September 24, 2004
Dr. Christopher M. Thomforde, President
St. Olaf College
1520 St. Olaf Avenue
Northfield, MN 55057
Dear President Thomforde:
The proposed sale of WCAL has deeply troubled me since it first was announced. Today I have reviewed the sale purchase agreement. Unfortunately, even a casual reading reveals flaws and omissions that may harm the college in the short and long term. I might have hoped for more prudent and precise terms even though this sale is one that I do not value.
My remarks are only based on the Purchase Agreement itself, and not any attached schedules referred to by the agreement. The two broad issues I will focus upon are the improvidently or poorly crafted transfer of tangible assets and the vulnerability of current and future endowments or bequests. These comments are based only on my experience with other contract negotiations and not on training in the law.
Let me quote, with emphasis, the first Article of the Purchase Agreement, because it contains terms that are critical to understanding the whole document and my comments about it.
Article 1: Sale and Purchase, Section 1.1 Station Assets. ……Buyer shall purchase and acquire from Seller, all right, title and interest of Seller in and to all assets, properties, interest and rights of Seller, real and personal, tangible and intangible, that are used or held for use in the operation of the Stations, except the Excluded Assets … including without limitation the following.
Tangible assets: Sale of the Skifter Building (Radio Studio)
(c) All of Seller's real property used or held for use in the operation of the Stations … including without limitation those listed on Schedule 1.1(c)
The Skifter building is not included as one of the excluded assets, but it certainly is a real property used in the operation of WCAL. I would be even more shocked and surprised if you intend for the Radio Building to be transferred, however the terms of Article 1 are so broadly drafted that the station building itself becomes included. If a later contentious relationship evolves between buyer and seller, the words of the agreement will prevail over the unexpressed intentions of either party. A precisely crafted agreement would not have permitted even the appearance that buildings, which are assets of St. Olaf, are being sold.
If title and interest in the Skifter Building is to remain with St. Olaf, then the agreement needs to be renegotiated to exclude the building (and certainly any other campus buildings or grounds that WCAL used for operations that you do not intend to sell).
Tangible assets: Sale of Dobson Organ, Studio A
(b) Seller's…furniture, fixtures, spare parts and other tangible personal property used or held for use in the operation of the Stations
Again, because of the inclusive "all assets…without limitation" terms of Article one, valuable properties used within the WCAL studios are subject also to the sale unless they are excluded. Among these is the mechanical tracker organ located in Studio A, where it is eminently useful for recital or religious broadcasts. Since an item as large as a pipe organ is almost as hard to miss as the building that contains it, and since both were overlooked, clearly the Skifter building needs to be revisited and inventoried. St. Olaf needs to make sure that any other fixtures, contents, artistic creations, instruments or historical assets are protected from unintended loss. Even decorative wood carvings should be in the Studio A "mission house' should be itemized and also excluded if they yet remain.
Tangible assets: Sale of the WCAL Audio Library
1.2 Excluded Assets (iii) any duplicate CDs in the Station's commercial music library
I am taken aback that the historical collection of audio materials used by WCAL would be sold without consideration for the College's own musical library. This is not merely an oversight of draftsmanship; it is a failure to appreciate and sustain an essential academic mission within the college. Your librarians most surely would prefer that this entire transaction not happen, but failing that, the Halvorson Music Library should be the first beneficiary of any dispersal of the distinguished WCAL audio collections.
(Here is another example of amusingly poor legal craftsmanship, because it simply excludes from the sale any CDs of which there are two, or perhaps more than two, copies in the commercial music library. When the intent of simple terms in a complex contract fails to be clear, then the competence of the whole agreement becomes suspect)
Tangible assets: ""St. Olaf Christmas Festival""
The purchase agreement is silent regarding ownership of rights related to broadcast production of the St. Olaf Christmas Festival, however it explicitly provides as an excluded asset:
(ii) "Sing for Joy" and all intangible property, music, and programming material associate therewith
As it was with WCAL itself, the annual St. Olaf Christmas Festival is a jewel of the college that, like "Sing for Joy" is a broadcast production of WCAL. If ownership of any aspect of the Christmas Festival, the production, or the media distribution is being sold to the Buyer, then it should be stated explicitly. If ownership is not being sold then the agreement should be just as clear as it is for the "Sing for Joy". It is dangerous draftsmanship to include the one, without mentioning the similar other, because silence can later be interpreted later as inclusion of the Festival rights or properties as among the assets sold to the buyer.
Financial assets: Existing WCAL endowments
Let me review, for emphasis, Article I of the purchase agreement, where the words "all assets, properties, interests, and rights…used or held for use in the operation of the stations" are printed in bold. I am concerned for a vulnerability to college endowment funds that is now opened by this sale.
Surely for as long as WCAL has been a listener supported station, donations, and bequests in support of long-term broadcasting have been solicited. I assume that proper accounting of the long term donations into separate endowment funds for the station has been maintained, that income has used to operate the service, while the funds have also been held and grown through prudent investment. I further assume records of the specific bequests have been retained.
These investments are now subject to the terms of the purchase agreement though the agreement itself seems to almost avoid this topic. I say "seems" because there is provision for "membership contributions" received after closing that would become property of the Buyer. It strains me to think that bequests and planned giving are meant to be included by the terms "membership contributions" . However these are investment assets used or held for use in station operation.
Some of these assets were formed from bequests and donations, given in gratitude and hope, which were unrestricted; others were certainly "conditional", being given to support a chosen aspect of the WCAL services. Conditional bequests are troublesome depending upon how clearly their givers expressed their intentions and the flexibility they offered St. Olaf for changed circumstances. The actual wording of the written wills may be ambiguous whether the gift is to WCAL, a station, or St. Olaf, a college.
This purchase agreement needs to clearly account for how existing endowments are reviewed and, where necessary, transferred to the buyer. To clarify this, let me make an example of a hypothetical probated will: "I bequeath $100,000 to WCAL to be used for broadcasting classical music programming." This language is fairly clear and inflexible. I pose these questions: If the buyer continues a WCAL station with classical music programming, should not the current investment value of this bequest honorably be transferred to the buyer? Does the purchase price include consideration of accepted bequests that the colleges can no longer honor?
Similar existing bequests may contain terms that now or eventually neither the buyer nor the seller can fulfill. These should become clear during the due diligence review that both parties should be conducting. My speculation is that St. Olaf will need to petition a court to determine a proper disposition for conditional bequests that it cannot honor following the sale of WCAL.
Financial assets: Future WCAL bequests
As a practical matter, my wife and I must now go to our attorney and change our will, which had a sizeable bequest for WCAL." This is a paraphrase of a recently given public reaction to this proposed sale. Until hearing that statement, I had not much thought about the agonizing side effects to supportive households that this business transaction creates.
Other wills may remain unchanged and problematic. Buyer and Seller should put in place an understanding of how all future WCAL bequests will be honored, respecting both the intentions and hopes of the donors, the requirements of law, and the transfer of ownership. It is regrettable that gifts may come from individuals who now are no longer competent to make the changes that an informed donor would make if ownership of WCAL by St. Olaf ends. Consequently, dealing with wills, probate courts, and potentially contested wills where gifts are made to a WCAL station not owned by St. Olaf, needs to be prudently foreseen.
There are many other aspects of the sale that are unsettling to me, and as time permits I will try to make them known to you, other college officers, and the Board of Regents. I hope these comments inform you to the point of realizing that flaws and omissions pervade the purchase agreement. If so, you will need time to negotiate a more favorable outcome. I write hoping that can be achieved even to the point of maintaining WCAL as a service of St. Olaf College.
Sincerely
Philip Voxland ‘'66
Cc (St. Olaf College):
Board of Regents
Alan Norton, Treasurer
Anton Armstrong, Professor of Music
John Gaddo, WCAL Station Manager
Beth Christensen, Music Librarian
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Letter: Analysis of WCAL purchase agreement shows frightening lack of details
Friday, September 24 2004 · 0 comments
in commentary
September 24, 2004
Dr. Christopher M. Thomforde, President
St. Olaf College
1520 St. Olaf Avenue
Northfield, MN 55057
Dear President Thomforde:
The proposed sale of WCAL has deeply troubled me since it first was announced. Today I have reviewed the sale purchase agreement. Unfortunately, even a casual reading reveals flaws and omissions that may harm the college in the short and long term. I might have hoped for more prudent and precise terms even though this sale is one that I do not value.
My remarks are only based on the Purchase Agreement itself, and not any attached schedules referred to by the agreement. The two broad issues I will focus upon are the improvidently or poorly crafted transfer of tangible assets and the vulnerability of current and future endowments or bequests. These comments are based only on my experience with other contract negotiations and not on training in the law.
Let me quote, with emphasis, the first Article of the Purchase Agreement, because it contains terms that are critical to understanding the whole document and my comments about it.
Article 1: Sale and Purchase, Section 1.1 Station Assets. ……Buyer shall purchase and acquire from Seller, all right, title and interest of Seller in and to all assets, properties, interest and rights of Seller, real and personal, tangible and intangible, that are used or held for use in the operation of the Stations, except the Excluded Assets … including without limitation the following.
Tangible assets: Sale of the Skifter Building (Radio Studio)
(c) All of Seller's real property used or held for use in the operation of the Stations … including without limitation those listed on Schedule 1.1(c)
The Skifter building is not included as one of the excluded assets, but it certainly is a real property used in the operation of WCAL. I would be even more shocked and surprised if you intend for the Radio Building to be transferred, however the terms of Article 1 are so broadly drafted that the station building itself becomes included. If a later contentious relationship evolves between buyer and seller, the words of the agreement will prevail over the unexpressed intentions of either party. A precisely crafted agreement would not have permitted even the appearance that buildings, which are assets of St. Olaf, are being sold.
If title and interest in the Skifter Building is to remain with St. Olaf, then the agreement needs to be renegotiated to exclude the building (and certainly any other campus buildings or grounds that WCAL used for operations that you do not intend to sell).
Tangible assets: Sale of Dobson Organ, Studio A
(b) Seller's…furniture, fixtures, spare parts and other tangible personal property used or held for use in the operation of the Stations
Again, because of the inclusive "all assets…without limitation" terms of Article one, valuable properties used within the WCAL studios are subject also to the sale unless they are excluded. Among these is the mechanical tracker organ located in Studio A, where it is eminently useful for recital or religious broadcasts. Since an item as large as a pipe organ is almost as hard to miss as the building that contains it, and since both were overlooked, clearly the Skifter building needs to be revisited and inventoried. St. Olaf needs to make sure that any other fixtures, contents, artistic creations, instruments or historical assets are protected from unintended loss. Even decorative wood carvings should be in the Studio A "mission house' should be itemized and also excluded if they yet remain.
Tangible assets: Sale of the WCAL Audio Library
1.2 Excluded Assets (iii) any duplicate CDs in the Station's commercial music library
I am taken aback that the historical collection of audio materials used by WCAL would be sold without consideration for the College's own musical library. This is not merely an oversight of draftsmanship; it is a failure to appreciate and sustain an essential academic mission within the college. Your librarians most surely would prefer that this entire transaction not happen, but failing that, the Halvorson Music Library should be the first beneficiary of any dispersal of the distinguished WCAL audio collections.
(Here is another example of amusingly poor legal craftsmanship, because it simply excludes from the sale any CDs of which there are two, or perhaps more than two, copies in the commercial music library. When the intent of simple terms in a complex contract fails to be clear, then the competence of the whole agreement becomes suspect)
Tangible assets: ""St. Olaf Christmas Festival""
The purchase agreement is silent regarding ownership of rights related to broadcast production of the St. Olaf Christmas Festival, however it explicitly provides as an excluded asset:
(ii) "Sing for Joy" and all intangible property, music, and programming material associate therewith
As it was with WCAL itself, the annual St. Olaf Christmas Festival is a jewel of the college that, like "Sing for Joy" is a broadcast production of WCAL. If ownership of any aspect of the Christmas Festival, the production, or the media distribution is being sold to the Buyer, then it should be stated explicitly. If ownership is not being sold then the agreement should be just as clear as it is for the "Sing for Joy". It is dangerous draftsmanship to include the one, without mentioning the similar other, because silence can later be interpreted later as inclusion of the Festival rights or properties as among the assets sold to the buyer.
Financial assets: Existing WCAL endowments
Let me review, for emphasis, Article I of the purchase agreement, where the words "all assets, properties, interests, and rights…used or held for use in the operation of the stations" are printed in bold. I am concerned for a vulnerability to college endowment funds that is now opened by this sale.
Surely for as long as WCAL has been a listener supported station, donations, and bequests in support of long-term broadcasting have been solicited. I assume that proper accounting of the long term donations into separate endowment funds for the station has been maintained, that income has used to operate the service, while the funds have also been held and grown through prudent investment. I further assume records of the specific bequests have been retained.
These investments are now subject to the terms of the purchase agreement though the agreement itself seems to almost avoid this topic. I say "seems" because there is provision for "membership contributions" received after closing that would become property of the Buyer. It strains me to think that bequests and planned giving are meant to be included by the terms "membership contributions" . However these are investment assets used or held for use in station operation.
Some of these assets were formed from bequests and donations, given in gratitude and hope, which were unrestricted; others were certainly "conditional", being given to support a chosen aspect of the WCAL services. Conditional bequests are troublesome depending upon how clearly their givers expressed their intentions and the flexibility they offered St. Olaf for changed circumstances. The actual wording of the written wills may be ambiguous whether the gift is to WCAL, a station, or St. Olaf, a college.
This purchase agreement needs to clearly account for how existing endowments are reviewed and, where necessary, transferred to the buyer. To clarify this, let me make an example of a hypothetical probated will: "I bequeath $100,000 to WCAL to be used for broadcasting classical music programming." This language is fairly clear and inflexible. I pose these questions: If the buyer continues a WCAL station with classical music programming, should not the current investment value of this bequest honorably be transferred to the buyer? Does the purchase price include consideration of accepted bequests that the colleges can no longer honor?
Similar existing bequests may contain terms that now or eventually neither the buyer nor the seller can fulfill. These should become clear during the due diligence review that both parties should be conducting. My speculation is that St. Olaf will need to petition a court to determine a proper disposition for conditional bequests that it cannot honor following the sale of WCAL.
Financial assets: Future WCAL bequests
As a practical matter, my wife and I must now go to our attorney and change our will, which had a sizeable bequest for WCAL." This is a paraphrase of a recently given public reaction to this proposed sale. Until hearing that statement, I had not much thought about the agonizing side effects to supportive households that this business transaction creates.
Other wills may remain unchanged and problematic. Buyer and Seller should put in place an understanding of how all future WCAL bequests will be honored, respecting both the intentions and hopes of the donors, the requirements of law, and the transfer of ownership. It is regrettable that gifts may come from individuals who now are no longer competent to make the changes that an informed donor would make if ownership of WCAL by St. Olaf ends. Consequently, dealing with wills, probate courts, and potentially contested wills where gifts are made to a WCAL station not owned by St. Olaf, needs to be prudently foreseen.
There are many other aspects of the sale that are unsettling to me, and as time permits I will try to make them known to you, other college officers, and the Board of Regents. I hope these comments inform you to the point of realizing that flaws and omissions pervade the purchase agreement. If so, you will need time to negotiate a more favorable outcome. I write hoping that can be achieved even to the point of maintaining WCAL as a service of St. Olaf College.
Sincerely
Philip Voxland ‘'66
Cc (St. Olaf College):
Board of Regents
Alan Norton, Treasurer
Anton Armstrong, Professor of Music
John Gaddo, WCAL Station Manager
Beth Christensen, Music Librarian
Related Posts: