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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 20, 1996
REGISTRATION NO. 333-__________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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HOME SHOPPING NETWORK, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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Delaware 2501 118th Avenue North 59-2649518
(State or other jurisdiction St. Petersburg, Florida 33716 (I.R.S. Employer
of incorporation or (813) 572-8585 Identification No.)
organization) (Address, including zip code, and telephone number,
including area code, of registrant's principal
executive offices)
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Kevin J. McKeon
Home Shopping Network, Inc.
2501 118th Avenue North
St. Petersburg, Florida 33716
(813) 572-8585
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC: From time to time after the effective date of the registration
statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box: [x]
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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=======================================================================================================================
PROPOSED
MAXIMUM PROPOSED
OFFERING MAXIMUM
TITLE OF EACH CLASS OF AMOUNT PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE PER SHARE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED (1) PRICE (1) FEE
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5 7/8% Convertible Subordinated Debentures
due March 1, 2006 . . . . . . . . . . . . . . $100,000,000 100% $100,000,000
- -------------------------------------------------------------------------------------------------------- $34,483.00
Common Stock, par value $0.01 per share . . . 8,333,333 shares (2) N/A N/A
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(1) Estimated solely for the purpose of calculating the registration
fee.
(2) Represents the shares of the Registrant's Common Stock issuable
upon conversion of the Debentures, based on the initial conversion
price of $12.00 per share, and is deemed to include any additional
shares of Common Stock that may be issuable upon conversion of the
Debentures as a result of the antidilution provisions thereof or as a
result of any adjustment to the conversion price.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE> 2
HOME SHOPPING NETWORK, INC.
Cross Reference Sheet
Pursuant to Item 501(b) of Regulation S-K
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Item No. Form S-3 Caption Location or Caption in Prospectus
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1. Forepart of the Registration Statement Front Cover Page; Cross-Reference Sheet; Outside
and Outside Front Cover Page of Front Cover Page
Prospectus
2. Inside Front and Outside Back Cover Inside Front and Outside Back Cover Pages
Pages of Prospectus
3. Summary Information, Risk Factors and The Company, Risk Factors, Ratio of Earnings to
Ratio of Earnings to Fixed Charges Fixed Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holders Selling Securityholders
8. Plan of Distribution Plan of Distribution
9. Description of Securities to be Description of Debentures; Description of Capital
Registered Stock
10. Interests of Named Experts and Counsel Legal Matters; Experts
11. Material Changes Recent Developments
12. Incorporation of Certain Information by Incorporation of Documents by Reference
Reference
13. Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act
Liabilities
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<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED AUGUST 20, 1996
PROSPECTUS
HOME SHOPPING NETWORK, INC.
$100,000,000
5 7/8% Convertible Subordinated Debentures due March 1, 2006
and
8,333,333 Shares of Common Stock
This Prospectus relates to the offering and sale from time to time of
the 5 7/8% Convertible Subordinated Debentures due March 1, 2006 (the
"Debentures"), of Home Shopping Network, Inc., a Delaware corporation ("HSN" or
the "Company"), and the shares of the Company's common stock, par value $0.01
per share (the "Common Stock"), issuable upon conversion thereof (the "Shares"
and together with the Debentures, the "Securities") by certain holders (the
"Selling Securityholders") of the Securities as described under "Selling
Securityholders." The Selling Securityholders may from time to time sell the
Securities offered hereby to or through one or more underwriters, directly to
other purchasers or through agents in ordinary brokerage transactions, in
negotiated transactions or otherwise, at market prices prevailing at the time
of sale, prices related to then prevailing market prices or at negotiated
prices. See "Plan of Distribution."
Interest on the Debentures is payable semi-annually in arrears on
March 1 and September 1 of each year, commencing on September 1, 1996.
Payments will be made without deduction for United States withholding taxes, to
the extent described herein. The Debentures are convertible, at the option of
the holder, unless previously redeemed or repurchased by the Company, at any
time prior to maturity, into shares of Common Stock at a conversion price of
$12.00 per share, equivalent to approximately 83.33 Shares for each $1,000
principal amount of Debentures, subject to certain adjustments. On August 16,
1996, the closing price of the Common Stock on the New York Stock Exchange was
$11 1/2 per share.
The Debentures are redeemable for cash at any time on or after March
1, 1998 at the option of the Company, in whole or in part, at the redemption
prices set forth herein, plus all accrued interest, except that, prior to March
1, 1999, the Debentures may not be redeemed unless the closing price of the
Common Stock equals or exceeds 140% of the then effective conversion price per
share for 20 out of 30 consecutive trading days ending within 20 calendar days
before the notice of redemption is mailed. See "Description of Debentures -
Optional Redemption by the Company." In the event of a Change of Control (as
defined herein), holders of the Debentures will have the right, subject to
certain conditions and restrictions, to require the Company to purchase all or
part of their Debentures at a redemption price of 100% of the principal amount
thereof, plus accrued interest (including any Additional Interest as defined
herein). See "Description of Debentures - Change of Control."
The Debentures are unsecured general obligations of the Company and
subordinated to all existing and future Senior Debt (as defined herein) of the
Company. See "Description of Debentures - Ranking."
The Debentures were originally issued by the Company on March 1, 1996
in a transaction exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act").
The Company will not receive any of the proceeds from the sale of any
of the Debentures or the Shares offered by the Selling Securityholders
hereunder.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SECURITIES
OFFERED HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is _____ __, 1996.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy and information statements and other
information with the Securities and Exchange Commission (the "SEC"). Such
reports, proxy and information statements and other information filed by the
Company with the SEC can be inspected and copied at the Public Reference
Section of the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the SEC located at Seven
World Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be
obtained from the Public Reference Section of the SEC at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.
Such reports, proxy and information statements and other information can also
be inspected at the offices of the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005.
The Company has filed with the SEC a Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act with respect to the Securities offered
hereby. This Prospectus does not contain all of the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the SEC. For further information pertaining
to the Securities and the Company, reference is made to the Registration
Statement. Statements contained herein concerning the provisions of any
document are not necessarily complete and, in each instance, reference is made
to the copy of such document filed as an exhibit to the Registration Statement
or otherwise filed with the SEC. Each such statement is qualified in its
entirety by such reference. Copies of the Registration Statement and the
exhibits may be inspected, without charge, at the offices of the SEC, or
obtained at prescribed rates from the Public Reference Section of the SEC at
the address set forth above.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents filed with the SEC (File No. 1-9118) are
incorporated by reference into this Prospectus: the Company's Annual Report on
Form 10-K for the year ended December 31, 1995; the Company's Quarterly Report
on Form 10-Q for the quarters ended March 31, 1996 and June 30, 1996; the
Company's Current Reports on Form 8-K dated February 15, 1996, February 26,
1996 and March 1, 1996; and the description of the Company's Common Stock
contained in the Company's registration statement filed pursuant to Section
12(b) of the Exchange Act, including any amendment or reports filed for the
purpose of updating such description filed by the Company.
All documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Securities hereunder shall be
deemed to be incorporated herein by reference and shall be a part hereof from
the date of filing of such documents.
Any statement contained in documents incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained in this Prospectus, or in any other
subsequently filed document which is also incorporated herein by reference,
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed to constitute a part of this Prospectus except
as so modified or superseded.
The Company hereby undertakes to provide without charge to each
person, including any beneficial owner, to whom a Prospectus is delivered, upon
written or oral request of any such person, a copy of any or all of the
documents incorporated by reference herein, other than exhibits to such
documents not specifically incorporated by reference. Requests for such copies
should be directed to the Company's Chief Financial Officer, 2501 118th Avenue
North, St. Petersburg, Florida 33716, whose telephone number is (813)
572-8585.
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<PAGE> 5
THE COMPANY
GENERAL
The Company is a holding company that was incorporated in Delaware in
1986, the subsidiaries of which conduct the day-to-day operations of the
Company's various business activities. The Company's primary business, and
principal source of revenue, is electronic retail sales by Home Shopping Club,
Inc. ("HSC"), a wholly-owned subsidiary of the Company and a leader in the
electronic retailing industry. HSC sells a variety of consumer goods and
services over live, customer-interactive retail sales programs through its
"HSN" and "Spree!" programming services.
The Company's programming is transmitted over two networks twenty-four
hours a day, seven days a week via satellite to affiliated cable television
systems and broadcast television stations and satellite dish receivers. The
Company's primary network, "HSN," currently is received by approximately 69.5
million homes throughout the United States. "Spree!," which provides a similar
retail shopping service in a more casual and less structured format, is
received by approximately 11.7 million cable television households as of June
30, 1996, approximately 4.8 million of which receive it on a part-time basis
and approximately 10.2 million of which also receive "HSN".
HSC programming is divided into segments. Each segment is televised
live with a show-host who presents the merchandise and conveys to the viewer
information relating to the product, including price, quality, features and
benefits. Viewers place orders for products by calling a toll-free telephone
number, and orders are processed by live operators or by the Company's
automated voice response system. Show-hosts engage callers in on-air
discussions regarding the Company's programming, the currently featured product
or the caller's experience with HSC and its products. This format creates a
spontaneous and entertaining program.
The Company's principal offices are located at 2501 118th Avenue
North, St. Petersburg, Florida 33716, and its telephone number is (813)
572-8585.
ADDITIONAL SUBSIDIARY BUSINESSES
In addition to the electronic retailing business, the Company's
subsidiaries are involved in mail order and other businesses.
HSN Mail Order, Inc. ("Mail Order") markets a variety of merchandise
through mail order catalogs distributed to individuals on mailing lists
developed by Mail Order or rented from agents. Mail Order also markets a
variety of products by inserting marketing materials, including its catalogs,
in packages containing HSC products shipped to customers.
Internet Shopping Network, Inc. ("ISN") operates an interactive
shopping service on the Internet specializing in small office and computer
equipment. ISN is also exploring business opportunities for merchandising
products via commercial digital interactive television services and other new
digital retailing vehicles.
Vela Research, Inc. develops and markets high technology audio and
video digital encoding and decoding devices and storage products to the cable,
broadcast, computer and telecommunications industries.
3
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RECENT DEVELOPMENTS
On August 2, 1996, the Company, HSC, HSN Realty, Inc. (together with
HSC, the "Subsidiary Guarantors"), The Chase Manhattan Bank, N.A., LTCB Trust
Company and the Bank of New York entered into a new $150 million senior secured
revolving credit facility (the "Replacement Facility") with a $25.0 million
sub-limit for import letters of credit, which facility replaced the Company's
prior revolving credit facility (the "Prior Credit Facility") and refinances
the Company's outstanding indebtedness thereunder. The Replacement Facility has
a three year term and expires on August 2, 1999. The obligations of the
Company under the Replacement Facility are secured by the outstanding capital
stock of, and are guaranteed by, the Subsidiary Guarantors. The Replacement
Facility contains customary covenants by the Company, including the maintenance
of corporate existence and ownership of subsidiaries, maintenance of
properties, delivery of financial information, limitations on other
indebtedness, limitations on repurchases of or distributions on capital stock,
limitations on transactions with affiliates, restrictions on acquisitions and
other investments, and the maintenance of certain financial ratios. Further,
the Replacement Facility includes a prohibition on prepayments, redemptions and
repurchases of other indebtedness (including the indebtedness of the Company
under the Debentures). In addition to other customary events of default, an
event of default will arise under the Replacement Facility upon the occurrence
of certain events involving a change of control of the Company (as defined in
the Replacement Facility).
RISK FACTORS
PRIOR TO MAKING AN INVESTMENT DECISION, PROSPECTIVE PURCHASERS OF THE
SECURITIES SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN ADDITION TO
THE OTHER INFORMATION AND FINANCIAL DATA PRESENTED IN THIS PROSPECTUS OR
INCORPORATED BY REFERENCE HEREIN:
RECENT OPERATING RESULTS AND FINANCIAL CONDITION
The Company experienced a significant decline in its business during
1995, resulting in a net loss of approximately $62 million for the year ended
December 31, 1995. The issuance of the Debentures by the Company, together
with the Company's possible future borrowings under the Replacement Facility,
may have the effect of increasing the total amount of the Company's
consolidated indebtedness and may increase its interest expense obligations in
subsequent periods. The Company's ability to make scheduled payments or to
refinance its obligations with respect to its indebtedness depends on its
financial and operating performance which, in turn, are subject in part to
prevailing economic conditions and financial, business and other factors beyond
its control. There can be no assurance that the Company will generate
sufficient funds from operations to satisfy its obligations under its
indebtedness.
PROSPECTS FOR FUTURE REVENUE GROWTH
The Company experienced only a 15.4% growth in net sales between 1990
and 1994, and net sales in 1995 declined 9.4% from 1994. The Company has
historically sought to increase the number of homes receiving its programming,
and hence the number of potential customers, primarily through the
establishment of affiliation agreements with cable television system operators
and broadcast station operators for the transmission of its programming
services to cable television subscribers and broadcast television viewers, and
by transmission of the Company's programming service directly to the owners of
home satellite dishes. While the Company continues to seek further
opportunities to increase the number of homes receiving the Company's
programming, it is unlikely that the number of homes receiving the Company's
programming will continue to grow at rates comparable to those achieved in
prior periods. Therefore, the Company's ability to increase its revenue will
depend more heavily on market penetration, defined as the addition of new
customers from homes already receiving the Company's programming and continued
growth in repeat sales to existing customers. No assurance can be given that
the Company will be successful in these efforts to increase market penetration.
4
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SUBSTANTIAL LEVERAGE
The Company and its consolidated subsidiaries incurred substantial
indebtedness and other cash obligations as a result of the consummation of the
sale of the Debentures. The Company used the net proceeds of $97.2 million
from the Debentures to repay borrowings under the Prior Credit Facility. This
and other repayments reduced the total outstanding amount under the Prior
Credit Facility to $20 million at June 30, 1996. As of August 5, 1996, after
repayment of outstanding borrowings under the Prior Credit Facility, the total
outstanding amount under the Replacement Facility was $15.0 million and
approximately $120 million was available for borrowing after accounting for
outstanding letters of credit. The Company anticipates that it will use its
borrowing capacity under the Replacement Facility to provide funds for working
capital and other corporate purposes, to the extent that funds from operations
are not sufficient for such purposes. As a result, the Company anticipates
that its consolidated indebtedness may increase during the remainder of 1996.
The Debentures are subordinated to all outstanding Indebtedness (as defined) of
the Company, including amounts outstanding under the Replacement Facility. All
outstanding amounts under the Replacement Facility become due and payable in
August 1999. See "Recent Developments". The Indenture (as defined) governing
the Debentures does not restrict the Company or any of its subsidiaries or
affiliates from incurring additional indebtedness or other liabilities or
obligations. See "Description of Debentures - Ranking."
The degree to which the Company is leveraged could have important
consequences to purchasers of the Securities, including (i) increasing the
Company's vulnerability to adverse general economic and industry conditions,
(ii) limiting the Company's ability to obtain additional financing to take
advantage of acquisition or development opportunities that may arise in the
future, whether in respect of new projects or to expand existing projects, or
to expand the Company's inventory, (iii) reducing the Company's flexibility to
respond to changing business, technological and economic conditions and (iv)
impeding the Company's ability to obtain financing or refinancing for general
working capital, capital expenditures or for other general corporate purposes.
HOLDING COMPANY STRUCTURE; DEPENDENCE UPON CASH FLOW FROM SUBSIDIARIES
The Company is a holding company and conducts all of its operations
through subsidiaries. Consequently, the ability of the Company to pay its
obligations, including its obligation to pay interest on and principal of the
Debentures when due, will be dependent upon the earnings of its subsidiaries.
The subsidiaries are separate and distinct legal entities and have no
obligation, contingent or otherwise, to pay any amounts due pursuant to the
Debentures or to make funds available therefor. The ability of the
subsidiaries to pay dividends or make other payments or advances to the Company
will depend upon their operating results and will be subject to various
business considerations and to applicable state laws.
Because the Debentures are not obligations of the Company's
subsidiaries and because a substantial portion of the assets of the Company are
owned by, and substantially all of its operations are conducted through, its
subsidiaries, claims of holders of Debentures are structurally subordinated to
the claims of such subsidiaries' creditors, including lenders and trade
creditors, of such subsidiaries. Thus, the Debentures effectively are
subordinated to all existing and future liabilities of the Company's
subsidiaries, including trade payables, except to the extent that the Company
is itself recognized as a creditor of such subsidiary, in which case the claims
of the Company would still be subordinate to any security interest in the
assets of such subsidiary and any indebtedness of such subsidiary senior to
that held by the Company. The capital stock of two of the Company's
subsidiaries, HSC and HSN Realty, Inc., has been pledged to the lenders under
the Replacement Facility and such subsidiaries have guaranteed the obligations
of the Company under such facility. The Indenture permits the Company's
subsidiaries to incur additional indebtedness and to issue preferred stock.
5
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RANKING; SUBORDINATION
The Debentures represent general unsecured obligations of the Company
senior or pari passu in right of payment to all other unsecured obligations of
the Company but subordinated to the prior payment in full of all existing and
future Senior Debt of the Company. See "Description of Debentures - Ranking."
As of June 30, 1996, the Company had approximately $21.7 million of debt that
constituted Senior Debt. In addition, as described above the Debentures were
structurally subordinated to the liabilities of the subsidiaries of the
Company, which constituted most of the approximately $151 million in other
consolidated liabilities of the Company as of such date. See "- Holding
Company Structure; Dependence Upon Cash Flow From Subsidiaries" above. There
are no restrictions in the Indenture on the creation of additional Senior Debt
(or any other indebtedness), including any indebtedness ranking senior to the
Debentures but junior to other indebtedness of the Company or on the incurrence
of additional liabilities by subsidiaries of the Company.
Upon the maturity or in the event of a default in payment when due
(whether at a date fixed for payment or by acceleration or otherwise) of
principal, premium, if any, or interest or any other amount due in respect of
Senior Debt then, unless such Senior Debt has been paid in full or such default
shall have been cured or waived or shall have ceased to exist, the Company may
not make principal or interest payments with respect to, or acquire any of, the
Debentures. Upon the occurrence of a covenant default under any Senior Debt
(i.e., a default that does not involve a missed payment of principal or
interest or any other amount due on Senior Debt) and receipt by the Trustee
under the Indenture of notice to such effect, the Company may not make payments
with respect to, or acquire any of, the Debentures, until the earlier of (i)
the default having been cured or waived or ceasing to exist or (ii) 180 days
having passed from the date of receipt of such written notice. Were the
maturity of the Senior Debt to be accelerated during such 180-day period, no
payment may be made with respect to the Debentures until such Senior Debt is
paid in full. See "Description of Debentures - Ranking."
Upon any distribution of assets in any dissolution, winding-up,
liquidation or reorganization of the Company (whether in any bankruptcy,
insolvency or receivership proceedings or otherwise), payment of all amounts
due in respect of the Debentures will be subordinated to the prior payment in
full of all Senior Debt. By reason of such subordination, in the event of
dissolution, insolvency, bankruptcy or other similar proceedings, upon any
distribution of assets: (i) the holders of Debentures will be required to pay
over their share of such distribution to the holders of Senior Debt until such
Senior Debt is paid in full; and (ii) creditors who are not holders of
Debentures or holders of Senior Debt may recover more, ratably, than the
holders of Debentures.
ANTICIPATED CHANGE IN CONTROL
Tele-Communications, Inc. ("TCI"), through Liberty Media Corporation
("Liberty"), is currently the beneficial owner of 17,566,702 shares of Common
Stock and 20,000,000 shares of the Company's Class B Common Stock, par value
$.01 per share (the "Class B Common Stock") (such shares of Common Stock and
Class B Common Stock are hereinafter referred to collectively as the "TCI
Company Shares"). The TCI Company Shares represent approximately 41% of the
outstanding equity securities of the Company and, by virtue of the fact that
the Common Stock and Class B Common Stock vote together as a single class, with
shares of Class B Common Stock generally entitled to cast 10 votes per share
while shares of Common Stock are entitled to cast one vote per share, the TCI
Company Shares represent approximately 80% of the voting power of the Company's
outstanding equity securities. Thus, TCI currently has, and Silver King
Communications, Inc. ("Silver King"), assuming consummation of the transactions
referred to herein will have, sufficient voting power to control all matters
requiring the approval of the Company's stockholders, including the power to
elect all of the members of the Company's Board of Directors (excluding the
directors which constitute 25% of the entire Board which are elected by the
holders of the Common Stock), the power to effect amendments to the Company's
Restated Certificate of Incorporation and the power to approve mergers, sales
of assets, "going private" and other corporate transactions without the
approval of any other stockholders of the Company. See "Description of Capital
Stock."
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In August 1995, Liberty and Mr. Barry Diller entered into an agreement
pursuant to which Liberty has transferred an option (the "Liberty Option") to
purchase 2,000,000 shares of the Silver King Class B Common Stock to BDTV INC.
("BDTV") in which Liberty owns substantially all of the equity interest and Mr.
Diller, who has been Chairman of the Board of Directors of the Company since
November 1995 and who became Chairman of the Board and Chief Executive Officer
of Silver King in August 1995, owns all of the voting interests. The shares of
Silver King Class B Common Stock held by this entity represent a majority of
the outstanding voting power of Silver King. Pursuant to the agreement between
Mr. Diller and Liberty, Mr. Diller is entitled to vote all of the Silver King
securities held by this entity and manage the business of Silver King, subject
to certain restrictions. Consummation of this transaction was subject to the
satisfaction of certain conditions, including receipt of the final approval of
the Federal Communications Commission (the "FCC") to the transfer of control of
Silver King's broadcast licenses to Mr. Diller (the "FCC Approval"). Following
the consummation of such transactions on August 13, 1996, Mr. Diller, who
acquired a significant number of options to acquire Silver King Common Stock in
August 1995, controlled securities of Silver King representing a majority of
the outstanding voting power of that entity.
In November 1995, Liberty and Mr. Diller entered into an amendment to
their original agreement and certain other agreements, which provided for,
among other things, Silver King's acquisition of control of the Company through
the transfer (the "Merger and Exchange") to Silver King of the TCI Company
Shares in exchange for additional shares of Silver King Common Stock and Class
B Common Stock (the "Silver King Exchange Securities"). In addition, in
connection with such transfer of the TCI Company Shares, TCI would acquire
beneficial ownership of a substantial additional equity interest in Silver King
and, through such ownership of Silver King securities, would continue to have a
substantial indirect equity interest in the Company.
By Memorandum Opinion and Order, adopted March 6, 1996, and released
March 11, 1996 (the "FCC Order"), the FCC granted, subject to certain
conditions described below, the FCC Approval; however, the FCC stayed the
effectiveness of the FCC Order to investigate certain allegations filed by a
third party against Silver King and to assess their impact on the FCC Order.
The provisions of the FCC Order granting the approval for the transfer
of control of the Silver King television stations described in the preceding
paragraphs was conditioned upon, among other things, the requirement that the
FCC approve (i) any substantial and material modification to the stockholders
agreement between Liberty and Mr. Diller relating to Silver King (the
"Stockholders Agreement"), (ii) any increase in TCI's interest in Silver King
(the "Equity Condition"), and (iii) any material increase in the percentage of
cable subscribers of TCI-owned cable systems within any of the eleven markets
served by Silver King's television stations (the "Subscriber Condition").
Based on information contained in a report on Schedule 13D filed by TCI and Mr.
Diller with the SEC, TCI has not agreed to the Subscriber Condition, and,
accordingly, the parties filed a request for clarification with the FCC, dated
April 10, 1996, in which the parties, among other things, requested that the
FCC eliminate the Subscriber Condition contained in the FCC Order. By
Memorandum Opinion and Order and Notice of Apparent Liability, adopted June 6,
1996 and released June 14, 1996 (the "FCC June Order"), the FCC, among other
things, granted in part such request for clarification and removed the
Subscriber Condition from its prior grant of approval of the transfer of
control of the Silver King television stations. In the FCC June Order, the FCC
required that BDTV notify the FCC prior to the consummation of an acquisition
by Liberty or TCI of cable systems, or other transaction, whereby the aggregate
percentage of television households served by cable systems owned or controlled
by TCI in any of the Silver King television markets would exceed 50%. In the
FCC June Order, the FCC also dissolved the stay of effectiveness of the FCC
Order.
The consummation of the foregoing transactions is subject to the
satisfaction of certain conditions, including, but not limited to, the approval
of the transaction in which Silver King is to acquire the TCI Company Shares by
the stockholders of Silver King. In addition, because the Equity Condition
remains a part of the FCC Order, Silver King's acquisition of the TCI Company
Shares (and the resulting increase in TCI's indirect equity interest in Silver
King) will require the approval of the FCC. There can be no assurance that the
transactions described above will be consummated.
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<PAGE> 10
Based on information contained in a report on Schedule 13D filed with
the SEC by TCI on August 16, 1996, each of the agreements relating to the
Merger and Exchange currently provides that such agreement may be terminated by
either party in the event that the transactions contemplated thereby have not
been consummated by August 30, 1996. Such report also indicates that because
of the delays in receiving the approval of the FCC of the acquisition of
control of Silver King by BDTV and certain limitations contained in the FCC
June Order relating to Liberty's acquisition of beneficial ownership of
additional equity securities of Silver King (including those shares in which it
would acquire an ownership interest as a result of the Merger and Exchange),
Liberty believes it is unlikely that such transactions will be consummated by
August 30, 1996. Such report also states that, as a result, Mr. Diller and
Liberty have recently begun discussing a restructuring of the proposed
transactions or a possible alternative transaction relating to the Company, in
any case such that Silver King could acquire control of the Company in a manner
that would be consistent with the limitations relating to Liberty's acquisition
of beneficial ownership of additional equity securities of Silver King
contained in the FCC June Order. According to TCI's Schedule 13D, there can be
no assurance that such discussions will result in any agreement providing for
such a restructured or alternative transaction or, if any such agreement is
reached, that any required regulatory or other approvals for such transaction
(including from the FCC) will be obtained or that any such transaction will be
consummated. [To be updated prior to effectiveness]
The foregoing summary discussion of certain proposed transactions and
other arrangements between and among Silver King, Mr. Diller and/or Liberty or
TCI has been derived from publicly available information concerning such
transactions, including certain reports on Schedule 13D filed by such persons
with the SEC, and certain exhibits included or incorporated by reference
therein. Such summary, as well as the other information regarding such
arrangements contained in this Prospectus, is qualified in its entirety by
reference to such Schedule 13D reports and the exhibits thereto, which may be
obtained from the places and in the manner described under the caption
"Available Information."
POTENTIAL CONFLICTS OF INTEREST BETWEEN THE COMPANY AND SILVER KING
Silver King and the Company currently are, and following consummation
of the transactions described above will remain, separate publicly-held
companies, with separate boards of directors, management (other than Mr.
Diller) and publicly traded securities. Programming produced by the Company
and its subsidiaries presently constitutes substantially all of the programming
broadcast by the Silver King stations. As a result, the Company is an
important source of programming and revenue to Silver King, and Silver King
constitutes a significant distributor of the Company's programming.
Following consummation of the transactions described herein the
Company would be controlled by Silver King, and there can be no assurance that
the conflicts of interest arising from such relationship will not affect
decisions between the two companies. In addition to his executive positions
with both the Company and Silver King, Mr. Diller has also been granted
significant equity interests in both companies. As a result, situations may
arise in which Mr. Diller may be required to make decisions which could be
perceived as favoring one company over the other. In addition, TCI will
continue to hold a large indirect equity interest in the Company through its
indirect ownership of Silver King securities. As a result, TCI may face
situations in which decisions relating to its business could be viewed as
favoring one company over the other.
In addition to its interest in the Company and Silver King, TCI
(through Liberty) also owns approximately 43% of the common equity of QVC, Inc.
("QVC"), another leading electronic retailer. Management of QVC is currently
controlled by Comcast Corporation (which owns approximately 57% of the common
equity of QVC), subject to certain restrictions. Situations may arise in which
TCI may take actions favoring QVC over the Company, including situations
relating to the carriage of one or both of such programmers on cable television
systems controlled by TCI or its affiliates.
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In addition, federal law currently prevents cable system operators
from providing distribution to an unlimited number of affiliated programmers.
Because TCI holds interests in various cable programmers, other than the
Company, such federal limitations may restrict TCI's ability to carry the
Company's programming in the future, especially if such programming entails the
creation of new channels that require additional channel capacity. Furthermore,
the agreements between Mr. Diller and Liberty provide that without the approval
of Mr. Diller and Liberty, neither Silver King nor its subsidiaries (which,
assuming consummation of the transactions referred to herein, will include the
Company), will engage in any transaction not in the ordinary course of
business, launch new or additional channels or engage in any new field of
business, in each case, which would have a reasonable likelihood of resulting
in Liberty or any of its affiliates being required to divest itself of Silver
King securities or any other assets or which would render such entity's
continued ownership of such securities or assets illegal or subject to the
imposition of a fine or penalty or which would impose material restrictions or
limitations on such entity's full rights of ownership thereof. As a
consequence of Liberty's ownership interest in the Company and TCI's ownership
interests in other suppliers of cable television programming, such agreement
may limit the ability of the Company to take advantage of electronic retailing
opportunities in the future.
MANAGEMENT CHANGES
In November 1995, Mr. Diller became Chairman of the Board and James
Held became President and Chief Executive Officer of the Company. Mr. Diller
does not have an employment agreement with the Company and does not receive a
salary from the Company; however, in connection with his appointment as
Chairman of the Board, Mr. Diller was originally granted options to purchase
13,400,000 shares of Common Stock at an exercise price of $8.50 per share, of
which amount options with respect to 100,000 shares were subsequently returned
to the Company. The vesting of such options will occur over the next four
years, subject to acceleration in certain specified circumstances, and, except
in certain circumstances, vesting is conditioned upon Mr. Diller remaining as
Chairman of the Company, with any unvested options subject to termination.
Mr. Held has entered into an employment agreement with the Company
(which agreement has a term of four years, subject to renewal), and has also
been granted options to purchase 2,500,000 shares of Common Stock at an
exercise price of $8.50 per share, vesting over a period of four years, subject
to acceleration in certain specified circumstances. Except in certain
circumstances, such vesting is subject to Mr. Held remaining in the employ of
the Company, with any unvested options subject to termination. Mr. Held's
employment agreement may be terminated by him under certain circumstances,
including in situations where Mr. Diller and/or TCI cease to be the direct or
indirect controlling stockholders of the Company.
Although the appointment of Messrs. Diller and Held occurred at
approximately the same time as the agreements described above relating to the
anticipated change in control of the Company, neither such appointment was
conditioned or otherwise made contingent upon, the consummation of such change
in control. Each of Mr. Diller and Mr. Held was granted significant equity
interests in the Company to provide them with substantial economic incentives
to remain with the Company whether or not such control transactions are
actually consummated. Despite the significant economic incentives provided by
such option grants, there can be no assurance that the Company will be able to
retain the long- term services of Mr. Diller, Mr. Held or other members of
senior management or key employees.
DEPENDENCE ON CERTAIN KEY PERSONNEL
Although Messrs. Diller and Held have been with the Company for less
than one year, the Company believes that significant future improvement in its
business will depend upon their contributions. If the transactions in which
Mr. Diller is to acquire control of Silver King and/or Silver King is to
acquire control of the Company are not consummated, it is uncertain what, if
any, effect such failure could have on Mr. Diller's status as Chairman and
Chief Executive Officer of Silver King or upon Mr. Diller's status as Chairman
of the Company, or upon Mr. Diller's intent to remain in any or all such
capacities. In the event that Mr. Diller were to resign or be terminated
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<PAGE> 12
from any of such positions, or were otherwise unable to perform his
responsibilities at the Company, the business of the Company, as well as the
market price of its Common Stock, could be adversely affected. Likewise, if
the transaction in which Silver King is to acquire a controlling interest in
the Company is not consummated, it is uncertain what Silver King's or TCI's
future course of action may be, or the effect such uncertainty would have upon
the Company and its senior management.
Messrs. Diller and Held, and other new management of the Company, have
conducted a comprehensive review of the Company's merchandising and programming
strategies, operations and budget and all other aspects of the Company's
business and have formulated plans and proposals to improve the operating
performance of the Company and to return it to profitability. The Company
believes that the improved sales in the quarter and six months ended June 30,
1996 compared to 1995 were primarily the result of immediate changes made by
new management to the Company's merchandising and programming strategies.
Management expects to take additional steps designed to attract both first-time
and active customers which include improving product assortment, reducing the
average price per unit, improving inventory management and better planning of
programmed shows. While management is optimistic that results will continue to
improve and the Company will remain profitable, there can be no assurance that
changes to the Company's merchandising and programming strategies will achieve
management's intended results.
AFFILIATION AGREEMENTS WITH PROGRAM CARRIERS
The Company's business is highly dependent on its affiliation
agreements with both cable television system operators and broadcast station
operators. Renewal of the Company's affiliation agreements with cable system
operators on favorable terms is dependent upon the Company's ability to
negotiate successfully with cable operators that, subject to applicable law,
determine which programs will be carried on their systems and the channel
position of each program carried. The Company's programming competes for
access to cable systems with competitive televised shopping programming and
other types of programming supplied by a variety of other well-established
sources, including news, public affairs, entertainment and sports programmers.
The Company anticipates that payments to cable system operators in 1996 under
the Company's cable distribution agreements (excluding commission payments)
will be approximately $49.0 million. The Company believes that competition
for cable channel access among televised shopping services is intense.
A significant number of the Company's customers are reached through
broadcast of the Company's programming pursuant to affiliation agreements with
broadcast station operators. The loss of broadcast distribution of the
Company's programming in certain markets may also mean that the Company would
lose cable television distribution because certain cable television systems are
required to distribute the Company's programming as a result of the federal
"must carry" rules. The Company has entered into a number of long term
carriage agreements with cable operators which are currently required to carry
the Company's programming pursuant to the "must carry" rules to prevent the
loss of distribution in the event that the "must carry" rules are declared
unconstitutional or are otherwise terminated or in the event that the
affiliation agreements with broadcast operators are not renewed.
Termination or non-renewal of existing affiliation agreements or an
increase in the expense associated with the renewal of existing affiliation
agreements or with entering into cable distribution agreements with additional
cable system operators could have a material adverse effect on the Company.
AFFILIATION AGREEMENTS WITH SILVER KING
Each of the Silver King Stations (as defined) has an Affiliation
Agreement (as defined) with HSC requiring it to carry HSC's programming through
December 28, 1997. HSC pays an affiliation fee to Silver King based upon
hourly rates and, upon reaching certain sales levels, commissions on net sales
made to customers in the applicable broadcast area. These agreements are
automatically renewable for an additional five-year term, unless written notice
of termination is given by Silver King at least 18 months prior to the
expiration date. Prior to the
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<PAGE> 13
final date for the giving of such notice, the Company agreed with Silver King
that the period for delivery of the notice of non-renewal by Silver King would
be extended until December 28, 1996. Silver King has informed the Company that
it has not made any decision regarding whether it will renew any or all of the
Affiliation Agreements. After evaluating the needs and costs of additional
program carriage, the Company believes that the orderly termination of the
Affiliation Agreements may be in the Company's best interests because of the
potential cost savings and the existing cable carriage of HSC programming in
many of the Silver King markets. As a result, the Company and Silver King are
discussing the process for an orderly termination of such Affiliation
Agreements in the event that the agreements are not renewed and the Company has
initiated preliminary discussions in a number of markets for the purpose of
securing alternative carriage of its programming. There can be no assurance
that Silver King will in fact terminate any or all of the Affiliation
Agreements or that, if so terminated, the Company will be able to find other
means of distributing its programming to the households in the broadcast areas
currently served by Silver King Stations at a reasonable cost.
POTENTIAL CONFLICTS BETWEEN DEBT AND EQUITY HOLDERS
Certain decisions concerning the operations or financial structure of
the Company present conflicts between the owners of the Company's capital stock
and the holders of the Debentures. For example, if the Company encounters
financial difficulties, or is unable to pay its debts as they mature, the
interest of the Company's equity investors might conflict with those of the
holders of the Debentures. In addition, the equity investors may have an
interest in pursuing acquisitions, divestitures, financings or other
transactions that, in their judgment, could enhance their equity investment,
even though such transactions might adversely affect the ability of the Company
to pay principal and interest on the Debentures.
COMPETITION
In addition to competitors in the electronic shopping industry, HSN
must compete with store and catalog retailers, many of whom have substantially
greater financial and marketing resources. The Company's business, financial
condition and operations can be adversely affected by changes in the general
retailing industry.
HSN also competes for distribution of its programming with other cable
programmers, many of whom have substantially greater financial and marketing
resources than the Company. While the Company believes that it has been
successful in obtaining carriage of its programming on reasonable terms to
date, there can be no assurance that it will continue to do so.
DEPENDENCE ON TECHNOLOGY
The Company is dependent upon the successful operation and maintenance
of its technological infrastructure, including its satellite up-links,
computerized order processing and fulfillment, and automated voice response
systems. While the Company has not experienced any material disruption of these
operations in the past, its business and operations could be adversely affected
by extended failure of any of these systems.
ABSENCE OF AN ESTABLISHED MARKET; RESTRICTIONS ON TRANSFER
The Debentures are not listed for trading on any national securities
exchange or authorized for listing on any automated inter-dealer quotation
system; however, the Shares of Common Stock into which they are convertible will
be listed on the New York Stock Exchange. There is no assurance that an active
trading market for the Debentures will develop or, if one develops, that it will
be maintained or that the Common Stock will continue to be listed on the New
York Stock Exchange or be actively traded.
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<PAGE> 14
RATIO OF EARNINGS TO FIXED CHARGES
The Company's ratio of earnings to fixed charges for each of the
periods indicated is as follows:
<TABLE>
<CAPTION>
Six Months Ended Years Ended Four Months Ended Years Ended
June 30, December 31, December 31, August 31,
-------- ----------------------------- ----------------- ------------------
1996 1995 1994 1993 1992 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
2.34 --(1) 4.01 --(1) 2.30 3.22 1.21
</TABLE>
(1) Ratio is less than zero.
The ratio of earnings to fixed charges is computed by dividing (i)
earnings from continuing operations before income taxes, minority interest and
extraordinary items plus fixed charges by (ii) fixed charges. Fixed charges
consist of interest expense, amortization of financing costs and the estimated
interest component of rent expense.
USE OF PROCEEDS
The Company will not receive any of the proceeds from any resales of
the Debentures or the Shares by the Selling Securityholders pursuant to this
Prospectus. See "Selling Securityholders" for a list of those persons and
entities receiving the proceeds from the sales of the Debentures or the Shares.
CERTAIN RELATIONSHIPS INVOLVING DILLER, LIBERTY AND SILVER KING
MR. DILLER AND LIBERTY
Mr. Diller, the Chairman of the Board and Chief Executive Officer of
Silver King, is Chairman of the Board of the Company. TCI, through Liberty,
currently beneficially owns the TCI Company Shares. Liberty and Mr. Diller
have formed BDTV, which, upon exercise of the Liberty Option, will become the
owner of shares representing a majority of the voting power of the outstanding
equity securities of Silver King. Liberty and Mr. Diller have agreed that Mr.
Diller will own all of the voting stock of BDTV and, therefore, following
exercise of the Liberty Option, will be the controlling stockholder of Silver
King. Liberty, Mr. Diller and Silver King and certain of their respective
affiliates have also entered into certain agreements providing for the transfer
of the TCI Company Shares to Silver King, subject to certain conditions, in
exchange for the issuance of the Silver King Exchange Securities to BDTV. See
"Risk Factors -- Anticipated Change in Control."
In May 1996, Mr. Diller owned 100,000 shares of Common Stock. Mr.
Diller also had been granted options to acquire an additional 13,400,000 shares
of Common Stock (of which amount options with respect to 100,000 shares had
been returned to the Company), which options were granted in connection with
his appointment as Chairman of the Board of the Company and have an exercise
price of $8.50 per share, none of which options is currently vested or
exercisable or becomes vested or exercisable in the next 60 days.
In May 1996, Mr. Diller's ownership of Silver King securities
consisted of 441,988 shares of Silver King Common Stock. In addition, in
August 1995 Mr. Diller was granted options to purchase 1,895,847 shares of
Silver King Common Stock at an exercise price of $22.625 per share, subject to
certain vesting provisions. In November 1995, Mr. Diller was granted options
to purchase an additional 625,000 shares of Silver King Common Stock (the
"Additional Options") at an exercise price of $30.75 per share, which
Additional Options were granted to Mr. Diller subject to approval by the Silver
King stockholders of the Silver King 1995 Stock Incentive Plan and contingent
on the consummation of the Savoy Merger (as defined below) and the Merger and
Exchange. Such plan is anticipated
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<PAGE> 15
to be presented to the Silver King stockholders for their approval at the next
annual meeting of the stockholders of Silver King. In the event that only one
of the Savoy Merger or the Merger and Exchange is consummated (and assuming
Silver King stockholder approval of the Silver King 1995 Stock Incentive Plan),
Mr. Diller will receive options to purchase 221,625 or 403,375 shares,
respectively, of Silver King Common Stock. In the event that neither
transaction is consummated (or Silver King stockholder approval for the Silver
King 1995 Stock Incentive Plan is not obtained), all such Additional Options
will be canceled.
In connection with the acquisition by Silver King of the TCI Company
Shares, Liberty and Silver King requested that the Board of Directors of the
Company consider and approve for purposes of Section 203 of the Delaware
General Corporation Law ("Section 203"), the Merger and Exchange. Prior to
there being any agreement, arrangement or understanding relating to the Merger
and Exchange, the Company's Board of Directors, upon the recommendation of a
Special Committee of independent directors of the Company, approved the
transactions, thereby exempting Silver King, BDTV, Mr. Diller and, in certain
circumstances, Liberty from the restrictions on "business combinations" between
an "interested stockholder" (as each such term is defined in Section 203) and
the Company contained in Section 203.
Following the exercise of the Liberty Option by BDTV, the consummation
of Silver King's acquisition of the TCI Company Shares and assuming the
consummation of certain transactions pursuant to the agreements between Mr.
Diller and Liberty but without giving effect to (i) Silver King's proposed
merger with Savoy Pictures Entertainment, Inc. (the "Savoy Merger") (in which
approximately 6,000,000 shares of Silver King Common Stock would be issued) or
(ii) the exercise of options to acquire Silver King Common Stock that have been
granted to Mr. Diller, it is currently expected that Liberty, Mr. Diller and
their respective affiliates (including BDTV) will collectively beneficially own
5,359,054 shares of Silver King Common Stock and 8,082,000 shares of Silver
King Class B Stock, which shares constitute approximately 66% of the
outstanding equity securities of Silver King. Such Silver King securities
would, by virtue of the fact that the shares of Silver King Class B Stock are
entitled to ten votes per share while the Silver King Common Stock is entitled
to one vote per share, represent approximately 89% of the voting power of the
outstanding equity securities of Silver King.
By virtue of its acquisition of the TCI Company Shares, Silver King
would beneficially own shares of Common Stock and Class B Common Stock
representing approximately 41% of the outstanding equity securities of the
Company, which shares would represent approximately 80% of the voting power of
the outstanding equity securities of the Company. Because there are currently
fewer than 22,800,000 shares of Class B Common Stock outstanding, pursuant to
the Company's Amended and Restated Certificate of Incorporation, the holders of
the Class B Common Stock generally will vote together as a class with the
holders of the Common Stock with respect to all matters presented to the
stockholders of the Company. As a result, Silver King would have the power to
elect a majority of the members of the board of directors of the Company and to
determine the outcome of the vote with respect to substantially all matters
presented to a vote of the stockholders of the Company or by which such
stockholders act by written consent. So long as Mr. Diller is entitled to vote
the shares of Silver King stock held by BDTV, under the terms of the
Stockholders Agreement Mr. Diller will have indirect voting control of the
Company by virtue of his voting control of Silver King (based upon the
anticipated equity capital structure of each of Silver King and the Company
upon the consummation of the foregoing transactions and certain other
transactions pursuant to the Stockholders Agreement.)
BUSINESS AGREEMENTS BETWEEN THE COMPANY AND SILVER KING.
Silver King owns and operates twelve full power UHF broadcast
television stations, including one television satellite station (the "Silver
King Stations") through its subsidiaries. The Silver King Stations are located
in many of the top markets in the United States and exclusively broadcast HSC
programming, except for a portion of broadcast time which is used to provide
public affairs and other non-entertainment programming and advertising inserts.
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<PAGE> 16
Each Silver King Station, through the applicable Silver King
subsidiary, has entered into an affiliation agreement with HSC, each dated
December 28, 1992 (an "Affiliation Agreement"), pursuant to which (as
subsequently amended) each Silver King Station currently broadcasts HSC's
electronic retail sales programming for 159 hours per week. Each Affiliation
Agreement has an initial term of five years, renewable at Silver King's option
for an additional five- year term unless the applicable Silver King subsidiary
provides notice of termination on or before December 28, 1996 (as previously
extended by the parties). If renewed for the initial renewal term, each
Affiliation Agreement is renewable thereafter for one additional term for up to
five years at Silver King's sole option. Thereafter, each Affiliation
Agreement shall automatically renew for successive five-year terms unless and
until either party provides the other party with written notice at least 18
months prior to the expiration date that it will not accept further renewal.
Under each Affiliation Agreement, if HSC misses two or more affiliation
payments to a Silver King Station during any five-year period, such Silver King
Station has the right to terminate the Affiliation Agreement, and must inform
HSC of its intention to cease carrying HSC programming 18 months after the
second missed payment. Similarly, if HSC's programming is changed
significantly, each Silver King Station has the right to terminate the
Affiliation Agreement and to cease carrying HSC programming upon 18-months'
prior written notice.
Each Silver King Station is compensated in accordance with the hourly
affiliation rate applicable to such Silver King Station. The Affiliation
Agreements provide for additional compensation to the Silver King Stations if a
Silver King Station's compensation amount, which is based upon a formula
involving HSC's net sales credited to such Silver King Station, exceeds the
minimum affiliation fee based upon that Silver King Station's hourly
affiliation rate. This determination is made on an annual basis within 30 days
of each anniversary of the Affiliation Agreements. On July 28, 1994, each of
the Affiliation Agreements was amended to clarify this compensation bonus
consistent with the intent of the parties.
Silver King has informed the Company that it has not made any decision
regarding whether it will renew any or all of the Affiliation Agreements.
After evaluating the needs and costs of additional program carriage, the
Company believes that the orderly termination of the Affiliation Agreements may
be in the Company's best interests because of the potential cost savings and
the existing cable carriage of HSC programming in many of the Silver King
markets. As a result, the Company and Silver King are discussing the process
for an orderly termination of such Affiliation Agreements in the event that the
agreements are not renewed and the Company has initiated preliminary
discussions in a number of markets for the purpose of securing alternative
carriage of its programming. There can be no assurance that Silver King will
in fact terminate any or all of the Affiliation Agreements or that, if so
terminated, the Company will be able to find other means of distributing its
programming to the households in the broadcast areas currently served by Silver
King Stations at a reasonable cost.
Silver King also owns 25 low power television ("LPTV") stations (the
"Silver King LPTV Stations") that also broadcast HSC's programming services.
LPTV stations have lower power transmitters than conventional television
stations, and therefore, the broadcast signal of an LPTV station does not cover
as broad a geographical area as conventional broadcast stations.
HSC and Silver King have negotiated an affiliation agreement for the
carriage of HSC programming which covers all of the Silver King LPTV Stations.
Such agreement, which became effective on May 1, 1996, has a four year term and
provides for fixed monthly payments by HSC to Silver King aggregating to
approximately $550,000 per annum. However, the compensation of Silver King for
the carriage of HSC programming by Silver King LPTV Station W60AI, New York, New
York, which is licensed to the same Silver King subsidiary that holds the
licenses for full-power television stations WHSE-TV, Newark, New Jersey, and
WHSI-TV, Smithtown, New York, is covered by the Affiliation Agreement for the
latter Silver King Stations.
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<PAGE> 17
In 1995, expenses under Affiliation Agreements with the Silver King
Stations and Silver King LPTV Stations were approximately $41.3 million.
For information regarding the possible non-renewal of the Affiliation
Agreements with Silver King, see "Risk- Factors--Affiliation Agreements with
Silver King".
SELLING SECURITYHOLDERS
The Debentures were initially issued and sold to Selling
Securityholders on March 1, 1996, through Allen & Company Incorporated, the
Company's exclusive placement agent for the purpose of placing the Debentures
(the "Placement Agent"). The Selling Securityholders acquired the Debentures
in transactions complying with Rule 144A, Regulation D or Regulation S under
the Securities Act. The Company agreed to indemnify and hold the Placement
Agent harmless against certain liabilities under the Securities Act that would
arise in connection with the sale of the Debentures.
The term Selling Securityholders includes the beneficial owners of the
Securities listed below and their transferees, pledgees, donees or other
successors. Other than as a result of the ownership of Securities indicated
below, unless otherwise indicated, none of the Selling Securityholders has had
any material relationship with the Company or any of its affiliates within the
past three years, except that Allen & Company Incorporated served as placement
agent in connection with the initial issuance of the Debentures for which it
received customary compensation.
Prior to the effectiveness of the Registration Statement, the Company
will amend the Registration Statement to incorporate the required information
regarding the beneficial owners of the Securities.
In view of the fact that Selling Securityholders may offer all or a
portion of the Debentures or Shares of Common Stock held by them pursuant to
the offering contemplated by this Prospectus, and because this offering is not
being underwritten on a firm commitment basis, no estimate can be given as to
the amount of Debentures or the number of Shares of Common Stock that will be
held by the Selling Securityholders after completion of the offering made
hereby.
Information concerning the Selling Securityholders may change from
time to time and any such changed information will be set forth in supplements
to this Prospectus if and when necessary. In addition, the per share
conversion price, and therefore, the number of Shares of Common Stock issuable
upon conversion of the Debentures, is subject to adjustment under certain
circumstances. Accordingly, the aggregate principal amount of Debentures and
the number of Shares of Common Stock issuable upon conversion thereof offered
by a Selling Securityholder hereby may increase or decrease. As of the date of
this Prospectus, the aggregate principal amount of Debentures outstanding is
$100,000,000.
DESCRIPTION OF DEBENTURES
The Debentures have been issued under an Indenture, dated as of March
1, 1996 (the "Indenture"), between the Company and United States Trust Company
of New York, as trustee (the "Trustee"). A copy of the form of Indenture is
available from the Company upon request. The following summaries of certain of
the provisions of the Debentures and the Indenture do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all the provisions of the Debentures and the Indenture, including the
definitions therein of certain terms which are not otherwise defined in this
Prospectus. Wherever particular provisions or defined terms of the Indenture
are referred to, such provisions or defined terms are incorporated herein by
reference.
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GENERAL
The Debentures represent general unsecured obligations of the Company
senior or pari passu in right of payment to all other unsecured obligations of
the Company but subordinated to all existing and future Senior Debt of the
Company (as described below under the caption "Ranking") and are convertible
into Shares (as described below under the caption "Conversion of Debentures").
The Debentures are limited to $100,000,000 aggregate principal amount, are
issued in fully registered form, without coupons, in minimum denominations of
$1,000 or any integral multiple in excess thereof (upon the effectiveness of
the Registration Statement) and will mature on March 1, 2006, unless otherwise
earlier converted into Shares by the holder or redeemed at the option of the
Company in the manner set forth below or repurchased by the Company (including
at the option of the holder upon a Change of Control). The Debentures are not
issuable in bearer form.
The Debentures bear interest from March 1, 1996 at 5 7/8% payable
semi-annually on March 1 and September 1, commencing on September 1, 1996, and
are payable to holders of record at the close of business on the preceding
February 15 and August 15, as the case may be. Interest is computed on the
basis of a 360-day year composed of twelve 30-day months.
Unless other arrangements are made, interest is paid by check mailed
to holders entitled thereto. Principal is payable, and the Debentures may be
presented for conversion, registration of transfer and exchange, without
service charge at the office of, the Trustee in New York, New York. Reference
is made to the information set forth below under the caption "Form,
Denomination and Registration" for information with respect to Debentures held
by QIBs.
The Debentures and the Indenture do not contain any financial
covenants or any restrictions on the payment of dividends, the repurchase of
securities of the Company or the incurrence of debt by the Company or any of
its subsidiaries.
The Indenture and Debentures are governed by and construed under the
laws of the state of New York.
FORM, DENOMINATION, AND REGISTRATION
Debentures previously offered in reliance on Rule 144A to QIBs or
Regulation S under the Securities Act are represented by a single, permanent
global Debenture in definitive, fully registered form without interest coupons
(the "Global Debenture") which has been deposited with, or on behalf of, The
Depository Trust Company ("DTC") and registered in the name of a nominee of
DTC. Except as set forth below, the Global Debenture may be transferred, in
whole and not in part, only to another nominee of DTC or to a successor of DTC
or its nominee.
Except in the limited circumstances described below under "Global
Debenture," owners of beneficial interests in the Global Debenture will not be
entitled to receive physical delivery of Certificated Debentures (as defined
below).
GLOBAL DEBENTURE
Upon the initial issuance of the Global Debenture, DTC or its
custodian credited, on its internal system, the respective principal amounts of
the individual beneficial interests represented by such Global Debenture to the
accounts of persons who had accounts with DTC. Such accounts initially were
designated by or on behalf of the purchasers of the Debentures (the
"Purchasers"). Ownership of beneficial interests in a Global Debenture is
limited to persons who have accounts with DTC ("Participants") or persons who
hold interests through Participants. Ownership of beneficial interests in the
Global Debenture are shown on records maintained by DTC or its nominee (with
respect to interests of Participants) and the records of Participants (with
respect to interests of persons other than Participants).
16
<PAGE> 19
QIBs may hold their interests in the Global Debenture directly through
DTC, Centrale de Livraison de Valeurs Mobilibras S.A. ("CEDEL") or Morgan
Guaranty Trust Company of New York, Brussels office, as operator of the
Euroclear System ("Euroclear"), if they are participants in such systems, or
indirectly through organizations that are participants in such systems. CEDEL
and Euroclear hold interests in the Global Debenture on behalf of their
participants through their respective depositaries, which in turn hold such
interests in the Global Debenture in customers' securities accounts in the
depositaries' names on the books of DTC.
So long as DTC, or its nominee, is the registered owner or holder of
the Global Debenture, DTC or such nominee, as the case may be, is considered
the sole owner or holder of the Debentures represented by the Global Debenture
for all purposes under the Indenture and the Debentures. Except as described
below, unless DTC notifies the Company that it is unwilling or unable to
continue as depositary for the Global Debenture or ceases to be a "Clearing
Agency" registered under the Exchange Act, or an Event of Default has occurred
and is continuing with respect to the Debentures, owners of beneficial
interests in the Global Debenture are not entitled to have any portion of the
Global Debenture registered in their names, will not receive or be entitled to
receive physical delivery of Debentures in certificated form and are not
considered to be the owners or holders of any Debentures under the Indenture or
the Debentures. In addition, no beneficial owner of an interest in the Global
Debenture may transfer that interest except in accordance with DTC's applicable
procedures, in addition to those provided for under the Indenture and, if
applicable, those of Euroclear and CEDEL.
Debentures originally purchased by or transferred to Accredited
Investors who were not QIBs (referred to herein as the "Non-Global Purchasers")
have been issued in registered form without coupons (the "Certificated
Debentures"). Upon the transfer of Certificated Debentures initially issued to
a Non-Global Purchaser, to a QIB, or in accordance with Regulation S, such
Certificated Debentures will, unless the Global Debenture has previously been
exchanged in whole for Certificated Debentures, be exchanged for an interest in
the Global Debenture.
Payment of the principal of, and interest on, the Global Debenture is
made to DTC or its nominee, as the case may be, as the registered owner
thereof. Neither the Company, the Trustee nor any paying agent has any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global
Debenture or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Company expects DTC or its nominee, upon receipt of any payment in
respect of a Global Debenture, to credit Participants' accounts with payments
in amounts proportionate to their respective beneficial interests in the
principal amount of such Global Debenture as shown on the records of DTC or its
nominee. The Company also expects that payments by participants to owners of
beneficial interests in such Global Debenture held through such Participants
are governed by standing instructions and customary practices, as is now the
case with securities held for the accounts of customers registered in the names
of nominees for such customers. Such payments are the responsibility of such
Participants.
Transfers between Participants in DTC are effected in the ordinary way
in accordance with DTC rules and are settled in same-day funds. The laws of
some states require that certain persons take physical delivery of securities
in definitive form. Consequently, the ability to transfer beneficial interests
in the Global Debenture to such persons may be limited. Because DTC only acts
on behalf of Participants, who in turn act on behalf of Indirect Participants
(as defined below) and certain banks, the ability of a person having a
beneficial interest in the Global Debenture to pledge such interest to persons
or entities that do not participate in the DTC system, or otherwise take
actions in respect of such interest, may be affected by the lack of a physical
certificate representing such interest. Transfers between participants in
Euroclear and CEDEL are effected in the ordinary way in accordance with their
respective rules and operating procedures.
Cross-market transfers between DTC, on the one hand, and directly or
indirectly through Euroclear or CEDEL participants, on the other, are effected
in DTC in accordance with DTC rules on behalf of Euroclear or
17
<PAGE> 20
CEDEL, as the case may be, by its respective depositary; however, such
cross-market transactions require delivery of instructions to Euroclear or
CEDEL, as the case may be, by the counterparty in such system in accordance
with its rules and procedures and within its established deadlines (Brussels
time). Euroclear or CEDEL, as the case may be, delivers, if the transaction
meets its settlement requirements, instructions to its respective depositary to
take action to effect final settlement on its behalf by delivering or receiving
interests in the Global Debenture in DTC, and making or receiving payment in
accordance with normal procedures for New York Clearing House funds settlement
applicable to DTC. CEDEL participants and Euroclear participants may not
deliver instructions directly to the depositaries for CEDEL or Euroclear.
DTC has advised the Company that it will take any action permitted to
be taken by a holder of Debentures (including the presentation of Debentures
for exchange as described below) only at the direction of one or more
Participants to whose account interests in the Global Debenture are credited
and only in respect of such portion of the aggregate principal amount of the
Debentures as to which such Participant or Participants has or have given such
direction. However, if there is an Event of Default under the Debentures, DTC
will exchange the Global Debenture for Certificated Debentures in definitive
form, which it will distribute to its Participants and which will be legended.
DTC has advised the Company as follows: DTC is a limited purpose
trust company organized under the laws of the New York Banking Law, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC holds securities that its
Participants deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic book-entry changes in Participants'
accounts, thereby eliminating the need for physical movement of certificates.
Participants include securities brokers and dealers, banks, trust companies and
clearing corporations and certain other organizations. Access to the DTC
system also is available to others such as securities brokers and dealers,
banks and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants are on file
with the SEC.
Although DTC, CEDEL and Euroclear have agreed to the foregoing
procedures to facilitate transfers of interests in the Global Debenture among
participants of DTC, CEDEL and Euroclear, they are under no obligation to
perform or continue to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee has any
responsibility for the performance by DTC, CEDEL or Euroclear or their
respective Participants or Indirect Participants of their respective
obligations under the rules and procedures governing their operations.
CERTIFICATED DEBENTURES
If any depositary is at any time unwilling or unable to continue as a
depositary for the reasons set forth under "Global Debenture" and a successor
depositary is not appointed by the Company within 90 days, the Company will
issue certificates for the Debentures in definitive registered form in exchange
for the Global Debenture. The holder of a certificate representing a
registered individual Debenture may transfer such Debenture by surrendering it
at the office or agency maintained by the Company for such purpose in the
Borough of Manhattan, the City of New York, which initially will be the office
of the Trustee, or at the office of any paying agent.
CONVERSION OF DEBENTURES
The holders of Debentures are entitled at any time through the close
of business on March 1, 2006, subject to prior redemption or repurchase by the
Company, to convert any Debentures or portions thereof (in any integral
multiple of $1,000) into Shares at $12.00 per share, subject to adjustment as
described below. The right to convert Debentures called for redemption will
expire at the close of business on the business day fixed for redemption
18
<PAGE> 21
unless the Company defaults in making the payments due upon redemption. A
Debenture (or portion thereof) in respect of which a holder is exercising its
option to require repurchase by the Company upon a Change of Control may be
converted only if such holder timely withdraws its election to exercise such
option in accordance with the terms of the Indenture. Except as described
below, no adjustment will be made upon conversion of any Debentures for
interest accrued thereon or for dividends on any Shares issued. If Debentures
not called for redemption are converted after a record date for the payment of
interest and prior to the next succeeding interest payment date, upon such
conversion, such Debentures must be accompanied by the payment of funds equal
to the interest payable on such succeeding interest payment date on the
principal amount so converted. The Company is not required to issue fractional
shares of Common Stock upon conversion of Debentures and, in lieu thereof, will
pay a cash adjustment based upon the market price of the Common Stock on the
last business day prior to the date of conversion.
The conversion price is subject to adjustment (under formulae set
forth in the Indenture) upon the occurrence of certain events, including: (i)
the issuance of Common Stock as a dividend or distribution on Common Stock;
(ii) the issuance to all holders of Common Stock of certain rights or warrants
to purchase Common Stock at a price less than the then current market price (as
defined in the Indenture); (iii) certain subdivisions, combinations and
reclassifications of Common Stock; and (iv) distributions to all holders of
Common Stock of capital stock of the Company (other than Common Stock) or
evidences of indebtedness of the Company or assets (including securities, but
excluding those dividends, rights, warrants and distributions referred to above
and dividends and distributions in connection with the liquidation, dissolution
or winding up of the Company and dividends and distributions paid exclusively
in cash). No adjustment of the conversion price will be made for shares issued
pursuant to a plan for reinvestment of dividends or interest. In addition to
the foregoing adjustments, the Company will be permitted to make such
reductions in the conversion price as it considers advisable in order that any
event treated for federal income tax purposes as a dividend of stock or stock
rights will not be taxable to the holders of the Common Stock.
Except as stated above, the conversion price will not be adjusted for
the issuance of Common Stock or any securities convertible into or exchangeable
for Common Stock or carrying the right to purchase any of the foregoing. No
adjustment in the conversion price will be required unless such adjustment
would require a change of at least 1% in the conversion price then in effect;
provided, that any adjustment that would otherwise be required to be made shall
be carried forward and taken into account in any subsequent adjustment.
In the case of (i) any reclassification or change of the Common Stock
(other than changes in par value or from par value to no par value or resulting
from a subdivision or a combination) or (ii) a consolidation or merger
involving the Company or a sale or conveyance of all or substantially all of
the property and assets of the Company, in each case as a result of which
holders of Common Stock shall be entitled to receive stock, other securities,
other property or assets (including cash) with respect to or in exchange for
such Common Stock, each holder of Debentures then outstanding will be entitled
thereafter to convert such Debentures into the kind and amount of shares of
stock, other securities or other property or assets which they would have owned
or been entitled to receive upon such reclassification, change, consolidation,
merger, sale or conveyance had such Debentures been converted into Common Stock
immediately prior to the applicable record date (or other comparable date) for
such reclassification, change, consolidation, merger, sale or conveyance
assuming such holder of Debentures did not exercise any rights of election as
to the stock, other securities or other property or assets receivable in
connection therewith.
In the event of a taxable distribution to holders of Common Stock (or
other transaction) which results in any adjustment of the conversion price, the
holders of Debentures may, in certain circumstances, be deemed to have received
a distribution subject to the United States income tax as a dividend; in
certain other circumstances, the absence of such an adjustment to the
conversion price of the Debentures may result in a taxable dividend to the
holders of Common Stock.
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<PAGE> 22
The Company from time to time may to the extent permitted by law
reduce the conversion price by any amount for any period of at least 20 days,
in which case the Company shall give at least 15 days' notice of such decrease,
if the Board of Directors has made a determination that such decrease would be
in the best interests of the Company, which determination shall be conclusive.
OPTIONAL REDEMPTION BY THE COMPANY
The Debentures are not redeemable at the option of the Company prior
to March 1, 1998. Thereafter, the Debentures are redeemable at the Company's
option on at least 30 but not more than 60 days' notice, in whole or in part,
at any time and from time to time, at the following prices (expressed in
percentages of the principal amount) together with accrued interest to the date
fixed for redemption, subject to certain conditions discussed below; provided,
that until March 1, 1999, the Debentures may not be redeemed at the option of
the Company unless the closing price of the Common Stock equals or exceeds 140%
of the then effective conversion price per share for at least 20 out of 30
consecutive trading days ending within 20 calendar days before the notice of
redemption is mailed.
If redeemed during the 12-month period beginning:
<TABLE>
<CAPTION>
DATE PERCENTAGE
---- ----------
<S> <C>
March 1, 1998 104.700%
March 1, 1999 104.113%
March 1, 2000 103.525%
March 1, 2001 102.938%
March 1, 2002 102.350%
March 1, 2003 101.763%
March 1, 2004 101.175%
March 1, 2005 100.588%
</TABLE>
and 100% at and after March 1, 2006.
If fewer than all the Debentures are to be redeemed, the Trustee will
select the Debentures to be redeemed in principal amounts of $1,000 or integral
multiples thereof by lot or, in its discretion, on a pro rata basis. If any
Debenture is to be redeemed in part only, a new Debenture or Debentures in
principal amount equal to the unredeemed principal portion thereof will be
issued. If a portion of a holder's Debenture is selected for partial
redemption and thereafter (but prior to the applicable redemption date) such
holder converts a portion of such Debenture, such converted portion shall be
deemed to be taken from the portion selected for redemption. No sinking fund
is provided for the Debentures.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of the
Debentures shall have the right, subject to certain conditions and
restrictions, to require that the Company repurchase such holder's Debentures
in whole or in part in integral multiples of $1,000, at a purchase price in
cash in an amount equal to 100% of the principal amount thereof, together with
accrued and unpaid interest to the date of purchase, pursuant to an offer (the
"Change of Control Offer") made in accordance with the procedures described
below and the other provisions in the Indenture. Neither the consummation of
Silver King's acquisition of the TCI Company Shares, nor the failure of such
acquisition to be consummated and TCI's continued ownership of the TCI Company
Shares, would constitute a Change of Control for purposes of the Indenture.
20
<PAGE> 23
A "Change of Control" means an event or series of events as a result
of which (i) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act) (other than TCI, Liberty, Mr. Diller, BDTV,
Silver King and their respective controlled affiliates (as defined in the
Indenture) and certain entities formed as a result of certain corporate
restructurings or spinoffs (as specified in the Indenture), or any successor of
any of the foregoing) acquires "beneficial ownership" (as determined in
accordance with Rule 13d-3 under the Exchange Act), directly or indirectly, of
more than 50% of the total voting power of the Voting Stock (as defined below)
of the Company; provided, however, that any such person or group shall not be
deemed to be the beneficial owner of, or to beneficially own, any Voting Stock
tendered in a tender or exchange offer until such Voting Stock is accepted for
purchase or exchange under such tender or exchange offer, or (ii) the Common
Stock (or other equity securities into which the Debentures are then
convertible or into which the Common Stock shall have been reclassified or
changed) is neither listed for trading on a United States national securities
exchange nor approved for trading on an established over-the-counter trading
market in the United States; provided, that no such Change of Control shall be
deemed to occur as a result of any such event or series of events described in
clause (i) above to the extent that (x) the closing price of the Common Stock
(or other equity securities into which the Debentures are then convertible or
into which the Common Stock of the Company shall have been reclassified or
changed) for any five trading days during the ten trading days immediately
preceding the event or series of events that would otherwise constitute a
Change of Control is at least equal to 105% of the conversion price in effect
on the last such trading day and, at least 15 business days prior to the
consummation of the Change of Control, holders of the Debentures have been
given notice of the occurrence of such event or events (as specified in the
Indenture), or (y) such Change of Control results from a transaction or series
of transactions (including any tender or exchange offer subject to the
provisions of the Exchange Act, whether by the issuer or otherwise) available
to the holders of the Voting Stock in general (including holders of Debentures
who would be entitled to tender or otherwise participate therein upon the
conversion thereof) in which the weighted average price paid by such person or
group to acquire such Voting Stock in such transaction or series of
transactions exceeds the then applicable conversion price of the Debentures.
"Voting Stock" means the Common Stock and the Class B Common Stock and any
other capital stock of the Company the holders of which are entitled to vote
generally upon all matters which may be submitted to a vote of stockholders at
any annual or special meeting.
Within 15 business days following any Change of Control, the Company
shall send by first-class mail, postage prepaid, to the Trustee and to each
holder of Debentures, at such holder's address appearing in the security
register, a notice stating, among other things, that a Change of Control has
occurred, the purchase price, the purchase date, which shall be a business day
no earlier than 15 business days nor later than 30 business days from the date
such notice is mailed, and certain other procedures that a holder of the
Debentures must follow to accept a Change of Control Offer or to withdraw such
acceptance. The Company will comply, to the extent applicable, with the
requirements of Rule 13e-4 under the Exchange Act and other securities laws or
regulations in connection with the repurchase of the Debentures as described
above.
Any event constituting a Change of Control of the Company under the
Indenture might also result in an event of default under the change in control
provisions of the Replacement Facility. In addition, the terms of the
Replacement Facility prohibit any repurchase of the Debentures by the Company,
whether or not following the occurrence of a Change in Control of the Company.
The occurrence of such an event of default could restrict the ability of the
Company to comply with its obligation to consummate the Change of Control
Offer. See "Ranking." In addition, future Indebtedness of the Company may
contain prohibitions of certain events which would constitute a Change of
Control or require the Company to offer to redeem such Indebtedness upon a
Change of Control. Moreover, the exercise by the holders of the Debentures of
their right to require the Company to purchase the Debentures could cause a
default under such Indebtedness, even if the event or events constituting such
Change of Control itself does not, due to the financial effect of such purchase
on the Company. Finally, the Company's ability to pay cash to holders of the
Debentures upon a purchase may be limited by the Company's then existing
financial resources and any restrictions or limitations contained in the
instruments representing any Indebtedness of the Company at such time. There
can be no assurance that sufficient funds will be available when necessary to
make any required purchases. The Change of Control provisions may in certain
circumstances make more difficult or
21
<PAGE> 24
discourage a takeover of the Company and the removal of the incumbent
management. In addition, at the request of the lenders under the Prior Credit
Facility, the Indenture provides that for so long as any Designated Senior Debt
(as defined in the Indenture to include Indebtedness under the Replacement
Facility) remains outstanding the Company will not commence a Change in Control
Offer until April 15, 1997 in the event of a Change in Control described in
clause (ii) of the definition of such term that occurs prior to April 15, 1997
(which event does not otherwise constitute a Change in Control).
RANKING
The indebtedness evidenced by the Debentures is an unsecured
obligation of the Company, and the payment of the principal of, premium, if
any, and interest on the Debentures, is subordinated in right of payment, to
the extent set forth in the Indenture, to the prior payment in full of all
present and future Senior Debt of the Company. The Indenture provides that in
the event of any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, upon any dissolution or
winding up or total or partial liquidation or reorganization of the Company,
whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or
other proceedings, all amounts payable under the Senior Debt shall first be
paid in full in cash, before the holders of the Debentures shall be entitled to
demand or receive any payment of principal of or interest on or other sums
payable (including premium (if any), damages or other liabilities) in respect
of the Debentures. The Indenture further provides that no direct or indirect
payment by or on behalf of the Company of principal of or interest on the
Debentures, whether pursuant to the terms of the Debentures or upon
acceleration or acquisition, repurchase, redemption or other retirement of any
Debenture, or otherwise, shall be made if, at the time of such payment, there
exists a default in the payment when due through maturity, acceleration or
otherwise, of principal of or interest on any Senior Debt and such default
shall not have been cured or waived, unless the benefits of this sentence are
waived by or on behalf of the holders of the Senior Debt. In addition, during
the continuance of any other event of default under such Senior Debt (a
"Non-Payment Default") that would give rise to a right to accelerate the Senior
Debt, upon receipt of written notice to such effect, or if such event of
default results from the acceleration of the Debentures, from the date of such
acceleration, no payment may be made by the Company upon or in respect of the
Debentures for a period (the "Payment Blockage Period") commencing on the
earlier of the date of receipt of such notice or the date of such acceleration,
as the case may be, and ending 180 days thereafter (unless such Payment
Blockage Period shall be terminated by written notice to such effect from the
representative of the holders of the Senior Debt).
The Indenture also provides that at any time when there is outstanding
any Senior Debt, in the event of any event of default on the Senior Debt, the
holders of the Debentures, for a period of 180 days (the "Standstill Period")
commencing on the date of occurrence of such event of default (or such shorter
period as is applicable if such event of default is cured or waived or ceases
to exist), shall not be permitted or otherwise entitled to: (i) accelerate the
maturity of the principal of and accrued interest on, or other amount owing
under the Debentures, unless the Senior Debt shall have been accelerated, (ii)
commence any judicial action or proceeding to collect the payment of principal
of or interest on or other amount owing under the Debentures, unless any
holders of the Senior Debt shall have commenced a judicial action or
proceedings to collect payment of the principal of or interest on any Senior
Debt, or (iii) commence an involuntary case or proceeding in bankruptcy against
the Company, unless any holders of the Senior Debt shall have commenced such a
case or proceeding.
"Senior Debt" is defined as the principal of, premium, if any, and
interest (including interest which accrues after a petition in bankruptcy is
filed by or against the Company) on and other amounts due on or in connection
with any Indebtedness of the Company, whether outstanding on the date of the
Indenture or thereafter created, incurred, assumed, guaranteed or in effect
guaranteed by the Company (including all deferrals, renewals, extensions or
refundings of, or amendments, modifications or supplements to the foregoing);
provided, however, that Senior Debt does not include (i) any particular
Indebtedness in which the instrument creating or evidencing the same or the
assumption or guarantee thereof expressly provides that such Indebtedness shall
not be senior in right of payment to, or is pari passu with, or is subordinated
or junior to, the Debentures or (ii) the Debentures. "Indebtedness" means,
22
<PAGE> 25
with respect to any person, (i) any obligation, contingent or otherwise, of
such person (a) for borrowed money (whether or not the recourse of the lender
is to the whole of the assets of such Person or only to a portion thereof), (b)
evidenced by a note, debenture or similar instrument (including a purchase
money obligation), (c) for the payment of any money under a lease required to
be a capitalized on the balance sheet of the lessee under generally accepted
accounting principles, (d) in respect of letters of credit (including
reimbursement obligations with respect thereto) or (e) to pay the deferred
purchase price of property or services; (ii) any obligation of others which the
person has directly or indirectly guaranteed (including any monetary obligation
of a keep-well or similar nature); (iii) any obligation secured by a mortgage,
pledge, lien, encumbrance, charge or adverse claim affecting title or resulting
in an encumbrance to which the property or assets of such person are subject,
whether or not the obligations secured thereby shall have been assumed by or
shall otherwise be such person's legal liability; (iv) to the extent not
otherwise included, obligations under currency swap agreements and interest
rate protection agreements or similar agreements; and (v) any and all
deferrals, renewals, extensions and refundings of, or amendments, modifications
or supplements to, any liability of the kind described in any of the preceding
clauses (i), (ii), (iii) or (iv); provided, that Indebtedness shall not include
accounts payable or any other indebtedness to trade creditors created or
assumed by the Company in the ordinary course of business.
As of June 30, 1996, the Company had approximately $21.7 million of
Senior Debt. In addition, the Debentures were structurally subordinated to the
liabilities of the subsidiaries of the Company, which constituted most of the
approximately $151 million in other consolidated liabilities of the Company as
of such date. Senior Debt also includes any outstanding amounts under an
additional uncommitted unsecured bank credit line offered on a conditional
basis. At August 5, 1996, the amount of the outstanding letters of credit
under these credit lines was approximately $6.3 million. While substantially
all of the net proceeds of the sale of the Debentures were used to reduce the
amount of such Senior Debt outstanding, the Company anticipates that it may
subsequently re-borrow all or a substantial portion of such amount. The
Indenture does not limit the amount of additional Indebtedness which the
Company or any of its subsidiaries or affiliates can create, incur, assume or
guarantee, including, without limitation, Senior Debt. See "Risk Factors -
Substantial Leverage" and "- Ranking; Subordination."
The Company is a holding company and conducts all of its operations
through subsidiaries. Consequently, the ability of the Company to pay its
obligations, including its obligation to pay interest on and principal of the
Debentures when due, is dependent upon the earnings of its subsidiaries and the
distribution of those earnings to the Company. The subsidiaries are separate
and distinct legal entities and have no obligation, contingent or otherwise, to
pay any amounts due pursuant to the Debentures or to make funds available
therefor. The ability of the subsidiaries to pay dividends or make other
payments or advances to the Company depends upon their operating results and is
subject to various business considerations and to applicable state laws.
Because the Debentures are not obligations of the Company's
subsidiaries and because a substantial portion of the assets of the Company are
owned by its subsidiaries, claims of holders of Debentures are structurally
subordinated to the claims of such subsidiaries' creditors, including lenders
and trade creditors, of such subsidiaries. Thus, the Debentures effectively
are subordinated to all existing and future liabilities of the Company's
subsidiaries, including trade payables and the liquidation value of preferred
stock of such subsidiaries, if any, except to the extent that the Company is
itself recognized as a creditor of such subsidiary, in which case the claims of
the Company will still be subordinate to any security interest in the assets of
such subsidiary and any indebtedness of such subsidiary senior to that held by
the Company. The capital stock of the Subsidiary Guarantors has been pledged
to the lenders under the Replacement Facility and the Subsidiary Guarantors
have guaranteed the obligations of the Company under such facility. The
Indenture permits the Company's subsidiaries to incur additional indebtedness
and to issue preferred stock.
By reason of the subordination provisions described above, in the
event of the Company's liquidation or dissolution, holders of Senior Debt may
receive more, ratably, and holders of the Debentures may receive less, ratably,
than the other creditors of the Company. Such subordination will not prevent
the occurrence of an event of default under the Indenture; however, during the
Standstill Period following the occurrence of an event of default
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with respect to Senior Debt, the rights of the holders of the Debentures to
exercise remedies under the Indenture relating to an event of default under the
Indenture may be restricted.
EVENTS OF DEFAULT AND REMEDIES
The following are Events of Default under the Indenture: (i) default
in the payment when due of any interest on the Debentures, which default
continues for 30 days; (ii) default in the payment of principal of the
Debentures when due; (iii) the failure of the Company to perform its
obligations related to the repurchase of the Debentures following a Change in
Control; (iv) the acceleration of the maturity of any Senior Debt, if the
aggregate principal amount (or, if applicable, issue price plus accrued
original issue discount) of the Senior Debt the maturity of which has been
accelerated exceeds $10 million, unless within 30 days after the Company's
receipt of written notice of such default such acceleration is rescinded or
annulled, such Senior Debt is paid or such acceleration is contested by
appropriate proceedings and all consequences thereof that would have a material
adverse effect on the Company stayed (without the Company having posted a bond
or surety or entered into a similar arrangement); (v) the failure of the
Company to perform any other covenant of the Company contained in the
Debentures or in the Indenture which failure continues for 60 days after
receipt of notice by the Company; (vi) the rendering against the Company of
final judgments in excess of $5 million that remain unsatisfied and unstayed
for more than 90 days and are not being contested by the Company; and (vii)
certain events of bankruptcy, insolvency or reorganization. The Indenture
provides that the Trustee may withhold notice to the holders of Debentures of
any default (except in payment of principal, premium, if any, or interest
(including any Additional Interest) with respect to the Debentures) if the
Trustee considers it in the interest of the holders of the Debentures to do so.
Subject to the provisions with respect to Senior Debt described above
under the caption "Ranking," the Indenture provides that if any Event of
Default shall have occurred and be continuing, the Trustee or the holders of
not less than 25% in principal amount of the Debentures then outstanding may
declare the principal of and premium, if any, on the Debentures to be due and
payable immediately, but if the Company shall cure all defaults (except the
nonpayment of interest on, premium, if any, and principal of any Debentures
which shall have become due by acceleration) and certain other conditions are
met, such declaration may be canceled and past defaults may be waived by the
holders of a majority in aggregate principal amount of Debentures then
outstanding.
The holders of a majority in principal amount of the Debentures then
outstanding have the right to direct the time, method and place of conducting
any proceedings for any remedy available to the Trustee, subject to certain
limitations specified in the Indenture.
SATISFACTION AND DISCHARGE; DEFEASANCE
The Indenture will cease to be of further effect as to all outstanding
Debentures (except as to (i) rights of registration of transfer and exchange
and the Company's right of optional redemption; (ii) substitution of apparently
mutilated, defaced, destroyed, lost or stolen Debentures; (iii) rights of
holders of the Debentures to receive payments of principal and interest on the
Debentures; (iv) rights, obligations and immunities of the Trustee under the
Indenture; and (v) rights of the holders of the Debentures as beneficiaries of
the Indenture with respect to the property so deposited with the Trustee
payable to all or any of them), if (A) the Company will have paid or cause to
be paid the principal of and interest on the Debentures as and when the same
will have become due and payable, (B) all outstanding Debentures (except lost,
stolen or destroyed Debentures which have been replaced or paid) have been
delivered to the Trustee for cancellation, or (C) (x) the Debentures not
previously delivered to the Trustee for cancellation will have become due and
payable or are by their terms to become due and payable within one year or are
to be called for redemption under arrangements satisfactory to the Trustee upon
delivery of notice and (y) the Company will have irrevocably deposited with the
Trustee, as trust funds, cash, in an amount sufficient to pay principal of and
interest on the outstanding Debentures, to maturity or redemption, as the case
may be. Such trust may only be established if such deposit will not result in
a breach or violation of, or constitute a default under, any agreement or
instrument pursuant to which the Company is a party or by which it is bound and
the Company has
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<PAGE> 27
delivered to the Trustee an Officers' Certificate and an opinion of counsel,
each stating that all conditions related to such defeasance have been complied
with.
The Indenture will also cease to be in effect (except as described in
clauses (i) through (v) in the immediately preceding paragraph) and the
indebtedness on all outstanding Debentures will be discharged on the 123rd day
after the irrevocable deposit by the Company with the Trustee, in trust,
specifically pledged as security for, and dedicated solely to, the benefit of
the holders of the Debentures, of cash, U.S. Government Obligations (as defined
in the Indenture) or a combination thereof, in an amount sufficient, in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, to pay
the principal of and interest on the Debentures then outstanding in accordance
with the terms of the Indenture of the Debentures ("legal defeasance"). Such
legal defeasance may only be effected if (i) such deposit will not result in a
breach or violation of, or constitute a default under, any agreement or
instrument to which the Company is a party or by which it is bound; (ii) the
Company has delivered to the Trustee an opinion of counsel stating that (A) the
Company has received from, or there has been published by, the Internal Revenue
Service a ruling, or (B) since the date of the Indenture, there has been no
change in the applicable federal income tax law, in either case to the effect
that, based thereon, the holders of the Debentures will not recognize income,
gain or loss for federal income tax purposes as a result of such deposit,
defeasance and discharge by the Company and will be subject to federal income
tax on the same amount and in the same manner and at the same times as would
have been the case if such deposit, defeasance and discharge had not occurred;
(iii) the Company has delivered to the Trustee an opinion of counsel to the
effect that after the 123rd day following the deposit, the trust funds will not
be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; and (iv)
the Company has delivered to the Trustee an Officers' Certificate and an
opinion of counsel stating that all conditions related to the defeasance have
been complied with.
Notwithstanding any satisfaction and discharge or defeasance of the
Indenture, the obligations of the Company described under the caption
"Conversion of Debentures" survive.
MODIFICATIONS OF THE INDENTURE
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
principal amount of the Debentures at the time outstanding, to modify the
Indenture or any supplemental indenture or the rights of the holders of the
Debentures, except that no such modification shall (i) extend the fixed
maturity of any Debenture, reduce the rate or extend the time or payment of
interest thereon, reduce the principal amount thereof or premium, if any,
thereon, reduce any amount payable upon redemption thereof, change the
obligation of the Company to make redemption of any Debenture upon the
happening of a Change of Control, impair or affect the right of a holder to
institute suit for the payment thereof, change the currency in which the
Debentures are payable or impair the right to convert the Debentures into
Common Stock subject to the terms set forth in the Indenture, without the
consent of the holder of each Debenture so affected, or (ii) reduce the
aforesaid percentage of principal amount of Debentures necessary to modify or
amend the Indenture or to consent to any waiver in the Indenture, without the
consent of the holders of all of the Debentures then outstanding.
CONCERNING THE TRUSTEE
United States Trust Company of New York, the Trustee under the
Indenture, has been appointed by the Company as the paying agent, conversion
agent, registrar and custodian with regard to the Debentures. The Trustee
and/or its affiliates may in the future provide banking and other services to
the Company in the ordinary course of their respective businesses.
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DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 150,000,000
shares of Common Stock, $.01 par value; 20,000,000 shares of Class B Common
Stock, $.01 par value; and 500,000 shares of Preferred Stock, $.01 par value.
As of August 1, 1996, a total of 71,984,759 shares of Common Stock (net of
6,986,000 shares of Common Stock held in treasury) and 20,000,000 shares of
Class B Common Stock were issued and outstanding, fully paid and non-assessable
and have no preemptive rights. No shares of Preferred Stock are presently
issued or outstanding. All of the outstanding Class B Common Stock is
currently held by a subsidiary of TCI. See "Risk Factors - Anticipated Change
in Control."
COMMON STOCK AND CLASS B COMMON STOCK
Each share of Common Stock entitles its holder to one vote and each
share of Class B Common Stock entitles its holder to ten votes on each matter
to be voted upon by the holders of the Common Stock and Class B Common Stock.
The holders of the Common Stock and Class B Common Stock vote together on all
such matters as one class (including elections of directors), except that (i)
the holders of Common Stock, voting as a separate class, are entitled to elect
25% of the total number of members of the Board of Directors of the Company and
(ii) so long as there are 22,800,000 or more shares of Class B Common Stock
outstanding, the holders of the Class B Common Stock will vote as a separate
class with respect to fundamental corporate transactions involving the Company,
such as a merger, reorganization, recapitalization, dissolution or sale of
substantially all of its assets. Because there are fewer than 22,800,000
shares of Class B Common Stock outstanding, the holders of the Class B Common
Stock would vote together with the holders of the Common Stock as a single
class on any such fundamental corporate transaction, with the holders of Class
B Common Stock entitled to cast ten votes for each share of Class B Common
Stock owned and the holders of Common Stock entitled to cast one vote for each
share of Common Stock owned. The Common Stock and Class B Common Stock are
otherwise identical in all respects, except that each share of Class B Common
Stock is convertible into one share of Common Stock at the option of the
holder. Common Stock is not convertible into Class B Common Stock. Upon
conversion of the Class B Common Stock, the shares of Class B Common Stock so
converted will be retired and will not be subject to reissuance.
The concentration of voting power afforded to the holders of Class B
Common Stock may have the effect of discouraging a third party from making a
tender offer or otherwise attempting to obtain control of the Company, even
though such an attempt might be economically beneficial to the Company and its
stockholders. In addition, the disparate voting rights of the Common Stock and
the Class B Common Stock may affect the ability of stockholders to change the
Board of Directors or to benefit from transactions that are opposed by the
holders of a significant number of shares of Class B Common Stock, even though
such actions may be in the interests of the holders of a majority of the
stockholders of the Company. Because such concentration of voting power may
make it more difficult to, and thereby discourage an effort to, acquire the
Company, the stockholders may be deprived of an opportunity to sell their
shares pursuant to a tender offer or to sell their shares at a premium over
prevailing market prices.
The holders of Common Stock and Class B Common Stock are entitled to
receive ratably such dividends, if any, as are declared by the Company's Board
of Directors out of funds legally available for that purpose. In the event of
the Company's liquidation, dissolution or winding up, the holders of Common
Stock and Class B Common Stock would be entitled to share ratably in all assets
of the Company available for distribution to holders of the Common Stock and
Class B Common Stock, subject to the preferential rights of holders, if any, of
shares of Preferred Stock. See "Preferred Stock" below.
The Restated Certificate of Incorporation of the Company provides that
there can be no stock dividend on, or stock split or combination of, either the
Common Stock or the Class B Common Stock without a corresponding
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stock dividend on, or stock split or combination of, the other class of such
stock. For purposes of the foregoing, if a dividend of shares of Common Stock
were paid on the outstanding shares of Common Stock, a corresponding dividend
of shares of Class B Common Stock would be required to be paid on the shares of
Class B Common Stock.
PREFERRED STOCK
The Board of Directors of the Company has the authority to issue
shares of Preferred Stock from time to time in one or more series and to fix
the relative rights, preferences, privileges and restrictions thereof,
including dividend rights, conversion rights, voting rights, terms of
redemption, redemption prices, liquidation preferences and the number of shares
constituting any series or the designation of such series, without any further
action by the stockholders. The issuance of shares of Preferred Stock may have
the effect of delaying, deferring or preventing a change in control of the
Company without further action by the stockholders. The issuance of shares of
Preferred Stock with voting and conversion rights may adversely affect the
voting power of the holders of Common Stock and the Class B Common Stock,
including the loss of voting control to others.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is
The Bank of New York.
NEW YORK STOCK EXCHANGE LISTING
The Company's Common Stock is listed on the New York Stock Exchange
under the symbol HSN.
PLAN OF DISTRIBUTION
The Securities covered hereby may be offered and sold from time to
time by the Selling Securityholders. The Selling Securityholders will act
independently of the Company in making decisions with respect to the timing,
manner and size of each sale. Sales of the Securities are, in general,
expected to be made at the market price prevailing at the time of each such
sale; however, prices in negotiated transactions may differ considerably. Such
sales may be made on any exchange in which the Securities are listed or
otherwise, at market prices prevailing at the time of sale, at prices related
to the then prevailing market prices or in negotiated transactions, including
without limitation pursuant to an underwritten offering or pursuant to one or
more of the following methods: (i) purchases by a broker-dealer as principal
and resale by such broker or dealer for its account pursuant to this
Prospectus; (ii) ordinary brokerage transactions and transactions in which a
broker solicits purchasers; and (iii) block trades in which a broker-dealer so
engaged will attempt to sell the Securities as agent but may take a position
and resell a portion of the block as principal to facilitate the transaction.
The Common Stock of the Company is listed for trading on the New York
Stock Exchange, and the Company will file a listing application for the Shares
on the New York Stock Exchange. The Company does not intend, at this time, to
apply for listing of the Debentures on any securities exchange, but reserves
the right to do so in the future. Accordingly, no assurance can be given as to
the development of liquidity of any trading market that may develop for the
Debentures. See "Risk Factors - Absence of an Established Market; Restrictions
on Transfer."
The Company has been advised that, as of the date hereof, the Selling
Securityholders have made no arrangement with any broker for the offering or
sale of the Securities. Underwriters, brokers, dealers or agents may
participate in such transactions as agents and may, in such capacity, receive
brokerage commissions from the Selling Securityholders or purchasers of such
Securities. Such underwriters, brokers, dealers or agents may also purchase
the Securities and resell such Securities for their own account. The Selling
Securityholders and underwriters, brokers, dealers or agents may be considered
"underwriters" as that term is defined by the Securities Act, although the
Selling Securityholders disclaim such status. Any commissions, discounts or
profits received by
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<PAGE> 30
such underwriters, brokers, dealers or agents in connection with the foregoing
transactions may be deemed to be underwriting discounts and commissions under
the Securities Act.
To comply with the securities laws of certain jurisdictions, if
applicable, the Securities will be offered or sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
jurisdictions, the Securities may not be offered or sold unless they have been
registered or qualified for sale in such jurisdictions or unless an exemption
from such registration or qualification is available and is complied with.
The Company will use its reasonable best efforts to cause the
Registration Statement to become effective as promptly as is practicable and to
keep the Registration Statement effective for up to three years after March 1,
1996, or until the Registration Statement is no longer required for the
transfer of the Securities. The Company is permitted to suspend the use of the
Prospectus if it determines, in its reasonable business judgment, that this
registration and offering could reasonably be expected to interfere with or
otherwise adversely affect any financing, acquisition, corporate
reorganization, or other material transaction or development involving the
Company or any of its Affiliates or require the Company to disclose matters
that otherwise would not be required to be disclosed at such time. The Company
may then require the suspension of resales of the Securities pursuant to this
Prospectus by giving notice to the Trustee and the holders of the Securities.
Any such notice need not specify the reasons for such suspension if the Company
determines, in its reasonable business judgment, that doing so could reasonably
be expected to interfere with or adversely affect such transaction or
development or would result in the disclosure of material non-public
information. In the event that such notice is given, then until the Company
has determined, in its reasonable business judgment, that this registration and
offering would no longer interfere with the matters described in the preceding
sentence and has given notice thereof to such holders of the Securities, the
Company's obligations with respect to registration will be suspended.
Selling Securityholders who sell Securities pursuant to the
Registration Statement will be required to deliver a Prospectus to purchasers
of the Securities and will be bound by such provisions of the Indenture which
are applicable to such Selling Securityholder (including certain
indemnification provisions). Expenses of preparing and filing the Registration
Statement and all post-effective amendments will be borne by the Company.
CERTAIN TAX CONSIDERATIONS
The following is a general discussion, based upon the relevant
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), of
the principal United States federal income and estate tax consequences to U.S.
Holders and Non-U.S. Holders of owning, converting and disposing of the
Debentures and of owning and disposing of the Shares issued upon conversion
thereof. The terms "U.S. Holder" and "Non-U.S. Holder" refer, respectively, to
persons that are or are not classified as United States persons. For this
purpose, a United States person includes (i) a citizen or resident of the
United States for United States federal income tax purposes, (ii) a
corporation, partnership or other entity created or organized in or under the
laws of the United States or of any political subdivision thereof, and (iii) an
estate or trust the income of which is subject to U.S. federal income taxation
regardless of its source.
This summary does not discuss all of the United States federal income
and estate tax consequences that may be relevant to holders of the Debentures
or the Shares and does not address the tax consequences arising under the laws
of any foreign, state or local jurisdiction. This discussion assumes that each
holder holds the Debentures and the Shares received upon conversion thereof as
capital assets (generally, property held for investment) within the meaning of
Section 1221 of the Code, and that any amounts received by a Non-U.S. Holder
with respect to the Debentures or the Shares are not effectively connected with
the conduct by such Non-U.S. Holder of a trade or business in the United
States. Persons considering the purchase of Debentures should consult their
tax advisers with respect to current and possible future tax consequences of
acquiring, holding, converting and disposing of the Debentures and the Shares.
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U.S. HOLDERS
Interest on Debentures. Interest on a Debenture will generally be
taxable to a U.S. Holder as ordinary interest income in accordance with the
U.S. Holder's method of tax accounting at the time that such interest is
accrued or (actually or constructively) received.
Premium and Market Discount. A U.S. Holder of a Debenture purchased
at a premium (i.e., a cost greater than its principal amount), excluding any
amount attributable to the conversion privilege, may amortize such premium.
Special rules apply which may require the amount of premium and the
amortization thereof to be determined with reference to the optional redemption
price and date.
If a U.S. Holder of a Debenture purchases the Debenture at an amount
that is less than its principal amount, the Debenture generally will be
considered to bear "market discount" in the hands of such U.S. Holder. In such
case, gain recognized by the U.S. Holder on the sale, exchange, or retirement
and unrecognized appreciation on certain nontaxable dispositions of the
Debenture generally will be treated as ordinary interest income at the time of
such sale, exchange, retirement or nontaxable disposition to the extent of the
market discount that accrued on the Debenture while held by such U.S. Holder
and to the extent it has not previously been included in income (pursuant to an
election by the U.S. Holder to include such market discount in income as it
accrues). In addition, the U.S. Holder may be required to defer the deduction
of all or a portion of the interest paid on any indebtedness incurred or
continued to purchase or carry the Debenture (but such deferral would not be
required where a U.S. Holder elects to include accrued market discount in
income as it accrues). In general terms, market discount on a Debenture will
be treated as accruing ratably over the term of such Debenture, or, at the
election of the U.S. Holder, under a constant yield method.
Conversion of Debentures. A U.S. Holder of a Debenture will not
recognize gain or loss on the conversion of the Debenture into Shares, except
with respect to cash received in lieu of a fractional Share. Gain or loss
recognized on the receipt of cash paid in lieu of such a fractional Share will
equal the difference between the amount of cash received and the amount of tax
basis allocable to the fractional Shares redeemed. The holding period of the
Share received by the U.S. Holder upon conversion of the Debenture will include
the period during which it held the Debenture prior to the conversion. The
U.S. Holder's aggregate tax basis in the Shares received upon conversion of the
Debenture will equal the U.S. Holder's aggregate tax basis in the Debenture
exchanged therefor (less any portion thereof allocable to cash received in lieu
of a fractional Share).
If a Debenture as to which there is accrued market discount is
converted into Shares, such accrued market discount will carry over to the
Shares (to the extent that such accrued market discount has not been included
in income), and any gain realized upon the subsequent disposition of such
Shares will, to the extent of such accrued market discount, be taxable as
ordinary interest income.
A taxable distribution to holders of the Shares which results in an
adjustment of the conversion price of the Debentures may, in certain
circumstances, be treated as a deemed distribution to the holders of the
Debentures; in certain other circumstances, the absence of such an adjustment
may result in a deemed distribution to the holders of the Shares. Such deemed
distributions will be taxable as a dividend, return of capital or capital gain
in accordance with the earnings and profits rules discussed below under "-
Dividends on Shares."
Disposition of Debentures or Shares. In general, the U.S. Holder of a
Debenture (or the Shares into which it was converted) will recognize capital
gain or loss upon the sale, redemption, retirement or other disposition of the
Debenture or on the sale or other disposition of such Shares measured by the
difference between the amount realized (except to the extent attributable to
the payment of accrued interest or to market discount not previously included
in income) (see "- Premium and Market Discount") and the U.S. Holder's tax
basis in the Debenture or Shares. A U.S. Holder's tax basis in a Debenture
generally will equal the cost of the Debenture to the U.S. Holder increased by
the amount of market discount, if any, previously taken into income by the U.S.
Holder or decreased
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by any bond premium theretofore amortized by the U.S. Holder with respect to
the Debenture. (For the basis and holding period of Shares, see "- Conversion
of Debentures" and "- Dividends on Shares.") The gain or loss on such
disposition of the Debentures or Shares will be long-term capital gain or loss
if the Debentures or Shares have been held for more than one year at the time
of such disposition.
Dividends on Shares. Distributions on Shares will constitute
dividends for United States federal income tax purposes to the extent of
current or accumulated earnings and profits of the Company as determined under
United States federal income tax principles. Such dividends will be subject to
United States federal income taxation in the hands of U.S. Holders of Shares
under rules generally applicable to dividends received from United States
corporations. For example, such dividends paid to U.S. Holders that are United
States corporations may qualify for the 70% dividends- received deduction
permitted by Section 243 of the Code. Individuals, partnerships, trusts, and
certain corporations, including certain foreign corporations, are not entitled
to the dividends-received deduction.
To the extent, if any, that a U.S. Holder receives a distribution on
Shares that would otherwise constitute a dividend for United States federal
income tax purposes, but that exceeds current and accumulated earnings and
profits of the Company, such distribution will be treated first as a
non-taxable return of capital reducing the U.S. Holder's tax basis in the
Shares. Any such distribution in excess of the U.S. Holder's tax basis in the
Shares will be treated as a capital gain.
NON-U.S. HOLDERS
Payments of Interest. A non-U.S. Holder will not be subject to United
States federal income tax by withholding or otherwise on payments of interest
on a Debenture (provided that the beneficial owner of the Debenture fulfills
the statement requirements set forth in applicable Treasury Regulations) unless
such Non-U.S. Holder (i) actually or constructively owns 10% or more of the
total combined voting power of all classes of stock of the Company entitled to
vote or (ii) is a controlled foreign corporation related, directly or
indirectly, to the Company through stock ownership.
Gain on Disposition of Debentures or Shares. A Non-U.S. Holder will
not be subject to United States federal income tax by withholding or otherwise
on any gain realized upon the disposition of a Debenture or Shares received
upon conversion thereof (including the receipt of cash in lieu of fractional
Shares upon such conversion) unless (i) in the case of a Non-U.S. Holder who is
a nonresident alien individual, a 30% withholding tax is applicable on such
gain if, such Non-U.S. Holder is present in the United States for a period or
periods aggregating 183 days or more during the taxable year of the disposition
and either (a) the Non-U.S. Holder has a "tax home" (within the meaning of the
Code) in the United States (unless such gain is attributable to a fixed place
of business in a country other than the United States maintained by such
individual and has been subject to tax by such country of at least 10%) or (b)
the gain is attributable to an office or other fixed place of business
maintained by the Non-U.S. Holder in the United States or (ii) the Company is
or will have been a "United States Real Property Holding Corporation" for
United States federal income tax purposes at any time within the shorter of the
five-year period preceding such disposition or such Non-U.S. Holder's holding
period, and no treaty exception is applicable, and at any point in time during
such period the Non-U.S. Holder has held, directly or indirectly, in the case
of Shares, more than 5% of the Common Stock or, in the case of the Debentures,
Debentures with a fair market value at the time of acquisition (or, if
additional Debentures are acquired, at the time of subsequent acquisition)
exceeding the fair market value at such time of 5% of the outstanding Common
Stock. If clause (ii) is applicable, such gain will be subject to U.S. income
tax and, in addition, a withholding tax will apply (generally at a rate of 10%
of the gross proceeds of any such sale or other disposition). The Company
believes that it is not, and will not be in the foreseeable future, a United
States Real Property Holding Company. Any amount withheld pursuant to these
rules will be creditable against such Non-U.S. Holder's United States federal
income tax liability and may entitle such Non-U.S. Holder to a refund upon
furnishing the required information to the Internal Revenue Service.
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Conversion of Debentures. A Non-U.S. Holder will not be subject to
United States federal income tax by withholding or otherwise on the conversion
of a Debenture into Shares (except with respect to the receipt of cash in lieu
of fractional Shares by Non-U.S. Holders described in clause (i) of "- Gain on
Disposition of Debentures or Shares") if such Non-U.S. Holder would not be
subject to such taxation in respect of gain on a disposition of the Debentures
under the rules described in clause (ii) of "- Gain on Disposition of
Debentures or Shares" and provided certain other conditions are satisfied. The
Company does not presently intend to withhold United States federal income tax
on the conversion of a Debenture. However, if the Company determines, based
upon the advice of recognized tax counsel, that such withholding is required,
the Company may in its sole discretion withhold generally at a rate of 10% of
the fair market value of the Shares, plus cash, if any, received by such
Non-U.S. Holder. See "- Gain on Disposition of Debentures or Shares" for the
treatment of such withheld amounts.
Dividends. Generally, any distribution on Shares to a Non-U.S. Holder
will be subject to United States federal income tax withholding at a rate of
30% of the amount of the distribution, or at a lesser applicable treaty rate.
Under current Treasury regulations, dividends paid to an address in a foreign
country are presumed to be paid to a resident of such country for purposes of
determining the applicability of a treaty rate unless the Company has definite
knowledge that such presumption is not warranted or an applicable tax treaty
requires some other method for determining a Non-U.S. Holder's residence.
To the extent, if any, that a distribution to a Non-U.S. Holder is
treated as a tax-free return of capital or as a capital gain (see "- U.S.
Holders - Dividends on Shares" above), the Company nevertheless intends to
withhold United States federal income tax at the 30% or lesser applicable
treaty rate. In such event, the Non-U.S. Holder is entitled to apply for a
refund of such withheld amounts by filing form 1040NR (individuals) or Form
1120F (corporations) with the Internal Revenue Service. To the extent that the
distribution is treated as a capital gain, however, it will be subject to the
same rules as applicable to gains realized on the disposition of Common Stock
(see "- Gain on disposition of Debentures or Shares"), and therefore a refund
may not be granted.
Estate Tax. Debentures held at the time of death by an individual
holder, who at such time was not a citizen or resident of the United States,
will not be subject to United States federal estate tax, provided that at such
time, the holder did not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the Company entitled to
vote. Shares held at the time of death (or previously transferred subject to
certain retained rights or powers) by an individual holder, who at such time
was not a citizen or resident of the United States, will be subject to United
States federal estate tax, except as otherwise provided by an applicable estate
tax treaty.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In addition to the withholding rules described above, interest,
dividends, distributions, and payments of proceeds from the disposition by
certain noncorporate holders of Debentures or shares of Common Stock may be
subject to backup withholding at a rate of 31%. A U.S. Holder generally will
be subject to backup withholding at a rate of 31% unless the recipient of such
payment supplies an accurate taxpayer identification number, as well as certain
other information, or otherwise establishes, in the manner prescribed by the
Code, an exemption from backup withholding. Any amount withheld under backup
withholding is allowable as a credit against the U.S. Holder's federal income
tax, upon furnishing the required information.
Generally, backup withholding of United States federal income tax at a
rate of 31% and information reporting may apply to payments of principal,
interest and premium (if any) to Non-U.S. Holders that are not "exempt
recipients" and that fail to provide certain information as may be required by
United States law and applicable regulations. Under temporary and proposed
United States Treasury regulations, backup withholding and information
reporting will not apply to dividends paid on Shares to a Non-U.S. Holder.
Generally, the payer of the dividends may rely on the payee's address outside
the United States in determining that such payee is a Non-U.S. Holder. The
payment of the proceeds of the disposition of Debentures or Shares to or
through the United States
31
<PAGE> 34
office or a broker will be subject to information reporting and backup
withholding at a rate of 31% unless the owner certifies its status as a
Non-U.S. Holder under penalties of perjury or otherwise establishes an
exemption. The proceeds of the disposition by a Non-U.S. Holder of Debentures
or Shares to or through a foreign office of a broker will not be subject to
backup withholding. However, if such broker is a U.S. person, a controlled
foreign corporation for United States tax purposes, or a foreign person 50% or
more of whose gross income from all sources for a specified three-year period
is from activities that are effectively connected with a United States trade or
business, information reporting will apply unless such broker has documentary
evidence in its files of the owner's status as a Non-U.S. Holder and has no
actual knowledge to the contrary. Under proposed Treasury regulations, both
backup or withholding and information reporting will apply to the proceeds from
such dispositions if the broker has actual knowledge that the payee is a U.S.
Holder.
Holders should consult their tax advisors regarding the application of
information reporting and backup withholding in their particular situations,
the availability of an exemption therefrom, and the procedures for obtaining
any such exemption, if available.
LEGAL MATTERS
Certain legal matters with respect to the Debentures and Shares will
be passed upon by H. Steven Holtzman, Senior Counsel to the Company.
EXPERTS
The consolidated financial statements and schedule of Home Shopping
Network, Inc. as of December 31, 1995 and 1994, and for each of the years in the
three-year period ended December 31, 1995, have been incorporated by reference
herein and in the Registration Statement in reliance upon the reports, dated
February 21, 1996, of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
32
<PAGE> 35
INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
Additional Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Affiliation Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
banking organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
BDTV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
beneficial ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
business combinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
CEDEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Certificated Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Change of Control Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Chase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Chase Commitment Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Class B Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
clearing agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
clearing corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
DTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Equity Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Euroclear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
exempt recipients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
FCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
FCC Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
FCC June Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
FCC Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Global Debenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
HSC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
HSN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Indirect Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
interested stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ISN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
legal defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Liberty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Liberty Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
LPTV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Mail Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
market discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Merger and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Non-Global Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Non-Payment Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Non-U.S. Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Payment Blockage Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
33
<PAGE> 36
<TABLE>
<S> <C>
person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Placement Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Prior Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
QIBs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
QVC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Replacement Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Savoy Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 203 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Selling Securityholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Senior Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Silver King . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Silver King Exchange Securities . . . . . . . . . . . . . . . . . . . . . . . . 7
Silver King LPTV Stations . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Silver King Stations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Standstill Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Stockholders Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Subscriber Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
tax home . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
TCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
TCI Company Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
U.S. Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
United States Real Property Holding Corporation . . . . . . . . . . . . . . . . 30
Voting Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
34
<PAGE> 37
================================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT IN CONNECTION WITH THE OFFERING DESCRIBED HEREIN AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY
PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED OR
INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH
DATE. THIS PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THOSE
SPECIFICALLY OFFERED HEREBY OR OF ANY SECURITIES OFFERED HEREBY IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
----------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
INCORPORATION OF DOCUMENTS BY
REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
RECENT DEVELOPMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
RATIO OF EARNINGS TO FIXED CHARGES . . . . . . . . . . . . . . . . . . . . . . 12
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
CERTAIN RELATIONSHIPS INVOLVING DILLER,
LIBERTY AND SILVER KING . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SELLING SECURITYHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
DESCRIPTION OF DEBENTURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
DESCRIPTION OF CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . 26
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
CERTAIN TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 28
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
HOME SHOPPING NETWORK, INC.
$100,000,000
5 7/8% Convertible Subordinated Debentures
due March 1, 2006
and
8,333,333 Shares of
Common Stock
----------------------
PROSPECTUS
----------------------
______ ___, 1996
================================================================================
<PAGE> 38
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
All of the expenses in connection with the distribution of the Shares
are set forth below and will be borne by the Registrant.
<TABLE>
<S> <C>
Registration Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $34,483.00
*Blue Sky Fees and Expenses (including counsel fees) . . . . . . . . . . . . . . . . . . . . . . .
*Legal Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
*Accounting Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $17,000.00
Additional Listing Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
*Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
----------
*Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
==========
</TABLE>
--------------------
*Estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law provides,
generally, that a corporation shall have the power to indemnify any person who
was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding (except actions by or in the
right of the corporation) by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation against all expenses,
judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the corporation and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful. A corporation may similarly indemnify
such person for expenses actually and reasonably incurred by such person in
connection with the defense or settlement of any action or suit by or in the
right of the corporation, provided such person acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the corporation, and, in the case of claims, issues and matters as
to which such person shall have been adjudged liable to the corporation,
provided that a court shall have determined, upon application, that, despite
the adjudication of liability but in view of all of the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which such court shall deem proper.
Section 102(b)(7) of the Delaware General Corporation Law provides,
generally, that the certificate of incorporation may contain a provision
eliminating or limiting the personal liability of a director to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, provided that such provision may not eliminate or limit the liability
of a director (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
under section 174 of Title 8 of the Delaware General Corporation Law, or (iv)
for any transaction from which the director derived an improper personal
benefit. No such provision may eliminate or limit the liability of a director
for any act or omission occurring prior to the date when such provision became
effective.
Article NINTH of the Company's Restated Certificate of Incorporation
provides as follows:
"(A) The corporation may indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a
II-1
<PAGE> 39
director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in and not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interest of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(B) The corporation may indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that he is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation and except that no indemnification shall
be made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the
extent that a court of equity or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication or
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
of equity or such other court shall deem proper.
(C) To the extent that a director, officer, employee or agent of
the corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (A) and (B) of this
Article Ninth or in the defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(D) Any indemnification under subsections (A) and (B) of this
Article NINTH (unless ordered by a court) shall be made by the corporation only
as authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in subsections (A) and
(B). Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or if such a quorum is not obtainable, or, even if
obtainable a quorum of the disinterested directors so directs, by independent
legal counsel in a written opinion or by the stockholders.
(E) Expenses incurred in defending a civil or criminal action,
suit or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of the director, officer, employee or agent to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this Article.
(F) The indemnification and advancement of expenses provided by,
or granted pursuant to this Article shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under any statute, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office and shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person; it being the intent and purpose of this Article that the corporation
shall have the authority to indemnify directors, officers, agents and employees
to the fullest extent allowed by the laws of the State of Delaware as those
laws exist now or may hereafter be amended, provided that such amendment
expands the right to indemnify officers, directors, agents or employees.
II-2
<PAGE> 40
(G) The corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out
of his status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of this Article."
Article FOURTEENTH of the Company's Restated Certificate of
Incorporation provides as follows:
"The directors of the corporation shall in no event be liable to the
corporation or to its stockholders for monetary damages for breach of a
fiduciary duty of a director; provided, however, that this Article shall not
eliminate the liability of a director (i) for any breach of the director's duty
of loyalty to the corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. The liability of a director shall be further eliminated or
limited to the fullest extent allowable under Delaware law, as it may in the
future be amended."
The Company either has executed or expects to execute indemnification
agreements for each member of the Board of Directors and for certain officers
of the Company.
ITEM 16. EXHIBITS
4.0 Indenture dated as of March 1, 1996 between the Company and United
States Trust Company of New York, as Trustee for the Company's 5 7/8%
Convertible Subordinated Debentures due March 1, 2006 (filed as
Exhibit 4.0 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 (file No. 1-9118) and incorporated herein by
reference).
*5.1 Opinion of H. Steven Holtzman, Senior Counsel to the Company.
12.0 Statement regarding Computation of Ratios.
23.0 Consent of KPMG Peat Marwick LLP.
24.0 Power of Attorney (included on signature pages to the Registration
Statement).
25.0 Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of United States Trust Company of New York.
* To be filed by amendment.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the
II-3
<PAGE> 41
foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of
the prospectus filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post- effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post- effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report pursuant
to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 that
is incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described under Item 15
above, or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
II-4
<PAGE> 42
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of St. Petersburg, State
of Florida, on August 20, 1996.
HOME SHOPPING NETWORK, INC.
By: /s/ James G. Held
----------------------------------
Name: James G. Held
Title: President and
Chief Executive Officer
II-5
<PAGE> 43
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Barry S. Augenbraun, Esq. and Kevin J.
McKeon, and each of them, his true and lawful attorneys-in-fact and agents with
full power of substitution and re-substitution for him and in his name, place
and stead, in any and all capacities, to sign any or all amendments (including
post-effective amendments) to this Registration Statement and to file the same,
with all exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact
and agents and each of them full power and authority, to do and perform each
and every act and thing requisite or necessary to be done in and about the
premises, to all intents and purposes and as fully as they might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or their substitutes may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons
(which persons constitute a majority of the Board of Directors) in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ James G. Held President, Chief August 20, 1996
- ------------------------------------ Executive Officer and Director
(James G. Held)
/s/ Kevin J. McKeon Executive Vice President, Chief August 20, 1996
- ------------------------------------ Financial Officer and Treasurer
(Kevin J. McKeon) (Principal Financial Officer)
/s/ Brian J. Feldman Vice President and Controller August 20, 1996
- ------------------------------------ (Chief Accounting Officer)
(Brian J. Feldman)
/s/ Barry Diller Chairman of the Board August 20, 1996
- ------------------------------------ and Director
(Barry Diller)
/s/ Peter R. Barton Director August 20, 1996
- ------------------------------------
(Peter R. Barton)
/s/ Robert R. Bennett Director August 20, 1996
- ------------------------------------
(Robert R. Bennett)
/s/ Leo J. Hindery, Jr. Director August 20, 1996
- ------------------------------------
(Leo J. Hindery, Jr.)
/s/ General H. Norman Schwarzkopf Director August 20, 1996
- ------------------------------------
(General H. Norman Schwarzkopf)
/s/ Eli J. Segal Director August 20, 1996
- ------------------------------------
(Eli J. Segal)
</TABLE>
II-6
<PAGE> 44
EXHIBIT INDEX
<TABLE>
<S> <C>
4.0 Indenture dated as of March 1, 1996 between the Company and United States Trust Company of New York, as
Trustee for the Company's 5 7/8% Convertible Subordinated Debentures due March 1, 2006 (filed as
Exhibit 4.0 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995 (file No.
1-9118) and incorporated herein by reference).
*5.1 Opinion of H. Steven Holtzman, Senior Counsel to the Company.
12.0 Statement regarding Computation of Ratios.
23.0 Consent of KPMG Peat Marwick LLP.
24.0 Power of Attorney (included on signature pages to the Registration Statement).
25.0 Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of United
States Trust Company of New York.
</TABLE>
* To be filed by amendment.
<PAGE> 1
EXHIBIT 12.0
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Six Months Ended Years Ended Four Months Ended Years Ended
June 30, December 31, December 31, August 31,
-------- -------------------------- ------------ -------------
1996 1995 1994 1993 1992 1992 1991
---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS EXCEPT RATIO OF EARNINGS TO FIXED CHARGES)
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings (Loss) Before Taxes and 11,629 (95,025) 30,520 (19,567) 11,446 64,492 6,116
Extraordinary Item
Add
Portion of Rents Representing 2,331 4,377 4,613 5,011 2,182 6,692 6,139
Interest Factor
Interest 6,336 10,077 5,512 10,863 6,651 22,299 23,176
------------------------------------------------------------------------------------
Earnings (Loss) as Adjusted 20,296 (80,571) 40,645 (3,693) 20,279 93,483 35,431
====================================================================================
Fixed Charges
Portion of Rents Representing 2,331 4,377 4,613 5,011 2,182 6,692 6,139
Interest Factor
Interest 6,336 10,077 5,512 10,863 6,651 22,299 23,176
------------------------------------------------------------------------------------
Total Fixed Charges 8,667 14,454 10,125 15,874 8,833 28,991 29,315
====================================================================================
Ratio of Earnings to Fixed Charges 2.34 --(1) 4.01 --(1) 2.30 3.22 1.21
</TABLE>
(1) Ratio is less than zero.
<PAGE> 1
EXHIBIT 23.0
INDEPENDENT ACCOUNTANT'S CONSENT
The Board of Directors
Home Shopping Network, Inc.
We consent to the use of our reports incorporated by reference herein and to
the reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
---------------------------------
KPMG Peat Marwick LLP
St. Petersburg, Florida
August 20, 1996
<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
-----------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-----------------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)_____
-----------------
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I. R. S. Employer
if not a U. S. national bank) Identification No.)
114 West 47th Street 10036
New York, New York (Zip Code)
(Address of principal
executive offices)
-----------------
Home Shopping Network, Inc.
(Exact name of obligor as specified in its charter)
Delaware 59-2649518
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
2501 118th Avenue North 33716
St Petersburg, Florida (Zip code)
(Address of principal executive offices)
-----------------
5-7/8% Convertible Subordinated Debentures Due March 1, 2006
(Title of the indenture securities)
================================================================================
<PAGE> 2
- 2 -
GENERAL
1. General Information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Federal Reserve Bank of New York (2nd District), New York, New
York (Board of Governors of the Federal Reserve
System).
Federal Deposit Insurance Corporation, Washington, D. C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust
powers.
2. Affiliations with the Obligor
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
3,4,5,6,7,8,9,10,11,12,13,14 and 15.
Home Shopping Network, Inc. is currently not in default under any of
its outstanding securities for which United States Trust Company of
New York is Trustee. Accordingly, responses to Items 3, 4, 5, 6, 7,
8, 9, 10, 11, 12, 13, 14 and 15 of Form T-1 are not required under
General Instruction B.
16. List of Exhibits
T-1.1 -- Organization Certificate, as amended, issued by the
State of New York Banking Department to transact
business as a Trust Company, is incorporated by
reference to Exhibit T-1.1 to Form T-1 filed on
September 15, 1995 with the Commission pursuant to
the Trust Indenture Act of 1939, as amended by the
Trust Indenture Reform Act of 1990 (Registration No.
33-97056).
<PAGE> 3
- 3 -
16. List of Exhibits
(cont'd)
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
T-1.4 -- The By-Laws of United States Trust Company of New
York, as amended, is incorporated by reference to
Exhibit T-1.4 to Form T-1 filed on September 15, 1995
with the Commission pursuant to the Trust Indenture
Act of 1939, as amended by the Trust Indenture Reform
Act of 1990 (Registration No. 33-97056).
T-1.6 -- The consent of the trustee required by Section 321(b)
of the Trust Indenture Act of 1939, as amended by the
Trust Indenture Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the
trustee pursuant to law or the requirements of its
supervising or examining authority.
NOTE
As of May 23, 1996, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U. S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United
States Trust Company of New York and its parent company, U. S. Trust
Corporation.
In answering Item 2 in this statement of eligibility, as to matters
peculiarly within the knowledge of the obligor or its directors, the
trustee has relied upon information furnished to it by the obligor and
will rely on information to be furnished by the obligor and the
trustee disclaims responsibility for the accuracy or completeness of
such information.
-----------------
<PAGE> 4
- 4 -
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, United States Trust Company of New York, a corporation
organized and existing under the laws of the State of New York, has
duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in the City of New
York, and State of New York, on the 23rd day of May, 1996.
UNITED STATES TRUST COMPANY OF
NEW YORK, Trustee
By: /s/ Gerard F. Ganey
-----------------------------------
Gerard F. Ganey
Senior Vice President
<PAGE> 5
EXHIBIT T-1.6
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of
1939, as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
By: /s/ Gerard F. Ganey
-----------------------------------
Gerard F. Ganey
Senior Vice President
<PAGE> 6
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
MARCH 31, 1996
($ IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
- ------
Cash and Due from Banks $ 47,046
Short-Term Investments 50
Securities, Available for Sale 758,118
Loans 1,221,210
Less: Allowance for Credit Losses 13,113
----------
Net Loans 1,208,097
Premises and Equipment 58,360
Other Assets 125,979
---------
TOTAL ASSETS $2,197,650
==========
LIABILITIES
- -----------
Deposits:
Non-Interest Bearing $ 387,509
Interest Bearing 1,446,148
---------
Total Deposits 1,833,657
Short-Term Credit Facilities 82,285
Accounts Payable and Accrued Liabilities 128,745
----------
TOTAL LIABILITIES $2,044,687
==========
STOCKHOLDER'S EQUITY
- --------------------
Common Stock 14,995
Capital Surplus 42,394
Retained Earnings 96,511
Unrealized Gains on Securities Available
for Sale (Net of Taxes) (937)
----------
TOTAL STOCKHOLDER'S EQUITY 152,963
----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $2,197,650
==========
</TABLE>
I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named bank
do hereby declare that this Statement of Condition has been prepared in
conformance with the instructions issued by the appropriate regulatory
authority and is true to the best of my knowledge and belief.
/s/ Richard E. Brinkman
- -------------------------------------
Richard E. Brinkman, SVP & Controller
June 7, 1996
