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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D/A
Under the Securities Exchange Act of 1934*
HSN, INC.
(Name of Issuer)
Common Stock, par value $.01 per share
(Title of Class of Securities)
40429R 10 9
(CUSIP Number)
Stephen M. Brett, Esq. Pamela S. Seymon, Esq.
Senior Vice President Wachtell, Lipton, Rosen & Katz
and General Counsel 51 West 52nd Street
Tele-Communications, Inc. New York, New York 10019
5619 DTC Parkway (212) 403-1000
Englewood, CO 80111
(303) 267-5500
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
May 20, 1997
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on
Schedule 13G to report the acquisition which is the subject of
this Schedule 13D, and is filing this schedule because of Rule
13d-1(b)(3) or (4), check the following box [ ].
Note: Six copies of this statement, including all exhibits,
should be filed with the Commission. See Rule 13d-1(a) for
other parties to whom copies are to be sent.
*The remainder of this cover page should be filled out for a
reporting person's initial filing on this form with respect to
the subject class of securities, and for any subsequent
amendment containing information which would alter disclosures
provided in a prior cover page.
The information required on the remainder of this cover page
shall not be deemed to be "filed" for the purpose of Section 18
of the Securities Exchange Act of 1934 ("Act") or otherwise
subject to the liabilities of that section of the Act but shall
be subject to all other provisions of the Act (however, see the
Notes).
*NOTE: THIS STATEMENT CONSTITUTES AMENDMENT NO. 2 OF A
REPORT ON SCHEDULE 13D OF BDTV II INC., AMENDMENT NO.
4 OF A REPORT ON SCHEDULE 13D OF BDTV INC., AMENDMENT
NO. 8 OF A REPORT ON SCHEDULE 13D OF EACH OF BARRY
DILLER AND THE REPORTING GROUP (AS DEFINED IN ITEM 2)
AND AMENDMENT NO. 10 OF A REPORT ON SCHEDULE 13D OF
TELE-COMMUNICATIONS, INC.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D/A
Statement of
TELE-COMMUNICATIONS, INC.,
BARRY DILLER
BDTV INC.
and
BDTV II INC.
Pursuant to Section 13(d)
of the Securities Exchange Act of 1934
in respect of
HSN, INC.
(formerly named Silver King Communications, Inc.)
This Report on Schedule 13D (the "Schedule 13D") re-
lates to the common stock, par value $.01 per share (the "Com-
mon Stock"), of HSN, Inc., a Delaware corporation (the "Com-
pany," which was formerly named Silver King Communications,
Inc.). The Report on Schedule 13D originally filed by Tele-
Communications, Inc., a Delaware corporation ("TCI"), on August
15, 1994, as amended and supplemented by the amendments thereto
previously filed with the Commission (collectively, the "TCI
Schedule 13D"), is hereby amended and supplemented to include
the information contained herein, and this Report constitutes
Amendment No. 10 to the TCI Schedule 13D. In addition, the Re-
port on Schedule 13D originally filed by each of Mr. Barry
Diller (the "Barry Diller Schedule 13D") and the Reporting
Group (the "Reporting Group Schedule 13D") on August 29, 1995,
as amended and supplemented by the amendments thereto previ-
ously filed with the Commission, is hereby amended and supple-
mented to include the information contained herein, and this
Report constitutes Amendment No. 8 to each of the Barry Diller
Schedule 13D and the Reporting Group Schedule 13D. This Report
on Schedule 13D also constitutes Amendment No. 4 to the Report
on Schedule 13D of BDTV INC., a Delaware corporation ("BDTV"),
originally filed with the Commission on August 16, 1996 (the
"BDTV Schedule 13D"). This Report on Schedule 13D also consti-
tutes Amendment No. 2 to the Report on Schedule 13D of BDTV II
INC., a Delaware corporation ("BDTV II"), originally filed with
the Commission on December 24, 1996 (the "BDTV II Schedule
13D"). Barry Diller, TCI, BDTV and BDTV II (each, a "Reporting
Page 2 of 10 Pages
Person") constitute a "group" for purposes of Rule 13d-5 under
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), with respect to their respective beneficial ownership of
the Common Stock and are collectively referred to as the "Re-
porting Group." The TCI Schedule 13D, the Barry Diller Sched-
ule 13D, the Reporting Group Schedule 13D, the BDTV Schedule
13D and the BDTV II Schedule 13D are collectively referred to
as the "Schedule 13D." Capitalized terms not defined herein
have the meanings provided in the prior Reports on Schedule 13D
referred to in this paragraph.
The summary descriptions contained in this Report of
certain agreements and documents are qualified in their en-
tirety by reference to the complete texts of such agreements
and documents, filed as Exhibits hereto and incorporated herein
by reference. Information contained herein with respect to
each Reporting Person and its executive officers, directors and
controlling persons is given solely by such Reporting Person,
and no other Reporting Person has responsibility for the ac-
curacy or completeness of information supplied by such other
Reporting Person.
ITEM 4. PURPOSE OF THE TRANSACTION.
The information set forth in Item 6 of this Schedule
13D is hereby incorporated by reference herein.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
The information set forth in Item 6 of this Schedule
13D is hereby incorporated by reference herein.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATION-
SHIPS WITH RESPECT TO THE SECURITIES OF THE ISSUER
The information set forth in Item 6 of the TCI Sched-
ule 13D, the Barry Diller Schedule 13D, the BDTV Schedule 13D,
the BDTV II Schedule 13D and the Reporting Group Schedule 13D
is hereby amended and supplemented by adding the following in-
formation:
On May 20, 1997, the Company entered into a Stock
Exchange Agreement with Paul G. Allen (the "Stock Exchange
Agreement") pursuant to which the Company will acquire
from Mr. Allen, and certain other stockholders of Ticket-
master Group. Inc. ("Ticketmaster") with certain tag-along
rights ("Tag-along Rights") who elect to participate in
the transaction (together with Mr. Allen, the "Tag-Along
Group"), up to 15,360,405 shares (the "Shares") of common
stock, no par value (the "Ticketmaster Common Stock"), in
exchange for up to 9,052,046 shares of Common Stock, sub-
ject to the issuance of an additional 4,073,421 shares of
Page 3 of 10 Pages
Common Stock to be reserved for contingent issuance in
July 1998 if the average market price of the Common Stock
over a specified period prior to such date is below $29
per share. However, the Company has been advised by a
member of the Tag-Along Group holding 2,544,526 shares of
Ticketmaster Common Stock (the "Non-Electing Holder") that
it does not intend to elect to exercise Tag-Along Rights.
Accordingly, it is assumed that the Company will acquire a
maximum of 12,815,879 shares of Ticketmaster Common Stock
in exchange for a maximum of 7,552,530 shares of Common
Stock, subject to possible adjustment as described below.
The closing under the Stock Exchange Agreement is subject
to specified conditions. The full text of the Stock Ex-
change Agreement is filed herewith as Exhibit 26 and is
incorporated herein by reference.
Pursuant to the rules of the National Association of
Securities Dealers, Inc. (the "NASD"), the issuance of
shares of Common Stock under the Stock Exchange Agreement
required stockholder approval because the number of shares
of Common Stock to be issued under the Stock Exchange
Agreement would exceed 20% of the number of shares of Com-
mon Stock outstanding before such issuance.
On May 20, 1997, following approval of the Stock Ex-
change Agreement and the transactions contemplated thereby
by the Board of Directors of the Company, in accordance
with Section 228 of the DGCL and Article II, Section 8 of
the Company's Amended and Restated By-laws, BDTV and BDTV
II INC., as the holders of shares of Class B Common Stock
representing, in the aggregate, approximately 71% of the
outstanding total voting power of the Company, executed a
consent approving the issuance of the shares of Common
Stock under the Stock Exchange Agreement and the transac-
tions contemplated thereby.
The action taken by the BDTV Entities in consenting
to the Stock Exchange Agreement and the transactions con-
templated thereby was in turn consented to by Mr. Diller
and Liberty as stockholders of the BDTV Entities. As dis-
closed previously, Mr. Diller and Liberty are parties to
the Stockholders Agreement and the Amendment Agreement
(together, the "Stockholders Agreement"), pursuant to
which the parties thereto and certain of their affiliates
have formed the BDTV Entities. Under the terms of the
Stockholders Agreement, the transactions contemplated by
the Stock Exchange Agreement, constitute a "Fundamental
Matter" (as such term is defined in the Stockholders
Agreement). The Stockholders Agreement provides that the
taking of any action by the BDTV Entities with respect to
any Fundamental Matter requires the unanimous approval of
Page 4 of 10 Pages
each holder of a voting and non-voting equity interest in
the BDTV Entities.
In connection with the Stock Exchange Agreement, Mr.
Diller, Mr. Allen and Liberty have entered into a Stock-
holders Agreement (the "Diller-Liberty-Allen Stockholders
Agreement") pursuant to which, among other things, each of
Mr. Diller and Liberty agrees to vote all shares of voting
stock of the Company over which he or it may then exercise
voting power, at any annual or special meeting of stock-
holders of the Company called for the purpose of the elec-
tion of directors or to execute written consents of stock-
holders without a meeting with respect to the election of
directors, in favor of Mr. Allen or a designee of Mr.
Allen acceptable to the Company, so long as Mr. Allen is
entitled to representation on the Company's Board of Di-
rectors, under the Stock Exchange Agreement.
The Diller-Liberty-Allen Stockholder Agreement will
terminate (as will Mr. Allen's right under the Stock Ex-
change Agreement to representation on the Company's Board
of Directors) upon the disposition by Mr. Allen and his
permitted transferees collectively, in one or more trans-
actions, to third parties of one-third or more of the
shares of Common Stock acquired by Mr. Allen under the
Stock Exchange Agreement; provided, however, that the
Diller-Liberty-Allen Stockholder Agreement will terminate
earlier (as will Mr. Allen's right under the Stock Ex-
change Agreement to representation on the Company's Board
of Directors) if Mr. Allen and his permitted transferees
do not beneficially own at least 5% of the Company's out-
standing equity securities (assuming for this purpose that
all Company equity securities issuable under the Liberty
Agreements (as defined in the Stock Exchange Agreement)
are outstanding). The full text of the Diller-Liberty-
Allen Stockholder Agreement is filed herewith as Exhibit
27 and is incorporated herein by reference.
In connection with the execution of the Diller-
Liberty-Allen Stockholder Agreement, Liberty and Mr.
Diller entered into a letter agreement (the "May 1997 Let-
ter Agreement") which provides that for purposes of deter-
mining under the Stockholders Agreement the number of di-
rectors to be designated by Mr. Diller or Liberty (which-
ever person is then entitled to designate a majority of
the members of the Company Board of Directors pursuant to
the Amendment Agreement), Mr. Allen (or his designee)
shall not be considered to be a designee of either Liberty
or Mr. Diller. The May 1997 Letter Agreement also pro-
vides that the voting of shares of Common Stock or Class B
Common Stock and the actions to be taken by director des-
ignees of Liberty under the substantive provisions of the
Page 5 of 10 Pages
Diller-Liberty-Allen Stockholder Agreement will not con-
stitute the basis for Mr. Diller's declaration of a Man-
agement Election (as such term is defined in the Amendment
Agreement) pursuant to Section 3 of the Amendment Agree-
ment. The full text of the May 1997 Letter Agreement is
filed herewith as Exhibit 28 and is incorporated herein by
reference.
As disclosed previously, a number of the shares of
Class B Common Stock issuable to Liberty HSN pursuant to
the Home Shopping Merger were not issued, but instead are
represented by the Company's contractual obligation to
issue to Liberty HSN such shares upon the occurrence of
certain events, including a change in applicable FCC regu-
lations or other event that would permit Liberty HSN to
have an equity interest represented by a greater number of
shares of Common Stock (such contractual right, the "Con-
tingent Rights," and such underlying shares, the "Contin-
gent Rights Shares"). Also as previously disclosed, in
connection with the Home Shopping Merger, the Company and
Liberty HSN entered into the Exchange Agreement. Pursuant
to the Exchange Agreement, at such time or from time to
time as Liberty HSN or its permitted transferee may be
allowed under applicable FCC authority to have an indirect
equity interest in an additional number of shares of Com-
mon Stock, Liberty HSN or its permitted transferee will
exchange its shares of Home Shopping common stock and its
Home Shopping class B common stock for shares of Common
Stock and Class B Common Stock, respectively, at the ap-
plicable conversion ratio (such exchange and such stock
issued pursuant thereto are referred to herein as the
"Liberty Exchange" and the "Liberty Exchange Shares," re-
spectively).
As a consequence of the issuance of shares to the
Tag-Along Group under the Stock Exchange Agreement, under
applicable FCC regulations and interpretations (including
the March Order), Liberty HSN will be permitted to hold an
indirect equity interest in a greater number of shares of
HSNi. Therefore, under the terms of the Contingent
Rights, Contingent Rights Shares will become issuable to
Liberty HSN. At the closing under the Stock Exchange
Agreement, the Company will issue 7,238,507 shares of Com-
mon Stock to Mr. Allen (up to 7,552,530 shares of Common
Stock if all members of the Tag-Along Group other than the
Non-Electing Holder exercise their Tag-Along Rights). In
accordance with the terms of the Contingent Rights held by
Liberty HSN, at least 2,002,591 Contingent Rights Shares
(and up to 2,087,935 Contingent Rights Shares if all mem-
bers of the Tag-Along Group other than the Non-Electing
Page 6 of 10 Pages
Holder exercise their Tag-Along Rights) will become issu-
able to Liberty HSN simultaneous with or immediately fol-
lowing the closing under the Stock Exchange Agreement.
In addition, the Stock Exchange Agreement provides
that, depending upon the market price of the Common Stock,
in July 1998 up to 3,257,328 additional shares of Common
Stock may be required to be issued to Mr. Allen (up to
3,398,639 additional shares of Common Stock if all members
of the Tag-Along Group other than the Non-Electing Holder
exercise their Tag-Along Rights). Accordingly, in the
event additional shares of Common Stock become issuable to
members of the Tag-Along Group pursuant to the Stock Ex-
change Agreement in July 1998, additional Contingent
Rights Shares, or if the Contingent Rights have thereto-
fore been terminated through the issuance of all Contin-
gent Rights Shares, Exchange Shares will become issuable
to Liberty HSN. Assuming the maximum of 3,257,328 of such
additional shares are issued to Mr. Allen (3,398,639 if
all members of the Tag-Along Group other than the Non-
Electing Holder exercise their Tag-Along Rights) the re-
maining 589,161 Contingent Rights Shares will become issu-
able to Liberty HSN.
Liberty HSN, however, is obligated to effect a Lib-
erty Exchange only after all of the Contingent Rights
Shares have been issued, subject to certain conditions.
Assuming the maximum of 3,257,328 of additional shares of
Common Stock are issued to Mr. Allen in July 1998 under
the Stock Exchange Agreement (3,398,639 if all members of
the Tag-Along Group other than the Non-Electing Holder
exercise their Tag-Along Rights) 296,113 Liberty Exchange
Shares (419,863 Liberty Exchange Shares if all members of
the Tag-Along Group other than the Non-Electing Holder
exercise their Tag-Along Rights) will become issuable to
Liberty HSN at that time. Because there can be no as-
surance as to the actual number of Contingent Rights
Shares that will ultimately be issued as a result of the
transactions contemplated by the Stock Exchange Agreement,
there can also be no assurance as to the actual number of
shares of Common Stock that may be issued pursuant to the
Contingent Rights Shares Exchange Agreement as a result of
such transactions. Upon completion of the exchange of all
shares of Home Shopping common stock and Home Shopping
class B common stock owned by Liberty for shares of Common
Stock and Class B Common Stock, Home Shopping would become
a wholly owned subsidiary of the Company.
Upon the Company's issuance of 7,238,507 shares
of Common Stock to Mr. Allen under the Stock Exchange
Agreement at closing and 2,002,591 Contingent Rights
Page 7 of 10 Pages
Shares, the Reporting Group will have in the aggregate ap-
proximately 26.1% of the outstanding total equity inter-
ests, and approximately 72.9% of the outstanding total
voting power of the Company (approximately 26.0% of the
outstanding total equity interests, approximately 72.9% of
the outstanding total voting power of the Company, if all
holders of Tag-Along Rights other than the Non-Electing
Holder exercise Tag-Along Rights (assuming issuance of
2,087,935 Contingent Rights Shares). Assuming the maximum
of 3,257,328 of additional shares of Common Stock are is-
sued to Mr. Allen in July 1998 under the Stock Exchange
Agreement (3,398,639 if all members of the Tag-Along Group
other than the Non-Electing Holder exercise their Tag-
Along Rights) and 296,113 Liberty Exchange Shares (419,863
Liberty Exchange Shares if all members of the Tag-Along
Group other than the Non-Electing Holder exercise their
Tag-Along Rights) are issued to Liberty HSN at that time,
the Reporting Group will have in the aggregate ap-
proximately 25.7% of the outstanding total equity inter-
ests, and approximately 72.9% of the outstanding total
voting power of the Company (approximately 25.7% of the
outstanding total equity interests, approximately 72.9% of
the outstanding total voting power of the Company, if all
holders of Tag-Along Rights other than the Non-Electing
Holder exercise Tag-Along Rights) at that time.
The aggregate percentage calculations in this para-
graph, which are based on a total of 36,094,593 shares of
Common Stock and 10,225,056 shares of Class B Common Stock
outstanding as of May 1, 1997, include 486,988 shares of
Common Stock beneficially owned by Mr. Diller and vested
options to purchase 2,126,461 shares of Common Stock but
do not include unvested options to purchase 6,379,386
shares of Common Stock held by Mr. Diller. TCI disclaims
beneficial ownership of such 486,988 shares beneficially
owned by Mr. Diller and the shares issuable to Mr. Diller
under vested and unvested options.
The actual number of Contingent Rights Shares or Ex-
change Shares issuable as a consequence of the transac-
tions contemplated by the Stock Exchange Agreement could
vary from the numbers contained in the above description,
as a result of events subsequent to the date of this
Amendment, including, among other things, a change in law,
or the occurrence of some event other than the Exchange
which could cause the issuance of Contingent Rights Shares
or Exchange Shares prior to the closing or the adjustment
in July 1998.
The Contingent Rights Shares issued to Liberty HSN
may be contributed to one or more newly formed entities in
which Mr. Diller owns all of the voting equity interests
Page 8 of 10 Pages
and TCI owns a non-voting equity interest (which non-
voting interest would constitute substantially all the
equity of such entities) and which (other than with re-
spect to certain fundamental corporate actions) would be
controlled by Mr. Diller, in accordance with the terms of
the Stockholders Agreement.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
1) Stock Exchange Agreement, dated as of
May 20, 1997, by and between HSN, Inc.
and Mr. Allen.
2) Stockholders Agreement, dated as of
May 20, 1997, by and among, Mr.
Diller, Mr. Allen and Liberty Media
Corporation.
3) Letter Agreement, dated as of May 20,
1997, by and between Mr. Diller and
Liberty Media Corporation.
Page 9 of 10 Pages
SIGNATURE
After reasonable inquiry and to the best of his
knowledge and belief, each of the undersigned certifies that
the information set forth in this statement is true, complete
and correct.
Dated: May 29, 1997
TELE-COMMUNICATIONS, INC.
By: /s/ Stephen M. Brett
Name: Stephen M. Brett
Title: Senior Vice President
and General Counsel
/s/ Barry Diller
Barry Diller
BDTV INC.
By: /s/ Barry Diller
Name: Barry Diller
Title: President
BDTV II INC.
By: /s/ Barry Diller
Name: Barry Diller
Title: President
Page 10 of 10 Pages
EXHIBIT INDEX
Seq. Pg. No.
1. Written Agreement between TCI
and Mr. Diller regarding Joint
Filing of Schedule 13D.*
2. Definitive Term Sheet regarding
Stockholders Agreement, dated
as of August 24, 1995, by and
between Liberty
and Mr. Diller.*
3. Definitive Term Sheet regarding
Equity Compensation Agreement,
dated as of August 24, 1995, by
and between the Company and
Mr. Diller.*
4. Press Release issued by the
Company and Mr. Diller, dated
August 25, 1995.*
5. Letter Agreement, dated November 13,
1995, by and between Liberty Media
Corporation and Mr. Diller.*
6. Letter Agreement, dated November 16,
1995, by and between Liberty Media
Corporation and Mr. Diller.*
7. First Amendment to Stockholders
Agreement, dated as of November 27,
1995, by and between Liberty Media
Corporation and Mr. Diller.*
8. Agreement and Plan of Merger, dated
as of November 27, 1995, by and among
Silver Management Company, Liberty
Program Investments, Inc., and Liberty
HSN, Inc.*
_____________________
* Previously filed.
9. Exchange Agreement, dated as of
November 27, 1995, by and between
Silver Management Company and Silver
King Communications, Inc.*
10. Agreement and Plan of Merger, dated
as of November 27, 1995, by and among
Silver King Communications, Inc.,
Thames Acquisition Corp. and Savoy
Pictures Entertainment, Inc.*
11. Voting Agreement, dated as of
November 27, 1995, by and among
Certain Stockholders of the Company
and Savoy Pictures Entertainment, Inc.*
12. Letter Agreement, dated March 22,
1996, by and between Liberty Media
Corporation and Barry Diller.*
13. In re Applications of Roy M. Speer
and Silver Management Company, Federal
Communications Commission Memorandum
and Order, adopted March 6, 1996 and
released March 11, 1996.*
14. In re Applications of Roy M. Speer
and Silver Management Company,
Request for Clarification of Silver
Management Company, dated April 10,
1996.*
15. In re Applications of Roy M. Speer
and Silver Management Company, Federal
Communications Commission Memorandum
Opinion and Order and Notice of Apparent
Liability, adopted June 6, 1996 and
released June 14, 1996.*
16. Amended and Restated Joint Filing
Agreement of TCI, Mr. Diller and BDTV.*
17. Amended and Restated Certificate of
Incorporation of BDTV INC.*
_____________________
* Previously filed.
18. Press Release issued by the Company
and Home Shopping Network, Inc.,
dated August 26, 1996.*
19. Agreement and Plan of Exchange
and Merger, dated as of August 25,
1996, by and among the Company,
Home Shopping Network, Inc., House
Acquisition Corp., and Liberty
HSN, Inc.*
20. Termination Agreement, dated as of
August 25, 1996, among the Company,
BDTV INC., Liberty Program Investments,
Inc., and Liberty HSN, Inc.*
21. Voting Agreement, dated as of
August 25, 1996, by and among
Certain Stockholders of Home
Shopping Network, Inc. and the
Company.*
22. Voting Agreement, dated as of
August 25, 1996, by and among
Barry Diller, Liberty Media
Corporation, Arrow Holdings,
LLC, BDTV INC., and Home Shopping
Network, Inc.*
23. Letter Agreement, dated as of
August 25, 1996, by and between
Liberty and
Barry Diller.*
24. Second Amended and Restated Joint
Filing Agreement by and between
TCI, Mr. Diller, BDTC Inc. and
BDTV II Inc.*
24. Stock Exchange Agreement, dated as of
December 20, 1996, by and between
the Company and Liberty HSN, Inc.*
25. Letter Agreement, dated as of
February 3, 1997, by and between
BDTV INC. and David Geffen.*
_____________________
* Previously filed.
26. Stock Exchange Agreement, dated as of
May 20, 1997, by and between HSN, Inc.
and Mr. Allen.
27. Stockholders Agreement, dated as of
May 20, 1997, by and among, Mr.
Diller, Mr. Allen and Liberty Media
Corporation.
28. Letter Agreement, dated as of May 20,
1997, by and between Mr. Diller and
Liberty Media Corporation.
Execution Copy
STOCK EXCHANGE AGREEMENT
BETWEEN
PAUL G. ALLEN
- AND -
HSN, INC.
MAY 20, 1997
STOCK EXCHANGE AGREEMENT
TABLE OF CONTENTS
Page No.
ARTICLE I CERTAIN DEFINITIONS...................... 1
ARTICLE II EXCHANGE................................. 5
Section 2.01. Exchange of Shares for shares
of HSNi Common Stock............ 5
Section 2.02. Delivery of HSNi Shares........... 5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
THE STOCKHOLDER.......................... 6
Section 3.01. Organization and Good Standing.... 6
Section 3.02. Capitalization.................... 7
Section 3.03. Due Authorization; Execution and
Delivery........................ 8
Section 3.04. Absence of Breach; No Conflict.... 8
Section 3.05. The Shares........................ 9
Section 3.06. Investment Purpose................ 9
Section 3.07. Brokers........................... 10
Section 3.08. Commission Documents; Financial
Information..................... 10
Section 3.09. Approvals; Compliance with Laws... 11
Section 3.10. Litigation........................ 12
Section 3.11. Related Party Transactions........ 12
Section 3.12. Absence of Certain Events; No
Material Adverse Change......... 13
Section 3.13. Full Disclosure................... 14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF HSNi... 15
Section 4.01. Organization and Good Standing.... 15
Section 4.02. Capitalization.................... 15
Section 4.03. Due Authorization; Execution
and Delivery.................... 16
Section 4.04. Absence of Breach; No Conflict.... 17
Section 4.05. The HSNi Shares................... 17
Section 4.06. Investment Purpose................ 17
Section 4.07. Brokers........................... 18
Section 4.08. Commission Documents; Financial
Information..................... 18
Section 4.09. Approvals; Compliance with Laws... 19
Section 4.10. Litigation........................ 20
Section 4.11. Related Party Transactions........ 20
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Page No.
Section 4.12. Absence of Certain Events;
No Material Adverse Change...... 20
Section 4.13. Full Disclosure................... 21
ARTICLE V COVENANTS OF THE PARTIES................. 22
Section 5.01. Additional HSNi Shares............ 22
Section 5.02. Registration Rights............... 22
Section 5.03. HSR Filings....................... 23
Section 5.04. Access to Information............. 23
Section 5.05. Further Action.................... 24
Section 5.06. Conduct of Business............... 24
Section 5.07. Tag-Along Rights.................. 25
Section 5.08. Stockholders Agreement............ 25
ARTICLE VI DIRECTORS................................ 26
Section 6.01. Director Election................. 26
Section 6.02. HSNi Director Appointment......... 26
ARTICLE VII CLOSING; SECOND CLOSING.................. 27
Section 7.01. Closing........................... 27
Section 7.02. Deliveries........................ 27
Section 7.03. Second Closing.................... 27
Section 7.04. Deliveries at Second Closing...... 27
ARTICLE VIII CONDITIONS PRECEDENT TO THE OBLIGA-
TIONS OF THE STOCKHOLDER TO EXCHANGE,
SELL AND DELIVER THE SHARES.............. 27
Section 8.01. Accuracy of HSNi's
Representations and Warranties.. 28
Section 8.02. Performance by HSNi............... 28
Section 8.03. HSR Act........................... 28
Section 8.04. No Injunction..................... 28
Section 8.05. Information Statements............ 28
Section 8.06. Stockholders Agreement............ 28
Section 8.07. No Adverse Decision or Action..... 28
Section 8.08. No Material Adverse Effect........ 29
Section 8.09. Approvals and Consents............ 29
Section 8.10. Proceedings....................... 29
ARTICLE IX CONDITIONS PRECEDENT TO THE OBLIGA-
TIONS OF HSNi TO EXCHANGE, ISSUE
AND DELIVER THE SHARES................... 30
Section 9.01. Accuracy of the Stockholder's
Representations and Warranties.. 30
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Page No.
Section 9.02. Performance by the Stockholder.... 30
Section 9.03. No Adverse Action or Decision..... 30
Section 9.04. No Material Adverse Effect........ 30
Section 9.05. No Injunction..................... 31
Section 9.06. Approvals and Consents............ 31
Section 9.07. HSR Act........................... 31
Section 9.08. Information Statements............ 31
Section 9.09. Proceedings....................... 31
ARTICLE X TERMINATION; EXPENSES.................... 31
Section 10.01. Termination by Mutual Written
Consent......................... 31
Section 10.02. Termination by the Stockholder
or HSNi......................... 32
Section 10.03. Termination by HSNi............... 32
Section 10.04. Termination by the Stockholder.... 32
Section 10.05. Expenses.......................... 33
ARTICLE XI SURVIVAL OF REPRESENTATIONS AND
WARRANTIES............................... 33
ARTICLE XII CONFIDENTIALITY.......................... 33
ARTICLE XIII MISCELLANEOUS............................ 34
Section 13.01. Notices........................... 34
Section 13.02. Entire Agreement.................. 36
Section 13.03. Successors and Assigns............ 36
Section 13.04. Paragraph Headings................ 36
Section 13.05. Reasonable Efforts................ 36
Section 13.06. Applicable Law.................... 37
Section 13.07. Severability...................... 37
Section 13.08. Equitable Remedies................ 37
Section 13.09. No Waiver......................... 37
Section 13.10. Counterparts...................... 38
Exhibit A Stockholders Agreement
-iii-
STOCK EXCHANGE AGREEMENT
AGREEMENT made and entered into on this 20th day of
May, 1997, between PAUL G. ALLEN (the "Stockholder") and HSN,
INC., a Delaware corporation ("HSNi").
W I T N E S S E T H :
WHEREAS, the Stockholder is the owner of 12,283,014
shares (the "Shares") of common stock, no par value ("Common
Stock"), of Ticketmaster Group, Inc., an Illinois corporation
(the "Company");
WHEREAS, the Stockholder desires to exchange with
HSNi, and HSNi desires to exchange with the Stockholder, the
Shares for shares of common stock, $.01 par value per share
("HSNi Common Stock"), of HSNi, upon the terms and subject to
the conditions hereinafter set forth; and
WHEREAS, the Stockholder and the Company are enter-
ing into this Agreement to provide for said exchange (the
"Exchange") and to establish various rights and obligations
in connection therewith, upon the terms and subject to the
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual pre-
mises and covenants contained herein, and of other good and
valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
"Additional HSNi Shares" shall have the meaning set
forth in Section 2.02 of this Agreement.
"Affiliate" shall have the meaning set forth in
Rule 12b-2 promulgated by the Commission under the Exchange
Act.
"Balance Sheet" shall have the meaning set forth in
Section 3.08 of this Agreement.
"Balance Sheet Date" shall have the meaning set
forth in Section 3.08 of this Agreement.
"Bank Consent" shall mean the consent or waiver by
the banks under the Credit Agreement to the transactions con-
templated hereby.
"Bank Refinancing" shall have the meaning set forth
in Section 5.05 of this Agreement.
"Business Day" shall mean any day except a Satur-
day, Sunday or other day on which commercial banks in the
City of New York are not open for the transaction of busi-
ness.
"Closing" shall have the meaning set forth in Sec-
tion 7.01 of this Agreement.
"Closing Date" shall have the meaning set forth in
Section 7.01 of this Agreement.
"Commission" shall mean the Securities and Exchange
Commission.
"Commission Documents" shall have the meaning set
forth in Section 3.08 of this Agreement.
"Common Stock" shall have the meaning set forth in
the recitals to this Agreement.
"Company" shall mean Ticketmaster Group, Inc., an
Illinois corporation.
"Company Information Statement" shall have the
meaning set forth in Section 6.01 of this Agreement.
"Credit Agreement" shall mean the Company's Credit
Agreement dated as of November 18, 1994, as amended, among
the Company, its lenders and Wells Fargo Bank, National As-
sociation, as agent.
"Diller" shall mean Mr. Barry Diller.
"Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
"Fair Market Value" shall mean the unweighted aver-
age closing price of a share of HSNi Common Stock as reported
by the National Association of Securities Dealers, Inc. Auto-
mated Quotation System ("NASDAQ"), during the period in ques-
tion or, if the HSNi Common Stock is no longer quoted on NAS-
DAQ, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the
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principal national securities exchange on which the HSNi Com-
mon Stock is listed or admitted to trading; provided, how-
ever, that if the Fair Market Value is less than $20 per
share, Fair Market Value shall be deemed to be $20 per share.
"FCC" shall mean the Federal Communications Commis-
sion.
"FCC Excess Shares" shall have the meaning set
forth in Section 2.02(c) of this Agreement.
"Form 10-K" shall have the meaning set forth in
Section 3.08 of this Agreement.
"Form S-1" shall mean the registration statement of
the Company on Form S-1, as amended through the date hereof,
filed with the Commission on September 20, 1996.
"GAAP" shall mean United States generally accepted
accounting principles.
"HSNi Certificate" shall have the meaning set forth
in Section 4.01 of this Agreement.
"HSNi Class B Stock" shall have the meaning set
forth in Section 4.02 of this Agreement.
"HSNi Commission Documents" shall have the meaning
set forth in Section 4.08 of this Agreement.
"HSNi Common Stock" shall have the meaning set
forth in the recitals to this Agreement.
"HSNi Form 10-K" shall have the meaning set forth
in Section 4.08 of this Agreement.
"HSNi Form S-4" shall have the meaning set forth in
Section 4.02 of this Agreement.
"HSNi Shares" shall have the meaning set forth in
Section 2.01 of this Agreement.
"HSR Act" shall mean Hart-Scott-Rodino Antitrust
Improvements Act of 1976.
"Information Statement" shall mean the Information
Statement relating to the Exchange mailed to HSNi sharehold-
ers in accordance with Rule 14c-2 under the Exchange Act.
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"Joint Ventures" shall have the meaning set forth
in Section 3.01 of this Agreement.
"Laws" shall have the meaning set forth in Section
3.09 of this Agreement.
"Liberty Agreements" shall have the meaning set
forth in Section 4.02 of this Agreement.
"Liens" shall mean any lien, claim, charge, re-
striction, pledge, mortgage, security interest or other en-
cumbrance.
"Loss" or "Losses" shall have the meaning set forth
in Section 11.01 of this Agreement.
"Material Adverse Effect" shall mean a material ad-
verse effect on the business, prospects, condition (financial
or otherwise), assets or results of operations of the party
in question.
"Permitted Transferees" shall have the meaning set
forth in the Stockholders Agreement.
"Representatives" shall have the meaning set forth
in Section 5.04.
"Restated By-laws" shall mean the By-laws of the
Company, as amended and restated and in effect on the date
hereof.
"Restated Certificate" shall mean the Articles of
Incorporation of the Company, as amended and restated and in
effect on the date hereof.
"Second Closing" shall have the meaning set forth
in Section 7.03 of this Agreement.
"Securities Act" shall mean the Securities Act of
1933, as amended.
"Shareholders Agreement" shall mean the Sharehold-
ers Agreement dated as of December 15, 1993 by and among Paul
Allen, on the one hand, and HG, Inc. and the other signato-
ries thereto, on the other hand.
"Shares" shall have the meaning set forth in the
recitals to this Agreement.
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"Stockholder" shall mean Mr. Paul G. Allen and his
successors.
"Stockholders Agreement" shall have the meaning set
forth in Section 5.08 of this Agreement.
"Subsidiary" shall mean each corporation or other
entity of which a majority of the voting power of the voting
equity securities or equity interest is owned, directly or
indirectly, by the party in question.
ARTICLE II
EXCHANGE
Section 2.01. Exchange of Shares for shares of
HSNi Common Stock. Upon the terms and subject to the condi-
tions hereinafter set forth, the Stockholder shall exchange,
assign, transfer and deliver the Shares to HSNi, or to any
direct or indirect subsidiary of HSNi designated by HSNi, at
the Closing, as described in Section 7.01; and, in consider-
ation therefor, HSNi shall issue, exchange, sell and deliver
to the Stockholder an aggregate of 7,238,507 shares (the
"HSNi Shares") of HSNi Common Stock as provided in Section
2.02 and subject to adjustment as therein provided.
Section 2.02. Delivery of HSNi Shares. (a) Sub-
ject to adjustment as provided in subparagraph (b) below, at
the Closing, HSNi shall deliver certificates representing the
HSNi Shares, bearing a legend regarding restrictions on
transfer under the Securities Act.
(b) The number of HSNi Shares to be issued to the
Stockholder in exchange for the Shares shall be subject to
adjustment as follows: if the Fair Market Value during the
first 20 trading days in July 1998 is less than $29 per
share, additional shares ("Additional HSNi Shares") of HSNi
Common Stock shall be issued to the Stockholder as additional
consideration in exchange for the Shares. The number of Ad-
ditional HSNi Shares to be issued shall equal the difference
between the number obtained by dividing $209,916,709 by the
Fair Market Value and the number of HSNi Shares. Notwith-
standing the foregoing, no adjustment shall be required or
made if the Fair Market Value during any consecutive 20 trad-
ing day period commencing on December 1, 1997 and ending on
the day immediately prior to the Second Closing equals or ex-
ceeds $29 per share.
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(c) In the event that the issuance of all or any
portion of the Additional HSNi Shares would cause the Stock-
holder to be in violation of the rules and regulations of the
FCC, the Stockholder, at his option, may elect to (i) receive
in lieu of the Additional HSNi Shares that may not be issued
under FCC law (the "FCC Excess Shares") non-voting partici-
pating preferred stock of HSNi, convertible upon transfer or
upon compliance with FCC regulatory restrictions into HSNi
Common Stock, and designed to be the economic equivalent of
the FCC Excess Shares, (ii) deliver a proxy complying with
FCC law to Diller to vote the FCC Excess Shares or (iii) en-
ter into such other arrangements to comply with FCC law as
are acceptable to HSNi.
(d) The number of Shares, HSNi Shares and/or Addi-
tional HSNi Shares shall be appropriately and equitably ad-
justed to reflect (i) the payment of any dividend or other
distribution on such shares, (ii) any stock split, combina-
tion or reclassification of such shares, or (iii) any con-
solidation, merger or other event which results in the con-
version or exchange of such shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
The Stockholder hereby represents and warrants to
HSNi as follows:
Section 3.01. Organization and Good Standing. The
Company is a corporation duly organized, validly existing and
in good standing under the laws of Illinois, and is duly
qualified to transact business as a foreign corporation and
is in good standing in each jurisdiction in which the nature
of the business transacted by it or the character or location
of the properties owned or leased by it requires such quali-
fication, except where the failure to be so qualified or in
good standing would not have a Material Adverse Effect on the
Company and its Subsidiaries considered as a whole. The Com-
pany has full corporate power and authority to own and manage
its properties and to carry on its business as it is now be-
ing (and as it is currently proposed to be) conducted. The
copies of the Company's Restated Certificate and Restated By-
laws and other organizational documents and instruments (in
each case, as amended and/or restated through the date here-
of), filed by the Company with the Commission prior to the
date hereof, are true, complete and correct copies thereof.
The Restated Certificate and the Restated By-laws will be in
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full force and effect on and prior to the Closing Date. Ex-
cept for the joint ventures (the "Joint Ventures"), disclosed
in the Commission Documents filed prior to the date hereof or
as set forth on Schedule 3.01 hereof, the Company does not
own any interest in any other company or entity other than
the Subsidiaries of the Company. Each Subsidiary of the Com-
pany and, to the knowledge of the Stockholder, each Joint
Venture is duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation
or organization and has the power and authority to own or
lease its properties and to conduct its business as now con-
ducted, except as would not result in any Material Adverse
Effect on the Company and its Subsidiaries considered as a
whole. All outstanding shares of the capital stock of each
Subsidiary of the Company and, to the knowledge of the Stock-
holder, equity interests of the Company in each Joint Venture
have been validly issued and are fully paid and nonassess-
able. Except as disclosed in the Commission Documents filed
prior to the date hereof, there are no outstanding options,
warrants, rights, agreements or commitments of any nature
whatsoever of any third party to subscribe for or purchase
any equity security of any Subsidiary of the Company or, to
the knowledge of the Stockholder, of any Joint Venture or to
cause any Subsidiary of the Company or, to the knowledge of
the Stockholder, any Joint Venture to issue any such equity
security.
Section 3.02. Capitalization. The authorized cap-
italization of the Company as of the date hereof consists of:
80,000,000 shares of Common Stock, no par value, one share of
series A redeemable convertible preferred stock, no par value
(the "Series A Stock"), and 19,999,999 shares of undesignated
preferred stock, no par value ("Preferred Stock"), of which,
as of the date hereof, there were 24,739,715 shares of Common
Stock outstanding (and 1,252,942 shares issuable upon ex-
change of the Class B shares of Ticketmaster Canada Acquisi-
tion Limited) and no shares of Series A Stock or Preferred
Stock outstanding. All such shares outstanding on the date
hereof are, and any shares that will be issued under the Re-
stated Certificate, when issued, will be, duly authorized,
validly issued and fully paid and nonassessable. Except as
disclosed on Schedule 3.02 hereof and other than options to
purchase an aggregate of 4,408,251 shares of Common Stock is-
sued pursuant to employee benefit plans of the Company, there
are no outstanding options, warrants, rights, puts, calls,
commitments, or other contracts, arrangements, or understand-
ings issued by or binding upon the Company requiring or pro-
viding for, and there are no outstanding debt or equity secu-
rities of the Company which upon the conversion, exchange or
exercise thereof would require or provide for, the issuance
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by the Company of any new or additional shares of Common
Stock (or any other securities of the Company which, with no-
tice, lapse of time and/or payment of monies, are or would be
convertible into or exercisable or exchangeable for shares of
Common Stock). There are no preemptive or other similar
rights available to the existing holders of Common Stock or
other securities of the Company.
Section 3.03. Due Authorization; Execution and De-
livery. The execution, delivery and performance of this
Agreement and the consummation of the transactions contem-
plated hereby have been duly authorized by all necessary ac-
tion on the part of the Stockholder and by the Board of Di-
rectors of the Company (including such authorization as may
be required so that no state anti-takeover statute or similar
statute or regulation including, without limitation, Section
5/11.75 of the Illinois Business Corporation Act, is or be-
comes operative with respect to this Agreement or the trans-
actions contemplated hereby), and, except (if applicable) for
requirements under Rule 14f-1 under the Exchange Act to
transmit the Company Information Statement to the Company's
stockholders at least 10 days prior to the date that persons
designated by HSNi constitute a majority of the Company's
Board, no other action by the Stockholder or corporate pro-
ceedings on the part of the Company are necessary to autho-
rize this Agreement and to consummate the transactions con-
templated hereby. This Agreement constitutes the legal,
valid and binding obligation of the Stockholder, enforceable
against the Stockholder in accordance with its terms, except
that such enforcement may be subject to applicable bank-
ruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights, and
the remedy of specific performance and injunctive relief may
be subject to equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought.
Section 3.04. Absence of Breach; No Conflict. Ex-
cept as disclosed in the Commission Documents filed prior to
the date hereof or as set forth on Schedule 3.04 hereto, the
execution, delivery, and performance of this Agreement by the
Stockholder, and the consummation by the Stockholder of the
transactions contemplated hereby, will not (a) give rise to a
right to (or otherwise) terminate, accelerate the maturity of
or increase any payment due under, conflict with, result in a
breach or violation of any of the terms, conditions or provi-
sions of, constitute a default (or an event which, with no-
tice or lapse of time, or both, would constitute a default)
under, require any approval, waiver or consent under, or re-
sult in the creation or imposition of any Lien upon any prop-
erty or assets of the Stockholder, the Company or any of its
-8-
Subsidiaries pursuant to the terms of, any note, bond, mort-
gage, pledge, indenture, deed of trust, lease, agreement, in-
demnity, obligation, commitment, instrument, franchise, li-
cense, certificate or permit to which the Company or any of
its Subsidiaries is a party or by which any of their respec-
tive properties or assets may be bound; (b) violate or con-
flict with any term or provision of the restated certificate
of incorporation, by-laws or equivalent organizational in-
struments and documents (in each case, as amended and/or re-
stated through the date hereof) of the Company or any Sub-
sidiary of the Company (and in each case as in effect on the
Closing Date); (c) violate any judgment, decree, order, writ,
statute, rule or regulation of any judicial, arbitral, pub-
lic, or governmental authority having jurisdiction over the
Company, any of its Subsidiaries or any of their respective
properties or assets or (d) to the knowledge of the Stock-
holder, violate or conflict with any term or provision of any
Joint Venture. No employment agreement or other contract
with any Company employee contains any provision that would
permit such employee to terminate such agreement or contract
or receive additional or accelerated payments or benefits
upon consummation of the transactions contemplated hereby.
Section 3.05. The Shares. (a) The Shares have
been duly authorized and legally and validly issued, are
fully paid and nonassessable, and represent all of the issued
and outstanding shares of capital stock of the Company held
by the Stockholder.
(b) The Stockholder has full beneficial ownership
of the Shares, subject to his obligations under the Share-
holders Agreement, and on the Closing Date shall possess full
authority and power to convey the same to HSNi, free and
clear of any and all Liens, and preemptive and other similar
rights. Except as disclosed on Schedule 3.05 hereof, the
Shareholders Agreement is the only agreement, arrangement or
understanding relating to the Shares to which the Stockholder
is a party, and since December 15, 1993, there have been no
amendments thereto. Schedule 3.05 hereof sets forth the
identity of the persons who have rights under the Sharehold-
ers Agreement and the maximum number of shares of Brick Com-
mon Stock as to which each such person may exercise "Tag-
Along Rights" thereunder.
Section 3.06. Investment Purpose. The Stockholder
is acquiring the HSNi Shares solely for the purpose of in-
vestment and not with view to, or for offer or sale in con-
nection with, any distribution thereof. The Stockholder ac-
knowledges and understands that the HSNi Shares may not be
sold except in compliance with the registration requirements
-9-
of the Securities Act, unless an exemption therefrom is
available.
The Stockholder hereby acknowledges and agrees that
upon the original issuance thereof, and until such time as
the same is no longer required under the applicable require-
ments of the Securities Act and the rules and regulations
thereunder, the certificates representing the HSNi Shares
(including shares of HSNi Common Stock issuable as Additional
HSNi Shares) may bear the following legend on the reverse
side thereof:
"THE SHARES REPRESENTED BY THIS CERTIFICATE (THE
`SHARES') HAVE NOT BEEN REGISTERED UNDER THE SECU-
RITIES ACT OF 1933, AS AMENDED, OR ANY STATE LAWS
REGULATING THE SALE OF SECURITIES AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS REG-
ISTERED OR AN OPINION OF COUNSEL SATISFACTORY TO
THE CORPORATION IS OBTAINED TO THE EFFECT THAT SUCH
REGISTRATION IS NOT REQUIRED."
Section 3.07. Brokers. Other than Montgomery Se-
curities, the fees of which shall be paid by HSNi (not to ex-
ceed the amount previously disclosed to HSNi), no broker,
finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon ar-
rangements made by or on behalf of the Stockholder or the
Company.
Section 3.08. Commission Documents; Financial In-
formation. The Company's Form S-1 filed with the Commission
on September 20, 1996, as amended, the Company's Form 10-K in
respect of the fiscal year ended January 31, 1997 (the "Form
10-K"), and each report, schedule, proxy, information state-
ment or registration statement (including all exhibits and
schedules thereto and documents incorporated by reference
therein) filed by the Company with the Commission on or be-
fore the Closing Date are collectively referred to as the
"Commission Documents". As of their respective filing dates,
the Commission Documents complied (or will comply) in all ma-
terial respects with the requirements of the Securities Act
and the Exchange Act and the rules and regulations of the
Commission thereunder applicable to such Commission Docu-
ments, and as of their respective dates none of the Commis-
sion Documents contained (or will contain) any untrue state-
ment of a material fact or omitted (or will omit) to state a
material fact required to be stated therein or necessary in
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order to make the statements therein, in light of the circum-
stances under which they were made, not misleading. The fi-
nancial statements of the Company included in the Commission
Documents comply (or will comply) as of their respective
dates as to form in all material respects with applicable ac-
counting requirements and the published rules and regulations
of the Commission with respect thereto (except as may be in-
dicated in the notes thereto or, in the case of the unaudited
statements, as permitted by Form 10-Q promulgated by the Com-
mission), and present fairly (or will present fairly) as of
their respective dates, in all material respects, the con-
solidated financial position of the Company and the Subsid-
iaries as at the dates thereof and the consolidated results
of their operations and their consolidated cash flows for
each of the respective periods, in conformity with GAAP. As
used in this Agreement, the consolidated balance sheet of the
Company and its Subsidiaries at January 31, 1997 included in
the Form 10-K is hereinafter referred to as the "Balance
Sheet", and January 31, 1997 is hereinafter referred to as
the "Balance Sheet Date."
Except as and to the extent expressly set forth in
the Balance Sheet, or the notes, schedules or exhibits there-
to, or as disclosed in the Form 10-K or Schedule 3.08 hereof,
(i) as of the Balance Sheet Date, neither the Company nor its
Subsidiaries had any liabilities or obligations (whether ab-
solute, contingent, accrued or otherwise) that would be re-
quired to be included on a balance sheet or in the notes,
schedules or exhibits thereto prepared in accordance with
GAAP and (ii) since the Balance Sheet Date, neither the Com-
pany nor any of its Subsidiaries has incurred any such li-
abilities or obligations other than in the ordinary course of
business.
Section 3.09. Approvals; Compliance with Laws.
(a) Except (i) as disclosed in the Commission Documents
filed prior to the date hereof or as set forth on Schedule
3.09(a) hereof and (ii) for any filings, notices, applica-
tions and other information as may be required to be made or
supplied pursuant to the HSR Act or the Exchange Act, no no-
tices, reports or other filings are required to be made by
the Stockholder, the Company or any of its Subsidiaries with,
nor are any consents, registrations, applications, approvals,
permits, licenses or authorizations required to be obtained
by the Stockholder, the Company or any of its Subsidiaries
from, any public or governmental authority or other third
party in connection with the execution and delivery of this
Agreement and the consummation of the transactions contem-
plated hereby.
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(b) Except as set forth on Schedule 3.09(b) or as
set forth in the Commission Documents filed prior to the date
hereof and except as would not result in any Material Adverse
Effect on the Company and its Subsidiaries considered as a
whole, the business of the Company and each of its Subsidiar-
ies has been and is presently being conducted in compliance
with all applicable federal, state, county and local ordi-
nances, statutes, rules, regulations and laws (collectively
"Laws").
Section 3.10. Litigation. Except as would not re-
sult in any Material Adverse Effect on the Company and its
Subsidiaries considered as a whole, there are no judicial,
administrative or arbitral actions, suits, claims, inquiries,
investigations or proceedings (whether of a public or private
nature) pending or, to the knowledge of the Stockholder,
threatened against the Company, any of its Affiliates (relat-
ing to the Company or its Subsidiaries) or any of the Com-
pany's Subsidiaries.
Section 3.11. Related Party Transactions. Except
as set forth on Schedule 3.11 hereto or as disclosed in the
Commission Documents filed prior to the date hereof, since
January 1, 1996, there is no transaction required to be dis-
closed under the Securities Act or the Exchange Act pursuant
to which an Affiliate of the Company and/or any person who
beneficially owns (within the meaning of Rule 13d-3 promul-
gated under the Exchange Act) five percent or more of the
outstanding Common Stock of the Company (other than the Sub-
sidiaries) has borrowed any monies from or has outstanding
any indebtedness or other similar obligations to the Company
or any Subsidiary of the Company. Except as disclosed in the
Commission Documents filed prior to the date hereof or as set
forth on Schedule 3.11 hereto, since January 1, 1996, there
is no transaction required to be disclosed under the Securi-
ties Act or the Exchange Act pursuant to which an Affiliate
of the Company and/or any person who beneficially owns
(within the meaning of Rule 13d-3 promulgated under the Ex-
change Act) five percent or more of the outstanding Common
Stock of the Company (other than the Subsidiaries) (a) owns
any direct or indirect interest of any kind in, or is a di-
rector, officer, employee, partner or Associate (as such term
is defined in Rule 12b-2 under the Exchange Act) of, or con-
sultant or lender to, or borrower from, or has the right to
participate in the management, operations or profits of, any
person or entity which is (i) a competitor, supplier, cus-
tomer, distributor, lessor, tenant, creditor or debtor of the
Company or any Subsidiary of the Company, (ii) engaged in a
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business related to the business of the Company or any Sub-
sidiary of the Company or (iii) participating in any transac-
tion to which the Company or any Subsidiary of the Company is
a party or (b) is otherwise a party to any contract, arrange-
ment or understanding with the Company or any Subsidiary of
the Company. To the knowledge of the Stockholder, each of
the contracts, arrangements or understandings set forth on
Schedule 3.11 hereto to which the Company or any Subsidiary
of the Company is a party provides for terms and conditions
that are no less favorable to the Company than could be ob-
tained from a non-Affiliate third-party in an arm's-length
transaction.
Section 3.12. Absence of Certain Events; No Mate-
rial Adverse Change. Except as disclosed in the Commission
Documents filed prior to the date hereof, since the Balance
Sheet Date, the Company and its Subsidiaries have conducted
their business operations in the ordinary course and there
has not occurred any event or condition having or, that the
Stockholder believes is likely to have, a Material Adverse
Effect on the Company and its Subsidiaries considered as a
whole. Without limiting the generality of the foregoing,
other than as is disclosed in the Commission Documents filed
prior to the date hereof or on Schedule 3.12 hereto, since
the Balance Sheet Date there has not occurred:
(a) any change or agreement to change the charac-
ter or nature of the business of the Company or any of its
Subsidiaries;
(b) any purchase, sale, transfer, assignment, con-
veyance or pledge of the assets or properties of the Company
or any of its Subsidiaries (including by merger or other-
wise), except in the ordinary course of business;
(c) any waiver or modification by the Company or
any of its Subsidiaries of any right or rights of substantial
value, or any payment, direct or indirect, in satisfaction of
any liability, in each case, having a Material Adverse Effect
on the Company and its Subsidiaries considered as a whole;
(d) any liability, contract, agreement, license or
other commitment entered into or assumed by or on behalf of
the Company or any of its Subsidiaries relating to a merger
or acquisition or to the business, assets or properties of
the Company or any of its Subsidiaries (whether oral or writ-
ten), except in the ordinary course of business;
-13-
(e) any loan, advance or capital expenditure by
the Company or any of its Subsidiaries, except for loans, ad-
vances and capital expenditures made in the ordinary course
of business;
(f) any change in the accounting principles, meth-
ods, practices or procedures followed by the Company in con-
nection with the business of the Company or any change in the
depreciation or amortization policies or rates theretofore
adopted by the Company in connection with the business of the
Company and its Subsidiaries;
(g) any declaration or payment of any dividends,
or other distributions in respect of the outstanding shares
of capital stock of the Company or any of its Subsidiaries
(other than dividends and distributions declared or paid by
its wholly-owned Subsidiaries or by Joint Ventures);
(h) other than in connection with the exercise of
employee stock options outstanding on the date hereof, any
issuance of any shares of capital stock of the Company or any
of its Subsidiaries or any other change in the authorized
capitalization of the Company or any of its Subsidiaries;
(i) other than options granted to employees in the
ordinary course of business prior to the date hereof, any
grant or award of any options, warrants, conversion rights or
other rights to acquire any shares of capital stock of the
Company or any of its Subsidiaries; or
(j) any increase in the compensation or benefits
of any director, officer or other key employee of the Company
or any of its Subsidiaries not required by an agreement or
plan as in effect on the Balance Sheet Date to any such per-
son.
Section 3.13. Full Disclosure. All of the state-
ments made by the Stockholder in this Agreement (including,
without limitation, the representations and warranties made
by the Stockholder herein and in the schedules and exhibits
hereto which are incorporated by reference herein and which
constitute an integral part of this Agreement) do not (and on
the Closing Date shall not) include or contain any untrue
statement of a material fact, and do not (and on the Closing
Date shall not) omit to state any material fact required to
be stated therein or necessary in order to make the state-
ments therein, in light of the circumstances under which they
were made, not misleading. Other than as is disclosed in the
Commission Documents filed prior to the date hereof, there is
no material fact as to the Company or its Subsidiaries which
-14-
the Stockholder has not disclosed to HSNi and which, in the
reasonable judgment of the Stockholder, has had or will have
a Material Adverse Effect on the Company and its Subsidiaries
considered as a whole.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF HSNI
HSNi hereby represents and warrants to the Stock-
holder as follows:
Section 4.01. Organization and Good Standing.
HSNi is a corporation duly organized, validly existing and in
good standing under the laws of Delaware, and is duly quali-
fied to transact business as a foreign corporation and is in
good standing in each jurisdiction in which the nature of the
business transacted by it or the character or location of the
properties owned or leased by it requires such qualification,
except where the failure to be so qualified or in good stand-
ing would not have a Material Adverse Effect on HSNi and its
Subsidiaries considered as a whole. HSNi has full corporate
power and authority to own and manage its properties and to
carry on its business as it is now being (and as it is cur-
rently proposed to be) conducted. The copies of HSNi's cer-
tificate of incorporation (the "HSNi Certificate"), by-laws
and other organizational documents and instruments (in each
case, as amended and/or restated through the date hereof),
heretofore delivered to the Stockholder, are true, complete
and correct copies thereof. Each Subsidiary is duly orga-
nized, validly existing and in good standing under the laws
of its jurisdiction of incorporation or organization and has
the power and authority to own or lease its properties and to
conduct its business as now conducted, except as would not
result in any Material Adverse Effect on HSNi and its Subsid-
iaries considered as a whole. All outstanding shares of the
capital stock of each HSNi Subsidiary have been validly is-
sued and are fully paid and nonassessable. Except as set
forth in the HSNi Form 10-K, there are no outstanding op-
tions, warrants, rights, agreements or commitments of any na-
ture whatsoever of any third party to subscribe for or pur-
chase any equity security of any Subsidiary or to cause any
Subsidiary to issue any such equity security.
Section 4.02. Capitalization. The authorized cap-
italization of HSNi as of the date hereof consists of:
150,000,000 shares of HSNi Common Stock, $.01 par value per
share, 30,000,000 shares of HSNi Class B Common Stock, $.01
par value per share ("HSNi Class B Stock"), and 15,000,000
-15-
shares of preferred stock, $.01 par value per share, of HSNi
("HSNi Preferred Stock"), of which, as of May 1, 1997, there
were 36,094,593 shares of HSNi Common Stock outstanding,
10,225,056 shares of HSNi Class B Stock outstanding and no
shares of HSNi Preferred Stock outstanding. All such shares
outstanding on the date hereof are, and any shares that will
be issued under the HSNi Certificate, when issued, will be,
duly authorized, validly issued and fully paid and nonassess-
able. Other than (a) options to purchase an aggregate of
11,359,592 shares of HSNi Common Stock issued pursuant to em-
ployee benefit plans and agreements of HSNi as of April 30,
1997, (b) rights to acquire shares of HSNi Class B Stock and
HSNi Common Stock under agreements (the "Liberty Agreements")
described in a Joint Proxy Statement/Prospectus dated Novem-
ber 20, 1996 filed by HSNi with the Commission on Form S-4
(the "HSNi Form S-4") and (c) shares of HSNi Common Stock is-
suable upon exercise or conversion, as the case may be, of
Savoy Warrants, Savoy Options, Savoy Debentures, the Savoy
Note, HSNi Options and HSNi Debentures (each such term as de-
fined in the HSNi Form S-4), as of the date hereof, there are
no outstanding options, warrants, rights, puts, calls, com-
mitments, or other contracts, arrangements, or understandings
issued by or binding upon HSNi requiring or providing for,
and there are no outstanding debt or equity securities of
HSNi which upon the conversion, exchange or exercise thereof
would require or provide for, the issuance by HSNi of any new
or additional shares of HSNi Common Stock (or any other secu-
rities of HSNi which, with notice, lapse of time and/or pay-
ment of monies, are or would be convertible into or exercis-
able or exchangeable for shares of HSNi Common Stock). There
are no preemptive or other similar rights available to the
existing holders of HSNi Common Stock or other securities of
HSNi.
Section 4.03. Due Authorization; Execution and De-
livery. The execution, delivery and performance of this
Agreement and the consummation of the transactions contem-
plated hereby have been duly authorized by the HSNi Board of
Directors (including such authorization as may be required so
that no state anti-takeover statute or similar statute or
regulation including, without limitation, Section 203 of the
Delaware Business Corporation Act, is or becomes operative
with respect to this Agreement or the transactions contem-
plated hereby) and by the requisite consent of HSNi stock-
holders acting by consent pursuant to HSNi's By-laws and, ex-
cept for notification requirements under HSNi's By-laws and
under Rule 14c-2 under the Exchange Act to deliver the Infor-
mation Statement to HSNi stockholders at least 20 calendar
-16-
days prior to consummation of the Exchange, no other corpo-
rate proceedings on the part of HSNi are necessary to autho-
rize this Agreement and to consummate the transactions con-
templated hereby. This Agreement constitutes the legal,
valid and binding obligation of HSNi, enforceable against
HSNi in accordance with its terms, except that such enforce-
ment may be subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar
laws affecting creditors' rights, and the remedy of specific
performance and injunctive relief may, as the case may be,
subject to equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought.
Section 4.04. Absence of Breach; No Conflict. Ex-
cept as set forth on Schedule 4.04 hereto, the execution, de-
livery, and performance of this Agreement by HSNi, and the
consummation by HSNi of the transactions contemplated hereby,
will not (a) give rise to a right to (or otherwise) termi-
nate, accelerate the maturity of or increase any payment due
under, conflict with, result in a breach or violation of any
of the terms, conditions or provisions of, constitute a de-
fault (or an event which, with notice or lapse of time, or
both, would constitute a default) under, require any ap-
proval, waiver or consent under, or result in the creation or
imposition of any Lien upon any property or assets of HSNi or
any Subsidiary pursuant to the terms of, any note, bond,
mortgage, pledge, indenture, deed of trust, lease, agreement,
indemnity, obligation, commitment, instrument, franchise, li-
cense, certificate or permit to which HSNi or any of its Sub-
sidiaries is a party or by which any of their respective
properties or assets may be bound; (b) violate or conflict
with any term or provision of the certificate of incorpora-
tion, by-laws or equivalent organizational instruments and
documents (in each case, as amended and/or restated through
the date hereof) of HSNi or any of its Subsidiaries (in each
case as in effect on the Closing Date); or (c) violate any
judgment, decree, order, writ, statute, rule or regulation of
any judicial, arbitral, public, or governmental authority
having jurisdiction over HSNi, any of its Subsidiaries or any
of their respective properties or assets except as would not
result in a Material Adverse Effect on HSNi and its Subsid-
iaries considered as a whole.
Section 4.05. The HSNi Shares. The HSNi Shares
have been, and any Additional HSNi Shares will be, duly au-
thorized and legally and validly issued, are (or will be)
fully paid and nonassessable.
Section 4.06. Investment Purpose. HSNi is acquir-
ing the Shares solely for the purpose of investment and not
-17-
with view to, or for offer or sale in connection with, any
distribution thereof. HSNi acknowledges and understands that
the Shares may not be sold except in compliance with the reg-
istration requirements of the Securities Act, unless an ex-
emption therefrom is available.
HSNi hereby acknowledges and agrees that upon the
transfer by the Stockholder of the Shares to HSNi, and until
such time as the same is no longer required under the ap-
plicable requirements of the Securities Act and the rules and
regulations thereunder, the certificates representing the
Shares may bear the following legend on the reverse side
thereof:
"THE SHARES REPRESENTED BY THIS CERTIFICATE (THE
`SHARES') HAVE NOT BEEN REGISTERED UNDER THE SECU-
RITIES ACT OF 1933, AS AMENDED, OR ANY STATE LAWS
REGULATING THE SALE OF SECURITIES AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS REG-
ISTERED OR AN OPINION OF COUNSEL SATISFACTORY TO
THE CORPORATION IS OBTAINED TO THE EFFECT THAT SUCH
REGISTRATION IS NOT REQUIRED."
Section 4.07. Brokers. Other than Allen & Company
Incorporated, the fees of which shall be solely the responsi-
bility of HSNi, no broker, finder or investment banker is en-
titled to any brokerage, finder's or other fee or commission
in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of
HSNi.
Section 4.08. Commission Documents; Financial In-
formation. The HSNi Form 10-K in respect of the fiscal year
ended December 31, 1996 (the "HSNi Form 10-K"), and each re-
port, schedule, proxy, information statement or registration
statement (including all exhibits and schedules thereto and
documents incorporated by reference therein) filed by HSNi
with the Commission following the date thereof and on or be-
fore the Closing Date are collectively referred to as the
"HSNi Commission Documents". As of their respective filing
dates, the HSNi Commission Documents complied (or will com-
ply) in all material respects with the requirements of the
Securities Act and the rules and regulations of the Commis-
sion thereunder applicable to such HSNi Commission Documents,
and as of their respective dates none of the HSNi Commission
Documents contained (or will contain) any untrue statement of
a material fact or omitted (or will omit) to state a material
fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial
-18-
statements of HSNi included in the HSNi Commission Documents
comply (or will comply) as of their respective dates as to
form in all material respects with applicable accounting re-
quirements and the published rules and regulations of the
Commission with respect thereto (except as may be indicated
in the notes thereto or, in the case of the unaudited state-
ments, as permitted by Form 10-Q promulgated by the Commis-
sion), and present fairly (or will present fairly) as of
their respective dates, in all material respects, the con-
solidated financial position of HSNi and its Subsidiaries as
at the dates thereof and the consolidated results of their
operations and their consolidated cash flows for each of the
respective periods, in conformity with GAAP. As used in this
Agreement, the consolidated balance sheet of HSNi and its
Subsidiaries at March 31, 1997 included in the HSNi Form 10-Q
filed with the Commission in respect of the fiscal quarter
ended March 31, 1997 is hereinafter referred to as the "HSNi
Balance Sheet", and March 31, 1997 is hereinafter referred to
as the "HSNi Balance Sheet Date."
Except as and to the extent expressly set forth in
the HSNi Balance Sheet, or the notes, schedules or exhibits
thereto, or as disclosed in the HSNi Form 10-K, (i) as of the
HSNi Balance Sheet Date, neither HSNi nor its Subsidiaries
had any liabilities or obligations (whether absolute, contin-
gent, accrued or otherwise) that would be required to be in-
cluded on a balance sheet or in the notes, schedules or ex-
hibits thereto prepared in accordance with GAAP and (ii)
since the HSNi Balance Sheet Date, neither HSNi nor any of
its Subsidiaries has incurred any such liabilities or obliga-
tions other than in the ordinary course of business.
Section 4.09. Approvals; Compliance with Laws.
(a) Except (i) as set forth on Schedule 3.09(a) hereof and
(ii) for any filings, notices, applications and other infor-
mation as may be required to be made or supplied pursuant to
the HSR Act or the Exchange Act, no notices, reports or other
filings are required to be made by HSNi, or any of its Sub-
sidiaries with, nor are any consents, registrations, applica-
tions, approvals, permits, licenses or authorizations re-
quired to be obtained by HSNi or any of its Subsidiaries
from, any public or governmental authority or other third
party in connection with the execution and delivery of this
Agreement and the consummation of the transactions contem-
plated hereby.
(b) Except as would not result in any Material Ad-
verse Effect on HSNi and its Subsidiaries considered as a
whole, the business of HSNi and its Subsidiaries has been and
-19-
is presently being conducted in compliance with all appli-
cable Laws.
Section 4.10. Litigation. Except as would not re-
sult in any Material Adverse Effect on HSNi and its Subsid-
iaries considered as a whole, there are no judicial, adminis-
trative or arbitral actions, suits, claims, inquiries, inves-
tigations or proceedings (whether of a public or private na-
ture) pending or, to the knowledge of HSNi, threatened
against HSNi, any of its controlled Affiliates or any of the
HSNi Subsidiaries.
Section 4.11. Related Party Transactions. Except
as disclosed in the HSNi Form S-4 or the HSNi Commission
Documents, since January 1, 1996, no officer or director of
HSNi has borrowed any monies from or has outstanding any in-
debtedness or other similar obligations to HSNi or any Sub-
sidiary of HSNi. Except as disclosed in the HSNi Form S-4 or
the HSNi Commission Documents, since January 1, 1996, no of-
ficer or director of HSNi (a) owns any direct or indirect in-
terest of any kind in, or is a director, officer, employee,
partner or Associate (as such term is defined in Rule 12b-2
under the Exchange Act) of, or consultant or lender to, or
borrower from, or has the right to participate in the manage-
ment, operations or profits of, any person or entity which is
(i) a competitor, supplier, customer, distributor, lessor,
tenant, creditor or debtor of HSNi or any Subsidiary of HSNi,
(ii) engaged in a business related to the business of HSNi or
any Subsidiary of HSNi or (iii) participating in any transac-
tion to which HSNi or any Subsidiary of HSNi is a party or
(b) is otherwise a party to any contract, arrangement or un-
derstanding with HSNi or any Subsidiary of HSNi.
Section 4.12. Absence of Certain Events; No Mate-
rial Adverse Change. Except as disclosed in the HSNi Form
10-K, since the HSNi Balance Sheet Date, HSNi and its Subsid-
iaries have conducted their business operations in the ordi-
nary course and there has not occurred any event or condition
having or, that management believes is likely to have, a Ma-
terial Adverse Effect on HSNi and its Subsidiaries considered
as a whole. Without limiting the generality of the forego-
ing, other than as is disclosed in the HSNi Commission Docu-
ments filed prior to the date hereof or on Schedule 4.11
hereto, since the HSNi Balance Sheet Date there has not oc-
curred:
(a) any change or agreement to change the charac-
ter or nature of the business of HSNi or any of its Subsid-
iaries;
-20-
(b) any purchase, sale, transfer, assignment, con-
veyance or pledge of the assets or properties of HSNi or its
Subsidiaries, except in the ordinary course of business;
(c) any waiver or modification by HSNi or any HSNi
Subsidiary of any right or rights of substantial value, or
any payment, direct or indirect, in satisfaction of any lia-
bility, in each case, having a Material Adverse Effect on
HSNi and its Subsidiaries considered as a whole;
(d) any loan, advance or capital expenditure by
HSNi or any of its Subsidiaries, except for loans, advances
and capital expenditures made in the ordinary course of busi-
ness;
(e) any change in the accounting principles, meth-
ods, practices or procedures followed by HSNi in connection
with the business of HSNi or any change in the depreciation
or amortization policies or rates theretofore adopted by HSNi
in connection with the business of HSNi and its Subsidiaries;
or
(f) any declaration or payment of any dividends,
or other distributions in respect of the outstanding shares
of capital stock of HSNi or any HSNi Subsidiary (other than
dividends declared or paid by wholly-owned Subsidiaries);
(g) other than in connection with the exercise of
employee stock options or the conversion of outstanding con-
vertible debt instruments, any issuance of any shares of
capital stock of HSNi or any HSNi Subsidiary or any other
change in the authorized capitalization of the Company or any
HSNi Subsidiary, except as contemplated by this Agreement or
the Liberty Agreement; or
(h) any grant or award of any options, warrants,
conversion rights or other rights to acquire any shares of
capital stock of HSNi or any HSNi Subsidiary, except as con-
templated by this Agreement or except pursuant to employee
benefit plans, programs or arrangements in the ordinary
course of business consistent with past practice.
Section 4.13. Full Disclosure. All of the state-
ments made by HSNi in this Agreement (including, without
limitation, the representations and warranties made by HSNi
herein and in the schedules and exhibits hereto which are in-
corporated by reference herein and which constitute an inte-
gral part of this Agreement) do not (and on the Closing Date
shall not) include or contain any untrue statement of a mate-
rial fact, and do not (and on the Closing Date shall not)
-21-
omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not
misleading. Other than as is disclosed in the Form S-4 or
the HSNi Commission Documents filed prior to the date hereof,
there is no material fact as to HSNi or its Subsidiaries
which HSNi has not disclosed to the Stockholder and which, in
the reasonable judgment of HSNi, has had or will have a Mate-
rial Adverse Effect on HSNi and its Subsidiaries considered
as a whole.
ARTICLE V
COVENANTS OF THE PARTIES
Section 5.01. Additional HSNi Shares. HSNi hereby
covenants to the Stockholder that it shall reserve and keep
available out of its authorized but unissued shares of HSNi
Common Stock (including any shares of HSNi Common Stock held
by HSNi in its corporate treasury), for the purpose of ef-
fecting the adjustment in full of the number of HSNi Shares
deliverable hereunder in accordance with Section 2.02 of this
Agreement, such number of its duly authorized shares of HSNi
Common Stock as shall be sufficient to effect such adjust-
ment.
Section 5.02. Registration Rights. (a) HSNi
hereby grants the Stockholder certain registration rights on
the basis of one demand registration right for each 4,000,000
shares of Common Stock being exchanged hereunder, together
with customary piggyback registration rights relating
thereto. Accordingly, HSNi hereby covenants to the Stock-
holder that following the one year anniversary of the Closing
Date, if requested by the Stockholder, it shall be required
promptly to cause the HSNi Shares and the Additional HSNi
Shares, if any, owned by the Stockholder or his Affiliates to
be registered under the Securities Act in order to permit the
Stockholder or such Affiliate to sell such shares in one or
more (but not more than three) registered public offerings
(each, a "Demand Registration"). The Stockholder shall also
be entitled to customary piggyback registration rights. If
the amount of shares sought to be registered by the Stock-
holder and his Affiliates pursuant to any Demand Registration
is reduced by more than 50% pursuant to any underwriters'
cutback, then the Stockholder may elect to request the Com-
pany to withdraw such registration, in which case, such reg-
istration shall not count as one of the Stockholder's three
Demand Registrations. If the Stockholder requests that any
Demand Registration be an underwritten offering, then the
-22-
Stockholder shall select the underwriter(s) to administer the
offering, provided that such underwriter(s) shall be reason-
ably satisfactory to HSNi. If a Demand Registration is an
underwritten offering and the managing underwriter advises
the Stockholder in writing that in its opinion the total num-
ber or dollar amount of securities proposed to be sold in
such offering is such as to materially and adversely affect
the success of such offering, then HSNi will include in such
registration, first, the securities of the Stockholder, and,
thereafter, any securities to be sold for the account of oth-
ers who are participating in such registration (as determined
by HSNi). In connection with any Demand Registration or in-
clusion of the Stockholder's or his Affiliate's shares in a
piggyback registration, the Company, the Stockholder and/or
his Affiliates shall enter into an agreement containing terms
(including representations, covenants and indemnities by HSNi
and the Stockholder), and shall be subject to limitations,
conditions, and blackout periods, customary for a secondary
offering by a selling stockholder. The costs of the regis-
tration (other than underwriting discounts, fees and commis-
sions) shall be paid by HSNi. HSNi shall not be required to
register such shares if the Stockholder would be permitted to
sell the HSNi Shares and/or Additional HSNi Shares in the
quantities proposed to be sold and at such time under Rule
144 of, or other exemption from, the Securities Act.
(b) If HSNi and the Stockholder cannot agree as to
what constitutes customary terms within 10 days of the
Stockholder's request for registration (whether in a Demand
Registration or a piggyback registration), then such determi-
nation shall be made by a law firm of national reputation mu-
tually acceptable to HSNi and the Stockholder.
Section 5.03. HSR Filings. Following the date hereof,
the Stockholder and HSNi shall, and the Stockholder shall use
all reasonable efforts to cause the Company to, file promptly
any forms required under applicable law and take any other
action reasonably requested in connection with obtaining the
expiration or termination of the waiting period under the HSR
Act.
Section 5.04. Access to Information. (a) From
the date hereof until the Closing, (i) the Stockholder shall
use all reasonable efforts to cause the Company and its Sub-
sidiaries and each of the Company's and its Subsidiaries' of-
ficers, directors, employees, agents, representatives, ac-
countants and counsel (collectively, "Representatives") to,
and (ii) HSNi and its Subsidiaries and each of HSNi's and its
Subsidiaries' Representatives shall: (x) afford the offic-
ers, employees and authorized agents, accountants, counsel
-23-
and representatives of the other party reasonable access to
its offices, properties, plants, other facilities, books and
records and to those officers, directors, employees, agents,
accountants and counsel who have any knowledge relating to
its business and (y) furnish to the officers, employees and
authorized agents, accountants, counsel and representatives
of the other party such additional financial and operating
data and other information regarding its assets, properties
and goodwill as the other party may from time to time reason-
ably request. All information obtained by a party or its
Representatives pursuant to this Section 5.04 shall be kept
confidential in accordance with the provisions of Article XII
hereof.
Section 5.05. Further Action. Each of the parties
hereto shall use all reasonable efforts to take, or cause to
be taken, all appropriate action, do or cause to be done all
things necessary, proper or advisable under applicable law,
and execute and deliver such documents and other papers, as
may be required to carry out the provisions of this Agreement
and consummate and make effective the transactions contem-
plated by this Agreement (including, without limitation,
promptly preparing, filing with the Commission and mailing to
stockholders, in the case of HSNi, the Information Statement
and, in the case of the Stockholder (and to the extent re-
quired), the Company Information Statement). HSNi and the
Stockholder shall, and the Stockholder shall use all reason-
able efforts to cause the Company to (a) cooperate with the
parties hereto in order to obtain any consents (including,
without limitation, the Bank Consent) required to be obtained
or to otherwise take action to effectuate the transactions
contemplated hereby (including without limitation refinancing
the Credit Agreement on terms reasonably acceptable to the
Company and HSNi (the "Bank Refinancing") if the Bank Consent
is not obtained) and (b) take such action as is required so
as to cause the representations and warranties made by such
party to be true at and as of the Closing, the covenants con-
tained herein to be complied with and the conditions to the
parties' obligations to proceed to the Closing to be satis-
fied.
Section 5.06. Conduct of Business. Except as con-
templated by this Agreement, during the period from the date
of this Agreement to the Closing, the Stockholder shall use
all reasonable efforts to cause the Company and its Subsid-
iaries to carry on their businesses in the ordinary course
consistent with past practice and in compliance in all mate-
rial respects with all applicable laws and regulations and,
to the extent consistent therewith, shall use all reasonable
-24-
efforts to preserve intact their current business organiza-
tions, use reasonable efforts to keep available the services
of their current officers and other key employees and pre-
serve their relationships with those persons having business
dealings with them to the end that their goodwill and on-
going businesses shall be unimpaired at the Closing. Without
limiting the generality of the foregoing, during the period
from the date of this Agreement to the Closing, the Stock-
holder shall use all reasonable efforts to cause the Company
and its Subsidiaries not to (without the consent of HSNi)
take any action that would cause the representations and war-
ranties made in paragraphs (a) through (j) of Section 3.12 to
be untrue. In addition, as an accommodation to HSNi to fa-
cilitate an orderly transition, the Stockholder will continue
to serve as Chairman of the Company for a period not to ex-
ceed six months following the Closing.
Section 5.07. Tag-Along Rights. HSNi hereby con-
firms that it has been informed of the "Tag-Along Rights"
provided for in the Shareholders Agreement and hereby agrees,
subject to the accuracy of the last two sentences of Section
3.05(b) of this Agreement, to purchase shares of Common Stock
from those Company shareholders who exercise their "Tag-Along
Rights" in accordance with the terms of the Shareholders
Agreement and will provide demand registration rights to such
holders on the basis of one demand registration right for
each 4,000,000 shares of Common Stock sold to HSNi pursuant
to such tag-along right. In addition, to the extent any such
exchanging holder receives under this Agreement more than 1%
of HSNi's outstanding equity securities, such holder shall be
permitted to "piggyback" on any demand registration by the
Stockholder if at the time thereof such holder cannot sell
his or its HSNi shares received pursuant to his or its tag-
along right under Rule 144 under the Securities Act (or its
equivalent) without volume limitation. The Stockholder shall
be solely responsible for giving notices to such holders in
connection with any such registration.
Section 5.08. Stockholders Agreement. In connec-
tion with the Closing, the Stockholder shall enter into the
Stockholders Agreement attached hereto as Exhibit A (the
"Stockholders Agreement") with the parties thereto. HSNi
shall use all reasonable efforts to cause Diller and Liberty
Media Corporation to enter into the Stockholders Agreement.
-25-
ARTICLE VI
DIRECTORS
Section 6.01. Director Election. Prior to the
Closing, the Stockholder shall use all reasonable efforts to
cause the directors of the Company and the Company to exer-
cise all authority under applicable law (including, without
limitation, if required, preparing, filing and mailing to the
Company's stockholders an information statement (the "Company
Information Statement") in accordance with Rule 14f-1 under
the Exchange Act) so that, effective upon the Closing, the
Board of Directors of the Company shall consist of up to a
majority of persons designated by HSNi (the precise number of
which shall be determined by HSNi). Such designees shall be
reasonably satisfactory to the Company's directors in the ex-
ercise of their fiduciary duties to the Company's stockhold-
ers. HSNi shall cooperate with the Company and shall provide
to the Company the information required to be contained in
the Company Information Statement, to the extent the Company
Information Statement is required under the Exchange Act,
concerning the persons proposed by HSNi to serve as Company
directors.
Section 6.02. HSNi Director Appointment. Prior to
the Closing, HSNi shall take such action under applicable law
so that, effective upon the Closing, the Stockholder shall be
elected to serve as a director of HSNi. Subject to ap-
plicable law (including the rules and regulations of the
FCC), so long as the Stockholder has not disposed of one-
third or more of the HSNi Shares acquired hereunder (ap-
propriately adjusted for stock splits, stock dividends, com-
binations, reorganizations and the like), other than to his
Permitted Transferees (provided that at all times the Stock-
holder is the beneficial owner of at least 5% of HSNi's out-
standing equity securities (assuming for this purpose that
all HSNi equity securities issuable under the Liberty Agree-
ments are outstanding)), HSNi shall take all necessary action
to cause the Stockholder (or a designee of the Stockholder
acceptable to HSNi) to be included in the slate of nominees
recommended by the HSNi Board and shall use all reasonable
efforts to cause the election of the Stockholder or such des-
ignee.
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ARTICLE VII
CLOSING; SECOND CLOSING
Section 7.01. Closing. Subject to the provisions
of Articles VIII and IX hereof and unless otherwise agreed by
the parties, the closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the of-
fices of Wachtell, Lipton, Rosen & Katz, 51 W. 52nd Street,
New York, New York at 10:00 a.m., Eastern time, on July 9,
1997; provided, however, that if the conditions set forth in
Sections 8.03, 8.05, 8.09, 9.06, 9.07 and 9.08 shall not have
been satisfied or, where legally permissible, waived by such
date, the Closing shall occur on the second Business Day af-
ter the last of such conditions has been satisfied or waived,
at such time and place as is specified above. The date of
the Closing is referred to in this Agreement as the "Closing
Date."
Section 7.02. Deliveries. At or prior to the
Closing, the parties shall deliver all documents, instru-
ments, certificates and writings required to be executed and
delivered by them at or prior to the Closing pursuant to this
Agreement.
Section 7.03. Second Closing. If an adjustment in
the number of HSNi Shares to be delivered in the Exchange is
required to be made under Section 2.02(b), a second closing
(the "Second Closing") shall take place at the offices of
Wachtell, Lipton, Rosen & Katz, 51 W. 52nd Street, New York,
New York at 10:00 a.m., Eastern time, on the fifth Business
Day following the determination of the number of Additional
HSNi Shares to be delivered in accordance with Section
2.02(b).
Section 7.04. Deliveries at Second Closing. At
the Second Closing, HSNi shall deliver to the Stockholder,
against receipt therefor, certificates representing the Ad-
ditional HSNi Shares and/or the FCC Excess Shares bearing a
legend as set forth in Section 3.06.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
THE STOCKHOLDER TO EXCHANGE, SELL AND DELIVER THE SHARES
The obligations hereunder of the Stockholder to ex-
change, sell and deliver the Shares to HSNi, and accept de-
livery of the HSNi Shares, are subject to the satisfaction,
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at or before the Closing, of each of the following conditions
set forth in Section 8.01 through Section 8.10 below. These
conditions are for the Stockholder's sole benefit and may be
waived by the Stockholder (in whole or in part) at any time
in his sole discretion.
Section 8.01. Accuracy of HSNi's Representations
and Warranties. The representations and warranties of HSNi
contained in Article IV hereof shall be true and correct as
of the date when made and as of the Closing Date, as though
made on such date (except that representations and warranties
made as of a specific date need be true and correct only as
of such date), and the Stockholder shall have received a cer-
tificate attesting thereto signed by a duly authorized of-
ficer or agent of HSNi.
Section 8.02. Performance by HSNi. HSNi shall
have performed, satisfied and complied with, in all material
respects, all covenants, agreements, and conditions required
by this Agreement to be performed, satisfied or complied with
by it on or prior to the Closing Date, and the Stockholder
shall have received a certificate attesting thereto signed by
a duly authorized officer or agent of HSNi.
Section 8.03. HSR Act. The waiting periods under
the HSR Act applicable to the Stockholder's acquisition of
the HSNi Shares and to HSNi's acquisition of the Shares shall
have expired or have been earlier terminated.
Section 8.04. No Injunction. No temporary, pre-
liminary or permanent injunction or any order by any federal
or state court of competent jurisdiction shall have been is-
sued which prohibits or otherwise seeks to prohibit, re-
strain, enjoin or delay the consummation of any of the trans-
actions contemplated by this Agreement.
Section 8.05. Information Statements. Twenty cal-
endar days shall have elapsed from the mailing of the Infor-
mation Statement to HSNi stockholders, and, if required under
the Exchange Act, 10 calendar days shall have elapsed from
the mailing of the Company Information Statement to the
Company's stockholders.
Section 8.06. Stockholders Agreement. The Stock-
holders Agreement shall be executed and delivered by Diller
and Liberty Media Corporation.
Section 8.07. No Adverse Action or Decision.
There shall be no action, suit, investigation or proceeding
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pending with, or to the knowledge of the Stockholder, threat-
ened by, any public or governmental authority, against or af-
fecting HSNi or the Stockholder or their respective proper-
ties or rights, before any court, arbitrator or administra-
tive or governmental body which (a) seeks to restrain, enjoin
or prevent the consummation of the transactions contemplated
by this Agreement, or (b) challenges the validity or legality
of any transactions contemplated by this Agreement or seeks
to recover damages or to obtain other relief in connection
with any such transactions.
Section 8.08. No Material Adverse Effect.
(a) There shall not have occurred and there shall
not otherwise exist any condition, event or development hav-
ing, or likely to have (in the reasonable judgment of the
Stockholder), a Material Adverse Effect on HSNi and its Sub-
sidiaries considered as a whole.
(b) Diller shall not have ceased serving HSNi as
its Chief Executive Officer and Chairman of the Board.
Section 8.09. Approvals and Consents. HSNi shall
have duly obtained, received or effected (and all applicable
waiting and termination periods, if any, including any exten-
sions thereof, under any applicable law, statute, regulation
or rule shall have expired or terminated) all authorizations,
consents, approvals, licenses, franchises, permits and cer-
tificates by or of, and shall have made all filings and ef-
fected all notifications, registrations and qualifications
with, all federal, state and local governmental and regula-
tory authorities necessary for the consummation of the trans-
actions contemplated hereby. The Bank Consent shall have
been obtained or, in lieu thereof, the Bank Refinancing shall
have been effected.
Section 8.10. Proceedings. All corporate and
other proceedings to be taken by HSNi in connection with the
transactions contemplated by this Agreement and all documents
reflecting or evidencing such proceedings shall be reasonably
satisfactory in scope, form and substance to the Stockholder
and his legal counsel, and the Stockholder and his legal
counsel shall have received all such duly executed counter-
part originals or certified or other copies of such documents
and instruments as they may reasonably request.
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ARTICLE IX
CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF HSNI TO EXCHANGE, ISSUE AND DELIVER THE SHARES
The obligations of HSNi hereunder to exchange, is-
sue and deliver the HSNi Shares, and accept delivery of the
Shares, are subject to the satisfaction, at or before the
Closing, of each of the following conditions set forth in
Section 9.01 through Section 9.08 below. These conditions
are for HSNi's sole benefit and may be waived (in whole or in
part) at any time in its sole discretion.
Section 9.01. Accuracy of the Stockholder's Repre-
sentations and Warranties. The representations and warran-
ties of the Stockholder contained in Article III hereof shall
be true and correct as of the date when made and as of the
Closing Date, as though made on such date (except that repre-
sentations and warranties made as of a specific date need be
true and correct only as of such date), and HSNi shall have
received a certificate attesting thereto signed by the Stock-
holder.
Section 9.02. Performance by the Stockholder. The
Stockholder shall have performed, satisfied and complied
with, in all material respects, all covenants, agreements and
conditions required by this Agreement to be performed, satis-
fied or complied with on or prior to the Closing Date, and
HSNi shall have received a certificate attesting thereto
signed by the Stockholder.
Section 9.03. No Adverse Action or Decision.
There shall be no action, suit, investigation or proceeding
pending with, or to the knowledge of HSNi, threatened by, any
public or governmental authority, against or affecting the
Company or its properties or rights, before any court, arbi-
trator or administrative or governmental body which (a) seeks
to restrain, enjoin or prevent the consummation of the trans-
actions contemplated by this Agreement, or (b) challenges the
validity or legality of any transactions contemplated by this
Agreement or seeks to recover damages or to obtain other re-
lief in connection with any such transactions.
Section 9.04. No Material Adverse Effect. There
shall not have occurred and there shall not otherwise exist
any condition, event or development having, or likely to have
(in the reasonable judgment of HSNi), a Material Adverse Ef-
fect on the Company and its Subsidiaries considered as a
whole.
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Section 9.05. No Injunction. No temporary, pre-
liminary or permanent injunction or any order by any federal
or state court of competent jurisdiction shall have been is-
sued or threatened which prohibits or otherwise seeks to pro-
hibit, restrain, enjoin or delay the consummation of any of
the transactions contemplated by this Agreement.
Section 9.06. Approvals and Consents. The Company
and the Stockholder, as applicable, shall have duly obtained,
received or effected (and all applicable waiting and termina-
tion periods, if any, including any extensions thereof, under
any applicable law, statute, regulation or rule, shall have
expired or terminated) all authorizations, consents, approv-
als, licenses, franchises, permits and certificates by or of,
and shall have made all filings and effected all notifica-
tions, registrations and qualifications with, all federal,
state and local governmental and regulatory authorities nec-
essary for the consummation of the transactions contemplated
hereby. The Bank Consent shall have been obtained or, in
lieu thereof, the Bank Refinancing shall have been effected.
Section 9.07. HSR Act. The waiting periods under
the HSR Act applicable to the Stockholder's acquisition of
the HSNi Shares and to HSNI's acquisition of the Shares shall
have expired or have been earlier terminated.
Section 9.08. Information Statements. Twenty cal-
endar days shall have elapsed from the mailing of the Infor-
mation Statement to HSNi stockholders, and, if required under
the Exchange Act, 10 calendar days shall have elapsed from
the mailing of the Company Information Statement to the
Company's stockholders.
Section 9.09. Proceedings. All corporate and
other proceedings to be taken by the Company in connection
with the transactions contemplated by this Agreement and all
documents reflecting or evidencing such proceedings shall be
reasonably satisfactory in scope, form and substance to HSNi
and its legal counsel, and HSNi and its legal counsel shall
have received all such duly executed counterpart originals or
certified or other copies of such documents and instruments
as they may reasonably request.
ARTICLE X
TERMINATION; EXPENSES
Section 10.01. Termination by Mutual Written Con-
sent. This Agreement may be terminated and the transactions
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contemplated hereby may be abandoned, for any reason, at any
time prior to the Closing Date, by the mutual written consent
of the Stockholder and HSNi.
Section 10.02. Termination by the Stockholder or
HSNi. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned by action of the Stock-
holder or HSNi if and to the extent that (a) the Closing
shall not have occurred at or prior to 5:00 p.m., Eastern
time, on December 31, 1997; provided, however, that the right
to terminate this Agreement under this Section 10.02 shall
not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or re-
sulted in, the failure of the Closing Date to occur on or be-
fore such date; or (b) any court or governmental authority of
competent jurisdiction shall have issued an order, decree,
writ or ruling or taken any other action, or there shall be
in effect any statute, rule or regulation, temporarily, pre-
liminarily or permanently restraining, enjoining or otherwise
prohibiting the Exchange or the consummation of the transac-
tions contemplated by this Agreement.
Section 10.03. Termination by HSNi. This Agree-
ment may be terminated and the transactions contemplated
hereby may be abandoned by action of HSNi, if (a) the Stock-
holder shall have failed to comply in any material respect
with any of the covenants or agreements contained in this
Agreement to be complied with or performed by the Stockholder
at or prior to such date of termination, and the Stockholder
shall not, within a reasonable period of time after notice of
such failure, have cured or commenced prompt and diligent
measures which would promptly cure such failure, (b) there
shall have been a misrepresentation or breach by the Stock-
holder with respect to any representation or warranty made by
him in this Agreement which would entitle HSNi not to consum-
mate the transactions contemplated hereby under Article IX
and such misrepresentation or breach cannot be cured prior to
the Closing Date, or (c) there shall have occurred and be
continuing any condition, event or development having, or
reasonably likely to have, a Material Adverse Effect on the
Company and its Subsidiaries considered as a whole.
Section 10.04. Termination by the Stockholder.
This Agreement may be terminated and the transactions contem-
plated hereby may be abandoned by action of the Stockholder,
at any time prior to the Closing Date, if (a) HSNi shall have
failed to comply in any material respect with any of the cov-
enants or agreements contained in this Agreement to be com-
plied with or performed by HSNi at or prior to such date of
termination and HSNi shall not, within a reasonable period of
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time after notice of such failure, have cured or commenced
prompt and diligent measures which would promptly cure such
failure, (b) there shall have been a misrepresentation or
breach by HSNi with respect to any representation or warranty
made by it in this Agreement which would entitle the Stock-
holder not to consummate the transactions contemplated hereby
under Article VIII and such misrepresentation or breach can-
not be cured prior to the Closing Date, (c) there shall have
occurred and be continuing any condition, event or develop-
ment having, or reasonably likely to have, a Material Adverse
Effect on HSNi and its Subsidiaries considered as a whole, or
(d) Diller shall have ceased serving HSNi as its Chief Execu-
tive Officer and Chairman of the Board.
Section 10.05. Expenses. Except as provided in
Section 3.7 hereof, each party shall be responsible for the
payment of any expenses incurred by such party (including
fees and expenses of counsel) incurred in connection with
this Agreement and the transactions contemplated hereby.
ARTICLE XI
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
Except as set forth below in the proviso to this
Article XI, the representations and warranties of the parties
set forth in this Agreement shall not survive the Closing
Date; provided, however, that (a) the representations and
warranties of the Stockholder set forth in Sections 3.03,
3.05, 3.06 and 3.07 of this Agreement shall survive the Clos-
ing Date indefinitely, and (b) the representations and war-
ranties of HSNi set forth in Sections 4.03, 4.05, 4.06 and
4.07 of this Agreement shall survive the Closing Date and
continue indefinitely. All covenants of the parties con-
tained in this Agreement that contemplate action following
the Closing shall survive the Closing; all other covenants
shall terminate at the Closing.
ARTICLE XII
CONFIDENTIALITY
Each party hereto agrees that any nonpublic infor-
mation heretofore delivered, provided or made available to it
or to be provided to it in the future, shall not be used to
the detriment of HSNi, the Company or any of their respective
Subsidiaries or their business or operations and shall be
-33-
kept confidential and not disclosed to any third party; pro-
vided, however, that disclosure of such information may be
made (a) to any officers, directors, general partners, repre-
sentatives, shareholders, agents, employees, Affiliates and
Associates of the person receiving such information who agree
to keep the nonpublic information confidential to the same
extent and degree as provided herein, or (b) to the extent
the same: (i) shall be or hereinafter become publicly avail-
able other than as a result of a disclosure by the party re-
ceiving such information; (ii) was lawfully available to the
party receiving such information prior to its having received
such information; (iii) becomes available to the party re-
ceiving such information from a source other than the party
providing such information, provided such source is not known
to the receiving party to be bound by a duty of confidential-
ity to the party providing such information; or (iv) shall be
required to be disclosed by law or during the course of or in
connection with any litigation or other proceeding, provided
that the party so required to make disclosure shall notify
the party provided such information of its obligation to dis-
close such information and shall fully cooperate with the
party which provided such information in order to protect
such confidentiality, or (c) by any party in connection with
the enforcement of its rights hereunder (to the minimum ex-
tent necessary to enforce such rights, as determined in good
faith by the party seeking to enforce such right).
ARTICLE XIII
MISCELLANEOUS
Section 13.01. Notices. Except as otherwise pro-
vided herein, whenever it is provided herein that any notice,
demand, request, consent, approval, declaration or other com-
munication shall or may be given to or served upon any of the
parties by any other party, or whenever any of the parties
desires to give or serve upon any other communication with
respect to this Agreement, each such notice, demand, request,
consent, approval, declaration or other communication shall
be in writing and either shall be delivered in person with
receipt acknowledged or sent by registered or certified mail,
return receipt requested, postage prepaid, or by overnight
mail or courier, or delivery service or by telecopy and con-
firmed by telecopy answerback, addressed as follows:
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(a) If to the Stockholder, to:
Paul G. Allen
c/o William Savoy
110 110th Avenue, NE
Suite 500
Bellevue, Washington 98004
Telephone: (206) 453-1940
Telecopy: (206) 453-1985
With a copy to:
Irell & Manella
1800 Avenue of the Stars
Suite 900
Los Angeles, California 90067
Telephone: (310) 203-7069
Telecopy: (310) 282-5669
Attention: Al Segel
(b) If to HSNi, to:
HSN, Inc.
2501 118th Avenue North
St. Petersburg, Florida 33716
Telephone: (813) 572-8585
Telecopy: (813) 556-6882
Attention: James G. Gallagher
With a copy to:
Wachtell, Lipton, Rosen & Katz
51 W. 52nd Street
New York, New York 10019
Telephone: (212) 403-1000
Telecopy: (212) 403-2000
Attention: Pamela S. Seymon
or at such other address as may be substituted by notice
given as herein provided. The furnishing of any notice re-
quired hereunder may be waived in writing by the party en-
titled to receive such notice. Every notice, demand, re-
quest, consent, approval, declaration or other communication
hereunder shall be deemed to have been duly given or served
on (A) the date on which personally delivered, with receipt
acknowledged, (B) the date on which telecopied and confirmed
-35-
by telecopy answerback, (C) the next Business Day if deliv-
ered by overnight or express mail, courier or delivery ser-
vice, or (D) three Business Days after the same shall have
been deposited in the United States mail, as the case may be.
Failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration or other communica-
tion to the persons designated above to receive copies shall
in no way adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other com-
munication.
Section 13.02. Entire Agreement. This Agreement
(together with the annex, schedules and exhibits hereto which
are incorporated by reference herein) together with the
Stockholders Agreement represent the entire agreement and un-
derstanding between the parties hereto with respect to the
subject matter hereof and supersedes any and all prior oral
and written agreements, arrangements and understandings among
the parties hereto with respect to such subject matter, and
can be amended, supplemented or changed, and any provision
hereof can be waived, only by a written instrument making
specific reference to this Agreement signed by the party
against whom enforcement of any such amendment, supplement,
modification or waiver is sought.
Section 13.03. Successors and Assigns. This
Agreement shall be binding upon the parties hereto and their
respective successors and permitted assigns. Neither the
Stockholder nor HSNi may assign its rights hereunder without
the prior written consent of the other party hereto.
Section 13.04. Paragraph Headings. The paragraph
headings contained in this Agreement are for general refer-
ence purposes only and shall not affect in any manner the
meaning or interpretation of the terms or other provisions of
this Agreement.
Section 13.05. Reasonable Efforts. Whenever in
this Agreement the Stockholder is required to use all reason-
able efforts to cause the Company to take or refrain from
taking any action, the Stockholder shall not be required to
breach his fiduciary duties to the Company in causing the
Company to take or refrain from taking such action. Notwith-
standing the foregoing, in the event the Company fails to
comply with the covenants contained herein despite the
Stockholder's efforts, for purposes of HSNi's rights under
this Agreement, such failure shall be a breach of the ap-
plicable covenant, permitting, to the full extent of HSNi's
rights under this Agreement, HSNi to terminate this Agree-
ment, and there shall be no liability on the part of the
-36-
Stockholder for the Company's failure (provided the Stock-
holder acts in good faith).
Section 13.06. Applicable Law. This Agreement
shall be governed by, construed and enforced in accordance
with the laws of the State of New York, applicable to con-
tracts to be made, executed, delivered and performed wholly
within such state, and in any case, without regard to the
conflicts of law principles of such state.
Section 13.07. Severability. If at any time sub-
sequent to the date hereof, any provision of this Agreement
shall be held by any court of competent jurisdiction to be
illegal, void or unenforceable, such provision shall be of no
force and effect, but the illegality or unenforceability of
such provision shall have no effect upon and shall not impair
the enforceability of any other provision of this Agreement.
Section 13.08. Equitable Remedies. The parties
hereto agree that irreparable harm would occur in the event
that any of the covenants contained in this Agreement were
not performed in all material respects by the parties hereto
in accordance with their specific terms or conditions or were
otherwise breached, and that money damages are an inadequate
remedy for breach thereof because of the difficulty of ascer-
taining and quantifying the amount of damage that will be
suffered by the parties hereto in the event that such cov-
enants are not performed in accordance with their terms or
are otherwise breached. It is accordingly hereby agreed that
the parties hereto shall be entitled to an injunction or in-
junctions to restrain, enjoin and prevent breaches and vio-
lations of any of the covenants contained in this Agreement
by the other parties and to enforce specifically the terms
and provisions hereof in any court of the United States or
any state having competent jurisdiction, such remedy being in
addition to and not in lieu of, any other rights and remedies
to which the other parties are entitled to at law or in eq-
uity.
Section 13.09. No Waiver. The failure of any
party at any time or times to require performance of any pro-
vision hereof shall not affect the right at a later time to
enforce the same. No waiver by any party of any condition,
and no breach of any provision, term, covenant, representa-
tion or warranty contained in this Agreement, whether by con-
duct or otherwise, in any one or more instances, shall be
deemed to be construed as a further or continuing waiver of
any such condition or of the breach of any other provision,
term, covenant, representation or warranty of this Agreement.
-37-
Section 13.10. Counterparts. This Agreement may
be executed in one or more counterparts, each of which shall
be deemed an original, but all of which together shall con-
stitute but one and the same original instrument.
-38-
IN WITNESS WHEREOF, the parties hereto have duly
executed and delivered this Agreement, as of the day and year
first above written.
PAUL G. ALLEN
By /s/ Paul G. Allen
Paul G. Allen
Attorney in Fact
HSN, INC.
By /s/Victor Kaufman
Name: Victor Kaufman
Office of the Chairman
-39-
STOCKHOLDERS AGREEMENT
This Stockholders Agreement is made and entered into
as of May 20, 1997 by and among Paul G. Allen, an individual
("ALLEN"); Barry Diller, an individual ("DILLER"), on behalf of
himself and his Affiliates (as defined below) (including,
without limitation, Arrow Holdings, LLC, BDTV, Inc. and BDTV
II, Inc.); and Liberty Media Corporation, a Delaware
corporation ("LIBERTY"), on behalf of itself and its Affiliates
(including, without limitation, Liberty HSN, Inc.).
WHEREAS, pursuant to a Stock Exchange Agreement,
dated May 20, 1997, between Allen and HSN, Inc., a Delaware
corporation (the "COMPANY") (the "EXCHANGE AGREEMENT"), Allen
will acquire shares of HSNi Common Stock, as defined below;
WHEREAS, Diller and Liberty and their respective
Affiliates collectively have "beneficial ownership" (within the
meaning of Rule 13d-3 promulgated under the Securities Exchange
Act of 1934, as amended) of an aggregate number of shares of
HSNi Common Stock and HSNi Class B Common Stock, as defined
below, which represent over 50% of the total voting power of
the outstanding Voting Stock of the Company; and
WHEREAS, Allen, Diller and Liberty desire to enter
into this Agreement to set forth their respective rights and
obligations with respect to certain matters relating to their
shares of Common Stock (as defined below).
NOW, THEREFORE, in consideration of the mutual
agreements contained herein, the parties hereto agree as
follows:
Section 1. Definitions. As used in this Agreement,
the following terms shall have the following meanings:
"Affiliate" of a specified person shall mean any
other person directly or indirectly controlling or controlled
by or under direct common control with such specified person.
For purposes of this definition, "control," when used with
respect to any person, means the power to direct the management
and policies of such person, directly or indirectly, whether
through the ownership of voting securities, by contract or
otherwise.
"Board of Directors" shall mean the Board of
Directors of the Company.
"Common Stock" shall mean and include, without
limitation, (i) the HSNi Common Stock; (ii) the HSNi Class B
Common Stock; (iii) any security or other instrument (A)
received as a dividend on, or other payment made to holder of,
the Common Stock (or any security or other instrument referred
to in this definition); (B) issued in connection with a split
of the Common Stock (or any security or other instrument
referred to in this definition) or as a result of any exchange
or reclassification of the Common Stock (or any security or
other instrument referred to in this definition)
or (C) issued as a result of any consolidation, merger or other
event which results in the conversion or exchange of the Common
Stock (or any security or other instrument referred to in this
definition); and (iv) any option, warrant or right to acquire
the Common Stock (or any security or other instrument referred
to in this definition).
"HSNi Common Stock" shall mean common stock, par
value $.01 per share of the Company.
"HSNi Class B Common Stock" shall mean Class B common
stock, par value $.01 per share of the Company.
"Permitted Transferee" shall mean, with respect to
Allen, (i) an Affiliate of Allen in which Allen is the sole
equity owner, (ii) Allen's spouse, parents, members of his
immediate family or his lineal descendants or to a trust the
beneficiary of which is any of such persons, (iii) any of
Allen's executors, administrators, testamentary trustees,
legatees or beneficiaries named by will or by the laws of
intestate succession or (iv) any investment fund, investment
account or investment entity whose investment manager,
investment advisor, general partner or managing member is Allen
or a Permitted Transferee of Allen and such manager, advisor,
partner or member has sole voting power with respect to the
HSNi Common Stock so transferred by Allen.
"Person" or "person" shall mean an individual,
trustee, corporation, partnership, limited liability company,
joint stock company, trust, unincorporated association, union,
business association, firm or other entity.
"Voting Stock" shall mean all capital stock of the
Company that by its terms may be voted on all matters submitted
to the stockholders of the Company generally.
Section 2. Voting Agreement Relating to Election of
Directors.
At all times after the date of this Agreement, (i)
Allen shall be entitled to nominate Allen (or a designee of his
acceptable to the Company) in each election of the Company's
directors or, if the Company shall have a staggered Board of
Directors, in each election in which Allen or his designee
would stand for re-election upon the expiration of his or her
term as a director of the Company, (ii) each of Diller and
Liberty agrees, and agrees to cause each of his or its
respective Affiliates, to vote all shares of Voting Stock over
which he or it may then exercise voting power, at any annual or
special meeting of stockholders of the Company called for the
purpose of the election of directors or to execute written
consents of stockholders without a meeting with respect to the
election of directors, in favor of Allen or his designee (or,
if necessary, to cause his or its designee or designees on the
Board of Directors of the Company, if any, to vote in favor of
the election of Allen or his designee) and (iii) each of Diller
and Liberty shall, and shall cause his or its respective
Affiliates to, take whatever other action is reasonably
necessary to ensure that the Board of Directors shall at all
times include Allen or his designee as a member (including
voting all shares of Voting Stock over which he or it may the
exercise voting power to ensure that the
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Company's charter and bylaws do not at any time conflict with
the provisions of this Agreement), subject to applicable law.
Allen or his designee shall not be removed except for cause or
with the consent of Allen. Upon any such removal for cause or
with the consent of Allen, Allen shall have the right to
designate a replacement director.
Nothing in this Agreement shall be construed as
requiring that Allen or his designee be counted as one of the
directors that Diller or Liberty would be entitled to designate
under the Stockholders Agreement dated as of August 24, 1995,
as amended, by and between Diller and Liberty following a
"Restructuring Transaction" or a "Change in Law" (as such terms
are defined in such Stockholders Agreement).
This Agreement shall terminate upon the disposition
by Allen and his Permitted Transferees collectively, in one or
more transactions, to third parties (other than Permitted
Transferees) of one-third or more of the shares of HSNi Common
Stock (as adjusted for stock splits, stock dividends,
combinations, reorganizations and the like) acquired by Allen
in the first closing of the Exchange Agreement; provided,
however, that this Agreement shall terminate earlier if Allen
and his Permitted Transferees do not beneficially own at least
5% of the Company's outstanding equity securities (assuming for
this purpose that all Company equity securities issuable under
the Liberty Agreements (as defined in the Exchange Agreement)
are outstanding).
Section 3. Miscellaneous.
(a) Effective Time of this Agreement. This
Agreement shall become effective upon the first closing of the
Exchange Agreement. If the Exchange Agreement is terminated
for any reason, this Agreement shall also terminate.
(b) Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
ENTIRELY WITHIN THE STATE OF DELAWARE.
(c) Binding Effect. This Agreement shall be binding
upon and inure to the benefit of the parties hereto.
(d) Amendments and Waivers. This Agreement may be
amended, waived or modified only with the written consent of
each of the parties hereto. Any amendment that shall be so
consented to shall be effective and binding on all of the
parties hereto.
(e) Specific Enforcement. Each of the parties
hereto acknowledges and agrees that (i) monetary damages would
be an inadequate remedy for a breach of any of the provisions
of this Agreement, (ii) the other parties shall therefore be
entitled to specific performance of its rights under this
Agreement and (iii) in the event of any action for specific
performance it shall waive the defense that a remedy at law
would be adequate.
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(f) Attorneys' Fees. In any action or proceeding
brought to enforce any provision of this Agreement, or where
any provision hereof is validly asserted as a defense, the
successful party shall be entitled to recover reasonable
attorneys' fees in addition to its cost and expense and any
other available remedy.
(g) Severability. If any term, provision, covenant
or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or
invalidated, and the parties hereto shall use their reasonable
best efforts to find and employ an alternative means to achieve
the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction.
(h) Counterparts. This Agreement may be executed in
any number of counterparts and by the parties hereto in
separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(i) Entire Agreement. This Agreement is intended by
the parties as a final expression of their agreement, and is
intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes
all prior agreements and understandings among the parties with
respect to such subject matter.
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IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date first written above.
/s/ Paul G. Allen
Paul G. Allen
Attorney-in-Fact
/s/ Barry Diller
Barry Diller
Liberty Media Corporation,
a Delaware Corporation
By: /s/ Robert R. Bennett
Robert R. Bennett
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May 20, 1997
LIBERTY MEDIA CORPORATION
8101 East Prentice Avenue, Suite 500
Englewood, Colorado 80111
Mr. Barry Diller
1940 Coldwater Canyon
Beverly Hills, California 90210
Dear Sir:
Reference is made to the agreement between Liberty
Media Corporation ("Liberty") and Barry Diller ("Diller"),
dated as of August 24, 1995 (the "August 1995 Agreement"), as
amended by the letter agreement dated August 25, 1996 (the
"August 1996 Amendment," and collectively with the August 1995
Agreement, the "Agreement") relating to the securities of HSN,
Inc. ("HSNi") (formerly known as Silver King communications,
Inc.). Capitalized terms not otherwise defined in this letter
agreement shall have the meanings ascribed to such terms in the
Agreement.
In connection with the execution and delivery of the
Stock Exchange Agreement between Paul G. Allen ("Allen") and
HSNi, Liberty and Diller have been requested to enter into a
stockholders agreement (the "Stockholders Agreement") pursuant
to which, among other things, each of Liberty and Diller would
be obligated to vote any shares of HSNi over which it possessed
voting power in favor of the election as a director to the HSNi
Board of Directors of Allen or his designee (the "Allen Desig-
nee").
For purposes of clarifying the status of the Allen
Designee as between Diller and Liberty for purposes of the
Agreement, you and we hereby agree as follows:
1. For purposes of determining the number of direc-
tors to be designated by Diller or Liberty
(whichever person is then entitled to designate
a majority of the members of the Board of Direc-
tors pursuant to Section 3 of the August 1996
Amendment), the Allen Designee shall not be con-
sidered to be a designee of either Liberty or
Diller.
Mr. Barry Diller
May 20, 1997
Page 1
2. The voting of shares and the actions to be taken
by director designees of Liberty pursuant to
Section 2 of the Stockholders Agreement shall
not constitute the basis for Diller's declara-
tion of a Management Election pursuant to Sec-
tion 3 of the August 1996 Amendment.
If the foregoing is acceptable to you, please execute
the copy of this agreement in the space below, at which time
this letter agreement will constitute a binding agreement be-
tween us.
Very truly yours,
LIBERTY MEDIA CORPORATION
By:
Name: Robert R. Bennett
Title: President
ACCEPTED AND AGREED
this 20th day of May, 1997
By: /s/ Barry Diller
Barry Diller