Item 1.01 Entry into a Material Definitive Agreement.
As previously disclosed, on May 18, 2021,
Gregory B. Maffei, the Chairman of the Board and a director of Qurate Retail, Inc. (“Qurate
Retail”), delivered a written offer (the “Offer”) to John C. Malone, a director of Qurate
Retail, to acquire all of the outstanding shares of Series B common stock of Qurate
Retail beneficially owned by Mr. Malone, his wife Leslie Malone and certain trusts for the benefit of Mr. Malone, Mrs. Malone
and/or their children (the “Malone Group,” and such shares, the “Subject Shares”) at a per share
price of $14.00 payable in cash, securities or such other form of consideration as to which Mr. Maffei and Mr. Malone might
mutually agree. The transfer by the Malone Group of the Subject Shares was subject to the terms of that
certain call agreement, dated February 9, 1998 (the “Call Agreement”), among Qurate Retail, as successor-in-interest
to the assignee of Tele-Communications, Inc., a Delaware corporation, Mr. Malone and Mrs. Malone, which provided
Qurate Retail with the right to acquire all, but not less than all, of the Subject Shares
at a per share price equal to the lower of (x) the Offer price or (y) 110% of the average
closing prices of a share of Series A common stock for the 30 consecutive trading days ending on May 17, 2021 (with the price
calculated pursuant to clause (y) equal to $13.62 per share (the “Call Price”))
(the “Call Right”). As previously disclosed, on May 18, 2021, Mr. Malone provided written notice to Qurate
Retail of his desire to accept the Offer, subject to the approval by the Board of Directors of Qurate
Retail of the transactions contemplated thereby for purposes of Section 203 of the General Corporation Law of the State of Delaware,
pursuant to the terms of the Call Agreement. Mr. Malone supports the long-term business strategy of Qurate Retail but desired to
accept the Offer because it would provide flexibility for certain long-term estate and tax planning goals in light of potential changes
in federal tax laws. However, in the event Qurate Retail determined to exercise the Call Right, Mr. Malone indicated a preference
for the payment of the per share price in the form of shares of Series A common stock of Qurate Retail such that he would continue
to hold a substantial investment in Qurate Retail.
Stock Exchange Agreement with John C. Malone
On
June 2, 2021, Qurate Retail delivered written notice to Mr. Malone to exercise
the Call Right and to pay the per share Call Price required by the Call Agreement in shares of Series A common stock of Qurate Retail.
On June 3, 2021, Qurate Retail and the Malone Group entered into a Stock Exchange Agreement (the “Malone Stock Exchange
Agreement”) to effect the closing of the Call Right exercise, pursuant to which the Malone Group transferred to Qurate
Retail an aggregate of 27,655,931 shares of Series B common stock, and in exchange (the “Malone Exchange”),
Qurate Retail issued to the Malone Group an aggregate of 30,421,522 shares of Series A
common stock. Under the terms of the Call Agreement, the aggregate Call Price converts into an equivalent ratio of 1.1 shares of Series A
common stock for each share of Series B common stock with the aggregate number of shares of Series A common stock issued to
each member of the Malone Group rounded down to the nearest whole share.
Arrangements with Gregory B. Maffei
As a result of the Malone Exchange and in the absence
of the negotiated Letter Agreement (defined below) Mr. Maffei would have had the right to assert that a “Change of Control”
(as defined in that certain Executive Employment Agreement, dated as of December 13, 2019 (the “Employment Agreement”),
by and between Liberty Media Corporation, a Delaware corporation (“Liberty Media”), and Mr. Maffei) with respect
to Qurate Retail had occurred and that Mr. Maffei had “Good Reason” (as
defined in the Employment Agreement) to resign from and terminate his employment with Qurate Retail. This would have resulted in the acceleration
of the vesting of Mr. Maffei’s outstanding and unvested Qurate Retail equity-based
awards, the obligation of Qurate Retail to pay Mr. Maffei certain severance related
benefits and the obligation of Qurate Retail to make a termination payment to Liberty Media
pursuant to that certain Services Agreement, dated as of September 23, 2011, between Qurate Retail and Liberty Media, as clarified
by that certain Letter Agreement, dated as of September 23, 2011, by and between Qurate Retail
and Liberty Media, and as amended by that certain First Amendment to Services Agreement, effective as of December 13, 2019, by and
between Qurate Retail and Liberty Media (the “Services Agreement”).
Waiver Letter and Amendment of Employment Agreement
On June 3, 2021, Qurate
Retail, Liberty Media and Mr. Maffei entered into a Waiver Letter and Amendment of Employment Agreement (the “Letter
Agreement”), pursuant to which, among other things, Mr. Maffei (x) waived his rights to assert that Qurate Retail’s
exercise of the Call Right, the transactions to be consummated pursuant to the Malone Stock Exchange Agreement or the resulting reduction
in the Malone Group’s voting power with respect to Qurate Retail (collectively, the
“Specified Events”) would constitute a “Change in Control” or “Good Reason,” in each case,
as defined in the Employment Agreement, with respect to Qurate Retail, and agreed not to
terminate his employment with Qurate Retail for “Good Reason” in connection with
or arising out of the Option Cancellation (as defined below) or any of the Specified Events, and (y) consented to the cancellation
(the “Option Cancellation”) of stock option awards to purchase shares of Series B common stock that had been granted
to Mr. Maffei on each of December 24, 2014, and March 31, 2015 for 1,137,228 shares at an exercise price of $16.97 per
share, and 197,783 shares at an exercise price of $16.71 per share, respectively. In consideration for the foregoing, pursuant to the
Letter Agreement, (i) Mr. Maffei received a grant of 1,101,321 restricted shares of Series B common stock that are scheduled
to vest, subject to Mr. Maffei’s continued employment with Qurate Retail, in two
equal tranches on December 10, 2024 and the fifth anniversary of the grant date, subject to earlier vesting under certain circumstances,
and (ii) Qurate Retail agreed that the portion of the Annual Equity Awards (as defined
in the Employment Agreement) to be granted by Qurate Retail to Mr. Maffei pursuant to
Section 4.11 of the Employment Agreement for calendar years 2022, 2023 and 2024 shall be granted with respect to the Series B
common stock.
Maffei Stock Exchange Agreement
Exchange
and Cap. Also, on June 3, 2021, Qurate Retail and Mr. Maffei also entered
into a Stock Exchange Agreement (the “Maffei Stock Exchange Agreement”) pursuant to which, among other things: (i) on
June 3, 2021, Mr. Maffei transferred to Qurate Retail an aggregate of 5,378,308
shares of Series A common stock, and in exchange Qurate Retail issued to Mr. Maffei
an equivalent number of shares of Series B common stock; (ii) Qurate Retail agreed
that on the terms and subject to the conditions of the Maffei Stock Exchange Agreement, Mr. Maffei, at his option (during the six-month
period following the vesting of the performance-based restricted stock unit award granted to Mr. Maffei on March 10, 2021),
may transfer to Qurate Retail the number of shares of Series A common stock actually
received by Mr. Maffei upon vesting of such performance-based restricted stock unit award in exchange for an equivalent number of
newly-issued shares of Series B common stock (the “Subsequent Exchange”); (iii) Mr. Maffei agreed that
until December 31, 2024 (the “Cap Period”), which is also the end of the current term of his employment as set
forth in the Employment Agreement, he will not, and will not authorize or permit any of his affiliates that he controls (“Controlled
Affiliates”) to, acquire or agree to acquire (or announce publicly an intent to acquire) by purchase or otherwise, beneficial
ownership of voting securities of Qurate Retail (or direct or indirect rights or options
to acquire any such voting securities) if, after giving effect to any such acquisition of securities, the aggregate voting power of Qurate
Retail’s voting securities beneficially owned by Mr. Maffei and his Controlled Affiliates would exceed 20.0% of the
voting power of all of the outstanding voting securities (assuming, for purposes of this calculation that all voting securities beneficially
owned by Mr. Maffei which are not outstanding are included in the calculation) (the “Cap”); and (iv) the
foregoing transactions by which Mr. Maffei and certain of his related persons became an “interested stockholder” were
approved for purposes of Section 203 of the General Corporation Law of the State of Delaware.
The Cap is subject to certain exceptions, including
(i) the Subsequent Exchange, (ii) the receipt, exercise or vesting of his equity compensation awards and (iii) any dividend
or other distribution made, or similar action taken, by Qurate Retail (including the receipt
in connection therewith of any rights, warrants or other securities granting the holder the right to acquire voting securities of Qurate
Retail, and any acquisition of voting securities of Qurate Retail upon the exercise thereof). However, if during the Cap Period, the voting
power of the outstanding voting securities of Qurate Retail beneficially owned by Mr. Maffei and his Controlled Affiliates exceeds
the Cap, Mr. Maffei will, and will cause his Controlled Affiliates to, vote his voting securities that represent voting power in
excess of the Cap, in the same proportions as the votes cast by stockholders of Qurate Retail
unaffiliated with Mr. Maffei on any matter submitted to a vote of the Qurate Retail’s
stockholders. In addition, Mr. Maffei and his Controlled Affiliates may not transfer voting securities of Qurate Retail to any other
Controlled Affiliate of Mr. Maffei unless such transferee has agreed to be bound by the terms of the Maffei Stock Exchange Agreement.
Pro Forma Ownership
Following the consummation of the transactions
described above, approximately 404.6 million shares of Series A common stock and approximately 8.2 million shares of Series B
common stock are estimated to be outstanding, in each case, as of June 3, 2021, based upon 379,563,326 shares of Series A common
stock and 29,353,492 shares of Series B common stock outstanding as of April 30, 2021, as reported by the Issuer in its Quarterly
Report on Form 10-Q for the quarterly period ended March 31, 2021, filed with the Securities and Exchange Commission on May 7,
2021, as adjusted for the consummation of the transactions described herein. Following the consummation of the transactions described
above and based upon such number of estimated outstanding shares, Mr. Maffei may be deemed to beneficially own voting equity securities
of Qurate Retail representing approximately 18.0% of the voting power with respect to the general election of directors of Qurate Retail
and a 2.3% economic interest, and Mr. Malone may be deemed to beneficially own voting equity securities representing approximately
6.5% of the voting power with respect to the general election of directors of Qurate Retail and a 7.7% economic interest. Actual share
ownership can be found in the most recent amendments to the Schedule 13D filings of Mr. Malone and Mr. Maffei. Mr. Malone
will remain on the Qurate Retail Board of Directors.
The foregoing descriptions of the Malone Stock Exchange Agreement, the Maffei Stock Exchange Agreement, the Letter Agreement and Mr. Maffei’s restricted stock award do not
purport to be complete and are subject to, and qualified in their entirety by, such agreements, copies of which are attached hereto as
Exhibits 10.1, 10.2, 10.3 and 10.4, respectively, and are incorporated herein by reference.