<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Amendment No. 2)
(Mark One)
/ X / ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [Fee Required] For the fiscal
year ended January 31, 1994
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No Fee Required] For the
transition period from ------------- to -----------------
Commission File No. 0-14999
QVC, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 23-2414041
- - --------------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1365 Enterprise Drive
West Chester, Pennsylvania 19380
- - ---------------------------------------- ---------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 430-1000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
--------------
Title of Class
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
The aggregate market value of voting stock held by non-affiliates of
the registrant, computed by reference to the price at which the stock was sold
as of the close of trading on March 31, 1994, was $839,806,539.
The number of shares outstanding of the registrant's Common Stock (net
of shares held in treasury), as of March 31, 1994 was:
Common Stock ($.01 par value) - 39,904,097 shares
DOCUMENTS INCORPORATED BY REFERENCE:
The registrant's definitive proxy statement in connection with
the 1994 Annual Meeting of Shareholders to be filed with the Securities and
Exchange Commission (the "Commission") within 120 days after the end of the
fiscal year ended January 31, 1994, is incorporated by reference in Part III of
the Annual Report on Form 10-K.
<PAGE> 2
Item 14 (Exhibits, Financial Statement Schedules and Reports
on Form 8-K) of Registrant's Annual Report on Form 10- K for the fiscal year
ended January 31, 1994, is hereby amended as follows:
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K
(a)(3)
Exhibit 10.52 --- An Application for Confidential Treatment
pursuant to Rule 24b-2 of certain portions of the Joint Venture Agreement,
dated October 11, 1993, among QVC Network, Inc., QVC Britain, British Sky
Broadcasting Limited, Precis (1192) Limited and QVC (without exhibits), has
been withdrawn. A copy of that agreement (without exhibits) (including the
portions which were subject to the application) is attached hereto.
2
<PAGE> 3
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused the report to
be signed on its behalf by the undersigned, thereunto duly authorized.
QVC, INC.
By: /s/ Neal S. Grabell
-------------------------
Neal S. Grabell
Senior Vice President
Dated: July 5, 1994
3
<PAGE> 1
EXHIBIT 10.52
(INCLUDING PORTIONS SUBJECT TO A
WITHDRAWN APPLICATION FOR CONFIDENTIAL TREATMENT
PURSUANT TO RULE 24b-2)
<PAGE> 2
QVC NETWORK, INC.
and
QVC BRITAIN
and
BRITISH SKY BROADCASTING LIMITED
and
PRECIS (1192) LIMITED
and
QVC
--------------------------------
JOINT VENTURE AGREEMENT
--------------------------------
Allen Allen & Hemsley
Bucklersbury House
3 Queen Victoria Street
LONDON EC4N 8EL
Ref: LON:412057:BMW
<PAGE> 3
TABLE OF CONTENTS
1. DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Interpretation . . . . . . . . . . . . . . . . . . . . 8
2. THE VENTURE . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.1 Formation . . . . . . . . . . . . . . . . . . . . . . . 9
2.2 The Closing . . . . . . . . . . . . . . . . . . . . . . 10
2.3 Principal Office . . . . . . . . . . . . . . . . . . . 11
2.4 Purpose . . . . . . . . . . . . . . . . . . . . . . . . 11
2.5 Term . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.6 Early Termination . . . . . . . . . . . . . . . . . . . 11
3. MANAGEMENT AND OPERATIONS OF THE VENTURE . . . . . . . . . . . 11
3.1 Board of Directors . . . . . . . . . . . . . . . . . . . 11
3.2 Designation . . . . . . . . . . . . . . . . . . . . . . 12
3.3 Decision-Making . . . . . . . . . . . . . . . . . . . . 12
3.4 Meetings of the Board of Directors . . . . . . . . . . 12
3.5 Actions Requiring Board Approval . . . . . . . . . . . 13
3.6 Annual Budget Approval . . . . . . . . . . . . . . . . 16
3.7 Officer and Senior Executives . . . . . . . . . . . . . 17
3.8 Other Employees and Services . . . . . . . . . . . . . 17
3.9 Insurance . . . . . . . . . . . . . . . . . . . . . . . 17
3.10 Venture Funds . . . . . . . . . . . . . . . . . . . . . 17
3.11 Shareholder and Parent Covenants . . . . . . . . . . . 18
4. TRANSACTIONS BETWEEN THE VENTURERS AND THE VENTURE . . . . . . 18
4.1 Renewal of Contracts Between a Venturer and the
Venture . . . . . . . . . . . . . . . . . . . . . . . . 18
4.2 Termination of Contracts Between a Venturer and the
Venture . . . . . . . . . . . . . . . . . . . . . . . . 18
4.3 Consideration of Transactions with the Venture . . . . 18
4.4 Payment of Fees and Expenses . . . . . . . . . . . . . 18
4.5 Venture Obligations . . . . . . . . . . . . . . . . . . 19
4.6 Venture Payments . . . . . . . . . . . . . . . . . . . 19
5. BORROWINGS BY, AND FUNDING OF, THE VENTURE . . . . . . . . . . 19
5.1 Funding to the Break Even Date . . . . . . . . . . . . 19
5.2 Repayment of Funding Loans; Dividend Policies . . . . . 21
5.3 Funding After the Break Even Date . . . . . . . . . . . 21
5.4 Funding Loan by Affiliate . . . . . . . . . . . . . . . 22
6. ACCOUNTING AND TAXATION . . . . . . . . . . . . . . . . . . . . 22
6.1 Financial Year . . . . . . . . . . . . . . . . . . . . 22
6.2 Maintenance of Books and Records . . . . . . . . . . . 22
6.3 Access to Books of Account . . . . . . . . . . . . . . 22
6.4 Financial Statements . . . . . . . . . . . . . . . . . 23
6.5 Taxation . . . . . . . . . . . . . . . . . . . . . . . 24
<PAGE> 4
(ii)
7. RESTRICTIONS ON DISPOSITION OF VENTURE INTERESTS . . . . . . . 25
7.1 Prohibition an Direct Disposition of Venture
Interests . . . . . . . . . . . . . . . . . . . . . . . 25
7.2 Subsidiary Status . . . . . . . . . . . . . . . . . . . 26
7.3 Effect of Prohibited Dispositions . . . . . . . . . . . 26
8. EVENTS OF DEFAULT: CONSEQUENCES AND REMEDIES; SPECIAL TERMINATION
EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.1 Events of Default . . . . . . . . . . . . . . . . . . . 27
8.2 Termination of Venture . . . . . . . . . . . . . . . . 27
8.3 Additional Remedies . . . . . . . . . . . . . . . . . . 28
9. BUSINESS OF THE VENTURE . . . . . . . . . . . . . . . . . . . . 28
9.1 Restrictive Provisions . . . . . . . . . . . . . . . . 28
9.2 Other Activities; Right to compete . . . . . . . . . . 30
9.3 Acknowledgments . . . . . . . . . . . . . . . . . . . . 30
9.4 Additional QVC Covenants . . . . . . . . . . . . . . . 31
9.5 Additional BSkyB Covenants . . . . . . . . . . . . . . 31
9.6 Covenants of the Venturers . . . . . . . . . . . . . . 31
9.7 Transponder . . . . . . . . . . . . . . . . . . . . . . 31
9.8 Sub-Lease of Premises . . . . . . . . . . . . . . . . . 32
9.9 Hiring Restrictions . . . . . . . . . . . . . . . . . . 34
9.10 Rights and Remedies Upon Breach . . . . . . . . . . . . 35
9.11 Reasonableness; Severability . . . . . . . . . . . . . 35
9.12 Confidential Information . . . . . . . . . . . . . . . 35
10. TERMINATION OF THE VENTURE . . . . . . . . . . . . . . . . . . 36
10.1 Termination . . . . . . . . . . . . . . . . . . . . . . 36
10.2 Consequences of a Termination . . . . . . . . . . . . . 36
10.3 Subordination and Non-Recourse . . . . . . . . . . . . 37
11. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 37
11.1 Representations and Warranties . . . . . . . . . . . . 37
11.2 Additional Representations . . . . . . . . . . . . . . 38
11.3 Survival . . . . . . . . . . . . . . . . . . . . . . . 38
12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.1 Entire Agreement, Construction . . . . . . . . . . . . . 39
12.2 Governing Law . . . . . . . . . . . . . . . . . . . . . 39
12.3 Third Party Beneficiaries . . . . . . . . . . . . . . . 39
12.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . 39
12.S Waivers and Amendments . . . . . . . . . . . . . . . . 39
12.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . 40
12.7 Counterparts . . . . . . . . . . . . . . . . . . . . . 40
12.8 Severability . . . . . . . . . . . . . . . . . . . . . 41
12.9 Successors and Assigns . . . . . . . . . . . . . . . . 41
12.10 No Right of Set-Off . . . . . . . . . . . . . . . . . . 41
12.11 Headings; Clause References . . . . . . . . . . . . . . 41
12.12 No Partnership . . . . . . . . . . . . . . . . . . . . 41
12.13 Restrictive Trade Practices Act . . . . . . . . . . . . 41
<PAGE> 5
(iii)
12.14 Conflicts with Ancillary Agreements . . . . . . . . . . 41
12.15 Conflicts with Memorandum of Association and Articles of
Association . . . . . . . . . . . . . . . . . . . . . . 41
12.16 Termination . . . . . . . . . . . . . . . . . . . . . . 42
<PAGE> 6
THIS JOINT VENTURE AGREEMENT is made the 11th day of October 1993
AMONG:
1. QVC NETWORK INC., a company duly organised under the laws of Delaware
with its registered office at Goshen Corporate Park, West Chester,
Pennsylvania ("QVC");
2. QVC BRITAIN, an unlimited company registered in and incorporated under
the laws of England, number 2825241 c/o Willkie Farr & Gallagher,
Dauntsey House, 4B Frederick's Place, London, EC2R 8AB ("QVC Sub");
3. BRITISH SKY BROADCASTING LIMITED, a limited company registered in and
duly organised and incorporated in England, number 2247735 of 6
Centaurs Business Park, Grant Way, Isleworth, Middlesex, TW7 5QD,
United Kingdom ("BSkyB");
4. PRECIS (1192) LIMITED, a limited company registered in and duly
organised and incorporated in England, number 280711 of 6 Centaurs
Business Park, Grant Way, Isleworth, Middlesex, TW7 5QD, United
Kingdom ("BSkyB Sub"); and
(QVC Sub and BSkyB Sub may herein be individually referred to as a
"Venturer" and collectively referred to as the "Venturers")
5. QVC, an unlimited company incorporated in and duly organised under the
laws of England, registered no. 2807164, with its registered office at
or to be at MarcoPolo House, Queenstown Road, London SW8, United
Kingdom (the "Venture").
WHEREAS:
A. The parties desire to participate in the Venture for the purpose of
engaging in the business of owning and operating a Home Shopping
Channel as a direct-to-the-consumer retail television network (the
"Service") serving cable and satellite dish homes within the United
Kingdom, the Republic of Ireland, the Isle of Man and the Channel
Isles (collectively, the "Territory") and to be encrypted using
VideoCrypt technology.
B. Direct-to-home distribution to dish houses will be provided by means
of the Service being included within BSkyB's "Basic Tier" which has
launched as an encrypted service as from 1st October 1993.
C. BSkyB leases an Astra transponder from Societe Europeenne des
Satellites S.A. ("SES"), which it has agreed to provide to the Venture
via the Transponder Sub-Lease (and also to provide uplinking and
related services) at cost
D. The business of the Venture is to be run from certain premises
currently leased by BSkyB and known as "MarcoPolo House", Queenstown
Road, London (the "Premises") which premises are to be sub-leased by
BSkyB to the Venture at cost.
E. QVC has agreed to provide funding to the Venture subject to the Agreed
Cap until the Break Even Date as hereafter provided.
NOW, THEREFORE, in consideration of the premises and other covenants and
conditions contained herein, the parties hereto agree as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
In this Agreement the following terms have the following meanings
(terms defined in the singular to include the plural and vice versa):
<PAGE> 7
2
"A DIRECTORS" has the meaning ascribed to that term in Clause 3.2
"A SHARES" has the meaning ascribed to that term in Clause 2.1(a).
"ACCOUNTANTS" means the independent chartered accountants and
registered auditors of the Venture.
"ADDITIONAL TERM" has the meaning ascribed to that term in Clause 2.5.
"AFFILIATE" means, with respect to any specified Person, any other
Person who or which, directly or indirectly through one or more
intermediaries, Controls, is Controlled by such specified Person.
Notwithstanding the foregoing, (i) neither the Venture nor any Person
Controlled by the Venture shall be deemed to be an "Affiliate " of any
Venturer or of any Affiliate of a Venturer, and (ii) no Venturer or
any Affiliate thereof shall be deemed to be an "Affiliate" of any
other Venturer or any Affiliate thereof by virtue of its equity
ownership in the Venture.
"AGENTS" has the meaning ascribed to that term in Clause 9.12.
"AGREEMENT" means this Agreement as it may from time to time be
amended, supplemented or otherwise modified in accordance with the
terms hereof.
"AGREED CAP" means ten million pounds sterling (Pound 10,000,000).
"ANCILLARY AGREEMENTS" means the Sub-Leases, the DTH Distribution
Agreement and the Transponder Sub-Lease.
"ANNUAL BUDGET" means, for any Financial Year of the Venture, either
(i) the budget and projected cash flow statement for the Venture for
such Financial Year, as approved by the Board of Directors, or (ii)
the budget and projected cash flow statement deemed to be the Annual
Budget pursuant to Clause 3.6(c) for such Financial Year, in either
case, conforming in form to the 1994 Annual Budget and containing
information in all categories included in the 1994 Annual Budget, as
amended or modified from time to time pursuant to Clause 3.6. Unless
the context otherwise requires, references to the Annual Budget shall
be deemed to be references to the Annual Budget then in effect.
"ASTRA TRANSPONDER" means the transponder on the Astra 1A satellite,
the Astra 1B satellite or the Astra 1C satellite that BSkyB has
identified for the purposes of transmitting the Service or any
replacement satellite access to which is provided by SES.
"B DIRECTORS" has the meaning ascribed to that term in Clause 3.2
"B SHARES" has the meaning ascribed to that term in Clause 2.1(a).
"BANK BASE RATE" means the base rate of Midland Bank PLC or if such
bank is no longer in existence, such other bank as shall be determined
in good faith by the Board of Directors.
"BANKRUPTCY PROCEEDING" means, with respect to any specified Person,
any case, proceeding or other action under any existing or future law
of any jurisdiction relating to bankruptcy, insolvency, reorganization
or relief of debtors, seeking to have an order for relief entered with
respect to such Person, or seeking to adjudicate such Person a
bankrupt or insolvent or seeking appointment of a receiver, trustee,
custodian or similar official for such Person or for all or any
substantial part of such Person's assets.
"BOARD OF DIRECTORS" or "BOARD" has the meaning ascribed to that term
in Clause 3.1.
<PAGE> 8
3
"BREACHING VENTURER" has the meaning ascribed to that term in Clause
8.2.
"BREAK EVEN DATE" means the date agreed between the parties (or
failing such agreement as determined by the Accountants who in making
such determination shall be deemed to be acting as experts and not as
arbitrators) being the last day of a Fiscal Quarter when:
(i) for that and the preceding Fiscal Quarter, the Venture has
achieved positive net cash flow on a monthly basis; and
(ii) the Venture can operate as a viable going concern without
funding support from the Venturers.
"BUDGET CERTIFICATE" has the meaning ascribed to that term in Clause
5.1(b).
"BUSINESS" means (i) the ownership and operation of the Service in the
Territory, (ii) the Hard Encryption of the Service and the
distribution thereof by satellite feed to viewers via satellite, cable
and such other means or media as to the Venturers seems fit (subject
to applicable regulatory requirements), (iii) such other functions as
shall be approved by the Board of Directors and (iv) all functions
incidental thereto including the ownership, lease and operation of
real and personal property acquired in connection with the foregoing
and the entering into and execution of agreements in connection with
the foregoing.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in London, England or Philadelphia,
Pennsylvania are authorised by law to close.
"CEO/MD" has the meaning ascribed to that term in Clause 3.7.
"CFO" has the meaning ascribed to that term in Clause 3.7.
"CHANNEL" has the same meaning as "Service".
"CLAIMANT COMPANY" has the meaning ascribed to that term in Clause 6.5
(b)(i).
"CLASSES" has the meaning ascribed to that term in Clause 3.2.
"CLOSING" has the meaning ascribed to that term in Clause 2.1.
"COMMITMENT INCREASE" has the meaning ascribed to that term in Clause
3.6(c).
"CONFIDENTIAL INFORMATION" means (i) the existence, and terms of, this
Agreement, (ii) all business and technical information relating to the
Business that is proprietary to the Venture or otherwise not available
to the general public and (iii) all trade secrets, technologies and
know-how of either Venturer in the areas of its expertise including,
without limitation, QVC's know-how in home shopping and direct
marketing and BSkyB's know-how in programming for and distribution to
United Kingdom audiences, encryption and BSkyB's subscriber base
(including but not limited to subscriber names and addresses) provided
however that such Confidential Information shall not include, with
respect to any Venturer desiring to disclose any information, any
information that (A) has become generally available to the public
other than as a result of a disclosure by such Venturer, its
Affiliates or its Agents in breach of Clause 9.12, (B) has been
independently developed by such Venturer or an Affiliate of such
Venturer without violating any obligations owed to the Venture or (C)
was or becomes available to such Venturer or an Affiliate of such
Venturer on a non-confidential basis from a third party having no
obligation of confidentiality to a Venturer or the Venture and which
has not itself received such information directly or indirectly in
breach of any such obligation of confidentiality.
<PAGE> 9
4
"CONSORTIUM PROVISIONS" has the meaning ascribed to that term in
Clause 6.5(b).
"CONTROL" means, as to any Person, the power to direct or cause the
direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
The term "Controlled" has a correlative meaning.
"DEFAULTED FUNDING LOAN" has the meaning ascribed to that term in
Clause 8.1(a).
"DEFICIT" has the meaning ascribed to that term in Clause 5.1(b).
"DIRECT EMPLOYEES COSTS" has the meaning ascribed to that term in
Clause 9.4(a).
"DIRECTORS" has the meaning ascribed to that term in Clause 3.2.
"DISPOSITION" means any sale, assignment, alienation, gift, exchange,
conveyance, transfer, pledge, hypothecation, granting of a security
interest (including a floating charge) or other disposition or
attempted disposition whatsoever, whether voluntary or involuntary.
The term "Dispose" means to make a Disposition.
"DOLLAR" or "$" means lawful currency of the United States of America.
"DTH" means the delivery of audio and video signals via high-powered
Hard Encrypted satellite transmission to owners or lessees of
television receive-only home satellite earth stations for private
non-commercial dwelling unit reception.
"DTH DISTRIBUTION AGREEMENT" means the DTH Distribution Agreement
between the Venture and BSkyB, substantially in the form of Exhibit F
hereto, as it may from time to time be amended or modified in
accordance with the terms hereof or thereof.
"EC" means the European Economic Community.
"EVENT OF DEFAULT" has the meaning ascribed to that term in Clause 8.1.
"FAIR MARKET VALUE" means, as to any equity interest in the Venture or
other property, the price at which a willing seller would sell and a
willing buyer would buy such property having full knowledge of the
facts, in an arm's-length transaction without time constraints, and
without being under any compulsion to buy or sell.
"FINANCIAL STATEMENTS" has the meaning ascribed to that term in Clause
3.6(b).
"FINANCIAL YEAR" means the annual reference period for accounting for
and maintaining records of the transactions of the Venture.
"FIRST LEASE" has the meaning ascribed to that term in Clause 9.8(a).
"FIRST VENTURER" has the meaning ascribed to that term in Clause
9.1(b).
"FISCAL QUARTER" or "QUARTER" means each 3 month period ending on the
last day of each of September, December, March and June during the
Term and the period of 3 months or less which terminates on the last
day of the Term.
"FUNDING DATE" means any date on which Funding Loans are required to
be made by QVC pursuant to this Agreement and without limiting the
generality of the foregoing includes any date an which Funding Loans
are due for repayment and profits are not available to make such
repayment.
"FUNDING EVENT OF DEFAULT" has the meaning ascribed to that term in
Clause 8.1(a).
<PAGE> 10
5
"FUNDING LOAN" means a funding loan made or to be made by QVC or any
of its Affiliates to the Venture pursuant to Clauses 2.2 and 5.1.
"FUNDING LOAN NOTE" means a promissory note issued by the Venture to
QVC (or any QVC Affiliate having made a Funding Loan) in respect of a
Funding Loan in the form attached hereto as Exhibit E or in such other
form as QVC and the Venture may agree from time to time.
"FUNDING NOTICE" has the meaning ascribed to that term in Clause
5.3(a).
"GAAP" means such generally accepted accounting principles as are
applied in, and would be generally acceptable in the United Kingdom as
of the date of the financial statement or other document with respect
to which the term is used.
"GOVERNMENTAL AUTHORITY" means any federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality of the United States of America or any state thereof,
or any government or governmental, supernational or state agency or
regulatory body of the United Kingdom, Ireland or the EC.
"GUARANTEE PAYMENT" means any payment made by QVC pursuant to the
terms of the Transponder Sub-Lease Guarantee or the Sub-Lease
Guarantee.
"HARD ENCRYPTION" means encryption using the videocrypt technology
that is descrambled by subscribers in the Territory by means of a
single "smart card" viewing card and "HARD ENCRYPTED" has a
corresponding meaning.
"INDEBTEDNESS FOR BORROWED MONEY" means:
(i) obligations for borrowed money (whether secured or unsecured);
(ii) obligations representing the deferred purchase price of
property or services other than accounts payable arising in
the ordinary course of business;
(iii) obligations in respect of operating or capital leases entered
into other than in the ordinary course of business, whether or
not such obligations would be required to be shown as a
liability on a balance sheet under GAAP; and
(iv) any guarantee or other obligations having the economic effect
of a guarantee in respect of any obligations referred to in
sub-paragraphs (i), (ii) or (iii) above.
"INITIAL TERM" has the meaning ascribed to that term in Clause 2.5.
"LANDLORD" has the meaning set out in Clause 9.8(a).
"LIENS" means any pledges, security interests, charges, restrictions
on or conditions to transfer, voting or exercise or enjoyment of any
right or beneficial interest, options, rights of first refusal and
other liens, claims, encumbrances, restrictions and equities of any
nature whatsoever.
"MATERIAL ADVERSE EFFECT" means any effect which is or is reasonably
likely to be materially adverse to the business of the Venture or the
relevant Venturer and its subsidiaries, taken as a whole (including
the continued conduct of the operation thereof in substantially the
manner currently conducted), or to the assets or liabilities of the
business or financial condition or results of operations of the
Venture or the relevant Venturer and its subsidiaries, taken as a
whole, or to the transactions (including performance thereof)
contemplated by this Agreement and the Ancillary Agreements.
<PAGE> 11
6
"1994 ANNUAL BUDGET" has the meaning ascribed to that term in Clause
3.6(a).
"NEW BUSINESS" has the meaning ascribed to that term in Clause 9.1(b).
"NON-BREACHING VENTURER" has the meaning ascribed to that term in
Clause 8.2
"NON-FUNDING VENTURER" has the meaning ascribed to that term in Clause
8.1.
"OFFER NOTICE" has the meaning ascribed to that term in Clause 9.1(c).
"OFFERED TERMS" has the meaning ascribed to that term in Clause 9.1(c).
"OPERATING PLAN" has the meaning ascribed to that term in Clause 2.4.
"OPERATIONAL START DATE" has the meaning ascribed to that term in
Clause 9.7(a).
"PARENT" means:
(i) QVC, in the case of QVC Sub; or
(ii) BSkyB, in the case of BSkyB Sub.
"PERCENTAGE SHARE" means, with respect to any Venturer at any date,
the number of Shares registered in the name of such Venturer divided
by the total number of Shares then in issue, expressed as a percentage
that is rounded to the nearest 1/1000 (being 50% as at the date of this
Agreement).
"PERSON" means any individual, corporation, partnership, firm, joint
venture, association, joint-stock company, trust, estate,
unincorporated organization, governmental or regulatory body or other
entity.
"POUND" or "POUND" means lawful currency of the United Kingdom.
"PREMISES" has the meaning ascribed to that term in Clause 9.8(a).
"PRIOR YEARS' CONTRACTS" has the meaning ascribed to that term in
Clause 3.6(c).
"PROPOSED ANNUAL BUDGET" has the meaning ascribed to that term in
Clause 3.6(b).
"QVC'S ANNUAL FUNDING OBLIGATION" has the meaning ascribed to that
term in Clause 5.1 (b).
"QVC PAYMENT BALANCE" means, at any time, the aggregate of all Funding
Loans and Guarantee Payments (not repaid at that time, unless repaid
from the issue of further Funding Loan Notes) made by QVC or any QVC
Affiliate to (in the case of Funding Loans) or on behalf of (in the
case of Guarantee Payments) the Venture.
"RESERVE FUND" has the meaning ascribed to that term in Clause 8.2
"RESTRICTED PROGRAM SERVICE" has the meaning ascribed to that term in
Clause 9.1(a).
"RESTRICTIVE COVENANTS" has the meaning ascribed to that term in
Clause 9.10.
"SECOND LEASE" has the meaning ascribed to the term in Clause 9.8(a).
"SECOND VENTURER" has the meaning ascribed to that term in Clause 9.1
(b).
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"SECTION 247 ELECTION" has the meaning ascribed to that term in Clause
6.5(c).
"SERVICE" has the meaning ascribed to that term in Recital A.
"SES" shall have the meaning referred to in Recital C.
"SHARES" has the meaning ascribed to that term in Clause 2.1(a)(i).
"SMS" means the subscriber management system operated by BSkyB's
Subsidiary, Sky Subscriber Services Limited, and which carries out
functions including subscriber phone contact, enablement and
disenablement, complaints handling and billing;
"SUB-LEASES" has the meaning ascribed to that term in Clause 9.8(a).
"SUB-LEASE GUARANTEE" has the meaning ascribed to that term in Clause
2.2.
"SUBSCRIBERS" means all Persons to whom the Service is distributed by
any television distribution system.
"SUBSIDIARY" has the meaning attributed to it by Section 736 of the
Companies Act 1985 but, for the avoidance of doubt, as if all
references therein to companies included any body corporate, wherever
incorporated.
"SUCCESSOR" means, with respect to any former Parent, the current
Parent which is the direct or indirect transferee of such former
Parent's equity interest in a Venturer.
"TAX LOSS" has the meaning ascribed to that term in Clause 6.5 (b)(i).
"TERM" has the meaning ascribed thereto in Clause 2.5.
"TERMINATION EVENTS" has the meaning ascribed to that term in Clause
10.1.
"TERRITORY" has the meaning ascribed to that term in Recital A.
"TRANSPONDER FOOTPRINT" means the reception footprint of the Astra
Transponder (being the area in which domestic reception of signals
from the Astra Transponder are received of a quality regarded as
normal broadcast reception quality and as further indicated in the
Transponder Lease).
"TRANSPONDER LEASE" means the lease of usage of an Astra Transponder
from SES, directly or indirectly, in the form or substantially in the
form referred to in Clause 9.7.
"TRANSPONDER SUB-LEASE" has the meaning ascribed to that term in
Clause 9.7.
"TRANSPONDER SUB-LEASE GUARANTEE" has the meaning ascribed to that term
in Clause 2.2(vi).
"VENTURE INTEREST" means and includes a Venturer's entire equity and
debt (or other) interest in the Venture, including:
(i) its Shares and Percentage Share;
(ii) all its interest in and rights under this Agreement; and
(iii) all rights or claims of any kind in respect of any of the
foregoing;
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but shall exclude in the case of QVC the QVC Payment Balance and
Funding Loan Notes.
"WINDING UP" has the meaning ascribed thereto in Clause 10.3.
1.2 INTERPRETATION
In this Agreement (and in any document that states in substance that
it is governed by the rules of interpretation contained herein, except
as expressly provided therein):
(i) a reference to a Person includes, unless the context otherwise
requires, its permitted Assignees;
(ii) a reference in such document to a law includes any amendment,
modification or replacement to such law;
(iii) accounting terms used in such document have the meanings
assigned to them by generally accepted accounting principles
applied on a consistent basis by the accounting entity to
which they refer;
(iv) references to any document, instrument or agreement:
(A) shall be deemed to include all appendices, exhibits,
schedules and other attachments thereto and all
documents, instruments or agreements issued or
executed in replacement thereof; and
(B) means such document, instrument or agreement, or
replacement thereto, as amended, modified and
supplemented from time to time in accordance with its
terms and as the same is in effect at any given time;
(v) unless otherwise specified, the words "hereof", "herein" and
"hereunder" and words of similar import when used in such
document shall refer to such document as a whole and not to
any particular provision of such document;
(vi) the words "include" and "including" and words of similar
import when used in such document are not limiting and shall
be construed to be followed by the words "without limitation",
whether or not they are in fact followed by such words;
(vii) the word "during" when used in such document with respect to a
period of time shall be construed to mean commencing at the
beginning of such period and continuing until the end of such
period;
(vii) all time explicitly or implicitly referenced in such document
shall be deemed to be Greenwich Mean Time;
(ix) all amounts required to be paid by any party pursuant to such
document to any other party thereunder shall, unless otherwise
specified in such document, be paid in such freely
transferable coin or currency of the United Kingdom or the
United States of America, as the case may be, as at the time
of payment shall be legal tender for the payment of public and
private debts, or shall be paid by banker's draft or certified
check, as the case may be, by wire transfer to an account
located in the United Kingdom or the United States, as the
case may be, as such party may specify by notice to the other
party(s);
<PAGE> 14
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(x) if any payment under such document is required to be made on a
day other than a Business Day, the date of payment shall be
extended to the next Business Day;
(xi) except as otherwise specifically provided in such document,
each party thereto shall, at its own cost and expense, obey
and comply with all applicable laws, as they may pertain to
each party's performance of its obligations under such
document; and
(xii) the parties to such document shall execute and deliver all
further documents and perform all further acts that may be
reasonably necessary to consummate the transactions
contemplated by such document.
2. THE VENTURE
2.1 FORMATION
(a) Prior to the closing of the transactions contemplated hereby
(the "Closing"):
(i) BSkyB and QVC shall cause the Venture:
(A) to be incorporated as an unlimited company
under the Companies Act 1985; and
(B) to have an authorised share capital of Pound
100 divided into 100 shares of one pound each
("Shares") consisting of a class of 50 A
shares par value one pound per share ("A
Shares") and a class of 50 B shares par
value one pound per share ("B Shares"). The
Memorandum of Association and the Articles of
Association substantially in the forms in
which they will be adopted by the Venture and
filed with the Registrar of Companies
immediately after the Closing are attached
hereto as Exhibits B-1 and B-2; and
(ii) (A) QVC shall procure that QVC Sub shall
subscribe and pay for 1 A Share for a
consideration of Pound 1; and
(B) BSkyB shall procure that BSkyB Sub shall
subscribe and pay for 1 B Share for a
consideration of Pound 1.
(b) For the purposes of this Agreement all acts done by QVC Sub
(or Funding Loans made by an Affiliate of QVC) shall be as
effective as if done by QVC and references to requiring such
acts to be done by QVC shall be construed accordingly,
PROVIDED THAT if not done, QVC shall be liable for such
breach. For the purposes of this Agreement all acts done by
BSkyB Sub shall be as effective as if done by BSkyB and
references to requiring such acts to be done by BSkyB shall be
construed accordingly, PROVIDED THAT if not done, BSkyB shall
be liable for such breach. For the avoidance of doubt (and
without derogating from Clause 12.3) the provisions of this
Clause 2.1(b) shall be for the benefit of QVC, QVC Sub, BSkyB
and BSkyB Sub and no other person shall be, entitled to rely
thereon.
(c) Prior to the Closing, (x) the persons designated as A
Directors by QVC and the persons designated as B Directors by
BSkyB pursuant to Clause 3.2 shall be duly appointed as
Directors of the Venture, subject to their signing a consent
to act as such, and the Venturers shall procure that any other
persons then holding office as a Director of the Venture shall
resign and (y) a meeting of the Board of Directors shall be
held at which:
<PAGE> 15
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(i) the applications for Shares referred to in Clause
2.1(a)(ii) shall be approved, the allotment and issue
of the Shares applied for shall be approved, share
certificates shall accordingly be issued to QVC Sub
and BSkyB Sub as appropriate and their names shall be
entered in the Register of Members of the Venture as
the respective owners of the Shares so allotted to
them;
(ii) the Board of Directors shall approve the entering
into of, and the performance of the transactions
contemplated by, this Agreement and each of the
Ancillary Agreements;
(iii) Neal Grabell and Richard Brooke shall be appointed
joint Company Secretaries of the Venture;
(iv) Arthur Andersen & Co. shall be appointed as
Accountants to the Venture;
(v) Midland Bank PLC shall be appointed as bankers to the
Venture, for the purposes of Clause 3.10;
(vi) the accounting reference date of the Venture shall be
altered to June 30 so that the first accounting
reference period of the Venture shall end on June 30,
1994; and
(vii) the address of the Premises shall be confirmed as the
registered office of the Venture.
2.2 THE CLOSING
The following actions shall take place at or prior to Closing:
(i) QVC shall make a Funding Loan in accordance with Clause 5.1
representing in the aggregate any amounts due (giving effect
to any and all Funding Loans made prior to such Closing) on
the date thereof as set forth in the Budget Certificate with
respect to the 1994 Annual Budget;
(ii) the Venture and BSkyB shall execute and deliver the DTH
Distribution Agreement PROVIDED THAT the parties agree that
if for any reason the Videocrypt encryption technology shall
not be available to the Venture or shall fail to function
properly, then until such time as BSkyB shall nominate and
provide an alternate encryption technology acceptable to QVC
(which acceptance shall not be unreasonably withheld) the
Venture shall be entitled to broadcast the Channel unencrypted
or "in the clear" until such encryption becomes available;
(iii) the Venture shall execute the Sub-Leases PROVIDED THAT if the
landlord's consent has not been obtained by the date of this
Agreement or if the Sub-Leases are not ready for execution the
Venture shall occupy the Premises as licensee of BSkyB in
accordance with Clause 9.8;
(iv) QVC shall execute the Sub-Lease Guarantee (as contained in the
Sub-Leases);
(v) the Venture shall execute the Transponder Sub-Lease; and
(vi) QVC shall execute the Transponder Sub-Lease Guarantee (as
contained in the Transponder Sub-Lease).
<PAGE> 16
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2.3 PRINCIPAL OFFICE
The principal office of the Venture shall be located at the Premises,
or such other place as the Board of Directors shall designate from
time to time. The books and records of the Venture shall be kept and
maintained at the principal office of the Venture.
2.4 PURPOSE
The Venture will be for the purpose of carrying on and expanding the
Business. The Venture has all powers necessary, desirable or
convenient, or which the Board of Directors deems necessary, desirable
or convenient, and may engage in any and all activities necessary,
desirable or convenient, or which the Board of Directors deems
necessary, desirable or convenient, to accomplish the purposes of the
Venture or consistent with the furtherance thereof. The initial
operating plan for the Venture that has been approved by the Venturers
(the "Operating Plan") is attached hereto as Exhibit C.
2.5 TERM
Subject to Clause 2.6 and to Clause 10, the Venture shall continue in
existence for an initial term commencing on 1 July 1993 and ending on
30 June 2003 (the "Initial Term") PROVIDED HOWEVER that the Venture
shall continue in existence for additional five year terms (the
"Additional Term(s)") after the expiration of the Initial Term or any
subsequent Additional Term unless, not less than one hundred and
eighty (180) days prior to the expiration of such term, the Board of
Directors elects to terminate the Venture. (As used herein, "Term"
means the Initial Term and, if applicable, any Additional Term(s)
referred to collectively.)
2.6 EARLY TERMINATION
(a) Either Venturer may elect to terminate this Agreement if by 1st
April, 1994 the "Operational Start Date" shall not have
occurred under the Transponder Sub-lease by delivering a
written notice to such effect to the other Venturer within
thirty (30) days after such date and the Venture shall
terminate on delivery of such notice.
(b) If the EC Commission or the Office of Fair Trading or other
competent body shall require any modification or change in the
terms of this Agreement or any of the Ancillary Agreements or
the manner in which the Business is conducted that, in the
reasonable judgment of a Venturer (taking into account
possible means to overcome such modification or change), has a
Material Adverse Effect on the benefits to be derived from the
Venture by such Venturer and its Affiliates, such Venturer may
elect to terminate this Agreement by delivering a written
notice to such effect to the other Venturer within ninety (90)
days after becoming aware of such requirement.
3. MANAGEMENT AND OPERATIONS OF THE VENTURE
3.1 BOARD OF DIRECTORS
Except as otherwise provided herein, the Venture shall be managed by
its Board of Directors (the "Board of Directors") pursuant to the
provisions of this Agreement and, except as aforesaid, the Board of
Directors has and shall exercise full power and discretion and
exclusive and final authority with respect to the management of the
affairs of the Venture for the accomplishment of its purposes.
<PAGE> 17
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3.2 DESIGNATION
The Board of Directors initially shall have six members ("Directors")
consisting of two classes ("Classes") of three Directors each ("A
Directors" and "B Directors"). Prior to the Closing, QVC Sub shall
designate by written notice to BSkyB Sub three persons (one of whom
shall be Barry Diller so long as he is employed in any capacity by QVC
or any of its Affiliates) to serve as the initial A Directors of the
Venture and BSkyB shall designate by written notice to QVC three
persons (one of whom shall be Sam Chisholm so long as his services are
made available to BSkyB or any of its Affiliates) to serve as the
initial B Directors of the Venture. Except as required above with
respect to Messrs. Diller and Chisholm, thereafter:
(i) QVC Sub shall have the right from time to time to remove or
replace any such A Director and to fill any vacancies arising
from the death or resignation of any such A Director, in each
case by written notice to the other Venturer and to the
Venture setting forth such action and designating any such new
A Directors; and
(ii) BSkyB Sub shall have the right from time to time to remove or
replace any B Director and to fill any vacancies arising from
the death or resignation of any B Director, in each case by
written notice to the other Venturer and to the Venture
setting forth such action and designating any such new B
Directors.
3.3 DECISION-MAKING
The presence at any meeting of the Board of Directors of at least one
Director from each Class shall constitute a quorum for the transaction
of business. Each Class of Directors shall be entitled collectively
to one vote on all matters and the transaction of any business at any
meeting shall require the affirmative vote of each Class of Directors.
The vote of each Class shall be determined by agreement among the
Directors of such Class present at the meeting or, failing such
agreement, by the majority vote of such Directors. If the Directors
of a Class present at a meeting cannot determine the vote of their
Class on a matter before the meeting by agreement or majority vote
(and the Directors of the other Class are entitled to vote), their
Class shall be deemed to have cast such vote on such matter so as to
create a unanimous vote of both Classes.
3.4 MEETINGS OF THE BOARD OF DIRECTORS
(a) The Board of Directors shall hold regular meetings to review,
among other things:
(i) the Annual Budget and balance sheet of the Venture;
(ii) the expenditure and revenue levels of the Venture; and
(iii) the allocations made and services provided by the
Affiliates of each Parent to the Venture;
such meetings shall take place no less frequently than
quarterly, at such times as shall be designated by any
Director (and reasonably satisfactory to the other Directors)
no later than ten (10) days in advance of any such meeting
PROVIDED HOWEVER that regular meetings may be held more
frequently during the start-up period of the Venture, as
determined by the Board of Directors.
(b) Meetings other than regular meetings may be called by any
Director and may be held at any time, upon:
<PAGE> 18
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(i) five Business Days' prior written notice with respect
to meetings at which Directors are expected to attend
at a single location, subject to a Director not
electing to participate in person in accordance with
Clause 3.4(d); and
(ii) two Business Days' prior written notice with respect
to conference telephone or similar communications
meetings;
in each case given by or to any A Director by or to any B
Director.
(c) Except to the extent otherwise agreed from time to time by the
Board of Directors, all meetings shall held at the Premises.
Any A Director may waive, an behalf of the other A Directors,
and any B Director may waive, on behalf of the other B
Directors, notice of a meeting, in writing, before. at or
after the meeting. The attendance of any A Director at a
meeting of the Board of Directors shall constitute a waiver of
notice of such meeting by the other A Directors and the
attendance of any B Director at any meeting of the Board of
Directors shall constitute a waiver of notice of such meeting
by the other B Directors, except where a Director attends a
meeting for the express purpose of objecting to the
transaction of any business because the meeting is not
properly called or convened.
(d) Directors may participate in a meeting of the Board of
Directors by means of conference telephone or similar
communications equipment through which all persons
participating in the meeting can hear each other, and
participation by such means shall constitute attendance in
person at such meeting.
(e) Any action to be taken by the Board of Directors may be taken
without a meeting of the Board of Directors by written consent
of a majority of the Directors of each Class.
(f) All actions by the Board of Directors shall be reflected in
minutes of the meeting or conference telephone call or similar
communications, which minutes will be furnished to each
Venturer within ten Business Days after the date of such
meeting. Subject to the provisions of this Agreement, the
Board of Directors may regulate its proceedings as the Board
of Directors determines.
(g) Each of the A Directors and each of the B Directors may
communicate to the Venturer appointing him (and the Parent of
such Venturer) any information acquired by him in relation to
the Venture, subject always to the Venturers' duty of
confidentiality contained in Clause 9.12.
3.5 ACTIONS REQUIRING BOARD APPROVAL
The following actions shall not be authorized or taken by the Venture
without approval of the Board of Directors:
(i) approval of the Annual Budget as set forth in Clause 3.6;
(ii) any change in the Business of the Venture;
(iii) the incurrence by the Venture or any of its subsidiaries of
any Indebtedness for Borrowed Money (other than Indebtedness
for Borrowed Money (x) relating to any contract, agreement,
commitment or arrangement that has been approved by the Board
of Directors or (y) consistent with or contemplated by, or
approved in connection with the approval of, the Annual
Budget, or the entering into of any contract, agreement,
commitment or arrangement to effect the foregoing);
<PAGE> 19
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(iv) the grant by the Venture of any security or additional
security for (x) any Indebtedness for Borrowed Money of the
Venture or (y) the performance of any other material
obligation of the Venture, other than liens granted to trade
creditors in the ordinary course of business;
(v) the making by the Venture of any guarantee of any obligation
of any Person;
(vi) all Funding Loan requests in addition to those required
pursuant to Clause 5.1;
(vii) any repayment of Funding Loans other than repayments required
pursuant to Clause 5.2;
(viii) the issue of any Shares or any obligation convertible into
Shares or the grant of any option or right to acquire any of
the foregoing;
(ix) any amendment or modification of the Memorandum of Association
or the Articles of Association;
(x) the entering into of any contract, agreement, commitment or
arrangement in respect of any transaction between the Venture
and any Venturer or any Affiliate of any Venturer (other than
to the Ancillary Agreements) relating to:
(a) matters covered by Clause 4; and
(b) any matters the terms of which have been expressly
approved under the provisions of Clause 9;
(xi) the making by the Venture of any loans, or advances
in the nature of loans in excess of Pound 5,000, to any
other entity (other than advance payments or prepayments of
amounts payable under contracts consistent with or contemplated
by, or approved in connection with the approval of, the Annual
Budget) other than in the ordinary course of business;
(xii) the authorization of the payment of any dividend or other
distribution with respect to, or the repurchase of, any
Shares;
(xiii) the making of (or commitment to make) any discretionary
expenditures by the Venture in any Financial Year that are not
consistent with or contemplated by, or approved in connection
with the approval of, the Annual Budget and which are in
excess of Pound 100,000 in the aggregate for all such
unbudgeted discretionary expenditures in such Financial Year;
(xiv) the making of (or binding commitment to make) any capital
expenditure (in a single transaction or a series of related
transactions) in excess of Pound 10,000 whether or not
approved in connection with the approval of the Annual Budget;
(xv) the Disposition by the Venture of assets which have an
aggregate Fair Market Value in excess of Pound 10,000 or a
book value in excess of Pound 10,000, in each case for any one
Disposition or related series of Dispositions in any Financial
Year, except, in either case for (and excluding from any
determination as to whether such Pound 10,000 limit has been
or would be exceeded) (x) Dispositions consistent with or
contemplated by, or approved in connection with the approval
of, the Annual Budget and (y) Dispositions in the ordinary
course of business;
(xvi) the acquisition by the Venture, by purchase or otherwise, of
any business (induding the purchase of any interest in or
equity securities of any business or
<PAGE> 20
15
the purchase of the assets of any business as an entirety or
substantially an entirety), or the entering into of any
agreement, commitment or arrangement to make any such
acquisition:
(xvii) the appointment or removal of the Accountants, or auditors or
principal outside counsel for the Venture;
(xviii) the commencement or abandonment by the Venture at any
litigation or arbitration involving matters outside the
ordinary course of business or the settlement of any
litigation or arbitration as to the Venture which (x) involves
a dispute in excess of Pound 25,000 or (y) has been brought or
commenced by or against any Governmental Authority PROVIDED
HOWEVER that the CEO/MD has the right to commence or abandon
any litigation or arbitration prior to the receipt of Board
approval in the event that time is of the essence in such
litigation or arbitration subject to the commencement or
abandonment of such litigation being submitted to the Board of
Directors for ratification as promptly as possible thereafter:
(xix) the voluntary commencement of any liquidation, dissolution or
winding-up of the affairs of the Venture;
(xx) the commencement of any legal proceedings or the taking of any
action or other preparatory steps for the winding up or
dissolution of the Venture, or for the appointment of a
liquidator, trustee, receiver, administrative receiver or
similar officer in relation to the Venture or over the whole
or any part at the undertaking, assets, rights or revenues of
the Venture;
(xxi) the execution by the Venture of any contract (other than any
employment contract, bonus plan or contract relating to
employee benefit plans or programs) involving aggregate
expenditures in a Financial Year by the Venture of more than
Pound 50,000 other than contracts consistent with or
contemplated by or approved in connection with the approval of
the Annual Budget;
(xxii) the entering into of contracts, agreements, commitments or
arrangements of the Venture (other than relating to matters
covered by Clause 3.5(xiv)) for a term (including possible
extensions or renewals of the term thereof at the option of
the other party thereto) greater than one year, other than
contracts, agreements, commitments or arrangements involving
expenditures of not more than Pound 100,000 in any one year;
(xxiii) the entering into of any employment contract which has a term
in excess of one year or which provides for compensation to
any employee of the Venture (including bonuses) in excess of
Pound 50,000 per annum;
(xxiv) the adoption by the Venture of (i) bonus or employee benefit
plans or programs, (ii) any material amendment to or change in
any such plans or programs or (iii) awards of bonuses or other
incentive compensation under such plans;
(xxv) the entering into of any collective bargaining agreement
regarding or otherwise affecting employees of the Venture or
the commencement of negotiations with any collective
bargaining unit;
(xxvi) the election or modification of (i) the Financial Year of the
Venture or (ii) any material tax or accounting practices or
policies;
(xxvii) any other significant action relating to the Venture's
financial statements, accounting practices or policies, tax
returns or elections for tax purposes;
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(xxviii) the admission of a new Venturer to the Venture, including the
identity of the new Venturer and the terms of any sale of a
Venture Interest to the new Venturers;
(xxix) the adoption by the Venture of any trademark, service mark or
trade name or the filing by the Venture of an application to
register any trade mark, service mark or trade name; and
(xxx) any material amendment or modifications of any contract,
agreement, commitment or arrangement required to be approved
by the Board of Directors pursuant to this Clause 3.5.
3.6 ANNUAL BUDGET APPROVAL
(a) The Annual Budget for the first Financial Year of the Venture
ending on June 30 1994 attached hereto as Exhibit D as in the
Exhibit List (the "1994 Annual Budget") is incorporated
herein for reference and is hereby ratified by the Venture as
the initial Annual Budget of the Venture.
(b) The CFO shall submit to the Board of Directors at least sixty
(60) days prior to the start of each Financial Year beginning
with the Financial Year ended June 30, 1995:
(i) a proposed budget and projected cash flow statement for
the Venture for such ensuing Financial Year
(collectively, the "Proposed Annual Budget"), in
substantially the same form and containing
substantially all of the information contained in the
1994 Annual Budget; and
(ii) a draft Budget Certificate relating to the Proposed
Annual Budget. The Proposed Annual Budget shall be
prepared on a basis consistent with the Venture's
Financial Statements and GAAP, except as noted therein.
The Proposed Annual Budget shall be subject to the
approval of the Board of Directors.
(c) If by the first day of any Financial Year beginning with the
Financial Year ended June 30, 1995 an Annual Budget for such
year shall not have been adopted by the Board of Directors,
then:
(i) the Annual Budget in effect for the preceding Financial
Year of the Venture, as adjusted by the CFO to reflect:
(I) increases of all revenue, disbursement and
expense items by the greater of (x) the increase
in the RPI during the prior year and (y) 10%;
and
(II) in addition to clause (I), any increases
("Commitment Increases") required to satisfy
commitments under contracts or agreements that
were entered into in a prior year ("Prior Year's
Contracts") PROVIDED HOWEVER that, if such
adjusted Annual Budget includes a Commitment
Increase, any payment in the preceding year's
Annual Budget required under the related Prior
Year's Contract shall not be increased and
included in such adjusted Annual Budget as
contemplated by sub-clause (I) above;
shall become the Annual Budget (and shall be deemed to
be the approved Annual Budget) for the then-current
Financial Year; and
<PAGE> 22
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(ii) the Budget certificate for such Annual Budget shall be
revised accordingly as provided in Clause 5.1.
The Board of Directors may ratify any Annual Budget deemed to
be in effect pursuant to this Clause 3.6(c). Any action
taken, or authorized to be taken, by the Board of Directors
which is inconsistent with the Annual Budget shall be deemed
to amend the Annual Budget.
(d) Each Annual Budget shall be capable of amendment or
modification by the Board of Directors.
(e) The Venturers shall procure that the CFO shall provide to
QVC's accountants such additional information as is
reasonably required for them to modify the proposed Annual
Budget to United States GAAP for QVC's United States
reporting purposes. For the avoidance of doubt, the official
annual budget shall be the version compiled according to
GAAP.
3.7 OFFICER AND SENIOR EXECUTIVES
The Venture shall have a Chief Executive Officer/Managing Director
(the "CEO/MD"), a Chief Financial Officer (the "CFO"), and such other
officers and senior executives as the Board of Directors shall
determine. The officers shall have such powers as may be delegated to
them from time to time by the Board of Directors.
(a) The CEO/MD shall be mutually selected by the Venturers, and
the Venturers shall cause the appointment of such CEO/MD by
the Board of Directors. The terms of employment of the
CEO/MD shall be approved by the Board of Directors. The
CEO/MD shall report to and shall be subject to direction and
removal by the Board of Directors. Except as otherwise
provided in this Clause, the CEO/MD has the right to
terminate the employment of the other executives of the
Venture.
(b) The CFO shall be mutually selected by the Venturers, and the
Venturers shall cause the appointment of such CFO by the
Board of Directors. The terms of employment of the CFO shall
be determined by the Board of Directors. The CFO shall
report to and be subject to the direction of the CEO/MD. The
CFO shall be appointed by and subject to removal by the Board
of Directors.
3.8 OTHER EMPLOYEES AND SERVICES
The Venture shall operate as an independent entity and shall hire its
own employees. Employees of the Venture shall have such compensation
and benefits as shall be approved by the Board of Directors.
3.9 INSURANCE
The Venture shall maintain insurance in such amounts (within the
limits of the Annual Budget), with such deductibles and against such
risks as may be customary for like businesses and properties and as
the Board of Directors deems appropriate for the Business. The
Venturers shall be named as additional insureds on all liability
insurance policies of the Venture.
3.10 VENTURE FUNDS
The funds of the Venture shall be deposited in such bank accounts of
the Venture or invested in such investments of the Venture as shall be
designated by the Board. Withdrawals from any such bank account shall
be made only in the regular course of business of the Venture upon the
signature of such person or persons as the Board shall
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determine. Venture funds shall not be commingled with those of any
other Person. If either Venturer or any of such Venturer's
Affiliates receives any funds to which the Venture is entitled under
any Ancillary Agreement or otherwise such funds shall promptly (and,
in any event, within five Business Days upon knowledge of receipt
thereof) be remitted to the Venture and deposited in a Venture bank
account.
3.11 SHAREHOLDER AND PARENT COVENANTS
Each Venturer and Parent shall exercise all its powers to ensure that:
(i) the Venture shall:
(a) comply with the provisions of and conditions attaching
to the non-domestic satellite licence granted to the
Venture;
(b) comply with the terms of each Ancillary Agreement; and
(c) not take any action which might lead to the withdrawal
or revocation of the non-domestic satellite licence;
and
(ii) no action is taken by it or its Affiliates which might result
in the revocation or withdrawal of the non-domestc satellite
licence granted to the Venture.
4. TRANSACTIONS BETWEEN THE VENTURERS AND THE VENTURE
4.1 RENEWAL OF CONTRACTS BETWEEN A VENTURER AND THE VENTURE
If any contract, agreement, commitment or arrangement between the
Venture and any Venturer or any Affiliate of such Venturer expires or
terminates, the Venturer that is not a party thereto (or whose
Affiliate is not a party thereto) shall, in its sole discretion, after
good faith consultation with the other Venturer, determine whether the
Venture shall renew such contract, agreement, commitment or
arrangement, and the terms of such renewal.
4.2 TERMINATION OF CONTRACTS BETWEEN A VENTURER AND THE VENTURE
If any contract, agreement, commitment or arrangement in respect of
any transaction between the Venture and either Venturer or any
Affiliate of such Venturer is terminable at any time by the Venture,
the Venturer that is not a party thereto (or whose Affiliate is not a
party thereto) may determine, in its sole discretion, after good faith
consultation with the other Venturer, to cause the Venture to exercise
such right of termination in accordance with and subject to the terms
thereof.
4.3 CONSIDERATION OF TRANSACTIONS WITH THE VENTURE
If a Venturer or any of its Affiliates offers to provide services,
goods or facilities to the Venture on a basis comparable to the basis
on which such services, goods or facilities are proposed to be
provided by an independent third party, the Venture shall give
favourable consideration to purchasing such services, goods or
facilities from such Venturer or Affiliate, as the case may be.
4.4 PAYMENT OF FEES AND EXPENSES
Except as expressly provided in this Agreement or any Ancillary
Agreement or as expressly approved by the Board of Directors, no
Venturer shall be reimbursed for any of its overhead or general or
administrative expenses attributable to the Venture, nor shall
salaries, fees, commissions or other compensation be paid by the
Venture to any Venturer or to any Affiliate of a Venturer for services
rendered to the Venture.
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4.5 VENTURE OBLIGATIONS
If any obligation in this Agreement or the Ancillary Agreements is
expressed to be an obligation of the Venture, it shall also be an
obligation of each Venturer to the other to take all steps within its
power to cause the Venture to perform such obligation. The
obligations of each Venturer shall include the obligation to exercise
the voting rights attaching to the Shares registered in its name from
time to time to give effect to such obligation, and the obligation to
procure that the Directors of the Venture appointed by such Venturer
shall, so far as not inconsistent with their fiduciary duties to the
Venture, cause the Venture to perform such obligation.
4.6 VENTURE PAYMENTS
All payments by the Venture to a Venturer shall be in Pounds except as
otherwise expressly provided herein or in any Ancillary Agreement.
5. BORROWINGS BY, AND FUNDING OF, THE VENTURE
5.1 FUNDING TO THE BREAK EVEN DATE
(a) Prior to the Break Even Date, QVC agrees to make or cause to be made
all Funding Loans called for pursuant to this Agreement PROVIDED
HOWEVER that QVC shall not be required to make any Funding Loan or any
portion thereof (other than pursuant to Clause 5.1(g)) to the extent
that, after giving effect thereto, the QVC Payment Balance would
exceed the amount of the Agreed Cap (without derogating from QVC's
liability to make Funding Loans up to the Agreed Cap). Funding Loans
shall:
(i) be three month non-interest bearing loans issued at a
discount equal to the Bank Base Rate at the date of issue;
(ii) be subordinated to all other creditors of the Venture but
shall rank prior to any distribution to any Venturer in
respect of such Venturer's Venture Interest;
(iii) rank for repayment an the winding up of the Venture in
accordance with Clause 10.3; and
(iv) be evidenced by zero coupon Funding Loan Notes in the form
set out in Exhibit E.
(b) Following the approval (or deemed approval) by the Board of Directors
of each Annual Budget after the 1994 Annual Budget, the CFO shall
cause a copy thereof to be delivered to each Venturer, and shall, if
the projected cash flow statement included in such Annual Budget
reflects a negative cash flow for any period (a "Deficit"), prepare and
distribute to each Venturer a certificate (the "Budget Certificate")
setting forth, based on the Annual Budget for such Financial Year:
(i) the amount of the Deficit to be funded through Funding Loans;
(ii) the Funding Date or Funding Dates, which shall be monthly in
advance, on which such Funding Loans will be required to be
made; and
(iii) the aggregate amount of the Funding Loans required to be made
an each such Funding Date(s). The Budget Certificate with
respect to the 1994 Annual Budget is attached thereto as
Exhibit D.
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Subject to the terms of Clause 5.3, prior to the Break Even Date QVC
shall make Funding Loans during the Financial Year covered by the
Annual Budget in an aggregate amount equal to the Deficit ("QVC's
Annual Funding Obligation") on the basis set forth in this Clause 5.
(c) In the event that during any Financial Year the Board of Directors
amends or is deemed to have amended the Annual Budget then in effect
(including any change in QVC's Annual Funding Obligation), the CFO
shall promptly issue a revised Budget Certificate for such Financial
Year (or remainder thereof). Subject to the terms of Clause 5.3, QVC
shall prior to the Break Even Date make all Funding Loans as and when
called for by any Budget Certificate as in effect from time to time.
(d) Subject to the terms of Clause 5.3, the CFO may increase or decrease
the aggregate amount of the Funding Loans required to be made an any
Funding Date, up to a maximum adjustment of 10% for each such Funding
Loan, by giving written notice thereof (together with a revised Budget
Certificate for the remainder of the Financial Year) no later than
five Business Days prior to such Funding Date PROVIDED HOWEVER that no
such adjustment by the CFO shall affect QVC's Annual Funding
Obligation.
(e) Should the conduct of the Business of the Venture at any time prior to
the Break Even Date result in the incurrence of losses or a Deficit
greater than allowed in the Budget for the Financial Year in which the
loss is incurred or as at the last preceding Funding Date
("Extraordinary Shortfall") and should the Venture be unable to obtain
from its bankers funding for such amount without requiring the
furnishing of guarantees, letters of comfort or other guarantees from
its shareholders, then subject to the terms of Clause 5.3 QVC shall
make a further Funding Loan to the Venture equal to the amount of the
Extraordinary Shortfall. In case there is any dispute as to the
amount of such Extraordinary Shortfall, a statement by the Accountants
shall be conclusive as to such amount and the parties shall co-operate
in aiding the Accountants to issue such statement within two (2)
Business Days of any Venturer deciding that there has been an
Extraordinary Shcrtfall (or in any event on request by the CEO/MD or
the CFO) and the date on which the Accountants issue such certificate
(or the parties otherwise decide the amount of an Extraordinary
Shortfall) shall be deemed to be a Funding Date for the purposes of
this Clause 5.1. In giving such certificate the Accountants shall act
as experts and not arbitrators and their determination shall be final
and binding on the parties hereto.
(f) Subject to the terms of Clause 5.3, on each date that a Funding Loan
becomes due for repayment the Venture shall consider to what extent
the Funding Loan is repayable out of profits in accordance with Clause
5.2 below or otherwise under the terms of this Agreement and QVC
shall, if required by the Venture, make further Funding Loans on the
terms set out in Clause 5.1 to enable the Venture to fund the Deficit
and repayment of the Funding Loans or Loans then due for repayment
which shall be repaid.
(g) Subject to the terms of Clause 5.3, on each Funding Date QVC shall
make a Funding Loan to the Venture in immediately available funds in
an amount equal to the aggregate amount of the Funding Loans due on
such Funding Date. In addition to any other remedies provided herein,
any such Funding Loan not made on the Funding Date shall accrue
interest at the rate of 3% over the Bank Base Rate for the period
commencing on the date such payment was due until the day such payment
is paid.
(h) All Funding Loans shall be made in Pounds by wire transfer or other
direct funds transfer of immediately available funds to the bank
account of the Venture specified in the applicable notice from the
Board of Directors.
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(i) QVC shall not be permitted to set-off or appropriate and apply against
its Funding Loans any credits, indebtedness or claims, in each case
whether direct or indirect, absolute or contingent, matured or
unmatured at any time owed by the Venture to QVC under any Ancillary
Agreement or otherwise.
(j) In determining for the purpose of this Clause whether the QVC Payment
Balance after giving effect to a proposed Funding Loan would exceed
the Agreed Cap, the Agreed Cap shall be deemed to be increased by an
amount equal to the discount element of any Funding Loan which has
been repaid from the issue of further Funding Loan Notes in accordance
with Clause 5.1(f).
5.2 REPAYMENT OF FUNDING LOANS; DIVIDEND POLICIES
(a) If in respect of any Fiscal Quarter the Venture has profits
available for distribution (within the meaning at Part VIII
of the Companies Act) and available cash, being cash balances
after:
(i) the provision of working capital to finance the
continuing operations and internal growth of the
Business; and
(ii) transfers to cash reserves consistent with the
normal commercial requirements of businesses
similar to those carried on by the Venture;
the Venturers (and, without requiring any financial
commitment, their respective Parents) shall procure that an
amount equivalent to the lower of the distributable profits
and the available cash shall be applied in the following
order of priority:
(A) repayment of Funding Loans as and when they fall due
for repayment to QVC or its Affiliate making such
Funding Loan; and
(B) the payment of cash dividends to the maximum level
possible within 3 months after the end of such Fiscal
Quarter;
(b) in deciding whether in respect of any Fiscal Quarter the
Venture had or has profits available for distribution the
parties hereto shall procure that the Accountants shall
certify whether such profits are available or not and the
amount thereof (if any). In giving such certificate the
Accountants shall act as experts and not arbitrators and
their determination shall be final and binding on the parties
hereto.
5.3 FUNDING AFTER THE BREAK EVEN DATE
For the avoidance of doubt notwithstanding anything contained in this
Agreement or any other agreement between any of the parties hereto,
QVC's obligation to make Funding Loans (save only as required to repay
outstanding Funding Loans) and Guarantee Payments shall only exist
prior to the Break Even Date and shall at all times be subject to the
QVC Payment Balance not exceeding the Agreed Cap after giving effect
to any proposed Funding Loan or Guarantee Payment PROVIDED THAT in
determining for the purpose of this Clause whether the QVC Payment
Balance after giving effect to a proposed Funding Loan would exceed
the Agreed Cap, the Agreed Cap shall be deemed to be increased by an
amount equal to the discount element of any Funding Loan which has
been repaid from the issue of further Funding Loans in accordance with
Clause 5.1(f). Upon the earlier of (a) the Break Even Date or (b) the
date upon which the QVC Payment Balance equals or exceeds the Agreed
Cap, the funding of the Venture shall be as agreed between the
Venturers PROVIDED FURTHER THAT:
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(a) in the event that the Venturers are unable to agree on the
funding of the Venture either Venturer may give to the other
notice in writing (a "Funding Notice") and if the Venturers
shall not have agreed as to the on-going funding of the
Venture by the expiration of twenty-one (21) days after the
giving of a Funding Notice, either Venturer shall be entitled
to terminate the Venture by giving a further written notice
to the other, and
(b) nothing shall make any Venturer, Parent or its nominated
Directors liable in any way for repayment of outstanding
Funding Loans to QVC.
5.4 FUNDING LOAN BY AFFILIATE
Any Funding Loan required to be made hereunder by QVC may, at the
election of QVC, be made by an Affiliate of QVC.
6. ACCOUNTING AND TAXATION
6.1 FINANCIAL YEAR
(a) The books and records of the Venture shall be kept on an
accrual basis and the Financial Year of the Venture for
financial accounting and tax purposes shall be July 1 - June
30.
(b) The Venture shall if requested by QVC cause to be prepared
and made available to QVC such financial statements and other
reports and shall take any other action as QVC may reasonably
require by reason of the fact that QVC's fiscal year is
February 1 - January 31.
6.2 MAINTENANCE OF BOOKS AND RECORDS
At all times during the continuance of the Venture, the CFO shall keep
or cause to be kept, at the principal office referred to in Clause
2.3, full and complete books of account. The books of account shall
be maintained as required by law and in a manner that provides
sufficient assurance that:
(a) transactions of the Venture are executed in accordance with
the general or specific authorization of the Board of
Directors consistent with the provisions of this Agreement
and the Ancillary Agreements;
(b) transactions of the Venture are recorded in such form and
manner as will (x) permit preparation of United Kingdom and
United States federal, state and local corporation, income
and franchise tax returns and information returns by the
Venture and the Venturers in accordance with this Agreement
and as required by law, and as needed to accommodate QVC's
fiscal year, (y) permit preparation of the Venture's
financial statements in accordance with GAAP, and (z)
maintain accountability for the Venture's assets; and
(c) recorded assets are compared with the existing assets at
reasonable intervals and appropriate action is taken with
respect to any difference.
6.3 ACCESS TO BOOKS OF ACCOUNT
Notwithstanding any other provision of this Agreement (but subject to
Clause 9.12), each Venturer has the right upon reasonable advance
notice at all reasonable times during usual business hours to (i)
audit, examine and make copies of the books of account at the Venture,
(ii) visit the facilities of the Venture and (iii) discuss the affairs
of the Vernture with its officers, employees, attorneys, accountants,
customers and suppliers PROVIDED HOWEVER that such audit, examination
and/or visit shall be conducted in such a manner
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as not to interfere unreasonably with the business of the Venture.
Such right may be exercised through any agent or employee of such
Venturer designated in writing by it or by independent certified
public accountants or counsel designated in writing by such Venturer.
Each Venturer shall bear all expenses incurred in any examination made
for such Venturer's account.
6.4 FINANCIAL STATEMENTS
(a) ANNUAL STATEMENTS
As soon as practicable following the end of each Financial
Year, but in any event within ninety (90) days after the end
of the Financial Year, the CFO shall prepare and deliver to
each Venturer an audited balance sheet of the Venture as at
the end of such Financial Year, and audited statements of
income (loss) and changes in financial position of the
Venture for such Financial Year, each prepared in accordance
with GAAP and accompanied by the Accountants' report thereon.
(b) QUARTERLY STATEMENTS
As soon as possible following the end of each Fiscal Quarter,
but in any event within twenty (20) Business Days after the
end of each such quarter, the CFO shall prepare and deliver
to each Venturer unaudited statements of income (loss) and
changes in financial position of the Venture for such Fiscal
Quarter and for the year to date and an unaudited balance
sheet of the Venture, together with:
(i) a reconciliation of actual and budgeted results at
budgeted cost code level;
(ii) modified balance sheet and changes in financial
position;
(iii) cash utilisation report;
(iv) stock control report;
(v) selling data for each main product line;
(vi) a certificate of the CFO to the effect that such
financial statements have been prepared under his
supervision and that, although such financial
statements do not contain the footnotes and other
disclosures required by GAAP, such financial
statements, in his judgment, fairly present in all
material respects the interim results of operations and
financial position of the Venture for the period and as
of the date indicated, subject to normal audit
adjustments; and
(vii) any reasonable information that may be required by
QVC's United States accountants to enable the reports
or accounts to be adjusted to reflect US GAAP or to
comply with United States tax and statutory reporting.
At such time, the CFO shall also prepare and deliver to each
Venturer current forecasts of year-end results of the
Venture.
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(c) MONTHLY STATEMENTS
As soon as possible following the end of each month, but in
any event within 15 Business Days after the end of each
such month, the CFO shall prepare and deliver to each Venturer
unaudited profit and profit and loss statements of the
Venture for such month, together with a reconciliation of
actual and budgeted results.
(d) OTHER INFORMATION
At the request of any Venturer, the CFO shall prepare and
deliver to each Venturer, as soon as practicable following
such request, any additional financial information and
statements as such Venturer shall from time to time
reasonably request.
6.5 TAXATION
(a) Except as otherwise provided herein, all tax elections by the
Venture shall be determined by the Board of Directors except
where law provides that the election shall be made by the
Venturers. The CFO shall prepare and file or cause to be
prepared and filed all tax returns required to be filed by
the Venture. The CFO shall submit copies of such tax returns
to the Venturers for their review at least fifteen (15)
Business Days prior to the due date for filing such returns.
Such returns shall be filed only after the Venturers have
approved such returns (such approval not to be unreasonably
withheld).
(b) (i) If the Venture has a trading loss or other amount
(hereinafter, a "Tax Loss") which, pursuant to Sections
402 through 413 of the Income and Corporation Taxes Act
1988 (hereinafter, the "Consortium Provisions") may be
surrendered to a Venturer or an Affiliate of a Venturer
(hereinafter, the "Claimant Company") by way of a
consortium claim, the Venture shall, subject to the
consent of each Venturer, surrender such portion, not
to exceed such Venturer's Percentage Share, of such Tax
Loss to the Claimant Company as may be requested by
such Venturer. The Claimant Company shall make (or, if
the Claimant Company is an Affiliate of a Venturer,
such Venturer shall cause the Claimant Company to make)
a payment to the Venture in an amount equal to the
product of the rate of United Kingdom corporation tax
in effect for the relevant Financial Year of the
Claimant Company (or the average rate calculated on a
time basis where more than one such rate is applicable
in respect of the relevant Financial Year) and the
amount of the surrendered Tax Loss.
(ii) If a Venturer or an Affiliate of a Venturer has a Tax
Loss which, pursuant to the Consortium Provisions, may
be surrendered to the Venture, such Venturer may, at
its election and subject to the consent of the other
Venturer, surrender or cause the surrender of all or a
portion of such Tax Loss to the Venture. The Venture
shall make a payment to the Person surrendering the Tax
Loss in an amount equal to the product of the United
Kingdom corporation tax rate in effect for the relevant
Financial Year of the Venture (or the average rate
calculated on a time basis where more than one such
rate is applicable in respect of the relevant Financial
Year) and the amount of the surrendered Tax Loss.
(iii) Any payment required pursuant to paragraph (i) or (ii)
above shall be made nine months after the end of the
relevant accounting period at the party to which the
Tax Loss is surrendered. Appropriate adjusting
payments shall be made in the event that the amount of
the
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surrendered Tax Loss is adjusted by the Inland Revenue
(including adjustments in the nature of total or
partial disallowance of (x) the surrendered Tax Loss or
(y) the application of consortium relief). In the case
of a Tax Loss surrendered to the Venture pursuant to
paragraph (ii) above, the Venturer which surrenders (or
whose Affiliate surrenders) the Tax Loss shall
indemnify and hold harmless the Venture from and
against any interest and penalties payable as a result
of any adjustment made by the Inland Revenue.
(iv) If a Tax Loss is surrendered to the Venture pursuant to
paragraph (ii) above, then for United States federal
income tax purposes, the amount of United Kingdom
corporaton taxes deemed to have been paid by the
Venture for the relevant accounting period allocated to
QVC shall equal (x) QVC's Percentage Share of the
amount of United Kingdom corporation taxes which would
have been payable by the Venture absent surrender of
the Tax Loss minus (y) the amount of United Kingdom
corporation tax liability saved by the Venture for the
relevant period as a result of Tax Losses surrendered
to the Venture by QVC or its Affiliates.
(v) QVC shall at all times ensure that its Subsidiary QVC
Sub owns its entire Shares in the Venture and that QVC
Sub is at all times a UK resident company for tax
purposes.
(c) The Venturers agree to jointly make an election under Section
247 of the Income and Corporation Taxes Act 1988 (the
election permitted under such provision being referred to
herein as the "Section 247 Election") with respect to
dividends paid by the Venture PROVIDED HOWEVER that unless
the Venturer receiving the dividend payment elects to the
contrary (in which case the Section 247 Election shall apply
with respect to any dividend payment to such Venturer and the
Venture shall not account for advance corporation tax with
respect to such dividend payment to such Venturer), the
Venture shall cause such Section 247 Election not to apply
with respect to any dividend payment and the Venture shall
account to the Inland Revenue for advance corporation tax
with respect to dividends in accord with Schedule 13 of the
Income and Corporation Taxes Act 1988. The Venturers agree
to jointly make the Section 247 Election with the Venture
with respect to any payments of interest made by the Venture
to the Venturers.
(d) All references herein to provisions of the Income and
Corporation Taxes Act 1988 shall be deemed to include
references to any successor provisions thereto.
7. RESTRICTIONS ON DISPOSITION OF VENTURE INTERESTS
7.1 PROHIBITION ON DIRECT DISPOSITION OF VENTURE INTERESTS
(a) BSkyB agrees with respect to BSkyB Sub and QVC agrees with
respect to QVC Sub that, except as otherwise provided in
Clause 7.3:
(i) BSkyB Sub and QVC Sub shall at all times be and remain
the record and beneficial owner of the Shares purchased
by it pursuant to Clause 2.1(a) and of any new Shares
which may hereafter be issued to it by the Venture;
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(ii) it will not Dispose of all or any portion of its Venture
Interest or any of such Venturer's rights or interests
under this Agreement (including without limitation such
Venturer's rights to participate in the management of
the Venture); and
(iii) it will not enter into any agreement which gives any
other Person any voting or other rights with respect to
such Venturer's Venture Interest.
(b) QVC and any QVC Affiliate having made a Funding Loan shall
not dispose of all or any portion of the Funding Loans
outstanding to it (including its Funding Loan Note or any
other note evidencing a Funding Loan).
7.2 SUBSIDIARY STATUS
QVC agrees that:
(i) QVC Sub will at all times remain a Subsidiary of QVC;
(ii) the occurrence of any event which results in QVC Sub ceasing
to be a Subsidiary of QVC shall be deemed to constitute a
Disposition by QVC of its interest in the Venture in
violation of the terms of this Agreement; and
(iii) it will procure that QVC Sub shall at all times fully comply
with its obligations under this Agreement.
BSkyB agrees that:
(i) BSkyB Sub will at all times remain a Subsidiary of BSkyB;
(ii) the occurrence of any event which results in BSkyB Sub
ceasing to be a Subsidiary of BSkyB shall be deemed to
constitute a Disposition by BSkyB of its interest in the
Venture in violation of the terms of this Agreement; and
(iii) it will procure that BSkyS Sub shall at all times fully
comply with its obligations under this Agreement.
7.3 EFFECT OF PROHIBITED DISPOSITIONS
No actual or purported Disposition of:
(a) any Shares or of all or any portion of a Venture Interest; or
(b) the QVC Payment Balance (or any part thereon) (including any
Funding Loan Notes) (except in connection with any "blanket"
bona fide security interest granted by QVC to a financing
entity in the ordinary course of such financing entity's
financing business,
nor any right with respect thereto, whether voluntary or involuntary,
in violation of any provision at this Agreement shall be valid or
effective to grant to any other Person any right, title or interest
in or to such Shares or Venture Interest (or portion thereof) and the
Venturers agree that all Shares and Funding Loan Notes shall bear an
appropriate legend setting forth such restriction.
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8. EVENTS OF DEFAULT: CONSEQUENCES AND REMEDIES; SPECIAL TERMINATION
EVENTS
8.1 EVENTS OF DEFAULT
An "Event of Default" means, with respect to a Venturer, the
occurrence of any of the following:
(a) the failure by QVC (the "Non-Funding Venturer") to make any
Funding Loan required pursuant to Clause 2.2(b) or Clause 5.1
when due (a "Defaulted Funding Loan") and such failure
continues for a period of five (5) Business Days after
receipt of notice from BSkyB that such Funding Loan (or any
portion therof) is overdue (a "Funding Event of Default")
PROVIDED THAT QVC shall not be required to make any Funding
Loan or any portion thereof in excess of the Agreed Cap as
adjusted in accordance with Clause 5.1(f) above;
(b) the Disposition of a Venturer's Shares or all or any portion
of such Venturer's Venture Interest except as permitted by
this Agreement PROVIDED HOWEVER that no Event of Default
shall be considered to have occurred for thirty (30) days
following the involuntary encumbrance of all or any part of
such Shares or Venture Interest if during such 30-day period
such Venturer acts diligently to, and does, remove any such
encumbrance, including, but not limited to, by effecting the
posting of a bond to prevent foreclosure where necessary;
(c) the Disposition by the Parent of a Venturer of all or any
part of such Parent's interest (equity or other) in such
Venturer;
(d) the failure by a Venturer to perform any other material
obligation to be performed by such Venturer hereunder or the
violation by such Venturer of any other material term or
condition hereof, which failure or violation continues for
ten (10) Business Days after written notice thereof from the
other Venturer PROVIDED HOWEVER that with respect to any
failure or violation which if not a failure to pay money:
(i) if such failure or violation is curable but is of such
a nature that it cannot reasonably be cured within such
ten (10) Business Day period; and
(ii) such Venturer in good faith begins efforts to cure such
failure or violation within such ten (10) Business Day
period and continues diligently to do so;
then in such case such Venturer has a reasonable additional
period thereafter to effect the cure.
8.2 TERMINATION OF VENTURE
Upon the occurrence and during the continuance of an Event of Default,
the Venturer not responsible for such Event of Default (the
"Non-Breaching Venturer") may at any time, by written notice to the
Venturer responsible for such Event of Default (the "Breaching
Venturer") elect to terminate the Venture in which event the Venture
shall be liquidated and dissolved in accordance with Clause 10. If
such election is made, the amount of all damages, losses, costs and
expenses incurred or suffered by the Non-Breaching Venturer as a
result of the Event of Default shall be deducted from any amounts
otherwise payable to the Breaching Venturer in connection with such
liquidation and dissolution and such amount shall be paid to the
Non-Breaching Venturer. To the extent that the amount of any such
damages, losses, and costs and expenses are uncertain, the Venture
shall establish a reserve fund (a "Reserve Fund") into which shall be
deposited funds equal to
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28
the Non-Breaching Venturer's bona fide estimate of such amounts. In
the event that the Breaching Venturer disagrees with the amount of
such estimate, the amount of such estimate shall be determined by an
independent appraiser who shall be mutually selected by the Venturers.
The Breaching Venturer shall bear all fees and costs with respect to
the use of such independent appraiser PROVIDED HOWEVER that in the
event that the appraiser determines that the Non-Breaching Venturer's
estimate with respect to the amount of damages, losses, costs and
expenses suffered by the Non-Breaching Venturer (a) exceeds the
appraiser's estimate by more than 10%, the Non-Breaching Venturer
shall bear all fees and costs with respect to the use of such
appraiser or (b) exceeds the appraiser's estimate by more than 5% but
less than 10%, the Venturers shall equally share the fees and costs
with respect to the use of such appraiser. All monies placed in the
Reserve Fund shall be deducted from any amounts otherwise payable to
the Breaching Venturer in connection with such liquidation and
dissolution. Upon a final, settlement of the amount of such damages,
losses, costs and expenses, the Non-Breaching Venturer shall receive
all amounts due to it from the Reserve Fund pursuant to the second
sentence of this Clause 8.2. In the event that any monies remain in
the Reserve Fund after the Non-Breaching Venturer has been paid in
full, such monies shall be paid to the Breaching Venturer (to the
extent otherwise distributable to him pursuant to the terms of Clause
10). Notwithstanding any other provision of this Agreement, in the
event that the only Event of Default is an Event of Default under
Clause 8.1(a), QVC shall in no event be liable for damages in excess
of an amount equal to the Agreed Cap minus the QVC Payment Balance as
of the date of the Event of Default.
8.3 ADDITIONAL REMEDIES
Notwithstanding any provision of Clause 8.2 to the contrary, the
foregoing provisions of this Clause 8 shall be in addition to and not
in limitation of any other rights or remedies that the Venture or the
Non-Breaching Venturer may have against the Breaching Venturer or its
Affiliates at law or in equity, pursuant to statute or regulation or
otherwise and the Venture and the Non-Breaching Venturer shall be
entitled to recover from the Breaching Venturer in an appropriate
proceeding any damages incurred by either of them in connection with
such Event of Default.
9. BUSINESS OF THE VENTURE
9.1 RESTRICTIVE PROVISIONS
(a) Each Venturer and Parent covenants and agrees that during the
Term, except as permitted under this Clause 9.1, it will not,
directly or indirectly:
(i) operate, own any interest in or participate in the
profits of a program service similar in theme or
content to the Service and distributed in any language
via television in any form, whether pay, free-to-air,
satellite or terrestrially delivered, directed at
audiences in the Territory (a "Restricted Program
Service") except through the Venture; and
(ii) become or remain interested in any Person (other than
the Venture) engaged in a Restricted Program Service in
any capacity, including, without limitation, as a
shareholder, director, partner, principal, employee,
agent or consultant.
(b) Without derogating from Clause 9.1(a), each Venturer and
Parent covenants and agrees that during the Term, except as
permitted under this Clause 9.1, it (the "First Participant")
will not, directly or indirectly:
(i) operate, own any interest in or participate in the
profits of a program service similar in theme or
content to the Service and distributed in any language
via television in any form, whether pay, free-to-air,
satellite or
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29
terrestrially delivered, directed at audiences in the
Transponder Footprint (a "Restricted European Program
Service") except through the Venture or a venture
structure that complies with Clause 9.1(c));
(ii) become or remain interested in any Person (other than
the Venture or a venture structure which complies with
Clause 9.1(c)) engaged in a Restricted European Program
Service in any capacity, including, without limitation,
as a shareholder, director, partner, principal,
employee, agent or consultant;
(a "New Business") except as set out in Clause 9.1(c) or as
otherwise approved by the other Venturer ("Second
Participant").
(c) a proposal for a New Business complies with the provisions of
this Clause 9.1(c) if:
(i) the only equity holders are BSkyB and QVC (or their
respective Affiliates) (each a "Participant") in equal
shares together with such other Persons as BSkyB and
QVC mutually approve;
(ii) each Participant bears 50% of the new venture's
investment costs and no Participant receives any
percentage of gross sales (other than equally with the
other Participant) and no Participant is entitled to
interest on recoupment of capital expenditure incurred
except pari passu with the other Participant;
(iii) the First Participant gives to the Second Participant
notice in writing (an "Offer Notice") setting out a
business plan and other terms in respect of the New
Business that comply with sub-paragraph (ii) above
("Offered Terms"). The Offered Terms shall in all
respects be bona fide arms length terms capable of
acceptance by the Second Participant and not providing
any rights or benefits to the First Participant
inconsistent with sub-paragraph (ii) above;
(iv) if the Second Participant does not accept the Offered
Terms within 28 days of the date on which the Offer
Notice is given to it, the First Participant shall be
free to proceed on the Offered Terms with another
Person but shall not proceed on terms more favourable
to any other Person without giving a fresh Offer Notice
to the Second Participant in accordance with this
Clause 9.1(c); and
(v) if the First Participant having given an Offer Notice
to the Second Participant (the terms of which Offer
Notice are not accepted by the Second Participant)
shall not conclude terms with another Person (or
commence in its own right a business being no broader
than as specified in the Offer Notice) within 3 months
of the date on which an Offer Notice is given, the
First Participant may not commence the New Business
without giving a further Offer Notice in accordance
with this Clause 9.1 (c).
(d) BSkyB shall not be in violation of this Clause 9.1 by virtue
of:
(i) BSkyB's ownership and operation of its subscriber
management system based at Livingston, Scotland;
(ii) BSkyB distributing any program service as part of the
Basic Tier (or any other tier or package or programming)
SAVE THAT BSkyB shall
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30
only distribute a program service directly competitive
with the Channel if they are judged by a court or
similar regulatory authority of competent jurisdiction
to be in violation of any applicable law or regulation;
(iii) BSkyB selling and promoting premiums and other
merchandise and Sky-branded goods (whether or not such
goods are advertised on BSkyB's programme services)
which premiums, merchandise and goods are intended to
promote the business of BSkyB;
(iv) BSkyB carrying advertisements on air whereby viewers
are invited to call telephone numbers or make other
responses to obtain goods or services which are
advertised (subject to applicable ITC advertising
regulations or standards).
(e) QVC shall not be in violation of this Clause 9.1 as a result
of its Spanish or Portuguese language broadcast services
conducted or to be conducted pursuant to its agreement with
Grupo Televiso.
(f) Any Venturer, either alone or in combination with any other
Person, without violating any provision of this Agreement or
any duty of such Venturer to the Venture or any other
Venturer and without incurring any obligation or liability to
the Venture or any other Venturer, may engage in activities
that would otherwise be prohibited pursuant to Clause 9.1 if:
(i) such Venturer has given written notice to the other
Venturer specifying the nature of such activities; and
(ii) such Venturer receives the written approval of the
other Venturer specifically authorizing such Venturer
to exploit such activities outside of the Venture.
9.2 OTHER ACTIVITIES; RIGHT TO COMPETE
Any Venturer, and any Affiliate of any Venturer, may, subject only to
the express provisions of this Clause 9, engage, directly or
indirectly (including without limitation through and by means of an
equity or profits interest in any other Person), in other businesses
or Ventures of any nature or description, without regard to whether
such businesses or Ventures are or may be deemed to be competitive
with the Business. Any term of this Agreement to the contrary
notwithstanding (other than and subject only to the express provisions
of this Clause 9), no Venturer or any Affiliate of any Venturer shall
be obligated to present or offer to the Venture any particular
investment or business opportunity, regardless of whether the Venture
could take advantage of such opportunity if it were presented to the
Venture, but may avail itself of any such opportunity for its own
behalf. Except to the extent otherwise expressly prohibited or
required by this Agreement, each Venturer and its Affiliates has the
right to act in any manner it believes to be in its own best interests
without regard to the interests of the Venture.
9.3 ACKNOWLEDGMENTS
The parties agree and acknowledge that:
(a) all trademarks, copyrights, patents, trade secrects, "trade
dress" and other similar proprietary rights, property and
information now or hereafter owned by QVC and used by the
Venture shall remain the sole property of QVC but shall
wherever possible be made available to the Venture during the
term of the Venture on the basis that the Venture shall
acquire no property rights or goodwill therein other
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pay the rent and other moneys payable under the Transponder
Sub-Lease to BSkyB or at QVC's election, directly to SES
PROVIDED THAT where payment is made direct reasonable prior
notice shall be given to BSkyB to avoid multiplicity of
payment and (y) observe and perform the covenants on the part
of the lessee and the conditions contained in the Transponder
Lease and (z) indemnify BSkyB and QVC against all claims,
demands, proceedings, damages, costs and expenses arising
out of or incidental to their breach, non-observance or
non-performance by the Venture. QVC shall join in the
Transponder Sub-Lease to give the guarantee therein. The
parties shall use all reasonable endeavours to obtain, and
will pay the incidental costs for obtaining, SES's consent to
the sub-lease and QVC shall ensure that the Venture shall
co-operate in obtaining such consent by supplying such
information and references as may reasonably be required.
The Venture shall indemnify BSkyB and QVC against all or any
costs, claims, demands and losses incurred or suffered by
BSkyB or QVC as a result of the use of the Transponder by the
Venture as sub-lessee.
(b) QVC hereby guarantees to BSkyB that the Venture shall make
all payments due to BSkyB under Schedule VI of the
Transponder Sub-Lease (including payments due pursuant to any
indemnity) or at QVC's election, directly to SES PROVIDED
THAT where payment is made direct reasonable prior notice
shall be given to BSkyB to avoid multiplicity of payment, in
either case, on the due dates and in the event of any failure
by the Venture to make any such payments QVC will on demand
make payments to BSkyB on a full indemnity basis PROVIDED
THAT any payments made by QVC pursuant to such guarantee
shall be treated as Funding Loans to the Venture and QVC's
aggregate liability under the said guarantee shall not exceed
the Agreed Cap less the QVC Payment Balance. For the
avoidance of doubt, QVC shall have no further liability under
such guarantee from the earlier of:
(i) the termination of this Agreement, the Venture or the
Transponder Sub-Lease (whichever shall first occur);
(ii) the QVC Payment Balance equalling or exceeding the
Agreed Cap; and
(iii) the Break Even Date.
(c) On the termination of the Transponder Sub-Lease for any
reason the Astra Transponder shall revert to BSkyB.
(d) BSkyB represents and warrants to QVC that:
(i) BSkyB has negotiated the terms of the head lease with
SES on a fair basis and that there is no cross
subsidisation between that lease and any other lease of
transponder capacity by BSkyB PROVIDED THAT BSkyB has
disclosed to QVC the arrangements between SES and BSkyB
in the event that BSkyB uses an alternate satellite
system for digital transmission; and
(ii) all necessary consents, approvals and permits have been
or will be obtained in connection with the execution of
the Transponder Sub-Lease.
9.8 SUB-LEASE OF PREMISES
(a) The main business premises of the Venture shall be at Block A
MarcoPolo House, Queenstown Road, London, SW8 (the "First
Premises") and the adjoining Arches Nos 94 to 96 inclusive)
and part Arch 93 Queenstown Road, London, SW8 (the "Second
Premises") (the First Premises and the Second Premises
<PAGE> 37
33
together called the "Premises"). The First Premises are
currently held by BSkyB under a Lease dated 23 December 1988
between Universities Superannuation Scheme Limited (the
"Landlord") (1) and British Satellite Broadcastng Limited
(BSkyB's former name) (2) (the "First Lease") and the Second
Premises are currently held under a lease dated 1 October
1992 between the Landlord (1) and BSkyB (2) (the "Second
Lease") (the First Lease and the Second Lease together called
the "Leases"). The parties shall do all things reasonably
required of them to ensure that the Venture shall take a
sub-lease of each of the First Premises and the Second
Premises in the form of the draft sub-leases attached hereto
as Exhibits G and H, respectively (the "Sub-Leases").
(b) The term of the Sub-Lease of the First Premises shall
commence on 24 June 1993 and expire on the day before the
expiry of the term of the First Lease and the term of the
Second Lease shall commence on 24 June 1993 and expire on
the day before the expiry of the term of the Second Lease.
(c) QVC shall guarantee the payments of the Venture thereunder in
the terms of the guarantee contained in the Sub-Leases.
(d) BSkyB shall at the cost of the Venture use all reasonable
endeavours to obtain the reversioner's licence to the grant of
the Sub-Leases. QVC shall provide all necessary information
and lend all assistance as may reasonably be required to
obtain the licences. The Venture shall join in the licences
to covenant direct with the Landlord to observe and perform
the covenants on the part of the Venture contained in the
Sub-Leases.
(e) From 24 June 1993 BSkyB shall permit the Venture to occupy
the Premises as licensee only and the Venture shall with
effect from the 24 June 1993:
(i) pay to BSkyB a licence fee equal to the rents reserved
by and other amounts due to the Landlord pursuant to
the Sub-Leases on the dates due for the payment of
such rents and other amounts pursuant to the
Sub-Leases;
(ii) pay and discharge all rates and other outgoings and
insurance premiums in respect of the Premises and all
charges for gas, electricity water, telephones and
other services consumed on the Premises (apportioned on
a daily basis) (or in the absence of direct assessment
on the Venture will reimburse BSkyB on demand for any
such outgoings or charges);
(iii) observe and perform all covenants and conditions on the
part of the tenant contained in the Sub-Leases as if
the same had been granted and shall indemnify BSkyB for
any loss suffered as a result of any breach, non-
observance or non-performance of such covenants and
conditions; and
(iv) assume all third party public liability and employers
liability risks attached to the occupation and use of
the Premises and keep BSkyB indemnified in respect of
any claim arising out of such risks.
(f) In the event that the requisite reversioner's licences to the
grant of the Sub-Leases has not been granted by the date six
(6) months after the date of this Agreement BSkyB shall at
the request of the Venture apply to the court for an order
declaring that the reversioner's licences have been
unreasonably withheld or delayed.
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34
(g) Each of the Sub-Leases shall be granted on the date seven
days after the date of the relevant reversioner's licence (or
an order of the court declaring that such licence has been
unreasonably withheld) provided that if such licence has not
been granted (or order made) by the date nine months after
the date of this Agreement the Sub-Leases shall forthwith
be completed in any event.
(h) Copies of the Leases have been supplied to the Venture and
the Venture shall accept BSkyB's title to the grant of the
Sub-Leases without any objection requisition or enquiry
PROVIDED THAT BSkyB shall not have knowingly done or
permitted to be done anything which adversely affects the
title between the date hereof and completion of the Sub-
Lease. Within one month of the date hereof BSkyB shall
furnish to QVC or QVC's solicitors evidence reasonably
satisfactory to QVC that the charge referred to in entries
numbers 1 and 2 of the Charges Register of BSkyB's title
number TGL14416 has been released.
(i) The Venture shall indemnify BSkyB and QVC against all or any
costs, claims, demands and losses incurred or suffered by
BSkyB or QVC as a result of:
(i) the occupation of the Premises by the Venture as
licensee; and/or
(ii) the completion of the grant of the Sub-Leases,
pursuant to the Agreement without in either case the
requisite consent or licence of the reversioner pursuant to
the Leases.
(j) QVC hereby guarantees to BSkyB that the Venture shall make
all rent payments due to BSkyB under the Sub-Leases
(including payments due pursuant to any indemnity) or at
QVC's election, directly to SES PROVIDED THAT where payment
is made direct reasonable prior notice shall be given to
BSkyB to avoid multiplicity of payment, in either case, on
the due dates, and in the event of any failure by the Venture
to make any such payments QVC will on demand make payments to
BSkyB on a full indemnity basis PROVIDED THAT any payments
made by QVC pursuant to such guarantee shall be treated as
Funding Loans to the Venture and QVC's aggregate liability
under the said guarantee shall not exceed the amount of the
Agreed Cap less the QVC Payment Balance. For the avoidance
of doubt, QVC shall have no further liability under the said
guarantee from the earlier of
(i) the termination of this Agreement, the Venture or the
Sub-Leases (whichever shall first occur); and
(ii) the QVC Payment Balance equalling or exceeding the
Agreed Cap; and
(iii) the Break Even Date.
(k) BSkyB shall have the right to remove from the Premises such
equipment as shall not reasonably be required for the conduct
of the Business in the reasonable discretion of the Venture.
9.9 HIRING RESTRICTIONS
Each Venturer covenants and agrees that during the Term such Venturer
shall not, and shall cause each of its Affiliates not to, solicit,
directly or indirectly, any of the Venture's employees (other than
employees who have previously been employed by such Venturer) to leave
the employ of the Venture or otherwise interfere with the relationship
of the Venture with any Person employed by the Venture.
Notwithstanding anything to the
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35
contrary contained herein, the Board of Directors may grant exceptions
to the restrictions contained in this Clause 9.9 on a case by case
basis.
9.10 RIGHTS AND REMEDIES UPON BREACH
If a party (either directly or by virtue of the activities at any of
its Affiliates) breaches, or threatens to commit a breach of, any of
the provisions of Clauses 9.1, 9.9 or 9.12 (collectively, the
"Restrictive Covenants"), the other parties and the Venture shall each
have the following rights and remedies, each of which rights and
remedies shall be independent of the others and severally enforceable,
and each of which is in addition to, and not in lieu of, any other
rights and remedies available to such parties or the Venture under law
or in equity:
(a) the right and remedy to have the Restrictive Covenants
specifically enforced by any court having jurisdiction, it
being acknowledged and agreed that any such breach or
threatened breach will cause irreparable injury to such other
party's Venture Interest and the Venture and that money
damages will not provide an adequate remedy to such other
party or the Venture; and
(b) the right and remedy to require such party to account for and
pay over to the Venture, all compensation, profits, monies,
accruals, increments or other benefits derived or received by
such Venturer or any of its Affiliates as the result of any
transactions constituting a breach of the Restrictive
Covenants.
Nothing in this Clause 9.10 shall be construed to limit the right of
any party or the Venture to collect money damages in the event of a
breach of any Restrictive Covenant.
9.11 REASONABLENESS; SEVERABILITY
(a) Each of the parties acknowledges and agrees that the
Restrictive Covenants are reasonable and valid in scope
(geographical, temporal and otherwise) and in all other
respects and that it shall not raise any issue of
reasonableness as a defence in any proceeding to enforce any
such Restrictive Covenants.
(b) In the event that any court or other competent regulatory
authority determines that any of the Restrictive Covenants,
or any part thereof, is unenforceable against any party
because of the duration or scope (geographic or otherwise) of
such provision, but would be valid if some part thereof were
deleted or the duration or scope thereof were reduced, such
restrictions shall apply with such modifications as shall be
necessary to make them effective with the maximum competitive
restraint and consent to such revision is hereby granted.
9.12 CONFIDENTIAL INFORMATION
Each Venturer, Parent and its Affiliates:
(i) shall use any and all Confidential Information only for
purposes of the Venture and shall not use such Confidential
Information for the benefit of or in connection with any
other business or enterprise of such Venturer or any of its
Affiliates; and
(ii) shall, and shall cause its and their respective officers,
directors, employees, attorneys, accountants and agents
(collectively "Agents"), to keep secret and retain in
strictest confidence any and all Confidential Information,
and shall not disclose such Confidential Information, and
shall cause its Agents not to disclose such Confidential
Information, to any Person other than such Venturer, its
Affiliates, the Venture or their respective Agents, except
for such disclosures as may be required by law, disclosures
to such Venturer's counsel, or disclosures
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36
pursuant to any listing agreement with, or the rules or
regulations of, any national securities exchange on which
securities of such Venturer or any such Affiliate are listed
or traded (in which event the Venturer making such disclosure
or whose Affiliates or Agents are making such disclosure
shall so notify the other Venturer as promptly as practicable
(and if possible, prior to making such disclosure) and shall
seek confidential treatment of such information) as may be
necessary to establish or enforce its rights hereunder. The
obligations under this Clause 9.12 shall survive the
termination of the Venture, any Venturer's withdrawal
therefrom and any Person ceasing to be an Affiliate of a
Venturer for a period of three (3) years. Any press release
concerning the formation or operation of the Venture must be
approved by the Board of Directors prior to release.
10. TERMINATION OF THE VENTURE
10.1 TERMINATION
Termination of this Agreement shall take place upon the first to occur
of the following:
(i) the mutual agreement of the Venturers to terminate the
Venture;
(ii) any termination of the Venture in accordance with Clauses 2.5
or 2.6;
(iii) any termination of the Venture in accordance with Clause
5.3(a);
(iv) any termination of the Venture in accordance with Clause 8.2;
or
(v) (x) the commencement by either Venturer or its Parent of any
Bankruptcy Proceeding; (y) the making by either Venturer of a
general assignment for the benefit of its creditors; or (z)
the commencement against either Venturer or its Parent of any
Bankruptcy Proceeding which either:
(A) results in the entry of an order for relief or any such
adjudication or appointment; or
(B) remains undismissed, undischarged or unbonded for a
period of sixty (60) days;
(vi) if the Astra Transponder is unavailable for in excess of
sixty (60) days and either no back-up or alternative
transponder or other delivery system acceptable to each
Venturer (such acceptance not to be unreasonably withheld) is
made available to the Venture during that time PROVIDED THAT
before exercising such right to terminate the Venture shall
have regard to the cable distribution of the Channel;
(vii) withdrawal of any license or consent materially necessary for
the conduct of the Business;
(the events set forth in (i) - (vii) of this Clause shall be
collectively referred to herein as "Termination Events").
10.2 CONSEQUENCES OF A TERMINATION
(a) Upon the occurrence of any Termination Event, the Venture
shall be liquidated and dissolved in accordance with the
applicable provisions of the laws of England and Wales. In
such event, the Venturers hereby agree to take all such steps
as shall be reasonably necessary to ensure that the Venture
is voluntarily wound-up promptly and that the liquidator
shall be an independent chartered accountant to be appointed
by agreement between the Venturers or, in the event
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of default of such agreement on the application of either
Venturer by the then current President of the Institute of
Chartered Accountants of England and Wales. Unless the Break
Even Date has occurred QVC agrees that, in the event of a
liquidation or dissolution of the Venture, if the Board of
Directors of the Venture is unable to make the
Statutory-Declaration of solvency required by Section 89 of
the Insolvency Act 1986 or would have been unable to make
such Declaration had it been proposed to wind the Venture up
voluntarily, QVC Shall forthwith make such non-returnable
capital contributions to the Venture as shall be necessary to
enable the Board of Directors to make such Declaration
PROVIDED THAT the amount of such contribution shall not
exceed an amount which when added to the QVC Payment
Balance, exceeds the Agreed Cap.
(b) The Parties hereby agree that each of the Ancillary
Agreements shall terminate upon the dissolution of the
Venture PROVIDED HOWEVER that no termination of any Ancillary
Agreement shall relieve any party thereto of any of its
obligations or liabilities thereunder arising prior to
(including, without limitation, any obligations or
liabilities arising out of or based upon transactions or
events occurring prior to) the date of such termination.
10.3 SUBORDINATION AND NON-RECOURSE
On the winding up of the Venture the rights of QVC against the Venture
in respect of the Funding Loans and the rights of BSkyB against the
Venture in respect of amounts owed BSkyB pursuant to Clause 3.1 of the
DTH Distribution Agreement ("Net Sales Payments") shall rank pari
passu and shall be postponed to the claims of the ordinary creditors
of the Venture (meaning creditors whose claims are admitted in the
winding up of the Venture) and accordingly no amount shall be payable
to QVC in respect of its Funding Loans or to BSkyB in respect of its
Net Sales Payments until the claims of the said ordinary creditors of
the Venture have been satisfied in full and the rights of QVC to
receive any amounts in respect of its Funding Loans and of BSkyB to
receive any amounts in respect of its Net Sales Payments in the
winding up of the Venture shall be limited to (and QVC and BSkyB shall
have sole recourse to) any remaining assets of the Venture and QVC and
BSkyB shall have no action against the Venture or any officer or
employee of the Venture or against any Venturer or any Venturer's
officers, employees or Affiliates if QVC's Funding Loans are not
repaid in full (or at all) or if BSkyB's Net Sales Payments are not
made in full (or at all). For the purposes of this clause "winding
up" shall include any procedure whereby the Venture may be liquidated,
dissolved or wound up or cease to exist as a body corporate and
whether brought or instigated by QVC, QVC Sub, BSkyB, BSkyB Sub or any
other Person.
11. REPRESENTATIONS AND WARRANTIES
11.1 REPRESENTATIONS AND WARRANTIES
In order to induce each other to enter into this Agreement and to
perform its obligations hereunder, each party hereby severally
represents and warrants to each other party that:
(a) it is a corporation duly organized and validly existing under
the laws of the jurisdiction of its incorporation and it has
all corporate power and authority necessary to carry on its
business as it is now being conducted, to enter into this
Agreement and to perform its obligations hereunder;
(b) all corporate and other proceedings required to be taken by
or on behalf of such Venturer to authorize it to enter into
and carry out this Agreement have been duly taken, and this
Agreement has been duly executed and delivered by, and
constitutes a legal, valid and binding obligation of, such
Venturer, enforceable against such Venturer in accordance
with its terms except:
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(i) as such enforceability may be limited by bankruptcy,
insolvency, or other similar laws affecting the
enforcement of creditors rights generally; and
(ii) to the extent that equitable remedies, such as
injunctive relief or specific performance, are within
the discretion of courts of competent jurisdiction;
(c) the execution and delivery of this Agreement, the performance
by such Venturer of its terms, and the consummation of the
transactions contemplated hereby, will not conflict with, or
result in any violation of, or default or loss of a benefit
under, or permit the acceleration of any obligation under:
(i) the certificate of incorporation, articles of
association, by-laws or memorandum of association (or
comparable instruments with different names) of such
Venturer;
(ii) any contract, agreement or commitment of such Venturer;
or
(iii) any permit, concession, grant, franchise, license,
judgment, order, decree, statute, law, ordinance, rule
or regulation (excluding any UK or EC competition laws,
rules and regulations) applicable to such Venturer or
to its respective properties, other than such
conflicts, violations, defaults or losses which do not
and will not, individually or in the aggregate, have a
material adverse effect on the business or financial
condition of such Venturer or the ability of such
Venturer to consummate the transactions contemplated
hereby;
(d) no consent, approval, order, or authorization of, or
registration, declaration or filing with, any Governmental
Authority is required in connection with the execution and
delivery of this Agreement by such Venturer or the
consummation by sucn Venturer of the transactions
contemplated hereby; and
(e) All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by such
Venturer or its Affiliates directly with the other Venturer
or Affiliates thereof and without the intervention of any
person who, either as a result of any act of such Venturer or
otherwise to the knowledge of such Venturer, has or will have
a valid claim against any of the Venturers or their
Affiliates for a finder's fee, brokerage commission or other
like payment with respect to this Agreement or such
transactions.
11.2 ADDITIONAL REPRESENTATIONS
In order to induce BSkyB to enter into this Agreement and to perform
its obligations hereunder, QVC hereby represents and warrants to BSkyB
that QVC Sub is a Subsidiary of QVC. In order to induce QVC to enter
into this Agreement and to perform its obligations hereunder, BSkyB
hereby represents and warrants to QVC that BSkyB Sub is a Subsidiary
of BSkyB.
11.3 SURVIVAL
The representations and warranties contained in this Agreement shall
survive the termination of this Agreement and any investigation made
by or on behalf of any of the parties hereto at any time with respect
thereto.
<PAGE> 43
39
12. MISCELLANEOUS
12.1 ENTIRE AGREEMENT; CONSTRUCTION
This Agreement, together with the Ancillary Agreements and the other
Exhibits and Annexures hereto (and any other agreements expressly
contemplated hereby or thereby), constitute the entire agreement and
understanding and supersede all other prior agreements and
understandings, both written and oral, between the Venturers or their
Affiliates or any of them with respect to the subject matter hereof
(including without limitation the Heads of Agreement signed between
BSkyB and QVC in Los Angeles, California, USA on 5 June 1993 and the
amendment thereto signed between BSkyB and QVC on 17 August 1993,
copies of which are attached hereto as Exhibit K). In construing this
Agreement, none of the parties hereto shall have any term or provision
construed against such party solely by reason of such party having
drafted the same.
12.2 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of England and Wales and each party hereby consents to the
non-exclusive jurisdiction of the Courts of England and Wales.
12.3 THIRD PARTY BENEFICIARIES
None of the provisions of this Agreement, including, without
limitation, Clause 10, shall be for the benefit of or enforceable by
any third party, including, without limitation, any creditor of the
Venture or of any Venturer. No sucn third party shall obtain any
right under any provision of this Agreement or shall by reason of any
such provision make any claim in respect of any debt, liability, or
obligation (or otherwise) against the Venture or any of the Venturers.
12.4 EXPENSES
Each party hereto shall assume and pay its own expenses incidental to
the negotiation and execution of this Agreement, the preparation for
carrying it into effect and the consummation of the transactions
contemplated hereby. Without limiting the generality of the
foregoing, each Venturer shall pay all legal and accounting fees, and
other fees to consultants and advisers incurred by it, including, if
any, brokers' or investment banking fees relating to this Agreement
and such transactions and shall indemnify and hold the Venture and the
other Venturer free and harmless from any of such expenses and fees.
It is understood and agreed that no legal fees or accounting fees for
services rendered relating to this Agreement shall be paid or assumed
by the Venture.
12.5 WAIVERS AND AMENDMENTS
This Agreement may be amended, superseded, cancelled, renewed or
extended and the terms hereof may be waived, only by a written
instrument signed by both Venturers, or, in the case of a waiver, by
the Venturer waiving compliance. Except where a specific period for
action or inaction is provided herein, no failure on the part of any
Venturer to exercise, and no delay on the part of a Venturer in
exercising, any right, power or privilege hereunder shall operate as a
waiver thereof; nor shall any waiver on the part of a Venturer of any
such right, power or privilege, or any single or partial exercise of
any such right, power or privilege, preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege.
<PAGE> 44
40
12.6 NOTICES
All notices, requests, demands. and other communications required or
permitted to be given or delivered under or by reason of the
provisions of this Agreement shall be in writing and shall be given by
certified or registered mail, postage prepaid, or delivered by hand or
by nationally recognized air courier services or in the form of
telegram, directed to the address or telecopy number of such Person
set forth below:
<TABLE>
<CAPTION>
If to the Venture, to:
----------------------
<S> <C>
MarcoPolo House
Queenstown Road
London SW8 4NQ
Attn: Peter Ridsdale
Telecopy number: (44.71) 627 6103
</TABLE>
with a copy to:
all other Persons specified in this notice section
<TABLE>
<CAPTION>
If to BSkyB or BSkyB Sub:
-----------
<S> <C>
6 Centaurs Business Park
Grant Way
Isleworth
Middlesex TW7 5QD
Telecopy number: (44.71) 705 3008
Attn: Chris Mackenzie
with a copy to:
Telecopy number: (44.71) 705 3254
Attn: Deanna Bates
</TABLE>
<TABLE>
<CAPTION>
If to QVC or QVC Sub
---------
<S> <C>
Goshen Corporate Park
West Chester
Pennsylvania 19380
Telecopy number: (215) 430 2380
Attn: Michael Boyd and Neal Grabell
</TABLE>
Any such notice shall become effective seven (7) Business Days after
posting in the United States Mail or the United Kingdom Mail as
aforesaid or, in the case of notices delivered by hand, air courier
service or telegram, when received as confirmed by receipt or other
confirmation signed by the receiving party. A party serving notice by
post shall use its best endeavours to copy the receiving party by
telecopy. From time to time any party hereto may designate a new
address or telecopy number for purposes of notice hereunder by notice
to the other party hereto.
12.7 COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be an original and all of which shall together constitute
one and the same instrument. It shall not be necessary for any
counterpart to bear the signature of all parties hereto.
<PAGE> 45
41
12.8 SEVERABILITY
If any provision of this Agreement, or the application of such
provision to any Person or circumstance, shall be held invalid, the
remainder of this Agreement or the application of such provision to
other Persons or circumstances shall not be affected thereby;
provided, however, that the parties shall negotiate in good faith with
respect to an equitable modification of the provision or application
thereof held to be invalid. To the extent that it may effectively do
so under applicable law, each party hereto hereby waives any provision
of law which renders any provision of this Agreement invalid, illegal
or unenforceable in any respect.
12.9 SUCCESSORS AND ASSIGNS
Except as otherwise specifically provided in this Agreement, this
Agreement shall be binding upon and inure to the benefit of the
Venturers, and their legal representatives, successors and assigns.
12.10 NO RIGHT OF SET-OFF
No Venturer shall be entitled to offset against any of its financial
obligations to the Venture under this Agreement, any obligation owed
to it or any of its Affiliates by any other Venturer or any of such
other Venturer's Affiliates.
12.11 HEADINGS; CLAUSE REFERENCES
The Clause headings contained in this Agreement are for reference
purposes only and are to be given no effect in the construction or
interpretation of this Agreement. All Clause and paragraph references
contain herein shall refer to this Agreement unless otherwise
specified.
12.12 NO PARTNERSHIP
Nothing contained herein shall be deemed to create any relationship of
partnership or agency, nor shall any similar relationship be deemed to
exist by virtue of this Agreement between any of BSkyB or any of its
Affiliates on the one hand and QVC or any of its Affiliates on the
other.
12.13 RESTRICTIVE TRADE PRACTICES ACT
No provisions of this Agreement or of any agreement or arrangement of
which it forms part, by virtue of which the agreement constituted by
all of the foregoing is subject to registration (if such be the case)
under the Restrictive Trade Practices Act 1976 and 1977, shall take
effect until the day after particulars of such agreement have been
furnished to the Director General of Fair Trading pursuant to Clause
24 of the Restrictive Trade Practices Act 1976.
12.14 CONFLICTS WITH ANCILLARY AGREEMENTS
In the event of any conflict between the terms and provisions of this
Agreement and those contained in any Ancillary Agreement, the terms
and provisions of this Agreement shall govern.
12.15 CONFLICTS WITH MEMORANDUM OF ASSOCIATION AND ARTICLES OF ASSOCIATION
In the event of any conflict between the terms and provisions of this
Agreement and those contained in the Memorandum of Association and
Articles of Association of the Venture, the terms and provisions of
this Agreement shall govern.
<PAGE> 46
42
12.16 TERMINATION
This Agreement (including the provisions of Clause 9) shall terminate
upon the consummation of the dissolution of the Venture PROVIDED
HOWEVER that no termination of this Agreement shall relieve either
Venturer of any liability under this Agreement prior to (including,
without limitation, any obligations or liabilities arising out of or
based upon transactions or events occurring prior to) the date of such
termination.
AS WITNESS the hands of the respective duly authorized officers of each of the
parties hereto on the date first above written.
<TABLE>
<S> <C>
SIGNED by QVC NETWORK, INC. )
by MICHAEL C BOYD in the )
presence of: ) MICHAEL C BOYD
---------------------------------------------
Ann Leinhauser DIRECTOR PRESIDENT AND CHIEF
---------------------------------------------
OPERATING OFFICER
---------------------------------------------
Title
SIGNED by BRITISH SKY )
BROADCASTING LIMITED )
by RICHARD BROOKE in the )
presence of: ) RICHARD BROOKE
---------------------------------------------
Michael Stern SECRETARY
---------------------------------------------
Title
SIGNED by PRECIS (1192) )
LIMITED by CHRISTOPHER MACKENZIE )
in the presence of: ) CHRISTOPHER MACKENZIE
---------------------------------------------
Michael Stern DIRECTOR
---------------------------------------------
Title
SIGNED by QVC BRITAIN )
by MICHAEL C BOYD and NEAL S )
GRABELL in the presence of: )
) MICHAEL C BOYD NEAL S GRABELL
---------------------------------------------
Ann Leinhauser
DIRECTORS
---------------------------------------------
Title
SIGNED by QVC by CHRISTOPHER )
MACKENZIE in the presence of: )
) CHRISTOPHER MACKENZIE
---------------------------------------------
Michael Stern
DIRECTOR
---------------------------------------------
Title
</TABLE>
<PAGE> 47
43
<TABLE>
<CAPTION>
EXHIBITS
--------
<S> <C>
A. Exhibit B-1 - Memorandum of Association.
B. Exhibit B-2 - Articles of Association.
C. Exhibit C - Five Year Operating Plan.
D. Exhibit D - 1994 Annual Budget.
E. Exhibit E - Funding Loan Note.
F. Exhibit F - DTH Distribution Agreement.
G. Exhibit G - the Sub-Lease (in respect of the First Lease).
H-I. Exhibit H - the Sub-Lease (in respect of the Second Lease).
J-K. Exhibit J - Transponder Sub-Lease.
L. Exhibit K - Heads of Agreement (with amendment).
</TABLE>
