<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
QVC Network, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
QVC Network, Inc.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
- ---------------
1Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE> 2
[LOGO]
1365 ENTERPRISE DRIVE
WEST CHESTER, PENNSYLVANIA 19380
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 27, 1994
AT QVC CHESAPEAKE, INC.
1553 NORTH RIVER BIRCH RUN
CHESAPEAKE, VIRGINIA
To Our Shareholders:
The Annual Meeting of Shareholders (the "Annual Meeting") of QVC Network,
Inc. (the "Corporation") will be held at 10:00 A.M. on June 27, 1994 at QVC
Chesapeake, Inc., 1553 North River Birch Run, Chesapeake, Virginia for the
following purposes:
1. To elect directors of the Corporation to serve until the next
Annual Meeting and until their successors are elected and shall
qualify;
2. To vote on the ratification of the directors' selection of
auditors;
3. To vote on the adoption of an amendment to the Restated Certificate
of Incorporation of the Corporation to change its corporate name
from "QVC Network, Inc." to "QVC, Inc.";
4. To vote on the ratification of the 1993 Qualified Incentive Stock
Option Plan;
5. To vote on the ratification of the grant by the Board of Directors
of certain stock options; and
6. To transact such other business as may properly come before the
meeting.
Holders of the Corporation's Common Stock, Series B Preferred Stock, Series
C Preferred Stock and Series D Preferred Stock at the close of business on May
13, 1994 are entitled to vote at the Annual Meeting and any adjournments
thereof. Such shareholders may vote in person or by proxy.
Your attention is directed to the following Proxy Statement.
By Order of the Board of Directors
Neal S. Grabell
Secretary
Dated: May , 1994
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, AND REGARDLESS
OF THE AMOUNT OF YOUR HOLDINGS, PLEASE COMPLETE, SIGN AND PROMPTLY RETURN YOUR
PROXY IN THE ENCLOSED RETURN ENVELOPE. THIS WILL NOT PREVENT YOU FROM VOTING IN
PERSON AT THE MEETING. IT WILL, HOWEVER, HELP ASSURE A QUORUM AND AVOID ADDED
PROXY SOLICITATION COSTS.
<PAGE> 3
[LOGO]
1365 ENTERPRISE DRIVE
WEST CHESTER, PENNSYLVANIA 19380
------------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
JUNE 27, 1994
------------------------------
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
This Proxy Statement, which is first being mailed to shareholders on or
about May , 1994, is furnished in connection with the solicitation by the
Board of Directors of QVC Network, Inc. (the "Corporation", "QVC, Inc." or
"QVC") of proxies to be used at the Annual Meeting of Shareholders (the "Annual
Meeting") of the Corporation, to be held at 10:00 A.M. on June 27, 1994 at QVC
Chesapeake, Inc., 1553 North River Birch Run, Chesapeake, Virginia, and at any
adjournments thereof. If proxies in the accompanying form are properly executed
and returned, the shares of Common Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock (the Common Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock are
collectively referred to as the "Voting Stock") represented thereby will be
voted as instructed on the proxy. If no instructions are given on a properly
executed and returned proxy, the shares of Voting Stock represented thereby will
be voted as follows: (i) for the election of two directors by the holders of
Common Stock, voting as a class, and the election of six directors by the
holders of Voting Stock, as indicated below, (ii) in favor of the ratification
of the directors' selection of KPMG Peat Marwick as auditors, (iii) in favor of
the adoption of an amendment to the Restated Certificate of Incorporation of the
Corporation to change its corporate name from "QVC Network, Inc." to "QVC,
Inc.", (iv) in favor of the ratification of the 1993 Qualified Incentive Stock
Option Plan, (v) in favor of the ratification of the grant by the Board of
Directors of certain stock options to BellSouth Corporation, Advance
Publications, Inc. and Cox Enterprises, Inc., and (vi) in support of management
on such other business as may properly come before the Annual Meeting or any
adjournments thereof. Any proxy may be revoked by a shareholder prior to its
exercise upon written notice to the Secretary of the Corporation, by the
execution and delivery of a later dated proxy, or by the vote of the shareholder
cast in person at the Annual Meeting.
VOTING SECURITIES
Holders of record of the Corporation's Voting Stock on May 13, 1994 will be
entitled to vote at the Annual Meeting or any adjournments thereof. As of April
30, 1994, there were 40,214,097 shares of Common Stock, 27,788 shares of Series
B Preferred Stock, 530,757 shares of Series C Preferred Stock and 938 shares of
Series D Preferred Stock outstanding and entitled to vote. The voting rights of
Common Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock are as follows: (i) as to the election of directors, two
directors are elected by the holders of Common Stock as a class, each share
being entitled to cast one vote in the election of each such director, and the
holders of the Voting Stock will be entitled to cast one vote per share for the
election of each of the remaining directors; and (ii) as to all other matters to
be voted on at the Annual Meeting, the holders of Voting Stock shall be entitled
to one vote on each matter for each share of Voting Stock owned.
QUORUM
As to the election of the two directors to be elected solely by the holders
of Common Stock, a majority of the outstanding shares of Common Stock will
constitute a quorum. As to all other matters
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<PAGE> 4
to be voted on, a majority of the outstanding shares of Voting Stock combined
will constitute a quorum. Abstentions and broker non-votes are counted for the
purposes of determining the presence or absence of a quorum for the transaction
of business.
VOTE REQUIRED FOR ELECTION OF DIRECTORS AND APPROVAL OF PROPOSALS
To be elected as a director, a nominee for election by the holders of the
Common Stock must receive the favorable vote of a majority of the outstanding
shares of Common Stock. To be elected as a director, a nominee for election by
the holders of the Voting Stock must receive the favorable vote of a majority of
the outstanding shares of Voting Stock. Approval of the other Proposals will
require a favorable vote of a majority of the outstanding shares of Voting
Stock. Abstentions and broker non-votes will have the same effect as a vote
"against" the proposal.
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
The Corporation's Board of Directors is comprised of eight (8) directors:
William F. Costello, Barry Diller, J. Bruce Llewellyn, Bruce M. Ramer, Brian L.
Roberts, Ralph J. Roberts, Joseph M. Segel and Linda J. Wachner. During the
fiscal year ended January 31, 1994, Peter Barton, Michael C. Boyd, Edwin Hamowy,
Melvin Jacobs and John Malone also served as directors of the Corporation. Mr.
Barton, Mr. Boyd, Mr. Hamowy and Dr. Malone resigned in November 1993, February
1994, July 1993 and November 1993, respectively. Mr. Jacobs died in September
1993.
Each director is elected at the Annual Meeting for a term ending at the
next Annual Meeting and until a successor is duly elected and qualified. Under
the provisions of the respective Certificates of Designation by which each of
the series of Preferred Stock were established, the holders of shares of
Preferred Stock of the Corporation have the right to vote for all but two
directors of the Corporation, which two directors are elected solely by the
holders of Common Stock. Unless otherwise specified in the accompanying proxy,
(i) the shares of Common Stock voted pursuant thereto will be cast for the
following nominees: William F. Costello, Barry Diller, J. Bruce Llewellyn, Bruce
M. Ramer, Brian L. Roberts, Ralph J. Roberts, Joseph M. Segel and Linda J.
Wachner, and (ii) the shares of Series B Preferred Stock, shares of Series C
Preferred Stock and shares of Series D Preferred Stock voted pursuant thereto
will be cast for the following nominees: J. Bruce Llewellyn, Bruce M. Ramer,
Brian L. Roberts, Ralph J. Roberts, Joseph M. Segel and Linda J. Wachner. Each
nominee has consented to be named as a nominee and, to the present knowledge of
the Corporation, is willing to serve as a director, if elected. If at the time
of election any of the nominees should be, for any reason, unable to accept
nomination or election, it is intended that such proxy will be voted for the
election of a substituted nominee to be selected by the Executive Committee of
the Board of Directors. The Board of Directors, however, has no reason to
believe that any nominee will be unable to serve as a director.
William F. Costello, age 47, has served as a director, Executive Vice
President and Chief Financial Officer of the Corporation since December 1989. He
also served as Treasurer of the Corporation from December 1989 to September
1992. Mr. Costello was an independent management and financial consultant from
1988 until he joined the Corporation. Prior thereto he was employed by Best
Products Co., Inc. where he served as President, Chief Operating Officer and a
director from March 1988 to November 1988, as Executive Vice President and Chief
Financial Officer from March 1987 to March 1988, and as Senior Vice President
and Chief Financial Officer from 1985 to 1987.
Barry Diller, age 52, has been a director and the Chairman and Chief
Executive Officer of the Corporation since January 1993. From 1984 to 1992 he
served as the Chairman and Chief Executive Officer of Fox, Inc. Prior to joining
Fox, Mr. Diller served for ten years as Chairman and Chief Executive Officer of
Gulf + Western's (now Paramount Communications) Paramount Pictures Corporation.
Mr. Diller serves on the Boards of the Museum of Television and Radio,
California Institute of the Arts, and the Academy of Television Arts and
Sciences Foundation. He is a member of the Board of Councilors for the
University of Southern California's School of Cinema-Television and
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<PAGE> 5
is a member of the President's Export Council. Mr. Diller is a member of the
Executive Committee. Mr. Diller is a member of a group that has jointly filed a
Schedule 13D with respect to the beneficial ownership of securities of the
Corporation. See "Certain Transactions and Business Relationships" below.
J. Bruce Llewellyn, age 66, has served as a director of the Corporation
since June 1990. Mr. Llewellyn has been the Chairman of the Board and Chief
Executive Officer of The Philadelphia Coca-Cola Bottling Company for more than
five years. He is also Chairman of the Board and Chief Executive Officer of The
Coca-Cola Bottling Company of Wilmington, Inc., Queen City Broadcasting, Inc.
and Garden State Cablevision, Inc. Mr. Llewellyn serves as a director of Coors,
Incorporated and Chemical Bank. Mr. Llewellyn is a member of the Audit
Committee.
Bruce M. Ramer, age 60, has served as a director of the Corporation since
May 1994. Mr. Ramer has been a principal of the law firm of Gang, Tyre, Ramer &
Brown, Inc., for more than five years. He is, or has been during the fiscal
year ended January 31, 1994, a Vice President and director of All Ahead Full,
Inc., Fresser, Inc., Heights Investment Co., Inc., No. 2 Hampton Enterprises,
Inc., Periscope City, Inc., Somerset Enterprises, Inc., and Subfare, Inc.; a
Vice President, Assistant Secretary and director of Malpaso Productions, Ltd.;
a Secretary and director of AMAX Productions, Inc., Bruning Paint Co., Inc.,
CMAX Productions, Ltd., Film Properties Management, Inc. and FTP Productions,
Inc.; and a Secretary of Amblin' Entertainment, Inc., Amblin' Productions,
Inc., Amblin' Television, Inc., Diamond Lane Productions, Extra-Terrestrial
Productions, Inc., Nighttime Films, Inc. and U-Drive Productions, Inc. Mr.
Ramer is a member of the Executive Compensation Committee. See "Certain
Transactions and Business Relationships" below.
Brian L. Roberts, age 34, has served as a director of the Corporation since
October 1987. He has been the President of Comcast Corporation ("Comcast"), a
publicly owned communications company, since February 1990. Prior thereto, Mr.
Roberts had been Executive Vice President of Comcast since June 1987, and had
been a Vice President of Comcast since September 1981. Previously, he served in
various capacities with Comcast Cable Communications, Inc., a division of
Comcast, for more than five years. He is a director of Comcast, Turner
Broadcasting System, Inc., Storer Communications, Inc. and Comcast Cellular
Corporation. Mr. Roberts is the son of Ralph J. Roberts, a director and a
nominee for director. Mr. Roberts is a member of the Executive Committee.
Comcast is a member of a group that has jointly filed a Schedule 13D with
respect to the beneficial ownership of securities of the Corporation. See
"Certain Transactions and Business Relationships" below.
Ralph J. Roberts, age 74, has served as a director of the Corporation since
June 1991. Mr. Roberts has been a director and the Chairman of the Board of
Directors of Comcast for more than five years. He has also been the President
and a director of Sural, a privately-held investment company, for more than five
years. Prior to February 7, 1990, Mr. Roberts was President of Comcast. Mr.
Roberts is also a director of Storer Communications, Inc. and Comcast Cellular
Corporation. Mr. Roberts is the father of Brian L. Roberts, a director and a
nominee for director. Mr. Roberts is a member of the Executive Compensation
Committee. Comcast is a member of a group that has jointly filed a Schedule 13D
with respect to the beneficial ownership of securities of the Corporation. See
"Certain Transactions and Business Relationships" below.
Joseph M. Segel, age 63, has served as a director of the Corporation since
June 1986 and as Chairman Emeritus since January 1993. He served as Chairman,
Chief Executive Officer and a director of the Corporation from June 1986 to
January 1993. From June 1986 to November 1986 and from December 1987 to July
1989, Mr. Segel also served as President of the Corporation. Mr. Segel was the
founder of the Franklin Mint Corporation, and served as its President from 1964
to 1971 and was its Chairman from 1971 to 1973. He retired in 1973 and continued
as a consultant to the Franklin Mint Corporation from 1974 to 1985. From 1970 to
1990 and since 1993, Mr. Segel was a principal shareholder of Le Mirador, S.A.,
a hotel and international conference center in Switzerland. Mr. Segel is a
member of the Audit Committee.
3
<PAGE> 6
Linda J. Wachner, age 48, has served as a director of the Corporation since
May 1994. Mrs. Wachner has been the Chairman, President and Chief Executive
Officer of Warnaco Inc., a publicly owned apparel company, for more than five
years. She is also Chairman and Chief Executive Officer of Authentic Fitness
Corporation (formerly the activewear division of Warnaco Inc.). Mrs. Wachner
serves as a director of The Travelers Inc., Castle & Cooke Homes, Inc. and the
New York City Partnership. She currently serves on the Policy Committee of The
Business Roundtable, the Board of Trustees of The Aspen Institute and Carnegie
Hall and the Board of Overseers of Memorial Sloan-Kettering Cancer Center. She
is a member of the Council on Foreign Relations. In 1991, Mrs. Warnaco was
reappointed by President Bush to the Advisory Committee for Trade Policy
Negotiations, on which she also served under President Reagan. She also served
on Mayor Rudolph Giuliani's Transition Team and currently serves on the Mayor's
Appointment Advisory Committee. Mrs. Wachner is a member of the Audit
Committee.
The Board of Directors recommends that shareholders vote "FOR" the election of
the nominated directors.
During the fiscal year ended January 31, 1994, the Board of Directors held
nine meetings and took one action by unanimous written consent. All of the
incumbent directors attended at least 75% of the aggregate of the total number
of meetings of the Board of Directors and committees of the Board of Directors
on which they served which were held during their terms of office.
During the fiscal year ended January 31, 1994, the Executive Committee,
which presently consists of Mr. Diller and Mr. B. Roberts, took one action by
unanimous written consent. Except with respect to certain extraordinary acts,
the Executive Committee may exercise all of the power and authority of the Board
of Directors in the management of the Corporation.
During the fiscal year ended January 31, 1994, the Executive Compensation
Committee, which presently consists of Mr. Ramer and Mr. R. Roberts, held no
meetings. The Executive Compensation Committee considers recommendations of the
Corporation's management regarding compensation and fringe benefits of the
senior executives of the Corporation, determines whether the recommendations of
management are consistent with general policies, practices and compensation
scales established by the Board of Directors, considers management's proposals
regarding incentive stock option grants and their consistency with policies
established by the Board of Directors and, in general, administers the
Corporation's stock option plans.
During the fiscal year ended January 31, 1994, the Audit Committee, which
presently consists of Mr. Llewellyn, Mr. Segel and Mrs. Wachner, held two
meetings. The Audit Committee recommends the appointment of auditors, consults
with management and the auditors on matters relating to internal financial
controls and procedures and reviews the results of the examination of the
independent public accountants.
The Executive Committee selected candidates as nominees for election by the
shareholders to the Board of Directors. Shareholders who wish to suggest
qualified candidates should write to Neal S. Grabell, Secretary of the
Corporation, at 1365 Enterprise Drive, West Chester, Pennsylvania, 19380,
stating in detail the candidate's qualifications for consideration.
EXECUTIVE OFFICERS
In addition to the executive officers of the Corporation listed above who
are also directors or nominees for director, other executive officers of the
Corporation, their ages and business experience during the past five years are
as follows:
Douglas S. Briggs, age 47, served as Senior Vice President -- Marketing
Planning from September 1986 to December 1987 when he was promoted to Executive
Vice President -- Programming. He served as Executive Vice
President -- Electronic Retailing from January 1993 to February 1994. In
February 1994, he became President -- QVC Electronic Retailing.
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<PAGE> 7
Candice M. Carpenter, age 42, has served as President of Q2, Inc. a
wholly-owned subsidiary of the Corporation, since July 1993. Prior to joining
the Corporation, Ms. Carpenter was President of Time-Warner Video and Time-Life
Television from 1989 to July 1993. Ms. Carpenter was Vice President, Consumer
Marketing at American Express Company, Travel Related Services, from 1983 to
1989.
Thomas G. Downs, age 53, served as Senior Vice President -- Fulfillment
from 1987 to December 1989. He was Executive Vice President -- Fulfillment from
December 1989 to January 1991 and Executive Vice President -- Customer Service
from February 1991 to February 1994. In February 1994, he became Executive Vice
President -- Operations and Services.
Neal S. Grabell, age 38, has served as the General Counsel, Senior Vice
President and Secretary of the Corporation since 1987. Mr. Grabell is also Of
Counsel to the law firm of Bolger, Picker, Hankin & Tannenbaum.
James G. Held, age 41, served as Senior Vice President -- New Business
Development of the Corporation from September 1993 to February 1994, when he was
promoted to his current position of Executive Vice President -- QVC
Merchandising. From 1983 to 1993, Mr. Held held a series of positions with
Bloomingdale's, most recently as Senior Vice President/General Merchandise
Manager -- Home Textiles.
John F. Link, Jr., age 52, served as Senior Vice President of Information
Systems and Data Communications from 1989 to August 1990, when he was promoted
to Executive Vice President -- Information Systems and Telecommunications. In
February 1994, he became Executive Vice President -- Information Technology and
Chief Information Officer. From 1964 to 1989, Mr. Link held a series of
positions with Sun Company, Inc., most recently as Director of Information
Systems Services.
Robert J. Perkins, age 46, has served as President of QDirect, since March
1994. Prior to joining the Corporation, Mr. Perkins served as Senior Vice
President of Marketing at Pizza Hut from March 1991 to March 1994. From 1985 to
1991, Mr. Perkins held a series of positions within the Chiat/Day advertising
organization, most recently as President and Chief Operating Officer of its New
York office. Mr. Perkins also started a diet marketing subsidiary
Perkins/Butler, for Chiat/Day.
William J. Schereck, Jr., age 48, served as Executive Vice
President -- International of the Corporation from December 1993 to February
1994, when he was appointed to his current position of
President -- International. From 1990 to December 1993, Mr. Schereck served as
Vice President, Cable Affiliates for Fox Broadcasting Company and from 1985 to
1990 he held a series of positions with WMSN, a television station in Madison,
Wisconsin, most recently as General Manager.
The Board of Directors appoints officers each year and from time to time as
necessary.
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<PAGE> 8
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation for
the Corporation's Chief Executive Officer and the four highest paid executive
officers, as well as the total compensation paid to each individual for the
Corporation's fiscal years ended January 31, 1994 ("fiscal 1993"), 1993 ("fiscal
1992"), and 1992 ("fiscal 1991"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------------
AWARDS
------------------------ PAYOUTS
ANNUAL COMPENSATION SECURITIES ---------------
------------------------------------- RESTRICTED UNDERLYING LONG-TERM
NAME AND OTHER ANNUAL STOCK OPTIONS INCENTIVE PLAN ALL OTHER
PRINCIPAL FISCAL SALARY BONUS COMPENSATION(1) AWARD($) GRANTED PAYOUTS COMPENSATION
POSITION YEAR ($) ($) ($) ($) (#) ($) ($)(2)
- ------------------------- ------ -------- --------- ---------------- ----------- ------------ --------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Barry Diller(3) 1993 500,000 -- -- -- -- -- --
Chairman and Chief 1992 20,833 4,868,800(4) -- -- 6,000,000 -- --
Executive Officer 1991 -- -- -- -- -- -- --
Douglas S. Briggs 1993 235,000 450,000 -- -- -- -- 16,044
President, Electronic 1992 215,000 235,000 -- -- 275,000 -- 12,408
Retailing 1991 190,417 205,000 -- -- -- -- --
Michael C. Boyd(5) 1993 290,000 290,000 -- -- -- -- 16,069
President and Chief 1992 270,000 290,000 -- -- 250,000 -- 13,921
Operating Officer 1991 239,583 260,000 -- -- -- -- --
William F. Costello 1993 250,000 300,000 -- -- -- -- 16,069
Executive Vice 1992 236,667 250,000 -- -- 250,000 -- 13,021
President
and Chief Financial 1991 212,500 230,000 -- -- -- -- --
Officer
Thomas G. Downs 1993 192,500 215,000 -- -- -- -- 14,769
Executive Vice 1992 188,125 192,500 -- -- 150,000 -- 12,189
President,
Operations and Services 1991 164,583 185,000 -- -- -- -- --
</TABLE>
- ------------------------------
(1) Perquisites and personal benefits did not exceed in the aggregate the lesser
of $50,000 or 10% of such officer's annual salary and bonus.
(2) Represents contributions made pursuant to the Corporation's Retirement Plan
and matching contributions made pursuant to the Corporation's 401(k) Savings
Plan. In the fiscal year ended January 31, 1994, amount includes for the
five named executives (a) contributions to the Corporation's Retirement Plan
of $0, $7,050, $7,075, $7,075 and $5,775, respectively; and (b) matching
contributions to the Corporation's 401(k) Savings Plan of $8,994 for each
executive except Barry Diller. Under revised proxy rules, this information
is not required for fiscal 1991.
(3) On January 18, 1993, upon retirement of Joseph M. Segel, Barry Diller became
Chairman and Chief Executive Officer at an annual salary of $500,000.
(4) Represents the dollar value as of December 9, 1992, of 160,000 shares
granted as an Executive Stock Award to Barry Diller on that date as an
incentive to become Chairman and Chief Executive Officer of the Corporation.
(5) In February 1994, Michael C. Boyd resigned as President and Chief Operating
Officer of the Corporation.
Note: The symbol "--" means the Corporation paid no such compensation.
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<PAGE> 9
AGGREGATED OPTIONS EXERCISED IN FISCAL 1993
AND FYE 1993 OPTION VALUES
The following table sets forth information regarding stock options
exercised and unexercised by the named officers in fiscal year 1993.
<TABLE>
<CAPTION>
UNEXERCISED OPTIONS AT FYE 1993
-------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
SHARES UNEXERCISED OPTIONS OPTIONS
ACQUIRED VALUE ------------------------------- -------------------------------
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
- -------------------------- ------------ ---------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Barry Diller
Chairman and Chief
Executive Officer -- -- 3,000,000 3,000,000 33,795,000 28,065,000
Douglas S. Briggs
President, Electronic
Retailing 10,688 523,712 143,750 143,750 2,252,500 2,252,500
Michael C. Boyd
President and Chief
Operating Officer -- -- 124,583 175,417 2,739,579 2,602,921
William F. Costello
Executive Vice President
and Chief Financial
Officer -- -- 157,500 143,750 2,791,250 2,365,000
Thomas G. Downs
Executive Vice
President, Operations
and Services 3,000 115,875 78,750 78,750 1,164,000 1,164,000
</TABLE>
- ------------------------------
(1) The value of the unexercised options is based on the difference between the
closing price of the Company's Common Stock on January 31, 1994 ($44.00) and
the exercise price of the options.
REPORT OF EXECUTIVE COMPENSATION COMMITTEE
The Corporation's executive compensation program is administered by the
Executive Compensation Committee (the "Committee") of the Board of Directors.
The Committee is comprised of two independent, non-employee directors. The
Committee sets officers' salaries, determines bonus criteria for the
Corporation's management and administers the Corporation's stock-based incentive
programs. The following is the Committee's report addressing the Corporation's
compensation policy as it relates to the named executive officers for fiscal
1993.
COMPENSATION POLICY -- The Corporation's compensation plan reflects the
Committee's belief that executive compensation should be directly related to the
profitability of the Corporation as well as increased shareholder value.
Accordingly, in the years in which profitability goals are achieved or exceeded,
executive compensation tends to be higher than in the years in which performance
is below expectations. Annual cash compensation, together with the issuance of
stock options, is designed to attract and retain qualified executives and to
ensure that such executives have a continuing stake in the success of the
Corporation. The following sections describe the three components of the
Corporation's executive compensation plan.
BASE COMPENSATION -- To insure a greater reliance on the bonus program, which is
directly related to the Corporation's performance, the annual cash compensation
for executives is set below the median level observed in the labor market. For
its purposes, the Committee has defined the labor market as the pool of
executives who are currently employed in similar positions in public companies
with similar sales and market capitalization, with an emphasis placed on
salaries paid by companies
7
<PAGE> 10
that constitute the Wilshire Retail Index. Salary decisions are determined using
market information as a frame of reference in a structured annual review by the
Committee with input from the Chairman and Chief Executive Officer of the
Corporation. This annual review also considers the responsibilities and work
performance of each executive. In February 1994, Michael C. Boyd retired as
President and Chief Operating Officer of the Corporation and became a
consultant. In accordance with his employment agreement entered into on December
9, 1992, Mr. Boyd will receive his listed salary of $290,000 for the remaining
four years of his agreement, starting in fiscal 1994.
ANNUAL BONUS PLAN -- The Corporation established the Key Management Incentive
Bonus Plan to reward certain employees, including executive officers, but
excluding the Chief Executive Officer, for accomplishing annual financial
objectives. The targets for the plan are set at the beginning of the fiscal
year. For fiscal 1993 and 1992, the Committee established that the most
meaningful measure of financial performance is the Corporation's EBITA (earnings
before interest, taxes and amortization). Accordingly, executive bonuses are
based on increases in EBITA over the prior fiscal year. Executives receive
bonuses based on whether the Corporation as a whole met or exceeded financial
expectations; if the objectives are not met, no bonuses are paid, regardless of
individual achievement or departmental performance. In fiscal 1993 and 1992, the
Corporation as a whole exceeded financial expectations in respect to increases
in EBITA over the prior year and the executive officers were entitled to receive
bonuses equal to their base salaries. Any bonus amount in excess of base salary
is a matter of judgment and is based on qualitative factors. The Committee
believes that the current system of awarding bonus compensation has been
extremely effective.
LONG-TERM INCENTIVE COMPENSATION -- Stock options are the principal vehicle for
payment of long-term compensation. This component of compensation is intended to
retain executives and motivate them to improve stock market performance. Stock
options are granted from time to time to members of management based primarily
on the individual's potential contribution. They are granted at the prevailing
market value and will have value only if the Corporation's stock price
increases. The Committee's policy is that the exercise price of stock options
should not be amended after grant. In fiscal 1993, no options were granted to
the top five named executives due to options granted in the previous year.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER -- On January 18, 1993, upon the
retirement of Joseph M. Segel, Barry Diller became Chairman and Chief Executive
Officer of the Corporation. Mr. Diller was formerly Chairman and Chief Executive
Officer of Fox, Inc. and Twentieth Century Fox Film Corporation. Prior to
joining Fox, Mr. Diller served for ten years as Chairman and Chief Executive
Officer at Paramount Pictures Corporation. The Committee believes that the
compensation of the Corporation's Chief Executive Officer should be more closely
linked to the performance of the Corporation's stock than the compensation of
other executive officers. Accordingly, in connection with his agreement to serve
as the Corporation's Chairman of the Board and Chief Executive Officer, Mr.
Diller was granted 160,000 shares of Common Stock as an executive stock award.
Mr. Diller receives a base annual salary of $500,000 and does not participate in
the Corporation's Annual Bonus Plan. Also, Mr. Diller was granted stock options
covering 6,000,000 shares of Common Stock. One-half of such options have an
exercise price of $30.43; the other one-half have an exercise price of $30.43
increased by 13 percent per annum in 1993 and 1994 and thereafter by 15 percent
per annum compounded annually.
The Committee believes that its policy concerning Chief Executive Officer
compensation coincides with the Corporation's financial objectives and closely
aligns the interests of the Chief Executive Officer with the interests of the
Corporation's shareholders.
Executive Compensation Committee
Ralph J. Roberts, Chairman
Brian L. Roberts, Member
8
<PAGE> 11
The following graph compares the cumulative total shareholder return
(assuming reinvestment of dividends) on the Corporation's Common Stock with the
cumulative total return of the Wilshire Retail Index and the Wilshire 5000 Index
for the five years ending January 31, 1994.
FIVE YEAR CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
MEASUREMENT PERIOD WILSHIRE
(FISCAL YEAR COVERED) QVC, INC. RETAIL WILSHIRE 5000
<S> <C> <C> <C>
1989 100 100 100
1990 142 112 112
1991 66 131 119
1992 204 186 152
1993 447 213 168
1994 485 211 190
</TABLE>
EMPLOYMENT AGREEMENTS
BARRY DILLER
Barry Diller has been Chairman of the Board and Chief Executive Officer of
the Corporation since January 18, 1993, when Joseph M. Segel retired from such
positions. At that time, the Corporation entered into an Equity Compensation
Agreement (the "Compensation Agreement") with Mr. Diller and Arrow Investments,
L.P., a Delaware limited partnership indirectly controlled by Mr. Diller
("Arrow"), in connection with Mr. Diller's serving the Corporation as Chairman
of the Board and Chief Executive Officer. Under the Compensation Agreement, Mr.
Diller was granted 160,000 shares (the "Bonus Shares") of Common Stock. The
Bonus Shares are not subject to forfeiture. The Compensation Agreement also
provides Mr. Diller with certain Base Options (options to purchase 3,000,000
shares of Common Stock at $30.43 per share, the market price on December 9,
1992, the date of grant) and certain Scaled Options (options to purchase an
additional 3,000,000 shares of Common Stock at $30.43 per share, increased at
the rate of 13% per annum during the first two years of the Compensation
Agreement, and thereafter at the rate of 15% per annum, in each case compounded
annually). One-half of the Base Options and one-half of the Scaled Options
became exercisable on December 9, 1993, and the remaining Base Options and
Scaled Options become exercisable on December 9, 1994.
The exercisability of the Base Options and the Scaled Options will be
accelerated in the event of (1) the termination of Mr. Diller's employment with
the Corporation as a result of death or disability, (2) the termination of Mr.
Diller's employment with the Corporation other than for Cause (as defined
9
<PAGE> 12
in the Compensation Agreement), or (3) Mr. Diller's voluntary termination of
employment with the Corporation for Good Reason (as defined in the Compensation
Agreement). All options, whether or not currently exercisable, will expire and
cease to be exercisable upon the earlier of (i) December 9, 1997, or (ii) the
date of the termination of Mr. Diller's employment for Cause, or upon his
voluntary termination of employment with the Corporation other than for Good
Reason. The number of shares subject to the options, as well as the exercise
price of the options, will be equitably adjusted in the event of any stock
split, stock dividend, reclassification or other change in the outstanding
Common Stock, any consolidation, merger, sale of substantially all of the assets
and business of the Corporation or other similar events. The Compensation
Agreement also provides for specific adjustments to the Scaled Options exercise
price in the event of any issuance of Common Stock at a price per share below
fair market value, subject to certain exceptions. The Corporation also agreed to
use all reasonable efforts to effect a registration of Common Stock owned by Mr.
Diller upon his request.
Mr. Diller receives an annual salary of $500,000.
JOSEPH M. SEGEL
On January 18, 1993, the Corporation entered into a new employment
agreement with Joseph M. Segel for his services as Chairman-Emeritus and as a
consultant of the Corporation. The agreement has a term of 10 years and provides
for a fee of $240,000 per year. The agreement provides that the Corporation may
terminate Mr. Segel's services at any time for Cause (as defined in the
agreement). In addition, Mr. Segel may terminate the agreement on account of a
material breach by the Corporation of its obligations thereunder. In that event,
Mr. Segel would be entitled to continue to receive compensation under the
agreement for the remainder of its term. In the event the agreement is
terminated by reason of Mr. Segel's disability (as defined in the agreement),
Mr. Segel would continue to receive 50% of his fees for the remainder of the
term.
MICHAEL C. BOYD, WILLIAM F. COSTELLO, DOUGLAS S. BRIGGS AND THOMAS G. DOWNS
On December 9, 1992, the Corporation entered into employment agreements
with Michael C. Boyd, William F. Costello, Douglas S. Briggs and Thomas G.
Downs, agreeing to employ them as President and Chief Operating Officer,
Executive Vice President -- Finance and Chief Financial Officer, Executive Vice
President, Programming, and Executive Vice President, Customer Services,
respectively. Mr. Boyd's agreement was for a term of five years and provided for
an annual base salary of $290,000. On February 17, 1994, Mr. Boyd resigned from
his position as President and Chief Operating Officer of the Corporation and
became consultant to the Corporation under the terms of the agreement. Mr.
Briggs' title subsequently changed to Executive Vice President, Electronic
Retailing, and on February 17, 1994, Mr. Briggs was appointed to the new
position of President, QVC Electronic Retailing. Mr. Down's title was changed to
Executive Vice President, Operations and Services. Mr. Costello's, Mr. Briggs'
and Mr. Downs' agreements are for terms of three years each, commencing on
January 1, 1993, and provide for annual base salaries of $250,000, $235,000 and
$192,500, respectively, subject to annual upward review at the discretion of the
Corporation. Mr Briggs, Mr. Costello and Mr. Downs have had their annual base
salaries increased to $350,000, $300,000 and $215,000, respectively, and, under
subsequent agreements, Mr. Briggs and Mr. Costello have had the terms of their
employment agreements extended to December 31, 1998, and December 31, 1996,
respectively. Mr. Briggs, Mr. Costello and Mr. Downs will continue to be
eligible for and participate in such bonus and incentive compensation programs
as are generally provided to other executive officers of the Corporation.
Each agreement provides that the Corporation may terminate the officer's
employment at any time for Cause (as defined in the agreement), and the officer
has the right to terminate his employment with the Corporation at any time for
Good Reason (as defined in the agreement). In the event of a termination of the
agreement by the Corporation for Cause, or by the officer without Good Reason,
or by reason of the officer's death or disability, the Corporation is required
to pay the officer the amounts of base salary, bonus or other compensation
earned but not paid prior to the effective
10
<PAGE> 13
date of the termination. In the event the officer's employment is terminated by
the officer for Good Reason, or by the Corporation other than for Cause, death
or disability, the Corporation must pay the officer, in addition to the amounts
described in the preceding sentence, full acceleration of his base salary for
the remainder of the term of the agreement, a pro rata portion of all bonus
compensation to which he would have been entitled for the year of termination,
assuming full satisfaction of performance objectives, and continuation during
the term of the agreement of all benefits and perquisites provided under the
agreement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended January 31, 1994, the Executive Compensation
Committee was composed of Dr. Malone and Mr. R. Roberts. On March 29, 1994, Mr.
B. Roberts became a member of the Executive Compensation Committee. Dr. Malone
resigned as a director of the Corporation as a member of the Executive Committee
and as a member of the Executive Compensation Committee on November 11, 1993.
Dr. Malone is Chairman of the Board of Liberty Media Corporation ("Liberty
Media"), and Mr. B. Roberts and Mr. R. Roberts are the President and the
Chairman of the Board of Comcast, respectively. Each cable system operator which
broadcasts the Corporation's program, including Comcast and Liberty Media and
their respective affiliates, has entered into an Affiliation Agreement with the
Corporation, providing that the cable system operator will receive a percentage
of net sales within its service area in return for transmitting the
Corporation's program as part of the cable system operator's basic cable
service. The current commission rate is five percent. See "Certain Transactions
and Business Relationships."
COMPENSATION OF DIRECTORS
Members of the Board of Directors who are employed by the Corporation are
not separately compensated for serving on the Board of Directors. The directors
who are not employed by the Corporation are compensated at the rate of $10,000
per annum, $1,000 per meeting of the Board of Directors and $750 per meeting of
Committees of the Board of Directors. Directors' expenses related to their
attendance at meetings of the Board of Directors are paid by the Corporation.
Mr. Costello, Mr. Diller and Mr. Segel are employees of the Corporation and do
not receive any compensation as directors. Mr. Boyd was an employee of the
Corporation and did not receive any compensation as a director. For a
description of the directors' compensation, see "Employment Agreements" above.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following tables set forth information, as of April 30, 1994, with
respect to ownership of shares of Common Stock, Series B Preferred Stock, Series
C Preferred Stock and Series D Preferred Stock of the Corporation (the only
classes of outstanding voting securities of the Corporation) by each person who
is known to the Corporation to be the beneficial owner of more than five percent
of the Corporation's outstanding Common Stock, Series B Preferred Stock, Series
C Preferred Stock and Series D Preferred Stock. Statements regarding beneficial
ownership are based upon information furnished by the transfer agent and
contained in Schedule 13Ds filed with the Securities and Exchange Commission
(the "Commission"). Unless otherwise indicated below, each shareholder has sole
voting and dispositive power with respect to all shares beneficially owned.
11
<PAGE> 14
COMMON STOCK
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- ------------------------------ ---------------------- --------
<S> <C> <C>
Comcast Corporation and 12,627,934(1) 27.7%(2)
Barry Diller
c/o Davis, Polk & Wardell
450 Lexington Avenue
New York, New York 10017
Advance Publications, Inc. 2,958,333(3) 6.9%(2)
and its affiliates
950 Fingerboard Road
Staten Island, New York 10305
BellSouth Corporation 8,627,934(4) 17.7%(2)
1155 Peachtree Street, N.E.
Atlanta, Georgia 30367
Comcast Corporation 8,627,934(5) 20.2%(2)
and its affiliates
1234 Market Street
Philadelphia, PA 19107
Cox Enterprises, Inc. 2,833,333(6) 6.6%(2)
1400 Lake Hearn Drive
Atlanta, Georgia 30319
Liberty Media Corporation 10,255,867(7) 23.3%(2)
and its affiliates
8101 E. Prentice Avenue
Englewood, Colorado 80111
Time Warner Inc. 4,062,218(8) 10.0%(2)
and its affiliates
Time & Life Building
New York, New York 10020
</TABLE>
- ------------------------------
(1) In Schedule 13D filings with the Commission, Comcast and Barry Diller have
reported that they have agreed to act as a group for the purpose of voting
their securities of the Corporation and that they each have shared voting
and dispositive power as to all shares beneficially owned by the group. See
"Certain Transactions and Business Relationships" below. Includes 8,627,934
shares beneficially owned by Comcast and 4,000,000 shares beneficially owned
by Mr. Diller. Comcast's shares include 72,050 shares of Series C Preferred
Stock, which are presently convertible into 720,500 shares of Common Stock,
and warrants to purchase 1,700,000 shares of Common Stock, which are
presently exercisable. Mr. Diller's shares include options to purchase
3,000,000 shares of Common Stock, which are presently exercisable, but does
not include options to purchase 3,000,000 shares of Common Stock, which are
not presently exercisable or exercisable within 60 days after April 30,
1994, and does not include 1,627,934 shares of Common Stock that Mr. Diller
will be entitled to purchase from Liberty Media pursuant to the terms of the
Stockholders Agreement and the Liberty-QVC Agreement.
(2) Under the terms of Rule 13d-3 ("Rule 13d-3") promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the shares
of Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock that are presently convertible or convertible within 60 days after
April 30, 1994 into shares of Common Stock, options to purchase Common Stock
and warrants to purchase Common Stock that are presently exercisable or
exercisable within 60
12
<PAGE> 15
days after April 30, 1994, which are owned by each individual are deemed to
be outstanding for purposes of computing the percentage of Common Stock
owned by that individual. Therefore, each percentage is computed based on
the sum of (i) the 40,214,097 shares of Common Stock actually outstanding as
of April 30, 1994, (ii) the number of shares of Common Stock into which
shares of Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock are presently convertible or convertible within 60 days
after April 30, 1994, and (iii) warrants to purchase Common Stock, as the
case may be, owned by that individual or entity whose percentage of share
ownership is being computed, but not taking account of the conversion of
shares of Series B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock or the exercise of warrants or options by any other person
or entity. Without taking into consideration ownership of shares of Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, and
warrants to purchase Common Stock, Advance Publications, Inc., BellSouth
Corporation, Comcast and its affiliates, Cox Enterprises, Inc., Liberty
Media and its affiliates, and Time Warner, Inc. and its affiliates own .3%,
0%, 15.4%, 0%, 16.2% and 9.6%, respectively, of the shares of Common Stock
actually outstanding as of April 30, 1994.
(3) Includes an option to purchase 2,833,333 shares of Common Stock which is
exercisable within 60 days after April 30, 1994.
(4) Consists solely of an option to purchase 8,627,934 shares of Common Stock
which is exercisable within 60 days after April 30, 1994.
(5) In Schedule 13D filings with the Commission, Comcast has reported that it
has shared voting and dispositive power with Barry Diller with regard to all
shares beneficially owned by the group. See footnote 1 above and "Certain
Transactions and Business Relationships" below. Includes 72,050 shares of
Series C Preferred Stock presently convertible into 720,500 shares of Common
Stock and warrants to purchase 1,700,000 shares of Common Stock.
(6) Consists solely of an option to purchase 2,833,333 shares of Common Stock
which is exercisable within 60 days after April 30, 1994.
(7) In a Schedule 13D filing with the Commission on May 19, 1994, Liberty Media
reported that it no longer has shared voting and dispositive power with
Comcast and Barry Diller with regard to all shares beneficially owned by the
three of them. See "Certain Transactions and Business Relationships" below.
Includes 372,866 shares of Series B and Series C Preferred Stock presently
convertible into 3,728,660 shares of Common Stock. Includes 1,627,934 shares
of Common Stock that Mr. Diller will be entitled to purchase from Liberty
Media pursuant to the terms of the Stockholders Agreement and the
Liberty-QVC Agreement. Does not include any shares of Common Stock
beneficially owned by Comcast or Mr. Diller.
(8) Includes 21,250 shares of Series C Preferred Stock presently convertible
into 212,500 shares of Common Stock.
13
<PAGE> 16
SERIES B PREFERRED STOCK
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- ---------------------------- --------------------- ---------
<S> <C> <C>
Liberty Media Corporation 17,922 64.5%
and its affiliates
8101 E. Prentice Avenue
Englewood, Colorado 80111
Viacom Cablevision Inc. 9,398 33.9%
5924 Stoneridge Drive
Pleasonton, CA 94566
</TABLE>
SERIES C PREFERRED STOCK
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- ---------------------------- --------------------- ---------
<S> <C> <C>
Comcast Corporation 72,050(1) 13.6%
and Barry Diller
c/o Davis, Polk & Wardell
450 Lexington Avenue
New York, New York 10017
Comcast Corporation 72,050(2) 13.6%
and its affiliates
1234 Market Street
Philadelphia, PA 19107
Liberty Media Corporation 372,866 70.3%
and its affiliates
8101 E. Prentice Avenue
Englewood, Colorado 80111
Viacom Cablevision, Inc. 49,300 9.3%
5924 Stoneridge Drive
Pleasonton, CA 94566
</TABLE>
- ------------------------------
(1) In Schedule 13D filings with the Commission, Comcast and Barry Diller have
reported that they have agreed to act as a group for the purpose of voting
their securities of the Corporation. See "Certain Transactions and Business
Relationships" below. Includes 72,050 shares of Series C Preferred Stock
beneficially owned by Comcast.
(2) In Schedule 13D filings with the Commission, Comcast has reported that it
has shared voting and dispositive power with Barry Diller with regard to all
shares beneficially owned by the group. See "Certain Transactions and
Business Relationships" below.
SERIES D PREFERRED STOCK
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- ------------------------------- --------------------- ---------
<S> <C> <C>
Harron Communications Corp. 810 86.4%
70 East Lancaster Avenue
Frazer, PA 19355-2121
Raystay Co. 128 13.6%
P.O. Box 38
1312 Holly Pike
Carlisle, PA 17013
</TABLE>
14
<PAGE> 17
SECURITY OWNERSHIP OF MANAGEMENT
The following tables set forth information as of April 30, 1994, with
respect to the ownership of the Corporation's Common Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock by each director,
nominee for director and by all directors and officers as a group. Unless
otherwise indicated, each person has sole voting power and sole investment
power.
<TABLE>
<CAPTION>
NAME OF DIRECTOR OR AMOUNT AND NATURE OF PERCENT
NOMINEE FOR DIRECTOR BENEFICIAL OWNERSHIP(1) OF CLASS
- ---------------------------- ------------------------ ---------
<S> <C> <C>
William F. Costello 167,500(2)(3) *
Barry Diller 4,000,000(4) 9.3%(2)
J. Bruce Llewellyn 0 *
Bruce M. Ramer 0 *
Brian L. Roberts 750(5) *
Ralph J. Roberts 5,000(5) *
Joseph M. Segel 120,000(2)(6) *
Linda J. Wachner 0 *
All directors and executive
officers as a group
(16 persons)(7)(8) 4,698,358(2) 10.8%(2)
</TABLE>
- ------------------------------
* Less than 1%.
(1) Statements with respect to beneficial ownership are based upon information
furnished by each director and officer.
(2) Under the terms of Rule 13d-3, the stock options to purchase Common Stock
which are presently exercisable or exercisable within 60 days after April
30, 1994 and owned by each individual are deemed to be outstanding for
purposes of computing the percentage of Common Stock owned by that
individual. Therefore, each percentage is computed based on a total number
of shares of Common Stock actually outstanding as of April 30, 1994 and the
number of options to purchase Common Stock owned by that individual whose
percentage of ownership is being considered but not taking account of the
conversion of shares of Series B Preferred Stock, Series C Preferred Stock
and Series D Preferred Stock, the exercise of warrants or options or the
conversion of convertible debt by any other person or entity.
(3) Consists of stock options to purchase 167,500 shares of Common Stock which
are presently exercisable or exercisable within 60 days after April 30,
1994.
(4) Includes stock options to purchase 3,000,000 shares of Common Stock which
are presently exercisable or exercisable within 60 days after April 30,
1994. The shares are owned by Arrow Investments, L.P. and Arrow Investments,
Inc. and Mr. Diller is deemed to have beneficial ownership of such shares by
virtue of his control of such entities. In Schedule 13D filings with the
Commission, Comcast and Mr. Diller have reported that they have agreed to
act as a group for the purpose of voting their securities of the Corporation
and that they each have shared voting and dispositive power as to all
12,627,934 shares of Common Stock beneficially owned by the group. See
"Certain Transactions and Business Relationships" below.
(5) Brian L. Roberts and Ralph J. Roberts disclaim beneficial ownership of
shares, warrants to purchase shares and debt convertible into shares owned
by Comcast and its affiliates.
(6) Mr. Segel disclaims beneficial ownership of 200 shares owned by Mrs. Segel.
Includes 100,000 shares owned jointly by Mr. and Mrs. Segel and stock
options to purchase 20,000 shares of Common Stock which are presently
exercisable or exercisable within 60 days after April 30, 1994.
(7) Includes all executive officers and directors as of May 20, 1994.
15
<PAGE> 18
(8) Includes stock options to purchase 3,568,750 shares of Common Stock which
are presently exercisable or exercisable within 60 days after April 30,
1994.
No directors or executive officers are beneficial owners of shares of
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, or
warrants to purchase shares of Common Stock.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Section 16(a) of the Exchange Act requires the Corporation's directors and
executive officers, and persons who own more than ten percent of a registered
class of the Corporation's equity securities, to file with the Commission
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Corporation. Officers, directors and greater
than ten percent shareholders are required by the rules and regulations
promulgated by the Commission under the Exchange Act to furnish the Corporation
with copies of all Section 16(a) forms that they file.
To the Corporation's knowledge, based solely on review of the copies of
such reports furnished to the Corporation and written representations that no
other reports were required, during the fiscal year ended January 31, 1994, all
Section 16(a) filing requirements applicable to its executive officers,
directors and greater than ten percent beneficial owners were complied with,
other than Mr. Llewellyn who failed to file a Form 4 or Form 5 with respect to a
sale of 1,700 shares of Common Stock.
PROPOSAL NO. 2 -- RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has again selected KPMG Peat Marwick as auditors for
the fiscal year ending January 31, 1995, and the shareholders are asked to
ratify this selection. KPMG Peat Marwick has advised the Corporation that it has
no direct or material indirect interest in the Corporation or its affiliates.
A representative from KPMG Peat Marwick will be present at the Annual
Meeting and will be afforded an opportunity to make a statement. The
representative will also be available to respond to appropriate questions
submitted by shareholders at the meeting.
The Corporation has an Audit Committee which is responsible for the
supervision of its auditors.
Vote Required for Adoption of Proposal No. 2
Ratification will require a favorable vote of a majority of the outstanding
shares of Voting Stock.
The Board of Directors recommends that shareholders vote "FOR" Proposal No. 2.
PROPOSAL NO. 3 -- APPROVAL OF THE AMENDMENT TO
THE CORPORATION'S CERTIFICATE OF INCORPORATION
The Board of Directors believes that it is desirable for the Corporation to
change its corporate name from "QVC Network, Inc." to "QVC, Inc." in order to
reflect more accurately the Corporation's future direction and established goal
of becoming a multimedia corporation. The new name will be in conformity with
the Corporation's objectives of expanding its existing lines of business,
exploring new lines of business outside the scope of its present cable
television home shopping programming services, and taking fuller advantage of
emerging new technologies.
Therefore, the Board recommends that the shareholders vote in favor of the
change of corporate name. If the shareholders approve such name change, the
First Article of the Corporation's Restated Certificate of Incorporation will be
amended to read in its entirety as follows:
"FIRST. The name of this Corporation shall be QVC, INC."
Vote Required for Adoption of Proposal No. 3.
16
<PAGE> 19
Approval of Proposal No. 3 will require a favorable vote of a majority of
the outstanding shares of Voting Stock.
The Board of Directors recommends that shareholders vote "FOR" Proposal No. 3.
PROPOSAL NO. 4 -- APPROVAL AND ADOPTION OF
1993 QUALIFIED INCENTIVE STOCK OPTION PLAN
The Board of Directors has approved a 1993 Qualified Incentive Stock Option
Plan (the "Plan"), pursuant to which the Executive Compensation Committee of the
Board of Directors may grant stock options to key managerial employees of the
Corporation. Such individuals will be selected from employees who have
responsibility for the management of the Corporation or its parent or
subsidiaries, if any. The purpose of the Plan is to afford an incentive to key
managerial employees of the Corporation and to enable the Corporation to attract
and retain such key employees.
The maximum number of executive officers of the Corporation the Committee
deems eligible to be granted stock options as of the date of this Proxy
Statement is ten, of which two are also directors; the maximum number of other
key employees of the Corporation the Committee deems eligible to be granted
stock options as of the date of this Proxy Statement is approximately 250.
Directors who are not also employees are not eligible to receive stock options.
Stock options to purchase 276,000 shares of Common Stock have been granted,
subject to shareholder approval of the Plan, through the date of this Proxy
Statement. Because the number of shares that may be made subject to stock
options, as well as the option price per share of Common Stock depends on
contingent and variable factors, it is not possible to estimate or otherwise
determine the stock options likely to be granted pursuant to the Plan. The
market value of the Common Stock as of May 19, 1994 was $32 1/4 per share.
Options for not more than 100,000 shares of Common Stock may be issued
under the Plan to a Chairman, President or Executive Vice President of the
Corporation or its parent or subsidiaries, options for not more than 50,000
shares may be issued under the Plan to any Senior Vice President of the
Corporation or its parent or subsidiaries, options for not more than 25,000
shares may be issued under the Plan for any Vice President of the Corporation or
its parent or subsidiaries, and options for not more than 10,000 shares may be
issued under the Plan for any other employee of the Corporation or its parent or
subsidiaries.
The options granted under the Plan are intended to qualify as incentive
stock options under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), and thereby provide the Plan participants with favorable income
tax consequences. However, the Plan expressly stipulates that any person
receiving an option thereunder shall be solely responsible for all taxes to
which he may be or become subject as a consequence of his participation in the
Plan.
Options for up to an aggregate of 750,000 shares of the Common Stock may be
issued under the Plan. The option price, which may not be less than 100% of the
fair market value of the Common Stock on the date of the grant, is to be fixed
by the Committee at the time of the grant of such option. No option is
exercisable in full or in part after the expiration of ten (10) years from the
date such option is granted. However, if the option is granted to an individual
who at the time the option is granted owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Corporation or its parent or subsidiary, such option is not exercisable in full
or in part after the expiration of five (5) years from the date such option is
granted. Options which have been granted to an employee will continue to be
exercisable only so long as the optionee remains an employee of the Corporation
or its parent or subsidiary. The Corporation may, in its sole discretion,
accelerate the option exercise period, based upon its evaluation of an
optionee's individual performance (subject to certain limitations).
The Plan may be amended or terminated by the Board of Directors at any
time, but no action of the Board of Directors, unless approved by shareholders,
may increase the maximum number of shares to be offered for sale or issued under
the Plan (except as permitted under certain anti-dilution
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provisions), change the manner of determining the minimum option price or the
price of outstanding options or terms of payments, extend the term of the Plan
or the period during which options may be granted or exercised, or change the
description of the class of persons eligible to receive options under the Plan.
Approval of the Plan by the shareholders is being sought in order to comply
with the Rules of the National Association of Securities Dealers, Inc. regarding
the issuance of securities, Section 162(m) of the Code regarding deductions of
compensation to employees in excess of $1,000,000 per annum and Section 422 of
the Code and Rule 16b-3 promulgated under the Securities and Exchange Act of
1934, as amended, regarding incentive stock option plans.
FEDERAL INCOME TAX CONSEQUENCES
Neither the Corporation, the Executive Compensation Committee nor any
member thereof makes or shall make any representation or warranty to any
participant regarding the Federal or State income tax consequences or effects of
participation in the Plan.
Without in any way limiting the foregoing, the following is a brief
discussion of the Federal income tax consequences of transactions under the Plan
based on the Code. Options granted under the Plan are intended to qualify as
incentive stock options ("Incentive Options") under Section 422 of the Code.
This discussion is not intended to be exhaustive and does not describe state or
local tax consequences.
INCENTIVE OPTIONS
No taxable income is realized by the optionee upon the grant or exercise of
an Incentive Option. If Common Stock is issued to an optionee pursuant to the
exercise of an Incentive Option, and if no disqualifying disposition of such
shares is made by such optionee within two years after the date of grant or
within one year after the transfer of such shares to such optionee, then (1)
upon sale of such shares, any amount realized in excess of the option price will
be taxed to such optionee as a long-term capital gain and any loss sustained
will be a long-term capital loss, and (2) no deduction will be allowed to the
optionee's employer for Federal income tax purposes.
If the Common Stock acquired upon the exercise of an Incentive Option is
disposed of prior to the expiration of either holding period described above,
generally (1) the optionee will realize ordinary income in the year of
disposition in an amount equal to the excess (if any) of the fair market value
of such shares at exercise (or, if less, the amount realized on the disposition
of such shares) over the option price paid for such shares, and (2) the
optionee's employer will be entitled to deduct such amount for Federal income
tax purposes if the amount represents an ordinary and necessary business
expense. Any further gain (or loss) realized by the optionee will be taxed as
short-term or long-term capital gain (or loss), as the case may be, and will not
result in any deduction by the employer.
Subject to certain exceptions for disability or death, if an Incentive
Option is exercised more than three months following termination of employment,
the exercise of the Incentive Option will generally be taxed as the exercise of
a Non-Statutory Option (defined below).
The exercise of an Incentive Option will give rise to an alternative
minimum tax adjustment that may result in alternative minimum tax liability for
the optionee, unless the optionee engages, within the same year of exercise, in
a disqualifying disposition of the shares received upon exercise. Each optionee
is potentially subject to the alternative minimum tax. In substance, a taxpayer
is required to pay the higher of his alternative minimum tax liability or his
"regular" tax liability. As a result, a taxpayer has to determine his potential
liability under the alternative minimum tax.
In general, for purposes of the alternative minimum tax, the exercise of an
Incentive Option will be treated essentially as if it were the exercise of a
Non-Statutory Option. As a result, the rules of Section 83 of the Code relating
to transfers of property, including restricted property, will apply in
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determining the optionee's alternative minimum taxable income. Consequently, an
optionee exercising an Incentive Option with respect to unrestricted Common
Stock will have income, for purposes of determining the base for the application
of the alternative minimum tax, in an amount equal to the difference between the
option price paid for the shares and the fair market value of the shares, if
unrestricted, on the date of exercise.
NON-STATUTORY OPTION
In the case of an option that fails to qualify as an Incentive Option (a
"Non-Statutory Option"), (1) no income is realized by the optionee at the time
the Non-Statutory Option is granted; (2) generally, at exercise, ordinary income
is realized by the optionee in an amount equal to the difference between the
option price paid for the shares and the fair market value of the shares, if
unrestricted, on the date of exercise, and the optionee's employer is generally
entitled to a tax deduction in the same amount subject to applicable tax
withholding requirements; and (3) at sale, appreciation (or depreciation) after
the date of exercise is treated as either short-term or long-term capital gain
(or loss) depending on how long the shares have been held.
A copy of the full text of the Plan is attached hereto as Exhibit A.
Vote Required for Adoption of Proposal No. 4
Approval of Proposal No. 4 will require a favorable vote of a majority of
the outstanding shares of Voting Stock.
The Board of Directors recommends that shareholders vote "FOR" Proposal No. 4.
PROPOSAL NO. 5 -- RATIFICATION OF GRANT OF CERTAIN STOCK OPTIONS
In connection with the financing of the Corporation's proposed acquisition
of Paramount Communications Inc., a Delaware corporation ("Paramount"), during
the latter part of the fiscal year ended January 31, 1994, the Corporation and
BellSouth Corporation ("BellSouth") entered into a Memorandum of Understanding,
dated as of November 11, 1993 (the "Memorandum of Understanding"), pursuant to
which, among other things, if the Corporation's efforts to acquire Paramount
were terminated or abandoned, BellSouth would have an option to purchase
directly from the Corporation, during the six-month period following such
termination or abandonment, 8,627,934 shares of Common Stock of the Corporation
for an aggregate purchase price of $517,676,040. The Corporation also entered
into a Commitment Letter, dated November 11, 1993, with Comcast, Advance
Publications, Inc. ("Advance"), and Cox Enterprises, Inc. ("Cox"), pursuant to
which, among other things, if the Corporation terminated or abandoned its
interest in pursuing the acquisition of Paramount, then each of Advance and Cox
would be entitled to purchase 2,833,333 shares of Common Stock of the
Corporation for an aggregate purchase price of $170,000,000. Based on the
foregoing, the options were in effect granted at an exercise price of $60 per
share. On November 11, 1993, the closing market price for the Corporation's
Common Stock was $51.75 per share. In accordance with the foregoing terms, the
Corporation, BellSouth, Advance and Cox entered into a Stock Option Agreement,
dated as of February 15, 1994 (the "Stock Option Agreement"), pursuant to which,
among other things, the Corporation granted to BellSouth, Advance and Cox the
above-described options to purchase Common Stock of the Corporation. These
options were granted in connection with the obligations of BellSouth, Advance
and Cox to purchase securities of the Corporation if the Corporation's efforts
to acquire Paramount were successful. These options will be exercisable during
the period (the "Option Period") commencing on the date of the Corporation's
public announcement of termination of its efforts to acquire Paramount (February
15, 1994) and will end on the later of the date that is (i) August 15, 1994, or
(ii) if approval of the stockholders of the Corporation of the issuance of these
options to BellSouth, Advance and Cox is required, ten (10) business days after
the stockholders vote with respect to such matter (whether or not such approval
is received). The options will be exercisable by BellSouth, Advance and Cox in
whole only at any time during the Option Period. If the options are exercised,
the proceeds will be used for general corporate purposes, including potential
future
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acquisitions and the expansion of existing lines of business, expanding new
lines of business outside the scope of its present cable television Home
Shopping programming services, and taking fuller advantage of emerging new
technologies. Pending such uses, it is anticipated that the proceeds would be
invested in short-term interest bearing investments.
A copy of the text of the Stock Option Agreement (without exhibits and
schedules) is attached hereto as Exhibit B. Approval by the shareholders of the
grant of stock options under the Stock Option Agreement is being sought in order
for the Corporation to comply with Section 6(a) of the Stock Option Agreement.
Vote Required for Adoption of Proposal No. 5
Approval of Proposal No. 5 will require a favorable vote of a majority of
the outstanding shares of Voting Stock.
The Board of Directors recommends that shareholders vote "FOR" Proposal No. 5.
CERTAIN TRANSACTIONS AND BUSINESS RELATIONSHIPS
The Commission requires disclosure of certain business transactions or
relationships between the Corporation and other organizations with which any of
the Corporation's directors or executive officers is affiliated as an owner,
partner, director or executive officer. From time to time, the Corporation has
engaged in transactions with or has used products or services of organizations
with which directors or executive officers of the Corporation are affiliated
when it has been appropriate and reasonable, and it is expected that the
Corporation will continue to do so.
On December 1, 1992, Comcast and Liberty Media, both significant
shareholders of the Corporation, formed a group (the "Comcast-Liberty Group")
and entered into an agreement (the "Participation Agreement") setting forth
their collective plans and proposals with respect to the Corporation.
On December 9, 1992, the Board of Directors of the Corporation unanimously
approved the terms of a proposed summary term sheet (the "Summary Term Sheet"),
pursuant to which (subject to certain conditions) (i) Barry Diller would obtain
a significant equity position in the Corporation from Liberty Media and Joseph
M. Segel and his wife and become Chairman of the Board and Chief Executive
Officer of the Corporation, (ii) Comcast, Liberty Media and Mr. Diller would
enter into a Stockholders Agreement (the "Stockholders Agreement") pursuant to
which Comcast, Liberty Media and Mr. Diller would agree to act together with
respect to purchases, dispositions and voting of the Corporation's securities,
and (iii) Mr. Diller would be granted, subject to his entering into an
employment agreement with the Corporation, 160,000 shares of Common Stock,
options to purchase 3,000,000 shares of Common Stock at $30.43 per share and
options to purchase an additional 3,000,000 shares of Common Stock at the market
price plus an amount equal to 10% of the market price plus an agreed upon rate
approximating the rate of inflation per year.
Pursuant to agreements entered into on December 9, 1992, on December 11,
1992, Mr. Diller purchased an aggregate of 420,000 shares of Common Stock from
Mr. Segel and his wife for an aggregate purchase price of $12.6 million in cash,
and on January 15, 1993, Mr. Diller purchased an additional 420,000 shares of
Common Stock from Liberty Media for $12.6 million in cash.
On January 18, 1993, Mr. Diller became Chairman of the Board and Chief
Executive Officer of the Corporation, and Mr. Segel retired from such positions.
The Corporation entered into the Compensation Agreement with Mr. Diller and
Arrow in connection with Mr. Diller's serving the Corporation as Chairman of the
Board and Chief Executive Officer. For a description of the terms of that
agreement, see "Executive Compensation -- Employment Agreements -- Mr. Barry
Diller" above.
On July 16, 1993, Comcast, Liberty Media, Arrow Investments, L.P. and Arrow
Investments, Inc. (collectively, "Arrow"), and certain affiliates of the
foregoing persons (collectively, the "QVC 13D Group"), which collectively own
approximately 34.7% of the voting power of the currently outstanding
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<PAGE> 23
voting securities of the Corporation, entered into a Stockholders Agreement (the
"Stockholders Agreement") which sets forth the terms and conditions that the QVC
13D Group has agreed to be subject to with respect to the Corporation and "QVC
Securities" (which is referred to in the Stockholders Agreement as "Company
Securities" and is used herein as such term is defined therein). Pursuant to the
Stockholders Agreement, all QVC Securities held by the QVC 13D Group are subject
to the provisions thereof, which governs the manner of all dispositions,
acquisitions and voting of QVC Securities by the QVC 13D Group. Such agreement
provides, among other things, that (i) the QVC 13D Group must hold certain
specified amounts of the outstanding Voting Stock in order to maintain certain
rights under the Stockholders Agreement (which provision does not apply to Arrow
so long as Mr. Diller is Chairman of the Board and Chief Executive Officer of
the Corporation), (ii) all Voting Stock held by the QVC 13D Group will be voted
for the election of a slate of directors approved by the QVC 13D Group (with
each member of the QVC 13D Group being entitled to designate an equal number of
Stockholder Designees (as defined therein) included in such slate) and (iii)
each member of the QVC 13D Group shall use its reasonable best efforts to reach
agreement with the other members of the QVC 13D Group as to the voting of all
Voting Stock on all matters presented to the Corporation's stockholders and to
vote or to use its reasonable best efforts to cause each Stockholder Designee to
cast his vote on all matters presented to the Corporation's Board of Directors
in accordance with such agreement, subject, with respect to director action, to
directors' fiduciary duties to the Corporation's stockholders; otherwise, each
member of the QVC 13D Group shall vote in the manner agreed to by at least two
of the three members of the QVC 13D Group; provided, however, that (x) if there
are only two Eligible Stockholders (as defined therein) and they cannot reach a
unanimous decision, each member of the QVC 13D Group may vote in the manner it
chooses and (y) if there is only one Eligible Stockholder, each member of the
QVC 13D Group shall be bound to vote all QVC Securities as instructed by such
Eligible Stockholder.
Subject to certain limited exceptions set forth in the Stockholders
Agreement, in the event Mr. Diller disagrees in good faith with Comcast and
Liberty Media as to any matter presented to a vote of the Board of Directors or
stockholders of the Corporation, Mr. Diller has the right to declare a deadlock
and initiate an auction process whereby Arrow, on the one hand, and Comcast and
Liberty Media, on the other hand, may bid on the entire interest in the
Corporation held by the other, with the winning bidder having six months to
complete the resulting purchase transaction. Comcast and Liberty Media also have
the right to purchase Arrow's entire interest in the Corporation upon Mr.
Diller's death or disability at its Fair Market Value (as defined in the
Stockholders Agreement).
The Stockholders Agreement contains a number of restrictions on the ability
of the QVC 13D Group to dispose of and acquire QVC Securities and certain rights
of the QVC 13D Group to participate in any such disposition or acquisition by
another member of the QVC 13D Group.
The Stockholders Agreement will terminate upon the earlier of (i) the 100th
anniversary of the date of the Stockholders Agreement and (ii) the dissolution
or liquidation of the Corporation.
The description herein of the Stockholders Agreement is qualified in its
entirety by reference to such agreement, a copy of which is an Exhibit to the
Schedule 13D of Comcast, Liberty Media and Mr. Diller filed with the Commission
in July 1993, and the amendments thereto, each of which is incorporated by
reference herein.
On May 19, 1994, Liberty Media filed a Schedule 13D (Amendment No. 25) with
the Commission, in which it states that it no longer may be deemed to constitute
a "group" with Comcast and Mr. Diller for purposes of Rule 13d-5 under the
Securities Exchange Act of 1934 (the "Exchange Act") with respect to the
respective beneficial ownership of Liberty Media, Comcast and Mr. Diller of the
Common Stock of the Corporation. As a result of the expiration of the 90-day
period following the termination of the Corporation's bid for Paramount
Communications Inc., within which Liberty Media was entitled to be elect to be
reinstated as an Eligible Stockholder under the Stockholders Agreement and
Liberty Media's decision not to be so reinstated, Liberty Media no longer may be
deemed to constitute a "group" with Comcast and Mr. Diller for purposes of Rule
13d-5 under the
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Exchange Act with respect to the respective beneficial ownership of the Common
Stock of Liberty Media, Comcast and Mr. Diller. Except for Mr. Diller's options
pursuant to the Liberty-QVC Agreement and the Stockholders Agreement to purchase
from Liberty Media the equivalent of 1,627,934 shares of Common Stock, Liberty
Media no longer has any contract, agreement or understanding with Comcast or Mr.
Diller with respect to the disposition or voting of the outstanding equity
securities of the Corporation. As a result, except as noted in its Schedule 13D
filing, Liberty Media has sole voting and dispositive power with respect to all
10,255,867 shares of Common Stock beneficially owned by it and no longer has any
rights or obligations under the Stockholders Agreement.
Pursuant to the Stock Option Agreement (see description of Proposal No. 5),
BellSouth has agreed that if it purchases Common Stock pursuant thereto,
BellSouth will become a party to the Stockholders Agreement in accordance with
the terms of the Understanding Among Stockholders. The Stock Option Agreement,
among other things, provides (as contemplated by the Memorandum of
Understanding) that after BellSouth becomes a party to the Stockholders
Agreement, so long as Comcast, Arrow, Liberty Media or BellSouth remains an
Eligible Stockholder (as defined in the Stockholders Agreement), the Corporation
will not take any action to (i) block or prevent open market purchases by such
Eligible Stockholder or Liberty Media (if it has become a party to the
Stockholders Agreement under the terms of the Liberty-QVC Agreement) of Common
Stock so long as such entity's total fully diluted voting power of the
Corporation does not exceed thirty-five percent of the fully diluted outstanding
voting power of the Corporation or (ii) discriminate against such Eligible
Stockholder or Liberty Media (if it has become a party to the Stockholders
Agreement pursuant to the Liberty-QVC Agreement) as a stockholder or deprive
BellSouth, Comcast, Arrow or Liberty Media (if it has become a party to the
Stockholders Agreement pursuant to the Liberty-QVC Agreement) of full rights as
a stockholder of the Corporation.
Under the Stock Option Agreement, the Corporation, BellSouth, Cox and
Advance also agreed that, for a period of 18 months from February 15, 1994, if
the Corporation proposes to invest in, acquire or form all or part of an
originator, owner or other producer of programming or content (including,
without limitation, a film studio, network, film library or television
programming producer) in a transaction valued at greater than $250 million, and
if the Stock Option Agreement has not terminated with respect to the applicable
purchaser thereunder or such purchaser has acquired shares of Common Stock
pursuant to the Stock Option Agreement, the Corporation will give such purchaser
along with Comcast, (and Liberty Media, if it has become a party to the
Stockholders Agreement), to the extent the Corporation requires third party
financing in connection with such transaction, a preferential opportunity,
subject to applicable law, to participate meaningfully in any such transaction
on an arm's-length basis and will negotiate in good faith concerning any such
party's participation therein. None of BellSouth, Comcast and Liberty Media will
be entitled to any such preferential opportunity, however, to the extent it is
not legally permitted to participate in the relevant transaction.
Contemporaneously with the execution of the Stock Option Agreement, Comcast and
Liberty Media entered into an Acknowledgement and Agreement dated as of February
15, 1994, pursuant to which Comcast and Liberty Media acknowledged and agreed to
the foregoing provisions of the Stock Option Agreement and further agreed that
such provisions modified and replaced the $500 million stock option provisions
of the Memorandum of Understanding.
Comcast, Liberty Media, BellSouth, Advance, Arrow and Cox entered into a
Letter Agreement dated as of February 15, 1994, pursuant to which the parties
agreed that the Agreement Among Stockholders (whereby each of them agreed to
vote all of their shares of voting securities of the Corporation, if any, in
favor of any merger with Paramount and the issuance of securities in connection
therewith) was terminated except that (i) each of Comcast, Liberty Media and
Arrow will be required to vote all of its equity securities of the Corporation
(to the extent such securities are entitled to vote with respect thereto) in
favor of the issuance of the shares of Common Stock pursuant to the Stock Option
Agreement and (ii) each of Comcast, Liberty Media, Arrow and BellSouth remains
bound by the provision of the Agreement Among Stockholders acknowledging the
Liberty-QVC Agreement.
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Brian L. Roberts and Ralph J. Roberts, directors and nominees for election
as directors of the Corporation, are President and Chairman of the Board,
respectively, of Comcast.
The law firm of Gang, Tyre, Ramer & Brown, Inc., of which Mr. Ramer is a
principal, has represented Mr. Diller in his individual capacity. Mr. Ramer and
Mr. Diller are directors and nominees for election as directors of the
Corporation.
The QVC 13D Group has indicated to the Corporation its intention to vote
all shares of Voting Stock beneficially owned by them in favor of the nominees
to the Board of Directors set forth in Proposal No. 1 and in favor of Proposal
Nos. 2, 3, 4, and 5 as described above.
Each cable system operator which broadcasts the Corporation's program,
including Comcast, Liberty Media, Time Warner Inc. and their respective
affiliates, has entered into an Affiliation Agreement with the Corporation,
providing that the cable system operator will receive a percentage of net sales
within its service area in return for transmitting the Corporation's program as
part of the cable system operator's basic cable service. The current commission
rate is five percent.
The Corporation has agreed that any future transaction between the
Corporation and any officer, director, key employee or a shareholder owning at
least 10% of the outstanding capital stock of the Corporation, or an affiliate
of any such person, will be approved by a majority of the disinterested
directors of the Corporation and will be on terms no less favorable to the
Corporation than could be obtained from an unaffiliated third party.
On October 31, 1989, the Company obtained a loan from Comcast Financial
Corporation, an affiliate of Comcast, in the principal amount of $30 million to
be used to provide a portion of the financing of the merger of QVC Acquisition
Corp. with and into CVN Companies, Inc., whereby CVN Companies, Inc. became a
wholly-owned subsidiary of the Corporation. Comcast Financial Corporation
received a convertible promissory note (the "Convertible Note") in an equal
principal amount and QVC Common Stock purchase warrants. Interest for the first
year of the Convertible Note was paid in advance by the issuance by the
Corporation to Comcast Financial Corporation of 1,000,000 Common Stock purchase
warrants. Interest for the second year was paid by the issuance by the
Corporation to Comcast Financial Corporation of warrants to purchase Common
Stock and shares of Common Stock. On October 31, 1992, Comcast Financial
Corporation converted the Convertible Note into 1,704,546 shares of Common
Stock.
On January 31, 1990, the Corporation obtained a loan from TCI Development
Corporation in the principal amount of $50 million under an agreement entered
into at the time of the acquisition of CVN Companies, Inc. The proceeds of the
loan were used to repay the first term loan installment due under the Credit
Agreement entered into at the time of the acquisition of CVN Companies, Inc. In
1991, TCI Development Corporation assigned the promissory note evidencing such
loan to Liberty Media. In satisfaction of such note, concurrently with the
closing of the public offering of the Corporation's Common Stock in October
1991, the Corporation (i) paid to Liberty Media approximately one-half of the
outstanding principal and interest of the note from the proceeds of such public
offering, (ii) issued to Liberty Media 2,269,552 shares of Common Stock, and
(iii) waived certain rights to repurchase 400,000 shares of Common Stock at
$1.00 per share from Liberty Media, which rights resulted from the carriage
shortfall of an affiliate of Liberty Media under its Affiliation Agreement with
the Corporation.
On December 23, 1992, the Company extended an offer (the "Offer") to all of
the holders (the "Warrantholders") of warrants (the "Warrants") to purchase
Common Stock to convert any or all of the Company's 9,479,913 outstanding
Warrants into shares of Common Stock. Pursuant to the terms of the Offer, the
Company offered, at the Warrantholder's election, (i) to issue to the
Warrantholder, in exchange for the Warrantholder's Warrants, shares of Common
Stock with an aggregate value (each share being valued at $37.75 per share,
representing the average of the closing prices on the NASDAQ National Market
System for the Common Stock for the five trading days ending December 22, 1992
(the "Conversion Price")) equal to the difference between the Conversion Price
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and the price at which the Warrants were exercisable (the "Exercise Price"),
multiplied by the number of shares of Common Stock into which the Warrants were
exercisable, or (ii) if the Warrantholder elected to exercise its Warrants by
making payment of the Exercise Price in cash and delivery of the Warrant
certificate, to issue the number of shares of Common Stock into which such
Warrants were exercisable and repurchase from the Warrantholder, at the
Conversion Price, all of the shares of Common Stock that could be purchased
using all of the proceeds of the payment by the Warrantholder of the Exercise
Price. In connection with election (ii) described above, the Company also
offered to accept payment of the Exercise Price in shares of Common Stock valued
at the Conversion Price. As a result of acceptances of the Offer by Liberty
Media, Time Warner, Inc. and other Warrantholders (but not including Comcast),
the Company has issued an aggregate of 6,790,551 shares of Common Stock
(consisting of 6,385,979 shares issuable upon exercise of Warrants and 404,572
shares issuable upon exchange of Warrants), has repurchased 998,457 shares of
Common Stock (with $37,692,000 cash proceeds received as a result of the
exercise of Warrants) and accepted 1,424,404 shares of Common Stock as payment
of the Exercise Price for certain Warrants, for a net issuance by the Company of
4,367,691 shares. Warrants to purchase 2,418,908 shares of Common Stock remain
outstanding. Assuming that all such Warrants are exercised, the Company will
receive approximately $38,604,000 in aggregate gross proceeds.
OTHER BUSINESS
Management knows of no other matters that will be presented at the Annual
Meeting. However, if any other matter properly comes before the Annual Meeting,
or any adjournment thereof, it is intended that proxies in the accompanying form
will be voted in support of the judgment of Management of the Corporation.
FINANCIAL STATEMENTS
A copy of the Corporation's Financial Statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations are
included on pages 28 to 52 of the Corporation's Annual Report to Shareholders
for the fiscal year ended January 31, 1994, which accompanies the Proxy
Statement.
SHAREHOLDER PROPOSAL
To be eligible for inclusion in the Corporation's proxy materials for the
1995 Annual Meeting of Shareholders, a proposal intended to be presented by a
shareholder for action at that meeting must, in addition to meeting the
shareholder eligibility and other requirements of the Securities and Exchange
Commission's rules governing such proposals, be received not later than January
28, 1995 by Neal S. Grabell, Secretary of the Corporation, at the Corporation's
principal executive offices, 1365 Enterprise Drive, West Chester, Pennsylvania
19380.
COST OF SOLICITATION
The cost of soliciting proxies in the accompanying form will be borne by
the Corporation. In addition to solicitation by mail and by the Corporation's
regular officers and employees personally or by telephone, telegram, facsimile
transmission or express mail, arrangements may be made with brokerage houses and
other custodians, nominees and fiduciaries to send proxies and proxy material to
their principals, and the Corporation may reimburse them for any attendant
expenses.
It is important that your shares be represented at the meeting. Therefore,
whether or not you expect to be present in person, and regardless of the amount
of your holdings, you are respectfully requested to complete and sign the
enclosed proxy and promptly return it in the enclosed stamped
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addressed envelope. This will not prevent you from voting in person at the
meeting. It will, however, help to assure a quorum and avoid added proxy
solicitation costs.
By Order of the Board of Directors
Neal S. Grabell
Secretary
Dated: May , 1994
West Chester, Pennsylvania
A COPY OF THE CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED JANUARY 31, 1994 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
AVAILABLE WITHOUT CHARGE TO THOSE SHAREHOLDERS WHO WOULD LIKE MORE DETAILED
INFORMATION CONCERNING THE CORPORATION. TO OBTAIN A COPY, PLEASE WRITE TO: NEAL
S. GRABELL, SECRETARY, QVC, INC., 1365 ENTERPRISE DRIVE, WEST CHESTER,
PENNSYLVANIA 19380.
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EXHIBIT A
QVC NETWORK, INC.
1993 QUALIFIED INCENTIVE STOCK OPTION PLAN
1. Purpose of the Plan
This 1993 Qualified Incentive Stock Plan ("Plan") is intended to afford an
incentive to key managerial employees of QVC NETWORK, INC. (the "Company") to
acquire a proprietary interest in the Company and to enable the Company to
attract and retain such key employees. For purposes of this Plan, the Company's
"parent" or "subsidiaries", if any, shall include any corporation which is a
"parent corporation" or a "subsidiary corporation" within the meaning of
Sections 425(e) and (f) of the Internal Revenue Code of 1986, as hereafter
amended (the "Code").
2. The Stock
Except as provided in Sections 6 and 7, the number of shares of stock which
may be optioned and sold under the Plan is 750,000 shares of Common Stock, $.01
par value, of the Company ("Shares"). If options granted under this Plan shall
expire or terminate for any reason without having been exercised in full, the
unpurchased Shares subject hereto shall again be available for the granting of
options under this Plan. Shares which are the subject of options to purchase may
be made available from authorized and unissued stock or from treasury stock.
3. Eligibility
An option shall be granted only to a person who at the time of the grant is
a key managerial employee of the Company or its parent or a subsidiary of the
Company. The term "key managerial employee" shall mean an employee (including
officers), who has responsibility for the management of the Company or its
parent or subsidiaries. The committee designated pursuant to Section 8
("Committee") shall determine from time to time the key managerial employees to
whom options shall be granted and the number of Shares subject to each option.
Notwithstanding the foregoing, options for not more than 100,000 shares may be
issued under the Plan to a Chairman, President or Executive Vice President of
the Company or its parent or subsidiaries, options for not more than 50,000
shares may be issued under the Plan to any Senior Vice President of the Company
or its parent or subsidiaries, options for not more than 25,000 shares may be
issued under the Plan for any Vice President of the Company or its parent or
subsidiaries, and options for not more than 10,000 shares may be issued under
the Plan for any other employee of the Company or its parent or subsidiaries.
4. Option Terms
(a) Except as otherwise provided herein, the Option Price shall be fixed
by the Committee at the time of the grant of such option and shall not be less
than 100% of the fair market value of the stock at the time the option is
granted. The Committee shall, in good faith, determine the fair market value of
the stock (without regard to any restrictions other than a restriction which, by
its terms, will never lapse) based upon a reasonable method of valuation adopted
by the Committee, or such other method as may be permitted by the Code, or
regulations or rulings promulgated thereunder. In no event shall the Option
Price be less than the par value of the Shares. The Committee will use its best
efforts to determine the fair market value of the Shares subject to the option,
but neither the Committee nor the Company will be responsible for the payment of
any tax imposed upon the participants, nor will they reimburse participants for
their payment of any tax so imposed. Neither the Company, the Committee nor any
member thereof makes or shall make any representation or warranty to any
participant regarding the Federal or State income tax consequences or effects of
participation in the Plan.
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(b) Subject to the provisions and limitations of this Plan, and subject to
applicable securities, tax and other laws and regulations, options may be
granted at such time or times and pursuant to such terms and conditions as may
be determined by the Committee during the period this Plan is in effect.
(c) Each Option shall provide that it may be exercised in not less than
such number of equal installments which may be cumulative between three and six
in number as shall be set forth in the Stock Option Agreement for such Option,
commencing from the date set forth in the Stock Option Agreement for such
Option; provided, however, that no option shall be exercised in full or in part
after the expiration of ten (10) years from the date such option is granted.
However, if the option is granted to an individual who at the time the option is
granted owns stock possessing more than ten (10%) percent of the total combined
voting power of all classes of stock of the Company or its parent or subsidiary,
such option shall not be exercisable in full or in part after the expiration of
five (5) years from the date such option is granted. Except as otherwise
specifically provided in the Stock Option Agreement between the Company and the
employee, options which have been granted to an employee will continue to be
exercisable only so long as the optionee remains an employee of the Company or
its parent or a subsidiary of the Company. Notwithstanding anything to the
contrary contained in this Section 4, the Committee may, in its sole discretion,
accelerate the option exercise period, based upon its evaluation of an
optionee's individual performance, as limited by subparagraph (d) hereof.
(d) Shares to be purchased upon the exercise of any option shall be paid
for, in full, in cash or by certified check payable to the order of the Company
(or in certificates of stock issued by the Company, which stock shall be
assigned a fair value by the Committee in its discretion) and delivered to the
Company at the time of such exercise.
(e) Each Option granted under the Plan shall be evidenced by a Stock
Option Agreement between the Company and the employee. The Committee shall
initially make all decisions as to the form of Stock Option Agreement to be
entered into with each optionee. All forms of Stock Option Agreement shall
contain such provisions, restrictions and conditions as are not inconsistent
with this Plan but need not be identical. The provisions of this Plan shall be
set forth in full or incorporated by reference in each Stock Option Agreement.
(f) Except as otherwise specifically provided in the Stock Option
Agreement between the Company and the employee, in the event an optionee retires
or otherwise ceases to be employed by the Company or its parent or any
subsidiary of the Company for any reason, including leaves of absences (other
than a termination by death, permanent and total disability within the meaning
of Section 22(e)(3) of the Code, or for cause), such employee shall have the
right to exercise any options which became exercisable prior to retirement or
cessation of employment but only within a period of three (3) months from the
date of cessation of employment (but in any event not later than the termination
date of the option), after which time any unexercised portion of all outstanding
options shall expire. If the optionee dies during such three-month period, the
executors, administrators, legatees or distributees of the optionee's estate
shall have the right to exercise such options during the remainder of such
period. In no event and under no circumstances may an option be exercised by an
employee (or his personal representative) after termination of the optionee's
employment for cause. Notwithstanding the foregoing provisions of this Section
4(f), the Stock Option Agreement between the Company and the employee may
provide that upon the cessation of the employment of such employee, such
employee shall have the right to exercise any options granted to the employee
but only within a period of three (3) months from the date of cessation of
employment (but in any event not later than the termination date of the option).
(g) In the case of an employee who becomes permanently disabled within the
meaning of Section 22(e)(3) of the Code while in the employ of the Company, or
its parent or any subsidiary of the Company, any option which was exercisable on
the date when such employee became disabled may be exercised within one (1) year
after such employee ceases employment (but in no event later than the
termination date of the option) after which time any unexercised portion of all
outstanding options shall expire.
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(h) In the event of the death of an optionee while in the employ of the
Company, its parent or any subsidiary of the Company, the executors,
administrators, legatees or distributees of the estate of the optionee shall
have the right to exercise any options which became exercisable prior to the
optionee's death but only within a period of three (3) months from the date of
the optionee's death (but in no event later than the termination date of the
option), after which time any unexercised portion of all outstanding options
shall expire. In the event an option is exercised by the executors,
administrators, legatees or distributees of the estate of the optionee, under
Subsection (f) or (h) of this Section 4, the Company shall be under no
obligation to issue Shares hereunder unless and until the Company is satisfied
that the person (or persons) exercising the option is the duly appointed legal
representative of the optionee's estate or the proper legatee or distributee
thereof.
5. Non-Transferability
No option granted hereunder shall be transferable by the optionee other
than by Will or by the laws of descent and distribution, and options shall be
exercisable, during the optionee's lifetime, only by such optionee; provided,
however, that in the event an optionee shall be subject to a legal disability,
his legal representative may exercise an option on his behalf.
6. Stock Dividends or Recapitalization
In the event of a stock dividend paid in shares of the class of stock
subject to any option outstanding hereunder, or recapitalization,
reclassification, splitup or combination of shares with respect to said class of
stock, the Committee shall make appropriate adjustments to the Option Price
under such option and to the kind and number of shares as to which such option
is then exercisable, to the end that the optionee's proportionate interest shall
be maintained as before the occurrence of such event, and in any case an
appropriate adjustment shall also be made in the total number and kind of event,
and in any case an appropriate adjustment shall also be made in the total number
and kind of shares of stock reserved for the future granting of options under
this Plan. Any such adjustment made by the Committee pursuant to this Plan shall
be binding upon the holders of all unexpired options outstanding hereunder.
7. Merger, Consolidation, Reorganization, Liquidation, Etc.
If the Company shall become a party to any corporate reorganization,
merger, liquidation, spinoff, or agreement for the sale of substantially all of
its assets and property, the Committee shall make appropriate arrangements,
which shall be binding upon the holders of unexpired options rights, for the
substitution of new options for any unexpired options then outstanding under
this Plan, or for the assumption of any such unexpired options, to the end that
the optionee's proportionate interest shall be maintained as before the
occurrence of such event.
8. Administration of Plan
(a) This Plan shall be administered by the Executive Compensation
Committee (the "Committee") appointed by the Board of Directors. The Committee
shall consist of a minimum of 2 and a maximum of 3 members of the Board of
Directors, each of whom shall be a "disinterested person" as defined in Rule
16b-3 under the Securities Exchange Act of 1934. The Committee shall, in
addition to its other authority and subject to the provisions of this Plan, have
authority in its sole discretion to determine who are the officers and key
employees of the Company or any parent or subsidiary of the Company eligible to
receive options under this Plan; which officers and key employees shall in fact
be granted an option or options; whether the option shall be an incentive stock
option or a nonqualified stock option; the number of Shares to be subject to
each of the options; the time or times at which the options shall be granted;
and, subject to Section 4 hereof, the price at which each of the options is
exercisable, the rate of option exercisability; and the duration of the option.
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(b) The Committee shall adopt such rules for the conduct of its business
and administration of this Plan as it considers desirable. A majority of the
members of the Committee shall constitute a quorum for all purposes. The vote or
written consent of a majority of the members of the Committee on a particular
matter shall constitute the act of the committee on such matter. The Committee
shall have the exclusive right to construe the Plan and the options issued
pursuant to it, correct defects, supply omissions and reconcile inconsistencies
to the extent necessary to effectuate the Plan and the options issued pursuant
to it, and such action shall be final, binding and conclusive upon all parties
concerned. No member of the Committee or the Board of Directors shall be liable
for any act or omission (whether or not negligent) taken or omitted in good
faith, or for the exercise of authority or discretion granted in connection with
this Plan to the Committee or the Board of Directors, or for the acts or
omissions of any other members of the Committee or the Board of Directors.
Subject to the numerical limitations on Committee membership set forth in
Subsection 8(a) hereof, the Board of Directors may at any time appoint
additional members of the Committee and may at any time remove any member of the
Committee with or without cause. Vacancies in the Committee, however caused, may
be filled by the Board of Directors if it so desires.
9. Effective Date
This Plan shall become effective upon adoption by the Board of Directors,
subject to the approval by holders of a majority of the Common Shares present in
person or by proxy and entitled to vote at the 1994 Annual Meeting of
Shareholders. Options may be granted under the Plan prior to receipt of such
approval, provided that, in the event such approval is not obtained, the Plan
and all Options granted under the Plan shall be null and void and of no force
and effect.
10. Modification, Amendment, Suspension and Termination
Unless sooner terminated, this Plan shall expire ten (10) years from the
date the Plan is adopted by the Board of Directors, or from the date of
shareholder approval, whichever is earlier. The Plan may be altered, suspended,
discontinued or terminated by the Board of Directors at any time, but no action
of the Board of Directors, unless approved by the shareholders, may increase the
maximum number of shares to be offered for sale or issued under the Plan (except
as permitted under Sections 6 and 7 above), change the manner of determining the
minimum option price or the price of outstanding options or terms of payments,
extend the term of the Plan or the period during which options may be granted or
exercised, or change the description of the class of persons eligible to receive
options under the Plan. Nothing contained herein shall be construed to permit a
termination, modification or amendment adversely affecting the rights of any
optionee under an existing option theretofore granted without the consent of
such optionee.
11. General
(a) Nothing contained in this Plan or any option granted pursuant to this
Plan shall confer upon any employee the right to continue in the employ of the
Company or its parent or subsidiary or any other corporation affiliated with the
Company, or interfere in any way with the rights of the Company or its parent or
subsidiary or any corporation affiliated with the Company to terminate his or
her employment.
(b) Corporate action constituting an offer of stock for sale to any
employee under the terms of the options to be granted hereunder shall be deemed
completed as of the date when the Committee authorizes the grant of the option
to the employee, regardless of when the option is actually delivered to the
employee or acknowledged or agreed to by the employee.
(c) The provisions of this Plan shall be binding upon and inure to the
benefit of the parties and their respective heirs, executors, administrators,
personal representatives, successors and permitted assigns.
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(d) Wherever used herein, the singular shall be deemed to refer to and
include the plural, and vice versa, where appropriate. Wherever used herein, the
masculine shall be deemed to refer to and include the feminine and the neuter,
and vice versa, where appropriate.
(e) Nothing contained in this Plan or in any option agreement issued
hereunder shall impose any liability or responsibility on the Company, the Board
of Directors, the Committee or any member of either of the foregoing to pay, or
reimburse any participant for the payment of any tax arising out of, or on
account of the issuance of an option or options hereunder to any participant, a
participant's exercise of any option issued under this Plan or a participant's
sale, transfer or other disposition of any Shares acquired pursuant to the
exercise of an option issued hereunder. Any person receiving an option hereunder
shall expressly acknowledge and agree that such participation is voluntary and
that the participant will be solely responsible for all taxes to which he or she
may be or become subject as a consequence of such participation.
(f) As a condition to the exercise of any Option, the Company may require
that an employee satisfy, through withholding from other compensation or
otherwise, the full amount of all federal, state and local income and other
taxes required to be withheld in connection with such exercise.
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EXHIBIT B
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT dated as of February 15, 1994 (this "Stock Option
Agreement"), among QVC NETWORK, INC., a Delaware corporation (the "Company"),
COX ENTERPRISES, INC., a Delaware corporation ("Cox"), ADVANCE PUBLICATIONS,
INC., a New York corporation ("Advance"), and BELLSOUTH CORPORATION, a Georgia
corporation ("BellSouth", and Cox, Advance and BellSouth each individually a
"Purchaser").
WHEREAS the Company had proposed to acquire (the "Acquisition") Paramount
Communications Inc., a Delaware corporation; and
WHEREAS the Acquisition has been abandoned, and each Purchaser wishes to
have the option to acquire from the Company shares of the Company's Common
Stock, par value $.01 per share (the "Common Stock"), as provided in this Stock
Option Agreement.
NOW, THEREFORE, in consideration of the representations, warranties and
agreements herein contained, the parties hereto agree as follows:
1. Grant of Options. The Company hereby grants to (i) BellSouth an
irrevocable option (the "BellSouth Option") to purchase 8,627,934 shares of
Common Stock (the "BellSouth Optioned Shares") for a purchase price of
$517,676,040 (the "BellSouth Purchase Price"), (ii) Cox an irrevocable option
(the "Cox Option") to purchase 2,833,333 shares of Common Stock (the "Cox
Optioned Shares") for a purchase price of $170,000,000 (the "Cox Purchase
Price") and (iii) Advance an irrevocable option (the "Advance Option") to
purchase 2,833,333 shares of Common Stock (the "Advance Optioned Shares") for a
Purchase Price of $170,000,000 (the "Advance Purchase Price"). The period during
which the BellSouth Option, the Cox Option or the Advance Option may be
exercised (the "Option Period") shall begin on the date hereof and shall end
(the "Option Expiration Date") at 5:00 p.m. on the later of the date that is (i)
August 15, 1994, or (ii) if receipt of the approval of the stockholders of the
Company of the issuance of the BellSouth Optioned Shares, the Cox Optioned
Shares or the Advance Optioned Shares is required pursuant to Section 5(i) of
Part III of Schedule D of the By-laws of the National Association of Securities
Dealers, Inc. (the "Stockholder Approval"), ten Business Days after the
stockholders vote with respect to such matter (whether or not such approval is
received, and provided that consummation of a Closing (as defined in Section
2(a)) shall remain subject to satisfaction of all conditions contained herein,
including, without limitation, the conditions contained in Sections 8(iv) and
9(v)).
2. Exercise of the Options; Termination. (a) BellSouth, Cox or Advance may
exercise the BellSouth Option, Cox Option or Advance Option, as the case may be,
in whole only at any time during the Option Period. In the event that BellSouth,
Cox or Advance wishes to exercise the BellSouth Option, the Cox Option or the
Advance Option, as the case may be, such exercising party shall give written
notice thereof (the date of such notice being the "Notice Date") to the Company
and the closing in connection therewith (a "Closing") shall take place at the
offices of Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, N.Y.
10019, on a date (subject to the provisions of paragraph (b) below) not later
than the later of ten Business Days following the Notice Date or two Business
Days following the satisfaction or waiver of the Closing conditions contained in
Sections 8 and 9 of this Stock Option Agreement; provided, however, that
(subject to the provisions of paragraph (b) below) if a Closing does not occur
before the tenth Business Day after the Option Expiration Date (the "Option
Termination Date"), the BellSouth Option, the Cox Option or the Advance Option,
as the case may be, shall automatically terminate on such date and the parties
with respect to whom such termination has occurred shall have no further rights
or obligations hereunder.
(b) To the extent that the condition to BellSouth's obligation to purchase
the BellSouth Optioned Shares set forth in Section 8(vii) hereof (the "MFJ
Condition") has not been satisfied, the Closing with respect thereto (but not
the Option Period) may be delayed by BellSouth (if BellSouth
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has given the written notice of exercise described above during the Option
Period) until the tenth Business Day after satisfaction of the MFJ Condition,
and the consummation of the exercise of the BellSouth Option may be conditioned
upon satisfaction of the MFJ Condition; provided, however, that if the Company
fulfills its obligations pursuant to Section 6(c) hereof and BellSouth
nevertheless is unable to acquire the BellSouth Optioned Shares as a result of
the failure of the MFJ Condition to be satisfied on or prior to February 15,
1996, then the BellSouth Option shall automatically be terminated on such date
and the Closing with respect thereto shall not occur (the "MFJ Option
Termination Date"). BellSouth agrees to provide the Company prompt written
notice of the receipt of approval, waiver or other resolution of any MFJ
problems, with the date for the Closing then being the 10th Business Day after
the day such notice is given. The term "Business Day" shall mean any day of the
year other than a day on which banks are required or authorized to be closed in
the City of New York.
(c) On the Option Expiration Date, if the BellSouth Option, the Cox Option,
or the Advance Option, as the case may be, has not been exercised on or before
such date, or upon termination of the BellSouth Option, the Cox Option or the
Advance Option, as the case may be, on the Option Termination Date or the MFJ
Option Termination Date, the terms of this Stock Option Agreement shall
thereafter become void and have no effect as to the Company and the Purchaser
with respect to whom such termination or expiration occurs, and no such party
hereto or directors or officers in respect thereof, except for the obligations
set forth in Section 6(f), and except that nothing herein will relieve any party
from liability for any breach of this Stock Option Agreement (except a
non-wilful breach of the representations and warranties in Sections 4 and 5, in
which case termination of this Stock Option Agreement shall be the sole remedy)
prior to such termination.
3. Payment of Purchase Price and Delivery of Certificate for Optioned
Shares. At a Closing of the BellSouth Option, the Cox Option or the Advance
Option, as the case may be, (i) BellSouth will pay the Company the BellSouth
Purchase Price, Cox will pay the Company the Cox Purchase Price and Advance will
pay the Company the Advance Purchase Price, in each case by wire or intrabank
transfer in immediately available funds to an account or accounts designated by
the Company as far in advance of such Closing as is reasonably practicable and
(ii) the Company will deliver to BellSouth, Cox or Advance, as the case may be,
a duly executed certificate or certificates representing the BellSouth Optioned
Shares, Cox Optioned Shares or Advance Optioned Shares, as the case may be,
registered in the name of BellSouth, Cox or Advance, as the case may be, in the
denominations designated by BellSouth, Cox or Advance, as the case may be, in
its notice of exercise.
4. Representations and Warranties of Company. The Company hereby makes the
following representations and warranties to each Purchaser (except the
representation and warranty set forth in paragraph (o), which is for the sole
benefit of BellSouth):
(a) Corporate Existence. The Company and each corporation which is a
"significant subsidiary" as defined in Regulation S-X under the Securities Act
of 1993, as amended (the "Securities Act"), of the Company (a "Significant
Subsidiary") is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation and has full corporate
power and authority to own and operate its properties and conduct its business
as now conducted by it. Each of the Company and each Significant Subsidiary is
duly qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such corporation owns or leases
substantial properties or in which the conduct of its business requires such
qualification and in which failure of such corporation to be so qualified and in
good standing would have a material adverse effect upon the business, financial
condition or results of operations of the Company and its consolidated
subsidiaries considered as a whole.
(b) Authorization; Enforcement. The Company has full corporate power and
authority to execute and deliver this Stock Option Agreement and (subject to
obtaining the Stockholder Approval) to perform its obligations hereunder in
accordance with its terms. The Company has taken all necessary corporate action
to authorize the execution and delivery of this Stock Option Agreement
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<PAGE> 35
and (other than obtaining the Stockholder Approval) the consummation of the
transactions contemplated hereby. This Stock Option Agreement is a valid and
legally binding obligation of the Company, enforceable in accordance with its
terms (assuming due authorization, execution and delivery by each Purchaser),
subject to bankruptcy, insolvency, reorganization and other laws affecting
creditors' rights generally and to general equity principles.
(c) Compliance with Law. (i) Neither the Company nor any Significant
Subsidiary has received notice, nor believes that it is in violation of any
statute, regulation or order of, or any restriction imposed by, the United
States of America, any state, municipality or other political subdivision having
jurisdiction over it or any agency thereof, in respect of the conduct of its
business or the ownership of its properties, that is expected to have a material
adverse effect on the business, financial condition or results of operations of
the Company and its consolidated subsidiaries considered as a whole.
(ii) Subject to the expiration or early termination of the applicable
waiting period under the HSR Act (as defined in paragraph (e) of this
Section 4), the execution and delivery by the Company of this Stock Option
Agreement does not, and the performance by the Company of its obligations
hereunder and the transactions contemplated hereby will not, violate any
provision of any material law or regulation, or any existing writ or decree
of any court or governmental authority applicable to it.
(d) Compliance with Obligations. (i) Neither the Company nor any
Significant Subsidiary is in violation of or in default under any obligation,
agreement, covenant or condition contained in its Certificate of Incorporation
or By-laws, or in any contract, lease or other instrument to which it is a party
(or which is binding on it or its assets), other than for such violations or
defaults the occurrence of which would not have a material adverse effect on the
business, financial condition or results of operations of the Company and its
consolidated subsidiaries considered as a whole.
(ii) The execution and delivery by the Company of this Stock Option
Agreement does not, and the performance by the Company of its obligations
hereunder and the transactions contemplated hereby will not, violate,
conflict with or constitute a breach of, or a default under, its Restated
Certificate of Incorporation or By-laws, or any other material agreement or
instrument to which it is a party (or which is binding on it or its assets)
and will not result in the creation of any lien on, or security interest
in, any of its assets.
(e) Consents and Approvals. All consents, approvals, authorizations and
orders (other than (i) under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act") and (ii) Stockholder Approval) required for the
Company to execute and deliver this Stock Option Agreement and to consummate the
transactions contemplated hereby have been obtained.
(f) Exchange Act Reports. Each of the Company's (i) Annual Reports on Form
10-K, for the fiscal years ended after January 31, 1990, (ii) Quarterly Reports
on Form 10-Q for the current fiscal year and (iii) proxy statement for the most
recently called annual meeting (collectively, the "SEC Documents"), has been
duly and timely filed, and when filed was in substantial compliance with the
requirements of the Securities Exchange Act of 1934 and the applicable rules and
regulations of the Securities and Exchange Commission thereunder (the "Exchange
Act"). Each of the SEC Documents was complete and correct in all material
respects as of its date and, as of its date, did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(g) Financial Condition. The consolidated balance sheets of the Company
and its consolidated subsidiaries as of (i) January 31, 1990, 1991 and 1992, and
(ii) October 31, 1993, together with consolidated statements of operations,
shareholders' equity and cash flows for the fiscal year then ended in the case
of (i) above, or the three months and nine months then ended, in the case of
(ii) above, contained in the SEC Documents and, in the case of (i) above,
certified by KPMG Peat Marwick, fairly present the financial condition of the
Company and its consolidated subsidiaries and the results of their operations
and changes in financial position as of the dates and for the periods
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referred to and have been prepared in accordance with generally accepted
accounting principles in the United States consistently applied (except, in the
case of (ii) above, that the consolidated financial statements have been
prepared in accordance with Exchange Act Form 10-Q and do not necessarily
reflect all normal audit adjustments throughout the periods involved).
(h) Litigation. Except as disclosed in the SEC Documents or as otherwise
disclosed in writing to each Purchaser and identified as an exception to this
representation, there is no legal action, suit, investigation or proceeding
pending or, to the knowledge of the Company, threatened against or affecting the
Company or any of its subsidiaries or the assets of any of them which is
expected by the Company to materially and adversely affect the business,
financial condition or results of operations of the Company and its consolidated
subsidiaries considered as a whole, or its ability to perform or observe any
obligation or condition under this Stock Option Agreement.
(i) Material Adverse Change. Except as disclosed in the SEC Documents or
as otherwise disclosed in writing to each Purchaser prior to the exercise of the
BellSouth Option, Cox Option or Advance Option, as the case may be, there has
been no material adverse change in the business, financial condition, results of
operations or prospects, of the Company and its consolidated subsidiaries since
October 31, 1993, it being understood that the incurrence and payment of fees
and expenses related to the Acquisition shall not give rise to or result in a
breach of this representation.
(j) Governmental Investigations. To the knowledge of the Company, except
as disclosed to each Purchaser in writing and identified as an exception to this
representation, there are no pending or threatened governmental investigations
or proceedings against the Company or any of its controlled affiliates or
against any officers, directors or employees of the Company or any of its
controlled affiliates, related to possible violations of any material Federal,
state or local law.
(k) Outstanding Capital Stock. As of the date hereof, the authorized
capital stock of the Company consists of 175,000,000 shares of Common Stock and
5,000,000 shares of Preferred Stock, par value $.10 per share. As of February
28, 1994, 27,788 shares of Series B Preferred Stock, 530,757 shares of Series C
Preferred Stock, 938 shares of Series D Preferred Stock and 39,902,822 shares of
Common Stock were validly issued and outstanding, fully paid and nonassessable.
The Company is the sole beneficial owner of all of the outstanding capital stock
of each Significant Subsidiary and has good and valid title to all shares of
such outstanding capital stock, free and clear of all liens and encumbrances,
and all shares of such outstanding capital stock are duly authorized and validly
issued and outstanding, fully paid and nonassessable. Except for the rights set
forth in the Stockholders Agreement (as defined in Section 6(e)) and the
Understanding Among Stockholders (as defined in Section 8(viii)), there are no
preemptive or similar rights in respect of the capital stock of the Company or
any Significant Subsidiary. The Company has previously delivered to each
Purchaser true, complete and correct copies of the Restated Certificate of
Incorporation and By-laws of the Company, which are in full force and effect on
the date hereof. Except as provided in this Stock Option Agreement and the
Liberty-QVC Agreement dated as of November 11, 1993 (the "Repurchase
Agreement"), between the Company and Liberty Media Corporation ("Liberty"), as
disclosed in the SEC Documents, or as disclosed to each Purchaser in writing and
identified as an exception to this representation, there are no outstanding
options, warrants, agreements, convertible or exchangeable securities or other
commitments pursuant to which the Company or any Significant Subsidiary is
obligated to issue, sell, purchase, repurchase, return or redeem any shares of
capital stock or other securities of the Company or any Significant Subsidiary
and there are not any securities of the Company or any Significant Subsidiary
reserved for such purpose.
(l) Common Stock. The BellSouth Optioned Shares, the Cox Optioned Shares
and the Advance Optioned Shares to be issued in accordance with the terms of
this Stock Option Agreement have been duly authorized; upon issuance to the
Purchasers as provided hereunder, such shares will be validly issued, fully paid
and nonassessable; and such shares are not subject to any preemptive or similar
rights.
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(m) Nasdaq National Market. The outstanding Common Stock has been included
for quotation in the Nasdaq National Market. The Company's agreement with the
NASD with respect thereto is in full force and effect and no action has been
taken or threatened by the NASD with respect to the suspension from trading of
the Common Stock.
(n) Securities Act Registration. Assuming the accuracy of the
representation contained in paragraph (g) of Section 5 with respect to the
applicable Purchaser, the issuance and sale of the BellSouth Optioned Shares,
the Cox Optioned Shares and the Advance Optioned Shares, as the case may be,
will be exempt from the registration and prospectus delivery requirements of the
Securities Act.
(o) MFJ Activities. Set forth on Exhibit 1 is a complete list, as of the
date hereof, of (i) all interLATA transmission facilities and services
(including, without limitation, satellite uplink facilities, satellite
transponders, receive-only earth stations and 800 numbers) and (ii) any
activities which constitute the manufacture or distribution of
telecommunications equipment or the manufacture of customer premises equipment
(but not the distribution of customer premises equipment) (collectively, "MFJ
Activities"), owned or provided by the Company or any of its subsidiaries.
Neither the Company nor any of its subsidiaries directly or indirectly, engages
or participates, alone or with any individual or entity, whether as a principal,
agent, reseller, representative, consultant or independent contractor, in any
MFJ Activity, other than activities listed on Exhibit 1. For purposes of this
Stock Option Agreement, "interLATA" means telecommunications between a point or
points located in one LATA, or within one service area or an independent
telephone company associated with the LATA, and a point or points located in one
or more LATAs or points outside a LATA, in each case as LATAs and associated
telephone company areas have been approved in the Modification of Final Judgment
entered August 24, 1982, by the U.S. District Court of the District of Columbia
(the "MFJ"). BellSouth acknowledges that the Company has no expertise in MFJ
matters and that the Company's knowledge with respect to MFJ matters consists
solely of BellSouth's descriptions of such matters.
5. Representations and Warranties of Each Purchaser. Each Purchaser hereby
severally with respect to itself only, and not jointly, makes the following
representations and warranties to the Company (except that the representation
and warranty contained in paragraph (i) is made solely by BellSouth):
(a) Corporate Existence. Such Purchaser is a corporation, duly organized,
validly existing and in good standing under the laws of its state of
incorporation.
(b) Authorization; Enforcement. Such Purchaser has full power and
authority to execute and deliver this Stock Option Agreement, and to perform its
obligations under and as contemplated by this Stock Option Agreement in
accordance with its terms. Such Purchaser has taken all necessary action to
authorize the execution and delivery of this Stock Option Agreement and the
transactions contemplated hereby. This Stock Option Agreement is a valid and
legally binding obligation of such Purchaser, enforceable in accordance with its
terms (assuming due authorization, execution and delivery by the Company),
subject to bankruptcy, insolvency, reorganization and other laws affecting
creditors' rights generally and to general equity principles.
(c) Compliance with Law. (i) Such Purchaser has not received notice, and
does not believe, that it is in violation of any statute, regulation or order
of, or any restriction imposed by, the United States of America, any state,
municipality or political subdivision having jurisdiction over it or any agency
thereof, in respect of the conduct of its business or the ownership of its
properties, that it expects to materially and adversely affect the ability of
the Purchaser to consummate the transactions contemplated by this Stock Option
Agreement.
(ii) Subject to the consents and approvals listed in paragraph (e) of
this Section 5, the execution and delivery by such Purchaser of this Stock
Option Agreement does not, and the performance by such Purchaser of its
obligations and the transactions contemplated hereby will
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not, violate any provision of any material law or regulation, or any
existing writ or decree of any court of governmental authority applicable
to it.
(d) Compliance with Obligations. (i) Such Purchaser is not in violation of
or in default under any obligation, agreement, covenant or condition contained
in its organizational documents or by-laws, or in any contract, lease or other
instrument to which it is a party (or which is binding on its assets), other
than such violations or defaults the occurrence of which would not materially
and adversely affect such Purchaser's ability to consummate the transactions
contemplated by this Stock Option Agreement.
(ii) The execution and delivery by such Purchaser of this Stock Option
Agreement does not, and the performance by such Purchaser of its
obligations hereunder and the transactions completed hereby will not,
violate, conflict with or constitute a breach of, or default under, any
charter or similar instrument, or any other material agreement or
instrument to which it is a party or which is binding on it or its assets.
(e) Consents and Approvals. All consents, approvals, authorizations and
orders (other than (i) under the HSR Act, (ii) with respect to BellSouth,
matters related to the MFJ and (iii) the Stockholder Approval) of governmental
or other third parties required for such Purchaser to execute and deliver this
Stock Option Agreement, and to consummate the transactions contemplated hereby
have been obtained.
(f) Litigation. There is no legal action, suit, investigation or
proceeding pending or, to the knowledge of such Purchaser, threatened against or
affecting such Purchaser or any of its subsidiaries or the assets of any of them
which is expected by such Purchaser materially and adversely to affect its
ability to perform or observe any obligation or condition under, or consummate
the transactions contemplated by, this Stock Option Agreement.
(g) Status and Investment Intent. Such Purchaser is an "accredited
investor" within the meaning of Regulation D under the Securities Act, and it is
purchasing the securities hereunder for its own account and (subject to its
property being at all times within its control) not with a view to any resale,
distribution or other disposition thereof.
(h) Governmental Investigation. To the knowledge of such Purchaser there
are no pending or threatened governmental investigations or proceedings against
it or any of its controlled affiliates or against any officers, directors or
employees of such Purchaser or any of its controlled affiliates which are
expected by such Purchaser to materially and adversely affect its ability to
perform or observe any obligation or condition under this Stock Option
Agreement.
(i) MFJ Activity. BellSouth represents that, to its knowledge, neither the
Company nor any of its subsidiaries, directly or indirectly engages or
participates, alone or with any individual or entity, as a principal, agent,
reseller, representatives, consultant or independent contractor, in any MFJ
Activity, other than activities listed on Exhibit 1. BellSouth further
represents that, to its knowledge, the Company's implementation of its Q-2
programming will not result in the Company engaging or participating, alone or
with any individual or entity, as a principal, agent, reseller, representative,
consultant or independent contractor, in any MFJ Activity. The parties
acknowledge that BellSouth's representations hereunder are made in reliance upon
the truthfulness and completeness of the responses to the questions BellSouth
has asked the Company.
6. Covenants of the Parties. Each of the Company and each Purchaser makes
the following covenants applicable to it (provided, however, that paragraphs
(c), (d), (e), (i) and (m) are made only between and for the benefit of the
Company and BellSouth, and that paragraph (k) is made only between and for the
benefit of the Company and each of Cox or Advance, as the case may be):
(a) Stockholder Approval. As promptly as practicable (which may be as late
as the Company's next annual stockholders meeting), the Company shall call a
stockholders meeting to obtain Stockholder Approval for the issuance of the
BellSouth Optioned Shares, the Cox Optioned Shares
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and the Advance Optioned Shares and shall use its reasonable best efforts to
obtain the Stockholder Approval.
(b) Reservation of Common Stock. The Company shall reserve and keep
available out of its authorized but unissued shares of Common Stock the full
number of the BellSouth Optioned Shares, the Cox Optioned Shares and the Advance
Optioned Shares.
(c) Satisfaction of MFJ Condition. Exhibit 2 sets forth the steps that the
Company is required to take to permit BellSouth to purchase the BellSouth
Optioned Shares pursuant to this Stock Option Agreement in compliance with the
MFJ (the "MFJ Transactions"). As promptly as practicable, the Company and
BellSouth shall use their reasonable best efforts to permit BellSouth to make
investments contemplated hereby (including acquiring the BellSouth Optioned
Shares pursuant to the terms of this Stock Option Agreement or participating in
certain acquisitions and joint ventures as contemplated by Section 6(g)) without
violation of the MFJ. Without limiting the foregoing, the Company agrees to
effectuate the MFJ Transactions promptly, and in any event within one year of
the date hereof.
(d) Other MFJ Related Activities. So long as (i) the Option Period has not
expired, (ii) BellSouth has exercised the BellSouth Option to acquire the
BellSouth Optioned Shares and is attempting in good faith to cause the
satisfaction of all conditions to Closing with respect to such exercise,
including the MFJ Condition, or (iii) BellSouth continues to own at least
2,588,380 shares of Common Stock (as adjusted consistently with the provisions
of Section 7), the Company will avoid engaging in new activities in a manner
that would, in BellSouth's good faith judgment, based upon the written advice of
counsel (which may be internal corporate counsel), advance written notice of
which has been provided to the Company, result in a potential violation of the
MFJ, as applicable to BellSouth, subject to BellSouth's obligation to make all
reasonable efforts to permit the Company to undertake an activity it wishes to
pursue without any such violation. In connection with the Company's obligation
to avoid conducting new activities in a manner that would result in a violation
of the MFJ, such activities may be conducted in a separate entity in which
BellSouth owns no interest (or otherwise structured to BellSouth's reasonable
satisfaction) so long as (i) BellSouth shall have been given a reasonable
opportunity (including obtaining the Company's reasonable cooperation) to take
steps to conduct such potentially violative activities (or a portion thereof, to
the extent reasonable) in the Company in a manner or to the extent permitted by
the MFJ and (ii) the Company will have the right to reacquire such activities
from such other entity if such potentially violative activities are no longer
prohibited by the MFJ; provided, however, that the reservation of such
reacquisition right does not result in a material economic detriment to the
Company.
(e) Open Market Purchases. After BellSouth becomes a party to the
Stockholders Agreement dated as of July 16, 1993, among Comcast Corporation
("Comcast"), Arrow Investments, L.P. ("Arrow"), Liberty and Barry Diller (the
"Stockholders Agreement") and so long as Comcast, Liberty, Arrow or BellSouth,
as the case may be, remains an Eligible Stockholder thereunder, the Company will
not take any action to (i) block or prevent open market purchases by such
Eligible Stockholder (or Liberty, if it has become a party to the Stockholders
Agreement pursuant to Section 5 of the Repurchase Agreement) of shares of Common
Stock so long as such entity's total fully diluted voting power of the Company
does not exceed 35% of the fully diluted outstanding voting power of the Company
or (ii) discriminate against such Eligible Stockholder (or Liberty, if it has
become a party to the Stockholders Agreement pursuant to Section 5 of the
Repurchase Agreement) as a stockholder or deprive BellSouth, Comcast or Arrow
(or Liberty, if it has become a party to the Stockholders Agreement pursuant to
Section 5 of the Repurchase Agreement) of full rights as a stockholder of the
Company.
(f) Additional Information and Confidentiality. Prior to the termination
of this Stock Option Agreement with respect to a Purchaser, the Company agrees
to provide such Purchaser with all information which such Purchaser may
reasonably request concerning the Company's business, financial condition and
prospects. Such Purchaser agrees to keep all such information (and other
confidential information previously supplied to such Purchaser) confidential and
not to use such
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information other than in connection with its investment hereunder or to
disclose any such information to any third party unless (i) it receives the
express written consent of the Company, (ii) such information otherwise is or
becomes publicly available (except where such Purchaser knows that such
information became publicly available as a result of a breach of any
confidentiality arrangement) or (iii) in its reasonable judgement it is required
by applicable law to do so, and then only to the extent it is so required, in
each case, to the extent practicable, only after notice to and consultation with
the Company. In the event that this Stock Option Agreement is terminated, such
Purchaser shall forthwith return to the Company or destroy all information
(including all copies of any documents) obtained by such Purchaser and required
to be kept confidential pursuant to this paragraph.
(g) Certain Acquisitions and Ventures. For a period of 18 months from the
date hereof, if the Company proposes to invest in, acquire or form all or part
of an originator, owner or other producer of programming or content (including,
without limitation, a film studio, network, film library or television
programming producer) in a transaction valued at greater than $250 million, if
this Stock Option Agreement has not terminated with respect to a Purchaser or
such Purchaser has acquired shares of Common Stock pursuant to this Stock Option
Agreement, the Company will give such Purchaser along with Comcast (and Liberty,
if it has become a party to the Stockholder's Agreement pursuant to Section 5 of
the Repurchase Agreement), to the extent the Company requires third party
financing in connection with such transaction, a preferential opportunity to
participate meaningfully in any such transaction on an arm's-length basis and
will negotiate in good faith concerning any such party's participation therein.
In connection with the foregoing but subject to the obligations of BellSouth and
the Company set forth in Section 6(c) hereof, none of Comcast, Cox, Advance,
Liberty or BellSouth shall be entitled to any such preferential opportunity, to
the extent it is not legally permitted to participate in the relevant
transaction.
(h) Certain Consents and Approvals. Each of the Company and such Purchaser
shall use its reasonable efforts to obtain, or to assist the other in obtaining,
as soon as practicable (i) expiration or early termination of the applicable
waiting period under the HSR Act and (ii) all other governmental approvals
required in connection with the transactions contemplated by this Stock Option
Agreement.
(i) Operations in Ordinary Course. From the date hereof until the Closing
hereunder with respect to BellSouth or termination of this Stock Option
Agreement with respect to BellSouth, except for those actions consented to by
BellSouth in advance in writing, the Company shall conduct its business in the
ordinary course and substantially in accordance with past practice. For purposes
of this covenant, any actions that under the Company's practices existing on the
date hereof are taken or authorized to be taken by the executive officers of the
Company without approval of the Board of Directors shall constitute ordinary
course. In addition, any action taken by the Company with the approval of the
Eligible Stockholders (as defined in the Stockholders Agreement) or its Board of
Directors shall be deemed to be in the ordinary course and substantially in
accordance with past practice if the Eligible Stockholders or the directors
designated by the Eligible Stockholders voted in favor of such action pursuant
to and in compliance with Paragraph 3(a) of the Understanding Among Stockholders
(as defined in Section 8(viii)).
(j) Transfers; Restrictive Legend. Each Purchaser acknowledges that the
shares of Common Stock to be issued pursuant to this Stock Option Agreement have
not been registered under the Securities Act and may be sold or disposed of in
the absence of such registration only pursuant to an exemption from such
registration. The certificates evidencing shares of Common Stock to be issued
pursuant to this Stock Option Agreement shall bear the following legend until
such time as such Purchaser or any transferee thereof delivers an opinion of
counsel reasonably acceptable to the Company to the effect that such legend is
no longer required:
THESE SECURITIES WERE SOLD IN A PRIVATE PLACEMENT, WITHOUT
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
OFFERED OR SOLD ONLY IF REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
IF AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
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In addition, certificates evidencing the BellSouth Optioned Shares shall
bear the following additional legend:
THESE SECURITIES MAY BE SUBJECT TO THE RESTRICTIONS CONTAINED IN THE
STOCKHOLDERS AGREEMENT DATED AS OF JULY 16, 1993, AMONG THE
SIGNATORIES THERETO, AS MAY BE AMENDED FROM TIME TO TIME, COPIES OF
WHICH MAY BE OBTAINED WITHOUT CHARGE FROM THE SECRETARY OF QVC
NETWORK, INC.
(k) Obtaining Consents. At any time from the date hereof, if any legally
imposed condition exists to the issuance of Common Stock pursuant to the Cox
Option or the Advance Option, Cox or Advance may notify the Company that it
intends to exercise the Cox Option or the Advance Option, as applicable, upon
the satisfaction of any such legally imposed condition and request that the
Company use its reasonable efforts to assist Cox or Advance in satisfying such
condition (including cooperating with the preparation of, or participating in,
any governmental filing or application required to be made by Cox or Advance);
provided, however, that (i) any such request by Cox or Advance shall not
obligate Cox or Advance to exercise the Cox Option or the Advance Option, as
applicable, and (ii) if Cox or Advance elects not to exercise the Cox Option or
the Advance Option, as the case may be, such Purchaser shall indemnify the
Company for the costs and expenses incurred by the Company in taking any action
requested by such Purchaser pursuant to this paragraph that would not have been
otherwise required under this Stock Option Agreement. Any such condition shall
not extend the Option Termination Date.
(l) Cooperation. The parties shall cooperate with one another in
determining whether any action by or in respect of, or filing with, any
governmental body, agency, official or authority is required, or any actions,
consents, approvals or waivers are required to be obtained from parties to any
material contracts, in connection with the consummation of the transactions
contemplated by this Stock Option Agreement. Subject to the terms and conditions
of this Stock Option Agreement, the Company and each Purchaser agree to use
their reasonable best efforts to take, or cause to be taken, all actions and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and implement, as soon as
reasonably practicable, the transactions contemplated by this Stock Option
Agreement.
(m) Stockholders Agreement. At the Closing of the BellSouth Option,
BellSouth agrees to become a party to the Stockholders Agreement in accordance
with the terms of the Understanding Among Stockholders.
(n) Registration Rights. The Company will use reasonable efforts to
provide each of Advance and Cox, if such entity purchases shares of Common Stock
pursuant to its option hereunder, with one demand registration of such shares
purchased hereunder (or a portion thereof, but not less than 25% of the shares
so purchased), subject to such selling entity entering into a registration
rights agreement reasonably acceptable to the Company. Such registration rights
shall not be transferable and may be exercised at any time after the first
anniversary of the purchase of shares hereunder and not after the third
anniversary thereof. The entity requesting registration shall bear all of the
Company's expenses in connection with the registration and sale of such entity's
shares.
7. Adjustments Upon Changes in Capitalization. If on or after the date of
this Stock Option Agreement there shall occur any stock dividend, stock split,
recapitalization, combination or exchange of shares, merger, consolidation,
reorganization or other change or transaction of or by the Company as a result
of which (i) shares of any class of stock, other securities, cash or other
property would have been issued in respect of the BellSouth Optioned Shares, the
Cox Optioned Shares or the Advance Optioned Shares had such shares been
outstanding at such time (the "Additional Property") or (ii) the Common Stock
issuable as the BellSouth Optioned Shares, the Cox Optioned Shares or the
Advance Optioned Shares shall be changed into the same or a different number of
shares of the same or another class of stock or other securities (the "New
Optioned Securities"), then upon the Closing of the acquisition of the BellSouth
Optioned Shares, the Cox Optioned Shares or the Advance
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Optioned Shares, BellSouth, Cox or Advance, as the case may be, shall receive
for the BellSouth Purchase Price, Cox Purchase Price or the Advance Purchase
Price payable upon such closing (x) in the case of clause (i) above, the
BellSouth Optioned Shares, the Cox Optioned Shares or the Advance Optioned
Shares plus the Additional Property and (y) in the case of clause (ii) above,
the New Optioned Securities.
8. Conditions to Obligations of each Purchaser. The obligations of each
Purchaser to consummate a Closing after the exercise of the BellSouth Option,
the Cox Option or the Advance Option, as the case may be, are, at the option of
such Purchaser, subject to the satisfaction of the following conditions
precedent (except the conditions precedent contained in paragraphs (vii) and
(viii) are for the sole benefit of BellSouth):
(i) Representations and Warranties. The representations and
warranties made by the Company in this Stock Option Agreement shall have
been true and correct when made, and except for the representations set
forth in paragraphs (c), (d), (f), (g), (h), (i), (j), (m) and (o) of
Section 4 (the "Exercise Representations"), shall be true and correct on
the date of Closing as though such representations and warranties were made
on and as of such date, and the Exercise Representations (except, with
respect to Cox and Advance, paragraph (o) of Section 4) shall have been
true and correct on the date the BellSouth Option, Cox Option or Advance
Option, as the case may be, was exercised (except that, in each case,
representations and warranties that are made as of a specific date need be
true and correct only as of such date).
(ii) Compliance with Agreements and Conditions. The Company shall
have performed and complied in all material respects with all agreements,
obligations and conditions required by this Stock Option Agreement to be
performed or complied with by the Company at or before the date of Closing
(unless such agreement, obligation or condition was not for the benefit of
the relevant Purchaser).
(iii) Litigation. There shall not then be in effect any order
enjoining or restraining the acquisition of the BellSouth Optioned Shares,
the Cox Optioned Shares or the Advance Optioned Shares, as the case may be,
or the other transactions contemplated by this Stock Option Agreement, and
there shall not then be threatened or instituted any action or proceeding
by any governmental body or agency with respect to the acquisition of the
BellSouth Optioned Shares, the Cox Optioned Shares or the Advance Optioned
Shares or the other transactions contemplated by this Stock Option
Agreement.
(iv) Stockholder Approval. To the extent required in connection with
the purchase of the BellSouth Optioned Shares, the Cox Optioned Shares or
the Advance Optioned Shares pursuant to the terms of this Stock Option
Agreement, the Company shall have received the Stockholder Approval.
(v) Certificate. Such Purchaser shall have received a certificate
executed on behalf of the Company by an executive officer acceptable to the
Purchaser and dated the date of Closing, to the effect that the conditions
set forth in clauses (i), (ii) and (iv) above have been satisfied.
(vi) Requisite Approvals. The Company and such Purchaser shall have
obtained all requisite consents or approvals from each Federal, state and
any other governmental agency, authority or regulatory body necessary in
order to permit the acquisition and sale and issuance of the BellSouth
Optioned Shares, the Cox Optioned Shares or the Advance Optioned Shares, as
the case may be, and the consummation of the other transactions
contemplated under this Stock Option Agreement, and all HSR Act and other
governmental waiting periods applicable to such transactions shall have
expired.
(vii) MFJ Condition. The Company shall have effected the MFJ
Transactions and BellSouth shall have concluded, in its good faith judgment
based upon the written advice of counsel (which may be internal corporate
counsel) that BellSouth's acquisition of the BellSouth
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Optioned Shares as contemplated by this Stock Option Agreement would not
result in a potential violation of the MFJ.
(viii) Performance of Understanding Among Stockholders. Liberty Media
Corporation, Comcast and Arrow Investments, L.P. shall have performed all
their obligations pursuant to the Understanding Among Stockholders dated as
of November 11, 1993, among BellSouth and such parties (the "Understanding
Among Stockholders"); BellSouth shall, concurrently with the Closing of the
BellSouth Option, become a party to the Stockholders Agreement as
contemplated by the Understanding Among Stockholders; and the Stockholders
Agreement shall, concurrently with the Closing of the BellSouth Option, be
amended as contemplated by the Understanding Among Stockholders in
connection with a purchase of BellSouth Optioned Shares pursuant to this
Stock Option Agreement.
9. Conditions to Obligations of the Company. The obligations of the
Company to consummate a Closing after the exercise by a Purchaser of the
BellSouth Option, the Cox Option or the Advance Option, as the case may be, are,
at the option of the Company, subject to the satisfaction of the following
conditions precedent:
(i) Representations and Warranties. The representations and
warranties made by such Purchaser in this Stock Option Agreement shall have
been true and correct when made, and shall be true and correct on the date
of Closing as though such representations and warranties were made on and
as of such date (except that representations and warranties that are made
as of a specific date need be true and correct only as of such date).
(ii) Compliance with Agreements and Conditions. Such Purchaser shall
have performed and complied in all material respects with all agreements,
obligations and conditions required by this Stock Option Agreement to be
performed or complied with by such Purchaser at or before the date of
Closing.
(iii) Litigation. There shall not then be in effect any order
enjoining or restraining the sale and issuance of the BellSouth Optioned
Shares, the Cox Optioned Shares or the Advance Optioned Shares, as the case
may be, or the other transactions contemplated by this Stock Option
Agreement, and there shall not then be threatened or instituted any action
or proceeding by any governmental body or agency with respect to the sale
and issuance of the BellSouth Optioned Shares, the Cox Optioned Shares or
the Advance Optioned Shares, as the case may be, or the other transactions
contemplated by this Stock Option Agreement.
(iv) Certificate. The Company shall have received a certificate
executed on behalf of such Purchaser by an executive officer acceptable to
the Company to the effect that the conditions set forth in clauses (i) and
(ii) above have been satisfied.
(v) Stockholder Approval. To the extent required in connection with
the sale and issuance of the BellSouth Optioned Shares, the Cox Optioned
Shares or the Advance Optioned Shares, as the case may be, pursuant to the
terms of this Stock Option Agreement, the Company shall have received the
Stockholder Approval.
(vi) Requisite Approvals. The Company and such Purchaser shall have
obtained all requisite consents or approvals from each Federal, state and
any other governmental agency, authority or regulatory body necessary in
order to permit the acquisition and sale and issuance of the BellSouth
Optioned Shares, the Cox Optioned Shares or the Advance Optioned Shares, as
the case may be, and the consummation of the other transactions
contemplated by this Stock Option Agreement, and all HSR Act and other
governmental waiting periods applicable to such transactions shall have
expired.
10. Further Assurances. If a Purchaser shall exercise the BellSouth
Option, the Cox Option or the Advance Option, as the case may be, in accordance
with the terms of this Stock Option Agreement, from time to time and without
additional consideration the Company will execute and
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deliver, or cause to be executed and delivered, such additional or further
transfers, assignments, endorsements, and other instruments as such Purchaser
may reasonably request for the purpose of effectively transferring ownership of
the BellSouth Optioned Shares, the Cox Optioned Shares or the Advance Optioned
Shares, as the case may be, to such Purchaser as contemplated by this Stock
Option Agreement.
11. Assignment. Neither this Stock Option Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any party without the
prior written consent of the other party, except that a Purchaser may assign, in
its sole discretion, any or all of its rights, interests and obligations
hereunder to any direct or indirect wholly-owned subsidiary of such Purchaser;
provided, however, that at all times such entity remains a direct or indirect
wholly-owned subsidiary of such Purchaser. Subject to the preceding sentence,
this Stock Option Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
12. General Provisions. (a) Specific Performance. The parties hereto
acknowledge that damages would be an inadequate remedy for any breach of the
provisions of this Stock Option Agreement and agree that the obligations of the
parties hereunder shall be specifically enforceable.
(b) Expenses. Whether or not the BellSouth Option, the Cox Option or the
Advance Option is exercised, all costs and expenses incurred in connection with
this Stock Option Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expense.
(c) Amendments. This Stock Option Agreement may not be amended except by
an instrument in writing signed by each of the parties hereto.
(d) Notices. All notices and other communications hereunder shall be
validly given or served, as the case may be, if in writing and delivered
personally or mailed by registered or certified mail (return receipt requested)
or sent by facsimile to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(i) if to the Company, to:
QVC Network, Inc.
1365 Enterprise Drive
Goshen Corporate Park
West Chester, PA 19380
Attention: Neal S. Grabell, Esq.
Senior Vice President and
General Counsel;
Fax: (610) 430-2380
With a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attention: Pamela S. Seymon, Esq.
Fax: (212) 403-2000
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(ii) if to BellSouth, to:
BellSouth Corporation
1155 Peachtree Street, N.E.
Atlanta, GA 30367-6000
Attention: Walter H. Alford, Esq.
Fax: (404) 249-5908
With a copy to:
Cravath, Swaine & Moore
825 Eighth Avenue
Worldwide Plaza
New York, New York 10019
Attention: Philip A. Gelston, Esq.
Fax: (212) 474-3700
(iii) if to Cox, to:
Cox Enterprises, Inc.
1400 Lake Hearn Drive
Atlanta, GA 30319
Attention: John R. Dillon
Fax: (404) 843-5104
With a copy to:
Dow, Lohnes & Albertson
1255 Twenty-Third Street
Washington, DC 20037
Attention: Stuart Sheldon, Esq.
Fax: (202) 857-2900
(iv) if to Advance:
Advance Publications, Inc.
c/o Newark Morning Ledger Co.
Star-Ledger Plaza
Newark, NJ 07101
Attention: Donald E. Newhouse
Fax: (201) 621-2604
With a copy to:
Sabin, Berman & Gould
350 Madison Avenue
New York, NY 10017
Attention: Craig D. Holleman, Esq.
Fax: (212) 692-4406
(e) Interpretation. When a reference is made in this Stock Option
Agreement to Sections or Exhibits, such reference shall be to a Section or
Exhibit to this Stock Option Agreement unless otherwise indicated. The headings
contained in this Stock Option Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Stock Option
Agreement.
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(f) Counterparts. This Stock Option Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more of the counterparts have been signed
by each of the parties and delivered to the other parties, it being understood
that all parties need not sign the same counterpart.
(g) Entire Agreement; Third-Party Beneficiaries. This Stock Option
Agreement (including the documents and instruments referred to herein and
Exhibits 3, 4 and 5 and the agreements referred to therein) (i) constitutes the
entire agreement and supersedes all prior agreements and understandings
(including, without limitation, the Memorandum of Understanding dated November
11, 1993, between BellSouth and the Company, the Commitment Letter dated
November 19, 1993, between BellSouth and the Company and the Equity Commitment
Letter dated November 11, 1993, among Comcast, the Company, Cox and Advance,
each as heretofore amended), both written and oral, among the parties with
respect to the subject matter hereof and (ii) is not intended to confer upon any
person other than the parties hereto any rights or obligations hereunder, except
with respect to (x) paragraphs (e) and (g) of Section 6, which are for the
explicit benefit of the persons mentioned therein and (y) paragraph (m) of
Section 6, which is for the benefit of the Eligible Stockholders, and such
paragraphs may not be amended, waived or altered to the detriment of any person
benefitting therefrom without the written consent of such person.
(h) SUBMISSION TO JURISDICTION; CONSENT TO SERVICE OF PROCESS. WITH
RESPECT TO ANY CLAIM ARISING OUT OF, OR RELATED TO THE TRANSACTIONS CONTEMPLATED
BY THIS STOCK OPTION AGREEMENT, (A) THE COMPANY AND EACH PURCHASER EACH
IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF
NEW YORK AND THE UNITED STATES DISTRICT COURT LOCATED IN THE BOROUGH OF
MANHATTAN IN NEW YORK CITY, AND (B) THE COMPANY AND EACH PURCHASER EACH
IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE LAYING OF
VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF, OR RELATING TO THE
TRANSACTIONS CONTEMPLATED BY, THIS STOCK OPTION AGREEMENT, BROUGHT IN ANY SUCH
COURT, IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND FURTHER
IRREVOCABLY WAIVES THE RIGHT TO OBJECT, WITH RESPECT TO SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT, THAT SUCH COURT DOES NOT HAVE JURISDICTION
OVER SUCH PARTY. THE COMPANY AND EACH PURCHASER EACH AGREES THAT SERVICE OF
PROCESS UPON IT IN ANY SUCH SUIT, ACTION OR PROCEEDING SHALL BE DEEMED IN EVERY
RESPECT EFFECTIVE SERVICE OF PROCESS UPON IT IF GIVEN IN THE MANNER SET FORTH IN
SECTION 12(d); PROVIDED, HOWEVER, THAT SUCH SERVICE SHALL NOT BE EFFECTIVE IF
MADE ONLY BY FACSIMILE.
(i) GOVERNING LAW. THIS STOCK OPTION AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES
OF CONFLICTS OF LAWS THEREOF.
B-14
<PAGE> 47
IN WITNESS WHEREOF, the Company and each Purchaser have caused this Stock
Option Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
QVC NETWORK, INC.
by
-----------------------------------
Name:
Title:
BELLSOUTH CORPORATION
by
-----------------------------------
Name:
Title:
COX ENTERPRISES, INC.
by
-----------------------------------
Name:
Title:
ADVANCE PUBLICATIONS, INC.
by
-----------------------------------
Name:
Title:
B-15
<PAGE> 48
PROXY
QVC NETWORK, INC.
1365 ENTERPRISE DRIVE
WEST CHESTER, PA 19380
The undersigned hereby appoints William F. Costello and Neal S. Grabell, and
each of them, with power of substitution, to represent and to vote on behalf of
the undersigned all of the shares of QVC Network, Inc. which the undersigned is
entitled to vote at the Annual Meeting of Stockholders to be held at QVC
Chesapeake, Inc., 1553 North River Birch Run, Chesapeake, Virginia, on Monday,
June 27, 1994 at 10:00 A.M., and at any adjournment or adjournments thereof,
hereby revoking all proxies heretofore given with respect to such stock, upon
the following proposals more fully described in the notice of and proxy
statement for the meeting receipt whereof is hereby acknowledged.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR (1), (2), (3), (4) and (5)
<TABLE>
<S> <C>
1. ELECTION OF DIRECTORS / / FOR ALL NOMINEES LISTED BELOW (EXCEPT AS
MARKED TO THE CONTRARY BELOW)
<CAPTION>
1. ELECTION OF DIRECTORS / / WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES
<CAPTION>
LISTED BELOW
</TABLE>
Nominees to be elected by holders of shares of Preferred Stock:
B. Llewellyn, B. Ramer, B. Roberts, R. Roberts, J. Segel, L. Wachner
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
- --------------------------------------------------------------------------------
2. PROPOSAL TO APPROVE THE APPOINTMENT OF KPMG PEAT MARWICK AS THE INDEPENDENT
PUBLIC ACCOUNTANTS OF THE CORPORATION.
[CAPTION]
<TABLE>
<S> <C>
FOR AGAINST
FOR ABSTAIN / /
<S> <C>
</TABLE>
3. PROPOSAL TO APPROVE AN AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO
CHANGE THE CORPORATE NAME TO "QVC, INC."
[CAPTION]
<TABLE>
<S> <C>
FOR AGAINST
FOR ABSTAIN / /
<S> <C>
</TABLE>
4. PROPOSAL TO APPROVE THE 1993 QUALIFIED INCENTIVE STOCK OPTION PLAN.
[CAPTION]
<TABLE>
<S> <C>
FOR AGAINST
FOR ABSTAIN / /
<S> <C>
</TABLE>
5. PROPOSAL TO APPROVE THE GRANT OF STOCK OPTIONS TO BELLSOUTH CORPORATION,
ADVANCE PUBLICATIONS, INC. AND COX ENTERPRISES, INC.
[CAPTION]
<TABLE>
<S> <C>
FOR AGAINST
FOR ABSTAIN / /
<S> <C>
</TABLE>
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS
AS MAY PROPERLY COME BEFORE THE MEETING.
(over)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF QVC NETWORK, INC.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE ELECTION OF ALL LISTED NOMINEES, FOR PROPOSALS 2, 3, 4 AND 5 AND IN
SUPPORT OF MANAGEMENT FOR SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENTS THEREOF.
<TABLE>
<S> <C>
PLEASE SIGN EXACTLY AS NAME(S) APPEARS BELOW. WHEN
SHARES ARE HELD BY JOINT TENANTS, BOTH SHOULD SIGN.
WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE, OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH.
IF A CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME
BY PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY
AUTHORIZED PERSON.
Dated:
Signature:
---------------------------------------------
Signature if held jointly
</TABLE>
<PAGE> 49
PROXY
QVC NETWORK, INC.
1365 ENTERPRISE DRIVE
WEST CHESTER, PA 19380
The undersigned hereby appoints William F. Costello and Neal S. Grabell, and
each of them, with power of substitution, to represent and to vote on behalf of
the undersigned all of the shares of QVC Network, Inc. which the undersigned is
entitled to vote at the Annual Meeting of Stockholders to be held at QVC
Chesapeake, Inc., 1553 North River Birch Run, Chesapeake, Virginia, on Monday,
June 27, 1994 at 10:00 A.M., and at any adjournment or adjournments thereof,
hereby revoking all proxies heretofore given with respect to such stock, upon
the following proposals more fully described in the notice of and proxy
statement for the meeting receipt whereof is hereby acknowledged.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR (1), (2), (3), (4) and (5)
<TABLE>
<S> <C>
1. ELECTION OF DIRECTORS / / FOR ALL NOMINEES LISTED BELOW (EXCEPT AS
MARKED TO THE CONTRARY BELOW)
<CAPTION>
1. ELECTION OF DIRECTORS / / WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES
<CAPTION>
LISTED BELOW
</TABLE>
Nominees to be elected by holders of shares of Common Stock:
W. Costello, B. Diller, B. Llewellyn, B. Ramer, B. Roberts, R. Roberts, J.
Segel, L. Wachner
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
- --------------------------------------------------------------------------------
2. PROPOSAL TO APPROVE THE APPOINTMENT OF KPMG PEAT MARWICK AS THE INDEPENDENT
PUBLIC ACCOUNTANTS OF THE CORPORATION.
[CAPTION]
<TABLE>
<S> <C>
FOR AGAINST
FOR ABSTAIN / /
<S> <C>
</TABLE>
3. PROPOSAL TO APPROVE AN AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO
CHANGE THE CORPORATE NAME TO "QVC, INC."
[CAPTION]
<TABLE>
<S> <C>
FOR AGAINST
FOR ABSTAIN / /
<S> <C>
</TABLE>
4. PROPOSAL TO APPROVE THE 1993 QUALIFIED INCENTIVE STOCK OPTION PLAN.
[CAPTION]
<TABLE>
<S> <C>
FOR AGAINST
FOR ABSTAIN / /
<S> <C>
</TABLE>
5. PROPOSAL TO APPROVE THE GRANT OF STOCK OPTIONS TO BELLSOUTH CORPORATION,
ADVANCE PUBLICATIONS, INC. AND COX ENTERPRISES, INC.
[CAPTION]
<TABLE>
<S> <C>
FOR AGAINST
FOR ABSTAIN / /
<S> <C>
</TABLE>
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS
AS MAY PROPERLY COME BEFORE THE MEETING.
(over)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF QVC NETWORK, INC.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE ELECTION OF ALL LISTED NOMINEES, FOR PROPOSALS 2, 3, 4 AND 5 AND IN
SUPPORT OF MANAGEMENT FOR SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENTS THEREOF.
<TABLE>
<S> <C>
PLEASE SIGN EXACTLY AS NAME(S) APPEARS BELOW. WHEN
SHARES ARE HELD BY JOINT TENANTS, BOTH SHOULD SIGN.
WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE, OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH.
IF A CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME
BY PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY
AUTHORIZED PERSON.
Dated:
Signature:
---------------------------------------------
Signature if held jointly
</TABLE>
