10-K
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FORM 10-K
1
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE YEAR ENDED DECEMBER 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NO. 1-9118
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HOME SHOPPING NETWORK, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 59-2649518
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2501 118TH AVENUE NORTH, ST. PETERSBURG, FLORIDA
(Address of registrant's principal executive offices)
33716
(ZIP CODE)
(813) 572-8585
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF NAME OF EXCHANGE
EACH CLASS ON WHICH REGISTERED
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Common Stock $.01 Par Value..................................... NYSE
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Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
As of March 13, 1995, there were outstanding 70,594,329 shares of Common
Stock (net of 6,986,000 shares held in treasury) and 20,000,000 shares of Class
B common stock. The aggregate market value of the voting stock held by
non-affiliates of the registrant as of March 13, 1995 was $477,248,643.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes / / No / /
DOCUMENTS INCORPORATED BY REFERENCE:
DOCUMENTS FORM 10-K REFERENCE
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1994 Annual Report................................................... Part II Items 5-8
Proxy Statement dated March 30, 1995................................. Part III Items 10-13
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HOME SHOPPING NETWORK, INC.
FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PAGE
NO.
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PART I
Item 1 Business................................................................ 1
Item 2 Properties.............................................................. 7
Item 3 Legal Proceedings....................................................... 8
Item 4 Submission of Matters to a Vote of Security Holders..................... 10
PART II
Item 5 Market for Registrant's Common Equity and Related Stockholder Matters... 11
Item 6 Selected Financial Data................................................. 11
Item 7 Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 11
Item 8 Consolidated Financial Statements and Supplementary Data................ 11
Item 9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.................................................... 11
PART III
Item 10 Directors and Executive Officers of the Registrant...................... 12
Item 11 Executive Compensation.................................................. 12
Item 12 Security Ownership of Certain Beneficial Owners and Management.......... 12
Item 13 Certain Relationships and Related Transactions.......................... 12
PART IV
Item 14 Exhibits, Financial Statement Schedule, and Reports on Form 8-K......... 13
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PART I
ITEM 1 -- BUSINESS
GENERAL
Home Shopping Network, Inc. ("HSN" or the "Company") is a holding company,
the subsidiaries of which conduct the day-to-day operations of the Company's
various business activities. The Company's primary business, and principal
source of revenue, is electronic retail sales by Home Shopping Club, Inc.
("HSC"), a wholly-owned subsidiary of the Company and a leader in the electronic
retailing industry.
HOME SHOPPING CLUB, INC.
HSC sells a variety of consumer goods and services by means of HSC's live,
customer-interactive retail sales programs which are transmitted twenty-four
hours a day, seven days per week, via satellite to cable television systems,
affiliated broadcast television stations and satellite dish receivers. HSC's
retail sales programming is currently carried on three separate networks, HSN 1,
HSN 2, and HSN Spree. HSN 1 is carried by cable television systems throughout
the country and is the original HSC programming network. HSN 2 is carried by
broadcast television stations as well as by cable television systems which
retransmit the broadcast television signal of the broadcast television stations
carrying HSN 2. HSN Spree programming is available in one hour segments
twenty-four hours per day, which enable broadcast and cable affiliates to air
HSN Spree in available time slots that would not otherwise produce revenue for
the affiliate. The Company is developing plans for combining HSN 1 and HSN 2
into a single network, to be implemented during 1995. HSN Spree will continue to
be available as described above and will also replace HSN 1 where there are
households currently receiving both HSN 1 and HSN 2.
As of December 31, 1994, there were approximately 95.4 million homes in the
United States with a television set, 60.0 million basic cable television
subscribers and 3.8 million homes with satellite dish receivers. As of December
31, 1994, approximately 24.8 million homes throughout the United States were
able to receive HSN 1 via over 1,833 cable systems. HSN 2 was broadcast at the
same date via 35 full power and 9 low power broadcast television stations in
areas with a total potential viewership of approximately 23.1 million
households. In addition, approximately 22.5 million households were able to
receive HSN 2 via approximately 850 cable systems. See "Regulatory Matters." As
of December 31, 1994, HSN Spree was carried on a full- or part-time basis by 116
broadcast television stations, including certain stations that are in areas also
served by cable television systems or broadcast television stations which carry
HSN 1 and/or HSN 2. Approximately 3.8 million additional households also were
able to receive HSN 1, HSN 2 and HSN Spree by means of satellite dish receivers.
Approximately 8.3 million of the cable television households receiving HSC
programming are considered multiple service households which receive HSN 1 and
HSN 2. Most of the homes that receive HSN Spree also receive HSN 1 and/or HSN 2.
HSC'S RETAIL SALES PROGRAMMING
HSC's electronic retail marketing and programming concept is the "Home
Shopping Club" (the "Club"). The Club format is intended to promote sales and
customer loyalty through a combination of information, entertainment and the
creation of confidence in HSC and its products. HSC programming is divided into
segments. Each segment is televised live with a show host who presents the
merchandise and conveys to the viewer information relating to the product,
including price, quality, features and benefits. Viewers place orders for
products by calling a toll-free telephone number. Show hosts engage callers in
on-air discussions regarding the Club, the currently featured product or the
caller's previous experience with the Club and its products. This format creates
a spontaneous and entertaining program. First-time purchasers of merchandise
receive complimentary membership in the Club. HSC attempts to stimulate Club
member loyalty by providing Club members with incentives to purchase additional
items from the Club using, for
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example, the "Bargaineer" magazine which, among other features, offers discounts
on HSC purchases. The Club format is used on HSN 1, HSN 2 and HSN Spree.
MEMBER SERVICES AND RETURN POLICY
HSC believes that satisfied Club members will be loyal and will purchase
merchandise from HSC on a regular basis. To help ensure Club member
satisfaction, HSC has member services personnel and computerized voice response
units (the "VRU System") available to handle calls relating to member inquiries.
Prior to March 1995, the member services department maintained toll-free lines
to assist Club members on weekdays from 8:00 a.m. to 12:00 a.m., Eastern Time.
Commencing in March 1995, the member services department will operate seven days
a week, twenty-four hours a day.
As part of HSC's member services policy, a Club member may, generally
within thirty days, return for any reason, any item purchased from HSC, except
certain special sale items, for a full refund of the purchase price, including
the original shipping and handling charges.
DISTRIBUTION, DATA PROCESSING AND TELECOMMUNICATIONS
The Company's fulfillment subsidiaries ship merchandise purchased by Club
members from warehouses located in St. Petersburg, Florida; Salem, Virginia;
Waterloo, Iowa; and Reno, Nevada. Substantially all inventory is stored at the
Company's four fulfillment centers prior to being offered for sale. Merchandise
typically is delivered to customers within 7 to 10 business days of placing an
order with HSC.
HSN currently operates several Unisys main frame computers and has
extensive proprietary data processing and order processing systems which
facilitate the timely delivery of merchandise to customers. HSN's computerized
systems track purchase orders, inventory, member orders, shipping records, and
member payments and also enhance credit verification and authorization.
To further facilitate the sale of merchandise to Club members, HSC
installed a state-of-the-art fiber optic telephone system and switching complex
which was developed for the Company in fiscal 1988. HSC also utilizes a VRU
System capable of handling incoming sales calls. The VRU System provides callers
with the option to place their orders by means of touch tone input or to be
transferred to an operator.
PRODUCT PURCHASING AND LIQUIDATION
HSC has purchased merchandise made to its specifications as well as
merchandise from manufacturers' lines, and the overstock inventories of
wholesalers. During 1994, the Company began to change its purchasing strategy in
order to emphasize product sourcing, variety, development of new private label
lines and name brand merchandise. The mix of products and source of such
merchandise depends upon a variety of factors including price and availability.
HSC has no long-term commitments with any of its vendors, and historically,
there have been various sources of supply available for each category of
merchandise sold by HSC. HSC's product offerings include: jewelry; hardgoods,
which include consumer electronics, collectibles, housewares, consumables and
toys; softgoods, which consist primarily of clothing; cosmetics; and other
product categories. In 1994, jewelry, hardgoods, softgoods, cosmetics and other
categories accounted for approximately 41%, 34%, 14%, 10% and 1%, respectively,
of HSC's net sales.
The Company liquidates merchandise through its seven outlet stores located
in Florida. Merchandise that is damaged or is unsuitable for sale via the Club
or the outlet stores is liquidated by the Company through traditional channels.
TRANSMISSION AND PROGRAMMING
HSC produces retail sales programs in its studios located in St.
Petersburg, Florida. These programs are distributed to cable television systems,
broadcast television stations and satellite dish receivers by means of HSN's
satellite uplink facilities to satellite transponders leased by HSN. Any cable
television system,
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broadcast television station or individual satellite dish owner in the United
States and the Caribbean Islands equipped with standard satellite receiving
facilities is capable of receiving HSC programming.
HSN has lease agreements securing full time use of three transponders on
three domestic communications satellites. Each of the transponder lease
agreements grants HSN "protected" rights. When the carrier provides services to
a customer on a "protected" basis, replacement transponders (i.e., spare or
unassigned transponders) on board the satellite may be used in the event the
"protected" transponder fails. Should there be no replacement transponders
available, the "protected" customer will displace a "preemptible" transponder
customer on the same satellite. The carrier also maintains a protection
satellite and should a satellite fail completely, all "protected" transponders
would be moved to the protection satellite which is available on a "first fail,
first served" basis.
One transponder leased by HSN may, however, be preempted in order to
satisfy the owner's obligations to provide the transponder to another lessee on
the satellite in the event that the other lessee cannot be restored to service
through the use of spare or reserve transponders (the "Special Termination
Right").
A transponder failure that would necessitate a move to another transponder
on the same satellite would not result in any significant interruptions of
service to the cable systems and/or television stations which receive HSC's
programming. However, a failure that would necessitate a move to another
satellite may temporarily affect the number of cable systems and/or television
stations which receive HSC's programming (as well as all other programming
carried on the failed satellite) because of the need to install equipment or to
reorient earth stations.
The terms of two of the leases are for the life of the satellites, which
are projected to be through 2004. The term of the third lease is through
December 31, 2006, subject to earlier implementation of the Special Termination
Right.
HSN's access to three transponders pursuant to long-term agreements would
enable HSC to continue transmission of its two primary programming services, HSN
1 and HSN 2, should any one of the satellites fail. Although HSN believes it is
taking every reasonable measure to ensure its continued satellite transmission
capability, there can be no assurance that termination or interruption of
satellite transmissions will not occur. Such a termination or interruption of
service by one or more of these satellites could have a material adverse effect
on the operation and financial condition of HSN.
The availability of replacement satellites and transponder time beyond
current leases is dependent on a number of factors over which HSN has no
control, including competition among prospective users for available
transponders and the availability of satellite launching facilities for
replacement satellites.
The Federal Communications Commission ("FCC") grants licenses to construct
and operate satellite uplink facilities which transmit signals to satellites.
These licenses are generally issued without a hearing if suitable frequencies
are available. HSN has been granted two licenses for operation of C-band
satellite transmission facilities and two licenses for operation of KU-band
satellite transmission facilities on a permanent basis in Clearwater and St.
Petersburg, Florida.
REGULATORY MATTERS
On October 5, 1992, the Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act") was enacted into law. Among the
many provisions of this new cable re-regulation law is one that mandates that
cable systems carry the signals of local commercial television stations ("must
carry") or, at the station's option, that cable systems and television stations
negotiate a fee to be paid by cable systems for the retransmission by such cable
systems of the local television station's broadcast signal. HSC's full-time
broadcast affiliates have all requested "must carry" status in lieu of a
retransmission fee.
On July 2, 1993, the FCC ruled that stations predominantly used for the
transmission of sales presentations or program-length commercials operate in the
public interest and are entitled to "must carry" status. A Petition for
Reconsideration of the FCC's ruling currently is pending before the FCC. The
Company has filed an opposition to that petition.
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On April 8, 1993, a decision by the United States District Court for the
District of Columbia upheld the constitutional validity of the mandatory signal
carriage requirements of the 1992 Cable Act. On appeal, in a multi-opinion
decision released on June 27, 1994, the Supreme Court vacated the District Court
decision and remanded the case to the District Court to permit the development
of a full factual record concerning the validity of the "must carry" rules.
While the "must carry" rules remain in effect, HSN 2 programming carried by
HSC's broadcast affiliates generally is being transmitted by cable operators
located within broadcast markets. As a result of "must carry," HSC has
experienced an increase in the number of cable systems that carry HSC
programming.
On September 23, 1993, the FCC adopted a Notice of Inquiry initiating a
proceeding to evaluate the commercial programming practices of broadcast
television stations (including stations with shop-at-home formats) and seeking
comment on whether the public interest would be served by establishing limits on
the amount of commercial matter broadcast by television stations. The FCC has
received comments and reply comments. Although the FCC is only seeking comments
at this time and has not made any proposals to limit the amount of
commercialization on television stations, there can be no assurance whether or
when such limitations may be forthcoming, what the nature of such limitations
might be, whether they will be implemented, and what impact, if implemented,
they would have on the Company.
In November 1994, the FCC issued "going forward" rules pursuant to the 1992
Cable Act regarding the fees cable operators can charge subscribers for new
programming. The going forward rules provide that cable operators can increase
the charges to subscribers for new programming but must offset the charges by
revenues, including sales commissions, they receive from the programmer. As a
revenue provider to the cable operator, this ruling may have an adverse effect
on the Company's ability to seek and maintain new cable carriage. The Company
and other electronic retailing companies have filed Petitions for
Reconsideration with the FCC which requests that shop-at-home programming
revenues be excluded from the cable operator's offset to revenues.
AFFILIATION AGREEMENTS WITH CABLE OPERATORS
HSC enters into affiliation agreements with cable system operators to carry
HSN 1, HSN 2, HSN Spree or any combination of the programming. HSC has a
standard form of affiliation agreement which has a term of five years, is
automatically renewable for subsequent one year terms, and obligates the cable
operator to assist the promotional efforts of HSC by carrying commercials
regarding the Club and distributing HSC's marketing materials to its
subscribers. The standard form of affiliation agreement provides that the cable
operator will receive a commission of five percent of the net sales of
merchandise sold within the cable operator's franchise area (from both cable and
non-cable households). However, particularly with larger, multiple system
operators, HSC has agreed to provide additional compensation arrangements. In
the past this has included the purchase of advertising availabilities from cable
operators on programming networks other than the Club and the establishment of
commission guarantees committing HSC to a certain level of payments. Although a
number of these contracts remain in effect, as a general rule, HSC is no longer
entering into agreements that provide for advertising availability and
commission guarantee compensation. In the past year these forms of compensation
were replaced with performance bonus commissions that are intended to increase
sales by rewarding the cable operators for promotional efforts which result in
higher sales levels.
During the past year, due to the possibility of "must carry" being found
unconstitutional, HSC embarked on an aggressive campaign to bring the "must
carry" households under contract by volunteering to pay commissions to cable
operators required to retransmit HSN 2. As an additional contract incentive, HSC
offered to make payments of cable distribution fees, primarily consisting of
up-front payments, based on a commitment to transmit HSC programming to a
certain number of subscribers. In exchange for these payments, HSC required
significant long term commitments of five to fifteen years for the current
programming carriage and additional carriage of HSC's HSN 1 programming. Due to
HSC's success in obtaining long term carriage commitments, in the event "must
carry" is ruled unconstitutional, the Company does not believe the ruling will
have a material adverse impact on the Company or result in any significant loss
in carriage.
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Affiliation agreements were entered into during 1994 with Satellite
Systems, Inc. a wholly owned subsidiary of Tele-Communications, Inc. ("TCI") and
InterMedia Partners, both related parties.
During fiscal 1987, the Company offered certain cable operators the
opportunity to participate in the 1987 Cable Operators Stock Option Plan (the
"1987 Plan") in exchange for entering into an affiliation agreement with HSC.
During fiscal 1994, cable operators exercised options for approximately 336,000
shares of the Company's Common Stock with an exercise price of approximately
$2.0 million. All remaining unexercised options under the 1987 Plan expired in
1994.
AFFILIATION AGREEMENTS WITH BROADCAST TELEVISION STATIONS
In July 1986, the Company initiated a program to broaden the viewership of
HSC's programming services by acquiring broadcast television stations in
principal television markets through Silver King Communications, Inc. ("SKC").
On December 28, 1992, the Company distributed the capital stock of SKC to the
Company's shareholders, in the form of a pro rata stock dividend. Intercompany
indebtedness in an amount of $135.2 million owed by SKC was converted into a
secured long-term senior loan between SKC and a wholly-owned subsidiary of the
Company pursuant to a loan agreement, evidenced by a promissory note, bearing
interest on the unpaid principal amount at a rate of 9.5% per annum. On August
1, 1994, SKC paid, prior to scheduled maturity, the outstanding principal and
accrued interest of $129.7 million on its obligation to the Company with
proceeds from a bank loan. SKC's bank loan agreement provides that cancellation,
suspension or termination of any existing affiliation agreement is an event of
default. The Company is not a party to this loan agreement and, therefore, would
not be entitled to enforce these restrictive provisions.
Each SKC station has an affiliation agreement with HSC to carry HSC's
programming through December 28, 1997. These agreements are automatically
renewable at SKC's option for a five-year term, unless written notice is given
by SKC at least 18 months prior to the expiration date. HSC pays an affiliation
fee to SKC based on hourly rates and, upon reaching certain sales levels,
commissions on net sales. Certain of the SKC stations realized commissions on
net sales during 1994. SKC stations are expected to continue to receive
commissions during the remaining years of their affiliation agreements if the
"must carry" rules remain in effect. See "Regulatory Matters."
SKC, through its subsidiaries, owns twelve broadcast television stations,
including one television satellite station. These stations are located in many
of the top markets in the United States and exclusively broadcast HSC
programming, except for a portion of broadcast time which is used to provide
public affairs and other non-entertainment programming and advertising inserts.
SKC also owns 19 low power television ("LPTV") stations that broadcast
HSC's programming services. LPTV stations have lower power transmitters than
conventional television stations, and therefore, the broadcast signal of an LPTV
station does not cover as broad a geographical area as conventional broadcast
stations.
In addition to affiliation agreements with the SKC broadcast television and
LPTV stations, HSC has entered into affiliation agreements with other broadcast
television stations and LPTV stations to carry either HSN 2 or HSN Spree for a
predetermined number of hours per day. The broadcast station affiliation
agreements may generally be terminated upon proper notice and specify the
payment of fixed fees for the carriage of HSC programming.
As of December 31, 1994, HSC had entered into either full- or part-time
affiliation agreements with 35 broadcast television stations to carry HSN 2
(including broadcast television stations owned by SKC), 71 television stations
to carry HSN Spree and 54 LPTV stations (including LPTV stations owned by SKC)
to carry HSN 2 or HSN Spree.
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ADDITIONAL SUBSIDIARY BUSINESSES
In addition to the electronic retailing business, the Company's
subsidiaries are involved in mail order, insurance and other businesses
complementary to electronic retailing.
HSN Mail Order, Inc. ("Mail Order") markets a variety of merchandise
through four mail order catalogs distributed to individuals on mailing lists
developed by Mail Order or rented from agents. The catalogs include Home
Shopping ValuesTM, Bargaineer Shopping ValuesTM, Private Showing Jewelry Values
By Mail, and Stuart McGuire Men's Footwear and Accessories. Mail Order also
markets a variety of products by inserting marketing materials, including its
catalogs, in packages containing HSC products shipped to Club members. In
addition, through its Life Way name, Mail Order markets natural vitamin and
mineral supplements, over-the-counter items, health and wellness merchandise and
a complete line of skin and hair products. More than 280 products are offered
under the Lifeway(R) line and are marketed via HSC's programming services, mail
order catalogs and continuity-based outbound telemarketing.
Vela Research, Inc. develops and markets high technology audio and video
MPEG compression/decompression products to the cable, computer and
telecommunications industries.
HSN Direct Joint Venture ("HSND") develops, produces, and markets
infomercials and short form direct response spots on a national and
international basis. The Company owns a majority interest in HSND.
HSN Interactive, Inc. ("Interactive") is responsible for creating new
interactive business opportunities and merchandising products via commercial
on-line PC services, digital interactive TV distribution channels, and other new
digital retailing vehicles, including the Internet. Internet retailing support
for Interactive and other retail clients is provided by the Company's Internet
Shopping Network.
HSN Insurance, Inc. ("HSI") is a full-service insurance agency marketing a
wide range of insurance products such as life, health, auto, homeowners and
commercial policies to the public and Club members. Mass-marketing of other
insurance and service-related products such as a private-label auto club, a
legal services plan, a dental insurance plan, an extended services plan for
electronics, and an appliance protection plan are also offered to Club members
nationally. HSI also handles the placement of all property and liability
insurance for HSN and its subsidiaries as well as employee benefits insurance
products.
COMPETITION
The Company operates in a highly competitive environment. It is in direct
competition with businesses which are engaged in retail merchandising, other
electronic retailers, direct marketing retailers such as mail order companies,
companies that sell from catalogs, other discount retailers and companies that
market through computer technology. The Company also competes for access to its
customers with broadcasters and alternative forms of entertainment and
information, such as programming for network and independent broadcast
television stations, basic and pay cable television services, satellite master
antenna systems, home satellite dishes and home entertainment centers. In
particular, the price and availability of programming for cable television
systems affects the availability of these channels for the Company's programs
and the compensation which must be paid to the cable operators for carriage of
HSC programming. In addition, the Company believes that due to a number of
factors, including the development by cable operators of alternative sources of
cable operator owned programming, the competition for channel capacity has
substantially increased. With the advent of new compression technologies on the
horizon, this competition for channel capacity may substantially decrease,
although additional competitors may have the opportunity to enter the
marketplace. No predictions can be made with respect to the viability of these
technologies or the extent to which they will ultimately impact the availability
of channel capacity.
The Company and QVC, Inc. ("QVC") are currently the two leading electronic
retailing companies. There are other companies, some having an affiliation or
common ownership with cable operators, that now market merchandise by means of
live television. A number of other entities are engaged in direct retail sales
businesses which utilize television in some form and which target the same
markets in which the Company operates. Some of the Company's competitors are
larger and more diversified than the Company, or are
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affiliated with cable operators which have a substantial number of subscribers.
The Company cannot predict the degree of success with which it will meet
competition in the future. TCI currently owns 43% of QVC but has entered into a
stockholders agreement with Comcast Corporation (which owns 57% of QVC) pursuant
to which Comcast controls the day to day operations of QVC.
In addition to the above factors, the Company's affiliation with broadcast
television stations creates another set of competitive conditions. These
stations compete for television viewers primarily within local markets. The
Company's affiliated broadcast television stations are located in highly
competitive markets and compete against both VHF and UHF stations. Due to
technical factors, a UHF television station generally requires greater power and
a higher antenna to secure substantially the same geographical coverage as a VHF
television station. Under present FCC regulations, additional UHF commercial
television broadcasting stations may be operated in all such markets, with the
possible exception of New York City. The Company cannot quantify the competitive
effect of the foregoing or any other sources of video programming on any of the
Company's affiliated television stations, nor can it predict whether such
competition will have a material adverse effect on its operations.
In summary, the Company operates in a highly competitive environment in
which, among other things, technological change, changes in distribution
patterns, media innovations, data processing improvements and new entrants make
the competitive position of both the Company and its competitors extremely
difficult to predict.
TRADEMARKS, TRADENAMES AND COPYRIGHTS
The Company has registered and continues to register, when appropriate, its
trade and service marks as they are developed and used, and the Company
vigorously protects its trade and service marks. The Company believes that its
marks are a primary marketing tool.
EMPLOYEES
At December 31, 1994, the Company had 4,383 full-time employees and 681
part-time employees. The Company believes it has generally good employee
relationships.
ITEM 2 -- PROPERTIES
The Company currently operates out of a campus facility in St. Petersburg,
Florida, containing approximately 480,000 square feet which, since September 30,
1987, has housed television studios, broadcast facilities, and most of the
Company's administrative offices and training facilities.
The Company owns an approximately 165,000 square foot shopping center
facility located in Clearwater, Florida, which formerly housed its corporate
headquarters, studios and certain of its administrative offices. The Company
occupies approximately 38,900 square feet of this facility. The balance is
either leased or available to third parties.
The Company owns a fulfillment center located in St. Petersburg, Florida
across the street from the main campus consisting of approximately 40,000 square
feet and a nearby approximately 40,000 square foot facility utilized as a credit
union and rework center. The Company also owns a total of approximately 73,000
square feet of other warehouse type facilities in the St. Petersburg/Clearwater
area.
The Company owns and operates a warehouse consisting of approximately
163,000 square feet located in Waterloo, Iowa, and leases a warehouse located
near Reno, Nevada, consisting of approximately 230,000 square feet. The lease
contains an option to purchase the property and expires September 30, 2002. Both
facilities are used as fulfillment centers.
The Company operates an approximately 650,000 square foot warehouse and
fulfillment center with administrative offices located in Salem, Virginia, which
is leased from the City of Salem Industrial
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Development Authority. On November 1, 1999, the Company will have the option to
purchase the property for $1.
The Company's retail outlet subsidiary leases seven retail stores in the
Tampa Bay and Orlando areas totaling approximately 173,000 square feet.
The Company and its other subsidiaries also lease office space in several
states to operate their businesses.
The Company considers its properties suitable and adequate for its present
needs.
ITEM 3 -- LEGAL PROCEEDINGS
The Company entered into a Stipulation and Agreement of Compromise and
Settlement dated November 16, 1994, pursuant to which it and the other
defendants agreed to settle a group of class and derivative actions pending in
both the Court of Chancery of the State of Delaware in and for New Castle
County, consolidated under the caption In re Home Shopping Network, Inc.
Shareholders Litigation (consolidated civil action number 12868) and in the
United States District Court for the District of Delaware under the caption
Gerda Bartnik et al. v. Home Shopping Network et al. (civil action numbers
93-336/347/406/489-MMS, consolidated). Under the settlement agreement, Liberty
Media Corporation ("Liberty") has agreed to create a settlement fund in the
amount of $13,000,000 plus interest at the rate of five percent (5%) per annum
from December 31, 1993 to be paid to certain members of the plaintiff class. The
Company was not required to contribute to this settlement fund or make any other
payments in settlement of these actions.
On January 24, 1995, at hearings held pursuant to notice given to members
of the class, these settlements were approved by the Court of Chancery of the
State of Delaware in and for New Castle County and the United States District
Court for the District of Delaware, and orders were entered approving the
settlement and dismissing the actions.
The Company entered into a Stipulation and Agreement of Settlement dated as
of October 10, 1994, with respect to a group of class actions which were
consolidated in the United States District Court for the Middle District of
Florida, Tampa Division under the caption Goldstein v. Speer, et al.,
consolidated case number 93-602-CIV-T-23(B). Pursuant to the settlement, all
claims asserted or that could have been asserted against all defendants were
settled in exchange for the agreement of the Company to pay $9,600,000, plus
interest from December 30, 1993, to members of the class. On January 9, 1995, at
a hearing held pursuant to notice given to members of the class, an order was
entered by U.S. District Court for the Middle District of Florida, Tampa
Division, approving the settlement and dismissing the actions.
On or about February 8, 1994, the Company, with the approval of the special
litigation committee of its Board of Directors, signed an agreement in principle
to settle the lawsuit entitled 7547 Corp., et al. v. Roy M. Speer, et al., Case
Nos. 92-1966-CIV-T-15A and 92-2045-CIV-T-99C (consolidated). Pursuant to the
terms of the settlement, Roy M. Speer, the Company's former Chairman of the
Board and Chief Executive Officer, has agreed to pay the Company $2,000,000 and
to pay the Company an additional $1,000,000 to partially fund the $9,600,000
settlement described above. The Company has agreed to pay Western Hemisphere,
Inc. ("Western"), the successor to Pioneer Data Processing, Inc. ("Pioneer"),
$4,500,000 in exchange for releases and cancellation or acquisition of a 1985
license agreement involving the Company and Pioneer. The Company also has agreed
to pay such attorneys' fees as may be awarded by the Court to the plaintiffs'
counsel. This settlement is conditioned on, among other things, Court approval
after notice to the shareholders and a hearing on the fairness of the
settlement.
On April 26, 1993, four stockholders of the Company filed with the Delaware
Chancery Court a purported class action complaint, styled as 7547 Corp. v.
Liberty Media Corp., C.A. No. 12956, on behalf of an unspecified class of
stockholders of the Company (the "Section 203 Action"). The defendants in the
original complaint were Liberty, Liberty Program Investments, Inc. ("LPI"), the
Company, and certain current and former directors of the Company (Messrs. Speer,
Forstmann, McNamara, Wandler, Chu, James, Ramsey and Roberts); on June 24, 1994,
plaintiffs filed an amended complaint which names additional defendants who are
8
11
past or present directors of the Company (Messrs. Barton, Bennett, Draper,
Hogan, Malone, Hindery and McNamee).
The gravamen of the amended complaint in the Section 203 action was that,
prior to the time when Liberty reached an agreement, arrangement or
understanding with RMS Limited Partnership, a Nevada Limited Partnership
("RMS"), to allow Liberty to purchase a controlling equity interest in the
Company, the Company's Board and Executive Committee failed to take effective
action to approve the proposed transaction and, thereby, failed under Section
203(a)(1) to exempt Liberty from the restrictions under Section 203 on any
"business combination" between Liberty and the Company prior to December 4,
1995. As a result, plaintiffs alleged that any business combination involving
Liberty, its affiliates or associates, and the Company would require the
affirmative vote of 66 2/3% of the outstanding voting stock of the Company which
is not owned by Liberty.
Plaintiffs also alleged that Liberty's disclosures regarding the
effectiveness of the Section 203 exemption by the HSN Executive Committee on
December 4, 1992 were false and misleading. Plaintiffs asserted that Liberty
disregarded the conflicts of interest held by the members of the HSN Executive
Committee on the Section 203 exemption, and that Liberty knew that no valid
action had been taken by the Company's Board to exempt Liberty from the
restrictions under Section 203. The amended complaint alleged that, by asserting
that Liberty was exempt from Section 203, Liberty and the other defendants
misrepresented a material fact to all sellers of the Company's stock and holders
of the Company's stock after the public announcement of the Liberty/RMS
Agreement in Principle on December 7, 1992. Plaintiffs also alleged that the
Liberty Tender Offer constituted a prohibited "business combination" under
Section 203.
Plaintiffs also alleged that the members of the Company's Executive
Committee (Messrs. Speer, Wandler and Ramsey) had disabling conflicts of
interest which prevented the Company's Executive Committee from taking effective
action on December 4, 1992 to exempt Liberty from the restrictions of Section
203. The Company and the individual defendants allegedly aided and abetted
Liberty in its asserted scheme to misrepresent its status under Section 203. The
individual defendants also allegedly breached their fiduciary duties by failing
to correct Liberty's asserted misrepresentation of its exemption from Section
203.
Plaintiffs sought a declaratory judgment that Liberty is subject to Section
203, an award of damages to the plaintiff class members who sold the Company's
common stock, and equitable relief.
On November 16, 1994 the parties reached an agreement to settle the Section
203 Action subject to several conditions. Under the settlement, all claims which
were, could have been or in the future might be asserted by any member of the
Section 203 Class against any of the Defendants or their affiliates, which
relate to or arise out of, directly or indirectly, the allegations contained in
any complaint filed in the Section 203 Action (the "Section 203 Claims"), would
be dismissed with prejudice. In exchange for the foregoing release of the
Section 203 Claims, Liberty and the Company have agreed, among other things,
that the consummation of any "business combination," as defined in Section 203,
prior to December 4, 1995 between the Company, on the one hand, and Liberty or
any of its "affiliates" or "associates," on the other hand (a "Qualifying
Business Combination"), shall be subject to the prior approval of the Company's
board of directors, and the authorization at an annual or special meeting of the
Company's stockholders, and not by written consent, by the affirmative vote of
the holders of at least a majority of the outstanding voting stock which is not
"owned" by Liberty (the "Section 203 Undertaking").
The parties to the Section 203 Action also agreed, among other things, that
upon the approval by the Delaware Chancery Court of the settlement of the
Section 203 Action, (i) the Section 203 Undertaking shall be binding as against
any member of the Section 203 Class, which shall include any holder, purchaser
or seller of the Company's stock from and after October 12, 1994 through and
including December 4, 1995 (a "Subsequent Company Stockholder"); and (ii) so
long as Liberty and the Company comply with the Section 203 Undertaking, no
member of the Section 203 Class (including any Subsequent Company Stockholder)
shall be entitled to assert that any Qualifying Business Combination (a) is
required to be separately approved by the Company's stockholders under any
provision of Section 203, or (b) is otherwise subject to, conditioned upon,
restricted by or prohibited under any provision of Section 203. Liberty also has
agreed that, in the event it consummates a "business combination" (as defined in
Section 203) with the Company prior to the hearing
9
12
on the proposed settlement of the Section 203 Action, Liberty will comply with
the Section 203 Undertaking. Plaintiffs' counsel in the Section 203 Action
petitioned the Court for an award of attorneys' fees and expenses not to exceed
$2.6 million. Liberty agreed to pay plaintiffs' counsel such fees and
disbursements as may be awarded by the Delaware Chancery Court in the Section
203 Action, and the Company is not responsible for any of the fees or expenses
of plaintiffs' counsel in the Section 203 Action.
On January 25, 1995, the Delaware Chancery Court approved the settlement of
the Section 203 Action.
Pursuant to existing indemnification agreements with current and former
officers and directors, the Company has paid approximately $650,000 in 1994 in
attorneys' fees and expenses of its current and former officers and directors in
connection with the foregoing described litigation.
A consolidated class action initiated in 1990 is pending in the Court of
Common Pleas of Bucks County, Pennsylvania entitled Mauger v. Home Shopping
Network, Inc.; Powell v. Home Shopping Network, Inc. (case number 91-6152-20-1).
The complaints allege violation of the Pennsylvania Unfair Trade Practices and
Consumer Protection Law in relation to the Company's pricing practices with
respect to diamond and imitation diamond jewelry. Plaintiffs seek compensatory
damages of $100 per class member, treble damages, attorneys' fees, costs,
interest and other relief on behalf of all Pennsylvania residents who purchased
any jewelry containing diamonds or residents who purchased any jewelry
containing diamonds or imitation diamonds from the Home Shopping Club between
December 27, 1984 and May 20, 1991. Substantial discovery has been taken in the
case. In February 1995, the plaintiffs filed a motion for summary judgment. The
Company believes that it has meritorious defenses and is vigorously defending
this action.
In 1993, the Company became aware that the Securities and Exchange
Commission ("SEC") entered a formal order of investigation involving matters
relating to, among other things, certain of the Company's SEC filings and other
public disclosures. The Company has furnished documents in connection with this
formal investigation and is cooperating in the investigation while maintaining
its legal privileges, including the attorney/client privilege. This is a
non-public investigation and the scope of the investigation is confidential. The
Company has been advised that this inquiry should not be construed as an
indication by the Commission or its staff that any violations of law have
occurred, nor should it be considered a reflection upon any person, entity or
security.
On March 2, 1995, the Federal Trade Commission ("FTC") issued an
administrative complaint against the Company, HSC and HSN Lifeway Health
Products, Inc., In Re Home Shopping Network, Inc. et al., No. D-9272, in
connection with the on-air presentation in 1993 of certain spray vitamin and
nutritional supplement products. The FTC alleged that the Company did not have a
reasonable basis to support certain on-air claims, and proposed a settlement
based upon a cease and desist order that would require the Company to obtain
scientific evidence that would meet certain defined standards. The Company did
not agree that the consent order proposed by the FTC was warranted, and the
complaint, which seeks no monetary damages, will be heard by an FTC
administrative law judge.
ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
10
13
PART II
ITEM 5 -- MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information set forth under the caption "Price Range of Common Stock"
on page 58 of the 1994 Annual Report, is incorporated herein by reference.
The total number of stockholders of record as of March 13, 1995 was 8,710.
The Company has paid no cash dividends on its common stock to date and does
not anticipate that it will pay cash dividends in 1995. Any payment of future
dividends and the amounts thereof will be dependent upon the Company's earnings,
financial requirements and other factors deemed relevant by the Board of
Directors.
ITEM 6 -- SELECTED FINANCIAL DATA
The information set forth under the caption "Summary Financial Data" on
page 57 of the 1994 Annual Report, is incorporated herein by reference.
ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information set forth under the caption "Management's Discussion and
Analysis" on pages 22 through 34 of the 1994 Annual Report, is incorporated
herein by reference.
ITEM 8 -- CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the Registrant and
Independent Auditors' Reports set forth on pages 36 through 56 of the 1994
Annual Report are incorporated herein by reference:
Independent Auditors' Reports for the years ended December 31, 1994
and 1993, the four months ended December 31, 1992, and the fiscal year
ended August 31, 1992.
Consolidated Balance Sheets as of December 31, 1994 and 1993.
Consolidated Statements of Operations for the years ended December 31,
1994 and 1993, the four months ended December 31, 1992, and the fiscal year
ended August 31, 1992.
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1994 and 1993, the four months ended December 31, 1992, and
the fiscal year ended August 31, 1992.
Consolidated Statements of Cash Flows for the years ended December 31,
1994 and 1993, the four months ended December 31, 1992, and the fiscal year
ended August 31, 1992.
Notes to Consolidated Financial Statements.
ITEM 9 -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
A report was filed on Form 8-K for the event occurring February 23, 1993,
reflecting the change in accountants from Deloitte & Touche LLP to KPMG Peat
Marwick LLP.
11
14
PART III
ITEM 10 -- DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth under the caption "Election of Directors" in the
Proxy Statement dated March 30, 1995, for the Annual Meeting of Stockholders to
be held May 10, 1995, is incorporated herein by reference.
ITEM 11 -- EXECUTIVE COMPENSATION
The information set forth under the captions "Summary Compensation Table"
and "Employment Agreements" in the Proxy Statement dated March 30, 1995, for the
Annual Meeting of Stockholders to be held May 10, 1995, is incorporated herein
by reference.
ITEM 12 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security ownership by management as outlined under the caption "Security
Ownership of Certain Beneficial Owners and Management" in the Proxy Statement
dated March 30, 1995, for the Annual Meeting of Stockholders to be held May 10,
1995, is incorporated herein by reference.
ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the captions "Compensation of Directors and
Executive Officers" and "Certain Transactions and Business Relationships" in the
Proxy Statement dated March 30, 1995, for the Annual Meeting of Stockholders to
be held on May 10, 1995, is incorporated herein by reference.
12
15
PART IV
ITEM 14 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
(a) List of Documents filed as part of this Report
(1) Financial Statements
Independent Auditors' Report -- KPMG Peat Marwick LLP
Independent Auditors' Report -- Deloitte & Touche LLP
Consolidated Balance Sheets as of December 31, 1994 and 1993.
Consolidated Statements of Operations for the years ended December 31,
1994 and 1993, the four months ended December 31, 1992, and the fiscal
year ended August 31, 1992.
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1994 and 1993, the four months ended December 31, 1992,
and the fiscal year ended August 31, 1992.
Consolidated Statements of Cash Flows for the years ended December 31,
1994 and 1993, the four months ended December 31, 1992, and the fiscal
year ended August 31, 1992.
Notes to Consolidated Financial Statements.
(2) Financial Statement Schedule
SCHEDULE PAGE
NUMBER NUMBER
-------- ------
VIII -- Valuation and Qualifying Accounts............................... 23
The reports of the Company's independent auditors with respect to
the above listed financial statement schedules appear on pages 21 and
22.
All other financial statements and schedules not listed have been
omitted since the required information is included in the Consolidated
Financial Statements or the notes thereto, or is not applicable or
required.
(3) Exhibits (numbered in accordance with Item 601 of Regulation S-K)
EXHIBIT
NUMBER DESCRIPTION
------- -----------------------------------------------------------------------------------
3.1 -- Restated Certificate of Incorporation of the Company filed as Exhibit 3.1 to the
Company's Annual Report on Form 10-K for the year ended August 31, 1987, is hereby
incorporated by reference.
3.2 -- Amendment to Restated Certificate of Incorporation of the Company filed as Exhibit
3.2 to the Company's Annual Report on Form 10-K for the year ended August 31, 1987,
is hereby incorporated by reference.
3.3 -- Amendment filed December 17, 1986, to the Restated Certificate of Incorporation of
the Company filed as Exhibit 3.3 to the Company's Annual Report on Form 10-K for
the year ended August 31, 1987 is hereby incorporated by reference.
3.4 -- Amended Bylaws of the Company.
*10.1 -- Employment Agreement dated March 5, 1986, by and between Roy M. Speer and the
Company, filed as Exhibit 10.10 to the Company's Form S-1 Registration Statement
#33-4356, dated May 13, 1986, is incorporated herein by reference.
*10.2 -- Amended 1986 Stock Option Plan for Outside Directors dated August 1, 1986, filed as
Exhibit 10.32 to the Company's Form S-1 Registration Statement #33-8560, dated
October 15, 1986, is incorporated herein by reference.
13
16
EXHIBIT
NUMBER DESCRIPTION
------- -----------------------------------------------------------------------------------
*10.3 -- 1986 Stock Option Plan for Employees dated August 1, 1986, filed as Exhibit 10.33
to the Company's Form S-1 Registration Statement #33-8560, dated October 15, 1986,
is incorporated herein by reference.
10.4 -- Form of 1987 Cable Operators Stock Option Plan, filed as Exhibit 10.48 to the
Company's Form S-1 Registration Statement #33-12527, dated May 4, 1987, is
incorporated herein by reference.
10.5 -- Form of Affiliation Agreement by and between the Company and Cable Operators under
the 1987 Cable Operators Stock Option Plan, filed as Exhibit 10.49 to the Company's
Form S-1 Registration Statement #33-12527, dated May 4, 1987, is incorporated
herein by reference.
10.6 -- Form of Cable Operators Stock Option Agreement by and between the Company and Cable
Operators under the 1987 Cable Operators Stock Option Plan, filed as Exhibit 10.50
to the Company's Form S-1 Registration Statement #33-12527, dated May 4, 1987, is
incorporated herein by reference.
10.7 -- Lease Agreement dated December 1, 1986, by and between G&M Properties, a Nevada
partnership and Home Shopping Network Realty, Inc., a subsidiary of the Company
filed as Exhibit 10.53 to the Company's Form S-1 Registration Statement #33-12527,
dated May 4, 1987, is incorporated herein by reference.
10.8 -- Option Agreement dated December 1, 1986, by and between G&M Properties, a Nevada
partnership and Home Shopping Network Realty, Inc., a subsidiary of the Company
filed as Exhibit 10.54 to the Company's Form S-1 Registration Statement #33-12527,
dated May 4, 1987, is incorporated herein by reference.
10.9 -- Lease Agreement dated January 30, 1987, by and between G&M Properties, a Nevada
partnership and Home Shopping Network Realty, Inc., a subsidiary of the Company
filed as Exhibit 10.55 to the Company's Form S-1 Registration Statement #33-12527,
dated May 4, 1987, is incorporated herein by reference.
10.10 -- Lease Agreement dated January 30, 1987, by and between G&M Properties, a Nevada
partnership and Home Shopping Network Realty, Inc., a subsidiary of the Company
filed as Exhibit 10.56 to the Company's Form S-1 Registration Statement #33-12527,
dated May 4, 1987, is incorporated herein by reference.
10.11 -- License Agreement dated as of July 16, 1986, between Home Shopping Network, Inc.,
and Canadian Home Shopping Network, Ltd., filed as Exhibit 10.61 to the Company's
Form S-1 Registration Statement #33-12527, dated May 4, 1987, is incorporated
herein by reference.
*10.12 -- Form of 1990 Executive Stock Award Program dated October 17, 1990, as amended,
filed as Exhibit 10.23 to the Company's Annual Report on Form 10-K for the year
ended August 31, 1991, is hereby incorporated by reference.
*10.13 -- Third and Fourth Amendments to 1986 Stock Option Plan for Outside Directors, filed
as Exhibit 10.30 to the Company's Annual Report on Form 10-K for the year ended
August 31, 1991, is hereby incorporated by reference.
10.14 -- Distribution Agreement by and between Home Shopping Network, Inc. and Precision
Systems, Inc. dated as of July 31, 1992 filed as Exhibit 10.1 to the Precision
Systems, Inc. Form 10, Registration Statement No. 0-20068 and filed April 14, 1992,
is incorporated herein by reference.
10.15 -- Tax Sharing Agreement by and between Home Shopping Network, Inc. and Precision
Systems, Inc. dated as of July 31, 1992 filed as Exhibit 10.3 to the Precision
Systems, Inc. Form 10, Registration Statement No. 0-20068 and filed April 14, 1992,
is incorporated herein by reference.
10.16 -- Software License Agreement by and between Home Shopping Network, Inc. and Precision
Systems, Inc. dated as of July 31, 1992 filed as Exhibit 10.4 to the Precision
Systems, Inc. Form 10, Registration Statement No. 0-20068 and filed April 14, 1992,
is incorporated herein by reference.
14
17
EXHIBIT
NUMBER DESCRIPTION
------- -----------------------------------------------------------------------------------
10.17 -- Software Development Agreement by and between Home Shopping Network, Inc. and
Precision Systems, Inc. dated as of July 31, 1992 filed as Exhibit 10.6 to the
Precision Systems, Inc. Form 10, Registration Statement No. 0-20068 and filed April
14, 1992, is incorporated herein by reference.
10.18 -- Stock Purchase Agreement by and between Home Shopping Network, Inc. and The
National Registry Inc. dated April 28, 1992 filed as Exhibit 10.29 to the Company's
Annual Report on Form 10-K for the year ended August 31, 1992, is incorporated
herein by reference.
10.19 -- Form of Distribution Agreement between Home Shopping Network, Inc. and Silver King
Communications, Inc. ("SKC") dated as of December 28, 1992 filed as Exhibit 10.1 to
the SKC Registration Statement on Form 10, as amended, Registration Statement No.
0-20570, is incorporated herein by reference.
10.20 -- Form of Affiliation Agreements between Home Shopping Club, Inc. and SKC dated as of
December 28, 1992 filed as Exhibit 10.2 to the SKC Registration Statement on Form
10, as amended, Registration Statement No. 0-20570, is incorporated herein by
reference.
10.21 -- Form of Tax Sharing Agreement between Home Shopping Network, Inc. and SKC dated as
of December 28, 1992 filed as Exhibit 10.4 to the SKC Registration Statement on
Form 10, as amended, Registration Statement No. 0-20570, is incorporated herein by
reference.
10.22 -- Amended and Restated System Maintenance and Support Agreement effective as of
February 2, 1993 between Home Shopping Network, Inc. and Precision Systems, Inc.
filed as Exhibit 10.28 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993, is incorporated herein by reference.
10.23 -- MCI Special Customer Arrangement between MCI Telecommunications Corporation and
Home Shopping Network, Inc. filed as Exhibit 10.29 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1993, is incorporated herein by
reference.
10.24 -- Credit Card Program Agreement, dated as of February 16, 1994, by and among Home
Shopping Network, Inc., participating subsidiaries and General Electric Capital
Corporation filed as Exhibit 10.30 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1993, is incorporated herein by reference.
*10.25 -- First, Second, Third and Fourth Amendments to the 1986 Stock Option Plan for
Employees filed as Exhibit 10.31 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1993, are hereby incorporated herein by reference.
*10.26 -- Employment Agreement between Home Shopping Network, Inc. and Gerald F. Hogan, dated
as of February 23, 1993 filed as Exhibit 10.32 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1993, is hereby incorporated herein by
reference.
*10.27 -- First Amendment, effective as of August 4, 1994, to Employment Agreement between
Home Shopping Network, Inc. and Gerald F. Hogan.
10.28 -- Second Amended and Restated Credit Agreement $100,000,000 Three-Year Revolving
Credit Facility, dated as of August 30, 1994 among Home Shopping Network, Inc.,
Home Shopping Club, Inc., the signatory banks, LTCB Trust Company as Agent, Bank of
Montreal and The Bank of New York, each as a Co-Agent, and LTCB Trust Company as
Administrative Agent, as amended.
*10.29 -- Amended and Restated Home Shopping Network, Inc. Retirement Savings Plan and Trust
Agreements, which incorporates by reference the Home Shopping Network, Inc.
Retirement Savings and Employee Stock Ownership Plan and Trust filed as Exhibit
10.33 to the Company's Annual Report on Form 10-K for the year ended December 31,
1993.
*10.30 -- Home Shopping Network, Inc. Employee Stock Purchase Plan and Part-Time Employee
Stock Purchase Plan
*10.31 -- Home Shopping Network, Inc. Employee Equity Participation Plan and Agreement and
Declaration of Trust
15
18
EXHIBIT
NUMBER DESCRIPTION
------- -----------------------------------------------------------------------------------
*10.32 -- Employment Agreement between Home Shopping Network, Inc. and David F. Dyer, dated
as of August 16, 1994
*10.33 -- Employment Agreement between Home Shopping Network, Inc. and Barry S. Augenbraun,
dated as of September 1, 1994.
*10.34 -- Employment Agreement between Home Shopping Network, Inc. and Honore A. LeBrun III,
dated as of November 2, 1993.
*10.35 -- Letter Agreement between Home Shopping Network, Inc. and Michael W.D. McMullen,
dated as of July 28, 1993.
10.36 -- Form of Amendment dated as of July 28, 1994 to Affiliation Agreements between Home
Shopping Club, Inc. and SKC.
11 -- Computation of net earnings (loss) per share.
13 -- Annual Report to Stockholders.
21 -- List of Subsidiaries of the Company.
---------------
* Reflects management contracts and compensatory plans.
(b) Reports on Form 8-K
Not applicable.
16
19
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
March 28, 1995 HOME SHOPPING NETWORK, INC.
By: /s/ GERALD F. HOGAN
--------------------------------------
Gerald F. Hogan
President and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES AND EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES INDICATED ON MARCH 28, 1995.
SIGNATURE TITLE
----------------------------------------------- --------------------------------------------
/s/ GERALD F. HOGAN President, Chief Executive Officer and
----------------------------------------------- Director
Gerald F. Hogan
/s/ KEVIN J. McKEON Senior Vice President of Accounting and
----------------------------------------------- Finance and Treasurer (Principal Financial
Kevin J. McKeon Officer)
/s/ BRIAN J. FELDMAN Controller (Chief Accounting Officer)
-----------------------------------------------
Brian J. Feldman
/s/ ROBERT R. BENNETT Chairman of the Board
-----------------------------------------------
Robert R. Bennett
/s/ JOHN M. DRAPER Director
-----------------------------------------------
John M. Draper
/s/ DAVID F. DYER Director
-----------------------------------------------
David F. Dyer
/s/ J. ANTHONY FORSTMANN Director
-----------------------------------------------
J. Anthony Forstmann
/s/ LEO J. HINDERY, JR. Director
-----------------------------------------------
Leo J. Hindery, Jr.
/s/ GEORGE C. McNAMEE Director
-----------------------------------------------
George C. McNamee
17
EX-10.27
2
EMPLOYMENT AGREEMENT; HSN AND G.F. HOGAN
1
EXHIBIT 10.27
EMPLOYMENT AGREEMENT
First Amendment
HOME SHOPPING NETWORK, INC., a Delaware corporation (the
"Company") and GERALD F. HOGAN ("Executive") have entered into an employment
agreement dated as of February 23, 1993 (the "Employment Agreement"). Company
and Executive desire to clarify the intention of the Employment Agreement with
respect to the treatment of Executive's rights under Section 12 of the
Employment Agreement and modify the provisions of Section 1(g) of the
Employment Agreement.
Accordingly, pursuant to Section 14(a) of the Employment
Agreement, Company and Executive hereby agree to the following:
1. The transaction in which the Company's parent, Liberty Media
Corporation, became a wholly owned subsidiary of Tele-
Communications, Inc., a Delaware corporation, was not intended
by the parties and shall not be treated as a Change of Control
as defined in Section 1(g) of the Employment Agreement.
2. From and after August 4, 1994, Section 1(g) of the Employment
Agreement shall read as follows:
"(g) Change of Control. For purposes of
this Agreement, a "Change of Control" shall be deemed
to have occurred as of the date upon which either (x)
Tele-Communications, Inc. ("TCI", which term shall
include each of TCI's affiliates and any successor
corporation, partnership or other entity formed as a
result of or in connection with any pro rata
distribution of securities or the right to acquire
securities to the holders of securities of TCI)
ceases to be the sole "beneficial owner" (within the
meaning of Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of Voting Securities (as hereinafter
defined) having a majority of the outstanding Voting
Power (as hereinafter defined) of the Company, or (y)
there shall have been a sale or other disposition of
all or substantially all of the assets of the Company
in any transaction or series of related transactions
to a person that is not an affiliate of TCI. As used
herein, the following terms shall have the following
meanings: (i) "Voting Securities" shall mean any
securities of the Company
-1-
2
entitled, or which may be entitled, to vote on
matters submitted to stockholders generally (whether
or not entitled to vote generally in the election of
directors), or securities which are convertible into,
or exercisable or exchangeable for such Voting
Securities, whether or not subject to the passage of
time or any contingency; (ii) "Voting Power" shall
mean the number of votes available to be cast
(determined by reference to the maximum number of
votes entitled to be cast by the holders of such
Voting Securities (or by the holders of any other
Voting Securities into which such Voting Securities
may be convertible, exercisable or exchangeable for,
whichever yields the highest number of votes) upon
any matter submitted to stockholders where the
holders of all Voting Securities vote together as a
single class) by the holders of Voting Securities;
and (iii) "affiliate" shall have the meaning set
forth in Rule 13e-3(a)(1) under the Exchange Act."
IN WITNESS WHEREOF, this First Amendment has been executed
this 6th day of March, 1995 but effective as of August 4, 1994.
ATTEST: HOME SHOPPING NETWORK, INC.
/s/ H. Steven Holtzman By: /s/ Barry S. Augenbraun
-------------------------- -------------------------------
Name: H. Steven Holtzman Name: Barry S. Augenbraun
Title: Assistant Secretary Title: Executive Vice President
/s/ Gerald F. Hogan
-------------------------------
Gerald F. Hogan
-2-
EX-10.28
3
SECOND AMENDMENT RESTATED CREDIT AGREEMENT
1
EXHIBIT 10.28
************************************************************
HOME SHOPPING NETWORK, INC.,
as Borrower
HOME SHOPPING CLUB, INC.,
as Guarantor
__________
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of August 30, 1994
__________
LTCB TRUST COMPANY,
as Administrative Agent
and as Agent
__________
BANK OF MONTREAL
and
THE BANK OF NEW YORK COMPANY, INC.,
as Co-Agents
__________
THE BANKS NAMED HEREIN
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TABLE OF CONTENTS
Page
Section 1. Definitions and Accounting Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Certain Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Certain Accounting Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2. Commitments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.1. Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.2. Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.3. Changes of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.4. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.5. Lending Offices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.6. Several Obligations; Remedies Independent. . . . . . . . . . . . . . . . . . . . . . . 16
2.7. Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.8. Prepayments and Conversions of Loans . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.9. Extension of Facility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3. Payments of Principal and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.1. Repayment of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.2. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4. Payments; Pro Rata Treatment; Computations, Etc. . . . . . . . . . . . . . . . . . . . 22
4.1. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.2. Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.3. Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.4. Minimum Amounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.5. Certain Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.6. Non-Receipt of Funds by the Administrative Agent . . . . . . . . . . . . . . . . . . . 25
4.7. Sharing of Payments, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 5. Yield Protection and Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.1. Additional Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.2. Limitation on Types of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.3. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.4. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.5. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6. Guarantee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.1. Unconditional Guarantee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.2. Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.3. Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.4. Subordination and Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.5. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.6. Reinstatement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
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Section 7. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.1. Initial Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.2. Initial and Subsequent Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 8. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.1. Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.2. Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.3. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.4. No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.5. Corporate Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.6. Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.7. Use of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.8. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.9. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.10. Credit Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.11. Ownership of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.12. Pari Passu Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.13. Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.14. Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.15. Prepayments of Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 9. Covenants of the Company and the Guarantor . . . . . . . . . . . . . . . . . . . . . . 40
9.1. Financial Statements; Reports and Other Information. . . . . . . . . . . . . . . . . . 40
9.2. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.3. Corporate Existence, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.4. Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.5. Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.6. Mergers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.7. Dispositions of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.8. Ranking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.9. Business; Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.10. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.11 Interest Coverage Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.12. Total Debt Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.13. Consolidated Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.14. Notification of Incurrence of Debt . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.15. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.16. Ownership of Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.17. Indebtedness of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.18. Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 10. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 11. The Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
11.1. Appointment, Powers and Immunities. . . . . . . . . . . . . . . . . . . . . . . . . . 56
11.2. Reliance by the Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . 56
11.3. Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
11.4. Rights as a Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
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11.5. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
11.6. Non-Reliance on Administrative Agent, Agent, Co-Agents and other Banks. . . . . . . . 58
11.7. Failure to Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
11.8. Resignation or Removal of Administrative
Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
11.9. Administrative Agent's Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
11.10. Agent and Co-Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 12. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
12.1. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
12.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
12.3. Expenses, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
12.4. Amendments, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
12.5. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
12.6. Assignments and Participation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
12.7. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
12.8. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
12.9. Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
12.10. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
12.11. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
12.12. JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
12.13. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Schedule 1: Existing Credit Agreements and Liens
Schedule 2: Calculations of Sample Financial Terms
Schedule 3: Description of Credit Card Program
Exhibit A: Form of Note
Exhibit B: Form of Opinion of Counsel to the Company and
the Guarantor
Exhibit C: Form of Compliance Certificate
Exhibit D: Form of Total Debt Ratio Notice
Exhibit E: Form of Assignment and Assumption Agreement
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SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of August 30,
1994 (as the same may be amended or modified from time to time, this
"Agreement"), among HOME SHOPPING NETWORK, INC., a Delaware corporation (the
"Company"); HOME SHOPPING CLUB, INC., a Delaware corporation (the "Guarantor");
each of the banks which is a signatory hereto (together with its successors
individually, a "Bank" and, collectively, the "Banks"); LTCB TRUST COMPANY, a
New York trust company, as agent (in such capacity, together with its
successors in such capacity, the "Agent"), BANK OF MONTREAL and THE BANK OF NEW
YORK COMPANY, INC. (in such capacity, together with their respective successors
in such capacity, the "Co-Agents"); and LTCB TRUST COMPANY, a New York trust
company, as Administrative Agent for the Banks (in such capacity, together with
its successors in such capacity, the "Administrative Agent").
The Company, the Guarantor, the Agent, the Co-Agents, certain banks as
"Banks", and LTCB Trust Company, as "Administrative Agent", are parties to the
Amended and Restated Credit Agreement, dated as of December 18, 1992 (as
amended, the "1992 Revolving Credit Agreement"), pursuant to which the "Banks"
(as defined therein) (hereinafter, the "Existing Banks") have made available to
the Company, under the guarantee of the Guarantor, a revolving credit facility
providing for loans in an aggregate principal amount not exceeding $40,000,000
at any one time outstanding.
The Company has requested that the revolving credit facility under the
1992 Revolving Credit Agreement be increased to $100,000,000 and that the 1992
Revolving Credit Agreement otherwise be modified as provided herein. Each of
the Existing Banks is willing to agree to such increase in the amounts and on
the terms and conditions of this Agreement, and each of the Banks other than
the Existing Banks (collectively, the "New Banks") wishes to become a party to
the 1992 Revolving Credit Agreement, as amended and restated hereby, and to
have all of the rights and obligations of "Banks" hereunder. Accordingly, the
Banks are willing to make loans to the Company, under the guarantee of the
Guarantor, in an aggregate principal amount not exceeding $100,000,000 at any
one time outstanding upon the terms and conditions hereof.
Accordingly, the parties hereto hereby agree that, effective on the
Amendment Effective Date (as hereinafter defined), the 1992 Revolving Credit
Agreement is hereby amended and restated in its entirety as follows:
Section 1. Definitions and Accounting Matters.
1.1. Certain Defined Terms. As used herein, the following terms shall
have the following meanings (all terms defined in this Section 1 or in other
provisions of this Agree-
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ment in the singular to have the same meanings when used in the plural and vice
versa):
"Affiliate" shall mean, with respect to any Person, any other Person
(other than a Wholly-Owned Subsidiary of such Person) directly or indirectly
controlling, controlled by, or under direct or indirect common control with,
such Person. A Person shall be deemed to control another Person if such Person
(x) is an officer or director of such other Person, (y) possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such other Person, whether through the ownership of voting
securities, by contract or otherwise, or (z) directly or indirectly owns or
controls 10% or more of such other Person's capital stock.
"Amendment Effective Date" shall mean the date on which this Agreement
shall have been executed and delivered by each of the parties provision for
whose signature has been made on the signature pages hereof, and each of the
conditions precedent set forth in Section 7.1 hereof has been satisfied.
"Anniversary Date" shall mean the Fee Payment Date falling on or about
each anniversary date of this Agreement.
"Applicable Lending Office" shall mean, for each Bank and for each type
of Loan, the Lending Office of such Bank (or of an affiliate of such Bank)
designated for such type of Loan on the signature pages hereof or such other
office of such Bank (or of an affiliate of such Bank) as such Bank may from time
to time specify to the Administrative Agent and the Company as the office by
which its Loans of such type are to be made and maintained.
"Applicable Margin" shall mean, at any time: (a) with respect to LIBOR
Loans, 1.25% minus the Margin Adjustment (if any) in effect at such time; and
(b) with respect to Prime Rate Loans, 0.25% minus the Margin Adjustment (if any)
in effect at such time; provided, that in no event shall the Applicable Margin
be less than 0%.
"Bankruptcy Code" shall mean the federal Bankruptcy Code of the United
States, 11 U.S.C. Section 101 et seq.
"Business Day" shall mean any day on which commercial banks are not
authorized or required to close in New York City and dealings in Dollar deposits
are carried out in the London interbank market.
"Capital Lease" shall mean any lease or other contractual arrangement
which under GAAP has been or should be recorded as a capital lease.
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"Change of Control" shall mean any of the following events:
(i) the acquisition by any "person" or "group" of persons of the
"beneficial ownership" (as such terms are defined within the meaning
of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended) of outstanding shares of the Company's capital stock, or any sale
or other disposition of any of the capital stock of the Company owned by any
owner thereof, or any other event such that, after giving effect to such
acquisition, sale, disposition or other event, TCI would no longer (A) own,
directly or indirectly, or otherwise control at least 51% of the outstanding
shares of any class of the Company's common stock the approval of which is
required for any fundamental corporate action (including, without
limitation, any merger, reorganization, recapitalization, liquidation,
distribution, winding-up, sale, transfer or hypothecation of substantially
all or a substantial portion of the Company's assets), or (B) possess the
ability to elect at least a majority of the Board of Directors of the
Company; or
(ii) any person or group of persons shall acquire all or substantially
all of the assets of the Company; or
(iii) the acquisition by any "person" or "group" of persons of the
"beneficial ownership" (as such terms are defined within the meaning of
Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended)
of more than 50% of the then outstanding shares of any class of TCI's
capital stock; or
(iv) any person or group of persons shall acquire all or substantially
all of the assets of TCI.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commitment" shall mean, with respect to any Bank, the amount set forth
opposite such Bank's name on the signature pages hereof under the caption
"Commitment" (as reduced from time to time pursuant to Section 2.3 hereof or
otherwise). The "Commitments" under the 1992 Revolving Credit Agreement are
hereby terminated.
"Commitment Termination Date" shall mean (a) initially, the Fee Payment
Date falling on or immediately prior to August 30, 1997, (b) in the event that
the Administrative Agent and the Banks agree to extend the facility provided for
by this Agreement in accordance with Section 2.9 hereof, then with respect to
the Banks agreeing to any such extension, the Commitment Termination Date as so
extended, and with respect to the Banks not agreeing
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to such extension, the Commitment Termination Date as in effect without regard
to such extension.
"Consolidated Net Worth" shall mean, at any date, all amounts which, in
conformity with GAAP, would be included under stockholder's equity on a
consolidated balance sheet of the Company and its Subsidiaries at such time.
"Cumulative Net Income" shall mean, for any period, the sum of the net
income (but not any net loss) of the Company and its Subsidiaries (including,
without limitation, the Guarantor) on a consolidated basis for such period,
determined in accordance with GAAP, for each Fiscal Quarter falling within such
period.
"Default" shall mean an Event of Default or an event which with notice
or lapse of time or both would become an Event of Default.
"Dollars" and "$" shall mean lawful money of the United States of
America.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"ERISA Affiliate" shall mean any corporation or trade or business which
is a member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Company or the Guarantor or is under common
control (within the meaning of Section 414(c) of the Code) with the Company or
the Guarantor.
"Extension Date" shall mean, for each extension of the Commitment
Termination Date requested by the Company under Section 2.9 hereof, the
Anniversary Date falling two years prior to the Commitment Termination Date then
in effect (without regard to the requested extension) or, if more than one
Commitment Termination Date is then in effect (by reason of certain Banks having
been Dissenting Banks for any previous extension request, the Anniversary Date
falling two years prior to the latest Commitment Termination Date then in effect
(without regard to the requested extension). Accordingly, the first Extension
Date shall be the Anniversary Date on or about August 30, 1995; and each
subsequent such date shall be the corresponding Anniversary Date in the
appropriate subsequent calendar year.
"Event of Default" shall have the meaning assigned to that term in
Section 10 hereof.
"Facility Fee Rate" shall mean, for each day, the following percentage:
at any time when the Total Debt Ratio in Section 9.12 hereof is less than 2:1,
0.25%, and at any time when said Total Debt Ratio is greater than or equal to
2:1, 0.375%, in each case as set forth in the Total Debt Ratio Notice most
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recently delivered to the Administrative Agent as of such day (which Notice
shall be effective on the date of the Administrative Agent's receipt thereof in
accordance with Section 12.2 hereof), subject to adjustments as provided in
Section 3.2 hereof.
"Federal Funds Rate" shall mean, (i) for Overnight Federal Funds Rate
Loans, for any day, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100th of 1%) equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers on such day, as published by the Federal Reserve Bank
of New York on the Business Day next succeeding such day, and (ii) for Term
Federal Funds Rate Loans (if requested by the Company and agreed to by the
Administrative Agent and the Banks), for any Interest Period, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100th of 1%) equal to the
weighted average of the rates on term Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers on the first day of
such Interest Period for a period equal to such Interest Period, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day and as determined by the Administrative Agent; provided, that (x) if the day
for which such rate is to be determined is not a Business Day, the Federal Funds
Rate for such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and (y) if
such rate is not so published for any day, the Federal Funds Rate for such day
shall be the average rate charged to LTCB on such day on such transactions as
determined by the Administrative Agent.
"Federal Funds Rate Loans" shall mean Loans which bear interest at rates
based upon the Federal Funds Rate, and in any event shall be either an Overnight
Federal Funds Rate Loan or a Term Federal Funds Rate Loan.
"Fee Payment Date" shall mean the 30th day of each February, May, August
and November in each year, the first of which shall be the first such day after
the date of this Agreement; provided, that if any such day is not a Business
Day, then such Fee Payment Date shall be the next succeeding Business Day
(unless such Business Day falls in a subsequent calendar month, in which case
such Fee Payment Date shall be the next preceding Business Day).
"Fiscal Quarter" shall mean, a period of three consecutive calendar
months commencing on any of the following dates in any Fiscal Year: January 1,
April 1, July 1 and October 1.
"Fiscal Year" shall mean, for the Company, the Guarantor or any
Subsidiary, the twelve consecutive calendar month period commencing on such date
and on January 1 of each
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calendar year thereafter and ending on December 31 of such calendar year; and
"Fiscal 1994", "Fiscal 1995", and any other year so designated shall mean the
Fiscal Year ending on August 31 or December 31, as the case may be, of the
indicated calendar year.
"GAAP" shall mean generally accepted accounting principles in the United
States of America, consistently applied, as in effect (unless otherwise
specified in this Agreement) from time to time.
"Guaranteed Program" shall have the meaning assigned to that term in
Schedule 3 hereto.
"Indebtedness" shall mean, for any Person (but without duplication):
(a) all indebtedness and other obligations of such Person for
borrowed money or for the deferred purchase price of property or services
(other than trade payables incurred in the ordinary course of business and
not overdue by more than 180 days), including, without limitation, all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments;
(b) all obligations of such Person under interest rate or currency
swaps, caps, collars, floors, options, forward exchange contracts and
similar hedging arrangements;
(c) the stated amount of all letters of credit issued for the account
of such Person and (without duplication) all drafts drawn thereunder, and
the aggregate face amount of all banker's acceptances as to which such
Person is obligated, other than trade letters of credit issued for the
account of such Person in the ordinary course of business pursuant to the
terms of which (i) such Person is obligated to reimburse the issuer thereof
for any drawing thereunder on the date of such drawing and (ii) no other
credit shall be extended thereunder to such Person by such issuer;
(d) all obligations of such Person under any Capital Leases;
(e) all obligations of such Person in connection with employee benefit
or similar plans;
(f) all obligations of such Person in respect of guarantees, whether
direct or indirect (including, without limitation, agreements to "keep well"
or otherwise ensure a creditor against loss) with respect to any
indebtedness or other obligation of any other Person of the type described
in any of clauses (a) through (e) above;
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(g) all indebtedness or other obligations referred to in any of clauses
(a) through (f) above secured by any Lien upon property owned by such
Person, whether or not such Person is liable on any such obligation; and
(h) all obligations of the Company, the Guarantor or any other
Subsidiary under the Special Program and/or the Guaranteed Program (each as
defined in Schedule 3 hereto).
"Interest Expense" shall mean, for any period, all interest expense of
the Company and its consolidated Subsidiaries for such period determined in
accordance with GAAP.
"Interest Payment Date" shall mean, (i) for any Loan, the last day of
the Interest Period relating thereto, and (ii) for any Federal Funds Rate Loan
or Prime Rate Loan, the last day of any month which occurs during the Interest
Period related thereto, and in any case if such day is not a Business Day, the
next succeeding Business Day.
"Interest Period" shall mean with respect to any (1) LIBOR Loan, the
period commencing on the date such Loan is made or converted from a Loan of
another type and ending on the numerically corresponding day in the first,
second, third or sixth calendar month thereafter, as the Company may select as
provided in Section 2.2 hereof (or such period of less than one month as the
Company may select in accordance with clause (ii) or (iii) of the next paragraph
below), except that each such Interest Period which commences on the last
Business Day of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent calendar month,
(2) Overnight Federal Funds Rate Loan, each period of one Business Day, (3) Term
Federal Funds Rate Loan, the period commencing on the date such Loan is made or
converted from a Loan of another type and ending on the last day for which the
Federal Funds Rate for such Loan applies, as agreed between the Company and the
Administrative Agent with the consent of the Banks prior to the commencement of
such Interest Period and (4) Prime Rate Loan, each period commencing on the date
such Loan is made or converted from a Loan of another type and ending on the
date 30 days later.
Notwithstanding the foregoing, (i) each Interest Period which would
otherwise end on a day that is not a Business Day shall end on the next
succeeding Business Day (or if such next succeeding Business Day falls in the
next succeeding calendar month, on the next preceding Business Day); (ii) each
Interest Period which would otherwise commence before and end after any
Commitment Termination Date then in effect for any Bank shall end on such
Commitment Termination Date; (iii) if the Company selects an Interest Period
that would begin before and end after any Anniversary Date, the Administrative
Agent may notify the Company
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and the Banks that the Company must select a shorter Interest Period that will
end on or prior to such Anniversary Date, in which case such shorter period
selected by the Company shall (subject to clauses (i) and (ii) above) be the
relevant Interest Period; and (iv) the Company must select the duration of
Interest Periods so that, notwithstanding clause (i) above, no Interest Period
for LIBOR Loans shall have a duration of less than one month (except as
provided in clause (ii) or (iii) above), and so that no more than ten Interest
Periods with respect to LIBOR Loans shall be in effect at any one time.
"Investment" shall mean, for any Person, (a) the acquisition (whether
for cash, property, services or securities or otherwise) of capital stock,
bonds, notes, debentures, partnership or other ownership interests or other
securities or obligations of any other Person or any agreement to make any such
acquisition (including, without limitation, any "short sale" or any sale of any
securities at a time when such securities are not owned by the Person entering
into such short sale); (b) the making of any deposit with, or advance, or loan
or other extension of credit to, any other Person (including the purchase of
property from another Person subject to an understanding or agreement,
contingent or otherwise, to resell such property to such Person, but excluding
any such advance, loan or other extension of credit to customers of the Company
or to customers of the Company's Subsidiaries having a term not exceeding 90
days arising in the ordinary course of business); (c) the entering into of any
guarantee of, or other contingent obligation with respect to, Indebtedness or
other liability of any other Person and (without duplication) any amount
committed to be advanced, lent or extended to such person; or (d) the entering
into of any interest rate or currency swaps, caps, collars, floors, options,
forward exchange contracts and similar hedging arrangements.
"LIBOR" shall mean, with respect to any LIBOR Loan for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/16 of 1%) quoted by the London office of LTCB at approximately 11:00
a.m. London time (or as soon thereafter as practicable) or if such rate is not
quoted to LTCB, the rate per annum appearing on the display designated as page
"LIBO" on the Reuter Monitor Money Rates Service (or such other page as may
replace the LIBO page of that service for the purpose of displaying London
interbank offered rates of major banks) two Business Days prior to the first day
of such Interest Period for the offering by such office to leading banks in the
London interbank market of Dollar deposits having a term comparable to such
Interest Period and in an amount comparable to the principal amount of the LIBOR
Loan scheduled to be outstanding during such Interest Period from LTCB Trust.
"LIBOR Loans" shall mean Loans the interest rates on which are
determined on the basis of LIBOR.
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"Lien" shall mean, with respect to any asset or other property, any
mortgage, lien, pledge, charge, security interest or encumbrance of any kind in
respect of such asset or property, any agreement to grant any of the foregoing
with respect to such asset or property, and the filing of a financing statement
or similar recording in any jurisdiction with respect to such asset or
property. For all purposes hereunder, the Company, the Guarantor or any
Subsidiary shall be deemed to own subject to a Lien (i) any asset or other
property which it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such asset or property and (ii) any account
receivable transferred by it with recourse (including any such transfer subject
to a holdback or similar arrangement that effectively imposes the risk of
collectibility on the transferor).
"Loans" shall mean the loans provided for by Section 2.1 hereof.
"LTCB" shall mean The Long-Term Credit Bank of Japan, Limited, a banking
corporation duly organized and validly existing under the laws of Japan, and its
successors.
"LTCB Trust" shall mean LTCB Trust Company, a trust company duly
organized and validly existing under the laws of the State of New York, and its
successors.
"Majority Banks" shall mean Banks having not less than 51% of the
aggregate amount of the Loans outstanding, or if no Loans are then outstanding,
Banks holding not less than 51% of the Commitments then in effect, or, if no
Loans are then outstanding nor Commitments in effect, Banks which held not less
than 51% of the Commitments when most recently in effect; provided, that solely
for purposes of determining whether or not the Banks have agreed to each
requested extension of the Commitment Termination Date pursuant to Section 2.9
hereof or amendments or waivers of Section 2.9 with respect to any particular
extension, "Majority Banks" shall not include any Bank whose Commitment, by
reason of such Bank having been a Dissenting Bank for any previous extension, is
scheduled to expire or has expired at any time prior to the Commitment
Termination Date that is the subject of such extension request.
"Margin Adjustment" shall mean, at any time of determination thereof,
when the Total Debt Ratio, as set forth in the Total Debt Ratio Notice most
recently delivered to the Administrative Agent (which Notice shall be effective
on the date of the Administrative Agent's receipt thereof in accordance with
Section 12.2 hereof), is at each of the following levels, a subtraction from any
Applicable Margin, as set forth below:
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Effective Subtraction from
Total Debt Ratio Applicable Margin
---------------- -----------------
[S] [C]
Greater than or
equal to 2.50 to 1 0
Less than 2.50 to 1,
but greater than
2.00 to 1 (0.25%)
Less than 2.00 to 1
but greater than or
equal to 1.00 to 1 (0.50%)
Less than 1.00 to 1 (0.75%);
provided, that in no event shall the Margin Adjustment cause the Applicable
Margin to be less than 0%.
"Material Subsidiary" shall mean, at any time, a Subsidiary the book
value of whose tangible assets at such time exceeds 10% of the book value of the
total tangible assets of the Company and the Subsidiaries (on a consolidated
basis), but in any event shall include each of the Guarantor, HSN Fulfillment,
Inc., HSN Mail Order, Inc. and HSN Realty, Inc., each a Delaware corporation,
and their respective successors.
"Material Subsidiary Group" shall mean, at any time, a group of any two
or more Subsidiaries which at such time has a combined aggregate book value of
tangible assets in excess of 10% of the book value of the total tangible assets
of the Company and the Subsidiaries (on a consolidated basis).
"Multiemployer Plan" shall mean a plan defined as such in Section 3(37)
of ERISA to which contributions have been made by the Company or any ERISA
Affiliate and which is covered by Title IV of ERISA.
"Non-Material Subsidiary" shall mean, at any time, a Subsidiary which is
not a Material Subsidiary.
"Notes" shall mean the promissory notes provided for by Section 2.7
hereof.
"Obligations" shall mean all obligations and liabilities of the Company
to the Administrative Agent, the Agent, the Co-Agents and the Banks (or any of
the foregoing) now or in the future existing under or in connection with this
Agreement, any of the Notes or any related document (as any of the foregoing
Agreement, Notes or documents may from time to time be respectively amended,
modified, substituted, extended or renewed), direct or indirect, absolute or
contingent, due or to become due, now or hereafter existing, including without
limitation, any
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payment of principal, interest, fees or expenses due at any time under this
Agreement.
"Operating Cash Flow" shall mean, for any period, the sum of the
following for the Company and its Subsidiaries (including, without limitation,
the Guarantor) on a consolidated basis:
(a) operating profit of such Persons for such period; plus
(b) (to the extent already deducted in arriving at operating
profit) depreciation and amortization expense for such Persons for such
period; plus
(c) (to the extent already deducted in arriving at operating
profit) non-cash compensation expense related to the Company's
executive stock award program;
all as shown on the consolidated financial statements, including the
notes thereto, of the Company and its consolidated Subsidiaries for such
period. Operating Cash Flow for the four-Fiscal Quarter period ended
June 30, 1994 is as set forth in Schedule 2 hereto (subject to the
assumptions set forth therein).
"Overnight Federal Funds Rate Loan" shall mean a Loan which bears
interest at an overnight Federal Funds Rate.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" shall mean an individual, a corporation, a company, a voluntary
association, a partnership, a trust, an unincorporated organization or a
government or any agency, instrumentality or political subdivision thereof.
"Plan" shall mean an employee benefit or other plan established or
maintained by the Company or any ERISA Affiliate and which is covered by Title
IV of ERISA, other than a Multiemployer Plan.
"Post-Default Rate" shall mean a rate per annum, during the period
commencing on the date on which any Obligation is not paid in full when due
(whether at stated maturity, by acceleration or otherwise) and ending on the
date on which all such overdue Obligations are paid in full, equal to 2.00% plus
the higher of (x) the Prime Rate as in effect from time to time and (y) the
interest rate in effect from time to time for Overnight Federal Funds Rate Loans
hereunder (including the Applicable Margin in effect for such Loans at each such
time); provided that, if any such unpaid Obligation is principal of a
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LIBOR Loan or of a Term Federal Funds Rate Loan and the due date thereof is a
day other than the last day of the Interest Period therefor, the "Post-Default
Rate" for such principal shall be, for the period commencing on the due date
and ending on the last day of the then current Interest Period therefor, 2.00%
plus the interest rate for such Loan as provided in Section 3.2(a) or (b)
hereof and, thereafter, the rate otherwise provided for above in this
definition.
"Prime Rate" shall mean the rate of interest from time to time announced
by LTCB at its office in New York, New York as its prime commercial lending
rate, which rate is not necessarily the lowest rate of interest charged or
received by LTCB. Each change in the Prime Rate resulting from a change in such
prime commercial lending rate shall take effect when such prime commercial
lending rate changes.
"Prime Rate Loans" shall mean Loans which bear interest at rates based
upon the Prime Rate.
"Program" shall have the meaning assigned to that term in Schedule 3
hereto.
"Regulation A" shall mean Regulation A of the Board of Governors of the
Federal Reserve System (or any successor), as the same may be amended or
supplemented from time to time.
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System (or any successor), as the same may be amended or
supplemented from time to time.
"Regulatory Change" shall mean, with respect to any Bank, any change
after the date of this Agreement in United States Federal, state or foreign law
or regulations (including Regulation D) or the adoption or making after such
date of any interpretations, directives or requests applying to a class of banks
including such Bank of or under any United States Federal, State or foreign law
or regulations (whether or not having the force of law) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.
"SEC Report" shall mean, with respect to any Person, any document filed,
or deemed filed, at any time with the Securities and Exchange Commission (or any
successor thereto) by or on behalf of such Person and available to the public.
"Short-Term Debt" shall mean, for any Person, all Indebtedness of such
Person which would be short term debt, whether direct or contingent, under GAAP
as in effect on the date of this Agreement.
"Special Program" shall have the meaning assigned to that term in
Schedule 3 hereto.
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"Subsidiary" shall mean any corporation, partnership or other Person of
which at least a majority of the outstanding shares of capital stock or other
ownership interests ordinarily having, in the absence of contingencies, by the
terms thereof voting power to elect a majority of the board of directors or
similar governing body of such Person is at the time directly or indirectly
owned or controlled by the Company, the Guarantor or by the Company and/or the
Guarantor, and in any event shall include the Guarantor and its subsidiaries.
"Wholly-Owned Subsidiary" shall mean any Person of which all of such ownership
interests, other than directors' qualifying shares, are so owned or controlled.
"TCI" shall mean Tele-Communications, Inc., a Delaware corporation
(formerly called TCI/Liberty Holdings, Inc.).
"Term Federal Funds Rate Loan" shall mean any Federal Funds Rate Loan
other than an Overnight Federal Funds Rate Loan.
"Total Debt" shall mean, for any Person at any time, all Indebtedness of
such Person at such time (including, without limitation, all long-term senior
and subordinated Indebtedness, all Short-Term Debt, the stated amount of all
letters of credit issued for the account of such Person and (without
duplication) all unreimbursed draws thereunder), as shown on the consolidated
quarterly or annual financial statements, including the notes thereto, of the
Company delivered for such period pursuant to Section 9.1 (or referred to in
Section 8.2) hereof. Total Debt of the Company and its consolidated
Subsidiaries as at the end of the four-Fiscal Quarter period ended June 30, 1994
is as set forth on Schedule 2 hereto (subject to the assumptions set forth
therein).
"Total Debt Ratio" shall mean, at any time, the ratio of (a) Total Debt
of the Company and its consolidated Subsidiaries as at the end of the Company's
four-Fiscal Quarter period most recently ended as of such time, to (b) Operating
Cash Flow for the same period, as shown in the Total Debt Ratio Notice for such
period.
"Total Debt Ratio Notice" shall mean each notice provided for in Section
9.1(g) (or Section 7.1(f)) hereof.
1.2. Certain Accounting Matters.
(a) Unless otherwise disclosed to the Banks in writing at the
time of delivery thereof in the manner described in subsection (b) below, all
financial statements and certificates and reports as to financial matters
required to be delivered to the Administrative Agent on behalf of itself and the
Banks hereunder shall be prepared in accordance with GAAP applied on a basis
consistent with those used in the preparation of the latest financial statements
furnished to the Banks hereunder after the
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date hereof (or, prior to the delivery of the first financial statements
furnished to the Banks hereunder, used in the preparation of the audited
financial statements referred to in Section 8.2 hereof). All calculations made
for the purposes of determining compliance with the terms of Sections 9.11,
9.12 and 9.13 hereof shall, except as otherwise expressly provided herein, be
made by application of GAAP applied on a basis consistent with those used in
the preparation of the annual or quarterly financial statements then most
recently furnished to the Banks pursuant to Section 9.1 (or referred to in
Section 8.2) hereof unless (i) the Company shall have objected to determining
such compliance on such basis at the time of delivery of such financial
statements or (ii) the Majority Banks shall so object in writing within 30 days
after delivery of such financial statements, in either of which cases such
calculations shall be made on a basis consistent with those used in the
preparation of the most recent financial statements as to which such objection
shall not have been made.
(b) The Company shall deliver to the Administrative Agent, with
sufficient copies for delivery to the Banks, contemporaneously with delivery of
any annual or quarterly financial statement under Section 9.1 hereof a
description in reasonable detail of any material variation between the
application of accounting principles employed in the preparation of such
statement and the application of accounting principles employed in the
preparation of the most recently preceding annual or quarterly financial
statements as to which no objection shall have been made in accordance with the
last sentence of subsection (a) above, and reasonable estimates of the
difference between such statements arising as a consequence thereof.
Section 2. Commitments.
2.1. Loans. Each Bank severally agrees, on the terms and subject to
the conditions of this Agreement, to make Loans to the Company from time to time
during the period from and including the date hereof to but not including the
Commitment Termination Date (as from time to time in effect for such Bank) in
principal amounts not to exceed in the aggregate at any time outstanding the
amount of such Bank's Commitment as in effect from time to time. Subject to the
terms and conditions of this Agreement, during such period the Company may
borrow, repay and reborrow the amount of the Commitments by means of LIBOR
Loans, Federal Funds Rate Loans or Prime Rate Loans, and during such period the
Company may convert Loans of one type into Loans of another type (as provided in
Section 2.8 hereof); provided, that no more than ten LIBOR Loans may be
outstanding from each Bank at any time.
On the Amendment Effective Date, any loans then outstanding under the
1992 Revolving Credit Agreement shall be
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deemed to be Loans outstanding under this Agreement, and the Administrative
Agent, on behalf of the Company, is hereby authorized and directed to make a
borrowing from all of the Banks to reimburse the Existing Banks in such amounts
as may be required so that the aggregate principal amount of the loans that
were outstanding under the 1992 Revolving Credit Agreement shall be Loans held
pro rata by the Banks hereunder in accordance with their respective
Commitments.
2.2. Borrowings. The Company shall give the Administrative Agent
(which shall promptly notify the Banks) notice of each borrowing hereunder as
provided in Section 4.5 hereof. Not later than 10:00 a.m., or, in the case of a
borrowing of Overnight Federal Funds Rate Loans or Prime Rate Loans, 12:00
p.m., New York time on the date specified for each such borrowing, each Bank
shall make available the amount of the Loan to be made by it on such date to the
Administrative Agent, at account number 04203606 maintained by the
Administrative Agent with Bankers Trust Company (ABA No. 021001033), One Bankers
Trust Plaza, New York, New York 10006 (reference: "Home Shopping Network - 1994
Revolving Credit Facility"), attention: Winston Brown, in immediately available
funds. The amount so received by the Administrative Agent shall, subject to the
terms and conditions of this Agreement, be made available to the Company by
depositing the same, in immediately available funds, in an account of the
Company designated by the Company in the related notice of borrowing.
References in this Agreement to the date on which a Loan is made shall be to the
date on which funds borrowed pursuant to such Loan shall have been made
available to the Company pursuant to this Section 2.2.
2.3. Changes of Commitments. The Company shall have the right to
terminate or reduce the amount of the Commitments at any time or from time to
time; provided that (i) the Company shall give notice of each such termination
or reduction as provided in Section 4.5 hereof; (ii) each partial reduction
shall be in an aggregate amount at least equal to $5,000,000; and (iii) the
Commitments may not be reduced below the aggregate principal amount of all Loans
then outstanding. Commitments once terminated or reduced may not be reinstated.
2.4. Fees.
(a) The Company shall pay to the Administrative Agent for account of
each Bank a facility fee on the full daily amount of such Bank's outstanding
Commitment (whether or not utilized), for each day during the period from and
including the date of this Agreement to and including the earlier of the date
such Commitment is terminated or the day prior to the Commitment Termination
Date for such Bank, at a rate per annum equal to the Facility Fee Rate for such
day (subject to Section 3.2 hereof); provided, however, that no such fee shall
be payable to any Bank with respect to the portion (if any) of such Bank's
Commitment
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corresponding to the principal amount of Loans which such Bank shall not have
made in accordance with (i) a notice of borrowing properly and timely given and
(ii) the terms and conditions of this Agreement, and with respect to which all
conditions precedent thereto shall have been satisfied. All outstanding
accrued facility fees of each Bank shall be due and payable on each Fee Payment
Date and on the earlier of the date the Commitment of such Bank is terminated
or the Commitment Termination Date for such Bank.
(b) The Company shall pay to the Administrative Agent for its own
account an annual Agency Fee in the amount and at the times set forth in the fee
letter, dated July 15, 1994, among the Company, the Guarantor and the
Administrative Agent.
2.5. Lending Offices. The Loans made by each Bank shall be made and
maintained at such Bank's Applicable Lending Office for Loans of such type.
2.6. Several Obligations; Remedies Independent. The failure of any
Bank to make any Loan to be made by it on the date specified therefor shall not
relieve any other Bank of its obligation to make its Loan on such date, but no
Bank shall be responsible for the failure of any other Bank to make a Loan to be
made by such other Bank. The amounts payable by the Company or the Guarantor at
any time hereunder and under the Notes to each Bank shall be a separate and
independent debt and each Bank shall be entitled to protect and enforce its
rights arising out of this Agreement and the Notes, and it shall not be
necessary for any other Bank, the Agent, either Co-Agent or the Administrative
Agent to consent to, or be joined as an additional party in, any proceedings for
such purposes.
2.7. Notes.
(a) The Loans made by each Bank shall be evidenced by a single
promissory note of the Company in substantially the form of Exhibit A hereto,
dated the date of this Agreement, payable to the order of such Bank in a
principal amount equal to the amount of its Commitment as originally in effect
and otherwise duly completed. Each Loan made by each Bank, and all payments and
prepayments made on account of the principal thereof, and all conversions of
such Loans, shall be recorded by such Bank on its books and, prior to any
transfer of the Note held by it, endorsed by such Bank on the schedule attached
to such Note or any continuation thereof; provided, that no failure by any Bank
to make such recording or endorsement shall affect the obligations of the
Company or the Guarantor under this Agreement to such Bank or the holder of such
Note.
(b) Each Bank shall be entitled to have its Note subdivided or
reissued in connection with an assignment of all or
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any portion of its Commitment, Loans and Note pursuant to Section 12.6(b)
hereof.
2.8. Prepayments and Conversions of Loans. The Company shall have the
right to prepay Loans, or to convert Loans of one type into Loans of another
type, at any time or from time to time, it being understood that any such
conversion constitutes the simultaneous repayment of a Loan in accordance with
Section 3.1 hereof and the making of a new Loan in accordance with Section 2.1
hereof; provided, that (a) the Company shall give the Administrative Agent
notice of each such prepayment or conversion as provided in Section 4.5 hereof;
(b) Loans may be prepaid or converted only on the last day of an Interest Period
for such Loans; (c) prepayments and conversions of Loans shall be subject to the
indemnity provisions of Section 5.4 hereof.
2.9. Extension of Facility. The Company shall be entitled to request,
by written notice to be given to the Administrative Agent not less than 45 days
prior to any Extension Date (of which request the Administrative Agent shall
promptly notify the Banks), that the Commitment Termination Date then in effect
be extended for a period of one year to the Fee Payment Date that is one year
after such Commitment Termination Date and:
(i) if all the Banks having Commitments that are scheduled to
terminate on such Commitment Termination Date shall have notified
the Administrative Agent that they agree to such request by not later
than the date (the "Cut-Off Date") 15 days prior to such Extension Date,
the definition of "Commitment Termination Date" in Section 1.1 shall, so
long as no Default shall have occurred and be continuing on such
Extension Date, be extended to the Fee Payment Date which is one year
beyond the date that would otherwise have been the Commitment
Termination Date;
(ii) if such notifications are not received from the Majority
Banks or if the Administrative Agent does not so agree, then no such
extension shall be made, and the facility provided for hereunder shall
terminate on the then scheduled Commitment Termination Date (or Dates)
then in effect; and
(iii) if such notifications are not received from all such Banks,
but are received from a Bank or Banks ("Assenting Banks") whose
Commitments constitute not less than 51 percent of the aggregate
Commitments (scheduled to terminate on the Commitment Termination Date
that is requested to be extended) at such time and from the
Administrative Agent, the Commitments of the Bank or Banks ("Dissenting
Banks") who do not so notify shall be reduced to zero on the Commitment
Termination Date then in effect and, solely for purposes of the
Administrative Agent and the Assenting Banks (and the obligations of the
Company and the
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Guarantor with respect thereto), the Commitment Termination Date shall
be extended as provided in clause (i) above in respect of the
Assenting Banks provided that no Default shall have occurred and be
continuing on such Extension Date.
Each of the Banks and the Administrative Agent agrees to use its
reasonable efforts to timely respond (either to consent or to withhold consent)
to a request to extend the Commitment Termination Date pursuant to this Section
2.9 on or before the relevant Cut-Off Date. If the Administrative Agent or any
Bank fails to timely respond in accordance with the previous sentence, the
Administrative Agent or such Bank, as the case may be, shall be deemed to have
rejected such request.
In the event that clause (iii) above of this Section 2.9 is
applicable, the following additional provisions shall apply:
(1) If, at any time after the Cut-Off Date for any extension
but prior to the corresponding Extension Date (15 days later), any
Dissenting Bank notifies the Administrative Agent that it has changed
its decision and that it agrees to the requested extension, the
Administrative Agent may, with the consent of the Company (which
consent shall not be unreasonably withheld), include or not include
such Bank as an Assenting Bank in the proposed extension, and if
such Bank is included as an Assenting Bank and if the provisions of
clause (i) or (iii) of this Section 2.9 become effective, the
Commitment of such Bank shall not be reduced to zero as provided in
clause (iii).
(2) At any time during the period commencing on the Cut-Off
Date for any extension pursuant to Section 2.9(i) to but not
including the Commitment Termination Date as then in effect for the
Dissenting Banks for such Cut-Off Date (without regard to any
extension thereof) (the "Replacement Period," such period being
approximately two years plus 15 days), the Company may give a written
request to the Administrative Agent (each such request a "Commitment
Reinstatement Request") requesting that the Administrative Agent
assist the Company in arranging with any financial institution or
institutions (which may or may not be a Bank hereunder at such time)
selected by the Company to assume that portion of the Commitments of
all of the Dissenting Banks for such extension (the "Available
Commitment Interests") as the Company may request in such Commitment
Reinstatement Request.
If the Administrative Agent receives a Commitment Reinstatement
Request on or prior to the last day of such Replacement Period,
the Administrative Agent may, but shall not be obligated to, assist
the Company in making such
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arrangements. If any financial institution or institutions agree to
assume any portion of the Available Commitment Interests (each such
institution being called a "Replacement Bank") on or prior to the last
day of such Replacement Period, the Administrative Agent shall
allocate the portion of the Available Commitment Interests to be so
assumed pro rata among the Commitments and Loans of all Dissenting
Banks for such Replacement Period. Each such Dissenting Bank hereby
agrees, immediately upon request therefor by the Administrative Agent
and in any event on the last day of an Interest Period and no later
than the last day of such Replacement Period, to assign to such
Replacement Bank the portion of its Commitment and outstanding Loans
so allocated for a purchase price equal to the principal amount of
each such Loan plus all accrued interest thereon to the date of
purchase. Such assignment shall be effected by the execution and
delivery to the Administrative Agent of an Assignment and Assumption
Agreement substantially in the form of Exhibit E hereto. Upon
execution and delivery of an Assignment and Assumption Agreement by
the Dissenting Banks and each Replacement Bank and the effectiveness
thereof as provided therein, such Replacement Bank shall be treated as
a "Bank" for all purposes of this Agreement and, without limiting the
foregoing, shall perform all of the obligations, and be entitled to
the full benefit, of this Agreement to the same extent as if it were
an original party to this Agreement in respect of the rights and/or
obligations assigned or transferred to it. Solely for the purposes of
determining the rights and obligations of any Replacement Bank with
respect to the portion of the Commitments so assigned to it, each
Dissenting Bank shall, upon the effectiveness of each such assignment,
be deemed to have assented to the previously proposed extension of the
Commitment Termination Date pursuant to this Section 2.9.
The giving of any Commitment Reinstatement Request shall
constitute the Company's and the Guarantor's authorization to the
Administrative Agent to effect the transactions contemplated thereby,
and no revocation thereof shall be effective unless received by the
Administrative Agent from the Company at least five Business Days
prior to the effectiveness of any assignment arranged by the
Administrative Agent in response to such Commitment Reinstatement
Request. Each request or notice from the Company under this Section
2.9, and each action taken by the Administrative Agent in response to
such request or notice, shall bind the Guarantor.
It is expressly agreed that the Administrative Agent and each
Bank may from time to time grant or withhold its consent to any extension of the
Commitment Termination Date at its sole discretion and based on such criteria
and subject to such terms or conditions as the Administrative Agent or such
Bank may deem
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appropriate at the time; provided that amendments to the terms and conditions
of this Agreement shall require the prior consent of the Company, the Guarantor
and some or all of the Banks, as provided in Section 12.4 hereof. Nothing in
this Agreement or any related document shall be construed to constitute a
commitment by the Administrative Agent or any Bank to effect any such
extension, and none of the Administrative Agent, the Agent, either Co-Agent or
any Bank shall be liable to the Company, the Guarantor or any other Person for
any consequences arising from the failure to effect any such extension.
Section 3. Payments of Principal and Interest.
3.1. Repayment of Loans. The Company shall pay to the
Administrative Agent for account of each Bank (i) the principal of each of such
Bank's Loans on the last day of the Interest Period for such Loan and (ii) on
the Commitment Termination Date for each Bank, the principal then outstanding
of all Loans of such Bank.
3.2. Interest. The Company shall pay to the Administrative Agent
for account of each Bank interest on the unpaid principal amount of each Loan
made by such Bank for the period commencing on the date of such Loan to but
excluding the date such Loan shall be paid in full, at the following rates per
annum:
(a) during such periods as such Loan is a LIBOR Loan, for
each Interest Period relating thereto, the LIBOR for such Loan for such
Interest Period plus the Applicable Margin in effect for each day during
such Interest Period; and
(b) during such periods as such Loan is a Federal Funds Rate
Loan, for each Interest Period relating thereto, the Federal Funds Rate
(as in effect for such Interest Period) plus 1.75% per annum;
(c) during such periods as such Loan is a Prime Rate Loan,
for each Interest Period relating thereto, the Prime Rate (as in effect
for such Interest Period) plus the Applicable Margin in effect for each
day during such Interest Period.
Notwithstanding the foregoing, at any time during the period commencing on the
date on which any Obligation is not paid in full when due (whether at stated
maturity, by acceleration or otherwise) and ending on the date on which all
such overdue Obligations are paid in full, the Company shall pay to the
Administrative Agent for account of each Bank interest on the principal of all
Loans and (to the fullest extent permitted by law) on any unpaid interest or
any other amount payable by the
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Company hereunder or under the Note held by such Bank at the Post-Default Rate.
Accrued interest on each Loan shall be payable (i) on each Interest
Payment Date for such Loan and (ii) in any case, on the date on which any
principal amount thereof is paid or prepaid or converted to a Loan of another
type on the portion thereof being so paid, prepaid or converted, except that
interest on any principal, interest or other amount payable at the Post-Default
Rate shall be payable from time to time on demand.
If the Company shall fail to timely deliver a Total Debt Ratio Notice
in respect of any four-Fiscal Quarter period in accordance with Section 9.1(g)
hereof, and it transpires that the Total Debt Ratio has changed from that which
was in effect with respect to the previous four-Fiscal Quarter period such that
any interest rate or Facility Fee Rate hereunder would increase, the Company
agrees that the interest rate on the Loans shall, by operation of the
definition of Applicable Margin, and the Facility Fee Rate shall, by operation
of the definition thereof, automatically increase on the date such Total Debt
Ratio Notice is duly given in accordance with Section 12.2 hereof. In
addition, (i) such increase shall be retroactive to the date on which such
Total Debt Ratio Notice should have been delivered in accordance with Section
9.1(g) hereof and (ii) the incremental interest or facility fee for the
retroactive period shall be payable on the next date on which interest or
facility fee is payable under this Agreement and the Notes (or, if no further
interest or facility fee is payable, immediately on demand by the
Administrative Agent or any Bank). If the Company shall fail to timely deliver
a Total Debt Ratio Notice in respect of any four-Fiscal Quarter period, and it
transpires that the Total Debt Ratio has changed from that which was in effect
with respect to the previous four-Fiscal Quarter period such that any interest
rate or facility fee hereunder would decrease, then such decrease shall be
effective from the date on which such Total Debt Ratio Notice is received by
the Administrative Agent, and shall have no retroactive effect.
No provision of this Agreement or the Notes or any other document
delivered in connection with either thereof and no transaction contemplated
hereby or thereby shall be construed or shall operate so as to require the
Company, the Guarantor or any other Person liable for payment of any of the
Obligations to pay interest in an amount or at a rate greater than the maximum
allowed from time to time by applicable law. Should any interest or other
charges paid by the Company, the Guarantor or any such other Person under any
such document result in a computation or earning of interest in excess of the
maximum rate of interest permitted under applicable law in effect while such
interest is being earned, then such excess shall be and hereby is waived by
each Bank and all such excess shall be automatically credited against and in
reduction of the principal balance of such amounts
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payable under such documents and any portion of such excess received by any
Bank shall be paid over by such Bank to the Company, the Guarantor or such
other Person, as the case may be, it being the intent of the parties hereto
that under no circumstances shall the Company, the Guarantor or such other
Person be required to pay interest in excess of the maximum rate allowed by
such applicable law.
Section 4. Payments; Pro Rata Treatment; Computations, Etc.
4.1. Payments. Except to the extent otherwise provided
herein, all payments of Obligations shall be made in Dollars, in immediately
available funds and without set-off, counterclaim or deduction of any kind, to
the Administrative Agent at account number 04203606 maintained by the
Administrative Agent at Bankers Trust Company (ABA No. 021001033), One Bankers
Trust Plaza, New York, New York 10006 (reference: "Home Shopping Network -
1994 Revolving Credit Facility"), attention: Winston Brown (or at such other
account or at such other place or in such other manner as the Administrative
Agent may notify the Company from time to time), not later than 11:00 a.m. New
York time on the date on which such payment shall become due (each such payment
made after such time on such due date to be deemed to have been made on the
next succeeding Business Day). Any Bank for whose account any such payment is
to be made may (but shall not be obligated to) debit the amount of any such
payment which is not made by such time to any ordinary deposit account of the
Company or the Guarantor with such Bank or any affiliate of such Bank (with
subsequent notice to the Company or the Guarantor, as the case may be,
provided, that such Bank's failure to give such notice shall not affect the
validity of such debit). The Company or the Guarantor, as the case may be,
shall at the time of making a payment under this Agreement or any Note specify
to the Administrative Agent (i) the account from which the payment funds will
be transmitted and the manner and approximate time of such transmission and
(ii) the Loans or other amounts payable by the Company hereunder to which such
payment shall be applied, and in the event that it shall have failed so to
specify, or if an Event of Default shall have occurred and be continuing, the
Administrative Agent may distribute such payment to the Banks in such manner as
it or the Majority Banks may deem appropriate, subject to Section 4.2 hereof.
Each payment received by the Administrative Agent under this Agreement
or any Note for account of a Bank shall be paid promptly to such Bank, in
immediately available funds, for account of such Bank's Applicable Lending
Office for the Loan in respect of which such payment is made.
If the due date of any payment to be made hereunder or under any Note
would otherwise fall on a day which is not a
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Business Day, such date shall be extended to the next succeeding Business Day
and interest shall be payable for any principal so extended for the period of
such extension.
4.2. Pro Rata Treatment. Except to the extent otherwise
provided herein:
(a) each borrowing from the Banks under Section 2.1
hereof shall be made from the Banks, each payment of facility fee
under Section 2.4 hereof shall be made for account of the Banks and
each termination or reduction of the amount of the Commitments under
Section 2.3 hereof shall be applied to the Commitments of the Banks,
pro rata according to the amounts of their respective unused
Commitments;
(b) each conversion of Loans of a particular type (other
than conversions provided for by Section 5.1 hereof) shall be made pro
rata among the Banks holding Loans of such type according to the
respective principal amounts of such Loans held by such Banks; and
(c) each payment and prepayment by the Company of
principal of or interest on Loans of a particular type shall be made
to the Administrative Agent for account of the Banks holding Loans of
such type pro rata in accordance with the respective unpaid principal
amounts of such Loans held by such Banks.
4.3. Computations. Interest on all Loans and the facility
fee shall be computed on the basis of a year of 360 days and actual days
elapsed (including the first day but excluding the last day) occurring in the
period for which payable.
4.4. Minimum Amounts. Except for conversions or
prepayments made pursuant to Section 5.1 hereof, each borrowing, conversion and
prepayment of principal of Loans shall be in an aggregate amount at least equal
to $5,000,000, provided, that borrowings, prepayments or conversions of or into
Loans of different types or, in the case of LIBOR Loans, having different
Interest Periods, at the same time hereunder shall each be deemed separate
borrowings, conversions or prepayments, as the case may be. Notwithstanding
anything in this Agreement to the contrary, the aggregate principal amount of
LIBOR Loans having the same Interest Period shall be at least equal to
$5,000,000 and, if any LIBOR Loans would otherwise be in a lesser principal
amount for any period, such Loans shall be Prime Rate Loans during such period.
4.5. Certain Notices. Notices by the Company to the
Administrative Agent of terminations or reductions of Commitments, of
borrowings, conversions and prepayments of Loans and of the duration of
Interest Periods shall be irrevocable and
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shall be effective only if received by the Administrative Agent not later than
10:00 a.m. New York time on the number of Business Days prior to the date of
the relevant termination, reduction, borrowing, conversion or prepayment or the
first day of such Interest Period specified below:
Number of
Business
Notice Days Prior
Termination or reduction of Commitments 10
Borrowing of Overnight Federal Funds Rate Loans; or conversion of Term Federal Funds Rate Loans
or Prime Rate Loans into Overnight Federal Funds Rate Loans same day
Borrowing or prepayment of LIBOR Loans; conversion of LIBOR Loans into any other type of Loans;
conversion of any type of Loans into LIBOR Loans; or duration of Interest Period for LIBOR
Loans 3
Borrowing or prepayment of Term Federal Funds Rate Loans; conversion of any type of Loans into
Term Federal Funds Rate Loans; or duration of Interest Period for Term Federal Funds Rate Loans 3
Borrowing or prepayment of Prime Rate Loans; or conversion of Federal Funds Rate Loans into
Prime Rate Loans same day
In addition:
(a) Each such notice of termination or reduction shall
specify the amount of the Commitments to be terminated or reduced.
(b) Each such notice of borrowing, conversion or
prepayment shall specify the Loans to be borrowed, converted or
prepaid and the amount (subject to Section 4.4 hereof) and type of the
Loans to be borrowed, converted or prepaid and the date of borrowing,
conversion or prepayment (which shall be a Business Day).
(c) Each such notice of the duration of an Interest
Period shall specify the Loans to which such Interest Period is to
relate.
The Administrative Agent shall promptly notify the Banks of
the contents of each such notice.
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In the event that the Company fails to select the duration of any
Interest Period for any LIBOR Loans or Term Federal Funds Rate Loans within
the time period and otherwise as provided in this Section 4.5, or if the
Company and the Administrative Agent with the consent of the Banks fail to
agree upon a term for any requested Term Federal Funds Rate Loans, such Loans
(if outstanding as LIBOR Loans) will, subject to the terms and conditions of
this Agreement, be automatically converted into Overnight Federal Funds Rate
Loans on the last day of the then current Interest Period for such Loans or (if
outstanding as Overnight Federal Funds Rate Loans or Prime Rate Loans) will
remain as Overnight Federal Funds Rate Loans or Prime Rate Loans, as the case
may be, or (if not then outstanding) will be made as Overnight Federal Funds
Rate Loans.
4.6 Non-Receipt of Funds by the Administrative Agent. Unless the
Administrative Agent shall have been notified by a Bank or the Company or the
Guarantor prior to the date on which such Bank or the Company or the Guarantor
is scheduled to make payment to the Administrative Agent of (in the case of a
Bank) the proceeds of a Loan to be made by it hereunder or (in the case of the
Company or the Guarantor) a payment to the Administrative Agent for account of
one or more of the Banks hereunder (such payment being herein called the
"Required Payment"), which notice shall be effective upon receipt, that it does
not intend to make the Required Payment to the Administrative Agent, the
Administrative Agent may assume that the Required Payment has been made and
may, in reliance upon such assumption (but shall not be required to), make the
amount thereof available to the intended recipient(s) on such date and, if such
Bank or the Company or the Guarantor (as the case may be) has not in fact made
the Required Payment to the Administrative Agent, the recipient(s) of such
payment shall, on demand, repay to the Administrative Agent the amount so made
available together with interest thereon in respect of each day during the
period commencing on the date such amount was so made available by the
Administrative Agent until the date the Administrative Agent recovers such
amount at a rate per annum equal to the Overnight Federal Funds Rate for such
day (as determined by the Administrative Agent) for the first three days and
thereafter (1) at the Prime Rate in effect from time to time in the case of
payments to be recovered from any Bank, and (2) at the Post-Default Rate in the
case of payments to be recovered from the Company or the Guarantor.
4.7 Sharing of Payments, Etc. Each of the Company and the
Guarantor agrees that, in addition to (and without limitation of) any right of
setoff, bankers' lien or counterclaim a Bank may otherwise have, each Bank
shall be entitled, at its option, to offset balances held by it in ordinary
deposit accounts of the Company or the Guarantor at any of its offices, in
Dollars or in any other currency, against any principal of or interest on any
of such Bank's Loans, or any other amount payable to such Bank hereunder, which
is not paid when due (regardless of whether such
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balances are then due to the Company or the Guarantor), in which case it shall
promptly notify the Company or the Guarantor, as the case may be, and the
Administrative Agent thereof, provided that such Bank's failure to give such
notice shall not affect the validity thereof. If any Bank shall obtain payment
of any principal of or interest on any Loan made by it to the Company, or any
other amount payable to such Bank, under this Agreement through the exercise of
any right of setoff, banker's lien or counterclaim or similar right or
otherwise, and, as a result of such payment, such Bank shall have received a
greater percentage of the principal, interest or such other amount then due
hereunder by the Company to such Bank than the percentage received by any other
Banks, it shall promptly purchase from such other Banks participations in (or,
if and to the extent specified by such Bank, direct interests in) the Loans
made by such other Banks (or in interest due thereon, as the case may be) in
such amounts, and make such other adjustments from time to time as shall be
equitable, to the end that all the Banks shall share the benefit of such excess
payment (net of any expenses which may be incurred by such Bank in obtaining or
preserving such excess payment) pro rata in accordance with the unpaid
principal and/or interest on the Loans held by each of the Banks or such other
amount due to the Banks hereunder. To such end all the Banks shall make
appropriate adjustments among themselves (by the resale of participations sold
or otherwise) if such payment is rescinded or must otherwise be restored. Each
of the Company and the Guarantor agrees that any Bank so purchasing a
participation (or direct interest) in the Loans made by other Banks (or in
interest due thereon, as the case may be) may exercise all rights of setoff,
bankers' lien, counterclaim or similar rights with respect to such
participation as fully as if such Bank were a direct holder of Loans in the
amount of such participation. Nothing contained herein shall require any Bank
to exercise any such right or shall affect the right of any Bank to exercise,
and retain the benefits of exercising, any such right with respect to any other
indebtedness or obligation of the Company or the Guarantor; provided that to
the extent any such Bank exercises any such right with respect to any other
indebtedness or obligation of the Company or the Guarantor, it shall also
exercise its rights under this Section 4.7 and agrees that the benefits of
exercising any such rights shall be shared with the Banks pro rata in the
proportion that the unpaid obligations of the Company and the Guarantor owing
to such Bank hereunder bear to such other indebtedness or obligation. If under
any applicable bankruptcy, insolvency or other similar law, any Bank receives a
secured claim in lieu of a setoff to which this Section 4.7 applies, such Bank
shall, to the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Banks entitled
under this Section 4.7 to share in the benefits of any recovery on such secured
claim.
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Section 5. Yield Protection and Illegality.
5.1 Additional Costs.
(a) The Company shall pay directly to each Bank from time to time
such amounts as such Bank may determine to be necessary to compensate it for
any costs which such Bank determines are attributable to its making or
maintaining of any LIBOR Loans to the Company or its obligation to make any
LIBOR Loans to the Company hereunder, or any reduction in any amount receivable
by the Bank hereunder in respect of any of such Loans or such obligation (such
increases in costs and reductions in amounts receivable being herein called
"Additional Costs"), resulting from any Regulatory Change which (i) changes the
basis of taxation of any amounts payable to such Bank by the Company or the
Guarantor under this Agreement or the Notes in respect of any of such Loans
(other than taxes imposed on the overall net income of such Bank or of its
Applicable Lending Office for any of such Loans by the jurisdiction in which
such Bank has its principal office or such Applicable Lending Office); or (ii)
imposes or modifies any reserve, special deposit, minimum capital, capital
ratio or similar requirements relating to any extensions of credit or other
assets of, or any deposits with or other liabilities of, such Bank (including
any of such Loans or any deposits referred to in the definition of "LIBOR" in
Section 1.1 hereof), or the Commitment of such Bank; or (iii) imposes any other
condition affecting this Agreement or the Notes (or any of such extensions of
credit or liabilities) or the Commitments.
(b) Without limiting the effect of the provisions of Section 5.1
(a) hereof, in the event that, by reason of any Regulatory Change, any Bank
either (i) incurs Additional Costs based on or measured by the excess above a
specified level of the amount of a category of deposits or other liabilities
of such Bank which includes deposits by reference to which the interest rate
on LIBOR Loans is determined as provided in this Agreement or a category of
extensions of credit or other assets of such Bank which includes LIBOR Loans
or (ii) becomes subject to restrictions on the amount of such a category of
liabilities or assets which it may hold, then, if such Bank so elects by
notice to the Company, the obligation of such Bank to make, and to convert
Federal Funds Rate Loans or Prime Rate Loans into, LIBOR Loans hereunder shall
be suspended until such Regulatory Change ceases to be in effect (and all
LIBOR Loans held by such Bank shall be automatically converted into Overnight
Federal Funds Rate Loans at the end of the then current Interest Period for
each of them, or on such earlier date as such Bank may specify in writing as
being the last permissible date for such prepayment under applicable law,
rules or regulations); provided, that in such event such Bank shall use its
best efforts to obtain a Federal Funds Rate offered for deposits made for a
period of time longer than overnight (to the extent such a rate is then
obtainable), but any failure to obtain such a rate shall in no
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way affect the rights of the Banks to receive interest on such Loans at the
Federal Funds Rate otherwise obtainable.
(c) Without limiting the effect of the foregoing provisions of
this Section 5.1 (but without duplication), the Company shall pay to each Bank
from time to time on request such amounts as such Bank may determine to be
necessary to compensate such Bank for any costs which it determines are
attributable to the maintenance by such Bank (or any Applicable Lending
Office), pursuant to any law or regulation or any interpretation, directive or
request (whether or not having the force of law) of any court or governmental
or monetary authority, of capital in respect of such Bank's Commitment (such
compensation to include, without limitation, an amount equal to any reduction
of the rate of return on assets or equity of such Bank (or any Applicable
Lending Office) to a level below that which such Bank (or any Applicable
Lending Office) could have achieved but for such law, regulation,
interpretation, directive or request).
(d) Determinations and allocations by any Bank for purposes of
this Section 5.1 of the effect of any Regulatory Change pursuant to Section
5.1(a) or (b) hereof, or of the effect of capital maintained pursuant to
Section 5.1(c) hereof, on its costs or rate of return of maintaining Loans
or its obligation to make Loans, or on amounts receivable by it in respect of
Loans, and of the amounts required to compensate such Bank under this Section
5.1, shall be conclusive absent manifest error.
5.2. Limitation on Types of Loans. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of any interest
rate for any LIBOR Loan for any Interest Period therefor:
(a) the Administrative Agent determines (which
determination shall be conclusive) that quotations of interest rates for
the deposits referred to in the definition of "LIBOR" in Section 1.1
hereof are not being provided in the relevant amounts or for the relevant
maturities for purposes of determining rates of interest for such Loans as
provided herein; or
(b) any Bank determines (which determination shall be conclusive),
and so notifies the Administrative Agent, that the rates of interest
referred to in the definition of "LIBOR" in Section 1.1 hereof upon the
basis of which the rate of interest for LIBOR Loans for such Interest
Period is to be determined do not adequately cover the cost to such Bank of
making or maintaining such LIBOR Loans for such Interest Period;
then the Administrative Agent shall give the Company prompt notice thereof, and
so long as such condition remains in effect, the Banks shall be under no
obligation to make additional LIBOR
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Loans or to convert Federal Funds Rate Loans or Prime Rate Loans into LIBOR
Loans and the Company shall, on the last day(s) of the then current Interest
Period(s) for the outstanding LIBOR Loans, either repay such Loans as provided
in Section 3.1 hereof or convert such Loans into Federal Funds Rate Loans or
Prime Rate Loans in accordance with Section 2.8 hereof.
5.3. Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Bank or its Applicable
Lending Office to honor its obligation to make or maintain LIBOR Loans
hereunder, then such Bank shall promptly notify the Administrative Agent and
the Company and such Bank's obligation to make LIBOR Loans shall be suspended
until such time (prior to the Commitment Termination Date) as such Bank may
again make and maintain LIBOR Loans and such Bank's outstanding LIBOR Loans
shall be automatically converted into Federal Funds Rate Loans or Prime Rate
Loans, as such Bank may select, at the end of the then current Interest Period
for each of them, or on such earlier date as such Bank may specify in writing
as being the last permissible date for such prepayment under applicable laws,
rules or regulations.
5.4. Compensation. The Company shall pay to each Bank, upon the
request of such Bank, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Bank) to compensate it for any loss, cost or expense
(including, without limitation, costs arising from premature termination of
such Bank's obligations under interest rate swaps, caps, collars, floors,
options, forward exchange contracts and similar hedging arrangements) which
such Bank determines are attributable to:
(a) any payment, prepayment or conversion of a Loan for any reason
(including, without limitation, the acceleration of the Loans pursuant to
Section 10 hereof) on a date other than the last day of an Interest Period
for such Loan; or
(b) any failure by the Company for any reason (including, without
limitation, the failure of any of the conditions precedent specified in
Section 7 hereof to be satisfied) to borrow or convert into a LIBOR Loan or
a Term Federal Funds Rate Loan on the date for such borrowing or conversion
specified in the relevant notice of borrowing given pursuant to Section 2.2
hereof or notice of conversion given pursuant to Section 2.8 hereof.
Such Bank shall deliver to the Company, promptly upon such request, a
certificate setting forth in reasonable detail the basis for calculation of
such amounts, the contents of such certificate being, in the absence of
manifest error therein, conclusive evidence of such amounts; provided, that the
failure of such Bank to deliver such certificate shall in no way affect such
Bank's rights to such compensation. The failure of any Bank
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to request the compensation provided for in this Section 5.4 in any instance
shall not affect such rights of such Bank in any other instance or of any other
such Bank in any instance.
5.5. Taxes. All payments of Obligations (as used in this Section
5.5, "Payments") shall be made free and clear of, and without deduction by
reason of, any and all taxes, duties, assessments, withholdings, retentions or
other similar charges whatsoever imposed, levied, collected, withheld or
assessed by any jurisdiction or any agency or taxing authority thereof or
therein (as used in this Section 5.5, "Taxes"), all of which shall be paid by
the Company for its own account not later than the date when due. If the
Company is required by law to deduct or withhold any Taxes from any Payment,
the Company shall: (a) make such deduction or withholding; (b) pay the amount
so deducted or withheld to the appropriate taxing authority not later than the
date when due (irrespective of the rate of such deduction or withholding); (c)
deliver to such Bank, promptly and in any event within 30 days after the date
on which such Taxes become due, original tax receipts and other evidence
satisfactory to such Bank of the payment when due of the full amount of such
Taxes; and (d) pay to the respective Bank, forthwith upon any request by such
Bank therefor from time to time, such additional amounts as may be necessary so
that such Bank receives, free and clear of all Taxes, the full amount of such
Payment stated to be due under this Agreement or the Notes as if no such
deduction or withholding had been made.
Each Bank that is not organized under the laws of the United States or
of any political subdivision thereof agrees that it will deliver to the Company
on the date of its initial Loan and thereafter as may be required from time to
time by applicable law or regulation United States Internal Revenue Service
Form 4224 or 1001 (or any successor form) or such other form as from time to
time may be required to demonstrate that payments made by the Company to such
Bank under this Agreement or such Note either are exempt from United States
Federal withholding taxes or are payable at a reduced rate (if any) specified
in any applicable tax treaty or convention.
Each Bank agrees to use reasonable efforts to transfer its Commitment
or Loans to another Applicable Lending Office of such Bank if such transfer
would avoid the need for or mitigate the amount of any deduction or withholding
of Taxes on payments of interest to such Bank under this Agreement thereafter,
but no Bank shall be required to make such transfer if such Bank determines
that such Bank would suffer any legal, economic or regulatory disadvantage.
Without limiting the survival of any other provisions of this
Agreement or the Notes, the obligations of the Company under this Section shall
survive the repayment of the Loans and the Notes.
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Section 6. Guarantee.
6.1 Unconditional Guarantee. For valuable consideration, receipt
of which is hereby acknowledged, and to induce the Banks to make Loans to the
Company, the Guarantor hereby unconditionally and irrevocably guarantees to the
Administrative Agent, the Agent, each of the Co-Agents and each of the Banks
the payment in full when due (whether at stated maturity, by acceleration or
otherwise) of all principal of and interest on each Loan and all other amounts
payable by the Company hereunder and under the Notes and all other documents
referred to herein or therein, in accordance with the terms hereof and thereof,
and, in the case of any extension of time of payment, in whole or in part, that
all such amounts shall be paid in full when due (whether at stated maturity, by
acceleration or otherwise) in accordance with the terms of such extension. The
Guarantor hereby unconditionally agrees that upon default in the payment when
due (whether at stated maturity, by acceleration or otherwise) of any of such
principal, interest or other amounts, the Guarantor shall forthwith pay and
perform the same in the money and funds, at the time, in the place and in the
manner provided for such payment in this Agreement, the Notes or other
applicable document.
6.2. Validity. The Guarantor hereby agrees that the guarantee
provided by this Section 6 is a continuing guarantee of payment and not merely
of collection, that it is a primary, independent obligation of the Guarantor
and that the Guarantor's obligations hereunder shall be absolute, unconditional
and irrevocable, irrespective of (a) any invalidity, illegality, irregularity
or unenforceability of, or defect in or any change in this Agreement, the Notes
or any other document referred to herein or therein, (b) any amendment,
modification or waiver of any term or condition of this Agreement or the Notes
or any such other document, or any waiver or consent by the Administrative
Agent or any Bank to any departure from the terms hereof or thereof, (c) any
sale, exchange, release, surrender, realization upon or other dealings with any
security or guarantee for any of the obligations guaranteed hereby (whether now
or hereafter granted), (d) any settlement or compromise of such obligations,
(e) the absence of any action to demand or enforce any of such obligations
against the Company, (f) the recovery of any judgment against the Company or
any other Person, or any action to enforce the same, (g) the recovery of any
claim under any other guarantee of or security for such obligations or under
any applicable insurance, or (h) any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a guarantor or surety
(other than full and strict compliance with and satisfaction of such
liabilities).
6.3. Waivers. The Guarantor hereby waives notice of acceptance of
the guarantee provided by this Section 6, notice of
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the extension of any credit or financial accommodation, notice of the making of
any Loan or the incurrence of any other Obligations, notice of any extension of
any Commitment Termination Date, demand of payment, filing of claims with a
court in the event of bankruptcy of the Company or any other Person, any right
to require a proceeding or the filing of a claim first against the Company, any
other guarantor, any other Person, any letter of credit, or any security for
any of the Obligations, presentment, protest, notice of default, dishonor or
nonpayment and any other notice and all demands whatsoever. The Guarantor
hereby further waives all setoffs and counterclaims against the Company, the
Administrative Agent, the Agent, each of the Co-Agents and each of the Banks.
6.4. Subordination and Subrogation. The Guarantor hereby
subordinates all present and future claims, now held or hereafter acquired,
against the Company as a creditor or contributor of capital, or otherwise, to
the prior and final payment in full to the Banks of all of the Obligations. If,
without reference to the provisions of this Section 6.4, the Guarantor would at
any time be or become entitled to receive any payment on account of any claim
against the Company, whether in insolvency, bankruptcy, liquidation or
reorganization proceedings, or otherwise, the Guarantor shall and does hereby
irrevocably direct that all such payments shall be made directly to the
Administrative Agent on account of the Banks until all Obligations shall be
paid in full. Should the Guarantor receive any such payment, the Guarantor
shall receive such amount in trust for the Banks and shall immediately pay over
to the Administrative Agent such amount as provided in the preceding sentence.
Anything contained in this Section 6 to the contrary notwithstanding,
the obligations of the Guarantor hereunder shall be limited to a maximum
aggregate amount equal to the largest amount that would not render its
obligations hereunder subject to avoidance as a fraudulent transfer or
conveyance under Section 548 of Title 11 of the United States Code or any
applicable provisions of comparable state law (collectively, the "Fraudulent
Transfer Laws"), in each case after giving effect to all other liabilities of
the Guarantor, contingent or otherwise, that are relevant under the Fraudulent
Transfer Laws (specifically excluding, however, any liabilities of the
Guarantor in respect of intercompany indebtedness to the Company or other
Affiliates of the Company to the extent that such indebtedness would be
discharged in an amount equal to the amount paid by the Guarantor hereunder)
and after giving effect as assets to the value (as determined under the
applicable provisions of the Fraudulent Transfer Laws) of any rights to
subrogation or contribution of the Guarantor pursuant to (i) applicable law or
(ii) any agreement providing for an equitable allocation among the Guarantor
and other Affiliates of Company of obligations arising under guaranties by such
parties.
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The Guarantor further agrees that any rights of subrogation the
Guarantor may have against the Company, and any rights of contribution the
Guarantor may have against Company, and any rights of contribution the
Guarantor may have against any other guarantor of the Obligations hereunder,
shall be junior and subordinate to any rights the Administrative Agent or the
Banks may have against such other guarantor.
6.5 Acceleration. The Guarantor agrees that, as between the
Company on the one hand, and the Administrative Agent, the Agent, the Co-Agents
and the Banks, on the other hand, the obligations of the Company guaranteed
under this Section 6 may be declared to be forthwith due and payable, or may be
deemed automatically to have been accelerated, as provided in Section 10 hereof
for purposes of this Section 6, notwithstanding any stay, injunction or other
prohibition (whether in a bankruptcy proceeding affecting the Company or
otherwise) preventing such declaration as against the Company and that, in the
event of such declaration or automatic acceleration, such obligations (whether
or not due and payable by the Company) shall forthwith become due and payable
by the Guarantor for purposes of this Section 6.
6.6. Reinstatement. The Guarantor covenants that the guarantee
provided by this Section 6 will not be discharged except by complete and final
payment of all of the Obligations and all obligations of the Guarantor arising
out of this guarantee. In the event that any payment is made by the Company
hereunder or by the Guarantor under this guarantee, and is thereafter required
to be rescinded or otherwise restored or paid over to the Company, the
Guarantor or any other person (whether upon the insolvency or bankruptcy of the
Company or the Guarantor or otherwise), the Guarantor's obligations hereunder
shall immediately and automatically be reinstated as though such payment had
not been made.
Section 7. Conditions Precedent.
7.1 Initial Loan. The occurrence of the Amendment Effective Date,
the accession of each New Bank to this Agreement and the obligation of the
Banks to make the initial Loans hereunder are subject to the receipt by the
Administrative Agent, on or before September 2, 1994, of each of the following
documents, each of which shall be satisfactory to the Administrative Agent in
form and substance:
(a) Certified copies of the certificate of incorporation and
bylaws of the Company and the Guarantor and all corporate action and (if
necessary) stockholder action taken by the Company and the Guarantor
approving this Agreement and the Notes and borrowings by the Company
hereunder and the guarantee by the Guarantor hereunder (including, without
limitation, a certificate setting forth the resolutions of
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the Boards of Directors of the Company and the Guarantor
adopted in respect of the transactions contemplated hereby).
(b) A certificate of each of the Company and the Guarantor in
respect of each of the officers (i) who is authorized to sign this
Agreement or the Notes on its behalf and (ii) who will, until replaced by
another officer or officers duly authorized for that purpose, act as its
representative for the purposes of signing documents and giving notices
and other communications in connection with this Agreement and the
transactions contemplated hereby. The Administrative Agent, the Agent,
the Co-Agents and the Banks may conclusively rely on such certificate
until the Administrative Agent receives notice in writing from the Company
or the Guarantor, respectively, to the contrary.
(c) Certificates, as of a recent date, from the appropriate
authorities for each jurisdiction in which the Company and the Guarantor
are incorporated or qualified to do business, as to the good standing of
the Company and the Guarantor, respectively, in each such jurisdiction.
(d) A certificate of a senior officer of each of the Company and
the Guarantor to the effect set forth in the first sentence of Section 7.2
hereof.
(e) An opinion of H. Steven Holtzman, Esq., Senior Counsel to the
Company and the Guarantor, substantially in the form of Exhibit B hereto.
(f) The Total Debt Ratio Notice for the Company's four-Fiscal
Quarter period ended June 30, 1994 (or, if the initial Loans hereunder are
made more than 60 days after the end of any succeeding Fiscal Quarter, for
the four-Fiscal Quarter period ended as of the end of the most recent such
succeeding Fiscal Quarter).
(g) The Notes, dated the date hereof and duly executed and
delivered by the Company to the order of each Bank and otherwise
appropriately completed, bearing the executed guarantee of the Guarantor.
(h) Evidence of the payment of all fees and expenses then payable
pursuant to Sections 2.4 and 12.3 hereof and all other fees theretofore
agreed between the Company and the Administrative Agent.
(i) Such other documents as the Administrative Agent or any Bank
may reasonably request including, without limitation, all requisite
governmental approvals and filings.
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Upon the occurrence of the Amendment Effective Date, (i) each of the promissory
notes heretofore delivered to the Existing Banks as "Banks" under the 1992
Revolving Credit Agreement shall be deemed to be amended and restated in their
entirety by the Notes delivered pursuant to Section 2.7(a) hereof (except with
respect to any unpaid amounts incurred under the 1992 Revolving Credit
Agreement prior to the Amendment Effective Date, as to which such promissory
notes shall remain in full force and effect), and (ii) the obligations (if any)
of the Agent, the Co-Agents, the Administrative Agent or the Banks under the
commitment letter and term sheet, dated July 15, 1994, of LTCB Trust, shall
cease to be of any force or effect.
7.2 Initial and Subsequent Loans. The obligation of the Banks to
make each Loan to the Company (including the initial Loans) and the occurrence
of the Amendment Effective Date shall be subject to the further conditions
that, as of the date of the making of such Loans and after giving effect
thereto (and also as of the Amendment Effective Date):
(a) no Default or Event of Default shall have occurred and be
continuing;
(b) the representations and warranties made by the Company and the
Guarantor in Section 8 hereof and in any other certificate or other
document delivered in connection with this Agreement shall be true in all
material respects on and as of the date of the making of such Loans (and
the Amendment Effective Date) with the same force and effect as if made on
and as of such date (including, without limitation, that there shall have
occurred no material adverse change since December 31, 1993 in the
consolidated financial condition or operations, or the business taken as a
whole, of the Company and its consolidated Subsidiaries from that set forth
in their financial statements dated as of December 31, 1993, except as
disclosed to the Banks in writing prior to the date of this Agreement);
(c) the Company shall be in compliance with the financial
covenants in this Agreement both before and immediately after the making of
such Loan on both an historical and a pro forma basis; and
(d) the Company shall have paid in full all fees and expenses
payable pursuant to Sections 2.4 and 12.3 hereof.
Each notice of borrowing made pursuant to Section 2.2 hereof shall constitute a
certification by the Company and the Guarantor as to the circumstances
specified in paragraphs (a), (b) and (c) above (both as of the date of such
notice and, unless the Company or the Guarantor otherwise notifies the
Administrative Agent prior to the date of such borrowing, as of the date of
such borrowing).
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Section 8. Representations and Warranties. Each of the Company
and the Guarantor represents and warrants to the Administrative Agent and the
Banks that:
8.1. Corporate Existence. Each of the Company and the Guarantor
and each of the other Material Subsidiaries (a) is a corporation duly organized
and validly existing under the laws of the jurisdiction of its incorporation;
(b) has all requisite corporate power, and has all material governmental
licenses, authorizations, consents and approvals, necessary to own its assets
and carry on its business as presently conducted, and conducts its business in
compliance with the requirements set forth in Section 9.3(b) hereof; and (c) is
qualified to do business in all jurisdictions in which the nature of the
business conducted by it makes such qualification necessary and where failure
so to qualify would have a material adverse effect on its business, financial
condition or operations.
8.2. Financial Condition. The consolidated balance sheet of the
Company and its consolidated Subsidiaries (including, without limitation, the
Guarantor) as at December 31, 1993 and the related consolidated statements of
income, retained earnings and changes in financial position of the Company and
its consolidated Subsidiaries (including, without limitation, the Guarantor)
for the Fiscal Year ended on such date, with the opinion thereon of KPMG Peat
Marwick, the independent auditors of the Company, and the unaudited
consolidated balance sheet of the Company and its consolidated Subsidiaries
(including, without limitation, the Guarantor) as at June 30, 1994 and the
related consolidated statements of income, retained earnings and changes in
financial position for the two-Fiscal Quarter period ended on such date, each
of which has been heretofore furnished to the Administrative Agent and each of
the Banks, are complete and correct and fairly present the consolidated
financial condition of the Company and its consolidated Subsidiaries
(including, without limitation, the Guarantor) as at such dates and the
consolidated results of their operations for such Fiscal Year or period, as the
case may be, ended on such dates, all in accordance with GAAP applied on a
consistent basis. Neither the Company nor any of its consolidated Subsidiaries
(including, without limitation, the Guarantor) had on either such date any
material contingent liabilities, liabilities for taxes, unusual forward or
long-term commitments or unrealized or anticipated losses from any unfavorable
commitments, except as referred to or reflected or provided for in such balance
sheets as at such dates. Since December 31, 1993, there has been no material
adverse change in the consolidated financial condition or operations, or the
business taken as a whole, of the Company and its consolidated Subsidiaries
(including, without limitation, the Guarantor) from that set forth in such
financial statements as at such date.
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8.3 Litigation. Except as heretofore disclosed to the Banks in
writing or in any SEC Report of the Company delivered to the Banks prior to the
date hereof, there is no action, proceeding or investigation by or before any
court or any arbitral, governmental or regulatory authority or agency, pending
or (to the knowledge of the Company or the Guarantor) threatened against the
Company or the Guarantor or any Subsidiary of either thereof which, if
adversely determined, could have a material adverse effect on the consolidated
financial condition or business of the Company and its consolidated
Subsidiaries (including, without limitation, the Guarantor).
8.4 No Breach. Neither the execution and delivery of this
Agreement and the Notes, nor the consummation of the transactions contemplated
hereby, nor the compliance by the Company or the Guarantor with the terms and
provisions hereof or thereof, will (a) conflict with or result in a breach of,
or require any consent or vote of any Person under, the certificate of
incorporation or bylaws of either the Company or the Guarantor, or any
agreement or instrument to which the Company, the Guarantor or any Subsidiary
of either thereof is a party or to which it is subject, (b) violate any
applicable law, regulation, order, writ, injunction or decree of any court or
governmental authority or agency, or (c) constitute a default or result in the
imposition of any Lien on any of the assets, revenues or other properties of
the Company, the Guarantor or any Subsidiary of either thereof under any such
agreement or instrument.
8.5 Corporate Action. The execution, delivery and performance by
each of the Company and the Guarantor of this Agreement and the Notes, and the
consummation of the transactions contemplated hereby, are within the scope of
its corporate power, and have been duly authorized by all necessary corporate
action on the part of each of them. This Agreement constitutes, and each of
the Notes, when duly executed and delivered will constitute, the legal, valid
and binding obligation of the Company and the Guarantor, enforceable against
each of them in accordance with their respective terms, except as such
enforceability may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or other similar laws of general applicability affecting the
enforcement of creditors' rights and (b) the application of general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
8.6 Approvals. No authorizations, approvals or consents of, and
no filings or registrations with, any governmental or regulatory authority or
agency are necessary for the execution, delivery or performance by the Company
or the Guarantor of this Agreement or the Notes or for the validity or
enforceability thereof, or for the consummation of the transactions
contemplated hereby.
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8.7 Use of Loans. Neither the Company, the Guarantor nor any
Subsidiary of either of them is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose, whether
immediate, incidental or ultimate, of buying or carrying margin stock (within
the meaning of Regulation U or X of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan will be used to buy or
carry any margin stock.
8.8 ERISA. Each of the Company and the Guarantor and the ERISA
Affiliates have fulfilled its obligations under the minimum funding standards
of ERISA and the Code with respect to each Plan, are in compliance in all
material respects with the presently applicable provisions of ERISA and the
Code and have not incurred any liability to the PBGC or any Plan or
Multiemployer Plan.
8.9 Taxes. (a) United States Federal income tax returns of the
Company, the Guarantor and the Subsidiaries have been examined and closed
through Fiscal 1985, have been examined for Fiscal 1986, 1987, 1988 and 1989
and are under examination for Fiscal 1990 and Fiscal 1991. (b) Each of the
Company, the Guarantor and the Subsidiaries has filed all United States Federal
income tax returns and all other material tax returns which are required to be
filed by it and has paid all taxes due pursuant to such returns or pursuant to
any assessment received by the Company, the Guarantor or any Subsidiary. The
charges, accruals and reserves on the books of the Company, the Guarantor and
the Subsidiaries in respect of taxes and other governmental charges are, in the
opinion of the Company and the Guarantor, adequate.
8.10 Credit Agreements. Schedule 1 hereto and all SEC Reports of
the Company completely and correctly disclose each credit agreement, loan
agreement, indenture, purchase agreement, guarantee or other arrangement
providing for or otherwise relating to any extension of credit or commitment
for any extension of credit (other than pursuant to any letter of credit
excepted from the definition of Indebtedness herein under paragraph (c)
thereof) to, or guarantee by, the Company, the Guarantor or any other Material
Subsidiary the aggregate principal or face amount of which equals or exceeds
(or may equal or exceed) $10,000,000 and accurately describes the aggregate
principal or face amount outstanding and which may become outstanding under
each thereof.
8.11 Ownership of Assets. Each of the Company, the Guarantor and
each other Material Subsidiary has good and marketable title to all assets
reflected on the audited consolidated balance sheet as of December 31, 1993
referred to in Section 8.2 hereof, subject to:
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(a) no Liens other than the Liens specified in Footnotes D and G
to such balance sheet and, on the date hereof, such additional Liens as are
listed on Schedule 1 hereto, and on any date hereafter, additional Liens
permitted by Section 9.5 hereof and either (i) listed in Footnotes to the
financial statements delivered pursuant to Section 9.1(a) or (b) hereof or
(ii) otherwise communicated to the Banks in writing, and
(b) on any date hereafter, dispositions permitted by Section 9.7
hereof and either (i) described in the financial statements, including any
notes thereto, delivered pursuant to Section 9.1(a) or (b) hereof or (ii)
otherwise communicated to the Banks in writing.
8.12 Pari Passu Obligations. The obligations of the Company and
the Guarantor under this Agreement and the Notes rank and will rank at least
pari passu in all respects with all other unsubordinated Indebtedness of the
Company and the Guarantor, respectively, except for Indebtedness that is senior
solely by operation of applicable law, and except that Indebtedness of the
Company and the Guarantor secured as permitted by Section 9.5 hereof ranks
senior in right of security with respect to the collateral therefor.
8.13 Investment Company Act. Neither the Company nor the Guarantor
is, and neither is "controlled by", an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
8.14 Environmental Matters. To the best of the knowledge of the
Company and the Guarantor, all operations and conditions at or in the premises
in which the Company and the Guarantor conduct their business comply in all
material respects with all Federal, state and local laws, rules and regulations
relating to environmental matters, pollution, waste disposal or industrial
hygiene including, without limitation, such laws, rules and regulations
relating to asbestos (collectively, "Environmental Laws"). None of the
operations of either the Company or the Guarantor is subject to any judicial or
administrative proceeding alleging the violation of or liability under any
Environmental Law.
8.15 Prepayments of Debt. All of the Silver King Notes (as defined
in the 1992 Revolving Credit Agreement as in effect prior to the Amendment
Effective Date) have been prepaid in full together with all interest accrued
thereon and all other amounts that may be or become payable in connection
therewith, and the Company has prepaid in full the principal amount of all
loans under the Term Loan Agreement and the 1993 Term Loan Agreement (each as
defined in the 1992 Revolving Credit Agreement as in effect prior to the
Amendment Effective Date) together with interest accrued thereon to the date of
prepayment and all other
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amounts that may be or become payable under said Term Loan Agreement and 1993
Term Loan Agreement.
Section 9. Covenants of the Company and the Guarantor. Each of
the Company and the Guarantor agrees that, so long as any of the Commitments
are in effect and until payment in full of all Obligations:
9.1 Financial Statements; Reports and Other Information. The
Company shall deliver to the Administrative Agent, with sufficient copies for
each of the Banks:
(a) as soon as available and in any event within 60 days after the
end of each of the first three Fiscal Quarters of each Fiscal Year of the
Company, consolidated statements of income, retained earnings and changes
in financial position of the Company and its consolidated Subsidiaries
(including, without limitation, the Guarantor) for such period and for the
period from the beginning of such Fiscal Year to the end of such period,
and the related consolidated balance sheet as at the end of such period,
setting forth in each case in comparative form the corresponding figures
for the corresponding period in the preceding Fiscal Year, accompanied by a
certificate of a senior financial officer of the Company, which certificate
shall state that such financial statements fairly present the consolidated
financial condition and results of operations of the Company and its
consolidated Subsidiaries in accordance with GAAP, consistently applied, as
at the end of, and for, such period (subject to normal year-end audit
adjustments);
(b) as soon as available and in any event within 120 days after
the end of each Fiscal Year of the Company, consolidated statements of
income, retained earnings and changes in financial position of the Company
and its consolidated Subsidiaries (including, without limitation, the
Guarantor) for such year and the related consolidated balance sheet as at
the end of such year, setting forth in each case in comparative form the
corresponding figures for the preceding Fiscal Year, and accompanied by an
opinion thereon of independent certified public accountants of recognized
national standing, which opinion shall state that such financial statements
fairly present the consolidated financial condition and results of
operations of the Company and its consolidated Subsidiaries (including,
without limitation, the Guarantor) as at the end of, and for, such Fiscal
Year, and a certificate of a senior financial officer of the Company that,
in examining the financial condition of the Company and its Subsidiaries
for such Fiscal Year, he or she obtained no knowledge, except as
specifically stated, of any Default arising from the breach of the
covenants
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provided for in Sections 9.4, 9.6, 9.7, 9.11, 9.12, 9.13, 9.17 or 9.18
hereof;
(c) promptly upon their becoming available, copies of all
registration statements and regular SEC Reports, if any, which the Company
shall have filed with the Securities and Exchange Commission (or any
governmental agency substituted therefor) or any national securities
exchange;
(d) promptly upon the mailing thereof to the shareholders of the
Company generally, copies of all financial statements, reports and proxy
statements so mailed;
(e) as soon as possible, and in any event within ten days after
either the Company or the Guarantor knows or has reason to know that any of
the events or conditions specified below with respect to any Plan or
Multiemployer Plan has occurred or exists, a statement signed by a senior
financial officer of the Company or the Guarantor setting forth details
respecting such event or condition and the action, if any, which the
Company, the Guarantor or their ERISA Affiliate proposes to take with
respect thereto (and a copy of any report or notice required to be filed
with or given to PBGC by the Company, the Guarantor or an ERISA Affiliate
with respect to such event or condition):
(i) any reportable event, as defined in Section 4043(b) of
ERISA and the regulations issued thereunder, with respect to a Plan, as to
which PBGC has not by regulation waived the requirement of Section 4043(a)
of ERISA that it be notified within 30 days of the occurrence of such event
(provided that a failure to meet the minimum funding standard of Section
412 of the Code or Section 302 of ERISA shall be a reportable event
regardless of the issuance of any waivers in accordance with Section 412(d)
of the Code);
(ii) the filing under Section 4041 of ERISA of a notice of
intent to terminate any Plan or the termination of any Plan;
(iii) the institution by PBGC of proceedings under Section
4042 of ERISA for the termination of, or the appointment of a trustee
to administer, any Plan, or the receipt by the Company or any ERISA
Affiliate of a notice from a Multiemployer Plan that such action has
been taken by PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal by the Company, the
Guarantor or any ERISA Affiliate under Section 4201 or 4204 of ERISA
from a Multiemployer
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Plan, or the receipt by the Company, the Guarantor or any ERISA
Affiliate of notice from a Multiemployer Plan that is in
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA
or that it intends to terminate or has terminated under Section 4041A
of ERISA; and
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against the Company, the Guarantor or any ERISA
Affiliate to enforce Section 515 of ERISA, which proceeding is not
dismissed within 30 days;
(f) promptly after either the Company or the Guarantor knows or
has reason to know that any Default has occurred, a notice of such Default,
describing the same in reasonable detail;
(g) not later than (i) 60 days after the last day of each of the
first three Fiscal Quarters of each of the Company's Fiscal Years and (ii)
120 days after the last Fiscal Quarter of each such Fiscal Year, a notice,
substantially in the form of Exhibit D hereto (the " Total Debt Ratio
Notice"), setting forth the Total Debt Ratio for the four-Fiscal Quarter
period ended on the last day of such Fiscal Quarter, which notice shall set
forth calculations and computations in sufficient detail to show the amount
and nature of each of the components of the Total Debt Ratio for such
four-Fiscal Quarter period; provided, that in the case of the Total Debt
Ratio Notice delivered with respect to each Fiscal Quarter specified in
clause (ii) above, the Company shall (if the final form of either of such
Notices is not yet available) deliver such Notice in a preliminary form
within 60 days of the end of such Fiscal Quarter setting forth all matters
required by this paragraph (g) to be included in the final form thereof as
accurately as shall be possible based upon information available to the
Company at such time; and
(h) from time to time such other information regarding the
business or financial condition of the Company or any of the Subsidiaries
(including, without limitation, any Plan or Multiemployer Plan and any
reports or other information required to be filed under ERISA) as any Bank
or the Administrative Agent may reasonably request.
Each of the Company and the Guarantor will furnish to the Administrative Agent,
with sufficient copies for the Banks, at the time it furnishes each set of
financial statements pursuant to paragraph (a) or (b) above, a certificate of a
senior financial officer of the Company and the Guarantor, substanti-
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ally in the form of Exhibit C hereto (i) to the effect that, to the best of his
or her knowledge, after full inquiry, no Default has occurred and is continuing
(or, if any Default has occurred and is continuing, describing the same in
reasonable detail), (ii) setting forth in reasonable detail the computations
necessary to determine whether the Company and the Guarantor are in compliance
with Sections 9.11, 9.12 and 9.13 hereof as at the end of the respective Fiscal
Quarter or Fiscal Year and (iii) setting forth additions to the list of
Subsidiaries that are Material Subsidiaries contained in the certificate most
recently delivered pursuant to this provision and containing either (A) a
representation that all other Subsidiaries combined do not constitute a
Material Subsidiary Group as at such date or (B) a representation that all
other Subsidiaries do constitute a Material Subsidiary Group as at such date
and identifying any such Subsidiary whose aggregate book value of tangible
assets exceeds $10,000,000 as at such date. In addition, each of the Company
and the Guarantor hereby agrees to furnish the Administrative Agent with an
updated notice with respect to the information specified in clause (iii) of the
preceding sentence upon the occurrence of any event either that has resulted or
could result in a Subsidiary becoming a Material Subsidiary or a group of
Subsidiaries becoming a Material Subsidiary Group or that could make the
representation contained in the most recently delivered certificate furnished
pursuant to this Section 9.1 no longer accurate.
9.2. Litigation. Without limiting the obligations of the Company
under Section 9.1(h) hereof, each of the Company and the Guarantor shall
promptly give to each Bank notice of all court or arbitral proceedings and
investigations, and of all proceedings and investigations before any
governmental or regulatory authority or agency, affecting the Company, the
Guarantor or any Subsidiary, except proceedings or investigations which, if
adversely determined, would not have a material adverse effect on the
consolidated financial condition or operations, or the business taken as a
whole, of the Company and its consolidated Subsidiaries (including, without
limitation, the Guarantor).
9.3. Corporate Existence, Etc. Each of the Company and the
Guarantor will, and will cause each of their respective Subsidiaries (but in
the case of paragraphs (a), (d) and (e) of this Section 9.3, only those
Subsidiaries which are Material Subsidiaries) to:
(a) preserve and maintain its corporate existence and all of its
material rights, privileges, licenses and franchises;
(b) comply with the requirements of all applicable laws, rules,
regulations and orders of governmental or
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regulatory authorities if failure to comply with such requirements
would materially and adversely affect the consolidated financial condition
or operations, or the business taken as a whole, of the Company and its
consolidated Subsidiaries;
(c) pay and discharge all taxes, assessments and governmental
charges or levies imposed on it or on its income or profits or on any of
its property prior to the date on which penalties attach thereto, except
for any such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and against which
adequate reserves are being maintained in accordance with GAAP;
(d) maintain all of its properties used or useful in its business
in good working order and condition, ordinary wear and tear excepted;
(e) permit representatives of any Bank or the Administrative
Agent, during normal business hours, to examine, copy and make extracts
from its books and records, to inspect its properties, and to discuss its
business and financial condition with its officers, all to the extent
reasonably requested by such Bank or the Administrative Agent (as the case
may be); and
(f) keep insured by financially sound and reputable insurers all
property of a character usually insured by corporations engaged in the same
or similar business similarly situated against loss or damage of the kinds
and in the amounts customarily insured against by such corporations and
carry such other insurance as is usually carried by such corporations.
9.4. Payment of Obligations. Without limiting the obligations of
the Company and the Guarantor under Section 9.3 hereof, each of the Company and
the Guarantor will, and will cause each of their respective Subsidiaries to,
pay and discharge at or before the date when due, all of their respective
material obligations and other liabilities, including, without limitation, tax
and pension liabilities, except where such obligations or liabilities are being
contested in good faith and by appropriate proceedings, and maintain, in
accordance with GAAP, appropriate reserves for the accrual of all of the
foregoing.
9.5. Liens. Neither the Company nor the Guarantor will, nor will
either of them permit any of their respective Subsidiaries to, create, incur,
assume or suffer to exist any Lien on any asset, revenue or other property now
or hereafter owned or acquired by it (including, without limitation, the
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stock of Subsidiaries at the time of disposition thereof as permitted by
Section 9.7 hereof) except:
(a) Liens existing on the date hereof securing Indebtedness
outstanding on such date and identified in Footnotes D and G to the
Company's audited consolidated balance sheet as of December 31, 1993 or on
Schedule 1 hereto;
(b) any purchase money security interest hereafter created on any
property of the Company, the Guarantor or such Subsidiary securing
Indebtedness incurred solely for the purpose of financing all or a portion
of the purchase price of such property; provided that: (i) such Lien (A) is
created within six months of the acquisition of such property, (B) extends
to no other property and (C) secures no other Indebtedness; (ii) the
principal amount of Indebtedness secured by such Lien shall at no time
exceed the lesser of (A) the cost to such Person of the property subject
thereto or (B) the fair value of such property (as determined in good faith
by the Board of Directors of such Person) at the time of the acquisition
thereof; (iii) such Lien does not extend to or in any way encumber any
inventory of the Guarantor purchased in the ordinary course of business;
and (iv) the aggregate principal amount of all Indebtedness secured by all
such Liens shall not exceed at any time $15,000,000 less the aggregate
principal amount of all Indebtedness secured by Liens permitted under
Section 9.5(i) hereof;
(c) carriers', warehousemen's, mechanics', materialmen's and
repairmen's liens arising in the ordinary course of business of the
Company, the Guarantor or such Subsidiary and not overdue for a period of
more than 30 days or which are being contested in good faith and by
appropriate proceedings;
(d) Liens created in connection with the lease by the Company, the
Guarantor or any of their respective Subsidiaries of any property (whether
real, personal or mixed) (i) now or hereafter owned by the Company, the
Guarantor or any such Subsidiary which has been sold or otherwise
transferred by any thereof to any other Person within six months of the
acquisition thereof or (ii) which any of the Company, the Guarantor or any
such Subsidiary, as the case may be, intends to use for substantially the
same purpose as any property described in clause (i) above;
(e) Liens in favor of consignors against inventory being sold on
consignment in the ordinary course of business by the Company, the
Guarantor or any Subsidiary;
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(f) Liens created in substitution for any Liens permitted by
paragraphs (a), (b) and (d) of this Section 9.5, provided that (i) any such
newly-created Lien does not extend to any other or additional property and
(ii) (A) if permitted by such paragraph (a) or (b), does not secure any
other (or additional principal amount of) Indebtedness and (B) if permitted
by such paragraph (d) does not secure any other obligations under such
lease or any obligations under any other lease;
(g) Liens existing on assets at the time of acquisition thereof by
the Company, the Guarantor or the respective Subsidiary and not incurred in
anticipation of or in connection with such acquisition;
(h) operating leases and Capital Leases, to the extent the same
would constitute Liens, pursuant to which the Company, the Guarantor or the
respective Subsidiary is lessee, and incurred by such Person in the
ordinary course of its business; and
(i) in addition to Liens otherwise permitted by this Section 9.5,
Liens on property of the Company, the Guarantor or any of their respective
Subsidiaries (i) which secure Indebtedness having an aggregate principal
amount not exceeding at any time $15,000,000 less the aggregate principal
amount of all Indebtedness secured by Liens permitted under Section 9.5(b)
hereof and (ii) each of which shall be limited to specified items of
collateral (and not a general Lien on all assets of such Person) having a
book value not greater than 150% of the aggregate principal amount of the
Indebtedness secured by such Lien;
provided, however, that all capital stock of all Subsidiaries will in any event
be maintained free and clear of all Liens whatsoever.
It is understood and agreed that the grant of security interests
described in clauses (i), (ii), (iii), (v) and (vi) of paragraph 6 of Schedule
3 hereto, to the extent that such security interests relate to the same
property that is "sold" by the Company under the Program, as described in
paragraph 1 of said Schedule, will not constitute a lien on assets of the
Company or its Subsidiaries for the purposes of this Section 9.5.
9.6. Mergers. Neither the Company nor the Guarantor will, and
neither of them will permit any other Material Subsidiary or Subsidiaries
constituting a Material Subsidiary Group to,
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(a) consolidate or merge with or into any other Person, except
that a Wholly-Owned Subsidiary of the Company or the Guarantor (other than
the Guarantor) may merge with or consolidate into the Company or the
Guarantor (provided that the Company or the Guarantor, as the case may be,
shall be the survivor of such merger or consolidation) or another Wholly-
Owned Subsidiary of the Company or the Guarantor, or
(b) sell, assign, convey, lease, sublet, transfer or otherwise
dispose of all or substantially all of its assets to any Person, whether in
a single transaction or in a series of related transactions, except that a
Wholly-Owned Subsidiary of the Company or the Guarantor (other than the
Guarantor) may sell, assign, convey, lease, sublet, transfer or otherwise
dispose of all or substantially all of its assets to the Company or to
another Wholly-Owned Subsidiary of the Company or the Guarantor;
provided, however, that none of the foregoing transactions shall be permitted
if a Default or an Event of Default has occurred and is continuing or would
result from the consummation of any such transaction.
It is understood and agreed that any consolidation, merger, sale,
assignment, conveyance, letting, subletting, transfer or other disposition of
all or substantially all of the assets of a Non-Material Subsidiary shall be
permitted under this Section 9.6, so long as such Non-Material Subsidiary,
together with all other Non-Material Subsidiaries with respect to which there
has been, since the date hereof, a consolidation, merger, sale, assignment,
conveyance, letting, subletting, transfer or other disposition of all or
substantially all of its assets, does not constitute a Material Subsidiary
Group.
9.7 Dispositions of Assets. Neither the Company nor the Guarantor
will, and neither of them will permit any other Material Subsidiary to, sell,
assign, convey, lease, sublet, transfer or otherwise dispose of any of the
assets, business or other properties of the Company, the Guarantor or any such
Material Subsidiary any Person, whether in a single transaction or in a series
of related transactions, except for:
(i) sales of inventory (but not of accounts receivable) in
the ordinary course of business of the Company, the Guarantor or any
such Subsidiary;
(ii) dispositions of assets in the ordinary course of
business in arm's-length transactions by the Company, the Guarantor or
any such Subsidiary to
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the extent such assets either are no longer used or useful to
the Company, the Guarantor or such Subsidiary or are promptly replaced
by other assets of at least equal usefulness; and
(iii) any such disposition by the Company, the Guarantor or
any Wholly-Owned Subsidiary to the Company, the Guarantor or any
Wholly-Owned Subsidiary, as the case may be; provided, however, that
the Company and the Guarantor shall maintain their respective assets
and operations substantially in accordance with their respective
assets and operations as of the date hereof, and that in the case of
any such disposition by the Company or the Guarantor to a Wholly-Owned
Subsidiary, each of the Company and the Guarantor agree that such
disposition shall be in the ordinary course of business consistent
with past practice and shall be accomplished upon fair and reasonable
terms to the Company or the Guarantor.
It is understood and agreed that the non-recourse sales of receivables
described in Schedule 3 hereto, if transacted in accordance with paragraph 1
thereof, will not constitute a sale or other disposition of assets for purposes
of this Section 9.7.
9.8. Ranking. (a) Each of the Company and the Guarantor will
cause its obligations under this Agreement, the Notes and each other document
now or hereafter entered into with respect hereto or thereto to rank at least
pari passu in right of payment and of security with all other unsubordinated
Indebtedness of the Company or the Guarantor, as the case may be, except that
Indebtedness secured by any Lien permitted by Section 9.5 hereof may rank
senior in right of security with respect to the collateral subject to such
Lien. Without limiting the generality of the foregoing, the Company covenants,
and will take all steps necessary to assure, that its obligations under this
Agreement will at all times constitute "Senior Indebtedness" as defined in, and
for all purposes of, any indenture or other instrument relating to subordinated
debt (and will be entitled to the benefits of the subordination provisions
relating thereto).
(b) Each of the Company and the Guarantor will cooperate with the
Administrative Agent and the Banks and execute such further instruments and
documents as any Bank may reasonably request to carry out the intentions of
this Section 9.8. Without limiting the generality of the foregoing, if the
Company or the Guarantor hereafter issues or otherwise incurs any subordinated
Indebtedness, each of them will execute and cause to be executed such further
documents as any Bank may reasonably request to ensure that the
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obligations of the Company and the Guarantor under this Agreement and the Notes
at all times rank senior to such subordinated Indebtedness.
(c) Nothing in this Section 9.8 shall be construed so as to limit
the ability of the Company or the Guarantor to incur any Indebtedness
(consistent with paragraphs (a) and (b) above and otherwise permitted by this
Agreement) on a basis pari passu with their respective Indebtedness under this
Agreement and the Notes.
9.9 Business; Fiscal Year. Neither the Company nor the Guarantor
will make any material change in the nature of its business from that in which
it is engaged on the date of this Agreement, and neither the Company nor the
Guarantor shall cause, or permit any of their respective Subsidiaries to cause,
any other Subsidiary to conduct business or operations substantially similar to
the business or operations conducted by the Guarantor on the date of this
Agreement. Neither the Company nor the Guarantor will change its fiscal year
from that currently in effect on the date hereof, as set forth in the
definition of "Fiscal Year" in Section 1.1 hereof.
9.10. Transactions with Affiliates. Neither the Company nor the
Guarantor will, and neither will permit any of its respective Subsidiaries to,
enter into or be a party to any transaction (including but not limited to any
merger, consolidation or sale of substantially all assets) with any Affiliate
of the Company or the Guarantor, except upon fair and reasonable terms no less
favorable to the Company or the Guarantor or such Subsidiary than would obtain
in a comparable arm's-length transaction with a Person not an Affiliate of the
Company or the Guarantor.
9.11 Interest Coverage Test. The Company will at all times
maintain the ratio of Operating Cash Flow for the Company and its Subsidiaries
on a consolidated basis for the four-Fiscal Quarter Period most recently ended
at such time to Interest Expense for the Company and its Subsidiaries on a
consolidated basis for the four-Fiscal Quarter Period most recently ended at
such time to be not less than 4:1; provided, that the denominator of said ratio
(i) for the four-Fiscal Quarter period ended September 30, 1994 shall be deemed
to be Interest Expense for the Fiscal Quarter ended on such date times four;
(ii) for the four-Fiscal Quarter period ended December 31, 1994 shall be deemed
to be Interest Expense for the two-Fiscal Quarter period ended on such date
times two, and (ii) for the four-Fiscal Quarter period ended March 31, 1995
shall be deemed to be Interest Expense for the three-Fiscal Quarter period
ended on such date times 1.3334.
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9.12. Total Debt Ratio. The Company will maintain the Total Debt
Ratio of the Company and its Subsidiaries on a consolidated basis at all times
to be less than 3:1.
9.13 Consolidated Net Worth. The Company shall not permit
Consolidated Net Worth at any time to be less than the sum of $175,000,000 plus
an amount equal to 50% of the Cumulative Net Income of the Company and its
consolidated Subsidiaries for the period commencing after June 30, 1994 and
ending with the date of determination (but not reduced by any net loss in any
Fiscal Quarter during such period); provided, that the aggregate amount paid by
the Company or its Subsidiaries after June 30, 1994 up to but not exceeding
$75,000,000 for the repurchase of shares of capital stock of the Company shall
not be deemed to reduce equity for purposes of the foregoing calculation.
9.14 Notification of Incurrence of Debt. Prior to the incurrence
by the Company or any of its Subsidiaries of Indebtedness, or upon obtaining
commitments for Indebtedness, in an aggregate principal amount of $20,000,000
(per incurrence or cumulatively since June 30, 1994 or since the last time
incurrence compliance was required to be tested pursuant to this Section 9.14)
or more, the Company shall deliver notice to the Administrative Agent and the
Banks, certifying, on the basis of its financial statements for the four Fiscal
Quarters most recently ended, the Company's compliance with the financial
covenants under this Agreement both before and immediately after the incurrence
of such Indebtedness or commitment therefor.
9.15 Use of Proceeds. The Company shall use the proceeds of the
Loans solely for its general corporate purposes (including, without limitation,
to fund its working capital needs), for the purpose of financing non-hostile
acquisitions, and for the purpose of financing a maximum amount of $75,000,000
of aggregate repurchases of common stock of the Company (to the extent that
such repurchases are permitted by Sections 9.13 and 9.18 hereof), and in any
event in compliance with all applicable legal and regulatory requirements,
including, without limitation, Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System and the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended, and the
regulations thereunder. Neither the Administrative Agent nor any Bank shall
have any responsibility for any use of the proceeds of the Loans.
9.16 Ownership of Guarantor. The Company agrees at all times to
own, both beneficially and of record and free and clear of all Liens, and
control 100% of the capital shares of the Guarantor.
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9.17. Indebtedness of Subsidiaries. The Company will not permit
any of its Subsidiaries to create, incur, assume, suffer to exist or otherwise
become obligated for or under any Indebtedness whatsoever, except for:
(i) Indebtedness owed to the Company;
(ii) Capital Leases;
(iii) Indebtedness of the Guarantor under this Agreement;
(iv) the joint and several liability of the Company,
Guarantor and the other "Participating Subsidiaries" identified in
Schedule 3 under the Program arising in the context of customary
credit card chargebacks, as described in paragraph 4 of said Schedule,
for accounts that are sold without recourse; and
(v) The joint and several liability of the Company, the
Guarantor and such other "Participating Subsidiaries" for the
obligations under the Special Program and the Guaranteed Program, but
only if and for so long as (i) the Company causes the Special Program
and the Guaranteed Program at all times to comply with the
requirements of Section 9.5(i) hereof (including, without limitation,
the $15,000,000 and 150% tests set forth therein), and (ii) for all
purposes of this Agreement, the obligations of the Company, the
Guarantor and such other Participating Subsidiaries under the Special
Program and the Guaranteed Program are treated as Indebtedness in an
aggregate amount equal to 100% of such obligations.
9.18. Restricted Payments. The Company shall not, and shall not
permit the Guarantor or any of its other Subsidiaries to, repurchase, redeem or
otherwise acquire any of the shares of capital stock of the Company except that
the Company may repurchase its common stock for an aggregate purchase price not
to exceed $75,000,000 in the aggregate after the date hereof.
Section 10. Events of Default. If one or more of the following
events (herein called "Events of Default" shall occur and be continuing:
(a) The Company or the Guarantor shall fail to pay the principal
of any Loan when due (provided that, other than with respect to any
principal payment due on the Commitment Termination Date or on such earlier
date on
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which all principal of the Loans shall have become due, if the Company
or the Guarantor has transmitted payment of such principal by wire transfer
to the Administrative Agent not later than 11:00 a.m. New York time on the
date when due and has delivered to the Administrative Agent a written
acknowledgement by the remitting bank that such bank has been instructed to
transfer such payment to the Administrative Agent and that there are
sufficient funds available in the Company's account with such remitting
bank to make such payment, then if the Administrative Agent shall have
failed to receive such payment of principal by 11:00 a.m. New York time on
the Business Day after the date when due); or the Company or the Guarantor
shall fail to pay any interest on any Loan or any other amount payable by
it hereunder more than two Business Days after the date when any such
amount shall be due; or
(b) [INTENTIONALLY OMITTED]; or
(c) The Company or the Guarantor or any Subsidiary shall default
in the payment when due (after giving effect to all applicable grace
periods provided for in the documents relating to such Indebtedness,
without regard to any waiver thereof) of any principal of or interest on or
any other amount payable in connection with any of its Indebtedness not
specified in Section 10(a) or 10(b) hereof in an aggregate principal amount
of $5,000,000 or more; or any event specified in any note, agreement,
indenture or other document evidencing or relating to any such Indebtedness
shall occur if (after giving effect to all applicable grace periods
provided for in the documents relating to such Indebtedness, without regard
to any waiver thereof) the effect of such event is to cause, or to permit
the holder or holders of such Indebtedness (or a trustee or agent on behalf
of such holder or holders) to cause, such Indebtedness becoming due prior
to its stated maturity; or
(d) Any representation, warranty or certification made or deemed
made herein by the Company or the Guarantor, or any certificate furnished
to any Bank or the Administrative Agent pursuant to the provisions hereof,
shall prove to have been false or misleading as of the time made or deemed
made or furnished in any material respect and, if the Company, the
Guarantor and the Majority Banks agree that the effects of such false or
misleading representation, warranty or certification are curable, such
effects shall not have been cured to the satisfaction of the Majority Banks
within 10 days after the earlier of (x) the date on which the Company or
the Guarantor obtained knowledge that such representation, warranty or
certification was so false or misleading or (y) the date of notice by the
Administrative Agent to the
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Company or the Guarantor that such representation, warranty or
certification was so false or misleading; or
(e) The Company or the Guarantor shall default in the performance
of any of its obligations under Section 9 (other than under any of Sections
9.1(a), 9.1(b), 9.1(c), 9.1(d), 9.1(g), 9.1(h), 9.2, 9.3(b), 9.3(c) and 9.4
hereof); or the Company or the Guarantor shall default in the performance
of any of its other obligations in this Agreement, including, without
limitation, any of Sections 9.1(a), 9.1(b), 9.1(c), 9.1(d), 9.1(g), 9.1(h),
9.2, 9.3(b), 9.3(c) and 9.4 hereof (not governed by any other provision in
this Section 10), and such default shall continue unremedied for a period
of 10 days after the earlier of (x) the date on which the Company or the
Guarantor obtained knowledge of such default or (y) the date of notice by
the Administrative Agent to the Company or the Guarantor of the occurrence
of such default; or
(f) The Company, the Guarantor, any other Material Subsidiary or
Subsidiaries constituting a Material Subsidiary Group shall admit in
writing its inability to, or be generally unable to, pay its debts as such
debts become due; or
(g) The Company, the Guarantor, any other Material Subsidiary or
Subsidiaries constituting a Material Subsidiary Group shall (i) apply for
or consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or of all or a
substantial part of its assets, (ii) make a general assignment for the
benefit of its creditors, (iii) commence a voluntary case under the
Bankruptcy Code (as now or hereafter in effect), (iv) file a petition
seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, creditor or debtor rights, winding-up, or
composition or readjustment of debts, (v) take any corporate action for the
purpose of effecting any of the foregoing; provided that an event specified
in clauses (i) through (v) above shall be deemed to have occurred (whether
at one time or cumulatively over a period of time after the date hereof)
with respect to a Material Subsidiary Group at the time when such an event
shall have occurred with respect to all Subsidiaries constituting such
Material Subsidiary Group; or
(h) A proceeding or case shall be commenced, without the
application or consent of the Company, the Guarantor, any other Material
Subsidiary or all Subsidiaries constituting a Material Subsidiary Group in
any court of competent jurisdiction, seeking (i) its liquidation,
reorganization, dissolution or winding-up, or the composition or
readjustment of its debts, including the filing
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of an involuntary petition under the Bankruptcy Code, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of
the Company, the Guarantor or such Subsidiary or of all or any substantial
part of its assets, or (iii) similar relief in respect of the Company, the
Guarantor or such Subsidiary under any law relating to bankruptcy,
insolvency, reorganization, creditor or debtor rights, winding-up, or
composition or adjustment of debts, and such proceeding or case shall
continue undismissed, or an order, judgment or decree approving or ordering
any of the foregoing shall be entered and shall not be vacated or dismissed
within 60 days; or an order for relief against the Company, the Guarantor
or such Subsidiary shall be entered in an involuntary case under any
applicable bankruptcy code; provided that an event specified in clauses (i)
through (iii) above or the preceding subclause shall be deemed to have
occurred with respect to a Material Subsidiary Group at the time when such
an event shall have occurred (whether at one time or cumulatively over a
period of time after the date hereof) with respect to all Subsidiaries
constituting such Material Subsidiary Group; or
(i) A judgment or judgments for the payment of money in excess of
$1,000,000 in the aggregate shall be rendered by a court or courts against
the Company, the Guarantor and/or any of their respective Subsidiaries and
the same shall not be discharged (or provision shall not be made for such
discharge), or a stay of execution thereof shall not be procured, within 30
days from the date of entry thereof (or, if later, by the date on which
such judgment specified that payment is due), and the Company, the
Guarantor or the relevant Subsidiary shall not, within said period of 30
days (or by such later date on which payment is due, as aforesaid), or such
longer period during which execution of the same shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during such
appeal; or
(j) An event or condition specified in Section 9.1(e) hereof shall
occur or exist with respect to any Plan or Multiemployer Plan and, as a
result of such event or condition, together with all other such events or
conditions, the Company, the Guarantor or any ERISA Affiliate shall incur
or in the opinion of the Majority Banks shall be reasonably likely to incur
a liability to a Plan, a Multiemployer Plan or PBGC (or any combination of
the foregoing) which is, in the determination of the Majority Banks,
material in relation to the consolidated financial position of the Company
and its consolidated Subsidiaries; or
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(k) There shall occur a Change of Control; provided that any such
Change of Control shall not constitute an Event of Default for purposes of
this Section 10(k) if (A) such Change of Control arises solely by reason of
the merger or consolidation of the Company with another corporation which
is organized under the laws of a state in the United States and the Company
is the surviving corporation in such merger or consolidation, (B) as of the
date of such merger or consolidationand after giving effect thereto, no
other Default or Event of Default shall have occurred and be continuing,
and (C) the Company has delivered a notice to the Administrative Agent and
the Banks not less than 30 days prior to the consummation of any such
merger or consolidation that sets forth in reasonable detail information
indicating compliance with the terms of this paragraph (k); or
(l) An event or condition that constitutes a default or breach by
the Company or any of its Subsidiaries of any affiliation agreement between
the Company or such Subsidiary and Silver King Communications, Inc., a
Delaware corporation, or any of its affiliates (or the respective
successors or assigns of Silver King Communications, Inc. or such
affiliates);
THEREUPON: (i) in the case of an Event of Default other than one referred
to in clause (f), (g) or (h) of this Section 10, the Administrative Agent, with
the consent of the Majority Banks, may and, upon request of the Majority Banks,
shall, by notice to the Company, terminate the Commitments and/or declare the
principal amount then outstanding of, and the accrued interest on, the Loans
and all other amounts payable by the Company and the Guarantor hereunder and
under the Notes to be forthwith due and payable, whereupon such amounts shall
be immediately due and payable without presentment, demand, diligence, protest
or other formalities of any kind, all of which are hereby expressly waived by
the Company and the Guarantor; and (ii) in the case of the occurrence of an
Event of Default referred to in clause (f), (g) or (h) of this Section 10, the
Commitments shall be automatically terminated and the principal amount then
outstanding of, and the accrued interest on, the Loans and all other amounts
payable by the Company and the Guarantor hereunder and under the Notes shall
become automatically immediately due and payable without presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by the Company and the Guarantor.
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Section 11. The Administrative Agent.
11.1. Appointment, Powers and Immunities. Each Bank hereby
irrevocably appoints and authorizes the Administrative Agent to act as its
agent hereunder with such powers as are specifically delegated to the
Administrative Agent by the terms of this Agreement, together with such other
powers as are reasonably incidental thereto. The Administrative Agent (which
term as used in this sentence and in Section 11.5 and the first sentence of
Section 11.6 hereof shall include reference to its affiliates and each of the
officers, directors, employees and agents of itself and of its affiliates): (a)
shall have no duties or responsibilities except those expressly set forth in
this Agreement, and shall not by reason of this Agreement be a trustee or other
fiduciary for any Bank; (b) shall not be responsible to the Banks for any
recitals, statements, representations or warranties contained in this
Agreement, or in any certificate or other document referred to or provided for
in, or received by any of them under, this Agreement, or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement, any Note or any other document referred to or provided for herein or
for any failure by the Company or any other Person to perform any of its
obligations hereunder or thereunder; (c) shall not be required to initiate or
conduct any litigation or collection proceedings hereunder, except as provided
for under Section 11.3 hereof; and (d) shall not be responsible for any action
taken or omitted to be taken by it hereunder or under any other document or
instrument referred to or provided for herein or in connection herewith, except
for its own gross negligence or willful misconduct. The Administrative Agent
may employ agents and attorneys-in-fact and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact selected by it
in good faith. The Administrative Agent may deem and treat the payee of any
Note as the holder thereof for all purposes hereof unless and until a written
notice of the assignment or transfer thereof shall have been filed with the
Administrative Agent.
11.2. Reliance by the Administrative Agent. The Administrative
Agent shall be entitled to rely upon any certification, notice or other
communication (including any thereof by telephone, telex, telegram or cable)
reasonably believed by it to be genuine and correct and to have been signed or
sent by or on behalf of the proper Person or Persons, and upon advice and
statements of legal counsel, independent accountants and other experts selected
by the Administrative Agent. As to any matters not expressly provided for by
this Agreement, the Administrative Agent shall in all cases be fully protected
in acting, or in refraining from acting, hereunder in accordance with
instructions signed by the Majority Banks, and such instructions of the
Majority Banks and any action taken or failure to act pursuant thereto shall be
binding on all of the Banks.
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11.3. Defaults. The Administrative Agent shall not be deemed to
have knowledge of the occurrence of a Default (other than the nonpayment of
principal of or interest on Loans or of facility fees) unless the
Administrative Agent has received notice from a Bank or the Company specifying
such Default and stating that such notice is a "Notice of Default". In the
event that the Administrative Agent receives such a notice of the occurrence of
a Default, the Administrative Agent shall give prompt notice thereof to the
Banks (and shall give each Bank prompt notice of each such nonpayment). The
Administrative Agent shall (subject to Section 11.7 and Section 12.4 hereof)
take such action with respect to such Default as shall be directed by the
Majority Banks, provided that, unless and until the Administrative Agent shall
have received such directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with
respect to such Default as it shall deem advisable in the best interest of the
Banks.
11.4. Rights as a Bank. With respect to its Commitment and the
Loans made by it, LTCB Trust (and any successor acting as Administrative Agent)
in its capacity as a Bank hereunder shall have the same rights and powers
hereunder as any other Bank and may exercise the same as though it were not
acting as the Administrative Agent, and the term "Bank" or "Banks" shall,
unless the context otherwise indicates, include the Administrative Agent in its
individual capacity. LTCB Trust (and any successor acting as Administrative
Agent) and its affiliates may (without having to account therefor to any Bank)
accept deposits from, lend money to and generally engage in any kind of
banking, trust or other business with the Company (and any of its Affiliates)
as if it were not acting as the Administrative Agent, and LTCB, LTCB Trust and
their affiliates may accept fees and other consideration from the Company and
the Guarantor for services in connection with this Agreement or otherwise
without having to account for the same to the Banks.
11.5. Indemnification. The Banks agree to indemnify the
Administrative Agent (to the extent not reimbursed under Section 12.3 hereof,
but without limiting the obligations of the Company under said Section 12.3),
ratably in accordance with the aggregate principal amount of the Loans made by
the Banks (or, if no Loans are at the time outstanding, ratably in accordance
with their respective Commitments), for any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against the Administrative Agent in any way relating to
or arising out of this Agreement or any other documents contemplated by or
referred to herein or the transactions contemplated hereby (including, without
limitation, the costs
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and expenses which the Company is obligated to pay under Section 12.3 hereof
but excluding, unless a Default has occurred and is continuing, normal
administrative costs and expenses incident to the performance of its agency
duties hereunder) or the enforcement of any of the terms hereof or of any such
other documents, provided that no Bank shall be liable for any of the foregoing
to the extent they arise from the gross negligence or willful misconduct of the
party to be indemnified.
11.6. Non-Reliance on Administrative Agent, Agent, Co-Agents and
other Banks. Each Bank agrees that it has, independently and without reliance
on the Administrative Agent, the Agent, either of the Co-Agents or any other
Bank, and based on such documents and information as it has deemed appropriate,
made its own credit analysis of the Company, the Guarantor and their respective
Subsidiaries and its own decision to enter into this Agreement and that it
will, independently and without reliance upon the Administrative Agent, the
Agent, either of the Co-Agents or any other Bank, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own analysis and decisions in taking or not taking action under this Agreement,
the Notes or any other related documents. The Administrative Agent shall not
be required to keep itself informed as to the performance or observance by the
Company or the Guarantor of this Agreement or any other document referred to or
provided for herein or to inspect the properties or books of the Company, the
Guarantor or any of their respective Subsidiaries. Except for notices, reports
and other documents and information expressly required to be furnished to the
Banks by the Administrative Agent hereunder, the Administrative Agent shall not
have any duty or responsibility to provide the Agent, either of the Co-Agents
or any Bank with any credit or other information concerning the affairs,
financial condition or business of the Company or any Subsidiary (or any of
their affiliates) which may come into the possession of the Administrative
Agent or any of its affiliates.
11.7. Failure to Act. Except for action expressly required of the
Administrative Agent hereunder, the Administrative Agent shall in all cases be
fully justified in failing or refusing to act hereunder unless it shall be
indemnified to its satisfaction by the Banks against any and all liability and
expense (other than that arising from gross negligence or willful misconduct)
which may be incurred by it by reason of taking or continuing to take any such
action.
11.8. Resignation or Removal of Administrative Agent. Subject to the
appointment and acceptance of a successor Administrative Agent as provided
below, the Administrative Agent may resign at any time by giving notice thereof
to the Banks, the Company and the Guarantor, and the
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Administrative Agent may be removed at any time with or without cause by the
Majority Banks. Upon any such resignation or removal, the Majority Banks shall
have the right to appoint a successor Administrative Agent. If no successor
Administrative Agent shall have been so appointed by the Majority Banks and
shall have accepted such appointment within 30 days after the retiring
Administrative Agent's giving of notice of resignation or the Majority Banks'
removal of the retiring Administrative Agent, then the retiring Administrative
Agent may, on behalf of the Banks, appoint a successor Administrative Agent,
which shall be a bank which has an office in New York, New York with a combined
capital and surplus of at least $100,000,000. Upon the acceptance of any
appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the
retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder. After any retiring
Administrative Agent's resignation or removal hereunder as Administrative
Agent, the provisions of this Section 11 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as the Administrative Agent.
11.9. Administrative Agent's Office. The Administrative Agent acts
initially through its office designated on the signature pages hereof, but may
transfer its functions as Administrative Agent to any other office, branch or
affiliate of LTCB at any time by giving prompt, subsequent written notice to
each of the other parties to this Agreement.
11.10. Agent and Co-Agents. Each of the parties acknowledges and
agrees that the Agent and the Co-Agents, in their respective capacities as
such, have no obligations, duties or liabilities whatsoever under or in respect
of this Agreement or the Notes.
Section 12. Miscellaneous.
12.1. Waiver. No failure on the part of the Administrative Agent,
the Agent, either of the Co-Agents or any Bank to exercise, no delay in
exercising, and no course of dealing with respect to, any right, power or
privilege under this Agreement or any Note shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, power or privilege under
this Agreement or any Note preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The remedies provided
herein are cumulative and not exclusive of any remedies provided by law.
12.2. Notices. All notices and other communications provided for
herein (including, without limitation, any
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modifications of, or waivers or consents under, this Agreement) shall be given
or made by telex, telecopy, telegraph, cable or in writing and telexed,
telecopied, telegraphed, cabled, mailed or delivered to the intended recipient
at the "Address for Notices" specified below its name on the signature pages
hereof; or, as to any party, at such other address as shall be designated by
such party in a notice to each other party. Except as otherwise provided in
this Agreement, all such communications shall be deemed to have been duly given
when transmitted by telex or telecopier (with receipt confirmed either
mechanically or in writing by a person at the office of the recipient),
personally delivered or, in the case of a mailed notice, upon receipt, in each
case given or addressed as aforesaid.
12.3. Expenses, Etc. The Company and the Guarantor jointly and
severally agree to pay or reimburse each of the Banks and the Administrative
Agent for paying:
(a) all costs and expenses of the Administrative Agent (including,
without limitation, the reasonable fees and expenses of all special counsel
to the Administrative Agent, the Agent, the Co-Agents and the Banks, in
connection with (i) the preparation, negotiation, execution and delivery of
this Agreement and the Notes and any related documents and the making of
the initial Loans hereunder, subject to limitations set forth in the
commitment letter and term sheet, dated July 15, 1994, of LTCB Trust, and
(ii) any amendment, modification or waiver of any of the terms of this
Agreement or any of the Notes or any related documents (whether or not any
such amendment, modification or waiver is signed or becomes effective);
(b) all reasonable costs and expenses of each Bank, the Agent, the
Co-Agents and the Administrative Agent (including reasonable counsels' fees
and expenses) in connection with the enforcement of this Agreement or any
of the Notes and the protection of the rights of each Bank, the Agent, each
of the Co-Agents and the Administrative Agent against the Company, the
Guarantor or any of their respective assets; and
(c) all transfer, stamp, documentary and other similar taxes,
assessments or charges (including, without limitation, penalties and
interest) levied by any governmental or revenue authority in respect of
this Agreement, any of the Notes or any other document referred to herein.
The Company hereby agrees to indemnify the Administrative Agent, the Agent,
each of the Co-Agents and each Bank and their respective Affiliates, directors,
officers, employees and agents from, and hold each of them harmless against,
any
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and all losses, liabilities, claims, damages or expenses incurred by any of
them arising out of or by reason of any investigation or litigation or other
proceedings (including any threatened investigation or litigation or other
proceedings) relating to or arising out of this Agreement, the statements
contained in the commitment letter and term sheet, dated July 15, 1994, of LTCB
Trust, or any aspect thereof, the Banks' agreement to make the Loans hereunder
or from any actual or proposed use by the Company, the Guarantor or any
Subsidiary of either thereof of the proceeds of any of the Loans or from an
alleged breach of this Agreement, including, without limitation, the reasonable
fees and disbursements of counsel incurred in connection with any such
investigation or litigation or other proceedings (but excluding any such
losses, liabilities, claims, damages or expenses incurred by reason of the
gross negligence or willful misconduct of the Person to be indemnified).
12.4. Amendments, Etc. Neither this Agreement nor any Note nor any
terms hereof or thereof may be amended, supplemented or modified except in
accordance with the provisions of this subsection. With the prior written
consent of the Majority Banks, the Administrative Agent, the Company and the
Guarantor may, from time to time, enter into written amendments, supplements or
modifications hereto for the purpose of adding any provisions to this Agreement
or the Notes or changing in any manner the rights of the Banks or of the
Company and the Guarantor hereunder or thereunder or waiving, on such terms and
conditions as the Administrative Agent (with the consent of the Majority Banks)
may specify in such instrument, any of the requirements of this Agreement or
the Notes or any Default or Event of Default and its consequences; provided,
however, that no such waiver and no such amendment, supplement or modification
shall (a) extend the maturity of any Note, or reduce the rate or extend the
time of payment of interest thereon, or reduce or extend the time of payment of
any fee payable to the Banks hereunder, or reduce the principal amount of any
Loan, or increase the amount of any Bank's Commitment, or release the Guarantor
from any of its obligations hereunder, or amend, modify or waive any provision
of this subsection, or reduce the percentage specified in the definition of
"Majority Banks" in Section 1.1 hereof or the percentage of the Banks otherwise
required to take actions under this Agreement or the Notes, or consent to the
assignment or transfer by the Company or the Guarantor of any of its rights and
obligations under this Agreement or the Notes, in each case without the prior
written consent of all the Banks, or (b) amend, modify or waive any provision
of Section 11 hereof without the prior written consent of the Administrative
Agent. Any such waiver and any such amendment, supplement or modification
shall apply equally to each of the Banks and shall be binding upon the Company,
the Guarantor, the Banks, the Administrative Agent, the Agent, the Co-Agents
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and all future holders of the Notes. In the case of any waiver, the Company,
the Guarantor, the Banks and the Administrative Agent shall be restored to
their former position and rights hereunder and under the outstanding Notes, and
any Default or Event of Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent or other Default
or Event of Default, or impair any right subsequent thereon.
12.5. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
12.6. Assignments and Participation.
(a) Neither the Company nor the Guarantor may assign its rights or
obligations hereunder or under the Notes without the prior consent of all
of the Banks and the Administrative Agent.
(b) Any Bank may assign any of its Loans, its Note or its
Commitment without the prior consent of the Company, the Guarantor, the
Administrative Agent or any other Bank, provided that (i) partial
assignments (being assignments of less than the entire amount of a Bank's
Commitment and Loans) to any Person other than an office, branch or
affiliate of the assigning Bank shall be in a principal amount of not less
than $9,000,000 (or such lesser amount as may be agreed upon by the
Company) and (ii) any such assignment shall be made pursuant to an
assignment and assumption agreement substantially in the form of Exhibit E
hereto (an "Assignment Agreement"). Upon (A) written notice to the Company
and the Administrative Agent of an assignment, identifying in detail
reasonably satisfactory to the Administrative Agent the assignee Bank and
the amount of the assignor Bank's Commitment and Loans assigned, and (B)
payment by the assignor or the assignee to the Administrative Agent, for
the Administrative Agent's own account, of a recordation fee of $2,500, the
assignee shall have, as of the date of effectiveness of such assignment and
to the extent of such assignment, the obligations, rights and benefits of,
and shall be deemed for all purposes hereunder, a Bank party hereto holding
the Commitment and Loans (or portions thereof) assigned to it (in addition
to the Commitment and Loans, if any, theretofore held by such assignee) and
the assignor shall be released from such obligations to such extent.
(c) Any Bank may sell to one or more other Persons a participation
in all or any part of the Commitment or any Loan held by it, in which event
each such participant shall be entitled to the rights and
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benefits of the provisions of Sections 5 and 9.1(h) hereof with respect
to its participation in such Loan as if (and the Company and the Guarantor
shall be directly obligated to such participant under such provisions as
if) such participant were a "Bank" for purposes of said Sections, but shall
not have any other rights or benefits under this Agreement or any Note (the
participant's rights against such Bank in respect of such participation to
be those set forth in the agreement (the "Participation Agreement")
executed by such Bank in favor of such participant); provided, that all
amounts payable by the Company or the Guarantor to any Bank and any
participant under Section 5 hereof in respect of any Loan shall be
determined as if such Bank had not sold any participations in such Loan and
as if such Bank were funding all of such Loan in the same way that it is
funding the portion of such Loan in which no participations have been sold.
In no event shall a Bank that sells a participation be obligated to any
participant under the Participation Agreement to take or refrain from
taking any action hereunder or under such Bank's Note (including, without
limitation, the extension of such Bank's Commitment pursuant to Section 2.9
hereof) except that such Bank may agree in the Participation Agreement that
it will not, without the consent of the participant, agree to (i) the
extension of any date fixed for the payment of principal of or interest on
the related Loan or Loans, (ii) the reduction of any payment of principal
thereof, (iii) the reduction of the rate at which either interest is
payable thereon or (if the participant is entitled to any part thereof)
facility fee is payable hereunder to a level below the rate at which the
participant is entitled to receive interest or facility fee (as the case
may be) in respect of such participation or (iv) any release of the
Guarantor from any of its obligations under this Agreement or the Notes.
(d) In addition to the assignments and participations permitted
under the foregoing provisions of this Section 12.6, any Bank may assign
and pledge all or any portion of its Loans and its Note to any Federal
Reserve Bank as collateral security pursuant to Regulation A and any
Operating Circular issued by such Federal Reserve Bank. No such assignment
shall release the assigning Bank from its obligations hereunder.
(e) A Bank may furnish any information concerning the Company, the
Guarantor or any of their respective Subsidiaries in the possession of such
Bank from time to time to assignees and participants (including prospective
assignees and participants).
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12.7 Confidentiality. The Administrative Agent, the Agent, each of
the Co-Agents and each of the Banks hereby acknowledge that certain of the
information to be furnished to them pursuant to this Agreement may be
non-public information. The Administrative Agent, the Agent, each of the
Co-Agents and each Bank hereby agrees that it will keep all information so
furnished to it pursuant hereto confidential in accordance with its normal
banking procedures and, except in accordance with such procedures, will make
no disclosure to any other Person of such information until the same shall
have become public, except (i) in connection with matters involving this
Agreement (including, without limitation, litigation involving the Company,
the Guarantor, the Agent, the Co-Agents, the Administrative Agent or the Banks)
and with the obligations of any of the Administrative Agent, the Agent, such
Co-Agent or such Bank under law or regulation, (ii) pursuant to subpoenas or
similar process, (iii) to Governmental Authorities or examiners, (iv) to
independent auditors or counsel, (v) to any parent or corporate Affiliate of
any of the Administrative Agent, the Agent, such Co-Agent or such Bank, or (vi)
to any participant or proposed participant or assignee or proposed assignee
hereunder so long as such participant or proposed participant or assignee or
proposed assignee (a) is not in the same general type of business as the
Company on the date of such disclosure and (b) agrees in writing to accept
such information subject to the restrictions provided in this Section 12.7;
provided that in no event shall any of the Administrative Agent, the Agent,
the Co-Agents or such Bank be obligated or required to return any materials
furnished by the Company or any of its Subsidiaries.
12.8. Survival. Without limiting the survival of any other
obligations of the Company, the Guarantor and the Banks hereunder, the
obligations of the Company and the Guarantor under Sections 2.6, 5.1, 5.4, 5.5
and 12.3 hereof and the obligations of the Banks under Sections 4.7, 11.5 and
12.7 hereof, shall survive the repayment of the Loans and the termination of
the Commitments.
12.9. Captions. Captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.
12.10. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
12.11. GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
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12.12. JURISDICTION. EACH OF THE COMPANY AND THE GUARANTOR HEREBY
AGREES THAT:
(A) ANY SUIT, ACTION OR PROCEEDING AGAINST THE COMPANY OR THE
GUARANTOR WITH RESPECT TO THIS AGREEMENT, THE LOANS, THE NOTES OR ANY
DOCUMENTS RELATED HERETO OR ANY JUDGMENT ENTERED BY ANY COURT IN RESPECT
THEREOF MAY BE BROUGHT IN THE SUPREME COURT OF THE STATE OF NEW YORK,
COUNTY OF NEW YORK, IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK, OR IN ANY STATE OR FEDERAL COURT SITTING IN THE STATE
OF FLORIDA (COLLECTIVELY, THE "SUBJECT COURTS"), AS THE ADMINISTRATIVE
AGENT, THE AGENT, EITHER CO-AGENT OR ANY BANK MAY ELECT IN ITS SOLE
DISCRETION AND EACH OF THE COMPANY AND THE GUARANTOR HEREBY IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF EACH OF THE SUBJECT COURTS FOR
THE PURPOSE OF ANY SUCH SUIT, ACTION, PROCEEDING OR JUDGMENT. EACH OF THE
COMPANY AND THE GUARANTOR HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS IN ANY SUIT, ACTION OR PROCEEDING IN ANY OF THE SUBJECT COURTS BY
THE MAILING THEREOF BY THE ADMINISTRATIVE AGENT, THE AGENT, THE RESPECTIVE
CO-AGENT OR THE RESPECTIVE BANK BY REGISTERED OR CERTIFIED MAIL, POSTAGE
PREPAID, TO THE COMPANY OR THE GUARANTOR, AS THE CASE MAY BE, ADDRESSED AS
PROVIDED IN SECTION 12.2 HEREOF. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED
TO LIMIT THE ABILITY OF THE ADMINISTRATIVE AGENT, THE AGENT, EITHER
CO-AGENT OR ANY BANK TO SERVE ANY SUCH WRITS, PROCESS OR SUMMONSES IN ANY
OTHER MANNER PERMITTED BY APPLICABLE LAW OR TO BRING PROCEEDINGS AGAINST
THE COMPANY OR THE GUARANTOR IN ANY COMPETENT COURT OF ANY OTHER
JURISDICTION OR JURISDICTIONS, AND IN SUCH MANNER, AS MAY BE PERMITTED BY
APPLICABLE LAW.
(B) EACH OF THE COMPANY AND THE GUARANTOR HEREBY WAIVES ANY RIGHT
TO TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING IN RESPECT OF THIS
AGREEMENT, THE NOTES OR ANY OTHER DOCUMENTS IN CONNECTION HEREWITH, ANY
OBJECTION TO THE LAYING OF VENUE IN ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY OF THE SUBJECT COURTS, AND, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY CLAIM THAT SUCH SUIT, ACTION OR PROCEEDING IN ANY OF THE
SUBJECT COURTS HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
12.13. Severability. Any provision of this Agreement or the Notes
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
thereof or affecting the validity or enforceability of such provision in any
other jurisdiction.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
HOME SHOPPING NETWORK, INC.,
as the Company
By ___________________________
Title: Treasurer
11831 30th Court North
St. Petersburg, Florida 33716
Telecopier No.: (813) 539-6505
Telephone No.: (813) 572-8585
Attention: Finance Department
with a copy to:
"Legal Department"
Telecopier No.: (813) 573-0866
HOME SHOPPING CLUB, INC.,
as Guarantor
By ___________________________
Title: Treasurer
11831 30th Court North
St. Petersburg, Florida 33716
Telecopier No.: (813) 539-6505
Telephone No.: (813) 572-8585
Attention: Finance Department
with a copy to:
"Legal Department"
Telecopier No.: (813) 573-0866
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The Banks
Commitment
$20,000,000 LTCB TRUST COMPANY, as a Bank
and as Agent
By ___________________________
Title:
Lending Office for Federal Funds
Rate Loans and Prime Rate Loans:
165 Broadway
New York, New York 10006
Lending Office for LIBOR Loans:
165 Broadway
New York, New York 10006
Address for Notices:
165 Broadway
New York, New York 10006
Telex No.: 425722
Telecopier No.: (212) 608-3081
Telephone No.: (212) 335-4854
Attention: Winston Brown
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Commitment
$ 17,000,000 BANK OF MONTREAL, as a Bank
and as Co-Agent
By ____________________________
Title:
Lending Office for Federal Funds
Rate Loans and Prime Rate Loans:
115 South LaSalle Street
11th Floor
Chicago, Illinois 60603
Lending Office for LIBOR Loans:
115 South LaSalle Street
11th Floor
Chicago, Illinois 60603
Address for Notices:
430 Park Avenue
15th Floor, Account
Administration
New York, New York 10022
Telecopier No.: (212) 605-1525
Telephone No.: (212) 605-1436
or (212) 605-1458
Attention: Maggie Gaglin
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Commitment
$ 17,000,000 THE BANK OF NEW YORK COMPANY,
INC., as a Bank and as a Co-Agent
By ______________________________
Title:
Lending Office for Federal Funds
Rate Loans and Prime Rate Loans:
One Wall Street
New York, New York 10286
Lending Office for LIBOR Loans:
One Wall Street
New York, New York 10286
Address for Notices:
One Wall Street
16th Floor
New York, New York 10286
Telecopier No.: (212) 635-8679
or (212) 635-8634
Telephone No.: (212) 635-8741
Attention: Brian Marshall
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Commitment
$ 14,000,000 PNC BANK, KENTUCKY, INC.
By ______________________________
Title:
Lending Office for Federal Funds
Rate Loans and Prime Rate Loans:
500 West Jefferson Street
Louisville, Kentucky 40202
Lending Office for LIBOR Loans:
500 West Jefferson Street
Louisville, Kentucky 40202
Address for Notices:
PNC Commercial Corp.
201 South Orange Avenue
Suite 750
Orlando, Florida 32801
Telecopier No.: (407) 843-8263
Telephone No.: (407) 841-3585
Attention: James Neil or
Diane Tyre
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Commitment
$ 14,000,000 TORONTO DOMINION [TEXAS], INC.
By ______________________________
Title:
Lending Office for Federal Funds
Rate Loans and Prime Rate Loans:
Toronto Dominion Bank,
Houston Agency
909 Fannin Street
Houston, Texas 77010
Lending Office for LIBOR Loans:
Toronto Dominion Bank,
Houston Agency
909 Fannin Street
Houston, Texas 77010
Address for Notices:
Toronto Dominion Bank,
Houston Agency
909 Fannin Street
Houston, Texas 77010
Telecopier No.: (713) 951-9921
Telephone No.: (713) 653-8248
Attention: Dave Parker
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Commitment
$ 9,000,000 THE DAIWA BANK, LIMITED
By ______________________________
Title:
By ______________________________
Title:
Lending Office for Federal Funds
Rate Loans and Prime Rate Loans:
233 South Wacker Dr., Suite 5400
Chicago, Illinois 60606
Lending Office for LIBOR Loans:
233 South Wacker Dr., Suite 5400
Chicago, Illinois 60606
Address for Notices:
100 South Ashley Drive
Suite 1780
Tampa, Florida 33602
Telecopier No.: (813) 229-6372
Telephone No.: (813) 229-6002
Attention: Sybil Weldon, Vice
President
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Commitment
$ 9,000,000 FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By ______________________________
Title:
Lending Office for Federal Funds
Rate Loans and Prime Rate Loans:
First Union Center-TW19
Charlotte, North Carolina
28288-0735
Lending Office for LIBOR Loans:
First Union Center-TW19
Charlotte, North Carolina
28288-0735
Address for Notices:
First Union Center-TW19
Charlotte, North Carolina
28288-0735
Telecopier No.: (704) 374-4092
Telephone No.: (704) 374-4897
Attention: Hilda Weathers
----------------------
Total: $100,000,000
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The Administrative Agent
LTCB TRUST COMPANY,
as Administrative Agent
By ______________________________
Title:
Address for Notices to
Administrative Agent:
165 Broadway
New York, New York 10006
Telex No.: 425722
Telecopier No.: (212) 608-3081
Telephone No.: (212) 335-4854
Attention: Winston Brown
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SCHEDULE 1
EXISTING CREDIT AGREEMENTS
AND LIENS
None.
80
SCHEDULE 2
CALCULATION OF SAMPLE
FINANCIAL TERMS
81
SCHEDULE 3
DESCRIPTION OF CREDIT CARD PROGRAM
82
EXHIBIT A
PROMISSORY NOTE
$______________ ____________, 1994
New York, New York
FOR VALUE RECEIVED, HOME SHOPPING NETWORK, INC., a Delaware corporation
(the "Company"), hereby promises to pay to the order of ___________________
(the "Bank"), for account of its respective Applicable Lending Offices provided
for by the Credit Agreement referred to below, by paying to account no.
04203606 of LTCB Trust Company (in its capacity as administrative agent for the
Bank and certain other banks, the "Administrative Agent") at the principal
offices of Bankers Trust Company, New York, New York (reference: "Home Shopping
Network-1994 Revolving Credit Facility") the principal sum of ______________
Dollars ($_____________) (or such lesser amount as shall equal the aggregate
unpaid principal amount of the Loans made by the Bank to the Company under the
Credit Agreement), in lawful money of the United States of America and in
immediately available funds (or at such other place or in such other manner as
the Administrative Agent may notify the Company from time to time), without
set-off, counterclaim or deduction of any kind, on the dates and in the
principal amounts provided in the Credit Agreement, and to pay interest on the
unpaid principal amount of each such Loan, at such office, in like money and
funds and in such manner, for the period commencing on the date of such Loan
until such Loan shall be paid in full, at the rates per annum and on the dates
provided in the Credit Agreement.
The amount and type of, and the duration of each Interest Period (if
applicable) for, each Loan made by the Bank to the Company under the Credit
Agreement, the date such Loan is made or converted from a Loan of another type,
and the amount of each payment or prepayment made on account of the principal
thereof, shall be recorded by the Bank on its books and, prior to any transfer
of this Note, endorsed by the Bank on the schedule attached hereto or any
continuation thereof; provided that no failure of the Bank to make any such
endorsement shall affect the obligations of the Company under the Credit
Agreement or this Note.
This Note is one of the Notes referred to in the Second Amended and
Restated Credit Agreement, dated as of August 30, 1994 (as amended and in
effect from time to time, the "Credit Agreement"), among the Company, Home
Shopping Club, Inc., a Delaware corporation, as guarantor (the "Guarantor"),
the Banks named therein (including the Bank), LTCB Trust Company, as Agent,
Bank of Montreal and The Bank of New York Company, Inc., as Co-Agents, and the
Administrative Agent, and evidences Loans made by the Bank thereunder and is
entitled to the benefits thereof. Capitalized terms used in
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this Note have the respective meanings assigned to them in the Credit
Agreement.
The Credit Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain events and for prepayments of Loans
upon the terms and conditions specified therein.
No provision of the Credit Agreement or this Note or any other document
delivered in connection with either thereof and no transaction contemplated
hereby or thereby shall be construed or shall operate so as to require the
Company or the Guarantor to pay interest hereunder in an amount or at a rate
greater than the maximum allowed from time to time by applicable law. Should
any interest or other charges paid by the Company or the Guarantor hereunder
result in a computation or earning of interest in excess of the maximum rate of
interest permitted under applicable law in effect while such interest is being
earned, then such excess shall be waived by the Bank and all such excess shall
be automatically credited against and in reduction of the principal balance of
such amounts payable hereunder and any portion of such excess received by the
Bank shall be paid over by the Bank to the Company or the Guarantor, as the
case may be, it being the intent of the Company and the Guarantor and the other
parties to the Credit Agreement that under no circumstances shall the Company
or the Guarantor or any other Person be required to pay interest in excess of
the maximum rate allowed by such applicable law.
The Company hereby waives diligence, presentment, protest, notice of
default, dishonor or nonpayment and any other notice and all demands
whatsoever. The Company hereby further waives all setoffs and counterclaims
against the Company, the Administrative Agent, the Agent, each of the Co-Agents
each of the Banks.
THIS NOTE HAS BEEN EXECUTED AND DELIVERED IN, AND SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF, THE STATE OF NEW YORK.
HOME SHOPPING NETWORK, INC.
By____________________________
Title:
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GUARANTEE
The undersigned HOME SHOPPING CLUB, INC., a Delaware corporation (the
"Guarantor"), hereby unconditionally and irrevocably guarantees the payment in
full when due (whether at stated maturity, by acceleration or otherwise) of the
principal of and interest on this Note and all other amounts payable hereunder,
in accordance with the terms hereof and of Section 6 of the Credit Agreement,
and, in the case of any extension of time of payment, in whole or in part, that
all such amounts shall be paid in full when due (whether at stated maturity, by
acceleration or otherwise) in accordance with the terms of such extension. In
addition, the Guarantor hereby unconditionally agrees that upon default in the
payment when due (whether at stated maturity, by acceleration or otherwise) of
any of such principal, interest or other amounts, the Guarantor shall forthwith
pay and perform the same in the money and funds, at the time, in the place and
in the manner provided for such payment in the Credit Agreement. This
guarantee is a continuing guarantee of payment and not merely of collection; it
is a primary, independent obligation of the Guarantor; and the Guarantor's
obligations hereunder shall be absolute, unconditional and irrevocable,
irrespective of any and all circumstances whatsoever. The Guarantor hereby
waives diligence, presentment, protest, notice of default, dishonor or
nonpayment and any other notice and all demands whatsoever. The Guarantor
hereby further waives all setoffs and counterclaims against the Company, the
Administrative Agent, the Agent, each of the Co-Agents and each of the Banks.
HOME SHOPPING CLUB, INC.
By_____________________________
Title:
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LOANS
Date
Loan Principal Type Amount Unpaid
Made or Amount of Interest Paid or Principal Notation
Converted of Loan Loan Period Prepaid Amount Made By
--------- ------- ---- -------- ------- --------- ---------
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EXHIBIT B
[Form of Opinion of Counsel to the Company and Guarantor]
_______, 1994
To the Banks party to the Credit
Agreement referred to below and
LTCB Trust Company, as Administrative
Agent
Gentlemen:
I have acted as counsel to Home Shopping Network, Inc., a Delaware
corporation (the "Company"), and Home Shopping Club, Inc., a Delaware
corporation (the "Guarantor"), in connection with the Second Amended and
Restated Credit Agreement dated as of August 30, 1994 (the "Credit Agreement")
among the Company, the Guarantor, the Banks named therein, LTCB Trust Company,
as Agent, Bank of Montreal and The Bank of New York Company, Inc., as Co-Agents,
and LTCB Trust Company, as Administrative Agent, providing for loans to be made
to the Company in the aggregate principal amount of $100,000,000 under the
guarantee of the Guarantor. Terms defined in the Credit Agreement are used
herein as defined therein.
In rendering the opinion expressed below, I have examined the originals
or conformed copies of such corporate records, agreements and instruments of the
Company and the Guarantor, certificates of public officials and of officers of
the Company and the Guarantor, and such other documents and records, and such
matters of law, as I have deemed appropriate as a basis for the opinions
hereinafter expressed.
Based upon the foregoing, I am of the opinion that:
1. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and the
Guarantor is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware; each of them is duly
qualified to transact business in the State of Florida and has the necessary
corporate power to enter into and perform the Credit Agreement and the Notes
and, in the case of the Company, to borrow under the Credit Agreement. The
Guarantor is a Wholly-Owned Subsidiary of the Company.
2. The making and performance by each of the Company and the
Guarantor of the Credit Agreement and the Notes and, in the case of the Company,
the borrowings thereunder
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have been duly authorized by all necessary corporate action, and do not and
will not violate any provision of law, regulation, order, writ, injunction or
decrees of any court or governmental authority or agency or any provision of
the charter or by-laws of the Company or the Guarantor or result in the breach
of, or constitute a default or require any consent under, or result in the
creation of any Lien upon any of its respective properties, revenues or assets
pursuant to, any indenture or other agreement or instrument to which the
Company, the Guarantor or any Subsidiary of either thereof is a party or by
which the Company or the Guarantor or any Subsidiary of either thereof or its
respective properties may be bound.
3. The Credit Agreement and the Notes have been duly executed and
delivered and constitute the legal, valid and binding obligations of the Company
and the Guarantor enforceable in accordance with their respective terms, except
as such enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general applicability
affecting the enforcement of creditors' rights and (b) the application of
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law), and except that no opinion is
expressed as to the fourth sentence of Section 4.7 of the Credit Agreement.
4. To my knowledge after due inquiry, there are no legal or
arbitral proceedings, and no proceedings by or before any governmental or
regulatory authority or agency, pending or threatened against or affecting the
Company or the Guarantor or any of the Subsidiaries of either thereof, or any
properties or rights of the Company or the Guarantor or any of the Subsidiaries
of either thereof, which, if adversely determined, would have a material adverse
effect on the consolidated financial condition or operations, or the business
taken as a whole, of the Company and the Guarantor and the Subsidiaries.
5. No authorizations, consents, approvals, licenses, filings or
registrations with any governmental or regulatory authority or agency are
required in connection with the execution, delivery or performance by the
Company or the Guarantor of the Credit Agreement or the Notes or the borrowings
thereunder.
6. Assuming that the Administrative Agent has its principal office
in the State of New York, the proceeds of the Loans will be disbursed from the
Administrative Agent's office in New York, payments will be made to the
Administrative Agent at its office in New York and the Loans will be
administered
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by the Administrative Agent from said office, the provision of Section 12.11 of
the Credit Agreement regarding the choice of the laws of the State of New York
to govern the Credit Agreement and the Notes is, under the laws of the State of
Florida, a valid choice of law and would be given effect by the courts in
Florida. However, courts in Florida are likely to apply Florida procedural
law.
7. The provisions of the Credit Agreement and the Notes do not
violate any Florida law relating to usury or other limitations on the rate of
interest that a lender may charge, collect or receive.
8. Assuming none of the Administrative Agent, the Agent, the
Co-Agents or any Bank were otherwise doing or transacting business in the State
of Florida, none of the Administrative Agent, the Agent, the Co-Agents or any
Bank shall be deemed to be doing or transacting business, as a bank or
otherwise, in the State of Florida solely by reason of the making and
performance by any party of the Credit Agreement or the Notes or the
consummation of the transactions contemplated thereby. None of the
Administrative Agent, the Agent, the Co-Agents or any Bank will be required, in
order to exercise or enforce its respective rights and remedies under the Credit
Agreement and the Notes in the courts of Florida, to qualify to do or transact
business, as a bank or otherwise, in the State of Florida, except to the extent
they are otherwise doing or transacting business in the State of Florida.
I am admitted to practice law in the State of Florida, and the opinions
expressed herein relate only to the laws of the State of Florida, the General
Corporation Law of the State of Delaware and applicable federal law.
The opinions expressed in this letter are based upon the law in effect
on the date hereof, and I assume no obligation to revise or supplement this
opinion should such law be changed in any respect by legislative action,
judicial decision or otherwise.
This opinion is being furnished to you solely for your benefit and only
with respect to the transaction referred to herein. Accordingly, it may not be
relied upon by any
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other person or entity without, in each instance, my prior written consent.
Very truly yours,
Senior Counsel
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EXHIBIT C
FORM OF COMPLIANCE CERTIFICATE
____________, 199_
To the Banks party to
the Credit Agreement
referred to below and
LTCB Trust Company, as
Administrative Agent
Gentlemen:
I, _________________, Chief Financial Officer of Home Shopping
Network, Inc., a Delaware corporation (the "Company"), and Treasurer of Home
Shopping Club, Inc., a Delaware corporation (the "Guarantor"), do hereby render
this Certificate in these capacities. This Certificate is being delivered in
connection with the Second Amended and Restated Credit Agreement, dated as of
August 30, 1994 (as amended from time to time, the "Credit Agreement"), among
the Company, the Guarantor, the Banks named therein, LTCB Trust Company, as
Agent, and Bank of Montreal and Bank of New York Company, Inc., each as a
Co-Agent, and LTCB Trust Company, as Administrative Agent for such Banks.
Terms defined in the Credit Agreement are used herein as defined therein.
I hereby certify to you, as of this date with respect to both
the Company and the Guarantor, that:
A. to the best of my knowledge, after full inquiry, no
default has occurred or is continuing;
B. the computations attached hereto as Exhibit I set
forth in reasonable detail the computations necessary to determine
whether the Company and the Guarantor are in compliance with Sections
9.11, 9.12 and 9.13 of the Credit Agreement as at the end of the
[Fiscal Quarter] [Fiscal Year] most recently ended as of the date
hereof;
C. the list attached hereto as Exhibit II sets forth
Subsidiaries that are Material Subsidiaries and that were not
contained in the Company's most recently delivered Compliance
Certificate; and
D. [all other Subsidiaries (that have not been certified
to you as Material Subsidiaries in this or previously delivered
Compliance Certificates) combined do not constitute a Material
Subsidiary Group as at the date hereof] [all other Subsidiaries (that
have not been
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certified to you as Material Subsidiaries in this or previously
delivered Compliance Certificates) do constitute a Material Subsidiary
Group as at such date and the list attached hereto as Exhibit III
identifies each such Subsidiary whose aggregate book value of tangible
assets exceeds $10,000,000 as at the date hereof].
-----------------------
[name of officer]
[representative capacity]
Home Shopping Network, Inc.
-----------------------
[name of officer]
[representative capacity]
Home Shopping Network, Inc.
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EXHIBIT E
Form of
Assignment and
Assumption Agreement
ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of _________,
199_, between _________________________________ (the "Assignor") and
__________________________________ (the "Assignee").
R E C I T A L S
A. The Assignor is a party to the Second Amended
and Restated Credit Agreement, dated as of August 30, 1994 (as amended and in
effect from time to time, the "Credit Agreement"), among Home Shopping Network,
Inc., a Delaware corporation (the "Company"), as borrower thereunder, Home
Shopping Club, Inc., a Delaware corporation, as guarantor thereunder, the Banks
named therein (the "Banks"), LTCB Trust Company, as an Agent, Bank of Montreal
and Bank of New York Company, Inc, as Co- Agents, and LTCB Trust Company, as
Administrative Agent for such Banks (in such capacity, the "Administrative
Agent") (terms used but not otherwise defined herein to have the meanings
specified in the Credit Agreement).
B. Pursuant to the Credit Agreement, the Assignor is
committed to make Loans to the Company in an aggregate principal amount at any
one time outstanding not to exceed $_______ (its "Pre-Assignment Commitment")
and the aggregate principal balance of all such Loans outstanding on the date
hereof is $ ________.
C. The Assignor proposes to assign without recourse or
warranty except as expressly stated in Section 6 hereof to the Assignee all of
its rights and obligations under the Credit Agreement in respect of a portion
of (i) its Pre-Assignment Commitment equal to $________ (the "Assigned
Commitment Amount") and (ii) certain of its Loans outstanding on the date
hereof listed on Schedule 2 hereto (the "Assigned Loans"), on the terms and
conditions set forth herein, and the Assignee proposes to accept the assignment
to it by the Assignor of such rights and obligations, and such Loans, on such
terms and conditions.
WHEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto hereby agree as follows:
Section 1. Assignment and Acceptance. As of the Assignment
Effective Date (defined below), the Assignor hereby sells and assigns to the
Assignee and the Assignee hereby purchases and assumes from the Assignor (the
"Assignment") all of the Assignor's rights and obligations under the Credit
Agreement,
93
the Notes held by the Assignor and any documents relating thereto
(collectively, the "Documents") relating to the Assigned Commitment Amount and
the Assigned Loans and arising after the Assignment Effective Date. THE
ASSIGNMENT SHALL BE WITHOUT RECOURSE TO THE ASSIGNOR AND, EXCEPT AS EXPRESSLY
SET FORTH IN SECTION 6 HEREOF, WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND.
Section 2. Release. As of the Assignment Effective Date, the
Assignor shall be released from all obligations relating to the Assigned
Commitment Amount and the Assigned Loans, to the extent such obligations have
been assumed by the Assignee, and the Assignor's Pre-Assignment Commitment
shall be reduced by the Assigned Commitment Amount as of such date.
Section 3. Payments. As consideration for the Assignment the
Assignee shall pay to the Assignor $_________ in immediately available funds.
The Assignor and the Assignee shall make appropriate arrangements between
themselves, and/or adjustments to such payment amount, to reflect liabilities
and amounts receivable, as the case may be with respect to the Assigned
Commitment Amount and the Assigned Loans corresponding to the time preceding
the Assignment Effective Date. The Assignor and the Assignee agree that if
either shall receive or pay any amount under the Credit Agreement, the Notes or
any other Document that is for the account of the other, it shall have received
such amount for and shall promptly pay such amount over to the other, or it
shall have paid such amount on behalf of and shall promptly be paid such amount
by the other, as the case may be.
Section 4. Assignment Effective Date. The date on which the
Assignment shall be effective (the "Assignment Effective Date") shall be the
later of (i) _________ __, 19__ or (ii) the date on which the conditions to the
Assignment set forth in Section 5 hereof shall be satisfied. On and as of the
Assignment Effective Date, the Assignee shall be deemed a Bank party to the
Credit Agreement, as provided in Section 12.6 thereof (or any successor section
thereto), with all the obligations, rights and benefits of a Bank thereunder
and having the Commitment set forth opposite its name on Schedule I hereto. On
and as of the Assignment Effective Date, the Commitment of the Assignor shall
be as set forth opposite its name on Schedule I hereto.
Section 5. Conditions. The effectiveness of the Assignment
shall be subject to the satisfaction of the following conditions: (a) the
receipt by the Assignor of the payment provided for in the first sentence of
Section 3 hereof and (b) the receipt by the Administrative Agent of a copy
hereof executed by the parties hereto.
Section 6. Representations and Warranties of the Assignor.
The Assignor (a) represents and warrants that it has
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full power and authority, and has taken all action necessary, to execute and
deliver this Agreement and any other documents contemplated hereby, to fulfill
its obligations hereunder and to fully consummate the transactions contemplated
hereby, and that no governmental or other consents are necessary in connection
with the foregoing, (b) represents and warrants that this Agreement constitutes
its legal, valid and binding obligation enforceable against it in accordance
with its terms and that it is not in breach of any of its obligations under the
Credit Agreement or any other Documents, (c) represents and warrants that it
owns, and is assigning, the Assigned Commitment Amount and the Assigned Loans
free and clear of all adverse claims, (d) MAKES NO REPRESENTATION OR WARRANTY
WITH RESPECT TO ANY STATEMENTS, WARRANTIES OR REPRESENTATIONS MADE IN OR IN
CONNECTION WITH THE CREDIT AGREEMENT, THE NOTES OR ANY OTHER DOCUMENT OR THE
DUE EXECUTION, LEGALITY, VALIDITY, ENFORCEABILITY, GENUINENESS, SUFFICIENCY OR
VALUE OF ANY THEREOF AND (E) MAKES NO REPRESENTATION OR WARRANTY AS TO THE
FINANCIAL CONDITION OF THE COMPANY OR THE GUARANTOR OR THE PERFORMANCE OR
OBSERVANCE BY THE COMPANY OR THE GUARANTOR OF ANY OF THEIR RESPECTIVE
OBLIGATIONS UNDER THE CREDIT AGREEMENT, THE NOTES OR ANY OTHER DOCUMENT.
Section 7. Representations, Warranties, etc., of the
Assignee. The Assignee (a) represents and warrants that it has full power and
authority, and has taken all action necessary, to execute and deliver this
Agreement and any other documents contemplated hereby, to fulfill its
obligations hereunder and to consummate the transactions contemplated hereby,
and that no governmental or other consents are necessary in connection with the
foregoing, (b) represents and warrants that this Agreement constitutes its
legal, valid and binding obligation enforceable against it in accordance with
its terms, (c) confirms that it has received copies of the Credit Agreement,
the financial statements most recently delivered by the Company pursuant to the
Credit Agreement and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision with respect to its
participation in the transactions contemplated hereby, (d) affirms that it will
continue to make its own credit and other decisions with respect to taking or
not taking any action under the Credit Agreement independent of and without
reliance upon the Administrative Agent, the Agent, the Co-Agents, the Assignor
or any other Bank and based on such documents and information as it shall deem
appropriate at the time, (e) pursuant to Section 11.1 of the Credit Agreement
(or any successor section thereto) hereby appoints and authorizes the
Administrative Agent its agent to take such action on its behalf and to
exercise such powers under the Credit Agreement as are granted to the
Administrative Agent by the terms thereof, together with such powers as are
incidental thereto, (f) specifies as its Applicable Lending Office the office
set forth opposite its name on Schedule I hereto and (g) specifies as its
address for notices pursuant to the Credit Agreement, the
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Notes and the other Documents the office set forth beneath its name on the
signature pages hereof.
Section 8. Further Assurances. The Assignor and the Assignee
hereby agree to execute and deliver such other instruments, and to take such
other action, as either party may reasonably request in connection with fully
effecting the intent and purposes hereof and the transactions contemplated
hereby.
Section 9. Confidentiality. The Assignee expressly agrees
that shall keep confidential all information with respect to the Company that
was or will be furnished to it by the Company, the Assignor, the Agent, the
Co-Agents or the Administrative Agent in accordance with Section 12.7 of the
Credit Agreement.
Section 10. Notices. All communications between the parties
hereto or notices in connection herewith shall be in writing, hand-delivered or
sent by registered or certified mail, telex or facsimile with confirmation of
transmission and addressed as follows: (a) if to the Assignee, as set forth
beneath its name on the signature pages hereof and (b) if to the Assignor, as
set forth in Section 12.2 of the Credit Agreement. All such communications and
notices shall be effective upon receipt.
Section 11. Binding Effect. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns, provided, however, that neither such party shall assign
its rights hereunder without the prior written consent of the other such party
and any purported assignment, absent such consent, shall be void.
Section 12. Termination. In the event that the Assignment
Effective Date shall not have occurred by the date ____ days from the date
hereof, this Agreement shall terminate and shall be of no further force or
effect.
Section 13. Interpretations. The headings of the sections
hereof are for convenience of reference only and shall not affect the meaning
or construction of any provision hereof.
SECTION 14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
Section 15. Counterparts. This Agreement may be executed in
any number of counterparts, each of which when so executed shall be deemed an
original and all of which taken together shall constitute one and the same
document.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered by their respective duly authorized
representatives as of the date first above written.
[ASSIGNOR]
By:
--------------------------
Name:
Title:
[ASSIGNEE]
By:
--------------------------
Name:
Title:
Address for Notices:
--------------------
--------------------
--------------------
Telephone no.:
Facsimile:
Telex no.:
Receipt acknowledged as of
19
------------------, ---.
LTCB TRUST COMPANY,
as Administrative Agent
By:
-----------------------
Name:
Title:
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SCHEDULE I
[Name of Assignee] [Applicable Lending [Commitment]
Office]
[Name of Assignor] [Commitment]
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SCHEDULE II
Type of Interest Interest Date Made or Original Amount Amount
Loan Period Date Converted Principal Amount Prepaid Outstanding
------- -------- -------- ------------ ---------------- ------- -----------
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SCHEDULE 3
DESCRIPTION OF CREDIT CARD PROGRAM
The Company has established a credit card program (the "Program") with
General Electric Capital Corporation ("GE Capital"). This Program, which is
now fully operative, provides the Company's customers with a convenient way to
make purchases through the Home Shopping system and thus, expands the Company's
market. The Company is enthusiastic about the Program, too, because it permits
the Company to receive, on the day after each purchase through the Program,
99%(1) of the cash amount of that purchase. The Program should reduce the
credit card fees that the Company and its Subsidiaries currently pay if
purchasers switch from traditional credit cards to the Home Shopping credit
card, and the Company also hopes to reduce the number of purchases which are
made by personal check. Personal checks not only delay payment to the Company
but also have a fifty percent (50%) fall out rate.
The Program is created under a Credit Card Program Agreement, dated as
of February 16, 1994 (the "Program Agreement"), among the Company, GE Capital,
the Guarantor and certain other subsidiaries(2) of the Company that sell
merchandise to retail customers (the "Participating Subsidiaries"). That
Agreement was structured with due regard to the terms of the 1992 Revolving
Credit Agreement, most of which are now incorporated into the Second Amended
and Restated Credit Agreement (the "Credit Agreement").
The Program contemplates that the Company may issue credit cards
bearing its name to its customers ("Account Debtors") who satisfy GE Capital's
credit standards. GE Capital finances the charges on the credit cards subject
to the terms and conditions of the Program Agreement. Those principal terms
and conditions may be summarized as follows:
--------------------
(1) The discount rate is fixed for the first year but thereafter is tied to
interest rates and outstanding balances under the Program.
(2) The subsidiaries subject to the Program Agreement, in addition to the
Company and the Guarantor, are HSN Tours, Inc., HSN Mail Order, Inc., World
Rez, Inc., Home Shopping Club Outlet of Clearwater, Inc., Home Shopping Club
Outlet of Tampa, Inc., Home Shopping Club Outlet of Orlando, Inc., Home
Shopping Club Outlet of South Orlando, Inc., Home Shopping Club Outlet of St.
Petersburg, Inc., Home Shopping Club Outlet of West Tampa, Inc. and Home
Shopping Club Outlet of Brandon, Inc. The Company expects that the Guarantor
will comprise 98% of the sales.
100
1. GE Capital will purchase from the Company and the Participating
Subsidiaries certain accounts and Indebtedness (as defined below, and related
rights, in each case up to an aggregate amount not exceeding $150,000,000 (or
such other amount to which GE Capital and the Company may from time to time
agree) at any one time. The term "Indebtedness" as used in the Program
Agreement means all obligations incurred by an Account Debtor with respect to
an account, whether or not billed, including, without limitation, charges for
merchandise purchased, finance charges, charges relating to credit insurance
and any other charges with respect to an account as such charges are accrued
pursuant to GE Capital's accounting practices.
GE Capital authorizes each credit transaction at the time of purchase,
and its obligation to purchase the relevant account and Indebtedness from the
Participating Subsidiary arises upon giving that authorization. As is typical
in credit card purchases, the Company, the Guarantor or any other Participating
Subsidiary, as the case may be, will not consummate a credit card sale of
merchandise without first obtaining GE Capital's authorization. The Company
transmits sale and credit information from the Company, the Guarantor and all
Participating Subsidiaries to GE Capital on a daily basis for the preceding
day's sales and credits. GE Capital forwards to the Company, on behalf of the
Company, the Guarantor and all Participating Subsidiaries, the purchase price
for the accounts and Indebtedness purchased, net of GE Capital's fees and
adjustments for merchandise return or credits. This is done by initiating a
wire transfer for the net purchase price, which normally will occur by 3:00
p.m. on the same business day after receipt by GE Capital of the transmission
from the Company.
The purchases by GE Capital of the accounts and Indebtedness are
non-recourse; none of the Company, the Guarantor or any Participating
Subsidiary will have liability whatsoever, contingent or otherwise, with
respect to such non-recourse sales. The only exceptions are for customary
credit card chargebacks(3)
--------------------
(3) The following excerpt from the Program Agreement describes the chargeback
provisions: 'Indebtedness incurred pursuant to an Account (a) as to which the
Account Debtor has, in apparent good faith, made a claim of (i) a breach of a
representation or warranty (either express or implied) by the Company or any
Participating Subsidiary, (ii) a violation of a local, state, or federal law or
regulation by the Company or any Participating Subsidiary or (iii) failure by
the Company or any Participating Subsidiary to provide the Account Debtor with
the agreed-upon goods or services, (b) as to which the Company or any
Participating Subsidiary has accepted a return of Merchandise from an Account
Debtor or has granted a partial credit with respect to Merchandise purchased
pursuant thereto other than in the ordinary course of business, (c) with
respect to which the
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which are not cured by the Company and for special programs described in
paragraph 2 below.
2. The Program contemplates that certain accounts may be approved by
GE Capital at the special request of the Company, but only in an aggregate
amount not to exceed $150,000 at any one time. The Company, the Guarantor and
the other Participating Subsidiaries must unconditionally guarantee all amounts
due under those accounts, and accordingly, this part of the Program is known as
the "Guaranteed Program".
In addition, the Program contemplates that certain accounts that
otherwise would fail to meet GE Capital's credit standards may nonetheless be
approved by GE Capital upon the Company's election, pursuant to special credit
standards to be implemented specifically for the Company. This is known as the
"Special Program", and it is limited in amount. GE Capital is not required to
purchase accounts or Indebtedness relating to the Special Program to the extent
that any such purchase would result in the aggregate Indebtedness owed to GE
Capital, by the charge-card holders, with respect to the Special Program
exceeding the greater of (i) the lesser of (A) $10,000,000 and (B) fifty
percent (50%) of the aggregate Indebtedness owned by GE Capital with respect to
the whole Program as of the date of such purchase and (ii) twenty percent (20%)
of such aggregate Indebtedness as of the date of such purchase. Special Program
accounts are sold with 95% recourse; as a result, the Company, the Guarantor
and the other Participating Subsidiaries bear the risk for losses in excess of
5% of Special Program Indebtedness.
The Program Agreement provides that a reserve account (the "Reserve
Account") will be established to secure all amounts owed to GE Capital by the
Company or any of the Participating Subsidiaries with respect to accounts which
are part of the
________________________
Account Documentation has not been forwarded to GE Capital in accordance with
Section 2.05 hereof, (d) as to which there is a breach of any representation,
warranty or covenant of the Company or any Participating Subsidiary hereunder
relating to an Account, or there would be such a breach if such representation
or warranty did not contain a requirement of materiality, (e) where an Account
Debtor has asserted that the Indebtedness was fraudulently incurred and the
claim of fraud is not frivolous, provided that such fraudulent incurrence does
not arise in connection with a fraudulent Credit Application (f) as to which
any charges have been made which have not been authorized by GE Capital
pursuant to Section 3.01(b) hereof. With respect to subsection (c) above, such
event shall not be considered RPR Indebtedness if cured or resolved by the
Company within two (2) Business Days after receiving notice from GE Capital
thereof." The Company has 25 days to cure the chargebacks with exception of
subsection (c) above.
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102
Special Program and part of the Guaranteed Program. The aggregate amount of
funds required to be set aside in the Reserve Account is determined in
accordance with a formula which is based on the aggregate amount of maximum
Indebtedness that could arise under the accounts in the Special Program and the
Guaranteed Program end a targeted loss rate. GE Capital will have the right to
withdraw amounts from the Reserve Account to the extent payments secured by the
Reserve Account are not otherwise paid in a timely manner to GE Capital.
3. GE Capital will service the Program and receive fees for its
services.
4. Each of the Company, the Guarantor and each of the other
Participating Subsidiaries will be jointly and severally liable for one
another's obligations pursuant to the Program Agreement, and will jointly and
severally guarantee one another's obligations to GE Capital. Since the sale of
accounts and Indebtedness under the Program is non-recourse (except as noted in
paragraphs 1 and 2 above), such joint and several liability could arise only in
the context of (i) obligations of the Company, the Guarantor or the
Participating Subsidiaries under the Special Program or the Guaranteed Program,
(ii) customary credit card chargebacks, which are routine and in the ordinary
course of business or, (iii) the Company's failure to pay fees due under the
Program Agreement, a highly unlikely scenario as GE Capital has the right to
offset such amount against the purchase price.
5. GE Capital and the Company may from time to time mutually agree to
include other Subsidiaries of the Company as parties to the Program Agreement.
6. GE Capital has been granted a security interest in the following
assets of the Company and the Participating Subsidiaries (whether now owned or
hereafter acquired):
(i) all accounts and Indebtedness which are purchased by GE Capital;
(ii) all documentation relating to the accounts and Indebtedness
purchased by GE Capital;
(iii) all general intangibles but only to the extent of guarantees,
claims, security interests or other security now held by or hereafter
granted to the Company or any Participating Subsidiary to secure payment
by any Participating Subsidiary with respect to or on account of any of
the items listed in (i) above, and all proceeds thereof;
(iv) all general intangibles consisting of credit balances and
reserves of whatever type or description created or established by GE
Capital in favor of or with respect to
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103
the Company or any Participating Subsidiary including, without limitation,
the Reserve Account and the balance in the Reserve Account;
(v) all accounts, accounts receivable, other receivables, all
contract rights, commercial paper, choses in action, instruments,
documents, chattel paper, general intangibles (as each of those terms
which is defined in the applicable UCC is so defined) and writings or
property, relating to accounts and Indebtedness purchased by GE Capital
pursuant to the Program Agreement;
(vi) all merchandise purchased by Account Debtors pursuant to
accounts in which GE Capital has an interest pursuant to the Program
Agreement, to the extent of the lien, if any, of the Company or any
Participating Subsidiary thereon; and
(vii) all proceeds of any of the foregoing in any form whatsoever.
The foregoing security interest is intended to secure the obligations
of the Company and the Participating Subsidiaries (present and future) to GE
Capital pursuant to the Program Agreement.
7. The Special Program and the Guaranteed Program unquestionably would
create "Indebtedness" (as defined in the Credit Agreement) in favor of GE
Capital and a Lien on the accounts sold and on the Reserve Account. The
Company can and will manage the programs in such a way that those Liens will at
all times comply with the $15,000,000 "basket" of permitted Liens and the 150%
test that are provided for in Section 9.5(i).
-5-
EX-10.29
4
AMENDMENT/RESTATED RETIREMENT SAVINGS PLAN
1
EXHIBIT 10.29
HOME SHOPPING NETWORK, INC.
RETIREMENT SAVINGS PLAN
AMENDED AND RESTATED
AS OF
JANUARY 1, 1994
KALISH & WARD
TAMPA, FL
2
HOME SHOPPING NETWORK, INC.
RETIREMENT SAVINGS PLAN
TABLE OF CONTENTS
ARTICLE TITLE PAGE
------- ----- ----
I DEFINITIONS . . . . . . . . . . . . . . . . . . . I - 1
II NAME AND PURPOSE OF THE PLAN AND THE TRUST . . . II - 1
III PLAN ADMINISTRATOR . . . . . . . . . . . . . . . III - 1
IV ELIGIBILITY AND PARTICIPATION . . . . . . . . . . IV - 1
V CONTRIBUTIONS TO THE TRUST . . . . . . . . . . . V - 1
VI PARTICIPANTS' ACCOUNTS AND ALLOCATION
OF CONTRIBUTIONS . . . . . . . . . . . . . . . VI - 1
VII BENEFITS UNDER THE PLAN . . . . . . . . . . . . . VII - 1
VIII PAYMENT OF BENEFITS . . . . . . . . . . . . . . . VIII - 1
IX HARDSHIP AND OTHER DISTRIBUTIONS . . . . . . . . IX - 1
X INVESTMENT FUNDS . . . . . . . . . . . . . . . . X - 1
XI TRUST FUND AND EXPENSES OF ADMINISTRATION . . . . XI - 1
XII AMENDMENT AND TERMINATION . . . . . . . . . . . . XII - 1
XIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . XIII - 1
3
HOME SHOPPING NETWORK, INC.
RETIREMENT SAVINGS PLAN
This amendment and restatement of the Home Shopping Network, Inc.
Retirement Savings Plan is made and entered into this _______ day of
___________ 1994, but is effective as of January 1, 1994, except as may
otherwise be noted herein, by Home Shopping Network, Inc. (the "Company").
W I T N E S S E T H:
WHEREAS, the Company has previously adopted the Home Shopping Network,
Inc. Retirement Savings Plan; and
WHEREAS, the Company is authorized and empowered to amend the Home
Shopping Network, Inc. Retirement Savings Plan; and
WHEREAS, the Company deems it advisable and in the best interest of
the Participants to amend the Home Shopping Network, Inc. Retirement Savings
Plan to comply with current law and make other desired changes; and
WHEREAS, the Company desires to amend, restate and implement the
provisions of the Home Shopping Network, Inc. Retirement Savings Plan relating
to Section 401(k) of the Code and Section 401(m) of the Code and incorporate by
reference the employee stock ownership provisions of said plan as in effect
prior to the adoption of this amendment and restatement.
NOW, THEREFORE, the plan provisions of the Home Shopping Network, Inc.
Retirement Savings Plan relating to Section 401(k) of the Code and Section
401(m) of the Code are hereby amended and restated to read as follows:
ARTICLE I
DEFINITIONS
(a) "ACCOUNT" or "ACCOUNTS" shall mean a Participant's Employer
Contribution Account, Elective Contribution Account, Matching Contribution
Account, Qualified Non-Elective Contribution Account, Rollover Contribution
Account and/or such other accounts as may be established by the Plan
Administrator.
I - 1.
4
(b) "ACTUAL CONTRIBUTION PERCENTAGE" shall mean, with respect to a
group of Participants for the Plan Year, the average of the Actual Contribution
Ratios (calculated separately for each member of the group) of each Participant
who is a member of such group (other than certain Family Members as described
in the definition of "Highly Compensated Employees").
(c) "ACTUAL CONTRIBUTION RATIO" shall mean the ratio of the amount
of matching contributions (including elective and qualified non-elective
contributions, if any, treated as matching contributions) made on behalf of a
Participant for a Plan Year to the amount of the Participant's special
compensation for the Plan Year taken into account for nondiscrimination testing
purposes under Section 401(m) of the Code; provided, however, that qualified
non-elective contributions, if any, may be treated as matching contributions
for this purpose only if such contributions are nonforfeitable when made,
subject to the same distribution restrictions that apply to the Participant's
elective contributions and satisfy the requirements of Section 1.401(m)-1(b)(5)
of the Treasury Regulations; provided, further, that the special compensation
taken into account for purposes of this paragraph must satisfy Section 414 of
the Code and one of the definitions described in Sections 1.414(s)-1(c)(2) and
1.414(s)-1(c)(3) of the Treasury Regulations; provided, further, that an
Employer may limit the period for which compensation is taken into account to
that portion of the Plan Year in which the Employee was an eligible Employee so
long as this limit is applied uniformly to all eligible Employees under the
Plan for the Plan Year. If no matching contributions, qualified non-elective
contributions or elective contributions are taken into account with respect to
an eligible Employee, the Actual Contribution Ratio of the Employee is zero.
For this purpose, an "eligible Employee" is any Employee who is directly or
indirectly eligible to receive an allocation of matching contributions
(including matching contributions derived from forfeitures) under the Plan for
a Plan Year as described in Section 1.401(m)-1(f)(4) of the Treasury
Regulations.
(d) "ACTUAL DEFERRAL PERCENTAGE" shall mean, with respect to a
group of Participants for the Plan Year, the average of the Actual Deferral
Ratios (calculated separately for each member of the group) of each Participant
who is a member of such group (other than certain Family Members as described
in the definition of "Highly Compensated Employees").
(e) "ACTUAL DEFERRAL RATIO" shall mean the ratio of the amount of
elective contributions (including qualified non-elective contributions, if any,
treated as elective contributions) made on behalf of a Participant for a Plan
Year to the amount of the Participant's special compensation for the Plan Year
taken into account for nondiscrimination testing purposes under Section 401(k)
of the Code; provided, however that the qualified non-elective contributions,
if any, may be treated as elective contributions for this purpose only if such
contributions are nonforfeitable when made, subject to the same distribution
restrictions that apply to a Participant's elective contributions and satisfy
the requirements of Section 1.401(k)-1(b)(5) of the Treasury Regulations;
provided, further, that the special compensation taken into account for
purposes of this paragraph must satisfy Section 414(s) of the Code and one of
the definitions described in Sections 1.414(s)-1(c)(2) and 1.414(s)-1(c)(3) of
the Treasury Regulations; provided, further, that an Employer may limit the
period for which compensation
I - 2.
5
is taken into account to that portion of the Plan Year in which the Employee
was an eligible Employee so long as this limit is applied uniformly to all
eligible Employees under the Plan for the Plan Year. If an eligible Employee
makes no elective contributions, and no qualified non-elective contributions
are treated as elective contributions, the Actual Deferral Ratio of the
Employee is zero. For this purpose, an "eligible Employee" is any Employee who
is directly or indirectly eligible to make a cash or deferred election into the
Plan for all or a portion of the Plan Year as described in Section
1.401(k)-1(g)(4) of the Treasury Regulations.
(f) "ADMINISTRATOR" shall mean the Plan Administrator.
(g) "AFFILIATE" shall mean, with respect to an Employer, any
corporation other than such Employer that is a member of a controlled group of
corporations, within the meaning of Section 414(b) of the Code, of which such
Employer is a member; all other trades or businesses (whether or not
incorporated) under common control, within the meaning of Section 414(c) of the
Code, with such Employer; any service organization other than such Employer
that is a member of an affiliated service group, within the meaning of Section
414(m) of the Code, of which such Employer is a member; and any other
organization that is required to be aggregated with such Employer under Section
414(o) of the Code. For purposes of determining the limitations on Annual
Additions, the special rules of Section 415(h) of the Code shall apply.
(h) "ANNUAL ADDITIONS" shall mean, with respect to a Limitation
Year, the sum of:
(1) the amount of Employer contributions (including
elective contributions) allocated to the Participant under any defined
contribution plan maintained by an Employer or an Affiliate;
(2) the amount of the Employee's contributions (other
than rollover contributions, if any) to any contributory defined
contribution plan maintained by an Employer or an Affiliate;
(3) any forfeitures allocated to the Participant under
any defined contribution plan maintained by an Employer or an
Affiliate; and
(4) amounts allocated to an individual medical account,
as defined in Section 415(l)(2) of the Code that is part of a pension
or annuity plan maintained by an Employer or an Affiliate, and amounts
derived from contributions that are attributable to post-retirement
medical benefits allocated to the separate account of a key employee
(as defined in Section 419A(d)(3) of the Code) under a welfare benefit
plan (as defined in Section 419(e) of the Code) maintained by an
Employer or an Affiliate; provided, however, the percentage limitation
set forth in paragraph (e)(1) of Article VI shall not apply to: (A)
any contribution for medical benefits (within the meaning of Section
419A(f)(2) of the Code) after separation from service which is
otherwise treated as an "Annual Addition," or (B) any amount otherwise
treated as an "Annual Addition" under Section 415(l)(1) of the Code.
I - 3.
6
(i) "BOARD OF DIRECTORS" and "BOARD" shall mean the board of
directors of the Company or, when required by the context, the board of
directors of an Employer other than the Company.
(j) "BREAK IN SERVICE" means a Period of Severance of twelve (12)
consecutive months. A Break in Service shall be deemed to commence on the
first day of the Period of Severance and shall be deemed to end on the day in
which the Employee again performs an Hour of Service for an Employer or an
Affiliate.
(1) Solely for purposes of determining whether a Break in
Service has occurred, in the case of an Employee who is absent from
work beyond the first anniversary of the beginning of a Period of
Severance and the absence is for maternity or paternity leave reasons,
the date the Employee incurs a Break in Service shall be the second
anniversary of the beginning of the Employee's Period of Severance.
The period between the first and second anniversary of the beginning
of the Period of Severance shall not constitute a Period of Service.
(2) For purposes of subparagraph (1), an absence from
work for maternity or paternity leave reasons means an absence by
reason of the pregnancy of the Employee, by reason of the birth of a
child of the Employee, by reason of the placement of a child with the
Employee in connection with the adoption of such child by such
Employee, or for purposes of caring for such child for a reasonable
period beginning immediately following such birth or placement.
(k) "CODE" shall mean the Internal Revenue Code of 1986, as
amended, or any successor statute. Reference to a specific section of the Code
shall include a reference to any successor provision.
(l) "COMPANY" shall mean Home Shopping Network, Inc., and its
successors.
(m) (1) "COMPENSATION" shall mean, for purposes of allocating
employer contributions under paragraph (c) of Article V and qualified
nonelective contributions under paragraph (d) of Article V, the
regular salaries and wages, commissions, bonuses and overtime pay paid
by an Employer and elective contributions made on behalf of a
Participant to this Plan or a plan described in Section 125 of the
Code, but shall not include disability payments, stock options, stock
awards, relocation expense payments, credits or benefits under this
Plan, any amount contributed to any pension, employee welfare, life
insurance or health insurance plan or arrangement, or any other fringe
benefits, deferred compensation or welfare benefits. Notwithstanding
the foregoing, for purposes of determining the limit on a
Participant's elective contributions under paragraph (a)(1)(B) of
Article V, "Compensation" shall not include bonuses.
(2) To the extent required by law, no Compensation in
excess of $200,000 (adjusted under such regulations as may be issued
by the Secretary of the Treasury) shall be taken into account for any
Employee. For Plan Years beginning on or after January 1, 1994,
"$150,000" shall be substituted for "$200,000" in the preceding
I - 4.
7
sentence. For purposes of determining whether Compensation exceeds
$200,000 (or $150,000 for Plan Years beginning on or after January 1,
1994), if any Employee is a Family Member of a Highly Compensated
Employee who is (i) a 5% owner of an Employer, or (ii) one of the ten
Highly Compensated Employees paid the greatest amount of Compensation
during the Plan Year, then such Family Member shall not be considered
as a separate Employee and any Compensation paid to such Family Member
shall be treated as if it were paid to or on behalf of the related
Highly Compensated Employee.
(3) For purposes of making allocations of Employer
contributions pursuant to Article VI with respect to any Plan Year, no
Compensation paid by an Employer with respect to an Employee prior to
the Employee's first day of participation shall be taken into account.
(n) "EFFECTIVE DATE" of this amended and restated Plan shall mean
January 1, 1994, except as may otherwise be noted herein.
(o) "ELECTIVE CONTRIBUTION ACCOUNT" shall mean an account
established pursuant to Article VI(b) with respect to contributions made under
salary reduction arrangements pursuant to Article V.
(p) "ELIGIBILITY DATE" shall mean, effective as of April 1, 1994,
January 1, April 1, July 1 or October 1 of each year.
(q) "EMPLOYEE" shall mean any person employed by an Employer or an
Affiliate other than:
(1) a member of a collective bargaining unit if
retirement benefits were a subject of good faith bargaining between
such unit and an Employer, and
(2) a non-resident alien who does not receive earned
income from sources within the United States.
The term "Employee" shall also include any individual required to be treated as
an Employee by reason of Section 414(n) or Section 414(o) of the Code (but only
for the purposes specified in such Sections).
(r) "EMPLOYER" shall mean the Company and any subsidiary, related
corporation, or other entity that adopts this Plan.
(s) "EMPLOYER CONTRIBUTION ACCOUNT" shall mean an account
established pursuant to Article VI(b) with respect to Employer contributions
made pursuant to Article V.
(t) "FAMILY MEMBER" of a Highly Compensated Employee shall mean
such Employee's spouse, lineal descendant or ascendant, or the spouse of his
lineal descendant or ascendant; provided, however, that for purposes of
determining the limit on a Highly
I - 5.
8
Compensated Employee's Compensation under Section 401(a)(17) of the Code, the
term "Family Member" shall include only the Employee's spouse and his lineal
descendants who have not attained age 19 before the close of the Plan Year.
(u) (1) "HIGHLY COMPENSATED EMPLOYEE" shall mean any Employee
during the Plan Year or the immediately preceding Plan Year (or
calendar year, if elected by the Employer in accordance with Treasury
regulations)
(A) who was a 5% owner of an Employer;
(B) whose Section 415 Compensation was more than
$75,000 (adjusted under such regulations as may be issued by
the Secretary of the Treasury);
(C) whose Section 415 Compensation was more than
$50,000 (adjusted under such regulations as may be issued by
the Secretary of the Treasury), and who was a member of the
"top paid group"; provided, that as used herein, "top paid
group" shall mean all Employees who are in the top 20% of the
Employer's work force on the basis of Section 415 Compensation
paid during the year; provided, further, that for purposes of
determining the number of Employees in the top paid group,
Employees described in Section 414(q)(8) of the Code shall be
excluded; or
(D) who was an officer of an Employer and
received compensation in excess of 50% of the amount in effect
under Section 415(b)(1)(A) of the Code for any such Plan Year.
(i) The number of officers shall be
limited to the lesser of (a) 50 Employees; or (b) the
greater of three Employees or 10% of all Employees.
For purposes of determining the number of officers,
Employees described in Section 414(q)(8) of the Code
shall be excluded, but such Employees shall still be
considered for the purpose of identifying particular
Employees who are officers.
(ii) If an Employer does not have at
least one officer whose Section 415 Compensation is
in excess of 50% of the amount in effect in Section
415(b)(1)(A) of the Code, then the highest paid
officer of the Employer will be treated as a Highly
Compensated Employee.
(2) In determining who is a Highly Compensated Employee,
Employees who are nonresident aliens and who receive no earned income
(within the meaning of Section 911(d)(2) of the Code) from an Employer
constituting United States source income (within the meaning of
Section 861(a)(3) of the Code) shall not be treated as Employees.
I - 6.
9
(3) For purposes of determining who is a Highly
Compensated Employee, an Employer and any Affiliate shall be taken
into account as a single Employer.
(4) For purposes of this paragraph, the determination of
Section 415 Compensation shall be based only on Section 415
Compensation that is actually paid and shall be made by including
elective or salary reduction contributions to a plan described in
Section 125 of the Code, a plan described in Section 401(k) of the
Code, a simplified employee pension described in Section 408(k) of the
Code or a plan described in Section 403(b) of the Code.
(5) The term "Highly Compensated Employee" shall also
mean any former Employee who separated from service (or was deemed to
have separated from service) prior to the Plan Year, performs no
service for an Employer during the Plan Year, and was an actively
employed Highly Compensated Employee in the separation year or any
Plan Year ending on or after the date the Employee attained age 55.
(6) For purposes of determining whether a Participant is
a Highly Compensated Employee, if any Employee is a Family Member of a
Highly Compensated Employee who is (A) a 5% owner of an Employer, or
(B) one of the ten Highly Compensated Employees paid the greatest
amount of Compensation during the Plan Year, then such Family Member
shall not be considered as a separate Employee and any Compensation
paid to such Family Member (and any applicable benefit or contribution
on behalf of such Family Member) shall be treated as if it were paid
to or on behalf of the related Highly Compensated Employee.
(v) "HOUR OF SERVICE" shall mean an hour for which an Employee is
paid, or entitled to payment, for the performance of duties for an Employer or
an Affiliate.
(w) "KEY EMPLOYEE" shall mean any Employee or former Employee who
is at any time during the Plan Year (or was at any time during the four
preceding Plan Years) (1) an officer of an Employer (within the meaning of
Section 416(i)(1) of the Code) having an aggregate annual compensation from the
Employer and its Affiliates in excess of 50% of the amount in effect under
Section 415(b)(1)(A) of the Code for any Plan Year, (2) one of the ten
Employees owning (or considered as owning) the largest interests in an
Employer, owning more than a 1/2% interest in the Employer, and having an
aggregate annual compensation from the Employer and its Affiliates of more than
the limitation in effect under Section 415(c)(1)(A) of the Code for the
calendar year that includes the last day of the Plan Year (if two Employees
have equal interests in an Employer, the Employees having the greater annual
compensation from the Employer shall be deemed to have a larger interest), (3)
a 5% owner of an Employer (within the meaning of Section 416(i)(1)(B) of the
Code) or (4) a 1% owner of an Employer (within the meaning of Section
416(i)(1)(B) of the Code) having an aggregate annual compensation from the
Employer and its Affiliates of more than $150,000. For purposes of this
paragraph the term "compensation" shall mean an Employee's Section 415
Compensation. The determination of Section 415 Compensation shall be based
only on Section 415 Compensation that is actually paid and shall be made by
including elective or
I - 7.
10
salary reduction contributions to a plan described in Section 125 of the Code,
a plan described in Section 401(k) of the Code, a simplified employee pension
described in Section 408(k) of the Code or a plan described in Section 403(b)
of the Code.
(x) "LIMITATION YEAR" shall mean the Plan Year.
(y) "MATCHING CONTRIBUTION ACCOUNT" shall mean an account
established pursuant to Article VI(b) with respect to contributions to this
Plan on behalf of a Participant by an Employer pursuant to paragraph (b) of
Article V.
(z) "NON-KEY EMPLOYEE" shall mean, with respect to any Plan Year,
an Employee or former Employee who is not a Key Employee (including any such
Employee who formerly was a Key Employee).
(aa) "NORMAL RETIREMENT DATE" shall mean the date on which a
Participant attains the age of 65 years.
(bb) "PARTICIPANT" shall mean any eligible Employee of an Employer
who participates in the Plan in accordance with Article IV and shall include
any former employee of an Employer who previously participated in the Plan and
who still has a balance in an Account under the Plan.
(cc) "PERIOD OF SERVICE" shall mean, with respect to an Employee,
the period (expressed in years and fractional years) beginning with the date
the Employee last commenced employment with an Employer or an Affiliate and
ending with the date that a Period of Severance begins; provided, however, that
any Period of Severance of less than twelve (12) consecutive months shall be
disregarded and such time shall be included in the Period of Service.
(1) For purposes of this paragraph,
(A) the date an Employee commenced employment is
the first day an Employee performs an Hour of Service, and
(B) fractional periods of less than a year shall
be expressed in terms of days.
(2) For purposes of determining a Participant's vested
percentage under the Plan:
(A) If an Employee incurs a Break in Service and
is thereafter reemployed by an Employer, his Periods of
Service before such date shall be added to his Periods of
Service after reemployment for purposes of determining his
vested percentage in his Matching Contribution Account and
Employer Contribution Account attributable to contributions
made after his reemployment.
I - 8.
11
(B) Notwithstanding the provisions of
subparagraph (A), Periods of Service shall not include any
Period of Service prior to a Break in Service if the
Participant had no vested interest in the balance of his
Accounts attributable to Employer contributions at the time of
such Break in Service and if the number of consecutive Breaks
in Service equaled or exceeded the greater of five or the
number of Whole Year Periods of Service completed by the
Employee prior thereto (not including any Periods of Service
not required to be taken into consideration under this
subparagraph as a result of any prior Break in Service).
(dd) "PERIOD OF SEVERANCE" shall mean, with respect to an Employee,
the period beginning with the earlier of the date the Employee separates from
the service of an Employer or an Affiliate by reason of quitting, discharge,
death or retirement, or the date twelve (12) months after the date the Employee
separates from the service of the Employer or Affiliate for any reason other
than quitting, retirement, discharge or death (e.g., vacation, holiday,
sickness, disability, leave of absence or day off), and ending with the date
the Employee performs an Hour of Service for such Employer or an Affiliate.
(ee) "PLAN" shall mean the 401(k) retirement savings plan as herein
set forth, as it may be amended from time to time.
(ff) "PLAN ADMINISTRATOR" shall mean the Company.
(gg) "PLAN YEAR" shall mean the 12-month period ending on
December 31.
(hh) "QUALIFIED NON-ELECTIVE CONTRIBUTION ACCOUNT" shall mean an
account established pursuant to Article VI(b) with respect to Employer
qualified non-elective contributions pursuant to Article V.
(ii) "ROLLOVER CONTRIBUTION ACCOUNT" shall mean an account
established pursuant to Article VI(b) with respect to qualified rollover
contributions made pursuant to Article V.
(jj) "SECTION 415 COMPENSATION" shall mean wages, salaries, and
fees for professional services and other amounts received (without regard to
whether or not an amount is paid in cash) for personal services actually
rendered in the course of employment with the Employer to the extent that the
amounts are includable in gross income (including, but not limited to,
commissions paid salesmen, compensation for services on the basis of a
percentage of profits, commissions on insurance premiums, tips, bonuses, fringe
benefits, and reimbursements or other expense allowances under a nonaccountable
plan (as described in Section 1.62-2(c) of the Income Tax Regulations), and
excluding the following:
(1) Employer contributions to a plan of deferred
compensation which are not includable in the Employee's gross income
for the taxable year in which contributed, or Employer contributions
under a simplified employee pension plan to the extent such
contributions are deductible by the Employee, or any distributions
from a plan of deferred compensation;
I - 9.
12
(2) Amounts realized from the exercise of a non-qualified
stock option, or when restricted stock (or property) held by the
Employee either becomes freely transferable or is no longer subject to
a substantial risk of forfeiture;
(3) Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock option; and
(4) Other amounts which received special tax benefits, or
contributions made by the Employer (whether or not under a salary
reduction agreement) towards the purchase of an annuity contract
described in Section 403(b) of the Code (whether or not the
contributions are actually excludable from the gross income of the
Employee).
(kk) "TOP HEAVY PLAN" shall mean this Plan if the aggregate account
balances (not including voluntary rollover contributions made by any
Participant from an unrelated plan) of the Key Employees and their
beneficiaries for such Plan Year exceed 60% of the aggregate account balances
(not including voluntary rollover contributions made by any Participant from an
unrelated plan) for all Participants and their beneficiaries. Such values
shall be determined for any Plan Year as of the last day of the immediately
preceding Plan Year (or, for the first Plan Year, the last day of the first
Plan Year). The account balances on any determination date shall include the
aggregate distributions made with respect to Participants during the five-year
period ending on the determination date. For the purposes of this definition,
the aggregate account balances for any Plan Year shall include the account
balances and accrued benefits of all retirement plans qualified under Section
401(a) of the Code with which this Plan is required to be aggregated to meet
the requirements of Section 401(a)(4) or 410 of the Code (including terminated
plans that would have been required to be aggregated with this Plan) and all
plans of an Employer or an Affiliate in which a Key Employee participates; and
such term may include (at the discretion of the Plan Administrator) any other
retirement plan qualified under Section 401(a) of the Code that is maintained
by an Employer or an Affiliate, provided the resulting aggregation group
satisfies the requirements of Sections 401(a) and 410 of the Code. All
calculations shall be on the basis of actuarial assumptions that are specified
by the Plan Administrator and applied on a uniform basis to all plans in the
applicable aggregation group. The account balance of any Participant shall not
be taken into account if:
(1) he is a Non-Key Employee for any Plan Year, but was a
Key Employee for any prior Plan Year, or
(2) he has not performed any service for an Employer
during the five-year period ending on the determination date.
(ll) "TRUST" shall mean the trust established by the Trust
Agreement.
(mm) "TRUST AGREEMENT" shall mean the agreement providing for the
Trust Fund, as it may be amended from time to time.
I - 10.
13
(nn) "TRUSTEE" shall mean the individual, individuals or
corporation designated as trustee under the Trust Agreement.
(oo) "TRUST FUND" shall mean the trust fund established under the
Trust Agreement from which the amounts of supplementary compensation provided
for by the Plan are to be paid or are to be funded.
(pp) "VALUATION DATE" shall mean the last day of each year and on
each day of the Plan Year on which securities are traded on a national stock
exchange.
(qq) "WHOLE YEAR PERIOD OF SERVICE" shall mean the number of whole
years included in an Employee's Periods of Service determined by aggregating
all his years and days of service and converting days into years based upon the
assumption that a year includes 365 days. Any Period of Service remaining
after the aggregation that totals less than 365 days shall be disregarded in
determining an Employee's number of Whole Year Periods of Service.
I - 11.
14
ARTICLE II
NAME AND PURPOSE OF THE PLAN AND THE TRUST
(a) NAME OF PLAN. A retirement savings plan as described in
Section 401(k) of the Code is hereby amended and restated in accordance with
the terms hereof and shall be known as the "HOME SHOPPING NETWORK, INC.
RETIREMENT SAVINGS PLAN." The employee stock ownership provisions of this Plan
as of in effect prior to the adoption of this amendment and restatement are
hereby incorporated into this Plan by reference and made a part hereof.
(b) EXCLUSIVE BENEFIT. This Plan is created for the sole purpose
of providing benefits to the Participants and enabling them to share in the
growth of their Employer. Except as otherwise permitted by law, in no event
shall any part of the principal or income of the Trust be paid to or reinvested
in any Employer or be used for or diverted to any purpose whatsoever other than
for the exclusive benefit of the Participants and their beneficiaries.
(c) MISTAKE OF FACT. Notwithstanding the foregoing provisions of
paragraph (b), any contribution made by an Employer to this Plan by a mistake
of fact may be returned to the Employer within one year after the payment of
the contribution; and any contribution made by an Employer that is conditioned
upon the deductibility of the contribution under Section 404 of the Code (each
contribution shall be presumed to be so conditioned unless the Employer
specifies otherwise) may be returned to the Employer if the deduction is
disallowed and the contribution is returned (to the extent disallowed) within
one year after the disallowance of the deduction.
(d) PARTICIPANTS' RIGHTS. The establishment of this Plan shall
not be considered as giving any Employee, or any other person, any legal or
equitable right against any Employer, any Affiliate, the Plan Administrator,
the Trustee or the principal or the income of the Trust, except to the extent
otherwise provided by law. The establishment of this Plan shall not be
considered as giving any Employee, or any other person, the right to be
retained in the employ of any Employer or any Affiliate.
(e) QUALIFIED PLAN. This Plan and the Trust are intended to
qualify under the Code as a tax-free employees' plan and trust, and the
provisions of this Plan and the Trust should be interpreted accordingly.
II - 1.
15
ARTICLE III
PLAN ADMINISTRATOR
(a) ADMINISTRATION OF THE PLAN. The Plan Administrator shall
control and manage the operation and administration of the Plan, except with
respect to investments. The Administrator shall have no duty with respect to
the investments to be made of the funds in the Trust except as may be expressly
assigned to it by the terms of the Trust Agreement.
(b) POWERS AND DUTIES. The Administrator shall have complete
control over the administration of the Plan herein embodied, with all powers
necessary to enable it to carry out its duties in that respect. Not in
limitation, but in amplification of the foregoing, the Administrator shall have
the power and discretion to interpret or construe this Plan and to determine
all questions that may arise as to the status and rights of the Participants
and others hereunder.
(c) DIRECTION OF TRUSTEE. It shall be the duty of the
Administrator to direct the Trustee with regard to the allocation and the
distribution of the benefits to the Participants and others hereunder.
(d) SUMMARY PLAN DESCRIPTION. The Administrator shall prepare or
cause to be prepared a summary plan description (if required by law) and such
periodic and annual reports as are required by law.
(e) DISCLOSURE. At least once each year, the Administrator shall
furnish to each Participant a statement containing the value of his interest in
the Trust Fund and such other information as may be required by law.
(f) CONFLICT IN TERMS. The Administrator shall notify each
Employee, in writing, as to the existence of the Plan and Trust and the basic
provisions thereof. In the event of any conflict between the terms of this
Plan and Trust as set forth in this Plan and Trust Agreement and as set forth
in any explanatory booklet or other description, this Plan and Trust Agreement
shall control.
(g) NONDISCRIMINATION. The Administrator shall not take any
action or direct the Trustee to take any action whatsoever that would result in
unfairly benefiting one Participant or group of Participants at the expense of
another or in improperly discriminating between Participants similarly situated
or in the application of different rules to substantially similar sets of
facts.
(h) RECORDS. The Administrator shall keep a complete record of
all its proceedings as such Administrator and all data necessary for the
administration of the Plan. All of the foregoing records and data shall be
located at the principal office of the Administrator.
(i) FINAL AUTHORITY. Except to the extent otherwise required by
law, the decision of the Administrator in matters within its jurisdiction shall
be final, binding and conclusive
III - 1.
16
upon each Employer and each Employee, member and beneficiary and every other
interested or concerned person or party.
(j) CLAIMS.
(1) Claims for benefits under the Plan may be made by a
Participant or a beneficiary of a Participant on forms supplied by the
Plan Administrator. Written notice of the disposition of a claim
shall be furnished to the claimant by the Administrator within ninety
(90) days after the application is filed with the Administrator,
unless special circumstances require an extension of time for
processing, in which event action shall be taken as soon as possible,
but not later than one hundred eighty (180) days after the application
is filed with the Administrator; and, in the event that no action has
been taken within such ninety (90) or one hundred eighty (180) day
period, the claim shall be deemed to be denied for the purposes of
subparagraph (2). In the event that the claim is denied, the denial
shall be written in a manner calculated to be understood by the
claimant and shall include the specific reasons for the denial,
specific references to pertinent Plan provisions on which the denial
is based, a description of the material information, if any, necessary
for the claimant to perfect the claim, an explanation of why such
material information is necessary and an explanation of the claim
review procedure.
(2) If a claim is denied (either in the form of a written
denial or by the failure of the Plan Administrator, within the
required time period, to notify the claimant of the action taken), a
claimant or his duly authorized representative shall have sixty (60)
days after the receipt of such denial to petition the Plan
Administrator in writing for a full and fair review of the denial,
during which time the claimant or his duly authorized representative
shall have the right to review pertinent documents and to submit
issues and comments in writing. The Plan Administrator shall promptly
review the claim and shall make a decision not later than sixty (60)
days after receipt of the request for review, unless special
circumstances require an extension of time for processing, in which
event a decision shall be rendered as soon as possible, but not later
than one hundred twenty (120) days after the receipt of the request
for review. If such an extension is required because of special
circumstances, written notice of the extension shall be furnished to
the claimant prior to the commencement of the extension. The decision
of the review shall be in writing and shall include specific reasons
for the decision, written in a manner calculated to be understood by
the claimant, with specific references to the Plan provisions on which
the decision is based.
(k) APPOINTMENT OF ADVISORS. The Administrator may appoint such
accountants, counsel (who may be counsel for an Employer), specialists and
other persons that it deems necessary and desirable in connection with the
administration of this Plan. The Administrator, by action of its Board of
Directors, may designate one or more of its Employees to perform the duties
required of the Administrator hereunder.
III - 2.
17
ARTICLE IV
ELIGIBILITY AND PARTICIPATION
(a) ELIGIBILITY AND PARTICIPATION. Any Employee of an Employer
shall be eligible to become a Participant in the Plan upon completing one Whole
Year Period of Service and attaining the age of 21. Any such eligible Employee
shall enter the Plan as a Participant, if he is still an Employee of an
Employer, on the first Eligibility Date concurring therewith or occurring
thereafter.
(b) FORMER EMPLOYEES.
(1) An Employee who ceases to be a Participant and who
subsequently reenters the employ of an Employer shall be eligible
again to become a Participant on the date of his reemployment.
(2) An Employee who satisfies the eligibility
requirements set forth above and who terminates employment with the
Employer prior to becoming a Participant will become a Participant on
the later of the Eligibility Date on which he would have entered the
Plan had he not terminated employment or the date of his reemployment.
IV - 1.
18
ARTICLE V
CONTRIBUTIONS TO THE TRUST
(a) PARTICIPANTS' ELECTIVE CONTRIBUTIONS.
(1) The Employer shall contribute to the Trust, on behalf
of each Participant, an elective contribution as specified in a
written salary reduction agreement (if any) between the Participant
and such Employer; provided, however, that such contribution for a
Participant shall not exceed the lesser of
(A) $7,000 or the amount specified in Section
402(g) of the Code (adjusted under such regulations as may be
issued from time to time by the Secretary of the Treasury)
with respect to any calendar year, or
(B) 16% of the Participant's Compensation for
such Plan Year.
(2) The minimum deferral percentage made on behalf of a
Participant electing to make a contribution for any Plan Year shall be
1% of his Compensation.
(3) If a Participant's elective contributions, together
with any elective contributions by the Participant to any other plans
intended to qualify under Sections 401(k), 403(b) or 457 of the Code,
exceed the limitation set forth in paragraph (a)(1) of this Article V,
the Administrator shall refund to such Participant the portion of such
excess that is attributable to elective contributions to the Plan,
plus the earnings thereon. The Plan Administrator may use any
reasonable method for computing the income allocable to such excess,
provided that the method does not violate Section 401(a)(4) of the
Code, is used consistently for all Participants and for all corrective
distributions under the Plan for the Plan Year, and is used by the
Plan for allocating income to Participants' Accounts. Any such refund
shall be made on or before April 15 of the Plan Year following the
Plan Year in which excess elective contribution is made. The amount
of excess elective contributions that may be distributed under this
paragraph (a)(3) with respect to a Participant for any taxable year
shall be reduced by any excess elective contributions previously
distributed pursuant to paragraph (a)(7) with respect to such
Participant for the Plan Year ending with or within such taxable year.
(4) Any salary reduction agreement shall be executed and
in effect prior to the first day of the first pay period to which it
applies. Any such agreement may be revised by the Participant, with
the approval of the Administrator, as of any Eligibility Date for pay
periods ending after the date such revision is executed and made
effective.
(5) A Participant may suspend further elective
contributions to the Plan at any time, provided the request for such
suspension is received by the Plan Admin-
V - 1.
19
istrator prior to the first day of the first pay period to which such
suspension applies. Any Participant who suspends further
contributions relating to periodic pay may reinstate such
contributions by providing written notice to the Plan Administrator
prior to any Eligibility Date thereafter.
(6) (A) The Administrator may establish such other
rules and procedures regarding Participant salary reduction
agreements and elective contributions as it deems necessary,
which rules and procedures shall be applied in a uniform,
nondiscriminatory manner.
(B) The Administrator shall have the right to
require any Participant to reduce his elective contributions
under any such agreement, or to refuse deferral of all or part
of the amount set forth in such agreement, if necessary to
comply with the requirements of this Plan and the Code.
(C) Any Employee who is a director or "officer"
(as defined in Rule 16a-1(f) under the Securities Exchange Act
of 1934) of the Company who receives a distribution from the
Plan or suspends his elective contributions under the Plan
shall not be permitted to make further elective contributions
under the Plan for a period of at least 6 months following the
distribution or the suspension of his elective contributions.
(7) (A) In the event that the elective contributions
of Highly Compensated Employees exceed the limitations set
forth in paragraph (e), such excess (plus the earnings
thereon), determined as set forth below, may be distributed to
the Highly Compensated Employees on or before the 15th day of
the third month after the close of the Plan Year to which the
excess contributions relate. Notwithstanding the preceding
sentence, the Plan Administrator shall in no event delay the
distribution of any excess elective contributions (plus the
earnings thereon) beyond the date that is 12 months after the
close of the Plan Year to which the excess contributions
relate.
(B) (i) The amount of such excess for a Highly
Compensated Employee for the Plan Year shall be
determined by reducing the Actual Deferral Ratio of
the Highly Compensated Employee with the highest
Actual Deferral Ratio to the extent required to
a. enable the arrangement to
satisfy the limitations set forth in
paragraph (e), or
b. cause such Highly Compensated
Employee's Actual Deferral Ratio to equal the
Actual Deferral Ratio of the Highly
Compensated Employee with the next highest
Actual Deferral Ratio.
V - 2.
20
This process shall be repeated until the arrangement
satisfies the limitations set forth in paragraph (e).
(ii) For each Highly Compensated
Employee, the amount of such excess shall be deemed
to equal
a. the total elective
contributions, plus qualified non-elective
contributions, if any, that are treated as
elective contributions, on behalf of the
Participant (determined prior to the
application of this paragraph (a)(7)), minus
b. the amount determined by
multiplying the Participant's Actual Deferral
Ratio (determined after application of this
paragraph (a)(7)) by his Compensation used in
determining such ratio.
(C) The amount of excess elective
contributions that may be distributed under this
paragraph (a)(7) with respect to a Participant for a
Plan Year shall be reduced by any excess elective
contributions previously distributed to such
Participant under paragraph (a)(3) for the
Participant's taxable year ending with or within such
Plan Year.
(D) The Plan Administrator may use any
reasonable method for computing the income allocable
to excess contributions, provided that the method
does not violate Section 401(a)(4) of the Code, is
used consistently for all Participants and for all
corrective distributions under the Plan for the Plan
Year, and is used by the Plan for allocating income
to Participants' Accounts.
(E) In the case of a Highly Compensated
Employee whose Actual Deferral Ratio is determined
under the family aggregation rules set forth in
paragraph (e)(3), the determination of the amount of
excess elective contributions shall be made by
reducing the Actual Deferral Ratio in accordance with
this subparagraph (a)(7) and allocating the excess
among the Family Members in proportion to the
elective contributions of each of the Family Members
that have been combined.
(b) MATCHING CONTRIBUTIONS.
(1) The Company may authorize a matching contribution
equal to 100% of the amount of the elective contribution made to the
Plan by a Participant for the Plan Year and the Employer may
contribute to the Trust on behalf of each Participant for whom an
elective contribution is made during the Plan Year the amount of the
matching contribution authorized by the Company; provided, however,
that no matching contribution will be made with respect to a
Participant's elective contribution
V - 3.
21
that exceeds 6% of his Compensation for the Plan Year; provided,
further, that no matching contribution made on behalf of a Participant
for the Plan Year shall exceed $520, unless otherwise determined by
the Board of Directors of the Company.
(2) No matching contribution shall be required for the
portion of a Participant's elective contribution (A) that is subject
to the refund requirements of paragraphs (a)(3) and (a)(7) or (B) that
exceeds the limitations of paragraph (e) of Article VI.
(3) Any matching contribution made by an Employer on
account of an elective contribution that has been refunded pursuant to
paragraph (a)(3) or paragraph (a)(7), above, or distributed to satisfy
the limitations set forth in paragraph (e) of Article VI shall be
forfeited and used to reduce Employer contributions as of the end of
the Plan Year in which the forfeiture occurs.
(4) In the event that the matching contributions of
Highly Compensated Employees exceed the limitations of paragraph (e):
(A) The nonvested portion of such excess
(including earnings thereon), if any, shall be forfeited and
used to reduce Employer contributions under this Article V.
(B) The vested portion of such excess (including
earnings thereon), if any, shall be distributed to the Highly
Compensated Employees on or before the 15th day of the third
month after the close of the Plan Year to which the matching
contributions relate. Notwithstanding the preceding sentence,
the Plan Administrator shall in no event delay the
distribution of any excess matching contributions (plus the
earnings thereon) beyond the date that is 12 months after the
close of the Plan Year to which the excess contributions
relate.
(C) The amount of such excess for a Highly
Compensated Employee for the Plan Year shall be determined by
the following leveling method, under which the Actual
Contribution Ratio of the Highly Compensated Employee with the
highest Actual Contribution Ratio is reduced to the extent
required to
(i) enable the Plan to satisfy the
limitations set forth in paragraph (e), or
(ii) cause such Highly Compensated
Employee's Actual Contribution Ratio to equal the
Actual Contribution Ratio of the Highly Compensated
Employee with the next highest Actual Contribution
Ratio.
This process shall be repeated until the Plan satisfies the
limitations set forth in paragraph (e). For each Highly
Compensated Employee, the amount of
V - 4.
22
such excess is equal to the total matching contributions, plus
elective contributions, if any, treated as matching
contributions, on behalf of the Employee (determined prior to
the application of this paragraph (b)(4)(C)) minus the amount
determined by multiplying the Employee's Actual Contribution
Ratio (determined after application of this paragraph
(b)(4)(C)) by his Compensation used in determining such ratio.
(D) In determining the amount of such excess,
Actual Contribution Ratios shall be rounded to the nearest
one-hundredth of one percent of the Employee's Compensation.
(E) In no case shall the amount of such excess
with respect to any Highly Compensated Employee exceed the
amount of matching contributions on behalf of such Highly
Compensated Employee for such Plan Year.
(F) The Plan Administrator may use any reasonable
method for computing the income allocable to excess
contributions, provided that the method does not violate
Section 401(a)(4) of the Code, is used consistently for all
Participants and for all corrective distributions under the
Plan for the Plan Year, and is used by the Plan for allocating
income to Participants' Accounts.
(G) In the case of a Highly Compensated Employee
whose Actual Contribution Ratio is determined under the family
aggregation rules set forth in paragraph (e)(3), the
determination of the amount of the excess shall be made by
reducing the Actual Contribution Ratio in accordance with this
subparagraph (b)(4) and allocating the excess among the Family
Members in proportion to the contribution made on behalf of
each of the Family Members that have been combined.
(c) EMPLOYER CONTRIBUTIONS. An Employer, at the discretion of its
Board of Directors, may make contributions to the Employer Contribution
Accounts of Participants.
(d) QUALIFIED NON-ELECTIVE CONTRIBUTIONS. An Employer, at the
discretion of its Board of Directors, may make qualified non-elective
contributions (as described in Section 1.401(k)-1(g)(13) or 1.401(m)-1(f)(15)
of the Income Tax Regulations) to the Qualified Non-Elective Contribution
Accounts of Participants.
(e) ACTUAL DEFERRAL PERCENTAGE AND ACTUAL CONTRIBUTION PERCENTAGE
TESTS. The amounts contributed as elective and matching contributions shall be
limited as follows:
(1) Actual Deferral Percentage:
(A) The Actual Deferral Percentage for the group
of Highly Compensated Employees for a Plan Year shall not
exceed the Actual Deferral Percentage for the group of all
other eligible Employees multiplied by 1.25, or
V - 5.
23
(B) The excess of the Actual Deferral Percentage
for the group of Highly Compensated Employees for a Plan Year
over the Actual Deferral Percentage for the group of all other
eligible Employees shall not exceed two (2) percentage points
(or such lesser amount as may be required by the Secretary of
the Treasury, through regulations or otherwise); and the
Actual Deferral Percentage for the group of Highly Compensated
Employees shall not exceed the Actual Deferral Percentage for
the group of all other eligible Employees, multiplied by 2.0;
and
(2) Actual Contribution Percentage:
(A) The Actual Contribution Percentage for the
group of Highly Compensated Employees for a Plan Year shall
not exceed the Actual Contribution Percentage for the group of
all other eligible Employees, multiplied by 1.25, or
(B) The excess of the Actual Contribution
Percentage for the group of Highly Compensated Employees for a
Plan Year over the Actual Contribution Percentage for the
group of all other eligible Employees shall not exceed two (2)
percentage points (or such lesser amount as may be required by
the Secretary of the Treasury, through regulations or
otherwise), and the Actual Contribution Percentage for the
group of Highly Compensated Employees shall not exceed the
Actual Contribution Percentage for the group of all other
eligible Employees, multiplied by 2.0.
(3) (A) For purposes of this paragraph (e), if two or
more plans of an Employer to which elective contributions or
matching contributions are made are elected by the Employer to
be treated as one Plan for purposes of Section 410(b)(6) of
the Code, such plans shall be treated as a single plan for
purposes of determining the Actual Deferral Percentage and the
Actual Contribution Percentage.
(B) For purposes of determining the Actual
Deferral Ratio and the Actual Contribution Ratio of a Highly
Compensated Employee who is (i) a 5% owner of an Employer, or
(ii) one of the ten Highly Compensated Employees paid the
greatest amount of Compensation during the Plan Year, to the
extent required by Section 414(q)(6) of the Code, the elective
contributions, matching contributions and Compensation of such
Highly Compensated Employee's Family Members shall be
considered the elective contributions, matching contributions
and Compensation of such Highly Compensated Employee.
(C) The Actual Deferral Ratio of a Highly
Compensated Employee who is eligible to participate in more
than one cash or deferred arrangement maintained by an
Employer shall be determined by treating all such cash or
deferred arrangements in which the Employee is eligible to
participate (other
V - 6.
24
than arrangements that may not be permissively aggregated) as
a single arrangement.
(4) An elective contribution will be taken into account
in determining the Actual Deferral Percentage only if it relates to
Compensation that either would have been received by the Employee in
the Plan Year but for the Employee's election to defer under the cash
or deferred arrangement or is attributable to services performed by
the Employee in the Plan Year and, but for the Employee's election to
defer, would have been received by the Employee within 2 1/2 months
after the close of the Plan Year.
(5) If the Plan Administrator determines, in accordance
with the provisions of Section 1.401(m)-2 of the Treasury Regulations,
that a multiple use of the alternative limitation has occurred, such
multiple use shall be corrected by reducing the Actual Contribution
Percentage of Highly Compensated Employees in the manner described in
Section 1.401(m)-2(c) of the Treasury Regulations and paragraph (b) of
this Article V. The provisions of Section 1.401(m)-2 of the Treasury
Regulations are incorporated herein by reference.
(f) FORM AND TIMING OF CONTRIBUTIONS. Payments on account of the
contributions due from an Employer for any Plan Year shall be made in cash
and/or qualifying employer securities (as defined in Section 407(d)(5) of the
Employee Retirement Income Security Act of 1974, as amended form time to time)
to the Trustee. Such payments may be made by a contributing Employer at any
time, but payment of the Employer contributions for any Plan Year shall be
completed on or before the time prescribed by law, including extensions
thereof, for filing such Employer's federal income tax return for its taxable
year with which or within which such Plan Year ends. Payment of any elective
contribution shall be made within ninety (90) days after it is withheld from a
Participant's pay.
(g) ROLLOVER CONTRIBUTIONS. Each Employee at any time during a
Plan Year, with the consent of the Plan Administrator and in such manner as
prescribed by the Plan Administrator, may pay or cause to be paid to the
Trustee a rollover contribution (as defined in the applicable sections of the
Code).
(h) NO DUTY TO INQUIRE. The Trustee shall have no right or duty
to inquire into the amount of any contribution made by an Employer or any
Participant or the method used in determining the amount of any such
contribution, or to collect the same, but the Trustee shall be accountable only
for funds actually received by it.
V - 7.
25
ARTICLE VI
PARTICIPANTS' ACCOUNTS AND ALLOCATION OF CONTRIBUTIONS
(a) COMMON FUND. The assets of the Trust shall constitute a
common fund in which each Participant shall have an undivided interest.
(b) ESTABLISHMENT OF ACCOUNTS.
(1) The Plan Administrator shall establish and maintain
with respect to each Participant an account, designated as an Employer
Contribution Account, Elective Contribution Account, Matching
Contribution Account and Qualified Non-Elective Contribution Account.
In addition, for each Participant who has made a rollover contribution
pursuant to Article V, the Plan Administrator shall establish and
maintain a Rollover Contribution Account.
(2) The Plan Administrator may establish such additional
Accounts as are necessary to reflect a Participant's interest in the
Trust Fund.
(c) INTERESTS OF PARTICIPANTS. The interest of a Participant in
the Trust Fund shall be the vested balance remaining from time to time in his
Accounts after making the adjustments required in paragraph (d).
(d) ADJUSTMENTS TO ACCOUNTS. Subject to the provisions of
paragraph (e), the Accounts of a Participant shall be adjusted from time to
time as follows:
(1) First, the value of a Participant's Accounts shall be
converted into units or shares;
(2) Next, contributions made on each Valuation Date shall
be credited in accordance with the following and shall be used to
purchase additional units or shares:
(A) The Elective Contribution Account of a
Participant shall be credited with any elective contributions
not previously credited.
(B) The Matching Contribution Account of a
Participant shall be credited with any matching contributions
not previously credited; provided, however, that a Participant
shall not be entitled to share in the matching contribution
unless he is actively employed during the pay period with
respect to which the matching contribution is made.
(C) The Employer Contribution Account of a
Participant shall be credited with his share of the
contribution made by his Employer not previously credited.
VI - 1.
26
(i) The contribution made by an Employer
shall be credited to the Employer Contribution
Accounts of Participants, pro rata, according to the
Compensation paid to such Participants for the Plan
Year to which such contribution relates.
(ii) Notwithstanding the foregoing, a
Participant shall not be entitled to share in the
contribution unless he is actively employed during
the last pay period of the Plan Year.
(iii) Notwithstanding the foregoing, if
this Plan would otherwise fail to meet the
requirements of Section 401(a)(26) or 410(b) of the
Code and the regulations thereunder because
contributions have not been credited to a sufficient
number or percentage of Participants for a Plan Year,
then the following rules shall apply:
a. The group of Participants
eligible to share in the contribution for the
Plan Year shall be expanded to include the
minimum number of Participants who would not
otherwise be eligible as are necessary to
satisfy the applicable requirements specified
above. The specific Participants who shall
become eligible under the terms of this
subparagraph shall be those who are employed
by an Employer on the last day of the Plan
Year and, when compared to similarly situated
Participants, have completed the greatest
amount of service in the Plan Year.
b. If after application of
subparagraph (C)(iii)a. above, the applicable
requirements are still not satisfied, then
the group of Participants eligible to share
in the contribution for the Plan Year shall
be further expanded to include the minimum
number of Participants who are not employed
by an Employer on the last day of the Plan
Year as are necessary to satisfy the
applicable test. The specific Participants
who shall become eligible to share shall be
those Participants, when compared to
similarly situated Participants, who have
completed the greatest amount of service in
the Plan Year before terminating employment.
c. Nothing in this subparagraph
(C)(iii) shall permit the reduction of a
Participant's accrued benefit. Therefore,
any amounts that have previously been
credited to Participants may not be adjusted
to satisfy these requirements. In such
event, the Company shall make an additional
contribution equal to the amount such
affected Participants would have received had
they been included in the credits, even if it
exceeds the amount which would be deductible
under Section 404 of the Code. Any
adjustment to the credits pursuant to this
subparagraph (C)(iii)
VI - 2.
27
shall be considered a retroactive amendment
adopted by the last day of the Plan Year.
(D) The Qualified Non-Elective Contribution
Account of a Participant shall be credited with his share of
the qualified non-elective contribution and not previously
credited as follows:
(i) The amount of the qualified
non-elective contribution shall be credited to the
Qualified Non-Elective Contribution Accounts of
Participants as selected by the Plan Administrator,
pro rata, according to the Compensation paid to them,
respectively, by the Employer for the Plan Year to
which such contribution relates.
(ii) A Participant who is a Highly
Compensated Employee or a Family Member of certain
Highly Compensated Employees as described in Article
I shall not be entitled to share in the qualified
non-elective contribution.
(E) The Rollover Contribution Account of a
Participant shall be credited with any rollover contributions
not previously credited.
(F) Elective, Employer (matching and
non-matching) and qualified non-elective contributions shall
be attributable to the Plan Year with respect to which such
contributions relate.
(3) Finally, the amount of distributions, withdrawals or
transfers between investment funds, or other fees not previously
charged to the Participant's Accounts shall be charged to the
appropriate Accounts of the Participant and the number of units or
shares equal in value to the amount paid from the Participant's
Accounts shall be deducted from the Participant's outstanding units or
shares.
(4) For each Plan Year in which this Plan is a Top Heavy
Plan, a Participant who is employed by an Employer on the last day of
such Plan Year and who is a Non-Key Employee for such Plan Year shall
be entitled to receive a combined credit of contributions and
forfeitures to his Employer Contribution Account and his Qualified
Non-Elective Contribution Account equal in the aggregate to at least
three percent (3%) of his Section 415 Compensation (or, if less, the
highest percentage of such Section 415 Compensation credited to a Key
Employee's Account hereunder, as well as his employer contribution
accounts under any other defined contribution plan maintained by such
Employer or an Affiliate, including any elective contribution to any
plan subject to Section 401(k) of the Code), regardless of whether
such Plan Year constitutes a Whole Year Period of Service for such
Participant, except to the extent such a contribution is made by an
Employer or an Affiliate on behalf of the Employee for the Plan Year
to any other defined contribution plan maintained by such Employer or
Affiliate.
VI - 3.
28
(5) The Plan Administrator also may adopt such additional
accounting procedures as are necessary to accurately reflect each
Participant's interest in the Trust Fund, which procedures shall be
effective upon approval by the Employer. All such procedures shall be
applied in a consistent and nondiscriminatory manner.
(6) For purposes of all computations required by this
Article VI, the accrual method of accounting shall be used, and the
Trust Fund and the assets thereof shall be valued at their fair market
value as of each Valuation Date.
(e) LIMITATION ON ALLOCATION OF CONTRIBUTIONS.
(1) Notwithstanding anything contained in this Plan to
the contrary, the aggregate Annual Additions to a Participant's
Accounts under this Plan and under any other defined contribution
plans maintained by an Employer or an Affiliate for any Limitation
Year shall not exceed the lesser of $30,000 (or, if greater, one
quarter of the dollar limitation in effect under Section 415(b)(1)(A)
of the Code) or 25% of the Participant's Section 415 Compensation for
such Plan Year.
(2) In the event that the Annual Additions, under the
normal administration of the Plan, would otherwise exceed the limits
set forth above for any Participant, or in the event that any
Participant participates in both a defined benefit plan and a defined
contribution plan maintained by any Employer or any Affiliate and the
aggregate annual additions to and projected benefits under all of such
plans, under the normal administration of such plans, would otherwise
exceed the limits provided by law, then the Plan Administrator shall
take such actions, applied in a uniform and nondiscriminatory manner,
as will keep the annual additions and projected benefits for such
Participant from exceeding the applicable limits provided by law.
Excess Annual Additions shall be disposed of as provided in
subparagraph (3). Adjustments shall be made to all other plans, if
necessary to comply with such limits, before any adjustments may be
made to this Plan.
(3) If as a result of the allocation of forfeitures, a
reasonable error in estimating a Participant's Section 415
Compensation, a reasonable error in determining the amount of elective
contributions that may be made with respect to any Participant under
the limits of Section 415 of the Code, or other circumstances
permitted under Section 415 of the Code, the Annual Additions
attributable to Employer contributions for a particular Participant
would cause the limitations set forth in this paragraph (e) to be
exceeded, the excess amount shall be deemed first to consist of
elective contributions, which excess shall be returned to the
Participant. Any remaining excess amount shall be used to reduce
Employer contributions for the next Plan Year (and succeeding Plan
Years, as necessary) for that Participant if that Participant is
covered by the Plan as of the end of the Plan Year. If the
Participant is not covered by the Plan as of the end of the Plan Year,
such excess amount shall be held unallocated in a suspense account for
the Plan Year and reallocated among the Participants as of the end of
the next Plan Year to all of the Participants in the Plan in the same
manner as an Employer contribution under the terms of paragraph (d) of
VI - 4.
29
this Article VI before any further Employer contributions are
allocated to the Accounts of the Participants, and such allocations
shall be treated as Annual Additions to the Accounts of the
Participants. In the event that the limits on Annual Additions for
any Participant would be exceeded before all of the amounts in the
suspense account are allocated among the Participants, then such
excess amounts shall be retained in the suspense account to be
reallocated as of the end of the next Plan Year and any succeeding
Plan Years until all amounts in the suspense account are exhausted.
VI - 5.
30
ARTICLE VII
BENEFITS UNDER THE PLAN
(a) RETIREMENT BENEFIT
(1) A Participant shall be entitled to retire from the
employ of his Employer upon such Participant's Normal Retirement Date.
Until a Participant actually retires from the employ of his Employer,
he shall continue to be treated in all respects as a Participant.
(2) Upon the retirement of a Participant as provided in
subparagraph (1), such Participant shall be entitled to a retirement
benefit in an amount equal to 100% of the balance in his Accounts as
of the date of distribution of his benefit.
(b) DISABILITY BENEFIT
(1) In the event a Participant's employment with his
Employer is terminated by reason of his total and permanent
disability, such Participant shall be entitled to a disability benefit
in an amount equal to 100% of the balance in his Accounts as of the
date of distribution of his benefit.
(2) Total and permanent disability shall mean the total
incapacity of a Participant to perform the usual duties of his
employment with his Employer and will be deemed to have occurred only
when certified by a physician who is acceptable to the Plan
Administrator and only if such proof is received by the Administrator
within sixty (60) days after the date of the termination of such
Participant's employment.
(c) TERMINATION OF EMPLOYMENT BENEFIT
(1) In the event a Participant's employment with his
Employer is terminated for reasons other than retirement, total and
permanent disability or death, such Participant shall be entitled to a
termination of employment benefit in an amount equal to his vested
interest in the balance in his Accounts as of the date of distribution
of his benefit.
(2) (A) A Participant's vested interest in his
Matching Contribution Account and his Employer Contribution
Account shall be a percentage of the balance of such Accounts
as of the applicable Valuation Date, based upon such
Participant's Whole Year Periods of Service as of the date of
the termination of his employment, as follows:
VII - 1.
31
TOTAL NUMBER OF WHOLE VESTED
YEAR PERIODS OF SERVICE INTEREST
----------------------- --------
Less than 2 Whole Year Periods of Service 0%
2 years, but less than 3 years 25%
3 years, but less than 4 years 50%
4 years, but less than 5 years 75%
5 years or more 100%
(B) Notwithstanding the foregoing, a Participant
shall be 100% vested in his Matching Contribution Account and
his Employer Contribution Account upon attaining his Normal
Retirement Date. A Participant's vested interest in his
Elective Contribution Account, Qualified Non-Elective
Contribution Account and his Rollover Contribution Account
shall be 100% regardless of the number of his Whole Year
Periods of Service.
(3) (A) If the termination of employment results in
five consecutive Breaks in Service, then upon the occurrence
of such five consecutive Breaks in Service, the nonvested
interest of the Participant in his Matching Contribution
Account and his Employer Contribution Account as of the
Valuation Date concurring with or next following the date of
his termination of employment shall be deemed to be forfeited
and such forfeited amount shall first be used to reduce
Employer matching Contributions under paragraph (b) of Article
V; any remaining forfeitures shall then be used to reduce
Employer non-matching contributions under paragraph (c) of
Article V, if any; thereafter, any remaining forfeitures shall
be used to reduce Employer matching and non-matching
contributions for the next following Plan Year. If the
Participant is later reemployed by an Employer or an
Affiliate, the unforfeited balance, if any, in his Matching
Contribution Account and his Employer Contribution Account
that has not been distributed to such Participant shall be set
aside in a separate account, and such Participant's Periods of
Service after any five consecutive Breaks in Service resulting
from such termination of employment shall not be taken into
account for the purpose of determining the vested interest of
such Participant in the balance of his Matching Contribution
Account and his Employer Contribution Account that accrued
before such five consecutive Breaks in Service.
(B) Notwithstanding any other provision of this
paragraph (c), if a Participant is reemployed by an Employer
or an Affiliate and, as a result, no five consecutive Breaks
in Service occur, the Participant shall not be entitled to any
termination of employment benefit as a result of such
termination of employment.
VII - 2.
32
(4) (A) Notwithstanding any other provision of this
paragraph (c), if at any time a Participant is less than 100%
vested in his Accounts and, as a result of his termination of
employment, he receives his entire vested termination of
employment benefit pursuant to the provisions of Article VIII,
and the distribution of such benefit is made not later than
the close of the fifth Plan Year following the Plan Year in
which such termination occurs (or such longer period as may be
permitted by the Secretary of the Treasury, through
regulations or otherwise), then upon the occurrence of such
distribution, the non-vested interest of the Participant in
his Accounts shall be deemed to be forfeited. Forfeited
amounts shall first be used to reduce Employer matching
Contributions under paragraph (b) of Article V; any remaining
forfeitures shall then be used to reduce Employer non-
matching contributions under paragraph (c) of Article V, if
any; thereafter, any remaining forfeitures shall be used to
reduce Employer matching and non-matching contributions for
the next following Plan Year.
(B) If a Participant is not vested as to any
portion of his Accounts, he will be deemed to have received a
distribution immediately following his termination of
employment. Upon the occurrence of such deemed distribution,
the non-vested interest of the Participant in his Accounts
shall be deemed to be forfeited. Forfeited amounts shall first
be used to reduce Employer matching Contributions under
paragraph (b) of Article V; any remaining forfeitures shall
then be used to reduce Employer non-matching contributions
under paragraph (c) of Article V, if any; thereafter, any
remaining forfeitures shall be used to reduce Employer
matching and non-matching contributions for the next following
Plan Year.
(C) If a Participant whose interest is forfeited
under this subparagraph (4) resumes employment covered under
the Plan, then such Participant shall have the right to repay
to the Trust, before the date that is the earlier of (1) five
years after the Participant's resumption of employment, or (2)
the close of a period of five consecutive Breaks in Service
following the date of his distribution, the full amount of the
termination of employment benefit previously distributed to
him. If the Participant elects to repay such amount to the
Trust within the time periods prescribed herein, or if a
non-vested Participant whose interest was forfeited under this
subparagraph (4) resumes employment covered under the Plan
prior to the occurrence of five consecutive Breaks in Service,
the non-vested interest of the Participant previously
forfeited pursuant to the provisions of this subparagraph (4)
shall be restored to the Accounts of the Participant, such
restoration to be made from forfeitures of non-vested
interests and, if necessary, by contributions of his Employer,
so that the aggregate of the amounts repaid by the Participant
and restored by the Employer shall not be less than the
Account balances of the Participant at the time of forfeiture
unadjusted by any subsequent gains or losses.
VII - 3.
33
(d) DEATH BENEFIT
(1) In the event of the death of a Participant, his
beneficiary shall be entitled to a death benefit in an amount equal to
100% of the balance in his Accounts as of the date of distribution of
his benefit.
(2) At any time and from time to time, each Participant
shall have the unrestricted right to designate a beneficiary to
receive his death benefit and to revoke any such designation. Each
designation or revocation shall be evidenced by written instrument
filed with the Plan Administrator, signed by the Participant and
bearing the signature of a witness to his signature. In the event
that a Participant has not designated a beneficiary or beneficiaries,
or if for any reason such designation shall be legally ineffective, or
if such beneficiary or beneficiaries shall predecease the Participant,
then the personal representative of the estate of such Participant
shall be deemed to be the beneficiary designated to receive such death
benefit, or if no personal representative is appointed for the estate
of such Participant, then his next of kin under the statute of descent
and distribution of the state of such Participant's domicile at the
date of his death shall be deemed to be the beneficiary or
beneficiaries to receive such death benefit.
(3) Notwithstanding the foregoing, if the Participant is
married as of the date of his death, the Participant's surviving
spouse shall be deemed to be his designated beneficiary and shall
receive the full amount of the death benefit attributable to the
Participant unless the spouse consents or has consented to the
Participant's designation of another beneficiary. Any such consent to
the designation of another beneficiary must acknowledge the effect of
the consent, must be witnessed by a Plan representative or by a notary
public and shall be effective only with respect to that spouse. A
spouse's consent shall be a restricted consent (which may not be
changed as to the beneficiary unless the spouse consents to such
change in the manner described herein). Notwithstanding the preceding
provisions of this subparagraph (3), a Participant shall not be
required to obtain spousal consent to his designation of another
beneficiary if (A) the Participant is legally separated or the
Participant has been abandoned, and the Participant provides the
Administrator with a court order to such effect, or (B) the spouse
cannot be located.
VII - 4.
34
ARTICLE VIII
PAYMENT OF BENEFITS
(a) TIME AND FORM OF PAYMENT OF BENEFITS.
(1) Except as otherwise provided under this Article VIII
(A) The amount of the retirement, disability,
termination of employment or death benefit to which a
Participant is entitled under paragraphs (a), (b), (c) or (d)
of Article VII shall be paid to him (or his beneficiary or
beneficiaries in the case of a death benefit), in a lump sum
as soon as practicable following the Participant's retirement,
disability, termination of employment or death, as the case
may be.
(2) (A) Notwithstanding the foregoing, no
distribution shall be made of the retirement, disability or
termination of employment benefit to which a Participant is
entitled under paragraph (a), (b) or (c) of Article VII prior
to his Normal Retirement Date unless the value of his benefit
attributable to Employer and Employee contributions, if any,
determined as of the time of distribution does not exceed
$3,500, or unless the Participant consents to the
distribution.
(B) In the event that a Participant does not
consent to a distribution of a benefit in excess of $3,500 to
which he is entitled under paragraph (a), (b) or (c) of
Article VII, the amount of his benefit shall be paid to the
Participant not later than sixty (60) days after the last day
of the Plan Year in which the Participant reaches his Normal
Retirement Date.
(3) (A) Notwithstanding anything contained herein to
the contrary, any distribution paid to a Participant (or, in
the case of a death benefit, to his beneficiary or
beneficiaries) pursuant to subparagraph (1) shall commence not
later than the earlier of:
(i) the 60th day after the last day of the
Plan Year in which the Participant's employment is
terminated or, if later, in which occurs the
Participant's Normal Retirement Date; or
(ii) April 1 of the year immediately
following the calendar year in which he reaches age
70-1/2.
(4) In the case of a death benefit, payment to the
designated beneficiary shall be made within one year following the
Participant's death (unless the designated beneficiary is the
Participant's surviving spouse, in which case such benefit shall begin
no later than the date the Participant would have reached age 70-1/2).
VIII - 1.
35
(5) Notwithstanding the foregoing, payments under the
Plan shall satisfy the incidental death benefit requirements and all
other applicable provisions of Section 401(a)(9) of the Code, the
regulations issued thereunder (including Prop. Reg. Section
1.401(a)(9)-2), and such other rules thereunder as may be prescribed
by the Commissioner).
(b) PROPERTY DISTRIBUTED. Distribution of a Participant's benefit
under the Plan will be made in whole shares of qualifying employer securities
(as defined in Section 407(d)(5) of the Employee Retirement Income Security Act
of 1974, as amended from time to time), or in cash, or partially in qualifying
employer securities or partially in cash, as requested by the Participant;
provided, however, that the maximum amount of qualifying employer securities
that may be distributed to a Participant shall not exceed the proportion in
which qualifying employer securities comprise the Participant's interest in the
Trust Fund.
(c) LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN. In the event that
all, or any portion of the distribution payable to a Participant or his
beneficiary, hereunder shall remain unpaid after five (5) Plan Years solely by
reason of the inability of the Administrator, after sending a registered
letter, return receipt requested, to the last known address, and after further
diligent effort, to ascertain the whereabouts of such Participant or his
Beneficiary, the amount so distributable shall be treated as a forfeiture
pursuant to the provisions of Article VII. In the event a Participant or
beneficiary of such Participant is located subsequent to his benefit being
reallocated, such benefit shall be restored.
(d) TRANSFER TO OTHER QUALIFIED PLANS. The Trustee, upon written
direction by the Plan Administrator, shall transfer some or all of the assets
held under the Trust to another plan or trust meeting the requirements of the
Code relating to qualified plans and trust, whether such transfer is made
pursuant to a merger or consolidation of this Plan with such other plan or
trust or for any other allowable purpose.
(e) DIRECT ROLLOVERS.
(1) The provisions of this paragraph apply to
distributions made on or after January 1, 1993. Notwithstanding any
provisions of the Plan to the contrary that would otherwise limit a
distributee's (as defined below) election under this paragraph, a
distributee may elect, at the time and in the manner prescribed by the
Plan Administrator, to have any portion of an eligible rollover
distribution (as defined below) paid directly to an eligible
retirement plan (as defined below) specified by the distributee in a
direct rollover (as defined below).
(2) For purposes of this paragraph, the following terms
shall have the following meanings:
(A) An "eligible rollover distribution" is any
distribution of all or any portion of the balance to the
credit of the distributee, except that an eligible rollover
distribution does not include: any distribution that is one of
a series of substantially equal periodic payments made (not
less frequently than annually)
VIII - 2.
36
for the life (or life expectancy) of the distributee or the
joint lives (or joint life expectancies) of the distributee
and the distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to the
extent such distribution is required under Code Section
401(a)(9), and the portion of any distribution that is not
includible in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to
employer securities).
(B) An "eligible retirement plan" is an
individual retirement account described in Code Section
408(a), an individual retirement annuity described in Code
Section 408(b), an annuity plan described in Code Section
403(a), or a qualified trust described in Code Section 401(a),
that accepts the distributee's eligible rollover distribution.
However, in the case of an eligible rollover distribution to
the surviving spouse, an eligible retirement plan is an
individual retirement account or individual retirement
annuity.
(C) A "distributee" includes an Employee or
former Employee. In addition, the Employee's or former
Employee's surviving spouse and the Employee's or former
Employee's spouse or former spouse who is the alternate payee
under a qualified domestic relations order, as defined in Code
Section 414(p), are distributees with regard to the interest
of the spouse or former spouse.
(D) A "direct rollover" is a payment by the Plan
to the eligible retirement plan specified by the distributee.
VIII - 3.
37
ARTICLE IX
HARDSHIP AND OTHER DISTRIBUTIONS
(a) HARDSHIP DISTRIBUTION.
(1) (A) A Participant will be eligible to receive a
distribution on account of hardship from his Elective
Contribution Account (not in excess of the actual
contributions thereto).
(B) A distribution will be on account of hardship
only if the distribution both (A) is made on account of an
immediate and heavy financial need of the Participant, and (B)
is necessary to satisfy such financial need. Based upon the
criteria set forth below, the Administrator shall determine,
in a uniform and nondiscriminatory manner, whether an
immediate and heavy financial need exists and the amount
necessary to meet such need.
(2) (A) Subject to the requirements of subparagraph
(2)(B) below, the determination of whether a Participant has
an immediate and heavy financial need shall be made in a
uniform and nondiscriminatory manner by the Plan Administrator
on the basis of all relative facts and circumstances. A
financial need shall not fail to qualify as immediate and
heavy merely because such need was reasonably foreseeable or
voluntarily incurred by the Participant.
(B) A distribution shall be deemed made on
account of an immediate and heavy financial need of the
Participant only if the distribution is on account of:
(i) medical expenses described in
Section 213(d) of the Code incurred by the
Participant, the Participant's spouse, or any
dependents of the Participant (as defined in Section
152 of the Code);
(ii) the purchase (excluding mortgage
payments) of a principal residence of the
Participant;
(iii) the payment of tuition and related
educational fees for the next 12 months of
post-secondary education for the Participant, his or
her spouse, children, or dependents;
(iv) the need to prevent the eviction of
the Participant from his principal residence or
foreclosure of the mortgage on the Participant's
principal residence; or
(v) such other events as may be
prescribed by the Commissioner in revenue rulings,
notices and other documents of general applicability.
IX - 1.
38
(3) (A) The Administrator shall determine whether a
distribution is necessary to satisfy an immediate and heavy
financial need on the basis of all relevant facts and
circumstances. A distribution will not be treated as
necessary to satisfy an immediate and heavy financial need of
a Participant to the extent the amount of the distribution is
in excess of the amount required to relieve the financial need
or to the extent such need may be satisfied from other
resources that are reasonably available to the Participant. A
distribution generally may be treated as necessary to satisfy
a financial need if the Employer reasonably relies upon the
Participant's representation that the need cannot be relieved:
(i) through reimbursement or
compensation by insurance or otherwise;
(ii) by reasonable liquidation of the
Participant's assets, to the extent such liquidation
would not itself cause an immediate and heavy
financial need;
(iii) by cessation of elective
contributions under the Plan; or
(iv) by other distributions or nontaxable
(at the time of the loan) loans from plans maintained
by an Employer or by any other employer or by
borrowing from commercial sources on reasonable
commercial terms.
(B) In determining whether a distribution is
necessary to satisfy a financial need, the Participant's
resources shall be deemed to include those assets of his
spouse and minor children that are reasonably available to the
Participant.
(b) DISTRIBUTIONS AFTER AGE 59 1/2. Upon reaching age 59 1/2, a
Participant may apply to the Administrator for a distribution of any portion of
each Account in which he is fully vested.
IX - 2.
39
ARTICLE X
INVESTMENT FUNDS
(a) INVESTMENT FUNDS. Effective for Plan Years beginning on or
after April 1, 1993, each Participant may direct the Plan Administrator to
invest his Accounts (other than his Matching Contribution Account) in one or
more investment funds that may be made available from time to time.
(b) PROCEDURES. The Administrator shall establish procedures
regarding Participant investment direction as are necessary, which procedures
shall be communicated to all Participants and applied in a uniform,
nondiscriminatory manner. Procedures established by the Administrator shall
comply with the requirements of Section 404(c) of the Employee Retirement
Income Security Act of 1974, as amended from time to time, and the applicable
regulations.
(c) CHARGES AND CREDITS; EARNINGS FACTOR. All dividends,
interest, and other income on the investments in a particular investment fund,
and all realized and unrealized gains, shall be credited to that fund. All
brokerage commissions, taxes, and other charges and expenses in connection with
the investments in a particular investment fund, and all realized and
unrealized losses, shall be charged to that fund. Each investment fund shall
be treated separately for purposes of crediting the earnings factor to a
Participant's Accounts.
(d) NONLIABILITY. Neither the Trustee, the Administrator, nor any
other person shall be under any duty to question any election by a Participant
or to make any suggestions to him in connection therewith. Any loss occasioned
by a Participant's election or failure to change an election of an investment
fund shall not be the responsibility of the Trustee, the Administrator, or any
other person. Nor shall the Trustee or the Administrator be liable to any
Participant for failure to make an investment in any investment fund elected by
the Participant if in the exercise of due diligence the Trustee has not been
able to acquire satisfactory securities or other property for that fund
satisfying the specifications and parameters established by the Administrator
and reasonable requirements as to price, terms, and other conditions, or for
inability to liquidate an investment in a fund promptly upon receipt of a new
election form from the Participant.
(e) SPECIAL RULES FOR DIRECTORS AND OFFICERS.
(1) Any Employee who is a director or "officer" (as
defined in Rule 16a-1(f) under the Securities Exchange Act of 1934) of
the Company who suspends his elective contributions shall not be
permitted to transfer funds previously invested in a non-Company stock
fund (as defined below) to a Company stock fund (as defined below)
during the six month period following the suspension.
(2) Any Employee who is a director or "officer" (as
defined in Rule 16a-1(f) under the Securities Exchange Act of 1934) of
the Company who suspends the
X - 1.
40
investment of his future elective contributions in a Company stock
fund shall not be permitted to invest future elective contributions in
a Company stock fund or transfer funds previously invested in a
non-Company stock fund to a Company stock fund during the 6-month
period following such suspension.
(3) Any Employee who is a director or "officer" (as
defined in Rule 16a-1(f) under the Securities Exchange Act of 1934) of
the Company who receives a distribution from the Plan shall not be
permitted to invest future contributions in a Company stock fund or
transfer funds previously invested in a non-Company stock fund to a
Company stock fund during the 6 month period following the
distribution.
(4) Any Employee who is a director or "officer" (as
defined in Rule 16a-1(f) under the Securities Exchange Act of 1934) of
the Company who transfers previously invested funds out of a Company
stock fund must suspend elective contributions to the Plan and shall
not be permitted to invest future contributions in a Company stock
fund or transfer funds previously invested in a non-Company stock fund
to a Company stock fund during the 6 month period following such
transfer out of the Company stock fund.
(5) Any transfer of previously invested funds to or from
a Company stock fund by an Employee who is a director or "officer" (as
defined in Rule 16a-1(f) under the Securities Exchange Act of 1934) of
the Company shall be made during the quarterly window period that
begins on the third business day after the Company's earnings release
and ends on the twelfth business day after such release; provided,
further, that no additional transfers of previously invested funds to
or from a Company stock fund may be made for a period of at least six
months following the transfer.
(f) SPECIAL DEFINITIONS.
(1) For purposes of paragraph (e), the term "Company
stock fund" shall mean an investment fund that invests directly and
primarily in qualifying employer securities (as defined Section
407(d)(5) of the Employee Retirement Income Security Act of 1974, as
amended from time to time), and
(2) the term "non-Company stock fund" shall mean any
investment fund other than a Company stock fund.
(g) PASS THROUGH OF VOTING AND OTHER RIGHTS. To the extent a
Participant directs the investment of his Accounts in a Company stock fund (as
defined in paragraph (f) above), the voting, tender and similar rights with
respect to the securities in the Company stock fund held in the Participant's
Accounts shall be passed through to the Participant and his beneficiaries to
the extent necessary to satisfy the requirements of Section 404(c) of the
Employee Retirement Income Security Act of 1974, as amended from time to time,
and the regulations promulgated thereunder. To the extent a Participant or his
beneficiary fails to exercise such voting, tender and similar rights, such
rights shall be exercised by the Trustee in its discretion.
X - 2.
41
ARTICLE XI
TRUST FUND AND EXPENSES OF ADMINISTRATION
(a) TRUSTEE. The Trust Fund shall be held by the Trustee, or by a
successor trustee or trustees, for use in accordance with the Plan under the
Trust Agreement. The Trust Agreement may from time to time be amended in the
manner therein provided. Similarly, the Trustee may be changed from time to
time in the manner provided in the Trust Agreement.
(b) EXPENSES OF ADMINISTRATION.
(1) (A) Unless otherwise paid or provided by the
Company and the other Employers, the assets of the Trust Fund
shall be used to pay all expenses of the administration of the
Plan and the Trust Fund, including the Trustee's compensation,
the compensation of any investment manager, the expense
incurred by the Plan Administrator in discharging its duties,
all income or other taxes of any kind whatsoever that may be
levied or assessed under existing or future laws upon or in
respect of the Trust Fund, and any interest that may be
payable on money borrowed by the Trustee for the purpose of
the Trust.
(B) The Company and the other Employers may pay
the expenses of the Plan and the Trust Fund. Any such payment
by the Company or another Employer shall not be deemed a
contribution to this Plan.
(2) Notwithstanding anything contained herein to the
contrary, no excise tax or other liability imposed upon the Trustee,
the Plan Administrator or any other person for failure to comply with
the provisions of any federal law shall be subject to payment or
reimbursement from the assets of the Trust.
(3) For its services, any corporate trustee shall be
entitled to receive reasonable compensation in accordance with its
rate schedule in effect from time to time for the handling of a
retirement trust. Any individual trustee shall be entitled to such
compensation as shall be arranged between the Company and the Trustee
by separate instrument; provided, however, that no person who is
already receiving full-time pay from any Employer or any Affiliate
shall receive compensation from the Trust Fund (except for the
reimbursement of expenses properly and actually incurred).
XI - 1.
42
ARTICLE XII
AMENDMENT AND TERMINATION
(a) RESTRICTIONS ON AMENDMENT AND TERMINATION OF PLAN. It is the
present intention of the Company to maintain the Plan set forth herein
indefinitely. Nevertheless, the Company specifically reserves to itself the
right at any time, and from time to time, to amend or terminate this Plan in
whole or in part; provided, however, that no such amendment:
(1) shall have the effect of vesting in any Employer,
directly or indirectly, any interest, ownership or control in any of
the present or subsequent funds held subject to the terms of the
Trust;
(2) shall cause or permit any property held subject to
the terms of the Trust to be diverted to purposes other than the
exclusive benefit of the Participants and their beneficiaries or for
the administrative expenses of the Plan Administrator and the Trust;
(3) shall (A) reduce any vested interest of a Participant
on the later of the date the amendment is adopted or the date the
amendment is effective, except as permitted by law, or (B) reduce or
restrict either directly or indirectly any benefit provided any
Participant prior to the date an amendment is adopted;
(4) shall reduce the Accounts of any Participant;
(5) shall amend any vesting schedule with respect to any
Participant who has at least three Years of Service at the end of the
election period described below, except as permitted by law, unless
each such Participant shall have the right to elect to have the
vesting schedule in effect prior to such amendment apply with respect
to him, such election, if any, to be made during the period beginning
not later than the date the amendment is adopted and ending no earlier
than sixty (60) days after the latest of the date the amendment is
adopted, the amendment becomes effective or the Participant is issued
written notice of the amendment by his Employer or the Plan
Administrator; or
(6) shall increase the duties or liabilities of the
Trustee without its written consent.
(b) AMENDMENT OF PLAN. Subject to the limitations stated in
paragraph (a), the Company shall have the power to amend this Plan in any
manner that it deems desirable, and, not in limitation but in amplification of
the foregoing, it shall have the right to change or modify the method of
allocation of contributions hereunder, to change any provision relating to the
administration of this Plan and to change any provision relating to the
distribution or payment, or both, of any of the assets of the Trust.
XII - 1.
43
(c) TERMINATION OF PLAN. Any Employer, in its sole and absolute
discretion, may permanently discontinue making contributions under this Plan or
may terminate this Plan and the Trust (with respect to all Employers if it is
the Company, or with respect to itself alone if it is an Employer other than
the Company), completely or partially, at any time without any liability
whatsoever for such permanent discontinuance or complete or partial
termination. In any of such events, the affected Participants, notwithstanding
any other provisions of this Plan, shall have fully vested interests in the
amounts credited to their respective Accounts at the time of such complete or
partial termination of this Plan and the Trust or permanent discontinuance of
contributions. All such vested interests shall be nonforfeitable.
(d) DISCONTINUANCE PROCEDURE. In the event an Employer decides to
permanently discontinue making contributions, such decision shall be evidenced
by an appropriate resolution of its Board and a certified copy of such
resolution shall be delivered to the Plan Administrator and the Trustee. All
of the assets in the Trust Fund belonging to the affected Participants on the
date of discontinuance specified in such resolutions shall, aside from becoming
fully vested as provided in paragraph (c), be held, administered and
distributed by the Trustee in the manner provided under this Plan. In the
event of a permanent discontinuance of contributions without such formal
documentation, full vesting of the interests of the affected Participants in
the amounts credited to their respective Accounts will occur on the last day of
the year in which a substantial contribution is made to the Trust.
(e) TERMINATION PROCEDURE. In the event an Employer decides to
terminate this Plan and the Trust, such decision shall be evidenced by an
appropriate resolution of its Board and a certified copy of such resolution
shall be delivered to the Plan Administrator and the Trustee. After payment of
all expenses and proportional adjustments of individual accounts to reflect
such expenses and other changes in the value of the Trust Fund as of the date
of termination, each affected Participant (or the beneficiary of any such
Participant) shall be entitled to receive, provided that no successor plan has
been established, any amount then credited to his Accounts in accordance with
the provisions of Article VIII.
XII - 2.
44
ARTICLE XIII
MISCELLANEOUS
(a) MERGER OR CONSOLIDATION. This Plan and the Trust may not be
merged or consolidated with, and the assets or liabilities of this Plan and the
Trust may not be transferred to, any other plan or trust unless each
Participant would receive a benefit immediately after the merger, consolidation
or transfer, if the plan and trust then terminated, that is equal to or greater
than the benefit the Participant would have received immediately before the
merger, consolidation or transfer if this Plan and the Trust had then
terminated.
(b) ALIENATION.
(1) Except as provided in subparagraph (2), no
Participant or beneficiary of a Participant shall have any right to
assign, transfer, appropriate, encumber, commute, anticipate or
otherwise alienate his interest in this Plan or the Trust or any
payments to be made thereunder; no benefits, payments, rights or
interests of a Participant or beneficiary of a Participant of any kind
or nature shall be in any way subject to legal process to levy upon,
garnish or attach the same for payment of any claim against the
Participant or beneficiary of a Participant; and no Participant or
beneficiary of a Participant shall have any right of any kind
whatsoever with respect to the Trust, or any estate or interest
therein, or with respect to any other property or right, other than
the right to receive such distributions as are lawfully made out of
the Trust, as and when the same respectively are due and payable under
the terms of this Plan and the Trust.
(2) Notwithstanding the provisions of subparagraph
(b)(1), the Plan Administrator shall direct the Trustee to make
payments pursuant to a Qualified Domestic Relations Order as defined
in Section 414(p) of the Code. The Plan Administrator shall establish
procedures consistent with Section 414(p) of the Code to determine if
any order received by the Plan Administrator, or any other fiduciary
of the Plan, is a Qualified Domestic Relations Order.
(c) GOVERNING LAW. This Plan shall be administered, construed and
enforced according to the laws of the State of Florida, except to the extent
such laws have been expressly preempted by federal law.
(d) ACTION BY EMPLOYER. Whenever the Company or another Employer
under the terms of this Plan is permitted or required to do or perform any act,
it shall be done and performed by the Board of Directors of the Company or such
other Employer and shall be evidenced by proper resolution of such Board of
Directors certified by the Secretary or Assistant Secretary of the Company or
such other Employer.
(e) ALTERNATIVE ACTIONS. In the event it becomes impossible for
the Company, another Employer, the Plan Administrator or the Trustee to perform
any act required by this Plan, then the Company, such other Employer, the Plan
Administrator or the Trustee, as the
XIII - 1.
45
case may be, may perform such alternative act that most nearly carries out the
intent and purpose of this Plan.
(f) GENDER. Throughout this Plan, and whenever appropriate, the
masculine gender shall be deemed to include the feminine and neuter; the
singular, the plural; and vice versa.
IN WITNESS WHEREOF, this amendment and restatement has been executed
this _________ day of _____________________, 1994.
HOME SHOPPING NETWORK, INC.
By: _______________________________________
"COMPANY"
HSN INSURANCE, INC.
HOME SHOPPING CLUB, INC.
HSN CREDIT CORPORATION
HSN TRUCKING, INC.
HSN FULFILLMENT OF VIRGINIA, INC.
HSN FULFILLMENT OF IOWA, INC.
HSN FULFILLMENT OF NEVADA, INC.
HSN MAIL ORDER, INC.
HSN TOURS, INC.
HSN LIFEWAY HEALTH PRODUCTS, INC.
HOME SHOPPING CLUB OUTLETS, INC.
HOME SHOPPING CLUB OUTLET OF CLEARWATER, INC.
HOME SHOPPING CLUB OUTLET OF TAMPA, INC.
HOME SHOPPING CLUB OUTLET OF ORLANDO, INC.
HOME SHOPPING CLUB OUTLET OF SOUTH ORLANDO, INC.
HOME SHOPPING SHOWCASE, INC.
NATIONAL CALL CENTER, INC.
HSN FULFILLMENT, INC.
ORTHO-VENT, INC.
HOME SHOPPING CLUB OUTLET OF ST. PETERSBURG, INC.
HSN LIQUIDATION, INC.
HOME SHOPPING CLUB OUTLET OF WEST TAMPA, INC.
HSN LIQUIDATION, INC. OF VIRGINIA
HSN LIQUIDATION, INC. OF NEVADA
HSN LIQUIDATION, INC. OF FLORIDA
HSN LIQUIDATION, INC. OF IOWA
VELA RESEARCH, INC.
HSN INTERACTIVE, INC.
HOME SHOPPING CLUB OUTLET OF BRANDON, INC.
HOME SHOPPING CLUB OUTLET OF PINE HILLS, INC.
XIII - 2.
46
INTERNET SOFTWARE, INC.
HSN DIRECT JOINT VENTURE
HSN REALTY, INC.
By: _______________________________________
"EMPLOYER"
XIII - 3.
47
HOME SHOPPING NETWORK, INC.
RETIREMENT SAVINGS TRUST
AMENDED AND RESTATED
AS OF
JANUARY 1, 1994
48
HOME SHOPPING NETWORK, INC.
RETIREMENT SAVINGS TRUST
TABLE OF CONTENTS
ARTICLE TITLE PAGE
------- ----- ----
I DEFINITIONS . . . . . . . . . . . . . . . . . . . . I - 1
II NAME OF THE TRUST AND ESTABLISHMENT OF
THE TRUST FUND . . . . . . . . . . . . . . . . . . II - 1
III TRUST ADMINISTRATION . . . . . . . . . . . . . . . . III - 1
IV INVESTMENT MANAGERS . . . . . . . . . . . . . . . . IV - 1
V INVESTMENT OF THE TRUST FUND . . . . . . . . . . . . V - 1
VI INVESTMENT FUNDS . . . . . . . . . . . . . . . . . . VI - 1
VII EXPENSES OF ADMINISTRATION OF THE PLAN
AND THE TRUST FUND . . . . . . . . . . . . . . . . VII - 1
VIII AMENDMENT AND TERMINATION . . . . . . . . . . . . . VIII - 1
IX MISCELLANEOUS . . . . . . . . . . . . . . . . . . . IX - 1
49
HOME SHOPPING NETWORK, INC.
RETIREMENT SAVINGS TRUST
AMENDED AND RESTATED
AS OF
JANUARY 1, 1994
THIS TRUST AGREEMENT (the "Agreement") is made and entered into this
_____ day of ___________________, 1994 by and between Home Shopping Network,
Inc. (the "Company") and PNC Bank Kentucky, Inc. (collectively, the "Trustee").
W I T N E S S E T H:
WHEREAS, the Company has previously adopted the Home Shopping Network,
Inc. Retirement Savings Plan and its related trust for the benefit of its
employees; and
WHEREAS, the Company deems it advisable and in the best interests of
the Participants to amend the trust.
NOW, THEREFORE, the trust under the Home Shopping Network, Inc.
Retirement Savings Plan is hereby amended and restated in its entirety to read
as follows:
ARTICLE I.
DEFINITIONS
Unless a different meaning is clearly required by the context or
except as may be otherwise indicated below, capitalized terms shall have the
meaning stated in Article I of the Plan. As used in this Agreement, the
following terms shall have the meaning hereinafter set out:
(a) "ACCOUNT" or "ACCOUNTS" shall mean a Participant's Employer
Contribution Account, Elective Contribution Account, Matching Contribution
Account, Qualified Non-Elective Contribution Account, Rollover Contribution
Account and/or such other accounts as may be established by the Plan
Administrator.
(b) "COMPANY" shall mean the Home Shopping Network, Inc., and its
successors.
(c) "EFFECTIVE DATE" of this Agreement shall mean January 1, 1994.
(d) "INVESTMENT MANAGER" shall mean the individual, individuals,
partnership, corporation or other entity, if any, appointed by the
Administrator to manage all or any portion of the assets of the Plan. Any
Investment Manager shall be (1) registered as an investment
50
advisor under the Investment Advisors Act of 1940; (2) a bank as defined in
such Act; or (3) an insurance company qualified to perform the services of an
investment manager under the laws of more than one state.
(e) "PLAN" shall mean the Home Shopping Network, Inc. Retirement
Savings Plan, as it may be in effect from time to time.
(f) "TRUST" shall mean the trust as herein set forth.
(g) "TRUSTEE" shall mean the individual, individuals or
corporation designated as trustee under this Agreement, or any amendment
hereof.
(h) "TRUST FUND" shall mean the trust fund established under this
Agreement from which the amounts of supplementary compensation provided for by
the Plan are to be paid or are to be funded.
51
ARTICLE II.
NAME OF THE TRUST AND ESTABLISHMENT OF THE TRUST FUND
(a) NAME OF THE TRUST. The trust amended and restated in
accordance with the terms hereof shall be known as the "HOME SHOPPING NETWORK,
INC. RETIREMENT SAVINGS TRUST."
(b) ESTABLISHMENT OF THE TRUST FUND. The Company has established,
pursuant to the Plan, a trust comprised of amounts previously contributed by
the Company, with such other sums of money and property as shall from time to
time be paid or delivered to the Trustee, the earnings and profits thereon and
any assets into which such funds are converted. The Trust Fund shall be held
by the Trustee in trust and dealt with in accordance with the provisions
hereof. Except as otherwise permitted by law, in no event shall any part of
the principal or income of the Trust Fund be used for or diverted to any
purpose whatsoever other than for the exclusive benefit of the Participants and
their beneficiaries.
II - 1.
52
ARTICLE III.
TRUST ADMINISTRATION
(a) RECEIPT OF CONTRIBUTIONS. The Trustee shall receive from each
Employer and the Participants the payments made as their contributions under
the Plan and shall perform such duties as are specified under the Plan and in
this Agreement. However, the Trustee shall have no right or duty to inquire
into the amount of any contribution made by an Employer or a Participant or the
method used in determining the amount of any such contribution, or to collect
the same, but the Trustee shall be accountable only for funds actually received
by it.
(b) PLAN ADMINISTRATOR'S DIRECTIONS. When directed in writing by
the Plan Administrator, the Trustee shall:
(1) value the Trust Fund;
(2) make transfers, payments and deliveries to or for the
account of Participants or their beneficiaries; and
(3) borrow money and pledge any Trust property for the
payment of any such loan.
Nothing contained in this paragraph (b) shall prevent the Plan Administrator
itself from performing the actions described in subparagraph (1).
(c) AUTHORIZED ACTIONS. The Trustee is authorized to:
(1) settle, compromise or submit to arbitration any
claims, debts or damages due or owing to or from this Trust, commence
or defend suits or legal or administrative proceedings and represent
the Trust in all suits and legal and administrative proceedings;
(2) employ suitable agents and counsel (who may be
counsel for an Employer), and pay their reasonable expenses and
compensation; and
(3) make, execute and deliver as Trustee, with provisions
for no individual responsibility, all instruments in writing necessary
or appropriate for the exercise of any of its powers of
administration; provided, that as a matter of convenience, when the
Trustee is two or more persons, any one of such persons may exercise
the powers contained in this paragraph (c) without the necessity of
the other person or persons joining therein.
(d) WRITTEN DIRECTIONS. In allocating the benefits of the Trust
to the respective Participants, the Trustee shall rely entirely on the written
directions of the Plan Administrator.
III - 1.
53
The Trustee shall have no dealings with the beneficiaries under this Agreement
except under the direction of the Plan Administrator to make payment to them.
If and when the Trustee is a corporation, all directions, papers and
communications addressed to it or intended to be filed with it shall be
delivered at its principal office.
(e) RECORDS AND ACCOUNTS. The Trustee shall keep accurate and
detailed accounts on all investments, receipts, disbursements and other
transactions hereunder. All accounts, books and records relating to this Trust
shall be open to inspection and audit at all reasonable times by any person
designated by the Plan Administrator.
(f) RESIGNATION AND REMOVAL.
(1) The Company may at any time remove any Trustee acting
hereunder by providing written notice to such Trustee, which removal
shall take effect on the date therein specified; and any Trustee
acting hereunder may at any time resign by providing the Company and
the Plan Administrator with a written resignation, which resignation
shall take effect on the date therein specified, but not less than
thirty (30) days from the date of the giving of such notice unless the
Plan Administrator shall agree to an earlier date. The Company may
appoint a corporation or an individual or individuals to be successor
Trustee hereunder in the place of any removed or resigned Trustee.
Any notice required or permitted by this subparagraph shall be deemed
given upon the mailing thereof to the appropriate person by certified
or registered U.S. mail, return receipt requested, in a properly
addressed envelope, postage prepaid.
(2) After receiving notice of removal or after the
effective date of resignation, the removed or resigning Trustee shall
transfer, pay over and deliver the Trust Fund to the successor
Trustee, or if no successor Trustee be appointed within sixty (60)
days from the Trustee's receipt of notice of removal or within sixty
(60) days from the effective date of the Trustee's resignation, as the
case may be, the removed or resigning Trustee shall, upon the
expiration of such 60-day period, transfer, pay over and deliver the
Trust Fund to the Plan Administrator, without any responsibility upon
the removed or resigning Trustee for any misapplication or to see to
the further application or disposition of the Trust Fund by any
successor Trustee or the Plan Administrator, as the case may be.
Notwithstanding any such transfer, payment and delivery of the Trust
Fund to any successor Trustee or to the Administrator, as the case may
be, the removed or resigning Trustee may have its entire account
judicially settled and it shall be entitled to the payment out of the
Trust Fund of any compensation due to it up to the time of removal or
resignation and of any expenses or other disbursements, whether
theretofore or thereafter arising, for which the removed or resigning
Trustee would be entitled to reimbursement if the Trust Fund had not
been so transferred, paid over and delivered.
III - 2.
54
(g) PERIODIC ACCOUNTING.
(1) Within ninety (90) days after the end of each Plan
Year, and within sixty (60) days after removal or resignation, the
Trustee shall furnish the Plan Administrator with a verified
accounting of the Trust Fund for such Plan Year, or for the portion
thereof ending with the date of such removal or resignation, which
accounting shall include a record of receipts and disbursements,
changes in investments and realized appreciation and depreciation for
such year or period, and a statement of assets (showing both book
value and fair market value) and liabilities on hand as of the end of
such year or period.
(2) Except as otherwise permitted by law, all rights of
every Participant and every beneficiary of a Participant under the
Plan or this Agreement with relation to the Trust Fund or that may
arise against or affect the Trustee shall be enforced exclusively by
the Administrator, which is hereby given the express power and
authority to enforce all such rights as a representative of every
Participant and beneficiary under the Plan, and in any action or
proceeding with relation to the Trust Fund or brought by or against
the Trustee, the Plan Administrator shall be deemed to represent every
interested Participant and beneficiary.
(h) FUNDING POLICY. The Plan Administrator shall establish in
writing a funding policy and method for the Plan and this Trust, which policy
shall be reviewed at least once each year. All actions taken with respect to
such funding policy and the reasons therefor shall be recorded in writing by
the Plan Administrator.
III - 3.
55
ARTICLE IV.
INVESTMENT MANAGERS
(a) APPOINTMENT. The Plan Administrator may appoint one or more
Investment Managers to manage all or part of the assets of the Plan in
accordance with the provisions of Article VI; each such appointment shall
specify the particular assets of the Trust Fund to be managed by such
Investment Manager.
(b) WRITTEN ACCEPTANCE. Before any such appointment becomes
effective, any Investment Manager so appointed shall accept such designation in
writing and, as part of such acceptance, shall acknowledge that it is a
fiduciary with respect to the Plan.
(c) RESIGNATION AND REMOVAL. The Plan Administrator may at any
time remove an Investment Manager acting hereunder, and any Investment Manager
acting hereunder may at any time resign, in each case in such manner as may be
or may have been agreed by the Plan Administrator and the Investment Manager.
The Administrator may appoint any individual, individuals, partnership,
corporation or other entity to be a successor Investment Manager hereunder in
the place of any removed or resigned Investment Manager.
IV - 1.
56
ARTICLE V.
INVESTMENT OF THE TRUST FUND
(a) INVESTMENT DECISIONS. Except for the designation of an
investment fund at the direction of a Participant, the responsibility for all
investment decisions with respect to the assets of the Trust shall be that of
the Trustee, unless one or more Investment Managers have been appointed, in
which event the responsibility for investment decisions shall be allocated
between the Trustee and the Investment Managers in accordance with the written
direction of the Plan Administrator, and the Trustee and each Investment
Manager shall have no responsibility for each other's investment decisions.
(b) EXECUTION OF INVESTMENT DECISIONS. Investment decisions made
by any Investment Manager shall be communicated to the Trustee and the Plan
Administrator, and shall be carried out forthwith either by the Investment
Manager or its agent or by the Trustee acting upon the direction of the
Investment Manager.
(c) POWERS. Subject to the other provisions of this Article V, in
carrying out their duties hereunder, each Investment Manager, if any, (with
respect to making and carrying out its investment decisions) and the Trustee
(with respect to carrying out the decisions of an Investment Manager or, to the
extent there is none, with respect to making and carrying out investment
decisions) are authorized and empowered to:
(1) sell, redeem or otherwise realize the value of any
assets of the Trust Fund;
(2) invest and reinvest all or any part of the Trust
Fund, the income therefrom and the increment thereof in any common or
preferred stocks, bonds, mortgages, secured or unsecured notes,
secured or unsecured debentures, mutual funds, other securities, or
commodities; any "qualifying employer security" as such term is
defined in Section 407(d)(5) of the Employee Retirement Income
Security Act of 1974, as amended from time to time (up to 100% of the
value of the Trust Fund); any common trust fund operated by the
Trustee (provided that as long as the Trust has any investments in a
common fund available only to pension trusts and profit sharing trusts
that meet the requirements of Section 401(a) of the Code, then such
common trust fund shall constitute an integral part of this Trust and
of the Plan); or property of any kind or nature whatsoever, real,
personal or mixed, including mortgaged real property, without regard
to any rule of law or statute designating securities to be held for
trust funds; and to hold cash uninvested (or in deposits bearing a
reasonable rate of interest, in a bank or other similar institution
supervised by the United States or a state, including, if applicable,
the Trustee) at any time and from time to time;
(3) without limitation on the foregoing, buy and sell
listed options and/or sell covered options and repurchase the same;
V - 1.
57
(4) vote upon any stocks, bonds or other securities of
any corporation or other issuer held in the Trust, and otherwise
consent to or request any action on the part of such corporation or
other issuer, and give general or special proxies or powers of
attorneys with or without power of substitution; and
(5) become a party to the reorganization, consolidation
or merger of any corporation, and for such purposes execute any
agreements or consents, or participate in or take any steps to
effectuate the same, whether or not any specific plans have been
formulated therefor and in connection therewith, deposit any such
securities with creditors or stockholders' committees, bodies or other
protective groups, and surrender or exchange any such securities for
such debentures, certificates, receipts, agreements or proceeds as may
be issued or paid by such committees, bodies or groups, or
reorganized, consolidated or merged corporations, and generally
exercise all the rights and powers, whether herein enumerated or not,
as may be lawfully exercised by persons holding similar property in
their own right.
(d) WRITTEN INSTRUMENTS. The Trustee and each Investment Manager
shall make, execute and deliver, as Trustee or Investment Manager, as the case
may be, with provisions for no individual liability, all instruments in writing
necessary for the exercise of any of the foregoing powers.
V - 2.
58
ARTICLE VI.
INVESTMENT FUNDS
(a) INVESTMENT OF ACCOUNTS. Each Participant may direct the Plan
Administrator to invest his Accounts (other than his Matching Contribution
Account) in one or more investment funds that may be made available from time
to time.
(b) PROCEDURES. The Administrator shall establish procedures
regarding Participant investment direction as are necessary, which procedures
shall be communicated to all Participants and applied in a uniform,
nondiscriminatory manner. Procedures established by the Administrator shall
comply with the requirements of Section 404(c) of the Employee Retirement
Income Security Act of 1974, as amended from time to time, and the applicable
regulations.
(c) CHARGES AND CREDITS; EARNINGS FACTOR. All dividends,
interest, and other income on the investments in a particular investment fund,
and all realized and unrealized gains, shall be credited to that fund. All
brokerage commissions, taxes, and other charges and expenses in connection with
the investments in a particular investment fund, and all realized and
unrealized losses, shall be charged to that fund. Each investment fund shall
be treated separately for purposes of crediting the earnings factor to a
Participant's Accounts.
(d) NONLIABILITY. Neither the Trustee, the Administrator, nor any
other person shall be under any duty to question any election by a Participant
or to make any suggestions to him in connection therewith. Any loss occasioned
by a Participant's election or failure to change an election of an investment
fund shall not be the responsibility of the Trustee, the Administrator, or any
other person. Nor shall the Trustee or the Administrator be liable to any
Participant for failure to make an investment in any investment fund elected by
him if in the exercise of due diligence the Trustee has not been able to
acquire satisfactory securities or other property for that fund satisfying the
specifications and parameters established by the Administrator and reasonable
requirements as to price, terms, and other conditions, or for inability to
liquidate an investment in a fund promptly upon receipt of a new election form
from the Participant.
(e) PASS THROUGH OF VOTING AND OTHER RIGHTS. Notwithstanding the
provisions of paragraph (c)(4) of Article V, to the extent a Participant
directs the investment of his Accounts in a Company stock fund (as defined in
paragraph (f) of Article X of the Plan), the voting, tender and similar rights
with respect to the securities in the Company stock fund held in the
Participant's Accounts shall be passed through to the Participant and his
beneficiaries to the extent necessary to satisfy the requirements of Section
404(c) of the Employee Retirement Income Security Act of 1974, as amended from
time to time, and the regulations promulgated thereunder. To the extent a
Participant or his beneficiary fails to exercise such voting, tender and
similar rights, such rights shall be exercised by the Trustee in its
discretion.
VI - 1.
59
ARTICLE VII.
EXPENSES OF ADMINISTRATION OF THE PLAN AND THE TRUST FUND
(a) EXPENSES OF ADMINISTRATION.
(1) Unless otherwise paid or provided by the Company and
the other Employers, the assets of the Trust Fund shall be used to pay
all expenses of the administration of the Plan and the Trust Fund,
including the Trustee's compensation, the compensation of any
investment manager, the expense incurred by the Plan Administrator in
discharging its duties, all income or other taxes of any kind
whatsoever that may be levied or assessed under existing or future
laws upon or in respect of the Trust Fund, and any interest that may
be payable on money borrowed by the Trustee for the purpose of the
Trust.
(2) The Company and the other Employers may pay the
expenses of the Plan and the Trust Fund. Any such payment by the
Company or another Employer shall not be deemed a contribution to this
Plan.
(b) NO PAYMENT OF EXCISE TAX. Notwithstanding anything contained
herein to the contrary, no excise tax or other liability imposed upon the
Trustee, the Plan Administrator or any other person for failure to comply with
the provisions of any federal law shall be subject to payment or reimbursement
from the assets of the Trust.
(c) PAYMENT OF TRUSTEE. For its services, any corporate trustee
shall be entitled to receive reasonable compensation in accordance with its
rate schedule in effect from time to time for the handling of a retirement
trust. Any individual Trustee shall be entitled to such compensation as shall
be arranged between the Company and the Trustee by separate instrument;
provided, however, that no person who is already receiving full-time pay from
any Employer or any Affiliate shall receive compensation from the Trust Fund
(except for the reimbursement of expenses properly and actually incurred).
VII - 1.
60
ARTICLE VIII.
AMENDMENT AND TERMINATION
(a) RESTRICTIONS ON AMENDMENT AND TERMINATION OF PLAN AND TRUST.
The Plan and this Trust may be amended or terminated by the Company in
accordance with the terms of the Plan and this Trust; provided, however, that
no such amendment:
(1) shall have the effect of vesting in any Employer,
directly or indirectly, any interest, ownership or control in any of
the present or subsequent funds held subject to the terms of this
Trust;
(2) shall cause or permit any property held subject to
the terms of this Trust to be diverted to purposes other than the
exclusive benefit of the Participants and their beneficiaries or for
the administration expenses of the Plan Administrator and this Trust;
(3) shall (A) reduce any vested interest of a Participant
on the later of the date the amendment is adopted or the date the
amendment is effective, except as permitted by law or (B) reduce or
restrict, either directly or indirectly, any benefit provided any
Participant prior to the date an amendment is adopted;
(4) shall reduce the Accounts of any Participant;
(5) shall amend any vesting schedule with respect to any
Participant who has at least three (3) Years of Service at the end of
the election period described below, except as permitted by law,
unless each such Participant shall have the right to elect to have the
vesting schedule in effect prior to such amendment apply with respect
to him, such election, if any, to be made during the period beginning
not later than the date the amendment is adopted and ending no earlier
than sixty (60) days after the latest of the date the amendment is
adopted, the amendment becomes effective or the Participant is issued
written notice of the amendment by his Employer or the Plan
Administrator; or
(6) shall increase the duties or liabilities of the
Trustee without its written consent.
(b) TERMINATION OR DISCONTINUANCE. Any Employer, in its sole and
absolute discretion, may permanently discontinue making contributions under the
Plan or may terminate the Plan and this Trust (with respect to all Employers if
it is the Company, or with respect to itself alone if it is an Employer other
than the Company), completely or partially, at any time without any liability
whatsoever for such permanent discontinuance or complete or partial
termination.
VIII - 1.
61
(c) DISCONTINUANCE PROCEDURE. In the event an Employer decides to
permanently discontinue making contributions, such decision shall be evidenced
by an appropriate resolution of its Board and a certified copy of such
resolution shall be delivered to the Plan Administrator and the Trustee. All
of the assets in the Trust Fund belonging to the affected Participants on the
date of discontinuance specified in such resolutions shall be held,
administered and distributed by the Trustee in the manner provided under the
Plan and this Agreement.
(d) TERMINATION PROCEDURE. In the event an Employer decides to
terminate the Plan and this Trust, such decision shall be evidenced by an
appropriate resolution of its Board and a certified copy of such resolution
shall be delivered to the Plan Administrator and the Trustee. After payment of
all expenses and proportional adjustments of individual accounts to reflect
such expenses and other changes in the value of the Trust Fund as of the date
of termination, each affected Participant or the beneficiary of any such
Participant shall be entitled to receive, provided that no successor plan has
been established, any amount then credited to his Accounts in a accordance with
the provisions of Article VIII of the Plan.
VIII - 2.
62
ARTICLE IX.
MISCELLANEOUS
(a) ACCEPTANCE OF TRUST. The Trustee hereby accepts this Trust
and agrees to hold all the property now or hereafter constituting the Trust
Fund hereunder, subject to all the terms and conditions of this Agreement.
(b) MERGER OR CONSOLIDATION. The Plan and this Trust may not be
merged or consolidated with, and the assets or liabilities of the Plan and this
Trust may not be transferred to, any other plan or trust unless each
Participant would receive a benefit immediately after the merger, consolidation
or transfer if the plan and trust then terminated that is equal to or greater
than the benefit the Participant would have received immediately before the
merger, consolidation or transfer if the Plan and this Trust had then
terminated.
(c) ALIENATION.
(1) Except as provided in subparagraph (2), no
Participant or beneficiary of a Participant shall have any right to
assign, transfer, appropriate, encumber, commute, anticipate or
otherwise alienate his interest in the Plan or this Trust or any
payments to be made hereunder; no benefits, payments, rights or
interests of a Participant or a beneficiary of a Participant of any
kind or nature shall be in any way subject to legal process to levy
upon, garnish or attach the same for payment of any claim against the
Participant or beneficiary of a Participant; and no Participant or
beneficiary of a Participant shall have any right of any kind
whatsoever with respect to this Trust, or any estate or interest
therein, or with respect to any other property or right, other than
the right to receive such distributions as are lawfully made out of
this Trust, as and when the same respectively are due and payable
under the terms of the Plan and this Agreement.
(2) Notwithstanding the provisions of subparagraph
(c)(1), the Plan Administrator shall direct the Trustee to make
payments pursuant to a Qualified Domestic Relations Order as defined
in Section 414(p) of the Code.
(d) GOVERNING LAW. This Agreement shall be administered,
construed and enforced according to the laws of the State of Florida, except to
the extent such laws have been expressly preempted by federal law.
(e) ACTION BY EMPLOYER. Whenever the Company or another Employer
under the terms of this Agreement is permitted or required to do or perform any
act, it shall be done and performed by the Board of Directors of the Company or
such other Employer and shall be evidenced by proper resolution of such Board
of Directors certified by the Secretary or Assistant Secretary of the Company
or such other Employer.
IX - 1.
63
(f) ALTERNATIVE ACTIONS. In the event it becomes impossible for
the Company, another Employer, the Plan Administrator or the Trustee to perform
any act required by this Agreement, then the Company, such other Employer, the
Plan Administrator or the Trustee, as the case may be, may perform such
alternative act that most nearly carries out the intent and purpose of this
Agreement.
(g) GENDER. Throughout this Agreement, and whenever appropriate,
the masculine gender shall be deemed to include the feminine and neuter; the
singular, the plural; and vice versa.
IN WITNESS WHEREOF, the parties have executed this Agreement this
_____ day of ___________________, 1994.
HOME SHOPPING NETWORK, INC.
By: __________________________
"COMPANY"
PNC BANK KENTUCKY, INC.
By: __________________________
"TRUSTEE"
IX - 2.
EX-10.30
5
EMPLOYEE AND PART-TIME EMPLOYEE STOCK PLAN
1
EXHIBIT 10.30
HOME SHOPPING NETWORK, INC.
EMPLOYEE STOCK PURCHASE PLAN
1. DEFINITIONS.
(a) "Administrator" means PNC National Bank, or any successor
appointed by the Company from time to time.
(b) "Base Compensation" means any base salary, wages and overtime
pay received by a Participant.
(c) "Company" means Home Shopping Network, Inc. and its
subsidiaries.
(d) "Eligible Employee" means any person who is currently employed
by the Company or any of its subsidiaries on a regular full-time basis and has
been so employed for a period of at least 90 days prior to electing to
participate in the Plan. A person shall be considered employed on a regular
full-time basis if he or she is customarily employed at least 30 hours per
week.
(e) "Enrollment Dates" means such quarterly dates as are
prescribed by the Administrator, on which Eligible Employees may commence
participation in the Plan, and Participants may make changes to the level of
their participation.
(f) "Insider" means an Eligible Employee subject to the
requirements and restrictions of Section 16 of the Securities Exchange Act of
1934.
(g) "Participant" means any Eligible Employee who elects to
purchase Shares pursuant to the Plan.
(h) "Plan" means this Home Shopping Network, Inc. Employee Stock
Purchase Plan.
(i) "Shares" means common stock of the Company.
2. PURPOSE OF THE PLAN. The purpose of the Plan is to provide
employees of the Company with an opportunity to acquire a proprietary interest
in the Company through the purchase of Shares in the open market.
3. BASIS OF PARTICIPATION AND FOR PURCHASING SHARES.
(a) An Eligible Employee may purchase Shares through
payroll deduction by completing the Payroll Deduction Authorization Form and
such other forms as may be promulgated by the Company and delivering them to
the Company at least 10 days prior to an Enrollment Date. The Payroll
Deduction Authorization Form shall state the percentage of the Participant's
Base Compensation that he or she desires to have withheld, which percentage
shall be a whole number not less than one and not greater than 15.
2
(b) The designated percentage of compensation shall be
withheld by the Company for the next pay period after the Enrollment Date and
for each succeeding pay period until the Participant submits a Payroll
Deduction Authorization Form changing such election. Changes to the percentage
of compensation to be withheld may be made by submitting a Payroll Deduction
Authorization Form to the Company at least 10 days before any subsequent
Enrollment Date; provided, however, that a Participant may discontinue
participation in the Plan at any time, as provided in Section 9.
(c) The Company will deliver the amounts deducted from
the Participant's compensation to the Administrator, who will accumulate and
hold such funds for each Participant's account. Not less frequently than
monthly, the Administrator will use the funds accumulated to purchase Shares in
the open market for the benefit of the Participants. The purchase price for
such Shares shall be their fair market value as of the time of purchase. The
Participant shall not be charged any brokerage fees in relation to the
purchases, and he or she shall be entitled to the interest, if any, paid on
funds held for his or her account. Once funds have been withheld from the
Participant's compensation, the Participant shall have no right to obtain the
release of such funds, except in accordance with the terms of this Plan.
(d) Shares purchased by the Administrator shall be
allocated to the individual accounts established for Participants in proportion
to the respective amounts withheld for Participants' accounts. Any funds not
used for the purchase of Shares on a particular purchase date shall be carried
over to the next purchase date.
4. OWNERSHIP OF SHARES. The Shares once allocated to the
Participants' accounts become the sole property of the respective Participants.
All Shares are registered as designated by the Administrator and remain so
registered until delivery or sale is requested by the Participant pursuant to
Section 5.
5. DELIVERY; SALE.
(a) A Participant may instruct the Company to advise the
Administrator at any time to deliver to him or her a certificate for any or all
of his or her Shares, without affecting his or her continuing participation in
the Plan; provided, however, that such Participant shall pay any and all costs
associated with the issuance and delivery of such certificate.
(b) A Participant may instruct the Company to advise the
Administrator at any time to sell any or all of the Shares allocable to his or
her account, without affecting his or her continuing participation in the Plan.
The Company shall pay all charges therefor, including but not limited to
brokerage commis-
2
3
sions, transfer taxes, and registration fees. The proceeds of any such sale
shall promptly be delivered to the Participant.
6. DISTRIBUTIONS ON SHARES. Cash dividends and other cash
distributions on Shares held in the custody of the Administrator are credited
to the account of the Participant, and the Participant may take a distribution
of such dividend or distribution or request the Administrator to purchase
additional Shares of the Company. Any dividends paid in Shares or any splits
of Shares which are received by the Administrator on Shares held in custody
will be allocated to each Participant in accordance with his or her interest in
the Shares in which the dividends or splits are paid, without charge.
7. CONFIRMATION OF TRANSACTIONS AND STATEMENTS OF ACCOUNT. Each
Participant will receive from the Administrator quarterly statements of account
which itemize the transactions for his or her account, and will also receive
confirmations of current transactions if required by regulatory authorities.
8. COMMUNICATIONS FROM COMPANY AND VOTING OF SHARES. The
Administrator shall deliver to each Participant as promptly as practicable, by
mail or otherwise, all notices of meetings, proxy statements and other material
distributed by the Company to its shareholders. The Shares in each
Participant's account will be voted in accordance with the Participant's signed
proxy instructions duly delivered to the Administrator, or otherwise in
accordance with rules applicable to the Company.
9. TERMINATION OF PARTICIPATION IN PLAN.
(a) A Participant may terminate his or her participation
in the Plan at any time by delivering to the Company written notice terminating
his or her payroll deduction authorization, which will become effective as soon
as practicable after receipt.
(b) Participation in the Plan and payroll deduction
authorizations terminate automatically without notice upon death or other
termination of employment with the Company. Any funds submitted in payment for
Shares prior to termination of employment and prior to purchase of Shares shall
be promptly returned to the Participant.
10. DIRECTORS AND EXECUTIVE OFFICERS. If an Insider:
(a) Withdraws Shares from the Plan pursuant to Section
5(a),
(b) Instructs the Administrator to sell any or all of the
Shares held by the Plan for the account of such
Insider pursuant to Section 5(b), or
3
4
(c) Ceases participation in the Plan pursuant to Section
9,
then the Insider shall immediately be required to cease participation in the
Plan and shall not be permitted to renew participation in the Plan for at least
six months after the date of such withdrawal, sale or cessation of
participation.
11. ADMINISTRATION.
(a) The Company's responsibilities under the Plan will be
administered by the Compensation/Benefits Committee appointed by the Board of
Directors, which Committee has appointed the Administrator to perform certain
functions. The Compensation/Benefits Committee serves at the pleasure of the
Board of Directors. The Company reserves the right to change the designation
of the Administrator at any time. Certain conditions imposed upon brokers by
regulatory agencies could cause delay, from time to time, in the purchase of
Shares for which delay neither the Company nor the Administrator shall have any
liability.
(b) All Shares issued under the Plan will either be
appropriately registered under applicable federal and state securities laws or
issued in transactions that comply with exemptions from the securities
registration requirements of applicable federal and state laws. The
Compensation/Benefits Committee may establish procedures and restrictions in
its discretion to ensure compliance with applicable securities laws.
12. TERM OF PLAN. Unless sooner terminated as provided in Section
13, the Plan shall commence on satisfaction of the conditions of Section 15.
Notwithstanding anything in the Plan to the contrary, if (i) the Company is
merged or consolidated with another corporation, and the Company is not a
surviving corporation or (ii) the Company is liquidated or dissolved, then the
Plan shall immediately terminate and all rights to purchase stock hereunder to
the extent not then exercised shall cease and become void.
13. AMENDMENT OR TERMINATION. The Board of Directors of the
Company shall have the right to amend, modify, or terminate the Plan at any
time without notice, provided that without stockholder approval, no such
amendment of the Plan shall (i) change the price at which the Shares shall be
sold from fair market value, or (ii) change the eligibility requirements. Upon
termination, all rights to purchase Shares hereunder to the extent not then
exercised shall cease and become void.
4
5
14. NOTICES.
(a) All notices or other communications by an employee to the
Company under or in connection with the Plan shall be deemed to have been duly
given when actually received by the Administrator or when actually received in
the form specified by the Company at the locations, or by the person,
designated by the Company for the receipt thereof.
(b) All notices or other communications by the Company to
an employee under or in connection with the Plan shall be deemed to have been
duly given by the Company to the employee if hand delivered to the employee or
delivered to the employee's location of employment, or if sent by U.S. mail to
the residence or business address of the employee as reflected on the books of
the Company or to such other address as the employee may designate from time to
time by notice given in accordance with the provisions in Section 14.
15. CONDITIONS PRECEDENT TO EFFECTIVENESS. The Plan shall become
effective upon the occurrence of the following:
(a) Adoption of the Plan by the Board of Directors of the
Company;
(b) Approval of the Plan by the shareholders of the
Company; and
(c) The effective registration under applicable federal
and state securities laws of the Shares under the Plan or the receipt of an
opinion of counsel to the Company that registration of the Shares under the
Plan will not be necessary under either federal or state securities laws.
16. RIGHT TO TERMINATE EMPLOYMENT. Nothing in the Plan or any
agreement entered into pursuant to the Plan shall confer upon any Eligible
Employee or other person the right to continue in the employment of the Company
or affect any right which the Company may have to terminate the employment of
such Eligible Employee or other person.
5
6
HOME SHOPPING NETWORK, INC.
PART-TIME EMPLOYEE STOCK PURCHASE PLAN
1. DEFINITIONS.
(a) "Administrator" means PNC National Bank, or any successor
appointed by the Company from time to time.
(b) "Base Compensation" means any base salary, wages and overtime
pay received by a Participant.
(c) "Company" means Home Shopping Network, Inc. and its
subsidiaries.
(d) "Eligible Employee" means any person who is currently employed
by the Company or any of its subsidiaries on a regular part-time basis and has
been so employed for a period of at least 90 days prior to electing to
participate in the Plan. A person shall be considered employed on a regular
part-time basis if he or she is customarily employed less than 30 hours per
week.
(e) "Enrollment Dates" means such quarterly dates as are
prescribed by the Administrator, on which Eligible Employees may commence
participation in the Plan, and Participants may make changes to the level of
their participation.
(f) "Participant" means any Eligible Employee who elects to
purchase Shares pursuant to the Plan.
(g) "Plan" means this Home Shopping Network, Inc. Employee Stock
Purchase Plan.
(h) "Shares" means common stock of the Company.
2. PURPOSE OF THE PLAN. The purpose of the Plan is to provide
employees of the Company with an opportunity to acquire a proprietary interest
in the Company through the purchase of Shares in the open market.
3. BASIS OF PARTICIPATION AND FOR PURCHASING SHARES.
(a) An Eligible Employee may purchase Shares through
payroll deduction by completing the Payroll Deduction Authorization Form and
such other forms as may be promulgated by the Company and delivering them to
the Company at least 10 days prior to an Enrollment Date. The Payroll
Deduction Authorization Form shall state the percentage of the Participant's
Base Compensation that he or she desires to have withheld, which percentage
shall be a whole number not less than one and not greater than 15.
(b) The designated percentage of compensation shall be
withheld by the Company for the next pay period after the Enrollment Date and
for each succeeding pay period until the Participant submits a Payroll
Deduction Authorization Form changing such
7
election. Changes to the percentage of compensation to be withheld may be made
by submitting a Payroll Deduction Authorization Form to the Company at least 10
days before any subsequent Enrollment Date; provided, however, that a
Participant may discontinue participation in the Plan at any time, as provided
in Section 9.
(c) The Company will deliver the amounts deducted from
the Participant's compensation to the Administrator, who will accumulate and
hold such funds for each Participant's account. Not less frequently than
monthly, the Administrator will use the funds accumulated to purchase Shares in
the open market for the benefit of the Participants. The purchase price for
such Shares shall be their fair market value as of the time of purchase. The
Participant shall not be charged any brokerage fees in relation to the
purchases, and he or she shall be entitled to the interest, if any, paid on
funds held for his or her account. Once funds have been withheld from the
Participant's compensation, the Participant shall have no right to obtain the
release of such funds, except in accordance with the terms of this Plan.
(d) Shares purchased by the Administrator shall be
allocated to the individual accounts established for Participants in proportion
to the respective amounts withheld for Participants' accounts. Any funds not
used for the purchase of Shares on a particular purchase date shall be carried
over to the next purchase date.
4. OWNERSHIP OF SHARES. The Shares once allocated to the
Participants' accounts become the sole property of the respective Participants.
All Shares are registered as designated by the Administrator and remain so
registered until delivery or sale is requested by the Participant pursuant to
Section 5.
5. DELIVERY; SALE.
(a) A Participant may instruct the Company to advise the
Administrator at any time to deliver to him or her a certificate for any or all
of his or her Shares, without affecting his or her continuing participation in
the Plan; provided, however, that such Participant shall pay any and all costs
associated with the issuance and delivery of such certificate.
(b) A Participant may instruct the Company to advise the
Administrator at any time to sell any or all of the Shares allocable to his or
her account, without affecting his or her continuing participation in the Plan.
The Company shall pay all charges therefor, including but not limited to
brokerage commissions, transfer taxes, and registration fees. The proceeds of
any such sale shall promptly be delivered to the Participant.
6. DISTRIBUTIONS ON SHARES. Cash dividends and other cash
distributions on Shares held in the custody of the Administrator
2
8
are credited to the account of the Participant, and the Participant may take a
distribution of such dividend or distribution or request the Administrator to
purchase additional Shares of the Company. Any dividends paid in Shares or any
splits of Shares which are received by the Administrator on Shares held in
custody will be allocated to each Participant in accordance with his or her
interest in the Shares in which the dividends or splits are paid, without
charge.
7. CONFIRMATION OF TRANSACTIONS AND STATEMENTS OF ACCOUNT. Each
Participant will receive from the Administrator quarterly statements of account
which itemize the transactions for his or her account, and will also receive
confirmations of current transactions if required by regulatory authorities.
8. COMMUNICATIONS FROM COMPANY AND VOTING OF SHARES. The
Administrator shall deliver to each Participant as promptly as practicable, by
mail or otherwise, all notices of meetings, proxy statements and other material
distributed by the Company to its shareholders. The Shares in each
Participant's account will be voted in accordance with the Participant's signed
proxy instructions duly delivered to the Administrator, or otherwise in
accordance with rules applicable to the Company.
9. TERMINATION OF PARTICIPATION IN PLAN.
(a) A Participant may terminate his or her participation
in the Plan at any time by delivering to the Company written notice terminating
his or her payroll deduction authorization, which will become effective as soon
as practicable after receipt.
(b) Participation in the Plan and payroll deduction
authorizations terminate automatically without notice upon death or other
termination of employment with the Company. Any funds submitted in payment for
Shares prior to termination of employment and prior to purchase of Shares shall
be promptly returned to the Participant.
10. ADMINISTRATION.
(a) The Company's responsibilities under the Plan will be
administered by the Compensation/Benefits Committee appointed by the Board of
Directors, which Committee has appointed the Administrator to perform certain
functions. The Compensation/Benefits Committee serves at the pleasure of the
Board of Directors. The Company reserves the right to change the designation
of the Administrator at any time. Certain conditions imposed upon brokers by
regulatory agencies could cause delay, from time to time, in the purchase of
Shares for which delay neither the Company nor the Administrator shall have any
liability.
3
9
(b) All Shares issued under the Plan will either be
appropriately registered under applicable federal and state securities laws or
issued in transactions that comply with exemptions from the securities
registration requirements of applicable federal and state laws. The
Compensation/Benefits Committee may establish procedures and restrictions in
its discretion to ensure compliance with applicable securities laws.
11. TERM OF PLAN. Unless sooner terminated as provided in Section
12, the Plan shall commence on satisfaction of the conditions of Section 14.
Notwithstanding anything in the Plan to the contrary, if (i) the Company is
merged or consolidated with another corporation, and the Company is not a
surviving corporation or (ii) the Company is liquidated or dissolved, then the
Plan shall immediately terminate and all rights to purchase stock hereunder to
the extent not then exercised shall cease and become void.
12. AMENDMENT OR TERMINATION. The Board of Directors of the
Company shall have the right to amend, modify, or terminate the Plan at any
time without notice. Upon termination, all rights to purchase Shares hereunder
to the extent not then exercised shall cease and become void.
13. NOTICES.
(a) All notices or other communications by an employee to the
Company under or in connection with the Plan shall be deemed to have been duly
given when actually received by the Administrator or when actually received in
the form specified by the Company at the locations, or by the person,
designated by the Company for the receipt thereof.
(b) All notices or other communications by the Company to
an employee under or in connection with the Plan shall be deemed to have been
duly given by the Company to the employee if hand delivered to the employee or
delivered to the employee's location of employment, or if sent by U.S. mail to
the residence or business address of the employee as reflected on the books of
the Company or to such other address as the employee may designate from time to
time by notice given in accordance with the provisions of Section 13.
14. CONDITIONS PRECEDENT TO EFFECTIVENESS. The Plan shall become
effective upon the occurrence of the following:
(a) Adoption of the Plan by the Board of Directors of the
Company; and
(b) The effective registration under applicable federal
and state securities laws of the Shares under the Plan or the receipt of an
opinion of counsel to the Company that registration
4
10
of the Shares under the Plan will not be necessary under either federal or
state securities laws.
15. RIGHT TO TERMINATE EMPLOYMENT. Nothing in the Plan or any
agreement entered into pursuant to the Plan shall confer upon any Eligible
Employee or other person the right to continue in the employment of the Company
or affect any right which the Company may have to terminate the employment of
such Eligible Employee or other person.
5
EX-10.31
6
EMPLOYEE EQUITY PARTICIPATION PLAN
1
EXHIBIT 10.31
HOME SHOPPING NETWORK, INC.
EMPLOYEE EQUITY PARTICIPATION PLAN
2
HOME SHOPPING NETWORK, INC.
EMPLOYEE EQUITY PARTICIPATION PLAN
M
Table Of Contents
ARTICLE I Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II Name and Purpose of the Plan and the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE III Plan Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IV Eligibility and Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE V Contributions to the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VI Participants' Account and Allocation
of Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VII Top Heavy Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VIII Benefits Under the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE IX Payment of Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE X Voting and Exercising Other Rights
of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE XI Valuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE XII Investment Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE XIII Trust Fund and Expenses of Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE XIV Amendment and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE XV Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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HOME SHOPPING NETWORK, INC.
EMPLOYEE EQUITY PARTICIPATION PLAN
This HOME SHOPPING NETWORK, INC. EMPLOYEE EQUITY PARTICIPATION PLAN
hereby adopted this 28th day of December 2, 1994, by HOME SHOPPING NETWORK,
INC., a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company desires to establish and maintain an employee stock
ownership plan for the benefit of its employees and the employees of its
Affiliates which adopt this Plan and who shall qualify as participants
hereunder; and
WHEREAS, the Company's securities are traded on an established
securities market; and
WHEREAS, the Company intends to contribute its securities to the Trust
Fund solely for the benefit of its employees and those of its Affiliates
who adopt this plan and who qualify hereunder.
NOW, THEREFORE, the Company hereby establishes an employee stock
ownership plan upon the following terms:
ARTICLE I
Definitions
(a) "Account" means the Participant's Company Stock Account.
(b) "Allocation Date" means December 31 of such Plan Year.
(c) "Administrator" shall mean the Plan Administrator.
(d) "Affiliate" or "Affiliates" shall mean, with
respect to an Employer, any corporation other than such Employer that is a
member of a controlled group of corporations, within the meaning of Section
414(b) of the Code, of which such Employer is a member; all other trades or
businesses (whether or not incorporated) under common control, within the
meaning of Section 414(c) of the Code, with such Employer; any service
organization other than such Employer that is a member of an affiliated service
group, within the meaning of Section 414(m) of the Code, of which such Employer
is a member; and any other organization that is required to be aggregated with
such Employer under Section 414(o) of the Code. For purposes of determining the
limitations on Annual Additions, the special rules of Section 415(h) of the Code
shall apply.
(e) "Annual Additions" shall mean, with respect to a
Limitation Year, the sum of:
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(1) the amount of Employer contributions (including
elective contributions) allocated to the Participant under any defined
contribution plan maintained by an Employer or an Affiliate;
(2) the amount of the Employee's contributions (other than
rollover contributions, if any) to any contributory defined contribution plan
maintained by an Employer or an Affiliate;
(3) any Forfeitures allocated to the Participant under any
defined contribution plan maintained by an Employer or an Affiliate; and
(4) amounts allocated to an individual medical account,
as defined in Section 415(l)(2) of the Code that is part of a pension or
annuity plan maintained by an Employer or an Affiliate, and amounts derived from
contributions that are attributable to post-retirement medical benefits
allocated to the separate account of a Key Employee (as defined in Section
419A(d)(3) of the Code) under a welfare benefit plan (as defined in Section
419(e) of the Code) maintained by an Employer or an Affiliate; provided,
however, the percentage limitation set forth in paragraph (e)(1) of Article VI
shall not apply to: (A) any contribution for medical benefits (within the
meaning of Section 419A(f)(2) of the Code) after separation from service which
is otherwise treated as an "Annual Addition," or (B) any amount otherwise
treated as an "Annual Addition" under Section 415(l)(1) of the Code.
(f) "Authorized Leave of Absence" shall mean an unpaid
temporary cessation from active employment with the Employer pursuant to a
nondiscriminatory policy, whether occasioned by illness, military service, or
any other reason.
(g) "Beneficiary" or "Beneficiaries" shall mean the person or
persons to whom the share of a deceased Participant is payable as provided in
paragraph (d)(2) of Article VIII.
(h) "Board of Directors" and "Board" shall mean the board of
directors of the Company or, when required by the context, the board of
directors of an Employer other than the Company.
(i) "Code" shall mean the Internal Revenue Code of 1986, as
amended, or any successor statute. Reference to a specific section of the Code
shall include a reference to any successor provision.
(j) "Company" shall mean Home Shopping Network, Inc., and its
successors.
(k) "Company Stock" means common stock issued by the Company (or by
a corporation which is a member of the controlled group of corporations of which
the Company is a member) which is readily tradeable on an established securities
market. If there is no common stock which meets the foregoing requirement, the
term "Company Stock"
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means common stock issued by the Company (or by a corporation which is a member
of the same controlled group) having a combination of voting power and
dividend rights equal to or in excess of: (A) that class of common stock of the
Company (or of any such corporation) having the greatest voting power, and (B)
that class of stock of the Company (or any other such corporation) having the
greatest dividend rights. Noncallable preferred stock shall be deemed to be
"Company Stock" if such stock is convertible at any time into stock which
constitutes "Company Stock" hereunder and if such conversion is at a conversion
price which (as of the date of the acquisition by the Trust) is reasonable. For
purposes, of the preceding sentence, pursuant to regulations, preferred stock
shall be treated as noncallable if after the call there will be a reasonable
opportunity for a conversion which meets the requirements of the preceding
sentence.
(l) "Company Stock Account" means the account of a Participant which
is credited with the shares of Company Stock purchased and paid for by the Trust
Fund or contributed to the Trust Fund pursuant to paragraph (a) of Article V.
(m) (1) "Compensation" shall mean the regular salaries and
wages, commissions, bonuses and overtime pay paid by an Employer (as
determined for federal income tax purposes and reported on IRS Form W-2)
and elective contributions under a Section 401(k) plan or a plan
described in Section 125 of the Code, but shall not include disability
payments, stock options, stock awards, relocation expense payments,
credits or benefits under this Plan, any amount contributed to any
pension, employee welfare, life insurance or health insurance plan or
arrangement, or any other fringe benefits, deferred compensation or
welfare benefits. Compensation shall be determined based on the Plan
Year.
(2) To the extent required by law, no Compensation in
excess of $150,000.00 (adjusted under such regulations as may be issued
by the Secretary of the Treasury) shall be taken into account for any
Employee. For purposes of determining whether Compensation exceeds
$150,000.00, if any Employee is a Family Member of a Highly Compensated
Employee who is (i) a 5% owner of an Employer, or (ii) one of the ten
Highly Compensated Employees paid the greatest amount of Compensation
during the Plan Year, then such Family Member shall not be considered as
a separate Employee and any Compensation paid to such Family Member
shall be treated as if it were paid to or on behalf of the related
Highly Compensated Employee.
(3) For purposes of making allocations of Company
contributions pursuant to Article VI with respect to any Plan Year, no
Compensation paid by an Employer with respect to an Employee prior to
the Employee's first day of participation shall be taken into account.
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(n) "Effective Date" shall mean December 31, 1994, except as may
otherwise be noted herein.
(o) "Eligible Person" is any Employee other than an Employee who has
been granted stock options under the Company's employee stock option plan or who
has been granted any stock appreciation rights by the Company. Any Employee who
became a Participant and thereafter is granted stock options pursuant to the
Company's stock option plan or is granted any stock appreciation rights shall
continue to vest in any shares allocated to his Account under this Plan but
shall not share in future allocations of Company stock as provided in Article
VI(b) and (e).
(p) "Eligible Participant" means a Participant who has worked at
least one thousand (1,000) Hours of Service with the Employer or an Affiliate
during a Plan Year and is in the employ of an Employer on the Allocation Date.
(q) "Entry Date" shall mean either June 30 or December 31.
(r) "Employee" shall mean any person employed by an Employer or an
Affiliate other than:
(1) a member of a collective bargaining unit if retirement
benefits were a subject of good faith bargaining between such unit and
an Employer, and
(2) a non-resident alien who does not receive earned income
from sources within the United States.
The term "Employee" shall also include any individual required
to be treated as an Employee by reason of Section 414(n) or Section
414(o) of the Code (but only for the purposes specified in such
Sections).
(s) "Employer" shall mean the Company and any Affiliate that
adopts this Plan with the consent of the Company.
(t) "Employment Commencement Date" means the date on which
an Employee performs his first Hour of Service for an Employer.
(u) "Family Member" of a Highly Compensated Employee shall mean such
Employee's spouse, lineal descendant or ascendant, or the spouse of his lineal
descendant or ascendant; provided, however, that for purposes of determining the
limit on a Highly Compensated Employee's Compensation under Section 401(a)(17)
of the Code, the term "Family Member" shall include only the Employee's spouse
and his lineal descendants who have not attained age 19 before the close of the
Plan Year.
(v) "Forfeiture" or "Forfeitures" means that portion of a
Participant's Company Stock Account that is not vested, and which is reallocated
(under paragraph (e) of Article VI) on the dates specified in paragraph (c)(3)
and (4) of Article VIII. Restoration
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of forfeited amounts shall occur pursuant to paragraph (c)(4)(C) of Article
VIII.
(w) (1) "Highly Compensated Employee" shall mean any Employee
during the Plan Year or the immediately preceding Plan Year (or calendar year,
if elected by the Employer in accordance with Treasury regulations)
(A) who was a 5% owner of an Employer;
(B) whose Section 415 Compensation was more than
$75,000.00 (adjusted under such regulations as may be issued by
the Secretary of the Treasury);
(C) whose Section 415 Compensation was more than
$50,000.00 (adjusted under such regulations as may be issued by
the Secretary of the Treasury), and who was a member of the "top
paid group"; provided, that as used herein, "top paid group"
shall mean all Employees who are in the top 20% of the
Employer's work force on the basis of Section 415 Compensation
paid during the year; provided, further, that for purposes of
determining the number of Employees in the top paid group,
Employees described in Section 414(q)(8) of the Code shall be
excluded; or
(D) who was an officer of an Employer and received
compensation in excess of 50% of the amount in effect under
Section 415(b)(1)(A) of the Code for any such Plan Year.
(i) The number of officers shall be limited
to the lesser of (a) 50 Employees; or (b) the greater of
three (3) Employees or 10% of all Employees. For
purposes of determining the number of officers,
Employees described in Section 414(q)(8) of the Code
shall be excluded, but such Employees shall still be
considered for the purpose of identifying particular
Employees who are officers.
(ii) If an Employer does not have at least
one officer whose Section 415 Compensation is in excess
of 50% of the amount in effect in Section 415(b)(1)(A)
of the Code, then the highest paid officer of the
Employer will be treated as a Highly Compensated
Employee.
(2) In determining who is a Highly Compensated Employee,
Employees who are nonresident aliens and who receive no earned income
(within the meaning of Section 911(d)(2) of the Code) from an Employer
constituting United States source income (within the meaning of Section
861(a)(3) of the Code) shall not be treated as Employees.
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(3) For purposes of determining who is a Highly Compensated
Employee, an Employer and any Affiliate shall be taken into account as a
single Employer.
(4) For purposes of this paragraph, the determination of
Section 415 Compensation shall be based only on Section 415 Compensation
that is actually paid and shall be made by including elective or salary
reduction contributions to a plan described in Section 125 of the Code,
a plan described in Section 401(k) of the Code, a simplified employee
pension described in Section 408(k) of the Code or a plan described in
Section 403(b) of the Code.
(5) The term "Highly Compensated Employee" shall also mean
any former Employee who separated from service (or was deemed to have
separated from service) prior to the Plan Year, performs no service for
an Employer during the Plan Year, and was an actively employed Highly
Compensated Employee in the separation year or any Plan Year ending on
or after the date the Employee attained age 55.
(6) For purposes of determining whether a Participant is a
Highly Compensated Employee, if any Employee is a Family Member of a
Highly Compensated Employee who is (A) a 5% owner of an Employer, or (B)
one of the ten Highly Compensated Employees paid the greatest amount of
Compensation during the Plan Year, then such Family Member shall not be
considered as a separate Employee and any Compensation paid to such
Family Member (and any applicable benefit or contribution on behalf of
such Family Member) shall be treated as if it were paid to or on behalf
of the related Highly Compensated Employee.
(x) "Key Employee" shall mean any Employee or former Employee who is
at any time during the Plan Year (or was at any time during the four preceding
Plan Years) (1) an officer of an Employer (within the meaning of Section
416(i)(1) of the Code) having an aggregate annual compensation from the Employer
and its Affiliates in excess of 50% of the amount in effect under Section
415(b)(1)(A) of the Code for any Plan Year, (2) one of the ten Employees owning
(or considered as owning) the largest interests in an Employer, owning more than
a 1/2% interest in the Employer, and having an aggregate annual compensation
from the Employer and its Affiliates of more than the limitation in effect under
Section 415(c)(1)(A) of the Code for the calendar year that includes the last
day of the Plan Year (if two Employees have equal interests in an Employer, the
Employees having the greater annual compensation from the Employer shall be
deemed to have a larger interest), (3) a 5% owner of an Employer (within the
meaning of Section 416(i)(1)(B) of the Code) or (4) a 1% owner of an Employer
(within the meaning of Section 416(i)(1)(B) of the Code) having an aggregate
annual compensation from the Employer and its Affiliates of more than
$150,000.00. For purposes of this paragraph the term "compensation" shall mean
an Employee's Section 415 Compensation. The determination of Section 415
Compensation shall be based only on Section 415 Compensation that is actually
paid
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and shall be made by including elective or salary reduction contributions to a
plan described in Section 125 of the Code, a plan described in Section 401(k)
of the Code, a simplified employee pension described in Section 408(k) of the
Code or a plan described in Section 403(b) of the Code.
(y) "Limitation Year" shall mean the Plan Year.
(z) "Non-Key Employee" shall mean, with respect to any Plan Year, an
Employee or former Employee who is not a Key Employee (including any such
Employee who formerly was a Key Employee).
(aa) "Normal Retirement Date" shall mean the date on which a
Participant attains the age of 65 years.
(ab) "Participant" shall mean any Eligible Person who participates in
the Plan as provided in Article IV and shall include any former employee of an
Employer who was participating in the Plan and who still has a balance in his
Account under the Plan.
(ac) "Plan" shall mean the Home Shopping Network, Inc. Employee
Equity Participation Plan as herein set forth, as it may be amended from time to
time.
(ad) "Plan Administrator" shall mean the Company.
(ae) "Plan Year" shall mean the 12-month period ending on December
31.
(af) "Section 415 Compensation" shall mean wages, salaries, and fees
for professional services and other amounts received (without regard to whether
or not an amount is paid in cash) for personal services actually rendered in the
course of employment with the Employer to the extent that the amounts are
includable in gross income (including, but not limited to, commissions paid
salesmen, compensation for services on the basis of a percentage of profits,
commissions on insurance premiums, tips, bonuses, fringe benefits, and
reimbursements or other expense allowances under a nonaccountable plan (as
described in Section 1.62-2(c) of the Income Tax Regulations), and excluding the
following:
(1) Employer contributions to a plan of deferred
compensation which are not includable in the Employee's gross income for
the taxable year in which contributed, or Employer contributions under a
simplified employee pension plan to the extent such contributions are
deductible by the Employee, or any distributions from a plan of deferred
compensation;
(2) Amounts realized from the exercise of a non-qualified
stock option, or when restricted stock (or property) held by the
Employee either becomes freely transferable or is no longer subject to a
substantial risk of forfeiture;
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(3) Amounts realized from the sale, exchange or other
disposition of stock acquired from an Employer under a qualified stock
option plan; and
(4) Other amounts which received special tax benefits, or
contributions made by the Employer (whether or not under a salary
reduction agreement) towards the purchase of an annuity contract
described in Section 403(b) of the Code (whether or not the
contributions are actually excludable from the gross income of the
Employee).
(ag) "Service" means:
(1) "Hour of Service" is defined as:
(A) Any hour for which an Employee is paid, or entitled to
payment, for the performance of duties for the Employer. These Hours
will be credited to the Employee for the computation period in which the
duties are performed; and
(B) Any hour for which an Employee is paid, or entitled to
payment, by the Employer on account of a period of time during which no
duties are performed (irrespective of whether the employment
relationship has terminated) due to vacation, holiday, illness,
incapacity (including disability), layoff, jury duty, military duty or
leave of absence; provided, however, that no more than 501 Hours of
Service shall be credited under this paragraph (1)(B) to an Employee on
account of any single continuous period during which the Employee
performs no duties (whether or not such period occurs in a single
computation period), and no credit shall be awarded for any payment
required by applicable worker's compensation, unemployment compensation
or disability insurance laws or for payments which solely reimburse an
Employee for medical or medical-related expenses. Hours under this
paragraph will be calculated and credited pursuant to Section
2530.200b-2 of the Department of Labor Regulations which is incorporated
herein by this reference.
Notwithstanding anything herein to the contrary, any Employee who is
paid on an hourly basis or who is required to account for his hours of work
shall be credited with Hours of Service based upon his actual hours of work as
reflected by the Employer's books and records. Payments made to Employees for
periods during which no services are performed are to be converted into Hours of
Service as provided by Labor Department Regulations 29 C.F.R. Section
2530.200b-2(b) and (c). Any other Employee required by paragraph (A) or (B)
above to be credited with at least one Hour of Service during his regular
payroll period shall be credited with Hours of Service for that period
determined by the following schedule:
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Pay Period Hours of Service
---------- ----------------
Weekly 45
Bi-Weekly 90
Semi-Monthly 95
Monthly 190
Any award or agreement providing back pay, irrespective of any
mitigation of damages, shall be credited as Hours of Service for the period for
which it is allowed provided that it does not result in duplication of hours
credited under paragraphs (1)(A) and (B) above.
Hours of Service will be credited for employment with other members of
an affiliated service group (under Code Section 414(m)), a controlled group of
corporations (under Code Section 414(b)), or a group of trades or businesses
under common control (under Code Section 414(c)) of which the Employer is a
member, and any other entity required to be aggregated with the Employer
pursuant to Code Section 414(o) and the Regulations thereunder. Hours of
Service will also be credited for any Leased Employee or other shared employee
considered to be an Employee for purposes of this Plan by application of Section
414(n) or Section 414(o) of the Code and the Regulations thereunder and for
service with a predecessor employer if the Employer maintains a plan of the
predecessor Employer.
Solely for purposes of determining whether a Break in Service, as
defined in paragraph (3) below, has occurred in a Plan Year for participation
and vesting purposes, an individual who is absent from work for maternity or
paternity reasons shall receive credit for the Hours of Service which would
otherwise have been credited to such individual but for such absence, or, in any
case in which such hours cannot be determined, eight (8) Hours of Service per
day of such absence. For purposes of this paragraph, an absence from work for
maternity or paternity reasons means an absence (A) by reason of the pregnancy
of the individual, (B) by reason of a birth of a child of the individual, (C) by
reason of the placement of a child with the individual in connection with the
adoption of such child by such individual, or (D) for purposes of caring for
such child for a period beginning immediately following such birth or
placement. The Hours of Service credited under this paragraph shall be
credited (A) in the Plan Year in which the absence begins if the crediting is
necessary to prevent a Break in Service in that Year, or (B) in all other
cases, in the following Plan Year.
(2) "Year of Service" A Year of Service is defined as the
twelve (12) consecutive month computation period during which the
Employee completes at least one thousand (1,000) Hours of Service:
(A) For purposes of determining a Year of Service
for an Employee's eligibility to participate in the Plan
pursuant to Article IV(a)(2), the initial eligibility
computation period is the twelve (12) consecutive month period
commencing with the Employee's Employment
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Commencement Date (or the date an Employee performs his first
Hour of Service following a Break in Service, whichever is
later) during which the Employee completes at least one thousand
(1,000) Hours of Service. All succeeding eligibility
computation periods shall be the Plan Year;
(B) For purposes of measuring Years of Service for
vesting and benefit accrual purposes pursuant to Article
VIII(c), after an Employee's satisfaction of the eligibility
requirements set forth in Article IV, herein, the computation
period shall be the Plan Years beginning with the Plan Year
which includes the Employee's Employment Commencement Date.
Initial Participants, as defined in Article IV(a)(1), will only
be credited with one (1) Year of Service at December 31, 1994,
for purposes of Article VIII(c)(2).
(C) For purposes of determining a Year of Service for
allocating additional shares of Company Stock pursuant to
Article VI(a)(1), the computation period shall be the calendar
year and shall exclude the calendar year which includes the
Employee's Employment Commencement Date.
For vesting purposes no credit shall be given for any Service prior to
January 1, 1994.
(3) "Break in Service" is defined as any twelve (12)
consecutive month computation period during which a Participant fails to
complete more than five hundred (500) Hours of Service with the Employer
or an Affiliate. However, for purposes of determining Breaks in Service
for eligibility, vesting and benefit accrual purposes, the computation
periods shall be the same respective consecutive twelve (12) month
periods used to determine Years of Service pursuant to paragraph (2)
above. Notwithstanding anything herein to the contrary, a Break in
Service shall not commence if the Participant is on an Authorized Leave
of Absence, as defined in paragraph (e) above.
(4) "Separation from Service" is defined as the date on
which an Employee quits, retires, is discharged or dies.
(ah) "Top Heavy Year" means any Plan Year in which the Top Heavy
Tests under Article VII are met.
(ai) "Trust" shall mean the trust established by the Trust Agreement.
(aj) "Trust Agreement" shall mean the agreement providing for the
Trust Fund, as it may be amended from time to time.
(ak) "Trustee" shall mean the individual, individuals or corporation
designated as trustee under the Trust Agreement.
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(al) "Trust Fund" shall mean the trust fund established under the
Trust Agreement from which the amounts of supplementary compensation provided
for by the Plan are to be paid or are to be funded.
(am) "Valuation Date" shall mean the date specified in paragraph
(a) of Article XI on which the net worth of the assets comprising the Trust
Fund is determined.
ARTICLE II
Name and Purpose of the Plan and the Trust
(a) Name of Plan. The name of the Plan is the Home Shopping
Network, Inc. Employee Equity Participation Plan. The Plan is an employee
stock ownership plan which is intended to satisfy the requirements of Code
Section 4975(e)(7) and Regulation Section 54.4975-11.
(b) Exclusive Benefit. This Plan is created for the sole purpose
of providing benefits to the Participants and enabling them to share in the
growth of their Company. Except as otherwise permitted by law, in no event
shall any part of the principal or income of the Trust be paid to or reinvested
in any Employer or be used for or diverted to any purpose whatsoever other than
for the exclusive benefit of the Participants and their Beneficiaries.
(c) Mistake of Fact. Notwithstanding the foregoing provisions of
paragraph (b), any contribution made by an Employer to this Plan by a mistake
of fact may be returned to the Employer within one year after the payment of
the contribution; and any contribution made by an Employer that is conditioned
upon the deductibility of the contribution under Section 404 of the Code (each
contribution shall be presumed to be so conditioned unless the Employer
specifies otherwise) may be returned to the Employer if the deduction is
disallowed and the contribution is returned (to the extent disallowed) within
one year after the disallowance of the deduction.
(d) Participant's Rights. The establishment of this Plan shall not
be considered as giving any Employee, or any other person, any legal or
equitable right against any Employer, any Affiliate, the Plan Administrator,
the Trustee or the principal or the income of the Trust, except to the extent
otherwise provided by law. The establishment of this Plan shall not be
considered as giving any Employee, or any other person, the right to be
retained in the employ of any Employer or any Affiliate.
(e) Qualified Plan. This Plan and the Trust are intended to
qualify under the Code as a tax-free employees' plan and trust, and the
provisions of this Plan and the Trust should be interpreted accordingly.
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ARTICLE III
Plan Administrator
(a) Administration of the Plan. The Plan Administrator shall
control and manage the operation and administration of the Plan, except with
respect to investments. The Administrator shall have no duty with respect to
the investments to be made of the funds in the Trust except as may be expressly
assigned to it by the terms of the Trust Agreement.
(b) Powers and Duties. The Administrator shall have complete
control over the administration of the Plan herein embodied, with all powers
necessary to enable it to carry out its duties in that respect. Not in
limitation, but in amplification of the foregoing, the Administrator shall have
the power and discretion to interpret or construe this Plan and to determine
all questions that may arise as to the status and rights of the Participants
and others hereunder.
(c) Direction of Trustee. It shall be the duty of the
Administrator to direct the Trustee with regard to the allocation and the
distribution of the benefits to the Participants and others hereunder.
(d) Summary Plan Description. The Administrator shall prepare or
cause to be prepared a summary plan description (if required by law) and such
periodic and annual reports as are required by law.
(e) Disclosure. At least once each year, the Administrator shall
furnish to each Participant a statement containing the value of his interest in
the Trust Fund and such other information as may be required by law.
(f) Conflict In Terms. The Administrator shall notify each
Employee, in writing, as to the existence of the Plan and Trust and the basic
provisions thereof. In the event of any conflict between the terms of this
Plan and Trust as set forth in this Plan and Trust Agreement and as set forth
in any explanatory booklet or other description, this Plan and Trust Agreement
shall control.
(g) Nondiscrimination. The Administrator shall not take any action
or direct the Trustee to take any action whatsoever that would result in
unfairly benefiting one Participant or group of Participants at the expense of
another or in improperly discriminating between Participants similarly situated
or in the application of different rules to substantially similar sets of
facts.
(h) Records. The Administrator shall keep a complete record of all
its proceedings as such Administrator and all data necessary for the
administration of the Plan. All of the foregoing records and data shall be
located at the principal office of the Administrator.
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(i) Final Authority. Except to the extent otherwise required by
law, the decision of the Administrator in matters within its jurisdiction shall
be final, binding and conclusive upon each Employer and each Employee, member
and Beneficiary and every other interested or concerned person or party.
(j) Claims.
(1) Claims for benefits under the Plan may be made by a
Participant or a Beneficiary of a Participant on forms supplied by the
Plan Administrator. Written notice of the disposition of a claim shall
be furnished to the claimant by the Administrator within ninety (90)
days after the application is filed with the Administrator, unless
special circumstances require an extension of time for processing, in
which event action shall be taken as soon as possible, but not later
than one hundred eighty (180) days after the application is filed with
the Administrator; and, in the event that no action has been taken
within such ninety (90) or one hundred eighty (180) day period, the
claim shall be deemed to be denied for the purposes of paragraph (2).
In the event that the claim is denied, the denial shall be written in a
manner calculated to be understood by the claimant and shall include
the specific reasons for the denial, specific references to pertinent
Plan provisions on which the denial is based, a description of the
material information, if any, necessary for the claimant to perfect the
claim, an explanation of why such material information is necessary and
an explanation of the claim review procedure.
(2) If a claim is denied (either in the form of a written
denial or by the failure of the Plan Administrator, within the required
time period, to notify the claimant of the action taken), a claimant or
his duly authorized representative shall have sixty (60) days after the
receipt of such denial to petition the Plan Administrator in writing
for a full and fair review of the denial, during which time the
claimant or his duly authorized representative shall have the right to
review pertinent documents and to submit issues and comments in
writing. The Plan Administrator shall promptly review the claim and
shall make a decision not later than sixty (60) days after receipt of
the request for review, unless special circumstances require an
extension of time for processing, in which event a decision shall be
rendered as soon as possible, but not later than one hundred twenty
(120) days after the receipt of the request for review. If such an
extension is required because of special circumstances, written notice
of the extension shall be furnished to the claimant prior to the
commencement of the extension. The decision of the review shall be in
writing and shall include specific reasons for the decision, written in
a manner calculated to be understood by the claimant, with specific
references to the Plan provisions on which the decision is based.
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(k) Appointment of Advisors. The Administrator may appoint such
accountants, counsel (who may be counsel for an Employer), specialists and
other persons that it deems necessary and desirable in connection with the
administration of this Plan. The Administrator, by action of its Board of
Directors, may designate one or more of its employees to perform the duties
required of the Administrator hereunder.
ARTICLE IV
Eligibility and Participation
(a) Current Employees.
(1) Initial Participants. Any Eligible Person employed
before January 1, 1994 who completes at least one thousand (1,000)
Hours of Service during the calendar year 1994 and attained age 21
shall be eligible to participate on the Effective Date of the Plan.
(2) Future Participants. Any Eligible Person who has not
satisfied the requirements specified in paragraph (1) above, shall
become eligible to participate in the Plan upon completing a Year of
Service and attaining the age of 21. Any such Eligible Person shall
enter the Plan as a Participant, if he is still an employee of an
Employer, on the first Entry Date concurring therewith or next
following his satisfaction of the eligibility requirements.
(b) Former Employees.
(1) An Employee who ceases to be a Participant and who
subsequently reenters the employ of an Employer shall be eligible again
to become a Participant on the date of his reemployment.
(2) An Employee who satisfies the eligibility requirements
set forth above and who terminates employment with an Employer prior to
becoming a Participant will become a Participant on the later of the
Entry Date on which he would have entered the Plan had he not
terminated employment or the date of his reemployment.
ARTICLE V
Contributions to the Trust
(a) Company's Contribution. The Company shall contribute stock or
cash as needed to fulfill the requirements of Article VI paragraphs (a)(1) and
(d) and may contribute Company Stock or cash in such amounts, if any, that the
Company's Board of Directors, in
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its sole discretion, may authorize and direct to be paid and allocated
as provided in Article VI paragraphs (a)(2) and (b).
(b) Payment. The Company's total annual contribution may be made,
in one or more installments, not later than the due date (including extensions
thereof) for filing the federal income tax return of the Company for its fiscal
year ending with or during the Plan Year for which the contribution is made.
Company Stock shall be valued at its then fair market value.
(c) Maximum Amount of Employer Contributions. The aggregate amount
of contributions made by the Employer shall not exceed the maximum amount
allowable as a deduction for federal income tax purposes for the year of
contribution nor shall the Employer contribute an amount for any Participant
which exceeds the maximum amount allowable under Code Section 415(c).
(d) Employee Contributions. Participants shall not be permitted to
make any contributions to this Plan.
(e) No Duty to Inquire. The Trustee shall have no right or duty to
inquire into the amount of any contribution made by the Company or the method
used in determining the amount of any such contribution, or to collect the
same, but the Trustee shall be accountable only for funds actually received by
it.
ARTICLE VI
Participants' Account and Allocation of Contributions
(a) Initial Allocation.
(1) Initial Participants. The Plan Administrator shall allocate
to the Company Stock Account of each Participant on the Effective Date of the
Plan 100 shares of Company Stock plus 10 shares for each Year of Service of the
Plan Participant in excess of 1. For years before 1988, a calendar year during
which the Participant was continuously employed shall be treated as a Year of
Service regardless of the number of hours worked.
(2) Future Participants. It is intended that each person who
becomes a Participant after the Effective Date receive an initial allocation
equal to the lesser of: (A) 100 shares of Company Stock or (B) shares of
Company Stock which have a value equal to $1,000, with such shares rounded down
to the nearest whole number of shares. If the Company makes discretionary
contributions in addition to the Initial Allocation to Initial Participants of
paragraph (a)(1), such contributions shall first be allocated pro rata to such
Future Participants based on their Entry Dates, with the earliest Entry Date
receiving the first allocation, until such Future Participants shall have been
allocated the whole number of shares of Company Stock originally calculated as
of the Allocation Date contemporaneous with or
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next following their Entry Date. If such contributions are
made during the Plan Year, which includes the Future Participant's
Entry Date, such Participant need not be employed on the Allocation
Date to share in the allocation provided by this paragraph. If such
contributions are made during any Plan Year subsequent to the Plan Year
which includes the Future Participant's Entry Date, such Participant
must be employed on the Allocation Date to share in the allocation
provided by this paragraph. Any discretionary contributions in excess
of those required to make the allocations provided herein shall be
allocated as provided in paragraph (b) below.
(b) Additional Allocations. If the Company makes discretionary
contributions in addition to the Initial Allocation of paragraph (a), every
Eligible Participant employed on the Allocation Date shall share in the
contribution in proportion to his Compensation relative to the Compensation of
all Eligible Participants employed on that Allocation Date.
(c) Limitation on Allocation of Contributions.
(1) Notwithstanding anything contained in this Plan to the
contrary, the aggregate Annual Additions to a Participant's Account
under this Plan and under any other defined contribution plans
maintained by an Employer or an Affiliate for any Limitation Year shall
not exceed the lesser of $30,000.00 (or, if greater, one quarter of the
dollar limitation in effect under Section 415(b)(1)(A) of the Code) or
25% of the Participant's Section 415 Compensation for such Plan Year.
(2) In the event that the Annual Additions, under the
normal administration of the Plan, would otherwise exceed the limits
set forth above for any Participant, or in the event that any
Participant participates in both a defined benefit plan and a defined
contribution plan maintained by any Employer or any Affiliate and the
aggregate Annual Additions to and projected benefits under all of such
plans, under the normal administration of such plans, would otherwise
exceed the limits provided by law, then the Plan Administrator shall
take such actions, applied in a uniform and nondiscriminatory manner,
as will keep the Annual Additions and projected benefits for such
Participant from exceeding the applicable limits provided by law.
Excess Annual Additions shall be disposed of as provided in paragraph
(3) below. Adjustments shall be made to this Plan, if necessary to
comply with such limits, before any adjustments may be made to any
other Plan.
(3) If as a result of the allocation of Forfeitures, a
reasonable error in estimating a Participant's Section 415
Compensation, a reasonable error in determining the amount of Employer
contributions that may be made with respect to any Participant under
the limits of Section 415 of the Code, or other circumstances permitted
under Section 415 of the Code, the Annual Additions attributable to
Employer contributions for
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a particular Participant would cause the limitations
set forth in this paragraph (c) to be exceeded, the excess
amount shall be used to reduce Employer contributions for the
next Plan Year (and succeeding Plan Years, as necessary) for
that Participant if that Participant is covered by the Plan as
of the end of the Plan Year. If the Participant is not covered
by the Plan as of the end of the Plan Year, such excess amount
shall be held unallocated in a suspense account for the Plan
Year and reallocated among the Participants as of the end of
the next Plan Year to all of the Participants in the Plan in
the same manner as an Employer contribution under the terms of
paragraphs (a) and (b) of this Article VI before any further
Employer contributions are allocated to the Accounts of the
Participants, and such allocations shall be treated as Annual
Additions to the Accounts of the Participants. In the event
that the limits on Annual Additions for any Participant would
be exceeded before all of the amounts in the suspense account
are allocated among the Participants, then such excess amounts
shall be retained in the suspense account to be reallocated as
of the end of the next Plan Year and any succeeding Plan Years
until all amounts in the suspense account are exhausted.
(d) Make-Up Allocation. Any Participant who is prevented
from receiving all or any portion of the Initial Allocation of Company
Stock provided by paragraph (a) because of the limitations of paragraph
(c) shall be entitled to an allocation of Company Stock in each
succeeding year in which he is employed on the Allocation Date up to
the limit provided by paragraph (c) until he has received the number of
shares of Company Stock he would have received pursuant to paragraph
(a) but for the limitations of paragraph (c). This paragraph shall not
apply to discretionary allocations pursuant to paragraph (b) above.
(e) Allocation of Forfeitures. Forfeitures arising during
the Plan Year shall be allocated in the following order:
(1) first to Participants who are entitled to
restoration of amounts previously forfeited pursuant to Article
VIII paragraph (c)(4)(C);
(2) second to Participants who are entitled to a
Make-Up Allocation pursuant to Article VI paragraph (d) above;
(3) third to Future Participants who had Entry
Dates in prior Plan Years and were not allocated the full
amount of their Initial Allocation specified in Article VI
paragraph (a)(2), above, and in the same order specified in
that paragraph;
(4) fourth, pursuant to paragraph (a)(2), above,
to any Employees who became Participants during the Plan Year;
and
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(5) the balance of any Forfeitures shall be
allocated in the same manner as the Company's contribution
under paragraph (b), above.
(f) Allocation of Earnings and Losses. As of each
Allocation Date, the Plan Administrator shall credit or charge each
Participant's Company Stock Account with its own earnings or losses for
the year.
(g) Allocation of Cash Dividends. Cash dividends paid on
Company Stock allocated to a Participant's Company Stock Account shall
be credited to that Participant's Company Stock Account.
ARTICLE VII
Top Heavy Plan
(a) Minimum Allocation of Employer Contribution for Top
Heavy Plan Year. Notwithstanding the foregoing, if the Plan is a Top
Heavy Plan or an Extra Top Heavy Plan for any Plan Year (as determined
by the tests set forth in paragraphs (e)(1) and (e)(2) of this Article
VII), then a participating Non-Key Employee who is in the employ of the
Employer on the last day of the Plan Year shall be entitled to a
minimum contribution in accordance with the following paragraphs:
(1) Only Defined Contribution Plans. If a
Participant participates only in defined contribution plans
maintained by the Employer or any Affiliate, and the
Participant did not receive a contribution under this Plan,
and/or any other defined contribution plan maintained by the
Employer or any Affiliate equal to the lesser of: (i) three
(3%) of the Participant's Section 415 Compensation for the
year, or (ii) the percentage of the Section 415 Compensation
for the Year which is equal to that of the Key Employee for
whom the percentage is the highest, then the aggregate
contribution for the year made by the Employer on behalf of
each Participant and any Forfeitures allocated to his Account
pursuant to this Plan shall be equal to the difference
between:
(A) the lesser of: (1) three percent (3%)
of the Participant's Section 415 Compensation for the
year from the Employer or any Affiliate, or (2) the
percentage of such Section 415 Compensation which is
equal to that of the Key Employee for whom the
percentage is the highest, and
(B) the contribution otherwise provided by
this Plan and all other defined contribution plans
maintained by the Employer or any Affiliate.
(2) Both Defined Benefit and Defined Contribution
Plans. If a Participant is also a participant in a defined
benefit plan maintained by the Employer or any Affiliate, the
minimum benefit
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to which a Participant is entitled shall be provided by, and in
accordance with, the terms of the defined benefit plan.
However, if the defined benefit plan does not provide the
Participant with a minimum accrued benefit equal to three percent (3%)
of the Participant's average annual Section 415 Compensation from the
Employer or any Affiliate for each Top Heavy Year or two percent (2%)
of a Participant's average annual Section 415 Compensation from the
Employer or any Affiliate for each Extra Top Heavy Year, multiplied by
the number of Top Heavy Years or Extra Top Heavy Years (not in excess
of ten (10) Years) during which he was a Participant in both Plans, and
the Participant did not receive a contribution under this Plan and/or
any other defined contribution plan maintained by the Employer or any
Affiliate of at least seven and one-half percent (7 1/2%) of his
Section 415 Compensation from the Employer or any Affiliate for a Top
Heavy Year or five percent (5%) of such Section 415 Compensation for an
Extra Top Heavy Year, the Participant shall be entitled to a minimum
contribution for the year under this Plan. The Participant's minimum
contribution under this Plan shall be a contribution equal to the
difference between:
(A) seven and one-half percent (7 1/2%) of his
Section 415 Compensation from the Employer or any Affiliate for
each Top Heavy Year or five percent (5%) of such Section 415
Compensation for each Extra Top Heavy Year in which he was a
Participant in both Plans, and
(B) the contribution otherwise provided by this
Plan and all other defined contribution plans maintained by the
Employer or any Affiliate.
(3) Rules of Application. The minimum benefit or minimum
contribution shall not be offset by any OASDI benefits received by the
Participant, and any Top Heavy minimum benefits shall be provided by
this Plan only after minimum benefits have been provided by all other
Plans.
(b) Top Heavy Tests.
(1) Top Heavy. The Plan will be Top Heavy during the Plan
Year if the aggregate accounts of the participating Key Employees
determined as of the Determination Date, as provided in paragraph (b)
below, equals or exceeds sixty percent (60%) of the aggregate accounts
of all Participants included within the aggregation group. In any Top
Heavy Year the applicable provisions of paragraph (a) of this Article
VII shall apply and the provisions of this Article VII will supersede
any conflicting provisions of the Plan.
(2) Extra Top Heavy. If the sum of the accounts of the
participating Key Employees equals or exceeds ninety percent (90%) of
the sum of the aggregate accounts of all Participants
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included within an aggregation group of plans, this Plan shall be
considered Extra Top Heavy. If the Plan is Extra Top Heavy, then
paragraph (a) of this Article VII shall apply. In addition,
paragraph (c)(2) of Article VI shall also apply together with the
adjustments required under Section 416(h)(1) of the Code.
(c) Determination Date. The Determination Date for any Plan Year
shall be the last day of the preceding Plan Year, or in the case of the first
Plan Year to which this Article applies, the last day of the first Plan Year.
(d) Aggregation Groups. Each plan maintained by the Employer or
any Affiliate in which a Key Employee participates and any other plan
maintained by those businesses which enables any plan in which a Key Employee
participates to meet the requirements of Code Sections 401(a)(4) or 410, will
be considered a part of the aggregation group. Other plans maintained by the
businesses which are not required to be included in the aggregation group may be
included if the requirements of Code Sections 401(a)(4) and 410 are satisfied
when those plans are considered together with the plans of the required
aggregation group. In the event that two or more Plans within the aggregation
group have different Determination Dates, the present value of all accrued
benefits shall be determined separately at each Plan's Determination Date and
the accrued benefits for each Plan shall then be aggregated based upon the
Determination Dates for each Plan which fall within the same calendar year.
(e) Definitions.
(1) Accrued Benefits. For purposes of this Article the
Accrued Benefits of a Participant, former Participant or Beneficiary
shall include the value of:
(A) the Participant's retirement benefits
provided by his employer as of the most recent Valuation Date
occurring within a twelve (12) month period ending on the
Determination Date, and (i), in the case of any defined
contribution plan maintained by the Employer or any Affiliate,
adjusted to include contributions made by (in the case of any
profit sharing plan) or due from (in the case of any pension
plan) the Employer as of the Determination Date, or (ii), in
the case of any defined benefit plan maintained by the
Employer or any Affiliate, determined as if the Participant
terminated service as of the Determination Date in the first
Plan Year or as if the Participant terminated service on the
Valuation Date for all subsequent Plan Years. The present
value of a Participant's retirement benefits attributable to
any defined benefit plan shall be determined using the
actuarial assumptions set forth with the provisions of such
plan; and
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(B) all distributions made to a Participant
within the Plan Year which includes the Determination Date or
within the four (4) preceding Plan Years, but only to the
extent that the distribution is not included in the value of
the Participant's Account on the Valuation Date.
Distributions of benefits received by a Participant from this
Plan and rollover into another plan maintained the by
Employer or any Affiliate shall not be counted as an accrued
benefit under this Plan. This paragraph (e)(1)(B) shall
include distributions under a terminated plan which if it had
not been terminated would have been required to be included
in the aggregation group as defined in paragraph (c) above.
Notwithstanding anything to the contrary, if any
Employee has not performed services for the Employer or any
Affiliate during the 5-year period ending on any
Determination Date, the accrued benefit of such Employee
shall not be taken into consideration for purposes of
determining whether the Plan is Top-Heavy with respect to the
Plan Year to which the Determination Date applies.
(2) Key Employee Accrued Benefits. The value of the Key
Employee Accrued Benefits shall equal the sum of the aggregate values
of the accrued benefits of all Key Employees and all Beneficiaries of
Key Employees.
(3) Non-Key Employee Accrued Benefit. Solely for
purposes of determining whether the Plan is Top-Heavy, the accrued
benefit of any Non-Key Employee shall be determined (A) under the
method, if any, that uniformly applies for accrual purposes under all
plans of the Employer or any Affiliate, or (B) if there is no such
method, as if such benefit accrued no more rapidly than the lowest
accrual rate permitted under the Fractional Accrual Rule of Section
411(b)(1)(C) of the Code.
(4) Total Accrued Benefits. The value of the Total
Accrued Benefits shall equal the sum of the aggregate value of the
Key Employee Accrued Benefits described above plus the aggregate
value of the accrued benefits of all other Participants, former
Participants and Beneficiaries of plans included within the
aggregation group of plans. The Total Accrued Benefits shall not,
however, include the Account of any Participant, or Beneficiary of a
Participant who was at any time a Key Employee but who is no longer a
Key Employee.
(5) Compensation. For any Plan Year in which the Plan
is Top-Heavy, annual Compensation for purposes of this Article VII
shall mean Section 415 Compensation.
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ARTICLE VIII
Benefits Under the Plan
(a) Retirement Benefit.
(1) A Participant shall be entitled to retire from the
employ of his Employer upon such Participant's Normal Retirement Date.
Until a Participant actually retires from the employ of his Employer,
he shall continue to be treated in all respects as a Participant.
(2) Upon the retirement of a Participant as provided in
paragraph (1), such Participant shall be entitled to a retirement
benefit in an amount equal to 100% of the balance in his Company
Stock Account as of the date of distribution of his benefit.
(b) Disability Benefit.
(1) In the event a Participant's employment with his
Employer is terminated by reason of his total and permanent
disability, such Participant shall be entitled to a disability
benefit in an amount equal to 100% of the balance in his Company
Stock Account as of the date of distribution of his benefit.
(2) Total and permanent disability shall mean the total
incapacity of a Participant to perform the usual duties of his
employment with his Employer and will be deemed to have occurred only
when certified by a physician who is acceptable to the Plan
Administrator and only if such proof is received by the Administrator
within sixty (60) days after the date of the termination of such
Participant's employment.
(c) Termination of Employment Benefit.
(1) In the event a Participant's employment with his
Employer is terminated for reasons other than retirement, total and
permanent disability or death, such Participant shall be entitled to
a termination of employment benefit in an amount equal to his vested
interest in the balance in his Company Stock Account as of the date
of distribution of his benefit.
(2) A Participant's vested interest in his Company Stock
Account shall be a percentage of the balance of such Account as of
the applicable Valuation Date, based upon such Participant's Years of
Service as of the date of the termination of his employment, as
follows:
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TOTAL NUMBER OF VESTED
YEARS OF SERVICE INTEREST
---------------- --------
Less than 1 Year of Service -0-
1 year, but less than 2 years 20%
2 years, but less than 3 years 40%
3 years, but less than 4 years 60%
4 years, but less than 5 years 80%
5 years or more 100%
(3) (A) If the termination of employment results in five
consecutive Breaks in Service, then upon the occurrence of such five
consecutive Breaks in Service, the non-vested interest of the
Participant in his Company Stock Account as of the Valuation Date
concurring with or next following the date of his termination of
employment shall be deemed to be forfeited and such forfeited amount
shall be allocated as provided in paragraph (e) of Article VI. If the
Participant is later reemployed by the Company or an Affiliate, the
unforfeited balance, if any, in his Company Stock Account that has not
been distributed to such Participant shall be set aside in a separate
account, and such Participant's Years of Service after any five
consecutive Breaks in Service resulting from such termination of
employment shall not be taken into account for the purpose of
determining the vested interest of such Participant in the balance of
his Company Stock Account that accrued before such five consecutive
Breaks in Service.
(B) Notwithstanding any other provision of this paragraph
(c), if a Participant is reemployed by the Company or an Affiliate and,
as a result, no five consecutive Breaks in Service occur, the
Participant shall not be entitled to any termination of employment
benefit as a result of such termination of employment.
(4) (A) Notwithstanding any other provision of this paragraph
(c), if at any time a Participant is less than 100% vested in his
Company Stock Account and, as a result of his termination of
employment, he receives his entire vested termination of employment
benefit pursuant to the provisions of Article IX, and the distribution
of such benefit is made not later than the close of the fifth Plan
Year following the Plan Year in which such termination occurs (or such
longer period as may be permitted by the Secretary of the Treasury,
through regulations or otherwise), then upon the occurrence of such
distribution, the non-vested interest of the Participant in his
Company Stock Account shall be deemed to be forfeited. Forfeited
amounts shall be allocated as provided in paragraph (e) of Article VI.
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EX-10.32
7
EMPLOYMENT AGREEMENT; HSN AND DAVID F DYER
1
EXHIBIT 10.32
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT dated as of August 16, 1994 between HOME SHOPPING
NETWORK, INC., a Delaware corporation (the "Company"), and DAVID F. DYER
("Executive").
This Agreement sets forth the terms and conditions of Executive's
employment by the Company as the Company's Chief Operating Officer.
In consideration of the mutual covenants and agreements herein contained
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties, intending to be legally bound, do
hereby agree as follows:
1. Term and Termination.
(a) Term. The term of Executive's employment under this Agreement
(the "Employment Term") shall commence immediately upon the execution of this
Agreement (the "Effective Date") and end on the fifth anniversary of such
date. The Employment Term shall be automatically extended beyond the original
five-year term for successive one-year terms unless at least one hundred
eighty (180) days prior to the expiration of the original Employment Term or
any subsequent renewal thereof, either party notifies the other party in
writing that it is electing to terminate this Agreement at the expiration of
the then current term. During the Employment Term, the Company agrees to
employ Executive and Executive agrees to serve the Company upon and subject to
the terms and conditions set forth in this Agreement.
(b) Termination by the Company. Executive' s employment by the
Company may be terminated by the Company only as provided in clauses (i)
through (iv) below.
(i) Upon the death of Executive.
(ii) Upon six (6) months' prior written notice from the Company
to Executive (the "Notice Period"), in the event of an illness or other
disability which has incapacitated Executive from performing his duties
hereunder, as determined in good faith by the Board of Directors of the
Company, for an aggregate of one hundred eighty (180) consecutive days during
the twelve calendar months preceding the month in which such notice is given;
provided, however, that in the event that prior to the end of the Notice
Period, Executive recovers from such illness or other disability to an extent
permitting him to perform his duties hereunder, the notice of termination
pursuant to this clause (ii) shall be of no further force and effect.
(iii) At any time upon giving written notice of such
termination to Executive and by (x) paying to Executive in a lump sum upon
such termination an amount equal to (A) Annual Base Salary (as hereinafter
defined) that would have been
2
payable to Executive had his employment by the Company continued until the
expiration of the Employment Term plus (B)(1) the amount of Annual Bonus (as
hereinafter defined) that Executive would have been entitled to receive had
his employment by the Company continued until the end of the fiscal year in
which such termination occurred (such amount of Annual Bonus is hereinafter
referred to as the "Remainder Bonus") and (2) any Annual Bonus for a prior
fiscal year that has been earned but not yet paid and (y) forgiving the Loan
(as hereafter defined). In addition, Executive shall receive benefits as
provided in Section l(h), and his Options shall be treated as specified in
Section 12.
(iv) At any time for "Cause", which for purposes of this
Agreement shall be deemed to have occurred only on the happening of any of the
following:
(A) the plea of guilty to, or conviction for, the
commission of a felony offense by Executive; provided, however,
that after indictment, the Company may suspend Executive from
the rendition of services, but without limiting or modifying in
any other way the Company's obligations under this Agreement;
(B) a material breach by Executive of a material
fiduciary duty owed to the Company;
(C) a material breach by Executive of any of the
covenants made by him in Sections 6 and 7 hereof; or
(D) the willful and gross neglect by Executive of the
material duties specifically and expressly required by this
Agreement.
provided, however, that any claim that "Cause", within the meaning of clauses
(B), (C) or (D) above, exists for the termination of Executive's employment
may be asserted on behalf of the Company only by a resolution duly adopted by
two-thirds of the total number of members of the Board of Directors of the
Company, and only after 15 days prior written notice to Executive during which
period he may cure the breach or neglect that is the basis of any such claim,
if curable; provided, further, that no state of facts that, with or without
notice to Executive or the passage of time or both, would give rise to the
right of the Company to terminate Executive's employment pursuant to clause
(ii) of this Section l(b) may, directly or indirectly, in whole or in part, be
the basis for a claim that Cause, within the meaning of clause (D) above,
exists for the termination of Executive's employment; provided, further, that
during the period of twelve (12) months following a Change in Control (as
hereinafter defined), Cause shall be deemed to have occurred only upon the
happening of an event referred to in clause (A) above; and provided, further,
that the term "material" as used in clauses (B), (C) and (D) above and in
Section 10 hereof shall be construed by reference to the effect of the
relevant action or omission on the Company and its subsidiaries taken as a
whole.
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3
(c) Effect of Termination by the CompanY. If Executive's
employment is terminated by the Company pursuant to Section 1(b)(iii) hereof,
he shall receive only the amounts and benefits, and his Options shall be
treated, as provided in Section 1(b)(iii). If Executive dies while employed by
the Company, his employment will thereupon be terminated pursuant to Section
1(b)(i) and he shall receive pursuant to this Agreement his Annual Base Salary
and Annual Bonus (to the extent not otherwise included in the Remainder Bonus)
that has accrued in favor of Executive as of the date of his death, to the
extent unpaid or delivered, and the Remainder Bonus, and the Loan shall be
forgiven, but Executive shall be eligible to receive benefits under the
Company's life insurance and death benefits plans or practices in which he is
then participating, to the extent provided in such plans or practices, and his
Options shall be treated as specified in Section 12. If Executive's employment
is terminated pursuant to Section 1(b)(ii) of this Agreement, his Options
shall be treated as specified in Section 12 and the Company shall (i) continue
to pay to Executive his Annual Base Salary as and when the same would
otherwise be due in accordance with Section 4 of this Agreement until the
first to occur of the expiration of the Employment Term or the date of
Executive's death, (ii) pay the Remainder Bonus to Executive on the date of
such termination and (iii) the Loan shall be forgiven. The amounts payable by
the Company pursuant to the foregoing sentence shall be reduced by the amount
of any long term disability benefits paid directly to Executive pursuant to
any benefit or welfare plans maintained by the Company for Executive's
benefit. If Executive's employment is terminated by the Company for Cause
pursuant to Section 1(b)(iv) hereof, he shall receive pursuant to this
Agreement only his Annual Base Salary earned as of the date of termination,
and his Options shall be treated as specified in Section 12. The phrase
"designated beneficiary or beneficiaries" shall mean the person or persons
named from time to time by Executive in a signed instrument filed for this
purpose with the Company. If the designation made in any such signed
instrument shall for any reason be ineffective, the phrase "designated
beneficiary or beneficiaries" shall mean Executive's estate. With respect to
the payment of the Remainder Bonus, such amount shall be the amount which
would have been payable to Executive as his Annual Bonus in accordance with
the applicable Company plan or program had Executive's employment continued
until the end of the fiscal year of the Company in which such termination
occurred, but without regard to any requirement in such plan that Executive be
employed by the Company at any time following the conclusion of such
succeeding fiscal year in order to receive his Annual Bonus.
(d) Termination by Executive. The Executive's employment
may be terminated during the Employment Term by the Executive (i) for Good
Reason or (ii) without any reason during the twelve (12) month period
immediately following a Change in Control or (iii) without any reason at any
time. For purposes of this Agreement, "Good Reason" shall mean:
(A) the assignment to the Executive of any duties
inconsistent in any with the Executive's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated Section 2 of this Agreement, or any
other action by the Company which results in a diminution in such
position, authority, duties or responsibilities, excluding for this
purpose an isolated,
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insubstantial and inadvertent action not taken in bad faith and
which is remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(B) any material breach of this Agreement by the
Company which is not remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(C) any purported termination by the Company of the
Executive's employment other wise than as expressly permitted
by this Agreement;
(D) any failure by the Company to comply with and
satisfy Section 13 of this Agreement; or
(E) (i) failure of Employee to be elected or appointed
to the Company's Board of Directors within ninety (90) days
of the Effective Date, (ii) failure of Executive to be
reelected to the Board of Directors or (iii) Executive's
removal from the Board of Directors.
For purposes of this subsection (d), a determination of "Good Reason" by the
Executive which is reasonable and is made in good faith shall be conclusive.
(e) Effect of Termination by the Executive. If Executive
terminates his employment with the Company pursuant to Section 1(d)(i) or (ii)
of this Agreement, the Company shall pay to Executive in a lump sum upon such
termination an amount in cash equal to (i) all Annual Base Salary that has
accrued in favor of Executive as of the date of termination, to the extent
unpaid or delivered, (ii) the Annual Base Salary that would have been payable
to Executive had his employment by the Company continued until the expiration
of the Employment Term, and (iii) the Remainder Bonus and the Loan shall be
forgiven. In addition, Executive shall receive benefits as provided in Section
1(h), and his Options shall be treated as specified in Section 12. If
Executive terminates his employment with the Company pursuant to Section
1(d)(iii) and is not eligible to terminate under Section 1(d)(i) or (ii), the
Company shall only pay to Executive in a lump sum upon such termination an
amount of cash equal to all Annual Base Salary that has accrued in favor of
Executive as of the date of termination, to the extent unpaid or delivered,
and his Options shall be treated as specified in Section 12.
(f) Survival. Upon termination of Executive's employment
and payment of the amounts due Executive pursuant to Section 1 of this
Agreement, the obligations of the Company and the Executive under this
Agreement shall terminate, except that the Company's obligations with respect
to the payment of amounts upon the death or disability of Executive, Section
1(h) (Continuation of Benefits), Section 4(e) (Indemnification), Section 5
(Reimbursement of Expenses) (as it relates to expenses incurred prior to such
termination, including, without limitation, relocation expenses incurred
pursuant to Section 5(c) and Schedule 5(c)), Section 12 (Stock Options) and
Section 13 (Successors), and the Executive's
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obligations under Sections 6 (Noncompetition), 7 (Confidentiality), 8
(Delivery of Materials) and 9 (Noninterference), will survive (in accordance
with the terms and conditions thereof) any such termination.
(g) Change of Control. For purposes of this Agreement, a
"Change of Control" shall be deemed to have occurred as of the date upon which
either (x) Tele-Communications, Inc. ("TCI", which term shall include TCI's
affiliates and any successor corporation, partnership or other entity formed
as a result of or in connection with any pro rata distribution of securities
or the right to acquire securities to the holders of securities of TCI,
provided that the condition of clause (y) of this Section 1(g) hereof
continues to be satisfied) ceases to be the sole "beneficial owner" (within
the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) of Voting Securities (as hereinafter
defined) having a majority of the outstanding Voting Power (as hereinafter
defined) of the Company, (y) any person or group (within the meaning of
Sections 3(a)(9) and 13(d)(3) of the Exchange Act) not presently an affiliate
of TCI becomes the beneficial owner of Voting Securities of TCI having a
majority of the outstanding Voting Power of TCI or (z) sale or other
disposition of all or substantially all of the assets of the Company in any
transaction or series of related transactions to a person that is not an
affiliate of TCI. As used herein, the following terms shall have the following
meanings: (i) "Voting Securities" shall mean any securities of the Company or
TCI, as the case may be, entitled, or which may be entitled, to vote on
matters submitted to stockholders generally (whether or not entitled to vote
generally in the election of directors), or securities which are convertible
into, or exercisable or exchangeable for such Voting Securities, whether or
not subject to the passage of time or any contingency; (ii) "Voting Power"
shall mean the number of votes available to be cast (determined by reference
to the maximum number of votes entitled to be cast by the holders of such
Voting Securities (or by the holders of any other Voting Securities into which
such Voting Securities may be convertible, exercisable or exchangeable for,
whichever yields the highest number of votes) upon any matter submitted to
stockholders where the holders of all Voting Securities vote together as a
single class) by the holders of Voting Securities; and (iii) "affiliate" shall
have the meaning set forth in Rule 13e-3(a)(1) under the Exchange Act.
(h) Continuation of Certain Benefits. In the event
Executive's employment is terminated by the Company due to death or
disability, or for any reason other than for Cause, or if Executive terminates
under Section 1(d)(i) or (ii), then for the remainder of the Employment Term
the Company shall continue benefits to the Executive and/or the Executive's
family at least equal to those which would have been provided to them in
accordance with this Agreement if the Executive's employment had not been
terminated, in accordance with the most favorable plans, practices, programs
or policies of the Company as in effect and applicable generally to other
executives and their families; provided, however, that the Company may
terminate such benefits if the Executive becomes reemployed with another
employer and is eligible to receive similar benefits under such subsequent
employer's benefit plans. For purposes of determining eligibility of the
Executive for retiree benefits pursuant to the Company's plans, practices,
programs and policies, in the event of a termination described
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in the preceding sentence, the Executive shall be considered to have remained
employed until the end of the Employment Term and to have retired on the last
day of such period.
2. Services to be Rendered by Executive. The Company and
Executive agree that Executive will serve the Company as its Chief Operating
Officer. Executive shall be responsible for all the Company's merchandizing
and marketing operations, reporting directly to the Company's chief executive
officer. In such capacity, Executive shall perform all reasonable acts
customarily associated with such position, and necessary or desirable to
protect and advance the best interests of the Company. Executive shall perform
such acts and carry out such duties, and shall in all other respects serve the
Company faithfully and to the best of his ability.
3. Time to be Devoted by Executive. Executive agrees to
devote substantially all of his business time, attention, efforts and
abilities to the business of the Company and to use his best efforts to
promote the interests of the Company. During the Employment Turn it shall not
be a violation of this Agreement for the Executive to (i) serve on corporate,
civic or charitable boards or committees, (ii) fulfill speaking engagements
and (iii) manage personal investments, so long as such activities do not
significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with this
Agreement.
4. Compensation.
(a) Salary. During the Employment Turn, the Executive
shall receive an annual base salary of not less than $500,000 ("Annual Base
Salary"), increased at least four percent annually, which shall be paid in
accordance with the Company's customary payroll practices for salaried
employees.
(b) Bonus: Loan.
(i) Annual Bonus. In addition to Annual Base
Salary and other compensation under this Agreement, the
Executive shall be entitled to participate in the Company's
Management Incentive Plan ("MIP") and be paid on an annual
basis such bonus amount ("Annual Bonus") as determined pursuant
to the MIP.
(ii) Loan. Upon the Effective Date, against
Executive's execution of a note evidencing the terms and
conditions thereof, the Company shall loan to Executive
$1,000,000 (such amount plus interest accrued thereon as yet
then unpaid, hereinafter the "Loan"). The Loan shall (i) bear
interest at 5.80% per annum, (ii) be due with respect to both
principal and interest on the earlier of (x) 2 years and 10
days following the Effective Date or (y) termination of
Executive's employment in accordance with Section 1 (b)(iv) or
Section 1 (d)(iii), and (iii) be evidenced by a written note
executed by Executive in favor of Company. Subject to earlier
forgiveness as may
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be required under this Agreement, the Loan shall be forgiven on
the following dates if Executive is then employed by the
Company.
Date Amount Forgiven
---- ---------------
January 1, 1995 $500,000 plus accrued interest attributable thereto
July 1, 1995 $250,000 plus accrued interest attributable thereto
2 years from Effective Date $250,000 plus accrued interest attributable thereto.
(c) Benefits. During the Employment Term, the Executive
(including, where applicable, Executive's family) shall be entitled to
benefits in accordance with the welfare benefit and incentive plans, practices,
programs and policies of the Company (including, but not limited to,
retirement, savings, incentive and stock compensation plans, employee stock
purchase plans, medical, death and disability, life and other insurance plans
and policies). Minimum service eligibility conditions of such plans shall be
waived unless such a waiver would adversely affect the plan or participants
therein.
(d) Vacation. During the Employment Term, the Executive shall be
entitled to four weeks of paid vacation per year or such longer period as may
be provided by the Company in accordance with the plans, policies, programs
and practices of the Company applicable to executives of the Company
generally.
(e) Indemnification.
(i) In addition to any separate agreements between Executive
and the Company relating to indemnification, the Company will indemnify
and hold harmless Executive, to the fullest extent permitted by
applicable law, in respect of any liability, damage, cost or expense
(including reasonable counsel fees) incurred in connection with the
defense of any claim, action, suit or proceeding to which he is a party,
or threat thereof, by reason of his being or having been an officer or
director of the Company or any subsidiary or affiliate of the Company, or
his serving or having served at the request of the Company as a director,
officer, employee or agent of another corporation or of a partnership,
joint venture, trust, business organization, enterprise or other entity,
including service with respect to employee benefit plans. Without
limiting the generality of the foregoing, the Company will pay the
expenses (including reasonable counsel fees) of defending any such claim,
action, suit or proceeding in advance of its final disposition, upon
receipt of an undertaking by Executive to repay all amounts advanced if
it should ultimately be determined that Executive is not entitled to be
indemnified under this Section.
(ii) In addition to the foregoing, the Company agrees to pay
promptly as incurred, to the full extent permitted by law, all legal fees
and expenses incurred by Executive in connection with the defense
(including in connection with the defense of counterclaims or
cross-claims) of any claim, action, suit or proceeding relating to the
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enforcement by the Company (including claims, actions, suits or proceedings
brought in the right of the Company) of the provisions of Sections 6, 7, 8
or 9 of this Agreement; provided, however. that in the event that the
Company (or any person asserting the Company's right) is the prevailing
party in such enforcement action (as determined by a court of competent
jurisdiction in a final adjudication not subject to appeal), the Executive
shall reimburse the Company for all payments made by it pursuant to this
Section 4(e)(ii).
(iii) Except as otherwise provided in Section 4(e)(ii) above, the
Company agrees to pay promptly as incurred, to the full extent permitted by
law, all legal fees and expenses which Executive may reasonably incur as a
result of any contest (regardless of the outcome thereof) by the Company,
Executive or others of the validity or enforceability of, or liability
under any provision of this Agreement or any guarantee of performance
thereof (including as a result of any contest by Executive about the amount
of any payment pursuant to this Agreement), plus in each case interest on
any delayed payment at the applicable Federal rate provided for in Section
7872(f)(2)(A) of the Code (as hereinafter define).
(f) Certain Reduction of Payments by the Company.
(i) Anything in this Agreement to the contrary notwithstanding,
in the event it shall be determined that any payment or distribution by
the Company to or for the benefit of the Executive (whether paid or
payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any reduction
required under this Section 4(f)) (a "Payment") would be nondeductible by
the Company for federal income tax purposes because of Section 280G of
the Internal Revenue Code of 1986, as amended (the "Code"), then the
aggregate present value of all Payments shall be reduced (but not below
zero) such that such aggregate present value of Payments equals the
Reduced Amount. The "Reduced Amount" shall be an amount expressed in
present value which maximizes the aggregate present value of Payments
without causing any Payment to be nondeductible by the Company because of
Section 280G of the Code. For purposes of this Section 4(f), present
value shall be determined in accordance with Section 280G(d)(4) of the
Code.
(ii) All determinations required to be made under this Section
4(f) shall be made by the Company's regular independent accounting and
auditing firm (the "Accounting Firm"), which shall provide detailed
supporting calculations both to the Company and the Executive within 15
business days of the Date of Termination. In the event that the
Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the Executive shall
appoint another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). Any such determination by
the Accounting Firm shall be binding upon the Company and the Executive.
All fees and expenses of the Accounting Firm shall be
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borne by the Company. The Executive shall determine which and how much of
the Payments shall be eliminated or reduced consistent with the
requirements of this Section 4(f), provided that if the Executive does
not make such determination within ten business days of the receipt of
the calculations made by the Accounting Firm the Company shall elect
which and how much of the Payments shall be eliminated or reduced
consistent with the requirements of this Section 4(f) and shall notify
the Executive promptly of such election. Within five business days
thereafter, the Company shall pay to or distribute to or for the benefit
of the Executive such Payments as are then due to the Executive and shall
promptly pay to or distribute to or for the benefit of the Executive such
Payments as become due to the Executive.
(iii) As a result of the uncertainty in the application of
Section 280G of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Payments will have been
made by the Company which should not have been made ("Overpayment") or
that additional Payments which will have not been made by the Company
could have been made ("Underpayment"), in each case, consistent with the
calculations required to be made hereunder. In the event that the
Accounting Firm determines that an Overpayment has been made, any such
Overpayment shall be treated for all purposes as a loan to the Executive
which the Executive shall repay to the Company together with interest at
the applicable federal rate provided for in Section 7872(f)(2) of the
Code; provided, however, that no amount shall be payable by the Executive
to the Company (or if paid by the Executive to the Company shall be
returned to the Executive) if and to the extent such payment would not
reduce the amount which is subject to taxation under Section 4999 of the
Code. In the event that the Accounting Firm determines that an
Underpayment has occurred, any such Underpayment shall be promptly paid
by the Company to or for the benefit of the Executive together with
interest at the applicable federal rate provided for in Section
7872(f)(2) of the Code.
5. Expenses: Relocation Expenses.
(a) During the Employment Term, the Executive shall be entitled to
receive prompt reimbursement for all reasonable expenses incurred by the
Executive in accordance with the policies, practices and procedures of the
Company.
(b) In addition, the Company shall reimburse Executive for the costs
and expenses relating to the temporary and permanent relocation of Executive
and his family to the Tampa, Florida area, including, but not limited to,
reimbursement of Executive for all reasonable temporary housing expenses for
Executive and his family during the period of their temporary relocation plus
any taxes imposed upon Executive with respect thereto.
(c) The Company shall provide Executive with the benefits (financial
and otherwise) of the Company's relocation policy (a description of which is
set forth in Schedule
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5(c) to this Agreement) with respect to the sale of Executive's PRINCIPAL
RESIDENCE OCCUPIED prior to his relocation to the Tampa, Florida area.
(d) It is at the request of the Company that for each calendar year
during the Employment Term, Executive shall attend a flight training course
for which Company shall reimburse Executive up to $10,000 per year.
6. Noncompetition. Executive agrees that while in the employ of the
Company and, if Executive terminates his employment with the Company prior to
the expiration of the Employment Term in breach of his obligations hereunder,
for the period beginning on the date Executive terminates his employment and
ending on the date the Employment Term was otherwise scheduled to expire (the
"Subject Period"), Executive will not, directly or indirectly, as principal or
agent, or in any other capacity, own, manage, operate, participate in or be
employed by or otherwise be interested in, or connected in any manner with,
any person, firm, corporation or other enterprise which directly competes in a
material respect with the business of the Company or any of its majority-owned
subsidiaries as it is conducted while Executive is employed by the Company,
except as provided in Schedule 6 hereto. Nothing herein contained shall be
construed as denying Executive the right to own securities of any such
corporation which is listed on a national securities exchange or quoted in the
National Association of Security Dealers, Inc. Automated Quotation System (the
"NASDAQ System") to the extent of an aggregate of 5% of the amount of such
securities outstanding.
7. Confidentiality.
(a) Executive agrees that while in the employ of the Company
(otherwise than in the performance of his duties hereunder) and during the
period of two years following the scheduled expiration of the Employment Term,
he shall not, directly or indirectly, make use of, or divulge to any person,
firm, corporation, entity or business organization, and shall use his best
efforts to prevent the publication or disclosure of, any Confidential
Information (as hereinafter defined) concerning the Company, but this Section
7(a) shall not prevent Executive from responding to any subpoena, court order
or threat of other legal duress, provided Executive notifies the Company
thereof with reasonable promptness so that the Company may seek a protective
order or other appropriate relief. The term "Confidential Information" shall
mean information disclosed to Executive by the Company in connection with his
employment relating to the business of the Company, including its accounts and
finances, customers and customer lists, and its future plans and proposals, to
the extent that the foregoing matters are considered proprietary by the
Company; Provided. however. that the following shall not be deemed to be
Confidential Information:
(i) information which is or becomes publicly known other than
as a result of a breach of this provision by Executive;
(ii) information lawfully in the possession of Executive prior
to disclosure to him by the Company;
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(iii) information disclosed to Executive by any third party; or
(iv) information developed independently by Executive
subsequent to Executive's employment by the Company.
(b) Executive agrees that he will comply with the provisions of any
confidentiality agreements with others to which he is or may be subject. More
specifically, Executive will not divulge to the Company any confidential or
proprietary information in violation of any agreements with others.
8. Delivery of Materials. Executive agrees that upon the termination of
his employment he will deliver to the Company all documents, papers, materials
and other property of the Company relating to its affairs which may then be in
his possession or under his control.
9. Noninterference. Executive agrees that he will not, while in the
employ of the Company and, in the event Executive terminates his employment
with the Company prior to the expiration of the Employment Term in breach of
his obligations hereunder, during the Subject Period, solicit the employment
of any employee of the Company on behalf of any other person, firm,
corporation, entity or business organization, or otherwise interfere with the
employment relationship between any employee or officer of the Company and the
Company.
10. Remedies of the Company. Executive agrees that, in the event of a
material breach by Executive of this Agreement, in addition to any other
rights that the Company may have pursuant to this Agreement, the Company shall
be entitled, if it so elects, to institute and prosecute proceedings at law or
in equity to obtain damages with respect to such breach or to enforce the
specific performance of this Agreement by Executive or to enjoin Executive
from engaging in any activity in violation hereof. Executive agrees that
because Executive's services to the Company are of such a unique and
extraordinary character, a suit at law may be an inadequate remedy with
respect to a breach by Executive of Sections 6, 7, 8 and 9 hereof, and that
upon any such breach or threatened breach by him of such Sections the Company
shall be entitled, in addition to any other lawful remedies that may be
available to it, to injunctive relief.
11. Notices. All notices to be given hereunder shall be deemed duly
given when delivered personally in writing or mailed, certified mail, return
receipt requested, postage prepaid and addressed as follows:
(a) If to be given to the Company:
Home Shopping Network, Inc.
2501 118th Avenue North
St. Petersburg, Florida 33716
Attention: Legal Department
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With a separate copy to:
Joseph A. Cialone, II
Baker & Botts, L.L.P.
910 Louisiana
Houston, Texas 77002-4995
(b) If to be given to Executive:
David F. Dyer
Home Shopping Network, Inc.
2501 118th Avenue North
St. Petersburg, Florida 33716
With a separate copy to:
Joseph E. Bachelder
Law Offices of Joseph E. Bachelder
780 Third Avenue
New York, New York 10017
or to such other address as a party may request by notice given in accordance
with this Section 11.
12. Stock Options.
(a) The Company hereby grants, effective as of the date hereof
("Grant Date"), to Executive stock options ("Options") with respect to
1,500,000 (the "Total Number of Options") shares of the Company's common
stock, par value $.01 per share (the "Common Stock", which term shall include
the Common Stock of the Company as it exists on the date hereof and any class
or series into which it may hereafter have been changed). The Options granted
hereunder (i) shall be at an option price (the "Option Price") per share equal
to the fair market value of Common Stock on the Grant Date which is $11.50 per
share, (ii) shall vest over a five-year period as follows: one-fifth of the
Total Number of Options shall vest and become exercisable by Executive on each
anniversary of the Effective Date, commencing with the first anniversary of
the Effective Date, such that the Total Number of Options will be fully vested
on the fifth anniversary of the Effective Date, unless such vesting is
accelerated pursuant to the terms of Section 12(b) or the terms of Schedule 12
of this Agreement, (iii) shall have a term expiring 10 years, unless sooner
terminated by reason of the provisions of the Stock Option Grant, from the
Grant Date and (iv) if not sooner exercised or expired shall be exercisable in
full for at least 10 days prior to any liquidation or dissolution of the
Company.
(b) Options granted hereunder shall contain the terms set forth
in Schedule 12 of this Agreement and, in addition, upon termination of
employment by Company without
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Cause or by Executive for Good Reason, or during the period described in
paragraph 1(d)(ii), or by reason of Executive's death, the Options will fully
vest and be exercisable for one year. If employee voluntarily terminates,
other than during the period described in paragraph 1(d)(ii), or is terminated
for Cause, the Options will be exercisable for not more than twelve months
following the date of termination and then only to the extent vested as of the
date of termination. If Executive's employment is terminated pursuant to
Section 1(b)(ii) of this Agreement, the Options shall lapse at the earlier of
the end of the ten-year term of the Option or the end of a period of time
after employment termination equal to one month for each full or partial year
of employment with the Company from the most recent date of employment.
(c) In the event of a stock dividend, recapitalization,
reorganization, split-up, spin-off, combination, exchange of shares, warrants
or rights offering to purchase Common Stock, or other similar corporate event
affecting the Common Stock such that an adjustment is required in order to
preserve the benefits of this Section 12, an adjustment shall be made to
increase or decrease any or all of (i) the number and kind of shares subject
to the Options granted hereunder and/or (ii) the Option Price, in such manner
as the Company's board of directors may deem reasonable and appropriate;
provided. however. that the number of shares subject to the Options granted
hereunder shall always be a whole number.
13. Successors.
(a) This Agreement is personal to the Executive and without the
prior written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns. However, no rights or obligations
of the Company under this Agreement may be assigned or transferred by the
Company except that such rights or obligations may be assigned or transferred
pursuant to a merger or consolidation in which the Company is not the
continuing entity, or the sale or liquidation of all or substantially all of
the assets of the Company.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
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14. Miscellaneous.
(a) This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and replaces and supersedes
as of the date hereof any and all prior agreements and understandings with
respect to Executive's employment by the Company, whether oral or written,
between the parties hereto. This Agreement may not be changed nor may any
provision hereof be waived except by an instrument in writing duly signed by
the party to be charged. This Agreement shall be interpreted, governed and
controlled by the law of the State of Florida, without reference to principles
of conflict of laws.
(b) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(c) The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(d) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement
or the failure to assert any right the Executive or the Company may have
hereunder, including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section 1(d) of this
Agreement, shall not be deemed to be a waiver of such provision or right or
any other provision or right of this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and
year first above written.
HOME SHOPPING NETWORK, INC.
By: /s/ John M. Draper
---------------------------------------
John M. Draper, Chairman of the
Compensation and Benefits Committee
of the Board of Directors
/s/ David F. Dyer
---------------------------------------
David F. Dyer
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Schedule 5(c)
-------------
In accordance with the Home Shopping Network, Inc. ("HSN") policy and practice
in such matters, the following will apply in the sale of Executive's home at
6203 South Highlands Avenue, Madison, Wisconsin 53705:
1. The Guaranteed Sales Price shall be based on appraised value. HSN will
guarantee Executive this price. HSN reserves the right to review and
approve/disapprove or modify any offers received by the realtor for
Executive. If HSN accepts or directs Executive to accept an offer which
is less than the appraised value, HSN will reimburse Executive for the
amount of the difference between the Guaranteed Sales Price and offer
price, less the monies it has paid towards the amortization of
Executive's mortgage.
2. Monthly mortgage payments = $5,011.59. HSN will remit these payments to
the first mortgage holder by the fifth day of each month. Upon the sale
of Executive's property, HSN will be reimbursed by Executive for any
mortgage amortization occurring during the period that HSN made such
payments.
3. Maintenance. It is recognized that the property must be properly
maintained while for sale. HSN will reimburse Executive for this expense
at the rate of $750.00 per month.
4. Insurance which provides appropriate protection against loss from fire,
theft, vandalism, weather, etc. will be maintained in Executive's name,
and HSN will reimburse Executive for such amounts during the period prior
to sale. The annual cost of $800.00 will be paid by HSN. Executive will
reimburse HSN for any insurance refunds made at the closing.
5. HSN's Vice President - Human Resources will serve as agent on behalf of
HSN to receive and review with Executive all offers presented by
Executive's realtors and, if appropriate, to adjust the asking price for
the property.
6. The foregoing agreements shall remain in effect during the Employment
Term and shall survive termination of the Agreement; provided, however,
that in the event Executive terminates his employment other than in
accordance with Section 1(d)(i) or (ii) of the Agreement, Executive shall
be required to reimburse HSN for the amounts paid on Executive's behalf
pursuant to Sections 2, 3 and 4 of this Schedule 5(c).
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Schedule 6
----------
The ownership of the following securities and/or participation with
respect to the activities of the following entities, shall be exempt from the
provisions of Section 6 of the Agreement:
NONE
16
EX-10.33
8
EMPLOYMENT AGREEMENT; HSN AND BARRY S. AUGENBRAUN
1
EXHIBIT 10.33
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of September 1, 1994 between HOME
SHOPPING NETWORK, INC., a Delaware corporation (the "Company"), and BARRY S.
AUGENBRAUN ("Executive").
This Agreement sets forth the terms and conditions of Executive's
employment by the Company as Executive Vice President and General Counsel.
In consideration of the mutual covenants and agreements herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties, intending to be
legally bound, do hereby agree as follows:
1. Term and Termination.
(a) Term. The term of Executive's employment under this
Agreement (the "Employment Term") shall commence immediately upon September 1,
1994 (the "Effective Date") and end on August 31, 1997. The Employment Term
shall be automatically extended beyond the original term for successive
one-year terms unless by April 30, 1997, or any subsequent April 30, either
party notifies the other party in writing that it is electing to terminate this
Agreement at the expiration of the then current term. During the Employment
Term, the Company agrees to employ Executive and Executive agrees to serve the
Company upon and subject to the terms and conditions set forth in this
Agreement.
(b) Termination by the Company. Executive's employment by the
Company may be terminated by the Company only as provided in clauses (i)
through (iv) below.
(i) Upon the death of Executive.
(ii) Upon one hundred eighty (180) days' prior
written notice from the Company to Executive (the "Notice Period"), in
the event of an illness or other disability which has incapacitated
Executive from performing his duties hereunder, as determined in good
faith by the Board of Directors of the Company, for an aggregate of
one hundred eighty (180) consecutive days during the twelve calendar
months preceding the month in which such notice is given; provided,
however, that in the event that prior to the end of the Notice Period,
Executive recovers from such illness or other disability to an extent
permitting him to perform his duties hereunder, the notice of
termination pursuant to this clause (ii) shall be of no further force
and effect.
(iii) At any time upon giving written notice of such
termination to Executive and by (x) paying to Executive in connection
with such termination in a lump sum (A) the Annual Base Salary (as
hereinafter defined) that would have been payable to Executive had his
employment by the Company continued until the expiration of the
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Employment Term plus (B)(1) the amount of Annual Bonus (as hereinafter
defined) that Executive would have been entitled to receive had his
employment by the Company continued until the end of the fiscal year
in which such termination occurred but without regard to any
requirement in such plan that Executive be employed by the Company at
any time following the conclusion of such succeeding fiscal year in
order to receive his Annual Bonus, (such amount of Annual Bonus is
hereinafter referred to as the "Remainder Bonus") and (2) any Annual
Bonus for a prior fiscal year that has been earned but not yet paid.
Any amount paid pursuant to (x)(A) or (B)(1) of the preceding sentence
shall be reduced by any salary or bonus received by Executive from a
subsequent employer in respect of a period for which Executive has
received payments pursuant to such clause (x) and Executive agrees to
pay to the Company such amounts promptly. In addition, Executive shall
receive benefits as provided in Section 1(h), and his Options shall be
treated as specified in Section 12. The Company shall also pay the
reasonable costs of a relocation by Executive and his family to (x)
Philadelphia, PA, or (y) any other location in the continental United
States to which Executive may relocate, whichever is less.
(iv) At any time for "Cause", which for purposes of
this Agreement shall be deemed to have occurred only on the happening
of any of the following:
(A) the plea of guilty to, or conviction for,
the commission of a felony offense by Executive;
provided. however. that after indictment, the
Company may suspend Executive from the rendition
of services, but without limiting or modifying in any
other way the Company's obligations under this
Agreement;
(B) a material breach by Executive of a material
fiduciary duty owed to the Company;
(C) a material breach by Executive of any of the
covenants made by him in Sections 6 and 7 hereof; or
(D) the willful and gross neglect by Executive
of the material duties specifically and expressly
required by this Agreement.
provided, however, that any claim that "Cause", within the meaning of
clauses (B), (C) or (D) above, exists for the termination of
Executive's employment may be asserted on behalf of the Company only
by a resolution duly adopted by two-thirds of the total number of
members of the Board of Directors of the Company, and only after 15
days prior written notice to Executive during which period he may cure
the breach or neglect that is the basis of any such claim, if curable;
provided, further. that no state of facts that, with or without
notice to Executive or the passage of time or both, would give rise to
the right of the Company to terminate Executive's employment pursuant
to clause (ii) of this Section 1(b) may, directly or indirectly, in
whole or in part, be the basis for
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a claim that Cause, within the meaning of clause (D) above,
exists for the termination of Executive's employment; provided,
further, that during the period of twelve (12) months following a
Change in Control (as hereinafter defined), Cause shall be deemed to
have occurred only upon the happening of an event referred to in
clause (A) above; and provided, further, that the term "material" as
used in clauses (B), (C) and (D) above and in Section 10 hereof shall
be construed by reference to the effect of the relevant action or
omission on the Company and its subsidiaries taken as a whole.
(c) Effect of Termination by the Company. If Executive's
employment is terminated by the Company pursuant to Section l(b)(iii) hereof,
he shall receive only the amounts and benefits, and his Options shall be
treated, as provided in Section l(b)(iii). If Executive dies while employed by
the Company, his employment will thereupon be terminated pursuant to Section
1(b)(i) and his beneficiary shall receive pursuant to this Agreement his Annual
Base Salary and Annual Bonus (to the extent not otherwise included in the
Remainder Bonus) that has accrued in favor of Executive as of the end of the
month of the date of his death, to the extent unpaid or delivered, and the
Remainder Bonus, but his beneficiary shall be eligible to receive benefits
under the Company's life insurance and death benefits plans or practices in
which he is then participating, to the extent provided in such plans or
practices, and his Options shall be treated as specified in Section 12. If
Executive's employment is terminated pursuant to Section 1(b)(ii) of this
Agreement, he shall receive pursuant to this Agreement his Annual Base Salary
and Annual Bonus (to the extent not otherwise included in the Remainder Bonus)
that has accrued in favor of Executive as of the date of his termination of
employment, to the extent unpaid or delivered, and the Remainder Bonus, plus
benefits under any Company disability plan to which he is under the terms of
such plan entitled and his Options shall be treated as specified in Section 12.
If Executive's employment is terminated by the Company for Cause pursuant to
Section 1(b)(iv) hereof, he shall receive pursuant to this Agreement only his
Annual Base Salary earned as of the date of termination and the Remainder
Bonus, and his Options shall be treated as specified in Section 12.
(d) Termination by Executive. The Executive's employment may
be terminated during the Employment Term by the Executive (i) for Good Reason
or (ii) during the twelve (12) month period immediately following a Change in
Control if the Executive is required to report to the legal department or chief
legal officer of any other corporation or entity or (iii) without any reason at
any time. For purposes of this Agreement, "Good Reason" shall mean:
(A) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position as chief
legal officer of the Company (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as
contemplated by Section 2 of this Agreement, or any other action by
the Company which results in a material diminution in such position,
authority, duties or responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in bad faith
and which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
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(B) any material breach of this Agreement by the
Company which is not remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(C) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this
Agreement; or
(D) any failure by the Company to comply with and
satisfy Section 13 of this Agreement.
For purposes of this subsection (d), a determination of "Good Reason" by the
Executive which is reasonable and is made in good faith shall be conclusive.
(e) Effect of Termination by the Executive. If Executive
terminates his employment with the Company pursuant to Section 1(d)(i) or (ii)
of this Agreement, the Company shall pay to Executive in connection with such
termination (i) in a lump sum all Annual Base Salary that has accrued in favor
of Executive as of the date of termination, to the extent unpaid or delivered,
(ii) at the time such amounts would have been payable had employment not
terminated, the Annual Base Salary that would have been payable to Executive
had his employment by the Company continued until the expiration of the
Employment Term, (iii) the Remainder Bonus at the time such amounts would have
been payable had employment not terminated and (iv) any Annual Bonus for a
prior fiscal year that has been earned but not paid. Amounts payable pursuant
to clauses (ii) and (iii) of the preceding sentence shall be reduced by any
salary or bonus received by Executive from a subsequent employer in respect of
a period during which Executive is receiving payments pursuant to such clauses
(ii) and (iii). In addition, Executive shall receive benefits as provided in
Section l(h), and his Options shall be treated as specified in Section 12. The
Company shall also pay the reasonable costs of a relocation by Executive and
his family to (A) Philadelphia, PA, or (B) any other location in the
continental United States to which Executive may relocate, whichever is less.
If Executive terminates his employment with the Company pursuant to Section
l(d)(iii) and is not eligible to terminate under Section 1(d)(i) or (ii), the
Company shall only pay to Executive in a lump sum upon such termination an
amount of cash equal to all Annual Base Salary that has accrued in favor of
Executive as of the date of termination, to the extent unpaid or delivered, and
his Options shall be treated as specified in Section 12.
(f) Survival. Upon termination of Executive's employment and
payment of the amounts due Executive pursuant to Section I of this Agreement,
the obligations of the Company and the Executive under this Agreement shall
terminate, except that the Company's obligations with respect to the payment of
amounts upon the death or disability of Executive, Section I (h) (Continuation
of Benefits), Section 4(e) (Indemnification), Section 5 (Reimbursement of
Expenses) (as it relates to expenses incurred prior to such termination,
including, without limitation, relocation expenses incurred pursuant to Section
5(c) and Schedule 5(c)), Section 12 (Stock Options) and Section 13
(Successors), and the Executive's obligations under Sections 6
(Noncompetition), 7 (Confidentiality), 8 (Delivery of Materials)
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and 9 (Noninterference), will survive (in accordance with the terms and
conditions thereof) any such termination.
(g) Change of Control. For purposes of this Agreement, a
"Change of Control" shall be deemed to have occurred as of the date upon which
either (x) Tele-Communications, Inc. ("TCI", which term shall include each of
TCI's affiliates and any successor corporation, partnership or other entity
formed as a result of or in connection with any pro rata distribution of
securities or the right to acquire securities to the holders of securities of
TCI) ceases to be the sole "beneficial owner" (within the meaning of Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of Voting Securities (as hereinafter defined) having a
majority of the outstanding Voting Power (as hereinafter defined) of the
Company, or (y) there shall have been a sole or other disposition of all or
substantially all of the assets of the Company in any transaction or series of
related transactions to a person that is not an affiliate of TCI. As used
herein, the following terms shall have the following meanings: (i) "Voting
Securities" shall mean any securities of the Company entitled, or which may be
entitled, to vote on matters submitted to stockholders generally (whether or
not entitled to vote generally in the election of directors), or securities
which are convertible into, or exercisable or exchangeable for such Voting
Securities, whether or not subject to the passage of time or any contingency;
(ii) "Voting Power" shall mean the number of votes available to be cast
(determined by reference to the maximum number of votes entitled to be cast by
the holders of such Voting Securities (or by the holders of any other Voting
Securities into which such Voting Securities may be convertible, exercisable or
exchangeable for, whichever yields the highest number of votes) upon any matter
submitted to stockholders where the holders of all Voting Securities vote
together as a single class) by the holders of Voting Securities; and (iii)
''affiliate'' shall have the meaning set forth in Rule 13e-3(a)(1) under the
Exchange Act.
(h) Continuation of Certain Benefits. In the event Executive's
employment is terminated by the Company due to death or disability, or for any
reason other than for Cause, or if Executive terminates under Section 1(d)(i)
or (ii), then for the remainder of the Employment Term the Company shall
continue benefits to the Executive and/or the Executive's family at least equal
to those which would have been provided to them in accordance with this
Agreement if the Executive's employment had not been terminated, in accordance
with the most favorable plans, practices, programs or policies of the Company
as in effect and applicable generally to other executives and their families;
provided. however. that the Company may terminate such benefits if the
Executive becomes reemployed with another employer and is eligible to receive
similar benefits under such subsequent employer's benefit plans. For purposes
of determining eligibility of the Executive for retiree benefits pursuant to
the Company's plans, practices, programs and policies, in the event of a
termination described in the preceding sentence, the Executive shall be
considered to have remained employed until the end of the Employment Term and
to have retired on the last day of such period.
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2. Services to be Rendered by Executive. The Company and Executive
agree that Executive will serve the Company as its Executive Vice President and
General Counsel. Executive shall be responsible for all the Company's legal
matters, reporting directly to the Company's Chief Executive Officer. In such
capacity, Executive shall perform all reasonable acts customarily associated
with such position, and necessary or desirable to protect and advance the best
interests of the Company. Executive shall perform such acts and carry out such
duties, and shall in all other respects serve the Company faithfully and to the
best of his ability.
3. Time to be Devoted by Executive. Executive agrees to devote
substantially all of his business time, attention, efforts and abilities to the
business of the Company and to use his best efforts to promote the interests of
the Company. During the Employment Term it shall not be a violation of this
Agreement for the Executive to (i) serve on civic, professional or charitable
boards or committees, (ii) fulfill speaking engagements and (iii) manage
personal investments, so long as such activities do not significantly interfere
with the performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement.
4. Compensation.
(a) Salary. During the Employment Term, the Executive
shall receive an annual base salary of not less than $225,000 ("Annual Base
Salary"), which shall be reviewed at least annually and may not be decreased
during the Employment Term, which shall be paid in accordance with the
Company's customary payroll practices for salaried employees.
(b) Annual Bonus. In addition to Annual Base Salary and
other compensation under this Agreement, the Executive shall be entitled to
participate in the Company's Management Incentive Plan ("MIP") or any other
bonus program established by the Company in which senior executives are
eligible to participate and be paid on an annual basis such bonus amount
("Annual Bonus") as determined pursuant to the MIP or such other program. For
the twelve-month period ending August 31, 1995, Executive shall receive a
minimum bonus of $50,000.
(c) Benefits. During the Employment Term, the Executive
(including, where applicable, Executive's family) shall be entitled to benefits
in accordance with the welfare benefit and incentive plans, practices, programs
and policies of the Company (including, but not limited to, retirement,
savings, incentive and stock compensation plans, employee stock purchase plans,
medical, death and disability, life and other insurance plans and policies).
Minimum service eligibility conditions of such plans shall be waived unless
such a waiver would adversely affect the plan or participants therein.
(d) Vacation. During the Employment Term, the Executive
shall be entitled to four weeks of paid vacation per year or such longer period
as may be provided by the Company in accordance with the plans, policies,
programs and practices of the Company
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applicable to executives of the Company generally. Executive shall be eligible
for vacation during the first year of employment hereunder.
(e) Indemnification.
(i) In addition to any separate agreements between
Executive and the Company relating to indemnification, or any
indemnification provided under the Company's certificate of
incorporation or by-laws, the Company will indemnify and hold harmless
Executive, to the fullest extent permitted by applicable law, in
respect of any liability, damage, cost or expense (including
reasonable counsel fees) incurred in connection with the defense of
any claim, action, suit or proceeding to which he is a party, or
threat thereof, by reason of his being or having been an officer or
director of the Company or any subsidiary or affiliate of the Company,
or his serving or having served at the request of the Company as a
director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust, business organization, enterprise
or other entity, including service with respect to employee benefit
plans. Without limiting the generality of the foregoing, the Company
will pay the expenses (including reasonable counsel fees) of defending
any such claim, action, suit or proceeding in advance of its final
disposition, upon receipt of an undertaking by Executive to repay all
amounts advanced if it should ultimately be determined that Executive
is not entitled to be indemnified under this Section.
(ii) In addition to the foregoing, the Company agrees
to pay promptly as incurred, to the full extent permitted by law, all
legal fees and expenses incurred by Executive in connection with the
defense (including in connection with the defense of counterclaims or
cross-claims) of any claim, action, suit or proceeding relating to the
enforcement by the Company (including claims, actions, suits or
proceedings brought in the right of the Company) of the provisions of
Sections 6, 7, 8 or 9 of this Agreement; provided, however. that in
the event that the Company (or any person asserting the Company's
right) is the prevailing party in such enforcement action (as
determined by a court of competent jurisdiction in a final
adjudication not subject to appeal), the Executive shall reimburse the
Company for all payments made by it pursuant to this Section 4(e)(ii).
(iii) Except as otherwise provided in Section
4(e)(ii) above, the Company agrees to pay promptly as incurred, to the
full extent permitted by law, all legal fees and expenses which
Executive may reasonably incur as a result of any contest (regardless
of the outcome thereof) by the Company, Executive or others of the
validity or enforceability of, or liability under any provision of
this Agreement or any guarantee of performance thereof (including as a
result of any contest by Executive about the amount of any payment
pursuant to this Agreement), plus in each case interest on any delayed
payment at the applicable Federal rate provided for in Section
7872(f)(2)(A) of the Code (as hereinafter defined).
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5. Expenses: Relocation Expenses.
(a) During the Employment Tenn, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in accordance with the policies, practices and procedures of
the Company, including costs of attendance at meetings of the American Bar
Association which are approved in advance by the Company.
(b) In addition, the Company shall reimburse Executive
for the costs and expenses relating to the temporary and permanent relocation
of Executive and his family to the Tampa, Florida area, including, but not
limited to, reimbursement of Executive for all reasonable temporary housing
expenses for Executive and his family during the period of their temporary
relocation, for up to sixty days.
(c) The Company shall reimburse Executive for reasonable
costs incurred in terminating the lease of Executive's apartment in New York,
New York.
6. Noncompetition. Executive agrees that while in the employ of
the Company and, if Executive terminates his employment with the Company prior
to the expiration of the Employment Term in breach of his obligations
hereunder, for the period beginning on the date Executive terminates his
employment and ending on the date the Employment Term was otherwise scheduled
to expire (the "Subject Period"), Executive will not, directly or indirectly,
as principal or agent, or in any other capacity, own, manage, operate,
participate in or be employed by or otherwise be interested in, or connected in
any manner with, any person, firm, corporation or other enterprise which
directly competes in a material respect with the business of the Company or any
of its majority-owned subsidiaries as it is conducted while Executive is
employed by the Company. Nothing herein contained shall be construed as denying
Executive the right to own securities of any such corporation which is listed
on a national securities exchange or quoted in the National Association of
Security Dealers, Inc. Automated Quotation System (the "NASDAQ System") to the
extent of an aggregate of 5% of the amount of such securities outstanding.
7. Confidentiality.
(a) Executive agrees that while in the employ of the
Company (otherwise than in the performance of his duties hereunder) and during
the period of two years following the scheduled expiration of the Employment
Term, he shall not, directly or indirectly, make use of, or divulge to any
person, firm, corporation, entity or business organization, and shall use his
best efforts to prevent the publication or disclosure of, any Confidential
Information (as hereinafter defined) concerning the Company, but this Section
7(a) shall not prevent Executive from responding to any subpoena, court order
or threat of other legal duress, provided Executive notifies the Company
thereof with reasonable promptness so that the Company may seek a protective
order or other appropriate relief The term "Confidential Information" shall
mean information disclosed to Executive by the Company in connection with his
employment relating to the business of the Company, including its accounts and
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finances, customers and customer lists, and its future plans and proposals, to
the extent that the foregoing matters are considered proprietary by the
Company; provided, however, that the following shall not be deemed to be
Confidential Information:
(i) information which is or becomes publicly
known other than as a result of a breach of this provision by
Executive;
(ii) information lawfully in the possession
of Executive prior to disclosure to him by the Company;
(iii) information disclosed to Executive by
any third party; or
(iv) information developed independently by
Executive subsequent to Executive's employment by the Company.
(b) Executive agrees that he will comply with the provisions
of any confidentiality agreements with others to which he is or may be subject.
More specifically, Executive will not divulge to the Company any confidential
or proprietary information in violation of any agreements with others.
8. Delivery of Materials. Executive agrees that upon the
termination of his employment he will deliver to the Company all documents,
papers, materials and other property of the Company relating to its affairs
which may then be in his possession or under his control.
9. Noninterference. Executive agrees that he will not, while in
the employ of the Company and, in the event Executive terminates his employment
with the Company prior to the expiration of the Employment Term in breach of
his obligations hereunder, during the Subject Period, solicit the employment of
any employee of the Company on behalf of any other person, firm, corporation,
entity or business organization, or otherwise interfere with the employment
relationship between any employee or officer of the Company and the Company.
10. Remedies of the Company. Executive agrees that, in the event
of a material breach by Executive of this Agreement, in addition to any other
rights that the Company may have pursuant to this Agreement, the Company shall
be entitled, if it so elects, to institute and prosecute proceedings at law or
in equity to obtain damages with respect to such breach or to enforce the
specific performance of this Agreement by Executive or to enjoin Executive from
engaging in any activity in violation hereof. Executive agrees that because
Executive's services to the Company are of such a unique and extraordinary
character, a suit at law may be an inadequate remedy with respect to a breach
by Executive of Sections 6, 7, 8 and 9 hereof, and that upon any such breach or
threatened breach by him of such Sections the Company shall be entitled, in
addition to any other lawful remedies that may be available to it, to
injunctive relief.
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11. Notices. All notices to be given hereunder shall be deemed duly
given when delivered personally in writing or mailed, certified mail, return
receipt requested, postage prepaid and addressed as follows:
(a) If to be given to the Company:
Home Shopping Network, Inc.
11831 30th Court North
St. Petersburg, Florida 33716
Attention: Gerald Hogan, Chief Executive Officer
With a separate copy to:
Joseph A. Cialone, II
Baker & Botts, L.L.P.
910 Louisiana
Houston, Texas 77002-4995
(b) If to be given to Executive:
Barry S. Augenbraun
Home Shopping Network, Inc.
11831 30th Court North
St. Petersburg, Florida 33716
or to such other address as a party may request by notice given in accordance
with this Section 11.
12. Stock Options.
(a) The Company has granted, effective as of September 1, 1994
("Grant Date"), to Executive stock options ("Options") with respect to 100,000
shares of the Company's common stock, par value $.01 per share (the "Common
Stock", which turn shall include the Common Stock of the Company as it exists
on the date hereof and any class or series into which it may hereafter have
been changed). The Options granted are at an option price per share equal to
the fair market value of Common Stock on the Grant Date which was $11.75 per
share.
(b) Options granted hereunder shall contain the terms set forth in
Schedule 12 of this Agreement.
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13. Successors.
(a) This Agreement is personal to the Executive and without the
prior written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns. However, no rights or
obligations of the Company under this Agreement may be assigned or transferred
by the Company except that such rights or obligations may be assigned or
transferred pursuant to a merger or consolidation in which the Company is not
the continuing entity, or the sale or liquidation of all or substantially all
of the assets of the Company.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
14. Miscellaneous.
(a) This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and replaces and supersedes
as of the date hereof any and all prior agreements and understandings with
respect to Executive's employment by the Company, whether oral or written,
between the parties hereto. This Agreement may not be changed nor may any
provision hereof be waived except by an instrument in writing duly signed by
the party to be charged. This Agreement shall be interpreted, governed and
controlled by the law of the State of Florida, without reference to principles
of conflict of laws.
(b) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(c) The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(d) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement
or the failure to assert any right the Executive or the Company may have
hereunder, including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section 1(d) of
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this Agreement, shall not be deemed to be a waiver of such provision or right
or any other provision or right of this Agreement.
15. Releases. Upon any termination of employment, the parties hereby
agree to execute a mutual release substantially in the form attached as
Exhibit B.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and
year first above written.
HOME SHOPPING NETWORK, INC.
By: /s/ Gerald F. Hogan
------------------------------------
Gerald F. Hogan, President
/s/ Barry S. Augenbraun
-------------------------------------
Barry S. Augenbraun
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Schedule 12
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The Options described in paragraph 12 of the Employment Agreement
has been reflected in an option agreement dated September 6, 1994 which has
been delivered to Executive. In addition to the provisions of such option
agreement, upon any termination of Executive's employment (i) by the Company
for any reason other than death, disability or for Cause or (ii) by Executive
under Section 1(d)(i) or (ii), all stock options granted hereunder shall vest
immediately and remain exercisable for a period of one year after such
termination. Upon a termination of Executive's employment by the Company for
Cause or by Executive under Section 1(d)(iii), the Option shall terminate
three months following such termination. Upon a termination of Executive's
employment by reason of death or disability, the provisions of the Stock
Option Plan as interpreted by the Compensation Committee of the Board of
Directors of the Company shall govern the exercisability of the option and the
period for which the option is exercisable.
13
14
DATE
Mr. _______________________________
___________________________________
___________________________________
Dear Mr. __________________:
In connection with your separation from Home Shopping Network, Inc.
(Company), you and Company have agreed to the terms and conditions as
contained in the attachment to this letter concerning your separation from
employment as of ___________________________________,____________.
In consideration of Company's agreement to provide the benefits,
payments, and other items described herein, some of which are in addition to
anything to which you are already entitled and the receipt and sufficiency of
which is hereby acknowledged, you hereby release and forever discharge
Company, its officers, directors, agents, servants, and employees, their
successors, assigns, and insurers, and their parents, subsidiaries and
affiliates, and any and all other persons, firms, organizations, and
corporations from any and all damage, losses, causes of action, expenses,
demands, liabilities, and claims on behalf of yourself, your heirs, executors,
administrators, and assigns with respect to all matters relating to Company
and you hereby accept the cash payments, benefits, and other items described
herein in full settlement of all such damages, losses, causes of action,
expenses, demands, liabilities, and claims you now have or may have with
respect to such matters.
This release includes, but is not limited to, claims arising under
the Age Discrimination in Employment Act, the Older Workers' Benefit
Protection Act, Title VII of the Civil Rights Act of 1964, the Americans with
Disabilities Act, the Family and Medical Leave Act, the Texas Labor Code, any
claims for breach of contract, tort or personal injury of any sort, and any
claim under any other state or federal statute or regulation. Further, by
accepting the payments described in the attachment, you agree not to sue
Company or the related persons and entities described above. You affirm and
agree that your employment relationship has ended and waive all rights in
connection with such relationship except to vested benefits and the payments
and benefits described in the attachment. You shall have twenty-one days to
decide whether to sign the Agreement and be bound by its terms. You shall have
the right to revoke or cancel it within seven days after you have signed it.
This cancellation or revocation can be accomplished by delivery of a written
notification to me. In
15
the event that this Agreement is cancelled or revoked, Company shall have no
obligation to furnish the payments and benefits described. You acknowledge
that you have been advised in writing to consult with an attorney prior to
signing this Agreement and have had an adequate opportunity to seek advice of
your own choosing. You acknowledge that you have read this Agreement, have had
an opportunity to ask questions and have it explained to you and that you
understand that the Agreement will have the effect of knowingly and
voluntarily waiving any action you might pursue, including breach of contract,
personal injury, retaliation discrimination on the basis of race, age, sex,
national origin, or disability and any other claims arising prior to the date
of the Agreement.
This release shall not effect your indemnification rights under
Paragraph 4(e) of the Employment Agreement between you and the Company dated
as of September 1, 1994.
The purpose of the arrangements described in this letter and
attachment is to arrive at a mutually agreeable and amicable basis upon which
to separate your employment with Company. You and Company agree to refrain
from any criticisms or disparaging comments about each other or in any way
relating to your separation from employment. Furthermore, you agree that you
have returned or will return immediately, and to maintain in strictest
confidence and not to use in any way, any proprietary, confidential, or other
nonpublic information or documents relating to the business and affairs of
Company and its affiliates. You further agree that the existence and all terms
of this agreement, including the terms and conditions contained in the
attachment, shall be kept strictly confidential and that any disclosure to
anyone for any purpose whatsoever (save and except disclosure to financial
institutions as part of a financial statement) by you or your agents,
representatives, heirs, children, spouse, employees or spokespersons shall be
a breach of this agreement and shall release the Company from further
performance hereunder.
Very truly yours,
AGREED TO AND ACCEPTED this day of
________ day of _______________, ______
_______________________________________
16
Attachment to Letter Dated _____________________________
1. VACATION
Beginning ________________,_______, you will begin your vacation pay. You
will receive all your ________ earned vacation days less any vacation days
taken in ________, plus all of your accrued vacation days through your
separation date.
2. CONSIDERATION
The Company will pay you, after the expiration of seven days after you
execute the attached letter agreement, a special payment of __________________
($________). This payment is in consideration for the full release of any and
all claims for non-punitive damages for personal and emotional injury only,
arising from an occurrence within the meaning of Section 104(a)(2) of the
Internal Revenue Code of the United States, 26 U.S.C. Section 104(a)(2) and
accompanying regulations. It is not compensation, payment in lieu of
compensation, service, severance, vacation, salary continuation, or any other
manner of compensation for loss of income and/or employment benefits for any
purpose under any provision of this Agreement or under any Company
compensation or benefit plan.
3. MEDICAL AND DENTAL COVERAGE
You will have the option to continue your medical and dental benefits for
up to eighteen months according to the COBRA legislation.
4. LIFE INSURANCE AND AD&D
Life Insurance and AD&D will continue during your vacation.
At the end of your vacation, you will have a thirty-one day period to
convert your life insurance and/or AD&D, according to the terms and conditions
in effect at that time. If you are interested in converting either benefit to
an individual policy, application must be made to the insurance company within
thirty-one days of the end of your vacation. It will be your responsibility to
complete the conversion process if you so desire.
5. STD/LTD
Short- and long-term disability coverage are not in effect after your
separation date.
17
6. RETIREMENT PLAN
You will continue to accrue a retirement benefit while receiving vacation
pay.
7. SAVINGS AND INVESTMENT PLAN
You will be eligible to continue participation in the Savings and
Investment Plan during your vacation period, if you so elect. Employee
accounts are 100% vested. Employer matching accounts will be vested and
distributed according to plan provisions.
8. FUTURE PAYCHECKS
Future paychecks will be mailed to the address noted on your paycheck or,
if you are on automatic bank deposit, that service will be provided as long as
you are receiving pay. The pay stub will be mailed to the address on the
paycheck.
9. OUTPLACEMENT AOD EMPLOYEE ASSISTANCE PROGRAM
The Company agrees to provide you, at its cost, outplacement services
through a third party provider. You will continue to be eligible to utilize
Company's Employee Assistance Program during your vacation period.
10. OFFSETS
In addition, benefits otherwise payable by virtue of the life insurance
and AD&D insurance coverage provided you and your dependents, pursuant to item
4 above, will be subject to offset to the extent such coverage was available
to you on either a contributory or noncontributory basis through your new
employer, without regard to whether or not you elected such coverage.
EX-10.34
9
EMPLOYMENT AGREEMENT; HSN AND HONORE A LEBRUN
1
EXHIBIT 10.34
[HSN LOGO]
HOME SHOPPING NETWORK, INC.
---------------------------
GERALD F. HOGAN
President & Chief Executive Officer
November 2, 1993
Mr. Honore A. LeBrun III
93 Forrest Place
Atlanta, GA 30328
Dear Nory:
It is my pleasure to confirm our offer to you for the position of Executive
Vice President of Affiliate Sales and Marketing at Home Shopping Network, Inc.
This position would be responsible for HSN's cable sales and marketing, tv
affiliate sales and marketing and government relations.
Subject to the approval of the Compensation and Benefits Committee of our board
of directors, we have offered you the following:
SALARY: Year I - $175,000, Year II $200,000
INCENTIVE COMPENSATION: Opportunity to earn an additional $150,000 over the
first two years of your employment for the achievement of performance goals,
$50,000 of which is guaranteed at the end of year one.
HOUSING ALLOWANCE: $1200 per month housing allowance for one year.
LONG TERM COMPENSATION: Stock Option Award to purchase 100,000 shares of HSN
common stock in accordance with our Employee Stock Option Plan. The strike
price will be the closing price on the day you join HSN as a full-time
employee. (A copy of the plan will be sent to you today).
As we discussed, your first day of employment at HSN will be November 15, 1993.
Nory, I look forward to your acceptance.
Best regards,
/s/ Gerry Hogan
----------------
Gerry Hogan
EX-10.35
10
LETTER AGREEMENT
1
EXHIBIT 10.35
[LOGO] HOME SHOPPING NETWORK, INC.
Edward M. Vaughn, Jr.
Senior Vice President
20 July 1993
Mr. Michael W. D. McMullen
1401 Peachtree Street, NE
Atlanta, Georgia 30309
Dear Mr. McMullen:
On behalf of Gerry Hogan and the entire Home Shopping Network management team,
welcome.
It is my pleasure to offer you the position of President, HSN International,
Inc. The annual compensation for this position will be a base salary of
$220,000.00, and a performance-based bonus in your first year of employment of
at least $50,000.00. Should HSN adopt a bonus plan for executives in the
future, you will be eligible for participation in the plan. We will
recommend to the Board of Directors that you be awarded options to purchase
200,000 shares of our common stock in accordance with our plan. We will also
request that the Board approve a two year contract of employment for you.
Enclosed for your information are various documents which describe the HSN
benefits programs, as well as a copy of our policy and procedure for the
relocation of your household. If I may answer any questions or assist you in
any way, please do not hesitate to contact me. Again, welcome to the team. I
look forward to serving with you.
Sincerely,
/s/ Edward M. Vaughn, Jr.
-------------------------
Edward M. Vaughn, Jr.
Enclosures
-------------------------------------------------------------------------------
P.O. Box 9090, Clearwater, FL 34618-9090 (813) 572-8585
EX-10.36
11
AMENDED AFFILIATION AGREEMENT
1
EXHIBIT 10.36
AMENDMENT TO TELEVISION AFFILIATION AGREEMENT
This Amendment to the TELEVISION AFFILIATION AGREEMENT ("Affiliation
Agreement") is entered into by and between HOME SHOPPING CLUB, INC. ("HSC")
and SILVER KING BROADCASTING OF ______________, licensee of Television Station
___________, _________ ("STATION").
RECITALS
WHEREAS, the parties entered in an Affiliation Agreement dated December
28, 1992, relating to HSC's daily television broadcast program service for the
presentation and sale of products and services offered by HSC or its licensee
subsidiaries or joint ventures known as HSN-2 (hereinafter the "HSC PROGRAM
SERVICE"); and
WHEREAS, the parties desire to clarify the compensation Formula set
forth in Sections 2.b., 5.a., 5.b., 5.c and 6.b., respectively of the
Affiliation Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, HSC and the STATION agree that
Sections 2.b., 5.a., 5.b., 5.c. and 6.b. shall be amended to read as follows:
"2.b. The presently contemplated schedule for STATION PROGRAM TIME is
set forth in Schedule B attached to this Agreement, which may be amended by
mutual agreement of STATION and HSC from time to time. In addition, STATION
shall be permitted automatically to preempt up to one- hundred fifty-six (156)
hours per year (as determined by STATION'S fiscal year) of the HSC PROGRAM
SERVICE (in addition to its rights under Section 14 below) if STATION provides
HSC with a written notice for preemption not less than sixty (60) days prior to
the proposed preemption. STATION may make a request for preemption, with the
same notice, for any hours in excess of one-hundred fifty-six (156) per year,
and HSC shall respond to STATION'S request for preemption within ten (10) days
after such request is received by HSC. After any alternative programming
permitted under this paragraph is aired (by right or with HSC's permission),
STATION shall repay to HSC an amount equal to twice the adjusted Average Hourly
Rate for the applicable hour(s) (as defined in Section 5(b) below and shown in
Schedule C) that STATION received for the period of time in which
2
preemption occurred. This amount shall be paid to HSC by STATION within
fifteen (15) days following the end of the month in which the preemption
occurred. This Section shall not apply to Substitute Programming as permitted
by Section 6(e)-6(g) of this Agreement (except as otherwise expressly provided
in Section 6(f)) or to the exercise of the right of refusal under Section 14 of
this Agreement. In either of those instances, STATION shall be required to
repay such applicable Average Hourly Rate advances as it has received for such
hours, as provided in Section 5(a) hereof.
"5.a. HSC will compensate the STATION for its broadcast of the HSC
PROGRAM SERVICE on the basis of the Average Hourly Rate as defined in Section
5.b hereof. Such compensation will consist of monthly payments to be made in
advance on the first business day of each month and will be calculated by
multiplying the then applicable Average Hourly Rate by the number of hours of
the HSC PROGRAM SERVICE expected to be aired in that month. For purposes
hereof, such monthly payment shall be known as the "Monthly Fixed Compensation"
payment. Any monthly payments not made in advance of the first business day of
each month shall accrue interest at the rate of nine and one-half percent (9
1/2%) until such amount is paid. Commencing with the third Monthly Fixed
Compensation payment hereunder and for every payment thereafter, the Monthly
Fixed Compensation payment to the STATION shall be reduced by an amount equal
to the Monthly Fixed Compensation payments made in advance two (2) months
earlier for hours when the HSC PROGRAM SERVICE was expected to be carried but
was not carried under the provisions of Section 6(e), 6(f) (during the third
term of this Agreement only), 6(g), 9 or 14 hereof. The STATION shall submit
to HSC within five (5) business days after the end of each calendar month, upon
forms to be provided by HSC, reports confirming the STATION'S broadcast of the
HSC PROGRAM SERVICE during the calendar month prior to the date of such report
in accordance with the terms of this Agreement.
"5.b. During the first year of this Agreement, the applicable Average
Hourly Rate shall be as established in Schedule C hereof. For every year
thereafter, the applicable Average Hourly Rate shall be increased by fifty
percent (50%) of any increase (expressed as a percentage) in the consumer price
index for the prior year.
"5.c. On or prior to the thirtieth day after each anniversary of the
effective date of this Agreement, the sum of the Monthly Fixed Compensation
payments paid for such year will be compared to the STATION'S Compensation
Amount for the year.
3
"Yearly Fixed Compensation" for any year shall mean the product of the Average
Hourly Rate as defined in Section 5(b), multiplied by the number of hours of
HSC PROGRAM SERVICE aired during such year. If the Compensation Amount exceeds
the Yearly Fixed Compensation paid for that year, such excess amount shall be
paid by HSC to the STATION by the thirtieth day following such anniversary.
"Compensation Amount" for any year shall mean the sum of the Yearly Fixed
Compensation and Commission Compensation for such year. "Commission
Compensation" for any year shall mean the product of the Commission Rate of
five percent (5%) multiplied by the Net Sales within the STATION'S Service Area
for such calendar year in excess of the Net Sales within the STATION'S Service
Area in calendar year 1992. "Net Sales" for any particular year shall mean the
dollar amount of gross sales of merchandise sold via the HSC PROGRAM SERVICE
during such year reduced by the sum of discounts, all promotional incentives
offered by HSC to Home Shopping Club members, returns, chargebacks, refunds,
sales taxes, and shipping and handling revenues for such calendar year."
"6.b. If HSC fails to make two (2) or more affiliation payments to
STATION during any five (5) year period while this Agreement is in effect (a
"Missed Affiliation Payment" shall be deemed to be the Monthly Fixed
Compensation in effect for that year which is not paid in full within thirty
(30) days after it is due to be paid hereunder), STATION shall have the right
to provide written notice to HSC, immediately after such second payment is
missed, of termination of this Agreement or to provide such notice in any
subsequent month in which another Affiliation Payment is Missed. Such
termination shall be effective eighteen (18) months after such notice. During
such eighteen (18) month period, STATION may carry Substitute Programming, as
provided in subsections (e) and (g) below."
This Amendment shall be effective as of the 28th day of July, 1994.
HOME SHOPPING CLUB, INC. SILVER KING BROADCASTING OF
----------------
By: By:
------------------------ --------------------------
Name: Name:
---------------------- ------------------------
Title: Title:
--------------------- -----------------------
EX-11
12
COMPUTATION OF NET EARNINGS PER SHARE
1
EXHIBIT 11
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
COMPUTATION OF NET EARNINGS (LOSS) PER SHARE
YEARS ENDED FOUR MONTHS YEAR
DECEMBER 31, ENDED ENDED
-------------------- DECEMBER 31, AUGUST 31,
1994 1993 1992 1992
------- -------- ------------ ----------
(In thousands, except per share amounts)
PRIMARY EARNINGS (LOSS) PER SHARE:
Weighted average shares outstanding
Common Stock.................................................. 72,843 67,802 63,698 63,394
Class B Common Stock.......................................... 21,352 23,390 24,160 24,160
Shares assumed to be issued upon the exercise of common stock
options under the treasury stock method....................... 866 -- 728 274
Shares assumed to be issued upon the conversion of the Company's
5 1/2% convertible debentures................................. -- -- 2,529 2,427
------- -------- ------------ ----------
95,061 91,192 91,115 90,255
======= ======== ============ =========
Earnings (loss) before extraordinary item....................... $17,701 $(15,539) $ 5,140 $ 37,405
Interest expense adjustment(1).................................. -- -- 191 575
------- -------- ------------ ----------
Earnings (loss) before extraordinary item....................... 17,701 (15,539) 5,331 37,980
Extraordinary item, net of taxes................................ (924) (7,242) -- (112)
------- -------- ------------ ----------
Net earnings (loss)............................................. $16,777 $(22,781) $ 5,331 $ 37,868
======= ======== ============ =========
Earnings (loss) per share before extraordinary item............. $ .19 $ (.18) $ .06 $ .42
Extraordinary item per share, net of taxes...................... (.01) (.08) -- --
------- -------- ------------ ----------
Net earnings (loss) per share................................... $ .18 $ (.26) $ .06 $ .42
======= ======== ============ =========
FULLY DILUTED EARNINGS (LOSS) PER SHARE:(2)
Weighted average shares outstanding Common Stock................ 72,843 67,802 63,698 63,394
Class B Common Stock.......................................... 21,352 23,390 24,160 24,160
Shares assumed to be issued upon the exercise of common stock
options under the treasury stock or modified treasury stock
method........................................................ 872 2,182 2,033 376
Shares assumed to be issued upon the conversion of the Company's
5 1/2% convertible debentures................................. -- 938 2,529 2,427
------- -------- ------------ ----------
95,067 94,312 92,420 90,357
======= ======== ============ =========
Earnings (loss) before extraordinary item....................... $17,701 $(15,539) $ 5,140 $ 37,405
Interest expense adjustment(1).................................. -- 205 191 575
------- -------- ------------ ----------
Earnings (loss) before extraordinary item....................... 17,701 (15,334) 5,331 37,980
Extraordinary item, net of taxes................................ (924) (7,242) -- (112)
------- -------- ------------ ----------
Net earnings (loss)............................................. $16,777 $(22,576) $ 5,331 $ 37,868
======= ======== ============ =========
Earnings (loss) per share before extraordinary item............. $ .19 $ (.16) $ .06 $ .42
Extraordinary item per share, net of taxes...................... (.01) (.08) -- --
------- -------- ------------ ----------
Net earnings (loss) per share................................... $ .18 $ (.24) $ .06 $ .42
======= ======== ============ =========
---------------
(1) Interest expense, net of taxes, that would not have been incurred had
conversion of the Company's 5 1/2% convertible debentures taken place at the
beginning of the period.
(2) The amounts in earnings (loss) per share on the fully diluted basis are
solely shown in this exhibit. Because the amounts are the same as the
primary calculation for the year ended December 31, 1994, the four months
ended December 31, 1992 and the fiscal year ended August 31, 1992 and are
antidilutive for the year ended December 31, 1993 (decrease the loss per
share), they are not required to be presented elsewhere in this Form 10-K.
18
EX-13
13
ANNUAL REPORT TO SHAREHOLDERS
1
EXHIBIT 13
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
GENERAL
Home Shopping Network, Inc. (the "Company") is a holding company, the
subsidiaries of which conduct the day-to-day operations of the Company's
various business activities. The Company's primary business is electronic
retailing conducted by Home Shopping Club, Inc. ("HSC"), a wholly-owned
subsidiary of the Company.
As discussed in Note A to the Consolidated Financial Statements, included
herein, on July 13, 1993, the Company elected to change its year end from
August 31 to December 31. This change was made effective January 1, 1993.
The following discussion presents the material changes in the consolidated
results of operations of the Company which have occurred between the years
ended December 31, 1994 and 1993, along with material changes between the year
ended December 31, 1993 and the fiscal year ended August 31, 1992, and the four
months ended December 31, 1992 versus the four months ended December 31, 1991.
Reference should also be made to the Consolidated Financial Statements and
Summary Financial Data included herein.
All tables and discussion included herein calculate the percentage changes
using actual dollar amounts, versus rounded dollar amounts.
YEAR ENDED DECEMBER 31, 1994 vs.
YEAR ENDED DECEMBER 31, 1993
NET SALES
For the year ended December 31, 1994, net sales for the Company increased $79.9
million, or 7.6%, to $1.127 billion from $1.047 billion for the year ended
December 31, 1993. Net sales of HSC increased $65.2 million, or 6.8%, for the
year ended December 31, 1994, reflecting a 19.5% increase in the number of
packages shipped and a 10.2% decrease in the average price per unit sold
compared to the year ended December 31, 1993. Promotional price discounts, used
to enhance HSC merchandise sales, increased to 2.7% of HSC sales for the year
ended December 31, 1994, from 1.8% in 1993. In addition, sales by the Company's
new infomercial joint venture, HSN Direct Joint Venture ("HSND"), which
commenced operations during the third quarter of 1994, totaled $13.5 million
and sales by the Company's retail outlets increased $6.7 million for the year
ended December 31, 1994 compared to the prior year.
The increases for the year ended December 31, 1994 were primarily offset by a
decline in sales of $6.9 million attributable to the sale of the Company's
former wholly-owned subsidiary, HSN Mistix Corporation ("Mistix") in the second
quarter of 1994. The sale of Mistix should not have a significant impact on the
Company's net sales or results of operations in future periods.
The sales increases for the year ended December 31, 1994 versus 1993,
occurred primarily in the first nine months of the year and were the
continuation of a trend that began in the latter part of the third quarter of
1993. Management believes that 1994 sales levels were positively affected by
several factors, most significantly the addition of new cable subscribers
beginning in September 1993 as a result of the "must carry" provisions of the
cable re-regulation law.
Since September 1994, the Company has appointed new senior management
personnel with expertise in merchandising. The Company has also instituted
procedures intended to improve purchasing and other merchandising practices.
Management's emphasis in this area includes evaluating new product sources and
programs to boost customer loyalty, offering higher quality and a greater
variety of products, developing strong private label lines, selling higher
margin items and offering name brand merchandise.
During the fourth quarter of 1994, in addition to reorganizing its
merchandising and sales practices, the Company continued to significantly
restyle its programming. This includes new on-air presentations, offering
regularly scheduled themed shows, increasing the number of items aired per hour
and the display of item numbers which enables a customer to order an item when
it is off the air. Additional programming changes which are currently under
evaluation by management include revising the current network structure to
simplify program scheduling. These changes are expected to be introduced in the
second and third quarters of 1995 and may not be fully implemented until the
end of 1995.
These changes in merchandising and programming strategy are aimed at
long-term improvements in sales by attempting to attract new customers and
increase the frequency of sales. However, the initial impact of these changes
was a slowdown in sales, such that consolidated net sales for the quarter ended
December 31, 1994 increased only 1.8% over the same period in 1993. Sales and
earnings through mid-1995 are expected to be negatively affected by these
changes. While management
22
2
believes the Company's new merchandising and programming strategy will improve
results, it estimates the earliest that sales will be positively affected will
be the latter half of 1995. There can be no assurance that these changes will
achieve management's intended results.
For the years ended December 31, 1994 and 1993, HSC's merchandise return
percentage remained constant at 24.4%. The return rate continues to be affected
by high returns in jewelry and electronics merchandise categories which
typically experience higher return rates than other merchandise categories.
Management is evaluating the Company's product mix and is taking other steps in
the area of merchandising, as discussed above, in an attempt to reduce the
merchandise return rate.
At December 31, 1994, HSC had approximately 4.9 million active members
representing a 1.4% gain over December 31, 1993. An active member is defined as
an HSC member that has completed a transaction within the last 18 months or
placed an order within the last seven months. In addition, 59.4% of active
members have made more than one purchase in the last 18 months.
The Company believes that future levels of net sales of HSC will be
dependent, in large part, on increases in program carriage, market penetration
and further improvements in sales and merchandising management. Program
carriage is defined as the number of cable systems and broadcast television
stations that carry HSC programming. Market penetration represents the level of
active purchasers within a market.
The following table highlights the changes in the estimated unduplicated
television household reach of HSC programming by category for the year ended
December 31, 1994:
Cable Broadcast Satellite Total
--------- ------------ ---------- ---------
(In thousands of households)
Balance - December 31, 1993. . . . . . . . . . . . . . . . . . . 33,788 25,876 3,100 62,764
Net additions. . . . . . . . . . . . . . . . . . . . . . . . . . 2,029 463 650 3,142
Shift in classification . . . . . . . . . . . . . . . . . . . . 3,143 (3,143) - -
Change in Nielsen household counts . . . . . . . . . . . . . . . - (128) - (128)
--------- --------- -------- ---------
Balance - December 31, 1994 . . . .. . . . . . . . . . . . . . . 38,960 23,068 3,750 65,778
========= ========= ======== =========
As of December 31, 1994, there were approximately 95.4 million homes in the
United States with a television set, 60.0 million basic cable television
subscribers and 3.8 million homes with satellite dish receivers.
The cable television household growth was achieved primarily through
increased cable system carriage of HSC's broadcast signal due to the
implementation of "must carry" beginning in September 1993, and the Company's
aggressive campaign to obtain contracts for cable carriage of HSC programming.
Because HSC programming is now on a cable channel line-up, former broadcast
households can now more easily access HSC programming. The decrease in
broadcast television households was primarily attributable to the shift in
classification from broadcast to cable. This decrease was offset, in part, by
the addition of broadcast television households due to changes in the
composition of the broadcast television station group with which HSC has
affiliation agreements.
During 1995, 5.0 million cable subscribers are covered by cable system
contracts that are subject to termination or renewal. This represents 12.7% of
the total number of unduplicated cable households receiving HSC programming,
exclusive of "must carry" subscribers. The Company is pursuing both renewals
and additional cable television system contracts, but channel availability,
competition, cost of carriage, cable re-regulation and ownership or affiliation
of the Company's competitors with cable system operators are some of the
factors affecting the negotiations for cable television system contracts.
Although management cannot determine the percentage of expiring contracts that
will be renewed or the number of households that will be added through new
contracts, management believes that a majority of the contracts will be
renewed.
HSC's market penetration typically lags behind increases in carriage. As a
result of the increase in carriage since late 1993, the Company has experienced
a slight improvement in its market penetration. As the new households mature,
the Company expects market penetration to improve, but there can be no
assurance that this will occur. The Company is developing new marketing
programs aimed at increasing consumer awareness of HSC programming to further
improve market penetration.
In 1994, the Company commenced two ventures: HSND produces and airs
infomercials and a joint venture with Black Entertainment Television, Inc. is
testing a new television shopping program. Also, in 1994 the Company expanded
its role in computer on-line interactive shopping through the acquisition of
Internet Software, Inc. ("ISN") which markets merchandise over the Internet.
The Company intends to expand this service. In addition, in 1994, the Company
launched two on-line stores over interactive on-line computer services.
Recently, the Company announced that it has engaged the services of consultants
23
3
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
to assist in developing its new shopping service, Television Shopping Mall,
which is expected to be launched by early 1996. These business activities did
not have a material negative impact on the Company's financial statements since
their inception or acquisition during the second half of 1994. A full year of
these business activities may have a negative impact on the Company's results
of operations in 1995.
The Company is also engaged in discussions with various entities to explore
other new business opportunities. The pursuit of these potential business
opportunities may include the creation of new business entities, both domestic
and international, development and distribution of broadcast and cable
television programming, changes in the Company's broadcast relationships and/or
expansion in the carriage of the Company's programming by operators of cable
television systems. There can be no assurance that the Company will be able to
reach agreements with the necessary parties to pursue these business
opportunities.
COST OF SALES
For the year ended December 31, 1994, cost of sales increased $26.5 million, or
3.7%, to $730.5 million from $704.0 million for the year ended December 31,
1993. As a percentage of net sales, cost of sales decreased to 64.8% from 67.3%
compared to the year ended December 31, 1993.
Cost of sales of HSC increased $22.5 million for the year ended December 31,
1994. As a percentage of HSC sales, cost of sales decreased to 66.9% from
69.1%, compared to the year ended December 31, 1993. In addition, cost of sales
for HSND and the Company's retail outlets for the year ended December 31, 1994,
increased $5.0 million and $3.7 million, respectively, compared to the year
ended December 31, 1993.
The remaining decrease in cost of sales for the year ended December 31, 1994,
compared to 1993, is primarily attributable to the sale of Mistix, as discussed
in "Net Sales."
The decreases in consolidated and HSC's cost of sales percentages in 1994
compared to 1993 relate primarily to an additional $20.1 million adjustment
made to HSC's inventory carrying amount, which increased cost of sales in the
first quarter of 1993, in connection with a change in management's
merchandising philosophy.
OPERATING EXPENSES
The following table highlights the operating expense section from the Company's
Consolidated Statements of Operations, including the dollar and percentage
changes for the year ended December 31, 1994, compared to the year ended
December 31, 1993:
Years Ended
December 31,
---------------------- $ %
1994 1993 Change Change
--------- --------- --------- ---------
(In millions, except %)
Selling and marketing. . . . . . . . . . . . . . . . . . . $161.9 $138.1 $ 23.8 17.2%
Engineering and programming. . . . . . . . . . . . . . . . 98.8 93.7 5.1 5.5
General and administrative . . . . . . . . . . . . . . . . 79.3 93.5 (14.2) (15.1)
Depreciation and amortization . . . . . . . . . . . . . . 29.1 24.2 4.9 20.2
--------- --------- ---------
$369.1 $349.5 $ 19.6 5.6
========= ========= =========
As a percentage of net sales, operating expenses decreased to 32.8% from 33.4%
compared to the year ended December 31, 1993.
24
4
SELLING AND MARKETING
For the year ended December 31, 1994, selling and marketing expenses, as a
percentage of net sales, increased to 14.4% from 13.2% compared to the year
ended December 31, 1993.
The major components of selling and marketing expenses are detailed below,
including the dollar and percentage changes for the year ended December 31,
1994 compared to the year ended December 31, 1993:
Years Ended
December 31,
--------------------- $ %
1994 1993 Change Change
-------- -------- --------- ---------
(In millions, except %)
Telephone, operator and customer service. . . . . . . . . . . $53.8 $48.5 $ 5.3 10.8%
Fees to cable system operators:
Commissions . . . . . . . . . . . . . . . . . . . . . . . . 38.4 33.9 4.5 13.1
Marketing payments for cable advertising. . . . . . . . . . 25.3 30.7 (5.4) (17.5)
Performance bonus commissions . . . . . . . . . . . . . . . 9.1 - 9.1 100.0
Telephone, operator and customer service expenses are typically related to
sales, call volume and the number of packages shipped, and for the year ended
December 31, 1994, compared to the year ended December 31, 1993, these expenses
increased as a result of increases in call and package volume. These expenses
are expected to fluctuate in relation to sales, call volume and package volume
in 1995.
For the year ended December 31, 1994, commissions to cable system operators
increased at a higher rate than sales as a result of increased cable system
carriage of the Company's programming due to the implementation of the "must
carry" provisions of the cable re-regulation law.
Marketing payments for cable advertising, related primarily to previous
contractual commitments, decreased for the year ended December 31, 1994,
compared to the year ended December 31, 1993. As older agreements expire or are
renegotiated and new cable carriage agreements are executed, marketing payments
for cable advertising are being replaced by other forms of incentive
compensation to cable operators. These include payment of cable distribution
fees, as discussed in "Depreciation and Amortization," and performance bonus
commissions. Accordingly, marketing payments for cable advertising are expected
to continue to decrease and depreciation and amortization is expected to
increase in 1995. Performance bonus commissions based upon the sales levels of
HSC programming in the cable operator's franchise area are expected to increase
as additional contracts are renewed or added.
In addition, cable operators which have executed affiliation agreements to
carry HSN2 are compensated for all sales of HSN2 within their franchise areas,
regardless of whether a customer's order results from watching the program via
cable, satellite dish, or on a broadcast television station. Thus, with the
advent of "must carry," HSC is paying commissions to cable operators in
addition to the hourly affiliation payments made to broadcast television
stations resulting in higher commission expense and higher total operating
expenses. As a result of the above factors, fees paid to cable system operators
are expected to remain at higher levels in future periods.
Selling and marketing expenses related to HSND totaled $6.7 million for the
year ended December 31, 1994. The remaining net increase in selling and
marketing expenses is attributable to other advertising and promotional
expenses of the Company's other subsidiary operations. Management believes that
total selling and marketing expenses in future periods will be at higher levels
as the Company maintains its efforts to increase the number of cable systems
carrying HSC programming, increase market penetration and develop new
electronic retailing opportunities.
ENGINEERING AND PROGRAMMING
For the year ended December 31, 1994, engineering and programming expenses, as
a percentage of net sales, decreased to 8.8% from 9.0% compared to the year
ended December 31, 1993.
Increases in expense related to broadcast affiliates in additional markets
totaled $3.7 million compared with the year ended December 31, 1993. In
addition, based on sales within the broadcast markets of Silver King
Communications, Inc. ("SKC"), for the year ended December 31, 1994, the Company
incurred additional broadcast commission expense of $1.3 million, compared to
the year ended December 31, 1993.
25
5
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
Broadcast costs are expected to remain at these higher levels in 1995.
Moreover, as the Company develops new programming and telemarketing
opportunities and attempts to expand its broadcast television reach for
existing programming, overall engineering and programming expenses are expected
to increase in 1995.
GENERAL AND ADMINISTRATIVE
For the year ended December 31, 1994, general and administrative expenses, as a
percentage of net sales, decreased to 7.0% from 8.9% compared to the year ended
December 31, 1993.
For the year ended December 31, 1994, consulting and stockholder relations
expenses decreased $5.3 million, due to expenses incurred in 1993, in
connection with a merger proposal by Liberty Media Corporation ("Liberty")
following the acquisition, in February 1993, of a controlling interest in the
Company by a wholly-owned subsidiary of Liberty and the unsolicited merger
proposal by QVC, Inc. that was not consummated. Expenses in connection with the
Company's executive stock award program, stock appreciation rights granted in
1993, settlement of sales tax issues, legal expense, repairs and maintenance
and equipment rental decreased $13.8 million for the year ended December 31,
1994, compared to the year ended December 31, 1993. The above decreases were
offset by increases for the year ended December 31, 1994, totaling $5.0
million, in payroll expense and other administrative expenses.
Based on present circumstances, management expects general and administrative
expenses to remain at current levels in 1995.
DEPRECIATION AND AMORTIZATION
For the year ended December 31, 1994, depreciation and amortization increased
primarily due to the amortization of cable distribution fees, which totaled
$3.9 million for the year ended December 31, 1994. Amortization of these fees
is expected to total $8.2 million in 1995 based on existing agreements. This
amortization could increase if additional cable distribution fees are paid in
1995 in connection with renewing or adding long-term cable system contracts, as
discussed in "Net Sales." The balance of the increase in depreciation and
amortization is attributable to capital asset additions during the year ended
December 31, 1994. Accordingly, depreciation and amortization will be higher
in 1995.
OTHER INCOME (EXPENSE)
For the year ended December 31, 1994, the Company had net other income of $3.6
million compared to net other expense of $(12.6) million for the year ended
December 31, 1993.
Interest income decreased $4.1 million for the year ended December 31, 1994,
compared to the year ended December 31, 1993, due to the repayment by SKC, in
August 1994, of its indebtedness to the Company, as discussed in "Financial
Position, Liquidity and Capital Resources." Accordingly, interest income is
expected to further decrease in 1995.
Interest expense decreased $5.4 million for the year ended December 31, 1994,
primarily as a result of the repayment by the Company, in August 1994, of its
Senior Term Loans, as discussed in "Financial Position, Liquidity and Capital
Resources." In late 1994 and the first quarter of 1995, the Company borrowed
funds under its amended bank facility and intends to borrow additional amounts
in 1995 as discussed in "Financial Position, Liquidity and Capital Resources."
Interest expense in 1995 will increase as a result of these borrowings and
higher interest rates compared to 1994.
For the year ended December 31, 1994, net miscellaneous expense decreased
$2.0 million compared to the year ended December 31, 1993. Net miscellaneous
expense for the year ended December 31, 1993 includes nonrecurring costs
totaling $3.8 million. For the year ended December 31, 1994, net miscellaneous
expense includes a $(2.9) million loss on the sale of Mistix. The sale of
Mistix should not have a significant impact on the Company's operating results
in future periods. In addition, 1994 includes the receipt of proceeds from a
lawsuit settlement totaling $.8 million. An additional $.6 million will be
received in the first quarter of 1995.
Net other expense for the year ended December 31, 1993 also includes
litigation settlements totaling $13.0 million.
INCOME TAXES
The Company's effective tax rate was an expense of 42.0% for the year ended
December 31, 1994 and a benefit of (20.6)% for the year ended December 31,
1993. The Company's effective tax rate for these periods differed from the
statutory rate due primarily to the amortization of goodwill and other acquired
intangible assets relating to acquisitions from prior years, state
26
6
income taxes and the provision for interest on adjustments proposed by the
Internal Revenue Service ("IRS"), as discussed in Note E to the Consolidated
Financial Statements included herein. In 1995, the Company anticipates a
decrease in its effective tax rate to approximately 39.0%.
EXTRAORDINARY ITEM -- LOSS ON EARLY EXTINGUISHMENT OF
LONG-TERM OBLIGATIONS
In the year ended December 31, 1994, the Company repaid the remaining $85.0
million outstanding balance on its Senior Term Loans. In the year ended
December 31, 1993, the Company refinanced and retired the remaining $143.3
million of its 11 3/4% Senior Notes (the "Senior Notes") and retired the
remaining $16.9 million of its 5 1/2% Convertible Subordinated Debentures (the
"Debentures"). These transactions resulted in extraordinary items -- loss on
early extinguishment of long-term obligations, net of taxes as discussed in
Note D to the Consolidated Financial Statements included herein.
NET EARNINGS (LOSS)
The Company had net earnings of $16.8 million, or $.18 per share, for the year
ended December 31, 1994, compared to a net loss of $(22.8) million, or $(.26)
per share, for the year ended December 31, 1993. The increase in net earnings
for the year ended December 31, 1994, was primarily attributable to an increase
in net sales of $79.9 million and an increase in gross profit of $53.5 million
compared to the year ended December 31, 1993. As discussed in "Cost of Sales,"
the results for the year ended December 31, 1993, included an additional
adjustment of $20.1 million to the inventory carrying amount, which increased
"Cost of Sales." The results for the year ended December 31, 1993 were also
affected by the litigation settlements of $13.0 million, as discussed in "Other
Income (Expense)" and Note I to the Consolidated Financial Statements included
herein. As previously discussed, the Company has recorded a loss of ($2.9)
million on the sale of the common stock of Mistix. In addition, the
consolidated results for the year ended December 31, 1994 includes a pre-tax
loss for Mistix of $(1.6) million. Consolidated results also include
extraordinary losses, net of taxes, of $(.9) million, or $(.01) per share, for
the year ended December 31, 1994, and $(7.2) million, or $(.08) per share, for
the year ended December 31, 1993.
YEAR ENDED DECEMBER 31, 1993 vs.
FISCAL YEAR ENDED AUGUST 31, 1992
GENERAL
As discussed in Note J to the Consolidated Financial Statements, included
herein, on July 31, 1992 and December 28, 1992, the Company distributed the
capital stock of its former wholly-owned subsidiaries, Precision Systems, Inc.
("PSi") and SKC, respectively, as stock dividends to the Company's
stockholders. As noted below, these distributions affect the comparison of
revenues and expenses for the year ended December 31, 1993 versus the fiscal
year ended August 31, 1992 and for the four months ended December 31, 1992
versus the four months ended December 31, 1991.
NET SALES
For the year ended December 31, 1993, net sales decreased $51.2 million, or
4.6%, to $1.047 billion from $1.098 billion for the fiscal year ended August
31, 1992. Net sales of HSC decreased $43.8 million, or 4.3%, for the year ended
December 31, 1993, reflecting a 22.7% decrease in the number of packages
shipped while the average price per unit sold increased 29.4% compared to the
fiscal year ended August 31, 1992. On a consolidated basis, $20.4 million of
the net sales decrease was due to the distribution by the Company of the
capital stock of PSi and SKC. These declines were somewhat offset by an
increase in sales attributable to the Company's mail order subsidiary, HSN Mail
Order, Inc. ("Mail Order") of $3.5 million and a $6.9 million increase in sales
through the Company's retail outlets for the year ended December 31, 1993.
After consideration of the distributions of SKC and PSi, net sales for the year
ended December 31, 1993, declined 2.9% compared to the fiscal year ended August
31, 1992. The decline in sales for the year ended December 31, 1993, primarily
occurred during the first quarter of the year. Management believes that this
decline was attributable to the same factors that resulted in lower sales in
the latter part of 1992, including the weak economy and a possible decline in
viewership due to programming competition. The Company also made certain format
and policy changes beginning in September 1992 which also may have contributed
to this
27
7
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
decline. These changes included, among other things, the visual display of
shipping and handling charges on the television screen, greater program
segmentation, higher priced merchandise in categories which typically carry a
higher return percentage, changes in merchandise offerings, and other show
format changes.
During April 1993, the Company held a week long "Big Top" sales event,
primarily to liquidate certain merchandise. See "Cost of Sales." While
additional sales volume was generated during this event, sales levels were
lower in the second quarter of 1993 than in 1992 and this trend continued
through the beginning of the third quarter of 1993. In the latter part of the
third quarter through the end of 1993, however, sales levels increased. A
significant reason for the sales increase during this period was the addition
of new cable subscribers beginning in September 1993 as a result of the "must
carry" provisions of the cable re-regulation law. Although sales increased in
the latter part of 1993, they are compared to a period which reflected a sales
decrease. Nonetheless, management believes that sales levels in late 1993 were
positively affected by improvements initiated during 1993 in the merchandising
management and sales philosophy of HSC.
For the year ended December 31, 1993, the merchandise return percentage
increased to 22.4% from 20.3%, compared to the fiscal year ended August 31,
1992. The primary reason for the higher return percentage was increased sales
in higher priced jewelry and electronic merchandise categories which typically
experience higher rates of return than other merchandise categories.
COST OF SALES
For the year ended December 31, 1993, cost of sales increased $12.7 million, or
1.8%, to $704.0 million from $691.3 million for the fiscal year ended August
31, 1992. As a percentage of net sales, cost of sales increased to 67.3% from
63.0% for the year ended December 31, 1993, compared to the fiscal year ended
August 31, 1992. Cost of sales of HSC increased $21.0 million for the year
ended December 31, 1993. The increases in consolidated and HSC's cost of sales
and cost of sales percentage relate primarily to the liquidation of certain
inventory at less than cost, due to a change in management's merchandising
philosophy as further discussed below. In addition, consolidated cost of sales
was affected by a decrease of $15.4 million as a result of the distribution by
the Company of the capital stock of SKC and PSi, as previously discussed. The
remaining change in cost of sales for the year ended December 31, 1993,
compared to the fiscal year ended August 31, 1992, is primarily attributable to
Mail Order and the Company's retail outlets, which had an increase in cost of
sales of $2.4 million and $5.0 million, respectively.
In connection with the change in management's merchandising philosophy, the
Company made an additional adjustment of $20.1 million to HSC's inventory
carrying amount in February 1993. During April 1993, the Company held a week
long "Big Top" sales event, primarily featuring products sold on a liquidation
basis, which provided additional sales volume. Due to the promotional nature of
this event, the cost of sales percentage for products featured during this
event was higher than typically experienced. The liquidation of this
merchandise continued during the second and third quarters resulting in higher
than usual cost of sales percentages during these periods.
OPERATING EXPENSES
The following table highlights the operating expense section from the Company's
Consolidated Statements of Operations, including the dollar and percentage
changes for the year ended December 31, 1993, compared to the fiscal year ended
August 31, 1992:
Years Ended
------------------------
December 31, August 31, $ %
1993 1992 Change Change
--------- --------- --------- ---------
(In millions, except %)
Selling and marketing. . . . . . . . . . . . . . . . . . . . $138.1 $135.8 $ 2.3 1.7%
Engineering and programming. . . . . . . . . . . . . . . . . 93.7 54.5 39.2 71.9
General and administrative . . . . . . . . . . . . . . . . . 93.5 87.1 6.4 7.4
Depreciation and amortization. . . . . . . . . . . . . . . . 24.2 46.9 (22.7) (48.4)
--------- --------- ---------
$349.5 $324.3 $ 25.2 7.8
========= ========= =========
As a percentage of net sales, these expenses increased to 33.4% from 29.5%
compared to the fiscal year ended August 31, 1992.
28
8
SELLING AND MARKETING
For the year ended December 31, 1993, selling and marketing expenses, as a
percentage of net sales, increased to 13.2% from 12.4% compared to the fiscal
year ended August 31, 1992.
The major components of selling and marketing expenses are detailed below,
including the dollar and percentage changes for the year ended December 31,
1993 compared to the fiscal year ended August 31, 1992:
Years Ended
-------------------
December 31, August 31, $ %
1993 1992 Change Change
------- ------- --------- ---------
(In millions, except %)
Telephone, operator and customer service. . . . . . . . . . . . $48.5 $47.0 $1.5 3.2%
Commissions to cable system operators . . . . . . . . . . . . . 33.9 34.4 (.5) (1.4)
Marketing payments for cable advertising. . . . . . . . . . . . 30.7 26.8 3.9 14.5
Telephone, operator and customer service expenses are typically related to
sales and order volume. However, for the year ended December 31, 1993 compared
to the fiscal year ended August 31, 1992, these expenses were higher primarily
due to telephone credits totaling $2.1 million received from the Company's long
distance carrier and lower salary costs in the fiscal year ended August 31,
1992.
For the year ended December 31, 1993, commissions to cable system operators
decreased as a result of lower sales volume, compared to the fiscal year ended
August 31, 1992.
Marketing payments for cable advertising increased for the year ended
December 31, 1993, due to previous contractual commitments for cable
advertising purchases in conjunction with the Company's attempt to increase
market penetration.
In addition, selling and marketing expenses for the year ended December 31,
1993 decreased as a result of the curtailment of the inhouse production portion
of the Company's infomercial operations which had selling and marketing
expenses of $2.1 million for the fiscal year ended August 31, 1992.
The remaining net decrease in selling and marketing expenses is attributable
to the Company's other subsidiary operations.
ENGINEERING AND PROGRAMMING
For the year ended December 31, 1993, engineering and programming expenses, as
a percentage of net sales, increased to 9.0% from 5.0% compared to the fiscal
year ended August 31, 1992.
The increase was primarily attributable to the expense of $41.1 million
incurred under affiliation agreements with SKC during the year ended December
31, 1993.
GENERAL AND ADMINISTRATIVE
For the year ended December 31, 1993, general and administrative expenses, as a
percentage of net sales, increased to 8.9% from 7.9% compared to the fiscal
year ended August 31, 1992.
For the year ended December 31, 1993, legal, accounting, consulting and
stockholder relations expenses increased $12.5 million primarily in connection
with a merger proposal by Liberty following the acquisition in February 1993,
of a controlling interest in the Company by a wholly-owned subsidiary of
Liberty, and the merger proposal by QVC, Inc. Additional expenses of $12.7
million, in connection with the Company's executive stock award program, stock
appreciation rights granted in 1993, increased salary expense, repairs and
maintenance and administrative expenses, were incurred in the year ended
December 31, 1993 compared to the fiscal year ended August 31, 1992.
The above increases were partially offset by decreases in certain general and
administrative expenses primarily attributable to the distribution of the
capital stock of SKC and PSi, as previously discussed, which reduced general
and administrative expenses by $15.1 million for the year ended December 31,
1993, compared to the fiscal year ended August 31, 1992. In addition, equipment
rental expense decreased $3.6 million for the year ended December 31, 1993,
compared to the fiscal year ended August 31, 1992, relating to new operating
leases for computer equipment with more favorable terms.
29
9
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
DEPRECIATION AND AMORTIZATION
For the year ended December 31, 1993, depreciation and amortization decreased
primarily due to the distribution of the capital stock of SKC and PSi, as
previously discussed, which resulted in a reduction of depreciation and
amortization of $23.4 million for the year ended December 31, 1993, compared to
the fiscal year ended August 31, 1992.
OTHER INCOME (EXPENSE)
For the year ended December 31, 1993, net other expense decreased $5.1 million
to $12.6 million from $17.7 million for the fiscal year ended August 31, 1992.
Interest income increased $12.8 million for the year ended December 31, 1993,
relating to a note receivable as a result of the distribution of the capital
stock of SKC, as discussed in Note J to the Consolidated Financial Statements
included herein. This increase was offset by a $3.5 million decrease in
interest earned on available cash due to lower cash balances and interest
rates.
Interest expense decreased $11.4 million for the year ended December 31,
1993, primarily relating to the redemption and refinancing of the Senior Notes.
The above mentioned decreases in net other expense are partially offset by
litigation settlements totalling $13.0 million during 1993 and an increase in
miscellaneous expense for the quarter ended March 31, 1993, primarily due to
nonrecurring costs which include $2.6 million of inventory contributed to
charity as a result of the change in management's merchandising philosophy
regarding the types of merchandise sold on HSC.
INCOME TAXES
The Company's effective tax rate was a benefit of (20.6)% for the year ended
December 31, 1993, and an expense of 42.0% for the fiscal year ended August 31,
1992. The Company's effective tax rate for these periods differed from the
statutory rate due primarily to the amortization of goodwill and other acquired
intangible assets relating to acquisitions from prior years, state income taxes
and the provision for interest on adjustments proposed by the IRS, as discussed
in Note E to the Consolidated Financial Statements included herein.
EXTRAORDINARY ITEM -- LOSS ON EARLY EXTINGUISHMENT OF
LONG-TERM OBLIGATIONS
In the year ended December 31, 1993, the Company refinanced and retired the
remaining $143.3 million of its Senior Notes and retired the remaining $16.9
million of its Debentures. In the fiscal year ended August 31, 1992, the
Company purchased and retired $4.0 million and $.1 million of Senior Notes and
Debentures, respectively. These transactions resulted in extraordinary items --
loss on early extinguishment of long-term obligations, net of taxes, as
discussed in Note D to the Consolidated Financial Statements included herein.
NET EARNINGS (LOSS)
The Company had a net loss of $(22.8) million, or $(.26) per share, for the
year ended December 31, 1993, compared to net earnings of $37.3 million, or
$.42 per share, for the fiscal year ended August 31, 1992. The loss for the
year ended December 31, 1993, was primarily attributable to the following
factors: decrease in net sales of $51.2 million compared to the fiscal year
ended August 31, 1992; the liquidation of a portion of the Company's inventory
at less than cost, the adjustment to the inventory carrying amount, as
discussed in "Cost of Sales" and the litigation settlements, as discussed in
"Other Income (Expense)" and Note I to the Consolidated Financial Statements
included herein. For the year ended December 31, 1993, the results include an
extraordinary loss of $(7.2) million, or $(.08) per share, compared to an
extraordinary loss of $(.1) million, with no per share effect, for the fiscal
year ended August 31, 1992.
30
10
FOUR MONTHS ENDED DECEMBER 31, 1992 (AUDITED) VS.
FOUR MONTHS ENDED DECEMBER 31, 1991 (UNAUDITED)
NET SALES
For the four months ended December 31, 1992, net sales decreased $29.4 million,
or 7.6%, to $357.2 million from $386.6 million for the four months ended
December 31, 1991. Net sales of HSC decreased $26.2 million, or 7.4%, for the
four months ended December 31, 1992. This decline reflected a decrease in the
number of packages shipped while the average price per unit sold increased
slightly compared to the four months ended December 31, 1991. Management
believes this decline in sales was attributable to the weak economy,
uncertainty in buyers' confidence levels caused by the November 1992 elections
and a possible decline in viewership due to programming competition. The
Company also made certain format and policy changes in the beginning of the
four month period in 1992, which also may have contributed to this decline.
These changes included, among other factors, the visual display of shipping and
handling charges on the television screen, greater program segmentation, higher
priced merchandise in categories which typically carry a higher return
percentage, changes in merchandise offerings, and other format changes. In an
effort to stimulate merchandise sales during the four months, the Company
instituted HSC customer incentive programs, which included increased sales
discounts and reduced shipping and handling charges. These programs which may
have stimulated sales for the period, nevertheless resulted in a net sales and
gross profit decrease of approximately $8.3 million. These programs were
subsequently curtailed. In addition, net sales decreased $5.9 million due to
the distribution by the Company of the capital stock of PSi. The above net
sales decreases were offset in part by increases in sales relating to the
Company's other subsidiary operations.
Merchandise returns for the four months ended December 31, 1992, remained
relatively constant as a percentage of sales decreasing to 20.0% from 20.3%
compared to the four months ended December 31, 1991.
COST OF SALES
For the four months ended December 31, 1992, cost of sales decreased $12.0
million, or 4.9%, to $232.5 million from $244.5 million for the four months
ended December 31, 1991. As a percentage of net sales, cost of sales increased
to 65.1% from 63.2% compared to the same period last year. Cost of sales of HSC
decreased $6.4 million. In addition, consolidated cost of sales was affected by
a decrease of $4.9 million for the four months ended December 31, 1992, as a
result of the distribution by the Company of the capital stock of PSi. The
balance of the change in cost of sales compared to the same period last year
relates to the Company's other subsidiary operations. The increase in cost of
sales percentage and the corresponding decrease in gross profit as a percentage
of net sales is primarily attributable to an increase in cost of sales
percentage of HSC which was related to the institution of incentive programs,
offering increased sales discounts and reduced shipping and handling charges,
which had a negative impact on gross profit and net sales of HSC, as discussed
in "Net Sales."
OPERATING EXPENSES
The following table highlights the operating expense section from the Company's
Consolidated Statements of Operations, including the dollar and percentage
changes for the four months ended December 31, 1992, compared to the four
months ended December 31, 1991:
Four Months Ended
December 31,
-----------------------
1992 1991 $ %
Unaudited Change Change
--------- ------------- --------- ---------
(In millions, except %)
Selling and marketing. . . . . . . . . . . . . . . . . . . . . . $ 45.3 $ 45.0 $ .3 0.6%
Engineering and programming. . . . . . . . . . . . . . . . . . . 18.1 17.8 .3 2.0
General and administrative . . . . . . . . . . . . . . . . . . . 29.3 31.3 (2.0) (6.3)
Depreciation and amortization. . . . . . . . . . . . . . . . . . 14.4 15.0 (.6) (4.2)
--------- --------- -------
$107.1 $109.1 $(2.0) 1.8
========= ========= =======
As a percentage of net sales, these expenses increased to 30.0% from 28.2%
compared to the four months ended December 31, 1991.
31
11
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
SELLING AND MARKETING
For the four months ended December 31, 1992, selling and marketing expenses, as
a percentage of net sales, increased to 12.7% from 11.6% compared to the four
months ended December 31, 1991.
The major components of selling and marketing expenses are detailed below,
including the dollar and percentage changes for the four months ended December
31, 1992, compared to the four months ended December 31, 1991:
Four Months Ended
December 31,
-----------------------
1992 1991 $ %
Unaudited Change Change
-------- ------------- --------- ---------
(In millions, except %)
Telephone, operator and customer service. . . . . . . . . . . . $16.2 $14.2 $2.0 14.1%
Commissions to cable system operators . . . . . . . . . . . . . 11.2 12.1 (.9) (7.4)
Marketing payments for cable advertising. . . . . . . . . . . . 9.0 8.9 .1 1.1
Telephone, operator and customer service expenses are typically related to
sales and order volume. However, for the four months ended December 31, 1992,
compared to the same period last year, these expenses were higher due to a rate
reduction and a volume discount credit totaling $2.1 million received from the
Company's long distance carrier in the four months ended December 31, 1991 and
increased rates during the four months ended December 31, 1992.
Commissions to cable system operators decreased as a result of lower sales
volume.
Marketing payments for cable advertising increased slightly for the four
months ended December 31, 1992.
In addition, selling and marketing expenses for the four months ended
December 31, 1992, decreased related to the in-house production portion of its
infomercial operations which had selling and marketing expenses of $.8 million
for the four months ended December 31, 1991, and which were discontinued in May
1992. The remaining change relates primarily to other subsidiary operations.
ENGINEERING AND PROGRAMMING
For the four months ended December 31, 1992, engineering and programming
expenses, as a percentage of net sales, increased to 5.1% from 4.6% compared to
the four months ended December 31, 1991.
GENERAL AND ADMINISTRATIVE
For the four months ended December 31, 1992, general and administrative
expenses, as a percentage of net sales, increased to 8.2% from 8.1% compared to
the four months ended December 31, 1991.
Equipment rent expense decreased $.9 million compared to the same period in
1991 relating to new operating leases for computer equipment with more
favorable terms. Additional savings of $.9 million were realized as a result of
the curtailment of subsidiary operations in the infomercial and 800/900
telemarketing businesses in May 1992.
DEPRECIATION AND AMORTIZATION
For the four months ended December 31, 1992, depreciation and amortization
decreased primarily due to a decrease in depreciation expense of $.6 million
due to the distribution by the Company of the capital stock of PSi.
OTHER INCOME (EXPENSE)
For the four months ended December 31, 1992, net other expense increased $.2
million to $6.1 million from $5.9 million for the four months ended December
31, 1991. The increase was primarily attributable to an increase in charitable
contributions of $.1 million relating to disaster relief efforts. In addition,
miscellaneous expenses, primarily related to other subsidiary operations,
increased $.6 million. These expense increases were offset by a decrease in
interest expense of $.9 million related to the redemption of $37.5 million of
Senior Notes on October 15, 1992.
32
12
INCOME TAXES
The Company's effective tax rate was 55.1% for the four months ended December
31, 1992, and 42.0% for the four months ended December 31, 1991. The Company's
effective tax rate for the four months ended December 31, 1992, differed from
the statutory rate due primarily to the distribution of the capital stock of
SKC, as discussed in Note J to the Consolidated Financial Statements included
herein, the amortization of goodwill and other acquired intangible assets
relating to acquisitions from prior years, state income taxes and the provision
for interest on adjustments proposed by the IRS, as discussed in Note E to the
Consolidated Financial Statements included herein.
NET EARNINGS
The Company had net earnings of $5.1 million, or $.06 per share, for the four
months ended December 31, 1992, compared to net earnings of $15.7 million, or
$.18 per share, for the four months ended December 31, 1991. The decrease in
net earnings was primarily attributable to a decrease in net sales of $29.4
million compared to the four months ended December 31, 1991, as discussed in
"Net Sales."
SEASONALITY
The Company believes that seasonality does impact its business but not to the
same extent it impacts the retail industry in general.
FINANCIAL POSITION, LIQUIDITY
AND CAPITAL RESOURCES
The following table highlights various balances and ratios from the
Consolidated Financial Statements included herein:
December 31,
-------------------------
1994 1993
--------- -----------
Cash and cash equivalents (millions). . . . . . . . . . . . . . . . $ 33.6 $ 35.6
Working capital (millions) . . . . . . . . . . . . . . . . . . . . $ 23.1 $ 8.1
Current ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.11:1 1.04:1
Accounts and notes receivable, net (millions) . . . . . . . . . . . $ 40.8 $ 27.8
Inventories, net (millions) . . . . . . . . . . . . . . . . . . . . $ 118.8 $ 110.9
Annual inventory turnover . . . . . . . . . . . . . . . . . . . . . 6.36 6.12
Cash and cash equivalents totaled $33.6 million at December 31, 1994 compared
to $35.6 million at December 31, 1993. The principal source of cash in 1994 was
the repayment by SKC of its obligation to the Company. These funds, along with
operating funds, were used principally to repay the balance of the Company's
outstanding Senior Term Loans, to pay cable distribution fees of $31.3 million,
and for capital expenditures. Net earnings adjusted for non-cash items totalled
$51.0 million and the Company borrowed $25.0 million under its revolving credit
facility in 1994.
Accounts and notes receivable, net, increased to $40.8 million at December
31, 1994, from $27.8 million at December 31, 1993. The primary reason for the
increase is "FlexPay" sales which resulted in accounts receivable totaling
$23.6 million at December 31, 1994 compared $15.5 million at December 31, 1993.
The Company's financing of "FlexPay" accounts receivable has not had a
significant impact on its liquidity position. In addition, on August 16, 1994,
the Company loaned $5.0 million to PSi under an unsecured Line of Credit
Agreement. This amount, together with accrued interest at the rate of 1% over
prime, is due on July 31, 1995.
Receivables from customer sales using the Company's private label credit card
are sold to a third party under a non-recourse financing arrangement. The
financial impact of this financing arrangement is similar to customer purchases
on other third party cards.
On August 1, 1994, SKC repaid the outstanding principal and accrued interest
of $129.7 million on its obligation to the Company, which bore interest at
9.5%. On the same date, the Company repaid the remaining $85.0 million
outstanding balance on its Senior Term Loans. As a result of the above
repayments, interest income and interest expense declined for the year ended
December 31, 1994. Under terms of affiliation agreements with SKC, the
broadcast stations are obligated to carry the Company's programming until
December 1997.
33
13
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
Inventories, net, increased to $118.8 million at December 31, 1994, from
$110.9 million at December 31, 1993. The inventory balance is net of a carrying
adjustment of $18.8 million at December 31, 1994, which represents a decrease
from $25.2 million at December 31, 1993. The carrying adjustment decrease
relates primarily to the liquidation of merchandise. The increase in the gross
inventory balance at December 31, 1994, from December 31, 1993, was $1.4
million. Inventory levels are expected to increase in 1995 over comparable 1994
periods.
Capital expenditures for the year ended December 31, 1994, were $18.6
million. These expenditures were primarily for additional telecommunications
equipment, technological upgrades and development of telemarketing
opportunities. The Company estimates capital expenditures will range between
$20.0 and $25.0 million for 1995.
The Company's working capital needs and capital expenditure requirements for
the year ended December 31, 1994, were met from funds provided by operations.
Surplus funds were invested in short-term investments.
On August 30, 1994, the Company's $40.0 million revolving credit facility was
amended and increased to $100.0 million, as discussed in Note D to the
Consolidated Financial Statements included herein. In December 1994, the
Company borrowed $25.0 million under its bank facility and in the first quarter
of 1995, borrowed an additional $50.0 million. These funds were used to finance
purchases of treasury stock, as discussed below, to pay litigation settlements
and for general corporate purposes.
During 1994, using available cash, the Company paid $19.6 million, including
interest, to the IRS relating to the audit settlement, as discussed in Note E
to the Consolidated Financial Statements included herein, and in February 1995
the Company paid $9.6 million, plus interest, in connection with litigation
settlements, using borrowings under its bank facility. In 1995, management
expects to pay cable distribution fees, totaling $40.6 million, relating to
current contracts with cable system operators to carry HSC programming.
The Company has agreed to participate in the investor group which was awarded
a major league baseball franchise for the Tampa Bay area. The Company's
commitment is contingent upon its securing certain merchandising and
broadcasting rights with respect to the franchise. If the Company obtains those
rights, it has agreed to contribute $10.0 million as a general and limited
partner.
The Company has received a commitment for an additional $50.0 million credit
facility which it expects to be in place by the end of the first quarter of
1995. The total credit facility will contain restrictive covenants, one of
which precludes the Company from purchasing its common stock if the debt to
operating cash flow ratio is above certain levels. Management believes that
available cash, internally generated funds and credit facilities will provide
sufficient capital resources to meet the Company's foreseeable needs.
As of February 28, 1995, the Company had $65.0 million of bank credit lines
which back letters of credit and which are used exclusively to facilitate
inventory imports. Presentation of letters of credit by vendors results in an
immediate charge to the Company's account with no interest charges incurred.
Outstanding letters of credit amounted to $16.1 million at February 28, 1995,
leaving $48.9 million available.
For the year ended December 31, 1994, the Company did not pay any cash
dividends and does not anticipate paying cash dividends in the immediate
future.
On September 1, 1994, a wholly-owned subsidiary of the Company purchased all
the outstanding shares of ISN for a total of $5.0 million consisting of cash
and $2.9 million of notes payable.
At February 28, 1995, .7 million options to purchase the Company's common
stock were outstanding and exercisable at prices ranging between $3.25 and
$14.75. The exercise of such stock options would result in a cash inflow of
$2.4 million to the Company.
In 1994, the Company's Board of Directors authorized the repurchase of up to
an additional $75.0 million of the Company's common stock. In 1994, the Company
repurchased 1.3 million shares at a total cost of $13.1 million and in 1995,
through February 28, the Company repurchased an additional 2.6 million shares
at a total additional cost of $21.6 million. The Company may, subject to cash
availability, debt covenants and market conditions, continue to repurchase its
common stock within the limits set by the Board of Directors.
34
14
MANAGEMENT'S RESPONSIBILITIES
FOR FINANCIAL REPORTING
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
The consolidated balance sheets of Home Shopping Network, Inc. and subsidiaries
as of December 31, 1994 and 1993 and the related consolidated statements of
operations, stockholders' equity and cash flows for the years ended December
31, 1994 and 1993, the four months ended December 31, 1992 and the fiscal year
ended August 31, 1992 have been prepared by management. These consolidated
financial statements have been prepared in conformity with generally accepted
accounting principles and include some amounts that are based upon management's
best estimates and judgments.
Our independent auditors are engaged to audit and to render an opinion on the
fairness in all material respects of our consolidated financial statements
presented in conformity with generally accepted accounting principles. In
performing their audit, they obtain an understanding of certain aspects of our
internal accounting control systems and carry out various substantive auditing
procedures they consider necessary in connection with expressing their opinion
on our consolidated financial statements.
In fulfilling its responsibility, management has established internal
controls, accounting policies and procedures, administrative procedures and
reporting practices which we believe to be effective. Although no system can
ensure that all errors or irregularities have been eliminated, management
believes that the internal accounting controls in place provide reasonable
assurance that assets are safeguarded against loss, unauthorized use or
disposition, that transactions are executed in accordance with management's
authorization and that financial records are reliable for preparing financial
statements and maintaining accountability for assets.
We believe our people are our most important asset and that their proper
selection, training and development is the best means of ensuring that
management's objectives of maintaining effective internal accounting controls
and uniform reporting standards are met.
35
15
CONSOLIDATED BALANCE SHEETS
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
December 31,
-------------------------
1994 1993
------------ ------------
ASSETS (In thousands)
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33,648 $ 35,566
Accounts and notes receivable (net of an allowance for doubtful accounts of
$1,738 and $1,627, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . 40,841 27,849
Income taxes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,816 --
Note and interest receivable from related party . . . . . . . . . . . . . . . . . . . . -- 5,707
Inventories, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,801 110,930
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,108 29,279
Other current assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,632 8,070
------------ ------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 228,846 217,401
PROPERTY, PLANT AND EQUIPMENT
Computer and broadcast equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,144 107,439
Buildings and leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . 74,514 71,283
Furniture and other equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,183 48,091
------------ ------------
226,841 226,813
Less accumulated depreciation and amortization . . . . . . . . . . . . . . 116,697 105,777
------------ ------------
110,144 121,036
Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,774 17,708
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,182 2,626
------------ ------------
131,100 141,370
OTHER ASSETS
Cable distribution fees, net ($34,174, net, to related parties) . . . . . . . . . . . . 67,978 --
Long-term investment in related party . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 10,000
Other non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,575 5,775
Note receivable from related party (net of current maturity) . . . . . . . . . . . . . -- 126,597
------------ ------------
86,553 142,372
------------ ------------
$446,499 $501,143
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term obligations . . . . . . . . . . . . . . . . . . . . . . $ 1,690 $ 25,345
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,264 88,858
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 15,586
Accrued liabilities:
Programming fees ($26,591 and $2,738, respectively, to related parties) . . . . . . . 50,170 10,860
Litigation settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,450 16,000
Treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,109 --
Sales returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,304 13,632
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,786 39,067
------------ ------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 205,773 209,348
LONG-TERM OBLIGATIONS (net of current maturities) . . . . . . . . . . . . . . . . . . . 27,491 86,927
DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,792 8,314
COMMITMENTS AND CONTINGENCIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
STOCKHOLDERS' EQUITY
Preferred stock - $.01 par value; authorized 500,000 shares, no shares
issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
Common stock - $.01 par value; authorized 150,000,000 shares,
issued 77,553,329 and 76,172,890 at December 31, 1994
and 1993, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 776 762
Class B - convertible common stock -- $.01 par value; authorized, issued
and outstanding, 20,000,000 and 20,559,456 shares at December 31,
1994 and 1993, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200 206
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167,463 160,371
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,560 52,783
Treasury stock - 4,440,700 and 3,105,700 common shares, at cost,
at December 31, 1994 and 1993, respectively . . . . . . . . . . . . . . . . . . . . . (27,136) (14,027)
Unearned compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,420) (3,541)
------------ ------------
206,443 196,554
------------ ------------
$446,499 $501,143
============ ============
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
36
16
CONSOLIDATED STATEMENTS OF OPERATIONS
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
Years Ended Four Months
December 31, Ended Year Ended
------------------------ December 31, August 31,
1994 1993 1992 1992
---------- ---------- ----------- -----------
(In thousands, except per share data)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . $1,126,514 $1,046,580 $357,166 $1,097,787
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . 730,504 704,040 232,530 691,328
---------- ---------- -------- ----------
Gross profit. . . . . . . . . . . . . . . . . . . . 396,010 342,540 124,636 406,459
---------- ---------- -------- ----------
Operating expenses:
Selling and marketing. . . . . . . . . . . . . . . . . . . 161,886 138,092 45,248 135,794
Engineering and programming. . . . . . . . . . . . . . . . 98,835 93,686 18,144 54,501
General and administrative . . . . . . . . . . . . . . . . 79,344 93,539 29,309 87,068
Depreciation and amortization. . . . . . . . . . . . . . . 29,066 24,172 14,366 46,894
---------- --------- ------- ---------
369,131 349,489 107,067 324,257
---------- --------- ------- ---------
Operating profit (loss) . . . . . . . . . . . . . . 26,879 (6,949) 17,569 82,202
Other income (expense):
Interest income. . . . . . . . . . . . . . . . . . . . . . 9,556 13,655 1,142 4,384
Interest expense . . . . . . . . . . . . . . . . . . . . . (5,512) (10,863) (6,651) (22,299)
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . (403) (2,410) (614) 205
Litigation settlements . . . . . . . . . . . . . . . . . . -- (13,000) -- --
---------- --------- ------- ---------
3,641 (12,618) (6,123) (17,710)
---------- --------- ------- ---------
Earnings (loss) before income taxes and extraordinary item . 30,520 (19,567) 11,446 64,492
Income tax expense (benefit) . . . . . . . . . . . . . . . . 12,819 (4,028) 6,306 27,087
---------- --------- ------- ---------
Earnings (loss) before extraordinary item . . . . . . . . . . 17,701 (15,539) 5,140 37,405
Extraordinary item -- loss on early extinguishment of long-term
obligations (net of tax benefit of $567, $4,395, $-0- and $82,
respectively) (924) (7,242) -- (112)
---------- --------- ------- ---------
NET EARNINGS (LOSS) . . . . . . . . . . . . . . . . . . . . . $ 16,777 $ (22,781) $ 5,140 $ 37,293
========== ========== ======= =========
Earnings (loss) per common share:
Earnings (loss) before extraordinary item. . . . . . . . . $ .19 $ (.18) $ .06 $ .42
Extraordinary item, net. . . . . . . . . . . . . . . . . . (.01) (.08) -- --
---------- ---------- ------- ---------
Net earnings (loss). . . . . . . . . . . . . . . . . . . . $ .18 $ (.26) $ .06 $ .42
========== ========== ======= =========
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
37
17
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
Class B
Convertible Additional Unearned
Common Common Paid-In Retained Treasury Compen-
Stock Stock Capital Earnings Stock sation Total
--------- ---------- ---------- -------- -------- -------- -----
(In thousands)
Balance at August 31, 1991 . . . . . . . . . . . . $661 $242 $107,706 $ 79,710 $(14,027) $(12,453) $161,839
Issuance of common stock upon exercise of
stock options . . . . . . . . . . . . . . . . . . 6 -- 3,555 -- -- -- 3,561
Issuance of common stock upon conversion
of debentures . . . . . . . . . . . . . . . . . . -- -- 146 -- -- -- 146
Issuance of common stock in connection with
employee stock bonus plan . . . . . . . . . . . . -- -- 9 -- -- -- 9
Unearned compensation related to executive
stock award program . . . . . . . . . . . . . . . -- -- 232 -- -- (232) --
Income tax benefit related to executive stock award
program and stock options exercised . . . . . . . -- -- 606 -- -- -- 606
Expense related to executive stock award program . -- -- -- -- -- 3,454 3,454
Dividend issued in the form of common stock of a
wholly-owned subsidiary . . . . . . . . . . . . . -- -- -- (36,579) -- -- (36,579)
Net earnings for the year ended August 31, 1992 . . -- -- -- 37,293 -- -- 37,293
---- ---- -------- -------- -------- ------- --------
Balance at August 31, 1992 . . . . . . . . . . . . 667 242 112,254 80,424 (14,027) (9,231) 170,329
Issuance of common stock upon exercise of
stock options . . . . . . . . . . . . . . . . . . 4 -- 1,854 -- -- -- 1,858
Income tax benefit related to executive
stock award program, stock options
exercised and stock dividends . . . . . . . . . . -- -- 1,738 -- -- -- 1,738
Expense related to executive stock award program . -- -- -- -- -- 1,084 1,084
Dividend issued in the form of common stock of a
wholly-owned subsidiary . . . . . . . . . . . . . -- -- -- (10,000) -- -- (10,000)
Net earnings for the four months ended
December 31, 1992 . . . . . . . . . . . . . . . . -- -- -- 5,140 -- -- 5,140
----- ---- -------- -------- -------- ------- --------
Balance at December 31, 1992 . . . . . . . . . . . 671 242 115,846 75,564 (14,027) (8,147) 170,149
Issuance of common stock upon exercise of
stock options . . . . . . . . . . . . . . . . . . 55 -- 31,796 -- -- -- 31,851
Issuance of common stock upon conversion
of debentures . . . . . . . . . . . . . . . . . . -- -- 15 -- -- -- 15
Unearned compensation related to executive
stock award program . . . . . . . . . . . . . . . -- -- 1,009 -- -- (1,009) --
Income tax benefit related to executive stock award
program and stock options exercised . . . . . . . -- -- 11,705 -- -- -- 11,705
Expense related to executive stock award program . -- -- -- -- -- 5,615 5,615
Conversion of Class B common stock to common stock 36 (36) -- -- -- -- --
Net loss for the year ended December 31, 1993 . . . -- -- -- (22,781) -- -- (22,781)
----- ---- -------- -------- -------- ------- --------
Balance at December 31, 1993 . . . . . . . . . . . 762 206 160,371 52,783 (14,027) (3,541) 196,554
Issuance of common stock upon exercise of
stock options . . . . . . . . . . . . . . . . . . 8 -- 4,517 -- -- -- 4,525
Unearned compensation related to employee
equity participation plan . . . . . . . . . . . . -- -- -- -- -- (3,736) (3,736)
Income tax benefit related to executive stock award
program and stock options exercised . . . . . . . -- -- 2,575 -- -- -- 2,575
Expense related to executive stock award program . -- -- -- -- -- 2,047 2,047
Expense related to employee equity
participation plan . . . . . . . . . . . . . . . -- -- -- -- -- 810 810
Purchases of treasury stock, at cost . . . . . . . -- -- -- -- (13,109) -- (13,109)
Conversion of Class B common stock to common stock 6 (6) -- -- -- -- --
Net earnings for the year ended December 31, 1994 . -- -- -- 16,777 -- -- 16,777
----- ---- -------- -------- -------- ------- --------
Balance at December 31, 1994 . . . . . . . . . . . $776 $200 $167,463 $ 69,560 $(27,136) $(4,420) $206,443
===== ==== ======== ======== ======== ======= ========
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
38
18
CONSOLIDATED STATEMENTS OF CASH FLOWS
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
Years Ended Four Months
December 31, Ended Year Ended
-------------------------- December 31, August 31,
1994 1993 1992 1992
------------ ----------- ------------ ----------
(In thousands)
Cash flows from operating activities:
Net earnings (loss). . . . . . . . . . . . . . . . . . . . . . . . $ 16,777 $ (22,781) $ 5,140 $ 37,293
Adjustments to reconcile net earnings (loss) to net cash provided
by (used in) operating activities: . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . 25,173 24,172 14,366 46,894
Amortization of cable distribution fees . . . . . . . . . . . . 3,893 -- -- --
Inventory carrying value adjustment . . . . . . . . . . . . . . (6,455) 12,179 (257) 5,171
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . 5,649 (14,102) (479) 11,902
Loss on disposition of wholly-owned subsidiary. . . . . . . . . 2,854 -- -- --
Loss on retirement of long-term obligations . . . . . . . . . . 1,491 11,637 -- 194
Common stock and Stock Appreciation Rights ("SARs")
issued for services provided . . . . . . . . . . . . . . . . . 1,310 8,449 1,084 3,463
Provision for losses on accounts and notes receivable . . . . . 377 (171) (436) 34
Equity in (earnings) losses of unconsolidated affiliates. . . . (144) 589 31 99
(Gain) loss on sale of assets . . . . . . . . . . . . . . . . . 106 (277) 56 124
Liquidation of joint venture operation . . . . . . . . . . . . -- 722 -- --
Non-cash interest income . . . . . . . . . . . . . . . . . . . -- -- -- (968)
Change in current assets and liabilities:
Increase in accounts receivable . . . . . . . . . . . . . . . (10,698) (15,753) (2,569) (11,529)
(Increase) decrease in interest receivable from related party. 1,039 (1,039) -- --
Increase in inventories . . . . . . . . . . . . . . . . . . . (1,416) (4,056) (5,179) (5,467)
(Increase) decrease in other current assets. . . . . . . . . . (3,313) (1,175) (351) 1,840
Increase (decrease) in accounts payable . . . . . . . . . . . (13,594) 26,683 13,450 (17,362)
Increase (decrease) in accrued liabilities and income
taxes payable . . . . . . . . . . . . . . . . . . . . . . 24,687 29,923 (2,037) (26,583)
Increase in cable distribution fees . . . . . . . . . . . . . . . (71,871) -- -- --
Stock purchases for employee benefit plan . . . . . . . . . . . . (3,736) -- -- --
------------ ------------ ----------- -----------
Net cash provided by (used in) operating activities (27,871) 55,000 22,819 45,105
------------ ------------ ----------- -----------
Cash flows from investing activities:
Proceeds from long-term notes receivable . . . . . . . . . . . . . 133,325 4,892 454 2,231
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . (18,602) (15,491) (9,939) (35,973)
(Increase) decrease in notes receivable and other. . . . . . . . . (6,185) 683 (4,439) (3,432)
Increase in intangible assets. . . . . . . . . . . . . . . . . . . (4,338) (2,057) (433) (1,830)
Proceeds from sale of assets . . . . . . . . . . . . . . . . . . . 3,221 548 93 410
Increase in long-term investment . . . . . . . . . . . . . . . . . -- (2,775) (1,515) (5,710)
------------ ------------ ----------- -----------
Net cash provided by (used in) investing activities. . . . . . 107,421 (14,200) (15,779) (44,304)
------------ ------------ ----------- -----------
Cash flows from financing activities:
Principal payments on and redemptions of long-term obligations . . (110,993) (206,506) (47,776) (7,432)
Proceeds from unsecured credit facilities . . . . . . . . . . . . 25,000 150,000 10,000 --
Proceeds from issuance of common stock . . . . . . . . . . . . . . 4,525 31,851 1,858 3,561
Cash portion of dividend . . . . . . . . . . . . . . . . . . . . . -- -- (5,249) (4,971)
------------ ------------ ----------- -----------
Net cash used in financing activities. . . . . . . . . . . . . (81,468) (24,655) (41,167) (8,842)
------------ ------------ ----------- -----------
Net increase (decrease) in cash and cash equivalents . . . . . . . . (1,918) 16,145 (34,127) (8,041)
Cash and cash equivalents at beginning of period . . . . . . . . . . 35,566 19,421 53,548 61,589
------------ ------------ ----------- -----------
Cash and cash equivalents at end of period . . . . . . . . . . . . . $ 33,648 $ 35,566 $ 19,421 $ 53,548
============ ============ =========== ===========
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
39
19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
NOTE A - ORGANIZATION AND SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Home Shopping Network, Inc. (the "Company" or "HSN") is a holding company, the
subsidiaries of which conduct the day-to-day operations of the Company's
various business activities. The Company's primary business is electronic
retailing conducted by Home Shopping Club, Inc. ("HSC"), a wholly-owned
subsidiary of the Company.
On July 13, 1993, the Company elected to change its annual reporting period
from a year ending August 31, to a year ending December 31, effective January
1, 1993. The change in year end was made following the acquisition of voting
control of the Company by a wholly-owned subsidiary of Liberty Media
Corporation ("Liberty"), a Delaware corporation, which reports its financial
position and results of operations using a December 31 year end. See Note K.
The following is a summary of the significant accounting policies of the
Company consistently applied in the preparation of the accompanying
consolidated financial statements.
1. CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
all subsidiaries. All significant intercompany transactions and accounts have
been eliminated. Certain amounts in the consolidated financial statements for
periods prior to December 31, 1994 have been reclassified to conform to the
1994 presentation.
2. CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents include cash
and short-term investments. Short-term investments consist primarily of U.S.
Treasury Securities, auction preferred shares, U.S. Government agency
securities and certificates of deposit with original maturities of less than 91
days.
3. ACCOUNTS AND NOTES RECEIVABLE, NET
HSN has a sales program with a deferred payment arrangement, "FlexPay," which
allows customers to charge their purchases to third party credit cards in
installments, generally over three consecutive months. FlexPay receivables
totaled $23,621,000 and $15,547,000 at December 31, 1994 and 1993,
respectively. An allowance for doubtful accounts is provided based on the
Company's past experience.
At December 31, 1994 and 1993, accounts and notes receivable includes
$3,000,000 due from a former Chairman of the Company's Board of Directors and
at December 31, 1994 a $5,000,000 note receivable from a former wholly-owned
subsidiary, Precision Systems, Inc. ("PSi").
4. INVENTORIES, NET
Merchandise inventories are valued at the lower of cost or market, cost being
determined using the first-in, first-out method. Cost includes freight, certain
warehousing costs and other allocable overhead. Market is determined on the
basis of net realizable value, giving consideration to obsolescence and other
factors. Inventories are presented net of a carrying adjustment of $18,791,000
and $25,246,000 at December 31, 1994 and 1993, respectively.
5. PROPERTY, PLANT AND EQUIPMENT, AND DEPRECIATION
Property, plant and equipment, including significant improvements, are stated
at cost. Repairs and maintenance and any gains or losses on dispositions are
included in operations.
Depreciation is provided on a straight-line basis to allocate the cost of
depreciable assets to operations over their estimated service lives as follows:
Original Period
ASSET CATEGORY Of Depreciation
-------------- --------------------
Computer and broadcast equipment. . . . . . . . . . . . . . 5 to 10 Years
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . 30 to 40 Years
Leasehold improvements. . . . . . . . . . . . . . . . . . . 4 to 13 Years
Furniture and other equipment . . . . . . . . . . . . . . . 3 to 10 Years
40
20
Depreciation expense was $22,540,000 and $21,911,000 for the years ended
December 31, 1994 and 1993, respectively. Depreciation expense for the four
months ended December 31, 1992, and the fiscal year ended August 31, 1992, was
$9,706,000 and $32,653,000, respectively.
For income tax purposes, certain assets are depreciated using allowable
accelerated methods which result in different depreciation amounts than would
be calculated for financial statement purposes.
6. CABLE DISTRIBUTION FEES, NET
During 1994, the Company committed to long-term cable contracts for carriage of
the Company's programming. These contracts provide for payments of distribution
fees to cable system operators totaling $71,871,000. Amounts payable under
these agreements totaled $40,559,000 at December 31, 1994.
Cable distribution fees are amortized to expense on a straight-line basis,
over the terms of the respective contracts which range from 5 to 15 years.
Amortization expense and accumulated amortization for the year ended, and as
of, December 31, 1994 was $3,893,000.
7. OTHER NON-CURRENT ASSETS
Other non-current assets include intangible assets consisting primarily of
mailing lists and goodwill. Intangible assets are recorded at cost and
amortized on a straight-line basis over their economic lives.
Amortization expense was $2,633,000 and $2,261,000 for the years ended
December 31, 1994 and 1993, respectively. Amortization expense for the four
months ended December 31, 1992, and the fiscal year ended August 31, 1992, was
$4,660,000 and $14,241,000, which includes amortization of intangible assets
related to Silver King Communications, Inc. ("SKC") distributed on December 28,
1992, as discussed in Note J.
Mailing lists developed for the Company's direct response advertising
business are amortized over two years. The total amount of direct response
advertising charged to expense for the years ended December 31, 1994 and 1993,
the four months ended December 31, 1992 and the fiscal year ended August 31,
1992 was $1,982,000, $1,988,000, $639,000 and $2,059,000, respectively. All
non-direct response advertising is expensed in the period incurred.
In connection with the purchase of Internet Software, Inc. ("ISN"), as
discussed in Note F, goodwill increased $5,239,000, representing the majority
of goodwill which is being amortized over a three year period.
8. NET SALES
Revenues include merchandise sales and shipping and handling revenues, and are
reduced by incentive discounts and sales returns to arrive at net sales.
Revenues are recorded for credit card sales upon transaction authorization, and
for check sales upon receipt of customer payment, which does not vary
significantly from the time goods are shipped. The Company's sales policy
allows merchandise to be returned at the customer's discretion, generally up to
30 days. An allowance for returned merchandise is provided based upon past
experience.
9. INCOME TAXES
In the consolidated financial statements as of and prior to December 31, 1992,
deferred income taxes were provided using the deferred method for those items
of revenue and expense which were recognized for financial reporting purposes
in different periods than for income tax purposes.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes" ("Statement 109").
The cumulative effect of this change in method of accounting for income taxes
was immaterial and was included as a reduction of income tax expense in the
Consolidated Statement of Operations for the year ended December 31, 1993. The
valuation allowance on the date of adoption of Statement 109 was $744,000.
Prior years' consolidated financial statements were not restated to apply the
provisions of Statement 109.
10. EARNINGS (LOSS) PER COMMON SHARE
Primary earnings (loss) per common share is based on net earnings (loss)
divided by the weighted average common shares outstanding giving effect to
stock options and convertible debt, when dilutive. Fully diluted earnings per
share is not materially different from primary earnings per share in any period
presented.
41
21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
Weighted average common shares outstanding were 95,061,000 and 91,192,000 for
the years ended December 31, 1994 and 1993, respectively. Weighted average
shares for the four months ended December 31, 1992, and the fiscal year ended
August 31, 1992, were 91,115,000 and 90,255,000, respectively.
The number of common shares outstanding at December 31, 1994 and 1993, of
73,112,629 and 73,067,190, respectively, are net of 4,440,700 and 3,105,700,
respectively, of common shares held in treasury.
NOTE B - NOTE AND INTEREST RECEIVABLE FROM RELATED PARTY
On August 1, 1994, SKC repaid the outstanding principal and accrued interest of
$129,700,000 on its obligation to the Company. On the same date, the Company
repaid the outstanding $85,000,000 balance on its Senior Term Loans, prior to
scheduled maturity. See Note D. The original terms of the loan to SKC provided
for principal repayments through December 2007 along with interest at 9.5% per
annum on any unpaid principal amounts. Interest income earned on the note was
$7,224,000 and $12,765,000 for the years ended December 31, 1994 and 1993,
respectively.
NOTE C - LONG-TERM INVESTMENT
The Company has a $10,000,000 investment consisting of 100,000 shares of Series
A non-voting preferred stock, $.01 par value, with a liquidation preference of
$100 per share, of The National Registry Inc. ("NRI"), which is accounted for
under the cost method. This investment is convertible into 6,000,000 shares of
NRI common stock at the Company's option, however, conversion to common stock
is automatic in the event that cumulative gross revenues for NRI reach
$15,000,000. Two of the Company's executive officers serve as directors of NRI.
J. Anthony Forstmann, a director of the Company, is Co-Chairman of NRI. See
Notes M and P.
NOTE D - LONG-TERM OBLIGATIONS AND CREDIT FACILITIES
December 31,
-------------------
1994 1993
------- --------
(In thousands)
Unsecured $100,000,000 Revolving Credit Facility ("Amended Credit Facility") dated August 30,
1994, and expiring August 30, 1997. Amounts can be used for any general corporate purposes.
The interest rate ranged from 6.75% to 7.06% and is tied to the London Interbank Offered
Rate ("LIBOR"), plus an applicable margin based on the Company's total debt to operating
cash flow ratio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $25,000 $ --
Unsecured note payable to related parties in connection with a business acquisition, with
$1,451,493 plus accrued interest due on both September 1, 1995 and September 1, 1996.
The interest rate is 7.5%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,903 --
Unsecured Senior Term Loans ("Senior Term Loans"), with $25,000,000 paid on June 15, 1994
and the balance repaid prior to scheduled maturity on August 1, 1994, as discussed in
Note B. The interest rate was tied to the LIBOR plus an applicable margin adjustment . . . . . -- 110,000
Capitalized lease obligation and other long-term obligations . . . . . . . . . . . . . . . . . . 1,278 2,272
------- --------
Total long-term obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,181 112,272
Less current portion. . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,690 25,345
------- --------
$27,491 $ 86,927
======= ========
42
22
Aggregate contractual maturities of long-term obligations are as follows:
Years Ending
December 31,
------------
(In thousands)
1995 . . . . . . . . . . . . . . . . . $ 1,690
1996 . . . . . . . . . . . . . . . . . 1,682
1997 . . . . . . . . . . . . . . . . . 25,249
1998 . . . . . . . . . . . . . . . . . 270
1999 . . . . . . . . . . . . . . . . . 290
-------
$29,181
=======
In August 1994, the Company entered into a three-year $100,000,000 Amended
Credit Facility which amended and restated the Company's $40,000,000 Revolving
Credit Facility. The only borrowings during the year were in December 1994. The
Amended Credit Facility has yearly extension options at the request of the
Company which are subject to the approval of the participating banks. Under the
Amended Credit Facility, the interest rate on borrowings is tied to the LIBOR,
Federal Funds Rate, or the Prime Rate, at the Company's option, plus an
applicable margin. Commitment fees relating to the Amended Credit Facility
totaled $170,000 during 1994, with $121,000 being amortized over the remaining
life of the agreement. In addition, there is an annual facility fee of $250,000
payable in quarterly installments.
Restrictions contained in the Amended Credit Facility include, but are not
limited to, limitations on the encumbrance and disposition of assets and the
maintenance of various financial covenants and ratios. The Company also has an
additional $65,000,000 of unsecured bank credit lines, which back letters of
credit, used exclusively to facilitate inventory importation. Presentation of
these letters of credit by vendors results in an immediate charge to the
Company's account with no interest charges incurred. At December 31, 1994,
outstanding letters of credit amounted to $17,514,000 leaving $47,486,000 of
these bank credit lines available.
The Company recognized extraordinary losses on the early extinguishment of
its long-term obligations as follows:
Years Ended
December 31, Year Ended
-------------------- August 31,
1994 1993 1992
--------- --------- ------
(In thousands)
Total extinguished . . . . . . . . . . . . . . . . . . . $ 85,000 $ 160,152 $4,050
--------- --------- ------
Pre-tax loss net of discounts . . . . . . . . . . . . . . $ (1,491) $ (11,637) $ (194)
Income tax benefit . . . . . . . . . . . . . . . . . . . 567 4,395 82
--------- --------- ------
Extraordinary loss . . . . . . . . . . . . . . . . . . . $ (924) $ (7,242) $ (112)
========= ========= ======
There was no early extinguishment of long-term obligations during the four
months ended December 31, 1992.
43
23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
NOTE E - INCOME TAXES
A reconciliation of total income tax expense (benefit) to the amounts computed
by applying the statutory federal income tax rate to earnings (loss) before
income tax expense (benefit) and extraordinary item is shown as follows:
Years Ended Four Months
December 31, Ended Year Ended
------------------ December 31, August 31,
1994 1993 1992 1992
------- -------- ------ -------
(In thousands)
Income tax expense (benefit) at the federal statutory rate of 35% for
1994 and 1993 and 34% for all other periods (effect of rate
change in 1993 to 35% was $(196). . . . . . . . . . . . . . . . . . $10,682 $ (6,848) $3,892 $21,927
Amortization and write-off of goodwill and other acquired intangibles
and interest on adjustments proposed by the
Internal Revenue Service ("IRS"). . . . . . . . . . . . . . . . . . 2,145 1,582 503 2,923
State income taxes, net of effect of federal tax benefit 803 71 275 1,728
Executive compensation in excess of $1 million - 688 - -
Distribution of SKC capital stock . . . . . . . . . . . . . . . . . . - - 1,500 -
Sale of wholly-owned subsidiary . . . . . . . . . . . . . . . . . . . (920) - - -
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 479 136 509
------- -------- ------ -------
$12,819 $ (4,028) $6,306 $27,087
======= ======== ====== =======
The Company's effective tax expense (benefit) rate was 42.0% for the year ended
December 31, 1994; (20.6)% for the year ended December 31, 1993; 55.1% for the
four months ended December 31, 1992; and 42.0% for the fiscal year ended August
31, 1992. The components of income tax expense (benefit) attributable to
operations are as follows:
Years Ended Four Months
December 31, Ended Year Ended
------------------ December 31, August 31,
1994 1993 1992 1992
------- -------- ------ -------
(In thousands)
INCOME TAXES CURRENTLY PAYABLE:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,791 $ 8,753 $6,392 $14,065
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 584 870 594 1,727
------- -------- ------ -------
5,375 9,623 6,986 15,792
------- -------- ------ -------
DEFERRED INCOME TAXES:
Depreciation for tax in excess of (less than) financial statements. . 683 55 (1,221) (1,538)
Sales returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . 493 (471) (314) 264
Amortization of acquired intangible assets. . . . . . . . . . . . . . (1,622) 47 322 1,048
Provision for accrued liabilities . . . . . . . . . . . . . . . . . . 956 (1,363) 218 (472)
Inventory costing . . . . . . . . . . . . . . . . . . . . . . . . . . 1,330 (4,057) (22) 427
Litigation settlements. . . . . . . . . . . . . . . . . . . . . . . . 542 (4,550) - 11,399
Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . 275 (907) 310 (561)
State income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 325 (618) (45) 588
IRS settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,794 - - -
Amortization of long-term obligation issue costs - (718) 236 20
Sales tax accrual . . . . . . . . . . . . . . . . . . . . . . . . . . 771 24 (77) (1)
Provision for uncollectible amounts . . . . . . . . . . . . . . . . . 2,585 (351) (17) (18)
Amortization of cable distribution fees . . . . . . . . . . . . . . . (530) - - -
Charitable contribution carryover . . . . . . . . . . . . . . . . . . 244 (910) - -
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . 116 135 - -
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (518) 33 (70) 139
------- -------- ------- -------
7,444 (13,651) (680) 11,295
------- -------- ------- -------
$12,819 $ (4,028) $ 6,306 $27,087
======= ======== ======= =======
Additionally, the Company recorded an extraordinary item, loss on early
extinguishment of long-term obligations, net of the income tax effect. See
Note D.
44
24
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:
December 31,
------------------------
1994 1993
------- -------
(In thousands)
DEFERRED TAX ASSETS:
Inventory costing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,918 $ 7,248
Provision for accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 3,775 4,731
Sales returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,176 4,669
Litigation settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,008 4,550
Provision for uncollectible amounts . . . . . . . . . . . . . . . . . . . . . . . . 608 3,193
Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,825 2,100
Sales tax reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 778 1,549
Charitable contribution carryover . . . . . . . . . . . . . . . . . . . . . . . . . 666 910
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 354 329
------- -------
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $22,108 $29,279
======= =======
DEFERRED TAX LIABILITIES (ASSETS):
State income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (633) $ (958)
Cable distribution fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (530) -
Investment in unconsolidated subsidiaries . . . . . . . . . . . . . . . . . . . . . (238) (238)
Installment sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (182) (182)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (915) (685)
------- -------
(2,498) (2,063)
Less valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 995 879
------- -------
(1,503) (1,184)
Depreciation for tax in excess of financial statements . . . . . . . . . . . . . . 7,616 6,933
Amortization of acquired intangible assets . . . . . . . . . . . . . . . . . . . . - 1,622
Capitalized costs of mailing lists . . . . . . . . . . . . . . . . . . . . . . . . 539 535
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140 408
------- -------
Net deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,792 $ 8,314
======= =======
The Company had taxable income and pre-tax book income (loss) for the periods
presented as follows:
Years Ended Four Months
December 31, Ended Year Ended
------------------- December 31, August 31,
1994 1993 1992 1992
------- -------- ------- --------
(In thousands)
Taxable income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,200 $ 8,207 $17,591 $ 34,740
Pre-tax book income (loss) . . . . . . . . . . . . . . . . . . . . . . . . 29,029 (31,204) 11,446 64,298
The primary differences between taxable income and pre-tax book income (loss)
are detailed above. In addition to these reconciling items, the Company
recognized income tax deductions relating to the issuance of common stock
pursuant to the executive stock award program and the exercise of stock options
("Common Stock Deductions"), the income tax benefit of which was recorded as an
increase to additional paid-in capital. During the year ended December 31,
1994, the Company incurred Common Stock Deductions of $7,308,000. Common Stock
Deductions for the year ended December 31, 1993, the four months ended December
31, 1992, and the fiscal year ended August 31, 1992, were $31,697,000,
$4,718,000 and $1,696,000, respectively.
45
25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
Except for the effects of the reversal of net deductible temporary
differences and the effects of future Common Stock Deductions, the Company is
not currently aware of any factors which would cause any significant
differences between taxable income and pre-tax book income in future years.
There can be no assurances that there will not be significant differences in
the future between taxable income and pre-tax book income if circumstances
change (for example, changes in tax laws or the Company's financial condition
or performance).
Management believes the existing net deductible temporary differences will
reverse during periods in which the Company generates net taxable income or a
net operating loss that would be carried back to prior taxable years. There can
be no assurance, however, that the Company will generate any earnings or any
specific level of continuing earnings.
The IRS conducted examinations of the Company's federal income tax returns
for fiscal years 1986 through 1989 and proposed various adjustments. On June 8,
1994, the Company and the IRS agreed to settle all of the outstanding issues
with the exception of the deductibility of royalty payments made to a then
related party. In August 1994, the Company paid the assessments, totaling
$15,000,000 including interest, related to all the issues except the royalty
payments covering all taxable periods through August 31, 1993. These
assessments had previously been accrued.
On September 9, 1994, the IRS issued a statutory Notice of Deficiency for
fiscal years 1986 through 1989 related to the royalty payments issue. In
December 1994, the Company paid the assessments, totaling $4,600,000 including
interest, which had previously been accrued. The Company continues to maintain
that it has meritorious positions regarding the deductibility of these payments
and intends to file a refund claim with the IRS during 1995.
The Company also made such royalty payments during fiscal years 1990 through
early 1993. The deductibility of these payments will also be challenged by the
IRS upon audit. The Company has made adequate provision for this issue for
these years.
The Company's federal income tax returns for fiscal years 1990 and 1991 are
currently under examination by the IRS. No proposed adjustments relating to
such years, other than those discussed above, have been brought to management's
attention.
NOTE F - BUSINESS COMBINATION
On September 1, 1994, a wholly-owned subsidiary of the Company purchased all
the outstanding shares of ISN for a total of $5,000,000 consisting of cash and
$2,903,000 of notes payable. The purchase method of accounting was used to
account for this business combination. Goodwill acquired in connection with
this transaction is being amortized over three years.
Consolidated results of operations for the year ended December 31, 1994
include the results of ISN from its acquisition date. The results of operations
prior to the date of acquisition and pro forma effects were not significant to
the Company's consolidated results of operations and therefore pro forma
information is not presented.
NOTE G - EMPLOYEE BENEFIT PLANS
The Company offers a plan pursuant to Section 401(k) of the Internal Revenue
Code covering substantially all full-time employees. Matching employer
contributions are set at the discretion of the Board of Directors. The
Company's contributions for the years ended December 31, 1994 and 1993, were
$824,000 and $667,000, respectively. Contributions for the four months ended
December 31, 1992 and the fiscal year ended August 31, 1992, were $300,000 and
$618,000, respectively.
On December 28, 1994, the Board of Directors adopted the Home Shopping
Network, Inc. Employee Equity Participation Plan (the "Equity Plan"), effective
December 31, 1994. The Company has applied to the IRS for a determination that
the Equity Plan is a qualified plan for IRS purposes.
The Equity Plan covers all employees at December 31, 1994, who were employed
before January 1, 1994, had completed at least 1,000 hours of service during
calendar 1994, were at least 21 years of age, and do not hold options to
purchase shares of HSN common stock or SAR's. The Company allocated 100 shares
of common stock to each eligible employee, plus an additional 10 shares of
common stock for each full year of service in excess of one. The allocated
stock vests ratably at 20% a year starting December 31, 1994, and is included
in the weighted average shares for the earnings per share calculation in 1994.
The Company transferred $5,000,000 to an escrow account to cover the cost of
purchasing stock for the Equity Plan, of which $3,736,000 of stock,
representing 367,000 shares, was purchased during December 1994. The remaining
$1,264,000 is included in cash and cash equivalents at December 31, 1994.
46
26
The common stock purchases were recorded as unearned compensation as of
December 31, 1994 and $810,000 was charged to expense based on the vesting
schedule discussed above. The remaining unearned compensation represents shares
purchased for the Equity Plan as of December 31, 1994, that have not vested.
Any future contributions to the Equity Plan will be subject to the Board of
Directors' approval.
NOTE H - COMMITMENTS and CONTINGENCIES
The Company leases satellite transponders, computers and warehouse space used
in connection with its operations under various operating leases.
Future minimum payments under noncancellable operating leases are as follows:
Years Ending
December 31,
------------
(In thousands)
1995 . . . . . . . . . . . . $12,954
1996 . . . . . . . . . . . . 12,369
1997 . . . . . . . . . . . . 12,223
1998 . . . . . . . . . . . . 8,094
1999 . . . . . . . . . . . . 7,723
Thereafter . . . . . . . . . 38,935
-------
$92,298
=======
Total rent and lease expense charged to operations was $13,978,000 and
$15,185,000 for the years ended December 31, 1994 and 1993, respectively. Total
rent and lease expense for the four months ended December 31, 1992, and the
fiscal year ended August 31, 1992, was $6,611,000 and $20,278,000,
respectively.
The Company had commitments for capital expenditures totaling $15,644,000 at
December 31, 1994.
On December 28, 1992, HSC entered into affiliation agreements with SKC
which provide for SKC's broadcast television stations to air HSC programming on
a full-time basis. The agreements have an original term of five years, and are
renewable for two successive five year terms at SKC's sole option. The
affiliation agreements are cancelable by SKC with eighteen months written notice
prior to the end of any scheduled term. HSC pays an affiliation fee to SKC based
on hourly rates and, upon reaching certain sales levels, also pays commissions
on net sales. Expense related to affiliation agreements with SKC for the years
ended December 31, 1994 and 1993, was $42,415,000 and $41,135,000, respectively,
of which $1,865,000 and $996,000, respectively, represent commissions. In 1995,
payments, exclusive of commissions, under these affiliation agreements are
expected to be $40,620,000.
In August 1994, the Company entered into a five-year employment agreement
with the Company's Chief Operating Officer, which is automatically renewable
for successive one-year terms unless either party provides at least 180 days
written notice. The employment agreement provides for an annual base salary of
not less than $500,000 and a $1,000,000 loan, evidenced by a note, bearing
interest at 5.8% per annum. The note is due on the earlier of August 16, 1996
or upon termination of employment, subject to forgiveness of $500,000, $250,000
and $250,000 plus accrued interest on January 1, 1995, July 1, 1995 and August
16, 1996, respectively. The employment agreement also provides options to
purchase 1,500,000 shares of the Company's common stock at $11.50 per share
under the terms of the 1986 Stock Option Plan for Employees, as amended (the
"1986 Plan").
In September 1994, the Company entered into a three-year employment agreement
with its General Counsel which calls for an annual base salary of at least
$225,000 per year until August 1997 and options to purchase 100,000 shares of
the Company's common stock at $11.75 per share under the terms of the 1986
Plan.
In February 1993, the Company entered into a four-year employment agreement
with the Company's President and Chief Executive Officer, which is
automatically renewable for successive one year terms unless either party
provides 180 days written notice. The employment agreement provides for an
annual base salary of not less than $500,000 and SARs, as further discussed in
Note L.
47
27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
Termination of the above employment agreements by the Company other than for
cause will result in payment of the annual base salary amounts that would have
been payable had employment continued until the expiration of the employment
terms plus any annual bonus for the year of termination. In addition,
termination of employment following a change in control of the Company may
result in entitlement to all unpaid compensation and other benefits through the
term of the contracts.
On August 11, 1993, upon resignation as Chairman of the Board of the Company,
the former Chairman commenced a five-year consultancy and non-competition
arrangement with the Company during which period he receives $500,000 per year.
The Company has entered into an agreement for telephone services with MCI
Telecommunications Corporation ("MCI") for a term of three years ending in
November 1996. In exchange for discounted phone rates, the Company agreed to
minimum monthly and minimum quarterly payments of $800,000 and $3,150,000,
respectively. If the Company terminates the agreement for reasons other than
cause, payment of 50% of the aggregate of the minimum amounts for the remainder
of the unexpired term will be due 30 days after the termination. The Company's
payments to MCI for phone services during the years ended December 31, 1994 and
1993 substantially exceeded the above mentioned minimums.
The Company has agreed to participate in the investor group which was awarded
a major league baseball franchise for the Tampa Bay area. The Company's
commitment is contingent upon its securing certain merchandising and
broadcasting rights with respect to the franchise. If the Company obtains those
rights, it has agreed to contribute $10,000,000 as a general and limited
partner.
NOTE I - LITIGATION
On December 30, 1993, the parties to several class action lawsuits (the
"Florida Federal Securities Actions"), which assert claims relating to, among
other things, the adequacy of HSN disclosures in certain public filings in 1992
and 1993, reached an agreement in principle to settle the cases. On January 11,
1995, the settlement was approved by the court. Pursuant to the terms of the
settlement the Company has agreed to pay $9,600,000 plus accrued interest of
$557,000 in complete settlement of the claims.
On November 16, 1994, an agreement was reached to settle several
lawsuits in which the Company, Liberty and others are parties. The actions
alleged, among other things, breaches of fiduciary duty relating to the change
in control, tender offers and merger proposal relating to the Company and
failure to take effective action to exempt Liberty from the requirements of
Section 203 of the Delaware Corporation Law relating to any subsequent business
combination with the Company. The Company will not incur any financial
obligation in connection with this settlement which was approved by the court
on January 25, 1995.
On or about February 8, 1994, the Company, with the approval of the special
litigation committee of its Board of Directors, signed an agreement in
principle to settle the lawsuit entitled 7547 Corp., et al. v. Roy M. Speer, et
al., Case Nos. 92-1966-CIV-T-15A and 92-2045-CIV-T-99C (consolidated). Pursuant
to the terms of the settlement, Roy M. Speer, the Company's former Chairman of
the Board and Chief Executive Officer, has agreed to pay the Company $2,000,000
and to pay the Company an additional $1,000,000 to partially fund the
$9,600,000 settlement in the Florida Federal Securities Actions. The Company
has agreed to pay Western Hemisphere, Inc. ("Western"), the successor to
Pioneer Data Processing, Inc. ("Pioneer"), $4,500,000 in exchange for releases
and cancellation or acquisition of a 1985 license agreement involving the
Company and Pioneer. The Company also has agreed to pay such attorneys' fees as
may be awarded by the Court to the plaintiffs' counsel. This settlement is
conditioned on, among other things, Court approval after notice to the
shareholders and a hearing on the fairness of the settlement.
In connection with the above lawsuits, the Company accrued $13,000,000 at
December 31, 1993, to cover anticipated costs and expenses primarily related to
such settlements.
Effective May 2, 1994, the Company, Liberty, and Messrs. Roy M. Speer, Gerald
F. Hogan and John M. Draper (the "Settling Defendants") entered into a
settlement agreement with Mr. Allen P. Allweiss pursuant to which, on May 5,
1994, Mr. Allweiss dismissed all claims against the Settling Defendants, and
the Company dismissed its counterclaim against Mr. Allweiss. The terms of the
settlement are confidential.
A consolidated class action initiated in 1990 is pending against the Company
in the Court of Common Pleas of Bucks County, Pennsylvania. The complaints
allege violation of the Pennsylvania Unfair Trade Practices and Consumer
Protection Law with respect to the Company's pricing practices for diamond and
imitation diamond jewelry. Plaintiffs seek compensatory damages of $100 per
class member, treble damages, attorneys' fees, costs, interest and other relief
on behalf of all Pennsylvania
48
28
residents who purchased any jewelry containing diamonds or imitation diamonds
from the Home Shopping Club between December 27, 1984 and May 20, 1991.
Substantial discovery has been taken in the case. In February 1995, the
plaintiffs filed a motion for summary judgment. The Company believes that it
has meritorious defenses and is vigorously defending this action.
During fiscal 1992, the Company paid $33,000,000 relating to certain suits
filed against officers and directors and class action lawsuits.
The Company is engaged in various other lawsuits either as plaintiff or
defendant. In the opinion of management, the ultimate outcome of these various
lawsuits should not have a material impact on the Company's financial position
or results of operations.
NOTE J - STOCKHOLDERS' EQUITY
The holders of both classes of the Company's common stock are entitled to
receive ratably such dividends, if any, as may be declared by the Board of
Directors out of funds legally available for the payment of dividends. In the
event of the liquidation, dissolution or winding up of the Company, the holders
of both classes of common stock are entitled to share ratably in all assets of
the Company remaining after provision for payment of liabilities. Shares of
Class B common stock are convertible at the option of the sole holder, a
wholly-owned subsidiary of Tele-Communications, Inc. ("TCI"), into shares of
common stock of the Company on a share-for-share basis. In the event of
conversion of the Class B common stock, the Class B shares so converted will be
retired and not subject to reissue.
In October 1993, RMS Limited Partnership, a Nevada limited partnership
("RMS"), converted 3,600,000 shares of Class B common stock into shares of
common stock, on a share-for-share basis. After the conversion, there were
20,559,456 shares of Class B common stock outstanding. Because there were less
than 22,800,000 shares of Class B common stock outstanding after this
conversion, the holders of the Class B common stock began voting together with
the holders of common stock on all matters submitted to stockholders, except
that they are not entitled to vote in the election of 25% of the Board of
Directors. The holder of the Class B common stock was entitled to cast ten
votes per share on all other matters. In 1994, RMS converted 559,456 additional
shares of Class B common stock to shares of common stock leaving a wholly-owned
subsidiary of TCI the sole holder of Class B common stock.
On December 28, 1992, the Company distributed the capital stock of SKC to the
Company's stockholders of record on December 24, 1992, in the form of a pro
rata stock dividend. The distribution also included Telemation, Inc., formerly
a wholly-owned subsidiary of HSN that operates video production and
post-production facilities, the capital stock of which was contributed to SKC
prior to the distribution. The stockholders of HSN received one share of SKC
common stock for each ten shares of HSN common stock held at the close of
business on December 24, 1992. In connection with this distribution,
intercompany indebtedness in the amount of $135,172,000 was converted into a
secured long-term Senior Loan. This loan was repaid in August 1994, as
discussed in Note B. At the date of distribution, the remaining intercompany
indebtedness in the amount of $93,120,000 was forgiven resulting in SKC having
a net book value at the date of distribution of $10,000,000. The distribution
reduced the Company's stockholders' equity at December 31, 1992, by
$10,000,000, consisting of net operating assets of $4,751,000 and cash and cash
equivalents of $5,249,000. Property, plant and equipment with a net book value
of $41,516,000 and identified intangible assets and FCC licenses with a net
book value of $88,720,000 were the major assets held by SKC at the time of the
stock distribution. SKC's assets and capabilities were an integral part of
HSC's operations and were used almost exclusively for HSC programming.
Accordingly, at the time of the distribution, HSC and SKC entered into
affiliation agreements, as discussed in Notes H and M providing, among other
things, parameters for SKC's carriage of HSC programming, HSC's payment to SKC
for such carriage and renewal or extension of the affiliation agreements.
The distribution of the capital stock of SKC was a taxable transaction. The
Company recognized a gain for income tax purposes in an amount equal to the
difference between the fair market value of the SKC capital stock distributed
and the Company's basis in such SKC capital stock. This gain resulted in
additional income tax expense of $1,500,000 which was recorded during the four
months ended December 31, 1992. No additional income tax expense resulted from
the final settlement of the IRS examination, as discussed in Note E.
In accordance with a Tax Sharing Agreement, entered into in connection with
the distribution of SKC, HSN is responsible for paying all taxes related to
SKC's operations for periods through December 28, 1992. Any liabilities
associated with IRS examinations through that date are the responsibility of
HSN and not SKC.
49
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
On July 31, 1992, the Company distributed the capital stock of PSi to the
Company's stockholders of record on July 30, 1992 in the form of a tax-free,
pro rata stock dividend. The stockholders of HSN received one share of PSi
common stock for each ten shares of HSN common stock held at the close of
business on July 30, 1992. The distribution reduced the Company's stockholders'
equity in the year ended August 31, 1992 by $36,579,000, consisting of net
operating assets of $31,579,000 and cash of $5,000,000.
NOTE K - CHANGE IN CONTROL
On February 11, 1993, Liberty acquired 20,000,000 shares of the Company's Class
B common stock, from RMS in exchange for $58,000,000 in cash and 8,000,000
shares (adjusted for a 2 for 1 stock dividend) of Liberty Class A common stock,
par value $1.00 per share. In addition, on the acquisition date, RMS granted an
irrevocable assignable option (the "Option") to Liberty to purchase from RMS
2,000,000 shares ("Subject Shares") of Class B common stock of SKC for
$2,000,000 plus interest from February 11, 1993.
On September 23, 1994, RMS and Liberty entered into an Option Amendment
Agreement in which RMS agreed to extend the exercise period of the option
agreement to February 11, 1999. RMS and Liberty further agreed to amend, among
other terms, the exercise price to $1.25 per share through February 11, 1995,
with such exercise price increasing in the amount of $.25 each year thereafter.
Upon exercise of the Option and purchase of the Subject Shares, Liberty or any
assignee under the Option would effectively control SKC by virtue of the voting
power of the Subject Shares.
The 20,000,000 shares of Class B common stock purchased by Liberty, in
addition to the 616,300 shares of HSN common stock acquired by Liberty prior to
February 11, 1993, represented approximately 23.3% of the beneficial ownership
interest in the Company's equity at February 28, 1993. In addition, because the
Class B common stock is generally entitled to ten votes per share, the
aggregate of all such shares represented approximately 65.6% of the beneficial
ownership interest in the voting rights of the Company. These percentage
amounts do not reflect the common stock purchased in the tender offer or the
conversion of the Class B common stock discussed below.
On April 23, 1993, Liberty commenced a tender offer to purchase up to
15,000,000 shares of HSN common stock at $7.00 per share. During the period of
the tender offer, which expired on May 20, 1993, 23,266,306 shares of HSN
common stock were tendered. Consistent with its rights under the federal
securities laws, Liberty elected to purchase an additional 1,296,602 of these
shares. This acquisition of 16,296,602 shares of HSN common stock increased
Liberty's beneficial ownership interest in HSN's equity to approximately 41.5%
and in its voting rights to approximately 70.8% at May 21, 1993.
In connection with Liberty's acquisition, RMS agreed to convert its remaining
4,159,456 shares of Class B common stock into shares of common stock. Of these
shares, 3,600,000 were converted prior to December 31, 1993, and the remainder
were converted to common stock during the year ended December 31, 1994. After
taking into account these conversions, Liberty's beneficial ownership and
voting rights were approximately 40.3% and 79.7%, respectively, at December 31,
1994.
In January, 1994, Liberty and Tele-Communications, Inc. ("Old TCI") entered
into a definitive agreement providing for a combination of the two companies.
On August 4, 1994, Liberty and Old TCI consummated a business combination
resulting in Old TCI and Liberty becoming wholly-owned subsidiaries of a newly
formed holding company, which has been renamed TCI.
NOTE L - STOCK OPTIONS AND AWARDS
The Company has granted options to purchase common stock under option plans as
follows:
The 1987 Cable Operators Stock Option Plan, as amended, provided for
the issuance of options to purchase common stock at or above the fair market
value at the date of grant in exchange for entering into affiliation agreements
to carry the Company's programming for up to seven years. All outstanding
options were exercised or cancelled on or before June 1, 1994.
The 1986 Plan provides for the grant of options to purchase common stock at
the fair market value at date of grant. The options generally vest and become
exercisable annually and equally over five years beginning one year from the
date of grant, and expire ten years from the date of grant.
The 1986 Stock Option Plan for Outside Directors, as amended, provides for
the grant of options to purchase common stock at fair market value as of the
date of grant. The options vest and become exercisable equally over two years
beginning on the date of grant. All options expire five years from the date
they vest and become exercisable. During 1992, the Board of Directors
50
30
and shareholders approved certain amendments to the plan. The amendments
provide for additional option grants after five years of service and, in
addition, the number of shares of common stock subject to option under the plan
was increased to 1,630,000 shares.
A summary of changes in outstanding options, under the stock option plans is
as follows:
Cable Operators Employees Outside Directors
--------------------- --------------------- ---------------------
Price Price Price Total
Options Range Options Range Options Range Options
---------- -------- ---------- -------- ---------- -------- ---------
(In thousands, except price range)
AUTHORIZED:
September 1, 1986 . . . . . . 15,000 2,400 630 18,030
Year ended August 31, 1987. . 12,500 7,600 -- 20,100
Year ended August 31, 1992. . -- -- 1,000 1,000
-------- -------- ------- ---------
Total authorized. . . . . . 27,500 10,000 1,630 39,130
-------- -------- ------- ---------
OUTSTANDING:
Outstanding - August 31, 1991 5,002 $6.00-7.00 3,294 $ 3.50- 8.88 510 $ 3.63- 7.13 8,806
Granted . . . . . . . . . . . -- -- 540 $ 5.63- 7.50 180 $ 5.38- 5.58 720
Exercised . . . . . . . . . . (234) $6.00-7.00 (286) $ 4.75- 6.88 (60) $ 5.88- 5.88 (580)
Canceled . . . . . . . . . . (432) $6.00-7.00 (543) $ 3.71- 6.13 -- -- (975)
-------- -------- ------- ---------
Outstanding - August 31, 1992(1) 4,336 $5.70-6.65 3,005 $ 3.33- 8.43 630 $ 3.44- 6.78 7,971
Granted . . . . . . . . . . . -- -- 145 $ 5.13- 5.13 -- -- 145
Exercised . . . . . . . . . . (11) $5.70-6.65 (66) $ 3.33- 6.53 (330) $ 3.44- 5.58 (407)
Canceled. . . . . . . . . . . -- -- (150) $ 5.22- 6.38 -- -- (150)
-------- -------- ------- ---------
Outstanding - December 31, 1992(1) 4,325 $5.56-6.49 2,934 $ 3.25- 8.23 300 $ 3.36- 6.61 7,559
Granted . . . . . . . . . . . 49 $5.56-6.49 1,063 $ 8.50-14.63 180 $14.75-14.75 1,292
Exercised . . . . . . . . . . (3,305) $5.56-6.49 (1,781) $ 3.25- 6.96 (216) $ 3.36- 6.61 (5,302)
Canceled. . . . . . . . . . . (524) $5.56-6.49 (115) $ 4.41- 9.88 (54) $ 4.98- 4.98 (693)
-------- -------- ------- ---------
Outstanding - December 31, 1993 545 $5.56-6.49 2,101 $ 3.25-14.63 210 $ 5.45-14.75 2,856
Granted . . . . . . . . . . . -- -- 3,316 $10.25-12.25 -- -- 3,316
Exercised . . . . . . . . . . (336) $5.56-6.49 (335) $ 3.71- 9.88 (30) $ 5.45- 5.45 (701)
Canceled. . . . . . . . . . . (209) $5.56-6.49 (419) $ 4.41-14.63 -- -- (628)
-------- -------- ------- ---------
Outstanding - December 31, 1994 -- -- 4,663 $ 3.25-14.63 180 $14.75-14.75 4,843
-------- -------- ------- ---------
Options exercisable . . . . . -- 586 $ 3.25-14.63 120 $14.75-14.75 706
-------- -------- ------- ---------
Options Available for grant . -- 2,417 814 3,231
-------- -------- ------- ---------
(1) All of the exercise prices were adjusted as of July 31, 1992 and December
28, 1992, for options outstanding at such dates, to reflect the
distributions of PSi and SKC, respectively, to the stockholders of the
Company as more fully discussed in Note J.
During 1994, the Company received $3,827,000 in cash in connection with the
exercise of 701,000 stock options.
During 1994 the Company issued 120,000 shares of common stock in connection
with the exercise of stock options by outside consultants not included in the
above chart, for which the Company received $698,000 in cash. At December 31,
1994, no other options were outstanding or exercisable by consultants.
In October 1990, the Company adopted the 1990 Executive Stock Award Program
(the "Program") pursuant to which 2,990,000 shares of common stock were granted
to certain key employees and consultants. The Program was funded exclusively by
the contribution of shares of common stock owned by the former Chairman of the
Board and a former President of the Company. The Company will not issue any
additional shares of stock in connection with the Program. The rights of such
individuals in shares granted under the Program vest over a five year period
and are distributed in five equal annual install-
51
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
ments commencing one year from the grant date. Participants in the Program are
entitled to receive dividends, if declared, on their unvested shares and
certain officers are entitled to voting rights with respect to their unvested
shares. Forfeitures are reissued at the discretion of the Compensation/Benefits
Committee of the Board of Directors.
Under this Program and another award of stock, the amount amortized and
expensed relating to the compensation earned was $2,047,000 and $5,615,000 for
the years ended December 31, 1994 and 1993, respectively, $1,084,000 for the
four months ended December 31, 1992, and $3,454,000 for the fiscal year ended
August 31, 1992.
In 1993, the President and Chief Executive Officer of HSN received SARs with
respect to 984,876 shares of the Company's common stock at an exercise price of
$8.25 per share. The SARs vest over a four year period and are exercisable
until February 23, 2003. The SARs will vest upon termination of employment
other than for cause and will be exercisable for up to one year following the
termination of employment. In the event of a change in control of the Company,
all unvested SARs will vest immediately prior to the change in control and
shall remain exercisable for a one year period. SARs not exercised will expire
to the extent not exercised. The SARs may be exercised for cash or, so long as
the Company is a public company, for shares of the Company's common stock equal
to the excess of the fair market value of each share of common stock over $8.25
at the exercise date. The SARs also will vest in the event of death or
disability. Compensation expense (benefit) recognized by the Company for the
SAR's during the years ended December 31, 1994 and 1993 was ($1,547,000) and
$2,800,000, respectively.
NOTE M - RELATED PARTY TRANSACTIONS
Currently, the Company is involved in several agreements with related parties
and has made payments to those related parties as follows.
HSC has entered into affiliation agreements with cable operators which are
wholly or partially owned by TCI. In addition, certain officers of Liberty
served, or continue to serve, on the Company's Board of Directors. The managing
general partner of certain cable systems which carry the Company's programming,
was appointed to HSN's Board of Directors in July 1993. TCI also has an
ownership interest in these cable systems. Payments to the above related
parties for cable commissions and advertising were $7,269,000 and $4,300,000
for the years ended December 31, 1994 and 1993, respectively. Commitments for
cable distribution fees to related parties were $34,684,000, of which
$8,673,000 was paid during 1994. The balance of $26,011,000 will be paid in
1995.
On April 28, 1992, the Company purchased 100,000 shares of Series A Preferred
Stock of NRI. Pursuant to the purchase of these shares, HSN provided office
space to NRI beginning in 1993. The Company charged NRI $200,000 and $65,000,
respectively, for rent during the years ended December 31, 1994 and 1993. The
Co-Chairman of NRI was appointed to the Board of Directors of the Company on
April 30, 1992. HSN and NRI also share one other common board member. See Notes
C and P.
Prior to 1994, the Company received a variety of products and services from
entities related through common ownership and management with the former
Chairman of the Company's Board of Directors and his immediate family members.
These transactions were considered related party transactions until the
resignation of the former Chairman of the Company's Board of Directors in
August 1993. Subsequent to his resignation, these transactions are no longer
considered related party transactions, but are included for disclosure purposes
for periods prior to January 1, 1994. Transactions with these entities are
summarized as follows:
1. Computer software license agreement: In 1985, the Company entered into a
license agreement for computer software with Pioneer, which provided for
continuing monthly payments of 1% of HSC's gross profit, as defined. The
amounts expensed in connection with these agreements were $297,000 for the year
ended December 31, 1993, $1,176,000 for the four months ended December 31, 1992
and $3,502,000 for the fiscal year ended August 31, 1992.
2. Commissions on inventory dispositions: Certain inventory in the form of
returned merchandise, rejects and small lot saleable inventory were disposed of
through Western for a 15% commission. Sales by the related party were less than
1% of total sales. The Company also provided certain equipment and space
located at or in close proximity to each of the Company's four fulfillment
centers, free of charge. The Company terminated this arrangement in 1993.
Commissions were $561,000 for the year ended December 31, 1993, $456,000 for
the four months ended December 31, 1992 and $1,469,000 for the fiscal year
ended August 31, 1992.
52
32
As of December 31, 1994 and 1993, in connection with a proposed litigation
settlement as discussed in Note I, the Company had a $4,500,000 liability
recorded to Western. This amount relates to cancellation of the computer
software license agreement, the arrangement pursuant to which Western provided
certain liquidation and related services, as noted above, and all other
existing agreements and arrangements excluding certain assignment, secrecy and
non-compete agreements. In connection with this and other litigation
settlements, the former Chairman of the Company's Board of Directors has agreed
to pay HSN $3,000,000, which is recorded in accounts and notes receivable, as
of December 31, 1994 and 1993.
Prior to the SKC distribution, the Company was a non-voting common
stockholder in a corporation which owns a television station that carries HSN
programming. A former member of the Company's Board of Directors is a
significant owner of this same corporation. During fiscal 1989, the Company
funded construction of the television station through a 12.8% interest-bearing
note, to be amortized over seven years beginning in April 1991, with monthly
payments of $69,000. The amount due under this note was $3,294,000 at August
31, 1992. In connection with the distribution of the capital stock of SKC, the
note and the Company's investment in the corporation were transferred to SKC
prior to December 31, 1992. See Note J. Also, the Company paid $1,549,000,
$504,300 and $1,553,000 under an affiliation agreement with the television
station for the year ended December 31, 1993, the four months ended December
31, 1992 and the fiscal year ended August 31, 1992, respectively.
During 1991, the Company engaged two firms in consulting capacities which had
one officer each that was on the Company's Board of Directors until February
1993. Fees paid pursuant to these engagements totaled $126,000 for the year
ended December 31, 1993, $34,000 for the four months ended December 31, 1992,
and $100,000 for the fiscal year ended August 31, 1992.
The Company purchased certain equipment from PSi and paid license and system
maintenance fees related to this equipment of $1,316,000 and $3,545,000,
respectively, for the year ended December 31, 1993 and $1,521,300 and
$2,250,000, respectively, for the four months ended December 31, 1992. The
former Chairman of HSN owned a controlling position in PSi's outstanding stock.
Until August 1993, HSN and PSi also shared a common board member, and officer.
Subsequent to August 11, 1993, PSi is no longer considered a related party due
to the resignation of certain members of PSi's Board of Directors, and the
resignation of the former Chairman of the Company.
NOTE N - CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplemental disclosure of cash flow information is as follows:
Years Ended Four Months
December 31, Ended Year Ended
------------------ December 31, August 31,
1994 1993 1992 1992
------- -------- ------ -------
(In thousands)
CASH PAID DURING THE PERIOD FOR:
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,899 $13,872 $10,837 $22,995
Income taxes. . . . . . . . . . . . . . . . . . . . . . . . 22,430 515 4,648 14,854
Supplemental information of non-cash investing and financing activities is as
follows:
- As discussed in Note F, in connection with the purchase of ISN, the
Company issued notes payable totaling $2,903,000.
- During the years ended December 31, 1994 and 1993, RMS converted 559,456
and 3,600,000 shares, respectively, of Class B common stock into shares
of common stock. See Note J.
- During the year ended December 31, 1993, and the fiscal year ended August 31,
1992, $15,000 and $150,000 of the Company's 5 1/2% Convertible
Subordinated Debentures were converted into 2,293 and 21,276 shares of
common stock, respectively.
- On December 28, 1992, the Company distributed the common stock of SKC
to the Company's stockholders, in the form of a taxable pro rata
stock dividend. See Note J.
- On July 31, 1992, the Company distributed the common stock of PSi to the
Company's stockholders in the form of a tax-free, pro rata stock dividend.
See Note J.
53
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
NOTE O - QUARTERLY RESULTS (UNAUDITED)
Quarter Quarter Quarter Quarter
Ended Ended Ended Ended
March 31, June 30, September 30, December 31,
------------ --------- ------------- ------------
(In thousands, except per share data)
YEAR ENDED DECEMBER 31, 1994
Net sales . . . . . . . . . . . . . . . . . . . . . . . $274,215 $274,005 $276,612 $301,682
Gross profit . . . . . . . . . . . . . . . . . . . . . 98,600 95,202 97,620 104,588
Earnings before extraordinary item . . . . . . . . . . 6,651 1,908 7,349 1,793
Net earnings . . . . . . . . . . . . . . . . . . . . . 6,651 1,908 6,425 1,793
Earnings per common share:
Before extraordinary item . . . . . . . . . . . . . . .07 .02 .08 .02
Net earnings . . . . . . . . . . . . . . . . . . . . .07 .02 .07 .02
YEAR ENDED DECEMBER 31, 1993(1)
Net sales . . . . . . . . . . . . . . . . . . . . . . . $239,421 $250,264 $260,462 $296,433
Gross profit . . . . . . . . . . . . . . . . . . . . . 61,540 (2) 87,541 90,122 103,337
Earnings (loss) before extraordinary item . . . . . . . (16,980) 2,001 1,115 (1,675)(3)
Net earnings (loss) . . . . . . . . . . . . . . . . . . (23,823) 1,602 1,115 (1,675)
Earnings (loss) per common share:
Before extraordinary item . . . . . . . . . . . . . . . (.19) .02 .01 (.02)
Net earnings (loss) . . . . . . . . . . . . . . . . . . (.27) .02 .01 (.02)
Quarter Quarter Quarter Month
Ended Ended Ended Ended
November 30, February 28, May 31, June 30,
1992 1993 1993 1993(4)
------------- ------------- ------------- ------------
PERIODS SUBSEQUENT TO (In thousands, except per share data)
AUGUST 31, 1992
Net sales . . . . . . . . . . . . . . . . . . . . . . . $265,796 $244,044 $260,157 $76,854
Gross profit . . . . . . . . . . . . . . . . . . . . . 94,829 60,529 (2) 93,052 25,307
Earnings (loss) before extraordinary item . . . . . . . 5,828 (20,040) 6,158 (1,785)
Net earnings (loss) . . . . . . . . . . . . . . . . . . 5,828 (26,883) 5,759 (1,785)
Earnings (loss) per common share:
Before extraordinary item . . . . . . . . . . . . . . .07 (.23) .07 (.02)
Net earnings (loss) . . . . . . . . . . . . . . . . . .07 (.31) .07 (.02)
(1) The quarters ended March 31, 1993 and June 30, 1993 are shown for
comparative purposes only.
(2) During February 1993, the Company adjusted its inventory carrying amount
by $22,700,000. Of this adjustment, $20,100,000 affected gross profit
and $2,600,000 was charged to miscellaneous expense.
(3) In the fourth quarter of 1993, the Company charged $13,000,000 to other
income (expense) for the settlement of various lawsuits. See Note I.
(4) The month ended June 30, 1993 is shown in connection with the transition
for the change in year end from August 31 to December 31, as discussed
in Note A.
The difference between earnings (loss) before extraordinary item and net
earnings (loss) in each quarter represents losses from early extinguishment
of long-term obligations. See Note D.
The Company believes that seasonality does impact its business, but not to
the same extent it impacts the retail industry in general.
54
34
NOTE P - FINANCIAL INSTRUMENTS
The additional disclosure below of the estimated fair value of financial
instruments was made in accordance with the requirements of Statements of
Financial Accounting Standards No. 107. The estimated fair value amounts have
been determined by the Company using available market information and
appropriate valuation methodologies.
December 31, 1994 December 31, 1993
---------------------- ---------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------------ ---------- ---------- ---------
(In thousands)
Cash and cash equivalents . . . . . . . . . . . . . . . . . . $ 33,648 $ 33,648 $ 35,566 $ 35,566
Note and interest receivable from related party . . . . . . . -- -- 132,304 132,304
Other non-current assets. . . . . . . . . . . . . . . . . . . 1,309 1,309 3,117 3,117
Long-term investment. . . . . . . . . . . . . . . . . . . . . 10,000 7,875 10,000 18,000
Long-term obligations . . . . . . . . . . . . . . . . . . . . (29,181) (29,181) (112,272) (112,272)
The carrying value of cash and cash equivalents, note and interest receivable
from related party, and other non-current assets are a reasonable estimate of
their fair value.
The fair value of the Company's long-term obligations at December 31, 1994
and 1993, approximates the carrying value because the instruments have variable
rates that, in effect, reprice the notes frequently.
The amount set out in the table above as the fair value of long-term
investment in NRI at December 31, 1994 and 1993 has been determined using the
trading price of NRI's common stock on those dates. Management is of the
opinion, however, that the fair value of this investment is not readily
determinable. The Company's investment is in the preferred stock of NRI which
is not publicly traded and, therefore, does not have an established market
price. In addition, if the Company were to convert its investment to common
stock, its investment would represent 23.3% of NRI's outstanding common stock
at December 31, 1994. It is not anticipated that the Company would be able to
sell its holdings without adversely affecting the market price of the NRI
common stock and the amount realized in the event of a sale.
In recent filings, NRI has indicated that it believes the adequacy of cash
resources and the ability to continue operations is dependent upon achieving
sales and obtaining additional capital to continue, among other things, the
development, testing and marketing of its products. On March 15, 1995, NRI sold
4,000,000 shares of common stock to a third party investor for $4,000,000.
Based in part on this capital infusion, which provides NRI funds to continue
the development, testing and marketing of its products, management believes
that continuing to carry the Company's investment in NRI at cost is
appropriate. The Company's maximum exposure on the NRI investment is the
$10,000,000 carrying value.
55
35
INDEPENDENT AUDITORS' REPORT
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
SUMMARY FINANCIAL DATA
The Board of Directors
Home Shopping Network, Inc.
We have audited the accompanying consolidated balance sheets of Home Shopping
Network, Inc. and subsidiaries as of December 31, 1994 and 1993 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the two year period ended December 31, 1994 and the four
months ended December 31, 1992. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Home Shopping
Network, Inc. and subsidiaries as of December 31, 1994 and 1993, and the
results of their operations and their cash flows for each of the years in the
two year period ended December 31, 1994 and the four months ended December 31,
1992 in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
---------------------
KPMG Peat Marwick LLP
St. Petersburg, Florida
February 15, 1995, except as to the last paragraph of Note P which
is as of March 15, 1995
The Board of Directors
Home Shopping Network, Inc.
We have audited the accompanying consolidated statements of operations,
stockholders' equity, and cash flows for the year ended August 31, 1992 of Home
Shopping Network, Inc. and subsidiaries (the "Company"). These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the Company's results of operations and its cash flows for
the year ended August 31, 1992 in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
---------------------
Deloitte & Touche LLP
Tampa, Florida
October 15, 1992
(February 15, 1995 as to
Note I to the consolidated
financial statements)
56
36
SUMMARY FINANCIAL DATA
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
SUMMARY CONSOLIDATED
STATEMENTS OF Years Ended Four Months
OPERATIONS DATA December 31, Ended Years Ended August 31,
---------------------- December 31, ----------------------------------
1994 1993 1992 1992 1991 1990
-------- -------- -------- -------- -------- --------
(In thousands, except per share data)
Net sales . . . . . . . . . . . . . . . $1,126,514 $1,046,580 $357,166 $1,097,787 $1,078,547 $1,008,272
Gross profit . . . . . . . . . . . . . 396,010 342,540(1) 124,636 406,459 389,398 374,908
Operating profit (loss) . . . . . . . . 26,879 (6,949) 17,569 82,202 64,570 (3) 74,720
Earnings (loss) before
extraordinary item . . . . . . . . . 17,701 (15,539)(2) 5,140 37,405 (9,599)(3) 32,464
Net earnings (loss) . . . . . . . . . . 16,777 (22,781) 5,140 37,293 (8,945)(3) 38,754
Earnings (loss) per common share:
Earnings (loss) before
extraordinary item . . . . . . . . . .19 (.18) .06 .42 (.11)(3) .35
Net earnings (loss) . . . . . . . . . . .18 (.26) .06 .42 (.10)(3) .42
Weighted average common
shares outstanding . . . . . . . . . 95,061 91,192 91,115 90,255 87,452 95,736
SUMMARY CONSOLIDATED
BALANCE SHEET DATA December 31, August 31,
--------------------------------- -----------------------------------
1994 1993 1992 1992 1991 1990
-------- -------- --------- ---------- --------- --------
Working capital . . . . . . . . . . . . $ 23,073 $ 8,053 $ 38,493 $ 47,004 $ 52,868 $ 98,006
Total assets . . . . . . . . . . . . . 446,499 501,143 477,913 519,670 565,036 556,236
Unsecured Revolving Credit Facility . . 25,000 -- -- -- -- --
Unsecured Senior Term Loans . . . . . . -- 85,000(4) -- -- -- --
11 3/4% Senior Notes. . . . . . . . . . -- -- 140,000(4) 153,252(4) 184,752 190,678
5 1/2% Convertible Subordinated
Debentures . . . . . . . . . . . . . -- -- 16,915 16,915 17,115 28,335
Other long-term obligations . . . . . . 2,491 1,927 2,276 2,689 3,175 6,096
Stockholders' equity . . . . . . . . . 206,443 196,554 170,149 170,329 161,839 177,481
(1) The gross profit declined to 32.7% for the year ended December 31, 1993,
from 37.0% for the fiscal year ended August 31, 1992. This was primarily
due to the liquidation of inventory at less than cost.
(2) In the fourth quarter of 1993, the Company charged $13,000,000 to other
income (expense) for the settlement of various lawsuits. See Note I.
(3) During fiscal 1991, the Company recorded $44,500,000 in pre-tax
non-recurring special charges. Additionally, the Company increased its
income tax provision $10,382,000 relating to certain adjustments proposed
by the IRS.
(4) At December 31, 1993 and 1992, and August 31, 1992, $25,000,000,
$3,200,000 and $27,500,000, respectively, was classified as current
reflecting management's ability and intent to satisfy a portion of the debt
from funds provided from operations.
57
37
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
The following table sets forth, for the quarterly periods indicated, the high
and low sales prices of the Company's common stock on the New York Stock
Exchange (Symbol: HSN).
High Low
---- ---
YEAR ENDED DECEMBER 31, 1994
Quarter ended March 31 ........................................... $15.13 $11.63
Quarter ended June 30 ............................................ 14.75 9.50
Quarter ended September 30 ....................................... 13.00 10.38
Quarter ended December 31 ........................................ 11.75 9.50
YEAR ENDED DECEMBER 31, 1993
Quarter ended November 30 ........................................ $ 6.38 $ 4.25
Quarter ended February 28 ........................................ 9.00 4.88
Quarter ended May 31.............................................. 8.63 4.13
Quarter ended June 30............................................. 12.88 7.50
Quarter ended September 30........................................ 14.75 10.63
Quarter ended December 31 ........................................ 15.38 10.50
YEAR ENDED AUGUST 31, 1992
Quarter ended November 30 ........................................ $ 7.13 $ 5.00
Quarter ended February 29 ........................................ 8.88 4.88
Quarter ended May 31.............................................. 8.63 5.25
Quarter ended August 31........................................... 6.38 5.13
The closing price per share as of March 13, 1995 was $9.00 and there were 8,710
stockholders of record as of that date.
58
38
PRICE RANGE OF COMMON STOCK
HOME SHOPPING NETWORK, INC. AND SUBSIDIARIES
The following table sets forth, for the quarterly periods indicated, the
high and low sales prices of the Company's common stock on the New York Stock
Exchange (Symbol: HSN).
High Low
------ -----
YEAR ENDED DECEMBER 31, 1994
Quarter ended March 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15.13 $11.63
Quarter ended June 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.75 9.50
Quarter ended September 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.00 10.38
Quarter ended December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.75 9.50
YEAR ENDED DECEMBER 31, 1993
Quarter ended November 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6.38 $ 4.25
Quarter ended February 28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.00 4.88
Quarter ended May 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.63 4.13
Month ended June 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.88 7.50
Quarter ended September 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.75 10.63
Quarter ended December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.38 10.50
YEAR ENDED AUGUST 31, 1992
Quarter ended November 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7.13 $ 5.00
Quarter ended February 29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.88 4.88
Quarter ended May 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.63 5.25
Quarter ended August 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.38 5.13
The closing price per share as of March 13, 1995 was $9.00 and there were
8,710 stockholders of record as of that date.
58
39
EXHIBIT 10.27
EMPLOYMENT AGREEMENT
First Amendment
HOME SHOPPING NETWORK, INC., a Delaware corporation (the
"Company") and GERALD F. HOGAN ("Executive") have entered into an employment
agreement dated as of February 23, 1993 (the "Employment Agreement"). Company
and Executive desire to clarify the intention of the Employment Agreement with
respect to the treatment of Executive's rights under Section 12 of the
Employment Agreement and modify the provisions of Section 1(g) of the
Employment Agreement.
Accordingly, pursuant to Section 14(a) of the Employment
Agreement, Company and Executive hereby agree to the following:
1. The transaction in which the Company's parent, Liberty Media
Corporation, became a wholly owned subsidiary of Tele-
Communications, Inc., a Delaware corporation, was not intended
by the parties and shall not be treated as a Change of Control
as defined in Section 1(g) of the Employment Agreement.
2. From and after August 4, 1994, Section 1(g) of the Employment
Agreement shall read as follows:
"(g) Change of Control. For purposes of
this Agreement, a "Change of Control" shall be deemed
to have occurred as of the date upon which either (x)
Tele-Communications, Inc. ("TCI", which term shall
include each of TCI's affiliates and any successor
corporation, partnership or other entity formed as a
result of or in connection with any pro rata
distribution of securities or the right to acquire
securities to the holders of securities of TCI)
ceases to be the sole "beneficial owner" (within the
meaning of Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of Voting Securities (as hereinafter
defined) having a majority of the outstanding Voting
Power (as hereinafter defined) of the Company, or (y)
there shall have been a sale or other disposition of
all or substantially all of the assets of the Company
in any transaction or series of related transactions
to a person that is not an affiliate of TCI. As used
herein, the following terms shall have the following
meanings: (i) "Voting Securities" shall mean any
securities of the Company
-1-
40
entitled, or which may be entitled, to vote on
matters submitted to stockholders generally (whether
or not entitled to vote generally in the election of
directors), or securities which are convertible into,
or exercisable or exchangeable for such Voting
Securities, whether or not subject to the passage of
time or any contingency; (ii) "Voting Power" shall
mean the number of votes available to be cast
(determined by reference to the maximum number of
votes entitled to be cast by the holders of such
Voting Securities (or by the holders of any other
Voting Securities into which such Voting Securities
may be convertible, exercisable or exchangeable for,
whichever yields the highest number of votes) upon
any matter submitted to stockholders where the
holders of all Voting Securities vote together as a
single class) by the holders of Voting Securities;
and (iii) "affiliate" shall have the meaning set
forth in Rule 13e-3(a)(1) under the Exchange Act."
IN WITNESS WHEREOF, this First Amendment has been executed
this 6th day of March, 1995 but effective as of August 4, 1994.
ATTEST: HOME SHOPPING NETWORK, INC.
/s/ H. Steven Holtzman By: /s/ Barry S. Augenbraun
-------------------------- -------------------------------
Name: H. Steven Holtzman Name: Barry S. Augenbraun
Title: Assistant Secretary Title: Executive Vice President
/s/ Gerald F. Hogan
-------------------------------
Gerald F. Hogan
-2-
41
EXHIBIT 10.30
HOME SHOPPING NETWORK, INC.
EMPLOYEE STOCK PURCHASE PLAN
1. DEFINITIONS.
(a) "Administrator" means PNC National Bank, or any successor
appointed by the Company from time to time.
(b) "Base Compensation" means any base salary, wages and overtime
pay received by a Participant.
(c) "Company" means Home Shopping Network, Inc. and its
subsidiaries.
(d) "Eligible Employee" means any person who is currently employed
by the Company or any of its subsidiaries on a regular full-time basis and has
been so employed for a period of at least 90 days prior to electing to
participate in the Plan. A person shall be considered employed on a regular
full-time basis if he or she is customarily employed at least 30 hours per
week.
(e) "Enrollment Dates" means such quarterly dates as are
prescribed by the Administrator, on which Eligible Employees may commence
participation in the Plan, and Participants may make changes to the level of
their participation.
(f) "Insider" means an Eligible Employee subject to the
requirements and restrictions of Section 16 of the Securities Exchange Act of
1934.
(g) "Participant" means any Eligible Employee who elects to
purchase Shares pursuant to the Plan.
(h) "Plan" means this Home Shopping Network, Inc. Employee Stock
Purchase Plan.
(i) "Shares" means common stock of the Company.
2. PURPOSE OF THE PLAN. The purpose of the Plan is to provide
employees of the Company with an opportunity to acquire a proprietary interest
in the Company through the purchase of Shares in the open market.
3. BASIS OF PARTICIPATION AND FOR PURCHASING SHARES.
(a) An Eligible Employee may purchase Shares through
payroll deduction by completing the Payroll Deduction Authorization Form and
such other forms as may be promulgated by the Company and delivering them to
the Company at least 10 days prior to an Enrollment Date. The Payroll
Deduction Authorization Form shall state the percentage of the Participant's
Base Compensation that he or she desires to have withheld, which percentage
shall be a whole number not less than one and not greater than 15.
42
(b) The designated percentage of compensation shall be
withheld by the Company for the next pay period after the Enrollment Date and
for each succeeding pay period until the Participant submits a Payroll
Deduction Authorization Form changing such election. Changes to the percentage
of compensation to be withheld may be made by submitting a Payroll Deduction
Authorization Form to the Company at least 10 days before any subsequent
Enrollment Date; provided, however, that a Participant may discontinue
participation in the Plan at any time, as provided in Section 9.
(c) The Company will deliver the amounts deducted from
the Participant's compensation to the Administrator, who will accumulate and
hold such funds for each Participant's account. Not less frequently than
monthly, the Administrator will use the funds accumulated to purchase Shares in
the open market for the benefit of the Participants. The purchase price for
such Shares shall be their fair market value as of the time of purchase. The
Participant shall not be charged any brokerage fees in relation to the
purchases, and he or she shall be entitled to the interest, if any, paid on
funds held for his or her account. Once funds have been withheld from the
Participant's compensation, the Participant shall have no right to obtain the
release of such funds, except in accordance with the terms of this Plan.
(d) Shares purchased by the Administrator shall be
allocated to the individual accounts established for Participants in proportion
to the respective amounts withheld for Participants' accounts. Any funds not
used for the purchase of Shares on a particular purchase date shall be carried
over to the next purchase date.
4. OWNERSHIP OF SHARES. The Shares once allocated to the
Participants' accounts become the sole property of the respective Participants.
All Shares are registered as designated by the Administrator and remain so
registered until delivery or sale is requested by the Participant pursuant to
Section 5.
5. DELIVERY; SALE.
(a) A Participant may instruct the Company to advise the
Administrator at any time to deliver to him or her a certificate for any or all
of his or her Shares, without affecting his or her continuing participation in
the Plan; provided, however, that such Participant shall pay any and all costs
associated with the issuance and delivery of such certificate.
(b) A Participant may instruct the Company to advise the
Administrator at any time to sell any or all of the Shares allocable to his or
her account, without affecting his or her continuing participation in the Plan.
The Company shall pay all charges therefor, including but not limited to
brokerage commis-
2
43
sions, transfer taxes, and registration fees. The proceeds of any such sale
shall promptly be delivered to the Participant.
6. DISTRIBUTIONS ON SHARES. Cash dividends and other cash
distributions on Shares held in the custody of the Administrator are credited
to the account of the Participant, and the Participant may take a distribution
of such dividend or distribution or request the Administrator to purchase
additional Shares of the Company. Any dividends paid in Shares or any splits
of Shares which are received by the Administrator on Shares held in custody
will be allocated to each Participant in accordance with his or her interest in
the Shares in which the dividends or splits are paid, without charge.
7. CONFIRMATION OF TRANSACTIONS AND STATEMENTS OF ACCOUNT. Each
Participant will receive from the Administrator quarterly statements of account
which itemize the transactions for his or her account, and will also receive
confirmations of current transactions if required by regulatory authorities.
8. COMMUNICATIONS FROM COMPANY AND VOTING OF SHARES. The
Administrator shall deliver to each Participant as promptly as practicable, by
mail or otherwise, all notices of meetings, proxy statements and other material
distributed by the Company to its shareholders. The Shares in each
Participant's account will be voted in accordance with the Participant's signed
proxy instructions duly delivered to the Administrator, or otherwise in
accordance with rules applicable to the Company.
9. TERMINATION OF PARTICIPATION IN PLAN.
(a) A Participant may terminate his or her participation
in the Plan at any time by delivering to the Company written notice terminating
his or her payroll deduction authorization, which will become effective as soon
as practicable after receipt.
(b) Participation in the Plan and payroll deduction
authorizations terminate automatically without notice upon death or other
termination of employment with the Company. Any funds submitted in payment for
Shares prior to termination of employment and prior to purchase of Shares shall
be promptly returned to the Participant.
10. DIRECTORS AND EXECUTIVE OFFICERS. If an Insider:
(a) Withdraws Shares from the Plan pursuant to Section
5(a),
(b) Instructs the Administrator to sell any or all of the
Shares held by the Plan for the account of such
Insider pursuant to Section 5(b), or
3
44
(c) Ceases participation in the Plan pursuant to Section
9,
then the Insider shall immediately be required to cease participation in the
Plan and shall not be permitted to renew participation in the Plan for at least
six months after the date of such withdrawal, sale or cessation of
participation.
11. ADMINISTRATION.
(a) The Company's responsibilities under the Plan will be
administered by the Compensation/Benefits Committee appointed by the Board of
Directors, which Committee has appointed the Administrator to perform certain
functions. The Compensation/Benefits Committee serves at the pleasure of the
Board of Directors. The Company reserves the right to change the designation
of the Administrator at any time. Certain conditions imposed upon brokers by
regulatory agencies could cause delay, from time to time, in the purchase of
Shares for which delay neither the Company nor the Administrator shall have any
liability.
(b) All Shares issued under the Plan will either be
appropriately registered under applicable federal and state securities laws or
issued in transactions that comply with exemptions from the securities
registration requirements of applicable federal and state laws. The
Compensation/Benefits Committee may establish procedures and restrictions in
its discretion to ensure compliance with applicable securities laws.
12. TERM OF PLAN. Unless sooner terminated as provided in Section
13, the Plan shall commence on satisfaction of the conditions of Section 15.
Notwithstanding anything in the Plan to the contrary, if (i) the Company is
merged or consolidated with another corporation, and the Company is not a
surviving corporation or (ii) the Company is liquidated or dissolved, then the
Plan shall immediately terminate and all rights to purchase stock hereunder to
the extent not then exercised shall cease and become void.
13. AMENDMENT OR TERMINATION. The Board of Directors of the
Company shall have the right to amend, modify, or terminate the Plan at any
time without notice, provided that without stockholder approval, no such
amendment of the Plan shall (i) change the price at which the Shares shall be
sold from fair market value, or (ii) change the eligibility requirements. Upon
termination, all rights to purchase Shares hereunder to the extent not then
exercised shall cease and become void.
4
45
14. NOTICES.
(a) All notices or other communications by an employee to the
Company under or in connection with the Plan shall be deemed to have been duly
given when actually received by the Administrator or when actually received in
the form specified by the Company at the locations, or by the person,
designated by the Company for the receipt thereof.
(b) All notices or other communications by the Company to
an employee under or in connection with the Plan shall be deemed to have been
duly given by the Company to the employee if hand delivered to the employee or
delivered to the employee's location of employment, or if sent by U.S. mail to
the residence or business address of the employee as reflected on the books of
the Company or to such other address as the employee may designate from time to
time by notice given in accordance with the provisions in Section 14.
15. CONDITIONS PRECEDENT TO EFFECTIVENESS. The Plan shall become
effective upon the occurrence of the following:
(a) Adoption of the Plan by the Board of Directors of the
Company;
(b) Approval of the Plan by the shareholders of the
Company; and
(c) The effective registration under applicable federal
and state securities laws of the Shares under the Plan or the receipt of an
opinion of counsel to the Company that registration of the Shares under the
Plan will not be necessary under either federal or state securities laws.
16. RIGHT TO TERMINATE EMPLOYMENT. Nothing in the Plan or any
agreement entered into pursuant to the Plan shall confer upon any Eligible
Employee or other person the right to continue in the employment of the Company
or affect any right which the Company may have to terminate the employment of
such Eligible Employee or other person.
5
46
HOME SHOPPING NETWORK, INC.
PART-TIME EMPLOYEE STOCK PURCHASE PLAN
1. DEFINITIONS.
(a) "Administrator" means PNC National Bank, or any successor
appointed by the Company from time to time.
(b) "Base Compensation" means any base salary, wages and overtime
pay received by a Participant.
(c) "Company" means Home Shopping Network, Inc. and its
subsidiaries.
(d) "Eligible Employee" means any person who is currently employed
by the Company or any of its subsidiaries on a regular part-time basis and has
been so employed for a period of at least 90 days prior to electing to
participate in the Plan. A person shall be considered employed on a regular
part-time basis if he or she is customarily employed less than 30 hours per
week.
(e) "Enrollment Dates" means such quarterly dates as are
prescribed by the Administrator, on which Eligible Employees may commence
participation in the Plan, and Participants may make changes to the level of
their participation.
(f) "Participant" means any Eligible Employee who elects to
purchase Shares pursuant to the Plan.
(g) "Plan" means this Home Shopping Network, Inc. Employee Stock
Purchase Plan.
(h) "Shares" means common stock of the Company.
2. PURPOSE OF THE PLAN. The purpose of the Plan is to provide
employees of the Company with an opportunity to acquire a proprietary interest
in the Company through the purchase of Shares in the open market.
3. BASIS OF PARTICIPATION AND FOR PURCHASING SHARES.
(a) An Eligible Employee may purchase Shares through
payroll deduction by completing the Payroll Deduction Authorization Form and
such other forms as may be promulgated by the Company and delivering them to
the Company at least 10 days prior to an Enrollment Date. The Payroll
Deduction Authorization Form shall state the percentage of the Participant's
Base Compensation that he or she desires to have withheld, which percentage
shall be a whole number not less than one and not greater than 15.
(b) The designated percentage of compensation shall be
withheld by the Company for the next pay period after the Enrollment Date and
for each succeeding pay period until the Participant submits a Payroll
Deduction Authorization Form changing such
47
election. Changes to the percentage of compensation to be withheld may be made
by submitting a Payroll Deduction Authorization Form to the Company at least 10
days before any subsequent Enrollment Date; provided, however, that a
Participant may discontinue participation in the Plan at any time, as provided
in Section 9.
(c) The Company will deliver the amounts deducted from
the Participant's compensation to the Administrator, who will accumulate and
hold such funds for each Participant's account. Not less frequently than
monthly, the Administrator will use the funds accumulated to purchase Shares in
the open market for the benefit of the Participants. The purchase price for
such Shares shall be their fair market value as of the time of purchase. The
Participant shall not be charged any brokerage fees in relation to the
purchases, and he or she shall be entitled to the interest, if any, paid on
funds held for his or her account. Once funds have been withheld from the
Participant's compensation, the Participant shall have no right to obtain the
release of such funds, except in accordance with the terms of this Plan.
(d) Shares purchased by the Administrator shall be
allocated to the individual accounts established for Participants in proportion
to the respective amounts withheld for Participants' accounts. Any funds not
used for the purchase of Shares on a particular purchase date shall be carried
over to the next purchase date.
4. OWNERSHIP OF SHARES. The Shares once allocated to the
Participants' accounts become the sole property of the respective Participants.
All Shares are registered as designated by the Administrator and remain so
registered until delivery or sale is requested by the Participant pursuant to
Section 5.
5. DELIVERY; SALE.
(a) A Participant may instruct the Company to advise the
Administrator at any time to deliver to him or her a certificate for any or all
of his or her Shares, without affecting his or her continuing participation in
the Plan; provided, however, that such Participant shall pay any and all costs
associated with the issuance and delivery of such certificate.
(b) A Participant may instruct the Company to advise the
Administrator at any time to sell any or all of the Shares allocable to his or
her account, without affecting his or her continuing participation in the Plan.
The Company shall pay all charges therefor, including but not limited to
brokerage commissions, transfer taxes, and registration fees. The proceeds of
any such sale shall promptly be delivered to the Participant.
6. DISTRIBUTIONS ON SHARES. Cash dividends and other cash
distributions on Shares held in the custody of the Administrator
2
48
are credited to the account of the Participant, and the Participant may take a
distribution of such dividend or distribution or request the Administrator to
purchase additional Shares of the Company. Any dividends paid in Shares or any
splits of Shares which are received by the Administrator on Shares held in
custody will be allocated to each Participant in accordance with his or her
interest in the Shares in which the dividends or splits are paid, without
charge.
7. CONFIRMATION OF TRANSACTIONS AND STATEMENTS OF ACCOUNT. Each
Participant will receive from the Administrator quarterly statements of account
which itemize the transactions for his or her account, and will also receive
confirmations of current transactions if required by regulatory authorities.
8. COMMUNICATIONS FROM COMPANY AND VOTING OF SHARES. The
Administrator shall deliver to each Participant as promptly as practicable, by
mail or otherwise, all notices of meetings, proxy statements and other material
distributed by the Company to its shareholders. The Shares in each
Participant's account will be voted in accordance with the Participant's signed
proxy instructions duly delivered to the Administrator, or otherwise in
accordance with rules applicable to the Company.
9. TERMINATION OF PARTICIPATION IN PLAN.
(a) A Participant may terminate his or her participation
in the Plan at any time by delivering to the Company written notice terminating
his or her payroll deduction authorization, which will become effective as soon
as practicable after receipt.
(b) Participation in the Plan and payroll deduction
authorizations terminate automatically without notice upon death or other
termination of employment with the Company. Any funds submitted in payment for
Shares prior to termination of employment and prior to purchase of Shares shall
be promptly returned to the Participant.
10. ADMINISTRATION.
(a) The Company's responsibilities under the Plan will be
administered by the Compensation/Benefits Committee appointed by the Board of
Directors, which Committee has appointed the Administrator to perform certain
functions. The Compensation/Benefits Committee serves at the pleasure of the
Board of Directors. The Company reserves the right to change the designation
of the Administrator at any time. Certain conditions imposed upon brokers by
regulatory agencies could cause delay, from time to time, in the purchase of
Shares for which delay neither the Company nor the Administrator shall have any
liability.
3
49
(b) All Shares issued under the Plan will either be
appropriately registered under applicable federal and state securities laws or
issued in transactions that comply with exemptions from the securities
registration requirements of applicable federal and state laws. The
Compensation/Benefits Committee may establish procedures and restrictions in
its discretion to ensure compliance with applicable securities laws.
11. TERM OF PLAN. Unless sooner terminated as provided in Section
12, the Plan shall commence on satisfaction of the conditions of Section 14.
Notwithstanding anything in the Plan to the contrary, if (i) the Company is
merged or consolidated with another corporation, and the Company is not a
surviving corporation or (ii) the Company is liquidated or dissolved, then the
Plan shall immediately terminate and all rights to purchase stock hereunder to
the extent not then exercised shall cease and become void.
12. AMENDMENT OR TERMINATION. The Board of Directors of the
Company shall have the right to amend, modify, or terminate the Plan at any
time without notice. Upon termination, all rights to purchase Shares hereunder
to the extent not then exercised shall cease and become void.
13. NOTICES.
(a) All notices or other communications by an employee to the
Company under or in connection with the Plan shall be deemed to have been duly
given when actually received by the Administrator or when actually received in
the form specified by the Company at the locations, or by the person,
designated by the Company for the receipt thereof.
(b) All notices or other communications by the Company to
an employee under or in connection with the Plan shall be deemed to have been
duly given by the Company to the employee if hand delivered to the employee or
delivered to the employee's location of employment, or if sent by U.S. mail to
the residence or business address of the employee as reflected on the books of
the Company or to such other address as the employee may designate from time to
time by notice given in accordance with the provisions of Section 13.
14. CONDITIONS PRECEDENT TO EFFECTIVENESS. The Plan shall become
effective upon the occurrence of the following:
(a) Adoption of the Plan by the Board of Directors of the
Company; and
(b) The effective registration under applicable federal
and state securities laws of the Shares under the Plan or the receipt of an
opinion of counsel to the Company that registration
4
50
of the Shares under the Plan will not be necessary under either federal or
state securities laws.
15. RIGHT TO TERMINATE EMPLOYMENT. Nothing in the Plan or any
agreement entered into pursuant to the Plan shall confer upon any Eligible
Employee or other person the right to continue in the employment of the Company
or affect any right which the Company may have to terminate the employment of
such Eligible Employee or other person.
5
51
EXHIBIT 10.28
************************************************************
HOME SHOPPING NETWORK, INC.,
as Borrower
HOME SHOPPING CLUB, INC.,
as Guarantor
__________
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of August 30, 1994
__________
LTCB TRUST COMPANY,
as Administrative Agent
and as Agent
__________
BANK OF MONTREAL
and
THE BANK OF NEW YORK COMPANY, INC.,
as Co-Agents
__________
THE BANKS NAMED HEREIN
************************************************************
52
TABLE OF CONTENTS
Page
Section 1. Definitions and Accounting Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Certain Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Certain Accounting Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2. Commitments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.1. Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.2. Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.3. Changes of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.4. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.5. Lending Offices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.6. Several Obligations; Remedies Independent. . . . . . . . . . . . . . . . . . . . . . . 16
2.7. Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.8. Prepayments and Conversions of Loans . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.9. Extension of Facility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3. Payments of Principal and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.1. Repayment of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.2. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4. Payments; Pro Rata Treatment; Computations, Etc. . . . . . . . . . . . . . . . . . . . 22
4.1. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.2. Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.3. Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.4. Minimum Amounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.5. Certain Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.6. Non-Receipt of Funds by the Administrative Agent . . . . . . . . . . . . . . . . . . . 25
4.7. Sharing of Payments, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 5. Yield Protection and Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.1. Additional Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.2. Limitation on Types of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.3. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.4. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.5. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6. Guarantee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.1. Unconditional Guarantee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.2. Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.3. Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.4. Subordination and Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.5. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.6. Reinstatement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
i
53
Section 7. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.1. Initial Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.2. Initial and Subsequent Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 8. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.1. Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.2. Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.3. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.4. No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.5. Corporate Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.6. Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.7. Use of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.8. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.9. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.10. Credit Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.11. Ownership of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.12. Pari Passu Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.13. Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.14. Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.15. Prepayments of Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 9. Covenants of the Company and the Guarantor . . . . . . . . . . . . . . . . . . . . . . 40
9.1. Financial Statements; Reports and Other Information. . . . . . . . . . . . . . . . . . 40
9.2. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.3. Corporate Existence, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.4. Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.5. Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.6. Mergers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.7. Dispositions of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.8. Ranking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.9. Business; Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.10. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.11 Interest Coverage Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.12. Total Debt Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.13. Consolidated Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.14. Notification of Incurrence of Debt . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.15. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.16. Ownership of Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.17. Indebtedness of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.18. Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 10. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 11. The Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
11.1. Appointment, Powers and Immunities. . . . . . . . . . . . . . . . . . . . . . . . . . 56
11.2. Reliance by the Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . 56
11.3. Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
11.4. Rights as a Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ii
54
11.5. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
11.6. Non-Reliance on Administrative Agent, Agent, Co-Agents and other Banks. . . . . . . . 58
11.7. Failure to Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
11.8. Resignation or Removal of Administrative
Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
11.9. Administrative Agent's Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
11.10. Agent and Co-Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 12. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
12.1. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
12.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
12.3. Expenses, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
12.4. Amendments, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
12.5. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
12.6. Assignments and Participation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
12.7. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
12.8. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
12.9. Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
12.10. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
12.11. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
12.12. JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
12.13. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Schedule 1: Existing Credit Agreements and Liens
Schedule 2: Calculations of Sample Financial Terms
Schedule 3: Description of Credit Card Program
Exhibit A: Form of Note
Exhibit B: Form of Opinion of Counsel to the Company and
the Guarantor
Exhibit C: Form of Compliance Certificate
Exhibit D: Form of Total Debt Ratio Notice
Exhibit E: Form of Assignment and Assumption Agreement
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55
SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of August 30,
1994 (as the same may be amended or modified from time to time, this
"Agreement"), among HOME SHOPPING NETWORK, INC., a Delaware corporation (the
"Company"); HOME SHOPPING CLUB, INC., a Delaware corporation (the "Guarantor");
each of the banks which is a signatory hereto (together with its successors
individually, a "Bank" and, collectively, the "Banks"); LTCB TRUST COMPANY, a
New York trust company, as agent (in such capacity, together with its
successors in such capacity, the "Agent"), BANK OF MONTREAL and THE BANK OF NEW
YORK COMPANY, INC. (in such capacity, together with their respective successors
in such capacity, the "Co-Agents"); and LTCB TRUST COMPANY, a New York trust
company, as Administrative Agent for the Banks (in such capacity, together with
its successors in such capacity, the "Administrative Agent").
The Company, the Guarantor, the Agent, the Co-Agents, certain banks as
"Banks", and LTCB Trust Company, as "Administrative Agent", are parties to the
Amended and Restated Credit Agreement, dated as of December 18, 1992 (as
amended, the "1992 Revolving Credit Agreement"), pursuant to which the "Banks"
(as defined therein) (hereinafter, the "Existing Banks") have made available to
the Company, under the guarantee of the Guarantor, a revolving credit facility
providing for loans in an aggregate principal amount not exceeding $40,000,000
at any one time outstanding.
The Company has requested that the revolving credit facility under the
1992 Revolving Credit Agreement be increased to $100,000,000 and that the 1992
Revolving Credit Agreement otherwise be modified as provided herein. Each of
the Existing Banks is willing to agree to such increase in the amounts and on
the terms and conditions of this Agreement, and each of the Banks other than
the Existing Banks (collectively, the "New Banks") wishes to become a party to
the 1992 Revolving Credit Agreement, as amended and restated hereby, and to
have all of the rights and obligations of "Banks" hereunder. Accordingly, the
Banks are willing to make loans to the Company, under the guarantee of the
Guarantor, in an aggregate principal amount not exceeding $100,000,000 at any
one time outstanding upon the terms and conditions hereof.
Accordingly, the parties hereto hereby agree that, effective on the
Amendment Effective Date (as hereinafter defined), the 1992 Revolving Credit
Agreement is hereby amended and restated in its entirety as follows:
Section 1. Definitions and Accounting Matters.
1.1. Certain Defined Terms. As used herein, the following terms shall
have the following meanings (all terms defined in this Section 1 or in other
provisions of this Agree-
56
ment in the singular to have the same meanings when used in the plural and vice
versa):
"Affiliate" shall mean, with respect to any Person, any other Person
(other than a Wholly-Owned Subsidiary of such Person) directly or indirectly
controlling, controlled by, or under direct or indirect common control with,
such Person. A Person shall be deemed to control another Person if such Person
(x) is an officer or director of such other Person, (y) possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such other Person, whether through the ownership of voting
securities, by contract or otherwise, or (z) directly or indirectly owns or
controls 10% or more of such other Person's capital stock.
"Amendment Effective Date" shall mean the date on which this Agreement
shall have been executed and delivered by each of the parties provision for
whose signature has been made on the signature pages hereof, and each of the
conditions precedent set forth in Section 7.1 hereof has been satisfied.
"Anniversary Date" shall mean the Fee Payment Date falling on or about
each anniversary date of this Agreement.
"Applicable Lending Office" shall mean, for each Bank and for each type
of Loan, the Lending Office of such Bank (or of an affiliate of such Bank)
designated for such type of Loan on the signature pages hereof or such other
office of such Bank (or of an affiliate of such Bank) as such Bank may from time
to time specify to the Administrative Agent and the Company as the office by
which its Loans of such type are to be made and maintained.
"Applicable Margin" shall mean, at any time: (a) with respect to LIBOR
Loans, 1.25% minus the Margin Adjustment (if any) in effect at such time; and
(b) with respect to Prime Rate Loans, 0.25% minus the Margin Adjustment (if any)
in effect at such time; provided, that in no event shall the Applicable Margin
be less than 0%.
"Bankruptcy Code" shall mean the federal Bankruptcy Code of the United
States, 11 U.S.C. Section 101 et seq.
"Business Day" shall mean any day on which commercial banks are not
authorized or required to close in New York City and dealings in Dollar deposits
are carried out in the London interbank market.
"Capital Lease" shall mean any lease or other contractual arrangement
which under GAAP has been or should be recorded as a capital lease.
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57
"Change of Control" shall mean any of the following events:
(i) the acquisition by any "person" or "group" of persons of the
"beneficial ownership" (as such terms are defined within the meaning
of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended) of outstanding shares of the Company's capital stock, or any sale
or other disposition of any of the capital stock of the Company owned by any
owner thereof, or any other event such that, after giving effect to such
acquisition, sale, disposition or other event, TCI would no longer (A) own,
directly or indirectly, or otherwise control at least 51% of the outstanding
shares of any class of the Company's common stock the approval of which is
required for any fundamental corporate action (including, without
limitation, any merger, reorganization, recapitalization, liquidation,
distribution, winding-up, sale, transfer or hypothecation of substantially
all or a substantial portion of the Company's assets), or (B) possess the
ability to elect at least a majority of the Board of Directors of the
Company; or
(ii) any person or group of persons shall acquire all or substantially
all of the assets of the Company; or
(iii) the acquisition by any "person" or "group" of persons of the
"beneficial ownership" (as such terms are defined within the meaning of
Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended)
of more than 50% of the then outstanding shares of any class of TCI's
capital stock; or
(iv) any person or group of persons shall acquire all or substantially
all of the assets of TCI.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commitment" shall mean, with respect to any Bank, the amount set forth
opposite such Bank's name on the signature pages hereof under the caption
"Commitment" (as reduced from time to time pursuant to Section 2.3 hereof or
otherwise). The "Commitments" under the 1992 Revolving Credit Agreement are
hereby terminated.
"Commitment Termination Date" shall mean (a) initially, the Fee Payment
Date falling on or immediately prior to August 30, 1997, (b) in the event that
the Administrative Agent and the Banks agree to extend the facility provided for
by this Agreement in accordance with Section 2.9 hereof, then with respect to
the Banks agreeing to any such extension, the Commitment Termination Date as so
extended, and with respect to the Banks not agreeing
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58
to such extension, the Commitment Termination Date as in effect without regard
to such extension.
"Consolidated Net Worth" shall mean, at any date, all amounts which, in
conformity with GAAP, would be included under stockholder's equity on a
consolidated balance sheet of the Company and its Subsidiaries at such time.
"Cumulative Net Income" shall mean, for any period, the sum of the net
income (but not any net loss) of the Company and its Subsidiaries (including,
without limitation, the Guarantor) on a consolidated basis for such period,
determined in accordance with GAAP, for each Fiscal Quarter falling within such
period.
"Default" shall mean an Event of Default or an event which with notice
or lapse of time or both would become an Event of Default.
"Dollars" and "$" shall mean lawful money of the United States of
America.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"ERISA Affiliate" shall mean any corporation or trade or business which
is a member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Company or the Guarantor or is under common
control (within the meaning of Section 414(c) of the Code) with the Company or
the Guarantor.
"Extension Date" shall mean, for each extension of the Commitment
Termination Date requested by the Company under Section 2.9 hereof, the
Anniversary Date falling two years prior to the Commitment Termination Date then
in effect (without regard to the requested extension) or, if more than one
Commitment Termination Date is then in effect (by reason of certain Banks having
been Dissenting Banks for any previous extension request, the Anniversary Date
falling two years prior to the latest Commitment Termination Date then in effect
(without regard to the requested extension). Accordingly, the first Extension
Date shall be the Anniversary Date on or about August 30, 1995; and each
subsequent such date shall be the corresponding Anniversary Date in the
appropriate subsequent calendar year.
"Event of Default" shall have the meaning assigned to that term in
Section 10 hereof.
"Facility Fee Rate" shall mean, for each day, the following percentage:
at any time when the Total Debt Ratio in Section 9.12 hereof is less than 2:1,
0.25%, and at any time when said Total Debt Ratio is greater than or equal to
2:1, 0.375%, in each case as set forth in the Total Debt Ratio Notice most
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recently delivered to the Administrative Agent as of such day (which Notice
shall be effective on the date of the Administrative Agent's receipt thereof in
accordance with Section 12.2 hereof), subject to adjustments as provided in
Section 3.2 hereof.
"Federal Funds Rate" shall mean, (i) for Overnight Federal Funds Rate
Loans, for any day, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100th of 1%) equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers on such day, as published by the Federal Reserve Bank
of New York on the Business Day next succeeding such day, and (ii) for Term
Federal Funds Rate Loans (if requested by the Company and agreed to by the
Administrative Agent and the Banks), for any Interest Period, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100th of 1%) equal to the
weighted average of the rates on term Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers on the first day of
such Interest Period for a period equal to such Interest Period, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day and as determined by the Administrative Agent; provided, that (x) if the day
for which such rate is to be determined is not a Business Day, the Federal Funds
Rate for such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and (y) if
such rate is not so published for any day, the Federal Funds Rate for such day
shall be the average rate charged to LTCB on such day on such transactions as
determined by the Administrative Agent.
"Federal Funds Rate Loans" shall mean Loans which bear interest at rates
based upon the Federal Funds Rate, and in any event shall be either an Overnight
Federal Funds Rate Loan or a Term Federal Funds Rate Loan.
"Fee Payment Date" shall mean the 30th day of each February, May, August
and November in each year, the first of which shall be the first such day after
the date of this Agreement; provided, that if any such day is not a Business
Day, then such Fee Payment Date shall be the next succeeding Business Day
(unless such Business Day falls in a subsequent calendar month, in which case
such Fee Payment Date shall be the next preceding Business Day).
"Fiscal Quarter" shall mean, a period of three consecutive calendar
months commencing on any of the following dates in any Fiscal Year: January 1,
April 1, July 1 and October 1.
"Fiscal Year" shall mean, for the Company, the Guarantor or any
Subsidiary, the twelve consecutive calendar month period commencing on such date
and on January 1 of each
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calendar year thereafter and ending on December 31 of such calendar year; and
"Fiscal 1994", "Fiscal 1995", and any other year so designated shall mean the
Fiscal Year ending on August 31 or December 31, as the case may be, of the
indicated calendar year.
"GAAP" shall mean generally accepted accounting principles in the United
States of America, consistently applied, as in effect (unless otherwise
specified in this Agreement) from time to time.
"Guaranteed Program" shall have the meaning assigned to that term in
Schedule 3 hereto.
"Indebtedness" shall mean, for any Person (but without duplication):
(a) all indebtedness and other obligations of such Person for
borrowed money or for the deferred purchase price of property or services
(other than trade payables incurred in the ordinary course of business and
not overdue by more than 180 days), including, without limitation, all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments;
(b) all obligations of such Person under interest rate or currency
swaps, caps, collars, floors, options, forward exchange contracts and
similar hedging arrangements;
(c) the stated amount of all letters of credit issued for the account
of such Person and (without duplication) all drafts drawn thereunder, and
the aggregate face amount of all banker's acceptances as to which such
Person is obligated, other than trade letters of credit issued for the
account of such Person in the ordinary course of business pursuant to the
terms of which (i) such Person is obligated to reimburse the issuer thereof
for any drawing thereunder on the date of such drawing and (ii) no other
credit shall be extended thereunder to such Person by such issuer;
(d) all obligations of such Person under any Capital Leases;
(e) all obligations of such Person in connection with employee benefit
or similar plans;
(f) all obligations of such Person in respect of guarantees, whether
direct or indirect (including, without limitation, agreements to "keep well"
or otherwise ensure a creditor against loss) with respect to any
indebtedness or other obligation of any other Person of the type described
in any of clauses (a) through (e) above;
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(g) all indebtedness or other obligations referred to in any of clauses
(a) through (f) above secured by any Lien upon property owned by such
Person, whether or not such Person is liable on any such obligation; and
(h) all obligations of the Company, the Guarantor or any other
Subsidiary under the Special Program and/or the Guaranteed Program (each as
defined in Schedule 3 hereto).
"Interest Expense" shall mean, for any period, all interest expense of
the Company and its consolidated Subsidiaries for such period determined in
accordance with GAAP.
"Interest Payment Date" shall mean, (i) for any Loan, the last day of
the Interest Period relating thereto, and (ii) for any Federal Funds Rate Loan
or Prime Rate Loan, the last day of any month which occurs during the Interest
Period related thereto, and in any case if such day is not a Business Day, the
next succeeding Business Day.
"Interest Period" shall mean with respect to any (1) LIBOR Loan, the
period commencing on the date such Loan is made or converted from a Loan of
another type and ending on the numerically corresponding day in the first,
second, third or sixth calendar month thereafter, as the Company may select as
provided in Section 2.2 hereof (or such period of less than one month as the
Company may select in accordance with clause (ii) or (iii) of the next paragraph
below), except that each such Interest Period which commences on the last
Business Day of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent calendar month,
(2) Overnight Federal Funds Rate Loan, each period of one Business Day, (3) Term
Federal Funds Rate Loan, the period commencing on the date such Loan is made or
converted from a Loan of another type and ending on the last day for which the
Federal Funds Rate for such Loan applies, as agreed between the Company and the
Administrative Agent with the consent of the Banks prior to the commencement of
such Interest Period and (4) Prime Rate Loan, each period commencing on the date
such Loan is made or converted from a Loan of another type and ending on the
date 30 days later.
Notwithstanding the foregoing, (i) each Interest Period which would
otherwise end on a day that is not a Business Day shall end on the next
succeeding Business Day (or if such next succeeding Business Day falls in the
next succeeding calendar month, on the next preceding Business Day); (ii) each
Interest Period which would otherwise commence before and end after any
Commitment Termination Date then in effect for any Bank shall end on such
Commitment Termination Date; (iii) if the Company selects an Interest Period
that would begin before and end after any Anniversary Date, the Administrative
Agent may notify the Company
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and the Banks that the Company must select a shorter Interest Period that will
end on or prior to such Anniversary Date, in which case such shorter period
selected by the Company shall (subject to clauses (i) and (ii) above) be the
relevant Interest Period; and (iv) the Company must select the duration of
Interest Periods so that, notwithstanding clause (i) above, no Interest Period
for LIBOR Loans shall have a duration of less than one month (except as
provided in clause (ii) or (iii) above), and so that no more than ten Interest
Periods with respect to LIBOR Loans shall be in effect at any one time.
"Investment" shall mean, for any Person, (a) the acquisition (whether
for cash, property, services or securities or otherwise) of capital stock,
bonds, notes, debentures, partnership or other ownership interests or other
securities or obligations of any other Person or any agreement to make any such
acquisition (including, without limitation, any "short sale" or any sale of any
securities at a time when such securities are not owned by the Person entering
into such short sale); (b) the making of any deposit with, or advance, or loan
or other extension of credit to, any other Person (including the purchase of
property from another Person subject to an understanding or agreement,
contingent or otherwise, to resell such property to such Person, but excluding
any such advance, loan or other extension of credit to customers of the Company
or to customers of the Company's Subsidiaries having a term not exceeding 90
days arising in the ordinary course of business); (c) the entering into of any
guarantee of, or other contingent obligation with respect to, Indebtedness or
other liability of any other Person and (without duplication) any amount
committed to be advanced, lent or extended to such person; or (d) the entering
into of any interest rate or currency swaps, caps, collars, floors, options,
forward exchange contracts and similar hedging arrangements.
"LIBOR" shall mean, with respect to any LIBOR Loan for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/16 of 1%) quoted by the London office of LTCB at approximately 11:00
a.m. London time (or as soon thereafter as practicable) or if such rate is not
quoted to LTCB, the rate per annum appearing on the display designated as page
"LIBO" on the Reuter Monitor Money Rates Service (or such other page as may
replace the LIBO page of that service for the purpose of displaying London
interbank offered rates of major banks) two Business Days prior to the first day
of such Interest Period for the offering by such office to leading banks in the
London interbank market of Dollar deposits having a term comparable to such
Interest Period and in an amount comparable to the principal amount of the LIBOR
Loan scheduled to be outstanding during such Interest Period from LTCB Trust.
"LIBOR Loans" shall mean Loans the interest rates on which are
determined on the basis of LIBOR.
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"Lien" shall mean, with respect to any asset or other property, any
mortgage, lien, pledge, charge, security interest or encumbrance of any kind in
respect of such asset or property, any agreement to grant any of the foregoing
with respect to such asset or property, and the filing of a financing statement
or similar recording in any jurisdiction with respect to such asset or
property. For all purposes hereunder, the Company, the Guarantor or any
Subsidiary shall be deemed to own subject to a Lien (i) any asset or other
property which it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such asset or property and (ii) any account
receivable transferred by it with recourse (including any such transfer subject
to a holdback or similar arrangement that effectively imposes the risk of
collectibility on the transferor).
"Loans" shall mean the loans provided for by Section 2.1 hereof.
"LTCB" shall mean The Long-Term Credit Bank of Japan, Limited, a banking
corporation duly organized and validly existing under the laws of Japan, and its
successors.
"LTCB Trust" shall mean LTCB Trust Company, a trust company duly
organized and validly existing under the laws of the State of New York, and its
successors.
"Majority Banks" shall mean Banks having not less than 51% of the
aggregate amount of the Loans outstanding, or if no Loans are then outstanding,
Banks holding not less than 51% of the Commitments then in effect, or, if no
Loans are then outstanding nor Commitments in effect, Banks which held not less
than 51% of the Commitments when most recently in effect; provided, that solely
for purposes of determining whether or not the Banks have agreed to each
requested extension of the Commitment Termination Date pursuant to Section 2.9
hereof or amendments or waivers of Section 2.9 with respect to any particular
extension, "Majority Banks" shall not include any Bank whose Commitment, by
reason of such Bank having been a Dissenting Bank for any previous extension, is
scheduled to expire or has expired at any time prior to the Commitment
Termination Date that is the subject of such extension request.
"Margin Adjustment" shall mean, at any time of determination thereof,
when the Total Debt Ratio, as set forth in the Total Debt Ratio Notice most
recently delivered to the Administrative Agent (which Notice shall be effective
on the date of the Administrative Agent's receipt thereof in accordance with
Section 12.2 hereof), is at each of the following levels, a subtraction from any
Applicable Margin, as set forth below:
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Effective Subtraction from
Total Debt Ratio Applicable Margin
---------------- -----------------
[S] [C]
Greater than or
equal to 2.50 to 1 0
Less than 2.50 to 1,
but greater than
2.00 to 1 (0.25%)
Less than 2.00 to 1
but greater than or
equal to 1.00 to 1 (0.50%)
Less than 1.00 to 1 (0.75%);
provided, that in no event shall the Margin Adjustment cause the Applicable
Margin to be less than 0%.
"Material Subsidiary" shall mean, at any time, a Subsidiary the book
value of whose tangible assets at such time exceeds 10% of the book value of the
total tangible assets of the Company and the Subsidiaries (on a consolidated
basis), but in any event shall include each of the Guarantor, HSN Fulfillment,
Inc., HSN Mail Order, Inc. and HSN Realty, Inc., each a Delaware corporation,
and their respective successors.
"Material Subsidiary Group" shall mean, at any time, a group of any two
or more Subsidiaries which at such time has a combined aggregate book value of
tangible assets in excess of 10% of the book value of the total tangible assets
of the Company and the Subsidiaries (on a consolidated basis).
"Multiemployer Plan" shall mean a plan defined as such in Section 3(37)
of ERISA to which contributions have been made by the Company or any ERISA
Affiliate and which is covered by Title IV of ERISA.
"Non-Material Subsidiary" shall mean, at any time, a Subsidiary which is
not a Material Subsidiary.
"Notes" shall mean the promissory notes provided for by Section 2.7
hereof.
"Obligations" shall mean all obligations and liabilities of the Company
to the Administrative Agent, the Agent, the Co-Agents and the Banks (or any of
the foregoing) now or in the future existing under or in connection with this
Agreement, any of the Notes or any related document (as any of the foregoing
Agreement, Notes or documents may from time to time be respectively amended,
modified, substituted, extended or renewed), direct or indirect, absolute or
contingent, due or to become due, now or hereafter existing, including without
limitation, any
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payment of principal, interest, fees or expenses due at any time under this
Agreement.
"Operating Cash Flow" shall mean, for any period, the sum of the
following for the Company and its Subsidiaries (including, without limitation,
the Guarantor) on a consolidated basis:
(a) operating profit of such Persons for such period; plus
(b) (to the extent already deducted in arriving at operating
profit) depreciation and amortization expense for such Persons for such
period; plus
(c) (to the extent already deducted in arriving at operating
profit) non-cash compensation expense related to the Company's
executive stock award program;
all as shown on the consolidated financial statements, including the
notes thereto, of the Company and its consolidated Subsidiaries for such
period. Operating Cash Flow for the four-Fiscal Quarter period ended
June 30, 1994 is as set forth in Schedule 2 hereto (subject to the
assumptions set forth therein).
"Overnight Federal Funds Rate Loan" shall mean a Loan which bears
interest at an overnight Federal Funds Rate.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" shall mean an individual, a corporation, a company, a voluntary
association, a partnership, a trust, an unincorporated organization or a
government or any agency, instrumentality or political subdivision thereof.
"Plan" shall mean an employee benefit or other plan established or
maintained by the Company or any ERISA Affiliate and which is covered by Title
IV of ERISA, other than a Multiemployer Plan.
"Post-Default Rate" shall mean a rate per annum, during the period
commencing on the date on which any Obligation is not paid in full when due
(whether at stated maturity, by acceleration or otherwise) and ending on the
date on which all such overdue Obligations are paid in full, equal to 2.00% plus
the higher of (x) the Prime Rate as in effect from time to time and (y) the
interest rate in effect from time to time for Overnight Federal Funds Rate Loans
hereunder (including the Applicable Margin in effect for such Loans at each such
time); provided that, if any such unpaid Obligation is principal of a
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LIBOR Loan or of a Term Federal Funds Rate Loan and the due date thereof is a
day other than the last day of the Interest Period therefor, the "Post-Default
Rate" for such principal shall be, for the period commencing on the due date
and ending on the last day of the then current Interest Period therefor, 2.00%
plus the interest rate for such Loan as provided in Section 3.2(a) or (b)
hereof and, thereafter, the rate otherwise provided for above in this
definition.
"Prime Rate" shall mean the rate of interest from time to time announced
by LTCB at its office in New York, New York as its prime commercial lending
rate, which rate is not necessarily the lowest rate of interest charged or
received by LTCB. Each change in the Prime Rate resulting from a change in such
prime commercial lending rate shall take effect when such prime commercial
lending rate changes.
"Prime Rate Loans" shall mean Loans which bear interest at rates based
upon the Prime Rate.
"Program" shall have the meaning assigned to that term in Schedule 3
hereto.
"Regulation A" shall mean Regulation A of the Board of Governors of the
Federal Reserve System (or any successor), as the same may be amended or
supplemented from time to time.
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System (or any successor), as the same may be amended or
supplemented from time to time.
"Regulatory Change" shall mean, with respect to any Bank, any change
after the date of this Agreement in United States Federal, state or foreign law
or regulations (including Regulation D) or the adoption or making after such
date of any interpretations, directives or requests applying to a class of banks
including such Bank of or under any United States Federal, State or foreign law
or regulations (whether or not having the force of law) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.
"SEC Report" shall mean, with respect to any Person, any document filed,
or deemed filed, at any time with the Securities and Exchange Commission (or any
successor thereto) by or on behalf of such Person and available to the public.
"Short-Term Debt" shall mean, for any Person, all Indebtedness of such
Person which would be short term debt, whether direct or contingent, under GAAP
as in effect on the date of this Agreement.
"Special Program" shall have the meaning assigned to that term in
Schedule 3 hereto.
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"Subsidiary" shall mean any corporation, partnership or other Person of
which at least a majority of the outstanding shares of capital stock or other
ownership interests ordinarily having, in the absence of contingencies, by the
terms thereof voting power to elect a majority of the board of directors or
similar governing body of such Person is at the time directly or indirectly
owned or controlled by the Company, the Guarantor or by the Company and/or the
Guarantor, and in any event shall include the Guarantor and its subsidiaries.
"Wholly-Owned Subsidiary" shall mean any Person of which all of such ownership
interests, other than directors' qualifying shares, are so owned or controlled.
"TCI" shall mean Tele-Communications, Inc., a Delaware corporation
(formerly called TCI/Liberty Holdings, Inc.).
"Term Federal Funds Rate Loan" shall mean any Federal Funds Rate Loan
other than an Overnight Federal Funds Rate Loan.
"Total Debt" shall mean, for any Person at any time, all Indebtedness of
such Person at such time (including, without limitation, all long-term senior
and subordinated Indebtedness, all Short-Term Debt, the stated amount of all
letters of credit issued for the account of such Person and (without
duplication) all unreimbursed draws thereunder), as shown on the consolidated
quarterly or annual financial statements, including the notes thereto, of the
Company delivered for such period pursuant to Section 9.1 (or referred to in
Section 8.2) hereof. Total Debt of the Company and its consolidated
Subsidiaries as at the end of the four-Fiscal Quarter period ended June 30, 1994
is as set forth on Schedule 2 hereto (subject to the assumptions set forth
therein).
"Total Debt Ratio" shall mean, at any time, the ratio of (a) Total Debt
of the Company and its consolidated Subsidiaries as at the end of the Company's
four-Fiscal Quarter period most recently ended as of such time, to (b) Operating
Cash Flow for the same period, as shown in the Total Debt Ratio Notice for such
period.
"Total Debt Ratio Notice" shall mean each notice provided for in Section
9.1(g) (or Section 7.1(f)) hereof.
1.2. Certain Accounting Matters.
(a) Unless otherwise disclosed to the Banks in writing at the
time of delivery thereof in the manner described in subsection (b) below, all
financial statements and certificates and reports as to financial matters
required to be delivered to the Administrative Agent on behalf of itself and the
Banks hereunder shall be prepared in accordance with GAAP applied on a basis
consistent with those used in the preparation of the latest financial statements
furnished to the Banks hereunder after the
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date hereof (or, prior to the delivery of the first financial statements
furnished to the Banks hereunder, used in the preparation of the audited
financial statements referred to in Section 8.2 hereof). All calculations made
for the purposes of determining compliance with the terms of Sections 9.11,
9.12 and 9.13 hereof shall, except as otherwise expressly provided herein, be
made by application of GAAP applied on a basis consistent with those used in
the preparation of the annual or quarterly financial statements then most
recently furnished to the Banks pursuant to Section 9.1 (or referred to in
Section 8.2) hereof unless (i) the Company shall have objected to determining
such compliance on such basis at the time of delivery of such financial
statements or (ii) the Majority Banks shall so object in writing within 30 days
after delivery of such financial statements, in either of which cases such
calculations shall be made on a basis consistent with those used in the
preparation of the most recent financial statements as to which such objection
shall not have been made.
(b) The Company shall deliver to the Administrative Agent, with
sufficient copies for delivery to the Banks, contemporaneously with delivery of
any annual or quarterly financial statement under Section 9.1 hereof a
description in reasonable detail of any material variation between the
application of accounting principles employed in the preparation of such
statement and the application of accounting principles employed in the
preparation of the most recently preceding annual or quarterly financial
statements as to which no objection shall have been made in accordance with the
last sentence of subsection (a) above, and reasonable estimates of the
difference between such statements arising as a consequence thereof.
Section 2. Commitments.
2.1. Loans. Each Bank severally agrees, on the terms and subject to
the conditions of this Agreement, to make Loans to the Company from time to time
during the period from and including the date hereof to but not including the
Commitment Termination Date (as from time to time in effect for such Bank) in
principal amounts not to exceed in the aggregate at any time outstanding the
amount of such Bank's Commitment as in effect from time to time. Subject to the
terms and conditions of this Agreement, during such period the Company may
borrow, repay and reborrow the amount of the Commitments by means of LIBOR
Loans, Federal Funds Rate Loans or Prime Rate Loans, and during such period the
Company may convert Loans of one type into Loans of another type (as provided in
Section 2.8 hereof); provided, that no more than ten LIBOR Loans may be
outstanding from each Bank at any time.
On the Amendment Effective Date, any loans then outstanding under the
1992 Revolving Credit Agreement shall be
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deemed to be Loans outstanding under this Agreement, and the Administrative
Agent, on behalf of the Company, is hereby authorized and directed to make a
borrowing from all of the Banks to reimburse the Existing Banks in such amounts
as may be required so that the aggregate principal amount of the loans that
were outstanding under the 1992 Revolving Credit Agreement shall be Loans held
pro rata by the Banks hereunder in accordance with their respective
Commitments.
2.2. Borrowings. The Company shall give the Administrative Agent
(which shall promptly notify the Banks) notice of each borrowing hereunder as
provided in Section 4.5 hereof. Not later than 10:00 a.m., or, in the case of a
borrowing of Overnight Federal Funds Rate Loans or Prime Rate Loans, 12:00
p.m., New York time on the date specified for each such borrowing, each Bank
shall make available the amount of the Loan to be made by it on such date to the
Administrative Agent, at account number 04203606 maintained by the
Administrative Agent with Bankers Trust Company (ABA No. 021001033), One Bankers
Trust Plaza, New York, New York 10006 (reference: "Home Shopping Network - 1994
Revolving Credit Facility"), attention: Winston Brown, in immediately available
funds. The amount so received by the Administrative Agent shall, subject to the
terms and conditions of this Agreement, be made available to the Company by
depositing the same, in immediately available funds, in an account of the
Company designated by the Company in the related notice of borrowing.
References in this Agreement to the date on which a Loan is made shall be to the
date on which funds borrowed pursuant to such Loan shall have been made
available to the Company pursuant to this Section 2.2.
2.3. Changes of Commitments. The Company shall have the right to
terminate or reduce the amount of the Commitments at any time or from time to
time; provided that (i) the Company shall give notice of each such termination
or reduction as provided in Section 4.5 hereof; (ii) each partial reduction
shall be in an aggregate amount at least equal to $5,000,000; and (iii) the
Commitments may not be reduced below the aggregate principal amount of all Loans
then outstanding. Commitments once terminated or reduced may not be reinstated.
2.4. Fees.
(a) The Company shall pay to the Administrative Agent for account of
each Bank a facility fee on the full daily amount of such Bank's outstanding
Commitment (whether or not utilized), for each day during the period from and
including the date of this Agreement to and including the earlier of the date
such Commitment is terminated or the day prior to the Commitment Termination
Date for such Bank, at a rate per annum equal to the Facility Fee Rate for such
day (subject to Section 3.2 hereof); provided, however, that no such fee shall
be payable to any Bank with respect to the portion (if any) of such Bank's
Commitment
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corresponding to the principal amount of Loans which such Bank shall not have
made in accordance with (i) a notice of borrowing properly and timely given and
(ii) the terms and conditions of this Agreement, and with respect to which all
conditions precedent thereto shall have been satisfied. All outstanding
accrued facility fees of each Bank shall be due and payable on each Fee Payment
Date and on the earlier of the date the Commitment of such Bank is terminated
or the Commitment Termination Date for such Bank.
(b) The Company shall pay to the Administrative Agent for its own
account an annual Agency Fee in the amount and at the times set forth in the fee
letter, dated July 15, 1994, among the Company, the Guarantor and the
Administrative Agent.
2.5. Lending Offices. The Loans made by each Bank shall be made and
maintained at such Bank's Applicable Lending Office for Loans of such type.
2.6. Several Obligations; Remedies Independent. The failure of any
Bank to make any Loan to be made by it on the date specified therefor shall not
relieve any other Bank of its obligation to make its Loan on such date, but no
Bank shall be responsible for the failure of any other Bank to make a Loan to be
made by such other Bank. The amounts payable by the Company or the Guarantor at
any time hereunder and under the Notes to each Bank shall be a separate and
independent debt and each Bank shall be entitled to protect and enforce its
rights arising out of this Agreement and the Notes, and it shall not be
necessary for any other Bank, the Agent, either Co-Agent or the Administrative
Agent to consent to, or be joined as an additional party in, any proceedings for
such purposes.
2.7. Notes.
(a) The Loans made by each Bank shall be evidenced by a single
promissory note of the Company in substantially the form of Exhibit A hereto,
dated the date of this Agreement, payable to the order of such Bank in a
principal amount equal to the amount of its Commitment as originally in effect
and otherwise duly completed. Each Loan made by each Bank, and all payments and
prepayments made on account of the principal thereof, and all conversions of
such Loans, shall be recorded by such Bank on its books and, prior to any
transfer of the Note held by it, endorsed by such Bank on the schedule attached
to such Note or any continuation thereof; provided, that no failure by any Bank
to make such recording or endorsement shall affect the obligations of the
Company or the Guarantor under this Agreement to such Bank or the holder of such
Note.
(b) Each Bank shall be entitled to have its Note subdivided or
reissued in connection with an assignment of all or
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any portion of its Commitment, Loans and Note pursuant to Section 12.6(b)
hereof.
2.8. Prepayments and Conversions of Loans. The Company shall have the
right to prepay Loans, or to convert Loans of one type into Loans of another
type, at any time or from time to time, it being understood that any such
conversion constitutes the simultaneous repayment of a Loan in accordance with
Section 3.1 hereof and the making of a new Loan in accordance with Section 2.1
hereof; provided, that (a) the Company shall give the Administrative Agent
notice of each such prepayment or conversion as provided in Section 4.5 hereof;
(b) Loans may be prepaid or converted only on the last day of an Interest Period
for such Loans; (c) prepayments and conversions of Loans shall be subject to the
indemnity provisions of Section 5.4 hereof.
2.9. Extension of Facility. The Company shall be entitled to request,
by written notice to be given to the Administrative Agent not less than 45 days
prior to any Extension Date (of which request the Administrative Agent shall
promptly notify the Banks), that the Commitment Termination Date then in effect
be extended for a period of one year to the Fee Payment Date that is one year
after such Commitment Termination Date and:
(i) if all the Banks having Commitments that are scheduled to
terminate on such Commitment Termination Date shall have notified
the Administrative Agent that they agree to such request by not later
than the date (the "Cut-Off Date") 15 days prior to such Extension Date,
the definition of "Commitment Termination Date" in Section 1.1 shall, so
long as no Default shall have occurred and be continuing on such
Extension Date, be extended to the Fee Payment Date which is one year
beyond the date that would otherwise have been the Commitment
Termination Date;
(ii) if such notifications are not received from the Majority
Banks or if the Administrative Agent does not so agree, then no such
extension shall be made, and the facility provided for hereunder shall
terminate on the then scheduled Commitment Termination Date (or Dates)
then in effect; and
(iii) if such notifications are not received from all such Banks,
but are received from a Bank or Banks ("Assenting Banks") whose
Commitments constitute not less than 51 percent of the aggregate
Commitments (scheduled to terminate on the Commitment Termination Date
that is requested to be extended) at such time and from the
Administrative Agent, the Commitments of the Bank or Banks ("Dissenting
Banks") who do not so notify shall be reduced to zero on the Commitment
Termination Date then in effect and, solely for purposes of the
Administrative Agent and the Assenting Banks (and the obligations of the
Company and the
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Guarantor with respect thereto), the Commitment Termination Date shall
be extended as provided in clause (i) above in respect of the
Assenting Banks provided that no Default shall have occurred and be
continuing on such Extension Date.
Each of the Banks and the Administrative Agent agrees to use its
reasonable efforts to timely respond (either to consent or to withhold consent)
to a request to extend the Commitment Termination Date pursuant to this Section
2.9 on or before the relevant Cut-Off Date. If the Administrative Agent or any
Bank fails to timely respond in accordance with the previous sentence, the
Administrative Agent or such Bank, as the case may be, shall be deemed to have
rejected such request.
In the event that clause (iii) above of this Section 2.9 is
applicable, the following additional provisions shall apply:
(1) If, at any time after the Cut-Off Date for any extension
but prior to the corresponding Extension Date (15 days later), any
Dissenting Bank notifies the Administrative Agent that it has changed
its decision and that it agrees to the requested extension, the
Administrative Agent may, with the consent of the Company (which
consent shall not be unreasonably withheld), include or not include
such Bank as an Assenting Bank in the proposed extension, and if
such Bank is included as an Assenting Bank and if the provisions of
clause (i) or (iii) of this Section 2.9 become effective, the
Commitment of such Bank shall not be reduced to zero as provided in
clause (iii).
(2) At any time during the period commencing on the Cut-Off
Date for any extension pursuant to Section 2.9(i) to but not
including the Commitment Termination Date as then in effect for the
Dissenting Banks for such Cut-Off Date (without regard to any
extension thereof) (the "Replacement Period," such period being
approximately two years plus 15 days), the Company may give a written
request to the Administrative Agent (each such request a "Commitment
Reinstatement Request") requesting that the Administrative Agent
assist the Company in arranging with any financial institution or
institutions (which may or may not be a Bank hereunder at such time)
selected by the Company to assume that portion of the Commitments of
all of the Dissenting Banks for such extension (the "Available
Commitment Interests") as the Company may request in such Commitment
Reinstatement Request.
If the Administrative Agent receives a Commitment Reinstatement
Request on or prior to the last day of such Replacement Period,
the Administrative Agent may, but shall not be obligated to, assist
the Company in making such
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arrangements. If any financial institution or institutions agree to
assume any portion of the Available Commitment Interests (each such
institution being called a "Replacement Bank") on or prior to the last
day of such Replacement Period, the Administrative Agent shall
allocate the portion of the Available Commitment Interests to be so
assumed pro rata among the Commitments and Loans of all Dissenting
Banks for such Replacement Period. Each such Dissenting Bank hereby
agrees, immediately upon request therefor by the Administrative Agent
and in any event on the last day of an Interest Period and no later
than the last day of such Replacement Period, to assign to such
Replacement Bank the portion of its Commitment and outstanding Loans
so allocated for a purchase price equal to the principal amount of
each such Loan plus all accrued interest thereon to the date of
purchase. Such assignment shall be effected by the execution and
delivery to the Administrative Agent of an Assignment and Assumption
Agreement substantially in the form of Exhibit E hereto. Upon
execution and delivery of an Assignment and Assumption Agreement by
the Dissenting Banks and each Replacement Bank and the effectiveness
thereof as provided therein, such Replacement Bank shall be treated as
a "Bank" for all purposes of this Agreement and, without limiting the
foregoing, shall perform all of the obligations, and be entitled to
the full benefit, of this Agreement to the same extent as if it were
an original party to this Agreement in respect of the rights and/or
obligations assigned or transferred to it. Solely for the purposes of
determining the rights and obligations of any Replacement Bank with
respect to the portion of the Commitments so assigned to it, each
Dissenting Bank shall, upon the effectiveness of each such assignment,
be deemed to have assented to the previously proposed extension of the
Commitment Termination Date pursuant to this Section 2.9.
The giving of any Commitment Reinstatement Request shall
constitute the Company's and the Guarantor's authorization to the
Administrative Agent to effect the transactions contemplated thereby,
and no revocation thereof shall be effective unless received by the
Administrative Agent from the Company at least five Business Days
prior to the effectiveness of any assignment arranged by the
Administrative Agent in response to such Commitment Reinstatement
Request. Each request or notice from the Company under this Section
2.9, and each action taken by the Administrative Agent in response to
such request or notice, shall bind the Guarantor.
It is expressly agreed that the Administrative Agent and each
Bank may from time to time grant or withhold its consent to any extension of the
Commitment Termination Date at its sole discretion and based on such criteria
and subject to such terms or conditions as the Administrative Agent or such
Bank may deem
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appropriate at the time; provided that amendments to the terms and conditions
of this Agreement shall require the prior consent of the Company, the Guarantor
and some or all of the Banks, as provided in Section 12.4 hereof. Nothing in
this Agreement or any related document shall be construed to constitute a
commitment by the Administrative Agent or any Bank to effect any such
extension, and none of the Administrative Agent, the Agent, either Co-Agent or
any Bank shall be liable to the Company, the Guarantor or any other Person for
any consequences arising from the failure to effect any such extension.
Section 3. Payments of Principal and Interest.
3.1. Repayment of Loans. The Company shall pay to the
Administrative Agent for account of each Bank (i) the principal of each of such
Bank's Loans on the last day of the Interest Period for such Loan and (ii) on
the Commitment Termination Date for each Bank, the principal then outstanding
of all Loans of such Bank.
3.2. Interest. The Company shall pay to the Administrative Agent
for account of each Bank interest on the unpaid principal amount of each Loan
made by such Bank for the period commencing on the date of such Loan to but
excluding the date such Loan shall be paid in full, at the following rates per
annum:
(a) during such periods as such Loan is a LIBOR Loan, for
each Interest Period relating thereto, the LIBOR for such Loan for such
Interest Period plus the Applicable Margin in effect for each day during
such Interest Period; and
(b) during such periods as such Loan is a Federal Funds Rate
Loan, for each Interest Period relating thereto, the Federal Funds Rate
(as in effect for such Interest Period) plus 1.75% per annum;
(c) during such periods as such Loan is a Prime Rate Loan,
for each Interest Period relating thereto, the Prime Rate (as in effect
for such Interest Period) plus the Applicable Margin in effect for each
day during such Interest Period.
Notwithstanding the foregoing, at any time during the period commencing on the
date on which any Obligation is not paid in full when due (whether at stated
maturity, by acceleration or otherwise) and ending on the date on which all
such overdue Obligations are paid in full, the Company shall pay to the
Administrative Agent for account of each Bank interest on the principal of all
Loans and (to the fullest extent permitted by law) on any unpaid interest or
any other amount payable by the
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Company hereunder or under the Note held by such Bank at the Post-Default Rate.
Accrued interest on each Loan shall be payable (i) on each Interest
Payment Date for such Loan and (ii) in any case, on the date on which any
principal amount thereof is paid or prepaid or converted to a Loan of another
type on the portion thereof being so paid, prepaid or converted, except that
interest on any principal, interest or other amount payable at the Post-Default
Rate shall be payable from time to time on demand.
If the Company shall fail to timely deliver a Total Debt Ratio Notice
in respect of any four-Fiscal Quarter period in accordance with Section 9.1(g)
hereof, and it transpires that the Total Debt Ratio has changed from that which
was in effect with respect to the previous four-Fiscal Quarter period such that
any interest rate or Facility Fee Rate hereunder would increase, the Company
agrees that the interest rate on the Loans shall, by operation of the
definition of Applicable Margin, and the Facility Fee Rate shall, by operation
of the definition thereof, automatically increase on the date such Total Debt
Ratio Notice is duly given in accordance with Section 12.2 hereof. In
addition, (i) such increase shall be retroactive to the date on which such
Total Debt Ratio Notice should have been delivered in accordance with Section
9.1(g) hereof and (ii) the incremental interest or facility fee for the
retroactive period shall be payable on the next date on which interest or
facility fee is payable under this Agreement and the Notes (or, if no further
interest or facility fee is payable, immediately on demand by the
Administrative Agent or any Bank). If the Company shall fail to timely deliver
a Total Debt Ratio Notice in respect of any four-Fiscal Quarter period, and it
transpires that the Total Debt Ratio has changed from that which was in effect
with respect to the previous four-Fiscal Quarter period such that any interest
rate or facility fee hereunder would decrease, then such decrease shall be
effective from the date on which such Total Debt Ratio Notice is received by
the Administrative Agent, and shall have no retroactive effect.
No provision of this Agreement or the Notes or any other document
delivered in connection with either thereof and no transaction contemplated
hereby or thereby shall be construed or shall operate so as to require the
Company, the Guarantor or any other Person liable for payment of any of the
Obligations to pay interest in an amount or at a rate greater than the maximum
allowed from time to time by applicable law. Should any interest or other
charges paid by the Company, the Guarantor or any such other Person under any
such document result in a computation or earning of interest in excess of the
maximum rate of interest permitted under applicable law in effect while such
interest is being earned, then such excess shall be and hereby is waived by
each Bank and all such excess shall be automatically credited against and in
reduction of the principal balance of such amounts
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payable under such documents and any portion of such excess received by any
Bank shall be paid over by such Bank to the Company, the Guarantor or such
other Person, as the case may be, it being the intent of the parties hereto
that under no circumstances shall the Company, the Guarantor or such other
Person be required to pay interest in excess of the maximum rate allowed by
such applicable law.
Section 4. Payments; Pro Rata Treatment; Computations, Etc.
4.1. Payments. Except to the extent otherwise provided
herein, all payments of Obligations shall be made in Dollars, in immediately
available funds and without set-off, counterclaim or deduction of any kind, to
the Administrative Agent at account number 04203606 maintained by the
Administrative Agent at Bankers Trust Company (ABA No. 021001033), One Bankers
Trust Plaza, New York, New York 10006 (reference: "Home Shopping Network -
1994 Revolving Credit Facility"), attention: Winston Brown (or at such other
account or at such other place or in such other manner as the Administrative
Agent may notify the Company from time to time), not later than 11:00 a.m. New
York time on the date on which such payment shall become due (each such payment
made after such time on such due date to be deemed to have been made on the
next succeeding Business Day). Any Bank for whose account any such payment is
to be made may (but shall not be obligated to) debit the amount of any such
payment which is not made by such time to any ordinary deposit account of the
Company or the Guarantor with such Bank or any affiliate of such Bank (with
subsequent notice to the Company or the Guarantor, as the case may be,
provided, that such Bank's failure to give such notice shall not affect the
validity of such debit). The Company or the Guarantor, as the case may be,
shall at the time of making a payment under this Agreement or any Note specify
to the Administrative Agent (i) the account from which the payment funds will
be transmitted and the manner and approximate time of such transmission and
(ii) the Loans or other amounts payable by the Company hereunder to which such
payment shall be applied, and in the event that it shall have failed so to
specify, or if an Event of Default shall have occurred and be continuing, the
Administrative Agent may distribute such payment to the Banks in such manner as
it or the Majority Banks may deem appropriate, subject to Section 4.2 hereof.
Each payment received by the Administrative Agent under this Agreement
or any Note for account of a Bank shall be paid promptly to such Bank, in
immediately available funds, for account of such Bank's Applicable Lending
Office for the Loan in respect of which such payment is made.
If the due date of any payment to be made hereunder or under any Note
would otherwise fall on a day which is not a
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Business Day, such date shall be extended to the next succeeding Business Day
and interest shall be payable for any principal so extended for the period of
such extension.
4.2. Pro Rata Treatment. Except to the extent otherwise
provided herein:
(a) each borrowing from the Banks under Section 2.1
hereof shall be made from the Banks, each payment of facility fee
under Section 2.4 hereof shall be made for account of the Banks and
each termination or reduction of the amount of the Commitments under
Section 2.3 hereof shall be applied to the Commitments of the Banks,
pro rata according to the amounts of their respective unused
Commitments;
(b) each conversion of Loans of a particular type (other
than conversions provided for by Section 5.1 hereof) shall be made pro
rata among the Banks holding Loans of such type according to the
respective principal amounts of such Loans held by such Banks; and
(c) each payment and prepayment by the Company of
principal of or interest on Loans of a particular type shall be made
to the Administrative Agent for account of the Banks holding Loans of
such type pro rata in accordance with the respective unpaid principal
amounts of such Loans held by such Banks.
4.3. Computations. Interest on all Loans and the facility
fee shall be computed on the basis of a year of 360 days and actual days
elapsed (including the first day but excluding the last day) occurring in the
period for which payable.
4.4. Minimum Amounts. Except for conversions or
prepayments made pursuant to Section 5.1 hereof, each borrowing, conversion and
prepayment of principal of Loans shall be in an aggregate amount at least equal
to $5,000,000, provided, that borrowings, prepayments or conversions of or into
Loans of different types or, in the case of LIBOR Loans, having different
Interest Periods, at the same time hereunder shall each be deemed separate
borrowings, conversions or prepayments, as the case may be. Notwithstanding
anything in this Agreement to the contrary, the aggregate principal amount of
LIBOR Loans having the same Interest Period shall be at least equal to
$5,000,000 and, if any LIBOR Loans would otherwise be in a lesser principal
amount for any period, such Loans shall be Prime Rate Loans during such period.
4.5. Certain Notices. Notices by the Company to the
Administrative Agent of terminations or reductions of Commitments, of
borrowings, conversions and prepayments of Loans and of the duration of
Interest Periods shall be irrevocable and
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shall be effective only if received by the Administrative Agent not later than
10:00 a.m. New York time on the number of Business Days prior to the date of
the relevant termination, reduction, borrowing, conversion or prepayment or the
first day of such Interest Period specified below:
Number of
Business
Notice Days Prior
Termination or reduction of Commitments 10
Borrowing of Overnight Federal Funds Rate Loans; or conversion of Term Federal Funds Rate Loans
or Prime Rate Loans into Overnight Federal Funds Rate Loans same day
Borrowing or prepayment of LIBOR Loans; conversion of LIBOR Loans into any other type of Loans;
conversion of any type of Loans into LIBOR Loans; or duration of Interest Period for LIBOR
Loans 3
Borrowing or prepayment of Term Federal Funds Rate Loans; conversion of any type of Loans into
Term Federal Funds Rate Loans; or duration of Interest Period for Term Federal Funds Rate Loans 3
Borrowing or prepayment of Prime Rate Loans; or conversion of Federal Funds Rate Loans into
Prime Rate Loans same day
In addition:
(a) Each such notice of termination or reduction shall
specify the amount of the Commitments to be terminated or reduced.
(b) Each such notice of borrowing, conversion or
prepayment shall specify the Loans to be borrowed, converted or
prepaid and the amount (subject to Section 4.4 hereof) and type of the
Loans to be borrowed, converted or prepaid and the date of borrowing,
conversion or prepayment (which shall be a Business Day).
(c) Each such notice of the duration of an Interest
Period shall specify the Loans to which such Interest Period is to
relate.
The Administrative Agent shall promptly notify the Banks of
the contents of each such notice.
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In the event that the Company fails to select the duration of any
Interest Period for any LIBOR Loans or Term Federal Funds Rate Loans within
the time period and otherwise as provided in this Section 4.5, or if the
Company and the Administrative Agent with the consent of the Banks fail to
agree upon a term for any requested Term Federal Funds Rate Loans, such Loans
(if outstanding as LIBOR Loans) will, subject to the terms and conditions of
this Agreement, be automatically converted into Overnight Federal Funds Rate
Loans on the last day of the then current Interest Period for such Loans or (if
outstanding as Overnight Federal Funds Rate Loans or Prime Rate Loans) will
remain as Overnight Federal Funds Rate Loans or Prime Rate Loans, as the case
may be, or (if not then outstanding) will be made as Overnight Federal Funds
Rate Loans.
4.6 Non-Receipt of Funds by the Administrative Agent. Unless the
Administrative Agent shall have been notified by a Bank or the Company or the
Guarantor prior to the date on which such Bank or the Company or the Guarantor
is scheduled to make payment to the Administrative Agent of (in the case of a
Bank) the proceeds of a Loan to be made by it hereunder or (in the case of the
Company or the Guarantor) a payment to the Administrative Agent for account of
one or more of the Banks hereunder (such payment being herein called the
"Required Payment"), which notice shall be effective upon receipt, that it does
not intend to make the Required Payment to the Administrative Agent, the
Administrative Agent may assume that the Required Payment has been made and
may, in reliance upon such assumption (but shall not be required to), make the
amount thereof available to the intended recipient(s) on such date and, if such
Bank or the Company or the Guarantor (as the case may be) has not in fact made
the Required Payment to the Administrative Agent, the recipient(s) of such
payment shall, on demand, repay to the Administrative Agent the amount so made
available together with interest thereon in respect of each day during the
period commencing on the date such amount was so made available by the
Administrative Agent until the date the Administrative Agent recovers such
amount at a rate per annum equal to the Overnight Federal Funds Rate for such
day (as determined by the Administrative Agent) for the first three days and
thereafter (1) at the Prime Rate in effect from time to time in the case of
payments to be recovered from any Bank, and (2) at the Post-Default Rate in the
case of payments to be recovered from the Company or the Guarantor.
4.7 Sharing of Payments, Etc. Each of the Company and the
Guarantor agrees that, in addition to (and without limitation of) any right of
setoff, bankers' lien or counterclaim a Bank may otherwise have, each Bank
shall be entitled, at its option, to offset balances held by it in ordinary
deposit accounts of the Company or the Guarantor at any of its offices, in
Dollars or in any other currency, against any principal of or interest on any
of such Bank's Loans, or any other amount payable to such Bank hereunder, which
is not paid when due (regardless of whether such
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balances are then due to the Company or the Guarantor), in which case it shall
promptly notify the Company or the Guarantor, as the case may be, and the
Administrative Agent thereof, provided that such Bank's failure to give such
notice shall not affect the validity thereof. If any Bank shall obtain payment
of any principal of or interest on any Loan made by it to the Company, or any
other amount payable to such Bank, under this Agreement through the exercise of
any right of setoff, banker's lien or counterclaim or similar right or
otherwise, and, as a result of such payment, such Bank shall have received a
greater percentage of the principal, interest or such other amount then due
hereunder by the Company to such Bank than the percentage received by any other
Banks, it shall promptly purchase from such other Banks participations in (or,
if and to the extent specified by such Bank, direct interests in) the Loans
made by such other Banks (or in interest due thereon, as the case may be) in
such amounts, and make such other adjustments from time to time as shall be
equitable, to the end that all the Banks shall share the benefit of such excess
payment (net of any expenses which may be incurred by such Bank in obtaining or
preserving such excess payment) pro rata in accordance with the unpaid
principal and/or interest on the Loans held by each of the Banks or such other
amount due to the Banks hereunder. To such end all the Banks shall make
appropriate adjustments among themselves (by the resale of participations sold
or otherwise) if such payment is rescinded or must otherwise be restored. Each
of the Company and the Guarantor agrees that any Bank so purchasing a
participation (or direct interest) in the Loans made by other Banks (or in
interest due thereon, as the case may be) may exercise all rights of setoff,
bankers' lien, counterclaim or similar rights with respect to such
participation as fully as if such Bank were a direct holder of Loans in the
amount of such participation. Nothing contained herein shall require any Bank
to exercise any such right or shall affect the right of any Bank to exercise,
and retain the benefits of exercising, any such right with respect to any other
indebtedness or obligation of the Company or the Guarantor; provided that to
the extent any such Bank exercises any such right with respect to any other
indebtedness or obligation of the Company or the Guarantor, it shall also
exercise its rights under this Section 4.7 and agrees that the benefits of
exercising any such rights shall be shared with the Banks pro rata in the
proportion that the unpaid obligations of the Company and the Guarantor owing
to such Bank hereunder bear to such other indebtedness or obligation. If under
any applicable bankruptcy, insolvency or other similar law, any Bank receives a
secured claim in lieu of a setoff to which this Section 4.7 applies, such Bank
shall, to the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Banks entitled
under this Section 4.7 to share in the benefits of any recovery on such secured
claim.
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Section 5. Yield Protection and Illegality.
5.1 Additional Costs.
(a) The Company shall pay directly to each Bank from time to time
such amounts as such Bank may determine to be necessary to compensate it for
any costs which such Bank determines are attributable to its making or
maintaining of any LIBOR Loans to the Company or its obligation to make any
LIBOR Loans to the Company hereunder, or any reduction in any amount receivable
by the Bank hereunder in respect of any of such Loans or such obligation (such
increases in costs and reductions in amounts receivable being herein called
"Additional Costs"), resulting from any Regulatory Change which (i) changes the
basis of taxation of any amounts payable to such Bank by the Company or the
Guarantor under this Agreement or the Notes in respect of any of such Loans
(other than taxes imposed on the overall net income of such Bank or of its
Applicable Lending Office for any of such Loans by the jurisdiction in which
such Bank has its principal office or such Applicable Lending Office); or (ii)
imposes or modifies any reserve, special deposit, minimum capital, capital
ratio or similar requirements relating to any extensions of credit or other
assets of, or any deposits with or other liabilities of, such Bank (including
any of such Loans or any deposits referred to in the definition of "LIBOR" in
Section 1.1 hereof), or the Commitment of such Bank; or (iii) imposes any other
condition affecting this Agreement or the Notes (or any of such extensions of
credit or liabilities) or the Commitments.
(b) Without limiting the effect of the provisions of Section 5.1
(a) hereof, in the event that, by reason of any Regulatory Change, any Bank
either (i) incurs Additional Costs based on or measured by the excess above a
specified level of the amount of a category of deposits or other liabilities
of such Bank which includes deposits by reference to which the interest rate
on LIBOR Loans is determined as provided in this Agreement or a category of
extensions of credit or other assets of such Bank which includes LIBOR Loans
or (ii) becomes subject to restrictions on the amount of such a category of
liabilities or assets which it may hold, then, if such Bank so elects by
notice to the Company, the obligation of such Bank to make, and to convert
Federal Funds Rate Loans or Prime Rate Loans into, LIBOR Loans hereunder shall
be suspended until such Regulatory Change ceases to be in effect (and all
LIBOR Loans held by such Bank shall be automatically converted into Overnight
Federal Funds Rate Loans at the end of the then current Interest Period for
each of them, or on such earlier date as such Bank may specify in writing as
being the last permissible date for such prepayment under applicable law,
rules or regulations); provided, that in such event such Bank shall use its
best efforts to obtain a Federal Funds Rate offered for deposits made for a
period of time longer than overnight (to the extent such a rate is then
obtainable), but any failure to obtain such a rate shall in no
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way affect the rights of the Banks to receive interest on such Loans at the
Federal Funds Rate otherwise obtainable.
(c) Without limiting the effect of the foregoing provisions of
this Section 5.1 (but without duplication), the Company shall pay to each Bank
from time to time on request such amounts as such Bank may determine to be
necessary to compensate such Bank for any costs which it determines are
attributable to the maintenance by such Bank (or any Applicable Lending
Office), pursuant to any law or regulation or any interpretation, directive or
request (whether or not having the force of law) of any court or governmental
or monetary authority, of capital in respect of such Bank's Commitment (such
compensation to include, without limitation, an amount equal to any reduction
of the rate of return on assets or equity of such Bank (or any Applicable
Lending Office) to a level below that which such Bank (or any Applicable
Lending Office) could have achieved but for such law, regulation,
interpretation, directive or request).
(d) Determinations and allocations by any Bank for purposes of
this Section 5.1 of the effect of any Regulatory Change pursuant to Section
5.1(a) or (b) hereof, or of the effect of capital maintained pursuant to
Section 5.1(c) hereof, on its costs or rate of return of maintaining Loans
or its obligation to make Loans, or on amounts receivable by it in respect of
Loans, and of the amounts required to compensate such Bank under this Section
5.1, shall be conclusive absent manifest error.
5.2. Limitation on Types of Loans. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of any interest
rate for any LIBOR Loan for any Interest Period therefor:
(a) the Administrative Agent determines (which
determination shall be conclusive) that quotations of interest rates for
the deposits referred to in the definition of "LIBOR" in Section 1.1
hereof are not being provided in the relevant amounts or for the relevant
maturities for purposes of determining rates of interest for such Loans as
provided herein; or
(b) any Bank determines (which determination shall be conclusive),
and so notifies the Administrative Agent, that the rates of interest
referred to in the definition of "LIBOR" in Section 1.1 hereof upon the
basis of which the rate of interest for LIBOR Loans for such Interest
Period is to be determined do not adequately cover the cost to such Bank of
making or maintaining such LIBOR Loans for such Interest Period;
then the Administrative Agent shall give the Company prompt notice thereof, and
so long as such condition remains in effect, the Banks shall be under no
obligation to make additional LIBOR
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Loans or to convert Federal Funds Rate Loans or Prime Rate Loans into LIBOR
Loans and the Company shall, on the last day(s) of the then current Interest
Period(s) for the outstanding LIBOR Loans, either repay such Loans as provided
in Section 3.1 hereof or convert such Loans into Federal Funds Rate Loans or
Prime Rate Loans in accordance with Section 2.8 hereof.
5.3. Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Bank or its Applicable
Lending Office to honor its obligation to make or maintain LIBOR Loans
hereunder, then such Bank shall promptly notify the Administrative Agent and
the Company and such Bank's obligation to make LIBOR Loans shall be suspended
until such time (prior to the Commitment Termination Date) as such Bank may
again make and maintain LIBOR Loans and such Bank's outstanding LIBOR Loans
shall be automatically converted into Federal Funds Rate Loans or Prime Rate
Loans, as such Bank may select, at the end of the then current Interest Period
for each of them, or on such earlier date as such Bank may specify in writing
as being the last permissible date for such prepayment under applicable laws,
rules or regulations.
5.4. Compensation. The Company shall pay to each Bank, upon the
request of such Bank, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Bank) to compensate it for any loss, cost or expense
(including, without limitation, costs arising from premature termination of
such Bank's obligations under interest rate swaps, caps, collars, floors,
options, forward exchange contracts and similar hedging arrangements) which
such Bank determines are attributable to:
(a) any payment, prepayment or conversion of a Loan for any reason
(including, without limitation, the acceleration of the Loans pursuant to
Section 10 hereof) on a date other than the last day of an Interest Period
for such Loan; or
(b) any failure by the Company for any reason (including, without
limitation, the failure of any of the conditions precedent specified in
Section 7 hereof to be satisfied) to borrow or convert into a LIBOR Loan or
a Term Federal Funds Rate Loan on the date for such borrowing or conversion
specified in the relevant notice of borrowing given pursuant to Section 2.2
hereof or notice of conversion given pursuant to Section 2.8 hereof.
Such Bank shall deliver to the Company, promptly upon such request, a
certificate setting forth in reasonable detail the basis for calculation of
such amounts, the contents of such certificate being, in the absence of
manifest error therein, conclusive evidence of such amounts; provided, that the
failure of such Bank to deliver such certificate shall in no way affect such
Bank's rights to such compensation. The failure of any Bank
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to request the compensation provided for in this Section 5.4 in any instance
shall not affect such rights of such Bank in any other instance or of any other
such Bank in any instance.
5.5. Taxes. All payments of Obligations (as used in this Section
5.5, "Payments") shall be made free and clear of, and without deduction by
reason of, any and all taxes, duties, assessments, withholdings, retentions or
other similar charges whatsoever imposed, levied, collected, withheld or
assessed by any jurisdiction or any agency or taxing authority thereof or
therein (as used in this Section 5.5, "Taxes"), all of which shall be paid by
the Company for its own account not later than the date when due. If the
Company is required by law to deduct or withhold any Taxes from any Payment,
the Company shall: (a) make such deduction or withholding; (b) pay the amount
so deducted or withheld to the appropriate taxing authority not later than the
date when due (irrespective of the rate of such deduction or withholding); (c)
deliver to such Bank, promptly and in any event within 30 days after the date
on which such Taxes become due, original tax receipts and other evidence
satisfactory to such Bank of the payment when due of the full amount of such
Taxes; and (d) pay to the respective Bank, forthwith upon any request by such
Bank therefor from time to time, such additional amounts as may be necessary so
that such Bank receives, free and clear of all Taxes, the full amount of such
Payment stated to be due under this Agreement or the Notes as if no such
deduction or withholding had been made.
Each Bank that is not organized under the laws of the United States or
of any political subdivision thereof agrees that it will deliver to the Company
on the date of its initial Loan and thereafter as may be required from time to
time by applicable law or regulation United States Internal Revenue Service
Form 4224 or 1001 (or any successor form) or such other form as from time to
time may be required to demonstrate that payments made by the Company to such
Bank under this Agreement or such Note either are exempt from United States
Federal withholding taxes or are payable at a reduced rate (if any) specified
in any applicable tax treaty or convention.
Each Bank agrees to use reasonable efforts to transfer its Commitment
or Loans to another Applicable Lending Office of such Bank if such transfer
would avoid the need for or mitigate the amount of any deduction or withholding
of Taxes on payments of interest to such Bank under this Agreement thereafter,
but no Bank shall be required to make such transfer if such Bank determines
that such Bank would suffer any legal, economic or regulatory disadvantage.
Without limiting the survival of any other provisions of this
Agreement or the Notes, the obligations of the Company under this Section shall
survive the repayment of the Loans and the Notes.
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Section 6. Guarantee.
6.1 Unconditional Guarantee. For valuable consideration, receipt
of which is hereby acknowledged, and to induce the Banks to make Loans to the
Company, the Guarantor hereby unconditionally and irrevocably guarantees to the
Administrative Agent, the Agent, each of the Co-Agents and each of the Banks
the payment in full when due (whether at stated maturity, by acceleration or
otherwise) of all principal of and interest on each Loan and all other amounts
payable by the Company hereunder and under the Notes and all other documents
referred to herein or therein, in accordance with the terms hereof and thereof,
and, in the case of any extension of time of payment, in whole or in part, that
all such amounts shall be paid in full when due (whether at stated maturity, by
acceleration or otherwise) in accordance with the terms of such extension. The
Guarantor hereby unconditionally agrees that upon default in the payment when
due (whether at stated maturity, by acceleration or otherwise) of any of such
principal, interest or other amounts, the Guarantor shall forthwith pay and
perform the same in the money and funds, at the time, in the place and in the
manner provided for such payment in this Agreement, the Notes or other
applicable document.
6.2. Validity. The Guarantor hereby agrees that the guarantee
provided by this Section 6 is a continuing guarantee of payment and not merely
of collection, that it is a primary, independent obligation of the Guarantor
and that the Guarantor's obligations hereunder shall be absolute, unconditional
and irrevocable, irrespective of (a) any invalidity, illegality, irregularity
or unenforceability of, or defect in or any change in this Agreement, the Notes
or any other document referred to herein or therein, (b) any amendment,
modification or waiver of any term or condition of this Agreement or the Notes
or any such other document, or any waiver or consent by the Administrative
Agent or any Bank to any departure from the terms hereof or thereof, (c) any
sale, exchange, release, surrender, realization upon or other dealings with any
security or guarantee for any of the obligations guaranteed hereby (whether now
or hereafter granted), (d) any settlement or compromise of such obligations,
(e) the absence of any action to demand or enforce any of such obligations
against the Company, (f) the recovery of any judgment against the Company or
any other Person, or any action to enforce the same, (g) the recovery of any
claim under any other guarantee of or security for such obligations or under
any applicable insurance, or (h) any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a guarantor or surety
(other than full and strict compliance with and satisfaction of such
liabilities).
6.3. Waivers. The Guarantor hereby waives notice of acceptance of
the guarantee provided by this Section 6, notice of
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the extension of any credit or financial accommodation, notice of the making of
any Loan or the incurrence of any other Obligations, notice of any extension of
any Commitment Termination Date, demand of payment, filing of claims with a
court in the event of bankruptcy of the Company or any other Person, any right
to require a proceeding or the filing of a claim first against the Company, any
other guarantor, any other Person, any letter of credit, or any security for
any of the Obligations, presentment, protest, notice of default, dishonor or
nonpayment and any other notice and all demands whatsoever. The Guarantor
hereby further waives all setoffs and counterclaims against the Company, the
Administrative Agent, the Agent, each of the Co-Agents and each of the Banks.
6.4. Subordination and Subrogation. The Guarantor hereby
subordinates all present and future claims, now held or hereafter acquired,
against the Company as a creditor or contributor of capital, or otherwise, to
the prior and final payment in full to the Banks of all of the Obligations. If,
without reference to the provisions of this Section 6.4, the Guarantor would at
any time be or become entitled to receive any payment on account of any claim
against the Company, whether in insolvency, bankruptcy, liquidation or
reorganization proceedings, or otherwise, the Guarantor shall and does hereby
irrevocably direct that all such payments shall be made directly to the
Administrative Agent on account of the Banks until all Obligations shall be
paid in full. Should the Guarantor receive any such payment, the Guarantor
shall receive such amount in trust for the Banks and shall immediately pay over
to the Administrative Agent such amount as provided in the preceding sentence.
Anything contained in this Section 6 to the contrary notwithstanding,
the obligations of the Guarantor hereunder shall be limited to a maximum
aggregate amount equal to the largest amount that would not render its
obligations hereunder subject to avoidance as a fraudulent transfer or
conveyance under Section 548 of Title 11 of the United States Code or any
applicable provisions of comparable state law (collectively, the "Fraudulent
Transfer Laws"), in each case after giving effect to all other liabilities of
the Guarantor, contingent or otherwise, that are relevant under the Fraudulent
Transfer Laws (specifically excluding, however, any liabilities of the
Guarantor in respect of intercompany indebtedness to the Company or other
Affiliates of the Company to the extent that such indebtedness would be
discharged in an amount equal to the amount paid by the Guarantor hereunder)
and after giving effect as assets to the value (as determined under the
applicable provisions of the Fraudulent Transfer Laws) of any rights to
subrogation or contribution of the Guarantor pursuant to (i) applicable law or
(ii) any agreement providing for an equitable allocation among the Guarantor
and other Affiliates of Company of obligations arising under guaranties by such
parties.
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The Guarantor further agrees that any rights of subrogation the
Guarantor may have against the Company, and any rights of contribution the
Guarantor may have against Company, and any rights of contribution the
Guarantor may have against any other guarantor of the Obligations hereunder,
shall be junior and subordinate to any rights the Administrative Agent or the
Banks may have against such other guarantor.
6.5 Acceleration. The Guarantor agrees that, as between the
Company on the one hand, and the Administrative Agent, the Agent, the Co-Agents
and the Banks, on the other hand, the obligations of the Company guaranteed
under this Section 6 may be declared to be forthwith due and payable, or may be
deemed automatically to have been accelerated, as provided in Section 10 hereof
for purposes of this Section 6, notwithstanding any stay, injunction or other
prohibition (whether in a bankruptcy proceeding affecting the Company or
otherwise) preventing such declaration as against the Company and that, in the
event of such declaration or automatic acceleration, such obligations (whether
or not due and payable by the Company) shall forthwith become due and payable
by the Guarantor for purposes of this Section 6.
6.6. Reinstatement. The Guarantor covenants that the guarantee
provided by this Section 6 will not be discharged except by complete and final
payment of all of the Obligations and all obligations of the Guarantor arising
out of this guarantee. In the event that any payment is made by the Company
hereunder or by the Guarantor under this guarantee, and is thereafter required
to be rescinded or otherwise restored or paid over to the Company, the
Guarantor or any other person (whether upon the insolvency or bankruptcy of the
Company or the Guarantor or otherwise), the Guarantor's obligations hereunder
shall immediately and automatically be reinstated as though such payment had
not been made.
Section 7. Conditions Precedent.
7.1 Initial Loan. The occurrence of the Amendment Effective Date,
the accession of each New Bank to this Agreement and the obligation of the
Banks to make the initial Loans hereunder are subject to the receipt by the
Administrative Agent, on or before September 2, 1994, of each of the following
documents, each of which shall be satisfactory to the Administrative Agent in
form and substance:
(a) Certified copies of the certificate of incorporation and
bylaws of the Company and the Guarantor and all corporate action and (if
necessary) stockholder action taken by the Company and the Guarantor
approving this Agreement and the Notes and borrowings by the Company
hereunder and the guarantee by the Guarantor hereunder (including, without
limitation, a certificate setting forth the resolutions of
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the Boards of Directors of the Company and the Guarantor
adopted in respect of the transactions contemplated hereby).
(b) A certificate of each of the Company and the Guarantor in
respect of each of the officers (i) who is authorized to sign this
Agreement or the Notes on its behalf and (ii) who will, until replaced by
another officer or officers duly authorized for that purpose, act as its
representative for the purposes of signing documents and giving notices
and other communications in connection with this Agreement and the
transactions contemplated hereby. The Administrative Agent, the Agent,
the Co-Agents and the Banks may conclusively rely on such certificate
until the Administrative Agent receives notice in writing from the Company
or the Guarantor, respectively, to the contrary.
(c) Certificates, as of a recent date, from the appropriate
authorities for each jurisdiction in which the Company and the Guarantor
are incorporated or qualified to do business, as to the good standing of
the Company and the Guarantor, respectively, in each such jurisdiction.
(d) A certificate of a senior officer of each of the Company and
the Guarantor to the effect set forth in the first sentence of Section 7.2
hereof.
(e) An opinion of H. Steven Holtzman, Esq., Senior Counsel to the
Company and the Guarantor, substantially in the form of Exhibit B hereto.
(f) The Total Debt Ratio Notice for the Company's four-Fiscal
Quarter period ended June 30, 1994 (or, if the initial Loans hereunder are
made more than 60 days after the end of any succeeding Fiscal Quarter, for
the four-Fiscal Quarter period ended as of the end of the most recent such
succeeding Fiscal Quarter).
(g) The Notes, dated the date hereof and duly executed and
delivered by the Company to the order of each Bank and otherwise
appropriately completed, bearing the executed guarantee of the Guarantor.
(h) Evidence of the payment of all fees and expenses then payable
pursuant to Sections 2.4 and 12.3 hereof and all other fees theretofore
agreed between the Company and the Administrative Agent.
(i) Such other documents as the Administrative Agent or any Bank
may reasonably request including, without limitation, all requisite
governmental approvals and filings.
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Upon the occurrence of the Amendment Effective Date, (i) each of the promissory
notes heretofore delivered to the Existing Banks as "Banks" under the 1992
Revolving Credit Agreement shall be deemed to be amended and restated in their
entirety by the Notes delivered pursuant to Section 2.7(a) hereof (except with
respect to any unpaid amounts incurred under the 1992 Revolving Credit
Agreement prior to the Amendment Effective Date, as to which such promissory
notes shall remain in full force and effect), and (ii) the obligations (if any)
of the Agent, the Co-Agents, the Administrative Agent or the Banks under the
commitment letter and term sheet, dated July 15, 1994, of LTCB Trust, shall
cease to be of any force or effect.
7.2 Initial and Subsequent Loans. The obligation of the Banks to
make each Loan to the Company (including the initial Loans) and the occurrence
of the Amendment Effective Date shall be subject to the further conditions
that, as of the date of the making of such Loans and after giving effect
thereto (and also as of the Amendment Effective Date):
(a) no Default or Event of Default shall have occurred and be
continuing;
(b) the representations and warranties made by the Company and the
Guarantor in Section 8 hereof and in any other certificate or other
document delivered in connection with this Agreement shall be true in all
material respects on and as of the date of the making of such Loans (and
the Amendment Effective Date) with the same force and effect as if made on
and as of such date (including, without limitation, that there shall have
occurred no material adverse change since December 31, 1993 in the
consolidated financial condition or operations, or the business taken as a
whole, of the Company and its consolidated Subsidiaries from that set forth
in their financial statements dated as of December 31, 1993, except as
disclosed to the Banks in writing prior to the date of this Agreement);
(c) the Company shall be in compliance with the financial
covenants in this Agreement both before and immediately after the making of
such Loan on both an historical and a pro forma basis; and
(d) the Company shall have paid in full all fees and expenses
payable pursuant to Sections 2.4 and 12.3 hereof.
Each notice of borrowing made pursuant to Section 2.2 hereof shall constitute a
certification by the Company and the Guarantor as to the circumstances
specified in paragraphs (a), (b) and (c) above (both as of the date of such
notice and, unless the Company or the Guarantor otherwise notifies the
Administrative Agent prior to the date of such borrowing, as of the date of
such borrowing).
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Section 8. Representations and Warranties. Each of the Company
and the Guarantor represents and warrants to the Administrative Agent and the
Banks that:
8.1. Corporate Existence. Each of the Company and the Guarantor
and each of the other Material Subsidiaries (a) is a corporation duly organized
and validly existing under the laws of the jurisdiction of its incorporation;
(b) has all requisite corporate power, and has all material governmental
licenses, authorizations, consents and approvals, necessary to own its assets
and carry on its business as presently conducted, and conducts its business in
compliance with the requirements set forth in Section 9.3(b) hereof; and (c) is
qualified to do business in all jurisdictions in which the nature of the
business conducted by it makes such qualification necessary and where failure
so to qualify would have a material adverse effect on its business, financial
condition or operations.
8.2. Financial Condition. The consolidated balance sheet of the
Company and its consolidated Subsidiaries (including, without limitation, the
Guarantor) as at December 31, 1993 and the related consolidated statements of
income, retained earnings and changes in financial position of the Company and
its consolidated Subsidiaries (including, without limitation, the Guarantor)
for the Fiscal Year ended on such date, with the opinion thereon of KPMG Peat
Marwick, the independent auditors of the Company, and the unaudited
consolidated balance sheet of the Company and its consolidated Subsidiaries
(including, without limitation, the Guarantor) as at June 30, 1994 and the
related consolidated statements of income, retained earnings and changes in
financial position for the two-Fiscal Quarter period ended on such date, each
of which has been heretofore furnished to the Administrative Agent and each of
the Banks, are complete and correct and fairly present the consolidated
financial condition of the Company and its consolidated Subsidiaries
(including, without limitation, the Guarantor) as at such dates and the
consolidated results of their operations for such Fiscal Year or period, as the
case may be, ended on such dates, all in accordance with GAAP applied on a
consistent basis. Neither the Company nor any of its consolidated Subsidiaries
(including, without limitation, the Guarantor) had on either such date any
material contingent liabilities, liabilities for taxes, unusual forward or
long-term commitments or unrealized or anticipated losses from any unfavorable
commitments, except as referred to or reflected or provided for in such balance
sheets as at such dates. Since December 31, 1993, there has been no material
adverse change in the consolidated financial condition or operations, or the
business taken as a whole, of the Company and its consolidated Subsidiaries
(including, without limitation, the Guarantor) from that set forth in such
financial statements as at such date.
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8.3 Litigation. Except as heretofore disclosed to the Banks in
writing or in any SEC Report of the Company delivered to the Banks prior to the
date hereof, there is no action, proceeding or investigation by or before any
court or any arbitral, governmental or regulatory authority or agency, pending
or (to the knowledge of the Company or the Guarantor) threatened against the
Company or the Guarantor or any Subsidiary of either thereof which, if
adversely determined, could have a material adverse effect on the consolidated
financial condition or business of the Company and its consolidated
Subsidiaries (including, without limitation, the Guarantor).
8.4 No Breach. Neither the execution and delivery of this
Agreement and the Notes, nor the consummation of the transactions contemplated
hereby, nor the compliance by the Company or the Guarantor with the terms and
provisions hereof or thereof, will (a) conflict with or result in a breach of,
or require any consent or vote of any Person under, the certificate of
incorporation or bylaws of either the Company or the Guarantor, or any
agreement or instrument to which the Company, the Guarantor or any Subsidiary
of either thereof is a party or to which it is subject, (b) violate any
applicable law, regulation, order, writ, injunction or decree of any court or
governmental authority or agency, or (c) constitute a default or result in the
imposition of any Lien on any of the assets, revenues or other properties of
the Company, the Guarantor or any Subsidiary of either thereof under any such
agreement or instrument.
8.5 Corporate Action. The execution, delivery and performance by
each of the Company and the Guarantor of this Agreement and the Notes, and the
consummation of the transactions contemplated hereby, are within the scope of
its corporate power, and have been duly authorized by all necessary corporate
action on the part of each of them. This Agreement constitutes, and each of
the Notes, when duly executed and delivered will constitute, the legal, valid
and binding obligation of the Company and the Guarantor, enforceable against
each of them in accordance with their respective terms, except as such
enforceability may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or other similar laws of general applicability affecting the
enforcement of creditors' rights and (b) the application of general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
8.6 Approvals. No authorizations, approvals or consents of, and
no filings or registrations with, any governmental or regulatory authority or
agency are necessary for the execution, delivery or performance by the Company
or the Guarantor of this Agreement or the Notes or for the validity or
enforceability thereof, or for the consummation of the transactions
contemplated hereby.
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8.7 Use of Loans. Neither the Company, the Guarantor nor any
Subsidiary of either of them is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose, whether
immediate, incidental or ultimate, of buying or carrying margin stock (within
the meaning of Regulation U or X of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan will be used to buy or
carry any margin stock.
8.8 ERISA. Each of the Company and the Guarantor and the ERISA
Affiliates have fulfilled its obligations under the minimum funding standards
of ERISA and the Code with respect to each Plan, are in compliance in all
material respects with the presently applicable provisions of ERISA and the
Code and have not incurred any liability to the PBGC or any Plan or
Multiemployer Plan.
8.9 Taxes. (a) United States Federal income tax returns of the
Company, the Guarantor and the Subsidiaries have been examined and closed
through Fiscal 1985, have been examined for Fiscal 1986, 1987, 1988 and 1989
and are under examination for Fiscal 1990 and Fiscal 1991. (b) Each of the
Company, the Guarantor and the Subsidiaries has filed all United States Federal
income tax returns and all other material tax returns which are required to be
filed by it and has paid all taxes due pursuant to such returns or pursuant to
any assessment received by the Company, the Guarantor or any Subsidiary. The
charges, accruals and reserves on the books of the Company, the Guarantor and
the Subsidiaries in respect of taxes and other governmental charges are, in the
opinion of the Company and the Guarantor, adequate.
8.10 Credit Agreements. Schedule 1 hereto and all SEC Reports of
the Company completely and correctly disclose each credit agreement, loan
agreement, indenture, purchase agreement, guarantee or other arrangement
providing for or otherwise relating to any extension of credit or commitment
for any extension of credit (other than pursuant to any letter of credit
excepted from the definition of Indebtedness herein under paragraph (c)
thereof) to, or guarantee by, the Company, the Guarantor or any other Material
Subsidiary the aggregate principal or face amount of which equals or exceeds
(or may equal or exceed) $10,000,000 and accurately describes the aggregate
principal or face amount outstanding and which may become outstanding under
each thereof.
8.11 Ownership of Assets. Each of the Company, the Guarantor and
each other Material Subsidiary has good and marketable title to all assets
reflected on the audited consolidated balance sheet as of December 31, 1993
referred to in Section 8.2 hereof, subject to:
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(a) no Liens other than the Liens specified in Footnotes D and G
to such balance sheet and, on the date hereof, such additional Liens as are
listed on Schedule 1 hereto, and on any date hereafter, additional Liens
permitted by Section 9.5 hereof and either (i) listed in Footnotes to the
financial statements delivered pursuant to Section 9.1(a) or (b) hereof or
(ii) otherwise communicated to the Banks in writing, and
(b) on any date hereafter, dispositions permitted by Section 9.7
hereof and either (i) described in the financial statements, including any
notes thereto, delivered pursuant to Section 9.1(a) or (b) hereof or (ii)
otherwise communicated to the Banks in writing.
8.12 Pari Passu Obligations. The obligations of the Company and
the Guarantor under this Agreement and the Notes rank and will rank at least
pari passu in all respects with all other unsubordinated Indebtedness of the
Company and the Guarantor, respectively, except for Indebtedness that is senior
solely by operation of applicable law, and except that Indebtedness of the
Company and the Guarantor secured as permitted by Section 9.5 hereof ranks
senior in right of security with respect to the collateral therefor.
8.13 Investment Company Act. Neither the Company nor the Guarantor
is, and neither is "controlled by", an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
8.14 Environmental Matters. To the best of the knowledge of the
Company and the Guarantor, all operations and conditions at or in the premises
in which the Company and the Guarantor conduct their business comply in all
material respects with all Federal, state and local laws, rules and regulations
relating to environmental matters, pollution, waste disposal or industrial
hygiene including, without limitation, such laws, rules and regulations
relating to asbestos (collectively, "Environmental Laws"). None of the
operations of either the Company or the Guarantor is subject to any judicial or
administrative proceeding alleging the violation of or liability under any
Environmental Law.
8.15 Prepayments of Debt. All of the Silver King Notes (as defined
in the 1992 Revolving Credit Agreement as in effect prior to the Amendment
Effective Date) have been prepaid in full together with all interest accrued
thereon and all other amounts that may be or become payable in connection
therewith, and the Company has prepaid in full the principal amount of all
loans under the Term Loan Agreement and the 1993 Term Loan Agreement (each as
defined in the 1992 Revolving Credit Agreement as in effect prior to the
Amendment Effective Date) together with interest accrued thereon to the date of
prepayment and all other
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amounts that may be or become payable under said Term Loan Agreement and 1993
Term Loan Agreement.
Section 9. Covenants of the Company and the Guarantor. Each of
the Company and the Guarantor agrees that, so long as any of the Commitments
are in effect and until payment in full of all Obligations:
9.1 Financial Statements; Reports and Other Information. The
Company shall deliver to the Administrative Agent, with sufficient copies for
each of the Banks:
(a) as soon as available and in any event within 60 days after the
end of each of the first three Fiscal Quarters of each Fiscal Year of the
Company, consolidated statements of income, retained earnings and changes
in financial position of the Company and its consolidated Subsidiaries
(including, without limitation, the Guarantor) for such period and for the
period from the beginning of such Fiscal Year to the end of such period,
and the related consolidated balance sheet as at the end of such period,
setting forth in each case in comparative form the corresponding figures
for the corresponding period in the preceding Fiscal Year, accompanied by a
certificate of a senior financial officer of the Company, which certificate
shall state that such financial statements fairly present the consolidated
financial condition and results of operations of the Company and its
consolidated Subsidiaries in accordance with GAAP, consistently applied, as
at the end of, and for, such period (subject to normal year-end audit
adjustments);
(b) as soon as available and in any event within 120 days after
the end of each Fiscal Year of the Company, consolidated statements of
income, retained earnings and changes in financial position of the Company
and its consolidated Subsidiaries (including, without limitation, the
Guarantor) for such year and the related consolidated balance sheet as at
the end of such year, setting forth in each case in comparative form the
corresponding figures for the preceding Fiscal Year, and accompanied by an
opinion thereon of independent certified public accountants of recognized
national standing, which opinion shall state that such financial statements
fairly present the consolidated financial condition and results of
operations of the Company and its consolidated Subsidiaries (including,
without limitation, the Guarantor) as at the end of, and for, such Fiscal
Year, and a certificate of a senior financial officer of the Company that,
in examining the financial condition of the Company and its Subsidiaries
for such Fiscal Year, he or she obtained no knowledge, except as
specifically stated, of any Default arising from the breach of the
covenants
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provided for in Sections 9.4, 9.6, 9.7, 9.11, 9.12, 9.13, 9.17 or 9.18
hereof;
(c) promptly upon their becoming available, copies of all
registration statements and regular SEC Reports, if any, which the Company
shall have filed with the Securities and Exchange Commission (or any
governmental agency substituted therefor) or any national securities
exchange;
(d) promptly upon the mailing thereof to the shareholders of the
Company generally, copies of all financial statements, reports and proxy
statements so mailed;
(e) as soon as possible, and in any event within ten days after
either the Company or the Guarantor knows or has reason to know that any of
the events or conditions specified below with respect to any Plan or
Multiemployer Plan has occurred or exists, a statement signed by a senior
financial officer of the Company or the Guarantor setting forth details
respecting such event or condition and the action, if any, which the
Company, the Guarantor or their ERISA Affiliate proposes to take with
respect thereto (and a copy of any report or notice required to be filed
with or given to PBGC by the Company, the Guarantor or an ERISA Affiliate
with respect to such event or condition):
(i) any reportable event, as defined in Section 4043(b) of
ERISA and the regulations issued thereunder, with respect to a Plan, as to
which PBGC has not by regulation waived the requirement of Section 4043(a)
of ERISA that it be notified within 30 days of the occurrence of such event
(provided that a failure to meet the minimum funding standard of Section
412 of the Code or Section 302 of ERISA shall be a reportable event
regardless of the issuance of any waivers in accordance with Section 412(d)
of the Code);
(ii) the filing under Section 4041 of ERISA of a notice of
intent to terminate any Plan or the termination of any Plan;
(iii) the institution by PBGC of proceedings under Section
4042 of ERISA for the termination of, or the appointment of a trustee
to administer, any Plan, or the receipt by the Company or any ERISA
Affiliate of a notice from a Multiemployer Plan that such action has
been taken by PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal by the Company, the
Guarantor or any ERISA Affiliate under Section 4201 or 4204 of ERISA
from a Multiemployer
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Plan, or the receipt by the Company, the Guarantor or any ERISA
Affiliate of notice from a Multiemployer Plan that is in
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA
or that it intends to terminate or has terminated under Section 4041A
of ERISA; and
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against the Company, the Guarantor or any ERISA
Affiliate to enforce Section 515 of ERISA, which proceeding is not
dismissed within 30 days;
(f) promptly after either the Company or the Guarantor knows or
has reason to know that any Default has occurred, a notice of such Default,
describing the same in reasonable detail;
(g) not later than (i) 60 days after the last day of each of the
first three Fiscal Quarters of each of the Company's Fiscal Years and (ii)
120 days after the last Fiscal Quarter of each such Fiscal Year, a notice,
substantially in the form of Exhibit D hereto (the " Total Debt Ratio
Notice"), setting forth the Total Debt Ratio for the four-Fiscal Quarter
period ended on the last day of such Fiscal Quarter, which notice shall set
forth calculations and computations in sufficient detail to show the amount
and nature of each of the components of the Total Debt Ratio for such
four-Fiscal Quarter period; provided, that in the case of the Total Debt
Ratio Notice delivered with respect to each Fiscal Quarter specified in
clause (ii) above, the Company shall (if the final form of either of such
Notices is not yet available) deliver such Notice in a preliminary form
within 60 days of the end of such Fiscal Quarter setting forth all matters
required by this paragraph (g) to be included in the final form thereof as
accurately as shall be possible based upon information available to the
Company at such time; and
(h) from time to time such other information regarding the
business or financial condition of the Company or any of the Subsidiaries
(including, without limitation, any Plan or Multiemployer Plan and any
reports or other information required to be filed under ERISA) as any Bank
or the Administrative Agent may reasonably request.
Each of the Company and the Guarantor will furnish to the Administrative Agent,
with sufficient copies for the Banks, at the time it furnishes each set of
financial statements pursuant to paragraph (a) or (b) above, a certificate of a
senior financial officer of the Company and the Guarantor, substanti-
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ally in the form of Exhibit C hereto (i) to the effect that, to the best of his
or her knowledge, after full inquiry, no Default has occurred and is continuing
(or, if any Default has occurred and is continuing, describing the same in
reasonable detail), (ii) setting forth in reasonable detail the computations
necessary to determine whether the Company and the Guarantor are in compliance
with Sections 9.11, 9.12 and 9.13 hereof as at the end of the respective Fiscal
Quarter or Fiscal Year and (iii) setting forth additions to the list of
Subsidiaries that are Material Subsidiaries contained in the certificate most
recently delivered pursuant to this provision and containing either (A) a
representation that all other Subsidiaries combined do not constitute a
Material Subsidiary Group as at such date or (B) a representation that all
other Subsidiaries do constitute a Material Subsidiary Group as at such date
and identifying any such Subsidiary whose aggregate book value of tangible
assets exceeds $10,000,000 as at such date. In addition, each of the Company
and the Guarantor hereby agrees to furnish the Administrative Agent with an
updated notice with respect to the information specified in clause (iii) of the
preceding sentence upon the occurrence of any event either that has resulted or
could result in a Subsidiary becoming a Material Subsidiary or a group of
Subsidiaries becoming a Material Subsidiary Group or that could make the
representation contained in the most recently delivered certificate furnished
pursuant to this Section 9.1 no longer accurate.
9.2. Litigation. Without limiting the obligations of the Company
under Section 9.1(h) hereof, each of the Company and the Guarantor shall
promptly give to each Bank notice of all court or arbitral proceedings and
investigations, and of all proceedings and investigations before any
governmental or regulatory authority or agency, affecting the Company, the
Guarantor or any Subsidiary, except proceedings or investigations which, if
adversely determined, would not have a material adverse effect on the
consolidated financial condition or operations, or the business taken as a
whole, of the Company and its consolidated Subsidiaries (including, without
limitation, the Guarantor).
9.3. Corporate Existence, Etc. Each of the Company and the
Guarantor will, and will cause each of their respective Subsidiaries (but in
the case of paragraphs (a), (d) and (e) of this Section 9.3, only those
Subsidiaries which are Material Subsidiaries) to:
(a) preserve and maintain its corporate existence and all of its
material rights, privileges, licenses and franchises;
(b) comply with the requirements of all applicable laws, rules,
regulations and orders of governmental or
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regulatory authorities if failure to comply with such requirements
would materially and adversely affect the consolidated financial condition
or operations, or the business taken as a whole, of the Company and its
consolidated Subsidiaries;
(c) pay and discharge all taxes, assessments and governmental
charges or levies imposed on it or on its income or profits or on any of
its property prior to the date on which penalties attach thereto, except
for any such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and against which
adequate reserves are being maintained in accordance with GAAP;
(d) maintain all of its properties used or useful in its business
in good working order and condition, ordinary wear and tear excepted;
(e) permit representatives of any Bank or the Administrative
Agent, during normal business hours, to examine, copy and make extracts
from its books and records, to inspect its properties, and to discuss its
business and financial condition with its officers, all to the extent
reasonably requested by such Bank or the Administrative Agent (as the case
may be); and
(f) keep insured by financially sound and reputable insurers all
property of a character usually insured by corporations engaged in the same
or similar business similarly situated against loss or damage of the kinds
and in the amounts customarily insured against by such corporations and
carry such other insurance as is usually carried by such corporations.
9.4. Payment of Obligations. Without limiting the obligations of
the Company and the Guarantor under Section 9.3 hereof, each of the Company and
the Guarantor will, and will cause each of their respective Subsidiaries to,
pay and discharge at or before the date when due, all of their respective
material obligations and other liabilities, including, without limitation, tax
and pension liabilities, except where such obligations or liabilities are being
contested in good faith and by appropriate proceedings, and maintain, in
accordance with GAAP, appropriate reserves for the accrual of all of the
foregoing.
9.5. Liens. Neither the Company nor the Guarantor will, nor will
either of them permit any of their respective Subsidiaries to, create, incur,
assume or suffer to exist any Lien on any asset, revenue or other property now
or hereafter owned or acquired by it (including, without limitation, the
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stock of Subsidiaries at the time of disposition thereof as permitted by
Section 9.7 hereof) except:
(a) Liens existing on the date hereof securing Indebtedness
outstanding on such date and identified in Footnotes D and G to the
Company's audited consolidated balance sheet as of December 31, 1993 or on
Schedule 1 hereto;
(b) any purchase money security interest hereafter created on any
property of the Company, the Guarantor or such Subsidiary securing
Indebtedness incurred solely for the purpose of financing all or a portion
of the purchase price of such property; provided that: (i) such Lien (A) is
created within six months of the acquisition of such property, (B) extends
to no other property and (C) secures no other Indebtedness; (ii) the
principal amount of Indebtedness secured by such Lien shall at no time
exceed the lesser of (A) the cost to such Person of the property subject
thereto or (B) the fair value of such property (as determined in good faith
by the Board of Directors of such Person) at the time of the acquisition
thereof; (iii) such Lien does not extend to or in any way encumber any
inventory of the Guarantor purchased in the ordinary course of business;
and (iv) the aggregate principal amount of all Indebtedness secured by all
such Liens shall not exceed at any time $15,000,000 less the aggregate
principal amount of all Indebtedness secured by Liens permitted under
Section 9.5(i) hereof;
(c) carriers', warehousemen's, mechanics', materialmen's and
repairmen's liens arising in the ordinary course of business of the
Company, the Guarantor or such Subsidiary and not overdue for a period of
more than 30 days or which are being contested in good faith and by
appropriate proceedings;
(d) Liens created in connection with the lease by the Company, the
Guarantor or any of their respective Subsidiaries of any property (whether
real, personal or mixed) (i) now or hereafter owned by the Company, the
Guarantor or any such Subsidiary which has been sold or otherwise
transferred by any thereof to any other Person within six months of the
acquisition thereof or (ii) which any of the Company, the Guarantor or any
such Subsidiary, as the case may be, intends to use for substantially the
same purpose as any property described in clause (i) above;
(e) Liens in favor of consignors against inventory being sold on
consignment in the ordinary course of business by the Company, the
Guarantor or any Subsidiary;
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(f) Liens created in substitution for any Liens permitted by
paragraphs (a), (b) and (d) of this Section 9.5, provided that (i) any such
newly-created Lien does not extend to any other or additional property and
(ii) (A) if permitted by such paragraph (a) or (b), does not secure any
other (or additional principal amount of) Indebtedness and (B) if permitted
by such paragraph (d) does not secure any other obligations under such
lease or any obligations under any other lease;
(g) Liens existing on assets at the time of acquisition thereof by
the Company, the Guarantor or the respective Subsidiary and not incurred in
anticipation of or in connection with such acquisition;
(h) operating leases and Capital Leases, to the extent the same
would constitute Liens, pursuant to which the Company, the Guarantor or the
respective Subsidiary is lessee, and incurred by such Person in the
ordinary course of its business; and
(i) in addition to Liens otherwise permitted by this Section 9.5,
Liens on property of the Company, the Guarantor or any of their respective
Subsidiaries (i) which secure Indebtedness having an aggregate principal
amount not exceeding at any time $15,000,000 less the aggregate principal
amount of all Indebtedness secured by Liens permitted under Section 9.5(b)
hereof and (ii) each of which shall be limited to specified items of
collateral (and not a general Lien on all assets of such Person) having a
book value not greater than 150% of the aggregate principal amount of the
Indebtedness secured by such Lien;
provided, however, that all capital stock of all Subsidiaries will in any event
be maintained free and clear of all Liens whatsoever.
It is understood and agreed that the grant of security interests
described in clauses (i), (ii), (iii), (v) and (vi) of paragraph 6 of Schedule
3 hereto, to the extent that such security interests relate to the same
property that is "sold" by the Company under the Program, as described in
paragraph 1 of said Schedule, will not constitute a lien on assets of the
Company or its Subsidiaries for the purposes of this Section 9.5.
9.6. Mergers. Neither the Company nor the Guarantor will, and
neither of them will permit any other Material Subsidiary or Subsidiaries
constituting a Material Subsidiary Group to,
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(a) consolidate or merge with or into any other Person, except
that a Wholly-Owned Subsidiary of the Company or the Guarantor (other than
the Guarantor) may merge with or consolidate into the Company or the
Guarantor (provided that the Company or the Guarantor, as the case may be,
shall be the survivor of such merger or consolidation) or another Wholly-
Owned Subsidiary of the Company or the Guarantor, or
(b) sell, assign, convey, lease, sublet, transfer or otherwise
dispose of all or substantially all of its assets to any Person, whether in
a single transaction or in a series of related transactions, except that a
Wholly-Owned Subsidiary of the Company or the Guarantor (other than the
Guarantor) may sell, assign, convey, lease, sublet, transfer or otherwise
dispose of all or substantially all of its assets to the Company or to
another Wholly-Owned Subsidiary of the Company or the Guarantor;
provided, however, that none of the foregoing transactions shall be permitted
if a Default or an Event of Default has occurred and is continuing or would
result from the consummation of any such transaction.
It is understood and agreed that any consolidation, merger, sale,
assignment, conveyance, letting, subletting, transfer or other disposition of
all or substantially all of the assets of a Non-Material Subsidiary shall be
permitted under this Section 9.6, so long as such Non-Material Subsidiary,
together with all other Non-Material Subsidiaries with respect to which there
has been, since the date hereof, a consolidation, merger, sale, assignment,
conveyance, letting, subletting, transfer or other disposition of all or
substantially all of its assets, does not constitute a Material Subsidiary
Group.
9.7 Dispositions of Assets. Neither the Company nor the Guarantor
will, and neither of them will permit any other Material Subsidiary to, sell,
assign, convey, lease, sublet, transfer or otherwise dispose of any of the
assets, business or other properties of the Company, the Guarantor or any such
Material Subsidiary any Person, whether in a single transaction or in a series
of related transactions, except for:
(i) sales of inventory (but not of accounts receivable) in
the ordinary course of business of the Company, the Guarantor or any
such Subsidiary;
(ii) dispositions of assets in the ordinary course of
business in arm's-length transactions by the Company, the Guarantor or
any such Subsidiary to
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the extent such assets either are no longer used or useful to
the Company, the Guarantor or such Subsidiary or are promptly replaced
by other assets of at least equal usefulness; and
(iii) any such disposition by the Company, the Guarantor or
any Wholly-Owned Subsidiary to the Company, the Guarantor or any
Wholly-Owned Subsidiary, as the case may be; provided, however, that
the Company and the Guarantor shall maintain their respective assets
and operations substantially in accordance with their respective
assets and operations as of the date hereof, and that in the case of
any such disposition by the Company or the Guarantor to a Wholly-Owned
Subsidiary, each of the Company and the Guarantor agree that such
disposition shall be in the ordinary course of business consistent
with past practice and shall be accomplished upon fair and reasonable
terms to the Company or the Guarantor.
It is understood and agreed that the non-recourse sales of receivables
described in Schedule 3 hereto, if transacted in accordance with paragraph 1
thereof, will not constitute a sale or other disposition of assets for purposes
of this Section 9.7.
9.8. Ranking. (a) Each of the Company and the Guarantor will
cause its obligations under this Agreement, the Notes and each other document
now or hereafter entered into with respect hereto or thereto to rank at least
pari passu in right of payment and of security with all other unsubordinated
Indebtedness of the Company or the Guarantor, as the case may be, except that
Indebtedness secured by any Lien permitted by Section 9.5 hereof may rank
senior in right of security with respect to the collateral subject to such
Lien. Without limiting the generality of the foregoing, the Company covenants,
and will take all steps necessary to assure, that its obligations under this
Agreement will at all times constitute "Senior Indebtedness" as defined in, and
for all purposes of, any indenture or other instrument relating to subordinated
debt (and will be entitled to the benefits of the subordination provisions
relating thereto).
(b) Each of the Company and the Guarantor will cooperate with the
Administrative Agent and the Banks and execute such further instruments and
documents as any Bank may reasonably request to carry out the intentions of
this Section 9.8. Without limiting the generality of the foregoing, if the
Company or the Guarantor hereafter issues or otherwise incurs any subordinated
Indebtedness, each of them will execute and cause to be executed such further
documents as any Bank may reasonably request to ensure that the
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obligations of the Company and the Guarantor under this Agreement and the Notes
at all times rank senior to such subordinated Indebtedness.
(c) Nothing in this Section 9.8 shall be construed so as to limit
the ability of the Company or the Guarantor to incur any Indebtedness
(consistent with paragraphs (a) and (b) above and otherwise permitted by this
Agreement) on a basis pari passu with their respective Indebtedness under this
Agreement and the Notes.
9.9 Business; Fiscal Year. Neither the Company nor the Guarantor
will make any material change in the nature of its business from that in which
it is engaged on the date of this Agreement, and neither the Company nor the
Guarantor shall cause, or permit any of their respective Subsidiaries to cause,
any other Subsidiary to conduct business or operations substantially similar to
the business or operations conducted by the Guarantor on the date of this
Agreement. Neither the Company nor the Guarantor will change its fiscal year
from that currently in effect on the date hereof, as set forth in the
definition of "Fiscal Year" in Section 1.1 hereof.
9.10. Transactions with Affiliates. Neither the Company nor the
Guarantor will, and neither will permit any of its respective Subsidiaries to,
enter into or be a party to any transaction (including but not limited to any
merger, consolidation or sale of substantially all assets) with any Affiliate
of the Company or the Guarantor, except upon fair and reasonable terms no less
favorable to the Company or the Guarantor or such Subsidiary than would obtain
in a comparable arm's-length transaction with a Person not an Affiliate of the
Company or the Guarantor.
9.11 Interest Coverage Test. The Company will at all times
maintain the ratio of Operating Cash Flow for the Company and its Subsidiaries
on a consolidated basis for the four-Fiscal Quarter Period most recently ended
at such time to Interest Expense for the Company and its Subsidiaries on a
consolidated basis for the four-Fiscal Quarter Period most recently ended at
such time to be not less than 4:1; provided, that the denominator of said ratio
(i) for the four-Fiscal Quarter period ended September 30, 1994 shall be deemed
to be Interest Expense for the Fiscal Quarter ended on such date times four;
(ii) for the four-Fiscal Quarter period ended December 31, 1994 shall be deemed
to be Interest Expense for the two-Fiscal Quarter period ended on such date
times two, and (ii) for the four-Fiscal Quarter period ended March 31, 1995
shall be deemed to be Interest Expense for the three-Fiscal Quarter period
ended on such date times 1.3334.
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9.12. Total Debt Ratio. The Company will maintain the Total Debt
Ratio of the Company and its Subsidiaries on a consolidated basis at all times
to be less than 3:1.
9.13 Consolidated Net Worth. The Company shall not permit
Consolidated Net Worth at any time to be less than the sum of $175,000,000 plus
an amount equal to 50% of the Cumulative Net Income of the Company and its
consolidated Subsidiaries for the period commencing after June 30, 1994 and
ending with the date of determination (but not reduced by any net loss in any
Fiscal Quarter during such period); provided, that the aggregate amount paid by
the Company or its Subsidiaries after June 30, 1994 up to but not exceeding
$75,000,000 for the repurchase of shares of capital stock of the Company shall
not be deemed to reduce equity for purposes of the foregoing calculation.
9.14 Notification of Incurrence of Debt. Prior to the incurrence
by the Company or any of its Subsidiaries of Indebtedness, or upon obtaining
commitments for Indebtedness, in an aggregate principal amount of $20,000,000
(per incurrence or cumulatively since June 30, 1994 or since the last time
incurrence compliance was required to be tested pursuant to this Section 9.14)
or more, the Company shall deliver notice to the Administrative Agent and the
Banks, certifying, on the basis of its financial statements for the four Fiscal
Quarters most recently ended, the Company's compliance with the financial
covenants under this Agreement both before and immediately after the incurrence
of such Indebtedness or commitment therefor.
9.15 Use of Proceeds. The Company shall use the proceeds of the
Loans solely for its general corporate purposes (including, without limitation,
to fund its working capital needs), for the purpose of financing non-hostile
acquisitions, and for the purpose of financing a maximum amount of $75,000,000
of aggregate repurchases of common stock of the Company (to the extent that
such repurchases are permitted by Sections 9.13 and 9.18 hereof), and in any
event in compliance with all applicable legal and regulatory requirements,
including, without limitation, Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System and the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended, and the
regulations thereunder. Neither the Administrative Agent nor any Bank shall
have any responsibility for any use of the proceeds of the Loans.
9.16 Ownership of Guarantor. The Company agrees at all times to
own, both beneficially and of record and free and clear of all Liens, and
control 100% of the capital shares of the Guarantor.
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9.17. Indebtedness of Subsidiaries. The Company will not permit
any of its Subsidiaries to create, incur, assume, suffer to exist or otherwise
become obligated for or under any Indebtedness whatsoever, except for:
(i) Indebtedness owed to the Company;
(ii) Capital Leases;
(iii) Indebtedness of the Guarantor under this Agreement;
(iv) the joint and several liability of the Company,
Guarantor and the other "Participating Subsidiaries" identified in
Schedule 3 under the Program arising in the context of customary
credit card chargebacks, as described in paragraph 4 of said Schedule,
for accounts that are sold without recourse; and
(v) The joint and several liability of the Company, the
Guarantor and such other "Participating Subsidiaries" for the
obligations under the Special Program and the Guaranteed Program, but
only if and for so long as (i) the Company causes the Special Program
and the Guaranteed Program at all times to comply with the
requirements of Section 9.5(i) hereof (including, without limitation,
the $15,000,000 and 150% tests set forth therein), and (ii) for all
purposes of this Agreement, the obligations of the Company, the
Guarantor and such other Participating Subsidiaries under the Special
Program and the Guaranteed Program are treated as Indebtedness in an
aggregate amount equal to 100% of such obligations.
9.18. Restricted Payments. The Company shall not, and shall not
permit the Guarantor or any of its other Subsidiaries to, repurchase, redeem or
otherwise acquire any of the shares of capital stock of the Company except that
the Company may repurchase its common stock for an aggregate purchase price not
to exceed $75,000,000 in the aggregate after the date hereof.
Section 10. Events of Default. If one or more of the following
events (herein called "Events of Default" shall occur and be continuing:
(a) The Company or the Guarantor shall fail to pay the principal
of any Loan when due (provided that, other than with respect to any
principal payment due on the Commitment Termination Date or on such earlier
date on
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which all principal of the Loans shall have become due, if the Company
or the Guarantor has transmitted payment of such principal by wire transfer
to the Administrative Agent not later than 11:00 a.m. New York time on the
date when due and has delivered to the Administrative Agent a written
acknowledgement by the remitting bank that such bank has been instructed to
transfer such payment to the Administrative Agent and that there are
sufficient funds available in the Company's account with such remitting
bank to make such payment, then if the Administrative Agent shall have
failed to receive such payment of principal by 11:00 a.m. New York time on
the Business Day after the date when due); or the Company or the Guarantor
shall fail to pay any interest on any Loan or any other amount payable by
it hereunder more than two Business Days after the date when any such
amount shall be due; or
(b) [INTENTIONALLY OMITTED]; or
(c) The Company or the Guarantor or any Subsidiary shall default
in the payment when due (after giving effect to all applicable grace
periods provided for in the documents relating to such Indebtedness,
without regard to any waiver thereof) of any principal of or interest on or
any other amount payable in connection with any of its Indebtedness not
specified in Section 10(a) or 10(b) hereof in an aggregate principal amount
of $5,000,000 or more; or any event specified in any note, agreement,
indenture or other document evidencing or relating to any such Indebtedness
shall occur if (after giving effect to all applicable grace periods
provided for in the documents relating to such Indebtedness, without regard
to any waiver thereof) the effect of such event is to cause, or to permit
the holder or holders of such Indebtedness (or a trustee or agent on behalf
of such holder or holders) to cause, such Indebtedness becoming due prior
to its stated maturity; or
(d) Any representation, warranty or certification made or deemed
made herein by the Company or the Guarantor, or any certificate furnished
to any Bank or the Administrative Agent pursuant to the provisions hereof,
shall prove to have been false or misleading as of the time made or deemed
made or furnished in any material respect and, if the Company, the
Guarantor and the Majority Banks agree that the effects of such false or
misleading representation, warranty or certification are curable, such
effects shall not have been cured to the satisfaction of the Majority Banks
within 10 days after the earlier of (x) the date on which the Company or
the Guarantor obtained knowledge that such representation, warranty or
certification was so false or misleading or (y) the date of notice by the
Administrative Agent to the
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Company or the Guarantor that such representation, warranty or
certification was so false or misleading; or
(e) The Company or the Guarantor shall default in the performance
of any of its obligations under Section 9 (other than under any of Sections
9.1(a), 9.1(b), 9.1(c), 9.1(d), 9.1(g), 9.1(h), 9.2, 9.3(b), 9.3(c) and 9.4
hereof); or the Company or the Guarantor shall default in the performance
of any of its other obligations in this Agreement, including, without
limitation, any of Sections 9.1(a), 9.1(b), 9.1(c), 9.1(d), 9.1(g), 9.1(h),
9.2, 9.3(b), 9.3(c) and 9.4 hereof (not governed by any other provision in
this Section 10), and such default shall continue unremedied for a period
of 10 days after the earlier of (x) the date on which the Company or the
Guarantor obtained knowledge of such default or (y) the date of notice by
the Administrative Agent to the Company or the Guarantor of the occurrence
of such default; or
(f) The Company, the Guarantor, any other Material Subsidiary or
Subsidiaries constituting a Material Subsidiary Group shall admit in
writing its inability to, or be generally unable to, pay its debts as such
debts become due; or
(g) The Company, the Guarantor, any other Material Subsidiary or
Subsidiaries constituting a Material Subsidiary Group shall (i) apply for
or consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or of all or a
substantial part of its assets, (ii) make a general assignment for the
benefit of its creditors, (iii) commence a voluntary case under the
Bankruptcy Code (as now or hereafter in effect), (iv) file a petition
seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, creditor or debtor rights, winding-up, or
composition or readjustment of debts, (v) take any corporate action for the
purpose of effecting any of the foregoing; provided that an event specified
in clauses (i) through (v) above shall be deemed to have occurred (whether
at one time or cumulatively over a period of time after the date hereof)
with respect to a Material Subsidiary Group at the time when such an event
shall have occurred with respect to all Subsidiaries constituting such
Material Subsidiary Group; or
(h) A proceeding or case shall be commenced, without the
application or consent of the Company, the Guarantor, any other Material
Subsidiary or all Subsidiaries constituting a Material Subsidiary Group in
any court of competent jurisdiction, seeking (i) its liquidation,
reorganization, dissolution or winding-up, or the composition or
readjustment of its debts, including the filing
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of an involuntary petition under the Bankruptcy Code, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of
the Company, the Guarantor or such Subsidiary or of all or any substantial
part of its assets, or (iii) similar relief in respect of the Company, the
Guarantor or such Subsidiary under any law relating to bankruptcy,
insolvency, reorganization, creditor or debtor rights, winding-up, or
composition or adjustment of debts, and such proceeding or case shall
continue undismissed, or an order, judgment or decree approving or ordering
any of the foregoing shall be entered and shall not be vacated or dismissed
within 60 days; or an order for relief against the Company, the Guarantor
or such Subsidiary shall be entered in an involuntary case under any
applicable bankruptcy code; provided that an event specified in clauses (i)
through (iii) above or the preceding subclause shall be deemed to have
occurred with respect to a Material Subsidiary Group at the time when such
an event shall have occurred (whether at one time or cumulatively over a
period of time after the date hereof) with respect to all Subsidiaries
constituting such Material Subsidiary Group; or
(i) A judgment or judgments for the payment of money in excess of
$1,000,000 in the aggregate shall be rendered by a court or courts against
the Company, the Guarantor and/or any of their respective Subsidiaries and
the same shall not be discharged (or provision shall not be made for such
discharge), or a stay of execution thereof shall not be procured, within 30
days from the date of entry thereof (or, if later, by the date on which
such judgment specified that payment is due), and the Company, the
Guarantor or the relevant Subsidiary shall not, within said period of 30
days (or by such later date on which payment is due, as aforesaid), or such
longer period during which execution of the same shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during such
appeal; or
(j) An event or condition specified in Section 9.1(e) hereof shall
occur or exist with respect to any Plan or Multiemployer Plan and, as a
result of such event or condition, together with all other such events or
conditions, the Company, the Guarantor or any ERISA Affiliate shall incur
or in the opinion of the Majority Banks shall be reasonably likely to incur
a liability to a Plan, a Multiemployer Plan or PBGC (or any combination of
the foregoing) which is, in the determination of the Majority Banks,
material in relation to the consolidated financial position of the Company
and its consolidated Subsidiaries; or
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(k) There shall occur a Change of Control; provided that any such
Change of Control shall not constitute an Event of Default for purposes of
this Section 10(k) if (A) such Change of Control arises solely by reason of
the merger or consolidation of the Company with another corporation which
is organized under the laws of a state in the United States and the Company
is the surviving corporation in such merger or consolidation, (B) as of the
date of such merger or consolidationand after giving effect thereto, no
other Default or Event of Default shall have occurred and be continuing,
and (C) the Company has delivered a notice to the Administrative Agent and
the Banks not less than 30 days prior to the consummation of any such
merger or consolidation that sets forth in reasonable detail information
indicating compliance with the terms of this paragraph (k); or
(l) An event or condition that constitutes a default or breach by
the Company or any of its Subsidiaries of any affiliation agreement between
the Company or such Subsidiary and Silver King Communications, Inc., a
Delaware corporation, or any of its affiliates (or the respective
successors or assigns of Silver King Communications, Inc. or such
affiliates);
THEREUPON: (i) in the case of an Event of Default other than one referred
to in clause (f), (g) or (h) of this Section 10, the Administrative Agent, with
the consent of the Majority Banks, may and, upon request of the Majority Banks,
shall, by notice to the Company, terminate the Commitments and/or declare the
principal amount then outstanding of, and the accrued interest on, the Loans
and all other amounts payable by the Company and the Guarantor hereunder and
under the Notes to be forthwith due and payable, whereupon such amounts shall
be immediately due and payable without presentment, demand, diligence, protest
or other formalities of any kind, all of which are hereby expressly waived by
the Company and the Guarantor; and (ii) in the case of the occurrence of an
Event of Default referred to in clause (f), (g) or (h) of this Section 10, the
Commitments shall be automatically terminated and the principal amount then
outstanding of, and the accrued interest on, the Loans and all other amounts
payable by the Company and the Guarantor hereunder and under the Notes shall
become automatically immediately due and payable without presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by the Company and the Guarantor.
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Section 11. The Administrative Agent.
11.1. Appointment, Powers and Immunities. Each Bank hereby
irrevocably appoints and authorizes the Administrative Agent to act as its
agent hereunder with such powers as are specifically delegated to the
Administrative Agent by the terms of this Agreement, together with such other
powers as are reasonably incidental thereto. The Administrative Agent (which
term as used in this sentence and in Section 11.5 and the first sentence of
Section 11.6 hereof shall include reference to its affiliates and each of the
officers, directors, employees and agents of itself and of its affiliates): (a)
shall have no duties or responsibilities except those expressly set forth in
this Agreement, and shall not by reason of this Agreement be a trustee or other
fiduciary for any Bank; (b) shall not be responsible to the Banks for any
recitals, statements, representations or warranties contained in this
Agreement, or in any certificate or other document referred to or provided for
in, or received by any of them under, this Agreement, or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement, any Note or any other document referred to or provided for herein or
for any failure by the Company or any other Person to perform any of its
obligations hereunder or thereunder; (c) shall not be required to initiate or
conduct any litigation or collection proceedings hereunder, except as provided
for under Section 11.3 hereof; and (d) shall not be responsible for any action
taken or omitted to be taken by it hereunder or under any other document or
instrument referred to or provided for herein or in connection herewith, except
for its own gross negligence or willful misconduct. The Administrative Agent
may employ agents and attorneys-in-fact and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact selected by it
in good faith. The Administrative Agent may deem and treat the payee of any
Note as the holder thereof for all purposes hereof unless and until a written
notice of the assignment or transfer thereof shall have been filed with the
Administrative Agent.
11.2. Reliance by the Administrative Agent. The Administrative
Agent shall be entitled to rely upon any certification, notice or other
communication (including any thereof by telephone, telex, telegram or cable)
reasonably believed by it to be genuine and correct and to have been signed or
sent by or on behalf of the proper Person or Persons, and upon advice and
statements of legal counsel, independent accountants and other experts selected
by the Administrative Agent. As to any matters not expressly provided for by
this Agreement, the Administrative Agent shall in all cases be fully protected
in acting, or in refraining from acting, hereunder in accordance with
instructions signed by the Majority Banks, and such instructions of the
Majority Banks and any action taken or failure to act pursuant thereto shall be
binding on all of the Banks.
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11.3. Defaults. The Administrative Agent shall not be deemed to
have knowledge of the occurrence of a Default (other than the nonpayment of
principal of or interest on Loans or of facility fees) unless the
Administrative Agent has received notice from a Bank or the Company specifying
such Default and stating that such notice is a "Notice of Default". In the
event that the Administrative Agent receives such a notice of the occurrence of
a Default, the Administrative Agent shall give prompt notice thereof to the
Banks (and shall give each Bank prompt notice of each such nonpayment). The
Administrative Agent shall (subject to Section 11.7 and Section 12.4 hereof)
take such action with respect to such Default as shall be directed by the
Majority Banks, provided that, unless and until the Administrative Agent shall
have received such directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with
respect to such Default as it shall deem advisable in the best interest of the
Banks.
11.4. Rights as a Bank. With respect to its Commitment and the
Loans made by it, LTCB Trust (and any successor acting as Administrative Agent)
in its capacity as a Bank hereunder shall have the same rights and powers
hereunder as any other Bank and may exercise the same as though it were not
acting as the Administrative Agent, and the term "Bank" or "Banks" shall,
unless the context otherwise indicates, include the Administrative Agent in its
individual capacity. LTCB Trust (and any successor acting as Administrative
Agent) and its affiliates may (without having to account therefor to any Bank)
accept deposits from, lend money to and generally engage in any kind of
banking, trust or other business with the Company (and any of its Affiliates)
as if it were not acting as the Administrative Agent, and LTCB, LTCB Trust and
their affiliates may accept fees and other consideration from the Company and
the Guarantor for services in connection with this Agreement or otherwise
without having to account for the same to the Banks.
11.5. Indemnification. The Banks agree to indemnify the
Administrative Agent (to the extent not reimbursed under Section 12.3 hereof,
but without limiting the obligations of the Company under said Section 12.3),
ratably in accordance with the aggregate principal amount of the Loans made by
the Banks (or, if no Loans are at the time outstanding, ratably in accordance
with their respective Commitments), for any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against the Administrative Agent in any way relating to
or arising out of this Agreement or any other documents contemplated by or
referred to herein or the transactions contemplated hereby (including, without
limitation, the costs
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and expenses which the Company is obligated to pay under Section 12.3 hereof
but excluding, unless a Default has occurred and is continuing, normal
administrative costs and expenses incident to the performance of its agency
duties hereunder) or the enforcement of any of the terms hereof or of any such
other documents, provided that no Bank shall be liable for any of the foregoing
to the extent they arise from the gross negligence or willful misconduct of the
party to be indemnified.
11.6. Non-Reliance on Administrative Agent, Agent, Co-Agents and
other Banks. Each Bank agrees that it has, independently and without reliance
on the Administrative Agent, the Agent, either of the Co-Agents or any other
Bank, and based on such documents and information as it has deemed appropriate,
made its own credit analysis of the Company, the Guarantor and their respective
Subsidiaries and its own decision to enter into this Agreement and that it
will, independently and without reliance upon the Administrative Agent, the
Agent, either of the Co-Agents or any other Bank, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own analysis and decisions in taking or not taking action under this Agreement,
the Notes or any other related documents. The Administrative Agent shall not
be required to keep itself informed as to the performance or observance by the
Company or the Guarantor of this Agreement or any other document referred to or
provided for herein or to inspect the properties or books of the Company, the
Guarantor or any of their respective Subsidiaries. Except for notices, reports
and other documents and information expressly required to be furnished to the
Banks by the Administrative Agent hereunder, the Administrative Agent shall not
have any duty or responsibility to provide the Agent, either of the Co-Agents
or any Bank with any credit or other information concerning the affairs,
financial condition or business of the Company or any Subsidiary (or any of
their affiliates) which may come into the possession of the Administrative
Agent or any of its affiliates.
11.7. Failure to Act. Except for action expressly required of the
Administrative Agent hereunder, the Administrative Agent shall in all cases be
fully justified in failing or refusing to act hereunder unless it shall be
indemnified to its satisfaction by the Banks against any and all liability and
expense (other than that arising from gross negligence or willful misconduct)
which may be incurred by it by reason of taking or continuing to take any such
action.
11.8. Resignation or Removal of Administrative Agent. Subject to the
appointment and acceptance of a successor Administrative Agent as provided
below, the Administrative Agent may resign at any time by giving notice thereof
to the Banks, the Company and the Guarantor, and the
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Administrative Agent may be removed at any time with or without cause by the
Majority Banks. Upon any such resignation or removal, the Majority Banks shall
have the right to appoint a successor Administrative Agent. If no successor
Administrative Agent shall have been so appointed by the Majority Banks and
shall have accepted such appointment within 30 days after the retiring
Administrative Agent's giving of notice of resignation or the Majority Banks'
removal of the retiring Administrative Agent, then the retiring Administrative
Agent may, on behalf of the Banks, appoint a successor Administrative Agent,
which shall be a bank which has an office in New York, New York with a combined
capital and surplus of at least $100,000,000. Upon the acceptance of any
appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the
retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder. After any retiring
Administrative Agent's resignation or removal hereunder as Administrative
Agent, the provisions of this Section 11 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as the Administrative Agent.
11.9. Administrative Agent's Office. The Administrative Agent acts
initially through its office designated on the signature pages hereof, but may
transfer its functions as Administrative Agent to any other office, branch or
affiliate of LTCB at any time by giving prompt, subsequent written notice to
each of the other parties to this Agreement.
11.10. Agent and Co-Agents. Each of the parties acknowledges and
agrees that the Agent and the Co-Agents, in their respective capacities as
such, have no obligations, duties or liabilities whatsoever under or in respect
of this Agreement or the Notes.
Section 12. Miscellaneous.
12.1. Waiver. No failure on the part of the Administrative Agent,
the Agent, either of the Co-Agents or any Bank to exercise, no delay in
exercising, and no course of dealing with respect to, any right, power or
privilege under this Agreement or any Note shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, power or privilege under
this Agreement or any Note preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The remedies provided
herein are cumulative and not exclusive of any remedies provided by law.
12.2. Notices. All notices and other communications provided for
herein (including, without limitation, any
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modifications of, or waivers or consents under, this Agreement) shall be given
or made by telex, telecopy, telegraph, cable or in writing and telexed,
telecopied, telegraphed, cabled, mailed or delivered to the intended recipient
at the "Address for Notices" specified below its name on the signature pages
hereof; or, as to any party, at such other address as shall be designated by
such party in a notice to each other party. Except as otherwise provided in
this Agreement, all such communications shall be deemed to have been duly given
when transmitted by telex or telecopier (with receipt confirmed either
mechanically or in writing by a person at the office of the recipient),
personally delivered or, in the case of a mailed notice, upon receipt, in each
case given or addressed as aforesaid.
12.3. Expenses, Etc. The Company and the Guarantor jointly and
severally agree to pay or reimburse each of the Banks and the Administrative
Agent for paying:
(a) all costs and expenses of the Administrative Agent (including,
without limitation, the reasonable fees and expenses of all special counsel
to the Administrative Agent, the Agent, the Co-Agents and the Banks, in
connection with (i) the preparation, negotiation, execution and delivery of
this Agreement and the Notes and any related documents and the making of
the initial Loans hereunder, subject to limitations set forth in the
commitment letter and term sheet, dated July 15, 1994, of LTCB Trust, and
(ii) any amendment, modification or waiver of any of the terms of this
Agreement or any of the Notes or any related documents (whether or not any
such amendment, modification or waiver is signed or becomes effective);
(b) all reasonable costs and expenses of each Bank, the Agent, the
Co-Agents and the Administrative Agent (including reasonable counsels' fees
and expenses) in connection with the enforcement of this Agreement or any
of the Notes and the protection of the rights of each Bank, the Agent, each
of the Co-Agents and the Administrative Agent against the Company, the
Guarantor or any of their respective assets; and
(c) all transfer, stamp, documentary and other similar taxes,
assessments or charges (including, without limitation, penalties and
interest) levied by any governmental or revenue authority in respect of
this Agreement, any of the Notes or any other document referred to herein.
The Company hereby agrees to indemnify the Administrative Agent, the Agent,
each of the Co-Agents and each Bank and their respective Affiliates, directors,
officers, employees and agents from, and hold each of them harmless against,
any
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and all losses, liabilities, claims, damages or expenses incurred by any of
them arising out of or by reason of any investigation or litigation or other
proceedings (including any threatened investigation or litigation or other
proceedings) relating to or arising out of this Agreement, the statements
contained in the commitment letter and term sheet, dated July 15, 1994, of LTCB
Trust, or any aspect thereof, the Banks' agreement to make the Loans hereunder
or from any actual or proposed use by the Company, the Guarantor or any
Subsidiary of either thereof of the proceeds of any of the Loans or from an
alleged breach of this Agreement, including, without limitation, the reasonable
fees and disbursements of counsel incurred in connection with any such
investigation or litigation or other proceedings (but excluding any such
losses, liabilities, claims, damages or expenses incurred by reason of the
gross negligence or willful misconduct of the Person to be indemnified).
12.4. Amendments, Etc. Neither this Agreement nor any Note nor any
terms hereof or thereof may be amended, supplemented or modified except in
accordance with the provisions of this subsection. With the prior written
consent of the Majority Banks, the Administrative Agent, the Company and the
Guarantor may, from time to time, enter into written amendments, supplements or
modifications hereto for the purpose of adding any provisions to this Agreement
or the Notes or changing in any manner the rights of the Banks or of the
Company and the Guarantor hereunder or thereunder or waiving, on such terms and
conditions as the Administrative Agent (with the consent of the Majority Banks)
may specify in such instrument, any of the requirements of this Agreement or
the Notes or any Default or Event of Default and its consequences; provided,
however, that no such waiver and no such amendment, supplement or modification
shall (a) extend the maturity of any Note, or reduce the rate or extend the
time of payment of interest thereon, or reduce or extend the time of payment of
any fee payable to the Banks hereunder, or reduce the principal amount of any
Loan, or increase the amount of any Bank's Commitment, or release the Guarantor
from any of its obligations hereunder, or amend, modify or waive any provision
of this subsection, or reduce the percentage specified in the definition of
"Majority Banks" in Section 1.1 hereof or the percentage of the Banks otherwise
required to take actions under this Agreement or the Notes, or consent to the
assignment or transfer by the Company or the Guarantor of any of its rights and
obligations under this Agreement or the Notes, in each case without the prior
written consent of all the Banks, or (b) amend, modify or waive any provision
of Section 11 hereof without the prior written consent of the Administrative
Agent. Any such waiver and any such amendment, supplement or modification
shall apply equally to each of the Banks and shall be binding upon the Company,
the Guarantor, the Banks, the Administrative Agent, the Agent, the Co-Agents
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and all future holders of the Notes. In the case of any waiver, the Company,
the Guarantor, the Banks and the Administrative Agent shall be restored to
their former position and rights hereunder and under the outstanding Notes, and
any Default or Event of Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent or other Default
or Event of Default, or impair any right subsequent thereon.
12.5. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
12.6. Assignments and Participation.
(a) Neither the Company nor the Guarantor may assign its rights or
obligations hereunder or under the Notes without the prior consent of all
of the Banks and the Administrative Agent.
(b) Any Bank may assign any of its Loans, its Note or its
Commitment without the prior consent of the Company, the Guarantor, the
Administrative Agent or any other Bank, provided that (i) partial
assignments (being assignments of less than the entire amount of a Bank's
Commitment and Loans) to any Person other than an office, branch or
affiliate of the assigning Bank shall be in a principal amount of not less
than $9,000,000 (or such lesser amount as may be agreed upon by the
Company) and (ii) any such assignment shall be made pursuant to an
assignment and assumption agreement substantially in the form of Exhibit E
hereto (an "Assignment Agreement"). Upon (A) written notice to the Company
and the Administrative Agent of an assignment, identifying in detail
reasonably satisfactory to the Administrative Agent the assignee Bank and
the amount of the assignor Bank's Commitment and Loans assigned, and (B)
payment by the assignor or the assignee to the Administrative Agent, for
the Administrative Agent's own account, of a recordation fee of $2,500, the
assignee shall have, as of the date of effectiveness of such assignment and
to the extent of such assignment, the obligations, rights and benefits of,
and shall be deemed for all purposes hereunder, a Bank party hereto holding
the Commitment and Loans (or portions thereof) assigned to it (in addition
to the Commitment and Loans, if any, theretofore held by such assignee) and
the assignor shall be released from such obligations to such extent.
(c) Any Bank may sell to one or more other Persons a participation
in all or any part of the Commitment or any Loan held by it, in which event
each such participant shall be entitled to the rights and
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benefits of the provisions of Sections 5 and 9.1(h) hereof with respect
to its participation in such Loan as if (and the Company and the Guarantor
shall be directly obligated to such participant under such provisions as
if) such participant were a "Bank" for purposes of said Sections, but shall
not have any other rights or benefits under this Agreement or any Note (the
participant's rights against such Bank in respect of such participation to
be those set forth in the agreement (the "Participation Agreement")
executed by such Bank in favor of such participant); provided, that all
amounts payable by the Company or the Guarantor to any Bank and any
participant under Section 5 hereof in respect of any Loan shall be
determined as if such Bank had not sold any participations in such Loan and
as if such Bank were funding all of such Loan in the same way that it is
funding the portion of such Loan in which no participations have been sold.
In no event shall a Bank that sells a participation be obligated to any
participant under the Participation Agreement to take or refrain from
taking any action hereunder or under such Bank's Note (including, without
limitation, the extension of such Bank's Commitment pursuant to Section 2.9
hereof) except that such Bank may agree in the Participation Agreement that
it will not, without the consent of the participant, agree to (i) the
extension of any date fixed for the payment of principal of or interest on
the related Loan or Loans, (ii) the reduction of any payment of principal
thereof, (iii) the reduction of the rate at which either interest is
payable thereon or (if the participant is entitled to any part thereof)
facility fee is payable hereunder to a level below the rate at which the
participant is entitled to receive interest or facility fee (as the case
may be) in respect of such participation or (iv) any release of the
Guarantor from any of its obligations under this Agreement or the Notes.
(d) In addition to the assignments and participations permitted
under the foregoing provisions of this Section 12.6, any Bank may assign
and pledge all or any portion of its Loans and its Note to any Federal
Reserve Bank as collateral security pursuant to Regulation A and any
Operating Circular issued by such Federal Reserve Bank. No such assignment
shall release the assigning Bank from its obligations hereunder.
(e) A Bank may furnish any information concerning the Company, the
Guarantor or any of their respective Subsidiaries in the possession of such
Bank from time to time to assignees and participants (including prospective
assignees and participants).
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12.7 Confidentiality. The Administrative Agent, the Agent, each of
the Co-Agents and each of the Banks hereby acknowledge that certain of the
information to be furnished to them pursuant to this Agreement may be
non-public information. The Administrative Agent, the Agent, each of the
Co-Agents and each Bank hereby agrees that it will keep all information so
furnished to it pursuant hereto confidential in accordance with its normal
banking procedures and, except in accordance with such procedures, will make
no disclosure to any other Person of such information until the same shall
have become public, except (i) in connection with matters involving this
Agreement (including, without limitation, litigation involving the Company,
the Guarantor, the Agent, the Co-Agents, the Administrative Agent or the Banks)
and with the obligations of any of the Administrative Agent, the Agent, such
Co-Agent or such Bank under law or regulation, (ii) pursuant to subpoenas or
similar process, (iii) to Governmental Authorities or examiners, (iv) to
independent auditors or counsel, (v) to any parent or corporate Affiliate of
any of the Administrative Agent, the Agent, such Co-Agent or such Bank, or (vi)
to any participant or proposed participant or assignee or proposed assignee
hereunder so long as such participant or proposed participant or assignee or
proposed assignee (a) is not in the same general type of business as the
Company on the date of such disclosure and (b) agrees in writing to accept
such information subject to the restrictions provided in this Section 12.7;
provided that in no event shall any of the Administrative Agent, the Agent,
the Co-Agents or such Bank be obligated or required to return any materials
furnished by the Company or any of its Subsidiaries.
12.8. Survival. Without limiting the survival of any other
obligations of the Company, the Guarantor and the Banks hereunder, the
obligations of the Company and the Guarantor under Sections 2.6, 5.1, 5.4, 5.5
and 12.3 hereof and the obligations of the Banks under Sections 4.7, 11.5 and
12.7 hereof, shall survive the repayment of the Loans and the termination of
the Commitments.
12.9. Captions. Captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.
12.10. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
12.11. GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
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12.12. JURISDICTION. EACH OF THE COMPANY AND THE GUARANTOR HEREBY
AGREES THAT:
(A) ANY SUIT, ACTION OR PROCEEDING AGAINST THE COMPANY OR THE
GUARANTOR WITH RESPECT TO THIS AGREEMENT, THE LOANS, THE NOTES OR ANY
DOCUMENTS RELATED HERETO OR ANY JUDGMENT ENTERED BY ANY COURT IN RESPECT
THEREOF MAY BE BROUGHT IN THE SUPREME COURT OF THE STATE OF NEW YORK,
COUNTY OF NEW YORK, IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK, OR IN ANY STATE OR FEDERAL COURT SITTING IN THE STATE
OF FLORIDA (COLLECTIVELY, THE "SUBJECT COURTS"), AS THE ADMINISTRATIVE
AGENT, THE AGENT, EITHER CO-AGENT OR ANY BANK MAY ELECT IN ITS SOLE
DISCRETION AND EACH OF THE COMPANY AND THE GUARANTOR HEREBY IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF EACH OF THE SUBJECT COURTS FOR
THE PURPOSE OF ANY SUCH SUIT, ACTION, PROCEEDING OR JUDGMENT. EACH OF THE
COMPANY AND THE GUARANTOR HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS IN ANY SUIT, ACTION OR PROCEEDING IN ANY OF THE SUBJECT COURTS BY
THE MAILING THEREOF BY THE ADMINISTRATIVE AGENT, THE AGENT, THE RESPECTIVE
CO-AGENT OR THE RESPECTIVE BANK BY REGISTERED OR CERTIFIED MAIL, POSTAGE
PREPAID, TO THE COMPANY OR THE GUARANTOR, AS THE CASE MAY BE, ADDRESSED AS
PROVIDED IN SECTION 12.2 HEREOF. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED
TO LIMIT THE ABILITY OF THE ADMINISTRATIVE AGENT, THE AGENT, EITHER
CO-AGENT OR ANY BANK TO SERVE ANY SUCH WRITS, PROCESS OR SUMMONSES IN ANY
OTHER MANNER PERMITTED BY APPLICABLE LAW OR TO BRING PROCEEDINGS AGAINST
THE COMPANY OR THE GUARANTOR IN ANY COMPETENT COURT OF ANY OTHER
JURISDICTION OR JURISDICTIONS, AND IN SUCH MANNER, AS MAY BE PERMITTED BY
APPLICABLE LAW.
(B) EACH OF THE COMPANY AND THE GUARANTOR HEREBY WAIVES ANY RIGHT
TO TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING IN RESPECT OF THIS
AGREEMENT, THE NOTES OR ANY OTHER DOCUMENTS IN CONNECTION HEREWITH, ANY
OBJECTION TO THE LAYING OF VENUE IN ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY OF THE SUBJECT COURTS, AND, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY CLAIM THAT SUCH SUIT, ACTION OR PROCEEDING IN ANY OF THE
SUBJECT COURTS HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
12.13. Severability. Any provision of this Agreement or the Notes
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
thereof or affecting the validity or enforceability of such provision in any
other jurisdiction.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
HOME SHOPPING NETWORK, INC.,
as the Company
By ___________________________
Title: Treasurer
11831 30th Court North
St. Petersburg, Florida 33716
Telecopier No.: (813) 539-6505
Telephone No.: (813) 572-8585
Attention: Finance Department
with a copy to:
"Legal Department"
Telecopier No.: (813) 573-0866
HOME SHOPPING CLUB, INC.,
as Guarantor
By ___________________________
Title: Treasurer
11831 30th Court North
St. Petersburg, Florida 33716
Telecopier No.: (813) 539-6505
Telephone No.: (813) 572-8585
Attention: Finance Department
with a copy to:
"Legal Department"
Telecopier No.: (813) 573-0866
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The Banks
Commitment
$20,000,000 LTCB TRUST COMPANY, as a Bank
and as Agent
By ___________________________
Title:
Lending Office for Federal Funds
Rate Loans and Prime Rate Loans:
165 Broadway
New York, New York 10006
Lending Office for LIBOR Loans:
165 Broadway
New York, New York 10006
Address for Notices:
165 Broadway
New York, New York 10006
Telex No.: 425722
Telecopier No.: (212) 608-3081
Telephone No.: (212) 335-4854
Attention: Winston Brown
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Commitment
$ 17,000,000 BANK OF MONTREAL, as a Bank
and as Co-Agent
By ____________________________
Title:
Lending Office for Federal Funds
Rate Loans and Prime Rate Loans:
115 South LaSalle Street
11th Floor
Chicago, Illinois 60603
Lending Office for LIBOR Loans:
115 South LaSalle Street
11th Floor
Chicago, Illinois 60603
Address for Notices:
430 Park Avenue
15th Floor, Account
Administration
New York, New York 10022
Telecopier No.: (212) 605-1525
Telephone No.: (212) 605-1436
or (212) 605-1458
Attention: Maggie Gaglin
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Commitment
$ 17,000,000 THE BANK OF NEW YORK COMPANY,
INC., as a Bank and as a Co-Agent
By ______________________________
Title:
Lending Office for Federal Funds
Rate Loans and Prime Rate Loans:
One Wall Street
New York, New York 10286
Lending Office for LIBOR Loans:
One Wall Street
New York, New York 10286
Address for Notices:
One Wall Street
16th Floor
New York, New York 10286
Telecopier No.: (212) 635-8679
or (212) 635-8634
Telephone No.: (212) 635-8741
Attention: Brian Marshall
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Commitment
$ 14,000,000 PNC BANK, KENTUCKY, INC.
By ______________________________
Title:
Lending Office for Federal Funds
Rate Loans and Prime Rate Loans:
500 West Jefferson Street
Louisville, Kentucky 40202
Lending Office for LIBOR Loans:
500 West Jefferson Street
Louisville, Kentucky 40202
Address for Notices:
PNC Commercial Corp.
201 South Orange Avenue
Suite 750
Orlando, Florida 32801
Telecopier No.: (407) 843-8263
Telephone No.: (407) 841-3585
Attention: James Neil or
Diane Tyre
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Commitment
$ 14,000,000 TORONTO DOMINION [TEXAS], INC.
By ______________________________
Title:
Lending Office for Federal Funds
Rate Loans and Prime Rate Loans:
Toronto Dominion Bank,
Houston Agency
909 Fannin Street
Houston, Texas 77010
Lending Office for LIBOR Loans:
Toronto Dominion Bank,
Houston Agency
909 Fannin Street
Houston, Texas 77010
Address for Notices:
Toronto Dominion Bank,
Houston Agency
909 Fannin Street
Houston, Texas 77010
Telecopier No.: (713) 951-9921
Telephone No.: (713) 653-8248
Attention: Dave Parker
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Commitment
$ 9,000,000 THE DAIWA BANK, LIMITED
By ______________________________
Title:
By ______________________________
Title:
Lending Office for Federal Funds
Rate Loans and Prime Rate Loans:
233 South Wacker Dr., Suite 5400
Chicago, Illinois 60606
Lending Office for LIBOR Loans:
233 South Wacker Dr., Suite 5400
Chicago, Illinois 60606
Address for Notices:
100 South Ashley Drive
Suite 1780
Tampa, Florida 33602
Telecopier No.: (813) 229-6372
Telephone No.: (813) 229-6002
Attention: Sybil Weldon, Vice
President
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Commitment
$ 9,000,000 FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By ______________________________
Title:
Lending Office for Federal Funds
Rate Loans and Prime Rate Loans:
First Union Center-TW19
Charlotte, North Carolina
28288-0735
Lending Office for LIBOR Loans:
First Union Center-TW19
Charlotte, North Carolina
28288-0735
Address for Notices:
First Union Center-TW19
Charlotte, North Carolina
28288-0735
Telecopier No.: (704) 374-4092
Telephone No.: (704) 374-4897
Attention: Hilda Weathers
----------------------
Total: $100,000,000
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The Administrative Agent
LTCB TRUST COMPANY,
as Administrative Agent
By ______________________________
Title:
Address for Notices to
Administrative Agent:
165 Broadway
New York, New York 10006
Telex No.: 425722
Telecopier No.: (212) 608-3081
Telephone No.: (212) 335-4854
Attention: Winston Brown
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SCHEDULE 1
EXISTING CREDIT AGREEMENTS
AND LIENS
None.
130
SCHEDULE 2
CALCULATION OF SAMPLE
FINANCIAL TERMS
131
SCHEDULE 3
DESCRIPTION OF CREDIT CARD PROGRAM
132
EXHIBIT A
PROMISSORY NOTE
$______________ ____________, 1994
New York, New York
FOR VALUE RECEIVED, HOME SHOPPING NETWORK, INC., a Delaware corporation
(the "Company"), hereby promises to pay to the order of ___________________
(the "Bank"), for account of its respective Applicable Lending Offices provided
for by the Credit Agreement referred to below, by paying to account no.
04203606 of LTCB Trust Company (in its capacity as administrative agent for the
Bank and certain other banks, the "Administrative Agent") at the principal
offices of Bankers Trust Company, New York, New York (reference: "Home Shopping
Network-1994 Revolving Credit Facility") the principal sum of ______________
Dollars ($_____________) (or such lesser amount as shall equal the aggregate
unpaid principal amount of the Loans made by the Bank to the Company under the
Credit Agreement), in lawful money of the United States of America and in
immediately available funds (or at such other place or in such other manner as
the Administrative Agent may notify the Company from time to time), without
set-off, counterclaim or deduction of any kind, on the dates and in the
principal amounts provided in the Credit Agreement, and to pay interest on the
unpaid principal amount of each such Loan, at such office, in like money and
funds and in such manner, for the period commencing on the date of such Loan
until such Loan shall be paid in full, at the rates per annum and on the dates
provided in the Credit Agreement.
The amount and type of, and the duration of each Interest Period (if
applicable) for, each Loan made by the Bank to the Company under the Credit
Agreement, the date such Loan is made or converted from a Loan of another type,
and the amount of each payment or prepayment made on account of the principal
thereof, shall be recorded by the Bank on its books and, prior to any transfer
of this Note, endorsed by the Bank on the schedule attached hereto or any
continuation thereof; provided that no failure of the Bank to make any such
endorsement shall affect the obligations of the Company under the Credit
Agreement or this Note.
This Note is one of the Notes referred to in the Second Amended and
Restated Credit Agreement, dated as of August 30, 1994 (as amended and in
effect from time to time, the "Credit Agreement"), among the Company, Home
Shopping Club, Inc., a Delaware corporation, as guarantor (the "Guarantor"),
the Banks named therein (including the Bank), LTCB Trust Company, as Agent,
Bank of Montreal and The Bank of New York Company, Inc., as Co-Agents, and the
Administrative Agent, and evidences Loans made by the Bank thereunder and is
entitled to the benefits thereof. Capitalized terms used in
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this Note have the respective meanings assigned to them in the Credit
Agreement.
The Credit Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain events and for prepayments of Loans
upon the terms and conditions specified therein.
No provision of the Credit Agreement or this Note or any other document
delivered in connection with either thereof and no transaction contemplated
hereby or thereby shall be construed or shall operate so as to require the
Company or the Guarantor to pay interest hereunder in an amount or at a rate
greater than the maximum allowed from time to time by applicable law. Should
any interest or other charges paid by the Company or the Guarantor hereunder
result in a computation or earning of interest in excess of the maximum rate of
interest permitted under applicable law in effect while such interest is being
earned, then such excess shall be waived by the Bank and all such excess shall
be automatically credited against and in reduction of the principal balance of
such amounts payable hereunder and any portion of such excess received by the
Bank shall be paid over by the Bank to the Company or the Guarantor, as the
case may be, it being the intent of the Company and the Guarantor and the other
parties to the Credit Agreement that under no circumstances shall the Company
or the Guarantor or any other Person be required to pay interest in excess of
the maximum rate allowed by such applicable law.
The Company hereby waives diligence, presentment, protest, notice of
default, dishonor or nonpayment and any other notice and all demands
whatsoever. The Company hereby further waives all setoffs and counterclaims
against the Company, the Administrative Agent, the Agent, each of the Co-Agents
each of the Banks.
THIS NOTE HAS BEEN EXECUTED AND DELIVERED IN, AND SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF, THE STATE OF NEW YORK.
HOME SHOPPING NETWORK, INC.
By____________________________
Title:
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134
GUARANTEE
The undersigned HOME SHOPPING CLUB, INC., a Delaware corporation (the
"Guarantor"), hereby unconditionally and irrevocably guarantees the payment in
full when due (whether at stated maturity, by acceleration or otherwise) of the
principal of and interest on this Note and all other amounts payable hereunder,
in accordance with the terms hereof and of Section 6 of the Credit Agreement,
and, in the case of any extension of time of payment, in whole or in part, that
all such amounts shall be paid in full when due (whether at stated maturity, by
acceleration or otherwise) in accordance with the terms of such extension. In
addition, the Guarantor hereby unconditionally agrees that upon default in the
payment when due (whether at stated maturity, by acceleration or otherwise) of
any of such principal, interest or other amounts, the Guarantor shall forthwith
pay and perform the same in the money and funds, at the time, in the place and
in the manner provided for such payment in the Credit Agreement. This
guarantee is a continuing guarantee of payment and not merely of collection; it
is a primary, independent obligation of the Guarantor; and the Guarantor's
obligations hereunder shall be absolute, unconditional and irrevocable,
irrespective of any and all circumstances whatsoever. The Guarantor hereby
waives diligence, presentment, protest, notice of default, dishonor or
nonpayment and any other notice and all demands whatsoever. The Guarantor
hereby further waives all setoffs and counterclaims against the Company, the
Administrative Agent, the Agent, each of the Co-Agents and each of the Banks.
HOME SHOPPING CLUB, INC.
By_____________________________
Title:
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135
LOANS
Date
Loan Principal Type Amount Unpaid
Made or Amount of Interest Paid or Principal Notation
Converted of Loan Loan Period Prepaid Amount Made By
--------- ------- ---- -------- ------- --------- ---------
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EXHIBIT B
[Form of Opinion of Counsel to the Company and Guarantor]
_______, 1994
To the Banks party to the Credit
Agreement referred to below and
LTCB Trust Company, as Administrative
Agent
Gentlemen:
I have acted as counsel to Home Shopping Network, Inc., a Delaware
corporation (the "Company"), and Home Shopping Club, Inc., a Delaware
corporation (the "Guarantor"), in connection with the Second Amended and
Restated Credit Agreement dated as of August 30, 1994 (the "Credit Agreement")
among the Company, the Guarantor, the Banks named therein, LTCB Trust Company,
as Agent, Bank of Montreal and The Bank of New York Company, Inc., as Co-Agents,
and LTCB Trust Company, as Administrative Agent, providing for loans to be made
to the Company in the aggregate principal amount of $100,000,000 under the
guarantee of the Guarantor. Terms defined in the Credit Agreement are used
herein as defined therein.
In rendering the opinion expressed below, I have examined the originals
or conformed copies of such corporate records, agreements and instruments of the
Company and the Guarantor, certificates of public officials and of officers of
the Company and the Guarantor, and such other documents and records, and such
matters of law, as I have deemed appropriate as a basis for the opinions
hereinafter expressed.
Based upon the foregoing, I am of the opinion that:
1. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and the
Guarantor is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware; each of them is duly
qualified to transact business in the State of Florida and has the necessary
corporate power to enter into and perform the Credit Agreement and the Notes
and, in the case of the Company, to borrow under the Credit Agreement. The
Guarantor is a Wholly-Owned Subsidiary of the Company.
2. The making and performance by each of the Company and the
Guarantor of the Credit Agreement and the Notes and, in the case of the Company,
the borrowings thereunder
B-1
137
have been duly authorized by all necessary corporate action, and do not and
will not violate any provision of law, regulation, order, writ, injunction or
decrees of any court or governmental authority or agency or any provision of
the charter or by-laws of the Company or the Guarantor or result in the breach
of, or constitute a default or require any consent under, or result in the
creation of any Lien upon any of its respective properties, revenues or assets
pursuant to, any indenture or other agreement or instrument to which the
Company, the Guarantor or any Subsidiary of either thereof is a party or by
which the Company or the Guarantor or any Subsidiary of either thereof or its
respective properties may be bound.
3. The Credit Agreement and the Notes have been duly executed and
delivered and constitute the legal, valid and binding obligations of the Company
and the Guarantor enforceable in accordance with their respective terms, except
as such enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general applicability
affecting the enforcement of creditors' rights and (b) the application of
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law), and except that no opinion is
expressed as to the fourth sentence of Section 4.7 of the Credit Agreement.
4. To my knowledge after due inquiry, there are no legal or
arbitral proceedings, and no proceedings by or before any governmental or
regulatory authority or agency, pending or threatened against or affecting the
Company or the Guarantor or any of the Subsidiaries of either thereof, or any
properties or rights of the Company or the Guarantor or any of the Subsidiaries
of either thereof, which, if adversely determined, would have a material adverse
effect on the consolidated financial condition or operations, or the business
taken as a whole, of the Company and the Guarantor and the Subsidiaries.
5. No authorizations, consents, approvals, licenses, filings or
registrations with any governmental or regulatory authority or agency are
required in connection with the execution, delivery or performance by the
Company or the Guarantor of the Credit Agreement or the Notes or the borrowings
thereunder.
6. Assuming that the Administrative Agent has its principal office
in the State of New York, the proceeds of the Loans will be disbursed from the
Administrative Agent's office in New York, payments will be made to the
Administrative Agent at its office in New York and the Loans will be
administered
B-2
138
by the Administrative Agent from said office, the provision of Section 12.11 of
the Credit Agreement regarding the choice of the laws of the State of New York
to govern the Credit Agreement and the Notes is, under the laws of the State of
Florida, a valid choice of law and would be given effect by the courts in
Florida. However, courts in Florida are likely to apply Florida procedural
law.
7. The provisions of the Credit Agreement and the Notes do not
violate any Florida law relating to usury or other limitations on the rate of
interest that a lender may charge, collect or receive.
8. Assuming none of the Administrative Agent, the Agent, the
Co-Agents or any Bank were otherwise doing or transacting business in the State
of Florida, none of the Administrative Agent, the Agent, the Co-Agents or any
Bank shall be deemed to be doing or transacting business, as a bank or
otherwise, in the State of Florida solely by reason of the making and
performance by any party of the Credit Agreement or the Notes or the
consummation of the transactions contemplated thereby. None of the
Administrative Agent, the Agent, the Co-Agents or any Bank will be required, in
order to exercise or enforce its respective rights and remedies under the Credit
Agreement and the Notes in the courts of Florida, to qualify to do or transact
business, as a bank or otherwise, in the State of Florida, except to the extent
they are otherwise doing or transacting business in the State of Florida.
I am admitted to practice law in the State of Florida, and the opinions
expressed herein relate only to the laws of the State of Florida, the General
Corporation Law of the State of Delaware and applicable federal law.
The opinions expressed in this letter are based upon the law in effect
on the date hereof, and I assume no obligation to revise or supplement this
opinion should such law be changed in any respect by legislative action,
judicial decision or otherwise.
This opinion is being furnished to you solely for your benefit and only
with respect to the transaction referred to herein. Accordingly, it may not be
relied upon by any
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139
other person or entity without, in each instance, my prior written consent.
Very truly yours,
Senior Counsel
B-4
140
EXHIBIT C
FORM OF COMPLIANCE CERTIFICATE
____________, 199_
To the Banks party to
the Credit Agreement
referred to below and
LTCB Trust Company, as
Administrative Agent
Gentlemen:
I, _________________, Chief Financial Officer of Home Shopping
Network, Inc., a Delaware corporation (the "Company"), and Treasurer of Home
Shopping Club, Inc., a Delaware corporation (the "Guarantor"), do hereby render
this Certificate in these capacities. This Certificate is being delivered in
connection with the Second Amended and Restated Credit Agreement, dated as of
August 30, 1994 (as amended from time to time, the "Credit Agreement"), among
the Company, the Guarantor, the Banks named therein, LTCB Trust Company, as
Agent, and Bank of Montreal and Bank of New York Company, Inc., each as a
Co-Agent, and LTCB Trust Company, as Administrative Agent for such Banks.
Terms defined in the Credit Agreement are used herein as defined therein.
I hereby certify to you, as of this date with respect to both
the Company and the Guarantor, that:
A. to the best of my knowledge, after full inquiry, no
default has occurred or is continuing;
B. the computations attached hereto as Exhibit I set
forth in reasonable detail the computations necessary to determine
whether the Company and the Guarantor are in compliance with Sections
9.11, 9.12 and 9.13 of the Credit Agreement as at the end of the
[Fiscal Quarter] [Fiscal Year] most recently ended as of the date
hereof;
C. the list attached hereto as Exhibit II sets forth
Subsidiaries that are Material Subsidiaries and that were not
contained in the Company's most recently delivered Compliance
Certificate; and
D. [all other Subsidiaries (that have not been certified
to you as Material Subsidiaries in this or previously delivered
Compliance Certificates) combined do not constitute a Material
Subsidiary Group as at the date hereof] [all other Subsidiaries (that
have not been
141
certified to you as Material Subsidiaries in this or previously
delivered Compliance Certificates) do constitute a Material Subsidiary
Group as at such date and the list attached hereto as Exhibit III
identifies each such Subsidiary whose aggregate book value of tangible
assets exceeds $10,000,000 as at the date hereof].
-----------------------
[name of officer]
[representative capacity]
Home Shopping Network, Inc.
-----------------------
[name of officer]
[representative capacity]
Home Shopping Network, Inc.
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EXHIBIT E
Form of
Assignment and
Assumption Agreement
ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of _________,
199_, between _________________________________ (the "Assignor") and
__________________________________ (the "Assignee").
R E C I T A L S
A. The Assignor is a party to the Second Amended
and Restated Credit Agreement, dated as of August 30, 1994 (as amended and in
effect from time to time, the "Credit Agreement"), among Home Shopping Network,
Inc., a Delaware corporation (the "Company"), as borrower thereunder, Home
Shopping Club, Inc., a Delaware corporation, as guarantor thereunder, the Banks
named therein (the "Banks"), LTCB Trust Company, as an Agent, Bank of Montreal
and Bank of New York Company, Inc, as Co- Agents, and LTCB Trust Company, as
Administrative Agent for such Banks (in such capacity, the "Administrative
Agent") (terms used but not otherwise defined herein to have the meanings
specified in the Credit Agreement).
B. Pursuant to the Credit Agreement, the Assignor is
committed to make Loans to the Company in an aggregate principal amount at any
one time outstanding not to exceed $_______ (its "Pre-Assignment Commitment")
and the aggregate principal balance of all such Loans outstanding on the date
hereof is $ ________.
C. The Assignor proposes to assign without recourse or
warranty except as expressly stated in Section 6 hereof to the Assignee all of
its rights and obligations under the Credit Agreement in respect of a portion
of (i) its Pre-Assignment Commitment equal to $________ (the "Assigned
Commitment Amount") and (ii) certain of its Loans outstanding on the date
hereof listed on Schedule 2 hereto (the "Assigned Loans"), on the terms and
conditions set forth herein, and the Assignee proposes to accept the assignment
to it by the Assignor of such rights and obligations, and such Loans, on such
terms and conditions.
WHEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto hereby agree as follows:
Section 1. Assignment and Acceptance. As of the Assignment
Effective Date (defined below), the Assignor hereby sells and assigns to the
Assignee and the Assignee hereby purchases and assumes from the Assignor (the
"Assignment") all of the Assignor's rights and obligations under the Credit
Agreement,
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the Notes held by the Assignor and any documents relating thereto
(collectively, the "Documents") relating to the Assigned Commitment Amount and
the Assigned Loans and arising after the Assignment Effective Date. THE
ASSIGNMENT SHALL BE WITHOUT RECOURSE TO THE ASSIGNOR AND, EXCEPT AS EXPRESSLY
SET FORTH IN SECTION 6 HEREOF, WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND.
Section 2. Release. As of the Assignment Effective Date, the
Assignor shall be released from all obligations relating to the Assigned
Commitment Amount and the Assigned Loans, to the extent such obligations have
been assumed by the Assignee, and the Assignor's Pre-Assignment Commitment
shall be reduced by the Assigned Commitment Amount as of such date.
Section 3. Payments. As consideration for the Assignment the
Assignee shall pay to the Assignor $_________ in immediately available funds.
The Assignor and the Assignee shall make appropriate arrangements between
themselves, and/or adjustments to such payment amount, to reflect liabilities
and amounts receivable, as the case may be with respect to the Assigned
Commitment Amount and the Assigned Loans corresponding to the time preceding
the Assignment Effective Date. The Assignor and the Assignee agree that if
either shall receive or pay any amount under the Credit Agreement, the Notes or
any other Document that is for the account of the other, it shall have received
such amount for and shall promptly pay such amount over to the other, or it
shall have paid such amount on behalf of and shall promptly be paid such amount
by the other, as the case may be.
Section 4. Assignment Effective Date. The date on which the
Assignment shall be effective (the "Assignment Effective Date") shall be the
later of (i) _________ __, 19__ or (ii) the date on which the conditions to the
Assignment set forth in Section 5 hereof shall be satisfied. On and as of the
Assignment Effective Date, the Assignee shall be deemed a Bank party to the
Credit Agreement, as provided in Section 12.6 thereof (or any successor section
thereto), with all the obligations, rights and benefits of a Bank thereunder
and having the Commitment set forth opposite its name on Schedule I hereto. On
and as of the Assignment Effective Date, the Commitment of the Assignor shall
be as set forth opposite its name on Schedule I hereto.
Section 5. Conditions. The effectiveness of the Assignment
shall be subject to the satisfaction of the following conditions: (a) the
receipt by the Assignor of the payment provided for in the first sentence of
Section 3 hereof and (b) the receipt by the Administrative Agent of a copy
hereof executed by the parties hereto.
Section 6. Representations and Warranties of the Assignor.
The Assignor (a) represents and warrants that it has
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full power and authority, and has taken all action necessary, to execute and
deliver this Agreement and any other documents contemplated hereby, to fulfill
its obligations hereunder and to fully consummate the transactions contemplated
hereby, and that no governmental or other consents are necessary in connection
with the foregoing, (b) represents and warrants that this Agreement constitutes
its legal, valid and binding obligation enforceable against it in accordance
with its terms and that it is not in breach of any of its obligations under the
Credit Agreement or any other Documents, (c) represents and warrants that it
owns, and is assigning, the Assigned Commitment Amount and the Assigned Loans
free and clear of all adverse claims, (d) MAKES NO REPRESENTATION OR WARRANTY
WITH RESPECT TO ANY STATEMENTS, WARRANTIES OR REPRESENTATIONS MADE IN OR IN
CONNECTION WITH THE CREDIT AGREEMENT, THE NOTES OR ANY OTHER DOCUMENT OR THE
DUE EXECUTION, LEGALITY, VALIDITY, ENFORCEABILITY, GENUINENESS, SUFFICIENCY OR
VALUE OF ANY THEREOF AND (E) MAKES NO REPRESENTATION OR WARRANTY AS TO THE
FINANCIAL CONDITION OF THE COMPANY OR THE GUARANTOR OR THE PERFORMANCE OR
OBSERVANCE BY THE COMPANY OR THE GUARANTOR OF ANY OF THEIR RESPECTIVE
OBLIGATIONS UNDER THE CREDIT AGREEMENT, THE NOTES OR ANY OTHER DOCUMENT.
Section 7. Representations, Warranties, etc., of the
Assignee. The Assignee (a) represents and warrants that it has full power and
authority, and has taken all action necessary, to execute and deliver this
Agreement and any other documents contemplated hereby, to fulfill its
obligations hereunder and to consummate the transactions contemplated hereby,
and that no governmental or other consents are necessary in connection with the
foregoing, (b) represents and warrants that this Agreement constitutes its
legal, valid and binding obligation enforceable against it in accordance with
its terms, (c) confirms that it has received copies of the Credit Agreement,
the financial statements most recently delivered by the Company pursuant to the
Credit Agreement and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision with respect to its
participation in the transactions contemplated hereby, (d) affirms that it will
continue to make its own credit and other decisions with respect to taking or
not taking any action under the Credit Agreement independent of and without
reliance upon the Administrative Agent, the Agent, the Co-Agents, the Assignor
or any other Bank and based on such documents and information as it shall deem
appropriate at the time, (e) pursuant to Section 11.1 of the Credit Agreement
(or any successor section thereto) hereby appoints and authorizes the
Administrative Agent its agent to take such action on its behalf and to
exercise such powers under the Credit Agreement as are granted to the
Administrative Agent by the terms thereof, together with such powers as are
incidental thereto, (f) specifies as its Applicable Lending Office the office
set forth opposite its name on Schedule I hereto and (g) specifies as its
address for notices pursuant to the Credit Agreement, the
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Notes and the other Documents the office set forth beneath its name on the
signature pages hereof.
Section 8. Further Assurances. The Assignor and the Assignee
hereby agree to execute and deliver such other instruments, and to take such
other action, as either party may reasonably request in connection with fully
effecting the intent and purposes hereof and the transactions contemplated
hereby.
Section 9. Confidentiality. The Assignee expressly agrees
that shall keep confidential all information with respect to the Company that
was or will be furnished to it by the Company, the Assignor, the Agent, the
Co-Agents or the Administrative Agent in accordance with Section 12.7 of the
Credit Agreement.
Section 10. Notices. All communications between the parties
hereto or notices in connection herewith shall be in writing, hand-delivered or
sent by registered or certified mail, telex or facsimile with confirmation of
transmission and addressed as follows: (a) if to the Assignee, as set forth
beneath its name on the signature pages hereof and (b) if to the Assignor, as
set forth in Section 12.2 of the Credit Agreement. All such communications and
notices shall be effective upon receipt.
Section 11. Binding Effect. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns, provided, however, that neither such party shall assign
its rights hereunder without the prior written consent of the other such party
and any purported assignment, absent such consent, shall be void.
Section 12. Termination. In the event that the Assignment
Effective Date shall not have occurred by the date ____ days from the date
hereof, this Agreement shall terminate and shall be of no further force or
effect.
Section 13. Interpretations. The headings of the sections
hereof are for convenience of reference only and shall not affect the meaning
or construction of any provision hereof.
SECTION 14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
Section 15. Counterparts. This Agreement may be executed in
any number of counterparts, each of which when so executed shall be deemed an
original and all of which taken together shall constitute one and the same
document.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered by their respective duly authorized
representatives as of the date first above written.
[ASSIGNOR]
By:
--------------------------
Name:
Title:
[ASSIGNEE]
By:
--------------------------
Name:
Title:
Address for Notices:
--------------------
--------------------
--------------------
Telephone no.:
Facsimile:
Telex no.:
Receipt acknowledged as of
19
------------------, ---.
LTCB TRUST COMPANY,
as Administrative Agent
By:
-----------------------
Name:
Title:
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SCHEDULE I
[Name of Assignee] [Applicable Lending [Commitment]
Office]
[Name of Assignor] [Commitment]
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SCHEDULE II
Type of Interest Interest Date Made or Original Amount Amount
Loan Period Date Converted Principal Amount Prepaid Outstanding
------- -------- -------- ------------ ---------------- ------- -----------
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SCHEDULE 3
DESCRIPTION OF CREDIT CARD PROGRAM
The Company has established a credit card program (the "Program") with
General Electric Capital Corporation ("GE Capital"). This Program, which is
now fully operative, provides the Company's customers with a convenient way to
make purchases through the Home Shopping system and thus, expands the Company's
market. The Company is enthusiastic about the Program, too, because it permits
the Company to receive, on the day after each purchase through the Program,
99%(1) of the cash amount of that purchase. The Program should reduce the
credit card fees that the Company and its Subsidiaries currently pay if
purchasers switch from traditional credit cards to the Home Shopping credit
card, and the Company also hopes to reduce the number of purchases which are
made by personal check. Personal checks not only delay payment to the Company
but also have a fifty percent (50%) fall out rate.
The Program is created under a Credit Card Program Agreement, dated as
of February 16, 1994 (the "Program Agreement"), among the Company, GE Capital,
the Guarantor and certain other subsidiaries(2) of the Company that sell
merchandise to retail customers (the "Participating Subsidiaries"). That
Agreement was structured with due regard to the terms of the 1992 Revolving
Credit Agreement, most of which are now incorporated into the Second Amended
and Restated Credit Agreement (the "Credit Agreement").
The Program contemplates that the Company may issue credit cards
bearing its name to its customers ("Account Debtors") who satisfy GE Capital's
credit standards. GE Capital finances the charges on the credit cards subject
to the terms and conditions of the Program Agreement. Those principal terms
and conditions may be summarized as follows:
--------------------
(1) The discount rate is fixed for the first year but thereafter is tied to
interest rates and outstanding balances under the Program.
(2) The subsidiaries subject to the Program Agreement, in addition to the
Company and the Guarantor, are HSN Tours, Inc., HSN Mail Order, Inc., World
Rez, Inc., Home Shopping Club Outlet of Clearwater, Inc., Home Shopping Club
Outlet of Tampa, Inc., Home Shopping Club Outlet of Orlando, Inc., Home
Shopping Club Outlet of South Orlando, Inc., Home Shopping Club Outlet of St.
Petersburg, Inc., Home Shopping Club Outlet of West Tampa, Inc. and Home
Shopping Club Outlet of Brandon, Inc. The Company expects that the Guarantor
will comprise 98% of the sales.
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1. GE Capital will purchase from the Company and the Participating
Subsidiaries certain accounts and Indebtedness (as defined below, and related
rights, in each case up to an aggregate amount not exceeding $150,000,000 (or
such other amount to which GE Capital and the Company may from time to time
agree) at any one time. The term "Indebtedness" as used in the Program
Agreement means all obligations incurred by an Account Debtor with respect to
an account, whether or not billed, including, without limitation, charges for
merchandise purchased, finance charges, charges relating to credit insurance
and any other charges with respect to an account as such charges are accrued
pursuant to GE Capital's accounting practices.
GE Capital authorizes each credit transaction at the time of purchase,
and its obligation to purchase the relevant account and Indebtedness from the
Participating Subsidiary arises upon giving that authorization. As is typical
in credit card purchases, the Company, the Guarantor or any other Participating
Subsidiary, as the case may be, will not consummate a credit card sale of
merchandise without first obtaining GE Capital's authorization. The Company
transmits sale and credit information from the Company, the Guarantor and all
Participating Subsidiaries to GE Capital on a daily basis for the preceding
day's sales and credits. GE Capital forwards to the Company, on behalf of the
Company, the Guarantor and all Participating Subsidiaries, the purchase price
for the accounts and Indebtedness purchased, net of GE Capital's fees and
adjustments for merchandise return or credits. This is done by initiating a
wire transfer for the net purchase price, which normally will occur by 3:00
p.m. on the same business day after receipt by GE Capital of the transmission
from the Company.
The purchases by GE Capital of the accounts and Indebtedness are
non-recourse; none of the Company, the Guarantor or any Participating
Subsidiary will have liability whatsoever, contingent or otherwise, with
respect to such non-recourse sales. The only exceptions are for customary
credit card chargebacks(3)
--------------------
(3) The following excerpt from the Program Agreement describes the chargeback
provisions: 'Indebtedness incurred pursuant to an Account (a) as to which the
Account Debtor has, in apparent good faith, made a claim of (i) a breach of a
representation or warranty (either express or implied) by the Company or any
Participating Subsidiary, (ii) a violation of a local, state, or federal law or
regulation by the Company or any Participating Subsidiary or (iii) failure by
the Company or any Participating Subsidiary to provide the Account Debtor with
the agreed-upon goods or services, (b) as to which the Company or any
Participating Subsidiary has accepted a return of Merchandise from an Account
Debtor or has granted a partial credit with respect to Merchandise purchased
pursuant thereto other than in the ordinary course of business, (c) with
respect to which the
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which are not cured by the Company and for special programs described in
paragraph 2 below.
2. The Program contemplates that certain accounts may be approved by
GE Capital at the special request of the Company, but only in an aggregate
amount not to exceed $150,000 at any one time. The Company, the Guarantor and
the other Participating Subsidiaries must unconditionally guarantee all amounts
due under those accounts, and accordingly, this part of the Program is known as
the "Guaranteed Program".
In addition, the Program contemplates that certain accounts that
otherwise would fail to meet GE Capital's credit standards may nonetheless be
approved by GE Capital upon the Company's election, pursuant to special credit
standards to be implemented specifically for the Company. This is known as the
"Special Program", and it is limited in amount. GE Capital is not required to
purchase accounts or Indebtedness relating to the Special Program to the extent
that any such purchase would result in the aggregate Indebtedness owed to GE
Capital, by the charge-card holders, with respect to the Special Program
exceeding the greater of (i) the lesser of (A) $10,000,000 and (B) fifty
percent (50%) of the aggregate Indebtedness owned by GE Capital with respect to
the whole Program as of the date of such purchase and (ii) twenty percent (20%)
of such aggregate Indebtedness as of the date of such purchase. Special Program
accounts are sold with 95% recourse; as a result, the Company, the Guarantor
and the other Participating Subsidiaries bear the risk for losses in excess of
5% of Special Program Indebtedness.
The Program Agreement provides that a reserve account (the "Reserve
Account") will be established to secure all amounts owed to GE Capital by the
Company or any of the Participating Subsidiaries with respect to accounts which
are part of the
________________________
Account Documentation has not been forwarded to GE Capital in accordance with
Section 2.05 hereof, (d) as to which there is a breach of any representation,
warranty or covenant of the Company or any Participating Subsidiary hereunder
relating to an Account, or there would be such a breach if such representation
or warranty did not contain a requirement of materiality, (e) where an Account
Debtor has asserted that the Indebtedness was fraudulently incurred and the
claim of fraud is not frivolous, provided that such fraudulent incurrence does
not arise in connection with a fraudulent Credit Application (f) as to which
any charges have been made which have not been authorized by GE Capital
pursuant to Section 3.01(b) hereof. With respect to subsection (c) above, such
event shall not be considered RPR Indebtedness if cured or resolved by the
Company within two (2) Business Days after receiving notice from GE Capital
thereof." The Company has 25 days to cure the chargebacks with exception of
subsection (c) above.
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Special Program and part of the Guaranteed Program. The aggregate amount of
funds required to be set aside in the Reserve Account is determined in
accordance with a formula which is based on the aggregate amount of maximum
Indebtedness that could arise under the accounts in the Special Program and the
Guaranteed Program end a targeted loss rate. GE Capital will have the right to
withdraw amounts from the Reserve Account to the extent payments secured by the
Reserve Account are not otherwise paid in a timely manner to GE Capital.
3. GE Capital will service the Program and receive fees for its
services.
4. Each of the Company, the Guarantor and each of the other
Participating Subsidiaries will be jointly and severally liable for one
another's obligations pursuant to the Program Agreement, and will jointly and
severally guarantee one another's obligations to GE Capital. Since the sale of
accounts and Indebtedness under the Program is non-recourse (except as noted in
paragraphs 1 and 2 above), such joint and several liability could arise only in
the context of (i) obligations of the Company, the Guarantor or the
Participating Subsidiaries under the Special Program or the Guaranteed Program,
(ii) customary credit card chargebacks, which are routine and in the ordinary
course of business or, (iii) the Company's failure to pay fees due under the
Program Agreement, a highly unlikely scenario as GE Capital has the right to
offset such amount against the purchase price.
5. GE Capital and the Company may from time to time mutually agree to
include other Subsidiaries of the Company as parties to the Program Agreement.
6. GE Capital has been granted a security interest in the following
assets of the Company and the Participating Subsidiaries (whether now owned or
hereafter acquired):
(i) all accounts and Indebtedness which are purchased by GE Capital;
(ii) all documentation relating to the accounts and Indebtedness
purchased by GE Capital;
(iii) all general intangibles but only to the extent of guarantees,
claims, security interests or other security now held by or hereafter
granted to the Company or any Participating Subsidiary to secure payment
by any Participating Subsidiary with respect to or on account of any of
the items listed in (i) above, and all proceeds thereof;
(iv) all general intangibles consisting of credit balances and
reserves of whatever type or description created or established by GE
Capital in favor of or with respect to
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the Company or any Participating Subsidiary including, without limitation,
the Reserve Account and the balance in the Reserve Account;
(v) all accounts, accounts receivable, other receivables, all
contract rights, commercial paper, choses in action, instruments,
documents, chattel paper, general intangibles (as each of those terms
which is defined in the applicable UCC is so defined) and writings or
property, relating to accounts and Indebtedness purchased by GE Capital
pursuant to the Program Agreement;
(vi) all merchandise purchased by Account Debtors pursuant to
accounts in which GE Capital has an interest pursuant to the Program
Agreement, to the extent of the lien, if any, of the Company or any
Participating Subsidiary thereon; and
(vii) all proceeds of any of the foregoing in any form whatsoever.
The foregoing security interest is intended to secure the obligations
of the Company and the Participating Subsidiaries (present and future) to GE
Capital pursuant to the Program Agreement.
7. The Special Program and the Guaranteed Program unquestionably would
create "Indebtedness" (as defined in the Credit Agreement) in favor of GE
Capital and a Lien on the accounts sold and on the Reserve Account. The
Company can and will manage the programs in such a way that those Liens will at
all times comply with the $15,000,000 "basket" of permitted Liens and the 150%
test that are provided for in Section 9.5(i).
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EXHIBIT 10.29
HOME SHOPPING NETWORK, INC.
RETIREMENT SAVINGS PLAN
AMENDED AND RESTATED
AS OF
JANUARY 1, 1994
KALISH & WARD
TAMPA, FL
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HOME SHOPPING NETWORK, INC.
RETIREMENT SAVINGS PLAN
TABLE OF CONTENTS
ARTICLE TITLE PAGE
------- ----- ----
I DEFINITIONS . . . . . . . . . . . . . . . . . . . I - 1
II NAME AND PURPOSE OF THE PLAN AND THE TRUST . . . II - 1
III PLAN ADMINISTRATOR . . . . . . . . . . . . . . . III - 1
IV ELIGIBILITY AND PARTICIPATION . . . . . . . . . . IV - 1
V CONTRIBUTIONS TO THE TRUST . . . . . . . . . . . V - 1
VI PARTICIPANTS' ACCOUNTS AND ALLOCATION
OF CONTRIBUTIONS . . . . . . . . . . . . . . . VI - 1
VII BENEFITS UNDER THE PLAN . . . . . . . . . . . . . VII - 1
VIII PAYMENT OF BENEFITS . . . . . . . . . . . . . . . VIII - 1
IX HARDSHIP AND OTHER DISTRIBUTIONS . . . . . . . . IX - 1
X INVESTMENT FUNDS . . . . . . . . . . . . . . . . X - 1
XI TRUST FUND AND EXPENSES OF ADMINISTRATION . . . . XI - 1
XII AMENDMENT AND TERMINATION . . . . . . . . . . . . XII - 1
XIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . XIII - 1
156
HOME SHOPPING NETWORK, INC.
RETIREMENT SAVINGS PLAN
This amendment and restatement of the Home Shopping Network, Inc.
Retirement Savings Plan is made and entered into this _______ day of
___________ 1994, but is effective as of January 1, 1994, except as may
otherwise be noted herein, by Home Shopping Network, Inc. (the "Company").
W I T N E S S E T H:
WHEREAS, the Company has previously adopted the Home Shopping Network,
Inc. Retirement Savings Plan; and
WHEREAS, the Company is authorized and empowered to amend the Home
Shopping Network, Inc. Retirement Savings Plan; and
WHEREAS, the Company deems it advisable and in the best interest of
the Participants to amend the Home Shopping Network, Inc. Retirement Savings
Plan to comply with current law and make other desired changes; and
WHEREAS, the Company desires to amend, restate and implement the
provisions of the Home Shopping Network, Inc. Retirement Savings Plan relating
to Section 401(k) of the Code and Section 401(m) of the Code and incorporate by
reference the employee stock ownership provisions of said plan as in effect
prior to the adoption of this amendment and restatement.
NOW, THEREFORE, the plan provisions of the Home Shopping Network, Inc.
Retirement Savings Plan relating to Section 401(k) of the Code and Section
401(m) of the Code are hereby amended and restated to read as follows:
ARTICLE I
DEFINITIONS
(a) "ACCOUNT" or "ACCOUNTS" shall mean a Participant's Employer
Contribution Account, Elective Contribution Account, Matching Contribution
Account, Qualified Non-Elective Contribution Account, Rollover Contribution
Account and/or such other accounts as may be established by the Plan
Administrator.
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(b) "ACTUAL CONTRIBUTION PERCENTAGE" shall mean, with respect to a
group of Participants for the Plan Year, the average of the Actual Contribution
Ratios (calculated separately for each member of the group) of each Participant
who is a member of such group (other than certain Family Members as described
in the definition of "Highly Compensated Employees").
(c) "ACTUAL CONTRIBUTION RATIO" shall mean the ratio of the amount
of matching contributions (including elective and qualified non-elective
contributions, if any, treated as matching contributions) made on behalf of a
Participant for a Plan Year to the amount of the Participant's special
compensation for the Plan Year taken into account for nondiscrimination testing
purposes under Section 401(m) of the Code; provided, however, that qualified
non-elective contributions, if any, may be treated as matching contributions
for this purpose only if such contributions are nonforfeitable when made,
subject to the same distribution restrictions that apply to the Participant's
elective contributions and satisfy the requirements of Section 1.401(m)-1(b)(5)
of the Treasury Regulations; provided, further, that the special compensation
taken into account for purposes of this paragraph must satisfy Section 414 of
the Code and one of the definitions described in Sections 1.414(s)-1(c)(2) and
1.414(s)-1(c)(3) of the Treasury Regulations; provided, further, that an
Employer may limit the period for which compensation is taken into account to
that portion of the Plan Year in which the Employee was an eligible Employee so
long as this limit is applied uniformly to all eligible Employees under the
Plan for the Plan Year. If no matching contributions, qualified non-elective
contributions or elective contributions are taken into account with respect to
an eligible Employee, the Actual Contribution Ratio of the Employee is zero.
For this purpose, an "eligible Employee" is any Employee who is directly or
indirectly eligible to receive an allocation of matching contributions
(including matching contributions derived from forfeitures) under the Plan for
a Plan Year as described in Section 1.401(m)-1(f)(4) of the Treasury
Regulations.
(d) "ACTUAL DEFERRAL PERCENTAGE" shall mean, with respect to a
group of Participants for the Plan Year, the average of the Actual Deferral
Ratios (calculated separately for each member of the group) of each Participant
who is a member of such group (other than certain Family Members as described
in the definition of "Highly Compensated Employees").
(e) "ACTUAL DEFERRAL RATIO" shall mean the ratio of the amount of
elective contributions (including qualified non-elective contributions, if any,
treated as elective contributions) made on behalf of a Participant for a Plan
Year to the amount of the Participant's special compensation for the Plan Year
taken into account for nondiscrimination testing purposes under Section 401(k)
of the Code; provided, however that the qualified non-elective contributions,
if any, may be treated as elective contributions for this purpose only if such
contributions are nonforfeitable when made, subject to the same distribution
restrictions that apply to a Participant's elective contributions and satisfy
the requirements of Section 1.401(k)-1(b)(5) of the Treasury Regulations;
provided, further, that the special compensation taken into account for
purposes of this paragraph must satisfy Section 414(s) of the Code and one of
the definitions described in Sections 1.414(s)-1(c)(2) and 1.414(s)-1(c)(3) of
the Treasury Regulations; provided, further, that an Employer may limit the
period for which compensation
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158
is taken into account to that portion of the Plan Year in which the Employee
was an eligible Employee so long as this limit is applied uniformly to all
eligible Employees under the Plan for the Plan Year. If an eligible Employee
makes no elective contributions, and no qualified non-elective contributions
are treated as elective contributions, the Actual Deferral Ratio of the
Employee is zero. For this purpose, an "eligible Employee" is any Employee who
is directly or indirectly eligible to make a cash or deferred election into the
Plan for all or a portion of the Plan Year as described in Section
1.401(k)-1(g)(4) of the Treasury Regulations.
(f) "ADMINISTRATOR" shall mean the Plan Administrator.
(g) "AFFILIATE" shall mean, with respect to an Employer, any
corporation other than such Employer that is a member of a controlled group of
corporations, within the meaning of Section 414(b) of the Code, of which such
Employer is a member; all other trades or businesses (whether or not
incorporated) under common control, within the meaning of Section 414(c) of the
Code, with such Employer; any service organization other than such Employer
that is a member of an affiliated service group, within the meaning of Section
414(m) of the Code, of which such Employer is a member; and any other
organization that is required to be aggregated with such Employer under Section
414(o) of the Code. For purposes of determining the limitations on Annual
Additions, the special rules of Section 415(h) of the Code shall apply.
(h) "ANNUAL ADDITIONS" shall mean, with respect to a Limitation
Year, the sum of:
(1) the amount of Employer contributions (including
elective contributions) allocated to the Participant under any defined
contribution plan maintained by an Employer or an Affiliate;
(2) the amount of the Employee's contributions (other
than rollover contributions, if any) to any contributory defined
contribution plan maintained by an Employer or an Affiliate;
(3) any forfeitures allocated to the Participant under
any defined contribution plan maintained by an Employer or an
Affiliate; and
(4) amounts allocated to an individual medical account,
as defined in Section 415(l)(2) of the Code that is part of a pension
or annuity plan maintained by an Employer or an Affiliate, and amounts
derived from contributions that are attributable to post-retirement
medical benefits allocated to the separate account of a key employee
(as defined in Section 419A(d)(3) of the Code) under a welfare benefit
plan (as defined in Section 419(e) of the Code) maintained by an
Employer or an Affiliate; provided, however, the percentage limitation
set forth in paragraph (e)(1) of Article VI shall not apply to: (A)
any contribution for medical benefits (within the meaning of Section
419A(f)(2) of the Code) after separation from service which is
otherwise treated as an "Annual Addition," or (B) any amount otherwise
treated as an "Annual Addition" under Section 415(l)(1) of the Code.
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(i) "BOARD OF DIRECTORS" and "BOARD" shall mean the board of
directors of the Company or, when required by the context, the board of
directors of an Employer other than the Company.
(j) "BREAK IN SERVICE" means a Period of Severance of twelve (12)
consecutive months. A Break in Service shall be deemed to commence on the
first day of the Period of Severance and shall be deemed to end on the day in
which the Employee again performs an Hour of Service for an Employer or an
Affiliate.
(1) Solely for purposes of determining whether a Break in
Service has occurred, in the case of an Employee who is absent from
work beyond the first anniversary of the beginning of a Period of
Severance and the absence is for maternity or paternity leave reasons,
the date the Employee incurs a Break in Service shall be the second
anniversary of the beginning of the Employee's Period of Severance.
The period between the first and second anniversary of the beginning
of the Period of Severance shall not constitute a Period of Service.
(2) For purposes of subparagraph (1), an absence from
work for maternity or paternity leave reasons means an absence by
reason of the pregnancy of the Employee, by reason of the birth of a
child of the Employee, by reason of the placement of a child with the
Employee in connection with the adoption of such child by such
Employee, or for purposes of caring for such child for a reasonable
period beginning immediately following such birth or placement.
(k) "CODE" shall mean the Internal Revenue Code of 1986, as
amended, or any successor statute. Reference to a specific section of the Code
shall include a reference to any successor provision.
(l) "COMPANY" shall mean Home Shopping Network, Inc., and its
successors.
(m) (1) "COMPENSATION" shall mean, for purposes of allocating
employer contributions under paragraph (c) of Article V and qualified
nonelective contributions under paragraph (d) of Article V, the
regular salaries and wages, commissions, bonuses and overtime pay paid
by an Employer and elective contributions made on behalf of a
Participant to this Plan or a plan described in Section 125 of the
Code, but shall not include disability payments, stock options, stock
awards, relocation expense payments, credits or benefits under this
Plan, any amount contributed to any pension, employee welfare, life
insurance or health insurance plan or arrangement, or any other fringe
benefits, deferred compensation or welfare benefits. Notwithstanding
the foregoing, for purposes of determining the limit on a
Participant's elective contributions under paragraph (a)(1)(B) of
Article V, "Compensation" shall not include bonuses.
(2) To the extent required by law, no Compensation in
excess of $200,000 (adjusted under such regulations as may be issued
by the Secretary of the Treasury) shall be taken into account for any
Employee. For Plan Years beginning on or after January 1, 1994,
"$150,000" shall be substituted for "$200,000" in the preceding
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sentence. For purposes of determining whether Compensation exceeds
$200,000 (or $150,000 for Plan Years beginning on or after January 1,
1994), if any Employee is a Family Member of a Highly Compensated
Employee who is (i) a 5% owner of an Employer, or (ii) one of the ten
Highly Compensated Employees paid the greatest amount of Compensation
during the Plan Year, then such Family Member shall not be considered
as a separate Employee and any Compensation paid to such Family Member
shall be treated as if it were paid to or on behalf of the related
Highly Compensated Employee.
(3) For purposes of making allocations of Employer
contributions pursuant to Article VI with respect to any Plan Year, no
Compensation paid by an Employer with respect to an Employee prior to
the Employee's first day of participation shall be taken into account.
(n) "EFFECTIVE DATE" of this amended and restated Plan shall mean
January 1, 1994, except as may otherwise be noted herein.
(o) "ELECTIVE CONTRIBUTION ACCOUNT" shall mean an account
established pursuant to Article VI(b) with respect to contributions made under
salary reduction arrangements pursuant to Article V.
(p) "ELIGIBILITY DATE" shall mean, effective as of April 1, 1994,
January 1, April 1, July 1 or October 1 of each year.
(q) "EMPLOYEE" shall mean any person employed by an Employer or an
Affiliate other than:
(1) a member of a collective bargaining unit if
retirement benefits were a subject of good faith bargaining between
such unit and an Employer, and
(2) a non-resident alien who does not receive earned
income from sources within the United States.
The term "Employee" shall also include any individual required to be treated as
an Employee by reason of Section 414(n) or Section 414(o) of the Code (but only
for the purposes specified in such Sections).
(r) "EMPLOYER" shall mean the Company and any subsidiary, related
corporation, or other entity that adopts this Plan.
(s) "EMPLOYER CONTRIBUTION ACCOUNT" shall mean an account
established pursuant to Article VI(b) with respect to Employer contributions
made pursuant to Article V.
(t) "FAMILY MEMBER" of a Highly Compensated Employee shall mean
such Employee's spouse, lineal descendant or ascendant, or the spouse of his
lineal descendant or ascendant; provided, however, that for purposes of
determining the limit on a Highly
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Compensated Employee's Compensation under Section 401(a)(17) of the Code, the
term "Family Member" shall include only the Employee's spouse and his lineal
descendants who have not attained age 19 before the close of the Plan Year.
(u) (1) "HIGHLY COMPENSATED EMPLOYEE" shall mean any Employee
during the Plan Year or the immediately preceding Plan Year (or
calendar year, if elected by the Employer in accordance with Treasury
regulations)
(A) who was a 5% owner of an Employer;
(B) whose Section 415 Compensation was more than
$75,000 (adjusted under such regulations as may be issued by
the Secretary of the Treasury);
(C) whose Section 415 Compensation was more than
$50,000 (adjusted under such regulations as may be issued by
the Secretary of the Treasury), and who was a member of the
"top paid group"; provided, that as used herein, "top paid
group" shall mean all Employees who are in the top 20% of the
Employer's work force on the basis of Section 415 Compensation
paid during the year; provided, further, that for purposes of
determining the number of Employees in the top paid group,
Employees described in Section 414(q)(8) of the Code shall be
excluded; or
(D) who was an officer of an Employer and
received compensation in excess of 50% of the amount in effect
under Section 415(b)(1)(A) of the Code for any such Plan Year.
(i) The number of officers shall be
limited to the lesser of (a) 50 Employees; or (b) the
greater of three Employees or 10% of all Employees.
For purposes of determining the number of officers,
Employees described in Section 414(q)(8) of the Code
shall be excluded, but such Employees shall still be
considered for the purpose of identifying particular
Employees who are officers.
(ii) If an Employer does not have at
least one officer whose Section 415 Compensation is
in excess of 50% of the amount in effect in Section
415(b)(1)(A) of the Code, then the highest paid
officer of the Employer will be treated as a Highly
Compensated Employee.
(2) In determining who is a Highly Compensated Employee,
Employees who are nonresident aliens and who receive no earned income
(within the meaning of Section 911(d)(2) of the Code) from an Employer
constituting United States source income (within the meaning of
Section 861(a)(3) of the Code) shall not be treated as Employees.
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(3) For purposes of determining who is a Highly
Compensated Employee, an Employer and any Affiliate shall be taken
into account as a single Employer.
(4) For purposes of this paragraph, the determination of
Section 415 Compensation shall be based only on Section 415
Compensation that is actually paid and shall be made by including
elective or salary reduction contributions to a plan described in
Section 125 of the Code, a plan described in Section 401(k) of the
Code, a simplified employee pension described in Section 408(k) of the
Code or a plan described in Section 403(b) of the Code.
(5) The term "Highly Compensated Employee" shall also
mean any former Employee who separated from service (or was deemed to
have separated from service) prior to the Plan Year, performs no
service for an Employer during the Plan Year, and was an actively
employed Highly Compensated Employee in the separation year or any
Plan Year ending on or after the date the Employee attained age 55.
(6) For purposes of determining whether a Participant is
a Highly Compensated Employee, if any Employee is a Family Member of a
Highly Compensated Employee who is (A) a 5% owner of an Employer, or
(B) one of the ten Highly Compensated Employees paid the greatest
amount of Compensation during the Plan Year, then such Family Member
shall not be considered as a separate Employee and any Compensation
paid to such Family Member (and any applicable benefit or contribution
on behalf of such Family Member) shall be treated as if it were paid
to or on behalf of the related Highly Compensated Employee.
(v) "HOUR OF SERVICE" shall mean an hour for which an Employee is
paid, or entitled to payment, for the performance of duties for an Employer or
an Affiliate.
(w) "KEY EMPLOYEE" shall mean any Employee or former Employee who
is at any time during the Plan Year (or was at any time during the four
preceding Plan Years) (1) an officer of an Employer (within the meaning of
Section 416(i)(1) of the Code) having an aggregate annual compensation from the
Employer and its Affiliates in excess of 50% of the amount in effect under
Section 415(b)(1)(A) of the Code for any Plan Year, (2) one of the ten
Employees owning (or considered as owning) the largest interests in an
Employer, owning more than a 1/2% interest in the Employer, and having an
aggregate annual compensation from the Employer and its Affiliates of more than
the limitation in effect under Section 415(c)(1)(A) of the Code for the
calendar year that includes the last day of the Plan Year (if two Employees
have equal interests in an Employer, the Employees having the greater annual
compensation from the Employer shall be deemed to have a larger interest), (3)
a 5% owner of an Employer (within the meaning of Section 416(i)(1)(B) of the
Code) or (4) a 1% owner of an Employer (within the meaning of Section
416(i)(1)(B) of the Code) having an aggregate annual compensation from the
Employer and its Affiliates of more than $150,000. For purposes of this
paragraph the term "compensation" shall mean an Employee's Section 415
Compensation. The determination of Section 415 Compensation shall be based
only on Section 415 Compensation that is actually paid and shall be made by
including elective or
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salary reduction contributions to a plan described in Section 125 of the Code,
a plan described in Section 401(k) of the Code, a simplified employee pension
described in Section 408(k) of the Code or a plan described in Section 403(b)
of the Code.
(x) "LIMITATION YEAR" shall mean the Plan Year.
(y) "MATCHING CONTRIBUTION ACCOUNT" shall mean an account
established pursuant to Article VI(b) with respect to contributions to this
Plan on behalf of a Participant by an Employer pursuant to paragraph (b) of
Article V.
(z) "NON-KEY EMPLOYEE" shall mean, with respect to any Plan Year,
an Employee or former Employee who is not a Key Employee (including any such
Employee who formerly was a Key Employee).
(aa) "NORMAL RETIREMENT DATE" shall mean the date on which a
Participant attains the age of 65 years.
(bb) "PARTICIPANT" shall mean any eligible Employee of an Employer
who participates in the Plan in accordance with Article IV and shall include
any former employee of an Employer who previously participated in the Plan and
who still has a balance in an Account under the Plan.
(cc) "PERIOD OF SERVICE" shall mean, with respect to an Employee,
the period (expressed in years and fractional years) beginning with the date
the Employee last commenced employment with an Employer or an Affiliate and
ending with the date that a Period of Severance begins; provided, however, that
any Period of Severance of less than twelve (12) consecutive months shall be
disregarded and such time shall be included in the Period of Service.
(1) For purposes of this paragraph,
(A) the date an Employee commenced employment is
the first day an Employee performs an Hour of Service, and
(B) fractional periods of less than a year shall
be expressed in terms of days.
(2) For purposes of determining a Participant's vested
percentage under the Plan:
(A) If an Employee incurs a Break in Service and
is thereafter reemployed by an Employer, his Periods of
Service before such date shall be added to his Periods of
Service after reemployment for purposes of determining his
vested percentage in his Matching Contribution Account and
Employer Contribution Account attributable to contributions
made after his reemployment.
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(B) Notwithstanding the provisions of
subparagraph (A), Periods of Service shall not include any
Period of Service prior to a Break in Service if the
Participant had no vested interest in the balance of his
Accounts attributable to Employer contributions at the time of
such Break in Service and if the number of consecutive Breaks
in Service equaled or exceeded the greater of five or the
number of Whole Year Periods of Service completed by the
Employee prior thereto (not including any Periods of Service
not required to be taken into consideration under this
subparagraph as a result of any prior Break in Service).
(dd) "PERIOD OF SEVERANCE" shall mean, with respect to an Employee,
the period beginning with the earlier of the date the Employee separates from
the service of an Employer or an Affiliate by reason of quitting, discharge,
death or retirement, or the date twelve (12) months after the date the Employee
separates from the service of the Employer or Affiliate for any reason other
than quitting, retirement, discharge or death (e.g., vacation, holiday,
sickness, disability, leave of absence or day off), and ending with the date
the Employee performs an Hour of Service for such Employer or an Affiliate.
(ee) "PLAN" shall mean the 401(k) retirement savings plan as herein
set forth, as it may be amended from time to time.
(ff) "PLAN ADMINISTRATOR" shall mean the Company.
(gg) "PLAN YEAR" shall mean the 12-month period ending on
December 31.
(hh) "QUALIFIED NON-ELECTIVE CONTRIBUTION ACCOUNT" shall mean an
account established pursuant to Article VI(b) with respect to Employer
qualified non-elective contributions pursuant to Article V.
(ii) "ROLLOVER CONTRIBUTION ACCOUNT" shall mean an account
established pursuant to Article VI(b) with respect to qualified rollover
contributions made pursuant to Article V.
(jj) "SECTION 415 COMPENSATION" shall mean wages, salaries, and
fees for professional services and other amounts received (without regard to
whether or not an amount is paid in cash) for personal services actually
rendered in the course of employment with the Employer to the extent that the
amounts are includable in gross income (including, but not limited to,
commissions paid salesmen, compensation for services on the basis of a
percentage of profits, commissions on insurance premiums, tips, bonuses, fringe
benefits, and reimbursements or other expense allowances under a nonaccountable
plan (as described in Section 1.62-2(c) of the Income Tax Regulations), and
excluding the following:
(1) Employer contributions to a plan of deferred
compensation which are not includable in the Employee's gross income
for the taxable year in which contributed, or Employer contributions
under a simplified employee pension plan to the extent such
contributions are deductible by the Employee, or any distributions
from a plan of deferred compensation;
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(2) Amounts realized from the exercise of a non-qualified
stock option, or when restricted stock (or property) held by the
Employee either becomes freely transferable or is no longer subject to
a substantial risk of forfeiture;
(3) Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock option; and
(4) Other amounts which received special tax benefits, or
contributions made by the Employer (whether or not under a salary
reduction agreement) towards the purchase of an annuity contract
described in Section 403(b) of the Code (whether or not the
contributions are actually excludable from the gross income of the
Employee).
(kk) "TOP HEAVY PLAN" shall mean this Plan if the aggregate account
balances (not including voluntary rollover contributions made by any
Participant from an unrelated plan) of the Key Employees and their
beneficiaries for such Plan Year exceed 60% of the aggregate account balances
(not including voluntary rollover contributions made by any Participant from an
unrelated plan) for all Participants and their beneficiaries. Such values
shall be determined for any Plan Year as of the last day of the immediately
preceding Plan Year (or, for the first Plan Year, the last day of the first
Plan Year). The account balances on any determination date shall include the
aggregate distributions made with respect to Participants during the five-year
period ending on the determination date. For the purposes of this definition,
the aggregate account balances for any Plan Year shall include the account
balances and accrued benefits of all retirement plans qualified under Section
401(a) of the Code with which this Plan is required to be aggregated to meet
the requirements of Section 401(a)(4) or 410 of the Code (including terminated
plans that would have been required to be aggregated with this Plan) and all
plans of an Employer or an Affiliate in which a Key Employee participates; and
such term may include (at the discretion of the Plan Administrator) any other
retirement plan qualified under Section 401(a) of the Code that is maintained
by an Employer or an Affiliate, provided the resulting aggregation group
satisfies the requirements of Sections 401(a) and 410 of the Code. All
calculations shall be on the basis of actuarial assumptions that are specified
by the Plan Administrator and applied on a uniform basis to all plans in the
applicable aggregation group. The account balance of any Participant shall not
be taken into account if:
(1) he is a Non-Key Employee for any Plan Year, but was a
Key Employee for any prior Plan Year, or
(2) he has not performed any service for an Employer
during the five-year period ending on the determination date.
(ll) "TRUST" shall mean the trust established by the Trust
Agreement.
(mm) "TRUST AGREEMENT" shall mean the agreement providing for the
Trust Fund, as it may be amended from time to time.
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(nn) "TRUSTEE" shall mean the individual, individuals or
corporation designated as trustee under the Trust Agreement.
(oo) "TRUST FUND" shall mean the trust fund established under the
Trust Agreement from which the amounts of supplementary compensation provided
for by the Plan are to be paid or are to be funded.
(pp) "VALUATION DATE" shall mean the last day of each year and on
each day of the Plan Year on which securities are traded on a national stock
exchange.
(qq) "WHOLE YEAR PERIOD OF SERVICE" shall mean the number of whole
years included in an Employee's Periods of Service determined by aggregating
all his years and days of service and converting days into years based upon the
assumption that a year includes 365 days. Any Period of Service remaining
after the aggregation that totals less than 365 days shall be disregarded in
determining an Employee's number of Whole Year Periods of Service.
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ARTICLE II
NAME AND PURPOSE OF THE PLAN AND THE TRUST
(a) NAME OF PLAN. A retirement savings plan as described in
Section 401(k) of the Code is hereby amended and restated in accordance with
the terms hereof and shall be known as the "HOME SHOPPING NETWORK, INC.
RETIREMENT SAVINGS PLAN." The employee stock ownership provisions of this Plan
as of in effect prior to the adoption of this amendment and restatement are
hereby incorporated into this Plan by reference and made a part hereof.
(b) EXCLUSIVE BENEFIT. This Plan is created for the sole purpose
of providing benefits to the Participants and enabling them to share in the
growth of their Employer. Except as otherwise permitted by law, in no event
shall any part of the principal or income of the Trust be paid to or reinvested
in any Employer or be used for or diverted to any purpose whatsoever other than
for the exclusive benefit of the Participants and their beneficiaries.
(c) MISTAKE OF FACT. Notwithstanding the foregoing provisions of
paragraph (b), any contribution made by an Employer to this Plan by a mistake
of fact may be returned to the Employer within one year after the payment of
the contribution; and any contribution made by an Employer that is conditioned
upon the deductibility of the contribution under Section 404 of the Code (each
contribution shall be presumed to be so conditioned unless the Employer
specifies otherwise) may be returned to the Employer if the deduction is
disallowed and the contribution is returned (to the extent disallowed) within
one year after the disallowance of the deduction.
(d) PARTICIPANTS' RIGHTS. The establishment of this Plan shall
not be considered as giving any Employee, or any other person, any legal or
equitable right against any Employer, any Affiliate, the Plan Administrator,
the Trustee or the principal or the income of the Trust, except to the extent
otherwise provided by law. The establishment of this Plan shall not be
considered as giving any Employee, or any other person, the right to be
retained in the employ of any Employer or any Affiliate.
(e) QUALIFIED PLAN. This Plan and the Trust are intended to
qualify under the Code as a tax-free employees' plan and trust, and the
provisions of this Plan and the Trust should be interpreted accordingly.
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ARTICLE III
PLAN ADMINISTRATOR
(a) ADMINISTRATION OF THE PLAN. The Plan Administrator shall
control and manage the operation and administration of the Plan, except with
respect to investments. The Administrator shall have no duty with respect to
the investments to be made of the funds in the Trust except as may be expressly
assigned to it by the terms of the Trust Agreement.
(b) POWERS AND DUTIES. The Administrator shall have complete
control over the administration of the Plan herein embodied, with all powers
necessary to enable it to carry out its duties in that respect. Not in
limitation, but in amplification of the foregoing, the Administrator shall have
the power and discretion to interpret or construe this Plan and to determine
all questions that may arise as to the status and rights of the Participants
and others hereunder.
(c) DIRECTION OF TRUSTEE. It shall be the duty of the
Administrator to direct the Trustee with regard to the allocation and the
distribution of the benefits to the Participants and others hereunder.
(d) SUMMARY PLAN DESCRIPTION. The Administrator shall prepare or
cause to be prepared a summary plan description (if required by law) and such
periodic and annual reports as are required by law.
(e) DISCLOSURE. At least once each year, the Administrator shall
furnish to each Participant a statement containing the value of his interest in
the Trust Fund and such other information as may be required by law.
(f) CONFLICT IN TERMS. The Administrator shall notify each
Employee, in writing, as to the existence of the Plan and Trust and the basic
provisions thereof. In the event of any conflict between the terms of this
Plan and Trust as set forth in this Plan and Trust Agreement and as set forth
in any explanatory booklet or other description, this Plan and Trust Agreement
shall control.
(g) NONDISCRIMINATION. The Administrator shall not take any
action or direct the Trustee to take any action whatsoever that would result in
unfairly benefiting one Participant or group of Participants at the expense of
another or in improperly discriminating between Participants similarly situated
or in the application of different rules to substantially similar sets of
facts.
(h) RECORDS. The Administrator shall keep a complete record of
all its proceedings as such Administrator and all data necessary for the
administration of the Plan. All of the foregoing records and data shall be
located at the principal office of the Administrator.
(i) FINAL AUTHORITY. Except to the extent otherwise required by
law, the decision of the Administrator in matters within its jurisdiction shall
be final, binding and conclusive
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upon each Employer and each Employee, member and beneficiary and every other
interested or concerned person or party.
(j) CLAIMS.
(1) Claims for benefits under the Plan may be made by a
Participant or a beneficiary of a Participant on forms supplied by the
Plan Administrator. Written notice of the disposition of a claim
shall be furnished to the claimant by the Administrator within ninety
(90) days after the application is filed with the Administrator,
unless special circumstances require an extension of time for
processing, in which event action shall be taken as soon as possible,
but not later than one hundred eighty (180) days after the application
is filed with the Administrator; and, in the event that no action has
been taken within such ninety (90) or one hundred eighty (180) day
period, the claim shall be deemed to be denied for the purposes of
subparagraph (2). In the event that the claim is denied, the denial
shall be written in a manner calculated to be understood by the
claimant and shall include the specific reasons for the denial,
specific references to pertinent Plan provisions on which the denial
is based, a description of the material information, if any, necessary
for the claimant to perfect the claim, an explanation of why such
material information is necessary and an explanation of the claim
review procedure.
(2) If a claim is denied (either in the form of a written
denial or by the failure of the Plan Administrator, within the
required time period, to notify the claimant of the action taken), a
claimant or his duly authorized representative shall have sixty (60)
days after the receipt of such denial to petition the Plan
Administrator in writing for a full and fair review of the denial,
during which time the claimant or his duly authorized representative
shall have the right to review pertinent documents and to submit
issues and comments in writing. The Plan Administrator shall promptly
review the claim and shall make a decision not later than sixty (60)
days after receipt of the request for review, unless special
circumstances require an extension of time for processing, in which
event a decision shall be rendered as soon as possible, but not later
than one hundred twenty (120) days after the receipt of the request
for review. If such an extension is required because of special
circumstances, written notice of the extension shall be furnished to
the claimant prior to the commencement of the extension. The decision
of the review shall be in writing and shall include specific reasons
for the decision, written in a manner calculated to be understood by
the claimant, with specific references to the Plan provisions on which
the decision is based.
(k) APPOINTMENT OF ADVISORS. The Administrator may appoint such
accountants, counsel (who may be counsel for an Employer), specialists and
other persons that it deems necessary and desirable in connection with the
administration of this Plan. The Administrator, by action of its Board of
Directors, may designate one or more of its Employees to perform the duties
required of the Administrator hereunder.
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ARTICLE IV
ELIGIBILITY AND PARTICIPATION
(a) ELIGIBILITY AND PARTICIPATION. Any Employee of an Employer
shall be eligible to become a Participant in the Plan upon completing one Whole
Year Period of Service and attaining the age of 21. Any such eligible Employee
shall enter the Plan as a Participant, if he is still an Employee of an
Employer, on the first Eligibility Date concurring therewith or occurring
thereafter.
(b) FORMER EMPLOYEES.
(1) An Employee who ceases to be a Participant and who
subsequently reenters the employ of an Employer shall be eligible
again to become a Participant on the date of his reemployment.
(2) An Employee who satisfies the eligibility
requirements set forth above and who terminates employment with the
Employer prior to becoming a Participant will become a Participant on
the later of the Eligibility Date on which he would have entered the
Plan had he not terminated employment or the date of his reemployment.
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ARTICLE V
CONTRIBUTIONS TO THE TRUST
(a) PARTICIPANTS' ELECTIVE CONTRIBUTIONS.
(1) The Employer shall contribute to the Trust, on behalf
of each Participant, an elective contribution as specified in a
written salary reduction agreement (if any) between the Participant
and such Employer; provided, however, that such contribution for a
Participant shall not exceed the lesser of
(A) $7,000 or the amount specified in Section
402(g) of the Code (adjusted under such regulations as may be
issued from time to time by the Secretary of the Treasury)
with respect to any calendar year, or
(B) 16% of the Participant's Compensation for
such Plan Year.
(2) The minimum deferral percentage made on behalf of a
Participant electing to make a contribution for any Plan Year shall be
1% of his Compensation.
(3) If a Participant's elective contributions, together
with any elective contributions by the Participant to any other plans
intended to qualify under Sections 401(k), 403(b) or 457 of the Code,
exceed the limitation set forth in paragraph (a)(1) of this Article V,
the Administrator shall refund to such Participant the portion of such
excess that is attributable to elective contributions to the Plan,
plus the earnings thereon. The Plan Administrator may use any
reasonable method for computing the income allocable to such excess,
provided that the method does not violate Section 401(a)(4) of the
Code, is used consistently for all Participants and for all corrective
distributions under the Plan for the Plan Year, and is used by the
Plan for allocating income to Participants' Accounts. Any such refund
shall be made on or before April 15 of the Plan Year following the
Plan Year in which excess elective contribution is made. The amount
of excess elective contributions that may be distributed under this
paragraph (a)(3) with respect to a Participant for any taxable year
shall be reduced by any excess elective contributions previously
distributed pursuant to paragraph (a)(7) with respect to such
Participant for the Plan Year ending with or within such taxable year.
(4) Any salary reduction agreement shall be executed and
in effect prior to the first day of the first pay period to which it
applies. Any such agreement may be revised by the Participant, with
the approval of the Administrator, as of any Eligibility Date for pay
periods ending after the date such revision is executed and made
effective.
(5) A Participant may suspend further elective
contributions to the Plan at any time, provided the request for such
suspension is received by the Plan Admin-
V - 1.
172
istrator prior to the first day of the first pay period to which such
suspension applies. Any Participant who suspends further
contributions relating to periodic pay may reinstate such
contributions by providing written notice to the Plan Administrator
prior to any Eligibility Date thereafter.
(6) (A) The Administrator may establish such other
rules and procedures regarding Participant salary reduction
agreements and elective contributions as it deems necessary,
which rules and procedures shall be applied in a uniform,
nondiscriminatory manner.
(B) The Administrator shall have the right to
require any Participant to reduce his elective contributions
under any such agreement, or to refuse deferral of all or part
of the amount set forth in such agreement, if necessary to
comply with the requirements of this Plan and the Code.
(C) Any Employee who is a director or "officer"
(as defined in Rule 16a-1(f) under the Securities Exchange Act
of 1934) of the Company who receives a distribution from the
Plan or suspends his elective contributions under the Plan
shall not be permitted to make further elective contributions
under the Plan for a period of at least 6 months following the
distribution or the suspension of his elective contributions.
(7) (A) In the event that the elective contributions
of Highly Compensated Employees exceed the limitations set
forth in paragraph (e), such excess (plus the earnings
thereon), determined as set forth below, may be distributed to
the Highly Compensated Employees on or before the 15th day of
the third month after the close of the Plan Year to which the
excess contributions relate. Notwithstanding the preceding
sentence, the Plan Administrator shall in no event delay the
distribution of any excess elective contributions (plus the
earnings thereon) beyond the date that is 12 months after the
close of the Plan Year to which the excess contributions
relate.
(B) (i) The amount of such excess for a Highly
Compensated Employee for the Plan Year shall be
determined by reducing the Actual Deferral Ratio of
the Highly Compensated Employee with the highest
Actual Deferral Ratio to the extent required to
a. enable the arrangement to
satisfy the limitations set forth in
paragraph (e), or
b. cause such Highly Compensated
Employee's Actual Deferral Ratio to equal the
Actual Deferral Ratio of the Highly
Compensated Employee with the next highest
Actual Deferral Ratio.
V - 2.
173
This process shall be repeated until the arrangement
satisfies the limitations set forth in paragraph (e).
(ii) For each Highly Compensated
Employee, the amount of such excess shall be deemed
to equal
a. the total elective
contributions, plus qualified non-elective
contributions, if any, that are treated as
elective contributions, on behalf of the
Participant (determined prior to the
application of this paragraph (a)(7)), minus
b. the amount determined by
multiplying the Participant's Actual Deferral
Ratio (determined after application of this
paragraph (a)(7)) by his Compensation used in
determining such ratio.
(C) The amount of excess elective
contributions that may be distributed under this
paragraph (a)(7) with respect to a Participant for a
Plan Year shall be reduced by any excess elective
contributions previously distributed to such
Participant under paragraph (a)(3) for the
Participant's taxable year ending with or within such
Plan Year.
(D) The Plan Administrator may use any
reasonable method for computing the income allocable
to excess contributions, provided that the method
does not violate Section 401(a)(4) of the Code, is
used consistently for all Participants and for all
corrective distributions under the Plan for the Plan
Year, and is used by the Plan for allocating income
to Participants' Accounts.
(E) In the case of a Highly Compensated
Employee whose Actual Deferral Ratio is determined
under the family aggregation rules set forth in
paragraph (e)(3), the determination of the amount of
excess elective contributions shall be made by
reducing the Actual Deferral Ratio in accordance with
this subparagraph (a)(7) and allocating the excess
among the Family Members in proportion to the
elective contributions of each of the Family Members
that have been combined.
(b) MATCHING CONTRIBUTIONS.
(1) The Company may authorize a matching contribution
equal to 100% of the amount of the elective contribution made to the
Plan by a Participant for the Plan Year and the Employer may
contribute to the Trust on behalf of each Participant for whom an
elective contribution is made during the Plan Year the amount of the
matching contribution authorized by the Company; provided, however,
that no matching contribution will be made with respect to a
Participant's elective contribution
V - 3.
174
that exceeds 6% of his Compensation for the Plan Year; provided,
further, that no matching contribution made on behalf of a Participant
for the Plan Year shall exceed $520, unless otherwise determined by
the Board of Directors of the Company.
(2) No matching contribution shall be required for the
portion of a Participant's elective contribution (A) that is subject
to the refund requirements of paragraphs (a)(3) and (a)(7) or (B) that
exceeds the limitations of paragraph (e) of Article VI.
(3) Any matching contribution made by an Employer on
account of an elective contribution that has been refunded pursuant to
paragraph (a)(3) or paragraph (a)(7), above, or distributed to satisfy
the limitations set forth in paragraph (e) of Article VI shall be
forfeited and used to reduce Employer contributions as of the end of
the Plan Year in which the forfeiture occurs.
(4) In the event that the matching contributions of
Highly Compensated Employees exceed the limitations of paragraph (e):
(A) The nonvested portion of such excess
(including earnings thereon), if any, shall be forfeited and
used to reduce Employer contributions under this Article V.
(B) The vested portion of such excess (including
earnings thereon), if any, shall be distributed to the Highly
Compensated Employees on or before the 15th day of the third
month after the close of the Plan Year to which the matching
contributions relate. Notwithstanding the preceding sentence,
the Plan Administrator shall in no event delay the
distribution of any excess matching contributions (plus the
earnings thereon) beyond the date that is 12 months after the
close of the Plan Year to which the excess contributions
relate.
(C) The amount of such excess for a Highly
Compensated Employee for the Plan Year shall be determined by
the following leveling method, under which the Actual
Contribution Ratio of the Highly Compensated Employee with the
highest Actual Contribution Ratio is reduced to the extent
required to
(i) enable the Plan to satisfy the
limitations set forth in paragraph (e), or
(ii) cause such Highly Compensated
Employee's Actual Contribution Ratio to equal the
Actual Contribution Ratio of the Highly Compensated
Employee with the next highest Actual Contribution
Ratio.
This process shall be repeated until the Plan satisfies the
limitations set forth in paragraph (e). For each Highly
Compensated Employee, the amount of
V - 4.
175
such excess is equal to the total matching contributions, plus
elective contributions, if any, treated as matching
contributions, on behalf of the Employee (determined prior to
the application of this paragraph (b)(4)(C)) minus the amount
determined by multiplying the Employee's Actual Contribution
Ratio (determined after application of this paragraph
(b)(4)(C)) by his Compensation used in determining such ratio.
(D) In determining the amount of such excess,
Actual Contribution Ratios shall be rounded to the nearest
one-hundredth of one percent of the Employee's Compensation.
(E) In no case shall the amount of such excess
with respect to any Highly Compensated Employee exceed the
amount of matching contributions on behalf of such Highly
Compensated Employee for such Plan Year.
(F) The Plan Administrator may use any reasonable
method for computing the income allocable to excess
contributions, provided that the method does not violate
Section 401(a)(4) of the Code, is used consistently for all
Participants and for all corrective distributions under the
Plan for the Plan Year, and is used by the Plan for allocating
income to Participants' Accounts.
(G) In the case of a Highly Compensated Employee
whose Actual Contribution Ratio is determined under the family
aggregation rules set forth in paragraph (e)(3), the
determination of the amount of the excess shall be made by
reducing the Actual Contribution Ratio in accordance with this
subparagraph (b)(4) and allocating the excess among the Family
Members in proportion to the contribution made on behalf of
each of the Family Members that have been combined.
(c) EMPLOYER CONTRIBUTIONS. An Employer, at the discretion of its
Board of Directors, may make contributions to the Employer Contribution
Accounts of Participants.
(d) QUALIFIED NON-ELECTIVE CONTRIBUTIONS. An Employer, at the
discretion of its Board of Directors, may make qualified non-elective
contributions (as described in Section 1.401(k)-1(g)(13) or 1.401(m)-1(f)(15)
of the Income Tax Regulations) to the Qualified Non-Elective Contribution
Accounts of Participants.
(e) ACTUAL DEFERRAL PERCENTAGE AND ACTUAL CONTRIBUTION PERCENTAGE
TESTS. The amounts contributed as elective and matching contributions shall be
limited as follows:
(1) Actual Deferral Percentage:
(A) The Actual Deferral Percentage for the group
of Highly Compensated Employees for a Plan Year shall not
exceed the Actual Deferral Percentage for the group of all
other eligible Employees multiplied by 1.25, or
V - 5.
176
(B) The excess of the Actual Deferral Percentage
for the group of Highly Compensated Employees for a Plan Year
over the Actual Deferral Percentage for the group of all other
eligible Employees shall not exceed two (2) percentage points
(or such lesser amount as may be required by the Secretary of
the Treasury, through regulations or otherwise); and the
Actual Deferral Percentage for the group of Highly Compensated
Employees shall not exceed the Actual Deferral Percentage for
the group of all other eligible Employees, multiplied by 2.0;
and
(2) Actual Contribution Percentage:
(A) The Actual Contribution Percentage for the
group of Highly Compensated Employees for a Plan Year shall
not exceed the Actual Contribution Percentage for the group of
all other eligible Employees, multiplied by 1.25, or
(B) The excess of the Actual Contribution
Percentage for the group of Highly Compensated Employees for a
Plan Year over the Actual Contribution Percentage for the
group of all other eligible Employees shall not exceed two (2)
percentage points (or such lesser amount as may be required by
the Secretary of the Treasury, through regulations or
otherwise), and the Actual Contribution Percentage for the
group of Highly Compensated Employees shall not exceed the
Actual Contribution Percentage for the group of all other
eligible Employees, multiplied by 2.0.
(3) (A) For purposes of this paragraph (e), if two or
more plans of an Employer to which elective contributions or
matching contributions are made are elected by the Employer to
be treated as one Plan for purposes of Section 410(b)(6) of
the Code, such plans shall be treated as a single plan for
purposes of determining the Actual Deferral Percentage and the
Actual Contribution Percentage.
(B) For purposes of determining the Actual
Deferral Ratio and the Actual Contribution Ratio of a Highly
Compensated Employee who is (i) a 5% owner of an Employer, or
(ii) one of the ten Highly Compensated Employees paid the
greatest amount of Compensation during the Plan Year, to the
extent required by Section 414(q)(6) of the Code, the elective
contributions, matching contributions and Compensation of such
Highly Compensated Employee's Family Members shall be
considered the elective contributions, matching contributions
and Compensation of such Highly Compensated Employee.
(C) The Actual Deferral Ratio of a Highly
Compensated Employee who is eligible to participate in more
than one cash or deferred arrangement maintained by an
Employer shall be determined by treating all such cash or
deferred arrangements in which the Employee is eligible to
participate (other
V - 6.
177
than arrangements that may not be permissively aggregated) as
a single arrangement.
(4) An elective contribution will be taken into account
in determining the Actual Deferral Percentage only if it relates to
Compensation that either would have been received by the Employee in
the Plan Year but for the Employee's election to defer under the cash
or deferred arrangement or is attributable to services performed by
the Employee in the Plan Year and, but for the Employee's election to
defer, would have been received by the Employee within 2 1/2 months
after the close of the Plan Year.
(5) If the Plan Administrator determines, in accordance
with the provisions of Section 1.401(m)-2 of the Treasury Regulations,
that a multiple use of the alternative limitation has occurred, such
multiple use shall be corrected by reducing the Actual Contribution
Percentage of Highly Compensated Employees in the manner described in
Section 1.401(m)-2(c) of the Treasury Regulations and paragraph (b) of
this Article V. The provisions of Section 1.401(m)-2 of the Treasury
Regulations are incorporated herein by reference.
(f) FORM AND TIMING OF CONTRIBUTIONS. Payments on account of the
contributions due from an Employer for any Plan Year shall be made in cash
and/or qualifying employer securities (as defined in Section 407(d)(5) of the
Employee Retirement Income Security Act of 1974, as amended form time to time)
to the Trustee. Such payments may be made by a contributing Employer at any
time, but payment of the Employer contributions for any Plan Year shall be
completed on or before the time prescribed by law, including extensions
thereof, for filing such Employer's federal income tax return for its taxable
year with which or within which such Plan Year ends. Payment of any elective
contribution shall be made within ninety (90) days after it is withheld from a
Participant's pay.
(g) ROLLOVER CONTRIBUTIONS. Each Employee at any time during a
Plan Year, with the consent of the Plan Administrator and in such manner as
prescribed by the Plan Administrator, may pay or cause to be paid to the
Trustee a rollover contribution (as defined in the applicable sections of the
Code).
(h) NO DUTY TO INQUIRE. The Trustee shall have no right or duty
to inquire into the amount of any contribution made by an Employer or any
Participant or the method used in determining the amount of any such
contribution, or to collect the same, but the Trustee shall be accountable only
for funds actually received by it.
V - 7.
178
ARTICLE VI
PARTICIPANTS' ACCOUNTS AND ALLOCATION OF CONTRIBUTIONS
(a) COMMON FUND. The assets of the Trust shall constitute a
common fund in which each Participant shall have an undivided interest.
(b) ESTABLISHMENT OF ACCOUNTS.
(1) The Plan Administrator shall establish and maintain
with respect to each Participant an account, designated as an Employer
Contribution Account, Elective Contribution Account, Matching
Contribution Account and Qualified Non-Elective Contribution Account.
In addition, for each Participant who has made a rollover contribution
pursuant to Article V, the Plan Administrator shall establish and
maintain a Rollover Contribution Account.
(2) The Plan Administrator may establish such additional
Accounts as are necessary to reflect a Participant's interest in the
Trust Fund.
(c) INTERESTS OF PARTICIPANTS. The interest of a Participant in
the Trust Fund shall be the vested balance remaining from time to time in his
Accounts after making the adjustments required in paragraph (d).
(d) ADJUSTMENTS TO ACCOUNTS. Subject to the provisions of
paragraph (e), the Accounts of a Participant shall be adjusted from time to
time as follows:
(1) First, the value of a Participant's Accounts shall be
converted into units or shares;
(2) Next, contributions made on each Valuation Date shall
be credited in accordance with the following and shall be used to
purchase additional units or shares:
(A) The Elective Contribution Account of a
Participant shall be credited with any elective contributions
not previously credited.
(B) The Matching Contribution Account of a
Participant shall be credited with any matching contributions
not previously credited; provided, however, that a Participant
shall not be entitled to share in the matching contribution
unless he is actively employed during the pay period with
respect to which the matching contribution is made.
(C) The Employer Contribution Account of a
Participant shall be credited with his share of the
contribution made by his Employer not previously credited.
VI - 1.
179
(i) The contribution made by an Employer
shall be credited to the Employer Contribution
Accounts of Participants, pro rata, according to the
Compensation paid to such Participants for the Plan
Year to which such contribution relates.
(ii) Notwithstanding the foregoing, a
Participant shall not be entitled to share in the
contribution unless he is actively employed during
the last pay period of the Plan Year.
(iii) Notwithstanding the foregoing, if
this Plan would otherwise fail to meet the
requirements of Section 401(a)(26) or 410(b) of the
Code and the regulations thereunder because
contributions have not been credited to a sufficient
number or percentage of Participants for a Plan Year,
then the following rules shall apply:
a. The group of Participants
eligible to share in the contribution for the
Plan Year shall be expanded to include the
minimum number of Participants who would not
otherwise be eligible as are necessary to
satisfy the applicable requirements specified
above. The specific Participants who shall
become eligible under the terms of this
subparagraph shall be those who are employed
by an Employer on the last day of the Plan
Year and, when compared to similarly situated
Participants, have completed the greatest
amount of service in the Plan Year.
b. If after application of
subparagraph (C)(iii)a. above, the applicable
requirements are still not satisfied, then
the group of Participants eligible to share
in the contribution for the Plan Year shall
be further expanded to include the minimum
number of Participants who are not employed
by an Employer on the last day of the Plan
Year as are necessary to satisfy the
applicable test. The specific Participants
who shall become eligible to share shall be
those Participants, when compared to
similarly situated Participants, who have
completed the greatest amount of service in
the Plan Year before terminating employment.
c. Nothing in this subparagraph
(C)(iii) shall permit the reduction of a
Participant's accrued benefit. Therefore,
any amounts that have previously been
credited to Participants may not be adjusted
to satisfy these requirements. In such
event, the Company shall make an additional
contribution equal to the amount such
affected Participants would have received had
they been included in the credits, even if it
exceeds the amount which would be deductible
under Section 404 of the Code. Any
adjustment to the credits pursuant to this
subparagraph (C)(iii)
VI - 2.
180
shall be considered a retroactive amendment
adopted by the last day of the Plan Year.
(D) The Qualified Non-Elective Contribution
Account of a Participant shall be credited with his share of
the qualified non-elective contribution and not previously
credited as follows:
(i) The amount of the qualified
non-elective contribution shall be credited to the
Qualified Non-Elective Contribution Accounts of
Participants as selected by the Plan Administrator,
pro rata, according to the Compensation paid to them,
respectively, by the Employer for the Plan Year to
which such contribution relates.
(ii) A Participant who is a Highly
Compensated Employee or a Family Member of certain
Highly Compensated Employees as described in Article
I shall not be entitled to share in the qualified
non-elective contribution.
(E) The Rollover Contribution Account of a
Participant shall be credited with any rollover contributions
not previously credited.
(F) Elective, Employer (matching and
non-matching) and qualified non-elective contributions shall
be attributable to the Plan Year with respect to which such
contributions relate.
(3) Finally, the amount of distributions, withdrawals or
transfers between investment funds, or other fees not previously
charged to the Participant's Accounts shall be charged to the
appropriate Accounts of the Participant and the number of units or
shares equal in value to the amount paid from the Participant's
Accounts shall be deducted from the Participant's outstanding units or
shares.
(4) For each Plan Year in which this Plan is a Top Heavy
Plan, a Participant who is employed by an Employer on the last day of
such Plan Year and who is a Non-Key Employee for such Plan Year shall
be entitled to receive a combined credit of contributions and
forfeitures to his Employer Contribution Account and his Qualified
Non-Elective Contribution Account equal in the aggregate to at least
three percent (3%) of his Section 415 Compensation (or, if less, the
highest percentage of such Section 415 Compensation credited to a Key
Employee's Account hereunder, as well as his employer contribution
accounts under any other defined contribution plan maintained by such
Employer or an Affiliate, including any elective contribution to any
plan subject to Section 401(k) of the Code), regardless of whether
such Plan Year constitutes a Whole Year Period of Service for such
Participant, except to the extent such a contribution is made by an
Employer or an Affiliate on behalf of the Employee for the Plan Year
to any other defined contribution plan maintained by such Employer or
Affiliate.
VI - 3.
181
(5) The Plan Administrator also may adopt such additional
accounting procedures as are necessary to accurately reflect each
Participant's interest in the Trust Fund, which procedures shall be
effective upon approval by the Employer. All such procedures shall be
applied in a consistent and nondiscriminatory manner.
(6) For purposes of all computations required by this
Article VI, the accrual method of accounting shall be used, and the
Trust Fund and the assets thereof shall be valued at their fair market
value as of each Valuation Date.
(e) LIMITATION ON ALLOCATION OF CONTRIBUTIONS.
(1) Notwithstanding anything contained in this Plan to
the contrary, the aggregate Annual Additions to a Participant's
Accounts under this Plan and under any other defined contribution
plans maintained by an Employer or an Affiliate for any Limitation
Year shall not exceed the lesser of $30,000 (or, if greater, one
quarter of the dollar limitation in effect under Section 415(b)(1)(A)
of the Code) or 25% of the Participant's Section 415 Compensation for
such Plan Year.
(2) In the event that the Annual Additions, under the
normal administration of the Plan, would otherwise exceed the limits
set forth above for any Participant, or in the event that any
Participant participates in both a defined benefit plan and a defined
contribution plan maintained by any Employer or any Affiliate and the
aggregate annual additions to and projected benefits under all of such
plans, under the normal administration of such plans, would otherwise
exceed the limits provided by law, then the Plan Administrator shall
take such actions, applied in a uniform and nondiscriminatory manner,
as will keep the annual additions and projected benefits for such
Participant from exceeding the applicable limits provided by law.
Excess Annual Additions shall be disposed of as provided in
subparagraph (3). Adjustments shall be made to all other plans, if
necessary to comply with such limits, before any adjustments may be
made to this Plan.
(3) If as a result of the allocation of forfeitures, a
reasonable error in estimating a Participant's Section 415
Compensation, a reasonable error in determining the amount of elective
contributions that may be made with respect to any Participant under
the limits of Section 415 of the Code, or other circumstances
permitted under Section 415 of the Code, the Annual Additions
attributable to Employer contributions for a particular Participant
would cause the limitations set forth in this paragraph (e) to be
exceeded, the excess amount shall be deemed first to consist of
elective contributions, which excess shall be returned to the
Participant. Any remaining excess amount shall be used to reduce
Employer contributions for the next Plan Year (and succeeding Plan
Years, as necessary) for that Participant if that Participant is
covered by the Plan as of the end of the Plan Year. If the
Participant is not covered by the Plan as of the end of the Plan Year,
such excess amount shall be held unallocated in a suspense account for
the Plan Year and reallocated among the Participants as of the end of
the next Plan Year to all of the Participants in the Plan in the same
manner as an Employer contribution under the terms of paragraph (d) of
VI - 4.
182
this Article VI before any further Employer contributions are
allocated to the Accounts of the Participants, and such allocations
shall be treated as Annual Additions to the Accounts of the
Participants. In the event that the limits on Annual Additions for
any Participant would be exceeded before all of the amounts in the
suspense account are allocated among the Participants, then such
excess amounts shall be retained in the suspense account to be
reallocated as of the end of the next Plan Year and any succeeding
Plan Years until all amounts in the suspense account are exhausted.
VI - 5.
183
ARTICLE VII
BENEFITS UNDER THE PLAN
(a) RETIREMENT BENEFIT
(1) A Participant shall be entitled to retire from the
employ of his Employer upon such Participant's Normal Retirement Date.
Until a Participant actually retires from the employ of his Employer,
he shall continue to be treated in all respects as a Participant.
(2) Upon the retirement of a Participant as provided in
subparagraph (1), such Participant shall be entitled to a retirement
benefit in an amount equal to 100% of the balance in his Accounts as
of the date of distribution of his benefit.
(b) DISABILITY BENEFIT
(1) In the event a Participant's employment with his
Employer is terminated by reason of his total and permanent
disability, such Participant shall be entitled to a disability benefit
in an amount equal to 100% of the balance in his Accounts as of the
date of distribution of his benefit.
(2) Total and permanent disability shall mean the total
incapacity of a Participant to perform the usual duties of his
employment with his Employer and will be deemed to have occurred only
when certified by a physician who is acceptable to the Plan
Administrator and only if such proof is received by the Administrator
within sixty (60) days after the date of the termination of such
Participant's employment.
(c) TERMINATION OF EMPLOYMENT BENEFIT
(1) In the event a Participant's employment with his
Employer is terminated for reasons other than retirement, total and
permanent disability or death, such Participant shall be entitled to a
termination of employment benefit in an amount equal to his vested
interest in the balance in his Accounts as of the date of distribution
of his benefit.
(2) (A) A Participant's vested interest in his
Matching Contribution Account and his Employer Contribution
Account shall be a percentage of the balance of such Accounts
as of the applicable Valuation Date, based upon such
Participant's Whole Year Periods of Service as of the date of
the termination of his employment, as follows:
VII - 1.
184
TOTAL NUMBER OF WHOLE VESTED
YEAR PERIODS OF SERVICE INTEREST
----------------------- --------
Less than 2 Whole Year Periods of Service 0%
2 years, but less than 3 years 25%
3 years, but less than 4 years 50%
4 years, but less than 5 years 75%
5 years or more 100%
(B) Notwithstanding the foregoing, a Participant
shall be 100% vested in his Matching Contribution Account and
his Employer Contribution Account upon attaining his Normal
Retirement Date. A Participant's vested interest in his
Elective Contribution Account, Qualified Non-Elective
Contribution Account and his Rollover Contribution Account
shall be 100% regardless of the number of his Whole Year
Periods of Service.
(3) (A) If the termination of employment results in
five consecutive Breaks in Service, then upon the occurrence
of such five consecutive Breaks in Service, the nonvested
interest of the Participant in his Matching Contribution
Account and his Employer Contribution Account as of the
Valuation Date concurring with or next following the date of
his termination of employment shall be deemed to be forfeited
and such forfeited amount shall first be used to reduce
Employer matching Contributions under paragraph (b) of Article
V; any remaining forfeitures shall then be used to reduce
Employer non-matching contributions under paragraph (c) of
Article V, if any; thereafter, any remaining forfeitures shall
be used to reduce Employer matching and non-matching
contributions for the next following Plan Year. If the
Participant is later reemployed by an Employer or an
Affiliate, the unforfeited balance, if any, in his Matching
Contribution Account and his Employer Contribution Account
that has not been distributed to such Participant shall be set
aside in a separate account, and such Participant's Periods of
Service after any five consecutive Breaks in Service resulting
from such termination of employment shall not be taken into
account for the purpose of determining the vested interest of
such Participant in the balance of his Matching Contribution
Account and his Employer Contribution Account that accrued
before such five consecutive Breaks in Service.
(B) Notwithstanding any other provision of this
paragraph (c), if a Participant is reemployed by an Employer
or an Affiliate and, as a result, no five consecutive Breaks
in Service occur, the Participant shall not be entitled to any
termination of employment benefit as a result of such
termination of employment.
VII - 2.
185
(4) (A) Notwithstanding any other provision of this
paragraph (c), if at any time a Participant is less than 100%
vested in his Accounts and, as a result of his termination of
employment, he receives his entire vested termination of
employment benefit pursuant to the provisions of Article VIII,
and the distribution of such benefit is made not later than
the close of the fifth Plan Year following the Plan Year in
which such termination occurs (or such longer period as may be
permitted by the Secretary of the Treasury, through
regulations or otherwise), then upon the occurrence of such
distribution, the non-vested interest of the Participant in
his Accounts shall be deemed to be forfeited. Forfeited
amounts shall first be used to reduce Employer matching
Contributions under paragraph (b) of Article V; any remaining
forfeitures shall then be used to reduce Employer non-
matching contributions under paragraph (c) of Article V, if
any; thereafter, any remaining forfeitures shall be used to
reduce Employer matching and non-matching contributions for
the next following Plan Year.
(B) If a Participant is not vested as to any
portion of his Accounts, he will be deemed to have received a
distribution immediately following his termination of
employment. Upon the occurrence of such deemed distribution,
the non-vested interest of the Participant in his Accounts
shall be deemed to be forfeited. Forfeited amounts shall first
be used to reduce Employer matching Contributions under
paragraph (b) of Article V; any remaining forfeitures shall
then be used to reduce Employer non-matching contributions
under paragraph (c) of Article V, if any; thereafter, any
remaining forfeitures shall be used to reduce Employer
matching and non-matching contributions for the next following
Plan Year.
(C) If a Participant whose interest is forfeited
under this subparagraph (4) resumes employment covered under
the Plan, then such Participant shall have the right to repay
to the Trust, before the date that is the earlier of (1) five
years after the Participant's resumption of employment, or (2)
the close of a period of five consecutive Breaks in Service
following the date of his distribution, the full amount of the
termination of employment benefit previously distributed to
him. If the Participant elects to repay such amount to the
Trust within the time periods prescribed herein, or if a
non-vested Participant whose interest was forfeited under this
subparagraph (4) resumes employment covered under the Plan
prior to the occurrence of five consecutive Breaks in Service,
the non-vested interest of the Participant previously
forfeited pursuant to the provisions of this subparagraph (4)
shall be restored to the Accounts of the Participant, such
restoration to be made from forfeitures of non-vested
interests and, if necessary, by contributions of his Employer,
so that the aggregate of the amounts repaid by the Participant
and restored by the Employer shall not be less than the
Account balances of the Participant at the time of forfeiture
unadjusted by any subsequent gains or losses.
VII - 3.
186
(d) DEATH BENEFIT
(1) In the event of the death of a Participant, his
beneficiary shall be entitled to a death benefit in an amount equal to
100% of the balance in his Accounts as of the date of distribution of
his benefit.
(2) At any time and from time to time, each Participant
shall have the unrestricted right to designate a beneficiary to
receive his death benefit and to revoke any such designation. Each
designation or revocation shall be evidenced by written instrument
filed with the Plan Administrator, signed by the Participant and
bearing the signature of a witness to his signature. In the event
that a Participant has not designated a beneficiary or beneficiaries,
or if for any reason such designation shall be legally ineffective, or
if such beneficiary or beneficiaries shall predecease the Participant,
then the personal representative of the estate of such Participant
shall be deemed to be the beneficiary designated to receive such death
benefit, or if no personal representative is appointed for the estate
of such Participant, then his next of kin under the statute of descent
and distribution of the state of such Participant's domicile at the
date of his death shall be deemed to be the beneficiary or
beneficiaries to receive such death benefit.
(3) Notwithstanding the foregoing, if the Participant is
married as of the date of his death, the Participant's surviving
spouse shall be deemed to be his designated beneficiary and shall
receive the full amount of the death benefit attributable to the
Participant unless the spouse consents or has consented to the
Participant's designation of another beneficiary. Any such consent to
the designation of another beneficiary must acknowledge the effect of
the consent, must be witnessed by a Plan representative or by a notary
public and shall be effective only with respect to that spouse. A
spouse's consent shall be a restricted consent (which may not be
changed as to the beneficiary unless the spouse consents to such
change in the manner described herein). Notwithstanding the preceding
provisions of this subparagraph (3), a Participant shall not be
required to obtain spousal consent to his designation of another
beneficiary if (A) the Participant is legally separated or the
Participant has been abandoned, and the Participant provides the
Administrator with a court order to such effect, or (B) the spouse
cannot be located.
VII - 4.
187
ARTICLE VIII
PAYMENT OF BENEFITS
(a) TIME AND FORM OF PAYMENT OF BENEFITS.
(1) Except as otherwise provided under this Article VIII
(A) The amount of the retirement, disability,
termination of employment or death benefit to which a
Participant is entitled under paragraphs (a), (b), (c) or (d)
of Article VII shall be paid to him (or his beneficiary or
beneficiaries in the case of a death benefit), in a lump sum
as soon as practicable following the Participant's retirement,
disability, termination of employment or death, as the case
may be.
(2) (A) Notwithstanding the foregoing, no
distribution shall be made of the retirement, disability or
termination of employment benefit to which a Participant is
entitled under paragraph (a), (b) or (c) of Article VII prior
to his Normal Retirement Date unless the value of his benefit
attributable to Employer and Employee contributions, if any,
determined as of the time of distribution does not exceed
$3,500, or unless the Participant consents to the
distribution.
(B) In the event that a Participant does not
consent to a distribution of a benefit in excess of $3,500 to
which he is entitled under paragraph (a), (b) or (c) of
Article VII, the amount of his benefit shall be paid to the
Participant not later than sixty (60) days after the last day
of the Plan Year in which the Participant reaches his Normal
Retirement Date.
(3) (A) Notwithstanding anything contained herein to
the contrary, any distribution paid to a Participant (or, in
the case of a death benefit, to his beneficiary or
beneficiaries) pursuant to subparagraph (1) shall commence not
later than the earlier of:
(i) the 60th day after the last day of the
Plan Year in which the Participant's employment is
terminated or, if later, in which occurs the
Participant's Normal Retirement Date; or
(ii) April 1 of the year immediately
following the calendar year in which he reaches age
70-1/2.
(4) In the case of a death benefit, payment to the
designated beneficiary shall be made within one year following the
Participant's death (unless the designated beneficiary is the
Participant's surviving spouse, in which case such benefit shall begin
no later than the date the Participant would have reached age 70-1/2).
VIII - 1.
188
(5) Notwithstanding the foregoing, payments under the
Plan shall satisfy the incidental death benefit requirements and all
other applicable provisions of Section 401(a)(9) of the Code, the
regulations issued thereunder (including Prop. Reg. Section
1.401(a)(9)-2), and such other rules thereunder as may be prescribed
by the Commissioner).
(b) PROPERTY DISTRIBUTED. Distribution of a Participant's benefit
under the Plan will be made in whole shares of qualifying employer securities
(as defined in Section 407(d)(5) of the Employee Retirement Income Security Act
of 1974, as amended from time to time), or in cash, or partially in qualifying
employer securities or partially in cash, as requested by the Participant;
provided, however, that the maximum amount of qualifying employer securities
that may be distributed to a Participant shall not exceed the proportion in
which qualifying employer securities comprise the Participant's interest in the
Trust Fund.
(c) LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN. In the event that
all, or any portion of the distribution payable to a Participant or his
beneficiary, hereunder shall remain unpaid after five (5) Plan Years solely by
reason of the inability of the Administrator, after sending a registered
letter, return receipt requested, to the last known address, and after further
diligent effort, to ascertain the whereabouts of such Participant or his
Beneficiary, the amount so distributable shall be treated as a forfeiture
pursuant to the provisions of Article VII. In the event a Participant or
beneficiary of such Participant is located subsequent to his benefit being
reallocated, such benefit shall be restored.
(d) TRANSFER TO OTHER QUALIFIED PLANS. The Trustee, upon written
direction by the Plan Administrator, shall transfer some or all of the assets
held under the Trust to another plan or trust meeting the requirements of the
Code relating to qualified plans and trust, whether such transfer is made
pursuant to a merger or consolidation of this Plan with such other plan or
trust or for any other allowable purpose.
(e) DIRECT ROLLOVERS.
(1) The provisions of this paragraph apply to
distributions made on or after January 1, 1993. Notwithstanding any
provisions of the Plan to the contrary that would otherwise limit a
distributee's (as defined below) election under this paragraph, a
distributee may elect, at the time and in the manner prescribed by the
Plan Administrator, to have any portion of an eligible rollover
distribution (as defined below) paid directly to an eligible
retirement plan (as defined below) specified by the distributee in a
direct rollover (as defined below).
(2) For purposes of this paragraph, the following terms
shall have the following meanings:
(A) An "eligible rollover distribution" is any
distribution of all or any portion of the balance to the
credit of the distributee, except that an eligible rollover
distribution does not include: any distribution that is one of
a series of substantially equal periodic payments made (not
less frequently than annually)
VIII - 2.
189
for the life (or life expectancy) of the distributee or the
joint lives (or joint life expectancies) of the distributee
and the distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to the
extent such distribution is required under Code Section
401(a)(9), and the portion of any distribution that is not
includible in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to
employer securities).
(B) An "eligible retirement plan" is an
individual retirement account described in Code Section
408(a), an individual retirement annuity described in Code
Section 408(b), an annuity plan described in Code Section
403(a), or a qualified trust described in Code Section 401(a),
that accepts the distributee's eligible rollover distribution.
However, in the case of an eligible rollover distribution to
the surviving spouse, an eligible retirement plan is an
individual retirement account or individual retirement
annuity.
(C) A "distributee" includes an Employee or
former Employee. In addition, the Employee's or former
Employee's surviving spouse and the Employee's or former
Employee's spouse or former spouse who is the alternate payee
under a qualified domestic relations order, as defined in Code
Section 414(p), are distributees with regard to the interest
of the spouse or former spouse.
(D) A "direct rollover" is a payment by the Plan
to the eligible retirement plan specified by the distributee.
VIII - 3.
190
ARTICLE IX
HARDSHIP AND OTHER DISTRIBUTIONS
(a) HARDSHIP DISTRIBUTION.
(1) (A) A Participant will be eligible to receive a
distribution on account of hardship from his Elective
Contribution Account (not in excess of the actual
contributions thereto).
(B) A distribution will be on account of hardship
only if the distribution both (A) is made on account of an
immediate and heavy financial need of the Participant, and (B)
is necessary to satisfy such financial need. Based upon the
criteria set forth below, the Administrator shall determine,
in a uniform and nondiscriminatory manner, whether an
immediate and heavy financial need exists and the amount
necessary to meet such need.
(2) (A) Subject to the requirements of subparagraph
(2)(B) below, the determination of whether a Participant has
an immediate and heavy financial need shall be made in a
uniform and nondiscriminatory manner by the Plan Administrator
on the basis of all relative facts and circumstances. A
financial need shall not fail to qualify as immediate and
heavy merely because such need was reasonably foreseeable or
voluntarily incurred by the Participant.
(B) A distribution shall be deemed made on
account of an immediate and heavy financial need of the
Participant only if the distribution is on account of:
(i) medical expenses described in
Section 213(d) of the Code incurred by the
Participant, the Participant's spouse, or any
dependents of the Participant (as defined in Section
152 of the Code);
(ii) the purchase (excluding mortgage
payments) of a principal residence of the
Participant;
(iii) the payment of tuition and related
educational fees for the next 12 months of
post-secondary education for the Participant, his or
her spouse, children, or dependents;
(iv) the need to prevent the eviction of
the Participant from his principal residence or
foreclosure of the mortgage on the Participant's
principal residence; or
(v) such other events as may be
prescribed by the Commissioner in revenue rulings,
notices and other documents of general applicability.
IX - 1.
191
(3) (A) The Administrator shall determine whether a
distribution is necessary to satisfy an immediate and heavy
financial need on the basis of all relevant facts and
circumstances. A distribution will not be treated as
necessary to satisfy an immediate and heavy financial need of
a Participant to the extent the amount of the distribution is
in excess of the amount required to relieve the financial need
or to the extent such need may be satisfied from other
resources that are reasonably available to the Participant. A
distribution generally may be treated as necessary to satisfy
a financial need if the Employer reasonably relies upon the
Participant's representation that the need cannot be relieved:
(i) through reimbursement or
compensation by insurance or otherwise;
(ii) by reasonable liquidation of the
Participant's assets, to the extent such liquidation
would not itself cause an immediate and heavy
financial need;
(iii) by cessation of elective
contributions under the Plan; or
(iv) by other distributions or nontaxable
(at the time of the loan) loans from plans maintained
by an Employer or by any other employer or by
borrowing from commercial sources on reasonable
commercial terms.
(B) In determining whether a distribution is
necessary to satisfy a financial need, the Participant's
resources shall be deemed to include those assets of his
spouse and minor children that are reasonably available to the
Participant.
(b) DISTRIBUTIONS AFTER AGE 59 1/2. Upon reaching age 59 1/2, a
Participant may apply to the Administrator for a distribution of any portion of
each Account in which he is fully vested.
IX - 2.
192
ARTICLE X
INVESTMENT FUNDS
(a) INVESTMENT FUNDS. Effective for Plan Years beginning on or
after April 1, 1993, each Participant may direct the Plan Administrator to
invest his Accounts (other than his Matching Contribution Account) in one or
more investment funds that may be made available from time to time.
(b) PROCEDURES. The Administrator shall establish procedures
regarding Participant investment direction as are necessary, which procedures
shall be communicated to all Participants and applied in a uniform,
nondiscriminatory manner. Procedures established by the Administrator shall
comply with the requirements of Section 404(c) of the Employee Retirement
Income Security Act of 1974, as amended from time to time, and the applicable
regulations.
(c) CHARGES AND CREDITS; EARNINGS FACTOR. All dividends,
interest, and other income on the investments in a particular investment fund,
and all realized and unrealized gains, shall be credited to that fund. All
brokerage commissions, taxes, and other charges and expenses in connection with
the investments in a particular investment fund, and all realized and
unrealized losses, shall be charged to that fund. Each investment fund shall
be treated separately for purposes of crediting the earnings factor to a
Participant's Accounts.
(d) NONLIABILITY. Neither the Trustee, the Administrator, nor any
other person shall be under any duty to question any election by a Participant
or to make any suggestions to him in connection therewith. Any loss occasioned
by a Participant's election or failure to change an election of an investment
fund shall not be the responsibility of the Trustee, the Administrator, or any
other person. Nor shall the Trustee or the Administrator be liable to any
Participant for failure to make an investment in any investment fund elected by
the Participant if in the exercise of due diligence the Trustee has not been
able to acquire satisfactory securities or other property for that fund
satisfying the specifications and parameters established by the Administrator
and reasonable requirements as to price, terms, and other conditions, or for
inability to liquidate an investment in a fund promptly upon receipt of a new
election form from the Participant.
(e) SPECIAL RULES FOR DIRECTORS AND OFFICERS.
(1) Any Employee who is a director or "officer" (as
defined in Rule 16a-1(f) under the Securities Exchange Act of 1934) of
the Company who suspends his elective contributions shall not be
permitted to transfer funds previously invested in a non-Company stock
fund (as defined below) to a Company stock fund (as defined below)
during the six month period following the suspension.
(2) Any Employee who is a director or "officer" (as
defined in Rule 16a-1(f) under the Securities Exchange Act of 1934) of
the Company who suspends the
X - 1.
193
investment of his future elective contributions in a Company stock
fund shall not be permitted to invest future elective contributions in
a Company stock fund or transfer funds previously invested in a
non-Company stock fund to a Company stock fund during the 6-month
period following such suspension.
(3) Any Employee who is a director or "officer" (as
defined in Rule 16a-1(f) under the Securities Exchange Act of 1934) of
the Company who receives a distribution from the Plan shall not be
permitted to invest future contributions in a Company stock fund or
transfer funds previously invested in a non-Company stock fund to a
Company stock fund during the 6 month period following the
distribution.
(4) Any Employee who is a director or "officer" (as
defined in Rule 16a-1(f) under the Securities Exchange Act of 1934) of
the Company who transfers previously invested funds out of a Company
stock fund must suspend elective contributions to the Plan and shall
not be permitted to invest future contributions in a Company stock
fund or transfer funds previously invested in a non-Company stock fund
to a Company stock fund during the 6 month period following such
transfer out of the Company stock fund.
(5) Any transfer of previously invested funds to or from
a Company stock fund by an Employee who is a director or "officer" (as
defined in Rule 16a-1(f) under the Securities Exchange Act of 1934) of
the Company shall be made during the quarterly window period that
begins on the third business day after the Company's earnings release
and ends on the twelfth business day after such release; provided,
further, that no additional transfers of previously invested funds to
or from a Company stock fund may be made for a period of at least six
months following the transfer.
(f) SPECIAL DEFINITIONS.
(1) For purposes of paragraph (e), the term "Company
stock fund" shall mean an investment fund that invests directly and
primarily in qualifying employer securities (as defined Section
407(d)(5) of the Employee Retirement Income Security Act of 1974, as
amended from time to time), and
(2) the term "non-Company stock fund" shall mean any
investment fund other than a Company stock fund.
(g) PASS THROUGH OF VOTING AND OTHER RIGHTS. To the extent a
Participant directs the investment of his Accounts in a Company stock fund (as
defined in paragraph (f) above), the voting, tender and similar rights with
respect to the securities in the Company stock fund held in the Participant's
Accounts shall be passed through to the Participant and his beneficiaries to
the extent necessary to satisfy the requirements of Section 404(c) of the
Employee Retirement Income Security Act of 1974, as amended from time to time,
and the regulations promulgated thereunder. To the extent a Participant or his
beneficiary fails to exercise such voting, tender and similar rights, such
rights shall be exercised by the Trustee in its discretion.
X - 2.
194
ARTICLE XI
TRUST FUND AND EXPENSES OF ADMINISTRATION
(a) TRUSTEE. The Trust Fund shall be held by the Trustee, or by a
successor trustee or trustees, for use in accordance with the Plan under the
Trust Agreement. The Trust Agreement may from time to time be amended in the
manner therein provided. Similarly, the Trustee may be changed from time to
time in the manner provided in the Trust Agreement.
(b) EXPENSES OF ADMINISTRATION.
(1) (A) Unless otherwise paid or provided by the
Company and the other Employers, the assets of the Trust Fund
shall be used to pay all expenses of the administration of the
Plan and the Trust Fund, including the Trustee's compensation,
the compensation of any investment manager, the expense
incurred by the Plan Administrator in discharging its duties,
all income or other taxes of any kind whatsoever that may be
levied or assessed under existing or future laws upon or in
respect of the Trust Fund, and any interest that may be
payable on money borrowed by the Trustee for the purpose of
the Trust.
(B) The Company and the other Employers may pay
the expenses of the Plan and the Trust Fund. Any such payment
by the Company or another Employer shall not be deemed a
contribution to this Plan.
(2) Notwithstanding anything contained herein to the
contrary, no excise tax or other liability imposed upon the Trustee,
the Plan Administrator or any other person for failure to comply with
the provisions of any federal law shall be subject to payment or
reimbursement from the assets of the Trust.
(3) For its services, any corporate trustee shall be
entitled to receive reasonable compensation in accordance with its
rate schedule in effect from time to time for the handling of a
retirement trust. Any individual trustee shall be entitled to such
compensation as shall be arranged between the Company and the Trustee
by separate instrument; provided, however, that no person who is
already receiving full-time pay from any Employer or any Affiliate
shall receive compensation from the Trust Fund (except for the
reimbursement of expenses properly and actually incurred).
XI - 1.
195
ARTICLE XII
AMENDMENT AND TERMINATION
(a) RESTRICTIONS ON AMENDMENT AND TERMINATION OF PLAN. It is the
present intention of the Company to maintain the Plan set forth herein
indefinitely. Nevertheless, the Company specifically reserves to itself the
right at any time, and from time to time, to amend or terminate this Plan in
whole or in part; provided, however, that no such amendment:
(1) shall have the effect of vesting in any Employer,
directly or indirectly, any interest, ownership or control in any of
the present or subsequent funds held subject to the terms of the
Trust;
(2) shall cause or permit any property held subject to
the terms of the Trust to be diverted to purposes other than the
exclusive benefit of the Participants and their beneficiaries or for
the administrative expenses of the Plan Administrator and the Trust;
(3) shall (A) reduce any vested interest of a Participant
on the later of the date the amendment is adopted or the date the
amendment is effective, except as permitted by law, or (B) reduce or
restrict either directly or indirectly any benefit provided any
Participant prior to the date an amendment is adopted;
(4) shall reduce the Accounts of any Participant;
(5) shall amend any vesting schedule with respect to any
Participant who has at least three Years of Service at the end of the
election period described below, except as permitted by law, unless
each such Participant shall have the right to elect to have the
vesting schedule in effect prior to such amendment apply with respect
to him, such election, if any, to be made during the period beginning
not later than the date the amendment is adopted and ending no earlier
than sixty (60) days after the latest of the date the amendment is
adopted, the amendment becomes effective or the Participant is issued
written notice of the amendment by his Employer or the Plan
Administrator; or
(6) shall increase the duties or liabilities of the
Trustee without its written consent.
(b) AMENDMENT OF PLAN. Subject to the limitations stated in
paragraph (a), the Company shall have the power to amend this Plan in any
manner that it deems desirable, and, not in limitation but in amplification of
the foregoing, it shall have the right to change or modify the method of
allocation of contributions hereunder, to change any provision relating to the
administration of this Plan and to change any provision relating to the
distribution or payment, or both, of any of the assets of the Trust.
XII - 1.
196
(c) TERMINATION OF PLAN. Any Employer, in its sole and absolute
discretion, may permanently discontinue making contributions under this Plan or
may terminate this Plan and the Trust (with respect to all Employers if it is
the Company, or with respect to itself alone if it is an Employer other than
the Company), completely or partially, at any time without any liability
whatsoever for such permanent discontinuance or complete or partial
termination. In any of such events, the affected Participants, notwithstanding
any other provisions of this Plan, shall have fully vested interests in the
amounts credited to their respective Accounts at the time of such complete or
partial termination of this Plan and the Trust or permanent discontinuance of
contributions. All such vested interests shall be nonforfeitable.
(d) DISCONTINUANCE PROCEDURE. In the event an Employer decides to
permanently discontinue making contributions, such decision shall be evidenced
by an appropriate resolution of its Board and a certified copy of such
resolution shall be delivered to the Plan Administrator and the Trustee. All
of the assets in the Trust Fund belonging to the affected Participants on the
date of discontinuance specified in such resolutions shall, aside from becoming
fully vested as provided in paragraph (c), be held, administered and
distributed by the Trustee in the manner provided under this Plan. In the
event of a permanent discontinuance of contributions without such formal
documentation, full vesting of the interests of the affected Participants in
the amounts credited to their respective Accounts will occur on the last day of
the year in which a substantial contribution is made to the Trust.
(e) TERMINATION PROCEDURE. In the event an Employer decides to
terminate this Plan and the Trust, such decision shall be evidenced by an
appropriate resolution of its Board and a certified copy of such resolution
shall be delivered to the Plan Administrator and the Trustee. After payment of
all expenses and proportional adjustments of individual accounts to reflect
such expenses and other changes in the value of the Trust Fund as of the date
of termination, each affected Participant (or the beneficiary of any such
Participant) shall be entitled to receive, provided that no successor plan has
been established, any amount then credited to his Accounts in accordance with
the provisions of Article VIII.
XII - 2.
197
ARTICLE XIII
MISCELLANEOUS
(a) MERGER OR CONSOLIDATION. This Plan and the Trust may not be
merged or consolidated with, and the assets or liabilities of this Plan and the
Trust may not be transferred to, any other plan or trust unless each
Participant would receive a benefit immediately after the merger, consolidation
or transfer, if the plan and trust then terminated, that is equal to or greater
than the benefit the Participant would have received immediately before the
merger, consolidation or transfer if this Plan and the Trust had then
terminated.
(b) ALIENATION.
(1) Except as provided in subparagraph (2), no
Participant or beneficiary of a Participant shall have any right to
assign, transfer, appropriate, encumber, commute, anticipate or
otherwise alienate his interest in this Plan or the Trust or any
payments to be made thereunder; no benefits, payments, rights or
interests of a Participant or beneficiary of a Participant of any kind
or nature shall be in any way subject to legal process to levy upon,
garnish or attach the same for payment of any claim against the
Participant or beneficiary of a Participant; and no Participant or
beneficiary of a Participant shall have any right of any kind
whatsoever with respect to the Trust, or any estate or interest
therein, or with respect to any other property or right, other than
the right to receive such distributions as are lawfully made out of
the Trust, as and when the same respectively are due and payable under
the terms of this Plan and the Trust.
(2) Notwithstanding the provisions of subparagraph
(b)(1), the Plan Administrator shall direct the Trustee to make
payments pursuant to a Qualified Domestic Relations Order as defined
in Section 414(p) of the Code. The Plan Administrator shall establish
procedures consistent with Section 414(p) of the Code to determine if
any order received by the Plan Administrator, or any other fiduciary
of the Plan, is a Qualified Domestic Relations Order.
(c) GOVERNING LAW. This Plan shall be administered, construed and
enforced according to the laws of the State of Florida, except to the extent
such laws have been expressly preempted by federal law.
(d) ACTION BY EMPLOYER. Whenever the Company or another Employer
under the terms of this Plan is permitted or required to do or perform any act,
it shall be done and performed by the Board of Directors of the Company or such
other Employer and shall be evidenced by proper resolution of such Board of
Directors certified by the Secretary or Assistant Secretary of the Company or
such other Employer.
(e) ALTERNATIVE ACTIONS. In the event it becomes impossible for
the Company, another Employer, the Plan Administrator or the Trustee to perform
any act required by this Plan, then the Company, such other Employer, the Plan
Administrator or the Trustee, as the
XIII - 1.
198
case may be, may perform such alternative act that most nearly carries out the
intent and purpose of this Plan.
(f) GENDER. Throughout this Plan, and whenever appropriate, the
masculine gender shall be deemed to include the feminine and neuter; the
singular, the plural; and vice versa.
IN WITNESS WHEREOF, this amendment and restatement has been executed
this _________ day of _____________________, 1994.
HOME SHOPPING NETWORK, INC.
By: _______________________________________
"COMPANY"
HSN INSURANCE, INC.
HOME SHOPPING CLUB, INC.
HSN CREDIT CORPORATION
HSN TRUCKING, INC.
HSN FULFILLMENT OF VIRGINIA, INC.
HSN FULFILLMENT OF IOWA, INC.
HSN FULFILLMENT OF NEVADA, INC.
HSN MAIL ORDER, INC.
HSN TOURS, INC.
HSN LIFEWAY HEALTH PRODUCTS, INC.
HOME SHOPPING CLUB OUTLETS, INC.
HOME SHOPPING CLUB OUTLET OF CLEARWATER, INC.
HOME SHOPPING CLUB OUTLET OF TAMPA, INC.
HOME SHOPPING CLUB OUTLET OF ORLANDO, INC.
HOME SHOPPING CLUB OUTLET OF SOUTH ORLANDO, INC.
HOME SHOPPING SHOWCASE, INC.
NATIONAL CALL CENTER, INC.
HSN FULFILLMENT, INC.
ORTHO-VENT, INC.
HOME SHOPPING CLUB OUTLET OF ST. PETERSBURG, INC.
HSN LIQUIDATION, INC.
HOME SHOPPING CLUB OUTLET OF WEST TAMPA, INC.
HSN LIQUIDATION, INC. OF VIRGINIA
HSN LIQUIDATION, INC. OF NEVADA
HSN LIQUIDATION, INC. OF FLORIDA
HSN LIQUIDATION, INC. OF IOWA
VELA RESEARCH, INC.
HSN INTERACTIVE, INC.
HOME SHOPPING CLUB OUTLET OF BRANDON, INC.
HOME SHOPPING CLUB OUTLET OF PINE HILLS, INC.
XIII - 2.
199
INTERNET SOFTWARE, INC.
HSN DIRECT JOINT VENTURE
HSN REALTY, INC.
By: _______________________________________
"EMPLOYER"
XIII - 3.
200
HOME SHOPPING NETWORK, INC.
RETIREMENT SAVINGS TRUST
AMENDED AND RESTATED
AS OF
JANUARY 1, 1994
201
HOME SHOPPING NETWORK, INC.
RETIREMENT SAVINGS TRUST
TABLE OF CONTENTS
ARTICLE TITLE PAGE
------- ----- ----
I DEFINITIONS . . . . . . . . . . . . . . . . . . . . I - 1
II NAME OF THE TRUST AND ESTABLISHMENT OF
THE TRUST FUND . . . . . . . . . . . . . . . . . . II - 1
III TRUST ADMINISTRATION . . . . . . . . . . . . . . . . III - 1
IV INVESTMENT MANAGERS . . . . . . . . . . . . . . . . IV - 1
V INVESTMENT OF THE TRUST FUND . . . . . . . . . . . . V - 1
VI INVESTMENT FUNDS . . . . . . . . . . . . . . . . . . VI - 1
VII EXPENSES OF ADMINISTRATION OF THE PLAN
AND THE TRUST FUND . . . . . . . . . . . . . . . . VII - 1
VIII AMENDMENT AND TERMINATION . . . . . . . . . . . . . VIII - 1
IX MISCELLANEOUS . . . . . . . . . . . . . . . . . . . IX - 1
202
HOME SHOPPING NETWORK, INC.
RETIREMENT SAVINGS TRUST
AMENDED AND RESTATED
AS OF
JANUARY 1, 1994
THIS TRUST AGREEMENT (the "Agreement") is made and entered into this
_____ day of ___________________, 1994 by and between Home Shopping Network,
Inc. (the "Company") and PNC Bank Kentucky, Inc. (collectively, the "Trustee").
W I T N E S S E T H:
WHEREAS, the Company has previously adopted the Home Shopping Network,
Inc. Retirement Savings Plan and its related trust for the benefit of its
employees; and
WHEREAS, the Company deems it advisable and in the best interests of
the Participants to amend the trust.
NOW, THEREFORE, the trust under the Home Shopping Network, Inc.
Retirement Savings Plan is hereby amended and restated in its entirety to read
as follows:
ARTICLE I.
DEFINITIONS
Unless a different meaning is clearly required by the context or
except as may be otherwise indicated below, capitalized terms shall have the
meaning stated in Article I of the Plan. As used in this Agreement, the
following terms shall have the meaning hereinafter set out:
(a) "ACCOUNT" or "ACCOUNTS" shall mean a Participant's Employer
Contribution Account, Elective Contribution Account, Matching Contribution
Account, Qualified Non-Elective Contribution Account, Rollover Contribution
Account and/or such other accounts as may be established by the Plan
Administrator.
(b) "COMPANY" shall mean the Home Shopping Network, Inc., and its
successors.
(c) "EFFECTIVE DATE" of this Agreement shall mean January 1, 1994.
(d) "INVESTMENT MANAGER" shall mean the individual, individuals,
partnership, corporation or other entity, if any, appointed by the
Administrator to manage all or any portion of the assets of the Plan. Any
Investment Manager shall be (1) registered as an investment
203
advisor under the Investment Advisors Act of 1940; (2) a bank as defined in
such Act; or (3) an insurance company qualified to perform the services of an
investment manager under the laws of more than one state.
(e) "PLAN" shall mean the Home Shopping Network, Inc. Retirement
Savings Plan, as it may be in effect from time to time.
(f) "TRUST" shall mean the trust as herein set forth.
(g) "TRUSTEE" shall mean the individual, individuals or
corporation designated as trustee under this Agreement, or any amendment
hereof.
(h) "TRUST FUND" shall mean the trust fund established under this
Agreement from which the amounts of supplementary compensation provided for by
the Plan are to be paid or are to be funded.
204
ARTICLE II.
NAME OF THE TRUST AND ESTABLISHMENT OF THE TRUST FUND
(a) NAME OF THE TRUST. The trust amended and restated in
accordance with the terms hereof shall be known as the "HOME SHOPPING NETWORK,
INC. RETIREMENT SAVINGS TRUST."
(b) ESTABLISHMENT OF THE TRUST FUND. The Company has established,
pursuant to the Plan, a trust comprised of amounts previously contributed by
the Company, with such other sums of money and property as shall from time to
time be paid or delivered to the Trustee, the earnings and profits thereon and
any assets into which such funds are converted. The Trust Fund shall be held
by the Trustee in trust and dealt with in accordance with the provisions
hereof. Except as otherwise permitted by law, in no event shall any part of
the principal or income of the Trust Fund be used for or diverted to any
purpose whatsoever other than for the exclusive benefit of the Participants and
their beneficiaries.
II - 1.
205
ARTICLE III.
TRUST ADMINISTRATION
(a) RECEIPT OF CONTRIBUTIONS. The Trustee shall receive from each
Employer and the Participants the payments made as their contributions under
the Plan and shall perform such duties as are specified under the Plan and in
this Agreement. However, the Trustee shall have no right or duty to inquire
into the amount of any contribution made by an Employer or a Participant or the
method used in determining the amount of any such contribution, or to collect
the same, but the Trustee shall be accountable only for funds actually received
by it.
(b) PLAN ADMINISTRATOR'S DIRECTIONS. When directed in writing by
the Plan Administrator, the Trustee shall:
(1) value the Trust Fund;
(2) make transfers, payments and deliveries to or for the
account of Participants or their beneficiaries; and
(3) borrow money and pledge any Trust property for the
payment of any such loan.
Nothing contained in this paragraph (b) shall prevent the Plan Administrator
itself from performing the actions described in subparagraph (1).
(c) AUTHORIZED ACTIONS. The Trustee is authorized to:
(1) settle, compromise or submit to arbitration any
claims, debts or damages due or owing to or from this Trust, commence
or defend suits or legal or administrative proceedings and represent
the Trust in all suits and legal and administrative proceedings;
(2) employ suitable agents and counsel (who may be
counsel for an Employer), and pay their reasonable expenses and
compensation; and
(3) make, execute and deliver as Trustee, with provisions
for no individual responsibility, all instruments in writing necessary
or appropriate for the exercise of any of its powers of
administration; provided, that as a matter of convenience, when the
Trustee is two or more persons, any one of such persons may exercise
the powers contained in this paragraph (c) without the necessity of
the other person or persons joining therein.
(d) WRITTEN DIRECTIONS. In allocating the benefits of the Trust
to the respective Participants, the Trustee shall rely entirely on the written
directions of the Plan Administrator.
III - 1.
206
The Trustee shall have no dealings with the beneficiaries under this Agreement
except under the direction of the Plan Administrator to make payment to them.
If and when the Trustee is a corporation, all directions, papers and
communications addressed to it or intended to be filed with it shall be
delivered at its principal office.
(e) RECORDS AND ACCOUNTS. The Trustee shall keep accurate and
detailed accounts on all investments, receipts, disbursements and other
transactions hereunder. All accounts, books and records relating to this Trust
shall be open to inspection and audit at all reasonable times by any person
designated by the Plan Administrator.
(f) RESIGNATION AND REMOVAL.
(1) The Company may at any time remove any Trustee acting
hereunder by providing written notice to such Trustee, which removal
shall take effect on the date therein specified; and any Trustee
acting hereunder may at any time resign by providing the Company and
the Plan Administrator with a written resignation, which resignation
shall take effect on the date therein specified, but not less than
thirty (30) days from the date of the giving of such notice unless the
Plan Administrator shall agree to an earlier date. The Company may
appoint a corporation or an individual or individuals to be successor
Trustee hereunder in the place of any removed or resigned Trustee.
Any notice required or permitted by this subparagraph shall be deemed
given upon the mailing thereof to the appropriate person by certified
or registered U.S. mail, return receipt requested, in a properly
addressed envelope, postage prepaid.
(2) After receiving notice of removal or after the
effective date of resignation, the removed or resigning Trustee shall
transfer, pay over and deliver the Trust Fund to the successor
Trustee, or if no successor Trustee be appointed within sixty (60)
days from the Trustee's receipt of notice of removal or within sixty
(60) days from the effective date of the Trustee's resignation, as the
case may be, the removed or resigning Trustee shall, upon the
expiration of such 60-day period, transfer, pay over and deliver the
Trust Fund to the Plan Administrator, without any responsibility upon
the removed or resigning Trustee for any misapplication or to see to
the further application or disposition of the Trust Fund by any
successor Trustee or the Plan Administrator, as the case may be.
Notwithstanding any such transfer, payment and delivery of the Trust
Fund to any successor Trustee or to the Administrator, as the case may
be, the removed or resigning Trustee may have its entire account
judicially settled and it shall be entitled to the payment out of the
Trust Fund of any compensation due to it up to the time of removal or
resignation and of any expenses or other disbursements, whether
theretofore or thereafter arising, for which the removed or resigning
Trustee would be entitled to reimbursement if the Trust Fund had not
been so transferred, paid over and delivered.
III - 2.
207
(g) PERIODIC ACCOUNTING.
(1) Within ninety (90) days after the end of each Plan
Year, and within sixty (60) days after removal or resignation, the
Trustee shall furnish the Plan Administrator with a verified
accounting of the Trust Fund for such Plan Year, or for the portion
thereof ending with the date of such removal or resignation, which
accounting shall include a record of receipts and disbursements,
changes in investments and realized appreciation and depreciation for
such year or period, and a statement of assets (showing both book
value and fair market value) and liabilities on hand as of the end of
such year or period.
(2) Except as otherwise permitted by law, all rights of
every Participant and every beneficiary of a Participant under the
Plan or this Agreement with relation to the Trust Fund or that may
arise against or affect the Trustee shall be enforced exclusively by
the Administrator, which is hereby given the express power and
authority to enforce all such rights as a representative of every
Participant and beneficiary under the Plan, and in any action or
proceeding with relation to the Trust Fund or brought by or against
the Trustee, the Plan Administrator shall be deemed to represent every
interested Participant and beneficiary.
(h) FUNDING POLICY. The Plan Administrator shall establish in
writing a funding policy and method for the Plan and this Trust, which policy
shall be reviewed at least once each year. All actions taken with respect to
such funding policy and the reasons therefor shall be recorded in writing by
the Plan Administrator.
III - 3.
208
ARTICLE IV.
INVESTMENT MANAGERS
(a) APPOINTMENT. The Plan Administrator may appoint one or more
Investment Managers to manage all or part of the assets of the Plan in
accordance with the provisions of Article VI; each such appointment shall
specify the particular assets of the Trust Fund to be managed by such
Investment Manager.
(b) WRITTEN ACCEPTANCE. Before any such appointment becomes
effective, any Investment Manager so appointed shall accept such designation in
writing and, as part of such acceptance, shall acknowledge that it is a
fiduciary with respect to the Plan.
(c) RESIGNATION AND REMOVAL. The Plan Administrator may at any
time remove an Investment Manager acting hereunder, and any Investment Manager
acting hereunder may at any time resign, in each case in such manner as may be
or may have been agreed by the Plan Administrator and the Investment Manager.
The Administrator may appoint any individual, individuals, partnership,
corporation or other entity to be a successor Investment Manager hereunder in
the place of any removed or resigned Investment Manager.
IV - 1.
209
ARTICLE V.
INVESTMENT OF THE TRUST FUND
(a) INVESTMENT DECISIONS. Except for the designation of an
investment fund at the direction of a Participant, the responsibility for all
investment decisions with respect to the assets of the Trust shall be that of
the Trustee, unless one or more Investment Managers have been appointed, in
which event the responsibility for investment decisions shall be allocated
between the Trustee and the Investment Managers in accordance with the written
direction of the Plan Administrator, and the Trustee and each Investment
Manager shall have no responsibility for each other's investment decisions.
(b) EXECUTION OF INVESTMENT DECISIONS. Investment decisions made
by any Investment Manager shall be communicated to the Trustee and the Plan
Administrator, and shall be carried out forthwith either by the Investment
Manager or its agent or by the Trustee acting upon the direction of the
Investment Manager.
(c) POWERS. Subject to the other provisions of this Article V, in
carrying out their duties hereunder, each Investment Manager, if any, (with
respect to making and carrying out its investment decisions) and the Trustee
(with respect to carrying out the decisions of an Investment Manager or, to the
extent there is none, with respect to making and carrying out investment
decisions) are authorized and empowered to:
(1) sell, redeem or otherwise realize the value of any
assets of the Trust Fund;
(2) invest and reinvest all or any part of the Trust
Fund, the income therefrom and the increment thereof in any common or
preferred stocks, bonds, mortgages, secured or unsecured notes,
secured or unsecured debentures, mutual funds, other securities, or
commodities; any "qualifying employer security" as such term is
defined in Section 407(d)(5) of the Employee Retirement Income
Security Act of 1974, as amended from time to time (up to 100% of the
value of the Trust Fund); any common trust fund operated by the
Trustee (provided that as long as the Trust has any investments in a
common fund available only to pension trusts and profit sharing trusts
that meet the requirements of Section 401(a) of the Code, then such
common trust fund shall constitute an integral part of this Trust and
of the Plan); or property of any kind or nature whatsoever, real,
personal or mixed, including mortgaged real property, without regard
to any rule of law or statute designating securities to be held for
trust funds; and to hold cash uninvested (or in deposits bearing a
reasonable rate of interest, in a bank or other similar institution
supervised by the United States or a state, including, if applicable,
the Trustee) at any time and from time to time;
(3) without limitation on the foregoing, buy and sell
listed options and/or sell covered options and repurchase the same;
V - 1.
210
(4) vote upon any stocks, bonds or other securities of
any corporation or other issuer held in the Trust, and otherwise
consent to or request any action on the part of such corporation or
other issuer, and give general or special proxies or powers of
attorneys with or without power of substitution; and
(5) become a party to the reorganization, consolidation
or merger of any corporation, and for such purposes execute any
agreements or consents, or participate in or take any steps to
effectuate the same, whether or not any specific plans have been
formulated therefor and in connection therewith, deposit any such
securities with creditors or stockholders' committees, bodies or other
protective groups, and surrender or exchange any such securities for
such debentures, certificates, receipts, agreements or proceeds as may
be issued or paid by such committees, bodies or groups, or
reorganized, consolidated or merged corporations, and generally
exercise all the rights and powers, whether herein enumerated or not,
as may be lawfully exercised by persons holding similar property in
their own right.
(d) WRITTEN INSTRUMENTS. The Trustee and each Investment Manager
shall make, execute and deliver, as Trustee or Investment Manager, as the case
may be, with provisions for no individual liability, all instruments in writing
necessary for the exercise of any of the foregoing powers.
V - 2.
211
ARTICLE VI.
INVESTMENT FUNDS
(a) INVESTMENT OF ACCOUNTS. Each Participant may direct the Plan
Administrator to invest his Accounts (other than his Matching Contribution
Account) in one or more investment funds that may be made available from time
to time.
(b) PROCEDURES. The Administrator shall establish procedures
regarding Participant investment direction as are necessary, which procedures
shall be communicated to all Participants and applied in a uniform,
nondiscriminatory manner. Procedures established by the Administrator shall
comply with the requirements of Section 404(c) of the Employee Retirement
Income Security Act of 1974, as amended from time to time, and the applicable
regulations.
(c) CHARGES AND CREDITS; EARNINGS FACTOR. All dividends,
interest, and other income on the investments in a particular investment fund,
and all realized and unrealized gains, shall be credited to that fund. All
brokerage commissions, taxes, and other charges and expenses in connection with
the investments in a particular investment fund, and all realized and
unrealized losses, shall be charged to that fund. Each investment fund shall
be treated separately for purposes of crediting the earnings factor to a
Participant's Accounts.
(d) NONLIABILITY. Neither the Trustee, the Administrator, nor any
other person shall be under any duty to question any election by a Participant
or to make any suggestions to him in connection therewith. Any loss occasioned
by a Participant's election or failure to change an election of an investment
fund shall not be the responsibility of the Trustee, the Administrator, or any
other person. Nor shall the Trustee or the Administrator be liable to any
Participant for failure to make an investment in any investment fund elected by
him if in the exercise of due diligence the Trustee has not been able to
acquire satisfactory securities or other property for that fund satisfying the
specifications and parameters established by the Administrator and reasonable
requirements as to price, terms, and other conditions, or for inability to
liquidate an investment in a fund promptly upon receipt of a new election form
from the Participant.
(e) PASS THROUGH OF VOTING AND OTHER RIGHTS. Notwithstanding the
provisions of paragraph (c)(4) of Article V, to the extent a Participant
directs the investment of his Accounts in a Company stock fund (as defined in
paragraph (f) of Article X of the Plan), the voting, tender and similar rights
with respect to the securities in the Company stock fund held in the
Participant's Accounts shall be passed through to the Participant and his
beneficiaries to the extent necessary to satisfy the requirements of Section
404(c) of the Employee Retirement Income Security Act of 1974, as amended from
time to time, and the regulations promulgated thereunder. To the extent a
Participant or his beneficiary fails to exercise such voting, tender and
similar rights, such rights shall be exercised by the Trustee in its
discretion.
VI - 1.
212
ARTICLE VII.
EXPENSES OF ADMINISTRATION OF THE PLAN AND THE TRUST FUND
(a) EXPENSES OF ADMINISTRATION.
(1) Unless otherwise paid or provided by the Company and
the other Employers, the assets of the Trust Fund shall be used to pay
all expenses of the administration of the Plan and the Trust Fund,
including the Trustee's compensation, the compensation of any
investment manager, the expense incurred by the Plan Administrator in
discharging its duties, all income or other taxes of any kind
whatsoever that may be levied or assessed under existing or future
laws upon or in respect of the Trust Fund, and any interest that may
be payable on money borrowed by the Trustee for the purpose of the
Trust.
(2) The Company and the other Employers may pay the
expenses of the Plan and the Trust Fund. Any such payment by the
Company or another Employer shall not be deemed a contribution to this
Plan.
(b) NO PAYMENT OF EXCISE TAX. Notwithstanding anything contained
herein to the contrary, no excise tax or other liability imposed upon the
Trustee, the Plan Administrator or any other person for failure to comply with
the provisions of any federal law shall be subject to payment or reimbursement
from the assets of the Trust.
(c) PAYMENT OF TRUSTEE. For its services, any corporate trustee
shall be entitled to receive reasonable compensation in accordance with its
rate schedule in effect from time to time for the handling of a retirement
trust. Any individual Trustee shall be entitled to such compensation as shall
be arranged between the Company and the Trustee by separate instrument;
provided, however, that no person who is already receiving full-time pay from
any Employer or any Affiliate shall receive compensation from the Trust Fund
(except for the reimbursement of expenses properly and actually incurred).
VII - 1.
213
ARTICLE VIII.
AMENDMENT AND TERMINATION
(a) RESTRICTIONS ON AMENDMENT AND TERMINATION OF PLAN AND TRUST.
The Plan and this Trust may be amended or terminated by the Company in
accordance with the terms of the Plan and this Trust; provided, however, that
no such amendment:
(1) shall have the effect of vesting in any Employer,
directly or indirectly, any interest, ownership or control in any of
the present or subsequent funds held subject to the terms of this
Trust;
(2) shall cause or permit any property held subject to
the terms of this Trust to be diverted to purposes other than the
exclusive benefit of the Participants and their beneficiaries or for
the administration expenses of the Plan Administrator and this Trust;
(3) shall (A) reduce any vested interest of a Participant
on the later of the date the amendment is adopted or the date the
amendment is effective, except as permitted by law or (B) reduce or
restrict, either directly or indirectly, any benefit provided any
Participant prior to the date an amendment is adopted;
(4) shall reduce the Accounts of any Participant;
(5) shall amend any vesting schedule with respect to any
Participant who has at least three (3) Years of Service at the end of
the election period described below, except as permitted by law,
unless each such Participant shall have the right to elect to have the
vesting schedule in effect prior to such amendment apply with respect
to him, such election, if any, to be made during the period beginning
not later than the date the amendment is adopted and ending no earlier
than sixty (60) days after the latest of the date the amendment is
adopted, the amendment becomes effective or the Participant is issued
written notice of the amendment by his Employer or the Plan
Administrator; or
(6) shall increase the duties or liabilities of the
Trustee without its written consent.
(b) TERMINATION OR DISCONTINUANCE. Any Employer, in its sole and
absolute discretion, may permanently discontinue making contributions under the
Plan or may terminate the Plan and this Trust (with respect to all Employers if
it is the Company, or with respect to itself alone if it is an Employer other
than the Company), completely or partially, at any time without any liability
whatsoever for such permanent discontinuance or complete or partial
termination.
VIII - 1.
214
(c) DISCONTINUANCE PROCEDURE. In the event an Employer decides to
permanently discontinue making contributions, such decision shall be evidenced
by an appropriate resolution of its Board and a certified copy of such
resolution shall be delivered to the Plan Administrator and the Trustee. All
of the assets in the Trust Fund belonging to the affected Participants on the
date of discontinuance specified in such resolutions shall be held,
administered and distributed by the Trustee in the manner provided under the
Plan and this Agreement.
(d) TERMINATION PROCEDURE. In the event an Employer decides to
terminate the Plan and this Trust, such decision shall be evidenced by an
appropriate resolution of its Board and a certified copy of such resolution
shall be delivered to the Plan Administrator and the Trustee. After payment of
all expenses and proportional adjustments of individual accounts to reflect
such expenses and other changes in the value of the Trust Fund as of the date
of termination, each affected Participant or the beneficiary of any such
Participant shall be entitled to receive, provided that no successor plan has
been established, any amount then credited to his Accounts in a accordance with
the provisions of Article VIII of the Plan.
VIII - 2.
215
ARTICLE IX.
MISCELLANEOUS
(a) ACCEPTANCE OF TRUST. The Trustee hereby accepts this Trust
and agrees to hold all the property now or hereafter constituting the Trust
Fund hereunder, subject to all the terms and conditions of this Agreement.
(b) MERGER OR CONSOLIDATION. The Plan and this Trust may not be
merged or consolidated with, and the assets or liabilities of the Plan and this
Trust may not be transferred to, any other plan or trust unless each
Participant would receive a benefit immediately after the merger, consolidation
or transfer if the plan and trust then terminated that is equal to or greater
than the benefit the Participant would have received immediately before the
merger, consolidation or transfer if the Plan and this Trust had then
terminated.
(c) ALIENATION.
(1) Except as provided in subparagraph (2), no
Participant or beneficiary of a Participant shall have any right to
assign, transfer, appropriate, encumber, commute, anticipate or
otherwise alienate his interest in the Plan or this Trust or any
payments to be made hereunder; no benefits, payments, rights or
interests of a Participant or a beneficiary of a Participant of any
kind or nature shall be in any way subject to legal process to levy
upon, garnish or attach the same for payment of any claim against the
Participant or beneficiary of a Participant; and no Participant or
beneficiary of a Participant shall have any right of any kind
whatsoever with respect to this Trust, or any estate or interest
therein, or with respect to any other property or right, other than
the right to receive such distributions as are lawfully made out of
this Trust, as and when the same respectively are due and payable
under the terms of the Plan and this Agreement.
(2) Notwithstanding the provisions of subparagraph
(c)(1), the Plan Administrator shall direct the Trustee to make
payments pursuant to a Qualified Domestic Relations Order as defined
in Section 414(p) of the Code.
(d) GOVERNING LAW. This Agreement shall be administered,
construed and enforced according to the laws of the State of Florida, except to
the extent such laws have been expressly preempted by federal law.
(e) ACTION BY EMPLOYER. Whenever the Company or another Employer
under the terms of this Agreement is permitted or required to do or perform any
act, it shall be done and performed by the Board of Directors of the Company or
such other Employer and shall be evidenced by proper resolution of such Board
of Directors certified by the Secretary or Assistant Secretary of the Company
or such other Employer.
IX - 1.
216
(f) ALTERNATIVE ACTIONS. In the event it becomes impossible for
the Company, another Employer, the Plan Administrator or the Trustee to perform
any act required by this Agreement, then the Company, such other Employer, the
Plan Administrator or the Trustee, as the case may be, may perform such
alternative act that most nearly carries out the intent and purpose of this
Agreement.
(g) GENDER. Throughout this Agreement, and whenever appropriate,
the masculine gender shall be deemed to include the feminine and neuter; the
singular, the plural; and vice versa.
IN WITNESS WHEREOF, the parties have executed this Agreement this
_____ day of ___________________, 1994.
HOME SHOPPING NETWORK, INC.
By: __________________________
"COMPANY"
PNC BANK KENTUCKY, INC.
By: __________________________
"TRUSTEE"
IX - 2.
217
EXHIBIT 10.31
HOME SHOPPING NETWORK, INC.
EMPLOYEE EQUITY PARTICIPATION PLAN
218
HOME SHOPPING NETWORK, INC.
EMPLOYEE EQUITY PARTICIPATION PLAN
M
Table Of Contents
ARTICLE I Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II Name and Purpose of the Plan and the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE III Plan Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IV Eligibility and Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE V Contributions to the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VI Participants' Account and Allocation
of Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VII Top Heavy Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VIII Benefits Under the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE IX Payment of Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE X Voting and Exercising Other Rights
of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE XI Valuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE XII Investment Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE XIII Trust Fund and Expenses of Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE XIV Amendment and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE XV Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
i
219
HOME SHOPPING NETWORK, INC.
EMPLOYEE EQUITY PARTICIPATION PLAN
This HOME SHOPPING NETWORK, INC. EMPLOYEE EQUITY PARTICIPATION PLAN
hereby adopted this 28th day of December 2, 1994, by HOME SHOPPING NETWORK,
INC., a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company desires to establish and maintain an employee stock
ownership plan for the benefit of its employees and the employees of its
Affiliates which adopt this Plan and who shall qualify as participants
hereunder; and
WHEREAS, the Company's securities are traded on an established
securities market; and
WHEREAS, the Company intends to contribute its securities to the Trust
Fund solely for the benefit of its employees and those of its Affiliates
who adopt this plan and who qualify hereunder.
NOW, THEREFORE, the Company hereby establishes an employee stock
ownership plan upon the following terms:
ARTICLE I
Definitions
(a) "Account" means the Participant's Company Stock Account.
(b) "Allocation Date" means December 31 of such Plan Year.
(c) "Administrator" shall mean the Plan Administrator.
(d) "Affiliate" or "Affiliates" shall mean, with
respect to an Employer, any corporation other than such Employer that is a
member of a controlled group of corporations, within the meaning of Section
414(b) of the Code, of which such Employer is a member; all other trades or
businesses (whether or not incorporated) under common control, within the
meaning of Section 414(c) of the Code, with such Employer; any service
organization other than such Employer that is a member of an affiliated service
group, within the meaning of Section 414(m) of the Code, of which such Employer
is a member; and any other organization that is required to be aggregated with
such Employer under Section 414(o) of the Code. For purposes of determining the
limitations on Annual Additions, the special rules of Section 415(h) of the Code
shall apply.
(e) "Annual Additions" shall mean, with respect to a
Limitation Year, the sum of:
1
220
(1) the amount of Employer contributions (including
elective contributions) allocated to the Participant under any defined
contribution plan maintained by an Employer or an Affiliate;
(2) the amount of the Employee's contributions (other than
rollover contributions, if any) to any contributory defined contribution plan
maintained by an Employer or an Affiliate;
(3) any Forfeitures allocated to the Participant under any
defined contribution plan maintained by an Employer or an Affiliate; and
(4) amounts allocated to an individual medical account,
as defined in Section 415(l)(2) of the Code that is part of a pension or
annuity plan maintained by an Employer or an Affiliate, and amounts derived from
contributions that are attributable to post-retirement medical benefits
allocated to the separate account of a Key Employee (as defined in Section
419A(d)(3) of the Code) under a welfare benefit plan (as defined in Section
419(e) of the Code) maintained by an Employer or an Affiliate; provided,
however, the percentage limitation set forth in paragraph (e)(1) of Article VI
shall not apply to: (A) any contribution for medical benefits (within the
meaning of Section 419A(f)(2) of the Code) after separation from service which
is otherwise treated as an "Annual Addition," or (B) any amount otherwise
treated as an "Annual Addition" under Section 415(l)(1) of the Code.
(f) "Authorized Leave of Absence" shall mean an unpaid
temporary cessation from active employment with the Employer pursuant to a
nondiscriminatory policy, whether occasioned by illness, military service, or
any other reason.
(g) "Beneficiary" or "Beneficiaries" shall mean the person or
persons to whom the share of a deceased Participant is payable as provided in
paragraph (d)(2) of Article VIII.
(h) "Board of Directors" and "Board" shall mean the board of
directors of the Company or, when required by the context, the board of
directors of an Employer other than the Company.
(i) "Code" shall mean the Internal Revenue Code of 1986, as
amended, or any successor statute. Reference to a specific section of the Code
shall include a reference to any successor provision.
(j) "Company" shall mean Home Shopping Network, Inc., and its
successors.
(k) "Company Stock" means common stock issued by the Company (or by
a corporation which is a member of the controlled group of corporations of which
the Company is a member) which is readily tradeable on an established securities
market. If there is no common stock which meets the foregoing requirement, the
term "Company Stock"
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means common stock issued by the Company (or by a corporation which is a member
of the same controlled group) having a combination of voting power and
dividend rights equal to or in excess of: (A) that class of common stock of the
Company (or of any such corporation) having the greatest voting power, and (B)
that class of stock of the Company (or any other such corporation) having the
greatest dividend rights. Noncallable preferred stock shall be deemed to be
"Company Stock" if such stock is convertible at any time into stock which
constitutes "Company Stock" hereunder and if such conversion is at a conversion
price which (as of the date of the acquisition by the Trust) is reasonable. For
purposes, of the preceding sentence, pursuant to regulations, preferred stock
shall be treated as noncallable if after the call there will be a reasonable
opportunity for a conversion which meets the requirements of the preceding
sentence.
(l) "Company Stock Account" means the account of a Participant which
is credited with the shares of Company Stock purchased and paid for by the Trust
Fund or contributed to the Trust Fund pursuant to paragraph (a) of Article V.
(m) (1) "Compensation" shall mean the regular salaries and
wages, commissions, bonuses and overtime pay paid by an Employer (as
determined for federal income tax purposes and reported on IRS Form W-2)
and elective contributions under a Section 401(k) plan or a plan
described in Section 125 of the Code, but shall not include disability
payments, stock options, stock awards, relocation expense payments,
credits or benefits under this Plan, any amount contributed to any
pension, employee welfare, life insurance or health insurance plan or
arrangement, or any other fringe benefits, deferred compensation or
welfare benefits. Compensation shall be determined based on the Plan
Year.
(2) To the extent required by law, no Compensation in
excess of $150,000.00 (adjusted under such regulations as may be issued
by the Secretary of the Treasury) shall be taken into account for any
Employee. For purposes of determining whether Compensation exceeds
$150,000.00, if any Employee is a Family Member of a Highly Compensated
Employee who is (i) a 5% owner of an Employer, or (ii) one of the ten
Highly Compensated Employees paid the greatest amount of Compensation
during the Plan Year, then such Family Member shall not be considered as
a separate Employee and any Compensation paid to such Family Member
shall be treated as if it were paid to or on behalf of the related
Highly Compensated Employee.
(3) For purposes of making allocations of Company
contributions pursuant to Article VI with respect to any Plan Year, no
Compensation paid by an Employer with respect to an Employee prior to
the Employee's first day of participation shall be taken into account.
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(n) "Effective Date" shall mean December 31, 1994, except as may
otherwise be noted herein.
(o) "Eligible Person" is any Employee other than an Employee who has
been granted stock options under the Company's employee stock option plan or who
has been granted any stock appreciation rights by the Company. Any Employee who
became a Participant and thereafter is granted stock options pursuant to the
Company's stock option plan or is granted any stock appreciation rights shall
continue to vest in any shares allocated to his Account under this Plan but
shall not share in future allocations of Company stock as provided in Article
VI(b) and (e).
(p) "Eligible Participant" means a Participant who has worked at
least one thousand (1,000) Hours of Service with the Employer or an Affiliate
during a Plan Year and is in the employ of an Employer on the Allocation Date.
(q) "Entry Date" shall mean either June 30 or December 31.
(r) "Employee" shall mean any person employed by an Employer or an
Affiliate other than:
(1) a member of a collective bargaining unit if retirement
benefits were a subject of good faith bargaining between such unit and
an Employer, and
(2) a non-resident alien who does not receive earned income
from sources within the United States.
The term "Employee" shall also include any individual required
to be treated as an Employee by reason of Section 414(n) or Section
414(o) of the Code (but only for the purposes specified in such
Sections).
(s) "Employer" shall mean the Company and any Affiliate that
adopts this Plan with the consent of the Company.
(t) "Employment Commencement Date" means the date on which
an Employee performs his first Hour of Service for an Employer.
(u) "Family Member" of a Highly Compensated Employee shall mean such
Employee's spouse, lineal descendant or ascendant, or the spouse of his lineal
descendant or ascendant; provided, however, that for purposes of determining the
limit on a Highly Compensated Employee's Compensation under Section 401(a)(17)
of the Code, the term "Family Member" shall include only the Employee's spouse
and his lineal descendants who have not attained age 19 before the close of the
Plan Year.
(v) "Forfeiture" or "Forfeitures" means that portion of a
Participant's Company Stock Account that is not vested, and which is reallocated
(under paragraph (e) of Article VI) on the dates specified in paragraph (c)(3)
and (4) of Article VIII. Restoration
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of forfeited amounts shall occur pursuant to paragraph (c)(4)(C) of Article
VIII.
(w) (1) "Highly Compensated Employee" shall mean any Employee
during the Plan Year or the immediately preceding Plan Year (or calendar year,
if elected by the Employer in accordance with Treasury regulations)
(A) who was a 5% owner of an Employer;
(B) whose Section 415 Compensation was more than
$75,000.00 (adjusted under such regulations as may be issued by
the Secretary of the Treasury);
(C) whose Section 415 Compensation was more than
$50,000.00 (adjusted under such regulations as may be issued by
the Secretary of the Treasury), and who was a member of the "top
paid group"; provided, that as used herein, "top paid group"
shall mean all Employees who are in the top 20% of the
Employer's work force on the basis of Section 415 Compensation
paid during the year; provided, further, that for purposes of
determining the number of Employees in the top paid group,
Employees described in Section 414(q)(8) of the Code shall be
excluded; or
(D) who was an officer of an Employer and received
compensation in excess of 50% of the amount in effect under
Section 415(b)(1)(A) of the Code for any such Plan Year.
(i) The number of officers shall be limited
to the lesser of (a) 50 Employees; or (b) the greater of
three (3) Employees or 10% of all Employees. For
purposes of determining the number of officers,
Employees described in Section 414(q)(8) of the Code
shall be excluded, but such Employees shall still be
considered for the purpose of identifying particular
Employees who are officers.
(ii) If an Employer does not have at least
one officer whose Section 415 Compensation is in excess
of 50% of the amount in effect in Section 415(b)(1)(A)
of the Code, then the highest paid officer of the
Employer will be treated as a Highly Compensated
Employee.
(2) In determining who is a Highly Compensated Employee,
Employees who are nonresident aliens and who receive no earned income
(within the meaning of Section 911(d)(2) of the Code) from an Employer
constituting United States source income (within the meaning of Section
861(a)(3) of the Code) shall not be treated as Employees.
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(3) For purposes of determining who is a Highly Compensated
Employee, an Employer and any Affiliate shall be taken into account as a
single Employer.
(4) For purposes of this paragraph, the determination of
Section 415 Compensation shall be based only on Section 415 Compensation
that is actually paid and shall be made by including elective or salary
reduction contributions to a plan described in Section 125 of the Code,
a plan described in Section 401(k) of the Code, a simplified employee
pension described in Section 408(k) of the Code or a plan described in
Section 403(b) of the Code.
(5) The term "Highly Compensated Employee" shall also mean
any former Employee who separated from service (or was deemed to have
separated from service) prior to the Plan Year, performs no service for
an Employer during the Plan Year, and was an actively employed Highly
Compensated Employee in the separation year or any Plan Year ending on
or after the date the Employee attained age 55.
(6) For purposes of determining whether a Participant is a
Highly Compensated Employee, if any Employee is a Family Member of a
Highly Compensated Employee who is (A) a 5% owner of an Employer, or (B)
one of the ten Highly Compensated Employees paid the greatest amount of
Compensation during the Plan Year, then such Family Member shall not be
considered as a separate Employee and any Compensation paid to such
Family Member (and any applicable benefit or contribution on behalf of
such Family Member) shall be treated as if it were paid to or on behalf
of the related Highly Compensated Employee.
(x) "Key Employee" shall mean any Employee or former Employee who is
at any time during the Plan Year (or was at any time during the four preceding
Plan Years) (1) an officer of an Employer (within the meaning of Section
416(i)(1) of the Code) having an aggregate annual compensation from the Employer
and its Affiliates in excess of 50% of the amount in effect under Section
415(b)(1)(A) of the Code for any Plan Year, (2) one of the ten Employees owning
(or considered as owning) the largest interests in an Employer, owning more than
a 1/2% interest in the Employer, and having an aggregate annual compensation
from the Employer and its Affiliates of more than the limitation in effect under
Section 415(c)(1)(A) of the Code for the calendar year that includes the last
day of the Plan Year (if two Employees have equal interests in an Employer, the
Employees having the greater annual compensation from the Employer shall be
deemed to have a larger interest), (3) a 5% owner of an Employer (within the
meaning of Section 416(i)(1)(B) of the Code) or (4) a 1% owner of an Employer
(within the meaning of Section 416(i)(1)(B) of the Code) having an aggregate
annual compensation from the Employer and its Affiliates of more than
$150,000.00. For purposes of this paragraph the term "compensation" shall mean
an Employee's Section 415 Compensation. The determination of Section 415
Compensation shall be based only on Section 415 Compensation that is actually
paid
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and shall be made by including elective or salary reduction contributions to a
plan described in Section 125 of the Code, a plan described in Section 401(k)
of the Code, a simplified employee pension described in Section 408(k) of the
Code or a plan described in Section 403(b) of the Code.
(y) "Limitation Year" shall mean the Plan Year.
(z) "Non-Key Employee" shall mean, with respect to any Plan Year, an
Employee or former Employee who is not a Key Employee (including any such
Employee who formerly was a Key Employee).
(aa) "Normal Retirement Date" shall mean the date on which a
Participant attains the age of 65 years.
(ab) "Participant" shall mean any Eligible Person who participates in
the Plan as provided in Article IV and shall include any former employee of an
Employer who was participating in the Plan and who still has a balance in his
Account under the Plan.
(ac) "Plan" shall mean the Home Shopping Network, Inc. Employee
Equity Participation Plan as herein set forth, as it may be amended from time to
time.
(ad) "Plan Administrator" shall mean the Company.
(ae) "Plan Year" shall mean the 12-month period ending on December
31.
(af) "Section 415 Compensation" shall mean wages, salaries, and fees
for professional services and other amounts received (without regard to whether
or not an amount is paid in cash) for personal services actually rendered in the
course of employment with the Employer to the extent that the amounts are
includable in gross income (including, but not limited to, commissions paid
salesmen, compensation for services on the basis of a percentage of profits,
commissions on insurance premiums, tips, bonuses, fringe benefits, and
reimbursements or other expense allowances under a nonaccountable plan (as
described in Section 1.62-2(c) of the Income Tax Regulations), and excluding the
following:
(1) Employer contributions to a plan of deferred
compensation which are not includable in the Employee's gross income for
the taxable year in which contributed, or Employer contributions under a
simplified employee pension plan to the extent such contributions are
deductible by the Employee, or any distributions from a plan of deferred
compensation;
(2) Amounts realized from the exercise of a non-qualified
stock option, or when restricted stock (or property) held by the
Employee either becomes freely transferable or is no longer subject to a
substantial risk of forfeiture;
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(3) Amounts realized from the sale, exchange or other
disposition of stock acquired from an Employer under a qualified stock
option plan; and
(4) Other amounts which received special tax benefits, or
contributions made by the Employer (whether or not under a salary
reduction agreement) towards the purchase of an annuity contract
described in Section 403(b) of the Code (whether or not the
contributions are actually excludable from the gross income of the
Employee).
(ag) "Service" means:
(1) "Hour of Service" is defined as:
(A) Any hour for which an Employee is paid, or entitled to
payment, for the performance of duties for the Employer. These Hours
will be credited to the Employee for the computation period in which the
duties are performed; and
(B) Any hour for which an Employee is paid, or entitled to
payment, by the Employer on account of a period of time during which no
duties are performed (irrespective of whether the employment
relationship has terminated) due to vacation, holiday, illness,
incapacity (including disability), layoff, jury duty, military duty or
leave of absence; provided, however, that no more than 501 Hours of
Service shall be credited under this paragraph (1)(B) to an Employee on
account of any single continuous period during which the Employee
performs no duties (whether or not such period occurs in a single
computation period), and no credit shall be awarded for any payment
required by applicable worker's compensation, unemployment compensation
or disability insurance laws or for payments which solely reimburse an
Employee for medical or medical-related expenses. Hours under this
paragraph will be calculated and credited pursuant to Section
2530.200b-2 of the Department of Labor Regulations which is incorporated
herein by this reference.
Notwithstanding anything herein to the contrary, any Employee who is
paid on an hourly basis or who is required to account for his hours of work
shall be credited with Hours of Service based upon his actual hours of work as
reflected by the Employer's books and records. Payments made to Employees for
periods during which no services are performed are to be converted into Hours of
Service as provided by Labor Department Regulations 29 C.F.R. Section
2530.200b-2(b) and (c). Any other Employee required by paragraph (A) or (B)
above to be credited with at least one Hour of Service during his regular
payroll period shall be credited with Hours of Service for that period
determined by the following schedule:
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Pay Period Hours of Service
---------- ----------------
Weekly 45
Bi-Weekly 90
Semi-Monthly 95
Monthly 190
Any award or agreement providing back pay, irrespective of any
mitigation of damages, shall be credited as Hours of Service for the period for
which it is allowed provided that it does not result in duplication of hours
credited under paragraphs (1)(A) and (B) above.
Hours of Service will be credited for employment with other members of
an affiliated service group (under Code Section 414(m)), a controlled group of
corporations (under Code Section 414(b)), or a group of trades or businesses
under common control (under Code Section 414(c)) of which the Employer is a
member, and any other entity required to be aggregated with the Employer
pursuant to Code Section 414(o) and the Regulations thereunder. Hours of
Service will also be credited for any Leased Employee or other shared employee
considered to be an Employee for purposes of this Plan by application of Section
414(n) or Section 414(o) of the Code and the Regulations thereunder and for
service with a predecessor employer if the Employer maintains a plan of the
predecessor Employer.
Solely for purposes of determining whether a Break in Service, as
defined in paragraph (3) below, has occurred in a Plan Year for participation
and vesting purposes, an individual who is absent from work for maternity or
paternity reasons shall receive credit for the Hours of Service which would
otherwise have been credited to such individual but for such absence, or, in any
case in which such hours cannot be determined, eight (8) Hours of Service per
day of such absence. For purposes of this paragraph, an absence from work for
maternity or paternity reasons means an absence (A) by reason of the pregnancy
of the individual, (B) by reason of a birth of a child of the individual, (C) by
reason of the placement of a child with the individual in connection with the
adoption of such child by such individual, or (D) for purposes of caring for
such child for a period beginning immediately following such birth or
placement. The Hours of Service credited under this paragraph shall be
credited (A) in the Plan Year in which the absence begins if the crediting is
necessary to prevent a Break in Service in that Year, or (B) in all other
cases, in the following Plan Year.
(2) "Year of Service" A Year of Service is defined as the
twelve (12) consecutive month computation period during which the
Employee completes at least one thousand (1,000) Hours of Service:
(A) For purposes of determining a Year of Service
for an Employee's eligibility to participate in the Plan
pursuant to Article IV(a)(2), the initial eligibility
computation period is the twelve (12) consecutive month period
commencing with the Employee's Employment
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Commencement Date (or the date an Employee performs his first
Hour of Service following a Break in Service, whichever is
later) during which the Employee completes at least one thousand
(1,000) Hours of Service. All succeeding eligibility
computation periods shall be the Plan Year;
(B) For purposes of measuring Years of Service for
vesting and benefit accrual purposes pursuant to Article
VIII(c), after an Employee's satisfaction of the eligibility
requirements set forth in Article IV, herein, the computation
period shall be the Plan Years beginning with the Plan Year
which includes the Employee's Employment Commencement Date.
Initial Participants, as defined in Article IV(a)(1), will only
be credited with one (1) Year of Service at December 31, 1994,
for purposes of Article VIII(c)(2).
(C) For purposes of determining a Year of Service for
allocating additional shares of Company Stock pursuant to
Article VI(a)(1), the computation period shall be the calendar
year and shall exclude the calendar year which includes the
Employee's Employment Commencement Date.
For vesting purposes no credit shall be given for any Service prior to
January 1, 1994.
(3) "Break in Service" is defined as any twelve (12)
consecutive month computation period during which a Participant fails to
complete more than five hundred (500) Hours of Service with the Employer
or an Affiliate. However, for purposes of determining Breaks in Service
for eligibility, vesting and benefit accrual purposes, the computation
periods shall be the same respective consecutive twelve (12) month
periods used to determine Years of Service pursuant to paragraph (2)
above. Notwithstanding anything herein to the contrary, a Break in
Service shall not commence if the Participant is on an Authorized Leave
of Absence, as defined in paragraph (e) above.
(4) "Separation from Service" is defined as the date on
which an Employee quits, retires, is discharged or dies.
(ah) "Top Heavy Year" means any Plan Year in which the Top Heavy
Tests under Article VII are met.
(ai) "Trust" shall mean the trust established by the Trust Agreement.
(aj) "Trust Agreement" shall mean the agreement providing for the
Trust Fund, as it may be amended from time to time.
(ak) "Trustee" shall mean the individual, individuals or corporation
designated as trustee under the Trust Agreement.
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(al) "Trust Fund" shall mean the trust fund established under the
Trust Agreement from which the amounts of supplementary compensation provided
for by the Plan are to be paid or are to be funded.
(am) "Valuation Date" shall mean the date specified in paragraph
(a) of Article XI on which the net worth of the assets comprising the Trust
Fund is determined.
ARTICLE II
Name and Purpose of the Plan and the Trust
(a) Name of Plan. The name of the Plan is the Home Shopping
Network, Inc. Employee Equity Participation Plan. The Plan is an employee
stock ownership plan which is intended to satisfy the requirements of Code
Section 4975(e)(7) and Regulation Section 54.4975-11.
(b) Exclusive Benefit. This Plan is created for the sole purpose
of providing benefits to the Participants and enabling them to share in the
growth of their Company. Except as otherwise permitted by law, in no event
shall any part of the principal or income of the Trust be paid to or reinvested
in any Employer or be used for or diverted to any purpose whatsoever other than
for the exclusive benefit of the Participants and their Beneficiaries.
(c) Mistake of Fact. Notwithstanding the foregoing provisions of
paragraph (b), any contribution made by an Employer to this Plan by a mistake
of fact may be returned to the Employer within one year after the payment of
the contribution; and any contribution made by an Employer that is conditioned
upon the deductibility of the contribution under Section 404 of the Code (each
contribution shall be presumed to be so conditioned unless the Employer
specifies otherwise) may be returned to the Employer if the deduction is
disallowed and the contribution is returned (to the extent disallowed) within
one year after the disallowance of the deduction.
(d) Participant's Rights. The establishment of this Plan shall not
be considered as giving any Employee, or any other person, any legal or
equitable right against any Employer, any Affiliate, the Plan Administrator,
the Trustee or the principal or the income of the Trust, except to the extent
otherwise provided by law. The establishment of this Plan shall not be
considered as giving any Employee, or any other person, the right to be
retained in the employ of any Employer or any Affiliate.
(e) Qualified Plan. This Plan and the Trust are intended to
qualify under the Code as a tax-free employees' plan and trust, and the
provisions of this Plan and the Trust should be interpreted accordingly.
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ARTICLE III
Plan Administrator
(a) Administration of the Plan. The Plan Administrator shall
control and manage the operation and administration of the Plan, except with
respect to investments. The Administrator shall have no duty with respect to
the investments to be made of the funds in the Trust except as may be expressly
assigned to it by the terms of the Trust Agreement.
(b) Powers and Duties. The Administrator shall have complete
control over the administration of the Plan herein embodied, with all powers
necessary to enable it to carry out its duties in that respect. Not in
limitation, but in amplification of the foregoing, the Administrator shall have
the power and discretion to interpret or construe this Plan and to determine
all questions that may arise as to the status and rights of the Participants
and others hereunder.
(c) Direction of Trustee. It shall be the duty of the
Administrator to direct the Trustee with regard to the allocation and the
distribution of the benefits to the Participants and others hereunder.
(d) Summary Plan Description. The Administrator shall prepare or
cause to be prepared a summary plan description (if required by law) and such
periodic and annual reports as are required by law.
(e) Disclosure. At least once each year, the Administrator shall
furnish to each Participant a statement containing the value of his interest in
the Trust Fund and such other information as may be required by law.
(f) Conflict In Terms. The Administrator shall notify each
Employee, in writing, as to the existence of the Plan and Trust and the basic
provisions thereof. In the event of any conflict between the terms of this
Plan and Trust as set forth in this Plan and Trust Agreement and as set forth
in any explanatory booklet or other description, this Plan and Trust Agreement
shall control.
(g) Nondiscrimination. The Administrator shall not take any action
or direct the Trustee to take any action whatsoever that would result in
unfairly benefiting one Participant or group of Participants at the expense of
another or in improperly discriminating between Participants similarly situated
or in the application of different rules to substantially similar sets of
facts.
(h) Records. The Administrator shall keep a complete record of all
its proceedings as such Administrator and all data necessary for the
administration of the Plan. All of the foregoing records and data shall be
located at the principal office of the Administrator.
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(i) Final Authority. Except to the extent otherwise required by
law, the decision of the Administrator in matters within its jurisdiction shall
be final, binding and conclusive upon each Employer and each Employee, member
and Beneficiary and every other interested or concerned person or party.
(j) Claims.
(1) Claims for benefits under the Plan may be made by a
Participant or a Beneficiary of a Participant on forms supplied by the
Plan Administrator. Written notice of the disposition of a claim shall
be furnished to the claimant by the Administrator within ninety (90)
days after the application is filed with the Administrator, unless
special circumstances require an extension of time for processing, in
which event action shall be taken as soon as possible, but not later
than one hundred eighty (180) days after the application is filed with
the Administrator; and, in the event that no action has been taken
within such ninety (90) or one hundred eighty (180) day period, the
claim shall be deemed to be denied for the purposes of paragraph (2).
In the event that the claim is denied, the denial shall be written in a
manner calculated to be understood by the claimant and shall include
the specific reasons for the denial, specific references to pertinent
Plan provisions on which the denial is based, a description of the
material information, if any, necessary for the claimant to perfect the
claim, an explanation of why such material information is necessary and
an explanation of the claim review procedure.
(2) If a claim is denied (either in the form of a written
denial or by the failure of the Plan Administrator, within the required
time period, to notify the claimant of the action taken), a claimant or
his duly authorized representative shall have sixty (60) days after the
receipt of such denial to petition the Plan Administrator in writing
for a full and fair review of the denial, during which time the
claimant or his duly authorized representative shall have the right to
review pertinent documents and to submit issues and comments in
writing. The Plan Administrator shall promptly review the claim and
shall make a decision not later than sixty (60) days after receipt of
the request for review, unless special circumstances require an
extension of time for processing, in which event a decision shall be
rendered as soon as possible, but not later than one hundred twenty
(120) days after the receipt of the request for review. If such an
extension is required because of special circumstances, written notice
of the extension shall be furnished to the claimant prior to the
commencement of the extension. The decision of the review shall be in
writing and shall include specific reasons for the decision, written in
a manner calculated to be understood by the claimant, with specific
references to the Plan provisions on which the decision is based.
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(k) Appointment of Advisors. The Administrator may appoint such
accountants, counsel (who may be counsel for an Employer), specialists and
other persons that it deems necessary and desirable in connection with the
administration of this Plan. The Administrator, by action of its Board of
Directors, may designate one or more of its employees to perform the duties
required of the Administrator hereunder.
ARTICLE IV
Eligibility and Participation
(a) Current Employees.
(1) Initial Participants. Any Eligible Person employed
before January 1, 1994 who completes at least one thousand (1,000)
Hours of Service during the calendar year 1994 and attained age 21
shall be eligible to participate on the Effective Date of the Plan.
(2) Future Participants. Any Eligible Person who has not
satisfied the requirements specified in paragraph (1) above, shall
become eligible to participate in the Plan upon completing a Year of
Service and attaining the age of 21. Any such Eligible Person shall
enter the Plan as a Participant, if he is still an employee of an
Employer, on the first Entry Date concurring therewith or next
following his satisfaction of the eligibility requirements.
(b) Former Employees.
(1) An Employee who ceases to be a Participant and who
subsequently reenters the employ of an Employer shall be eligible again
to become a Participant on the date of his reemployment.
(2) An Employee who satisfies the eligibility requirements
set forth above and who terminates employment with an Employer prior to
becoming a Participant will become a Participant on the later of the
Entry Date on which he would have entered the Plan had he not
terminated employment or the date of his reemployment.
ARTICLE V
Contributions to the Trust
(a) Company's Contribution. The Company shall contribute stock or
cash as needed to fulfill the requirements of Article VI paragraphs (a)(1) and
(d) and may contribute Company Stock or cash in such amounts, if any, that the
Company's Board of Directors, in
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its sole discretion, may authorize and direct to be paid and allocated
as provided in Article VI paragraphs (a)(2) and (b).
(b) Payment. The Company's total annual contribution may be made,
in one or more installments, not later than the due date (including extensions
thereof) for filing the federal income tax return of the Company for its fiscal
year ending with or during the Plan Year for which the contribution is made.
Company Stock shall be valued at its then fair market value.
(c) Maximum Amount of Employer Contributions. The aggregate amount
of contributions made by the Employer shall not exceed the maximum amount
allowable as a deduction for federal income tax purposes for the year of
contribution nor shall the Employer contribute an amount for any Participant
which exceeds the maximum amount allowable under Code Section 415(c).
(d) Employee Contributions. Participants shall not be permitted to
make any contributions to this Plan.
(e) No Duty to Inquire. The Trustee shall have no right or duty to
inquire into the amount of any contribution made by the Company or the method
used in determining the amount of any such contribution, or to collect the
same, but the Trustee shall be accountable only for funds actually received by
it.
ARTICLE VI
Participants' Account and Allocation of Contributions
(a) Initial Allocation.
(1) Initial Participants. The Plan Administrator shall allocate
to the Company Stock Account of each Participant on the Effective Date of the
Plan 100 shares of Company Stock plus 10 shares for each Year of Service of the
Plan Participant in excess of 1. For years before 1988, a calendar year during
which the Participant was continuously employed shall be treated as a Year of
Service regardless of the number of hours worked.
(2) Future Participants. It is intended that each person who
becomes a Participant after the Effective Date receive an initial allocation
equal to the lesser of: (A) 100 shares of Company Stock or (B) shares of
Company Stock which have a value equal to $1,000, with such shares rounded down
to the nearest whole number of shares. If the Company makes discretionary
contributions in addition to the Initial Allocation to Initial Participants of
paragraph (a)(1), such contributions shall first be allocated pro rata to such
Future Participants based on their Entry Dates, with the earliest Entry Date
receiving the first allocation, until such Future Participants shall have been
allocated the whole number of shares of Company Stock originally calculated as
of the Allocation Date contemporaneous with or
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next following their Entry Date. If such contributions are
made during the Plan Year, which includes the Future Participant's
Entry Date, such Participant need not be employed on the Allocation
Date to share in the allocation provided by this paragraph. If such
contributions are made during any Plan Year subsequent to the Plan Year
which includes the Future Participant's Entry Date, such Participant
must be employed on the Allocation Date to share in the allocation
provided by this paragraph. Any discretionary contributions in excess
of those required to make the allocations provided herein shall be
allocated as provided in paragraph (b) below.
(b) Additional Allocations. If the Company makes discretionary
contributions in addition to the Initial Allocation of paragraph (a), every
Eligible Participant employed on the Allocation Date shall share in the
contribution in proportion to his Compensation relative to the Compensation of
all Eligible Participants employed on that Allocation Date.
(c) Limitation on Allocation of Contributions.
(1) Notwithstanding anything contained in this Plan to the
contrary, the aggregate Annual Additions to a Participant's Account
under this Plan and under any other defined contribution plans
maintained by an Employer or an Affiliate for any Limitation Year shall
not exceed the lesser of $30,000.00 (or, if greater, one quarter of the
dollar limitation in effect under Section 415(b)(1)(A) of the Code) or
25% of the Participant's Section 415 Compensation for such Plan Year.
(2) In the event that the Annual Additions, under the
normal administration of the Plan, would otherwise exceed the limits
set forth above for any Participant, or in the event that any
Participant participates in both a defined benefit plan and a defined
contribution plan maintained by any Employer or any Affiliate and the
aggregate Annual Additions to and projected benefits under all of such
plans, under the normal administration of such plans, would otherwise
exceed the limits provided by law, then the Plan Administrator shall
take such actions, applied in a uniform and nondiscriminatory manner,
as will keep the Annual Additions and projected benefits for such
Participant from exceeding the applicable limits provided by law.
Excess Annual Additions shall be disposed of as provided in paragraph
(3) below. Adjustments shall be made to this Plan, if necessary to
comply with such limits, before any adjustments may be made to any
other Plan.
(3) If as a result of the allocation of Forfeitures, a
reasonable error in estimating a Participant's Section 415
Compensation, a reasonable error in determining the amount of Employer
contributions that may be made with respect to any Participant under
the limits of Section 415 of the Code, or other circumstances permitted
under Section 415 of the Code, the Annual Additions attributable to
Employer contributions for
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a particular Participant would cause the limitations
set forth in this paragraph (c) to be exceeded, the excess
amount shall be used to reduce Employer contributions for the
next Plan Year (and succeeding Plan Years, as necessary) for
that Participant if that Participant is covered by the Plan as
of the end of the Plan Year. If the Participant is not covered
by the Plan as of the end of the Plan Year, such excess amount
shall be held unallocated in a suspense account for the Plan
Year and reallocated among the Participants as of the end of
the next Plan Year to all of the Participants in the Plan in
the same manner as an Employer contribution under the terms of
paragraphs (a) and (b) of this Article VI before any further
Employer contributions are allocated to the Accounts of the
Participants, and such allocations shall be treated as Annual
Additions to the Accounts of the Participants. In the event
that the limits on Annual Additions for any Participant would
be exceeded before all of the amounts in the suspense account
are allocated among the Participants, then such excess amounts
shall be retained in the suspense account to be reallocated as
of the end of the next Plan Year and any succeeding Plan Years
until all amounts in the suspense account are exhausted.
(d) Make-Up Allocation. Any Participant who is prevented
from receiving all or any portion of the Initial Allocation of Company
Stock provided by paragraph (a) because of the limitations of paragraph
(c) shall be entitled to an allocation of Company Stock in each
succeeding year in which he is employed on the Allocation Date up to
the limit provided by paragraph (c) until he has received the number of
shares of Company Stock he would have received pursuant to paragraph
(a) but for the limitations of paragraph (c). This paragraph shall not
apply to discretionary allocations pursuant to paragraph (b) above.
(e) Allocation of Forfeitures. Forfeitures arising during
the Plan Year shall be allocated in the following order:
(1) first to Participants who are entitled to
restoration of amounts previously forfeited pursuant to Article
VIII paragraph (c)(4)(C);
(2) second to Participants who are entitled to a
Make-Up Allocation pursuant to Article VI paragraph (d) above;
(3) third to Future Participants who had Entry
Dates in prior Plan Years and were not allocated the full
amount of their Initial Allocation specified in Article VI
paragraph (a)(2), above, and in the same order specified in
that paragraph;
(4) fourth, pursuant to paragraph (a)(2), above,
to any Employees who became Participants during the Plan Year;
and
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(5) the balance of any Forfeitures shall be
allocated in the same manner as the Company's contribution
under paragraph (b), above.
(f) Allocation of Earnings and Losses. As of each
Allocation Date, the Plan Administrator shall credit or charge each
Participant's Company Stock Account with its own earnings or losses for
the year.
(g) Allocation of Cash Dividends. Cash dividends paid on
Company Stock allocated to a Participant's Company Stock Account shall
be credited to that Participant's Company Stock Account.
ARTICLE VII
Top Heavy Plan
(a) Minimum Allocation of Employer Contribution for Top
Heavy Plan Year. Notwithstanding the foregoing, if the Plan is a Top
Heavy Plan or an Extra Top Heavy Plan for any Plan Year (as determined
by the tests set forth in paragraphs (e)(1) and (e)(2) of this Article
VII), then a participating Non-Key Employee who is in the employ of the
Employer on the last day of the Plan Year shall be entitled to a
minimum contribution in accordance with the following paragraphs:
(1) Only Defined Contribution Plans. If a
Participant participates only in defined contribution plans
maintained by the Employer or any Affiliate, and the
Participant did not receive a contribution under this Plan,
and/or any other defined contribution plan maintained by the
Employer or any Affiliate equal to the lesser of: (i) three
(3%) of the Participant's Section 415 Compensation for the
year, or (ii) the percentage of the Section 415 Compensation
for the Year which is equal to that of the Key Employee for
whom the percentage is the highest, then the aggregate
contribution for the year made by the Employer on behalf of
each Participant and any Forfeitures allocated to his Account
pursuant to this Plan shall be equal to the difference
between:
(A) the lesser of: (1) three percent (3%)
of the Participant's Section 415 Compensation for the
year from the Employer or any Affiliate, or (2) the
percentage of such Section 415 Compensation which is
equal to that of the Key Employee for whom the
percentage is the highest, and
(B) the contribution otherwise provided by
this Plan and all other defined contribution plans
maintained by the Employer or any Affiliate.
(2) Both Defined Benefit and Defined Contribution
Plans. If a Participant is also a participant in a defined
benefit plan maintained by the Employer or any Affiliate, the
minimum benefit
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to which a Participant is entitled shall be provided by, and in
accordance with, the terms of the defined benefit plan.
However, if the defined benefit plan does not provide the
Participant with a minimum accrued benefit equal to three percent (3%)
of the Participant's average annual Section 415 Compensation from the
Employer or any Affiliate for each Top Heavy Year or two percent (2%)
of a Participant's average annual Section 415 Compensation from the
Employer or any Affiliate for each Extra Top Heavy Year, multiplied by
the number of Top Heavy Years or Extra Top Heavy Years (not in excess
of ten (10) Years) during which he was a Participant in both Plans, and
the Participant did not receive a contribution under this Plan and/or
any other defined contribution plan maintained by the Employer or any
Affiliate of at least seven and one-half percent (7 1/2%) of his
Section 415 Compensation from the Employer or any Affiliate for a Top
Heavy Year or five percent (5%) of such Section 415 Compensation for an
Extra Top Heavy Year, the Participant shall be entitled to a minimum
contribution for the year under this Plan. The Participant's minimum
contribution under this Plan shall be a contribution equal to the
difference between:
(A) seven and one-half percent (7 1/2%) of his
Section 415 Compensation from the Employer or any Affiliate for
each Top Heavy Year or five percent (5%) of such Section 415
Compensation for each Extra Top Heavy Year in which he was a
Participant in both Plans, and
(B) the contribution otherwise provided by this
Plan and all other defined contribution plans maintained by the
Employer or any Affiliate.
(3) Rules of Application. The minimum benefit or minimum
contribution shall not be offset by any OASDI benefits received by the
Participant, and any Top Heavy minimum benefits shall be provided by
this Plan only after minimum benefits have been provided by all other
Plans.
(b) Top Heavy Tests.
(1) Top Heavy. The Plan will be Top Heavy during the Plan
Year if the aggregate accounts of the participating Key Employees
determined as of the Determination Date, as provided in paragraph (b)
below, equals or exceeds sixty percent (60%) of the aggregate accounts
of all Participants included within the aggregation group. In any Top
Heavy Year the applicable provisions of paragraph (a) of this Article
VII shall apply and the provisions of this Article VII will supersede
any conflicting provisions of the Plan.
(2) Extra Top Heavy. If the sum of the accounts of the
participating Key Employees equals or exceeds ninety percent (90%) of
the sum of the aggregate accounts of all Participants
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included within an aggregation group of plans, this Plan shall be
considered Extra Top Heavy. If the Plan is Extra Top Heavy, then
paragraph (a) of this Article VII shall apply. In addition,
paragraph (c)(2) of Article VI shall also apply together with the
adjustments required under Section 416(h)(1) of the Code.
(c) Determination Date. The Determination Date for any Plan Year
shall be the last day of the preceding Plan Year, or in the case of the first
Plan Year to which this Article applies, the last day of the first Plan Year.
(d) Aggregation Groups. Each plan maintained by the Employer or
any Affiliate in which a Key Employee participates and any other plan
maintained by those businesses which enables any plan in which a Key Employee
participates to meet the requirements of Code Sections 401(a)(4) or 410, will
be considered a part of the aggregation group. Other plans maintained by the
businesses which are not required to be included in the aggregation group may be
included if the requirements of Code Sections 401(a)(4) and 410 are satisfied
when those plans are considered together with the plans of the required
aggregation group. In the event that two or more Plans within the aggregation
group have different Determination Dates, the present value of all accrued
benefits shall be determined separately at each Plan's Determination Date and
the accrued benefits for each Plan shall then be aggregated based upon the
Determination Dates for each Plan which fall within the same calendar year.
(e) Definitions.
(1) Accrued Benefits. For purposes of this Article the
Accrued Benefits of a Participant, former Participant or Beneficiary
shall include the value of:
(A) the Participant's retirement benefits
provided by his employer as of the most recent Valuation Date
occurring within a twelve (12) month period ending on the
Determination Date, and (i), in the case of any defined
contribution plan maintained by the Employer or any Affiliate,
adjusted to include contributions made by (in the case of any
profit sharing plan) or due from (in the case of any pension
plan) the Employer as of the Determination Date, or (ii), in
the case of any defined benefit plan maintained by the
Employer or any Affiliate, determined as if the Participant
terminated service as of the Determination Date in the first
Plan Year or as if the Participant terminated service on the
Valuation Date for all subsequent Plan Years. The present
value of a Participant's retirement benefits attributable to
any defined benefit plan shall be determined using the
actuarial assumptions set forth with the provisions of such
plan; and
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(B) all distributions made to a Participant
within the Plan Year which includes the Determination Date or
within the four (4) preceding Plan Years, but only to the
extent that the distribution is not included in the value of
the Participant's Account on the Valuation Date.
Distributions of benefits received by a Participant from this
Plan and rollover into another plan maintained the by
Employer or any Affiliate shall not be counted as an accrued
benefit under this Plan. This paragraph (e)(1)(B) shall
include distributions under a terminated plan which if it had
not been terminated would have been required to be included
in the aggregation group as defined in paragraph (c) above.
Notwithstanding anything to the contrary, if any
Employee has not performed services for the Employer or any
Affiliate during the 5-year period ending on any
Determination Date, the accrued benefit of such Employee
shall not be taken into consideration for purposes of
determining whether the Plan is Top-Heavy with respect to the
Plan Year to which the Determination Date applies.
(2) Key Employee Accrued Benefits. The value of the Key
Employee Accrued Benefits shall equal the sum of the aggregate values
of the accrued benefits of all Key Employees and all Beneficiaries of
Key Employees.
(3) Non-Key Employee Accrued Benefit. Solely for
purposes of determining whether the Plan is Top-Heavy, the accrued
benefit of any Non-Key Employee shall be determined (A) under the
method, if any, that uniformly applies for accrual purposes under all
plans of the Employer or any Affiliate, or (B) if there is no such
method, as if such benefit accrued no more rapidly than the lowest
accrual rate permitted under the Fractional Accrual Rule of Section
411(b)(1)(C) of the Code.
(4) Total Accrued Benefits. The value of the Total
Accrued Benefits shall equal the sum of the aggregate value of the
Key Employee Accrued Benefits described above plus the aggregate
value of the accrued benefits of all other Participants, former
Participants and Beneficiaries of plans included within the
aggregation group of plans. The Total Accrued Benefits shall not,
however, include the Account of any Participant, or Beneficiary of a
Participant who was at any time a Key Employee but who is no longer a
Key Employee.
(5) Compensation. For any Plan Year in which the Plan
is Top-Heavy, annual Compensation for purposes of this Article VII
shall mean Section 415 Compensation.
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ARTICLE VIII
Benefits Under the Plan
(a) Retirement Benefit.
(1) A Participant shall be entitled to retire from the
employ of his Employer upon such Participant's Normal Retirement Date.
Until a Participant actually retires from the employ of his Employer,
he shall continue to be treated in all respects as a Participant.
(2) Upon the retirement of a Participant as provided in
paragraph (1), such Participant shall be entitled to a retirement
benefit in an amount equal to 100% of the balance in his Company
Stock Account as of the date of distribution of his benefit.
(b) Disability Benefit.
(1) In the event a Participant's employment with his
Employer is terminated by reason of his total and permanent
disability, such Participant shall be entitled to a disability
benefit in an amount equal to 100% of the balance in his Company
Stock Account as of the date of distribution of his benefit.
(2) Total and permanent disability shall mean the total
incapacity of a Participant to perform the usual duties of his
employment with his Employer and will be deemed to have occurred only
when certified by a physician who is acceptable to the Plan
Administrator and only if such proof is received by the Administrator
within sixty (60) days after the date of the termination of such
Participant's employment.
(c) Termination of Employment Benefit.
(1) In the event a Participant's employment with his
Employer is terminated for reasons other than retirement, total and
permanent disability or death, such Participant shall be entitled to
a termination of employment benefit in an amount equal to his vested
interest in the balance in his Company Stock Account as of the date
of distribution of his benefit.
(2) A Participant's vested interest in his Company Stock
Account shall be a percentage of the balance of such Account as of
the applicable Valuation Date, based upon such Participant's Years of
Service as of the date of the termination of his employment, as
follows:
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TOTAL NUMBER OF VESTED
YEARS OF SERVICE INTEREST
---------------- --------
Less than 1 Year of Service -0-
1 year, but less than 2 years 20%
2 years, but less than 3 years 40%
3 years, but less than 4 years 60%
4 years, but less than 5 years 80%
5 years or more 100%
(3) (A) If the termination of employment results in five
consecutive Breaks in Service, then upon the occurrence of such five
consecutive Breaks in Service, the non-vested interest of the
Participant in his Company Stock Account as of the Valuation Date
concurring with or next following the date of his termination of
employment shall be deemed to be forfeited and such forfeited amount
shall be allocated as provided in paragraph (e) of Article VI. If the
Participant is later reemployed by the Company or an Affiliate, the
unforfeited balance, if any, in his Company Stock Account that has not
been distributed to such Participant shall be set aside in a separate
account, and such Participant's Years of Service after any five
consecutive Breaks in Service resulting from such termination of
employment shall not be taken into account for the purpose of
determining the vested interest of such Participant in the balance of
his Company Stock Account that accrued before such five consecutive
Breaks in Service.
(B) Notwithstanding any other provision of this paragraph
(c), if a Participant is reemployed by the Company or an Affiliate and,
as a result, no five consecutive Breaks in Service occur, the
Participant shall not be entitled to any termination of employment
benefit as a result of such termination of employment.
(4) (A) Notwithstanding any other provision of this paragraph
(c), if at any time a Participant is less than 100% vested in his
Company Stock Account and, as a result of his termination of
employment, he receives his entire vested termination of employment
benefit pursuant to the provisions of Article IX, and the distribution
of such benefit is made not later than the close of the fifth Plan
Year following the Plan Year in which such termination occurs (or such
longer period as may be permitted by the Secretary of the Treasury,
through regulations or otherwise), then upon the occurrence of such
distribution, the non-vested interest of the Participant in his
Company Stock Account shall be deemed to be forfeited. Forfeited
amounts shall be allocated as provided in paragraph (e) of Article VI.
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(B) If a Participant is not vested as to any portion of
his Company Stock Account, he will be deemed to have received a
distribution immediately following his termination of employment. Upon
the occurrence of such deemed distribution, the non-vested interest of
the Participant in his Company Stock Account shall be deemed to be
forfeited. Forfeited amounts shall be allocated as provided in
paragraph (e) of Article VI.
(C) If a Participant whose interest is forfeited under this
paragraph (c)(4) resumes employment covered under the Plan, then such
Participant shall have the right to repay to the Trust, before the date
that is the earlier of: (i) five years after the Participant's
resumption of employment, or (ii) the close of a period of five
consecutive Breaks in Service following the date of his distribution,
the full amount of the termination of employment benefit previously
distributed to him. If the Participant elects to repay such amount to
the Trust within the time periods prescribed herein, or if a non-vested
Participant whose interest was forfeited under this paragraph (c)(4)
resumes employment covered under the Plan prior to the occurrence of
five consecutive Breaks in Service, the non-vested interest of the
Participant previously forfeited pursuant to the provisions of this
paragraph (c)(4) shall be restored to the Company Stock Account of the
Participant, such restoration to be made from Forfeitures of non-vested
interests and, if necessary, by contributions of the Company, so that
the aggregate of the amounts repaid by the Participant and restored by
the Company shall not be less than the account balance of the
Participant at the time of Forfeiture unadjusted by any subsequent
gains or losses.
(d) Death Benefit.
(1) In the event of the death of a Participant, his Beneficiary
shall be entitled to a death benefit in an amount equal to 100% of the balance
in his Company Stock Account as of the date of distribution of his benefit.
(2) At any time and from time to time, each Participant shall have
the unrestricted right to designate a Beneficiary to receive his death benefit
and to revoke any such designation. Each designation or revocation shall be
evidenced by written instrument filed with the Plan Administrator, signed by the
Participant and bearing the signature of a witness to his signature. In the
event that a Participant has not designated a Beneficiary or Beneficiaries, or
if for any reason such designation shall be legally ineffective, or if such
Beneficiary or Beneficiaries shall predecease the Participant, then the personal
representative of the estate of such Participant shall be deemed to be the
Beneficiary designated to receive such death benefit, or if no personal
representative is appointed for the
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estate of such Participant, then his next of kin under the statute of
descent and distribution of the state of such Participant's domicile
at the date of his death shall be deemed to be the Beneficiary or
Beneficiaries to receive such death benefit.
(3) Notwithstanding the foregoing, if the Participant is
married as of the date of his death, the Participant's surviving
spouse shall be deemed to be his designated Beneficiary and shall
receive the full amount of the death benefit attributable to the
Participant unless the spouse consents or has consented to the
Participant's designation of another Beneficiary. Any such consent
to the designation of another Beneficiary must acknowledge the effect
of the consent, must be witnessed by a Plan representative or by a
notary public and shall be effective only with respect to that spouse.
A spouse's consent shall be a restricted consent (which may not be
changed as to the Beneficiary unless the spouse consents to such
change in the manner described herein). Notwithstanding the
preceding provisions of this paragraph (d)(3), a Participant shall not
be required to obtain spousal consent to his designation of another
Beneficiary if: (i) the Participant is legally separated or the
Participant has been abandoned, and the Participant provides the
Administrator with a court order to such effect, or (ii) the spouse
cannot be located.
(e) Withdrawals During Employment. Participants shall not be
entitled to receive an in-service withdrawal (including loans) under this Plan.
Distributions may only be made as provided for under this Article VIII.
ARTICLE IX
Payment of Benefits
(a) Time and Form of Payment of Benefits.
(1) Except as otherwise provided under this Article IX:
(A) The amount of the retirement, disability,
termination of employment or death benefit to which a
Participant is entitled under paragraphs (a), (b), (c) or (d)
of Article VIII shall be paid to him (or his Beneficiary or
Beneficiaries in the case of a death benefit), in a lump sum
as soon as practicable following the Participant's retirement,
disability, termination of employment or death, as the case
may be.
(2) (A) Notwithstanding the foregoing, no
distribution shall be made of the retirement, disability or
termination of employment benefit to which a Participant is
entitled under paragraph (a), (b) or (c) of Article VIII
prior to his Normal Retirement Date unless the value of his
benefit
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attributable to Employer contributions, if any, determined as
of the time of distribution, does not exceed $3,500.00, or
unless the Participant consents to the distribution.
(B) In the event that a Participant does not
consent to a distribution of a benefit in excess of $3,500.00
to which he is entitled under paragraph (a), (b) or (c) of
Article VIII, the amount of his benefit shall be paid to the
Participant not later than sixty (60) days after the last day
of the Plan Year in which the Participant reaches his Normal
Retirement Date.
(3) (A) Notwithstanding anything contained herein to
the contrary, any distribution paid to a Participant (or, in
the case of a death benefit, to his Beneficiary or
Beneficiaries) pursuant to paragraph (a)(1) above shall
commence not later than the earlier of:
(i) the 60th day after the last day of
the Plan Year in which the Participant attains the
earlier of age 65 or the Normal Retirement Date; or
(ii) April 1 of the year immediately
following the calendar year in which he reaches age
70-1/2.
(4) In the case of a death benefit, payment to the
designated Beneficiary shall be made within one year following the
Participant's death (unless the designated Beneficiary is the
Participant's surviving spouse, in which case such benefit shall
begin no later than the date the Participant would have reached age
70-1/2).
(5) Notwithstanding the foregoing, payments under the
Plan shall satisfy the incidental death benefit requirements and all
other applicable provisions of Section 401(a)(9) of the Code, the
regulations issued thereunder (including Prop. Reg. Section 1.401(a)
(9)-2), and such other rules thereunder as may be prescribed by the
Commissioner).
(b) Distribution of Benefits. Distribution of a Participant's
benefit under the Plan will be made in whole shares of Company Stock or cash
if Company Stock is not available for that purpose. Fractional shares of
Company Stock shall be distributed in cash.
(c) Put Option.
(1) If the Company Stock becomes not readily tradeable
on an established securities market, then any Participant, who is
otherwise entitled to a distribution from the Plan, shall have the
right (the "Put Option") to require that the Company repurchase any
Company Stock under a fair valuation formula.
(2) The Put Option must be exercisable only by a
Participant, by the Participant's donees, or by a person
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(including an estate or its distributees) to whom the Company Stock
passes by reason of a Participant's death (Under this paragraph (c)
(2), Participant or former Participant means a Participant or former
Participant and the Beneficiaries of the Participant or former
Participant under the Plan). The Put Option must permit a
Participant to put the Company Stock to the Company. Under no
circumstances may the Put Option bind the Plan. However, it shall
grant the Plan an option to assume the rights and obligations of the
Company at the time that the Put Option is exercised.
The Put Option shall commence as of the day following the
date the Company Stock is distributed to the Participant and end 60
days thereafter and, if not exercised within such 60-day period, an
additional 60-day option shall commence on the first day of the first
month of the Plan Year next following the date the stock was
distributed to the Participant (or such other 60-day period as
provided in regulations promulgated by the Secretary of the Treasury).
However, in the case of Company Stock that is publicly traded without
restrictions when distributed but ceases to be so traded within
either of the 60-day periods described herein after distribution, the
Company must notify each holder of such Company Stock in writing on
or before the tenth day after the date the Company Stock ceases to be
so traded that for the remainder of the applicable 60-day period the
Company Stock is subject to the Put Option. The number of days
between the tenth day and the date on which notice is actually given,
if later than the tenth day, must be added to the duration of the Put
Option. The notice must inform distributees of the term of the Put
Options that they are to have. The terms must satisfy the
requirements of this paragraph (c)(2).
The Put Option is exercised by the holder notifying the
Company in writing that the Put Option is being exercised; the notice
shall state the name and address of the holder and the number of
shares to be sold. The period during which a Put Option is
exercisable does not include any time when a distributee is unable to
exercise it because the party bound by the Put Option is prohibited
from honoring it by applicable federal or state law. The price at
which a Put Option must be exercisable is the value of the Company
Stock determined in accordance with paragraph (c) of Article XI of
the Plan. Payment upon exercise of the Put Option shall be made in
substantially equal installments over a period certain determined by
the payor beginning not later than thirty (30) days after exercise of
the option and not extending beyond five (5) years from the date of
exercise of the option. Any deferred payments must provide for
reasonable interest and adequate security. The payor shall have the
right to prepay the deferred payments, without penalty and with
interest to the date of payment, in its sole discretion. Payment for
Company Stock received other than as part of a "Total Distribution"
shall be made within thirty (30) days after exercise of the Put Option.
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For purposes of this Section, "Total Distribution" means a
distribution to a Participant or his Beneficiary within one taxable
year of the Participant's entire Vested Interest in the Plan.
(3) An arrangement involving the Plan that creates a Put
Option must not provide for the issuance of Put Options other than as
provided under this paragraph (c). The Plan (and the Trust Fund)
must not otherwise obligate itself to acquire Company Stock from a
particular holder thereof at an indefinite time determined upon the
happening of an event such as the death of the holder.
(d) Location of Participant or Beneficiary Unknown. In the event
that all, or any portion of the distribution payable to a Participant or his
Beneficiary, hereunder shall remain unpaid after five (5) Plan Years solely
by reason of the inability of the Administrator, after sending a registered
letter, return receipt requested, to the last known address, and after further
diligent effort, to ascertain the whereabouts of such Participant or his
Beneficiary, the amount so distributable shall be treated as a Forfeiture
pursuant to the provisions of Article VIII. In the event a Participant or
Beneficiary of such Participant is located subsequent to his benefit being
reallocated, such benefit shall be restored.
(e) Transfer to Other Qualified Plans. The Trustee, upon written
direction by the Plan Administrator, shall transfer some or all of the assets
held under the Trust to another plan or trust meeting the requirements of the
Code relating to qualified plans and trust, whether such transfer is made
pursuant to a merger or consolidation of this Plan with such other plan or
trust or for any other allowable purpose.
(f) Direct Rollovers.
(1) Notwithstanding any provisions of the Plan to the
contrary that would otherwise limit a distributee's (as defined below)
election under this paragraph, a distributee may elect, at the time
and in the manner prescribed by the Plan Administrator, to have any
portion of an eligible rollover distribution (as defined below) paid
directly to an eligible retirement plan (as defined below) specified
by the distributee in a direct rollover (as defined below).
(2) For purposes of this paragraph, the following terms
shall have the following meanings:
(A) An "eligible rollover distribution" is any
distribution of all or any portion of the balance to the
credit of the distributee, except that an eligible rollover
distribution does not include: any distribution that is one
of a series of substantially equal periodic payments made not
less frequently than annually for the
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life (or life expectancy) of the distributee or the joint
lives (or joint life expectancies) of the distributee and the
distributee's designated Beneficiary, or for a specified
period of ten years or more; any distribution to the extent
such distribution is required under Code Section 401(a)(9), and
the portion of any distribution that is not includable in
gross income (determined without regard to the exclusion for
net unrealized appreciation with respect to employer
securities).
(B) An "eligible retirement plan" is an
individual retirement account described in Code Section
408(a), an individual retirement annuity described in Code
Section 408(b), an annuity plan described in Code Section
403(a), or a qualified trust described in Code Section
401(a), that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover
distribution to the surviving spouse, an eligible retirement
plan is an individual retirement account or individual
retirement annuity.
(C) A "distributee" includes an Employee or
former Employee. In addition, the Employee's or former
Employee's surviving spouse and the Employee's or former
Employee's spouse or former spouse who is the alternate payee
under a qualified domestic relations order, as defined in
Code Section 414(p), are distributees with regard to the
interest of the spouse or former spouse.
(D) A "direct rollover" is a payment by the Plan
to the eligible retirement plan specified by the distributee.
ARTICLE X
Voting and Exercising Other Rights of Securities
(a) Voting Company Stock. Each Participant (or, in the event of
his death, his Beneficiary) shall have the right to direct the Trustee as to
the manner in which whole and partial shares of Company Stock allocated to his
Company Stock Account as of the record date are to be voted on each matter
brought before an annual or special shareholders' meeting. Before each such
meeting of shareholders, the Trustee shall furnish to each Participant (or
Beneficiary) a copy of the proxy solicitation material, together with a form
requesting directions on how such shares of Company Stock allocated to such
Participant's Company Stock Account shall be voted on each such matter. Upon
timely receipt of such directions, the Trustee shall on each such matter vote
as directed the number of shares (including fractional shares) of Company
Stock allocated to such Participant's Company Stock Account, and the Trustee
shall have no discretion in such matter. The directions received by the
Trustee from Participants shall be held by the Trustee in confidence and shall
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not be divulged or released to any person, including officers or employees of
any Employer. The Trustee shall vote allocated shares for which it has not
received direction and unallocated shares of Company Stock in the same
proportion as directed shares are voted, and shall have no discretion in such
matter.
(b) Tender Offer. If a tender or exchange offer is commenced for
Company Stock:
(1) The Trustee shall distribute in a timely manner to
each Participant (or Beneficiary) such information as is distributed
to holders of Company Stock in connection with the tender or exchange
offer.
(2) All Company Stock held by the Trustee in Company
Stock Accounts shall be tendered or not tendered by the Trustee in
accordance with directions it receives from the Participants (or
Beneficiaries). Each Participant (or Beneficiary) shall be entitled
to direct the Trustee with respect to the tender of such Company
Stock allocated to his Account. The instructions received by the
Trustee from Participants (or Beneficiaries) shall be held by the
Trustee in confidence and shall not be divulged or released to any
person, including officers or employees of any Employer.
(3) The Trustee shall not tender Company Stock allocated
to Company Stock Accounts with respect to which directions by
Participants (or Beneficiaries) are not received or Company Stock
held by the Trustee that is not allocated to Company Stock Accounts.
(c) No Recommendations. The Trustee shall make no recommendations
regarding the manner of exercising any rights under this Article, including
whether or not such rights should be exercised.
ARTICLE XI
Valuations
(a) Valuation of Trust Fund. The Plan Administrator shall direct
the Trustee, as of each Allocation Date, and at such other date or dates
deemed necessary by the Plan Administrator, herein called "Valuation Date", to
determine the net worth of the assets comprising the Trust Fund as it exists
on the "Valuation Date" prior to taking into consideration any contribution to
be allocated for that Plan Year. In determining such net worth, the Trustee
shall value the assets comprising the Trust Fund at their fair market value as
of the "Valuation Date" and shall deduct all expenses for which the Trustee
has not yet obtained reimbursement from the Company or the Trust Fund.
(b) Methods of Valuation. Valuations must be made in good
faith and based on all relevant factors for determining the fair
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