<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
COMMISSION FILE NUMBER: 333-09529
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BENEDEK COMMUNICATIONS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 36-4076007
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
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100 PARK AVENUE
ROCKFORD, ILLINOIS 61101
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (815) 987-5350
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED:
NONE NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _____
100% of the voting common stock of Benedek Communications Corporation is
owned by affiliates.
Indicate the number of shares outstanding of each of Benedek Communications
Corporation's classes of common stock, as of the latest practicable date: At
March 29, 2000, there were outstanding 7,400,000 shares of Class B common stock,
$0.01 par value, and no shares of Class A common stock, $0.01 par value.
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<PAGE>
BENEDEK COMMUNICATIONS CORPORATION
INDEX TO FORM 10-K
<TABLE>
<CAPTION>
ITEM
NUMBER PAGE
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PART I
<S> <C> <C> <C>
Item 1. Business........................................................................ 1
Item 2. Properties...................................................................... 17
Item 3. Legal Proceedings............................................................... 19
Item 4. Submission of Matters to a Vote of Security Holders............................. 19
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters........... 20
Item 6. Selected Consolidated Financial Data............................................ 20
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations...................................................................... 22
Item 7A. Quantitative and Qualitative Disclosures About Market Risk...................... 31
Item 8. Financial Statements and Supplementary Data..................................... 31
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure........................................................ 31
PART III
Item 10. Directors and Executive Officers of the Company................................. 32
Item 11. Executive Compensation.......................................................... 34
Item 12. Security Ownership of Certain Beneficial Owners and Management.................. 37
Item 13. Certain Relationships and Related Transactions.................................. 37
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K................. 39
Signatures............................................................................................ 43
</TABLE>
<PAGE>
PART I
ITEM 1. BUSINESS.
This Annual Report on Form 10-K contains forward-looking statements that
involve risks and uncertainties. Wherever possible, Benedek Communications
Corporation (the "Company") has identified these forward looking statements by
words such as "anticipates," "believes," "estimates," "expects" and similar
expressions. Actual results could differ materially from those anticipated in
these forward-looking statements as a result of certain factors, including
changes in national and regional economies, competition in the television
business, pricing fluctuations in local and national advertising, program
ratings and changes in programming costs, among other factors. The Company
assumes no obligation to update publicly any forward looking statements, whether
as a result of new information, future events or otherwise. Discussions
containing such forward looking statements may be found in the materials set
forth under "Item 1. Business," "Item 3. Legal Proceedings" and "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained herein.
Except as otherwise provided, the financial data set forth below is derived
from the historical consolidated financial statements of the Company, prepared
in accordance with generally accepted accounting principles. The Company is a
holding company with minimal separate operations from its operating subsidiary,
Benedek Broadcasting Corporation ("Benedek Broadcasting"). Such historical
financial data includes the results of operations of KKTV which was operated
under a time brokerage agreement (a "TBA") with the Ackerley Group, Inc. from
January 1, 1999 until the Company's acquisition of KKTV on May 1, 1999, net of
the fees associated with such TBA. The historical financial data also includes
the limited operating results and TBA fee revenue of KCOY-TV which was being
operated by the Ackerley Group, Inc. under a TBA from January 1, 1999 until the
Ackerley Group, Inc's acquisition of KCOY-TV on May 1, 1999. KCOY-TV was
exchanged for KKTV in a transaction which closed on May 1, 1999.
As used herein, "Same Station" data refers to the historical results of
operations of all 23 television stations currently operated by the Company as if
such stations were owned by the Company throughout the periods indicated with
pro forma adjustments only for depreciation and amortization and TBA fees and
revenue. Same Station information excludes the results of Benedek Cable, Inc., a
nonrecourse subsidiary. Same Station information does not purport to represent
what the Company's results of operations would have been if such transactions
had been effected at the beginning of such periods and does not purport to
project results of operations of the Company in any future period.
Broadcast cash flow is defined as operating income, excluding net income of
nonrecourse subsidiaries, before financial income as derived from the
consolidated statements of operations plus depreciation and amortization,
amortization of program broadcast rights, corporate expenses and noncash
compensation less payments for program broadcast liabilities and net gain on
sale of stations. The Company has included broadcast cash flow data because (i)
the information is a measurement utilized by lenders to measure the Company's
ability to service its debt and pay for capital expenditures, (ii) the
information is a measurement utilized by industry analysts to determine a market
value of the Company's television stations and (iii) the information is a
measurement industry analysts utilize when evaluating and comparing the
operating performance of the Company. Broadcast cash flow does not purport to
represent cash provided by operating activities as reflected in the Company's
Consolidated Financial Statements, is not a measure of financial performance
under generally accepted accounting principles and should not be considered in
isolation or as a substitute for measures of performance prepared in accordance
with generally accepted accounting principles. Broadcast cash flow is also not
reflected in the Company's consolidated statements of cash flows; but it is a
common and meaningful
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<PAGE>
measure for comparison to other companies in the broadcast industry. The amounts
excluded from broadcast cash flow are significant components in understanding
and assessing the Company's results of operations and cash flows. The term
"broadcast cash flow" may not be the same terminology utilized by other
companies in the presentation of similar information.
Adjusted EBITDA is defined as operating income, excluding net income of
nonrecourse subsidiaries, before financial income as derived from the
consolidated statements of operations plus depreciation and amortization,
amortization of program broadcast rights and noncash compensation less payments
for program broadcast liabilities and net gain on sale of stations. The Company
has included Adjusted EBITDA data because (i) the information is a measurement
utilized by lenders to measure the Company's ability to service its debt and pay
for capital expenditures, (ii) the information is a measurement utilized by
industry analysts to determine a private market value of the Company's
television stations and (iii) the information is a measurement industry analysts
utilize when evaluating and comparing the operating performance of the Company.
Adjusted EBITDA does not purport to represent cash provided by operating
activities as reflected in the Company's Consolidated Financial Statements, is
not a measure of financial performance under generally accepted accounting
principles and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with generally accepted
accounting principles. Adjusted EBITDA is also not reflected in the Company's
consolidated statements of cash flows; but it is a common and meaningful measure
for comparison to other companies in the broadcast industry. The amounts
excluded from Adjusted EBITDA are significant components in understanding and
assessing the Company's results of operations and cash flows. The term "Adjusted
EBITDA" may not be the same terminology utilized by other companies in the
presentation of similar information.
The Company believes that Adjusted EBITDA and broadcast cash flow
information discussed below provide meaningful information as to the performance
of the television stations owned by the Company, particularly information that
is presented on a Same Station basis. Changes from year to year indicate how the
Company has performed in its efforts to increase net sales and manage expenses
on an operating basis.
GENERAL
The Company owns 23 network-affiliated television stations (the "Stations")
in the United States. The Stations are diverse in geographic and network
affiliation, serve small to medium-sized markets and, in the aggregate, reach
communities in 24 states. Twelve of the Stations are affiliated with CBS, six
are affiliated with ABC, four are affiliated with NBC, and one is affiliated
with Fox.
The Stations are located in markets ranked in size from 85 to 199 out of
the 210 markets surveyed by A. C. Nielsen Company ("Nielsen"). The Company's
broadcast signals reach approximately 3.4 million households, representing more
than 3.4% of all television households in the United States and more than 20.0%
of all television households in the markets above 100. The Company believes that
broadcast television stations in small to medium-sized markets offer an
opportunity to generate attractive and stable Adjusted EBITDA due to limited
competition for viewers from other over-the-air broadcasters, from other media
soliciting advertising expenditures and from other broadcasters purchasing
syndicated programming. The Company targets small and medium-sized markets that
have stable employment and population and a diverse base of employers. The
markets targeted by the Company generally have population centers that share
common community interests and are receptive to local programming. The Company
believes that network affiliations with one of the four established networks
provide each of its Stations an established audience and reputation for national
news, sports and entertainment programming. With the established audiences
provided by network affiliations, management seeks to enhance the ratings of its
local news and non-network programming and increase revenues while maintaining
strict cost control.
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On December 30, 1998, the Company entered into an Asset Exchange Agreement
with the Ackerley Group, Inc. ("Ackerley") pursuant to which it agreed to
exchange the television broadcast assets of KCOY-TV, Santa Maria, California
owned by the Company for the television broadcast assets of KKTV, Colorado
Springs-Pueblo, Colorado owned by Ackerley. Both KCOY-TV and KKTV are CBS
affiliates. The exchange was completed on May 1, 1999 at which time the Company
paid $9.0 million to Ackerley as further consideration in accordance with the
agreement. The transaction was structured, to the extent feasible, as a tax-free
exchange pursuant to Section 1031 of the Internal Revenue Code. The exchange was
recorded as a separate sale and acquisition, with the acquisition of KKTV
recorded under the purchase method of accounting. The total purchase price for
KKTV was $33.6 million which consisted of the fair market value of KCOY-TV of
$24.3 million, cash payment of $9.0 million, and fees of $0.3 million. The
purchase price was allocated to fixed assets in the amount of $6.2 million and
intangibles in the amount of $27.4 million. A gain in the amount of $13.3
million was recorded to reflect the sale of KCOY-TV which consisted of the fair
market value of the KCOY-TV assets of $24.3 million less their book value of
$10.8 million and fees associated with the transaction. In addition, the parties
entered into a time brokerage agreement for each station, in effect from January
1, 1999 through April 30, 1999. During the time brokerage period, the revenues
and expenses of each station went to the account of the acquirer of such
station, net of applicable time brokerage fees. The net time brokerage fee
expense was $0.5 million for the year ended 1999.
During September 1999, a loss in the amount of approximately $0.2 million
was recorded to reflect the sale of KTVS-TV, Sterling, Colorado which was a
satellite operation of KGWN-TV, the Company's station in Cheyenne, Wyoming. The
Company sold KTVS-TV to UPN. KTVS-TV is part of the Denver market.
During October 1998, the Company transferred WMTV-TV, the Company's station
in Madison, Wisconsin to a trust (the "WMTV Trust") due to the Grade A broadcast
signal overlap between WMTV-TV and WIFR-TV, the Company's station in Rockford,
Illinois. Under the trust arrangement, the Company relinquished control of
WMTV-TV to a trustee while retaining the economic risks and benefits of
ownership. On August 5, 1999, the Federal Communications Commission (the "FCC")
approved new duopoly rules which enabled the Company to own both WMTV-TV and
WIFR-TV, and as a result the WMTV Trust was dissolved on February 29, 2000 and
all assets and liabilities were transferred to Benedek Broadcasting.
STRATEGY
The Company's senior management team, led by A. Richard Benedek, Chairman
and Chief Executive Officer, and K. James Yager, President and Chief Operating
Officer, has extensive experience in acquiring and improving the operations of
television stations. Management's primary operating strategy is to maximize each
Station's advertising revenue through the production of local news, information
and community-oriented programming that has broad audience appeal and
value-added sales potential, while maintaining strict cost controls. Key
elements of management's strategy include:
LOCAL NEWS LEADERSHIP AND LOCAL PROGRAMMING. Management believes that local
news and informational programming leadership contributes to higher ratings and,
therefore, increased advertising revenues. Management's emphasis on local and
ongoing community involvement allows the Stations to maximize the advertising
rates they can charge local, regional and national accounts, not only for news,
but for network and nationally-syndicated programming which the Stations
broadcast in time periods adjacent to regularly scheduled local newscasts and
local news specials.
The Company has focused on maintaining and building each Station's local
news franchise as the key element in its strategy to build and maintain audience
loyalty. Management believes that strong, well-differentiated local news
programming attracts high viewership levels, particularly of demographic groups
that are appealing to both local and national advertisers, thereby allowing the
Company to maximize advertising rates.
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<PAGE>
Management of the Company believes that television stations with a
prominent local identity and active community involvement can realize additional
revenues from local advertisers through the development and sale of special
promotional programming. The Stations have developed high-quality programming
which highlights community events and topics of local interest. The Stations
also sell promotional advertising packages tied to various local events such as
youth expos, county fairs, parades, athletic events and other local activities.
These local programs have proven successful in attracting incremental
advertising revenues and are a core element of each Station's local identity.
SYNDICATED PROGRAMMING. The Company selectively purchases first run and
off-network syndicated programming designed to reach specific demographic groups
attractive to advertisers. Currently, the four most highly-rated syndicated
programs are "Wheel of Fortune," "Jeopardy," "Judge Judy" and "The Oprah Winfrey
Show." The Company broadcasts "Wheel of Fortune" on 15 of the Stations,
"Jeopardy" on 11 of the Stations, "Judge Judy" on six of the stations, and "The
Oprah Winfrey Show" on nine of the Stations. Additionally, the Company
broadcasts other highly-rated first run syndicated programs on several of the
Stations including "Live with Regis & Kathie Lee," "The Rosie O'Donnell Show"
and "Hollywood Squares." A number of the Stations also broadcast other
highly-rated off-network syndicated programs including "Home Improvement,"
"Frasier," "Mad About You" and "Seinfeld."
The Company seeks to acquire programs that are available on a
cost-effective basis for limited licensing periods, allow scheduling
flexibility, complement each Station's overall programming mix and counter
competitive programming. The Company has been able to purchase syndicated
programming at attractive rates in part as a result of the limited competition
for such programming in the Company's markets. As a result of the limited
competition from other broadcasters for purchasing syndicated programming in the
small and medium-sized markets served by the Company, cash program expense as a
percentage of net revenues for the Stations was 4.7%, 4.6% and 5.3% in 1997,
1998 and 1999, respectively, as compared to approximately 7.4% for all
network-affiliated stations in 1998.
LOCAL SALES EMPHASIS. Management's sales strategy focuses on increasing the
sale of local advertising by attracting new advertisers to television and
increasing the amount of advertising dollars being spent by existing local
advertisers. Management of the Company believes that its leadership in local
news and informational programming enhances its ability to develop and attract
local advertising expenditures. Management believes that through local sales
efforts it can stimulate local advertising expenditures more readily than it can
national advertising expenditures. This enables the Company to react promptly to
changes in the national and local advertising climate and better maintain
consistent Adjusted EBITDA.
Trained and experienced sales personnel sell local advertising for the
Company in each of its markets. The Company focuses on local advertisers by
producing their commercials, producing news and informational programming with
local advertising appeal and sponsoring or co-promoting local events and
activities that give local advertisers unique value-added community identity.
Approximately 57.0% of the Company's gross revenues in 1999 were generated from
local and regional advertisers.
FINANCIAL PLANNING AND CONTROLS. Management emphasizes strict control of
the Company's programming and operating costs as an important factor in
increasing broadcast cash flow. The Company continually seeks to identify and
implement cost savings opportunities. Management of the Company believes that
controlling costs is an essential factor in achieving and maintaining
profitability. The Company intends to continue to identify opportunities to
increase Adjusted EBITDA through its ongoing strategic planning and budgeting
process.
FUTURE ACQUISITIONS AND OPPORTUNITIES. The Company has a long-term strategy
to pursue additional acquisitions of broadcast television stations, primarily of
network-affiliated stations in medium-sized markets where the Company believes
it can successfully implement its operating strategy and where such stations can
be acquired on financially acceptable terms.
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<PAGE>
On November 19, 1999, the Company entered into an Asset Purchase Agreement
with The Chronicle Publishing Company ("Chronicle") and on December 10, 1999,
the Company entered into an Asset Exchange Agreement with WGRC, Inc. ("WGRC").
Pursuant to these agreements, WGRC will acquire the television broadcast assets
of WOWT-TV and KAKE-TV, Chronicle's television stations in Omaha, Nebraska and
Wichita, Kansas, respectively, and then immediately transfer the same to the
Company in exchange for the television broadcast assets of WWLP-TV, the
Company's station in Springfield, Massachusetts. The proposed transaction will
include an $18.0 million payment by the Company to WGRC. At December 31, 1999,
the Company had deposited $10.0 million in an escrow account related to this
transaction. The remaining $8.0 million will be funded from the proceeds related
to the sale of KOSA-TV discussed below. The transaction will be structured, to
the extent feasible, as a tax-free exchange pursuant to Section 1031 of the
Internal Revenue Code and recorded under the purchase method of accounting. The
transaction has been approved by the FCC and is expected to close in the first
quarter of 2000.
On December 15, 1999, the Company entered into an Asset Purchase Agreement
with ICA Broadcasting I, Ltd. ("ICA") pursuant to which the Company would sell
the television broadcast assets of KOSA-TV, in Odessa, Texas to ICA for a cash
payment of $8.0 million. Accordingly, the Company recorded a lower of cost or
market adjustment of approximately $6.9 million in 1999 to write down the assets
of KOSA-TV to the sales price less estimated selling costs. This transaction was
completed on March 21, 2000.
BACKGROUND OF THE COMPANY
The Company was incorporated under the laws of the State of Delaware on
April 10, 1996. Benedek Broadcasting was incorporated under the laws of the
State of Delaware on January 22, 1979. The principal executive offices of the
Company are located at 100 Park Avenue, Rockford, Illinois 61101. The telephone
number at the executive offices is (815) 987-5350.
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THE STATIONS
The following table sets forth certain information for each of the Stations
and the markets they serve.
<TABLE>
<CAPTION>
NUMBER OF
COMMERCIAL
BROADCAST STATION
MARKET CALL NETWORK STATIONS IN RANK IN CABLE
MARKET AREA RANK (a) LETTERS CHANNEL (b) AFFILIATION MARKET (a) MARKET (c) PENETRATION (a)
----------- -------- ------- ----------- ----------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Madison, Wisconsin 85 WMTV-TV 15 NBC 4 1 63%
Colorado Springs-Pueblo, Colorado 93 KKTV-TV 11 CBS 4 1 68%
Youngstown, Ohio 99 WYTV-TV 33 ABC 4 3 74%
Springfield and Holyoke, Massachusetts (d) 104 WWLP-TV 22 NBC 2 1 83%
Lansing, Michigan 107 WILX-TV 10 NBC 4 2 68%
Peoria and Bloomington, Illinois 110 WHOI-TV 19 ABC 4 3 72%
Duluth, Minnesota and Superior, Wisconsin 133 KDLH-TV 3 CBS 4 3 52%
Rockford, Illinois 135 WIFR-TV 23 CBS 4 1 70%
Wausau and Rhinelander, Wisconsin 136 WSAW-TV 7 CBS 3 1 56%
Topeka, Kansas 138 WIBW-TV 13 CBS 4 1 71%
Wheeling, West Virginia and 140 WTRF-TV 7 CBS 2 2 78%
Steubenville, Ohio
Wichita Falls, Texas and Lawton, Oklahoma 143 KAUZ-TV 6 CBS 5 2 68%
Columbia and Jefferson City, Missouri 145 KMIZ-TV 17 ABC 5 3 60%
145 KO2NQ 2 FOX 5(e) 4(e) 60%
145 K11TB 11 FOX 5(e) 4(e) 60%
Odessa and Midland, Texas (f) 150 KOSA-TV 7 CBS 4 2 73%
Quincy, Illinois, Hannibal, Missouri
and Keokuk, Iowa 161 KHQA-TV 7 CBS 2 1 62%
Dothan, Alabama 172 WTVY-TV 4 CBS 3 1 70%
Panama City, Florida 157 WTVY-TV 4 CBS 4 3 65%
Harrisonburg, Virginia 180 WHSV-TV 3 ABC 1 1 74%
Bowling Green, Kentucky 182 WBKO-TV 13 ABC 2 1 55%
Meridian, Mississippi 183 WTOK-TV 11 ABC 3 1 54%
Parkersburg, West Virginia 185 WTAP-TV 15 NBC 1 1 77%
Cheyenne, Wyoming and Scottsbluff, 197 KGWN-TV 5 CBS 3 1(g) 72%(g)
Nebraska 197 KSTF-TV(h) 10 CBS (i) (g) (g)
Casper and Riverton, Wyoming 199 KGWC-TV 14 CBS 4 2(k) 66%(k)
199 KGWL-TV(j) 5 CBS (i) (k) (k)
199 KGWR-TV(j) 13 CBS (i) (k) (k)
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(a) Based on data compiled from the November 1999 Nielsen surveys.
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(b) Channels 2 through 13 are broadcast over the very high frequency band of
the broadcast spectrum and channels 14 through 69 are broadcast over the
ultra high frequency band of the broadcast spectrum.
(c) Station Rank in Market is a Station's rank in the market among all
commercial stations in a Station's market, measured by such Station's
average rating Sunday through Saturday, 6:00 am to 2:00 am during the
February 1999, May 1999, July 1999 and November 1999 Nielsen surveys.
(d) The Company has entered into an agreement to exchange the broadcast assets
of WWLP-TV for the broadcast assets of KAKE-TV, Wichita, Kansas and
WOWT-TV, Omaha, Nebraska. See Business-Future Acquisitions and
Opportunities and Management's Discussion and Analysis of Financial
Condition and Results of Operations-Recent Developments.
(e) KO2NQ and K11TB are low-power broadcast television stations operated by
KMIZ-TV and distributed primarily via cable television. These two Stations
began operating in September 1997 as a single entity operating from one
facility and offering an identical programming schedule. Additionally, such
Stations are treated as one station for purposes of determining the number
of commercial stations in the market and rank in the market.
(f) The Company sold the television broadcast assets of KOSA-TV on March 21,
2000. See Business-Future Acquisitions and Opportunities and Management's
Discussion and Analysis of Financial Condition and Results of
Operations-Recent Developments.
(g) Station Rank, Station Rating and Cable Penetration information for KGWN-TV
includes data for satellite station KSTF-TV, Scottsbluff, Nebraska.
(h) Satellite station of KGWN-TV.
(i) Satellite stations are not considered distinct stations in this market for
Nielsen purposes.
(j) Satellite station of KGWC-TV.
(k) Station Rank, Station Rating and Cable Penetration information for KGWC-TV
includes data for satellite stations KGWL-TV, Lander, Wyoming and KGWR-TV,
Rock Springs, Wyoming, as reported by Nielsen.
</TABLE>
INDUSTRY BACKGROUND
Commercial television broadcasting began in the United States on a regular
basis in the 1940's. Currently, there are a limited number of channels available
for broadcasting in any one geographic area, and the license to operate a
broadcast station is granted by the FCC. Television stations can be
distinguished by the frequency on which they broadcast. Television stations
which broadcast over the very high frequency ("VHF") band (channels 2-13) of the
spectrum generally have some competitive advantage over television stations
which broadcast over the ultra-high frequency ("UHF") band (channels 14-69) of
the spectrum because VHF channels typically cover larger geographic areas and
operate at a lower transmission cost. However, specific market characteristics
such as population densities, geographic features or other factors may determine
whether UHF stations are in fact at a competitive disadvantage.
Television station revenues are primarily derived from local, regional and
national advertising and, to a modest extent, from network compensation and
revenues from tower rentals and commercial production activities. Advertising
rates are based upon numerous factors including a program's popularity among the
viewers an advertiser wishes to attract, the number of advertisers competing for
the available time allotted to commercials, the size and demographic make-up of
the audience and the availability of alternative advertising media in the market
area. The extent of advertising expenditures, which are sensitive to broad
economic trends, has historically affected the broadcast industry.
Whether or not a station is affiliated with one of the four major networks
(ABC, CBS, NBC or Fox) may have a significant impact on the composition of the
station's programming, revenues, expenses and operations. A typical network
affiliate receives a significant portion of its daily programming from the
network. This programming, together, in most cases, with cash payments, is
provided to the affiliate by the network in exchange for a substantial majority
of the advertising time sold during the broadcast of network programming. The
Fox network has operating characteristics which are similar to ABC, CBS and NBC,
although the hours of network programming produced for Fox affiliates is less
than that produced by the other major networks. In addition, UPN and The Warner
Brothers Television Network were launched in 1994 as television networks. UPN
and The Warner Brothers Television Network currently supply fewer hours of
network programming than any of the four major networks.
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<PAGE>
Through the 1970's, network television broadcasting generally enjoyed
dominance in viewership and television advertising revenues. FCC regulation
evolved to address this dominance, with the focus on increasing competition and
diversity of programming in the television broadcasting industry. See "--Federal
Regulation of Television Broadcasting."
Cable television systems were first installed in significant numbers in the
late 1960s and early 1970s and were initially used to retransmit broadcast
television programming in areas with poor broadcast signal reception. According
to the 2000 Television & Cable Factbook, cable television currently passes
approximately 91% of all television households nationwide and approximately 72%
of such households are cable subscribers. Cable-originated programming has
emerged as a significant competitor for viewers of broadcast television
programming. With increased cable penetration, the cable programming share of
advertising revenues has increased. Notwithstanding increased cable viewership
and advertising, broadcast television remains the dominant distribution system
for mass market television advertising. No single cable programming network
regularly attains audience levels amounting to more than a small fraction of any
single major broadcast network. Despite the growth in the alternative
programming from cable, according to Nielsen, 54% of all prime time television
viewing time during the 1998-1999 broadcast season, through November 1999, was
spent viewing broadcast television programming on ABC, CBS, NBC, and Fox.
Other developments have also affected television programming and delivery.
Independent stations have emerged as viable competitors for television
viewership share, particularly as the result of the availability of first run
network programming from UPN and The Warner Bros. Television Network. In
addition, there has been substantial growth in the number of home satellite dish
receivers and VCRs, which has further expanded the number of programming
alternatives for television audiences. Furthermore, direct broadcast services
("DBS") to homes from satellites became available on a nationwide basis during
1994. See "--Competition."
NETWORK AFFILIATION OF THE STATIONS
Each of the Stations is affiliated with either ABC, CBS, NBC or Fox
pursuant to an affiliation agreement (an "Affiliation Agreement"). Each
Affiliation Agreement provides the affiliated Station with the right to
broadcast all programs transmitted by the network with which the Station is
affiliated. In return, the network has the right to sell a substantial majority
of the advertising time during such broadcasts. In the case of networks except
for Fox, in exchange for every hour that a Station elects to broadcast network
programming, the network pays the Station a specified fee, which varies with the
time of day. Typically, prime-time programming generates the highest hourly
rates. Rates are subject to increase or decrease by the network during the term
of an Affiliation Agreement, with provisions for advance notices and the right
of termination by the Station in the event of a reduction of rates.
During 1999, each of the major networks publicly indicated that it is
reviewing the economic and other terms under which it provides programming to
network affiliates like the Stations. Proposed changes that have been publicly
discussed include: (i) reducing or eliminating the cash payments paid by
networks to affiliates, (ii) reducing the period of exclusivity with respect to
popular programming, (iii) changing the amount and placement of advertising time
made available for sale by affiliates during network programming and (iv)
requiring affiliates to share part of the costs of producing popular or special
programming. These changes may be implemented during the term of existing
affiliation agreements or upon renewal of the contract. In response to declining
revenues, some networks have suggested that they may search for alternative
methods of distribution for their programming, such as satellite and cable
channels. While management does not anticipate changes in the current contract
periods, certain of these changes could materially adversely affect the
Company's financial condition or results of operations.
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Each of the Stations' network affiliation agreements currently runs for a
period of two to ten years. WYTV, KIMZ-TV, WBKO-TV, WTOK-TV and WHSV-TV, all of
which are ABC affiliates, each have an affiliation agreement which expires in
2004. WHOI-TV, an ABC affiliate, currently operates under an affiliation
agreement which expires in 2005 and which does not provide for renewals. Each of
KDLH-TV, WIFR-TV, KHQA-TV, WTVY-TV, KGWN-TV, KGWC-TV, WIBW-TV, WSAW-TV, WTRF-TV,
KAUZ-TV and KOSA-TV, all of which are CBS affiliates, has a ten-year affiliation
agreement which expires in 2005 and is automatically renewed for successive
five-year terms, subject to either party's right to terminate the agreement at
the end of any term upon six months' advance notice. KKTV-TV, a CBS affiliate,
currently operates under an affiliation agreement which expires June 30, 2000
and is automatically renewed for successive five-year terms, subject to either
party's right to terminate the agreement at the end of any term upon six months'
advance notice, which notice was not received for the current term. Therefore,
the term of the KKTV-TV affiliation agreement will run through June 30, 2005.
WMTV-TV, WWLP-TV and WILX-TV, all of which are NBC affiliates, each have an
affiliation agreement which expires in 2006 and is automatically renewed for
successive five-year terms, subject to either party's right to terminate the
agreement at the end of any term upon six months' advance notice. WTAP-TV, an
NBC affiliate, currently operates under a six-year affiliation agreement which
expires in 2005.
The Company also owns and operates two low-power television stations
located in Columbia and Jefferson City, Missouri under the call letters KO2NQ
and K11TB. These Stations are affiliated under a network affiliation agreement
with Fox that automatically continues until terminated by either party upon 120
days' advance notice. The primary means of distribution for these Stations is
via cable television.
During September 1998, the Company began delivering The Warner Bros.
Television Network programming to local cable companies in 15 of the Company's
20 markets which rank above market 100 as measured by Nielsen surveys. These
local affiliates are collectively called the "WB" and are operated by Benedek
Cable, Inc. ("BCI"), a wholly-owned subsidiary of Benedek Broadcasting. The WB's
impact on the Company's operations for the years ended December 31, 1999 and
1998 was insignificant. For purposes of calculating the Company's Adjusted
EBITDA, the results of operations of BCI are excluded due to its status as a
nonrecourse subsidiary.
ADVERTISING SALES
Television station revenues are derived primarily from local, regional and
national advertising and, to a lesser extent, from compensation paid by the
networks for broadcasting network programming and barter transactions for goods
and services. Advertising rates are based upon numerous factors including a
program's popularity among the viewers an advertiser wishes to target, the
number of advertisers competing for the available time, the size and demographic
composition of a program's audience and the availability of competing or
alternative advertising media in the market area. Because broadcast television
stations rely on advertising revenue, declines in advertising budgets,
particularly in recessionary periods, adversely affect the broadcast industry
and as a result may contribute to a decrease in the revenues of broadcast
television stations. The Company seeks to manage its spot inventory efficiently
thereby maximizing advertising rates.
Local Sales. Approximately 57.0% of the gross revenues of the Stations in
1999 came from local and regional advertisers. Local and regional advertising is
sold primarily by each Station's professional sales staff. Typical local and
regional advertisers include automobile dealerships, retailers, local grocery
chains, soft drink bottlers, state lotteries and restaurants. The Company
focuses on local advertisers by producing their commercials, producing news and
informational programming with local advertising appeal and sponsoring or
co-promoting local events and activities that give local advertisers value-added
community identity. The Company's management team monitors sales plans and
promotional activities and frequently shares such information among the
Stations.
- 9 -
<PAGE>
National Sales. Approximately 30.2% of the gross revenues of the Stations
in 1999 came from national advertisers. Typical national advertisers include
automobile manufacturers, consumer goods manufacturers, communications
companies, fast food franchisers, national retailers and direct marketers.
National advertising time is sold through representative agencies retained by
the Company. Nine of the Stations are represented by Katz Television Sales, 11
Stations are represented by Petry Television, Inc., and three retain Blair
Television. The Stations' national sales coordinators actively assist their
national sales representatives to induce national advertisers to increase their
national spot expenditures designated to the Company's markets.
COMPETITION
The principal methods of competition in television broadcasting are the
development of audience interest through programming and promotions and
competition in rates charged to advertisers. Broadcast television stations
compete for advertising revenues with other broadcast stations, cable television
and all other advertising media in their market areas and generally do not
compete with stations in other markets. The Company has generally acquired
stations in markets where there are only a limited number of over-the-air
television stations competing for local viewership and for local advertising
revenues. In two of its markets, the Company owns the only local television
station. In four markets, the Company owns one of only two local television
stations. In three markets, the Company owns one of three local television
stations. In 10 markets, the Company owns one of four local television stations.
In the Columbia and Jefferson City, Missouri market, the Company owns two of
five stations, one of the owned stations being the jointly operated low-power
station known in the market as Fox-11. In one other market, the Company owns one
of five local television stations. In addition, WTVY-TV competes with two other
stations in the Dothan market and with three other stations in the Panama City
market.
Audience. Stations compete for audience on the basis of program popularity
which has a direct effect on advertising rates. A significant portion of the
Company's daily programming is supplied by the networks. In those time periods,
the Stations are totally dependent upon the performance of the networks'
programs in attracting viewers. Non-network time periods are programmed by the
Stations with local news and syndicated programs generally purchased for cash
and barter and, to a lesser extent, barter-only. The Stations also air sports,
public affairs and other entertainment programming.
The development of methods of television transmission of video programming
other than over-the-air broadcasting, and in particular the growth of cable
television and DBS, have significantly altered competition for audience in the
television industry. These other transmission methods can increase competition
for a broadcasting station by bringing into its market distant broadcasting
signals not otherwise available to the station's audience and also by serving as
a distribution system for non-broadcast programming distributed by the cable
system. As the technology of satellite program delivery to cable systems
advanced in the late 1970's, development of programming for cable television
accelerated dramatically, resulting in the emergence of multiple, national-scale
program alternatives and the rapid expansion of cable television and higher
subscriber growth rates. Historically, cable operators have not sought to
compete with broadcast stations for a share of the local news audience in small
and medium-sized markets.
Two major nationwide companies deliver DBS to homes from satellites. In
1999, Congress passed a new law permitting DBS systems to carry local television
stations, which will make DBS more competitive with cable. The FCC has also
adopted rules which may significantly increase the number of multipoint
distribution service stations ("MDS") (i.e., video service distributed on
microwave frequencies which can only be received by special microwave antennae).
These MDS stations have launched service in several cities, and one telephone
company has also begun offering digital MDS service. In addition, the FCC has
licensed a 28 GHz and 31 GHz microwave cable service that will have the
potential to provide up to 100 channels of video or more. The FCC has licensed
low power television stations which are television stations with coverage areas
much smaller than those served by full power conventional television stations.
- 10 -
<PAGE>
Current technology offers several different methods for transmitting
television signals with greatly improved definition, color rendition, sound and
wider screen picture. Collectively, these improvements are referred to as
digital television ("DTV"), with the most advanced type of transmission system
being high definition television. Intensive research and development efforts
have achieved forms of DTV that can be transmitted by existing terrestrial
broadcasters in the United States. A number of such proposed systems have been
extensively tested by an industry test center under the auspices of an Industry
Advisory Committee reporting to the FCC. Following such testing, the major
proponents of the competing systems agreed to combine their efforts to provide a
single DTV system, and these efforts resulted in technical standards that were
submitted to the FCC in 1995. In 1996, the FCC adopted a technical standard for
DTV. The standard will involve the broadcast of DTV on a separate television
channel from that used for conventional broadcasting. This separate channel may
also be used by broadcasters for data transmission and multi-channel
transmission. The FCC has decided to issue a second channel to each television
broadcaster to permit it to provide DTV during a transition period. Although in
some cases a DTV channel may provide a station with a smaller geographic service
area than its current channel, most stations are expected to obtain DTV service
areas that are consistent with their current service areas. At the end of the
transition period in 2006, each broadcaster will be required to return to the
FCC one of these two channels. This transition ultimately will permit
broadcasters to provide higher quality services to their viewers and may permit
broadcasters to compete more effectively with other digital video systems.
However, constructing and operating a second television channel will require a
substantial capital outlay for all of the Stations. In late 1998, the FCC
refined its DTV rules and DTV channel assignments. The FCC's DTV decisions now
are subject to judicial review before the U.S. Court of Appeals for the District
of Columbia Circuit. Also in 1998, the FCC issued a decision to implement the
requirement of the Telecommunications Act of 1996 that it charge broadcasters a
fee for offering subscription services on the DTV channel. The FCC's decision to
impose a fee of 5% of the gross revenues generated by such services currently is
subject to petitions for reconsideration before the FCC. The FCC also is
considering whether and how to extend cable systems' obligations for mandatory
carriage of certain broadcast television signals to the DTV channel.
Deliberations on this issue include the question of whether cable systems will
be required to carry both DTV and analog channels broadcast by a television
station that multicasts on its DTV channel, and whether cable systems should be
required to retransmit DTV signals in the same definition in which originally
broadcast. The Company is unable to predict the effect that technological
changes will have on the broadcast television industry or the future results of
the Company's operations.
Programming. Competition for programming involves negotiating with national
program distributors or syndicators which sell first run and rerun packages of
programming. The Stations compete against local broadcast stations for exclusive
access to first run products (such as "The Oprah Winfrey Show," "Wheel of
Fortune" and "Jeopardy") and for off-network reruns (such as "Home Improvement,"
"Seinfeld" and "Frasier") in their respective markets. Cable systems generally
do not compete with local stations for programming, although various national
cable networks have acquired programs that would have otherwise been offered to
local television stations. Competition also occurs for exclusive news stories
and features.
Advertising. The Stations compete for advertising revenues with other
television stations in their respective markets, as well as with other
advertising media, such as newspapers, radio, magazines, outdoor advertising,
transit advertising, yellow page directories, direct mail, local cable systems
and internet sites. Competition for advertising expenditures in the broadcasting
industry occurs primarily in individual markets. Generally, television
broadcasting stations in one market do not compete with stations in other market
areas.
Management cannot predict the exact nature of the competition it will face
in any market since competing stations may change owners, affiliations and/or
programming focus at any time. The Company cannot predict the effect the changes
in legislation or technology, discussed herein, will have on its operations. In
certain markets, construction permits for new stations have been or may be
granted.
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<PAGE>
RATING SERVICE DATA
All television stations in the United States are grouped into 210
television markets which are ranked in size according to the number of
television households in such markets. Nielsen periodically publishes reports on
the estimated audience for the television stations in the various television
markets throughout the country. The audience estimates are expressed in terms of
the percentage of the total potential audience in a market viewing a particular
station (the station's "rating") and of the percentage of households actually
viewing television (the station's "share"). The ratings reports provide data on
the basis of total television households and selected demographic groupings in
15-minute or half-hour increments for a particular market. Each specific market
is called a Designated Market Area ("DMA"). Every county in the continental
United States is assigned to a DMA of a specific television market on an
exclusive basis. In larger markets, ratings are determined by a combination of
meters connected directly to selected television sets (the results of which are
reported on a daily basis) and weekly diaries of television viewing prepared by
the actual viewers. In smaller markets only weekly diaries are completed during
four separate four-week periods during the course of any year. These periods are
commonly knows as "sweeps periods." All the Company's markets are measured
during these sweeps periods.
FEDERAL REGULATION OF TELEVISION BROADCASTING
Existing Regulation. Television broadcasting is subject to the jurisdiction
of the FCC, pursuant to the Communications Act of 1934, as amended (the
"Communications Act"). The Communications Act prohibits the operation of
television broadcasting stations except under a license issued by the FCC and
empowers the FCC to issue, renew, revoke and modify broadcasting licenses,
regulate the frequency and operating power of stations, determine station
location, regulate the equipment used by stations, adopt rules and regulations
to carry out the provisions of the Communications Act and to impose certain
penalties for violations of the Communications Act. The Communications Act
prohibits the assignment of a license or the transfer of control of a licensee
without prior approval of the FCC.
License Grant and Renewal. Television broadcasting licenses are usually
granted or renewed for the maximum allowable term of eight years. The FCC may
revoke a license or renew a license for a period shorter than the maximum
allowable term if the FCC finds that the licensee has committed a serious
violation of FCC rules, has committed other violations which taken together
would constitute a pattern of abuse, or has otherwise failed to serve the public
interest. At the time the application is made for renewal of a television
license, parties in interest may file petitions to deny renewal, and such
parties as well as members of the public may comment upon the service the
station has provided during the preceding term and urge denial of the
application. Additionally, if an incumbent licensee fails to meet the renewal
standard, and if it does not show other mitigating factors warranting a lesser
sanction, the FCC then has the authority to deny the renewal application and
consider a competing application.
In the vast majority of cases, broadcast licenses are renewed by the FCC
even when petitions to deny are filed against broadcast license renewal
applications. All of the Stations are presently operating under eight-year
licenses expiring on various dates from 1999 to 2006. Currently, WWLP-TV,
Springfield, Massachusetts has a pending application for license renewal. The
Company is not aware of any facts or circumstances that might prevent any of the
Stations from having its current license renewed at the end of its respective
term or which might prevent the license renewal for WWLP-TV from being granted.
The Communications Act prohibits the assignment of a license or the
transfer of control of a license without prior approval of the FCC. Under the
Communications Act, no license may be held by a corporation of which more than
20% of the capital stock is owned of record, voted or subject to control by
aliens, and no corporation may hold the capital stock of another corporation
holding broadcast licenses if more than 25% of the capital stock of such parent
corporation is owned of record, voted or subject to control by aliens, unless
specific FCC authorization is obtained.
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<PAGE>
Multiple Ownership Restrictions. The FCC has promulgated a number of rules
designed to limit the ability of individuals and entities to own or have an
ownership interest above a certain level (an "attributable interest," defined
more fully below) in broadcast stations, as well as other mass media entities.
These rules include limits on the number of television stations that may be
owned both on a national and a local basis. On a national basis, FCC rules
generally limit any individual or entity from having attributable interests in
television stations with an aggregate audience reach exceeding 35% of all United
States households.
The FCC also limits the common ownership of broadcast stations with
overlapping service areas, combined local ownership of a newspaper and a
broadcast station and combined local ownership of a cable television system and
a broadcast television station. The FCC recently amended its local ownership
rules to permit one company to own two television stations in the same market if
there are at least eight independently owned full-power television stations in
that market (counting the co-owned stations as one) and if at least one of the
co-owned stations is not among the top four ranked television stations in the
same market. The FCC also decided to permit common ownership of stations in a
single market if there signals do not overlap and to permit common ownership of
certain failing or unbuilt stations, and it liberalized its rules on ownership
of stations in neighboring markets. These rule changes are likely to increase
concentration of ownership in medium-size and larger markets. They also will
permit some common ownership in bordering markets that was prohibited under the
prior rule. For example, the Company is now permitted to maintain ownership of
WIFR-TV, Rockford, Illinois, and WMTV-TV in Madison, Wisconsin. Under the prior
rules, the Company would have been required to dispose of one of these stations.
The Company also may have opportunities to acquire additional properties under
this rule. The ultimate effect of this rule on the Company's broadcast
operations cannot be predicted. Expansion of the Company's broadcast operations
in particular areas and nationwide will continue to be subject to the FCC's
ownership rules and any changes the FCC may adopt.
Under the FCC's ownership rules, if a purchaser of the Company's common
stock acquires an "attributable" interest in the Company, a violation of FCC
regulations could result if that purchaser owned or acquired an attributable
interest in other media properties in a manner prohibited by the FCC's rules.
All officers and directors of a licensee, as well as stockholders who own 5% or
more of the outstanding voting stock of a licensee (either directly or
indirectly), will generally be deemed to have an attributable interest. For
certain institutional investors who exert no control or influence over a
licensee, the benchmark is 10% or more of such outstanding voting stock before
attribution occurs. Under FCC regulations, debt instruments, non-voting stock
and certain limited partnership interests and voting stock held by non-majority
stockholders in cases in which there is a single majority stockholder are not
generally subject to attribution. The Company currently has a single majority
stockholder who owns 87.4% of outstanding stock of the Company. In the event the
Company no longer had a single majority stockholder, minority interests would be
deemed to be attributable interests.
To the best of the Company's knowledge, no officer, director or stockholder
of the Company holds an interest in another radio or television station, cable
television system or daily newspaper that is inconsistent with the FCC's
ownership rules and policies.
Regulation of Broadcast Operations. Television broadcasters are subject to
FCC regulation in several other areas, including political broadcasting,
children's programming, obscene and indecent programming and equal employment
opportunities.
Qualified candidates for Federal elective office have a right to buy
advertising time on television stations. Stations may also choose, but are not
required, to carry advertising by state or local candidates. When a station
carries advertising by one candidate (whether Federal, state or local), the
station must afford "equal time" for advertising by that candidate's
opponent(s). During the last 45 days of a primary campaign and the last 60 days
of a general election campaign, stations may not charge political candidates
rates any higher than the rate being charged to the most favored commercial
advertiser for a
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<PAGE>
spot of the same length and class in the same period. These requirements can
have the effect of reducing the revenues that a station might otherwise earn
during pre-election periods.
Television stations must serve the educational and information needs of
children in their overall programming, and must air some programming
specifically designed to serve those needs. The programming obligation applies
to programs originally produced and broadcast for an audience of children 16
years of age and younger. Commercial time is limited to 10.5 minutes per hour on
weekends and 12 minutes per hour on weekdays for programs originally produced
and broadcast primarily for an audience of children 12 years of age and younger.
Television stations may not air obscene programming at any time, and may
not air indecent programming during the morning, afternoon and early evening (6
a.m. to 10 p.m.). Material is obscene if it appeals to viewers' prurient
interests by depicting sexual conduct in a patently offensive manner and lacks
serious literary, artistic, political or scientific value. Material is indecent
if it describes in patently offensive terms, sexual or excretory activities or
organs.
In all of the foregoing areas, as well as in other matters that affect
operations and competition in the television broadcast industry, regulatory
policies are subject to change over time and cannot be fully predicted.
Proposed Legislation and Regulation. The Congress and the FCC currently
have under consideration, and may in the future adopt new rules, regulations and
policies regarding a wide variety of matters which could, directly or
indirectly, affect the operation and ownership of the Stations. In addition to
the proposed changes set forth above, examples of such matters include policies
concerning eliminating certain cross-ownership restrictions, political
advertising and programming practices, flexible use of broadcast spectrum,
spectrum use fees, the standards to govern evaluation of television programming
directed toward children and violent and indecent programming. Other matters
that could affect the Company's broadcast properties include technological
innovations and developments generally affecting competition in the mass
communications industry, such as the continued establishment of DBS, wireless
cable systems and low power television stations and the participation of
telephone companies in the provision of video programming by wire.
Implementation of the Cable Act of 1992. The Cable Television Consumer
Protection and Competition Act of 1992 (the "Cable Act") was enacted on October
5, 1992. The Cable Act imposes cable rate regulation, establishes cable
ownership limitations, regulates the relationships between cable operators and
their program suppliers, regulates signal carriage and retransmission consent
and regulates numerous other aspects of the cable television business.
The signal carriage, or "must carry," provisions of the Cable Act require
cable operators to carry the signals of local commercial and non-commercial
television stations and certain low power television stations. Systems with 12
or fewer usable activated channels and more than 300 subscribers must carry the
signals of at least three local commercial television stations. A cable system
with more than 12 usable activated channels, regardless of the number of
subscribers, must carry the signals of all local commercial television stations,
up to one-third of the aggregate number of usable activated channels of such
system. The Cable Act also includes a retransmission consent provision that
requires cable operators and other multi-channel video programming distributors
to obtain the consent of broadcast stations prior to carrying them in certain
circumstances. The must carry and retransmission consent provisions are related
in that a television station must elect once every three years either to waive
its right to mandatory, but uncompensated, carriage or to negotiate a grant of
retransmission consent to permit the cable system to carry the station's signal.
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<PAGE>
In April 1993, a three-judge panel of the United States District Court of
the District of Columbia upheld the constitutionality of the legislative
must-carry provisions. In June 1994, the Supreme Court ruled that the must-carry
provisions were "content-neutral" and, thus, not subject to strict scrutiny and
that Congress's stated interests in preserving the benefits of free, off-air
broadcast television, promoting the widespread dissemination of information from
a multiplicity of sources and promoting fair competition in the market for
television programming all qualify as important governmental interests. The
Court, however, remanded to the lower federal court with instructions to hold
further proceedings with respect to evidence that lack of the must-carry
requirements would harm free, off-air broadcasting. In 1995, the lower court
again upheld the constitutionality of must-carry requirements after reviewing
the required evidence. In its March 31, 1997 decision, the Supreme Court, by a 5
to 4 vote, affirmed the judgment of the district court. The Court concluded that
the record supports Congress' judgment that the must-carry provisions serve
significant governmental interests, namely preserving the benefits of free,
over-the-air local broadcast television, promoting the widespread dissemination
of information from a multiplicity of sources and promoting fair competition in
the market for television programming.
Under rules adopted to implement these must carry and retransmission
consent provisions, local broadcast stations were required to make their initial
elections of must carry or retransmission consent by June 17, 1993, effective
October 6, 1993. Such elections are generally required every three years. By
October 1, 1999, stations were required to make their second election covering
the three-year period from January 1, 2000 to December 31, 2002.
The Company has entered into agreements for the Stations with
substantially all of the cable system operators which carry the Stations'
signals. All of these agreements grant such cable system operators consent to
retransmit the Stations' signal. These retransmission arrangements do not
represent a significant source of revenue for the Company. Although the Company
expects to be able to renew its current retransmission agreements when such
agreements expire, there can be no assurance that such renewals will be
obtained.
Implementation of the Satellite Home Viewer Improvement act of 1999. In
November 1999, Congress passed the Satellite Home Viewer Improvement Act, which
provides DBS operators with the ability to retransmit the broadcast signal of
local television stations to subscribers in the station's local market area.
("local-into-local" service), provided that the DBS operator has obtained the
consent of the broadcaster. By January 1, 2002, DBS providers that offer
local-into-local service will be required to carry all full-power television
stations in markets in which they have chosen to provide this service. The Act
also continues restrictions on the transmission of distant network station by
DBS operators. Under these restrictions, DBS operators are effectively
prohibited from distributing the signal of any network affiliated television
station except in areas where the over-the-air signal of the same network's
local affiliate is not available. Several lawsuits were filed beginning in late
1996 in which plaintiffs allege that certain DBS operators have not been
complying with this restriction. The plaintiffs have entered into a settlement
with DBS operator DirecTV, under which it will discontinue distant-network
service to certain subscribers and alter the method by which it determines
eligibility for this service. Litigation against DBS operator Echostar is
ongoing. The Act also provides that certain distant-network subscribers whose
service would have been discontinued by this litigation will continue to have
access to this service for a five-year period. The Act further requires the FCC
to reconsider the computer model by which DBS providers predict eligibility for
distant-signal service and to suggest recommendations to Congress on whether the
technical standard for eligibility should be changed by subsequent legislation.
The ability of DBS operators to provide local-into-local service is
expected to increase competition between cable and DBS operators in markets
where local-into-local service is provided. DBS operators are not required to
provide local-into-local service, and some smaller markets may not receive this
service for several years. Broadcast stations in smaller markets may face
increasing competition from stations in nearby larger markets, which may be
carried under the Act's local-into-local provisions before stations in smaller
markets are carried. However, legislation is pending before Congress that would
provide loan guarantees to companies intending to offer local-into-local service
in smaller communities,
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<PAGE>
and DBS operators have stated that they intend to provide this service to a
greater number of markets in the future. Local-into-local service is not yet
offered in most markets in which the Company operates television stations, but
such services could be launched by DBS operators at any time.
EMPLOYEES
The Company currently employs 1,247 full-time employees. Approximately 257
of the Company's employees located at WMTV-TV, WILX-TV, WHOI-TV, WTRF-TV,
KDLH-TV and WYTV-TV are represented by labor unions under collective bargaining
agreements. The collective bargaining agreements expire at various times from
2000 through 2003. There are no unionized employees at the remaining Stations.
The Company believes that its relationship with all of its employees, including
those represented by labor unions, is satisfactory.
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<PAGE>
ITEM 2. PROPERTIES.
The Company's principal executive offices are located in leased premises in
Rockford, Illinois.
The types of properties required to support each of the Stations include
offices, studios and tower and transmitter sites. A station's studio and office
are generally located in business districts while tower and transmitter sites
are generally located so as to provide maximum signal coverage to each market.
The following table contains certain information describing the general
character of the properties of the Company.
<TABLE>
<CAPTION>
OWNED APPROXIMATE EXPIRATION
STATION, MARKET AREA AND USE OR LEASED SIZE (a) HEIGHT/POWER OF LEASE
- ------------------------------------------------- ----------- ----------- -------------- -----------
<S> <C> <C> <C> <C>
Madison, Wisconsin WMTV-TV
Office and Studio............................ Owned(b) 16,485 sq. ft. (c) -- --
Tower/Transmitter Site....................... Owned(b) 1,040 ft./955 kw --
Colorado Springs and Pueblo, Colorado KKTV-TV
Office and Studio............................ Owned(b) 30,465 sq. ft. -- --
Tower/Transmitter Site....................... Leased 500 sq. ft. 350 ft./234 kw 2/01/2059
Youngstown, Ohio WYTV-TV
Office and Studio............................ Owned(b) 18,964 sq. ft. (c) -- --
Tower/Transmitter Site....................... Owned(b) 642 ft./550 kw --
Springfield and Holyoke, Massachusetts WWLP-TV
Office and Studio............................ Owned(d) 46,000 sq. ft. -- --
Tower/Transmitter Site....................... Owned(b) 20,000 sq. ft. 500 ft./342 kw --
Lansing, Michigan WILX-TV
Office and Studio............................ Owned(b) 13,700 sq. ft. -- --
Tower/Transmitter Site....................... Leased 5,000 sq. ft. 994 ft./309 kw 10/18/2003
Peoria and Bloomington, Illinois WHOI-TV
Office and Studio............................ Owned(b) 16,900 sq. ft. (c) -- --
Tower/Transmitter Site....................... Owned(b) 640 ft./2,240 kw --
Duluth, Minnesota and Superior, Wisconsin
KDLH-TV
Office and Studio............................ Owned(b) 25,000 sq. ft. (e) -- --
Tower/Transmitter Site....................... Owned(b) 1,040 sq. ft. 811 ft./100 kw --
Rockford, Illinois WIFR-TV
Office and Studio............................ Owned(b) 13,500 sq. ft. (c) -- --
Tower/Transmitter Site....................... Owned(b) 674 ft./562 kw --
Wausau and Rhinelander, Wisconsin WSAW-TV
Office and Studio............................ Owned(b) 24,400 sq. ft. -- --
Tower/Transmitter Site....................... Leased (f) 432 sq. ft. 650 ft./316 kw 08/01/2017
Topeka, Kansas WIBW-TV
Office and Studio............................ Leased 18,774 sq. ft. (g) -- 02/28/2002
Tower/Transmitter Site....................... Leased 2,338 sq. ft. 1,249 ft./316 kw 02/14/2062
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
OWNED APPROXIMATE EXPIRATION
STATION, MARKET AREA AND USE OR LEASED SIZE (a) HEIGHT/POWER OF LEASE
- ------------------------------------------------- ----------- ----------- -------------- -----------
<S> <C> <C> <C> <C>
Wheeling, West Virginia and Steubenville,
Ohio WTRF-TV
Office and Studio............................ Owned(b) 43,872 sq. ft.(h) -- --
Tower/Transmitter Site....................... Owned(b) 2,000 sq. ft. 741 ft./316 kw --
Wichita Falls, Texas and Lawton, Oklahoma
KAUZ-TV
Office and Studio............................ Owned(b) 13,078 sq. ft.(c) -- --
Tower/Transmitter Site....................... Owned(b) 1,028 ft./100 kw --
Columbia and Jefferson City, Missouri KMIZ-TV
Office and Studio............................ Owned(b) 5,993 sq. ft. -- --
Tower/Transmitter Site....................... Owned(b) 875 sq. ft. 1,030 ft./1,580 kw --
Columbia and Jefferson City, Missouri
KO2NQ (low power)
Tower/Transmitter Site....................... Leased (i) 60 ft./30 w 09/03/2002
K11TB (low power)
Tower/Transmitter Site....................... Leased (j) 100 ft./10 w 05/15/2000
Odessa and Midland, Texas KOSA-TV
Office and Studio............................ Owned(b) 14,222 sq. ft. -- --
Tower/Transmitter Site....................... Leased 930 sq. ft. 726 ft./316 kw 10/31/2003
Quincy, Illinois, Hannibal, Missouri
and Keokuk, Iowa KHQA-TV
Office and Studio............................ Owned 18,000 sq. ft. -- --
Tower/Transmitter Site....................... Owned(b) 1,200 sq. ft. 804 ft./269 kw --
Dothan, Alabama and Panama City, Florida
WTVY-TV
Office and Studio............................ Leased 20,440 sq. ft. -- 12/31/2002
Tower/Transmitter Site....................... Owned(b) 2,500 sq. ft. 1,880 ft./100 kw --
Harrisonburg, Virginia WHSV-TV
Office and Studio............................ Leased(b) 18,000 sq. ft. -- 4/27/2018(k)
Tower/Transmitter Site....................... Leased 2,016 sq. ft. 337 ft./8.32 kw 12/31/2001(l)
Bowling Green, Kentucky WBKO-TV
Office and Studio............................ Owned(b) 17,598 sq. ft. -- --
Tower/Transmitter Site....................... Owned(b) 1,175 sq. ft. 603 ft./316 kw --
Meridian, Mississippi WTOK-TV
Office and Studio............................ Owned(b) 13,188 sq. ft. -- --
Tower/Transmitter Site....................... Owned(b) 1,504 sq. ft. 316 ft./316 kw --
Parkersburg, West Virginia WTAP-TV
Office and Studio............................ Leased(b) 17,500 sq. ft. -- 04/30/2005(m)
Tower/Transmitter Site....................... Owned 3,600 sq. ft. 439 ft./208 kw --
</TABLE>
- 18 -
<PAGE>
<TABLE>
<CAPTION>
OWNED APPROXIMATE EXPIRATION
STATION, MARKET AREA AND USE OR LEASED SIZE (a) HEIGHT/POWER OF LEASE
- ------------------------------------------------- ----------- ----------- -------------- -----------
<S> <C> <C> <C> <C>
Cheyenne, Wyoming KGWN-TV
Office and Studio........................... Owned(b) 7,500 sq. ft. -- --
Tower/Transmitter Site...................... (n) 2,646 sq. ft. 620 ft./100 kw --
Scottsbluff, Nebraska KSTF-TV (satellite)
Office and Studio........................... Owned 2,400 sq. ft. -- --
Tower/Transmitter Site...................... Owned 2,457 sq. ft. 674 ft./240 kw --
Casper and Riverton, Wyoming KGWC-TV
Office and Studio........................... Leased 10,000 sq. ft. -- 03/04/2007(o)
Tower/Transmitter Site...................... Owned 1,692 sq. ft. 235 ft./60 kw --
Lander, Wyoming KGWL-TV (satellite)
Tower/Transmitter Site...................... Leased 768 sq. ft. 155 ft./30 kw 12/31/2007
Rock Springs, Wyoming KGWR-TV (satellite)
Tower/Transmitter Site...................... Leased 400 sq. ft. 100 ft./12 kw 05/22/2009
- --------------
(a) Approximate size is for building space only and does not include the land
on which the facilities are located.
(b) The Company has mortgaged its interest in this property to Toronto Dominion
(Texas), Inc., as administrative agent and collateral agent, as collateral
for its obligations under the Company's loan agreement.
(c) Tower/Transmitter Site is located at and included within the size of the
office and studio premises.
(d) The Company has mortgaged its interest in this property to Chicopee Savings
Bank, as collateral for its obligations to the bank under a construction
loan.
(e) The Company owns a building of approximately 55,000 sq. ft. in which the
offices and studio of KDLH-TV are located and of which approximately 30,000
sq. ft. are leased to third parties.
(f) Leased together with Shockley Communications Corporation and the Wisconsin
Educational Communications Board from the State of Wisconsin Department of
Natural Resources.
(g) The Company leases a building of approximately 23,837 sq. ft. in which the
offices and studio of WIBW-TV are located and of which approximately 5,063
sq. ft. are subleased to Stauffer Communications, Inc., which owns and
operates radio stations WIBW AM and FM. The lease will expire on the
earlier of February 28, 2002 or when a certificate of occupancy is issued
for a new facility the land for which was purchased by the Company on
February 29, 2000. The new facility is expected to be built on the recently
purchased property.
(h) The Company owns a building of approximately 46,872 sq. ft. in which the
offices and studio of WTRF-TV are located and of which approximately 3,000
sq. ft. are leased to a third party.
(i) The Company leases rooftop space for its tower/transmitter.
(j) The Company leases space on a tower on which it has mounted a broadcasting
antenna.
(k) The Company has an option to purchase the premises at various times during
the term of the lease. At December 31, 1999, the purchase price was
$1,477,148.
(l) Occupied pursuant to a Special Use Permit granted by the United States
Department of Agriculture Forest Service.
(m) The Company has exercised an option to purchase the premises on May 1, 2000
for $650,000.
(n) This property is utilized subject to an easement granted by the State of
Wyoming.
(o) The Company has an option to purchase the premises during the term of the
lease at purchase prices that are subject to adjustment during the lease
term based on the date the option is exercised. The purchase price would
have been $400,435 as of December 31, 1999.
</TABLE>
ITEM 3. LEGAL PROCEEDINGS.
The Company currently and from time to time is involved in litigation
incidental to the conduct of its business. The Company is not currently a party
to any lawsuit or proceeding which, in the opinion of management, is likely to
have a material adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
- 19 -
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Not applicable.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.
The following selected consolidated financial data for the five years ended
December 31, 1999 represents the consolidated financial information of the
Company and are derived from the audited Consolidated Financial Statements,
which Consolidated Financial Statements for the three years ended December 31,
1999 together with the report of McGladrey & Pullen, LLP, independent certified
public accountants, are included elsewhere in this Annual Report on Form 10-K.
The selected consolidated financial information presented below should be read
in conjunction with the Consolidated Financial Statements included elsewhere in
this Annual Report on Form 10-K and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1995 (a) 1996 (b) 1997 1998 1999 (c)
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue (d)...................... $ 50,329 $96,386 $ 127,073 $ 139,833 $140,406
Operating expenses:
Station operating expenses....... 29,049 58,603 80,003 85,509 86,594
Depreciation and amortization.... 5,041 20,220 31,380 30,830 28,520
---------- ---------- ---------- ---------- ----------
Station operating income............. 16,239 17,563 15,690 23,494 25,292
Corporate expenses............... 1,576 2,695 3,787 4,643 4,510
---------- ---------- ---------- ---------- ----------
14,663 14,868 11,903 18,851 20,782
Net gain on sale of stations (e)..... - - - - 6,181
---------- ---------- ---------- ---------- ----------
Operating income................. 14,663 14,868 11,903 18,851 26,963
---------- ---------- ---------- ---------- ----------
Financial expenses, net:
Interest expense, net (f):
Cash interest, net............... (14,763) (22,559) (28,866) (26,485) (25,077)
Other interest................... (712) (8,130) (19,374) (17,043) (19,040)
---------- ---------- ---------- ---------- ----------
(15,475) (30,689) (48,240) (43,528) (44,117)
---------- ---------- ---------- ---------- ----------
Income (loss) before income tax
benefit and extraordinary item... (812) (15,821) (36,337) (24,677) (17,154)
Income tax benefit (g)............... - 4,664 12,027 8,052 1,377
---------- ---------- ---------- ---------- ----------
Income (loss) before extraordinary
item............................. (812) (11,157) (24,310) (16,625) (15,777)
Extraordinary item (h)............... 6,864 - - - (12,510)
---------- ---------- ---------- ---------- ----------
Net income (loss).................... 6,052 (11,157) (24,310) (16,625) (28,287)
Preferred stock dividends and
accretion........................ - (9,519) (19,037) (30,855) (18,987)
---------- ---------- ---------- ---------- ----------
Net income (loss) applicable to
common stock...................... $ 6,052 $(20,676) $(43,347) $(47,480) $(47,274)
========== ========== ========== ========== ==========
Basic earnings (loss) per common
share (i):
(Loss) before extraordinary item.. $ (0.12) $ (2.94) $ (6.17) $ (6.42) $ (4.70)
Extraordinary item................ 0.98 - - - (1.69)
---------- ---------- ---------- ---------- ----------
Earnings (loss) per common share.. $ 0.86 $ (2.94) $ (6.17) $ (6.42) $ (6.39)
========== ========== ========== ========== ==========
Weighted-average common shares
outstanding................... 7,030,000 7,030,000 7,030,000 7,400,000 7,400,000
========== ========== ========== ========== ==========
</TABLE>
- 20 -
<PAGE>
<TABLE>
<CAPTION>
1995 (a) 1996 (b) 1997 1998 1999(c)
-------- -------- ---- ---- -------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF CASH FLOWDATA:
Net cash provided by operating activities........ $ 3,250 $17,843 $ 8,471 $20,016 $19,302
Net cash (used in) investing activities.......... (30,972) (326,632) (6,282) (6,582) (28,291)
Net cash provided by (used in) financing activities 32,773 307,212 (7,632) (11,791) 7,976
CERTAIN FINANCIAL DATA:
Broadcast cash flow (j)1........................ $21,310 $38,864 $47,534 $54,830 $54,625
Broadcast cash flow margin (k) 1................ 42.3% 40.3% 37.4% 39.2% 39.0%
Adjusted EBITDA (l) 1........................... $19,734 $36,169 $43,747 $50,187 $50,115
Adjusted EBITDA margin (m) 1.................... 39.2% 37.5% 34.4% 35.9% 35.8%
Amortization of program broadcast rights........ $ 2,162 $ 4,399 $ 6,401 $ 6,758 $ 8,127
Payments on program broadcast liabilities....... 2,132 3,318 5,937 6,399 7,455
Capital expenditures............................ 2,008 5,003 10,833 10,147 12,784
1Excludes BCI, a nonrecourse subsidiary
BALANCE SHEET DATA (END OF PERIOD):
Total assets.................................... $114,453 $495,015 $468,495 $447,462 $457,776
Working capital................................. 13,665 3,697 2,511 3,555 20,407
Long-term debt (n).............................. 135,767 358,234 370,917 374,816 427,579
Redeemable preferred stock...................... - 105,519 124,556 162,644 181,631
Stockholders' (deficit)......................... (36,564) (51,561) (94,908) (147,263) (197,494)
- -------------
(a) On March 31, 1995, the Company acquired WTVY-TV serving Dothan, Alabama and
Panama City, Florida. The statement of operations and other data does not
include information with respect to WTVY-TV prior to the date of
acquisition.
(b) On June 6, 1996, the Company acquired thirteen television stations. The
statement of operations and other data does not include information with
respect to these acquisitions prior to June 6, 1996.
(c) In January 1999, the Company effected a TBA in anticipation of the "Station
Swap" of KKTV and KCOY-TV. The statement of operations and other data for
the year ended December 31, 1999 includes information with respect to the
TBA.
(d) Net revenues reflect deductions from gross revenues for agency and national
sales representative commissions.
(e) Net gain on sale of stations includes $13.3 million as a result of the
"Station Swap" netted against a $0.2 million loss from the sale of KTVS-TV
(a satellite operation of KGWN-TV) and a $6.9 million expected loss on the
sale of KOSA-TV.
(f) Cash interest expense, net includes cash interest paid and normal
adjustments to accrued interest. Other interest expense includes accrued
interest added to long-term debt balances, deferred loan cost amortization
and write offs (except deferred loan cost write offs related to
extraordinary debt extinguishments), financing costs not consummated, and
accretion of discounts.
(g) Prior to June 1996, the Company had elected to be taxed as an S Corporation
for federal and state income tax purposes. The Company's election to be
taxed as an S Corporation terminated on June 6, 1996. Accordingly, while
the Company became subject to federal and state income taxes on that date,
the then sole stockholder of the Company is responsible for the payment of
income taxes on the Company's taxable income for any time prior to the
termination date.
(h) In 1995, the Company recorded an extraordinary gain from the early
extinguishment of debt comprised of a gain of $11.1 million reduced by
losses of $2.7 million of prepayment premiums and contingent payments and
$1.5 million of unamortized debt discount and deferred loan costs. In 1999,
the Company recorded an extraordinary loss of $12.5 million net of
applicable taxes of $8.4 million as a result of the early extinguishment of
debt associated with the completion of the tender offer for $135.0 million
of outstanding notes.
(i) Earnings (loss) per common share is computed by dividing income (loss)
after the deduction of preferred dividends and accretion of the redemption
prepayment premium and amortization of the initial warrants, by the
weighted average number of common shares outstanding. The effect of the
stock options and initial warrants has not been reflected in the
computation since their inclusion as common stock equivalents for both
basic and fully-diluted earnings (loss) per share was anti-dilutive.
(j) Broadcast cash flow is defined as operating income, excluding net income of
nonrecourse subsidiaries, before financial income as derived from the
consolidated statements of operations plus depreciation and amortization,
amortization of program broadcast rights, corporate expenses and noncash
compensation less payments on program broadcast liabilities and net gain on
sale of stations. The Company has included broadcast cash flow data because
(i) the information is a measurement utilized by lenders to measure the
Company's ability to service its debt and pay for capital expenditures,
(ii) the information is a measurement utilized by industry analysts to
determine a market value of the Company's television stations and (iii) the
information is a measurement industry analysts utilize when evaluating and
comparing the operating performance of the Company. Broadcast cash flow
does not purport to represent cash provided by operating activities as
reflected in the Company's Consolidated Financial Statements, is not a
measure of financial performance under generally accepted accounting
principles and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with generally accepted
accounting principles. Broadcast cash flow is also not reflected in the
- 21 -
<PAGE>
Company's consolidated statements of cash flows; but it is a common and
meaningful measure for comparison to other companies in the broadcast
industry. The amounts excluded from broadcast cash flow are significant
components in understanding and assessing the Company's results of
operations and cash flows. The term "broadcast cash flow" may not be the
same terminology utilized by other companies in the presentation of similar
information.
(k) Broadcast cash flow margin is defined as broadcast cash flow divided by net
revenues.
(l) Adjusted EBITDA is defined as operating income, excluding net income of
nonrecourse subsidiaries, before financial income as derived from the
consolidated statements of operations plus depreciation and amortization,
amortization of program broadcast rights and noncash compensation less
payments on program broadcast liabilities and net gain on sale of stations.
The Company has included Adjusted EBITDA data because (i) the information
is a measurement utilized by lenders to measure the Company's ability to
service its debt and pay for capital expenditures, (ii) the information is
a measurement utilized by industry analysts to determine a private market
value of the Company's television stations and (iii) the information is a
measurement industry analysts utilize when evaluating and comparing the
operating performance of the Company. Adjusted EBITDA does not purport to
represent cash provided by operating activities as reflected in the
Company's Consolidated Financial Statements, is not a measure of financial
performance under generally accepted accounting principles and should not
be considered in isolation or as a substitute for measures of performance
prepared in accordance with generally accepted accounting principles.
Adjusted EBITDA is also not reflected in the Company's consolidated
statements of cash flows; but it is a common and meaningful measure for
comparison to other companies in the broadcast industry. The amounts
excluded from Adjusted EBITDA are significant components in understanding
and assessing the Company's results of operations and cash flows. The term
"Adjusted EBIDTA" may not be the same terminology utilized by other
companies in the presentation of similar information.
(m) Adjusted EBITDA margin is defined as Adjusted EBITDA divided by net
revenues.
(n) Long-term debt is defined as notes payable (including the current portion
thereof), net of discount.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
OVERVIEW
The operating revenues of the Company are derived primarily from the sale
of advertising time and, to a lesser extent, from compensation paid by the
networks for broadcasting network programming and barter transactions for goods
and services. Revenue depends on the ability of the Company to provide popular
programming which attracts audiences in the demographic groups targeted by
advertisers, thereby allowing the Company to sell advertising time at
satisfactory rates. Revenue also depends significantly on factors such as the
national and local economy and the level of local competition.
In 1999, the Company reported net revenues of $140.4 million compared to
net revenues of $139.8 million in 1998 and $127.1 million in 1997. The results
for 1998 were favorably impacted by political revenue of $12.6 million compared
to $1.1 million in 1997 and $1.5 million in 1999. The Company had a net loss of
$28.3 million for 1999 compared to a net loss of $16.6 million for 1998 and a
net loss of $24.3 million for 1997. Adjusted EBITDA for 1999 was $50.1 million
as compared to $50.2 million for 1998 and $43.7 million for 1997.
Net revenues and operating cash flow of the Company are generally higher
during the fourth quarter of each year, primarily due to increased expenditures
by advertisers in anticipation of the holiday season, consumer spending, an
increase in viewership during this period, and political advertising
expenditures in even numbered years, and to a lesser extent, during the second
quarter of each year.
Time sales to local/regional advertisers and national advertisers
constitute the largest concentration of the Company's operating revenues and
represent approximately 88.1% of gross revenues in 1999 as compared to 87.2% in
1998. Excluding political advertising revenue, however, the percentage of gross
revenues attributable to local/regional advertising and national advertising of
the Company in 1997, 1998 and 1999 was 85.9%, 86.1% and 88.0%, respectively.
Approximately 57.0% of the gross revenues of the
- 22 -
<PAGE>
Company in 1999 were generated from local and regional advertising, which
is sold primarily by the Stations' sales staff, and the remainder of the
advertising revenues is comprised primarily of national advertising, which is
sold by national sales representatives retained by the Company. The Company
generally pays commissions to advertising agencies on local, regional and
national advertising and to national sales representatives on national
advertising. Net revenues reflect deductions from gross revenues for commissions
payable to advertising agencies and national sales representatives.
The Company's primary operating expenses are employee compensation,
programming, depreciation and amortization. Changes in compensation expense
result primarily from adjustments to fixed salaries based on employee
performance and inflation and, to a lesser extent, from changes in sales
commissions paid based on levels of advertising revenues. Programming expense
consists primarily of amortization of program rights. The Company purchases
first run and off-network syndicated programming on an ongoing basis. Under its
contract with the network, a network-affiliated station receives approximately
two-thirds of its daily programming from its network and in turn is compensated,
in most cases, by the network for carrying such programming with the network's
commercial content intact. Barter expense generally offsets barter revenue and
reflects the fair market value of goods and services received. The Company's
operating expenses (excluding depreciation and amortization) represent
approximately 64.9% of net revenues for 1999 as compared to 64.5% for 1998 and
65.9% of net revenues for 1997.
The Company has included Adjusted EBITDA and broadcast cash flow data
because such data is used by certain investors to measure a company's ability to
service debt. Adjusted EBITDA is used to pay principal and interest on long-term
debt and to fund capital expenditures. Adjusted EBITDA and broadcast cash flow
do not purport to represent cash provided by operating activities as reflected
in the Company's Consolidated Financial Statements, is not a measure of
financial performance under generally accepted accounting principles and should
not be considered in isolation or as a substitute for measures of performance
prepared in accordance with generally accepted accounting principles.
The Company believes that Adjusted EBITDA and broadcast cash flow
information discussed below provide meaningful information as to the performance
of the television stations owned by the Company, particularly information that
is presented on a Same Station basis. Changes from year to year indicate how the
Company has performed in its efforts to increase net sales and manage expenses
on an operating basis.
The following table sets forth certain historical results of the operations
and operating data for the periods indicated. The table reflects the operating
effects of the TBA associated with the exchange of KCOY-TV for KKTV (the
"Station Swap") only since January 1, 1999.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------
1997 1998 1999
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Operating income......................... $ 11,903 $ 18,851 $ 26,963
Add:
Amortization of program broadcast
rights........................... 6,401 6,758 8,127
Depreciation and amortization...... 31,380 30,830 28,520
Corporate expenses................. 3,787 4,643 4,510
Operating loss of BCI.............. - 147 141
Less:
Payments on program
broadcast liabilities........... (5,937) (6,399) (7,455)
Net gain on sale of stations...... - - (6,181)
-------- -------- --------
Broadcast cash flow1..................... $ 47,534 $ 54,830 $ 54,625
======== ======== ========
1 Excludes BCI, a nonrecourse subsidiary
</TABLE>
- 23 -
<PAGE>
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
The following table provides both historical information and Same Station
information for the year ended December 31, 1998 and 1999. The Same Station
information gives effect to the Station Swap as if the exchange was consummated
prior to January 1, 1998.
<TABLE>
<CAPTION>
HISTORICAL SAME STATION1
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
-------------------------------- --------------------------------
1998 1999 % CHANGE 1998 1999 % CHANGE
-------- ------- -------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Local/regional...................... $85,900 $92,269 7.4% $89,160 $91,892 3.1%
National............................ 41,570 48,901 17.6 45,065 48,817 8.3
Political........................... 12,551 1,476 (88.2) 11,113 1,476 (86.7)
Other............................... 20,640 19,238 (6.8) 20,581 18,355 (10.8)
-------- ------- ----- ------- ------- ------
160,661 161,884 0.8 165,919 160,540 (3.2)
Direct costs........................ 20,828 21,478 3.1 21,727 21,344 (1.8)
-------- ------- ----- ------- ------- ------
Net revenues........................ $139,833 $140,406 0.4% $144,192 $139,196 (3.5)%
Operating expenses:
Selling, technical and
program expenses.............. 64,651 66,793 3.3 70,091 66,553 (5.0)
General and administrative...... 20,858 19,801 (5.1) 18,115 18,101 (0.1)
Depreciation and amortization. 30,830 28,520 (7.5) 31,306 28,676 (8.4)
Corporate....................... 4,643 4,510 (2.9) 4,668 4,510 (3.4)
-------- ------- ----- ------- ------- ------
120,982 119,624 (1.1) 124,180 117,840 (5.1)
Net gain (loss) on sale of stations. - 6,181 100.0 - (7,142) (100.0)
-------- ------- ----- ------- ------- ------
Operating income................ $ 18,851 $26,963 43.0% $20,012 $14,214 (29.0)%
======== ======= ===== ======= ======= ======
Broadcast cash flow 1............... $ 54,830 $54,625 (0.4)% $56,328 $55,265 (1.9)%
Broadcast cash flow margin 1........ 39.2% 39.0% 39.1% 39.7%
Adjusted EBITDA 1................... $ 50,187 $50,115 (0.1)% $51,660 $50,755 (1.8)%
Adjusted EBITDA margin 1............ 35.9% 35.8% 35.8% 36.5%
1 Excludes BCI, a nonrecourse subsidiary
</TABLE>
Net revenues for the year ended December 31, 1999 increased $0.6 million or
0.4% to $140.4 million from $139.8 million for the year ended December 31, 1998.
Gross revenues excluding political advertising revenue increased $12.3 million
or 8.3% to $160.4 million from $148.1 million for the year ended December 31,
1998. On a Same Station basis, net revenues for the year ended December 31, 1999
were $139.2 million as compared to $144.2 million for the year ended December
31, 1998. Net revenues for the year ended December 31, 1999 reflected an
increase in advertising demand which offset the absence of the Winter Olympics
on the Company's 12 CBS stations and a decline in political advertising both of
which positively affected the year ended December 31, 1998. Political
advertising revenue for the year ended December 31, 1999 was $1.5 million
compared to $12.6 million for the year ended December 31, 1998.
Operating expenses for the year ended December 31, 1999 decreased $1.4
million or 1.1% to $119.6 million from $121.0 million for the year ended
December 31, 1998. The decrease in operating expenses was attributable to a
decrease in depreciation and amortization, and payroll related costs which were
offset in part by increased costs due to the effect of the Station Swap. As a
percentage of net revenues, operating expenses decreased to 85.2% for the year
ended December 31, 1999 compared to 86.5% for the same period ending 1998. On a
Same Station basis, operating expenses for the year ended December 31, 1999
decreased $6.4 million or 5.1% to $117.8 million from $124.2 million for the
year ended December 31, 1998. The decrease in operating expenses resulted
primarily from a reduction in depreciation and amortization, promotional
expenses and decreased payroll-related costs.
- 24 -
<PAGE>
Net gain (loss) on sale of stations, includes $13.3 million as a result of
the Station Swap where the assets of KCOY-TV with a fair market value of $24.3
million were exchanged for the assets of KKTV. The book value of the KCOY-TV
assets were $10.8 million and related fees were $0.2 million. Gain on the sale
of stations also includes a $0.2 million loss on the sale of KTVS-TV (a
satellite operation of KGWN-TV) and an anticipated $6.9 million loss on the sale
of KOSA-TV.
Operating income for the year ended December 31, 1999 increased $8.1
million or 43.0% to $27.0 million from $18.9 million for the year ended December
31, 1998. On a Same Station basis, operating income for the year ended December
31, 1999 decreased $5.8 million or 29.0% to $14.2 million from $20.0 million for
the year ended December 31, 1998.
Financial (expenses), net for the Company for the year ended December 31,
1999 increased $0.6 million or 1.4% to $44.1 million from $43.5 million in the
year ended December 31, 1998.
Income tax benefit for the Company for the year ending December 31, 1999
was $1.4 million compared to $8.1 million for the year ended December 31, 1998.
The decrease in income tax benefit is due in part to the $13.3 million gain on
the sale of KCOY-TV. In addition, the $6.9 million anticipated loss on the sale
of KOSA-TV was entirely nondeductible as it consisted of a write down of
nondeductible goodwill, which contributed to the decrease in income tax benefit
for the year ended December 31, 1999.
Extraordinary loss was $12.5 million for the year ended December 31, 1999,
net of applicable income taxes of $8.4 million. The loss was reflected as a
result of the early extinguishment of debt associated with the completion of the
tender offer for $135.0 million of Benedek Broadcasting's outstanding 11 7/8%
Senior Secured Notes due 2005 (the "Notes"). Total consideration of $149.3
million (including a premium of $14.3 million), fees of the transaction and a
write-off of deferred loan costs caused the loss.
Net loss for the Company was $28.3 million for the year ended December 31,
1999 as compared to a net loss of $16.6 million for the year ended December 31,
1998.
Broadcast cash flow for the year ended December 31, 1999 decreased $0.2
million or 0.4% to $54.6 million from $54.8 million for the year ended December
31, 1998. As a percentage of net revenues, broadcast cash flow margin decreased
to 39.0% for the year ended December 31, 1999 from 39.2% for the year ended
December 31, 1998.
On a Same Station basis, broadcast cash flow for the year ended December
31, 1999 decreased $1.0 million or 1.9% to $55.3 million from $56.3 million for
the year ended December 31, 1998. As a percentage of net revenues, broadcast
cash flow margin on a Same Station basis increased to 39.7% for the year ended
December 31, 1999 from 39.1% for the year ended December 31, 1998.
- 25 -
<PAGE>
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
The following table provides historical information:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1997 1998 % CHANGE
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Local/regional......................... $81,739 $ 85,900 5.1%
National............................... 42,284 41,570 (1.7)
Political.............................. 1,103 12,551 1,037.9
Other.................................. 20,440 20,640 1.0
-------- -------- -------
145,566 160,661 10.4
Direct costs........................... 18,493 20,828 12.6
-------- -------- -------
Net revenues............................ $127,073 $139,833 10.0%
Operating expenses:
Selling, technical and program
expenses......................... 60,385 64,651 7.1
General and administrative......... 19,618 20,858 6.3
Depreciation and amortization...... 31,380 30,830 (1.8)
Corporate.......................... 3,787 4,643 22.6
-------- -------- -------
115,170 120,982 5.0
-------- -------- -------
Operating income............... $ 11,903 $ 18,851 58.4%
======== ======== =======
Broadcast cash flow 1.................. $ 47,534 $ 54,830 15.3%
Broadcast cash flow margin 1........... 37.4% 39.2%
Adjusted EBITDA 1...................... $ 43,747 $ 50,187 14.7%
Adjusted EBITDA margin 1............... 34.4% 35.9%
1 Excludes BCI, a nonrecourse subsidiary
</TABLE>
Net revenues for the year ended December 31, 1998 increased $12.7 million
or 10.0% to $139.8 million from $127.1 million for the year ended December 31,
1997. Gross revenues excluding political advertising revenue increased $3.6
million or 2.5% to $148.1 million from $144.5 million for the year ended
December 31, 1997. Net revenues for the year ended December 31, 1998 were
positively affected by political spending and the Winter Olympics shown on the
Company's 12 CBS stations. Political advertising revenue for the year ended
December 31, 1998 increased by $11.5 million to $12.6 million compared to $1.1
million in 1997. Net revenues for the second half of 1998 were adversely
affected by a General Motors Corporation strike and a continued general weakness
in revenue from national advertising. Gross revenues excluding political
advertising for the second half of 1998 decreased $3.1 million or 4.2% to $71.1
million from $74.2 million for the six months ended December 31, 1997.
Net revenues during the year ended December 31, 1998 continued to be
adversely affected by weakness in advertising revenue for the Company's six ABC
affiliated stations. Net revenues of the Company's CBS and NBC affiliated
stations increased by 12.0% and 12.0%, respectively, while net revenues of the
Company's ABC affiliated stations increased by 5.2%.
Operating expenses for the year ended December 31, 1998 increased $5.8
million or 5.0% to $121.0 million from $115.2 million for the year ended
December 31, 1997. The increase in expenses was due in part to increased
compensation expense as the Company expanded news operations during the first
half of 1998, and increased programming expense. As a percentage of net
revenues, operating expenses decreased to 86.5% from 90.6% in the year ended
December 31, 1997.
Operating income for the year ended December 31, 1998 increased $7.0
million or 58.4% to $18.9 million from $11.9 million for the year ended December
31, 1997.
Financial (expenses), net for the Company for the year ended December 31,
1998 decreased $4.7 million or 9.8% to $43.5 million from $48.2 million in the
year ended December 31, 1997 due to the lower interest rates on its credit
facility.
- 26 -
<PAGE>
Income tax benefit for the year ended December 31, 1998 for the Company was
$8.1 million compared to $12.0 million for the year ended December 31, 1997. The
tax effect of the excess of book depreciation over tax depreciation and a
current period net operating loss for tax purposes were the primary factors
resulting in the income tax benefit for the year ended December 31, 1998
Net loss for the Company was $16.6 million for the year ended December 31,
1998 as compared to a net loss of $24.3 million for the year ended December 31,
1997.
Broadcast cash flow for the year ended December 31, 1998 increased $7.3
million or 15.3% to $54.8 million from $47.5 million for the year ended December
31, 1997. As a percentage of net revenues, broadcast cash flow margin increased
to 39.2% for the year ended December 31, 1998 from 37.4% for the year ended
December 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows from Operating Activities is the primary source of liquidity for
the Company and were $19.3 million for the year ended December 31, 1999 compared
to $20.0 million for the year ended December 31, 1998. Cash payments of interest
expense totaled $30.3 million for the year ended December 31, 1999 as compared
to $27.1 million for the year ended December 31, 1998 and resulted in the
decrease in cash flows from operating activities.
Cash Flows from Investing Activities were $(28.3) million for the year
ended December 31, 1999, as compared to $(6.6) million for the year ended
December 31, 1998. The change in cash flows from investing activities for the
year ended December 31, 1999 was the result of a $9.4 million outlay for the
purchase of KKTV and $10.3 million in a deposit and costs of the pending
purchase of KAKE-TV and WOWT-TV.
Cash Flows from Financing Activities were $8.0 million for the year ended
December 31, 1999 compared to $(11.8) million for the year ended December 31,
1998. On May 20, 1999, Benedek Broadcasting borrowed $275.0 million against a
new credit facility (the "Credit Facility"), which was amended June 18, 1999.
The proceeds were used to pay off the existing term loans totaling $108.3
million and redeem 100% of the Notes for $149.3 million, which consisted of
$135.0 million in principal and $14.3 million in premium. Fees and expenses
associated with the redemption were $0.6 million. The Company also repurchased a
portion of its 13 1/4% Senior Subordinated Discount Notes due 2006 (the
"Discount Notes") with a face amount of $3.0 million for $2.6 million. In
addition, the Company acquired its warrants to purchase an aggregate of 185,000
shares of Class A common stock for $3.0 million. Of the 600,000 initial warrants
issued during 1996, 365,000 warrants remain outstanding at December 31, 1999.
For the year ended December 31, 1998, cash flows from financing
activities included $100.0 million of proceeds from the issuance of the
Company's 11 1/2% Exchangeable Senior Preferred Stock (the "Senior Preferred
Stock") issued in June 1998. The proceeds were used to redeem the Company's
15.0% Exchangeable Redeemable Senior Preferred Stock due 2007 totaling $92.8
million (including $12.1 million representing premiums relating to the
redemption) and to pay fees and expenses totaling $4.3 million associated with
the offering. Cash flows from financing activities for the year ended December
31, 1998 also included $0.5 million to acquire warrants to purchase 50,000
shares of the Company's Class A common stock.
The Credit Facility includes an aggregate borrowing limit of $310.0 million
consisting of a $220.0 million term loan (the "Term Loan") and a $90.0 million
revolving credit facility (the "Revolver"). The Credit Facility contains certain
financial covenants, including, but not limited to, covenants related to
interest coverage, total and senior leverage ratios and fixed charge ratio. In
addition, the Credit Facility contains other affirmative and negative covenants
relating to, among other things, liens, payments on other debt, restricted
junior payments (excluding distributions from Benedek Broadcasting to the
- 27 -
<PAGE>
Company) transactions with affiliates, mergers and acquisitions, sales of
assets, guarantees and investments. The Credit Facility also contains customary
events of default for highly-leveraged financings, including certain changes in
ownership or control of the Company.
At December 31, 1999, the Company had borrowed $220.0 million under the
Term Loan and $58.5 million under the Revolver. At December 31, 1999, the
Company could have borrowed approximately an additional $4.2 million under the
Revolver. During the year ended December 31, 1999, the highest outstanding
balance under the Revolver was $58.5 million. The Company's ability to draw
funds under the Revolver is limited by its level of earnings and its ability to
meet certain financial covenants.
The commitment under the Revolver will be permanently reduced over the
period from June 2002 to maturity in 2007, as follows: 2002 - $10.1 million;
2003 - $13.5 million; 2004 - $16.9 million; 2005 - $21.4 million; 2006 - $22.5
million; and 2007 - $5.6 million. In addition, the commitment under the Revolver
will be permanently reduced in certain circumstances including upon the sales of
certain assets and the issuance of certain debt or equity securities and from
Excess Cash Flow (as defined in the Credit Facility). The Company has the right
to pay off the Revolver without penalty in increments of $1.0 million.
The Term Loan and the Revolver bear interest initially at the Company's
option, at a base rate plus 2.25% and 1.75%, respectively, or at a LIBOR rate
plus 3.25% and 2.75%, respectively. The margins above the base rate and the
LIBOR rate at which the Term Loan and the Revolver bear interest are subject to
reductions based on certain leverage ratios. The unused portion of the Revolver
is subject to a commitment fee ranging from 0.75% per annum to 0.375% per annum
based on certain leverage ratios.
The Company is required to make scheduled amortization payments on the Term
Loan, as follows: 2002 - $1.7 million; 2003-$2.2 million; 2004 - $2.2 million;
2005 - $2.2 million; 2006 - $2.2 million; and 2007 - $209.5 million. In
addition, the Company is required to make prepayments on the Term Loan and the
Revolver under certain circumstances, including upon the sale of certain assets
and the issuance of certain debt or equity securities. Beginning in 2002, the
Company is required to make prepayments on the Term Loan and the Revolver in an
amount equal to 50% of Excess Cash Flow.
The Term Loan and the Revolver are secured by certain of the Company's
present and future assets. The Company and its subsidiaries, other than BCI,
guaranteed the obligation of Benedek Broadcasting under the Credit Facility. The
ownership interest of Benedek Broadcasting in its subsidiaries, including
Benedek License Corporation ("BLC"), which holds the FCC licenses and
authorizations for the Stations, has been pledged as collateral for the loans.
In 1996, the Company issued Discount Notes in the principal amount of
$170.0 million. The Discount Notes mature on May 15, 2006 and yield 13.25% per
annum with no cash interest accruing prior to May 15, 2001. Thereafter, cash
interest will accrue until maturity payable semiannually, commencing November
15, 2001. On or after May 15, 2000, the Discount Notes are redeemable at the
option of the Company, in whole or in part, at predetermined redemption prices
and under specified conditions. The Discount Notes are subordinated to all other
senior debt of the Company. The Discount Notes contain various restrictive
covenants.
During July 1999, the Company retired a portion of its Discount Notes with
a face amount of $3.0 million. The Discount Notes had an accreted value of $2.4
million and were purchased for a total of $2.6, million which included a $0.2
premium payment for early retirement.
Dividends on the Senior Preferred Stock are cumulative and payable
quarterly commencing August 15, 1998 at a rate of 11.5% of the then effective
liquidation preference per share. The Company, at its option, may pay dividends
on any dividend payment date occurring on or before May 15, 2003 either in cash
or by adding such dividends to the then effective liquidation preference. The
Company has been adding the dividends to the liquidation preference from
issuance date through December 31, 1999. The
- 28 -
<PAGE>
Senior Preferred Stock is not redeemable until May 15, 2003 at which time
cash dividends are required at a rate of 11.5% of the then effective liquidation
preference per share. Thereafter, the Company has the option to redeem these
shares in whole or in part at predetermined redemption prices. The Senior
Preferred Stock contains various restrictive covenants relating to limitations
on dividends, transactions with affiliates, further issuance of debt, and the
sales of assets, among other things. Notwithstanding the foregoing, until May
15, 2001, in the event of a public equity offering, a Required Disposition (as
defined) or other specified circumstances, the Company may redeem up to 25.0% of
the initial liquidation preference at 111.50% of the then effective liquidation
preference, provided at least $75.0 million in liquidation preference remains
outstanding. The Credit Facility currently prohibits the Company from making
cash payments with respect to the Senior Preferred Stock at any time.
Accordingly, the Company currently intends not to pay cash dividends on the
Senior Preferred Stock prior to May 15, 2003.
Dividends on the Junior Discount Preferred Stock due July 1, 2008 (the
"Junior Preferred Stock") are payable to the holders of the Junior Preferred
Stock at 7.92% per annum, cumulative June 5, 2001 and thereafter at increasing
rates up to 18%. The Junior Preferred Stock had an aggregate liquidation
preference of $59.5 million at December 31, 1999. Since the Company intends to
redeem the Junior Preferred Stock prior to June 5, 2001, dividends are being
accrued at the initial rate. The dividends on the Junior Preferred Stock are
cumulative. Prior to and including June 5, 2001, dividend payments on the Junior
Preferred Stock are not permitted to be made in cash and instead will be added
automatically to the liquidation preference and as a result will be deemed paid
in full and will not accumulate. For all dividend payment dates with respect to
the Junior Preferred Stock prior to and including June 5, 2001, the Company will
pay such dividends by adding the amount thereof to the then effective
liquidation preference of the Junior Preferred Stock.
The Junior Preferred Stock is subject to mandatory redemption in whole on
July 1, 2008 and the Company has the option to redeem these shares in whole or
in part at a price equal to the sum of the liquidation value per share plus an
amount equal to all accumulated and unpaid dividends per share to the date of
redemption.
The Company is a holding company that derives all of its operating income
and Adjusted EBITDA from its subsidiary, Benedek Broadcasting. As a holding
company, the Company's ability to pay its obligations, including its obligation
to pay interest on and principal of the Discount Notes, whether at maturity,
upon a change of control or otherwise, is dependent primarily upon receiving
dividends and other payments or advances from Benedek Broadcasting. Benedek
Broadcasting is a separate and distinct legal entity and has no obligation,
contingent or otherwise, to pay any amounts to the Company or to make funds
available to the Company for debt service or any other obligation.
The Company anticipates that Adjusted EBITDA of the Company will be
sufficient to finance the operating requirements of the Stations, debt service
requirements of the Credit Facility and presently anticipated capital
expenditures for at least the period until the Company is required to make cash
payments in respect of the Discount Notes. The Company expects that at that time
it will be necessary to refinance the Discount Notes and the Junior Preferred
Stock. Such refinancing will also require amending or refinancing the Credit
Facility since it currently prohibits the repayment or redemption of the
Discount Notes or the redemption of the Junior Preferred Stock.
RECENT DEVELOPMENTS
On November 19, 1999, the Company entered into an Asset Purchase Agreement
with Chronicle and on December 10, 1999, the Company entered into an Asset
Exchange Agreement with WGRC. Pursuant to these agreements, WGRC will acquire
the television broadcast assets of WOWT-TV and KAKE-TV, Chronicle's television
stations in Omaha, Nebraska and Wichita, Kansas, respectively, and then
immediately transfer the same to the Company in exchange for the television
broadcast assets of WWLP-TV, the Company's station in Springfield,
Massachusetts. The proposed transaction will include an
- 29 -
<PAGE>
$18.0 million payment by the Company to WGRC. At December 31, 1999, the Company
had deposited $10.0 million in an escrow account related to this transaction.
The remaining $8.0 million will be funded from the proceeds related to the sale
of KOSA-TV as discussed below. The transaction will be structured, to the extent
feasible, as a tax-free exchange pursuant to Section 1031 of the Internal
Revenue Code and recorded under the purchase method of accounting. The
transaction has been approved by the FCC and is expected to close in the first
quarter of 2000.
On December 15, 1999, the Company entered into an Asset Purchase Agreement
with ICA pursuant to which the Company would sell the television broadcast
assets of KOSA-TV, in Odessa, Texas to ICA for a cash payment of $8.0 million.
Accordingly, the Company recorded a lower of cost or market adjustment of
approximately $6.9 million in 1999 to write down the assets of KOSA-TV to the
sales price less estimated selling costs. This transaction was completed on
March 21, 2000.
In January 2000, the FCC granted its approval to assign all of the FCC
licenses and authorizations from WMTV License Co., LLC ("License Co.") to BLC.
License Co. was wholly owned by Philip A. Jones, solely in his capacity as
trustee under The WMTV Trust, which was formed to hold the assets of television
station WMTV (TV), Madison, Wisconsin to comply with FCC rules and regulations.
Effective as of February 29, 2000, The WMTV Trust transferred all of the assets
of WMTV to Benedek Broadcasting, and License Co. transferred all of the FCC
licenses and authorizations to BLC.
The Company amended the Credit Facility as of March 23, 2000. The amendment
modified the Senior Leverage Ratio (as defined in the Credit Facility)
applicable for all fiscal quarters of the year ending December 31, 2000.
INCOME TAXES
For the year ended December 31, 1999, the Company had an income tax benefit
of $1.4 million compared to $8.1 million for the year ended December 31, 1998.
The decrease in income tax benefit is due in part to the $13.3 million gain on
the sale of KCOY-TV. In addition, the $6.9 million anticipated loss on the sale
of KOSA-TV was entirely nondeductible as it consisted of a write down of
nondeductible goodwill, which contributed to the decrease in income tax benefit
for the year ended December 31, 1999.
Under the provisions of the Internal Revenue Code, the Company has
approximately $26.2 million of actual net operating loss carryforwards available
to offset future tax liabilities. These net operating loss carryforwards expire
between 2007 through 2019.
PENDING ADOPTION OF ACCOUNTING STANDARD
The FASB (Financial Accounting Standards Board) has issued FASB statement
No. 133 "Accounting for Derivative Instruments and Hedging Activities" which the
Company will be required to adopt for its fiscal year ending December 31, 2001.
This pronouncement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, (collectively referred to as derivatives) and for hedging activities.
It requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. This pronouncement is not expected to have a significant impact
on the Company's financial statements since the Company's only financial
instrument is an interest rate cap.
- 30 -
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
During August 1999, in accordance with certain covenants of the Credit
Facility, the Company entered into an interest rate cap agreement which matures
in September 2001, to reduce the impact of changes in interest rates on its
floating-rate long-term debt. That agreement effectively entitles the Company to
receive from a financial institution the amount, if any, by which the British
Bankers' Association interest settlement rates ("settlement rate") for U.S.
dollar deposits exceeds 8.00% on a notional amount totaling $70,000,000 subject
to an amortization schedule. As of December 31, 1999, the settlement rate was
6.18%. Although the Company is exposed to credit loss in the event of
nonperformance by the counterparty on the interest rate cap, management does not
expect nonperformance by the counterparty.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See pages F-1 and S-2.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
- 31 -
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
The following table sets forth certain information with respect to each
director and executive officer of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
A. Richard Benedek...................... 60 Chairman, Chief Executive Officer and Director
K. James Yager.......................... 64 President, Chief Operating Officer and Director
Ronald L. Lindwall...................... 54 Senior Vice President-Finance, Chief Financial
Officer, Treasurer, Secretary and Director
Terrance F. Hurley...................... 44 Senior Vice President of Benedek Broadcasting
Raymond P. Maselli...................... 58 Senior Vice President of Benedek Broadcasting
Clyde G. Payne.......................... 63 Senior Vice President of Benedek Broadcasting
Raymond J. Schonbak..................... 57 Senior Vice President of Benedek Broadcasting
Keith L. Bland.......................... 44 Senior Vice President-Planning and Technology of
Benedek Broadcasting
Mary L. Flodin.......................... 44 Vice President and Controller
Jay Kriegel............................. 59 Director
Paul S. Goodman......................... 45 Director
</TABLE>
Mr. A. Richard Benedek has been engaged in the television broadcasting
industry for over 20 years. Mr. Benedek is the Chairman and Chief Executive
Officer of the Company, a position he has held since the formation of the
Company in 1996. Mr. Benedek has served as Chairman and Chief Executive Officer
of Benedek Broadcasting since its formation in January 1979. From the formation
of Benedek Broadcasting until March 1995, Mr. Benedek also served as President
of Benedek Broadcasting. Prior to his activities in the television broadcasting
industry, Mr. Benedek was a partner in the investment banking firm of Bear,
Stearns & Co. Inc. Mr. Benedek currently serves on the board of directors of the
ABC Affiliates Association.
Mr. K. James Yager has been engaged in the television broadcasting industry
for over 40 years. Mr. Yager is the President and Chief Operating Officer of the
Company, positions he has held since the formation of the Company in 1996. Mr.
Yager has served as President of Benedek Broadcasting since March 1995. From
1987 until he became President, Mr. Yager served as Executive Vice President of
Benedek Broadcasting. Mr. Yager has been a director of Benedek Broadcasting
since 1986. Mr. Yager was employed by Cosmos Broadcasting from 1960 until 1980,
most recently as general manager of its television stations in Columbia, South
Carolina and New Orleans, Louisiana. From 1980 until 1986, Mr. Yager was
Executive Vice President and Chief Operating Officer of Spartan Radiocasting,
which then owned three television stations and four radio stations. Mr. Yager
was elected Chairman of the Joint Board of the National Association of
Broadcasters (NAB) in June of 1999 after serving for a year as Chairman of the
NAB's Television Board. Mr. Yager also serves on the board of directors of
Broadcast Music, Inc. and the Television Bureau of Advertising.
Mr. Ronald L. Lindwall is the Senior Vice President-Finance, Chief
Financial Officer, Secretary and Treasurer of the Company, positions he has held
since the formation of the Company in 1996. Mr. Lindwall has also held the same
positions at Benedek Broadcasting since March 1995. From 1990 until March 1995,
Mr. Lindwall served as Senior Vice President, Chief Financial Officer and
Treasurer of Benedek Broadcasting. Mr. Lindwall has been a director of Benedek
Broadcasting since 1994. From 1982 to 1990, Mr. Lindwall was a partner at the
accounting firm of McGladrey & Pullen.
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<PAGE>
Mr. Terrance F. Hurley has served as Senior Vice President of Benedek
Broadcasting since May 1996. From December 1995 until he became Senior Vice
President, Mr. Hurley served as Vice President/General Manager of KDLH-TV
serving Duluth, Minnesota and Superior, Wisconsin. Mr. Hurley also served as
General Manager of KDLH-TV from October 1994 until December 1995 and General
Sales Manager of KHQA-TV serving Quincy, Illinois and Hannibal, Missouri from
May 1993 until December 1995. From 1991 until May 1993, Mr. Hurley was employed
by Dix Communications as the General Sales Manager of KAAL-TV, serving
Rochester-Austin, Minnesota. Mr. Hurley currently serves on the 100 Plus
Committee of the National Association of Broadcasters and the television retail
advertising committee of the board of directors of the Television Bureau of
Advertising. He is also a member of the CBS Advisory Board.
Mr. Raymond P. Maselli has served as Senior Vice President of Benedek
Broadcasting since March 1997. From 1989 until he became Senior Vice President,
Mr. Maselli served as Vice President, General Manager of WYTV-TV in Youngstown,
Ohio. Mr. Maselli was President and General Manager of WGRZ-TV of Buffalo, New
York from 1988-1989. He was the Vice President of Sales and Programming for
WGRZ-TV from 1983 to 1988.
Mr. Clyde G. Payne has been engaged in the television broadcasting industry
for 40 years. Mr. Payne was promoted to Senior Vice President of Benedek
Broadcasting effective March 1997. From March 1995 until February 1997, he
served as Divisional Vice President of Benedek Broadcasting. Mr. Payne also
served as General Manager of WBKO-TV, serving Bowling Green, Kentucky, from 1970
until 1997. Mr. Payne was also part owner of WBKO-TV from 1976 until the Station
was acquired by the Company in 1983. Mr. Payne has served as chairman of the
Arbitron Television Advisory Counsel and the ABC Affiliates Association, as well
as Vice Chairman of the Television Board of the National Association of
Broadcasters.
Mr. Raymond J. Schonbak has served as Senior Vice President of Benedek
Broadcasting since April 1997. Mr. Schonbak was the founder and President of US
Broadcast Group of Shelton, Connecticut from 1995 to 1997. He served as the
Chief Executive Officer of Triad Communications of San Francisco, California
from 1991 to 1995.
Mr. Keith L. Bland has been engaged in the television broadcasting industry
for over 25 years. Mr. Bland has served as Senior Vice President-Planning and
Technology of Benedek Broadcasting since January 1996. From March 1995 until
January 1996, Mr. Bland served as Vice President and General Manager of WTAP-TV
serving Parkersburg, West Virginia. Mr. Bland also served as General Manager of
WTAP-TV from January 1990 until March 1995, General Sales Manager of WIFR-TV
serving Rockford, Illinois from September 1989 until January 1990 and
Local/Regional Sales Manager of WIFR-TV from July 1987 until September 1989.
Ms. Mary L. Flodin has served as Vice President and Controller of the
Company since its formation in 1996. Ms. Flodin has also held the same positions
at Benedek Broadcasting since 1990. From 1988 to 1990, Ms. Flodin served as
Controller of Benedek Broadcasting. From 1983 to 1988, Ms. Flodin served in
various financial capacities as Vice President of AMCORE Financial, Inc. Ms.
Flodin currently serves as a director of the Broadcast Cable Financial Managers'
Association.
Mr. Jay L. Kriegel has been engaged in the communications industry for over
20 years. Since March 1994, Mr. Kriegel has been a counselor with the public
relations firm of Abernathy MacGregor Group and its predecessor firm. From 1988
to 1994, Mr. Kriegel was Senior Vice President of CBS Inc. Mr. Kriegel has
served as a director of Benedek Broadcasting since May 1994 and as a director of
the Company since its formation in 1996.
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<PAGE>
Mr. Paul S. Goodman has been corporate counsel to Benedek Broadcasting
since 1983 and the Company since its formation in 1996. Since April 1993, Mr.
Goodman has been a member of the law firm of Shack & Siegel, P.C. From January
1990 to April 1993, Mr. Goodman was a member of the law firm of Whitman &
Ransom. Mr. Goodman has served as a director of Benedek Broadcasting since
November 1994 and as a director of the Company since its inception.
All directors hold office until their successors are duly elected and
qualify. Executive officers of the Company are appointed by the Board of
Directors and serve at the Board's discretion. In 1999, the Company paid each
director who is not an employee of the Company $2,500 per quarter and $500 per
Board meeting for his services as a director. No reportable family relationship
exists between any of the executive officers or directors of the Company.
ITEM 11. EXECUTIVE COMPENSATION.
EXECUTIVE COMPENSATION.
The following table sets forth certain information concerning the
compensation paid to the Company's Chief Executive Officer and the other five
most highly-compensated executives during the fiscal years ended December 31,
1999, December 31, 1998 and December 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------
OTHER ALL
ANNUAL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) COMPENSATION($)(a)
- --------------------------- ---- --------- -------- --------------- ------------------
<S> <C> <C> <C> <C> <C>
A. Richard Benedek, Chairman and 1999 217,110 -- -- 12,671
Chief Executive Officer 1998 916,667 -- -- 11,326
1997 750,000 -- -- 11,218
K. James Yager, President and Chief Operating
Officer 1999 585,000 55,000 -- 15,172
1998 542,667 -- -- 14,522
1997 415,500 -- -- 14,875
Ronald L. Lindwall, Senior Vice President- 1999 219,308 -- -- 6,379
Finance, Chief Financial Officer, Secretary 1998 199,231 -- -- 4,180
and Treasurer 1997 174,327 25,000 -- 4,555
Terrance F. Hurley, Senior Vice President 1999 258,615 -- 53,479(b) 5,601
1998 218,615 -- -- 4,897
1997 174,327 -- -- 3,530
Raymond P. Maselli, Senior Vice President 1999 214,481 -- 22,311(c) 7,883
1998 199,231 -- -- 7,365
1997 174,352 -- -- 7,703
Raymond J. Schonbak, Senior Vice
President 1999 298,269 -- -- 11,504
1998 250,000 -- -- 9,504
1997 182,693 -- 99,561(d) 5,544
- --------------
(a) Represents the amount of the Company's contribution under its 401(k) plan
and life insurance premiums.
(b) Represents relocation expenses ($24,393), amounts reimbursed for the
payment of taxes ($11,942), living expenses ($10,047), personal use of
company vehicle and medical insurance.
(c) Represents relocation expenses ($10,514), amounts reimbursed for the
payment of taxes ($5,148), personal use of company vehicle and medical
insurance.
(d) Represents relocation expenses ($63,554), amounts reimbursed for the
payment of taxes ($31,116), personal use of company vehicle and medical
insurance.
</TABLE>
- 34 -
<PAGE>
EMPLOYMENT AGREEMENTS
Mr. Benedek is employed by Benedek Broadcasting pursuant to an employment
agreement that expires May 31, 2000. During the term of the agreement, Mr.
Benedek is to be paid at a rate per annum of not less than $525,000. In December
1998, the Company agreed with the lenders under its then existing Credit
Agreement that the amounts permitted to be paid as compensation to Mr. A.
Richard Benedek under the Credit Agreement could be paid to him as loans
instead. The Credit Facility also permits such loans. The employment agreement
requires Mr. Benedek to devote substantially all of his business time to the
business of Benedek Broadcasting and precludes Mr. Benedek from engaging in
activities competitive with the business of Benedek Broadcasting throughout the
term of the employment agreement.
Mr. Yager is employed by Benedek Broadcasting pursuant to an employment
agreement that expires May 31, 2000. During the term of the agreement, Mr. Yager
is to be paid at a rate per annum of not less than $400,000. The employment
agreement requires Mr. Yager to devote his full time to the business of Benedek
Broadcasting and precludes Mr. Yager from engaging in activities competitive
with the business of Benedek Broadcasting throughout the term of the employment
agreement.
Mr. Lindwall was employed by Benedek Broadcasting pursuant to an employment
agreement that expired May 31, 1999. During the term of the agreement, Mr.
Lindwall was to be paid at a rate per annum of not less than $150,000. The
employment agreement required Mr. Lindwall to devote his full time to the
business of Benedek Broadcasting. Mr. Lindwall continues to be employed by
Benedek Broadcasting without an employment agreement.
Mr. Hurley was employed by Benedek Broadcasting pursuant to an employment
agreement that expired May 31, 1999. During the term of the agreement, Mr.
Hurley was to be paid at a rate per annum of not less than $150,000. The
employment agreement required Mr. Hurley to devote his full time to the business
of Benedek Broadcasting and precluded Mr. Hurley from engaging in activities
competitive with the business of Benedek Broadcasting throughout the term of the
employment agreement and for a period of one year thereafter with respect to
designated market areas then served by a television station owned by Benedek
Broadcasting. Mr. Hurley continues to be employed by Benedek Broadcasting
without an employment agreement.
1999 STOCK OPTION PLAN
The Company's 1999 Stock Option Plan (the "Plan") provides for granting of
stock options to employees, directors, consultants and advisors of the Company
and its subsidiaries. The Plan is intended to encourage stock ownership by
employees, directors, consultants and advisors of the Company and its
subsidiaries and thereby enhance their proprietary interest in the Company.
Subject to the provisions of the Plan, the Board of Directors determines which
of the eligible directors, employees, consultants and advisors receive stock
options, the terms, including applicable vesting periods, of such options, and
the number of shares for which such options are granted.
The total number of shares of Class B common stock that may be purchased
pursuant to options under the Plan shall not exceed 240,000. The option price
per share with respect to each such option is determined by the Board and
generally is not less than 100% of the fair market value of the Class B common
stock on the date such option is granted as determined by the Board. The Plan
terminates on December 31, 2008, unless terminated earlier by the Board.
- 35 -
<PAGE>
The following table sets forth certain information concerning the option
grants under the Plan for the Chief Executive Officer and the other five most
highly-compensated executives during the year ended December 31, 1999.
<TABLE>
<CAPTION>
% OF EXERCISE
NUMBER OF 1999 PRICE PER
NAME AND PRINCIPAL POSITION OPTIONS (a) GRANTS SHARE (b)
- --------------------------- ----------- ------- ----------
<S> <C> <C> <C>
A. Richard Benedek, Chairman and
Chief Executive Officer - - % $ -
K. James Yager, President and Chief Operating
Officer - - -
Ronald L. Lindwall, Senior Vice President-
Finance, Chief Financial Officer, Secretary
and Treasurer 25,000 15.2 15
Terrance F. Hurley, Senior Vice President 40,000 24.2 15
Raymond P. Maselli, Senior Vice President 15,000 9.1 15
Raymond J. Schonbak, Senior Vice President 40,000 24.2 15
- --------------
(a) Stock options were granted on January 1, 1999 with an exercise price of
$15.00 per share. Options vest in varying increments annually beginning
January 1, 2000, becoming fully vested on January 1, 2005. The options
expire on December 31, 2008.
(b) The fair market value of each option at December 31, 1999 was $6.61 per
share using the Black-Scholes option-pricing model which was approximately
the fair market value at the date of the grant. The following assumptions
were used in the option-pricing model: no dividends will be paid on the
Class B common stock; a risk-free interest rate of 4.44%; an expected life
of five years; and an expected price volatility of 43.0%.
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Benedek, Yager and Lindwall, all of whom are executive officers of
the Company, serve as Directors of the Company. Presently, the Company does not
have a compensation committee. Compensation for executive officers is
recommended to the Board of Directors by the Chief Executive Officer. In making
his compensation recommendations, the Chief Executive Officer considers several
criteria, including the Company's performance and growth, industry standards for
similarly situated companies and experience and qualitative performance of such
executive officers.
On January 1, 1998, Mr. K. James Yager, the President, Chief Operating
Officer and a director of the Company, exercised options to purchase 370,000
shares of Class B common stock of the Company for an aggregate exercise price of
$555,000. Mr. Yager borrowed the funds necessary to pay the exercise price from
the Company, which loan is evidenced by a promissory note which bears interest
at the rate of 5.93% per annum, is secured by the shares which were issued upon
exercise of the option and is payable as and when any such shares are sold and
in any event no later than December 31, 2007.
- 36 -
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT.
Mr. A. Richard Benedek, the Chairman and Chief Executive Officer of the
Company, owns 6,467,600 shares of Class B common stock of the Company,
representing 87.4% of its outstanding common stock.
Mr. Stephen Benedek, the son of Mr. A. Richard Benedek, owns 562,400 shares
of Class B common stock of the Company, representing 7.6% of its outstanding
common stock. Mr. Stephen Benedek became an employee of the Company effective in
November 1999.
Mr. K. James Yager, the President, Chief Operating Officer and a director
of the Company, owns 370,000 shares of Class B common stock of the Company,
representing 5.0% of its outstanding common stock.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources" for a discussion with
respect to arrangements which may result in a change in control of Benedek
Broadcasting and/or BLC.
ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS.
On January 1, 1998, Mr. K. James Yager, the President, Chief Operating
Officer and a director of the Company, exercised options to purchase 370,000
shares of Class B common stock of the Company for an aggregate exercise price of
$555,000. Mr. Yager borrowed the funds necessary to pay the exercise price from
the Company, which loan is evidenced by a promissory note which bears interest
at the rate of 5.93% per annum, is secured by the shares which were issued upon
exercise of the option and is payable as and when any such shares are sold and
in any event no later than December 31, 2007.
During June 1998, Mr. A. Richard Benedek, the Chairman, Chief Executive
Officer and a director of the Company, borrowed $65,000 from the Company for
personal purposes. The loan is unsecured, evidenced by a promissory note which
bears interest at the rate of 5.58% per annum and is payable on July 1, 2000.
During July 1998, Mr. K. James Yager, the President, Chief Operating
Officer and a director of the Company, borrowed $150,000 from the Company for
personal purposes. The loan is unsecured, evidenced by a promissory note which
bears interest at the rate of 5.56% per annum and is payable on July 1, 2000.
During 1999, Mr. A. Richard Benedek, the Chairman, Chief Executive Officer
and a director of the Company, borrowed a total of $720,000 from the Company in
three separate transactions for personal purposes. The loans are unsecured,
evidenced by promissory notes which bear interest at rates ranging from 4.74% to
5.32% per annum and are payable during 2002. For the year ended December 31,
1999, interest was paid in full on a quarterly basis.
- 37 -
<PAGE>
In December 1998, the Company agreed with the lenders under its then
existing Credit Agreement that the amounts permitted to be paid as compensation
to Mr. A. Richard Benedek under the Credit Agreement could be paid to him as
loans instead. The Credit Facility also permits such loans. In 2000, the Company
intends to make loans to Mr. Benedek in amounts to be determined within the
limitations set forth in the Credit Facility.
Paul S. Goodman, a member of the law firm of Shack & Siegel, P.C., is a
director of the Company. During the fiscal year ended December 31, 1999, the
Company paid approximately $0.9 million for legal services to Shack & Siegel,
P.C.
- 38 -
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) Consolidated Financial Statements of the Company.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Benedek Communications Corporation and Subsidiaries................................................
Independent Auditor's Report................................................................ F-2
Consolidated Balance Sheets as of December 31, 1998 and 1999................................ F-3
Consolidated Statements of Operations for the Three Years Ended
December 31, 1999........................................................................ F-4
Consolidated Statements of Stockholders' (Deficit) for the Three
Years Ended December 31, 1999............................................................ F-5
Consolidated Statements of Cash Flows for the Three Years Ended
December 31, 1999........................................................................ F-6
Notes to Consolidated Financial Statements.................................................. F-8
(a)(2) Supplemental Schedule
Benedek Communications Corporation and Subsidiaries
Independent Auditor's Report.................................................................... S-1
Schedule II--Valuation and Qualifying Accounts.................................................. S-2
</TABLE>
All other schedules for which provision is made in the applicable
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and, therefore, have been omitted.
- 39 -
<PAGE>
(a)(3) Exhibits.
<TABLE>
<S> <C>
3.1 --Certificate of Incorporation of the Registrant, as amended,
incorporated by reference to Exhibit 3.1 to Benedek
Communications Corporation's Registration Statement on Form S-4,
File No. 333-09529, filed on August 2, 1996 (the "S-4
Registration Statement").
3.2 --By-Laws of Benedek Communications Corporation incorporated by
reference to Exhibit 3.2 to the S-4 Registration Statement.
3.3 --Certificate of Designation of the Powers, Preferences and
Relative, Participating, Optional and Other Special Rights of 11
1/2% Senior Exchangeable Preferred Stock Qualifications,
Limitations and Restrictions thereof, of Benedek Communications
Corporation, incorporated by reference to Exhibit 3.3 to Benedek
Communications Corporation's Registration Statement on Form S-4,
File No. 333-56367, filed on June 9, 1998 (the "1998 S-4
Registration Statement").
3.4 --Certificate of Designation, Preferences and Relative,
Participating, Optional and Other Special Rights of Series C
Junior Discount Preferred Stock and Qualifications, Limitations
and Restrictions thereof of Benedek Communications Corporation,
incorporated by reference to Exhibit 3.4 to the S-4 Registration
Statement.
4.1 --Indenture dated as of May 15, 1996 between Benedek
Communications Corporations and United States Trust Company of
New York, relating to the 13 1/4% Senior Subordinated Discount
Notes due 2006, incorporated by reference to Exhibit 4.1 to the
S-4 Registration Statement.
4.2 --Form of 13 1/4% Senior Subordinated Discount Note due 2006 of
Benedek Communications Corporation (included in Exhibit 4.1
hereof), incorporated by reference to Exhibit 4.2 to the S-4
Registration Statement.
4.3 --Certificate of Designation, Preferences and Relative,
Participating, Optional and Other Special Rights of 11 1/2%
Senior Preferred Stock due 2008 and Qualifications, Limitations
and Restrictions thereof (filed as Exhibit 3.3 hereof),
incorporated by reference to Exhibit 4.6 to the 1998 S-4
Registration Statement.
4.4 --Certificate of Designation, Preferences and Relative,
Participating, Optional and Other Special Rights of Series C
Junior Discount Preferred Stock and Qualifications, Limitations
and Restrictions thereof of Benedek Communications Corporation
(filed as Exhibit 3.4 hereof), incorporated by reference to
Exhibit 4.6 to the S-4 Registration Statement.
4.5 --Warrant Agreement dated as of June 5, 1996 between Benedek
Communications Corporation and IBJ Schroder Bank & Trust Company
with respect to Class A Common Stock of Benedek Communications
Corporation, incorporated by reference to Exhibit 4.7 to the S-4
Registration Statement.
4.6 --Form of Exchange Debenture relating to the 11 1/2% Exchange
Debentures which may be issued, under certain circumstances, in
exchange for the 11 1/2% Senior Exchangeable Preferred Stock of
Benedek Communications Corporation incorporated by reference to
Exhibit 4.9 to the 1998 S-4 Registration Statement.
10.1 --Purchase Agreement dated May 30, 1996 between Benedek
Communications Corporation and Goldman, Sachs & Co.,
incorporated by reference to Exhibit 10.1 to the S-4
Registration Statement.
10.2 --Exchange and Registration Rights Agreement dated May 30, 1996
between Benedek Communications Corporation and Goldman, Sachs &
Co. with respect to the 13 1/4% Senior Subordinated Discount
Notes due 2006 of the Registrant, incorporated by reference to
Exhibit 10.2 to the S-4 Registration Statement.
10.3 --Purchase Agreement dated May 7, 1998 among Benedek
Communications Corporation, TD Securities (USA) and BT Alex.
Brown Incorporated, incorporated by reference to Exhibit 10.1 of
the 1998 S-4 Registration Statement.
</TABLE>
- 40 -
<PAGE>
<TABLE>
<S> <C>
10.4 --Exchange and Registration Rights Agreement dated May 7, 1998
among Benedek Communications Corporation, TD Securities (USA)
Inc. and BT Alex. Brown Incorporated with respect to the 11 1/2%
Senior Exchangeable Redeemable Preferred Stock of Benedek
Communications Corporation, incorporated by reference to Exhibit
10.2 of the 1998 S-4 Registration Statement.
10.5 --Warrant Agreement dated as of June 5, 1996 between Benedek
Communications Corporation and IBJ Schroder Bank & Trust Company
(filed as Exhibit 4.8 hereof), incorporated by reference to
Exhibit 10.5 to the S-4 Registration Statement.
10.8 --Common Stock Registration Rights Agreement dated as of June 5,
1996 among Benedek Communications Corporation, Goldman, Sachs &
Co. and BT Securities Corporation, incorporated by reference to
Exhibit 10.7 to the S-4 Registration Statement.
10.9 --Form of Indemnity Agreement between Benedek Communications
Corporation and each of its executive officers and directors,
incorporated by reference to Exhibit 10.14 to the S-4
Registration Statement.
10.10 --Employment Agreement dated as of June 6, 1996 between Benedek
Broadcasting Corporation and A. Richard Benedek, incorporated by
reference to Exhibit 10.16 to the S-4 Registration Statement.
10.11 --Employment Agreement dated as of June 6, 1996 between Benedek
Broadcasting Corporation and K. James Yager, incorporated by
reference to Exhibit 10.17 to the S-4 Registration Statement.
10.12 --Employment Agreement dated as of June 6, 1996 between Benedek
Broadcasting Corporation and Ronald L. Lindwall, incorporated by
reference to Exhibit 10.19 to the S-4 Registration Statement.
10.13 --Employment agreement dated as of June 6, 1996 between Benedek
Broadcasting Corporation and Terrance F. Hurley, incorporated by
reference to Exhibit 10.20 to the S-4 Registration Statement.
10.14 --Trust Agreement dated as of September 21, 1998 among Benedek
Broadcasting Corporation, Benedek License Corporation and Philip
A. Jones, as trustee, incorporated by reference to Exhibit 10.26
to Benedek Communications Corporation's Annual Report on Form
10-K for the fiscal year ended December 31, 1998 (the "1998
10-K")
10.15 --Asset Exchange Agreement dated December 30, 1998 between
Benedek Broadcasting Corporation and Benedek License
Corporation, and AK Media Group, Inc., incorporated by reference
to Exhibit 10.27 to the 1998 10-K.
10.16 --1999 Stock Option Plan of Benedek Communications Corporation,
incorporated by reference to Exhibit 10.28 to the 1998 10-K.
10.17 --Time Brokerage Agreement (KKTV (TV)) dated as of December 30,
1998 between Benedek Broadcasting Corporation and AK Media
Group, Inc., incorporated by reference to Exhibit 10.29 to the
1998 10-K.
10.18 --Time Brokerage Agreement (KCOY-TV) dated as of December 30,
1998 between Benedek Broadcasting Corporation, Benedek License
Corporation and AK Media Group, Inc., incorporated by reference
to Exhibit 10.30 to the 1998 10-K.
10.19 --Letter Agreement dated January 22, 1999 between AK Media
Group, Inc. and Benedek Broadcasting Corporation amending the
Time Brokerage Agreement (KKTV (TV)) dated as of December 30,
1998, incorporated by reference to Exhibit 10.31 to the 1998
10-K.
10.20 --Letter Agreement dated January 22, 1999 between AK Media
Group, Inc. and Benedek Broadcasting Corporation amending the
Time Brokerage Agreement (KCOY-TV) dated as of December 30,
1998, incorporated by reference to Exhibit 10.32 to the 1998
10-K.
10.21 --Loan Agreement dated as of May 20, 1999 by and among Benedek
Communications Corporation, as parent, Benedek Broadcasting
Corporation, as borrower, the financial institutions signatory
thereto, as lenders, and Toronto Dominion (Texas), Inc. as
administrative agent and collateral agent for the lenders, with
TD Securities (USA) Inc., as lead arranger, incorporated by
reference to Exhibit 10.1 to Benedek Communications
Corporation's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999 (the "Second Quarter 1999 10-Q").
</TABLE>
- 41 -
<PAGE>
<TABLE>
<S> <C>
10.22 --First Amendment to Loan Agreement dated as of June 18, 1999 by
and among Benedek Communications Corporation, as parent, Benedek
Broadcasting Corporation, as borrower, the lender (as defined)
and Toronto Dominion (Texas), Inc., as administrative agent and
collateral agent, incorporated by reference to Exhibit 10.2 to
the Second Quarter 1999 10-Q.
*10.23 --Asset Purchase Agreement dated as of November 17, 1999 between
The Chronicle Publishing Company and Benedek Broadcasting
Corporation.
*10.24 --Escrow Agreement dated as of November 17, 1999 among The
Chronicle Publishing Company, Benedek Broadcasting Corporation
and Allfirst Bank, as Escrow Agent.
*10.25 --Asset Exchange Agreement dated as of December 10, 1999 among
WGRC, Inc. and Benedek Broadcasting Corporation and Benedek
License Corporation.
*10.26 --Assignment and Assumption Agreement dated as of December 10,
1999 among WGRC, Inc. and Benedek Broadcasting Corporation and
Benedek License Corporation.
*10.27 --Guaranty dated as of December 10, 1999 made by LIN Television
Corporation in favor of Benedek Broadcasting Corporation and
Benedek License Corporation.
*10.28 --Asset Purchase Agreement dated as of December 15, 1999 among
ICA Broadcasting I, Ltd. and Benedek Broadcasting Corporation
and Benedek License Corporation.
*10.29 --Unwind Agreement regarding termination of the WMTV Trust and
the related agreements dated as of February 1, 2000 amount
Benedek Broadcasting Corporation, Benedek License Corporation,
the WMTV Trust and WMTV License Co., LLC.
*21 --Subsidiaries of Benedek Communications Corporation.
*27 --Financial Data Schedule pursuant to Article 5 of Regulation
S-X with respect to Benedek Communications Corporation.
- ---------------
* Filed herewith
</TABLE>
(b) Reports on Form 8-K
None.
- 42 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
BENEDEK COMMUNICATIONS CORPORATION
(REGISTRANT)
By: /s/ A. RICHARD BENEDEK
-----------------------------------
A. RICHARD BENEDEK
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
DATE: March 29, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY IN WHICH SIGNED DATE
- --------- ------------------------ ----
<S> <C> <C>
/s/ A. RICHARD BENEDEK Chairman and Chief Executive Officer March 29, 2000
..................................... (Principal Executive Officer) and
A. RICHARD BENEDEK Director
/s/ K. JAMES YAGER President and Director March 29, 2000
.....................................
K. JAMES YAGER
/s/ RONALD L. LINDWALL Senior Vice President-Finance, Chief March 29, 2000
..................................... Financial Officer, Secretary and
RONALD L. LINDWALL Treasurer (Principal Financial and
Accounting Officer) and Director
/s/ JAY KRIEGEL Director March 29, 2000
.....................................
JAY KRIEGEL
/s/ PAUL S. GOODMAN Director March 29, 2000
.....................................
PAUL S. GOODMAN
</TABLE>
- 43 -
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Benedek Communications Corporation and Subsidiaries
Independent Auditor's Report.................................................................... F-2
Consolidated Balance Sheets as of December 31, 1998 and 1999.................................... F-3
Consolidated Statements of Operations for the Three Years Ended
December 31, 1999........................................................................... F-4
Consolidated Statements of Stockholders' (Deficit) for the Three Years Ended
December 31, 1999........................................................................... F-5
Consolidated Statements of Cash Flows for the Three Years Ended
December 31, 1999........................................................................... F-6
Notes to Consolidated Financial Statements...................................................... F-8
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Benedek Communications Corporation and Subsidiaries
Rockford, Illinois
We have audited the accompanying consolidated balance sheets of Benedek
Communications Corporation and subsidiaries as of December 31, 1998 and 1999 and
the related consolidated statements of operations, stockholders' (deficit) and
cash flows for the years ended December 31, 1997, 1998 and 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Benedek
Communications Corporation and subsidiaries as of December 31, 1998 and 1999 and
the results of their operations and their cash flows for the years ended
December 31, 1997, 1998 and 1999, in conformity with generally accepted
accounting principles.
/s/ McGLADREY & PULLEN, LLP
Rockford, Illinois
February 18, 2000
F-2
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1998 1999
---- ----
ASSETS (In thousands)
<S> <C> <C>
Current Assets
Cash and cash equivalents............................................................ $ 4,291 $ 3,278
Receivables
Trade, less allowance for doubtful accounts of $480 and
$683 for 1998 and 1999......................................................... 25,984 27,619
Notes receivable-officers......................................................... - 275
Other............................................................................. 1,114 983
Current portion of program broadcast rights.......................................... 4,878 5,844
Prepaid expenses..................................................................... 1,623 1,979
Deferred income taxes................................................................ 1,191 1,085
---------------------------------------
TOTAL CURRENT ASSETS....................................................... 39,081 41,063
---------------------------------------
Property and equipment (Note D)......................................................... 62,627 62,782
---------------------------------------
Intangible assets (Note E).............................................................. 335,634 335,348
---------------------------------------
Other assets
Program broadcast rights, less current portion (Note H).............................. 1,198 1,270
Deferred loan costs.................................................................. 8,475 6,060
Deposit on and costs of acquisitions................................................. - 10,294
Notes receivable-officers............................................................ 275 720
Other................................................................................ 172 239
---------------------------------------
10,120 18,583
---------------------------------------
$ 447,462 $ 457,776
---------------------------------------
---------------------------------------
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current Liabilities
Current maturities of notes payable.................................................. $ 15,911 $ 1,300
Current portion of program broadcast liabilities..................................... 6,994 8,608
Accounts payable and accrued expenses (Note I)....................................... 11,977 10,169
Deferred revenue..................................................................... 644 579
---------------------------------------
TOTAL CURRENT LIABILITIES.................................................. 35,526 20,656
---------------------------------------
Long-Term Obligations
Notes payable (Note F, G)............................................................ 358,905 426,279
Program broadcast liabilities (Note H)............................................... 891 978
Deferred revenue..................................................................... 2,994 2,435
Deferred income taxes (Note K)....................................................... 33,765 23,291
---------------------------------------
396,555 452,983
---------------------------------------
Exchangeable redeemable senior preferred stock, liquidation
preference, 1998-$106,579 1999-$119,251 (Note F)..................................... 107,596 122,092
---------------------------------------
Seller junior discount preferred stock (Note F)......................................... 55,048 59,539
---------------------------------------
Commitments (Note B, H, J)
Stockholders' (Deficit) (Note C, F, L)
Common stock, Class A................................................................ - -
Common stock, Class B................................................................ 74 74
Additional paid-in capital........................................................... (59,549) (64,296)
Accumulated deficit.................................................................. (87,200) (132,651)
Stockholder's note receivable (Note C)............................................... (588) (621)
---------------------------------------
(147,263) (197,494)
---------------------------------------
$ 447,462 $ 457,776
=======================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------------
1997 1998 1999
(In thousands, except share and per share data)
<S> <C> <C> <C>
Net revenues.................................................. $ 127,073 $ 139,833 $ 140,406
----------------- ----------------- -----------------
Operating expenses:
Selling, technical and program expenses.................... 60,385 64,651 66,793
General and administrative................................. 19,618 20,858 19,801
Depreciation and amortization.............................. 31,380 30,830 28,520
Corporate.................................................. 3,787 4,643 4,510
----------------- ----------------- -----------------
115,170 120,982 119,624
----------------- ----------------- -----------------
Net gain on sale of stations (Note B)......................... - - 6,181
----------------- ----------------- -----------------
Operating income.................................. 11,903 18,851 26,963
----------------- ----------------- -----------------
Financial income (expense):
Interest expense: (Note A)
Cash interest.......................................... (28,996) (26,979) (25,285)
Other interest......................................... (19,374) (17,043) (19,040)
----------------- ----------------- -----------------
(48,370) (44,022) (44,325)
Interest income............................................ 130 494 208
----------------- ----------------- -----------------
(48,240) (43,528) (44,117)
(Loss) before income tax benefit and extraordinary item.... (36,337) (24,677) (17,154)
Income tax benefit (Note K)................................... 12,027 8,052 1,377
----------------- ----------------- -----------------
(Loss) before extraordinary item........................... (24,310) (16,625) (15,777)
Extraordinary item, loss on early extinguishment of debt less
applicable income taxes of $8,340 (Note G)................. - - (12,510)
----------------- ----------------- -----------------
Net (loss).................................................... (24,310) (16,625) (28,287)
Preferred stock dividends and accretion....................... (19,037) (30,855) (18,987)
----------------- ----------------- -----------------
Net (loss) applicable to common stock......................... $ (43,347) $ (47,480) $ (47,274)
================= ================= =================
Basic and diluted (loss) per common share:
(Loss) before extraordinary item........................... $ (6.17) $ (6.42) $ (4.70)
Extraordinary item......................................... - - (1.69)
----------------- ----------------- -----------------
(Loss) per common share.................................... $ (6.17) $ (6.42) $ (6.39)
================= ================= =================
Weighted-average common shares outstanding 7,030,000 7,400,000 7,400,000
================= ================= =================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
Additional Stockholder's
Common Paid-In Accumulated Note
Stock Capital Deficit Receivable Total
----------- -------------- --------------- ---------------- ----------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $ 70 $ (35,347) $ (16,284) $ - $ (51,561)
Accretion to exchangeable
redeemable senior preferred
stock (Note F)............... - (4,845) - - (4,845)
Dividends on preferred stock... - - (14,192) - (14,192)
Net (loss)..................... - - (24,310) - (24,310)
----------- ------------- -------------- ---------------- ---------------
Balance at December 31, 1997 $ 70 $ (40,192) $ (54,786) $ - $ (94,908)
Accretion to exchangeable
redeemable senior
preferred stock (Note F)..... - (15,067) - - (15,067)
Dividends on preferred stock - - (15,789) - (15,789)
Financial costs related to the
sale of preferred stock...... - (4,339) - - (4,339)
Repurchase and retirement of
initial warrants............. - (535) - - (535)
Stock options exercised in
exchange for stockholder note
receivable (Note C).......... 4 551 - (555) -
Accrued interest on note
receivable................... - 33 - (33) -
Net (loss)..................... - - (16,625) - (16,625)
----------- ------------- -------------- ---------------- ---------------
Balance at December 31, 1998 $ 74 $ (59,549) $ (87,200) $ (588) $ (147,263)
Accretion to exchangeable
redeemable senior
preferred stock (Note F)..... - (1,823) - - (1,823)
Dividends on preferred stock - - (17,164) - (17,164)
Purchase and retirement of
warrants..................... - (2,957) - - (2,957)
Accrued interest on note
receivable................... - 33 - (33) -
Net (loss)..................... - - (28,287) - (28,287)
----------- ------------- -------------- ---------------- ---------------
Balance at December 31, 1999...... $ 74 $ (64,296) $ (132,651) $ (621) $ (197,494)
=========== ============= ============== ================ ===============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------
1997 1998 1999
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Cash flows from operating activities
Net (loss).............................................................. $ (24,310) $(16,625) $(28,287)
Adjustments to reconcile net (loss) to net cash provided
by operating activities:
Amortization of program broadcast rights.......................... 6,401 6,758 8,127
Depreciation and amortization..................................... 20,971 21,178 15,695
Amortization and write-off of intangibles and deferred loan costs. 15,779 11,657 14,609
Amortization of note discount..................................... 13,275 15,090 17,227
Deferred income taxes............................................. (12,376) (8,317) (10,368)
Net gain on sale of stations...................................... - - (6,181)
Loss on early extinguishments of debt............................. - - 20,850
Other............................................................. 610 - -
Changes in operating assets and liabilities, net of effects of acquisitions:
Receivables....................................................... (2,603) (400) (1,504)
Due to sellers.................................................... (153) - -
Prepaid expenses and other........................................ (206) 36 (356)
Payments on program broadcast liabilities......................... (5,937) (6,399) (7,455)
Accounts payable and accrued expenses............................. (2,281) (2,157) (2,482)
Deferred revenue.................................................. (699) (805) (573)
-------------- ------------- --------------
Net cash provided by operating activities....................... 8,471 20,016 19,302
-------------- ------------- --------------
Cash flows from investing activities
Purchase of property and equipment...................................... (6,174) (6,295) (7,923)
Payment for acquisition of stations..................................... - - (9,359)
Deposit on and costs of acquisitions.................................... - - (10,294)
Disbursements on notes receivable-officers.............................. - (240) (720)
Purchase of intangibles................................................. - (199) -
Other, net.............................................................. (108) 152 5
-------------- ------------- --------------
Net cash (used in) investing activities......................... (6,282) (6,582) (28,291)
-------------- ------------- --------------
Cash flows from financing activities
Principal payments on notes payable..................................... (14,864) (4,134) (262,044)
Proceeds from issuance of preferred stock............................... - 100,000 -
Net (payments) borrowings on long-term revolver......................... 10,000 (10,000) 58,500
Proceeds from long-term borrowing....................................... - - 220,000
Redemption of senior preferred stock.................................... - (92,768) -
Purchase of initial warrants............................................ - (535) (2,957)
Payment of debt and preferred stock acquisition costs................... (2,768) (4,354) (5,523)
-------------- ------------- --------------
Net cash provided by (used in) financing activities............. (7,632) (11,791) 7,976
-------------- ------------- --------------
Increase (decrease) in cash and cash equivalents................ (5,443) 1,643 (1,013)
Cash and cash equivalents:
Beginning............................................................. 8,091 2,648 4,291
-------------- ------------- --------------
Ending................................................................ $ 2,648 $ 4,291 $3,278
============== ============= ==============
</TABLE>
(Continued)
F-6
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS-(CONTINUED)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------
1997 1998 1999
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Supplemental Disclosure of Cash Flow Information:
Cash payments for interest................................................ $30,489 $ 27,055 $ 30,307
Cash payments for income taxes............................................ 432 152 679
============= ============= ==============
Supplemental Schedule of Noncash Investing and Financing Activities:
Acquisition of program broadcast rights................................... $ 6,340 $ 6,169 $ 8,186
Purchase of equipment on accounts payable................................. - - 500
Notes payable incurred for purchase of property and equipment............. 4,271 2,943 4,140
Equipment acquired by barter transactions................................. 388 909 221
Dividends accrued on redeemable preferred stock........................... 14,192 15,789 17,164
Stock option exercised in exchange for note receivable.................... - 555 -
Accrued interest on note receivable stockholder added to
additional paid-in capital............................................. - 33 33
Accretion to exchangeable redeemable senior preferred stock............... 4,845 15,067 1,823
============= ============= ==============
Acquisition of station:
Property and equipment acquired at fair market value...................... $ - $ - $ 6,238
Intangible assets acquired ............................................... - - 27,376
Program broadcast rights acquired......................................... - - 1,115
Program broadcast liabilities assumed..................................... (1,115)
Other, net................................................................ - - 17
------------- ------------- --------------
- - 33,631
Less: Fair value of assets swapped....................................... - - (24,272)
------------- ------------- --------------
Cash purchase price, including fees paid.................................. $ - $ - $ 9,359
============= ============= ==============
Sale of stations:
Property equipment sold................................................... $ - $ - $ 3,076
Intangible assets sold.................................................... - - 8,101
Program broadcast rights sold............................................. - - 136
Program broadcast liabilities transferred................................. - - (145)
------------- ------------- --------------
- 11,168
Gain recognized on sale of stations....................................... - - 13,101
------------- ------------- --------------
24,269
Less: Fair value of assets swapped....................................... - - (24,272)
Fees on sales paid in 1998................................................ - - 59
------------- ------------- --------------
Proceeds from sale of station net of fees paid............................ $ - $ - $ 56
============= ============= ==============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(NOTE A) - NATURE OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Benedek Communications Corporation (the "Company") is a holding company
with minimal operations other than from its wholly-owned subsidiary, Benedek
Broadcasting Corporation ("Benedek Broadcasting"). Benedek Broadcasting owns and
operates twenty-three television stations (the "Stations") located throughout
the United States. The operating revenues of the Stations are derived primarily
from the sale of advertising time and, to a lesser extent, from compensation
paid by the networks for broadcasting network programming and barter
transactions for goods and services. The Stations sell commercial time during
the programs to national, regional and local advertisers. The networks also sell
commercial time during the programs to national advertisers. Credit arrangements
are determined on an individual customer basis. Segment information is not
presented since all of the Company's revenue is attributed to a single
reportable segment.
BASIS OF PRESENTATION
The consolidated financial statements of the Company include the accounts
of the Company and its wholly-owned subsidiary, Benedek Broadcasting and its
wholly-owned subsidiaries, Benedek License Corporation ("BLC"), Benedek Cable,
Inc. ("BCI"), Benedek Interactive Media, Inc. and the WMTV Trust and its
subsidiary, WMTV License Co., LLC ("WMTV LLC"). All significant intercompany
items and transactions have been eliminated in consolidation.
During 1998, BCI was formed as the entity through which Benedek
Broadcasting delivers The Warner Bros. Television Network programming to local
cable companies in 15 of its 20 markets ranked above 100 as measured by Nielsen
surveys. BCI holds minimal assets and had insignificant operations in 1998 and
1999.
During October 1998, in order to comply with certain FCC duopoly rules,
Benedek Broadcasting transferred all assets and liabilities related to WMTV-TV,
serving Madison, Wisconsin, to the WMTV Trust, a disposition trust, and BLC
transferred the related FCC license to WMTV LLC. Since Benedek Broadcasting is
the sole beneficiary of this grantor trust, the assets, liabilities and results
of operations from this trust are included in the consolidated financial
statements of the Company. Due to changes in FCC duopoly rules, the WMTV Trust
and its subsidiary WMTV LLC were dissolved subsequent to December 31, 1999 and
all assets and liabilities related to them were transferred to Benedek
Broadcasting and BLC.
Benedek Interactive Media, Inc. was formed in December 1999 and has minimal
assets and had no operations in 1999.
F-8
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
SIGNIFICANT ACCOUNTING POLICIES
(1) Accounting estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and the
accompanying notes. Actual results could differ from those estimates.
(2) Cash equivalents and concentration
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
At various times during the periods, the Company had cash and cash
equivalents on deposit with a financial institution in excess of federal
depository insurance limits. The Company has not experienced any credit losses
on these deposits.
(3) Revenues
Revenue related to the sale of advertising, network compensation and
contracted time is recognized at the time of broadcast. Net revenues are shown
net of agency and national representatives' commissions.
Deferred revenues primarily relate to compensation due from the network and
national sales representatives at the inception of the network affiliation and
the national sales representative agreements, respectively. These revenues are
recognized over the life of the agreements on a straight-line method. Since
these payments are earned over the life of the respective agreements, the
network affiliation payment is recognized over ten years and the national sales
representative payments are recognized over five years.
(4) Barter transactions
Revenue from barter transactions (advertising provided in exchange for
goods and services) is recognized as income when advertisements are broadcast
and merchandise or services received are charged to expense (or capitalized as
appropriate) when received or used. The transactions are recorded at the fair
market value of the asset or service received.
(5) Program broadcast rights and liabilities
Program broadcast rights represent rights for the telecast of feature
length motion pictures, series produced for television and other films, and are
presented at the lower of amortized cost or net realizable value. Each agreement
is recorded as an asset and liability when the license period begins and the
program is available for its first showing. Program broadcast rights are
amortized on a straight-line method over the life of the contract, which is
included in selling, technical and program expenses. The agreements are
classified between current and long-term assets according to the estimated time
of future usage. The related liability is classified between current and
long-term on the basis of the payment terms.
F-9
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
(6) Deferred loan and acquisition costs
Deferred loan costs are amounts incurred in connection with long-term
financing. The costs are amortized on the interest method over the terms of the
related debt security. Costs incurred in connection with long-term financing
which is not consummated are expensed at the point in time when the negotiation
on the financing ceases. Costs incurred in connection with issuances of
preferred stock are included in stockholders' deficit as a permanent reduction
of additional paid-in capital.
Acquisition costs are amounts incurred in connection with acquiring
additional television stations. Costs incurred in connection with acquisitions
which are not consummated are expensed at the point in time when the negotiation
on the acquisition ceases. The acquisition costs related to successful
acquisitions are treated as part of the purchase price and are allocated to the
assets purchased.
(7) Property and equipment and intangible assets
(a) Property and equipment are recorded at cost and depreciated using the
straight-line method over the following estimated ranges of useful
lives:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Buildings and improvements........................ 5-40
Towers............................................ 5-12
Transmission equipment............................ 3-10
Other equipment................................... 1-5
</TABLE>
Gains and losses on the disposition of property and equipment are
insignificant and are included in depreciation and amortization on the
consolidated statement of operations.
(b) Intangible assets, which include FCC licenses, network affiliation
agreements and goodwill, have been recorded at cost and are amortized over 40
years using the straight-line method.
(c) The Company reviews its property and equipment and intangibles annually
to determine potential impairment by comparing the carrying value of the assets
with the undiscounted anticipated future cash flows of the related property
before interest charges. If the future cash flows are less than the carrying
value, the Company would obtain an appraisal or discount the future cash flows
to determine fair value, and adjust the carrying value of the assets to the
estimated fair value if the fair value is less than the carrying value (Note E).
(8) Other interest expense
Other interest expense includes accrued interest added to long-term debt
balances, deferred loan cost amortization and write offs (except deferred loan
cost write offs related to extraordinary debt extinguishments), financing costs
not consummated, and accretion of discounts.
F-10
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
(9) Income taxes
Deferred taxes are provided on a liability method whereby deferred tax
assets are recognized for deductible temporary differences, operating losses and
tax credit carryforwards. Deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment.
The Company and its subsidiaries file a consolidated federal income tax
return.
(10) Employee Benefits
The Company has defined contribution plans covering all eligible employees.
The Company's contribution is at the discretion of the Board of Directors.
The Company self-insures for health benefits which are provided to all
full-time employees with specified periods of service. Insurance coverage is
maintained by the Company for claims in excess of specific and annual aggregate
limits.
The Company has elected to continue accounting for stock-based compensation
under Accounting Principles Board Opinion No. 25.
(11) Earnings (loss) per common share
Basic per-share amounts are computed by dividing net income adjusted for
preferred stock dividends declared and accretion (the numerator) by the
weighted-average number of common shares outstanding (the denominator). Diluted
per-share amounts assume the conversion, exercise or issuance of all potential
common stock instruments unless the effect is to reduce the loss or increase the
income per common share from continuing operations. The Company has no present
dilutive per share amounts, since the inclusion of the Initial Warrants (as
defined) and stock options would have been anti-dilutive for the periods
presented.
(12) Interest rate cap agreement
Interest rate cap agreements are used to manage interest rate exposure by
hedging certain liabilities. Income and expense are accrued under the terms of
the agreement based on the expected settlement payments and are recorded as a
component of interest income or expense.
(13) Reclassifications
Certain amounts in the consolidated financial statements for the years ended
December 31, 1997 and 1998 have been reclassified to conform with the
classification adopted for the year ended December 31, 1999. These
reclassifications had no effect on the 1997 or 1998 net loss.
F-11
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
(NOTE B) - ACQUISITION, SALE OF STATIONS AND PENDING PURCHASE
On December 30, 1998, the Company entered into an Asset Exchange Agreement
with The Ackerley Group, Inc. ("Ackerley") pursuant to which the Company
exchanged the television broadcast assets of KCOY-TV, in Santa Maria, California
("KCOY-TV"), for the television broadcast assets of KKTV, Ackerley's station in
Colorado Springs, Colorado ("KKTV"). Both KCOY-TV and KKTV are CBS affiliates.
The exchange was completed on May 1, 1999, upon which the Company paid
$9,000,000 to Ackerley as further consideration in accordance with the
agreement.
The exchange was recorded as a separate sale and acquisition of stations,
with the acquisition of KKTV accounted for under the purchase method of
accounting. Accordingly, the results of the operations for KKTV are included in
the Company's consolidated financial statements since the date of acquisition,
May 1, 1999. In addition, the parties entered into a time brokerage agreement
for each station, in effect from January 1, 1999 until April 30, 1999. During
the time brokerage period, the revenue and expenses of each station went to the
account of the buyer, net of applicable time brokerage fees. The net time
brokerage fee expense was $508,000 for the year ended December 31, 1999.
The total purchase price for KKTV was approximately $33,631,000 which
consisted of the fair market value of KCOY-TV assets of $24,272,000, cash
payment of $9,000,000, and fees of $359,000. The purchase price has been
allocated to acquired assets and liabilities based on their relative fair values
as of the closing date. The excess of the purchase price over the net assets
received from the acquisition is being amortized on the straight-line method
over a period of 40 years.
The unaudited pro forma results of operations and earnings per share for
the years ended December 31, 1998 and 1999, assuming only the acquisition of
KKTV, and assuming both the acquisition of KKTV and disposition of KCOY-TV, had
occurred on January 1, 1998 and 1999, are presented in the table below. The 1998
pro forma adjustments for the disposition of KCOY-TV eliminate the revenues and
operating expenses of KCOY-TV as of January 1, 1998 but do not give any pro
forma effect to the gain on disposition which is reported in 1999.
<TABLE>
<CAPTION>
Acquisition of KKTV and
Acquisition of KKTV Only Disposition of KCOY-TV
-------------------------------- --------------------------------
1998 1999 1998 1999
---- ---- ---- ----
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net revenue........................ $ 149,760 $ 140,406 $ 144,209 $ 139,613
-------------- -------------- -------------- --------------
(Loss) before extraordinary
item........................ (16,480) (15,697) (16,542) (15,913)
Extraordinary item................. - (12,510) - (12,510)
-------------- -------------- -------------- --------------
Net (loss)......................... $ (16,480) $ (28,207) $ (16,542) $ (28,423)
============== ============== ============== ==============
Basic and diluted (loss) per
common share ...................
(Loss) before extraordinary
item........................ $ (6.40) $ (4.69) $ (6.41) $ (4.72)
Extraordinary item.............. - (1.69) - (1.69)
-------------- -------------- -------------- --------------
(Loss) per common share......... $ (6.40) $ (6.38) $ (6.41) $ (6.41)
============== ============== ============== ==============
</TABLE>
F-12
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
The pro forma amounts include certain adjustments to reflect interest
expense, amortization of intangibles and income taxes. The pro forma information
does not necessarily reflect the actual results that would have occurred nor is
it necessarily indicative of future results of the operations of the stations.
A gain of approximately $13,323,000 was recorded to reflect the sale of
KCOY-TV. This gain consisted of the fair market value of KCOY-TV assets of
$24,272,000 less their book value of $10,732,000 and fees of $217,000.
During September 1999, a loss in the amount of approximately $222,000 was
recorded to reflect the sale of KTVS-TV, Sterling, Colorado ("KTVS-TV") which
was a satellite operation of KGWN-TV Cheyenne, Wyoming ("KGWN-TV"). The Company
sold KTVS-TV since KTVS-TV is outside of the KGWN-TV designated market area.
PENDING PURCHASE AND SALE OF STATIONS
On November 19, 1999, the Company entered into an Asset Purchase Agreement
with The Chronicle Publishing Company ("Chronicle") and on December 10, 1999,
the Company entered into an Asset Exchange Agreement with WGRC, Inc. ("WGRC").
Pursuant to these agreements, WGRC will acquire the television broadcast assets
of WOWT-TV and KAKE-TV, Chronicle's television stations in Omaha, Nebraska and
Wichita, Kansas, respectively, and then immediately transfer the same to the
Company in exchange for the television broadcast assets of WWLP-TV, the
Company's station in Springfield, Massachusetts. The proposed transaction will
include an $18,000,000 payment by the Company to WGRC. At December 31, 1999, the
Company had deposited $10,000,000 in an escrow account related to this
transaction. The remaining $8,000,000 will be funded from the proceeds related
to the sale of KOSA-TV discussed below. The transaction will be structured, to
the extent feasible, as a tax-free exchange pursuant to Section 1031 of the
Internal Revenue Code and accounted for under the purchase method of accounting
in accordance with APB Opinion No. 16.
On December 15, 1999, the Company entered into an Asset Purchase Agreement
with ICA Broadcasting I, Ltd. ("ICA") pursuant to which the Company will sell
the television broadcast assets of KOSA-TV, in Odessa, Texas to ICA for a cash
payment of $8,000,000. Accordingly, the Company recorded a lower of cost or
market adjustment of approximately $6,920,000 in 1999 to write down the assets
of KOSA-TV to the sales price less estimated selling costs. This loss is
included in "net gain on sale of stations" in the consolidated statement of
operations.
The assets of WWLP-TV and KOSA-TV which are held for sale or to be
exchanged and their corresponding carrying values as of December 31, 1999 are as
follows:
<TABLE>
<CAPTION>
WWLP-TV KOSA-TV
--------------- --------------
(In thousands)
<S> <C> <C>
Property and equipment............................... $ 6,728 $ 1,586
Intangible assets.................................... 54,520 6,174
--------------- --------------
$ 61,248 $ 7,760
=============== ==============
</TABLE>
Both of the above transactions remain subject to FCC approval. It is
anticipated that both transactions will be completed in the first quarter of
2000.
F-13
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
(NOTE C) - RELATED PARTY TRANSACTIONS AND 1999 STOCK OPTION PLAN
STOCK OPTION AGREEMENTS
In 1998, a key employee exercised all outstanding options granted to him
under a stock-based compensation plan for the employee. A total of 370,000
options had been outstanding and exercisable throughout 1997 and were all
exercised in 1998 at a price of $1.50 per share, which was reduced in 1998 from
$3.22 per share based on an independent appraisal. The Company loaned the key
employee the funds necessary to pay for the shares under a note which bears
interest at 5.93% and is due on December 31, 2007. This recourse note, which is
a personal obligation of the employee, is collateralized by the stock which was
issued upon exercise of the option, and is classified as a contra equity account
in the accompanying consolidated balance sheet.
In December 1998, the Company's Board of Directors (the "Board") adopted
the 1999 Stock Option Plan (the "Plan") whereby from time to time on or before
December 31, 2008, options to purchase shares of Class B common stock may be
granted to employees, directors or consultants and advisors of the Company and
its subsidiaries. The aggregate number of shares of common stock which may be
purchased pursuant to options granted at any time under the Plan shall not
exceed 240,000. The purchase price per share shall be the fair market value, as
defined by the Plan, or an amount determined by the Board. If options are
granted to an employee who, at the time of the grant, owns more than ten percent
of the voting stock of the Company, the purchase price per share shall be at
least one hundred and ten percent of the fair market value, as defined by the
Plan. The vesting period of options granted under the Plan are determined by the
Board. The maximum term options may be outstanding under the plan is ten years.
A total of 165,000 options were granted during 1999 at an exercise price of
$15.00 per share, the grant date fair value, which vest in varying increments
annually starting on January 1, 2000, becoming fully vested on January 1, 2005.
No options were exercised, forfeited, or expired during 1999, thus the 165,000
options were outstanding and none were exercisable at December 31, 1999. The
remaining contractual life of the 165,000 options is nine years.
As permitted under generally accepted accounting principles, the Company
accounts for the options under the provisions of APB Opinion No. 25 and its
related interpretations. Accordingly, no compensation cost has been recognized
for the grant of the options. Had compensation cost been determined based on the
fair value method prescribed in FASB Statement No. 123, the reported net (loss)
and basic and diluted (loss) per common share for the year ended December 31,
1999 would have been $(28,395) and $(6.40), respectively. In determining the pro
forma amounts, the fair value per share for each option was estimated to be
$6.61 at the grant date by using the Black-Scholes option-pricing model with the
following assumptions: no dividends will be paid on the Class B common stock; a
risk-free interest rate of 4.44%; an expected life of five years; and an
expected price volatility of 43.0%. In 1998 and 1997 there would have been no
effect on the reported net (loss) and basic and diluted (loss) per common share
determined by the fair value method.
DIRECTOR FEES
The Company paid fees of approximately $222,000, $601,000 and $871,000
during the years ended December 31, 1997, 1998 and 1999, respectively, to the
law firm of Shack & Siegel, P.C., a partner of which serves as a director to the
Company.
F-14
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
NOTES RECEIVABLE-OFFICERS
During 1998 and 1999 the Company issued loans to various officers of the
Company for which the total amounts receivable as of December 31, 1998 and 1999
were $275,000 and $995,000, respectively. These notes bear interest at rates
ranging from 4.74% to 5.58% and have due dates ranging from July 1, 2000 to
September 1, 2002. These notes are personal obligations of the applicable
officer and have been issued with recourse.
(NOTE D) - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1998 1999
---- ----
(In thousands)
<S> <C> <C>
Land and improvements................................ $ 5,823 $ 6,741
Buildings and improvements........................... 28,152 33,498
Towers............................................... 15,163 16,199
Transmission and studio equipment.................... 75,615 77,512
Office equipment..................................... 9,298 10,269
Transportation equipment............................. 2,988 3,296
Construction in progress............................. 2,434 3,457
------------ ------------
139,473 150,972
Less accumulated depreciation and amortization....... 76,846 88,190
------------ ------------
$ 62,627 $ 62,782
============ ============
</TABLE>
(NOTE E) - INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
December 31,
-------------------------------
1998 1999
---- ----
(In thousands)
<S> <C> <C>
Goodwill............................................. $ 159,057 $ 148,944
FCC licenses......................................... 117,330 127,313
Network affiliations................................. 58,206 58,348
Other................................................ 1,041 743
-------------- -------------
$ 335,634 $ 335,348
============== =============
</TABLE>
F-15
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
Intangible assets are recorded net of accumulated amortization of
$39,273,000 and $58,791,000 as of December 31, 1998 and 1999, respectively. In
addition to the $6,920,000 lower of cost or market adjustment on KOSA-TV as
discussed in (Note B), during 1999 the Company also wrote down certain stations'
goodwill and FCC licenses which were determined to have been impaired based on
the Company's estimate of fair value using discounted future cash flows. The
write down of approximately $2,762,000 is included in depreciation and
amortization on the consolidated statement of operations.
(NOTE F) - REDEEMABLE EQUITY SECURITIES AND DISCOUNT NOTES
SENIOR PREFERRED STOCK
In 1996, the Company sold 60,000 Units in a private placement, which
generated proceeds of $60,000,000. Each Unit consisted of (i) ten shares of 15%
Exchangeable Redeemable Senior Preferred Stock due 2007 (the "Original Senior
Preferred Stock"), (ii) ten initial warrants to purchase Class A common stock of
the Company with an expiration date of July 1, 2007 (the "Initial Warrants"),
and (iii) 14.8 contingent warrants to purchase Class A common stock of the
Company.
The Original Senior Preferred Stock and the contingent warrants were
redeemed in June 1998 from the proceeds of the Company's May 14, 1998 issuance
of 100,000 shares of 11.5% Exchangeable Senior Preferred Stock (the "Senior
Preferred Stock"), with an initial liquidation preference equal to proceeds
received of $100,000,000.
The Company used approximately $92,800,000 of the net proceeds from the
issuance of the Senior Preferred Stock to redeem the Original Senior Preferred
Stock (including approximately $12,100,000 representing premiums relating to the
redemption). The balance of the proceeds were used to pay fees related to the
transaction and for general corporate purposes, including the reduction of a
portion of Benedek Broadcasting's Revolving Credit Facility (hereinafter
defined).
Dividends on the Senior Preferred Stock are cumulative and payable
quarterly commencing August 15, 1998 at a rate of 11.5% of the then effective
liquidation preference per share. The Company, at its option, may pay dividends
on any dividend payment date occurring on or before May 15, 2003 either in cash
or by adding such dividends to the then effective liquidation preference. The
Company has been adding the dividends to the liquidation preference from
issuance date through December 31, 1999. The Senior Preferred Stock is not
redeemable until May 15, 2003 at which time cash dividends are required at a
rate of 11.5% of the then effective liquidation preference per share.
Thereafter, the Company has the option to redeem these shares in whole or in
part at predetermined redemption prices. The Senior Preferred Stock contains
various restrictive covenants relating to limitations on dividends, transactions
with affiliates, further issuance of debt, and the sales of assets, among other
things. Notwithstanding the foregoing, until May 15, 2001, in the event of a
public equity offering, a Required Disposition (as defined) or other specified
circumstances, the Company may redeem up to 25.0% of the initial liquidation
preference at 111.50% of the then effective liquidation preference, provided at
least $75,000,000 in liquidation preference remains outstanding.
F-16
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
Since it is management's intention to redeem the Senior Preferred Stock
prior to being required to pay cash dividends, the amount of the redemption
premium payable at such time is being accreted as a constructive distribution
from May 14, 1998 to May 15, 2003. The Senior Preferred Stock is exchangeable
into debentures at the Company's option, subject to certain conditions, in whole
on any scheduled dividend payment date. The Senior Preferred Stock was exchanged
for Senior Preferred Stock registered with the Securities and Exchange
Commission pursuant to a registration statement declared effective on June 15,
1998.
JUNIOR PREFERRED STOCK
In 1996, the Company issued 450,000 shares of Seller Junior Discount
Preferred Stock due July 1, 2008 (the "Junior Preferred Stock") with an
aggregate liquidation preference equal to the proceeds of $45,000,000. Dividends
are payable to the holders of the Junior Preferred Stock at 7.92% per annum,
cumulative until the fifth anniversary of the issuance thereof and thereafter at
increasing rates up to 18%. Since the Company intends to redeem the Junior
Preferred Stock prior to the fifth anniversary, dividends are being accrued at
the initial rate. The dividends on the Junior Preferred Stock are cumulative.
Prior to June 5, 2001, dividend payments on the Junior Preferred Stock are not
permitted to be made in cash and instead will be added automatically to the
liquidation preference and as a result will be deemed paid in full and will not
accumulate.
The Junior Preferred Stock is subject to mandatory redemption in whole on
July 1, 2008 and the Company has the option to redeem these shares in whole or
in part at a price equal to the sum of the liquidation value per share plus an
amount equal to all accumulated and unpaid dividends per share to the date of
redemption.
The following table summarizes these activities from December 31, 1997
through December 31, 1999 as follows:
<TABLE>
<CAPTION>
Senior Junior
Preferred Preferred
Stock Stock
-------------- --------------
(In thousands)
<S> <C> <C>
Balance at December 31, 1997............................ $ 73,660 $ 50,896
Accrued dividends................................... 11,637 4,152
Accretion of initial discount and redemption prepayment
premium.......................................... 15,067 -
Issuance of Senior Preferred Stock.................. 100,000 -
Redemption of Original Senior Preferred Stock....... (92,768) -
-------------- --------------
Balance at December 31, 1998............................ 107,596 55,048
Accrued dividends................................... 12,673 4,491
Accretion of redemption prepayment premium.......... 1,823 -
-------------- --------------
Balance at December 31, 1999............................ $122,092 $ 59,539
============== ==============
</TABLE>
F-17
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
INITIAL WARRANTS
At December 31, 1998 and 1999, there were 550,000 and 365,000 of
outstanding Initial Warrants, respectively, which expire July 1, 2007. Each
Initial Warrant entitles the holder thereof to purchase one share of Class A
common stock at an exercise price of $0.01 per share. The value of the Initial
Warrants at the date of issuance was $9,000,000 which was allocated to paid-in
capital. During October 1998 and September 1999, the Company redeemed 50,000 and
185,000 of the outstanding Initial Warrants for $535,000 and $2,957,000,
respectively.
DISCOUNT NOTES
In June 1996, the Company issued Senior Subordinated Discount Notes due
2006 (the "Discount Notes") in the principal amount of $170,000,000. These
Discount Notes were issued at a discount of $79,822,000 which generated gross
proceeds of $90,178,000. The Discount Notes mature on May 15, 2006 and yield
13.25% per annum with no cash interest accruing prior to May 15, 2001.
Thereafter, cash interest will accrue until maturity payable semiannually,
commencing November 15, 2001. On or after May 15, 2000, the Discount Notes are
redeemable at the option of the Company, in whole or in part, at predetermined
redemption prices and under specified conditions. The Discount Notes are
subordinated to all other senior debt of the Company. The Discount Notes contain
various restrictive covenants. The Discount Notes were exchanged for Discount
Notes registered with the Securities and Exchange Commission pursuant to a
registration statement declared effective in October 1996. See (Note G) for
amount outstanding on the Discount Notes at December 31, 1998 and 1999.
During July 1999, the Company retired a portion of its Discount Notes with
a face amount of $3,000,000. The Discount Notes had an accreted value of
$2,371,000 and were purchased for a total of $2,591,000 which includes a premium
payment for early retirement. The premium payment, totaling $220,000, is
included in other interest expense.
Since the Company derives all of its operating income and cash flow from
Benedek Broadcasting, the Company's ability to pay its obligations including (i)
interest on and principal of the Discount Notes, (ii) redemption of and cash
dividends on the Senior Preferred Stock, and (iii) redemption of and cash
dividends on the Junior Preferred Stock will be dependent primarily upon
receiving dividends and other payments or advances from Benedek Broadcasting.
Benedek Broadcasting is a separate and distinct legal entity and has no legal
obligation, contingent or otherwise, to pay any amount to the Company or to make
funds available to the Company for debt service or any other obligation.
(NOTE G) - NOTES PAYABLE, INTEREST RATE CAP, PLEDGED ASSETS AND LOSS ON
EXTINGUISHMENT OF DEBT
(1) NOTES PAYABLE
TERM LOANS AND REVOLVER
During 1996, Benedek Broadcasting entered into a credit agreement which
included two term loan facilities in an initial aggregate principal amount of
$128,000,000. This agreement was amended and restated on December 17, 1997 to
convert the existing term loans to new term loans, to amend and delete certain
provisions of the agreement and to replace certain parties to the agreement.
Associated with this amendment and change in lead banks, fees of $3,631,000 were
written off to other interest expense in 1997.
F-18
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
On May 20, 1999, the Company borrowed $275,000,000 against a new credit
facility (the "Credit Facility"), which was amended as of June 18, 1999, with an
aggregate borrowing limit of $310,000,000. The proceeds were used by the Company
to finance the tender offer of its 11.875% Senior Secured Notes due 2005 (the
"Notes") and extinguish the existing credit agreement.
The new Credit Facility includes a $220,000,000 term loan (the "Term Loan")
and a $90,000,000 revolver (the "Revolver") of which approximately $4,200,000
was available at December 31, 1999. The Term Loan and the Revolver bear interest
at the Company's option, at a base rate plus 2.25% and 1.75%, respectively, or
at a LIBOR rate plus 3.25% or 2.75%, respectively. The interest rates on the
Term Loan ranged from 9.41% to 9.43% and the interest rates on the Revolver
ranged from 8.68% to 8.78% at December 31, 1999. The margins above the base rate
and the LIBOR rate at which the Revolver bears interest are subject to
reductions based on certain leverage ratios. The unused portion of the Revolver
is subject to a commitment fee ranging from 0.75% per annum to 0.375% per annum
based on certain leverage ratios.
The Company is required to make scheduled payments on the Term Loan
beginning in 2002 to maturity in 2007. In addition, the Company is required to
make prepayments on the Term Loan and the Revolver under certain circumstances,
including upon the sale of certain assets and the issuance of certain debt or
equity securities. Beginning in 2002, the Company is required to make
prepayments on the Term Loan and the Revolver in an amount equal to 50% of
excess cash flow.
The commitment under the Revolver will be permanently reduced over the
period from June 2002 to maturity in 2007. In addition, the commitment under the
Revolver will be permanently reduced in certain circumstances including upon the
sales of certain assets and the issuance of certain debt or equity securities
and with excess cash flow. The Company has the right to pay down the Revolver
without penalty in increments of $1,000,000.
The Credit Facility contains certain financial covenants, including, but
not limited to, covenants related to interest coverage, total and senior
leverage ratios and fixed charge ratio. In addition, the Credit Facility
contains other affirmative and negative covenants relating to, among other
things, liens, payments on other debt, restricted junior payments (excluding
distributions from Benedek Broadcasting to the Company) transactions with
affiliates, mergers and acquisitions, sales of assets, guarantees and
investments. The Credit Facility contains customary events of default for
highly-leveraged financings, including certain changes in ownership or control
of the Company. The Credit Facility is secured by the Company's present and
future property and assets and the common stock of BLC.
OTHER NOTES
Other notes payable consist of multiple financing agreements requiring
monthly payments including interest from 2.9% to 15.6% on notes maturing from
2000 through 2024 that are collateralized by various assets of the Company.
F-19
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
Notes payable consist of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1998 1999
---- ----
(In thousands)
<S> <C> <C>
Senior Secured Notes.......................... $ 135,000 $ -
Revolver...................................... - 58,500
Term Loan..................................... - 220,000
Prior year term loans......................... 108,317 -
Discount Notes - see (Note F) for terms....... 125,413 140,049
Other......................................... 6,086 9,030
----------------- -----------------
374,816 427,579
Less current maturities....................... 15,911 1,300
----------------- -----------------
$ 358,905 $ 426,279
================= =================
</TABLE>
At December 31, 1999, the notes provide for annual reductions as follows:
<TABLE>
<CAPTION>
Year Ending December 31,
- ------------------------
(In thousands)
<S> <C>
2000..................................... $ 1,300
2001..................................... 141,397
2002..................................... 3,586
2003..................................... 2,772
2004..................................... 11,614
Thereafter............................... 266,910
-------------------
$ 427,579
===================
</TABLE>
(2) INTEREST RATE CAP
During August 1999, in accordance with certain covenants of the Credit
Facility, the Company entered into an interest rate cap agreement which matures
in September 2001, to reduce the impact of changes in interest rates on its
floating-rate long-term debt. That agreement effectively entitles the Company to
receive from a financial institution the amount, if any, by which the British
Bankers' Association interest settlement rates ("settlement rate") for U.S.
dollar deposits exceeds 8.00% on a notional amount totaling $70,000,000 subject
to an amortization schedule. As of December 31, 1999, the settlement rate was
6.18%. The $168,000 premium paid for this interest rate cap is being amortized
ratably to interest expense over the 24-month term of the cap, and is reported
as an other asset in the accompanying consolidated balance sheets. Although the
Company is exposed to credit loss in the event of nonperformance by the
counterparty on the interest rate cap, management does not expect nonperformance
by the counterparty.
F-20
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
(3) LOSS ON EXTINGUISHMENT OF DEBT
On April 16, 1999, the Company commenced a tender offer and consent
solicitation (the "Offer") for any and all of the $135,000,000 in outstanding
principal amount of the Notes. The total consideration for each of $1,000
principal of Notes was $1,105.78 which consisted of the Offer price per $1,000
principal of Notes of $1,075.78 and a consent payment of $30 per $1,000
principal amount of Notes.
On May 20, 1999, the Company redeemed all of the outstanding Notes. The
offer was financed through the Credit Facility. A total of $12,510,000 (net of
$8,340,000 of applicable income taxes) was reflected as a loss on the early
extinguishment of debt which was comprised of prepayment premiums, consent
payments, expenses of the transaction and a write-off of unamortized fees
associated with the Notes and then existing credit agreement.
(NOTE H) - PROGRAM BROADCAST RIGHTS AND LIABILITIES
Program broadcast rights and program broadcast liabilities consist of the
following:
<TABLE>
<CAPTION>
Program Program
Broadcast Broadcast
Rights Liabilities
-------------- ---------------
(In thousands)
<S> <C> <C>
Balance at December 31, 1997......................... $ 6,665 $ 8,115
Contracts acquired.............................. 6,169 6,169
Amortization.................................... (6,758) -
Payments........................................ - (6,399)
-------------- ---------------
Balance at December 31, 1998......................... 6,076 7,885
Contracts acquired.............................. 8,186 8,186
Net addition due to station swap (Note B)....... 979 970
Amortization.................................... (8,127) -
Payments........................................ - (7,455)
-------------- ---------------
Balance at December 31, 1999......................... $ 7,114 $ 9,586
============== ===============
</TABLE>
The current maturities of program broadcast liabilities consist of the
following:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1998 1999
---- ----
(In thousands)
<S> <C> <C>
Program contracts, due in varying installments........ $ 7,885 $ 9,586
Less current maturities............................... (6,994) (8,608)
---------------- ----------------
Long-term portion..................................... $ 891 $ 978
================ ================
</TABLE>
F-21
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
The maturities of the contracts are as follows at December 31, 1999:
<TABLE>
<CAPTION>
Year Ending December 31,
- ------------------------
(In thousands)
<S> <C>
2000............................................................... $ 8,608
2001............................................................... 793
2002............................................................... 161
2003............................................................... 19
2004............................................................... 5
-----------------
$ 9,586
==================
</TABLE>
In addition, the Company has entered into noncancellable commitments for
future program broadcast rights aggregating approximately $19,464,000 as of
December 31, 1999 with future payments as follows:
<TABLE>
<CAPTION>
Year Ending December 31,
- ------------------------
(In thousands)
<S> <C>
2000..................................... $ 1,892
2001..................................... 6,007
2002..................................... 4,746
2003..................................... 2,443
2004..................................... 2,424
Thereafter............................... 1,952
-------------------
$ 19,464
===================
</TABLE>
(NOTE I) - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1998 1999
---- ----
(In thousands)
<S> <C> <C>
Trade payables................................... $ 1,073 $ 3,404
Barter, net...................................... 526 271
Compensation and benefits........................ 3,093 3,921
Interest......................................... 5,624 601
Other............................................ 1,661 1,972
--------------- ----------------
$ 11,977 $ 10,169
=============== ================
</TABLE>
(NOTE J) - LEASES
The Company leases land, office space and office and transportation
equipment under agreements which expire from 2000 through 2007 and require
various minimum annual rentals. The leases also require payment of the normal
maintenance, real estate taxes and insurance on the properties. The Company
currently leases its premises in Parkersburg, West Virginia. The Company has
committed to exercise their option to acquire the premises on May 1, 2000 for
$650,000.
F-22
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
The Company has the option to purchase its leased premises in Casper,
Wyoming upon written notice to the landlord at any time during the 10-year term
which expires March 5, 2007. At December 31, 1999, the option purchase price was
$400,435 which increases each year through 2004 by six percent and each year
thereafter by three percent of the original option purchase price.
The approximate total minimum rental commitments at December 31, 1999 under
these leases are due as follows:
<TABLE>
<CAPTION>
Year Ending December 31,
- ------------------------
(In thousands)
<S> <C>
2000..................................... $ 923
2001..................................... 713
2002..................................... 557
2003..................................... 307
2004..................................... 136
Thereafter............................... 312
------------------
$ 2,948
==================
</TABLE>
Total rental expense under these agreements and other monthly rentals for
the years ended 1997, 1998 and 1999 was approximately $1,416,000, $1,244,000,
and $1,127,000, respectively.
The Company is a lessor of certain portions of its real property to various
organizations. Total rental income under these agreements for the years ended
1997, 1998 and 1999 was approximately $1,030,000, $990,000, and $1,000,000,
respectively.
(NOTE K) - INCOME TAX MATTERS
On June 6, 1996 when the Company changed tax status, the accumulated
deficit of $41,073,000 which existed on that date was reclassified to additional
paid-in capital.
The deferred tax assets and liabilities consist of the following components
for the Company:
<TABLE>
<CAPTION>
December 31,
---------------------------------
1998 1999
---- ----
(In thousands)
<S> <C> <C>
Deferred tax assets:
Loss carryforwards.................................... $ 5,385 $ 10,458
Receivable allowances and accruals.................... 1,191 1,085
Network agreements.................................... 1,178 1,205
Original issue discount............................... 14,094 20,585
--------------- ---------------
21,848 33,333
--------------- ---------------
Deferred tax liabilities:
Property and equipment................................ 7,877 6,788
Intangibles........................................... 46,545 48,751
--------------- ---------------
54,422 55,539
--------------- ---------------
Net deferred tax liability............................ $ (32,574) $ (22,206)
=============== ===============
</TABLE>
F-23
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
The total income tax benefit for the years ended December 31, 1997, 1998
and 1999 was $12,027, $8,052 and $9,717, respectively. Those amounts have been
allocated to the following financial statement items:
<TABLE>
<CAPTION>
1997 1998 1999
-------------- ---------------- ----------------
(In thousands)
<S> <C> <C> <C>
Loss from continuing operations...... $ 12,027 $ 8,052 $ 1,377
Extraordinary item................... - - 8,340
-------------- ---------------- ----------------
$ 12,027 $ 8,052 $ 9,717
============== ================ ================
</TABLE>
The income tax benefit related to continuing operations before income taxes
and the extraordinary item for the Company consisted of the following:
<TABLE>
<CAPTION>
1997 1998 1999
-------------- ---------------- ----------------
(In thousands)
<S> <C> <C> <C>
Current tax expense.................. $ (349) $ (265) $ (651)
Deferred tax benefit................. 12,376 8,317 2,028
-------------- ---------------- ----------------
$ 12,027 $ 8,052 $ 1,377
============== ================ ================
</TABLE>
Under the provisions of the Internal Revenue Code, the Company and its
subsidiaries have approximately $26,200,000 of net operating loss carryforwards
which expire in 2007 through 2019 that are available to offset future tax
liabilities.
A reconciliation of the statutory federal income tax rate to the Company's
effective tax rate is as follows:
<TABLE>
<CAPTION>
December 31,
---------------------------------------------
1997 1998 1999
------------ ------------ -----------
<S> <C> <C> <C>
Computed "expected" income tax benefit............ (35.0)% (35.0)% (35.0)%
Increase (decrease) resulting from:
State income taxes, net of federal effect..... (5.0) (5.0) (5.0)
Nondeductible amortization and expenses....... 5.1 7.7 12.7
Nondeductible write-off of intangibles
related to sale of station................. - - 16.1
Other, net.................................... 1.8 (0.3) 3.2
------------ ------------ -----------
Effective tax rate................................ (33.1)% (32.6)% (8.0)%
============ ============ ===========
</TABLE>
The tax effect related to the extraordinary item (Note G) is deferred
and it approximates the statutory U.S. tax rate.
F-24
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
(NOTE L) - PREFERRED AND COMMON STOCK
The Board of Directors of the Company has authorized 2,500,000 shares of
preferred stock of which 550,000 was issued and outstanding as of December 31,
1999. The Board has the right and ability to set the terms and preferences of
the preferred stock. The Board has not set the terms and preferences of the
remaining 1,950,000 unissued shares.
The following table summarizes common stock:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1998 1999
---- ----
<S> <C> <C>
Common stock, Class A par value $0.01, one vote per share
Authorized shares............................................ 10,000,000 10,000,000
Issued and outstanding shares................................ None None
Common stock, Class B par value $0.01, ten votes per share,
convertible into Class A common stock at a ratio of 1:1
Authorized shares............................................ 10,000,000 10,000,000
Issued and outstanding shares................................ 7,400,000 7,400,000
</TABLE>
(NOTE M) - FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments has been estimated by the
Company using available market information and appropriate valuation
methodologies as discussed below. Considerable judgment was required, however,
to interpret market data to develop the estimates of fair value. Accordingly,
the estimates presented below are not necessarily indicative of the amounts the
Company could realize in a current market exchange.
Cash and cash equivalents, current receivables and current payables have
carrying values which approximate fair value because of the short-term nature of
those instruments. The floating rate long-term debt carrying amount approximates
fair value because the interest rate fluctuates with the bank's lending rate.
The interest rate cap agreement carrying value approximates fair value due to
the relationship of the cap rate to current interest rates.
The following table shows the carrying amounts and estimated fair values of
other financial instrument liabilities at December 31, 1998 and 1999:
<TABLE>
<CAPTION>
1998 1999
--------------------------------- ---------------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
-------------- -------------- --------------- --------------
(In thousands)
<S> <C> <C> <C> <C>
Program broadcast liabilities $ 7,885 $ 7,461 $ 9,586 $ 9,081
Other notes payable................. 6,086 6,086 9,030 9,030
Notes............................... 135,000 147,150 - -
Discount Notes...................... 125,413 117,300 140,049 152,387
Senior Preferred Stock.............. 107,596 69,000 122,092 82,000
Junior Preferred Stock.............. 55,048 48,478 59,539 54,778
</TABLE>
F-25
<PAGE>
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
The fair value of program broadcast liabilities and other notes payable
were estimated using the discounted cash flow method.
The fair value of the Discount Notes, Notes and Senior Preferred Stock were
estimated using readily available quoted market prices.
The fair value of the Junior Preferred Stock is estimated using discounted
cash flow analysis, based on the interest rate, preferences and other risks
inherent in the instrument.
The above fair value estimates were made at a discrete point in time based
on relevant market information and other assumptions about the financial
instruments. As no active market exists for a significant portion of the
Company's financial instruments, fair value estimates were based on judgments
regarding current economic conditions, future expected cash flows, risk
characteristics and other factors. These estimates are subjective in nature and
involve uncertainties, and therefore, cannot be calculated with precision.
Changes in assumptions could significantly affect these estimates.
(NOTE N) - PENDING ADOPTION OF ACCOUNTING STANDARD
The FASB (Financial Accounting Standards Board) has issued FASB statement
No. 133 "Accounting for Derivative Instruments and Hedging Activities" which the
Company will be required to adopt for its fiscal year ending December 31, 2001.
This pronouncement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, (collectively referred to as derivatives) and for hedging activities.
It requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. This pronouncement is not expected to have a significant impact
on the Company's financial statements since the Company's only derivative
financial instrument is an interest rate cap.
F-26
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Benedek Communications Corporation and Subsidiaries
Rockford, Illinois
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The consolidated
supplemental schedule is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not a part of the basic consolidated
financial statements. This schedule has been subjected to the auditing
procedures applied in our audits of the basic consolidated financial statements
and, in our opinion, is fairly stated in all material respects in relation to
the basic consolidated financial statements taken as a whole.
/s/ McGLADREY & PULLEN, LLP
Rockford, Illinois
February 18, 2000
S-1
<PAGE>
SCHEDULE II
BENEDEK COMMUNICATIONS CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions
Balance at Balances Charged to Deductions Balance at
Beginning Acquired in Costs and Described End of
of Period Acquisition Expenses (1) Period
------------------------------------------------------------------------------------
Deducted from asset account -
allowance for doubtful accounts:
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1997 $483,519 $ - $231,480 $243,347 $471,652
Year ended December 31, 1998 471,652 - 552,357 543,834 480,175
Year ended December 31, 1999 480,175 - 642,988 440,398 682,765
(1) Uncollectible accounts written off, net of recoveries
</TABLE>
S-2
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of November 17, 1999, by and between The Chronicle Publishing Company, a
Nevada corporation (the "Seller"), and Benedek Broadcasting Corporation, a
Delaware corporation (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Seller owns certain assets which it uses to conduct the
operations of television stations WOWT(TV), Omaha, Nebraska, KAKE-TV, Wichita,
Kansas, KUPK-TV, Garden City, Kansas, and KLBY(TV), Colby, Kansas (the
"Business").
WHEREAS, the Purchaser desires to purchase from the Seller, and the
Seller desires to sell to the Purchaser, substantially all of the assets of the
Seller owned, used or held for use by the Seller primarily to conduct the
operations of the Business, and in connection therewith, the Purchaser has
agreed to assume certain liabilities of the Seller relating to the Business, all
upon the terms and subject to the conditions set forth herein (such transaction
sometimes being referred to herein as the "Asset Purchase").
WHEREAS, the prior consent of the United States Federal Communications
Commission is required to permit the consummation of the Asset Purchase.
WHEREAS, the Seller and the Purchaser desire to make certain
representations, warranties, covenants and agreements in connection with the
Asset Purchase, all as more fully set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants, promises and agreements hereinafter set forth, the mutual benefits to
be gained by the performance of such covenants, promises and agreements, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged and accepted, the parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Certain Definitions. For all purposes of and under this Agreement, the
following terms shall have the respective meanings set forth below:
(a) "Action" means any claim, action, suit or proceeding, arbitral
action, governmental inquiry, criminal prosecution or other investigation.
(b) "Affiliate" means any "affiliate" as defined in Rule 144(a)(1)
promulgated under the Securities Act of 1933, as amended, any successor statute
thereto, and the rules and regulations promulgated thereunder.
<PAGE>
(c) "Business Day" means any weekday (Monday through Friday) on which
commercial banks in San Francisco, California are open for business.
(d) "Communications Act" means the Communications Act of 1934, as
amended, any successor statute thereto, and all rules, regulations and written
policies of the FCC promulgated thereunder.
(e) "Confidentiality Agreement" means the letter agreement between the
Seller and the Purchaser, dated as of July 21, 1999.
(f) "Contract" means any currently enforceable contract, agreement,
indenture, note, bond, instrument, lease, conditional sales contract, mortgage,
license, franchise agreement, concession agreement, insurance policy, security
interest, guaranty, binding commitment or other agreement or arrangement,
whether written or oral.
(g) "Encumbrance" means any security interest, pledge, mortgage, lien,
charge, adverse claim of ownership or use, restriction on transfer (such as a
right of first refusal or other similar right), defect of title, or other
encumbrance of any kind or character.
(h) "Environmental Law" means any Law pertaining to land use, air,
soil, surface water, groundwater (including the protection, cleanup, removal,
remediation or damage thereof), public or employee health or safety or any other
environmental matter, including, without limitation, the following laws as in
effect on the Closing Date: (i) Clean Air Act (42 U.S.C. ss.7401, et seq.); (ii)
Clean Water Act (33 U.S.C. ss.1251, et seq.); (iii) Resource Conservation and
Recovery Act (42 U.S.C. ss.6901, et seq.); (iv) Comprehensive Environmental
Resource Compensation and Liability Act (42 U.S.C. ss.9601, et seq.); (v) Safe
Drinking Water Act (42 U.S.C. ss.300f, et seq.); (vi) Toxic Substances Control
Act (15 U.S.C. ss.2601, et seq.); (vii) Rivers and Harbors Act (33 U.S.C.
ss.401, et seq.); (viii) Endangered Species Act (16 U.S.C. ss.1531, et seq.);
(ix) Occupational Safety and Health Act (29 U.S.C. ss.651, et seq.); and (x) any
other Laws relating to Hazardous Materials or Hazardous Materials Activities.
(i) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, any successor statute thereto, and the rules and regulations
promulgated thereunder.
(j) "FCC" means the United States Federal Communications Commission,
and any successor agency thereto.
(k) "GAAP" means generally accepted accounting principles in the United
States.
(l) "Governmental Authority" means any government, any governmental
entity, department, commission, board, agency or instrumentality, and any court,
tribunal, or judicial body, in each case whether federal, state, county,
provincial, local or foreign.
2
<PAGE>
(m) "Governmental Order" means any statute, rule, regulation, order,
judgment, injunction, decree, stipulation or determination issued, promulgated
or entered by or with any Governmental Authority of competent jurisdiction.
(n) "Hazardous Material" means
(i) any "hazardous substance," as defined by the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended
("CERCLA");
(ii) any "hazardous waste," as defined by the Resource Conversation
and Recovery Act, as amended;
(iii) any petroleum product; or
(iv) any pollutant or contaminant or hazardous, dangerous or toxic
chemical, material or substance within the meaning of any other Environmental
Law.
(o) "Hazardous Materials Activity" means the handling, transportation,
transfer, recycling, storage, use, treatment, manufacture, investigation,
removal, remediation, release, exposure of others to, sale or other distribution
of any Hazardous Material or any product containing a Hazardous Material.
(p) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, any successor statute thereto, and the rules and regulations
promulgated thereunder.
(q) "Income Tax" means any federal, state, county, provincial, local or
foreign income, franchise, business profits or other similar Tax, any estimated
Tax related thereto, any interest and penalties (civil or criminal) thereon or
additions thereto, and any expenses incurred in connection with the
determination, settlement or litigation of any Liabilities related to any such
Tax.
(r) "Intellectual Property" means any United States and foreign
patents, patent applications, patent disclosures and improvements thereto, (ii)
United States and foreign trademarks, service marks, trade dress, logos, trade
names and corporate names, the goodwill associated therewith, and the
registrations and applications for registration thereof, and (iii) United States
and foreign copyrights, and the registrations and applications for registration
thereof.
(s) "Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, any successor statute thereto, and the rules and regulations
promulgated thereunder.
(t) "IRS" means the United States Internal Revenue Service, and any
successor agency thereto.
3
<PAGE>
(u) "Knowledge of the Seller," "known to the Seller" and phrases of
similar import mean, with respect to any matter in question relating to the
Business or the Seller, if John B. Sias, Martin A. Jaffe, W. Ronald Ingram,
Steve South, Randy Oswald, James Lowrey or Dale Morrel have actual knowledge of
such matter without obligation of inquiry.
(v) "Law" means any federal, state, county, provincial, local or
foreign statute, law, ordinance, regulation, rule, code or rule of common law.
(w) "Liability" means any direct or indirect debt, obligation or
liability of any kind or nature, whether accrued or fixed, absolute or
contingent, determined or determinable, matured or unmatured, and whether due or
to become due, asserted or unasserted, or known or unknown.
(x) "License" means any franchise, approval, permit, order,
authorization, consent, license, registration or filing, certificate, variance
and any other similar right obtained from or filed with any Governmental
Authority.
(y) "Material Adverse Effect" means any change or effect that is
materially adverse to the assets, properties, operations, business, financial
condition or results of operations of (i) television station WOWT-TV, Omaha,
Nebraska, or (ii) television stations KAKE-TV, Wichita, Kansas, KUPK-TV, Garden
City, Kansas and KLBY-TV, Colby, Kansas taken as a whole, except in either case
for any such changes or effects resulting directly or indirectly from (i) the
transactions contemplated by this Agreement, (ii) the announcement or other
disclosure of the transactions contemplated by this Agreement, (ii) regulatory
changes, (iii) changes in conditions generally applicable to the television
broadcasting industry, or in general economic conditions in the geographic
regions in which the Business is conducted.
(z) "NGCL" means the General Corporation Law of the State of Nevada,
and any successor statute thereto.
(aa) "Permitted Encumbrances" means (i) Encumbrances for inchoate
mechanics' and materialmen's liens for construction in progress and workmen's,
repairmen's, warehousemen's and carriers' liens arising in the ordinary course
of the business, (ii) Encumbrances for Taxes and other Liabilities not yet due
and payable, and for Taxes and other Liabilities being contested in good faith,
provided an appropriate reserve for such Liabilities has been established in
accordance with GAAP, (iii) Encumbrances in favor of the Purchaser arising out
of, under or in connection with this Agreement, (iv) Encumbrances reflected on
the Latest Balance Sheet (other than any Encumbrances securing the Seller's
obligation for borrowed money), (v) Encumbrances and imperfections of title the
existence of which does not materially detract from the value of, interfere
with, or otherwise affect the use and enjoyment of the property subject thereto
or affected thereby, for the same use and operations as currently conducted, and
(vi) solely with respect to Owned Real Property, provided that the following are
not violated by existing improvements in any material respect and do not
prohibit or
4
<PAGE>
materially restrict the continued use and operation of such Owned Real Property
for the same uses and operations as currently conducted, or grant any third
party any option or right to acquire or lease a material portion thereof, (A)
easements, rights of way and other similar restrictions which would be shown by
a current title report, (B) conditions that may be shown by a current survey,
title report or physical inspection, and (C) zoning, building and other similar
restrictions imposed by applicable Law.
(bb) "Person" means any individual, general or limited partnership,
firm, corporation, limited liability company, association, trust, unincorporated
organization or other entity.
(cc) "Program License Agreements" means any Business Contract granting
rights for the broadcast of programming on any of the Stations.
(dd) "Proprietary Rights" means any (i) Intellectual Property, (ii)
trade secrets and confidential business information (including, without
limitation, ideas, formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, research and
development information, software, drawings, specifications, designs, plans,
proposals, technical data, copyrightable works, financial, marketing and
business data, pricing and cost information, business and marketing plans and
customer and supplier lists and information), (iii) other proprietary rights,
(iv) copies and tangible embodiments thereof (in whatever form or medium), (v)
the domain names and websites www.kake.com and www.wowt.com, together with their
content, style and layout, including, without limitation, any related rights,
data, data bases, programming, scripting, coding, software, agreements, and
rights to links (both to and from the sites), and (vi) licenses granting any
rights with respect to any of the foregoing.
(ee) "Purchaser Permitted Encumbrances" means (i) Encumbrances for
inchoate mechanics' and materialmen's liens for construction in progress and
workmen's, repairmen's, warehousemen's and carriers' liens arising in the
ordinary course of the business, (ii) Encumbrances for Taxes and other
liabilities not yet due and payable, and for Taxes and other Liabilities being
contested in good faith, (iii) Encumbrances arising out of, under or in
connection with this Agreement, (iv) Encumbrances and imperfections of title the
existence of which does not materially detract from the value of, interfere
with, or otherwise affect the use and enjoyment of the property subject thereto
or affected thereby, consistent with past practice.
(ff) "Seller Documents" means, collectively, the (i) the Grant Deeds,
(ii) the Bill of Sale, (iii) the Assignment and Assumption, and (iv) the
Assignment of Proprietary Rights.
(gg) "Stations" means television stations WOWT(TV), Channel 6, Omaha,
Nebraska, KAKE-TV, Channel 10, Wichita, Kansas, KUPK-TV, Channel 13, Garden
City, Kansas, and KLBY(TV), Channel 4, Colby, Kansas.
5
<PAGE>
(hh) "Subsidiary" means (unless otherwise indicated), with respect to a
Person, any other Person in which such Person has a direct or indirect equity or
other ownership interest in excess of fifty percent (50%).
(ii) "Tax" means any federal, state, county, provincial, local or
foreign income, gross receipts, sales, use, ad valorem, employment, severance,
transfer, gains, profits, excise, franchise, property, capital stock, premium,
minimum and alternative minimum or other taxes, fees, levies, duties,
assessments or charges of any kind or nature whatsoever imposed by any
Governmental Authority (whether payable directly or by withholding), together
with any interest, penalties (civil or criminal), additions to, or additional
amounts imposed by, any Governmental Authority with respect thereto, and any
expenses incurred in connection with the determination, settlement or litigation
of any Liability therefor.
(jj) "Tax Return" means a report, return or other information required
to be supplied to a Governmental Authority with respect to any Tax.
(kk) "Trade Agreements" means any Business Contract for the sale of
advertising time on any of the Stations in exchange for goods or services other
than Program License Agreements.
1.2 Certain Additional Definitions. For all purposes of and under this
Agreement, the following terms shall have the respective meanings ascribed
thereto in the respective sections of this Agreement set forth opposite each
such term below:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
Term Section
- --------------------------------------------------------------------------------
Agreement Preamble
- --------------------------------------------------------------------------------
Asset Purchase Recitals
- --------------------------------------------------------------------------------
Asset Transfer Amount 6.9(g)
- --------------------------------------------------------------------------------
Asset Transfer Date 6.9(g)
- --------------------------------------------------------------------------------
Assignment and Assumption 3.2(a)(iii)
- --------------------------------------------------------------------------------
Assignment of Proprietary Rights 3.2(a)(iv)
- --------------------------------------------------------------------------------
Assignment of Station Licenses 3.2(a)(v)
- --------------------------------------------------------------------------------
Assumed Liabilities 2.2(b)
- --------------------------------------------------------------------------------
Assumed Plans 6.9(c)
- --------------------------------------------------------------------------------
Benefit Plan(s) 4.10(a)
- --------------------------------------------------------------------------------
Bill of Sale 3.2(a)(ii)
- --------------------------------------------------------------------------------
Business Recitals
- --------------------------------------------------------------------------------
Business Contract(s) 2.1(b)(ii)
- --------------------------------------------------------------------------------
Business Employee(s) 4.9
- --------------------------------------------------------------------------------
Business Insurance Policies 4.18(a)
- --------------------------------------------------------------------------------
Business License(s) 2.1(b)(iii)
- --------------------------------------------------------------------------------
Cash Payment 2.3(a)
- --------------------------------------------------------------------------------
Closing 3.1
- --------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
Term Section
- --------------------------------------------------------------------------------
Closing Date 3.1
- --------------------------------------------------------------------------------
Consultant 6.15(a)
- --------------------------------------------------------------------------------
Deeds 3.2(a)(i)
- --------------------------------------------------------------------------------
Environmental Auditor 6.15(d)
- --------------------------------------------------------------------------------
Environmental Work 6.15(b)
- --------------------------------------------------------------------------------
Escrow Agent 6.14
- --------------------------------------------------------------------------------
Escrow Agreement 6.14
- --------------------------------------------------------------------------------
Escrow Deposit 6.14
- --------------------------------------------------------------------------------
Excluded Assets 2.1(c)
- --------------------------------------------------------------------------------
Excluded Liabilities 2.2(c)
- --------------------------------------------------------------------------------
FCC Applications 6.12
- --------------------------------------------------------------------------------
Final Prorations Schedule 2.3(b)(iii)
- --------------------------------------------------------------------------------
Financial Statements 4.12(a)
- --------------------------------------------------------------------------------
Former Business Employees 4.10(a)
- --------------------------------------------------------------------------------
KRON Target Closing Date 3.1
- --------------------------------------------------------------------------------
Latest Balance Sheet 4.12(a)
- --------------------------------------------------------------------------------
Latest Balance Sheet Date 4.12(a)
- --------------------------------------------------------------------------------
Leased Assets 4.5(a)
- --------------------------------------------------------------------------------
Leased Real Property 4.5(a)
- --------------------------------------------------------------------------------
Lender 6.17
- --------------------------------------------------------------------------------
Material Business Contract(s) 4.7(a)
- --------------------------------------------------------------------------------
Material Business License(s) 4.8
- --------------------------------------------------------------------------------
New Cafeteria Plan 6.9(h)
- --------------------------------------------------------------------------------
Notice of Disagreement 2.3(b)(iii)
- --------------------------------------------------------------------------------
Owned Real Property 4.5(a)
- --------------------------------------------------------------------------------
PBGC 4.10(e)
- --------------------------------------------------------------------------------
Purchase Price 2.3(a)
- --------------------------------------------------------------------------------
Purchased Assets 2.1(b)
- --------------------------------------------------------------------------------
Purchaser Preamble
- --------------------------------------------------------------------------------
Purchaser 401(k) Plan 6.9(d)
- --------------------------------------------------------------------------------
Seller Preamble
- --------------------------------------------------------------------------------
Seller Articles of Incorporation 4.1
- --------------------------------------------------------------------------------
Seller Bylaws 4.1
- --------------------------------------------------------------------------------
Seller DB Plan 6.9(f)
- --------------------------------------------------------------------------------
Seller 401(k) Plan 6.9(d)
- --------------------------------------------------------------------------------
Seller's Proration Amount 2.3(b)(iii)
- --------------------------------------------------------------------------------
Short Term Agreement 4.7(a)
- --------------------------------------------------------------------------------
Station Licenses 2.1(b)(vii)
- --------------------------------------------------------------------------------
Termination Date 8.1(b)
- --------------------------------------------------------------------------------
Transferred Employees 6.9(a)
- --------------------------------------------------------------------------------
Transferred Non-Union Employees 6.9(a)
- --------------------------------------------------------------------------------
Transferred Union Employees 6.9(a)
- --------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
ARTICLE II.
PURCHASE AND SALE OF ASSETS
2.1 Purchase and Sale of Purchased Assets.
(a) Purchase and Sale. Upon the terms and subject to the conditions set
forth herein, at the Closing, the Purchaser shall purchase from the Seller, and
the Seller shall irrevocably sell, convey, transfer, assign and deliver to the
Purchaser, free and clear of all Encumbrances other than Permitted Encumbrances
and those Encumbrances set forth in Schedule 4.5(b) hereto, all right, title and
interest in and to the Purchased Assets (as defined below).
(b) Definition of Purchased Assets. For all purposes of and under this
Agreement, the term "Purchased Assets" shall mean, refer to and include all of
the Seller's right, title and interest in and to all tangible and intangible
assets, properties and rights which are owned, used or held for use by the
Seller primarily to conduct the operations of the Business, including, without
limitation, all right, title and interest of the Seller in and to all real
property (including, without limitation, the Owned Real Property set forth in
Schedule 4.5(a) hereto), and any leaseholds and sub-leaseholds therein
(including, without limitation, leases for the Leased Real Property set forth in
Schedule 4.5(a) hereto), buildings, towers, antennas, transmitters, structures,
improvements, fixtures, furnishings and other fittings thereon and additions,
replacements and alterations thereto, and easements, rights-of-way, and other
appurtenances thereto, all tangible personal property (whether or not located on
the Seller's premises and including, without limitation, the tangible personal
property set forth in Schedule 4.5(a) hereto) including all machinery, equipment
and tools, furniture and furnishings, computers and computer supplies, office
materials and supplies, automobiles, trucks and other vehicles, cameras, spare
parts, inventories of any kind or nature, office materials and supplies,
manufactured and purchased goods, all prepaid assets and expenses, and all
books, records (other than records relating to Income Taxes), employment records
(except to the extent prohibited by law), production records, filings with the
FCC, ledgers, files, documents, correspondence, customer, supplier, advertiser,
and other lists, invoices and sales data, creative, advertising and other
promotional materials, studies, reports, and other printed or written materials
or data, and specifically including, without limitation, the following:
(i) Proprietary Rights (including, without limitation, the
Intellectual Property set forth in Schedule 4.6(a) hereto), goodwill associated
therewith, licenses and sublicenses granted and obtained with respect thereto,
rights thereunder, remedies against infringements thereof, and rights to
protection of interests therein under the applicable Laws of all jurisdictions;
(ii) Contracts to which the Seller is a party or by which its
assets or properties are bound (each, a "Business Contract" and, collectively,
"Business Contracts") (including, without limitation, the Material Business
Contracts set forth in
8
<PAGE>
Schedule 4.7(a) hereto), to the extent transferable by the Seller to the
Purchaser, and all rights thereunder;
(iii) Licenses owned or possessed by the Seller used or necessary
for the lawful conduct of the Business (each, a "Business License" and,
collectively, "Business Licenses") (including, without limitation, the Material
Business Licenses), to the extent transferable by the Seller to the Purchaser,
and all rights thereunder, except for the Station Licenses, which shall be
conveyed pursuant to Subsection 2.1(b)(vii);
(iv) rights in or to all Assumed Plans, and any and all assets
associated with or allocated to Business Employees thereunder;
(v) any and all refunds of Taxes relating primarily to the Business
other than refunds of Income Taxes;
(vi) Actions, deposits, prepayments, refunds, causes of action,
choses in action, rights of recovery, rights of set off, and rights of
recoupment of any kind or nature (including, without limitation, any such item
relating to Taxes other than Income Taxes) relating to the Purchased Assets or
the Assumed Liabilities;
(vii) All licenses, permits, permissions and other authorizations
issued by the FCC and other governmental agencies for the operation of the
Stations, including, but not limited to those listed on Schedule 4.21 hereto,
and the Seller's rights in and to the call letters WOWT(TV), KAKE-TV, KUPK-TV
and KLBY(TV) (the "Station Licenses");
(viii) All rights of the Seller relating to or arising out of or
under express or implied warranties from suppliers with respect to the assets
and properties being transferred to the Purchaser;
(ix) All prepaid expenses, advances and deposits which relate to
the business and operation of the Stations, including prepaid film and
programming expenses (it being understood that the Purchase Price includes
payment for the contracts and commitments of the Seller relating to film and
programming and that no further payment to the Seller or proration shall be due
in respect thereof) and all barter receivables arising in connection with Trade
Agreements now existing or hereafter entered into in the ordinary course of
business to the extent permitted by Section 6.1 hereof; and
(x) All rights of the Seller under Business Insurance Policies, to
the extent they relate to claims against the Business arising prior to the
Closing Date and such rights are transferable by the Seller to the Purchaser,
subject to Section 2.1(c)(x).
(c) Definition of Excluded Assets. Notwithstanding anything to the
contrary set forth in this Section 2.1 or elsewhere in this Agreement, the term
"Purchased Assets" shall not mean, refer to or include the following
(collectively, the "Excluded Assets"):
9
<PAGE>
(i) the corporate charter and bylaws, qualifications to transact
business as a foreign corporation, arrangements with registered agents relating
to foreign qualifications, taxpayer and other identification numbers, seals,
minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of the Seller
as a corporation;
(ii) all assets, whether real or personal, tangible or intangible,
which are owned, used or held for use by the Seller primarily to conduct any
business operation or activity other than the Business;
(iii) all real and personal property (including, without
limitation, all equipment, furniture, fixtures, files, computers, computer
software and computer software licenses, supplies and other personal property)
used by the corporate and accounting departments of the Seller in San Francisco,
California;
(iv) rights in or to all Benefit Plans other than Assumed Plans,
and all assets associated with or allocated to employees of the Seller other
than Business Employees thereunder;
(v) cash and cash equivalents;
(vi) any and all refunds of Income Taxes;
(vii) Actions, deposits, prepayments, refunds, causes of action,
choses in action, rights of recovery, rights of set off, and rights of
recoupment of any kind or nature (including any such item relating to Income
Taxes) relating to the Excluded Assets or the Excluded Liabilities ;
(viii) refunds paid or payable in connection with the cancellation
or discontinuance of any insurance policies applicable to the Business
(including, without limitation, the Business Insurance Policies set forth in
Schedule 4.18 hereto) following the Closing;
(ix) all rights of the Seller under this Agreement, any agreement,
certificate, instrument or other document executed and delivered by the Seller
in connection with the transactions contemplated hereby, or any side agreement
between the Seller and the Purchaser entered into on or after the date of this
Agreement; and
(x) all rights of the Seller for reimbursement under Business
Insurance Policies to the extent (A) they relate to claims against the Business
arising prior to the Closing Date, and (B) the Seller has incurred costs or paid
monies in connection with such claims.
10
<PAGE>
2.2 Assumption of Liabilities.
(a) Assumption. Upon the terms and subject to the conditions set forth
herein, at the Closing the Purchaser shall assume from the Seller (and therefore
pay, perform and discharge), and the Seller shall irrevocably convey, transfer
and assign to the Purchaser, all of the Assumed Liabilities (as defined below).
(b) Definition of Assumed Liabilities. For all purposes of and under
this Agreement, the term "Assumed Liabilities" shall mean, refer to and include
all Liabilities of the Seller arising out of or relating to the operation of the
Business, including, without limitation, the Liabilities set forth below to the
extent that such Liabilities arose out of or relate primarily to the operation
of the Business or the Purchased Assets, but specifically excluding the Excluded
Liabilities (as defined below):
(i) Liabilities of the Seller under all Business Contracts
(including, without limitation, the Material Business Contracts set forth in
Schedule 4.7(a) hereto) to the extent such Business Contracts are transferred by
the Seller to the Purchaser;
(ii) Liabilities of the Seller under all Business Licenses
(including, without limitation, the Material Business Licenses), to the extent
such Business Licenses are transferred by the Seller to the Purchaser;
(iii) Liabilities of the Seller under all Assumed Plans;
(iv) Liabilities reflected in the Latest Balance Sheet to the
extent not discharged on or prior to the Closing Date;
(v) Liabilities for Taxes, other than Income Taxes of the Seller
arising at any time;
(vi) Liabilities of the Seller arising out of or in connection with
any Action (including, without limitation, any Action set forth in Schedule 4.15
hereto);
(vii) Liabilities of the Seller for any obligation to make
severance payments to any Business Employee as set forth in any employment
agreement, collective bargaining agreement or other Contract between the Seller
and any such Business Employee, other than any such obligation to make payments,
payable upon the sale of the Stations by the Seller, to (A) Randy Oswald,
pursuant to that letter, dated July 8, 1999, from John B. Sias on behalf of the
Seller to Randy Oswald, (B) James Lowery, pursuant to that Letter Agreement,
dated April 17, 1998, from Randy Oswald on behalf of the Seller to James Lowery
and (C) any other Business Employee if such payment is due solely by reason of
the sale of the Stations by the Seller;
(viii) Liabilities of the Seller for all accrued vacation and sick
time of all Business Employees;
11
<PAGE>
(ix) Liabilities of the Seller arising from discharges or releases
of Hazardous Materials and other Hazardous Material Activities, violations of
Environmental Laws or similar matters to the extent such Liabilities are related
to the operations of the Business; and
(x) Liabilities under all employment agreements, other Contracts
between the Seller and any Business Employee, and collective bargaining
agreements relating to the Business, including, without limitation, all employee
benefit plans or other arrangements required under any collective bargaining
agreement or otherwise negotiated with the union that is a party thereto.
(c) Definition of Excluded Liabilities. Except for the Assumed
Liabilities, the Purchaser shall not assume any Liabilities of the Seller
(collectively, the "Excluded Liabilities"). Notwithstanding anything to the
contrary set forth in this Section 2.2 or elsewhere in this Agreement, the term
"Assumed Liabilities" shall not mean, refer to or include (and, therefore, the
"Excluded Liabilities" shall include) the following:
(i) Liabilities of the Seller under any Benefit Plan which is not
an Assumed Plan;
(ii) Liabilities for Income Taxes of the Seller;
(iii) Liabilities of the Seller in respect of transaction costs
payable by the Seller pursuant to Section 6.8 hereof;
(iv) Liabilities of the Seller for borrowed money; and
(v) Liabilities of the Seller to any shareholder of the Seller or
any of its Affiliates, except as set forth in Schedule 4.19.
2.3 Consideration for Purchased Assets.
(a) Consideration. Subject to Section 2.3(b) hereof, the purchase price
(the "Purchase Price") for the Purchased Assets shall be (i) One Hundred
Forty-One Million Dollars ($141,000,000) in cash (the "Cash Payment"), and (ii)
the assumption by the Purchaser of the Assumed Liabilities pursuant to Section
2.2 hereof.
(b) Prorations.
(i) Except as otherwise provided herein, all income and expenses
arising from the conduct of the Business shall be prorated in accordance with
GAAP for the account of the Seller through 11:59 p.m. on the Closing Date and
thereafter for the account of the Purchaser, it being understood that (A) any
amounts that are or should have been accrued under GAAP as of the Closing Date
with respect to the Assumed Liabilities are to be charged to the Seller to the
extent the Seller has received the benefit therefrom prior to the Closing, (B)
pre-paid fees and expenses, to the extent the Purchaser
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will receive a benefit therefrom after the Closing Date, are to be charged to
the Purchaser, and (C) notwithstanding the foregoing clauses (A) and (B), the
Purchase Price includes payment for Program License Agreements and for barter
receivables arising in connection with Trade Agreements and that no further
payment to Seller or proration shall be due in respect thereof and any cash
payment due under Program License Agreements on or prior to the Closing Date
shall be charged to the Seller. Such prorations shall include, without
limitation, all unbilled advertising income, all network compensation, all ad
valorem, real estate and other property taxes (but excluding taxes arising by
reason of the transfer of the Purchased Assets as contemplated hereby which
shall be paid in accordance with Section 6.8 hereof), business and license fees,
annual FCC regulatory fees, lease payments, rents (excluding amounts paid as
capital expenditures in connection with real property, whether leased or owned),
wages and salaries of employees (including accruals for bonuses, commissions and
vacation pay), workers' compensation premiums, utility expenses, water and sewer
use charges, time sales agreements, and all other income and expenses
attributable to the ownership and conduct of the Business. The Seller shall
provide to the Purchaser a list of all known proratable items and payables for
the Business at least five (5) Business Days prior to the Closing.
(ii) At the Closing, the Cash Payment shall be adjusted by the
amount of the adjustments contemplated in Subsection 2.3(b)(i) to the extent
practicable. As to those prorations and adjustments not reasonably capable of
being ascertained on the Closing Date, adjustments and prorations shall be made
in accordance with the procedures set forth in Subsection 2.3(b)(iii).
(iii) As promptly as practicable, but in any event within sixty
(60) calendar days after the Closing, the Purchaser shall cause to be prepared
and delivered to the Seller a schedule of its proposed prorations (which shall
set forth in reasonable detail the basis for those determinations) (the "Final
Prorations Schedule"). The Final Prorations Schedule shall be conclusive and
binding on the Seller and the Seller shall pay to the Purchaser, or the
Purchaser shall pay to the Seller, as the case may be, any amount due as a
result of such adjustment within thirty-five (35) calendar days of the Seller's
receipt of the Final Prorations Schedule, unless the Seller provides the
Purchaser with written notice of objection (the "Notice of Disagreement") within
thirty (30) calendar days after the Seller's receipt of the Final Proration
Schedule, which notice shall state the prorations of expenses proposed by the
Seller (the "Seller's Proration Amount"). The Purchaser shall have fifteen (15)
calendar days from receipt of a Notice of Disagreement to accept or reject
Seller's Proration Amount. Payment by the Purchaser to the Seller, or by the
Seller to the Purchaser, as the case may be, pursuant to this Subsection
2.3(b)(iii) shall be due within fifteen (15) calendar days after the last to
occur of (A) the Purchaser's acceptance of the Seller's Proration Amount, or (B)
the Purchaser's failure to reject the Seller's Proration Amount within fifteen
(15) calendar days of the Purchaser's receipt of a Notice of Disagreement.
(iv) In the event of any disputes between the parties as to the
prorations and adjustments described in this Section, the amounts not in dispute
shall nonetheless be
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paid at the time provided in this Section and such disputes shall be determined
by an independent certified public accountant of national recognition that does
not then have a relationship with the Seller or the Purchaser, or any of their
respective Affiliates, mutually acceptable to the Seller and the Purchaser, with
the fees and expenses of such accountant being shared equally by the Seller and
the Purchaser. Any payment required by the Seller to the Purchaser or the
Purchaser to the Seller, as the case may be, under this Section shall be paid by
wire transfer of immediately available funds to the account of the payee with
the financial institution in the United States as designated by such party
within five (5) Business Days after the date on which the determination of the
independent certified public accountant is delivered to the Seller and the
Purchaser pursuant to this Subsection 2.3(b)(iv).
(v) If either the Seller or the Purchaser fails to pay when due any
amount under Section 2.3(b), interest on such amount will accrue from the date
payment was due to the date such payment is made at a rate per annum equal the
lesser of (A) the generally prevailing prime interest rates (as reported by the
Wall Street Journal) plus five percentage points, or (B) the maximum amount
permitted by applicable Law, and such interest shall be payable upon demand.
Notwithstanding the provisions of Subsections 2.3(b) (ii), (iii), and (iv) of
this Agreement, if the amount of any taxes to be prorated pursuant to this
Section 2.3 is not known by sixty (60) calendar days after the Closing, then the
amount will be estimated as of such date, and once the amount of such taxes is
known, the Seller shall pay to the Purchaser, or the Purchaser shall pay to the
Seller, as the case may be, the net amount due as a result of the actual
apportionment of such taxes.
(c) Allocation of Purchase Price. The parties agree that David Tait
Appraisal shall determine the allocation of the sum of the Cash Payment and the
Assumed Liabilities among the Purchased Assets and shall deliver such allocation
to the Seller and the Purchaser on or before February 29, 2000. The Seller shall
have the right, in its sole and absolute discretion, to accept or reject the
allocation of David Tait Appraisal; provided that, if such rejection by the
Seller is not delivered to the Purchaser on or before fifteen (15) days after
Seller's receipt of the allocation, the Seller shall be deemed to have accepted
such allocation and it shall be conclusive and binding on the parties for
purposes of this Section 2.3(c). In the event that the Seller rejects the
allocation by David Tait Appraisal, then the parties agree to be bound by an
appraisal of the Purchased Assets by a mutually acceptable independent
nationally recognized firm of valuation experts. The cost of appraisals pursuant
to this Section 2.3(c) shall be borne equally the Purchaser and the Seller.
Notwithstanding anything to the contrary herein, the allocation will be
consistent with Section 1060 of the Internal Revenue Code. The Purchaser and the
Seller (i) shall execute and file all Tax Returns and prepare all financial
statements, returns and other instruments in a manner consistent with the
allocation determined pursuant to this Section 2.3(c), (ii) shall not take any
position before any Governmental Authority or in any judicial proceeding that is
inconsistent with such allocation, and (iii) shall cooperate with each other in
a timely filing, consistent with such allocation, of Form 8594 with the IRS.
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2.4 Further Assurances. At and after the Closing, and without further
consideration therefor, (i) the Seller shall execute and deliver to the
Purchaser such further instruments and certificates of conveyance and transfer
as the Purchaser may reasonably request in order to more effectively convey and
transfer the Purchased Assets to the Purchaser and to put the Purchaser in
operational control of the Business, or for aiding, assisting, collecting and
reducing to possession any of the Purchased Assets and exercising rights with
respect thereto, and (ii) the Purchaser shall execute and deliver to the Seller
such further instruments and certificates of assumption, novation and release as
the Seller may reasonably request in order to effectively make the Purchaser
responsible for all Assumed Liabilities and release the Seller therefrom to the
fullest extent permitted under applicable Law.
2.5 Nontransferable Business Contracts and Business Licenses. To the extent
that transfer or assignment hereunder by the Seller to the Purchaser of any
Business Contract or Business License is not permitted or is not permitted
without the consent of another Person, this Agreement shall not be deemed to
constitute an undertaking to assign the same if such consent is not given or if
such an undertaking otherwise would constitute a breach thereof or cause a loss
of benefits thereunder. The Seller shall use all commercially reasonable efforts
to obtain any and all such third party consents under all Material Business
Contracts and Material Business Licenses; provided, however, that the Seller
shall not be required to pay or incur any cost or expense to obtain any third
party consent that the Seller is not otherwise required to pay or incur in
accordance with the terms of the applicable Material Business Contract or
Material Business License, other than reasonable fees for internal and external
professional services incurred in connection therewith. If any such third party
consent is not obtained before the Closing, the Seller and the Purchaser shall
cooperate in any reasonable arrangement designed to provide to the Purchaser
after the Closing the benefits, and to assume the Liabilities of the Seller,
under the applicable Business Contract or Business License.
ARTICLE III.
THE CLOSING
3.1 The Closing. The consummation of the transactions contemplated hereby
shall take place at a closing (the "Closing") to be held at 2:00 p.m., New York
time, on a date to be designated by the Seller and the Purchaser, which shall be
no later than the later of (a) the fifth (5th) Business Day after satisfaction
and fulfillment or, if permissible pursuant to the terms hereof, waiver of the
conditions set forth in Article VII, and (b) the earlier of (i) seventy (70)
calendar days after public notice of the grant of the FCC's consent to the FCC
Applications, (ii) the date (the "KRON Target Closing Date") that is the later
of (x) June 15, 2000 and (y) ten (10) days prior to the date on which Seller is
obligated to close the sale of Station KRON-TV, San Francisco (without taking
into consideration any extensions requiring payment or restructuring of the
transaction), or (iii) the consummation of the transactions contemplated by
Section 9.4(b) (the "Closing Date"), at the offices of Latham & Watkins, 885
Third Avenue, Suite 1000, New York,
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New York, unless another time, date or place is mutually agreed upon in writing
by the Seller and the Purchaser.
3.2 Closing Deliveries of the Seller. At the Closing, the Seller shall
deliver, or cause to be delivered, to the Purchaser, the following instruments,
certificates and other documents, dated as of the Closing Date and executed on
behalf of the Seller by a duly authorized officer thereof, in order to effect
the transfer of the Purchased Assets to the Purchaser pursuant to Section 2.1
hereof:
(a) Instruments of Transfer and Assignment.
(i) Special warranty deeds in substantially the forms attached
hereto as Exhibit A1 and Exhibit A2 (the "Deeds"), conveying fee simple title to
all of the Owned Real Property;
(ii) a Bill of Sale substantially in the form attached hereto as
Exhibit B (the "Bill of Sale");
(iii) an Instrument of Assignment and Assumption substantially in
the form attached hereto as Exhibit C (the "Assignment and Assumption");
(iv) an Assignment of Proprietary Rights substantially in the form
attached hereto as Exhibit D1 (the "Assignment of Proprietary Rights");
(v) an Assignment of Station Licenses substantially in the form
attached hereto as Exhibit D2 (the "Assignment of Station Licenses");
(vi) copies of all instruments, certificates, documents and other
filings (if applicable) necessary to release the Purchased Assets from all
Encumbrances other than Permitted Encumbrances and those Encumbrances set forth
in Schedule 4.5(b) hereto, all in a form reasonably satisfactory to counsel for
the Purchaser;
(vii) copies of all requisite Licenses, waivers, consents,
approvals, authorizations, qualifications and other orders of any Governmental
Authorities with competent jurisdiction over the transactions contemplated
hereby, and all requisite consents, approvals or waivers from third parties,
which are necessary to effect the valid transfer and assignment of the Purchased
Assets to the Purchaser pursuant to this Agreement and to otherwise consummate
the transactions contemplated hereby; and
(viii) all other instruments and certificates of conveyance and
transfer as the Purchaser may reasonably request in order to more effectively
convey and transfer the Purchased Assets to the Purchaser and to put the
Purchaser in operational control of the Business, or for aiding, assisting,
collecting and reducing to possession any of the Purchased Assets and exercising
rights with respect thereto.
(b) Closing Certificates.
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(i) An officer's certificate substantially in the form attached
hereto as Exhibit E;
(ii) a secretary's certificate substantially in the form attached
hereto as Exhibit F; and
(iii) a certificate of the Seller certifying as to its non-foreign
status which complies with the requirements of Section 1445 of the Internal
Revenue Code.
(c) Legal Opinions.
(i) A legal opinion of Latham & Watkins, outside counsel for the
Seller, substantially in the form attached hereto as Exhibit G; and
(ii) a legal opinion of W. Ronald Ingram, general counsel of the
Seller, substantially in the form attached hereto as Exhibit H.
3.3 Closing Deliveries of the Purchaser. At the Closing, the Purchaser
shall deliver, or cause to be delivered, to the Seller, the following
instruments, certificates and other documents, dated as of the Closing Date and
executed or acknowledged (as applicable) on behalf of the Purchaser by a duly
authorized officer thereof, in order to pay for the Purchased Assets and effect
the assumption of all Assumed Liabilities from the Seller pursuant to Section
2.2 hereof:
(a) Cash Payment. An amount in cash equal to the Cash Payment, plus or
minus the amount of any adjustment as provided in Subsection 2.3(b)(i) and (ii),
and minus the amount of any adjustment as provided in Section 6.15, payable by
wire transfer of immediately available funds to an account designated in writing
by the Seller at least two (2) Business Days prior to the Closing Date.
(b) Instruments of Assumption.
(i) The Bill of Sale;
(ii) the Assignment and Assumption;
(iii) the Assignment of Proprietary Rights;
(iv) the Assignment of Station Licenses; and
(v) all other instruments and certificates of assumption, novation
and release as the Seller may reasonably request in order to effectively make
the Purchaser responsible for all Assumed Liabilities and release the Seller
therefrom to the fullest extent permitted under applicable Law.
(c) Closing Certificates.
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(i) An officer's certificate substantially in the form attached
hereto as Exhibit I; and
(ii) a secretary's certificate substantially in the form attached
hereto as Exhibit J.
(d) Legal Opinion. A legal opinion of Shack & Siegel, P.C., outside
counsel for the Purchaser, substantially in the form attached hereto as Exhibit
K.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Purchaser as
follows:
4.1 Organization. The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada, and has all
requisite corporate power and authority to own, operate or lease the assets and
properties now owned, operated or leased by it, and to conduct the Business as
presently conducted by the Seller. The Seller is duly authorized, qualified or
licensed to do business as a foreign corporation, and is in good standing, under
the Laws of each state or other jurisdiction in which the character of its
properties owned, operated or leased, or the nature of its activities, makes
such qualification necessary, except in those states and jurisdictions where the
failure to be so qualified or in good standing would not reasonably be expected,
as of the date hereof, to have a Material Adverse Effect. True and complete
copies of the Articles of Incorporation (the "Seller Articles of Incorporation")
and Bylaws (the "Seller Bylaws") of the Seller, each as amended and in effect as
of the date of this Agreement, have been made available to the Purchaser and its
agents and representatives.
4.2 Authority. The Seller has all requisite corporate power and authority
to enter into this Agreement and the Seller Documents, to perform its
obligations hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by the Seller of
this Agreement and the Seller Documents, the performance by the Seller of its
obligations hereunder and thereunder, and the consummation by the Seller of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary corporate action on the part of the Seller. This Agreement has been
duly executed and delivered by the Seller and, assuming the due authorization,
execution and delivery of this Agreement by the Purchaser, this Agreement
constitutes a legally valid and binding obligation of the Seller, enforceable
against the Seller in accordance with its terms, except as such enforceability
may be limited by principles of public policy, and subject to (i) the effect of
any applicable Laws of general application relating to bankruptcy,
reorganization, insolvency, moratorium or similar Laws affecting creditors'
rights and relief of debtors generally, and (ii) the effect of rules of law and
general principles of equity, including, without limitation, rules of law and
general principles of equity governing specific performance, injunctive relief
and other equitable remedies (regardless of whether such enforceability is
considered in a proceeding in equity or at law). Upon the execution and delivery
of the Seller Documents
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by the Seller at the Closing and, assuming the due authorization, execution and
delivery of the Assignment and Assumption by the Purchaser, each of the Seller
Documents will constitute a legally valid and binding obligation of the Seller,
enforceable against the Seller in accordance with its respective terms, except
as such enforceability may be limited by principles of public policy, and
subject to (i) the effect of any applicable Laws of general application relating
to bankruptcy, reorganization, insolvency, moratorium or similar Laws affecting
creditors' rights and relief of debtors generally, and (ii) the effect of rules
of law and general principles of equity, including, without limitation, rules of
law and general principles of equity governing specific performance, injunctive
relief and other equitable remedies (regardless of whether such enforceability
is considered in a proceeding in equity or at law).
4.3 No Violation; Third Party Consents. Assuming that all consents,
waivers, approvals, orders and authorizations set forth in Schedule 4.4 hereto
have been obtained and all registrations, qualifications, designations,
declarations or filings with any Governmental Authorities set forth in Schedule
4.4 hereto have been made, and except as set forth in Schedule 4.3 hereto, the
execution and delivery by the Seller of this Agreement and the Seller Documents,
the performance by the Seller of its obligations hereunder and thereunder, and
the consummation by the Seller of the transactions contemplated hereby and
thereby, will not conflict with or violate in any material respect, constitute a
material default (or event which with the giving of notice or lapse of time, or
both, would become a material default) under, give rise to any right of
termination, amendment, modification, acceleration or cancellation of any
material obligation or loss of any material benefit under, result in the
creation of any Encumbrance other than a Permitted Encumbrance on any of the
Purchased Assets pursuant to, or require the Seller to obtain any consent,
waiver, approval or action of, make any filing with, or give any notice to any
Person as a result or under, the terms and provisions of (i) the Seller Articles
of Incorporation or the Seller Bylaws, (ii) any Contract to which the Seller is
a party or by which any of the Purchased Assets is bound, or (iii) any Law
applicable to the Seller or any of the Purchased Assets, or any Governmental
Order issued by a Governmental Authority by which the Seller or any of the
Purchased Assets is in any way bound or obligated, except, in the case of
clauses (ii) and (iii) of this Section 4.3, as would not, in any individual
case, or in the aggregate, have a Material Adverse Effect.
4.4 Government Consents. No consent, waiver, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any Governmental Authority is required on the part of the Seller in
connection with the execution and delivery by the Seller of this Agreement and
the Seller Documents, the performance by the Seller of its obligations hereunder
and thereunder, and the consummation by the Seller of the transactions
contemplated hereby and thereby, including, without limitation, the sale and
transfer of the Purchased Assets and transferable Business Licenses to the
Purchaser, except (i) as set forth in Schedule 4.4 hereto, and (ii) where the
failure to obtain such consent, waiver, approval, order or authorization, or to
make such registration, qualification, designation, declaration or filing, would
not, in any individual
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case, or in the aggregate, reasonably be expected, as of the date hereof, to
have a Material Adverse Effect.
4.5 Tangible Property.
(a) Schedule 4.5(a) hereto contains a true, correct and complete list
of the following to the extent owned, used or held for use by the Seller
primarily to conduct the operations of the Business: (i) each parcel of real
property owned, as of the date hereof, by the Seller ("Owned Real Property"),
(ii) each parcel of real property leased from or to a third party, as of the
date hereof, by the Seller ("Leased Real Property"), the name of the third party
lessor(s) or lessee(s) thereof, as the case may be, the date of the lease
contract relating thereto and all amendments thereof, and (iii) all fixed assets
owned by the Seller, as reflected in the Seller's schedule of fixed assets
prepared in the ordinary course of business as of the date set forth therein.
Except as set forth in Schedule 4.5(a) hereto, the Seller does not own, or have
a contractual obligation to purchase or otherwise acquire any material interest
in, any parcel of real property which would be used or held for use primarily in
the operation of the Business. All of the tangible assets and properties used by
the Seller pursuant to a lease or license included among the Purchased Assets
shall be referred to herein, collectively, as "Leased Assets."
(b) The Seller has, and at the Closing the Seller will convey to the
Purchaser and the Purchaser will acquire, (i) legal and valid (and in the case
of Owned Real Property, insurable) title to, or all of the Seller's right, title
and interest in and to, all of the Purchased Assets, and (ii) valid and
subsisting licenses or leasehold interests in and to all of the Leased Real
Property and other Leased Assets, in each case free and clear of any
Encumbrances other than Permitted Encumbrances and those Encumbrances set forth
in Schedule 4.5(b) hereto. The Seller has fee simple title to all of the Owned
Real Property.
(c) To the knowledge of the Seller, none of the Owned Real Property or
Leased Real Property has been condemned or otherwise taken by any public
authority, no condemnation or taking is threatened or contemplated and none
thereof is subject to any claim, contract or law which might affect its use or
value for the purposes now made of it, and each thereof is in good condition and
repair.
4.6 Intellectual Property and Proprietary Rights.
(a) Schedule 4.6(a) hereto contains a true, correct and complete list
of all material Intellectual Property owned by the Seller as of the date hereof,
to the extent such Intellectual Property is related primarily to the operations
of the Business. A true and complete copy of all material documentation relating
to each item of Intellectual Property set forth in Schedule 4.6(a) hereto has
been made available to the Purchaser and its agents and representatives.
(b) The Seller owns or has a valid right to use all Proprietary Rights
used by the Seller to conduct the operations of the Business as currently
conducted by the Seller,
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without infringing upon the rights of any other Person, except as would not, in
any individual case, or in the aggregate, reasonably be expected, as of the date
hereof, to have a Material Adverse Effect. To the knowledge of the Seller, no
other Person is infringing upon the rights of the Seller in or to any of the
Intellectual Property set forth in Schedule 4.6(a) hereto, except as would not,
in any individual case, or in the aggregate, reasonably be expected, as of the
date hereof, to have a Material Adverse Effect.
4.7 Business Contracts.
(a) Schedule 4.7(b) hereto contains a list of each Business Contract
(whether written or oral and including all amendments thereto) to which the
Seller is a party or by which the Seller or any of the Purchased Assets is bound
as of the date hereof, which is material to the Business, the Purchased Assets
or the Assumed Liabilities (each, a "Material Business Contract" and,
collectively, the "Material Business Contracts"), including, without limitation,
the following: (i) noncompetition or other agreements restricting the ability of
the Seller to engage in the Business in any location, and (ii) agreements under
which the Seller is obligated to indemnify, or entitled to indemnification from,
any other Person, other than any agreement that requires indemnification solely
in connection with or as a result of a breach of such agreement; provided,
however, that any Contract for the sale of time shall be deemed not to be a
Material Business Contract for purposes of this Section 4.7(a). For purposes of
this Agreement, any Short Term Agreements and any Business Contracts to which
the Seller is a party and which obligates the Seller to pay Thirty-Five Thousand
Dollars ($35,000) or less in payments over the remaining term of such Business
Contract, shall be deemed not to be a Material Business Contract, and any
Business Contracts (other than Short Term Agreements) to which the Seller is a
party and which obligates the Seller to pay more than Thirty-Five Thousand
Dollars ($35,000) in payments over the remaining term of such Business Contract
shall be deemed to be a Material Business Contract. For all purposes of and
under this Agreement, the term "Short Term Agreement" shall mean an agreement
entered into in the ordinary course of business that is terminable by the Seller
upon ninety (90) calendar days or less notice without premium or penalty.
(b) Except as set forth in Schedule 4.7(a), the Seller has made
available to the Purchaser and its agents and representatives a true, complete
and correct copy of each written Material Business Contract and a written
summary of each oral Material Business Contract. Except as set forth in Schedule
4.7(b) hereto, (i) each Material Business Contract is in full force and effect
and represents a valid, binding and enforceable obligation of the Seller in
accordance with the respective terms thereof and, to the knowledge of the
Seller, represents a valid, binding and enforceable obligation of each of the
other parties thereto; and (ii) there exists no material breach or material
default (or event that with notice or the lapse of time, or both, would
constitute a material breach or material default) on the part of the Seller or,
to the knowledge of the Seller, on the part of any other party under any
Material Business Contract, in any individual case, or in the aggregate, which
has had or could reasonably be expected, as of the date hereof, to have a
Material Adverse Effect.
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(c) To the knowledge of the Seller, as of the date hereof, there is no
fact or circumstance that would permit the termination for cause of (i) the
Primary Television Affiliation Agreement dated December 20, 1996, between the
Seller and American Broadcasting Companies, Inc. by American Broadcasting
Companies, Inc., or (ii) the Affiliation Agreement Term Sheet dated December 6,
1994, between the Seller and NBC Television Network, as affected by a letter
dated September 29, 1998, in either case prior to the expiration of their
respective terms and with respect to the Stations.
4.8 Business Licenses. Schedule 4.8 hereto contains a list of each Business
License which is necessary to conduct the Business as conducted by the Seller as
of the date hereof, except for such Business Licenses which the failure to
obtain or possess would not have a Material Adverse Effect (each, a "Material
Business License" and, collectively, the "Material Business Licenses"). No loss
or expiration of any Material Business License is pending or, to the knowledge
of the Seller, threatened, other than the expiration of any Material Business
Licenses in accordance with the terms thereof which may be renewed in the
ordinary course of business.
4.9 Business Employees. Schedule 4.9 hereto contains a true, correct and
complete list of all employees of the Seller who, as of the date of this
Agreement, have employment duties principally related to the Business, including
(and designating as such) any such employee who is an inactive employee on paid
or unpaid leave of absence, and indicating date of employment, current title and
compensation. Each employee set forth in Schedule 4.9 hereto who remains
employed by the Seller immediately prior to the Closing (whether actively or
inactively), and each additional employee who is hired to work in the Business
following the date hereof and prior to the Closing who remains employed by the
Seller immediately prior to the Closing (whether actively or inactively), shall
be referred to herein individually as a "Business Employee" and, collectively,
as "Business Employees." Expect as set forth on Schedule 4.9, no current or
former director, officer or employee of the Seller at any of the Stations or any
relative, associate or agent of such director, officer or employee has any
interest in any property of the Seller except as a stockholder, or is a party,
directly or indirectly, to any contract for employment or otherwise or any lease
or has entered into any transaction with the Seller, including, without
limitation, any contract for the furnishing of services by, or rental of real or
personal property from or to, or requiring payments to, any such director,
officer, employee, relative, associate or agent. Complete and correct copies of
any such contracts have been delivered to the Purchaser. The Seller does not
have any written contract for the future employment of any Business Employee
except as may be listed on Schedule 4.9 or Schedule 4.10(a).
4.10 Employee Benefit Plans.
(a) Schedule 4.10(a) hereto contains a true, correct and complete list
of each employment, bonus, incentive compensation, deferred compensation,
pension, profit sharing, retirement, stock purchase, stock option, stock
ownership, stock appreciation rights, phantom stock, equity (or equity-based),
leave of absence, layoff, vacation, day or
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dependent care, legal services, cafeteria, life, health, medical, accident,
disability, workmen's compensation or other insurance, severance, separation,
termination, change of control or other benefit plan, agreement (including any
collective bargaining agreement), practice, policy or arrangement, whether
written or oral, and whether or not subject to ERISA (including, without
limitation, any "employee benefit plan" within the meaning of Section 3(3) of
ERISA), which the Seller sponsors, maintains, has any obligation to contribute
to, has Liability under or is otherwise a party to as of the date hereof, and
which covers or otherwise provides benefits to any Business Employees or former
employees of the Seller whose employment duties principally related to the
Business during the term of their employment ("Former Business Employees") (or
their dependents and beneficiaries) (with respect to their relationship with the
Business) (each, a "Benefit Plan" and, collectively, the "Benefit Plans").
(b) The Seller has not received any written notice from any labor union
or group of employees other than as listed on Schedule 4.10(a) that such union
or group represents or believes or claims it represents or intends to represent
any of the employees of the Seller employed at any of the Stations; to the
Seller's knowledge, no strike or work interruption by the Seller's employees at
any of the Stations is planned, under consideration, threatened or imminent; the
Seller has not received any written notice from any labor union with which the
Seller has a collective bargaining agreement that such union desires to amend or
renegotiate the terms of any such collective bargaining agreement with the
Seller prior to its expiration; and neither the Seller nor any officer or
director of the Seller has made any loan or given anything of value, directly or
indirectly, to any officer, official, agent or representative of any labor union
or group of employees other than salaries and ordinary course compensation. At
no time since January 1, 1999 has any of the Stations experienced any threats of
strikes or work stoppages by any union or labor organization or any other group
or other organization of employees. Except as set forth on Schedule 4.10(a) and
made a part hereof:
(i) the Seller is not delinquent in payments to any of its
employees at any of the Stations for any wages, salaries, commissions, bonuses
or other direct compensation for any services performed by them to the date
hereof or amounts required to be reimbursed to such employees;
(ii) in the event of termination of the employment of any said
employees other than termination of any employee who is a party to an employment
agreement with the Seller, neither the Seller nor the Purchaser will by reason
of anything done prior to the Closing be liable to any of said employees for
so-called "severance pay" or any other payments other than as specified in the
applicable collective bargaining agreements, other employment agreements or any
severance agreements referred to in Schedule 4.10(a).
(iii) the Seller is in compliance in all material respects with all
Laws concerning labor, employment and employment practices, terms and conditions
of employment and wages and hours; and there is no unfair labor practice
complaint against
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the Seller relating to the business and operation of any of the Stations pending
before the National Labor Relations Board;
(iv) each of the Assumed Plans and the Seller 401(k) Plan presently
complies and has been operated in compliance in all material respects with its
terms and all applicable Laws, including, without limitation, all tax rules for
which favorable tax treatment is intended;
(v) each of the Assumed Plans and the Seller 401(k) Plan which is
intended to be tax-qualified under Section 401(a) of the Internal Revenue Code
has been determined by the IRS to be so qualified and, to the knowledge of the
Seller, no circumstances have occurred that would adversely affect the
tax-qualified status of any such Assumed Plan or the Seller 401(k) Plan;
(vi) with respect to each of the Assumed Plans, the Seller 401(k)
Plan and the Seller DB Plan, true, correct, and complete copies of the
applicable following documents have been provided or made available to the
Purchaser and its agents and representatives: (A) all current plan documents and
related trust documents, and any amendments thereto; (B) Forms 5500, financial
statements, and actuarial reports for the most recent plan year; (C) the most
recently issued IRS determination letter; (D) summary plan descriptions; and (E)
if the Benefit Plan is funded, the most recent annual account of the Benefit
Plan's assets; and
(vii) neither the Seller, nor any entity required to be aggregated
with the Seller or any Subsidiary thereof (as defined under Sections 414(b),
414(c), 414(m) or 414(o) of the Internal Revenue Code or Section 4001 of ERISA)
has incurred any withdrawal liability that has not been satisfied with respect
to any "multiemployer plan" (as defined in Section 3(37) of ERISA).
(c) Except as set forth in Schedule 4.10(c) hereto, the execution and
delivery by the Seller of this Agreement and the Seller Documents, the
performance by the Seller of its obligations hereunder and thereunder, and the
consummation by the Seller of the transactions contemplated hereby and thereby,
does not and will not result in the acceleration or creation of any rights or
benefits of any current or former Business Employee (or other current or former
service provider to the Business) that would not have been required but for the
transactions contemplated by this Agreement.
(d) To the knowledge of the Seller, no "disqualified person" or
"party-in-interest" (as defined in Section 4975 of the Internal Revenue Code and
Section 3 of ERISA, respectively) has engaged in any "prohibited transaction,"
as such term is defined in Section 4975 of the Internal Revenue Code or Section
406 of ERISA, which could subject any Assumed Plan (or its related trust),
Seller, Purchaser or any of their affiliates, or any officer, director or
employee of any of them to any tax or penalty imposed under Section 4975 of the
Internal Revenue Code or ERISA either directly or indirectly, and whether by way
of indemnity or otherwise.
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(e) The Seller does not have any Liability to the Pension Benefit
Guaranty Corporation ("PBGC") with respect to any Assumed Plan and does not have
any Liability under ERISA Sections 502 or 4071.
(f) All filings required by ERISA and the Internal Revenue Code with
respect to any Assumed Plan have been timely filed, and all notices and
disclosures to participants and beneficiaries required by ERISA and the Internal
Revenue Code have been timely provided.
(g) Other than routine claims for benefits, no claim against or
involving any Assumed Plan is pending or, to the knowledge of Seller is
threatened.
(h) Seller has met the minimum funding standards, and has made all
contributions required under ERISA Section 302 and Internal Revenue Code Section
402 and there is no accumulated funding deficiency with respect to any Assumed
Plan.
(i) No steps have been taken to terminate any Assumed Plan which is
subject to Title IV of ERISA and no liability under such Title has been incurred
by Seller since the effective date of ERISA (in connection with an Assumed Plan)
that has not been satisfied in full. No condition exists that could reasonably
be expected to result in Seller incurring a liability under such Title and no
proceeding has been initiated by the PBGC to terminate any Assumed Plan or to
appoint a trustee to administer any Assumed Plan. No "reportable event" within
the meaning of Section 4043 of ERISA and the regulations promulgated thereunder
has occurred with respect to any Assumed Plan (other than those which may result
from the transactions contemplated hereby).
(j) Seller has not withdrawn from any Assumed Plan as a "substantial
employer" so as to become subject to the provisions of Section 4063 of ERISA, or
ceased operations at any facility so as to become subject to the provisions of
Section 4068(f) of ERISA.
(k) Those sections of all annual reports heretofore filed with the IRS,
the Department of Labor and the PBGC by or on behalf of every Assumed Plan which
were required to be certified were only certified without qualification by the
accountants or actuaries of such Assumed Plan.
(l) Seller does not maintain any Assumed Plan which is funded by an
association described in Section 501(c)(9) of the Internal Revenue Code.
(m) Except for the retiree health arrangement for Martin Umansky
referred to in Schedule 6.9(j), no Assumed Plan provides any retiree health,
life or other non-pension retirement benefit.
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4.11 Sufficiency of Purchased Assets.
(a) The Purchased Assets (including the licenses or leasehold interests
in or relating to the Leased Assets) constitute all of the assets, properties
and rights necessary for the conduct of the Business by the Seller in a manner
consistent with past practice.
(b) The tangible personal property included in the Purchased Assets or
the Leased Assets are in good condition and repair (ordinary wear and tear
excepted) for property of comparable type, age and usage, except for tangible
personal property that is obsolete and no longer used in the Business.
4.12 Financial Statements.
(a) Attached to Schedule 4.12(a) hereto is a true, correct and complete
copy of the following financial statements (collectively, the "Financial
Statements"): (i) the unaudited balance sheet of the Business (the "Latest
Balance Sheet") as of October 31, 1999 (the "Latest Balance Sheet Date"), and
the related unaudited income statement for the ten (10) month period then ended,
and (ii) the unaudited balance sheets of the Business as of December 31, 1998
and December 31, 1997, and the related unaudited income statements for the years
then ended. Each of the Financial Statements is derived from the books and
records of the Seller (which are accurate and complete in all material respects)
and the audited consolidated financial statements of the Seller (which were
prepared in accordance with GAAP), and fairly present, in all material respects,
the assets and the Liabilities of the Seller that primarily relate to, or
primarily arise out of, the Business as of the respective dates thereof, and the
results of operations for the respective periods then ended.
(b) Except as set forth in Schedule 4.12(b) hereto, no reserves or
other Liabilities attributable to the Business were recorded in the consolidated
financial statements of the Seller as of July 31, 1999, December 31, 1998, and
December 31, 1997 respectively, that are not reflected in the Financial
Statements.
4.13 No Undisclosed Liabilities. The Seller has no Liabilities that are
attributable to the Business other than (i) the Liabilities reflected on the
Latest Balance Sheet, (ii) Liabilities incurred in the ordinary course of
business after the Latest Balance Sheet Date, none of which is material to the
assets, properties, business, results of operations or condition (financial or
otherwise) of the Business, (iii) Liabilities set forth in Schedule 4.13 hereto,
and (iv) Liabilities that individually or in the aggregate, have not and would
not reasonably be expected, as of the date hereof, to have a Material Adverse
Effect.
4.14 Subsidiaries and Investments. The Seller does not have any
Subsidiaries, and does not own any direct or indirect equity or debt interest in
any other Person, including, without limitation, any interest in a corporation,
partnership or joint venture, and is not obligated or committed to acquire any
such interest, in any case which Subsidiary, interest or other Person relates
primarily to the Business.
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4.15 Litigation; Governmental Orders.
(a) Except as set forth in Schedule 4.15 hereto, as of the date hereof,
there are no pending or, to the knowledge of the Seller, threatened Actions by
any Person or Governmental Authority against or relating to the Seller with
respect to the Business or any Assumed Plan or, to the knowledge of the Seller,
any current or former employees (in their capacity as such) of the Seller, or to
which any of the Purchased Assets are subject, other than those which would not,
in any individual case, or in the aggregate, reasonably be expected, as of the
date hereof, to have an adverse effect on the Business in an amount in excess of
Twenty-Five Thousand Dollars ($25,000) or in which an unfavorable judgment,
decree or order would restrain, prohibit, invalidate, set aside, rescind,
prevent or make unlawful this Agreement or the carrying out of this Agreement or
the transactions contemplated hereby.
(b) The Seller is not subject to or bound by any Governmental Order
other than those which would not, in any individual case, or in the aggregate,
reasonably be expected, as of the date hereof, to have a Material Adverse
Effect.
4.16 Compliance with Laws. Except as set forth in Schedule 4.16 hereto, to
the knowledge of the Seller, as of the date hereof the Seller is in compliance
with, and the Seller has not received any claim or notice that it is not in
current compliance with, each material Law or Governmental Order applicable to
the Business.
4.17 Environmental Matters. Except as would not reasonably be expected, as
of the date hereof, to result in a Material Adverse Effect, (i) no Hazardous
Material is present at any of the Owned Real Property or Leased Real Property in
violation of any applicable Environmental Law or in a manner that would
reasonably be expected, as of the date hereof, to result in liability under any
Environmental Law, (ii) during the course of its operation of the Business, the
Seller has not engaged in any Hazardous Materials Activity in violation of any
applicable Environmental Law or in a manner that would reasonably be expected,
as of the date hereof, to result in liability under any Environmental Law, and
(iii) as of the date hereof, no Action is pending or, to the knowledge of the
Seller, has been threatened against the Seller concerning any of the Owned Real
Property or Leased Real Property, or any of the Hazardous Materials Activities
of the Seller taken during the course of its operation of the Business. To the
knowledge of the Seller, there have been no releases of Hazardous Materials at,
on or under any Owned Real Property or Leased Real Property that, singly or in
the aggregate, have, or may reasonably be expected to have, a Material Adverse
Effect.
4.18 Insurance.
(a) Schedule 4.18 hereto contains a true, correct and complete list
(specifying the insurer, the type of coverage, expiration date, pending claims
thereunder, the policy number or covering note number with respect to binders
and the limits, and the aggregate limit, if any, of the insurer's liability
thereunder) of all policies or binders of fire, liability, errors and omissions,
workers' compensation, vehicular, and other insurance held by or
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on behalf of the Seller with respect to the Business as of the date hereof
("Business Insurance Policies").
(b) All of the Business Insurance Policies are in full force and
effect. The Seller is not in default with respect to any material provision
contained in any such Business Insurance Policy, nor has the Seller failed to
give any notice or present any claim under any such Business Insurance Policy in
due and timely fashion. The Seller has not received any notice of cancellation
or non-renewal of any such Business Insurance Policy. The Seller has not
received any notice from any of its insurance carriers that any premiums will be
materially increased in the future or that any insurance coverage under the
Business Insurance Policies will not be available in the future on substantially
the same terms as now in effect.
(c) All of the Business Insurance Policies in the name of the Seller
with respect to libel shall be in full force and effect and enforceable by the
Purchaser following the consummation of the transactions contemplated by this
Agreement in respect of all reported or unreported libel claims arising out of
occurrences prior to the consummation of this Agreement.
4.19 Transactions with Affiliates. Except as set forth in Schedule 4.19
hereto, no shareholder, officer or director of the Seller or any of its
Affiliates, or any immediate family member of any of the foregoing, has (a)
borrowed money from, or loaned money to, the Business which remains outstanding,
(b) except as set forth in Schedule 4.19 hereto, any contractual or other claim,
express or implied, of any kind whatsoever against the Business, (c) any
interest in any of the Purchased Assets, or (d) engaged in any other transaction
with the Business other than in such person's capacity as an employee, officer
or director of the Seller.
4.20 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by the Seller directly
with the Purchaser without the intervention of any Person on behalf of the
Seller in such manner as to give rise to any valid claim by any Person against
the Purchaser for a finder's fee, brokerage commission or similar payment, other
than Donaldson, Lufkin & Jenrette Securities Corporation, whose fees and
expenses shall be borne by the Seller.
4.21 FCC Matters. The Seller is the holder of the Station Licenses as set
forth on Schedule 4.21 which constitute all FCC licenses, permits and
authorizations necessary for the Seller to operate television station
transmitters on Channel 6 in Omaha, Nebraska, Channel 10 in Wichita, Kansas,
Channel 13 in Garden City, Kansas, and Channel 4 in Colby, Kansas. Other than
matters of general applicability to television stations in the Omaha, Nebraska,
Wichita, Kansas, Garden City, Kansas, and Colby, Kansas markets, respectively,
there are no fines, forfeitures, notices of apparent liability, orders to show
cause or any other administrative or judicial orders outstanding nor any
proceeding pending or, to the knowledge of the Seller, threatened, the effect of
which would be the revocation, cancellation, non-renewal, suspension or adverse
modification of the Station
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Licenses or any materially adverse consequence for any of the Stations, and
there does not exist any event of which the Seller has knowledge, which with
notice or the passing of time or both could result in a fine, forfeiture, notice
of apparent liability, order to show cause or any other administrative or
judicial order or proceeding by the FCC, the effect of which would result in the
revocation, cancellation, non-renewal, suspension or adverse modification of any
of the Station Licenses or have a Material Adverse Effect. The Station Licenses
are in full force and effect.
4.22 Taxes. Except as set forth on Schedule 4.22, with respect to Taxes,
other than Income Taxes, relating to the Business (a) the Seller has duly filed
all Tax Returns required to have been filed by the Seller prior to the date
hereof; and (b) each such Tax Return is true, correct and complete in all
material respects and the Seller has paid all Taxes shown to be due thereon. The
Seller has paid to the proper authorities all material customs, duties and
similar or related charges relating to the Business required to be paid by the
Seller with respect to the importation of goods into the United States. No
government or Governmental Authority is now asserting or threatening to assert
any deficiency or assessment for additional Taxes other than Income Taxes with
respect to the Business.
4.23 Accuracy of Information. Neither this Agreement nor the representations
and warranties by the Seller contained herein or in any Exhibit hereto contains
any untrue statement of a material fact or omits to state a material fact
necessary to make the statements or fact contained herein and therein not
misleading.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Seller as follows:
5.1 Organization. The Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation.
5.2 Authority. The Purchaser has all requisite corporate power and
authority to enter into this Agreement and the Assignment and Assumption, to
perform its obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby. The execution and delivery by the
Purchaser of this Agreement and the Assignment and Assumption, the performance
by the Purchaser of its obligations hereunder and thereunder, and the
consummation by the Purchaser of the transactions contemplated hereby and
thereby, have been duly authorized by all necessary corporate action on the part
of the Purchaser. This Agreement has been duly executed and delivered by the
Purchaser and, assuming the due authorization, execution and delivery of this
Agreement by the Seller, this Agreement constitutes a legally valid and binding
obligation of the Purchaser, enforceable against the Purchaser in accordance
with its terms, except as such enforceability may be limited by principles of
public policy, and subject to (i) the effect of any applicable Laws of general
application relating to bankruptcy, reorganization, insolvency, moratorium or
similar Laws affecting creditors'
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rights and relief of debtors generally, and (ii) the effect of rules of law and
general principles of equity, including, without limitation, rules of law and
general principles of equity governing specific performance, injunctive relief
and other equitable remedies (regardless of whether such enforceability is
considered in a proceeding in equity or at law). Upon the execution and delivery
of the Assignment and Assumption by the Purchaser at the Closing and, assuming
the due authorization, execution and delivery thereof by the Seller, the
Assignment and Assumption will constitute a legally valid and binding obligation
of the Purchaser, enforceable against the Purchaser in accordance with its
terms, except as such enforceability may be limited by principles of public
policy, and subject to (i) the effect of any applicable Laws of general
application relating to bankruptcy, reorganization, insolvency, moratorium or
similar Laws affecting creditors' rights and relief of debtors generally, and
(ii) the effect of rules of law and general principles of equity, including,
without limitation, rules of law and general principles of equity governing
specific performance, injunctive relief and other equitable remedies (regardless
of whether such enforceability is considered in a proceeding in equity or at
law).
5.3 No Violation. Assuming that all consents, waivers, approvals, orders
and authorizations set forth in Schedule 5.4 hereto have been obtained and all
registrations, qualifications, designations, declarations or filings with any
Governmental Authorities set forth in Schedule 5.4 hereto have been made, and
except as set forth in Schedule 5.3 hereto, the execution and delivery by the
Purchaser of this Agreement and the Assignment and Assumption, the performance
by the Purchaser of its obligations hereunder and thereunder, and the
consummation by the Purchaser of the transactions contemplated hereby and
thereby, will not conflict with or violate in any material respect, constitute a
material default (or event which with the giving of notice or lapse of time, or
both, would become a material default) under, give rise to any right of
termination, amendment, modification, acceleration or cancellation of any
material obligation or loss of any material benefit under, or require the
Purchaser to obtain any consent, waiver, approval or action of, make any filing
with, or give any notice to any Person as a result or under, the terms or
provisions of (i) the organizational documents of the Purchaser, (ii) any
Contract to which the Purchaser is a party or is bound, or (iii) any Law
applicable to the Purchaser, or any Governmental Order issued by a Governmental
Authority by which the Purchaser is in any way bound or obligated, except, in
the case of clauses (ii) and (iii) of this Section 5.3, as would not, in any
individual case, have a material adverse effect on the ability of the Purchaser
to perform its obligations under this Agreement and the Assignment and
Assumption or to consummate the transactions contemplated hereby or thereby.
5.4 Governmental Consents. No consent, waiver, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any Governmental Authority is required on the part of the Purchaser
in connection with the execution and delivery by the Purchaser of this Agreement
and the Assignment and Assumption, the performance by the Purchaser of its
obligations hereunder and thereunder, and the consummation by the Purchaser of
the transactions contemplated hereby and thereby,
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including, without limitation, the assumption of the Assumed Liabilities from
the Seller, except (i) as set forth in Schedule 5.4 hereto, and (ii) where the
failure to obtain such consent, waiver, approval, order or authorization, or to
make such registration, qualification, designation, declaration or filing, would
not have a material adverse effect on the ability of the Purchaser to perform
its obligations under this Agreement and the Assignment and Assumption or to
consummate the transactions contemplated hereby or thereby.
5.5 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by the Purchaser directly
with the Seller without the intervention of any Person on behalf of the
Purchaser in such manner as to give rise to any valid claim by any Person
against the Seller for a finder's fee, brokerage commission or similar payment.
5.6 FCC Matters. The Purchaser is legally and financially qualified under
the Communications Act to enter into this Agreement and the Assignment and
Assumption, and to consummate the transactions contemplated hereby and thereby.
In connection with the transactions contemplated by the Agreement, except as set
forth in Schedule 5.6 hereto, it is not necessary for the Purchaser or any
Affiliate of the Purchaser (or any person in which the Purchaser or any
Affiliate of the Purchaser has an attributable interest under the Communications
Act) to seek or obtain any waiver from the FCC, dispose of any interest in any
media or communications property or interest (including, without limitation, any
of the Stations), terminate any venture or arrangement, or effectuate any
changes or restructuring of its ownership, including, without limitation, the
withdrawal or removal of officers or directors or the conversion or repurchase
of equity securities of the Purchaser or any Affiliate of the Purchaser or owned
by the Purchaser or any Affiliate of the Purchaser (or any person in which the
Purchaser or any Affiliate of the Purchaser has any attributable interest under
the Communications Act). The Purchaser is able to certify on an FCC Form 314
that it is financially qualified.
5.7 Accuracy of Information. Neither this Agreement nor the
representations and warranties by the Purchaser contained herein or in any
Exhibit hereto contain any untrue statement of a material fact or omits to
state a material fact necessary to make the statements or fact contained herein
and therein not misleading.
ARTICLE VI.
COVENANTS AND AGREEMENTS
6.1 Conduct of Business.
(a) At all times during the period commencing upon the execution and
delivery hereof by each of the parties hereto and terminating upon the earlier
to occur of the Closing or the termination of this Agreement pursuant to and in
accordance with the terms of Section 8.1 hereof, unless the Purchaser shall
otherwise consent in writing, the Seller shall (a) conduct the operations of the
Business in the ordinary course of business and consistent with past practices
and in material conformity with the Station Licenses
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and the Communications Act, (b) use commercially reasonable efforts to preserve
intact the goodwill of the Business and the current relationships of the Seller
with its officers, employees, customers, suppliers and others with significant
and recurring business dealings with the Business, (c) use commercially
reasonable efforts to maintain in full force and effect all Business Insurance
Policies and all Business Licenses that are necessary for the Seller to carry
on the Business in the manner conducted by the Seller as of the date hereof,
(d) maintain the books of account and records of the Business in the usual,
regular and ordinary manner and consistent with past practices, and (e) not
take any action that would result in a breach of or inaccuracy in (in each case
as of the Closing) any of the representations and warranties of the Seller
contained in Article IV hereof.
(b) At all times during the period commencing upon the date hereof and
terminating upon the earlier to occur of the Closing or the termination of this
Agreement pursuant to and in accordance with the terms of Section 8.1 hereof,
unless the Purchaser shall otherwise consent in writing and except as otherwise
set forth in Schedule 6.1 hereto, the Seller shall not take, or caused to be
taken, any of the following actions to the extent such actions relate primarily
to the Business:
(i) change or agree to rearrange in any material respect the
character of the Business;
(ii) (A) adopt, enter into or amend any arrangement which is, or
would be, an Assumed Plan unless otherwise required by applicable Law or this
Agreement, or (B) make any change in any actuarial methods or assumptions used
in funding any Assumed Plan or in the assumptions or factors used in determining
benefit equivalencies thereunder;
(iii) knowingly waive any right of material value;
(iv) make any change in the accounting methods or practices of the
Seller, or make any changes in depreciation or amortization policies or rates
adopted by the Seller;
(v) except in the ordinary course of business and consistent with
past practices, make any write down of inventory or write off as uncollectible
of accounts receivable;
(vi) unless the Purchaser shall consent in writing (which consent
shall not be unreasonably withheld or delayed), increase any wage, salary, bonus
or other direct or indirect compensation payable or to become payable to any of
the Business Employees, or make any accrual for or commitment or agreement to
make or pay the same that impose material obligations on the Seller extending
beyond the Closing Date, other than increases in wages, salary, bonuses or other
direct or indirect compensation to any of the Business Employees made in the
ordinary course of business consistent with past practice, and those required by
any Contract or Law applicable to the Seller;
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(vii) unless the Purchaser shall consent in writing (which consent
shall not be unreasonably withheld or delayed), enter into any transactions with
any of its shareholders, officers, directors or their immediate family members,
or any Affiliate of any of the foregoing that impose material obligations on the
Seller extending beyond the Closing Date;
(viii) unless the Purchaser shall consent in writing (which consent
shall not be unreasonably withheld or delayed), except as set forth on Schedule
6.9 hereto, make any commitment to pay any severance or termination pay to any
Business Employee or any independent contractor, consultant, agent or other
representative of the Business, that impose material obligations on the Seller
extending beyond the Closing Date;
(ix) (A) enter into any real property lease (as lessor or lessee);
(B) sell, abandon or make any other disposition of any of the assets or
properties of the Seller other than in the ordinary course of business
consistent with past practice and in the case of a sale, where the asset is
replaced with an asset of similar utility and value; or (C) grant or incur any
Encumbrance on any of the assets or properties of the Seller; in any case,
without the prior written consent of the Purchaser, which shall not be
unreasonably withheld or delayed;
(x) except in the ordinary course of business and except for
Excluded Liabilities, incur or assume any debt, obligation or Liability;
(xi) make any acquisition of all or any part of the capital stock
or all or substantially all of the assets, properties or business of any other
Person;
(xii) unless the Purchaser shall consent in writing (which consent
shall not be unreasonably withheld or delayed) enter into any commitments to
make capital expenditures payable after the Closing in an aggregate amount
exceeding an average of $10,000 per quarter, other than in the ordinary course
and as provided in capital expenditures budgeted for the Business as set forth
on Schedule 6.1(b) hereto; provided however, the Seller shall not enter into any
commitment to make capital expenditures that unreasonably delays such
expenditures until after the Closing and is inconsistent with past practice;
provided further, the Seller shall not enter into any capital leases that
include commitments to make payments after the Closing in excess of Fifty
Thousand Dollars ($50,000) in any individual case or Two Hundred Fifty Thousand
Dollars ($250,000) in the aggregate, unless the Purchaser shall consent in
writing (which consent shall not be unreasonably withheld or delayed);
(xiii) enter into any Contract relating to sales of advertising
time other than in the ordinary course of business or contract or agree to
provide any advertising or broadcast time at substantially less than customary
rate practices; provided that all such sales of advertising time shall be for
cash or on a trade basis to the extent such trades are made in the ordinary
course and consistent with past practice of the Business, or to the extent the
Seller receives the Purchaser's prior written consent thereto;
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(xiv) unless the Purchaser shall consent in writing (which consent
shall not be unreasonably withheld or delayed), enter into any employment
agreement or become liable for any bonus, profit-sharing or incentive payment to
any of its officers, directors or employees, except pursuant to presently
existing Assumed Plans, arrangements or agreements disclosed herein or in a
schedule hereto or except with respect to any retention bonus for Business
Employees to be paid by the Seller;
(xv) make any material changes in the Seller's customary method of
operations, including marketing and pricing and policies and maintenance of
business premises, fixtures, furniture or equipment;
(xvi) enter into any collective bargaining agreement;
(xvii) enter into or renew any programming contract with a term
that extends beyond the 2000/2001 broadcast year or amend or modify any network
affiliation or representation agreement; or
(xviii) fail to expend funds for budgeted capital expenditures or
commitments substantially pursuant to the timetable provided in the capital
expenditures budget for the Business, as previously provided by the Seller to
the Purchaser.
(c) Notwithstanding anything to the contrary set forth in this Section
6.1 or elsewhere in this Agreement, the Seller shall be permitted, without
obtaining the consent or other approval of the Purchaser, to enter into, perform
its obligations under, and consummate the transactions contemplated by, any
existing or new agreements or other arrangements pursuant to which the Seller
shall sell, transfer or otherwise dispose of any of its assets other than the
Purchased Assets, it being expressly acknowledged and agreed by each of the
parties hereto that the foregoing shall include the right to distribute the
proceeds from any such sale, transfer or other disposition to the shareholders
of the Seller without obtaining the consent or other approval of the Purchaser.
6.2 Access and Information. Subject to the terms of the Confidentiality
Agreement, at all times during the period commencing upon the execution and
delivery hereof by each of the parties hereto and terminating upon the earlier
to occur of the Closing or the termination of this Agreement pursuant to and in
accordance with the terms of Section 8.1 hereof, the Seller shall permit the
Purchaser and its authorized agents and representatives to have reasonable
access, upon reasonable notice and during normal business hours, to all Business
Employees, assets and properties and all relevant books, records and documents
of or relating to the Business, the Purchased Assets and the Assumed
Liabilities, including the work papers of Arthur Andersen LLP (accountant of the
Seller) relating to the Financial Statements, and shall furnish to the Purchaser
such information and data, financial records and other documents relating to the
Business, the Purchased Assets and the Assumed Liabilities as the Purchaser may
reasonably request. Representatives of Purchaser shall be entitled to hold one
or more meetings with Business Employees in each jurisdiction upon reasonable
notice to Seller and to provide written materials to Business Employees to
explain and answer questions about the conditions,
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policies and benefits of employment with Purchaser. Seller shall be entitled to
have one or more representatives at any such meeting. The Seller shall permit
the Purchaser and its agents and representatives reasonable access to the
Seller's accountants, auditors and suppliers for reasonable consultation or
verification of any information obtained by the Purchaser during the course of
any investigation conducted pursuant to this Section 6.2, and shall use all
commercially reasonable efforts to cause such Persons to cooperate with the
Purchaser and its agents and representatives in such consultations and in
verifying such information. The Seller shall deliver to the Purchaser (i)
unaudited monthly operating statements of the Stations within ten (10) calendar
days after the end of each calendar month, (ii) unaudited annual financial
statements of the Stations within seventy-five (75) days of the end of the
fiscal year, and (iii) on a weekly basis, pacing reports for the ensuing three
month period, it being expressly understood and agreed that delivery of any
financial information pursuant to this Section 6.2 by the Seller or Arthur
Andersen LLP, as applicable, to the Purchaser shall not constitute a
representation or warranty as to the future financial performance of the
Stations or the Business. Notwithstanding anything to the contrary contained in
the Confidentiality Agreement, the Purchaser shall have the right to contact the
executive officers of the Seller or the general manager, or other senior
management personnel, of each of the Stations directly with respect to any
information provided, or to be provided, by the Seller pursuant to this Section
6.2.
6.3 Confidentiality. The terms of the Confidentiality Agreement are hereby
incorporated herein by reference and shall continue in full force and effect
from and after the Closing in accordance with the terms thereof, such that the
information obtained by any party hereto, or its officers, employees, agents or
representatives, during any investigation conducted pursuant to Section 6.2
hereof, in connection with the negotiation, execution and performance of this
Agreement, the consummation of the transactions contemplated hereby, or
otherwise, shall be governed by the terms set forth in the Confidentiality
Agreement.
6.4 Further Actions.
(a) Upon the terms and subject to the conditions set forth in this
Agreement (including, without limitation, the terms of Section 6.4(b) hereof),
the Seller and the Purchaser shall each use their respective commercially
reasonable best efforts to take, or cause to be taken, all appropriate action,
and to do, or cause to be done, and to assist and cooperate with the other party
hereto in doing, all things necessary, proper or advisable under applicable Laws
to consummate the transactions contemplated hereby, including, without
limitation: (i) obtaining all necessary Licenses, actions or nonactions,
waivers, consents, approvals, authorizations, qualifications and other orders of
any Governmental Authorities with competent jurisdiction over the transactions
contemplated hereby, (ii) obtaining all necessary consents, approvals or waivers
from third parties, (iii) defending any lawsuits or other legal proceedings,
whether judicial or administrative, challenging this Agreement or the
consummation of the transactions contemplated hereby, including, without
limitation, seeking to have vacated or reversed any stay or temporary
restraining order entered by any Governmental Authority prohibiting or otherwise
restraining the
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consummation of the transactions contemplated hereby, and (iv) executing and
delivering any additional instruments, certificates and other documents
necessary or advisable to consummate the transactions contemplated hereby and to
fully carry out the purposes of this Agreement.
(b) Without limiting the generality of the foregoing, the Seller and
the Purchaser hereby agree to provide promptly to Governmental Authorities with
regulatory jurisdiction over enforcement of any applicable antitrust laws all
information and documents requested by any such Governmental Authorities or
necessary, proper or advisable to permit consummation of the transactions
contemplated hereby, and to file any Notification and Report Form and related
material required under the HSR Act as soon as practicable after the date
hereof. The Seller and the Purchaser shall each thereafter use its respective
commercially reasonable best efforts to complete as soon as practicable its
substantial compliance with any requests for additional information or
documentary material that may be made under the HSR Act. The Purchaser and the
Seller hereby further agree to use their respective commercially reasonable best
efforts to (i) obtain any governmental clearances required for consummation of
the transactions contemplated hereby, which shall specifically include, in the
case of the Purchaser, (A) taking any and all actions necessary or appropriate
to divest any shares of capital stock of any other Person held by the Purchaser
(or any of its Subsidiaries or Affiliates), any assets and properties of the
Purchaser (or any of its Subsidiaries or Affiliates), or any business conducted
by the Purchaser (or any of its Subsidiaries or Affiliates), and (B) consenting
to any restriction or limitation on the ability of the Purchaser (or any of its
Subsidiaries or Affiliates) to operate or exercise control over any of the
assets and properties of the Purchaser (or any of its Subsidiaries or
Affiliates) or conduct any business of the Purchaser (or any of its Subsidiaries
or Affiliates), which is necessary, in the case of any of the foregoing, to
obtain such governmental clearances, (ii) respond to any government request for
information, (iii) contest and resist any action, including any legislative,
administrative or judicial action, and have vacated, lifted, reversed or
overturned, any Governmental Order (whether temporary, preliminary or permanent)
that restricts, prevents or prohibits the consummation of the transactions
contemplated hereby, including, without limitation, by using all legal efforts
to vigorously pursue all available avenues of administrative and judicial appeal
and all available legislative action, and (iv) in the event that any permanent
or preliminary injunction or other order is entered or becomes reasonably
foreseeable to be entered in any proceeding that would make consummation of the
transactions contemplated hereby in accordance with the terms of this Agreement
unlawful or that would prohibit, prevent, delay or otherwise restrain the
consummation of the transactions contemplated hereby, to cause the relevant
Governmental Authorities to vacate, modify or suspend such injunction or order
so as to permit the consummation of the transactions contemplated hereby prior
to the Termination Date.
(c) Neither the Seller nor the Purchaser shall take any action that is
inconsistent with its respective obligations under this Agreement, or could
hinder or delay
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or impede the consummation of the transactions contemplated by this Agreement or
the consent of the FCC to the FCC Applications.
6.5 Fulfillment of Conditions by the Seller. The Seller shall not knowingly
take or cause to be taken, or fail to take or cause to be taken, any action that
would cause the conditions to the obligations of the Seller or the Purchaser to
consummate the transactions contemplated hereby to fail to be satisfied or
fulfilled at or prior to the Closing, including, without limitation, by taking
or causing to be taken, or failing to take or cause to be taken, any action that
would cause any of the representations and warranties made by the Seller in
Article IV hereof to fail to be true and correct as of the Closing in all
material respects. The Seller shall take, or cause to be taken, all commercially
reasonable actions within its power to cause to be satisfied or fulfilled, at or
prior to the Closing, the conditions precedent to the Purchaser's obligations to
consummate the transactions contemplated hereby as set forth in Section 7.1
hereof.
6.6 Fulfillment of Conditions by the Purchaser. The Purchaser shall not
knowingly take or cause to be taken, or fail to take or cause to be taken, any
action that would cause the conditions to the obligations of the Seller or the
Purchaser to consummate the transactions contemplated hereby to fail to be
satisfied or fulfilled, including, without limitation, by taking or causing to
be taken, or failing to take or cause to be taken, any action that would cause
the representations and warranties made by the Purchaser in Article V hereof to
fail to be true and correct as of the Closing in all material respects. The
Purchaser shall take, or cause to be taken, all commercially reasonable actions
within its power to cause to be satisfied or fulfilled, at or prior to the
Closing, the conditions precedent to the obligations of the Seller to consummate
the transactions contemplated hereby as set forth in Section 7.2 hereof.
6.7 Publicity. The Seller and the Purchaser shall cooperate with each other
in the development and distribution of all news releases and other public
disclosures relating to the transactions contemplated by this Agreement. Neither
the Seller nor the Purchaser shall issue or make, or allow to have issued or
made, any press release or public announcement concerning the transactions
contemplated by this Agreement without the consent of the other party hereto,
except as otherwise required by applicable Law, but in any event only after
giving the other party hereto a reasonable opportunity to comment on such
release or announcement in advance, consistent with such applicable legal
requirements.
6.8 Transaction Costs. The Purchaser shall pay all transaction costs and
expenses (including legal, accounting and other professional fees and expenses
and other fees described in Section 5.5 hereof) that it incurs in connection
with the negotiation, execution and performance of this Agreement and the
consummation of the transactions contemplated hereby. The Seller shall pay all
transaction costs and expenses (including legal, accounting and other
professional fees and expenses and other fees described in Section 4.20 hereof)
that it incurs in connection with the negotiation, execution and performance of
this Agreement and the consummation of the transactions contemplated
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hereby. Notwithstanding the foregoing and anything to the contrary contained in
this Agreement, the Seller and the Purchaser shall share equally (a) any
transfer Taxes (including stock transfer, sales, use and deed Taxes) or refunds
thereof and the fees and costs of recording or filing all applicable
conveyancing instruments associated with the transfer of the Purchased Assets
from the Seller to the Purchaser pursuant to this Agreement and (b) all filing
fees paid in connection with the HSR Act. The Seller and the Purchaser shall
cooperate in the preparation, execution and filing of all Tax Returns regarding
any transfer Taxes which become payable as a result of the transfer of the
Purchased Assets from the Seller to the Purchaser pursuant to this Agreement.
6.9 Employees and Employee Benefit Matters.
(a) The Purchaser shall offer employment as of the Closing Date to all
Business Employees who are actively employed (i.e., not on a paid or unpaid
leave of absence). Further, Purchaser shall immediately offer employment to any
Business Employee who is not actively employed on the Closing Date, when his or
her leave of absence has expired, if such individual is then able to return to
active employment on such date. As of the Closing Date, the Purchaser shall
employ each active Business Employee whose employment is not covered by a
collective bargaining agreement and who accepts the Purchaser's offer of
employment ("Transferred Non-Union Employees") at a base pay that is at least as
favorable as that provided by the Seller (or its Affiliates) immediately before
the execution hereof and on terms and conditions (and with employee benefits
(including without limitation benefits of the type described in section 3(1) of
ERISA)) that are at least as favorable in the aggregate as those provided to
Purchaser's similarly situated employees; provided, however, Purchaser shall be
free to modify any such base pay, terms and conditions and employee benefits
after the Closing in accordance with Purchaser's normal business practices. The
Purchaser shall provide each Transferred Non-Union Employee credit for years of
service with the Seller or any Affiliate of the Seller prior to the Closing for
(A) the purpose of eligibility and vesting under the Purchaser's health,
vacation and other employee benefit plans (including, without limitation, the
Purchaser 401(k) Plan), and (B) any and all pre-existing condition limitations
and eligibility waiting periods under group health plans of the Purchaser, and
shall cause to be credited to any deductible out-of-pocket expenses under any
health plans of the Purchaser any deductibles or out-of-pocket expenses incurred
by Transferred Non-Union Employees and their beneficiaries and dependents during
the portion of the calendar year in which the Closing occurs and prior to their
participation in the health plans of the Purchaser. Notwithstanding any other
provision of this Agreement, Business Employees that become employed by the
Purchaser as of the Closing who are covered by a collective bargaining agreement
on and after the Closing (the "Transferred Union Employees" and, collectively
with the Transferred Non-Union Employees, the "Transferred Employees") shall
receive benefits in accordance with the terms of such agreement.
(b) Effective at the Closing Date, the Purchaser shall assume the
severance arrangements set forth in Schedule 6.9(b) hereto; provided, however,
that the Purchaser
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shall have no liability under such severance arrangements with respect to
terminations of employment occurring before the Closing.
(c) Effective on the Closing Date, the Purchaser shall assume the
Seller's obligations, duties and liabilities to provide benefits under, and the
Seller shall assign, all Benefit Plans (including all related assets and funding
vehicles) sponsored, established and maintained by the Seller solely for the
benefit of Business Employees as are set forth in Schedule 6.9(c) hereto (the
"Assumed Plans") and any other arrangement described in Section 6.1(b)(iii)
hereof that is adopted by the Seller before the Closing with the prior written
consent of the Purchaser. The Seller shall have no Liability with respect to the
Assumed Plans following the Closing Date.
(d) Effective as of the Closing Date, the Seller shall cause each
Business Employee to have a fully nonforfeitable right to such employee's
account balances, if any, under The Tax Deferred Investment Plan of The
Chronicle Publishing Company (the "Seller 401(k) Plan"). Seller shall make, or
cause to be made, all "matching contributions" due under the Seller 401(k) Plan
with respect to Business Employees through the Closing Date. Effective as of the
Closing Date, the Purchaser shall establish or shall extend coverage to each
Business Employee under a defined contribution individual account plan (the
"Purchaser 401(k) Plan") qualified pursuant to Sections 401(a) and 401(k) of the
Internal Revenue Code to the extent the Business Employee has satisfied the
requirements for participation therein.
(e) As soon as practicable after the Closing Date, the Seller shall
cause the trustee of the Seller 401(k) Plan to transfer in the form of cash (or
such other form as may be agreed upon by the Seller and the Purchaser) the full
account balances of the Business Employees in such plan, reduced by any
necessary benefit, distribution or withdrawal payments to or in respect of
Business Employees occurring during the period from the Closing Date to the date
of transfer described herein, to the appropriate trustee as designated by the
Purchaser under the trust agreement forming a part of the Purchaser 401(k) Plan.
The aggregate account balances of Business Employees under the Seller 401(k)
Plan transferred by the trustee of the Seller 401(k) Plan to the trustee of the
Purchaser 401(k) Plan shall be increased (or decreased) by the Seller by the
amount of any actual earnings (or losses) on each account included therein from
the Closing Date to the date of transfer to the Purchaser 401(k) Plan and such
earnings (or losses) shall be credited (or debited) to the appropriate accounts.
Following the transfer of account balances to the Purchaser 401(k) Plan as
described herein, neither the Seller nor the Seller 401(k) Plan and the related
trust shall have any obligation or Liability with respect to the benefits and
entitlements accrued in respect of Business Employees under the Seller 401(k)
Plan that were transferred to the Purchaser 401(k) Plan. The Seller and
Purchaser shall reasonably cooperate to effectuate the foregoing.
(f) The Seller shall cause Business Employees to be fully vested in
their accrued benefit under the Pension Plan of Chronicle Publishing Company
(the "Seller DB Plan") as of the Closing to at least the same extent that
employees of the Seller who are
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not Business Employees become fully vested in their accrued benefits under the
Seller DB Plan in connection with, or as a result of, the sale of assets of
other divisions of the Seller with respect to which such employees primarily
render their services.
(g) The Seller shall cause the administrator of the Seller 401(k) Plan
and the Purchaser shall cause the administrator of the Purchaser 401(k) Plan, to
timely make such filings as are required under ERISA, the Internal Revenue Code
or any applicable Laws with respect to the transfer of account balances, assets
or Liabilities described in this Section 6.9, including any required filings on
Form 5310-A.
(h) Prior to the Closing Date, the Seller shall establish a plan solely
for the benefit of the Business Employees which shall be intended to satisfy the
requirements of Internal Revenue Code Section 125 (the "New Cafeteria Plan") and
which shall assume the liabilities attributable to the Business Employees (and
shall provide for the crediting of Business Employees' accounts in such amounts)
under the Chronicle Publishing Company Cafeteria Plan as of the Closing Date.
The New Cafeteria Plan shall be an Assumed Plan, as defined above.
(i) Seller agrees, if requested by Purchaser, to consent to the
designation of Purchaser (or its designee) as successor employer to the Business
for purposes of unemployment insurance payroll tax or contribution ratings and
payroll credits under sate and federal law and/or workers' compensation
contributions premium ratings under applicable state law. Seller shall provide
Purchaser (or its designee) in a timely fashion with any payroll or other
account data as may be necessary or appropriate to make application for the
transfer of Seller's ratings, payroll credits and premium ratings as an employer
subject to unemployment compensation laws and/or workers' compensation laws with
any public authority.
6.10 Interdivisional Agreements. Except as set forth in Schedule 6.10
hereto, prior to Closing, the Seller shall terminate, without any continuing
Liability to the Business resulting therefrom, all agreements between any
division of the Seller not related to the Business, on the one hand, and the
division of the Seller responsible for operating the Business, on the other
hand.
6.11 Retention and Delivery of Seller Records. From and after the Closing,
the Purchaser shall preserve, in accordance with the normal document retention
policy of the Business, all books and records transferred by the Seller to the
Purchaser pursuant to this Agreement. As soon as practicable following the
Closing, the Purchaser shall deliver to the Seller or, if so requested by the
shareholders of the Seller through the representative designated pursuant to
Section 9.8, to such representative, (a) such financial information relating to
the Business for the periods ending on or prior to the Closing Date, as has been
customarily provided to the Seller by the Stations, and (b) such financial
information relating to the Business for the periods after the Closing Date as
is customarily prepared by the Purchaser, in each case, in sufficient detail to
enable such shareholders or the Seller to prepare the Seller's financial
statements, the Final Prorations Schedule and all
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Tax Returns of the Seller and such shareholders relating to periods ending on or
prior to the Closing Date. In addition to the foregoing, for a period of three
(3) years after the Closing (or with respect to access related to Tax matters,
from and after the Closing without limitation of time) the Purchaser shall
afford to the Seller, and the Seller shall afford to the Purchaser, as
applicable, their respective counsel, accountants and other authorized agents
and representatives, and to any shareholders of the Seller and their respective
counsel, accountants and other authorized agents and representatives, during
normal business hours and upon the execution and delivery of a confidentiality
and non-disclosure agreement in customary form and substance (which shall
include appropriate exceptions for disclosure relating to Tax Returns and other
Tax matters), reasonable access to the employees, books, records and other data
relating to the Purchased Assets, the Excluded Assets, the Assumed Liabilities
and the Excluded Liabilities in its possession with respect to periods prior to
the Closing, and the right to make copies and extracts therefrom, to the extent
that such access may be reasonably required by the requesting party (a) to
facilitate the investigation, litigation and final disposition of any claims
which may have been or may be made against any such party or Person, or its
Affiliates, (b) for the preparation of Tax Returns and audits, and (c) for any
other reasonable business purpose.
6.12 FCC Consent. The transfer of the Purchased Assets and the assignment of
the Station Licenses as contemplated by this Agreement is subject to the prior
consent of the FCC. Promptly after the execution of this Agreement and promptly
after any assignment by the Purchaser of its rights and obligations under this
Agreement as contemplated by Section 9.4, as applicable, the Purchaser and the
Seller shall proceed to prepare for filing with the FCC appropriate applications
for consent to the assignment of the Station Licenses (the "FCC Applications"),
which shall be filed with the FCC as soon as practicable but in no event later
that thirty (30) calendar days after the date hereof. The parties shall
thereafter prosecute the FCC Applications with all reasonable diligence and
otherwise use their commercially reasonable efforts to obtain such consent as
expeditiously as practicable. The Purchaser and the Seller shall share equally
all filing fees payable with respect to all filings required by the FCC in
connection with the transactions contemplated by this Agreement and made
pursuant to this Section 6.12. In the event of any assignment by the Purchaser
of its rights under this Agreement pursuant to Section 9.4 hereof, the Purchaser
and the Seller will cooperate to file with the FCC as promptly as possible any
amendments or additional or new applications required as a result of such
assignment.
6.13 Account Receivable. At the Closing, the Seller will deliver to the
Purchaser a schedule of the accounts receivable of the Business. Subject to the
terms and provisions of this Section 6.13, the Purchaser agrees to collect the
accounts receivable in the manner regularly pursued by the Purchaser with
respect to the collection of accounts receivable and in the ordinary course of
business.
(a) The Purchaser shall use commercially reasonable efforts to collect
the accounts receivable of the Seller outstanding on the Closing Date for a
period of one
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hundred twenty (120) calendar days after the Closing. The Purchaser shall remit
all amounts so collected to an account designated by the Seller, net of
commission fees (as directed by the Seller) on a bi-monthly basis, beginning
within fifteen (15) days after the Closing until the end of such one hundred
twenty (120) calendar day period. Promptly after the expiration of the one
hundred twenty (120) day period, the Purchaser shall deliver to the Seller (i) a
statement or report showing all collections, (ii) a check or draft in an amount
equal to the aggregate amount of the collections then due to the Seller and not
previously delivered, and (iii) all records of uncollected accounts receivable
after which the Seller shall have the right to collect such uncollected accounts
receivable. In the collection of accounts receivable, all payments received by
the Purchaser from account debtors will be applied first to accounts receivable
of that account debtor arising prior to the Closing, if any, in the order of
their origination unless disputed by that account debtor. The Purchaser or the
Seller will promptly deliver to the other a true copy of any notice of a dispute
as to the validity or enforceability of an account receivable received from an
account debtor, and at the election of the Seller, the Purchaser shall
immediately remit such disputed account to the Seller for collection. The
Purchaser shall not agree to any settlement, discount, or reduction of any
account receivable without the prior written consent of the Seller. The
Purchaser's collection obligation under this Section 6.14 shall not include any
obligation to bring suit, engage a collection agent, or take any other legal
action for the collection of any account receivable. All amounts due to the
Seller under this subsection that are not paid in accordance with the provisions
hereof shall bear interest until paid at a rate per annum equal to the lesser of
(a) the generally prevailing prime interest rates (as reported by The Wall
Street Journal), plus five percentage points, or (b) the maximum amount
permitted by applicable Law. The parties acknowledge and agree that accounts
receivable collected by the Purchaser for the Seller pursuant to this Section
6.13 shall not be subject to a right of offset for any claim by the Purchaser
against the Seller; provided that, if the Purchaser takes any action in
violation of such prohibition the Purchaser's right and obligation to collect
all accounts receivable arising prior to the Closing shall immediately
terminate, and the Seller shall have the right to collect all such accounts
receivable in its sole and absolute discretion.
(b) Effective upon the Closing Date continuing only for such period as
the Purchaser has the obligation to collect the accounts receivable of the
Business pursuant to this Section 6.13, the Seller hereby irrevocably
constitutes and appoints the Purchaser, its successors and assigns, the true and
lawful attorney of the Seller with full power of substitution, in the name of
the Purchaser, or the name of the Seller, on behalf of and for the benefit of
the Purchaser (except as otherwise provided), to collect all accounts receivable
pursuant to this Section 6.13, and to endorse, without recourse, checks, notes
and other instruments in the name of the Seller pursuant to this Section 6.13.
The Seller agrees that the foregoing powers are coupled with an interest and
shall be irrevocable by the Seller directly or indirectly by the dissolution of
the Seller or in any manner or for any reason, but shall terminate as provided
in this Section 6.13(b).
6.14 Escrow Deposit. Upon the execution and delivery of this Agreement, the
Purchaser shall deposit by wire transfer of immediately available funds the sum
of Ten
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Million Dollars ($10,000,000) (the "Escrow Deposit") in an escrow account with
AllFirst Bank (the "Escrow Agent") in accordance with an escrow agreement among
the Seller, the Purchaser and the Escrow Agent (the "Escrow Agreement") attached
hereto as Exhibit L. All funds deposited with the Escrow Agent shall be held and
disbursed in accordance with the terms of the Escrow Agreement and the following
provisions:
(a) Upon Closing, the Seller and the Purchaser shall jointly instruct
the Escrow Agent to disburse all amounts held by the Escrow Agent pursuant to
the Escrow Agreement to the Purchaser, including any interest or other proceeds
from the investment of funds held by the Escrow Agent.
(b) If this Agreement is terminated as a result of a breach by the
Purchaser, and the Seller is not in material breach of this Agreement, then the
Seller and the Purchaser shall jointly instruct the Escrow Agent to hold the
Escrow Deposit, including any interest or other proceeds from the investment of
funds held by the Escrow Agent, (i) pending the receipt of a final order of a
court of competent jurisdiction directing release in accordance with such order,
or (ii) pending resolution of any disagreements between the parties until
receipt of a second joint instruction directing the release of the Escrow
Deposit in accordance with such instruction; provided, however, that except as
set forth in Section 6.14(g) below, the parties recognize that the Escrow
Deposit does not constitute liquidated damages, that recovery of all or part of
the Escrow Deposit by the Seller shall not constitute the Seller's exclusive
remedy, and the Seller shall therefore be entitled to pursue any other remedies
that may be available to it, including recovery of the full extent of the
Seller's damages.
(c) If this Agreement is terminated as a result of a breach by the
Seller, and the Purchaser is not in material breach of this Agreement, then the
Seller and the Purchaser shall jointly instruct the Escrow Agent to deliver the
Escrow Deposit to the Purchaser, including any interest or other proceeds from
the investment of funds held by the Escrow Agent.
(d) If this Agreement is terminated jointly by the Seller and the
Purchaser, then the Seller and the Purchaser shall jointly instruct the Escrow
Agent to deliver the Escrow Deposit to the Purchaser, including any interest or
other proceeds from the investment of funds held by the Escrow Agent.
(e) If this Agreement is terminated by the Seller pursuant to Section
6.15(f) hereof, then the Seller and the Purchaser shall jointly instruct the
Escrow Agent to deliver the Escrow Deposit to the Purchaser, including any
interest or other proceeds from the investment of funds held by the Escrow
Agent.
(f) If this Agreement is terminated by the Purchaser pursuant to
Section 8.2(a) hereof, then the Seller and the Purchaser shall jointly instruct
the Escrow Agent to deliver the Escrow Deposit to the Purchaser, including any
interest or other proceeds from the investment of funds held by the Escrow
Agent.
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(g) If Seller terminates this Agreement pursuant to Section 8.1(f) or
Section 8.1(g), then the Seller and the Purchaser shall jointly instruct the
Escrow Agent to deliver the Escrow Deposit to the Seller, including any interest
or other proceeds from the investment of funds held by the Escrow Agent and such
amount shall constitute liquidated damages (in lieu of any and all other damages
Seller may otherwise have been entitled to collect) for Purchaser's failure to
close under such circumstances.
6.15 Environmental Work.
(a) Within thirty (30) calendar days from the date hereof, the
Purchaser shall have the right, at its sole cost and expense, to engage
AquaTerra Services Corp. (the "Consultant") to conduct a Phase I Environmental
Assessment, as such term is commonly understood, with respect to the Owned Real
Property and the Leased Real Property, except that the rights granted to the
Purchaser with respect to the Leased Real Property shall be subject to any
required consent of the landlord of such Leased Real Property and provided, in
each case, such inspections and interviews shall be conducted only (i) during
regular business hours upon reasonable notice to the Seller, (ii) in a manner
which will not unduly interfere with the operation of the Business and/or the
use of, access to or egress from the Owned Real Property and the Leased Real
Property, and (iii) without damage to any property of the Seller or any property
of any lessor of Leased Real Property.
(b) If the assessment conducted in connection with Section 6.15(a)
above details a Recognized Environmental Condition (as such term is defined in
the American Society of Testing and Materials Standard for Phase I Environmental
Assessments) in connection with the Owned Real Property or the Leased Real
Property, the Consultant reasonably recommends further investigatory action with
respect to such Recognized Environmental Condition, and the Purchaser delivers
such assessment and recommendation to the Seller within thirty (30) calendar
days from the date hereof, the Purchaser shall have the right, for thirty (30)
calendar days from the date such assessment and recommendations are delivered to
the Seller, to conduct the investigation so recommended (the "Phase II
Inspection"); provided, however, the rights granted to the Purchaser with
respect to the Leased Real Property shall be subject to any required consent of
the landlord of such Leased Real Property; provided, further, the Seller shall
have the right to review and approve the work plan for any Phase II Inspection
so proposed, and provided further, such Phase II Inspection shall be conducted
only (i) during regular business hours upon reasonable notice to the Seller,
(ii) in a manner which will not unduly interfere with the operation of the
Business and/or the use of, access to or egress from the Owned Real Property and
the Leased Real Property, and (iii) without material damage to any property of
the Seller or any property of any lessor of Leased Real Property; provided,
however, that any such damage shall be promptly repaired by the Purchaser.
(c) If, as a result of the Phase II Inspection, the Purchaser
identifies a Recognized Environmental Condition that Seller is required to
remediate under
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applicable Environmental Law, the Cash Payment shall be reduced by the estimated
amount of all costs and expenses of cleanup, removal, remedial, corrective or
responsive action necessary to address such Recognized Environmental Condition
("Environmental Work") as reasonably determined by the Consultant (which
estimate shall set forth reasonable detail on the basis for those estimates);
provided, however, the Environmental Work shall be designed to meet the least
stringent standards or requirements that the Seller is required to meet so as
not to be a violation under applicable Environmental Law (taking into account
the zoning of the applicable Owned Real Property or Leased Real Property and the
current uses of resources thereon), provided further, any reduction of the Cash
Payment pursuant to this Section 6.15(c) shall be limited to the amount by which
the costs and expenses of the Environmental Work exceed One Hundred Thousand
Dollars ($100,000); provided, further, if parties other than the Seller are
required to participate in any Environmental Work, any reduction of the Cash
Payment pursuant to this Section 6.15(c) shall be limited to the amount of the
costs and expenses of Environmental Work reasonably allocable to the Seller.
(d) If the Seller and the Purchaser disagree as to the estimated costs,
expenses or required extent of the Environmental Work as provided by the
Consultant, the Seller shall notify the Purchaser of such disagreement in
writing specifying in detail the particulars of such disagreement within twenty
(20) Business Days after the Seller's receipt of the results of the Phase II
Inspection pursuant to Section 6.15(c) above. The Purchaser shall provide the
Seller full access to the assessment and/or inspection results (and all related
records) that are the causes of such disagreement.
(e) The Seller and the Purchaser shall use their commercially
reasonable efforts for a period of thirty (30) calendar days after the Seller's
delivery of the notice referred to in Section 6.15(d) above to resolve any
disagreements raised by the Seller with respect to the extent of the
Environmental Work. If, at the end of such period, the Seller and the Purchaser
are unable to resolve all such disagreements, Dames & Moore (the "Environmental
Auditor") shall determine the costs, expenses and extent of the Environmental
Work that it deems to be required. The determination of the Environmental
Auditor shall be final, binding and conclusive on the parties. The Seller and
the Purchaser shall use their commercially reasonable efforts to cause the
Environmental Auditor to make its determination within thirty (30) calendar days
of receipt of the parties' request for a determination. The fees and expenses of
the Environmental Auditor shall be shared equally between the Seller and the
Purchaser.
(f) Notwithstanding anything to the contrary contained herein, if the
estimated costs and expenses of the Environmental Work as determined by the
Consultant or the Environmental Auditor, as applicable, exceed One Million
Dollars ($1,000,000), the Seller shall have the right, in its sole and absolute
discretion, to terminate this Agreement, subject to Section 6.15(g) below. If
the Seller makes this election the parties, subject to Section 6.15(g) below,
shall have no liability or further obligation to the other under this Agreement
except as provided in Section 8.2.
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(g) If the Seller elects to terminate this Agreement under Section
6.15(f) above, the Purchaser shall have the right, in its sole and absolute
discretion, to accept a reduction of the Cash Payment pursuant to Section
6.15(c) of Nine Hundred Thousand Dollars ($900,000) and proceed with the
Closing.
(h) The parties understand and agree that the procedures outlined in
this Section 6.15 shall in no event delay the Closing beyond the date on which
the Closing would occur but for such procedures.
6.16 Payment of Taxes. Seller shall file all Tax Returns, other than those
relating to Income Taxes, with respect to the Business required to be filed by
it after the date hereof and prior to the Closing and shall pay all Taxes shown
to be due thereon.
6.17 Financing. Within sixty (60) days of the date hereof, the Purchaser
shall deliver to the Seller, evidence, reasonably acceptable to the Seller, of
the Purchaser's financial ability to pay the Cash Payment (minus the amount of
the Escrow Deposit) and make all other payments of fees and expenses in
connection with the transactions contemplated by this Agreement required to be
paid by the Purchaser, it being understood that such evidence shall include one
or more of (a) availability under the Purchaser's existing credit facility or a
binding written commitment letter from another financing source reasonably
acceptable to the Seller (the "Lender") containing the Lender's commitment to
provide financing, (b) the Purchaser's cash on hand (which shall be reflected in
the most recent balance sheet of the Purchaser at the time of the delivery
pursuant to this Section 6.17), or (c) a binding agreement between the Purchaser
and a qualified third party providing for the sale of one or more television
stations now owned by Purchaser to such third party.
ARTICLE VII.
CLOSING CONDITIONS
7.1 Conditions to Obligations of the Purchaser. The obligations of the
Purchaser to consummate the transactions contemplated by this Agreement are
subject to the satisfaction or fulfillment at or prior to the Closing of the
following conditions, any of which may be waived in whole or in part by the
Purchaser in writing:
(a) All representations and warranties of the Seller contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing with the same effect as though such representations and warranties were
made at and as of the Closing (other than any representation or warranty that is
expressly made as of a specified date, which shall be true and correct in all
material respects as of such specified date only).
(b) The Seller shall have performed and complied in all material
respects with all the covenants and agreements required by this Agreement to be
performed or complied with by it at or prior to the Closing.
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(c) All applicable waiting periods (and any extensions thereof) under
the HSR Act shall have expired or otherwise been terminated.
(d) There shall be in effect no Law or injunction issued by a court of
competent jurisdiction making illegal or otherwise prohibiting or restraining
the consummation of the transactions contemplated by this Agreement.
(e) The Seller shall have delivered to the Purchaser all of the
certificates, instruments and other documents required to be delivered by the
Seller at or prior to the Closing pursuant to Section 3.2 hereof.
(f) The FCC shall have granted its consent to the FCC Applications.
(g) All required consents to the assignment of the Primary Television
Affiliation Agreement dated December 20, 1996, between the Seller and American
Broadcasting Companies, Inc., as amended, with respect to television station
KAKE-TV shall have been obtained.
(h) The Seller shall be the holder of the Station Licenses and all
other material government licenses, permits and other authorizations listed on
Schedule 4.21, and there shall not have been any modification of any of such
licenses, permits and other authorizations which has a Material Adverse Effect.
No proceeding shall be pending (other than rule making proceedings of general
applicability to the television broadcast industry, applications at the FCC that
propose to make changes to broadcast facilities other than the Stations in the
markets where the Stations are located or any application that could result in
the addition of video services in those markets or could have an impact on the
broadcast signal of the any of the Stations) which seeks or the effect of which
could be to revoke, cancel, fail to renew, suspend or modify adversely in a
material way the Station Licenses or any other material government licenses,
permits or other authorizations.
7.2 Conditions to Obligations of the Seller. The obligations of the Seller
to consummate the transactions contemplated by this Agreement are subject to the
satisfaction or fulfillment at or prior to the Closing of the following
conditions, any of which may be waived in whole or in part by the Seller in
writing:
(a) All representations and warranties of the Purchaser contained in
this Agreement shall be true and correct in all material respects at and as of
the Closing with the same effect as though such representations and warranties
were made at and as of the Closing (other than any representation or warranty
that is expressly made as of a specified date, which shall be true and correct
in all material respects as of such specified date only).
(b) The Purchaser shall have performed and complied in all material
respects with the covenants and agreements required by this Agreement to be
performed or complied with by it at or prior to the Closing.
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(c) All applicable waiting periods (and any extensions thereof) under
the HSR Act shall have expired or otherwise been terminated.
(d) There shall be in effect no Law or injunction issued by a court of
competent jurisdiction making illegal or otherwise prohibiting or restraining
the consummation of the transactions contemplated by this Agreement.
(e) The Purchaser shall have delivered to the Seller the Cash Payment
and all of the certificates, instruments and other documents required to be
delivered by the Purchaser at or prior to the Closing pursuant to Section 3.3
hereof.
(f) The FCC shall have granted its consent to the FCC Applications.
ARTICLE VIII.
TERMINATION; RISK OF LOSS
8.1 Termination. This Agreement and the transactions contemplated hereby
may be terminated and abandoned:
(a) by either the Seller or the Purchaser at any time prior to the
Closing with the mutual written consent of the other party hereto;
(b) unless the Closing has not occurred as a result of a breach of this
Agreement by the party seeking such termination, by either the Seller or the
Purchaser if the Closing has not occurred on or prior to 5:00 p.m. (California
time) on the date which is one (1) year following the date of this Agreement
(the "Termination Date");
(c) by either the Seller or the Purchaser if any Governmental Authority
with jurisdiction over such matters shall have issued a final and nonappealable
Governmental Order permanently restraining, enjoining or otherwise prohibiting
the consummation of the transactions contemplated by this Agreement; provided,
however, that neither the Seller nor the Purchaser may terminate this Agreement
pursuant to this Section 8.1(c) unless the party seeking to so terminate this
Agreement is not in default hereunder and has used all commercially reasonable
efforts to oppose any such Governmental Order or to have such Governmental Order
vacated or made inapplicable to the transactions contemplated by this Agreement;
(d) by either the Seller or the Purchaser if the FCC has not granted
its consent to the FCC Applications within 270 days after the parties file the
FCC Applications; provided, however, that neither party hereto may terminate
this Agreement if such party is in default hereunder, or if a delay in any
decision or determinations by the FCC respecting the FCC Applications has been
caused or materially contributed to by any failure on the part of such party to
furnish, file or make available information within its control or caused by the
willful furnishing by such party of incorrect, inaccurate or incomplete
information to the FCC, or caused by any action taken by such party for the
purposes of delaying any decision or determination respecting the FCC
Applications;
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(e) by either the Seller or the Purchaser if, for any reason, any of
the FCC Applications is designated for hearing by the FCC; provided, however,
that the party giving such notice is not then in material default under this
Agreement and has not caused such designation for hearing by virtue of its
misrepresentations in this Agreement or in any Assignment Application or its
willful and knowing violation of the FCC's rules or policies;
(f) by Seller if Purchaser fails to fulfill its obligations under
Section 6.17; provided, however, that Seller is not then in material default of
its obligations under this Agreement and that Seller gives notice of such
termination on or before fifteen (15) days after the date the obligations under
Section 6.17 were required to be fulfilled ; or
(g) by Seller if all of the conditions to the obligations of the
parties to close set forth in Article VII have been either satisfied or waived
on or before the KRON Target Closing Date and the Closing does not occur on or
before the KRON Target Closing Date; provided, however, that Seller gives notice
of such termination on or before fifteen (15) days after the KRON Target Closing
Date.
(h) Effect of Termination. If this Agreement is terminated pursuant to
this Section 8.1, this Agreement shall become null and void and neither party
hereto shall have any further liability hereunder except that (a) the provisions
of Section 6.7, Section 6.8, those portions of Section 6.14 relating to the
disposition of the Escrow Deposit in the event the Agreement is terminated
pursuant to such Section, and Article VIII generally shall remain in full force
and effect, and (b) each party hereto shall remain liable to each other party
hereto for any willful breach of its obligations under this Agreement prior to
such termination.
8.2 Risk of Loss. Except to the extent of any loss or damage caused by acts
or omissions of the Purchaser, its agents, employees, or other persons while
acting pursuant to a contract with the Purchaser, the risk of loss or damage to
the Purchased Assets shall be upon the Seller at all times prior to the Closing.
In the event of loss or damage except to the extent caused by acts or omissions
of the Purchaser, its agents, employees, or other persons while acting pursuant
to a contract with the Purchaser, the Seller shall promptly notify the Purchaser
thereof and shall use commercially reasonable efforts to repair, replace and
restore the lost or damaged property to its former condition as soon as
possible. If such repair, replacement and restoration of damage not caused by
the Purchaser, its agents, employees, or other persons while acting pursuant to
a contract with the Purchaser has not been completed prior to the Closing Date,
the Purchaser may, at its option:
(a) elect to terminate this Agreement, but only if the failure to
repair, replace and restore the lost or damaged property relates to a material
portion of the Purchased Assets and continues for a period in excess of sixty
(60) calendar days after the Closing Date without consideration of this Section
8.2;
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(b) elect to consummate the transactions contemplated by this Agreement
on the Closing Date in which event the Seller shall pay to the Purchaser the
amount necessary to restore the lost or damaged property to its former condition
and against such obligation shall assign to the Purchaser all of the Seller's
rights under any applicable insurance policies; or
(c) elect to postpone the Closing Date, with prior consent of the FCC
if necessary, which consent both parties will use commercially reasonable
efforts to obtain, until a date within fifteen (15) Business Days after the
Seller gives written notice to the Purchaser of completion of the repair,
replacement and restoration of such lost or damaged property. If, after the
expiration of that extension period, the lost or damaged property has not been
adequately repaired, replaced or a restored, Purchaser may terminate this
Agreement, and the parties shall be released and discharged from any further
obligation hereunder.
8.3 Failure of Broadcast Transmission. Seller shall give prompt written
notice to the Purchaser if either of the following (a "Specified Event") shall
occur: (a) the regular broadcast transmissions of any of the Stations in the
normal and usual manner are interrupted or discontinued; or (b) any of the
Stations are operated at less than their licensed antenna height above average
terrain or at less than ninety percent (90%) of their licensed effective
radiated power. If any Specified Event persists for more than seventy-two (72)
consecutive hours or one hundred twenty (120) non-consecutive hours (or, in the
event of force majeure or utility failure affecting generally the market served
by the applicable Station, ninety-six (96) consecutive hours or three hundred
thirty-six (336) non-consecutive hours) during any period of thirty (30)
consecutive calendar days, then the Purchaser may, at its option: (x) terminate
this Agreement by written notice given to the Seller not more than ten (10)
calendar days after the expiration of such thirty (30) calendar day period, or
(y) proceed in the manner set forth in Section 8.4. In the event of termination
of this Agreement by the Purchaser pursuant to this Section 8.3, the parties
shall be released and discharged from any further obligation hereunder.
8.4 Resolution of Disagreements. If the parties are unable to agree upon
the extent of any loss or damage, the cost to repair, replace or restore any
lost or damaged property, the adequacy of any repair, replacement, or
restoration of any lost or damaged property, or any other matter arising under
Section 8.3, the disagreement shall be referred to a qualified consulting
communications engineer mutually acceptable to the Seller and the Purchaser who
is a member of the Association of Federal Communications Consulting Engineers,
whose decision shall be final, binding upon and non-appealable by the parties,
and whose fees and expenses shall be shared equally by the Seller and the
Purchaser.
ARTICLE IX.
MISCELLANEOUS
9.1 Survival. None of the representations and warranties of the Seller and
the Purchaser contained in this Agreement, or in any certificate, instrument or
other
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document delivered by the Seller or the Purchaser pursuant to this Agreement or
in connection with the transactions contemplated hereby, shall survive the
Closing. None of the covenants and agreements of the Seller and the Purchaser
contained in this Agreement, or in any certificate, instrument or other document
delivered by the Seller or the Purchaser pursuant to this Agreement or in
connection with the transactions contemplated hereby, shall survive the Closing,
except to the extent such covenants and agreements by their terms contemplate
performance after the Closing and except that the covenants of the Seller
contained in Subsections 6.1(b)(vi), (vii), (viii), (ix), (xii), (xiii), (xiv),
(xvii), and (xviii) shall survive for a period of three (3) months after the
Closing Date.. No claim shall be made or action brought by any party hereto
after the Closing (i) for the breach of, or inaccuracy in, any representation or
warranties contained in this Agreement, or in any certificate, instrument or
other document delivered pursuant to this Agreement or in connection with the
transactions contemplated hereby, or (ii) for the breach of any covenant or
agreement contained in this Agreement, or in any certificate, instrument or
other document delivered pursuant to this Agreement or in connection with the
transactions contemplated hereby, except with respect to (x) those covenants set
forth in Subsections 6.1(b)(vi), (vii), (viii), (ix), (xii), (xiii), (xiv),
(xvii), and (xviii), to the extent a claim is made within three (3) months after
the Closing Date and (y) those agreements that by their terms contemplate
performance after the Closing, including, but not limited to, the covenants and
agreements set forth in Sections 2.3(b), 2.3(c), 2.4, 2.5, 6.3, 6.7, 6.8, 6.9,
6.10, 6.11 and 6.13 hereof, Article VIII hereof and in this Article IX.
9.2 Notices. All notices that are required or may be given pursuant to this
Agreement must be in writing and delivered personally, by a recognized courier
service, by a recognized overnight delivery service, by telecopy or by
registered or certified mail, postage prepaid, to the parties at the following
addresses (or to the attention of such other person or such other address as any
party may provide to the other parties by notice in accordance with this Section
9.2):
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if to the Purchaser, to: with copies to:
- ------------------------ ---------------
Benedek Broadcasting Corporation Shack & Siegel, P.C.
100 Park Avenue 530 Fifth Avenue
Rockford, Illinois 61101 New York, New York 10036
Facsimile: (815) 987-5335 Facsimile: (212) 730-1964
Attention: K. James Yager Attention: Paul S. Goodman, Esq.
if to the Seller, to: with copies to:
- --------------------- ---------------
The Chronicle Publishing Company Latham & Watkins
901 Mission Street 135 Commonwealth Drive
San Francisco, California 94103 Menlo Park, California 94025
Facsimile: (415) 495-5057 Facsimile: (650) 463-2600
Attention: W. Ronald Ingram Attention: Peter F. Kerman
Kimberly Wilkinson
and, with regard to matters relating
------------------------------------
to Taxes, to:
-------------
Skadden, Arps, Slate, Meagher &
Flom LLP
919 Third Avenue
New York, New York 10022
Facsimile: (212) 735-2001
Attention: Matthew A. Rosen
Any such notice or other communication will be deemed to have been given and
received (whether actually received or not) on the day it is personally
delivered or delivered by courier or overnight delivery service or sent by
telecopy (receipt confirmed) or, if mailed, when actually received.
9.3 Attorneys' Fees and Costs. If attorneys' fees or other costs are
incurred to secure performance of any obligations hereunder, or to establish
damages for the breach thereof or to obtain any other appropriate relief,
whether by way of prosecution or defense, the prevailing party will be entitled
to recover reasonable attorneys' fees and costs incurred in connection
therewith.
9.4 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned or delegated by the Seller or the
Purchaser without the prior written consent of the other party and any purported
assignment or delegation in violation hereof shall be null and void.
Notwithstanding the foregoing, (a) the Seller may assign its obligations under
this Agreement to another entity which succeeds to all or substantially all of
the Seller's assets and properties for purposes of handling any dissolution or
liquidation of the Seller, and (b) the Purchaser may elect to effect the
transfer and
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conveyance of the Purchased Assets as part of an exchange under Section 1031 of
the Internal Revenue Code, and in connection therewith, the Purchaser may assign
all of its rights and obligations under this Agreement, provided that doing so
does not delay Closing beyond the date on which the Closing would occur but for
such election or cause the Seller to incur any expense that the Seller would not
have incurred but for such election. If the Purchaser so elects, it shall
provide notice to the Seller of its election. Notwithstanding the foregoing, an
election by the Purchaser pursuant to this Section 9.4 shall not relieve the
Purchaser of any of its obligations under this Agreement.
9.5 Amendments and Waiver. This Agreement may not be modified or amended
except in writing signed by the party against whom enforcement is sought. The
terms of this Agreement may be waived only by a written instrument signed by the
party waiving compliance. No waiver of any provision of this Agreement shall be
deemed or shall constitute a waiver of any other provision hereof (whether or
not similar), nor shall such waiver constitute a continuing waiver unless
otherwise provided. No delay on the part of any party hereto in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege hereunder. Unless otherwise provided, the rights and
remedies herein provided are cumulative and are not exclusive of any rights or
remedies which the parties hereto may otherwise have at law or in equity.
Whenever this Agreement requires or permits consent by or on behalf of a party,
such consent shall be given in writing in a manner consistent with the
requirements for a waiver of compliance as set forth in this Section 9.5.
9.6 Entire Agreement. This Agreement, the Confidentiality Agreement and the
related documents contained as Exhibits and Schedules hereto or expressly
contemplated hereby (including the Seller Documents) contain the entire
understanding of the parties relating to the subject matter hereof and supersede
all prior written or oral and all contemporaneous oral agreements and
understandings relating to the subject matter hereof. The Exhibits and Schedules
to this Agreement are hereby incorporated by reference into and made a part of
this Agreement for all purposes.
9.7 Representations and Warranties Complete. The representations,
warranties, covenants and agreements set forth in this Agreement and the
Confidentiality Agreement constitute all the representations, warranties,
covenants and agreements of the parties hereto and their respective
shareholders, directors, officers, employees, Affiliates, advisors (including
financial, legal and accounting), agents and representatives and upon which the
parties have relied.
9.8 Third Party Beneficiaries. Except as set forth below in this Section
9.8, this Agreement is made for sole for the benefit of the parties hereto and
nothing contained herein, express or implied, is intended to or shall confer
upon any other Person any third party beneficiary right or any other legal or
equitable rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement. Notwithstanding the foregoing
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or anything to the contrary contained in this Agreement, the parties hereto
acknowledge and agree that the shareholders of the Seller are the only third
party beneficiaries of the benefits under this Agreement that inure to the
Seller following the Closing, and, as a result, a representative of the
shareholders to be designated from time to time by the Seller or the previously
designated shareholder representative in writing shall be entitled to enforce
any of the shareholders' third party beneficiary rights following the Closing
for so long as any such rights remain in effect pursuant to the terms of this
Agreement.
9.9 Governing Law. This Agreement will be governed by and construed and
interpreted in accordance with the substantive laws of the State of California,
without giving effect to any conflicts of law rule or principle that might
require the application of the laws of another jurisdiction.
9.10 Neutral Construction. The parties to this Agreement agree that this
Agreement was negotiated fairly between them at arms' length and that the final
terms of this Agreement are the product of the parties' negotiations. Each party
represents and warrants that it has sought and received legal counsel of its own
choosing with regard to the contents of this Agreement and the rights and
obligations affected hereby. The parties agree that this Agreement shall be
deemed to have been jointly and equally drafted by them, and that the provisions
of this Agreement therefore should not be construed against a party or parties
on the grounds that the party or parties drafted or was more responsible for
drafting the provision(s).
9.11 Severability. In the event that any one or more of the provisions or
parts of a provision contained in this Agreement shall for any reason be held to
be invalid, illegal or unenforceable in any respect in any jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
or part of a provision of this Agreement or any other jurisdiction, but this
Agreement shall be reformed and construed in any such jurisdiction as if such
invalid or illegal or unenforceable provision or part of a provision had never
been contained herein and such provision or part shall be reformed so that it
would be valid, legal and enforceable to the maximum extent permitted in such
jurisdiction.
9.12 Bulk Sales Laws. The parties hereby waive compliance with the Bulk
Sales Laws of any State in which the Purchased Assets are located or in which
operations relating to the Business are conducted.
9.13 Headings; Interpretation; Schedules and Exhibits. The descriptive
headings of the several Articles and Sections of this Agreement are inserted for
convenience only and do not constitute a part of this Agreement. References to
Sections or Articles, unless otherwise indicated, are references to Sections and
Articles of this Agreement. The word "including" means including without
limitation. Words (including defined terms) in the singular shall be held to
include the plural and vice versa and words of one gender shall be held to
include the other gender as the context requires. The terms "hereof," "herein"
and "herewith" and words of similar import shall, unless otherwise stated, be
construed to
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refer to this Agreement as a whole (including all of the Schedules and Exhibits
hereto) and not to any particular provision of this Agreement unless otherwise
specified. It is understood and agreed that neither the specifications of any
dollar amount in this Agreement nor the inclusion of any specific item in the
Schedules or Exhibits is intended to imply that such amounts or higher or lower
amounts, or the items so included or other items, are or are not material, and
neither party shall use the fact of setting of such amounts or the fact of the
inclusion of such item in the Schedules or Exhibits in any dispute or
controversy between the parties as to whether any obligation, item or matter is
or is not material for purposes hereof.
9.14 WAIVER OF JURY TRIAL. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE SUCH WAIVER, (II) IT UNDERSTANDS AND HAS
CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (III) IT MAKES SUCH WAIVER
VOLUNTARILY, AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.14.
9.15 Liability for Breaches of Certain Covenants. The Seller shall be liable
to the Purchaser for damages to the Purchaser resulting from the breach by the
Seller of Subsections 6.1(b)(vi), (vii), (viii), (ix), (xii), (xiii), (xiv),
(xvii), and (xviii) only to the extent that the aggregate damages to the
Purchaser resulting from all such breaches exceeds One Hundred Thousand Dollars
($100,000), at which time the Purchaser shall be entitled to recover for all of
the damages suffered by the Purchaser. The Seller shall not be liable to the
Purchaser for damages to the Purchaser resulting from the breach by the Seller
of Subsections 6.1(b)(vi), (vii), (viii), (ix), (xii), (xiii), (xiv), (xvii),
and (xviii) in an aggregate amount in excess of Three Million Dollars
($3,000,000). The Purchaser shall not make any claim against the Seller for
damages to the Purchaser resulting from the breach by the Seller of Subsections
6.1(b)(vi), (vii), (viii), (ix), (xii), (xiii), (xiv), (xvii), and (xviii) which
individually does not exceed Fifteen Thousand Dollars ($15,000). The amount of
all such damages shall be reduced by (a) any tax benefit or deduction allowable
as a result of the incurrance of such damages or the facts or circumstances
giving rise thereto, and (b) any contributions or similar payments recovered
from any third party as a result of the incurrence of such damages or the facts
or circumstances
55
<PAGE>
giving rise thereto, provided that, the Purchaser shall reimburse the Seller for
the amount of any such contributions or similar payments when they are
recovered.
56
<PAGE>
9.16 Counterparts. This Agreement may be executed in one or more
counterparts for the convenience of the parties hereto, each of which shall be
deemed an original and all of which together will constitute one and the same
instrument.
[Remainder of Page Intentionally Left Blank]
57
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by a duly authorized officer as of the date first above written.
THE CHRONICLE PUBLISHING
COMPANY
By: /s/ W. Ronald Ingram
------------------------------------
Name: W. Ronald Ingram
Title: Secretary
BENEDEK BROADCASTING
CORPORATION
By: /s/ A. Richard Benedek
------------------------------------
Name: A. Richard Benedek
Title: Chairman and Chief Executive
Officer
58
<PAGE>
ESCROW AGREEMENT
This Escrow Agreement (the "Agreement"), dated as of November 17, 1999, by and
among The Chronicle Publishing Company, a Nevada Corporation (the "Seller"),
Benedek Broadcasting Corporation, a Delaware corporation (the "Purchaser"), and
Allfirst Bank, as Escrow Agent (the "Escrow Agent").
The Purchaser and the Seller have entered into an Asset Purchase Agreement (the
"Purchase Agreement") dated as of November 17, 1999 for the sale by the Seller
to the Purchaser of certain assets which it uses to conduct the operations of
television stations WOWT-TV, Omaha, Nebraska, KAKE-TV, Wichita, Kansas, KUPK-TV,
Garden City, Kansas, and KLBY-TV Colby, Kansas. Pursuant to the Purchase
Agreement, Purchaser is required on this date to deposit Ten Million Dollars
($10,000,000) in escrow to secure its obligations under the Purchase Agreement.
The Purchaser and the Seller desire that the Escrow Agent hold these funds as
provided in this Agreement and the Purchase Agreement.
Accordingly, in consideration of the mutual covenants contained herein the
parties, intending to be legally bound, hereby agree as follows:
1. Receipt of Escrow Deposit. By its signature below, Escrow Agent
acknowledges receipt of Ten Million Dollars ($10,000,000) (the "Escrow Deposit")
from the Purchaser.
2. Investment of Escrow Deposit. The Escrow Deposit shall be invested by
Escrow Agent in (i) direct obligations of the United States of America maturing
within 90 days of the date of acquisition thereof, (ii) certificates of deposit
maturing within 90 days of the date of acquisition thereof issued by a bank or
trust company which is organized under the laws of the United States or any
state thereof having capital, surplus and undivided profits aggregating in
excess of $500 million, or (iii) in commercial paper given the highest rating by
two established national credit rating agencies and maturing not more than 90
days from the date of acquisition thereof, as may be directed by the Purchaser.
All interest earned on the Escrow Deposit shall become part of the Escrow
Deposit, set aside and paid upon the termination of this Agreement. The Escrow
Agent shall determine the aggregate amount of interest and other income earned
on the Escrow Deposit (the "Interest Amount"). The Interest Amount shall be
income of the Purchaser and the Purchaser shall be responsible for all taxes,
including interest, penalties and additions to tax payable with respect to such
income.
3. Disbursement of Escrow Deposit. Escrow Agent shall release the Escrow
Deposit within forty-eight (48) hours of receipt of (a) written instructions
jointly executed by the Seller and the Purchaser or (b) a final order of a court
of competent jurisdiction directing release of the funds in accordance with such
order. An order shall be deemed "final" when, by a lapse of time or otherwise,
it is no longer subject to administrative or judicial reconsideration or review.
Escrow Agent shall be authorized to act on any document believed to be genuine
and to be signed by the proper party or parties, and will incur no liability in
so acting. In the event of any disagreement or presentation of adverse claims or
demands in connection with the Escrow
<PAGE>
Deposit, Escrow Agent may act as stake-holder and deposit the item in dispute
with the registry of the court having jurisdiction over the dispute.
4. Indemnity. The Seller and the Purchaser agree to indemnify and hold
Escrow Agent harmless against any loss, claim, damage, liability, or expense
incurred in connection with any action, suit, proceeding, claim or alleged
liability arising from this Agreement; provided, however, that Escrow Agent
shall not be so indemnified or held harmless for its gross negligence or acts in
bad faith by it or any of its agents or employees, nor for its breach of this
Agreement.
5. Expenses. All expenses incurred by Escrow Agent in the administration of
this Agreement, including reasonable legal costs incurred by Escrow Agent, shall
be paid by the Purchaser. Any expenses incurred by the Purchaser or the Seller
in connection with this Agreement shall be borne by the parties incurring the
expenses. If there arises a dispute concerning a party's entitlement to some or
all of the Escrow Deposit, the prevailing party shall be entitled to recover its
reasonable costs (including reasonable attorneys' fees) incurred in connection
with such dispute.
6. Notices. Any notice, report, demand, waiver, consent, and other
communications pertaining to this Agreement shall be in writing and shall be
given by hand delivery, by prepaid registered or certified mail, with return
receipt requested, by an established national overnight courier providing proof
of delivery for next business day delivery, or by telecopy, addressed as
follows:
if to the Purchaser, to: with copies to:
------------------------ ---------------
Benedek Broadcasting Corporation Shack & Siegel, P.C.
100 Park Avenue 530 Fifth Avenue
Rockford, Illinois 61101 New York, New York 10036
Facsimile: (815) 987-5335 Facsimile: (212) 730-1964
Attention: K. James Yager Attention: Paul S. Goodman, Esq.
if to the Seller, to: with copies to:
------------------------ ---------------
The Chronicle Publishing Company Latham & Watkins
901 Mission Street 135 Commonwealth Drive
San Francisco, California 94103 Menlo Park, California 94025
Facsimile: (415) 495-5057 Facsimile: (650) 463-2600
Attention: W. Ronald Ingram Attention: Peter F. Kerman
Kimberly Wilkinson
<PAGE>
if to the Escrow Agent, to:
---------------------------
Allfirst Bank
Capital Markets
Homer Building
601 13th Street N.W.
Suite 1000 N
Washington, D.C. 20005
Facsimile: (202) 434-7032
Attention: John Wise, Vice President
The date of any such notice and service thereof shall be deemed to be: (i) the
day of delivery if hand delivered or delivered by overnight courier; (ii) the
day of delivery as indicated on the return receipt if dispatched by mail, or
(iii) the date of telecopy transmission as indicated on the telecopier
transmission report provided that any telecopy transmission shall not be
effective unless a paper copy is sent by overnight courier on the date of the
telecopy transmission. Any party may change its address for the purpose of
notice by giving of such change in accordance with the provisions of this
Section.
7. Duties of Escrow Agent. The duties and responsibilities of Escrow Agent
shall be limited to those expressly set forth herein.
8. Assignment. The Purchaser and the Seller may assign their rights under
this Agreement to the same extent they are permitted to assign their rights and
obligations under the Purchase Agreement.
9. Headings. The descriptive headings of the several Articles and Sections
of this Agreement are inserted for convenience only and do not constitute a part
of this Agreement.
10. Counterparts. This Agreement may be executed in one or more
counterparts for the convenience of the parties hereto, each of which shall be
deemed an original and all of which together will constitute one and the same
instrument.
11. Governing Law. This Agreement will be governed by and construed and
interpreted in accordance with the substantive laws of the State of California,
without giving effect to any conflicts of law rule or principle that might
require the application of the laws of another jurisdiction.
12. Miscellaneous. This Agreement shall bind and inure to the benefit of
the parties hereto and their respective, heirs, personal representatives,
successors and permitted assigns.
<PAGE>
To evidence their agreement, the parties have caused this Escrow Agreement
to be executed on the date first written above.
THE CHRONICLE PUBLISHING COMPANY
By: /s/ W. Ronald Ingram
----------------------------
Name: W. Ronald Ingram
Title: Secretary
BENEDEK BROADCASTING CORPORATION
By: /s/ A. Richard Benedek
----------------------------
Name: A. Richard Benedek
Title: Chairman and Chief Executive Officer
ALLFIRST BANK
By: /s/ John G. Wise
----------------------------
Name: John G. Wise
Title: Vice President
<PAGE>
ASSET EXCHANGE AGREEMENT
BY AND AMONG
WGRC, INC.,
AND
BENEDEK BROADCASTING CORPORATION
AND
BENEDEK LICENSE CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. Definitions..............................................................................................1
2. Exchange of Assets.......................................................................................5
2.1 WWLP Assets..............................................................................5
2.2 WWLP Excluded Assets.....................................................................7
2.3 Chronicle Assets.........................................................................8
2.4 Chronicle Excluded Assets................................................................8
2.5 Transfer of Assets.......................................................................8
2.6 Accounts Receivable......................................................................9
2.7 Power of Attorney.......................................................................10
2.8 Non-Assignable WWLP Assets..............................................................10
2.9 Non-Assignable Chronicle Assets.........................................................10
3. Assumption of Liabilities...............................................................................11
3.1 WWLP Assumed Liabilities................................................................11
3.2 Chronicle Assumed Liabilities...........................................................11
3.3 Instruments of Assumption for the WWLP Assumed Liabilities..............................12
3.4 Instruments of Assumption for the Chronicle Assumed Liabilities.........................12
3.5 WWLP Excluded Liabilities...............................................................12
3.6 Chronicle Excluded Liabilities..........................................................13
4. Closing Payment; Allocation.............................................................................13
4.1 Closing Payment.........................................................................13
4.2 Letter of Credit........................................................................13
4.3 WWLP Closing Adjustments................................................................14
4.4 Allocation..............................................................................15
5. Closing.................................................................................................15
6. Governmental Consents...................................................................................16
6.1 FCC Consent.............................................................................16
6.2 Hart-Scott-Rodino.......................................................................16
6.3 Other Governmental Consents.............................................................17
7. Representations and Warranties of Benedek...............................................................17
7.1 Organization and Standing...............................................................17
7.2 Power and Authority.....................................................................17
7.3 No Conflicts............................................................................18
7.4 Government Approval.....................................................................18
7.5 Validity................................................................................18
7.6 Financial Statements....................................................................19
7.7 Taxes...................................................................................19
7.8 Contracts...............................................................................20
7.9 Real Estate.............................................................................21
7.10 Personal Property.......................................................................22
7.11 Intellectual Property...................................................................22
7.12 Insurance...............................................................................22
7.13 Litigation..............................................................................23
7.14 Compliance with Law.....................................................................23
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C> <C>
7.15 Labor...................................................................................24
7.16 Employees...............................................................................24
7.17 Employee Benefit Plans..................................................................24
7.18 Environmental Matters...................................................................26
7.19 Chronicle Agreement.....................................................................27
7.20 Entire Business.........................................................................27
7.21 Transactions with Affiliates............................................................28
8. Representations and Warranties of WGRC..................................................................28
8.1 Organization and Standing...............................................................28
8.2 Power and Authority.....................................................................28
8.3 No Conflicts............................................................................28
8.4 Government Approval.....................................................................29
8.5 Validity................................................................................29
8.6 Litigation..............................................................................29
8.7 Independent Investigation...............................................................29
9. Covenants of Benedek....................................................................................30
9.1 Books and Records.......................................................................30
9.2 Interim Operations......................................................................30
9.3 Discharge of Liens......................................................................32
9.4 Licenses................................................................................32
9.5 Maintenance of Insurance................................................................32
9.6 Compliance..............................................................................32
9.7 Compliance with Laws....................................................................33
9.8 Payment of Taxes........................................................................33
9.9 Financial Statements....................................................................34
9.10 Action..................................................................................34
9.11 Further Assurances......................................................................34
9.12 Chronicle Agreement.....................................................................34
10. Covenants of WGRC.......................................................................................35
10.1 Compliance..............................................................................35
10.2 Control of the Station..................................................................36
10.3 FCC Compliance..........................................................................36
10.4 Books and Records.......................................................................36
10.5 Action..................................................................................36
10.6 Employees and Employee Benefit Matters..................................................36
10.7 Further Assurances. ...................................................................38
10.8 Conditions of Closing...................................................................39
10.9 Obligation of WGRC to Close.............................................................39
10.10 Obligation of Benedek to Close..........................................................40
11. Remedies for Breach.....................................................................................42
11.1 WGRC Declines to Close..................................................................42
11.2 WGRC Elects to Close....................................................................42
11.3 Benedek Declines to Close...............................................................42
11.4 Benedek Elects to Close.................................................................42
11.5 Remedies Cumulative.....................................................................42
12. Termination Rights......................................................................................42
13. Risk of Loss............................................................................................43
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C> <C>
13.2 Failure of Broadcast Transmission.......................................................44
13.3 Resolution of Disagreements.............................................................44
14. Indemnification.........................................................................................44
14.1 Indemnification of Benedek..............................................................44
14.2 Indemnification of WGRC.................................................................45
14.3 Procedures for Indemnification..........................................................46
14.4 Procedures for Third-Party Claims.......................................................46
14.5 Survival of Representations, Warranties and Covenants...................................47
15. Brokers.................................................................................................47
16. Tax Matters.............................................................................................47
17. Miscellaneous...........................................................................................48
17.1 Confidentiality.........................................................................48
17.2 Entire Agreement........................................................................48
17.3 Notices.................................................................................48
17.4 Public Announcement.....................................................................49
17.5 No Waiver...............................................................................50
17.6 Governing Law...........................................................................50
17.7 Consent to Jurisdiction.................................................................50
17.8 Expenses................................................................................50
17.9 Binding Agreement.......................................................................50
17.10 Intent..................................................................................50
17.11 Good Faith..............................................................................51
17.12 Headings................................................................................51
17.13 Counterparts............................................................................51
</TABLE>
(iii)
<PAGE>
SCHEDULES
<TABLE>
<CAPTION>
Schedule Number Description
- --------------- -----------
<S> <C>
1.16 Benedek's Knowledge
1.16 WGRC's Knowledge
2.2.11 Other Excluded Assets
3.5.6 WWLP Excluded Contracts
7.3 Conflicts
7.4 FCC Licenses
7.6 Financial Statements
7.8 Contracts, agreements and commitments of Benedek
7.9 Real Property, Liens
7.10 Personal Property, Liens
7.11 Intellectual Property
7.12 Insurance
7.13 Litigation
7.15 Representation or labor contracts; Delinquency in
payments to employees
7.16 Employees
7.17 Employee Benefit Plans
7.18.1 Environmental Matters
</TABLE>
(iv)
<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
A Form of Letter of Credit
</TABLE>
(v)
<PAGE>
INDEX TO DEFINED TERMS
<TABLE>
<CAPTION>
TERM LOCATION
- ---- --------
<S> <C>
"Affiliate" Section 1.1
"Agreement" Section 1.2
"Assignment Agreement" Page 1, 3rd WHEREAS
"BBC" Page 1, paragraph 1
"Benedek" Page 1, paragraph 1
"Benedek 401(k) Plan" Section 10.6.2
"Benedek Cafeteria Plan" Section 10.6.5
"BLC" Page 1, paragraph 1
"Chronicle" Page 1, 2nd WHEREAS
"Chronicle Agreement" Page 1, 2nd WHEREAS
"Chronicle Assets" Section 1.4
"Chronicle Assumed Liabilities" Section 1.5
"Chronicle Cash Payment" Section 1.6
"Chronicle Excluded Assets" Section 1.7
"Chronicle Excluded Liabilities" Section 1.8
"Chronicle Station Licenses" Section 1.9
"Chronicle Stations" Page 1, 2nd WHEREAS
"Closing" Section 5
"Closing Date" Section 5
"Closing Payment" Section 4.1
"COBRA" Section 7.17.6
"Code" Page 1, 5th WHEREAS
"Collection Period" Section 2.6
"Communications Act" Section 1.3
"Confidentiality Agreement" Section 1.10
"control" Section 1.1
"Employee Plans" Section 7.17
"Environmental Law(s)" Section 7.18.1
"Environmental Claims" Section 7.18.2
"Environmental Reports" Section 7.18.1
"ERISA" Section 1.11
"ERISA Affiliate" Section 1.12
"FCC" Page 1, 1st WHEREAS
"FCC Application" Section 6.1.1
"FCC Consent" Section 1.13
"Final Order" Section 1.14
"Final Proration Schedule" Section 4.3.2
"Financial Statements" Section 7.6
</TABLE>
(vi)
<PAGE>
<TABLE>
<CAPTION>
TERM LOCATION
- ---- --------
<S> <C>
"GAAP" Section 1.15
"Hazardous Substances" Section 7.18.1
"herein" Section 1.2
"hereof" Section 1.2
"hereunder" Section 1.2
"HSR Act" Section 6.2
"including" Section 1.25.4
"Indemnified Party" Section 14.3
"Indemnifying Party" Section 14.3
"Intellectual Property" Section 1.17
"IRS" Section 4.4
"knowledge" Section 1.16
"Leased Real Property" Section 7.9.1
"Leases" Section 7.9.1
"Lien" Section 1.18
"Losses" Section 14.1.1
"Material Adverse Effect" Section 1.19
"NBC" Section 2.1.4
"Notice of Disagreement" Section 4.3.2
"or" Section 1.25.3
"Owned Real Property" Section 7.9.1
"Permitted Liens" Section 1.20
"Person" Section 1.21
"Premises" Section 7.18.1
"Proprietary Rights" Section 1.22
"Real Property" Station 7.9.1
"Receivables" Section 2.6
"Specified Event" Section 13.2
"Station" Page 1, 1st WHEREAS
"Station Licenses" Section 1.23
"Tax" Section 7.7.8
"Taxes" Section 7.7.8
"Tax Return" Section 7.7.8
"Third-Party Claim" Section 14.4.1
"trade-out agreements" Section 4.3.1
"Transfer Taxes" Section 9.8
"Transferred Employees" Section 10.6
"WGRC" Page 1, paragraph 1
"WGRC 401(k) Plan" Section 10.6
"WGRC Cafeteria Plan" Section 10.6.5
"WGRC's Proration Amount" Section 4.3.2
</TABLE>
(vii)
<PAGE>
<TABLE>
<CAPTION>
TERM LOCATION
- ---- --------
<S> <C>
"WWLP Assets" Section 2.1
"WWLP Assumed Liabilities" Section 3.1
"WWLP Excluded Assets" Section 2.2
"WWLP Excluded Contracts" Section 3.5.6
"WWLP Excluded Liabilities" Section 3.5
"WWLP Excluded Records" Section 2.2.6
"WWLP Value" Section 1.24
</TABLE>
(viii)
<PAGE>
ASSET EXCHANGE AGREEMENT
AGREEMENT dated as of this 10th day of December, 1999, by and among
WGRC, Inc. ("WGRC"), a Delaware corporation, having its principal place of
business at 79 Ridge Road, Bristol, Rhode Island 02809, and Benedek Broadcasting
Corporation, a Delaware corporation ("BBC"), and Benedek License Corporation, a
Delaware corporation ("BLC"), each having its principal place of business at 100
Park Avenue, Rockford, Illinois 61101 (BBC and BLC are collectively referred to
as "Benedek").
W I T N E S S E T H :
WHEREAS, BBC and its wholly-owned subsidiary, BLC, own and operate
television station WWLP (TV), Channel 22, Springfield, Massachusetts and its
auxiliary facilities (the "Station") pursuant to licenses issued by the Federal
Communications Commission (the "FCC"); and
WHEREAS, BBC has entered into an Asset Purchase Agreement dated as of
November 17, 1999, as the same may be amended from time to time (the "Chronicle
Agreement"), with The Chronicle Publishing Company ("Chronicle") pursuant to
which the purchaser thereunder will acquire television stations WOWT(TV), Omaha,
Nebraska and KAKE-TV, Wichita Kansas (together with its satellite stations,
KUPK-TV, Garden City, Kansas and KLBY(TV), Colby, Kansas) (collectively, the
"Chronicle Stations"); and
WHEREAS, Benedek and WGRC are entering into an Assignment and
Assumption Agreement of even date herewith (the "Assignment Agreement") pursuant
to which Benedek's rights under the Chronicle Agreement to acquire the Chronicle
Stations will be assigned to WGRC; and
WHEREAS, Benedek desires to acquire the Chronicle Stations by way of an
exchange transaction for substantially all of the assets of the Station; and
WHEREAS, Benedek and WGRC have agreed that WGRC will transfer the
Chronicle Stations to Benedek in exchange for the Station in a transaction
intended to qualify as a like-kind exchange under Section 1031 of the Internal
Revenue Code of 1986, as amended (the "Code"), as contemplated herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, the parties hereto agree as follows:
1. DEFINITIONS. Unless otherwise stated in this Agreement, the following
terms shall have the following meanings:
<PAGE>
1.1 The term "Affiliate" means, with respect to a Person, any
other Person which, directly or indirectly, is in control of, is controlled by
or is under common control with such Person. For purposes of the foregoing
definition, "control" of a Person means the power, direct or indirect, to direct
or cause the direction of the management and policies of such Person whether by
contract or otherwise.
1.2 The term "Agreement" means this agreement, including the
schedules and all exhibits hereto, as the same may be amended or otherwise
modified from time to time, and the terms "herein", "hereof", "hereunder" and
like terms shall be taken as referring to this Agreement in its entirety and
shall not be limited to any particular section or provision hereof.
1.3 The term "Communications Act" means the Communications Act
of 1934, as amended.
1.4 The term "Chronicle Assets" means the Purchased Assets, as
that term is defined in the Chronicle Agreement, which will be acquired by WGRC
pursuant to the Chronicle Agreement.
1.5 The term "Chronicle Assumed Liabilities" means the Assumed
Liabilities, as that term is defined in the Chronicle Agreement, which will be
assumed by WGRC pursuant to the Chronicle Agreement.
1.6 The term "Chronicle Cash Payment" means the Cash Payment,
as that term is defined in the Chronicle Agreement, adjusted as contemplated by
Section 3.3(a) of the Chronicle Agreement.
1.7 The term "Chronicle Excluded Assets" means the Excluded
Assets, as that term is defined in the Chronicle Agreement.
1.8 The term "Chronicle Excluded Liabilities" means the
Excluded Liabilities, as that term is defined in the Chronicle Agreement.
1.9 The term "Chronicle Station Licenses" means the Station
Licenses, as that term is defined in the Chronicle Agreement.
1.10 The term "Confidentiality Agreement" means the
Confidentiality Agreement dated October 21, 1999 between LIN Television
Corporation and Benedek.
1.11 The term "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time, and any successor statute
thereto and all final or temporary regulations promulgated thereunder.
2
<PAGE>
1.12 The term "ERISA Affiliate" shall mean with respect to
Benedek, all members of a controlled group of corporations and all trades or
businesses (whether or not incorporated) under common control and all other
entities which, together with Benedek, are treated as a single employer under
any or all of Sections 414(b), (c), (m) or (o) of the Code.
1.13 The term "FCC Consent" means action by the FCC granting
its consent to the assignment of the Station Licenses as contemplated by this
Agreement.
1.14 The term "Final Order" means a written action or order
issued by the FCC, setting forth the FCC Consent and which has not been
reversed, stayed, enjoined, set aside, annulled or suspended, and with respect
to which no requests have been filed for administrative or judicial review,
reconsideration, appeal or stay and the periods provided by statute or FCC
regulations for filing of any such requests for administrative or judicial
review, reconsideration or appeal or for the FCC to set aside the action on its
own motion have expired.
1.15 The term "GAAP" means generally accepted accounting
principals set forth in opinions and pronouncements of the Accounting Principals
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, in each case as the same are applicable to the
circumstances as of the date of determination.
1.16 The term "knowledge" or similar words shall be deemed to
mean the actual personal knowledge after reasonable inquiry as of the date
specified or if no such date is specified, as of the Closing Date, in the case
of Benedek, of those employees of Benedek identified on Schedule 1.16 attached
hereto and, in the case of WGRC, of those employees of WGRC identified on
Schedule 1.16 attached hereto.
1.17 The term "Intellectual Property" means any registered (i)
United States and foreign patents, patent applications, patent disclosures and
improvements thereto, (ii) United States and foreign trademarks, service marks,
trade dress, logos, trade names and corporate names, the goodwill associated
therewith, and the registrations and applications for registration thereof, and
(iii) United States and foreign copyrights, and the registrations and
applications for registration thereof.
1.18 The term "Lien" means any charge, lien, mortgage, pledge,
security interest or other encumbrance of any nature whatsoever upon, of or in
property or other assets of a Person, whether absolute or conditional, voluntary
or involuntary, whether created pursuant to agreement, arising by force of
statute, by judicial proceedings or otherwise.
1.19 The term "Material Adverse Effect" means any change or
effect that is materially adverse to the properties, operations, business,
financial condition or results of operations of the Station or to the WWLP
Assets, except for any such changes or effects resulting directly or indirectly
from (i) the transactions contemplated by this Agreement, (ii) the announcement
or other
3
<PAGE>
disclosure of the transactions contemplated by this Agreement, (iii) regulatory
changes, or (iv) changes in conditions generally applicable to the television
broadcasting industry or in general economic conditions in the geographic region
in which the Station is broadcast.
1.20 The term "Permitted Liens" means (i) Liens for inchoate
mechanics' and materialmen's Liens for construction in progress and workmen's,
repairmen's, warehousemen's and carriers' Liens arising in the ordinary course
of the business, (ii) Liens for taxes not yet due and payable, and for taxes
being contested in good faith for which adequate reserves have been established
in accordance with GAAP, (iii) Liens and imperfections of title the existence of
which does not materially detract from the value of, interfere with, or
otherwise affect the use and enjoyment of the property subject thereto or
affected thereby, for the same use and operations as currently conducted, and
(iv) solely with respect to Owned Real Property, provided that the following are
not violated by existing improvements in any material respect and do not
prohibit or materially restrict the continued use and operation of such Owned
Real Property for the same uses and operations as currently conducted, or grant
any third party any option or right to acquire or lease a material portion
thereof, (A) easements, rights of way or other similar restrictions which would
be shown by a current title report, (B) conditions that may be shown by a
current survey, title report or physical inspection, or (C) zoning, building or
other similar restrictions imposed by applicable law.
1.21 The term "Person" shall include an individual, a
partnership, a joint venture, a corporation, a limited liability company, a
trust, an estate, an unincorporated organization or association or a
governmental agency.
1.22 The term "Proprietary Rights" means any (i) Intellectual
Property, (ii) trade secrets and confidential business information (including,
without limitation, ideas, formulas, compositions, inventions (whether
patentable or unpatentable and whether or not reduced to practice), know-how,
research and development information, software, drawings, specifications,
designs, plans, proposals, technical data, copyrightable works, financial,
marketing and business data, pricing and cost information, business and
marketing plans and customer and supplier lists and information), (iii) other
proprietary rights, (iv) copies and tangible embodiments thereof (in whatever
form or medium), and (v) licenses granting any rights with respect to any of the
foregoing.
1.23 The term "Station Licenses" means the licenses, permits
and other authorizations issued by the FCC to BLC in connection with the conduct
of the business and operation of the Station, including the licenses, permits
and other authorizations listed on Schedule 7.4 annexed hereto.
1.24 The term "WWLP Value" means $123,000,000.
1.25 Unless the context otherwise requires:
1.25.1 a term has the meaning assigned to it;
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1.25.2 an accounting term not otherwise defined has
the meaning assigned to it in accordance GAAP and all accounting calculations
will be determined in accordance with such principles;
1.25.3 "or" is not exclusive;
1.25.4 "including" means including without
limitation; and
1.25.5 words in the singular include the plural and
words in the plural include the singular.
2. EXCHANGE OF ASSETS.
2.1 WWLP ASSETS. On the terms and subject to the conditions of
this Agreement, Benedek shall transfer, convey, assign and deliver to WGRC, and
WGRC shall acquire and accept from Benedek, on the Closing Date, all of the
right, title and interest of Benedek in and to all assets, properties and rights
of Benedek used or held for use primarily in connection with the operation of
the Station, of every nature, kind and description, wherever located, tangible
and intangible, real, personal and mixed (excluding only the WWLP Excluded
Assets as specified in Section 2.2 below) as and to the extent the same shall
exist at and as of the Closing Date (the "WWLP Assets"), including, without
limitation, the following:
2.1.1 all rights in and to the licenses, permits and
other authorizations issued to Benedek by any governmental authority and held by
Benedek and used or intended for use in the conduct of the business and
operation of the Station, including the Station Licenses listed on Schedule 7.4
annexed hereto together with any renewals, extensions or modification thereof
and additions thereto between the date hereof and the Closing Date, the
goodwill, if any, and other intangible personal property owned by Benedek and
used or held for use primarily in connection with the operation of the Station,
the business of the Station as a going concern, and all of Benedek's rights in
and to the call letters "WWLP";
2.1.2 all land, leaseholds and other interests of
every kind and description in real property, buildings, towers, and antennae,
and fixtures and improvements thereon owned by Benedek as of the date hereof and
used or held for use primarily in connection with the operation of the Station,
including, without limitation, those listed on Schedule 7.9 annexed hereto;
2.1.3 all equipment, cameras, transmitters, antennas,
office furniture and fixtures, office materials and supplies, tools, inventory,
spare parts, and other tangible personal property of every kind and description,
owned by Benedek and used or held for use primarily in connection with the
operation of the Station, including the property listed on Schedule 7.10 annexed
hereto;
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2.1.4 all leases, contracts, licenses, purchase
orders, sales orders, commitments and other agreements primarily relating to the
business and operation of the Station to which Benedek is a party or in which
Benedek has rights, listed on Schedule 7.8 annexed hereto, including the
affiliation agreement with NBC Television Network ("NBC"), or not required by
Section 7.8 hereof to be set forth on Schedule 7.8, and those leases, contracts,
licenses, purchase orders, sales orders, commitments and other agreements
relating to the business and operation of the Station entered into by Benedek
between the date hereof and the Closing Date in accordance with Section 9.2
hereof;
2.1.5 all orders and agreements now existing, or
entered into between the date hereof and the Closing Date in accordance with
Section 9.2, for the sale of advertising time on the Station;
2.1.6 all programs and programming materials and
elements of whatever form or nature owned by Benedek as of the date of this
Agreement and used or held for use primarily in connection with the operation of
the Station, whether recorded on tape or any other substance or intended for
live performance, and whether completed or in production, and all related
common-law and statutory copyrights owned by or licensed to Benedek and used or
held for use primarily in connection with the operation of the Station, together
with all such programs, materials, elements, and copyrights acquired by Benedek
in connection with the business and operations of the Station between the date
hereof and the Closing Date;
2.1.7 all rights of Benedek in and to trade names,
service marks, trademarks, trademark registrations and trademark applications,
copyrights, copyright registrations and copyright applications, patents and
patent applications, inventions, trade secrets, logos, slogans, jingles,
proprietary processes, computer software and all other information, know-how and
intellectual property rights and all licenses and other agreements relating to
any of the foregoing and used solely in connection with the business and
operation of the Station, including those listed on Schedule 7.11 hereof;
2.1.8 all causes of action, judgments, claims,
demands and other rights of Benedek of every kind or nature relating to the
business and operation of the Station;
2.1.9 all rights of Benedek relating to or arising
out of or under express or implied warranties from suppliers with respect to the
WWLP Assets;
2.1.10 subject to Section 4.3, all prepaid expenses,
advances and deposits made by Benedek in connection with the operation of the
Station, including prepaid motion picture and other programming expenses and all
barter receivables arising in connection with trade-out agreements now existing
or hereafter entered into in the ordinary course of business; and
2.1.11 all books and records, including, but not
limited to, correspondence, employment records, production records, accounting
records, property records, filings with the FCC,
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mailing lists, customer and vendor lists and other records and files of or
relating to the WWLP Assets, other than the WWLP Excluded Records; provided,
however, that such books and records shall be maintained in existence for a
period of three (3) years following the Closing Date and shall be made available
for inspection and duplication by Benedek, at its expense, upon reasonable
notice during normal business hours.
2.2 WWLP EXCLUDED ASSETS. Anything contained in Section 2.1
above to the contrary notwithstanding, Benedek shall not transfer, convey or
assign to WGRC and the WWLP Assets shall not include the following (the "WWLP
Excluded Assets"):
2.2.1 the consideration delivered by WGRC to Benedek
pursuant to this Agreement and all other rights of Benedek under this Agreement,
any agreement, certificate, instrument or other document executed and delivered
by Benedek in connection with the transactions contemplated hereby, or any side
agreement between Benedek and WGRC entered into on or after the date of this
Agreement;
2.2.2 any cash or cash equivalents or money market
instruments, including unprocessed checks, savings and checking accounts and
other deposits, certificates of deposits, Treasury bills and other marketable
securities of Benedek;
2.2.3 Receivables of Benedek as of the Closing Date;
2.2.4 all real and personal property (including,
without limitation, all equipment, furniture, fixtures, files, computers,
computer software and computer software licenses, including general accounting
software, supplies and other personal property) used by the corporate and
accounting departments of Benedek and located at Rockford, Illinois;
2.2.5 all assets, whether real or personal, tangible
or intangible, which are owned, used or held for use by Benedek solely to
conduct any business operation or activity other than the operation of the
Station;
2.2.6 Benedek's minute books and such other books and
records located at Rockford, Illinois (other than books and records specifically
described in Section 2.1.11 hereof) as pertain to the organization, existence or
ownership of Benedek; provided, however, that such books and records shall be
maintained in existence for a period of three (3) years following the Closing
Date and shall be made available for inspection and duplication by WGRC, at its
expense, upon reasonable notice during normal business hours and solely for
purposes related to the business and operation of the Station (the "WWLP
Excluded Records");
2.2.7 WWLP Excluded Contracts and contracts,
commitments and agreements of Benedek to the extent the same relate solely to
WWLP Excluded Assets and not to the operation of the Station and actions, claims
suits, proceedings, arbitral actions, deposits, prepayments, refunds, causes of
action, choses in action, rights of recovery, rights of set off, and
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rights of recoupment of any kind or nature (including any such item relating to
income taxes) relating to the WWLP Excluded Assets or the WWLP Excluded
Liabilities;
2.2.8 assets sold by Benedek after the date hereof
and prior to the Closing Date in accordance with Section 9.2 hereof;
2.2.9 any refunds of Taxes, to the extent that
liability for such Taxes is a WWLP Excluded Liability;
2.2.10 refunds paid or payable in connection with the
cancellation or discontinuance of any insurance policies applicable to the
Station following the Closing; and
2.2.11 those other assets, properties and rights
listed on Schedule 2.2.11 annexed hereto.
2.3 CHRONICLE ASSETS. On the terms and subject to the
conditions of this Agreement, in exchange for the WWLP Assets, on the Closing
Date, WGRC shall transfer, convey, assign and deliver to Benedek the Chronicle
Assets.
2.4 CHRONICLE EXCLUDED ASSETS. Anything contained in Section
2.3 above to the contrary notwithstanding, WGRC shall not transfer, convey or
assign to Benedek, and the Chronicle Assets shall not include, the Chronicle
Excluded Assets.
2.5 TRANSFER OF ASSETS.
2.5.1 The transfer of the WWLP Assets as herein
contemplated shall be made by Benedek, free and clear of all Liens other than
Permitted Liens. The transfer of the WWLP Assets shall be effected by delivery
by Benedek of such endorsements, assignments, drafts, checks, deeds, affidavits
of title and other instruments of transfer, conveyance and assignment, including
customary Massachusetts quit claim deeds (which include covenants against
grantor's acts) with respect to real property to be conveyed hereunder, as shall
be necessary or appropriate to transfer, convey and assign the WWLP Assets to
WGRC on the Closing Date as contemplated by this Agreement and as shall be
reasonably requested by WGRC. The conveyancing documents shall be in form and
substance reasonably satisfactory to WGRC and Benedek. Benedek shall, at any
time and from time to time after the Closing Date, but at no cost to Benedek,
execute and deliver such other instruments of transfer and conveyance and do all
such further acts and things as may be reasonably requested by WGRC to transfer,
convey, assign and deliver to WGRC or to aid and assist WGRC in collecting and
reducing to possession, any and all of the WWLP Assets, or to vest in WGRC good,
valid and marketable title to the WWLP Assets.
2.5.2 The transfer of the Chronicle Assets as herein
contemplated shall be made by WGRC, free and clear of all Liens, other than
Liens not created by WGRC or contemplated or permitted to exist pursuant to the
Chronicle Agreement. The transfer of the
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Chronicle Assets shall be effected by delivery of such endorsements, assignment,
drafts, checks, deeds, affidavits of title and other instruments of transfer,
conveyance and assignment as are contemplated by or attached as exhibits to the
Chronicle Agreement. Such conveyancing documents with respect to the Chronicle
Assets shall provide for the direct transfer, conveyance and assignment by
Chronicle to Benedek. WGRC shall, at any time and from time to time after the
Closing Date, but at no cost to WGRC, execute and deliver such other instruments
of transfer and conveyance and do all such further acts and things as may be
reasonably requested by Benedek to transfer, convey, assign and deliver to
Benedek or to aid and assist Benedek in collecting and reducing to possession,
any and all of the Chronicle Assets, or to vest in Benedek good, valid and
marketable title to the Chronicle Assets.
2.6 ACCOUNTS RECEIVABLE. On the Closing Date, Benedek will
assign to WGRC for purposes of collection all of the outstanding accounts
receivable of Benedek as of the Closing Date arising out of the sale of
advertising time on the Station for cash (the "Receivables"). Subject to the
terms and provisions in this Section 2.6, WGRC will collect the Receivables in
the same manner and with the same diligence that WGRC uses to collect its own
accounts receivable for a period of 180 days following the Closing Date (the
"Collection Period"). All amounts received by WGRC after the Closing from an
account debtor will be applied first to the Receivables of such account debtor
in the order of their origination; provided however, that amounts received shall
not be applied to specific discrepancies identified by the account debtor unless
objected to in writing as a reason for non-payment. WGRC will not be obligated
to institute litigation, employ any collection agency, legal counsel, or other
third party, or take any other extraordinary means of collections or pay any
expenses to third parties. Within 10 days after the end of each month during the
Collection Period, WGRC will provide Benedek with a written report on
collections made with respect to the Receivables and an aging report as of the
end of such month and pay over to Benedek the amounts collected net of employee,
national representation or advertising agency sales commissions (unless already
paid) and WGRC shall promptly pay such commissions to the appropriate party. On
the 181st day after the Closing Date, WGRC will reassign to Benedek any
Receivables that remain uncollected. If during the Collection Period a dispute
arises with regard to an account included among the Receivables, WGRC shall
promptly advise Benedek thereof and may (or, if requested by Benedek, shall)
return that account to Benedek. Any amounts received by WGRC after any
Receivable has been reassigned to Benedek which can be specifically identified
as a payment on the account of such reassigned Receivable will be promptly paid
over or forwarded to Benedek. All amounts due to Benedek under this Section 2.6
that are not paid in accordance with the provisions hereof shall bear interest
until paid at a rate per annum equal to the generally prevailing prime interest
rates (as reported by The Wall Street Journal) plus two percentage points (2%).
The parties acknowledge and agree that (i) Receivables collected by WGRC for
Benedek pursuant to this Section 2.6 shall not be subject to a right of offset
for any claim by WGRC against Benedek and (ii) if WGRC takes any action in
violation of such prohibition, WGRC's right and obligation to collect
Receivables shall immediately terminate, and Benedek shall have the right to
collect all such Receivables in its sole and absolute discretion.
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2.7 POWER OF ATTORNEY. Effective upon the Closing Date,
Benedek hereby irrevocably constitutes and appoints WGRC, its successors and
assigns, the true and lawful attorney of Benedek with full power of
substitution, in the name of WGRC, or the name of Benedek, on behalf of and for
the benefit of WGRC, to collect the Receivables, to endorse, without recourse,
checks, notes and other instruments in the name of Benedek, and to do all such
further acts and things in relation thereto as is contemplated by Section 2.6
hereof. Benedek agrees that the foregoing powers are coupled with an interest
and shall be irrevocable by Benedek except as provided in Section 2.6 hereof.
2.8 NON-ASSIGNABLE WWLP ASSETS. Notwithstanding anything
contained in this Agreement to the contrary, this Agreement shall not constitute
an agreement or an attempted agreement to transfer or assign any contract,
license, lease, commitment, sales order, purchase order or other agreement, or
any claim or right of any benefit arising thereunder or resulting therefrom if
any such attempted transfer or assignment thereof, without the consent of any
other party thereto, would constitute a breach thereof or in any way affect the
rights of WGRC thereunder. Benedek shall, between the date hereof and the
Closing Date, take commercially reasonable efforts to obtain the consent of any
party or parties to any such contracts, licenses, leases, commitments, sales
orders, purchase orders or other agreements to the transfer or assignment
thereof by Benedek to WGRC hereunder in all cases in which such consent is
required for transfer or assignment; provided, that such efforts shall not
require the payment of any consideration by Benedek other than as expressly
provided for in this Agreement. If after Benedek has used its best efforts to
obtain the consent of any such other party to such contract, license, lease,
commitment, sales order, purchase order or other agreement, such consent shall
not be obtained at or prior to the Closing, or an attempted assignment thereof
at the Closing would be ineffective and would affect the rights of Benedek
thereunder, Benedek will cooperate with WGRC in any reasonable arrangement
designed to provide for WGRC the benefits under any such contract, license,
lease, commitment, sales order, purchase order or other agreement, including the
enforcement, at the cost and for the benefit of WGRC, of any and all rights of
Benedek against such other party thereto arising out of the breach or
cancellation thereof by such other party or otherwise.
2.9 NON-ASSIGNABLE CHRONICLE ASSETS. Notwithstanding anything
contained in this Agreement to the contrary, this Agreement shall not constitute
an agreement or an attempted agreement to transfer or assign any contract,
license, lease, commitment, sales order, purchase order or other agreement which
is included within the Chronicle Assets, or any claims or right of any benefit
arising thereunder or resulting therefrom if any such attempted transfer or
assignment thereof, without the consent of any party thereto, would constitute a
breach or in any way affect the rights of Benedek thereunder. WGRC shall be
under no obligation to obtain any consent with respect to the foregoing, it
being understood that any non-assignable Chronicle Assets and related consent
thereto shall be governed by the provisions contained in the Chronicle
Agreement.
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3. ASSUMPTION OF LIABILITIES.
3.1 WWLP ASSUMED LIABILITIES. Subject to the terms and
conditions of this Agreement and the performance by the parties hereto of their
respective obligations hereunder, on the Closing Date, simultaneously with the
transfer, conveyance and assignment by Benedek to WGRC of the WWLP Assets, WGRC
shall assume or otherwise be liable for, subject to the limitations contained
herein, the liabilities and obligations of Benedek (the "WWLP Assumed
Liabilities") under:
3.1.1 the contracts, agreements and commitments set
forth on Schedule 7.8 hereof, other than WWLP Excluded Contracts, to the extent
the liabilities and obligations thereunder arise on or after the Closing Date;
3.1.2 contracts, agreements and commitments in
existence on the date hereof and not required by Section 7.8 hereof to be set
forth on Schedule 7.8, other than WWLP Excluded Contracts, to the extent the
liabilities and obligations thereunder arise on or after the Closing Date;
3.1.3 contracts, agreements and commitments with
customers and advertising agencies in existence on the date hereof and accepted
in the ordinary course of business for the sale of advertising time for cash, to
the extent the liabilities and obligations thereunder arise on or after the
Closing Date;
3.1.4 contracts, agreements and commitments of the
type set forth in Sections 3.1.1, 3.1.2 or 3.1.3, to the extent the liabilities
and obligations thereunder arise on or after the Closing Date, to which Benedek
becomes a party in the ordinary course of business subsequent to the date of
this Agreement and prior to the Closing Date, which (a) are not fully performed
or discharged prior to the Closing Date, (b) are permitted to be entered into by
Benedek under the terms and conditions of this Agreement and (c) are effectively
assigned and transferred to WGRC as contemplated herein;
3.1.5 liabilities for accruals for employee vacation
and sick time for Transferred Employees as of the Closing Date; and
3.1.6 liabilities of Benedek which are to be assumed
by WGRC under Section 10.6.5 hereof.
3.2 CHRONICLE ASSUMED LIABILITIES. Subject to the terms and
conditions of this Agreement and the performance by the parties hereto of their
respective obligations hereunder, on the Closing Date, simultaneously with the
transfer, conveyance and assignment by WGRC to Benedek of the Chronicle Assets,
Benedek shall assume or otherwise be liable for the Chronicle Assumed
Liabilities. Benedek shall indemnify and hold WGRC harmless from and against the
Chronicle Assumed Liabilities.
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3.3 INSTRUMENTS OF ASSUMPTION FOR THE WWLP ASSUMED
LIABILITIES. The assumption by WGRC of the WWLP Assumed Liabilities shall be
effected by such instruments of assumption delivered to Benedek on the Closing
Date as shall be reasonably satisfactory to WGRC and Benedek. WGRC shall, at any
time and from time to time after the Closing Date, execute and deliver such
other instruments of assumption and do all such further acts and things as may
be reasonably requested by Benedek to implement the assumption of each such
liability and obligation. Assumption by WGRC of the WWLP Assumed Liabilities
shall in no way expand the rights or remedies of third parties against WGRC as
compared to the rights and remedies which such parties would have had against
Benedek had this Agreement not been consummated.
3.4 INSTRUMENTS OF ASSUMPTION FOR THE CHRONICLE ASSUMED
LIABILITIES. The assumption by Benedek of the Chronicle Assumed Liabilities
shall be effected by such instruments of assumption delivered by Benedek on the
Closing Date as are contemplated by or attached as exhibits to the Chronicle
Agreement. Such instruments of assumption with respect to the Chronicle Assumed
Liabilities shall provide for the direct assumption by Benedek from Chronicle of
such Chronicle Assumed Liabilities. Benedek shall, at any time and from time to
time after the Closing Date, execute and deliver such other instruments of
assumption and do all such further acts and things as may be reasonably
requested by WGRC to implement the assumption of the Chronicle Assumed
Liabilities.
3.5 WWLP EXCLUDED LIABILITIES. WGRC does not and shall not
assume, pay, perform or discharge any liabilities or obligations of Benedek
other than the WWLP Assumed Liabilities, and, without limiting the foregoing, it
is expressly agreed by the parties hereto that WGRC shall not assume or be
liable for any of the following liabilities or obligations of Benedek (the "WWLP
Excluded Liabilities"):
3.5.1 liabilities or obligations of Benedek for
borrowed money or to any of its stockholders or to any Person affiliated
therewith;
3.5.2 liabilities or obligations of Benedek incurred
with respect to its entry into this Agreement or its consummation of any of the
transactions contemplated hereunder (including, without limitation, Benedek's
legal and accounting fees and any brokerage or finder's fees payable by Benedek
pursuant to Section 15 hereof) and the Transfer Taxes to the extent payable by
Benedek in accordance with Section 9.8 hereof;
3.5.3 liabilities or obligations for income and
franchise Taxes of Benedek for all taxable periods and all other liabilities or
obligations for Taxes that relate to the Station or the WWLP Assets for periods
(or portions thereof) up to and including the Closing Date;
3.5.4 any pension, retirement, profit-sharing plan or
trust or other employee benefit plan of Benedek;
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3.5.5 any litigation, proceeding, or claim by any
Person to the extent relating to the business or operation of or otherwise
relating to the Station prior to the Closing Date, whether or not such
litigation, proceeding, or claim is pending, threatened, or asserted before, on,
or after the Closing Date, including any litigation, proceeding or claim listed
on Schedule 7.13 hereto and any litigation, proceeding or claim pending or
threatened as of the Closing Date;
3.5.6 liabilities or obligations arising under or
with respect to the contracts, agreements and commitments listed on Schedule
3.5.6 hereto (the "WWLP Excluded Contracts");
3.5.7 any claims, liabilities and obligations of
Benedek for wages, supplemental unemployment benefits, vacation benefits (except
as otherwise provided in Section 10.7.1), severance benefits (except as
otherwise provided in Section 10.7.1), retirement benefits, COBRA benefits, FMLA
benefits, WARN obligations and liabilities, or any other similar employee
benefits, withholding tax liabilities, workers' compensation, or unemployment
compensation benefits or premiums attributable to employment or termination by
Benedek on or prior to the Closing Date; hospitalization, medical, disability,
accident and other similar claims, incurred on or prior to the Closing Date (for
purposes of this Section 3.5.7, medical or hospitalization claims shall be
deemed incurred on the date services are rendered and disability, accident or
other similar claims shall be deemed incurred on the date that the accident or
disability occurs); and any claims, liabilities and obligations arising from or
relating to Benedek's employee benefit plans; and
3.5.8 all accounts payable of Benedek as of the
Closing Date.
3.6 CHRONICLE EXCLUDED LIABILITIES. Benedek does not and shall
not assume, pay, perform or discharge any liabilities or obligations relating to
the Chronicle Assets other than the Chronicle Assumed Liabilities as provided in
the Chronicle Agreement.
4. CLOSING PAYMENT; ALLOCATION.
4.1 CLOSING PAYMENT. WGRC and Benedek acknowledge that the
WWLP Value is less than the Chronicle Cash Payment. Accordingly, in addition to
the transfer of the WWLP Assets and the Chronicle Assets and the assumption of
the WWLP Assumed Liabilities and the Chronicle Assumed Liabilities, Benedek
shall pay to WGRC the difference between the Chronicle Cash Payment and the WWLP
Value at the Closing (such payment being referred to as the "Closing Payment").
The Closing Payment shall be made by wire transfer of immediately available
funds to an account designated by WGRC. The Closing Payment shall be subject to
upward or downward adjustment as the case may be on and after the Closing Date
as provided in Section 4.3
4.2 LETTER OF CREDIT. On the date hereof, WGRC has caused to
be issued to Benedek a letter of credit for Five Million ($5,000,000) Dollars in
the form attached as Exhibit A annexed hereto.
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4.3 WWLP CLOSING ADJUSTMENTS.
4.3.1 All income and expenses arising from the
conduct of the business and operation of the Station shall be prorated between
WGRC and Benedek in accordance with customary proration practices in
broadcasting acquisitions (including, without limitation, any prepayments in
respect of the sale of advertising time for cash) as of 11:59 p.m. local time,
Springfield, Massachusetts, on the Closing Date. Such prorations shall include,
without limitation, all ad valorem, real estate and other property taxes which
shall be allocated in accordance with the fiscal year of the applicable taxing
authority (but excluding Transfer Taxes which shall be paid as set forth in
Section 9.8 and taxes based on income of Benedek), business and license fees,
lease payments, payments made pursuant to WWLP Assumed Liabilities, rents, wages
and salaries of employees (excluding accruals for commissions, vacation and sick
pay), workers' compensation premiums, utility expenses, water and sewer use
charges, time sales agreements, pre-paid fees and expenses (other than those
relating to (i) motion pictures and other programming and (ii) in connection
with agreements for the sale of advertising time in exchange for goods or
services and not in exchange for motion pictures or other programming
("trade-out agreements")) to the extent WGRC will receive a benefit thereof, and
all other income and expenses attributable to the ownership and operation of the
Station. Benedek and WGRC acknowledge, however, that the consideration hereunder
for the WWLP Assets includes consideration for the contracts and commitments of
Benedek relating to motion pictures and other programming and for barter
receivables arising in connection with trade-out agreements and that no further
payment or proration shall be due in respect thereof. Prorations under this
Section 4.3 to the extent possible shall be determined and paid on the Closing
Date with final settlement thereof to occur, to the extent possible, within 60
calendar days after the Closing Date in accordance with Sections 4.3.2 and 4.3.3
below.
4.3.2 As promptly as practicable, but in any event
within 60 calendar days after the Closing Date, Benedek shall cause to be
prepared and delivered to WGRC a schedule of its proposed prorations (which
shall set forth in reasonable detail the basis for those determinations) (the
"Final Prorations Schedule"). The Final Prorations Schedule shall be conclusive
and binding on the parties and Benedek shall pay to WGRC, or WGRC shall pay to
Benedek, as the case may be, any amount due as a result of such adjustment,
unless WGRC provides Benedek with written notice of objection (the "Notice of
Disagreement") within 20 calendar days after WGRC's receipt of the Final
Proration Schedule, which notice shall state the prorations of expenses proposed
by WGRC ("WGRC's Proration Amount"). Benedek shall have 15 calendar days from
receipt of a Notice of Disagreement to accept or reject WGRC's Proration Amount.
Payment pursuant to this Section 4.3.2 shall be due within 15 calendar days
after the last to occur of (i) WGRC's failure to reject the Final Prorations
Schedule within 20 calendar days after WGRC's receipt of the Final Prorations
Schedule or, (ii) Benedek's failure to reject WGRC's Proration Amount within 15
calendar days of Benedek's receipt of a Notice of Disagreement.
4.3.3 In the event of any disputes between the
parties as to the prorations and adjustments described in Section 4.3, the
amounts not in dispute shall nonetheless be promptly
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paid and such disputes shall be determined by KPMG LLP, or such other accounting
firm as may be mutually acceptable to Benedek and WGRC, with the fees and
expenses of such accountant being shared equally by Benedek and WGRC. Any
payment required by Benedek to WGRC or WGRC to Benedek, as the case may be,
under this Section shall be paid by wire transfer of immediately available funds
to an account designated by such party. If either Benedek or WGRC fails to pay
when due any amount under Section 4.3, interest on such amount will accrue from
the date payment was due to the date such payment is made at a rate per annum
equal to the generally prevailing prime interest rates (as reported by The Wall
Street Journal) plus two percentage points (2%), and such interest shall be
payable upon demand. Notwithstanding the provisions of Sections 4.3.1 and 4.3.2,
if the amount of any Taxes to be prorated pursuant to Section 4.3 is not known
by 60 calendar days after the Closing Date, then the amount will be estimated as
of such date, and once the amount of such Taxes is known, Benedek shall pay to
WGRC, or WGRC shall pay to Benedek, as the case may be, the net amount due as a
result of the actual apportionment of such taxes.
4.3.4 CHRONICLE CLOSING ADJUSTMENTS. All income and
expenses arising from the conduct of the business and operation of the Chronicle
Stations shall be prorated in accordance with the Chronicle Agreement and
Benedek shall be entitled to any payments, credits or adjustments payable by
Chronicle thereunder and shall be responsible for any payments, credits or
adjustments payable to Chronicle thereunder.
4.4 ALLOCATION. As promptly as practicable following the
execution hereof, WGRC and Benedek shall enter into good faith negotiations
regarding a mutually agreeable allocation of the sum of (a) the WWLP Value and
(b) the WWLP Assumed Liabilities assumed by WGRC among the WWLP Assets acquired
by WGRC. In the event that the parties are unable to agree on an allocation
within 60 days after the Closing Date, then the parties agree to be bound by an
appraisal of such assets by David A. Tait & Company or another independent
nationally recognized firm of valuation experts mutually acceptable to Benedek
and WGRC. The cost of such appraisal shall be borne by Benedek. Such appraisal
shall be conclusive and binding on the parties for purposes of this Section 4.4.
Notwithstanding anything to the contrary herein, the allocation will be
consistent with Section 1060 of the Code and the Treasury regulations
promulgated thereunder. WGRC and Benedek (i) shall execute and file all Tax
Returns and prepare all financial statements, returns and other instruments in a
manner consistent with the allocation determined pursuant to this Section 4.4,
(ii) shall not take any position before any governmental authority or in any
judicial proceeding that is inconsistent with such allocation, and (iii) shall
cooperate with each other in a timely filing, consistent with such allocation,
of Form 8594 with the Internal Revenue Service ("IRS").
5. CLOSING. The closing of this Agreement (the "Closing") shall take place at
10:00 a.m. local time, on the fifth business day following the date on which (i)
public notice of FCC Consent is issued (or if such date is a Saturday, Sunday,
or Federal holiday, on the next business day thereafter), and (ii) all other
conditions to the obligations of WGRC and Benedek hereunder shall have been
satisfied or waived in writing; provided, however, that Benedek may in its sole
discretion, upon written notice to WGRC, delay the Closing until the earlier of
(x) five (5) business days after the
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FCC Consent becomes a Final Order or (y) the last day upon which the purchaser
under the Chronicle Agreement is obligated to close thereunder. Benedek shall
give at least five business days written notice to WGRC of the actual
rescheduled Closing Date. The Closing shall take place at the offices of Shack &
Siegel, P.C., 530 Fifth Avenue, New York, New York 10036, or at such other place
as may be agreed to by WGRC and Benedek. The date of the Closing is hereinafter
referred to as the "Closing Date." For accounting and tax purposes, the
transactions contemplated by this Agreement shall be effective as of 11:59 p.m.
on the Closing Date. The Closing shall be conducted simultaneously with the
closing under the Chronicle Agreement.
6. GOVERNMENTAL CONSENTS.
6.1 FCC CONSENT. The assignment of the Station Licenses to
WGRC and of the Chronicle Station Licenses to Benedek as contemplated by this
Agreement is subject to prior FCC Consent.
6.1.1 Promptly after the execution of this Agreement,
WGRC and Benedek shall proceed to prepare for filing with the FCC appropriate
applications for consent to the assignment of the Station Licenses to WGRC (the
"FCC Application"), which shall be filed with the FCC as soon as practicable but
in no event later than December 17, 1999. The FCC Application shall include such
information relating to the Station and the Chronicle Stations in order to
effect the timely and simultaneous closing of both this Agreement and the
Chronicle Agreement. WGRC and Benedek shall each pay 50% of all filing fees
payable with respect to all filings required by the FCC in connection with the
transactions contemplated by this Agreement and made pursuant to this Section
6.1.1.
6.1.2 The transfer of the WWLP Assets hereunder is
expressly conditioned upon the grant of the FCC Consent and compliance by the
parties hereto with the conditions (if any) imposed in such consent.
6.1.3 The transfer of the Chronicle Assets is
expressly conditioned upon the grant of the FCC Consent (as defined in the
Chronicle Agreement) and by compliance by the parties thereto with the
conditions (if any) imposed in such consent.
6.2 HART-SCOTT-RODINO. The parties hereto will file as soon as
reasonably practicable (but in any event within 30 days after the date of this
Agreement) with the United States Federal Trade Commission and the Antitrust
Division of the United States Department of Justice notification and report
forms with respect to the exchange and assignment of the Station for the
Chronicle Stations as contemplated hereunder and under the Chronicle Agreement
and the Assignment Agreement pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act"). Such notification and report forms
will comply as to form with all requirements applicable thereto and all of the
data and information reported in such forms shall be true, correct and complete
in all material respects. The parties shall comply as promptly as practicable
with all requests if any for additional information and documentary materials
unless, in the reasonable
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opinion of counsel, such information or documentation, as the case may be, is
not required to be produced. Such additional information and documentation will
comply as to form with all requirements applicable thereto and will be true,
correct and complete in all material respects and shall be promptly delivered.
WGRC shall pay all filing fees payable with respect to all filings required by
the HSR Act in connection with the transfer of the WWLP Assets to WGRC. As
between WGRC and Benedek, Benedek shall pay all filing fees payable with respect
to all filings required by the HSR Act in connection with the transfer of the
Chronicle Assets to Benedek.
6.3 OTHER GOVERNMENTAL CONSENTS. Promptly following the
execution of this Agreement, the parties will proceed to prepare and file with
the appropriate governmental authorities any other requests for approval or
waiver that are required from governmental authorities in connection with the
transactions contemplated hereby, and shall diligently and expeditiously
prosecute, and shall cooperate fully with each other in the prosecution of, such
requests for approval or waiver and all proceedings necessary to secure such
approvals and waivers.
7. REPRESENTATIONS AND WARRANTIES OF BENEDEK. In order to induce WGRC to enter
into this Agreement and to perform its obligations hereunder, Benedek hereby
makes the following representations and warranties to WGRC:
7.1 ORGANIZATION AND STANDING. Each of BBC and BLC is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and each has all requisite power and authority to own,
lease, use and operate its properties and assets at and carry on its business in
the places where such properties and assets are now owned, leased or operated or
where such business is now conducted. Each of BBC and BLC is duly qualified to
do business and is in good standing in Massachusetts.
7.2 POWER AND AUTHORITY. Each of BBC and BLC has all requisite
power and authority to enter into this Agreement, the Assignment Agreement and
the documents and instruments contemplated hereby and thereby and to assume and
perform its obligations hereunder and thereunder. The execution and delivery of
this Agreement, the Assignment Agreement and the documents and instruments
contemplated hereby and thereby and the performance by each of BBC and BLC of
its obligations hereunder and thereunder have been duly and validly authorized
by all necessary action and no further action or approval is required in order
to constitute this Agreement, the Assignment Agreement and the documents and
instruments contemplated hereby and thereby as valid and binding obligations of
each of BBC and BLC, enforceable in accordance with their terms, except as the
enforceability of such agreements, documents and instruments, may be limited by
or subject to, any bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally
and that the remedies of specific performance, injunction, and other forms of
equitable relief are subject to certain principles of equity jurisdiction,
equitable defenses and the discretion of the court before which any proceeding
therefor may be brought.
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7.3 NO CONFLICTS. Except as set forth on Schedule 7.3 annexed
hereto and subject to the receipt of any consent set forth on Schedule 7.8
required for the assignment to WGRC of any contract, lease, agreement or
commitment included within the WWLP Assets, the execution and delivery by each
of BBC and BLC of this Agreement and the documents and instruments contemplated
hereby, the consummation by each of BBC and BLC of the transactions contemplated
hereby and the performance by each of BBC and BLC of their obligations hereunder
and thereunder:
7.3.1 do not and will not conflict with or violate
any provision of the Certificate of Incorporation or Bylaws of either BBC or
BLC;
7.3.2 do not and will not conflict with or result in
any breach of any condition or provisions of, or constitute a default under or
give rise to any right of termination, cancellation or acceleration or (whether
after the giving of notice or lapse of time or both) result in the creation or
imposition of any Lien (other than Permitted Liens), upon any of the WWLP Assets
by reason of the terms of any contract, mortgage, Lien, lease, agreement,
indenture, instrument, judgment or decree to which either BBC or BLC is a party
or which is or purports to be binding upon BBC or BLC or which affects or
purports to affect any of the WWLP Assets; and
7.3.3 subject to the receipt of any governmental
approvals required in connection with the transfer of the WWLP Assets to WGRC,
do not and will not conflict with or result in a violation of or default under
(with or without notice of the lapse of time or both) any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge or other
restriction of any court, administrative agency or commission or other
governmental authority or instrumentality.
7.4 GOVERNMENT APPROVAL. BLC is the holder of the Station
Licenses as set forth on Schedule 7.4 annexed hereto, which constitute all
necessary authorizations from the FCC to enable Benedek to broadcast and
transmit the present television programming. Other than FCC rulemaking
procedures of general applicability, there are no fines, forfeitures, notices of
apparent liability, orders to show cause or any other administrative or judicial
orders outstanding nor any proceedings pending or, to Benedek's knowledge,
threatened, the effect of which would be the revocation, cancellation,
non-renewal, suspension or material adverse modification of the Station Licenses
or any material adverse consequence for the Station. Except as contemplated in
Section 6 hereof, no action, approval, consent, authorization or other action by
or filing with any governmental or quasi-governmental agency, commission, board,
bureau or instrumentality, is necessary or required as to each of BBC and BLC
for the due execution, delivery or performance by each of BBC and BLC of this
Agreement or any document or instrument contemplated hereby.
7.5 VALIDITY. This Agreement constitutes and the other
documents and instruments contemplated hereby will, on the due execution and
delivery thereof, constitute the legal, valid and binding obligations of each of
BBC and BLC, enforceable in accordance with their respective terms, except as
the enforceability of such agreements, documents and instruments, may be limited
by or subject to, any bankruptcy, insolvency, reorganization, moratorium or
other similar
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laws now or hereafter in effect relating to creditors' rights generally.
7.6 FINANCIAL STATEMENTS.
7.6.1 Annexed hereto as Schedule 7.6 are the
following financial statements of Benedek (collectively the "Financial
Statements"): internal unaudited financial statements with respect to the
results of operations of the Station for the fiscal year ended December 31, 1998
and the eleven months ended November 30, 1999 as prepared in accordance with the
Station's ordinary course of business. The Financial Statements are true,
correct and complete in all material respects and except as set forth on
Schedule 7.6, are in accordance with GAAP. The books and records of Benedek
pertaining to the Station fairly, completely and accurately present the
financial position of the Station at the dates specified and the results of
operations for the periods covered.
7.6.2 The Station is not subject to any liability or
obligation, whether direct, indirect, absolute, contingent, accrued, vested or
otherwise, which is not shown or which is in excess of amounts shown or reserved
for in the Financial Statements or reflected in the Schedules to this Agreement,
other than (i) liabilities incurred after November 30, 1999 in the ordinary
course of business and (ii) liabilities and obligations, direct, indirect,
absolute or contingent, not required to be reflected or reserved against in a
balance sheet prepared in accordance with GAAP which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
7.6.3 Since November 30, 1999, Benedek has operated
the Station in the ordinary course of business and there has been no material
(i) transaction relating to the WWLP Assets or the Station outside of the
ordinary course of business, except for those contemplated by this Agreement,
(ii) Lien created or assumed with respect to any material amount of the WWLP
Assets, except for Permitted Liens or Liens which are to be discharged by
Benedek on or prior to the Closing Date or (iii) increase in compensation
payable or to become payable to any employee other than in the ordinary course
of business.
7.7 TAXES.
7.7.1 Benedek has timely filed or has had filed on
its behalf, after giving effect to any applicable extensions, all Tax Returns
required to be filed under applicable law with respect to the WWLP Assets or the
income or operations of the Station, and all such Tax Returns were true,
correct, and complete in all material respects. Benedek has timely paid or has
had paid on its behalf, after giving effect to any applicable extensions, all
Taxes shown due on such Tax Returns.
7.7.2 No taxing authority has asserted any Tax
deficiency that has not been paid or reserved for in accordance with GAAP with
respect to the WWLP Assets or the income and operations of the Station.
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7.7.3 Benedek has not requested any extension of time
within which to file any Tax Return with respect to the WWLP Assets or the
income or operations of the Station, which Tax Return has not yet been filed.
7.7.4 Benedek has not executed any outstanding
waivers or comparable consents regarding the application of the statute of
limitations with respect to any Taxes or Tax Returns with respect to the WWLP
Assets or the income and operations of the Station.
7.7.5 Neither the Station nor any of the WWLP Assets
is (i) "tax-exempt use" property within the meaning of Section 168(h) of the
Code, (ii) required to be treated as owned by another person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as amended
and in effect immediately prior to the enactment of the Tax Reform Act of 1986,
(iii) "tax-exempt bond financed property" within the meaning of Section 168(g)
of the Code, or (iv) "limited use property" (as that term is used in Rev. Proc.
76-30).
7.7.6 Benedek has withheld and paid all Taxes
required to be withheld in connection with any amounts paid or owing to any
employee, creditor, independent contractor or other third party.
7.7.7 Benedek is not a foreign person within the
meaning of Section 1445 of the Code.
7.7.8 For purposes of this Agreement, the term "Tax"
and "Taxes" shall mean all Federal, state, local or foreign taxes, assessments,
duties, levies or similar charges of any kind including, without limitation, all
income, payroll, Medicare, withholding, unemployment insurance, social security,
sales, use, service, service use, leasing, leasing use, excise, franchise, gross
receipts, value added, alternative or add-on minimum, estimated, occupation,
real and personal property, stamp, duty, transfer, workers' compensation,
severance, windfall profits, environmental, or any other tax, charge, fee, levy
or assessment of the same or of a similar nature, including any interest,
penalty, or addition thereto whether disputed or not. The term "Tax Return"
means any return, declaration, report, claim for refund, or information return
or statement relating to Taxes or any amendment thereto, and including any
schedule or attachment thereto.
7.8 CONTRACTS.
7.8.1 Except only those contracts, agreements or
commitments listed and described on Schedule 7.8 annexed hereto (copies of which
have been heretofore delivered to WGRC or, with respect to oral agreements,
written summaries of the terms of which have been heretofore delivered to WGRC),
the WWLP Excluded Contracts and contracts, agreements or commitments entered
into in the ordinary course of business of the Station and (x) involving less
than $50,000 over their term or (y) involving more than $50,000 over their term
but not more than $250,000 in the aggregate for all such contracts, agreements
or commitments or (z) involving sales of advertising time for cash in accordance
with the Station's customary rate practices and with a term
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of less than six (6) months, neither BBC nor BLC is a party to or has any
contract, agreement or commitment of any kind or nature whatsoever, written or
oral, formal or informal, with respect to the business and operation of the
Station. Except as set forth on Schedule 7.8, each of the written contracts and
commitments referred to therein is valid and existing, in full force and effect,
and enforceable in accordance with its terms, except as the enforceability of
such agreements, documents and instruments, may be limited by or subject to, any
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally. No party to any
material contract or commitment is in default in any material respect and no
claim of any material default by any party has been made or is now pending.
7.8.2 The Station is currently affiliated with NBC
pursuant to the network affiliation contract listed on Schedule 7.8. Said
network affiliation contract is in full force and effect and Benedek is not
aware of any state of facts which would permit the termination for cause of such
network affiliation contract prior to the expiration of the term thereof.
7.9 REAL ESTATE.
7.9.1 Schedule 7.9 annexed hereto is a complete and
correct list of all real property or premises owned in whole or in part by
Benedek and used in the business and operation of the Station (other than WWLP
Excluded Assets) ("Owned Real Property") and all real property or premises
leased in whole or in part by Benedek and used in the business and operation of
the Station ("Leased Real Property", and together with Owned Real Property, the
"Real Property"). Except as set forth on Schedule 7.9, there are no lease
amendments or subleases relating to the Leased Real Property. Benedek has not
entered into any oral or written agreement with any lessor of the Leased Real
Property except as set forth on Schedule 7.9. Copies of the leases with respect
to Leased Real Property or, with respect to oral leases, written summaries of
the terms (the "Leases") and the other documents referred to on Schedule 7.9
(other than those that will not survive the Closing) have been heretofore
delivered to WGRC.
7.9.2 Benedek has all required legal and valid
occupancy permits and other licenses or government approvals for each of the
Real Properties used or held for use in connection with the operation of the
Station and such permits, licenses and approvals are in full force and effect,
except for violations which are not material. Benedek has delivered to WGRC
true, complete and correct copies of all certificates of occupancy in its
possession relating to the Owned Real Property.
7.9.3 Benedek has the legal right (without the
consent or other approval of any other party) to possess and quietly enjoy the
premises and properties under each of the Leases. Each Lease is in full force
and effect and constitutes a legal, valid and binding obligation of BBC and
there is not under any Lease any claim of a material default thereunder.
7.9.4 Except for Permitted Liens and as set forth on
Schedule 7.9 annexed hereto, Benedek has good, marketable and insurable title to
the Owned Real Property (other than WWLP Excluded Assets), free and clear of all
Liens and no party has the right to acquire or use such
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Owned Real Property or any improvements, fixtures or equipment located thereon.
Except as set forth on Schedule 7.9 or Schedule 7.10, Benedek has good and
marketable title and owns outright, free and clear of all Liens (other than
Permitted Liens), each improvement, fixture and item of equipment located in or
on each Real Property. Benedek has not received any notice of material
violations from any governmental authority affecting any of the Real Properties
that has not been cured.
7.9.5 None of the Real Properties has been condemned
or otherwise taken by any public authority, no condemnation or taking is, to
Benedek's knowledge, pending, threatened or contemplated.
7.10 PERSONAL PROPERTY. Schedule 7.10 annexed hereto is a true
and complete list of (i) all tangible personal property owned by Benedek and
used in connection with the business and operation of the Station having a book
value at the date hereof in excess of $25,000 per item (other than items of
personal property having a value in excess of $25,000 but not in excess of
$100,000 in the aggregate) and (ii) all personal property owned by a third party
which is leased or otherwise used by Benedek in connection with the business and
operation of the Station, including, without limitation, leases or other
agreements relating to the use or operation of any machinery, equipment, motor
vehicles, office furniture or fixtures owned by any third party (copies of which
leases or other agreements have been heretofore delivered to WGRC) but excluding
leases not required to be set forth on Schedule 7.8. Each such personal property
lease is in full force and effect and constitutes a legal, valid and binding
obligation of Benedek and there is not under any personal property lease any
material default or any claim of a material default thereunder. Except for
Permitted Liens and as set forth on Schedule 7.10, all personal property
purported to be owned by Benedek is owned by it, free and clear of all Liens. As
of the date hereof, the fixed assets and equipment owned, leased or used by the
Station are in all material respects in good condition and working order, normal
wear and tear excepted, and adequate in all material respects in quality and
quantity for the current operation of the Station.
7.11 INTELLECTUAL PROPERTY. Schedule 7.11 annexed hereto is a
complete and correct list of all material Intellectual Property owned by Benedek
as of the date hereof, to the extent such Intellectual Property is primarily
used or held for use in connection with the operation of the Station. A true and
complete copy of all material documentation relating to each item of
Intellectual Property set forth in Schedule 7.11 hereto has been made available
to WGRC and its agents and representatives. Benedek owns or has a valid right to
use all Proprietary Rights used or held for use by Benedek primarily in
connection with the operation of the Station as currently conducted by Benedek,
without infringing upon the rights of any other Person, except as would not,
individually or in the aggregate, reasonably be expected, as of the date hereof,
to have a Material Adverse Effect. To the knowledge of Benedek, no other Person
is infringing upon the rights of Benedek in or to any of the Intellectual
Property set forth in Schedule 7.11 hereto.
7.12 INSURANCE. Schedule 7.12 annexed hereto is a complete and
correct list, and brief description (including name of insurer, agent, type of
coverage, policy number, amount of
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coverage, expiration date and any pending claims thereunder) of all insurance
policies, including, without limitation, liability, burglary, theft, fidelity,
errors and omissions, life, fire, product liability, workers' compensation,
health and other forms of insurance of any kind held by Benedek in connection
with the business and operation of the Station; each such policy is in full
force and effect; except as set forth on Schedule 7.12 hereto, BBC or BLC is the
sole beneficiary of each such policy; no such policy, or the future proceeds
thereof, has been assigned to any other Person; to Benedek's knowledge, there is
no act or fact or failure to act which has or might cause any such policy to be
cancelled or terminated; and each such policy is adequate for the business and
operation of the Station. No notice of cancellation or non-renewal with respect
to, or disallowance of any material claim under, any insurance policies or
binders of insurance which relate to the WWLP Assets or the Station has been
received by either BBC or BLC. All of the insurance policies of the Station with
respect to libel shall be in full force and effect and enforceable by WGRC
following the consummation of the transactions contemplated by this Agreement in
respect of all reported or unreported libel claims arising out of occurrences
prior to the consummation of this Agreement at the Station.
7.13 LITIGATION. Except as set forth on Schedule 7.13 annexed
hereto, no action, suit, claim, investigation, proceeding or controversy,
whether legal or administrative or in mediation or arbitration, is pending or,
to Benedek's knowledge, threatened, at law or in equity or admiralty, before or
by any court or Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, which could reasonably be
expected, individually or in the aggregate, as of the date hereof, to have a
Material Adverse Effect against or seeking to restrain, prohibit, invalidate,
set aside, rescind, prevent or make unlawful this Agreement or the carrying out
of this Agreement or the transactions contemplated hereby. Benedek is not
operating under or subject to, or in default in respect of, any judgment, order,
writ, injunction or decree of any court or any Federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality.
7.14 COMPLIANCE WITH LAW. Each of BBC and BLC has all material
permits, licenses, orders and approvals of all Federal, state or local
governmental regulatory bodies required for it to conduct the business and
operation of the Station as currently conducted. No action, suit, claim,
investigation, proceeding or controversy, whether legal or administrative or in
mediation or arbitration, is pending or, to Benedek's knowledge, threatened, at
law or in equity or admiralty, before or by any court or Federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality alleging a violation of any material permits, licenses, orders
or approvals of any Federal, state or local governmental regulatory body. All
such permits, licenses, orders and approvals are in full force and effect in all
material respects and no suspension or cancellation of any of them is pending or
threatened. Each of BBC and BLC is in compliance with each law, rule, ordinance,
regulation, order and decree applicable to the business and operation of the
Station, including, without limitation, laws, rules and regulations respecting
occupational safety and employment practices, except where the failure to so
comply could not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect.
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7.15 LABOR. Benedek is not a party to any representation or
labor contract with respect to any employees at the Station. Benedek has not
received any written notice from any labor union or group of employees that such
union or group represents or believes or claims it represents or intends to
represent any of the employees of Benedek; to Benedek's knowledge, no strike or
work interruption by the Station's employees is planned, under consideration,
threatened or imminent; and Benedek has not made any loan or given anything of
value, directly or indirectly, to any officer, official, agent or representative
of any labor union or group of employees other than salaries and ordinary course
compensation. Except as set forth on Schedule 7.15 annexed hereto, (i) Benedek
is not delinquent in any material respect in payments to any of its employees
for any wages, salaries, commissions, bonuses or other direct compensation for
any services performed by them for the Station to the date hereof or amounts
required to be reimbursed to such employees; (ii) in the event of termination of
the employment of any said employees other than termination of any employee who
is a party to an employment agreement with Benedek listed on Schedule 7.16,
neither Benedek nor WGRC will by reason of anything done prior to the Closing be
liable to any of said employees for so-called "severance pay," "pay in lieu of
notice" or any other payments; (iii) Benedek is in compliance in all material
respects with all Federal, state and local laws and regulations respecting
labor, employment and employment practices, terms and conditions of employment
and wages and hours; and (iv) there is no unfair labor practice complaint
against Benedek pending before the National Labor Relations Board or any
comparable state or local agency.
7.16 EMPLOYEES. Schedule 7.16 annexed hereto is a complete and
correct list as of December 6, 1999, of the names and annual salary, bonus,
commission and perquisite arrangements, written or unwritten, for each current
employee of the Station and of the accrued vacation and sick time for such
employee. Benedek does not have any contract for the future employment of any
employee except as may be listed on Schedule 7.16.
7.17 EMPLOYEE BENEFIT PLANS. Schedule 7.17 annexed hereto is a
complete and correct list of all employment, bonus, incentive compensation,
deferred compensation, pension, profit sharing, retirement, stock purchase,
stock option, stock ownership, stock appreciation rights, phantom stock, equity
(or equity-based), leave of absence, layoff, vacation, day or dependent care,
legal services, cafeteria, life, health, medical, accident, disability,
workmen's compensation or other insurance, severance, separation, termination,
change of control or other benefit plan, agreement (including any collective
bargaining agreement), practice, policy or arrangement, whether written or oral,
and whether or not subject to ERISA (including, without limitation, any
"employee benefit plan" within the meaning of Section 3(3) of ERISA) ("Employee
Plans") sponsored, maintained or contributed to by Benedek or any ERISA
Affiliate of Benedek in connection with the business and operation of the
Station. True and complete copies of each Employee Plan have been heretofore
made available to WGRC. All Employee Plans, related trust instruments or annuity
contracts (or any other funding instruments) are legal, valid and binding and
are in full force and effect, and each Employee Plan intended to be qualified
under Section 401(a) of the Code is so qualified and has been so qualified at
all times since its inception. All Employee Plans have been maintained, in all
material respects, in accordance with the requirements of the Code and ERISA, or
any other applicable statute, regulation or rule. There are no pending claims
against any Employee Plan (other
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than routine claims for benefits in accordance with its terms) nor, to the
knowledge of Benedek, has any claim been threatened in writing by any
participant thereof or beneficiary thereunder.
7.17.1 No Employee Plan is covered by Title IV of
ERISA, Section 302 of ERISA or Section 412 of the Code.
7.17.2 With respect to all Employee Plans that are
defined contribution plans, Benedek and any ERISA Affiliate have made all
contributions due thereunder for plan years prior to the date hereof.
7.17.3 Neither Benedek nor any ERISA Affiliate or any
plan fiduciary of any Employee Plan is or has engaged in any transaction in
violation of Section 406(a) or 406(b) of ERISA for which no exemption exists
under ERISA or under applicable sections of the Code. Neither Benedek nor any
ERISA Affiliate, or the administering committee or trustees of any Employee Plan
has received (i) notice from the IRS or the Department of Labor of the
occurrence of a prohibited transaction within the meaning of Section 406 of
ERISA; or (ii) notice of any breach of loyalty, prudence or diversification
within the meaning of Section 404 of ERISA.
7.17.4 No Employee Plan is a "multiemployer plan"
within the meaning of Section 4001(a)(3) of ERISA.
7.17.5 All Employee Plans are in material compliance
with all applicable reporting, disclosure, filing and other administrative
requirements pertaining to employee benefit plans set forth in the Code and
ERISA and rules and regulation promulgated under either, including but not
limited to those set forth in Sections 6057, 6058 and 6059 of the Code and
applicable rules and regulations thereunder, and in Sections 101, 102, 103, 104,
105, and 107 of ERISA.
7.17.6 Benedek and any ERISA Affiliate at all times
have been in full compliance with all provisions of the Title X of the
Consolidation Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"),
and with the provisions of Part 6 of Title I of ERISA.
7.17.7 During the twelve-consecutive month period
prior to the date of this Agreement, no steps have been taken to terminate any
Employee Plan, and no contribution failure has occurred with respect to any
Employee Plan sufficient to give rise to a lien under Section 302(f) of ERISA.
No condition exists or event or transaction has occurred with respect to an
Employee Plan which might result in the incurrence of any material liability,
fine or penalty by any of BBC, BLC or any ERISA Affiliate of either of them.
None of BBC, BLC or any ERISA Affiliate of either of them has any contingent
liability with respect to any post-retirement benefit under any welfare plan, as
such term is defined in Section 3(1) of ERISA, other than liability for
continuation coverage described in Part 6 of Title I of ERISA.
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7.17.8 The transactions contemplated by this
Agreement will not result in any payment or series of payments by Benedek to any
Person of a parachute payment within the meaning of Section 280G of the Code.
7.18 ENVIRONMENTAL MATTERS.
7.18.1 Except as provided below in this Section
7.18.1, Benedek makes no representation or warranty, express or implied, with
respect to: (a) the existence or presence on, at, under or about the real
property used in the business and operation of the Station (the "Premises") of
any environmental hazards, conditions, defects or hazardous materials, including
but not limited to any flammables, explosives, radioactive materials, asbestos,
asbestos containing material, PCBs, hazardous waste, any petroleum, petroleum
product derivative, compound or mixture, and without limitation, those
substances defined as "hazardous substances" or "hazardous wastes" (collectively
referred to as "Hazardous Substances") under any Environmental Laws, as defined
below); (b) the Premises' compliance with the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980 and Superfund Amendments and
Preauthorization Act of 1986, the Hazardous Materials Transportation Act, the
Resource Conservation and Recovery Act of 1976, the Water Pollution Control Act,
the Clean Air Act, all regulations promulgated under all such Acts, as well as
any other Federal, state or local law, ordinance or regulation pertaining to
health, industrial hygiene or the environment and/or applicable to the
existence, removal, generation, transportation, discharge, process, storage or
treatment of Hazardous Substances (collectively referred to as "Environmental
Laws"). Benedek represents that: (i) during the period that Benedek has owned or
leased the Premises, Benedek has not caused or knowingly permitted (nor, at any
time prior to the Closing, will Benedek cause or consent to) any Hazardous
Substances to be deposited in or on the Premises in violation of any
Environmental Laws; (ii) Benedek has caused the Station to be operated in
material compliance with all Environmental Laws; (iii) all environmental
permits, certificates, licenses, approvals, registrations and authorizations
required for operating the Station are in full force and effect and Benedek is
in compliance in all material respects with the terms of such environmental
permits; (iv) there are no judicial or administrative actions pending or, to the
knowledge of Benedek, threatened against Benedek or the Station alleging the
violation of or seeking to impose liability pursuant to any Environmental Laws;
and (v) except as set forth in the Environmental Reports, Benedek has no
knowledge of any environmental contamination at the Premises. Benedek has
delivered to WGRC a complete copy of all environmental assessment reports with
regard to the Premises (or any portion thereof) in Benedek's possession and
which are listed in Schedule 7.18.1 annexed hereto (the "Environmental
Reports"). To the knowledge of Benedek, except as set forth in the Environmental
Reports, there is not now nor during the period of Benedek's use or ownership of
the Premises, has there been, on, in or under any of the Premises (i) any
underground storage tanks, above-ground storage tanks, dikes or impoundments
containing Hazardous Substances, (ii) any asbestos-containing materials, or
(iii) any polychlorinated biphenyls, and none of the items listed in (i), (ii)
or (iii) above are used, or have been used on the Premises during Benedek's use
or ownership thereof in any manner that violates any Environmental Law. To the
knowledge of Benedek, the transactions contemplated by this Agreement do not
trigger any property transfer requirements of any Environmental Law.
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7.18.2 By negotiation and execution of this
Agreement, the parties have expressly allocated certain environmental risks,
liabilities and expenses whether historical, current or prospective from Benedek
to WGRC. In this regard, Benedek shall have no liability in the future (except
with respect to breach of Benedek's representations in Section 7.18.1) to WGRC
or to any person claiming by, through or under WGRC with respect to (i) any
past, present or future claim, cause of action, proceeding or otherwise, whether
known or unknown, relating to or arising out of any past, present or future
environmental condition at, under or about the Premises, (ii) the presence of
Hazardous Substances, (iii) a violation of any Environmental Law relating to the
Premises, and (iv) any losses, damages, penalties, costs (foreseen or
unforeseen, known or unknown), counsel, engineering and other professional or
expert fees with respect to the foregoing (the foregoing clauses (i), (ii),
(iii), and (iv) are collectively referred to as "Environmental Claims"). Except
with respect to breach of Benedek's representations in Section 7.18.1: (i) WGRC
hereby unconditionally releases and discharges Benedek from any and all
Environmental Claims, whether sustained by WGRC directly or relating to any
claims by WGRC for indemnification, contribution or otherwise with respect to
Environmental Claims against WGRC by third parties; and (ii) WGRC hereby agrees
to indemnify, defend and hold Benedek harmless from and against all such
Environmental Claims, including any and all Environmental Claims made hereafter
directly against Benedek by third parties claiming by, through or under WGRC.
7.19 CHRONICLE AGREEMENT. The execution, delivery and
performance of the Chronicle Agreement and the documents contemplated thereby,
and the consummation of the transactions contemplated thereby, by BBC have been
duly and validly authorized by all necessary corporate action of BBC and no
further action or approval, corporate or otherwise, is required in order to
constitute the Chronicle Agreement as a valid and binding obligation of BBC
enforceable in accordance with its terms, except as the enforceability of such
agreement, documents and instruments, may be limited by or subject to, any
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally. As of the date of
this Agreement, the Chronicle Agreement has not been amended or modified and no
rights of BBC thereunder have been waived. BBC has not breached in any material
respect any of its obligations under the Chronicle Agreement and has received no
claim or assertion of breach from Chronicle with respect to the Chronicle
Agreement. BBC has provided WGRC a correct and complete copy of the Chronicle
Agreement, including all exhibits and schedules thereto.
7.20 ENTIRE BUSINESS. The WWLP Assets constitute all of the
assets, properties and rights, together with the services of the employees of
the Station, necessary to conduct the business of the Station in all material
respects as currently conducted. On the Closing Date, the broadcasting facility
located at One Broadcast Center (formerly known as 86-88 Chicopee Street),
Chicopee, Massachusetts, shall be fully operational in accordance with Benedek's
normal practices and standard operating procedures for all of its stations, and
shall contain all equipment customarily located at a television broadcasting
facility including, without limitation, replacements of like or better quality
for all items listed on Schedule 2.2.11.
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7.21 TRANSACTIONS WITH AFFILIATES. No Affiliate of Benedek is
a party, directly or indirectly, to any contract, lease, arrangement or
transaction which is material to the business or operations of the Station,
whether for the purchase, lease or sale of property, for the rendition of
services or otherwise.
8. REPRESENTATIONS AND WARRANTIES OF WGRC. In order to induce Benedek to enter
into this Agreement and to perform its obligations hereunder, WGRC hereby makes
the following representations and warranties to Benedek:
8.1 ORGANIZATION AND STANDING. WGRC is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite power and authority, to own, lease, use and
operate its properties and assets at and carry on its business in the places
where such properties and assets are now owned, leased or operated or where such
business is now being conducted.
8.2 POWER AND AUTHORITY. WGRC has all requisite power and
authority to enter into this Agreement, the Assignment Agreement and the
documents and instruments contemplated hereby and thereby and to assume and
perform its obligations hereunder and thereunder. The execution and delivery of
this Agreement, the Assignment Agreement and the documents and instruments
contemplated hereby and thereby and the performance by WGRC of its obligations
hereunder and thereunder have been duly and validly authorized by all necessary
action and no further action or approval is required in order to constitute this
Agreement, the Assignment Agreement and the documents and instruments
contemplated hereby and thereby as valid and binding obligations of WGRC,
enforceable in accordance with their terms, except as the enforceability of such
agreements, documents and instruments, may be limited by or subject to, any
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and that the
remedies of specific performance, injunction, and other forms of equitable
relief are subject to certain principles of equity jurisdiction, equitable
defenses and the discretion of the court before which any proceeding therefor
may be brought.
8.3 NO CONFLICTS. The execution and delivery by WGRC of this
Agreement and the documents and instruments contemplated hereby, the
consummation by WGRC of the transactions contemplated hereby and the performance
by WGRC of its obligations hereunder and thereunder:
8.3.1 do not and will not conflict with or violate
any provision of the Certificate of Incorporation or Bylaws of WGRC;
8.3.2 do not and will not conflict with or violate
any agreements, contracts or instruments to which WGRC is a party; and
8.3.3 subject to the receipt of any governmental
approvals required in connection with the transfer of the WWLP Assets to WGRC,
do not and will not conflict with or
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result in a violation of or default under (with or without notice of the lapse
of time or both) any statute, regulation, rule, judgment, order, decree,
stipulation, injunction, charge or other restriction of any court,
administrative agency or commission or other governmental authority or
instrumentality.
8.4 GOVERNMENT APPROVAL. WGRC is legally and financially
qualified under the Communications Act to enter into this Agreement and the
Assignment Agreement, and to consummate the transactions contemplated hereby and
thereby. In connection with the transactions contemplated by the Agreement, it
is not necessary for WGRC or any Affiliate of WGRC (or any Person in which WGRC
or any Affiliate of WGRC has an attributable interest under the Communications
Act) to seek or obtain any waiver from the FCC, dispose of any interest in any
media or communications property or interest (including, without limitation, the
Station), terminate any venture or arrangement, or effectuate any changes or
restructuring of its ownership, including, without limitation, the withdrawal or
removal of officers or directors or the conversion or repurchase of equity
securities of WGRC or any Affiliate of WGRC or any Person owned by WGRC or any
Affiliate of WGRC (or any Person in which WGRC or any Affiliate of WGRC has any
attributable interest under the Communications Act). WGRC is able to certify on
an FCC Form 314 that it is financially qualified. Additionally, except as
contemplated in Section 6 hereof, no action, approval, consent or authorization
or other action, including, but not limited to, any action, approval, consent or
authorization or other action by or filing with any governmental or
quasi-governmental agency, commission, board, bureau or instrumentality, is
necessary or required as to WGRC for the due execution, delivery or performance
by WGRC of this Agreement or any document or instrument contemplated hereby.
8.5 VALIDITY. This Agreement constitutes and the other
documents and instruments contemplated hereby will, on the due execution and
delivery thereof, constitute the legal, valid and binding obligations of WGRC,
enforceable in accordance with their respective terms, except as the
enforceability of such agreements, documents and instruments, may be limited by
or subject to, any bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally.
8.6 LITIGATION. No action, suit, claim, investigation,
proceeding or controversy, whether legal or administrative or in mediation or
arbitration, is pending or, to WGRC's knowledge, threatened, at law or in equity
or admiralty, before or by any court or Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
which, if adversely determined, would effect WGRC's ability to carry out this
Agreement or the transactions contemplated hereby.
8.7 INDEPENDENT INVESTIGATION. WGRC has conducted an
independent investigation of the Station and its business operations, assets,
liabilities, results of operations, financial condition and prospects in making
its determination as to the propriety of the transactions contemplated by this
Agreement and in entering into this Agreement and the documents and instruments
required hereby, has relied solely on the results of said investigation and on
the
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representations and warranties of Benedek expressly contained in this Agreement
and the instruments, certificates or schedules furnished pursuant hereto.
9. COVENANTS OF BENEDEK.
Each of BBC and BLC covenants as follows:
9.1 BOOKS AND RECORDS. Between the date hereof and the Closing
Date, Benedek shall give WGRC and its authorized representatives reasonable
access, during regular business hours, to any and all of its premises,
properties, contracts, books and records relating to the business and operation
of the Station and will cause its employees to furnish to WGRC and its
authorized representatives any and all data and information pertaining to the
business and operation of the Station as WGRC or its authorized representatives
shall from time to time reasonably request.
9.2 INTERIM OPERATIONS. From the date hereof until the Closing
Date, Benedek covenants and agrees that the business of the Station shall be
conducted only in the ordinary course of business consistent with past
practices, and Benedek shall use its reasonable best efforts to (i) preserve
intact the business organization of the Station, (ii) keep available the
services of the present employees and consultants of the Station and (iii)
preserve the present relationships of the Station with customers, suppliers and
other persons with which the Station has significant business relationships.
Without limiting the generality of the foregoing, except as otherwise consented
to or approved in writing by WGRC or as required by this Agreement, Benedek
shall not:
9.2.1 sell, assign, lease, transfer or otherwise
dispose of any of the WWLP Assets except in the ordinary course of business
consistent with past practices of the Station, provided, that in no event shall
Benedek dispose of WWLP Assets with a fair market value of more than $25,000 in
the aggregate;
9.2.2 mortgage, pledge or grant any Lien (other than
Permitted Liens), charge or other encumbrance on any of the WWLP Assets;
9.2.3 cancel or waive any rights of material value
with respect to the WWLP Assets;
9.2.4 incur any obligation or liability with respect
to the Station (absolute or contingent, liquidated or unliquidated, choate or
inchoate), except current obligations and liabilities (other than capitalized
lease obligations) incurred in the ordinary course of business consistent with
past practices of the Station;
9.2.5 except as specifically permitted under this
Section 9.2, (i) enter into any programming agreement or (ii) enter into any
lease, contract, license or other agreement, or make any amendment of or
terminate any lease, contract, license or other agreement to which Benedek is a
party regarding the business and operation of the Station (other than WWLP
Excluded
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Contracts); provided, however, that Benedek may enter into (a) one or more
programing agreements which do not involve the payment of cash and have a term
of not more than one (1) year and (b) leases (other than leases for real
property as lessor or lessee), contracts, licenses or other agreements, which
provide for payments of less than $25,000 in the aggregate or have a term of
less than one (1) year;
9.2.6 enter into any contract or commitment relating
to sales of advertising time for the Station except sales of advertising time on
the basis of the Station's customary rate practices and otherwise in the
ordinary course of business or contract or agree to provide any advertising or
broadcast time at substantially less than customary rate practices of the
Station; provided, however, that (i) no such contracts or commitments for
advertising time for cash may have a term of greater than six (6) months and
(ii) no trade-out agreement entered into after the date hereof with respect to
the Station shall obligate the Station to provide commercial time with a value
in any individual case in excess of $10,000; provided, however, trade-out
agreements may be entered into with a value in excess of $10,000 in any
individual case so long as all such trade-out agreements in excess of $10,000 do
not obligate the Station to provide commercial time with an aggregate value in
excess of $50,000.
9.2.7 effect any change in its accounting practices,
procedures or methods of the Station, including, without limitation, the
Station's accrual policy with respect to employee vacation and sick time;
9.2.8 hire any employee of the Station other than in
the ordinary course of business (provided no department heads will be hired
without WGRC's prior approval, such approval not to be unreasonably withheld),
or increase the compensation payable to any of the Station's employees or become
obligated to increase any such compensation other than in the ordinary course of
business consistent with past practices of the Station; provided, that no such
increase in compensation shall be greater than 3.5% or such other amount as WGRC
may approve, such approval not to be unreasonably withheld;
9.2.9 with respect to employees of the Station, enter
into or become subject to or amend or modify (i) any labor or union contract;
(ii) any employment or professional service contract not terminable at will;
(iii) any bonus, pension, insurance, profit sharing, incentive, deferred
compensation, severance pay, retirement, hospitalization, employee benefit, or
other similar plan; or (iv) pay or arrange to pay any bonus payment to any
employee, except in the case of this clause (iv) in the ordinary course of
business consistent with past practices of the Station;
9.2.10 enter into any transaction with any Affiliate
of Benedek regarding the operation of the Station including, without limitation,
any renewal, extension, modification, waiver, amendment or other change in, any
existing contract or agreement to which an Affiliate of Benedek is a party or
any other transaction regarding the operation of the Station involving an
Affiliate of Benedek which will have continued effectiveness after the Closing
Date;
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9.2.11 unless WGRC shall consent in writing, which
consent shall not be unreasonably withheld or delayed, enter into any
commitments to make capital expenditures payable after the Closing in an
aggregate amount exceeding an average of $10,000 per quarter, other than in the
ordinary course and as provided in capital expenditures budgeted for the Station
as previously disclosed to WGRC in writing; provided, however, Benedek shall not
enter into any commitment to make capital expenditures that unreasonably delays
such expenditures until after the Closing and is inconsistent with past
practice; provided further, Benedek shall not enter into any capital leases that
include commitments to make payments after the Closing in excess of $25,000 in
any individual case or $125,000 in the aggregate, unless WGRC shall consent in
writing, which consent shall not be unreasonably withheld or delayed; or
9.2.12 enter into any transaction other than in the
ordinary course of business and consistent with past practices of the Station.
9.3 DISCHARGE OF LIENS. On or prior to the Closing Date,
Benedek will cause all Liens with respect to the WWLP Assets (other than
Permitted Liens) to be discharged.
9.4 LICENSES. Benedek will take all reasonable actions to
preclude the suspension, revocation, or adverse modification of the Station
Licenses and any other material governmental licenses, permits and other
authorizations listed on Schedule 7.4. Benedek will not take any action, by
commission or omission, which would cause the FCC or any other governmental
authority to institute proceedings for the suspension, revocation or adverse
modification of any of said licenses, permits and authorizations, or fail to
prosecute with due diligence any pending application to any governmental
authority, or take any action within its control which would result in the
Station being in non-compliance with the requirements of the Communications Act
or the rules and regulations of the FCC material to the transactions
contemplated by this Agreement.
9.5 MAINTENANCE OF INSURANCE. Benedek will maintain in full
force and effect all insurance policies listed on Schedule 7.12, up to and
including the Closing Date.
9.6 COMPLIANCE. Benedek shall use its reasonable best efforts
to take or cause to be taken all action and do or cause to be done all things
necessary, proper or advisable to consummate the transactions contemplated by
this Agreement, including, without limitation, to obtain all consents, approvals
and authorizations of third parties and to make all filings with and give all
notices to third parties which may be necessary or required in order to
effectuate the transactions contemplated hereby and Benedek shall not
intentionally take or omit to take any action that will cause any governmental
authority to deny, delay or fail to approve any consent, approval or
authorization or cause any governmental consent, approval or authorization not
to be granted. Without limiting the generality of the foregoing, Benedek hereby
agrees to provide promptly to governmental authorities with regulatory
jurisdiction over enforcement of any applicable antitrust laws all information
and documents requested by any such governmental authorities or necessary,
proper or advisable to permit consummation of the transactions contemplated
hereby. Benedek shall thereafter use its commercially reasonable best efforts to
complete as soon as practicable its
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substantial compliance with any requests for additional information or
documentary material that may be made under the HSR Act. Benedek hereby further
agrees to use its commercially reasonable best efforts to (a) obtain any
governmental clearances required for consummation of the transactions
contemplated hereby, (b) respond to any governmental requests for information,
(c) contest and resist any action, including any legislative, administrative or
judicial action, and have vacated, lifted, reversed or overturned, any
governmental order (whether temporary, preliminary or permanent) that restricts,
prevents or prohibits the consummation of the transactions contemplated hereby,
including, without limitation, by using all legal efforts to vigorously pursue
all available avenues of administrative and judicial appeal and all available
legislative action, and (d) in the event that any permanent or preliminary
injunction or other order is entered or becomes reasonably foreseeable to be
entered in any proceeding that would make consummation of the transactions
contemplated hereby in accordance with the terms of this Agreement unlawful or
that would prohibit, prevent, delay or otherwise restrain the consummation of
the transactions contemplated hereby, to cause the relevant governmental
authorities to vacate, modify or suspend such injunction or order so as to
permit the consummation of the transactions contemplated hereby.
9.7 COMPLIANCE WITH LAWS. Benedek will comply in all material
respects with all rules and regulations of the FCC pertaining to the operation
of the Station, and with all other applicable laws, rules, ordinances and
regulations pertaining to the operation of the Station. Upon receipt of notice
of violation of any of such laws, rules, ordinances and regulations, Benedek
shall use its reasonable best efforts to contest in good faith or to cure such
violation prior to the Closing Date. Benedek will file with the FCC, when due,
all ownership reports, renewal applications, financial reports and other
documents required to be filed between the date of this Agreement and the
Closing Date, and all such reports, applications and documents will be true and
correct to the best of Benedek's knowledge and will comply in all material
respects with the Communications Act and the rules and regulations of the FCC.
9.8 PAYMENT OF TAXES. Benedek shall be responsible for all
Taxes attributable to the operation or ownership of the Station or the WWLP
Assets for all periods up to and including the Closing Date. Thereafter, WGRC
shall be responsible for all such Taxes. Any Taxes paid by either party
pertaining to the operation of the Station which relate to periods both before
and after the Closing shall be prorated in accordance with Section 4.3.1 hereof.
Benedek shall file all Tax Returns required to be filed by it pertaining to the
operation of the Station up to and including the Closing Date and shall pay all
Taxes, interest and penalties due with respect to such returns. Each party shall
be responsible for all applicable sales and transfer Taxes in accordance with
customary practice in Massachusetts (including Taxes, if any, imposed upon the
transfer of personal property) and filing, recording, registration, stamp,
documentary and other Taxes and fees ("Transfer Taxes") that are payable in
connection with this Agreement, the transactions contemplated by this Agreement
or the documents giving effect to such transactions, which the parties
acknowledge, include the following: Transfer Taxes due upon transfer of the
Owned Real Property, which shall solely be the responsibility of Benedek, and
Transfer Taxes due upon transfer of the Station's vehicles, which shall solely
be the responsibility of WGRC.
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9.9 FINANCIAL STATEMENTS. Benedek shall provide WGRC with the
following financial information with respect to the Station:
9.9.1 as soon as practicable (but in no event later
than 10 business days after the end of each month), an unaudited statement of
income and expense for each month after the date hereof and before the Closing
Date;
9.9.2 on a biweekly basis, pacing reports for the
ensuing three (3) month period; and
9.9.3 such other financial information with respect
to the Station as WGRC may from time to time reasonably request.
9.10 ACTION. Benedek shall not knowingly take or cause to be
taken, or fail to take or cause to be taken, any action that would cause the
conditions to the obligations of Benedek or WGRC to consummate the transactions
contemplated hereby to fail to be satisfied or fulfilled at or prior to the
Closing, including, without limitation, by taking or causing to be taken, or
failing to take or cause to be taken, any action that would cause any of the
representations and warranties made by Benedek in Section 7 hereof to fail to be
true and correct as of the Closing in all material respects. Benedek shall take,
or cause to be taken, all commercially reasonable actions within its power to
cause to be satisfied or fulfilled, at or prior to the Closing, the conditions
precedent to the obligations of WGRC to consummate the transactions contemplated
hereby as set forth in Section 10.9 hereof.
9.11 FURTHER ASSURANCES. Benedek shall, at any time, and from
time to time, after the Closing Date, but at no cost to Benedek (other than the
salaries or wages of any Benedek employees), use its reasonable best efforts to
(i) take, or cause to be taken, all appropriate action, and to do, all things
necessary, proper or advisable to consummate the transactions contemplated by
this Agreement and the Assignment Agreement, including, without limitation,
executing and delivering any additional instruments, certificates or other
documents; (ii) have the present and future officers, directors and employees of
Benedek cooperate with WGRC in furnishing information, evidence, testimony and
other assistance in connection with any Tax Return filing obligations, actions,
proceedings, arrangements or disputes of any nature with respect to matters
relating to all periods up to and including the Closing Date, and (iii) transfer
to WGRC in electronic format accounting data pertaining to the operation of the
Station on or prior to the Closing Date.
9.12 CHRONICLE AGREEMENT. Benedek shall not knowingly take or
cause to be taken, or fail to take or cause to be taken, any action that would
cause the conditions to the obligations of Benedek or Chronicle to consummate
the transactions contemplated under the Chronicle Agreement to fail to be
satisfied or fulfilled at or prior to the Closing, including, without
limitation, by taking or causing to be taken, or failing to take or cause to be
taken, any action that would cause any of the representations and warranties
made by Benedek in the Chronicle Agreement to fail to be true and correct as of
the Closing in all material respects. Benedek shall take, or cause to be taken,
all commercially reasonable actions within its power to cause to be satisfied or
fulfilled,
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at or prior to the Closing the conditions precedent to the obligations of
Chronicle to consummate the transactions contemplated by the Chronicle
Agreement.
10. COVENANTS OF WGRC.
WGRC covenants as follows:
10.1 COMPLIANCE. WGRC shall use its reasonable best efforts to
take or cause to be taken all action and do or cause to be done all things
necessary, proper or advisable to consummate the transactions contemplated by
this Agreement, including, without limitation, to obtain all consents, approvals
and authorizations of third parties and to make all filings with and give all
notices to third parties which may be necessary or required in order to
effectuate the transactions contemplated hereby, and WGRC shall not
intentionally take or omit to take any action that will cause any governmental
authority to deny, delay or fail to approve any consent, approval or
authorization or cause any governmental consent, approval or authorization not
to be granted. Without limiting the generality of the foregoing, WGRC hereby
agrees to provide promptly to governmental authorities with regulatory
jurisdiction over enforcement of any applicable antitrust laws all information
and documents requested by any such governmental authorities or necessary,
proper or advisable to permit consummation of the transactions contemplated
hereby. WGRC shall thereafter use its commercially reasonable best efforts to
complete as soon as practicable its substantial compliance with any requests for
additional information or documentary material that may be made under the HSR
Act. WGRC hereby further agrees to use its commercially reasonable best efforts
to (a) obtain any governmental clearances required for consummation of the
transactions contemplated hereby, which shall specifically include, (i) taking
any and all actions necessary or appropriate to divest any shares of capital
stock of any other Person held by WGRC (or any of its Affiliates), any assets
and properties of WGRC (or any of its Affiliates), or any business conducted by
WGRC (or any of its Affiliates), and (ii) consenting to any restriction or
limitation on the ability of WGRC (or any of its Affiliates) to operate or
exercise control over any of the assets and properties of WGRC (or any of its
Affiliates) or conduct any business of WGRC (or any of its Affiliates), which is
necessary, in the case of any of the foregoing, to obtain such governmental
clearances, (b) respond to any governmental requests for information, (c)
contest and resist any action, including any legislative, administrative or
judicial action, and have vacated, lifted, reversed or overturned, any
governmental order (whether temporary, preliminary or permanent) that restricts,
prevents or prohibits the consummation of the transactions contemplated hereby,
including, without limitation, by using all legal efforts to vigorously pursue
all available avenues of administrative and judicial appeal and all available
legislative action, and (d) in the event that any permanent or preliminary
injunction or other order is entered or becomes reasonably foreseeable to be
entered in any proceeding that would make consummation of the transactions
contemplated hereby in accordance with the terms of this Agreement unlawful or
that would prohibit, prevent, delay or otherwise restrain the consummation of
the transactions contemplated hereby, to cause the relevant governmental
authorities to vacate, modify or suspend such injunction or order so as to
permit the consummation of the transactions contemplated hereby.
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10.2 CONTROL OF THE STATION. Prior to Closing, WGRC shall not,
directly or indirectly, control, supervise, direct, or attempt to control,
supervise or direct, the operations of the Station, such operations, including
complete control and supervision of all the Station's programs, employees, and
policies, shall be the sole responsibility of Benedek until the consummation of
the Closing hereunder.
10.3 FCC COMPLIANCE. Between the date hereof and the Closing
Date, WGRC agrees that it will not take or fail to take any action within its
control which would result in material noncompliance by WGRC with the
requirements of the Communications Act and the rules and regulations of the FCC
material to the transactions contemplated by this Agreement. WGRC will take no
action that WGRC knows, or has reason to know, would disqualify WGRC from being
the assignee of the Station Licenses or the owner or operator of the Station.
10.4 BOOKS AND RECORDS. If the acquisition contemplated herein
is consummated, WGRC covenants and agrees that it shall preserve and keep the
records of Benedek delivered to it hereunder for a period of three (3) years
after the Closing Date and shall make such records available to Benedek or its
authorized representatives as reasonably required by Benedek in connection with
any legal proceedings against or governmental investigation of Benedek or in
connection with any Tax examination of Benedek.
10.5 ACTION. WGRC shall not knowingly take or cause to be
taken, or fail to take or cause to be taken, any action that would cause the
conditions to the obligations of Benedek or WGRC to consummate the transactions
contemplated hereby to fail to be satisfied or fulfilled, at or prior to the
Closing, including, without limitation, by taking or causing to be taken, or
failing to take or cause to be taken, any action that would cause the
representations and warranties made by WGRC in Section 8 hereof to fail to be
true and correct as of the Closing in all material respects. WGRC shall take, or
cause to be taken, all commercially reasonable actions within its power to cause
to be satisfied or fulfilled, at or prior to the Closing, the conditions
precedent to the obligations of Benedek to consummate the transactions
contemplated hereby as set forth in Section 10.10 hereof.
10.6 EMPLOYEES AND EMPLOYEE BENEFIT MATTERS. All employees
whose employment contracts are being assumed hereunder (including any employees
who are temporarily absent from active employment), will be employed under the
same terms and condition as set forth in their assumed employment contracts and
all of the remaining employees of the Station who are actively employed on the
Closing Date shall be offered employment on an "at will" basis with WGRC on such
date, and such persons who accept such offer on such date, together with those
employees whose employment contracts are being assumed, shall be hereafter
referred to as "Transferred Employees". Each such offer of employment shall be
at a salary and on other terms and conditions that are substantially similar in
the aggregate as those provided by Benedek on the Closing Date, it being
understood that no defined benefit plan shall be provided. WGRC shall also offer
employment on an "at will" basis to any employee of the Station who is
temporarily absent from active employment on the Closing Date upon termination
of such temporary absence, provided that such employee is able to perform the
essential functions of the position he or she previously held
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with Benedek prior to such absence, and any such employee shall be treated as a
Transferred Employee from and after his or her date of employment with WGRC.
Subject to applicable laws and the terms of any applicable employment contracts,
WGRC shall have the right, at any time, to dismiss any or all Transferred
Employees at any time, with or without cause, and to change the terms and
conditions of their employment (including compensation and employee benefits
provided to them). For purposes of this paragraph, an individual shall be deemed
temporarily absent from active employment on the Closing Date if such individual
is absent from work for any reason (including disability, illness, injury, leave
of absence or layoff with rights of re-employment) other than by reason of
vacation. WGRC shall provide each Transferred Employee credit for years of
service prior to the Closing with Benedek or any prior owner of the Station for
(A) the purpose of eligibility and vesting under WGRC's health, vacation and
other employee benefit plans (including, without limitation, WGRC 401(k) Plan ),
to the extent credited under Benedek's employee benefit plans, and (B) any and
all pre-existing condition limitations and eligibility waiting periods under
group health plans of WGRC, and shall cause to be credited to any deductible or
out-of-pocket expenses under any health plans of WGRC any deductibles or
out-of-pocket expenses incurred by Transferred Employees and their beneficiaries
and dependents during the portion of the calendar year prior to their
participation in the health plans of WGRC.
10.6.1 Effective at the Closing Date, WGRC shall
assume the severance arrangements set forth in Schedule 7.17 hereto; provided,
however, that WGRC shall have no liability under such severance arrangements
with respect to terminations of employment occurring before the Closing.
Following the Closing, WGRC shall indemnify and hold harmless Benedek with
respect to any and all liability for the termination of employment by WGRC of
any Transferred Employee.
10.6.2 Effective as of the Closing Date, Benedek
shall cause each of the Transferred Employees to have a fully nonforfeitable
right to such employee's account balances, if any, under BBC Profit Sharing and
Retirement Plan (the "Benedek 401(k) Plan") and shall make all matching
contributions allocable to the period ended December 31, 1999 in an amount
consistent with past practice and in respect of the calendar year ending
December 31, 2000 shall, within 60 days after the Closing Date, make a pro rata
matching contribution at the same rate as utilized in 1999 for the portion of
2000 during which Benedek owns the Station. Effective as of the Closing Date,
WGRC shall establish or shall extend coverage to each Transferred Employee under
a defined contribution individual account plan (the "WGRC 401(k) Plan")
qualified pursuant to Sections 401(a) and 401(k) of the Code to the extent such
Transferred Employees has satisfied the requirements for participation therein.
10.6.3 As soon as practicable after the Closing Date,
Benedek shall cause the trustee of the Benedek 401(k) Plan to transfer in the
form of cash (or such other form as may be agreed upon by Benedek and WGRC) the
full account balances of the Transferred Employees in such plan, reduced by any
necessary benefit, distribution or withdrawal payments to or in respect of the
Transferred Employees occurring during the period from the Closing Date to the
date of transfer described herein, to the appropriate trustee as designated by
WGRC under the trust
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agreement forming a part of the WGRC 401(k) Plan. The aggregate account balances
of the Transferred Employees under the Benedek 401(k) Plan transferred by the
trustee of the Benedek 401(k) Plan to the trustee of the WGRC 401(k) Plan shall
be increased (or decreased) by Benedek by the amount of any actual earnings (or
losses) on each account included therein from the Closing Date to the date of
transfer to the WGRC 401(k) Plan and such earnings (or losses) shall be credited
(or debited) to the appropriate accounts. Following the transfer of account
balances to the WGRC 401(k) Plan as described herein, neither Benedek nor the
Benedek 401(k) Plan and the related trust shall have any obligation or liability
with respect to the benefits and entitlements accrued and transferred in respect
of the Transferred Employees under the Benedek 401(k) Plan and WGRC will
indemnify and hold harmless Benedek for and against any such obligation or
liability. WGRC represents and warrants that the WGRC 401(k) Plan is qualified
under Section 401(a) of the Code. WGRC shall reasonably cooperate to effectuate
the foregoing and shall use commercially reasonable efforts to cause its trustee
and other service providers with respect to the WGRC 401(k) Plan to cooperate to
effectuate the foregoing.
10.6.4 Benedek shall cause the administrator of the
Benedek 401(k) Plan, and WGRC shall cause the administrator of the WGRC 401(k)
Plan, to timely make such filings as are required under ERISA, the Code or any
applicable laws with respect to the transfer of account balances, assets or
liabilities described in this Section 10.6, including any required filings on
Form 5310-A.
10.6.5 Prior to the Closing Date, WGRC shall
establish a plan solely for the benefit of the Transferred Employees which shall
be intended to satisfy the requirements of Code Section 125 (the "WGRC Cafeteria
Plan") and which shall assume the assets and liabilities attributable to the
Transferred Employees (and shall provide for the crediting of Transferred
Employees' accounts in such amounts) under the BBC employee benefit plan which
is intended to satisfy the requirements of Code Section 125 (the "Benedek
Cafeteria Plan") as of the Closing Date.
10.7 FURTHER ASSURANCES. WGRC shall, at any time, and from
time to time, after the Closing Date, but at no cost to WGRC (other than the
salaries or wages of any of its employees), use its reasonable best efforts to
(i) take, or cause to be taken, all appropriate action, and to do, all things
necessary, proper or advisable to consummate the transactions contemplated by
this Agreement and the Assignment Agreement, including, without limitation,
executing and delivering any additional instruments, certificates or other
documents; and (ii) have the present and future officers, directors, employees
of WGRC, including the Transferred Employees, cooperate with Benedek in
furnishing information, evidence, testimony and other assistance in connection
with any Tax Return filing obligations, actions, proceedings, arrangements or
disputes of any nature with respect to matters relating to all periods up to and
including the Closing Date.
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10.8 CONDITIONS OF CLOSING.
10.9 OBLIGATION OF WGRC TO CLOSE. The obligation of WGRC to
close hereunder shall be subject to the fulfillment and satisfaction, prior to
or at the Closing, of the following conditions or the written waiver thereof by
WGRC:
10.9.1 REPRESENTATIONS. All representations and
warranties of Benedek in this Agreement which are qualified by materiality shall
be true and correct in all respects when made and shall be true and correct in
all respects on and as of the Closing Date (other than any such representation
or warranty that is expressly made as of a specified date, which shall be true
and correct in all respects as of such specified date only) and all
representations and warranties of Benedek which are unqualified by materiality
shall be true and correct in all material respects when made and shall be true
and correct in all material respects on and as of the Closing Date, and WGRC
shall have received a certificate to that effect dated the Closing Date and
executed by an appropriate officer of each of BBC and BLC.
10.9.2 COVENANTS. Each of the agreements and
covenants of Benedek to be performed under this Agreement at or prior to the
Closing Date shall have been duly performed in all material respects, and WGRC
shall have received a certificate to that effect dated the Closing Date and
executed by an appropriate officer of each of BBC and BLC.
10.9.3 NO INJUNCTION. No injunction or restraining
order shall be in effect to forbid or enjoin the consummation of the
transactions contemplated by this Agreement, no governmental action seeking such
an injunction or restraining order shall be pending or threatened in writing,
and no Federal, state or local statute, rule or regulation shall have been
enacted which prohibits, restricts or delays the consummation hereof.
10.9.4 STATION LICENSES. Benedek shall be the holder
of the Station Licenses and all other material governmental licenses, permits
and other authorizations listed on Schedule 7.4, and there shall not have been
any modification of any of such licenses, permits and other authorizations which
could, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
10.9.5 FCC CONSENT. The FCC shall have granted its
consent to the assignment of the Station Licenses to WGRC.
10.9.6 NBC CONSENT. NBC shall have consented to the
assignment to WGRC of the Affiliation Agreement dated as of December 1, 1995
between Benedek, as successor-in-interest to Brissette TV of Springfield, Inc.,
and NBC.
10.9.7 INSTRUMENTS OF TRANSFER. WGRC shall have
received the deeds, endorsements, assignments, drafts, checks and other
documents of transfer, conveyance and assignment contemplated by Section 2.5.1
valid to transfer all of Benedek's right, title and interest
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in and to the WWLP Assets to WGRC and to vest in WGRC good, marketable and
insurable title to the WWLP Assets, subject only to Permitted Liens.
10.9.8 BOOKS OF ACCOUNT. WGRC shall have received
Benedek's books of account, records, leases, indentures, contracts, agreements,
correspondence and other documents pertaining to the WWLP Assets and the
Station. Unless otherwise requested by WGRC, delivery of the foregoing shall not
be effected by physical delivery at the Closing but by surrendering access to
the Premises containing the foregoing to WGRC.
10.9.9 RESOLUTIONS. WGRC shall have received a
certified copy of resolutions duly adopted by each of BBC and BLC authorizing
and approving the transfer of the WWLP Assets and performance by each of BBC and
BLC of their respective obligations hereunder and the other documents and
instruments to be executed and delivered in connection herewith.
10.9.10 HART-SCOTT-RODINO COMPLIANCE. The parties
shall have filed with the United States Federal Trade Commission and the
Antitrust Division of the United States Department of Justice complete and
accurate notification and report forms with respect to the transactions
contemplated hereby pursuant to the HSR Act. With respect to the HSR Act,
neither such agency shall have instituted or threatened to institute an action
in connection with the transactions contemplated by this Agreement and all
waiting periods required to expire under the HSR Act, including any extension
thereof, shall have expired or been terminated prior to the Closing Date.
10.9.11 ASSUMPTION AGREEMENTS. Benedek shall have
executed and delivered the instruments of assumption contemplated in Section 3.4
hereof.
10.9.12 CHRONICLE AGREEMENT. The transactions
contemplated by the Chronicle Agreement shall have been consummated in
accordance with the terms thereof.
10.9.13 TAX CERTIFICATE. Each of BBC and BLC shall
have furnished to WGRC affidavits of non-foreign status that comply with Section
1445 of the Code and all Tax clearance certificates or similar documents which
may be required by any state taxing authority in order to relieve WGRC of any
withholding obligation.
10.10 OBLIGATION OF BENEDEK TO CLOSE. The obligation of
Benedek to close hereunder shall be subject to the fulfillment and satisfaction,
prior to or at the Closing, of the following conditions or the written waiver
thereof by Benedek:
10.10.1 REPRESENTATIONS. All representations and
warranties of WGRC in this Agreement which are qualified by materiality shall be
true and correct in all respects when made and shall be true and correct in all
respects on and as of the Closing Date (other than any such representation or
warranty that is expressly made as of a specified date, which shall be true and
correct in all respects as of such specified date only) and all representations
and warranties of WGRC
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which are unqualified by materiality shall be true and correct in all material
respects when made and shall be true and correct in all material respects on and
as of the Closing Date and Benedek shall have received a certificate to that
effect dated the Closing Date and executed by an appropriate officer of WGRC.
10.10.2 COVENANTS. Each of the agreements and
covenants of WGRC to be performed under this Agreement at or prior to the
Closing Date shall have been duly performed in all material respects, and
Benedek shall have received a certificate to that effect dated the Closing Date
and executed by an appropriate officer of WGRC.
10.10.3 NO INJUNCTION. No injunction or restraining
order shall be in effect to forbid or enjoin the consummation of the
transactions contemplated by this Agreement, no governmental action seeking such
injunction or restraining order shall be pending or threatened in writing, and
no Federal, state, or local statute, rule or regulation shall have been enacted
which prohibits, restricts or delays the consummation hereof.
10.10.4 FCC CONSENT. The FCC shall have granted its
consent to the assignment of the Chronicle Station Licenses to Benedek.
10.10.5 HART-SCOTT-RODINO. The parties shall have
filed with the United States Federal Trade Commission and the Antitrust Division
of the United States Department of Justice complete and accurate notification
and report forms with respect to the transactions contemplated hereby pursuant
to the HSR Act. With respect to the HSR Act, neither such agency shall have
instituted or threatened to institute an action in connection with the
transactions contemplated by this Agreement and all waiting periods required to
expire under the HSR Act, including any extension thereof, shall have expired or
been terminated prior to the Closing Date.
10.10.6 INSTRUMENTS OF TRANSFER. Benedek shall have
received the deeds, endorsements, assignments, drafts, checks and other
documents of transfer, conveyance and assignment contemplated by Section 2.5.2
valid to transfer the Chronicle Stations to Benedek and to vest in Benedek good,
marketable and insurable title to the Chronicle Assets, subject only to any
Liens contemplated by the Chronicle Agreement not to be discharged at the time
of the closing thereunder.
10.10.7 ASSUMPTION AGREEMENTS. WGRC shall have
executed and delivered the instruments of assumption contemplated by Section 3.3
hereof.
10.10.8 CHRONICLE AGREEMENT. The transactions
contemplated by the Chronicle Agreement shall have been consummated in
accordance with the terms thereof.
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11. REMEDIES FOR BREACH.
11.1 WGRC DECLINES TO CLOSE. If WGRC shall be entitled to
decline to close, and shall decline to close the transactions contemplated by
this Agreement, WGRC shall have no liability to Benedek under or in any way by
reason hereof, and WGRC shall have all such rights and remedies against Benedek
as may be available to it in law or equity or otherwise.
11.2 WGRC ELECTS TO CLOSE. If WGRC elects to close the
transactions contemplated by this Agreement and Benedek wrongfully refuses so to
do, or if Benedek fails, or if a failure by Benedek is threatened, to comply
with any of its covenants and agreements contained in this Agreement, then, in
addition to all other remedies which may be available to it, WGRC shall be
entitled to injunctive and other equitable relief, including, without
limitation, specific performance, and shall be entitled to recover from Benedek
its losses, costs and expenses, including reasonable attorneys' fees incurred by
WGRC in securing such injunctive or equitable relief.
11.3 BENEDEK DECLINES TO CLOSE. If Benedek shall be entitled
to decline to close, and shall decline to close the transactions contemplated by
this Agreement, Benedek shall have no liability to WGRC under or in any way by
reason hereof, and Benedek shall have all such rights and remedies against WGRC
as may be available to it in law or equity or otherwise.
11.4 BENEDEK ELECTS TO CLOSE. If Benedek elects to close the
transactions contemplated by this Agreement and WGRC wrongfully refuses so to
do, or if WGRC fails, or if a failure by WGRC is threatened, to comply with any
of its covenants and agreements contained in this Agreement, then, in addition
to all other remedies which may be available to it, Benedek shall be entitled to
injunctive and other equitable relief, including, without limitation, specific
performance, and shall be entitled to recover from WGRC its losses, costs and
expenses, including reasonable attorneys' fees incurred by Benedek in securing
such injunctive or equitable relief.
11.5 REMEDIES CUMULATIVE. The specific remedies to which any
party may resort under the terms of this Agreement are cumulative and are not
intended to be exclusive of any other remedies or means of redress to which such
party may lawfully be entitled in case of any breach, threatened breach or
failure of observance or performance of any representation, warranty, covenant,
agreement or commitment made hereunder or relating hereto or by reason of any
such representation, warranty, covenant, agreement or commitment being untrue or
incorrect.
12. TERMINATION RIGHTS. This Agreement may be terminated by either WGRC or
Benedek, if not then in material default, upon written notice to the other upon
the occurrence of any of the following:
12.1 If the Chronicle Agreement is terminated for any reason;
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12.2 If the exchange of the WWLP Assets by WGRC pursuant to
this Agreement shall not have been effected within nine (9) months after the
date that the FCC accepts the FCC Application for filing;
12.3 If the other party breaches in any material respect its
representations or warranties herein contained; provided, however, that
termination pursuant to this paragraph shall not be effective unless the
terminating party shall have given to the party in breach at least 30 days
advance notice of its claim of breach so as to afford the other party the
opportunity to cure; or
12.4 If the other party defaults in any material respect in
the observance or in the due and timely performance of any of its covenants
herein contained other than the obligation to close on the Closing Date;
provided, however, that termination pursuant to this paragraph shall not be
effective unless the terminating party shall have given to the party in default
at least 30 days advance notice of its claim of default so as to afford the
other party the opportunity to cure.
12.5 If any of the conditions precedent to the obligations of
the parties set forth in this Agreement cannot be satisfied and such conditions
have not been waived by the respective party.
13. RISK OF LOSS.
13.1 Except to the extent of any loss or damage caused by acts
or omissions of WGRC, its agents, employees, or other persons while acting
pursuant to a contract with WGRC, the risk of loss or damage to the WWLP Assets
shall be upon Benedek at all times up to and including the Closing Date. In the
event of loss or damage except to the extent caused by acts or omissions of
WGRC, its agents, employees, or other persons while acting pursuant to a
contract with WGRC, Benedek shall promptly notify WGRC thereof and shall use
commercially reasonable efforts to repair, replace and restore the lost or
damaged property to its former condition as soon as possible. If such repair,
replacement and restoration of damage not caused by WGRC, its agents, employees,
or other persons while acting pursuant to a contract with WGRC has not been
completed prior to the Closing Date, WGRC may, at its option:
13.1.1 elect to terminate this Agreement, but only if
the failure to repair, replace and restore the lost or damaged property relates
to a material portion of the WWLP Assets and continues for a period in excess of
60 calendar days;
13.1.2 elect to consummate the transactions
contemplated by this Agreement on the Closing Date in which event Benedek shall
pay to WGRC the amount necessary to restore the lost or damaged property to its
former condition and against such obligation shall assign to WGRC all of
Benedek's rights under any applicable insurance policies; or
13.1.3 elect to postpone the Closing Date, with prior
consent of the FCC if necessary, which consent both parties will use
commercially reasonable efforts to obtain, until a date within 15 calendar days
after Benedek gives written notice to WGRC of completion of the
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repair, replacement and restoration of such lost or damaged property. If, after
the expiration of that extension period, the lost or damaged property has not
been adequately repaired, replaced or restored, WGRC may terminate this
Agreement, and the parties shall be released and discharged from any further
obligation hereunder.
13.2 FAILURE OF BROADCAST TRANSMISSION. Benedek shall give
prompt written notice to WGRC if either of the following (a "Specified Event")
shall occur: (a) the regular broadcast transmission of the Station in the normal
and ususal manner is interrupted or discontinued; or (b) the Station is operated
at less than its licensed antenna height above average terrain or at less than
90% of its licensed effective radiated power. If any Specified Event persists
for more than 72 consecutive hours or 120 non-consecutive hours (or, in the
event of force majeure or utility failure affecting generally the market served
by the Station, 96 consecutive hours or 336 non-consecutive hours) during any
period of 30 consecutive calendar days, then WGRC may, at its option: (x)
terminate this Agreement by written notice given to Benedek not more than 10
calendar days after the expiration of such 30 calendar day period, or (y)
proceed in the manner set forth in Section 13.3. In the event of termination of
this Agreement by WGRC pursuant to this Section 13.2, the parties shall be
released and discharged from any further obligation hereunder.
13.3 RESOLUTION OF DISAGREEMENTS. If the parties are unable to
agree upon the extent of any loss or damage, the cost to repair, replace or
restore any lost or damaged property, the adequacy of any repair, replacement,
or restoration of any lost or damaged property, or any other matter arising
under Section 13.2, the disagreement shall be referred to a qualified consulting
communications engineer mutually acceptable to Benedek and WGRC who is a member
of the Association of Federal Communications Consulting Engineers, whose
decision shall be final, binding upon and non-appealable by the parties, and
whose fees and expenses shall be shared equally by Benedek and WGRC.
14. INDEMNIFICATION.
14.1 INDEMNIFICATION OF BENEDEK.
14.1.1 WGRC shall defend and promptly indemnify
Benedek and save and hold it harmless from, against, for and in respect of and
shall pay any and all damages, losses, obligations, liabilities, claims,
encumbrances, deficiencies, costs and expenses, including, without limitation,
reasonable attorneys' fees and other costs and expenses incident to any action,
investigation, claim or proceeding (all hereinafter collectively referred to as
"Losses") suffered, sustained, incurred or required to be paid by Benedek by
reason of (i) the WWLP Assumed Liabilities, (ii) any representation or warranty
of WGRC herein being untrue or incorrect, (iii) the operation of the Station
after the Closing Date or (iv) any breach or failure of observance or
performance of any covenant, agreement or commitment made by WGRC hereunder or
under any document or instrument relating hereto or executed pursuant hereto. In
addition, WGRC shall indemnify Benedek with respect to any Environmental Claims
to the extent provided in Section
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7.18.2; provided such indemnification shall be governed by the procedures set
forth in Sections 14.3 and 14.4.
14.1.2 Notwithstanding anything to the contrary
in this Agreement, WGRC shall be under no obligation to defend, indemnify or
hold harmless Benedek with respect to any claim arising under the Chronicle
Agreement. In lieu thereof, at the Closing, WGRC shall assign all of its rights
and remedies under the Chronicle Agreement to Benedek.
14.2 INDEMNIFICATION OF WGRC.
14.2.1 Benedek shall defend and promptly indemnify
WGRC, and save and hold it harmless from, against, for and in respect of and pay
any and all Losses suffered, sustained, incurred or required to be paid by WGRC
by reason of (i) any and all obligations and liabilities of Benedek with respect
to the WWLP Excluded Assets and the WWLP Excluded Liabilities; (ii) any
representation or warranty contained in Section 7 hereof being untrue or
incorrect; (iii) to the extent not covered by the other clauses of this Section
14.2.1, the operation of the Station on or prior to the Closing Date (other than
the WWLP Assumed Liabilities); (iv) any breach or failure of observance or
performance of any covenant, agreement or commitment made by Benedek hereunder
or under any document or instrument relating hereto or executed pursuant hereto;
(v) any liability or obligation of Benedek for Taxes; (vi) any and all
liabilities and obligations with respect to the Chronicle Assets, the Chronicle
Assumed Liabilities or the Chronicle Agreement; or (vii) the closing of the
transactions contemplated by this Agreement in the absence of a Final Order.
14.2.2 Notwithstanding anything to the contrary in
this Agreement, WGRC shall not be entitled to indemnification under Section
14.2.1:
14.2.2.1 in connection with any Loss to the extent of
any net Tax benefit realized (by reason of a Tax deduction, basis reductions,
shifting of income, credits and/or deductions or otherwise) by WGRC in
connection with such Loss;
14.2.2.2 with respect to any claim for
indemnification hereunder, unless WGRC has given Benedek written notice of such
claim prior to the expiration of the applicable survival period of such
representation, warranty or covenant as specified in Section 14.5 hereof;
14.2.2.3 for any Losses as to which WGRC otherwise
may be entitled to indemnification hereunder pursuant to clauses (ii) or (iii)
of Section 14.2.1 (without giving effect to this Section), until such Losses
exceed $500,000, and then only for such Losses in excess of $500,000 in the
aggregate;
14.2.2.4 for any Losses as a result of Environmental
Claims as provided in Section 7.18.2 (it being understood that WGRC shall be
indemnified pursuant to clause
45
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(ii) of Section 14.2.1 for any Losses relating to the representations and
warranties contained in Section 7.18.1 being untrue or incorrect); and
14.2.2.5 with respect to any claim for
indemnification under clauses (ii) and (iii) of Section 14.2.1, for any Losses
in excess of $18,500,000, all of such Losses in excess of $18,500,000 being the
responsibility of WGRC.
14.2.3 If with respect to a claim of indemnification
that WGRC asserts against Benedek hereunder, WGRC also has an enforceable right
of indemnification against any third party (contractual or otherwise), WGRC
shall use reasonable efforts to pursue such claims or, in the event Benedek pays
or otherwise discharges such claim of WGRC, WGRC shall assign to Benedek without
recourse to WGRC the claims against such third party.
14.3 PROCEDURES FOR INDEMNIFICATION. If a party (an
"Indemnified Party") shall claim to have suffered a Loss for which
indemnification is available under Section 14.1 or 14.2, as the case may be, the
Indemnified Party shall notify the other party (the "Indemnifying Party") in
writing of such claim within the applicable time periods. The Indemnified Party
shall use reasonable efforts to describe in such notice the nature of such
claim, the facts and circumstances that give rise to such claim and the amount
of such claim if reasonably ascertainable at the time such claim is made.
14.4 PROCEDURES FOR THIRD-PARTY CLAIMS.
14.4.1 Any Indemnified Party seeking indemnification
pursuant to this Section 14 in connection with any legal proceeding, action or
claim, instituted by a third party, including any governmental entity (a
"Third-Party Claim"), shall give the Indemnifying Party from whom
indemnification with respect to such claim is sought (i) prompt written notice
of such Third- Party Claim and (ii) copies of all documents and information
relating to any such Third-Party Claim; provided, however, that the failure by
the Indemnified Party to so notify or provide copies to the Indemnifying Party
shall not relieve the Indemnifying Party from any liability to the Indemnified
Party for any liability hereunder except to the extent that such failure shall
have prejudiced the defense of such Third-Party Claim.
14.4.2 The Indemnifying Party shall have the right
and obligation, at its sole expense, to defend against, negotiate, settle or
otherwise deal with any Third-Party Claim with respect to which it is the
Indemnifying Party and to be represented by counsel of its own choice, and the
Indemnified Party will not admit any liability with respect thereto or settle,
compromise, pay or discharge the same without the consent of the Indemnifying
Party, which consent shall not be unreasonably withheld, so long as the
Indemnifying Party is contesting or defending the same with reasonable diligence
and in good faith; provided, however, that the Indemnified Party may participate
in any proceeding with counsel of its choice and at its expense; provided
further, that the Indemnifying Party may not enter into a settlement of any such
Third-Party Claim without the consent of the Indemnified Party, which consent
shall be not unreasonably withheld, unless such
46
<PAGE>
settlement requires no more than a monetary payment for which the Indemnified
Party is fully indemnified by the Indemnifying Party or involves other matters
not binding upon the Indemnified Party; and provided further that, in the event
the Indemnifying Party fails timely to defend against, negotiate, settle or
otherwise deal with such Third-Party Claim as provided above in this Section
14.4.2, then the Indemnified Party shall have the right to defend against,
negotiate, settle or otherwise deal with the Third-Party Claim in such manner as
the Indemnified Party deems appropriate, in its sole discretion, and may recover
subject to the limitations set forth in Section 14.2.2, all other amounts paid
as a result of such Third-Party Claim or compromise or settlement thereof.
14.5 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
The representations, warranties and covenants of Benedek and WGRC contained in
this Agreement, or in any certificate, instrument or other document delivered by
Benedek or WGRC pursuant to this Agreement or in connection with the
transactions contemplated hereby, shall survive the Closing for a period of 18
months; provided, however, that the covenants and agreements contained in this
Article 14 shall continue in full force and effect until fully discharged and
the representations and warranties of Benedek (i) in Section 7.7 shall survive
for the period of the applicable statute of limitations, (ii) in Section 7.18.1
shall survive for a period of two and one-half (2 1/2) years after the Closing,
and (iii) in Section 7.5 and the penultimate sentence of Section 7.10 shall
survive indefinitely; and further provided that, any representation, warranty or
covenant that is the subject of a claim which is asserted in writing prior to
the expiration of the applicable survival period shall survive with respect to
such claim or dispute until the final resolution thereof.
15. BROKERS. Benedek, on the one hand, and WGRC, on the other hand, covenant and
represent to each other that they had no dealings with any broker or finder in
connection with this Agreement or the transactions contemplated hereby and no
broker, finder or other Person is entitled to receive any broker's commissions
or finder's fee or similar compensation in connection with any such transaction.
Each of the parties agrees to defend, indemnify and hold harmless the other
from, against, for and in respect of any and all losses sustained by the other
as a result of any liability or obligation to any broker or finder on the basis
of any arrangement, agreement or acts made by or on behalf of such party with
any Person whatsoever.
16. TAX MATTERS. Benedek and WGRC shall cooperate fully with each other and make
available or cause to be made available to each other in a timely fashion such
Tax data, prior Tax Returns and filings and other information as may be
reasonably required for the preparation by Benedek or WGRC of any Tax Returns,
elections, consents or certificates required to be prepared and filed by Benedek
or WGRC and any audit or other examination by any taxing authority, or judicial
or administrative proceeding relating to liability for Taxes in connection with
the transactions contemplated hereby. Benedek and WGRC will each retain and
provide to the other party all records and other information which may be
relevant to any such Tax Return, audit or examination, proceeding or
determination, and will each provide the other party with any final
determination of any such audit or examination, proceeding or determination that
affects the amount required to be shown on any Tax Return of the other party for
any period.
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<PAGE>
17. MISCELLANEOUS.
17.1 CONFIDENTIALITY. The terms of the Confidentiality
Agreement are hereby incorporated by reference and WGRC agrees to be bound by
the terms thereof from and after the Closing in accordance with the terms
thereof, such that the information obtained by WGRC, or its officers, employees,
agents or representatives pursuant to Sections 9.1, 9.11 or 10.7 hereof, in
connection with the negotiation, execution and performance of this Agreement and
the Assignment Agreement, the consummation of the transactions contemplated
hereby and thereby, or otherwise, shall be governed by the terms set forth in
the Confidentiality Agreement.
17.2 ENTIRE AGREEMENT. Except for the Assignment Agreement and
the Confidentiality Agreement, this Agreement constitutes the entire agreement
of the parties (and supersedes any prior understanding of the parties) with
respect to the subject matter hereof. The representations, warranties, covenants
and agreements set forth in this Agreement, the Confidentiality Agreement and
the Assignment Agreement and in any financial statements, schedules or exhibits
delivered pursuant hereto constitute all the representations, warranties,
covenants and agreements of the parties hereto and upon which the parties have
relied and except as may be specifically provided herein, in the Confidentiality
Agreement or in the Assignment Agreement, no change, modification, amendment,
addition or termination of this Agreement or any part thereof shall be valid
unless in writing and signed by or on behalf of the party to be charged
therewith.
17.3 NOTICES. Any and all notices or other communications or
deliveries required or permitted to be given or made pursuant to any of the
provisions of this Agreement shall be deemed to have been duly given or made for
all purposes if sent by certified or registered mail, return receipt requested
and postage prepaid, hand delivery, overnight delivery service or telephone
facsimile:
If to WGRC, Inc., at:
WGRC, Inc.
79 Ridge Road
Bristol, RI 02809
Telephone: (401) 253-4950
Facsimile: (401) 454-1317
Attention: Gary R. Chapman, President
With a copy to:
48
<PAGE>
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Telephone: (212) 310-8239
Facsimile: (212) 310-8677
Attention: Marita A. Makinen, Esq.
If to Benedek c/o Benedek Broadcasting Corporation at:
100 Park Avenue
Rockford, Illinois 61101
Telephone: (815) 987-5350
Facsimile: (815) 987-5335
Attention: President
With a copy to:
Shack & Siegel, P.C.
530 Fifth Avenue
New York, New York 10036
Telephone: (212) 782-0700
Facsimile: (212) 730-1964
Attention: Paul S. Goodman, Esq.
or at such other address as any party may specify by notice given to the other
party in accordance with this Section 17.3. The date of the giving of any notice
sent by mail shall be three (3) business days following the date of the posting
of the mail, the date delivered in person if delivered in person, the next
business day following delivery to an overnight delivery service or the date
sent by telephone facsimile.
17.4 PUBLIC ANNOUNCEMENT. Except for any disclosures or
announcements which Benedek or WGRC shall be required to make pursuant to the
Communications Act or the rules and regulations of the FCC, or disclosures or
announcements required to be made pursuant to the rules and regulations of the
Securities and Exchange Commission or any other Federal or state governmental
agency, WGRC and Benedek will jointly prepare and determine the timing of any
press release or other announcement to the public (including any announcement to
the employees of the Station) concerning the execution of this Agreement and the
transactions contemplated herein. Except as provided for in the preceding
sentence, no party hereto will issue any press release or make any other public
announcement relating to the execution of this Agreement or the transactions
contemplated herein, except that any party may make any disclosure required to
be made by it under applicable law if it determines in good faith that it is
appropriate to do so and gives prior notice and a reasonable time to comment to
the other party hereto.
49
<PAGE>
17.5 NO WAIVER. No waiver of the provisions hereof shall be
effective unless in writing and signed by the party to be charged with such
waiver. No waiver shall be deemed a continuing waiver in respect of any
subsequent breach or default, either of similar or different nature, unless
expressly so stated in writing.
17.6 GOVERNING LAW. This Agreement shall be governed,
interpreted and construed in accordance with the laws of the State of New York
applicable to contracts to be performed entirely within that State. Should any
clause, section or part of this Agreement be held or declared to be void or
illegal for any reason, all other clauses, sections or parts of this Agreement
which can be effected without such illegal clause, section or part shall
nevertheless continue in full force and effect.
17.7 CONSENT TO JURISDICTION. Each of the parties hereto
hereby consents to the exclusive jurisdiction and venue of the Courts of the
State of New York, located in the County of New York and the United States
District Court for the Southern District of New York with respect to any matter
relating to this Agreement and performance of the parties' obligations
hereunder, the documents and instruments executed and delivered concurrently
herewith or pursuant hereto and performance of the parties' obligations
thereunder and each of the parties hereto hereby consents to the personal
jurisdiction of such courts and shall subject itself to such personal
jurisdiction. Any action, suit or proceeding relating to such matters shall be
commenced, pursued, defended and resolved only in such courts and any
appropriate appellate court having jurisdiction to hear an appeal from any
judgment entered in such courts. Service of process in any action, suit or
proceeding relating to such matters may be made and served within or outside the
State of New York, County of New York or the Southern District of New York by
registered or certified mail to the parties and their representatives at their
respective addresses specified in Section 17.3 hereof, provided that a
reasonable time, not less than 30 days, is allowed for response. Service of
process may also be made in such other manner as may be permissible under the
applicable court rules.
17.8 EXPENSES. Except as otherwise provided herein, WGRC and
Benedek shall each bear their own costs and expenses in connection with this
transaction. If attorneys' fees or other costs are incurred to secure
performance of any obligations hereunder, or to establish damages for the breach
thereof or to obtain any other appropriate relief, whether by way of prosecution
or defense, the prevailing party will be entitled to recover reasonable
attorneys' fees and costs incurred in connection therewith.
17.9 BINDING AGREEMENT. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that no party may assign any of its rights or
delegate any of its duties under this Agreement without the prior written
consent of the other party hereto.
17.10 INTENT. It is the intent of the parties hereto that the
transactions contemplated by this Agreement will qualify as to Benedek as a
like-kind exchange pursuant to Section 1031 of the Code.
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<PAGE>
17.11 GOOD FAITH. Recognizing the complex nature of the
transactions contemplated in this Agreement, the parties hereto agree to
cooperate in good faith to effectuate the transactions set forth herein and in
the Chronicle Agreement in accordance with the intent of the parties as
expressed herein and therein.
17.12 HEADINGS. The headings or captions under sections of
this Agreement are for convenience and reference only and do not in any way
modify, interpret or construe the intent of the parties or effect any of the
provisions of this Agreement.
17.13 COUNTERPARTS. This Agreement may be executed in one or
more counterparts each of which when taken together shall constitute one
agreement.
[Remainder of page intentionally left blank]
51
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed on the date and year first above written.
WGRC, INC.
By: /s/ Gary R. Chapman
______________________________________________
Name: Gary R. Chapman
Title: President
BENEDEK BROADCASTING CORPORATION
By: /s/ Ronald L. Lindwall
______________________________________________
Name: Ronald L. Lindwall
Title: Senior Vice President-Finance and Chief
Financial Officer
BENEDEK LICENSE CORPORATION
By: /s/ Ronald L. Lindwall
______________________________________________
Name: Ronald L. Lindwall
Title: Senior Vice President-Finance and Chief
Financial Officer
<PAGE>
ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Agreement"), dated as of
December 10, 1999, by and among WGRC, INC., a Delaware corporation having its
principal place of business at 79 Ridge Road, Bristol, Rhode Island 02809
("WGRC"), and BENEDEK BROADCASTING CORPORATION, a Delaware corporation ("BBC"),
and BENEDEK LICENSE CORPORATION, a Delaware corporation ("BLC"), each having its
principal place of business at 100 Park Avenue, Rockford, Illinois 61101 (BBC
and BLC are collectively referred to as "Benedek").
WHEREAS, BBC and its wholly-owned subsidiary, BLC, own and operate
television station WWLP (TV), Channel 22, Springfield, Massachusetts and its
auxiliary facilities (the "Station"); and
WHEREAS, BBC has entered into an Asset Purchase Agreement dated as of
November 17, 1999, as the same may be amended from time to time, with The
Chronicle Publishing Company ("Chronicle") pursuant to which the purchaser
thereunder will acquire television stations WOWT(TV), Omaha, Nebraska and
KAKE-TV, Wichita, Kansas (together with its satellite stations, KUPK-TV, Garden
City, Kansas and KLBY(TV), Colby, Kansas) (collectively, the "Chronicle
Stations"), a true, correct and complete copy of which is attached hereto as
Annex A (the "Chronicle Agreement"); and
WHEREAS, Benedek and WGRC have agreed that WGRC will purchase the
Chronicle Stations and then immediately transfer the same to Benedek in exchange
for the Station in a transaction intended to qualify as a like-kind exchange
under Section 1031 of the Internal Revenue Code of 1986, as amended, as
contemplated herein; and
WHEREAS, in furtherance of the foregoing, BBC, BLC and WGRC have
entered into an Asset Exchange Agreement of even date herewith (the "Exchange
Agreement") (any capitalized term used herein without definition shall have the
meaning provided therefor in the Exchange Agreement); and
WHEREAS, as contemplated by the Exchange Agreement, BBC and BLC desire
to assign to WGRC, and WGRC desires to accept from BBC and BLC, all of their
right, title and interest in and to the Chronicle Agreement on the terms and
conditions set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. Assignment. Subject to Sections 3 and 5 hereof, BBC and BLC
do hereby assign to WGRC all of their right, title and interest in and to the
Chronicle Agreement, which assignment shall be effective immediately prior to
the Closing (as defined in the Exchange Agreement) (the "Effective Time").
<PAGE>
2. Assumption. WGRC hereby accepts the assignment of the
Chronicle Agreement pursuant to Section 1 above and assumes all of the
obligations, liabilities and responsibilities, on the part of BBC and BLC
thereunder, effective as of the Effective Time; provided, however, that the
assumption of such obligations, liabilities and responsibilities by WGRC shall
not be effective until (a) Benedek has delivered a certificate to WGRC stating
that (i) the conditions contained in Section 7.1 of the Chronicle Agreement have
been satisfied and (ii) to the knowledge of Benedek, the conditions contained in
Section 7.2 of the Chronicle Agreement have been satisfied and (b) all of the
conditions of closing contained in Sections 10.9 and 10.10 of the Exchange
Agreement have been satisfied or waived.
3. Escrow Agreement. Benedek has deposited the sum of
$10,000,000 as an escrow deposit under the Chronicle Agreement pursuant to an
Escrow Agreement dated as of November 17, 1999 (the "Escrow Agreement") among
Benedek, Chronicle and Allfirst Brokerage Corporation, as escrow agent. Nothing
contained herein shall be deemed an assignment by Benedek of its right, title
and interest under the Escrow Agreement nor to the escrow funds deposited
thereunder. As between WGRC and Benedek, at the Closing Benedek shall be
entitled to the return of such escrow funds and all interest earned thereon.
4. Amendment and Modifications to the Chronicle Agreement.
Until the Effective Time, the Chronicle Agreement may be amended, modified or
supplemented only in a written agreement approved by BBC and BLC; provided that
no such amendment, modification or supplement may be made which could reasonably
be expected to adversely affect WGRC without the written consent of WGRC.
5. Termination. This Agreement and the assignment and
assumption contemplated hereby shall terminate if the Exchange Agreement is
terminated pursuant to the terms thereof prior to the Effective Time.
6. Notices. Any and all notices or other communications or
deliveries required or permitted to be given or made pursuant to any of the
provisions of this Agreement shall be deemed to have been duly given or made for
all purposes if sent by certified or registered mail, return receipt requested
and postage prepaid, hand delivery, overnight delivery service or telephone
facsimile:
If to WGRC, Inc., at:
WGRC, Inc.
79 Ridge Road
Bristol, RI 02809
Telephone: (401) 253-4950
Facsimile: (401) 454-1317
Attention: Gary R. Chapman, President
2
<PAGE>
With a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Telephone: (212) 310-8239
Facsimile: (212) 310-8677
Attention: Marita A. Makinen, Esq.
If to Benedek c/o Benedek Broadcasting Corporation at:
100 Park Avenue
Rockford, Illinois 61101
Telephone: (815) 987-5350
Facsimile: (815) 987-5335
Attention: President
With a copy to:
Shack & Siegel, P.C.
530 Fifth Avenue
New York, New York 10036
Telephone: (212) 782-0700
Facsimile: (212) 730-1964
Attention: Paul S. Goodman, Esq.
or at such other address as any party may specify by notice given to the other
party in accordance with this Section. The date of the giving of any notice sent
by mail shall be three business days following the date of the posting of the
mail, the date delivered in person if delivered in person, the next business day
following delivery to an overnight delivery service or the date sent by
telephone facsimile.
7. Amendment and Modifications. This Agreement may be amended,
modified and supplemented only in a written agreement executed by each of the
parties hereto. No waiver of the provisions hereof shall be effective unless in
writing and signed by the party to be charged with such waiver. No waiver shall
be deemed a continuing waiver in respect of any subsequent breach or default,
either of similar or different nature, unless expressly so stated in writing.
8. Headings. The headings or captions under sections of this
Agreement are for convenience and reference only and do not in any way modify,
interpret or construe the intent of the parties or effect any of the provisions
of this Agreement.
3
<PAGE>
9. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that no party may assign any of its
rights or delegate any of its duties under this Agreement without the prior
written consent of the other party hereto.
10. Governing Law. This Agreement shall be governed,
interpreted and construed in accordance with the laws of the State of New York
applicable to contracts to be performed entirely within that State. Should any
clause, section or part of this Agreement be held or declared to be void or
illegal for any reason, all other clauses, sections or parts of this Agreement
which can be effected without such illegal clause, section or part shall
nevertheless continue in full force and effect.
11. Counterparts. This Agreement may be executed in one or
more counterparts each of which when taken together shall constitute one
agreement.
[Remainder of page intentionally left blank]
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed on the date and year first above written.
WGRC, INC.
By: /s/ Gary R. Chapman
---------------------------------------------
Name: Gary R. Chapman
Title: President
BENEDEK BROADCASTING CORPORATION
By: /s/ Ronald L. Lindwall
---------------------------------------------
Name: Ronald L. Lindwall
Title: Senior Vice President-Finance and Chief
Financial Officer
BENEDEK LICENSE CORPORATION
By: /s/ Ronald L. Lindwall
---------------------------------------------
Name: Ronald L. Lindwall
Title: Senior Vice President-Finance and Chief
Financial Officer
<PAGE>
GUARANTY
GUARANTY dated as of December 10, 1999 made by LIN TELEVISION
CORPORATION, a Delaware corporation having an address at 4 Richmond Square,
Suite 200, Providence, Rhode Island 02906 ("Guarantor"), in favor of BENEDEK
BROADCASTING CORPORATION, a Delaware corporation with an address at 100 Park
Avenue, Rockford, Illinois 61101 ("BBC") and BENEDEK LICENSE CORPORATION, a
Delaware corporation with an address at 100 Park Avenue, Rockford, Illinois
61101 ("BLC" and collectively with BBC, the "Beneficiaries").
W I T N E S S E T H:
WHEREAS, the Beneficiaries and WGRC, Inc., a Delaware corporation
("WGRC"), are parties to an Asset Exchange Agreement (the "Exchange Agreement")
of even date herewith pursuant to which WGRC is acquiring substantially all of
the assets of television station WWLP-TV located in Springfield, Massachusetts;
WHEREAS, Guarantor has entered into an option agreement with Gary R.
Chapman, pursuant to which Guarantor has the right to purchase all of the shares
of capital stock of WWLP Holdings, Inc., a Delaware corporation which indirectly
holds all of the shares of capital stock of WGRC;
WHEREAS, in order to induce the Beneficiaries to enter into the
Exchange Agreement, the Beneficiaries have required and Guarantor has agreed to
guaranty WGRC's obligations under the Exchange Agreement.
NOW, THEREFORE, for value received, the receipt and sufficiency of
which are hereby acknowledged, the Guarantor does hereby agree as follows:
1. The Guarantor hereby absolutely, unconditionally, and irrevocably
guarantees the full and prompt payment when due of all obligations and
liabilities of every kind and nature of WGRC to the Beneficiaries arising under
the Exchange Agreement.
2. The guaranty hereunder shall be a continuing, absolute, irrevocable
and unconditional guaranty of payment and performance as aforesaid and shall
remain in full force and effect until the obligations and liabilities of WGRC to
the Beneficiaries under the Exchange Agreement shall have been fully and
satisfactorily discharged in accordance with its terms and provisions. This
Guaranty shall remain in full force and effect without respect to future changes
in conditions, including changes in law, until the obligations of WGRC under the
Exchange Agreement have been indefeasibly discharged in full and until such
obligations are not subject to rescission or repayment upon any bankruptcy,
insolvency, arrangement, reorganization, moratorium, receivership or similar
proceeding affecting WGRC.
3. The guaranty and the liability of Guarantor hereunder shall remain
in full force and effect and shall in no way be affected or impaired by (and no
notice to Guarantor shall be required in respect of) any compromise, waiver,
settlement, release, renewal, extension, indulgence, change in, or modification
of any of the obligations and liabilities of WGRC or any sale or transfer by
WGRC of all or any part of its assets, or any voluntary or involuntary
liquidation, dissolution, merger or consolidation, of all or substantially all
the assets, marshaling of assets and liabilities, receivership, insolvency,
bankruptcy,
<PAGE>
assignment for the benefit of creditors, reorganization, moratorium,
arrangement, composition with creditors or readjustment of, or other similar
proceedings affecting WGRC, or by any failure, neglect, or omission on the part
of the Beneficiaries or any other person to give Guarantor notice of any default
by WGRC under its obligations and liabilities or to realize upon any obligations
or liabilities of WGRC, nor shall the obligation and liability of Guarantor
hereunder be impaired, diminished, abated, or otherwise affected by any
circumstances whatsoever (with or without notice to or knowledge of Guarantor)
which may or might in any manner or to any extent vary the risk of Guarantor or
otherwise constitute the legal or equitable discharge of a surety or guarantor;
it being the intent and purpose hereof that Guarantor shall not be entitled to,
and does hereby waive, any and all defenses available to guarantors, sureties
and other secondary parties at law or in equity, except for the defense of
payment and satisfaction. In order to hold Guarantor liable hereunder, there
shall be no obligation on the part of the Beneficiaries or any other person at
any time to demand or resort for payment or performance to WGRC or to any other
person or corporation, their properties or assets or to any security, property
or other rights or remedies whatsoever, and each of the Beneficiaries and each
other person entitled to receive payments or the benefit of performance
guaranteed hereunder shall have the right to enforce this guaranty irrespective
of whether or not proceedings or steps are pending seeking resort to or
realization upon or from any of the foregoing. Without limiting the foregoing,
it is understood that repeated and successive demands may be made and recoveries
may be had hereunder as and when, from time to time, WGRC shall default under
its obligations to the Beneficiaries and that notwithstanding recovery hereunder
for or in respect of any given default or defaults by WGRC under its liabilities
and obligations to the Beneficiaries, this Guaranty shall remain in full force
and effect and shall apply to each and every subsequent default.
4. No act or omission of any kind or at any time on the part of either
Beneficiary or any other person in respect of any matter whatsoever shall in any
way affect or impair this Guaranty.
5. This Guaranty shall continue to be effective or be reinstated, as
the case may be, if at any time any payment or performance under the Exchange
Agreement is rescinded, avoided or for any other reason must be returned by
either Beneficiary and the returned payment shall remain payable as part of
Guarantor's obligations hereunder, all as though such payment had not been made.
6. Notwithstanding any payment or payments made or obligations
performed by the Guarantor by reason of this Guaranty, unless or until the
obligations of WGRC under the Exchange Agreement have been indefeasibly
discharged in full, Guarantor shall not be entitled to be subrogated to any
rights of the Beneficiaries against WGRC relating to payments under the Exchange
Agreement, and until the obligations of WGRC under the Exchange Agreement have
been indefeasibly discharged in full, Guarantor waives any claim or other right
which Guarantor may now have or hereafter acquire against WGRC that arises from
the existence or performance of the Guarantor's obligations under this Guaranty,
including, without limitation, any right of subrogation, reimbursement,
exoneration, contribution, indemnification, which Guarantor now has or hereafter
acquires whether or not such claim, remedy, or right arises in equity, or under
contract, statute or common law.
7. This Guaranty shall be binding upon Guarantor and its respective
successors and assigns, and shall inure to the benefit of and be enforceable by
the Beneficiaries and its successors and assigns.
8. In the event any provision of this Guaranty shall be held invalid or
unenforceable by any court of competent jurisdiction, such holding shall not
invalidate or render unenforceable any other provision hereof.
2
<PAGE>
9. This Guaranty shall be governed, interpreted and construed in
accordance with the laws of the State of New York applicable to contracts to be
performed entirely within that State. Should any clause, section or part of this
Guaranty be held or declared to be void or illegal for any reason, all other
clauses, sections or parts of this Guaranty which can be effected without such
illegal clause, section or part shall nevertheless continue in full force and
effect.
10. Guarantor hereby consents to the exclusive jurisdiction and venue
of the Courts of the State of New York, located in the County of New York and
the United States District Court for the Southern District of New York with
respect to any matter relating to this Guaranty and performance of its
obligations hereunder, and Guarantor hereby consents to the personal
jurisdiction of such courts and shall subject itself to such personal
jurisdiction. Any action, suit or proceeding relating to such matters shall be
commenced, pursued, defended and resolved only in such courts and any
appropriate appellate court having jurisdiction to hear an appeal from any
judgment entered in such courts. Service of process in any action, suit or
proceeding relating to such matters may be made and served within or outside the
State of New York, County of New York or the Southern District of New York by
registered or certified mail to Guarantor at its address set forth above,
provided that a reasonable time, not less than 30 days, is allowed for response.
Service of process may also be made in such other manner as may be permissible
under the applicable court rules.
11. No failure or delay in exercising any right, power, or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege.
12. Subject to applicable law, this Guaranty may be amended, modified
or supplemented only by a written agreement signed by both Guarantor and the
Beneficiaries.
13. Guarantor specifically acknowledges that the Beneficiaries have and
will specifically rely on this Guaranty in entering into the Exchange Agreement
and consummating the transactions contemplated thereby. The Beneficiaries shall
give Guarantor written notice of any assignment of its rights hereunder but the
failure to give such notice shall not in any way operate to release Guarantor of
its obligations hereunder or be any grounds for a defense to the enforcement of
this Guaranty. Each of the obligations guaranteed under the Exchange Agreement
(now or hereafter in effect) shall be deemed conclusively to have been created,
contracted or incurred in reliance upon this Guaranty.
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IN WITNESS WHEREOF, Guarantor has executed this instrument as of the
day and year first above written.
LIN TELEVISION CORPORATION
By: /s/ Denise M. Parent
-----------------------
Denise M. Parent
VP--Deputy General Counsel
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ASSET PURCHASE AGREEMENT
AGREEMENT dated as of the 15th day of December 1999, by and among ICA
BROADCASTING I, LTD., a Texas limited partnership having its principal place of
business at 700 North Grant Street, Odessa, Texas 79761 ("Purchaser"), BENEDEK
BROADCASTING CORPORATION, a Delaware corporation ("BBC"), and BENEDEK LICENSE
CORPORATION, a Delaware corporation ("BLC"), each having its principal place of
business at 100 Park Avenue, Rockford, Illinois 61101 (BBC and BLC are
collectively referred to as "Benedek").
W I T N E S S E T H :
WHEREAS, BBC and its wholly-owned subsidiary, BLC, own and operate
television station KOSA-TV, Channel 7, Odessa, Texas and its auxiliary
facilities (the "Station") pursuant to licenses issued by the Federal
Communications Commission (the "FCC"); and
WHEREAS, Benedek desires to transfer, convey and assign, and Purchaser
desires to purchase and acquire substantially all of the assets, properties and
rights of Benedek in the Station on the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, the parties hereto agree as follows:
1. DEFINITIONS. Unless otherwise stated in this Agreement, the
following terms shall have the following meanings:
1.1 The term "Affiliate" means, with respect to a Person, any
other Person which, directly or indirectly, is in control of, is controlled by
or is under common control with such Person. For purposes of the foregoing
definition, "control" of a Person means the power, direct or indirect, to direct
or cause the direction of the management and policies of such Person whether by
contract or otherwise.
1.2 The term "Agreement" means this agreement, including the
schedules and all exhibits hereto, as the same may be amended or otherwise
modified from time to time, and the terms "herein", "hereof", "hereunder" and
like terms shall be taken as referring to this Agreement in its entirety and
shall not be limited to any particular section or provision hereof.
1.3 The term "Communications Act" means the Communications Act
of 1934, as amended.
1.4 The term "Disclosure Schedule" means the Disclosure
Schedule delivered to Purchaser upon the execution of this Agreement.
1.5 The term "Effective Date" means December 22, 1999.
1.6 The term "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time, and any successor statute
thereto and all final or temporary regulations promulgated thereunder.
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1.7 The term "FCC Consent" means action by the FCC granting
its consent to the assignment of the Station Licenses (as defined in Section
1.14 hereof) as contemplated by this Agreement.
1.8 The term "Final Order" means a written action or order
issued by the FCC, setting forth the FCC Consent and which has not been
reversed, stayed, enjoined, set aside, annulled or suspended, and with respect
to which no requests have been filed for administrative or judicial review,
reconsideration, appeal or stay and the periods provided by statute or FCC
regulations for filing of any such requests for administrative or judicial
review, reconsideration or appeal or for the FCC to set aside the action on its
own motion have expired.
1.9 The term "GAAP" means generally accepted accounting
principals set forth in opinions and pronouncements of the Accounting Principals
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, in each case as the same are applicable to the
circumstances as of the date of determination.
1.10 The term "Lien" means any charge, lien, mortgage, pledge,
security interest or other encumbrance of any nature whatsoever upon, of or in
property or other assets of a Person, whether absolute or conditional, voluntary
or involuntary, whether created pursuant to agreement, arising by force of
statute, by judicial proceedings or otherwise.
1.11 The term "Material Adverse Effect" means any change or
effect that is materially adverse to the properties, operations, business,
financial condition or results of operations of the Station or to the Assets,
except for any such changes or effects resulting directly or indirectly from (i)
the transactions contemplated by this Agreement, (ii) the announcement or other
disclosure of the transactions contemplated by this Agreement, (iii) regulatory
changes, or (iv) changes in conditions generally applicable to the television
broadcasting industry or in general economic conditions in the geographic region
in which the Station is broadcast.
1.12 The term "Permitted Liens" means (i) Liens for inchoate
mechanics' and materialmen's Liens for construction in progress and workmen's,
repairmen's, warehousemen's and carriers' Liens arising in the ordinary course
of the business, (ii) Liens for taxes and other liabilities not yet due and
payable, and for taxes and other liabilities being contested in good faith,
(iii) Liens and imperfections of title the existence of which does not
materially detract from the value of, interfere with, or otherwise affect the
use and enjoyment of the property subject thereto or affected thereby, for the
same use and operations as currently conducted, and (iv) solely with respect to
Owned Real Property, provided that the following are not violated by existing
improvements in any material respect and do not prohibit or materially restrict
the continued use and operation of such Owned Real Property for the same uses
and operations as currently conducted, or grant any third party any option or
right to acquire or lease a material portion thereof, (A) easements, rights of
way or other similar restrictions which would be shown by a current title
report, (B) conditions that may be shown by a current survey, title report or
physical inspection, or (C) zoning, building or other similar restrictions
imposed by applicable law.
1.13 The term "Person" shall include an individual, a
partnership, a joint venture, a corporation, a limited liability company, a
trust, an estate, an unincorporated organization or association or a
governmental agency.
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1.14 The term "Station Licenses" means the licenses, pending
applications, permits and other authorizations issued by the FCC to BLC in
connection with the conduct of the business and operation of the Station,
including the licenses, pending applications, permits and other authorizations
listed on Schedule 7.4 of the Disclosure Schedule.
1.15 The term "Unwind Agreement" means an agreement in form
and substance reasonable satisfactory to Benedek and Purchaser setting forth the
manner in which the parties will comply with a withdrawal of the FCC Consent
prior to the time that it becomes a Final Order. Benedek and Purchaser shall use
their best efforts to agree upon the form of the Unwind Agreement on or prior to
the Effective Date.
1.16 Unless the context otherwise requires: a term has the
meaning assigned to it; an accounting term not otherwise defined has the meaning
assigned to it in accordance GAAP and all accounting calculations will be
determined in accordance with such principles; "or" is not exclusive;
"including" means including without limitation; and words in the singular
include the plural and words in the plural include the singular.
2. PURCHASE AND SALE OF ASSETS.
2.1 PURCHASED ASSETS. On the terms and subject to the
conditions of this Agreement, Benedek shall transfer, convey, assign and deliver
to Purchaser, and Purchaser shall acquire and accept from Benedek, on the
Closing Date, all of the right, title and interest of Benedek in and to all
assets, properties and rights of Benedek used or held for use primarily in
connection with the operation of the Station, of every nature, kind and
description, wherever located, tangible and intangible, real, personal and mixed
(excluding only the Excluded Assets as specified in Section 2.2 below) as the
same shall exist at and as of the Closing Date (the "Assets"), including,
without limitation, the following:
2.1.1 all rights in and to the licenses, pending
applications, permits and other authorizations issued to Benedek by any
governmental authority and held by Benedek and used or intended for use in the
conduct of the business and operation of the Station, including the Station
Licenses listed on Schedule 7.4 of the Disclosure Schedule together with any
renewals, extensions or modification thereof and additions thereto between the
date hereof and the Closing Date, the goodwill and other intangible personal
property owned by Benedek and used or held for use primarily in connection with
the operation of the Station, the business of the Station as a going concern,
and all of Benedek's rights in and to the call letters "KOSA" as the same relate
to the Station;
2.1.2 all land, leaseholds and other interests of
every kind and description in real property, buildings, towers, and antennae,
and fixtures and improvements thereon owned by Benedek as of the date hereof and
used or held for use primarily in connection with the operation of the Station,
including, without limitation, those shown on Schedule 7.9 of the Disclosure
Schedule, and any additions, improvements, replacements and alterations thereto
made between the date of this Agreement and the Closing Date;
2.1.3 all equipment, cameras, transmitters, antennas,
office furniture and fixtures, office materials and supplies, tools, inventory,
spare parts, and other tangible personal property of every kind and description,
owned by it and used or held for use primarily in connection with the operation
of the Station, including the property listed on Schedule 7.10 of the Disclosure
Schedule, together with, to
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the extent permitted by this Agreement, any replacements thereof and additions
thereto made between the date hereof and the Closing Date, and less any
retirements or dispositions thereof made between the date hereof and the Closing
Date which are permitted by this Agreement;
2.1.4 all leases, contracts, licenses, purchase
orders, sales orders, commitments and other agreements primarily relating to the
business and operation of the Station to which Benedek is a party or in which
Benedek has rights, listed on Schedule 7.8 of the Disclosure Schedule, including
the Affiliation Agreement dated as of November 8, 1994, as amended through the
date hereof (the "Affiliation Agreement") with CBS Television Network ("CBS"),
or not required by Section 7.8 hereof to be set forth on Schedule 7.8, and those
leases, contracts, licenses, purchase orders, sales orders, commitments and
other agreements relating to the business and operation of the Station entered
into by Benedek between the date hereof and the Closing Date, except for those
that expire by their terms or are cancelled between the date hereof and the
Closing Date;
2.1.5 all orders and agreements now existing, or
entered into in the ordinary course of business between the date hereof and the
Closing Date, for the sale of advertising time on the Station except those which
on the Closing Date have already been filled or cancelled or have expired;
2.1.6 all programs and programming materials and
elements of whatever form or nature owned by Benedek as of the date of this
Agreement and used or held for use primarily in connection with the operation of
the Station, whether recorded on tape or any other substance or intended for
live performance, and whether completed or in production, and all related
common-law and statutory copyrights owned by or licensed to Benedek and used or
held for use primarily in connection with the operation of the Station, together
with all such programs, materials, elements, and copyrights acquired by Benedek
in connection with the business and operations of the Station between the date
hereof and the Closing Date, except those that expire or are cancelled between
the date hereof and the Closing Date;
2.1.7 all rights of Benedek in and to trade names,
service marks, trademarks, trademark registrations and trademark applications,
copyrights, copyright registrations and copyright applications, patents and
patent applications, inventions, trade secrets, logos, slogans, jingles,
proprietary processes, computer software (including the Station's traffic system
software) and all other information, know-how and intellectual property rights
and all licenses and other agreements relating to any of the foregoing and used
solely in connection with the business and operation of the Station;
2.1.8 all rights of Benedek relating to or arising
out of or under express or implied warranties from suppliers with respect to the
Assets;
2.1.9 except as provided for in Section 4.3 all
prepaid expenses, advances and deposits made by Benedek in connection with the
operation of the Station, including prepaid film and programming expenses (it
being understood that the consideration being transferred to Purchaser includes
consideration for the contracts and commitments of Benedek relating to film and
programming of the Station and that no further consideration shall be due to
Benedek or proration shall be due in respect thereof) and all barter receivables
arising in connection with trade-out agreements now existing or hereafter
entered into in the ordinary course of business;
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2.1.10 all rights of Benedek in and to all post
office boxes, telephone numbers and phone book listings used or held for use in
connection with the operation of the Station, to the extent transferable by
Benedek; and
2.1.11 all books and records relating to the
operation of the Station, including, but not limited to, correspondence,
employment records, production records, accounting records, property records,
filings with the FCC, mailing lists, customer and vendor lists, maps, plans,
diagrams, blue prints, schematics, studies, data, lists and other records and
files of or relating to the Assets, other than the Excluded Records; provided,
however, that such books and records shall be maintained in existence for a
period of three years following the Closing Date and shall be made available for
inspection and duplication by Benedek, at its expense, upon reasonable notice
during normal business hours.
2.2 EXCLUDED ASSETS. Anything contained in Section 2.1 above
to the contrary notwithstanding, Benedek shall not transfer, convey or assign to
Purchaser and the Assets shall not include the following (the "Excluded
Assets"):
2.2.1 the consideration delivered by Purchaser to
Benedek pursuant to this Agreement and all other rights of Benedek under this
Agreement, any agreement, certificate, instrument or other document executed and
delivered by Benedek in connection with the transactions contemplated hereby, or
any side agreement between Benedek and Purchaser entered into on or after the
date of this Agreement;
2.2.2 any cash or cash equivalents or money market
instruments, including unprocessed checks, savings and checking accounts and
other deposits, certificates of deposits, Treasury bills and other marketable
securities of Benedek;
2.2.3 all real and personal property (including,
without limitation, all equipment, furniture, fixtures, files, computers,
computer software and computer software licenses, including the general ledger
accounting software, supplies and other personal property) used by the corporate
and accounting departments of Benedek located at Rockford, Illinois;
2.2.4 all assets, whether real or personal, tangible
or intangible, which are owned, used or held for use by Benedek primarily to
conduct any business operation or activity other than the operation of the
Station;
2.2.5 Benedek's minute books and such other books and
records (other than books and records specifically described in Section 2.1.11
hereof) as pertain to the organization, existence or ownership of Benedek;
provided, however, that such books and records shall be maintained in existence
for a period of three years following the Closing Date and shall be made
available for inspection and duplication by Purchaser, at its expense, upon
reasonable notice during normal business hours and solely for purposes related
to the business and operation of the Station (the "Excluded Records");
2.2.6 Contracts, commitments and agreements of
Benedek to the extent the same relate solely to Excluded Assets and not to the
operation of the Station and actions, claims suits, proceedings, arbitral
actions, deposits, prepayments, refunds, causes of action, choses in action,
rights of recovery, rights of set off, and rights of recoupment of any kind or
nature (including any such item relating to income taxes) relating to the
Excluded Assets or the Excluded Liabilities;
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2.2.7 any refunds of Federal, state, local or other
taxes, including, without limitation, income, property or sales taxes, or other
taxes of any kind or description which relate to periods prior to the Closing
Date;
2.2.8 refunds paid or payable in connection with the
cancellation or discontinuance of any insurance policies applicable to the
Station following the Closing; and
2.2.9 any accounts receivable of Benedek as of the
Closing Date.
2.3 TRANSFER OF ASSETS. The transfer of the Assets as herein
contemplated shall be made by Benedek, free and clear of all Liens other than
(i) Liens set forth on Schedules 7.9 and 7.10 of the Disclosure Schedule and not
required to be discharged on or prior to the Closing Date pursuant to the terms
of this Agreement, (ii) Liens assumed by Purchaser pursuant to Section 3 below,
and (iii) Permitted Liens. The transfer of the Assets shall be effected by
delivery by Benedek of such endorsements, assignments, drafts, checks, deeds,
affidavits of title and other instruments of transfer, conveyance and
assignment, including customary deeds with respect to real property to be
conveyed hereunder, as shall be necessary or appropriate to transfer, convey and
assign the Assets to Purchaser on the Closing Date as contemplated by this
Agreement and as shall be reasonably requested by Purchaser. The conveyancing
documents shall be in form and substance reasonably satisfactory to Purchaser
and Benedek. Benedek shall, at any time and from time to time after the Closing
Date, but at no cost to Benedek, execute and deliver such other instruments of
transfer and conveyance and do all such further acts and things as may be
reasonably requested by Purchaser to transfer, convey, assign and deliver to
Purchaser or to aid and assist Purchaser in collecting and reducing to
possession, any and all of the Assets, or to vest in Purchaser good, valid and
marketable title to the Assets.
3. ASSUMPTION OF CONTRACTS.
3.1 ASSUMED CONTRACTS. Subject to the terms and conditions of
this Agreement and the performance by the parties hereto of their respective
obligations hereunder, on the Closing Date, simultaneously with the transfer,
conveyance and assignment by Benedek to Purchaser of the Assets, Purchaser shall
assume or otherwise be liable for, subject to the limitations contained herein,
the liabilities and obligations of Benedek (the "Assumed Contracts") under:
3.1.1 the contracts, agreements and commitments set
forth on Schedule 7.8 of the Disclosure Schedule to the extent the liabilities
and obligations thereunder arise on or after the Closing Date;
3.1.2 contracts, agreements and commitments
pertaining to the operation of the Station in existence on the date hereof and
not required by Section 7.8 hereof to be set forth on Schedule 7.8, to the
extent the liabilities and obligations thereunder arise on or after the Closing
Date;
3.1.3 contracts, agreements and commitments with
customers and advertising agencies accepted in the ordinary course of business
for the sale of advertising time for cash, to the extent the liabilities and
obligations thereunder arise on or after the Closing Date;
3.1.4 contracts, agreements and commitments of the
type set forth in Sections 3.1.1, 3.1.2 or 3.1.3, to the extent the liabilities
and obligations thereunder arise on or after the Closing Date,
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to which Benedek becomes a party in the ordinary course of business subsequent
to the date of this Agreement and prior to the Closing Date, which (a) are not
fully performed or discharged prior to the Closing Date and (b) are permitted to
be entered into by Benedek under the terms and conditions of this Agreement; and
3.1.5 liabilities for accruals as of the Closing Date
for employee vacation and sick time not to exceed two weeks per employee.
3.2 INSTRUMENTS OF ASSUMPTION FOR THE ASSUMED CONTRACTS. The
assumption by Purchaser of the Assumed Contracts shall be effected by such
instruments of assumption delivered to Benedek on the Closing Date as shall be
reasonably satisfactory to Purchaser and Benedek. Purchaser shall, at any time
and from time to time after the Closing Date, execute and deliver such other
instruments of assumption and do all such further acts and things as may be
reasonably requested by Benedek to implement the assumption of each such
liability and obligation. Assumption by Purchaser of the Assumed Contracts shall
in no way expand the rights or remedies of third parties against Purchaser as
compared to the rights and remedies which such parties would have had against
Benedek had this Agreement not been consummated.
3.3 EXCLUDED LIABILITIES. Purchaser does not and shall not
assume, pay, perform or discharge any liabilities or obligations of Benedek
other than the Assumed Contracts, and, without limiting the foregoing, it is
expressly agreed by the parties hereto that Purchaser shall not assume or be
liable for any of the following liabilities or obligations of Benedek (the
"Excluded Liabilities"):
3.3.1 liabilities or obligations of Benedek for
borrowed money or to any of its stockholders or to any Person affiliated
therewith;
3.3.2 liabilities or obligations of Benedek incurred
with respect to its entry into this Agreement or its consummation of any of the
transactions contemplated hereunder (including, without limitation, Benedek's
legal and accounting fees);
3.3.3 liabilities or obligations for Federal, state,
local or other taxes based on income;
3.3.4 any pension, retirement, profit-sharing plan or
trust or other employee benefit plan of Benedek; and
3.3.5 any litigation, proceeding, or claim by any
Person to the extent relating to the business or operation of or otherwise
relating to the Station prior to the Closing Date, whether or not such
litigation, proceeding, or claim is pending, threatened, or asserted before, on,
or after the Closing Date, including any litigation, proceeding or claim listed
on Schedule 7.11 of the Disclosure Schedule and any litigation, proceeding or
claim pending or threatened as of the Closing Date.
4. PURCHASE PRICE.
4.1 PURCHASE PRICE. The purchase price (the "Purchase Price")
for the Assets shall be (i) Eight Million Dollars ($8,000,000), plus (ii) the
assumption of the Assumed Contracts as herein provided. The Purchase Price, less
any amount transferred by the Escrow Agent to Benedek pursuant to Section 4.2,
shall be made by wire transfer of immediately available funds to an account
designated by Benedek.
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4.2 ESCROW DEPOSIT. On the date hereof, Purchaser has
deposited with Shack & Siegel, P.C. (the "Escrow Agent"), the sum of Two Hundred
Fifty Thousand Dollars ($250,000) (the "Deposit"), which amount shall be held
and disbursed by the Escrow Agent pursuant to the terms of the Escrow Agreement
(the "Escrow Agreement") in the form of Exhibit A annexed hereto. On or before
December 24, 1999, if Purchaser has not theretofore elected to terminate this
Agreement pursuant to Section 13.2 hereof, Purchaser shall deposit with the
Escrow Agent the additional sum of Five Hundred Fifty Thousand Dollars
($550,000)(the "Additional Deposit") and in such event the term "Deposit" as
used in this Agreement shall mean the aggregate sum of Eight Hundred Thousand
Dollars ($800,000) deposited with the Escrow Agent. Purchaser shall be entitled
to receive all interest earned with respect to the Deposit prior to the date of
payment of the Deposit (except as otherwise provided in Section 12 hereof) and,
if Purchaser so instructs, Purchaser and Benedek shall instruct the Escrow Agent
to pay any such interest accumulated on the Closing Date to Benedek in payment
to be credited toward the Purchase Price. At the Closing, contemporaneously with
the performance by Benedek and Purchaser of their respective obligations to be
performed at the Closing, Purchaser and Benedek shall instruct the Escrow Agent
to pay the Deposit to Benedek in immediately available funds. In the event the
transactions contemplated by this Agreement are not consummated in accordance
with the terms hereof, Purchaser and Benedek shall instruct the Escrow Agent to
disburse the Deposit and all interest earned thereon in accordance with Section
12 hereof; provided, however, that if this Agreement is terminated by Purchaser
pursuant to Sections 13.2 or 14, Purchaser and Benedek shall instruct the Escrow
Agent to disburse the Deposit and all interest earned thereon to Purchaser.
4.3 CLOSING ADJUSTMENTS.
4.3.1 All income and expenses arising from the
conduct of the business and operation of the Station shall be prorated between
Purchaser and Benedek in accordance with customary proration practices in
broadcasting acquisitions as of 11:59 p.m. local time, Odessa, Texas, on the
Closing Date. Such prorations shall include, without limitation, all ad valorem,
real estate and other property taxes (but excluding taxes arising by reason of
the transfer of the Assets as contemplated hereby which shall be paid as set
forth in Section 9.6 and taxes based on income of Benedek), business and license
fees (including, without limitations FCC regulatory fees which shall be the sole
responsibility of Benedek for the year-ended December 31, 1999 and which shall
be prorated between Benedek and Purchaser for the year-ended December 31, 2000
as of the Closing Date), lease payments, payments made pursuant to Assumed
Contracts, rents, wages and salaries of employees (excluding accruals for
commissions, vacation and sick pay), utility expenses, water and sewer use
charges, time sales agreements, pre-paid fees and expenses to the extent
Purchaser will receive a benefit thereof, and all other income and expenses
attributable to the ownership and operation of the Station. Benedek
acknowledges, however, that the consideration hereunder for the Assets includes
consideration for the contracts and commitments of Benedek relating to motion
pictures and other programming and for barter receivables arising in connection
with trade-out agreements and that no further payment to Benedek or proration
shall be due in respect thereof. Prorations under this Section 4.3 to the extent
possible shall be determined and paid on the Closing Date with final settlement
thereof to occur, to the extent possible, within 60 calendar days after the
Closing Date in accordance with Sections 4.3.2 and 4.3.3 below.
4.3.2 As promptly as practicable, but in any event
within 60 calendar days after the Closing, Benedek shall cause to be prepared
and delivered to Purchaser a schedule of its proposed prorations (which shall
set forth in reasonable detail the basis for those determinations) (the "Final
Prorations Schedule"). The Final Prorations Schedule shall be conclusive and
binding on Purchaser and Benedek shall
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pay to Purchaser, or Purchaser shall pay to Benedek, as the case may be, any
amount due as a result of such adjustment, unless Purchaser provides Benedek
with written notice of objection (the "Notice of Disagreement") within 20
calendar days after Purchaser's receipt of the Final Proration Schedule, which
notice shall state the prorations of expenses proposed by Purchaser
("Purchaser's Proration Amount"). Benedek shall have 15 calendar days from
receipt of a Notice of Disagreement to accept or reject Purchaser's Proration
Amount. Payment pursuant to this Section 4.3.2 shall be due within 15 calendar
days after the last to occur of (i) Purchaser's failure to reject the Final
Prorations Schedule within 20 calendar days after Purchaser's receipt of the
Final Prorations Schedule or, (ii) Benedek's failure to reject Purchaser's
Proration Amount within 15 calendar days of Benedek's receipt of a Notice of
Disagreement.
4.3.3 In the event of any disputes between the
parties as to the prorations and adjustments described in Section 4.3, the
amounts not in dispute shall nonetheless be promptly paid and such disputes
shall be determined by an independent certified public account of national
recognition that does not then have a relationship with Benedek or Purchaser, or
any of their respective Affiliates, mutually acceptable to Benedek and
Purchaser, with the fees and expenses of such accountant being shared equally by
Benedek and Purchaser. Any payment required by Benedek to Purchaser or Purchaser
to Benedek, as the case may be, under this Section shall be paid by wire
transfer of immediately available funds to an account designated by such party.
If either Benedek or Purchaser fails to pay when due any amount under Section
4.3, interest on such amount will accrue from the date payment was due to the
date such payment is made at a rate per annum equal the lesser of (A) the
generally prevailing prime interest rates (as reported by the Wall Street
Journal) plus five percentage points (5%), or (B) the maximum amount permitted
by applicable law, and such interest shall be payable upon demand.
Notwithstanding the provisions of Sections 4.3.1 and 4.3.2, if the amount of any
taxes to be prorated pursuant to Section 4.3 is not known by 60 calendar days
after the Closing, then the amount will be estimated as of such date, and once
the amount of such taxes is known, Benedek shall pay to Purchaser, or Purchaser
shall pay to Benedek, as the case may be, the net amount due as a result of the
actual apportionment of such taxes.
4.4 ALLOCATION. As promptly as practicable following the
execution hereof, Purchaser and Benedek shall enter into good faith negotiations
regarding a mutually agreeable allocation of the sum of (a) the Purchase Price
and (b) the Assumed Contracts assumed by Purchaser among the Assets acquired by
Purchaser. In the event that the parties are unable to agree on an allocation
within 60 days after the Closing, then the parties agree to be bound by an
appraisal of such assets by David A. Tait & Company or another independent
nationally recognized firm of valuation experts mutually acceptable to Benedek
and Purchaser. The cost of such appraisal shall be borne equally by Purchaser
and Benedek and shall be conclusive and binding on the parties for purposes of
this Section 4.4. Notwithstanding anything to the contrary herein, the
allocation will be consistent with Section 1060 of the Code. Purchaser and
Benedek (i) shall execute and file all tax returns and prepare all financial
statements, returns and other instruments in a manner consistent with the
allocation determined pursuant to this Section 4.4, (ii) shall not take any
position before any governmental authority or in any judicial proceeding that is
inconsistent with such allocation, and (iii) shall cooperate with each other in
a timely filing, consistent with such allocation, of Form 8594 with the Internal
Revenue Service ("IRS").
5. CLOSING. The closing of this Agreement (the "Closing") shall take
place at 10:00 a.m. local time, on a date within five (5) days following the
date of public notice of FCC Consent (or if such date is a Saturday, Sunday, or
Federal holiday, on the next business day thereafter) and all other conditions
to the obligations of Purchaser and Benedek hereunder shall have been satisfied
or waived in writing; provided, however, that in the event any petition or other
objection with respect to the FCC Application has been filed
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with the FCC prior to the Closing Date, the Closing shall take place on a date
within five (5) days following the date on which the FCC Consent shall have
become a Final Order (or if such date is a Saturday, Sunday, or Federal holiday,
on the next business day thereafter), or such other date as may be agreed to by
Purchaser and Benedek. If the Closing takes place prior to the date upon which
the FCC Consent becomes a Final Order, the parties shall, at the Closing, enter
into the Unwind Agreement. The Closing shall take place at the offices of Shack
& Siegel, P.C., 530 Fifth Avenue, New York, New York 10036, or at such other
place as may be agreed to by Purchaser and Benedek. The date of the Closing is
hereinafter referred to as the "Closing Date." For accounting and tax purposes,
the transactions contemplated by this Agreement shall be effective as of 11:59
p.m. on the Closing Date.
6. FCC CONSENTS. The assignment of the Station Licenses to Purchaser as
contemplated by this Agreement is subject to prior FCC Consent. Promptly after
the Effective Date, Purchaser and Benedek shall proceed to prepare for filing
with the FCC appropriate applications for consent to the assignment of the
Station Licenses to Purchaser (the "FCC Application"), which shall be filed with
the FCC as soon as practicable but in no event sooner than the Effective Date
and no later than ten (10) days after the Effective Date. The FCC Application
shall include such information relating to the Station in order to effect the
timely closing of this Agreement. The parties shall thereafter prosecute the FCC
Application with all reasonable diligence and otherwise use commercially
reasonable efforts to obtain the grant of such application as expeditiously as
practicable (but no party shall have any obligation to take any unreasonable
steps to satisfy complainants, if any). If the FCC Consent imposes any condition
on any party hereto, such party shall use commercially reasonable efforts to
comply with such condition unless compliance would have a material adverse
effect upon it, its parent corporation, or any of its or its parent
corporation's subsidiaries or Affiliates, as appropriate. Purchaser and Benedek
shall each pay 50% of all filing fees payable with respect to all filings
required by the FCC in connection with the transactions contemplated by this
Agreement.
7. REPRESENTATIONS AND WARRANTIES OF BENEDEK. In order to induce
Purchaser to enter into this Agreement and to perform its obligations hereunder,
Benedek hereby makes the following representations and warranties to Purchaser:
7.1 ORGANIZATION AND STANDING. Each of BBC and BLC is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and each has all requisite power and authority to own,
lease, use and operate its properties and assets at and carry on its business in
the places where such properties and assets are now owned, leased or operated or
where such business is now conducted. Each of BBC and BLC is duly qualified to
do business and is in good standing in the State of Texas.
7.2 POWER AND AUTHORITY. Each of BBC and BLC has all requisite
power and authority to enter into this Agreement and the documents and
instruments contemplated hereby and to assume and perform its obligations
hereunder. The execution and delivery of this Agreement and the documents and
instruments contemplated hereby and the performance by each of BBC and BLC of
its obligations hereunder have been duly and validly authorized by all necessary
action and no further action or approval is required in order to constitute this
Agreement and the documents and instruments contemplated hereby as valid and
binding obligations of each of BBC and BLC, enforceable in accordance with their
terms, except as the enforceability of such agreements, documents and
instruments, may be limited by or subject to, any bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and that the remedies of specific
performance, injunction, and other forms of
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equitable relief are subject to certain principles of equity jurisdiction,
equitable defenses and the discretion of the court before which any proceeding
therefor may be brought.
7.3 NO CONFLICTS. Except as set forth on Schedule 7.3 of the
Disclosure Schedule and except for any consent required for the assignment to
Purchaser of any contract, lease, agreement or commitment included within the
Assets, the execution and delivery by each of BBC and BLC of this Agreement and
the documents and instruments contemplated hereby, the consummation by each of
BBC and BLC of the transactions contemplated hereby and the performance by each
of BBC and BLC of their obligations hereunder:
7.3.1 do not and will not conflict with or violate
any provision of the Certificate of Incorporation or Bylaws of either BBC or
BLC;
7.3.2 do not and will not conflict with or result in
any breach of any condition or provisions of, or constitute a default under or
give rise to any right of termination, cancellation or acceleration or (whether
after the giving of notice or lapse of time or both) result in the creation or
imposition of any Lien (other than Permitted Liens), upon any of the Assets by
reason of the terms of any contract, mortgage, Lien, lease, agreement,
indenture, instrument, judgment or decree to which either BBC or BLC is a party
or which is or purports to be binding upon BBC or BLC or which affects or
purports to affect any of the Assets; and
7.3.3 subject to the receipt of any governmental
approvals required in connection with the transfer of the Assets to Purchaser,
do not and will not conflict with or result in a violation of or default under
(with or without notice of the lapse of time or both) any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge or other
restriction of any court, administrative agency or commission or other
governmental authority or instrumentality.
7.4 GOVERNMENT APPROVAL. BLC is the holder of the Station
Licenses as set forth on Schedule 7.4 of the Disclosure Schedule, which, except
as set forth on such Schedule 7.4, constitute all necessary authorizations from
the FCC to enable Benedek to broadcast and transmit the present television
programming. Other than FCC rulemaking procedures of general applicability and
except as set forth on Schedule 7.4, there are no fines, forfeitures, notices of
apparent liability, orders to show cause or any other administrative or judicial
orders outstanding nor any proceedings pending or, to Benedek's knowledge,
threatened, the effect of which would be the revocation, cancellation,
non-renewal, suspension or material adverse modification of the Station Licenses
or any material adverse consequence for the Station. Except as contemplated in
Section 6 hereof, no action, approval, consent, authorization or other action by
or filing with any governmental or quasi-governmental agency, commission, board,
bureau or instrumentality, is necessary or required as to each of BBC and BLC
for the due execution, delivery or performance by each of BBC and BLC of this
Agreement or any document or instrument contemplated hereby.
7.5 VALIDITY. This Agreement constitutes and the other
documents and instruments contemplated hereby will, on the due execution and
delivery thereof, constitute the legal, valid and binding obligations of each of
BBC and BLC, enforceable in accordance with their respective terms, except as
the enforceability of such agreements, documents and instruments, may be limited
by or subject to, any bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally.
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7.6 FINANCIAL STATEMENTS. Schedule 7.6 of the Disclosure
Schedule sets forth the following financial statements of Benedek (collectively
the "Financial Statements"): internal unaudited financial statements with
respect to the results of operations of the Station for the fiscal year ended
December 31, 1998 and the nine months ended September 30, 1999. Except as set
forth on Schedule 7.6 of the Disclosure Schedule, the Financial Statements are
true, correct and complete in all material respects, are in accordance with GAAP
and the books and records of Benedek and fairly, completely and accurately
present the financial position of the Station at the dates specified and the
results of operations for the periods covered.
7.7 TAXES. Benedek has duly filed all material foreign,
Federal, state, county and local income, excise, sales, property, withholding,
social security, franchise, license, information returns and other tax returns
and reports required to have been filed by Benedek to the date hereof pertaining
to the operation of the Station and Benedek has paid all amounts shown to be due
thereon.
7.8 CONTRACTS. Except only those contracts, agreements or
commitments listed and described on Schedule 7.8 of the Disclosure Schedule, and
contracts, agreements or commitments entered into in the ordinary course of
business of the Station and (x) involving less than $10,000 over their term or
(y) involving more than $10,000 over their term but not more than $100,000 in
the aggregate for all such contracts, agreements or commitments or (z) involving
sales of advertising time in accordance with the Station's customary rate
practices, neither BBC nor BLC is a party to or has any contract, agreement or
commitment of any kind or nature whatsoever, written or oral, formal or
informal, with respect to the business and operation of the Station. Except as
set forth on Schedule 7.8, each of the written contracts and commitments
referred to therein is valid and existing, in full force and effect, and
enforceable in accordance with its terms, except as the enforceability of such
agreement, documents and instruments, may be limited by or subject to, any
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally, and no party
thereto is in default and no claim of default by any party has been made or is
now pending, except for such defaults as would not, in any individual case, be
reasonably be expected, as of the date hereof, to have a Material Adverse
Effect. The Station is currently affiliated with CBS pursuant to the Affiliation
Agreement listed on Schedule 7.8. Said Affiliation Agreement is in full force
and effect and Benedek is not aware of any state of facts which would permit the
termination of the Affiliation Agreement prior to the expiration of the term
thereof.
7.9 REAL PROPERTY.
7.9.1 Schedule 7.9 of the Disclosure Schedule is a
complete and correct list of all real property or premises owned in whole or in
part by Benedek and used in the business and operation of the Station (other
than Excluded Assets) ("Owned Real Property") and all real property or premises
leased in whole or in part by Benedek and used in the business and operation of
the Station ("Leased Real Property", and together with Owned Real Property, the
"Real Property"). Copies of the leases with respect to Leased Real Property or,
with respect to oral leases, written summaries of the terms (the "Leases") and
the other documents referred to on Schedule 7.9 (other than those that will not
survive the Closing) have been delivered to Purchaser.
7.9.2 Benedek has all required legal and valid
occupancy permits and other licenses or government approvals for each of the
Real Properties used or held for use in connection with the operation of the
Station except where the failure to obtain such permit or license would not, in
any individual case, be reasonably be expected, as of the date hereof, to have a
Material Adverse Effect.
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7.9.3 Benedek has the legal right (without the
consent or other approval of any other party) to possess and quietly enjoy the
premises and properties under each of the Leases. Each Lease is in full force
and effect and constitutes a legal, valid and binding obligation of BBC and
there is not under any Lease any claim of default or event which, with or
without notice or the lapse of time or both, could reasonably be expected, in
any individual case, as of the date hereof, to have a Material Adverse Effect.
7.9.4 Except for Permitted Liens and as set forth on
Schedule 7.9 of the Disclosure Schedule, Benedek has good, marketable and
insurable title to the Owned Real Property (other than Excluded Assets), free
and clear of all Liens and no party has the right to acquire or use such Owned
Real Property or any improvements, fixtures or equipment located thereon. Except
as set forth on Schedule 7.9 or Schedule 7.10 of the Disclosure Schedule,
Benedek has good and marketable title and owns outright, free and clear of all
Liens (other than Permitted Liens), each improvement, fixture and item of
equipment located in or on each Real Property.
7.9.5 None of the Real Properties has been condemned
or otherwise taken by any public authority, no condemnation or taking is, to
Benedek's knowledge, threatened or contemplated.
7.10 PERSONAL PROPERTY. Schedule 7.10 of the Disclosure
Schedule is a true and complete list of (i) all tangible personal property owned
by Benedek and used in connection with the business and operation of the Station
having a book value at the date hereof in excess of $10,000 per item and (ii)
all personal property owned by a third party which is leased or otherwise used
by Benedek in connection with the business and operation of the Station,
including, without limitation, leases or other agreements relating to the use or
operation of any machinery, equipment, motor vehicles, office furniture or
fixtures owned by any third party (copies of which leases or other agreements
have been delivered to Purchaser) but excluding leases not required to be set
forth on Schedule 7.8 of the Disclosure Schedule. Each such personal property
lease is in full force and effect and constitutes a legal, valid and binding
obligation of Benedek and there is not under any such lease any default or any
claim of default or of an event which, with or without notice or the lapse of
time or both, could reasonably be expected, in any individual case, as of the
date hereof, to have a Material Adverse Effect. Except for Permitted Liens and
as set forth on Schedule 7.10 of the Disclosure Schedule, all personal property
purported to be owned by Benedek is owned by it, free and clear of all Liens. To
Benedek's knowledge, all tangible personal property is in good working order.
7.11 LITIGATION. Except as set forth on Schedule 7.11 of the
Disclosure Schedule, no action, suit, claim, investigation, proceeding or
controversy, whether legal or administrative or in mediation or arbitration, is
pending or, to Benedek's knowledge, threatened, at law or in equity or
admiralty, before or by any court or Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
which could reasonably be expected, in any individual case, as of the date
hereof, to have a Material Adverse Effect against or seeking to restrain,
prohibit, invalidate, set aside, rescind, prevent or make unlawful this
Agreement or the carrying out of this Agreement or the transactions contemplated
hereby. Benedek is not operating under or subject to, or in default in respect
of, any judgment, order, writ, injunction or decree of any court or any Federal,
state, municipal or other governmental department commission, board, bureau,
agency or instrumentality.
7.12 COMPLIANCE WITH LAW. Except as set forth on Schedule 7.4
of the Disclosure Schedule, each of BBC and BLC has all material permits,
licenses, orders and approvals of all Federal, state or local governmental
regulatory bodies required for it to conduct the business and operation of the
Station
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as conducted on the date of this Agreement. Except as set forth on Schedule 7.4,
all such permits, licenses, orders and approvals are in full force and effect in
all material respects and no suspension or cancellation of any of them is
pending or threatened. Each of BBC and BLC is in compliance in all material
respects with each law, rule, ordinance, regulation, order and decree applicable
to the business and operation of the Station, except where the failure to so
comply could not reasonably be expected, in any individual case, as of the date
hereof, to have a Material Adverse Effect. Except as set forth on Schedule 7.4
of the Disclosure Schedule, the Station's transmitting and studio equipment is
in all material respects operating in accordance with the terms and conditions
of the Station License, all underlying construction permits, and the rules,
regulations, practices and policies of the FCC, including all requirements
concerning equipment authorization and human exposure to radio frequency
radiation. Except as set forth on Schedule 7.4 of the Disclosure Schedule, all
ownership reports, employment reports, children's television reports, tax
returns and other material documents required to be filed by Benedek with the
FCC or other governmental authority have been timely filed; such reports and
filings are accurate and complete in all material respects; such items as are
required to be placed in the Station's local public records files have been
timely placed in such files; all proofs of performance and measurements that are
required to be made by Benedek with respect to the Station's transmission
facilities have been completed and filed at the Station; and all information
contained in the foregoing documents is true, complete and accurate, except as
to any of the foregoing where the failure to do so would not have a Material
Adverse Effect. The location of the Station's main studio complies with the
FCC's rules. Benedek, or its predecessor-in-interest, has paid to the FCC all
annual regulatory fees due for the Station for the years 1994-1998.
7.13 LABOR. Benedek is not a party to any representation or
labor contract with respect to any employees at the Station. Benedek has not
received any written notice from any labor union or group of employees that such
union or group represents or believes or claims it represents or intends to
represent any of the employees of Benedek; to Benedek's knowledge, no strike or
work interruption by Benedek's employees is planned, under consideration,
threatened or imminent; and Benedek has not made any loan or given anything of
value, directly or indirectly, to any officer, official, agent or representative
of any labor union or group of employees other than salaries and ordinary course
compensation.
7.14 EMPLOYEES. Schedule 7.14 of the Disclosure Schedule is a
complete and correct list as of December 9, 1999 of the names and annual salary,
bonus, commission and perquisite arrangements, written or unwritten, for each
current employee of the Station, including accruals for vacation and sick time.
Benedek does not have any contract for the future employment of any employee
except as may be listed on Schedule 7.14 of the Disclosure Schedule.
7.15 EMPLOYEE BENEFIT PLANS. Schedule 7.15 of the Disclosure
Schedule is a complete and correct list of all employment, bonus, incentive
compensation, deferred compensation, pension, profit sharing, retirement, stock
purchase, stock option, stock ownership, stock appreciation rights, phantom
stock, equity (or equity-based), leave of absence, layoff, vacation, day or
dependent care, legal services, cafeteria, life, health, medical, accident,
disability, workmen's compensation or other insurance, severance, separation,
termination, change of control or other benefit plan, agreement (including any
collective bargaining agreement), practice, policy or arrangement, whether
written or oral, and whether or not subject to ERISA (including, without
limitation, any "employee benefit plan" within the meaning of Section 3(3) of
ERISA) ("Employee Plans") sponsored, maintained or contributed to by Benedek in
connection with the business and operation of the Station. All Employee Plans,
related trust instruments or annuity contracts (or any other funding
instruments) are legal, valid and binding and are in full force and effect, and
each Employee Plan intended to be qualified under Section 401(a) of the Code is
so qualified and has been so qualified at all
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times since its inception. All Employee Plans have been maintained, in all
material respects, in accordance with the requirements of the Code and ERISA, or
any other applicable statute, regulation or rule. There are no pending claims
against any Employee Plan (other than routine claims for benefits in accordance
with its terms) nor, to the knowledge of Benedek, has any claim been threatened
in writing by any participant thereof or beneficiary thereunder.
7.16 ENVIRONMENTAL MATTERS.
7.16.1 Except as provided below in this Section
7.16.1, Benedek makes norepresentation or warranty, express or implied, with
respect to: (a) the existence or presence on, at, under or about the real
property used in the business and operation of the Station (the "Premises") of
any environmental hazards, conditions, defects or hazardous materials, including
but not limited to any flammables, explosives, radioactive materials, asbestos,
asbestos containing material, PCBs, hazardous waste, any petroleum, petroleum
product derivative, compound or mixture, and without limitation, those
substances defined as "hazardous substances" or "hazardous wastes" (collectively
referred to as "Hazardous Substances") under any Environmental Laws); (b) the
Premises' compliance with the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 and Superfund Amendments and
Preauthorization Act of 1986, the Hazardous Materials Transportation Act, the
Resource Conservation and Recovery Act of 1976, the Water Pollution Control Act,
the Clean Air Act, all regulations promulgated under all such Acts, as well as
any other Federal, state or local law, ordinance or regulation pertaining to
health, industrial hygiene or the environment and/or applicable to the
existence, removal, generation, transportation, discharge, process, storage or
treatment of Hazardous Substances (collectively referred to as "Environmental
Law(s)"). Benedek represents that: (i) during the period that Benedek has owned
or leased the Premises, Benedek has not caused or knowingly permitted (nor, at
any time prior to the Closing, will Benedek cause or consent to) any Hazardous
Substances to be deposited in or on the Premises in violation of any
Environmental Laws; and (ii) except as set forth in the environmental reports
referred to in Schedule 7.16 of the Disclosure Schedule, Benedek is not aware of
any environmental contamination at the Premises. Benedek has delivered to
Purchaser a complete copy of the most recent environmental assessment reports
with regard to the Premises (or any portion thereof) in Benedek's possession and
which are listed on Schedule 7.16.
7.16.2 By negotiation and execution of this
Agreement, the parties have expressly allocated certain environmental risks,
liabilities and expenses whether historical, current or prospective from Benedek
to Purchaser. In this regard, Benedek shall have no liability in the future
(except with respect to breach of Benedek's representations in Section 7.16.1)
to Purchaser or to any person claiming by, through or under Purchaser with
respect to (i) any past, present or future claim, cause of action, proceeding or
otherwise, whether known or unknown, relating to or arising out of any past,
present or future environmental condition at, under or about the Premises, (ii)
the presence of Hazardous Substances, (iii) a violation of any Environmental Law
relating to the Premises, and (iv) any losses, damages, penalties, costs
(foreseen or unforeseen, known or unknown), counsel, engineering and other
professional or expert fees with respect to the foregoing (the foregoing clauses
(i), (ii), (iii), and (iv) are collectively referred to as "Environmental
Claims"). Except with respect to breach of Benedek's representations in Section
7.16.1: (i) Purchaser hereby unconditionally releases and discharges Benedek
from any and all Environmental Claims, whether sustained by Purchaser directly
or relating to any claims by Purchaser for indemnification, contribution or
otherwise with respect to Environmental Claims against Purchaser by third
parties; and (ii) Purchaser hereby agrees to indemnify, defend and hold Benedek
harmless from and against all such Environmental Claims,
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including any and all Environmental Claims made hereafter directly against
Benedek by third parties claiming by, through or under Purchaser.
7.17 SUFFICIENCY OF ASSETS. The Assets constitute all of the
assets, properties and rights necessary for the conduct of the business of the
Station by Benedek in a manner consistent with past practices.
8. REPRESENTATIONS AND WARRANTIES OF PURCHASER. In order to induce
Benedek to enter into this Agreement and to perform its obligations hereunder,
Purchaser hereby makes the following representations and warranties to Benedek:
8.1 ORGANIZATION AND STANDING. Purchaser is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Texas and has all requisite power and authority, to
own, lease, use and operate its properties and assets at and carry on its
business in the places where such properties and assets are now owned, leased or
operated or where such business is now being conducted.
8.2 POWER AND AUTHORITY. Purchaser has all requisite power and
authority to enter into this Agreement and the documents and instruments
contemplated hereby and to assume and perform its obligations hereunder. The
execution and delivery of this Agreement and the documents and instruments
contemplated hereby and the performance by Purchaser of its obligations
hereunder have been duly and validly authorized by all necessary action and no
further action or approval, is required in order to constitute this Agreement
and the documents and instruments contemplated hereby as valid and binding
obligations of Purchaser, enforceable in accordance with their terms, except as
the enforceability of such agreements, documents and instruments, may be limited
by or subject to, any bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally and that the remedies of specific performance, injunction, and other
forms of equitable relief are subject to certain principles of equity
jurisdiction, equitable defenses and the discretion of the court before which
any proceeding therefor may be brought.
8.3 NO CONFLICTS. The execution and delivery by Purchaser of
this Agreement and the documents and instruments contemplated hereby, the
consummation by Purchaser of the transactions contemplated hereby and the
performance by Purchaser of its obligations hereunder:
8.3.1 do not and will not conflict with or violate
any provision of the Certificate of Formation or Operating Agreement of
Purchaser;
8.3.2 do not and will not conflict with or violate
any agreements, contracts or instruments to which Purchaser is a party; and
8.3.3 subject to the receipt of any governmental
approvals required in connection with the transfer of the Assets to Purchaser,
do not and will not conflict with or result in a violation of or default under
(with or without notice of the lapse of time or both) any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, charge or other
restriction of any court, administrative agency or commission or other
governmental authority or instrumentality.
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8.4 GOVERNMENT APPROVAL. Purchaser is legally and financially
qualified under the Communications Act to enter into this Agreement, and to
consummate the transactions contemplated hereby. In connection with the
transactions contemplated by the Agreement, it is not necessary for Purchaser or
any Affiliate of Purchaser (or any Person in which Purchaser or any Affiliate of
Purchaser has an attributable interest under the Communications Act) to seek or
obtain any waiver from the FCC, dispose of any interest in any media or
communications property or interest (including, without limitation, the
Station), terminate any venture or arrangement, or effectuate any changes or
restructuring of its ownership, including, without limitation, the withdrawal or
removal of officers or directors or the conversion or repurchase of equity
securities of Purchaser or any Affiliate of Purchaser or owned by Purchaser or
any Affiliate of Purchaser (or any Person in which Purchaser or any Affiliate of
Purchaser has any attributable interest under the Communications Act). Purchaser
is able to certify on an FCC Form 314 that it is financially qualified.
Additionally, except as contemplated in Section 6 hereof, no action, approval,
consent or authorization or other action, including, but not limited to, any
action, approval, consent or authorization or other action by or filing with any
governmental or quasi-governmental agency, commission, board, bureau or
instrumentality, is necessary or required as to Purchaser for the due execution,
delivery or performance by Purchaser of this Agreement or any document or
instrument contemplated hereby.
8.5 VALIDITY. This Agreement constitutes and the other
documents and instruments contemplated hereby will, on the due execution and
delivery thereof, constitute the legal, valid and binding obligations of
Purchaser, enforceable in accordance with their respective terms, except as the
enforceability of such agreements, documents and instruments, may be limited by
or subject to, any bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally.
8.6 LITIGATION. No action, suit, claim, investigation,
proceeding or controversy, whether legal or administrative or in mediation or
arbitration, is pending or, to Purchaser's knowledge, threatened, at law or in
equity or admiralty, before or by any court or Federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality which, if adversely determined, would effect Purchaser's ability
to carry out this Agreement or the transactions contemplated hereby.
8.7 INDEPENDENT INVESTIGATION. Purchaser has conducted or will
have the opportunity to conduct an independent investigation of the Station and
its business operations, assets, liabilities, results of operations, financial
condition and prospects in making its determination as to the propriety of the
transactions contemplated by this Agreement and in entering into this Agreement
and the documents and instruments required hereby, has relied or will have
relied solely on the results of said investigation and on the representations
and warranties of Benedek expressly contained in this Agreement and the
instruments, certificates or schedules furnished pursuant hereto.
9. COVENANTS OF BENEDEK.
Each of BBC and BLC covenants as follows:
9.1 BOOKS AND RECORDS. Between the date hereof and the Closing
Date, Benedek shall give Purchaser and its authorized representatives reasonable
access, during regular business hours, to any and all of its premises,
properties, contracts, books and records relating to the business and operation
of the Station and will cause its employees to furnish to Purchaser and its
authorized representatives any and all
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data and information pertaining to the business and operation of the Station as
Purchaser or its authorized representatives shall from time to time reasonably
request.
9.2 INTERIM OPERATIONS. From the date hereof until the Closing
Date, except as otherwise consented to or approved in writing by Purchaser or as
required by this Agreement, Benedek shall not (i) sell, assign, lease, transfer
or otherwise dispose of any of the Assets except in the ordinary course of
business; (ii) mortgage, pledge or grant any Lien (other than Permitted Liens),
charge or other encumbrance on any of the Assets; (iii) other than in the
ordinary course of business, enter into any lease, contract, license or other
agreement, or make any amendment of or terminate any lease, contract, license or
other agreement to which Benedek is a party regarding the business and operation
of the Station; (iv) enter into any contract or commitment relating to sales of
advertising time for the Station except sales of advertising time on the basis
of the Station's customary rate practices and otherwise in the ordinary course
of business or contract or agree to provide any advertising or broadcast time at
substantially less than customary rate practices of the Station; (v) increase
the compensation payable to any of the Station's employees or become obligated
to increase any such compensation other than in the ordinary course of business
(provided, however, Benedek may enter into account executive compensation
guidelines substantially in the form annexed to Schedule 7.14 of the Disclosure
Schedule, which are deemed to be in the ordinary course of business); or (vi)
enter into any transaction other than in the ordinary course of business and
consistent with past practices of the Station.
9.3 DISCHARGE OF LIENS. On or prior to the Closing Date,
Benedek will cause all Liens with respect to the Assets (other than Permitted
Liens and the Liens set forth on Schedule 7.9 and 7.10 of the Disclosure
Schedule hereto which are not required to be discharged on or prior to the
Closing Date pursuant to the terms of this Agreement and except only those
assumed by Purchaser pursuant to Section 3) to be discharged.
9.4 COMPLIANCE. Benedek shall use its commercially reasonable
efforts to take or cause to be taken all action and do or cause to be done all
things necessary, proper or advisable to consummate the transactions
contemplated by this Agreement. Benedek shall, between the Effective Date and
the Closing Date, take commercially reasonable efforts to obtain the consent of
any party or parties to any such contracts, licenses, leases, commitments, sales
orders, purchase orders or other agreements to the transfer or assignment
thereof by Benedek to Purchaser hereunder in all cases in which such consent is
required for transfer or assignment, including, without limitation, (i) CBS's
consent to the assignment of the Affiliation Agreement, (ii) the consent of the
landlord with respect to Lease Agreement dated November 1, 1993 between Bank One
Texas, N.A., Trustee of the J. E. Parker Testamentary Trust for the benefit of
Bessie Lou Doelling, Timothy H. Parker, individually and as Attorney-in-Fact for
Stephen H. Parker, James M. Parker and Philip L. Parker, as landlord, and
Brissette TV of Odessa, Inc. d/b/a KOSA-TV, as Tenant, as modified by Extension
Option Agreement dated July 27, 1995 (the "Bank One Lease") and (iii) the
consent of the landlord with respect to Lease Agreement dated August 17, 1995
between CAC Consulting, as Landlord, and KOSA-TV, as Tenant (the "CAC Lease"),
provided, that such efforts shall not require the payment of any consideration
by Benedek other than as expressly provided for in this Agreement.
9.5 COMPLIANCE WITH LAWS. Benedek will comply in all material
respects with all rules and regulations of the FCC pertaining to the operation
of the Station, and with all other applicable laws, rules, ordinances and
regulations pertaining to the operation of the Station. As promptly as
practicable after execution of this Agreement, Benedek shall use its reasonable
best effort to obtain authority from the FCC to permit the translator station
K10HH, Big Springs, Texas (the "Translator") to operate in a lawful manner
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in all material respects in the manner in which it currently operates,
including, without limitation, the filing of appropriate applications and/or
requests: (i) to reinstate or replace the construction permit to modify the
license of Translator, permit number BPTTV-960517RC (the "Translator Permit"),
(ii) to issue a license covering the Translator Permit or (iii) to authorize
special temporary authority to operate the Translator.
9.6 PAYMENT OF TAXES. Benedek shall be responsible for all
Federal, state, county, local, income, property, sales, use, intangibles and
other taxes attributable to the operation or ownership of the Station or the
Assets for all periods prior to and including the Closing Date. Thereafter,
Purchaser shall be responsible for all such taxes. Any taxes paid by either
party pertaining to the operation of the Station which relate to periods both
before and after the Closing shall be prorated in accordance with Section 4.3.1
hereof. Benedek shall file all Federal, state, county and local income and other
tax returns and reports required to be filed by it pertaining to the operation
of the Station until and including the Closing Date and shall pay all taxes,
interest and penalties shown on such returns or reports.
9.7 FCC CONSENT. Benedek shall diligently prosecute the FCC
Application and use all commercially reasonable efforts to obtain the FCC
Consent as promptly and expeditiously as possible. Benedek shall not
intentionally take or omit to take any action that will cause the FCC to deny,
delay or fail to approve the FCC Application or cause the FCC Consent not to be
granted.
9.8 ACTION. Benedek shall not knowingly take or cause to be
taken, or fail to take or cause to be taken, any action that would cause the
conditions to the obligations of Benedek or Purchaser to consummate the
transactions contemplated hereby to fail to be satisfied or fulfilled at or
prior to the Closing, including, without limitation, by taking or causing to be
taken, or failing to take or cause to be taken, any action that would cause any
of the representations and warranties made by Benedek in Section 7 hereof to
fail to be true and correct as of the Closing in all material respects. Benedek
shall take, or cause to be taken, all commercially reasonable actions within its
power to cause to be satisfied or fulfilled, at or prior to the Closing, the
conditions precedent to the obligations of Purchaser to consummate the
transactions contemplated hereby as set forth in Section 11.1 hereof.
9.9 FURTHER ASSURANCES. Benedek shall, at any time, and from
time to time, after the Closing Date, but at no cost to Benedek (other than the
salaries or wages of any Benedek employees), use commercially reasonable efforts
to (i) take, or cause to be taken, all appropriate action, and to do, all things
necessary, proper or advisable to consummate the transactions contemplated by
this Agreement, including, without limitation, executing and delivering any
additional instruments, certificates or other documents; and (ii) have the
present and future officers, directors and employees of Benedek cooperate with
Purchaser in furnishing information, evidence, testimony and other assistance in
connection with any tax return filing obligations, actions, proceedings,
arrangements or disputes of any nature with respect to matters relating to all
periods prior to the Closing Date.
9.10 NO SOLICITATION. For a period commencing on the date
hereof and ending six (6) months after the Closing Date, neither Benedek nor any
Affiliate of Benedek shall, directly or indirectly, for itself or on behalf of
any other entity, solicit for employment after the Closing Date any person
currently working for the Station in a management position; provided that the
foregoing prohibition shall not apply to the General Manager of the Station if
Purchaser has not made arrangements for the continued employment of the General
Manager in such position after the Closing within a period of 30 days after the
date of this Agreement.
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9.11 NON-COMPETITION. Subject to the performance by Purchaser
of its obligations to be performed prior to the Closing, for a period of five
(5) years after the Closing Date, Benedek will not directly or indirectly (i)
own, manage, operate, control or participate in the ownership, management,
operation or control of a broadcast television station or a radio station in the
currently designated market area ("DMA") of the Station, as designated by A. C.
Nielsen Company, and (ii) be engaged by, or become an Affiliate of, or otherwise
associated with, as a consultant, an independent contractor or otherwise, with
any other Person which is engaged in the business of owning, managing, operating
or controlling a broadcast television station or a radio station in the DMA.
Purchaser and Benedek acknowledge that the length of time and the geographic
restrictions pertaining to the prohibitions in this Section 9.11 are reasonable
and necessary for the protection of Purchaser. Purchaser and Benedek acknowledge
that Purchaser will not have an adequate remedy at law for any breach by Benedek
of this Section 9.11 and that damages flowing from such a breach are not readily
susceptible to being measured in monetary terms. Accordingly, Benedek and
Purchaser acknowledge that Purchaser shall be entitled, among other remedies, to
immediate and injunctive relief and may obtain a restraining order restraining
any threatened or further breach of this Section 9.11. Nothing in this Section
9.11 will be deemed to limit Purchaser's remedies at law or equity for any
breach by Benedek. If any court of competent jurisdiction determines that the
specified time period or geographic area set forth in this Section 9.11 is
unreasonable, arbitrary or against public policy, then a lesser time period or
smaller geographic area that is determined by the court to be reasonable,
non-arbitrary and not against public policy shall be enforced.
10. COVENANTS OF PURCHASER.
Purchaser covenants as follows:
10.1 COMPLIANCE. Purchaser shall use commercially reasonable
efforts to take or cause to be taken all action and do or cause to be done all
things necessary, proper or advisable to consummate the transactions
contemplated by this Agreement, including, without limitation, to obtain all
consents, approvals and authorizations of third parties and to make all filings
with and give all notices to third parties which may be necessary or required in
order to effectuate the transactions contemplated hereby.
10.2 CONTROL OF THE STATION. Prior to Closing, Purchaser shall
not, directly or indirectly, control, supervise, direct, or attempt to control,
supervise or direct, the operations of the Station, such operations, including
complete control and supervision of all the Station's programs, employees, and
policies, shall be the sole responsibility of Benedek until the consummation of
the Closing hereunder.
10.3 FCC CONSENT. Purchaser shall diligently prosecute the FCC
Application and use all commercially reasonable efforts to obtain the FCC
Consent as promptly and expeditiously as possible. Purchaser shall not
intentionally take or omit to take any action that will cause the FCC to deny,
delay or fail to approve the FCC Application or cause the FCC Consent not to be
granted.
10.4 FCC COMPLIANCE. Between the date hereof and the Closing
Date, Purchaser agrees that it will not take or fail to take any action within
its control which would result in material noncompliance by Purchaser with the
requirements of the Communications Act and the rules and regulations of the FCC
material to the transactions contemplated by this Agreement. Purchaser will take
no action that Purchaser knows, or has reason to know, would disqualify
Purchaser from being the assignee of the Station Licenses or the owner or
operator of the Station.
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10.5 BOOKS AND RECORDS. If the acquisition contemplated herein
is consummated, Purchaser covenants and agrees that it shall preserve and keep
the records of Benedek delivered to it hereunder for a period of three years
after the Closing Date and shall make such records available to Benedek or its
authorized representatives as reasonably required by Benedek in connection with
any legal proceedings against or governmental investigation of Benedek or in
connection with any tax examination of Benedek.
10.6 ACTION Purchaser shall not knowingly take or cause to be
taken, or fail to take or cause to be taken, any action that would cause the
conditions to the obligations of Benedek or Purchaser to consummate the
transactions contemplated hereby to fail to be satisfied or fulfilled, at or
prior to the Closing, including, without limitation, by taking or causing to be
taken, or failing to take or cause to be taken, any action that would cause the
representations and warranties made by Purchaser in Section 8 hereof to fail to
be true and correct as of the Closing in all material respects. Purchaser shall
take, or cause to be taken, all commercially reasonable actions within its power
to cause to be satisfied or fulfilled, at or prior to the Closing, the
conditions precedent to the obligations of Benedek to consummate the
transactions contemplated hereby as set forth in Section 11.2 hereof.
10.7 EMPLOYEES AND EMPLOYEE BENEFIT MATTERS. Purchaser (i)
shall offer employment as of the Closing Date to each employee set forth in
Schedule 7.14 of the Disclosure Schedule who remains employed by Benedek
immediately prior to the Closing, and each additional employee who is hired to
work at the Station following the date hereof and prior to the Closing who
remains employed by Benedek immediately prior to the Closing, except for the
General Manager of the Station and (ii) may offer employment as of the Closing
Date to the General Manager of the Station (all persons referred to in (i) above
and, if offered employment by the Purchaser, the General Manger referred to in
(ii) above, collectively, the "Transferred Employees") at a salary at least as
favorable as that provided by Benedek immediately before the execution hereof
and with such other benefits as Purchaser makes available to Purchaser's
employees of comparable status. Purchaser shall provide each Transferred
Employee credit for years of service prior to the Closing with Benedek or any
prior owner of the Station for (A) the purpose of eligibility and vesting under
Purchaser's health, vacation and other employee benefit plans and (B) any and
all pre-existing condition limitations and eligibility waiting periods under
group health plans of Purchaser, and shall cause to be credited to any
deductible or out-of-pocket expenses under any health plans of Purchaser any
deductibles or out-of-pocket expenses incurred by Transferred Employees and
their beneficiaries and dependents during the portion of the calendar year prior
to their participation in the health plans of Purchaser. Following the Closing,
Purchaser shall indemnify and hold harmless Benedek with respect to any and all
liability for the termination of employment by Purchaser of any Transferred
Employee.
10.8 FURTHER ASSURANCES. Purchaser shall, at any time, and
from time to time, after the Closing Date, but at no cost to Purchaser (other
than the salaries or wages of any of its employees), use its commercially
reasonable efforts to (i) take, or cause to be taken, all appropriate action,
and to do, all things necessary, proper or advisable to consummate the
transactions contemplated by this Agreement, including, without limitation,
executing and delivering any additional instruments, certificates or other
documents; and (ii) have the present and future officers, directors, employees
of Purchaser, including the Transferred Employees, cooperate with Benedek in
furnishing information, evidence, testimony and other assistance in connection
with any tax return filing obligations, actions, proceedings, arrangements or
disputes of any nature with respect to matters relating to all periods prior to
the Closing Date.
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11. CONDITIONS OF CLOSING.
11.1 OBLIGATION OF PURCHASER TO CLOSE. The obligation of
Purchaser to close hereunder shall be subject to the fulfillment and
satisfaction, prior to or at the Closing, of the following conditions or the
written waiver thereof by Purchaser:
11.1.1 REPRESENTATIONS. The representations and
warranties of Benedek in this Agreement shall be true and correct in all
material respects when made and shall be true and correct in all material
respects on and as of the Closing Date (other than any representation or
warranty that is expressly made as of a specified date, which shall be true and
correct in all material respects as of such specified date only) except for
changes permitted or contemplated by this Agreement, and Purchaser shall have
received a certificate to that effect dated the Closing Date and executed by an
appropriate officer of each of BBC and BLC.
11.1.2 COVENANTS. Each of the agreements and
covenants of Benedek to be performed under this Agreement at or prior to the
Closing Date shall have been duly performed in all material respects, and
Purchaser shall have received a certificate to that effect dated the Closing
Date and executed by an appropriate officer of each of BBC and BLC.
11.1.3 NO INJUNCTION. No injunction or restraining
order shall be in effect to forbid or enjoin the consummation of the
transactions contemplated by this Agreement and no Federal, state or local
statute, rule or regulation shall have been enacted which prohibits, restricts
or delays the consummation hereof.
11.1.4 STATION LICENSES. Benedek shall be the holder
of the Station Licenses and all other material governmental licenses, permits
and other authorizations listed on Schedule 7.4 of the Disclosure Schedule,
except as otherwise provided in such Schedule, and there shall not have been any
modification of any of such licenses, permits and other authorizations which
could reasonably be expected to have a Material Adverse Effect. Benedek shall
also have obtained special temporary authority or such other appropriate FCC
authorization to operate the Translator in all material respects in the manner
in which it currently operates.
11.1.5 FCC CONSENT. The FCC shall have granted its
consent to the assignment of the Station Licenses to Purchaser and such consent
will have appeared on public notice.
11.1.6 CBS CONSENT. CBS shall have consented, without
material modification to the compensation payable to the Station thereunder, to
the assignment to the Purchaser of the Affiliation Agreement.
11.1.7 LANDLORD CONSENTS. The landlords, with respect
to the Bank One Lease and the CAC Lease, shall have consented to the assignment
to the Purchaser of the Bank One Lease and CAC Lease, respectively.
11.1.8 INSTRUMENTS OF TRANSFER. Purchaser shall have
received the deeds, endorsements, assignments, drafts, checks and other
documents of transfer, conveyance and assignment contemplated by Section 2.3
valid to transfer all of Benedek's right, title and interest in and to the
Assets to Purchaser and to vest in Purchaser good, marketable and insurable
title to the Assets, subject only to
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Permitted Liens and the Liens set forth on Schedule 7.9 and 7.10 of the
Disclosure Schedule hereto and not required to be discharged (in the manner
herein provided) on or prior to the Closing Date pursuant to the terms of this
Agreement.
11.1.9 BOOKS OF ACCOUNT. Purchaser shall have
received Benedek's books of account, records, leases, indentures, contracts,
agreements, correspondence and other documents pertaining to the Assets and the
Station. Unless otherwise requested by Purchaser, delivery of the foregoing
shall not be effected by physical delivery at the Closing but by surrendering
access to the premises containing the foregoing to Purchaser.
11.1.10 FIXED ASSETS AND EQUIPMENT. The fixed assets
and equipment owned, leased or used by the Station shall be in all material
respects in good working condition and working order, normal wear and tear
excepted.
11.1.11 RESOLUTIONS. Purchaser shall have received a
certified copy of resolutions duly adopted by each of BBC and BLC authorizing
and approving the transfer of the Assets and performance by each of BBC and BLC
of their respective obligations hereunder and the other documents and
instruments to be executed and delivered in connection herewith.
11.2 OBLIGATION OF BENEDEK TO CLOSE. The obligation of Benedek
to close hereunder shall be subject to the fulfillment and satisfaction, prior
to or at the Closing, of the following conditions or the written waiver thereof
by Benedek:
11.2.1 REPRESENTATIONS. The representations and
warranties of Purchaser in this Agreement shall be true and correct in all
material respects when made and shall be true and correct in all material
respects on and as of the Closing Date (other than any representation or
warranty that is expressly made as of a specified date, which shall be true and
correct in all material respects as of such specified date only) except for
changes permitted or contemplated by this Agreement, and Benedek shall have
received a certificate to that effect dated the Closing Date and executed by an
appropriate officer of Purchaser.
11.2.2 COVENANTS. Each of the agreements and
covenants of Purchaser to be performed under this Agreement at or prior to the
Closing Date shall have been duly performed in all material respects, and
Benedek shall have received a certificate to that effect dated the Closing Date
and executed by an appropriate officer of Purchaser.
11.2.3 NO INJUNCTION. No injunction or restraining
order shall be in effect to forbid or enjoin the consummation of the
transactions contemplated by this Agreement and no Federal, state, or local
statute, rule or regulation shall have been enacted which prohibits, restricts
or delays the consummation hereof.
11.2.4 FCC CONSENT. The FCC shall have granted its
consent to the assignment of the Station Licenses to Purchaser and such consent
will have appeared on public notice.
11.2.5 ASSUMPTION AGREEMENTS. Purchaser shall have
executed and delivered the instruments of assumption contemplated by Section 3.2
hereof.
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12. REMEDIES FOR BREACH.
12.1 PURCHASER DECLINES TO CLOSE. If Purchaser shall be
entitled to decline to close, and shall decline to close the transactions
contemplated by this Agreement, Purchaser shall have no liability to Benedek
under or in any way by reason hereof, Purchaser shall be entitled to payment of
the Deposit plus interest thereon, and Purchaser shall have all such rights and
remedies against Benedek as may be available to it in law or equity or
otherwise.
12.2 PURCHASER ELECTS TO CLOSE. If Purchaser shall be entitled
to decline to close the transactions contemplated by this Agreement but
Purchaser shall elect nevertheless to close, Purchaser shall be deemed to have
waived any claims of any nature arising from the failure of Benedek to comply
with any of the terms and conditions of this Agreement of which Purchaser had
knowledge at the time of the Closing. If Purchaser elects to close the
transactions contemplated by this Agreement and Benedek wrongfully refuse so to
do, or if Benedek fails, or if a failure by Benedek is threatened, to comply
with any of its covenants and agreements contained in this Agreement, then, in
addition to all other remedies which may be available to it, Purchaser shall be
entitled to injunctive and other equitable relief, including, without
limitation, specific performance.
12.3 BENEDEK DECLINES TO CLOSE. If Benedek shall be entitled
to decline to close, and shall decline to close the transactions contemplated by
this Agreement, Benedek shall have no liability to Purchaser under or in any way
by reason hereof. If this Agreement fails to close or is terminated by reason of
or under circumstances arising from a breach by Purchaser of its
representations, warranties, or covenants hereunder in any material respect, or
if Purchaser refuses or fails to close after the conditions to its Closing have
been satisfied, in either case without Benedek being in breach of any of its
representations, warranties or covenants hereunder in any material respect,
then, in that event, Benedek shall be entitled to payment of the Deposit plus
interest earned thereon as liquidated damages, it being understood that this sum
shall constitute full payment for any and all damages suffered by Benedek by
reason of Purchaser's failure to close this Agreement. The parties acknowledge
that the damages actually suffered by Benedek would be difficult to determine,
but that the amount of the Deposit is a reasonable estimate of the damages
anticipated to be suffered by Benedek in such event.
12.4 PURCHASER FAILS TO MAKE ADDITIONAL DEPOSIT. If Purchaser
does not elect to terminate this Agreement pursuant to Section 13.2 hereof and
does not pay to the Escrow Agent the Additional Deposit contemplated by Section
4.2 hereof in a timely manner, then Benedek may terminate this Agreement and in
such event, Benedek shall be entitled to payment of the Deposit plus interest
earned thereon as liquidated damages, it being understood that this sum shall
constitute full payment for any and all damages suffered by Benedek by reason of
Purchaser's breach of this Agreement. The parties acknowledge that the damages
actually suffered by Benedek would be difficult to determine, but that the
amount of the Deposit is a reasonable estimate of the damages anticipated to be
suffered by Benedek in such event.
12.5 REMEDIES CUMULATIVE. Except as otherwise provided in
Section 12.3 hereof, the specific remedies to which any party may resort under
the terms of this Agreement are cumulative and are not intended to be exclusive
of any other remedies or means of redress to which such party may lawfully be
entitled in case of any breach, threatened breach or failure of observance or
performance of any representation, warranty, covenant, agreement or commitment
made hereunder or relating hereto or by reason of any such representation,
warranty, covenant, agreement or commitment being untrue or incorrect.
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13. TERMINATION RIGHTS.
13.1 TERMINATION BY EITHER PARTY This Agreement may be
terminated by either Purchaser or Benedek, if not then in default hereunder,
upon written notice to the other upon the occurrence of any of the following:
13.1.1 If the sale of the Assets to Purchaser
pursuant to this Agreement shall not have been effected within nine months after
the date that the FCC accepts the FCC Application for filing; or
13.1.2 If any party defaults in any material respect
in the observance or in the due and timely performance of any of its covenants
herein contained other than the obligation to close on the Closing Date;
provided, however, that termination pursuant to this paragraph shall not be
effective unless the terminating party shall have given to the party in default
at least 30 days advance notice of its claim of default so as to afford the
other party the opportunity to cure.
13.2 TERMINATION BY PURCHASER. This Agreement may be
terminated by Purchaser, if not then in default hereunder upon written notice
delivered to Benedek no later than the Effective Date, if Purchaser so elects,
in its sole and absolute discretion, based on its review of the due diligence
materials with respect to the Station and the Assets.
14. RISK OF LOSS.
14.1 Except to the extent of any loss or damage caused by acts
or omissions of Purchaser, its agents, employees, or other persons while acting
pursuant to a contract with Purchaser, the risk of loss or damage to the Assets
shall be upon Benedek at all times up to and including the Closing Date. In the
event of loss or damage except to the extent caused by acts or omissions of
Purchaser, its agents, employees, or other persons while acting pursuant to a
contract with Purchaser, Benedek shall promptly notify Purchaser thereof and
shall use commercially reasonable efforts to repair, replace and restore the
lost or damaged property to its former condition as soon as possible. If such
repair, replacement and restoration of damage not caused by Purchaser, its
agents, employees, or other persons while acting pursuant to a contract with
Purchaser has not been completed prior to the Closing Date, Purchaser may, at
its option:
14.1.1 elect to terminate this Agreement, but only if
the failure to repair, replace and restore the lost or damaged property relates
to a material portion of the Assets and continues for a period in excess of 30
calendar days;
14.1.2 elect to consummate the transactions
contemplated by this Agreement on the Closing Date in which event Benedek shall
pay to Purchaser the amount necessary to restore the lost or damaged property to
its former condition and against such obligation shall assign to Purchaser all
of Benedek's rights under any applicable insurance policies; or
14.1.3 elect to postpone the Closing Date, with prior
consent of the FCC if necessary, which consent both parties will use
commercially reasonable efforts to obtain, until a date within 15 calendar days
after Benedek gives written notice to Purchaser of completion of the repair,
replacement and restoration of such lost or damaged property. If, after the
expiration of that extension period, the lost
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or damaged property has not been adequately repaired, replaced or restored,
Purchaser may terminate this Agreement, and the parties shall be released and
discharged from any further obligation hereunder.
14.2 FAILURE OF BROADCAST TRANSMISSION. Benedek shall give
prompt written notice to Purchaser if either of the following (a "Specified
Event") shall occur: (a) the regular broadcast transmission of the Station in
the normal and ususal manner is interrupted or discontinued; or (b) the Station
is operated at less than its licensed antenna height above average terrain or at
less than 90% of its licensed effective radiated power. If any Specified Event
persists for more than 48 consecutive hours or 72 non-consecutive hours (or, in
the event of force majeure or utility failure affecting generally the market
served by the Station, 72 consecutive hours or 168 non-consecutive hours) during
any period of 30 consecutive calendar days, then Purchaser may, at its option:
(x) terminate this Agreement by written notice given to Benedek not more than 10
calendar days after the Specified Event, or (y) proceed in the manner set forth
in Section 14.3. In the event of termination of this Agreement by Purchaser
pursuant to this Section 14.2, the parties shall be released and discharged from
any further obligation hereunder.
14.3 RESOLUTION OF DISAGREEMENTS. If the parties are unable to
agree upon the extent of any loss or damage, the cost to repair, replace or
restore any lost or damaged property, the adequacy of any repair, replacement,
or restoration of any lost or damaged property, or any other matter arising
under Section 14.2, the disagreement shall be referred to a qualified consulting
communications engineer mutually acceptable to Benedek and Purchaser who is a
member of the Association of Federal Communications Consulting Engineers, whose
decision shall be final, binding upon and non-appealable by the parties, and
whose fees and expenses shall be shared equally by Benedek and Purchaser.
15. INDEMNIFICATION.
15.1 INDEMNIFICATION OF BENEDEK. Purchaser shall defend and
promptly indemnify Benedek and save and hold it harmless from, against, for and
in respect of and shall pay any and all damages, losses, obligations,
liabilities, claims, encumbrances, deficiencies, costs and expenses, including,
without limitation, reasonable attorneys' fees and other costs and expenses
incident to any action, investigation, claim or proceeding (all hereinafter
collectively referred to as "Losses") suffered, sustained, incurred or required
to be paid by Benedek by reason of (i) the Assumed Contracts, (ii) any
representation or warranty of Purchaser contained herein being untrue or
incorrect in any respect, (iii) the operation of the Station after the Closing
Date or (iv) any breach or failure of observance or performance of any covenant,
agreement or commitment made by Purchaser hereunder or under any document or
instrument relating hereto or executed pursuant hereto. In addition, Purchaser
shall indemnify Benedek with respect to any Environmental Claims as provided in
Section 7.16.2; provided such indemnification shall be governed by the
procedures set forth in Sections 15.3 and 15.4.
15.2 INDEMNIFICATION OF PURCHASER.
15.2.1 Benedek shall defend and promptly indemnify
Purchaser, and save and hold it harmless from, against, for and in respect of
and pay any and all Losses suffered, sustained, incurred or required to be paid
by Purchaser by reason of (i) any and all obligations and liabilities of Benedek
with respect to the Assets and the Excluded Liabilities; (ii) any representation
or warranty contained herein being untrue or incorrect in any material respect;
(iii) the operation of the Station on or prior to the Closing Date (other than
the Assumed Contracts); (iv) any breach or failure of observance or performance
of any covenant, agreement or commitment made by Benedek hereunder or under any
document or instrument relating hereto
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or executed pursuant hereto; or (v) any liability or obligation of Benedek for
Federal, state, local or other taxes.
15.2.2 Notwithstanding anything to the contrary in
this Agreement, Purchaser shall not be entitled to indemnification under Section
15.2.1:
15.2.2.1 in connection with any Loss to the
extent of any net tax benefit realized (by reason of a tax deduction, basis
reductions, shifting of income, credits and/or deductions or otherwise) by
Purchaser in connection with such Loss;
15.2.2.2 with respect to any claim for
indemnification hereunder, unless Purchaser has given Benedek written notice of
such claim prior to the eighteen month anniversary of the Closing Date, except
for any claim for indemnification arising from a claim by the United States of
America, the State of Texas or any other governmental unit, body or agency with
taxing authority relating to taxes or interest or penalties in connection
therewith which claim may be asserted at any time;
15.2.2.3 if the existence of such liability,
breach of representation, warranty or covenant or falsity of the representation
upon which such liability would be based is known by Purchaser prior to Closing
and by reason of the existence thereof Purchaser would have been entitled to
decline to close the transactions contemplated by this Agreement;
15.2.2.4 for any Losses as to which
Purchaser otherwise may be entitled to indemnity hereunder based upon a claim of
breach of a representation or warranty by Benedek contained in Section 7 of this
Agreement (without giving effect to this Section), until such Losses exceed
$50,000, and then only for such Losses in excess of in the aggregate $50,000;
15.2.2.5 for any Losses as a result of
Environmental Claims as provided in Section 7.16.2; and
15.2.2.6 for any Losses in excess of
$8,000,000, all of such Losses in excess of $8,000,000 being the responsibility
of Purchaser.
15.2.3 If with respect to a claim of indemnification
that Purchaser asserts against Benedek hereunder, Purchaser also has an
enforceable right of indemnification against any third party (contractual or
otherwise), Purchaser shall use reasonable efforts to pursue such claims or, in
the event Benedek pays or otherwise discharges such claim of Purchaser,
Purchaser shall assign to Benedek without recourse to Purchaser the claims
against such third party.
15.2.4 Benedek shall also indemnify Purchaser and
save and hold it harmless from, against, for and in respect of any and all fines
or penalties, if any, assessed by the FCC by reason of the matter described in
footnote 2 to Schedule 7.4 of the Disclosure Schedule. After the Closing Date,
in connection with obtaining from the FCC a license modification for the
Translator, if necessary, to operate the Translator in the manner in which it
currently operates, at the Purchaser's option, Benedek shall (i) pay the
reasonable attorneys' fees and expenses incurred by the Purchaser after the
Closing, up to a maximum aggregate amount of $10,000 to obtain such license
modification for the Translator or (ii) retain FCC counsel of Benedek's choice
and at its sole expense, including without limitation, attorneys' fees and
engineering expenses, to undertake to obtain such license modification.
27
<PAGE>
15.3 PROCEDURES FOR INDEMNIFICATION. If a party (an
"Indemnified Party") shall claim to have suffered a Loss for which
indemnification is available under Section 15.1 or 15.2, as the case may be, the
Indemnified Party shall notify the other party (the "Indemnifying Party") in
writing of such claim within the applicable time periods. The Indemnified Party
shall use reasonable efforts to describe in such notice the nature of such
claim, the facts and circumstances that give rise to such claim and the amount
of such claim if reasonably ascertainable at the time such claim is made.
15.4 PROCEDURES FOR THIRD-PARTY CLAIMS.
15.4.1 Any Indemnified Party seeking indemnification
pursuant to this Section 15 in connection with any legal proceeding, action or
claim, instituted by a third party, including any governmental entity (a
"Third-Party Claim"), shall give the Indemnifying Party from whom
indemnification with respect to such claim is sought (i) prompt written notice
of such Third-Party Claim and (ii) copies of all documents and information
relating to any such Third-Party Claim; provided, however, that the failure by
the Indemnified Party to so notify or provide copies to the Indemnifying Party
shall not relieve the Indemnifying Party from any liability to the Indemnified
Party for any liability hereunder except to the extent that such failure shall
have prejudiced the defense of such Third-Party Claim.
15.4.2 The Indemnifying Party shall have the right
and obligation, at its sole expense, to defend against, negotiate, settle or
otherwise deal with any Third-Party Claim with respect to which it is the
Indemnifying Party and to be represented by counsel of its own choice, and the
Indemnified Party will not admit any liability with respect thereto or settle,
compromise, pay or discharge the same without the consent of the Indemnifying
Party, which consent shall not be unreasonably withheld, so long as the
Indemnifying Party is contesting or defending the same with reasonable diligence
and in good faith; provided, however, that the Indemnified Party may participate
in any proceeding with counsel of its choice and at its expense; provided
further, that the Indemnifying Party may not enter into a settlement of any such
Third-Party Claim without the consent of the Indemnified Party, which consent
shall be not unreasonably withheld, unless such settlement requires no more than
a monetary payment for which the Indemnified Party is fully indemnified by the
Indemnifying Party or involves other matters not binding upon the Indemnified
Party; and provided further that, in the event the Indemnifying Party fails
timely to defend against, negotiate, settle or otherwise deal with such
Third-Party Claim as provided above in this Section 15.4.2, then the Indemnified
Party shall have the right to defend against, negotiate, settle or otherwise
deal with the Third- Party Claim in such manner as the Indemnified Party deems
appropriate, in its sole discretion, and may recover subject to the limitations
set forth in Section 15.2.2, all other amounts paid as a result of such Third
Party Claim or compromise or settlement thereof.
15.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Benedek and Purchaser contained in this
Agreement, or in any certificate, instrument or other document delivered by
Benedek or Purchaser pursuant to this Agreement or in connection with the
transactions contemplated hereby, shall survive the Closing for a period of
eighteen (18) months. No claim shall be made or action brought by any party
hereto after the eighteen month anniversary of the Closing for the breach of, or
inaccuracy in, any representation or warranties contained in this Agreement, or
in any certificate, instrument or other document delivered pursuant to this
Agreement or in connection with the transactions contemplated hereby. None of
the covenants and agreements of Benedek and Purchaser contained in this
Agreement, or in any certificate, instrument or other document delivered by
Benedek or Purchaser pursuant to this Agreement or in connection with the
transactions contemplated hereby, shall survive the Closing, except to the
extent such covenants and agreements by their terms contemplate performance
after the
28
<PAGE>
Closing. No claim shall be made or action brought by any party hereto after the
Closing for the breach of any covenant or agreement contained in this Agreement,
or in any certificate, instrument or other document delivered pursuant to this
Agreement or in connection with the transactions contemplated hereby, except
with respect to those covenants and agreements that by their terms contemplate
performance after the Closing.
16. BROKERS. Benedek, on the one hand, and Purchaser, on the other,
covenant and represent to each other that they had no dealings with any broker
or finder in connection with this Agreement or the transactions contemplated
hereby and no broker, finder or other Person is entitled to receive any broker's
commissions or finder's fee or similar compensation in connection with any such
transaction. Each of the parties agrees to defend, indemnify and hold harmless
the other from, against, for and in respect of any and all losses sustained by
the other as a result of any liability or obligation to any broker or finder on
the basis of any arrangement, agreement or acts made by or on behalf of such
party with any Person whatsoever.
17. MISCELLANEOUS.
17.1 ENTIRE AGREEMENT. This Agreement and the Confidentiality
Agreement dated November 16, 1999 constitute the entire agreement of the parties
(and supersedes any prior understanding of the parties) with respect to the
subject matter hereof. The representations, warranties, covenants and agreements
set forth in this Agreement, the Confidentiality Agreement and in any financial
statements, schedules or exhibits delivered pursuant hereto constitute all the
representations, warranties, covenants and agreements of the parties hereto and
upon which the parties have relied and except as may be specifically provided
herein or in the Confidentiality Agreement, no change, modification, amendment,
addition or termination of this Agreement or any part thereof shall be valid
unless in writing and signed by or on behalf of the party to be charged
therewith.
17.2 NOTICES. Any and all notices or other communications or
deliveries required or permitted to be given or made pursuant to any of the
provisions of this Agreement shall be deemed to have been duly given or made for
all purposes if sent by certified or registered mail, return receipt requested
and postage prepaid, hand delivery, overnight delivery service or telephone
facsimile:
If to Purchaser, at:
c/o ICA Broadcasting I, Ltd.
700 North Grant Street
Suite 600
Odessa, TX 79761
Facsimile: (915) 334-8881
Attention: John Bushman, President
With a copy to:
Shafer, Davis, Ashley, O'Leary & Stoker
700 North Grant Street, Second Floor
Nations Bank Building
P.O. Drawer 1552 Ector Co.
Odessa, TX 79760
Telephone: (915) 332-0893
29
<PAGE>
Facsimile: (915) 335-8329
Attention: Richard E. Buck, Esq.
If to Benedek c/o Benedek Broadcasting Corporation at:
100 Park Avenue
Rockford, Illinois 61101
Telephone: (815) 987-5350
Facsimile: (815) 987-5335
Attention: President
With a copy to:
Shack & Siegel, P.C.
530 Fifth Avenue
New York, New York 10036
Telephone: (212) 782-0700
Facsimile: (212) 730-1964
Attention: Paul S. Goodman, Esq.
or at such other address as any party may specify by notice given to the other
party in accordance with this Section 17.2. The date of the giving of any notice
sent by mail shall be three business days following the date of the posting of
the mail, if delivered in person, the date delivered in person or the next
business day following delivery to an overnight delivery service or the date
sent by telephone facsimile.
17.3 PUBLIC ANNOUNCEMENT. Except for any disclosures or
announcements which Benedek or Purchaser shall be required to make pursuant to
the Communications Act or the rules and regulations of the FCC, or disclosures
or announcements required to be made pursuant to the rules and regulations of
the Securities and Exchange Commission or any other Federal or state
governmental agency, Purchaser and Benedek will jointly prepare and determine
the timing of any press release or other announcement to the public (including
any announcement to the employees of the Station) concerning the execution of
this Agreement and the transactions contemplated herein. Except as provided for
in the preceding sentence, no party hereto will issue any press release or make
any other public announcement relating to the execution of this Agreement or the
transactions contemplated herein, except that any party may make any disclosure
required to be made by it under applicable law if it determines in good faith
that it is appropriate to do so and gives prior notice and a reasonable time to
comment to the other party hereto. Notwithstanding the foregoing, neither party
will make any public disclosure relating to the execution of this Agreement
until after the Effective Date and then only in accordance with this Section.
17.4 NO WAIVER. No waiver of the provisions hereof shall be
effective unless in writing and signed by the party to be charged with such
waiver. No waiver shall be deemed a continuing waiver in respect of any
subsequent breach or default, either of similar or different nature, unless
expressly so stated in writing.
17.5 GOVERNING LAW. This Agreement shall be governed,
interpreted and construed in accordance with the laws of the State of Texas
applicable to contracts to be performed entirely within that State. Should any
clause, section or part of this Agreement be held or declared to be void or
illegal for any
30
<PAGE>
reason, all other clauses, sections or parts of this Agreement which can be
effected without such illegal clause, section or part shall nevertheless
continue in full force and effect.
17.6 EXPENSES. Except as otherwise provided herein, Purchaser
and Benedek shall each bear their own costs and expenses in connection with this
transaction. If attorneys' fees or other costs are incurred to secure
performance of any obligations hereunder, or to establish damages for the breach
thereof or to obtain any other appropriate relief, whether by way of prosecution
or defense, the prevailing party will be entitled to recover reasonable
attorneys' fees and costs incurred in connection therewith.
17.7 COMPUTATION OF TIME. Whenever any time period provided
for in this Agreement is measured in "business days", there shall be excluded
from such period each day that is a Saturday, Sunday, recognized federal legal
holiday, or other day on which the FCC's office are closed and are not reopened
prior to 5:30 p.m. Washington, D.C. time. In all other cases all days shall be
counted.
17.8 BINDING AGREEMENT. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that no party may assign any of its rights or
delegate any of its duties under this Agreement without the prior written
consent of the other party hereto. Notwithstanding the foregoing, Purchaser may
assign its rights under this Agreement to an Affiliate of Purchaser, provided
that (i) no such assignment shall be made after (a) the earlier of December 22,
1999 or (b) the filing by Purchaser of the FCC Application and (ii) such
assignment shall not relieve Purchaser of its obligations under this Agreement.
17.9 HEADINGS. The headings or captions under sections of this
Agreement are for convenience and reference only and do not in any way modify,
interpret or construe the intent of the parties or effect any of the provisions
of this Agreement.
17.10 COUNTERPARTS. This Agreement may be executed in one or
more counterparts each of which when taken together shall constitute one
agreement.
[Remainder of page intentionally left blank]
31
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed on the date and year first above written.
ICA BROADCASTING I, LTD.
By: ICA BROADCASTING, LLC, ITS GENERAL PARTNER
By: /s/ John Bushman
-----------------------------------------
Name: John Bushman
Title: Chairman
BENEDEK BROADCASTING CORPORATION
By: /s/ Ronald L. Lindwall
-----------------------------------------
Name: Ronald L. Lindwall
Title: Senior Vice President-Finance and Chief
Financial Officer
BENEDEK LICENSE CORPORATION
By: /s/ Ronald L. Lindwall
-----------------------------------------
Name: Ronald L. Lindwall
Title: Senior Vice President-Finance and Chief
Financial Officer
UNWIND AGREEMENT
This unwind agreement (the "Unwind Agreement"), is made and entered
into as of this 21st day of March, 2000, by and between Benedek Broadcasting
Corporation ("BBC"), Benedek License Corporation ("BLC") (collectively,
"Benedek") and ICA Broadcasting I, Ltd. ("Purchaser"). Capitalized terms used
herein without definition have the meaning provided therefor in the Purchase
Agreement (as defined herein).
WITNESSETH:
WHEREAS, Purchaser and Benedek entered into an Asset Purchase
Agreement, dated as of December 15, 1999, (the "Purchase Agreement") pursuant to
which Benedek agreed to transfer, assign, convey and deliver to Purchaser, and
Purchaser agreed to acquire and accept, subject to the approval of the FCC,
among other things, all of the right, title and interest of Benedek in and to
the Assets, which include, among other things, the Station Licenses;
WHEREAS, the FCC Consent has been granted;
WHEREAS, Benedek and Purchaser desire to consummate the Closing prior
to the date by which the FCC Consent shall become a Final Order; and
WHEREAS, Benedek and Purchaser have agreed to be governed by the terms
of this Unwind Agreement in the unlikely event that the FCC Consent should fail
to become a Final Order.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and for other good and valuable consideration, the receipt and adequacy
of which is
<PAGE>
hereby acknowledged, the parties hereto, intending to be legally bound, hereby
covenant and agree as follows:
1. Appeal Period.
a. Benedek and Purchaser recognize that there is a thirty-day
period after the FCC publishes the FCC Consent during which an aggrieved party
can appeal from or seek reconsideration by the FCC of the FCC Consent (the
"Appeal Period"). The Appeal Period will expire on April 15, 2000. Despite the
opportunity for an appeal to be filed, the parties have agreed to consummate the
Closing prior to expiration of the Appeal Period.
b. Benedek and Purchaser further recognize that there is a
forty-day period after the FCC publishes the FCC Consent during which the FCC on
its own motion can reconsider the FCC Consent (the "Reconsideration Period").
The Reconsideration Period will expire on April 25, 2000. Despite the
possibility that the FCC could seek to reconsider the FCC Consent on its own
motion, the parties have agreed to consummate the Closing prior to the
expiration of the Reconsideration Period.
c. Benedek and Purchaser agree that at their own cost and
expense they will cooperate in the defense of any appeal filed or
reconsideration taken which challenges Benedek's right to assign the Assets,
including, without limitation, the Station Licenses to Purchaser or Purchaser's
right to acquire and accept such assignment. Additionally, Benedek and Purchaser
agree that neither party shall take any action which would impede the FCC
Consent from becoming a Final Order.
2
<PAGE>
d. Benedek and Purchaser agree that if, as a result of an appeal filed
within the Appeal Period or as a result of the action of the FCC on its own
motion within the Reconsideration Period, the FCC Consent shall be revoked by
the FCC or an appeals court having jurisdiction, and the revocation shall have
become final and no further appeal is possible, Benedek and Purchaser will
immediately do any and all things, execute and deliver any and all writings,
including preparation and execution of FCC applications, and take any and all
steps which may be required to restore to each of them their respective rights,
title and interests in and to the Assets and the consideration paid therefor
enjoyed by each of them immediately prior to the consummation of the Closing.
Benedek and Purchaser agree that all of the Assets assigned by Benedek to
Purchaser in connection with the consummation of the Closing shall be reassigned
to Benedek by Purchaser, and all consideration paid to Benedek by Purchaser for
the Assets shall be returned by Benedek to Purchaser.
2. Obligations in the Event of an Appeal. Benedek and Purchaser agree
that Purchaser shall have the right to control the defense of any appeal filed
which challenges Purchaser's qualifications to hold the Station Licenses.
Benedek and Purchaser agree that Benedek shall have the right to control the
defense of any appeal filed which challenges Benedek's qualifications to assign
the Station Licenses to Purchaser. The parties will jointly control the defense
of any appeal which challenges both parties' qualifications. Each party will
diligently take all steps that it deems necessary, proper or desirable to
expedite the resolution of an appeal and to obtain a Final Order approving the
transfer of the Station Licenses to Purchaser. The parties will consult with
each other in formulating the manner in which to defend an appeal. The parties
will cooperate with
3
<PAGE>
each other in preparing and executing any documents necessary to defend the
qualifications of either of them during an appeal, such cooperation to include
the full and complete disclosure to the other party of all facts known to such
party regarding the operations of the Station and the Assets. However, neither
party will take any steps, without the written consent of the other party, to
file separate documents for purposes of defending an appeal or initiate contact
with a third-party filing an appeal, unless such action is required by law (in
which event, the acting party will promptly notify the other party of such
action and provide to such other party copies of all documents and instruments
delivered in connection with such action). Each party will make its respective
FCC counsel available to participate in defending an appeal.
3. Cost of Appeal and Settlement. Benedek shall pay the full cost of
defending or settling any appeal that alleges that Benedek was not qualified to
assign the Station Licenses to Purchaser. Purchaser shall pay the full cost of
defending or settling any appeal alleging that Purchaser is not qualified to
hold the Station Licenses. Purchaser and Benedek shall share equally in the cost
of defending or settling an appeal which alleges that Benedek was not qualified
to assign the Station Licenses to Purchaser and Purchaser is not qualified to
hold the Station Licenses. Such costs so shared shall not include any overhead
expenses or charges for time of a party's own employees or use of a party's own
equipment.
4. Operation of Station During Appeal Period. So long as this Unwind
Agreement is in effect, Purchaser will operate the Station in a normal and
prudent manner and will defend the Station in any action challenging the
Purchaser's operation of the Station which is brought before the FCC. Purchaser
will use commercially reasonable
4
<PAGE>
efforts to preserve the business and goodwill of the Station. If the Assets are
assigned back to Benedek pursuant to this Unwind Agreement, the tangible
personal property shall be delivered in the same condition as received,
reasonable wear and tear excepted. Benedek further acknowledges that it may be
impossible to restore the status quo ante completely as a result of the passage
of time and the resultant consumption of certain of the Assets acquired by
Purchaser. During this period of operation of the Station by Purchaser, the
Station shall be deemed to have been operated for the benefit of Purchaser and
Purchaser shall be entitled to receive and retain all monies earned from the
operation of the Station until assignment of the Assets back to Benedek.
Further, Purchaser shall be obligated to pay and shall pay all of the
obligations incurred by Purchaser in the operation of the Station during the
same time period. Purchaser shall be entitled to collect and retain all proceeds
of any account receivable generated during the same time period. So long as this
Unwind Agreement is in effect, if the repair or replacement of equipment
necessary for the continued operation of the Station is necessary, reasonable
wear and tear excepted, Benedek shall, on the date of assignment of the Assets
back to Benedek, reimburse Purchaser for all costs associated with such
equipment to the extent Benedek receives a benefit therefrom.
5. Notices. Any and all notices or other communications or deliveries
required or permitted to be given or made pursuant to any of the provisions of
this Unwind Agreement shall be deemed to have been duly given or made for all
purposes if sent by certified or registered mail, return receipt requested and
postage prepaid, hand delivery, overnight delivery service or telephone
facsimile:
5
<PAGE>
(a) If to Purchaser, to:
c/o ICA Broadcasting I, Ltd.
700 North Grant Street
Suite 600
Odessa, TX 79761
Facsimile: (915) 334-8881
Attention: John Bushman, President
with a copy to (that shall not constitute Notice):
Shafer, Davis, Ashley, O'Leary & Stoker
700 North Grant Street, Second Floor
Nations Bank Building
P.O. Drawer 1552 Ector Co.
Odessa, TX 79760
Telephone: (915) 332-0893
Facsimile: (915) 335-8329
Attention: Richard E. Buck, Esq.
(b) If to Benedek c/o Benedek Broadcasting Corporation,
to:
100 Park Avenue
Rockford, IL 61101
Telephone: (815) 987-5350
Facsimile: (815) 987-5353
Attention: President
With a copy to (which shall not constitute Notice):
Shack & Siegel, P.C.
530 Fifth Avenue
New York, NY 10036
Telephone: (212) 782-0700
Facsimile: (212) 730-1964
Attention: Paul S. Goodman, Esq.
or at such other address as any party may specify by notice given to the other
party in accordance with this Section 5. The date of the giving of any notice
sent by mail shall be three business days following the date of the posting of
the mail, if delivered in person, the date delivered in person or the next
business day following delivery to an overnight delivery service or the date
sent by telephone facsimile.
6
<PAGE>
6. Survival. This Unwind Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.
7. Governing Law. This Unwind Agreement shall be governed, interpreted
and construed in accordance with the laws of the State of Texas applicable to
contracts to be performed entirely within that State. Should any clause, section
or part of this Unwind Agreement be held or declared to be void or illegal for
any reason, all other clauses, sections or parts of this Unwind Agreement which
can be effected without such illegal clause, section or part shall nevertheless
continue in full force and effect.
8. Termination of Unwind Agreement. Upon such date as the FCC Consent
shall have become a Final Order, this Unwind Agreement shall terminate, and any
obligations or liabilities imposed upon Benedek or Purchaser pursuant to this
Unwind Agreement shall terminate.
9. Purchase Agreement In Effect. Except to the extent required by the
express provisions of this Unwind Agreement, the Purchase Agreement shall remain
in full force and effect according to its terms.
10. Amendment. This Unwind Agreement, together with the Purchase
Agreement, contain all of the terms agreed upon with respect to the subject
matter hereof and supersede all prior agreements and understandings among the
parties with respect thereto; provided, however, to the extent, any of the terms
of this Unwind Agreement are inconsistent with the Purchase Agreement, the
Purchase Agreement shall be controlling. This Unwind Agreement may not be
altered or amended except by an instrument in writing signed by the party
against whom enforcement of any such change is sought.
7
<PAGE>
11. Counterpart. This Unwind Agreement may be signed by any number of
counterparts with the same effect as if the signature on each such counterpart
were on the same instrument.
IN WITNESS WHEREOF, the parties have caused this Unwind Agreement to be
duly executed by their duly authorized officers, all as of the day and year
first above written.
ICA BROADCASTING I, LTD.
By: ICA BROADCASTING, LLC, its general partner
By: /s/ John C. Nichols
--------------------------------------
John C. Nichols
Executive Vice President
BENEDEK BROADCASTING CORPORATION
By: /s/ Ronald L. Lindwall
--------------------------------------
Ronald L. Lindwall
Senior Vice President and Chief Financial
Officer
BENEDEK LICENSE CORPORATION
By: /s/ Ronald L. Lindwall
--------------------------------------
Ronald L. Lindwall
Senior Vice President and Chief Financial
Officer
8
<PAGE>
Exhibit 21
SUBSIDIARIES OF BENEDEK COMMUNICATIONS CORPORATION
At December 31, 1999
<TABLE>
<CAPTION>
Subsidiary Jurisdiction Ownership
<S> <C> <C>
Benedek Broadcasting Corporation Delaware 100%
owned
by
Benedek
Communications
Corporation
Benedek License Corporation Delaware 100%
owned
by
Benedek
Communications
Corporation
Benedek Cable, Inc. Delaware 100%
owned
by
Benedek
Communications
Corporation
The WMTV Trust Wisconsin 100%
beneficially
owned
by
Benedek
Broadcasting
Corporation
WMTV License Co., LLC Delaware 100%
owned
by
Phillip
A.
Jones
solely
in
his
capacity
as
trustee
Benedek Interactive Media, Inc. Delaware 100%
owned
by
Benedek
Broadcasting
Corporation
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 1017522
<NAME> BENEDEK COMMUNICATIONS CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 3,278
<SECURITIES> 0
<RECEIVABLES> 30,280
<ALLOWANCES> 683
<INVENTORY> 0
<CURRENT-ASSETS> 41,063
<PP&E> 150,972
<DEPRECIATION> 88,190
<TOTAL-ASSETS> 457,776
<CURRENT-LIABILITIES> 20,656
<BONDS> 426,279
<COMMON> 74
181,631
0
<OTHER-SE> 197,568
<TOTAL-LIABILITY-AND-EQUITY> 457,776
<SALES> 158,197
<TOTAL-REVENUES> 161,884
<CGS> 21,478
<TOTAL-COSTS> 21,478
<OTHER-EXPENSES> 118,981
<LOSS-PROVISION> 643
<INTEREST-EXPENSE> 44,325
<INCOME-PRETAX> (17,154)
<INCOME-TAX> 1,377
<INCOME-CONTINUING> (15,777)
<DISCONTINUED> 0
<EXTRAORDINARY> (12,510)
<CHANGES> 0
<NET-INCOME> (28,287)
<EPS-BASIC> (6.39)
<EPS-DILUTED> (6.39)
</TABLE>
