SHOP AT HOME INC /TN/, PRE 14A, 2000-02-28

SHOP AT HOME INC /TN/
PRE 14A, 2000-02-28
CATALOG & MAIL-ORDER HOUSES

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<PAGE> 1

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(A) of the
Securities Exchange Act of 1934
(Amendment No. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[X] Preliminary Proxy Statement

[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))

[ ] Definitive Proxy Statement

[ ] Definitive Additional Materials

[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

Shop At Home, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

C. Michael Norton, Wyatt, Tarrant & Combs, 1500 Nashville City Center,
Nashville, Tennessee 37219
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

[ ] Fee paid previously with preliminary materials:

[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:

<PAGE> 2

SHOP AT HOME, INC.
5388 HICKORY HOLLOW PARKWAY
ANTIOCH, TENNESSEE 37013

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 30, 2000

Notice is hereby given that the Annual Meeting of Shareholders of Shop
At Home, Inc. (hereinafter called the "Company"), will be held at the offices of
the Company, located at 5388 Hickory Hollow Parkway, Antioch, Tennessee, on
March 30, 2000, at 10:00 a.m. local time, for the following purposes:

(1) To consider and to vote upon the election of six (6) directors
to serve until the next annual meeting and until their
successors are duly elected and qualified;

(2) To consider and to vote upon the approval of the Company's
1999 Employee Stock Option Plan;

(3) To consider and to vote upon the approval of the Kent E.
Lillie Stock Option;

(4) To consider and to vote upon the approval of an amendment to
the Charter of the Company to provide that the provisions of
the Tennessee Investor Protection Act, the Tennessee Business
Combination Act, the Tennessee Control Share Acquisition Act
and the Tennessee Greenmail Act will be applicable to the
Company, to the extent permitted by law;

(5) To transact such other business as may properly come before
the meeting or any adjournment thereof.

Information regarding the matters to be acted upon at the Annual
Meeting is contained in the Proxy Statement accompanying this Notice. The Annual
Meeting may be adjourned from time to time without notice, other than the
announcement of the adjournment at the Annual Meeting or any adjournment or
adjournments thereof, and any and all business for which notice is hereby given
may be transacted at any such adjourned Annual Meeting.

The Board of Directors has fixed the close of business on February 25,
2000, as the record date for the determination of shareholders entitled to
notice of, and to vote at, the meeting.

By Order of the Board of Directors

George J. Phillips, Secretary
Nashville, Tennessee
March 9, 2000

YOUR REPRESENTATION AT THE MEETING IS IMPORTANT. TO ENSURE YOUR REPRESENTATION,
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY. SHOULD YOU DESIRE TO REVOKE YOUR PROXY, YOU MAY DO SO
AS PROVIDED IN THE ACCOMPANYING PROXY STATEMENT, AT ANY TIME BEFORE IT IS VOTED.

<PAGE> 3

TABLE OF CONTENTS

<TABLE>
<S> <C>
Information Concerning the Solicitation.......................................................................... 1

Security Ownership of Certain Beneficial Owners.................................................................. 2

PROPOSAL NO. 1 -- ELECTION OF DIRECTORS.......................................................................... 2
Director Nominees....................................................................................... 3
Security Ownership of Management and Directors.......................................................... 4
Other Executive Officers................................................................................ 5
Remuneration of Directors and Officers.................................................................. 6
Summary Compensation.................................................................................... 7
Option Grants in Last Fiscal Year....................................................................... 8
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values.................................. 9
Employment Agreements................................................................................... 10
Compensation of Directors............................................................................... 11
Omnibus Stock Incentive Plan............................................................................ 11
Transactions with Management and Directors.............................................................. 12
Compensation Committee Interlocks and Insider Participation............................................. 12
Transactions with Related Parties....................................................................... 12
Report on Executive Compensation........................................................................ 13
Compensation Philosophy and Policies for Executive Officers............................................. 13
Base Salary............................................................................................. 13
Annual Bonus............................................................................................ 14
Long-Term Incentives.................................................................................... 14
Chief Executive Compensation............................................................................ 15
Stockholder Return Comparisons.......................................................................... 15
Compliance with Section 16(a) of the Exchange Act....................................................... 16

PROPOSAL NO. 2 -- ADOPTION OF 1999 EMPLOYEE STOCK OPTION PLAN.................................................... 16
General Information..................................................................................... 16
Term of Options......................................................................................... 17
Change of Control....................................................................................... 17
Plan Amendments......................................................................................... 17
Tax Effects of Plan Participation....................................................................... 17
Existing Plan........................................................................................... 18
Stockholder Resolution.................................................................................. 18

PROPOSAL NO. 3 - KENT E. LILLIE OPTION........................................................................... 19
General Introduction.................................................................................... 19
Term of Options......................................................................................... 19
Tax Effects............................................................................................. 20
Shareholder Resolution.................................................................................. 20

PROPOSAL NO. 4 - CHARTER AMENDMENT - CORPORATE TAKEOVER STATUTES................................................. 20
Business Combinations................................................................................... 21
Control Share Acquisitions.............................................................................. 22
Investor Protection Laws................................................................................ 22
Greenmail............................................................................................... 23
Reasons for the Recommenation........................................................................... 23

PROPOSAL NO. 5 -- OTHER BUSINESS................................................................................. 24

OTHER INFORMATION................................................................................................ 24
Interests of Company Affiliates......................................................................... 24
</TABLE>

i
<PAGE> 4
<TABLE>
<S> <C>
Proposals of Shareholders............................................................................... 24
Cost of Solicitation of Proxies......................................................................... 24
Annual Report........................................................................................... 24
</TABLE>

EXHIBIT A- 1999 STOCK OPTION PLAN
EXHIBIT B - KENT E. LILLIE OPTION
EXHIBIT C - CHARTER AMENDMENT - CORPORATE TAKEOVER STATUTES

ii
<PAGE> 5

SHOP AT HOME, INC.
5388 HICKORY HOLLOW PARKWAY
ANTIOCH, TENNESSEE 37013
(615) 263-8000

PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS

INFORMATION CONCERNING THE SOLICITATION

The accompanying proxy is solicited by the Board of Directors of Shop
At Home, Inc. (the "Company"), for use at the Annual Meeting of Shareholders to
be held on March 30, 2000, and any adjournments thereof, notice of which is
attached hereto.

This Proxy Statement and the Annual Report of the Company for the
fiscal year ended June 30, 1999, have been mailed on or about March 9, 2000, to
all shareholders of record on February 25, 2000.

The purposes of the Annual Meeting are: [1] to consider and to vote
upon the election of six (6) directors; [2] to consider and to vote upon the
approval of the Company's 1999 Employee Stock Option Plan; and [3] to consider
and to vote upon the approval of the Kent E. Lillie Stock Option; [4] to
consider and to vote upon the approval of an amendment to the Charter of the
Company in order to make applicable to the Company certain Tennessee corporate
takeover statutes; and [5] to consider such other business as may properly come
before the meeting or any adjournment thereof.

A shareholder of record who signs and returns a proxy in the
accompanying form may revoke that proxy at any time before the authority granted
thereby is exercised (i) by attending the Annual Meeting and electing to vote in
person, (ii) by filing with the Secretary of the Company a written revocation,
or (iii) by duly executing and filing with the Secretary of the Company a proxy
bearing a later date. Unless so revoked, the shares represented by the proxy
will be voted at the Annual Meeting. Where a choice is specified on the proxy,
the shares represented thereby will be voted in accordance with that
specification. If no specification is made, all shares will be voted: FOR the
election of all director nominees, FOR the approval of the 1999 Employee Stock
Option Plan, FOR the approval of the Kent E. Lillie Stock Option, and FOR the
amendment to the Charter of the Company to make the Tennessee corporate takeover
statutes applicable to the Company.

The Board of Directors knows of no other matters that are to be brought
to a vote at the Annual Meeting. If, however, any other matter does come before
the meeting, the persons appointed in the proxy, or their substitutes, will vote
in accordance with their best judgment on such matters.

The Board of Directors has fixed the close of business on February 25,
2000 (the "Record Date") as the record date for the Annual Meeting. The
Company's only class of securities entitled to vote is its Common Stock, $.0025
par value per share ("Common Stock"). On the Record Date, the Company had
outstanding 30,491,515 shares of Common Stock. Only shareholders of record at
the close of business on the Record Date will be entitled to vote at the Annual
Meeting. Shareholders will be entitled to one vote for each share held, which
vote may be given in person or by proxy authorized in writing.

Under the Tennessee Business Corporation Act (the "Act") and the
Company's Bylaws, the presence, in person or by proxy, of a majority of the
outstanding shares of the Company's Common Stock is necessary to establish a
quorum of the Company's shareholders for the purpose of taking action at the
Annual Meeting. For these purposes, shares which are present or represented by a
proxy at the Annual Meeting will be counted for quorum purposes, regardless of
whether the holder of the shares or proxy fails to vote on any particular matter
or whether a broker with discretionary authority fails to exercise his
discretionary voting authority with respect to any particular matter.

<PAGE> 6

The directors standing for election must be elected by a plurality of
the votes cast at the Annual Meeting. Any other action to be taken at the Annual
Meeting must be approved by a majority of the votes cast. For these voting
purposes, abstentions and broker non-votes will not be counted in determining
whether the directors standing for election have been elected or whether any
other action has been approved.

None of the proposals will give any shareholder of the Company the
right to dissent from such action, and to thereby obtain payment in cash of the
fair value of that shareholder's shares.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following information relates to the Common Stock of the Company
beneficially owned, directly or indirectly, by all persons known by the Company
to be the beneficial owners of more than five percent (5%) of the Common Stock,
as of February 25, 2000. Unless otherwise noted, the named persons have sole
voting and investment power with respect to the shares indicated.

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP CLASS
- --------------------------------------- -------------------- ----------
<S> <C> <C>

J.D. Clinton and SAH Holdings, Ltd.(2)....................... 4,740,356 14.49%
</TABLE>

(1) In addition to shares over which the person has voting power or
investment power, a person is deemed to be the beneficial owner of
securities that can be acquired by such person within 60 days from the
date of this Proxy Statement upon the exercise of options and warrants.
Each beneficial owner's percentage ownership is determined by assuming
that options and warrants that are held by such person (but not those
held by any other person) and that are exercisable within 60 days from
the date of this Proxy Statement have been exercised.

(2) Mr. Clinton's address and the address of SAH Holdings, Ltd. ("SAH"), is
400 Fifth Avenue South, Suite 205, Naples, Florida 34102. SAH is a
Florida limited partnership with Gatehouse Equity Management
Corporation, a Tennessee corporation ("GEM"), as its sole general
partner. Mr. Clinton is chairman, a director and the sole shareholder
of GEM. SAH currently owns 1,840,490 shares of Common Stock, and holds
warrants to purchase an additional 1,650,000 shares of Common Stock.
Clinton Investments, Ltd., a limited partnership for which GEM is the
sole general partner, owns 595,285 shares of Common Stock, and holds
warrants to purchase an additional 542,500 shares of Common Stock. GEM
owns 18,600 shares of Common Stock. Mr. Clinton holds options to
purchase 25,000 shares of stock from the Company. Mr. Clinton's wife
owns, individually, 9,320 shares of Common Stock. Two trusts, the
beneficiaries of whom are members of Mr. Clinton's immediate family,
own 59,161 shares of Common Stock in the aggregate. All of the listed
shares are assumed to be beneficially owned by Mr. Clinton.

<PAGE> 7

PROPOSAL NO. 1
ELECTION OF DIRECTORS

The Board of Directors proposes the election of the six (6) nominees
listed below. Unless contrary instructions are received, it is intended that the
shares represented by the Proxy solicited by the Board of Directors will be
voted in favor of the election as directors of all the nominees named below. If
for any reason any of the nominees is not available for election, the persons
named in the Proxy have advised that they will vote for such substitute nominees
as the Board of Directors of the Company may propose. The Board of Directors has
no reason to expect that any of these nominees will fail to be candidates at the
meeting, and therefore does not at this time have any substitute nominee under
consideration. The information relating to the six (6) nominees set forth below
has been furnished to the Company by the individuals named. All of the nominees
are presently directors of the Company, having been elected at the Company's
annual meeting held on December 2, 1998. At the December 2, 1998 annual meeting
a total of eight (8) directors were elected. One director, Patricia E. Mitchell,
resigned from the Board of Directors effective January 27, 1999. Another
director, Donna Hilley, resigned from the Board of Directors effective December
15, 1999. Both Ms. Mitchell and Ms. Hilley resigned because of schedule
conflicts that prevented them from serving as directors. The Company's Bylaws
specify that the Company's President shall be a member of its Board of
Directors.

The Directors shall be elected by a plurality of the votes cast by the
shares entitled to vote in the election at the Annual Meeting.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
NOMINEES LISTED BELOW. PROXIES, UNLESS INDICATED TO THE CONTRARY, WILL BE VOTED
"FOR" THE LISTED NOMINEES.

J.D. Clinton, Director and Chairman of the Board. Mr. Clinton has been
a Director and Chairman of the Board since 1993. Mr. Clinton is Chairman,
President and Chief Executive Officer of Independent Southern BancShares, Inc.,
Brownsville, Tennessee, a diversified financial institutions holding company.
Mr. Clinton is Chairman and Director, INSOUTH Bank, Brownsville, Tennessee. Mr.
Clinton is a Director, Southern Financial, Inc., Nashville, Tennessee. Age 55.

Kent E. Lillie, President and Chief Executive Officer and Director. Mr.
Lillie joined the Company as President and Chief Executive Officer in September
1993 and has been a Director since that date. Prior to joining the Company, Mr.
Lillie was Vice President and General Manager, WATL-TV, Atlanta, Georgia,
1992-1993, and was Vice President and General Manager, WPTY-TV, Memphis,
Tennessee, 1987-1992. Age 53.

Frank A. Woods, Director. Mr. Woods has been a Director since 1993.
Since 1991, Mr. Woods has been Chairman of the Board and Director of MediaUSA
L.L.C. (and its predecessor company, MediaOne), Nashville, Tennessee, a
communications consulting and strategic planning firm. Mr. Woods is a principal
of The Woods Group, Nashville, Tennessee, a diversified merchant banking firm.
Age 59.

A.E. Jolley, Director. Mr. Jolley has been a Director since 1986. Mr.
Jolley has been President, Lakeway Containers, Inc., Morristown, Tennessee, a
corrugated container manufacturer, since 1975. Mr. Jolley is a Director,
Kingwood School, Morristown, Tennessee, and Commissioner, Morristown City
Planning Commission. Mr. Jolley is a Member, Board of Trustees, Walters State
Community College. Age 61.

Joseph I. Overholt, Director. Mr. Overholt has been a Director since
1986. Mr. Overholt has been President and Owner of Planet Systems, Inc., a
computer software development company engaged in the satellite delivery of
computer data, since 1992. Mr. Overholt has been President and Owner of Skylink
Communications since 1989. Mr. Overholt was a Vice President of the Company from
1986 through August 1993. Age 53.

J. Daniel Sullivan, Director. Mr. Sullivan has been a Director since
the annual meeting of shareholders held on March 6, 1998. Mr. Sullivan currently
is President & Chief Executive Officer of Quorum Broadcasting, Inc., a
television broadcasting business. Mr. Sullivan served as the President and CEO
of Sullivan Broadcasting Company, a television broadcasting company from 1995 to
1998. Between 1987 and 1995, Mr. Sullivan was the President of Clear Channel TV,
a subsidiary of Clear Channel Communications, Inc., a broadcasting company. Age
48.

3
<PAGE> 8

The principal business activity of each of the above Directors has been
as shown above during the past five years, except that in some cases the
individual has been employed by a predecessor organization or has undertaken
greater responsibilities with the same employer, a parent company, or a
successor organization.

The Board of Directors has no standing nominating or compensation
committees. The Board of Directors has appointed Messrs. Clinton, Woods and
Lillie to serve as an administrative committee to administer the Company's 1991
Omnibus Stock Incentive Plan. The Board of Directors has appointed Messrs.
Clinton and Woods to serve as an administrative committee to administer the
Company's 1999 Stock Option Plan. The Board of Directors has appointed Mr.
Clinton, Mr. Woods, Mr. Sullivan, and Mr. Jolley to serve as an audit committee.
During the last fiscal year, the audit committee held one (1) meeting.

During the fiscal year ended June 30, 1999, the Board of Directors held
six (6) meetings. No incumbent director attended fewer than 75% of the Board
meetings during the year, with the exception of Ms. Hilley. Ms. Hilley was
elected to the Board of Directors on December 2, 1998 and between that date and
June 30, 1999, the Board had two (2) meetings of which Ms. Hilley was absent
from one (1) of the meetings because of a schedule conflict.

SECURITY OWNERSHIP OF MANAGEMENT AND DIRECTORS

The following information presents the beneficial ownership of the
Common Stock of the Company, as of February 25, 2000, by the Company's
directors, director nominees, the executive officers named in the Remuneration
of Directors and Officers, and by all directors, director nominees and executive
officers as a group.

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP CLASS
- --------------------------- -------------------- ----------
<S> <C> <C>

J.D. Clinton (2)............................................. 4,740,356 14.49%
Kent E. Lillie (3)........................................... 1,157,600 3.70%
A.E. Jolley (4).............................................. 536,092 1.76%
Joseph I. Overholt (5)....................................... 440,000 1.44%
J. Daniel Sullivan (6)....................................... 161,000 *
Joseph Nawy (7).............................................. 75,000 *
M. Engle III (8)............................................. 51,250 *
Henry I. Shapiro (9)......................................... 45,100 *
Frank A. Woods (10).......................................... 25,000 *
Everit A. Herter (11)........................................ 19,000 *
James Bauchiero ............................................ 0 --
All directors and executive officers as a group
(15 persons).............................................. 7,434,498 22.04%
</TABLE>

* Less than 1.0%.

(2) See Notes in preceding section entitled "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS."

4
<PAGE> 9

(3) Includes options to purchase 825,000 shares of Common Stock from the
Company and 32,600 shares of Common Stock held in a retirement account
controlled by Mr. Lillie.

(4) Includes options to purchase 25,000 shares of Common Stock from the
Company.

(5) Includes options to purchase 25,000 shares of Common Stock from the
Company.

(6) Includes options to purchase 15,000 shares of Common Stock from the
Company.

(7) Mr. Nawy holds 5,000 shares in a retirement account that he controls
and 100 shares in a family limited partnership. Mr. Nawy left his
position as Vice President Finance of the Company on December 31, 1999.

(8) Includes options to purchase 48,000 shares of Common Stock from the
Company.

(9) Includes options to purchase 42,000 shares of Common Stock from the
Company.

(10) Includes options to purchase 25,000 shares of Common Stock from the
Company.

(11) Includes options to purchase 10,000 shares of Common Stock from the
Company.

OTHER EXECUTIVE OFFICERS

The following information relates to the executive officers of the
Company, as of February 25, 2000, other than Mr. Lillie who also serves as a
director of the Company, as noted above. With the exception of the President and
Chief Executive Officer and the Executive Vice President and Chief Financial
Officer, who have employment agreements, the remaining executive officers serve
at the discretion of the Board:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>

Theodore M. Engle III................. 37 President, collectibles.com

Everit A. Herter...................... 58 Executive Vice President of Affiliate Relations

H. Wayne Lambert...................... 50 Executive Vice President and Chief Information Officer

George J. Phillips.................... 38 Executive Vice President, General Counsel and Secretary

John E. Roberson..................... 33 Executive Vice President and Chief Operating Officer

Arthur D. Tek......................... 50 Executive Vice President and Chief Financial Officer
</TABLE>

Theodore M. Engle III, President, collectibles.com. Mr. Engle has
served as President of collectibles.com since July 1999. Mr. Engle joined the
Company in February 1998 as Executive Vice President and Chief Operating
Officer. Prior to joining the Company, Mr. Engle was Chief Operating Officer of
HLC, Inc., a developer and provider of banking products to corporate clients.
Prior to joining HLC, Inc. in 1995, Mr. Engle served as Chief Financial Officer
for IBM's Tennessee marketing and sales operation. He was with IBM for 11 years.
Mr. Engle holds a BS degree in accounting from the University of Tennessee.

Everit A. Herter, Executive Vice President of Affiliate Relations. Mr.
Herter became Executive Vice President of Affiliate Relations in September 1998,
and has served the Company since 1994 as a consultant, as Director of Affiliate
Relations and as Vice President for Affiliate Relations. Prior to joining the
Company, Mr. Herter was a Senior Vice President with the J. Walter Thompson
Company advertising agency ("JWT"). Mr. Herter was with JWT for 16 years. Before
joining JWT, Mr. Herter was Vice President, Management Supervisor on the Ford
Motor Company Corporate advertising account and Assistant to the President of
Kenyon & Eckhardt Advertising in New York City.

5
<PAGE> 10

H. Wayne Lambert, Executive Vice President and Chief Information
Officer. Mr. Lambert became Executive Vice President and Chief Information
Officer in August 1999. He joined the Company in March 1992 as Vice President of
Information Technology. Prior to joining the Company, he served as Operations
Officer for National Book Warehouses, Inc. in Knoxville, Tennessee. Prior to
joining National Book Warehouses, he served as Assistant Controller for the
Knoxville News-Sentinel, a newspaper in Knoxville, Tennessee. Mr. Lambert is a
retired Captain of the Tennessee Air National Guard and a Base Budget Officer.
He is a graduate of the University of Tennessee.

George J. Phillips, Executive Vice President, General Counsel and
Secretary. Mr. Phillips joined the Company in November 1997. Prior to joining
the Company, Phillips was Counselor to the Assistant Attorney General of the
Civil Division of the United States Department of Justice from 1993 through
1997, where he oversaw the Office of Consumer Litigation. Prior to joining the
Justice Department, Mr. Phillips was in private practice with Baker,
Worthington, Crossley, Stansberry & Woolf in Nashville, Tennessee, from 1989 to
1993 where he concentrated on litigation. Mr. Phillips graduated from Duke and
obtained his law degree from the University of Tennessee. Mr. Phillips is a
member of the American Corporate Counsel Association and the Tennessee Bar
Association.

John E. Roberson, Executive Vice President and Chief Operating Officer.
Mr. Roberson joined the Company in October 1999 in his current position. Prior
to joining the Company, Mr. Roberson served as Senior Vice President of
Marketing for KnowledgeBase Marketing, an integrated information-based marketing
firm that specializes in assisting companies to acquire, retain and increase
their customer base, from 1996 to 1999. Prior to then, Mr. Roberson was Vice
President of Marketing and Licensing for Performance Unlimited, Inc., and was
Brand Manager and Direct Marketing Manager for Johnston & Murphy, a premium
men's footwear company. Mr. Roberson holds an M.B.A. from Vanderbilt University
with an emphasis in Consumer Satisfaction and a B.A. from David Lipscomb
University.

Arthur D. Tek, Executive Vice President and Chief Financial Officer.
Mr. Tek has served as the Executive Vice President and Chief Financial Officer
since March 1999. Prior to joining the Company, Mr. Tek served as Chief
Financial Officer of Paxson Communications Corporation (owner of the nation's
largest group of television stations) from 1992 to March 1999. Mr. Tek currently
serves on the board of the Broadcast Cable Financial Management Association. He
is also a member of the American Institute of CPA's. Mr. Tek holds a bachelor's
degree in economics from Tulane University, an MBA degree in accounting from
Columbia University and an MS degree in information systems from Rensselaer
Polytechnic Institute.

REMUNERATION OF DIRECTORS AND OFFICERS

SUMMARY COMPENSATION

The following table sets forth the compensation paid or accrued by the
Company during the three fiscal years ended June 30, 1999, to those persons who
served as the Company's CEO during the 1999 fiscal year and were the Company's
most highly compensated executive officers (other than the CEO) serving as of
the end of the 1999 fiscal year whose compensation exceeded $100,000
(collectively, the "Named Executive Officers"). Not more than five persons (six
including Mr. Bauchiero) are required to be shown.

6
<PAGE> 11

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------------- ------------------
SECURITIES ALL OTHER
NAME AND OTHER ANNUAL UNDERLYING OPTIONS COMPEN-
PRINCIPAL SALARY BONUS COMPENSATION /SARS SATION
POSITION YEAR $ $ $ (#)(2) $
-------- ---- ------ ------- ------------ ------------------ ---------
<S> <C> <C> <C> <C> <C> <C>

Kent E. Lillie 1999 204,583 -- 12,000(1) 510,000 --
President/CEO 1998 190,000 124,523 12,000(1) 55,000 88,453(3)
1997 188,654 155,605 12,000(1) 510,000 --

Theodore M. Engle 1999 140,000 -- -- 50,000 --
III, President, 1998 41,539 -- -- 100,000 --
collectibles.com 1997 N/A N/A N/A N/A N/A

Joseph Nawy, 1999 115,000 5,480 500(1) -- --
Vice President 1998 115,000 12,449 6,000(1) 10,000 1,554(3)
Finance 1997 114,393 15,560 6,000(1) 20,000 --

Henry I. Shapiro, 1999 130,000 2,800 -- 14,792(3)
Vice President 1998 129,308 -- -- 15,000 --
Merchandise 1997 97,510 -- -- 10,000 --

Everit A. Herter 1999 120,769 12,000 -- -- --
Executive 1998 94,961 12,000 -- -- --
Vice President 1997 76,707 12,000 -- -- --
Affiliate Relations

James Bauchiero 1999 150,000 -- 7,200(1) -- --
Executive 1998 70,385 -- 3,600(1) -- --
Vice President 1997 N/A N/A N/A N/A N/A
CFO
</TABLE>

(1) Other Annual Compensation consists of automobile allowances.

(2) All numbers represent options to purchase Common Stock of the Company.

(3) Other Compensation consists of relocation allowances.

7
<PAGE> 12

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth certain information concerning stock
option and stock appreciation right ("SAR") grants to any Named Executive
Officer who was granted a stock option during the 1999 fiscal year of the
Company.

OPTIONS/SAR GRANTS IN LAST FISCAL YEAR

INDIVIDUAL GRANTS
---------------------------------------------------------
POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS/SARS EXERCISE STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION ----------------------------
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5%(S) 10%($)
- ---- ------------ ------------ -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>

Kent E. Lillie 100,000 9.83% $11.813 1/27/04(1) 332,671 727,496

100,000 9.83% $11.813 1/27/05 408,055 917,745

100,000 9.83% $11.813 1/27/06 487,208 1,127,020

100,000 9.83% $11.813 1/27/07 570,318 1,357,221

100,000 9.83% $11.813 1/27/08 657,584 1,610,444

10,000 .98% $ 6.969 12/2/03(2) 19,254 42,546

Everit A. Herter 9,000 .88% $ 3.031 8/19/04(3) 9,277 21,047

9,000 .88% $ 3.031 8/19/05 11,105 25,880

9,000 .88% $ 3.031 8/19/06 13,025 31,196

9,000 .88% $ 3.031 8/19/07 15,040 37,043

9,000 .88% $ 3.031 8/19/08 17,156 43,476

Theodore M. Engle III 10,000 .98% $ 3.563 7/1/04(4) 12,118 27,491

10,000 .98% $ 3.031 7/1/05 14,505 33,803

10,000 .98% $ 3.031 7/1/06 17,012 40,746

10,000 .98% $ 3.031 7/1/07 19,644 48,384

10,000 .98% $ 3.031 7/1/08 22,408 56,785
</TABLE>

(1) Options to acquire 500,000 shares of Common Stock of the Company were
issued January 27, 1999, of which options to purchase 100,000 shares
became exercisable on January 27, 1999, with options to acquire 100,000
shares to become exercisable on January 27, 2000, 2001, 2002 and 2003.
The options expire on the earlier of thirty (30) days after the
termination of employment or five (5) years from the date the options
become exercisable.

(2) Options awarded for serving as a director.

(3) Options to acquire 45,000 shares of Common Stock of the Company were
issued August 19, 1998, of which options to purchase 9,000 shares
became exercisable on August 19, 1999, with options to acquire 9,000
shares to become exercisable on August 19, 2000, 2001, 2002 and 2003.

8
<PAGE> 13

(4) Options to acquire 50,000 shares of Common Stock of the Company were
issued July 1, 1998, of which options to purchase 10,000 shares became
exercisable on July 1, 1999, with options to acquire 10,000 shares to
become exercisable on July 1, 2000, 2001, 2002, and 2003.

OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES

The following table sets forth certain information with respect to
options exercised by any Named Executive Officer during the 1999 fiscal year of
the Company, and with respect to unexercised options to purchase shares of the
Common Stock held by such officers as of the end of the 1999 fiscal year.

AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUE

<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS
JUNE 30, 1999 AT JUNE 30, 1999
SHARES ACQUIRED VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) ($) UNEXERCISABLE UNEXERCISABLE(5)
- ---- --------------- -------------- --------------- --------------------
<S> <C> <C> <C> <C>

Kent E. Lillie None N/A 625,000/650,000 $4,675,650/$2,226,500

Theodore M. Engle III 2,000 $ 19,250(1) 18,000/130,000 $ 160,308/$1,157,780

Everit Herter 10,000 $120,650(2) 0/65,000 0/$578,890

Joseph Nawy 56,000 $658,630(3) 2,000/32,000 $ 17,812/$284,992

Henry I. Shapiro 20,000 $242,500(4) 37,000/18,000 $ 329,522/$160,308
</TABLE>

(1) Options to purchase 2,000 shares were exercised on February 19, 1999 at
an exercise price of $3.63 per share. The value realized is based upon
the closing price on the Nasdaq National Stock Market ("NMS") on that
date of $13.25.

(2) Exercised on February 11, 1999 at an exercise price of $2.810 per
share. The value realized is calculated using the closing price on the
NMS market on that date of $14.875.

(3) Options to purchase 10,000 shares were exercised on February 11, 1999
and February 17, 1999 and options to purchase 28,000 shares were
exercised on February 23, 1999, each at an exercise price of $2.125 per
share. Options to purchase 8,000 shares were exercised on February 23,
1999 at an exercise price of $2.875 per share. The value realized is
based upon the closing price on the NMS market as of the close of those
dates of $14.875, $9.938 and $14.875, respectively.

(4) Options to purchase 10,000 shares were exercised on February 11, 1999
and February 23, 1999, each at an exercise price of $2.75 per share.
The value realized is based upon the closing price on the NMS market as
of those dates of $14.875.

(5) The market value of underlying securities at June 30, 1999, was $8.906
per share based upon the NMS closing price. "In-the-Money" options are
options in which the fair market value of the underlying securities
exceeds the exercise price of the options.

9
<PAGE> 14

EMPLOYMENT AGREEMENTS

KENT E. LILLIE. On September 25, 1993, the Company executed an
employment agreement with Kent E. Lillie whereby Mr. Lillie commenced employment
as the Company's President and Chief Executive Officer. Under that agreement,
Mr. Lillie was granted options to purchase up to 600,000 shares of Common Stock
at an exercise price of $1.00 per share during the term of the agreement. Of
those options, options to purchase 100,000 shares vested immediately, and
additional options to purchase 100,000 shares vested on each anniversary date of
the agreement for five years. The options expire on the earlier to occur of (a)
five years after the date of vesting or (b) thirty days after termination of Mr.
Lillie's employment with the Company. In the event of a "change of control" of
the Company, as defined in the agreement, the agreement granted Mr. Lillie
certain rights, including the right to resign any time during the twelve months
following the occurrence of the change of control, and in the event of such
resignation, any options to purchase stock not yet vested would automatically
vest on the date of resignation.

On June 21, 1996, the Board of Directors granted Mr. Lillie options to
purchase an additional 500,000 shares of the Company's Common Stock at a price
of $3.75 per share. Options to purchase 100,000 of these shares vested on
January 1, 1997, 1998, 1999 and 2000, and options to purchase an additional
100,000 shares will vest on January 1 of each year thereafter for another two
years. Effective June 19, 1997, these options were replaced with options having
the same terms and conditions, except for the exercise price which was reduced
to $2.87.

Effective July 1, 1997, the Company executed a new employment agreement
with Mr. Lillie to continue his employment as President and Chief Executive
Officer. The agreement provided that Mr. Lillie would be granted options to
purchase up to 50,000 shares of the Company's Common Stock at an exercise price
of $2.875 per share. These options will vest on June 30, 2001 and expire on June
30, 2006. In the event of a "change of control" of the Company, as defined in
the agreement, the agreement grants Mr. Lillie certain rights, including the
right to resign at any time during the twelve months following the occurrence of
the event, and any options to purchase stock not yet vested shall automatically
vest on the date of such termination. The Company also agreed to pay or
reimburse Mr. Lillie for the relocation of his primary residence from Atlanta,
Georgia, to Nashville, Tennessee, the Company's new headquarters location. The
Company also agreed to make Mr. Lillie a loan in the amount of $800,000 in
connection with the relocation of his residence. All of the loan proceeds have
been advanced to Mr. Lillie. The loan matures on the earlier of (i) the date of
Mr. Lillie's termination from the Company, or (ii) June 30, 2002. Until
maturity, payments equal to ten percent (10%) of bonus payments made to Mr.
Lillie are required to be used to repay the loan. During the fiscal year ending
June 30, 1999, Mr. Lillie received no cash bonus payments to apply as payments
on the loan. The loan does not bear interest.

Effective January 27, 1999, the Company executed a new employment
agreement with Mr. Lillie to continue his employment as President and Chief
Executive Officer. Under the terms of the agreement, Mr. Lillie will be employed
for a term of five (5) years, beginning February 1, 1999, with a base salary of
$225,000 per year. The agreement is automatically renewable for successive two
(2) year terms unless either party terminates the agreement prior to the
commencement of the renewal term. In addition to the base salary, the agreement
also provides for a quarterly bonus of the greater of (i) ten percent (10%) of
the increase of the Corporation's net income over the same quarter of the
previous fiscal year, or (ii) five percent (5%) of the Total Cash Flow with
Total Cash Flow being defined as the net income, plus depreciation and
amortization. Under the agreement, Mr. Lillie receives an automobile allowance
and other fringe benefits and allowances. The agreement also provides that Mr.
Lillie will be granted options to purchase up to 500,000 shares of the Company's
Common Stock at an exercise price of $11.813 per share. Effective on the date of
the Agreement, the option to purchase 100,000 of these shares vested, and
options to purchase 100,000 shares will vest on each of the next four (4)
anniversary dates of the Agreement. In the event of a "change of control" of the
Company, as defined in the agreement, the agreement grants Mr. Lillie certain
rights, including the right to resign at any time during twenty-four (24) months
following the occurrence of the event, and to receive an amount of cash equal to
his base salary and monthly allowances for the twenty-four (24) months preceding
such resignation. In addition, any options to purchase stock not yet vested
shall automatically vest on the date of such termination. In the event the
Company terminates Mr. Lillie for cause, the Company has agreed to continue Mr.
Lillie's base salary and car allowance for a period of one year. The agreement
also provides that Mr. Lillie will not compete with the Company for two (2)
years following the termination of his employment.

10
<PAGE> 15

ARTHUR D. TEK. On February 25, 1999, the Company executed an employment
agreement with Arthur D. Tek whereby Mr. Tek commenced employment as the
Company's Executive Vice President and Chief Financial Officer. Under the terms
of the agreement, Mr. Tek will be employed for a term of five (5) years,
beginning on March 12, 1999, with a base salary of $175,000 per year. The term
of the agreement may only be extended by mutual agreement. If the Company elects
not to renew the agreement, then Mr. Tek will be paid his base salary for one
year or until he accepts a position with another company. In addition to the
base salary, the agreement provides Mr. Tek an annual bonus up to $75,000 per
year, based on a bonus plan similar to the one in existence for the President
and Chief Executive Officer. The agreement also provided for Mr. Tek to be paid
or reimbursed for the relocation of his primary residence from Florida to
Nashville, Tennessee, including certain lodging expenses in Nashville,
Tennessee. The agreement granted Mr. Tek options to purchase up to 150,000
shares of Common Stock at an exercise price of $13.00 per share during the term
of the agreement. Of those options, options to purchase 30,000 shares vested on
March 12, 1999, and additional options to purchase 24,000 shares vest on each
anniversary date thereafter for five years. The options expire on the earlier to
occur of (a) five years after the date of vesting or (b) 90 days after
termination of Mr. Tek's employment with the Company. If within two years of a
"change of control", as defined in the agreement, the Company terminates Mr. Tek
without cause or Mr. Tek resigns, then the Company has agreed to continue Mr.
Tek's base salary for a period of two years or the remainder of the term of the
agreement, whichever is shorter, and has also agreed to extend the time during
which Mr. Tek can exercise his stock options to one (1) year following the
termination. In the event the Company terminates Mr. Tek without cause or Mr.
Tek resigns due to the Company's breach of the agreement, then the Company has
agreed to continue Mr. Tek's base salary for one year, unless he accepts a
position with another company. The agreement also provides that Mr. Tek will not
compete with the Company for one year following the termination of his
employment, unless the agreement is terminated by the Company without cause or
by Mr. Tek due to the Company's breach of the agreement.

COMPENSATION OF DIRECTORS

In June 1997, each director was granted an option to purchase 10,000
shares of the Common Stock of the Company at a price of $2.875 per share. These
options expire in June 2002 if not exercised prior to such date. Beginning in
1998, the Company paid each director $500 for each meeting attended ($100 if
attendance is by telephone), along with the director's expenses associated with
attending the meeting. Effective December 2, 1998, the amount paid to Directors
was increased to $1,000 for each meeting attended ($500 if attendance is by
telephone). Effective January 1, 1998, the Company also granted to each director
an option to purchase 5,000 shares of the Company's Common Stock at an exercise
price of $3.75, the market price on the date issued. Effective December 2, 1998
the Company also granted to each director an option to purchase 10,000 shares of
the Company's Common Stock at an exercise price of $6.969, the market price on
the date granted.

OMNIBUS STOCK INCENTIVE PLAN

The Company's Omnibus Stock Incentive Plan (the "Plan") was adopted by
the Company's Board of Directors on October 15, 1991, and approved by the
Company's shareholders at the 1991 annual meeting of shareholders. The Plan was
amended at the 1996 annual meeting of shareholders to make certain technical
changes.

A special administrative committee of the Board of Directors was
appointed to administer the plan. All employees of the Company are eligible to
receive stock options and/or stock appreciation rights under the plan. Options
granted under the Plan can be either incentive stock options or nonqualified
stock options. Incentive stock options to purchase Common Stock may be granted
at not less than 100% of fair market value of the Common Stock on the date of
the grant.

SARs generally entitle the participant to receive the excess of the
fair market value of a share of Common Stock on the date of exercise over the
initial value of the SAR. The initial value of the SAR is the fair market value
of a share of Common Stock on the date of the grant.

A maximum of 1,500,000 shares of Common Stock may be issued upon the
exercise of options and SARs.

11
<PAGE> 16

No option or SAR may be granted after October 15, 2001. No option that
is an incentive stock option nor any corresponding SAR related to such option
shall be exercisable after the expiration of ten (10) years from the date such
option or SAR was granted or after the expiration of five (5) years in the case
of any such option or SAR that was granted to a 10% shareholder.

As of February 25, 2000, stock options for 871,100 shares of Common
Stock have been granted under the Plan and were outstanding and unexercised. A
total of 570,000 shares of Common Stock of the Company have been previously
issued upon exercise of stock options issued under the Plan. Mr. Lillie's
options were not granted by the Company pursuant to the Plan. The Company has
never issued any SARs.

TRANSACTIONS WITH MANAGEMENT AND DIRECTORS

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Board of Directors of the Company does not have a Compensation
Committee. All directors of the Company participate in executive compensation
decisions. The members of the Board of Directors during the fiscal year ended
June 30, 1999, were J.D. Clinton, A.E. Jolley, Joseph I. Overholt, Frank A.
Woods, J. Daniel Sullivan, Patricia E. Mitchell, Donna Hilley, and Kent E.
Lillie. All of these directors served for the entire fiscal year with the
exception of Ms. Hilley, who was elected on December 2, 1998 and Patricia E.
Mitchell, who resigned effective January 27, 1999.

TRANSACTIONS WITH RELATED PARTIES

In September 1998, the Company relocated its studios and headquarters
to newly constructed facilities in Nashville, Tennessee. The real property for
the new facility was initially acquired by a limited liability company organized
by individuals related to J.D. Clinton, and that company obtained a construction
loan (the "Facility Loan") in January 1998 from a commercial lender to build the
facility. The loan was guaranteed by the Company and also was personally
guaranteed by Mr. Clinton. The Company agreed to pay to Mr. Clinton an annual
fee equal to 1% of the amount of the Facility Loan in consideration for Mr.
Clinton's guaranty, which was to be payable in either cash or in stock of the
Company. In March 1998, the Company acquired the facility by acquiring all of
the ownership interest in the limited liability company for a price equal to the
balance due on the Facility Loan, thereby generating no profits for the owners
of the limited liability company. The Company paid the Facility Loan in full
upon the acquisition of the limited liability company, thereby terminating Mr.
Clinton's guaranty. As a result of the agreement to pay a fee to Mr. Clinton for
his guaranty, the Company issued to Mr. Clinton a total of 11,226 shares of
Common Stock. The Company also retained the services of a development company
with respect to the construction and development of the facility, and paid a
development fee of approximately $165,000 for its services. The development
company is owned by Stephen Sanders, an individual who is related to J.D.
Clinton. The Board of Directors of the Company approved the development
agreement and determined that the agreed upon fee was in an amount considered
normal and typical in the industry for the type of services to be rendered.

In connection with the relocation of Kent E. Lillie's primary residence
from Atlanta, Georgia, to Nashville, Tennessee, the Company has made an
interest-free loan to Mr. Lillie in the principal amount of $800,000. See
"MANAGEMENT C Employment Agreements C Kent E. Lillie" herein.

On September 1, 1999, the Company entered into a lease agreement with
INSOUTH Bank under which the Company leased approximately 9,244 square feet of
office space in a commercial building which is adjacent to the main offices of
the Company in Nashville. The lease is for a term of five (5) years, with
renewal options, at a lease rate that was determined by the Company to be
comparable to the lease rates for comparable space in the area. J.D. Clinton is
the controlling shareholder of INSOUTH Bank.

12
<PAGE> 17

REPORT ON EXECUTIVE COMPENSATION

The Company's Board of Directors makes decisions on compensation of the
Company's executives. Each member of the Board, except for Kent E. Lillie, is a
non-employee director. It is the responsibility of the Board to assure that the
executive compensation programs are reasonable and appropriate, meet their
stated purpose and effectively service the interests of the Company and its
stockholders. Pursuant to rules of the Securities and Exchange Commission
("SEC") designed to enhance disclosure of corporate policies toward executive
compensation, set forth below is the report of the Board of Directors with
respect to executive compensation.

COMPENSATION PHILOSOPHY AND POLICIES FOR EXECUTIVE OFFICERS

The Company believes that the most effective executive compensation
program aligns the interest of the Company's executives with the interests of
its stockholders. The Company's primary corporate mission is to achieve
profitability on a consistent basis and thereby enhance long-term stockholder
value. In pursuit of that mission, the Board seeks to maintain a strong positive
nexus between this mission and its compensation and benefit goals.

The Company's executive compensation program exemplifies the Board's
commitment to that nexus. The Company provides only minimal perquisites to its
executive officers, relying instead upon compensation methods that emphasize
overall Company performance. In addition, the Company maintains no contractual
arrangements with any executive officer, other than its agreements with its
President and CFO, thereby enhancing the opportunities for performance-based
rewards to individuals.

The Company's executive compensation program supports the Company's
mission by:

- - Directly aligning the interests of executive officers with the
long-term interests of the Company's stockholders by making Company
stock appreciation over the long term the cornerstone of executive
compensation through awards that can result in the ownership of
substantial amounts of the Company's Common Stock.

- - Providing compensation opportunities that create an environment that
attracts and retains talented executives on a long-term basis.

- - Emphasizing pay for performance by having a meaningful portion of
executive compensation "at risk."

At present, the Company's executive compensation program is comprised
of three primary components: base salary, annual cash incentive (bonus) and
long-term incentive opportunity in the form of stock options. Two of the three
components of the Company's executive compensation plan -- bonus and stock
options -- directly relate to overall performance by the Company. With respect
to the third component -- salary -- the Company seeks to be at or below market,
placing primary emphasis on the opportunities for greater reward through the
availability of performance-based reward mechanisms.

BASE SALARY

The base salary of the Company's President, as listed in the Summary
Compensation Table, is governed by an employment agreement with the Company. As
a part of its search for a President in 1993, the Board determined that in order
to attract an individual with knowledge and experience necessary to implement
the Company's mission, the Company needed to provide that individual with a
certain level of compensation. The Board also determined to place a greater
portion of the compensation package in performance-based compensation (i.e.,
performance bonus and stock options), thereby providing an incentive for
outstanding performance and minimizing the amount of guaranteed compensation.
The Board believes that the employment agreement with Mr. Lillie contains an
appropriate mix of guaranteed and performance-based compensation.

13
<PAGE> 18

The Company has no other employment agreements with any other
employees, other than its CFO. All other executive officer salaries are
evaluated on an annual basis. In determining appropriate salary levels and
salary increases, the Board considers achievement of the Company's mission,
level of responsibility, individual performance, internal equity and external
pay practices. In this regard, the Board attempts to set base salaries of all
executive officers at rates at or below the rates of other individuals in
equivalent positions in the market area. The Board determines those rates from
information gathered by its members.

ANNUAL BONUS

The Board believes that annual bonuses to executive officers encourage
management to focus attention on key operational goals of the Company, and
corporate and business earnings are the main performance measure for awards of
bonuses. In that regard, the agreement with the Company's President provides a
quarterly bonus of the greater of (i) ten percent (10%) of the increase of the
Corporation's net income over the same quarter of the previous fiscal year, or
(ii) five percent (5%) of the Total Cash Flow with Total Cash Flow being defined
as the net income, plus depreciation and amortization. In addition, the
agreement with the Company's CFO provides for a bonus equal to 25% of the amount
of the bonus paid to the President up to $75,000, and the Company may also pay
the CFO a discretionary bonus. With respect to the other executive officers of
the Company, the Board does not have a formal annual incentive plan. Instead,
the Board has elected to review the corporate and business performance of the
Company on a periodic basis, and make awards to executive officers if
appropriate. In determining appropriate annual bonuses, the Board considers
achievement of the Company's mission, level of responsibility, individual
performance, internal equity, and external pay practices. In the fiscal year
ended June 30, 1999, the Board elected to award cash bonuses to one executive
officer (Mr. Herter).

LONG-TERM INCENTIVES

The Company's only current long-term incentive compensation is stock
options that are directly related to improvement in long-term stockholder value.
The Board believes that stock option grants provide an incentive to executive
officers that focuses each officer's attention on managing the Company from the
perspective of an owner with an equity stake in the business. In addition, the
Board believes that stock option grants provide the Company with a mechanism for
recruiting individuals by providing an opportunity for those officers to profit
from the results of their contributions to the Company. These grants also help
ensure that operating decisions are based on long-term results that benefit the
Company and ultimately the Company's stockholders.

The options granted to executive officers provide the right to purchase
shares of Common Stock usually at the fair market value on the date of grant.
Usually, each stock option becomes vested and exercisable over a period of time,
generally five years. The number of shares covered by each grant reflects the
Board's assessment of the executive's level of responsibility, and his or her
past and anticipated contributions to the Company. The size of option grants to
individual executives is designed to reflect the impact the individual has on
decisions that affect the overall success of the Company.

The Company granted no stock options for shares of Common Stock to its
officers in the fiscal year ended June 30, 1993, and the Company granted stock
options for 210,000 shares of Common Stock to its officers, other than the
President, in the fiscal year ended June 30, 1994. In the fiscal year ended June
30, 1995, the Company awarded officers options to purchase up to 140,000 shares
of Common Stock. In the fiscal year ended June 30, 1996, the Company awarded
officers options to purchase up to 225,000 shares of Common Stock. In the fiscal
year ended June 30, 1997, the Company awarded officers options to purchase up to
145,000 shares of Common Stock. In the fiscal year ended June 30, 1998, the
Company awarded officers options to purchase up to 485,000 shares of Common
Stock. In the fiscal year ended June 30, 1999, the Company awarded executive
officers options to purchase up to 270,000 shares of Common Stock. Since June
30, 1999, the Company has awarded its executive officers options to purchase up
to 170,000 shares of Common Stock. These totals are exclusive of stock options
granted to Kent E. Lillie and are net of any options that expired without being
exercised.

14
<PAGE> 19

CHIEF EXECUTIVE COMPENSATION

The regulations of the SEC require the Board to disclose the basis for
the compensation of the Company's chief executive officer relative to the
Company's performance. The Company's chief executive officer is its President,
Kent E. Lillie. Mr. Lillie's compensation is governed by the terms of an
employment agreement dated September 25, 1993, and a second employment agreement
dated July 1, 1997, and a third employment agreement dated January 27, 1999.

The Board's general approach in establishing Mr. Lillie's compensation
was to provide a base salary below market, augmented by an annual bonus based
upon specific corporate-wide performance criteria, and stock options reflective
of the value of that performance. The Board approved a current base salary of
$225,000 as provided by the third Employment Agreement, and a quarterly bonus
based upon the financial performance of the Company. The Board determined, based
upon the information available, that the base salary and annual bonus was below
the market rate and within the Company's overall internal compensation goal. Mr.
Lillie was not paid a bonus for the fiscal year ended June 30, 1999. Consistent
with the goals stated above, that fact reflects the Company's overall
performance during that fiscal year and not Mr. Lillie's performance.

As a part of the first employment agreement, dated September 25, 1993,
Mr. Lillie was granted options to purchase up to 600,000 shares of the Company's
Common Stock at an exercise price of $1.00 per share. Those options vest over a
period of five (5) years, with 100,000 shares vesting immediately upon
employment. The Board granted Mr. Lillie an option to purchase 500,000 shares of
its Common Stock as additional long-term incentive during the fiscal year ended
June 30, 1997. Effective July 1, 1997, the Company and Mr. Lillie entered into a
new employment agreement, under which Mr. Lillie received options to purchase
50,000 shares of the Company's Common Stock and certain changes were made in the
computation of Mr. Lillie's bonus. Effective January 27, 1999, the Company and
Mr. Lillie entered into a new employment agreement, under which Mr. Lillie
received options to purchase 500,000 shares of the Company's Common Stock. See
"Employment Agreements" herein.

THE FOREGOING REPORT IS SUBMITTED BY ALL MEMBERS OF THE COMPANY'S BOARD OF
DIRECTORS WHOSE MEMBERS ARE AS FOLLOWS:

<TABLE>
<S> <C> <C>
J.D. Clinton A.E. Jolley J. Daniel Sullivan
Kent E. Lillie Frank A. Woods Joseph I. Overholt
</TABLE>

STOCKHOLDER RETURN COMPARISONS

The following line-graph compares the cumulative stockholder returns
for the Company over the past five (5) years with a broad market equity index
and a published industry or line-of-business index. For these purposes, the
Company has chosen the Nasdaq Market Index and a Peer Group Index composed of a
combination of those industries classified as "Media - Broadcasting - TV" and
"Retail - Catalog & Mail Order Houses" by Media General Financial Services, Inc.
The chart below uses as a beginning price the average of the high and low bid of
the Company's Stock on June 30, 1994 (the last trading day prior to fiscal year
1995), and assumes $100 invested on that date.

<TABLE>
<CAPTION>
FISCAL YEAR ENDING
------------------
COMPANY/INDEX/MARKET
--------------------
<S> <C> <C> <C> <C> <C> <C>

6/30/94 6/30/95 6/30/96 6/30/97 6/30/98 6/30/99

Shop At Home, Inc. 100.00 141.75 200.00 144.85 183.51 459.28

Peer Group Index 100.00 56.82 76.57 73.64 93.45 86.22

NASDAQ Market Index 100.00 117.28 147.64 177.85 235.75 330.37
</TABLE>

15
<PAGE> 20

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Officers, directors and certain shareholders of companies which have
equity securities registered with the SEC under Section 12 of the Securities
Exchange Act of 1934, as amended from time to time (the "Securities Exchange
Act"), must file certain periodic reports (identified as Forms 3, 4 and 5) with
respect to their stock ownership of the company, and certain changes therein.
Based solely upon a review of the Forms 3 and 4 and amendments thereto furnished
to the Company during the most recent fiscal year and Forms 5 and amendments
thereto furnished to the Company with respect to the most recent fiscal year, no
director, officer, or shareholder beneficially owning more than 10% of any class
of equity securities failed on a timely basis to file reports required by
Section 16(a) of the Exchange Act:

PROPOSAL NO. 2
1999 EMPLOYEE STOCK OPTION PLAN

At the Annual Meeting, stockholders will vote on approval of the
Company's 1999 Employee Stock Option Plan (the "1999 Plan"). The Board of
Directors approved the 1999 Plan on July 21, 1999, subject to approval by
stockholders. A copy of the 1999 Plan is annexed as EXHIBIT A to this Proxy
Statement. Approval of the 1999 Plan requires the affirmative vote of the
holders of a majority of the shares of Common Stock present or represented, and
entitled to vote, at the Annual Meeting.

The award of options pursuant to the 1999 Plan is intended to benefit
the Company by (i) assisting it in recruiting and retaining officers and key
employees with ability and initiative, (ii) providing personal financial
incentive for officers and key employees, and (iii) associating the interests of
officers and key employees with those of the Company and its shareholders
through opportunities for increased stock ownership.

The descriptions of the 1999 Plan set out herein are summaries, and as
such, do not modify or amend any term or provision of the 1999 Plan, to which
reference is hereby made for a fuller and complete description of such terms and
provisions.

GENERAL INFORMATION

The 1999 Plan will be administered by the full Board of Directors or a
committee of the Board (the "Committee") consisting of two or more non-employee
directors, as defined in Rule 16b-3 promulgated under the Securities Exchange
Act. All directors and key employees of the Company and its subsidiaries
(persons to whom options are granted are referred to as "Participants"), shall
be eligible to receive options under the 1999 Plan; no director or other person
who is not also an employee of the Company or a subsidiary shall be eligible to
receive "incentive stock options" ("ISOs"), as defined under the Internal
Revenue Code of 1986, as amended (the "Code"). Subject to the provisions of the
1999 Plan, the Board or the Committee shall select the directors and key
employees to whom options will be granted, determine the number of shares of
Common Stock that will be subject to each option, and determine the time when
options will be granted, the manner in which each option is exercisable, the
duration of the exercise period, and the terms of conditions of options that are
based on performance. Under the 1999 Plan, the Board or the Committee is
authorized to include in an option agreement such other terms and conditions
that are not inconsistent with the 1999 Plan and which the Board or the
Committee deem appropriate.

The maximum number of shares of Common Stock that may be subject to
options granted under the 1999 Plan is 3,000,000. The shares that may be issued
under the 1999 Plan may be authorized but unissued shares. If there is a stock
split, stock dividend, recapitalization, spin-off of assets, or other relevant
change affecting the Common Stock, the maximum number of shares issuable under
the 1999 Plan or to any Participant and the number of shares subject to, and the
option price of, outstanding options will be equitably adjusted by the
Committee.

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TERM OF OPTIONS

An option entitles the holder to purchase the number of shares subject
to the option at the option exercise price specified in the 1999 Plan. For all
options granted under the 1999 Plan, the option exercise price will be equal to
the fair market value of a share of Common Stock on the date of the grant,
unless the person to whom an option is granted owns more than ten percent (10%)
of the total voting stock of the Company, in which case the exercise price must
not be less than 110% of the fair market value of the stock at the time of the
grant. Each option may be exercised in full or in part and at such time as the
Committee determines at the time of grant.

The option exercise price may be paid in cash or, unless the Committee
determines otherwise, in shares of Common Stock or in a combination of cash and
such shares.

Each option agreement shall specify the expiration date of the option,
which for ISO's shall not be more than ten years after the date of grant or five
years in the case of an ISO granted to a ten percent shareholder. Upon the
Participant=s death, the options may be exercised, to the extent exercisable by
the Participant at the date of death, by the appropriate representative of the
Participant=s estate. The Board or the Committee may treat a period when the
Participant is on military or other leave of absence as a period of employment.
If the leave exceeds 90 days and reemployment by the Company is not guaranteed,
the Participant=s employment shall be deemed to have terminated on the 91st day
of the leave.

Options are not transferable except by will or by the laws of descent
and distribution.

CHANGE OF CONTROL

The Board or the Committee may provide that an option shall be
exercisable, even if not then vested, in full or in part on or after a change in
control of the Company. A "change of control" is defined in the 1999 Plan to
occur upon (i) the sale of all, or substantially all, of the assets of the
Company to a person which is not controlled by the Company, (ii) the approval by
the Company=s shareholders of a plan of liquidation, or (iii) a change in
control under the Securities Exchange Act, except that a change in control shall
be considered to have occurred if a person becomes the beneficial owner of 30%
or more of the voting stock of the Company, unless the Board has approved the
acquisition. A change of control shall also be considered to have occurred if
the members of the current Board of Directors (and future Directors who are
approved by a majority of the Board and approved by the shareholders) cease to
constitute a majority of the Board, or if both J.D. Clinton ceases to be
Chairman of the Board and Kent Lillie ceases to be either the Chief Executive
Officer or Chairman of the Board.

PLAN AMENDMENTS

The Board may amend, suspend or terminate the 1999 Plan at any time,
except that shareholder approval shall be required for any amendment which would
(i) change the number of shares of Common Stock which may be delivered under the
1999 Plan, (ii) change the employees or class of employees eligible to receive
ISOs, or (iii) require shareholder approval under applicable federal or state
law.

TAX EFFECTS OF PLAN PARTICIPATION

Federal Income Tax Treatment. The 1999 Plan is not, nor is it intended
to be, qualified under Section 401(a) of the Code. The 1999 Plan has been
structured, however, so that options granted thereunder may qualify as ISOs.

ISOs. The grant of an ISO has no immediate federal income tax
consequences to the Company or to the Participant. Likewise, the exercise of an
ISO will not have an immediate federal income tax consequence to the Company or
the Participant. The exercise of an ISO, however, may subject the Participant to
federal alternative minimum tax in the year in which the ISO is exercised.

To qualify for treatment as an ISO, (i) a Participant may not dispose
of any shares received upon the exercise of an option within two years from the
date of grant or within one year from the date of the issuance of such shares

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(together the "Holding Periods"), and (ii) a Participant who ceases to be an
employee of the Company must exercise his or her option within three months
after the date of his or her cessation of employment or, in the event of the
Participant's cessation of employment due to permanent or total disability,
within one year of his or her cessation of employment. In the event of the
Participant's death, provided (i) the Participant was employed by the Company or
its affiliates on the date of his or her death, or within three months of his or
her death, and (ii) the Participant's estate or the person or persons to whom
the Participant's rights pass by will or by the laws of descent or distribution,
comply with all other terms of the option, the option will continue to qualify
for treatment as an ISO.

If the option qualifies for treatment as an ISO, the Participant
recognizes no taxable gain or loss either on the grant or the exercise of the
ISO. The Participant will generally recognize long-term capital gain or loss
upon the sale of any shares received upon the exercise of an option provided the
holding period applicable to long-term capital assets is satisfied. The
Participant's gain will be equal to the difference between the net sale proceeds
and the Participant's tax basis in the Common Stock received upon exercise of
the ISO. Generally, the Participant's tax basis will be equal to the option
price. Since the Participant recognizes no compensation income with respect to
an ISO (except upon the occurrence of a disqualifying event, as discussed
below), the Company is not entitled to any compensation tax deduction with
respect to an ISO.

If the Participant takes action which disqualifies the option from
treatment as an ISO (such as the failure to meet the Holding Periods), then the
Participant will recognize compensation or ordinary income in the year of the
disqualifying event, and the Company will receive a tax deduction from its
income in the tax year in which the Participant recognizes income, in an amount
equal to the lesser of (i) the fair market value on the date of exercise minus
the option price of the optioned shares, and (ii) the amount realized on the
disposition minus the option price. The balance of the Participant's gain on
disposition of the shares acquired pursuant to the exercise of the option will
be long-term capital gain, provided the holding period applicable to long-term
capital assets is satisfied. For this purpose, the Participant's tax basis in
the stock will include any ordinary income recognized on the disqualifying
disposition of the stock.

Any ordinary income recognized by the Participant will constitute wages
for federal income and employment tax purposes. Accordingly, the Company may
make whatever arrangements are necessary to ensure that funds equaling the
amount of income and employment taxes required to be withheld are available for
payment.

Nonqualified Options. The Participant will recognize no taxable gain
or loss on the grant of a nonqualified option under the 1999 Plan. Upon exercise
of a nonqualified stock option, the Participant will recognize compensation or
ordinary income in an amount equal to the excess of the fair market value of the
shares of the Common Stock received over the option price of such shares. Upon a
subsequent sale of the stock, the Participant will recognize short-term or
long-term capital gain or loss depending upon the Participant's holding period
for the stock. The Participant's gain will be equal to the difference between
the net sale proceeds and the Participant's tax basis in the Common Stock
received upon exercise of the nonqualified option. Generally, the Participant's
tax basis will be equal to the option price plus the compensation income
recognized at the time the nonqualified option is exercised. The Company will be
allowed a federal income tax deduction for the amount recognized as ordinary
income by the Participant upon the Participant's exercise of the option.

EXISTING PLAN

The Company's 1991 Omnibus Stock Incentive Plan (the "1991 Plan")
authorizes the committee which administers the 1991 Plan to grant various stock
incentives, including stock options, to employees of the Company and its
subsidiaries. The number of shares of Common Stock available as of any given
date for stock incentives under the 1991 Plan may not exceed 1,500,000 shares of
Common Stock. Approval of the 1999 Plan will not alter or affect the
administration of the 1991 Plan or any options granted thereunder.

STOCKHOLDER RESOLUTION

In order to effect approval and adoption of the Plan by stockholders,
the following resolution will be presented to the Annual Meeting:

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RESOLVED, that the Shop At Home, Inc., 1999 Stock Option Plan as set
forth at Exhibit A to the Proxy Statement for the Annual Meeting of
Stockholders of the Company to be held on March 30, 2000, be, and the
same is hereby, approved and adopted.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL AND ADOPTION OF THE
PLAN.

PROPOSAL NO. 3
KENT E. LILLIE OPTION

At the Annual Meeting, stockholders will vote on approval of the grant
by the Board of Directors of an option to Kent E. Lillie, the Company's
President and Chief Executive Officer, to purchase 500,000 shares of Common
Stock of the Company (the "Lillie Stock Option"). The Lillie Stock Option was
approved by the Board of Directors on January 27, 1999. A copy of the Lillie
Stock Option is annexed as EXHIBIT B to this Proxy Statement. Approval of the
Lillie Stock Option requires the affirmative vote of the holders of a majority
of the shares of Common Stock present or represented, and entitled to vote, at
the Annual Meeting.

The award of options pursuant to the Lillie Stock Option is intended to
benefit the Company by (i) assisting it in retaining Kent E. Lillie as its
President and Chief Executive Officer as a valuable employee who has been
directly responsible for the Company's growth and financial success, (ii)
permitting the Company to enter into a newly negotiated employment agreement
with Mr. Lillie which, among other provisions, extended the term of his
employment with the Company and also extended the period during which he has
agreed not to compete with the Company, after the termination of this Employment
Agreement, to two years, (iii) providing personal financial incentive for Mr.
Lillie, and (iv) associating the interests of Mr. Lillie with those of the
Company and its shareholders through opportunities for increased stock
ownership.

The descriptions of the Lillie Stock Option set out herein are
summaries, and as such, do not modify or amend any term or provision of the
Lillie Stock Option, to which reference is hereby made for a fuller and complete
description of such terms and provisions.

GENERAL INFORMATION

The Lillie Stock Option was approved by the Board of Directors of the
Company on January 27, 1999. Mr. Lillie was the only employee of the Company to
whom an option was granted at that time. Prior to this date Mr. Lillie has
previously been granted options to purchase a total of 1,175,000 shares of the
Common Stock of the Company. These consist of a grant on September 25, 1993 of
an option to purchase 600,000 shares; the grant of an option on June 21, 1996 to
purchase 500,000 shares; and the grant of an option on July 1, 1997 to purchase
50,000 shares, all issued to Mr. Lillie in connection with his position as
President and Chief Executive Officer of the Company and his performance in that
position. See "Election of Directors - Chief Executive Compensation" herein. In
addition, as a director, Mr. Lillie has received options to purchase a total of
25,000 shares of Common Stock, which options were granted at various dates to
each of the Company's directors at the date of the grant. See "Election of
Directors - Compensation of Directors" herein.

The shares that may be issued under the Lillie Stock Option may be
authorized but unissued shares. If there is a stock split, stock dividend,
recapitalization, spin-off of assets, or other relevant change affecting the
Common Stock, the maximum number of shares issuable under the Lillie Stock
Option and the number of shares subject to, and the option price of, outstanding
options will be equitably adjusted.

TERM OF OPTIONS

The Lillie Stock Option entitles Mr. Lillie to purchase up to 500,000
shares of the Company's Common Stock at an exercise price of $11.813 per share.
Of the total of 500,000 shares, the option to purchase up to 100,000 shares
vested on January 27, 1999, and an option to purchase an additional 100,000
shares vest on each January 27 thereafter for the following four years. Each
option terminates five (5) years after the date of vesting if not exercised by
that date.

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In the event Mr. Lillie resigns his position with the Company, or
the Company terminates him for cause, all of Mr. Lillie's rights with respect to
option not yet vested shall terminate. In the event of Mr. Lillie's death, all
options which would have vested within one year after his death shall vest. In
the event Mr. Lillie resigns with 24 months of the occurrence of a change of
control of the Company, or the Company terminates Mr. Lillie for any reason
other than for cause, complete disability of death, all of Mr. Lillie's rights
with respect to option not yet vested, shall vest as of the date of his
termination. For cause is defined in the option agreement to include the
commission of certain dishonest acts, competing with the Company in violation of
his employment agreement, conducting himself in a manner substantially
detrimental to the Company, conviction of certain crimes, and the removal of Mr.
Lillie from his position by a governmental regulatory authority.

A "change of control" is deemed to occur upon (i) the sale of all, or
substantially all, of the assets of the Company to a person which is not
controlled by the Company, (ii) the approval by the Company's shareholders of a
plan of liquidation, or (iii) a change in control under the Securities Exchange
Act, except that a change in control shall be considered to have occurred if a
person becomes the beneficial owner of 30% or more of the voting stock of the
Company, unless the Board has approved the acquisition. A change of control
shall also be considered to have occurred (i) if any person has voting control
with respect to the election of directors of more of the stock of the Company
than SAH Holdings, Ltd., or (ii) if J.D. Clinton is not elected to or is removed
from the Board of Directors (other than by the mutual decision of Mr. Clinton
and Mr. Lillie; or (iii) J.D. Clinton ceases to be the Chairman of the Board of
Directors and Mr. Lillie is neither the Company's chief executive office or
chairman.

TAX EFFECTS

Federal Income Tax Treatment. The Lillie Stock Option is not, nor is it
intended to be, qualified under Section 401(a) of the Code, and the Lillie Stock
Option does not qualify as an ISO. As a nonqualified option, Mr. Lillie will
recognize no taxable gain or loss on the grant of the Lillie Stock Option. Upon
exercise of a nonqualified stock option, the Mr. Lillie will recognize
compensation or ordinary income in an amount equal to the excess of the fair
market value of the shares of the Common Stock received over the option price of
such shares. Upon a subsequent sale of the stock, the Mr. Lillie will recognize
short-term or long-term capital gain or loss depending upon the Mr. Lillie's
holding period for the stock. The Mr. Lillie's gain will be equal to the
difference between the net sale proceeds and the Mr. Lillie's tax basis in the
Common Stock received upon exercise of the nonqualified option. Generally, the
Mr. Lillie's tax basis will be equal to the option price plus the compensation
income recognized at the time the nonqualified option is exercised. The Company
will be allowed a federal income tax deduction for the amount recognized as
ordinary income by the Mr. Lillie upon the Mr. Lillie's exercise of the option.

STOCKHOLDER RESOLUTION

In order to effect approval and adoption of the Plan by stockholders,
the following resolution will be presented to the Annual Meeting:

RESOLVED, THAT THE SHOP AT HOME, INC., LILLIE STOCK OPTION AS SET FORTH AT
EXHIBIT B TO THE PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS OF THE
COMPANY TO BE HELD ON MARCH 30, 2000, BE, AND THE SAME IS HEREBY, APPROVED AND
ADOPTED.

PROPOSAL NO. 4
CHARTER AMENDMENT
CORPORATE TAKEOVER STATUTES

The Board of Directors has approved and recommended to the stockholders
a proposal to amend the Charter of the Company in order to make applicable to
the Company certain Tennessee statutes which were enacted in an effort to make
the acquisition of control of a Tennessee corporation more difficult or less
desirable (the "Corporate Takeover Statutes"). The text of the proposed
amendment is attached hereto as EXHIBIT C.

At the annual meeting of shareholders held on December 2, 1998, the
shareholders approved an amendment (the "1998 Amendment") to the Charter under
which the Company waived the applicability of these statutes, to the extent
permitted by law to do so. The Company agreed at that time to make the proposal
and to recommend its adoption

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in order to obtain an order from the Department of Corporations of the State of
California making the Company's offering of 11,500,000 shares of Common Stock
and $75,000,000 of its 11% Senior Secured Notes due 2005 (the "Offerings")
effective in the State of California in March 1998. The Company filed a
registration statement with respect to the Offerings with the SEC and in
virtually all of the fifty (50) states, the District of Columbia and Puerto
Rico. The registration statement was made effective by the SEC on March 23,
1998. On March 17, 1998, the California Department of Corporations advised the
Company that it would condition the registration of the Offerings in that state
upon the Company's commitment to submit a proposal to its shareholders at their
next meeting to "opt out of" or waive the application of Tennessee's Corporate
Takeover Statutes to the Company, and further upon the Board of Directors
agreeing to recommend the adoption of the proposal and to vote their shares to
approve the proposal. California was the only state to make the registration in
that state conditional upon these commitments; however, because the Company
considered the registration of the Offerings in California to be important in
the success of the Offerings, it agreed to the condition. If the registration
had not been made effective in California, the Company and its underwriters
believed their ability to sell the securities under the Offerings would have
been significantly limited or eliminated.

For the reasons set out below, the Board of Directors has since decided
that the applicability of these statutes is in the best interests of the Company
and its shareholders. Accordingly, the Board of Directors is recommending to the
shareholders that the provisions added to the Charter in 1998 making these
statutes inapplicable, now be removed from the Charter.

Tennessee has a series of statutes that come within the classification
of "Corporate Takeover Statutes," which statutes are summarized in the following
paragraphs.

BUSINESS COMBINATIONS

The Tennessee Business Combination Act, T.C.A. ss.48-103-201 et seq.,
generally prohibits a "resident domestic corporation" (defined below) from
engaging in any "business combination" (defined to include mergers,
consolidations, sales of certain assets, dissolutions, liquidations and other
transactions) with any "interested shareholder" (generally defined as any person
that, individually or with or through any of its affiliates or associates,
beneficially owns 10% or more of the outstanding voting securities of the
corporation) for a period of five years after the date the person becomes an
interested shareholder unless (i) prior to such date, the board of directors
approved either the business combination or the transaction which resulted in
the shareholder becoming an interested shareholder, (ii) the corporation's
original charter or original bylaws provide that the corporation shall not be
governed by the statute, or (iii) the holders of a majority of shares held
continuously for at least one year approve an amendment to the corporation's
charter or bylaws expressly electing not to be governed by the statute and
expressly providing that such amendment shall not be effective until two years
after the vote of the holders of such shares. Consummation of a business
combination that is subject to the five-year moratorium is permitted after such
period, provided that the transaction (i) complies with all applicable charter
and bylaw requirements and (ii) either (a) is approved by the holders of
two-thirds of the voting stock not beneficially owned by the interested
shareholder or (b) meets certain fair price criteria.

The Tennessee Business Combination Act defines a "resident domestic
corporation" as an issuer of voting stock which is organized under the laws of
Tennessee and meets two or more of the following requirements: (i) the
corporation has, as of the last record date before the event requiring a
determination to be made, more than either 10,000 or 10% of its shareholders are
residents of Tennessee or more than 10% of its outstanding shares held by
resident Tennessee shareholders, (ii) the corporation has its principal office
or place of business in Tennessee, (iii) the corporation has the principal
office or place of business of a significant subsidiary, representing not less
than 25% of the corporation's consolidated net sales, located in Tennessee, (iv)
the corporation employs more than 250 individuals in Tennessee or has a combined
annual payroll paid to Tennessee residents in excess of $5,000,000, (v) the
corporation produces goods and/or services in Tennessee which result in annual
gross receipts in excess of $10,000,000, or (vi) the corporation has physical
assets and/or deposits, including those of any subsidiary, located in Tennessee
which exceed $10,000,000 in value.

The Company believes that it qualifies as a "resident domestic
corporation" under the above definition and that the Tennessee Business
Combination Act would be applicable to the Company except for the 1998
Amendment. By

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voting for this proposal, the Tennessee Business Combination Act shall be
applicable to the Company, and that could make an acquisition of control of the
Company more difficult to accomplish.

CONTROL SHARE ACQUISITIONS

The Tennessee Control Share Acquisition Act, T.C.A. ss.48-103-301 et
seq., generally provides that any person or group of persons that acquires the
power to vote more than specified levels (one-fifth, one-third or a majority) of
the shares of certain domestic corporations will not have the right to vote such
shares unless granted voting rights by the holders of a majority of the votes
entitled to be cast, excluding "interested shares." Interested shares are those
shares held by the acquiring person, officers of the corporation and employees
of the corporation who are also directors of the corporation. If approval of
voting power for the shares is obtained at one of the specified levels,
additional shareholder approval is required when a shareholder seeks to acquire
the power to vote shares at the next level. In the absence of such approval, the
additional shares acquired by the shareholder may not be voted until they are
transferred to another person in a transaction other than a control share
acquisition. The Tennessee Control Share Acquisition Act applies only to a
Tennessee corporation whose charter or bylaws contain an express declaration
that control share acquisitions in respect of the shares of such corporation are
governed by and subject to the provisions of such act and the corporation has
(i) 100 or more shareholders, (ii) its principal place of business, its
principal office, or substantial assets within Tennessee, and (iii) either (a)
more than 10% of its shareholders as residents of Tennessee, (b) more than 10%
of its shares owned by Tennessee residents, or (c) 10,000 or more shareholders
are residents of Tennessee.

The Amendment will make the Tennessee Control Share Acquisition Act
applicable to the Company, provided the Company's Board of Directors
subsequently adopt an amendment to the Company's bylaws making the statute
applicable or if the Charter of the Company is subsequently amended to make the
statute applicable.

INVESTOR PROTECTION LAWS

The Tennessee Investor Protection Act, T.C.A. ss.48-103-101 et seq.,
provides that, unless a Tennessee corporation's board of directors has
recommended a takeover offer to shareholders, no offeror beneficially owning 5%
or more of any class of equity securities of the offeree company, any of which
equity securities was purchased within one year prior to the proposed takeover
offer, may offer to acquire any class of equity security of the offeree company
pursuant to a tender offer if after the proposed acquisition thereof the offeror
would be directly or indirectly a beneficial owner of more than 10% of any class
of outstanding equity securities of the company unless the offeror, before
making such purchase, (i) makes a public announcement of his or her intention
with respect to changing or influencing the management or control of the offeree
company, (ii) makes a full, fair and effective disclosure of such intention to
the person or persons from whom he or she intends to acquire such securities,
and (iii) files with the Tennessee Commissioner of Commerce and Insurance (the
"Commissioner") and the offeree company a statement signifying such intentions
and containing such additional information as may be prescribed by the
Commissioner. Such an offeror must provide that any equity securities of an
offeree company deposited with or tendered to the offeror pursuant to a takeover
offer may be withdrawn by an offeree at any time within seven days from the date
the offer has become effective following the filing with the Commissioner and
the offeree company and public announcement of the terms or after 60 days from
the date the offer has become effective. If the takeover offer is for less than
all the outstanding equity securities of any class, such an offeror also must
accept securities pro rata if the number of securities tendered is greater than
the number the offeror has offered to accept and for which the offeror has
offered to pay. If such an offeror varies the terms of the takeover offer before
its expiration date by increasing the consideration offered to offerees, the
offeror must pay the increased consideration for all equity securities
previously accepted.

The Tennessee Investor Protection Act does not apply to an offer
involving a vote by holders of equity securities of the offeree company,
pursuant to its charter, or a merger, consolidation or sale of corporate assets
in consideration of the issuance of securities of another corporation, or on a
sale of its securities in exchange for cash or securities of another
corporation.

A vote for the proposal shall have the effect of making the Tennessee
Investor Protection Act applicable to the Company and that could make an
acquisition of control of the Company more difficult to accomplish.

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GREENMAIL

The Tennessee Greenmail Act, T.C.A. ss.48-103-501 et seq., prohibits a
Tennessee corporation that has a class of voting stock registered or traded on a
national securities exchange or registered with the SEC pursuant to Section
12(g) of the Exchange Act from purchasing, directly or indirectly, any of its
shares at a price above the market value of such shares (defined as the average
of the highest and lowest closing market prices of such shares during the 30
trading days preceding the purchase and sale or the 30 days preceding the
commencement or announcement of a tender offer if the seller of such shares has
commenced a tender offer or announced an intention to seek control of the
corporation) from any person who holds more than 3% of the class of securities
to be purchased if such person has held such shares for less than two years,
unless the purchase has been approved by the affirmative vote of a majority of
the outstanding shares of each class of voting stock issued by such corporation
or the corporation makes an offer, of at least equal value per share, to all
holders of shares of such class.

The above statutes have the effect of making a takeover of control of
the Company more difficult or otherwise might have the effect of discouraging
potential takeover attempts.

REASONS FOR THE RECOMMENDATION

This proposal is not in response to any specific effort to accumulate
the Company's stock or to obtain control of the Company. However, the Board has
determined that the Company should periodically review its ability to
adequately respond to potential suitors. The Board, while not desiring either
to entrench itself or management, has decided that it is in the best interest
of shareholders, employees, vendors, and customers of the Company to ensure
that the Company is not vulnerable to an undesirable acquisition.

The Board recognizes that it is neither desirable nor possible to
retain the ultimate power to determine whether to accept or reject an
acquisition offer. However, as the elected governing body of the Company, the
Board desires to maintain sufficient control over any potential acquisition so
that it may serve the best interests of all stockholders in the Company.

The Board has tried to strike a balance between the Directors' desire
to safeguard the interests of both the Company and its shareholders against the
shareholders' ultimate authority to decide the fate of the Company which they
own.

THE OVERALL EFFECT OF THESE PROPOSALS MAY BE TO RENDER MORE DIFFICULT
THE ACCOMPLISHMENT OF MERGERS OR THE ASSUMPTION OF CONTROL BY A PRINCIPAL
STOCKHOLDER, AND THUS TO MAKE DIFFICULT THE REMOVAL OF MANAGEMENT, EVEN IF SUCH
TRANSACTION OR SUCH REMOVAL IS FAVORABLE TO SHAREHOLDERS. PLEASE READ THE
PROPOSALS AND ACCOMPANYING MATERIAL CAREFULLY. However, these Amendments will
strengthen the Board's ability to respond to unsolicited inquiries for the
Company and to negotiate effectively with persons desiring to acquire
substantial blocks of Company stock or control of the Company.

The Company's stock is currently sold on the NASDAQ National Market
System. Adoption of the Board's proposals will not cause NASDAQ to de-list the
Company's stock.

The Amendments to the Charter will become effective as soon as they are
filed with the Secretary of State of the State of Tennessee, which the Company
expects to occur as soon as practical after the annual meeting.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
PROPOSAL. PROXIES, UNLESS INDICATED TO THE CONTRARY, WILL BE VOTED "FOR" THE
PROPOSAL.

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PROPOSAL NO. 5
OTHER BUSINESS

The Board of Directors of the Company currently is unaware of any
proposal to be presented at the Annual Meeting other than the matters specified
in the Notice of Annual Meeting accompanying this Proxy Statement. Should any
other proposal properly come before the Annual Meeting, the persons named in the
enclosed proxy will vote on each such proposal in accordance with their
discretion.

OTHER INFORMATION

INTERESTS OF COMPANY AFFILIATES

None of the Company's directors, executive officers or principal
shareholders, including any of their affiliates has any interest in the matters
to be acted upon at the Annual Meeting, other than the specific matters
described herein.

PROPOSALS OF SHAREHOLDERS

Shareholders intending to submit proposals for presentation at the 2000
annual meeting of Shareholders of the Company for inclusion in the proxy
statement and form of proxy relating to that meeting should forward those
proposals to George J. Phillips, Secretary, Shop At Home, Inc., 5388 Hickory
Hollow Parkway, Antioch, Tennessee 37013. Proposals must be in writing and must
be received by the Company a reasonable time before the Company begins to print
and mail its proxy material for the 2000 annual meeting. Proposals should be
sent to the Company by certified mail, return receipt requested.

COST OF SOLICITATION OF PROXIES

The cost of solicitation of proxies, including expenses in connection
with preparing, assembling and mailing this Proxy Statement, will be borne by
the Company. That solicitation will be made by mail, and also may be made by the
Company's regular officers or employees, personally or by telephone or telegram.
The Company may reimburse brokers, custodians and nominees for their expenses in
sending proxies and proxy material to beneficial owners.

ANNUAL REPORT

The Company's 1999 Annual Report on Form 10-K/A and its Quarterly
Report on Form 10-Q for the three months ended December 31, 1999 accompany this
Proxy Statement. The Annual Report and the Quarterly Report do not form any part
of the material for the solicitation of proxies.

24
<PAGE> 29

EXHIBIT A

SHOP AT HOME, INC.
1999 STOCK OPTION PLAN

1. Purpose. The purpose of the Shop At Home, Inc. 1999 Stock
Option Plan is to promote the interests of the Company by affording an incentive
to directors and key employees to continue their service to the Company and its
Subsidiaries and to use their best efforts on its behalf; and further to aid the
Company and its Subsidiaries in attracting, maintaining, and developing capable
personnel of a caliber required to ensure the continued success of the Company
and its Subsidiaries by having the means to offer to such persons an opportunity
to acquire or increase their proprietary interest in the Company through the
granting of incentive stock options and nonstatutory stock options to purchase
the Company's stock pursuant to the terms of the Plan.

2. Definitions.

A. "Board" means the Company's Board of Directors.

B. "Change in Control" means: (a) the sale, lease,
exchange or other transfer of all or substantially all of the assets of the
Company (in one transaction or in a series of related transactions) to a person
that is not controlled by the Company, (b) the approval by the Company
shareholders of any plan or proposal for the liquidation or dissolution of the
Company, or (c) a change in control of the Company of a nature that would be
required to be reported (assuming such event has not been "previously reported")
in response to Item 1(a) of the Current Report on Form 8-K, as in effect on the
effective date of the Plan, pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, whether or not the Company is then subject to such
reporting requirement; provided, however, that, without limitation, such a
change in control shall be deemed to have occurred at such time as (i) any
Person becomes after the date this Plan is approved or ratified by the Company's
shareholders the "beneficial owner" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of 30% or more of the
combined voting power of the Company's outstanding securities ordinarily having
the right to vote at elections of directors unless the Board shall have
expressly approved the transaction or acquisition that resulted in such Person
becoming the beneficial owner of such voting power, or (ii) individuals who
constitute the board of directors of the Company on the date this Plan is
approved or ratified by the Company's shareholders cease for any reason to
constitute at least a majority thereof, provided that any person becoming a
director subsequent to such date whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority of the
directors comprising or deemed pursuant hereto to comprise the Board on the date
this Plan is approved or ratified by the Company's shareholders (either by a
specific vote or by approval of the proxy statement of the Company in which such
person is named as a nominee for director) shall be, for purposes of this clause
(ii) considered as though such person were a member of the Board on the date
this Plan is approved or ratified by the Company's shareholders; or (iii) both
J.D. Clinton ceases to be Chairman of the Board and Kent E. Lillie ceases to be
either the Company's Chief Executive Officer or Chairman of the Board.

C. "Code" means the Internal Revenue Code of 1986, as
amended.

D. "Committee" means the committee appointed by the
Board to administer the Plan pursuant to Section 4.

E. "Common Stock" means the Company's $.0025 par value
common stock or the Common Stock or securities of a Successor that have been
substituted therefor pursuant to Section 9.

F. "Company" means Shop At Home, Inc., with its
principal place of business at 5388 Hickory Hollow Parkway, Antioch, Tennessee
37013.

G. "Disability" means, as defined by and to be construed
in accordance with Code Section 22(e)(3), any medically determinable physical or
mental impairment that is expected to result in death or that has lasted or can
be expected to last for a continuous period of not less than twelve (12) months,
and that renders Optionee unable

A-1

<PAGE> 30

to engage in any substantial gainful activity. An Optionee shall not be
considered to have a Disability unless Optionee furnishes proof of the existence
thereof in such form and manner, and at such time, as the Board or the Committee
may require.

H. "ISO" means an option to purchase Common Stock that
at the time the option is granted qualifies as an incentive stock option within
the meaning of Code Section 422.

I. "NSO" means a nonstatutory stock option to purchase
Common Stock that at the time the option is granted does not qualify as an ISO.

J. "Option Price" means the price to be paid for Common
Stock upon the exercise of an option, in accordance with Section 7.E.

K. "Optionee" means a director or key employee to whom
an option has been granted under the Plan.

L. "Optionee's Representative" means the personal
representative of Optionee's estate, and after final settlement of Optionee's
estate, the successor or successors entitled thereto by law.

M. "Plan" means the Shop At Home, Inc. 1999 Stock Option
Plan, as set forth herein, and as amended from time to time.

N. "Subsidiary" means any "subsidiary corporation" that
at the time an option is granted qualifies as a subsidiary of the Company as
defined by Code Section 424(f).

O. "Successor" means the entity surviving a Change in
Control.

P. "Ten Percent Shareholder" means an employee
(including an employee director) who, at the time an option is granted, owns
more than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or Subsidiary employing Optionee or of its parent (within
the meaning of Code Section 424(e)) or subsidiary (within the meaning of Code
Section 424(f)) corporation.

3. Shares Subject to Plan.

A. Authorized Unissued or Treasury Shares. Subject to
Section 9, shares to be delivered upon exercise of options shall be made
available, at the discretion of the Board, from the authorized unissued shares
of Common Stock.

B. Aggregate Number of Shares. Subject to adjustments
and substitutions made pursuant to Section 9, the aggregate number of shares
that may be issued upon exercise of all options that may be granted under the
Plan shall not exceed three million (3,000,000) of the Company's authorized
shares of Common Stock.

C. Shares Subject to Expired Options. Shares of Common
Stock subject to, but not delivered under, an option that expires or terminates
for any reason without having been fully exercised shall be available for any
lawful corporate purpose, including for transfer pursuant to other options
granted to the same director or key employee or other directors or key employees
without decreasing the aggregate number of shares of Common Stock that may be
granted under the Plan.

4. Administration. The Plan shall be administered by the full
Board or Board committee consisting solely of two (2) or more non-employee
directors, as defined in Rule 16b-3 promulgated under the Securities Exchange
Act of 1934, as amended from time to time. The Board or the Committee shall have
full power and authority to construe, interpret, and administer the Plan and may
from time to time adopt such rules and regulations for carrying out the Plan as
it may deem proper and in the Company's best interest.

A-2
<PAGE> 31

5. Grant of Options. Subject to the terms and conditions of the
Plan, the Board or the Committee shall have jurisdiction and discretion to: [i]
select the directors and key employees to whom options are awarded; [ii]
authorize the award of ISOs, NSOs or a combination of ISOs and NSOs, which may,
in the Board's or the Committee's discretion, be performance-based options;
[iii] determine the number of shares of Common Stock subject to each option;
[iv] determine the time(s) when options will be granted, the manner in which
each option is exercisable, and the duration of the exercise period; [v]
determine the terms and conditions of performance-based options; [vi] fix other
provisions of the option agreement that it deems necessary or desirable
consistent with the terms of the Plan; and [vii] determine all other questions
relating to the administration of the Plan. Any decision made, or action taken
by the Board or the Committee in connection with the administration of the Plan,
and the interpretation of any provision of the Plan by the Board or the
Committee shall be final, conclusive, and binding upon all persons and the
officers of the Company shall place into effect and shall cause the Company to
perform its obligations under the Plan in accordance with the determinations of
the Board or the Committee in administering the Plan.

6. Eligibility. Directors and key employees of the Company and
its Subsidiaries, including officers and directors, shall be eligible to receive
options under the Plan; provided that no director or other person who is not
also an employee of the Company or a Subsidiary shall be eligible to receive an
ISO. Directors and key employees to whom options may be granted will be those
selected by the Board or the Committee from time to time who, in the sole
discretion of the Board or the Committee, have contributed in the past or who
may be expected to contribute materially in the future to the successful
performance of the Company and its Subsidiaries.

7. Terms and Conditions of Options. Each option granted under the
Plan shall be evidenced by an option agreement signed by Optionee and approved
by the Board or the Committee on the Company's behalf. An option agreement shall
constitute a binding contract between the Company and Optionee, and every
Optionee, upon acceptance of such option agreement, shall be bound by the terms
and restrictions of the Plan and of the option agreement. Such agreement shall
be subject to the following express terms and conditions and to such other terms
and conditions that are not inconsistent with the Plan as the Board or the
Committee deems appropriate.

A. $100,000 ISO Limitation. The aggregate fair market value
(determined as of the option grant date) of the stock for which ISOs will first
become exercisable by an Optionee in any calendar year under all ISO plans of
Optionee's employer corporation and its parent corporation and Subsidiaries
shall not exceed One Hundred Thousand Dollars ($100,000.00). Options granted in
excess of this limitation shall constitute NSOs.

B. Option Period. Subject to Section 7.F, each option
agreement shall specify the period during which the option is exercisable and
shall provide for expiration of the option at the end of such period. The Board
or the Committee may extend the period except that no extension shall be made
without Optionee's consent if the extension would disqualify the option as an
ISO.

C. Option Vesting. Each option agreement shall specify
the time(s) during the option period that the option vests and becomes
exercisable. The option agreement may provide for vesting and exercise of the
option in installments.

D. Acceleration of Option Vesting.

[1] Change in Control. The Board or the Committee may
provide in the option agreement for the exercise dates of outstanding
options to accelerate and be fully or partially exercisable on or after
the date of a Change in Control.

[2] Death or Disability. The Board or the Committee
may provide in the option agreement for the exercise dates of
outstanding options to accelerate and be fully or partially exercisable
upon termination of Optionee's employment due to death and/or
Disability.

E. Option Price. The Option Price per share of Common
Stock shall be determined by the Board or the Committee at the time an option is
granted, provided that the Option Price for an ISO shall be not less than fair
market value at the time of grant (one hundred ten percent (110%) of the fair
market value at the time of grant in

A-3
<PAGE> 32

the case of an ISO granted to a Ten Percent Shareholder). The Option Price shall
be subject to adjustments in accordance with Section 9. The fair market value of
Common Stock on any given measurement date shall be the closing bid price of the
Common Stock in the over-the-counter market on the measurement date (or if there
was no sale of the Common Stock on that date, on the immediately preceding date
on which there was a sale of the Common Stock), as reported by the National
Association of Securities Dealers Automated Quotation System.

F. Option Expiration. An option shall cease to be
exercisable upon expiration. Each option agreement shall specify the expiration
date for the option. Notwithstanding the foregoing, the option agreement may not
provide for an ISO to expire more than ten (10) years after the date of grant
(five (5) years in the case of an ISO granted to a Ten Percent Shareholder).
Upon Optionee's death, Optionee may exercise options, to the extent exercisable
on the date of Optionee's death, by Optionee's Representative at any time before
expiration of the option.

G. Leaves of Absence. The Board or the Committee may, in
its discretion, treat all or any portion of any period during which an Optionee
is on military or on an approved leave of absence from the Company or a
Subsidiary as a period of employment of the Optionee by the Company or
Subsidiary for purposes of accrual of rights under the Plan. Notwithstanding the
foregoing, in the case of an ISO, if a leave of absence exceeds ninety (90) days
and reemployment is not guaranteed by contract or statute, Optionee's employment
by the Company or a Subsidiary shall be deemed to have terminated on the 91st
day of the leave.

H. Payment of Option Price. Each option shall provide
that the Option Price shall be paid to the Company at the time of exercise
either in cash or in such other consideration as the Board or the Committee
deems appropriate, including, but not limited to, Common Stock already owned by
Optionee having a total fair market value, as determined by the Board or the
Committee, equal to the Option Price, or a combination of cash and Common Stock
having a total fair market value, as determined by the Board or the Committee,
equal to the Option Price.

I. Manner of Exercise. To exercise an option, Optionee
shall deliver to the Company, or in the case of a cashless exercise, to a
broker-dealer in the Common Stock with the original copy to the Company, the
following: [i] advance written notice specifying the number of shares as to
which the option is being exercised and, if determined by counsel for the
Company to be necessary, representing that such shares are being acquired for
investment purposes only and not for purpose of resale or distribution; and [ii]
payment by Optionee, or the broker-dealer, for such shares in cash, or if the
Board or the Committee in its discretion agrees to so accept, by delivery to the
Company of other Common Stock owned by Optionee, or in some combination of cash
and such Common Stock acceptable to the Board or the Committee. As soon as
administratively practicable after receipt of written notice of exercise, and
provided that all conditions precedent contained in the Plan are satisfied, the
Company shall, without transfer or issuance tax or other incidental expenses to
Optionee, deliver to Optionee, at the offices of the Company, a certificate or
certificates for the Common Stock. If Optionee fails to accept delivery of the
Common Stock, Optionee's right to exercise the applicable portion of the option
shall terminate. If payment of the Option Price is made in Common Stock, the
value of the Common Stock used for payment of the Option Price shall be the fair
market value of the Common Stock, determined in accordance with Section 7.E, on
the business day preceding the day written notice of exercise is delivered to
the Company. Subject to the terms and conditions of any applicable option
agreement, any option granted under the Plan may be exercised in whole or in
part in installments at such time or times as the Board or the Committee may
prescribe in the applicable option agreement.

J. Exercises Causing Loss of Compensation Deduction. No
part of an option may be exercised to the extent the exercise would cause
Optionee to have compensation from the Company and its affiliated companies for
any year in excess of $1 million and that is nondeductible by the Company and
its affiliated companies pursuant to Code Section 162(m). Any option not
exercisable because of this limitation shall continue to be exercisable in any
subsequent year in which the exercise would not cause the loss of the Company's
or its affiliated companies' compensation tax deduction, provided that an ISO
may not be exercised later than ten (10) years from the date of grant or five
(5) years in the case of a Ten Percent Shareholder, and further provided the
option otherwise complies with the terms and conditions of the Plan and option
agreement. This section shall not limit the exercise of an option in the event
of a Change in Control to the extent provided by the Board or the Committee in
the option agreement.

K. Investment Representation. Each option agreement may
provide that, upon demand by the

A-4
<PAGE> 33

Board, the Committee, Optionee or Optionee's Representative shall deliver to the
Board or the Committee at the time of exercise of an option or portion thereof a
written representation that the shares are being acquired for investment and not
for resale or distribution. Delivery of the representation, if required by the
Board or the Committee, shall be a condition precedent to the right of Optionee
or Optionee's Representative to exercise the option.

L. ISOs. Each option agreement that provides for the
grant of an ISO shall contain such terms and provisions as the Board or the
Committee deems necessary or desirable to qualify the option as an ISO within
the meaning of Code Section 422.

M. Transferability of Options. Options granted under the
Plan may not be transferred by the Optionee except by will or the laws of
descent and distribution, and may be exercised only by the Optionee during the
Optionee's lifetime.

N. No Rights as Shareholder. No Optionee or Optionee's
Representative shall have any rights as a shareholder with respect to Common
Stock subject to an option before the date of transfer to the Optionee of a
certificate or certificates for such shares.

O. No Rights to Continued Employment. Neither the Plan
nor any option granted under the Plan shall confer upon any Optionee any right
with respect to continuance of employment by the Company or any Subsidiary, nor
shall it interfere in any way with the right of the Company or any Subsidiary to
terminate the Optionee's employment.

8. Compliance With Other Laws and Regulations. The Plan, the
grant and exercise of options, and the obligation of the Company to sell and
deliver Common Stock under such options, shall be subject to all applicable
federal and state laws, rules and regulations and to such approvals by any
government or regulatory agency as may be required. The Company shall not be
required to issue or deliver any certificates for Common Stock before [i] the
listing of the Common Stock on any stock exchange or over-the-counter market on
which the Common Stock may then be listed and [ii] the completion of any
registration or qualification of any governmental body that the Company shall,
in its sole discretion, determine to be necessary or advisable. To the extent
the Company meets the then applicable requirements for the use thereof and to
the extent the Company may do so without undue cost or expense, and subject to
the determination by the Board or the Committee that such action is in the
Company's best interest, the Company intends to register the issuance and sale
of such Common Stock by the Company under federal and applicable state
securities laws using a Form S-8 registration statement under the Securities Act
of 1933, as amended, or such successor form as shall then be available.

9. Capital Adjustments Affecting Stock, Mergers and
Consolidations.

A. Capital Adjustments. In the event of a capital
adjustment in the Common Stock resulting from a stock dividend, stock split,
reorganization, merger, consolidation, or a combination or exchange of shares,
the number of shares of Common Stock subject to the Plan and the number of
shares under option shall be automatically adjusted to take into account such
capital adjustment. The price of any share under option shall be adjusted so
that there will be no change in the aggregate purchase price payable upon
exercise of the option.

B. Mergers and Consolidations. In the event the Company
merges or consolidates with another entity, or all or a substantial portion of
the Company's assets or outstanding capital stock are acquired (whether by
merger, purchase or otherwise) by a Successor, the kind of shares that shall be
subject to the Plan and to each outstanding option shall, automatically by
virtue of such merger, consolidation or acquisition, be converted into and
replaced by shares of stock of the Successor having rights and preferences no
less favorable than the Common Stock, and the number of shares subject to the
option and the purchase price per share upon exercise of the option shall be
correspondingly adjusted, so that, by virtue of such merger, consolidation or
acquisition, each Optionee shall have the right to purchase [i] that number of
shares of stock of the Successor that have a value equal, as of the date of such
merger, conversion or acquisition, to the value, as of the date of such merger,
conversion or acquisition, of the shares of Common Stock of the Company
theretofore subject to Optionee's option, [ii] for a purchase price per share
that, when multiplied by the number of shares of stock of the Successor subject
to the option, equal the aggregate exercise price

A-5
<PAGE> 34

at which Optionee could have acquired all of the shares of Common Stock of the
Company theretofore optioned to Optionee.

C. No Effect on Company's Rights. The granting of an
option pursuant to the Plan shall not affect in any way the right and power of
the Company to make adjustments, reorganizations, reclassifications, or changes
of its capital or business structure or to merge, consolidate, dissolve,
liquidate, sell or transfer all or any part of its business or assets.

10. Amendment, Suspension, or Termination. The Board shall have
the right, at any time, to amend, suspend or terminate the Plan in any respect
that it may deem to be in the best interests of the Company, except that no
amendment shall be made without approval by shareholders of the Company holding
not less than a majority of the votes represented and entitled to be voted at a
duly held meeting of the Company's shareholders that would: [i] change the
aggregate number of shares of Common Stock which may be delivered under the
Plan, except as provided in Section 9; or [ii] change the employees or class of
employees eligible to receive ISOs; or [iii] require shareholder approval under
applicable federal or state laws.

11. Effective Date, Term and Approval. The effective date of the
Plan shall be July 21, 1999 (the date of Board adoption of the Plan), subject to
approval by shareholders of the Company holding not less than a majority of the
shares present and voting at its 1999 Annual Shareholder Meeting. The Plan shall
terminate ten (10) years after the effective date of the Plan and no options may
be granted under the Plan after such time, but any option granted prior thereto
may be exercised in accordance with its terms.

12. Severability. The invalidity or unenforceability of any
provision of the Plan or option agreement under the Plan shall not affect the
validity and enforceability of the remaining provisions of the Plan and the
option agreement, and the invalid or unenforceable provision shall be stricken
to the extent necessary to preserve the validity and enforceability of the Plan
and the options granted hereunder.

13. Governing Law. The Plan shall be governed by the laws of the
State of Tennessee.

A-6
<PAGE> 35
EXHIBIT B

SHOP AT HOME, INC.

STOCK OPTION AGREEMENT

KENT E. LILLIE

Options Granted: 500,000

Date of Grant: January 27, 1999

Exercise Price: $11.813

VESTING SCHEDULE:

1. 100,000 Options Vest on January 27, 1999
2. 100,000 Options Vest on January 27, 2000
3. 100,000 Options Vest on January 27, 2001
4. 100,000 Options Vest on January 27, 2002
5. 100,000 Options Vest on January 27, 2003

THIS AGREEMENT is made and entered into as of the January 27, 1999 by
and between SHOP AT HOME, INC., a Tennessee corporation (herein the "Network"),
and Kent E. Lillie (herein "Employee");

W I T N E S S E T H:

WHEREAS, the Network engages in the business of retail sales of
merchandise by sales presentations broadcast directly to potential customers by
cable and satellite television and Internet transmissions commonly known as the
"shop at home business"; and

WHEREAS, Network employs Employee as President and Chief Executive
Officer and wishes to provide a mechanism to reward Employee for his continued
service.

NOW, THEREFORE, for and in consideration of the promises and the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:

1. DEFINITIONS. For purposes of this Agreement, the following
terms shall have the meanings specified below. Capitalized
terms in this Agreement have the meaning ascribed to such
terms in the Plan unless otherwise defined herein.

1.1 "BENEFICIAL OWNER" shall have the meaning attributed
to that term under Rule 13d-3 Of the Securities
Exchange Act of 1934, as amended.

1.2 "CHANGE OF CONTROL" means: (a) the sale, lease,
exchange or other transfer of all or substantially
all of the assets of the Network (in one transaction
or in a series of related transactions) to a person
that is not controlled by the Network, (b) the
approval by the Network's shareholders of any plan or
proposal for the liquidation or dissolution of the
Network, or (c) a change in control of the Network of
a nature that would be required to be reported
(assuming such event has not been "previously
reported") in response to Item 1(a) of the Current
Report on Form 8-K, as in effect on the effective
date of the Plan, pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934, whether or not
the Network is then subject to such reporting
requirement; provided, however, that, without
limitation, such a change in control shall be deemed
to have occurred at such time as (i) any Person
becomes after the date this Plan is approved or
ratified by the Network's shareholders the
"beneficial owner" (as defined in Rule 13d-3 under
the Securities Exchange Act of 1934), directly or
indirectly, of 30% or more of the combined voting
power of the Network's outstanding securities
ordinarily having the right to vote at elections of
Directors unless the Board shall have expressly
approved the
<PAGE> 36

transaction or acquisition that resulted in such
Person becoming the beneficial owner of such voting
power, or (ii) individuals who constitute the Board
of Directors of the Network on the date this Plan is
approved or ratified by the Network's shareholders
cease for any reason to constitute at least a
majority thereof, provided that any person becoming a
Director subsequent to such date whose election, or
nomination for election by the Network's
shareholders, was approved by a vote of at least a
majority of the Directors comprising or deemed
pursuant hereto to comprise the Board on the date
this Plan is approved or ratified by the Network's
shareholders (either by a specific vote or by
approval of the proxy statement of the Network in
which such person is named as a nominee for Director)
shall be, for purposes of this clause (ii) considered
as though such person were a member of the Board on
the date this Plan is approved or ratified by the
Network's shareholders; or (d) that results in any
person, including its affiliates, owning or otherwise
having voting control with respect to directors of
the Corporation, of more of the issued and
outstanding stock of the Corporation or any successor
entity than SAH Holdings, L.P. and its affiliates
(Global Network Television, Inc., Clinton
Investments, L.P. or J.D. Clinton) or (e) J.D.
Clinton is not elected to, or is removed from, the
Board of Directors of the Corporation (other than by
the mutual decision of J.D. Clinton and Employee); or
(f) both J.D. Clinton ceases to be Chairman of the
Board and Kent E. Lillie ceases to be the Network's
Chief Executive Officer or Chairman of the Board.

1.3 "DISABILITY" means, as defined by and to be construed
in accordance with Code Section 22(e)(3), any
medically determinable physical or mental impairment
that is expected to result in death or that has
lasted or can be expected to last for a continuous
period of not less than twelve (12) months, and that
renders Employee unable to engage in any substantial
gainful activity. An Employee shall not be considered
to have a Disability unless Employee furnishes proof
of the existence thereof in such form and manner, and
at such time, as the Board of Directors or the
Compensation Committee of the Board may require.

1.4 "FOR CAUSE" shall mean any one of the following:

(a) The Employee commits an act of dishonesty,
embezzlement or fraud against the Network.

(b) The Employee fails to use his/her best
efforts on behalf of the Network, or
conducts himself/herself in a manner
substantially detrimental to the Network.

2
<PAGE> 37

(c) Employee is convicted of a misdemeanor
involving dishonesty, breach or trust or
moral turpitude, or is convicted of a
felony.

(d) Employee engages in the illegal usage of any
drug.

(e) Any state or federal regulatory agency or
court of competent jurisdiction issues an
order requiring the Employee's removal from
any duties or responsibilities for the
Network.

2. STOCK OPTIONS. The Network hereby grants to Employee an option that is
intended to be an incentive stock option pursuant to Code Section 422
to purchase up to 500,000 shares of the Network's Common Stock, $.0025
par value, at an exercise price of $11.813 per share, expiring the
earlier of five (5) years from the date of vesting or ten (10) years
from the date of grant. Such incentive stock option is granted pursuant
to the Plan, and the exercise price of the option has been determined
by the Board of Directors of the Network to be not less than one
hundred percent (100%) of the fair market value of the stock as of the
date of this Agreement. Pursuant to this Section, options to purchase
100,000 shares shall vest on January 27, 1999, with options to purchase
100,000 shares vesting on January 27th of each year thereafter, and
continuing until all options shall have vested pursuant to the schedule
on the first page of this Agreement.

2.1 TERMINATION AND RESIGNATION. If the Employee resigns as an
employee of the Network, or the Network terminates Employee
for any reason, all options not yet vested shall terminate
except as provided in Section 2.3. Upon the occurrence of such
termination or resignation, Employee shall have one (1) year
to exercise any previously vested options.

2.2 DISABILITY OR DEATH. Upon the Employee's Disability or death
any options that would vest within one (1) year of such
disability or death shall vest and may be exercised by the
executor, heir or legal representative of the deceased or by
the disabled Employee so long as such options are exercised
within one (1) year of the death or disability. All other
options that do not vest under this section shall terminate.

2.3 CHANGE OF CONTROL. Notwithstanding Section 2.1, in the event
the Employee is terminated or resigns for any reason other
than For Cause within twenty-four (24) months after the
occurrence of a Change of Control, all outstanding options
vest and the Employee has one (1) year to exercise such
options. If the Employee is terminated For Cause, then all
unvested options shall terminate.

3
<PAGE> 38

3. EXERCISE OF OPTIONS. To exercise these options the Employee shall
complete Exhibit A to this Agreement and must submit it with the
payment for the Exercise Price times the number of shares being
exercised. Upon confirmation that such shares are exercisable, that the
payment presented is good and that such exercise is in compliance with
this Agreement, the Network will direct its stock transfer agent to
send the shares to the Employee or the Employer's stock brokerage
account at the Employee's direction. These can be sent as actual
certificates or they may be deposited electronically. The Employee
agrees that because the Network wants to avoid even the appearance of
any employee trading the Network's stock based on "insider" information
or for other business reasons, that there may be times when the Network
determines that there should be a "quiet period" during which employees
may not sell stock. By accepting this Agreement, the Employee agrees
not to sell any shares during such quite periods.

4. GOVERNING LAW AND VENUE. This Agreement is to be construed and enforced
in accordance with and governed by the laws of the State of Tennessee,
notwithstanding any conflicts of law doctrines of any jurisdiction to
the contrary. The Employee waives any right to bring any action
concerning this Agreement in any court other than the courts found in
Davidson County, Tennessee.

5. RESERVATION OF SHARES. The Network shall at all times reserve and keep
available a number of its authorized but unissued shares of its Common
Stock sufficient to permit the exercise in full of these Options
granted under this Agreement.

6. RESTRICTIONS ON SALE OF STOCK. The Options granted under this Agreement
are not transferable or assignable except by will or by the applicable
laws of descent and distribution, and only he or she may exercise them
during the Employee's lifetime. If the Employee is an executive officer
of the Network, or is deemed to be an "affiliate" of the Network,
within the meaning ascribed to that term under Rule 144 of the
Securities & Exchange Commission, the number of shares such person may
transfer during any three month period will be restricted under the
provisions of Rule 144. If the Employee is such a person, each
certificate evidencing any of the shares acquired by Employee pursuant
to the Option shall include a restrictive legend consistent with such
limitation on transfers.

The Options granted shall be registered on the books of the Network,
which shall be kept by it's Corporate Secretary at its principal
office, and shall be transferable only on said books by the registered
owner hereof in person or by duly authorized

4
<PAGE> 39

attorney upon surrender of an Exercise Form attached hereto as Exhibit
A properly endorsed, and only in compliance with the provisions of the
Plan and this Agreement. The Network will record any exercises in its
books indicating the number of shares having been exercised and the
number of shares left to be exercised.

7. CAPITAL ADJUSTMENTS AFFECTING STOCK, MERGERS AND CONSOLIDATIONS.

A. Capital Adjustments. In the event of a capital adjustment in the
Common Stock resulting from a stock dividend, stock split,
reorganization, merger, consolidation, or a combination or exchange of
shares, the number of shares of under option shall be automatically
adjusted to take into account such capital adjustment. The price of any
share under option shall be adjusted so that there will be no change in
the aggregate purchase price payable upon exercise of the option.

B. Mergers and Consolidations. In the event the Network merges or
consolidates with another entity, or all or a substantial portion of
the Network's assets or outstanding capital stock are acquired (whether
by merger, purchase or otherwise) by a Successor, the kind of shares
that shall be subject to the Plan and to each outstanding option shall,
automatically by virtue of such merger, consolidation or acquisition,
be converted into and replaced by shares of stock of the Successor
having rights and preferences no less favorable than the Common Stock,
and the number of shares subject to the option and the purchase price
per share upon exercise of the option shall be correspondingly
adjusted, so that, by virtue of such merger, consolidation or
acquisition, each Employee shall have the right to purchase [i] that
number of shares of stock of the Successor that have a value equal, as
of the date of such merger, conversion or acquisition, to the value, as
of the date of such merger, conversion or acquisition, of the shares of
Common Stock of the Network theretofore subject to Employee's option,
[ii] for a purchase price per share that, when multiplied by the number
of shares of stock of the Successor subject to the option, equal the
aggregate exercise price at which Employee could have acquired all of
the shares of Common Stock of the Network theretofore optioned to
Employee.

C. No Effect on Network's Rights. The granting of an option pursuant to
the Plan shall not affect in any way the right and power of the Network
to make adjustments, reorganizations, reclassifications, or changes of
its capital or business structure or to merge, consolidate, dissolve,
liquidate, sell or transfer all or any part of its business or assets.

5
<PAGE> 40

8. NOTIFICATION OF SALE. The Employee agrees that if the shares obtained
under this Agreement are sold within two (2) years from the date of
grant and one (1) year of the date of exercise to give the Network's
Corporate Secretary, at the address set out in Section 14 below, the
sale price and the number of shares sold, within ten (10) days from the
date of sale on the form attached hereto as Exhibit B.

9. LIMITATIONS OF DAMAGES. Employee agrees that notwithstanding any other
provision of this Agreement to the contrary, Employee's sole and
exclusive remedy for breach shall be for the Network to deliver any
shares that are vested, properly exercisable and are properly exercised
under the terms of the Plan and this Agreement. THE EMPLOYEE AGREES
THAT THE NETWORK SHALL NOT BE LIABLE FOR SUCH EMPLOYEE'S CONSEQUENTIAL
DAMAGES BECAUSE OF THE NETWORK'S BREACH OR ALLEGED BREACH OF THIS
AGREEMENT, INCLUDING SUCH PARTY'S DAMAGES FOR LOST PROFITS, EVEN IF
THOUGH BOTH PARTIES RECOGNIZE SUCH BREACH WOULD COST THE EMPLOYEE SUCH
PROFITS AND CONSEQUENTIAL DAMAGES.

10. HOLD HARMLESS. Employee covenants and agrees that he or she will
indemnify and hold harmless the Network from any and all losses,
damages, liabilities, expenses or claims, including reasonable attorney
fees, resulting from or arising out of any nonfulfillment by the
Employee of any material provision of this Agreement.

11. VOID IF BREACH. The Network's obligations under this Agreement are
contingent upon the Employee abiding by all agreements, including but
not limited to any non-compete, confidentiality, non-inducement,
non-appearance agreements, with the Network. Further the Employee
agrees that any material breach of such agreements will cause the
Network irreparable harm that is hard to measure and the Employee
therefore agrees that for such material breach, Network shall be
entitled, in addition to any other available remedies, to immediately
terminate this Agreement. Upon Employee's material breach of such
agreements, Employee agrees that the Network shall be immediately
released from having to perform any of its obligations under this
Agreement, in addition to whatever other relief that the Network may be
entitled to under law or equity arising from the Employee's breach of
such agreements.

12. WAIVER OF JURY TRIAL. Employee waives any right to a jury trial in any
dispute concerning this Stock Option Agreement.

6
<PAGE> 41

13. ASSIGNMENT. The parties acknowledge that this Agreement has been
entered into due to, among other things, the special skills of
Employee, and agree that this Agreement may not be assigned or
transferred by Employee. The options hereunder may be exercised only by
the Employee during the Employee's lifetime, or by Employee's
representative in the event of death or disability to the extent the
options were exercisable on the date of death or disability. The
Network may assign this Agreement to its successors and assigns.

14. NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed
to have been duly given on the date of receipt if delivered or mailed,
first class, certified mail, postage prepaid, with a copy by facsimile,
if any is provided,:

To Network:

Shop At Home, Inc.
P.O. Box 305249
Nashville, Tennessee 37230-5249
Attention: Corporate Secretary
Telephone Number: (615) 263-8000
Facsimile Number: (615) 263-8911

To Employee:

Mr. Kent E. Lillie
4362 Chickering Lane
Nashville, Tennessee 37215
Telephone Number:(615) 370-0035
Facsimile Number:(615) 661-0122

15. AMENDMENTS AND MODIFICATIONS. This Agreement may be amended or modified
only by a writing signed by both parties hereto.

16. EMPLOYEE RESPONSIBLE FOR TAXES. The Employee is responsible for paying
any taxes (both Federal and State) on any gain from the sale of stock
obtained from the exercise of stock options. Employee should consult
with his or her tax advisor concerning any questions about the tax
liability arising from the sale of stock obtained through the exercise
of stock options to determine, among other things, whether the Employee
needs to pay quarterly estimated taxes on any gain.

17. NO RIGHTS AS STOCKHOLDER. This Agreement does not confer any rights of
a

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<PAGE> 42

stockholder on the Employee, except as to shares of common stock that
are actually delivered to the Employee.

18. EXECUTION IN COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, and all
of which shall constitute one and the same instrument.

19. HEADINGS. The headings set out in this Agreement are for convenience of
reference and shall not be deemed a part of this Agreement and shall
not affect the meaning or construction of any of the provisions hereof.

IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.

SHOP AT HOME, INC.

By:
-------------------------------

Title:
----------------------------

EMPLOYEE:

----------------------------------
KENT E. LILLIE

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<PAGE> 43

EXHIBIT C
PROPOSED AMENDMENT TO THE CHARTER
OF SHOP AT HOME, INC.

Pursuant to the provisions of Sections 48-20-103 and 48-20-106 of the
Tennessee Business Corporation Act, the undersigned Corporation adopts the
following amendments to its Charter:

1. The name of the Corporation is:

Shop At Home, Inc.

2. The Charter of the Corporation is amended by deleting Paragraph 9 of the
Charter in its entirety.

3. The Board of Directors of the Corporation recommended this amendment to the
shareholders of the Corporation and the shareholders approved the amendment at a
duly called and convened meeting held on March 30, 2000.

4. These Articles of Amendment shall be effective upon filing with the Office of
the Secretary of State of the State of Tennessee.

<PAGE> 44

SHOP AT HOME, INC.

PROXY SOLICITED BY THE BOARD OF DIRECTORS OF SHOP AT HOME, INC. FOR THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MARCH 30, 2000.

The undersigned hereby appoints A. E. Jolley and Joseph I. Overholt,
and each of them, as proxies, with full power of substitution, to vote all
shares of the undersigned as shown below on this proxy at the Annual Meeting of
Shareholders of Shop At Home, Inc. to be held at the offices of Shop At Home,
Inc., located at 5388 Hickory Hollow Parkway, Antioch, Tennessee, on March 30,
2000, at 10:00 a.m., local time, and any adjournments thereof.

(1) ELECTION OF DIRECTORS:

[ ] FOR all the following nominees (except as indicated to the
contrary below):

J.D. Clinton, Kent E. Lillie, A. E. Jolley, Joseph I.
Overholt, J. Daniel Sullivan and Frank A. Woods (to serve
until the next annual meeting)

[ ] AGAINST THE FOLLOWING NOMINEE(S) (PLEASE PRINT NAME(S)):

--------------------------------------------------------

[ ] WITHHOLD AUTHORITY (ABSTAIN) TO VOTE FOR THE FOLLOWING
NOMINEES (PLEASE PRINT NAME):

[ ] AGAINST ALL NOMINEES.

[ ] WITHHOLD AUTHORITY (ABSTAIN) TO VOTE FOR ALL NOMINEES.

--------------------------------------------------------

(2) To approve the 1999 Employee Stock Option Plan

[ ] FOR [ ] AGAINST [ ] WITHHOLD AUTHORITY (ABSTAIN)

(3) To approve the Kent E. Lillie Stock Option

[ ] FOR [ ] AGAINST [ ] WITHHOLD AUTHORITY (ABSTAIN)

(4) To approve an amendment to the Charter of the Company to provide that
the Tennessee corporate takeover statutes will be applicable to the
Company.

[ ] FOR [ ] AGAINST [ ] WITHHOLD AUTHORITY (ABSTAIN)

(5) In their discretion, to transact such other business as may properly be
brought before the meeting or any adjournment thereof.

[ ] FOR [ ] AGAINST [ ] WITHHOLD AUTHORITY (ABSTAIN)

(Please date and sign this proxy on the reverse side.)

<PAGE> 45

Your shares will be voted in accordance with your instructions. If no
choice is specified, shares will be voted FOR the nominees in the election of
directors, FOR the 1999 Employee Stock Option Plan, FOR the Kent E. Lillie Stock
Option, and FOR the Charter amendment.

Date _______________________, 2000. PLEASE SIGN HERE AND RETURN PROMPTLY

---------------------------

Please sign exactly as your name
appears at left. If registered in the
names of two or more persons, each
should sign. Executors,
administrators, trustees, guardians,
attorneys, and corporate officers
should show their full titles.

- -----------------------------------------------------------------------------
IF you have changed your address, please PRINT your new address on this line.