<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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, 1997 0-25596
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SHOP AT HOME, INC.
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(Exact name of registrant as specified in its charter)
TENNESSEE 62-1282758
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5210 Schubert Road
P. O. Box 12600
Knoxville, Tennessee 37912
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(Address of principal executive offices)
Registrant's telephone number, including area code: (423) 688-0300
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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 11,518,591
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(Title of class) (Shares outstanding at
October 28, 1997)
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SHOP AT HOME, INC. AND SUBSIDIARIES
INDEX
THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
PART I FINANCIAL INFORMATION
<TABLE>
<S> <C>
ITEM 1 - FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets - unaudited 3
Condensed Consolidated Statements of Operations - unaudited 4
Condensed Consolidated Statements of Cash Flows - unaudited 5-6
Notes to Condensed Consolidated Financial Statements - unaudited 7-8
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9-10
</TABLE>
PART II OTHER INFORMATION
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SHOP AT HOME, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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<TABLE>
<CAPTION>
ASSETS
September 30, June 30,
1997 1997
(Unaudited) (Audited)
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<S> <C> <C>
Cash $ 1,260,563 $ 5,077,641
Accounts receivable 3,687,168 3,295,925
Inventories 3,066,301 3,262,080
Prepaid expenses 894,323 458,243
Deferred tax assets 1,482,530 1,342,450
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Total current assets 10,390,885 13,436,339
Related party - Notes receivable 300,000
Property & equipment, net 4,623,300 4,433,767
FCC License, net 13,161,809 13,423,182
Goodwill, net 2,002,390 1,989,529
Other assets 2,148,838 1,127,493
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Total assets $ 32,627,222 $ 34,410,310
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 13,330,112 $ 15,518,828
Current portion - capital leases and long term debt 2,499,286 2,451,331
Deferred revenue 122,973 107,619
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Total current liabilities 15,952,371 18,077,778
Long-term debt 6,983,834 7,522,131
Deferred income taxes 3,766,871 3,613,410
Redeemable Preferred Stock
$10 par value, 1,000,000 shares authorized,
137,943 shares issued and outstanding at
September 30, 1997 and June 30, 1997 1,393,430 1,393,430
Stockholders' equity:
Common stock - $.0025 par value,
30,000,000 shares authorized,
11,074,414 and 10,714,414 shares issued at
September 30, 1997 and June 30, 1997, respectively 27,686 26,786
Additional paid in capital 10,425,655 10,066,555
Accumulated deficit (5,922,625) (6,289,780)
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Total stockholders equity 4,530,716 3,803,561
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Total liabilities and stockholders' equity $ 32,627,222 $ 34,410,310
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.
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SHOP AT HOME, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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<TABLE>
<CAPTION>
Three Months Ended September 30,
1997 1996
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(Unaudited) (Unaudited)
<S> <C> <C>
Net revenues $ 20,958,035 $ 13,741,493
Cost of sales 12,347,598 8,474,787
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Gross profit 8,610,437 5,266,706
Other operating income 270,888 226,834
Operating expenses 8,226,553 5,190,519
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Operating income 654,772 303,021
Interest expense (283,569) (186,820)
Other income 104,334 25,292
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Income before income taxes 475,537 141,493
Income tax expense/(benefit) 108,382 (25,000)
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Net income $ 367,155 $ 166,493
============ ============
Primary and fully diluted net
income per common and
equivalent share $ 0.03 $ 0.01
============ ============
Weighted average number of
common and equivalent
shares outstanding 14,256,780 14,812,455
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.
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SHOP AT HOME, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED SEPTEMBER 30, 1997, AND 1996
<TABLE>
<CAPTION>
1997 1996
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(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 367,155 $ 166,493
Non-cash expenses included in net loss
Depreciation and amortization 386,229 211,190
Deferred income taxes 108,382 (25,000)
Provision for bad debt and returns 209,849
Changes in current and non-current items
Accounts receivable (601,092) (96,410)
Inventories 195,779 (108,844)
Prepaid expenses and other assets (436,080) 77,790
Accounts payable and accrued expenses (2,208,717) 1,688,379
Deferred revenue 15,354 (1,413,519)
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Net cash (used) by operations (1,963,141) 500,079
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CASH FLOWS FROM INVESTING ACTIVITIES:
Goodwill (50,702) --
Related party notes receivable (300,000) --
Purchase of equipment (202,449) (172,768)
Other assets (1,021,345) --
FCC licenses -- (50,894)
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Net cash (used)/provided by investing activities (1,574,496) (223,662)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options 360,000
Repayments of debt (639,441) (208,064)
Additional long-term debt --
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Net cash (used) by financing activities (279,441) (208,064)
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NET INCREASE/(DECREASE) IN CASH (3,817,078) 68,353
Cash beginning of period 5,077,641 1,914,759
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Cash end of period $ 1,260,563 $ 1,983,112
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.
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SHOP AT HOME, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
THREE MONTHS ENDED SEPTEMBER 30, 1997, AND 1996
<TABLE>
<CAPTION>
1997 1996
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(Unaudited) (Unaudited)
<S> <C> <C>
SCHEDULE OF NONCASH
FINANCING ACTIVITIES
Stock issued for inventory and reduction
of accounts payable $ 0 $ 57,477
=========== ===========
Note payable issued for acquisition
of FCC license $ 0 $ 1,400,000
=========== ===========
Assets acquired through capital lease $ 149,099 $ 0
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</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.
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SHOP AT HOME, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 (UNAUDITED)
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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of management, 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, 1997 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 the Shop at Home, Inc. and Subsidiaries Annual Report on
Form 10-K for the fiscal year ended June 30, 1997.
NOTE 2 - NET INCOME PER SHARE
Income per share is computed by dividing net income by the weighted average
number of common shares and equivalents outstanding. Common stock equivalents
represented by options, warrants, redeemable preferred stock, and convertible
debt outstanding have been included in the computation through the use of the
modified treasury stock method. See Exhibit 11 for details of changes in
computation of weighted average number of shares.
NOTE 3 - MANAGEMENT STOCK OPTIONS OUTSTANDING
At September 30, 1997, options to purchase up to 1,262,500 shares of common
stock at prices ranging from $1.00 - $2.875 per share were outstanding to
employees and members of management. Options vest annually over a period of up
to five years. The options expire the earlier of 5 years from date of vesting or
30 days after termination of employment.
NOTE 4 - INCOME TAXES
The income tax expense is computed by applying the federal corporate income tax
rate of 34% and the blended state rate of 4% to net income before tax plus the
effect of other than temporary timing differences similar to those reflected in
the annual report for June 30, 1997.
NOTE 5 - RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standard Board issued Statement of
Financial Accounting
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Standards No. 128, "Earnings per Share," which changes the calculations used
for earnings per share (EPS) and makes them comparable to international EPS
standards. It replaces the presentation of primary EPS with a presentation of
basic EPS. It also requires dual presentation of basic and diluted EPS on the
face of the income statement for all entities with complex capital structures
and requires a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS computation. The
effect of the change in the standard on condensed consolidated financial
statements results in $.03 and $.02 of basic EPS for the quarters ended
September 1997 and 1996. Diluted EPS would be consistent with the amounts
currently reported as income per share for those quarters. The Statement is
effective for financial statements issued for periods ending after December 15,
1997; earlier application is not permitted.
SEGMENT INFORMATION
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information." This Statement establishes standards for
the way that public business enterprises report information about operating
segments in annual financial statements and interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. The Statement is
effective for financial statements issued for periods beginning after December
15, 1997. Management has not yet determined the full effect of this Statement
on its financial statements.
CAPITAL STRUCTURE
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 129, "Disclosure of Information about Capital
Structure." The statement establishes standards for disclosing information
about an entity's capital structure. The Statement is effective for periods
ending after December 15, 1997. Management has determined that the adoption of
this Statement will not have a material impact on the financial statements.
COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income." The
Statement establishes standards for reporting comprehensive income and its
components in a full set of financial statements. The Statement is effective
for fiscal years beginning after December 15, 1997. The Company currently has
no items that would be classified as other comprehensive income. Thus,
management has determined that the adoption of this Statement will not have a
material impact on the financial statements.
NOTE 6 - RELATED PARTY - NOTE RECEIVABLE
In August 1997, $300,000 of a total commitment of $800,000 was loaned to an
officer of the Company in accordance with the officer's employment agreement.
This note bears no interest and is repayable at the rate of 10% of any
additional compensation above the officer's base salary. Any unpaid amount
becomes due on the earlier of termination of employment or June 30, 2002.
Subsequent to September 30, 1997, the Company advanced the additional $500,000
to this officer under the same terms and conditions.
NOTE 7 - SUBSEQUENT EVENT - ISSUANCE OF COMMON STOCK
In October 1997, the Company issued 444,177 shares of common stock in connection
with the conversion of a 10.75% note payable in the amount of $1,332,531. The
conversion rate was $3.00 per share. This note was being amortized in monthly
installments of $43,494 and was due September, 2000. The conversion of this note
will reduce interest expense by approximately $75,000 in the fiscal year ending
June 30, 1998.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE MONTH PERIODS ENDED
SEPTEMBER 30, 1997 AND 1996.
The following table sets forth for the periods indicated the percentage
relationship to total revenues of certain items included in the Company's
Condensed Consolidated Statements of Operations:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1997 1996
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<S> <C> <C>
Net sales 100.0% 100.0%
Cost of sales 58.9 61.7
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Gross profit 41.1 38.3
Other operating income 1.3 1.7
Operating expenses 39.3 37.8
Interest expense 1.4 1.4
Other income 0.5 0.2
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Net income before income taxes 2.2 1.0
====== ======
</TABLE>
The Company's net sales for the quarter ended September 30, 1997, were
$20,958,000 which was an increase of 53% from net sales of $13,741,000 for the
quarter ended September 30, 1996. The core business of the shopping network
accounted for 42% of the increase based on an average of 8,443,000 Full Time
Equivalent Households (FTEs) in the 1997 quarter compared to an average of
5,700,000 FTEs in the 1996 quarter. The remaining 10.5% increase resulted from
approximately $1,500,000 in sales from Collector's Edge, whose operations were
not part of the 1996 results. Although the shopping network sales continued to
grow through the addition of more households, sales performance in the 1997
quarter suffered somewhat from the UPS strike and also from the media coverage
of the passing of Princess Diana.
The gross profit margin for the three month period ended September 30, 1997, was
41.1%, compared to 38.3% for the same period in 1996. This increase, in the core
business, is due to the combination of a more aggressive trend towards higher
gross profits with our supplier/partners, a shift in sales towards product lines
with higher gross profits such as home furnishings, ceremonial cutlery and coins
and a smaller inventory write off in the 1997 quarter. In addition, although a
smaller factor, the gross profit
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margin of Collector's Edge is approximately 6 percentage points higher than the
core shopping business and also had the effect of increasing the overall gross
profit percentage.
The Company had other operating income of $271,000 during the three months ended
September 30, 1997, compared to $227,000 in the comparable three month period in
1996. This income represents infomercial income generated by its two owned and
operated broadcast stations WMFP (TV) in Boston and KZJL (TV) in Houston.
The Company's operating expenses for the three month period ended September 30,
1997, increased $3,036,000 or 58% overall compared to the same period in 1996.
Of this increase, approximately $2,461,000 or 81% relates to the core shopping
business, mostly in the areas of distribution, salaries, credit card fees and
other expenses which are basically volume dependent in nature. The remaining
$575,000 or 19% of the increase pertains to the inclusion of the operations of
Collector's Edge.
As a result of the foregoing, the Company generated net income of $367,000 for
the three months ended September 30, 1997, compared to net income of $166,000
for the same period of the prior year. The Company believes this $201,000
earnings improvement is attributable to the improved gross profit margins offset
in part by some increased expenses.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1997, the Company had total current assets of $10,391,000
and total current liabilities of $15,952,000 for negative working capital of
$5,561,000. At June 30, 1997, the Company had current assets of $13,436,000 and
current liabilities of $18,078,000 for a negative working capital of $4,642,000.
The Company believes internally generated funds from operations, and the sale
of common stock and warrant rights, if needed, will be sufficient to meet the
Company's capital requirements for the near future. The Company is investigating
other avenues of additional financing for the near to mid-future to facilitate
its possible need for additional payments in connection with its bid to acquire
the assets of Global Shopping Network, its contemplated relocation and capital
purchases for expansion. In October 1997, the Company converted a note payable
of $1,333,000 into 444,177 shares of common stock at $3.00 per share.
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SHOP AT HOME, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Description
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<S> <C>
10.44 Asset Purchase Agreement, dated September 23, 1997,
among SAH Acquisition Corporation II, Global
Broadcasting Systems, Inc., and Global Broadcasting
Systems License Corp.
11 Statement re Computation of Per Share Earnings
27 Financial Data Schedule, filed as part of the Form
10-Q (for SEC use only)
</TABLE>
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the period covered by this
report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
/S/ Kent Lillie
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Kent E. Lillie, President
Date: November 14, 1997
----------------------------
/S/ Joseph Nawy
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Joseph Nawy, Vice President Finance
Date: November 14, 1997
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EXHIBIT 10.44
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT, made and entered into as of this 23rd
day of September, 1997, by and between SAH Acquisition Corporation II, a
Tennessee corporation ("Purchaser"), and Global Broadcasting Systems, Inc., a
Delaware corporation ("Global"), and its wholly owned subsidiary, Global
Broadcasting Systems License Corp., a Delaware corporation ("License Corp.")
(Global and License Corp. are hereinafter sometimes individually and
collectively referred in this Agreement to as "Debtors");
WITNESSETH:
WHEREAS, Global and License Corp. each filed a voluntary petition for
relief under Chapter 11 of title 11 of the United States Code (the "Bankruptcy
Code"), in the United States Bankruptcy Court for the Southern District of New
York (the "Bankruptcy Court"), case numbers 97 B 44268 (PCB) and 97 B 44269
(PCB), respectively (collectively, the "Bankruptcy Proceedings"); and
WHEREAS, the Bankruptcy Proceedings were ordered jointly administered
by order of the Bankruptcy Court dated July 24, 1997, as Case No. 97 B 44268
(PCB); and
WHEREAS, License Corp. is the licensee and operator of television
stations KCNS(TV), San Francisco, California and WRAY(TV), Wilson, North
Carolina (collectively, the "Stations"), pursuant to licenses issued by the
Federal Communications Commission (the "FCC"); and
WHEREAS, Global is the owner of the rights under certain executory
contracts to purchase television stations WOAC(TV), Canton, Ohio ("WOAC") and
WMPC(TV), Jellico, Tennessee ("WMPC") (the "Station Contracts"); and
WHEREAS, Purchaser wishes to acquire (a) substantially all of Debtors'
assets used or useful in the operation of the Stations, and (b) the Station
Contracts, and Debtors desire to sell and assign such assets, subject to and
upon the terms and conditions provided in this Agreement;
NOW, THEREFORE, in consideration of the above recitals, and the mutual
promises, agreements and covenants contained herein, the parties hereto,
intending to be legally bound, hereby agree as follows:
SECTION 1. CERTAIN DEFINED TERMS.
The following terms shall have the following meanings in this Agreement:
1.1 "363 Application" has the meaning set forth in Section 10.3 hereof.
1.2 "Agreement Date" means the date of this Agreement.
1.3 "Assets" means Debtor's right, title and interest in all of the tangible and
intangible assets described in Section 2.2(a) hereof.
1.4 "Assumed Contracts" means the contracts, leases or agreements listed in
Schedule 2.2(a)(iii) hereof, but excludes the Executory Station Contracts.
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1.5 "Bankruptcy Code" means Chapter 11 of Title 11 of the United States Code.
1.6 "Bankruptcy Court Approval" has the meaning set forth in Section 6 hereof.
1.7 "Bankruptcy Court Order" has the meaning set forth in Section 10.3 hereof.
1.8 "Bankruptcy Proceedings" has the meaning set forth in the recitals.
1.9 "Cash Deposit" means the Initial Deposit and the Second Deposit,
collectively.
1.10 "Closing" has the meaning set forth in Section 6 hereof.
1.11 "Closing Date" means the date of the Closing set forth in Section 6 hereof.
1.12 "Communications Act" means the Communications Act of 1934, as amended.
1.13 "Confidential Information" has the meaning set forth in Section 17.1 (c).
1.14 "Consents" means all of the consents, permits or approvals of government
authorities and other third parties necessary to transfer the Assets to
Purchaser or otherwise to consummate the transactions contemplated by this
Agreement.
1.15 "Conveyance Documents" has the meaning set forth in Section 5.1 hereof.
1.16 "Debtors" means Global and License Corp., collectively and individually.
1.17 "Escrow Agent" has the meaning set forth in Section 3.1 (a) hereof.
1.18 "Executory Station Contracts" means (a) the Station Contracts, which are
more fully described in Schedule 2.2(a)(viii).
1.19 "Executory Stations" has the meaning set forth in Section 8.4 hereof.
1.20 "FCC" means the Federal Communications Commission.
1.21 "FCC Consent" means actions by the FCC granting its consent to the
assignment to Purchaser of the FCC Licenses of the Stations and, if applicable,
the licenses, permits and authorizations issued by the FCC related to the
television stations subject to the Executory Station Contracts, as the case may
be, as contemplated by this Agreement.
1.22 "FCC Licenses" means all of the licenses, permits and other authorizations
issued by the FCC to Debtors in connection with the conduct of the business or
operation of the Stations.
1.23 "Final Order" means the written action(s), order(s) or public notice(s)
issued by the FCC setting forth the FCC Consent, (a) which action(s), order(s)
or notices(s) have not been vacated, reversed, stayed, enjoined, set aside,
annulled or suspended, and (b) with respect to which (i) no timely requests have
been filed for administrative or judicial review, reconsideration, appeal or
stay, and the time for filing any such requests, and for the FCC to review the
action(s),
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order(s) or notice(s) on its own motion, has expired, or (ii) in the event of
the filing of a timely request for any review, reconsideration or appeal or
review by the FCC on its own motion, that does not result in the FCC Consent
being vacated, reversed, stayed, enjoined, set aside, annulled or suspended, the
time for further review, reconsideration or appeal has expired without the
filing of any timely request for further review, reconsideration or appeal.
1.24 "Global" means Global Broadcasting Systems, Inc., a Delaware corporation.
1.25 "Indemnified Claim" has the meaning set forth in Section 15.1 (e) hereof.
1.26 "Initial Deposit" has the meaning set forth in Section 3.1(a) hereof.
1.27 "Letter of Credit" has the meaning set forth in Section 3.1(b) hereof.
1.28 "Letter of Credit Amount" means $3,963,750.
1.29 "Liabilities or Encumbrances" has the meaning set forth in Section 2.3
hereof.
1.30 "License Corp." means Global Broadcasting Systems License Corp., a Delaware
corporation.
1.31 "Licenses" means all of the licenses, permits and other authorizations,
including the FCC Licenses, issued to Debtors by the FCC, and any other federal,
state or local governmental authorities, in connection with the conduct of the
business or operation of the Stations.
1.32 "Loss" or "Losses" have the meanings set forth in Section 15.1(a) hereof.
1.33 "Personal Property" means all of the machinery, equipment, tools, vehicles,
furniture, leasehold improvements, office equipment, plant, inventory, tapes,
spare parts and other tangible personal property owned or leased by Debtors and
used or useful in the conduct of the business or operation of the Stations.
1.34 "Purchase Price" means the purchase price set forth in Section 3.2(a)
hereof, subject to adjustment as provided for in Section 3.2(b) hereof or as
elsewhere provided for in this Agreement.
1.35 "Purchaser" means SAH Acquisition Corporation II, a Tennessee corporation.
1.36 "Purchaser Ancillary Agreements" has the meaning set forth in Section 3.5
hereof.
1.37 "Purchaser's Closing Documents" has the meaning set forth in Section 8.1
hereof.
1.38 "Public File" means that file kept by each of the Stations as required by
Section 73.3526 of the FCC Rules and Regulations.
1.39 "Representatives" has the meaning set forth in Section 17.1(a) hereof.
1.40 "SAH" means Shop at Home, Inc., a Tennessee corporation and the parent
corporation of Purchaser.
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1.41 "SAH Letter Agreement" means that certain letter, dated August 15, 1997, by
and between SAH and the Trustee on behalf of the Debtors.
1.42 "Second Deposit" has the meaning set forth in Section 3.1(a) hereof.
1.43 "Special Category Assumed Contracts" has the meaning set forth in Section
11 (a) hereof.
1.44 "Station Contracts" means the executory contracts to purchase WOAC(TV),
Canton, Ohio and WMPC(TV), Jellico, Tennessee.
1.45 "Stations" means KCNS(TV), San Francisco, California, and WRAY(TV), Wilson,
North Carolina.
1.46 "Third Party Claim" has the meaning set forth in Section 15.1(e) hereof.
1.47 "Transfer Taxes" has the meaning set forth in Section 4(a) hereof.
1.48 "Trustee" means S. James Coppersmith ("Coppersmith"), or any successor to
Coppersmith, who shall be duly appointed by the Bankruptcy Court to serve as
trustee of the Debtors under the Bankruptcy Code.
1.50 "WMPC" shall mean Television Station WMPC, Jellico, Tennessee.
1.51 "WOAC" shall mean Television Station WOAC, Canton, Ohio.
SECTION 2. PURCHASE OF ASSETS.
2.1 Condition Precedent. In addition to any applicable conditions under Sections
12 and 13 hereof, the obligations of Debtors and Purchaser hereunder are subject
to the approval by the Bankruptcy Court of the transactions contemplated by this
Agreement.
2.2 Transfer of Assets.
(a) Included Assets. Subject to the terms and conditions set forth in
this Agreement, Debtors hereby agree to sell, assign, transfer and deliver to
Purchaser on the Closing Date, and Purchaser agrees to purchase on the Closing
Date, all of the rights, title and interest of Debtors in and to the following
Assets:
(i) The Personal Property, including those items of Personal Property
listed on Schedule 2.2(a)(i);
(ii) The Licenses listed on Schedule 2.2(a)(ii);
(iii) The Assumed Contracts listed on Schedule 2.2(a)(iii);
(iv) All trademarks, trade names, service marks, call signs,
copyrights, jingles and privileges and all other information and all intangible
assets relating to the Stations, including those listed on Schedule 2.2(a)(iv);
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(v) All of the Debtors' proprietary information, relating to the
Stations, including technical information and data, machinery and equipment,
warranties, coverage maps, computer discs and tapes, plans, diagrams, blueprints
an,i schematics, including the Public File and filings with the FCC relating to
the Stations;
(vi) All choses in action and rights under warranties to the benefit of
the Debtors relating to the Stations or the Assets, subject to Section
2.2(c)(v);
(vii) All books and records relating to the business or operation of
the Stations, including any executed copies of the Assumed Contracts or the
Executory Station Contracts in the Debtors' possession, and all records required
by the FCC to be kept, subject to the right of Debtors to have such books and
records made available to Debtor prior to the Closing, as set forth in Section
17.11 hereof;
(viii) The Executory Station Contracts listed on Schedule 2.2(a)(viii);
and
(ix) The amounts, including interest, if any, on such amounts,
deposited in escrows by Debtors pursuant to the Executory Station Contract
relating to WOAC in the original principal amount of $2,350,000 and the
Executory Station Contract relating to WMPC in the original principal amount of
$500,000.
(b) Status of Title. All of the Assets shall be conveyed by Debtors
free and clear of any and all liens, claims, encumbrances and obligations, and
shall be accepted by Purchaser "AS IS" and "WHERE IS" and as provided in the
Bankruptcy Court Order (as provided for in Section 10.3 and Section 12.1).
Except as provided in Section 7 hereof, no representations or warranties
whatsoever are made by Debtors with respect to the Assets. With the exception of
the Assumed Contracts and the Executory Station Contracts, all other real estate
leases, equipment leases, contracts and other instruments and obligations that
bind Debtors or affect the Assets shall not be assumed by Purchaser.
(c) Excluded Assets. Notwithstanding anything in this Agreement to the
contrary, there shall not be included in the Assets, and Debtors shall retain as
their properties, the following assets:
(i) the capital stock of Debtors;
(ii) Subject to Section 9.6, any employment, consulting or
labor-related contracts, commitments, collective bargaining or union agreements
or arrangements, employee benefit plans, pension plans or retirement plans and
any assets or trusts or other funding arrangements relating thereto;
(iii) any minute books, stock ownership record books and tax records
relating to Debtors;
(iv) all cash or cash equivalents or accounts receivable owned by
Debtors, except as set forth in Section 2.2(a)(ix);
(v) any claims, suits, choses in action and actions, except as
expressly provided for in Section 2.2(a)(vi), including any preference, turnover
or fraudulent conveyance actions;
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(vi) any net operating losses of Debtors;
(vii) any and all prepaid assets, employee advances, security deposits
and utility deposits, except as set forth in Section 2.2(a)(ix);
(viii) all right, title and interest of Debtors in and to any real
property leases, equipment and other personal property leases, contracts and
other instruments not otherwise included in the Assets to be transferred;
(ix) all right, title and interest of Debtors in and to any property
held or used by Debtors in connection with other business engaged in by Debtors,
other than the operation of the Stations, including any tangible or intangible
assets, contracts, leases or agreements; and
(x) any contract, agreement or understanding of Debtors to acquire any
television station, other than the Executory Station Contracts;
(d) Operation of Stations Pending Closing. Between the Agreement Date
and the Closing Date, Debtors agree to operate the Stations only in the ordinary
course of business, and shall use all reasonable efforts to preserve such
Stations and avoid any act which might materially adversely affect the value of
the Stations, provided that Debtors (i) shall not remove, sell, transfer or
otherwise dispose of any of the Personal Property forming part of the Assets to
be sold hereunder or remove any such Assets from the premises where such
Personal Property is located on the Agreement Date, and (ii) shall not sell or
otherwise transfer any of the Assets to be acquired by Purchaser without the
prior written consent of Purchaser, except in the ordinary course of the
business conducted at each of the Stations, where the assets involved are either
no longer used or useful or are replaced with a substantially equivalent asset.
2.3 No Assumption of Liabilities: No Encumbrances on Assets. Except for
the Assumed Contracts and the Executory Station Contracts, or as otherwise
expressly provided for in this Agreement, Purchaser is not assuming any
liabilities or obligations whatsoever of Debtors, whether absolute, accrued,
liquidated, known or unknown, matured or unmatured, contingent or otherwise and
whether due or arising before the Closing or arising or to become due on or
after Closing and whether or not asserted at the time of Closing (including
commissions, salaries, wages, rebates to customers, fees, medical or other
liabilities or compensation to employees, rents, mortgages, expenses, accounts
payable, liabilities arising under the Internal Revenue Code of 1986, as
amended, or under any state or local tax law, for any tax which may become due
for periods on or prior to the Closing and for all interest and penalties
thereon, any liability for any obligations heretofore or hereafter incurred by
Debtors for any contributions to any employment benefit plans, pension programs
and other such benefit programs or arrangements), and none of the Assets shall
be acquired subject to any such liens, liabilities or encumbrances
(collectively, the "Liabilities or Encumbrances"). At the Closing, subject to
Section 3.2(b) and Section 6.2, Debtors shall, pursuant to Section 363(f) of the
Bankruptcy Code, sell, convey and assign, transfer and deliver, and Purchaser
shall purchase and assume, all of Debtors' rights, title and interest in and to
all of the Assets, free and clear of all Liabilities or Encumbrances, whether
absolute, accrued, contingent or otherwise and whether due or to become due and
whether or not asserted at the time of Closing.
SECTION 3. PURCHASE PRICE; LETTER OF CREDIT; CERTAIN ADJUSTMENTS; GUARANTEE
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3.1 (a) Pursuant to the SAH Letter Agreement, Shop at Home, Inc., the
Purchaser's parent company, delivered the sum of One Million ($1,000,000)
Dollars to the Trustee as an initial deposit (the "Initial Deposit"), to be
applied towards the acquisition of the Assets. Following the execution and
delivery of this Agreement, and within five (5) days after the Bankruptcy Court
Approval, Purchaser shall cause to be delivered to the Trustee the additional
sum (the "Second Deposit") of Two Million Nine Hundred Sixty-Three Thousand
Seven Hundred Fifty ($2,963,750) Dollars (the Initial Deposit and the Second
Deposit are sometimes collectively referred to herein as the "Cash Deposit"), to
be held by the Trustee, subject to and upon the terms and conditions provided
for in this Agreement, for the purpose of providing liquidated damages as
provided for in this Agreement. At Purchaser's election, the Cash Deposit may be
held by a third party escrow agent ("Escrow Agent"), mutually acceptable to the
Trustee and the Purchaser pursuant to an escrow agreement containing customary
provisions acceptable to the Trustee, the Purchaser and the Escrow Agent.
(b) In lieu of delivery of the Cash Deposit to the Trustee or the
Escrow Agent, as the case may be, upon the execution and delivery of this
Agreement and within five (5) days after the Bankruptcy Court Approval,
Purchaser may, at its option, cause to be issued and delivered to the Trustee,
an irrevocable letter of credit in favor of Debtors drawn on a bank reasonably
acceptable to the Trustee with total assets of not less than $10,000,000,000 and
shareholders' equity of not less than $600,000,000 available for the sum of
Three Million Nine Hundred Sixty-Three Thousand Seven Hundred Fifty ($3,963,750)
Dollars (the "Letter of Credit Amount") on the terms set forth in this Section
3.1 (b) (the "Letter of Credit"). Upon the delivery of the Letter of Credit, the
Trustee shall return the Initial Deposit to Purchaser. The Letter of Credit
shall be in substantially the form annexed hereto as Exhibit 3.1(b) and shall
provide that it shall (i) be irrevocable, subject to expiration and termination
as provided for in this Section 3.1(b); (ii) expire on December 31,1998, unless
earlier drawn on or terminated as provided for in the Letter of Credit; (iii) be
terminable by written notice of termination given to the issuing bank and signed
by both Purchaser and the Trustee; (iv) be for the purpose of providing
liquidated damages in the event of a default by Purchaser as provided for in
this Agreement; (v) terminate immediately upon written notice of termination
given to the issuing bank by the Trustee advising the issuing bank of the
approval by the Bankruptcy Court of any offer or agreement to purchase the
Assets made by any entity other than Purchaser, which notice shall be given
pursuant to Section 10.2 hereof; (vi) be payable to Debtor upon presentation of
the Letter of Credit to the issuing bank, together with a certificate signed and
sworn to by the Trustee in substantially the form annexed hereto in Exhibit
3.1(b). In such certificate presented to the issuing bank with the Letter of
Credit, the Trustee shall certify that Debtors have not breached any material
obligations under this Agreement and that Purchaser has failed to perform one or
more of its material obligations hereunder. The Letter of Credit Amount or the
Cash Deposit, as the case may be, will constitute liquidated damages (and not a
penalty) for such failure. Purchaser expressly acknowledges that the Letter of
Credit Amount or the Cash Deposit, as the case may be, are appropriate and
reasonable amounts in respect of liquidated damages.
(c) Notwithstanding the foregoing, Purchaser may cause the requirements
of Sections 3.1(a) and (b) above to be satisfied by a combination of cash and a
Letter of Credit, so long as the total is Three Million Nine Hundred Sixty-Three
Thousand Seven Hundred Fifty ($3,963,750) Dollars.
3.2 Purchase Price, Certain Adjustments.
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(a) Purchase Price. On the terms and subject to the conditions set
forth in this Agreement, Purchaser shall pay to Debtors in exchange for the
Assets, Fifty Two Million, Eight Hundred and Fifty Thousand ($52,850,000.00)
Dollars, plus or minus the adjustments provided for in Section 3.2(b) hereof, or
as elsewhere provided for in this Agreement (as such amount may be adjusted, the
"Purchase Price").
(b) Adjustments to Purchase Price for Non-Delivery of Executory Station
Contracts. Notwithstanding anything contained in this Agreement to the contrary,
in the event that Debtors are unable to deliver to Purchaser their rights, title
and interest in the Executory Station Contract relating to Station WOAC for any
reason other than Purchaser's breach of this Agreement, Purchaser shall
nonetheless be obligated to purchase all of the other Assets as provided for in
this Agreement, excluding any deposits with respect to Station WOAC provided for
in Section 2.2(a)(ix), provided that Purchaser shall be entitled to a $3,600,000
reduction in the Purchase Price, or if the Debtors are unable to deliver to
Purchaser their rights, title and interest in the Executory Station Contract for
Station WMPC for any reason other than Purchaser's breach of the Agreement,
Purchaser shall nonetheless be obligated to purchase all of the other Assets as
provided for in this Agreement, excluding any deposits with respect to Station
WMPC provided for in Section 2.2(a)(ix), provided that Purchaser shall be
entitled to a $1,750,000 reduction in the Purchase Price.
3.3 Payments on Closing Date. On the Closing Date, Purchaser shall pay
to Debtors, by wire transfer of federal funds to an account at a bank designated
by the Debtors, an amount equal to the Purchase Price minus the Cash Deposit.
3.4 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Assets and reported for federal and state tax purposes in accordance
with the allocations which shall be fixed by Purchaser and Debtors after
Bankruptcy Court Approval and on or before the Closing Date, provided however
that if the parties fail to fix such allocations, this Agreement shall
nonetheless remain binding and enforceable. None of the parties hereto shall, at
any time, in any tax or information return filed with any state or federal
agency or in any audit or tax proceeding, take a position that is contrary to
such allocations, if made.
3.5 Guarantee. To induce Debtors to enter into this Agreement and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, SAH, hereby unconditionally guarantees the full and prompt
payment and performance by Purchaser of each and every obligation of Purchaser
arising under this Agreement or any other agreement or instrument executed by
Purchaser in connection with this Agreement (the "Purchaser Ancillary
Agreements"), including the obligation of the Purchaser to pay the Purchase
Price to Debtors as and when due hereunder and to perform all obligations of the
Debtors under the Executory Station Contracts, which shall be assigned to and
assumed by Purchaser under this Agreement. Accordingly, SAH shall be jointly and
severally liable with Purchaser for the performance by Purchaser of all of
Purchaser's obligations under this Agreement and the Purchaser Ancillary
Agreements. The obligations of SAH under this Agreement will not be affected by
(a) Debtors' failure to assert any claim or demand or to enforce any right or
remedy against Purchaser under this Agreement or any of the Purchaser Ancillary
Agreements; (b) any amendment, extension, renewal, rescission, waiver or
modification of any of the terms or provisions of this Agreement or any of the
Purchaser Ancillary Agreements; or (c) Debtors settling, releasing or
compromising any claims against Purchaser under this Agreement or any of the
Purchaser Ancillary Agreements in any manner, as Debtors determine.
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3.6 Liquidated Damages for Pre-Closing Default by Purchaser. Debtors
recognize that if the Closing does not take place as a result of Purchaser's
default, Debtors would be entitled to compensation, the extent of which is
extremely difficult and impractical to ascertain. To avoid this problem, the
parties agree that if the Trustee shall terminate this Agreement pursuant to
Section 14.3 due to a material breach of this Agreement by Purchaser, Debtors
shall be entitled to receive as liquidated damages the Cash Deposit and any
interest thereon or the Letter of Credit Amount, as the case may be. The parties
agree that such amount (i.e. $3,963,750), and interest thereon, shall constitute
liquidated damages and shall be in lieu of any other remedies to which Debtors
might otherwise be entitled if the Trustee shall exercise his right to terminate
this Agreement pursuant to Section 14.3. Purchaser and Debtors each acknowledge
and agree that such liquidated damage amount is reasonable in light, among other
things, of the anticipated harm which will be caused to the Debtors, the
difficulty of proof of loss, the inconvenience and non-feasibility of otherwise
obtaining an adequate remedy.
SECTION 4. TRANSFER TAXES.
(a) Purchaser shall pay any and all transfer taxes or charges that
become due on account of the transfers of the Assets contemplated under this
Agreement (including use, documentary, stamp, deed, sales, ad valorem, bulk
transfer, tangible personal property, real estate and other taxes and charges)
and any capital tax in connection with the transactions contemplated by this
Agreement, including (i) any amounts payable to any governmental authority,
entity or subdivision in the States of Ohio, New York, Tennessee, California or
North Carolina in connection with any of the transactions contemplated
hereunder; and (ii) any amounts payable under the law of any other jurisdiction,
to the governmental authorities, entities or subdivisions in such jurisdiction
(collectively, the "Transfer Taxes"). Purchaser shall indemnify the Debtors an
the Trustee from and against any Losses (as hereinafter defined) which may be
imposed upon, incurred, asserted or awarded against the Debtors arising from or
related to Purchaser's failure to timely pay any and ail Transfer Taxes that
shall become due on account of the transfer of Assets contemplated under this
Agreement.
(b) Before and after Closing, the parties shall give any notices to any
governmental authorities, entities or subdivisions, make any filings,
applications or submissions, execute and deliver all certificates, documents and
instruments and take all other actions that may be required under applicable law
to effectuate compliance with all such laws relating to Transfer Taxes and to
enable Purchaser to effectuate the payment of all Transfer Taxes required to be
paid in connection with the transactions contemplated under this Agreement. Such
actions shall be completed by the parties in a timely manner prior to Closing
and shall include any necessary or required filings of sales tax clearances and
applications and sales tax exemptions, as reasonably requested by Purchaser.
SECTION 5. INSTRUMENTS OF CONVEYANCE AND CLOSING.
5.1 Transfer of Assets. Subject to Section 3.2(b) and Section 6.2, on
the Closing Date, Debtors shall transfer the Assets to Purchaser in exchange for
payment of the Purchase Price. Subject to Section 3.2(b) and Section 6.2, on the
Closing Date, Debtors shall execute and deliver to Purchaser all such
instruments and documents (including all deeds, bills of sale or
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assignments) as shall be necessary or reasonably requested by Purchaser in order
to effectuate the sale, assignment, transfer, conveyance and delivery of the
Assets from Debtors to Purchaser in accordance with this Agreement (such
instruments and documents, collectively, the "Conveyance Documents").
5.2 Further Assurances. Subject to Section 3.2(b) and Section 6.2,
Debtors shall on the Closing Date and from time to time thereafter at
Purchaser's request, reasonably cooperate with Purchaser, take such actions and
execute and deliver to Purchaser such Conveyance Documents in addition to those
delivered pursuant to Section 5.1 hereof as Purchaser shall reasonably request
to effectuate the transfer, conveyance and assignment of the Assets to Purchaser
free and clear of any Liabilities or Encumbrances or otherwise to effectuate the
terms of this Agreement. Prior to and on and after the Closing Date, the
Purchaser shall take such actions as shall be reasonably requested by the
Trustee to consummate the transactions contemplated by this Agreement and the
Executory Station Contracts.
SECTION 6. CLOSING.
6.1 The Closing. Subject to Section 3.2(b) and Section 6.2, the closing
of the sale, transfer, assignment and delivery of the Assets and the Conveyance
Documents pursuant to Section 5 hereof, the delivery of the Purchase Price
pursuant to Section 3.3 hereof and the delivery of the other instruments and
certificates required pursuant to this Agreement, including the delivery of the
Conveyance Documents and the Purchaser Closing Documents (the "Closing"), shall
take place on a day mutually agreeable to the Trustee and Purchaser no later
than forty-five (45) days following the last to occur of (i) the entry of an
order of the Bankruptcy Court approving the sale and assignment of the Stations
to Purchaser in accordance with Sections 10.3 and 12.1 hereof (the "Bankruptcy
Court Approval"), and (ii) the issuance of the FCC Consent with respect to the
Stations and such consent becoming a Final Order, but in no event shall the
Closing Date be later than May 1, 1998 (the date and time of the closing being
referred to herein as the "Closing Date"). The Closing shall take place on the
Closing Date at 10:00 a.m., New York time, at the offices of Brauner Baron
Rosenzweig & Klein, LLP, 61 Broadway, New York, New York 10006 or such other
place as the parties shall agree. Upon consummation of the Closing, Purchaser
shall be deemed to have acquired the Assets transferred at Closing as of 12:01
a.m. on the day of the Closing.
6.2 Multiple Closings. Notwithstanding anything contained in this
Agreement to the contrary, if all conditions provided for in this Agreement for
the transfer of the Stations have been met, but one or more conditions have not
been met with respect to the transfer of one or both of the Executory Station
Contracts, the parties shall nonetheless promptly close the sale of the
Stations. As provided for in Section 6.1 above, such Closing shall take place
not later than 45 days following the last to occur of (i) Bankruptcy Court
Approval, and (ii) the issuance of the FCC Consent with respect to the Stations
and such consent being a Final Order, but in no event later than May 1, 1998. In
any such event, Section 9.2 shall apply with respect to those Executory Station
Contracts which have not been transferred as of the Closing.
SECTION 7. REPRESENTATIONS AND WARRANTIES OF DEBTOR;
Debtors hereby make the following representations and warranties to
Purchaser, which representations and warranties shall be true and correct on the
Agreement Date and the Closing Date:
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7.1 Execution and Authority. Subject to Bankruptcy Court Approval,
Debtors have all requisite power and authority to enter into, execute, deliver
and perform this Agreement, the Conveyance Documents that are to be executed by
Debtors and to carry out the transactions contemplated hereby and thereby.
7.2 Authorization. Etc. Subject to Bankruptcy Court Approval, the
execution, delivery and performance of this Agreement, and the Conveyance
Documents that are to be executed by Debtors and the due consummation of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary corporate action on the part of the Debtors. This Agreement has been
duly executed and delivered by Debtors. Subject to Bankruptcy Court Approval,
this Agreement, and the Conveyance Documents constitute the legal, valid and
binding obligations of Debtors enforceable against Debtors in accordance with
their terms, except as such enforceability and the availability of equitable
remedies may be limited by laws relating to bankruptcy, insolvency,
reorganization, moratorium or creditor's rights or by any similar law or by
general equitable principles.
7.3 No Violation. Subject to Bankruptcy Court Approval, neither the
execution and delivery of this Agreement or the Conveyance Documents nor the
consummation by Debtors of the transactions contemplated hereby or thereby will
cause any default or breach of or conflict with or constitute a violation of any
provision of the Certificates of Incorporation or Bylaws of Debtors.
7.4 Rights to Properties: Encumbrances. On the Closing Date, Debtors
shall transfer to Purchaser, all of Debtors' right, title and interest in and to
all of the Assets, free and clear of any Liens or Encumbrances, pursuant to
Section 363(f) of the Bankruptcy Code.
7.5 Brokers Finders, Etc. Debtors have not incurred any liability to
any broker, finder or agent for any brokerage fees, finders fees or other like
commissions with respect to the transactions contemplated by this Agreement.
7.6 Absence of Certain Changes. Debtors will not between the date of
this Agreement and the Closing Date without the consent of Purchaser, which
consent shall not be unreasonably withheld or delayed:
(a) Make a material change in their business or operations or in the
manner of conducting their business other than changes in the ordinary course of
business.
(b) Sell, transfer or convey any of their properties or assets except
in the ordinary course of business and consistent with past practice.
(c) Terminate or amend or suffer the termination or amendment of, or
fail to perform in any material respect, their obligations or suffer or permit
any default to exist under any of the Special Category Assumed Contracts which
relate to the Stations.
7.7 Insurance. Debtors have in effect valid, outstanding and
enforceable policies of fire, liability, workmen's compensation, health, and
other forms of insurance, which provide reasonably adequate coverage for the
properties, assets and operations of the Debtors. Debtors
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will cause all such policies to remain in full force and effect through the
Closing Date.
7.8 Leases. To the best of Debtor's knowledge, Schedule 2.2(a)(iii)
attached hereto contains a complete and accurate list of all leases (including
any capital leases) and lease-purchase arrangements which relate to the Stations
pursuant to which Debtors leases real or personal property from others.
7.9 Authorizations. Debtors are the holders of the licenses or
authorizations described on Schedule 2.2(a)(ii) hereto. Except as set forth in
Schedule 7.9, the Stations' licenses or authorizations issued by the FCC are
now, and will be at the Closing, in good standing. To the best of Debtors'
knowledge, except as set forth in Schedule 7.9, the Stations are being operated
in all material respects in accordance with the terms and conditions of its
licenses or authorizations and in accordance with the statutes, rules,
regulations, ordinances, and resolutions of the FCC, as well as all other
applicable federal, state and local governmental entities, and will be so
operated as of the Closing Date. Except as set forth in Schedule 7.9, Debtors
have no knowledge of any circumstance or condition, including any investigation,
which might in any manner jeopardize the licenses of the Stations. Except as set
forth in Schedule 7.9, there will not be on Closing Date hereunder, any
unsatisfied citations issued by the FCC outstanding with respect to the Stations
or their operation.
7.10 Licenses and Permits; Compliance with Laws. Debtors hold all
permits, licenses, authorizations, variances, exemptions, orders or approvals of
all governmental entities which are material to the operation of the Stations as
currently operated by Debtors, except as set forth in Schedule 7.9.
7.11 Labor Relations. Except as set forth on Schedule 7.11 and Section
9.6, none of the employees employed by Debtors at the Stations are covered by or
subject to any collective bargaining agreement, union contract, labor agreement
or conciliation agreement.
SECTION 8. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND SAH.
Purchaser and SAH hereby make the following representations and
warranties to Debtors, which representations and warranties shall be true and
correct on the Agreement Date and the Closing Date:
8.1 Corporate Organization; Good Standing. Each of Purchaser and SAH is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Tennessee, and each of Purchaser and SAH has the corporate
power and authority to enter into this Agreement and all other agreements and
instruments required to be executed by it under this Agreement (collectively,
the "Purchaser's Closing Documents"), and to carry out the transactions
contemplated hereby and thereby.
8.2 Authorization, Etc. The execution, delivery and performance of the
Purchasers Closing Documents by Purchaser or SAH, as the case may be, and the
due consummation of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action on the part of the Purchaser
or SAHI. Each of the Purchaser's Closing Documents constitutes a legal, valid
and binding agreement of Purchaser or SAH, as the case may be, enforceable
against Purchaser or SAH in accordance with its terms, except as such
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enforceability and the availability of equitable remedies may be limited by laws
relating to bankruptcy, insolvency, reorganization, moratorium or creditor's
rights or by any similar law or by general equitable principles.
8.3 No Violation. The execution and delivery of the Purchaser's Closing
Documents and the consummation by Purchaser or SAH, as the case may be, of the
transactions contemplated hereby or thereby do not and will not with or without
the giving of notice or lapse of time, or both, conflict with or constitute a
violation of (i) any term or provision of the Articles of Incorporation or
Bylaws of Purchaser or SAH; (ii) any agreement or commitment to which Purchaser
or SAH is a party or by which Purchaser or SAH is bound; (iii) any law, statute,
rule, regulation or executive order to which Purchaser or SAH is subject; or
(iv) any judgment, order, writ, award or injunction or decree of any court,
arbitration or administrative body applicable to Purchaser or SAH.
8.4 Qualification To Be Licensee. Purchaser is legally, financially and
otherwise qualified to be a FCC licensee of, acquire, own and operate the
Stations and each of the television stations (the "Executory Stations"), covered
by the Executory Station Contracts under the applicable rules, regulations and
policies of the FCC, including, without limitation, the Communications Act.
Neither Purchaser nor any person with an attributable ownership or positional
interest (as defined by the FCC) in Purchaser, including SAH, will, at any time
from the Agreement Date until after the Closing Date and until the closing under
each of the Executory Station Contracts which shall be assigned to and assumed
by Purchaser hereunder, take any action which would cause Purchaser to be
disqualified as an FCC licensee or assignee of the Stations or the Executory
Station Contracts or which would require the waiver of any applicable FCC rule
or regulation with respect to this transaction, for Purchaser to be found
qualified as an FCC licensee or an assignee of the Stations, the Executory
Stations or the Executory Station Contracts. Purchaser has no knowledge of any
fact which would, under existing law (including the Communications Act) and
existing rules, regulations and practices of the FCC, disqualify Purchaser as an
assignee of the Executory Station Contracts or of the FCC' Licenses held by the
Stations or the Executory Stations or as owner and operator of the Stations, the
Executory Stations or the Assets.
8.5 Acknowledgment of Condition of Assets. Purchaser has been afforded
the opportunity to inspect the Assets, including the Stations, and is familiar
with the condition thereof including the matters described on Schedule 7.9 and
Schedule 8.5 hereto. Purchaser agrees that it is acquiring the Assets, "AS IS,
WHERE IS" with all faults and in the operating condition as exists as of the
Closing Date and without any warranty or representation whatsoever as to
condition, profitability, merchantability or fitness for any use or purpose
whatsoever, other than those specific representations and warranties of Debtors
expressly provided for in Section 7 hereof, or as provided in the Bankruptcy
Court Order. Purchaser further acknowledges that Debtors shall not be liable
under this Agreement for any lost profits or indirect, consequential or special
damages.
8.6 Brokers, Finders, Etc. Purchaser has not incurred any liability to
any broker, finder or agent for any brokerage fees, finders fees or other like
commissions with respect to the transactions contemplated by this Agreement,
except as provided pursuant to separate agreement, and Purchaser shall be
responsible for any and all fees earned by any persons or entities under such an
agreement.
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SECTION 9. SPECIAL COVENANTS AND AGREEMENTS.
9.1 FCC Consent. The assignment of each of the FCC Licenses and, if
applicable, the licenses, permits and authorizations issued by the FCC related
to the television stations subject to the Executory Station Contracts as
contemplated by this Agreement is subject to the issuance of the FCC Consent.
(a) As soon as commercially practicable, but in no event later than
twenty (20) days after the execution and delivery of this Agreement, Purchaser
and Debtors shall file with the FCC complete and accurate applications for the
FCC Consent. The parties shall prosecute said applications with all reasonable
diligence and otherwise use their best efforts to obtain the approval of such
applications as expeditiously as practicable. Without limiting the generality of
the foregoing, Debtors and Purchaser shall promptly provide such documents and
other items that shall be required or requested by the FCC. Purchaser and Debtor
shall each oppose any petitions to deny or other objections filed with respect
to the FCC applications. If the FCC Consent imposes any condition on any party
hereto, such party shall use its best efforts to comply with such condition,
unless compliance would be unduly burdensome or would have a material adverse
effect upon it. If administrative or judicial reconsideration or review is
sought with respect to the FCC Consent, Purchaser and Debtors shall each oppose
such efforts to obtain administrative or judicial reconsideration review (but
nothing herein shall be construed to limit any party's right to terminate this
Agreement provided for in this Agreement, including under Section 14 hereof).
(b) Within twenty (20) days of the execution and delivery of this
Agreement, if required by law, Purchaser and Debtors shall file the requisite
forms with the Federal Trade Commission pursuant to the Pre-merger Notification
Requirements under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
(c) Subject to Section 3.2(b) and Section 6.2, the transfer of the
Assets pursuant to this Agreement is expressly conditioned upon (i) the grant of
the FCC Consent without any conditions materially adverse to Purchaser, (ii)
compliance by the parties hereto with the conditions (if any) imposed in the FCC
Consent, (iii) the FCC Consent, through the passage of time or otherwise,
becoming a Final Order; and (iv) Notice of Termination of the waiting period
provided by Section 7A(b)(1) of the Clayton Act and Section 803.10 (B) of the
Pre-merger Notification Requirements under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, if applicable.
9.2 Agreement With Respect to Certain Executory Station Contracts.
(a) WOAC. In the event the present licensee and operator of WOAC
declines to agree to the assumption and assignment of the Executory Station
Contract with respect to that station and commences any proceeding before the
Bankruptcy Court, the FCC, or any other court or administrative agency with
jurisdiction over the matter, requesting that Purchaser not be permitted to
acquire the assets of WOAC, the Debtors ,and the Purchaser shall oppose such
action and use their reasonable efforts to cause such proceeding to be
determined in a manner favorable to the transfer to Purchaser. If any such
proceeding is determined adversely to Debtors and Purchaser such that Debtors
shall be unable to transfer WOAC to Purchaser, other than by reason of
Purchaser's breach of this Agreement, Debtors shall not be required to transfer
WOAC to Purchaser, and the Purchaser shall be entitled to an adjustment in the
Purchase Price as
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provided for in Section 3.2(b). In the event the Closing occurs prior to such
matter being resolved and the FCC Consent with respect to WOAC being granted,
the parties shall nonetheless close the acquisition of the remaining Assets, as
provided for in Section 3.2(b) and Section 6.2. Purchaser shall, however, be
permitted to withhold from the Purchase Price $3,600,000 as provided for in
Section 3.2(b) hereof by depositing such funds at the Closing with a third party
escrow agent acceptable to the Purchaser and the Trustee pursuant to an escrow
agreement acceptable to both parties, which such funds shall be held in escrow
until such time as the closing with respect to WOAC can be held. If the
proceeding challenging the ability of Purchaser to acquire the assets of WOAC is
not resolved prior to the Closing and the closing regarding WOAC is not held on
or prior to September 30, 1998, Purchaser or the Trustee may in its discretion,
upon notice to the other, terminate the acquisition of WOAC, in which case,
provided Purchaser shall not have breached this Agreement, the $3,600,000
amount, plus any interest thereon, shall be resumed to Purchaser and Debtors
shall be free to transfer their rights to WOAC to any third party. If following
the Closing, the closing of the sale of WOAC shall not occur by reason of a
breach by Purchaser of this Agreement, the escrow agent shall deliver such
$3,600,000, together with any interest thereon, to the Trustee who shall be
entitled to retain such funds as liquidated damages, for such breach and not as
a penalty.
(b) WMPC. In the event the present licensee and operator of WMPC
declines to agree to the assumption and assignment of the Executory Station
Contract with respect to that station and commences any proceeding before the
Bankruptcy Court, the FCC, or any other court or administrative agency with
jurisdiction over the matter, requesting that Purchaser not be permitted to
acquire the assets of WMPC, the Trustee, the Debtors and the Purchaser shall
oppose such action and use their reasonable efforts to cause such proceeding to
be determined in a manner favorable to the transfer to Purchaser. If any such
proceeding is determined adversely to Debtors and Purchaser such that Debtors
shall be unable to transfer WMPC to Purchaser, other than by reason of
Purchaser's breach of this Agreement, Debtors shall not be required to transfer
WMPC to Purchaser, and Purchaser shall be entitled to an adjustment in the
Purchase Price as provided for in Section 3.2(b). In the event the Closing
occurs prior to such matter being resolved and the FCC Consent with respect to
WMPC being granted, the parties shall nonetheless close the acquisition of the
remaining Assets, as provided for in Section 3.2(b) and Section 6.2. Purchaser
shall, however, be permitted to withhold from the Purchase Price the $1,750,000
provided for in Section 3.2(b) hereof by depositing such funds at the Closing
with a third party escrow agent acceptable to the Purchaser and the Trustee
pursuant to an escrow agreement acceptable to both parties, which such funds
shall be held in escrow until such time as the closing with respect to WMPC can
be held. If the proceeding challenging the ability of Purchaser to acquire the
assets of WMPC is not resolved prior to the Closing and the closing regarding
WMPC is not held on or prior to September 30, 1998, Purchaser or the Trustee may
in its discretion, upon notice to the other, terminate the acquisition of WMPC,
in which case, provided Purchaser shall not have breached this Agreement, the
$1,750,000 amount plus any interest thereon shall be returned to Purchaser and
Debtors shall be free to transfer their rights to WMPC to any third party. If
following the Closing, the closing of the sale of WOAC shall not occur by reason
of a breach by Purchaser of this Agreement, the escrow agent shall deliver such
$1,750,000, together with any interest thereon, to the Trustee who shall be
entitled to retain such funds as liquidated damages for such breach and not as a
penalty.
9.3 Control of the Stations. The operations, including the complete
control and supervision of all of the Stations' programs, employees and
policies, shall be the sole
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responsibility of Debtors until the completion of the Closing hereunder. The
Time Purchase Agreement by and between Debtors and Purchaser whereby Purchaser
is providing programming services to the Stations gives to Purchaser no rights
to participate in the management, supervision or control of the Stations, and
notwithstanding any other provision of this Agreement, Purchaser shall not,
directly or indirectly, control, supervise or manage the operation of the
Stations prior to the Closing.
9.4 Taxes Fees and Expenses. All filing fees required by the FCC and
the Federal Trade Commission shall be paid by Purchaser. Except as otherwise
provided in this Agreement, each party shall pay its own expenses incurred in
connection with the authorization, preparation, execution and performance of
this Agreement, including all fees and expenses of counsel, accountants, agents
and other representatives.
9.5 Cooperation. Purchaser and Debtors shall cooperate fully with each
other and their respective counsel and accountants in connection with any
actions required to be taken as part of their respective obligations under this
Agreement, and Purchaser and Debtors shall execute such other documents as may
be necessary or desirable to implement and consummate this Agreement and the
transactions contemplated hereby and shall otherwise use their best efforts to
consummate the transactions contemplated hereby and to fulfill their obligations
hereunder.
9.6 Collective Bargaining Agreement. KCNS is a party to a collective
bargaining agreement dated May 11, 1994 with the National Association of
Broadcast Employees and Technicians, The Broadcasting and Cable Television
Workers Sector of the Communications Workers of America, AFL-CIO (the "Union")
covering or relating to some of the employees of KCNS. Such agreement has been
extended until October 27, 1997. The parties agree that the Debtors shall have
the right to modify, terminate or further extend such agreement, but in no event
shall any such extension be for more than 30 days after the Closing. Purchaser
acknowledges that the Debtors have provided Purchaser with copies of such
agreement including any amendments or extensions thereof. Purchaser agrees that
after the Closing it shall honor any obligations to the Union imposed by
applicable law.
SECTION 10. CERTAIN PRE-CLOSING MATTERS; FINANCIAL VIABILITY OF PURCHASER.
10.1 Pre-Closing Matters. Debtors hereby agree that, from and after the
Agreement Date hereof to and including the Closing Date, except as otherwise
consented to or approved by Purchaser in writing:
(a) Access. Subject to Section 17.1, Debtors shall afford to the
officers and authorized representatives of Purchaser, to the attorneys and
auditors for Purchaser and to representatives of any lenders, banks or other
entities that consider providing financing in connection with the transactions
contemplated hereunder, reasonable access to all properties, offices,
facilities, books and records in its possession or under its control to the
extent relating to the Assets and a reasonable opportunity to make such
reasonable investigations as Purchaser shall desire to make of Debtors' Assets,
upon reasonable notice and during normal business hours and without undue
disruption of Debtors' business, provided however, that prior to such access, if
requested by the Trustee, any such person shall agree to the provisions of
Section 17.1 hereof.
(b) Ordinary Course. Debtors shall operate the Stations only in the
ordinary course
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of business consistent with Debtors' current practice and shall use all
reasonable efforts to preserve and maintain the Assets intact.
10.2 Other Offers. The transactions contemplated herein and the
Bankruptcy Court Approval shall be subject to higher or better offers made at
the Bankruptcy Court Hearing (defined below). The parties acknowledge and agree
that pursuant to the motion for approval of this Agreement to be made by the
Trustee, the Court shall establish bidding procedures (the "Bidding
Procedures"), to be carried out in connection with the hearing on approval of
this Agreement which the Trustee and the Purchaser agree to accept and be bound
by. Except as may otherwise be provided for in the Bidding Procedures, Debtors
shall not entertain any such offer unless the entity making such offer (a)
presents a certified check or bank check, letter of credit or other cash
equivalent in the amount of seven and one-half percent (7 1/2%) of the purchase
price, which amount shall serve as a good faith deposit against payment of the
purchase price by such entity, and (b) agrees that in the event of such entity's
failure to perform any obligation under its purchase agreement with Debtors,
which failure results in a failure to close the transactions contemplated by
such purchase agreement, such entity shall forfeit to Debtors the full amount of
such good faith deposit. If a higher or better offer is made and approved by the
Bankruptcy Court, Debtors shall immediately return the Cash Deposit, plus any
interest thereon, to Purchaser, or if the Purchaser delivered the Letter of
Credit in lieu of the Cash Deposit, the Trustee and the Purchaser shall
immediately execute and deliver written notice to the issuer of the Letter of
Credit confirming the termination of the Letter of Credit, and, provided such
sale includes the Stations, Debtors shall immediately pay $750,000 from the cash
proceeds of such sale to Purchaser as liquidated damages to Purchaser, and up to
$400,000 as reimbursement for Purchaser's cost and expense of due diligence,
negotiating and pursuing the transactions contemplated hereby including the fees
and expenses of its attorneys, accountants, consultants, advisors, and agents in
connection therewith. Debtors expressly acknowledge that such amount is
appropriate given the difficulty of measuring Purchaser's damages under the
circumstances. Such payment of up to $1,150,000 shall be made by Debtors to
Purchaser by certified check or wire transfer upon the closing of such sale to
an entity other than Purchaser. The obligation to make such payment shall be
first priority administrative expense under Section 503(b) of the Bankruptcy
Code. If a higher or better offer is made, the Debtors shall not agree to such
offer unless the offer is accompanied with an escrow deposit in an amount which
will be sufficient to pay the payment to Purchaser of $750,000 and up to
$400,000. The payment shall then be made to the Purchaser from the proceeds of
such sale upon Closing, or from the forfeiture of the escrow deposit if such
sale does not close. Notwithstanding anything contained in this Agreement to the
contrary, in the event of any conflict or variance between the Bidding
Procedures and any provision of this Agreement including this Section 10.2 or
Section 10.3, the Bidding Procedures shall prevail and control.
10.3 Bankruptcy Court Consents and Orders. Subject to the terms and
conditions of this Agreement, within ten (10) days after the execution and
delivery of this Agreement, Debtors shall at their own expense move the
Bankruptcy Court for a hearing (the "Bankruptcy Court Hearing"), pursuant to
Section 363 of the Bankruptcy Code, in accordance with the Federal Bankruptcy
Rules, for an order authorizing and directing, pursuant to Section 363 of the
Bankruptcy Code, the sale of the Assets to Purchaser as provided for in this
Agreement and authorizing and directing the other transactions provided for
herein, including, but not limited to, authorizing, pursuant to Section 365 of
the Bankruptcy Code, Debtors to assume and assign the Assumed Contracts and the
Executory Station Contracts (such application, the "363 Application")
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(such order, as the same may be modified to reflect the elimination of one or
more of the Executory Station Contracts or otherwise as provided for in Section
12.1 below, the "Bankruptcy Court Order"); provided, however, that the
Bankruptcy Court Order shall provide that the assumption and assignment of each
respective Executory Station Contract, although approved and authorized, shall
not be effective until the closing of the transactions, including the sale of
the television station and other Assets, contemplated by each such Executory
Station Contract. The Bankruptcy Court Order shall provide, among other terms
consistent with this Agreement, that any Liabilities or Encumbrances relating to
the Assets will, pursuant to Section 363 of the Bankruptcy Code, attach to the
proceeds of the sale of such Assets contemplated hereunder. Debtors shall
provide to Purchaser copies of any pleadings, memoranda, briefs, notices,
motions or other papers or documents of any kind relating to the Assets that are
to be filed with or submitted to the Bankruptcy Court or any other body or
tribunal after the Agreement Date and within five (5) days prior to Closing. All
such papers and documents shall be provided to Purchaser no later than the time
of their filing. Debtors shall provide to Purchaser copies of all orders,
decrees, awards and decisions relating to the Assets that may be rendered or
issued by the Bankruptcy Court or any other tribunal or body after the Agreement
Date and prior to Closing, which copies shall be provided to Purchaser promptly
after each such order, decree, award or decision is issued or rendered.
10.4 Financial Viability of Purchaser. Purchaser shall use its best
efforts to deliver to the Bankruptcy Court at the Bankruptcy Court Hearing,
evidence reasonably satisfactory to the Bankruptcy Court which shall demonstrate
that Purchaser has and shall have the ability to perform all of its obligations
under this Agreement and the Executory Station Contracts, including the
financial ability to pay the Purchase Price for the Assets and perform all of
Debtors' obligations under each of the Executory Station Contracts, including
the obligation to pay the purchase price for the television stations and other
assets or liabilities provided for in the Executory Station Contracts.
Notwithstanding anything contained in this Section 10.4 to the contrary, at the
Closing, Purchaser shall be obligated to deliver the Purchase Price in cash and
such obligation is not in any way conditioned upon Purchaser obtaining
financing.
SECTION 11. THE ASSUMED CONTRACTS, SPECIAL CATEGORY ASSUMED CONTRACTS AND
EXECUTORY STATION CONTRACTS.
(a) Following the Bankruptcy Court Approval, Purchaser shall take any
and all actions reasonably requested by Debtors or as otherwise required by the
Bankruptcy Court, necessary for Debtors to assign to Purchaser, and for
Purchaser to assume, all Debtors' right, title and interest in and obligations
under the Assumed Contracts described on Schedule 11 (a) (the "Special Category
Assumed Contracts") and the Executory Station Contracts, including, taking such
actions and paying any amounts that Debtors may be required to take or pay to
cure any and all defaults by Debtors thereunder, which payment(s), if any, shall
result in a downward adjustment to the Purchase Price. All such amounts which
are required to be paid or delivered prior to the Closing, shall be delivered to
the Trustee to be held in escrow, except that the Trustee shall be entitled to
use any of such funds to cure any such default as provided for in the Bankruptcy
Court Order.
(b) Following the Bankruptcy Court Approval, Purchaser, at its own cost
and expense, shall take any and all actions reasonably requested by Debtors or
as otherwise required by the Court, necessary to assign to Purchaser, and for
Purchaser to assume, all Debtors' right, title and
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interest in and obligations under the Assumed Contracts other than the Special
Category Assumed Contracts, provided, however, notwithstanding anything
contained in this Agreement to the contrary, if Debtors are required to make any
payments or otherwise incur any further liability or expense in order to assign
to Purchaser any such Assumed Contract, Debtors may, in their sole discretion,
reject such Assumed Contract and not assign it to Purchaser, unless Purchaser
agrees to make any such required payments. In no event shall there be any
downward adjustment of the Purchase Price for any such Assumed Contract rejected
by Debtors, or payments made by Purchaser, pursuant to this Section 11(b).
(c) Notwithstanding anything contained in this Agreement to the
contrary, Purchaser agrees to defend, indemnify and hold harmless Debtors and
the Trustee, from and against any and all Losses (as hereinafter defined),
relating to or arising from Purchaser's breach under any of the Executory
Station Contracts that are assigned to Purchaser pursuant to the Bankruptcy
Court Order that shall be imposed upon, incurred by, or asserted or awarded
against Debtors or the Trustee.
SECTION 12. CONDITIONS TO OBLIGATIONS OF ALL PARTIES.
Subject to Section 3.2(b) and Section 6.2, each and every obligation of
Debtors and Purchaser under this Agreement to be performed at or before the
Closing Date shall be subject to the satisfaction, at or before the Closing
Date, of each of the following conditions:
12.1 Bankruptcy Court Approval. The Bankruptcy Court shall find that
(i) Purchaser is a good faith bona fide purchaser within the meaning of Section
363(m) of the Bankruptcy Code, (ii) the consideration to be paid by Purchaser to
Debtors pursuant to this Agreement is fair and reasonable, (iii) there are
exigent business reasons to sell and assign the Assets to Purchaser and such
sale and assignment are in the best interest of Debtor, and their creditors, and
(iv) the notice provided with respect to the proposed sale to Purchaser i;
sufficient under the circumstances of the Bankruptcy Proceedings.
Contemporaneously with such finding, the Bankruptcy Court shall enter such
orders as may be necessary or desirable (A) to approve this Agreement
(including, subject to Section 3.2(b) and Section 11(b) hereof, an order
authorizing upon the Closing, the assumption and assignment, pursuant to Section
365 of the Bankruptcy Code, of the Executory Station Contracts, the Assumed
Contracts, if any, and any and all other executory contracts included in the
Assets, by Debtors to Purchaser), except that the assumption and assignment of
each respective Executory Station Contract shall not be effective until the
completion of the closing under each such Executory Station Contract, subject to
Section 3.2(b), Section 6.2 and Section 11 (b) hereof, (B) to authorize Debtors
to perform their obligations hereunder so as to immediately consummate the
transactions provided for herein in accordance with this Agreement upon the
entering of such orders, and (C) to retain jurisdiction over Debtors, Purchaser,
and the subject matter of this Agreement to issue and enter such further orders
and to grant such relief as may be necessary to effectuate the transfer of all
Assets and the transactions contemplated by this Agreement. Notwithstanding
anything contained in this Agreement to the contrary, if the Bankruptcy Court
shall approve this Agreement and the transfer of the Assets insofar as it
relates to the Stations, but shall not issue an order providing for the
assignment and assumption of one or more of the Executory Station Contracts,
this Agreement shall nonetheless be deemed approved and the Bankruptcy Court
Approval shall be deemed issued and the parties shall proceed with the sale of
the remaining Assets, (excluding any of the Executory Station Contracts, the
assignment and assumption of which was not approved),
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subject to an adjustment, if any, to the Purchase Price provided for in Section
3.2(b) and the Debtors shall be free to transfer same to any third party.
12.2 FCC Consents. The FCC Consent(s) shall be a Final Order(s).
12.3 Litigation. No stay of any court shall be in effect that prohibits the
consummation or effectuation of any of the transactions contemplated herein.
12.4 Other Conditions. All conditions provided for in Sections 9, 10.3 and 13
hereof.
SECTION 13. CONDITIONS TO PURCHASER'S OBLIGATIONS; CONDITIONS TO DEBTORS'
OBLIGATIONS.
13.1 Conditions to Purchases Obligations. Subject to Section 3.2(b) and
Section 6.2, each and every obligation of Purchaser under this Agreement to be
performed at or before the Closing Date shall be subject to the satisfaction, at
or before the Closing Date, of each of the following conditions:
(a) Conveyance Documents. Debtors shall have executed and delivered to
Purchaser the Conveyance Documents in form and substance reasonably satisfactory
to Purchaser and its counsel.
(b) Performance of Agreement. The representations and warranties of
Debtors contained in this Agreement shall be true and correct as of the Closing
Date, with the same force and effect as if made on and as of the Closing Date;
Debtors shall have performed or complied with ail agreements and covenants
required by this Agreement to be performed by Debtors prior to the Closing Date
or at the Closing; and Debtors shall have delivered to Purchaser a certificate,
executed and dated as of the Closing Date, certifying that the foregoing
conditions are satisfied.
13.2 Conditions to Debtors' Obligations. Subject to Section 3.2(b) and
Section 6.2, each and every obligation of Debtors under this Agreement to be
performed at or before the Closing Date shall be subject to the satisfaction, at
or before the Closing Date, of each of the following conditions:
(a) Performance of Agreement. The representations and warranties of
Purchaser and SAH, as the case may be, contained in this Agreement shall be true
and correct as of the Closing Date, with the same force and effect as if made on
and as of the Closing Date; Purchaser and SAH (as the case may be) shall have
performed or complied with all agreements and covenants required by this
Agreement to be performed by Purchaser or SAH, prior to the Closing Date or at
the Closing; and Purchaser and SAH shall have delivered to Debtors a
certificate, executed and dated the Closing Date, certifying that the foregoing
conditions are satisfied.
(b) Purchaser Closing Documents. Debtors and SAH shall have executed
and delivered to the Trustee the Purchaser Closing Documents in form and
substance reasonably satisfactory to the Trustee and his counsel.
(c) Authorization. Purchaser and SAH shall each have delivered to
Debtors certified copies of resolutions adopted by their respective Boards of
directors and shareholders authorizing the execution, delivery and performance
of this Agreement, the Purchaser Ancillary Agreements and
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the Purchaser Closing Documents, to which each is a party, and the consummation
of the transactions contemplated hereby and thereby.
SECTION 14. TERMINATION.
14.1 This Agreement may be terminated and the purchase and sale
contemplated herein may be terminated and abandoned:
(a) prior to or subsequent to Bankruptcy Court Approval by mutual
consent in writing of the parties hereto;
(b) by Purchaser or the Trustee if the Bankruptcy Court Approval shall
not have been entered on or before December 1, 1997, other than by reason of the
terminating party's failure to comply with any of its obligations under this
Agreement;
(c) by Purchaser or the Trustee if the FCC Consent with respect to the
Stations shall not have become a Final Order on or before March 15, 1998, other
than by reason of the terminating party's failure to comply with any of its
obligations under this Agreement;
(d) by Purchaser or the Trustee if the Application for FCC Consent with
respect to the Stations shall be set for hearing for any reason;
(e) by Purchaser or the Trustee if the Closing with respect to the
Stations shall not have occurred on or before May 1, 1998, other than by reason
of the terminating party's failure to comply with any of its obligations under
this Agreement; or
(f) by the Trustee, as elsewhere provided for in this Agreement.
14.2 In the event of any termination or abandonment referred to in
Section 14.1, no party hereto (or any of its stockholders, directors or officers
or the Trustee) shall have any liability or further obligation to any other
party to this Agreement, except that (i) subject to Sections 14.2(ii) and 14.3,
the Trustee shall return to Purchaser the Cash Deposit, and any interest earned
thereon, or if the Letter of Credit was delivered by Purchaser, the Trustee and
Purchaser shall terminate the Letter of Credit as provided for in Section
3.1(b), and the Trustee shall reimburse Purchaser for any amounts advanced
under Section 11(a) to cure defaults on the Special Category Assumed Contracts
or the Executory Station Contracts; (ii) nothing herein will relieve any party
from liability for any breach of this Agreement; and (iii) Section 15 hereof
shall remain in full force and effect. If the Bankruptcy Court fails to approve
the transaction contemplated by this Agreement due to higher or better offers,
Section 10.2 shall govern.
14.3 Notwithstanding anything contained in this Agreement to the
contrary, this Agreement may be terminated and the purchase and sale of the
Assets contemplated herein may be terminated and abandoned at the option of the
Trustee if there shall be a material breach by Purchaser or SAH of any of its
obligations hereunder or a material breach of any of the representations and
warranties made by Purchaser or SAH herein. In the event of any such breach by
Purchaser or SAH, the Trustee may terminate this Agreement by the Trustee's
giving written notice of such termination in accordance with this Section 14.3;
provided, however, that such notice shall not become effective unless the
Purchaser or SAH fails to cure such default
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within thirty (30) days after such notice. Upon the effective date of
termination in accordance with this Section 14.3, the Trustee shall be entitled
to retain the Cash Deposit plus any interest earned thereon, or if the Letter of
Credit was delivered by Purchaser in lieu of the Cash Deposit, the Trustee shall
be entitled to draw down on the Letter of Credit, as the case may be, as
liquidated damages (and not as a penalty) for such breach of Purchaser, which
shall be Debtors' sole remedy for any such termination of this Agreement which
is caused by Purchaser's breach of this Agreement. Purchaser expressly
acknowledges that payment of such amount(s) to Debtors upon such breach by
Purchaser constitute liquidated damages and is an appropriate and reasonable
amount of liquidated damages.
14.4 Notwithstanding anything contained in this Agreement to the
contrary, this Agreement may be terminated and the purchase and sale of the
Assets contemplated herein may be terminated and abandoned at the option of the
Purchaser if there shall be a material breach by the Trustee or Debtors of any
of their obligations hereunder or a material breach of any of the
representations and warranties made by the Trustee and Debtors herein. In the
event of any such breach by the Trustee or Debtors, the Purchaser may terminate
this Agreement by the Purchaser's giving written notice of such termination in
accordance with this Section 14.4; provided, however, that such notice shall not
become effective unless the Trustee and Debtors fail to cure such default within
thirty (30) days after such notice.
SECTION 15. CERTAIN OBLIGATIONS AFTER CLOSING.
15.1 Indemnification of the Trustee and Debtor.
(a) Indemnification of the Trustee. Purchaser and SAH hereby agree,
jointly and severally, to defend, indemnify and hold harmless the Trustee, from
and against any and all losses, claims, fees, judgments, expenses, taxes,
interest, penalties, damages, deficiencies, liabilities, obligations, suits,
proceedings or actions (including reasonable fees and disbursements of attorneys
and expert witnesses) of any kind or nature relating to this Agreement, any of
the Assets, or the transactions contemplated hereby, that shall after Closing be
imposed upon, incurred by or asserted or awarded against the Trustee, arising
from or related to: (i) any occurrence, condition or matter relating to
pollution, hazardous waste, hazardous materials or the environment or any
applicable law relating thereto; (ii) any liability under the Worker Adjustment
and Retraining Notification Act, 29 U.S.C. ss.2101 et seq., and any regulations
promulgated thereunder or any other like federal, state or local law; or (iii)
Purchaser's failure to timely pay any and all Transfer Taxes as required by this
Agreement (any such loss, claim, judgment, penalty, fee, cost, expense, damages,
taxes, interest, deficiency or liability, a "Loss" or collectively "Losses").
(b) Indemnification of Debtors and the Trustee. Purchaser and SAH
agree, jointly and severally, to defend, indemnify and hold harmless Debtors and
the Trustee from and against any and all Losses of any kind or nature that shall
be imposed upon, incurred or asserted or made against Debtors or the Trustee,
arising out of or in connection with (a) any inaccuracy in any representation or
any breach of any warranty, covenant or agreement made by Purchaser in this
Agreement or any agreement executed by Purchaser in connection herewith, (b) the
performance by Purchaser after the Closing of Debtors' obligations under the
Executory Station Contracts or the Assumed Contracts; or (c) the ownership or
operation after the Closing of the Stations or the television stations and other
assets or liabilities acquired by Purchaser pursuant to the Executory Station
Contracts.
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(c) To the extent proceeds of insurance have been paid to the Trustee
with respect to any matter subject to indemnification under this Section 15.1,
any and all Losses otherwise payable to Debtors or the Trustee, as the case may
be, shall be reduced by the amount of such insurance recovery; provided, that,
in the event that any matter is or may be covered by insurance but the proceeds
of such insurance have not been paid as of the date on which any Losses have
been incurred by Debtors or the Trustee, Purchaser shall pay the Trustee the
amount of such Losses and the Trustee shall assign to Purchaser all of its
rights, title and interest in and to the proceeds of such insurance to the
extent of the Losses so paid.
(d) Notwithstanding anything to the contrary contained in this
Agreement, Purchaser and SAH shall not be required to indemnify, defend or hold
harmless the Trustee under Section 15.1(a) for any Losses which are directly
caused by the willful misconduct or gross negligence of the Trustee.
(e) If the Trustee believes that he or the Debtors have suffered or
incurred any Losses in respect of which the Trustee proposes to demand
indemnification pursuant to this Agreement on behalf of Debtors or the Trustee
(an "Indemnified Claim"), the Trustee shall so notify Purchaser promptly in
writing describing such Indemnified Claim, the amount thereof, if known, and the
method of computation of such Indemnified Claim, all with particularity. If any
action or law or suit in equity or administrative action is instituted by or
against a third party (a "Third Party Claim") with respect to which the Trustee
hereunder intends to claim any Loss as an Indemnified Claim under this Agreement
on behalf of Debtors or the Trustee, the Trustee shall promptly notify Purchaser
of such action or suit.
(f) If a Third Party Claim is made, Purchaser shall be entitled to
participate in the defense thereof and, if it so chooses, to assume the defense
thereof with counsel selected by Purchaser; provided such counsel is not
reasonably objected to by the Trustee; and the Trustee shall make available to
Purchaser any litigation pleadings, documents and other papers and any official
correspondence with judicial or governmental authorities with respect thereto.
If Purchaser elects to assume the defense of a Third Party Claim, Purchaser
shall promptly notify the Trustee of such election and the Trustee shall (i)
cooperate in all reasonable respects with Purchaser in connection with such
defense, and (ii) subject to any required approval of the Bankruptcy Court,
agree to any settlement, compromise or discharge of a Third Party Claim that
Purchaser may reasonably recommend and that releases the Trustee or Debtors, as
the case may be, in connection with such Third Party Claim, provided that in no
event shall the Trustee or Debtors be required to plead guilty to any crime or
violation of law. In the event Purchaser shall assume the defense of any Third
Party Claim, the Trustee and/or Debtors, as the case may be, shall be entitled
to participate in (but not control) such defense with its own counsel. Such
counsel shall be employed at the expense of Debtors unless (A) the employment of
such counsel has been specifically authorized in writing by Purchaser, or (B)
the named parties to any such action (including any impleaded parties) include
the Trustee, Debtors and Purchaser or any affiliate of Purchaser including SAH
and the Trustee shall have been advised by his counsel that a conflict of
interest between Purchaser or any affiliate of Purchaser including SAH and the
Trustee or Debtors will arise or is likely to arise and that for this reason it
is not desirable for the same counsel to represent both Purchaser and the
Trustee or Debtors (in which case Purchaser shall not have the right to assume
the defense of such action on behalf of the Trustee). If Purchaser does not
assume the defense of any such Third Party Claim, the Trustee may defend the
same in such manner as he may deem appropriate.
23
<PAGE> 24
SECTION 16. LOSS OR DAMAGE.
Notwithstanding anything contained in this Agreement to the contrary,
any loss or damage to the Assets, due to fire or other casualty shall not give
the Purchaser any right to terminate this Agreement, refuse to dose, or to delay
the Closing. Debtors shall, however, at their option, apply any proceeds of
insurance received by Debtors in respect of any such loss towards the repair or
remedy of any such condition, or Debtors shall deliver any proceeds of such
insurance to Purchaser, who shall utilize such proceeds to repair or remedy any
such condition. Notwithstanding anything contained in this Agreement to the
contrary, Debtors sole obligation in respect of any such loss or damage shall be
to utilize or deliver the insurance proceeds, if any, in the manner provided for
in this Section 16 and the Debtors shall not have any obligation to incur any
cost or make any expenditure in excess of such insurance proceeds to repair or
remedy any such condition. Notwithstanding the foregoing, if any such loss shall
occur prior to Bankruptcy Court Approval and the Court shall determine that a
third party other than Purchaser shall have delivered a higher or better offer
for the Assets, Purchaser shall not have any further responsibility pursuant to
this Agreement in respect of any such loss or any rights to the proceeds of such
insurance.
SECTION 17. MISCELLANEOUS.
17.1 Confidentiality.
(a) From the date hereof until the Closing Date, each party hereto
shall hold in confidence (unless and to the extent compelled to disclose by
judicial or administrative process or, in the opinion of its counsel, by other
applicable law) all "Confidential Information" (as defined below) and will not
use the same in any way detrimental to the party from whom such Confidential
Information was obtained and will not disclose such Confidential Information to
any third party except after reasonable prior notice to such other party hereto
(i) in connection with any proceedings regarding Debtors before the Bankruptcy
Court, (ii) in connection with obtaining Consents and waivers required in
connection with this Agreement, (iii) as may otherwise reasonably be necessary
to carry out this Agreement and the transactions contemplated hereby, and (iv)
to the directors, officers, employees and agents of either party and
representatives of the attorneys and accountants of either party and/or
financial institutions or other entities that are considering providing or
assisting Purchaser in obtaining financing for the acquisition hereunder (the
persons to whom such disclosure is permissible being collectively called
"Representatives") who need to know such information for the purpose of
evaluating or assisting a party hereto in evaluating the transactions
contemplated herein (it being agreed that the Representatives will be informed
of the confidential nature of the Confidential Information and will agree in
writing to be bound and shall be caused by each party hereto to be bound by this
Agreement and not to disclose the Confidential Information). Each party hereto
shall be responsible for any breach of this Agreement by its Representatives.
(b) If a party, or any of its Representatives, are legally compelled
(by deposition, interrogatory, request for documents, subpoena, civil
investigative demand or similar process) or, in the opinion of its counsel, by
other applicable law to disclose any of the Confidential Information, such
entity shall provide the other party hereto with prompt prior written notice of
such legal requirement so that such party may seek a protective order or other
appropriate remedy and/or waive compliance with the terms of this Agreement.
24
<PAGE> 25
(c) As used herein, "Confidential Information" shall mean any and all
information obtained by Debtors regarding Purchaser, and any information
obtained by Purchaser or SAH or any of their Representatives regarding Debtors
including any information regarding the Assets, information regarding prices,
costs or employees and any other information relating to Debtors. The term
"Confidential Information" does not include any information which (i) at the
time of disclosure or thereafter is generally available to and known by the
public (other than as a result of a disclosure directly or indirectly by the
party receiving the information hereunder or its Representatives), (ii) was
available to the receiving party on a non-confidential basis on the date of
receipt thereof from a source other than the disclosing party, its advisors or
any person bound by a confidentiality agreement with the disclosing party, or
(iii) has been independently acquired or developed by the receiving party
without violating any of its obligations under this Agreement.
(d) Any breach or threatened breach by any party of any provision of
this Section 17.1 shall entitle the party, in addition to any other remedies
available to it, to apply to any court of competent jurisdiction to enjoin such
breach or threatened breach, and each party hereby consents to the entry of such
a decree or order.
17.2 Waiver of Conditions. No waiver of any provision of this Agreement
shall constitute a waiver of any other provision (whether or not similar), nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided. Neither any failure nor any delay on the part of any party to this
Agreement in exercising any right, power or privilege hereunder shall operate as
a waiver of any rights of any such party, unless such waiver is made by a
writing executed by such party and delivered to the other parties, nor shall a
single or partial exercise of any right preclude any other or further exercise
of any other right, power or privilege accorded to any party to this Agreement.
17.3 Amendment and Modification. The terms or conditions of this
Agreement may be altered, modified or amended by an instrument in writing
executed by all of the parties hereto.
17.4 NOTICES.
(a) All notices, requests, demands or other communications required or
permitted hereunder shall be in writing and shall be deemed to have been given
when (a) delivered by hand, (b) sent by telecopier (with receipt confirmed),
provided that a copy is mailed by registered or certified mail, return receipt
requested, or (c) when received by the addressee, if sent by Express Mail,
Federal Express or other express delivery service (receipt requested), in each
case to the appropriate addresses, telex numbers and telecopier numbers set
forth below (or to such other addresses, telex numbers and telecopier numbers as
a party may designate as to itself by notice to the other parties):
(i) if to Debtors or the Trustee, addressed to:
S. James Coppersmith
1740 Broadway, 17th Floor
New York, New York 10019
Telecopy No. (617) 824-8511
with a copy to:
25
<PAGE> 26
Cara Ebert Cameron, P.A.
3101 North Federal Highway
Suite 601
Fort Lauderdale, Florida 33306-104:2
Telecopy No. (954) 565-1311
and a copy to:
Brauner Baron Rosenzweig & Klein, LLP
61 Broadway, 18 Floor
New York, New York 10006
Attention: Alan Nisselson, Esq.
Telecopy No. (212) 797-9161
(ii) if to Purchaser or SAH, addressed to:
Kent E. Little, President and CEO
Shop at Home, Inc.
102 Woodmont Boulevard
Suites 200-228
Nashville, TN 37205
Telecopy No. (615) 345-0256
with a copy to:
Charles W. Bone, Esq.
Wyatt, Tarrant & Combs
1500 Nashville City Center
Nashville, Tennessee 37219
Telecopy No. (615) 256-1726
17.5 Counterparts. This Agreement may be executed simultaneously in two
or more facsimile counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
17.6 Headings. The headings of sections herein are for convenience of
reference only, do not constitute a part of this Agreement, and shall not be
deemed to limit or affect the meaning of any of the provisions hereof.
17.7 Assignment and Binding Effect. Neither Purchaser nor Debtors nor
SAH shall transfer, convey or otherwise assign this Agreement or any of its
rights or obligations hereunder without the prior written consent of all of the
other parties hereto provided that any assigning party shall, in any permitted
transfer or assignment after the Closing, remain primarily liable for its
obligations hereunder and shall obtain from any such transferee or assignee
written consent to be bound by the terms of this Agreement. Any such transfer or
assignment not in accordance with the provisions of this Section 17.7 shall be
void and of no effect. This Agreement and all of the provisions hereof shall be
binding upon, and shall inure to the benefit of, Debtors, Purchaser, SAH and
their respective successors and permitted assigns.
26
<PAGE> 27
17.8 Entire Agreement. This Agreement, including the Exhibits and other
documents and instruments referred to herein that form a part hereof, contains
the entire understanding of the parties hereto with respect to the subject
matter contained herein. There are no restrictions, promises, warranties,
covenants or undertakings, other than those expressly set forth herein. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to such subject matter, including the SAH Letter Agreement.
17.9 Applicable Law. Interpretation and Jurisdiction. This Agreement
shall be governed by and construed and enforced in accordance with the law of
the State of New York applicable to contracts negotiated, entered into and to be
performed solely in that State, without regard to the choice or conflicts of law
principles of such State and, to the extent applicable, by and in accordance
with the Bankruptcy Code. No provision of this Agreement or any related document
shall be construed against or interpreted to the disadvantage of any party
hereto by any court or other governmental or judicial authority by reason of
such party having or being deemed to have structured or drafted such provision.
As used in this Agreement unless the context otherwise requires (i) the word
"including" shall mean "including but not limited to", and (ii) the word "or"
shall mean and include "and/or". During the pendency of the Bankruptcy
Proceedings, the Bankruptcy Court shall have jurisdiction over the parties
hereto including SAH and over any disputes, claims or matters relating to or
arising in connection with this Agreement. After the termination of such
Bankruptcy Proceedings, the state and federal courts located in the County of
New York, State of New York, shall have jurisdiction over the parties hereto
including SAH and over any disputes, claims, suits, proceedings or actions
relating to or arising in connection herewith. The parties hereto consent to the
jurisdiction of the Bankruptcy Court and such other courts pursuant to this
Section 17.9.
17.10 Third Party Beneficiaries. Except as provided in Section 17.7
hereof, nothing expressed or implied in this Agreement is intended, or shall be
construed, to confer upon or to give any person, firm or corporation other than
the parties hereto, and their heirs, personal representatives, successors,
administrators or assigns, any rights, remedies, obligations or liabilities
under or by reason of this Agreement, or shall result in their being deemed a
third party beneficiary of this Agreement.
17.11 Retention of Records: Access. Debtors shall be permitted to
retain copies of all financial and business records necessary to file its tax
returns, after delivery of all originals of such records to Purchaser pursuant
to Sections 2 and 5 of this Agreement. Debtors and Purchaser shall each provide
reasonable access on reasonable notice by the other party to any records
conveyed to or retained by Debtors or Purchaser that may be necessary for the
other party to complete its tax returns or to respond to any other judicial or
administrative inquiry including, insider transfers, conveyances within one year
and preferences, and the matters referred to in Section 2.2(a)(vii) hereof. At
the Closing, Debtors shall deliver to Purchaser copies of all records necessary
to show the tax basis for depreciation of any Assets that are subject to
depreciation.
17.12 Survival. The representations, warranties and covenants made by
the parties hereto shall survive the Closing and the completion of the Closing
under each of the Executory Station Contracts, except as provided in this
Section 17.12. The provisions of Sections 2.3, 3.1, 3.4, 3.5, 4, 5, 8, 9.2, 9.5,
11(c), 14, 15, 16 and 17 shall survive the Closing hereunder and the closing of
each of the Executory Station Contracts. The provisions of Sections 3.1, 3.5,
3.6,
27
<PAGE> 28
4, 8, 9.4, 10.3, 11(c), 14, 15, 16 and 17 shall survive any termination of this
Agreement. The representations and warranties contained in Sections 7.6, 7.7,
7.8, 7.9, 7.10 and 7.11 shall terminate on the Closing Date. Notwithstanding
anything contained in this Agreement or elsewhere to the contrary, neither
Debtors nor Purchaser shall have any recourse, claim or remedy against the
Trustee personally for any damages or monetary relief for any breach, default or
misrepresentation in connection with any representations, warranties or
covenants under this Agreement.
17.13 Severability. If any part of this Agreement is held to be
unenforceable or invalid under, or in conflict with, the applicable law of any
jurisdiction, then the unenforceable, invalid or conflicting part shall be
narrowed or replaced, to the extent possible, with a judicial construction in
such jurisdiction that effectuates the intent of the parties regarding this
Agreement and the unenforceable, invalid or conflicting part. Notwithstanding
the unenforceability, invalidity or conflict with applicable law of any part of
this Agreement, the remaining parts shall be valid, enforceable and binding on
the parties.
17.14 Adjustments. All adjustments customary in asset acquisitions of
this type, including real estate taxes, personal property taxes, rents, security
deposits, customer pre-payments, electricity, fuel and employee compensations
(including vacation accruals) if relating to a period before and after the
Closing Date shall be apportioned between Debtors' estates and the Purchaser
according to the number of days in the period covered thereby which occurred
prior to and including the Closing Date and subsequent to the Closing Date. The
Trustee shall provide to the Purchaser, prior to the Closing Date or as promptly
as practicable thereafter, the adjustments and accruals, subject to verification
by Purchaser.
17.15 Time of the Essence. The parties acknowledge and agree that all
dates including times for performance or notices or otherwise shall deemed to be
TIME OF THE ESSENCE.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first written above.
SELLERS:
GLOBAL BROADCASTING SYSTEMS,
INC.
By: /s/ S. James Coppersmith, Trustee
----------------------------------
GLOBAL BROADCASTING SYSTEMS
LICENSE CORP.
By: /s/ S. James Coppersmith, Trustee
----------------------------------
PURCHASER:
28
<PAGE> 29
SAH ACQUISITION CORPORATION II
By: /s/ Kent E. Lillie
----------------------------------
President
SAH:
SHOP AT HOME, INC.
By: /s/ Kent E. Lillie
----------------------------------
President
29
<PAGE> 1
EXHIBIT 11
SHOP AT HOME, INC. AND SUBSIDIARIES
SCHEDULE OF COMPUTATION OF NET EARNINGS PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
September 30,
1997 1996
----------- -----------
<S> <C> <C>
Net earnings $ 367,155 $ 166,493
Interest expense saved from
conversion of debt 28,582 29,582
Interest expense saved from
payoff of debt with excess
proceeds from conversion
of options and warrants - 0 - 24,848
----------- -----------
Adjusted net earnings $ 395,737 $ 220,923
=========== ===========
Common shares outstanding 10,925,718 10,587,958
Common equivalent shares
issuable upon exercise of
stock options and warrants (1) 2,748,942 3,523,408
Common equivalent shares
issuable upon conversion
of debt 444,177 563,146
Common equivalent shares
issuable upon conversion
of preferred stock 137,943 137,943
----------- -----------
Total weighted average shares 14,256,780 14,812,455
=========== ===========
Primary and fully diluted net
income per common and
equivalent share $ 0.03 $ 0.01
=========== ===========
</TABLE>
Notes:
(1) Amount calculated using the modified treasury stock method and fair market
values.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000810029
<NAME> SHOP AT HOME, INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-1-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,260,563
<SECURITIES> 0
<RECEIVABLES> 3,687,168
<ALLOWANCES> 0
<INVENTORY> 3,066,301
<CURRENT-ASSETS> 10,390,885
<PP&E> 6,680,274
<DEPRECIATION> 2,056,974
<TOTAL-ASSETS> 32,627,222
<CURRENT-LIABILITIES> 15,952,371
<BONDS> 6,983,834
1,393,430
0
<COMMON> 27,686
<OTHER-SE> 4,503,030
<TOTAL-LIABILITY-AND-EQUITY> 32,627,222
<SALES> 20,958,035
<TOTAL-REVENUES> 21,333,257
<CGS> 12,347,598
<TOTAL-COSTS> 12,347,598
<OTHER-EXPENSES> 8,226,553
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 383,569
<INCOME-PRETAX> 475,537
<INCOME-TAX> 108,382
<INCOME-CONTINUING> 367,155
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 367,155
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
