owned subsidiary of Silver King
("Sub"), the Company and Liberty HSN and the Special Committee of the Board of
Directors of the Company have each approved the terms and conditions of the
business combination between Silver King and the Com pany to be effected by the
merger (the "Merger") of Sub with and into the Company, pursuant to the terms
and subject to the conditions of the Agreement and Plan of Exchange and Merger,
dated as of the date hereof (the "Exchange and Merger Agreement"), and the
General Corporation Law of the State of Delaware, and each deems the Merger
advisable and in the best interests of each corporation; and
WHEREAS, in furtherance of the Exchange and Merger Agreement and the
transactions contemplated thereby, each of BDTV, Liberty Program and Liberty HSN
desires to terminate the BDTV-Liberty Merger Agreement pursuant to Section
6.1(i) thereof, and each of Silver King and BDTV desires to terminate the
Exchange Agreement pursuant to Section 6.1(i) thereof.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements contained in this Agreement, the parties agree as follows:
<PAGE>
1. The BDTV-Liberty Merger Agreement shall be terminated pursuant to
Section 6.1(i) thereof and all rights and obligations of the parties thereunder
shall be extinguished effective immediately upon the due execution and delivery
of the Exchange and Merger Agreement by the parties thereto.
2. The Exchange Agreement shall be terminated pursuant to Section
6.1(i) thereof and all rights and obligations of the parties thereunder shall be
extinguished effective immediately upon the due execution and delivery of the
Exchange and Merger Agreement by the parties thereto.
3. This Agreement also constitutes the prior written consent of
Liberty Program for the termination of the Exchange Agreement pursuant to
Section 4.6 of the BDTV-Liberty Merger Agreement and the prior written consent
of Silver King for the termination of the BDTV-Liberty Merger Agreement pursuant
to Section 4.6 of the Exchange Agreement.
4. This Agreement and the legal relations between the parties hereto
shall be governed by and construed in accordance with the laws of the State of
Delaware, without regard to the conflict of laws rules thereof.
5. This Agreement may be executed in counterparts, each of which
shall be deemed an original, and all of which together shall be considered one
and the same instrument.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
SILVER KING COMMUNICATIONS, INC.
By: /s/ Barry Diller
-------------------------------------
Name: Barry Diller
Title: Chairman of the Board and
Chief Executive Officer
BDTV INC.
By: /s/ Barry Diller
-------------------------------------
Name: Barry Diller
Title: President
LIBERTY PROGRAM INVESTMENTS, INC.
By: /s/ Robert R. Bennett
-------------------------------------
Name: Robert R. Bennett
Title: Executive Vice President
LIBERTY HSN, INC.
By: /s/ Robert R. Bennett
-------------------------------------
Name: Robert R. Bennett
Title: Executive Vice President
-3-
<PAGE>
EXHIBIT 12
Conformed Copy
--------------
August 25, 1996
Silver King Communications, Inc.
12425 28th Street North
St. Petersburg, FL 33716
Ladies and Gentlemen:
The Board of Directors of Home Shopping Network, Inc., a Delaware
corporation (the "Company"), has approved, and concurrently herewith, Silver
King Communications, Inc., a Delaware corporation ("Parent"), House Acquisition
Corporation, a Delaware corporation and a wholly-owned subsidiary of Parent
("Sub"), Liberty HSN, Inc., a Colorado corporation, and the Company are entering
into an Agreement and Plan of Exchange and Merger of even date herewith (the
"Exchange and Merger Agreement") (all capitalized terms used but not defined
herein shall have the meanings set forth in the Exchange and Merger Agreement),
pursuant to which Sub will be merged with and into the Company (the "Merger").
Each of the undersigned owns, beneficially and of record, the number of shares
(the "Shares") of the common stock, par value $.01 per share, or Class B common
stock, par value $.01 per share, of the Company (the "Company Stock"), set forth
opposite such stockholder's name on Exhibit A hereto, which are all the shares
of Company Stock so owned by such person.
The entering into of this letter agreement is a condition to the
willingness of Parent and Sub to enter into the Exchange and Merger Agreement
and consummate the Transactions.
Each of the undersigned agrees that at any meeting of the stockholders
of the Company, however called, it shall (a) vote the Shares in favor of the
Transactions, to the extent that such holder's voting of such Shares is in
accordance with the stockholder approval requirement specified in the Exchange
and Merger Agreement; and (b) vote the Shares against any action or agreement
(other than the Exchange and Merger Agree ment or the transactions contemplated
thereby) that would impede, interfere with, delay, postpone or attempt to
discourage any of the Transactions, including, but not limited to: (i) any
extraordinary corporate transaction, such as a merger, consolidation or other
business combination involving the Company; (ii) a sale or transfer of all or
substantially all of the assets of the Company and its subsidiaries or a
reorganization, recapitalization or liquidation of the Company and its
subsidiaries; (iii) any material change in the present capitalization or
dividend policy of the Company; or (iv) any other material change in the
Company's corporate structure or business.
<PAGE>
This Agreement shall terminate on the first to occur of (i) the
Effective Time, (ii) the day after the termination of the Exchange and Merger
Agreement in accordance with its terms, and (iii) written notice of termination
of this Agreement by Parent to the undersigned. Each of the undersigned, as to
itself, represents and warrants that as of the date hereof, (i) it has due
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, (ii) it is the owner of record and
beneficially owns the Shares set forth opposite its name on Exhibit A, and such
Shares constitute all of the Shares owned of record or beneficially by it; (iii)
the undersigned has sole voting power and sole power of disposition with respect
to all of the Shares, with no restrictions, on its rights of disposition
pertaining thereto, subject to applicable securities laws; (iv) the transactions
contemplated by this Agreement will not affect the voting rights of any of the
Shares except as provided in this Agreement; and (v) neither the execution and
delivery of this Agreement by it nor the consummation of the trans actions
contemplated hereby will (x) require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or regulatory
authority (except filings under the Securities Exchange Act of 1934, as amended,
or where the failure to ob tain such consent, approval, authorization or permit,
or to make such filing or notification, would not prevent or delay consummation
of the transactions contemplated by this Agreement or would not otherwise
prevent the undersigned from performing its obligations under this Agreement),
(y) result in a default (or give rise to any right of termi nation, cancellation
or acceleration) under any of the terms, condi tions or provisions of any note,
license, agreement or other instrument or obligation to which the undersigned is
a party, except for such de faults (or rights of termination, cancellation or
acceleration) as to which requisite waivers or consents have been obtained or
which would not adversely affect the performance of the obligations of the un
dersigned hereunder or (z) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to it.
Each of the undersigned further covenants and agrees, while this
Agreement is in effect, and except as contemplated hereby or by the Exchange and
Merger Agreement, not to (i) sell, transfer, pledge, encumber, assign or
otherwise dispose of, or enter into any contract, option or other arrangement or
understanding with respect to the sale, transfer, pledge, encumbrance,
assignment or other disposition of, any of the Shares; provided, that the
--------
undersigned shall be permitted to pledge or grant a security interest in the
Shares, provided, that any such pledge or grant of security interest shall
--------
provide that the pledgee or secured party hereunder shall take any pledge or
interest subject to the pledgor's voting obligations hereunder; (ii) grant any
proxies, deposit the Shares into a voting trust or enter into a voting agreement
with respect to the Shares; or (iii) take any action that would
-2-
<PAGE>
make any representation or warranty made by it herein untrue or incorrect or
have the effect of preventing or disabling it from performing its obligations
under this letter agreement.
The undersigned agrees to promptly notify Parent of the number of any
new shares of Company Stock acquired by it (whether by purchase or conversion or
exercise of options, warrants or other securities convertible into Company
Stock), if any, after the date hereof. Any such Shares acquired shall become
additional Shares subject to the terms of this Agreement.
This Agreement (i) constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, among the parties or any
of them with respect to the subject matter hereof, and (ii) shall not be
assigned by operation of law or otherwise, provided that Parent may assign any
--------
of its rights and obligations to any wholly-owned subsidiary of Parent, but no
such assignment shall relieve Parent of its obligations hereunder. This
Agreement may not be amended except by an instrument in writing signed on behalf
of all the parties affected by such amendment.
The parties hereto agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any federal or state court located in the
State of Delaware (as to which the parties agree to submit to jurisdiction for
the purposes of such action), this being in addition to any other remedy to
which they are entitled at law or in equity.
This Agreement shall be governed by and construed in ac cordance with
the substantive laws of the State of Delaware regardless of the laws that might
otherwise govern under principles of conflicts of laws applicable thereto. The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provisions of this Agreement,
which shall remain in full force and effect.
-3-
<PAGE>
Parent and the undersigned acknowledge and agree that this Agreement
is being entered into by the undersigned solely in its capacity as a stockholder
of the Company and that none of the obligations contained herein is intended to,
and such obligations do not, limit, restrict or otherwise affect the obligations
and duties of the undersigned (or its affiliates or associates) in any capacity
it may have as an officer and/or director of the Company. The obligations of
each undersigned are several and not joint.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
HSN STOCKHOLDERS
LIBERTY MEDIA CORPORATION
By: /s/ Robert R. Bennett
-------------------------------
Name: Robert R. Bennett
Title: Executive Vice President
LIBERTY PROGRAM INVESTMENTS, INC.
By: /s/ Robert R. Bennett
-------------------------------
Name: Robert R. Bennett
Title: Executive Vice President
LIBERTY HSN, INC.
By: /s/ Robert R. Bennett
-------------------------------
Name: Robert R. Bennett
Title: Executive Vice President
SILVER KING COMMUNICATIONS, INC.
By: /s/ Barry Diller
-------------------------
Name: Barry Diller
Title: Chairman of the Board and
Chief Executive Officer
-4-
<PAGE>
Exhibit A
Company Share Ownership
<TABLE>
<CAPTION>
No. of Shares No. of Shares
Name of Common Stock of Class B Stock
---- --------------- ----------------
<S> <C> <C>
Liberty Media Corporation 0 0
Liberty Program 0 0
Investments, Inc.
Libery HSN, Inc.(1) 17,566,702 20,000,000
</TABLE>
______________________
(1) Liberty HSN, Inc. is a wholly owned subsidiary of Liberty Program
Investments, Inc., which in turn is an indirect wholly owned subsidiary of
Liberty Media Corporation.
-5-
<PAGE>
EXHIBIT 13
As of August 25, 1996
LIBERTY MEDIA CORPORATION
8101 East Prentice Avenue, Suite 500
Englewood, Colorado 80111
Mr. Barry Diller
1940 Coldwater Canyon
Beverly Hills, California 90210
Dear Sir:
Reference is made to the agreement between Liberty Media Corporation
("Liberty" and formerly "Rockies") and Barry Diller ("Diller" and formerly
"Lasorda" or "Dodgers"), dated as of August 24, 1995 (including the related term
sheet included therein, the "August Agreement" which, in the event that a
definitive stockholders agreement is not executed by the parties shall, together
with this letter agreement (this "Agreement") constitute the "Silver
Stockholders Agreement"), relating to the securities of Silver King
Communications, Inc. ("Silver"). Capitalized terms not otherwise defined in
this Agreement shall have the meanings ascribed to such terms in the August
Agreement. The obligations of the parties contained herein are subject to the
receipt of any required approvals of the Boards of Directors of Silver and/or
Home Shopping Network, Inc. ("HSN"), for purposes of Section 203 of the Delaware
General Corporation Law.
1. HSN Merger Agreement.
--------------------
(a) Simultaneous with the execution of this Agreement, a newly
formed direct wholly owned subsidiary of Silver ("Silver Sub"),
HSN and Liberty HSN, Inc. ("Liberty HSN") are entering into the
merger agreement attached to this Agreement as Exhibit A (such
agreement, including the schedules and exhibits thereto, the
"Merger Agreement"). The Merger Agreement provides among other
things that Silver Sub will merge with and into HSN (the
"Merger"), with the result that HSN, as the surviving
corporation in the Merger (the "Surviving Corporation"), would
become a subsidiary of Silver. Silver Sub shall have an equity
capital structure identical to that of HSN prior to the merger,
in that the shares of Silver Sub common stock ("Silver Sub
Common") will have the same rights, designations and
preferences as the common stock of HSN (the "HSN Common Stock")
and the Silver Sub Class B common stock ("Silver Sub Class B")
will have the same rights, designations and preferences as the
Class B common stock of HSN (the "HSN Class B Common Stock").
In the Merger:
<PAGE>
(i) Each outstanding share of HSN Common Stock (other than
shares held by Silver Sub) would be converted into the
right to receive 0.45 of a share of Silver Common Stock
(the "Common Exchange Ratio").
(ii) The 19,260,859 shares of HSN Class B Common Stock held by
Liberty HSN (the Liberty Initial Class B Shares"),
following the exchange referred to in clause (iii) below,
would be converted into the right of Liberty HSN, as the
holder of the Liberty Initial Class B Shares as of the
time of the Merger (or any wholly owned subsidiary of
Liberty HSN to which the Contingent Right (as defined
below) is assigned), to receive an aggregate of 10,400,863
shares of Silver Class B Stock (such number, the
"Aggregate Class B Amount") (which number shall be subject
to adjustment immediately prior to the Merger in
accordance with Section 2(f) of the Merger Agreement) plus
cash in lieu of fractional shares as provided in the
Merger Agreement. At the Effective Time (as defined in the
Merger Agreement) of the Merger, 7,756,564 shares of
Silver Class B Common Stock shall be issued to Liberty HSN
(the "Initial Merger Class B Amount"). Immediately
following the Effective Time, Silver will be obligated to
issue to Liberty HSN (or any wholly owned subsidiary to
which it has assigned the Contingent Right) an aggregate
of 2,644,299 shares of Silver Class B Common Stock (such
amount, the "Initial Contingent Class B Amount") upon the
occurrence of certain contingencies set forth in Exhibit A
to the Merger Agreement, together with such additional
number of shares of Silver Class B Common Stock as may be
required in order to fulfill its obligation with respect
to the issuance of Extra Shares (as defined in Exhibit A
to the Merger Agreement) in such Exhibit A. Liberty HSN's
right following the Merger to receive shares of Silver
Class B Common Stock in accordance with the terms and
conditions set forth in Exhibit A to the Merger Agreement
is hereinafter referred to as the "Contingent Right," and
the shares issuable to it upon the satisfaction of the
contingencies set forth in Exhibit A to the Merger
Agreement are hereinafter referred to as the "Contingent
Silver Shares."
(iii) The Merger Agreement provides that (A) immediately prior
to, but conditioned upon the consummation of the Merger,
Liberty HSN will exchange (the "Merger Exchange") (1) the
17,566,702 shares of HSN Common Stock held by the Liberty
Stockholder Group (the "Liberty HSN Common Shares") for an
equal number of shares of Silver Sub Common and (2) the
739,141 shares of HSN Class B Common Stock
2
<PAGE>
held by the Liberty Stockholder Group (the "Liberty HSN B
Shares") for an equal number of shares of Silver Sub Class
B (with the result that at the time of the Merger, the
total number of outstanding shares of Silver Sub Common
and Silver Sub Class B shall be equal to the number of
outstanding shares of HSN Common Stock and HSN Class B
Common Stock immediately prior to the Merger, with Silver
owning a number of shares of Silver Sub Common and Silver
Sub Class B equal to the number of shares of HSN Common
Stock not held by the Liberty Stockholder Group and the
number of Liberty Initial Class B Shares, respectively,
and Liberty HSN owning all other outstanding equity
securities of Silver Sub (and Silver Sub shall have no
other outstanding securities)), and (B) in the Merger,
each outstanding share of Silver Sub Common shall be
converted into one share of common stock of the Surviving
Corporation ("Surviving Common") and each outstanding
share of Silver Sub Class B shall be converted into one
share of Class B common stock of the Surviving Corporation
("Surviving Class B Stock"), with the shares of Surviving
Common and Surviving Class B Stock having the same rights,
designations and preferences as the Silver Sub Common
Stock and Silver Sub Class B, respectively.
(iv) To the extent that at the time of the Merger Exchange and
the Merger the Liberty Stockholder Group would be
permitted in accordance with the FCC Regulations (as
defined below) (and taking into account the Silver
Securities then beneficially owned by it) to own, directly
or, through a BDTV Entity (as defined below), indirectly,
a greater number of shares of Silver than the Initial
Merger Class B Amount, then such number of additional
Silver Securities shall also become issuable to the
Liberty Stockholder Group upon consummation of the Merger
(such shares, the "Additional Merger Shares"). The
Additional Merger Shares shall be issued to the Liberty
Stockholder Group in the Merger and upon issuance, shall
be applied first to reduce the Initial Contingent Class B
Amount on a share for share basis until such time as the
Initial Contingent Class B Amount is equal to zero (and,
in the event the Initial Contingent Class B Amount is
reduced to zero through the issuance of Additional Merger
Shares, Silver's obligation to issue Contingent Silver
Shares in connection with the Contingent Right shall be
terminated). In the event that the Initial Contingent
Class B Amount is reduced to zero and there remain
Additional Merger Shares issuable at the time of the
Merger, such remaining Additional Merger Shares shall be
issued to the Liberty Stockholder Group and upon issuance
shall be applied to
3
<PAGE>
reduce on a share for share basis (A) first, to the
obligation of Liberty HSN and Silver Sub to exchange the
Liberty HSN B Shares for shares of Silver Sub Class B and
(B) then, to the extent that there are any remaining
Additional Merger Shares to be issued, to the obligation
of Liberty HSN and Silver Sub to exchange Liberty HSN
Common Shares for shares of Silver Sub Common, with the
result that the Liberty HSN Class B Shares and Liberty HSN
Common Shares not so exchanged would be converted into
Silver Class B Stock and Silver Common Stock,
respectively, in the Merger, and the respective
obligations of the parties referred to in clauses (i)
through (iii) above would be adjusted to reflect the
issuance of such Additional Merger Shares.
(v) Subject to the condition that the contribution thereto
would be tax free, all Additional Merger Shares would be
issued to the Liberty Stockholder Group and contributed to
a BDTV Entity in connection with the Merger. As used
herein, the term "BDTV Entity" shall mean any corporation,
partnership, limited liability company or other business
association having a capital structure and governance
rights substantially similar to that of BDTV, Inc.
("BDTV", which is the corporation referred to as "Silver
Company" in the August Agreement), except that (i) for
purposes of determining whether Liberty is permitted to
transfer the Silver Securities held by any such BDTV
Entity, such BDTV Entity shall be deemed to be a member of
the Liberty Stockholder Group and the restrictions on
transfers of interests in the Silver Company set forth
opposite the caption "I. Silver Company Arrangements --
Transfers of Interests" in the August Agreement shall not
be applicable to Liberty (subject, however, to the other
restrictions on transfer of Silver Securities set forth
herein and in the August Agreement, including the Right of
First Refusal) and (ii) in connection with any proposed
sale by Liberty HSN of the Silver Securities held by such
BDTV Entity (or its equity interest in such BDTV Entity),
Liberty shall be entitled to purchase Diller's entire
interest in such BDTV Entity for an amount in cash equal
to the Dodgers Interest Purchase Price or, at its
election, require Diller to sell its interest in such BDTV
Entity to any such transferee for a pro rata portion of
the consideration to be paid by the applicable transferee
in such transaction; provided, however, that the term
-------- -------
"BDTV Entity" shall not be deemed to include BDTV or BDTV
II (as defined below). The term "FCC Regulations" shall
mean, collectively, all federal communications statutes,
and all rules, regulations, orders, decrees and policies
(including the FCC's
4
<PAGE>
Memorandum Opinion and Order released March 11, 1996 (the
"FCC March Order") and its Memorandum Opinion and Order
released June 14, 1996 (the "FCC June Order", and together
with the FCC March Order, the "FCC Orders")) of the FCC,
and any interpretations or waivers thereof or
modifications thereto.
(vi) If as a result of any issuance of Contingent Silver Shares
to Liberty HSN, Liberty HSN would otherwise own shares of
Silver Class B Common Stock (other than any such shares
held by BDTV or BDTV II or, to the extent Liberty HSN is
not deemed to have an "attributable interest" therein, a
BDTV Entity) which would represent an "attributable
interest" in Silver under applicable FCC Regulations), (i)
Liberty HSN would contribute to a BDTV Entity all such
Contingent Silver Shares in exchange for non-voting equity
securities of such BDTV Entity (in an amount based on the
market price of the Silver Common Stock as of the date of
such contribution) and (ii) Diller would contribute to
such BDTV Entity a number of whole shares of Silver Common
Stock equal to (A) $100, divided by (B) the market price
of the Silver Common Stock as of the date of such
contribution, rounded up to the nearest whole number;
provided, that (i) for purposes of determining whether
Liberty is permitted to transfer the Silver Securities
held by such BDTV Entity, such BDTV Entity shall be deemed
to be a member of the Liberty Stockholder Group and the
restrictions on transfers of interests in BDTV set forth
in the August Agreement shall not apply to Liberty
(subject, however, to the other restrictions on transfer
of Silver Securities set forth herein and in the August
Agreement, including the Right of First Refusal) and (ii)
in connection with any proposed sale by Liberty HSN of the
Silver Securities held by such BDTV Entity (or its equity
interest in such BDTV Entity), Liberty shall be entitled
to purchase Diller's entire interest in such BDTV Entity
for an amount in cash equal to the Dodgers Interest
Purchase Price or, at its election, require Diller to sell
its interest in such BDTV Entity to any such transferee
for a pro rata portion of the consideration to be paid by
the applicable transferee in such transaction.
(b) Consummation of the Merger will also be conditioned upon Silver
and Liberty HSN entering into a definitive exchange agreement
having the terms and conditions set forth in Exhibit C to the
Merger Agreement (the "Exchange Agreement"), and otherwise in
form and substance reasonably satisfactory to the parties to the
Merger Agreement, pursuant to which the Liberty Stockholder Group
(or any transferee permitted under the August
5
<PAGE>
Agreement, treating the Exchange Securities (as defined in
Exhibit C to the Merger Agreement) as though they were Silver
Securities) would have the right to exchange from time to time a
number of shares of Surviving Common or Surviving Class B Stock
(with the holder entitled to elect the class of Surviving
Corporation stock to be so exchanged) received by the Liberty
Stockholder Group in connection with the Merger (such shares
issued to the Liberty Stockholder Group, the "Liberty Surviving
Common" and the "Liberty Surviving Class B", respectively, in
each case including any other securities or rights for which such
shares of Liberty Surviving Common or Liberty Surviving Class B,
as the case may be, are exchanged or into which such shares are
converted prior to the exchange of such shares for Silver
Securities), for shares of Silver Common Stock and Silver Class B
Stock, with each share of Liberty Surviving Common being
exchangeable into a number of shares of Silver Common Stock equal
to the Common Exchange Ratio and each share of Liberty Surviving
Class B being exchangeable into a number of shares of Silver
Class B Stock equal to the Class B Exchange Ratio, in each case
subject to adjustment upon certain events affecting Silver.
In the event that a holder of Exchange Securities would be
entitled to hold directly shares of Silver Class B Common Stock
issuable upon an exchange of shares of Liberty Surviving Class B
but for the limitations imposed by the FCC Regulations relating
to a person's aggregate voting power in Silver, and if such
person would, under the FCC Regulations, be permitted to hold
directly a number of shares of Silver Common Stock equal to the
number of shares of Silver Class B Stock so issuable, then in
connection with such exchange, such holder will be required to
offer to exchange such shares of Silver Class B Stock so
receivable by it for Silver Common Stock owned by the Diller
Stockholder Group and, if Diller does not accept such offer to
exchange, or if such exchange with the Diller Stockholder Group
cannot be accomplished on a tax-free basis (and the exchange of
such Exchange Securities for Silver Securities would not
otherwise be taxable), then such holder shall be entitled to
exchange such Exchange Securities for shares of Silver Class B
Stock and thereafter convert such shares of Silver Class B Stock
into shares of Silver Common Stock.
Nothing in this Agreement shall obligate Liberty HSN to
contribute any Silver Securities received pursuant to the
Exchange Agreement to a BDTV Entity.
(c) Promptly following the Merger in a transaction complying with the
requirements of Section 351 of the Code or in an otherwise tax-
free transaction, (i) Liberty will contribute the Initial Merger
Class B Amount of
6
<PAGE>
shares of Silver Class B Common Stock issued to Liberty at the
time of the Merger (other than any Additional Merger Shares) to a
corporation ("BDTV II") having a charter and bylaws substantially
equivalent to the charter and bylaws of BDTV as in effect on the
date hereof (or, in the event the FCC Regulations would permit
such Silver Securities to be held by a partnership, limited
liability company or other entity, such entity as the parties may
mutually agree), in exchange for a number of shares of Class B
Common Stock of BDTV II based upon the market price of the shares
of Silver Class B Stock contributed to BDTV II by the Liberty
Stockholder Group and (ii) Diller will contribute to BDTV II a
number of whole shares of Silver Common Stock equal to (A) $100
divided by (B) the market price of the Silver Common Stock as of
the date of contribution, rounded up to the nearest whole number,
in exchange for one share of Class A Common Stock of BDTV II. At
all times following such contribution for purposes of this
Agreement and the August Agreement the term "Silver Company" or
"BDTV," as the case may be, shall be deemed to refer to BDTV and
BDTV II, collectively. The respective rights and obligations of
Liberty (and its Stockholder Group) and Diller (and his
Stockholder Group) with respect to each of BDTV and BDTV II and
the outstanding equity securities of both BDTV and BDTV II shall
be as provided in the August Agreement with respect to "Silver
Company", including, subject to paragraph 2(c) below, the
provisions set forth in the August Agreement under the caption
"I. Silver Company Arrangements--Transfers of Interests."
2. Restructuring Transaction. (a) At any time following the
-------------------------
consummation of the Merger that Liberty or Liberty HSN is no
longer a subsidiary of Tele-Communications, Inc. (and provided
that a Change in Law has not theretofore otherwise occurred),
Liberty may request by written notice to Diller and Silver that
Diller use all reasonable efforts to take, and, subject to any
applicable fiduciary duties of Diller, as a director or officer
of Silver, to the stockholders of Silver, use all reasonable
efforts to cause Silver to take, such actions as may be
reasonably necessary, including, but not limited to, to file any
required applications with the FCC and any other governmental or
regulatory agency, to obtain any required FCC or other
governmental or regulatory consents and approvals, and to
undertake any restructuring of Silver's assets, liabilities and
businesses, in order that Liberty or Liberty HSN, as the case may
be, would (subject to its obligations under the August Agreement,
this Agreement and the Silver Stockholders Agreement) be
permitted to exercise full ownership rights (including voting
rights) with respect to the Silver Securities owned by it
(including its pro rata interest in any Silver Securities held by
the Silver Company or a BDTV Entity) (such
7
<PAGE>
action or transaction resulting from the foregoing, a
"Restructuring Transaction").
(b) Simultaneously with or immediately following the consummation of
the Restructuring Transaction, Liberty or its designee shall be
required to purchase (and Diller will be required to sell)
Diller's entire equity interest in the Silver Company and each
BDTV Entity for an amount equal to the applicable Dodgers
Interest Purchase Price.
(c) If a Restructuring Transaction has not occurred within 365 days
following the notice referred to in paragraph 2(a) (or, if
earlier, such time as Liberty reasonably determines, after
consultation with Diller, that Diller has ceased to use his
reasonable efforts to consummate a Restructuring Transaction as
required by this Section 2), and a Change in Law has not
otherwise occurred by such date, then notwithstanding the
restrictions on transfer of the Silver Securities described under
the caption "Transfers of Silver Securities" in the August
Agreement, the Liberty Stockholder Group will be entitled to sell
any and all of its Silver Securities (including its entire equity
interest in the Silver Company or any BDTV Entity, or any
Exchange Securities or Silver Securities receivable pursuant to
the Exchange Agreement, but not any direct sale of Contingent
Silver Shares issuable pursuant to the Contingent Right), subject
only to (i) Diller's Right of First Refusal (as defined below),
(ii) Liberty's obligation to exchange shares of Silver Class B
Stock so proposed to be sold for shares of Silver Common Stock
owned by the Diller Stockholder Group pursuant to the paragraph
of the August Agreement entitled "Share Exchange" (but without
regard to the limitation in the last sentence thereof), (iii)
Liberty's further obligation to convert shares of Silver Class B
Stock (or Surviving Class B Stock) into shares of Silver Common
Stock (or Surviving Common) prior to or simultaneous with such a
sale (other than to a member of the Diller Stockholder Group),
and (iv) Diller's Special Purchase Right (as defined below). Such
person or entity (other than a member of the Diller Stockholder
Group) shall acquire such Silver Securities and/or interest in
the Silver Company or such BDTV Entity free and clear of any
rights or obligations under the August Agreement, this Agreement
or the Silver Stockholders Agreement; provided, that such person
or entity shall be entitled to such reasonable demand and
incidental registration rights with respect to its Silver
Securities (including those shares represented by its interest in
the Silver Company or a BDTV Entity) as was the Liberty
Stockholder Group under the August Agreement and/or the Silver
Stockholders Agreement or this Agreement prior to such sale.
Except as specifically provided in this paragraph, the sale by
the Liberty Stockholder Group permitted herein will not otherwise
alter the rights and obligations of
8
<PAGE>
the parties set forth in the August Agreement (as amended by this
Agreement).
Right of First
Refusal and
Special
Purchase
Right The term "Right of First Refusal" shall mean (for purposes
of this Agreement and for purposes of the right of first refusal
referred to in the August Agreement under the caption "Transfers
of Silver Securities") the right of a Stockholder (which shall be
assignable) to acquire all, but not less than all, of the
securities proposed to be sold by the other Stockholder in a
transaction having terms (including (except pursuant to the
Special Purchase Right) net economic terms) and conditions no
less favorable in the aggregate to the selling Stockholder than
those of the transaction pursuant to which it intends to sell
such securities.
In the event that (x) a Stockholder proposes to sell Silver
Securities in a transaction in which the other Stockholder would
have the right to exercise its Right of First Refusal to purchase
all, but not less than all, of such shares to be sold, and (y)
after giving effect to such sale and the requirement that the
selling Stockholder convert all shares of Silver Class B Stock
into Silver Common Stock upon such sale, the other Stockholder
Group's beneficial ownership of Silver Securities would represent
less than 50.1% of the outstanding voting power of the Silver
Securities on a fully diluted basis, then subject to the
satisfaction of the conditions set forth herein, a Stockholder
shall have the right (the "Special Purchase Right") to purchase
from such selling Stockholder such minimum number of Silver
Securities (giving effect to the voting power thereof) as is
required in order to result in the aggregate voting power of the
Silver Securities beneficially owned or whose voting power is
controlled by such Stockholder Group being equal to 50.1% of the
voting power of the outstanding Silver Securities on a fully
diluted basis. A Stockholder's right to exercise the Special
Purchase Right shall be subject to the condition that such
Stockholder shall have (x) exercised all options, warrants,
convertible securities and other rights to acquire Silver
Securities as are beneficially owned by it and which are then (or
will become prior to such sale) exercisable, and (y) exchanged
with the other Stockholder all shares of Silver Common Stock
beneficially owned by it for shares of Silver Class B Stock owned
by the other Stockholder (to the extent such Stockholder owns
shares of Silver Class B Stock), or in each case, made
arrangements reasonably satisfactory to the other Stockholder in
respect of such exercise, conversion or exchange (which will
occur
9
<PAGE>
simultaneously with the purchasing Stockholder's purchase from
the other Stockholder).
The purchase price for Silver Securities in connection with the
exercise of the Special Purchase Right or the Right of First
Refusal shall be equal to the price per share of Silver
Securities to be paid to the selling Stockholder in the proposed
transaction (as it may be adjusted in order to determine the net
economic value thereof other than in the case of the Special
Purchase Right). In the event that the consideration payable to a
Stockholder in a proposed transaction consists of securities, the
purchase price per share shall equal the fair market value of
such securities divided by the number of shares of Silver
Securities to be sold. Such fair market value shall be the
market price of any publicly traded security and, if such
security is not publicly traded, the fair market value shall
equal the Appraised Value. A Stockholder (or its assignee) shall
pay such purchase price in cash or by the delivery of marketable
securities having an aggregate fair market value equal to such
purchase price; provided that if the securities to be so
--------
delivered by a Stockholder (or its assignee) would not, in the
other Stockholder's possession, have at least the same general
degree of liquidity as the securities the other Stockholder was
to receive in such proposed transaction (determined by reference
to the other Stockholder's ability to dispose of such securities
(including, without limitation, the trading volume of such
securities and the other Stockholder's percentage ownership of
the issuer of such securities)), then the purchasing Stockholder
shall be required to deliver securities having an Appraised Value
equal to such purchase price. In the event the purchasing
Stockholder delivers securities in payment of such purchase
price, the purchasing Stockholder agrees to provide the other
Stockholder with registration rights related thereto (if, in the
other transaction, the selling Stockholder would have received
registered securities or registration rights). Each Stockholder
agrees to use its commercially reasonable efforts to preserve to
the other Stockholder, to the extent possible (except in the case
of a Right of First Refusal where it is a condition thereto that
such tax benefits be included in determining the net economic
value of an offer pursuant to such right), the tax benefits
available to it in such proposed transaction, and to otherwise
seek to structure such transaction in the most tax efficient
method available. Notwithstanding the foregoing, in the event
that the purchasing Stockholder pays the purchase price for
Silver Securities purchased pursuant to the Right of First
Refusal or the Special Purchase Right in securities, such
securities must be securities that the other Stockholder is
permitted to own under applicable FCC Regulations.
10
<PAGE>
Notwithstanding anything herein or in the August Agreement,
Liberty HSN's sale on or after the third anniversary of the
Merger of the Approved Shares (as defined in Exhibit A to the
Merger Agreement) in an offering of Silver Common Stock
registered under the Securities Act shall not be subject to the
Right of First Refusal, the Special Purchase Right and Diller's
right to exchange Silver Common Stock for shares of Silver Class
B Stock, unless and to the extent such rights can be exercised
without impairing Liberty's economic benefit therefrom or
delaying any transaction relating to the Approved Shares.
Subject to the foregoing, Liberty agrees to cooperate in good
faith in the event Diller seeks to exercise such rights.
3. Management Structure. The Silver Stockholders Agreement shall
---------------------
provide that upon the earlier to occur of (x) the Restructuring
Transaction (which will result in a Change in Law following the
consummation thereof) and (y) a Change in Law (which the parties
agree shall include, for purposes of this Agreement, the August
Agreement, the Silver Stockholders Agreement, and the
organizational documents of each of BDTV, BDTV II and any BDTV
Entity, any change in law, rule or regulation, or change in the
circumstances of any holder of shares of Silver Class B Common
Stock (or Surviving Class B Stock) or of an interest in the
Silver Company (or any BDTV Entity) or Silver (including, but not
limited to, in the case of Liberty, a change in the ownership of
a majority of the outstanding common stock of Liberty or Liberty
HSN)) or any other event, the effect of which is or would be to
permit Liberty or any holder of Liberty's interest in the Silver
Company (or any BDTV Entity) to exercise ownership rights
(including voting rights) with respect to the Silver Securities
owned by it (including its pro rata portion of any Silver
Securities held by the Silver Company or any BDTV Entity)), or
which would otherwise result in the issuance to it of all
Contingent Silver Shares and the exchange of all Exchange
Securities, whether before or after the Merger, the management
rights of the parties with respect to Silver shall be as follows:
(i) Diller thereafter would be entitled to designate a
mutually agreeable number of the members of the Board of
Directors of Silver and Liberty would be entitled to
designate the remainder of the directors of Silver (which
number designated by Liberty shall, in any event,
constitute a majority of the number of directors
constituting the entire Silver Board of Directors). In the
event that (A) any of Liberty's designees on the Silver
Board of Directors vote in a manner different than Diller
(or in the event that Diller is required to abstain from
voting under applicable law, different than Diller's
expressed preference) with respect to any matter voted
upon by the Silver Board
11
<PAGE>
of Directors, and the outcome of such vote is inconsistent
with Diller's vote (or such preference) solely as a result
of such different vote by any of such designees of Liberty
(except to the extent that such Liberty designees are
required under applicable law to abstain from voting) or
(B) any member of the Liberty Stockholder Group votes any
of its Silver Securities with respect to any matter
presented for a vote of the stockholders of Silver in a
manner inconsistent with the manner in which the Diller
Stockholder Group votes Silver Securities and the outcome
of such vote is inconsistent with the manner in which
Diller has voted, solely as a result of such different
vote by any such member of the Liberty Stockholder Group
(including, except as set forth below, decisions relating
to Diller's employment with Silver), in either case other
than (w) as specifically provided for by this Agreement,
the August Agreement or the Silver Stockholders Agreement
(including, without limitation, a Class B Issuance (as
defined below)), (x) any decision to terminate Diller's
employment with Silver for Cause, (y) any decision
relating to Diller's compensation by Silver or any of its
subsidiaries (except as provided for by the Silver Term
Sheet), or (z) any decision relating to a Fundamental
Matter (any such vote contrary to Diller's vote on such
preference other than as provided in clauses (w) (x), (y)
and (z) above, a "Qualifying Disagreement"), then Diller
shall be entitled to deliver notice of his election (a
"Management Election") to exercise his management rights
as a result of the occurrence of such Qualifying
Disagreement in the manner and to the extent set forth
below.
(ii) Following a Management Election by Diller: (A) Diller
shall be entitled to exercise his voting authority or
authority to act by written consent over all Silver
Securities then owned by each member of the Liberty
Stockholder Group and the Diller Stockholder Group on all
matters submitted to a vote of Silver stockholders, or by
which Silver stockholders may act by written consent,
pursuant to a conditional proxy (which proxy shall be
valid until the first to occur of (x) such time as Diller
ceases to be the Chairman of the Board and/or Chief
Executive Officer and/or President of Silver or (y) such
time as the Diller Stockholder Group ceases to hold its
Eligible Stockholder Amount of Silver Securities) and
shall be irrevocable and coupled with an interest for
purposes of Section 212 of the DGCL), provided, that each
--------
Stockholder agrees, and agrees to cause each member of its
Stockholder Group, to take or cause to be taken all
reasonable actions required (1) for the election of a
slate of directors of Silver, two of
12
<PAGE>
whom will be designated by Liberty and the remainder of
whom will be designated by Diller, and (2) to prevent the
taking of any action by Silver or its subsidiaries with
respect to a Fundamental Matter without the consent of
both Stockholders; and (B) subject to applicable law and
fiduciary duties and except with respect to any
Fundamental Matters or a Class B Issuance, any matter
referred to in clause (x) or (y) of clause (i) above, and
except as otherwise specifically provided by this
Agreement, the August Agreement or the Silver Stockholder
Agreement, Liberty shall be required to use its reasonable
best efforts to cause its designees on the Silver Board of
Directors to vote with respect to any matter presented to
a vote of the Silver Board of Directors in the same manner
as Diller (or in the event that Diller is required to
abstain from voting under applicable law, in the same
manner as Diller's expressed preference), except to the
extent that such Liberty designees are required under
applicable law to abstain from voting.
(iii) Diller shall cease to be entitled to exercise any rights
under this Agreement, the August Agreement or the Silver
Stockholders Agreement with respect to the matters set
forth in this Section 3 upon the occurrence of any of the
following: (x) Diller is no longer Chairman of the Board
and/or Chief Executive Officer and/or President of Silver
and (y) the Diller Stockholder Group ceases to own its
Eligible Stockholder Amount of Silver Securities. Liberty
and Diller agree that, for purposes of determining
Liberty's Eligible Stockholder Amount the number of shares
of Silver Common Stock held by the Liberty Stockholder
Group shall be deemed to include that number of Silver
Securities then issuable to Liberty HSN pursuant to the
Contingent Right or to a member of the Liberty Stockholder
Group pursuant to the HSN Exchange Agreement, in addition
to the Liberty Stockholder Group's pro rata interest in
the Silver Securities held by Silver Company or a BDTV
Entity.
(iv) Each of Liberty and Diller agrees, and agrees to cause
each member of its Stockholder Group, to take all
reasonable actions required (including to vote or execute
a written consent with respect to the Silver Securities
held by Silver Company or any BDTV Entity) in order to
give effect to the provisions of this Section 3. In this
connection, (A) following the earlier to occur of the
events specified in clauses (x) and (y) of the
introductory paragraph of this Section 3, if so requested
by Liberty, all representatives of Diller and/or the
Diller Stockholder Group on the Silver Board of Directors
shall
13
<PAGE>
immediately resign (other than the representative(s) to be
designated by Diller pursuant to clause (i) of this
Section 3) and (B) following a Management Election, if so
requested by Diller, all representatives of Liberty on the
Silver Board of Directors shall resign immediately (other
than two persons designated by Liberty).
(v) Notwithstanding the provisions of any Fundamental Matter
and except as otherwise provided herein, in the Merger
Agreement and the Exchange Agreement, each Stockholder
agrees, and agrees to cause each member of its Stockholder
Group, to take or cause to be taken all reasonable actions
required (including to vote or execute a written consent
with respect to the Silver Securities held by Silver
Company or a BDTV Entity) to prevent the taking by Silver
of any action with respect to any issuance or proposed
issuance of any shares of Silver Class B Common Stock (or
any rights or other securities exercisable or exchangeable
for, or convertible into, such shares), or the entering
into of any agreement, arrangement or understanding with
respect to any such issuance or proposed issuance, except
as specifically provided in this Agreement (such issuance,
a "Class B Issuance").
4. Fundamental Matters. Upon the consummation of the Merger, the
-------------------
indicated paragraphs of the definition of the term "Fundamental
Matters" in the August Agreement shall be amended in their
entirety to read as follows:
"(2) The acquisition, disposition (including pledges),
directly or indirectly, by Silver or any of its
subsidiaries, of any assets (including debt and/or
equity securities) or business (by merger,
consolidation or otherwise), the grant or issuance
of any debt or equity securities of Silver or any of
its subsidiaries, the redemption, repurchase or
reacquisition of any debt or equity securities of
Silver or any of its subsidiaries by Silver or any
such subsidiary, or the incurrence of any
indebtedness, or any combination of the foregoing,
in any such case, in one transaction or any series
of transactions in a six month period, with a value
of 10% or more of the market value of Silver's
outstanding equity securities at the time of such
transaction, provided that the prepayment,
redemption, repurchase or conversion of prepayable,
callable, redeemable or convertible securities in
accordance with the terms thereof shall not be a
transaction subject to this paragraph (2)."
14
<PAGE>
"(4) Engaging in any line of business other than media,
communications and entertainment products, services
and programming, and electronic retailing or other
businesses engaged in by HSN as of August 25, 1996."
5. Consent of Liberty and Diller Regarding Certain Transactions.
------------------------------------------------------------
For purposes of the provisions of the August Agreement and this
Agreement regarding Diller's Management Rights and Fundamental
Matters, each of Liberty and Diller hereby consents and agrees to
the taking of any action by any of Diller, the Silver Company or
Silver, which action is reasonably necessary or appropriate to
approve and consummate the transactions (including the related
amendments to the Silver Certificate of Incorporation and other
actions to be taken by the Silver stockholders) as may be
contemplated by each of the Merger Agreement, the Exchange
Agreement and the merger agreement among Silver, a wholly owned
subsidiary of Silver and Savoy Pictures Entertainment, Inc. (the
"SP Merger Agreement"); provided, however, that the applicable
-------- --------
parties shall not enter into, or permit any material amendment
to, or waiver or modification of material rights or obligations
under the SP Merger Agreement, as amended as of August 13, 1996,
without the prior written consent of Liberty (which consent shall
not be unreasonably withheld).
6. Termination of Merger Agreement and Exchange Agreement. In
------------------------------------------------------
connection with the execution and delivery of this Agreement,
each of Diller and Liberty shall cause each of the Merger
Agreement, dated as of November 27, 1995, among Silver Company,
Liberty Program Investments, Inc. and Liberty HSN, and the
Exchange Agreement, dated as of November 27, 1995, between Silver
and Silver Company, to be terminated by the applicable parties
thereto.
7. Reasonable Efforts. Subject to the terms and conditions of the
------------------
applicable agreements, each of Liberty and Diller agrees to use,
and to cause each of its respective officers, directors,
employees, affiliates and representatives to use, all reasonable
efforts and take all reasonable actions required or necessary to
consummate the transactions contemplated by this Agreement, the
August Agreement, the Merger Agreement and the Exchange
Agreement, and to cause the conditions to each of the respective
parties' obligations to consummate the foregoing transactions to
be satisfied.
8. Liabilities under the Federal Securities Laws. The exercise of
---------------------------------------------
any rights hereunder or under the August Agreement or the Silver
Stockholders Agreement by any member of the Diller Stockholder
Group or the Liberty Stockholder Group (and including in the case
of the Liberty Stockholder
15
<PAGE>
Group, its exercise of rights relating to the Contingent Right
and the Exchange Agreement) shall be subject to such reasonable
delay as may be required to prevent the other Stockholder Group
from incurring any liability under the federal securities laws
and the parties agree to cooperate in good faith in respect
thereof.
9. Miscellaneous. This agreement shall be governed by and construed
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in accordance with the laws of the State of New York applicable
to agreements to be fully performed therein and without regard to
principles of conflict of laws. This Agreement, together with the
August Agreement, incorporates the entire understanding of the
parties with respect to the subject matter herein and therein and
supersedes all previous understandings, discussions, negotiations
and agreements with respect to such subject matter. The August
Agreement, as amended pursuant to the specific terms of this
Agreement, is hereby ratified and confirmed in all respects;
provided, however, (i) that in the event of any conflict between
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the terms of this Agreement and the terms of the August
Agreement, the terms of this Agreement shall be deemed to
supersede the conflicting terms of the August Agreement and (ii)
for purposes of the computation of any time periods set forth in
the August Agreement (including any applicable time periods
relating to or based upon the execution of the Silver
Stockholders Agreement), such time periods shall be deemed to
have commenced on August 24, 1995. This Agreement may be executed
in counterparts, each of which shall be deemed an original and
all of which shall constitute one and the same instrument. Except
as otherwise provided herein, neither party may assign this
Agreement without the prior written consent of the other party.
In the event of any conflicts between the provisions of this
Agreement and the Merger Agreement (including the Exhibits
thereto), the provisions of the Merger Agreement shall control.
Whenever it is necessary for purposes of this Agreement to
determine whether an exchange is tax-free or taxable, such
determination shall be made without regard to any interest
imputed pursuant to Section 483 of the Code.
16
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If the foregoing is acceptable to you, please execute the copy of this
agreement in the space below, at which time this Agreement will, subject to the
receipt of any required approvals of the Board of Directors of Silver or HSN
referenced on the first paragraph of this letter, constitute a binding agreement
between us.
Very truly yours,
LIBERTY MEDIA CORPORATION
By: /s/ Robert R. Bennett
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Name: Robert R. Bennett
Title: Executive Vice President
ACCEPTED AND AGREED
this 25 day of August, 1996
By: /s/ Barry Diller
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Barry Diller
