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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) May 3, 1999
VALUEVISION INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA
(State or other jurisdiction of incorporation)
0-20243 41-1673770
(Commission File Number) (IRS Employer Identification No.)
6740 SHADY OAK ROAD, MINNEAPOLIS, MN 55344-3433
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 947-5200
NOT APPLICABLE
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
ValueVision International, Inc. Announces Sale of Television Stations
On May 3, 1999 ValueVision International, Inc.'s wholly-owned
subsidiaries VVI Baytown, Inc. and VVILPTV, Inc. (collectively, "ValueVision" or
the "Company") entered into an agreement with an entity wholly owned by Pappas
Telecasting Companies ("Pappas"), pursuant to which ValueVision has agreed to
sell its full power television station, KVVV-TV, channel 57, and its low power
television station, K53 FV, each serving the Houston, Texas market to Pappas for
an aggregate purchase price of $28 million. As a result, ValueVision will
recognize a pre-tax gain of approximately $21 million upon closing, which is
expected to occur in the third quarter of 1999. The transaction is subject to
obtaining certain consents and regulatory approvals.
ValueVision acquired Houston station KVVV-TV in fiscal 1995, along with
three other full power UHF stations, WVVI, serving Washington, D.C.; WHAI,
serving New York City; and WAKC, serving Cleveland and Akron, Ohio; for an
aggregate purchase price of $22.4 million. Since then, the Company has sold its
WVVI, WHAI and WAKC stations, in separate transactions, for a total price of $84
million.
(Note: The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
Form 8-K and other communications by the Company contain statements that are
forward-looking, such as statements relating to the closing on the sale of its
television stations. There are certain important factors that could cause
results to differ materially from those anticipated statements. Investors are
cautioned that all forward-looking statements involve risk and uncertainty,
including the possibility that the conditons to closing on the sale of the
television stations will not occur. For more information on the potential
factors that could affect the Company's financial results, investors should
refer to the Company's recent filings with the Securities and Exchange
Commission, including the Company's annual report on Form 10-K, quarterly
reports on Form 10-Q and current reports on Form 8-K.)
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits
10.1 Asset Purchase Agreement by and among VVI Baytown, Inc., VVILPTV and
Pappas Telecasting of Houston, a California Limited Partnership, dated
as of May 3, 1999.
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SIGNATURE
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 on this 7th day of May, 1999.
VALUEVISION INTERNATIONAL, INC.
By: /s/ David T. Quinby
---------------------------------------
David T. Quinby
Vice President, General
Counsel and Secretary
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Exhibit 10.1
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ASSET PURCHASE AGREEMENT
VVI Baytown, Inc. and VVILPTV, Inc.
("Seller")
and
Pappas Telecasting of Houston,
a California Limited Partnership
("Purchaser")
May 3, 1999
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") is made and
entered into as of this 3rd day of May, 1999, by and among VVI BAYTOWN, INC.
("VVI BAYTOWN"), a Minnesota corporation and VVILPTV, INC. ("VVILPTV"), a
Minnesota corporation, (collectively, "Seller") and PAPPAS TELECASTING OF
HOUSTON, A CALIFORNIA LIMITED PARTNERSHIP ("Purchaser"):
RECITALS
A. Seller holds the licenses, permits, and authorizations,
including the right to file an application for authority to construct a digital
television station pursuant to Sections 73.622 and 73.624 of the FCC's rules
(collectively, the "FCC Licenses") issued by the Federal Communications
Commission (the "FCC") to operate commercial broadcast television station
KVVV-TV, Baytown, Texas and commercial low power television station K53FV,
Houston, Texas, (collectively, the "Stations"), and the other Assets (as defined
in Section 1.1) used in the operation of the Stations.
B. Seller desires to sell to Purchaser, and Purchaser
desires to purchase and acquire the Assets from Seller for the consideration and
upon the terms and conditions herein provided.
NOW, THEREFORE, in consideration of the mutual covenants,
agreements, representations, and warranties contained in this Agreement, the
parties hereto, intending to be legally bound, do hereby agree as follows:
ARTICLE I
ASSETS BEING SOLD AND PURCHASED
AND PURCHASE PRICE
1.1 ASSETS. Upon the terms and subject to the conditions set
forth in this Agreement, Seller agrees to sell, assign, convey, transfer, and
deliver to Purchaser at the Closing (as defined, in Section 2.1 hereof), and
Purchaser shall purchase at the Closing, all of the Seller's right, title, and
interest in and to the tangible and intangible assets (except as expressly
provided in Section 1.2 hereof) owned by, licensed to, or leased to Seller on
the Closing Date (as defined in Section 2.1 hereof) and used in connection with
the operation of the Stations (collectively, the "Assets"), including but not
limited to:
(a) The FCC Licenses and all other licenses, permits or
authorizations, if any, issued by the Federal Aviation Administration (the
"FAA"), any other regulatory agency, or any Federal, state or local governmental
authority to Seller in connection with the ownership and operation of the
Stations, as set forth in Schedule 1.1(a) hereto (collectively, and including
the FCC Licenses, the "Authorizations");
(b) All of Seller's right, title and interest in and to
the Stations' transmitters, antenna towers, antenna systems, fixtures,
equipment, machinery, tools, inventories of supplies, film, video tapes,
including recorded commercials and programming, blank video stock, spare parts,
automobiles and other vehicles, furniture, office equipment, and other tangible
assets or personal property, which are owned or leased by Seller and used in or
relating to the operation of the Stations, the material items of which are set
forth in Schedule 1.1(b) hereto
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(collectively, the "Tangible Personal Property"), plus such additions thereto
and minus such deletions therefrom as are permitted by the provisions of this
Agreement;
(c) All right, title, and interest of Seller in and to
the Assumed Contracts listed on Schedule 1.1(c) hereto including all film and
program contracts, and other leases, contracts, agreements, and commitments
entered into in the ordinary course of business of the Stations, and any
renewals or extensions thereof, to which Seller is a party or which are binding
upon Seller, the Assets, or the Stations, and (i) which are in effect on the
date hereof and are listed and described in Schedule 1.1(c) hereto, or (ii)
which are entered into by Seller in accordance with the provisions of this
Agreement between the date hereof and the Closing Date, and are agreed to be
assumed by Purchaser (collectively, the "Assumed Contracts"). For purposes of
this Agreement, the term "Material Contracts" shall refer to those Assumed
Contracts designated as "Material Contracts" in Schedule 1.1(c) hereto;
(d) Seller's right, title and interest in and to the
call letters "KVVV", trade names, trademarks, service marks, copyrights, and
patents (registered or unregistered, and including applications and licenses
therefor) listed and described in Schedule 1.1(d) hereto, together with the
goodwill associated therewith, and any logograms, jingles, and other intangible
personal property associated therewith;
(e) The real property listed and described in
Schedule 1.1(e) hereto, including the fee estates and buildings, fixtures, and
improvements thereon, leasehold interests (including deposits), easements,
rights to access, rights-of-way, and other real property interests which are
owned by Seller and used in the operation of the Stations as of the date hereof,
plus such additions thereto and minus such deletions therefrom as are permitted
by the provisions of this Agreement (collectively, the "Real Property");
(f) Books, files, and records specifically relating to
the Assets, the Stations, and the business or operation of the Stations,
including proprietary information, schematics, technical information and
engineering data, machinery and equipment warranties, maps, computer discs and
tapes, software, drawings, blueprints, plans, and processes developed or
acquired by Seller and used or intended for use in connection with the Stations
or the Assets, programming information, books of accounts, financial statements,
Federal and state sales tax books, records, and returns, employment records,
customer lists and files, purchase and sales records, correspondence,
advertising records, files, literature, copies of the Assumed Contracts, and the
FCC required logs, files, and records, but not including (i) those books, files,
and records set forth in Section 1.2 below, and (ii) any corporate or accounting
books or records of Seller which do not relate to the operation of the Stations
and the Assets, or which relate to Seller's past or current income tax
liabilities;
(g) Any accounts receivable of the Stations; and
(h) All market data and information relating to the Stations'
market in Seller's possession or control.
1.2 EXCLUDED ASSETS. Notwithstanding anything in this
Agreement to the contrary, the Assets do not include, and Seller shall not, and
is not hereby agreeing to, sell, assign, transfer, deliver, or convey to
Purchaser (a) cash and cash equivalents on hand or on deposit in banks,
marketable securities, or intercompany or inter-affiliate accounts, (b) the name
"ValueVision" or the name of any affiliate thereof, or any logograms, trade
names, trademarks, service marks, copyrights, and patents (including
applications and licenses therefor) related thereto, except as expressly
provided above, (c) any insurance policies, promissory notes, amounts due from
employees, bonds, letters of credit, certificates of deposit, other similar
items, and any cash surrender value in
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regard thereto; (d) any pension, profit-sharing, or employee benefit plans,
including Seller's interest in any welfare plan, pension plan, or benefit
arrangement; (e) any collective bargaining agreements; (f) all tax returns and
supporting materials, all original financial statements and supporting
materials, all books and records that Seller is required by law to retain, and
all records of Seller relating to the sale of the Assets; (g) any interest in
and to any refunds of federal, state, or local franchise, income, or other taxes
for periods prior to the Closing Date; (h) Seller's production facilities and
other property located outside the State of Texas, and (i) any contract, lease,
or agreement other than the Assumed Contracts, as set forth in Schedule 1.2.
1.3 PURCHASE PRICE. (a) Upon the terms and subject to the
conditions set forth in this Agreement, and in consideration for the sale,
assignment, conveyance, transfer, bargain, and delivery of the Assets to
Purchaser pursuant to the terms hereof, the purchase price hereunder (the
"Purchase Price") shall be a total of Twenty-Eight Million Dollars ($28,000,000)
in cash payable by Purchaser by wire transfer of immediately available funds, to
an account designated by Seller, subject to adjustments as provided in Section
2.3 hereof.
(b) At the Closing, Purchaser shall assume and agree to pay
and otherwise fully to perform and discharge, and to indemnify Seller against,
and hold Seller harmless from, all of Seller's obligations and duties arising on
or after the Closing Date (as hereinafter defined) under the Assumed Contracts
(the "Assumed Contract Obligations"). Purchaser shall not assume nor become
obligated to pay any debt, obligation, or liability of any kind incurred or
accrued in connection with the operation of the Stations, except for the Assumed
Contract Obligations and such other charges as are specifically allocated to
Purchaser in accordance with Schedule 2.3 or elsewhere in this Agreement or
which Purchaser expressly agrees in writing to assume.
(c) Upon execution and delivery of this Agreement, Purchaser
will place in escrow with Norwest Bank Minnesota, National Association (the
"Escrow Agent"), pursuant to the terms and conditions of an escrow agreement
(the "Escrow Agreement") substantially in the form of Exhibit A hereto and which
is being executed and delivered by Purchaser, Seller and the Escrow Agent
contemporaneously herewith, cash, or an irrevocable letter of credit listing the
Escrow Agent as beneficiary, in the amount of One Million Four Hundred Thousand
Dollars ($1,400,000) (the "Escrow Funds"), which shall be held and released by
the Escrow Agent in accordance with the terms and conditions of the Escrow
Agreement. Any Escrow Funds and interest thereon delivered to Seller at Closing
shall be credited toward the Purchase Price.
1.4 ADDITIONAL FEES. Seller shall bear any and all sales and
use taxes, and Seller and Purchaser shall share equally any and all transfer,
conveyance, recordation and filing fees, taxes or assessments, including fees in
connection with the conveyance of real property and the recordation of
instruments related thereto, applicable to, imposed upon, or arising out of the
sale, assignment, conveyance, and transfer to Purchaser of the Assets as
contemplated by this Agreement.
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ARTICLE II
CLOSING AND CLOSING DELIVERIES
2.1 CLOSING. The term "Closing" as used herein shall refer to
the actual conveyance, transfer, assignment, and delivery of the Assets to
Purchaser in exchange for the payment to Seller by Purchaser of the
consideration payable pursuant to Section 1.3 hereof on the Closing Date (as
hereinafter defined), and shall be deemed effective as of 12:01 a.m. on the
Closing Date. The Closing shall take place at the offices of Paul, Hastings,
Janofsky & Walker LLP, counsel to Purchaser, 1299 Pennsylvania Avenue, N.W.,
Washington, D.C., 20004, at 10:00 A.M. local time on the Closing Date, or at
such other place and hour as shall be mutually agreed upon by Purchaser and
Seller. The Closing shall be held on the date which is five (5) business days
after the date on which the FCC Consent (as defined in Section 3.1) has become a
Final Order (as defined in Section 8.1), or such other date as may be agreed
upon by Purchaser and Seller (such date hereinafter referred to as the "Closing
Date").
2.2 CLOSING DELIVERIES. At the Closing:
(a) Seller shall deliver, or shall cause to be
delivered, to Purchaser:
(i) A duly executed Bill of Sale and Assignment,
dated the Closing Date, in form and substance reasonably satisfactory to
Purchaser;
(ii) A duly executed Assignment or Assignments of
FCC Licenses and other Authorizations, dated the Closing Date, in form and
substance reasonably satisfactory to Purchaser;
(iii) In each case where the rights of Seller
under any of the Assumed Contracts listed in Schedule 1.1(c) hereto and
designated therein as Material Contracts, or under any of the leases listed on
Schedule 1.1(e), are not assignable to Purchaser as provided herein without the
consent of another party, the written consent to such assignment from each such
other party (the "Material Consents"), together with such additional written
consents to the assignment to Purchaser of other Assumed Contracts listed in
Schedule 1.1(c) as Seller shall have obtained as of the Closing Date. (All of
the consents referred to in this Section 2.2(a)(iii), including the Material
Consents, shall be referred to herein collectively as the "Consents");
(iv) All of the other documents that are required
to be delivered by Seller to Purchaser pursuant to Section 8.2 hereof;
(v) Such other assignments or documents as are
necessary in order to vest good and marketable title to the Assets in the name
of Purchaser or its permitted assigns, free and clear of any claims,
liabilities, mortgages, liens, pledges, conditions, charges or encumbrances of
any nature, except for Permitted Encumbrances (as hereinafter defined), or as
may be otherwise permitted by this Agreement. "Permitted Encumbrances" shall
mean (A) liens for current taxes not yet due and payable, (B) easements,
covenants, conditions, financing agreements and restrictions that are disclosed
on Schedule 2.2, and (C) other easements, covenants, conditions, and
restrictions of record that affect any real or personal property and do not have
a material adverse effect on the use of such real or personal property in the
conduct of the business or operations of the Stations or materially detract from
the value of such real or personal property in the conduct of the business or
operations of the Stations; and
(vi) Such other documents as Purchaser or its
legal counsel may reasonably request in order to carry out the purposes of this
Agreement.
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(b) Purchaser shall deliver, or shall cause to be
delivered, to Seller;
(i) The Purchase Price, as adjusted, pursuant
to Section 2.3 hereof;
(ii) A duly executed Assumption Agreement,
dated the Closing Date, in form and substance reasonably satisfactory to Seller
pursuant to which Purchaser shall assume and undertake to perform the Assumed
Contract Obligations (the "Assumption Agreement");
(iii) The documents that are required to be
delivered by Purchaser to Seller pursuant to Section 9.2 hereof; and
(iv) Such other documents as Seller or its
legal counsel may reasonably request in order to carry out the purposes of this
Agreement.
(c) Purchaser and Seller shall, upon request, on or
after the Closing Date, cooperate with one another by furnishing any additional
information, executing and delivering any additional documents and/or
instruments, and doing any and all other acts as may be reasonably required by a
party hereto or by its legal counsel in order to consummate or otherwise to
implement the transaction contemplated by this Agreement.
2.3 PRO-RATED AMOUNTS. Except as otherwise provided in this
Agreement, the following items shall be pro-rated as of 12:01 a.m. on the
Closing Date and paid, as between Seller, on the one hand, and Purchaser, on the
other hand, at the Closing (to the extent possible) in the manner provided for
herein below:
(a) All pre-paid expenses and deposits, and all
expenses for which liability has accrued but whose payment is not yet due as of
the Closing Date, including but not limited to (i) such expenses in connection
with the Assumed Contracts, (ii) rents and deposits, (iii) utility deposits and
charges, including electricity, water and sewer charges, (iv) business and
license fees and FCC regulatory fees, including any retroactive adjustments
thereof, (v) programming payments, costs, and charges (except as otherwise
provided in this Agreement), (vi) property and equipment rentals, (vii)
applicable copyright or other fees, (viii) sales and service charges, (ix) real
and personal property taxes in connection with the Assets, and (x) operating
expenses, shall be pro-rated and adjusted between Purchaser and Seller in
accordance with the principle that except as otherwise provided in this
Agreement, Seller shall be responsible for all expenses, costs, and liabilities
allocable to the conduct of the business or operations of the Station up to
12:01 a.m. on the Closing Date and Purchaser shall be responsible for all such
expenses, costs and liabilities after 12:01 a.m. on the Closing Date.
Notwithstanding the foregoing, there shall be no adjustment for, and Seller
shall remain solely liable with respect to, any contract other than the Assumed
Contracts in Schedule 1.1(c) hereto, or any other obligation or liability not
being assumed by Purchaser.
(b) Seller shall deliver to Purchaser, no less than
five (5) business days before the Closing Date, Seller's written good faith
estimate of the prorated amounts set forth in Section 2.3(a), as of the Closing
Date. Purchaser and Seller will negotiate in good faith to resolve any amounts
in such statement which Purchaser may dispute based upon its preliminary review
of such statement, and the undisputed portion of the prorated amounts set forth
in such statement will then be used to adjust the Purchase Price. Purchaser's
failure to dispute any pro-rated amount on such statement prior to Closing shall
not be deemed a waiver of its right to challenge any such amount during the
post-Closing adjustment process contemplated by Section 2.3(c).
(c) At the conclusion of sixty (60) days from and
after the Closing Date, a final adjustment of the items to be pro-rated between
Purchaser and Seller pursuant to Section 2.3(a) hereof shall be
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made. In the event that there is a dispute as to certain amounts, Seller and
Purchaser shall adjust any amounts for which there is no dispute, and attempt in
good faith to resolve any disputed amounts.
ARTICLE III
FCC APPROVAL AND HART-SCOTT FILING
3.1 FCC APPROVAL.
(a) Purchaser and Seller shall jointly file with the
FCC substantially complete applications (the "Applications") to request the
FCC's consent to the voluntary assignment of the FCC Licenses from Seller to
Purchaser (the "FCC Consent"), within ten (10) business days after the execution
of this Agreement. Purchaser and Seller shall each pay its own expenses in
connection with the preparation and prosecution of the Applications and shall
share any filing fee associated with the Applications equally. Seller and
Purchaser shall prosecute the Applications to the FCC, including opposing any
petitions to deny filed against any of the Applications, with all reasonable
diligence, in order to obtain the FCC Consent promptly and in order to carry out
the provisions of this Agreement. If FCC reconsideration or review, or if
judicial review, shall be sought with respect to the FCC Consent, by a third
party or upon the FCC's own motion, Purchaser and Seller shall cooperate in
opposing such requests for FCC reconsideration or review or for judicial review.
(b) If the FCC Consent shall impose any condition
upon any party hereto, such party shall use its best efforts to comply with such
condition. If any party to this Agreement shall seek FCC reconsideration or
review, or judicial review, of a materially adverse condition imposed by the
FCC, the other party shall cooperate fully with the party seeking
reconsideration or review of such condition; provided, however, that neither
party shall seek or cause to be sought, without the prior written consent of the
other party, FCC reconsideration or review, or judicial review, of any condition
or qualification that is not a materially adverse condition. For purposes of
this Agreement, a "materially adverse condition" shall not include (i) any
condition generally applicable to the broadcast industry or a transaction of
this kind, (ii) any condition imposed as a result of any act or failure to act
by Purchaser, or (iii) any condition imposed as a result of Purchaser's entry
into any Other TV Acquisition Agreement (including but not limited to a
requirement that Purchaser divest KVVV or another television station).
3.2 HART-SCOTT-RODINO FILING. Within thirty (30) days after
the execution and delivery of this Agreement, the parties will each complete and
file any notification and report required to be filed under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and each such filing shall request early termination of the waiting
period under the HSR Act. The parties shall use commercially reasonably efforts
to respond promptly to any inquiries or requests for documents or information
with respect to the transactions contemplated by this Agreement received from
the Federal Trade Commission ("FTC") or the Department of Justice ("DOJ"). The
fees relating to the filings under the HSR Act will be shared equally by the
Seller and Purchaser.
ARTICLE IV
COVENANTS OF SELLER
4.1 INSPECTION RIGHTS. Until the Closing, upon prior
notice, Seller shall, during the Stations' regular business hours, make the
studio and office facilities, books, accounts, records, contracts, and documents
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of Seller pertaining to the Stations and included in the Assets available for
examination and inspection by Purchaser and its agents, provided that neither
the furnishing of such information to Purchaser or its representatives nor any
investigation made heretofore or hereafter by Purchaser shall affect Purchaser's
right to rely upon any representation or warranty made by Seller in this
Agreement, each of which shall survive any furnishing of information to
Purchaser or its agents, or any investigation by Purchaser or its agents,
subject to Section 6.22 hereof. Any such examination and inspection by Purchaser
or by its agents shall be undertaken in a manner designed to minimize the
disruption to Seller and to the operations of the Stations.
4.2 NO CHANGES. From and after the date hereof to the
Closing Date, Seller shall:
(a) operate the Stations' business in the ordinary
course of business, including, without limitation, pay when due all obligations
arising under the Assumed Contracts or any other agreements or commitment of the
Stations. Consistent with the foregoing, Seller shall keep and maintain the
Assets being purchased hereunder in good operating condition and repair (normal
wear and tear excepted);
(b) not sell, assign, lease, mortgage, pledge, or
otherwise transfer, or dispose of any of the Assets, or create, assume, or
permit to exist any claim, liability, lien, condition, charge, or encumbrance
upon any of the Assets, except for (i) liens, charges, and encumbrances in favor
of Purchaser, (ii) Permitted Encumbrances; (iii) immaterial items of personal
property included in the Assets and sold, or otherwise disposed of in the
ordinary and regular course of the operation of the Stations; and (iv)
transactions engaged in with Purchaser's written consent first obtained.
(c) except with Purchaser's prior written consent,
not increase or otherwise change the rate or nature of the compensation
(including wages, salaries, and bonuses) which is paid or payable to any of the
Stations' employees, except in connection with ordinary reviews or promotions
consistent with Seller's past practices or the replacement of incumbent
personnel consistent with Seller's past practices, pursuant to pre-existing
written compensation and fringe-benefit plans, or as otherwise set forth on
Schedule 4.2(c);
(d) except with Purchaser's prior written consent,
not enter into, nor become obligated under, (i) any film or program contract,
whether for cash or barter, not terminable at the Closing, or (ii) any other
agreement or commitment on behalf of the Stations, except for normal commitments
for personal property, services, and advertising time on the Stations entered
into in the ordinary and regular course of the operation of the Stations,
consistent with the Stations' past and present practices, and which do not
provide for payments, in the aggregate, in excess of Ten Thousand Dollars
($10,000.00) during the full terms of all such agreements and commitments, nor
materially change, amend, terminate, or otherwise modify any agreement or
commitment other than in the ordinary course of business;
(e) maintain insurance policies on the Assets in
accordance with Seller's normal and prudent business practices;
(f) not make, nor commit to make, any payments,
contribution, or award under or into any profit-sharing or similar plan,
program, or trust on behalf of employees of the Stations, except in accordance
with any such plan, program, or trust currently maintained by Seller, and
contributions which are made consistent with past practices;
(g) maintain and preserve the operations of the
Stations and use Seller's commercially reasonable efforts to maintain and
preserve audience levels of the Stations, and, consistent with the ordinary
course
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of business, the Stations' goodwill and the Stations' present relationships with
suppliers and others having business relations with them;
(h) not make any material changes in the broadcast
hours or in the percentages of public affairs and news programming broadcast by
the Stations, or make any other material changes in the Stations' programming
policies, except such changes as in the good-faith judgment of Seller are
required by the public interest;
(i) not do any act which would reasonably be
expected to result in the expiration, revocation, suspension, or modification of
any of the Authorizations (other than to correct FCC records), nor fail to do
any act necessary in order to prevent the expiration, revocation, suspension, or
modification of any of the Authorizations, nor fail to file on a timely basis
any application with the FCC with respect to digital television facilities;
(j) not waive or release any material right of
Seller in the Material Contracts;
(k) except as required by law, not enter into any
collective bargaining agreement, or through negotiations or otherwise make any
commitment or incur any liability to any labor organization with respect to the
employees of the Stations;
(l) not transfer or grant any rights under any
leases, licenses, agreements, trademarks, trade names, or copyrights included in
the Assets, and respond substantively to any outstanding matters before the U.S.
Patent and Trademark Office;
(m) not introduce any material change to Seller's
method of accounting with respect to the Stations;
(n) not take any material action which is
inconsistent with Seller's obligations hereunder, or which would reasonably be
expected to materially hinder or delay the consummation of the transactions
contemplated by this Agreement, except as specifically required or permitted
herein;
(o) maintain all of the Assets (except for
immaterial Assets with a fair market value, in the aggregate, not exceeding
Fifteen Thousand Dollars) or replacements thereof (to the extent required
pursuant to this Agreement) and improvements thereon in good condition (ordinary
wear and tear excepted) in the usual and customary manner, and in material
compliance with the FCC's rules and regulations, and use, operate, and maintain
all of the Assets in a reasonable manner, with inventories of spare parts and
expendable supplies being maintained at levels reasonably consistent with past
practices;
(p) maintain its books and records, including the
record keeping and reporting requirements imposed by the FCC, in accordance with
past practices and in material compliance with the FCC's rules and regulations;
(q) promptly notify Purchaser in writing of any
developments, except for matters affecting the television broadcasting industry
generally, which singly or in concert with others are material with respect to
the business or operations of the Stations or the Assets, and of any material
change in any of the information contained in Seller's representations and
warranties contained in Article VI hereof or in the schedules hereto, provided
that such notification shall not relieve Seller of any obligations hereunder;
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(r) consistent with the needs of the Stations,
maintain film usage schedules and amortization schedules consistent with past
practice, and make by the Closing Date all payments under the Assumed Contracts
that are due to be paid on or before the Closing Date, and, consistent with past
practice, take all action reasonably necessary to preserve in full force and
effect the existing rights of Seller under the Assumed Contracts;
(s) prior to the Closing Date, deliver to Purchaser
a list of all material contracts relating to the Stations entered into by Seller
between the date hereof and the Closing Date of the type required to be listed
in Schedule 1.1(c) hereto, together with copies of such contracts; and
(t) comply in all material respects with all rules
and regulations of the FCC, and all other laws, rules, and regulations to which
Seller, the Stations, and the Assets are subject.
4.3 WRITTEN CONSENTS. Except as provided in Schedule 4.3,
pending the Closing Date, Seller shall proceed with all reasonable diligence and
shall use commercially reasonable efforts to obtain the written consents to the
consummation of the transactions contemplated by this Agreement from all
necessary persons; provided, however, that Seller shall not be required to pay
any consideration not otherwise due to any third party for such third party's
consent.
4.4 AMENDMENT OF LEASE FOR K53FV TRANSMITTER SITE.
ValueVision agrees to use commercially reasonable efforts to assist Purchaser in
obtaining, prior to Closing, an amendment in form and substance reasonably
satisfactory to Purchaser, to the Antenna Site License Agreement dated October
13, 1994 among Metropolitan Life Insurance Co., Metropolitan Tower Realty Co.
and ValueVision International, Inc., as amended, to grant the Licensee
thereunder the right to mount a dish capable of enabling such Licensee to
receive satellite feeds for station K53FV. ValueVision shall be under no
obligation to expend funds to obtain such amendment, or to agree to any material
adverse change in the Antenna Site License Agreement to obtain the amendment.
Notwithstanding the foregoing, except as expressly provided in Section 8.6, the
securing of the amendment shall not be a condition precedent to the obligation
of Purchaser to close the transactions contemplated hereby.
4.5 EXERCISE OF RENEWAL OPTION IN LEASE FOR STUDIO SITE.
ValueVision agrees to exercise the renewal option set forth in Section 15 of the
Lease Agreement dated August 22, 1994 between ValueVision and Hercules Partners
in accordance with the terms thereof.
ARTICLE V
SPECIAL COVENANTS AND AGREEMENTS
5.1 INDEMNIFICATION REGARDING BROKERS. Seller agrees to
indemnify Purchaser, and to hold Purchaser harmless, from and against any claims
asserted by any broker or finder, or any person or entity acting or claiming to
act in a similar capacity in connection with the sale of the Stations, arising
out of the representation made in Section 6.4 by Seller; and Purchaser agrees to
indemnify Seller, and to hold Seller harmless, from and against any claims
asserted by any broker or finder, or any person or entity acting or claiming to
act in a similar capacity in connection with the sale of the Stations, arising
out of the representation made in Section 7.6 by Purchaser.
5.2 NO BULK SALES. Seller and Purchaser hereby agree that
the transactions contemplated by this Agreement are not governed by either the
bulk sales laws or the bulk transfer laws of the State of Texas.
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5.3 COOPERATION. Purchaser and Seller shall cooperate fully
with each other and with 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 Seller shall execute such other
documents as may be necessary and reasonable for the implementation and
consummation of this Agreement, and otherwise use their best efforts to
consummate the transaction contemplated hereby and to fulfill their obligations
hereunder. Notwithstanding the foregoing, Seller and Purchaser shall have no
obligation (i) to expend funds in order to obtain the Consents (other than any
fee payable to the FCC in connection with the filing of the Applications and any
fee imposed by the FTC in connection with the filings made pursuant to the HSR
Act), or (ii) to agree to any material adverse change in any Material Contract
in order to obtain a Consent with respect thereto.
5.4 RISK OF LOSS. The risk of any loss, damage, impairment,
confiscation, or condemnation of any of the Assets from any cause whatsoever
shall be borne by Seller at all times prior to the completion of the Closing,
and by Purchaser at all times thereafter, subject to the provisions of this
Section 5.4. In the event of any loss, damage, impairment, confiscation, or
condemnation of any of the Assets (a "Loss") prior to the Closing, which Loss
shall prevent either Station's signal transmission in accordance with the terms
of its FCC License, or which Loss shall materially impair either Station's
signal coverage area, Seller shall use commercially reasonable efforts to
repair, replace, or restore the Assets affected by such Loss in order to restore
the Station's signal coverage substantially as it existed prior to the Loss.
Seller and Purchaser agree that in the event the Station is not operating on the
scheduled Closing Date, the Closing Date shall be rescheduled to the date which
is five (5) business days after the Station's signal coverage has been so
restored. In the event of a Loss which prevents either Station's signal
transmission, or materially impairs either Station's signal coverage area, for a
period of more than forty (40) days, Purchaser may terminate this Agreement
pursuant to Section 10.1(a) (ii).
5.5 NO INCONSISTENT ACT.
(a) Pending the Closing Date, neither Seller nor
Purchaser shall (i) take any action which is materially inconsistent with their
respective obligations hereunder, or which would reasonably be expected to
materially hinder or delay the consummation of the transaction contemplated by
this Agreement, except as specifically required or permitted herein, or (ii)
take or fail to take any action which would render any of its representations
set forth in Article VI or VII, as the case may be, no longer accurate or which
would be inconsistent with any warranty contained in Article VI or VII, as the
case may be.
(b) Pending the Closing Date, Purchaser shall not
acquire or enter into any agreement to acquire any broadcast station or other
mass media interest that, in conjunction with Purchaser's acquisition of the
Stations, would be inconsistent with 47 C.F.R. ss.73.3555, or would violate any
other FCC rule or policy; provided, however, that Seller acknowledges that prior
to the Closing Purchaser may seek to enter into an agreement involving the
acquisition of another television station that would be inconsistent with
Purchaser's acquisition of the Stations under 47 C.F.R. ss.73.3555 ("Other TV
Acquisition Agreement"). In the event it enters into such Other TV Acquisition
Agreement, Purchaser agrees that it will seek in the Applications (or an
amendment thereto, as the case may be) a waiver request consistent with the FCC
rules, regulations and policies ("Waiver Request"), in which Purchaser agrees to
file with the FCC an application to divest KVVV or such other television station
within six months of the later of the Closing under this Agreement and the
closing under the Other TV Acquisition Agreement, and to use its best efforts to
take any additional steps necessary to obtain FCC, DOJ, and any other
governmental approvals required in connection with the consummation of the
transactions contemplated by this Agreement. The Waiver Request shall be made no
later than fifteen (15) business days following entry into such Other TV
Acquisition Agreement, and Purchaser shall take all reasonable action necessary
to prosecute the Waiver Request.
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5.6 NOTIFICATIONS.
(a) Pending the Closing Date, Seller and Purchaser
shall promptly notify each other in writing of any developments, except for
matters affecting the television broadcasting industry generally, which singly
or in concert with others are material with respect to the ability of such
notifying party to consummate the transactions contemplated hereby, and of any
material change in any of the information contained in such party's
representations and warranties contained in this Agreement, provided that such
notification shall not relieve such party of any obligations under this
Agreement.
(b) Pending the Closing Date, Purchaser shall
promptly notify Seller in writing of any developments, except for matters
affecting the television broadcasting industry generally, of which Purchaser
becomes aware, which developments would be reasonably expected to cause the
information contained in Seller's representations and warranties to be untrue in
any material respect.
5.7 ALLOCATION OF PURCHASE PRICE. The Purchase Price set
forth in Section 1.3 shall be allocated among the Assets in accordance with the
provisions of Section 1060 of the Code and as determined by mutual agreement of
Seller and Purchaser. If Seller and Purchaser are unable to agree on the
allocation of the Purchase Price within ninety (90) days after the Closing Date,
the parties shall jointly appoint and engage an independent accounting or
appraisal firm of national or regional repute (the "Arbiter") to resolve any
dispute. The determination of the Arbiter shall be binding and conclusive on the
parties. The fees and expenses of the Arbiter shall be borne fifty percent (50%)
by Seller and fifty percent (50%) by Purchaser. Purchaser and Seller shall each
complete, execute and timely file Form 8594 with the Internal Revenue Service
with their respective Tax Returns for the taxable year that includes the Closing
Date (or such other Internal Revenue Service Form as may then be prescribed for
use by the Income Tax Regulations to comply with applicable asset acquisition
reporting requirements of Section 1060 of the Code and the Income Tax
Regulations thereunder). Purchaser and Seller agree to act in accordance with
the allocation of the Purchase Price established pursuant to this Section 5.7 in
the preparation and filing of all Tax Returns, including Form 8594.
5.8 ENVIRONMENTAL ASSESSMENT.
(a) Within ten (10) days of the date hereof,
Purchaser may order a so-called "Phase One" environmental assessment, (the
"Environmental Assessment") of all real properties leased by Seller and included
in the Assets. The cost of the Environmental Assessment shall be borne equally
by Purchaser and Seller. Within ten (10) days from and after the date of
Purchaser's receipt of the report on the Environmental Assessment (the
"Environmental Assessment Report"), Purchaser shall supply a copy of the
Environmental Assessment Report to Seller and, if the Environmental Assessment
Report discloses any material environmental hazard or reasonable possibility of
future material liability for environmental damages or clean-up costs (each, an
"Environmental Hazard"), Purchaser may request Seller in writing to remedy such
Environmental Hazard.
(b) If Purchaser requests that Seller remedy such
Environmental Hazard pursuant to Section 5.8(a), then Seller may, by notice
delivered to Purchaser within seven (7) days after receipt of such notice from
Purchaser, agree to remedy such Environmental Hazard prior to the Closing Date.
If Seller does not agree prior to the end of such seven-day period to remedy
such Environmental Hazard prior to the Closing Date, then Purchaser may
terminate this Agreement pursuant to Section 10.1(a)(ii) by written notice of
termination delivered to Seller within thirty (30) days of the expiration of
such seven-day period.
(c) Seller shall use commercially reasonable efforts
to assure that Purchaser's
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consultants will have access to the leased real estate included in the Assets
for purposes of the Environmental Assessment.
5.9 REAL ESTATE ISSUES. Prior to the Closing Date,
Purchaser may obtain with respect to each parcel of real estate leased by
Seller, a commitment of a title insurance company to issue a lender's title
insurance policy insuring the leasehold title of Purchaser and the lien of
Purchaser's lender in all leaseholds in a cumulative amount reasonably specified
by Purchaser, subject only to (i) the standard exceptions to title insurance
that are customarily contained in such title policies; (ii) liens for current
state and local property taxes which are not delinquent nor subject to penalty;
(iii) such other matters as are disclosed in Schedule 5.9 hereto; and (iv) any
such other imperfection of title, encroachment, easement, covenant, restriction,
zoning designation, or violation of existing zoning or building code, ordinance,
or law, as the case may be, as would not materially or adversely affect, impair,
or interfere with the use of any property affected thereby as heretofore used by
Seller or by the Stations. The premiums and any other costs associated with
obtaining such title insurance will be shared equally by Purchaser and Seller.
5.10 FURTHER ASSURANCES. After the Closing Date, each party
will take all action reasonably requested by the other to carry out the intent
of this Agreement and to vest good and marketable title to the Assets in
Purchaser.
5.11 CONTROL OF THE STATIONS. Prior to Closing, Purchaser
shall not, directly or indirectly, control, supervise, direct, or attempt to
control, supervise, or direct the operations of the Stations; such operations,
including complete control and supervision of all of the Stations' programs,
employees, and policies, shall be the sole responsibility of Seller until the
Closing.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
6.1 GOOD STANDING. VVI Baytown and VVILPTV are corporations
duly organized, validly existing, and in good standing under the laws of the
State of Minnesota and are duly qualified to conduct business in the State of
Texas. Seller has all requisite corporate power and authority (i) to own, lease,
and use the Assets as presently owned, leased, and used, (ii) to conduct the
business and operations of the Stations as presently conducted, and (iii) to
execute and deliver this Agreement and the documents contemplated hereby, and to
perform and comply with all of the terms and conditions to be performed and
complied with by Seller hereunder and thereunder. Seller holds all material
rights, franchises, licenses, permits, authorizations, and approvals
(governmental and otherwise), including the licenses and permits issued by the
FCC, necessary to own and operate its properties and to carry on and conduct the
business of the Stations as it is presently carried on and conducted. Seller is
not a participant in any joint venture or partnership with any other person or
entity with respect to any part of the Stations' operations or the Assets.
6.2 RIGHT, POWER AND AUTHORITY. Seller has taken all
requisite corporate action in order to authorize the execution, delivery, and
performance of this Agreement and the consummation of the sale of the Assets and
the other transactions contemplated hereby. This Agreement and the Escrow
Agreement have been duly executed and delivered by Seller and are the legal,
valid, and binding obligations of Seller enforceable against Seller in
accordance with their terms, except to the extent limited by (i) bankruptcy,
insolvency, moratorium, and other
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laws of general applicability relating to or affecting the enforcement of
creditors' rights, (ii) principles of public policy, and (iii) court-applied
general principles of equity.
6.3 NO CONFLICTS OR DEFAULTS. Neither the execution,
delivery, nor performance of this Agreement by Seller, nor the consummation of
the sale and purchase of the Assets or any other transaction contemplated
hereby, after the giving of notice, or the lapse of time, or both, (a) conflicts
with, results in a breach of, or constitutes a default under, the articles of
incorporation or bylaws of Seller, or any Federal, state or local law, statute,
ordinance, rule, or regulation, or any court or administrative order or process
applicable to Seller; (b) conflicts with, constitutes grounds for termination
of, results in a breach of, constitutes a default under, or accelerates or
permits the acceleration of any performance required by the terms of, any
contract, agreement, arrangement, commitment, plan, instrument, license, or
permit to which Seller is a party or by which Seller or the Assets are bound and
which relates to the ownership or operation of the Stations or the Assets
(except with respect to any Assumed Contract listed in Schedule 1.1(c) hereto
which is not assignable without the consent of another party and with respect to
which Seller has notified Purchaser in writing that such consent will not be
obtained by Closing); (c) results in the creation of any mortgage, pledge, lien,
claim, liability, charge, condition, or encumbrance upon any of the Assets
utilized or required in connection with the operation of the Stations, other
than as expressly contemplated by this Agreement; or (d) conflicts with the
organizational documents of Seller.
6.4 BROKER'S FEE. Neither this Agreement, nor the sale and
purchase of the Assets contemplated by this Agreement, was induced or procured
through the services of any person, firm, corporation, or other entity acting on
behalf of or representing Seller as broker, finder, investment banker, financial
advisor, or in any similar capacity, except for certain payments made to Michael
Jones pursuant to a management consulting agreement, which are the
responsibility of Seller.
6.5 FCC LICENSES AND OTHER AUTHORIZATIONS. Seller holds the
FCC Licenses and other Authorizations identified on Schedule 1.1(a) hereto.
Schedule 1.1(a) includes a true and complete list of the FCC Licenses and all
other Authorizations, except as otherwise noted therein. The FCC Licenses give
the Seller the right to file an application to construct and operate a digital
television station on a paired-channel with station KVVV- TV, pursuant to
Sections 73.622 and 73.624 of the FCC's rules. Seller will deliver to Purchaser,
upon Purchaser's request, true and complete copies of the Authorizations
(including any and all amendments and other modifications thereto). Assuming the
due regularity of the FCC's processes in connection therewith, as to which
Seller has no contrary knowledge, the FCC Licenses and other Authorizations were
validly issued and are in full force and effect. Other than the FCC Licenses and
the other Authorizations set forth in Schedule 1.1(a) hereto, no franchises,
licenses, permits, approvals, or authorizations are required in order for Seller
to own and operate the Stations in the manner and to the full extent that they
are operated on the date hereof and on the Closing Date, and none of the FCC
Licenses or other Authorizations are subject to any restriction or condition
which would limit the full operation of either Station as presently operated or
as operated on the Closing Date, other than restrictions of general
applicability to the television broadcasting industry as a whole. Except as
noted on Schedule 6.5, (a) no action or proceeding is pending or, to the
knowledge of Seller, threatened, by or before the FCC or by or before any other
governmental body to revoke, refuse to renew, or modify the FCC Licenses or any
other Authorizations, other than proceedings of general applicability affecting
or purporting to affect all similarly-situated television broadcasting stations,
and (b) no applications are currently pending before the FCC with respect to the
Stations.
6.6 FCC COMPLIANCE. The Stations, their physical
facilities, electrical and mechanical systems, and transmitting and studio
equipment are operated in all material respects in accordance with the
specifications of the FCC Licenses. All reports and other filings required by
the FCC with respect to the Stations, including without limitation material
required to be placed in the Stations' local public inspection file, have been
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duly and currently filed in all material respects.
6.7 TITLE TO ASSETS. Seller has good and marketable title
to all of the Assets, free and clear of any mortgages, pledges, liens,
encumbrances, or other charges or rights of others of any kind, except for
Permitted Encumbrances.
6.8 REAL ESTATE. Schedule 1.1(e) hereto describes all real
estate, including all leasehold interests in real estate, included in the
Assets, and the nature of the right, title, or interest that Seller has in such
real estate. All leases included in the Assets are valid, binding, and
enforceable in accordance with their terms, subject to applicable provisions of
any subsequently-enacted landlord-tenant laws of the jurisdiction in which each
such lease is to be performed, and subject to the qualifications set forth in
clauses (i), (ii), and (iii) of Section 6.2 hereof. Seller is not in material
breach, nor to the best of Seller's knowledge is any other party in material
breach, of the terms of any such leases, or other instruments, except as
disclosed in Schedule 1.1(e).
6.9 NO LITIGATION OR VIOLATIONS OF LAW. (a) Except for
matters affecting the television broadcasting industry generally, and except for
those matters set forth in Schedule 6.9(a) hereto, there is no litigation at law
or in equity, no arbitration proceeding, and no proceeding before or by any
court, commission, agency, or other administrative or regulatory body or
authority, pending or, to the knowledge of Seller, threatened, which would
reasonably be expected to have a material adverse effect upon the Stations.
(b) Except as disclosed in Schedule 6.9(b) hereto,
there is no labor trouble, dispute, grievance, controversy, strike, union
representation, or request for union representation pending, or, to the
knowledge of Seller, threatened, against Seller relating to or affecting the
business or operation of the Stations.
(c) Seller owns and operates its properties and
assets, and carries on and conducts the business and affairs of the Stations, in
material compliance with all Federal, state, and local laws, statutes,
ordinances, rules, and regulations. To Seller's knowledge, neither the ownership
or use of its properties, nor the conduct of the business or operations of the
Stations, conflicts in any material way with the rights of any other person,
firm, corporation or entity.
6.10 INTELLECTUAL PROPERTY. All patent, trademark, trade
name, service mark, or brand name registrations and copyright registrations,
licenses, permits, jingles, privileges, and other similar intangible property
rights and interests and all pending applications or applications to be filed,
if any, therefor, owned by Seller and used in the operation of the Stations are
disclosed in Schedule 1.1(d) hereto. Seller has delivered to Purchaser copies of
all documents, establishing or supporting Seller's claim to such rights,
licenses, or other authority. To the knowledge of Seller, the ownership and
operation of the Stations and the Assets, as presently owned and operated, does
not infringe upon nor conflict in any material respect with any patent,
trademark, trade name, service mark, brand name or copyright of any other
person, firm, corporation, or entity.
6.11 CONTRACTS. Schedule 1.1(c) hereto sets forth all film
and program contracts, personal property leases, and other contracts,
agreements, and commitments to which Seller or either Station is a party as of
the date hereof and which relate to the Assets, or the operation of the business
or affairs of the Stations. Seller will make available to Purchaser, upon
Purchaser's request, true and complete copies of all such written contracts,
leases, agreements, and commitments, and true and complete memoranda of all oral
contracts, leases, agreements, and commitments (including any and all amendments
and other modifications to such contracts). Except as otherwise disclosed in
Schedule 1.1(c) hereto, all of the Assumed Contracts are in full force and
effect, and are valid, binding, and enforceable in accordance with their terms,
subject to the qualifications set forth in clauses (i),
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(ii), and (iii) of Section 6.2 hereof. Seller is not in material breach, nor to
Seller's knowledge is any other party in material breach, of the terms of any of
the Assumed Contracts. Except as expressly set forth in Schedule 1.1(c), Seller
is not aware of any intention of any party to any Assumed Contract (i) to
terminate such Assumed Contract, or to amend the terms thereof, (ii) to refuse
to renew the same upon its expiration of its term, or (iii) to renew the same
upon its expiration only upon terms and conditions which are more onerous than
those pertaining to such existing Assumed Contract. Except as disclosed on
Schedule 1.1(c), all oral contracts set forth thereon are terminable by the
Seller at will or upon no more than 30 days notice. Assuming that the Consents
shall have been obtained, and except as set forth on Schedule 6.11, Seller has
full legal power and authority to assign its rights under the Assumed Contracts
to Purchaser in accordance with this Agreement, and such assignment will not
affect the validity, enforceability, and continuation of any of the Assumed
Contracts. Seller is not party to any agreements pursuant to which Seller has
agreed to provide commercial advertising time on the Stations in exchange for
property or services in lieu of, or in addition to, cash.
6.12 INSURANCE. Seller has in full force and effect
insurance insuring the properties and assets of the Stations included in the
Assets. Seller will make available to Purchaser, at Purchaser's request, copies
of such insurance policies.
6.13 ASSETS IN GOOD REPAIR. Except as provided in Schedule
6.13 hereto, the Assets described in Schedule 1.1(b) hereto are in good
operating condition and repair (ordinary wear and tear excepted), and are
available for immediate use in the business or operations of the Stations.
6.14 OPERATIONAL ASSETS. (a) The Assets, and those
additional properties and assets of Seller identified in Section 1.2 hereof,
constitute all of the assets and properties that Seller owns or leases in
connection with its operation of the Stations as of the date hereof.
(b) Schedule 1.1(b) hereto contains descriptions of
all material items which comprise all personal property necessary to conduct the
business or operations of the Stations as now conducted, except for those assets
described in Section 1.2 hereof. The Assets will permit the Stations to be
operated by Purchaser in substantially the manner currently operated by Seller
and substantially in accordance with the terms of the FCC Licenses and the rules
and regulations of the FCC, and with all other applicable Federal, state, and
local statutes, ordinances, rules and regulations.
6.15 REQUIRED CONSENTS. Except for the FCC Consent and the
Consents described in Schedule 6.15 hereto, no consent, approval, permit, or
authorization of, or declaration to, or filing with, any governmental or
regulatory authority or any other third party is required to be obtained by
Seller in order (i) to consummate the transactions contemplated by this
Agreement, or (ii) to permit Seller to assign or transfer the Assets to
Purchaser.
6.16 EMPLOYEE BENEFITS. Schedule 6.16 hereto contains a
complete list of all of the employees of the Station as of the date hereof, the
rate of pay for each such employee, and a list of all Employee Benefit Plans, as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or any other "Compensation Arrangements," whether or not
written, applicable to the employees of Seller or any entity related to Seller
(under the terms of Section 414 of the Internal Revenue Code of 1986 (the
"Code")). For purposes of the preceding sentence, "Compensation Arrangements"
means any bonus, deferred compensation, incentive compensation, stock purchase,
stock option, severance or termination pay, or profit sharing plan, program,
agreement, or arrangement and any other employee benefit plan, program,
agreement or arrangement for the benefit of any current or former employee,
director, or independent contractor. Seller will, upon Purchaser's request,
furnish Purchaser with true and complete copies of any contracts with employees
of the Stations. Seller is not aware of the
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existence of any pending, threatened or anticipated governmental audit or
examination of any such Employee Benefit Plan or Compensation Arrangement. There
exists no action, suit, or claim (other than routine claims for benefits) with
respect to any such plans or arrangements pending, or, to the knowledge of
Seller, threatened or anticipated, against any of such Employee Benefit Plan or
Compensation Arrangement. Neither Purchaser nor any entity related to Purchaser
under Section 414 of the Code, or any officers, directors, partners, employees,
or affiliates of the same, shall have any liability, obligation, or
responsibility with respect to claims or liabilities arising or accruing under
any Employee Benefit Plan or Compensation Arrangement maintained or provided by
Seller or any other entity related to Seller under Section 414 of the Code which
relates to any period whatsoever. Seller has complied in all material respects
with Part 6 of Subtitle B of Title I of ERISA or Section 4980B of the Code
(hereinafter collectively referred to as "COBRA"), and will provide such
continuation of health benefit coverage to the extent required by reason of the
events occurring prior to or on the Closing Date or by reason of the
transactions contemplated by this Agreement. Neither Purchaser nor any entity
related to Purchaser under Section 414 of the Code, or any officers, directors,
partners, employees, or affiliates of the same, shall have any liability,
obligation, or responsibility with respect to penalties, claims, or liabilities
arising or accruing under COBRA with respect to any group health plan maintained
by or contributed to by Seller or any entity related to Seller under Section 414
of the Code.
6.17 LABOR MATTERS. Seller is not party to, or subject to
any, collective bargaining agreements with respect to the Stations, except as
described in Schedule 1.1(c) hereto. Seller has no written or oral contracts of
employment with any employee of the Stations, other than (i) oral employment
agreements terminable at will without penalty, or (ii) those listed in Schedule
1.1(c). Seller will, upon Purchaser's request, provide Purchaser with true and
complete copies of all such written contracts of employment, and true and
accurate memoranda of any such oral contracts, to the extent such memoranda
exist. Except as disclosed in Schedule 6.9(b) hereto, Seller has received no
notice alleging that Seller has failed to comply in any material respect with
all applicable laws, rules, and regulations relating to the employment of labor,
including those related to wages, hours, collective bargaining, occupational
safety, discrimination, and the payment of social security and other
payroll-related taxes. No controversies, disputes, or proceedings are pending,
or, to the best of Seller's knowledge, threatened or anticipated, between Seller
and the employees (singly or collectively) of the Station, except as disclosed
in Schedule 6.9(b) hereto. No labor union or other collective bargaining unit
represents, or, to the best of Seller's knowledge, claims to represent any of
the employees of the Stations. To the best of Seller's knowledge, there is no
union campaign being conducted to solicit cards from employees to authorize a
union to request a National Labor Relations Board certification election with
respect to any of Seller's employees at the Station.
6.18 TAXES. Except as set forth in Schedule 6.18, Seller has
filed or caused to be filed all Federal income tax returns and all other
Federal, state, county, local, or city tax returns which are required to have
been filed, and Seller has paid or caused to be paid all taxes shown on said
returns or on any tax assessment received by Seller to the extent that such
taxes have become due, or has set aside on its books reserves (segregated to the
extent required by generally accepted accounting practices) deemed by Seller to
be adequate with respect thereto and except as specified disclosed or scheduled
there is no known, threatened or anticipated tax liability. No events have
occurred which could impose upon Purchaser any transferee liability for any
taxes, penalties, or interest due or to become due from Seller.
6.19 REPORTS. Except as stated in Schedule 6.19, all
material returns, reports, and statements which either Station is currently
required to have filed with the FCC or with any other governmental agency have
been filed, and all material reporting requirements of the FCC and other
governmental authorities having jurisdiction over the Stations have been
complied with. All of such reports, returns, and statements are substantially
complete and correct as filed. The Stations' public inspection file is located
at the Stations' offices in Houston,
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Texas and is in material compliance with the FCC's rules and regulations.
6.20 BALANCE SHEET. Attached as Schedule 6.20 is a true and
complete copy of the unaudited balance sheet (the "Balance Sheet") of Station
KVVV-TV as of January 31, 1999 (the "Balance Sheet Date"). The Balance Sheet has
been prepared from the books and records of the Seller and presents fairly, in
all material respects, the financial condition of Station KVVV-TV as of the
Balance Sheet Date.
6.21 NO CHANGES. Since the Balance Sheet Date, Seller has
conducted the business and operations of the Stations only in the ordinary
course, and has not:
(a) Suffered any material adverse change in the
condition of the Stations, including any material damage, destruction, or loss
affecting the Assets; or
(b) Made any sale, assignment, lease, or other
transfer of any of the Assets, other than in the normal and usual course of
business, with suitable replacements being obtained therefor to the extent
required by this Agreement.
6.22 SURVIVAL. Each of Seller's representations and
warranties set forth in this Agreement shall survive the Closing of the
transactions herein contemplated, and shall not be merged therein, for a period
of twelve (12) months from and after the Closing Date.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
7.1 GOOD STANDING. Purchaser is a limited partnership,
validly organized and in good standing under the laws of the State of
California, and on the Closing Date will be duly qualified to conduct business
in the State of Texas.
7.2 RIGHT, POWER AND AUTHORITY. Purchaser has the full
power and authority to enter into, to execute and deliver, and to perform its
obligations under, this Agreement, the Assumption Agreement, the Escrow
Agreement, and any other instruments contemplated hereby, and Purchaser has
taken all requisite action in order to authorize the execution, delivery, and
performance of this Agreement, the Assumption Agreement, and the Escrow
Agreement, and the consummation of the purchase of the Assets and the other
transactions contemplated hereby and thereby. This Agreement, the Assumption
Agreement, and the Escrow Agreement have been duly executed and delivered by
Purchaser and are the legal, valid, and binding obligations of Purchaser,
enforceable against Purchaser in accordance with their terms, except to the
extent limited by (i) bankruptcy, insolvency, moratorium, and other laws of
general applicability relating to or affecting the enforcement of creditors'
rights, and (ii) court-applied general principles of equity.
7.3 LICENSEE QUALIFICATIONS. Except as set forth on
Schedule 7.3 hereto, there is no fact that would, under the Communications Act
of 1934, as amended, and the rules, regulations and policies of the FCC, each as
in effect on the date of this Agreement, disqualify Purchaser from holding the
FCC Licenses. Purchaser has sufficient net liquid assets on hand or available
from committed sources to consummate the transactions contemplated by this
Agreement and to operate the Stations for three (3) months after Closing and is
otherwise financially qualified under the Communications Act of 1934, as
amended, and the rules, regulations and policies
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of the FCC, each as in effect on the date of this Agreement, to be the holder of
the FCC Licenses.
7.4 NO CONFLICTS OR DEFAULTS. Neither the execution,
delivery, nor performance of this Agreement by Purchaser, nor the consummation
of the sale and purchase of the Assets or any other transaction contemplated
hereby or thereby, after the giving of notice, or the lapse of time, or both,
(a) conflicts with, results in a breach of, or constitutes a default under any
Federal, state, or local law, statute, ordinance, rule, or regulation, or any
court or administrative order or process applicable to Purchaser, (b) conflicts
with, constitutes grounds for termination of, results in a breach of,
constitutes a default under, or accelerates or permits the acceleration of any
performance required by the terms of, any material contract, agreement,
arrangement, commitment, plan, instrument, license, or permit to which Purchaser
is a party or by which Purchaser is bound and which might materially affect
Purchaser's ability to perform its obligations under this Agreement, or (c)
conflicts with the organizational documents of Purchaser.
7.5 REQUIRED CONSENTS. Except for the FCC Consents and the
Consents described in Schedule 7.5 hereto, no consent, approval, permit, or
authorization of, or declaration to, or filing with, any governmental or
regulatory authority or any other third party is required to be obtained by
Purchaser in order (i) to consummate the transactions contemplated by this
Agreement, or (ii) to permit Purchaser to acquire the Assets from Seller.
7.6 BROKER'S FEE. Neither this Agreement, nor the sale and
purchase of the Assets contemplated by this Agreement, was induced or procured
through the services of any person, firm, corporation, or other entity acting on
behalf of or representing Purchaser as broker, finder, investment banker,
financial advisor, or in any similar capacity, other than Gammon Media Brokers,
Inc., whose fees and commissions Purchaser shall be solely responsible for.
7.7 SURVIVAL. Each of Purchaser's representations and
warranties set forth in this Agreement shall survive the Closing of the
transactions herein contemplated, and shall not be merged therein, for a period
of twelve (12) months from and after the Closing Date.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER
The obligations of Purchaser hereunder to close the
transactions herein contemplated are subject to the following conditions
precedent (unless any such conditions are waived in writing by Purchaser, in
Purchaser's sole discretion):
8.1 CONDITIONS.
(a) All warranties and representations made by
Seller herein to Purchaser (except for any such representation or warranty that
expressly relates solely to a date prior to the Closing Date), after
disregarding any materiality qualifications contained therein, shall be true and
correct on and as of the Closing Date, with the same effect as if such
warranties and representations had been made by Seller to Purchaser on and as of
the Closing Date, with only such exceptions as would not, in the aggregate, be
reasonably expected to have a material adverse impact on the Assets or the
operation of the Stations;
(b) Seller shall have performed and complied in all
material respects, after disregarding any materiality qualifications contained
therein, with all agreements, covenants, and conditions herein
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required to be performed or complied with on Seller's part on or prior to the
Closing Date, with only such exceptions as would not, in the aggregate, be
reasonably expected to have a material adverse impact on the Assets or the
operation of the Stations;
(c) each of the Material Consents shall have been
duly obtained and delivered to Purchaser, with no material adverse change to the
terms of the Assumed Contracts with respect to which such Material Consent shall
have been obtained, unless Purchaser shall have consented in writing to such
change;
(d) Seller shall be the holder of the FCC Licenses
and there shall not have been any modification with respect to such FCC Licenses
which has a materially adverse effect on either Station or the conduct of its
business or operations other than proceedings generally applicable to the
television broadcast industry;
(e) no proceeding shall be pending, the effect of
which would be to revoke, cancel, fail to renew, suspend, or adversely modify
the FCC Licenses;
(f) Seller shall have made, or shall stand willing
and able to make, all deliveries to Purchaser required to be made pursuant to
this Agreement;
(g) between the date of this Agreement and the
Closing Date, there shall have been no material adverse change in the condition
of either Station or of the Assets;
(h) the consent of any governmental authority
required to be obtained for the consummation of the transactions contemplated by
this Agreement shall have been obtained, and the waiting period with respect to
the filings made by the parties under the HSR Act shall have expired or been
terminated; and
(i) the FCC Consent shall have been granted without
any materially adverse condition to Purchaser, such FCC Consent shall be in full
force and effect, and, unless waived by the Purchaser, such FCC Consent shall
have become a Final Order. For the purpose of this Agreement, an action or order
of the FCC granting the FCC's Consent shall be deemed to have become a "Final
Order" when such action or order shall have been issued by the FCC in writing,
setting forth the FCC Consent, and (i) so long as such action or order shall not
have been reversed, stayed, enjoined, set aside, annulled or suspended, and (ii)
so long as no protest, request for stay, reconsideration or review by the FCC on
its own motion or by any third party, petition for FCC reconsideration or for
rehearing, application for FCC review, or judicial appeal of such action or
order shall be pending, when the period provided by law for initiating such
protest, request for stay, reconsideration or review by the FCC on its own
motion, petition for FCC reconsideration or for rehearing, application for FCC
review, or judicial appeal of such action or order shall have expired.
8.2 DELIVERIES TO PURCHASER. At the Closing there shall be
delivered to Purchaser:
(a) The opinion of Seller's legal counsel, dated the
Closing Date in substantially the form of Schedule 8.2(a);
(b) Certificates dated as of the Closing Date,
executed by an officer of Seller certifying (i) that the representations and
warranties of Seller contained in this Agreement are true and complete in all
material respects as of the Closing Date, except for changes contemplated by
this Agreement and except for representations and warranties expressly made
solely as of a prior date; (ii) that Seller has, in all material respects,
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performed all of its obligations and complied with all of its covenants set
forth in this Agreement to be performed and complied with by it prior to or on
the Closing Date; and (iii) that Seller is not aware of any basis for a claim
for indemnification under Article XI hereof which could be asserted against
Purchaser after the Closing;
(c) For each leasehold interest included in the
Assets, certificates of estoppel and, if requested by Purchaser, non-disturbance
and attornment commitments, from the respective landlords of such leaseholds,
acknowledging the existence of the lease for each such leasehold interest,
certifying that each such lease remains in full force and effect and that Seller
is not in material breach thereof or in default thereunder, certifying that
there have been no oral modifications to the lease for each such leasehold
interest and that copies of all written modifications have been provided,
certifying the amount of the then current rental for the leasehold interest and
whether such landlord holds a security deposit for such leasehold, certifying
the date of the expiration of the leasehold interest and that no rent due under
the lease for each such leasehold that is due and payable has not been paid in
full, and consenting to the assignment by Seller to Purchaser of each such
leasehold interest without material adverse changes in the terms of each such
lease;
(d) A written report on the results of searches in
the names of Value Vision International, Inc. and KVVV for tax, lien, and
judgment filings in the Secretary of State's records of the State of Texas and
in the records of any county in which the Assets and the current studio(s) are
located, such searches having been made no earlier than thirty (30) days prior
to the Closing Date, and the cost of which searches shall be borne equally by
Seller and Purchaser;
(e) Subject to the provisions of Section 1.2 hereof,
copies of all Authorizations, Assumed Contracts, blueprints, schematics, working
drawings, plans, projections, statistics, engineering records, and all files and
records regarding the Assets and used by Seller in connection with the Assets
and the Stations' operations (provided, however, that such Assumed Contracts,
blueprints, schematics, working drawings, plans, projections, statistics,
engineering records, and all such files and records shall be deemed to have been
delivered to Purchaser if the same shall be located at the premises of the
Station on the Closing Date); and
(f) The documents and instruments required to be
delivered by Seller to Purchaser at the Closing under Section 2.2(a) hereof.
8.3 NO CHALLENGES. No proceeding or formal investigation by
or before any court or governmental agency shall be pending or threatened which
would reasonably be expected to prevent the consummation of the transactions
contemplated by this Agreement.
8.4 TITLE INSURANCE. Purchaser shall have received the
title insurance commitments described in Section 5.9.
8.5 ORGANIZATIONAL DOCUMENTS. Purchaser shall have received
from Seller certificates from the Secretaries of State of Minnesota and Texas as
to the good standing of each Seller in such States, and a copy of the
resolutions of the shareholders and directors of each Seller authorizing its
execution and delivery of this Agreement and its performance of its obligations
hereunder, which copies shall be certified by an appropriate officer of such
Seller, such certification to be reasonably satisfactory to Purchaser.
8.6 MICROWAVE LINK/LEASE AMENDMENT. Either (i) Seller shall
have entered into a binding written agreement, in form and substance reasonably
acceptable to Purchaser and with a term contemporaneous with the term of the
lease pursuant to which Seller leases space for the antenna and transmitter for
station K53FV that
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permits Seller and its assignees to receive satellite feeds for delivery by
Seller or its assignee to station K53FV's transmitter site, or (ii) the
amendment contemplated by Section 4.4 shall have been entered into.
ARTICLE IX
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
The obligations of Seller hereunder to close the transactions
herein contemplated are subject to the following conditions precedent (unless
any such conditions are waived in writing by Seller, in Seller's sole
discretion):
9.1 CONDITIONS.
(a) All warranties and representations made by
Purchaser herein to Seller (except for any such representation or warranty that
expressly relates solely to a date prior to the Closing Date), after
disregarding any materiality qualifications contained therein, shall be true and
correct in all material respects on and as of the Closing Date, with the same
effect as if such warranties and representations had been made by Purchaser to
Seller on and as of the Closing Date, with only such exceptions as would not, in
the aggregate, be reasonably expected to have a material adverse impact on the
Assets or the operation of the Stations;
(b) Purchaser shall have performed and complied in
all material respects, after disregarding any materiality qualifications
contained therein, with all agreements, covenants, and conditions herein
required to be performed or complied with on Purchaser's part on or prior to the
Closing Date, with only such exceptions as would not, in the aggregate, be
reasonably expected to have a material adverse impact on the Assets or the
operation of the Stations;
(c) Purchaser shall have made, or shall stand
willing and able to make, all deliveries to Seller required to be made pursuant
to this Agreement;
(d) the consent of any governmental authority
required to be obtained for the consummation of the transactions contemplated by
this Agreement shall have been obtained, and the waiting period with respect to
the filings made by the parties under the HSR Act shall have expired or been
terminated; and
(e) the FCC Consent shall have been granted and
shall be in full force and effect.
9.2 DELIVERIES TO SELLER. At the Closing there shall be
delivered to Seller:
(a) A certificate, dated as of the Closing Date,
executed by an officer of Purchaser, certifying that (i) the representations and
warranties of Purchaser contained in this Agreement are true and complete in all
material respects as of the Closing Date, except for changes contemplated by
this Agreement and except for representations and warranties expressly made as
of a prior date; (ii) Purchaser has, in all material respects, performed all of
its obligations and complied with all of its covenants set forth in this
Agreement to be performed and complied with prior to or on the Closing Date; and
(iii) Purchaser is not aware of any basis for a claim for indemnification under
Article XI hereof which could be asserted against Seller after the Closing.
(b) The documents and instruments required to be
delivered by Purchaser to Seller at the Closing under Section 2.2(b) hereof.
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9.3 NO CHALLENGES. No proceeding or formal investigation by
or before any court or governmental agency shall be pending or threatened which
would reasonably be expected to prevent the consummation of the transactions
contemplated by this Agreement.
9.4 ORGANIZATIONAL DOCUMENTS. Seller shall have received
from Purchaser certificates from the Secretaries of State of California and
Texas as to the good standing of Purchaser in such states, and a copy of the
resolutions of the general partners of Purchaser authorizing its execution and
delivery of this Agreement and its performance of its obligations hereunder,
which copies shall be certified by a general partner of Purchaser, such
certification to be reasonably satisfactory to Seller.
ARTICLE X
RIGHTS OF PURCHASER AND SELLER UPON TERMINATION OR BREACH
10.1 TERMINATION.
(a) This Agreement may be terminated by either
Purchaser or Seller (if the terminating party is not then in breach of any
material provision of this Agreement), upon written notice to the other party,
upon the occurrence of any of the following:
(i) if at any time prior to the Closing Date,
there shall have occurred a material breach of a representation or warranty of
the non-terminating party contained herein, or a material default in the
performance by the non-terminating party of a covenant or obligation of such
non-terminating party contained herein, and if such breach or default shall not
have been cured within ninety (90) days, with curative steps having been
commenced within fifteen (15) days, from and after the date upon which written
notice thereof shall have been given to the nonterminating party by the
terminating party;
(ii) pursuant to Sections 5.4 or 5.8 of this
Agreement;
(iii) if the FCC denies the Applications by
Final Order;
(iv) by mutual agreement of Seller and
Purchaser; and
(v) if the Closing has not occurred by the
first anniversary date of this Agreement (the "First Anniversary"); provided,
however, that Purchaser shall not be entitled to terminate this Agreement
pursuant to this Section 10.1(a)(v) if the Closing shall not have occurred by
the First Anniversary on account of any delay attributable in whole or in part
to Purchaser's entry into an Other TV Acquisition Agreement.
(b) Seller may terminate this Agreement upon written
notice to Purchaser (i) if Purchaser fails to file the Waiver Request within the
time period specified in Section 5.5(b) or to prosecute the Waiver Request with
all reasonable diligence; (ii) if Purchaser fails to use its best efforts to
take any additional steps necessary to obtain FCC, DOJ, and any other
governmental approvals required in connection with the consummation of the
transactions contemplated by this Agreement; (iii) if the FCC denies the Waiver
Request and such denial has become a Final Order; or (iv) if the Closing has not
occurred by the First Anniversary as a result of a delay attributable, in whole
or in part, to Purchaser's entry into an Other TV Acquisition Agreement;
provided, however, that Seller shall not have the right to terminate this
Agreement upon the occurrence of any of the events set forth in clauses (i) and
(ii) of this Section 10.1(b) unless Purchaser shall not have cured such failure
within ten
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business days after receiving written notice of such failure from Seller.
10.2 EFFECT OF BREACH. The parties agree that they shall
each have the rights and remedies set forth in this Agreement for any breach
hereof and expressly waive any and all other rights and remedies at law or in
equity.
10.3 RELEASE OF ESCROW; LIQUIDATED DAMAGES. If this
Agreement is terminated by Seller pursuant to Section 10.1(a)(i) or 10.1(b),
Purchaser and Seller shall jointly instruct the Escrow Agent to disburse the
Escrow Funds to or at the discretion of Seller as and for liquidated damages and
full payment and the exclusive remedy for any damages suffered by Seller by
reason of such event. The parties hereto agree in advance that actual damages
would be difficult to ascertain and that the sum of One Million Four Hundred
Thousand Dollars ($1,400,000) is a fair and equitable amount to reimburse Seller
for damages sustained due to such event. In the event this Agreement is
terminated under any other provision of Section 10.1, Purchaser and Seller shall
jointly instruct the Escrow Agent to disburse the Escrow Funds to or at the
discretion of Purchaser.
ARTICLE XI
INDEMNIFICATION
11.1 CONTINUING EFFECT. All representations and warranties
contained in this Agreement shall survive the Closing for the periods provided
in Sections 6.22 and 7.7 hereof. The covenants contained in Sections 2.2(c),
2.3(c), 5.1, 5.7, 5.10, 11.2, 11.4, 12.1 and 12.2 of this Agreement shall
survive the Closing of the transactions herein contemplated, and shall not be
merged therein. All other covenants contained in this Agreement shall expire at,
and shall not survive, the Closing. Any investigations by or on behalf of any
party hereto shall not constitute a waiver as to the enforcement of any
representation, warranty, or covenant contained herein.
11.2 INDEMNIFICATION BY SELLER. Notwithstanding the Closing,
and regardless of any investigation made at any time by or on behalf of
Purchaser, or any information that Purchaser may have, Seller shall (subject to
the provisions of Section 11.3 hereof) indemnify Purchaser and hold Purchaser
harmless from and against, and shall reimburse Purchaser for,
(a) any and all losses, liabilities, or damages
resulting from any untrue representation, breach of warranty, or nonfulfillment
of any covenant by Seller contained herein or in any certificate, document, or
instrument delivered or to be delivered to Purchaser under this Agreement;
(b) any and all obligations of Seller not included
in the Assumed Contract Obligations;
(c) any and all losses, liabilities, or damages
resulting from Seller's operation or ownership of the Stations and/or the Assets
prior to the Closing Date, including any and all liabilities arising under the
Authorizations or the Assumed Contracts which relate to events occurring prior
to the Closing Date, except to the extent otherwise provided in this Agreement;
and
(d) any and all actions, suits, proceedings, claims,
demands, assessments, judgments, costs, and expenses, including reasonable legal
fees and expenses, incident to any of the foregoing.
11.3 INDEMNIFICATION LIMITATIONS OF SELLER. Seller's
obligation to indemnify Purchaser and
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to hold Purchaser harmless from and against, and to reimburse Purchaser for,
losses, liabilities, damages, obligations, actions, suits, proceedings, claims,
demands, assessments, judgments, costs, and expenses, including reasonable legal
fees and expenses (collectively, "Losses"), pursuant to Section 11.2 hereof,
shall be subject to the following limitations:
(a) Purchaser shall not be entitled to any
indemnification from Seller, unless and until (i) the total value of all of
Purchaser's claims for indemnification for Losses resulting from breaches of
Seller's representations and warranties contained in Sections 6.7, 6.13, and
6.14, as such Sections relate to tangible personal property included in the
Assets, shall have exceeded Twenty-Five Thousand Dollars ($25,000), or (ii) the
total value of all of Purchaser's claims for indemnification by Seller for all
other Losses shall have exceeded Seventy-Five Thousand Dollars ($75,000),
whereupon, in either such case, Seller shall then indemnify Purchaser for all
such claims;
(b) Purchaser shall not be entitled to
indemnification from Seller in excess of the amount of the Purchase Price.
(c) Purchaser shall not be entitled to
indemnification from Seller for any claim based upon an alleged breach of or
default under any representation, warranty, or covenant of Seller that shall
have expired pursuant to Section 6.22 or 11.1 hereof, unless Purchaser shall
have notified Seller in writing of such claim for indemnification prior to such
expiration date.
11.4 INDEMNIFICATION BY PURCHASER. Notwithstanding the
Closing, and regardless of any investigation made at any time by or on behalf of
Seller or any information that Seller may have, Purchaser shall (subject to the
provisions of Section 11.5 hereof) indemnify Seller and hold Seller harmless
from and against, and shall reimburse Seller for:
(a) any and all losses, liabilities, or damages
resulting from any untrue representation, breach of warranty, or nonfulfillment
of any covenant by Purchaser contained herein or in any certificate, document,
or instrument delivered or to be delivered to Seller under this Agreement;
(b) any and all losses, liabilities, or damages
resulting from Purchaser's operation or ownership of the Stations on and after
the Closing Date, including any and all liabilities arising under the
Authorizations or the Assumed Contracts which relate to events occurring on and
after the Closing Date;
(c) any and all actions, suits, proceedings, claims,
demands, assessments, judgments, costs, and expenses, including reasonable legal
fees and expenses, incident to any of the foregoing; and
(d) any Assumed Contract Obligations.
11.5 INDEMNIFICATION LIMITATIONS OF PURCHASER. Purchaser's
obligation to indemnify Seller and to hold Seller harmless from and against, and
to reimburse Seller for, Losses pursuant to Section 11.4 hereof, shall be
subject to the following limitations:
(a) Seller shall not be entitled to any
indemnification from Purchaser, unless and until the total value of all of
Seller's claims for such indemnification by Purchaser shall have exceeded
Seventy-Five Thousand Dollars ($75,000), whereupon Purchaser shall then
indemnify Seller for all such claims;
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(b) Seller shall not be entitled to indemnification
from Purchaser in excess of the amount of the Purchase Price.
(c) Seller shall not be entitled to indemnification
from Purchaser for any claims based upon an alleged breach of or default under
any representation, warranty, or covenant of Purchaser that shall have expired
pursuant to Section 7.7 or 11.1 hereof, unless Seller shall have notified
Purchaser in writing of such claim for indemnification prior to such expiration
date.
11.6 INDEMNIFICATION PROCEDURE. The procedure for
indemnification pursuant to Sections 11.2 and 11.4 hereof shall be as follows:
(a) The party claiming indemnification (the
"Claimant") shall promptly give notice to the party from whom such
indemnification is claimed (the "Indemnifying Party") of any claim, whether
between the parties hereto or brought by a third party against Claimant,
specifying in such notice (i) the factual basis for such claim, and (ii) the
amount of the claim, if known. If the claim relates to an action, suit, or
proceeding filed by a third party against Claimant, such notice shall be given
by Claimant within five (5) days after written notice of such action, suit, or
proceeding was given to Claimant; provided, however, that failure of Claimant to
give such notice within such five day period shall limit Claimant's right to
indemnification hereunder only to the extent the Indemnifying Party's defense of
such claim is actually prejudiced by such delay.
(b) Following receipt of notice from Claimant of a
claim, the Indemnifying Party shall have thirty (30) days in which to make such
investigation of the claim as Indemnifying Party shall deem necessary or
desirable. For the purposes of such investigation, Claimant agrees to make
available to Indemnifying Party and/or to its authorized representative(s) the
information relied upon by Claimant to substantiate the claim. If Claimant and
Indemnifying Party shall have agreed at or prior to the expiration of the said
thirty (30) day period (or any mutually agreed-upon extension thereof) to the
validity and amount of such claim, Indemnifying Party shall immediately pay to
Claimant the amount so agreed upon. If Claimant and Indemnifying Party shall not
have agreed to the validity and amount of such claim within the said thirty (30)
day period (or any mutually agreed-upon extension thereof), Claimant may seek
appropriate legal remedy.
(c) With respect to any claim by a third party as to
which Claimant is entitled to indemnification hereunder, Indemnifying Party
shall have the right at its own expense to participate in or to assume control
of the defense of such claim, and Claimant shall cooperate fully with
Indemnifying Party, subject to reimbursement for actual out-of-pocket expenses
incurred by Claimant as the result of a request to Claimant by Indemnifying.
Party. If Indemnifying Party elects to assume control of the defense of any
third-party claim, Claimant shall have the right to participate in the defense
of such claim at Claimant's own expense; provided, however, that Claimant's
participation shall not interfere with Indemnifying Party's defense of such
claim. If Indemnifying Party does not elect to assume control or otherwise to
participate in the defense of any third-party claim, Indemnifying Party shall be
bound by the results obtained by Claimant with respect to such claim.
(d) If a claim, whether between the parties hereto
or by a third party, shall require immediate action, the parties hereto will
make every effort to reach a decision with respect thereto as expeditiously as
possible.
(e) The indemnification rights provided in Sections
11.2 and 11.4 hereof shall extend to the partners, shareholders, directors,
officers, employees, and representatives of Claimant, although for the purpose
of the procedures set forth in this Section 11.6, any indemnification claims by
such parties shall be made
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by and through Claimant.
11.7 EXCLUSIVE REMEDY. After the Closing, the exclusive
remedy of Seller or Purchaser with respect to any claim of the type described in
Section 11.2 or Section 11.4 shall be a claim for indemnification pursuant to
the terms and conditions of this Article XI.
ARTICLE XII
MISCELLANEOUS
12.1 RESPECTIVE COSTS. Except as otherwise specifically
provided herein, Purchaser on the one hand, and Seller on the other, will each
pay its own costs and expenses (including attorneys' fees, accountants' fees,
and other professional fees and expenses) in connection with the negotiation,
preparation, execution, delivery, and performance of this Agreement and the
consummation of the purchase and sale of the Assets and the other transactions
contemplated by this Agreement.
12.2 BOOKS AND RECORDS. For a period of five (5) years from
the Closing Date, Purchaser will not destroy nor otherwise dispose of any of the
books and records of the Stations acquired by Purchaser hereunder, unless
consented to in advance in writing by Seller, without first offering to
surrender to Seller such books and records or any portion thereof that Purchaser
may intend to destroy or dispose of. Purchaser shall allow Seller's
representatives, attorneys, and accountants access to such books and records,
upon Seller's reasonable request therefor and during Purchaser's normal business
hours, for examination and/or copying.
12.3 ENTIRE UNDERSTANDING. This Agreement, including the
Schedules and Exhibits hereto, and the Escrow Agreement, contain the entire
understanding among the parties hereto with respect to the transactions
contemplated herein and therein, and supersede all negotiations,
representations, warranties, commitments, offers, letters of intent, contracts,
agreements, understandings, and writings not set forth herein or therein. No
waiver and no modification or amendment of any provision of this Agreement shall
be effective, unless specifically made in writing and duly signed by all parties
hereto.
12.4 CONFIDENTIALITY.
(a) Except as necessary for the consummation of the
transactions contemplated by this Agreement, and except as and to the extent
required by law, including disclosure requirements of federal or state
securities laws and rules and regulations of securities markets, each party will
keep confidential any information obtained from any other party in connection
with the transactions contemplated by this Agreement. If this Agreement is
terminated, each party will return to any other party that furnished it with
information in connection with the transactions contemplated by this Agreement
all such information.
(b) No party shall publish any press release or make
any other public announcement concerning this Agreement or the transactions
contemplated hereby without the prior written consent of each other party, which
shall not be withheld unreasonably; provided, however, that nothing contained in
this Agreement shall prevent any party, after notification to each other party,
from making any filings with governmental authorities that, in its judgment, may
be required or advisable in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby. Purchaser
acknowledges and agrees that ValueVision is required by law to disclose the
terms of this transaction in a press release and a Form 8-K to be filed with the
Securities and Exchange Commission, which Form 8-K will contain a copy of this
Agreement as an exhibit thereto.
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12.5 HEADINGS. The Article headings contained herein are for
convenience and for reference purposes only, and shall not in any way affect the
meaning or interpretation of this Agreement.
12.6 COUNTERPARTS. This Agreement may be executed in one (1)
or more counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one (1) and the same instrument.
12.7 CHOICE OF LAW. This Agreement shall be governed by, and
shall be construed in accordance with, the internal laws of the State of New
York governing contracts made and to be performed entirely within such State,
without reference to any choice-of-law principles of the laws of such State. If
any provision herein shall be held to be invalid or unenforceable by any court
of competent jurisdiction or as a result of future legislative or administrative
action, such holding or action shall be strictly construed and shall not affect
the validity or the enforceability of any other provision herein.
12.8 BENEFIT AND BIDDING EFFECT. This Agreement shall be
binding upon, and shall insure to the benefit of, the successors and permitted
assigns of the parties hereto. No party may assign any of its rights, interests
or obligations under this Agreement without the prior written consent of the
other party hereto, which consent shall not be unreasonably withheld,
conditioned, or delayed, or except that (i) without the consent of Seller,
Purchaser may assign its rights, interests and obligations under this Agreement
to any entity more than 50% of the equity of which is owned, directly or
indirectly, by Harry J. Pappas (a "Pappas Entity"), and (ii) without the consent
of Purchaser, Seller may assign its rights, interests and obligations under this
Agreement to ValueVision International, Inc. ("ValueVision") in connection with
the assignment of all its assets and liabilities to ValueVision. Notwithstanding
the foregoing, no assignment by Seller or Purchaser shall be permitted after the
applications requesting FCC Consent to the transactions contemplated herein have
been filed with the FCC if such an assignment would result in a situation in
which a new file number will be assigned to any such application under 47 C.F.R.
ss. 73.3572. If Seller assigns all its assets to ValueVision and, in connection
therewith, ValueVision assumes all obligations and liabilities of Seller under
this Agreement, Purchaser and Seller agree to amend this Agreement so as to
eliminate Seller as a party hereto and to reflect the assumption by ValueVision
of all obligations and liabilities of Seller under this Agreement. If Purchaser
assigns its rights, interests and obligations under this Agreement to a Pappas
Entity, Seller and Purchaser agree to amend the Agreement so as to eliminate
Purchaser as a party hereto and to reflect the assumption by the Pappas Entity
of all obligations and liabilities of Purchaser under this Agreement.
12.9 NOTICES. (a) All notices, requests, demands, and other
communications under this Agreement shall be in writing and shall be delivered
in person or sent by overnight private commercial delivery service or by
certified or registered United States mail, postage prepaid, and addressed as
follows:
to Seller:
KVVV Baytown, Inc.
6740 Shady Oak Road
Eden Prairie, MN
Attention: David T. Quinby, Esq.
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with copies to (which shall not constitute notice to Seller):
Wilmer Cutler & Pickering
2445 M Street, NW
Washington, DC 20037-1420
Attention: Carolyn Cox, Esq.
to Purchaser:
Pappas Telecasting of Houston, a California Limited Partnership
500 South Chinowth Road
Visalia, California 93277
Attention: Mr. Harry J. Pappas
with copies to (which shall not constitute notice to Purchaser):
Paul, Hastings, Janofsky & Walker LLP
1299 Pennsylvania Avenue, N.W.
10th Floor
Washington, DC 20004
Attention: David D. Burns, Esq.
All notices and other communications required or permitted under this Agreement
which are addressed as provided in this Section 12.9, shall be effective upon
such delivery.
(b) Either party may from time to time change its
address for the purpose of the giving of notices to that party, by giving to the
other party a notice specifying a new address in compliance with the provisions
of this Section 12.9.
12.10 VALUEVISION'S COVENANT. ValueVision agrees to cause
Seller to perform each of Seller's covenants and agreements contained in this
Agreement, and further agrees that ValueVision shall be liable to the same
extent as Seller for any non-performance of Seller's covenants and agreements
contained in this Agreement. ValueVision also agrees to use commercially
reasonable efforts to obtain the Material Consents of any third parties required
for the assignment to Purchaser of Material Contracts set forth on Schedule
1.1(c) to which ValueVision is a party and, assuming such Material Consents are
obtained, shall assign such Material Contracts to Purchaser at Closing.
Notwithstanding the foregoing, ValueVision shall have no obligation to expend
funds in order to obtain the Material Consents or to agree to any material
adverse change in any Material Contract in order to obtain the Material
Consents.
12.11 SPECIFIC PERFORMANCE. Each of Purchaser and Seller
acknowledges and agrees that Purchaser would be damaged irreparably in the event
Seller fails to transfer the Assets to Purchaser upon satisfaction of the
conditions set forth in Section 9.1 of this Agreement. Accordingly, Purchaser
and Seller agree that Purchaser shall be entitled to enforce specifically the
provisions of Section 1.1 of this Agreement and the terms and provisions hereof,
upon satisfaction of the conditions set forth in Section 9.1.
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IN WITNESS WHEREOF, the parties hereto have caused their hands
and seals to be affixed herein below on the date and year first above written.
KVVV BAYTOWN, INC.
By: /s/ Gene McCaffery
---------------------------------
Name: Gene McCaffery
Title: Chief Executive Officer
VVILPTV, INC.
By: /s/ Gene McCaffery
---------------------------------
Name: Gene McCaffery
Title: Chief Executive Officer
PAPPAS TELECASTING OF HOUSTON, A
CALIFORNIA LIMITED PARTNERSHIP
By: /s/ Harry J. Pappas
----------------------------------
Name: Harry J. Pappas
Title: General Partner
AS TO SECTIONS 4.4, 4.5, AND 12.10 ONLY,
VALUEVISION INTERNATIONAL, INC.
By: /s/ Gene McCaffery
--------------------------------------
Name: Gene McCaffery
Title: Chief Executive Officer
30
