SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the Quarter Ended Commission File Number
September 30, 2002 0-25596
- ---------------------------- --------------------------------------
SUMMIT AMERICA TELEVISION, INC.
(formerly known as SHOP AT HOME, INC.)
----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
TENNESSEE 62-1282758
--------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5388 Hickory Hollow Parkway
P. O. Box 305249
Nashville, Tennessee 37230-5249
---------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (615) 263-8000
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Common Stock $.0025 par value 41,958,247
- ------------------------------ -----------------------------------
(Title of class) (Shares outstanding at
October 11, 2002)
SUMMIT AMERICA TELEVISION, INC. AND SUBSIDIARIES
Index
Three Months Ended September 30, 2002 and 2001
- --------------------------------------------------------------------------
Part I FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Operations 4
Condensed Consolidated Statements of Cash Flows 5-6
Notes to Condensed Consolidated Financial Statements 7-14
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 15-19
Item 3 - Quantitative and Qualitative Disclosure About
Market Risk 19-20
Item 4 - Controls and Procedures 20-21
Part II OTHER INFORMATION
Item 1 - Legal Proceedings 22
Item 6 - Exhibits and Reports on Form 8-K 22
SUMMIT AMERICA TELEVISION, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Thousands of Dollars)
- ------------------------------------------------------------------------------------------------------------------------------
September 30, June 30,
2002 2002
--------------------- -------------------
(Unaudited)
ASSETS
Cash and cash equivalents 11,669 11,563
Restricted cash 4 4
Accounts receivable - trade, net 4,690 5,575
Inventories, net 14,349 13,117
Prepaid expenses 1,039 626
Deferred tax assets 2,287 2,306
--------------------- -------------------
Total current assets 34,038 33,191
Property & equipment, net 28,119 30,468
Deferred tax asset 24,047 20,891
Television station licenses 89,251 89,251
Goodwill 528 528
Other assets 3,786 3,751
--------------------- -------------------
Total assets 179,769 178,080
===================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses 36,177 30,561
Current portion - capital leases and long term debt 17,729 330
Deferred revenue 832 1,356
--------------------- -------------------
Total current liabilities 54,738 32,247
Capital leases 39 96
Long-term debt 75,000 92,500
Redeemable preferred stock:
Series A - Redeemable at $10 per share, $10 par value, 1,000,000 shares
authorized; 5,015 and 14,480 shares issued and outstanding at September 30,
2002 and June 30, 2002, respectively 50 145
Series B - $10 par value, 2,000 shares
authorized, 0 issued and outstanding - -
Series C - $10 par value, 10,000 shares
authorized, 0 issued and outstanding - -
Series D - $10 par value, 10,000 shares
authorized, 3,000 issued and outstanding 3,000 -
Stockholders' equity:
Common stock - $.0025 par value, 100,000,000 shares authorized; September 30,
2002 and June 30, 2002 and 41,958,247 and 41,953,747 shares issued at
September 30, 2002
and June 30, 2002, respectively 105 105
Non-voting common stock - $.0025 par value,
30,000,000 shares authorized, 0 issued and outstanding - -
Additional paid in capital 111,213 111,228
Accumulated deficit (60,539) (54,448)
Note receivable from related party (3,837) (3,793)
--------------------- -------------------
Total liabilities and stockholders' equity $ 179,769 $ 178,080
===================== ===================
The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.
SUMMIT AMERICA TELEVISION, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three Months Ended September 30, 2002 and 2001
(Thousands of Dollars)
2002 2001
------------------- ------------------
(Unaudited) (Unaudited)
Net revenues $ 53,141 $ 43,410
Operating expenses:
Cost of goods sold 34,084 28,413
Salaries and wages 4,564 4,310
Transponder and affiliate charges 12,673 8,215
General and administrative 5,328 4,405
Depreciation and amortization 2,861 2,921
------------------- ------------------
Total operating expenses 59,510 48,264
------------------- ------------------
Loss from operations (6,369) (4,854)
Interest income 73 182
Interest expense (2,933) (2,645)
Other income (expense) - (4)
------------------- ------------------
Net loss before taxes (9,229) (7,321)
Income tax benefit 3,138 2,489
------------------- ------------------
Net loss available for shareholders $ (6,091) $ (4,832)
=================== ==================
Basic and diluted loss per common share: $ (0.15) $ (0.12)
=================== ==================
The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.
SUMMIT AMERICA TELEVISION, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Three Months Ended September 30, 2002 and 2001
(Thousands of Dollars)
2002 2001
------------------- -------------------
(Unaudited) (Unaudited)
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss $(6,091) $(4,832)
Non-cash expenses/(income) included in net loss:
Depreciation and amortization 2,861 2,921
Gain on disposal of assets - -
Deferred tax benefit (3,137) (2,489)
Deferred interest 522 283
Provision for bad debt 195 347
Provision for inventory obsolescence - -
Changes in current and non-current items:
Accounts receivable 690 (2,893)
Inventories (1,232) (2,454)
Prepaid expenses and other assets (413) (397)
Accounts payable and accrued expenses 5,616 (330)
Deferred revenue (524) (647)
------------------- -------------------
Net cash used by operations (1,513) (10,491)
=================== ===================
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (503) (680)
Net change in restricted cash - -
Other assets (103) (7)
------------------- -------------------
Net cash used in investing activities (606) (687)
=================== ===================
CASH FLOWS FROM FINANCING ACTIVITIES:
Preferred stock dividends (23) -
Deferred finance charges (464) -
Repayments of debt and capitalized leases (158) (211)
Proceeds from preferred stock 3,000 -
Proceeds from debt - 17,500
Exercise of stock options and warrants 8 3
Issuance of shareholder notes (43) -
Preferred stock redemption (95) -
------------------- -------------------
Net cash provided (used) by financing activities 2,225 17,292
=================== ===================
NET INCREASE/(DECREASE) IN CASH 106 6,114
Cash beginning of period 11,563 19,557
------------------- -------------------
Cash end of period $11,669 $25,671
=================== ===================
The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.
SUMMIT AMERICA TELEVISION, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Continued)
Three Months Ended September 30, 2002 and 2001
(Thousands of Dollars)
- --------------------------------------------------------------------------------------------------------------------------------
2002 2001
-------------------------- --------------------------
(Unaudited) (Unaudited)
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $ 346 $ 222
========================== ==========================
SCHEDULE OF NONCASH FINANCING ACTIVITIES
Accrued Series D preferred stock dividends $ 23 $ -
========================== ==========================
The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.
SUMMIT AMERICA TELEVISION, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2002 (Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
All dollar values have been expressed in thousands (000s) unless
otherwise noted except for per share data. The financial information included
herein is unaudited for the quarter ended September 30, 2002 and 2001; however,
such information reflects all adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of the Company, necessary for a fair
presentation of financial condition and results of operations of the interim
periods. The condensed consolidated balance sheet data for the fiscal year ended
June 30, 2002 was derived from audited financial statements, but does not
include all disclosures required by generally accepted accounting principles.
The accounting policies followed by the Company are set forth in the
Company's financial statements in its Annual Report on Form 10-K for the fiscal
year ended June 30, 2002.
Certain amounts in the prior periods' condensed consolidated financial
statements have been reclassified for comparative purposes to conform to the
current year presentation.
NOTE 2 -- INVENTORY
The components of inventory at September 30, 2002 and June 30, 2002 are
as follows:
September 30, June 30,
2002 2002
---- ----
Products purchased for resale $ 14,966 $ 13,801
Valuation allowance (617) (684)
--------------------
------------------
Total $ 14,349 $ 13,117
==================== ==================
NOTE 3 - INDEBTEDNESS
On August 1, 2001, the Company obtained a new $17,500 revolving line of
credit from a financial institution. No principal payments are due before
maturity except as required if certain assets are sold. The facility requires
that interest be paid at least quarterly at a variable rate (6.875% at September
30, 2002) based on LIBOR or prime rate. The facility is collateralized by
substantially all of the Company's assets, except those which secure the Senior
Secured Notes. The facility contains covenants restricting the sale of assets,
mergers and investments and requiring that cash on hand exceed $3.0 million at
all times. This credit facility restricts the Company from paying dividends on
its common stock and has cumulative quarterly requirements for EBITDA, as
defined in the agreement. The Company failed to comply with the cumulative
EBITDA covenant for the six months ended December 31, 2001. On February 11,
2002, the Company was granted a waiver of the EBITDA violation within an
amendment to the loan agreement with the lender. The amendment also
prospectively eliminated the EBITDA covenant through June 30, 2002. The Company
was in compliance with all covenants at June 30, 2002. Subsequent to June 30,
2002, the Company and lender agreed to lower the EBITDA requirements for the
fiscal year ending June 30, 2003, to conform to the historical fiscal 2002
results. On September 3, 2002, the Company amended its $17.5 million senior
credit facility to reset its EBITDA covenant to conform to recent operating
results. Other provisions of the amendment are expected to require the Company
to dispose of television stations or obtain additional equity. Station disposals
are not required unless the sale price is at least equal to the appraised value.
The proceeds from any disposals or additional equity must be used to reduce the
balance of the credit facility. The lender also extended the maturity of the
loan from August 1, 2003 to September 30, 2003; this debt is accordingly
classified as currently payable in the September 30, 2002 balance sheet. The
facility was repaid in full on October 31, 2002, as part of the sale of Network
assets to Scripps.
The carrying value of the revolving line of credit approximates fair
value at September 30, 2002, as the base interest rate charged is at LIBOR and
is reset to reflect changes in LIBOR.
Senior Secured Notes in the amount of $75.0 million, classified as
long-term debt in the September 30, 2002 balance sheet, were repaid in full on
October 31, 2002 as a part of the sale of the Network assets to Scripps.
NOTE 4 - NET LOSS PER SHARE
The following table sets forth for the periods indicated the
calculation of net loss per share included in the Company's Consolidated
Statements of Operations:
Three Months Ending September 30,
2002 2001
---- ----
Numerator:
Loss from continuing operations $ (6,091) $ (4,832)
Preferred dividends 23 -
---------------------- ----------------------
Numerator for basic earnings per
share-income (loss) available to
common stockholders $ (6,114) $ (4,832)
====================== ======================
Denominator:
Denominator for basic earnings per
share-weighted-average shares 41,957 41,816
Effect of dilutive securities - -
---------------------- ----------------------
Denominator for diluted earnings per
share-adjusted weighted-average
shares and assumed conversions 41,957 41,816
====================== ======================
Basic and diluted loss from continuing
operations per share $ (0.15) $ (0.12)
====================== ======================
Although the amounts are excluded from the computations in loss years
because their inclusion would be anti-dilutive they are shown here for
informational and comparative purposes only:
Employee stock options 4,684 3,276
Warrants 2,000 2,000
Convertible preferred stock 3,005 16
NOTE 5 - SEGMENT DISCLOSURE
The segment disclosures for prior years have been restated to conform
with the current year presentation due to the discontinuation of the Collector's
Edge segment. The Company operates principally in two segments: Shop At Home
Network and shopathometv.com. The Company operates almost exclusively in the
United States.
The accounting policies of the segments are the same as those described
in the summary of significant accounting policies. Intersegment sales and
transfers are accounted for as if the sales or transfers were with third
parties, that is, at current market prices.
OPERATING SEGMENT DATA
Three Months Ended September 30,
2002 2001
---- ----
Revenue:
Network $ 47,301 $ 39,345
Shopathometv.com 5,840 4,065
------------------------- -----------------------
$ 53,141 $ 43,410
========================= =======================
Operating income (loss):
Network $ (7,326) $ (4,385)
Shopathometv.com 957 (469)
------------------------- -----------------------
$ (6,369) $ (4,854)
========================= =======================
Depreciation and amortization:
Network $ 2,297 $ 2,353
Shopathometv.com 564 568
------------------------- -----------------------
$ 2,861 $ 2,921
========================= =======================
Interest income:
Network $ 73 $ 182
Shopathometv.com - -
------------------------- -----------------------
$ 73 $ 182
========================= =======================
Interest expense:
Network $ 2,933 $ 2,645
Shopathometv.com - -
------------------------- -----------------------
$ 2,933 $ 2,645
========================= =======================
Income (loss) before taxes:
Network $ (10,186) $ (6,852)
Shopathometv.com 957 (469)
------------------------- -----------------------
$ (9,229) $ (7,321)
========================= =======================
Income tax (expense) benefit:
Network $ 3,463 $ 2,330
Shopathometv.com (325) 159
------------------------- -----------------------
$ 3,138 $ 2,489
========================= =======================
Total assets: September 30, 2002 June 30, 2002
Network $ 172,184 $ 167,726
Shopathometv.com 7,585 10,354
------------------------- -----------------------
$ 179,769 $ 178,080
========================= =======================
NOTE 6 - RECENT ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 143, Accounting for Asset Retirement Obligations. This Statement
requires that the fair value of a liability for an asset retirement obligation
be recognized in the period in which it is incurred. The associated asset
retirement costs are capitalized as part of the carrying amount of the
long-lived asset. An entity shall subsequently allocate that asset retirement
cost to expense using a systematic and rational method over its useful life.
This Statement applies to legal obligations associated with the retirement of
long-lived assets that result from the acquisition, construction, development
and/or the normal operation of a long-lived asset, except for certain
obligations of lessees. SFAS No. 143 is effective for the Company beginning on
July 1, 2002. Management does not believe the adoption of SFAS No. 143 will have
a material effect on the consolidated financial position, results of operations
or cash flows of the Company.
In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which replaces SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of. This Statement develops one accounting model for long-lived
assets to be disposed of by sale and requires that long-lived assets be measured
at the lower of carrying amount or fair value less cost to sell, whether
reported in continuing operations or in discontinued operations. This Statement
also modifies the reporting of discontinued operations to include all components
of an entity with operations that can be distinguished from the rest of the
entity and that will be eliminated from ongoing operations in a disposal
transaction. SFAS No. 144 is effective for the Company beginning on July 1,
2002. Management does not believe the adoption of SFAS No. 144 will have a
material effect on the consolidated financial position, results of operations or
cash flows of the Company.
In April 2002, the FASB issued SFAS No. 145, Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. The two most significant aspects of this pronouncement, with
respect to the Company, is the elimination of SFAS No. 4, Reporting Gains and
Losses from Extinguishment of Debt, and the amendment to SFAS No. 13, Accounting
for Leases. As a result of the elimination of SFAS No. 4, gains and losses from
extinguishment of debt should be classified as extraordinary items only if they
meet the criteria in Accounting Principles Board Opinion ("APB") No. 30,
Reporting the Results of Operations--Discontinued Events and Extraordinary
Items. The amendment to SFAS No. 13 changes the accounting treatment of certain
lease modifications that have economic effects similar to sale-leaseback
transactions to require those lease modifications to be accounted for in the
same manner as sale-leaseback transactions. The rescission of SFAS No. 4 is
effective for fiscal years beginning after May 15, 2002. The amendment to SFAS
No. 13 is effective for all transactions after May 15, 2002. Management does not
believe the adoption of SFAS No. 145 will have a material effect on the
consolidated financial position, results of operations or cash flows of the
Company. However, should the transaction discussed in Note 20 be consummated,
any gain or loss on the early extinguishment of the Company's long-term debt
would be classified in operations rather than classified as an extraordinary
item in the Company's consolidated statement of operations.
In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. SFAS No. 146 addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring). The principal
difference between this Statement and EITF Issue No. 94-3 relates to its
requirements for recognition of a liability for a cost associated with an exit
or disposal activity. SFAS No. 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized when the liability is
incurred rather than at the date of an entity's commitment to an exit plan. SFAS
No. 146 is effective for all exit or disposal activities after December 31,
2002. Management has not completed the process of determining the effect on the
consolidated financial position, results of operations or cash flows of the
Company.
The Company's carrying value of goodwill of $528 at September 30, 2002,
June 30, 2002 and 2001 is attributable to its network reporting segment. The
Company completed the first step of the transitional goodwill impairment test
during the quarter ended December 31, 2001 and determined that no potential
impairment exists. As a result, the Company has recognized no transitional
impairment loss in connection with the adoption of SFAS No. 142.
The Company has chosen June 30 of each year as its annual impairment
testing date for intangible assets not subject to amortization and goodwill. As
of September 30, 2002 and June 30, 2002, the Company has recorded no impairment
loss in connection with these assets.
NOTE 7 - SALE OF NETWORK ASSETS TO SCRIPPS
On October 31, 2002, the Company closed the sale of a 70% interest
in its television and Internet home shopping network to a subsidiary of The E.W.
Scripps Company ("Scripps"). The Company retains a 30% interest in the network
and also retains ownership of its five full-power television stations, certain
wireless spectrum assets and tax-loss carry-forward benefits.
The closing was completed on the basis of a Share Purchase Agreement
(the "Agreement") entered into by the parties dated August 14, 2002 and approved
by the Company's shareholders on October 30, 2002. Under the Agreement, the
Company transferred its network to a subsidiary (the "Operating Company") in a
two-tier holding company structure. The Operating Company received substantially
all the assets of the network as well as assuming certain of its current
liabilities. As part of the closing, the Company retired its obligations under a
$17.5 million senior credit facility and its $75,000,000 of 11% Senior Secured
Notes due 2005, but retained certain liabilities associated with pending
litigation and certain other contractual obligations. The Company sold a 70%
interest in the Operating Company for a cash purchase price of $49.5 million,
and the Company retained $3.0 million in cash.
The Company has the right to require Scripps to purchase its 30%
interest in the Operating Company during the period beginning on the second
anniversary of the closing and ending on the fifth anniversary, at a cash
purchase price equal to the fair market value of the 30% interest. After five
years, Scripps has the right to require the Company to sell the 30% interest to
Scripps at a price equal to fair market value. Scripps also has the right to
require the Company to sell its 30% interest in certain other events, including
a change of control of the Company, the Company's breach of certain obligations
to Scripps or the Company's insolvency. The Company is restricted in its ability
to sell its 30% interest to a third party without first offering to sell the
interest to Scripps. Scripps is restricted in its ability to sell all or a part
of its 70% interest to a third party, if such transfer would result in a change
of control of the Operating Company, unless the purchaser also agrees to
purchase the Company's interest. If the Company declines to sell its interest,
Scripps has the right, but not the obligation, to require the Company to sell
its interest at the same pricing.
Scripps has also loaned $47.5 million to the Company payable in
three years. The loan bears interest at 6%, payable quarterly, and is secured by
an assignment of the Company's 30% interest in the Operating Company and the
encumbrance of the assets of the Company's television stations located in the
Boston, San Francisco and Cleveland markets. The Company used the purchase price
and these loan proceeds to retire debt and for working capital purposes.
The Operating Company is governed by a five member board, three
members of which are selected by Scripps and two selected by the Company.
Scripps has agreed to loan up to $35.0 million to the Operating Company to be
used for working capital purposes.
The Company has entered into a three year affiliation agreement with
the Operating Company, under which the Company agrees to carry the network
programming on its five television stations, located in the Boston, San
Francisco, Cleveland, Raleigh and Bridgeport, Connecticut, markets. Company
retains the right to terminate the affiliation agreement after 15 months.
In addition, on August 15, 2002, Scripps purchased $3,000,000
aggregate amount of newly authorized Series D Senior Redeemable Preferred Stock
from the Company. The shares of Preferred Stock will mature on April 15, 2005,
at which time the Company will be obligated to redeem the shares for a price
equal to their original purchase price plus accrued and unpaid dividends.
Dividends of 6% are payable quarterly, with the Company having the right to
defer payment of the dividends until maturity
The shares of Preferred Stock are not convertible to any other
shares of capital stock of the Company and do not vote (unless granted that
right by statute). The shares of Preferred Stock carry a liquidation preference
to the Company's Common Stock and are on parity with the Company's outstanding
shares of Series A Preferred Stock. Other than the Series A and D Preferred
Stock, the Company has no other series of preferred stock outstanding.
NOTE 8 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The following is summarized condensed consolidating financial
information for the Company, segregating the Parent from the guarantor
subsidiaries of the $75,000 11% Senior Secured Notes. The guarantor subsidiaries
are wholly owned subsidiaries of the Company and guarantees are full,
unconditional, joint and several. The separate company financial statements of
each guarantor subsidiary have not been included herein because management does
not believe that their inclusion would be more meaningful to investors than the
presentation of the condensed consolidating financial information presented
below.
CONSOLIDATING BALANCE SHEET DATA
September 30, 2002 June 30, 2002
------------------ -------------
GuarantorNon-Guarantor Guarantor Non-Guarantor
Parent SubsidiariesSubsidiariesEliminationsConsolidatedParentSubsidiariesSubsidiariesEliminationsConsolidated
-------------------------------------------------------------------------------------------------------------
Assets:
Cash and cash equivalents $ 11,656 $ 13 $ - $ - $11,669 $ 11,542 $ 21 $ - $ - $ 11,563
Restricted cash 4 - - - 4 4 - - - 4
Accounts receivable 58,638 - - (53,948) 4,690 58,214 - - (52,639) 5,575
Inventories 14,349 - - - 14,349 13,117 - - - 13,117
Prepaid expenses 987 52 - - 1,039 615 11 - - 626
Deferred tax assets 2,287 - - - 2,287 2,306 - - - 2,306
---------- -------- ----------- --------- -------- --------- ---------- ------- ---------- -------------
Total current assets 87,921 65 - (53,948) 34,038 85,798 32 - 52,639) 33,191
Property and equipment,
Net 9,836 6,330 11,953 - 28,119 12,403 6,037 12,028 - 30,468
Deferred tax assets 41,487 - - (17,440) 24,047 38,245 - - (17,354) 20,891
Television station licenses - 89,251 - - 89,251 - 89,251 - - 89,251
Goodwill 528 - - - 528 528 - - - 528
Other assets 3,618 168 - - 3,786 3,584 167 - - 3,751
Investment in subsidiaries 23,816 22,748 - (46,564) - 23,816 22,748 - (46,564) -
---------- -------- ----------- --------- -------- -------- ---------- ------- ---------- -------------
Total assets $ 167,206 $118,562 $ 11,953$(117,952) $179,769 $164,374 $118,235 $12,028 $(116,557) $ 178,080
========== ======== =========== ========= ======== ========= ========== ======= ========== =============
Liabilities and
Stockholders' Equity:
Current portion--capital
Leases and long-term
Debt $17,729 $ - $ - $ - $17,729 $ 330 $ - $ - $ - $ 330
Accounts payable and
Accrued expenses 35,678 27,952 13,522 (40,975) 36,177 29,926 27,879 13,522 (40,766) 30,561
Deferred revenue 832 - - - 832 1,356 - - - 1,356
---------- -------- ----------- --------- -------- --------- ---------- ------- ---------- -------------
Total current
liabilities 54,239 27,952 13,522 (40,975) 54,738 31,612 27,879 13,522 (40,766) 32,247
Long-term debt including
Capital leases 75,039 - - - 75,039 92,596 - - - 92,596
Deferred income taxes - 17,440 - (17,440) - - 17,354 - (17,354) -
Redeemable preferred
Stock 3,050 - - - 3,050 145 - - - 145
Common stock 105 20 - (20) 105 105 20 - (20) 105
Additional paid-in
capital 111,213 46,545 - (46,545) 111,213 111,228 46,545 - (46,545) 111,228
Accumulated earnings
(deficit) (72,603) 26,605 (1,569) (12,972) 60,539) (67,519) 26,437 (1,494) (11,872) (54,448)
Notes receivable (3,837) - - - (3,837) (3,793) - - - (3,793)
---------- -------- ----------- --------- -------- --------- ---------- ------- ---------- -------------
Total liabilities and
Stockholders'
equity $167,206 $118,562 $ 11,953 $(117,952) $179,769 $164,374 $ 118,235 $12,028 $(116,557) $ 178,080
========== ======== =========== ========= ======== ========= ========== ======= ========= =============
Consolidating Statement of Operations and Cash Flow Data
For the Three Months Ended:
September 30, 2002 September 30, 2001
Guarantor Non-Guarantor Guarantor Non-Guarantor
ParentSubsidiariesSubsidiariesEliminationsConsolidatedParentSubsidiariesSubsidiariesEliminationsConsolidated
------------------------------------------------------------------------------------------------------------
Net revenues 50,915 2,226 - 53,141 41,246 2,164 - 43,410
Cost of goods sold 34,084 - - 34,084 28,413 - - 28,413
Operating expenses 23,379 1,972 75 - 25,426 17,589 2,187 75 - 19,851
----------- ---------- ------------ -------- ---------- ----------- -------- ---------- --------- ----------
Income (loss) from
Operations (6,548) 254 (75) - (6,369) (4,756) (23) (75) - (4,854)
Interest income 73 - - - 73 181 1 - 182
Interest expense (2,933) - - - (2,933) (2,645) - (2,645)
Other income (expense) - - - - - (4) - (4)
----------- ---------- ------------ -------- ---------- ----------- -------- ---------- --------- ----------
Net income (loss) before
taxes (9,408) 254 (75) - (9,229) (7,224) (22) (75) - (7,321)
Income tax (expense)
benefit 3,224 (86) - - 3,138 2,481 8 - - 2,489
----------- ---------- ------------ -------- ---------- ----------- -------- ---------- --------- ----------
Net income (loss) (6,184) 168 (75) - (6,091) (4,743) (14) (75) - (4,832)
=========== ========== ============ ======== ========== =========== ======== ========== ========= ==========
CASH FLOWS
Cash provided by
(used in) operations (1,959) 446 - - (1,513) (10,641) 150 - - (10,491)
Cash provided by
(used in) investing
activities (153) (453) - - (606) (554) (133) - - (687)
Cash provided by
(used in) financing
activities 2,225 - - - 2,225 17,292 - - - 17,292
----------- ---------- ------------ -------- ---------- ----------- -------- ---------- --------- ----------
Increase (decrease) in
cash 113 (7) - - 106 6,097 17 - - 6,114
Cash at beginning of
period 11,542 21 - - 11,563 19,562 (5) - - 19,557
----------- ---------- ------------ -------- ---------- ----------- -------- ---------- --------- ----------
Cash at end of period 11,655 14 - - 11,669 25,659 12 - - 25,671
=========== ========== ============ ======== ========== =========== ======== ========== ========= ==========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the "Selected Financial Data" and the Company's consolidated financial
statements and related notes included elsewhere herein.
Critical Accounting Policies and Estimates
Management's Discussion and Analysis of Financial Condition and Results
of Operations discusses the Company's consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of these financial statements
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Management continually
evaluates its estimates and assumptions. Management bases its estimates and
assumptions on historical information and on various other factors that are
believed to be reasonable under the circumstances. Actual results may differ
from these estimates. Management believes the following critical accounting
policies affect the more significant assumptions and estimates used in the
preparation of its consolidated financial statements:
The carrying value of the Company's goodwill and television station
licenses is tested for impairment in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 142, Goodwill and Other Intangible Assets. If
an impairment test indicates that the carrying value of goodwill is impaired,
the carrying value of goodwill is reduced by the amount by which the carrying
value exceeds the implied fair value of that goodwill. If an impairment test
indicates that the carrying value of the television station licenses is
impaired, the carrying value of the television station licenses is reduced by
the amount by which the carrying value exceeds the fair value of the television
station licenses. Both the implied fair value of goodwill and the fair value of
the television station licenses are based upon assumptions which may prove to be
untrue in the future.
The assessment of the recoverability of the carrying value of
long-lived assets with finite lives is performed in accordance with SFAS No.
121, Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to
Be Disposed Of. If circumstances suggest that long-lived assets with finite
lives may be impaired and a review indicates that the carrying value will not be
recoverable, as determined based on the projected undiscounted future cash
flows, the carrying value is reduced to its estimated fair value. The
determination of cash flows is based upon assumptions and forecasts that may not
occur.
The Company recognizes product sales upon delivery of merchandise to
the customer. Sales are reduced by estimated sales returns to arrive at net
sales. The Company's return policy allows merchandise to be returned at the
customer's discretion within 30 days of the date of delivery. The estimated
return percentage for the three months ended September 30, 2002, was arrived at
based upon empirical evidence of actual returns, and the percentage was applied
against sales to arrive at net sales. Actual levels of merchandise returned may
vary from these estimates.
Certain of the Company's accounts receivable are subject to credit
losses. The Company utilizes an installment credit process called "stretch pay"
which enables its customers to purchase merchandise over an expanded period from
two to five months. The reserve for expected credit losses is based on past
experience with similar accounts receivable. It is possible, however, that the
accuracy of the Company's estimation process could be materially affected as the
composition of this pool of accounts receivable changes over time. Management
continually reviews and refines the estimation process to make it as current as
possible; however, there can be no guarantee that estimated credit losses on
these accounts receivable will be accurate.
The Company identifies slow-moving or obsolete inventories and
estimates appropriate loss provisions. These loss provisions are calculated with
the proviso that the majority of the Company's inventories are eligible for
return under various vendor return programs. While the Company has no reason to
believe its inventory return privileges will be discontinued in the future, its
risk of loss associated with obsolete or slow-moving inventories would increase
if such were to occur.
The Company records a valuation allowance to reduce its net deferred
tax assets to the amount that is more likely than not to be realized. While
management has considered future taxable income and ongoing prudent and feasible
tax planning strategies in assessing the need for its valuation allowance, in
the event the Company were to determine that it would be able to realize its
deferred tax assets in the future in an amount in excess of the net recorded
amount, an adjustment to the valuation allowance would decrease income tax
expense in the period such determination was made. Likewise, should the Company
determine that it would not be able to realize all or part of its net deferred
tax assets in the future, an adjustment to its valuation allowance would
increase income tax expense in the period such determination was made.
Overview
The following table sets forth for the periods indicated the percentage
relationship to net revenues of certain items included in the Company's
Statements of Operations:
Three Months Ended
September 30,
2002 2001
---- ----
Net revenues 100.0 % 100.0 %
Cost of goods sold 64.1 65.5
Salaries and wages 8.6 9.9
Transponder and affiliate charges 23.9 18.9
General and administrative expenses 10.0 10.2
Depreciation and amortization 5.4 6.7
Total operating expenses 112.0 111.2
Interest income 0.1 0.4
Interest expense 5.5 6.1
Other income - -
Net loss before income taxes (17.4) (16.9)
Income tax benefit 5.9 5.8
Net loss (11.5) (11.1)
Three months ended September 30, 2002 vs. three months ended September 30, 2001
Net Revenues. The Company's net revenues for the quarter ended
September 30, 2002, were $53.1 million, an increase of 22.4% from $43.4 million
for the same quarter in 2001. Returns for the first quarter increased from $9.3
million or 18.7% of sales last year to $13.8 million or 22.0% of sales this
year. Chargebacks decreased from $0.2 million or 0.5% of sales last year to $0.1
million or 0.1% of sales this year. The core business of sales through the
television network accounted for 89.0% of total net revenues; shopathometv.com
represented 11.0% of the Company's total net revenues or $5.8 million. The
increase in net revenues was primarily due to a greater number of homes reached
by the television network due to the successful launch of the Network on
DirecTV, the largest DBS system, in late October 2001.
Cost of Goods Sold. Cost of goods sold represents the purchase price of
merchandise and freight. For the quarter ended September 30, 2002, the cost of
goods sold decreased as a percentage of net revenues to 64.1% from 65.5% in the
comparable 2001 period. The improvement in cost of goods in relation to net
revenues was due primarily to better merchandise planning and price negotiation.
Salaries and Wages. Salaries and wages for the quarter ended September
30, 2002 were $4.6 million, an increase of $0.3 million over the comparable 2001
quarter. Salaries and wages, as a percent of revenues, decreased to 8.6% in the
2002 period compared to 9.9% in the 2001 period. The increase was due to the
addition of executive personnel, including Co-chief Executive Officers,
subsequent to October 1, 2001.
Transponder and Affiliate Charges. Transponder and affiliate charges
for the quarter ended September 30, 2002 were $12.7 million, an increase of $4.5
million or 54.3% over the comparable 2001 quarter. The increase was due to the
addition of households to the Network's reach, although the average cost per
household declined.
General and Administrative. General and administrative expenses for the
quarter ended September 30, 2002 were $5.3 million, an increase of $0.9 million
or 20.9% over the comparable 2001 quarter. The increase was primarily due to
expenses which rose in proportion to sales, such as credit card fees, and to
$0.5 million in costs associated with the sale of Network assets to Scripps
described below.
Depreciation and Amortization. Depreciation and amortization for the
quarter ended September 30, 2002 was $2.9 million, virtually unchanged from last
year.
Interest. Interest expense was $2.9 million compared to $2.6 million in
the prior period. The increase was due to additional fees associated with the
Company's revolving credit line.
Sale of Network Assets to Scripps
On October 31, 2002, the Company closed the sale of a 70% interest
in its television and Internet home shopping network to a subsidiary of The E.W.
Scripps Company ("Scripps"). The Company retains a 30% interest in the network
and also retains ownership of its five full-power television stations, certain
wireless spectrum assets and tax-loss carry-forward benefits.
The closing was completed on the basis of a Share Purchase Agreement
(the "Agreement") entered into by the parties dated August 14, 2002 and approved
by the Company's shareholders on October 30, 2002. Under the Agreement, the
Company transferred its network to a subsidiary (the "Operating Company") in a
two-tier holding company structure. The Operating Company received substantially
all the assets of the network as well as assuming certain of its current
liabilities. As part of the closing, the Company retired its obligations under a
$17.5 million senior credit facility and its $75,000,000 of 11% Senior Secured
Notes due 2005, but retained certain liabilities associated with pending
litigation and certain other contractual obligations. The Company sold a 70%
interest in the Operating Company for a cash purchase price of $49.5 million,
and the Company retained $3.0 million in cash.
The Company has the right to require Scripps to purchase its 30%
interest in the Operating Company during the period beginning on the second
anniversary of the closing and ending on the fifth anniversary, at a cash
purchase price equal to the fair market value of the 30% interest. After five
years, Scripps has the right to require the Company to sell the 30% interest to
Scripps at a price equal to fair market value. Scripps also has the right to
require the Company to sell its 30% interest in certain other events, including
a change of control of the Company, the Company's breach of certain obligations
to Scripps or the Company's insolvency. The Company is restricted in its ability
to sell its 30% interest to a third party without first offering to sell the
interest to Scripps. Scripps is restricted in its ability to sell all or a part
of its 70% interest to a third party, if such transfer would result in a change
of control of the Operating Company, unless the purchaser also agrees to
purchase the Company's interest. If the Company declines to sell its interest,
Scripps has the right, but not the obligation, to require the Company to sell
its interest at the same pricing.
Scripps has also loaned $47.5 million to the Company payable in
three years. The loan bears interest at 6%, payable quarterly, and is secured by
an assignment of the Company's 30% interest in the Operating Company and the
encumbrance of the assets of the Company's television stations located in the
Boston, San Francisco and Cleveland markets. The Company used the purchase price
and these loan proceeds to retire debt and for working capital purposes.
The Operating Company is governed by a five member board, three
members of which are selected by Scripps and two selected by the Company.
Scripps has agreed to loan up to $35.0 million to the Operating Company to be
used for working capital purposes.
The Company has entered into a three year affiliation agreement with
the Operating Company, under which the Company agrees to carry the network
programming on its five television stations, located in the Boston, San
Francisco, Cleveland, Raleigh and Bridgeport, Connecticut, markets. Company
retains the right to terminate the affiliation agreement after 15 months.
In addition, on August 15, 2002, Scripps purchased $3,000,000
aggregate amount of newly authorized Series D Senior Redeemable Preferred Stock
from the Company. The shares of Preferred Stock will mature on April 15, 2005,
at which time the Company will be obligated to redeem the shares for a price
equal to their original purchase price plus accrued and unpaid dividends.
Dividends of 6% are payable quarterly, with the Company having the right to
defer payment of the dividends until maturity.
The shares of Preferred Stock are not convertible to any other
shares of capital stock of the Company and do not vote (unless granted that
right by statute). The shares of Preferred Stock carry a liquidation preference
to the Company's Common Stock and are on parity with the Company's outstanding
shares of Series A Preferred Stock. Other than the Series A and D Preferred
Stock, the Company has no other series of preferred stock outstanding.
Liquidity and Capital Resources
As a result of the completed sale of the Network assets to
Scripps on October 31, 2002, the Company believes that it has sufficient
liquidity for continuing operations. The Company projects that beginning cash on
hand resulting from the sale, combined with the revenue from Scripps related to
the affiliation of the Company's five owned and operated television stations,
will be sufficient to fund operating expenses. The Company's forecasted capital
expenditures relate primarily to the construction of digital transmission
facilities at three of its television stations which will total an estimated
$2.4 million. The timing of these expenditures is subject to governmental
approval. It is possible that the Company may require additional funding to
complete the digital facilities. Management believes that such funding would be
available from lenders.
New Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 143, Accounting for Asset Retirement Obligations. This Statement
requires that the fair value of a liability for an asset retirement obligation
be recognized in the period in which it is incurred. The associated asset
retirement costs are capitalized as part of the carrying amount of the
long-lived asset. An entity shall subsequently allocate that asset retirement
cost to expense using a systematic and rational method over its useful life.
This Statement applies to legal obligations associated with the retirement of
long-lived assets that result from the acquisition, construction, development
and/or the normal operation of a long-lived asset, except for certain
obligations of lessees. SFAS No. 143 is effective for the Company beginning on
July 1, 2002. Management does not believe the adoption of SFAS No. 143 will have
a material effect on the consolidated financial position, results of operations
or cash flows of the Company.
In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which replaces SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of. This Statement develops one accounting model for long-lived
assets to be disposed of by sale and requires that long-lived assets be measured
at the lower of carrying amount or fair value less cost to sell, whether
reported in continuing operations or in discontinued operations. This Statement
also modifies the reporting of discontinued operations to include all components
of an entity with operations that can be distinguished from the rest of the
entity and that will be eliminated from ongoing operations in a disposal
transaction. SFAS No. 144 is effective for the Company beginning on July 1,
2002. Management does not believe the adoption of SFAS No. 144 will have a
material effect on the consolidated financial position, results of operations or
cash flows of the Company.
In April 2002, the FASB issued SFAS No. 145, Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. The two most significant aspects of this pronouncement, with
respect to the Company, is the elimination of SFAS No. 4, Reporting Gains and
Losses from Extinguishment of Debt, and the amendment to SFAS No. 13, Accounting
for Leases. As a result of the elimination of SFAS No. 4, gains and losses from
extinguishment of debt should be classified as extraordinary items only if they
meet the criteria in Accounting Principles Board Opinion ("APB") No. 30,
Reporting the Results of Operations--Discontinued Events and Extraordinary
Items. The amendment to SFAS No. 13 changes the accounting treatment of certain
lease modifications that have economic effects similar to sale-leaseback
transactions to require those lease modifications to be accounted for in the
same manner as sale-leaseback transactions. The rescission of SFAS No. 4 is
effective for fiscal years beginning after May 15, 2002. The amendment to SFAS
No. 13 is effective for all transactions after May 15, 2002. Management does not
believe the adoption of SFAS No. 145 will have a material effect on the
consolidated financial position, results of operations or cash flows of the
Company. However, any gain or loss on the early extinguishment of the Company's
long-term debt will be classified in operations rather than classified as an
extraordinary item in the Company's consolidated statement of operations.
In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. SFAS No. 146 addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring). The principal
difference between this Statement and EITF Issue No. 94-3 relates to its
requirements for recognition of a liability for a cost associated with an exit
or disposal activity. SFAS No. 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized when the liability is
incurred rather than at the date of an entity's commitment to an exit plan. SFAS
No. 146 is effective for all exit or disposal activities after December 31,
2002. Management has not completed the process of determining the effect on the
consolidated financial position, results of operations or cash flows of the
Company.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of loss that may affect the financial
position, results of operations, or cash flows of the Company due to adverse
changes in financial market prices, including interest rate risk, foreign
currency exchange rate risk, commodity price risk, and other relevant market
rate or price risks.
The Company is exposed to some market risk through interest rates
related to its investment of its current cash and cash equivalents of
approximately $11.7 million as of September 30, 2002. These funds are generally
invested in highly liquid instruments with short-term maturities. As such
instruments mature and the funds are re-invested, the Company is exposed to
changes in market interest rates. This risk is not considered material and the
Company manages such risk by continuing to evaluate the best investment rates
available for short-term, high quality investments.
The Company is not exposed to market risk through potential interest
rate fluctuation on its $75.0 million Senior Secured Notes, because interest
accrues on this debt at the fixed rate of 11%. At June 30, 2002, the Company
does incur some market risk on its $17.5 million senior credit facility, which
accrues interest at a floating rate based on LIBOR (London Interbank Offered
Rate) or the lender's prime rate at the Company's option. The Company has chosen
not to incur hedging expense related to this facility at this time.
Certain risks are associated with the products sold by the Company,
namely that product prices are subject to changes in market conditions. The
Company manages this risk by maintaining minimal inventory levels as a
percentage of its revenues. The Company also reserves the right, with many
vendors, to return products. The Company's products are purchased domestically,
and, consequently, there is no foreign currency exchange risk.
The Company has no activities related to derivative financial
instruments or derivative commodity instruments.
ITEM 4. CONTROLS AND PROCEDURES
We maintain a system of controls and procedures designed to provide
reasonable assurance as to the reliability of the financial statements and other
disclosures included in this report, as well as to safeguard assets from
unauthorized use or disposition. We evaluated the effectiveness of the design
and operation of our disclosure controls and procedures under supervision and
with the participation of management, including our chief Executive Officer and
Chief Financial Officer, within 90 days prior to the filing date of this report.
Based upon that evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures are effective in
timely alerting them to material information required to be included in our
periodic Securities and Exchange Commission filings. No significant changes were
made to our internal controls or other factors that could significantly affect
these controls subsequent to the date of their evaluation.
FORWARD-LOOKING STATEMENTS
This report includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Summit America Television, Inc. (the "Company" or "Summit
America Television") based these forward-looking statements largely on its
current expectations and projections about future events and financial trends
affecting the financial condition of its business. These forward-looking
statements are subject to a number of risks, uncertainties and assumptions about
Summit America Television, including, among other things:
o general economic and business conditions, both nationally and in the
Company's markets;
o the Company's expectations and estimates concerning future financial
performance and financing plans;
o anticipated trends in the Company's business;
o existing and future regulations affecting the Company's business;
o the Company's successful implementation of its business strategy;
o fluctuations in the Company's operating results;
o technological changes in the television and Internet industry;
o restrictions imposed by the terms of the Company's indebtedness;
o significant competition in the sale of consumer products through
electronic media;
o the Company's dependence on exclusive arrangements with vendors;
o the Company's ability to achieve broad recognition of its brand names;
o continued employment of key personnel and the ability to hire qualified
personnel; and
o legal uncertainties and possible security breaches associated with the
Internet.
In addition, in this report, the words "believe," "may," "will,"
"estimate," "continue," "anticipate," "intend," "expect" and similar
expressions, as they relate to Summit America Television, its business or
management, are intended to identify forward-looking statements.
The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise after the date of this report. Because of these risks and
uncertainties, the forward-looking events and circumstances discussed in this
report may not occur and actual results could differ materially from those
anticipated or implied in the forward-looking statements.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
A lawsuit was filed against the Company in January 2000 by a former
vendor, Classic Collectibles, LLC, in state Chancery Court in Chattanooga,
Tennessee. The vendor alleges that the Company improperly canceled certain
orders, that certain amounts it paid to the Company under a written agreement
should be refunded, and that certain amounts were left owing on the account. The
vendor is also claiming entitlement to alleged lost profits of approximately $2
million, asserting the Company did not provide an amount of broadcast network
time in 1999 that the vendor alleges was orally promised in connection with the
written agreement. The Company has filed its answer and has vigorously pursued
its defense of this action. The case is currently set for a jury trial in
November 2002.
The Company is subject to routine litigation arising from the normal
and ordinary operation of its business. The Company believes that such
litigation is not likely to have a material adverse effect on its financial
position, results of operations or cash flows.
Item 6. Reports On Form 8-K.
Form 8-K Reports
The Company filed two reports on Form 8-K during the quarter
ending September 30, 2002, reporting the following:
Form 8-K filed August 16, 2002, reporting that on August 14,
2002, Shop at Home, Inc. entered into a Share Purchase Agreement with a
subsidiary of The E.W. Scripps Company pursuant to which the Company will sell a
70% interest in its television and Internet home shopping network to Scripps.
The transaction is scheduled for approval of the shareholders of the Company at
a meeting scheduled for October 16, 2002, and is also subject to antitrust
clearance under the Hart-Scott-Rodino Act. The Company will retain a 30%
interest in the network and will also retain ownership of its five full-power
television stations, certain wireless spectrum assets and tax-loss carry-forward
benefits.
Form 8-K filed September 9, 2002, reporting that on September
9, 2002, Shop At Home, Inc. held a conference call to discuss the Company's
financial results for its fiscal year 2002 ending June 30, 2002. These results
were filed with the SEC on the Form 10-K filed on September 6, 2002. The Company
elected to voluntarily file a copy of this transcript with Form 8-K to ensure
that the contents of such conference call are fully disseminated and that any
investor of Shop At Home, Inc. have full access to such transcript.
Exhibits
3(i).9 Charter amendemnt
10.74 Loan Agreement Scripps
10.75 Severance Woods
10.76 Severance Tek
10.77 Severance Merrihew
10.78 Severance Smith
99.1 Sarbanes-Oxley Act of 2002
99.2 Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this Quarterly Report on Form 10-Q to
be signed on its behalf by the undersigned, thereunto duly authorized.
SUMMIT AMERICA TELEVISION, INC.
(formerly know as SHOP AT HOME, INC.)
By: /s/ George R. Ditomassi Date: 10/31/02
-----------------------------------
George R. Ditomassi
Co-Chief Executive Officer, Director
By: /s/ Frank A. Woods Date: 10/31/02
-----------------------------------
Frank A. Woods
Co-Chief Executive Officer, Director
By: /s/Arthur D. Tek Date: 10/31/02
-----------------------------------
Arthur D. Tek
Executive Vice President and Chief Financial Officer
CERTIFICATION
I, George R. Ditomassi, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Shop At Home, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report.
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13A-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in the
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: October 31, 2002
/s/ George R. Ditomassi
George R. Ditomassi
Co-Chief Executive Officer
CERTIFICATION
I, Frank A. Woods, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Shop At Home, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report.
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13A-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in the
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: October 31, 2002
/s/ Frank A. Woods
Frank A. Woods
Co-Chief Executive Officer
CERTIFICATION
I, Arthur D. Tek, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Shop At Home, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report.
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13A-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in the
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: October 31, 2002
/s/ Arthur D. Tek
Arthur D. Tek
Chief Financial Officer
Exhibit 3(i).9
ARTICLES OF AMENDMENT
TO AMENDED AND RESTATED CHARTER OF
SHOP AT HOME, INC.
Pursuant to the provisions of Section 48-20-106 of the Tennessee
Business Corporations Act, the undersigned corporation adopts the following
Articles of Amendment to its Amended and Restated Charter:
1. The name of the Corporation is
Shop At Home, Inc.
2. Article 1 of the Corporation's Amended and Restated Charter is
amended and fully restated as follows:
The name of the Corporation is:
Summit America Television, Inc.
3. This amendment was duly adopted as of October 30, 2002, by a
majority vote of all of the issued and outstanding shares of
the Corporation.
4. This amendment is to be effective upon filing in the Office of
the Secretary of State of the State of Tennessee.
EXECUTED as of this 30th day of October, 2002.
SHOP AT HOME, INC.
BY: /s/ Frank A. Woods
Frank A. Woods,
Co-Chief Executive Officer
BY: /s/ George R. Ditomassi
George R. Ditomassi
Co-Chief Executive Officer
Filed
State of Tennessee
Secretary of State
2002 OCT 31
Exhibit 10.74
LOAN AND SECURITY AGREEMENT
BETWEEN
THE E.W. SCRIPPS COMPANY,
AS THE LENDER,
AND
SUMMIT AMERICA TELEVISION, INC.
(f/k/a SHOP AT HOME, INC.),
KCNS, INC.,
WMFP, INC.,
WOAC, INC.,
AND
SAH LICENSE, INC.
AS THE BORROWERS
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") is dated as of October 31,
2002, among SUMMIT AMERICA TELEVISION, INC. (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 E.W. SCRIPPS COMPANY, an Ohio corporation, as the lender
(the "Lender"). Capitalized and certain other terms are defined
in Section 8 of this Agreement.
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
1.1 Loan. Subject to the terms and conditions of this Agreement, the Borrowers
agree to borrow from the Lender, and the Lender agrees to loan to the Borrowers,
the principal sum of $47,500,000.00 (the "Loan"). The obligation to repay the
Loan pursuant to this Agreement will be evidenced by a promissory note (the
"Note") of the Borrowers in the principal amount of $47,500,000.00 in the form
attached hereto as Exhibit A and made a part hereof, and on the terms set forth
therein.
1.2 Prepayment. The Loan may be prepaid prior to maturity at any time or from
time to time, in whole or in part, without penalty or premium. If the Borrowers
make any prepayment of the Loan, such prepayment will be applied first to
payment of accrued but unpaid interest on the principal balance of the Loan
through the date of prepayment and then to payment of principal. After any
partial prepayment, regular payments will continue to be due and payable in the
same amounts and at the same times as required by the Note prior to prepayment
until the Loan is paid in full.
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.
1.3 Use of Proceeds. The Borrowers shall use the Loan proceeds solely to fund a
portion of the payments necessary for the Borrowers to extinguish all of their
Indebtedness existing on the date hereof under SATH's $75,000,000 Senior Secured
Notes due April 2005 and the Loan and Security Agreement dated August 1, 2001
between SATH, as Borrower, and Foothill Capital Corporation, as Lender, and all
encumbrances in respect thereof.
SECTION 2
CREATION OF SECURITY INTEREST
2.1 Grant of Security Interest. The Borrowers hereby grant to the Lender a
continuing valid first lien and security interest (individually, the "Security
Interest" and collectively, the "Security Interests") in all of their respective
right, title and interest in and to all currently existing and hereafter
acquired or arising Collateral in order to secure prompt repayment of any and
all of the Obligations in accordance with the terms and conditions of the Loan
Documents and in order to secure prompt performance by each Borrower of its
respective covenants and duties under the Loan Documents. The Security Interest
shall attach to all of the Collateral without any further action on the part of
the Lender or the Borrowers. Notwithstanding any other provision of this
Agreement or any of the other Loan Documents, no Borrower has any authority,
whether express or implied, to Transfer or to create any Encumbrance on any of
the Collateral.
2.2 Evidence of Security Interest. The Security Interest shall be evidenced and
enhanced by this Agreement, the Financing Statements, the Pledge Agreements and
the Collateral Assignments of Leases. The Borrowers shall take all steps
required by any of the foregoing documents to perfect or enhance the Security
Interest, including without limitation by delivering such certificates and stock
powers as may be necessary to perfect the Security Interest in the Pledged Stock
and to the extent not delivered as of the Closing Date by using commercially
reasonable best efforts to obtain the delivery of landlord lien waivers and
estoppels as to any leased real property.
2.3 Broadcast Licenses as Collateral. Notwithstanding anything in the definition
of "Collateral" to the contrary, to the extent that this Agreement or any other
Loan Document purports to require any Borrower to grant a security interest to
the Lender in any Broadcast License now owned or hereafter acquired, the Lender
will have only a lien and security interest in such Broadcast License at such
time and to the extent that a lien and security interest in such Broadcast
License is permitted under applicable Legal Requirements. Notwithstanding
anything 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 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.
2.5 Power of Attorney. The Borrowers hereby irrevocably make, constitute and
appoint the Lender and any officers, employees or agents designated by the
Lender as the Borrowers' true and lawful attorney, with power (a) to sign the
name of any Borrower on any of the documents described in this Section 2, (b) at
any time that an Event of Default has occurred and is continuing, to sign the
name of any Borrower on any document relating to the Collateral, (c) to send
requests for verification of accounts, (d) to endorse the name of any Borrower
on any checks, instruments or items of payment that may come into the Lender's
possession, (e) at any time that an Event of Default has occurred and is
continuing, to make, settle and adjust any claims under a policy of insurance of
any Borrower and (f) at any time that an Event of Default has occurred and is
continuing, to settle and adjust disputes and claims respecting the accounts,
chattel paper or general intangibles directly with the account debtors for
amounts and upon terms that the Lender determines in its sole discretion. The
Lender's appointment as the Borrowers' attorney, and each and every one of the
Lender's rights and powers, being coupled with an interest, are irrevocable
until the Obligations have been fully repaid and performed.
2.6 Right to Inspect. The Lender and its officers, employees or agents will have
the right, at any time upon reasonable advance notice and from time to time but
not more often than quarterly, to inspect the books and records of the Borrowers
and to assess, check, test and appraise the Collateral, in either case to verify
the financial condition of any Borrower or the amount, quality, value or
condition of the Collateral.
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:
3.1 Delivery of Documents. The Borrowers shall have delivered to the Lender each
of the following documents, each in form and substance satisfactory to the
Lender in its sole discretion:
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 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.
(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.
3.2 Share Purchase Agreement. All of the terms and conditions provided under the
Share Purchase Agreement dated as of August 14, 2002 between Scripps Networks
and SATH (the "Share Purchase Agreement") which are required to have been
performed for the consummation of the closing thereunder shall have been fully
satisfied and the closing thereunder shall occur simultaneously with the closing
hereunder.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE BORROWERS
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:
4.1 Organization and Good Standing. Each Borrower is a corporation duly
organized, validly existing, and in good standing under the laws of its state of
incorporation, 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 of its Obligations. Each Borrower 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. Each Borrower has delivered to the
Lender copies of its Organizational Documents, as currently in effect.
4.2 Authority; No Conflict.
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
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.
4.3 Capitalization. After giving effect to the Network Transactions, SATH is the
record and beneficial owner and holder of all of the Pledged Stock of KCNS,
WMFP, WOAC, Holdings and Network Operating Company and WMFP is the record and
beneficial owner of all of the Pledged Stock of SAH License. The Pledged Stock
of SAH Acquisition, WMFP and SAH License constitutes all of the outstanding
Stock of such entities. All of the Pledged Stock is owned free and clear of all
Encumbrances except for the Security Interest. The authorized capital Stock of
each such Subsidiary Borrower is set forth in Schedule 4.3, and all of such
Stock is duly authorized, validly issued, fully paid and nonassessable, and was
issued in conformity with all applicable state and federal securities laws. No
Subsidiary Borrower has any other Stock of any class issued, reserved for
issuance, or outstanding. There are no outstanding options, offers, warrants,
conversion rights, agreements, or other rights to subscribe for Stock of or to
purchase Stock from any Subsidiary Borrower. No Stock of any Subsidiary Borrower
carries, and no stockholder of any Subsidiary Borrower has been granted, any
preemptive rights. No Subsidiary Borrower is obligated under any agreement,
arrangement or understanding to redeem or otherwise purchase any of its Stock.
There are no Contracts relating to the issuance, sale or Transfer of any equity
or other Stock of any Subsidiary Borrower. No Borrower owns, or has a Contract
to acquire, any Stock of any Person, including without limitation any direct or
indirect equity or ownership interest in any other business.
4.4 Financial Statements.
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 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.
4.5 Books and Records. The books of account, minute books, stock record books,
and other records of the Borrowers, all of which have been made available to the
Lender, are complete and correct and have been maintained in accordance with
sound business practices. Each Borrower maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (a)
transactions are executed in accordance with management's general or specific
authorizations, (b) transactions are recorded as necessary to permit preparation
of financial statements in conformity with GAAP and to maintain asset
accountability, (c) access to assets is permitted only in accordance with
management's general or specific authorization and (d) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The
minute books of each Borrower contain accurate and complete records of all
meetings held of, and action taken by, the stockholders or members and the
boards of directors, the managers, and the committees thereof, and no meeting of
any stockholders, members, board of directors, managers, or committee of any
Borrower has been held for which minutes have not been prepared and are not
contained in such minute books.
4.6 Title to Properties; Encumbrances; Leases. Schedule 4.6 contains a complete
and accurate list of all real property, leaseholds, or other interests therein
owned or used by each Borrower. The Borrowers have made available to the Lender
all policies of title insurance, surveys, deeds and other documents vesting
title in or containing restrictions on the ownership or 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.
4.7 Condition and Sufficiency of Assets. The buildings, plants, structures, and
equipment of the Borrowers are structurally sound, in good operating condition
and repair, and adequate for the uses to which they are being put, and none of
such buildings, plants, structures or equipment is in need of maintenance or
repairs except for routine maintenance and repairs that are not material in
nature or cost. The building, plants, structures, and equipment of each Borrower
are sufficient for the continued conduct of such Borrower's business (after
giving effect to the Network Transactions) after the date hereof in
substantially the same manner as conducted prior to the date hereof (excluding
the business transferred in the Network Transactions) and constitute all of the
assets necessary for such Borrower to conduct its business.
4.8 No Undisclosed Liabilities. Except as set forth in Schedule 4.8, no Borrower
has any liabilities or obligations of any nature (whether known or unknown and
whether absolute, accrued, contingent, or otherwise) except for liabilities or
obligations reflected or reserved against on the face of the Pro Forma Financial
Statements and current liabilities incurred in the Ordinary Course of Business
since June 30, 2002.
4.9 Taxes.
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 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.
4.10 Employee Benefits. No member of the ERISA Group has ever had any liability,
nor has it ever made a contribution, to any Plan subject to the minimum funding
standards of IRC ss.412, or to any Multiemployer Plan. Each Plan sponsored by,
or contributed to, any member of the ERISA Group which is intended to be
qualified under IRC ss.401(a) is so qualified. Each Plan and Benefit Arrangement
has been operated and administered, in all material respects, in compliance with
all applicable Legal Requirements. The Borrowers have made all contributions and
payments to all Plans and Benefit Arrangements which were due and payable
through the date hereof.
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.
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.
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.
4.13 Absence of Certain Changes and Events. Except for the Network Transactions
and except as set forth on Schedule 4.13, since June 30, 2001, there has not
been any material adverse change in the business, operations, properties,
prospects, assets, or condition of any Borrower, and no event has occurred or
circumstance exists that may result in a Material Adverse Effect. No Borrower
has taken, and none of them currently expects to take, any steps to seek
protection pursuant to any bankruptcy law, nor does any Borrower have any
Knowledge 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.
4.14 Contracts; No Defaults.
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);
(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.
4.15 Insurance.
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
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 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.
4.17 Labor Relations; Compliance. Since June 30, 1997, no Borrower has been or
is a party to any collective bargaining or other labor Contract. Since June 30,
1997, there has not been, there is not presently pending or existing, and to the
Borrowers' Knowledge there is not Threatened, (a) any strike, slowdown,
picketing, work stoppage, or employee grievance process affecting any Borrower,
(b) any Proceeding against or affecting any Borrower relating to the alleged
violation of any Legal Requirement pertaining to labor relations or employment
matters, including any charge or complaint filed by an employee or union with
the National Labor Relations Board, the Equal Employment Opportunity Commission,
or any comparable Governmental Body, or any organizational activity, or any
labor or employment dispute against or affecting any Borrower or any Borrower's
business, or (c) any application for certification of a collective bargaining
agent affecting any Borrower. To the Borrowers' Knowledge, no event has occurred
or circumstance exists that could provide the basis for any work stoppage or
other labor dispute by employees of any Borrower. There is no lockout of any
employees by any Borrower, and no such action is contemplated by any Borrower.
Each Borrower has complied in all respects with all Legal Requirements relating
to employment, equal employment opportunity, nondiscrimination, immigration,
wages, hours, benefits, collective bargaining, the payment of social security
and similar taxes, occupational safety and health, and plant closings. No
Borrower is liable for the payment of any compensation, damages, taxes, fines,
penalties, or other amounts, however designated, for failure to comply with any
of the foregoing Legal Requirements.
4.18 Intellectual Property. The Borrowers own, or hold licenses in, all
trademarks, trade names, copyrights, patents, patent rights, and licenses that
are necessary to the conduct of their respective businesses as currently
conducted after giving effect to the Network Transactions. Schedule 4.18 is a
true, correct and complete listing of all material patents, patent applications,
registered trademarks, trademark applications and copyright registrations as to
which any Borrower is the owner or exclusive licensee.
4.19 Certain Payments. Since June 30, 1997, no Borrower and no director,
officer, agent, or employee of any Borrower, or to the Borrowers' Knowledge, any
other Person associated with or acting for or on behalf of any Borrower, has
directly or indirectly (a) made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any Person, private or public,
regardless of form, whether in money, property, or services (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured, (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of any Borrower, (iv) in
violation of any Legal Requirement, or (b) established or maintained any fund or
asset that has not been recorded in the books and records of the Borrowers.
4.20 Broadcast Licenses; Operations of Stations. The Borrowers have operated the
Stations in material compliance with the terms of the applicable Broadcast
License and of the Communications Act. Each Borrower has timely filed or made
all applications, reports and other disclosures required by the FCC to be made
with respect to the Stations and has timely paid all FCC regulatory fees with
respect thereto. Each Borrower has and is the authorized legal holder of, all
Broadcast Licenses necessary or useful in the operation of the business of each
Borrower as presently operated. All of the Broadcast Licenses are validly held
and are in full force and effect, unimpaired by any act or omission of any
Borrower or, to the Borrowers' Knowledge, their respective predecessors, or
their respective directors, officers, employees or agents. Except as set forth
in Schedule 4.20, no application or Proceeding is pending for the renewal of any
Broadcast License and, to the Borrowers' Knowledge, there is no Proceeding
before the FCC, no notice of violation or no Order of forfeiture relating to any
Station, and no Borrower has Knowledge of any basis that could reasonably be
expected to cause the FCC not to renew any Broadcast License (other than
Proceedings to amend FCC rules or the Communications Act of general
applicability to the television broadcast industry). There is not pending and,
to the Borrowers' Knowledge, there is not Threatened, any action by or before
the FCC to revoke, suspend, cancel, rescind, fail to renew, or modify in any
material respect any Broadcast License (other than Proceedings to amend FCC
rules or the Communications Act of general applicability to the television
broadcast industry).
4.21 Relationships with Affiliates. Except as set forth on Schedule 4.21,
neither a Borrower nor any Affiliate of a Borrower has, or since June 30, 1999
has had, any interest in any property (whether real, personal, or mixed and
whether tangible or intangible), used in or pertaining to the business of the
Borrowers. Neither a Borrower nor any Affiliate of a Borrower is, or since June
30, 1999 has owned (of record or as a beneficial owner) an equity interest or
any other financial or profit interest in, a Person that has (a) had business
dealings or a material financial interest in any transaction with a Borrower
other than business dealings or transactions conducted in the Ordinary Course of
Business with a Borrower at substantially prevailing market prices and on
substantially prevailing market terms, or (b) engaged in competition with a
Borrower with respect to the business of the Borrowers. Except as set forth in
Schedule 4.21, no Borrower is a party to any Contract with, or has any claim or
right against any other Borrower and no Affiliate of a Borrower is a party to
any Contract with, or has any claim or right against, a Borrower.
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.
4.23 Brokerage Fees. The Borrowers have not utilized the services of any broker
or finder in connection with this Agreement, and no brokerage commission or
finder's fee is payable by the Borrowers in connection with this Agreement.
4.24 Disclosure. No representation or warranty of any Borrower in this Agreement
(including the Schedules) omits to state a material fact necessary to make the
statements herein or therein, in light of the circumstances in which they were
made, not misleading. There is no fact known to any Borrower that has specific
application to such Borrower (other than general economic or industry
conditions) and that materially adversely affects or, as far as any Borrower can
reasonably foresee, materially threatens, the assets, business, prospects,
financial condition, or results of operations of any Borrower that has not been
set forth in this Agreement or the Schedules.
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
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;
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;
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;
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
7.1 Events of Default. Any one or more of the following events will constitute
an event of default (each, an "Event of Default") under this Agreement:
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;
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;
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.
7.2 Lender's Rights and Remedies. Upon the occurrence of an Event of Default,
the Lender, at its option, may (a) declare the Obligations immediately due and
payable, without presentment, notice, protest or demand of any kind for the
payment of all or any part of the Obligations (all of which are expressly waived
by the Borrowers) and exercise all of its rights and remedies against the
Borrowers and any Collateral provided herein, in any other Loan Document, or in
any other agreement between any Borrower and the Lender, at law or in equity,
and (b) exercise all rights granted to a secured party under the UCC or
otherwise. Upon the occurrence of an Event of Default, the Lender may take
possession of the Collateral, or any part thereof, and the Borrowers hereby
grant the Lender authority to enter upon any premises on which the Collateral
may be situated, and remove the Collateral from such premises or use such
premises together with the Borrowers' materials, supplies, books and records, to
maintain possession and/or the condition of the Collateral and to prepare the
Collateral. The Borrowers shall, upon the Lender's demand, assemble the
Collateral and make it available at a place designated by the Lender which is
reasonably convenient to the Lender. Unless the Collateral is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, the Lender shall give the Borrowers reasonable notice of the
time and place of any public sale thereof or of the time after which any private
sales or other intended disposition thereof is to be made. The requirement of
reasonable notice will be met if such notice is mailed, postage prepaid, to
Borrowers at least ten days prior to the time of such sale or disposition. If
the Lender sells any of the Collateral upon credit, the Borrowers will be
credited only with payments actually made by the purchaser, received by the
Lender and applied to the Obligations. If the purchaser fails to pay for the
Collateral, the Lender may resell the Collateral and the Borrowers will be
credited with the proceeds therefrom. Notwithstanding the foregoing, upon the
filing by or against any Borrower of any petition under any provision of the
United 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).
SECTION 8
DEFINITIONS
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 ss.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.
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 ss.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. ss.9601 et seq., as amended.
8.17 "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.
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.
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.
8.37 "Multiemployer Plan" means an employee pension benefit plan within the
meaning of ERISAss.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 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 ss.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.
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.
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, 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 Indebtedness
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;
h. settle, 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 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 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 Section 364 of the United States
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
10.1 Amendment; Modification and Waiver. No amendment, modification or
alteration of the terms hereof will be binding unless it is in writing and duly
executed by the parties. Failure of the Lender to exercise its rights hereunder
on any one occasion will not be construed as a waiver of any requirement of this
Agreement or a waiver of the Lender's right to take advantage of any subsequent
or continued breach by any of the Borrowers of any covenant contained herein.
All remedies herein provided will be in addition to and not in substitution for
any remedies otherwise available to the Lender.
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.
10.3 Lender's Expenses. If an Event of Default occurs, the Borrowers shall pay
the Lender's reasonable expenses of collection, including without limitation
reasonable attorneys' fees and expenses for counsel retained by the Lender.
10.4 Notices. All notices and communications to the Lender provided for herein
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:
The E.W. Scripps Company
312 Walnut Street, 28th Floor
Cincinnati, Ohio 45202
Attention: Timothy Peterman, Vice President Corporate Development
Facsimile: (513) 977-3024
with a copy to:
--------------
William Appleton, Esq.
Baker & Hostetler LLP
312 Walnut Street
Suite 2650
Cincinnati, Ohio 45202-4074
Facsimile No.: (513) 929-0303
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:
Summit America Television, Inc.
5388 Hickory Hollow Parkway
Nashville, Tennessee 37013
Attn: George J. Phillips, Esq.
Facsimile: 615.263.8909
with a copy to:
--------------
Charles W. Bone, Esq.
Bone McAllester Norton, P.L.L.C.
Suntrust Center
424 Church Street, Suite 900
Nashville, Tennessee 37203
Facsimile: (613) 238-6301
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."
10.6 Governing Law; Interpretation. This Agreement is being delivered and is
intended to be performed in the State of Ohio and will be construed and enforced
in accordance with the laws of such state, without regard to conflicts of laws
principles, except to the extent that, by reason of any mandatory provision of
law, the attachment, perfection or priority of the Security Interest is governed
by the Uniform Commercial Code as in effect in any jurisdiction other than Ohio.
The section headings contained in this Agreement are for reference purposes only
and will not affect in any way the meaning or interpretation of this Agreement.
10.7 Counterparts. This Agreement may be executed simultaneously in two or more
counterparts, each of which will be deemed an original but all of which together
shall constitute one and the same instrument.
10.8 Assignment; Successors and Assigns. Neither this Agreement nor any of the
rights, interests or Obligations hereunder may be assigned by the Borrowers
(whether by operation of law or otherwise) without the prior written consent of
the Lender. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
10.9 Third Party Beneficiaries. Nothing in this Agreement, express or
implied, is intended or shall be construed to create any third party
beneficiaries.
10.10 Consent to Jurisdiction; Venue. Each of the parties irrevocably submits to
the exclusive jurisdiction of the state courts of Ohio and the United States
District Court for the Southern District of Ohio for the purpose of any action
or proceeding arising out of or relating to this Agreement, and each of the
parties irrevocably agrees that all claims in respect to such action or
proceeding may be heard and determined exclusively in any Ohio state court
sitting in Hamilton County, Ohio or the United States District Court for the
Southern District of Ohio. Each of the parties agrees that a final judgment in
any Proceeding will be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.
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.
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.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year first above written.
LENDER: BORROWERS:
------- ----------
THE E. W. SCRIPPS COMPANY SUMMIT AMERICA TELEVISION, INC.
f/k/a SHOP AT HOME, INC.
By: /s/ Richard A. Boehne By: /s/ George R. Ditomassi
Executive Vice President President
WOAC, INC.
By: /s/ George R. Ditomassi
President
WMFP, INC.
By: /s/ George R. Ditomassi
President
KCNS, INC.
By: /s/ George R. Ditomassi
President
SAH LICENSE, INC.
By: /s/ George R. Ditomassi
President
EXHIBIT A
Form of Promissory Note
PROMISSORY NOTE
$47,500,000.00
October 31, 2002
On or before October 31, 2005, for value received, SUMMIT AMERICA
TELEVISION, INC. (formerly known as SHOP AT HOME, INC.), KCNS, INC., WMFP, INC.,
WOAC, INC. and SAH LICENSE, INC. (collectively, the "Borrowers") jointly and
severally promise to pay to the order of THE E.W. SCRIPPS COMPANY (the "Lender")
the sum of Forty-Seven Million Five Hundred Thousand Dollars ($47,500,000.00) at
the office of the Lender located at 312 Walnut Street, 28th Floor, Cincinnati,
Ohio 45202, together with interest at six percent (6%) per annum, payable as
provided in this Note. Interest shall be computed on a three hundred sixty (360)
day year basis but calculated on actual days, and all accrued interest shall be
due and payable quarterly commencing on January 31, 2003 and continuing on the
last day of each January, April, July, and October thereafter during the term of
this Note and at maturity. The entire remaining balance of principal and
accrued, unpaid interest shall be due and payable in full on or before October
31, 2005.
After maturity, whether by acceleration, notice of intent to prepay or
otherwise, the Note shall bear interest (computed and adjusted in the same
manner and with the same effect as interest hereon prior to maturity), payable
on demand, at a rate per annum equal to eight percent (8%), and whether before
or after entry of judgment. In no event shall the interest rate exceed the
maximum permitted by law.
This Promissory Note is issued under and entitled to the benefits of a
Loan and Security Agreement dated October 31, 2002, ("Loan Agreement"), between
the Borrowers and the Lender to which Loan Agreement reference is hereby made
for a statement of the rights in respect thereto of the holder of this Note. All
terms not otherwise defined in this Note will have the meanings provided under
the Loan Agreement.
This Note is secured by the Collateral described and defined under the
Loan Agreement. If any of the Borrowers shall sell, transfer or otherwise
dispose of any of the Collateral, or any part thereof, then such Borrower shall
be required to make a prepayment of the principal and accrued and outstanding
interest in the manner provided under Section 1.2 of the Loan Agreement.
Subject to the terms and conditions of the Loan Agreement, the
Borrowers may prepay their obligations hereunder at any time, in whole or in
part, without penalty or premium. Prepayment amounts shall be applied first to
payment of interest on the unpaid principal balance through the date of
prepayment and then to payment of principal.
Upon the occurrence of any event constituting an Event of Default under
the terms of the Loan Agreement, the entire balance of the principal and
interest upon this Note then owing and unpaid, at the option of the holder
hereof, immediately shall become due and payable. Except as therein required, no
notice shall be required upon any default and the maker and any endorsers hereon
hereby severally waive demand, protest and notice of nonpayment on this Note.
The holder hereof at any time either before or after the maturity of this
obligation may appropriate and apply any and every indebtedness, including all
monies on deposit, credits, balances, monies, collections, drafts, bills, notes,
checks and property of every kind, tangible and intangible, whether in custody
or in transit, due and owing from the holder hereof or held for the undersigned
upon this Note without protest or demand upon or notice of any kind to anyone.
The Lender and the Borrowers hereby waive right to trial by jury of any matters
arising out of this Note.
The Borrowers hereby authorize any attorney at law to appear in a court
of record of the State of Ohio or any other state in the United States at any
time after this Note becomes due, whether by acceleration or otherwise, and to
waive the issuing and service of process and confess a judgment in favor of the
Lender against the Borrowers for the amount of principal and interest then due
upon this Note, together with costs of suit, including reasonable attorneys'
fees, and to release all errors and waive all right of appeal and stay of
execution. Such attorney-at-law may be an attorney for the Lender. Further, the
Borrowers hereby expressly waive any conflict of interest with respect thereto,
and the Borrowers expressly consent that the confessing attorney may receive a
legal fee from the Lender. The foregoing warrant of attorney will survive any
judgment, it being understood that should any judgment be vacated for any
reason, the foregoing warrant of attorney nevertheless may thereafter be used
for obtaining an additional judgment or judgments.
No delay on the part of the Lender in exercising any power or rights
hereunder will operate as a waiver of any power or rights. Any demand or notice
hereunder to the Borrowers may be made by delivery to the address last known by
the Lender or mailing such demand or notice to such address with the same effect
as if delivered to the Borrowers in person.
The Borrowers hereby consent to the jurisdiction of the United Stated
District Court for the Southern District of Ohio in Cincinnati, Ohio or the
Court of Common Pleas of Hamilton County, Ohio, with respect to any civil action
commenced upon this Note and acknowledge that such courts have jurisdiction over
the Borrowers.
This Note will be governed by and construed in accordance with the laws
of the State of Ohio, without regard for conflict of laws principles.
WARNING - BY SIGNING THIS PAPER, YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON ITS PART TO COMPLY WITH THE AGREEMENTS
OR ANY OTHER CAUSE.
SUMMIT AMERICA TELEVISION, INC. (formerly known as SHOP AT HOME, INC.)
By
-----------------------------------------------------
, ________
--------------------------
KCNS, INC.
By
----------------------------------------------------
, ________
--------------------------
WMFP, INC.
By
----------------------------------------------------
, __________
--------------------------
WOAC, INC.
BY
----------------------------------------------------
, __________
--------------------------
SAH LICENSE, INC.
BY
----------------------------------------------------
, __________
--------------------------
Exhibit 10.75
FRANK A. WOODS
SEVERANCE AGREEMENT
This Severance Agreement (herein "Agreement") is entered into as of the date
indicated below by Frank A. Woods, (herein "You") concerning your employment and
termination of your employment with Shop At Home, Inc., a/k/a Summit America
Television, Inc., a Tennessee corporation (herein "SAH"). In consideration as
specified herein, You agree as follows:
1. Upon your execution of this Agreement and the expiration of a seven (7) day
revocation period, and in full satisfaction of any claim or potential claim that
You have or may have against SAH as detailed in paragraph 2 below, SAH agrees
(a) to pay you a total of Four Hundred Thousand Dollars ($400,000) with
fifty-percent (50%) of such amount paid upon the Closing of the Scripps
transaction, with the remainder paid out in the employee's normal biweekly
payroll from Summit America Television, Inc. as if you had not been terminated
(except there will not be any other benefits of any kind) and (b) to interpret
your stock option agreements so that upon Your termination as a SAH employee it
is agreed that a "Change of Control" has occurred allowing You the benefits
spelled out in your stock option agreements provided upon a termination
following a "Change of Control" (collectively (a) and (b) referred to herein as
"Severance").
2. You, for yourself, your heirs, personal representatives, successors and
assigns for the Severance recited in paragraph 1 hereby release and forever
discharge SAH and its subsidiaries and their successors, subsidiaries, assigns,
affiliates, agents, representatives, employees, officers, directors, trustees,
lawyers and shareholders (herein "Released Parties"), from any and all causes of
action or claims including but not limited to injuries, contractual,
specifically including the waiver of any claims, actions or amounts owed under
your Employment Agreement dated March 20, 2002, and any modifications or
amendments thereto (herein "Employment Agreement"), or otherwise, in law or
equity, known or unknown, in any federal or state court or before any federal or
state commission, agency, or board, specifically including, but not limited to,
any claim of age (specifically including but not limited to the Age
Discrimination Act of 1967, 29 United States Code Section 626, et. al., herein
"ADEA"), race, religion, national origin, handicap and/or sex discrimination,
and/or breach of contract, and/or claim or wrongful discharge, sexual harassment
and/or any claim arising under the Family and Medical Leave Act, Workers
Compensation, or any other action arising out of or otherwise associated with
your employment and the termination of your employment with SAH, or claims of
any other nature against SAH and the Released Parties except violations of
criminal statutes prejudicing You, your heirs, personal representatives,
successors and assigns (herein "Releasing Parties") which are felonies. This
waiver shall be rescinded if SAH does not pay the Severance as detailed above.
3. You understand and agree that the only and essential reason that SAH has
agreed to provide You the Severance is to avoid potential litigation costs that
might arise from any dispute and that nothing in its payment of the sum
specified above is an admission of any wrongdoing on the behalf of SAH or the
Released Parties.
4. You understand that the terms and conditions of this Agreement and the
incidents surrounding this matter are to be kept strictly confidential.
Therefore, You agree to hold this Agreement, its terms, and underlying events in
strict confidence and not to discuss or disclose the existence, contents or
details of this Agreement or the underlying events with anyone except with your
personal legal counsel, where required by law or subpoena, or with SAH and the
E. W. Scripps Company, its affiliates, subsidiaries, divisions and successors
including, but not limited to, The Scripps Shop at Home Holding Company and Shop
At Home Network, LLC, and their officers, directors and employees. When required
by law or subpoena to disclose or potentially disclose this information you
agree to give prompt notice to SAH so that SAH can have an opportunity to oppose
such disclosure. You also agree not to engage in any conduct that is intended
to, or is reasonably foreseeable as likely to, reflect adversely upon SAH or the
Released Parties. You agree not to make any derogatory statements about SAH or
the Released Parties.
5. You agree to reasonably cooperate with SAH and testify truthfully about any
matter relating or involving SAH should litigation or any other proceeding ever
arise concerning such matter. You agree that you will not voluntarily meet or
communicate with any attorney or third person (beyond your personal attorney)
representing any party, other than SAH and the E. W. Scripps Company, its
affiliates, subsidiaries, divisions and successors including, but not limited
to, The Scripps Shop at Home Holding Company and Shop At Home Network, LLC, and
their officers, directors and employees, in litigation or otherwise, concerning
any matter involving or relating to SAH and will give SAH immediate notice of
any attempted contact or contact with you by such attorney or third party. In
the event that you feel the law or a subpoena requires you to disclose or
potentially disclose any information protected by the terms of this Agreement,
you agree to give SAH immediate notice of such circumstances and a reasonable
opportunity to oppose such disclosure prior to your disclosure of the
information.
6. You agree that your promise of confidentiality in this Agreement and your
agreements and promises set out above in Sections 4 and 5 are essential reasons
why SAH is agreeing to offer you the Severance. Further, You understand that
your material breach of this Agreement, of your promise of confidentiality or of
your other promises will injure SAH and the Released Parties and you agree that
for any such material breach that SAH shall be immediately released from having
to perform any of its obligations under this Agreement, in addition to whatever
other relief that SAH or the Released Parties may be entitled to under law or
equity arising from such breach. You also specifically agree that your material
breach or attempted breach of Sections 4 and 5 of this Agreement would cause SAH
irreparable harm entitling SAH to immediate injunctive relief (i.e., a
restraining order or an injunction) to stop such violations or attempted
violations in addition to whatever other remedies that SAH would be entitled to
for such breach or attempted breach. Such actions or relief sought or obtained
by SAH, however, shall in no way relieve You of the waiver and release of claims
made by You in Section 2 of this Agreement.
7. You declare and represent that no promise, inducement of, or agreement not
here and expressed in writing in this Agreement has been made to You, that this
is a FULL, FINAL AND COMPLETE SETTLEMENT, RELEASE AND DISCHARGE FOR ALL CLAIMS
arising out of or otherwise associated with your employment and your termination
of your employment with SAH, including your Employment Agreement, and contains
the entire agreement between the parties hereto, other than your previously
executed Non-Compete and Confidentiality Agreement, if any, that remains in full
force and effect, and that the terms herein are contractual and not a mere
recital.
8. You further declare and represent that SAH through the terms of this
Agreement has advised you to obtain the advice of your own personal legal
counsel before executing this Agreement with regard to all releases, waivers,
concessions, rights, obligations and liabilities contained herein. You
acknowledge by signing below that you have advised to seek such independent
legal advice and have either received such advice or have voluntarily elected
yourself not to seek such advice.
9. You agree that if any provision of this Agreement shall be held invalid or
unenforceable, the remainder of this Agreement shall nevertheless remain in full
force and effect. If any provision is held invalid or unenforceable with respect
to particular circumstances, this Agreement shall nevertheless remain in full
force and effect in all other circumstances. No waiver of any term or condition
of this Agreement or any part thereof shall be deemed a waiver of any other
terms or conditions of this Agreement or of any later breach of this Agreement.
10. You acknowledge that no guarantees have been made by SAH or the Released
Parties concerning the federal, state, and/or local tax treatment of the
payments that You will receive. You hereby acknowledge and agree that this is
the entire amount that SAH will pay to You without regard to such treatment. You
agree and acknowledge that all or part of such payments may be subject to
withholding for federal, state, and/or local taxes, including FICA, FUTA, and
income taxes.
11. SAH agrees that the indemnification provisions of Tennessee law and its
charter and/or bylaws, regarding the conduct and actions of SAH's officers and
employees shall continue to be applicable to You for a period of two years after
your termination with regard to actions taken by You within the scope of your
employment while an officer or employee of SAH.
12. You understand that you have up to twenty-one (21) days from your receipt of
this Agreement to consider whether to execute this Agreement, although you may
elect on your own to sign this Agreement earlier.
13. You understand that you may revoke this Agreement for a period of seven (7)
days after You have signed it. You agree, however, that upon such revocation
this Agreement shall be null and void and have no effect whatsoever, and SAH
shall have no obligation to extend the Severance provided in Section 1 above.
14. You agree that if after You sign this Agreement and upon the expiration of
the seven (7) day revocation period, except for ADEA claims, that as a condition
precedent to your attempting to have any part of this Agreement found
inoperative or attempting to be relieved of any of the waivers or other
obligations that you have made under this Agreement, that you will first refund
to SAH any proceeds obtained either directly or indirectly from the Severance
received from or paid by SAH.
15. You agree that his Agreement shall be governed by and construed in
accordance only with the laws of the State of Tennessee and agree that any
conflict of law rule that might require reference to the laws of some
jurisdiction other than Tennessee shall be disregarded. You hereby agree for
yourself and your properties that the courts sitting in Davidson County,
Tennessee, shall have sole and exclusive jurisdiction and venue over any matter
arising out of or relating to this Agreement or to your employment and
termination of your employment with SAH and hereby submit yourself and your
property to the venue and jurisdiction of such courts.
BY SIGNING BELOW YOU AGREE TO WAIVE YOUR RIGHT TO OBJECT OR OPPOSE ANY MOTION TO
DISMISS ANY LAWSUIT YOU BRING IN ANY COURT OR FORUM NOT LOCATED IN DAVIDSON
COUNTY, TENNESSEE.
16. NO JURY TRIAL. YOU SPECIFICALLY WAIVE YOUR RIGHT TO A TRIAL BY JURY IN ANY
ACTION BETWEEN THE PARTIES IN ANY ACTION RELATED IN ANY WAY TO THIS AGREEMENT OR
TO ANY ACTIONS OR CLAIMS BROUGHT BY YOU REFERRED TO IN PARAGRAPH 2 OR OTHERWISE.
YOU HAVE READ, REVIEWED AND UNDERSTAND THIS AGREEMENT AND HAVE BEEN ENCOURAGED
AND HAVE HAD THE OPPORTUNITY TO CONSULT LEGAL COUNSEL, AND YOU AGREE TO THE
TERMS SET OUT HEREIN FREELY, VOLUNTARILY AND WITHOUT COERCION.
AGREED TO AND ACCEPTED THIS DAY OF _________________, 2002.
SHOP AT HOME, INC.
SUMMIT AMERICA TELEVISION, INC.
/s/ Frank A. Woods By:
- --------------------------- ---------------------------------------
FRANK A. WOODS
Title:
---------------------------------------
Exhibit 10.76
ARTHUR D. TEK
SEVERANCE AGREEMENT
This Severance Agreement (herein "Agreement") is entered into as of the date
indicated below by Arthur D. Tek, (herein "You") concerning your employment and
termination of your employment with Shop At Home, Inc., a/k/a Summit America
Television, Inc., a Tennessee corporation (herein "SAH"). In consideration as
specified herein, You agree as follows:
1. Upon your execution of this Agreement and the expiration of a seven (7) day
revocation period, and in full satisfaction of any claim or potential claim that
You have or may have against SAH as detailed in paragraph 2 below, SAH agrees
(a) to pay you a total of Two Hundred Sixty One Thousand Two Hundred and Fifty
Dollars ($261,250) with fifty-percent (50%) of such amount paid upon the Closing
of the Scripps transaction, with the remainder paid out in the employee's normal
biweekly payroll from Summit America Television, Inc. as if you had not been
terminated (except there will not be any other benefits of any kind) and (b) to
interpret your stock option agreements so that upon Your termination as a SAH
employee it is agreed that a "Change of Control" has occurred allowing You the
benefits spelled out in your stock option agreements provided upon a termination
following a "Change of Control" (collectively (a) and (b) referred to herein as
"Severance").
2. You, for yourself, your heirs, personal representatives, successors and
assigns for the Severance recited in paragraph 1 hereby release and forever
discharge SAH and its subsidiaries and their successors, subsidiaries, assigns,
affiliates, agents, representatives, employees, officers, directors, trustees,
lawyers and shareholders (herein "Released Parties"), from any and all causes of
action or claims including but not limited to injuries, contractual,
specifically including the waiver of any claims, actions or amounts owed under
your Employment Agreement dated March 12, 1999, and any modifications or
amendments thereto (herein "Employment Agreement"), or otherwise, in law or
equity, known or unknown, in any federal or state court or before any federal or
state commission, agency, or board, specifically including, but not limited to,
any claim of age (specifically including but not limited to the Age
Discrimination Act of 1967, 29 United States Code Section 626, et. al., herein
"ADEA"), race, religion, national origin, handicap and/or sex discrimination,
and/or breach of contract, and/or claim or wrongful discharge, sexual harassment
and/or any claim arising under the Family and Medical Leave Act, Workers
Compensation, or any other action arising out of or otherwise associated with
your employment and the termination of your employment with SAH, or claims of
any other nature against SAH and the Released Parties except violations of
criminal statutes prejudicing You, your heirs, personal representatives,
successors and assigns (herein "Releasing Parties") which are felonies. This
waiver shall be rescinded if SAH does not pay the Severance as detailed above.
3. You understand and agree that the only and essential reason that SAH has
agreed to provide You the Severance is to avoid potential litigation costs that
might arise from any dispute and that nothing in its payment of the sum
specified above is an admission of any wrongdoing on the behalf of SAH or the
Released Parties.
4. You understand that the terms and conditions of this Agreement and the
incidents surrounding this matter are to be kept strictly confidential.
Therefore, You agree to hold this Agreement, its terms, and underlying events in
strict confidence and not to discuss or disclose the existence, contents or
details of this Agreement or the underlying events with anyone except with your
personal legal counsel, where required by law or subpoena, or with SAH and the
E. W. Scripps Company, its affiliates, subsidiaries, divisions and successors
including, but not limited to, The Scripps Shop at Home Holding Company and Shop
At Home Network, LLC, and their officers, directors and employees. When required
by law or subpoena to disclose or potentially disclose this information you
agree to give prompt notice to SAH so that SAH can have an opportunity to oppose
such disclosure. You also agree not to engage in any conduct that is intended
to, or is reasonably foreseeable as likely to, reflect adversely upon SAH or the
Released Parties. You agree not to make any derogatory statements about SAH or
the Released Parties.
5. You agree to reasonably cooperate with SAH and testify truthfully about any
matter relating or involving SAH should litigation or any other proceeding ever
arise concerning such matter. You agree that you will not voluntarily meet or
communicate with any attorney or third person (beyond your personal attorney)
representing any party, other than SAH and the E. W. Scripps Company, its
affiliates, subsidiaries, divisions and successors including, but not limited
to, The Scripps Shop at Home Holding Company and Shop At Home Network, LLC, and
their officers, directors and employees, in litigation or otherwise, concerning
any matter involving or relating to SAH and will give SAH immediate notice of
any attempted contact or contact with you by such attorney or third party. In
the event that you feel the law or a subpoena requires you to disclose or
potentially disclose any information protected by the terms of this Agreement,
you agree to give SAH immediate notice of such circumstances and a reasonable
opportunity to oppose such disclosure prior to your disclosure of the
information.
6. You agree that your promise of confidentiality in this Agreement and your
agreements and promises set out above in Sections 4 and 5 are essential reasons
why SAH is agreeing to offer you the Severance. Further, You understand that
your material breach of this Agreement, of your promise of confidentiality or of
your other promises will injure SAH and the Released Parties and you agree that
for any such material breach that SAH shall be immediately released from having
to perform any of its obligations under this Agreement, in addition to whatever
other relief that SAH or the Released Parties may be entitled to under law or
equity arising from such breach. You also specifically agree that your material
breach or attempted breach of Sections 4 and 5 of this Agreement would cause SAH
irreparable harm entitling SAH to immediate injunctive relief (i.e., a
restraining order or an injunction) to stop such violations or attempted
violations in addition to whatever other remedies that SAH would be entitled to
for such breach or attempted breach. Such actions or relief sought or obtained
by SAH, however, shall in no way relieve You of the waiver and release of claims
made by You in Section 2 of this Agreement.
7. You declare and represent that no promise, inducement of, or agreement not
here and expressed in writing in this Agreement has been made to You, that this
is a FULL, FINAL AND COMPLETE SETTLEMENT, RELEASE AND DISCHARGE FOR ALL CLAIMS
arising out of or otherwise associated with your employment and your termination
of your employment with SAH, including your Employment Agreement, and contains
the entire agreement between the parties hereto, other than your previously
executed Non-Compete and Confidentiality Agreement, if any, that remains in full
force and effect, and that the terms herein are contractual and not a mere
recital.
8. You further declare and represent that SAH through the terms of this
Agreement has advised you to obtain the advice of your own personal legal
counsel before executing this Agreement with regard to all releases, waivers,
concessions, rights, obligations and liabilities contained herein. You
acknowledge by signing below that you have advised to seek such independent
legal advice and have either received such advice or have voluntarily elected
yourself not to seek such advice.
9. You agree that if any provision of this Agreement shall be held invalid or
unenforceable, the remainder of this Agreement shall nevertheless remain in full
force and effect. If any provision is held invalid or unenforceable with respect
to particular circumstances, this Agreement shall nevertheless remain in full
force and effect in all other circumstances. No waiver of any term or condition
of this Agreement or any part thereof shall be deemed a waiver of any other
terms or conditions of this Agreement or of any later breach of this Agreement.
10. You acknowledge that no guarantees have been made by SAH or the Released
Parties concerning the federal, state, and/or local tax treatment of the
payments that You will receive. You hereby acknowledge and agree that this is
the entire amount that SAH will pay to You without regard to such treatment. You
agree and acknowledge that all or part of such payments may be subject to
withholding for federal, state, and/or local taxes, including FICA, FUTA, and
income taxes.
11. SAH agrees that the indemnification provisions of Tennessee law and its
charter and/or bylaws, regarding the conduct and actions of SAH's officers and
employees shall continue to be applicable to You for a period of two years after
your termination with regard to actions taken by You within the scope of your
employment while an officer or employee of SAH.
12. You understand that you have up to twenty-one (21) days from your receipt of
this Agreement to consider whether to execute this Agreement, although you may
elect on your own to sign this Agreement earlier.
13. You understand that you may revoke this Agreement for a period of seven (7)
days after You have signed it. You agree, however, that upon such revocation
this Agreement shall be null and void and have no effect whatsoever, and SAH
shall have no obligation to extend the Severance provided in Section 1 above.
14. You agree that if after You sign this Agreement and upon the expiration of
the seven (7) day revocation period, except for ADEA claims, that as a condition
precedent to your attempting to have any part of this Agreement found
inoperative or attempting to be relieved of any of the waivers or other
obligations that you have made under this Agreement, that you will first refund
to SAH any proceeds obtained either directly or indirectly from the Severance
received from or paid by SAH.
15. You agree that his Agreement shall be governed by and construed in
accordance only with the laws of the State of Tennessee and agree that any
conflict of law rule that might require reference to the laws of some
jurisdiction other than Tennessee shall be disregarded. You hereby agree for
yourself and your properties that the courts sitting in Davidson County,
Tennessee, shall have sole and exclusive jurisdiction and venue over any matter
arising out of or relating to this Agreement or to your employment and
termination of your employment with SAH and hereby submit yourself and your
property to the venue and jurisdiction of such courts.
BY SIGNING BELOW YOU AGREE TO WAIVE YOUR RIGHT TO OBJECT OR OPPOSE ANY MOTION TO
DISMISS ANY LAWSUIT YOU BRING IN ANY COURT OR FORUM NOT LOCATED IN DAVIDSON
COUNTY, TENNESSEE.
16. NO JURY TRIAL. YOU SPECIFICALLY WAIVE YOUR RIGHT TO A TRIAL BY JURY IN ANY
ACTION BETWEEN THE PARTIES IN ANY ACTION RELATED IN ANY WAY TO THIS AGREEMENT OR
TO ANY ACTIONS OR CLAIMS BROUGHT BY YOU REFERRED TO IN PARAGRAPH 2 OR OTHERWISE.
YOU HAVE READ, REVIEWED AND UNDERSTAND THIS AGREEMENT AND HAVE BEEN ENCOURAGED
AND HAVE HAD THE OPPORTUNITY TO CONSULT LEGAL COUNSEL, AND YOU AGREE TO THE
TERMS SET OUT HEREIN FREELY, VOLUNTARILY AND WITHOUT COERCION.
AGREED TO AND ACCEPTED THIS DAY OF _________________, 2002.
SHOP AT HOME, INC.
SUMMIT AMERICA TELEVISION, INC.
/s/ Arthur D. Tek By:
- -------------------------------------------- ----------------------------------
ARTHUR D. TEK
Title:
----------------------------------
Exhibit 10.77
THOMAS N. MERRIHEW
SEVERANCE AGREEMENT
This Severance Agreement (herein "Agreement") is entered into as of the date
indicated below by Thomas N. Merrihew, (herein "You") concerning your employment
and termination of your employment with Shop At Home, Inc., a/k/a Summit America
Television, Inc., a Tennessee corporation (herein "SAH"). In consideration as
specified herein, You agree as follows:
1. Upon your execution of this Agreement and the expiration of a seven (7) day
revocation period, and in full satisfaction of any claim or potential claim that
You have or may have against SAH as detailed in paragraph 2 below, SAH agrees
(a) to pay you a total of One Hundred Seventy-Five Thousand Dollars ($175,000)
with fifty-percent (50%) of such amount paid upon the Closing of the Scripps
transaction, with the remainder paid out in the employee's normal biweekly
payroll from Summit America Television, Inc. as if you had not been terminated
(except there will not be any other benefits of any kind) and (b) to interpret
your stock option agreements so that upon Your termination as a SAH employee it
is agreed that a "Change of Control" has occurred allowing You the benefits
spelled out in your stock option agreements provided upon a termination
following a "Change of Control" (collectively (a) and (b) referred to herein as
"Severance").
2. You, for yourself, your heirs, personal representatives, successors and
assigns for the Severance recited in paragraph 1 hereby release and forever
discharge SAH and its subsidiaries and their successors, subsidiaries, assigns,
affiliates, agents, representatives, employees, officers, directors, trustees,
lawyers and shareholders (herein "Released Parties"), from any and all causes of
action or claims including but not limited to injuries, contractual,
specifically including the waiver of any claims, actions or amounts owed under
your Employment Agreement dated July 20, 2001, and any modifications or
amendments thereto (herein "Employment Agreement"), or otherwise, in law or
equity, known or unknown, in any federal or state court or before any federal or
state commission, agency, or board, specifically including, but not limited to,
any claim of age (specifically including but not limited to the Age
Discrimination Act of 1967, 29 United States Code Section 626, et. al., herein
"ADEA"), race, religion, national origin, handicap and/or sex discrimination,
and/or breach of contract, and/or claim or wrongful discharge, sexual harassment
and/or any claim arising under the Family and Medical Leave Act, Workers
Compensation, or any other action arising out of or otherwise associated with
your employment and the termination of your employment with SAH, or claims of
any other nature against SAH and the Released Parties except violations of
criminal statutes prejudicing You, your heirs, personal representatives,
successors and assigns (herein "Releasing Parties") which are felonies. This
waiver shall be rescinded if SAH does not pay the Severance as detailed above.
3. You understand and agree that the only and essential reason that SAH has
agreed to provide You the Severance is to avoid potential litigation costs that
might arise from any dispute and that nothing in its payment of the sum
specified above is an admission of any wrongdoing on the behalf of SAH or the
Released Parties.
4. You understand that the terms and conditions of this Agreement and the
incidents surrounding this matter are to be kept strictly confidential.
Therefore, You agree to hold this Agreement, its terms, and underlying events in
strict confidence and not to discuss or disclose the existence, contents or
details of this Agreement or the underlying events with anyone except with your
personal legal counsel, where required by law or subpoena, or with SAH and the
E. W. Scripps Company, its affiliates, subsidiaries, divisions and successors
including, but not limited to, The Scripps Shop at Home Holding Company and Shop
At Home Network, LLC, and their officers, directors and employees. When required
by law or subpoena to disclose or potentially disclose this information you
agree to give prompt notice to SAH so that SAH can have an opportunity to oppose
such disclosure. You also agree not to engage in any conduct that is intended
to, or is reasonably foreseeable as likely to, reflect adversely upon SAH or the
Released Parties. You agree not to make any derogatory statements about SAH or
the Released Parties.
5. You agree to reasonably cooperate with SAH and testify truthfully about any
matter relating or involving SAH should litigation or any other proceeding ever
arise concerning such matter. You agree that you will not voluntarily meet or
communicate with any attorney or third person (beyond your personal attorney)
representing any party, other than SAH and the E. W. Scripps Company, its
affiliates, subsidiaries, divisions and successors including, but not limited
to, The Scripps Shop at Home Holding Company and Shop At Home Network, LLC, and
their officers, directors and employees, in litigation or otherwise, concerning
any matter involving or relating to SAH and will give SAH immediate notice of
any attempted contact or contact with you by such attorney or third party. In
the event that you feel the law or a subpoena requires you to disclose or
potentially disclose any information protected by the terms of this Agreement,
you agree to give SAH immediate notice of such circumstances and a reasonable
opportunity to oppose such disclosure prior to your disclosure of the
information.
6. You agree that your promise of confidentiality in this Agreement and your
agreements and promises set out above in Sections 4 and 5 are essential reasons
why SAH is agreeing to offer you the Severance. Further, You understand that
your material breach of this Agreement, of your promise of confidentiality or of
your other promises will injure SAH and the Released Parties and you agree that
for any such material breach that SAH shall be immediately released from having
to perform any of its obligations under this Agreement, in addition to whatever
other relief that SAH or the Released Parties may be entitled to under law or
equity arising from such breach. You also specifically agree that your material
breach or attempted breach of Sections 4 and 5 of this Agreement would cause SAH
irreparable harm entitling SAH to immediate injunctive relief (i.e., a
restraining order or an injunction) to stop such violations or attempted
violations in addition to whatever other remedies that SAH would be entitled to
for such breach or attempted breach. Such actions or relief sought or obtained
by SAH, however, shall in no way relieve You of the waiver and release of claims
made by You in Section 2 of this Agreement.
7. You declare and represent that no promise, inducement of, or agreement not
here and expressed in writing in this Agreement has been made to You, that this
is a FULL, FINAL AND COMPLETE SETTLEMENT, RELEASE AND DISCHARGE FOR ALL CLAIMS
arising out of or otherwise associated with your employment and your termination
of your employment with SAH, including your Employment Agreement, and contains
the entire agreement between the parties hereto, other than your previously
executed Non-Compete and Confidentiality Agreement, if any, that remains in full
force and effect, and that the terms herein are contractual and not a mere
recital.
8. You further declare and represent that SAH through the terms of this
Agreement has advised you to obtain the advice of your own personal legal
counsel before executing this Agreement with regard to all releases, waivers,
concessions, rights, obligations and liabilities contained herein. You
acknowledge by signing below that you have advised to seek such independent
legal advice and have either received such advice or have voluntarily elected
yourself not to seek such advice.
9. You agree that if any provision of this Agreement shall be held invalid or
unenforceable, the remainder of this Agreement shall nevertheless remain in full
force and effect. If any provision is held invalid or unenforceable with respect
to particular circumstances, this Agreement shall nevertheless remain in full
force and effect in all other circumstances. No waiver of any term or condition
of this Agreement or any part thereof shall be deemed a waiver of any other
terms or conditions of this Agreement or of any later breach of this Agreement.
10. You acknowledge that no guarantees have been made by SAH or the Released
Parties concerning the federal, state, and/or local tax treatment of the
payments that You will receive. You hereby acknowledge and agree that this is
the entire amount that SAH will pay to You without regard to such treatment. You
agree and acknowledge that all or part of such payments may be subject to
withholding for federal, state, and/or local taxes, including FICA, FUTA, and
income taxes.
11. SAH agrees that the indemnification provisions of Tennessee law and its
charter and/or bylaws, regarding the conduct and actions of SAH's officers and
employees shall continue to be applicable to You for a period of two years after
your termination with regard to actions taken by You within the scope of your
employment while an officer or employee of SAH.
12. You understand that you have up to twenty-one (21) days from your receipt of
this Agreement to consider whether to execute this Agreement, although you may
elect on your own to sign this Agreement earlier.
13. You understand that you may revoke this Agreement for a period of seven (7)
days after You have signed it. You agree, however, that upon such revocation
this Agreement shall be null and void and have no effect whatsoever, and SAH
shall have no obligation to extend the Severance provided in Section 1 above.
14. You agree that if after You sign this Agreement and upon the expiration of
the seven (7) day revocation period, except for ADEA claims, that as a condition
precedent to your attempting to have any part of this Agreement found
inoperative or attempting to be relieved of any of the waivers or other
obligations that you have made under this Agreement, that you will first refund
to SAH any proceeds obtained either directly or indirectly from the Severance
received from or paid by SAH.
15. You agree that his Agreement shall be governed by and construed in
accordance only with the laws of the State of Tennessee and agree that any
conflict of law rule that might require reference to the laws of some
jurisdiction other than Tennessee shall be disregarded. You hereby agree for
yourself and your properties that the courts sitting in Davidson County,
Tennessee, shall have sole and exclusive jurisdiction and venue over any matter
arising out of or relating to this Agreement or to your employment and
termination of your employment with SAH and hereby submit yourself and your
property to the venue and jurisdiction of such courts.
BY SIGNING BELOW YOU AGREE TO WAIVE YOUR RIGHT TO OBJECT OR OPPOSE ANY MOTION TO
DISMISS ANY LAWSUIT YOU BRING IN ANY COURT OR FORUM NOT LOCATED IN DAVIDSON
COUNTY, TENNESSEE.
16. NO JURY TRIAL. YOU SPECIFICALLY WAIVE YOUR RIGHT TO A TRIAL BY JURY IN ANY
ACTION BETWEEN THE PARTIES IN ANY ACTION RELATED IN ANY WAY TO THIS AGREEMENT OR
TO ANY ACTIONS OR CLAIMS BROUGHT BY YOU REFERRED TO IN PARAGRAPH 2 OR OTHERWISE.
YOU HAVE READ, REVIEWED AND UNDERSTAND THIS AGREEMENT AND HAVE BEEN ENCOURAGED
AND HAVE HAD THE OPPORTUNITY TO CONSULT LEGAL COUNSEL, AND YOU AGREE TO THE
TERMS SET OUT HEREIN FREELY, VOLUNTARILY AND WITHOUT COERCION.
AGREED TO AND ACCEPTED THIS DAY OF _________________, 2002.
SHOP AT HOME, INC.
SUMMIT AMERICA TELEVISION, INC.
/s/ Thomas N. Merrihew By:
----------------------------------------- ---------------------------------
THOMAS N. MERRIHEW
Title:
---------------------------------
Exhibit 10.78
BENNETT S. SMITH
SEVERANCE AGREEMENT
Tbis Severance Agreement (herein "Agreement") is entered into as of the
date indicated below by Bennett S. Smith, (herein "You") concerning your
employment and termination of your employment with Shop At Home, Inc., a/k/a
Summit America Television, Inc., a Tennessee corporation (herein "SAIl"). In
consideration as specified herein, You agree as follows:
1. Upon your execution of this Agreement and the expiration of a seven
(7) day revocation period, and in full satisfaetinn of any claim or potential
claim that You have or may have against SAH as detailed In paragraph 2 below,
SAIl agrees (a) to pay you a total of Three Hundred Fifty Thousand Dollars
($350,000) with fifty-percent (50%) of such amount paid upon the Closing of the
Scripps transaction, with the remainder paid out in the employee's normal
biweekly payroll from Summit America Television, Inc. as if you had not been
terminated (except there will not be any other benefits of any kind) and (b) to
interpret your stock option agreements so that upon Your termination as a SAH
employee it is agreed that a "Change of Control" has occurred allowing You the
benefits spelled out in your stock option agreements provided upon a termination
following a "Change of Control" (colleetively (a) and (b) referred to herein as
"Severance").
2. You, for yourself, your heirs, personal representatives, successors
and assigns for the Severance recited in paragraph 1 hereby release and forever
discharge SAIl and its subsidiaries and their successors, subsidiaries, assigns,
affiliates, agents, representatives, employees, officers, directors, trastees,
lawyers and shareholders (herein "Released Parties"), from any and all causes of
action or claims including but not limited to injuries, contractual,
specifically including the waiver of any claims, actions or amounts owed under
your Employment Agreement dated December 7, 2001, and any modifications or
amendments thereto (herein "Employment Agreement"), or otherwise, in law or
equity, known or unknown, in any federal or state court or before any federal or
state commission, agency, or board, specifically including, but not limited to,
any claim of age (specifically including but not limited to the Age
Discrimination Act of 1967, 29 United States Code Section 626, et. al., herein
"ADEA"), race, religion, national origin, handicap and/or sex discrimination,
and/or breach of contract, and/or claim or wrongful discharge, sexual harassment
and/or any claim arising under the Family and Medical Leave Act, Workers
Compensation, or any other action arising out of or otherwise associated with
your employment and the termination of your employment with SAIl, or claims of
any other nature against SAIl and the Released Parties. This waiver shall be
rescinded if SAH does not pay the Severance as detailed above.
3. You understand and agree that the only and essential reason that SAH
has agreed to provide You the Severance is to avoid potential litigation costs
that might arise from any dispute and that nothing in its payment of the sum
specified above is an admission of any wrongdoing on the behalf of SAH or the
Released Parties.
4. You understand that the terms and conditions of this Agreement and
the incidents surrounding this matter are to be kept strictly confidential.
Therefore, You agree to hold this Agreement, its terms, and underlying events in
strict confidence and not to discuss or disclose the existence, contents or
details of this Agreement or the underlying events with anyone except with your
personal legal counsel or where required by law or subpoena. When required by
law or subpoena to disclose or potentially disclose this information you agree
to give prompt notice to SAH so that SAH can have an opportunity to oppose such
disclosure. You also agree not to engage in any conduct that is intended to, or
is reasonably foreseeable as likely to, reflect adversely upon SAI-I or the
Released Parties. You agree not to make any derogatory statements about SAH or
the Released Parties.
5. You agree to reasonably cooperate with SAH and testify truthfully
about any matter relating or involving SAIt should litigation or any other
proceeding ever arise concerning such matter. You agree that you will not
voluntarily meet or communicate with any attorney or third person (beyond your
personal attorney) representing any party, other than SAH, in litigation or
otherwise, concerning any matter
involving or relating to SAI-I and will give SAH immediate notice of any
attempted contact or contact with you by such attorney or third party. In the
event that you feel the law or a subpoena requires you to disclose or
potentially disclose any information protected by the terms of tiffs Agreement,
you agree to give SAI-I immediate notice of such circumstances and a reasonable
opportunity to oppose such disclosure prior to your disclosure of the
information.
6. You agree that your promise of confidentiality in fl~s Agreement and
your agreements and promises set out above in Sections 4 and 5 are essential
reasons why SAI-I is agreeing to offer you the Severance. Further, You
understand that your material breach of this Agreement, of your promise of
confidentiality or of your other promises will injure SAH and the Released
Parties and you agree that for any such material breach that SAH shall be
immediately released from having to perform any of its obligations under this
Agreement, in addition to whatever other relief that SAI-I or the Released
Parties may be entitled to under law or equity arising from such breach. You
also specifically agree that your material breach or attempted breach of
Sections 4 and 5 of this Agreement would cause SAI-I irreparable harm entitling
SAI-I to immediate injunctive relief (i.e., a restraining order or an
injunction) to stop such violations or attempted violations in addition to
whatever other remedies that SATI would be entitled to for such breach or
attempted breach. Such actions or relief sought or obtained by SAI-I, however,
shall in no way relieve You of the waiver and release of claims made by You in
Section 2 of this Agreement.
7. You declare and represent that no promise, inducement of, or
agreement not here and expressed in writing in this Agreement has been made to
You, that tl~s is a FULL, FINAL AND COMPLETE SETTLEMENT, RELEASE AND DISCI~RGE
FOR ALL CLAIMS arising out of or otherwise associated with your employment and
your termination of your empIoyment with SAII, including your Employment
Agreement, and contains the entire agreement between the parties hereto, other
than your previously executed Non-Compete and Confidentiality Agreement, if any,
that remains in full force and effect, and that the terms herein are contractual
and not a mere recital.
8. You further declare and represent that S AH through t he terms o f t
his Agreement h as advised you to obtain the advice of your own personal legal
counseI before executing this Agreement with regard to aII releases, waivers,
concessions, rights, obligations and liabilities contained herein. You
acknowledge by signing below that you have advised to seek such independent
legal advice and have either received such advice or have voluntarily elected
yourself not to seek such advice.
9. You agree that if any provision of this Agreement shall be held
invalid or unenforceable, the remainder of this Agreement shall nevertheless
remain in full force and effect. If any provision is held invalid or
unenforceable with respect to particular circumstances, this Agreement shall
nevertheless remain in full force and effect in all other circumstances. No
waiver of any term or condition of this Agreement or any part thereof shall be
deemed a waiver of any other terms or conditions of this Agreement or of any
later breach of this Agreement.
10. You acknowledge that no guarantees have been made by SAI-I or the
Released Parties concerning the federal, state, and/or local tax treatment of
the payments that You will receive. You hereby acknowledge and agree that this
is the entire amount that SAI-I will pay to You without regard to such
treatment. You agree and acknowledge that all or part of such payments may be
subject to withholding for federal, state, and/or local taxes, ineluding FICA,
FUTA, and income taxes.
11. You understand that you have up to twenty-one (21) days from your
receipt of this Agreement to consider whether to execute this Agreement,
although you may elect on your own to sign tbSs Agreement earlier.
12. You understand that you may revoke this Agreement for a period
of seven (7) days after You have signed it. You agree, however, that upon
such revocation this Agreement shall be null and void and have no effect
whatsoever, and SAH shall have no obligation to extend the Severance
provided in Section 1 above.
13. You agree that if after You sign this Agreement and upon the
expiration of the seven (7) day revocation period, except for ADEA claims,
that as a condition precedent to your attempting to have any part of this
Agreement found inoperative or attempting to be relieved of any of the
waivers or other obligations that you have made under this Agreement, that
you will first refund to SAIl any proceeds obtained either directly or
indirectly from the Severance received from or paid by SAH.
14. You agree that his Agreement shall be governed by and
construed in accordance only with the laws of the State of Tennessee and
agree that any conflict of law rule that might require reference to the
laws of some jurisdiction other than Tennessee shall be disregarded. You
hereby agree for yourself and your properties that the courts sitting in
Davidson County, Tennessee, shall have sole and exclusive jurisdiction and
venue over any matter arising out of or relating to this Agreement or to
your employment and termination of your employment with SAI-I and hereby
submit yourself and your property to the venue and jurisdiction of such
courts.
BY SIGNING BELOW YOU AGREE TO WAIVE YOUR RIGHT TO OBJECT OR OPPOSE ANY
MOTION TO DISMISS ANY LAWSUIT YOU BRING IN ANY COURT OR FORUM NOT LOCATED IN
DAVIDSON COUNTY, TENNESSEE.
15. NO JURY TRIAL. YOU SPECIFICALLY WAIVE YOUR RIGHT TO A TRIAL BY
JURY IN ANY ACTION BETWEEN TI:[E PARTIES IN ANY ACTION RELATED IN ANY WAY
TO THIS AGREEMENT OR TO ANY ACTIONS OR CLAIMS BROUGHT BY YOU REFERRED TO IN
PARAGRAPH 2 OR OTHERWISE.
YOU HAVE READ, REVIEWED AND UNDERSTAND THIS AGREEMENT AND HAVE BEEN
ENCOURAGED AND HAVE HAD THE OPPORTUNITY TO CONSULT LEGAL COUNSEL, AND
YOU AGREE TO THE TERMS SET OUT HEREIN FREELY,
VOLUNTARILY AND WITHOUT COERCION.
AGREED TO AND ACCEPTED THIS DAY OF _________________, 2002.
SHOP AT HOME, INC.
SUMMIT AMERICA TELEVISION, INC.
/s/ Bennett S. Smith By:
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Bennett S. Smith
Title:
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Exhibit 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Shop At Home, Inc. (the "Company") on
Form 10-Q for the period ending September 30, 2002, as amended and filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Frank A. Woods, Co-Chief Executive Officer of the Company, certify, pursuant to
18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that:
1. The Report fully complies with the requirements of 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of
the Company.
Date: October 31, 2002
/s/ Frank A. Woods
Frank A. Woods
Co-Chief Executive Officer
CERTIFICATION PURSUANT TO
18 U.S.C. 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Shop At Home, Inc. (the "Company") on
Form 10-Q for the period ending September 30, 2002, as amended and filed with
the Securities and Commission on the date hereof (the "Report"), I, George R.
Ditomassi, Co-Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:
1. The Report fully complies with the requirements of 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of
the Company.
Date: October 31, 2002
/s/ George R. Ditomassi
George R. Ditomassi
Co-Chief Executive Officer
Exhibit 99.2
CERTIFICATION PURSUANT TO
18 U.S.C. 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Shop At Home, Inc. (the "Company") on
Form 10-Q for the period ending September 30, 2002, as amended and filed with
the Securities and Commission on the date hereof (the "Report"), I, Arthur D.
Tek, Executive Vice President and Chief Financial Officer of the Company,
certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of
the Company.
Date: October 31, 2002
/s/ Arthur D. Tek
Arthur D. Tek
Executive Vice President
and Chief Financial Officer