SHARE PURCHASE AGREEMENT
Exhibit 10.3
between
SHOP AT HOME, INC.
and
SCRIPPS NETWORKS, INC.
August 14, 2002
TABLE OF CONTENTS
Pages | |||||
ARTICLE I. DEFINITIONS |
4 | ||||
Section 1.1 Definitions |
4 | ||||
ARTICLE II. SALE AND TRANSFER OF SHARES; CLOSING |
11 | ||||
Section 2.1 Shares |
11 | ||||
Section 2.2 Purchase Price |
11 | ||||
Section 2.3 Closing |
12 | ||||
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER |
12 | ||||
Section 3.1 Organization and Good Standing |
12 | ||||
Section 3.2 Authority; No Conflict |
12 | ||||
Section 3.3 Capitalization |
14 | ||||
Section 3.4 Financial Statements |
14 | ||||
Section 3.5 Books and Records |
15 | ||||
Section 3.6 Title to Properties; Encumbrances |
15 | ||||
Section 3.7 Condition and Sufficiency of Assets |
16 | ||||
Section 3.8 Accounts Receivable; Reserves for Returns and Charge Backs |
16 | ||||
Section 3.9 Inventory |
16 | ||||
Section 3.10 No Undisclosed Liabilities |
16 | ||||
Section 3.11 Taxes |
17 | ||||
Section 3.12 Employee Benefits |
18 | ||||
Section 3.13 Compliance; Governmental Authorizations |
23 | ||||
Section 3.14 Legal Proceedings; Orders |
24 | ||||
Section 3.15 Absence of Certain Changes and Events |
25 | ||||
Section 3.16 Contracts; No Defaults |
26 | ||||
Section 3.17 Insurance |
29 | ||||
Section 3.18 Environmental Matters |
30 | ||||
Section 3.19 Employees |
30 | ||||
Section 3.20 Labor Relations; Compliance |
31 | ||||
Section 3.21 Intellectual Property |
31 | ||||
Section 3.22 Certain Payments |
34 | ||||
Section 3.23 FCC Licenses; Operations of Licensed Facilities |
34 | ||||
Section 3.24 Subscribers |
34 | ||||
Section 3.25 Affiliation and Programming Agreements |
35 | ||||
Section 3.26 Transponder Contracts |
35 | ||||
Section 3.27 Network Rights |
35 | ||||
Section 3.28 Website |
36 | ||||
Section 3.29 Relationships with Affiliates |
36 | ||||
Section 3.30 Proxy Statement |
37 | ||||
Section 3.31 Customers and Vendors |
37 | ||||
Section 3.32 Brokers or Finders |
37 |
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Section 3.33 Disclosure |
37 | ||||
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER |
38 | ||||
Section 4.1 Organization and Good Standing |
38 | ||||
Section 4.2 Authority; No Conflict |
38 | ||||
Section 4.3 Investment Intent; Financial Capability |
38 | ||||
Section 4.4 Certain Proceedings |
38 | ||||
Section 4.5 Proxy Statement Preparation |
38 | ||||
Section 4.6 Brokers or Finders |
39 | ||||
ARTICLE V. COVENANTS OF SELLER PRIOR TO CLOSING DATE |
39 | ||||
Section 5.1 Access and Investigation |
39 | ||||
Section 5.2 Operation of the Business of the Network |
39 | ||||
Section 5.3 Negative Covenant |
40 | ||||
Section 5.4 Notification |
40 | ||||
Section 5.5 Reasonable Best Efforts |
40 | ||||
Section 5.6 No Solicitation |
40 | ||||
Section 5.7 Preparation of Proxy Statement |
41 | ||||
Section 5.8 Shareholders Meeting |
42 | ||||
Section 5.9 Approval for Transfer of Network Assets and Network Liabilities |
42 | ||||
ARTICLE VI. COVENANTS OF BUYER PRIOR TO CLOSING DATE |
43 | ||||
Section 6.1 Reasonable Best Efforts |
43 | ||||
Section 6.2 Preparation of Proxy Statement |
43 | ||||
Section 6.3 Loan to Operating Company |
43 | ||||
ARTICLE VII. MISCELLANEOUS COVENANTS |
43 | ||||
Section 7.1 Section 338(h)(10) Election |
43 | ||||
Section 7.2 Required Approvals |
43 | ||||
Section 7.3 FCC Actions |
44 | ||||
Section 7.4 Amendment to Holding Company Articles |
44 | ||||
Section 7.5 Access to Records |
45 | ||||
45 | |||||
Section 8.1 Accuracy of Representations |
45 | ||||
Section 8.2 Seller’s Performance |
45 | ||||
Section 8.3 Consents |
45 | ||||
Section 8.4 Additional Documents |
45 | ||||
Section 8.5 No Proceedings |
46 | ||||
Section 8.6 No Claim Regarding Ownership or Sale Proceeds |
46 | ||||
Section 8.7 No Prohibition |
46 | ||||
Section 8.8 Loan Transaction |
46 | ||||
Section 8.9 Network Assets and Network Liabilities |
46 | ||||
Section 8.10 Holding Company Amended Articles |
47 |
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Section 8.11 Title Insurance |
47 | ||||
Section 8.12 754 Election |
47 | ||||
Section 8.13 Amendment of Option Plans; Employment Agreements |
47 | ||||
Section 8.14 HSR Act |
47 | ||||
Section 8.15 Shareholder Approval |
47 | ||||
ARTICLE IX. CONDITIONS PRECEDENT TO SELLER’S OBLIGATION TO CLOSE |
47 | ||||
Section 9.1 Accuracy of Representations |
47 | ||||
Section 9.2 Buyer’s Performance |
47 | ||||
Section 9.3 Consents |
48 | ||||
Section 9.4 Additional Documents |
48 | ||||
Section 9.5 No Injunction |
48 | ||||
Section 9.6 Loan Transaction |
48 | ||||
ARTICLE X. TERMINATION |
48 | ||||
Section 10.1 Termination of Agreement |
48 | ||||
Section 10.2 Effect of Termination |
49 | ||||
50 | |||||
Section 11.1 Survival; Right to Indemnification Not Affected by Knowledge |
50 | ||||
Section 11.2 Indemnification by Seller |
50 | ||||
Section 11.3 Indemnification by Buyer |
51 | ||||
Section 11.4 Time Limitations |
51 | ||||
Section 11.5 Limitations on Amount |
51 | ||||
Section 11.6 Procedure for Indemnification – Third Party Claims |
51 | ||||
Section 11.7 Procedure for Indemnification – Other Claims |
53 | ||||
ARTICLE XII. GENERAL PROVISIONS |
53 | ||||
Section 12.1 Expenses |
53 | ||||
Section 12.2 Public Announcements |
53 | ||||
Section 12.3 Confidentiality |
53 | ||||
Section 12.4 Declaratory Judgment |
53 | ||||
Section 12.5 Notices |
53 | ||||
Section 12.6 Jurisdiction; Service Of Process |
54 | ||||
Section 12.7 Further Assurances |
54 | ||||
Section 12.8 Waiver |
55 | ||||
Section 12.9 Entire Agreement and Modification |
55 | ||||
Section 12.10 Schedules |
55 | ||||
Section 12.11 Assignments, Successors, and No Third-Party Rights |
55 | ||||
Section 12.12 Severability |
56 | ||||
Section 12.13 Section Headings, Construction |
56 | ||||
Section 12.14 Governing Law |
56 | ||||
Section 12.15 Counterparts |
56 |
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This Agreement is made as of August 14, 2002, by Scripps Networks, Inc., a Delaware corporation (“Buyer”), and Shop At Home, Inc., a Tennessee corporation (“Seller”).
Seller owns 1,000 common shares, without par value, of SAH Holdings, Inc., an Ohio corporation (“Holding Company”), constituting all of Holding Company’s outstanding shares.
Seller desires to sell, and Buyer desires to purchase, 800 common shares, without par value, of Holding Company (the “Shares”) for the consideration and on the terms set forth in this Agreement.
The parties, intending to be legally bound, agree as follows:
“1934 Act” means the Securities Exchange Act of 1934, as amended, or any successor law, and rules and regulations issued pursuant thereto.
“Affiliate” means, with respect to any Person, any other Person (i) that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with such Person, (ii) that is a general partner, director, manager, trustee or principal officer of, or a limited partner owning more than 10% of, or that serves in a similar capacity with respect to, such Person, or (iii) of which such Person is a general partner, director, manager, trustee or principal officer or a limited partner owning more than 10% of, or with respect to which such Person serves in a similar capacity. For purposes of this definition, “control” means the possession, directly or indirectly, of the power to direct or to cause the direction of the management or policies of the Person in question through the ownership of voting securities or by contract or otherwise.
“Affiliation Agreement” means the letter agreement to be entered into between Seller and Operating Company prior to or at the Closing pertaining to the provision of programming by the Network to Seller’s owned television stations.
“Assets and Liabilities Statement” is defined in Section 3.4(a).
“Buyer” is defined in the first paragraph of this Agreement.
“Closing” is defined in Section 2.4.
“Closing Date” means the date and time as of which the Closing actually takes place.
“Communications Act” means the Communications Act of 1934, as amended and the rules and regulations promulgated thereunder.
“Companies” means collectively Holding Company and Operating Company and a “Company” means either Holding Company or Operating Company.
“Confidentiality Agreement” means the Confidentiality Agreement between The X.X. Xxxxxxx Company and Seller dated March 11, 2002.
“Consent” means any approval, consent, ratification, waiver, or other authorization (including any Governmental Authorization).
“Contemplated Transactions” means all of the transactions contemplated by this Agreement, including: (a) the transfer by Seller to Holding Company or Operating Company of the Network Assets and Network Liabilities, (b) the sale of the Shares by Seller to Buyer; (c) the execution, delivery, and performance of the Transaction Documents; (d) the performance by Buyer and Seller of their respective covenants and obligations under this Agreement; and (e) Buyer’s acquisition and ownership of the Shares and exercise of control over Holding Company.
“Contract” means any agreement, contract, obligation, promise, or undertaking (whether written or oral and whether express or implied).
“Damages” is defined in Section 11.2.
“Encumbrance” means any charge, claim, community property interest, condition, equitable interest, lien, option, pledge, security interest, right of first refusal, or restriction of any kind, including any restriction on use, voting, transfer, receipt of income, or exercise of any other attribute of ownership.
“Environment” means soil, land surface or subsurface strata, surface waters (including navigable waters, ocean waters, streams, ponds, drainage basins, and wetlands), groundwater, drinking water supply, stream sediments, ambient air (including indoor air), plant and animal life, and any other environmental medium or natural resource.
“Environmental, Health, and Safety Liabilities” means any cost, damages, liability or other obligation arising under Environmental Law or Occupational Safety and Health Law and consisting of or relating to (a) any environmental, health, or safety matters or conditions (including on-site or off-site contamination, occupational safety and health, and regulation of chemical substances or products); (b) fines, penalties, judgments, awards, settlements, legal or administrative proceedings, damages, losses, claims, demands and response, investigative, remedial, or inspection costs and expenses arising under Environmental Law or Occupational
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Safety and Health Law; (c) financial responsibility under Environmental Law or Occupational Safety and Health Law for cleanup costs or corrective action, including any investigation, cleanup, removal, containment, or other remediation or response actions (“Cleanup”) required by applicable Environmental Law or Occupational Safety and Health Law (whether or not such Cleanup has been required or requested by any Governmental Body or other Person) and for any natural resource damages; or (d) any other compliance, corrective, investigative, or remedial measures required under Environmental Law or Occupational Safety and Health Law. The terms “removal,” “remedial,” and “response action” include the types of activities covered by the U.S. Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §9601 et seq., as amended.
“Environmental Law” means any Legal Requirement that requires or relates to: (a) advising appropriate authorities, employees, and the public of intended or actual releases of pollutants or hazardous substances or materials, violations of discharge limits, or other prohibitions and of the commencements of activities that could have significant impact on the Environment; (b) preventing or reducing to acceptable levels the release of pollutants or hazardous substances or materials into the Environment; (c) reducing the quantities, preventing the release, or minimizing the hazardous characteristics of wastes that are generated; (d) assuring that products are designed, formulated, packaged, and used so that they do not present unreasonable risks to human health or the Environment when used or disposed of; (e) protecting resources, species, or ecological amenities; (f) reducing to acceptable levels the risks inherent in the transportation of hazardous substances, pollutants, oil, or other potentially harmful substances; (g) cleaning up pollutants that have been released, preventing the threat of release, or paying the costs of such clean up or prevention; or (h) making responsible parties pay private parties for damages done to their health or the Environment, or permitting self-appointed representatives of the public interest to recover for injuries done to public assets.
“ERISA” means the Employee Retirement Income Security Act of 1974 or any successor law, and rules and regulations issued pursuant to thereto.
“FTE Subscribers” is defined in Section 3.24.
“Facilities” means any real property, leaseholds, or other interests currently or formerly owned or operated by Seller with respect to the Network or by Operating Company and any buildings, plants, structures, or equipment currently or formerly owned or operated by Seller with respect to the Network or by Operating Company.
“FCC” means the Federal Communications Commission.
“GAAP” means generally accepted United States accounting principles, applied on a consistent basis.
“Governmental Authorization” means any approval, consent, license, permit, waiver, or other authorization issued, granted, given, or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement.
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“Governmental Body” means any: (a) nation, state, county, city, town, village, district, or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign, or other government; (c) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal); (d) multi-national organization or body; or (e) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature.
“HSR Act” is defined in Section 7.2.
“Hazardous Activity” means the distribution, generation, handling, importing, management, manufacturing, processing, production, refinement, Release, storage, transfer, transportation, treatment, or use (including any withdrawal or other use of groundwater) of Hazardous Materials in, on, under, about, or from the Facilities or any part thereof into the Environment, and any other act, business, operation, or thing that increases the danger, or risk of danger, or poses an unreasonable risk of harm to persons or property on or off the Facilities, or that may affect the value of the Facilities or the Companies.
“Hazardous Materials” means any waste or other substance that is listed, defined, designated, or classified as, or otherwise determined to be, hazardous, radioactive, or toxic or a pollutant or a contaminant under any Environmental Law, including any admixture or solution thereof.
“Holding Company” is defined in the Recitals to this Agreement.
“Holding Company Contribution Agreement” means the Contribution and Assumption Agreement to be entered into by Seller and Holding Company immediately prior to the Closing, the form of which is attached hereto as Exhibit 1.1A.
“IRC” means the Internal Revenue Code of 1986 or any successor law, and regulations issued by the IRS pursuant thereto.
“IRS” means the U.S. Internal Revenue Service or any successor agency, and, to the extent relevant, the U.S. Department of the Treasury.
“Intellectual Property Assets” is defined in Section 3.21.
An individual will be deemed to have “Knowledge” of a particular fact or matter if he or she is actually aware of such fact or matter or if a prudent individual could be expected to discover or otherwise become aware of such fact or matter in the course of conducting a reasonably comprehensive investigation concerning the existence of such fact or matter. A Person other than an individual will be deemed to have “Knowledge” of a particular fact or matter if any individual who is serving as a director, executive officer, member, governor, manager (with respect to a partnership or limited liability company), partner, executor, or trustee of such Person (or in any similar capacity) has, or at any time had, Knowledge of such fact or matter in accordance with the preceding sentence.
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“Legal Requirement” means any order, constitution, law, ordinance, principle of common law, regulation, statute, or treaty of any Governmental Body.
“Network” means a home shopping cable television network and interactive web-based business called the Shop At Home Network.
“Network Assets” means the “Membership Interest” and the “Network Employee Rights” under the Holding Company Contribution Agreement, and the “Contributed Assets” under the Operating Company Contribution Agreement.
“Network Liabilities” means the “Assumed Liabilities” under the Holding Company Contribution Agreement and the Operating Company Contribution Agreement.
“Network Intangible Rights” means all domestic or foreign patents, patent applications, written invention disclosures to be filed or awaiting filing determinations, trademark and service xxxx applications, registered trademarks, registered service marks, uniform resource locators, domain names, franchises, trade names, jingles, slogans, logotypes, copyrights and other intangible rights owned, leased or licensed by Seller or the Companies in connection with the Network.
“Occupational Safety and Health Law” means any Legal Requirement designed to provide safe and healthful working conditions and to reduce occupational safety and health hazards, and any program, whether governmental or private (including those promulgated or sponsored by industry associations and insurance companies), designed to provide safe and healthful working conditions.
“Operating Company” means Partners – SATH L.L.C., a Tennessee limited liability company, which is currently owned 99% by Seller and 1% by SAH Acquisition, but which will, upon consummation of the Contemplated Transactions, be owned 87.5% by Holding Company, 11.5% by Seller and 1% by SAH Acquisition.
“Operating Company Contribution Agreement” means the Contribution and Assumption Agreement to be entered into by Seller, SAH Acquisition and Operating Company immediately prior to the Closing (or earlier upon receipt of consent of Seller’s senior lender and Buyer), the form of which is attached hereto as Exhibit 1.1B.
“Operating Company LLC Agreement” means the Amended and Restated Operating Agreement among Holding Company, Seller, SAH Acquisition and Operating Company to be entered into at the Closing.
“Order” means any award, decision, injunction, judgment, order, ruling, subpoena or verdict entered, issued, made, or rendered by any court, administrative agency or other Governmental Body or by any arbitrator.
“Ordinary Course of Business” means an action taken by a Person only if: (a) such action is consistent with the past practices of such Person and is taken in the ordinary course of such
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Person’s normal day-to-day operations; (b) such action is not required to be authorized by such Person’s board of directors or managers (or by any Person or group of Persons exercising similar authority) and is not required to be specifically authorized by such Person’s parent company (if any) or other equity holders; and (c) such action is similar in nature and magnitude to actions customarily taken, without any authorization by the board of directors or managers (or by any Person or group of Persons exercising similar authority), in the ordinary course of the normal day-to-day operations of other Persons that are in the same line of business as such Person.
“Organizational Documents” means (a) the articles or certificate of incorporation and bylaws or code of regulations of a corporation; or (b) the articles of organization or certificate of formation or similar document and limited liability company agreement or operating agreement or similar document of a limited liability company; (c) any charter or similar document adopted or filed in connection with the creation, formation, or organization of a Person; and (d) any amendment to any of the foregoing.
“Participation Agreement” means the letter agreement referred to in Section 8.4(g).
“Person” means any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union, or other entity or Governmental Body.
“Plan” is defined in Section 3.13.
“Proceeding” means any action, arbitration, audit, hearing, investigation, litigation, or suit (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Body or arbitrator.
“Programming Assets” means all programs, programming, performances, productions, content and related materials of any nature whatsoever, and all elements thereof, whether intended for television broadcast or other exhibition over any other medium (including, but not limited to, the Internet) as a live performance, a pre-recorded performance or otherwise, whether completed or in process or production, in whatever form or media the same may be recorded, including, but not limited to, documents, drawings, films, tapes, compact discs, and any other digital or digitized formats (collectively, the “Programming Materials”), all related common law and statutory Network Intangible Rights in the Programming Materials and all rights, releases, clearances, and licenses granted to Seller by third parties (including, but not limited to, persons appearing in, or performing services in connection with the exhibition and syndication of, any of the Programming Materials) with respect to such third parties’ Third-Party Intangible Rights in the Programming Materials.
“Promotional Assets” means all sales support, advertising, marketing and promotional materials of any nature whatsoever, including, but not limited to, interstitial promotional materials, and all elements thereof (including, but not limited to, all advertiser files, information, lists and rate cards, all catalogs, data, drawings, designs, files, price lists and subscriber information, files and lists, and all other records and other documents related thereto), whether intended for television broadcast or other exhibition over or in any other medium (including, but
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not limited to, the Internet and any print media) as a live performance, a pre-recorded performance or otherwise, whether completed or in process or production, in whatever form or media the same may be recorded, including, but not limited to, documents, drawings, films, tapes, compact discs, and any other digital or digitized formats (collectively, the “Promotional Materials”), all related common law and statutory Network Intangible Rights in the Promotional Materials and all rights, releases, clearances, and licenses granted to Seller by third parties (including, but not limited to, persons appearing in, or performing services in connection with the exhibition and syndication of, any of the Promotional Materials) with respect to such third parties’ Third-Party Intangible Rights in the Promotional Materials.
“Proxy Statement” is defined in Section 5.8.
“Release” means any spilling, leaking, emitting, discharging, depositing, escaping, leaching, dumping, or other releasing into the Environment, whether intentional or unintentional.
“Representative” means with respect to a particular Person, any director, officer, member, manager, employee, agent, consultant, advisor, or other representative of such Person, including legal counsel, accountants, and financial advisors.
“SAH Acquisition” means SAH Acquisition Corporation, a Tennessee corporation wholly owned by Seller.
“SEC” means the U.S. Securities and Exchange Commission or any successor agency.
“Section 338(h)(10) Election” is defined in Section 7.2.
“Securities Act” means the Securities Act of 1933, as amended, or any successor law, and rules and regulations issued pursuant thereto.
“Seller” is defined in the first paragraph of this Agreement.
“Shareholder Agreement” means the Shareholder Agreement among Seller, Buyer and Holding Company to be entered at the Closing.
“Shareholder Approval” is defined in Section 5.7.
“Shareholders Meeting” is defined in Section 5.8.
“Shareholders Vote” is defined in Section 5.8.
“Shares” is defined in the Recitals of this Agreement.
“Subscriber” means a household that receives Shop at Home Network in a distribution system, including but not limited to, any cable television system, MATV and SMATV systems, MMDS, TVRO and other wireline, wireless and direct broadcast satellite delivery methods, in all cases, whether analog or digital, in the United States and its territories and possessions.
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“Tax” means (a) any net income, alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad valorem, value added, franchise, profits, license, withholding on amounts paid to or by Seller or a Company, payroll, employment, excise, severance, stamp occupation, premium, property, environmental or windfall profit tax, custom, duty or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or any penalty, addition to tax or additional amount imposed by any Governmental Body responsible for the imposition of any such tax (domestic or foreign), (b) any liability of Seller or a Company for the payment of any amounts of the type described in clause (a) as a result of being a member of an affiliated, consolidated, combined or unitary group for any period prior to the Closing, and (c) any liability of Seller or a Company for the payment of any amounts of the type described in clause (a) as a result of any express or implied obligation to indemnify any other Person..
“Tax Return” means any return (including any information return), report, statement, schedule, notice, form, or other document or information filed with or submitted to, or required to be filed with or submitted to, any Governmental Body in connection with the determination, assessment, collection, or payment of any Tax or in connection with the administration, implementation, or enforcement of or compliance with any Legal Requirement relating to any Tax.
“Tax Sharing Agreement” means the Tax Sharing Agreement referenced in Section 8.4(h).
“Third Party Intangible Rights” means third parties’ literary, artistic, trademark, copyright, music performance, master use, synchronization and other similar intellectual property rights and their publicity, privacy and publishing rights.
A claim, Proceeding, dispute, action, or other matter will be deemed to have been “Threatened” if any demand or statement has been made (orally or in writing) or any notice has been given (orally or in writing), or if any other event has occurred or any other circumstances exist, that would lead a prudent Person to conclude that such a claim, Proceeding, dispute, action, or other matter is likely to be asserted, commenced, taken, or otherwise pursued in the future.
“Transaction Documents” means this Agreement, the Shareholder Agreement, the Operating Company LLC Agreement, the Affiliation Agreement, the Confidentiality Agreement, the Participation Agreement, and the Tax Sharing Agreement.
ARTICLE II. SALE AND TRANSFER OF SHARES; CLOSING
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ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
Section 3.1 Organization and Good Standing.
(a) Seller is a corporation duly organized, validly existing, and in good standing under the laws of the State of Tennessee, with full corporate power and authority to conduct its business as it is now being conducted, to own or use the properties and assets that it purports to own or use, and to perform all its obligations under this Agreement and the other Transaction Documents to which it is a party. Seller is duly qualified to do business as a foreign corporation and is in good standing under the laws of each state or other jurisdiction in which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification, except where the failure to be so qualified would not have a material adverse effect on Seller.
(b) Holding Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Ohio, with full corporate power and authority to own the assets that it purports to own and to perform all its obligations under this Agreement and the other Transaction Documents to which it is a party. Holding Company does not own and has never owned any assets. Holding Company does not conduct and has never conducted any business.
(c) Operating Company is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Tennessee, with full power and authority to own or use the properties and assets that it purports to own or use, and to perform all its obligations under the other Transaction Documents to which it is a party. Operating Company currently owns only certain real estate located at 0000 Xxxxxxx Xxxxxx Xxxxxxx and certain fixtures and rights related thereto and such property constitutes the only assets ever owned by Operating Company. Operating Company does not conduct and has never conducted any business other than the ownership and operation of such property.
(d) Seller has delivered to Buyer copies of its and each Company’s Organizational Documents, as currently in effect.
Section 3.2 Authority; No Conflict.
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(a) This Agreement constitutes the legal, valid, and binding obligation of Seller, enforceable against Seller in accordance with its terms. Upon the execution and delivery by Seller and the Companies of each other Transaction Document to which any of them is a party, such Transaction Documents will constitute the legal, valid, and binding obligations of Seller and the Companies, as applicable, enforceable against Seller or the Company in accordance with their respective terms. Each of Seller and each Company has the absolute and unrestricted right, power and authority to execute and deliver the Transaction Documents to which it is a party and to perform its obligations thereunder. Seller’s Board of Directors has approved the Contemplated Transactions and has resolved to recommend the Contemplated Transactions for Shareholder Approval.
(b) Except as set forth in Schedule 3.2, neither the execution and delivery of this Agreement nor the consummation or performance of any of the Contemplated Transactions will, directly or indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A) any provision of the Organizational Documents of Seller or either Company, or (B) any resolution adopted by the board of directors or the stockholders of Seller or Holding Company or the member or managers of Operating Company; | |
(ii) contravene, conflict with, or result in a violation of, or give any Governmental Body or other Person the right to challenge any of the Contemplated Transactions, or to exercise any remedy or obtain any relief under, any Legal Requirement or any Order to which Seller or a Company, or any of the assets owned or used by Seller or a Company, may be subject; | |
(iii) contravene, conflict with, or result in a violation of any of the terms of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental Authorization that is held by Seller or a Company or that otherwise relates to the business of, or any of the assets owned or used by, Seller or a Company; | |
(iv) cause Buyer or a Company to become subject to, or to become liable for the payment of, any Tax; | |
(v) cause any of the assets owned or used by Seller or a Company to be reassessed or revalued by any taxing authority or other Governmental Body; | |
(vi) contravene, conflict with, or result in a violation or breach of any provision of, or give any Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate, or modify, any Contract to which Seller or a Company is bound; |
(vii) result in the imposition or creation of any Encumbrance upon or with respect to any of the assets owned or used by Seller or a Company; or |
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(viii) contravene, conflict with, or result in a violation, breach, or acceleration of any provision of any employment agreement between Seller and any employee of Seller. |
Except as set forth in Schedule 3.2, neither Seller nor a Company is or will be required to give any notice to or obtain any Consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions.
Section 3.4 Financial Statements.
(a) Since June 30, 1997, Seller has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the 1934 Act (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “SEC Documents”). A complete list of the SEC Documents is set forth on Schedule 3.4. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act. None of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. As of their respective dates, Seller’s financial statements included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with GAAP (except as may be otherwise indicated in such financial statements or the notes thereto, or in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects
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the consolidated financial position of Seller as of the dates thereof and the consolidated results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). No other information provided by or on behalf of Seller to Buyer that is not included in the SEC Documents contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstance under which they are or were made, not misleading.
(b) Schedule 3.4(b) includes a statement of assets and liabilities of the Network as of June 30, 2002 (the “Assets and Liabilities Statement”). The Assets and Liabilities Statement was prepared in accordance with the books and records of Seller (which are and have been maintained in accordance with GAAP, consistently applied), were prepared in good faith in accordance with sound internal accounting practices, consistently applied, subject to the assumptions stated therein, and present fairly in all material respects the financial condition of the Network at June 30, 2002.
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limitations of any nature except, with respect to all such properties and assets, liens for current taxes not yet due and with respect to real property, (a) minor imperfections of title, if any, none of which is substantial in amount, materially detracts from the value or impairs the use of the property subject thereto, or impairs the operations of the Network, and (b) zoning laws and other land use restrictions that do not impair the present or anticipated use of the property subject thereto. All buildings, plants, and structures owned by Seller or a Company lie wholly within the boundaries of the real property owned by such entity and do not encroach upon the property of, or otherwise conflict with the property rights of, any other Person.
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obligations reflected or reserved against on the face of the Assets and Liabilities Statement and current liabilities incurred in the Ordinary Course of Business since June 30, 2002.
(a) Seller and the Companies have timely filed or caused to be timely filed all Tax Returns that are or were required to be filed by or with respect to any of them, either separately or as a member of a group of entities, pursuant to applicable Legal Requirements and all Taxes owed by Seller and the Companies have been timely paid. All such Tax Returns are true, correct and complete. Seller has made available to Buyer copies of all such Tax Returns filed since June 30, 1993. Schedule 3.11 contains a complete and accurate list of all income Tax Returns filed since June 30, 1993. Seller and the Companies have paid, or made provision for the payment of, all Taxes that have or may have become due pursuant to all Tax Returns or otherwise, or pursuant to any assessment received by Seller or a Company, except such Taxes, if any, as are listed in Schedule 3.11 and are being contested in good faith and as to which adequate reserves (determined in accordance with GAAP) have been provided in the applicable accounting records.
(b) The United States federal and state income Tax Returns of Seller and the Companies subject to such Taxes have been audited by the IRS or relevant state tax authorities or are closed by the applicable statute of limitations for all taxable years through June 30, 1998. Schedule 3.11 contains a complete and accurate list of all audits of all such Tax Returns, including a reasonably detailed description of the nature and outcome of each audit. All deficiencies proposed as a result of such audits have been paid, reserved against, settled, or, as described in Schedule 3.11, are being contested in good faith by appropriate proceedings. Schedule 3.11 describes all adjustments to the United States federal and state income Tax Returns filed by Seller or a Company or any group of corporations including Seller or a Company for all taxable years since June 30, 1993, and the resulting deficiencies proposed by the IRS or state authorities. Except as described in Schedule 3.11, neither Seller nor a Company has given or been requested to give waivers or extensions (or is or would be subject to a waiver or extension given by any other Person) of any statute of limitations relating to the payment of Taxes of Seller or a Company or for which Seller or a Company may be liable.
(c) The charges, accruals, and reserves with respect to Taxes on the respective books of Seller and each Company are adequate (determined in accordance with GAAP) and are at least equal to Seller’s and such Company’s respective liability for Taxes. There exists no proposed Tax assessment against Seller or either Company except as disclosed in Schedule 3.11. All Taxes that Seller or a Company is or was required by Legal Requirements to withhold or collect have been duly withheld or collected and, to the extent required, have been paid to the proper Governmental Body or other Person.
(d) Except as set forth on Schedule 3.11, (i) none of Seller or the Companies has made with respect to Seller or the Companies, or any property held by the Companies any consent under IRC §341(f), (ii) no property of the Companies is “tax exempt use property” within the meaning of IRC §168(h), (iii) none of the Companies is a party to any lease made pursuant to §168(f)(8) of the Internal Revenue Code of 1954, and (iv) none of Seller or the Companies has agreed or is required to make any adjustment under IRC §481(a) by reason of a
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change in method of accounting or otherwise that will affect the liability of Seller or the Companies for Taxes.
(e) Except as set forth on Schedule 3.11, Seller and the Companies have withheld and paid all Taxes required by law to have been withheld and paid and have complied in all respects with all rules and regulations relating to the withholding or remittance of Taxes (including, without limitation, employee-related Taxes).
(f) Except as set forth on Schedule 3.11, none of the Companies is a party to an Contract or arrangement that, individually or collectively, would give rise to any payment (whether in cash or property) that would not be deductible pursuant to IRC §§162(a)(1), 162(m), 162(n) or 280G.
(g) None of Seller or the Companies is a foreign person within the meaning of IRC §1445.
(h) Except as set forth on Schedule 3.11, (i) none of Seller or the Companies is a party to any Tax allocation, indemnity or sharing agreement; (ii) none of Seller or the Companies has any liability for Taxes of any Person (A) under Treasury Regulation §1.1502-6, (B) as transferee or successor, (C) by Contract, or (D) otherwise; and (iii) neither Seller nor the Companies has been a member of an affiliated group (as that term is defined in the IRC) filing a consolidated federal income Tax return other than a group the common parent of which was Seller.
“Company Other Benefit Obligation” means an Other Benefit Obligation owed, adopted, or followed by Seller or an ERISA Affiliate.
“Company Plan” means all Plans of which Seller or an ERISA Affiliate is or was a Plan Sponsor, or to which Seller or an ERISA Affiliate otherwise contributes or has contributed, or in which Seller or an ERISA Affiliate otherwise participates or has participated.
“ERISA Affiliate” means any other Person that, together with Seller, would be treated as a single employer under IRC §414.
“Other Benefit Obligations” means all obligations, arrangements, or customary practices, whether or not legally enforceable, to provide benefits, other than salary or wages, as compensation for services rendered, to present or former directors, employees, or agents, other than obligations, arrangements, and practices that are Plans. Other Benefit Obligations include consulting agreements under which the compensation paid does not depend upon the amount of service rendered, sabbatical policies, severance payment policies, and fringe benefits within the meaning of IRC §132.
“PBGC” means the Pension Benefit Guaranty Corporation, or any successor thereto.
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“Pension Plan” is defined in ERISA §3(2)(A).
“Plan” is defined in ERISA §3(3).
“Plan Sponsor” is defined in ERISA §3(16)(B).
“Qualified Plan” means any Company Plan that meets or purports to meet the requirements of IRC §401(a).
“Welfare Plan” is defined in ERISA §3(1).
(b) | (i) Schedule 3.12(b)(i) contains a complete and accurate list of (A) all ERISA Affiliates, and (B) all Plans of which Seller or any such ERISA Affiliate is or was a Plan Sponsor, in which Seller or any such ERISA Affiliate participates or has participated, or to which Seller or any such ERISA Affiliate contributes or has contributed. Neither Seller nor any ERISA Affiliate has ever established, maintained, or contributed to or otherwise participated in, or had an obligation to maintain, contribute to, or otherwise participate in, any voluntary employees’ benefit association under IRC §501(c)(9), Pension Plan subject to Title IV of ERISA or multi-employer plan as defined in ERISA §3(37)(A). Neither Company has or has ever had any employees or sponsored any Plan or Other Benefit Obligation. |
(ii) Schedule 3.12(b)(ii) contains a complete and accurate list of all Company Plans, Company Other Benefit Obligations and identifies as such all Company Plans that are defined benefit Pension Plans or Qualified Plans. |
(iii) Schedule 3.12(b)(iii) sets forth a calculation of Seller’s liability for post-retirement benefits other than pensions, made in accordance with Financial Accounting Statement 106 of the Financial Accounting Standards Board, regardless of whether Seller is required by Statement 106 to disclose such information. |
(iv) Schedule 3.12(b)(iv) sets forth the financial cost of all obligations owed under any Company Plan or Company Other Benefit Obligation that is not subject to the disclosure and reporting requirements of ERISA. |
(c) | Seller has delivered to Buyer: |
(i) all documents that set forth the terms of each Company Plan, Company Other Benefit Obligation and of any related trust, including (A) all plan descriptions and summary plan descriptions of Company Plans for which Seller is required to prepare, file, and distribute plan descriptions and summary plan descriptions, and (B) all summaries and descriptions furnished to participants and beneficiaries regarding Company Plans and Company Other Benefit Obligations for which a plan description or summary plan description is not required; |
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(ii) all personnel, payroll, and employment manuals and policies; |
(iii) all collective bargaining agreements pursuant to which contributions have been made or obligations incurred (including both pension and welfare benefits) by Seller and the ERISA Affiliates, and all collective bargaining agreements pursuant to which contributions are being made or obligations are owed by such entities; |
(iv) a written description of any Company Plan or Company Other Benefit Obligation that is not otherwise in writing; |
(v) all registration statements filed with respect to any Company Plan; |
(vi) all insurance policies purchased by or to provide benefits under any Company Plan; |
(vii) all contracts with third party administrators, actuaries, investment managers, consultants, and other independent contractors that relate to any Company Plan and Company Other Benefit Obligation; |
(viii) all reports submitted within the four years preceding the date of this Agreement by third party administrators, actuaries, investment managers, consultants, or other independent contractors with respect to any Company Plan or Company Other Benefit Obligation; |
(ix) all notifications to employees of their rights under ERISA §601 et seq. and IRC §4980B; | |
(x) the Form 5500 filed in each of the most recent three plan years with respect to each Company Plan, including all schedules thereto and the opinions of independent accountants; |
(xi) all notices that were given by Seller or any ERISA Affiliate or any Company Plan to the IRS, PBGC, or any participant or beneficiary, pursuant to statute, within the four years preceding the date of this Agreement, including notices that are expressly mentioned elsewhere in this Section 3.12; |
(xii) all notices that were given by the IRS, PBGC, or the Department of Labor to Seller, any ERISA Affiliate, or any Company Plan within the four years preceding the date of this Agreement; and |
(xiii) the most recent determination letter for each Qualified Plan. |
(d) | Except as set forth in Schedule 3.12(d): |
(i) Seller and each ERISA Affiliate have performed all of their respective obligations under all Company Plans and Company Other Benefit Obligations. Seller and each ERISA Affiliate have made appropriate entries in |
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their financial records and statements for all obligations and liabilities under such Plans and Obligations that have accrued but are not due. |
(ii) No statement, either written or oral, has been made by Seller or any ERISA Affiliate to any Person with regard to any Plan or Other Benefit Obligation that was not in accordance with the Plan or Other Benefit Obligation and that could have, individually or in the aggregate, a material adverse economic consequence to a Company or Buyer. |
(iii) Seller and each ERISA Affiliate, with respect to all Company Plans and Company Other Benefits Obligations are, and each Company Plan and Company Other Benefit Obligation is, in full compliance with ERISA, the IRC, and other applicable Legal Requirements, including the provisions of such Legal Requirements expressly mentioned in this Section 3.12, and with any applicable collective bargaining agreement. |
(iv) No transaction prohibited by ERISA §406 and no “prohibited transaction” under IRC §4975(c) have occurred with respect to any Company Plan with respect to which there is no statutory or regulatory exemption. |
(v) Seller has no liability to the IRS with respect to any Company Plan, including any liability imposed by Chapter 43 of the IRC. |
(vi) Seller has no liability to the PBGC with respect to any Company Plan or has any liability under XXXXX §000 xx §0000. |
(vii) All filings required by ERISA and the IRC as to each Company Plan have been timely filed, and all notices and disclosures to participants required by either ERISA or the IRC have been timely provided. |
(viii) All contributions and payments made or accrued with respect to all Company Plans and Company Other Benefit Obligations are deductible under IRC §162 or §404. No amount, or any asset of any Company Plan is subject to tax as unrelated business taxable income. |
(ix) Each Company Plan can be terminated within 30 days, without payment of any additional contribution or amount and without the vesting or acceleration of any benefits promised by such Plan. |
(x) Since June 30, 1999, there has been no establishment or amendment of any Company Plan or Company Other Benefit Obligation. |
(xi) No event has occurred or circumstance exists that could result in a material increase in premium costs of Company Plans and Company Other Benefit Obligations that are insured, or a material increase in benefit costs of such Plans and Obligations that are self-insured. |
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(xii) Other than claims for benefits submitted by participants or beneficiaries, no claim against, or legal proceeding involving, any Company Plan or Company Other Benefit Obligation is pending or, to Seller’s Knowledge, Threatened. |
(xiii) No Company Plan is a stock bonus or pension plan within the meaning of IRC §401(a). |
(xiv) Each Qualified Plan is qualified in form and operation under IRC §401(a); each trust for each such Qualified Plan is exempt from federal income tax under IRC §501(a). No event has occurred or circumstance exists that will or could give rise to disqualification or loss of tax-exempt status of any such Qualified Plan or trust. |
(xv) Seller and each ERISA Affiliate has met the minimum funding standard, and has made all contributions required, under ERISA §302 and IRC §402. |
(xvi) Seller and each ERISA Affiliate has paid all amounts due to the PBGC pursuant to ERISA §4007. |
(xvii) Neither Seller nor any ERISA Affiliate has filed a notice of intent to terminate any Company Plan or has adopted any amendment to treat a Company Plan as terminated. The PBGC has not instituted proceedings to treat any Company Plan as terminated. No event has occurred or circumstance exists that may constitute grounds under ERISA §4042 for the termination of, or the appointment of a trustee to administer, any Company Plan. |
(xviii) No amendment has been made, or is reasonably expected to be made, to any Company Plan that has required or could require the provision of security under ERISA §307 or IRC §401(a)(29). |
(xix) No accumulated funding deficiency, whether or not waived, exists with respect to any Company Plan; no event has occurred or circumstance exists that may result in an accumulated funding deficiency as of the last day of the current plan year of any Company Plan. |
(xx) The actuarial report for each Pension Plan of Seller and each ERISA Affiliate fairly presents the financial condition and the results of operations of each such Pension Plan in accordance with GAAP. |
(xxi) Since the last valuation date for each Pension Plan of Seller and each ERISA Affiliate, no event has occurred or circumstance exists that would increase the amount of benefits under any such Pension Plan or that would cause the excess of Pension Plan assets over benefit liabilities (as defined in ERISA §4001) to decrease, or the amount by which benefit liabilities exceed assets to increase. |
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(xxii) No reportable event (as defined in ERISA §4043 and in regulations issued thereunder) has occurred. |
(xxiii) Seller has no Knowledge of any facts or circumstances that may give rise to any liability of Seller, a Company or Buyer to the PBGC under Title IV of ERISA. |
(xxiv) Except to the extent required under ERISA §601 et seq. and IRC §4980B, neither Seller nor any ERISA Affiliate provides health or welfare benefits for any retired or former employee nor is it obligated to provide health or welfare benefits to any active employee following such employee’s retirement or other termination of service. |
(xxv) Seller has the right to modify and terminate benefits to retirees (other than Pension Plans) with respect to both retired and active employees. |
(xxvi) Seller has complied with the provisions of ERISA §601 et seq. and IRC §4980B. |
(xxvii) No payment that is owed or may become due to any director, officer, employee, or agent of Seller will be non-deductible to Seller or subject to tax under IRC §280G or §4999; nor will Seller be required to “gross up” or otherwise compensate any such Person because of the imposition of any excise tax on a payment to such Person. |
(xxviii) The consummation of the Contemplated Transactions will not result in the payment, vesting, or acceleration of any benefit under any Company Plan or Company Other Benefit Obligation, nor will it trigger the payment of severance or termination pay under any policy, plan, procedure, practice or agreement to any employee of Seller. |
(xxix) Seller is in material compliance with its obligations to its employees under the Health Insurance Portability and Accountability Act of 1996. |
Section 3.13 Compliance; Governmental Authorizations.
(a) Except as set forth in Schedule 3.13(a):
(i) each of Seller and each Company is and at all times has been, in full compliance with each Legal Requirement that is or was applicable to it or to the conduct or operation of its business or the ownership or use of any of its assets; |
(ii) no event has occurred or circumstance exists that (with or without notice or lapse of time) (A) may constitute or result in a violation by Seller or a Company of, or a failure on the part of Seller or a Company to comply with, any Legal Requirement, or (B) may give rise to any obligation on the part of Seller or |
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a Company to undertake, or to bear all or any portion of the cost of, any remedial action of any nature; and |
(iii) neither Seller nor a Company has received any notice or other communication (whether oral or written) from any Governmental Body or any other Person regarding (A) any actual, alleged, possible, or potential violation of, or failure to comply with, any Legal Requirement, or (B) any actual, alleged, possible, or potential obligation on the part of Seller or a Company to undertake, or to bear all or any portion of the cost of, any remedial action of any nature. |
(b) Schedule 3.13(b) contains a complete and accurate list of each Governmental Authorization that is held by Seller or each Company or that otherwise relates to the business of, or to any of the assets owned or used by, the Companies. Each Governmental Authorization listed or required to be listed in Schedule 3.13(b) is valid and in full force and effect. Except as set forth in Schedule 3.13(b):
(i) Seller and each Company is, and at all times has been, in full compliance with all of the terms and requirements of each Governmental Authorization identified or required to be identified in Schedule 3.13(b); |
(ii) no event has occurred or circumstance exists that may (with or without notice or lapse of time) (A) constitute or result directly or indirectly in a violation of or a failure to comply with any term or requirement of any Governmental Authorization listed or required to be listed in Schedule 3.13(b), or (B) result directly or indirectly in the revocation, withdrawal, suspension, cancellation, or termination of, or any modification to, any Governmental Authorization listed or required to be listed in Schedule 3.13(b); |
(iii) neither Seller nor a Company has received any notice or other communication (whether oral or written) from any Governmental Body or any other Person regarding (A) any actual, alleged, possible, or potential violation of or failure to comply with any term or requirement of any Governmental Authorization, or (B) any actual, proposed, possible, or potential revocation, withdrawal, suspension, cancellation, termination of, or modification to any Governmental Authorization; and |
(iv) all applications required to have been filed for the renewal of the Governmental Authorizations listed or required to be listed in Schedule 3.13(b) or the transfer of the Governmental Authorizations listed or required to be listed in Schedule 3.13(b) from Seller or any of its subsidiaries to either Company have been duly filed on a timely basis with the appropriate Governmental Bodies, and all other filings required to have been made with respect to such Governmental Authorizations have been duly made on a timely basis with the appropriate Governmental Bodies. |
The Governmental Authorizations listed in Schedule 3.13(b) collectively constitute all of the Governmental Authorizations necessary to permit the Companies to lawfully conduct and
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operate their business in the manner they currently conduct and operate such business and to permit the Companies to own and use their assets in the manner in which they currently own and use such assets.
Section 3.14 Legal Proceedings; Orders.
(a) Except as set forth in Schedule 3.14, there is no pending Proceeding:
(i) that has been commenced by or against Seller or a Company or that otherwise relates to or may affect the business of, or any of the assets owned or used by, the Companies; or |
(ii) that challenges, or that may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the Contemplated Transactions. |
To Seller’s Knowledge, no such Proceeding has been Threatened. Seller has made available to Buyer copies of all pleadings, correspondence, and other documents relating to each Proceeding listed in Schedule 3.14. Except as specifically referenced in Schedule 3.14 as having a material adverse effect, the Proceedings listed in Schedule 3.14 will not have a material adverse effect on the business, operations, assets, condition, or prospects of the Companies.
(b) Except as set forth in Schedule 3.14:
(i) there is no Order to which a Company, or any of the assets owned or used by the Companies, is subject; |
(ii) Seller is not subject to any Order that relates to the business of, or any of the assets owned or used by, the Companies; and |
(iii) no officer, director, agent, or employee of a Company is subject to any Order that prohibits such Person from engaging in or continuing any conduct, activity, or practice relating to the business of the Companies. |
(c) Except as set forth in Schedule 3.14:
(i) Each of Seller and each Company is, and at all times has been, in full compliance with all of the terms and requirements of each Order to which it, or any of the assets owned or used by it, is or has been subject; |
(ii) no event has occurred or circumstance exists that may constitute or result in (with or without notice or lapse of time) a violation of or failure to comply with any term or requirement of any Order to which Seller or a Company, or any of the assets owned or used by the Companies, is subject; and |
(iii) neither Seller nor a Company has received any notice or other communication (whether oral or written) from any Governmental Body or any other Person regarding any actual, alleged, possible, or potential violation of, or |
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failure to comply with, any term or requirement of any Order to which Seller or a Company, or any of the assets owned or used by the Companies, is or has been subject. |
Section 3.15 Absence of Certain Changes and Events. Since June 30, 2001, except as set forth on Schedule 3.15, there has not been any material adverse change in the business, operations, properties, prospects, assets, or condition of Seller, and no event has occurred or circumstance exists that may result in such a material adverse change. Neither Seller nor either Company has taken any steps, and none of them currently expect to take any steps, to seek protection pursuant to any bankruptcy law nor does Seller or either Company have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact that would reasonably lead a creditor to do so. Except as set forth in Schedule 3.15, since June 30, 2001, Seller has conducted its business only in the Ordinary Course of Business and there has not been any:
(a) payment or increase by Seller of any bonuses, salaries, or other compensation to any director, officer, or (except in the Ordinary Course of Business) employee or entry into any employment, severance, or similar Contract with any director, officer, or (except in the Ordinary Course of Business) employee;
(b) adoption of, or increase in the payments to or benefits under, any profit sharing, bonus, deferred compensation, savings, insurance, pension, retirement, or other employee benefit plan for or with any employees of Seller;
(c) damage to or destruction or loss of any asset or property owned or used by the Network, whether or not covered by insurance, materially and adversely affecting the properties, assets, business, financial condition, or prospects of the Network;
(d) entry into, termination of, or receipt of notice of termination of (i) any license, distributorship, dealer, sales representative, joint venture, credit, affiliation or similar agreement, or (ii) any Contract or transaction involving a total remaining commitment by or to Seller (as relates to the Network) of at least $50,000 except in the Ordinary Course of Business;
(e) sale (other than sales of inventory in the Ordinary Course of Business), lease, or other disposition of any asset or property owned or used by the Companies or mortgage, pledge, or imposition of any Encumbrance on any material asset or property owned or used by the Network;
(f) cancellation or waiver of any claims or rights with a value to Seller (as relates to the Network) in excess of $50,000;
(g) material change in the accounting methods used by Seller; or
(h) agreement, whether oral or written, by Seller or a Company, as applicable, to do any of the foregoing.
Section 3.16 Contracts; No Defaults.
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(a) Schedule 3.16(a) contains a complete and accurate list, and Seller has delivered to Buyer true and complete copies, of:
(i) each Contract relating to the business of the Network that involves performance of services or delivery of goods or materials by Seller or a Company of an amount or value in excess of $50,000; |
(ii) each Contract relating to the business of the Network that involves performance of services or delivery of goods or materials to Seller or a Company of an amount or value in excess of $50,000; |
(iii) each Contract relating to the business of the Network that was not entered into in the Ordinary Course of Business and that involves expenditures or receipts of Seller or a Company in excess of $50,000; |
(iv) each lease, rental or occupancy agreement, license, installment and conditional sale agreement, and other Contract relating to the business of the Network affecting the ownership of, leasing of, title to, use of, or any leasehold or other interest in, any real or personal property (except personal property leases and installment and conditional sales agreements having a value per item or aggregate payments of less than $50,000 and with terms of less than one year); |
(v) each licensing agreement or other Contract relating to the business of the Network with respect to patents, trademarks, copyrights, or other intellectual property, including agreements with current or former employees, consultants, or contractors regarding the appropriation or the non-disclosure of any Intellectual Property Assets; |
(vi) each joint venture, partnership, and other Contract (however named) involving a sharing of profits, losses, costs, or liabilities by Seller or a Company or with respect to the Network business with any other Person; |
(vii) each Contract containing covenants that in any way purport to restrict the business activity of Seller or a Company or any Affiliate of a Company or limit the freedom of Seller or a Company or any Affiliate of a Company to engage in any line of business or to compete with any Person; |
(viii) each Contract providing for payments to or by any Person based on sales, purchases, or profits, other than direct payments for goods; |
(ix) each power of attorney binding on Seller (as relates to the Network) or a Company that is currently effective and outstanding; |
(x) each Contract entered into other than in the Ordinary Course of Business that contains or provides for an express undertaking by Seller (as relates to the Network) or a Company to be responsible for consequential damages; |
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(xi) each Contract for capital expenditures by Seller or a Company with respect to the Network business in excess of $50,000; |
(xii) each written warranty, guaranty, and or other similar undertaking with respect to contractual performance extended by Seller or a Company with respect to the Network business other than in the Ordinary Course of Business; |
(xiii) each Contract that is a talent or programming Contract or in any way obligates Seller to pay any royalty, residual, license fee or other similar payment in respect of any third parties’ literary, artistic, trademark, copyright, music performance, master use, synchronization and other similar intellectual property rights and their publicity, privacy and publishing rights; and |
(xiv) each amendment, supplement, and modification (whether oral or written) in respect of any of the foregoing. |
(b) Except as set forth in Schedule 3.16(b), no officer, director, or employee of Seller is bound by any Contract that purports to limit the ability of such Person to (A) engage in or continue any conduct, activity, or practice relating to the business of the Network, or (B) assign to a Company or to any other Person any rights to any invention, improvement, or discovery.
(c) Except as set forth in Schedule 3.16(c), each Contract listed or required to be listed in Schedule 3.16(a) is in full force and effect and is valid and enforceable in accordance with its terms.
(d) Except as set forth in Schedule 3.16(d):
(i) each of Seller and each Company is and has been in full compliance with all applicable terms and requirements of each Contract listed or required to be listed in Schedule 3.16(a), including, without limitation, all “most favored nations” provisions of such Contracts; |
(ii) each other party to each Contract listed or required to be listed in Schedule 3.16(a) is, to Seller’s Knowledge, in full compliance with all applicable terms and requirements of such Contract; |
(iii) no event has occurred or circumstance exists that (with or without notice or lapse of time) may contravene, conflict with, or result in a violation or breach of, or give Seller or a Company or other Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate, or modify, any Contract listed or required to be listed in Schedule 3.16(a); and |
(iv) neither Seller nor a Company has given to or received from any other Person, at any time since June 30, 1999, any notice or other communication (whether oral or written) regarding any actual, alleged, possible, or potential violation or breach of, or default under, any Contract listed or required to be listed |
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in Schedule 3.16(a), except for notices of violations, breaches or defaults, the results of which would not result in the ability for the other party to such Contract to exercise a right or remedy that could have a material adverse effect on Seller or the Company, as the case may be. |
(e) To Seller’s Knowledge, there are no renegotiations of, attempts to renegotiate, or outstanding rights to renegotiate any material amounts paid or payable to a Company or with respect to the Companies’ business under current or completed Contracts with any Person and no such Person has made written demand for such renegotiation.
(f) The Contracts relating to the sale, design, manufacture, or provision of products or services by the Companies have been entered into in the Ordinary Course of Business and have been entered into without the commission of any act alone or in concert with any other Person, or any consideration having been paid or promised, that is or would be in violation of any Legal Requirement.
(a) Seller has made available to Buyer true and complete copies of all policies of insurance to which Seller or a Company is a party or under which Seller or a Company, or any director, officer or manager of Seller or a Company, is or has been covered at any time within the five years preceding the date of this Agreement, copies of all pending applications for policies of insurance; and any statement by the auditor of Seller’s financial statements with regard to the adequacy of such entity’s coverage or of the reserves for claims.
(b) Schedule 3.17(b) sets forth, by year, for the current policy year and each of the five preceding policy years a summary of the loss experience under each policy and a statement describing each claim under an insurance policy for an amount in excess of $10,000.
(c) Except as set forth on Schedule 3.17(c):
(i) All policies to which Seller or a Company is a party or that provide coverage to Seller, a Company, or any director, officer or manager of Seller or a Company (A) are valid, outstanding and enforceable; (B) are issued by an insurer that is financially sound and reputable; (C) taken together, provide adequate insurance coverage for the assets and the operations of the Network; (D) are sufficient for compliance with all Legal Requirements and Contracts to which Seller or a Company is a party or by which any of them is bound; (E) will continue in full force and effect following the consummation of the Contemplated Transactions; and (F) do not provide for any retrospective premium adjustment or other experienced-based liability on the part of Seller or a Company. |
(ii) Neither Seller nor a Company has received any refusal of coverage or any notice that a defense will be afforded with reservation of rights, or any notice of cancellation or any other indication that any insurance policy is no longer in full force or effect or will not be renewed or that the issuer of any policy is not willing or able to perform its obligations thereunder. |
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(iii) Each of Seller and each Company has paid all premiums due, and has otherwise performed all of its obligations, under each policy to which it is a party or that provides coverage to the Companies or their business or any director, officer or manager thereof. |
(iv) Seller and the Companies have given notice to the insurer of all material claims that may be insured thereby. |
Section 3.18 Environmental Matters. Except as set forth in Schedule 3.18:
(a) Each of Seller and each Company is, and at all times has been, in full compliance with, and has not been and is not in violation of or liable under, any Environmental Law. Neither Seller nor either Company has or has any basis to expect, nor has any of them or any other Person for whose conduct they are or may be held to be responsible received, any actual or Threatened Order, notice, or other communication from (i) any Governmental Body or private citizen acting in the public interest, or (ii) the current or prior owner or operator of any Facilities, of any actual or potential violation or failure to comply with any Environmental Law, or of any actual or Threatened obligation to undertake or bear the cost of any Environmental, Health, and Safety Liabilities with respect to any of the Facilities or any other properties or assets (whether real, personal, or mixed) in which Seller or a Company has or had an interest, or with respect to any property or Facility at or to which Hazardous Materials were generated, manufactured, refined, transferred, imported, used, or processed by Seller, a Company, or any other Person for whose conduct they are or may be held responsible, or from which Hazardous Materials have been transported, treated, stored, handled, transferred, disposed, recycled, or received.
(b) There are no Hazardous Materials present on or in the Environment at the Facilities. None of Seller, either Company, or any other Person for whose conduct they are or may be held responsible has permitted or conducted, or is aware of, any Hazardous Activity conducted with respect to the Facilities or any other properties or assets (whether real, personal, or mixed) in which Seller or a Company has or had an interest except in full compliance with all applicable Environmental Laws.
(c) There has been no Release or, to Seller’s Knowledge, threat of Release, of any Hazardous Materials at or from the Facilities or at any other locations where any Hazardous Materials were generated, manufactured, refined, transferred, produced, imported, used, or processed from or by the Facilities, or from or by any other properties and assets (whether real, personal, or mixed) in which Seller or a Company has or had an interest.
(d) Seller has delivered to Buyer accurate and complete copies and results of any reports, studies, analyses, tests, or monitoring possessed or initiated by Seller or a Company pertaining to Hazardous Materials or Hazardous Activities in, on, or under the Facilities, or concerning compliance by Seller, a Company, or any other Person for whose conduct they are or may be held responsible, with Environmental Laws.
Section 3.19 Employees.
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(a) Schedule 3.19 contains a complete and accurate list of the following information for each employee of Seller relating to the Network, including each employee on leave of absence or layoff status: name; job title; current compensation paid or payable and any change in compensation since June 30, 2002; vacation accrued; and service credited for purposes of vesting and eligibility to participate under any Company Plan.
(b) No employee of Seller is a party to, or is otherwise bound by, any agreement or arrangement, including any confidentiality, noncompetition, or proprietary rights agreement, between such employee and any other Person (a “Proprietary Rights Agreement”) that in any way adversely affects or will affect (i) the performance of his duties as an employee of Seller or, after the Closing, of a Company, or (ii) the ability Seller or the Companies to conduct the Network business, including any Proprietary Rights Agreement with Seller or a Company. To Seller’s Knowledge, no officer or other key employee of Seller intends to terminate his employment.
Section 3.21 Intellectual Property.
(a) Intellectual Property Assets. As used in this Agreement, the term “Intellectual Property Assets” includes:
(i) the name “Shop at Home”, all fictional business names, trading names, registered and unregistered trademarks, service marks, and applications (collectively, “Marks”); |
(ii) all patents, patent applications, and inventions and discoveries that may be patentable (collectively, “Patents”); |
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(iii) all copyrights in both published works and unpublished works (collectively, “Copyrights”); |
(iv) all rights in mask works (collectively, “Rights in Mask Works”); and |
(v) all know-how, trade secrets, confidential information, customer lists, software, technical information, data, process technology, plans, drawings, and blue prints (collectively, “Trade Secrets”) |
in each case owned, used, or licensed by Seller as licensee or licensor.
(c) Know-How Necessary for the Business. The Intellectual Property Assets are all those necessary for the operation of the Network as it is currently conducted. Seller is the owner of all right, title, and interest in and to each of the Intellectual Property Assets, free and clear of all Encumbrances, and Seller has the right to use without payment to a third party all of the Intellectual Property Assets. Notwithstanding the foregoing, Buyer acknowledges that Seller has not applied for a trademark or servicemark registration for the name “Shop At Home”; provided, however that nothing contained in this sentence will be deemed to abrogate Seller’s representation with respect to such Xxxx as set forth in Section 3.21(e)(v).
(e) Marks.
(i) Schedule 3.21(e) contains a complete and accurate list and summary description of all Marks. Seller is the owner of all right, title, and interest in and to each of the Marks, free and clear of all Encumbrances. |
(ii) All Marks that have been registered with the U.S. Patent and Trademark Office are currently in compliance with all formal legal requirements (including the timely post-registration filing of affidavits of use and incontestability and renewal applications), are valid and enforceable, and are not subject to any maintenance fees or Taxes or actions falling due within 90 days after the Closing Date. |
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(iii) No Xxxx has been or is now involved in any opposition, invalidation, or cancellation and, to Seller’s Knowledge, no such action is Threatened with the respect to any of the Marks. |
(iv) To Seller’s Knowledge, there is no potentially interfering trademark or trademark application of any third party. |
(v) Except as Schedule 3.21, no Xxxx is infringed or, to Seller’s Knowledge, has been challenged or threatened in any way. None of the Marks used by Seller infringes or is alleged to infringe any trade name, trademark, or service xxxx of any third party. |
(vi) All products and materials containing a Xxxx xxxx the proper federal registration notice where permitted by law. |
(f) Copyrights.
(i) Schedule 3.21(f) contains a complete and accurate list and summary description of all Copyrights. Seller is the owner of all right, title, and interest in and to each of the Copyrights, free and clear of all Encumbrances. |
(ii) All the Copyrights have been registered and are currently in compliance with formal legal requirements, are valid and enforceable, and are not subject to any maintenance fees or Taxes or actions falling due within 90 days after the date of Closing. |
(iii) No Copyright is infringed or, to Seller’s Knowledge, has been challenged or threatened in any way. None of the subject matter of any of the Copyrights infringes or is alleged to infringe any copyright of any third party or is a derivative work based on the work of a third party. | |
(iv) All works encompassed by the Copyrights have been marked with the proper copyright notice. |
(i) With respect to each Trade Secret, the documentation relating to such Trade Secret is current, accurate, and sufficient in detail and content to identify and explain it and to allow its full and proper use without reliance on the knowledge or memory of any individual. | |
(ii) Seller has taken all reasonable precautions to protect the secrecy, confidentiality, and value of its Trade Secrets. | |
(iii) Seller has good title and an absolute (but not necessarily exclusive) right to use the Trade Secrets used by it related to the Network. The Trade Secrets are not part of the public knowledge or literature, and, to Seller’s Knowledge, have not been used, divulged, or appropriated either for the benefit of any Person |
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(other than Seller or a Company) or to the detriment of the Network. No Trade Secret is subject to any adverse claim or has been challenged or threatened in any way. |
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the Shop At Home Network on a full-time basis, calculated on a basis consistent with that historically calculated by Seller by estimating the number of full-time households that receive the Shop At Home Network and derived by adding (a) the number of actual full-time households and (b) a number calculated under the assumption that part-time households had been combined into full-time households in accordance with a formula, as set forth more fully on Schedule 3.24, that considers the number of hours carried and gives weight to the amount of sales historically made by Seller during such hours.
Section 3.25 Affiliation and Programming Agreements.
(a) Affiliation Agreements. Schedule 3.25(a) sets forth an accurate and complete list of, and a schedule of payments with respect to, all Contracts with cable system operators and satellite televisions system operators relating to carriage of the Network (the “Affiliation Agreements”) and the number of Subscribers served by each such operator. Except as disclosed on Schedule 3.25(a), none of the Affiliation Agreements contains any “most favored nations” provisions and none of the Affiliation Agreements purports to be binding on any Affiliates of Seller or the Companies or any successor in interest to any of them. Except as disclosed on Schedule 3.25(a), Seller has not received any notice that any such cable system operator or satellite television system operator (i) has canceled or terminated, or has a specific intention to cancel or terminate, any Affiliation Agreement, or (ii) has a specific intention to effect a planned reduction in the number of Subscribers covered by any Affiliation Agreement, other than any Affiliation Agreement representing less than 10,000 FTE Subscribers. All Affiliation Agreements are valid, binding and in full force and effect, enforceable by Seller in accordance with their terms. Except as disclosed on Schedule 3.25(a), Seller has performed all obligations required to be performed by it to date under the Affiliation Agreements and Seller is not (with or without the lapse of time or the giving of notice, or both) in breach or default in any respect thereunder and, to Seller’s Knowledge, no other party to any of the Affiliation Agreements is (with or without the lapse of time or the giving of notice, or both) in breach or default in any respect thereunder.
(b) Programming Agreements. Schedule 3.25(b) sets forth an accurate and complete list of, and a schedule of payments with respect to, all Contracts with third parties relating to the Programming Assets (the “Programming Agreements”). Except as disclosed on Schedule 3.25(b), Seller has not received any notice that any other party to the Programming Agreements (i) has canceled or terminated, or has a specific intention to cancel or terminate, any Programming Agreement, or (ii) has a specific intention to effect a planned alteration or modification of the Programming Assets that are the subject matter of any Programming Agreement. All Programming Agreements are valid, binding and in full force and effect, enforceable by Seller in accordance with their terms. Except as disclosed on Schedule 3.25(b), Seller has performed all obligations required to be performed by it to date under the Programming Agreements and Seller is not (with or without the lapse of time or the giving of notice, or both) in breach or default in any respect thereunder and, to Seller’s Knowledge, no other party to any of the Programming Agreements is (with or without the lapse of time or the giving of notice, or both) in breach or default in any respect thereunder.
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
Section 4.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and binding obligation of Buyer, enforceable against Buyer in accordance with its terms. Upon the execution and delivery by Buyer of the Transaction Documents to which it is a party, such Transaction Documents will constitute the legal, valid, and binding obligations of Buyer, enforceable against Buyer in accordance with their respective terms. Buyer has the absolute and unrestricted right, power, and authority to execute and deliver this Agreement and the Transaction Documents to which it is a party and to perform its obligations hereunder and thereunder.
(b) Neither the execution and delivery of this Agreement by Buyer nor the consummation or performance of any of the Contemplated Transactions by Buyer will give any Person the right to prevent, delay, or otherwise interfere with any of the Contemplated Transactions pursuant to:
(i) any provision of Buyer’s Organizational Documents; |
(ii) any resolution adopted by the board of directors or the stockholders of Buyer; |
(iii) any Legal Requirement or Order to which Buyer may be subject; or |
(iv) any Contract to which Buyer is a party or by which Buyer may be bound. |
Buyer is not and will not be required to obtain any Consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions.
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making illegal, or otherwise interfering with, any of the Contemplated Transactions. To Buyer’s Knowledge, no such Proceeding has been Threatened.
ARTICLE V. COVENANTS OF SELLER PRIOR TO CLOSING DATE
Section 5.1 Access and Investigation. Between the date of this Agreement and the Closing Date, Seller shall, and shall cause the Companies and their Representatives to, (a) afford Buyer and its Representatives and, if applicable, prospective lenders and their Representatives (collectively, “Buyer’s Advisors”) full and free access to the Companies’ personnel, properties (including subsurface testing), contracts, books and records, and other documents and data, (b) furnish Buyer and Buyer’s Advisors with copies of all such contracts, books and records, and other existing documents and data as Buyer reasonably requests, and (c) furnish Buyer and Buyer’s Advisors with such additional financial, operating, and other data and information as Buyer reasonably requests.
Section 5.2 Operation of the Business of the Network. Between the date of this Agreement and the Closing Date, Seller shall, and shall cause the Companies to:
(a) conduct its business only in the Ordinary Course of Business;
(b) use its best efforts to preserve intact its current business organization, keep available the services of its current officers, employees, and agents, and maintain the relations and goodwill with suppliers, customers, landlords, creditors, employees, agents, Network affiliates, advertisers and others having business relationships with it;
(c) confer with Buyer concerning operational matters of a material nature; and
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(d) otherwise report periodically to Buyer, at Buyer’s reasonable request, concerning the status of its business, operations, and finances.
Without limiting the foregoing, Seller shall maintain sufficient cash on hand to timely make required payments with respect to its indebtedness for borrowed money. Notwithstanding anything to the contrary contained in this Section 5.2, immediately prior to the Closing (or earlier upon consent of Seller’s senior lender and Buyer), Seller shall transfer the Network Assets and Network Liabilities to Holding Company or Operating Company, as Buyer and Seller shall mutually agree. Furthermore, notwithstanding anything to the contrary contained in this Section 5.2, Operating Company may make a distribution to its members of $3,000,000. In no event will Seller permit the net working capital deficit of Operating Company at the Closing to be greater than $4,800,000 without obtaining Buyer’s prior consent, which consent will not be unreasonably withheld. As used in the previous sentence, “net working capital” means (a) cash, cash equivalents, inventories and trade receivables, net of applicable reserves, computed in accordance with GAAP, minus (b) trade payables and accrued wages, computed in accordance with GAAP.
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proposal or offer to its stockholders) that constitutes, or may reasonably be expected to lead to, any Third-Party Transaction (as hereinafter defined), or enter into or maintain or continue discussions or negotiate with any person or entity regarding a Third-Party Transaction, or agree to or endorse any Third-Party Transaction; (b) shall notify Buyer promptly if any written proposal or offer regarding a Third-Party Transaction is made; (c) shall immediately cease and cause to be terminated all existing discussions or negotiations with any parties conducted heretofore with respect to a Third-Party Transaction; and (d) shall not release any third party from, or waive any provision of, any confidentiality or standstill agreement to which Seller is a party. Seller shall promptly notify Buyer in writing if it receives any written proposal or offer relating to a Third-Party Transaction, and Seller shall inform such inquiring person or entity of the existence of this provision and make such person or entity aware of Seller’s obligations hereunder. Notification hereunder must include the identity of the person or entity making such offer or other proposal, the terms thereof, and any other information with respect thereto as Buyer reasonably requests. Notwithstanding the foregoing, (y) Seller may engage in discussions and negotiations, enter into agreements, and conclude transactions with Castle Creek Partners, Capital Works Group and the Xxxxxx family with respect to possible non-voting preferred equity investments (pari passu or junior to Seller’s Series D Senior Redeemable Preferred Stock) by such third parties in Seller unrelated to the Contemplated Transactions; provided that Seller shall keep Buyer information regarding all developments with respect thereto and (z) Seller may, with notice to Buyer, discuss with any third party proposals for the potential acquisition of one or more of Seller’s broadcast television stations (exclusive of the Network business) but Seller may not enter into agreements in respect of such discussions without Buyer’s written consent; provided that in no event shall any such transaction be inconsistent with or impair the benefit to Buyer of the Contemplated Transactions. For purposes hereof, a “Third-Party Transaction” means any of the following involving Seller (other than the Contemplated Transactions and other than as set forth in the previous sentence): (a) a merger, consolidation, share exchange, business combination or other similar transaction; (b) any sale, lease, exchange, transfer or other disposition of 10% or more of the assets of Seller; (c) a tender offer or exchange offer for, or any other acquisition of, 10% or more of the outstanding voting securities of Seller; or (d) any issuance, sale or grant of any shares of, or securities convertible into or exchangeable for, or options, warrants, calls, commitments or rights of any kind to acquire, any shares of capital stock of Seller.
Section 5.7 Preparation of Proxy Statement.
(a) As soon as practicable after the execution of this Agreement, Seller shall prepare and cause to be filed with the SEC preliminary proxy materials (the “Proxy Statement”) for the solicitation of approval of the shareholders of Seller of (i) the Contemplated Transactions and (ii) the amendment of Seller’s amended and restated charter to change its corporate name to one which is not the same as or similar to its present name or any other trademark or trade style or name now or then used by Operating Company (collectively, the “Shareholder Approval”) and for the election of directors and such other matters as Seller and Buyer may reasonably agree. Subject to compliance by Buyer with its covenants in this Section 6.3, Seller shall cause the Proxy Statement related thereto to materially comply with applicable law and the rules and regulations promulgated by the SEC, to respond promptly to any comments of the SEC or its staff and Seller shall use reasonable best efforts to cause the Proxy Statement to be mailed to
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Seller’s shareholders as promptly as practicable. Each party shall promptly furnish to the other party all information concerning itself, its shareholders and its affiliates that may be required or reasonably requested in connection with any action contemplated by this Section. If any event relating to any party occurs, or if any party becomes aware of any information, that should be disclosed in an amendment or supplement to the Proxy Statement, then such party shall inform the other thereof and shall cooperate with each other in filing such amendment or supplement with the SEC and, if appropriate, in mailing such amendment or supplement to the shareholders of Seller. The Proxy Statement shall include the recommendations of the Board of Directors of Seller in favor of Shareholder Approval. Buyer and its advisors shall have a reasonable opportunity to review and comment on the proxy materials prior to any filing with the SEC.
(b) Seller will notify Buyer promptly of the receipt of any comments from the SEC or its staff or any other government official and of any requests by the SEC or its staff or any other government official for amendments or supplements to the Proxy Statement or for additional information, and will supply Buyer with copies of all such comments and any correspondence between Seller and its representatives, and the SEC or its staff or any other government official with respect thereto. If at any time prior to the Closing Date, any event shall occur that should be set forth in an amendment of, or a supplement to, the Proxy Statement, Seller agrees promptly to prepare and file such amendment or supplement and to distribute such amendment or supplement as required by applicable law, including mailing such supplement or amendment to the shareholders of Seller. Buyer and its advisors shall have a reasonable opportunity to review and comment on any amendment or supplement to the Proxy Statement prior to any filing with the SEC.
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ARTICLE VI. COVENANTS OF BUYER PRIOR TO CLOSING DATE
Section 6.1 Reasonable Best Efforts. Between the date of this Agreement and the Closing Date, Buyer shall use its reasonable best efforts to cause the conditions in Articles VIII and IX to be satisfied.
ARTICLE VII. MISCELLANEOUS COVENANTS
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and Seller shall cause the Companies to, cooperate with each other with respect to all filings that the other elects to make or is required by Legal Requirements to make in connection with the Contemplated Transactions.
Without limiting the generality of the foregoing, Seller and Buyer shall promptly make and effect all registrations, filings and submissions required to be made or effected by them pursuant to the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the “HSR Act”) and other applicable Legal Requirements with respect to this Agreement and the other Transaction Documents and the Contemplated Transactions. Each of Seller and Buyer shall bear one-half of the cost of such filing. Without limiting the generality of the foregoing, each of Buyer and Seller shall (a) promptly provide all information requested by any Governmental Body in connection with this Agreement and the other Transaction Documents and the Contemplated Transactions, and (b) promptly take all actions and steps necessary to obtain any antitrust clearance or similar clearance required to be obtained from the Federal Trade Commission, the Antitrust Division of the Department of Justice, any state attorney general, any foreign competition authority or any other governmental entity in connection with the Contemplated Transactions. The actions required to be taken by Buyer and Seller pursuant to this Section in order to obtain required antitrust clearances will include using reasonable efforts to avoid or set aside any preliminary or permanent injunction or other Order but do not include making arrangements for the disposition of particular assets and making arrangements to hold such assets separate pending their disposition.
Without limiting the generality of the foregoing, each party hereto shall (a) give the other party prompt notice of the commencement of any Proceeding by or before any Governmental Body with respect to this Agreement or the other Transaction Documents or any of the Contemplated Transactions, (b) keep the other party informed as to the status of any such Proceeding, and (c) promptly inform the other party of any communication to or from the Federal Trade Commission, the Antitrust Division of the Department of Justice, or any other Governmental Body regarding this Agreement or the Contemplated Transaction.
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of an amendment to Holding Company’s Articles of Incorporation to eliminate cumulative voting.
ARTICLE VIII. CONDITIONS PRECEDENT TO BUYER’S OBLIGATION TO CLOSE
Buyer’s obligation to purchase the Shares and to take the other actions required to be taken by Buyer at the Closing is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by Buyer, in whole or in part):
Section 8.2 Seller’s Performance.
Each of the covenants and obligations that Seller is required to perform or to comply with pursuant to this Agreement at or prior to the Closing must have been duly performed and complied with in all material respects.
Section 8.4 Additional Documents. Each of the following documents must have been delivered to Buyer:
(a) certificates representing the Shares, issued in the name of Buyer or duly endorsed for transfer;
(b) a certificate executed by Seller certifying to Buyer that each of Seller’s representations and warranties in this Agreement was accurate in all respects as of the date of this Agreement and is accurate in all respects as of the Closing Date as if made on the Closing Date;
(c) an opinion of Bone McAllester Norton PLLC, dated the Closing Date, in the form of Exhibit 8.4(c);
(d) the Operating Company LLC Agreement, in the form of Exhibit 8.4(d), executed by all of the parties thereto;
(e) the Shareholder Agreement, in the form of Exhibit 8.4(e), executed by Seller and Holding Company;
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(f) the Affiliation Agreement, in the form of Exhibit 8.4(f), executed by the parties thereto;
(g) the Participation Agreement, in the form of Exhibit 8.4(g), executed by Seller;
(h) the Loan and Security Agreement, in the form of Exhibit 8.4(h), executed by the parties thereto (other than The X.X. Xxxxxxx Company);
(i) the Tax Sharing Agreement, executed by Buyer and Holding Company;
(j) such documents and forms, executed by Seller, as are required to complete properly the Section 338(h)(10) Election; and
(k) such other documents as Buyer may reasonably request for the purpose of (i) evidencing the accuracy of any of Seller’s representations and warranties, (ii) evidencing the performance by Seller of, or the compliance by Seller with, any covenant or obligation required to be performed or complied with by Seller, (iii) evidencing the satisfaction of any condition referred to in this Article VIII, or (iv) otherwise facilitating the consummation or performance of any of the Contemplated Transactions.
Section 8.6 No Claim Regarding Ownership or Sale Proceeds. There must not have been made or Threatened by any Person any claim asserting that such Person (a) is the holder or the beneficial owner of, or has the right to acquire or to obtain beneficial ownership of, any stock of, or any other voting, equity, or ownership interest in, the Companies, or (b) is entitled to all or any portion of the Purchase Price.
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Company, each on terms and conditions and pursuant to documentation in form and substance in all respects reasonably satisfactory to Buyer.
Section 8.12 754 Election. Operating Company shall have made an election pursuant to IRC §754.
ARTICLE IX. CONDITIONS PRECEDENT TO SELLER’S OBLIGATION TO CLOSE
Seller’s obligation to sell the Shares and to take the other actions required to be taken by Seller at the Closing is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by Seller, in whole or in part):
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(a) the Shareholder Agreement, duly endorsed by Buyer;
(b) the Participation Agreement, in the form of Exhibit 8.4(g), executed by Buyer;
(c) the Loan and Security Agreement, in the form of Exhibit 8.4(h), executed by The X.X. Xxxxxxx Company;
(d) a certificate executed by Buyer certifying to Seller that each of Buyer’s representations and warranties in this Agreement was accurate in all respects as of the date of this Agreement and is accurate in all respects as of the Closing Date as if made on the Closing Date;
(e) the X.X. Xxxxxxx Company and Operating Company shall have entered into a Secured Cognovit Promissory Note in a principal amount of $35,000,0000 and the security documents referred to therein;
(f) such documents as Seller may reasonably request for the purpose of (i) evidencing the accuracy of any representation or warranty of Buyer, (ii) evidencing the performance by Buyer of, or the compliance by Buyer with, any covenant or obligation required to be performed or complied with by Buyer, (iii) evidencing the satisfaction of any condition referred to in this Article IX, or (iv) otherwise facilitating the consummation of any of the Contemplated Transactions.
(a) by mutual written consent of Buyer and Seller duly authorized by their respective Boards of Directors;
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(b) by either Buyer or Seller if there is any law or regulation that makes consummation of the Contemplated Transactions illegal or otherwise prohibited or if consummation of the Contemplated Transactions would violate any non-appealable final order, decree or judgment of any Governmental Entity having competent jurisdiction;
(c) by either Seller or Buyer on or after January 1, 2003 if the Closing shall not have been consummated on or before December 31, 2002 (the “Termination Date”); provided that such right to terminate this Agreement will not be available to any party whose failure to perform or satisfy in any material respect any covenant, condition or obligation of such party under this Agreement when performance or satisfaction thereof was due is the cause of such delay;
(d) by either Buyer or Seller if any of the representations or warranties of the other party contained herein are inaccurate or untrue in any respect if qualified by the word “material” or in any material respect if not so qualified, and such inaccuracy cannot reasonably be expected to be cured prior to the Termination Date and, in the case of Seller, the failure of any representation and warranty to satisfy the foregoing standard would reasonably be expected to have a material adverse effect on Operating Company or its ability to operate the Network;
(e) by Buyer if Seller has not within 100 days from the date hereof obtained Shareholder Approval;
(f) by Buyer, provided it is not then in material breach of any of its obligations under this Agreement, if Seller fails to perform or satisfy in any material respect any agreement, covenant, condition or obligation in this Agreement when performance or satisfaction thereof is due and does not cure the failure within 20 business days after Buyer delivers written notice thereof; or
(g) by Seller, provided it is not then in material breach of any of its obligations under this Agreement, if Buyer fails to perform or satisfy in any material respect any agreement, covenant, condition or obligation in this Agreement when performance thereof is due and does not cure the failure within 20 business days after notice by Seller thereof.
The party desiring to terminate this Agreement pursuant to this Section 10.1 will give written notice of such termination to the other party.
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termination unimpaired, and (b) if this Agreement is terminated by Buyer pursuant to Section 10.1(e) and Seller has received an offer or proposal for a Third-Party Transaction, then Seller shall pay to Buyer, in cash, within one business day after the closing of the Third-Party Transaction or 30 days after termination of discussions by Seller and such third party with respect thereto a non-refundable fee in the amount of $2,500,000, the receipt of which will be Buyer’s sole remedy hereunder.
ARTICLE XI. INDEMNIFICATION; REMEDIES
(a) any breach of any representation or warranty made by Seller in this Agreement or any other certificate or document delivered by Seller pursuant to this Agreement;
(b) any breach by Seller of any covenant or obligation of Seller in this Agreement;
(c) any product shipped by, or any services provided by, Seller or a Company prior to the Closing Date;
(d) any liability of Seller that does not constitute a Network Liability; and
(e) any claim by any Person for brokerage or finder’s fees or commissions or similar payments based upon any agreement or understanding alleged to have been made by any such Person with either Seller or a Company (or any Person acting on their behalf) in connection with any of the Contemplated Transactions.
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The remedies provided in this Section 11.2 will not be exclusive of or limit any other remedies that may be available to Buyer or the other Indemnified Persons.
Section 11.5 Limitations on Amount.
(a) Seller will not be liable (for indemnification or otherwise) with respect to the matters described in Section 11.2(a) or, to the extent relating to any failure to perform or comply prior to the Closing Date, Section 11.2(b) until the total of all Damages with respect to such matters exceeds $100,000, after which Seller will be liable for all Damages and not merely those that exceed $100,000. However, the foregoing limitation will not apply to any breach of any of Seller’s representations and warranties of which Seller had Knowledge at any time prior to the date on which such representation and warranty is made or any intentional breach by Seller of any covenant or obligation.
(b) Buyer will not be liable (for indemnification or otherwise) with respect to the matters described in Section 11.3(a) or (b) until the total of all Damages with respect to such matters exceeds $50,000, after which Buyer will be liable for all Damages and not merely those that exceed $50,000. However, the foregoing limitation will not apply to any breach of any of Buyer’s representations and warranties of which Buyer had Knowledge at any time prior to the date on which such representation and warranty is made or any intentional breach by Buyer of any covenant or obligation.
Section 11.6 Procedure for Indemnification – Third Party Claims.
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(a) Promptly after receipt by an indemnified party under Section 11.2 or 11.3 of notice of the commencement of any Proceeding against it, such indemnified party will, if a claim is to be made against an indemnifying party under such Section, give notice to the indemnifying party of the commencement of such claim, but the failure to notify the indemnifying party will not relieve the indemnifying party of any liability that it may have to any indemnified party, except to the extent that the indemnifying party demonstrates that the defense of such action is prejudiced by the indemnifying party’s failure to give such notice.
(b) If any Proceeding referred to in Section 11.6(a) is brought against an indemnified party and it gives notice to the indemnifying party of the commencement of such Proceeding, the indemnifying party may participate in such Proceeding and, to the extent that it wishes (unless (i) the indemnifying party is also a party to such Proceeding and the indemnified party determines in good faith that joint representation would be inappropriate, or (ii) the indemnifying party fails to provide reasonable assurance to the indemnified party of its financial capacity to defend such Proceeding and provide indemnification with respect to such Proceeding) to assume the defense of such Proceeding with counsel reasonably satisfactory to the indemnified party and, after notice from the indemnifying party to the indemnified party of its election to assume the defense of such Proceeding, the indemnifying party shall not, as long as it diligently conducts such defense, be liable to the indemnified party under this Article XI for any fees of other counsel or any other expenses with respect to the defense of such Proceeding, in each case subsequently incurred by the indemnified party in connection with the defense of such Proceeding, other than reasonable costs of investigation. If the indemnifying party assumes the defense of a Proceeding, (i) it will be conclusively established for purposes of this Agreement that the claims made in that Proceeding are within the scope of and subject to indemnification; (ii) no compromise or settlement of such claims may be effected by the indemnifying party without the indemnified party’s consent unless (A) there is no finding or admission of any violation of Legal Requirements or any violation of the rights of any Person and no effect on any other claims that may be made against the indemnified party, and (B) the sole relief provided is monetary damages that are paid in full by the indemnifying party; and (iii) the indemnified party will not be liable with respect to any compromise or settlement of such claims effected without its consent. If notice is given to an indemnifying party of the commencement of any Proceeding and the indemnifying party does not, within 20 days after the indemnified party’s notice is given, give notice to the indemnified party of its election to assume the defense of such Proceeding, the indemnifying party will be bound by any determination made in such Proceeding or any compromise or settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party determines in good faith that there is a reasonable probability that a Proceeding may adversely affect it or its affiliates other than as a result of monetary damages for which it would be entitled to indemnification under this Agreement, the indemnified party may, by notice to the indemnifying party, assume the exclusive right to defend, compromise, or settle such Proceeding, but the indemnifying party will not be bound by any determination of a Proceeding so defended or any compromise or settlement effected without its consent (which may not be unreasonably withheld).
(d) Seller and Buyer hereby consent to the non-exclusive jurisdiction of any court in which a Proceeding is brought against any Indemnified Person for purposes of any claim that an
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Indemnified Person may have under this Agreement with respect to such Proceeding or the matters alleged therein, and agree that process may be served on Seller or Buyer, as the case may be, with respect to such a claim anywhere in the world.
ARTICLE XII. GENERAL PROVISIONS
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Seller:
SHOP AT HOME, INC.
0000 Xxxxxxx Xxxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxx, Executive Vice President
Facsimile No.: (000) 000-0000
with a copy to:
BONE McALLESTER NORTON PLLC
SunTrust Center
000 Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxxx X. Bone, Esq.
Facsimile No.: (000) 000-0000
Buyer:
SCRIPPS NETWORKS, INC.
c/o The X.X. Xxxxxxx Company
000 Xxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxxxxx, Xxxx 00000
Attn: Xxxxxxx Xxxxxxxx, Vice President Corporate Development
Facsimile No.: (000) 000-0000
with a copy to:
XXXXX & XXXXXXXXX LLP
000 Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxx, Xxxx 00000
Attn: Xxxxxxx Xxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
Section 12.6 Jurisdiction; Service Of Process. Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought against any of the parties in the courts of the State of Ohio, Xxxxxxxx County, or, if it has or can acquire jurisdiction, in the United States District Court for the Southern District of Ohio, and each party consents to the jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any objection to venue laid therein. Process in any action or proceeding referred to in the preceding sentence may be served on any party anywhere in the world.
54
documents, and (c) to do such other acts and things, all as the other party reasonably requests for the purpose of carrying out the intent of this Agreement and the documents referred to in this Agreement.
(a) The disclosures in the Schedules must relate only to the representations and warranties in the Section of the Agreement to which they expressly relate and not to any other representation or warranty in this Agreement.
(b) In the event of any inconsistency between the statements in the body of this Agreement and those in the Schedules (other than an exception expressly set forth as such in the Schedules with respect to a specifically identified representation or warranty), the statements in the body of this Agreement will control.
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Section 12.14 Governing Law. This Agreement will be governed by the laws of the State of Ohio without regard to conflicts of laws principles.
[Remainder of page intentionally left blank.]
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BUYER: | ||||
SCRIPPS NETWORKS, INC. | ||||
By | /s/ Xxxxxxx X. Xxxxxx | |||
Title | Executive Vice President | |||
SELLER: | ||||
SHOP AT HOME, INC. | ||||
By | /s/ Xxxxxx X. Xxxxxxxxx | |||
Title | Co-Chief Executive Officer | |||
By | /s/ Xxxxx X. Xxxxx | |||
Title | Co-Chief Executive Officer | |||
The X.X. Xxxxxxx Company hereby guarantees the obligations of Buyer under the foregoing Share Purchase Agreement.
By | /s/ Xxxxxxx X. Xxxxxx | |||
Title | Executive Vice President | |||
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EXHIBIT 1.1A
CONTRIBUTION AND ASSUMPTION AGREEMENT
THIS CONTRIBUTION AND ASSUMPTION AGREEMENT, dated as of , 2002 [this date will be the Closing Date of the Share Purchase Agreement] (this “Agreement”), is made by and between Shop At Home, Inc., a Tennessee corporation (“SATH”), and SAH Holdings, Inc., an Ohio corporation and wholly owned subsidiary of SATH (“Holdings”).
ARTICLE I
Contribution, Retention and Assumption
(a) SATH hereby contributes, conveys, transfers and assigns to Holdings, free and clear of all liens and encumbrances, all of SATH’s right, title and interest in and to 88.39% of SATH’s 99% membership interest in the Company (representing an 87.5% membership interest in the Company) (the “Membership Interest”).
(b) SATH and each of its Affiliates with an interest therein hereby contributes, grants, conveys, assigns, transfers and delivers to Holdings all of their Network Employees Rights with respect to the Network Employees listed on Schedule 1.01(b), including all records, contracts, assets and other properties of SATH and its Affiliates related thereto, and SATH and Holdings hereby agree, as soon as is administratively practicable after the date hereof, to cause each Network Employee to become an employee of Holdings for all purposes on such salary as set forth for such Network Employee on Schedule 1.01(b) and such other terms and conditions, including but not limited to bonus, leave allowances and health and welfare benefits, as SATH and Holdings shall mutually agree with the consent of Scripps Networks, Inc.
1.02 Retention and Assumption of Liabilities.
(a) Except for the Assumed Membership Interest Liabilities (hereinafter defined) and the Assumed Employees Liabilities (hereinafter defined) (collectively, the “Assumed Liabilities”), Holdings shall not assume any debts, liabilities or obligations of any kind, character or description, whether accrued or fixed, absolute or contingent, matured or unmatured or determined or undetermined, or any costs or expenses related thereto (collectively, “Liabilities”), of SATH or any Affiliate of SATH, including, but not limited to Liabilities in respect of the Membership Interest, the Network Employees and the Network Employees Rights (collectively, the “Retained Liabilities”), and Holdings shall not at any time be required to assume, pay, perform or discharge any Retained Liabilities.
(b) Notwithstanding the provisions of Section 1.02(a), the Company hereby unconditionally assumes and agrees to pay, perform, satisfy and discharge all Liabilities first arising on or after the date hereof in connection with the ownership of the Membership Interest, whether arising by reason of contact, operation of law or otherwise, and including, but not limited to all such Liabilities arising under the Operating Agreement of the Company dated , (the “Assumed Membership Interest Liabilities”).
(c) Notwithstanding the provisions of Section 1.02(a), Holdings hereby unconditionally assumes and agrees to pay, perform, satisfy and discharge (i) all Liabilities first arising on or after the date hereof in connection with the Network Employees and Network Employees Rights and (ii) the Liabilities of SATH and its Affiliates relating to the Network Employees to the extent unpaid, unperformed, unsatisfied and not discharged prior to the date hereof solely as expressly set forth on Schedule 1.02(c) (collectively, the “Assumed Employees Liabilities”). Holdings shall have no responsibility or liability with respect to any employees of SATH or its Affiliates who are not listed on Schedule 1.01(b).
(d) For purposes of this Agreement, the term “Affiliate” means any other legal entity (i) that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with SATH, (ii) that is a general partner, director, manager, trustee or principal officer of, or a limited partner owning more than ten percent (10%) of, or that serves in a similar capacity with respect to, SATH, or (iii) of which SATH is a general partner, director, manager, trustee or principal officer or a limited partner owning more than ten percent (10%) of, or with respect to which SATH serves in a similar capacity. For purposes of this definition of Affiliate, “control” means the possession, directly or indirectly, of the power to direct or to cause the direction of the management or policies of the legal entity in question through the ownership of voting securities or by contract or otherwise. The Holdings shall be excluded from the meaning of Affiliate for all purposes of this Agreement.
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delivery by the appropriate parties of such good and sufficient instruments of contribution, transfer and delivery, in form and substance reasonably satisfactory to the parties as shall be necessary to vest in the Holdings all of the right, title and interest in and to the Membership Interest and the Network Employees Rights, and (b) the assumption of the Assumed Liabilities contemplated hereby shall be effected by delivery of the appropriate parties of such good and sufficient instruments of assumption, in form and substance reasonably satisfactory to the parties, as shall be necessary for the assumption by Holdings of the Assumed Liabilities. Each of the parties hereto also agrees to deliver to any other party hereto such other documents, instruments and writings as may be reasonably requested by such other parties hereto in connection with the transactions contemplated hereby. Notwithstanding any other provisions of this Agreement to the contrary, (x) the instruments of transfer or assumption referred to in this Section 1.04 shall not include any representations and warranties, and (y) in the event and to the extent that there is any conflict between the provisions of this Agreement and the provisions of any of the instruments of transfer or assumption referred to in this Section 1.04, the provisions of this Agreement shall prevail and govern.
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oral and all contemporaneous oral agreements and understandings with respect to the subject matter hereof.
SHOP AT HOME, INC. | ||||
By: | ||||
Name: | ||||
Title: | ||||
SAH HOLDINGS, INC. | ||||
By: | ||||
Name: | ||||
Title: | ||||
4
Schedule 1.01(b)
Network Employees
[To be provided by Xxxxxx Xxxxxxxx]
5
Schedule 1.02(c)
Assumed Employee Liabilities
1. | Accrued but unpaid wages of the Network Employees. | ||
2. | Accrued but unused vacation of the Network Employees. |
6
EXHIBIT 1.1B
CONTRIBUTION AND ASSUMPTION AGREEMENT
THIS CONTRIBUTION AND ASSUMPTION AGREEMENT, dated effective as of , 2002 (this “Agreement”), is made by and among Shop At Home, Inc., a Tennessee corporation (“SATH”), SAH Acquisition Corporation, a Tennessee corporation and a wholly owned subsidiary of SATH (“SAHAC”), and Partners – SATH, L.L.C., a Tennessee limited liability company and a wholly owned subsidiary of SATH through an indirect 1% membership interest held therein by SAHAC and a 99% membership interest held by SATH (the “Company”).
ARTICLE 1
CONTRIBUTION, RETENTION AND ASSUMPTION
1.01 Contribution and Retention of Assets.
(a) Except for the Retained Assets (hereinafter defined), SATH and each of its Affiliates with an interest therein hereby contributes, grants, conveys, assigns, transfers and delivers, subject to all liens and encumbrances, a 1% undivided interest to SAHAC and, immediately upon such contribution by SATH to SAHAC, SATH and each of its Affiliates with an interest therein and SAHAC hereby respectively contribute, grant, convey, assign, transfer and deliver 99% and 1% undivided interests to the Company, in and to all right, title and interest of SATH and its Affiliates and SAHAC with an interest therein in and to any and all assets, rights and properties used or held for use in the conduct and operation of the Network Business, whether tangible or intangible, whether fixed, contingent or otherwise, and wherever located (collectively, the “Contributed Assets”), including, but not limited to, the assets, rights and properties described on Schedule 1.01(a).
(b) Notwithstanding the provisions of Section 1.01(a), the Contributed Assets shall not include, and SATH and its Affiliates shall retain all of their right, title and interest in and to,
the assets, rights and properties described on Schedule 1.01(b), SATH’s rights under this Agreement, all their rights relating to the employment of the Network Employees and any other assets, rights and properties of SATH and its Affiliates not used or held for use in the operations of the Network Business (collectively, the “Retained Assets”).
1.02 Retention and Assumption of Liabilities.
(a) Except for the Assumed Liabilities (hereinafter defined), neither SAHAC nor the Company shall assume any debts, liabilities or obligations of any kind, character or description, whether accrued or fixed, absolute or contingent, matured or unmatured or determined or undetermined, or any costs or expenses related thereto (collectively, “Liabilities”), of SATH, the Network Business, or any Affiliate of SATH, including, but not limited to Liabilities in respect of the Network Employees (collectively, the “Retained Liabilities”), and neither SAHAC nor the Company shall at any time be required to assume, pay, perform or discharge any Retained Liabilities.
(b) Notwithstanding the provisions of Section 1.02(a), SAHAC as to an undivided interest of 1% of SATH therein, and the Company as to the 99% and 1% undivided interests of SATH and SAHAC therein, without recourse, hereby unconditionally assume and agree to pay, perform, satisfy and discharge (i) all Liabilities first arising on or after the date hereof in connection with the Contributed Assets or as a result of the Company’s conduct and operation of the Network Business on or after the date hereof and (ii) the Liabilities of SATH and its Affiliates relating to the Network Business (excluding Liabilities in respect of the Network Employees and excluding Liabilities in respect of any Retained Asset) to the extent unpaid, unperformed, unsatisfied and not discharged prior to the date hereof solely as expressly set forth on Schedule 1.02(b) (the “Assumed Liabilities”).
(c) For purposes of this Agreement, the term “Affiliate” means any other legal entity (i) that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with SATH, (ii) that is a general partner, director, manager, trustee or principal officer of, or a limited partner owning more than ten percent (10%) of, or that serves in a similar capacity with respect to, SATH, or (iii) of which SATH is a general partner, director, manager, trustee or principal officer or a limited partner owning more than ten percent (10%) of, or with respect to which SATH serves in a similar capacity. For purposes of this definition of Affiliate, “control” means the possession, directly or indirectly, of the power to direct or to cause the direction of the management or policies of the legal entity in question through the ownership of voting securities or by contract or otherwise. The Company and SAHAC shall be excluded from the meaning of Affiliate for all purposes of this Agreement.
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respect to any real property interest and any improvements thereon, a quitclaim deed or the equivalent thereof in accordance with local practice, and (iii) with respect to all other rights, assets and properties, such good and sufficient instruments of contribution, transfer and delivery, in form and substance reasonably satisfactory to the parties as shall be necessary to vest in the Company or SAHAC, as the case may be, all of the right, title and interest in and to the Contributed Assets, and (b) the assumption of the Assumed Liabilities contemplated hereby shall be effected by delivery of the appropriate parties of such good and sufficient instruments of assumption, in form and substance reasonably satisfactory to the parties, as shall be necessary for the assumption by SAHAC or the Company of the Assumed Liabilities. Each of the parties hereto also agrees to deliver to any other party hereto such other documents, instruments and writings as may be reasonably requested by such other parties hereto in connection with the transactions contemplated hereby. Notwithstanding any other provisions of this Agreement to the contrary, (x) the instruments of transfer or assumption referred to in this Section 1.04 shall not include any representations and warranties, and (y) in the event and to the extent that there is any conflict between the provisions of this Agreement and the provisions of any of the instruments of transfer or assumption referred to in this Section 1.04, the provisions of this Agreement shall prevail and govern.
ARTICLE 2
3
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SHOP AT HOME, INC. | |||
By: | |||
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Name: | |||
Title: | |||
SAH ACQUISITION CORPORATION | |||
By: | |||
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Name: | |||
Title: | |||
PARTNERS-SATH, L.L.C. | |||
By: | |||
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Name: | |||
Title: | |||
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Schedule 1.01(b)
CONTRIBUTED ASSETS
The following sets forth general descriptions of certain assets, rights and properties included in the Contributed Assets:
all programs, programming, performances, productions, content and related materials of any nature whatsoever, and all elements thereof, whether intended for television broadcast or other exhibition over any other medium (including, but not limited to, the Internet) as a live performance, a pre-recorded performance or otherwise, whether completed or in process or production, in whatever form or media the same may be recorded, including, but not limited to, documents, drawings, films, tapes, compact discs, and any other digital or digitized formats (collectively, the “Programming Materials”), all related common law and statutory Network Intangible Rights (as defined in paragraph (c) hereof) in the Programming Materials and all rights, releases, clearances, and licenses granted by third parties (including, but not limited to persons appearing in, or performing services in connection with the exhibition and syndication of, any of the Programming Materials) with respect to such third parties’ literary, artistic, trademark, copyright, music performance, master use, synchronization and other similar intellectual property rights and their publicity, privacy and publishing rights (collectively, the “Third-Party Intangible Rights”) in the Programming Materials;
all sales support, advertising, marketing and promotional materials of any nature whatsoever, including, but not limited to, interstitial promotional materials, and all elements thereof (including, but not limited to, all advertiser files, information, lists and rate cards, all catalogs, data, drawings, designs, files, price lists and subscriber information, files and lists, and all other records and other documents related thereto), whether intended for television broadcast or other exhibition over or in any other medium (including, but not limited to, the Internet and any print media) as a live performance, a pre-recorded performance or otherwise, whether completed or in process or production, in whatever form or media the same may be recorded, including, but not limited to, documents, drawings, films, tapes, compact discs, and any other digital or digitized formats (collectively, the “Promotional Materials”), all related common law and statutory Network Intangible Rights in the Promotional Materials and all rights, releases, clearances, and licenses granted by third parties (including, but not limited to, persons appearing in, or performing services in connection with the exhibition and syndication of, any of the Promotional Materials) with respect to such third parties’ Third-Party Intangible Rights in the Promotional Materials;
all domestic or foreign patents, patent applications, written invention disclosures to be filed or awaiting filing determinations, copyrights, trademark and service xxxx applications, registered trademarks, registered service marks, unregistered trademarks and service marks in which SATH or its Affiliates possess common law rights, uniform resource locators, domain names, franchises, trade names, jingles, slogans, logotypes, copyrights and other intangible rights owned, leased or licensed (collectively, the “Network Intangible Rights”);
all goodwill associated with the Network Business as a going concern and with the Network Intangible Rights;
all files, records, books of account, computer programs, tapes, electronic data processing software, data and other records to the extent exclusively relating to the conduct and operation of the Network Business, in whatever form or format they are maintained, kept or stored, including, without limitation, books of account and accounting information, purchasing and production information, income, sales, use and all other tax information, subscriber data, subscriber and other third party credit information, pricing information, advertiser information, cost and expense information, market research, surveys and reports, equipment service, maintenance and warranty records, sales, advertising, marketing and promotional materials, and industry information;
all Contracts entered into in connection with the conduct and operation of the Network Business (such as, without limitation, contracts with suppliers, service vendors, providers of insurance or services in connection with employee benefit and welfare plans, advertisers, consultants and designers) and all rights under such Contracts, whether such rights are express or implied, matured or unmatured, known or unknown, absolute or contingent;
all stationery, forms, labels, and similar supplies bearing, exhibiting or otherwise embodying any of the Network Intangible Rights;
all prepaid expenses, deposits and other current assets of a similar nature related to Contracts or otherwise, including cash, cash equivalents, notes receivable, accounts receivable and prepaid taxes, and all negotiable instruments and chattel paper, including credit card receivables and accrued interest charges on customer accounts;
all rights to all post office boxes, telephone numbers and facsimile numbers;
all orders, arrangements, understandings and Contracts for the sale of advertising time on broadcasts or on Internet web sites;
all goods, assets, rights and services due under trade contracts with third parties, and all inventory and work in process;
all permits, licenses, consents, approvals or other authorizations from or of any court, arbitral tribunal, administrative agency or commission or other governmental or other regulatory authority, agency or body relating to or necessary for the conduct and operation of the Network Business;
all rights, claims, credits, causes of action and rights of set-off against third parties relating to the Network Business or Contributed Assets; and
all real property, furniture, fixtures, equipment, vehicles, tools, computer and hardware, whether owned, leased licensed or otherwise, and all appurtenances thereto.
Schedule 1.01(b)
RETAINED ASSETS
The following sets forth the Retained Assets:
(a) all assets, rights and properties directly used or directly held for use in the operation of the five (5) UHF television station properties owned and operated by SATH and its Affiliates in San Francisco, California, Boston, Massachusetts, Cleveland, Ohio, Raleigh, North Carolina and Bridgeport, Connecticut, including but not limited to, the FCC licenses for such stations, equipment at such stations, employment agreements of the personnel working at such stations and the leases and other Contracts which relate exclusively to such stations, but excluding all rights in Programming Materials, Third-Party Intangible Rights, Promotional Rights, and Network Intangible Rights.
(b) AT&T/TCI full-time carriage agreement dated 4/24/96.
(c) Employment related contracts with Xxxxxxx S, Xxxxx, Xxxxxx X. Xxxxxxxxx, Xxxxx X. Xxxxx, Xxxxxx X. Tek, Xxxxxx X. Xxxxxxxx, Xxxxxx X. Wales, Xxxxxx X. Xxxx, Xxxxxx X. Xxxxxxxx and Xxxxxx X. Xxxxxxx.
(d) Promissory Notes from X.X. Xxxxxxx and Xxxxxxx X. Bone.
(e) Equity Edge Software concerning SATH’s stock option program.
(f) The membership interest in the Company and the shares of capital stock in SAH Holdings, Inc. and SAHAC owned and held by SATH.
(g) Paymaxx Agreement.
(h) All rights, claims, credits, causes of action and rights of set-off against third parties relating to the Retained Liabilities.
Schedule 1.02(b)
ASSUMED LIABILITIES
(a) The current liabilities of the Network Business as of the date hereof reflected or reserved against on the face of the Pro Forma Statement of Assets and Liabilities attached to and made part hereof (as approved in writing by Scripps Networks, Inc.). SATH hereby represents and warrants to the Company that such Pro Forma Statement of Assets and Liabilities has been prepared in all material respects consistently with the Pro Forma Statement of Assets and Liabilities of the Network Business as of June 30, 2002 delivered by SATH to Scripps Networks, Inc. in connection with the Share Purchase Agreement dated August , 2002 between SATH and Scripps Networks, Inc. SATH further represents and warrants to the Company that such Pro Forma Statement of Assets and Liabilities does not contain any current liabilities not incurred in the Ordinary Course of Business (as such term is defined in the Share Purchase Agreement referred to herein).
(b) If any claim is made after the date hereof by a third party alleging infringement of such third party’s intellectual property rights arising from the use of the name “Shop at Home” in the operation of the Network Business by either or both SATH or the Company, as between SATH and the Company, SATH shall be responsible for all Liabilities which arose therefrom that relate to any period prior to the date hereof and the Company shall be responsible for all Liabilities which arose therefrom on and after the date hereof and, if the Company elects to defend such claim, the Company shall at its cost and expense provide a defense for both the Company and SATH; provided that SATH shall cooperate with the Company at SATH’s cost and expense as may be reasonably required.
EXHIBIT 8.4(c)
Capitalized terms used herein will have the meanings set forth in the Share Purchase Agreement between Shop At Home, Inc. and Scripps Networks, Inc. (the “Purchase Agreement”).
1. Seller is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Tennessee. The Holding Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Ohio. The Operating Company is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Tennessee.
2. Each of Seller, the Holding Company and the Operating Company has the necessary power and authority to conduct its business as currently conducted and to own, lease and use its assets in the manner in which its assets are currently owned, leased and used. Each of Seller, the Holding Company and the Operating Company is qualified to do business as a foreign corporation in each jurisdiction in which the nature of its business or ownership of its assets requires such qualification (except to the extent that failure to be so qualified would not have a material adverse effect on the business of Seller, the Holding Company or the Operating Company, as the case may be), and is in good standing in each such jurisdiction.
3. The Holding Company has 1,500 authorized shares, without par value, of which 1,000 are outstanding and are held beneficially and of record by Seller. All of the Holding Company’s outstanding shares have been duly authorized and validly issued and are fully paid and nonassessable.
4. The Operating Company is owned beneficially and of record 1% by SAH Acquisition Corporation, 87.5% by the Holding Company and 11.5% by Seller.
5. No preemptive rights, rights of first refusal or similar rights to purchase securities of the Operating Company or the Holding Company exist and no such rights will arise or become exercisable by virtue of or in connection with the transactions contemplated by the Agreement. There are no outstanding or authorized options, warrants, convertible securities, subscription rights, conversion rights, exchange rights relating to the issuance or sale of any securities of the Holding Company or the Operating Company. There are no stock appreciation, phantom stock, profit participation or other similar rights granted by the Holding Company or the Operating Company.
6. To our knowledge, there is no pending Proceeding and no Person has threatened to commence any Proceeding materially affecting or that could materially affect the Holding Company or the Operating Company, or their properties or assets or the Network or that questions the validity or enforceability of the Transaction Documents or the Contemplated Transactions.
7. Each of Seller, the Holding Company and the Operating Company has the requisite power and authority to enter into and to perform its obligations pursuant to the Transaction Documents to
which it is a party. The execution, delivery and performance by each of Seller, the Holding Company and the Operating Company of the Transaction Documents to which it is a party, and the consummation of the Contemplated Transactions, have been duly authorized by all necessary corporate and shareholder action on the part of Seller, the Holding Company and the Operating Company. The Transaction Documents to which each of Seller, the Holding Company and the Operating Company is a party constitute the legal, valid and binding obligation of Seller, the Holding Company or the Operating Company, as the case may be, enforceable against such entity in accordance with their respective terms.
8. The execution and delivery by each of Seller, the Holding Company and the Operating Company of the Transaction Documents to which it is a party and the consummation by such entity of the Contemplated Transactions will not (a) violate such entity’s Organizational Documents; (b) violate any Legal Requirement applicable to the Contemplated Transactions; or (c) cause a default by such entity under, or give rise to a right of payment under or the right to terminate, amend, modify, abandon or accelerate obligations under, any Contract to which such entity is a party or by which it or any of its assets or properties are bound.
9. Except for the third party consents or notices set forth on Schedule 3.2 to the Purchase Agreement, none of Seller, the Holding Company or the Operating Company is required to make any filing with or give any notice to or obtain any consent from any Person in connection with the execution and delivery of the Transaction Documents or consummation of the Contemplated Transactions.
EXHIBIT 8.4(d)
AMENDED AND RESTATED OPERATING AGREEMENT
OF
SHOP AT HOME NETWORK, LLC
TABLE OF CONTENTS
Page | |||||||
ARTICLE 1 Definitions |
1 | ||||||
ARTICLE 2 The Company |
1 | ||||||
2.1 Formation |
1 | ||||||
2.2 Operating Agreement |
1 | ||||||
2.3 Name |
1 | ||||||
2.4 Purpose |
2 | ||||||
2.5 Authority of Scripps Holding and Scripps Governors with Respect to the Network |
2 | ||||||
2.6 Names and Addresses of Members |
2 | ||||||
2.7 Period of Duration |
2 | ||||||
2.8 Statutory Agent and Office |
2 | ||||||
2.9 Principal Executive Office |
2 | ||||||
ARTICLE 3 Accounting and General Tax Matters |
2 | ||||||
3.1 Accounting Methods |
2 | ||||||
3.2 Records |
2 | ||||||
3.3 Fiscal Year |
2 | ||||||
3.4 Taxation as a Partnership |
3 | ||||||
3.5 Tax Elections |
3 | ||||||
3.6 Tax Matters Partner |
3 | ||||||
3.7 Tax Information |
3 | ||||||
ARTICLE 4 Management |
3 | ||||||
4.1 Management by the Board of Governors |
3 | ||||||
4.2 Board of Governors |
5 | ||||||
4.2.1 Composition |
5 | ||||||
4.2.2 Authority |
5 | ||||||
4.2.3 Voting |
6 | ||||||
4.2.4 Meetings |
6 | ||||||
4.2.5 Committees |
6 | ||||||
4.2.6 Compensation |
6 | ||||||
4.2.7 Governors’ Time and Effort |
6 | ||||||
4.3 Officers and Employees |
6 | ||||||
4.4 Arrangements with Scripps Affiliates |
7 | ||||||
4.5 Compensation of Scripps Holdings |
7 | ||||||
4.6 Discretion |
7 | ||||||
ARTICLE 5 General Rights and Obligations of Members |
7 | ||||||
5.1 Limitation of Liability |
7 | ||||||
5.2 Standards for Access to Information |
8 | ||||||
5.3 Limited Voting and Management Rights |
8 | ||||||
5.4 Representations and Warranties |
8 | ||||||
5.5 No Withdrawal of a Member |
9 | ||||||
5.6 Title to Property |
9 | ||||||
5.7 Financial Statements |
9 |
Page | |||||||
5.8 Confidentiality Covenants |
9 | ||||||
5.9 Outside Businesses or Opportunities |
10 | ||||||
5.10 Noncompetition Covenant of SATH |
10 | ||||||
5.11 Re-formation in Delaware |
10 | ||||||
ARTICLE 6 EXCULPATORY PROVISIONS; Indemnification |
11 | ||||||
6.1 Exculpatory Provisions |
11 | ||||||
6.1.1 General Limitation of Liability |
11 | ||||||
6.1.2 Limitation of Duties |
11 | ||||||
6.1.3 No Consequential Damages |
11 | ||||||
6.2 Indemnification of Governors and Other Indemnified Persons |
11 | ||||||
6.2.1 General Obligations of the Company |
11 | ||||||
6.2.2 Disabling Conduct |
12 | ||||||
6.2.3 Advances |
12 | ||||||
6.2.4 Non-Exclusivity |
12 | ||||||
6.2.5 Insurance |
12 | ||||||
6.2.6 No Personal Liability of Members |
13 | ||||||
6.2.7 Conflicts of Interest |
13 | ||||||
6.2.8 Beneficiaries |
13 | ||||||
ARTICLE 7 Contributions and Loans |
13 | ||||||
7.1 Members’ Capital Contributions |
13 | ||||||
7.2 Additional Equity Funding |
13 | ||||||
7.3 No Interest |
14 | ||||||
7.4 Credit Line |
14 | ||||||
7.5 Loans From Members |
14 | ||||||
ARTICLE 8 Capital Accounts |
14 | ||||||
8.1 Creation and Maintenance |
14 | ||||||
8.1.1 Interpretations |
14 | ||||||
8.1.2 Computations |
15 | ||||||
8.1.3 Book Value and Revaluations of Company Property |
15 | ||||||
8.1.4 Effective Terminations under Code Section 708(b)(1)(B) |
15 | ||||||
8.2 Transfer of Capital Account; No Code Section 743 Adjustment |
16 | ||||||
8.3 No Deficit Restoration Obligation |
16 | ||||||
ARTICLE 9 Allocations |
16 | ||||||
9.1 Allocation of Operating Profits and Losses |
16 | ||||||
9.1.1 Profits |
16 | ||||||
9.1.2 Losses |
16 | ||||||
9.1.3 Limitations and Special Allocations |
16 | ||||||
9.2 Special Allocations |
17 | ||||||
9.2.1 Nonrecourse Deductions |
17 | ||||||
9.2.2 Member Nonrecourse Deductions |
17 | ||||||
9.2.3 Company Minimum Gain |
17 | ||||||
9.2.4 Member Minimum Gain |
17 | ||||||
9.2.5 Qualified Income Offset |
17 | ||||||
9.2.6 Gross Income Allocation |
18 | ||||||
9.2.7 Code Section 754 Adjustments |
18 |
Page | |||||||
9.3 Corrective Allocations |
18 | ||||||
9.4 Application of Code Section 704(c) |
18 | ||||||
9.5 Distributions of Nonrecourse Liability Proceeds |
18 | ||||||
9.6 Allocation of Debt |
19 | ||||||
9.7 Other Allocation Provisions |
19 | ||||||
9.7.1 Elections |
19 | ||||||
9.7.2 Fees to Members |
19 | ||||||
ARTICLE 10 Distributions |
19 | ||||||
10.1 Distributions |
19 | ||||||
10.1.1 Definition of Distributable Cash |
19 | ||||||
10.1.2 Tax Distributions |
19 | ||||||
10.1.3 Distributions of Distributable Cash |
20 | ||||||
10.1.4 Distributions of Proceeds from Interim Capital Transactions |
20 | ||||||
10.1.5 Distributions of Proceeds from Liquidating Capital Transactions |
20 | ||||||
10.2 General Limitations on Distributions |
20 | ||||||
ARTICLE 11 Dispositions of Membership Interests |
20 | ||||||
11.1 General Restrictions |
20 | ||||||
11.2 Void Dispositions |
22 | ||||||
11.3 Scripps Holding’s Right of First Refusal |
22 | ||||||
11.3.1 Notice of Intended Disposition |
22 | ||||||
11.3.2 Exercise of Right |
22 | ||||||
11.3.3 Non-Exercise of Right |
22 | ||||||
11.3.4 SATH Debt |
22 | ||||||
11.4 Transfers to Affiliates |
23 | ||||||
11.5 Scripps Holding’s Right to Sell; SATH’s and Sub’s Tag
Along Right; Scripps Holding’s Drag Along Right |
23 | ||||||
11.6 Put and Call Rights |
23 | ||||||
11.6.1 SATH’s and Sub’s Put Right |
24 | ||||||
11.6.2 SATH’s Put Right Upon Scripps’s Disposition of Scripps Holding Shares |
24 | ||||||
11.6.3 Scripps’s Call Right |
24 | ||||||
11.6.4 Scripps Holding Call Right Upon SATH’s Disposition of Scripps Holding Shares |
24 | ||||||
11.6.5 Scripps Call Right Upon Change in Control of SATH |
25 | ||||||
11.6.6 Scripps Call Right Upon Default |
25 | ||||||
11.6.7 Limitation on Exercise Based on Exercise of Put/Call
Relating to Scripps Holding |
25 | ||||||
11.7 Certain Buyout Events |
25 | ||||||
11.7.1 Definition of Event |
25 | ||||||
11.7.2 Purchase Option of the Company |
26 | ||||||
11.7.3 Company’s Right of Assignment |
26 | ||||||
11.7.4 Scripps Debt |
26 | ||||||
11.7.5 Continuing Effect After Insolvency |
27 | ||||||
11.8 Determination of Fair Market Value |
27 | ||||||
11.9 Contract Terms |
27 | ||||||
11.9.1 Payment Terms |
27 | ||||||
11.9.2 Closing |
28 | ||||||
11.9.3 Documents |
28 |
Page | |||||||
ARTICLE 12 Assignees; Substitute Members |
28 | ||||||
12.1 Admission of Substitute Members |
28 | ||||||
12.2 Rights of Assignees |
28 | ||||||
ARTICLE 13 Dissolution and Winding Up |
29 | ||||||
13.1 Dissolution |
29 | ||||||
13.2 Effect of Dissolution |
29 | ||||||
13.3 Winding Up |
29 | ||||||
13.4 Fair Market Value Distributions |
29 | ||||||
13.5 Proceeds of Liquidation |
29 | ||||||
13.5.1 Expenses |
29 | ||||||
13.5.2 Debts |
29 | ||||||
13.5.3 Reserves |
30 | ||||||
13.5.4 Capital Accounts |
30 | ||||||
13.6 Final Accounting |
30 | ||||||
ARTICLE 14 Amendment |
30 | ||||||
ARTICLE 15 Miscellaneous Provisions |
30 | ||||||
15.1 Entire Agreement |
30 | ||||||
15.2 Rights of Creditors and Third Parties |
30 | ||||||
15.3 Notices |
30 | ||||||
15.4 Severability |
31 | ||||||
15.5 Parties Bound |
31 | ||||||
15.6 Applicable Law |
31 | ||||||
15.7 Strict Construction |
31 | ||||||
15.8 Headings |
31 | ||||||
15.9 Counterpart Execution |
31 | ||||||
15.10 Pronouns |
31 | ||||||
15.11 Effect of Waiver or Consent |
31 | ||||||
15.12 Further Assurances |
31 | ||||||
15.13 Public Announcements |
32 | ||||||
15.14 Expenses |
32 | ||||||
SCHEDULE II |
1 |
AMENDED AND RESTATED OPERATING AGREEMENT
OF
SHOP AT HOME NETWORK, LLC
THIS AMENDED AND RESTATED OPERATING AGREEMENT of Shop At Home Network, LLC, a Tennessee limited liability company fka Partners – SATH, L.L.C. (together with any successor thereto, the “Company”), dated as of , 2002, is made by and among Shop At Home, Inc., a Tennessee corporation (“SATH”), SAH Acquisition Corporation, a Tennessee corporation and wholly owned subsidiary of SATH (“Sub”), and The Scripps Shop At Home Holding Company, an Ohio corporation fka SAH Holdings, Inc. (“Scripps Holding”).
WHEREAS, pursuant to the Share Purchase Agreement, dated August 14, 2002, between Scripps Networks, Inc., a Delaware corporation (“Scripps”), and SATH, SATH sold to Scripps eighty percent (80%) of the outstanding common shares of Scripps Holding and as a condition to such sale, SATH, Sub, and Scripps Holding are required to enter into this Amended and Restated Operating Agreement.
Article 1
Certain capitalized terms used in this Agreement are defined as set forth on Schedule I.
Article 2
be changed if authorized by the Board of Governors and upon any such name change the Company shall promptly file such name change instruments as may be required by applicable law.
2.5 Authority of Scripps Holding and Scripps Governors with Respect to the Network. Neither Scripps Holding nor the Scripps Governors will be obligated to continue the business operations of the Network, and, as the holder of more than fifty percent (50%) of the Membership Interests, Scripps Holding may cause the discontinuation of the business of the Network and the dissolution of the Company, if, in its sole discretion such business is no longer feasible or desirable or otherwise in the interests of Scripps Holding or Scripps.
Article 3
Accounting and General Tax Matters
2
that period beginning on January 1 of such year and ending on the date of cancellation of the Articles of Organization.
Article 4
4.1.1 acquire, sell, lease, sublease, manage, finance and own assets, whether or not in the ordinary course of the Company’s business;
4.1.2 repurchase Membership Interests or any other class or type of interest in the Company;
3
4.1.3 admit new members to the Company and reduce the Membership Interests of existing Members to reflect the value of new members’ contributions to the Company in accordance with Section 7.2;
4.1.4 make distributions and retain significant balances of cash and cash equivalents not required for working capital;
4.1.5 subject to and in accordance with Section 4.4, enter into any transaction with any Member or an Affiliate thereof;
4.1.6 approve an annual budget and any significant deviations therefrom (including capital, operating, research and development budgets);
4.1.7 make capital expenditures;
4.1.8 establish reserves or write-offs;
4.1.9 pay, collect, compromise, litigate, arbitrate or otherwise adjust or settle any and all claims or demands of or against the Company or to hold such proceeds against the payment of contingent liabilities;
4.1.10 borrow money or obtain credit in such amounts, at such rates of interest and upon such other terms and conditions as it deems appropriate, including nonrecourse debts, from banks, other lending institutions or any other Person, including (subject to Section 7.5) the Members or any of their respective Affiliates, and pursuant to indentures, loan agreements or any other type of instrument, for any purpose of the Company, and secure payment of the principal of any such indebtedness and the interest thereon by mortgage, pledge, conveyance or assignment in trust of or grant security interests in the whole or any part of any or all of the property and assets of the Company; provided, however, that no Member shall become personally liable, as a guarantor or otherwise, without such Member’s written consent;
4.1.11 make, execute, assign, acknowledge and file any and all documents or instruments of any kind which it may deem necessary or appropriate in carrying out the purposes and business of the Company (and any Person dealing with the Board of Governors shall not be required to determine or inquire into its authority or power to bind the Company or to execute, acknowledge or deliver any and all documents in connection therewith);
4.1.12 assume obligations, enter into contracts, including contracts of guaranty or suretyship, incur liabilities, lend money and otherwise use the credit of the Company, and secure any and all obligations, contracts or liabilities of the Company by mortgage, pledge or other encumbrance of all or any part of the property and assets of the Company;
4.1.13 invest funds of the Company;
4.1.14 employ and engage suitable agents, employees, advisors, consultants and counsel (including any custodian, investment advisor, accountant, attorney, corporate fiduciary, bank or other reputable financial institution, or any other agents, employees or Persons who may serve in such capacity for any Member or any Affiliate thereof) to carry out any activities under this Agreement, including a Person who may be engaged to undertake some or all of the general management, property
4
management, financial accounting and recordkeeping or other duties, and to indemnify such Persons against liabilities incurred by them in acting in such capacity on behalf of the Company;
4.1.15 employ and retain Persons as may be necessary or appropriate for the conduct of the Company’s business;
4.1.16 qualify the Company to do business in any state, territory, dependency or foreign country;
4.1.17 form or cause to be formed, and own securities of, one or more corporations, and form or cause to be formed and participate and own interests in partnerships, joint ventures, limited liability companies, trusts and other entities;
4.1.18 adopt, fund and maintain employee benefit plans or participate in affiliated group plans;
4.1.19 select and engage independent accountants;
4.1.20 choose and change accounting and tax policies;
4.1.21 modify or terminate any of the agreements to which the Company is a party and enter into new agreements; and
4.1.22 take any other actions as the Board of Governors determines to be appropriate, convenient or incidental to the purposes of the Company.
The expression of any right, power or authority of the Board of Governors in this Agreement shall not in any way limit or exclude any other right, power or authority which is not specifically or expressly set forth in this Agreement.
5
decisions of the Board of Governors shall be presumed to be within its scope of authority, power and discretion and shall be binding on the Company and each Member. The Members hereby waive all rights to vote on matters relating to the management and control of the business, operations, affairs and properties of the Company, other than with respect to the Reserved Matters, and hereby irrevocably assign all such voting rights to the Board of Governors. No member of the Board of Governors in his or her capacity as such shall have the authority, power or discretion to take any action individually other than in the course of carrying out delegated authority, power or discretion under direction given by the Board of Governors or its delegee duly acting.
4.3.1 The day-to-day operational management of the Company shall be exercised by such officers as shall be appointed from time to time by the Board of Governors, which officers shall include a President who will be the Chief Manager of the Company and a Secretary and may include any number of Vice-Presidents as may be deemed necessary from time to time by the Board of Governors and a Treasurer, and may include any other officer as may be deemed necessary by the Board of Governors from time to time. Except for the positions of President and Secretary which shall not be held by the same Person, one Person may hold more than one position, but no officer shall execute, acknowledge, or verify any instrument in
6
more than one capacity. The officers, subject to the direct control of the Board of Governors, shall do all things and take all actions necessary or appropriate to run the business of the Company. Any officer may be removed at any time, with or without cause by the Board of Governors.
4.3.2 The Company may employ such employees and agents as the Board of Governors deems necessary or appropriate to effectuate the purposes of the Company.
4.3.3 The officers and employees of the Company may be officers and employees of Scripps or its Affiliates, including Scripps Holding, and officers and employees of the Company may also be officers and employees of Scripps Holding. The Members hereby waive any conflict of interest that may arise in connection with the foregoing.
4.5 Compensation of Scripps Holdings.
4.5.1 Scripps Holding and its personnel, and any Affiliates of it and their personnel utilized by the Company, may be compensated and reimbursed by the Company for their operating, administrative, management, employee and clerical services for and on behalf of the Company, including but not limited to, the following functions: (i) bookkeeping and accounting, (ii) data processing, (iii) accounts payable, (iv) purchasing, (v) regulatory reporting, (vi) contract administration, (vii) legal, tax and auditing matters, (viii) marketing, (ix) advertising and affiliate sales, (x) programming, (xi) promotion and development, and (xii) human resources matters. Such compensation and reimbursement shall be on substantially the terms that would be available in connection with the provision of such services from comparable, unaffiliated third parties as the Board of Governors shall determine in its discretion.
4.5.2 The Company shall reimburse Scripps Holding for all compensation, benefits, costs, employment taxes, and expenses paid by Scripps Holding to any officer or other employee of Scripps Holding or any Affiliate of Scripps Holding assigned to or working for the Company.
Article 5
General Rights and Obligations of Members
7
5.2 Standards for Access to Information. Any Member requesting access to the information described in Section 00-000-000 of the Act shall make such demand in writing, stating the purpose of the demand in reasonable detail, mailed or delivered to the Company at the Principal Office. The Company shall comply with such demand by providing the Member with the right to examine documents in person or by agent or attorney and to make copies of the documents personally examined, or providing the Member true and accurate copies of the documents responsive to the demand. The Company may not keep confidential from the Members any information concerning the business or affairs of the Company, including but not limited to, trade secrets, except information that the Company is required by order of a court of competent jurisdiction to keep confidential, and any confidential information disclosed to a Member shall be subject to the confidentiality and nondisclosure provisions of Section 5.8.
8
delivery of this Agreement does not require any filing by such party with, or approval or consent of, any governmental authority which has not already been made or obtained; and (h) it acknowledges that its Membership Interest has not been registered under the Securities Act of 1933, as amended, or any state securities laws and may not be resold or transferred by such party without appropriate registration or in accordance with an opinion of counsel in form and substance satisfactory to the Board of Governors that an exemption from such requirements is available.
5.5 No Withdrawal of a Member. Except as specifically provided in Article 11, and subject to the provisions for Disposition contained therein, no Member shall have the right to withdraw as a Member of the Company prior to the Liquidation and termination of the Company. No Member shall be considered to have ceased to be or to have withdrawn as a member of the Company for any reason listed in Section 48-245-101(a)(5) of the Act, it being the express intent of the parties that this Agreement contain the complete understanding of the Members in respect thereof. In addition, no Member shall have the right to receive a return of or withdraw any portion of its Capital Contributions to, or to receive any Distributions or Liquidation Proceeds from, the Company, except as provided in Article 10, Article 11 or Article 13, as the case may be.
9
governmental agency exercising its ordinary regulatory oversight of a Member, a Member shall notify the Company thereof, which notice shall include the basis upon which such Member believes the information is required to be disclosed. This Section 5.8 shall survive for a period of five years with respect to any Member that for any reason ceases to be a Member of the Company and for a period of time agreed to by all of the Members in connection with any dissolution of the Company pursuant to Article 13. The provisions of this Section 5.8 shall be enforceable by any and all remedies available at law and in equity, including, but not limited to, damages and injunctive relief.
5.10 Noncompetition Covenant of SATH. Solely for purposes of this Section 5.10 and for no other purpose, the term “Affiliate” does not include any individual stockholder of SATH or any Person that is a director or officer of SATH. During the period in which SATH has any interest in the Company, and for a period of three years following the earlier of the termination of this Agreement or the termination of SATH’s interest in the Company, neither SATH nor any of its Affiliates shall directly or indirectly acquire or possess any interest, or engage or participate, independently or with any other Person, as an owner, investor, shareholder, member, partner, joint venturer, lender, manager, governor, operator, distributor, consultant, contractor, director, officer, employee, agent or otherwise, in any business, enterprise, venture or other activity that consists of the development, ownership, distribution and commercial exploitation of a cable television network or interactive web-based service business the same or substantially the same in concept as the Shop At Home Network. The provisions of this Section 5.10 shall be enforceable by any and all remedies available at law and in equity, including, but not limited to, damages and injunctive relief. Notwithstanding the foregoing, SATH, or any Affiliate of SATH, may acquire and hold shares constituting not more than five percent (5%) of the equity in any company where the shareholding is for investment purposes only and does not confer any control over the business in question and neither SATH nor any such Affiliate is involved in the management of such company or provides services to such company.
10
5.11 Re-formation in Delaware. SATH hereby consents to the re-formation of the Company as a Delaware limited liability company at Scripps Holdings’ option, by virtue of a merger with and into a Delaware limited liability company containing substantially the same rights and obligations with respect to the Membership Interests as contained herein.
Article 6
Exculpatory Provisions; Indemnification
6.1 Exculpatory Provisions.
6.2 Indemnification of Governors and Other Indemnified Persons.
11
12
pursuant to which arrangements are made for the advancement of expenses and the funding of obligations under this Section 6.2 and containing such other procedures regarding indemnification as are appropriate.
Article 7
7.2 Additional Equity Funding. If a Majority of the Members determine, in such Majority’s discretion, that the Company requires funding in addition to that available under the EWS Credit Facility, the Scripps Governors shall have the sole discretion to determine whether such funding will be in the form of a loan to the Company by Scripps or an Affiliate thereof, the Members (pursuant to Section 7.5) or a third party, or whether such funding will be in the form of Additional Capital Contributions from the Members or Scripps or an Affiliate of Scripps or a third party, any such contribution to be based upon the Fair Market Value of the Company at the time such contribution is proposed to be made, as determined in accordance with Section 11.8. If Capital Contributions are to be made in accordance with the foregoing by Scripps or Scripps Holding or any of their Affiliates, SATH shall be entitled to make an Additional Capital Contribution on a pro rata basis and will be granted a period of six (6) months, measured from receipt of written notice evidencing the aforesaid commitment of Scripps, Scripps Holding or such Affiliate, to determine whether or not to make such Additional Capital Contribution and to make such Additional Capital Contribution in accordance herewith. During such six (6) month period, Scripps, Scripps Holding or such Affiliate of Scripps may make its contemplated Additional Capital Contribution and may loan to the Company funds equal to the portion of the Additional Capital Contribution to be made by SATH, with such loan bearing interest at 6% per annum and with such interest being borne by SATH and payable at the time of its Additional Capital Contribution. Such loan shall be repaid in full, with such interest, when SATH makes its Additional Capital Contribution as contemplated. If a third party makes an additional capital contribution or if Scripps, Scripps Holding or an Affiliate of Scripps makes Additional Capital Contributions to the
13
Company, but SATH and/or Sub do not (or both Scripps and Sub and/or SATH make Additional Capital Contributions, but not in the ratio of their then-current respective Percentage Interests), then the Percentage Interests of the Members will be recomputed, based on the ratio of the fair market values of the Members’ respective Capital Accounts as of the end of the six-month period referred to above and taking into account the Additional Capital Contributions of the Members. Notwithstanding and without limiting the foregoing, SATH will not have any preemptive right to purchase any securities issued to any third party other than Scripps, Scripps Holding or an Affiliate of Scripps.
7.3 No Interest. No interest shall accrue on any Capital Contribution.
7.4 Credit Line. The X.X. Xxxxxxx Company (“EWS”) and the Company have entered into a credit facility, dated , 2002, pursuant to which EWS may loan up to $35,000,000 in aggregate principal amount to the Company as EWS determines in its sole discretion is necessary for the working capital needs of the Company (the “EWS Credit Facility”). Other than Tax Distributions, the Company shall not make any distributions to the Members until all principal and interest outstanding under the EWS Credit Facility is paid in full. The Members each have received and reviewed copies of all documents evidencing the EWS Credit Facility.
7.5 Loans From Members. In the event that the Board of Governors determines in its reasonable business judgment that it is in the best interest of the Company to borrow funds from the Members for use in the operation of the business of the Company, the Company shall give written notice of such determination to the Members including a requested loan amount. The Members shall have a period of twenty (20) days from the date of such notice in which to give the Company written notice that they wish to loan funds to the Company in an amount equal to the amount of the requested loan, multiplied by their respective Percentage Interests. In that case, the Company shall execute a promissory note in form and content reasonably acceptable to all Members making a loan and such Members shall each loan their share of the requested funds in cash to the Company within five (5) days after the Member’s written election to participate in such loan is delivered to the Company. If all Members do not elect to participate in the making of any such loan within the aforementioned twenty (20) day period, the Company may borrow the remaining amount from the Members who have elected to participate in such loan request, in such manner as the Board of Governors deems reasonably appropriate. All loans made pursuant to this Section 7.5 shall be payable upon demand or upon such other commercially reasonable terms as the Board of Governors shall determine. Unless otherwise agreed by the Board of Governors, interest shall accrue and may be payable monthly on the unpaid principal balance of any such loan at a fluctuating interest rate not to exceed two percentage points (2%) in excess of the announced prime rate of The Fifth Third Bank of Cincinnati, Ohio or its successors, and any change in the interest rate due to a change in such announced prime rate shall be effective immediately upon and after each such announced change in the prime rate. Any payments made by the Company on such loans shall be made to the Members in proportion to the outstanding balance of the loans owed to each of them. In making any such loan, Members shall be treated as general creditors of the Company and not as Members.
Article 8
14
provisions of this Agreement relating to the maintenance of Capital Accounts. All such provisions of this Agreement are intended to be interpreted and applied in a manner consistent therewith.
8.1.3 Book Value and Revaluations of Company Property.
(a) “Book Value” means, with respect to any asset of the Company, such asset’s adjusted basis for federal income tax purposes, except as follows:
(i) The initial Book Value of any Contributed Property shall be the gross fair market value of such asset.
(ii) The Book Value of all Company assets shall be adjusted to equal their respective gross fair market values, as determined by the Board of Governors in accordance with Code Section 7701(g), as of the following times: (a) the acquisition of an additional interest in the Company by any new or existing Member in exchange for more than a de minimis Capital Contribution; (b) the distribution by the Company to a retiring or continuing Member as consideration for a Membership Interest in the Company of more than a de minimis amount of money or other Company Property; and (c) the Liquidation of the Company.
(iii) If the Book Value of an asset has been determined or adjusted pursuant to clause (i) or (ii) of this Section 8.1.3, such Book Value shall thereafter be adjusted for the Depreciation taken into account with respect to such asset for purposes of computing Profits and Losses.
(b) The decision of whether to revalue the Company Property and the Members’ Capital Accounts, and the amount of any such adjustments shall be determined by the Board of Governors using such reasonable methods of valuation as it may adopt.
8.1.4 Effective Terminations under Code Section 708(b)(1)(B). A Transferee of a Member’s Membership Interest will succeed to the Capital Account (or portion thereof) relating to the Disposed interest; provided, however, that if the Disposition causes a termination of the Company under Code Section 708(b)(1)(B), the Company Properties shall be deemed to have been contributed to a new limited liability company in exchange for all of the interests in such new limited liability company, which interests will then be deemed to be distributed in Liquidation of the Company to the Members (including the transferee of an interest). The Capital Accounts of such new limited liability company shall be maintained in accordance with the principles set forth herein, this Agreement will apply to such
15
new limited liability company and all references herein to the Company will become references to the new limited liability company.
Article 9
9.1.1 Profits. Operating Profits shall be allocated in the following order and priority:
(a) First, to the extent that Losses have been allocated pursuant to Section 9.1.2(b), Profits shall be allocated among the Members to offset the Losses allocated pursuant to Section 9.1.2(b) until the cumulative Profits allocated pursuant to this Section 9.1.1(a) equal cumulative Losses allocated pursuant to Section 9.1.2(b) for all periods (and allocated among the Members pro rata in proportion to their shares of Losses being offset).
(b) Second, the balance, if any, shall be allocated to the Members pro rata in proportion to their respective Percentage Interests.
9.1.2 Losses. Operating Losses shall be allocated in the following order and priority:
(a) First, to the extent Profits have been allocated pursuant to Section 9.1.1(b) for any prior Taxable Year, Losses shall be allocated first to offset any Profits allocated pursuant to Section 9.1.1(b) (pro rata among the Members in proportion to their shares of Profits being offset). To the extent that any allocations of Profits are offset pursuant to this Section 9.1.2(a), such allocations shall be disregarded for purposes of computing subsequent allocations pursuant to this Section 9.1.2(a).
(b) Second, to the Members pro rata in proportion to their respective Percentage Interests.
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then notwithstanding the provisions of Section 9.1.1, Operating Profits occurring after the Taxable Year of such Losses will first be allocated to those Members to offset the Losses so allocated pursuant to the second sentence of this Section 9.1.3(a).
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economic effect set forth in Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted and applied in a manner consistent therewith.
9.2.7 Code Section 754 Adjustments. To the extent an adjustment to the adjusted basis of any Company Property or Contributed Property pursuant to Code Section 734(b) or Code Section 743(b) is required, pursuant to the Treasury Regulations to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis), and such gain or loss shall be specially allocated to the Members in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to the Treasury Regulations.
9.4 Application of Code Section 704(c). Notwithstanding any other provision of this Agreement, to the extent required by law, taxable income, gain, loss, deduction, and items thereof attributable to Contributed Property and to Company Property that has been revalued pursuant to Section 8.1.3 shall be shared among the Members so as to take into account any variation between the basis of the property and the fair market value of the property at the time of contribution or revaluation in accordance with the requirements of Section 704(c) of the Code and the applicable Treasury Regulations thereunder. Further, if Code Section 704(c) applies to any such property, all required reallocations shall be made using the method(s) prescribed by the Board of Governors.
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Section 1.704-2(h)(3), to treat such distribution as a distribution that is not allocable to an increase in Company Minimum Gain.
9.6 Allocation of Debt. For purposes of allocating excess Nonrecourse Liabilities among the Members pursuant to Treasury Regulations Section 1.752-3(a)(3), the Members’ interests in Profits shall be allocated among the Members in the proportion to their respective Percentage Interests.
9.7 Other Allocation Provisions.
Article 10
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Fiscal Year. Solely for purposes of this Section 10.1.2, if a Member is allocated a loss for federal income tax purposes under Article 9 for any Fiscal Year or period of the Company beginning after the date of this Agreement, such net loss shall be offset against, and shall reduce the income allocated (or reasonably estimated to be allocable) to, such Member under this Section 10.1.2 in subsequent fiscal quarters of the Company (until such loss is exhausted) for purposes of calculating the Mandatory Tax Distribution Amount for such Member for such subsequent fiscal quarters within the same calendar year. The Mandatory Tax Distribution Amount shall be paid by check delivered by Express Mail, or by wire transfer, (i) at least ten (10) days in advance of each date on which quarterly payments of estimated federal income taxes are due and (ii) on April 10th of the following tax year for any reconciliation amounts. Payments of Mandatory Tax Distribution Amounts shall be made before any other distributions of Distributable Cash.
Article 11
Dispositions of Membership Interests
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this Article 11, unless each of the following conditions are satisfied in the judgment of, or waived in writing by, the Board of Governors in its discretion:
11.1.1 The Member, Assignee or other Transferee engaging or attempting to engage in such Disposition (the “Assigning Member”) complies with all applicable provisions of this Article 11;
11.1.2 The Person engaging or attempting to engage in such Disposition as the Transferee agrees in writing to assume all of the obligations of the Assigning Member with respect to such Membership Interest (including the obligations imposed under this Agreement, including this Article 11) as a condition to any Disposition and becomes a party to this Agreement;
11.1.3 The Assigning Member and the Transferee each execute, acknowledge and deliver to the Company such instruments of transfer and assignment with respect to such Disposition and such other instruments as may be reasonably deemed necessary by, and in form and substance reasonably satisfactory to, the Board of Governors (including the written instruments described in Section 12.2, if applicable);
11.1.4 Either (i) the Disposed interests will be registered under the Securities Act of 1933, as amended, and any applicable state securities laws, or (ii) the Company shall have received, at the expense of the parties to the Disposition, an opinion of counsel for the Company (or counsel acceptable to counsel of the Company) to the effect that such Disposition is exempt from registration under the Securities Act of 1933, as amended, and is in compliance with all applicable federal and state securities laws and regulations; provided that, in the event that the Board of Governors waives such opinion requirements, such waiver will not constitute a waiver of any subsequent Disposition of such interest or the Disposition of any other interest;
11.1.5 The Disposition does not cause any Nonrecourse Debt that is not already Member Nonrecourse Debt to become Member Nonrecourse Debt;
11.1.6 The Disposition does not result in or create a “prohibited transaction” as defined in Code Section 4975(c), or result or cause the Company or any Member, or any Affiliate of a Member, to be liable for any excise tax under Chapter 42 of the Code, or result in or cause any interest in the Company or the Company’s assets to become an asset of an employee benefit plan (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974 or any successor law, and rules and regulations issued pursuant to thereto);
11.1.7 The Disposition does not cause any violation of or an event of default under, or result in acceleration of any indebtedness under, any note, mortgage, loan, or similar instrument or document to which the Company is a party;
11.1.8 The Disposition does not cause a material adverse tax consequence to the Company or any of the Members including but not limited to any material adverse tax consequence resulting, directly or indirectly, from the termination of the Company under Code Section 708;
11.1.9 The Disposition does not cause the Company to be classified as an entity other than a partnership for purposes of the Code;
11.1.10 The Assigning Member and Transferee furnish the Company with the Transferee’s taxpayer identification number, sufficient information to determine the Transferee’s initial tax basis in
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the interest Disposed, and any other information necessary to permit the Company to file all required federal and state tax returns and other legally required information statements or returns; provided that, without limiting the generality of the foregoing, the Company will not be required to make any distribution otherwise provided for in this Agreement with respect to any Disposed interests until it has received such information; and
11.1.11 All costs of the Disposition incurred by the Company are reimbursed by the Assigning Member or the Transferee to the Company.
11.3 Scripps Holding’s Right of First Refusal.
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(less expenses related thereto but including the proceeds to Sub) to first, redeem any Series D Senior Redeemable Preferred Stock (the “Series D Preferred Shares”) held by EWS or its Affiliates at the Original Issue Price thereof, plus accrued and unpaid dividends thereon, and second, pay to EWS or its Affiliates principal and interest owed by SATH to EWS or its Affiliates under any indebtedness for borrowed money. If Scripps Holding is the purchaser hereunder, Scripps Holding will have the right to offset, on a dollar for dollar basis, from the purchase price payable to SATH hereunder an amount equal to such outstanding indebtedness, redemption price and dividends.
11.5 Scripps Holding’s Right to Sell; SATH’s and Sub’s Tag Along Right; Scripps Holding’s Drag Along Right. Subject only to compliance with Section 11.1 and this Section 11.5, Scripps Holdings and its successors and assigns may Dispose of any or all of their Membership Interests to any Person (a “Purchaser”) without notice to any other Member and without any further restriction. As a condition to the effectiveness of any such Disposition, if Scripps Holding intends to Dispose of its Membership Interest and such Disposition would result in a Change of Control of the Company, SATH and Sub will have the collective right to require, as a condition to such Disposition, that the Purchaser purchase from SATH and Sub all of SATH’s and Sub’s Membership Interests. Such right of SATH and Sub must be exercised concurrently and neither may exercise such right without the participation of the other. Scripps Holding shall promptly deliver to SATH and Sub written notice of the proposed Disposition (the “Sale Notice”), including the terms and conditions of the Purchaser’s offer, including the price to be paid to Scripps Holding, and the closing and termination dates, the identity of the Purchaser and any other material facts or terms and conditions. SATH and Sub shall notify Scripps Holding of their intention to participate in such sale as soon as practicable but not later than 30 days after receipt of the Sale Notice, which notice of intention to participate together with the Sale Notice, will be deemed to constitute a valid, legally binding and enforceable agreement for the Disposition of all of SATH’s and Sub’s Membership Interests. Scripps Holding, SATH and Sub shall sell to the Purchaser all of the Membership Interests in the Company proposed to be Disposed by them at not less than the price originally offered by the Purchaser, and upon other terms and conditions, if any, not more favorable to the Purchaser than those originally offered. Scripps Holding shall use its reasonable best efforts to obtain the agreement of the Purchaser to the participation of SATH and Sub in the contemplated Disposition, and shall not Dispose of any Membership Interest to such Purchaser if such Disposition would result in a Change of Control of the Company and such Purchaser declines to purchase all of SATH’s and Sub’s Membership Interests pursuant to the terms of this Section. If (a) SATH and Sub elect not to, or otherwise fail to notify Scripps Holding of their decision to or not to, participate in the sale under the Sale Notice and (b) the sale under the Notice of Sale would result in a Change of Control of the Company, Scripps Holding will have the right, but not the obligation, to require SATH and Sub to sell all of their Membership Interests pursuant to the Sale Notice and the foregoing provisions of this Section by written notice of such requirement given within 45 days after its delivery of the Sale Notice to SATH and Sub. In the event of a sale of SATH’s and Sub’s Membership Interests under this Section 11.5, SATH shall use the proceeds of such sale (less expenses related thereto but including the proceeds to Sub) to first, redeem any Series D Preferred Shares held by EWS or its Affiliates at the Original Issue Price thereof, plus accrued and unpaid dividends thereon, and second, pay to EWS or its Affiliates
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principal and interest owed by SATH to EWS or its Affiliates under any indebtedness for borrowed money. If Scripps Holding is the purchaser hereunder, Scripps Holding will have the right to offset, on a dollar for dollar basis, from the purchase price payable to SATH hereunder an amount equal to such outstanding indebtedness, redemption price and dividends.
11.6.2 SATH’s Put Right Upon Scripps’s Disposition of Scripps Holding Shares. If Scripps Disposes of or attempts to Dispose of such shares in Scripps Holding that such Disposition (or series of related or unrelated Dispositions) of the shares in Scripps Holding such that, upon consummation thereof, Scripps and/or its Affiliates (taken as a group) would no longer possess, directly or indirectly, the power to direct or cause the direction of management or policies of Scripps Holding through the ownership of shares, then SATH and Sub may exercise their Put Right in Section 11.6.1 notwithstanding any limitations with respect to timing set forth in the first clause of such Section.
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dollar for dollar basis, first, by such redemption price, including accrued and unpaid dividends thereon, and second, by the amount of principal and interest owed by SATH to Scripps or its Affiliates under any indebtedness for borrowed money.
(a) such Member, Assignee or Transferee becomes or is determined to be bankrupt or insolvent;
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(b) such Member, Assignee or Transferee institutes or has instituted against it any proceedings of any kind under any provision of any applicable bankruptcy or insolvency law seeking any readjustment, arrangement, composition, postponement or reduction of debts, liabilities or obligations (in the case of any involuntary proceeding, which is not removed or dismissed within ninety (90) days);
(c) such Member, Assignee or Transferee makes an assignment for the benefit of its creditors;
(d) such Member, Assignee or Transferee is required or deemed to have Disposed of any interest in any of its Membership Interest by operation of law (other than a Disposition to the Company);
(e) any Membership Interest of such Member, Assignee or Transferee is attached by, levied upon by, or becomes subject to judicial or other legal process and such proceeding is not removed, discharged, dismissed or bonded within ninety (90) days;
(f) the death or Permanent Disability of any Member, Assignee or Transferee who is a natural Person; or
(g) any Membership Interest of such Member, Assignee or Transferee is the subject of a Disposition or an attempted Disposition in any way (including a sale ordered by a court or a Disposition required or deemed to have occurred by operation of law, other than a Disposition to the Company) in breach of this Agreement.
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11.8 Determination of Fair Market Value. If the purchase price for any transaction involving any Membership Interest purchased and sold on and in accordance with the Contract Terms or otherwise is to be the Fair Market Value thereof, or if Additional Capital Contributions are proposed to be made under Section 7.2, the determination of such Fair Market Value as at the applicable valuation date shall be made as set forth in this Section 11.8. Within ten (10) days after it is determined that the Fair Market Value process must be initiated, each of Scripps Holding and SATH will choose a nationally recognized reputable investment bank (which investment bank must commit to deliver its determination within 60 days) to determine the Fair Market Value and the Fair Market Value will be the average of the two determinations so made. Notwithstanding anything to the contrary in the foregoing, however, if the two determinations differ by more than ten percent (10%), then the aforesaid investment banks shall select a third nationally recognized reputable investment bank (which investment bank must commit to deliver its determination within 60 days) to determine the Fair Market Value; and upon receipt of the third determination, the Fair Market Value will be the average of the two determinations closest in amount to each other. Scripps Holding, on the one hand, and SATH and Sub, on the other hand, will share equally in the cost of the investment banks. The Board of Governors and the purchaser(s) and seller(s) in the transaction shall cooperate with the investment banks and provide them (on a confidential basis) with all information regarding the Company and their respective Membership Interests (directly or indirectly owned) as reasonably requested by them. The Fair Market Value shall be determined without regard to any minority interest, lack of marketability or other discounts for any Membership Interest and without regard to any premiums for control.
11.9 Contract Terms. For purposes of this Agreement, the “Contract Terms” are as follows:
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Article 12
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Membership Interest to receive distributions, return of Capital Contributions and related tax allocations and (ii) such privileges and rights which a non-substituted permitted Transferee is entitled to under the Act that cannot be eliminated or modified by this Agreement. Accordingly, an Assignee shall not have any rights to (a) participate or become a participant in the management of the business and affairs of the Company, (b) require an accounting of the Company’s transactions, (c) inspect the Company’s books and records, (d) require any information from the Company, or (e) exercise any privilege or right of a member of a Tennessee limited liability company which is not specifically and irrevocably reserved to a non-substituted permitted Transferee under the Act.
Article 13
13.1.1 the consent of a Majority of Members to dissolve the Company;
13.1.2 the sale, transfer or other disposition of all or substantially all of the assets of the Company; or
13.1.3 the entry of a decree of judicial dissolution under the Act.
For purposes of this Agreement, no other event shall be deemed an event triggering dissolution, including, but not limited to, the death, retirement, resignation, expulsion, bankruptcy, or dissolution of a Member, or any event specified under the Act as affecting the dissolution of a limited liability company formed under the Act.
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13.5.1 Expenses. To the payment of the costs and expenses of the Liquidation of the Company;
Article 14
No provision of this Agreement may be amended or modified at any time except by a written instrument adopted by the Board of Governors and approved by all of the Members.
Article 15
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shall have any rights under this Agreement or any agreement between the Company and any Member or Assignee with respect to any Capital Contribution or otherwise.
If to the Company or the Board of Governors: to the Principal Office of the Company.
If to the Members: to the address as shown from time to time on the records of the Company. Any Member may specify a different address, which change shall become effective upon receipt of such notice by the Company.
15.10 Pronouns. All pronouns shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the Person or Persons may require.
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15.11 Effect of Waiver or Consent. A waiver or consent, express or implied, to or of any breach or default by any Person in the performance by that Person of its obligations hereunder or with respect to the Company is not a consent or waiver to or of any other breach or default in the performance by that Person of the same or any other obligations of that Person. Failure on the part of a Person to complain of any act or to declare any Person in default hereunder, irrespective of how long that failure continues, does not constitute a waiver by that Person of its rights with respect to that default.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.
SHOP AT HOME, INC. | ||||||||
By: | ||||||||
Its: | ||||||||
THE SCRIPPS SHOP AT HOME HOLDING COMPANY, LLC | ||||||||
By: | ||||||||
Its: | ||||||||
SAH ACQUISITION CORPORATION | ||||||||
By: | ||||||||
Its: | ||||||||
Acknowledged and agreed to: | ||||||||
SHOP AT HOME NETWORK, LLC | ||||||||
By: | ||||||||
|
||||||||
Its: | ||||||||
|
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SCHEDULE I
DEFINITIONS
1. Act. The Tennessee Limited Liability Company Act, Title 48, Chapters 201-248 of the Tennessee Code Annotated, and any successor statute, as amended from time to time.
8. Assignee. A transferee of a Membership Interest who has not been admitted as a Substitute Member.
9. Assigning Member. As defined in Section 11.1.1.
10. Board Actions. As defined in Section 4.2.3.
11. Board of Governors. As described in Section 4.2.1.
12. Book Value. As defined in Section 8.1.3.
13. Capital Account. As defined in Section 8.1.
17. Code. The Internal Revenue Code of 1986 and any successor statute, as amended from time to time.
18. Company. As defined in the preamble.
19. Company Minimum Gain. Such terms have the meaning given to the term “partnership minimum gain” as set forth in Treasury Regulations Sections 1.704-2(b)(2) and 1.704-2(d), and any Member’s share of Company Minimum Gain shall be determined in accordance with Treasury Regulations Section 1.704-2(g)(1).
21. Contract Terms. As defined in Section 11.9.
23. Covered Person or Covered Persons. As defined in Section 6.1.1.
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25. Disabling Conduct. As defined in Section 6.1.1.
27. Distributable Cash. As defined in Section 10.1.1.
29. Disposition (Dispose). Any direct or indirect sale, assignment, transfer, exchange, mortgage, pledge, grant, endorsement, delivery, conveyance, hypothecation, or other transfer, whether absolute, contingent or conditional, or as security or an encumbrance, whether voluntary or involuntary, whether with or without consideration, and whether by operation of law, such as dispositions in a merger or consolidation, pursuant to intestacy, descendance, distribution by succession, bankruptcy, insolvency, receivership, levy, execution or other seizure and sale by legal process.
30. EWS Credit Facility. As defined in Section 7.4.
31. Effective Date. The date of this Agreement set forth in the preamble.
33. Entity Member. As defined in Section 11.4.
34. Event. As defined in Section 11.7.1.
35. Event Notice. As defined in Section 11.7.2.
36. Event Option. As defined in Section 11.7.2.
37. Fair Market Value. As determined pursuant to Section 11.8.
38. Fiscal Year. The fiscal year of the Company described in Section 3.3.
39. Governor. A member of the Board of Governors.
40. Initial Members. Those persons identified on Schedule II who have executed this Agreement as of the Effective Date.
41. Interim Capital Transaction. A Capital Transaction that does not lead to or is not made in connection with the Liquidation of the Company.
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42. Liquidation. As described in Section 13.3.
44. Losses. As described in the definition of Profits and Losses.
45. Majority of the Members. As defined in Section 5.3.
46. Member Minimum Gain. A Member’s share of minimum gain attributable to a Member Nonrecourse Debt within the meaning of Treasury Regulations Section 1.704-2(i)(4) and (5).
48. Member Nonrecourse Debt Minimum Gain. The amount, with respect to each Member Nonrecourse Debt, determined in the same manner as “partner nonrecourse debt minimum gain” would be determined in accordance with Treasury Regulations Section 1.704-2(i).
50. Members. The Initial Members, Substitute Members and Additional Members.
55. Offer. As defined in Section 11.3.1.
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56. Offering Member. As defined in Section 11.7.2.
60. Person. A natural individual, an estate or any Entity permitted to be a member of a limited liability company under the laws of the State of Tennessee.
61. Principal Office. The principal office of the Company as described in Section 2.9.
(i) any income of the Company that is exempt from federal income tax shall be added to such taxable income or loss;
(ii) any expenditures of the Company not deductible in computing its taxable income and not properly chargeable to capital account (as described in and within the meaning of Code Section 705(a)(2)(B)) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(i) shall be subtracted from such taxable income or loss;
(iii) if Company property is reflected on the Company’s books at other than its adjusted tax basis, then in lieu of depreciation, amortization and other cost recovery deductions taken into account for federal income tax purposes, there shall be taken into account Depreciation for such year or other period, computed in accordance with the Treasury Regulations promulgated pursuant to Code Section 704(b);
(iv) any items that are specially allocated to a Member pursuant to Section 9.4 shall not be taken into account in determining Profits and Losses; and
(v) for purposes of determining Profit or Loss upon the sale or other disposition of any Company asset, then in accordance with the Treasury Regulations promulgated under Code Section 704(b), the value of an asset properly reflected on the Company’s books at the time of sale or other disposition shall be substituted for the asset’s adjusted tax basis if at the time of sale or disposition there is a variance in such value and adjusted tax basis.
Except as may be otherwise provided in this Agreement, all items that are components of Profits and Losses shall be divided among the Members in the same ratio as they share Profits and Losses.
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64. Purchaser. As defined in Section 11.5.
65. Regulatory Allocations. As defined in Section 9.5.
66. Reserved Matters. As defined in Section 4.2.2.
67. Sale Notice. As defined in Section 11.5.
68. SATH. As defined in the preamble.
69. SATH Governors. As defined in Section 4.2.1.
70. Scripps. As defined in the preamble.
71. Scripps Holding. As defined in the preamble.
72. Scripps Governors. As defined in Section 4.2.1.
73. Series D Preferred Shares. As defined in Section 11.3.4.
74. Shop At Home Network. As defined in Section 2.4.
75. Sub. As defined in the preamble.
77. Tax Distributions. The distributions required by Section 10.1.2.
78. Taxable Year. The taxable year of the Company as determined pursuant to Section 706 of the Code.
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SCHEDULE II
SHOP AT HOME NETWORK, LLC
Members, Percentage Interests and
Capital Contributions (As of _________, 2002)
Percentage | Capital | |||||||
Name and Address | Interest | Contribution | ||||||
Shop At Home, Inc. |
11.5 | % | $ | |||||
The Scripps Shop At Home Holding Company |
87.5 | % | $ | |||||
SAH Acquisition Corporation |
1 | % | $ |
EXHIBIT 8.4(e)
SHAREHOLDERS AGREEMENT
THIS AGREEMENT, dated as of , 2002 (the “Effective Date”), is among The Scripps Shop At Home Holding Company fka SAH Holdings, Inc., an Ohio corporation (the “Company”), Shop At Home, Inc., a Tennessee corporation (“SATH”), and Scripps Networks, Inc., a Delaware corporation (“Scripps”).
A. Pursuant to a Share Purchase Agreement (the “Purchase Agreement”) dated as of August 14, 2002 between Scripps and SATH, Scripps has agreed to purchase from SATH, and SATH has agreed to sell to Scripps, 800 common shares, without par value, of the Company (“Shares”).
B. Upon consummation of the transactions contemplated by the Purchase Agreement, SATH will be the record and beneficial owner of 200 Shares and Scripps will be the record and beneficial owner of 800 Shares.
C. It is a condition to the obligations of Scripps and SATH under the Purchase Agreement that the parties execute this Agreement.
“Affiliate” means, with respect to any Person, any other Person (i) that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with such Person, (ii) that is a general partner, director, manager, trustee or principal officer of, or a limited partner owning more than 10% of , or that serves in a similar capacity with respect to, such Person, or (iii) of which such Person is a general partner, director, manager, trustee or principal officer or a limited partner owning more than 10% of, or with respect to which such Person serves in a similar capacity. For purposes of this definition, “control” means the possession, directly or indirectly, of the power to direct or to cause the direction of the management or policies of the Person in question through the ownership of voting securities or by contract or otherwise.
“Board” means the board of directors of the Company.
“Change of Control” means any Disposition or series of related or unrelated Dispositions of the Shares of Scripps or its Affiliates which, upon consummation thereof, would result in Scripps or its Affiliates (taken as a group) no longer possessing, directly or indirectly, the power to direct or cause the direction of management or policies of the Company through the ownership of Shares.
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“Code” means the Internal Revenue Code of 1986 and any successor statute, as amended from time to time.
“Dispose” and “Disposition” mean any direct or indirect sale, assignment, transfer, exchange, mortgage, pledge, grant, endorsement, delivery, conveyance, hypothecation, or other transfer, whether absolute, contingent or conditional, or as security or an encumbrance, whether voluntary or involuntary, whether with or without consideration, and whether by operation of law, such as dispositions in a merger or consolidation, pursuant to intestacy, descendance, distribution by succession, bankruptcy, insolvency, receivership, levy, execution or other seizure or sale by legal process.
“LLC” means Shop At Home Network, LLC, a Tennessee limited liability company, of which SATH owns 11.5%, SAH Acquisition Corporation, a Tennessee corporation and wholly owned subsidiary of SATH, owns 1% and the Company owns 87.5% of the outstanding membership interests.
“Original Issue Price” means the Original Issue Price as defined in the Articles of Amendment to SATH’s Charter relating to the Series D Preferred Shares.
“Person” means any natural person, partnership, corporation, association, limited liability company, joint stock company, trust, joint venture, unincorporated organization or governmental entity or any department, agency or political subdivision thereof.
“Purchase Agreement” is defined in the Recitals to this Agreement.
“Securities Act” means the Securities Act of 1933, as amended from time to time.
“Series D Preferred Shares” means any shares of SATH’s Series D Senior Redeemable Preferred Stock held by Scripps or an Affiliate of Scripps.
“Shareholders” means Scripps and SATH and their permitted assignees and transferees.
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In making determinations with respect to the LLC (whether on behalf of Scripps Holding as a Member or otherwise), neither Scripps nor the directors of the Company appointed by Scripps will in any way be obligated to cause the continuation of the business of the Network (as defined in the LLC’s Amended and Restated Operating Agreement) and Scripps may cause the discontinuation of the business of the Network and the dissolution of the LLC, if, in its sole discretion, such business is no longer feasible or desirable or otherwise in the interests of Scripps.
3. Restrictions on Transfer of Shares.
(i) | The Shareholder engaging or attempting to engage in such Disposition (the “Assigning Shareholder”) complies with all of the applicable provisions of this Section 3; | ||
(ii) | The Person engaging or attempting to engage in such Disposition as the assignee, purchaser or other transferee of Shares (the “Transferee”) agrees in writing to assume all of the obligations of the Assigning Shareholder with respect to such Shares (including the obligations imposed under this Agreement and specifically this Section 3) as a condition to any Disposition and becomes a party to this Agreement; | ||
(iii) | The Assigning Shareholder and the Transferee each execute, acknowledge and deliver to the Company such instruments of transfer and assignment with respect to such Disposition and such other instruments as may be reasonably deemed necessary by, and in form and substance reasonably satisfactory to, the Board. | ||
(iv) | Either (A) the Disposed interests will be registered under the Securities Act and any applicable state securities laws, or (B) the Company shall have received, at the expense of the parties to the Disposition, an opinion of counsel for the Company (or counsel acceptable to counsel of the Company) to the effect that such Disposition is exempt from registration under the Securities Act and is in compliance with all applicable federal and state securities laws and regulations; provided that, if the Board waives such opinion requirements, such waiver will not constitute a |
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waiver of any subsequent Disposition of such interest or the Disposition of any other interest; | |||
(v) | The Disposition does not cause any violation of or an event of default under, or result in acceleration of any indebtedness under, any note, mortgage, loan, or similar instrument or document to which the Company is a party; | ||
(vi) | The Assigning Shareholder and Transferee furnish the Company with the Transferee’s taxpayer identification number, sufficient information to determine the Transferee’s initial tax basis in the interest Disposed, and any other information necessary to permit the Company to file all required federal and state tax returns and other legally required information statements or returns; and | ||
(vii) | All costs of the Disposition incurred by the Company are reimbursed by the Assigning Member or the Transferee to the Company. |
(c) Scripps’s Right of First Refusal.
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(e) Scripps’s Right to Sell; SATH’s Tag Along Right; Scripps’s Drag Along Right. Subject only to compliance with Section 3(a) and this Section 3(e), Scripps and its successors and assigns may Dispose of any or all of their Shares to any Person (a “Purchaser”) without notice to any other Shareholder and without any further restriction. As a condition to the effectiveness of any such Disposition, if Scripps intends to Dispose of Shares and such Disposition would result in a Change of Control of the Company, SATH will have the right to require, as a condition to such Disposition, that the Purchaser purchase from SATH all of SATH’s Shares. Scripps shall promptly deliver to SATH written notice of the proposed Disposition (the “Sale Notice”), including the terms and conditions of the Purchaser’s offer, including the price to be paid to Scripps, and the closing and termination dates, the identity of the Purchaser and any other material facts or terms and conditions. SATH shall notify Scripps of its intention to participate in such sale as soon as practicable but not later than 30 days after receipt of the Sale Notice, which notice of intention to participate together with the Sale Notice, will be deemed to constitute a valid, legally binding and enforceable agreement for the Disposition of all of SATH’s Shares. Scripps and SATH shall sell to the Purchaser all of the Shares in the Company proposed to be Disposed by them at not less than the price originally offered by the
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Purchaser, and upon other terms and conditions, if any, not more favorable to the Purchaser than those originally offered. Scripps shall use its reasonable best efforts to obtain the agreement of the Purchaser to the participation of SATH in the contemplated Disposition, and shall not Dispose of any Shares to such Purchaser if such Disposition would result in a Change of Control of the Company and such Purchaser declines to purchase all of SATH’s Shares pursuant to the terms of this Section. If (i) SATH elects not to, or otherwise fails to notify Scripps of its decision to or not to, participate in the sale under the Sale Notice and (ii) the sale under the Notice of Sale would result in a Change of Control of the Company, Scripps will have the right, but not the obligation, to require SATH to sell all of its Shares pursuant to the Sale Notice and the foregoing provisions of this Section by written notice of such requirement given within 45 days after its delivery of the Sale Notice to SATH. In the event of a sale of SATH’s Shares under this Section 3(e), SATH shall use the proceeds of such sale (less expenses related thereto) to first, redeem any Series D Preferred Shares held by Scripps or its Affiliates at the Original Issue Price thereof, plus accrued and unpaid dividends thereon, and second, pay to Scripps or its Affiliates principal and interest owed by SATH to Scripps or its Affiliates under any indebtedness for borrowed money. If Scripps is the purchaser hereunder, Scripps will have the right to offset, on a dollar for dollar basis, from the purchase price payable to SATH hereunder an amount equal to such outstanding indebtedness, redemption price and dividends.
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purchases any shares (or securities convertible into shares) pursuant to a tender or exchange offer without the prior consent of the board of directors or becomes the beneficial owner of securities of SATH representing 25% or more of the voting power of SATH’s outstanding securities, (D) during any two-year period, individuals who at the beginning of such period constitute the entire board of directors of SATH cease to constitute a majority of the board of directors of SATH, unless the election or the nomination for election of each new director is approved by at least two-thirds of the directors then still in office who were directors at the beginning of that period or (E) any third party acquires the power to direct or cause the direction of management or policies of SATH through the ownership of securities, by contract or otherwise, then Scripps may exercise its Call Right in Section 3(f)(iii) notwithstanding any limitations with respect to timing set forth in the first clause of such Section. | |||
(vi) | Scripps Call Right Upon Default. If SATH is in default under this Agreement or any other agreement between it and Scripps or an Affiliate of Scripps (including without limitation the Amendment to SATH’s Charter relating to the Series D Preferred Shares), then Scripps may exercise its Call Right in Section 3(f)(iii) notwithstanding any limitations with respect to timing set forth in the first clause of such Section. | ||
(vii) | Limitation on Exercise Based on Exercise of Put/Call Relating to Shop At Home Network. Notwithstanding anything to the contrary in the foregoing Section 3(f), neither the Put Right nor the Call Right may be exercised unless the Put Right or the Call Right, respectively, set forth in Section 11.6 of the LLC’s Operating Agreement is exercised by SATH or the Company, respectively. |
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(A) | such Shareholder becomes or is determined to be bankrupt or insolvent; | ||
(B) | such Shareholder institutes or has instituted against it any proceedings of any kind under any provision of any applicable bankruptcy or insolvency law seeking any readjustment, arrangement, composition, postponement or reduction of debts, liabilities or obligations (in the case of any involuntary proceeding, which is not removed or dismissed within 90 days); | ||
(C) | such Shareholder makes an assignment for the benefit of its creditors; | ||
(D) | such Shareholder is required or deemed to have Disposed of any interest in any of its Shares by operation of law (other than a Disposition to the Company); | ||
(E) | any Shares of such Shareholder are attached by, levied upon by, or becomes subject to judicial or other legal process and such proceeding is not removed, discharged, dismissed or bonded within 90 days; or | ||
(F) | any Shares of such Shareholder are the subject of a Disposition or an attempted Disposition in any way (including a sale ordered by a court or a Disposition required or deemed to have occurred by operation of law, other than a Disposition to the Company) in breach of this Agreement. |
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days after it is determined that the Fair Market Value process must be initiated, each of Scripps and SATH shall choose a nationally recognized reputable investment bank (which investment bank must commit to deliver its determination within 60 days) to determine the Fair Market Value and the Fair Market Value will be the average of the two determinations so made. Notwithstanding anything to the contrary in the foregoing, however, if the two determinations differ by more than 10%, then the aforesaid investment banks shall select a third nationally recognized reputable investment bank (which investment bank must commit to deliver its determination within 60 days) to determine the Fair Market Value; and upon receipt of the third determination, the Fair Market Value will be the average of the two determinations closest in amount to each other. Scripps and SATH will share equally in the cost of the investment banks. The Board and the purchaser(s) and seller(s) in the transaction shall cooperate with the investment banks and provide them (on a confidential basis) with all information regarding the Company and their respective Shares (directly or indirectly owned) as they reasonably request. The Fair Market Value will be determined without regard to any minority interest, lack of marketability or other discounts for any Shares and without regard to any premiums for control and will be determined without regard for any increase in membership interest by the Company in the LLC due to a concurrent exercise of any rights and remedies contained in the LLC’s Operating Agreement.
(i) Contract Terms. For purposes of this Agreement, the “Contract Terms” are as follows:
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containing a representation and warranty that on such date the Assigning Shareholder is the holder of record and sole beneficial owner of the Shares so Disposed of, has the full and unrestricted right to sell, assign, transfer and deliver such Shares to such Transferee, that the Disposition of such Shares to the Transferee will not conflict with or constitute a breach of the Company’s Articles of Incorporation, Code of Regulations, or this Agreement, and that the Assigning Shareholder is transferring to such Transferee good and marketable title to the Shares so transferred, free from all liens, security interests, pledges, encumbrances, equities, charges, claims, voting trusts or restrictions whatsoever, other than those restrictions contained in or arising under this Agreement or, if applicable, the Articles of Incorporation (and any restrictions arising by reason of federal or state securities laws). |
4. Affiliate Transactions. SATH acknowledges that the Company may enter into any agreement with any Person that is an Affiliate of Scripps, without the prior approval of the Shareholders provided that any such agreement contains substantially such terms and conditions as would be contained in a similar agreement entered into by the Company with a comparable, unaffiliated third party.
6. SATH Participation in Additional Equity Issuances. If the Company issues any additional equity securities to Scripps or an Affiliate of Scripps, then SATH will have the right, for a period of six months from Scripps’s (or such Affiliate’s) election to fund any equity purchase, to purchase up to a number of such securities equal to (a) the number of such securities issued to Scripps or such Affiliate, multiplied by (b) a fraction, the numerator of which is the number of equity securities held by SATH on a fully diluted basis immediately prior to the
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issuance to Scripps or such Affiliate and the denominator of which is the number of equity securities held by Scripps and its Affiliates on a fully diluted basis immediately prior to the issuance to Scripps or such Affiliate. Notwithstanding and without limiting the foregoing, SATH will not have any preemptive right to purchase any securities issued to any third party other than Scripps or an Affiliate of Scripps.
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A SHAREHOLDERS AGREEMENT DATED AS OF , 2002, AMONG THE ISSUER OF SUCH SECURITIES (THE “COMPANY”) AND THE COMPANY’S SHAREHOLDERS. A COPY OF SUCH AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF WITHIN FIVE DAYS OF WRITTEN REQUEST.” |
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[Signature pages follow.]
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THE SCRIPPS SHOP AT HOME HOLDING COMPANY | ||||
By: | Name: Title: |
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SCRIPPS NETWORKS, INC. | ||||
By: | Name: Title: |
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SHOP AT HOME, INC. | ||||
By: | Name: Title: |
The X.X. Xxxxxxx Company hereby guarantees the obligations of Scripps under the foregoing Shareholder Agreement.
THE X.X. XXXXXXX COMPANY | ||||
By Title |
|
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EXHIBIT 8.4(f)
Shop At Home Network, LLC
0000 Xxxxxxx Xxxxxx Xxxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
, 2002
Shop at Home, Inc.
0000 Xxxxxxx Xxxxxx Xxxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Ladies and Gentlemen:
The following shall comprise the agreement (the “Agreement”) among (formerly known as Shop at Home, Inc.) and its subsidiaries listed on Exhibit A, attached hereto and made part hereof (collectively, “SATH”), and Shop At Home Network, LLC (the “Company”) for the affiliation of SATH’s television broadcasting stations set forth on Exhibit A (each respective station and the holder of the FCC license therefor being referred to herein as a “Station” and collectively as, the “Stations”), with the Company’s Shop at Home Network (the “Network”) and shall supersede and replace all prior agreements between SATH and the Company or its predecessor with respect to the Network, which agreements are hereby terminated and of no further force or effect.
(a) This Agreement shall become effective at a.m., central time on , 2002 (the “Effective Date”) and, unless sooner terminated as provided herein, shall remain in effect until a.m., central time on , 2005 (the “Term”).
(b) This Agreement may be terminated by SATH with respect to any Station, provided that such termination shall not be effective (i) prior to the day following the last day of the fifteenth (15th) month following the Effective Date; (ii) unless SATH provides the Company written notice of such termination no later than six (6) months prior to the date of such termination; and (iii) so long as SATH does not enter into any other affiliation or limited marketing agreement with any television home shopping network.
(c) Provided SATH is not in breach of its obligations under this Agreement, SATH may terminate this Agreement with respect to any Station upon written notice to the Company if the Company breaches any of its obligations under this Agreement with respect to such Station and the Company fails within thirty (30) days after its receipt of notice of such breach from SATH to cure such breach.
(d) The Company may terminate this Agreement as to all Stations without liability upon six (6) months prior written notice if the Company shall by action of its members elect to cease the business of the Network.
(a) The Company commits to supply to SATH network programming for free over-the-air television broadcasting by each Station twenty-four (24) hours a day, seven (7) days a week for the term of this Agreement (the “Programming Period”). SATH agrees that, subject only to Section 3 below, each Station shall clear and broadcast all programming supplied to Station hereunder for broadcast during the Programming Period.
(b) All programming furnished to SATH for the Stations pursuant to this Agreement shall be referred to herein as “Network Programming,” and any one program of Network Programming shall be referred to as a “Network Program.” The selection, scheduling, substitution and withdrawal of any Network Program or other portion of Network Programming shall at all times remain within the sole discretion and control of the Company.
(c) SATH shall be solely responsible for all costs and expenses incurred by SATH or any Station hereunder in connection with SATH’s ownership, operation, maintenance and facility upgrades of each Station, including, without limitation, timely compliance with the FCC’s requirements for transition to digital television broadcasting. Notwithstanding the foregoing, any costs and expenses incurred by SATH or any Station in connection with the expansion of any Station facilities beyond the FCC’s requirements or any other non-essential capital improvement, in either case expressly requested by the Company, shall be paid by the Company.
(d) Notwithstanding anything to the contrary in this Agreement, the Company shall not have any obligation to supply Network Programming to any Station if the Company reasonably believes that such Station’s airing of Network Programming could result in the violation by the Company or any parent, subsidiary or affiliated company of the Company of any policy, rule or regulation of the FCC, including but not limited to, Section 73.3555(b) of the FCC’s rules (the local television multiple ownership rule).
3. FCC Mandated Programming Requirements.
(a) SATH shall be responsible for all material broadcast over its facilities and reserves the right to substitute programming other than Network Programming as necessary in its good faith discretion to comply with its licensee obligations under the FCC’s rules and policies. During the past year, Stations each have devoted less than 3.5 hours per week (the “Programming Allowance”) to programming other than Network Programming. SATH does not presently foresee that any Station’s licensee obligations will require that it present a greater amount of programming other than Network Programming during the Programming Period or significantly alter the time periods during which such programming other than Network Programming is presented.
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(b) SATH shall immediately notify the Company in the event that any Station broadcasts more than 3.5 hours of programming other than Network Programming in any calendar week and shall provide the Company with a complete schedule of that week’s programming other than Network Programming within one week. SATH agrees that the next Network Payment for a month that includes the last day of a calendar week in which any Station aired more than 3.5 hours of programming other than Network Programming shall be reduced by an amount equal to $.0001461 for every hour of programming other than Network Programming broadcast in excess of the Programming Allowance multiplied by the number of Network Households reached by the Station. Further, should any Station broadcast more than 3.5 hours per calendar week of programming other than Network Programming during any four calendar weeks per calendar year, the Company, in addition to any other remedies it may have under this Agreement or otherwise, may immediately terminate the Agreement with respect to that Station. The remedies set forth in this Section 3 shall not apply if (i) SATH’s failure to broadcast Network Programming on any Station is a direct result of an event of force majeure as provided in Section 6 of this Agreement; or (ii) SATH reasonably believes that such Network Programming is unsatisfactory, unsuitable, or contrary to the public interest as described below.
(c) While a Station may decline to air Network Programming that it reasonably deems to be unsatisfactory, unsuitable, or contrary to the public interest, SATH shall not fail to broadcast any Network Programming as a result of commercial motivation; that is, programming shall not be deemed to be unsatisfactory, unsuitable or contrary to the public interest based on performance, ratings, or the availability of alternative programming which SATH believes to be more profitable or more attractive.
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audit shall be binding for the period covered by the audit. If, as a result of the audit by the third party, it is determined that SATH overstated the number of Network Households during the audit period by more than 5% for any Station, the cost of the audit shall be paid by SATH. Otherwise, the cost of the audit shall be paid by the Company.
(a) The Company shall indemnify, defend and hold each Station (individually, an “Indemnified Station”), its parent, subsidiary and affiliated companies, and their respective directors, officers and employees, harmless from and against all claims, damages, liabilities, costs and expenses (including reasonable attorneys’ fees) arising out of the use by the Indemnified Station, in accordance with this Agreement, of any Network Program or other material as furnished by the Company hereunder, provided that the Indemnified Station promptly notifies the Company of any claim or litigation to which this indemnity shall apply, and that the Indemnified Station cooperates fully with the Company in the defense or settlement of such claim or litigation.
(b) SATH shall indemnify, defend and hold the Company, its parent, subsidiary and affiliated companies, and their respective directors, officers and employees, harmless with respect to (i) material added to or deleted from any program by any Station; and (ii) any programming or other material broadcast by any Station and not provided by the Company hereunder, provided that the Company promptly notifies SATH of any claim or litigation to which this indemnity shall apply, and that the Company cooperates fully with SATH in the defense or settlement of such claim or litigation.
(c) These indemnities shall not apply to litigation expenses, including attorneys’ fees, which the indemnified party elects to incur on its own behalf, provided that the indemnifying party has assumed responsibility for the defense or settlement of the claim.
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9. Unauthorized Copying and Transmission; Retransmission Consent.
(a) SATH shall not authorize, cause, or permit, without the Company’s consent, any Network Program or other material furnished to SATH hereunder to be recorded, duplicated, rebroadcast or otherwise transmitted or used for any purpose other than broadcasting by SATH on each Station as provided herein. Notwithstanding the foregoing, SATH shall not be restricted in the exercise of its signal carriage rights pursuant to any applicable rule or regulation of the FCC with respect to retransmission of its broadcast signal by any cable system or multichannel video program distributor (“MVPD”), as defined in Section 76.64(d) of the FCC’s rules, which (i) is located within the DMA in which each Station is located; or (ii) was actually carrying Station’s signal as of April 1, 1993; or (iii) with respect to cable systems, serving an area in which Station is “significantly viewed” (as determined by the FCC) as of April 1, 1993; provided, however, that any such exercise pursuant to the FCC’s rules with respect to Network Programs shall not be deemed to constitute a license by the Company.
(b) SATH shall not consent to the retransmission of its broadcast signal by any cable television system, or, except as provided in Section (c) below, to any other MVPD whose carriage of broadcast signals requires retransmission consent, if such cable system or MVPD is located outside the DMA to which any Station is assigned, unless such Station’s signal was actually carried by such cable system or MVPD as of April 1, 1993, or, with respect to such cable system, is “significantly viewed” (as determined by the FCC) as of April 1, 1993.
(c) SATH shall not consent to the retransmission of its broadcast signal by any MVPD that provides such signal to any home satellite dish user, unless such user is located within any Station’s own DMA.
(d) If SATH violates any of the provisions set forth in this Section 9, the Company may, in addition to any other of its rights or remedies at law or in equity under this Agreement or any amendment thereto, terminate this Agreement with respect to the violating Station by written notice to SATH given at least ninety (90) days prior to the effective date of such termination.
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(a) This Agreement may not be assigned or transferred (including pursuant to any change in the control of SATH or any Station), except a “short form” assignment or transfer of control made pursuant to Section 73.3540(f) of the FCC’s rules, directly or indirectly, whether by operation of law or otherwise, without the prior written consent of the Company, which consent shall not be unreasonably withheld, and, except as permitted by Section 11(b), no permitted assignment or transfer shall relieve SATH of its obligations hereunder. Any purported assignment or transfer by SATH or any Station without the Company’s consent as required hereby shall be null and void and not enforceable against the Company.
(b) In the event of a transfer of control or assignment of any Station’s license, except a “short form” assignment or transfer of control made pursuant to Section 73.3540(f) of the FCC’s rules (each, a “Change in Control Transaction”), SATH shall cause the license assignee or transferee (a “Station Transferee”) to assume SATH’s obligations hereunder with respect to such Station, provided that such Station Transferee may terminate this Agreement with respect to such Station but such termination shall not be effective (i) prior to the day following the last day of the fifteenth (15th) month following the Effective Date; and (ii) unless such Station Transferee provides the Company written notice of such termination no later than six (6) months prior to the date of such termination.
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If the foregoing is in accordance with your understanding, please indicate your acceptance on the copy of this Agreement enclosed for that purpose and return that copy to us.
Very truly yours, | ||||
SHOP AT HOME NETWORK, LLC | ||||
By: Name: Title: |
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AGREED: | |||
SHOP AT HOME, INC. | |||
By: Name: Title: |
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SAH LICENSE, INC. | |||
By: Name: Title: |
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SAH ACQUISITION CORPORATION II | |||
By: Name: Title: |
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EXHIBIT A
1. | SAH License, Inc. 0000 Xxxxxx Xxxxxx Xxxxxxx, Xxxxx 000 Xxx Xxxxx, XX 00000 |
|
Licensee of Television Stations: WSAH, Bridgeport, CT; WMFP, Lawrence, MA | ||
2. | SAH Acquisition Corporation II X.X. Xxx 000000 Xxxxxxxxx, XX 00000 |
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Licensee of Television Stations: KCNS, San Francisco, CA; XXXX-TV, Wilson, NC; WOAC, Canton, OH |
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EXHIBIT 8.4(g)
THE X.X. XXXXXXX COMPANY
000 Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
_____________, 2002
Shop At Home, Inc.
0000 Xxxxxxx Xxxxxx Xxxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Dear Sirs:
As a condition to the indirect purchase by The X.X. Xxxxxxx Company (“XX Xxxxxxx”), through a subsidiary, of shares in SAH Holdings, Inc. (“Holdings”), an Ohio corporation and a wholly owned subsidiary of Shop At Home, Inc. (“SATH”), XX Xxxxxxx hereby agrees that it will not directly or indirectly through a subsidiary acquire substantially all of the equity interests in or assets related to any home shopping cable television network offered and distributed in the United States unless it provides SATH with the opportunity to participate in such acquisition, on the same terms and conditions as XX Xxxxxxx, pro rata with XX Xxxxxxx to the extent of SATH’s direct or indirect membership interest in the Shop At Home Network, LLC, a Tennessee limited liability company owned by SATH, Holdings and SAH Acquisition Corporation, a wholly owned subsidiary of SATH (the “LLC”). If XX Xxxxxxx so chooses, in its sole discretion, XX Xxxxxxx can require that such participation take the form of direct participation in the purchase from the seller of such business, purchase of the business through an entity jointly owned (directly or indirectly) by XX Xxxxxxx, SATH and third parties, or a sale by XX Xxxxxxx or issuance by the entity holding such business to SATH of equity as soon as practicable after consummation of the acquisition. XX Xxxxxxx shall promptly deliver to SATH written notice of the proposed acquisition (the “Acquisition Notice”), including information regarding the business to be acquired, the terms and conditions of the acquisition, and the closing and termination dates, and any other material facts or terms and conditions. SATH shall notify Scripps of its intention to participate in such acquisition as soon as practicable but not later than 30 days after receipt of the Acquisition Notice.
In no event will XX Xxxxxxx be required to use the LLC to effect any acquisition of a home shopping cable television network or be required to offer any opportunity to effect any such acquisition to the LLC, and, by their countersignatures on this letter, SATH, SAH Acquisition Corporation and the LLC hereby acknowledge and agree to same and waive any statutory or common law duties with respect to the foregoing.
Respectfully, | ||||
THE X.X. XXXXXXX COMPANY | ||||
By | |
Acknowledged and agreed to: | ||||
SHOP AT HOME, INC. | ||||
By |
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SHOP AT HOME NETWORK, LLC | ||||
By |
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SAH HOLDINGS, INC. | ||||
By |
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SAH ACQUISITION CORPORATION | ||||
By |
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2
EXHIBIT 8.4(h)
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) is dated as of , 2002, among (formerly known as SHOP AT HOME, INC.), a Tennessee corporation (“SATH”), KCNS, INC., a Tennessee corporation (“KCNS”), WMFP, INC., a Tennessee corporation (“WMFP”), WOAC, INC., a Tennessee corporation (“WOAC”), and SAH LICENSE, INC., a Nevada corporation (“SAH License”), as the borrowers (each of the foregoing individually, a “Borrower” and, collectively, the “Borrowers”), and THE X.X. XXXXXXX COMPANY, an Ohio corporation, as the lender (the “Lender”). Capitalized and certain other terms are defined in Section 8 of this Agreement.
In consideration of the mutual agreements contained in this Agreement, the parties hereby agree as follows:
SECTION 1
LOAN, PREPAYMENT AND USE OF PROCEEDS
The parties acknowledge that the Loan is secured by the Collateral. Without limiting any other provision of this Agreement, if any Borrower sells, transfers or otherwise disposes of, whether by sale of assets or Stock, merger, consolidation, reorganization, by contract or otherwise (each a “Transfer”), any interest in any Collateral, then the Borrowers shall pay to the Lender the entire amount of the Net Proceeds received by any Borrower from such Transfer as a prepayment of the Loan under this Section and such amount will be applied in accordance herewith. Without the Lender’s express written consent, no Borrower may use any proceeds of a Transfer of Collateral to pay any taxes, assessments, liens or other obligations other than those contemplated by the definition of Net Proceeds.
The parties acknowledge that SATH and Scripps Networks, Inc., a subsidiary of the Lender (“Scripps Networks”), are parties to a Shareholders Agreement dated of even date herewith, in respect of their interests in The Scripps Shop At Home Holding Company, an Ohio corporation
(“Holdings”), and that Holdings, SATH and SAH Acquisition Corporation, a wholly owned subsidiary of SATH, are parties to an Amended and Restated Operating Agreement dated of even date herewith, in respect of their interests in Shop At Home Network, LLC, a Tennessee limited liability company (“Network Operating Company”) (the Shareholders Agreement and the Amended and Restated Operating Agreement will be referred to as the “Network Partnership Agreements”). The Lender hereby agrees that upon the occurrence of any event that under the Network Partnership Agreements results in any provision thereof requiring or permitting Scripps Networks or Holdings to offset all or any portion of the Loan against SATH’s right to receive payments from Scripps Networks or Holdings, or requiring SATH to make a prepayment of the Loan, the Lender shall accept such offsets with Scripps Networks and Holdings as valid prepayments hereunder and the amount of such offsets as determined under the Network Partnership Agreements will constitute satisfaction of the Loan to the extent of such amount.
SECTION 2
CREATION OF SECURITY INTEREST
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in this Agreement or any other Loan Document to the contrary, the Lender shall not take any action pursuant to this Agreement or any other Loan Document that would constitute or result in any assignment or deemed assignment of any Broadcast License without obtaining the prior approval of the FCC or any other necessary Governmental Body if, under the applicable Legal Requirements then in effect, such assignment would require such approval. Prior to the Lender’s exercise of any power, right, privilege or remedy pursuant to this Agreement that requires any consent, approval, recording, qualification or authorization of the FCC or any other Governmental Body, the Borrowers shall execute and deliver, or shall cause the execution and delivery of, all applications, certificates, instruments and other documents and papers that the Lender determines may be required to obtain such consent, approval, recording, qualification or authorization. Without limiting the generality of the foregoing, upon the Lender’s request, the Borrowers shall use their good faith efforts to assist the Lender in obtaining any of the foregoing consents, approvals or authorizations.
2.4 Financing Statements; Additional Actions.
a. The Borrowers authorize the Lender to file any financing statements required hereunder and any continuation statements or authorizations with respect thereto (collectively, the “Financing Statements”) in any appropriate filing office without the signature of any Borrower where permitted by applicable law.
b. If any of the Collateral, including without limitation any proceeds of any Collateral, is evidenced by or consists of letters of credit, letter of credit rights, instruments, promissory notes, drafts, documents or chattel paper (including without limitation electronic chattel paper), or any supporting obligations in respect thereof, and the Security Interest depends upon or is enhanced by possession of any such Collateral, immediately upon the Lender’s request, the Borrowers shall endorse and deliver to the Lender physical possession thereof.
c. If any Borrower acquires any commercial tort claims relating to any Stations after the date hereof, such Borrower shall immediately deliver a written description of such claim to the Lender, together with a written agreement in form and substance satisfactory to the Lender in its reasonable discretion pursuant to which such Borrower shall pledge and collaterally assign all of its right, title and interest in and to such commercial tort claim to the Lender as security for the Obligations.
d. If any Collateral is at any time in the possession or control of any warehouseman, bailee or any agent or processor, the Borrowers shall notify such Person of the Security Interest in such Collateral and shall obtain from such Person an acknowledgment that such Person is holding the Collateral for the Lender’s benefit.
e. At any time upon Lender’s request, the Borrowers shall execute and deliver to the Lender any and all Financing Statements, mortgages, fixture filings, security agreements, pledges, assignments, endorsements of certificates of title and all other documents, each in form and substance satisfactory to the Lender in its reasonable discretion, to create and perfect and continue perfected or better perfect the Security Interest (whether arising now or hereafter) in the Collateral. To the maximum extent permitted by applicable law, each Borrower hereby (i) authorizes the Lender to execute and file any such documents in any appropriate filing office and (ii) agrees, upon the Lender’s request, (A) to cause all patents, copyrights and
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trademarks acquired or generated by the Borrower and relating to the Stations that are not already the subject of a registration with the appropriate filing office to be registered with such filing office in a manner sufficient to impart constructive notice of the Borrower’s ownership thereof and (B) to cause to be prepared, executed and delivered to the Lender supplemental schedules to the applicable Loan Documents to identify any of the foregoing as being subject to the Security Interest created under this Agreement.
SECTION 3
CONDITIONS PRECEDENT TO THE LENDER’S OBLIGATION
The obligation of the Lender to enter into this Agreement and make the Loan to the Borrowers is conditioned upon the Borrowers’ satisfaction of the following conditions precedent:
a. Properly executed Note;
b. Properly executed Financing Statements, Pledge Agreements and Collateral Assignments of Leases, and other documentation contemplated thereby or hereby;
c. The Organizational Documents of each Borrower pursuant to the Pledge Agreements, in each case certified by the Secretary or Assistant Secretary of such Borrower as true and complete on and as of the date of such certificate, and a certificate of good standing for each of the Borrowers issued by the secretary of state of its jurisdiction of organization and all
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other jurisdictions in which it is qualified, in each case as of a date immediately prior to the date hereof;
d. Certified copy of the resolutions of the board of directors of each Borrower authorizing the Loan and such Borrower’s execution and delivery of the Loan Documents, its grant of the Security Interest, and its assumption of the Obligations;
e. Incumbency certificate for each Borrower, signed by the Secretary or Assistant Secretary of such Borrower, for each person executing any of the Loan Documents on behalf of such Borrower;
f. Opinion of counsel for each Borrower in form and substance satisfactory to the Lender confirming the following:
(i) The Borrower is a corporation duly organized, existing and in good standing under the laws of its jurisdiction of organization. The Borrower has the corporate power to own its properties and to carry on its business as now being conducted. The Borrower is where necessary duly qualified as a foreign corporation to do business and is in good standing in the jurisdiction or jurisdictions in which the nature of the business conducted makes such qualification necessary.
(ii) Except as otherwise disclosed in writing, there is no action or proceeding pending or threatened against or affecting the Borrower in any court or before any Governmental Body, arbitration board or tribunal, which individually or in the aggregate could have a Material Adverse Effect.
(iii) The execution of the Loan Documents executed by the Borrower, the Loan and the Security Interests have been fully authorized by the Borrower pursuant to its Organizational Documents or otherwise; and the officers executing the Loan Documents have been duly authorized to do so.
(iv) The Loan Documents executed by the Borrower constitute legal, valid and binding obligations of the Borrower and are enforceable against the Borrower in accordance with their respective terms, except as enforcement of such terms may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditor’s rights generally.
(v) The Security Interests constitute valid liens upon the Collateral and are properly perfected. The filings made in connection with the Liens have been made in all of the necessary public offices and are all of the filings which may be of material advantage in preserving, protecting and perfecting the Security Interests.
(vi) The execution of the Loan Documents by the Borrower and its performance of the Obligations will not be in conflict with the terms and provisions of any contract or agreement to which the Borrower is a party or by which it is bound and will not result in a breach of the terms, conditions and provisions of or constitute a default under the Borrower’s Organizational Documents.
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(vii) The execution and performance of the Loan Documents by the Borrower do not violate any law, statute or ordinance, nor do they violate any rule or regulation promulgated pursuant to any law, statute or ordinance which materially and adversely affects the Borrower.
(viii) Such qualifications, assumptions and other matters incident to the Loan as reasonably may be requested by the Borrower’s counsel.
g. Such other usual and customary documents as the Lender or its counsel may reasonably request.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE BORROWERS
Note: No Schedules need to be produced until the Closing Date, so all internal restructuring will have occurred already. |
The Borrowers, jointly and severally, represent and warrant to the Lender, as of the date hereof (except for such representations and warranties that refer specifically to another date and, in such case, as of the date so referred to), as follows:
a. This Agreement constitutes the legal, valid, and binding obligation of each Borrower, enforceable against each Borrower in accordance with its terms. Upon the execution and delivery by each Borrower of each of the Loan Documents to which it is a party, such Loan Documents will constitute the legal, valid, and binding obligations of such Borrower, enforceable against such Borrower in accordance with their respective terms. Each Borrower has the absolute and unrestricted right, power and authority to execute and deliver the Loan Documents to which it is a party and to perform its obligations thereunder.
b. Neither the execution and delivery of this Agreement nor the consummation or performance of the terms and conditions of the Loan Documents, after giving
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effect to the closing of the transactions contemplated under the Share Purchase Agreement and the Network Partnership Agreements (collectively, the “Network Transactions”), by a Borrower will, directly or indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of any provision of the Organizational Documents of such Borrower, or any resolution adopted by the board of directors or stockholders of such Borrower;
(ii) contravene, conflict with, or result in a violation of, or give any Governmental Body or other person the right to challenge the Loan, or to exercise any remedy or obtain any relief under, any Legal Requirement or any Order to which such Borrower, or any of the assets owned or used by such Borrower, may be subject;
(iii) contravene, conflict with, or result in a violation of any of the terms of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental Authorization that is held by such Borrower or that otherwise relates to the business of, or any of the assets owned or used by, such Borrower;
(iv) contravene, conflict with, or result in a violation or breach of any provision of, or give any Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate, or modify, any Contract to which such Borrower is bound; or
(v) result in the imposition or creation of any Encumbrance upon or with respect to any of the assets owned or used by such Borrower, other than the Security Interest.
Except as set forth in Schedule 4.2, no Borrower will be required to give any notice to or obtain any Consent from any Person in connection with the execution and delivery of the Loan Documents, the consummation of the Loan or the performance of the Obligations.
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a. SATH has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the 1934 Act (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “SEC Documents”). A complete list of the SEC Documents is set forth on Schedule 4.4. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act. None of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. As of their respective dates, SATH’s financial statements included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with GAAP (except as may be otherwise indicated in such financial statements or the notes thereto, or, in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the consolidated financial position of SATH and its subsidiaries on a consolidated basis as of the dates thereof and the consolidated results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). No other information provided by or on behalf of any Borrower to the Lender that is not included in the SEC Documents contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstance under which they are or were made, not misleading.
b. The Borrowers have delivered or caused to be delivered to the Lender pro forma combined statements of operations and balance sheets of the Borrowers for the twelve months ended June 30, 2002 and for the quarter ended September 30, 2002, after giving effect to the Network Transactions and the Loan as if such transactions had occurred as of July 1, 2002 (the “Pro Forma Financial Statements”). The Pro Forma Financial Statements were prepared on behalf of the Borrowers in good faith after taking into account the existing and historical levels of business activity of the Borrowers, known trends, including general economic trends, and all other information, assumptions and estimates considered by management of Borrowers to be reasonable at the time, after giving effect to the Network Transactions and the Loan, and on a basis consistent with the financial statements referred to in Sections 4.4(a) and (c), other than as expressly set forth in the Pro Forma Financial Statements. There are no statements or conclusions in any of the Pro Forma Financial Statements that are based upon or include information known to any Borrower to be misleading in any material respect or that fail to take into account material information regarding the matters set forth therein. No facts are known to the Borrowers which, if reflected in the Pro Forma Financial Statements, could be expected to materially affect the reliability, performance, accuracy and completeness of the Pro Forma Financial Statements or the assets, liabilities, results of operations or cash flows reflected therein.
c. The Borrowers have delivered to the Lender complete and correct copies of pro forma financial projections prepared by Borrowers’ management for the fiscal years ending June 30, 2003 and June 30, 2004, after giving effect to the Network Transactions and the Loan (the “Financial Projections”). The Financial Projections were prepared on behalf of the Borrowers in good faith after taking into account the existing and historical levels of business activity of the Borrowers, known trends, including general economic trends, and all other information, assumptions and estimates considered by Borrowers’ management to be reasonable
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at the time, after giving effect to the Network Transactions and the Loan and on a basis consistent with the financial statements referred to in Sections 4.4(a) and (b), other than as expressly set forth in the Financial Projections. There are no statements or conclusions in the Financial Projections that are based upon or include information known to any Borrower to be misleading in any material respect or that fail to take into account material information regarding the matters set forth therein. No facts are known to the Borrowers which, if reflected in the Financial Projections, could be expected to materially affect the reliability, performance, accuracy and completeness of the Financial Projections or the assets, liabilities, results of operations or cash flows reflected therein. On the date hereof, the Borrowers believe that the Financial Projections are reasonable and attainable but the parties acknowledge that future changes in facts and circumstances may render such Financial Projections unattainable. This Section 4.4(c) is not intended, nor will it be considered, to be a guaranty of future performance.
d. Except as fully reflected in the financial statements and notes related thereto described in Section 4.4(a), there were as of the date hereof (after giving effect to the Network Transactions), no liabilities or obligations with respect to any Borrower of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether or not due) which, either individually or in aggregate, have had or could reasonably be expected to result in a material adverse effect on the business, prospects, properties, operations, results of operations, assets, liabilities or condition (financial or otherwise) of any Borrower. As of the date hereof, the Borrowers know of no basis for the assertion against any Borrower of any liability or obligation of any nature whatsoever that is not fully disclosed in the financial statements delivered pursuant to Sections 4.4(a) and (b) which, either individually or in the aggregate, has had or could reasonably be expected to result in a Material Adverse Effect. As of the date hereof (after giving effect to the Network Transactions), no Borrower has any outstanding Indebtedness other than the Loan and the Permitted Indebtedness.
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use of any real property owned or used by any Borrower. Each Borrower owns (with good and marketable title in the case of real property, subject only to the matters permitted by the following sentence) all the properties and assets (whether real, personal, or mixed and whether tangible or intangible) that it purports to own or reflected as owned in its books and records. Except as set forth on Schedule 4.6, all properties and assets of the Borrowers are free and clear of all Encumbrances and are not, in the case of real property, subject to any rights of way, building use restrictions, exceptions, variances, reservations, or limitations of any nature except, with respect to all such properties and assets, liens for current taxes not yet due and with respect to real property, (a) minor imperfections of title, if any, none of which is substantial in amount, materially detracts from the value or impairs the use of the property subject thereto, or impairs the operations of any Borrower, and (b) zoning laws and other land use restrictions that do not impair the present or anticipated use of the property subject thereto. Each Borrower enjoys peaceful and undisturbed possession under any leases to which it is a party. All of such leases are valid and subsisting, and no default by any Borrower exists under any such leases. The property leased or owned by the Borrowers is all of the property necessary for the operation of the Stations as they are currently being operated.
a. Each Borrower has timely filed or caused to be timely filed all Tax Returns that are or were required to be filed by or with respect to any of them, either separately or as a member of a group of entities, pursuant to applicable Legal Requirements, and all Taxes owed by each Borrower have been timely paid. All such Tax Returns are true, correct and complete. Each Borrower has made available to the Lender copies of all such Tax Returns filed since June 30, 1993. Schedule 4.9 contains a complete and accurate list of, all such income Tax Returns filed since June 30, 1993. Each Borrower has paid, or made provision for the payment of, all Taxes that have or may have become due pursuant to all Tax Returns or otherwise, or pursuant to any assessment received by such Borrower, except such Taxes, if any, as are listed in Schedule 4.9 and are being contested in good faith and as to which adequate reserves (determined in accordance with GAAP) have been provided in the applicable accounting records.
b. The federal and state income Tax Returns of each Borrower have been audited by the IRS or relevant state tax authorities or are closed by the applicable statute of
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limitations for all taxable years through June 30, 1998. Schedule 4.9 contains a complete and accurate list of all audits of all such Tax Returns, including a reasonably detailed description of the nature and outcome of each audit. All deficiencies proposed as a result of such audits have been paid, reserved against, settled, or, as described in Schedule 4.9, are being contested in good faith by appropriate proceedings. Schedule 4.9 describes all adjustments to the United States federal and state income Tax Returns filed by Borrower or any group of corporations including each of the Borrowers for all taxable years since June 30, 1993 and the resulting deficiencies proposed by the IRS or state authorities. Except as described in Schedule 4.9, no Borrower has given or been requested to give waivers or extensions (or is or would be subject to a waiver or extension given by any other Person) of any statute of limitations relating to the payment of Taxes of such Borrower for which such Borrower may be liable.
c. The charges, accruals and reserves with respect to Taxes on the books of each Borrower are adequate (determined in accordance with GAAP) and are at least equal to such Borrower’s liability for Taxes. There exists no proposed Tax assessment against any Borrower except as disclosed in Schedule 4.9. All Taxes that each Borrower is or was required by Legal Requirements to withhold or collect have been duly withheld or collected and, to the extent required, have been paid to the proper Governmental Body or other Person.
4.11 Compliance; Governmental Authorizations.
a. Except for liabilities expressly assumed by Holdings or the Network Operating Company in connection with the Network Transactions and except as set forth in Schedule 4.11:
(i) each Borrower is, and at all times has been, in full compliance with each Legal Requirement and each Governmental Authorization that is or was applicable to it or to the conduct or operation of its business or the ownership or use of any of its assets;
(ii) no event has occurred or circumstance exists that (with or without notice or lapse of time) (A) may constitute or result in a violation by any Borrower of, or a failure on the part of any Borrower to comply with, any Legal Requirement, or (B) may give rise to any obligation on the part of any Borrower to undertake, or to bear all or any portion of the cost of, any remedial action of any nature; and
(iii) no Borrower has received any notice or other communication (whether oral or written) from any Governmental Body or any other Person regarding (A) any actual, alleged, possible, or potential violation of, or failure to comply with, any Legal Requirement or Governmental Authorization, or (B) any actual, alleged, possible, or potential obligation on the part of any Borrower to undertake, or to bear all or any portion of the cost of, any remedial action of any nature.
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b. Schedule 4.11 contains a complete and accurate list of each Governmental Authorization held by each Borrower or that otherwise relates to the business of any Borrower as such business shall exist immediately after giving effect to the Network Transactions. Each Governmental Authorization listed or required to be listed in Schedule 4.11 is valid and in full force and effect. Except as set forth in Schedule 4.11:
(i) each Borrower is, and at all times has been, in full compliance with all of the terms and requirements of each Governmental Authorization identified or required to be identified in Schedule 4.11;
(ii) no event has occurred or circumstance exists that may (with or without notice or lapse of time, or both) (A) constitute or result directly or indirectly in a violation of, or a failure to comply with, any term or requirement of any Governmental Authorization listed or required to be listed in Schedule 4.11, or (B) result directly or indirectly in the revocation, withdrawal, suspension, cancellation, or termination of, or any modification to, any Governmental Authorization listed or required to be listed in Schedule 4.11;
(iii) no Borrower has received any notice or other communication (whether oral or written) from any Governmental Body or any other Person regarding (A) any actual, alleged, possible, or potential violation of, or failure to comply with, any term or requirement of any Governmental Authorization, or (B) any actual, proposed, possible, or potential revocation, withdrawal, suspension, cancellation, termination of, or modification to any Governmental Authorization; and
(iv) all applications required to have been filed for the renewal of the Governmental Authorizations listed or required to be listed in Schedule 4.11 or the transfer of the Governmental Authorizations listed or required to be listed in Schedule 4.11 have been duly filed on a timely basis with the appropriate Governmental Bodies, and all other filings required to have been made with respect to such Governmental Authorizations have been duly made on a timely basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in Schedule 4.11 collectively constitute all of the Governmental Authorizations necessary to permit each Borrower to lawfully conduct and operate its business in the manner in which such business is currently conducted and operated and to permit each Borrower to own and use its assets in the manner in which it currently owns and uses such assets in each case after giving effect to the Network Transactions.
4.12 Legal Proceedings; Orders.
a. Except as set forth in Schedule 4.12, there is no pending Proceeding (i) that has been commenced by or against any Borrower or that otherwise relates to or may affect the business of, or any of the assets owned or used by, any Borrower; or (ii) that challenges, or may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the transactions contemplated by this Agreement. To the Borrowers’ Knowledge, no such Proceeding has been Threatened, and no event has occurred or circumstance exists that may give rise to or serve as a basis for the commencement of any such Proceeding. The Borrowers have delivered to the Lender copies of all pleadings, correspondence, and other documents relating to each Proceeding listed in Schedule 4.12. The Proceedings listed in Schedule 4.12 will not have a Material Adverse Effect.
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b. Except as set forth in Schedule 4.12, (i) there is no Order to which any Borrower, or any of the assets owned or used by any Borrower, is subject; and (ii) no Borrower is subject to any Order that relates to the business of, or any of the assets owned or used by, any of the Borrower.
c. Except as set forth in Schedule 4.12:
(i) each Borrower is, and at all times has been, in full compliance with all of the terms and requirements of each Order to which it, or any of the assets owned or used by it, is or has been subject;
(ii) no event has occurred or circumstance exists that may constitute or result in (with or without notice or lapse of time) a violation of or failure to comply with any term or requirement of any Order to which any of the Borrower, or any of the assets owned or used by any of the Borrower, is subject; and
(iii) no Borrower has received any notice or other communication (whether oral or written) from any Governmental Body or any other Person regarding any actual, alleged, possible, or potential violation of, or failure to comply with, any term or requirement of any Order to which any Borrower, or any of the assets owned or used by any Borrower, is or has been subject.
a. Schedule 4.14(a) contains a complete and accurate list, and the Borrowers have delivered to the Lender true and complete copies, of (in each case after giving effect to the Network Transactions):
(i) each Contract relating to the business of each Borrower that involves performance of services or delivery of goods or materials by such Borrower of an amount or value in excess of $50,000;
(ii) each lease, rental or occupancy agreement, license, installment and conditional sale agreement, and other Contract relating to the business of any Borrower affecting the ownership of, leasing of, title to, use of, or any leasehold or other interest in, any real or personal property (except personal property leases and installment and conditional sales agreements having a value per item or aggregate payments of less than $50,000 and with terms of less than one year);
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(iii) each joint venture, partnership, and other Contract (however named) involving a sharing of profits, losses, costs, or liabilities of any Borrower or, with respect to any Borrower’s business, with any other Person;
(iv) each written warranty, guaranty, or other similar undertaking with respect to contractual performance extended by any Borrower or with respect to the any Borrower’s business other than in the Ordinary Course of Business;
(v) each other Contract material to the business of any Borrower; and
(vi) each amendment, supplement, and modification (whether oral or written) in respect of any of the foregoing.
b. Except as set forth in Schedule 4.14(b), each Contract listed or required to be listed in Schedule 4.14(a) is in full force and effect and is valid and enforceable in accordance with its terms.
c. Except as set forth in Schedule 4.14(c):
(i) each Borrower is and has been in full compliance with all applicable terms and requirements of each Contract listed or required to be listed in Schedule 4.14(a);
(ii) each other party to each Contract listed or required to be listed in Schedule 4.14(a) is, to the Borrowers’ Knowledge, in full compliance with all applicable terms and requirements of such Contract;
(iii) no event has occurred or circumstance exists that (with or without notice or lapse of time, or both) may contravene, conflict with, or result in a violation or breach of, or give any Borrower the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate, or modify, any Contract listed or required to be listed in Schedule 4.14(a); and
(iv) no Borrower has given to or received from any other Person, at any time since June 30, 1999, any notice or other communication (whether oral or written) regarding any actual, alleged, possible, or potential violation or breach of, or default under, any Contract listed or required to be listed in Schedule 4.14(a).
d. To the knowledge of the Borrowers, there are no renegotiations of, attempts to renegotiate, or outstanding rights to renegotiate any material amounts paid or payable to any Borrower or with respect to a Borrower’s business under any Contracts listed or required to be listed on Schedule 4.14(a) with any Person, and no such Person has made written demand for such renegotiation.
a. The Borrowers have made available to the Lender true and complete copies of all policies of insurance to which any Borrower is a party or under which any
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Borrower, or any director or officer of any Borrower, is or has been covered at any time within the five years preceding the date of this Agreement; copies of all pending applications for policies of insurance; and any statement by the auditor of any Borrower’s financial statements with regard to the adequacy of such Borrower’s coverage or of the reserves for claims.
b. Schedule 4.15(b) sets forth, by year, for the current policy year and each of the five preceding policy years, a summary of the loss experience under each of the foregoing policies and a statement describing each claim under any insurance policy for an amount in excess of $10,000.
c. Except as set forth on Schedule 4.15(c):
(i) all policies to which any Borrower is a party or that provide coverage to any Borrower, or any director or officer of any Borrower (A) are valid, outstanding and enforceable; (B) are issued by an insurer that is financially sound and reputable; (C) taken together, provide adequate insurance coverage for Borrowers’ assets and the operations; (D) are sufficient for compliance with all Legal Requirements and Contracts to which any Borrower is a party or by which any of them is bound; (E) will continue in full force and effect following the consummation of the Loan; and (F) do not provide for any retrospective premium adjustment or other experienced-based liability on the part of any Borrower;
(ii) no Borrower has received any refusal of coverage or any notice that a defense will be afforded with reservation of rights, or any notice of cancellation or any other indication that any insurance policy is no longer in full force and effect or will not be renewed or that the issuer of any policy is not willing or able to perform its obligations thereunder;
(iii) each Borrower has paid all premiums due, and has otherwise performed all of its obligations under, each policy to which it is a party or that provides coverage to such Borrower or any of its directors or officers; and
(iv) each Borrower has given notice to each insurer of all material claims that may be insured thereby.
4.16 Environmental Matters. Except as set forth in Schedule 4.16:
a. Each Borrower is, and at all times has been, in full compliance with, and has not been and is not in violation of or liable under, any Environmental Law. No Borrower has or has any basis to expect, nor has any Borrower or any other Person for whose conduct a Borrower is or may be held to be responsible received, any actual or Threatened order, notice, or other communication from (i) any Governmental Body or private citizen acting in the public interest, or (ii) the current or prior owner or operator of any real property in which Borrower has or previously had an interest, of any actual or potential violation or failure to comply with any Environmental Law, or of any actual or Threatened obligation to undertake or bear the cost of any Environmental, Health, and Safety Liabilities with respect to any of the improvements on any such property or any other assets (whether real, personal, or mixed) in which any Borrower has or had an interest, or with respect to any property at or to which Hazardous Materials were generated, manufactured, refined, transferred, imported, used, or processed by any Borrower, or any other Person for whose conduct a Borrower is or may be held responsible, or from which
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Hazardous Materials have been transported, treated, stored, handled, transferred, disposed, recycled, or received.
b. There are no Hazardous Materials present on or in the Environment at any real property in which a Borrower now has or had immediately prior to giving effect to the Network Transactions an interest directly or indirectly through a Subsidiary. No Borrower, or any other Person for whose conduct a Borrower is or may be held responsible has permitted or conducted, or is aware of, any Hazardous Activity conducted with respect to any such property or any other assets (whether real, personal, or mixed) in which any Borrower has or had an interest except in full compliance with all applicable Environmental Laws.
c. There has been no Release or, to Borrowers’ Knowledge, threat of Release, of any Hazardous Materials at or from any property in which any Borrower has or had an interest or at any other location where any Hazardous Materials were generated, manufactured, refined, transferred, produced, imported, used, or processed.
d. The Borrowers have delivered to the Lender accurate and complete copies and results of any reports, studies, analyses, tests, or monitoring possessed or initiated by any Borrower pertaining to Hazardous Materials or Hazardous Activities in, on, or under any property in which any Borrower has or had an interest, or concerning compliance by any Borrower, or any other Person for whose conduct a Borrower is or may be held responsible, with Environmental Laws.
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applications, registered trademarks, trademark applications and copyright registrations as to which any Borrower is the owner or exclusive licensee.
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4.22 State of Incorporation; Location of Chief Executive Office; FEIN; Organizational I.D. The state of incorporation, chief executive office and FEIN and organizational identification numbers of each of the Borrowers is as set forth in Schedule 4.22.
SECTION 5
AFFIRMATIVE COVENANTS
So long as this Agreement is in effect or the Loan or any other Obligation of the Borrowers to the Lender is outstanding, the Borrowers shall, jointly and severally:
5.1 Promptly pay when due the principal and interest on the Note;
5.2 Furnish or cause to be furnished to the Lender, with respect to each Borrower:
a. not later than 30 days following the end of each fiscal quarter, in form and substance satisfactory to the Lender:
(i) an unaudited income statement for the period and fiscal year to date and copies of statements for the same periods of the previous year;
(ii) an unaudited balance sheet as of the end of such period and copies of statements for the same period of the previous year;
(iii) a certificate from the chief financial officer stating that the above financial statements are complete and correct and fairly represent the financial position of such Borrower as of their respective dates and the results of the respective Borrower’s operations for the periods then ended;
(iv) a certificate from the Chief Financial Officer certifying that there exists no condition, event or act which with notice of lapse of time could constitute an Event of Default, or any condition, event or act which could materially and adversely affect the financial condition or operations of such Borrower, or, if any such condition, event or act exists, specifying the nature and status thereof (A) that such Borrower has complied with and is then in compliance with all terms and covenants of this Agreement, and (B) that there exists no Event of Default as defined in this Agreement and no event which, with the giving of notice or the lapse of time would constitute such an Event of Default; and
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b. not later than 90 days following the end of each fiscal year of each Borrowers, in form and substance satisfactory to the Lender:
(i) complete audited financial statements for such Borrower for such fiscal year, certified by Deloitte & Touche or another comparable independent certified public accounting firm reasonably acceptable to the Lender, with an opinion not significantly qualified in the Lender’s opinion; and
(ii) a certificate from the Chief Financial Officer certifying that there exists no condition, event or act which with notice of lapse of time could constitute an Event of Default, or any condition, event or act which could materially and adversely affect the financial condition or operations of such Borrower, or, if any such condition, event or act exists, specifying the nature and status thereof (A) that such Borrower has complied with and is then in compliance with all terms and covenants of this Agreement, and (B) that there exists no Event of Default as defined in this Agreement and no event which, with the giving of notice or the lapse of time would constitute such an Event of Default
5.3 At all times maintain all of the Borrowers’ properties, real and personal, tangible and intangible, in good order and working condition and from time to time make necessary repairs, renewals and replacements thereto in order that such properties shall be preserved and maintained fully and efficiently and, in addition, maintain and protect any permit, patent, trademark, trade name or other rights that any Borrower may possess or under which any Borrower may operate and that are material to any Borrower’s business;
5.4 Keep all insurable property, real and personal, of the Borrowers insured with responsible insurance companies against loss or damage by fire, tornado or windstorm and against such other hazards or liabilities as are commonly insured against by companies operating the same or comparable businesses, with each policy naming the Lender as an additional insured. Such insurance shall be kept in reasonable amounts based on past practices as the Lender may require and in any event in an amount equal to at least 100% of the replacement value of such property. Copies of all such policies shall be delivered to the Lender and shall not be subject to cancellation or modification without at least 30 days’ prior written notice to the Lender. In addition thereto, the Borrowers shall carry liability insurance on account of injury to persons or property and in respect of use and occupancy, including business interruption, in such reasonable amounts as the Lender may require. Such insurance may be carried under blanket policies applicable to more than one entity;
5.5 Take all action necessary to preserve the corporate existence, foreign qualification where necessary and applicable, and the right to continue business of the Borrowers, and operate within the limitations set forth under each Borrower’s Organizational Documents, and under the applicable Legal Requirements;
5.6 Pay and discharge all Taxes imposed upon any of them or upon any of their income or profits, or upon any property belonging to any of them, prior to the date on which penalties attach thereto, provided that the Borrowers will not be required to pay such tax, assessments, charges or levies, the payment of which is being contested in good faith and by proper proceedings;
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5.7 Promptly give notice (together with copies of any order or notice received by any Borrower) to the Lender of:
a. the imminent threat or commencement of Proceedings against any Borrower wherein the amount claimed or the amount of all claims in the aggregate exceeds $100,000 unless such claim or claims are insured under policies conforming to the requirements of Section 5.4 or are funded by reserves established in accordance with GAAP;
b. any notification from the Internal Revenue Service or U.S. Department of Labor of any material noncompliance by a Borrower or any member of the ERISA Group with applicable Legal Requirements regarding any of Plans or Benefit Arrangements;
c. with respect to any Borrower, any condition, event or act which constitutes an Event of Default, or which, with the giving of notice or lapse of time, or both, would constitute an Event of Default, by delivering to the Lender the certificate of the chief financial officer of such Borrower specifying such condition, event or act, the period of existence thereof, and what action such Borrower proposes to take with respect thereto;
d. any change of name, address, identity or corporate structure of any Borrower;
e. with respect to any Borrower, any uninsured or partially uninsured loss through fire, theft, liability or property damage in excess of $100,000 in the aggregate during any fiscal year of such Borrower;
f. any other event or fact that may materially and adversely affect the financial or operating condition of any Borrower or any Collateral; or
g. as soon as practicable after the receipt thereof, and in any event within ten business days after the issuance thereof:
(i) any order or notice of the FCC, a court of competent jurisdiction, or any other Governmental Body which designates any Broadcast License of any Borrower or any application therefor for a hearing, or which refuses renewal or extension of any such Broadcast License, or revokes or suspends the authority of any Borrower to operate a Station;
(ii) a copy of any competing application filed against any Broadcast License of any Borrower or any application therefor;
(iii) copies of any citation, notice of violation or order to show cause from the FCC, or any material complaint filed by or with the FCC, in each case, in connection with any Borrower; and
(iv) a copy of any notice or application by any Borrower requesting authority to cease broadcasting on any Station for any period in excess of 48 hours.
5.8 Pay when due all rent and other amounts payable under any leases to which any Borrower is a party or by which any Borrower or its properties or assets are bound;
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5.9 Comply in all material respects with all applicable Environmental Laws and obtain and comply in all material respects with and maintain any and all licenses, approvals, notifications, registrations and permits required by applicable Environmental Laws; and
5.10 Provide the Lender promptly upon their becoming available, and in any event within five days after the receipt of the filing thereof by a Borrower, with copies of (i) any periodic or special reports filed by any Borrower with any Governmental Body, if such reports indicate any event or occurrence that could have a Material Adverse Effect or if copies are requested by the Lender and (ii) any material notices and other material communications from any Governmental Body which relate specifically to a Borrower or any Broadcast License.
SECTION 6
NEGATIVE COVENANTS
So long as this Agreement remains in effect or any Borrower has any Obligations to the Lender, no Borrower shall without the prior written consent of the Lender:
6.1 Grant any security interest in, or permit the imposition of any Encumbrance upon, any of its properties or assets used or useful in the conduct or operation of the Stations or the Pledged Stock, including without limitation the Collateral, except for those in existence as of the date hereof which are set forth on Schedule 6.1;
6.2 Purchase, redeem or exchange for cash any of its outstanding Stock or declare or pay, during any fiscal year, any dividend in cash, stock or other property except that any Subsidiary Borrower may pay a dividend to another Borrower and, so long as no Event of Default has occurred, SATH may make dividends to its shareholders as required by the terms of any of its issued and outstanding stock and otherwise at its election consistent with its historical practices;
6.3 Lease, license, or Transfer any of its properties or assets used or useful in the conduct or operations of the Stations, including, without limitation, the Collateral, other than (i) in the Ordinary Course of Business; (ii) as permitted by and subject to the prepayment repayments of Section 1.2; or (iii) in connection with a Transfer from any Borrower of the interest in the Borrower’s Broadcast License to any other Person who will own and control the Broadcast License of that Borrower, provided that such Person will execute and deliver any and all documentation and instruments (including, without limitation, this Agreement or an amendment hereto) to evidence that such Person will serve as a Borrower with respect to the Loan and the Obligations.
6.4 Consolidate with or merge with or into any other Person or reorganize, or, solely with respect to the Subsidiary Borrowers, issue any additional shares of common or preferred stock, acquire all or substantially all of the assets of any other Person, or acquire the Stock of or an ownership interest in any other Person;
6.5 Solely with respect to the Subsidiary Borrowers, assume, guarantee, or become contingently liable upon any obligation or Indebtedness of SATH, any Affiliate or any other Person;
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6.6 Solely with respect to the Subsidiary Borrowers, create any Indebtedness to SATH, any Affiliate any other Person, except for short-term trade accounts payable and endorsements of checks, drafts, and other negotiable instruments incurred in the Ordinary Course of Business;
6.7 Solely with respect to the Subsidiary Borrowers, make any loan or loans, advance or advances, or investment or investments to, in or with SATH, any Affiliate or any other Person;
6.8 Prepay, or cause to be prepaid, or become obligated to prepay any Indebtedness other than in accordance with its stated maturity, except Indebtedness incurred pursuant to this Agreement;
6.9 Change the nature of, suspend or cease all of any portion of the business of any Subsidiary Borrower currently being conducted, or suspend or cease a material portion of the business or SATH as currently being conducted after giving effect to the Network Transactions, or change its name, FEIN, organizational identification number, date of incorporation, or corporate structure or identity, or add any new fictitious name;
6.10 Take any action that permits, or after notice or lapse of time or both would permit, revocation or termination of any Broadcast License;
6.11 Modify or change its method of accounting (other than as may be required to conform to GAAP);
6.12 Enter into or permit to exist, directly or indirectly, any transaction with any Affiliate of such Borrower except for transactions in the Ordinary Course of Business, upon fair and reasonable terms that are disclosed to the Lender and that are no less favorable to the Borrower than would be obtained in an arm’s length transaction with a non-Affiliate; or
6.13 Use the Loan proceeds for any purpose other than the purpose specified in Section 1.3.
SECTION 7
DEFAULT — RIGHTS OF THE LENDER
a. Default in any payment required to be made under the Note, or in any other Obligation within five (5) days after the same shall become due;
b. Default in any payment of principal or of interest on any other obligation for borrowed money beyond any period of grace provided with respect thereto (except for amounts less than $100,000 that are disputed by the Borrowers in good faith) or in the performance of any other agreement, term or condition contained in any agreement including without limitation, financing leases under which any such obligation is created, if the effect of such default is to cause such obligation to become due or to entitle the holder to declare such obligation due prior to its date of maturity or, in the case of financing leases, to enable the lessor to exercise remedies arising only upon the occurrence of default;
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c. Any representation or warranty made by any Borrower herein or in any writing subsequently furnished in connection with or pursuant to this Agreement is false in any material respect on the date as of which executed or delivered to the Lender;
d. Default in the performance or observance of any other covenant, term or condition or agreement contained herein or any of the other Loan Documents, if such default shall not have been remedied within 30 days after determination of the existence thereof by a Borrower or within 30 days after written notice thereof is delivered to a Borrower by the Lender, whichever is earlier, except defaults as to payments as set forth in Sections 7.1(a) and (b), or by misrepresentation or warranty breach as set forth in Section 7.1(c), as to which no notice need be given;
e. Any Borrower or Affiliate of a Borrower breaches or is in default under any provision, term or condition provided under any agreements between the Lender or any Affiliate of the Lender, on the one hand, and a Borrower or an Affiliate of a Borrower, on the other hand;
f. Any Broadcast License necessary for the operation of the Stations is terminated, forfeited or revoked or fails to be renewed for any reason whatsoever, or, for any other reason, any Borrower at any time fails to be a licensee under any of the Broadcast Licenses or otherwise fails to have all required authorizations, licenses and permits to construct, own, operate or promote any Station pursuant to any Broadcast License;
g. Any Borrower loses, fails to keep in force, suffers the termination or revocation or non-renewal of, or terminates, forfeits or suffers a material adverse amendment to any Broadcast License used by it in connection with any Station, or any Proceeding is commenced against a Borrower that is reasonably likely to result in such loss, termination or non-renewal, provided that an Event of Default will not be deemed to exist if a Broadcast License is not renewed but is replaced prior to its expiration by another Broadcast License authorizing substantially the same operations as the non-renewed Broadcast License;
h. (i) The directors or shareholders of any Borrower approve a merger or consolidation that results in the shareholders of such Borrower immediately prior to the transaction giving rise to the consolidation or merger owning less than 50% of the total combined voting power of all classes of stock entitled to vote of the surviving entity immediately after the consummation of the merger or consolidation; (ii) the directors or shareholders of any Borrower approve the sale of substantially all of the assets of such Borrower or the liquidation or dissolution of such Borrower; (iii) any person or entity (other than another Borrower) purchases any shares (or securities convertible into shares) of a Borrower pursuant to a tender or exchange offer without the prior consent of such Borrower’s board of directors or becomes the beneficial owner of securities of such Borrower representing 25% or more of the voting power of the Borrower’s outstanding securities; (iv) during any two-year period, individuals who at the beginning of such period constitute the entire board of directors of any Borrower cease to constitute a majority of the board of directors of such Borrower, unless the election or the nomination for election of each new director is approved by at least two-thirds of the directors then still in office who were directors at the beginning of that period; or (v) any third party acquires the power to direct or cause the direction of management or policies of any Borrower through the ownership of securities, contract or otherwise;
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i. Any Borrower makes an assignment for the benefit of creditors; or any Borrower applies to any tribunal for the appointment of a trustee or receiver for such Borrower or of any substantial part of such Borrower’s assets; or any Borrower commences any Proceeding relating to such Borrower under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction; or any such petition or application is filed or any such proceedings are commenced and such Borrower by any act indicates its approval thereof, consent thereto, or acquiescence therein; or an order is entered appointing any trustee or receiver, or adjudicating any such Borrower bankrupt or insolvent, or approving the petition in any such proceeding;
j. Any Order entered in any Proceeding against any Borrower decrees the dissolution or split-up of such Borrower;
k. Any Borrower is enjoined, restrained or in any way prevented by Order from continuing to conduct all or any material part of its business;
l. This Agreement or any other Loan Document that purports to create the Security Interest, for any reason, fails or ceases to create a valid and perfected first priority Security Interest on any of the Collateral; or
m. A notice of Encumbrance is filed of record with respect to any Borrower’s assets by any Governmental Authority, or if any Taxes owing to any Governmental Authority become an Encumbrance upon any assets of a Borrower.
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States Bankruptcy Code (and in the case of an involuntary action, which remains unvacated for 45 days), the Lender may take the actions described above in clauses (a) and (b).
As used herein, the following terms shall have the meanings herein specified:
8.1 “1934 Act” means the Securities Act of 1934, as amended, or any successor law, and rules and regulations issued pursuant thereto.
8.2 “Affiliate” means, with respect to any Person, any other Person (i) that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with such Person, (ii) that is a general partner, director, manager, trustee or principal officer of, or a limited partner owning more than 10% of, or that serves in a similar capacity with respect to, such Person, or (iii) of which such Person is a general partner, director, manager, trustee or principal officer or a limited partner owning more than 10% of, or with respect to which such Person serves in a similar capacity. For purposes of this definition, “control” means the possession, directly or indirectly, of the power to direct or to cause the direction of the management or policies of the Person in question through the ownership of voting securities or by contract or otherwise. Solely for purposes of this Agreement, Holdings and Network Operating Company will be deemed to be Affiliates of the Lender but not Affiliates of any Borrower.
8.3 “Agreement” is defined in the introductory paragraph.
8.4 “Benefit Arrangement” means an employee benefit plan within the meaning of ERISA §3(3) that is not a Plan or Multiemployer Plan.
8.5 “Borrower” is defined in the introductory paragraph.
8.6 “Broadcast License” means any license, permit, authorization or certificate now or hereafter held by any Borrower (including without limitation the Broadcast Licenses listed on Schedule 8.6) to construct, own, operate or program any Station that is or has been granted by the FCC or any other Governmental Body, and all extensions, additions and renewals thereto or thereof.
8.7 “Collateral” means all of the Borrowers’ respective right title and interest, whether now owned or hereafter acquired, in and to each of the following to the extent it relates to the Stations: accounts; chattel paper; inventory; equipment; instruments; investment property; documents; letter of credit rights; general intangibles (including without limitation payment intangibles); commercial tort claims identified in Schedule 8.7; supporting obligations; real property; rights under any leases for real property; all of the Borrowers’ respective rights under all present and future Governmental Authorizations heretofore or hereafter granted to any Borrower for the ownership or operation of the Stations, including the Broadcast Licenses; and to the extent not listed above as original collateral (and without regard to Section 2.5), all proceeds and products of the any of the foregoing. “Collateral” also includes all of the Pledged Stock.
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8.8 “Collateral Assignments of Leases” means the agreements, whether collateral assignments or leasehold mortgages or deeds of trust, whereby the Borrowers assign to the Lender all of their respective interests in leases used or useful in the operation of the Stations.
8.9 “Communications Act” means the Federal Communications Act of 1934, as amended and the rules and regulations promulgated thereunder.
8.10 “Consent” means any approval, consent, ratification, waiver, or other authorization (including any Governmental Authorization).
8.11 “Contract” means any agreement, contract, obligation, promise, or undertaking (whether written or oral and whether express or implied).
8.12 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended and any successor statute.
8.13 “ERISA Group” means the Borrowers and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrowers, are treated as a single employer with the Borrowers under IRC §414.
8.14 “Encumbrance” means any charge, claim, community property interest, condition, equitable interest, lien, option, pledge, security interest, right of first refusal, or restriction of any kind, including any restriction on use, voting, transfer, receipt of income, or exercise of any other attribute of ownership.
8.15 “Environment” means soil, land surface or subsurface strata, surface waters (including navigable waters, ocean waters, streams, ponds, drainage basins, and wetlands), groundwater, drinking water supply, stream sediments, ambient air (including indoor air), plant and animal life, and any other environmental medium or natural resource.
8.16 “Environmental, Health, and Safety Liabilities” means any cost, damages, liability or other obligation arising under Environmental Law or Occupational Safety and Health Law and consisting of or relating to (a) any environmental, health, or safety matters or conditions (including on-site or off-site contamination, occupational safety and health, and regulation of chemical substances or products); (b) fines, penalties, judgments, awards, settlements, legal or administrative proceedings, damages, losses, claims, demands and response, investigative, remedial, or inspection costs and expenses arising under Environmental Law or Occupational Safety and Health Law; (c) financial responsibility under Environmental Law or Occupational Safety and Health Law for cleanup costs or corrective action, including any investigation, cleanup, removal, containment, or other remediation or response actions (“Cleanup”) required by applicable Environmental Law or Occupational Safety and Health Law (whether or not such Cleanup has been required or requested by any Governmental Body or other Person) and for any natural resource damages; or (d) any other compliance, corrective, investigative, or remedial measures required under Environmental Law or Occupational Safety and Health Law. The terms “removal,” “remedial,” and “response action” include the types of activities covered by the U.S. Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §9601 et seq., as amended.
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8.17 “Environmental Law” means any Legal Requirement that requires or relates to: (a) advising appropriate authorities, employees, and the public of pntended or actual releases of pollutants or hazardous substances or materials, violations of discharge limits, or other prohibitions and of the commencements of activities that could have significant impact on the Environment; (b) preventing or reducing to acceptable levels the release of pollutants or hazardous substances or materials into the Environment; (c) reducing the quantities, preventing the release, or minimizing the hazardous characteristics of wastes that are generated; (d) assuring that products are designed, formulated, packaged, and used so that they do not present unreasonable risks to human health or the Environment when used or disposed of; (e) protecting resources, species, or ecological amenities; (f) reducing to acceptable levels the risks inherent in the transportation of hazardous substances, pollutants, oil, or other potentially harmful substances; (g) cleaning up pollutants that have been released, preventing the threat of release, or paying the costs of such clean up or prevention; or (h) making responsible parties pay private parties for damages done to their health or the Environment, or permitting self-appointed representatives of the public interest to recover for injuries done to public assets.
8.18 “Event of Default” is defined in Section 7.1.
8.19 “FCC” means the Federal Communications Commission.
8.20 “Financial Projections” is defined in Section 4.4(c).
8.21 “Financing Statements” is defined in Section 2.4(a).
8.22 “GAAP” means generally accepted United States accounting principles, applied on a consistent basis.
8.23 “Governmental Authorization” means any approval, consent, license, permit, waiver, or other authorization issued, granted, given, or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement.
8.24 “Governmental Body” means any: (a) nation, state, county, city, town, village, district, or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign, or other government; (c) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal); (d) multi-national organization or body; or (e) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature.
8.25 “Hazardous Activity” means the distribution, generation, handling, importing, management, manufacturing, processing, production, refinement, Release, storage, transfer, transportation, treatment, or use (including any withdrawal or other use of groundwater) of Hazardous Materials in, on, under, about, or from any real property in which any Borrower has or had an interest into the Environment, and any other act, business, operation, or thing that increases the danger, or risk of danger, or poses an unreasonable risk of harm to persons or property on or off any real property in which any Borrower has or had an interest, or that may affect the value of any real property in which any Borrower has or had an interest or the Borrowers.
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8.26 “Hazardous Materials” means any waste or other substance that is listed, defined, designated, or classified as, or otherwise determined to be, hazardous, radioactive, or toxic or a pollutant or a contaminant under any Environmental Law, including any admixture or solution thereof.
8.27 “Holdings” is defined in Section 1.2.
8.28 “Indebtedness” means (i) all indebtedness for borrowed money, including without limitation the Loan; (ii) all obligations evidenced by bonds, debentures, notes or other similar instruments; (iii) all other obligations upon which interest or finance charges are customarily paid; (iv) all obligations arising under conditional sale or other title retention agreements (including any lease capitalized in accordance with generally accepted accounting principles) with respect to property acquired; (v) all indebtedness and obligations of the foregoing types which are secured by property of a person (whether or not such indebtedness shall have been assumed by such person); and (vi) all indebtedness and obligations of the foregoing types which are guaranteed by such person.
8.29 “IRC” means the Internal Revenue Code of 1986 or any successor law, and regulations issued by the Internal Revenue Service pursuant thereto.
8.30 “KCNS” is defined in the introductory paragraph.
8.31 An individual will be deemed to have “Knowledge” of a particular fact or matter if he or she is actually aware of such fact or matter or if a prudent individual could be expected to discover or otherwise become aware of such fact or matter in the course of conducting a reasonably comprehensive investigation concerning the existence of such fact or matter. A Person other than an individual will be deemed to have “Knowledge” of a particular fact or matter if any individual who is serving as a director, executive officer, member, governor, manager (with respect to a partnership or limited liability company, partner, executor, or trustee of such Person (or in any similar capacity) has, or at any time had, Knowledge of such fact or matter in accordance with the preceding sentence.
8.32 “Legal Requirement” means any order, constitution, law, ordinance, principle of common law, regulation, statute, or treaty of any Governmental Body.
8.33 “Lender” is defined in the introductory paragraph.
8.34 “Loan” is defined in Section 1.1.
8.35 “Loan Documents” means this Agreement, the Note and any other document executed by any party in connection with this Agreement, as each may be amended, supplemented or modified from time to time.
8.36 “Material Adverse Effect” means (a) a material adverse effect on the business, properties, prospects, operations, results of operations, assets, liabilities or condition (financial or otherwise) of any Borrower, (b) a material impairment of any Borrower’s ability to perform its Obligations or of the Lender’s ability to enforce the Obligations or realize upon the Collateral or (c) a material impairment of the enforceability or priority of the Security Interest with respect to the Collateral as a result of an action or a failure to act on the part of any Borrower.
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8.37 “Multiemployer Plan” means an employee pension benefit plan within the meaning of ERISA §4001(a)(3).
8.38 “Net Proceeds” means the aggregate proceeds paid in cash or other readily available funds received by any or all of the Borrowers in exchange for the Transfer of a Station, net of (a) reasonable costs and expenses relating to the Transfer of the Station and actually incurred (including, without limitation, reasonable legal and accounting fees, and customary agent, broker or finder commissions), and (b) all Taxes paid or payable as a result of the Transfer of the Station, including but not limited to any transfer or conveyance taxes actually incurred by the Borrowers solely to the extent that they arise from the Transfer of the Station and in any event after giving effect of any applicable net operating loss carry forward with respect to such Tax liability.
8.39 “Network Operating Company” is defined in Section 1.2.
8.40 “Network Partnership Agreements” is defined in Section 1.2.
8.41 “Network Transactions” is defined in Section 4.2(b).
8.42 “Note” is defined in Section 1.1.
8.43 “Obligations” means the Borrowers’ obligation to repay the Loan together with all other obligations of the Borrowers to the Lender under this Agreement, the other Loan Documents or any other agreements among the Parties.
8.44 “Occupational Safety and Health Law” means any Legal Requirement designed to provide safe and healthful working conditions and to reduce occupational safety and health hazards, and any program, whether governmental or private (including those promulgated or sponsored by industry associations and insurance companies), designed to provide safe and healthful working conditions.
8.45 “Order” means any award, decision, injunction, judgment, order, ruling, subpoena or verdict entered, issued, made, or rendered by any court, administrative agency or other Governmental Body or by any arbitrator.
8.46 “Ordinary Course of Business” means an action taken by a Person only if: (a) such action is consistent with the past practices of such Person and is taken in the ordinary course of such Person’s normal day-to-day operations; (b) such action is not required to be authorized by such Person’s board of directors (or by any Person or group of Persons exercising similar authority) and is not required to be specifically authorized by such Person’s parent company (if any) or other equity holders; and (c) such action is similar in nature and magnitude to actions customarily taken, without any authorization by the board of directors (or by any Person or group of Persons exercising similar authority), in the ordinary course of the normal day-to-day operations of other Persons that are in the same line of business as such Person.
8.47 “Organizational Documents” means (a) the charter or articles or certificate of incorporation and bylaws or code of regulations of a corporation; (b) any charter or similar
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document adopted or filed in connection with the creation, formation, or organization of any other Person; and (c) any amendment to any of the foregoing.
8.48 “Person” means any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union, or other entity or Governmental Body.
8.49 “Plan” means any employee pension benefit plan (other than a Multiemployer Plan) which is covered by the Title IV of ERISA or subject to the minimum funding standards under IRC §412.
8.50 “Pledge Agreements” means stock pledge agreements in form and substance satisfactory to the Lender executed and delivered by SATH to the Lender with respect to the pledge by SATH of all Stock (including, in the case of the Network Operating Company, the membership interests) of WOAC, WMFP, KCNS, Holdings, the Network Operating Company, and any other Person owning and/or controlling the Broadcast Licenses for WOAC, WMFP, and KCNS held by SATH and executed an delivered by WOAC, WMFP and KCNS to the Lender with respect to the pledge by WOAC, WMFP and KCNS of all Stock of SAH License or any other Person owning and/or controlling the Broadcast Licenses for WOAC, WMFP and KCNS.
8.51 “Pledged Stock” means the Stock subject to the Pledge Agreements.
8.52 “Pro Forma Financial Statements” is defined in Section 4.4(b).
8.53 “Proceeding” means any action, arbitration, audit, hearing, investigation, litigation, or suit (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Body or arbitrator.
8.54 “Release” means any spilling, leaking, emitting, discharging, depositing, escaping, leaching, dumping, or other releasing into the Environment, whether intentional or unintentional.
8.55 “SAH License” is defined in the introductory paragraph.
8.56 “SATH” is defined in the introductory paragraph.
8.57 “Scripps Network” is defined in Section 1.2.
8.58 “SEC” means the U.S. Securities and Exchange Commission or any successor agency.
8.59 “SEC Documents” is defined in Section 4.4.
8.60 “Security Interest” is defined in Section 2.1.
8.61 “Share Purchase Agreement” is defined in Section 3.3.
8.62 “Stations” means WOAC (TV) in Canton, Ohio; KCNS (TV) in San Francisco, California; and WMFP (TV) in Lawrence, Massachusetts.
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8.63 “Stock” means all shares, options, warrants, interests, partnerships or other equivalents (regardless of how designated) of or in a Person, whether voting or nonvoting, including without limitation common stock, preferred stock, partnership interest, limited liability company membership interest or any other “equity securities” (as defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under the 1934 Act).
8.64 “Subsidiary Borrowers” means KCNS, WMFP, and SAH License.
8.65 “Tax” means (a) any net income, alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad valorem, value added, franchise, profits, license, withholding on amounts paid to or by any of the Borrowers, payroll, employment, excise, severance, stamp occupation, premium, property, environmental or windfall profit tax, custom, duty or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or any penalty, addition to tax or additional amount imposed by any Governmental Body responsible for the imposition of any such tax (domestic or foreign), (b) any liability of any Borrower for the payment of any amounts of the type described in clause (a) as a result of being a member of an affiliated, consolidated, combined or unitary group for any period prior to the Closing, and (c) any liability of any Borrower for the payment of any amounts of the type described in clause (a) as a result of any express or implied obligation to indemnify any other Person.
8.66 “Tax Return” means any return (including any information return), report, statement, schedule, notice, form, or other document or information filed with or submitted to, or required to be filed with or submitted to, any Governmental Body in connection with the determination, assessment, collection, or payment of any Tax or in connection with the administration, implementation, or enforcement of or compliance with any Legal Requirement relating to any Tax.
8.67 A claim, proceeding, dispute, action, or other matter will be deemed to have been “Threatened” if any demand or statement has been made (orally or in writing) or any notice has been given (orally or in writing), or if any other event has occurred or any other circumstances exist, that would lead a prudent Person to conclude that such a claim, Proceeding, dispute, action, or other matter is likely to be asserted, commenced, taken, or otherwise pursued in the future.
8.68 “Transfer” is defined in Section 1.2.
8.69 “UCC” shall mean the Uniform Commercial Code as in effect on the date hereof in the State of Ohio; provided, however, that if by reason of mandatory provisions of law, any of the attachment, perfection or priority of the security interest in any item or portion of the Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of Ohio, “UCC” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection.
8.70 “WOAC” is defined in the introductory paragraph.
8.71 “WMFP” is defined in the introductory paragraph.
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8.72 All accounting and financial terms used in this Section and throughout this Agreement and not otherwise defined shall be determined in accordance with generally accepted accounting principles consistently applied.
8.73 Subject to the express definitions set forth in this Agreement, all terms used in this Agreement are defined in the UCC have the meanings ascribed to them in the UCC.
SECTION 9
ADDITIONAL REPRESENTATIONS AND WARRANTIES,
WAIVERS AND CONSENTS.
Each Borrower acknowledges, covenants and agrees as follows:
9.1 Each Borrower will be jointly and severally liable for satisfaction of the Obligations, including without limitation the repayment of all of the Indebtedness.
9.2 The Lender will not have any responsibility to inquire into the apportionment, allocation or disposition of the proceeds of the Loan as among the Borrowers.
9.3 Each Subsidiary Borrower hereby irrevocably appoints SATH as its agent and attorney-in-fact for all purposes of the Loan Documents, including without limitation the giving and receiving of notices and other communications, the making of requests for and conversions or continuations of the Loan, the execution and delivery of certificates, and the receipt and allocation of disbursements of the Loan proceeds from the Lender and all matters under Section 9.6. Any statement, representation, response or instruction provided by SATH will be deemed to be approved and consented to by each Borrower, and the Lender may unconditionally rely on any such statement, representation, response or instruction.
9.4 The making of the Loan on a joint borrowing basis is solely an accommodation to the Borrowers and is done at Borrowers’ request. The request for joint handling of the Loan was made because all of the Borrowers are engaged in owning and operating the Stations and each Borrower expects to derive benefit, directly or indirectly, from the Loan because the successful operation of the Stations is dependent on the continued successful performance of all of the Borrowers. Each Borrower agrees that the Lender will not incur any liability to any Borrower as a result thereof. To induce the Lender to make the Loan, and in consideration thereof, each Borrower hereby agrees to indemnify the Lender and hold the Lender harmless from and against any and all liabilities, expenses, losses, damages and/or claims of damage or injury asserted against the Lender by any Borrower or by any other Person arising from or incurred by reason of the structuring of the Loan as provided in this Agreement, reliance by the Lender on any requests or instructions from any Borrower, or any other action taken by the Lender under this Agreement. This Section will survive repayment of the Loan.
9.5 Each Borrower has established adequate means of obtaining from each other Borrower on a continuing basis financial and other information pertaining to the business, operations and condition (financial and otherwise) of each other Borrower and is and hereafter will be completely familiar with the business, operations and condition (financial and otherwise) of each other Borrower. The Lender will have no duty, and each Borrower hereby waives any duty of the Lender, to disclose to any Borrower any matter, fact or thing relating to the business,
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operations or condition (financial or otherwise) of any other Borrower, or the property of any other Borrower, whether now or hereafter known by the Lender.
9.6 The obligations and liabilities of each Borrower under this Agreement or any other Loan Document may derive from value provided directly to another Borrower and, in full recognition of that fact, each Borrower consents and agrees that the Lender may, at any time and from time to time, without notice to, demand on, or the agreement of, such Borrower, and without affecting the enforceability or security of the Loan Documents:
a. with the agreement of such Borrower, supplement, modify, amend, extend, renew, accelerate or change the terms of the Indebtedness, or otherwise change the time for payment of the Indebtedness or any part thereof, including increasing or decreasing the rate of interest thereon;
b. with the agreement of such Borrower, supplement, modify, amend or waive, or enter into any agreement, approval or consent with respect to, the hndebtedness or any part thereof or any of the Loan Documents or any collateral or any additional security or guaranties, or any condition, covenant, default, remedy, right, representation or term thereof or thereunder;
c. with the agreement of such Borrower, accept new or additional instruments, documents or agreements in exchange for, or relative to, any of the Loan Documents or the Indebtedness or any part thereof;
d. accept partial payments on the Indebtedness;
e. with the agreement of such Borrower, receive and hold additional security or guaranties for the Indebtedness or any part thereof;
f. release, reconvey, terminate, waive, abandon, subordinate, exchange, substitute, transfer and enforce any collateral or guaranties, and apply any security and direct the order or manner of sale thereof as the Lender in its sole and absolute discretion may determine;
g. release any party or any guarantor from any personal liability with respect to the Indebtedness or any part thereof;
x. xxxxxx, release on terms satisfactory to the Lender, or by operation of applicable laws or otherwise liquidate or enforce any of the Indebtedness and any security or guaranty in any manner, consent to the transfer of any security, and bid and purchase at any sale; and/or
i. consent to the merger, change or any other restructuring or termination of the corporate or limited liability company existence of any other Borrower or any other person or entity, and correspondingly restructure the Loan, continuing existence of any lien under any other Loan Document to which any Borrower is a party or the enforceability hereof or thereof with respect to all or part of the Indebtedness.
9.7 Lender will not be required to, and each Borrower expressly waives any right to require the Lender to, marshal assets in favor of any Borrower or any other Person or to proceed against any other Borrower or any other person or entity or any Collateral provided by any other
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Borrower or any other Person, and the Lender will have the right to proceed against any Borrower and/or any of the Collateral in such order as the Lender determines in its sole and absolute discretion. The Lender may file a separate action or actions against any Borrower, whether such action is brought or prosecuted with respect to any other security or against any other person, or whether any other person is joined in any such action or actions. The Lender will have the right to deal with any Borrower in connection with the Indebtedness or otherwise, or alter any contracts or agreements now or hereafter existing between the Lender and any Borrower, in any manner whatsoever, all without in any way altering or affecting the obligations of any other Borrower under the Loan Documents.
9.8 Each Borrower authorizes Lender, upon the occurrence of and during the continuance of any Event of Default, at its sole option, without notice or demand and without affecting any Aggregate Indebtedness or the validity or enforceability of any liens of Lender on any collateral, to foreclose any or all of the deeds of trust of mortgages securing the obligations by judicial or nonjudicial sale. Each by real property. This means, among other things:
(i) The Lender may collect from any Borrower without first foreclosing on any real or personal property collateral pledged by the debtor;
(ii) If the Lender forecloses on any real property collateral pledged by the debtor;
A. The amount of the debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price; and
B. The Lender may collect from any Borrower even if the Lender, by foreclosing on the real property collateral, has destroyed any right one Borrower may have to collect from another Borrower.
This is an unconditional and irrevocable waiver of any rights and defenses the Borrower may have because the obligations are secured by real property. These rights and defenses include but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure.
Each Borrower waives all rights and defenses arising out of an election of remedies by the Lender, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed the Borrower’s rights of subrogation and reimbursement against the other Borrower by the operation of Section 580d of the Code of Civil Procedure or otherwise.
9.9 Each Borrower expressly waives any and all defenses now or hereafter arising or asserted by reason of (i) any disability or other defense of any other Borrower or any other Person with respect to any Indebtedness, (ii) the unenforceability or invalidity as to any other Borrower or any other Person of the Indebtedness, (iii) the unenforceability or invalidity of any security or guaranty for the Indebtedness or the lack of perfection or continuing perfection or failure of priority of any security for the Indebtedness, (iv) the cessation for any cause whatsoever of the liability of any Borrower or any other Person (other than by reason of the full payment and performance of all Indebtedness), (v) to the extent permitted by law, any failure of the Lender to give notice of sale or other disposition of Collateral to any Borrower or any defect
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in any notice that may be given in connection with any sale or disposition, (vi) to the extent permitted by law, any failure of the Lender to comply with applicable Legal Requirements in connection with the sale or other disposition of any Collateral or other security for any Indebtedness, including without limitation any failure of the Lender to conduct a commercially reasonable sale or other disposition of any Collateral or other security for any obligation, (vii) any act or omission of the Lender or others that directly or indirectly results in or aids the discharge or release of any Borrower or any other Person or the Indebtedness or any other security or guaranty therefor by operation of law or otherwise, (viii) any Legal Requirement that provides that the obligation of a surety or guarantor must neither be larger in amount nor in other respects more burdensome than that of the principal or which reduces a surety’s or guarantor’s obligation in proportion to the principal obligation, (ix) any failure of the Lender to file or enforce a claim in any bankruptcy or other proceeding with respect to any other Borrower, (x) the election by the Lender, in any bankruptcy proceeding of any other Borrower, of the application or non-application of Section 1111(b)(2) of the United States Bankruptcy Code, (xi) any extension of credit or the grant of any lien under Xxxxxxx 000 xx xxx Xxxxxx Xxxxxx Bankruptcy Code in connection with the bankruptcy of any other Borrower, (xii) any use of cash collateral under Section 363 of the United States Bankruptcy Code, or (xiii) any agreement or stipulation with any other Borrower with respect to the provision of adequate protection in any bankruptcy proceeding of any person or entity.
9.10 Notwithstanding anything to the contrary elsewhere contained herein or in any other Loan Document to which any Borrower is a party, each Borrower hereby waives with respect to each other Borrower and their respective successors and assigns (including any surety) and any other party any and all rights at law or in equity, to subrogation, to reimbursement, to exoneration, to contribution, to setoff or to any other rights that could accrue to a surety against a principal, to a guarantor against a maker, to an accommodation party against the party accommodated, or to a holder or transferee against a maker and which any Borrower may have or hereafter acquire against each other Borrower or any other party in connection with or as a result of the execution, delivery and/or performance of this Agreement, the Note or any other Loan Document to which any Borrower is a party. Each Borrower agrees that it will not have and shall not assert any such rights against any other Borrower or the successors and assigns of any other Borrower or any other party (including any surety), either directly or as an attempted setoff to any action commenced against any Borrower by another Borrower (as Borrower or in any other capacity) or any other party. Each Borrower hereby acknowledges and agrees that this waiver is intended to benefit the Lender and will not limit or otherwise affect the liability of the Borrower hereunder or under any other Loan Document to which any Borrower is a party, or the enforceability hereof or thereof.
SECTION 10
MISCELLANEOUS PROVISIONS
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10.2 Other Reports to the Lender by the Borrowers and Inspections of Books, Records, Etc. In addition to the reports required to be furnished to the Lender under Section 5, each Borrower shall furnish to the Lender such other information and reports as may be necessary in the Lender’s opinion to inform the Lender of each Borrower’s financial status and condition and shall permit any person designated by the Lender to visit and inspect any of the properties, corporate books and financial records of any Borrower and to discuss its affairs, finances and accounts with its officers and employees at such reasonable times and as often as may be requested by the Lender.
The X.X. Xxxxxxx Company 000 Xxxxxx Xxxxxx, 00xx Xxxxx Xxxxxxxxxx, Xxxx 00000 Attention: Xxxxxxx Xxxxxxxx, Vice President Corporate Development Facsimile: (000) 000-0000 |
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with a copy to: | |
Xxxxxxx Xxxxxxxx, Esq. Xxxxx & Xxxxxxxxx LLP 000 Xxxxxx Xxxxxx Xxxxx 0000 Xxxxxxxxxx, Xxxx 00000-0000 Facsimile No.: (000) 000-0000 |
All communications to the Borrowers hereunder shall be hand delivered, sent by registered or certified mail, return receipt requested, or by recognized national courier service, or sent by facsimile (with receipt confirmed electronically), and shall be effective upon receipt or delivery, or refusal to accept delivery as evidenced by the return receipt, addressed to:
Shop At Home, Inc. 0000 Xxxxxxx Xxxxxx Xxxxxxx Xxxxxxxxx, Xxxxxxxxx 00000 Attn: Facsimile: |
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with a copy to: | |
Xxxxxxx X. Bone, Esq. Bone McAllester Norton, P.L.L.C. Suntrust Center |
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000 Xxxxxx Xxxxxx, Xxxxx 000 Xxxxxxxxx, Xxxxxxxxx 00000 Facsimile: (000) 000-0000 |
10.5 Lender’s Duties Upon Payment in Full by the Borrowers. Upon payment in full of all Obligations, the Lender shall (a) reassign or redeliver, as appropriate, to the Borrowers all Collateral (except to the extent such Collateral secures other indebtedness to the Lender); (b) at the Borrowers’ expense, cause to be released or cancelled of record all financing statements or other documents previously filed and recorded in public offices by or on behalf of the Lender evidencing the Obligations and the security therefor; and (c) deliver to the Borrowers the Note marked “Paid in Full.”
10.11 Further Assurances. The Borrowers shall, in good faith, execute such other and further instruments, assignments or documents as may be necessary or appropriate for the consummation of the transactions contemplated by this Agreement.
10.12 Severability. If any provision of this Agreement is finally determined by a court of competent jurisdiction to be unenforceable, such provision will be deemed to be severed from this Agreement, but every other provision of this Agreement will remain in full force and effect.
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10.13 Entire Agreement. This Agreement (including the documents and the instruments referred to herein) constitutes the entire agreement among the parties with respect to its subject matter and supersedes all prior agreements and understandings, or representations, by or among the parties, written and oral, with respect to the subject matter hereof and thereof.
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LENDER: | BORROWERS: | |||||
THE X. X. XXXXXXX COMPANY | SHOP AT HOME, INC. | |||||
By |
___________,__________________ |
By | ___________,_____________________________ |
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WOAC, INC. | ||||||
By | ___________,_____________________________ |
|||||
WMFP, INC. | ||||||
By | ___________,_____________________________ |
|||||
KCNS, INC. | ||||||
By | ___________,_____________________________ |
|||||
SAH LICENSE, INC. | ||||||
By | ___________,_____________________________ |
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EXHIBIT A
Form of Promissory Note
[To Be Inserted]
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