EXHIBIT L
December 13, 1995
XX. X.X. XXXXXXX
and
XXX HOLDINGS, L.P. and
GLOBAL NETWORK TELEVISION, INC. and
MORTGAGE FUNDING CORPORATION
c/o Xx. X.X. Xxxxxxx
Brighton 1604
0000 Xxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxx 00000
SHOP AT HOME, INC.
0000 Xxxxxxxx Xxxx
X.X. Box 12600
Knoxville, Tennessee 37912
Re: PCC/SAH TRANSACTION
Gentlemen:
This letter summarizes and confirms the willingness of the parties
hereto to continue negotiations regarding (i) the Acquisition (as defined
below) by Xxxxxx Communications Corporation ("PCC"), or a subsidiary of
PCC, of certain assets of SAH Holdings, L.P., a Tennessee limited
partnership (the "Partnership"), Mortgage Funding Corporation, a Tennessee
corporation ("MFC"), and Global Network Television, Inc., a Tennessee
corporation ("Global"), and shares of newly-issued common stock from Shop
at Home, Inc., a Tennessee corporation ("Shop at Home"), on the terms and
conditions set forth herein, and (ii) certain transactions to be effected
by and among the parties hereto in connection with the Acquisition, which
transactions and Acquisition will, upon the consummation thereof, result in
PCC owning voting control of more than 50% of the outstanding common stock
of Shop at Home. Certain parties hereto previously executed a letter of
intent relating to certain of the subject matter hereof dated October 9,
1995, which expired pursuant to its terms.
1. FORM OF ACQUISITION. Under the transactions contemplated by the
parties hereto, PCC shall acquire (the "Acquisition") (a) from the
Partnership, certain assets consisting of (i) 2,280,245 shares of common
stock (the "Partnership Stock") of Shop at Home, (ii) an option (the
"Cowell Option") to purchase 969,755 shares of common stock (the "Cowell
Stock") of Shop at Home from Xxxx X. Xxxxxx, and (iii) one or more options
or warrants (collectively, the "Partnership Warrants") to purchase from
Shop at Home up to 1,750,000 shares in the aggregate of newly-issued common
stock of Shop at Home (the "Partnership Warrant Shares") at an exercise
price of $1.00 per share; (b) from Global, the $2,000,000 Variable Rate
Convertible Secured Note Due 2000 of Shop at Home, payable to Global (the
"Convertible Note") convertible into shares of common stock of Shop at Home
(any such shares issued upon such conversion, the "Convertible Note
Shares") at a rate equal to one share for each $3.00 of the outstanding
principal amount of the Convertible Note; (c) from MFC, 100,000 shares of
common stock of Shop at Home; and (d) from Shop at Home, 1,199,191 shares
of newly-issued Shop at Home common stock, plus an additional number of
newly-issued shares of Shop at Home common stock such that PCC shall own,
after the closing of the transactions contemplated hereby, on a fully
diluted basis, a majority equity interest in Shop at Home. The Acquisition
will be consummated by PCC or a subsidiary of PCC, as PCC elects.
2. CONSIDERATION. PCC shall provide the following consideration in
the Acquisition:
(a) the Partnership will receive:
(i) cash of $6,708,000, to be paid at the closing;
(ii) 1,071,429 shares of Class A Common Stock of PCC (the
"PCC Shares"), with "piggy back" registration rights
which shall, subject to customary underwriters'
approval, be pro rata with any registration obligations
and priorities of PCC issued to other PCC holders of
equity and equity rights; provided, however, that such
registration rights shall not apply to the next
underwritten primary public offering of PCC Shares by
PCC; and
(iii) the "take-along" agreement described below;
(b) Global will receive an amount of cash equal to $5.00
MULTIPLIED by the total number of shares of common stock of Shop at Home
issued to the holder of the Convertible Note upon the exercise of the
conversion rights thereunder. Assuming closing had occurred on December 1,
1995, the outstanding principal amount of the Convertible Note was
$1,993,180.33, which amount would have been convertible into 644,393 shares
of common stock of Shop at Home and would result in a purchase price
payable by PCC to Global of $3,221,967;
(c) MFC will receive 35,714 PCC Shares, with rights under the
"take-along" agreement described below and "piggy-back" registration rights
which shall, subject to customary underwriter's approval, be pro rata with
any registration obligations a priorities of PCC issued to other PCC
holders of equity and equity rights; provided, however, that such
registration rights shall not apply to the next underwritten primary public
offering of PCC Shares by PCC; and
(d) SAH will receive $2,757,000.
3. ADDITIONAL AGREEMENTS. (a) Certain entities controlled by Xxxxxx
X. Xxxxxx ("Xxx Xxxxxx"), PCC's Chief Executive Officer, will enter into a
"take-along" agreement with the Partnership and MFC, pursuant to which the
PCC Shares held by the Partnership and MFC will be entitled to certain
"take-along" rights in connection with certain sales of Class A Common
Stock by such entities controlled by Xxx Xxxxxx, subject to existing take-
along obligations to and priorities of other PCC holders of equity and
equity rights.
(b) Promptly after the Acquisition, PCC will exercise the Cowell
Option, currently held by the Partnership, to purchase the Cowell Stock,
from Xxxx Xxxxxx. The exercise price to purchase the Cowell Stock will be
$1.116 per share.
(c) Promptly after the Acquisition, PCC will convert the
Convertible Note into the Convertible Note Shares.
(d) At closing, Shop at Home will grant to PCC options to (i)
purchase 2,500,000 shares of Shop at Home's common stock at a price of
$5.00 per share, which option shall expire June 30, 1998; (ii) purchase
2,500,000 additional shares of Shop at Home's common stock at a price of
$7.00 per share, expiring June 30, 2000; and (iii) purchase approximately
3,620,000 shares of Shop at Home's common stock at various prices and
expiring at various dates (such prices and expiration dates generally
corresponding to those of the other options and warrants to purchase Shop
at Home common stock that are not otherwise a part of the Acquisition).
(e) Prior to closing, Shop at Home shall transfer all of the
issued and outstanding capital stock of MFP, Inc. and Broadcast, Cable and
Satellite Technologies, Inc., two wholly-owned subsidiaries of Shop at
Home, to a newly-created corporation to be owned by certain current
shareholders of Shop at Home owning sufficient shares of Shop at Home
common stock so that the application for approval of the transfer by the
Federal Communications Commission (the "FCC") of such stock can be made on
FCC Form 316. Such transfer shall be made in consideration for (a) a
promissory note issued by such new corporation to Shop at Home in a
principal amount to be agreed upon by such newly-created corporation, Shop
at Home and PCC, secured by the stock of the two subsidiaries transferred,
and/or (b) options for Shop at Home to purchase all of the stock of such
two corporations at a price equal to the unpaid balance due under such
purchase money promissory note, secured by the stock of the two
subsidiaries transferred. In addition, during the term of the options,
Shop at Home would purchase substantially all of the broadcast time of the
television station operated by MFP, Inc. under a time brokerage agreement
containing terms and conditions to be agreed upon by such newly-created
corporation, Shop at Home, MFP, Inc. and PCC.
(f) PCC shall provide carriage to Shop at Home that will be at
least as extensive as carriage over those stations and for the hours
indicated in the list previously delivered by PCC to Shop at Home.
4. ACQUISITION AGREEMENT: CLOSING DATE. Definitive agreements
required to consummate the Acquisition and, to the extent appropriate, the
other transactions contemplated hereunder, shall be prepared by PCC's
counsel, subject to review by the Partnership's, Shop at Home's, Global's
and MFC's counsel, and shall contain such representations, warranties,
covenants, indemnities and conditions as are considered appropriate in the
circumstances and as are mutually agreed to by the parties. It is the
intention of the parties to execute the definitive documents relating to
the Acquisition and the related transactions as soon as practicable after
the signing of this letter of intent. The parties intend to execute the
definitive acquisition documents and close the Acquisition and the
transactions described herein within ten (10) days after receipt of all
regulatory approvals required as of such date, including, without
limitation, under the HSR Act (as defined below) and from the FCC. The
parties shall promptly commence preparation of any necessary filings with
the FCC and under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), and shall promptly seek all other required
regulatory and other required approvals.
5. DUE DILIGENCE REVIEW. In connection with the proposed
Acquisition, each of the parties hereto will afford each other full and
complete access to all books, records, contracts, facilities and personnel
so that each party and their respective agents and representatives,
including accountants and attorneys, may conduct a due diligence
investigation of the business, operations, records, contracts, personnel
and properties of the other to the extent necessary to evaluate the
parties' businesses for the purpose of consummating the proposed
Acquisition. Due diligence investigations shall be conducted at reasonable
times and upon reasonable notice subsequent to execution by the parties of
this letter of intent. All non-public information regarding one party's
affairs obtained by or provided to the other party, its agents or
representatives, including, but not limited to, accountants and attorneys,
shall be treated as confidential and proprietary information belonging
exclusively to the disclosing party. If the proposed acquisition
contemplated by this letter of intent is not consummated, all documents
containing non-public information, including originals and copies thereof
provided to or obtained by either party, will be returned and any memoranda
or analyses prepared by either party or its representatives shall be
destroyed. Notwithstanding the termination of this letter of intent or
subsequent abandonment of the transactions contemplated hereby at any state
of negotiations prior to the closing, the confidentiality agreements set
forth in this paragraph 5 and elsewhere in this letter of intent shall
survive and remain fully enforceable. None of the parties hereto shall
communicate with any employee or customer of the other until a request to
do so has been made to an executive officer of the other party. Neither
party shall be under any obligation to continue its due diligence
investigation or with negotiations regarding the contents of a definitive
acquisition agreement if at any time the results of such party's due
diligence investigation are unsatisfactory to such party for any reason, in
its sole discretion.
6. CONFIDENTIALITY. Each party agrees that, subject to the
requirements of applicable law or pursuant to the obligations resulting
from the listing of Shop at Home or PCC common stock on the American Stock
Exchange or The NASDAQ Stock Market, in each case as advised by counsel,
that each of them and their respective officers, directors, accountants,
attorneys, employees, and agents will keep and maintain the terms of this
letter of intent confidential, including (a) the nature and content of all
non-public information provided pursuant to paragraph 5 above, and (b) any
and all information regarding the consideration and other terms and
conditions of the Acquisition and other proposed transactions. Each party
agrees that confidential information regarding the other party's business
and affairs will not be used by it except in connection with the
investigation and possible consummation of the proposed acquisition and
that it will not disclose such information, except as required by law and
to legal counsel, accountants, professional advisors, and other persons to
whom such disclosure is reasonably necessary to facilitate the proposed
Acquisition and the other transactions contemplated hereby on a need to
know basis.
Each of the parties further agree that, subject to the requirements of
applicable law or pursuant to the obligations resulting from the listing of
the Shop at Home or PCC common stock on the American Stock Exchange or The
NASDAQ Stock Market, in each case as advised by counsel, that they will
mutually agree on the content and timing of any press release or other
public statement relating to the Acquisition. In the event the proposed
Acquisition and the transactions contemplated hereby are not consummated,
in addition to the parties' agreement in paragraph 5 above to return or
destroy all documents containing confidential information, each party
further agrees not to use or disclose such confidential information for any
purpose whatsoever upon termination of the due diligence or negotiation.
Each party agrees that in the event it, or any of its agents, advisors, or
representatives breach the provisions of paragraphs 5 or 6, the other party
shall be entitled to seek and obtain injunctive relief from a court of
competent jurisdiction and shall be entitled to all reasonable attorneys'
fees and court costs in connection therewith.
7. CONDITIONS OF CLOSING. The closing of the Acquisition and
related transactions will be subject to customary terms and conditions,
including the execution of a mutually acceptable definitive Acquisition
documents. The closing will also be subject to (a) the receipt of all
necessary regulatory approvals and clearances, including, without
limitation, any approval required from the FCC and under the HSR Act, (b)
approval of the Board of Directors of Shop at Home, (c) approval of the
Board of Directors of PCC, (d) the execution of an employment agreement
between Shop at Home and Xxxx X. Xxxxxx, upon terms and conditions
satisfactory to each party, and (e) satisfaction by each party with its due
diligence investigation of the other parties to the Acquisition. Shop at
Home's obligation to enter into the transactions described above shall be
further subject to its receipt of an opinion from an independent investment
banking or accounting firm reasonably acceptable to Shop at Home to the
effect that the consideration to be received by Shop at Home in connection
with the transactions described in this letter is fair, from a financial
point of view, to Shop at Home. PCC's obligation to consummate the
transactions described in this letter is further subject to Shop at Home's
agreement to become a guarantor of, and unconditionally guarantee on the
same terms and conditions (including existing contribution provisions) as
each of the other guarantors thereof, PCC's 11 5/8% Senior Subordinated
Notes due 2002.
8. EXPENSES. The parties will each pay its own expenses incident to
the negotiation, preparation, and carrying out of this letter of intent and
the agreements contemplated hereby, including, without limitation, all
fees, expenses, and commissions of its counsel, accountants, and advisors,
whether or not the transactions contemplated hereby are consummated. Each
party represents that it has not engaged any broker, finder or other
intermediary in connection with the transactions contemplated hereby, and
will indemnify each other party against any claim to the contrary.
9. EXCLUSIVE DEALING. From and after the date hereof through the
closing of the transactions contemplated hereby, none of Shop at Home, the
Partnership, Global, MFC (and none of their directors, officers, or
partners) or Clinton shall, directly or indirectly, through any
representative or otherwise, solicit or entertain offers from, negotiate
with or in any manner encourage, accept or assist any proposal of any other
person relating to the acquisition of the assets, business, or securities
of the Partnership, or Shop at Home, in whole or in part, whether through
direct purchase, acquisition, consolidation, or other business combination
(other than sales of inventory in the ordinary course). Without limiting
the foregoing, none of the parties hereto shall voluntarily take any action
inconsistent with, or otherwise frustrate the intent of the parties to
consummate the Acquisition and the other transactions contemplated
hereunder, all as evidenced by this letter of intent.
10. NON-BINDING EFFECT OF LETTER OF INTENT. Except for paragraphs 5,
6, 8, and 9, which shall constitute binding agreements of the parties
hereto, this letter of intent shall not be construed as a commitment or
agreement on the part of any party to consummate the proposed Acquisition,
but shall constitute solely a letter of intent having the purpose of
setting forth the principal terms of the proposed Acquisition as now
contemplated. If, for any reason whatsoever, a definitive written
agreement is not executed by January 5, 1996 as contemplated hereunder,
this letter of intent shall terminate and none of the parties hereto nor
any of their respective agents or representatives shall have liability to
any of the other parties, except for liability on account of any breach of
the provisions of paragraphs 5, 6, 8, and 9 hereof. This letter of intent
may be executed in counterparts.
Sincerely,
XXXXXX COMMUNICATIONS CORPORATION
By: /S/ XXXXXX X. XXXXXX
Name: Xxxxxx X. Xxxxxx,
Title: Chief Executive Officer
SAH HOLDINGS, L.P.
By: Global Network Television, Inc.,
Sole General Partner
By: /S/ XXX X. XXXXXXX
Name: Xxx X. Xxxxxxx, President,
SHOP AT HOME, INC.
By: /S/ XXXX X. XXXXXX
Name: Xxxx X. Xxxxxx
Title: President & CEO
GLOBAL NETWORK TELEVISION, INC.
By: /S/ XXX X. XXXXXXX
Name: Xxx X. Xxxxxxx
Title: President
/S/ X.X. XXXXXXX
X.X. XXXXXXX
MORTGAGE FUNDING CORPORATION
By: /S/ XXX X. XXXXXXX
Name: Xxx X. Xxxxxxx
Title: President
