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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _______
Commission file number 333-29555
STC BROADCASTING, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2676358
(State of Incorporation) (I.R.S. Employer Identification No.)
3839 4th Street N., Suite 420
St. Petersburg, FL 33703
(727) 821-7900
(Address, including zip code, and
telephone number, including area code, of
registrant's principal executive offices)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- --------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in any definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of March 22, 1999, STC Broadcasting, Inc. had 1000 shares of common stock par
value $.01 issued and outstanding all of which is held by an affiliate of the
registrant.
DOCUMENTS INCORPORATED BY REFERENCE
None
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PART I
ITEM 1. BUSINESS
STC Broadcasting, Inc. was incorporated on November 1, 1996 and
commenced operations on March 1, 1997. The Company and its subsidiaries
comprise a wholly owned subsidiary of Sunrise Television Corp. (Sunrise). The
Company currently owns and operates the following broadcast stations
(collectively the Stations):
<TABLE>
<CAPTION>
Network
Station Acquisition Date Market Affiliation
------- ---------------- ------ -----------
<S> <C> <C> <C>
WEYI March 1, 1997 Flint, Saginaw-Bay City, Michigan NBC
WROC March 1, 1997 Rochester, New York CBS
WTOV March 1, 1997 Wheeling, West Virginia and
Steubenville, Ohio NBC
WJAC October 1, 1997 Johnstown, Altoona, State College,
Pennsylvania NBC
KRBC/KACB April 1, 1998 Abilene-Sweetwater, Texas and
San Angelo, Texas NBC
WDTN June 1, 1998 Dayton, Ohio ABC
WNAC June 1, 1998 Providence, Rhode Island and
New Bedford, Massachusetts FOX
KVLY November 1, 1998 Fargo-Valley City, North Dakota NBC
KFYR and
Satellites November 1, 1998 Minot-Bismarck-Dickinson, North Dakota NBC
WUPW February 1, 1999 Toledo, Ohio FOX
</TABLE>
The Company acquired WEYI, WROC, KSBW, and WTOV (collectively, the
Jupiter/Smith Stations) from Jupiter/Smith TV Holdings, L.P. (Jupiter/Smith)
and Smith Broadcasting Partners, L.P. (SBP) for approximately $163,176,000. SBP
is a partnership between Smith Broadcasting Group, Inc. (SBG), Sandy
DiPasquale, John Purcell, and David Fitz. The majority owner of SBG is Robert
Smith. These four individuals operated the Jupiter/Smith Stations from January
1996 until the sale to the Company on March 1, 1997. All four individuals
continue as senior management of the Company.
The Company acquired all of the outstanding stock of WJAC,
Incorporated on October 1, 1997 for approximately $36,078,000 including working
capital of $1,400,000. WJAC, Incorporated owned and operated WJAC, the NBC
affiliate for Johnstown, Pennsylvania.
On April 1, 1998, the Company acquired 100% of the outstanding stock
of Abilene Radio and Television Company (ARTC) for approximately $8,172,000.
ARTC operated television stations KRBC and KACB, NBC affiliates for Abilene and
San Angelo, Texas.
In a series of transactions, the Company has acquired certain assets
from Hearst-Argyle Stations, Inc., (Hearst) through transactions structured
as an exchange of assets (the Hearst
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Transaction). On February 3, 1998, the Company agreed to acquire WPTZ, WNNE,
and a local marketing agreement (LMA) for WFFF from Sinclair Broadcast Group,
Inc. for $72,000,000, with the intention of using these assets in the Hearst
Transaction. WPTZ and WNNE are the NBC affiliates and WFFF is the FOX
affiliate serving the Burlington, Vermont, and Plattsburgh, New York television
market. On February 18, 1998, the Company agreed with Hearst to trade KSBW, the
NBC affiliate for Salinas, California, WPTZ, and WNNE for WDTN, the ABC
affiliate in Dayton, Ohio, WNAC, the FOX affiliate in Providence, Rhode Island,
WNAC's interest in a Joint Marketing Programming Agreement with WPRI, the CBS
affiliate in Providence, Rhode Island, and approximately $22,000,000 in cash.
On April 24, 1998, the Company completed a purchase of non-license assets (all
operating assets other than FCC licenses and other minor equipment) of WPTZ,
WNNE, and WFFF for $70,000,000. WFFF was sold by the Company to a related party
on April 24, 1998 (see Item 13 "Certain Relationships and Related
Transactions"). Funds to complete this acquisition were provided by Hearst. The
assets acquired were pledged to Hearst under the related loan agreement and the
loan was repaid on July 3, 1998.
Effective June 1, 1998, the Company received via contract rights the
benefits of the operation of stations WDTN and WNAC and its joint operating
agreement with WPRI. The Company recorded a book gain of approximately
$17,457,000 on the asset swap. On July 3, the transaction with Hearst was
closed.
On November 1, 1998, the Company acquired substantially all of the
assets of KVLY-TV, KFYR-TV, KUMV-TV, KMOT-TV, and KQCD-TV (the Meyer
Stations) from Meyer Broadcasting for approximately $65,259,000. The Meyer
Stations are all NBC affiliates serving Fargo, Bismarck, Williston, Minot, and
Dickinson, North Dakota.
On February 5, 1999, the Company acquired substantially all the assets
of WUPW-TV from Raycom Media, Inc. for approximately $74,400,000 including fees
and expenses. WUPW, Channel 36, is the FOX-affiliated station serving Toledo,
Ohio.
The Company was organized by management and Hicks, Muse, Tate & Furst
Incorporated (Hicks Muse) with the goal of becoming a leading owner and
operator of network-affiliated television stations, serving select
middle-to-small markets (i.e., those DMAs ranked from approximately 50 to 150
by the A. C. Nielsen Company (Nielsen)).
The markets in which the Company currently operates offer geographic
diversity that reduces the impact on the Company of changes in respective
market economies and provide favorable competitive operating environments. The
Company believes that the Stations are well positioned to achieve long-term
growth in audience share and revenue share because of: (i) the limited
competition for viewers from other over-the-air television broadcasters in
these markets; (ii) the strength of the Company's management; and (iii) the
Stations' favorable and/or improving rankings within their DMAs. Management
believes that the limited number of other television broadcast stations in
these markets enables the Company to purchase syndicated programming at
favorable rates.
The following table summarizes additional information regarding each
Station and its respective DMA.
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<TABLE>
<CAPTION>
Number of
Market Commercial Station Station
Station/Channel: DMA Revenue TV Stations Rank in Audience
DMA Rank(1) Rank(1) in DMA(1) DMA(2) Share(2)
- -------------------------------------- ------- ------- ----------- ------- --------
<S> <C> <C> <C> <C> <C>
WNAC/64 50 55 6 4 6
Providence, Rhode Island and
New Bedford, Massachusetts
WDTN/2 54 52 5 2 16
Dayton, Ohio
WEYI/25:
Flint-Saginaw-Bay City, Michigan 64 69 4 3 11
WUPW-TV/36
Toledo, Ohio 66 67 5 4 7
WROC/8:
Rochester, New York 77 61 4 1 19
WJAC/8:
Johnstown, Pennsylvania 93 114 4 1 18
KVLY/11
Fargo, North Dakota 115 128 4 1 18
WTOV/9:
Wheeling, West Virginia
Steubenville, Ohio 138 150 2 1 21
KFYR and satellites
Minot-Bismarck-Dickinson,
North Dakota 150 145 (3) 3 1 28
KRBC/9
Abilene, Texas 159 161 4 3 12
KACB/3
San Angelo, Texas 195 173 4 3 7
</TABLE>
(1) BIA's Investing in Television 1998, 4th Edition
(2) As of November 1998, Sunday through Saturday 6 a.m to 2 a.m. Nielsen
Household Shares
(3) Satellite stations are counted as one with the main station
BUSINESS STRATEGY
The Company's business strategy is to acquire and operate television
broadcast stations and maximize operating cash flow through both revenue growth
and improved cost control. The Company believes that revenue growth and cost
control may be achieved simultaneously, principally because many of the costs
associated with operating a television station are fixed. The Company's
management team has successfully implemented this strategy with other
television broadcast stations as well as with the Stations. Key components of
the Company's business strategy include:
Management.
The Company believes that one of its most important assets is its
experienced management team. General managers are responsible for the
day-to-day operations of their respective stations. The Company believes that
the autonomy of its station management enables it to attract top quality
managers capable of implementing the Company's aggressive marketing strategy
and reacting to competition in the local markets. As an incentive, a portion of
each station manager's compensation is based on the performance of the station
for which he or she is responsible.
Controlling Costs.
The Company seeks to selectively reduce costs at acquired stations
without adversely affecting growth. After acquiring a station, management
implements a cost control strategy stressing the elimination of unnecessary
costs, budgeting, accountability and disciplined credit and collection
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procedures. Management believes that it can create an operating structure that
will profitably accommodate revenue growth.
Intensifying Sales Efforts.
The Company has implemented an aggressive approach to sales and
marketing designed to increase market revenue share. Management believes that
increases in revenue share are not necessarily dependent on increases in
audience share.
Building on Local News Franchises.
The Company seeks to increase revenues by developing a highly-rated,
well-differentiated local news product designed to build viewer loyalty and
target specific demographic audiences that appeal to advertiser.
Managing Program Selection.
Each Station seeks to cost effectively purchase first-run and
off-network syndicated programming to target specific demographic audiences.
The Stations have been able to purchase syndicated programming at rates that
management believes are attractive, in part because of the limited competition
for such programming in the Stations' DMAs.
Positioning and Branding Stations.
The Company seeks to increase revenues by developing and maintaining a
unique, local "brand image" for each Station within its respective market with
which viewers and advertisers can identify. This strategy integrates local
news, programming, promotion, and sales efforts for each Station based on its
market's demographics, competition, dynamics, and opportunities.
Pursuing Selective Acquisitions.
The Company actively seeks to acquire television stations that
management believes can benefit from its business strategy. Targeted stations
generally have one or more of the following characteristics: (i) attractive
acquisition terms, which may include station-for-station exchanges; (ii)
opportunities to implement effective cost controls; (iii) opportunities for
increased advertising revenue; (iv) opportunities for increased audience share
through improved newscasts and programming; (v) limited competition from other
television broadcasters; and (vi) market locations that possess attractive
projected growth in advertising revenues. The Company generally targets
network-affiliated stations, which typically have established audiences for
their news, sports and entertainment programming, located in DMAs generally
ranked from 50 to 150.
NETWORK AFFILIATIONS.
Each of the Stations is affiliated with a major broadcast network
pursuant to a long-term affiliation agreement. Each affiliation agreement
generally provides the 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 nearly all of the advertising time during its
broadcasts and pays a specified network compensation fee to the Station. These
payments are subject to increase or decrease by the network during the term of
an affiliation agreement with provisions for advance notice and a right of
termination by the Station in the event of a reduction. The agreements are
generally long-term in nature, and contain customary renewal provisions, which
generally provide for automatic renewal for successive terms, subject to either
party's right to terminate the agreement at the end of any term upon proper
notice.
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The following table summarizes the network affiliation agreement for
the Stations:
<TABLE>
<CAPTION>
Station Network Expiration Date
------- ------- ---------------
<S> <C> <C>
WNAC-TV FOX 1998 *
WDTN-TV ABC August 29, 2004
WEYI-TV NBC December 31, 2010
WUPW-TV FOX October 11, 2001
WROC-TV CBS January 31, 2005
WJAC-TV NBC December 31, 2010
KVLY-TV NBC March 28, 2002
WTOV-TV NBC December 31, 2010
KFYR & satellites NBC December 31, 2001
KRBC-TV NBC December 31, 2010
KACB-TV NBC December 31, 2010
</TABLE>
* The Company and Clear Channel Communications are in negotiations
with FOX on renewal of WNAC affiliation agreements. Contract has been extended
while negotiations proceed.
ADVERTISING SALES
General.
Television station revenues are primarily derived from the sale of
local and national advertising. Advertising rates are based upon a program's
popularity among the viewers that an advertiser wishes to target, the number of
advertisers competing for the available time, the size and the demographic
composition of the market served by the station, the availability of
alternative advertising media in the market area, and the effectiveness of the
stations' sales force. Advertising rates are also determined by a station's
overall ability to attract viewers in its market area, as well as the station's
ability to attract viewers among particular demographic groups that an
advertiser may be targeting. Advertising revenues are positively affected by
strong local economies, national and regional political election campaigns, and
certain events such as the Olympic Games or the Super Bowl. Because television
broadcast stations rely on advertising revenues, 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. Conversely, increases in advertising budgets
targeting specific demographic groups are based upon superior coverage or the
dominant competitive position of the station. The Company seeks to manage its
advertising spot inventory efficiently to maximize advertising revenues and
return on programming costs.
Local Sales.
Approximately 60.9% of gross broadcast spot revenues (excluding
political advertising) in 1998 came from the sale of local advertising time.
Local advertising time is sold by each Station's local sales staff who call
upon advertising agencies and local businesses, which typically include car
dealerships, retail stores and restaurants. Compared to revenues from national
advertising accounts, revenues from local advertising generally are more stable
and, due to a lower cost of sales, more profitable. The Company seeks both to
attract new advertisers to television, and to increase the amount of
advertising time sold to existing local advertisers by relying on experienced
local sales forces with strong community ties, producing news and other
programming with local advertising appeal and sponsoring or co-promoting local
events and activities. The Company places a strong emphasis on experience of
its local sales staff and maintains an on-going training program for sales
personnel. To increase accountability of the Stations' sales forces, management
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has implemented initiatives whereby sales managers are responsible for the
effective management of commercial inventory using input from account
executives who are responsible for preparing detailed reports and projections.
National Sales.
Approximately 39.1% of gross broadcast spot revenues (excluding
political advertising) in 1998 came from the sale of national advertising time.
National advertising time is sold through national sales representative firms
retained by the Company, which firms call upon businesses, which typically
include automobile manufacturers and dealer groups, telecommunications
companies, fast food franchisers, and national retailers (all of which may
advertise locally). Each Station has a manager assigned to work with the
national sales representative to increase advertising expenditures with the
Stations.
INDUSTRY BACKGROUND
General.
Commercial television broadcasting began in the United States on a
regular basis in the 1940s over a portion of the broadcast spectrum commonly
known as the "VHF Band" (very-high frequency broadcast channels numbered 2
through 13). Television channels were later assigned by the FCC under
additional broadcast spectrum commonly known as the "UHF Band" (ultra-high
frequency broadcast channels numbered 14 through 83; channels 70 through 83
have since been reallocated to non-broadcast services). The license to operate
a broadcast station is granted by the FCC, and due to spacing requirements and
other considerations, the number of licenses allocated to any one market is
limited.
Although UHF and VHF stations compete in the same market, UHF stations
historically have suffered a competitive disadvantage, in part because: (i)
receivers of many households were originally designed only for VHF reception;
(ii) UHF signals were more affected by terrain and other obstructions than VHF
signals; and (iii) VHF stations were able to provide higher quality signals to
a wider area. This historic disadvantage of UHF stations has gradually declined
through: (a) carriage on cable system; (b) improvements in television
receivers; (c) improvement in television transmitters; (d) wider use of all
channel antennae; (e) increased availability of programming; and (f) the
development of new networks such as FOX and UPN.
All television stations throughout the United States are grouped into
211 generally recognized DMAs, which are ranked in size according to various
formulae based upon actual or potential audience. Each DMA is defined as an
exclusive geographic area consisting of all counties in which the home-market
commercial stations receive the greatest percentage of total viewing hours.
Television Networks.
A majority of commercial television stations in the United States are
affiliated with ABC, CBS, FOX, or NBC. The affiliation by a station with one of
the four major networks has a significant impact on the composition of the
station's programming, revenues, expenses, and operations. ABC, CBS, and NBC
provide the majority of its affiliates' programming each day without charge in
exchange for nearly all of the available advertising time in the programs
supplied, and sells this advertising time, and retains the revenues. The
affiliate receives compensation from the three networks and retains the revenue
from time sold by the affiliate during breaks in and between network programs
and in programming the affiliate produces or purchases from non-network
sources.
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FOX has established an affiliation of independent stations which
operates on a basis similar to ABC, CBS and NBC. However, the number of hours
per week of programming supplied by FOX to its affiliates is significantly less
than the number of hours supplied by ABC, CBS, and NBC, and the network
compensation is normally less. As a result, FOX affiliates retain a
significantly higher portion of the available inventory of broadcast time for
their own use but must, however, purchase or produce a greater amount of their
own programming, resulting in generally higher programming costs.
In contrast to stations affiliated with major networks, an independent
station supplies over-the-air programming through the acquisition of broadcast
programs through syndication. This syndicated programming is generally acquired
by the independent stations for cash and/or barter. Independent stations that
acquire a program through syndication are usually given exclusive rights to
show the program in the station's market for either a period of years or a
number of episodes agreed upon between the independent station and the
syndicator of the programming. Types of syndicated programs aired on the
independent stations include feature films, popular series previously shown on
network television, and series produced for direct distribution to television
stations.
During 1994, UPN established an affiliation of independent stations
that began broadcasting in January 1995 and operates on a basis similar to FOX.
However, UPN currently supplies fewer hours of programming per week to its
affiliates than FOX. As a result, UPN affiliates retain a significantly higher
portion of the available inventory of broadcast time for their own use than
affiliates of FOX or the Major Networks. UPN has indicated its intention to
increase the amount of programming supplied to its affiliates. In 1994, WB
announced its intention to establish separate affiliations of independent
television stations similar to UPN, and began broadcasting in January 1995.
Television Advertising.
Television stations derive their revenues primarily from the sale of
local and national advertising. Television stations compete for advertising
revenues, primarily with other broadcast television stations and, to a lesser
extent, with radio stations, cable system operators and programmers, and
newspapers serving the same market. All network-affiliated stations are
required to carry spot advertising sold by their networks. This reduces the
amount of advertising spots available for sale by the stations. Stations
directly sell all of the remaining advertising to be inserted in network
programming and all of the advertising in non-network programming, retaining
all of the revenues received from these sales of advertising, less any related
sales costs. A national syndicated program distributor typically retains a
portion of the available advertising time for programming it supplies in
exchange for no or reduced fees to the stations for such programming.
Advertisers wishing to reach a national audience usually purchase time
directly from the networks, or advertise nationwide on an ad hoc basis.
National advertisers who wish to reach a particular region or local audience
often buy advertising time directly from local stations through national
advertising sales representative firms. Local businesses purchase advertising
time directly from the stations' local sales staffs. Advertising rates are
based upon factors that include the size of the DMA, a program's popularity
among the viewers that an advertiser wishes to attract, the number of
advertisers competing for the available time, the demographic characteristics
of the DMA served by the station, the availability of alternative advertising
media in the DMA, aggressive and knowledgeable sales forces, and development of
projects, features and marketing programs that tie advertiser messages to
programming.
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Television Viewing Audience.
Nielsen is a national audience measuring service that periodically
publishes data on estimated audiences for television stations in various DMAs
throughout the country. The estimates are expressed in terms of the percentage
of the total potential audience in the DMA viewing a station, referred to as
the station's "rating," and of the percentage of the audience actually watching
the television station, referred to as the station's "share." This rating
service provides such data on the basis of total television households and of
selected demographic groupings in the media markets being measured. Nielsen
uses one of two methods to measure the station's actual viewership. In larger
DMAs, ratings are determined by a combination of meters connected directly to
selected television sets, and periodic surveys of television viewing, while in
smaller DMAs only periodic surveys are completed. In 1998, all of the DMAs in
which the Company operated were survey markets except Providence, Rhode Island.
COMPETITION
Competition in the television industry exists on several levels,
including competition for audience, advertisers, and programming (including
local news). Competition is continually affected by technological change and
innovation, fluctuation in the popularity of competing entertainment and
communications media (including newspapers, magazine, internet, and direct
mail), and governmental restrictions or actions by Congress and federal
regulatory bodies. Any of these factors could have a material adverse effect on
the Company's operations. Competition in the television broadcasting industry
occurs primarily in individual DMAs. Generally, a television broadcast station
in one DMA does not compete with television broadcast stations in other DMAs.
Certain market competitors who are part of larger organizations have
substantially greater financial, technical, and programming resources than the
Company.
Audience.
Stations compete for audience share primarily on the basis of program
popularity which has a direct effect on advertising rates. A large amount of
the Stations' prime time programming is supplied by the networks, and is
therefore dependent upon the performance of such network programs in attracting
viewers. Non-network time periods are programmed by the Station primarily with
syndicated programs, and locally produced news.
The development of methods of video transmission other than
over-the-air broadcasting has significantly altered competition for audience
share in the television industry. These other transmission methods can increase
competition faced by a broadcast station by bringing into its market distant
broadcasting signals not otherwise available to the station's audience, and by
serving as a distribution system for programming that originates on the cable
system.
Other sources of competition for audience include home entertainment
systems (including video cassette recorder and playback systems, videodiscs and
television game devices), multichannel multipoint distribution systems, and
internet services. The Company's television stations face competition from
high-powered direct broadcast satellite services that transmit programming
directly to homes equipped with special receiving antennas or to cable
television systems for transmission to their subscribers. Various television
stations and networks have recently filed suit in federal court against certain
providers of direct broadcasts satellite services. The suits allege that such
DBS providers have impermissibly distributed the signals of distant
over-the-air television stations over their systems, in violation of the
Satellite Home Viewer Act. The suits are presently pending.
Further advances in technology may increase competition for household
audiences and
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advertisers. Video compression techniques, now under development for use with
current cable channels and direct broadcast satellites, are expected to reduce
the bandwidth required for television signal transmission. These compression
techniques, as well as other technological developments, are applicable to all
video delivery systems, including over-the-air broadcasting, and have the
potential to provide vastly expanded programming to highly targeted audiences.
Reduction in the cost of creating additional channel capacity could lower entry
barriers for new channels and encourage the development of increasingly
specialized "niche" programming. This ability to reach very defined audiences
may alter the competitive dynamics for advertising expenditures. 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.
Advertising.
Advertising revenues and advertising rates are based upon factors that
include the size of the DMA in which the station operates, a program's
popularity among the viewers that an advertiser wishes to attract, the number
of advertisers competing for the available time, the demographic makeup of the
DMA served by the station, the availability of alternative advertising media in
the DMA, aggressive and knowledgeable sales forces and developments of
projects, features and programs that tie advertiser messages to programming.
Prior to and through the 1970s, over-the-air television broadcasting
enjoyed virtual dominance in viewership and television advertising revenues
because over-the-air television stations compete only with each other in most
local markets. Although cable television systems were initially used to
retransmit broadcast television programming to paid subscribers in areas with
poor broadcast signal reception, significant increases in penetration into
homes did not occur until the 1970s and 1980s, notwithstanding signal reception
problems. As the technology of satellite program delivery to cable systems
advanced in the late 1970s, 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 generally have not
sought to compete with over-the-air broadcast stations for a share of the local
news audience in the size of markets that the Company targets. To the extent
they elect to do so, increased competition from cable operators for local news
audiences could have a material adverse effect on the Company's advertising
revenues.
All of the Company's station cable penetration generally exceeds 70%.
The Stations have elected both must-carry and retransmission consent rights in
connection with their carriage by local cable providers. Cable-originated
programming has emerged as a competitor for viewers of over-the-air broadcast
television programming, although no single cable programming network regularly
attains audience levels amounting to more than a small fraction of any
over-the-air programming. Since 1980, the advertising share of cable networks
has increased significantly. Notwithstanding such increases, in cable
viewership and advertising, over-the-air broadcasting remains the dominant
distribution system for mass market television advertising.
Programming.
The Company competes for programming, which involves negotiating with
national program distributors or syndicators that sell first-run and rerun
packages of programming. The Stations compete for exclusive access to those
programs against in-market broadcast station competitors for syndicated
products. Cable systems generally do not compete with local stations for
programming, although various national cable networks have become more active
in acquiring programs that would have otherwise been offered to local
television stations. In addition, a television station may acquire programming
through barter arrangements. Under barter arrangements, which are becoming
increasingly popular with both network affiliates and independents, a national
program
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distributor can receive advertising time in exchange for the programming it
supplies, with the station paying no fee or a reduced fee for such programming.
FEDERAL REGULATION OF TELEVISION BROADCASTING
General.
The ownership, operation and sale of television stations are subject
to the jurisdiction of the FCC which acts under authority granted by the
Communications Act of 1934, as amended. Among other things, the FCC assigns
frequency bands for broadcasting; determines the particular frequencies,
locations and operating power of stations; issues, renews, revokes and modifies
station licenses; regulates equipment used by stations; adopts and implements
regulations and policies that directly or indirectly affect the ownership and
operation of stations; and has the power to impose penalties for violations of
its rules or the Communications Act.
The following is a brief summary of certain provisions of the
Communications Act, the Telecommunications Act of 1996 (the Telecommunications
Act) and specific FCC regulations and policies. Reference should be made to
the Communications Act, the Telecommunications Act, FCC rules and the public
notices and rulings of the FCC for further information concerning the nature
and extent of federal regulation of broadcast stations.
License Grant and Renewal.
Television stations operate pursuant to broadcasting licenses that
usually are granted by the FCC for a maximum permitted term of eight years.
Television licenses are subject to renewal upon application to the
FCC. Under the Telecommunications Act, the FCC is required to grant the renewal
application if it finds (i) that the station has served the public interest,
convenience and necessity; (ii) that there have been no serious violations by
the licensee of the Communications Act or the rules and regulations of the FCC;
and (iii) there have been no other violations by the licensee of the
Communications Act or the rules and regulations of the FCC that, when taken
together, would constitute a pattern of abuse.
All of the Stations are presently operating under licenses with terms
expiring as follows: April 1, 1999 (WNAC-TV), June 1, 1999 (WROC-TV), August 1,
1999 (WJAC-TV), October 1, 2005 (WEYI-TV, WDTN-TV, WTOV-TV, WUPW-TV), April 1,
2006 (KFYR-TV, KMOT-TV, KQCD-TV, KUMV-TV, KVLY-TV) and August 1, 2006 (KRBC-TV,
KACB-TV). An application for renewal of license of WROC was timely filed and is
pending at the FCC. An application for renewal of license of WNAC-TV filed
after the applicable filing deadline but within the 90-day period established
for the filing of public comments on renewal applications also is pending at
the FCC. It is possible that the Company will be subject to an administrative
sanction, most likely in the form of a monetary forfeiture, as a result of the
late-filed WNAC-TV renewal application. Until such time as the applications are
acted upon, the Company is authorized to continue operating the stations. There
can be no assurance that the licenses of such stations will be renewed.
Ownership Matters
General.
The Communications Act prohibits the assignment of a broadcast license
or the transfer of control of a broadcast licensee without the prior approval
of the FCC. FCC rules impose significant restrictions on certain positional and
ownership interests in broadcast stations, cable systems and other media. The
FCC generally applies its ownership limits to "attributable" interests held by
an
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<PAGE> 12
individual, corporation, partnership or other association. In the case of
corporations holding, or through subsidiaries controlling, broadcast licenses,
the interest of officers, directors and those who, directly or indirectly, have
the right to vote 5% or more of the corporation's stock (or 10% or more of such
stock in the case of insurance companies, investment companies and bank trust
departments that are passive investors) are generally deemed to be
attributable, except that, in general, no minority voting stock interest will
be attributable if there is a single holder of more than 50% of the outstanding
voting power of the corporation. In addition, under its "cross-interest"
policy, the FCC considers and may prohibit the common ownership of an
attributable interest in one media outlet and a non-attributable but
significant equity interest in another media outlet in the same market, joint
ventures, and common key employees among competitors, if it determines that
such relationships could have a significant adverse effect upon economic
competition and viewpoint diversity.
The FCC has a pending rulemaking proceeding that, among other things,
seeks comment on whether the FCC should modify its attribution rules by (i)
raising the voting stock attribution benchmark from 5% to 10%; (ii) raising the
attribution benchmark for passive investors from 10% to 20%; and (iii)
attributing certain interests held by limited liability companies in certain
circumstances. The FCC also has solicited comment on proposed rules that would
(i) treat an otherwise nonattributable equity or debt interest in a licensee as
an attributable interest where the interest holder is a program supplier or the
owner of a broadcast station in the same market and the equity and / or debt
holding is greater than a specified benchmark; (ii) treat a licensee of a
television station which, under a "local marketing agreement" or "LMA," brokers
more than 15% of the time on another television station serving the same
market, as having an attributable interest in the brokered station; and (iii)
in certain circumstances, treat the licensee of a broadcast station that sells
advertising time on another station in the same market pursuant to a "joint
sales agreement," or "JSA," as having an attributable interest in the station
whose advertising is being sold. The FCC also has sought comment on, among
other things, (i) whether the cross-interest policy should be applied only in
smaller markets, and (ii) whether non-equity financial relationships such as
debt, when combined with multiple business interrelationships such as LMAs and
JSAs, raise concerns under the cross-interest policy. It is not possible at
this time to predict what actions the FCC may take and how they may affect the
Company.
The Communications Act prohibits the issuance of broadcast licenses
to, or the holding of a broadcast license by, any corporation of which more
than 20% of the capital stock is beneficially or nominally owned or voted by
non-U.S. citizens or their representatives or by a foreign government or a
representative thereof, or by any corporation organized under the laws of a
foreign country (collectively, Aliens). The Communications Act also
authorizes the FCC , if the FCC determines that it would be in the public
interest, to prohibit the issuance of a broadcast license to, or the holding of
a broadcast license by, any corporation directly or indirectly controlled by
any other corporation of which more than 25% of the capital stock is
beneficially or nominally owned or voted by Aliens. The FCC has issued
interpretations of existing law under which these restrictions in modified form
apply to other forms of business organizations, including partnerships. The
Company and its subsidiaries are domestic corporations, and the Company's
ultimate controlling stockholder is a United States citizen. The Articles of
Incorporation of the Company contain limitations on Alien ownership and control
that are substantially similar to those contained in the Communications Act.
Pursuant to the Articles of Incorporation, the Company has the right to
repurchase Alien-owned shares at their fair market value to the extent
necessary, in the judgment of the Board of Directors, to comply with the Alien
ownership restrictions.
National Ownership Rule.
Under the FCC's rules, an individual or entity may hold attributable
interests in an unlimited
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<PAGE> 13
number of television stations nationwide, subject to the restriction that no
individual or entity may have an attributable interest in television stations
reaching more than 35% of the national television viewing audience, subject to
a 50% discount in the number of television households attributed to any UHF
station. Of the Stations, eleven are VHF and three are UHF.
Duopoly Rule.
Unless applicable waiver standards are met, the television "duopoly"
rule generally prohibits a single individual or entity from having an
attributable interest in two or more television stations with overlapping Grade
B service areas. The FCC has pending a rulemaking proceeding in which it has
proposed to modify the television duopoly rule to permit the common ownership
of television stations in different DMAs, so long as the Grade A service
contours of the stations do not overlap. Pending resolution of its rulemaking
proceeding, the FCC has adopted an interim waiver policy that permits the
common ownership of television stations, such as KRBC-TV and KACB-TV, which are
located in different DMAs and whose Grade A service contours do not overlap,
conditioned on the final outcome of the rulemaking proceeding. The FCC has also
sought comment on whether common ownership of two television stations in a
market should be permitted: (i) where one or more of the commonly owned stations
is UHF; (ii) where one of the stations is in bankruptcy or has been off the air
for a substantial period of time; or (iii) where the commonly owned stations
have very small audience or advertising shares, are located in a very large
market, and/or a specified number of independently owned media voices would
remain after the acquisition. It is not possible at this time to predict what
actions the FCC may take and how they may affect the Company.
Because of the Duopoly Rule, the attributable television interests of
persons with such interests in the Company may limit the markets where the
Company may acquire or own television stations. Thomas O. Hicks, who is the
Company's ultimate controlling shareholder, has an attributable interest in LIN
Television Corporation (LIN). Any new acquisition that would result in a LIN and
Company station providing service to a common area, as defined by the FCC rules,
will require a waiver of the Duopoly Rule, and there can be no assurance that
such waiver will be granted.
Radio/Television Cross-Ownership Rule.
The FCC's radio/television cross-ownership rule (the "one to a market"
rule) generally prohibits a single individual or entity from having an
attributable interest in a television station and a radio station serving the
same market. However, in each of the 25 largest local markets in the United
States, provided that there are at least 30 separately owned stations in the
particular market, FCC policy presumptively allows waivers of the rule to
permit the common ownership of one AM, one FM and one TV station in a market.
The Telecommunications Act directs the FCC to extend this policy to each of the
top 50 markets. The FCC has pending a rulemaking proceeding in which it has
solicited comment on whether the one to a market rule should be modified or
eliminated. It is not possible at this time to predict what actions the FCC may
take and how they may affect the Company.
The FCC does not apply its presumptive waiver policy in cases
involving the common ownership of one television station and two or more radio
stations in the same service (AM or FM), in the same market. Pending its
rulemaking proceeding to reexamine the one to a market rule, the FCC has stated
that it will consider requests for waivers of the rule in such instances on a
case-by-case basis. Certain waivers that have been granted on this basis also
have been conditioned on the outcome of the rulemaking proceeding.
As a result of the one to a market rule, the attributable radio
interests of persons with attributable interests in the Company limit the
markets where the Company may acquire or own television stations. Thomas O.
Hicks, for example, who is the Company's ultimate controlling stockholder,
holds attributable interests in various entities, such as Capstar Broadcasting
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<PAGE> 14
Corporation, Chancellor Media Corporation, and GulfStar Communications, Inc.,
which companies own radio stations in various markets throughout the United
States.
Local Television/Cable Cross-Ownership Rule.
While the Telecommunications Act eliminated a previous statutory
prohibition against the common ownership of a television broadcast station and
a cable system that serves the same local market, the Telecommunications Act
left a similar FCC rule in place. The legislative history of the Act indicates
that its repeal of the statutory ban should not prejudge the outcome of any FCC
review of the rule.
Television/Daily Newspaper Cross-Ownership Rule.
The FCC's rules prohibit the common ownership of a television
broadcast station and a daily newspaper in the same market.
Pursuant to the requirements of the Telecommunications Act, the FCC is
considering a formal inquiry to review all of its broadcast ownership rules
which are not otherwise under review, including the national audience reach
limitation and the associated 50% discount for UHF stations, and the
cable/television cross-ownership rule. It is not possible at this time to
predict what actions the FCC may take and how they may affect the Company.
Expansion of the Company's television operations on both a local and national
level will continue to be subject to the FCC's ownership rules and any changes
the FCC or Congress may adopt. Concomitantly, any further relaxation of the
FCC's ownership rules may increase the level of competition in one or more of
the markets in which the Company's stations are located, more specifically to
the extent that any of the Company's competitors may have greater resources and
thereby be in a superior position to take advantage of such changes.
Other Matters
Must Carry-Retransmission Consent.
Pursuant to the Cable Act of 1992, television broadcasters are
required to make triennial elections to exercise either certain "must carry" or
"retransmission consent" rights in connection with their carriage by cable
systems in each broadcaster's local market. By electing must-carry rights, a
broadcaster demands carriage on a specified channel on cable systems within its
Area of Dominant Influence (ADI), in general as defined by the Arbitron
1991-92 Television Market Guide. These must carry rights are not absolute, and
their exercise is dependent on variables such as: (i) the number of activated
channels on a cable system; (ii) the location and size of a cable system; and
(iii) the amount of programming on a broadcast station that duplicates the
programming of another broadcast station carried by the cable system.
Therefore, under certain circumstances, a cable system may decline to carry a
given station. Alternatively, if a broadcaster chooses to exercise
retransmission consent rights, it can prohibit cable systems from carrying its
signal or grant the appropriate cable system the authority to retransmit the
broadcast signal for a fee or other consideration.
The most recent election date for must-carry or retransmission consent
was October 1, 1996, such election to be effective for the three-year period
from January 1, 1997 through December 31, 1999. For subsequent elections
beginning with the election to be made by October 1, 1999, the must carry
market will be the station's DMA, in general as defined by the Nielsen DMA
Market and Demographic Rank Report of the prior year.
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<PAGE> 15
Digital Television.
The FCC has taken a number of steps to implement digital television
service (DTV) (including high-definition television) in the United States. On
February 17, 1998, the FCC adopted a final table of digital channel allotments
and rules for the implementation of DTV. The table of digital allotments
provides each existing television station licensee or permittee with a second
broadcast channel to be used during the transition to DTV, conditioned upon the
surrender of one of the channels at the end of the DTV transition period.
Implementation of DTV will improve the technical quality of television.
Furthermore, the implementing rules permit broadcasters to use their assigned
digital spectrum flexibly to provide either standard or high definition video
signals and additional services, including, for example, data transfer,
subscription video, interactive materials, and audio signals subject to the
requirement that they continue to provide at least one free, over the air
television service. Conversion to DTV may reduce the geographic reach of the
Company's stations or result in increased interference, with, in either case, a
corresponding loss of population coverage. DTV implementation will impose
additional costs on the Company, primarily due to the capital costs associated
with construction of DTV facilities and increased operating costs both during
and after the transition period. The FCC has adopted rules that require
broadcasters to pay a fee of 5% of gross revenues received from ancillary or
supplementary uses of the digital spectrum for which they receive subscription
fees or compensation other than advertising revenues derived from free
over-the-air broadcasting services. The FCC has set a target date of 2006 for
expiration of the transition period, subject to biennial reviews to evaluate
the progress of DTV, including the rate of consumer acceptance. Management of
the Company believes that its conversion to DTV will commence in 1999 for the
Company's larger markets and in 2000 for the Company's smaller markets. Future
capital expenditures by the Company will be compatible with the new technology
whenever possible. Presently, no Company station broadcast is in DTV format.
Programming and Operation.
General.
The Communications Act requires broadcasters to serve the "public
interest." The FCC has relaxed or eliminated many of the more formalized
procedures it had developed in the past to promote the broadcast of certain
types of programming responsive to the needs of a station's community of
license. FCC licensees continue to be required, however, to present programming
that is responsive to community issues, and to maintain certain records
demonstrating such responsiveness. Complaints from viewers concerning a
station's programming often will be considered by the FCC when it evaluates
renewal applications of a licensee, although such complaints may be filed at
any time and generally may be considered by the FCC at any time. Stations also
must pay regulatory and application fees, and follow various rules promulgated
under the Communications Act that regulate, among other things, political
advertising, sponsorship identifications, the advertisement of contests and
lotteries, obscene and indecent broadcasts, and technical operations, including
limits on radiofrequency radiation. The FCC also has traditionally enforced its
equal employment opportunity rules vigorously with respect both to compliance
with numerical employment guidelines and recruitment efforts and recordkeeping
requirements. The FCC's employment rules, as they relate to outreach efforts
for recruiting minorities, recently were struck down as unconstitutional by the
U.S. Court of Appeals for the D.C. Circuit. The FCC currently is conducting a
rulemaking proceeding to modify its employment rules in a manner consistent
with the court's ruling. In addition, pursuant to FCC rules which became
effective on February 16, 1999, broadcast licensees will be required to
disclose on a biennial basis information regarding the race, ethnic background
and gender of persons with attributable position or ownership interest in the
licensee. Failure to observe these or other rules and policies can result in
the imposition of various sanctions, including monetary forfeitures, or the
grant of a "short" (i.e., less than the full) license renewal term or, for
particularly egregious violations, the denial of a license renewal application
or the revocation of a license.
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<PAGE> 16
Children's Television Programming.
Pursuant to legislation enacted in 1990, the amount of commercial
matter broadcast during programming designed for children 12 years of age and
younger is limited to 12.0 minutes per hour on weekdays and 10.5 minutes per
hour on weekends. In addition, television stations are required to broadcast a
minimum of three hours per week of "core" children's educational programming,
which, among other things, must have serving the educational and informational
needs of children 16 years of age and under as a significant purpose. A
television station found not to have complied with the "core" programming
requirements or the children's commercial limitations could face sanctions,
including monetary fines and the possible non-renewal of its broadcasting
license. The FCC has indicated its intent to strictly enforce its children's
television rules.
Television Violence.
Pursuant to a directive in the Telecommunications Act, the broadcast
and cable television industries have adopted, and the FCC has approved, a
voluntary content ratings system which, when used in conjunction with V-Chip
technology, would permit the blocking of programs with a common rating. The FCC
has directed that all television receiver models with picture screens 13 inches
or greater be equipped with V-Chip technology under a phased implementation
beginning on July 1, 1999. The Company cannot predict how the implementation of
the ratings system and V-Chip technology will affect the Company's business.
Closed Captioning.
Under rules which became effective January 1, 1998, program
distributors, including television stations, are generally responsible for
compliance with an on-screen captioning requirement with respect to the vast
majority of video programming. The rules divide programming into two groups:
pre-rule programming (which is defined to be programming that was first
published or exhibited on or before January 1, 1998 by any distribution method)
and new programming (programming that was first published or exhibited after
that date). Pre-rule programming is subject to no specific requirements until
the first calendar quarter of 2008. In that quarter, 75% of all pre-rule
programming actually aired is required to be captioned. Beginning in the first
calendar quarter of 2000, new programming that is not otherwise exempt from
captioning requirements is subject to a series of quarterly benchmarks, until
by January 1, 2006, 95% of all new non-exempt programming is to be captioned.
Proposed Changes.
The Congress and the FCC have under consideration, and in the future
may consider and adopt, new laws, regulations and policies regarding a wide
variety of matters that could affect, directly or indirectly, the operation,
ownership and profitability of the Company's broadcast stations, result in the
loss of audience share and advertising revenues for the Stations, and affect
the ability of the Company to acquire additional broadcast stations or finance
such acquisitions. In addition to the changes and proposed changes noted above,
such matters include, for example, spectrum use fees, political advertising
rates, potential restrictions on the advertising of certain products (beer,
wine and hard liquor, for example), and the rules and policies to be applied in
enforcing the FCC's equal employment opportunity regulations. 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 radio and television direct broadcast
satellite service, the continued establishment of wireless cable systems and
low power television stations, digital television and radio technologies, and
the advent of telephone company participation in the provision of video
programming service.
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The Telecommunications Act also eliminates the overall ban on
telephone companies offering video services and permits the ownership of cable
television companies by telephone companies in their service areas (or vice
versa) in certain circumstances. Telephone companies providing such video
services will be regulated according to the transmission technology they use.
The Telecommunications Act also permits telephone companies to hold an
ownership interest in the programming carried over such systems. Although the
Company cannot predict the effect of the removal of these barriers to telephone
company participation in the video services industry, it may have the effect of
increasing competition in the television broadcasting industry in which the
Company operates.
Other Considerations.
The foregoing summary does not purport to be a complete discussion of
all provisions of the Communications Act or other congressional acts or of the
regulations and policies of the FCC. For further information, reference should
be made to the Communications Act, other congressional acts, and regulations
and public notices promulgated from time to time by the FCC. There are
additional regulations and policies of the FCC and other federal agencies that
govern political broadcasts, public affairs programming, equal opportunity
employment and other matters affecting the Company's business and operations.
EMPLOYEES
As of December 31, 1998, the Stations had approximately 641 full-time
and 85 part-time employees. WEYI has a contract with United Auto Workers that
expires on September 30, 2002 with respect to 50 employees. WROC has a contract
with American Federation of Television and Radio Artists (AFTRA) that expires
on March 2, 1999 with respect to 19 employees (tentative contract for two
additional years is in progress), and has entered into a contract with the
National Association of Broadcast Employees and Technicians/Communications
Workers of America (NABET) that expires on May 31, 2000 with respect to 33
employees. WTOV has a contract with AFTRA that expires January 29, 2002 and a
contract with International Brotherhood of Electrical Workers that expires on
November 30, 2000 with respect to 25 and 18 employees, respectively. WJAC has a
contract with International Alliance of Theatrical Stage Employees that expires
on September 30, 2002 with respect to 42 employees. WDTN has a contract with
the International Brotherhood of Electrical Workers that expires July 1, 2003
with respect to 50 employees. No significant labor problems have been
experienced by the Stations. The Company considers its overall labor relations
to be good. However, there can be no assurance that the Company's collective
bargaining agreements will be renewed in the future or that the Company will
not experience a prolonged labor dispute, which could have a material adverse
effect on the Company's business, financial condition, or results of
operations.
ENVIRONMENTAL REGULATION
Prior to the Company's ownership or operation of its facilities,
substances or wastes that are or might be considered hazardous under applicable
environmental laws may have been generated, used, stored or disposed of at
certain of those facilities. In addition, environmental conditions relating to
the soil and groundwater at or under the Company's facilities may be affected
by the proximity of nearby properties that have generated, used, stored, or
disposed of hazardous substances. As a result, it is possible that the Company
could become subject to environmental liabilities in the future in connection
with these facilities under applicable environmental laws and regulations.
Although the Company believes that it is in substantial compliance with such
environmental requirements, and has not in the past been required to incur
significant costs in connection therewith, there can be no assurance that the
Company's costs to comply with such requirements will not increase in the
future. The Company presently believes that none of its
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<PAGE> 18
properties have any condition that is likely to have a material adverse effect
on the Company's financial condition or results of operations.
YEAR 2000 COMPLIANCE
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define applicable year. Any of the
Company's computer programs that have date sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in system failures that may create an inability for the Stations to broadcast
their daily programming and generate revenues.
Since its inception, the Company has been replacing and enhancing its
computer systems to gain significant operational efficiencies and, through
these same efforts, year 2000 compliant equipment and applications have been
installed. Total expenditures for the period March 1, 1997 to December 31, 1998
have amounted to approximately $0.6 million for the replacement and enhancement
of these systems. In October of 1998, Company management initiated a
company-wide program to prepare the Company's operations for the year 2000.
The Company's program consists of two phases. The first phase is an
assessment of the Company's systems with respect to year 2000 compliance and
the formulation of an action plan. During the assessment phase, the Company
will be reviewing individual applications, as well as the computer hardware and
satellite delivery systems. The assessment will include information technology
(IT) and non-information technology systems. A comprehensive review and
inventory will be completed in the first quarter of 1999. This phase involves
an assessment of the readiness of third party vendors and suppliers. The
Company will issue year 2000 readiness questionnaires to some vendors, however,
responses to these inquiries are expected to be limited. The assessment of the
Company's IT and non-IT systems, and an action plan for remediation is expected
to be completed by the end of the second quarter of 1999. Until such assessment
has been completed, the Company cannot properly determine the impact of system
failures related to year 2000 non-compliance.
The second phase of the Company's program will be the implementation
and testing of the remediations required based upon the conclusions reached
from the assessments completed during the first phase. The Company's IT
environment is comprised of two distinct layers of technology: equipment and
applications. During this second phase, the Company anticipates that it will
perform a series of tests. Unit testing will confirm the readiness of the
equipment and of the applications for the year 2000. System testing ensures
that a specific application is year 2000 compliant in conjunction with its
supporting equipment. Finally, integration testing determines whether a set of
applications and the equipment, when operated on a combined basis, deliver
services that are year 2000 ready.
It may not be economically or technically feasible for the Company to
fully test certain systems, and it is possible that not all IT and non-IT
systems can be prepared for the year 2000. Therefore, the readiness plan will
provide priority to those applications and equipment critical to the operation
of the Stations and will identify contingency plans that need to be in place
for functions which could be adversely impacted. The contingency plans covering
these systems are in the process of being developed. The Company already has,
as a matter of course, many contingency plans to provide continuation of
critical business functions in the event that systems become unavailable for
any reason: including, for example, satellite failures, power outages, or major
equipment failures.
It is difficult for the Company to estimate the costs incurred to date
related specifically to
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remediating year 2000 issues, since the Company has been replacing and
enhancing its computer systems in the ordinary course of business. Estimated
future costs of remediation are not currently known but the Company expects to
have a cost estimate by the end of the second quarter of 1999 when the
assessment phase of the Company's year 2000 readiness plan is completed.
The Company recognizes that the scope of effort to fully execute its
year 2000 readiness plan is significant. The Company is utilizing internal
resources and, where appropriate, external resources to provide the tools and
resources to complete the plan. Despite these efforts, there can be no assurance
that the Company's systems will be timely remediated or that a failure by the
Company's vendors or suppliers to be year 2000 ready would not have a material
adverse effect on the Company's systems, or the Company's business financial
condition, cash flows, and results of operations.
ACQUISITION AND PROPOSED SALE AND ACQUISITION SUBSEQUENT TO YEAR END
On February 5, 1999, the Company completed the acquisition of the
assets related to Station WUPW-TV from Raycom Media, Inc. pursuant to the terms
of an Asset Purchase Agreement dated July 24, 1998. The purchase price including
fees and expenses was approximately $74,400,000. WUPW, Channel 36, is the UHF
FOX-affiliated station serving the Toledo, Ohio market. The Company financed the
acquisition with $40,000,000 of borrowings under the Amended Revolving Credit
Facility and $35,000,000 of newly issued Redeemable Preferred Stock Series B.
Sale of WROC-TV
On March 3, 1999, the Company, STC License Company and Nexstar
Broadcasting of Rochester, Inc. ("Nexstar") entered into an Asset Purchase
Agreement (the "Rochester Agreement"). Pursuant to the Rochester Agreement, the
Company and STC License Company will sell to Nexstar the television broadcast
license and assets of WROC-TV Channel 8, Rochester, New York. The total purchase
price for WROC will be approximately $46,000,000 subject to adjustment for
certain customary proration amounts. Closing of this sale is subject to
customary conditions, including review by the Department of Justice and the
Federal Communications Commission.
Purchase Agreement for WICS, WICD, and KGAN
On March 16, 1999, the Company and Sinclair Communications, Inc.
("Sinclair") entered into a Purchase Agreement (the "Sinclair Agreement").
Pursuant to the Sinclair Agreement, the Company will purchase from Sinclair
WICS-TV Channel 20, Springfield, Illinois, WICD-TV Channel 15, Champaign,
Illinois and KGAN-TV Channel 2, Cedar Rapids, Iowa for a total purchase price of
$81,000,000. WICS and WICD are NBC affiliates and KGAN is a CBS affiliate.
Closing of this purchase is subject to customary conditions, including review by
the Department of Justice and the Federal Communications Commission.
ITEM 2. PROPERTIES
Each Station's real properties generally include main offices, studios
and transmitter/antenna sites. The transmitter/antenna sites generally are
located to provide maximum signal strength and market coverage. The Company
generally considers its facilities and equipment to be suitable for its current
operations, and generally in good condition. The Company does not anticipate any
difficulties leasing or purchasing additional space. The Company continues to
evaluate potential upgrades in its facilities and equipment.
The principal executive offices of the Company are located at
3839 4th Street North, Suite 420, St. Petersburg, Florida 33703. The telephone
number of the Company at that address is (727) 821-7900. The following table
generally describes the Company's principal properties in each of its markets:
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<TABLE>
<CAPTION>
Approximate
Station and Property Type of Owned Size Expiration
Location Facility and Use or Leased (Square Feet) of Lease
<S> <C> <C> <C> <C>
WEYI:
Clio, Michigan......................Main Office/Studio Owned 17,500 --
Tower/Antenna Site Owned (1) --
Saginaw, Michigan...................Satellite Sales Office Leased 1,200 2/14/00
WROC:
Rochester, New York.................Main Office/Studio Owned 48,000 --
Brighton, New York..................Tower/Antenna Site Owned 2,400 --
WTOV:
Steubenville, Township, Ohio........Main Office/Studio Owned 12,750 --
Tower/Antenna Site Owned (1) --
Pultney Township, Ohio..............Microwave /Relay Owned 450 --
Wheeling, West Virginia.............Satellite Sales Office Leased 973 8/31/00
WJAC:
Johnstown, Pennsylvania.............Main Office/Studio Owned 40,000 --
Laurel Hill, Pennsylvania...........Tower/Antenna Site Owned 3,600 --
Altoona, Pennsylvania...............Satellite News and Sales Office Leased 1,100 6/30/02
KRBC:
Abilene, Texas......................Main Office/Studio Owned 19,312 --
Cedar Gap Mountain, Texas...........Tower/Antenna Site Owned 1,600 --
KACB:
San Angelo, Texas...................Main Office/Studio Leased 3,470 4/30/01
San Angelo, Texas...................Tower/Antenna Site Leased 1,134 5/15/03
WDTN:
Dayton, Ohio........................Main Office/Studio Owned 43,500 --
Dayton, Ohio........................Tower/Antenna Site Owned 1,800 --
WNAC-TV
Rehoboth, Massachusetts.............Main Office/Studio Owned (2) 14,000 --
Tower/Antenna Site Owned
KFYR:
Bismarck, North Dakota..............Main Office/Studio Owned 19,600 --
Saint Anthony, North Dakota ........Tower/Antenna Site Owned 3,840 --
KMOT:
Minot, North Dakota.................Main Office/Studio Owned 9,676 --
Tower/Antenna Site Owned (1) --
KUMV:
Williston, North Dakota.............Main Office/Studio Owned 7,884 --
Judson Township,
North Dakota...................Tower/Antenna Site Owned 3,168 --
KQCD:
Dickinson, North Dakota.............Main Office/Studio Owned 3,600 --
Stark County, North Dakota..........Tower/Antenna Site Owned 2,400 --
KVLY:
Fargo, North Dakota.................Main Office/Studio Owned 15,200 --
Blanchard, North Dakota.............Tower/Antenna Site Owned 4,320 --
Grand Forks, North Dakota...........Sales and News Office Leased 1,500 6/30/00
WUPW:
Toledo, Ohio........................Main Office/Studio Leased 12,500 6/20/02
Toledo, Ohio........................Tower/Antenna Site Leased 800 12/2/89
</TABLE>
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(1) Main office/studio and tower/antenna site are at the same location.
(2) WNAC owns significant additional assets that are co-located at WPRI
studio site in Providence, Rhode Island.
(3) The North Dakota Stations are interconnected with a significant number
of microwave towers.
ITEM 3. LEGAL PROCEEDINGS
Lawsuits and claims are filed against the Company from time to time in
the ordinary course of business. Management believes that the outcome of such
matters will not have a material adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
Not applicable
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no established public trading market for the Company's common
stock, par value $0.01 per share (the Common Stock). All of the Company's
Common Stock is held by Sunrise Television Corp. The Company has never paid a
cash dividend with respect to its Common Stock.
On February 24, 1997, the Company issued 1,000 shares of its Common
Stock to Sunrise Television Corp. in a private transaction for a cash purchase
price of $50,000,000 in reliance on the exemption, set forth in Section 4(2) of
the Securities Act of 1933, as amended (the Securities Act), from the
registration requirement set forth in Section 5 of the Securities Act.
On February 28, 1997, the Company sold 300,000 shares of its 14%
Redeemable Preferred Stock Series A in a private placement in reliance on
Section 4(2) of the Securities Act for a cash purchase price of $28.95 million,
with an aggregate liquidation preference of $30.0 million, or $100 per share,
in connection with the acquisition of the Jupiter/Smith Stations. These shares
are entitled to quarterly dividends and accrue at a rate per annum of 14%.
Prior to February 28, 2002, dividends may be paid in either additional whole
shares of Redeemable Preferred Stock Series A or cash, at the Company's option,
and only in cash following that date.
On March 25, 1997, the Company sold $100,000,000 aggregate principal
amount of its 11% Senior Subordinated Notes due 2007 (the Notes) in reliance
on Rule 144A of the Securities Act to Chase Securities, Inc., NationsBanc
Capital Markets, Inc., and Schroder Wertheim & Co. as the initial purchasers.
The Company paid discounts to the initial purchasers of 3% of the aggregate
principal amount of the Notes sold - See Management Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources.
The Company's revolving credit facility (the Credit Agreement)
generally prohibits the Company from paying dividends on its common stock. See
Management's Discussion and Analysis of Financial Conditions and Results of
Operations - Liquidity and Capital Resources.
On February 5, 1999, the Company entered into a $90,000,000 Redeemable
Preferred Stock Series B bridge financing agreement (Preferred Agreement) with
three purchasers, two of which are participants in the Amended Credit Agreement
(see Item 7, "Management Discussion and Analysis of Financial Conditions and
Results of Operations"), and sold $35,000,000 of Redeemable Preferred Stock
Series B to fund the WUPW purchase, and $2,500,000 to fund an escrow account to
pay dividends on the stock. The remaining amounts under the Preferred Agreement
are available for acquisitions by the Company, as defined.
20
<PAGE> 22
The Redeemable Preferred Stock Series B has a par value of $0.01 per
share with a liquidation preference of $1,000 per share. With respect to
dividends and distributions upon liquidation, winding up and dissolution of the
Company, the Redeemable Preferred Stock Series B ranks on a parity with the 14%
Redeemable Preferred Stock Series A. Dividends are payable monthly at either:
(i) LIBOR for the applicable dividend period plus 125 basis points; or (ii) the
ABR rate. At the option of the Company, any dividends payable on any dividend
payment date after August 5, 1999, may be paid in additional whole shares of
Redeemable Preferred Stock Series B.
At any time, the Company may redeem the shares of Redeemable Preferred
Stock Series B at a redemption price equal to 100% of the liquidation
preference per share plus all accumulated and unpaid dividends per share
(Redemption Value). On December 31, 2008, the Company will have an obligation
to redeem the then outstanding shares of Preferred Stock. The Company is also
obligated, concurrently with the consummation of any offering of any debt or
equity securities of the Company or Sunrise, to use the net cash proceeds of
such offering to redeem the Redeemable Preferred Stock Series B at the
Redemption Value. The holders of Redeemable Preferred Stock Series B, except as
required by Delaware law, are not entitled or permitted to vote on any matter
required or permitted to be voted upon by the stockholders of the Company.
Under certain conditions related to non-payment of dividends, the holders of
the Redeemable Preferred Stock Series B may have the right to elect the lesser
of two directors or 25% of the members of the Board of Directors of the
Company.
On February 5, 1999, Hicks, Muse, Tate and Furst Equity Fund III, L.P.
(the Fund) and other related Hicks Muse entities entered into a Put and Call
Agreement with the purchasers of the Redeemable Preferred Stock Series B. At
the time of a Trigger Event, any of the purchasers may require the Fund to
purchase outstanding shares of the Redeemable Preferred Stock Series B at the
Redemption Price. Trigger Events are defined as the earliest to occur of: (i)
the occurrence of an event of default under the 11% Senior Subordinated Notes,
the Amended Credit Agreement or the Preferred Agreement; (ii) a failure to
comply with any terms of the Certificate of Designation with respect to the
Preferred Stock; or (iii) August 5, 1999. The Fund has the right to call the
Redeemable Preferred Stock Series B at the Redemption Value at any time.
ITEM 6. SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth the selected historical information of
the Company as of the dates and for the periods indicated. Information for the
Company for the year ended December 31, 1998 and the ten months ended December
31, 1997 was derived from the financial statements of the Company, which have
been audited by Arthur Andersen, LLP and included in Item 8. Predecessor
historical information for the two months ended February 28, 1997, and the year
ended December 31, 1996, were derived from the audited financial statements of
the Jupiter/Smith Stations which have been audited by Arthur Andersen, LLP and
included in Item 8. Predecessor historical financial information for the two
years ended December 31, 1995, has been derived from the audited financials of
the Jupiter/Smith Stations, which were audited by Arthur Andersen, LLP.
Statement of Operations Data below station operating income, as well as Balance
Sheet Data, for the Jupiter/Smith Stations for the years ended, or at, December
31, 1994 through December 31, 1995 have not been presented because such
information is not meaningful for the following reasons: (i) during such period
the Stations were owned and/or operated by persons other than the Company and /
or management; (ii) they were not owned or operated as a single unit for any
such periods; and (iii) they were operated as part of larger units and
therefore, allocations of corporate expenses, interest, and long term debt
cannot be made to the Stations.
21
<PAGE> 23
<TABLE>
<CAPTION>
COMBINED OPERATIONS | HISTORICAL
PREDECESSOR(1) | STC BROADCASTING, INC
|
Two Months | Ten Months Year
Ended | Ended Ended
February 28, | December 31, December 31,
1994 1995 1996 1997 | 1997 1998
--------- --------- --------- ----------- | ----------- ----------
(Dollars in thousands) |
<S> <C> <C> <C> <C> | <C> <C>
Statement of Operations Data: |
|
Net revenues $ 31,043 $ 32,905 $ 37,559 $ 5,228 | $ 36,231 $ 67,123
Station expenses 22,945 23,910 22,145 3,786 | 21,141 38,057
Depreciation 3,079 3,121 4,286 757 | 3,475 8,208
Amortization 616 998 5,860 977 | 9,159 16,826
--------- --------- --------- --------- | --------- ---------
Station operating income (loss) $ 4,403 $ 4,876 $ 5,268 $ (292) | 2,456 4,032
========= ========= |
Corporate expense 840 146 | 1,402 2,347
--------- --------- | --------- ---------
Operating income (loss) 4,428 (438) | 1,054 1,685
|
Gain on asset swap -- -- | -- 17,457
Interest expense (6,072) (963) | (9,502) (16,301)
Other income(2) 1,552 39 | 330 42
--------- --------- | --------- ---------
(Loss) income before income tax (92) (1,362) | (8,118) 2,883
Income tax (benefit) provision -- -- | (299) 1,823
--------- --------- | --------- ---------
Net (loss) income before extraordinary item (92) (1,362) | (7,819) 1,060
Extraordinary loss from early retirement of |
debt net of income tax benefit -- -- | -- (2,860)
--------- --------- | --------- ---------
Net loss (92) (1,362) | (7,819) (1,800)
Dividends and accretion on |
Redeemable Preferred Stock(3) -- -- | (3,763) (5,100)
--------- --------- | --------- ---------
Net loss applicable to |
Common Stock $ (92) $ (1,362) | $ (11,582) $ (6,900)
========= ======== | ========= =========
Other Financial Data: |
|
Net cash provided by (used in): |
Operating activities $ 7,215 $ 6,898 $ 9,557 $ 1,632 | $ 5,106 $ 13,880
Investing activities (1,287) (750) (108,298) (233) | (201,986) (137,257)
Financing activities (5,680) (5,978) 101,405 -- | 198,512 127,092
Broadcast cash flow(4) 7,822 8,624 15,405 1,441 | 14,990 29,083
Broadcast cash flow margins(5) 25.20% 26.21% 41.02% 27.60% | 41.37% 43.33%
Capital expenditures $ 1,287 $ 750 $ 2,966 $ 264 | $ 2,848 $ 5,573
Amortization of film payments 3,123 3,181 3,581 620 | 3,214 5,696
Payments for program rights 3,399 3,552 3,590 621 | 3,314 5,679
Ratio of earnings to fixed charges(6) | (11,882) (6,803)
|
Balance Sheet Data: |
|
Cash and cash equivalents | 1,632 5,347
Total assets | 240,791 384,512
Long term debt (including current portion): |
Credit Agreement | 14,500 111,000
Senior Subordinate Debt | 100,000 100,000
Redeemable Preferred Stock | 32,263 37,364
Stockholder's equity | 52,429 78,729
</TABLE>
22
<PAGE> 24
Notes to Selected Historical Financial Data
(1) Financial statements for periods presented are at the predecessor cost
basis.
(2) Other income in 1996 consists primarily of approximately $1.5 million
of non recurring revenues for consulting services provided.
(3) Reflects dividend requirement and accretion on the Redeemable
Preferred Stock.
(4) "Broadcast cash flow" consists of operating income (loss) plus
depreciation of property and equipment, amortization of intangible assets,
amortization of program rights, and corporate expense minus payments on program
rights. Broadcast cash flow is not a measure of performance calculated in
accordance with GAAP and should not be considered in isolation or as a
substitute for net income (loss), cash flows from operating activities and
other income or cash flow statement data prepared in accordance with GAAP or as
a measure of liquidity or profitability.
(5) "Broadcast cash flow margin" is broadcast cash flow divided by net
revenues expressed as a percentage.
(6) For purposes of this calculation, "earnings" consist of net loss
applicable to common stockholder before tax benefit and fixed charges. "Fixed
charges" consist of interest expense, amortization of deferred financing costs,
the component of rental expense believed by management to be representative of
the interest factor thereon and preferred stock dividend requirements and
related accretion. If the ratio is less than 1.0x, the deficiency is shown.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
The operating revenues of the Stations are derived primarily from
advertising revenues and, to a much lesser extent, compensation paid by the
networks to the Stations for broadcasting network programming. The Stations'
primary operating expenses are employee compensation and related benefits, news
gathering costs, film and syndicated programming expenditures and promotional
costs. A significant proportion of the operating expenses of the Stations are
fixed.
In general, television stations receive revenues from advertising sold
for placement within and adjoining its local programming and network
programming. Advertising is sold in time increments and is priced primarily on
the basis of a program's popularity within the demographic group an advertiser
desires to reach, as measured principally by audience surveys conducted in
February, May and November of each year. The ratings of local television
stations affiliated with a national television network can be affected by
ratings of network programming. In addition, advertising rates are affected by
the number of advertisers competing for the available time, the size and
demographic makeup of the markets served by the television station and the
availability of alternative advertising media in the market areas. Advertising
rates are highest during the most desirable viewing hours, generally during
local news programming, access (the hour before prime time), early fringe (3:00
p.m. to 5:00 p.m.) and prime time.
Most advertising contracts are short-term and generally run for only a
few weeks. A majority of the revenues of the Stations are generated from local
advertising, which is sold primarily by a Station's sales staff, and the
remainder of the advertising revenues represents national advertising, which is
sold by independent national advertising sales representatives. The Stations
generally pay commissions to advertising agencies on local and national
advertising, and on national advertising the Stations also pay commissions to
the national sales representatives operating under an agreement that provides
for exclusive representation within the particular Station market. In 1998,
local advertising comprised 60.9% of the Company's gross spot revenues
(excluding political advertising), and national advertising comprised 39.1% of
the Company's gross spot revenues (excluding political advertising). The gross
spot broadcast revenues of the Stations are generally highest in the second and
fourth quarters of each year, due in part to increases in consumer advertising
in the spring and retail advertising in the period leading up to and including
the holiday season. On a quarterly basis for 1998, first, second, third and
fourth quarter gross
23
<PAGE> 25
spot revenues constituted 18.33%, 25.22%, 23.31%, and 33.14%,
respectively, excluding political revenues and the effects of acquisitions. The
Company's advertising revenues are generally highest in the fourth quarter of
each year, due in part to increases in the retail advertising in the period
leading up to and including the holiday season. Advertising spending by
political candidates is typically heaviest during the fourth quarter. In 1998,
the Stations' advertising revenues benefited from local and congressional
elections and the Winter Olympic Games on CBS. In 1996, the Stations'
advertising revenues benefited from presidential and congressional elections as
well as the NBC broadcast of both the United States-based Olympic Games and the
Super Bowl.
"Broadcast Cash Flow" is defined as operating income plus depreciation
of property and equipment, amortization of intangible assets, amortization of
program rights, and corporate expenses less payments for program rights. The
Company has included broadcast cash flow data because such data are commonly
used as a measure of performance for broadcast companies and are used by
investors to measure a company's ability to service debt. Broadcast cash flow is
not, and should not be used as an indicator or alternative to operating income,
net loss or cash flow as reflected in the accompanying financial statements, is
not intended to represent funds available for debt service, dividends,
reinvestment or other discretionary uses, 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.
This Annual Report on Form 10-K contains forward-looking statements
that involve a number of risks and uncertainties. When used in this Annual
Report on Form 10-K the words "believes," "anticipated," and similar
expressions are intended to identify forward-looking statements. There are a
number of factors that could cause the Company's actual results to differ
materially from those forecasted or projected in such forward-looking
statements. These factors include, without limitation, competition from other
local free over-the-air broadcast stations, acquisition of additional broadcast
properties, and future debt service obligations. Readers are cautioned not to
place undue reliance on these forward-looking statements which speak only as of
the date hereof. The Company undertakes no obligations to publicly release the
result of any revisions to these forward-looking statements which may be made
to reflect events or circumstance after the date hereof or to reflect the
occurrence of unanticipated events.
In the discussion comparing the year ended December 31, 1998 to 1997,
WTOV, WEYI and WROC will be referred to as the Core Stations. The effect of the
acquisition of television stations WJAC, KRBC, KACB and the Meyer Stations will
be referred to as the Station Acquisitions. The WJAC acquisition closed on
October 1, 1997, KRBC and KACB acquisition closed on April 1, 1998, and the
Meyer acquisition closed on November 1, 1998. The net change resulting from the
transactions with Sinclair and Hearst (acquisition of WDTN, WNAC, and its joint
operating agreement with WPRI, and the disposition of KSBW, WPTZ, and WNNE)
will be referred to as the Swap Transaction.
The Jupiter/Smith Stations operations are presented on a
pre-acquisition cost basis and are not comparable with the Company's operations
for periods subsequent to March 1, 1997.
The 1997 financial information is a combination of the Company
financial statements of the ten months ended December 31, 1997, and the
Jupiter/Smith Stations financial statements for the two months ended February
28, 1997. The 1996 financial information is from the Jupiter/Smith Stations
financial statements for the year ended December 31, 1996.
24
<PAGE> 26
BROADCAST CASH FLOW
The following table sets forth certain data for the three years ended December
31, 1998.
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1997 1998
-------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Operating Income $ 4,428 $ 616 $ 1,685
Add:
Amortization of program rights 3,581 3,834 5,696
Depreciation of property and equipment 4,286 4,232 8,208
Amortization of intangibles 5,860 10,136 16,826
Corporate expenses 840 1,548 2,347
Less:
Payments for program rights (3,590) (3,935) (5,679)
-------- -------- --------
Broadcast cash flow $ 15,405 $ 16,431 $ 29,083
======== ======== ========
Growth Rate: 6.7% 77.0%
======== ========
</TABLE>
TELEVISION REVENUES
Set forth below are the principal types of television revenues that
the Company has generated for the periods indicated and the percentage
contribution of each to total revenues.
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1997 1998
------------------------------------------------------------------------
$ % $ % $ %
-------- ------- -------- ------- -------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Local $ 20,207 45.8% $ 23,768 48.9% $ 37,959 48.5%
National 15,980 36.2 18,847 38.8 24,350 31.1
Political 3,513 8.0 300 0.7 5,721 7.3
Network Compensation 2,752 6.2 3,078 6.3 4,808 6.1
Joint Operating Agreement -- -- -- -- 2,522 3.2
Trade and barter 969 2.2 1,731 3.6 1,999 2.6
Other 744 1.6 839 1.7 926 1.2
-------- ------- -------- ------- -------- -------
Total 44,165 100.0% 48,563 100.0% 78,285 100.0%
Agency and national
representative commissions 6,606 14.9 7,105 14.6 11,162 14.3
-------- ------- -------- ------- -------- -------
Net revenue $ 37,559 85.1% $ 41,458 85.4% $ 67,123 85.7%
======== ======= ======== ======= ======== =======
Growth Rate: 10.4% 61.9%
======== ========
</TABLE>
25
<PAGE> 27
RESULTS OF OPERATIONS
Set forth below is a summary of the operations of the Company for the
years indicated and their percentages of net revenues.
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1997 1998
--------------------------------------------------------------------------
% of % of % of
$ Net Revenues $ Net Revenues $ Net Revenues
-------- ------------ -------- ------------ -------- -------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Net Revenues: $ 37,559 100.0% $ 41,458 100.0% $ 67,123 100.0%
Operating Expenses:
Station Operating 12,572 33.5 13,617 32.9 20,696 30.8
Selling, General & Administrative 8,514 22.7 9,738 23.5 15,447 23.0
Trade and Barter 1,059 2.8 1,571 3.8 1,914 2.9
Depreciation 4,286 11.4 4,232 10.2 8,208 12.2
Amortization 5,860 15.6 10,136 24.4 16,826 25.1
Corporate Expenses 840 2.2 1,548 3.7 2,347 3.5
-------- ------- -------- ------- -------- -------
Operating income $ 4,428 11.8% $ 616 1.5% $ 1,685 2.5%
======== ======= ======== ======= ======== =======
Broadcast cash flow $ 15,405 41.0% $ 16,431 39.6% $ 29,083 43.3%
======== ======= ======== ======= ======== =======
Growth rate: 6.7% 77.0%
======== ========
</TABLE>
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Gross Revenues.
Gross revenues increased by $29.7 million, or 61.2% to $78.3 million
for the year ended December 31, 1998 from $48.6 million for the year ended
December 31, 1997. Local and national revenues were up 59.7% and 29.2%,
respectively, over the comparable period in 1997. An increase of $15.6 million
is attributable to the Acquisitions, and an increase of $11.1 million is
attributable to the Swap Transactions. An increase of $3.0 million at the Core
Stations is substantially attributable to political revenues. The year ended
December 31, 1998 had $5.7 million of political revenues compared to $0.3
million for the year ended December 31, 1997.
Net Revenues.
Net revenues increased by $25.6 million, or 61.9% to $67.1 million for
the year ended December 31, 1998 from $41.5 million for the year ended December
31, 1997. An increase of $13.5 million is attributable to the Acquisitions, and
an increase of $9.8 million is attributable to the Swap Transactions. An
increase of $2.3 million at the Core Stations is substantially attributable to
political revenues.
Station Operating Expenses.
Station operating expenses increased by $7.1 million or 52.0% to $20.7
million for the year ended December 31, 1998 from $13.6 million for the year
ended December 31, 1997. An increase of $4.0 million is attributable to the
Acquisitions and an increase of $2.6 million is attributable to the Swap
Transactions. An increase of $0.5 million at the Core Stations is attributable
to increased costs at WEYI for improvements in news personnel and additional
news expenditures at WROC.
Selling, General and Administrative Expenses.
Selling, general and administrative expenses increased by $5.7 million
or 58.6% to $15.4 million for the year ended December 31, 1998 from $9.7
million for the year ended December 31, 1997. An increase of $4.4 million is
attributable to the Acquisitions and an increase of $1.0 million is
attributable to the Swap Transactions. An increase of $0.3 million at the Core
Stations is attributable to increased costs in sales due to increased
commissions on increased local sales.
26
<PAGE> 28
Trade and Barter Expenses.
Trade and barter expenses increased by $0.3 million or 21.8% to $1.9
million for the year ended December 31, 1998 from $1.6 million for the year
ended December 31, 1997. An increase of $0.3 million is attributable to the
Acquisitions.
Depreciation.
Depreciation increased by $4.0 million or 94.0% to $8.2 million for
the year ended December 31, 1998 from $4.2 million for the year ended December
31, 1997. An increase of $2.6 million is attributable to the Acquisitions and
an increase of $1.2 million is attributable to the Swap Transactions. An
increase of $0.2 million at the Core Stations is attributable to increased
capital expenditures.
Amortization.
Amortization increased by $6.7 million or 66.3% to $16.8 million for
the year ended December 31, 1998 from $10.1 million for the year ended December
31, 1997. An increase of $3.3 million is attributable to the Acquisitions and
an increase of $3.1 million is attributable to the Swap Transactions. An
increase of $0.2 million at the Core Stations is attributable to the
revaluation of assets at the time of purchase by the Company on March 1, 1997.
Corporate Expenses.
Corporate expenses increased by $0.8 million or 51.6% to $2.3 million
for the year ended December 31, 1998 from $1.5 million for the year ended
December 31, 1997. Cost increases related to higher salary costs, additional
staff, and related benefits.
Operating Income.
Operating income increased by $0.9 million or 173.5% to $1.7 million
for the year ended December 31, 1998 from $0.6 million for the year ended
December 31, 1997 due to the reasons outlined above.
Interest Expense.
Interest expense increased by $5.8 million to $16.3 million for the
year ended December 31, 1998 from $10.5 million for the year ended December 31,
1997. An increase of $1.8 million is due to higher outstanding balances of the
Senior Subordinated Notes resulting from the purchase of the Jupiter/Smith
Stations by the Company on March 1, 1997. An increase of $2.0 million is due to
higher outstanding balances on the Amended Credit Agreement resulting from the
Acquisitions, an increase of $0.9 million is due to interest related to and
resulting from the purchase of the non-license assets, all operating assets
other than FCC licenses and other minor equipment, of WPTZ, WNNE, and WFFF on
April 24, 1998, and for the period ending May 31, 1998, and an increase of $1.1
million resulting from the Swap Transactions.
Income Tax.
Income tax increased by $2.1 million to $1.8 million for the year ended
December 31, 1998 from a benefit of $0.3 million for the year ended December 31,
1997. This increase is attributable to the acquisition of WJAC, KRBC, and KACB,
and the related amortization of the step up in basis of their assets for
purchase accounting offset by the gain on asset swap.
Gain on Asset Swap.
Gain on asset swap was $17.5 million for the year ended December 31,
1998 with no gain for the year ended December 31, 1997. $7.9 million of the
gain is attributable to the non-license assets of KSBW, $1.5 million is
attributable to the non-license assets of WPTZ and WNNE, and $8.0 million is
attributable to the FCC license of KSBW, WPTZ, and WNNE.
27
<PAGE> 29
Extraordinary Item.
Extraordinary charge for early retirement of debt was $2.9 million,
net of $1.7 million of income taxes for the year ended December 31, 1998 with
no extraordinary item for the period ended December 31, 1997. The change
consists of $2.4 million of unamortized costs incurred on the issuance of the
former Bank Credit Agreement written off and $2.2 million of fees incurred on
the issuance of the Amended Credit Agreement, net of $1.7 million of taxes.
Redeemable Preferred Stock Dividends and Accretion.
Redeemable preferred stock dividends and accretion increased by $1.3
million to $5.1 million for the year ended December 31, 1998 from $3.8 million
for the period ended December 31, 1997. The increase is attributable to twelve
months in 1998 versus ten months in 1997 and higher outstanding balances.
Net Loss Applicable to Common Shareholder.
Net loss applicable to common shareholder decreased by $4.7 million to
$6.9 million for the year ended December 31, 1998 from a loss of $11.6 million
for the period ended December 31, 1997 due to the reasons outlined above.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Gross Revenues.
Gross revenues increased by $4.4 million or 10.0% to $48.6 million for
the year ended December 31, 1997 from $44.1 million for the year ended December
31, 1996. Gross local revenues in 1997 increased by approximately $3.6 million,
or 17.6% as compared to 1996, while gross national revenues increased by
approximately $2.9 million, or 17.9% as compared to 1996. The year ended
December 31, 1997 includes $3.1 million of gross revenues from WJAC, since the
date of acquisition. The majority of the other increase in local and national
revenues were generated by KSBW, WEYI, and WROC and resulted from sales
initiatives started in 1996. Both local and national revenues in 1996 were
favorably impacted by the United States based Olympic Games. Political revenues
in 1997 were $0.3 million compared to $3.5 million in 1996, due to 1997 being
an off year for presidential and congressional races. Trade and barter revenues
increased $0.8 million due to changes in value of film barter (see increase in
trade and barter expense) and the use of trade to purchase capital items.
Net Revenues.
Net revenues increased by $3.9 million or 10.4% to $41.5 million for
the year ended December 31, 1997 from $37.9 million for the year ended December
31, 1996. Agency and national representative commissions as a percentage of
sales decreased due to reduced political sales.
Station Operating Expenses.
Station operating expenses increased by $1.0 million to $13.6 million
or 8.3% for the year ended December 31, 1997 from $12.6 million for the year
ended December 31, 1996. The year ended December 31, 1997 includes $0.8 million
of station operating expenses for WJAC since the date of acquisition. A
majority of the other expense increase related to increased costs at WEYI for
improvements in news personnel and news services, additional news expenditures
at WROC, and increased cost of yearly program contracts.
Selling, General and Administrative.
Selling, general and administrative expenses increased by $1.2 million
to $9.7 million or 14.3% for the year ended December 31, 1997 from $8.5 million
for the year ended December 31, 1996. The year
28
<PAGE> 30
ended December 31, 1997 includes $0.6 million selling, general and
administrative expenses for WJAC since the date of acquisition. A majority of
the other increases relate to increased sales staff at WROC, and increased
sales commissions on increased local sales.
Trade and Barter Expense.
Trade and barter expense increased by $0.5 million or 48.3% to $1.6
million for the year ended December 31, 1997 from $1.1 million for the year
ended December 31, 1996. The year ended December 31, 1997 includes $0.1 million
of trade and barter expense for WJAC since the date of acquisition. The other
increase related to higher costs assigned to barter contracts and the use of
trade to purchase capital items.
Depreciation.
Depreciation decreased by $0.1 million or 1.0% to $4.2 million for the
year ended December 31, 1997 from $4.3 million for the year ended December 31,
1996 due to the revaluation of assets related to the Company's acquisition of
the five stations during the year.
Amortization.
Amortization increased by $4.2 million or 72.9% to $10.1 million for
the year ended December 31, 1997 from $5.9 million for the year ended December
31, 1996 due to the upward evaluation of intangible assets related to the
Company's acquisition of the five stations during the year.
Corporate Expenses.
Corporate expenses increased by $0.7 million or 84.3% to $1.5 million
for the year ended December 31, 1997 from $0.8 million for the year ended
December 31, 1996. Cost increases related to higher salary costs and additional
staff.
Operating Income.
Operating income decreased by $3.8 million or 86.4% to $0.6 million
for the year ended December 31, 1997 from $4.4 million for the year ended
December 31, 1996 due to the reasons outlined above.
Interest Expense.
Interest expense increased by $4.5 million to $10.5 million for the
year ended December 31, 1997 from $6.0 million for the year ended December 31,
1996. The increase was the result of higher interest rates and amounts of
borrowing related to the acquisition of the Jupiter/Smith Stations and
increased borrowing related to the WJAC acquisition on October 1, 1997.
Other Income.
Other income decreased by $1.2 million to $0.4 million for the year
ended December 31, 1997 from $1.6 million for the year ended December 31, 1996.
The year ended December 31, 1996 included $1.5 million of non-recurring
revenues for consulting services provided.
Income Tax.
Income tax benefit increased by $0.3 million to $0.3 million for the
year ended December 31, 1997 from zero for the year ended December 31, 1996.
This increase is attributable to the acquisition of WJAC and the related
amortization of the step up in basis of WJAC assets for purchase accounting.
29
<PAGE> 31
Redeemable Preferred Stock Dividends and Accretion.
Redeemable preferred stock dividends and accretion increased by $3.8
million to $3.8 million for the year ended December 31, 1997 from zero for the
year ended December 31, 1996. The increase is attributable to ten months of
dividends and accretion on preferred stock issued March 1, 1997.
Net Loss Applicable to Common Shareholder.
Net loss applicable to common shareholder increased $12.9 million to
$13.0 million for the year ended December 31, 1997 from a loss of $0.1 million
for the year ended December 31, 1996 due to the reasons outlined above.
Liquidity and Capital Resources
As of December 31, 1998, the Company had $5.3 million in cash balances
and net working capital of approximately $7.8 million. The Company's primary
sources of liquidity are cash provided by operations, and availability under the
Amended Credit Agreement.
Net cash flows provided by operating activities increased by $7.1
million to $13.9 million for the year ended December 31, 1998 from $6.8 million
for the year ended December 31, 1997. The Company made interest and film
payments of $16.3 million and $5.7 million, respectively, during the year ended
December 31, 1998 compared to payments of $6.2 million and $3.8 million,
respectively, for the year ended December 31, 1997.
Net cash flows used in investing activities decreased by $64.7 million
to $137.3 million for the year ended December 31, 1998 from $202.0 million for
the year ended December 31, 1997. In 1998, the Company expended approximately
$131.0 million to complete the Acquisition and the Swap Transaction. In 1997,
the Company acquired the four Jupiter/Smith Stations and WJAC, Inc. for
approximately $163.1 million and $36.0 million, respectively.
Net cash flows provided by financing activities decreased by $61.2
million to $137.3 million for the year ended December 31, 1998 from $198.5
million for the year ended December 31, 1997. In 1998, the Company borrowed
$111.0 million under the Amended Credit Agreement, received a capital infusion
of $33.2 million from Sunrise, and repaid $14.5 million net of borrowings under
the Credit Agreement. During 1998, Hearst loaned the Company $70.0 million
dollars to buy the non-license assets of WPTZ, WNNE, and WFFF and the loan was
repaid on July 3, 1998. For the year ended December 31, 1997, the Company
received a capital infusion of $49.0 million from Sunrise, sold $28.5 million of
Redeemable Preferred Stock Series A, borrowed and repaid $90.8 million under the
Credit Agreement, and sold $100.0 million of 11% Senior Subordinated Notes.
On March 25, 1997, the Company completed a private placement of $100.0
million principal amount of its 11% Senior Subordinated Notes (the Old Notes)
due March 15, 2007. On September 26, 1997, the Company completed an exchange
offer in which all of the Old Notes were exchanged for registered 11% Senior
Subordinated Notes (the New Notes) of the Company having substantially
identical terms as the Old Notes.
Interest on the New Notes is payable on March 15 and September 15 of
each year. The Indenture imposes certain limitations on the ability of the
Company and its subsidiaries to, among other things, pay dividends or make
restricted payments, consummate certain asset sales, enter into transactions
with affiliates, incur liens, impose restrictions on the ability of a
subsidiary to pay dividends or make certain payments to the Company, merge or
consolidate with any person or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of the assets of the Company.
On July 2, 1998, the Company entered into the Amended Credit Agreement
with various lenders which provides a $100.0 million term loan facility and
$65.0 million revolving credit facility. On July 3,
30
<PAGE> 32
1998, the Company borrowed $70.0 million on the term loan facility and $2.5
million on the revolving credit facility to fund amounts owed Hearst under the
Swap Transactions, retire amounts outstanding under the Credit Agreement, and
pay transaction fees and working capital needs. The remaining $30.0 million of
the term loan facility and $13.5 million of the revolving facility was used for
the Meyer transaction, and $40.0 million of the revolving credit facility was
used to finance the WUPW transaction.
The Amended Credit Agreement provides for first priority security
interests in all of the tangible and intangible assets of the Company and its
direct and indirect subsidiaries. In addition, the loans under the Amended
Credit Agreement are guaranteed by Sunrise and the Company's current direct,
and indirect subsidiaries, and will be guaranteed by the Company's future
subsidiaries. The Amended Credit Agreement contains certain financial and
operating maintenance covenants including a maximum consolidation leverage
ratio (initially 7.0:1), a minimum consolidated fixed charge coverage ratio
(initially 1.05:1), and a consolidated interest coverage ratio (initially
1.35:1). The Company is limited in the amount of annual payments that may be
made for corporate overhead.
Interest payments under the Amended Credit Agreement and the New Notes
represent significant liquidity requirements for the Company. Loans under the
Amended Credit Agreement bear interest at floating rates based upon the
interest rate option selected by the Company. In addition, the Company's 14%
Redeemable Preferred Stock Series A is cumulative, with dividends accruing
quarterly, and prior to 2002 may, at the option of the Company, be paid in
additional shares of Redeemable Preferred Stock Series A. In the event
dividends on the Redeemable Preferred Stock Series A are paid in cash,
dividends would amount to $4.2 million annually. The Amended Credit Agreement
and the Indenture will limit the Company's ability to pay cash dividends prior
to 2002 and the Company's ability to exchange the Redeemable Preferred Stock
Series A for debt of the Company.
On February 5, 1999, the Company entered into the $90.0 million
Preferred Agreement with three purchasers, two of which are participants in the
Amended Credit Agreement, and sold $35.0 million of Redeemable Preferred Stock
Series B to fund the purchase of WUPW, and $2.5 million to fund an escrow
account to pay dividends on the Redeemable Preferred Stock Series B. The
remaining amounts under the Preferred Agreement are available for acquisition
by the Company, as defined.
The Redeemable Preferred Stock Series B has a par value of $0.01 per
share with a liquidation preference of $1,000 per share. With respect to
dividends and distributions upon liquidation, winding up and dissolution of the
Company, the Redeemable Preferred Stock Series B rank on a parity with the 14%
Redeemable Preferred Stock Series A. Dividends are payable monthly at either
(i) LIBOR for the applicable dividend period plus 125 basis points, or (ii) the
ABR rate. At the option of the Company, any dividends payable on any dividend
payment date after August 5, 1999, may be paid in additional whole shares of
Redeemable Preferred Stock Series B.
At any time, the Company may redeem the shares of Redeemable Preferred
Stock Series B at a redemption price equal to 100% of the liquidation
preference per share plus all accumulated and unpaid dividends per share
(Redemption Value). On December 31, 2008, the Company will have an obligation
to redeem the then outstanding shares of Redeemable Preferred Stock Series B.
The Company is also obligated concurrently with the consummation of any
offering of any debt or equity securities of the Company or Sunrise, to use the
net cash proceeds of such offering to redeem the Redeemable Preferred Stock
Series B at the Redemption Value. The holders of Redeemable Preferred Stock
Series B, except as required by Delaware law, shall not be entitled or
permitted to vote on any matter required or permitted to be voted upon by the
stockholders of the Company. Under certain conditions related to non-payment of
dividends, the holders of the Redeemable Preferred Stock Series B may have the
right to elect the lesser of two directors or 25% of the members of the Board
of Directors.
On February 5, 1999, Hicks, Muse, Tate and Furst Equity Fund III, L.P.
(Fund) and other related Hicks Muse entities entered into a Put and Call
Agreement with the purchasers of the Redeemable Preferred Stock Series B. At the
time of a Trigger Event, any of the Purchasers may require the Fund to purchase
outstanding shares of the Redeemable Preferred Stock Series B at the Redemption
Price. Trigger Events are defined as the earliest to occur of: (i) the
occurrence of an event of default under the
31
<PAGE> 33
11% Senior Subordinated Notes, the Amended Credit Agreement or the Preferred
Agreement; (ii) a failure to comply with any terms of the Certificate of
Designation with respect to the Redeemable Preferred Stock Series B; or (iii)
August 5, 1999. The Fund has the right to call the Redeemable Preferred Stock
Series B at the Redemption Value at any time.
Based on the current level of operations, anticipated future
internally generated growth, additional borrowings under the Amended Credit
Agreement and additional equity contributions from Sunrise, the Company
anticipates that it will have sufficient funds to meet its anticipated
requirements for working capital, capital expenditures, interest payments, and
have funds available for additional acquisitions. The Company's future
operating performance and ability to service or refinance the New Notes and to
extend or refinance the Amended Credit Agreement and Preferred Agreement will
be subject to future economic conditions and to financial, business, and other
factors, many of which are beyond the control of the Company. The ability of
the Company to implement its business strategy, and to consummate future
acquisitions will require additional debt and significant equity capital and no
assurance can be given as to whether, and on what terms, such additional debt
and/or equity capital will be available, including additional equity
contributions from Sunrise. The degree to which the Company is leveraged could
have a significant effect on its results of operations.
Credit and Interest Rate Risks
The Company's financial instruments that constitute exposed credit
risks consist primarily of cash equivalents and trade receivables. The
Company's cash equivalents consist solely of high quality securities.
Concentrations of credit risks with respect to receivables are somewhat limited
due to the large number of customers and to their dispersion across the
geographic areas served by the Stations. No single customer amounts to 10% of
the Company's total outstanding receivables.
The Company was exposed to minimal market risk related to interest
rates as of December 31, 1998. The Company's Senior Subordinate Debt is fixed
at 11% and is due and payable on March 15, 2007. On September 11, 1998, the
Company entered into a thee year interest rate swap agreement to reduce the
impact of changing interest rates on $70.0 million of its floating rate
borrowings from the Amended Credit Agreement. The interest rate was fixed at
5.15% plus the applicable borrowing margin (currently 1.875%) for an overall
borrowing rate of 7.025%. The floating interest rates are based upon the three
month London Interbank Offered Rate (LIBOR) and the measurement and settlement
is performed quarterly. The quarterly settlements of this agreement will be
recorded as an adjustment to interest expense and are anticipated to have an
immaterial effect on the operations of the Company for 1999. The counter party
to this agreement is one of the lenders under the Amended Credit Agreement.
On February 9, 1999, the Company entered into a two year interest rate
swap agreement, which is extendable by the other party for an additional two
years, to reduce the impact of changing interest rates on $40,000,000 of its
floating rate borrowings from the Amended Credit Agreement. The interest rate
was fixed at 5.06% plus the applicable borrowing margin (currently 1.875%) for
an overall borrowing rate of 6.935%. The floating interest rates are based upon
the three month (LIBOR) and the measurement and settlement is performed
quarterly. The quarterly settlements of this agreement will be recorded as an
adjustment to interest expense and are anticipated to have an immaterial effect
on the operations of the Company for 1999. The counter party to this agreement
is one of the lenders under the Amended Credit Agreement.
Capital Expenditures
Capital expenditures were $5.6 million and $3.1 million for the years
ended December 31, 1998 and 1997, respectively. The Company continues to
implement improvements to the news gathering and production capabilities of
WROC, WEYI, and WDTN, and has spent approximately $1.8 million to modernize the
studio of KRBC and construct a new studio for KACB.
32
<PAGE> 34
Depreciation, Amortization and Interest
Because the Company has incurred substantial indebtedness in the
acquisition of stations, for which it will have significant debt service
requirements, and because the Company will have significant non-cash charges
relating to the depreciation and amortization expense of the property,
equipment, and intangibles that were acquired in the multiple station
acquisitions, the Company expects that it will report net losses for the
foreseeable future.
Inflation
The Company believes that its business is affected by inflation to an
extent no greater than other businesses are generally affected.
Current Accounting Pronouncements
In April 1998, American Institute of Certified Public Accountants
issued Statement of Position (SOP) No. 98-5, "Reporting on the Costs of Start-Up
Activities" (SOP 98-5) effective for fiscal years beginning after December 15,
1998. This SOP provides guidance on the financial reporting of start-up costs
and organization costs. Management does not believe the implementation of SOP
98-5 will have a material impact on the Company's consolidated financial
statements.
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." This
Statement 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. SFAS No. 133 is effective for all fiscal quarters of all fiscal
years beginning after June 15, 1999. Management does not anticipate that this
Statement will have a material impact on the Company's consolidated financial
statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable.
33
<PAGE> 35
PART III
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Certified Public Accountants
To the Stockholder of STC Broadcasting, Inc.:
We have audited the accompanying consolidated balance sheets of STC
Broadcasting, Inc. and subsidiaries as of December 31, 1998, and 1997, and the
related consolidated statements of operations, stockholder's equity and cash
flows for the year ended December 31, 1998, and the ten months ended December
31, 1997. 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 STC Broadcasting,
Inc. and subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for the year ended December 31, 1998 and the ten
months ended December 31, 1997, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Tampa, Florida
February 12, 1999
(except with respect to the matters
discussed in paragraphs 7 & 8 of
note 13, as to which the date is
March 16, 1999)
34
<PAGE> 36
STC BROADCASTING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS December 31, 1998 December 31, 1997
- ------ ----------------- -----------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 5,347,476 $ 1,632,190
Accounts receivable, net of allowance for
doubtful accounts of approximately $504,000
and $286,000, respectively 16,198,405 10,924,654
Current portion of program rights 7,769,974 4,175,969
Other current assets 1,190,629 1,031,367
--------------- ---------------
Total current assets 30,506,484 17,764,180
PROPERTY AND EQUIPMENT, net 82,178,999 36,002,597
INTANGIBLE ASSETS, net 250,643,816 168,836,284
OTHER LONG-TERM ASSETS, net 21,182,841 18,188,152
--------------- ---------------
Total assets $ 384,512,140 $ 240,791,213
=============== ===============
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 6,886,704 $ 2,407,165
Accrued expenses 6,074,752 4,873,714
Current portion of long-term debt 1,500,000 --
Current portion of program rights payable 8,230,567 4,258,003
--------------- ---------------
Total current liabilities 22,692,023 11,538,882
LONG-TERM DEBT, net of current portion 209,500,000 114,500,000
DEFERRED TAXES 25,410,000 21,109,000
PROGRAM RIGHTS PAYABLE, net of current portion 10,816,970 8,950,776
REDEEMABLE PREFERRED STOCK SERIES A, liquidation
preference of $30,000,000 37,363,679 32,263,225
--------------- ---------------
STOCKHOLDER'S EQUITY:
Common stock, par value $.01 per share, 1,000 shares
authorized, issued and outstanding 10 10
Additional paid-in capital 97,211,972 64,011,972
Accumulated deficit (18,482,514) (11,582,652)
--------------- ---------------
Total stockholder's equity 78,729,468 52,429,330
--------------- ---------------
Total liabilities and stockholder's equity $ 384,512,140 $ 240,791,213
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
35
<PAGE> 37
STC BROADCASTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended Ten Months Ended
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
REVENUES:
Broadcasting spot revenues, net of agency and national
representative commissions of $11,162,323 and
$6,244,161, respectively $ 56,867,497 $ 31,450,425
Network compensation 4,808,696 2,611,714
Income from joint operating agreement 2,522,247 --
Trade and barter 1,998,902 1,518,120
Other 925,903 650,688
--------------- --------------
Total revenues 67,123,245 36,230,947
--------------- --------------
OPERATING EXPENSES:
Station operating 20,696,363 11,539,436
Selling, general and administrative 15,447,033 8,211,908
Trade and barter 1,914,601 1,390,001
Depreciation of property and equipment 8,207,670 3,474,522
Amortization of intangibles and other long term assets 16,826,388 9,159,173
Corporate expenses 2,346,600 1,402,349
--------------- --------------
Total operating expenses 65,438,655 35,177,389
--------------- --------------
OPERATING INCOME 1,684,590 1,053,558
OTHER INCOME (EXPENSE):
Interest income 215,427 289,855
Interest expense (16,300,523) (9,502,041)
Gain on asset swap 17,457,142 --
Other (expense) income, net (173,124) 40,201
--------------- --------------
INCOME (LOSS) BEFORE INCOME TAX
AND EXTRAORDINARY ITEM 2,883,512 (8,118,427)
INCOME TAX (PROVISION) BENEFIT (1,823,000) 299,000
--------------- --------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 1,060,512 (7,819,427)
EXTRAORDINARY LOSS FROM EARLY RETIREMENT
OF DEBT, NET OF INCOME TAX BENEFIT
OF $1,726,000 (2,859,920) --
--------------- --------------
NET LOSS (1,799,408) (7,819,427)
REDEEMABLE PREFERRED STOCK SERIES A
DIVIDENDS AND ACCRETION (5,100,454) (3,763,225)
--------------- --------------
NET LOSS APPLICABLE TO COMMON STOCK $ (6,899,862) $ (11,582,652)
=============== ==============
BASIC AND DILUTED NET LOSS PER COMMON SHARE:
Loss applicable to common stock
excluding extraordinary item $ (4,040) $ (11,583)
Extraordinary item (2,860) --
--------------- --------------
Net loss applicable to common stock $ (6,900) $ (11,583)
=============== ==============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 1,000 1,000
=============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
36
<PAGE> 38
STC BROADCASTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
Total
Common Additional Accumulated Stockholder's
Stock Paid-in Capital Deficit Equity
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Beginning balance $ -- $ -- $ -- $ --
Net loss applicable to common
stockholder for the ten
months ended December 31, 1997 -- -- (11,582,652) (11,582,652)
Issuance of common stock,
net of expenses 10 49,011,972 -- 49,011,982
Capital contribution by Sunrise
Television Corp. -- 15,000,000 -- 15,000,000
-------- ------------ ------------ ------------
Balance, December 31, 1997 10 64,011,972 (11,582,652) 52,429,330
Net loss applicable to common
stockholder for the year
ended December 31, 1998 -- -- (6,899,862) (6,899,862)
Capital contribution by
Sunrise Television Corp.,
net of expenses -- 33,200,000 -- 33,200,000
-------- ------------ ------------ ------------
Balance, December 31, 1998 $ 10 $ 97,211,972 $(18,482,514) $ 78,729,468
======== ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
37
<PAGE> 39
STC BROADCASTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended Ten Months Ended
December 31, December 31,
1998 1997
------------ ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,799,408) $ (7,819,427)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation of property and equipment 8,207,670 3,474,522
Amortization of intangibles and other long term assets 16,826,388 9,159,173
Amortization of program rights 5,696,392 3,213,767
Payments on program rights payable (5,679,238) (3,313,970)
Gain on asset swap (17,457,142) --
Loss (gain) on disposal of property and equipment 143,091 (46,476)
Extraordinary loss on early retirement of debt 4,585,920 --
Deferred income tax provision (benefit) 97,000 (299,000)
Changes in operating assets and liabilities, net of effects
from acquired stations:
Accounts receivable 1,313,884 (2,429,745)
Other current assets 811,578 (660,479)
Accounts payable and accrued expenses 1,313,758 3,827,449
------------ -------------
Net cash provided by operating activities 13,879,893 5,105,814
------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Jupiter/Smith stations -- (163,175,576)
Acquisition of WJAC, Incorporated -- (36,077,537)
Net assets acquired in Hearst transactions (58,408,118) --
Acquisition of KRBC/KACB (8,171,560) --
Acquisition of Meyer stations (65,259,332) --
Capital expenditures (5,573,133) (2,848,235)
Proceeds from the disposal of property and equipment 62,836 115,244
Other 92,450 --
------------ -------------
Net cash used in investing activities (137,256,857) (201,986,104)
------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowing under credit agreement 12,000,000 107,800,000
Proceeds from senior subordinated notes -- 100,000,000
Repayment of credit agreement (26,500,000) (93,300,000)
Proceeds from sale of preferred stock, net -- 28,500,000
Proceeds from sale of common stock, net -- 49,011,982
Capital contribution of cash by parent, net 33,200,000 15,000,000
Proceeds from Hearst loan 70,000,000 --
Repayment of Hearst loan (70,000,000) --
Deferred debt financing costs and corporate organization costs (443,306) (8,499,502)
Payment of loan fees on amended credit agreement (2,164,444) --
Proceeds from amended credit agreement 116,000,000 --
Repayments of amended credit agreement (5,000,000) --
------------ -------------
Net cash provided by financing activities 127,092,250 198,512,480
------------ -------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 3,715,286 1,632,190
CASH AND CASH EQUIVALENTS, beginning balance 1,632,190 --
------------ -------------
CASH AND CASH EQUIVALENTS, ending balance $ 5,347,476 $ 1,632,190
============ =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Non cash items:
Preferred dividends and accretion $ 5,100,454 $ 3,763,225
Exchange offer on Senior Subordinated Notes $ -- $ 100,000,000
New program contracts $ 1,218,820 $ 3,706,879
Cash paid for interest $ 16,304,599 $ 6,228,521
</TABLE>
See accompanying notes to consolidated financial statements.
38
<PAGE> 40
STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
1. ORGANIZATION AND NATURE OF OPERATIONS:
The accompanying financial statements present the consolidated
financial statements of STC Broadcasting, Inc. and subsidiaries (the Company).
STC Broadcasting, Inc. was incorporated on November 1, 1996, in the state of
Delaware, commenced operations on March 1, 1997, and is a wholly owned
subsidiary of Sunrise Television Corp. (Sunrise). All of the common stock of
Sunrise is owned by Sunrise Television Partners, L.P., of which the managing
general partner is Thomas O. Hicks, an affiliate of Hicks, Muse, Tate and Furst,
Incorporated (Hicks Muse). The Company operates the following commercial
television stations (the Stations) at December 31, 1998:
<TABLE>
<CAPTION>
STATION ACQUISITION DATE DESIGNATED MARKET AREA NETWORK AFFILIATION
- ------- ---------------- ---------------------- -------------------
<S> <C> <C> <C>
WEYI March 1, 1997 Flint, Saginaw-Bay City, NBC
Michigan
WROC March 1, 1997 Rochester, New York CBS
WTOV March 1, 1997 Wheeling, West Virginia NBC
and Steubenville, Ohio
WJAC October 1, 1997 Johnstown, Altoona, State NBC
College, Pennsylvania
KRBC April 1, 1998 Abilene-Sweetwater, Texas NBC
KACB April 1, 1998 San Angelo, Texas NBC
WDTN June 1, 1998 Dayton, Ohio ABC
WNAC June 1, 1998 Providence, Rhode Island and
New Bedford, Massachusetts FOX
KVLY November 1, 1998 Fargo, North Dakota NBC
KFYR November 1, 1998 Bismarck, North Dakota NBC
KUMV November 1, 1998 Williston, North Dakota NBC
KMOT November 1, 1998 Minot, North Dakota NBC
KQCD November 1, 1998 Dickinson, North Dakota NBC
</TABLE>
Various subsidiaries hold the assets of the Stations. One subsidiary, Smith
Acquisition Company (SAC) has a one percent equity interest controlled by Smith
Broadcasting Group, Inc., (SBG). SBG is controlled by Robert N. Smith, the Chief
Executive Officer and a Director of Sunrise and the Company. SBG's interest in
SAC, which includes the assets of WTOV-TV and WNAC-TV, represents an
insignificant portion of the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
The accompanying consolidated financial statements include the
consolidated accounts of the Company. All material intercompany items and
transactions have been eliminated.
Reclassifications
Certain reclassifications have been made to the 1997 financial
statements to conform to current year's presentation.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less to be cash equivalents.
39
<PAGE> 41
STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Concentration of Risk and Accounts Receivable
The Company serves the markets shown in Note 1 above. Accordingly, the
revenue potential of the Company is dependent on the economy in these markets.
The Company monitors the collectibility of its accounts receivable through
continuing credit evaluations. Total provision for losses on doubtful accounts
amounted to approximately $351,000 and $34,000 for the year ended December 31,
1998, and the ten months ended December 31, 1997, respectively.
Program Rights
The Company has agreements with distributors for the rights to
television programming over contract periods which generally run from one to
four years. Each contract is recorded as an asset and liability when the license
agreement is signed. Program rights and the corresponding obligation are
classified as current or long-term based on the estimated usage and payment
terms.
The capitalized cost of program rights for one-time only programs is
amortized on a straight-line basis over the period of the program rights
agreements. The capitalized cost of program rights for multiple showing
syndicated program material is amortized on an accelerated basis over the period
of the program rights agreements. Program rights are reflected in the
consolidated balance sheet at the lower of unamortized cost or estimated net
realizable value. Estimated net realizable values are based upon management's
expectation of future advertising revenues net of sales commissions to be
generated by the program material. Payments of program rights liabilities are
typically paid on a scheduled basis and are not affected by adjustments for
amortization or estimated net realizable value.
Program Barter and Trade Transactions
The Company purchases certain programming, which includes advertising
time of the syndicator during the airing of the programs. The estimated fair
value of advertising revenue received in program barter transactions is
recognized as revenue and a corresponding program cost when the airtime is used
by the advertiser. Additionally, the Company broadcasts certain customers'
advertising in exchange for equipment, merchandise, or services. The estimated
fair value of the equipment, merchandise or services received is recorded as
deferred trade costs, the corresponding obligation to broadcast advertising is
recorded as deferred trade revenues, resulting in a net current asset or net
current liability. The deferred trade costs are expensed or capitalized as they
are used, consumed or received. Deferred trade revenues are recognized as the
related advertising is aired.
The following table summarizes program barter revenue and trade revenue.
<TABLE>
<CAPTION>
Year Ended Ten Month Period Ended
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
Program barter revenue $ 1,261,312 $ 937,545
Trade revenue 737,590 580,575
------------ ------------
Total $ 1,998,902 $ 1,518,120
============ ============
</TABLE>
Property and Equipment
Property and equipment of the Stations acquired were recorded at the
estimate of fair value based upon independent appraisals, and property and
equipment acquired subsequent thereto is recorded at
40
<PAGE> 42
STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
cost. Property and equipment is depreciated using the straight-line method over
the estimated useful lives of the assets, as follows:
<TABLE>
<S> <C>
Buildings and improvements 20-39 years
Broadcast equipment 5-15 years
Vehicles 3 years
Furniture and computers 5 years
</TABLE>
Expenditures for maintenance and repairs are charged to operations as
incurred, whereas expenditures for renewals and betterments are capitalized.
The major classes of property and equipment are as follows:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
Land and improvements $ 3,931,723 $ 2,536,679
Buildings and improvements 13,728,627 8,726,962
Broadcast equipment 68,082,971 24,995,411
Vehicles 1,767,270 892,544
Furniture and computers 4,537,407 2,301,636
------------- -------------
92,047,998 39,453,232
Less: accumulated depreciation and
amortization (9,868,999) (3,450,635)
------------- -------------
$ 82,178,999 $ 36,002,597
============= =============
</TABLE>
Intangible Assets
Intangible assets consist principally of values assigned to the Federal
Communications Commission (FCC) licenses and network affiliation agreements of
the Stations. Intangible assets are being amortized on the straight-line basis
over 15 years.
Intangible assets consist of the following:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
FCC licenses $ 76,438,188 $ 42,460,571
Network affiliations 189,813,529 132,005,474
Other 3,772,616 2,431,669
------------- -------------
270,024,333 176,897,714
Less: Accumulated amortization (19,380,517) (8,061,430)
------------- -------------
$ 250,643,816 $ 168,836,284
============= =============
</TABLE>
Other Long-Term Assets
Other long-term assets consist of values assigned to deferred financing
and acquisition costs and the non-current portion of program rights. Deferred
financing costs are amortized over the applicable loan period (seven or ten
years) on a straight-line basis, and deferred acquisition and organization costs
are amortized over a five year period on a straight-line basis.
41
<PAGE> 43
STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Other long-term assets consist of the following:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
Deferred financing and acquisition costs, net
of accumulated amortization of $2,269,699
and $1,097,743, respectively $ 11,016,417 $ 9,590,604
Program rights, net of current portion 10,166,424 8,597,548
------------ ------------
$ 21,182,841 $ 18,188,152
============ ============
</TABLE>
Revenue Recognition
The Company's primary source of revenue is the sale of television time
to advertisers. Revenue is recorded when the advertisements are broadcast and
are net of agency and national representative commissions.
Joint Operating Agreement
The Company has a Joint Marketing and Programming Agreement with Clear
Channel Communications (Clear Channel) under which Clear Channel programs
certain airtime, including news programming for WNAC and manages the sale of
commercial air time on WNAC and WPRI, the CBS station in Providence, for an
initial period of ten years commencing July 1, 1996. The Company and Clear
Channel each receive 50% of the broadcast cash flow generated by the two
stations subject to certain adjustments. This amount is recorded by the Company
in income from joint operating agreement in the accompanying consolidated
statements of operations.
Income Taxes
Income taxes are provided using the liability method in accordance with
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes."
Long-Lived Assets
Long-lived assets and identifiable intangibles are reviewed
periodically for impairment if events or changes in circumstances indicate that
the carrying amount should be addressed. The Company has determined that there
has been no impairment in the carrying value of long-lived assets of the
Stations, as of December 31, 1998.
Fair Value of Financial Instruments
The book value of all financial instruments approximates their fair
value as of December 31, 1998 and December 31, 1997.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expense during the reporting
period. Actual results could differ from those estimates.
Basic and Diluted Net Loss per Common Share
Net loss per common share is computed as net loss applicable to common
stockholder divided by the weighted average number of shares of common stock
outstanding.
42
<PAGE> 44
STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Current Accounting Pronouncements
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) No. 98-5, "Reporting on the Costs of Start-Up
Activities" (SOP 98-5) effective for fiscal years beginning after December 15,
1998. This SOP provides guidance on the financial reporting of start-up costs
and organization costs. Management does not believe the implementation of SOP
98-5 will have a material impact on the Company's consolidated financial
statements.
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133).
SFAS 133 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.
SFAS 133 is effective for all fiscal years beginning after June 15, 1999.
Management does not anticipate that this Statement will have a material impact
on the Company's consolidated financial statements.
3. ACQUISITIONS:
1998 Acquisitions
On April 1, 1998, the Company acquired 100% of the outstanding stock of
Abilene Radio and Television Company (ARTC) for approximately $8,172,000. ARTC
operated television stations KRBC and KACB, NBC affiliates for Abilene and San
Angelo, Texas. The accompanying financial statements reflect the acquisition
under the purchase method of accounting and include the results of operations
from April 1, 1998. The acquired assets and assumed liabilities were recorded at
fair value as of the date of acquisition. The approximate purchase price was
allocated as follows:
<TABLE>
<S> <C>
Property and equipment $ 5,503,000
Intangible assets 6,570,000
Working capital 303,000
Deferred taxes (4,204,000)
------------
$ 8,172,000
============
</TABLE>
The acquisition was funded by borrowings under the Credit Agreement
(see Note 6).
In a series of transactions, the Company has acquired certain assets
from Hearst-Argyle Stations, Inc., (Hearst) through transactions structured as
an exchange of assets (the Hearst Transaction). On February 3, 1998, the Company
agreed to acquire WPTZ, WNNE, and a local marketing agreement (LMA) for WFFF
from Sinclair Broadcast Group, Inc. for $72,000,000, with the intention of using
these assets in the Hearst Transaction. WPTZ and WNNE are the NBC affiliates and
WFFF is the FOX affiliate serving the Burlington, Vermont and Plattsburgh, New
York television market. On February 18, 1998, the Company agreed with Hearst to
trade KSBW, the NBC affiliate in Salinas, California, WPTZ and WNNE for WDTN,
the ABC affiliate in Dayton, Ohio, WNAC, the FOX affiliate in Providence, Rhode
Island, WNAC's interest in a Joint Marketing Programming Agreement with WPRI,
the CBS affiliate in Providence, Rhode Island, and approximately $22,000,000 in
cash. On April 24, 1998, the Company completed a purchase of non-license assets
(all operating assets other than FCC licenses and other minor equipment) of
WPTZ, WNNE and WFFF for $70,000,000. WFFF was sold by the Company to a related
party on April 24, 1998 (see Note 9). Under the purchase method of accounting,
the accompanying financial statements reflect the operations of WPTZ and WNNE
for the period April 24, 1998 to May 31, 1998. Funds to complete the acquisition
of WPTZ, WNNE, and WFFF were provided by Hearst. The assets acquired were
pledged to Hearst under the related loan agreement which was repaid on July 3,
1998.
On June 1, 1998, the Company received contractually the benefits of the
operation of stations WDTN, and WNAC and its joint operating agreement with
WPRI. The accompanying financial statements reflect the asset swap using the
purchase method of accounting and include the results of operations from June 1,
1998. The Company recorded a book gain of approximately $17,457,000 on the asset
swap.
43
<PAGE> 45
STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The fair value of the WDTN and WNAC assets were allocated as follows:
<TABLE>
<S> <C>
Property and equipment $ 19,615,000
Intangible assets 93,892,000
Working capital 3,084,000
-------------
$ 116,591,000
=============
</TABLE>
The swap was funded by borrowings of $72,500,000 under the Amended
Credit Agreement (see Note 6), Sunrise invested an additional $10,400,000 in the
Company in the form of additional contributed capital and from available cash.
On November 1, 1998, the Company acquired substantially all of the
assets of KVLY, KFYR, KUMV, KMOT, and KQCD (the Meyer Stations) from Meyer
Broadcasting for approximately $65,259,000. The accompanying financial
statements reflect the acquisition under the purchase method of accounting and
include results of operations from November 1, 1998. The acquired assets and
assumed liabilities were recorded at fair value as of the date of acquisition.
The final allocation of the purchase price is contingent on finalization of
costs and expenses of the acquisition and the determination of certain
liabilities, however, the allocation is not expected to differ materially from
the preliminary allocation. The purchase price was allocated as follows:
<TABLE>
<S> <C>
Property and equipment $32,615,000
Intangible assets 33,568,000
Working capital (924,000)
-----------
$65,259,000
===========
</TABLE>
The acquisition was funded by $43,500,000 of borrowing under the
Amended Credit Agreement, $22,800,000 of additional contributed capital from
Sunrise and available cash on hand.
The results of operations for the year ended December 31, 1998 and the
ten months ended December 31, 1997, include operations of each station from the
respective date of acquisition. The following table summarizes the unaudited
consolidated proforma results of operations for the calendar years ended
December 31, 1998 and 1997 assuming the acquisitions during 1998 and the Hearst
Transaction had occurred on January 1, 1998 and 1997.
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED
--------- ---------
1998 1997
---- ----
<S> <C> <C>
Net revenue $ 83,885,000 $ 69,653,000
Operating loss (794,000) (4,327,000)
Net loss after tax (22,352,000) (18,826,000)
Net loss applicable to
common stock (30,312,000) (22,590,000)
Net loss per share (30,312) (22,590)
Weighted average shares outstanding 1,000 1,000
</TABLE>
The proforma information above is presented in response to applicable
accounting rules relating to business acquisitions and is not necessarily
indicative of the actual results that would have been achieved had each of the
Stations been acquired at the beginning of 1997, nor is it indicative of the
future results of operations.
1997 Acquisitions
On March 1, 1997 , the Company acquired substantially all of the assets
of WEYI, WROC, KSBW, and WTOV (the Jupiter/Smith Stations) from Jupiter/Smith TV
Holdings, L.P. and Smith Broadcasting
44
<PAGE> 46
STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Partners,L.P. for approximately $163,176,000. The accompanying financial
statements reflect the acquisition under the purchase method of accounting.
Accordingly, the acquired assets and assumed liabilities were recorded at fair
value as of the date of acquisition. The purchase price was allocated as
follows:
<TABLE>
<S> <C>
Property and equipment $ 26,921,000
Intangible assets 130,530,000
Working capital 5,725,000
-------------
$ 163,176,000
=============
</TABLE>
The acquisition was funded by $90,800,000 in borrowings under the
Credit Agreement and the sale of preferred and common stock in the approximate
amount of $77,500,000.
On October 1, 1997, the Company acquired 100% of the outstanding stock
of WJAC, Incorporated (WJAC) for approximately $36,078,000. The accompanying
financial statements reflect the acquisition under the purchase method of
accounting. Accordingly, the acquired assets and assumed liabilities were
recorded at fair value as of the date of acquisition. The purchase price was
allocated as follows:
<TABLE>
<S> <C>
Property and equipment $ 9,777,000
Intangible assets 48,534,000
Working capital (825,000)
Deferred taxes (21,408,000)
--------------
$ 36,078,000
==============
</TABLE>
The acquisition was funded by $17,000,000 of borrowing under the Credit
Agreement, $15,000,000 of additional contributed capital from Sunrise, and
available cash on hand.
The results of operations for the ten months ended December 31, 1997,
include operations of the Jupiter/Smith Stations and WJAC from the respective
dates of acquisition. The following table summarizes the unaudited condensed
consolidated pro forma results of operations for the calendar years ended
December 31, 1997 and 1996 assuming all the 1997 station acquisitions had
occurred on January 1, 1997 and 1996, respectively.
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED
--------- ---------
1997 1996
---- ----
<S> <C> <C>
Net revenue $ 48,448,000 $ 47,480,000
Operating loss (92,000) (164,000)
Net loss after tax (11,422,000) (11,494,000)
Net loss applicable to common stock (15,900,000) (15,994,000)
Net loss per share (15,900) (15,994)
Weighted average shares outstanding 1,000 1,000
</TABLE>
The proforma information above is presented in response to applicable
accounting rules relating to business acquisitions and is not necessarily
indicative of the actual results that would have been achieved had each of the
Stations been acquired at the beginning of 1997 or 1996, nor is it indicative of
the future results of operations.
45
<PAGE> 47
STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
4. ACCRUED EXPENSES:
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
Interest $ 3,269,444 $ 3,273,520
Compensation 1,529,883 966,163
National representative fees 316,090 171,204
Property taxes 345,471 69,433
Professional fees 210,063 181,442
Other 403,801 211,952
------------- -------------
Total: $ 6,074,752 $ 4,873,714
============= =============
</TABLE>
5. OBLIGATIONS FOR PROGRAM RIGHTS:
The aggregate scheduled maturities of program rights obligations
subsequent to December 31, 1998 are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1999 $ 8,230,567
2000 6,126,450
2001 2,704,860
2002 1,691,225
2003 and thereafter 294,435
-------------
19,047,537
Less: Current portion 8,230,567
-------------
Long-term portion of
program rights payable $ 10,816,970
=============
</TABLE>
6. LONG-TERM DEBT:
To finance the Jupiter/Smith acquisition described in Note 3, the
Company entered into a Credit Agreement with Chase Manhattan Bank and
NationsBank of Texas, N.A., (the Credit Agreement), as agents for borrowings up
to $95,000,000. The Credit Agreement provided for: (i) a seven-year term loan
facility in the amount of $60,000,000 (the Term Loan); and (ii) a seven-year
revolving credit facility in the amount of $35,000,000 (the Revolving Credit
Facility) both expiring on February 27, 2004. On March 25, 1997, the Company
completed a private placement of $100,000,000 principal amount of its 11% Senior
Subordinated Notes (the Old Notes) due March 15, 2007. Proceeds from the sale of
the Old Notes were used to repay all outstanding Term Loan and Revolving Credit
borrowings under the Credit Agreement and the Term Loan facility was cancelled.
The remaining net proceeds were available for general working capital purposes.
On September 26, 1997, the Company completed an exchange offer in which all the
Old Notes were exchanged for registered 11% Senior Subordinated Notes (the New
Notes) of the Company having substantially the identical terms as the Old Notes.
On July 2, 1998, the Company entered into an Amended and Restated
Credit Agreement (the Amended Credit Agreement) with various lenders which
provides a $100,000,000 term loan facility (the Amended Term Loan) and
$65,000,000 revolving credit facility (the Amended Revolving Credit Facility).
On July 3, 1998, the Company borrowed $70,000,000 on the Amended Term Loan and
$2,500,000 on the Amended Revolving Credit Facility to fund the amounts owed
Hearst under the Hearst Transaction, retire
46
<PAGE> 48
STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
outstanding amounts under the Credit Agreement, pay transaction fees and provide
for working capital needs. The Company recorded a pretax extraordinary loss of
$4,585,920 on the retirement of the Credit Agreement. The loss consisted of
$2,421,476 of previously unamortized costs incurred on the Credit Agreement and
$2,164,444 of financing fees paid to the lenders of the Amended Credit
Agreement.
The Amended Credit Agreement bears interest at an annual rate, at the
Company's option, equal to the applicable borrowing rate plus the applicable
margin as defined in the Amended Credit Agreement (8.38% at December 31, 1998),
or the Eurodollar Rate plus the applicable margin as defined in the Amended
Credit Agreement (7.155% at December 31, 1998). Interest rates may be reduced
quarterly in the event the Company meets certain financial tests relating to
consolidated leverage.
The Amended Credit Agreement provides for first priority security
interests in all of the tangible and intangible assets of the Company and its
direct and indirect subsidiaries. In addition, the loans under the Amended
Credit Agreement are guaranteed by Sunrise and the Company's current direct and
indirect and any future subsidiaries. The Amended Credit Agreement and the New
Notes contain certain financial and operating maintenance covenants including a
maximum consolidation leverage ratio (initially 7.0:1), a minimum consolidated
fixed charge coverage ratio (initially 1.05:1), and a consolidated interest
coverage ratio (initially 1.3:1). The Company is limited in the amount of annual
payments that may be made for capital expenditures and corporate overhead.
The operating covenants of the Amended Credit Agreement and the New
Notes include limitations on the ability of the Company to: (i) incur additional
indebtedness, other than certain permitted indebtedness; (ii) permit additional
liens or encumbrances, other than certain permitted liens; (iii) make any
investments in other persons, other than certain permitted investments, (iv)
become obligated with respect to contingent obligations, other than certain
permitted contingent obligations; and (v) make restricted payments (including
dividends on its common stock). The operating covenants also include
restrictions on certain specified fundamental changes, such as mergers and asset
sales, transactions with shareholders and affiliates and transactions outside
the ordinary course of business as currently conducted, amendments or waivers of
certain specified agreements and the issuance of guarantees or other credit
enhancements. At December 31, 1998, the Company was in compliance with the
financing and operating covenants of both the Amended Credit Agreement and the
New Notes.
On September 11, 1998, the Company entered into a three year interest
rate swap agreement to reduce the impact of changing interest rates on
$70,000,000 of its variable rate borrowings under the Amended Credit Agreement.
The interest rate was fixed at 5.15% plus the applicable borrowing margin
(currently 1.875%) for an overall borrowing rate of 7.025% at December 31, 1998.
The variable interest rates are based upon the three month London Interbank
Offered Rate (LIBOR) and the measurement and settlement is performed quarterly.
The quarterly settlements of this agreement will be recorded as an adjustment to
interest expense and are not anticipated to have a material effect on the
consolidated financial statements of the Company. The counter party to this
agreement is one of the lenders under the Amended Credit Agreement.
Interest on the New Notes is payable semiannually on March 15 and
September 15 of each year. The New Notes will mature on March 15, 2007. Except
as described below, the Company may not redeem the New Notes prior to March 15,
2002. On and after such date, the Company may redeem the New Notes, in whole or
in part, together with accrued and unpaid interest, if any, to the redemption
date. In addition, at any time on or prior to March 15, 2000, the Company may,
subject to certain requirements, redeem up to 25% of the aggregate principal
amount of the New Notes with the net cash proceeds from one or more Public
Equity Offerings at a redemption price equal to 111% of the principal amount
thereof plus accrued and unpaid interest, if any, to the redemption date,
provided that after any such redemption, at least 75% of the aggregate principal
amount of the New Notes originally issued remain outstanding immediately after
each such redemption. The New Notes will not be subject to any sinking fund
requirements. Upon a change of control, as defined, the
47
<PAGE> 49
STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Company will have the option, at any time on or prior to March 15, 2002, to
redeem the New Notes, in whole but not in part, at a redemption price equal to
100% of the principal amount thereof, plus accrued and unpaid interest plus the
applicable premium and if the New Notes are not redeemed or if such change of
control occurs after March 15, 2002, the Company will be required to offer to
repurchase the New Notes at a price equal to 101% of the principal amount
thereof, together with accrued and unpaid interest, if any, to the repurchase
date.
The New Notes are unsecured and subordinated in right of payment to all
existing and future senior indebtedness of the Company. The New Notes rank pari
passu with any future senior subordinated indebtedness of the Company and will
rank senior to all other subordinated indebtedness of the Company. The indenture
under which the New Notes were issued permits the Company to incur additional
indebtedness, including senior indebtedness subject to certain limitations.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
Amended Term Loan $100,000,000 $ --
Amended Revolving Credit Facility 11,000,000 --
New Notes 100,000,000 100,000,000
Revolving Credit Facility -- 14,500,000
------------ ------------
Total long-term debt 211,000,000 114,500,000
Less: current portion 1,500,000 --
------------ ------------
Long-term debt, net of current portion $209,500,000 $114,500,000
============ ============
</TABLE>
The following table shows scheduled payments on long-term debt:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1999 $ 1,500,000
2000 5,000,000
2001 10,000,000
2002 14,500,000
2003 21,500,000
Thereafter 158,500,000
--------------
Total $ 211,000,000
==============
</TABLE>
The following table shows interest expense for the periods indicated:
<TABLE>
<CAPTION>
Year Ended Ten Months Ended
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
New Notes $ 11,000,000 $ 8,463,888
Credit Agreements 4,357,963 1,030,151
Hearst-Argyle loan (see Note 3) 942,560 --
Other -- 8,002
-------------- -------------
Total $ 16,300,523 $ 9,502,041
============== =============
</TABLE>
48
<PAGE> 50
STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
7. REDEEMABLE PREFERRED STOCK SERIES A:
In connection with the Jupiter/Smith Stations acquisition, the Company
issued 300,000 shares of Redeemable Preferred Stock Series A with an aggregate
liquidation preference of $30.0 million, or $100 per share, which is entitled to
quarterly dividends that will accrue at a rate per annum of 14%. Prior to
February 28, 2002, dividends may be paid in either additional whole shares of
Redeemable Preferred Stock Series A or cash, at the Company's option, and only
in cash following that date. The New Notes and the Amended Credit Agreement
prohibit the payment of cash dividends until May 31, 2002.
The Redeemable Preferred Stock Series A is subject to mandatory
redemption (subject to contractual and other restrictions with respect thereto
and to the legal availability of funds therefor) in whole on February 28, 2008,
at a price equal to the then effective liquidation preference thereof, plus all
accumulated and unpaid dividends to the date of redemption. Prior to February
28, 2008, the Company has various options on redemption of the Redeemable
Preferred Stock Series A at various redemption prices exceeding the liquidation
preference.
The Company may, at its option, subject to certain conditions,
including its ability to incur additional indebtedness under the New Notes and
the Amended Credit Agreement, on any scheduled dividend payment date occurring
on or after the Redeemable Preferred Stock Series A issuance date, exchange the
Redeemable Preferred Stock Series A, in whole but not in part, for the Company's
14% subordinated exchange debentures due 2008 (the Exchange Debentures). Holders
of the Redeemable Preferred Stock Series A will be entitled to receive $1.00
principal amount of Exchange Debentures for each $1.00 in liquidation preference
of Redeemable Preferred Stock Series A.
Holders of the Redeemable Preferred Stock Series A have no voting
rights, except as otherwise required by law; however, the holders of the
Redeemable Preferred Stock Series A, voting together as a single class, shall
have the right to elect the lesser of the two directors or 25% of the total
number of directors constituting the Board of Directors of the Company upon the
occurrence of certain events, including but not limited to, the failure by the
Company on or after February 28, 2002, to pay cash dividends in full on the
Redeemable Preferred Stock Series A for six or more quarterly dividend periods,
the failure by the Company to discharge any mandatory redemption or repayment
obligation with respect to the Redeemable Preferred Stock Series A, the breach
or violation of one or more of the covenants contained in the Certificate of
Designation, or the failure by the Company to repay at final stated maturity, or
the acceleration of the final stated maturity of, certain indebtedness of the
Company.
The Certificate of Designation for the Redeemable Preferred Stock
Series A and the indenture for the Exchange Debentures contain covenants
customary for securities comparable to the Redeemable Preferred Stock Series A
and the Exchange Debentures, including covenants that restrict the ability of
the Company and its subsidiaries to incur additional indebtedness, pay dividends
and make certain other restricted payments, to merge or consolidate with any
other person or to sell, assign, transfer, lease, convey, or otherwise dispose
of all or substantially all of the assets of the Company. Such covenants are
substantially identical to those covenants contained in the New Notes.
8. TRANSACTIONS WITH AFFILIATES:
On March 1, 1997, Sunrise and the Company entered into a ten-year
agreement (the Monitoring and Oversight Agreement) with an affiliate of Hicks
Muse (Hicks Muse Partners) pursuant to which Sunrise and the Company have agreed
to pay Hicks Muse Partners an annual fee payable quarterly for oversight and
monitoring services to the Company. The annual fee is adjustable on January 1,
of each calendar year to an amount equal to 0.2% of the budgeted consolidated
annual net revenues of the Company and its subsidiaries for the then-current
fiscal year plus reimbursement of certain expenses.
49
<PAGE> 51
STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The Monitoring and Oversight Agreement makes available the resources of
Hicks Muse Partners concerning a variety of financial and operational matters.
The Company does not believe that the services that have been, and will continue
to be provided to the Company by Hicks Muse Partners could otherwise be obtained
by the Company without the addition of personnel or the engagement of outside
professional advisors. In the Company's opinion, the fees provided for under the
Monitoring and Oversight Agreement reasonably reflect the benefits received, and
to be received, by Sunrise and the Company. Total payments related to this
agreement amounted to approximately $201,000 and $139,000 for the year ended
December 31, 1998 and the ten months ended December 31, 1997, respectively.
On March 1, 1997, Sunrise and the Company entered into a ten-year
agreement (the Financial Advisory Agreement) pursuant to which Hicks Muse
Partners received a financial advisory fee of 1.5% of the transaction value at
the closing of the Jupiter/Smith acquisition as compensation for its services as
financial advisor to the Company. Hicks Muse Partners is entitled to receive a
fee equal to 1.5% of the "transaction value" for each "add-on transaction" in
which the Company is involved. The term "transaction value" means the total
value of the add-on transaction including, without limitation, the aggregate
amount of the funds required to complete the add-on transaction (excluding any
fees payable pursuant to the Financial Advisory Agreement), including the amount
of any indebtedness, preferred stock or similar terms assumed (or remaining
outstanding). The term "add-on transaction" means any future proposal for a
tender offer, acquisition, sale, merger, exchange offer, recapitalization,
restructuring or other similar transaction directly involving the Company or any
of its subsidiaries, and any other person or entity. The Financial Advisory
Agreement makes available the resources of Hicks Muse Partners concerning a
variety of financial and operational matters. The Company does not believe that
the services that have been, and will continue to be provided by Hicks Muse
Partners could otherwise be obtained by the Company without the addition of
personnel or the engagement of outside professional advisors. In the Company's
opinion, the fees provided for under the Financial Advisory Agreement reasonably
reflect the benefits received and to be received by the Company. Total fees paid
under this agreement for the year ended December 31, 1998 and the ten month
period ended December 31, 1997 were $2,723,438 and $3,355,500, respectively, and
were capitalized as cost of acquisition or netted against preferred stock.
On March 1, 1997, affiliates of Hicks Muse purchased 250,000 shares of
the Redeemable Preferred Stock for a purchase price of approximately $24.1
million (or 96.5% of the initial liquidation preference of such shares) and
received in connection therewith warrants to purchase shares of common stock of
Sunrise. The Hicks Muse affiliates, along with the other purchaser of the
Redeemable Preferred Stock and warrants, received certain registration rights
with respect to the shares of common stock of Sunrise issuable upon exercise of
the warrants.
The Company has elected to participate in a Hicks Muse affiliate
insurance program which covers vehicles, buildings, equipment, libel and
slander, liability and earthquake damage. The Company pays actual invoice costs
and no employee of Hicks Muse is compensated for these services other than
through the above Monitoring and Oversight Agreement. Management believes the
amounts paid are attractive and representative of the services provided.
The Company has elected to participate in the Sunrise health, life,
vision and dental program, long and short-term disability, travel accident and
long-term care program. Management believes the amounts paid are representative
of the services provided.
A defined contribution 401(k) savings plan is provided to employees of
the Company by Sunrise. Employees of the Company who have been employed for six
months and who have attained the age of 21 years are generally eligible to
participate. Certain employees represented by various unions have elected not to
participate in the Plan or have established their own plans. Total contributions
by the Company to the defined contribution 401(k) savings plan were
approximately $341,000 and $135,000 for the twelve months ended December 31,
1998 and the ten months ended December 31, 1997, respectively.
50
<PAGE> 52
STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The Company has contracts with national representation firms to sell
advertising time. During 1998, entities controlled by Hicks Muse acquired
certain of these firms. In 1999, the Company entered into extensions of certain
of these contracts in the normal course of business on terms and conditions
which the Company considered representative of current market conditions.
On April 24, 1998, the Company sold to Robert N. Smith the assets and
certain rights and obligations related to WFFF for $500,000, which amount would
be increased to reflect any operating losses associated with WFFF subsequent to
the Company's commencement of operations of WFFF under a time brokerage
agreement on April 24, 1998. The purchase price was secured by a note and liens
on all of the assets sold and on July 23, 1998, the Company received full
payment on the note.
9. PENSION PLAN:
In October 1997, the Company approved the termination of two WJAC
non-contributory, defined benefit pension plans (the Plans) covering principally
all full-time salaried and hourly employees and certain part-time employees of
WJAC. Effective December 31, 1997, the Company froze pension benefits at the
current level and suspended future benefit accruals. The Company terminated the
Plans during 1998. Final distribution to current and former employees and
expenses related to the termination were paid out of the Plans' assets in 1998.
10. INCOME TAXES:
STC Broadcasting, Inc. files a consolidated federal income tax return
with all qualified subsidiaries. All nonqualifying subsidiaries file a separate
federal income tax return. STC Broadcasting, Inc. and certain subsidiaries file
separate state income tax returns. The provision (benefit) for income taxes
consists of the following for the year ended December 31, 1998 and the ten
months ended December 31, 1997:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Deferred Provision (Benefit):
Federal $ 1,659,000 $ (269,000)
State 164,000 (30,000)
----------- -----------
Total income tax provision (benefit) $ 1,823,000 $ (299,000)
=========== ===========
</TABLE>
Deferred taxes reflect the tax effect on temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Components of the Company's net
deferred tax liability as of December 31, 1998 and 1997, are as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Deferred Tax Assets:
Net operating loss (NOL) carryforward $ 4,734,000 $ 2,735,000
Deferred debt costs 1,573,000 --
Post retirement benefit obligations 198,000 198,000
Allowance for doubtful accounts 232,000 95,000
Other 222,000 82,000
-------------- -------------
6,959,000 3,110,000
-------------- -------------
Deferred Tax Liabilities:
Intangible assets (22,122,000) (20,551,000)
Deferred gain on asset exchange (5,664,000) --
Property and equipment (4,503,000) (3,276,000)
-------------- -------------
(31,389,000) (23,827,000)
-------------- -------------
Net deferred tax liability (24,430,000) (20,717,000)
Less: valuation allowance (980,000) (392,000)
-------------- -------------
$ (25,410,000) $ (21,109,000)
============== ==============
</TABLE>
The Company has federal and state NOL carryforwards which expire in
2017 and 2018. During the year ended December 31, 1998 and the ten months ended
December 31, 1997, the Company created $588,000 and $392,000, respectively, of
valuation allowance to reserve for deferred tax assets resulting from
nonqualifying subsidiaries' NOLs for the tax reporting period and for other
deferred tax assets.
During 1997 the Company created $2,743,000 in valuation allowance to
reserve for deferred tax assets created as a result of STC Broadcasting, Inc.
and qualified subsidiaries' NOLs. This valuation allowance was reversed as a
result of the WJAC acquisition and the reversal was charged against the
intangible assets of WJAC in accordance with the provisions of SFAS No. 109
"Accounting for Income Taxes."
51
<PAGE> 53
STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The reconciliation of the income tax provision (benefit) based on the
federal statutory federal income tax rate (34 percent) to the Company's income
tax provision (benefit) is as follows for the year ended December 31, 1998 and
for the ten months ended December 31, 1997:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Tax provision (benefit) at the statutory rate $ 980,000 $ (2,760,000)
State income tax provision (benefit), net of
federal tax effect 202,000 (417,000)
Valuation allowance 588,000 2,845,000
Other 53,000 33,000
---------- -------------
$1,823,000 $ (299,000)
========== =============
</TABLE>
11. COMMITMENT AND CONTINGENCIES:
Legal Proceedings
The Company is subject to legal proceedings and claims in the normal
course of business. In the opinion of management, after discussion with legal
counsel, the amount of ultimate liability with respect to these actions will not
materially affect the financial position or results of operations of the
Company.
Management Contracts
The Company has entered into five-year employment agreements with four
members of senior management for minimum base compensation of $250,000 and an
annual bonus based upon criteria established by the Board of Directors. If prior
to the fourth anniversary of the executive officers employment date, the
executive officer terminates his employment for good reason, as defined, or
Sunrise or the Company terminate his employment for any reason other than for
cause, as defined, then such executive officer shall be paid his salary and
shall continue to be covered by certain employee benefit plans for 12 months or
until the third anniversary of the employment date, whichever period is longer;
provided, however, that continued coverage under any employee benefit plan of
Sunrise or the Company shall terminate upon such executive officer becoming
eligible for comparable benefits pursuant to new employment. In the event of a
change of control (as defined in the agreements) prior to the fourth anniversary
of the Employment Date, either Sunrise, the Company, or the executive officer
may terminate the employment agreement concurrently with sale and receive the
salary and benefits on the same terms described in the preceding sentence.
Employees
At December 31, 1998, the Company had 648 full time and 85 part time
employees. The Company had 237 employees represented by seven different union
locals with one of the local contracts expiring in 1999, two in 2000, three in
2002, and one in 2003. No significant labor problems have been experienced by
the Stations. The Company considers its overall labor relations to be good,
however, there can be no assurance that the Company's collective bargaining
agreements will be renewed in the future or that the Company will not experience
a prolonged labor dispute which could have a material adverse effect on the
Company's business, financial conditions and/or results of operations.
12. SEGMENT INFORMATION
The Company has 12 reportable segments and a corporate office in
accordance with SFAS 131, "Disclosures about Segments of an Enterprise and
Related Information." These segments are television stations in designated
market areas (DMA) as defined by A. C. Nielsen Company. The majority of each
52
<PAGE> 54
STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
segments' revenues are broadcast related.
The accounting policies of the segments are the same as those described
in the summary of significant accounting policies. The Company evaluates
performance based on operating income before interest income, interest expense,
income taxes, nonrecurring gains and losses, and extraordinary items.
The Company has no significant intersegment sales or transfers other
than that interest is allocated to subsidiaries but not divisions. All segments
have local distinct management separate from corporate management. Each
management team is evaluated based upon the results of operations of their
station.
The following tables set forth information by segments and reconcile
segment information to consolidated financial statements.
($ in thousands)
<TABLE>
<CAPTION>
Year Net Net Total Capital Depreciation New Program
Revenues Income Assets Expenditures and Program Amortization
(Loss) Amortization Rights
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WDTN 1998 12,562 1,668 60,931 806 2,990 2 1,668
1997 -- -- -- -- -- -- --
WEYI 1998 9,227 890 28,768 400 2,601 390 415
1997 7,042 541 30,685 813 2,025 267 346
WROC 1998 11,652 (580) 39,199 442 3,157 100 1,890
1997 9,803 (201) 44,109 658 2,566 1,222 1,603
WTOV 1998 8,677 (197) 23,203 468 1,941 390 440
1997 6,663 (1,070) 24,728 322 1,590 424 322
WJAC 1998 10,091 (4,210) 46,222 789 4,693 141 616
1997 2,678 (1,286) 50,661 343 764 -- 151
WNAC/WPRI 1998 2,522 (1,381) 30,903 7 1,333 -- --
1997 -- -- -- -- -- -- --
KSBW 1998 5,068 8,241 -- 50 1,307 -- 436
1997 10,045 744 41,710 654 2,488 1,794 792
KRBC/KACB 1998 3,207 (565) 13,474 1,814 825 196 102
1997 -- -- -- -- -- -- --
KVLY 1998 1,229 143 17,895 303 319 -- 78
1997 -- -- -- -- -- -- --
KFYR/KMOT/KUMV and KQCD 1998 1,601 (375) 43,367 477 747 -- 51
1997 -- -- -- -- -- -- --
WNNE/WPTZ 1998 1,287 545 -- -- 469 -- --
1997 -- -- -- -- -- -- --
Corporate 1998 -- (16,395) 8,895 17 927 -- --
1997 -- (8,375) 8,647 58 993 -- --
License Corporations 1998 -- 10,417 71,657 -- 3,725 -- --
1997 -- 1,828 40,251 -- 2,208 -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Company Totals: 1998 67,123 (1,799) 384,512 5,573 25,034 1,219 5,696
1997 36,231 (7,819) 240,791 2,848 12,634 3,707 3,214
==================================================================================================================================
</TABLE>
53
<PAGE> 55
STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
($ in thousands)
<TABLE>
<CAPTION>
Year Income Tax Gain on Interest
(Benefit) Asset Swap Income Interest expense*
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
WJAC 1998 $ -- $ -- $ 5 $2,080
1997 -- -- 1 1,031
WEYI 1998 -- -- -- --
1997 -- -- -- --
KSBW 1998 -- 7,895 -- --
1997 -- -- -- --
WNNE/WPTZ 1998 -- 1,562 5 --
1997 -- -- -- --
License corporations 1998 -- 8,000 -- --
1997 -- -- -- --
Corporate office 1998 97 -- 202 10,600
1997 (299) -- 289 6,812
KRBC/KACB 1998 -- -- 3 528
1997 -- -- -- --
WTOV 1998 -- -- -- 1,600
1997 -- -- -- 1,659
WNAC/WPRI 1998 -- -- -- 1,493
1997 -- -- -- --
- ------------------------------------------------------------------------------------------------------------------
Company Totals: 1998 $ 97 $17,457 $215 $16,301
1997 (299) -- 290 9,502
==================================================================================================================
</TABLE>
* Note: All other stations were divisions of STC Broadcasting, Inc. and no
interest was allocated to them in 1998 and 1997. The extraordinary loss on
early retirement of debt and tax provision and benefits were allocated entirely
to the corporate office.
13. SUBSEQUENT EVENTS:
Acquisition of WUPW
On February 5, 1999, the Company completed the acquisition of the
assets related to WUPW from Raycom Media, Inc. pursuant to the terms of an asset
purchase agreement dated July 24, 1998. The purchase price including fees and
expenses was approximately $74,400,000. WUPW, Channel 36, is the FOX-affiliated
television station serving the Toledo, Ohio, market. The Company financed the
acquisition with $40,000,000 of borrowings under the Amended Revolving Credit
Facility, and $35,000,000 of newly issued Redeemable Preferred Stock Series B.
Redeemable Preferred Stock Series B:
On February 5, 1999, the Company entered into a $90,000,000 Redeemable
Preferred Stock Series B bridge financing agreement (Preferred Agreement) with
three purchasers, two of which are participants in the New Credit Agreement, and
sold $35,000,000 or 35,000 shares of Redeemable
54
<PAGE> 56
STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Preferred Stock Series B to fund the WUPW purchase, and $2,500,000 or 2,500
shares to fund an escrow account to pay dividends on the stock. The remaining
amounts under the Preferred Agreement are available for acquisitions by the
Company, as defined.
The Redeemable Preferred Stock Series B has a par value of $0.01 per
share with a liquidation preference of $1,000 per share. With respect to
dividends and distributions upon liquidation, winding up and dissolution of the
Company, the Redeemable Preferred Stock Series B rank on a parity with the 14%
Redeemable Preferred Stock Series A. Dividends are payable monthly at either:
(i) LIBOR for the applicable dividend period plus 125 basis points; or (ii) the
ABR rate. At the option of the Company, any dividends payable on any dividend
payment date after August 5, 1999, may be paid in additional whole shares of
Redeemable Preferred Stock Series B.
At any time, the Company may redeem the shares of Redeemable Preferred
Stock Series B at a redemption price equal to 100% of the liquidation preference
per share plus all accumulated and unpaid dividends per share (Redemption
Value). On December 31, 2008, the Company will have an obligation to redeem the
then outstanding shares and concurrently with the consummation of any offering
of any debt or equity securities of the Company or Sunrise use the net cash
proceeds to redeem the Redeemable Preferred Stock Series B at the Redemption
Value. The Holders of Redeemable Preferred Stock Series B, except as required by
Delaware law, shall not be entitled or permitted to vote on any matter required
or permitted to be voted upon by the stockholders of the Company. Under certain
conditions related to non-payment of dividends, the holders of the Redeemable
Preferred Stock Series B may have the right to elect the lesser of two directors
or 25% of the members of the Board of Directors.
On February 5, 1999, Hicks, Muse, Tate and Furst Equity Fund III, L.P.
(Fund) and other related Hicks Muse entities entered into a Put and Call
Agreement with the purchasers of the Redeemable Preferred Stock Series B. At the
time of a Trigger Event, any of the purchasers may require the Fund to purchase
outstanding shares of the Redeemable Preferred Stock Series B at the Redemption
Price. Trigger Events are defined as the earliest to occur of: (i) the
occurrence of an event of default under the New Notes, the Amended Credit
Agreement or the Preferred Agreement; (ii) a failure to comply with any terms of
the Certificate of Designation with respect to the Redeemable Preferred Stock
Series B; or (iii) August 5, 1999. The Fund has the right to call the Redeemable
Preferred Stock Series B at the Redemption Value at any time.
Additional Swap Agreement
On February 9, 1999, the Company entered into a two year interest rate
swap agreement, which is extendable by the other party for an additional two
years, to reduce the impact of changing interest rates on $40,000,000 of its
floating rate borrowings from the Amended Credit Agreement. The interest rate
was fixed at 5.06% plus the applicable borrowing margin (currently 1.875%) for
an overall borrowing rate of 6.935%. The floating interest rates are based upon
the three month LIBOR and the measurement and settlement is performed quarterly.
The quarterly settlements of this agreement will be recorded as an adjustment to
interest expense and are not anticipated to have a material effect on the
consolidated financial statement of the Company. The counter party to this
agreement is one of the lenders under the Amended Credit Agreement.
55
<PAGE> 57
STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Sale of WROC-TV
On March 3, 1999, the Company, STC License Company and Nexstar
Broadcasting of Rochester, Inc. ("Nexstar") entered into an Asset Purchase
Agreement (the "Rochester Agreement"). Pursuant to the Rochester Agreement, the
Company and STC License Company will sell to Nexstar the television broadcast
license and assets of WROC-TV Channel 8, Rochester, New York. The total purchase
price for WROC will be approximately $46,000,000 subject to adjustment for
certain customary proration amounts. Closing of this sale is subject to
customary conditions, including review by the Department of Justice and the
Federal Communications Commission.
Purchase Agreement for WICS, WICD, and KGAN
On March 16, 1999, the Company and Sinclair Communications, Inc.
("Sinclair") entered into a Purchase Agreement (the "Sinclair Agreement").
Pursuant to the Sinclair Agreement, the Company will purchase from Sinclair
WICS-TV Channel 20, Springfield, Illinois, WICD-TV Channel 15, Champaign,
Illinois and KGAN-TV Channel 2, Cedar Rapids, Iowa for a total purchase price of
$81,000,000. WICS and WICD are NBC affiliates and KGAN is a CBS affiliate.
Closing of this purchase is subject to customary conditions, including review by
the Department of Justice and the Federal Communications Commission.
56
<PAGE> 58
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Jupiter/Smith TV Holdings, L.P.:
We have audited the accompanying combined statements of operations,
partners' equity and cash flows of Smith Television of Michigan, L.P., Smith
Television of Rochester, L.P., Smith Television - WTOV, L.P. and Smith
Television of Salinas-Monterey, L.P., and their respective licensed
subsidiaries, (collectively, the Partnerships) for the two months ended
February 28, 1997, and the year ended December 31, 1996. These financial
statements are the responsibility of the Partnerships' 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 combined financial statements referred to above
present fairly, in all material respects, the results of the Partnerships'
operations and cash flows for the two months ended February 28, 1997, and the
year ended December 31, 1996, in conformity with generally accepted accounting
principles.
As discussed in Note 2, on March 1, 1997, Jupiter/Smith TV Holdings,
LP. and Smith Broadcasting Partners, L.P. sold substantially all of the assets
of the Partnerships to STC Broadcasting, Inc. and Smith Acquisition Company.
Arthur Andersen, LLP
Tampa, Florida
February 18, 1998
57
<PAGE> 59
SMITH TELEVISION OF MICHIGAN, L.P.
SMITH TELEVISION OF ROCHESTER, L.P.
SMITH TELEVISION - WTOV, L.P., AND
SMITH TELEVISION OF SALINAS-MONTEREY, L.P.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Year For the Two Months
Ended Ended
December 31, 1996 February 28, 1997
----------------- -----------------
<S> <C> <C>
REVENUES:
Broadcasting spot revenues, net of agency and national
representative commissions of $6,605,677 and
$861,100, respectively ............................ $ 33,094,978 $ 4,360,352
Network compensation ................................. 2,752,359 465,400
Trade and barter ..................................... 968,460 213,396
Other revenue ........................................ 742,995 188,733
------------ -----------
Net revenues .................................. 37,558,792 5,227,881
------------ -----------
EXPENSES:
Station operating .................................... 12,572,516 2,078,753
Selling, general and administrative .................. 8,513,562 1,525,923
Trade and barter ..................................... 1,058,676 181,432
Depreciation of property and equipment ............... 4,285,734 756,999
Amortization of intangibles .......................... 5,860,048 976,884
Corporate expense .................................... 840,135 146,000
------------ -----------
Total operating expenses ...................... 33,130,671 5,665,991
------------ -----------
Operating income (loss) ....................... 4,428,121 (438,110)
INTEREST INCOME ........................................ 92,882 20,662
INTEREST EXPENSE ....................................... (6,072,477) (962,920)
OTHER INCOME, net (note 6) ............................. 1,459,770 18,522
------------ -----------
NET LOSS ............................................... $ (91,704) $(1,361,846)
============ ===========
</TABLE>
See accompanying notes to combined financial statements.
58
<PAGE> 60
SMITH TELEVISION OF MICHIGAN, L.P.
SMITH TELEVISION OF ROCHESTER, L.P.
SMITH TELEVISION - WTOV, L.P., AND
SMITH TELEVISION OF SALINAS-MONTEREY, L.P.
COMBINED STATEMENTS OF PARTNERS' EQUITY
<TABLE>
<CAPTION>
For the Year For the Two Months
Ended Ended
December 31, 1996 February 28, 1997
----------------- -----------------
<S> <C> <C>
PARTNERS' EQUITY, beginning of period -- $ 36,313,296
Partners' contributions ........... $ 36,405,000 --
Net loss .......................... (91,704) (1,361,846)
------------ ------------
PARTNERS' EQUITY, end of period ..... $ 36,313,296 $ 34,951,450
============ ============
</TABLE>
See accompanying notes to combined financial statements.
59
<PAGE> 61
SMITH TELEVISION OF MICHIGAN, L.P.
SMITH TELEVISION OF ROCHESTER, L.P.
SMITH TELEVISION - WTOV, L.P., AND
SMITH TELEVISION OF SALINAS-MONTEREY, L.P.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Year For the Two Months
Ended Ended
December 31, 1996 February 28, 1997
----------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................................................. $ (91,704) $(1,361,846)
Adjustments to reconcile net loss to net cash provided
by operating activities -
Depreciation of property and equipment ............................. 4,285,734 756,999
Amortization of intangibles ........................................ 5,860,048 976,884
Amortization of program rights ..................................... 3,580,799 620,416
Payments on syndicated program and film obligations ................ (3,590,265) (621,037)
(Increase) decrease in accounts receivable ......................... (1,292,494) 1,210,423
Increase in other current assets ................................... (398,791) (246,862)
Increase in accounts payable and accrued expenses .................. 1,259,338 297,410
Loss on disposal of property and equipment ......................... 33,118 --
------------- -----------
Net cash provided by operating activities ..................... 9,645,783 1,632,387
------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of television stations .................................. (105,353,237) --
Capital expenditures ................................................. (2,965,697) (263,644)
Proceeds from disposal of property and equipment ..................... 65,889 --
Other ................................................................ (45,104) 31,101
------------- -----------
Net cash used in investing activities ......................... (108,298,149) (232,543)
------------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from credit agreement ....................................... 68,300,000 --
Principal payments on credit agreement ............................... (3,300,000) --
Partners' contributions .............................................. 36,405,000 --
------------- -----------
Net cash provided by financing activities ..................... 101,405,000 --
------------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS .............................. 2,752,634 1,399,844
CASH AND CASH EQUIVALENTS, beginning of period ......................... -- 2,752,634
------------- -----------
CASH AND CASH EQUIVALENTS, end of period ............................... $ 2,752,634 $ 4,152,478
============= ===========
</TABLE>
See accompanying notes to combined financial statements.
60
<PAGE> 62
SMITH TELEVISION OF MICHIGAN, L.P.
SMITH TELEVISION OF ROCHESTER, L.P.
SMITH TELEVISION - WTOV, L.P., AND
SMITH TELEVISION OF SALINAS-MONTEREY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND FEBRUARY 28, 1997
1. ORGANIZATION AND NATURE OF OPERATIONS:
The accompanying financial statements present the combined results of
operations, partners' equity, and cash flows for the year ended December 31,
1996 and the two months ended February 28, 1997 of four limited partnerships:
Smith Television of Michigan, L.P., Smith Television of Rochester, L.P., Smith
Television - WTOV, L.P. and Smith Television of Salinas-Monterey, L.P., and
their respective licensed subsidiaries, (collectively, the Partnerships). The
Partnerships own the following commercial television stations: WEYI, Saginaw,
Flint and Bay City, Michigan; WROC, Rochester, New York; WTOV, Wheeling, West
Virginia and Steubenville, Ohio; and KSBW, Monterey-Salinas, California
(collectively, the Stations). Stations WEYI, WTOV and KSBW are NBC affiliates
and station WROC is a CBS affiliate. The Partnerships are controlled by
Jupiter/Smith TV Holdings, L.P. (Jupiter/Smith) and Smith Broadcasting
Partners, L.P. (SBP). Under the terms of the Partnerships' agreements, SBP is
the managing general partner. Income and loss is generally allocated based on
capital contribution percentages. The Partnerships were formed on December 13,
1995 and acquired the Stations in January 1996 for a total purchase price of
approximately $105,400,000, including transaction fees and working capital.
The combined financial statements reflect the acquisitions of the
Stations under the purchase method of accounting. Accordingly, the acquired
assets and liabilities were recorded at fair value as of the date of
acquisition. The acquisition price of approximately $105,400,000 was allocated
based upon appraised values resulting in approximately $27,600,000, $71,800,000
and $6,000,000 being assigned to property and equipment, intangibles (including
deferred financing and organizational costs), and working capital, respectively.
The transaction was funded by the Credit Agreement and partners' contributions.
Management does not consider the results of operations of the Stations from
January 1, 1996, to the dates the Stations were acquired to be significant.
2. SALE OF THE ASSETS OF THE PARTNERSHIPS:
On March 1, 1997, Jupiter/Smith and SBP completed the sale of
substantially all of the assets of the Partnerships to STC Broadcasting, Inc.
(STC) and Smith Acquisition Company (SAC) for an aggregate sales price of
approximately $157,000,000. In connection with the sale, STC and SAC will assume
the Partnerships' television programming obligations, certain accounts payable
and accrued liabilities, and certain other obligations relating to the
operations of the Stations after the closing date. The Partnerships will retain
all other liabilities of the Partnerships, including the Credit Agreement with
Chase Manhattan Bank.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
The accompanying financial statements include the combined accounts of
the Partnerships. The Partnerships are combined because of common ownership,
management and relationship of operations. All material items and transactions
between the Partnerships have been eliminated.
Cash and Cash Equivalents
The Partnerships consider all highly liquid investments with a maturity
of three months or less to be cash equivalents.
61
<PAGE> 63
SMITH TELEVISION OF MICHIGAN, L.P.
SMITH TELEVISION OF ROCHESTER, L.P.
SMITH TELEVISION - WTOV, L.P., AND
SMITH TELEVISION OF SALINAS-MONTEREY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
Concentration of Risk and Accounts Receivable
The Partnerships serve the Saginaw, Flint and Bay City, Michigan;
Rochester, New York; Wheeling, West Virginia and Steubenville, Ohio; and
Monterey and Salinas, California, demographic areas. Accordingly, the revenue
potential of the Partnerships is dependent on the economy in these diverse
areas. The Partnerships monitor their accounts receivable through continuing
credit evaluations. Historically, the Partnerships have not had significant
uncollectible accounts.
Program Rights
The Partnerships have agreements with distributors for the rights to
television programming over contract periods which generally run from one to
four years. Each contract is recorded as an asset and liability when the license
agreement is signed. The capitalized cost of program rights for one-time only
programs is amortized on a straight-line basis over the period of the program
rights agreements. The capitalized cost of program rights for multiple showing
syndicated program material is amortized on an accelerated basis over the period
of the program rights agreement. Program rights are reflected in the
consolidated financial statements at the lower of unamortized cost or estimated
net expectation of future advertising revenues net of sales commissions to be
generated by the program material.
Property and Equipment
Property and equipment acquired in purchase transactions are recorded
at the estimate of fair value based upon independent appraisals and property and
equipment acquired subsequent thereto are recorded at cost. Property and
equipment are depreciated using the straight-line method over the estimated
useful lives of the assets, as follows:
<TABLE>
<S> <C>
Buildings............................. 39 years
Broadcast equipment................... 5 - 15 years
Automobiles........................... 3 years
Furniture and computers............... 5 years
</TABLE>
Expenditures for maintenance and repairs are charged to operations as
incurred, whereas expenditures for renewals and betterments are capitalized.
Intangible Assets
Intangible assets consist principally of values assigned to the Federal
Communications Commission (FCC) licenses and network affiliation agreements of
the Stations. Intangible assets are being amortized on the straight-line basis
primarily over 15 years.
Revenue Recognition
The Company's primary source of revenue is the sale of television time
to advertisers. Revenue is recorded when the advertisements are broadcast.
62
<PAGE> 64
SMITH TELEVISION OF MICHIGAN L.P.
SMITH TELEVISION OF ROCHESTER, L.P.
SMITH TELEVISION - WTOV, L.P. AND
SMITH TELEVISION OF SALINAS-MONTEREY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
Impairment of Long-Lived Assets
Long-lived assets and identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount should be addressed. The Partnerships have determined there has
been no impairment in the carrying value of long-lived assets of Stations as of
December 31, 1996 or February 28, 1997.
Deferred Charges
Deferred charges are being amortized over the applicable loan period
(84 month period) on a straight-line basis, and organization costs are being
amortized over a 60-month period on a straight-line basis.
Trade/Barter Transactions
Trade/barter transactions involve the exchange of advertising time for
products and/or services. Trade/barter transactions are recorded based on the
fair market value of the products and/or services received. Revenue is recorded
when advertising schedules air and expense is recognized when products and/or
services are used or received.
Income Taxes
No income tax provision has been included in the financial statements
since income or loss of the Partnerships is required to be reported by the
partners on their respective income tax returns.
Allocation of Partnerships' Loss
The Partnerships' loss for the year ended December 31, 1996 and the
two months ended February 28, 1997, is allocated as described by the Partnership
Agreement.
Supplemental Cash Flow Disclosures
Cash paid for interest during 1996 was $5,974,847 and $0 for the two
months ended February 28, 1997. In addition, the Partnerships acquired new
contracts for television program obligations in the amount of $698,861 during
1996 and $0 for the two months ended February 28, 1997.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
reported amounts of revenues and expenses during the reporting period. The
preparation of financial statements in conformity with generally accepted
accounting principles also requires management to make estimates and assumptions
that affect the disclosures of contingent assets and liabilities at the date of
the financial statements. Actual results could differ from those estimates.
63
<PAGE> 65
SMITH TELEVISION OF MICHIGAN L.P.
SMITH TELEVISION OF ROCHESTER, L.P.
SMITH TELEVISION - WTOV, L.P. AND
SMITH TELEVISION OF SALINAS-MONTEREY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
4. CREDIT AGREEMENT
To finance the acquisitions described in Note 1 and to provide for
future operating capital, the Partnerships entered into a Credit Agreement with
Chase Manhattan Bank, N.A. (the Credit Agreement), as administrative agent for
borrowings of up to $72,000,000. The borrowings are collateralized by all of the
Partnerships' assets and outstanding Partnership interests.
Under the Credit Agreement, the Partnerships have the option to
maintain domestic and Eurodollar loans. Interest on borrowings under this
agreement are at varying rates based, at the Partnerships' option, on the banks'
prime rate or the London Interbank Offering Rate (LIBOR), plus a fixed percent,
and are adjusted based upon the ratio of total debt to earnings before interest,
taxes, depreciation, and amortization. The weighted average interest rate during
1996 and the two months ended February 28, 1997, was 9.08% and 8.9%,
respectively. Additionally, commitment fees of 0.5% are payable quarterly.
Under the existing Credit Agreement, the Partnerships agree to abide by
restrictive covenants which place limitations upon payments of cash
distributions, issuance of Partnership interest, investment transactions and the
incurrence of additional obligations. In addition, the Partnerships must
maintain specified levels of operating cash flow and comply with other financial
covenants.
Upon the sale of assets on February 28, 1997, the Credit Agreement was
paid in full from the proceeds.
5. AFFILIATE TRANSACTIONS:
The Partnerships pay SBP, the general partner of the Partnerships, to
provide certain management services. The Partnerships recorded expense of
$840,135 in 1996 and $146,000 for the two months ended February 28, 1997 for
these services. Management believes these amounts are reasonable and
representative of the services provided. The agreement terminates upon the sale
of the Stations' assets.
The Partnerships have elected to participate in an affiliate insurance
program which covers automobiles, buildings, equipment, libel and slander,
liability and earthquake damage. The Partnerships pay actual invoice costs and
no employee of the affiliate or SBP is compensated for these services other than
through the above management fee. Management believes the amounts paid are
reasonable and representative of the services provided.
The Partnerships have elected to participate in an affiliate health,
life, vision and dental program, long and short term disability, travel accident
and long-term care program. The Partnerships are charged the same costs as any
other participating affiliate. No employee of the affiliate or SBP is
compensated for these services other than through the above management fee.
Management believes the amounts paid are reasonable and representative of the
services provided.
A defined contribution savings plan (401k) (the Plan) is provided to
employees of the Partnerships by an affiliate. Employees of the Partnerships who
have been employed for six months, who have attained the age of 21 years and who
have completed 1,000 hours of service are generally eligible to participate.
Certain employees represented by various unions have elected not to participate
in the Plan
64
<PAGE> 66
SMITH TELEVISION OF MICHIGAN L.P.
SMITH TELEVISION OF ROCHESTER, L.P.
SMITH TELEVISION - WTOV, L.P. AND
SMITH TELEVISION OF SALINAS-MONTEREY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
or have established their own plans. Amounts contributed to the Plan by the
Partnerships amounted to $131,429 in 1996 and $35,682 for the two months ended
February 28, 1997.
Management believes the costs incurred in connection with the above
affiliate programs approximate the costs that would be incurred if the
Partnerships procured such services on a stand-alone basis.
OTHER INCOME:
Other income for the periods indicated consisted of the following:
<TABLE>
<CAPTION>
For the Year For the Two Months
Ended Ended
December 31, 1996 February 28, 1997
----------------- -----------------
<S> <C> <C>
Payment received from an unaffiliated network, net.......... $ 1,500,000 $ --
Loss on disposal of equipment............................... (33,118) --
Other....................................................... (7,112) 18,522
----------- --------
$ 1,459,770 $ 18,522
=========== ========
</TABLE>
During 1996, the Partnerships agreed to provide certain services to an
unaffiliated national television network and agreed to potentially swap one of
its Stations for one of the unaffiliated network's stations. The Partnerships
have provided all services required by the network. The Partnerships received
$1,500,000 for these services.
7. CONTINGENCIES:
The Partnerships are subject to legal proceedings and claims in the
ordinary course of business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not materially affect the
financial position or results of operations of the Partnerships.
65
<PAGE> 67
SCHEDULE II
STC BROADCASTING, INC. AND SUBSIDIARIES
-----
TELEVISION STATIONS WEYI, WROC, WTOV AND KSBW
-----
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Balance at Charged to Charged Balance
Beginning Costs and to Other at End
Description of Period Expenses Accounts Deductions of Period
----------- --------- -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
STC BROADCASTING, INC.
Allowance for doubtful accounts
Year ended December 31, 1998 $286 $351 $192(1) $ 325 $504
Ten months ended December 31, 1997 $ -- $ 34 $346(1) $ (94) $286
TELEVISION STATIONS WEYI,
WROC, WTOV, and KSBW
Allowance for doubtful accounts
Two months ended February 28, 1997 $223 $ 16 $ -- $ (21) $218
Year ended December 31, 1996 $ -- $121 $329(1) $(227) $223
</TABLE>
Amounts represent allowance for doubtful account balances purchased in
connection with the acquisition of certain television stations.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None to Report
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth information concerning the executive
officers and directors of Sunrise and the Company as of March 1, 1999.
<TABLE>
<CAPTION>
Name Age Title
- ---- --- -----
<S> <C> <C>
Robert N. Smith 54 President of Sunrise and Chief Executive Officer and
Director of Sunrise and the Company
Sandy DiPasquale 51 President and Chief Operating Officer of the Company
and Executive Vice President and Chief Operating
Officer of Sunrise
David A. Fitz 54 Senior Vice President and Chief Financial Officer
of Sunrise and the Company
John M. Purcell 56 Regional Vice President of Sunrise and the Company
John R. Muse 47 Chairman of the Board of Directors of Sunrise and the
Company
Michael J. Levitt 39 Director of Sunrise and the Company
John H. Massey 58 Director of Sunrise and the Company
Daniel S. Dross 40 Director of Sunrise and the Company
</TABLE>
Mr. Smith has served in the broadcast industry for 19 years and served as
President of Sunrise
66
<PAGE> 68
and Chief Executive Officer and Director of Sunrise and the Company since their
formation. Since 1985, Mr. Smith has served as President and majority
stockholder of SBG, which owns, operates and manages seven television stations
in addition to the Company's Stations, and has served as Chief Executive Officer
of SBP, an affiliate of SBG. From 1983 to 1985, Mr. Smith served as an officer,
director and part owner of Heritage Broadcasting Company, which was the licensee
of WCTI-TV, New Bern, North Carolina. Mr. Smith first became involved with the
television broadcast industry as an attorney in the Broadcast Bureau of the FCC
from 1971 to 1974. Thereafter, Mr. Smith's career included substantial
government service, including serving on the White House Staff in 1977 and as
Assistant Director for Community Services Administration from 1977 to 1979,
prior to returning full time to the broadcast industry in 1983.
Mr. DiPasquale has served in the broadcast industry for 19 years and
served as President of the Company and Executive Vice President and Chief
Operating Officer of Sunrise since their formation. From January of 1996 through
February of 1997, Mr. DiPasquale served as Chief Operating Officer of SBP and
was responsible for the day-to-day operations and from November 1994 to January
1996 was associated with SBG. From 1989 to 1994, Mr. DiPasquale served as
President, Chief Executive Officer and was a part owner of SD Communications,
Inc., KBS, Limited Partnership and KBS, Inc., which were the owners of KWCH-TV,
Wichita, Kansas, and its affiliated stations in Hays, Goodland and Dodge City,
Kansas. From 1986 to 1988, Mr. DiPasquale served as President and General
Manager and was a partner in WGRZ-TV, Buffalo, New York. Prior to such time, Mr.
DiPasquale served in sales and management positions at various television
broadcast stations in the Buffalo area.
Mr. Fitz has served in the broadcast industry for 21 years and served
as Senior Vice President and Chief Financial Officer of Sunrise and the Company
since their formation. From January 1996 through February 1997, Mr. Fitz served
as Chief Financial Officer of SBP and as an officer and director of each of the
SBG affiliated companies. Mr. Fitz has held various positions with SBG
affiliated companies since 1986. Prior to joining SBG, Mr. Fitz served for nine
years as Executive Vice President and Chief Financial Officer of the Broadcast
Division of Gulf Broadcast Company, which at that time owned six television and
eight radio broadcast stations. Prior to that time, Mr. Fitz was a manager with
KPMG Peat Marwick, which he joined in 1969.
Mr. Purcell has served in the broadcast industry for 36 years and
served as Regional Vice President of Sunrise and the Company and as General
Manager of WROC-TV, Rochester, New York, since March 1997. From January 1996,
through February 1997, Mr. Purcell served as Senior Vice President of SBP and
General Manager of WROC-TV, Rochester, New York. From November 1994, to January
1996, Mr. Purcell was associated with SBG. From 1986 to September 1994, Mr.
Purcell served as Vice President and General Manager of WHTM-TV, Harrisburg,
Pennsylvania, an SBG-owned station. Prior to such time, Mr. Purcell served as
President and General Manager of WGHP-TV, Greensboro, North Carolina, and as
Vice President and Director of Sales of WTSP-TV, Tampa/St. Petersburg, Florida.
Mr. Muse has served as Chairman of the Board of Directors of the
Company and Sunrise since its formation. Mr. Muse is Chief Operating Officer and
Partner of Hicks, Muse, and co-founded the firm in 1989. At Hicks, Muse, Mr.
Muse has been actively involved in originating, structuring, and monitoring
Hicks Muse's investments. From 1984 to 1989, Mr. Muse headed the
merchant/investment banking operations of Prudential Securities for the
Southwestern region of the United States. From 1980 to 1984, Mr. Muse served as
Senior Vice President and a Director of Schneider, Bernet & Hickman, Inc., in
Dallas, and was responsible for that firm's investment banking activities. Mr.
Muse serves as Chairman of Arena Brands, Inc., and Lucchese, Inc. He is a
director for Arnold Palmer Golf Management Co., Glass's Group, International
Home Foods, Inc., LIN Television Corporation, Olympus Real Estate Corporation,
Regal Cinemas, Inc., and Suiza Foods Corporation. Mr. Muse also serves on the
Board of Directors for Goodwill Industries, SMU Edwin L. Cox School of Business,
the UCLA Anderson School Board of Visitors, and the Board of Trustees of St.
Mark's School of Texas.
Mr. Levitt has served as a director of the Company and Sunrise since
its formation. Mr. Levitt has been a partner of Hicks Muse since 1996, and is
involved in originating, structuring, executing, and monitoring Hicks Muse's
investments as well as building relationships with investment and commercial
banking firms. Prior to joining Hicks Muse, Mr. Levitt served as a Managing
Director and Deputy Head of
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<PAGE> 69
Investment Banking with Smith Barney, Inc. from 1993 through 1995. From 1986
through 1995, Mr. Levitt was a Managing Director with Morgan Stanley & Co.
responsible for corporate finance, merger and acquisition and high yield
activities with leveraged buyout firms and non-investment grade companies. Mr.
Levitt serves as a director of LIN Television Corporation, Capstar Broadcasting
Corporation, Atrium Companies, Inc., and International Home Foods, Inc.
Mr. Massey has served as a director of the Company and Sunrise since
its formation. Until August 2, 1996, Mr. Massey served as the Chairman of the
Board and Chief Executive Officer of Life Partners Group, Inc., an insurance
holding company, having assumed those offices in October 1994. Prior to joining
Life Partners, he served, since 1992, as the Chairman of the Board of, and
currently serves as a director of, FSW Holdings, Inc., a regional investment
banking firm. Since 1986, Mr. Massey has served as a director of Gulf-California
Broadcast Company, a private holding company, that was sold in May 1996. From
1986 to 1992, he also was President of Gulf-California Broadcast Company. From
1976 to 1986, Mr. Massey was President of Gulf Broadcast Company, which owned
and operated 6 television stations and 11 radio stations in major markets in the
United States. Mr. Massey currently serves as a director of Chancellor Media
Corp., Central Texas Bankshare Holdings, Inc., Hill Bank and Trust Co., Hill
Bancshares Holdings, Inc., Bank of the Southwest of Dallas, Texas, Columbus
State Bank, Columbine JDS Systems, Inc., and the Paragon Group, Inc.
Mr. Dross serves as a Senior Vice President of Hicks Muse where he has
been employed since 1991. Prior to joining Hicks Muse, Mr. Dross was employed
for five years as a Vice President in the investment banking division of
Prudential Securities in New York and Dallas. Mr. Dross is a graduate of
Dartmouth College and received his M.B.A. from the Wharton School of Business at
the University of Pennsylvania.
All directors hold office for one year terms and until their successors
are duly elected and qualified. The Board of Directors of the Company
established an Executive Committee to which Messrs. Massey, Muse and Levitt have
been appointed, and an Audit Committee and Compensation Committee to which
Messrs. Levitt, Massey and Muse have been appointed. Directors of the Company
are elected by Sunrise, the sole stockholder of the Company.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company to
its Chief Executive Officer and each of its four most highly compensated
executive officers whose total cash compensation for the period January 1, 1998
through December 31, 1998 exceed $100,000.
<TABLE>
<CAPTION>
All Other
Name and Principal Position Salary Bonus Other Compensation Compensation(2)
- --------------------------- -------- -------- ------------------ ---------------
<S> <C> <C> <C> <C>
Robert N. Smith(4)
Chief Executive Officer $300,000 $100,000 $ 5,000 (1) $3,000
Sandy DiPasquale
Chief Operating Officer $300,000 $100,000 $ 6,668 (1) $3,000
David A. Fitz
Chief Financial Officer $275,000 $100,000 $ 5,000 (1) $3,000
John M. Purcell
Regional Vice President $259,400 -- $ 8,680 (1) $3,000
David LaFrance
Vice President and
General Manager WDTN-TV $239,632 $ 20,000 $58,824 (3) $3,000
</TABLE>
(1) Dollar value of premiums for life insurance reimbursed by the Company.
(2) Represents amounts contributed by the Company to the Sunrise 401(k) Savings
Plan.
(3) Represents amount of deferred compensation included in employment letter.
(4) Compensation decisions are made by the Board of Sunrise and it is
anticipated that Robert Smith will continue to serve both as an executive
officer and a director during 1999.
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<PAGE> 70
Employment Agreements
In connection with the Acquisition, each of Robert N. Smith, Sandy
DiPasquale, David A. Fitz and John M. Purcell has entered into five-year
employment agreements with the Company and Sunrise. Each employment agreement is
subject to automatic successive one-year renewal terms that take effect unless
notice of non-renewal is given by either party to the agreement at least 120
days prior to the expiration of the initial term or annual extension, as the
case may be. The compensation provided Messrs. Smith, DiPasquale, Fitz and
Purcell under their respective agreements includes an annual base salary of
$250,000 each, subject to adjustment at the sole discretion of the Board of
Directors of Sunrise, and an annual bonus based upon criteria to be established
by the Board of Directors of Sunrise at the beginning of each fiscal year. These
executives are also entitled to participate in certain benefit plans of Sunrise
and the Company. If prior to the fourth anniversary of the Employment Date, the
executive officer terminates his employment for good reason (as defined) or
Sunrise or the Company terminate his employment for any reason other than for
cause (as defined), then such executive officer shall be paid his salary and
shall continue to be covered by certain employee benefit plans for 12 months or
until the third anniversary of the employment date, whichever period is longer;
provided, however, that continued coverage under any employee benefit plan of
Sunrise or the Company shall terminate upon such executive officer becoming
eligible for comparable benefits pursuant to new employment. In the event of a
change of control (as defined in the agreements) prior to the fourth anniversary
of the Employment Date, either Sunrise, the Company or the executive officer may
terminate the employment agreement concurrently with sale and receive the salary
and benefits on the same terms described in the preceding sentence.
Mr. Smith's employment agreement requires him to devote his best
efforts and such time, attention, knowledge and skill to the operation of the
Stations as is necessary to manage and supervise the Stations and the Company.
Mr. Fitz's employment agreement requires him to devote his best efforts and his
working time, attention, knowledge and skill solely to the operation of the
Stations; provided, however, that Mr. Fitz is permitted to devote reasonable
time in advisory services and oversight duties in connection with Mr. Smith's
investments in other business enterprises having an interest in or operating a
television station within certain excluded markets in which Mr. Smith currently
holds an interest in a television station (the Excluded Markets) and any
acquisition or investment in up to three additional excluded stations (the
Excluded Stations).
Each employment agreement also contains a noncompetition provision,
which provides that during the term of each agreement and for a period of two
years thereafter (or one year, if Hicks Muse or its affiliates cease to own any
of the Stations) and during any period in which the executive officer is
receiving severance payments pursuant to the employment agreement, such
executive officer will not engage in the television broadcast business within
the DMA of any Station. Mr. Smith's employment agreement permits him to invest
in, become employed by or otherwise render services to or for (i) another
business enterprise (other than the Company) having an interest in or operating
a television station within the Excluded Markets and (ii) after an opportunity
to acquire or invest shall have been presented to the Company and the Company
shall have declined in writing to make such acquisition or investment, the
Excluded Stations. Mr. Fitz's employment agreement permits him to invest in,
become employed by or otherwise render services to or for another business
enterprise (other than the Company) having an interest in or operating a
television station within the Excluded Markets.
401(k) Savings Plan
Effective as of March 1, 1997, the Company became a participating
subsidiary in the Sunrise 401(k) Savings Plan (the Plan), which covers
employees of the Company and subsidiaries who have attained the age of 21, and
completed six months of service. An employee may contribute up to an aggregate
of 15% of annual compensation to the Plan, subject to statutory limitations and
top heavy limitations. The Company will match 100% of each employee's
contribution up to 3% of employee compensation or $3,000 which ever is less.
Contributions are allocated to each employee's individual account, which is
intended to be invested in various funds according to the direction of the
employee. All five highly compensated executive officers participate in the
Plan.
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<PAGE> 71
Director Compensation
Directors of the Company who are employees of the Company, Sunrise or
Hicks Muse serve without additional compensation. Independent directors of the
Company receive an annual retainer of $12,000. The independent director also
receives $1,000 for each meeting of the Board of Directors attended and $1,000
for each committee meeting attended. The independent director is reimbursed for
any expenses incurred in connection with his attendance at such meetings.
Currently, John H. Massey is the Company's only independent director.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company has 1000 shares of Common Stock, $0.01 par value per share,
issued and outstanding, all of which are owned by Sunrise, whose address is 3839
4th Street North, Suite 420, St. Petersburg, Florida 33703. All of the capital
stock of Sunrise is owned by Sunrise Television Partners, L.P. (the
Partnership) of which the ultimate managing partner is Thomas O. Hicks, an
affiliate of Hicks Muse.
Affiliates of Hicks Muse have purchased $25.0 million of the Company's
Redeemable Preferred Stock for a price of approximately $24.1 million (or 96.5%
of the initial liquidation preferences of such shares) and received, in
connection therewith, warrants to purchase shares of common stock of Sunrise.
The Hicks Muse affiliates, along with the other purchasers of the Redeemable
Preferred Stock and warrants, received certain registration rights with respect
to the shares of common stock of Sunrise issuable upon exercise of the warrants.
Robert N. Smith (through SBG), Sandy DiPasquale, David A. Fitz and John
M. Purcell own 100% of the Class B limited partnership interest in the
Partnership, and together with others have invested $2,450,000 in Class A
interest of the Partnership. The return on the Class B ownership interest is
based on the performance of Sunrise and the Company. Neither the Class A nor
Class B interest owned by limited partners have any rights to participate in the
management or control of the Partnership or its business.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On March 1, 1997, Sunrise and the Company entered into a ten-year
agreement (the Monitoring and Oversight Agreement) with an affiliate of Hicks
Muse (Hicks Muse Partners) pursuant to which Sunrise and the Company have
agreed to pay Hicks Muse Partners an annual fee payable quarterly for oversight
and monitoring services to the Company. The annual fee is adjustable on January
1, of each calendar year to an amount equal to 0.2% of the budgeted consolidated
annual net revenues of the Company and its subsidiaries for the then-current
fiscal year plus reimbursement of certain expenses.
The Monitoring and Oversight Agreement makes available the resources of
Hicks Muse Partners concerning a variety of financial and operational matters.
The Company does not believe that the services that have been, and will continue
to be provided to the Company by Hicks Muse Partners could otherwise be obtained
by the Company without the addition of personnel or the engagement of outside
professional advisors. In the Company's opinion, the fees provided for under the
Monitoring and Oversight Agreement reasonably reflect the benefits received, and
to be received, by Sunrise and the Company.
<TABLE>
<CAPTION>
Year Ended Ten Months Ended
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
Oversite fee $ 113,868 $ 66,892
Reimbursed expenses 87,261 72,063
--------- ---------
$ 201,129 $ 138,955
========= =========
</TABLE>
70
<PAGE> 72
On March 1, 1997, Sunrise and the Company entered into a ten-year
agreement (the Financial Advisory Agreement) pursuant to which Hicks Muse
Partners received a financial advisory fee of 1.5% of the transaction value at
the closing of the Jupiter / Smith acquisition as compensation for its services
as financial advisor to the Company. Hicks Muse Partners is entitled to receive
a fee equal to 1.5% of the "transaction value" for each "add-on transaction" in
which the Company is involved. The term "transaction value" means the total
value of the add-on transaction including, without limitation, the aggregate
amount of the funds required to complete the add-on transaction (excluding any
fees payable pursuant to the Financial Advisory Agreement), including the amount
of any indebtedness, preferred stock or similar terms assumed (or remaining
outstanding). The term "add-on transaction" means any future proposal for a
tender offer, acquisition, sale, merger, exchange offer, recapitalization,
restructuring or other similar transaction directly involving the Company or any
of its subsidiaries, and any other person or entity. The Financial Advisory
Agreement makes available the resources of Hicks Muse Partners concerning a
variety of financial and operational matters. The Company does not believe that
the services that have been, and will continue to be provided by Hicks Muse
Partners could otherwise be obtained by the Company without the addition of
personnel or the engagement of outside professional advisors. In the Company's
opinion, the fees provided for under the Financial Advisory Agreement reasonably
reflect the benefits received and to be received by the Company. Total fees paid
under this agreement for the year ended December 31, 1998, and the ten month
period ended December 31, 1997 were $2,723,438 and $3,355,500, respectively, and
were capitalized as cost of acquisition or netted against preferred stock.
On March 1, 1997, affiliates of Hicks Muse purchased $25.0 million of
the Redeemable Preferred Stock Series A for a purchase price of approximately
$24.1 million (or 96.5% of the initial liquidation preference of such shares)
and received in connection therewith warrants to purchase shares of common stock
of Sunrise. The Hicks Muse affiliates, along with the other purchaser of the
Redeemable Preferred Stock Series A and warrants, received certain registration
rights with respect to the shares of common stock of Sunrise issuable upon
exercise of the warrants.
The Company has elected to participate in a Hicks Muse affiliate
insurance program which covers vehicles, buildings, equipment, libel and
slander, liability and earthquake damage. The Company pays actual invoice costs
and no employee of Hicks Muse is compensated for these services other than
through the above Monitoring and Oversight Agreement. Management believes the
amounts paid are attractive and representative of the services provided.
The Company has elected to participate in the Sunrise health, life,
vision and dental program, long and short-term disability, travel accident and
long-term care program. Management believes the amounts paid are attractive and
representative of the services provided.
A defined contribution 401(k) savings plan is provided to employees of
the Company by Sunrise. Employees of the Company who have been employed for six
months and who have attained the age of 21 years are generally eligible to
participate. Certain employees represented by various unions have elected not to
participate in the Plan or have established their own plans. Total contributions
by the Company to defined contribution 401(k) savings plan were approximately
$341,000 and $135,000 for the twelve months ended December 31, 1998, and the ten
months ended December 31, 1997, respectively.
The Company has contracts with national representation firms to sell
advertising time. During 1998, entities controlled by Hicks Muse acquired
certain of these firms. In 1999, the Company entered into extensions of certain
of these contracts in the normal course of business on terms and conditions
which the Company considered attractive and representative of current market
conditions.
On April 24, 1998, the Company sold to Robert N. Smith, the Chief
Executive Officer and a Director of Sunrise and the Company, the assets and
certain rights and obligations related to WFFF for $500,000, which amount would
be increased to reflect any operating losses associated with WFFF subsequent to
the Company's commencement of operations of WFFF under a time brokerage
agreement on April 24, 1998. The purchase price was secured by a note and liens
on all of the assets sold and on July 23, 1998, the Company received full
payment on the note.
71
<PAGE> 73
On February 5, 1999, the Company entered into the Preferred Agreement and sold
$35.0 million of stock to fund the WUPW Acquisition and $2.5 million to fund an
escrow account to pay dividends on the Redeemable Referred Stock Series B. On
February 5, 1999, Hicks, Muse, Tate & Furst Equity Fund III, L.P. (Fund) and
other related Hicks Muse entities entered into a Put and Call Agreement with the
purchasers of the Redeemable Preferred Stock Series B. At the time of a Trigger
Event, any of the Purchasers may require the Fund to purchase the outstanding
shares of the Redeemable Preferred Stock Series B at the liquidation value plus
all accumulated and unpaid dividends. Trigger Events are defined as the earliest
to occur of: (i) the occurrence of an event of default under the 11% Senior
Subordinated Notes, the Amended Credit Agreement, or the Preferred Agreement;
(ii) a failure to comply with any terms of the Certificate of Designation with
respect to the Redeemable Preferred Stock Series B; or (iii) August 5, 1999. The
Fund has the right to call the Redeemable Preferred Stock Series B at the
Redemption Value at any time.
PART IV
ITEM 14. EXHIBITS, FINANCIAL SCHEDULES AND REPORTS ON FORM 8-K
(a) 1.
Financial Statements
STC Broadcasting, Inc.
Report of Independent Certified Public Accountants
Consolidated Balance Sheets as of December 31, 1998 and 1997
Consolidated Statements of Operations for the year ended December 31,
1998 and ten months ended December 31, 1997
Consolidated Statements of Stockholder's Equity for the year ended
December 31, 1998 and ten months ended December 31, 1997
Consolidated Statements of Cash Flows for the year ended December 31,
1998 and ten months ended December 31, 1997
Notes to Consolidated Financial Statements
Smith Television of Michigan, L.P.
Smith Television of Rochester, L.P.
Smith Television - WTOV, L.P.
Smith Television of Salinas-Monterey, L.P.
Report of Independent Certified Public Accountants
Combined Statements of Operations for the year ended December 31, 1996
and the two months ended February 28, 1997
Combined Statements of Partners' Equity for the year ended December 31,
1996 and the two months ended February 28, 1997
Combined Statements of Cash Flows for the year ended December 31, 1996
and the two months ended February 28, 1997
Notes to Combined Financial Statements
a(2)
Financial Statement Schedule
Schedule II Valuation and Qualifying Accounts
a(3)
Exhibits
2.1 Asset Purchase Agreement dated as of February 3, 1998 by and
among Tuscaloosa Broadcasting, Inc., as seller and STC Broadcasting of
Vermont, Inc. as Buyer (1)
2.2 Asset Exchange Agreement dated as of February 18, 1998 by and
among STC Broadcasting, Inc., STC Broadcasting of Vermont, Inc., STC
License Company, STC Broadcasting of Vermont Subsidiary, Inc. and
Hearst-Argyle Stations, Inc. (1)
72
<PAGE> 74
2.3 Contract of Sale by and between Meyer Broadcasting Company and
STC Broadcasting, Inc. dated April 27, 1998 (2)
2.4 Asset Purchase Agreement by and between Elcom of Ohio, Inc.,
and STC Broadcasting, Inc. dated as of July 24, 1998. (3)
2.5 Asset Purchase Agreement by and among STC Broadcasting, Inc.
and STC License Company and Nexstar Broadcasting of Rochester, Inc.
dated March 3, 1999. (5)
2.6 Purchase Agreement by and among Sinclair Communications, Inc.
and STC Broadcasting, Inc. dated March 16, 1999. (5)
10.1 Affiliation Agreement, dated March 2, 1998 between National
Broadcasting Company, Inc. and STC Broadcasting, Inc. (2)
10.2 Letter Agreement between STC Broadcasting of Vermont, Inc. and
Smith Broadcasting of Vermont, LLC, dated April 24, 1998. (2)
10.3 Interim operating Agreement by and among Smith Broadcasting of
Vermont, LLC, STC Broadcasting, Inc., STC Broadcasting of Vermont,
Inc., STC License Company, and STC Broadcasting of Vermont Subsidiary,
Inc., dated April 24, 1998 (2)
10.4 Security Agreement dated April 24, 1998 made by Smith
Broadcasting of Vermont, LLC in favor of STC Broadcasting of Vermont
Subsidiary, Inc. (2)
10.5 $500,000 Promissory Note dated April 24, 1998 made by Smith
Broadcasting of Vermont, LLC in favor of STC Broadcasting of Vermont
Subsidiary, Inc. (2)
10.6 Letter Agreement between STC Broadcasting, Inc. and
Hearst-Argyle Stations, Inc. regarding certain amendments to the STC
Broadcasting, Inc. and Sinclair Broadcast Group, Inc. Asset Purchase
Agreement and the STC Broadcasting, Inc. and Hearst-Argyle Stations,
Inc. Asset Exchange Agreement (2)
10.7 First Amendment to Transitional Service Agreement between STC
Broadcasting of Vermont Subsidiary, Inc., Tuscaloosa Broadcasting Inc.,
William Evans, Rollins, Telecasting and WNNE-TV, Inc. dated April 24,
1998 (2)
10.8 First Amendment to Asset Purchase Agreement by and between STC
Broadcasting of Vermont, Inc. and certain subsidiaries of Sinclair
Broadcast Group, Inc. dated April 20, 1998 (2)
10.9 Second Amendment to Asset Purchase Agreement by and between
STC Broadcasting of Vermont, Inc. and certain subsidiaries of Sinclair
Broadcast Group, Inc. dated April 24, 1998 (2)
10.10 Waiver and Second Amendment dated April 22, 1998 to the Credit
Agreement dated February 28, 1997 by and among STC Broadcasting, Inc.,
and The Chase Manhattan Bank and NationsBank of Texas, N.A. (2)
10.11 Credit Agreement between STC Broadcasting of Vermont
Subsidiary, Inc. as borrower and Hearst-Argyle Stations, Inc. as
lenders dated April 24, 1998 (2)
10.12 Agreement dated July 3, 1998 between the Company and the
International Brotherhood of Electrical Workers, AFL-CIO Local No. 1266
representing certain employees of WDTN-TV, Dayton, Ohio. (3)
10.13 Amended and Restated Credit Agreement dated as of July 2, 1998
among Sunrise Television Corp., STC Broadcasting, Inc., as borrowers
and the Chase Manhattan Bank, Salomon Brothers Holding Company, Inc.,
and NationsBank, N.A. as lenders and agents (3)
10.14 First Amendment and Assignment and Acceptance dated to the
Amended and Restated Credit Agreement dated July 2, 1998 (item 10.13)
dated as of July 27, 1998 among Sunrise Television Corp., STC
Broadcasting, Inc., various lenders as listed on the signature pages,
Chase Manhattan Bank, Salomon Brothers Holding Company, Inc., and
NationsBank, N.A. (3)
73
<PAGE> 75
10.15 Primary Television Affiliation Agreement dated June 5, 1998
between STC Broadcasting, Inc., WDTN-TV and the American Broadcasting
Companies, Inc. (3)
10.16 Memorandum, Opinion and Order of the Federal Communications
Commission dated July 1, 1998, related to the Hearst-Argyle Stations,
Inc. asset swap. (3)
10.17 Letter agreement dated March 2, 1998 between STC Broadcasting,
Inc., WJAC-TV, and NBC Television Network amending the Affiliation
Agreement dated December 16, 1994. (3)
10.18 Letter agreement dated March 2, 1998 between STC Broadcasting,
Inc., KRBC/KACB and NBC Television Network amending the Affiliation
Agreement dated December 20, 1995. (3)
10.19 Letter agreement dated March 2, 1998 between STC Broadcasting,
Inc., WEYI and NBC Television amending the Affiliation Agreement dated
July 10, 1995. (3)
10.20 First Amendment to Asset Exchange Agreement dated April 24,
1998 amending the Asset Exchange Agreement dated as of February 18,
1998 (item 2.2) (3)
10.21 Letter Agreement dated April 24, 1998 between STC
Broadcasting, Inc. and Hearst-Argyle Stations, Inc. consenting to
amendments to Asset Purchase Agreement and Asset Exchange Agreements.
(3)
10.22 Joint Exchange Agreement dated July 3, 1998 by and among STC
Broadcasting, Inc., STC Broadcasting of Vermont, Inc., STC License
Company, STC Broadcasting of Vermont Subsidiary, Inc., Smith
Acquisition Company, Smith Acquisition License Company, Hearst-Argyle
Stations, Inc., and Chicago Deferred Exchange Corporation. (3)
10.23 Closing Letter Agreement dated July 2, 1998, between
Hearst-Argyle Stations, Inc., and STC Broadcasting, Inc., regarding
certain matters in connection with the Closing under the Asset Exchange
Agreement. (3)
10.24 Agreement dated October 1, 1998 between the Company and the
United Automobile, Aerospace and Agricultural Implement Workers of
American (UAW) Local 1811 representing certain employees of WEYI-TV,
Flint, Michigan (4)
10.25 Second Amendment, dated as of January 29, 1999 to the Amended
and Restated Credit Agreement, dated as of July 2, 1998 among Sunrise
Television Corp., STC Broadcasting, Inc. and Chase Manhattan Bank,
NationsBank NA, and Salomon Brothers Holding Company, Inc. (5)
10.26 Securities Purchase Agreement by and among the Company and
Chase Manhattan Corporation, Credit Suisse First Boston Corporation,
and Salomon Brothers Holding Company, Inc. dated February 5, 1999 (5)
10.27 Certificate of Designation of the Powers, Preferences and
Relative Participating, optional and other special rights of Preferred
Stock, Series B dated February 5, 1999 (5)
10.28 Put and Call Agreement dated February 5, 1999 among Hicks Muse
Tate & Furst Equity Fund III, L.P. Chase Manhattan Corporation, Credit
Suisse First Boston Corporation and Salomon Brothers Holding Company,
Inc. (5)
10.29 Escrow Agreement dated February 5, 1999 by and between Company
and the Chase Manhattan Bank (5)
10.30 Engagement letter dated February 5, 1999 between Sunrise
Television Corp., the Company and Chase Securities, Inc., Credit Suisse
First Boston Corporation and Salomon Smith Barney, Inc. (5)
10.31 Station Affiliation Agreement between FOX Broadcasting
Company and STC License Company for station WUPW-TV dated February 2,
1999 (5)
10.32 Agreement dated January 29, 1999 between the Company and the
American Federation of Television and Radio Artists, Pittsburgh Local,
representing certain employees of WTOV-TV, Stuebenville, Ohio (5)
74
<PAGE> 76
12 Statement of fixed charge ratio (5)
21.1 Subsidiaries of STC Broadcasting, Inc. (5)
27.2 Financial Data Schedule (for SEC use only). (5)
(1) Incorporated by reference to the Form 10-K of STC Broadcasting, Inc.
for the period March 1, 1997 to December 31, 1997.
(2) Incorporated by reference to the Form 10-Q of STC Broadcasting, Inc.
for the period January 1, 1998 to March 31, 1998.
(3) Incorporated by reference to the Form 10-Q of STC Broadcasting, Inc.
for the period April 1, 1998 to June 30, 1998.
(4) Incorporated by reference to the Form 10-Q of STC Broadcasting, Inc.
for the period July 1, 1998 to September 30, 1998.
(5) Filed herewith.
Reports on Form 8-K
Nothing to report for period October 1, 1998 to December 31, 1998.
75
<PAGE> 77
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly cause this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of St.
Petersburg, State of Florida, on the 30th day of March 1999.
STC Broadcasting, Inc.
By: /s/ Robert N. Smith
-----------------------------------
Robert N. Smith
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Robert N. Smith Chief Executive Officer March 30, 1999
- --------------------------- (Principal Executive Officer)
Robert N. Smith and Director
/s/ Sandy DiPasquale President and March 30, 1999
- --------------------------- Chief Operating Officer
Sandy DiPasquale
/s/ David A. Fitz Chief Financial Officer March 30, 1999
- ---------------------------
David A. Fitz
/s/ John R. Muse Chairman of the Board of March 30, 1999
- --------------------------- Directors
John R. Muse
/s/ Daniel S. Dross Director March 30, 1999
- ---------------------------
Daniel S. Dross
/s/ Michael J. Levitt Director March 30, 1999
- ---------------------------
Michael J. Levitt
/s/ John H. Massey Director March 30, 1999
- ---------------------------
John H. Massey
</TABLE>
76
<PAGE> 78
EXHIBIT INDEX
Exhibit Description of Document
No.
2.1 Asset Purchase Agreement dated as of February 3, 1998 by and
among Tuscaloosa Broadcasting, Inc., as seller and STC Broadcasting of
Vermont, Inc. as Buyer (1)
2.2 Asset Exchange Agreement dated as of February 18, 1998 by and
among STC Broadcasting, Inc., STC Broadcasting of Vermont, Inc., STC
License Company, STC Broadcasting of Vermont Subsidiary, Inc. and
Hearst-Argyle Stations, Inc. (1)
2.3 Contract of Sale by and between Meyer Broadcasting Company and
STC Broadcasting, Inc. dated April 27, 1998 (2)
2.4 Asset Purchase Agreement by and between Elcom of Ohio, Inc.,
and STC Broadcasting, Inc. dated as of July 24, 1998. (3)
2.5 Asset Purchase Agreement by and among STC Broadcasting, Inc.
and STC License Company and Nexstar Broadcasting of Rochester, Inc.
dated March 3, 1999. (5)
2.6 Purchase Agreement by and among Sinclair Communications, Inc.
and STC Broadcasting, Inc. dated March 16, 1999. (5)
10.1 Affiliation Agreement, dated March 2, 1998 between National
Broadcasting Company, Inc. and STC Broadcasting, Inc. (2)
10.2 Letter Agreement between STC Broadcasting of Vermont, Inc. and
Smith Broadcasting of Vermont, LLC, dated April 24, 1998. (2)
10.3 Interim operating Agreement by and among Smith Broadcasting of
Vermont, LLC, STC Broadcasting, Inc., STC Broadcasting of Vermont,
Inc., STC License Company, and STC Broadcasting of Vermont Subsidiary,
Inc., dated April 24, 1998 (2)
10.4 Security Agreement dated April 24, 1998 made by Smith
Broadcasting of Vermont, LLC in favor of STC Broadcasting of Vermont
Subsidiary, Inc. (2)
10.5 $500,000 Promissory Note dated April 24, 1998 made by Smith
Broadcasting of Vermont, LLC in favor of STC Broadcasting of Vermont
Subsidiary, Inc. (2)
10.6 Letter Agreement between STC Broadcasting, Inc. and
Hearst-Argyle Stations, Inc. regarding certain amendments to the STC
Broadcasting, Inc. and Sinclair Broadcast Group, Inc. Asset Purchase
Agreement and the STC Broadcasting, Inc. and Hearst-Argyle Stations,
Inc. Asset Exchange Agreement (2)
10.7 First Amendment to Transitional Service Agreement between STC
Broadcasting of Vermont Subsidiary, Inc., Tuscaloosa Broadcasting Inc.,
William Evans, Rollins, Telecasting and WNNE-TV, Inc. dated April 24,
1998 (2)
10.8 First Amendment to Asset Purchase Agreement by and between STC
Broadcasting of Vermont, Inc. and certain subsidiaries of Sinclair
Broadcast Group, Inc. dated April 20, 1998 (2)
10.9 Second Amendment to Asset Purchase Agreement by and between
STC Broadcasting of Vermont, Inc. and certain subsidiaries of Sinclair
Broadcast Group, Inc. dated April 24, 1998 (2)
10.10 Waiver and Second Amendment dated April 22, 1998 to the Credit
Agreement dated February 28, 1997 by and among STC Broadcasting, Inc.,
and The Chase Manhattan Bank and NationsBank of Texas, N.A. (2)
10.11 Credit Agreement between STC Broadcasting of Vermont
Subsidiary, Inc. as borrower and Hearst-Argyle Stations, Inc. as
lenders dated April 24, 1998 (2)
77
<PAGE> 79
10.12 Agreement dated July 3, 1998 between the Company and the
International Brotherhood of Electrical Workers, AFL-CIO Local No. 1266
representing certain employees of WDTN-TV, Dayton, Ohio. (3)
10.13 Amended and Restated Credit Agreement dated as of July 2, 1998
among Sunrise Television Corp., STC Broadcasting, Inc., as borrowers
and the Chase Manhattan Bank, Salomon Brothers Holding Company, Inc.,
and NationsBank, N.A. as lenders and agents (3)
10.14 First Amendment and Assignment and Acceptance dated to the
Amended and Restated Credit Agreement dated July 2, 1998 (item 10.13)
dated as of July 27, 1998 among Sunrise Television Corp., STC
Broadcasting, Inc., various lenders as listed on the signature pages,
Chase Manhattan Bank, Salomon Brothers Holding Company, Inc., and
NationsBank, N.A. (3)
10.15 Primary Television Affiliation Agreement dated June 5, 1998
between STC Broadcasting, Inc., WDTN-TV and the American Broadcasting
Companies, Inc. (3)
10.16 Memorandum, Opinion and Order of the Federal Communications
Commission dated July 1, 1998, related to the Hearst-Argyle Stations,
Inc. asset swap. (3)
10.17 Letter agreement dated March 2, 1998 between STC Broadcasting,
Inc., WJAC-TV, and NBC Television Network amending the Affiliation
Agreement dated December 16, 1994. (3)
10.18 Letter agreement dated March 2, 1998 between STC Broadcasting,
Inc., KRBC/KACB and NBC Television Network amending the Affiliation
Agreement dated December 20, 1995. (3)
10.19 Letter agreement dated March 2, 1998 between STC Broadcasting,
Inc., WEYI and NBC Television amending the Affiliation Agreement dated
July 10, 1995. (3)
10.20 First Amendment to Asset Exchange Agreement dated April 24,
1998 amending the Asset Exchange Agreement dated as of February 18,
1998 (item 2.2) (3)
10.21 Letter Agreement dated April 24, 1998 between STC
Broadcasting, Inc. and Hearst-Argyle Stations, Inc. consenting to
amendments to Asset Purchase Agreement and Asset Exchange Agreements.
(3)
10.22 Joint Exchange Agreement dated July 3, 1998 by and among STC
Broadcasting, Inc., STC Broadcasting of Vermont, Inc., STC License
Company, STC Broadcasting of Vermont Subsidiary, Inc., Smith
Acquisition Company, Smith Acquisition License Company, Hearst-Argyle
Stations, Inc., and Chicago Deferred Exchange Corporation. (3)
10.23 Closing Letter Agreement dated July 2, 1998, between
Hearst-Argyle Stations, Inc., and STC Broadcasting, Inc., regarding
certain matters in connection with the Closing under the Asset Exchange
Agreement. (3)
10.24 Agreement dated October 1, 1998 between the Company and the
United Automobile, Aerospace and Agricultural Implement Workers of
American (UAW) Local 1811 representing certain employees of WEYI-TV,
Flint, Michigan (4)
10.25 Second Amendment, dated as of January 29, 1999 to the Amended
and Restated Credit Agreement, dated as of July 2, 1998 among Sunrise
Television Corp., STC Broadcasting, Inc. and Chase Manhattan Bank,
NationsBank NA, and Salomon Brothers Holding Company, Inc. (5)
10.26 Securities Purchase Agreement by and among the Company and
Chase Manhattan Corporation, Credit Suisse First Boston Corporation,
and Salomon Brothers Holding Company, Inc. dated February 5, 1999 (5)
78
<PAGE> 80
10.27 Certificate of Designation of the Powers, Preferences and
Relative Participating, optional and other special rights of Preferred
Stock, Series B dated February 5, 1999 (5)
10.28 Put and Call Agreement dated February 5, 1999 among Hicks Muse
Tate & Furst Equity Fund III, L.P. Chase Manhattan Corporation, Credit
Suisse First Boston Corporation and Salomon Brothers Holding Company,
Inc. (5)
10.29 Escrow Agreement dated February 5, 1999 by and between Company
and the Chase Manhattan Bank (5)
10.30 Engagement letter dated February 5, 1999 between Sunrise
Television Corp., the Company and Chase Securities, Inc., Credit Suisse
First Boston Corporation and Salomon Smith Barney, Inc. (5)
10.31 Station Affiliation Agreement between FOX Broadcasting Company
and STC License Company for station WUPW-TV dated February 2, 1999 (5)
10.32 Agreement dated January 29, 1999 between the Company and the
American Federation of Television and Radio Artists, Pittsburgh Local,
representing certain employees of WTOV-TV, Steubenville, Ohio (5)
12 Statement of fixed charge ratio (5)
21.1 Subsidiaries of STC Broadcasting, Inc. (5)
27.2 Financial Data Schedule (for SEC use only) (5)
(1) Incorporated by reference to the Form 10-K of STC Broadcasting, Inc.
for the period March 1, 1997 to December 31, 1997.
(2) Incorporated by reference to the Form 10-Q of STC Broadcasting, Inc.
for the period January 1, 1998 to March 31, 1998.
(3) Incorporated by reference to the Form 10-Q of STC Broadcasting, Inc.
for the period April 1, 1998 to June 30, 1998.
(4) Incorporated by reference to the Form 10-Q of STC Broadcasting, Inc.
for the period July 1, 1998 to September 30, 1998.
(5) Filed herewith.
79
<PAGE> 1
EXHIBIT 2.5
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is entered into as of
this 3rd day of March, 1999, by and among STC BROADCASTING, INC., a Delaware
corporation ("STC"), STC LICENSE COMPANY, a Delaware corporation and a
wholly-owned subsidiary of STC ("STC LICENSEE") (each of the foregoing entities
referred to herein individually as "SELLER" and collectively as "SELLERS"), and
NEXSTAR BROADCASTING OF ROCHESTER, LLC, a Delaware limited liability company
("BUYER").
WHEREAS, STC Licensee is the licensee of television broadcast station
WROC-TV, Channel 8, Rochester, New York (the "STATION") pursuant to certain
authorizations issued by the FCC, and STC operates the Station and owns and
leases certain assets used in connection with the operation of the Station; and
WHEREAS, Sellers desire to sell, assign and transfer the assets and
business of the Station as described below, and Buyer desires to acquire the
assets and business of the Station as described below, and to assume certain
liabilities of Sellers and the Station as described below, all on the terms
described in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the parties hereto hereby agree
as follows:
ARTICLE 1.
DEFINITIONS AND REFERENCES
Capitalized terms used herein without definition shall have the
respective meanings assigned thereto in Annex I attached hereto and
incorporated herein for all purposes of this Agreement (such definitions to be
equally applicable to both the singular and plural forms of the terms defined).
Unless otherwise specified, all references herein to "Articles" or "Sections"
are to Articles or Sections of this Agreement.
<PAGE> 2
ARTICLE 2.
SALE AND PURCHASE OF ASSETS; ESCROW DEPOSIT;
PURCHASE PRICE; PRORATION AMOUNTS; ASSUMPTION OF LIABILITIES
2.1. ASSET SALE AND PURCHASE OF ASSETS.
Subject to the terms and conditions hereof and in reliance upon
the representations, warranties and agreements contained herein, Sellers shall
sell, assign, transfer, convey and deliver to Buyer, and Buyer shall purchase,
acquire, pay for and accept from Sellers, all right, title and interest of
Sellers in, to and under all real, personal and mixed assets, rights, benefits
and privileges, both tangible and intangible, wheresoever located, owned,
leased, used or held for use by Sellers in connection with the business and
operations of the Station (collectively, the "ASSETS"); but excluding the
Excluded Assets described in Section 2.2.
The Assets shall include, without limitation, all right, title and
interest of Sellers in, to and under the following:
2.1.1. FCC LICENSES.
All licenses, permits and other authorizations issued by
the FCC to either Seller for the operation of the Station (the "FCC LICENSES"),
including without limitation those listed in Schedule 2.1.1, and all
applications therefor, together with any renewals, extensions or modifications
thereof and additions thereto.
2.1.2. REAL AND LEASED PROPERTY INTERESTS.
(a) All the real property owned by Sellers including,
without limitation, all land, fee interests, easements and other interests of
every kind and description in real property, buildings, structures, fixtures,
appurtenances, towers and antennae, and other improvements thereon owned by
Sellers ("REAL PROPERTY"), including, without limitation, all of those items
listed or described in Schedule 2.1.2.
(b) All the real property leasehold interests of Sellers
including, without limitation, leases and subleases of any land, easements and
other real property leasehold interests of every kind and description in real
property, buildings, structures, fixtures, appurtenances, towers and antennae,
and other improvements thereon leased by Sellers in connection with the
business and operations of the Station ("LEASED PROPERTY"), including, without
limitation, all of those items listed or described in Schedule 2.1.2.
2
<PAGE> 3
2.1.3. TANGIBLE PERSONAL PROPERTY.
All of the furniture, fixtures, furnishings, machinery,
computers, equipment, inventory, spare parts, supplies, office materials and
other tangible property of every kind and description maintained, owned,
leased, used or held for use by Sellers in connection with the business and
operations of the Station, including, without limitation, those items which are
set forth and identified in Schedule 2.1.3 (which is intended to identify those
having a book value in excess of Ten Thousand Dollars ($10,000)), together with
any replacements thereof and additions thereto made before the Closing Date,
and less any retirements or dispositions thereof made before the Closing Date
in the Ordinary Course of Business.
2.1.4. INTELLECTUAL PROPERTY.
All of the service marks, copyrights, franchises,
trademarks, trade names, domain names, jingles, slogans, logotypes, trade
secrets, confidential information, technical and computer data, documentation
and software, business and marketing plans and all other intangible assets
maintained, owned, used or held for use by Sellers in connection with the
business and operations of the Station (including any and all applications,
registrations, extensions and renewals relating thereto) (collectively, the
"INTELLECTUAL PROPERTY"), and all of the rights, benefits and privileges
associated therewith, including, without limitation, those set forth and
identified in Schedule 2.1.4 and the right to use the "WROC" call letters for
the Station.
2.1.5. PROGRAM CONTRACTS.
Except for the Excluded Contracts, the program licenses
and contracts under which Sellers are authorized to broadcast programs on the
Station (collectively the "PROGRAM CONTRACTS"), including without limitation,
(a) all program (cash and non-cash) licenses and contracts listed on Schedule
2.1.5, and (b) any other such program contracts that are entered into between
the date of this Agreement and the Closing Date in accordance with the terms of
this Agreement.
2.1.6. TRADE-OUT AGREEMENTS.
Except for the Excluded Contracts, all contracts and
agreements (excluding Program Contracts) pursuant to which Sellers have sold,
traded or bartered commercial air time on the Station in consideration for any
property or services in lieu of or in addition to cash (collectively, the
"TRADE-OUT AGREEMENTS"), including, without limitation, those set forth and
identified in Schedule 2.1.6.
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2.1.7. BROADCAST TIME SALES AGREEMENT.
Except for the Excluded Contracts, all contracts and
agreements pursuant to which Sellers have sold commercial air time on the
Station for cash (collectively the "TIME SALES AGREEMENTS").
2.1.8. OPERATING CONTRACTS.
The other contracts and agreements entered into by Sellers
in connection with the business and operations of the Station, including,
without limitation, those listed on Schedule 2.1.8 (including, without
limitation, employment agreements and talent contracts, collective bargaining
agreements, network affiliation agreements and national and local advertising
representation agreements for the Station), together with all contracts and
agreements that will be entered into between the date of this Agreement and the
Closing Date in accordance with the terms of this Agreement (collectively, the
"OPERATING CONTRACTS" and together with the Program Contracts, and the
Trade-out Agreements and the Time Sales Agreements, the "STATION CONTRACTS");
provided, that, in each case, unless Buyer otherwise accepts such contract or
agreement in writing, neither the Program Contracts, the Trade-Out Agreements,
the Time Sales Agreements or the Operating Contracts will include (a) any
contract or agreement that is required by Section 3.14.1 to be, but which is
not, described on any of Schedules 2.1.5, 2.1.6 or 2.1.8, or (b) any contract
or agreement that is entered into in breach of any of Sections 6.1.3, 6.1.4,
6.1.5 or 6.1.6 (collectively, such contracts and agreements described in
clauses (a) and (b), the "EXCLUDED CONTRACTS").
2.1.9. VEHICLES.
Except for the vehicle described on Schedule 2.2.13, all
automotive equipment and motor vehicles maintained, owned, leased, used or held
for use by Sellers in connection with the business and operations of the
Station, including, without limitation, those set forth and described in
Schedule 2.1.9.
2.1.10. FILES AND RECORDS.
All engineering, business and other books, papers, logs,
files, and accounting, financial and other records pertaining to the business
and operations of the Station, but not the documents, books and records
described in Section 2.2.8.
2.1.11. AUXILIARY FACILITIES.
All translators, earth stations, and other auxiliary
facilities, and all applications therefor, owned, leased, used or held for use
by Sellers in connection with the business and operations of the Station.
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2.1.12. PERMITS AND LICENSES.
All permits, approvals, orders, authorizations, consents,
licenses, certificates, franchises, exemptions of, or filings or registrations
with, any court or Governmental Authority (other than the FCC) in any
jurisdiction, which have been issued or granted to or are owned, used or held
for use by Sellers in connection with the business and operations of the
Station and all pending applications therefor.
2.1.13. GOODWILL.
The business of the Stations as a "going concern,"
customer relationships and goodwill.
2.2. EXCLUDED ASSETS.
Notwithstanding anything to the contrary in this Agreement, there
shall be excluded from the Assets and retained by Sellers, the following assets
(collectively, the "EXCLUDED ASSETS"):
2.2.1. CASH.
All cash and cash equivalents held by Sellers, all
interest payable in connection with any such cash, cash equivalents or short
term investments, bank balances and rights in and to bank accounts, marketable
and other securities of Sellers.
2.2.2. ACCOUNT RECEIVABLE.
All Accounts Receivable.
2.2.3. DEPOSITS AND PREPAID EXPENSES.
All deposits (other than deposits under Program Contracts,
to the extent apportioned to Buyer pursuant to Section 2.6.1), and prepaid
expenses of the Station and Sellers; provided, however, that such deposits and
prepaid expenses shall be included in the Assets conveyed pursuant hereto to
the extent that Sellers receive a credit therefor in the calculation of the
Proration Amount pursuant to Section 2.6.
2.2.4. PERSONAL PROPERTY DISPOSED OF.
All tangible personal property disposed of or consumed in
the Ordinary Course of Business as permitted by this Agreement.
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2.2.5. INSURANCE.
Except for the Health Insurance Contracts, all contracts
of insurance and all insurance plans and the assets thereof; provided, however,
in the event of any loss or damage by fire or other casualty or other cause
occurring prior to the Non-License Transfer or the Closing, as the case may be,
insurance proceeds received by Sellers with respect to such loss or damage
shall belong to and be paid over to Buyer at the Non-License Transfer or the
Closing, as the case may be, or upon receipt by Sellers, if later, to the
extent that such proceeds have not been used to restore, replace or repair such
damaged Assets; provided, further, that upon the receipt by Buyer of such
insurance proceeds, Sellers shall have no further liability to Buyer to the
extent of the insurance proceeds received by Buyer for any such loss or damage
(pursuant to the indemnification provisions of this Agreement or otherwise).
2.2.6. EMPLOYEE PLANS AND ASSETS.
Except for the Health Insurance Contracts, all Plans,
Benefit Arrangements, Qualified Plans and Welfare Plans and the assets thereof.
2.2.7. RIGHT TO TAX REFUNDS.
Any and all claims of Sellers with respect to any Tax
refunds.
2.2.8. CERTAIN BOOKS AND RECORDS.
All of (a) Sellers' organizational documents and other
corporate records, and originals of account books of original entry, (b)
duplicated copies of any books, records, accounts, checks, payment records, Tax
records (including payroll, unemployment, real estate and other Tax records)
and other similar books, records and information of Sellers relating to the
operation of the business of the Station prior to the Closing Date, (c) all
records prepared by or on behalf of Sellers in connection with the sale of the
Station, and (d) all records and documents to the extent relating to any
Excluded Assets.
2.2.9. THIRD-PARTY CLAIMS.
All rights and claims of Sellers whether mature,
contingent or otherwise, against third parties relating to the business and
operations of the Station during the period prior to the Closing Date, whether
in tort, contract, or otherwise.
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2.2.10. RIGHTS UNDER THIS AGREEMENT.
All of the rights of Sellers under or pursuant to this
Agreement or any other rights in favor of Sellers pursuant to the other
agreements contemplated hereby or thereby.
2.2.11. NAME.
All rights to the name "STC" and "STC Broadcasting" and
any logo or variation thereof and the goodwill associated therewith.
2.2.12. SECURITIES.
All capital stock or other securities of any direct or
indirect subsidiary of Sellers.
2.2.13. EXCLUDED CONTRACTS AND UNRELATED ASSETS.
The contracts, agreements and any other assets listed on
Schedule 2.2.13, and the rights of Sellers under the Excluded Contracts.
2.3. ESCROW DEPOSIT.
For and in partial consideration of the execution and delivery of
this Agreement, simultaneously with the execution and delivery of this
Agreement, Buyer is depositing in escrow with the Deposit Escrow Agent an
amount equal to Four Million Six Hundred Thousand Dollars ($4,600,000) in cash,
said amount to be held as an earnest money deposit (the "DEPOSIT"), in
accordance with the terms and conditions of this Agreement and the Deposit
Escrow Agreement.
2.4. PURCHASE PRICE.
For and in consideration of the conveyances and assignments
described herein and in addition to the assumption of Liabilities as set forth
in Section 2.8, Buyer agrees to pay to Sellers, and Sellers agree to accept
from Buyer, an amount equal to Forty-Six Million Dollars ($46,000,000) (the
"BASE PURCHASE PRICE"), plus or minus (as the case may be) the Proration Amount
(the Base Purchase Price, as adjusted by the Proration Amount, the "PURCHASE
PRICE"). The Purchase Price shall be payable as described in Section 2.5. The
Purchase Price shall be allocated among the Assets in accordance with Section
2.7.
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2.5. PAYMENT OF PURCHASE PRICE.
2.5.1. At the Non-License Transfer pursuant to Section 11.1, (a)
Buyer shall pay to Sellers by wire transfer of immediately available funds to
an account or accounts which will be identified by Sellers not less than two
(2) days prior to the Non-License Transfer Date, an amount equal to Forty-Three
Million Dollars ($43,000,000) of the Base Purchase Price (plus or minus, as the
case may be, the Proration Amount), and (b) Buyer and Sellers shall cause the
Deposit to be returned to Buyer in accordance with the joint written
instructions of Buyer and Sellers.
2.5.2. The Purchase Price (less any amounts paid to Sellers at a
Non-License Transfer) shall be paid by Buyer to Sellers at the Closing by wire
transfer of immediately available funds to an account or accounts which will be
identified by Sellers not less than two (2) days prior to the Closing Date.
2.6. PRORATION AMOUNT.
2.6.1. At least five (5) days prior to the Transfer Date, Sellers
shall make a good faith estimate of the adjustments to the Base Purchase Price
customary in television broadcast station transactions for Proration Items (the
"PRORATION AMOUNT") to reflect that all Proration Items of the Station shall be
apportioned between Buyer and Sellers in accordance with the principle that
Sellers shall receive the benefit of all refunds, deposits (other than deposits
under Program Contracts, to the extent of the amount of such deposits set forth
on Schedule 2.1.5, which deposits shall be prorated based on the percentage of
the term that the film or program was permitted or required to be aired on the
Station before the Transfer Date and the percentage of the term that the film
or program is permitted or required to be aired on and after the Transfer Date)
and prepaid expenses, and shall be responsible for all expenses, costs and
liabilities allocable to the conduct of the business or operations of the
Station for the period prior to the Transfer Date, and Buyer shall receive the
benefit of all refunds, deposits and prepaid expenses, and shall be responsible
for all expenses, costs and liabilities allocable to the conduct of the
business or operations of the Station from and after the Transfer Date.
Notwithstanding the foregoing, there shall be no adjustment or proration (a)
for the Accounts Receivable; (b) for the Assumed Accrued Employee Liabilities;
provided, however, that in consideration of Buyer's assumption of such
Liabilities, Buyer shall receive a credit in the amount of Seventy-Five
Thousand Dollars ($75,000) in connection with the calculation of the Proration
Amount; (c) for any prepayments (other than deposits as provided for above)
under any Program Contract; or (d) for any negative or positive net trade
balance of the Station except to the extent that the net negative trade balance
(i.e., the amount by which the aggregate value of goods or services to be
received under all Trade-out Agreements is less than the aggregate value of any
advertising time remaining to be run under
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all Trade-out Agreements) or the net positive trade balance (i.e., the amount
by which the aggregate value of any advertising time remaining to be run under
all Trade-out Agreements is greater than the aggregate value of goods or
services to be received under all Trade-out Agreements) for the Station exceeds
Twenty-Five Thousand Dollars ($25,000) as of immediately prior to the Transfer
Date. With respect to amounts due under the Program Contracts as of the
Transfer Date, only those amounts first becoming due and payable during the
month in which the Transfer Date occurs shall be prorated (it being understood
and agreed that obligations for payments with respect to Program Contracts
first becoming due and payable prior to the month during which the Transfer
Date occurs will be allocated solely to Sellers), and such amounts shall be
prorated based on time elapsed and not actual use of the runs. If there shall
be a Non-License Transfer, then prorations and adjustments for Proration Items
related to the License Assets shall be made pursuant to this Section 2.6 as of
the Closing Date. Determinations pursuant to this Section 2.6 shall be made in
accordance with GAAP.
2.6.2 Within one hundred twenty (120) days after the Transfer
Date, Buyer shall deliver to Sellers in writing and in reasonable detail a good
faith final determination of the Proration Amount determined as of the Transfer
Date under Section 2.6.1 ("FINAL PRORATION AMOUNT"). Sellers shall assist Buyer
in making such determination, and Buyer shall provide Sellers with reasonable
access to the properties, books and records relating to the Station for the
purpose of determining the Final Proration Amount. Sellers shall have the right
to review the computations and workpapers used in connection with Buyer's
preparation of the Final Proration Amount. If Sellers disagree with the amount
of the Final Proration Amount determined by Buyer, Sellers shall so notify
Buyer in writing within thirty (30) days after the date of receipt of Buyer's
Final Proration Amount, specifying in detail any point of disagreement. If
Sellers fail to notify Buyer of any disagreement with Buyer's determination of
the Final Proration Amount within such thirty (30) day period, then Buyer's
determination of the Final Proration Amount shall be final as between the
parties. After the receipt of any notice of disagreement, Buyer and Sellers
shall negotiate in good faith to resolve any disagreements regarding the Final
Proration Amount. If any such disagreement cannot be resolved by Sellers and
Buyer within thirty (30) days after Buyer has received notice from Sellers of
the existence of such disagreement, Buyer and Sellers shall jointly select a
nationally recognized independent public accounting firm (the "ACCOUNTING
FIRM"), to review Buyer's determination of the Final Proration Amount and to
resolve as soon as possible all points of disagreement raised by Sellers. All
determinations made by the Accounting Firm with respect to the Final Proration
Amount shall be final, conclusive and binding on Buyer and Sellers. The fees
and expenses of the Accounting Firm incurred in connection with any such
determination shall be shared one-half by Buyer and one-half by Sellers.
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If the Final Proration Amount is such that Buyer's payment
of the Proration Amount was an underpayment to Sellers, then Buyer shall pay
such underpayment amount to Sellers in cash, within five (5) business days
following the final determination of the Final Proration Amount, plus interest
on such underpayment amount at an annual rate of eight percent (8%) from the
Transfer Date to the date of such payment to Sellers. If the Final Proration
Amount is such that Buyer's payment of the Proration Amount was an overpayment
to Sellers, then Sellers shall pay such overpayment amount to Buyer in cash
within two (2) business days following the final determination of the Final
Proration Amount, plus interest on such overpayment amount at an annual rate of
eight percent (8%) from the Transfer Date to the date of such payment to Buyer.
Any amounts paid pursuant to this Section 2.6.2 shall be by wire transfer of
immediately available funds for credit to the recipient at a bank account
identified by such recipient in writing.
Buyer and Sellers agree that prior to the date of the
final determination of the Final Proration Amount pursuant to this Section
2.6.2 (by the Accounting Firm or otherwise), neither party will destroy any
records pertaining to, or necessary for, the final determination of the Final
Proration Amount.
2.7. ALLOCATION OF PURCHASE PRICE.
As promptly as reasonably practicable following execution of this
Agreement, Sellers and Buyer agree to retain Bond & Pecaro (the "APPRAISAL
FIRM") to appraise the classes of Assets of the Station based on the Base
Purchase Price for the Station. The Appraisal Firm shall be instructed to
perform such appraisal and deliver a written report thereof to Sellers and
Buyer as soon as reasonably practicable (the "APPRAISAL REPORT"). Sellers, on
the one hand, and Buyer, on the other hand, shall each pay one-half (1/2) of
the fees, costs and expenses of the Appraisal Firm whether or not the
transactions contemplated hereby are consummated; provided, however, that the
amount of the fees, costs and expenses of the Appraisal Firm payable by Buyer
shall not exceed Ten Thousand Dollars ($10,000). Sellers and Buyer each
represent, warrant, covenant and agree with each other that the Base Purchase
Price shall be allocated among the classes of Assets for the Station as set
forth in the Appraisal Report. Sellers and Buyer agree, pursuant to Section
1060 of the Code, that the Base Purchase Price shall be allocated in accordance
with this Section 2.7, and that all Tax returns and reports shall be filed
consistent with such allocation. The parties acknowledge and agree that the
payment of the Purchase Price as contemplated herein does not reflect the
allocation among classes of Assets for the Station as determined pursuant to
this Section 2.7. Notwithstanding any other provision of this Agreement, the
provisions of this Section 2.7 shall survive the Non-License Transfer Date and
the Closing Date without limitation.
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2.8. ASSUMPTION OF LIABILITIES.
2.8.1. At the Non-License Transfer, Buyer shall assume, and shall
agree to pay, perform and discharge as and when the same become due and payable
or are required to be performed, (a) all Liabilities arising on or after, and
relating to the period from and after, the Non-License Transfer Date under the
Station Contracts, (b) all Liabilities arising out of events occurring on or
after the Non-License Transfer Date related to the business or operations of
the Station or Buyer's ownership of the Non-License Assets, (c) all Liabilities
for which Buyer receives a credit in connection with the calculation of the
Proration Amount, and (d) the Assumed Accrued Employee Liabilities; provided,
however, that the Assumed Liabilities shall not include any Liability under any
Excluded Contract.
2.8.2. To the extent not assumed by Buyer at the Non-License
Transfer, at the Closing, Buyer shall assume, and shall agree to pay, perform
and discharge as and when the same become due and payable or are required to be
performed, (a) all Liabilities arising on or after, and relating to the period
from and after, the Closing Date under the Station Contracts and the FCC
Licenses, (b) all Liabilities arising out of events occurring on or after the
Closing Date related to the business or operations of the Station or Buyer's
ownership of the Assets, (c) all Liabilities for which Buyer receives a credit
in connection with the calculation of the Proration Amount, and (d) the Assumed
Accrued Employee Liabilities; provided, however, that the Assumed Liabilities
shall not include any Liability under any Excluded Contract.
2.8.3. Except for the Assumed Liabilities, Buyer assumes no other
Liabilities of any kind or description.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES BY SELLERS
Sellers jointly and severally represent and warrant to Buyer as follows:
3.1. ORGANIZATION AND STANDING.
Each Seller is duly organized, validly existing and in good
standing under the laws of the State of Delaware and is duly qualified to do
business and is in good standing in any jurisdiction where such qualification
is necessary, except for those jurisdictions where the failure to be so
qualified would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. Sellers have the corporate power and
authority to own, lease and otherwise to hold and operate the Assets, to carry
on the business of the Station as now conducted,
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and to enter into and perform the terms of this Agreement, the other Seller
Documents and the transactions contemplated hereby and thereby.
3.2. AUTHORIZATION.
The execution, delivery and performance of this Agreement and of
the other Seller Documents, and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate actions of Sellers (none of which actions has been modified
or rescinded and all of which actions are in full force and effect). This
Agreement and the Deposit Escrow Agreement constitute, and upon execution and
delivery each other Seller Document will constitute, valid and binding
agreements and obligations of Sellers, enforceable against Sellers in
accordance with their respective terms, except as the same may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws of
general applicability relating to or affecting creditors' rights generally and
by the application of general principles of equity.
3.3. COMPLIANCE WITH LAWS.
Sellers are in compliance in all material respects with all Laws
applicable to Sellers, to the Assets, to the Station and to the business and
operations of Sellers. Sellers have obtained and hold all permits, licenses and
approvals (none of which has been modified or rescinded and all of which are in
full force and effect) from all Governmental Authorities necessary in order to
conduct the operations of the Station as presently conducted, except for such
permits, licenses and approvals for which the failure to obtain would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
3.4. CONSENTS AND APPROVALS; NO CONFLICTS.
3.4.1. The execution and delivery of this Agreement, and the
performance of the transactions contemplated herein by Sellers, will not
require any consent, approval, authorization or other action by, or filing with
or notification to, any Person in connection with any Station Contract, except
that certain of the Station Contracts may be assigned only with the consent of
third parties, as specified in Schedule 3.4.1, and except for any consent,
approval, authorization, action, filing or notification, the failure of which
to obtain or make would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect.
3.4.2. The execution and delivery of this Agreement, and the
performance of the transactions contemplated herein by Sellers, will not
require
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any consent, approval, authorization or other action by, or filing with
or notification to, any Governmental Authority where the failure to make such
filing or obtain such consent would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect, except as follows:
(a) filings required under Hart-Scott-Rodino, (b) consents to the assignment of
the FCC Licenses to Buyer by the FCC, and (c) filings, if any, with respect to
real estate transfer taxes.
3.4.3. Assuming all consents, approvals, authorizations and other
actions described in Section 3.4.1 and Section 3.4.2 have been obtained and all
filings and notifications described in Section 3.4.1 and Section 3.4.2 have
been made, the execution, delivery and performance of this Agreement and the
other Seller Documents by Sellers do not and will not (a) conflict with or
violate any Law applicable to Sellers, the Assets or the Station or by which
any of the Assets or the Station is subject or affected, (b) conflict with or
result in any breach of or constitute a default (or an event which with notice
or lapse of time or both would become a default) under any contract or
agreement to which either Seller is a party or by which either Seller is bound
or to which any of the Assets or the Station is subject or affected, (c) result
in the creation of any Encumbrance upon the Assets, or (d) conflict with or
violate the organizational documents of Sellers; except where any such
conflict, violation or breach would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
3.5. FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.
3.5.1. Sellers have provided to Buyer the unaudited balance sheet
of the Station as of December 31, 1997, and December 31, 1998, and the
unaudited statements of operations of the Station for the years ended December
31, 1997, and December 31, 1998. The financial statements referred to in this
Section 3.5.1 (a) present fairly in all material respects the financial
condition of the Station as of the respective dates and the results of
operations for the respective periods indicated, and (b) have been prepared in
accordance with GAAP (except that the financial statements referred to in this
Section 3.5.1 do not contain all footnotes required under GAAP and do not
include statements of cashflows).
3.5.2. There exist no Liabilities of the Station relating to, or
arising out of, the business or operations of the Station, contingent or
absolute, matured or unmatured, known or unknown, except (a) as reflected on
the unaudited balance sheet as of December 31, 1998 (the "CURRENT BALANCE SHEET
DATE") referred to in Section 3.5.1, (b) for Liabilities that were incurred
after the Current Balance Sheet Date in the Ordinary Course of Business and (c)
for Liabilities that would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect.
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3.6. ABSENCE OF CERTAIN CHANGES OR EVENTS.
There has been no Material Adverse Effect since the Current
Balance Sheet Date through the date of this Agreement. Since the Current
Balance Sheet Date, Sellers have conducted the business of the Station in the
Ordinary Course of Business, and Sellers have not (a) incurred loss of, or
injury to, any of the Assets as the result of any fire, explosion, flood,
windstorm, earthquake, labor trouble, riot, accident, act of God or public
enemy or armed forces, or other casualty, except for such losses or injuries
which have been cured in accordance with Section 8.2; (b) incurred, or become
subject to, any Liability, except current Liabilities incurred in the Ordinary
Course of Business; (c) mortgaged, pledged or subjected to any Encumbrance any
of its Assets other than Encumbrances in connection with Liabilities arising
under any credit or loan agreement between Sellers and their lenders; (d) sold,
exchanged, transferred or otherwise disposed of any Assets, or canceled any
debts or claims; (e) entered into any transactions other than in the Ordinary
Course of Business; (f) made any material change in any method of accounting or
accounting practice; or (g) made any agreement to do any of the foregoing.
3.7. ABSENCE OF LITIGATION.
Except as set forth on Schedule 3.7, as of the date hereof there
is no action, suit, investigation, claim, arbitration or litigation pending or,
to the knowledge of Sellers, threatened against Sellers, the Assets or the
Station by or before any Governmental Authority that would reasonably be
expected to, individually or in the aggregate, (a) have a Material Adverse
Effect, or (b) challenge or seek to prevent, enjoin, alter or materially delay
the transaction contemplated hereby.
3.8. ASSETS.
Except for the Excluded Assets, the Assets include all of the
assets or property used in the business of the Station as presently operated.
Sellers are the owners of, and have good title to, or have a good and valid
leasehold or license interest in and to, the Assets free and clear of any
Encumbrances, except for and subject only to (a) the Permitted Encumbrances,
(b) those Encumbrances listed in Schedule 3.8, which shall be discharged and
removed on or prior to the Transfer Date, and (c) as to the Real Property,
those Encumbrances listed in Schedule 3.10 which, to the extent so indicated in
Schedule 3.10, shall be discharged and removed on or prior to the Transfer
Date. At the Non-License Transfer and the Closing, Buyer shall acquire good
title to, and all right, title and interest in and to the Assets, free and
clear of all Encumbrances, except for the Permitted Encumbrances.
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3.9. FCC MATTERS.
STC Licensee holds the FCC Licenses listed as held by STC Licensee
on Schedule 2.1.1. The FCC Licenses constitute all of the licenses, permits and
authorizations from the FCC that are required for the business and operations
of the Station. The FCC Licenses are valid and in full force and effect through
the dates set forth on Schedule 2.1.1, unimpaired by any condition which would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. The Station has been operated by Sellers in all material
respects in accordance with the terms of the FCC Licenses. Except as set forth
on Schedule 3.9, no application, action or proceeding is pending for the
renewal or modification of any of the FCC Licenses, and, except for actions or
proceedings affecting television broadcast stations generally, no application,
complaint, action or proceeding is pending or, to Sellers' knowledge,
threatened that may result in the (a) the revocation, modification, non-renewal
or suspension of any of the FCC Licenses, (b) the issuance of a
cease-and-desist order, or (c) the imposition of any administrative or judicial
sanction with respect to the Station. Sellers have no knowledge of any facts,
conditions or events relating to Sellers or the Station including, without
limitation, compliance by Sellers with the Children's Television Act, that
would reasonably be expected to cause the FCC to deny the assignment of the FCC
Licenses as provided for in this Agreement. Sellers have filed with the FCC all
reports, forms and statements required by the FCC to be filed by Sellers
relating to the Station, including, without limitation, applications for
renewal of authority required by applicable Laws.
3.10. REAL PROPERTY.
3.10.1. STC has good and marketable title to the Real Property
listed in Schedule 2.1.2, free and clear of all Encumbrances, except for (a)
those items listed in Schedule 3.10 (which, to the extent so indicated on
Schedule 3.10, shall be discharged and removed on or prior to the Transfer
Date), and (b) Permitted Encumbrances. Schedule 2.1.2 sets forth the address
and the legal description of each parcel of real property owned by Sellers and
used or held for use in the operation of the Station.
3.10.2. STC has a valid leasehold interest in all Leased Property
listed as leased by STC in Schedule 2.1.2. Schedule 2.1.2 lists all leases,
subleases and other occupancy agreements (the "LEASES") pursuant to which any
of the Leased Property is leased by Sellers. STC is the owner and holder of all
the Leased Property purported to be granted by the Leases. Each Lease is in
full force and effect and constitutes a legal, valid and binding obligation of,
and is legally enforceable against STC and, to the knowledge of Sellers, each
other party thereto, and grants the leasehold interest it purports to grant.
STC has complied with all of the material provisions of the Leases and is not
in default thereunder in any
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material respect, and there has not occurred any event which (whether with or
without notice, lapse of time or the happening or occurrence of any other
event) would constitute such a default by Sellers or, to the knowledge of
Sellers, any other parties to the Leases.
3.10.3. The Real Property and the Leased Property listed in
Schedule 2.1.2 constitute all of the real property owned, leased, used or held
for use by Sellers in the business and operations of the Station. Except as set
forth in Schedule 3.10 and except for any Permitted Encumbrances, other than
Sellers, no Person occupies or has the current or future right to occupy, the
Real Property (or the Leased Property in a manner that would infringe Sellers'
right with respect thereto).
3.10.4. All buildings, structures, fixtures and other improvements
on the Real Property are in sufficient operating condition and adequate repair
(ordinary wear and tear excepted) for the purposes to which they are currently
devoted.
3.10.5. To the knowledge of Sellers, no portion of the Real
Property or any building, structure, fixture or improvement thereon is the
subject of, or affected by, any condemnation, eminent domain or inverse
condemnation proceeding currently instituted or pending.
3.10.6. Sellers have delivered to Buyer copies of title policies
and surveys prepared in connection with the acquisition of the Real Property by
Sellers.
3.11. CONDITION OF TANGIBLE ASSETS.
Except as set forth on Schedule 3.11, all tangible Assets
presently in use are in operating condition and adequate repair (ordinary wear
and tear excepted) for the purposes to which they are currently devoted.
3.12. INTELLECTUAL PROPERTY.
Schedule 2.1.4 contains a true, correct and complete listing of
all registered or applied-for Intellectual Property owned or licensed by or
registered in the name of Sellers which is used in the business and operations
of the Station. Except as set forth in Schedule 3.4.1, all Intellectual
Property owned or licensed by Sellers and used or held for use in the business
and operations of the Station is transferable to Buyer by the sole act and deed
of Sellers. Except as set forth in Schedule 3.4.1, no consent on the part of,
notice to or filing with any other person is necessary in connection with the
transfer to Buyer of such Intellectual Property. No royalty is payable to any
Person as a result of or with respect to the use of any Intellectual Property.
Sellers own or possess pursuant to a valid and enforceable
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license, all rights to use all such Intellectual Property material to the
conduct of the business of the Station. Sellers do not have any knowledge and
Sellers have not received any notice to the effect that the conduct of the
business of the Station may infringe, misappropriate or conflict with any
Intellectual Property right or other legally protectable right of another.
Sellers have the right to the use of the call letters "WROC-TV" pursuant to the
rules and regulations of the FCC. Sellers have no knowledge of any claim by
another Person contesting the validity, enforceability, use or ownership of any
Intellectual Property or any grounds for the same.
3.13. REPORTS AND RECORDS.
All material returns, reports and statements relating to the
Station required to be filed by Sellers with the FCC or any other Governmental
Authority have been filed and when filed were correct and complete in all
material respects. All such reports, returns and statements shall continue to
be filed on a current basis until the Closing Date, and will be correct and
complete in all material respects when filed. All documents required by the
FCC's rules to be placed in the Station's public files by Sellers have been
placed and are being held in such files. All logs and business records of every
type and nature relating to the business and operations of the Station have
been maintained in all material respects in accordance with the rules and
regulations of the FCC.
3.14. STATION CONTRACTS.
3.14.1. The Station Contracts set forth in Schedules 2.1.5, 2.1.6
and 2.1.8 are all of the contracts and agreements relating to the Assets, to
the Station or to the business and operations thereof, other than (a) Time
Sales Agreements entered into in the Ordinary Course of Business; and (b)
contracts and agreements which are not Subject Agreements and which do not
require payments of more than Ten Thousand Dollars ($10,000) per contract per
year or One Hundred Fifty Thousand Dollars ($150,000) per year in the
aggregate. Complete and correct copies of all Station Contracts have been made
available to Buyer.
3.14.2. Sellers represent and warrant to Buyer that (a) each
Station Contract is in full force and effect; (b) Sellers are not in breach or
default of the terms of any Station Contract in any material respect; (c) none
of the material rights of Sellers under any Station Contract will be subject to
termination or modification, nor will a default occur, as a result of the
consummation of the transactions contemplated hereby, except to the extent that
failure to obtain the prior consent to assignment thereof (to the extent set
forth on Schedule 3.4.1) of any party thereto shall or could be interpreted to
constitute a termination or modification of or a default under any such Station
Contract; and (d) to the knowledge of Sellers, no other party to any Station
Contract is in material breach or default of the terms thereunder.
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3.15. TAXES.
3.15.1. Sellers have (or, in the case of returns becoming due
after the date hereof and on or before the Transfer Date, will have prior to
the Transfer Date) duly filed all Seller Tax Returns required to be filed by
Sellers on or before the Transfer Date with respect to all applicable Taxes. In
the case of any Seller Tax Returns which receive an extension for their date of
filing, such Seller Tax Returns will be considered due on, and not considered
required to be filed before, the extended due date. To the knowledge of
Sellers, all of the Seller Tax Returns are (or, in the case of returns becoming
due after the date hereof and on or before the Transfer Date, will be) true and
complete in all material respects. Sellers: (a) have paid all Taxes due to any
Governmental Authority in connection with any of the Seller Tax Returns; or (b)
has established (or, in the case of amounts becoming due after the date hereof,
prior to the Transfer Date will have established) adequate reserves (in
conformity with GAAP consistently applied) for the payment of such Taxes.
3.15.2. There is no action, suit, proceeding, audit, investigation
or claim pending or, to the knowledge of Sellers, threatened in respect of any
Taxes associated with, or which would become a lien against, the Assets or
operations of the Station for which Sellers may become liable, nor has any
deficiency or claim for any such Taxes been proposed, asserted or, to the
knowledge of Sellers, threatened. There is no Station Contract, waiver or
consent providing for an extension of time with respect to the assessment or
collection of any Taxes associated with, or which would become a lien against,
the Assets or operations of the Station against Sellers, and no power of
attorney granted by Sellers with respect to any related tax matters is
currently in force.
3.16. EMPLOYEE BENEFIT PLANS.
3.16.1. Schedule 3.16 lists all Plans and Benefit Arrangements
maintained by or contributed to by Sellers, or with respect to which Sellers
have any liability, for the benefit of the employees of the Station
(collectively, the "BENEFIT PLANS"). Each Benefit Plan has been maintained in
substantial compliance with its terms and with the requirements prescribed by
applicable Law, including, without limitation, ERISA and the Code.
3.16.2. Schedule 3.16 sets forth a list of all Qualified Plans.
All Qualified Plans and any related trust agreements or annuity agreements (or
any other funding document) have been maintained in compliance with ERISA and
the Code (including, without limitation, the requirements for Tax qualification
described in Section 401 thereof). The trusts established under such Plans are
exempt from federal income taxes under Section 501(a) of the Code.
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3.16.3. Schedule 3.16 lists all funded Welfare Plans that provide
benefits to current employees of Sellers or their beneficiaries. The funding
under each Welfare Plan does not exceed and has not exceeded the limitations
under Sections 419A(b) and 419A(c) of the Code. Sellers are not subject to
taxation on the income of any Welfare Plan's welfare benefit fund (as such term
is defined in Section 419(e) of the Code) under Section 419A(g) of the Code.
3.16.4. Except as required by applicable Law, Sellers have no
post-retirement medical, life insurance or other benefits promised, provided or
otherwise due now or in the future to current, former or retired employees of
the Station.
3.16.5. Except as set forth in Schedule 3.16, Sellers have (a)
filed or caused to be filed all returns and reports on the Plans that it is
required to file and (b) paid or made adequate provision for all fees,
interest, penalties, assessments or deficiencies that have become due pursuant
to those returns or reports or pursuant to any assessment or adjustment that
has been made relating to those returns or reports. All other fees, interest,
penalties and assessments that are payable by or for Sellers have been timely
reported, fully paid and discharged. There are no unpaid fees, penalties,
interest or assessments due from Sellers or from any other person that are or
could become an Encumbrance on any Asset or could otherwise adversely affect
the business of the Station or Assets. Sellers have collected or withheld all
amounts that are required to be collected or withheld by Sellers to discharge
its obligations, and all of those amounts have been paid to the appropriate
Governmental Authority or set aside in appropriate accounts for future payment
when due. Sellers have furnished to Buyer true and complete copies of all
documents setting forth the terms and funding of each Plan (including, without
limitation, copies of each severance benefit arrangement and vacation pay
plan).
3.16.6. Sellers have not incurred any liability to the Pension
Benefit Guaranty Corporation (other than premium payments) or otherwise under
Title IV of ERISA, including any withdrawal liability, or under the Code, with
respect to any employee pension plan covering employees of the Station that
either Sellers (or any other Person that, together with Sellers, is treated as
a single employer under Section 414 of the Code) maintain or have maintained or
to which either Seller contributes, has contributed or is required to
contribute, and which, individually or in the aggregate, would be reasonably
executed to have a Material Adverse Effect.
3.16.7. As of the close of business on December 31, 1998, (a) no
employee of the Station had any accrued vacation time that was eligible to be
used by such employee after December 31, 1998, except for employees covered by
the AFTRA collective bargaining agreement; (b) the Liability of Sellers for
accrued and unused vacation time for employees covered by the AFTRA collective
bargaining agreement did not exceed Fifty Thousand Dollars ($50,000) in the
aggregate; and (c) no employee of the Station had more than eighty (80) hours
of accrued unused sick leave that was eligible to be used by such employee
after December 31, 1998.
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3.17. LABOR RELATIONS.
3.17.1. Except as set forth in Schedule 3.17.1, there are no
strikes, work stoppages, grievance proceedings, union organization efforts, or
other controversies pending or threatened between Sellers and any union or
collective bargaining unit representing such employees. Sellers are in
compliance in all material respects with all Laws relating to the employment or
the workplace, including, without limitation, provisions relating to wages,
hours, collective bargaining, safety and health, work authorization, equal
employment opportunity, immigration and the withholding of income taxes,
unemployment compensation, worker's compensation, employee privacy and right to
know and social security contributions. Except as set forth in Schedule 3.17.1
hereto, there are no collective bargaining agreements relating to the Station
or the business and operations thereof and Sellers have not agreed to recognize
any union or other collective bargaining unit, nor has any union or collective
bargaining unit been certified as representing any employees of Sellers.
3.17.2. Sellers have provided to Buyer a true and complete list
dated as of February 1, 1999 of all employees of Sellers who perform
significant services at the Station.
3.18. ENVIRONMENTAL MATTERS.
3.18.1. Schedule 3.18 sets forth all environmental reports and
assessments prepared for and/or delivered to Sellers in connection with the
acquisition and operation of the Real Property by Sellers, true and complete
copies of which have been provided to Buyer.
3.18.2. To the knowledge of Sellers, the information set forth in
Schedule 3.18 is true, correct and complete in all material respects. Since
January 3, 1996, the Station, the Real Property or Leased Property and all
improvements thereon have been operated in material compliance with all
Environmental Laws; provided, that with respect to the Leased Property, the
representation and warranty set forth in this sentence is made only with
respect to the operations of Sellers thereon and thereat.
3.18.3. Except as set forth in Schedule 3.18, there are no pending
or, to the knowledge of Sellers, threatened actions, suits, claims, or other
legal proceedings based on (and Sellers have not received any notice of any
complaint, order, directive, citation, notice of responsibility, notice of
potential responsibility, or information request from any Governmental
Authority arising out of or
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attributable to): (a) the current or past presence at any part of the Real
Property of Hazardous Materials; (b) the current or past release or threatened
release into the environment from the Real Property (including, without
limitation, into any storm drain, sewer, septic system or publicly owned
treatment works) of any Hazardous Materials; (c) the off-site disposal of
Hazardous Materials originating on or from the Real Property or the business or
Assets of Sellers; (d) any facility operations or procedures of Sellers which
do not conform to requirements of the Environmental Laws; or (e) any violation
of Environmental Laws at any part of the Real Property arising from activities
of Sellers involving Hazardous Materials. To the knowledge of Sellers, Sellers
have been duly issued all permits, licenses, certificates and approvals
required under any Environmental Law, except for such permits the failure to
obtain, would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
3.18.4. Based on the information set forth in Schedule 3.18, the
Real Property contains no underground storage tanks, or underground piping
associated with such tanks, used currently or in the past for Hazardous
Materials.
3.19. TRANSACTIONS WITH AFFILIATES.
Except as set forth in Schedule 3.19 attached hereto, Sellers are
not now, and for the past twelve (12) months, have not been, 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, with any affiliate of Sellers, or any officer, director, employee,
proprietor, partner or shareholder of either Seller. The terms and conditions
of the transactions involving Sellers and any affiliate of Sellers which are
identified on Schedule 3.19 are described briefly therein.
3.20. INSURANCE.
Schedule 3.20 contains a list and brief summary of all policies of
title, property, fire, casualty, liability, life, workmen's compensation, libel
and slander, and other forms of insurance of any kind relating to the Assets or
the business and operations of the Station and held by Sellers. All such
policies: (a) are in full force and effect; (b) are sufficient for compliance
in all material respects by Sellers with all requirements of Law and of all
material agreements to which Sellers are party; and (c) are valid, outstanding,
and enforceable policies.
3.21. INTERPRETATION OF CERTAIN PROVISIONS.
Sellers have not relied and are not relying on the specification
of any dollar amount in any representation or warranty made in this Agreement
or any
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Schedule hereto to indicate that such amounts, or higher or lower amounts, are
or are not material, and agree not to assert in any dispute or controversy
between the parties hereto that specification of such amounts indicates or is
evidence as to whether or not any obligation, item or matter is or is not
material for purposes of this Agreement and the transactions contemplated
hereby.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES BY BUYER
Buyer represents, warrants and covenants to Sellers as follows:
4.1. ORGANIZATION AND STANDING.
Buyer is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware and is
duly qualified to do business as a foreign corporation where such qualification
is necessary, unless the failure to be so qualified would not materially and
adversely affect Buyer's ability to consummate the transactions contemplated by
this Agreement. Buyer has the full power and authority to enter into and
perform the terms of this Agreement and the other Buyer Documents and to carry
out the transactions contemplated hereby and thereby.
4.2. AUTHORIZATION.
The execution, delivery and performance of this Agreement and of
the other Buyer Documents, and the consummation of the transactions
contemplated hereby and thereby, have been duly and validly authorized by all
necessary actions of Buyer (none of which actions has been modified or
rescinded and all of which actions are in full force and effect). This
Agreement and the Deposit Escrow Agreement constitute, and upon execution and
delivery each such other Buyer Document will constitute, a valid and binding
agreement and obligation of Buyer, enforceable against Buyer in accordance with
its respective terms, except as the same may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws of general
applicability relating to or affecting creditors' rights generally and by the
application of general principles of equity.
4.3. COMPLIANCE WITH LAWS.
Buyer has obtained and holds all material permits, licenses and
approvals (none of which will have been modified or rescinded and all of which
shall be in full force and effect) from all Governmental Authorities necessary
in order to
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conduct the operations of the Station as presently conducted and to own, use
and maintain the Assets.
4.4. CONSENTS AND APPROVALS; NO CONFLICTS.
4.4.1. The execution and delivery of this Agreement, and the
performance of the transactions contemplated herein by Buyer, will not require
any consent, approval, authorization or other action by, or filing with or
notification to, any Person or Governmental Authority where the failure to make
such filing or obtain such consent would reasonably be expected to have a
material adverse effect on Buyer's ability to consummate the transactions
contemplated by this Agreement, except as follows: (a) filings required under
Hart-Scott-Rodino, (b) approvals of the assignment of the FCC Licenses to Buyer
by the FCC, and (c) based upon Sellers' representations set forth in Section
3.4.1, certain of the Station Contracts may be assigned only with the consent
of third parties, as specified in Schedule 3.4.1.
4.4.2. Assuming all consents, approvals, authorizations and other
actions described in Section 4.4.1 have been obtained and all filings and
notifications described in Section 4.4.1 have been made, the execution,
delivery and performance of this Agreement and the other Buyer Documents by
Buyer do not and will not (a) conflict with or violate any Law applicable to
Buyer, (b) conflict with or result in any breach of or constitute a default (or
an event which with notice or lapse of time or both would become a default) of
any contract or agreement to which Buyer is a party or by which Buyer is bound,
or (c) conflict with or violate the organizational documents of Buyer.
4.5. AVAILABILITY OF FUNDS.
Buyer will have available on the Non-License Transfer Date and the
Closing Date sufficient funds either under Buyer's existing credit facility
with NationsBank and the other lenders thereunder, or pursuant to financing
from Buyer's current investors, to enable Buyer to consummate the transactions
contemplated hereby.
4.6. QUALIFICATION OF BUYER.
Buyer is, and pending the Non-License Transfer and the Closing,
will be legally, technically, financially and otherwise qualified under the
Communications Act and all rules, regulations and policies of the FCC to
acquire and operate the Station. There are no facts or proceedings which would
reasonably be expected to disqualify Buyer under the Communications Act or
otherwise from acquiring or operating the Station or would cause the FCC not to
approve the assignment of the FCC Licenses to Buyer. Buyer has no knowledge of
any fact or
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circumstance relating to Buyer or any of Buyer's affiliates that would
reasonably be expected to (a) cause the filing of any objection to the
assignment of the FCC Licenses to Buyer, or (b) lead to a delay in the
processing by the FCC of the applications for such assignment. No waiver of any
FCC rule or policy is necessary to be obtained for the grant of the
applications for the assignment of the FCC Licenses to Buyer.
4.7. NO OUTSIDE RELIANCE.
Buyer has not relied and is not relying on any statement,
representation or warranty not made in this Agreement, any Schedule hereto or
any certificate to be delivered to Buyer at the Non-License Transfer or the
Closing, as applicable, pursuant to this Agreement. Buyer is not relying on any
projections or other predictions contained or referred to in the Schedules or
other materials that have been or may hereafter be provided to Buyer or any of
its affiliates, agents or representatives, and Sellers make no representations
or warranties with respect to any such projections or other predictions.
4.8. INTERPRETATION OF CERTAIN PROVISIONS.
Buyer has not relied and is not relying on the specification of
any dollar amount in any representation or warranty made in this Agreement or
any Schedule hereto to indicate that such amounts, or higher or lower amounts,
are or are not material, and agrees not to assert in any dispute or controversy
between the parties hereto that specification of such amounts indicates or is
evidence as to whether or not any obligation, item or matter is or is not
material for purposes of this Agreement and the transactions contemplated
hereby.
ARTICLE 5.
PRE-CLOSING FILINGS
5.1. APPLICATIONS FOR FCC CONSENT.
As promptly as practicable and no later than five (5) business
days following the execution of this Agreement, Sellers and Buyer shall jointly
file an application for the Station with the FCC requesting the consent of the
FCC to the assignment of the FCC Licenses for the Station to Buyer. Sellers and
Buyer will diligently take, or fully cooperate in the taking of, all necessary
and proper steps, and provide any additional information reasonably requested
in order to obtain promptly the requested consents and approvals of the
applications by the FCC; provided, however, that none of the parties hereto
shall have any obligation to participate in any evidentiary hearing.
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5.2. HART-SCOTT-RODINO.
As promptly as practicable and no later than five (5) business
days following the execution of this Agreement, Sellers and Buyer shall
complete any filing that may be required pursuant to Hart-Scott-Rodino (each an
"HSR FILING"). Sellers and Buyer shall diligently take, or fully cooperate in
the taking of, all necessary and proper steps, and provide any additional
information reasonably requested in order to comply with, the requirements of
Hart-Scott-Rodino.
ARTICLE 6.
COVENANTS AND AGREEMENTS OF SELLERS
Sellers covenant and agree with Buyer as follows:
6.1. NEGATIVE COVENANTS.
Pending and prior to the Closing Date, Sellers will not, without
the prior consent of Buyer (which consent shall not be unreasonably withheld,
delayed or conditioned), do or agree to do any of the following with respect to
the Station or the Assets:
6.1.1. DISPOSITIONS; MERGERS.
Sell, assign, lease, license or otherwise transfer or
dispose of any of the Assets other than the disposition in the Ordinary Course
of Business of items that are replaced prior to the Transfer Date with items of
comparable or superior value and utility in the operation of the Station; or
merge or consolidate with or into any other entity or enter into any contracts
or agreements relating thereto.
6.1.2. ACCOUNTING PRINCIPLES AND PRACTICES.
Change or modify any of the accounting principles or
practices or any method of applying such principles or practices currently
employed with respect to the Station, except as required by GAAP.
6.1.3. TRADE-OUT AGREEMENTS.
Enter into any Trade-out Agreement, except in the Ordinary
Course of Business not to exceed Twenty-Five Thousand Dollars ($25,000) in the
aggregate.
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6.1.4. BROADCAST TIME SALES AGREEMENTS.
Enter into any Time Sales Agreement except in the Ordinary
Course of Business.
6.1.5. NETWORK AFFILIATION AGREEMENTS AND LOCAL MARKETING
ARRANGEMENTS.
Except for the Time Brokerage Agreement with Buyer,
acquire or enter into any network affiliation agreements, local marketing
arrangements, joint operating agreements, time brokerage agreements or other
similar contracts.
6.1.6. ADDITIONAL AGREEMENTS.
Except as set forth on Schedule 6.1.6, acquire or enter
into any new Station Contracts not referred to in Sections 6.1.3, 6.1.4 or
6.1.5 above, or renew, extend, amend, alter, modify or otherwise change any
existing Station Contract, except, in any such case, for Station Contracts
which are not Subject Agreements and which (after any such renewal, extension,
amendment, alteration, modification or other change) require payments of less
than Twenty-Five Thousand Dollars ($25,000) per contract per year and no
greater than One Hundred Fifty Thousand Dollars ($150,000) per year in the
aggregate (collectively, "ADDITIONAL AGREEMENTS"), copies of which Additional
Agreements shall be provided to Buyer at or prior to the Transfer Date.
6.1.7. BREACHES.
Do or omit to do any act which will cause a material
breach of any Station Contract.
6.1.8. EMPLOYEE MATTERS.
Except as set forth on Schedule 6.1.8, enter into or
become subject to any employment, labor, union, or professional service
contract not terminable at will, without cost or obligation other than to pay
accrued salary or wages at the normally applicable rate through the time of
termination, or any bonus, pension, insurance, profit sharing, incentive,
deferred compensation, severance pay, retirement, hospitalization, employee
benefit, or other similar plan; or increase the compensation payable or to
become payable to any employee, or pay or arrange to pay any bonus payment to
any employee, except in the Ordinary Course of Business.
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6.1.9. ACTIONS AFFECTING FCC LICENSES.
Take any action which may jeopardize the validity or
enforceability of or rights under the FCC Licenses.
6.1.10. PROGRAMMING.
Program or broadcast any Program Contract or syndicated
program, except in the Ordinary Course of Business.
6.1.11. AFFILIATED TRANSACTIONS.
Except for the transactions described in Schedule 3.19,
enter any transaction with any affiliate of Sellers, including, without
limitation, any renewal, extension, modification or other change in, any
existing contract or agreement to which an affiliate of Sellers is a party or
any other transaction involving an affiliate of Sellers which will have
continued effectiveness after the Non-License Transfer Date or the Closing
Date.
6.2. AFFIRMATIVE COVENANTS.
Pending and prior to the Closing Date, Sellers will with respect
to the Station and the Assets:
6.2.1. PRESERVE EXISTENCE.
Preserve their respective corporate existences and
business organizations intact, maintain their existing franchises and licenses,
use commercially reasonable efforts to preserve for Buyer the relationships of
the Station with suppliers, customers, employees and others with whom the
Station has business relationships, and keep all Assets substantially in their
present condition, ordinary wear and tear excepted.
6.2.2. NORMAL OPERATIONS.
Subject to the terms and conditions of this Agreement
(including, without limitation, Section 6.1) and the Time Brokerage Agreement,
(a) carry on the business and activities of the Station, including without
limitation, the sale of advertising time, entering into other contracts and
agreements, or purchasing and scheduling of programming, in the Ordinary Course
of Business; (b) pay or otherwise satisfy all obligations (cash and barter) of
the Station in the Ordinary Course of Business; (c) maintain books of account,
records, and files with respect to the Station in substantially the same manner
as heretofore; and (d) maintain the Assets in customary repair, maintenance and
condition, except to the extent of normal wear and tear, and repair or replace,
consistently with the
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Ordinary Course of Business, any Asset that may be damaged or destroyed;
notwithstanding the foregoing, Buyer acknowledges that Sellers shall not be
obligated to spend any funds on capital expenditures after the date hereof,
except for the repair or replacement of Assets that may be damaged or
destroyed.
6.2.3. MAINTAIN FCC LICENSES.
Maintain the validity of the FCC Licenses, and comply in
all material respects with all requirements of the FCC Licenses and the rules,
policies and regulations of the FCC and all other applicable Laws.
6.2.4. NETWORK AFFILIATION.
Use reasonable efforts to maintain in full force and
effect the present network affiliation agreement for the Station (and any and
all modifications and renewals thereof).
6.2.5. STATION CONTRACTS.
Pay and perform its obligations in the Ordinary Course of
Business under the Station Contracts and under any Additional Agreements that
shall be entered into between the date hereof and the Transfer Date pursuant to
Section 6.1.6, in accordance with the respective terms and conditions of such
Station Contracts.
6.2.6. TAXES.
Pay or discharge all Taxes when due and payable in the
Ordinary Course of Business.
6.2.7. CORPORATE ACTION.
Take all corporate action (including, without limitation,
all shareholder action) under the Laws of any state having jurisdiction over
Sellers necessary to effectuate the transactions contemplated by this Agreement
and by the other Seller Documents.
6.2.8. ACCESS.
Cause to be afforded to representatives of Buyer
reasonable access during normal business hours to offices, properties, assets,
books and records, contracts and reports of the Station, as Buyer shall from
time to time reasonably request; provided, however, that such investigation
shall only be upon reasonable notice and shall not unreasonably disrupt the
personnel or operations of Sellers or the Station. All requests for access to
the offices, properties, assets, books and records, contracts and reports of
the Station shall be made to David A. Fitz (at
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the address set forth in Section 15.4) and John Purcell (at the Station), or
such other representative as Sellers shall designate in writing, who shall be
solely responsible for coordinating all such requests and all access permitted
hereunder. Buyer acknowledges and agrees that prior to the Transfer Date,
neither Buyer nor its representatives shall contact any of the employees,
customers, suppliers, partners, or other associates or affiliates of Sellers or
the Station, in connection with the transactions contemplated hereby, whether
in person or by telephone, mail or other means of communication, without
reasonable prior written notice to Sellers; provided, however, that (a) Sellers
shall have the right to be present at any meetings or on any telephone calls
with any such Persons; (b) Sellers shall be given the opportunity to review in
advance any correspondence with any such Persons; and (c) any access to the
Station shall be during normal business hours and shall not cause any
disruption to the business and operations of the Station.
6.2.9. INSURANCE.
Maintain in full force and effect all of their existing
casualty, liability, and other insurance through the day following the Closing
Date in amounts not less than those in effect on the date hereof; provided,
however, that if the Non-License Transfer occurs, the amount of insurance
coverage required to be carried by Sellers may be reduced to an amount
reasonable to cover casualty and liability related to the License Assets and
the business of Sellers conducted pursuant to the Time Brokerage Agreement.
6.2.10. FINANCIAL STATEMENTS.
Provide Buyer with (a) unaudited monthly statements of
assets and liabilities of Sellers relating to the business and operations of
the Station, and statements of revenues and expenses reflecting the results of
business and operations of the Station, for January, 1999 and for each month
thereafter, within thirty (30) days after the end of each such month; and (b)
weekly pacing reports for each week after the date hereof within five (5) days
after the end of each such week.
6.3. CONFIDENTIALITY.
Sellers shall, at all times, maintain strict confidentiality with
respect to all documents and information furnished to Sellers by or on behalf
of Buyer, and documents and information related to the business and operations
of the Station during the period prior to the Closing Date to the extent
included in the Assets. Nothing shall be deemed to be confidential information
that: (a) is known to Sellers at the time of its disclosure to Sellers; (b)
becomes publicly known or available other than through disclosure by Sellers;
(c) is received by Sellers from a third party not actually known by Sellers to
be bound by a confidentiality agreement with or
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obligation to Buyer; or (d) is independently developed by Sellers.
Notwithstanding the foregoing provisions of this Section 6.3, Sellers may
disclose such confidential information (i) to the extent required or deemed
advisable to comply with applicable Laws; and (ii) to its officers, directors,
employees, representatives, financial advisors, attorneys, accountants, and
agents with respect to the transactions contemplated hereby; provided, however,
Sellers shall be liable for any disclosure by any such Person that such Person
would not have been permitted to make if such Person were a Seller hereunder.
In the event this Agreement is terminated, Sellers will return to Buyer all
documents and other material prepared or furnished by Buyer relating to the
transactions contemplated hereunder, whether obtained before or after the
execution of this Agreement. In the event that any Seller is required by Law
(including without limitation by oral question, interrogatories, requests for
information or documents, subpoena, civil investigative demand or similar legal
process) to disclose any confidential information, such Seller will promptly
notify Buyer of such requirement so that Buyer may, as it may elect, either
seek an appropriate protective order or waive such Seller's compliance with the
provisions of this Section 6.3. In the event that such protection or other
remedy is not obtained or that Buyer waives compliance, such Seller agrees to
furnish only that portion of the confidential information which such Seller is
advised by counsel is legally required and to exercise such Seller's reasonable
efforts to obtain assurance that confidential treatment will be accorded such
confidential information.
6.4. NO SHOPPING.
From and after the date hereof until the earlier to occur of the
Closing Date or the termination of this Agreement, Sellers shall not, and shall
cause its officers, directors and affiliates not to, (a) initiate contact with,
solicit, encourage or respond to any inquiries or proposals by, or (b) enter
into any discussions or negotiations with, or disclose, directly or indirectly,
any information concerning, the Assets or the Station, or afford any access to
Sellers' properties, books and records to any Person in connection with any
possible proposal for the acquisition (directly or indirectly, whether by
purchase, merger, consolidation or otherwise) of all or any material portion of
the Assets or the Station.
6.5. NO SOLICITATION OF EMPLOYEES.
From and after the date hereof to the first anniversary of the
Transfer Date, neither Sellers nor any Seller Affiliate shall solicit or offer
employment to or hire or employ or otherwise compensate any employee or former
employee (who is an employee of a Station as of the date hereof or as of the
Transfer Date) of the Stations at any other location; provided, however, that
the foregoing shall not apply
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to the Excluded Employee, or to any employee of the Station who is terminated
by Buyer after the Transfer Date.
ARTICLE 7.
COVENANTS AND AGREEMENTS OF BUYER
Buyer covenants and agrees with Sellers as follows:
7.1. CONFIDENTIALITY.
Buyer shall, at all times prior to the Non-License Transfer,
maintain strict confidentiality with respect to all documents and information
furnished to Buyer by or on behalf of Sellers. Nothing shall be deemed to be
confidential information that: (a) is known to Buyer at the time of its
disclosure to Buyer; (b) becomes publicly known or available other than through
disclosure by Buyer; (c) is received by Buyer from a third party not actually
known by Buyer to be bound by a confidentiality agreement with or obligation to
Sellers; or (d) is independently developed by Buyer. Notwithstanding the
foregoing provisions of this Section 7.1, Buyer may disclose such confidential
information (i) to the extent required or deemed advisable to comply with
applicable Laws; and (ii) to its officers, directors, partners, employees,
representatives, financial advisors, attorneys, accountants, agents,
underwriters, lenders, investors and any other potential sources of financing
with respect to the transactions contemplated hereby; provided, however, Buyer
shall be liable for any disclosure by any such Person that such Person would
not have been permitted to make if such Person were Buyer hereunder. In the
event this Agreement is terminated, Buyer will return to Sellers all documents
and other material prepared or furnished by Sellers relating to the
transactions contemplated by this Agreement, whether obtained before or after
the execution of this Agreement. In the event that Buyer is required by Law
(including without limitation by oral question, interrogatories, requests for
information or documents, subpoena, civil investigative demand or similar legal
process) to disclose any confidential information, Buyer will promptly notify
Sellers of such requirement so that Sellers may, as they may elect, either seek
an appropriate protective order or waive Buyer's compliance with the provisions
of this Section 7.1. In the event that such protection or other remedy is not
obtained or that the Sellers waive compliance, Buyer agrees to furnish only
that portion of the confidential information which Buyer is advised by counsel
is legally required and to exercise Buyer's reasonable efforts to obtain
assurance that confidential treatment will be accorded such confidential
information.
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7.2. CORPORATE ACTION.
Prior to the Non-License Transfer and the Closing, Buyer shall
take all corporate action (including, without limitation, all shareholder
action) under the Laws of any state having jurisdiction over Buyer necessary to
effectuate the transactions contemplated by this Agreement and the other Buyer
Documents.
7.3. ACCESS.
For a period of seven (7) years from and after the Transfer Date,
Buyer shall cause to be afforded to representatives of Sellers reasonable
access during normal business hours to the offices, books and records,
contracts and reports of the Station which relate to the operations of the
Station during the period during which the Station was owned by Sellers and
that are included in the Assets (the "PRE-TRANSFER DATE RECORDS"), as Sellers
shall from time to time reasonably request for Sellers' reasonable business
purposes, and shall provide to Sellers copies of any Pre-Transfer Date Records
reasonably requested by Sellers; provided, however, that such investigation
shall only be upon reasonable notice and shall not disrupt the personnel or
operations of Buyer or the Station. Any costs incurred by Buyer in connection
with any such copying during the first nine (9) months after the Transfer Date
shall be paid by Buyer, and any such costs incurred by Buyer after such nine
(9) month period shall be paid by Sellers. All requests for access to the
Pre-Transfer Date Records shall be made to such representatives as Buyer shall
designate in writing, who shall be solely responsible for coordinating all such
requests and all access permitted hereunder. For a period of seven (7) years
from and after the Transfer Date, Buyer shall not dispose of any Pre-Transfer
Date Records; provided, however, Buyer may destroy any Pre-Transfer Date
Records upon providing thirty (30) days written notice to Sellers of an intent
to destroy such Pre-Transfer Date Records; provided, further, that Buyer, at
Buyer's expense, shall transfer to Sellers such Pre-Transfer Date Records,
rather than destroy them if, before the expiration of such thirty (30) day
notice period, Sellers direct Buyer to transfer such Pre-Transfer Date Records
to Sellers.
7.4. COLLECTION OF RECEIVABLES.
At the earlier of the Non-License Transfer or the Closing, Sellers
shall assign the Accounts Receivable to Buyer for collection purposes only,
and, within ten (10) business days after the Transfer Date, Sellers shall
furnish to Buyer a list of the Accounts Receivable by accounts and the amounts
then owing. Buyer agrees, for a period of one hundred fifty (150) days
following the Transfer Date (the "COLLECTION PERIOD"), without any requirement
to litigate or engage any third party to collect the Accounts Receivable, to
use its reasonable efforts (with at least the care and diligence Buyer uses to
collect its own accounts receivable) to collect for Sellers the Accounts
Receivable and to remit to Sellers (or their designees)
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on the tenth (10th) business day following the last day of each month occurring
during the Collection Period, collections received by Buyer with respect to the
Accounts Receivable. Buyer shall not make any referral or compromise of any
Accounts Receivable to a collection agency or attorney for collection and shall
not compromise for less than full value any Account Receivable without the
prior written consent of Sellers. At all times during the Collection Period,
Buyer shall promptly notify Sellers of any claim made by an Account Receivable
debtor that such debtor is not obligated to make payment. In any such case,
Buyer shall, at the written request of Sellers, reassign, without recourse to
Buyer, the associated Account Receivable, and Sellers shall thereafter have the
exclusive right to enforce the collection of such Account Receivable. Any
Account Receivable not collected by Buyer during the Collection Period shall
revert to Sellers (or their designees). Buyer shall reassign, without recourse
to Buyer, each Account Receivable and deliver to Sellers, all records relating
thereto at the end of the Collection Period. All payments in respect of the
Accounts Receivable received by Buyer (whether during the Collection Period or
otherwise), shall be first applied to the oldest balance then due on the
Accounts Receivable unless the account debtor, without any consultation or
discussions with Buyer or Buyer's representatives to such effect, indicates in
writing that payment is to be applied otherwise. Buyer agrees, upon the
reasonable request of Sellers, to furnish to Sellers periodic reports on the
status of its Accounts Receivable. Buyer shall have no right to set-off any
amounts collected for Accounts Receivable for any amounts owed to Buyer by
Sellers. During the Collection Period, Sellers will not make efforts to collect
Accounts Receivable, except those with respect to which Seller has requested
reassignment as described above.
ARTICLE 8.
MUTUAL COVENANTS AND UNDERSTANDINGS
OF SELLER AND BUYER
8.1. POSSESSION AND CONTROL.
Between the date hereof and the Closing Date, Buyer shall not
directly or indirectly control, supervise or direct, or attempt to control,
supervise or direct, the business and operations of the Station, and such
operation, including complete control and supervision of all programming, shall
be the sole responsibility of the owners of the Station, except as contemplated
by the Time Brokerage Agreement after the Non-License Transfer. On and after
the Closing Date, Sellers shall have no control over, or right to intervene,
supervise, direct or participate in, the business and operations of the
Stations.
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8.2. RISK OF LOSS.
The risk of loss or damage by fire or other casualty or cause to
the Assets until the Transfer Date (and, with respect to the License Assets,
until the Closing Date), shall be upon Sellers. In the event of any such loss
or damage prior to the Transfer Date (or, with respect to the License Assets,
the Closing Date) which causes a Material Adverse Effect (a "MATERIAL CASUALTY
LOSS"), Sellers shall restore, replace or repair the damaged Assets to their
previous condition; provided, however, that Sellers obligation to so restore,
replace or repair the damaged Assets shall be limited to the extent of
insurance proceeds actually received by Sellers as a result of such Material
Casualty Loss. In the event that as of the Non-License Transfer Date or the
Closing Date, as the case may be, any such Material Casualty Loss shall not
have been restored, replaced, or repaired, Sellers shall have the right to
defer the Non-License Transfer Date or the Closing Date, as applicable, by
written notice to Buyer, for a period of up to sixty (60) days after the date
on which such Material Casualty Loss occurred. In the event that any such
Material Casualty Loss shall not be restored, replaced, or repaired by the end
of such sixty (60) day period, Buyer shall, at its option, either:
(a) proceed with the Non-License Transfer or the Closing, as
applicable, and receive at the Non-License Transfer or the Closing, as
applicable, the insurance proceeds or an assignment of the right to receive
such insurance proceeds, as applicable, to which Sellers otherwise would be
entitled, whereupon Sellers shall have no further liability to Buyer for such
Material Casualty Loss (pursuant to the indemnification provisions of this
Agreement or otherwise); or
(b) terminate this Agreement by written notice to Sellers and
receive the immediate return of the Deposit, whereupon no party to this
Agreement shall have any liability to any other party to this Agreement, and
this Agreement in its entirety shall be deemed null, void and of no further
force and effect, except for the provisions set forth in Section 13.2 (which
shall survive such termination).
Buyer and Sellers acknowledge and agree that nothing in this
Section 8.2 shall be deemed to waive any requirement that the representations
and warranties be true and correct in all material respects at the Non-License
Transfer and the Closing, as applicable, as provided for in Section 9.1 of this
Agreement.
8.3. PUBLIC ANNOUNCEMENTS.
Between the date hereof and the Closing Date, Sellers and Buyer
shall consult with each other before issuing any press release or otherwise
making any public statements with respect to this Agreement or the transactions
contemplated herein and shall not issue any such press release or make any such
public statement without the prior written consent of the other party, which
shall
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not be unreasonably withheld; provided, however, that a party may, without the
prior written consent of the other party, issue such press release or make such
public statement as may be required by Law or any listing agreement with a
national securities exchange to which either Seller or Buyer is a party if it
has used all reasonable efforts to consult with the other party and to obtain
such party's consent but has been unable to do so in a timely manner.
8.4. EMPLOYEE MATTERS.
8.4.1. TRANSFERRED EMPLOYEES.
(a) Upon the earlier of the Non-License Transfer or the
Closing, except for the employee listed on Schedule 8.4.1(a) hereto (the
"EXCLUDED EMPLOYEE"), Buyer shall offer employment to each of the employees of
the Station (including each Person who has taken a leave of absence or is on
disability leave from the Station), as of the Transfer Date, at the same salary
or wage rate (as applicable), position and place of employment as held by each
such employee immediately prior to the Transfer Date, and with benefits no less
favorable in the aggregate than those provided by Buyer and Buyer's affiliates
to their similarly situated employees (subject, in all cases, to the provisions
of any collective bargaining agreements and employment agreements that are
Station Contracts); provided, however, that the two (2) employees designated in
the Time Brokerage Agreement shall continue as employees of Sellers and, except
for the Excluded Employee, shall become Transferred Employees hereunder as of
the Closing Date. Buyer shall also offer employment to each employee of the
Station who is temporarily absent from active employment on the Transfer Date
upon termination of such temporary absence provided such employee is able to
perform the essential functions of the position such employee held prior to
such absence and any such employee who accepts such employment shall be treated
as a "Transferred Employee" (as defined herein) from and after the Transfer
Date.
(b) To the extent such employees accept employment with
Buyer (collectively, "TRANSFERRED EMPLOYEES"), such Transferred Employees will
be included in Buyer's employee benefit plans and will be subject to Buyer's
employment policies, as generally applicable to Buyer's employees who are
similarly situated. Buyer agrees that Transferred Employees shall be credited
under all of Buyer's applicable employee benefit plans covering such employees
with their service at the Station for purposes of determining any period of
eligibility to participate or to vest in benefits to the same extent such
service was counted under the Benefit Plans of Sellers. Buyer agrees that from
and after the Non-License Transfer until the Closing Date, Buyer shall not,
except for the employees listed on Schedule 8.4.1(b), (i) terminate any
Transferred Employee, except for termination for good cause, or (ii) reduce the
salary or wages of any Transferred Employee, or change the terms of any
Transferred Employee's employment or benefits to be
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materially adversely different than those provided by Buyer and Buyer's
affiliates to their similarly situated employees; provided, however, that after
the Closing Date, subject to applicable laws, Buyer shall have the right, at
any time thereafter, to dismiss any or all Transferred Employees at any time
thereafter, with or without cause, and to change the terms and conditions of
their employment (including compensation and employee benefit plans, policies
or arrangements, provided to them).
8.4.2. VACATION AND SICK LEAVE.
In furtherance of and not in limitation of the obligations
and liabilities of Buyer set forth in Section 8.4.1, Buyer shall assume,
without duplication of benefits, the Liabilities of Sellers to Transferred
Employees as of the Transfer Date for unused and unpaid vacation and sick
leave, but only to the extent reflected in the employee personnel records of
Sellers. Except as otherwise required by applicable law, Buyer shall provide,
without duplication of benefits, all Transferred Employees with vacation time
or sick leave, as the case may be, rather than cash in lieu thereof, for such
unused and unpaid vacation and sick leave in accordance with Buyer's policies.
Buyer shall be liable for, and shall indemnify, defend and hold harmless
Sellers from and against, all Liabilities of Sellers to Transferred Employees
with respect to unused sick leave and unused vacation leave.
8.4.3. SEVERANCE BENEFITS.
In furtherance of and not in limitation of the obligations
and liabilities of Buyer set forth in Section 8.4.1 and Buyer's obligations
under the collective bargaining and employment agreements that are Station
Contracts, with respect to each Transferred Employee, Buyer shall provide
severance benefits no less favorable than those provided by Buyer and Buyer's
affiliates to their similarly situated employees. Transferred Employees shall
be credited under Buyer's severance benefit plan with their service at the
Station for purposes of determining the amount of severance benefits to which
they may be entitled under such plan; provided, however, that any service at
the Station for which severance had previously been paid shall be disregarded.
Buyer shall be liable for, and shall indemnify, defend and hold harmless
Sellers from and against any and all claims by Transferred Employees on or
after the Transfer Date for severance Liabilities, and any other Losses
asserted against, resulting to, imposed upon or incurred by Sellers in
connection with the termination of any Transferred Employee by Buyer (or any
affiliates, successors or assigns of Buyer) on or after the Transfer Date.
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8.4.4. REPRESENTED EMPLOYEES.
(a) In furtherance of and not in limitation of the
obligations and liabilities of Buyer set forth in Section 8.4.1, upon the
earlier of the Non-License Transfer or the Closing, Buyer shall: (i) recognize
the unions and labor organizations which are parties to the collective
bargaining agreements set forth in Schedule 3.17.1; (ii) employ all active
employees of the Stations represented by any such union or labor organization
(collectively, "REPRESENTED EMPLOYEES"); (iii) adopt employee benefit plans,
policies and arrangements covering such Represented Employees substantially
similar to the Benefit Plans of Sellers in effect as of the date hereof to the
extent required by such collective bargaining agreements; and (iv) negotiate in
good faith with the collective bargaining representatives of the employees of
Seller regarding the substitution of Buyer's employee benefit plans, policies
and arrangements for the Benefit Plans of Sellers.
(b) Upon the earlier of the Non-License Transfer or the
Closing, Sellers shall assign to Buyer, and Buyer shall assume the collective
bargaining agreements listed in Schedule 3.17.1, including, without limitation,
all obligations, if any, to provide severance benefits in connection with the
termination after the Transfer Date of any Represented Employee. Such
assignment and assumption shall not obligate Buyer to assume any Benefit Plans
of Sellers. Except for any Liabilities of Sellers with respect to unused sick
leave or unused vacation (which Buyer expressly assumes), Buyer shall not be
responsible for any Liabilities of Sellers under any collective bargaining
agreement listed in Schedule 3.17.1, which arose on or prior to the Transfer
Date, including, without limitation, any Liabilities for wages and any Benefit
Plans of Seller.
(c) Sellers agree to cooperate with Buyer in arranging for
such meetings as Buyer may reasonably request with the collective bargaining
representatives of the employees of Sellers to discuss the implementation of
employee benefits plans, policies and arrangements of Buyer; provided, however,
that any such meeting (i) shall be subject to the prior written approval of
Sellers upon reasonable notice to Sellers, and (ii) shall not unreasonably
disrupt the personnel or operations of Sellers or the Station.
8.4.5. COBRA OBLIGATIONS.
Sellers shall satisfy and discharge any obligations to
provide health care continuation coverage as required by the Consolidated
Omnibus Budget Reconciliation Act of 1985 and as described in Section 4980B of
the Code and Sections 601 through 608 of ERISA and as required by any
applicable state continuation of health coverage provisions (collectively,
"COBRA OBLIGATIONS") to (a) any employee of the Station whose employment is
terminated prior to the Transfer Date to whom Sellers have on-going COBRA
Obligations (and such employee's covered dependents), and (b) the Excluded
Employee. Buyer shall satisfy and discharge all other COBRA Obligations with
respect to Transferred Employees (and such
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employees' covered dependents). Sellers and Buyer shall reasonably cooperate in
good faith to comply with their respective COBRA Obligations hereunder.
8.4.6. SELLER BENEFITS PLANS.
As between Buyer and Sellers, Sellers agree to be
responsible and liable for any medical, disability or other benefits owed under
Sellers' benefit plans, except to the extent such benefits arise under the
Health Insurance Contracts during the period from and after the Transfer Date,
which benefits shall be the responsibility of Buyer. Except as otherwise
specified in Section 8.4.5, Sellers will be responsible for providing, at its
cost, all medical, life and other insurance coverage and benefits, and
disability benefits to which any employee of Sellers who was terminated from
service with Sellers prior to the Transfer Date or who was disabled prior to
the Transfer Date is entitled under Sellers' benefit plans or otherwise.
8.4.7. 401(k) PLANS.
Buyer agrees to permit those Transferred Employees, at
each such Transferred Employee's option, to transfer as a rollover to Buyer's
401(k) Plan their respective pre-tax account balances under Sellers' 401(k)
Plan, provided that such plan is a tax qualified plan under Section 401(a) and
401(k) of the Code and that the transfer as a rollover of any such pre-tax
account balance will not affect the tax qualified status of Buyer's 401(k)
Plan. Sellers agree that if any such Transferred Employee elects to transfer as
a rollover its pre-tax account balance to Buyer's 401(k) Plan, Sellers will
cause the trustees of Sellers' 401(k) Plan to transfer each such electing
Transferred Employee's account to the trustee of Buyer's 401(k) Plan. Effective
as of the Transfer Date, Sellers shall fully vest Transferred Employees in
their account balances under Sellers' 401(k) Plan.
8.4.8. EMPLOYMENT AND COLLECTIVE BARGAINING CONTRACTS.
Buyer acknowledges and agrees that Buyer's obligations
pursuant to this Section 8.4 are in addition to, and not in limitation of,
Buyer's obligation to assume the employment contracts and the collective
bargaining agreements that are Station Contracts.
8.5. DISCLOSURE SCHEDULES.
Sellers and Buyer acknowledge and agree that Sellers shall have
the right from time to time after the date hereof to update or correct the
Schedules
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attached hereto to reflect changes expressly permitted in accordance with the
terms of Article 6. The inclusion of any fact or item on a Schedule referenced
by a particular section in this Agreement shall, should the existence of the
fact or item or its contents, be relevant to any other section, be deemed to be
disclosed with respect to such other section whether or not an explicit
cross-reference appears in the Schedules if it is reasonably apparent on the
face of the Schedule in which such item is referenced that such item is
relevant to such other section.
8.6. BULK SALES LAWS.
Buyer hereby waives compliance by Sellers, in connection with the
transactions contemplated hereby, with the provisions of any applicable bulk
transfer laws; provided, however, that Sellers shall indemnify and hold
harmless Buyer from and against any Losses attributable to Sellers'
non-compliance with any applicable bulk transfer laws, without regard to the
provisions of Article 12.
8.7. CONSENTS.
Prior to, on and after the Non-License Transfer and the Closing,
Sellers and Buyer shall take all reasonable action required to obtain all
consents, approvals and agreements of any third parties (the initial requests
for which shall be provided by Sellers) necessary to authorize, approve or
permit the consummation of the transactions contemplated by this Agreement,
provided that neither Sellers nor Buyer shall be required to make any financial
accommodations to any third party in order to obtain such consents and
approvals (other than payment of any amount otherwise due such third party);
provided, further, that although Sellers may request release from any contract
as part of a request for any such consent, approval or agreement, Sellers shall
not require that Sellers be released from such contract as a condition to
obtaining any such consent, approval or agreement.
ARTICLE 9.
CONDITIONS PRECEDENT TO
BUYER'S OBLIGATION TO CLOSE
The obligations of Buyer to purchase the Assets and to proceed
with the Non-License Transfer or proceed with the Closing, as applicable, are
subject to the satisfaction (or waiver in writing by Buyer) at or prior to the
Non-License Transfer or Closing, as applicable, of each of the following
conditions:
9.1. REPRESENTATIONS AND COVENANTS.
The representations and warranties of Sellers made in this
Agreement (without giving effect to materiality qualifiers therein) shall be
true and
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correct on and as of the Non-License Transfer Date or the Closing Date, as
applicable, with the same effect as though such representations and warranties
had been made on and as of the Non-License Transfer Date or the Closing Date,
as applicable, except as modified by the Schedules updated after the date
hereof in accordance with Section 8.5, except for representations and
warranties that speak as of a specific date or time other than the Non-License
Transfer Date or the Closing Date, as applicable (which need only be true and
correct in all material respects as of such date or time), and except to the
extent that the failure of such representations and warranties to be true and
correct is due to facts and circumstances that have not had, and that are not
reasonably expected to have, in the aggregate, a Material Adverse Effect; and
the covenants and agreements of Sellers required to be performed on or before
the Non-License Transfer Date or the Closing Date, as applicable, in accordance
with the terms of this Agreement shall have been performed in all material
respects.
9.2. REQUIRED CONSENT.
Sellers shall have obtained prior to the Transfer Date the consent
required under the Network Affiliation Agreement to effect a valid assignment
thereof to Buyer.
9.3. DELIVERY OF DOCUMENTS.
Sellers shall have delivered to Buyer all contracts, agreements,
instruments and documents required to be delivered by Sellers to Buyer pursuant
to Section 11.4.
9.4. FCC ORDER.
As a condition precedent to the obligation of Buyer to consummate
the Closing but not the Non-License Transfer, the FCC Order shall have become a
Final Order.
9.5. HART-SCOTT-RODINO.
All applicable waiting periods under Hart-Scott-Rodino shall have
expired or terminated.
9.6. LEGAL PROCEEDINGS.
No injunction, restraining order or decree of any nature of any
court or Governmental Authority of competent jurisdiction shall be in effect
that restrains or prohibits the transactions contemplated by this Agreement;
and no action or
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proceeding by or before any Governmental Authority (other than an action or
proceeding instituted or threatened by Buyer) shall have been instituted or
threatened (and not subsequently dismissed, settled or otherwise terminated)
which, if determined adversely, would be reasonably likely to (a) restrain,
prohibit or invalidate the transactions contemplated by this Agreement or any
other Seller Document or Buyer Document, (b) have a Material Adverse Effect, or
(c) have a material adverse effect, in the aggregate, on the business,
operations, assets or financial condition of Buyer and the Buyer Affiliates
(taken as a whole).
9.7. NO MATERIAL ADVERSE EFFECT.
Since the date hereof through the Transfer Date, there shall not
have occurred a Material Adverse Effect.
ARTICLE 10.
CONDITIONS PRECEDENT TO
SELLERS' OBLIGATION TO CLOSE
The obligations of Sellers to sell, transfer, convey and deliver the
Assets and to proceed with the Non-License Transfer or proceed with the
Closing, as applicable, are subject to the satisfaction (or waiver in writing
by Sellers) at or prior to the Non-License Transfer or the Closing, as
applicable, of each of the following conditions:
10.1. REPRESENTATIONS AND COVENANTS.
The representations and warranties of Buyer made in this Agreement
(without giving effect to materiality qualifiers therein) shall be true and
correct on and as of the Non-License Transfer Date or the Closing Date, as
applicable, with the same effect as though such representations and warranties
had been made on and as of the Non-License Transfer Date or the Closing Date,
as applicable, except for representations and warranties that speak as of a
specific date or time other than the Non-License Transfer Date or the Closing
Date, as applicable (which need only be true and correct in all material
respects as of such date or time), and except to the extent that the failure of
such representations and warranties to be true and correct is due to facts and
circumstances that have not had, and that are not reasonably expected to have,
in the aggregate, a material adverse effect on Buyer or its ability to perform
its obligations hereunder and the other Buyer Documents; and the covenants and
agreements of Buyer required to be performed on or before the Non-License
Transfer Date or the Closing Date, as applicable, in accordance with the terms
of this Agreement shall have been performed in all material respects.
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10.2. DELIVERY BY BUYER.
Buyer shall have delivered to Sellers the Purchase Price in
accordance with Section 2.5, and all contracts, agreements, instruments and
documents required to be delivered by Buyer to Sellers pursuant to Section
11.5.
10.3. FCC ORDER.
As a condition precedent to the obligation of Sellers to
consummate the Closing but not the Non-License Transfer, the FCC Order shall
have been granted.
10.4. HART-SCOTT-RODINO.
All applicable waiting periods under Hart-Scott-Rodino shall have
expired or terminated.
10.5. LEGAL PROCEEDINGS.
No injunction, restraining order or decree of any nature of any
court or Governmental Authority of competent jurisdiction shall be in effect
that restrains or prohibits the transactions contemplated by this Agreement;
and no action or proceeding by or before any Governmental Authority (other than
an action or proceeding instituted or threatened by Sellers) shall have been
instituted or threatened (and not subsequently dismissed, settled or otherwise
terminated) which would be reasonably likely to restrain, prohibit or
invalidate the transactions contemplated by this Agreement or any other Seller
Document or Buyer Document.
ARTICLE 11.
NON-LICENSE TRANSFER; CLOSING
11.1. NON-LICENSE TRANSFER.
11.1.1. Notwithstanding anything to the contrary herein, provided
that the conditions set forth in Article 9 (except for Section 9.4) and Article
10 (except for Section 10.3) shall have been satisfied and the Closing shall
not have occurred, there shall be a closing (the "NON-LICENSE TRANSFER") for
the purchase and sale of all of the Non-License Assets, on the last business
day of the calendar month during which all applicable waiting periods under
Hart-Scott-Rodino shall have expired or terminated (the date on which the
Non-License Transfer shall occur pursuant to this Section 11.1.1 is referred to
herein as the "NON-LICENSE TRANSFER DATE"); provided, however, that if there
shall occur an early termination of the waiting period under Hart-Scott-Rodino
within five (5) business days prior to the
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last business day of the month (such date the "EARLY TERMINATION DATE"), then
the Non-License Transfer shall occur on the fifth (5th) business day after the
Early Termination Date; provided, further, that in such case, the parties shall
in good faith take reasonable actions to effect the economics of the
Non-License Transfer as of the end of the last business day of the preceding
calendar month.
11.1.2. At the Non-License Transfer, Sellers shall sell, assign,
transfer, convey and deliver to Buyer free and clear of any Encumbrances other
than Permitted Encumbrances, and Buyer shall purchase, acquire, pay for and
accept from Sellers, all right, title and interest of Sellers in, to and under
the Non-License Assets.
11.2. CLOSING.
11.2.1. To the extent not previously transferred pursuant to the
Non-License Transfer, and provided that the conditions set forth in Article 9
and Article 10 shall have been satisfied, the closing for all of the Assets
hereunder (the "CLOSING") shall be held on a date specified by Buyer in writing
that is not later than the tenth (10th) day after the date on which the FCC
Order shall have become a Final Order; provided, that such written notice shall
be provided to Sellers at least five (5) business days prior to the Closing
Date (the date on which the Closing shall occur pursuant to this Section 11.2.1
is referred to herein as the "CLOSING DATE").
11.2.2. If there shall occur a Non-License Transfer but the
Closing shall not have occurred on or prior to such date which is twelve (12)
months after the date hereof (the "OUTSIDE CLOSING DATE") solely due to the
failure to receive an FCC Order for reasons relating to Buyer's qualifications
and all conditions to the Closing (other than those set forth in Sections 9.4
and 10.3) shall have been satisfied or waived, then Buyer shall pay to Sellers
on the Outside Closing Date all amounts that would have been payable to Sellers
had the Closing occurred on the Outside Closing Date. Buyer acknowledges and
agrees that, notwithstanding anything to the contrary contained in this
Agreement or otherwise, Buyer's obligation to pay such amounts pursuant to this
Section 11.2.2 and the rights of Sellers to receive such payment shall be
absolute and unconditional (subject to the conditions of the preceding
sentence) and not subject to any right of set off, deduction or counterclaim.
Payment of the amounts at the Non-License Transfer or pursuant to this Section
11.2.2 shall be final and non-refundable and Buyer shall not seek to recover
all or any part of such payment from any Seller for any reason whatsoever
(other than pursuant to Article 12). Notwithstanding such payment to Sellers,
the Time Brokerage Agreement shall remain in effect from and after the Outside
Closing Date in accordance with the terms and conditions of the Time Brokerage
Agreement. All payments pursuant to this Section 11.2.2 shall be made
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by wire transfer of immediately available funds to an account or accounts
identified in writing by Sellers.
11.3. TIME AND PLACE OF NON-LICENSE TRANSFER AND CLOSING.
The Closing and the Non-License Transfer shall be held at 10:00
A.M. local time on the Closing Date and the Non-License Transfer Date,
respectively, at the offices of Hogan & Hartson L.L.P., 8300 Greensboro Drive,
Suite 1100, McLean, Virginia, or at such other time and place as the parties
may agree in writing.
11.4. DELIVERY BY SELLER.
At the Non-License Transfer and the Closing, as applicable,
Sellers shall deliver to Buyer the following:
11.4.1. AGREEMENTS AND INSTRUMENTS
The following bills of sale, assignments and other
instruments of transfer duly executed by Sellers:
(a) the Bill of Sale;
(b) the Assignment of FCC Licenses; provided that the
Assignment of FCC Licenses shall not be delivered at
the Non-License Transfer;
(c) the Assignment of Contracts and Leases;
(d) the Assumption Agreement;
(e) certificates of title with respect to the motor
vehicles listed on Schedule 2.1.10 or if any such
motor vehicles are leased by Sellers, an assignment
of such lease;
(f) special or limited warranty deeds for all Real
Property owned by Sellers substantially in the form
attached hereto as Exhibit E;
(g) real and personal property transfer tax forms,
including, without limitation, those set forth in
Exhibit F attached hereto; and
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(h) the Time Brokerage Agreement; provided that the Time
Brokerage Agreement shall not be delivered at the
Closing.
11.4.2. CONSENTS.
Copies of all consents Sellers have been able to obtain to
effect the assignment to Buyer of the Station Contracts listed on Schedule
3.4.1.
11.4.3. CERTIFIED RESOLUTIONS.
A copy of the approval of the board of directors and
stockholders of each Seller, certified as being correct and complete and then
in full force and effect, authorizing the execution, delivery and performance
of this Agreement, and of the other Sellers Documents, and the consummation of
the transactions contemplated hereby and thereby.
11.4.4. OFFICERS' CERTIFICATES.
(a) A certificate of each Seller certifying the matters
set forth in Section 9.1; and
(b) A certificate of each Seller as to the incumbency of
the representatives of such Seller executing this Agreement or any of the other
Seller Documents on behalf of such Seller.
11.4.5. ORGANIZATIONAL DOCUMENTS.
Copies of the organizational documents of each Seller
certified by an executive officer of such Seller as being correct and complete.
11.4.6. DEPOSIT
Instructions to the Deposit Escrow Agent in writing to
return the Deposit to Buyer on the Transfer Date.
11.4.7. RELEASES.
Duly executed releases, termination statements and
mortgage satisfactions to the extent necessary to release any Encumbrances on
the Assets required to be removed by Sellers pursuant to the terms of this
Agreement.
11.4.8. FIRPTA CERTIFICATE.
A certificate of nonforeign status under Section 1445 of
the Code.
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11.4.9. TITLE INSURANCE DOCUMENTS.
An owner's affidavit executed by Sellers and such other
customary documents and certificates executed by Sellers reasonably acceptable
to Sellers and as may be reasonably required by Buyer's title insurance company
with respect to Buyer's title insurance of the Real Property and Leased
Property.
11.5. DELIVERY BY BUYER.
At the Non-License Transfer and the Closing, as applicable, Buyer
shall deliver to Sellers the following:
11.5.1. PURCHASE PRICE PAYMENT.
The Purchase Price in the amount and manner set forth in
Section 2.5.
11.5.2. AGREEMENTS AND INSTRUMENTS.
The following agreements, documents and instruments duly
executed by Buyer:
(a) the Assumption Agreement;
(b) the Time Brokerage Agreement; provided that the Time
Brokerage Agreement shall not be delivered at the
Closing; and
(c) real and personal property transfer tax forms,
including, without limitation, those set forth in
Exhibit F attached hereto.
11.5.3. CERTIFIED RESOLUTIONS.
Copies of the resolutions of the directors of Buyer,
certified as being correct and complete and then in full force and effect,
authorizing the execution, delivery and performance of this Agreement and of
the other Buyer Documents, and the consummation of the transactions
contemplated hereby and thereby.
11.5.4. OFFICERS' CERTIFICATE.
(a) A certificate of Buyer signed by an officer of Buyer
certifying the matters set forth in Section 10.1; and
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(b) a certificate signed by the Secretary of Buyer as to
the incumbency of the officers of Buyer executing this Agreement or any of the
other Buyer Documents on behalf of Sellers.
ARTICLE 12.
SURVIVAL; INDEMNIFICATION
12.1. SURVIVAL OF REPRESENTATIONS.
Unless otherwise set forth herein, all representations and
warranties, covenants and agreements of Sellers and Buyer contained in or made
pursuant to this Agreement or in any certificate furnished pursuant hereto
shall survive the Non-License Transfer Date or the Closing Date, as applicable,
and shall remain in full force and effect to the following extent: (a)
representations, warranties, covenants and agreements of Sellers with respect
to the Non-License Assets shall remain for a period of twelve (12) months after
the Non-License Transfer Date; (b) representations, warranties, covenants and
agreements of Sellers with respect to the License Assets shall survive for a
period of twelve (12) months after the Closing Date; provided, however, that
any representation, warranty, covenant or agreement that is the subject of a
claim which is asserted by the party seeking indemnification hereunder in a
reasonably detailed writing delivered to the other party or parties, as the
case may be, prior to the expiration of either such twelve (12) month period
shall survive with respect to such claim or dispute until the final resolution
thereof; and (c) the following covenants and agreements shall continue in full
force and effect until fully discharged: Sections 6.3 and 7.1 (which relate to
confidentiality), Sections 6.2.8 and 7.3 (which relate to access), Section 8.4
(which relates to employee matters), Article 12 (which relates to
indemnification) and Article 15 (which relates to miscellaneous matters). No
claim for indemnification may be made pursuant to this Article 12 after the
survival period set forth in this Section 12.1.
12.2. INDEMNIFICATION BY SELLERS.
Subject to the conditions and provisions of Section 12.4 and
Section 12.5, from and after the Transfer Date, Sellers, jointly and severally,
agree to indemnify, defend and hold harmless Buyer, and Buyer's officers,
directors, employees, agents and shareholders ("BUYER INDEMNIFIED PARTIES")
from and against and in any respect of any and all Losses, asserted against,
resulting to, imposed upon or incurred by any Buyer Indemnified Parties,
directly or indirectly, by reason of or resulting from: (a) any failure by
Seller to pay, perform or discharge any Liabilities of Seller not expressly
assumed by Buyer pursuant hereto or pursuant to any Buyer Document; (b) the
business or operations of the Station during the period prior to the Transfer
Date (except to the extent such Loss is an
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Assumed Liability); (c) any misrepresentation or breach of the representations,
warranties and certifications of Sellers contained in or made pursuant to this
Agreement or any other Seller Document; or (d) any breach by Sellers of any
covenants of Sellers contained in or made pursuant to this Agreement or any
other Seller Document.
12.3. INDEMNIFICATION BY BUYER.
Subject to the conditions and provisions of Section 12.4 and
Section 12.5, from and after the Transfer Date, Buyer hereby agrees to
indemnify, defend and hold harmless Sellers, and their respective officers,
directors, employees, agents and partners ("SELLER INDEMNIFIED PARTIES") from,
against and with respect of any and all Losses, asserted against, resulting to,
imposed upon or incurred by any Seller Indemnified Parties, directly or
indirectly, by reason of or resulting from: (a) any failure by Buyer to pay,
perform or discharge any Assumed Liabilities; (b) the business or operations of
the Station during the period from and after the Transfer Date; (c) any
misrepresentation or breach of the representations, warranties and
certifications of Buyer contained in or made pursuant to this Agreement or any
other Buyer Document; or (d) any breach by Buyer of any covenants of Buyer
contained in or made pursuant to this Agreement or any other Buyer Document.
12.4. LIMITATIONS ON INDEMNIFICATION
12.4.1. Notwithstanding any other provision of this Agreement to
the contrary, in no event shall Losses include a party's indirect,
consequential, incidental, exemplary or punitive damages or other special
damages or lost profits, regardless of the theory of recovery. Each party
hereto agrees to use reasonable efforts to mitigate any Losses which form the
basis for any claim for indemnification hereunder.
12.4.2. Sellers (taken as a whole) shall not be liable to the
Buyer Indemnified Parties in respect of any indemnification under Section
12.2(c) or Section 12.2(d) (with respect to breaches of covenants set forth in
Sections 6.1 and 6.2) except to the extent that the aggregate Losses of the
Buyer Indemnified Parties under such Sections exceed One Hundred Thousand
Dollars ($100,000) (the "BASKET AMOUNT"), and then only to the extent of the
excess over the Basket Amount. Buyer shall not be liable to the Seller
Indemnified Parties in respect of any indemnification under Section 12.3(c) or
Section 12.3(d) (with respect to breaches of covenants set forth in Section
7.2) except to the extent that the aggregate Losses of the Seller Indemnified
Parties under such Sections exceed the Basket Amount, and then only to the
extent of the excess over the Basket Amount.
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12.4.3. Notwithstanding any other provision of this Agreement to
the contrary (other than Section 12.4.2), Buyer acknowledges and agrees that
the maximum aggregate liability of Sellers (taken as a whole) pursuant to
Section 12.2(c) and Section 12.2(d) (with respect to breaches of covenants set
forth in Sections 6.1 and 6.2) of this Agreement to the Buyer Indemnified
Parties and any third parties for any and all Losses shall not exceed Two
Million Dollars ($2,000,000), regardless of the form of action, whether in
contract or tort, including negligence, and regardless of whether or not the
Sellers are notified of the possibility of damages to the Buyer Indemnified
Parties or any other third party; provided, however, nothing in this Section
12.4.3 shall be construed to constitute a waiver or limitation of any claims by
Buyer based on fraud. Notwithstanding anything to the contrary in this
Agreement, from and after the Transfer Date, the indemnifications set forth in
this Article 12 shall be the sole and exclusive remedies available to the Buyer
Indemnified Parties and the Seller Indemnified Parties for any claims arising
out of or related to the transactions contemplated by this Agreement,
including, without limitation, any claims for breaches of representations,
warranties, covenants or agreements contained in this Agreement, or any
certificate delivered pursuant to this Agreement or otherwise in connection
with this Agreement; provided, however, that from after the Non-License
Transfer and prior to the Closing, Buyer shall also have the remedies set forth
in Section 14.4 with respect to the covenants and agreements of Sellers that
survive the Transfer Date.
12.4.4. Each party (a "RECIPIENT PARTY") shall notify the other
party (the "REPRESENTING PARTY") reasonably promptly of any perceived breach by
the representing party of which the recipient party has knowledge of any
representations and warranties, covenants, and agreements and of any Losses
(including a brief description of the same) of the recipient party caused
thereby. In the event of any breach that is cured prior to the Transfer Date in
accordance with the terms of this Agreement, the representing party shall have
no obligation under Section 12.2 or Section 12.3 or otherwise to indemnify the
recipient party with respect to such Losses.
12.5. CONDITIONS OF INDEMNIFICATION.
The obligations and liabilities of Sellers and of Buyer hereunder
with respect to their respective indemnities pursuant to this Article 12,
resulting from any Losses, shall be subject to the following terms and
conditions:
12.5.1. The party seeking indemnification (the "INDEMNIFIED
PARTY") must give the other party or parties, as the case may be (the
"INDEMNIFYING PARTY"), notice of any such Losses promptly after the Indemnified
Party receives notice thereof; provided that the failure to give such notice
shall not
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affect the rights of the Indemnified Party hereunder except to the extent that
the Indemnifying Party shall have suffered actual damage by reason of such
failure.
12.5.2. The Indemnifying Party shall have the right to undertake,
by counsel or other representatives of its own choosing (reasonably acceptable
to the Indemnified Party), the defense of such Losses at the Indemnifying
Party's risk and expense; provided, however, that as a condition to the
exercise of such right to undertake defense of such Losses, the Indemnifying
Party shall, as between the Indemnifying Party and the Indemnified Party,
assume the liability for such Losses, without regard to the limitations set
forth in Section 12.4.3.
12.5.3. In the event that the Indemnifying Party shall elect not
to undertake such defense, or, within a reasonable time after notice from the
Indemnified Party of any such Losses, shall fail to defend, the Indemnified
Party (upon further written notice to the Indemnifying Party) shall have the
right to undertake the defense, compromise or settlement of such Losses, by
counsel or other representatives of its own choosing, on behalf of and for the
account and risk of the Indemnifying Party (subject to the right of the
Indemnifying Party to assume defense of such Losses at any time prior to
settlement, compromise or final determination thereof (with counsel reasonably
acceptable to the Indemnified Party)). In such event, the Indemnifying Party
shall pay to the Indemnified Party, in addition to the other sums required to
be paid hereunder, the costs and expenses incurred by the Indemnified Party in
connection with such defense, compromise or settlement as and when such costs
and expenses are so incurred.
12.5.4. Anything in this Section 12.5 to the contrary
notwithstanding, (a) if any third party alleges the right to or seeks any
remedy other than money damages or other money payments, the Indemnified Party
shall have the right, at the cost and expense of the Indemnifying Party, to
participate in and direct the defense, compromise or settlement of the Losses,
(b) the Indemnifying Party shall not, without the Indemnified Party's written
consent, settle or compromise any Losses or consent to entry of any judgment
which does not include as an unconditional term thereof the giving by the
claimant or the plaintiff to the Indemnified Party of a release from all
liability in respect of such Losses in form and substance satisfactory to the
Indemnified Party, and (c) in the event that the Indemnifying Party undertakes
defense of any Losses, the Indemnified Party, by counsel or other
representative of its own choosing and at its sole cost and expense, shall have
the right to consult with the Indemnifying Party and its counsel or other
representatives concerning such Losses and the Indemnifying Party and the
Indemnified Party and their respective counsel or other representatives shall
cooperate with respect to such Losses (d) in the event that the Indemnifying
Party undertakes defense of any Losses, the Indemnifying Party shall have an
obligation to keep the Indemnified Party informed of the status of the defense
of such Losses and furnish the Indemnified Party with all documents,
instruments and
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information that the Indemnified party shall reasonably request in connection
therewith, and (e) in the event that both the Indemnified Party and the
Indemnifying Party are parties (directly or through interpleader) to any Losses
giving rise to indemnification hereunder and the Indemnified Party is advised
by counsel that there is or may be a conflict of interest in the representation
of both the Indemnified Party and the Indemnifying Party by one firm of
counsel, the Indemnified Party shall be entitled to assume, at the sole cost
and expense of the Indemnifying Party, the defense, compromise and settlement
(subject to clause (b) above) of such Loss with counsel (in addition to local
counsel) reasonably satisfactory to the Indemnifying Party.
12.5.5 In the event that an Indemnified Party has a good faith
basis for a claim for indemnification which does not involve a claim against it
by a third party (a "DIRECT CLAIM"), the Indemnified Party shall notify the
Indemnifying Party in writing of such Direct Claim with reasonable promptness,
specifying, to the extent known, the nature, circumstances and amount of such
Direct Claim (a "DIRECT CLAIM NOTICE"), including with particularity the
specific representation and warranty or covenant and agreement alleged to have
been breached; provided, that the failure to give such notice shall not affect
the rights of the Indemnified Party hereunder except to the extent that the
Indemnifying Party shall have suffered actual damage by reason of such failure.
If the Indemnifying Party notifies the Indemnified Party that it disputes an
Indemnified Party's right of indemnification with respect to a particular
Direct Claim, the parties shall use their reasonable efforts to negotiate a
resolution of such dispute promptly. Except to the extent of the limitations on
indemnification set forth in this Article 12, nothing in this Section 12.5.5
shall be deemed to prevent any Indemnified Party from initiating litigation
under this Agreement with respect to any Direct Claim disputed by the
Indemnifying Party for the purpose of establishing the Indemnified Party's
right to indemnification hereunder.
12.6. CURE OF BREACH
Notwithstanding any other provision of this Agreement to the
contrary, a breach by Sellers of any representations and warranties or a
failure to perform any covenant or agreement hereunder may be cured prior to
the Transfer Date by Sellers (a) by reducing the Purchase Price in an amount
equal to the Losses to Buyer caused by such breach, (b) by making payment to a
third party or taking other action to discharge the Losses, (c) by placing an
amount equal to the Losses in an escrow account under an escrow arrangement
reasonably satisfactory to Sellers and Buyer, or (d) a combination of the
foregoing. If the foregoing actions fully cure the breach, and the Non-License
Transfer or Closing, as the case may be, is consummated, Sellers shall have no
obligation under Section 12.2 or otherwise to indemnify Buyer with respect to
the Losses caused by such breach; if such actions
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partially cure the breach, Sellers shall continue to have an obligation under
Section 12.2 to indemnify Buyer with respect to the remaining portion of the
Losses caused by such breach. This Section 12.6 shall not operate to limit
Section 9.1.
ARTICLE 13.
TERMINATION
13.1. TERMINATION
This Agreement may be terminated at any time prior to the Closing
by:
13.1.1. the mutual consent of Sellers and Buyer;
13.1.2. either Buyer or Sellers, by written notice of termination
delivered to the other, if (a) the Transfer Date has not occurred within twelve
(12) months after the date of this Agreement; provided, however, that the
failure of the Non-License Transfer to have occurred within twelve (12) months
of the date of this Agreement shall not be attributable to the breach of this
Agreement by the party seeking termination pursuant to this Section 13.1.2(a);
and provided, further, that Buyer's right to terminate this Agreement pursuant
to this Section 13.1.2(a) shall be subject to Sellers' rights to extend the
Transfer Date pursuant to Section 8.2; or (b) the FCC designates the
applications contemplated by Section 5.1 for an evidentiary hearing; provided,
however, that Sellers shall not be permitted to terminate this Agreement
pursuant to this Section 13.1.2(b) after the Non-License Transfer Date;
13.1.3. either Buyer or Sellers in the event that any court or
Governmental Authority of competent jurisdiction shall issue a final,
non-appealable injunction prohibiting the transactions contemplated by this
Agreement; provided, however, that the issuance of such final, non-appealable
injunction shall not be attributable to the breach of this Agreement by the
party seeking termination pursuant to this Section 13.1.3; provided that
Sellers shall not be permitted to terminate this Agreement pursuant to this
Section 13.1.3 after the Non-License Transfer Date;
13.1.4. either Buyer or Sellers in accordance with the terms and
conditions of Article 14; or
13.1.5. Sellers if (a) the Closing shall not have occurred within
thirty (30) months after the date of this Agreement, and (b) Buyer shall not
have paid to Sellers on or prior to the end of such thirty (30) month period,
all amounts payable to Sellers by Buyer at the Closing; provided, however, that
the failure of the
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Closing to have occurred within such thirty (30) month period shall not be
caused by a breach of this Agreement by Sellers.
13.2. EFFECT OF TERMINATION
13.2.1. In the event this Agreement is terminated as provided in
Sections 13.1.1, 13.1.2, 13.1.3 or 13.1.5, Buyer shall receive the immediate
return of the Deposit (except in the event that the Non-License Transfer shall
have occurred) and this Agreement shall be deemed null, void and of no further
force or effect, and the parties hereto shall be released from all future
obligations hereunder; provided, however, that the obligations of Buyer and
Sellers set forth in Sections 6.3 and 7.1 (which relate to confidentiality),
and Section 15.3 (which relates to payment of certain expenses), shall survive
such termination and the parties hereto shall have any and all remedies to
enforce such obligations provided at law or in equity or otherwise (including,
without limitation, specific performance).
13.2.2. In the event this Agreement is terminated as provided in
Section 13.1.4, this Agreement shall be deemed null, void and of no further
force or effect, and the parties hereto shall be released from all future
obligations hereunder; provided, however, that the obligations of Buyer and
Sellers set forth in Sections 6.3 and 7.1 (which relate to confidentiality),
Article 14 (which relates to remedies and the Deposit) and Section 15.3 (which
relates to payment of certain expenses), shall survive such termination and the
parties hereto shall have any and all remedies to enforce such obligations
provided at law or in equity or otherwise (including, without limitation,
specific performance).
ARTICLE 14.
REMEDIES
14.1. DEFAULT BY BUYER.
If each condition set forth in Section 9 and Section 10 (other
than any condition that has not been satisfied solely as a result of an uncured
misrepresentation or breach of representation or warranty of Buyer set forth in
this Agreement or a default by Buyer in the performance of its obligations
under this Agreement) has been satisfied or waived, and Buyer has breached its
obligation to effect the transactions to be consummated on the Transfer Date by
the date required pursuant to Sections 11.1 or 11.2, as the case may be, then
Sellers shall be entitled, by written notice to Buyer, to terminate this
Agreement, and as Sellers' sole remedy under this Agreement, to receive the
Deposit as liquidated damages, and upon the receipt of such payment by Sellers,
Buyer shall be discharged from all further liability under this Agreement;
provided, however, Buyer shall have a period of ten (10) business days after
receipt of Sellers' written termination notice to
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cure any such misrepresentation, breach or default, and if Buyer cures such
misrepresentation, breach or default within such ten (10) business day period,
Sellers shall have no right to terminate this Agreement based on such
misrepresentation, breach or default; provided, further, however, that Buyer
shall have no right to such ten (10) business day cure period with respect to
any breach by Buyer of Buyer's obligations to consummate the Non-License
Transfer on the Non-License Transfer Date (including, without limitation,
Buyer's obligation to pay the amounts set forth in Section 2.5.1 on the
Non-License Transfer Date, and execute and deliver the agreements, certificates
and documents set forth in Section 11.5).
14.2. DEFAULT BY SELLERS.
If there exists a material misrepresentation or breach of
representation or warranty of Sellers set forth in this Agreement, or if
Sellers shall default in any material respect in the performance of Sellers'
obligations under this Agreement, or if, as a result of Sellers' action or
failure to act, the conditions precedent to Buyer's or Sellers' obligation to
close specified in Section 9 or Section 10 are not satisfied, and for such
reason or reasons this Agreement is not consummated, and provided that Buyer
shall not then be in default in the performance of Buyer's obligations
hereunder, Buyer shall be entitled, by written notice to Sellers, to terminate
this Agreement to receive the immediate return of the Deposit, and to pursue
any other remedies Buyer has at law or in equity or otherwise; provided,
however, Sellers shall have a period of ten (10) business days after receipt of
Buyer's written termination notice to cure any such misrepresentation, breach
or default, and if Sellers cure such misrepresentation, breach or default
within such ten (10) business day period, Buyer shall have no right to
terminate this Agreement based on such misrepresentation, breach or default,
provided, further, however, that Sellers shall have no right to such ten (10)
business day cure period with respect to any breach by Sellers of Sellers'
obligation to consummate the Non-License Transfer on the Non-License Transfer
Date or the Closing on the Closing Date (including, without limitation,
Sellers' obligation to execute and deliver on the Non-License Transfer Date or
the Closing Date, as the case may be, the agreements, certificates and
documents set forth in Section 11.4).
14.3. LIQUIDATED DAMAGES.
Sellers and Buyer have provided for the amount of the Deposit to
be liquidated damages as a remedy for Sellers after having considered carefully
the anticipated and actual harms and losses that would be incurred if Buyer
defaults and thus fails to perform its obligations to consummate the
transactions contemplated hereunder, the difficulty of ascertaining at this
time the actual amount of damages, special and general, that Sellers will
suffer in such event, and
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the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy
in such event. In any situation hereunder pursuant to which the Deposit shall
be payable to Sellers, Buyer agrees to waive any defense that there is an
alternative adequate remedy available to Sellers and/or that payment of the
Deposit to Sellers would constitute a penalty.
14.4. SPECIFIC PERFORMANCE.
Sellers hereby acknowledge that the Assets are unique, and that
the harm to Buyer resulting from Sellers failure to perform their obligations
hereunder cannot be adequately compensated by damages. Accordingly, Sellers
agree that Buyer shall have the right to have all obligations, undertakings,
agreements, covenants and other provisions of this Agreement specifically
performed by Sellers. In any such specific performance action, Sellers agree to
waive the defense that there is an adequate remedy at law for damages and agree
that Buyer shall be entitled to obtain specific performance of Sellers'
obligations hereunder without having to post any bond or other security in any
such proceeding.
ARTICLE 15.
GENERAL PROVISIONS
15.1. ADDITIONAL ACTIONS, DOCUMENTS AND INFORMATION.
Buyer agrees that it will, at any time, prior to, at or after the
Transfer Date, take or cause to be taken such further actions, and execute,
deliver and file or cause to be executed, delivered and filed such further
documents and instruments and obtain such consents, as may be reasonably
requested by Sellers in connection with the consummation of the transactions
contemplated by this Agreement. Each Seller agrees that it will, at any time,
prior to, at or after the Transfer Date, take or cause to be taken such further
actions, and execute, deliver and file or cause to be executed, delivered and
filed such further documents and instruments and obtain such consents, as may
be reasonably requested by Buyer in connection with the consummation of the
transactions contemplated by this Agreement.
15.2. BROKERS.
Sellers represent to Buyer that, except for the brokerage fees
payable to Sellers' Broker (which fees are solely the responsibility of
Sellers), Sellers have not engaged, or incurred any unpaid liability (for any
brokerage fees, finders' fees, commissions or otherwise) to, any broker, finder
or agent in connection with the transactions contemplated by this Agreement;
Buyer represents to Sellers that Buyer has not engaged, or incurred any unpaid
liability (for any brokerage fees,
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finders' fees, commissions or otherwise) to, any broker, finder or agent in
connection with the transactions contemplated by this Agreement; and Sellers
agree to indemnify Buyer, and Buyer agrees to indemnify Sellers, against any
claims asserted against the other parties for any such fees or commissions by
any person purporting to act or to have acted for or on behalf of the
indemnifying party. Notwithstanding any other provision of this Agreement, this
representation and warranty shall survive the Transfer Date without limitation
and shall not be subject to the Basket Amount contained in Section 12.4.2 or
the limitations of Section 12.4.3.
15.3. EXPENSES AND TAXES.
Each party hereto shall pay its own expenses incurred in
connection with this Agreement and in the preparation for and consummation of
the transactions provided for herein. Notwithstanding the foregoing, (a) Buyer
and Sellers shall each pay one-half (1/2) of all sales (including, without
limitation, bulk sales), use, documentary, stamp, gross receipts, registration,
transfer, conveyance, excise, recording, license and other similar Taxes and
fees ("TRANSFER TAXES") applicable to, imposed upon or arising out of the
transactions contemplated hereby whether now in effect or hereinafter adopted
and regardless of which party such Transfer Tax is imposed upon, (b) Sellers
and Buyer shall each pay one-half (1/2) of any FCC filing fees incurred in
connection with the assignment of the FCC Licenses, and (c) Buyer shall pay any
filing fees payable in connection with any HSR Filings. Each party agrees to
cooperate with such other party in the timely completion, execution and filing
of any documentation required by any local or state governmental agency in
connection with the Transfer Taxes.
15.4. NOTICES.
All notices, demands, requests, or other communications which may
be or are required to be given or made by any party to any other party pursuant
to this Agreement shall be in writing and shall be hand delivered, mailed by
first-class registered or certified mail, return receipt requested, postage
prepaid, delivered by overnight air courier, or transmitted by telegram, telex,
or facsimile transmission addressed as follows:
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If to Buyer:
c/o Nexstar Broadcasting Group, Inc.
200 Abington Executive Park
Suite 201
Clarks Summit, Pennsylvania 18411
Attention: Mr. Perry A. Sook
Telecopy No.: (570) 586-8745
with a copy (which shall not constitute notice) to:
Kirkland & Ellis
153 East 53rd Street
New York, New York 10022
Attention: John L. Kuehn, Esq.
Telecopy No.: (212) 446-4900
If to Sellers:
STC Broadcasting, Inc.
3839 Fourth Street, North
Suite 420
St. Petersburg, Florida 33703
Attention: Mr. David A. Fitz
Telecopy No.: (727) 821-8092
with copies (which shall not constitute notice) to:
Hicks, Muse, Tate & Furst. Inc.
200 Crescent Court
Suite 1600
Dallas, Texas 75201
Attention: Mr. Lawrence D. Stuart, Jr.
Telecopy No.: (214) 740-7355
and to:
Hogan & Hartson L.L.P.
8300 Greensboro Drive
Suite 1100
McLean, Virginia 22102
Attention: Richard T. Horan, Jr., Esq.
Telecopy No.: (703) 610-6200
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or such other address as the addressee may indicate by written notice to the
other parties.
Each notice, demand, request, or communication which shall be
given or made in the manner described above shall be deemed sufficiently given
or made for all purposes at such time as it is delivered to the addressee (with
the return receipt, the delivery receipt, the affidavit of messenger or (with
respect to a telex) the answerback being deemed conclusive but not exclusive
evidence of such delivery) or at such time as delivery is refused by the
addressee upon presentation.
15.5. WAIVER.
No delay or failure on the part of any party hereto in exercising
any right, power or privilege under this Agreement or under any other
instrument or document given in connection with or pursuant to this Agreement
shall impair any such right, power or privilege or be construed as a waiver of
any default or any acquiescence therein. No single or partial exercise of any
such right, power or privilege shall preclude the further exercise of such
right, power or privilege, or the exercise of any other right, power or
privilege. No waiver shall be valid against any party hereto unless made in
writing and signed by the party against whom enforcement of such waiver is
sought and then only to the extent expressly specified therein.
15.6. BENEFIT AND ASSIGNMENT.
(a) No party hereto shall assign this Agreement, in whole or in
part, whether by operation of law or otherwise, without the prior written
consent of the other party hereto; provided, however, upon written notice to
Sellers, Buyer may assign all or any portion of Buyer's rights and obligations
under this Agreement to one or more direct or indirect wholly-owned
subsidiaries of Buyer (each a "PERMITTED ASSIGNEE"); provided, further, that
(i) prior to or concurrently with such assignment, Buyer shall have
represented, warranted and certified to Sellers in writing that (A) Buyer has
no knowledge of any fact or proceeding which would reasonably be expected to
disqualify any such Permitted Assignee under the Communications Act or under
the rules and regulations of the FCC from acquiring or operating the Station or
would cause the FCC not to approve the assignment of the FCC Licenses to any
such Permitted Assignee, (B) Buyer has no knowledge of any fact or circumstance
relating to any such Permitted Assignee or any of any such Permitted Assignee's
affiliates that would reasonably be expected to (1) cause the filing of any
objection to the assignment of the FCC Licenses to any such Permitted Assignee,
or (2) lead to a material delay in the processing by the FCC of the
applications for such assignment, and (C) no waiver of an FCC rule or policy is
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necessary to be obtained for the grant of the applications for the assignment
of the FCC Licenses to any such Permitted Assignee, nor will processing
pursuant to any exception or rule of general applicability be requested or
required in connection with the consummation of the transactions herein; (ii)
prior to or concurrently with such assignment, each such Permitted Assignee
shall assume in writing all of Buyer's obligations to Sellers, and each such
Permitted Assignee shall deliver to Sellers a certificate representing and
warranting to Sellers as to the matters set forth in Article 4; (iii)
notwithstanding such assumption, Buyer shall not be released from any
liabilities or obligations hereunder; (iv) Buyer and any such Permitted
Assignee shall be jointly and severally liable for the liabilities or
obligations of Buyer and any such Permitted Assignee hereunder (including,
without limitation, any obligation pursuant to Article 12 hereof); and (v) such
assignment shall not cause a material delay in the receipt of the FCC Order or
the Final Order. Notwithstanding the foregoing, if the Non-License Transfer
shall have occurred, then Buyer shall have the right at any time after the
Non-License Transfer Date and upon at least five (5) business days notice to
Sellers, to pay to Sellers all, but not less than all, of the amounts that
would have been payable to Sellers had the Closing occurred on the date of such
payment, and, at any time after such payment is made, or at any time after
Buyer has paid the amount described in Section 11.2.2, Buyer shall be permitted
to assign this Agreement, in whole or in part, without regard to the
limitations and conditions set forth in Section 15.6(a)(i), (ii), (iv) or (v).
(b) Any purported assignment contrary to the terms hereof shall be
null, void and of no force and effect. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and assigns as permitted hereunder. No Person, other than the
parties hereto, is or shall be entitled to bring any action to enforce any
provision of this Agreement against any of the parties hereto, and the
covenants and agreements set forth in this Agreement shall be solely for the
benefit of, and shall be enforceable only by, the parties hereto or their
respective successors and assigns as permitted hereunder. Without limiting the
foregoing, no employee of Sellers and no other Person shall be a third-party
beneficiary under this Agreement (including, without limitation, the provisions
of Section 8.4), or any Seller Document or Buyer Document.
15.7. ENTIRE AGREEMENT; AMENDMENT.
This Agreement, including the Schedules and Exhibits hereto and
the other instruments and documents referred to herein or delivered pursuant
hereto contains the entire agreement among the parties with respect to the
subject matter hereof and supersedes all prior oral or written agreements,
commitments or understandings with respect to such matters. No amendment,
modification or discharge of this Agreement shall be valid or binding unless
set forth in writing and
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duly executed by the party or parties against whom enforcement of the
amendment, modification or discharge is sought.
15.8. SEVERABILITY.
If any part of any provision of this Agreement or any other
contract, agreement, document or writing given pursuant to or in connection
with this Agreement shall be invalid or unenforceable under applicable law,
such part shall be ineffective to the extent of such invalidity or
unenforceability only, without in any way affecting the remaining parts of such
provisions or the remaining provisions of said contract, agreement, document or
writing.
15.9. HEADINGS.
The headings of the sections and subsections contained in this
Agreement are inserted for convenience only and do not form a part or affect
the meaning, construction or scope thereof.
15.10. GOVERNING LAW; JURISDICTION.
This Agreement, the rights and obligations of the parties hereto,
and any claims or disputes relating thereto, shall be governed by and construed
under and in accordance with the laws of the state of New York, without giving
effect to the conflicts of law principles thereof (other than Section 5-1401 of
the New York General Obligations Law). The parties hereto hereby irrevocably
consent to the nonexclusive jurisdiction and venue of the courts of the State
of New York and of any Federal Court located in New York County, New York, in
connection with any action, suit or proceeding arising out of or relating to
this Agreement. The parties hereto hereby waive personal service of any process
in connection with any such action, suit or proceeding and agree that the
service thereof may be made by certified or registered mail addressed to or by
personal delivery to the other party, at such other party's address set forth
pursuant to Section 15.4 hereof. In the alternative, in its discretion, any of
the parties hereto may effect service upon any other party in any other form or
manner permitted by law.
15.11. SIGNATURE IN COUNTERPARTS.
This Agreement may be executed in separate counterparts, none of
which need contain the signatures of all parties, each of which shall be deemed
to be an original, and all of which taken together constitute one and the same
instrument. It shall not be necessary in making proof of this Agreement to
produce or account for more than the number of counterparts containing the
respective signatures of, or on behalf of, all of the parties hereto.
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[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, each of the parties hereto has executed this Asset
Purchase Agreement, or has caused this Asset Purchase Agreement to be duly
executed and delivered in its name on its behalf, all as of the day and year
first above written.
SELLERS
STC BROADCASTING, INC.
By: /s/ David A. Fitz
-----------------------------------
Name: David A. Fitz
Title: Chief Financial Officer
STC LICENSE COMPANY
By: /s/ David A. Fitz
-----------------------------------
Name: David A. Fitz
Title: Chief Financial Officer
BUYER
NEXSTAR BROADCASTING OF ROCHESTER, LLC
By: /s/ Shirley Green
-----------------------------------
Name: Shirley Green
Title: Secretary
<PAGE> 63
ANNEX I
DEFINITIONS
"ACCOUNTING FIRM" shall have the meaning specified in Section 2.6.
"ACCOUNTS RECEIVABLE" means all accounts receivable with respect to the
Station as of the end of the broadcast day immediately preceding the Transfer
Date.
"ADDITIONAL AGREEMENTS" shall have the meaning set forth in Section
6.1.6.
"APPRAISAL FIRM" shall have the meaning set forth in Section 2.7.
"APPRAISAL REPORT" shall have the meaning set forth in Section 2.7.
"ASSETS" shall have the meaning set forth in Section 2.1.
"ASSUMED ACCRUED EMPLOYEE LIABILITIES" shall mean all Liabilities to be
assumed by Buyer pursuant to Sections 8.4.2 and 8.4.4(b) hereof for unused and
unpaid vacation and sick leave of the Transferred Employees, and all
Liabilities related to Buyer's obligations under Section 8.4 to provide length
of service credits to the Transferred Employees for purposes of determining the
eligibility of the Transferred Employees for benefits under Buyer's benefit
plans.
"ASSUMED LIABILITIES" means the Liabilities assumed by Buyer pursuant to
Section 2.8 of this Agreement.
"ASSIGNMENT OF CONTRACTS AND LEASES" means that certain Assignment of
Contracts and Leases executed by Sellers, substantially in the form attached
hereto as Exhibit C.
"ASSIGNMENT OF FCC LICENSES" means that certain Assignment of FCC
Licenses executed by STC Licensee, substantially in the form attached hereto as
Exhibit B.
"ASSUMPTION AGREEMENT" means that certain Assumption Agreement executed
by Buyer and Sellers, substantially in the form attached hereto as Exhibit D.
"BASE PURCHASE PRICE" shall have the meaning set forth in Section 2.4.
"BASKET AMOUNT" shall have the meaning set forth in Section 12.4.
<PAGE> 64
"BENEFIT ARRANGEMENT" means a welfare or benefit program, practice or
policy providing for bonuses, incentive compensation, vacation pay, severance
pay, insurance, restricted stock, stock options, employee discounts, company
cars, tuition reimbursement or any other perquisite or benefit (including,
without limitation, any fringe benefit under Section 132 of the Code) to
employees, officers or independent contractors that is not a Plan.
"BENEFIT PLANS" shall have the meaning specified in Section 3.16.1.
"BILL OF SALE" means that certain Bill of Sale and Assignment of Assets,
dated as of the Transfer Date and executed by Sellers, substantially in the
form attached hereto as Exhibit A.
"BUYER AFFILIATES" mean Nexstar Broadcasting Group, LLC, and all direct
or indirect subsidiaries of Nexstar Broadcasting Group, LLC.
"BUYER DOCUMENTS" means, collectively, this Agreement, the Deposit Escrow
Agreement, the Assumption Agreement and the Time Brokerage Agreement and the
closing certificates and other deliveries contemplated by Section 11.5.
"BUYER INDEMNIFIED PARTIES" shall have the meaning specified in Section
12.2.
"CLOSING" shall have the meaning set forth in Section 11.2.1.
"CLOSING DATE" shall have the meaning specified in Section 11.2.1.
"COBRA OBLIGATIONS" shall have the meaning specified in Section 8.4.5.
"CODE" means the Internal Revenue Code of 1986, as amended, and all Laws
promulgated pursuant thereto or in connection therewith.
"COMMUNICATIONS ACT" means the Communications Act of 1934, as amended.
"CURRENT BALANCE SHEET DATE" shall have the meaning specified in Section
3.5.2.
"DEPOSIT" shall have the meaning specified in Section 2.3.
"DEPOSIT ESCROW AGENT" means United Bank, 1667 K Street, N.W.,
Washington, D.C. 20006.
ANNEX I-2
<PAGE> 65
"DEPOSIT ESCROW AGREEMENT" means that certain Deposit Escrow Agreement
dated as of the date hereof by and among Buyer, Sellers and the Deposit Escrow
Agent.
"EARLY TERMINATION DATE" shall have the meaning specified in Section
11.1.1.
"ENCUMBRANCES" means any mortgages, pledges, liens, security interests,
defects in title, easements, encumbrances, encroachments and any other matters
affecting the title, value, marketability or current use of the Real Property
or the Leased Property.
"ENVIRONMENTAL LAWS" means any federal, state, local, or foreign law
(including common law), statute, code, ordinance, rule, regulation, or other
requirement relating to the environment, natural resources, public, or employee
health and safety, and Hazardous Materials generation, production, use, storage,
treatment, transportation or disposal, and includes, but is not limited to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
("CERCLA") as amended by the Superfund Amendments and Reauthorization Act of
1986 ("SARA"), 42 U.S.C. Section 9601 et seq.; the Toxic Substances Control Act
("TSCA"), 15 U.S.C. Section 2601 et seq.; the Hazardous Materials Transportation
Act, 49 U.S.C. Section 1802 et seq.; the Resource Conservation and Recovery Act
("RCRA"), 42 U.S.C. Section 9601 et seq.; the Clean Water Act ("CWA"), 33 U.S.C.
Section 1251 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300f et
seq.; the Clean Air Act ("CAA"), 42 U.S.C. Section 7401 et seq.; the Toxic
Substances Control, 15 U.S.C. Section 2601 et seq., the Federal Insecticide,
Fungicide, and Rodenticide Act, 7 U.S.C. Section 2701 et seq., and the
Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq., as such laws
have been amended or supplemented, and the regulations promulgated pursuant
thereto, and all analogous state or local statues.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all Laws promulgated pursuant thereto or in connection therewith.
"EXCLUDED ASSETS" shall have the meaning specified in Section 2.2.
"EXCLUDED CONTRACTS" shall have the meaning specified in Section 2.1.8.
"EXCLUDED EMPLOYEE" shall have the meaning specified in Section 8.4.1(a).
"FCC" means the Federal Communications Commission.
"FCC LICENSES" shall have the meaning specified in Section 2.1.1.
ANNEX I-3
<PAGE> 66
"FCC ORDER" means an unconditional order or orders (except for standard
conditions imposed by the FCC on all assignments of licenses) of the FCC, or of
the Chief, Mass Media Bureau of the FCC, acting under delegated authority,
consenting to the assignment to Buyer of the FCC Licenses for the Station.
"FINAL ORDER" means an FCC Order as to which the time for filing a
request for administrative or judicial review, or for instituting
administrative review sua sponte, shall have expired without any such filing
having been made or notice of such review having been issued; or, in the event
of such filing or review sua sponte, as to which such filing or review shall
have been disposed of favorably to the grant and the time for seeking further
relief with respect thereto shall have expired without any request for such
further relief having been filed.
"GAAP" means generally accepted accounting principles consistently
applied for the periods involved.
"GOVERNMENTAL AUTHORITY" means any agency, board, bureau, court,
commission, department, instrumentality or administration of the United States
government, any state government or any local or other governmental body in a
state, territory or possession of the United States or the District of
Columbia.
"HART-SCOTT-RODINO" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and all Laws promulgated pursuant thereto or in
connection therewith.
"HSR FILING" shall have the meaning specified in Section 5.2.
"HAZARDOUS MATERIALS" means any wastes, substances, or materials (whether
solids, liquids or gases) that are deemed hazardous, toxic, pollutants, or
contaminants, including without limitation, substances defined as "hazardous
wastes", "hazardous substances", "hazardous materials", "extremely hazardous
waste", "toxic substances", "radioactive materials", or other similar
designations in, or otherwise subject to regulation under, any Environmental
Laws.
"HEALTH INSURANCE CONTRACTS" means the contracts and agreements of the
Station described in Schedule 2.1.8 with (i) Blue Cross & Blue Shield and (ii)
the Rochester Area Health Maintenance Organization (d/b/a Preferred Care), each
with respect to the health care plans for employees of the Station.
"INDEMNIFIED PARTY" and "INDEMNIFYING PARTY" shall have the respective
meanings set forth in Section 12.5.1.
"INTELLECTUAL PROPERTY" shall have the meaning set forth in Section
2.1.4.
ANNEX I-4
<PAGE> 67
"LAWS" means any federal, state or local law, statute, code, ordinance,
regulation, order, writ, injunction, judgment or decree applicable to the
specified Person and to the businesses and assets thereof.
"LEASED PROPERTY" shall have the meaning set forth in Section 2.1.2.
"LIABILITIES" means, as to any Person, all debts, adverse claims,
liabilities and obligations, direct, indirect, absolute or contingent of such
Person, whether accrued, vested or otherwise, whether in contract, tort, strict
liability or otherwise and whether or not actually reflected, or required by
GAAP to be reflected, in such Person's balance sheets or other books and
records.
"LICENSE ASSETS" means the FCC Licenses and other Assets described on
Schedule I hereto.
"LOSSES" means any and all demands, claims, complaints, actions or causes
of action, suits, proceedings, investigations, arbitrations, assessments,
losses, damages, liabilities, obligations (including those arising out of any
action, such as any settlement or compromise thereof or judgment or award
therein) and any costs and expenses, including, without limitation, reasonable
attorneys' fees and disbursements; provided that "Losses" shall not include any
indirect, consequential, incidental, exemplary or punitive damages or other
special damages or lost profits.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
business, operations, assets or financial condition of the Station, except for
any material adverse affect resulting from (a) general economic conditions
applicable to the television broadcast industry, or (b) general conditions in
the market in which the Station operates.
"NETWORK AFFILIATION AGREEMENT" means that certain Network Affiliation
Agreement dated January 12, 1995, between the Station and CBS Television
Network and the other agreements with the CBS Television Network listed under
Section 2 of Schedule 2.1.8 hereto.
"NON-LICENSE TRANSFER" shall have the meaning set forth in Section
11.1.1.
"NON-LICENSE ASSETS" means the Assets, other than the License Assets.
"NON-LICENSE TRANSFER DATE" shall have the meaning set forth in Section
11.1.1.
ANNEX I-5
<PAGE> 68
"OPERATING CONTRACTS" shall have the meaning set forth in Section 2.1.8.
"ORDINARY COURSE OF BUSINESS" means, with respect to Sellers, the
ordinary course of business consistent with past practices of Sellers; any
actions taken pursuant to the requirements of law or contracts existing on the
date hereof and described on any of Schedules 2.1.5, 2.1.6, 2.1.8 or 3.14,
shall be deemed to be action in the Ordinary Course of Business.
"OUTSIDE CLOSING DATE" shall have the meaning set forth in Section
11.2.2.
"PENSION PLAN" means an "employee pension benefit plan" as such term is
defined in Section 3(2) of ERISA.
"PERMITTED ASSIGNEE" shall have the meaning set forth in Section 15.6(a).
"PERMITTED ENCUMBRANCES" means (a) Encumbrances arising in connection
with equipment or maintenance financing or leasing pursuant to any contract or
lease set forth on Schedule 2.1.8 hereto, (b) Encumbrances on Real Property
that do not interfere with the value, marketability or use of the Real Property
in the operations or business of the Station, (c) Encumbrances for Taxes not
yet due and payable or which are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are
maintained on Seller's books in accordance with GAAP, (d) Encumbrances
identified on Schedule 3.10 that are not required to be discharged or removed
on or prior to the Transfer Date and (e) Encumbrances which do not secure
monetary liabilities of any Person and that, individually or in the aggregate,
do not and would not materially detract from the value or marketability of any
of the Assets or materially interfere with the use thereof as currently used.
"PERSON" or "PERSON" means any individual, corporation, partnership,
limited liability company, joint venture, trust, unincorporated organization,
other form of business or legal entity or Governmental Authority.
"PLAN" means any plan, program or arrangement, whether or not written,
that is or was an "employee benefit plan" as such term is defined in Section
3(3) of ERISA and (a) which was or is established or maintained by Seller; (b)
to which Seller contributed or was obligated to contribute or to fund or
provide benefits; or (c) which provides or promises benefits to any person who
performs or who has performed services for Seller and because of those services
is or has been (i) a participant therein or (ii) entitled to benefits
thereunder.
ANNEX I-6
<PAGE> 69
"PRE-TRANSFER DATE RECORDS" shall have the meaning set forth in Section
7.3.
"PROGRAM CONTRACTS" shall have the meaning set forth in Section 2.1.5.
"PRORATION AMOUNT" shall have the meaning set forth in Section 2.7.1.
"PRORATION ITEMS" means all items of revenue (other than Accounts
Receivable) and expense with respect to the Station and the Assets, including
power and utility charges, business and license fees (including retroactive
adjustments thereof), sales and service charges, commissions, special
assessments, and rental payments and personal and real estate Taxes and
assessments with respect to the Real Property, taxes (except for Taxes arising
from the transfer of the Assets hereunder), deposits, Trade-out Agreements, FCC
annual regulatory fees, and other similar prepaid and deferred items and any
other operating expenses incurred in the Ordinary Course of Business.
"PURCHASE PRICE" shall have the meaning set forth in Section 2.4.
"QUALIFIED PLAN" means a Pension Plan that satisfies, or is intended by
Seller to satisfy, the requirements for tax qualification described in Section
401 of the Code.
"REAL PROPERTY" shall have the meaning set forth in Section 2.1.2.
"REPRESENTED EMPLOYEES" shall have the meaning set forth in Section
8.4.4.
"RESTRICTED CONTRACTS" shall have the meaning set forth in Section 6.3.
"SCHEDULES" means the disclosure schedules delivered by Sellers to Buyer
in connection herewith.
"SELLER AFFILIATE" means any direct or indirect wholly owned subsidiary
of STC Broadcasting, Inc.
"SELLER DOCUMENTS" means, collectively, this Agreement, the Deposit
Escrow Agreement, the Assignment of Contracts and Leases, the Bill of Sale, the
Assignment of FCC Licenses, and the Assumption Agreement and the Time Brokerage
Agreement and the closing certificates and other deliveries contemplated by
Section 11.4.
ANNEX I-7
<PAGE> 70
"SELLER INDEMNIFIED PARTIES" shall have the meaning set forth in Section
12.3.
"SELLER TAX RETURNS" means all federal, state, local, foreign and other
applicable Tax returns, declarations of estimated Tax reports required to be
filed by Sellers (without regard to extensions of time permitted by law or
otherwise).
"SELLERS' BROKER" means Media Venture Partners.
"STATION" means WROC-TV, Channel 8, Rochester, New York.
"STATION CONTRACTS" shall have the meaning set forth in Section 2.1.8.
"STC" means STC Broadcasting, Inc., a Delaware corporation.
"STC LICENSEE" means STC License Company, a Delaware corporation and a
wholly-owned subsidiary of STC.
"SUBJECT AGREEMENTS" means the following types of Station Contracts: (i)
written employment agreements that will not be terminable by Buyer after the
Transfer Date at-will without cost or obligation (other than an obligation to
pay accrued salary or wages at the normally applicable rate through the time of
termination); (ii) agreements related to Real Property and Leased Property;
(iii) program licenses and contracts under which Sellers are authorized to
broadcast programs on the Station; (iv) all contracts and agreements pursuant
to which commercial air time on the Station is sold, traded or bartered in
consideration for any property or services in lieu of or in addition to cash;
(v) network affiliation agreements; (vi) rating service agreements; (vii)
advertising sales representation agreements; and (viii) agreements pursuant to
which an Encumbrance is placed on an Asset.
"TAXES" means all federal, state and local taxes (including, without
limitation, income, profit, franchise, sales, use, real property, personal
property, ad valorem, excise, employment, social security and wage withholding
taxes) and installments of estimated taxes, assessments, deficiencies, levies,
imports, duties, license fees, registration fees, withholdings, or other
similar charges of every kind, character or description imposed by any
Governmental Authorities.
"TIME BROKERAGE AGREEMENT" means the Time Brokerage Agreement executed by
Buyer and Sellers, in substantially the form attached hereto as Exhibit G.
ANNEX I-8
<PAGE> 71
"TIME SALES AGREEMENTS" shall have the meaning set forth in Section
2.1.7.
"TRADE-OUT AGREEMENTS" shall have the meaning set forth in Section 2.1.6.
"TRANSFER DATE" means either the earlier of the Non-License Transfer Date
or the Closing Date.
"TRANSFER TAXES" shall have the meaning set forth in Section 15.3.
"TRANSFERRED EMPLOYEE" shall have the meaning set forth in Section 8.4.1.
"WELFARE PLAN" means an "employee welfare benefit plan" as such term is
defined in Section 3(1) of ERISA.
ANNEX I-9
<PAGE> 72
ASSET PURCHASE AGREEMENT
BY AND AMONG
STC BROADCASTING, INC.
AND
STC LICENSE COMPANY
AS SELLERS
AND
NEXSTAR BROADCASTING OF ROCHESTER, LLC
AS BUYER
DATED AS OF MARCH 3, 1999
<PAGE> 73
TABLE OF CONTENTS
<TABLE>
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ARTICLE 1. DEFINITIONS AND REFERENCES...................................... 1
ARTICLE 2. SALE AND PURCHASE OF ASSETS; ESCROW DEPOSIT; PURCHASE PRICE;
PRORATION AMOUNTS; ASSUMPTION OF LIABILITIES.................... 2
2.1. Asset Sale and Purchase of Assets............................ 2
2.1.1. FCC Licenses....................................... 2
2.1.2. Real and Leased Property Interests................. 2
2.1.3. Tangible Personal Property......................... 3
2.1.4. Intellectual Property.............................. 3
2.1.5. Program Contracts.................................. 3
2.1.6. Trade-out Agreements............................... 3
2.1.7. Broadcast Time Sales Agreement..................... 4
2.1.8. Operating Contracts................................ 4
2.1.9. Vehicles........................................... 4
2.1.10. Files and Records.................................. 4
2.1.11. Auxiliary Facilities............................... 4
2.1.12. Permits and Licenses............................... 5
2.1.13. Goodwill........................................... 5
2.2. Excluded Assets.............................................. 5
2.2.1. Cash............................................... 5
2.2.2. Account Receivable................................. 5
2.2.3. Deposits and Prepaid Expenses...................... 5
2.2.4. Personal Property Disposed Of...................... 5
2.2.5. Insurance.......................................... 6
2.2.6. Employee Plans and Assets.......................... 6
2.2.7. Right to Tax Refunds............................... 6
2.2.8. Certain Books and Records.......................... 6
2.2.9. Third-Party Claims................................. 6
2.2.10. Rights Under this Agreement........................ 7
2.2.11. Name............................................... 7
2.2.12. Securities......................................... 7
2.2.13. Excluded Contracts and Unrelated Assets............ 7
2.3. Escrow Deposit............................................... 7
2.4. Purchase Price............................................... 7
2.5. Payment of Purchase Price.................................... 8
2.6. Proration Amount............................................. 8
2.7. Allocation of Purchase Price................................. 10
2.8. Assumption of Liabilities.................................... 11
ARTICLE 3. REPRESENTATIONS AND WARRANTIES BY SELLERS....................... 11
3.1. Organization and Standing.................................... 11
</TABLE>
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TABLE OF CONTENTS (continued)
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3.2. Authorization................................................ 12
3.3. Compliance with Laws......................................... 12
3.4. Consents and Approvals; No Conflicts......................... 12
3.5. Financial Statements; Undisclosed Liabilities................ 13
3.6. Absence of Certain Changes or Events......................... 14
3.7. Absence of Litigation........................................ 14
3.8. Assets....................................................... 14
3.9. FCC Matters.................................................. 15
3.10. Real Property................................................ 15
3.11. Condition of Tangible Assets................................. 16
3.12. Intellectual Property........................................ 16
3.13. Reports and Records.......................................... 17
3.14. Station Contracts............................................ 17
3.15. Taxes........................................................ 18
3.16. Employee Benefit Plans....................................... 18
3.17. Labor Relations.............................................. 20
3.18. Environmental Matters........................................ 20
3.19. Transactions With Affiliates................................. 21
3.20. Insurance.................................................... 21
3.21. Interpretation of Certain Provisions......................... 21
ARTICLE 4. REPRESENTATIONS AND WARRANTIES BY BUYER......................... 22
4.1. Organization and Standing.................................... 22
4.2. Authorization................................................ 22
4.3. Compliance with Laws......................................... 22
4.4. Consents and Approvals; No Conflicts......................... 23
4.5. Availability of Funds........................................ 23
4.6. Qualification of Buyer....................................... 23
4.7. No Outside Reliance.......................................... 24
4.8. Interpretation of Certain Provisions......................... 24
ARTICLE 5. PRE-CLOSING FILINGS............................................. 24
5.1. Applications for FCC Consent................................. 24
5.2. Hart-Scott-Rodino............................................ 25
ARTICLE 6. COVENANTS AND AGREEMENTS OF SELLERS............................. 25
6.1. Negative Covenants........................................... 25
6.1.1. Dispositions; Mergers.............................. 25
6.1.2. Accounting Principles and Practices................ 25
6.1.3. Trade-out Agreements............................... 25
6.1.4. Broadcast Time Sales Agreements.................... 26
6.1.5. Network Affiliation Agreements and Local
Marketing Arrangements............................. 26
6.1.6. Additional Agreements.............................. 26
6.1.7. Breaches........................................... 26
6.1.8. Employee Matters................................... 26
6.1.9. Actions Affecting FCC Licenses..................... 27
</TABLE>
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<PAGE> 75
TABLE OF CONTENTS (continued)
<TABLE>
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6.1.10. Programming........................................ 27
6.1.11. Affiliated Transactions............................ 27
6.2. Affirmative Covenants........................................ 27
6.2.1. Preserve Existence................................. 27
6.2.2. Normal Operations.................................. 27
6.2.3. Maintain FCC Licenses.............................. 28
6.2.4. Network Affiliation................................ 28
6.2.5. Station Contracts.................................. 28
6.2.6. Taxes.............................................. 28
6.2.7. Corporate Action................................... 28
6.2.8. Access............................................. 28
6.2.9. Insurance.......................................... 29
6.2.10. Financial Statements............................... 29
6.3. Confidentiality.............................................. 29
6.4. No Shopping.................................................. 30
6.5. No Solicitation of Employees................................. 30
ARTICLE 7. COVENANTS AND AGREEMENTS OF BUYER............................... 31
7.1. Confidentiality.............................................. 31
7.2. Corporate Action............................................. 32
7.3. Access....................................................... 32
7.4. Collection of Receivables.................................... 32
ARTICLE 8. MUTUAL COVENANTS AND UNDERSTANDINGS OF SELLER AND BUYER......... 33
8.1. Possession and Control....................................... 33
8.2. Risk of Loss................................................. 34
8.3. Public Announcements......................................... 34
8.4. Employee Matters............................................. 35
8.4.1. Transferred Employees.............................. 35
8.4.2. Vacation and Sick Leave............................ 36
8.4.3. Severance Benefits................................. 36
8.4.4. Represented Employees.............................. 37
8.4.5. COBRA Obligations.................................. 37
8.4.6. Seller Benefits Plans.............................. 38
8.4.7. 401(k) Plans....................................... 38
8.4.8. Employment and Collective Bargaining Contracts..... 38
8.5. Disclosure Schedules......................................... 38
8.6. Bulk Sales Laws.............................................. 39
8.7. Consents..................................................... 39
ARTICLE 9. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE............. 39
9.1. Representations and Covenants................................ 39
9.2. Required Consent............................................. 40
9.3. Delivery of Documents........................................ 40
9.4. FCC Order.................................................... 40
</TABLE>
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<PAGE> 76
TABLE OF CONTENTS (continued)
<TABLE>
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9.5. Hart-Scott-Rodino............................................ 40
9.6. Legal Proceedings............................................ 40
9.7. No Material Adverse Effect................................... 41
ARTICLE 10. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE............ 41
10.1. Representations and Covenants................................ 41
10.2. Delivery by Buyer............................................ 42
10.3. FCC Order.................................................... 42
10.4. Hart-Scott-Rodino............................................ 42
10.5. Legal Proceedings............................................ 42
ARTICLE 11. NON-LICENSE TRANSFER; CLOSING................................... 42
11.1. Non-License Transfer......................................... 42
11.2. Closing...................................................... 43
11.3. Time and Place of Non-License Transfer and Closing........... 44
11.4. Delivery by Seller........................................... 44
11.4.1. Agreements and Instruments......................... 44
11.4.2. Consents........................................... 45
11.4.3. Certified Resolutions.............................. 45
11.4.4. Officers' Certificates............................. 45
11.4.5. Organizational Documents........................... 45
11.4.6. Deposit............................................ 45
11.4.7. Releases........................................... 45
11.4.8. FIRPTA Certificate................................. 45
11.4.9. Title Insurance Documents.......................... 46
11.5. Delivery by Buyer............................................ 46
11.5.1. Purchase Price Payment............................. 46
11.5.2. Agreements and Instruments......................... 46
11.5.3. Certified Resolutions.............................. 46
11.5.4. Officers' Certificate.............................. 46
ARTICLE 12. SURVIVAL; INDEMNIFICATION....................................... 47
12.1. Survival of Representations.................................. 47
12.2. Indemnification by Sellers................................... 47
12.3. Indemnification by Buyer..................................... 48
12.4. Limitations on Indemnification............................... 48
12.5. Conditions of Indemnification................................ 49
12.6. Cure of Breach............................................... 51
ARTICLE 13. TERMINATION..................................................... 52
13.1. Termination.................................................. 52
13.2. Effect of Termination........................................ 53
ARTICLE 14. REMEDIES........................................................ 53
14.1. Default by Buyer............................................. 53
14.2. Default by Sellers........................................... 54
14.3. Liquidated Damages........................................... 54
14.4. Specific Performance......................................... 55
</TABLE>
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TABLE OF CONTENTS (continued)
<TABLE>
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ARTICLE 15. GENERAL PROVISIONS.............................................. 55
15.1. Additional Actions, Documents and Information................ 55
15.2. Brokers...................................................... 55
15.3. Expenses and Taxes........................................... 56
15.4. Notices...................................................... 56
15.5. Waiver....................................................... 58
15.6. Benefit and Assignment....................................... 58
15.7. Entire Agreement; Amendment.................................. 59
15.8. Severability................................................. 60
15.9. Headings..................................................... 60
15.10. Governing Law; Jurisdiction.................................. 60
15.11. Signature in Counterparts.................................... 60
</TABLE>
v
<PAGE> 78
SCHEDULES
<TABLE>
<S> <C>
Schedule 2.1.1 FCC Licenses
Schedule 2.1.2 Real Property Interests
Schedule 2.1.3 Tangible Personal Property
Schedule 2.1.4 Intellectual Property
Schedule 2.1.5 Program Contracts
Schedule 2.1.6 Trade-out Agreements
Schedule 2.1.8 Operating Contracts
Schedule 2.1.9 Vehicles
Schedule 2.2.13 Excluded Contracts and Unrelated Assets
Schedule 3.4.1 Consents
Schedule 3.7 Litigation
Schedule 3.8 Encumbrances on Assets
Schedule 3.9 FCC Matters
Schedule 3.10 Encumbrances on Real Property and Leasehold Interests
Schedule 3.11 Condition of Tangible Assets
Schedule 3.16 Employee Benefit Plans
Schedule 3.17.1 Collective Bargaining Agreements
Schedule 3.18 Environmental Matters
Schedule 3.19 Transactions with Affiliates
Schedule 3.20 Insurance
Schedule 6.1.8 Employee Matters
Schedule 8.4.1(a) Excluded Employee
Schedule 8.4.1(b) Certain Other Employees
Schedule I License Assets
</TABLE>
vi
<PAGE> 79
EXHIBITS
<TABLE>
<S> <C>
EXHIBIT A Form of Bill of Sale and Assignment of Assets
EXHIBIT B Form of Assignment of FCC Licenses
EXHIBIT C Form of Assignment of Contracts and Leases
EXHIBIT D Form of Assumption Agreement
EXHIBIT E Form of Warranty Deed
EXHIBIT F Transfer Tax Forms
EXHIBIT G Form of Time Brokerage Agreement
</TABLE>
vii
<PAGE> 1
Exhibit 2.6
PURCHASE AGREEMENT
BY AND BETWEEN
SINCLAIR COMMUNICATIONS, INC.
AND
STC BROADCASTING, INC.
DATED AS OF MARCH 16, 1999
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE 1. SALE OF ASSETS; ASSUMPTION OF LIABILITIES.................... 4
1.1 Assets to Be Acquired......................................... 4
1.2 Excluded Assets............................................... 7
1.3 Assumption of Liabilities..................................... 7
1.4 Non-License Transfer; Closing................................. 8
1.5 Additional Closing Deliveries................................. 10
1.6 Due Diligence, Delivery of Disclosure Schedule and
Purchaser Termination Right................................. 13
ARTICLE 2. PURCHASE PRICE............................................... 13
2.1 Escrow Deposit................................................ 13
2.2 Purchase Price................................................ 14
2.3 Payment of Purchase Price..................................... 14
2.4 Post-Closing Adjustment....................................... 15
2.5 Allocation of the Base Purchase Price......................... 17
ARTICLE 3. REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY....... 17
3.1 Organization and Standing..................................... 17
3.2 Binding Agreement............................................. 18
3.3 Absence of Conflicting Agreements or Required Consents........ 18
3.4 Equity Investments............................................ 19
3.5 Financial Statements.......................................... 19
3.6 Title to Assets; Related Matters.............................. 19
3.7 Absence of Certain Changes, Events and Conditions............. 20
3.8 Litigation.................................................... 21
3.9 Insurance..................................................... 22
3.10 Material Contracts........................................... 22
3.11 Permits and Licenses; Compliance with Law.................... 23
3.12 FCC Licenses................................................. 23
3.13 Environmental Matters........................................ 24
3.14 Employee Benefit Matters..................................... 24
3.15 Labor Relations.............................................. 26
3.16 Intellectual Property........................................ 27
3.17 Taxes........................................................ 27
3.18 Commissions.................................................. 28
3.19 Affiliate Transactions....................................... 28
3.20 Gannett Purchase Agreement................................... 28
3.21 Accuracy and Completeness of Representations and
Warranties.................................................. 29
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF PURCHASER.................. 29
4.1 Organization and Standing..................................... 29
<PAGE> 3
4.2 Binding Agreement............................................. 29
4.3 Absence of Conflicting Agreements or Required Consents........ 30
4.4 Litigation.................................................... 30
4.5 Commissions................................................... 31
4.6 Financing..................................................... 31
4.7 Purchaser's Qualification..................................... 31
4.8 Accuracy and Completeness of Representations and
Warranties.................................................. 31
ARTICLE 5. COVENANTS AND AGREEMENTS..................................... 31
5.1 Conduct of the Business Prior to Closing; Access.............. 31
5.2 Post-Closing Covenants and Agreements, and Other Employee
Benefit Matters............................................. 36
5.3 Cooperation................................................... 39
5.4 Confidentiality............................................... 42
5.5 Public Announcements.......................................... 42
5.6 No Solicitation............................................... 42
5.7 Employees..................................................... 42
5.8 No Additional Representations................................. 43
5.9 Certain Payments.............................................. 43
5.10 Bulk Sales Laws.............................................. 44
5.11 Control of the Stations...................................... 44
5.12 Use of Certain Names......................................... 45
5.13 News Sharing Arrangements.................................... 45
5.14 Rights Under the Gannett Purchase Agreement.................. 46
ARTICLE 6. CONDITIONS TO OBLIGATIONS OF PURCHASER....................... 47
6.1 Representations and Warranties................................ 47
6.2 Performance by the Company.................................... 48
6.3 Certificates.................................................. 48
6.4 Consents; No Objections....................................... 48
6.5 No Proceedings or Litigation.................................. 49
6.6 FCC Consent................................................... 49
6.7 No Material Adverse Change.................................... 49
6.8 Opinions of Counsel........................................... 49
6.9 Certain Certified Matters..................................... 49
6.10 Good Standing Certificate.................................... 50
6.11 No Transmission Defects...................................... 50
6.12 Closing on the Gannett Purchase Agreement.................... 50
6.13 Deliveries................................................... 50
ARTICLE 7. CONDITIONS TO OBLIGATIONS OF THE COMPANY..................... 51
7.1 Representations and Warranties................................ 51
7.2 Performance by Purchaser...................................... 51
7.3 Certificate................................................... 51
7.4 Consents; No Objections....................................... 51
7.5 No Proceedings or Litigation.................................. 51
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<PAGE> 4
7.6 FCC Consent................................................... 52
7.7 Certain Certified Matters..................................... 52
7.8 Good Standing Certificate..................................... 52
7.9. Closing on Gannett Purchase Agreement........................ 52
7.10 Deliveries................................................... 53
ARTICLE 8. INDEMNIFICATION.............................................. 53
8.1 Indemnification by the Company................................ 53
8.2 Indemnification by Purchaser.................................. 53
8.3 Limitations on Indemnification Claims and Liability;
Termination of Indemnification.............................. 54
8.4 Computation of Claims and Damages............................. 55
8.5 Notice of Claims.............................................. 56
8.6 Defense of Third Party Claims................................. 56
8.7 Third Party Beneficiaries..................................... 57
ARTICLE 9. DEFINITIONS.................................................. 57
ARTICLE 10. MISCELLANEOUS PROVISIONS.................................... 71
10.1 Termination Rights........................................... 71
10.2 Litigation Costs............................................. 73
10.3 Expenses..................................................... 73
10.4 Notices...................................................... 74
10.5 Benefit and Assignment....................................... 75
10.6 Waiver....................................................... 76
10.7 Severability................................................. 77
10.8 Amendment.................................................... 77
10.9 Effect and Construction of this Agreement.................... 77
10.10 Transfer and Conveyance Taxes............................... 78
10.11 Specific Performance........................................ 78
10.12 Survival of Representations, Warranties and Covenants....... 78
ARTICLE 11. NO PERSONAL LIABILITY FOR REPRESENTATIVES, STOCKHOLDERS,
DIRECTORS OR OFFICERS............................................. 79
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<PAGE> 5
EXHIBITS
Exhibit A Bill of Sale, Assignment and Assumption Agreement
Exhibit B Assignment of FCC Licenses
Exhibit C Time Brokerage Agreement
Exhibit D Deposit Escrow Agreement
Exhibit E FCC Opinion
<PAGE> 6
DISCLOSURE SCHEDULE
Section 1.1(d) Real Property
Section 1.2 Excluded Assets
Section 1.4 License Assets
Section 2.5 Allocation of Base Purchase Price
Section 3.3. Absence of Conflicting Agreements or Required Consents
Section 3.5. Financial Statements
Section 3.6. Title to Assets; Related Matters
Section 3.7. Absence of Certain Changes, Events and Conditions
Section 3.8. Litigation
Section 3.9. Insurance
Section 3.10. Material Contracts
Section 3.11 Permits
Section 3.12 FCC Licenses
Section 3.13 Environmental Matters
Section 3.14 Employee Benefits
Section 3.14.1 Non-Corporate Employees (other than division heads)
Section 3.14.2 Severance and Retention Agreements - Division Heads
Section 3.15 Labor Relations
Section 3.16 Intellectual Property
Section 3.17 Taxes
Section 3.19 Affiliate Transactions
Section 4.4 Purchaser Litigation
Section 4.7 Purchaser's Qualification
Section 5.1 Conduct of Business Prior to Closing
Section 5.2 Post-Closing Covenants and Agreements
Section 5.13 News Share Arrangements
Section 6.4 Material Consents Required as a Condition of the
Purchaser's Obligation to Close
Section 7.4 Material Consents Required as a Condition of the
Company's Obligation to Close
Section 9 Closing Statement Differences
SECTION 2.5
ALLOCATION OF BASE PURCHASE PRICE
WICS-TV/WICD-TV $64,093,000
KGAN-TV $16,907,000
<PAGE> 7
SECTION 4.7
PURCHASER'S QUALIFICATION
Principals of STC Broadcasting, Inc. hold attributable interests in:
(a) WFMB(AM) and WFMB-FM, Springfield, Illinois, and WCVS(FM), Virden, Illinois,
each of which are within the service contour of WICS(TV); (b) KDAT(FM), KHAK(FM)
and KTOF(AM), Cedar Rapids, Iowa and KRNA(FM), Iowa City, Iowa, which are within
the service contour of KGAN(TV); and (c) WAND(TV), Decatur, Illinois, which is
believed to cover substantially the same areas as covered by WICS(TV) and
WICD(TV). Without waivers or other structural changes, the acquisition of the
License Assets as proposed in the Agreement would violate existing FCC rules
and/or policies.
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SECTION 5.13
NEWS SHARE ARRANGEMENTS
The news share arrangement with television station WSMH-TV, Flint,
Michigan ("WSMH") will include the following: WSMH will have an option for a
period of one (1) year after the date of the Agreement to cause television
station WEYI-TV, Flint, Michigan ("WEYI"), to produce for WSMH the ten o'clock
(p.m.) news, seven (7) days a week, for a period of three (3) years. The total
time of each daily newscast shall not exceed thirty-five (35) minutes (including
any commercial or advertising time). WEYI will be reimbursed for all capital
expenditures; WSMH will be entitled to sell all advertising time in the news;
and after reimbursement of all expenses, the parties will split equally any
remaining revenues from WSMH's news.
The news share arrangement with television station WUHF-TV, Rochester,
New York ("WUHF") will include the following: WUHF will have an option for a
period of six (6) months after the date of the Agreement to cause television
station WROC-TV, Rochester, New York ("WROC"), to produce for WUHF the ten
o'clock (p.m.) news, seven (7) days a week, for a period of two (2) years. The
total time of each daily newscast shall not exceed thirty-five (35) minutes
(including any commercial or advertising time). WROC will be reimbursed for all
capital expenditures; WUHF will be entitled to sell all advertising time in the
news; and after reimbursement of all expenses, the parties will split equally
any remaining revenues from WUHF's news. The Purchaser shall use Purchaser's
reasonable efforts to have the purchaser of WROC agree that the terms of the
news share arrangement for WUHF shall be for a period of three (3) years.
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<PAGE> 9
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "AGREEMENT") is entered into as of this 16th
day of March, 1999, by and between SINCLAIR COMMUNICATIONS, INC., a Maryland
corporation (the "COMPANY"), and STC BROADCASTING, INC., a Delaware corporation
("PURCHASER").
WHEREAS, the Company and Guy Gannett Communications ("GANNETT") entered
into that certain Purchase Agreement dated September 4, 1998, as mended on March
16, 1999 (the "GANNETT PURCHASE AGREEMENT"), pursuant to which the Company
agreed to purchase substantially all of the assets of the Gannett Television
Stations, including television broadcast stations WICS-TV, Channel 20,
Springfield, Illinois; WICD-TV, Channel 15, Champaign, Illinois; and KGAN-TV,
Channel 2, Cedar Rapids, Iowa (each a "STATION" and collectively, the
"STATIONS"); and
WHEREAS, the Company desires to sell, assign and transfer to Purchaser the
assets and business of the Stations as described below, and Purchaser desires to
purchase and acquire the assets and business of the Stations as described below,
on the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties, intending legally to be bound, agree as follows:
[A LIST OF DEFINED TERMS IS PROVIDED IN ARTICLE 9 HEREOF.]
ARTICLE 1. SALE OF ASSETS; ASSUMPTION OF LIABILITIES.
1.1 ASSETS TO BE ACQUIRED.
Upon the terms and subject to the satisfaction of the conditions set
forth herein, the Company shall sell, convey, assign, transfer and deliver to
Purchaser, and Purchaser shall purchase, acquire, accept and pay for, all right,
title and interest of the Company and Gannett in and to all of the real,
personal and mixed properties, assets and other rights, both tangible and
intangible (other than the Excluded Assets), owned or leased by, or licensed to
or used or useful by, the Company and Gannett in connection with the Business
and the Stations (collectively, the "ASSETS"), which Assets shall consist of all
of the Assets relating to
-4-
<PAGE> 10
the Stations that the Company (and its successors and assigns) have acquired or
have the right to acquire, pursuant to the Gannett Purchase Agreement.
Without limiting the generality of the foregoing, the Assets shall
include the following:
(a) the FCC Licenses;
(b) the Equipment;
(c) all translators, earth stations and other auxiliary facilities,
and all applications therefor;
(d) the Real Property and Leased Property as set forth in Section
1.1(d) of the Disclosure Schedule;
(e) all orders and agreements for the sale of advertising time on
the Stations for cash, and all trade, barter and similar agreements, excluding
Program Contracts (which are provided for below), for the sale of advertising
time on the Stations for any property or services in lieu of or in addition to
cash, and any other orders and agreements relating to the Stations and entered
into (other than in violation of this Agreement or the Gannett Purchase
Agreement) between the date of the Gannett Purchase Agreement and the Transfer
Date;
(f) all film and program licenses and contracts under which the
Company or Gannett has the right to broadcast film product or programs on the
Stations ("PROGRAM CONTRACTS"), including all cash and non-cash (barter) program
contracts and including, without limitation, the Program Contracts set forth in
Section 3.10 of the Disclosure Schedule and any other Program Contracts relating
to the Stations and entered into (other than in violation of this Agreement or
the Gannett Purchase Agreement) between the date of the Gannett Purchase
Agreement and the Transfer Date;
(g) all other contracts and agreements related to the Business,
including, without limitation, network affiliation agreements, all employment
contracts entered into with television talent and other Business Employees, all
collective bargaining agreements with respect to any Business Employees, any
time brokerage agreements and all national or local advertising representation
agreements for the Stations, including, without limitation, the contracts and
agreements set forth in Section 3.10 of the Disclosure Schedule, and any other
such contracts and agreements relating to the Stations and entered into (other
than in violation of this Agreement or the Gannett Purchase Agreement) between
the date of the Gannett Purchase Agreement and the Transfer Date;
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(h) the Intellectual Property, including, without limitation, the
Call Letters;
(i) all programs and programming materials used in connection with
the Business, whether recorded on tape or any other media or intended for live
performance, and whether completed or in production, and all related common law
and statutory copyrights owned by or licensed to the Company or Gannett and used
or useful in connection with the Business;
(j) all FCC logs and other records that relate to the operation of
the Stations;
(k) except as set forth in Section 1.2 hereof, all files, books and
other records relating to the Business, including, without limitation, written
technical information, data, specifications, research and development
information, engineering, drawings, manuals, computer programs, tapes and
software relating directly to the Business, other than duplicate copies of
account books of original entry and duplicate copies of such files and records,
if any, that are maintained at the corporate offices of the Company or Gannett
for tax and accounting purposes;
(l) all of the goodwill in, and "going concern" value of,
the Business;
(m) all accounts, notes and accounts receivable of the Business and
the Stations relating to or arising out of the business and operations of the
Stations and the Business during the period prior to the Transfer Date;
(n) all deposits, reserves and prepaid expenses of the Business
(other than those relating to Excluded Assets or Liabilities that are not
Assumed Liabilities);
(o) to the extent transferable under applicable law, all franchises,
approvals, permits, licenses, orders, registrations, certificates, exemptions,
variances and similar rights obtained from Governmental Authorities (other than
the FCC Licenses) in any jurisdiction that had issued or granted such items to
the Company or Gannett, or that the Company or Gannett otherwise owns or uses,
in each case relating to the Business, and all pending applications therefor;
and
(p) except as set forth in Section 1.2 hereof, all insurance
proceeds and claims therefor arising out of or related to (i) damage,
destruction or loss of any property or asset used or useful in connection with
the Business to the extent of any damage or destruction that remains unrepaired,
or to the extent any property or asset remains unreplaced, at the Non-License
Transfer Date or the Closing Date, as
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applicable, and (ii) any other matters related to, or involving the Business,
including, without limitation, employment practices.
1.2 EXCLUDED ASSETS.
Notwithstanding anything to the contrary herein, all of the assets
listed on Section 1.2 of the Disclosure Schedule or defined in the Gannett
Purchase Agreement as Excluded Assets (collectively, the "EXCLUDED ASSETS")
shall be excluded from the Assets.
1.3 ASSUMPTION OF LIABILITIES.
(a) On and after the Non-License Transfer Date, Purchaser will
assume and agree to perform and fully discharge when due, except to the extent
that such Liabilities constitute Retained Liabilities, the following Liabilities
of the Company or Gannett: (i) those solely related to or solely arising from or
in connection with the Assets or the Business (other than the License Assets);
and (ii) those partly related to any contract or agreement for the Stations that
are also related to other Gannett Television Stations, but not related to any
other assets or business of Gannett or the Company (any such contract or
agreement being a "GROUP CONTRACT"), but only to the extent the Liabilities
under any such Group Contract relate to or arise from or are in connection with
the Assets or the Business, whether such Liabilities specified in clause (i) or
(ii) are incurred or arise prior to, on or after the Non-License Transfer Date,
including, without limitation, those obligations of the Company relating to the
Business to be assumed by Purchaser pursuant to Section 5.2 hereof.
(b) On and after the Closing Date, to the extent not assumed by
Purchaser at the Non-License Transfer, Purchaser will assume and agree to
perform and fully discharge when due, except to the extent that any Liabilities
constitute Retained Liabilities, the following Liabilities of the Company or
Gannett: (i) those solely related to or solely arising from or in connection
with the Assets or the Business; (ii) those partly related to any Group
Contract, but only to the extent the Liabilities under any such Group Contract
relate to or arise from or are in connection with the Assets or the Business,
and (iii) those solely related to or solely arising from or in connection with
the License Assets listed in Section 1.4 of the Disclosure Schedule, whether
such Liabilities specified in clause (i), (ii) or (iii) are incurred or arise
prior to, on or after the Closing Date, including, without limitation, those
obligations of the Company relating to the Business to be assumed by Purchaser
pursuant to Section 5.2 hereof (the Liabilities assumed by Purchaser
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pursuant to Sections 1.3(a) and (b) hereof shall be collectively be referred to
herein as the "ASSUMED LIABILITIES").
(c) Except for the Assumed Liabilities and except as otherwise
expressly provided in this Agreement, Purchaser will assume no other Liabilities
or any kind of description (collectively, the "RETAINED LIABILITIES"). The
Retained Liabilities include, without limitation, any of the following
Liabilities:
(i) any of the Liabilities defined in the Gannett
Purchase Agreement as "Retained Liabilities";
(ii) any of the Company's obligations hereunder;
(iii) any Liability for federal, state or local income taxes
of Gannett or the Company, their respective stockholders
or any other Person;
(iv) any Liabilities relating to the Corporate Office except
for the Purchaser's reimbursement obligation pursuant to
Section 5.9(b) hereof;
(v) any Liabilities relating to current, former or inactive
Corporate Office Employees;
(vi) any Liabilities under any Employee Benefit Plans of
Gannett or the Company except to the extent assumed by
Purchaser pursuant to Section 5.2 and Section 5.9
hereof;
(vii) any Liability of Gannett or the Company arising from
Indebtedness or any overdrafts on any bank accounts of
Gannett or the Company;
(viii) any Liability for dividends; and
(ix) any Liability with respect to the Gannett Television
Stations (other than the Stations) under any Group
Contract or otherwise.
(d) The Company shall retain, and shall continue to be responsible
after the Transfer Date for, all Retained Liabilities and all other Liabilities
of the Company and Gannett that are not Assumed Liabilities.
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1.4 NON-LICENSE TRANSFER; CLOSING.
(a) Unless this Agreement shall have been terminated and the
transactions herein shall have been terminated pursuant to Section 10.1 hereof,
provided that the conditions set forth in Article 6 (except for Section 6.6) and
Article 7 (except for Section 7.6) shall have been satisfied and the Closing
shall not have occurred, there shall be a closing (the "NON-LICENSE TRANSFER")
for the purchase and sale of all of the Assets (other than the Assets which are
listed in Section 1.4 of the Disclosure Schedule (the "LICENSE ASSETS"), at
10:00 a.m. New York City time on a date specified by Purchaser that is within
the later of (i) ten (10) days after the date on which all applicable waiting
periods under the HSR Act shall have expired or terminated, or (ii) the date,
time and place of the closing under the Gannett Purchase Agreement as long as
Purchaser shall have received at least ten (10) days prior written notice from
the Company of the date of the Gannett closing (the date on which the
Non-License Transfer shall occur pursuant to this Section 1.4(a) is referred to
herein as the "NON-LICENSE TRANSFER DATE"); provided, however, that the Company
and Purchaser shall take such reasonable actions as may be necessary to hold the
Non-License Transfer simultaneously with the closing of the Gannett Purchase
Agreement. If the Non-License Transfer shall occur simultaneously with the
closing under the Gannett Purchase Agreement, then the Non-License Transfer
shall occur at the place of the closing under the Gannett Purchase Agreement, or
at such other place as the parties shall agree in writing. Otherwise, the
Non-License Transfer shall occur at the offices of Hogan & Hartson L.L.P., 8300
Greensboro Drive, Suite 1100, McLean, Virginia 22102, or at such other place as
the Company and Purchaser shall agree in writing. At the Non-License Transfer,
each of the parties hereto shall take, or cause to be taken, all such actions
and deliver, or cause to be delivered, all such documents, instruments,
certificates and other items as may be required under this Agreement or
otherwise, in order to perform or fulfill all covenants and agreements on its
part to be performed at or prior to the Non-License Transfer. The Non-License
Transfer shall be effective as of 12:01 a.m., New York City time, on the day of
the Non-License Transfer Date.
(b) Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been terminated pursuant to Section
10.1 hereof, the closing (the "CLOSING") of the transactions herein contemplated
shall take place at 10:00 a.m., New York City time, on a date specified by
Purchaser that is within ten (10) days following the satisfaction or waiver of
the conditions set forth in Articles 6 and 7 hereof, or at such other time and
date as the Company and Purchaser shall agree in writing (such time and date of
the Closing being referred to herein as the "CLOSING DATE"), at the offices of
Hogan & Hartson L.L.P., 8300 Greensboro Drive, Suite 1100, McLean, Virginia
22102, or at such
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other place as the Company and Purchaser shall agree in writing. At the Closing,
each of the parties hereto shall take, or cause to be taken, all such actions
and deliver, or cause to be delivered, all such documents, instruments,
certificates and other items as may be required under this Agreement or
otherwise, in order to perform or fulfill all covenants and agreements on its
part to be performed at or prior to the Closing. The Closing shall be effective
as of 12:01 a.m., New York City time, on the day of the Closing Date.
(c) In the event that the closing of the Company's acquisition of the
Stations pursuant to the Gannett Purchase Agreement does not occur
simultaneously with the Transfer Date hereunder, the Company and Purchaser
acknowledge and agree that (i) the representations, warranties, covenants and
agreements made by Gannett under the Gannett Purchase Agreement which relate to
the Stations shall be deemed (A) incorporated by reference into the terms
hereof, and (B) restated by the Company for the benefit of Purchaser as of the
Transfer Date as though the Company was Gannett under the Gannett Purchase
Agreement; provided, that, without limiting the Company's representations,
warranties, covenants and agreements hereunder, such additional representations,
warranties, covenants and agreements from the Gannett Purchase Agreement shall
apply only with respect to the period of ownership of the Stations and the
Assets by the Company and the Company's successors and assigns; (ii) on or prior
to the fifth (5th) Business Day prior to the Transfer Date, the Disclosure
Schedule hereto shall be updated and amended by the Company to reflect the
updates and amendments to the Disclosure Schedule that are necessary in order
for the Company to restate such representations and warranties hereunder as of
the Transfer Date; provided, however, no such updates or amendments shall be
made which would constitute a violation of this Agreement or the Gannett
Purchase Agreement; and (iii) in addition to the Assets described in Section 1.1
hereof, the "Assets" shall include the Assets of the Business and the Stations
with respect to which the Company and the Company's successors and assigns shall
have acquired from and after the closing under the Gannett Purchase Agreement.
(d) If the Closing shall not have occurred on or prior to such date
which is four (4) years after the date of this Agreement, the Company and
Purchaser acknowledge and agree to cooperate and use commercially reasonable
efforts to consummate the sale to a third party of both the License Assets and
the Non-License Assets in an orderly and mutually satisfactory manner (the
"THIRD PARTY SALE"). At the closing of the Third Party Sale pursuant to this
Section 1.4(d), the proceeds therefrom shall be paid as follows: (i) any amounts
of the Purchase Price hereunder not previously paid to the Company shall be paid
directly to the Company, and (2) any other amounts shall be paid directly to the
Purchaser. Any
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<PAGE> 16
such payments shall be by wire transfer of immediately available funds to an
account identified by the recipient party in writing.
1.5 ADDITIONAL CLOSING DELIVERIES.
(a) At the Non-License Transfer and the Closing, as applicable, the
Company shall deliver to Purchaser:
(i) a duly executed counterpart of the Bill of Sale,
Assignment and Assumption Agreement substantially in the form set forth in
Exhibit A hereto (the "BILL OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT");
(ii) at the Closing only, a duly executed counterpart of the
Assignment of FCC Licenses, substantially in the form set forth in Exhibit B
hereto (the "ASSIGNMENT OF FCC LICENSES");
(iii) instruments of assignment with respect to all of the
Company's rights and interests in the Leased Property and special warranty deeds
(of a type equivalent to that known in New York as a "bargain and sale deed with
covenants against grantor's actions") with respect to all of the Company's
rights and interests in the Real Property, in recordable form sufficient to
convey to Purchaser all of the Company's rights and interests or rights and
interest in the Leased Property and the Real Property acquired by the Company
from Gannett pursuant to the Gannett Purchase Agreement;
(iv) an owner's affidavit, gap indemnity and such other
customary documents and certificates as may be reasonably required by
Purchaser's title insurance company with respect to Purchaser's title insurance
of the Real Property and any Leased Property;
(v) evidence reasonably satisfactory to Purchaser that the
third-party insurance policies listed in Section 3.9 of the Disclosure Schedule
are in full force and effect with respect to the period prior to the Transfer
Date (together with appropriate evidence showing loss payable and/or additional
insured clauses or endorsements, as reasonably requested by Purchaser, in favor
of Purchaser);
(vi) a certificate, dated as of the Transfer Date, executed on
behalf of the Company by the Company's duly authorized officers that, except as
disclosed in Section 3.8 of the Disclosure Schedule (or otherwise disclosed
pursuant to such certificate) (a) there are no Actions against the Company or,
to the Company's knowledge, Gannett relating to the Business or the Assets
pending, or, to the Company's Knowledge, threatened to be brought by or before
any Governmental Authority, and (b) neither the Company nor, to the Company's
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Knowledge, Gannett is subject to any Governmental Orders (nor, are there any
such Governmental Orders threatened to be imposed by any Governmental Authority)
relating to the Business or the Assets;
(vii) domain name transfer agreements in form and substance
reasonably satisfactory to Purchaser to perfect the transfer to Purchaser of all
of the domain names of the Stations;
(viii) all other instruments of conveyance and transfer
sufficient to convey the Assets to Purchaser;
(ix) at the Non-License Transfer only, a duly executed
counterpart of the Time Brokerage Agreement, substantially in the form set forth
in Exhibit C hereto (the "TIME BROKERAGE AGREEMENT"); and
(x) all other documents, instruments and writings required to
be delivered by the Company at or prior to the Closing Date or the Non-License
Transfer Date, as applicable, pursuant to this Agreement.
(b) At the Non-License Transfer and the Closing, as applicable,
Purchaser shall deliver to Company:
(i) the Purchase Price in accordance with Section 2.3
hereof;
(ii) a duly executed counterpart of the Bill of Sale,
Assignment and Assumption Agreement;
(iii) at the Closing only, a duly executed counterpart of the
Assignment of FCC Licenses;
(iv) at the Non-License Transfer only, a duly executed
counterpart of the Time Brokerage Agreement; and
(v) all other documents, instruments and writings required to
be delivered by Purchaser at or prior to the Closing Date or the Non-License
Transfer Date, as applicable, pursuant to this Agreement.
(c) Purchaser shall, at any time prior to, at or after the Transfer
Date, take or cause to be taken such further actions, and execute, deliver and
file or cause to be executed, delivered and filed such further documents and
instruments, as may be reasonably requested by the Company in connection with
the consummation of the transactions contemplated by this Agreement. The Company
shall, at any time prior to, at or after the Transfer Date, take or cause to be
taken such further actions, and execute, deliver and file or cause to be
executed, delivered
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<PAGE> 18
and filed such further documents and instruments, as may be reasonably requested
by Purchaser in connection with the consummation of the transactions
contemplated by this Agreement.
1.6 DUE DILIGENCE, DELIVERY OF DISCLOSURE SCHEDULE AND PURCHASER
TERMINATION RIGHT.
The Company hereby acknowledges and agrees that neither the Company
nor Gannett has delivered all due diligence materials or the Disclosure Schedule
with respect to the Stations to Purchaser prior to the date hereof. Subject to
the receipt of any required prior approvals from Gannett, the parties,
therefore, acknowledge and agree that (a) Purchaser shall be permitted to
conduct a due diligence review of the Business and Assets upon, and at all times
after the execution and delivery of this Agreement pursuant to the terms and
conditions of this Agreement, and (b) the Company shall deliver to Purchaser and
to Purchaser's counsel a complete set of the Disclosure Schedule for the
Stations (and copies of all materials identified on the Disclosure Schedule, as
reasonably required to support such Disclosure Schedule or as otherwise
reasonably requested by Purchaser) as soon as possible after the execution and
delivery of this Agreement. Purchaser shall have the right, in its sole and
absolute discretion and for any reason, to terminate this Agreement at any time
prior to 5:00 p.m. (New York City time) on the date which is the tenth (10th)
Business Day after the date hereof (the "Diligence Termination Deadline")
pursuant to Section 10.1(a)(ii) hereof. Such termination right of Purchaser is
in addition to, and shall not limit or diminish, any other termination rights or
other remedies available to Purchaser hereunder or at law or in equity.
ARTICLE 2. PURCHASE PRICE.
2.1 ESCROW DEPOSIT.
For and in partial consideration of the execution and delivery of
this Agreement, provided, that this Agreement shall not have been terminated and
the transactions herein contemplated shall not have been terminated pursuant to
Sections 10.1(a)(ii) or 10.1(a)(iii) hereof, Purchaser shall deposit within
twelve (12) Business Days after the execution and delivery of this Agreement
with the Deposit Escrow Agent an original, irrevocable letter of credit in a
form reasonably acceptable to the Company (the "LETTER OF CREDIT"), issued for
the benefit of the Company and the Deposit Escrow Agent by The Chase Manhattan
Bank for an amount equal to Eight Million One Hundred Thousand Dollars
($8,100,000) (the "ESCROW DEPOSIT"), such Letter of Credit to be dealt with in
accordance with the terms and provisions of the Deposit Escrow Agreement, dated
as of the date of the
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delivery of the Letter of Credit to the Deposit Escrow Agent, among the Company,
Purchaser and the Deposit Escrow Agent, in the form attached hereto as Exhibit D
(the "DEPOSIT ESCROW AGREEMENT"). Purchaser and the Company shall cause the
Letter of Credit to be returned to Purchaser on the Transfer Date.
2.2 PURCHASE PRICE.
(a) In consideration of the sale of the Assets and the Business
hereunder, Purchaser shall (i) pay the Company in cash the aggregate amount of
Eighty One Million Dollars ($81,000,000) (the "BASE PURCHASE PRICE"), plus (if
the Estimated Net Financial Assets are greater than zero) or minus (if the
Estimated Net Financial Assets are less than zero), as the case may be, the
Estimated Net Financial Assets (the Base Purchase Price, as adjusted by the Net
Financial Assets, the "PURCHASE PRICE") and (ii) assume the Assumed Liabilities.
(b) As promptly as possible but no later than three (3) Business
Days prior to the Transfer Date, the Company shall deliver to Purchaser a
statement setting forth the amount estimated in good faith by the Company to be
the amount of the Net Financial Assets as of the Transfer Date (the "ESTIMATED
NET FINANCIAL ASSETS").
2.3 PAYMENT OF PURCHASE PRICE.
(a) At the Non-License Transfer, Purchaser shall pay to the Company
the sum of Seventy-Six Million Dollars ($76,000,000) of the Base Purchase Price
plus (if the Estimated Net Financial Assets are greater than zero) or minus (if
the Estimated Net Financial Assets are less than zero), as the case may be, the
Estimated Net Financial Assets, by wire transfer in immediately available funds
to an account or accounts which shall be designated by the Company not less than
three (3) Business Days prior to the Transfer Date.
(b) One (1) year after the date hereof (the "FIRST YEAR ANNIVERSARY
DATE"), Purchaser shall pay the Company the sum of Two Million Dollars
($2,000,000) of the Purchase Price, by wire transfer in immediately available
funds to an account or accounts which shall be designated by the Company not
less than three (3) Business Days prior to the First Year Anniversary Date.
(c) If the Closing shall not have occurred on or prior to the date
which is two (2) years after the date hereof (the "SECOND YEAR ANNIVERSARY
DATE"), Purchaser shall pay the Company the sum of Three Million Dollars
($3,000,000) of the Purchase Price, by wire transfer in immediately available
funds
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to an account or accounts which shall be designated by the Company not less than
three (3) Business Days prior to the Second Year Anniversary Date.
(d) The Purchase Price (less any amounts of the Purchase Price paid
to the Company at the Non-License Transfer, on the First Year Anniversary Date
and on the Second Year Anniversary Date) shall be paid by Purchaser to the
Company at the Closing by wire transfer of immediately available funds to an
account or accounts which shall be designated by the Company not less than three
(3) Business Days prior to the Closing Date.
(e) To the extent that any payments described in Section 2.3(a) or
Section 2.3(b) are not paid when due in accordance with the terms hereof, any
unpaid payments shall accrue interest at a rate per annum of twelve percent
(12%) until paid in full.
2.4 POST-CLOSING ADJUSTMENT.
(a) The parties agree that no later than seventy-five (75) days
after the Transfer Date (or such later date on which such statement reasonably
can be prepared and delivered in light of the compliance of Purchaser and the
Company with their obligations set forth in next two succeeding sentences), the
Company shall deliver to Purchaser, in the form received by the Company from
Gannett (i) a statement of the actual Net Financial Assets as of 11:59 p.m., New
York City time, on the day immediately preceding the Transfer Date (the "CLOSING
STATEMENT") certified by PriceWaterhouseCoopers L.L.P., independent accountants
for Gannett, to be prepared (except as otherwise provided in Section 9 of the
Disclosure Schedule to the Gannett Purchase Agreement) in conformity with GAAP
and on a basis consistent with the basis used in preparing the Unaudited
Financial Statements as of, and for the year ended, December 27, 1997, referred
to in Section 3.5 of the Gannett Purchase Agreement, except to the extent of any
position taken as the result of such statements being prepared on a consolidated
basis, and (ii) a determination of the amount by which the actual Net Financial
Assets are less than or greater than the Estimated Net Financial Assets.
Purchaser shall provide the Company and Gannett, and Gannett's independent
accountants, access at all reasonable times to the relevant personnel,
properties, books and records of the Business for such purposes and to assist
the Company and Gannett, and Gannett's independent accountants, in preparing the
Closing Statement. Purchaser's assistance shall include, without limitation, the
closing of the books of the Business as of the Transfer Date, the preparation of
schedules supporting the amounts set forth in the general ledger and other books
and records of the Business, and such other assistance as the Company, Gannett
or Gannett's independent accountants may reasonably request. During the
twenty-five (25) day period following the delivery by the Company of the Closing
Statement referred to in the first sentence
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of this Section 2.4(a), Purchaser and its independent accountants will be
permitted to review the working papers of the Company and of Gannett and its
independent accountants relating to the preparation of the Closing Statement to
the same extent as such working papers have been made available to the Company
by Gannett pursuant to the Gannett Purchase Agreement. If, within twenty-five
(25) days after delivery by the Company of the Closing Statement, Purchaser
notifies the Company that it disagrees with the Closing Statement, the Company
shall attempt to resolve the disagreement with Gannett. In the event the Company
and Purchaser cannot agree with respect to the Closing Statement within five (5)
days of the notice of disagreement provided by Purchaser to the Company, then
the determination shall be submitted for resolution promptly to an independent
nationally recognized accounting firm (the "ACCOUNTING FIRM"), jointly selected
by the Company and Purchaser, whose determination (the "ACCOUNTING FIRM
DETERMINATION") shall be instructed by the parties to be made within twenty (20)
days and be binding upon all parties hereto, and the fees and expenses of which
shall be borne equally by Purchaser and the Company to the extent that such fees
and expenses are allocable to the transactions contemplated by this Agreement.
The Purchaser agrees that the accounting firm selected by Gannett and the
Company pursuant to Section 2.3(a) of the Gannett Purchase Agreement shall be
the Accounting Firm hereunder as long as such firm has not been engaged by
Gannett or the Company during the three (3) year period prior to the date
hereof. In the event that (whether expressly or by failure of Purchaser to
provide notice of any disagreement within the applicable period) Purchaser
agrees with the determination of the final Net Financial Assets set forth in the
Closing Statement without submitting the matter for an Accounting Firm
Determination, the Net Financial Assets set forth in the Closing Statement shall
be the final determination of the Net Financial Assets. The amount of Net
Financial Assets as of 11:59 p.m., New York City time, on the day immediately
preceding the Closing Date, as definitively determined pursuant to this Section
2.4(a) is referred to herein as the "ACTUAL NET FINANCIAL ASSETS".
(b) If the Actual Net Financial Assets are greater than the Estimated
Net Financial Assets, then Purchaser shall pay the Company in cash, within two
(2) Business Days following the determination of the Actual Net Financial
Assets, an amount equal to such difference, plus interest on the amount of such
difference at the rate of eight percent (8%) per annum from the Transfer Date to
the date of such payment to the Company. If the Actual Net Financial Assets are
less than the Estimated Net Financial Assets, then the Company shall pay the
Purchaser in cash within two (2) Business Days following the determination of
the Actual Net Financial Assets, an amount equal to such difference, plus
interest on the amount of such difference at the rate of eight percent (8%) per
annum from the Transfer Date to the date of such payment to Purchaser. The
amounts paid pursuant to this Section 2.4(b) shall be by wire transfer of
immediately available
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funds for credit to the recipient at a bank account identified by such recipient
in writing.
2.5 ALLOCATION OF THE BASE PURCHASE PRICE.
The Company and Purchaser agree to allocate the Base Purchase Price
among the Stations for all purposes (including financial, accounting and tax
purposes) in accordance with Section 2.5 of the Disclosure Schedule. The Company
and Purchaser agree to engage Bond & Pecaro, a nationally recognized appraisal
firm, to appraise the classes of Assets of each Station in accordance with the
allocation for the Stations set forth in Section 2.5 of the Disclosure Schedule
and in accordance with Section 1060 of the Code and the Treasury Regulations
promulgated thereunder (the "ALLOCATION"). The Allocation shall be binding upon
Purchaser and the Company, and none of the parties hereto shall file, or cause
to be filed, any Tax Return, Internal Revenue Service Form 8594 or other form,
or take a position with any Tax authority or jurisdiction, that is inconsistent
with the Allocation without obtaining the prior written consent of the Company
or Purchaser, as the case may be. The fees and disbursements of the appraiser
engaged in connection with the Allocation as to the Assets of the Stations shall
be paid one-half (-1/2) by Purchaser and one-half (-1/2) by the Company.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY.
The Company represents and warrants to Purchaser as follows:
3.1 ORGANIZATION AND STANDING.
The Company is a corporation duly incorporated, validly existing,
and in good standing under the laws of the State of Maryland. The Company and,
to the Company's Knowledge, Gannett have all requisite corporate power and
authority to own, lease and operate their respective properties and assets and
to conduct their business as it is now being conducted. The Company is and, to
the Company's Knowledge, Gannett is, duly qualified to do business as a foreign
corporation and is in good standing under the laws of each state in which the
operation of its business or ownership of its assets makes such qualification
necessary, except where the failure to so qualify or be in good standing would
not reasonably be expected to have a Material Adverse Effect.
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<PAGE> 23
3.2 BINDING AGREEMENT.
The Company has all requisite corporate power and authority to enter
into this Agreement, to execute and deliver this Agreement and the other
Transaction Documents, to carry out its obligations hereunder and thereunder and
to consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and the other Transaction Documents by the
Company and the consummation by the Company of its obligations hereunder and
thereunder have been duly and validly authorized by all necessary corporate and
stockholder action on the part of the Company. This Agreement has been, and on
the Non-License Transfer Date and on the Closing Date the other Transaction
Documents will be, duly executed and delivered on behalf of the Company and,
assuming the due authorization, execution and delivery by Purchaser, constitutes
a legal, valid and binding obligation of the Company enforceable in accordance
with its terms, subject to applicable bankruptcy and similar laws affecting the
rights of creditors generally and to general principles of equity (whether
applied at law or equity).
3.3 ABSENCE OF CONFLICTING AGREEMENTS OR REQUIRED CONSENTS.
Except as set forth in Section 3.3 of the Disclosure Schedule, the
execution, delivery and performance by the Company of this Agreement and the
other Transaction Documents (and to the extent that the Assets are transferred
directly from Gannett to the Purchaser, to the Company's Knowledge, Gannett) do
not and will not (a) violate, conflict with or result in the breach or default
of any provision of the articles of incorporation or bylaws of the Company, (b)
conflict with or violate in any material respect any material Law or material
Governmental Order applicable to the Company or any of its properties or assets
or to the Assets or the Business, (c) except for (i) the notification
requirements of the HSR Act and (ii) such filings with, and orders of, the FCC
as may be required under the Communications Act and the FCC's rules and
regulations in connection with this Agreement and the transactions contemplated
hereby, require any material consent, approval, authorization or other order of,
action by, registration or filing with or declaration or notification to any
Governmental Authority, or (d) conflict with, result in any violation or breach
of, constitute a default (or event which with the giving of notice, or lapse of
time or both, would become a default) under, require any consent under, or give
to others any rights of termination, amendment, acceleration, suspension,
revocation or cancellation of, or result in the creation of any Encumbrance on
any of the Assets, or result in the imposition or acceleration of any payment,
time of payment, vesting or increase in the amount of compensation or benefit
payable, pursuant to any Material Contract.
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3.4 EQUITY INVESTMENTS.
The Assets do not include any capital stock of any corporation or
any equity interest in any Person.
3.5 FINANCIAL STATEMENTS.
(a) The Company has furnished, or prior to the Diligence Termination
Deadline will furnish, to Purchaser the balance sheets for each of the Stations
as of December 31, 1994, December 31, 1995, December 31, 1996, December 31,
1997, and December 31, 1998, and statements of operations for each of the
Stations for the years then ended (such financial statements are collectively
referred to herein as the "UNAUDITED FINANCIAL STATEMENTS"). Except as otherwise
disclosed in Section 3.5 of the Disclosure Schedule, to the Company's Knowledge,
the Unaudited Financial Statements (including any notes thereto) present fairly,
in all material respects, the financial position of the Stations, as of the
dates thereof and the results of operations for the Stations for the periods
then ended and have been prepared in conformity with GAAP.
(b) Except as set forth in Section 3.5 of the Disclosure Schedule,
to the Company's Knowledge, there are no liabilities or obligations, secured or
unsecured (whether absolute, accrued, contingent or otherwise, and whether due
or to become due), of any Station of a nature required by GAAP to be reflected
in a corporate balance sheet, except such liabilities and obligations (i) that
are adequately accrued or reserved against in the Unaudited Financial Statements
or disclosed in the notes thereto, (ii) that were incurred after December 31,
1998, either in the ordinary course of business consistent with past practice or
in connection with the transactions contemplated by this Agreement, or (iii)
that are immaterial in amount.
3.6 TITLE TO ASSETS; RELATED MATTERS.
To the Company's Knowledge, except for Permitted Exceptions or as
disclosed in Section 3.6 of the Disclosure Schedule (a) Gannett has good, valid
and marketable title (as measured in the context of their current uses) to, or,
in the case of leased or subleased assets, valid and subsisting leasehold
interests (as measured in the context of their current uses) in, or otherwise
has the right to use, all of the Assets, free and clear of all Encumbrances
(except for any assets sold or otherwise disposed of, or with respect to which
the lease, sublease or other right to use such Asset has expired or has been
terminated, in each case after the date hereof solely to the extent permitted
under Section 5.1(a) hereof), (b) each lease or sublease pursuant to which any
Leased Property is leased by Gannett is, to the Company's Knowledge, legal,
valid and binding on Gannett and the Company (as the case may
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be) and, to the Company's Knowledge, the other parties thereto and grants the
leasehold interest it purports to grant, including, without limitation, any
rights to nondisturbance and peaceful and quiet enjoyment that may be contained
therein and, to the Company's Knowledge, Gannett and each other party thereto is
in compliance in all material respects with the provisions of such leases and
subleases, (c) to the Company's Knowledge, the Assets, together with the
Excluded Assets, constitute all the assets and rights of Gannett and its
Affiliates used in or necessary for the operation of the Business as currently
conducted, (d) to the Company's Knowledge, except for Equipment scheduled to be
replaced by Gannett's capital expenditure budget, the Real Property, Leased
Property and Equipment is, in all material respects, in good operating condition
and repair (ordinary wear and tear excepted) taking into account the age
thereof, (e) to the Company's Knowledge, there are no contractual or legal
restrictions to which Gannett or the Company is a party or by which the Real
Property is otherwise bound that preclude or restrict in any material respect
Gannett's ability to use the Real Property for the purposes for which it is
currently being used and (f) no portion of the Real Property or Leased Property
is the subject of, or affected by, any condemnation, eminent domain or inverse
condemnation proceeding currently instituted or, to the Company's Knowledge,
threatened. At each of the Non-License Transfer and the Closing, as applicable,
the Company (or Gannett) shall sell, convey, assign, transfer and deliver to
Purchaser all of the Company's (or Gannett's) right, title and interest in and
to all of the Assets, free and clear of all Encumbrances other than Permitted
Exceptions and Encumbrances arising from Purchaser's acts. Section 1.1(d) of the
Disclosure Schedule contains a true and correct list of all Real Property owned
by Gannett used in the Business (other than the Excluded Assets).
3.7 ABSENCE OF CERTAIN CHANGES, EVENTS AND CONDITIONS.
To the Company's Knowledge, since June 30, 1998, except as otherwise
provided in or contemplated by this Agreement or as disclosed in Section 3.7 of
the Disclosure Schedule:
(a) other than in the ordinary course of business consistent with
past practice neither the Company nor Gannett has sold, transferred, leased,
subleased, licensed or otherwise disposed of any material assets used in the
Business, other than the sale of obsolete Equipment;
(b) (i) neither the Company nor Gannett has granted any increase, or
announced any increase, in the wages, salaries, compensation, bonuses,
incentives, pension or other benefits payable to any of the Business Employees,
including, without limitation, any increase or change pursuant to any Employee
Benefit Plan, or (ii) established, increased or accelerated the payment or
vesting of any benefits under any Employee Benefit Plan with respect to Business
Employees,
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in either case except (A) as required by Law, (B) that involve only increases
consistent with the past practices of Gannett or (C) as required under any
existing agreement or arrangement;
(c) neither the Company nor Gannett has made any material change in
any method of accounting or accounting practice or policy used by Gannett or the
Company with respect to the Stations, other than changes required by Law or
under GAAP;
(d) neither the Company nor Gannett has suffered any extraordinary
casualty loss or damage with respect to any material assets used in the
Business, whether or not covered by insurance;
(e) there has not been any Material Adverse Effect;
(f) except in connection with the transactions contemplated hereby,
the Business has been conducted in all material respects only in the ordinary
and usual course consistent with past practice;
(g) neither the Company nor Gannett has created, incurred, assumed
or guaranteed any Indebtedness, except for net borrowings under existing lines
of credit;
(h) other than in the ordinary course of business, neither the
Company nor Gannett has compromised, settled, granted any waiver or release
relating to, or otherwise adjusted any Action, material Liabilities or any other
material claims or material rights of the Business; and
(i) neither the Company nor Gannett has entered into any agreement,
contract, commitment or arrangement to do any of the foregoing.
3.8 LITIGATION.
Except as disclosed in Section 3.8 of the Disclosure Schedule, as of
the date hereof, (a) there are no Actions against the Company or, to the
Company's Knowledge, Gannett relating to the Business or the Assets pending, or,
to the Company's Knowledge, threatened to be brought by or before any
Governmental Authority, (b) neither the Company nor, to the Company's Knowledge,
Gannett is subject to any Governmental Orders (nor, are there any such
Governmental Orders threatened to be imposed by any Governmental Authority)
relating to the Business or the Assets, and (c) there is no Action pending or,
to the Company's Knowledge, threatened to be brought before any Governmental
Authority, that seeks to
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question, delay or prevent the consummation of the transactions contemplated
hereby.
3.9 INSURANCE.
Section 3.9 of the Disclosure Schedule lists all insurance policies
as of the date hereof relating to the Assets or the Business (the "INSURANCE
POLICIES"). Except as set forth in either Section 3.9 or Section 3.14 of the
Disclosure Schedule, (a) to the Company's Knowledge, all insurance policies
relating to the Assets or Business to which the Company or Gannett is a party or
under which the Assets or the Business is covered (or replacement policies
therefor) are in full force and effect and, to the Company's Knowledge, all
premiums due have been paid and are not in default, (b) to the Company's
Knowledge, no notice of cancellation or non-renewal with respect to, or
disallowance of any claim under, any such policy has been received by either the
Company or Gannett, and (c) to the Company's Knowledge, neither the Company nor
Gannett has been refused insurance with respect to the Business or Assets, nor,
to the Company's Knowledge, has coverage with respect to the Business or Assets
been previously canceled or limited by an insurer to which Gannett or the
Company has applied for such insurance or with which the Company or, to the
Company's Knowledge, Gannett has held insurance within the last three years.
3.10 MATERIAL CONTRACTS.
Section 3.10 of the Disclosure Schedule sets forth all Material
Contracts relating to the Stations, including, without limitation, all
amendments thereof, as of the date hereof. To the extent received by the Company
from Gannett, complete and accurate copies of all written Material Contracts
listed in Section 3.10 of the Disclosure Schedule and accurate summaries of the
material terms of all oral contracts and agreements (which would be Material
Contracts if in writing) have been delivered or made available to Purchaser
(except as otherwise noted therein). Except as set forth in Section 3.10 of the
Disclosure Schedule, to the Company's Knowledge, (a) each Material Contract and
each other contract or agreement that is material to the Business is legal,
valid and binding on Gannett and, to the Company's Knowledge, the other parties
thereto, (b) to the Company's Knowledge, neither the Company nor Gannett is in
default under any Material Contract or other contract or agreement that is
material to the Business and no event has occurred or failed to occur that, with
or without the giving of notice or the lapse of time or both, would result in
such a default and (c) to the Company's Knowledge, no other party to any
Material Contract or other contract or agreement that is material to the
Business has breached or is in default thereunder.
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<PAGE> 28
3.11 PERMITS AND LICENSES; COMPLIANCE WITH LAW.
(a) Except as disclosed in Section 3.11 of the Disclosure Schedule,
(i) to the Company's Knowledge, Gannett currently holds all the material
permits, licenses, authorizations, certificates, exemptions and approvals of
Governmental Authorities or other Persons including, without limitation,
Environmental Permits, necessary for the current operation and the conduct (as
it is being conducted prior to the Transfer Date) of the Business, other than
the FCC Licenses (which are provided for in Section 3.12 hereof) (collectively,
"PERMITS"), and all material Permits are in full force and effect, (ii) to the
Company's Knowledge, since November 1, 1996, Gannett has not received any
written notice from any Governmental Authority revoking, canceling, rescinding,
modifying or refusing to renew any material Permit and, (iii) to the Company's
Knowledge, Gannett is in material compliance with the requirements of all
material Permits.
(b) Except as disclosed in Section 3.11 of the Disclosure Schedule,
to the Company's Knowledge, (i) Gannett is in compliance in all material
respects with all Laws and Governmental Orders, other than the FCC Licenses, the
Communications Act and the rules and regulations of the FCC (which are provided
for in Section 3.12 hereof), applicable to the conduct of the Business as it is
being conducted prior to the Transfer Date, and (ii) Gannett has not been
charged, since November 1, 1996, by any Governmental Authority with a violation
of any Law or any Governmental Order relating to the Stations, which charge has
not been fully resolved and, to the extent required, accounted for.
3.12 FCC LICENSES.
Except as disclosed in Section 3.12 of the Disclosure Schedule, (a)
to the Company's Knowledge, Gannett holds, and immediately prior to the Closing
the Company will hold, the FCC Licenses listed in Section 3.12 of the Disclosure
Schedule, which FCC Licenses expire on the respective dates set forth in Section
3.12 of the Disclosure Schedule; (b) to the Company's Knowledge, Section 3.12 of
the Disclosure Schedule sets forth a true and complete list of any and all
pending applications filed with the FCC by Gannett, true and complete copies of
which (to the extent received from Gannett by the Company) have been delivered
to Purchaser or made available for inspection by Purchaser; (c) to the Company's
Knowledge, the FCC Licenses listed in Section 3.12 of the Disclosure Schedule
constitute all of the licenses and authorizations required under the
Communications Act and the current rules and regulations of the FCC in
connection with the operation of the Stations as currently operated; (d) to the
Company's Knowledge, the FCC Licenses are in full force and effect through the
dates set forth in Section 3.12 of the Disclosure Schedule, and there is not
pending or, to the Company's Knowledge, threatened any action by or before the
FCC to
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<PAGE> 29
revoke, suspend, cancel, rescind, modify, or refuse to renew in the ordinary
course any of the FCC Licenses; (e) to the Company's Knowledge, the Stations are
operating in compliance with the FCC Licenses and in compliance in all material
respects with the Communications Act and the current rules and regulations of
the FCC and have been assigned digital television frequencies; and (f) to the
Company's Knowledge, there exist no facts, conditions or events relating to
Gannett or the Company that would reasonably be expected to cause the revocation
of FCC Licenses or denial by the FCC of the application for consent to the
assignment of the FCC Licenses as provided in this Agreement or the Gannett
Purchase Agreement. To the Company's Knowledge, Gannett has filed all reports,
forms and statements, including, without limitation, construction permit
applications for digital television channels required to be filed by Gannett
with the FCC and maintained in its public files in accordance with the rules and
regulations of the FCC.
3.13 ENVIRONMENTAL MATTERS.
Except as disclosed in Section 3.13 of the Disclosure Schedule, to
the Company's Knowledge, (a) Hazardous Materials have not been Released on any
Real Property except in material compliance with applicable Law; (b) there have
been no events related to the Business or the Real Property that would
reasonably be expected to give rise to any material liability under any
Environmental Law; (c) the Business, the Real Property and the Leased Property
is now, and for the past five (5) years has been, in material compliance with
all applicable Environmental Laws and there are no extant conditions that would
reasonably be expected to constitute an impediment to such compliance in the
future; (d) the Business has disposed of all wastes arising from or otherwise
relating to its business, including those wastes containing Hazardous Materials,
in material compliance with all applicable Environmental Laws (including the
filing of any required reports with respect thereto) and Environmental Permits
and (e) there are no pending or, to the Company's Knowledge, threatened
Environmental Claims against Gannett relating to the Real Property.
3.14 EMPLOYEE BENEFIT MATTERS.
The Company has made available to Purchaser copies of all material
Employee Benefit Plans (including, without limitation, all plans governed by
ERISA, providing pension benefits or providing health, life insurance or
disability benefits) relating to the Stations), which plans are set forth in
Section 3.14 of the Disclosure Schedule. To the Company's Knowledge and except
as set forth in Section 3.14 of the Disclosure Schedule, all such Employee
Benefit Plans are in compliance with the terms of the applicable plan and the
requirements prescribed by applicable law currently in effect with respect
thereto (including Sections 4980B
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and 5000 of the Code) and, to the Company's Knowledge, Gannett has performed in
all material respects all obligations required to be performed by it under, and
is not in default under or in violation of, any of the terms of such Employee
Benefit Plans where any such noncompliance, nonperformance, default or violation
would, individually or in the aggregate, be reasonably expected to result in
liability in excess of Twenty-Five Thousand Dollars ($25,000). To the Company's
Knowledge, Gannett has no post-retirement welfare obligations with respect to
the Business. To the Company's Knowledge, Gannett has not incurred, and, to the
Company's Knowledge, no event, transaction or condition has occurred or exists
which is reasonably expected to result in the occurrence of any liability to the
Pension Benefit Guaranty Corporation (other than contributions to the plan and
premiums to the Pension Benefit Guaranty Corporation which, in either event, are
not in default) or any "withdrawal liability" within the meaning of Section 4201
of ERISA, or any other liability pursuant to Title I or IV of ERISA or the
penalty, excise tax or joint and several liability provisions of the Code
relating to employee benefit plans, in any such case relating to any Employee
Benefit Plan or any pension plan maintained by any company that during the last
five years was or currently would be treated as a single employer with the
Company or Gannett, as the case may be, under Section 4001 of ERISA or Section
414 of the Code (an "ERISA AFFILIATE"), where individually or in the aggregate,
in any of such events, any such liability would be in excess of Twenty-Five
Thousand Dollars ($25,000). To the Company's Knowledge, except as set forth in
Section 3.14 of the Disclosure Schedule and except for such matters that would
not, individually or in the aggregate, reasonably be expected to result in
liability in excess of Twenty-Five Thousand Dollars ($25,000), each Employee
Benefit Plan relating to the Stations intended to be "qualified" within the
meaning of Section 401(a) of the Code has received a favorable determination
letter that such plan is so qualified and the trusts maintained thereunder are
exempt from taxation under Section 501(a) of the Code and, to the Company's
Knowledge, is so qualified, and no such Employee Benefit Plan holds employer
securities. To the Company's Knowledge and except as set forth in Section 3.14
of the Disclosure Schedule, neither Gannett nor any ERISA Affiliate has ever
made or been obligated to make, or reimbursed or been obligated to reimburse
another employer for, contributions to any multiemployer plan (as defined in
ERISA Section 3(37)). To the Company's Knowledge and except as set forth in
Section 3.14 of the Disclosure Schedule, the Employee Benefit Plans are not
presently under audit or examination (and have not received notice of a
potential audit or examination) by any governmental authority, and no matters
are pending with respect to the Qualified Plan under any governmental compliance
programs. To the Company's Knowledge, with respect to each Employee Benefit Plan
of the Stations, there have been no violations of Code Section 4975 or ERISA
Sections 404 or 406 as to which successful claims would, individually or in the
aggregate, result in liability in excess of Twenty-Five Thousand Dollars
($25,000) for Gannett, the
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Company or any Person required to be indemnified by either of them. To the
Company's Knowledge, except as set forth in Section 3.14 of the Disclosure
Schedule, and except as expressly provided in this Agreement, the consummation
of the transactions contemplated by this Agreement will not (i) entitle any
current or former employee or officer of the Business to severance pay,
unemployment compensation or other payment, or (ii) accelerate the time of
payment or vesting, or increase the amount of compensation due any such employee
or officer. To the Company's Knowledge, there are no pending or threatened or
anticipated claims by or on behalf of any Employee Benefit Plan relating to the
Stations, by any employee or beneficiary covered under any such plan, or
otherwise involving any such plan (other than routine claims for benefits) where
any such pending, threatened or anticipated claims would, individually or in the
aggregate, reasonably be expected to result in liability in excess of
Twenty-Five Thousand Dollars ($25,000). The Twenty-Five Thousand Dollars
($25,000) liability threshold in this Section 3.14 is intended to apply only to
this Section 3.14, and is in no way intended to be used in defining materiality
anywhere in this Agreement.
3.15 LABOR RELATIONS.
To the Company's Knowledge, Section 3.15 of the Disclosure Schedule
sets forth a list of all labor organizations recognized as representing the
employees of the Business. Complete and accurate copies of all collective
bargaining agreements and other labor union contracts relating to employees of
the Stations and any such labor organizations have been delivered or made
available to Purchaser. Except as disclosed in Section 3.8 or Section 3.15 of
the Disclosure Schedule, (a) to the Company's Knowledge, there are no collective
bargaining agreements or other labor union contracts applicable to employees of
the Business, (b) to the Company's Knowledge, there are no strikes, slowdowns or
work stoppages pending or, to the Company's Knowledge, threatened between
Gannett and any employees of the Business, and Gannett has not experienced any
such strike, slowdown, or work stoppage within the past two (2) years, in each
case, as of the date of the Gannett Purchase Agreement, (c) to the Company's
Knowledge, there are no pending or threatened grievance or arbitration
proceedings arising under any collective bargaining agreements or labor
contracts affecting any employees of the Business, (d) to the Company's
Knowledge, there are no unfair labor practice complaints pending or, to the
Company's Knowledge, threatened against the Business relating to employees of
the Business before the National Labor Relations Board or any other Governmental
Authority or, to the Company's Knowledge, any current union representation
questions involving employees of the Business, (e) to the Company's Knowledge,
Gannett is in compliance in all material respects with its obligations under all
Laws and Governmental Orders governing its employment practices with respect to
employees of the Business, including, without limitation,
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provisions relating to wages, hours and equal opportunity, employment
discrimination, workers' compensation, family and medical leave, the Immigration
Reform and Control Act, and occupational safety and health requirements, (f) to
the Company's Knowledge, all Persons classified by Gannett as independent
contractors with respect to the Business do satisfy the requirements of law to
be so classified, and, to the Company's Knowledge, Gannett has fully and
accurately reported their compensation on IRS Forms 1099 when required to do so,
and (g) to the Company's Knowledge, there is no charge or compliance proceeding
actually pending or, to the Company's Knowledge, threatened against the Company
or Gannett with respect to employees of the Business before the Equal Employment
Opportunity Commission or any state, local, or foreign agency responsible for
the prevention of unlawful employment practices.
3.16 INTELLECTUAL PROPERTY.
To the Company's Knowledge, Section 3.16 of the Disclosure Schedule
includes a complete list of all call letters of the Stations (the "CALL
LETTERS"). Except as disclosed in Section 3.16 of the Disclosure Schedule, to
the Company's Knowledge, (a) the rights of Gannett, and immediately prior to the
Transfer Date, the Company, in or to the Call Letters and, to the Company's
Knowledge, the other Intellectual Property do not conflict with or infringe on
the rights of any other Person, (b) the Company has not and, to the Company's
Knowledge, Gannett has not, received any claim from any Person that the rights
of Gannett or the Company in or to the Intellectual Property conflict with or
infringe on the rights of any other Person and, to the Company's Knowledge, no
such claim is threatened, (c) to the Company's Knowledge, Gannett owns (free and
clear of any Encumbrances other than Permitted Exceptions), is licensed or
otherwise has the right to use all Intellectual Property necessary for the
conduct of the Business as currently conducted by Gannett (free and clear of any
Encumbrances other than Permitted Exceptions), except where the failure to have
such rights would not reasonably be expected to impair the operations of the
Business in any material respect and (d) to the Company's Knowledge, no other
Person is infringing or diluting the rights of Gannett with respect to the
Intellectual Property.
3.17 TAXES.
Except as disclosed in Section 3.17 of the Disclosure Schedule and
except relating exclusively to the Gannett Maine Media Business, to the
Company's Knowledge (a) all material Tax Returns required to be filed by Gannett
(or to the extent required to be filed by the Company) relating to the Business
have been timely filed and all such Tax Returns are correct and complete in all
material respects; (b) all Taxes required to be paid by Gannett (or to the
extent required to be paid by the Company) relating to the Business, whether or
not shown as due on
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such Tax Returns, have been timely paid other than such Taxes, if any, as are
described in Section 3.17 of the Disclosure Schedule and are being contested in
good faith; (c) there is no action, suit, proceeding, investigation, audit or
claim pending or, to the Company's Knowledge, threatened with respect to Taxes
of Gannett or the Company relating to the Stations or for which Gannett or the
Company may be liable, and no adjustment relating to such Taxes of Gannett or
the Company relating to the Stations has been proposed in writing by any Tax
authority and remains unresolved; (d) there are, and immediately prior to the
Transfer Date there will be, no Tax liens on any of the assets of the Business
(other than liens for Taxes that are not yet due and payable); and (e) all Taxes
that the Business is required to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper Tax
authority.
3.18 COMMISSIONS.
There is no broker or finder or other Person who has any valid claim
against the Company, Purchaser, or any of their respective Affiliates or any of
their respective assets for a commission, finders' fee, brokerage fee or other
similar fee in connection with this Agreement, or the transactions contemplated
hereby, by virtue of any actions taken by on or behalf of the Company, its
stockholders or the Company's officers, employees or agents.
3.19 AFFILIATE TRANSACTIONS.
Except as set forth in Section 3.19 of the Disclosure Schedule or as
expressly otherwise provided or permitted in this Agreement, to the Company's
Knowledge, since December 27, 1997, Gannett has not engaged in any transaction
with any Affiliate thereof that was material to the Business, and, to the
Company's Knowledge, Gannett is not a party to any material agreements or
arrangements relating to the Stations with any Affiliates that will continue in
effect after the Transfer Date for the Purchaser that are not immediately
terminable by the Purchaser without payment of any penalty or premium.
3.20 GANNETT PURCHASE AGREEMENT.
The Company and its Affiliates have not waived any of their rights
or conditions under the Gannett Purchase Agreement related to the Stations.
Neither the Company nor Gannett is in material breach of, and has not defaulted
under, any of the terms of the Gannett Purchase Agreement. The Gannett Purchase
Agreement constitutes a legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to applicable bankruptcy and
similar laws affecting the rights of creditors generally and to general
principles of equity (whether applied at law or equity). The Company is not and,
to Company's
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Knowledge, Gannett is not, subject to any judgment, award, order, writ,
injunction, arbitration decision or decree which prohibits the performance of
the Gannett Purchase Agreement or the consummation of any transaction
contemplated under the Gannett Purchase Agreement. There is no Action (a)
pending or, to the Company's Knowledge, threatened against or affecting the
Company or (b) to the Company's Knowledge, pending or threatened against or
affecting Gannett in any federal, state or local court, or before any
Governmental Authority or arbitrator that would adversely affect the ability of
the Company or Gannett to consummate, or that would prohibit, the transactions
contemplated under the Gannett Purchase Agreement related to the Stations.
3.21 ACCURACY AND COMPLETENESS OF REPRESENTATIONS AND WARRANTIES.
No representation or warranty made by the Company in this Article 3,
to the Company's Knowledge, contains any untrue statement of a material fact or
omits a material fact necessary in order to make the representation or warranty
not misleading.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser represents and warrants to the Company as follows:
4.1 ORGANIZATION AND STANDING.
Purchaser is a corporation duly incorporated, validly existing, and
in good standing under the laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to own, lease and operate its properties
and assets and to conduct its business.
4.2 BINDING AGREEMENT.
Purchaser has all requisite corporate power and authority to enter
into this Agreement, to execute and deliver this Agreement and the other
Transaction Documents, to carry out its obligations hereunder and thereunder and
to consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and the other Transaction Documents by Purchaser
and the consummation by Purchaser of its obligations hereunder and thereunder
have been duly and validly authorized by all necessary corporate and stockholder
action on the part of Purchaser. This Agreement has been and, on the Non-License
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Transfer Date and the Closing Date, the other Transaction Documents will be,
duly executed and delivered on behalf of Purchaser and, assuming the due
authorization, execution and delivery by the Company, constitutes a legal, valid
and binding obligation of Purchaser enforceable in accordance with its terms,
subject to applicable bankruptcy and similar laws affecting the rights of
creditors generally and to general principles of equity (whether applied at law
or equity).
4.3 ABSENCE OF CONFLICTING AGREEMENTS OR REQUIRED CONSENTS.
The execution, delivery and performance by Purchaser of this
Agreement and the other Transaction Documents do not and will not (a) violate,
conflict with or result in the breach or default of any provision of the
certificate or articles of incorporation or by-laws of Purchaser, (b) materially
conflict with or materially violate any material Law or material Governmental
Order applicable to Purchaser or any of its properties or assets, (c) except for
(i) the notification requirements of the HSR Act, (ii) such filings with, and
orders of, the FCC as may be required under the Communications Act and the FCC's
rules and regulations in connection with this Agreement and the transactions
contemplated hereby as provided for in Section 4.7 hereof (including Section 4.7
of the Disclosure Schedule) or otherwise hereunder, and (iii) such matters that
would not reasonably be expected to materially impair or delay the consummation
of the transactions contemplated hereby, require any consent, approval,
authorization or other order of, action by, registration or filing with or
declaration or notification to any Governmental Authority or any other Person or
(d) except for such matters that would not reasonably be expected to materially
impair or delay the consummation of the transaction contemplated hereby,
conflict with, result in any violation or breach of, constitute a default (or
event which with the giving of notice, or lapse of time or both, would become a
default) under, require any consent under, or give to others any rights of
termination, amendment, acceleration, suspension, revocation or cancellation of,
or result in the creation of any Encumbrance on any of the Purchaser's assets
pursuant to, any note, bond, mortgage or indenture, contract, agreement, lease,
sublease, license or permit, or franchise to which Purchaser is a party or by
which its assets are bound.
4.4 LITIGATION.
Except as described in Section 4.4 of the Disclosure Schedule, there
are no Actions pending or, to Purchaser's knowledge, threatened to be brought by
or before any Governmental Authority, against Purchaser or any of its Affiliates
that (a) seek to question, delay or prevent the consummation of the transactions
contemplated hereby or (b) would reasonably be expected to affect adversely the
ability of Purchaser to fulfill its obligations hereunder, including without
limitation, Purchaser's obligations under Articles 1 and 2 hereof.
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4.5 COMMISSIONS.
There is no broker or finder or other Person who has any valid claim
against the Company, Purchaser, any of their respective Affiliates or any of
their respective assets for a commission, finders' fee, brokerage fee or other
similar fee in connection with this Agreement, or the transactions contemplated
hereby, by virtue of any actions taken by on or behalf of Purchaser, or its
officers, employees or agents.
4.6 FINANCING.
Purchaser will at the Non-License Transfer and the Closing have
sufficient funds to pay the amounts of the Purchase Price payable at the
Non-License Transfer and the Closing pursuant to this Agreement and otherwise to
satisfy its obligations hereunder.
4.7 PURCHASER'S QUALIFICATION.
Except as set forth in Section 4.7 of the Disclosure Schedule, (a)
Purchaser does not know of any fact or circumstance that could reasonably be
expected to result in a finding by the FCC that Purchaser is not qualified
legally, financially or otherwise to be the licensee of the Stations as its
operations are now being conducted and (b) except for the FCC's Duopoly Rule, a
waiver of which will be requested by Purchaser (or Purchaser shall be
restructured to comply with), Purchaser does not know of any policy, rule,
regulation or ruling of the FCC that could reasonably be expected to be violated
by the acquisition of the Stations by Purchaser.
4.8 ACCURACY AND COMPLETENESS OF REPRESENTATIONS AND WARRANTIES.
No representation or warranty made by Purchaser in this Article 4,
to the Purchaser's Knowledge, contains any untrue statement of a material fact
or omits a material fact necessary in order to make the representation or
warranty not misleading.
ARTICLE 5. COVENANTS AND AGREEMENTS.
5.1 CONDUCT OF THE BUSINESS PRIOR TO CLOSING; ACCESS.
The Company covenants as follows:
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(a) Between the date hereof and the Closing, except as contemplated
by this Agreement or as described in Section 5.1 of the Disclosure Schedule, or
except with the written consent of Purchaser (which consent shall not be
unreasonably withheld), the Company will (or will cause Gannett to the extent
possible under the Gannett Purchase Agreement) operate the Business in the
ordinary course of business consistent with past practice and shall use
commercially reasonable efforts to (i) preserve intact the Business and preserve
the Business's relationships with customers, suppliers, licensees, licensors,
the networks with whom the Stations are affiliated and others having business
dealings with the Stations; (ii) maintain the Business's inventory of supplies,
parts and other materials and keep its books of account, records and files, in
each case in the ordinary course of business consistent with past practice;
(iii) maintain the material items of Real Property, Leased Property and
Equipment substantially in their present condition, ordinary wear and tear
excepted; (iv) pay or discharge all cash and barter obligations in the ordinary
course of business; (v) bring current as of the day immediately preceding the
Transfer Date all payments due and payable under Program Contracts in accordance
with their terms as in effect on the date hereof (with respect to Program
Contracts existing as of the date hereof) or on the date originally entered into
(with respect to Program Contracts entered into after the date hereof); and (vi)
maintain its corporate existence.
(b) Without limiting the generality of Section 5.1(a), between the
date hereof and the Closing, except as contemplated by this Agreement or as
described in Section 5.1 of the Disclosure Schedule, or except with the written
consent of Purchaser (which consent shall not be unreasonably withheld, except
in the case of any consent relating to the entering into of any Program Contract
providing for payments in excess of Thirty Thousand Dollars ($30,000) or having
a term greater than one (1) year (other than any Program Contract that will be
fully satisfied, discharged and performed prior to the Closing), in which case
Purchaser may grant or withhold its consent in Purchaser's absolute discretion
(and the parties hereto further agree that no such consent unreasonably withheld
shall be taken into account in any determination of whether a Material Adverse
Effect has occurred), and any consent shall be deemed given unless withheld in
writing no later than three (3) Business Days after Purchaser's receipt of a
written request for such consent), the Company will not (and, to the extent
provided for in the Gannett Purchase Agreement, will cause Gannett not to, to
the extent possible under the Gannett Purchase Agreement) with respect to the
Business:
(i) create, assume or subject any of the assets of the
Business to any Encumbrance, other than Permitted Exceptions and Encumbrances
that will be released at or prior to the Non-License Transfer and the Closing;
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(ii) make any material changes in the operations of the
Business;
(iii) other than, in each case, in the ordinary course of
business consistent with past practice, sell, transfer, lease, sublease, license
or otherwise dispose of any material assets of the Business, other than the sale
of obsolete Equipment that has been or is replaced with Equipment of like kind;
(iv) (A) grant any increase, or announce any increase, in the
wages, salaries, compensation, bonuses, incentives, pension or other benefits
payable to any of the officers or key employees of the Business, including,
without limitation, any increase or change pursuant to any Employee Benefit
Plan, or (B) establish or increase or promise to increase or accelerate the
payment or vesting of any benefits under any Employee Benefit Plan with respect
to officers or employees of the Business, in the case of either (A) or (B)
except (I) as required by Law, (II) that involve only increases consistent with
the past practices of the Company or Gannett (or as otherwise required or
allowed under the Gannett Purchase Agreement, as the case may be, but in no
event more than five percent (5%), (III) as required under any existing
agreement or arrangement, (IV) that involve increases related to promotions to
the extent such increases result in the compensation and benefits of the
relevant employee being consistent with the compensation and benefits provided
to the holder of such position in the past or (V) that relate to the
supplemental executive retirement plans identified in Section 3.14 of the
Disclosure Schedule;
(v) make any change in any method of accounting or accounting
practice or policy used by the Company or Gannett in respect of the Business,
other than as required by law or under GAAP;
(vi) fail to maintain in full force and effect all of its
existing casualty, liability or other insurance relating to the Stations through
the Non-License Transfer and the Closing in amounts at least equal to those in
effect on the date hereof;
(vii) (A) amend the payment terms of any Program Contract to
provide that payments that would otherwise be made prior to the Non-License
Transfer or the Closing are made after the Non-License Transfer or the Closing
or (B) acquire, enter into, modify, change or extend the term of (x) any Program
Contract providing for payments in excess of Ten Thousand Dollars ($10,000) or
with a term greater than one year or (y) Program Contracts not subject to clause
(x) that in the aggregate provide for payments in excess of Two Hundred Thousand
Dollars ($200,000);
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(viii) acquire, enter into, modify, change or extend the term
of any Material Contract, provided that this clause (viii) will not apply to the
acquisition or entering into of any new Material Contract not otherwise subject
to clauses (i) to (vii) or clauses (ix) to (xv) of this Section 5.1(b) with
respect to which all Liabilities of the Company thereunder relating to the
Stations will be fully satisfied, discharged and performed prior to the Transfer
Date with no adverse effect on Purchaser;
(ix) compromise, settle, grant any waiver or release relating
to, or otherwise adjust, any material Action, material Liabilities or any other
material claims or material rights relating to the Stations;
(x) enter into any new agreement, contract, commitment or
arrangement with any Affiliate of the Company that will be binding upon
Purchaser, the Assets or the Stations after the Non-License Transfer or the
Closing Date;
(xi) apply to the FCC for any construction permit that would
adversely affect the Stations present operations, or make any material change in
the Stations buildings, leasehold improvements, or fixtures;
(xii) except with respect to promotion during ratings sweep
periods (which shall not be subject to this clause (xii)), enter into any trade,
barter or similar agreements (other than Program Contracts) for the sale of
advertising time that would be binding on the Stations or Purchaser after the
Non-License Transfer or the Closing for any property or services in lieu of or
in addition to cash that requires the provision of broadcast time having a value
that exceeds Ten Thousand Dollars ($10,000) in any individual agreement or Two
Hundred Thousand Dollars ($200,000) in the aggregate;
(xiii) take any action, or refrain from taking any action,
that would constitute a material breach of, constitute a default (or event which
with the giving of notice, or lapse of time or both, would become a default)
under, or give to others any rights of termination, amendment, acceleration,
suspension, revocation or cancellation of, any Material Contract;
(xiv) enter into or renew any time sales agreement except in
the ordinary course of business for a term not exceeding twelve (12) months; or
(xv) enter into any agreement, contract, commitment or
arrangement to do any of the foregoing.
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(c) Pending the Non-License Transfer and the Closing, the Company
shall:
(i) to the extent allowed by Gannett under the Gannett Purchase
Agreement or otherwise, give to Purchaser and its representatives reasonable
access during normal business hours to all of the employees, properties, books
and records of Gannett or the Company that relate to the Stations and, to the
extent available from, or allowed by, Gannett pursuant to the Gannett Purchase
Agreement or otherwise, furnish Purchaser and its representatives with such
information concerning the Stations as Purchaser may reasonably require,
including such access and cooperation as may be necessary to allow Purchaser and
its representatives to interview the employees, to examine the books and records
of the Stations, and to inspect the Real Property and Equipment (which right of
access shall not be exercised in any way which would unreasonably interfere with
the normal operations, business or activities of the Stations);
(ii) to the extent allowed by Gannett under the Gannett Purchase
Agreement or otherwise, cooperate in all reasonable respects with Purchaser's
request to conduct an audit of the financial information of the Stations as
Purchaser may reasonably determine is necessary to satisfy Purchaser's senior
lenders and Purchaser's public company reporting requirements pursuant to the
Securities Act of 1933 or the Securities Exchange Act of 1934 including, without
limitation, (A) using commercially reasonable efforts to obtain the consent of
the auditors of Gannett and/or the Company to permit Purchaser and Purchaser's
auditors to have access to such auditors' work papers, (B) consenting to such
access by Purchaser and (C) using commercially reasonable efforts to cause
Gannett to execute and deliver to Purchaser's independent auditors such
customary management representation letters as the auditors may require as a
condition to such auditors ability to deliver an unqualified report upon the
audited financial statements of the Stations;
(iii) to the extent provided by Gannett pursuant to the Gannett
Purchase Agreement or otherwise, furnish to Purchaser within twenty (20) days
after the end of each month ending between the date of this Agreement and the
Transfer Date an unaudited statement of income and expense and a balance sheet
for the Stations for the month just ended; and
(iv) to the extent provided by Gannett pursuant to the Gannett
Purchase Agreement or otherwise, from time to time, furnish to Purchaser such
additional information (financial or otherwise) concerning the Stations as
Purchaser may reasonably request (which right to request information shall not
be exercised in any way which would unreasonably interfere with the normal
operations, business or activities of the Stations).
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(d) The Company will deliver to Purchaser, within ten (10) Business
Days after delivery or receipt, copies of any reports, applications or
communications to or from the FCC or its staff related to the Stations which are
delivered or received between the date of the Gannett Purchase Agreement and the
Transfer Date.
5.2 POST-CLOSING COVENANTS AND AGREEMENTS, AND OTHER EMPLOYEE BENEFIT
MATTERS.
(a) Purchaser shall at all reasonable times after reasonable notice
to Purchaser from and after the Transfer Date, make available without cost, for
inspection and/or copying by the Company and any Person that was a stockholder
of Gannett during any of the tax years (or portions thereof) immediately
preceding the closing under the Gannett Purchase Agreement for which the
relevant statute of limitations (including any waiver thereof) has not expired,
or their respective representatives, the books and records of the Business
transferred to Purchaser from the Company at the Non-License Transfer or the
Closing, as the case may be. Such books and records shall be preserved by
Purchaser until the later of the closing by tax audit of, or the expiration of
the relevant statute of limitations (including any waiver thereof) with respect
to, all open tax periods of Gannett and such stockholders prior to and including
the time immediately prior to the Transfer Date. After the period set forth
above, Purchaser may destroy the books and records in its possession unless,
before expiration of such notice period the Company objects in writing to the
destruction of any or all of such books and records, in which case, such books
and records shall be delivered to the Company. Notwithstanding the foregoing,
Purchaser shall continue to preserve and, at all reasonable times after the
Transfer Date, to make available without cost, for inspection and/or copying by
any Person that was a trustee or other fiduciary under the Employee Benefit
Plans identified in Section 5.2(a) of the Disclosure Schedule, the books and
records of such Employee Benefit Plan transferred to Purchaser from the Company
at the Non-License Transfer or the Closing, as the case may be, and the books
and records of the Business relating thereto.
(b) At least five (5) Business Days prior to the Transfer Date, the
Company shall provide to Purchaser a true and complete list of the names, titles
and annual compensation of each of the employees (including inactive employees)
of the Stations. Effective as of the Transfer Date, except for such employees of
the Stations which are retained by the Company pursuant to the terms of the Time
Brokerage Agreement who shall be offered employment by Purchaser as of the
Closing Date, and the employees identified in Section 5.2(b) of the Disclosure
Schedule (the "EXCLUDED EMPLOYEES"), Purchaser shall offer employment to all
then employees of the Stations, on such terms and conditions as Purchaser shall
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establish (except that base cash compensation shall be comparable to their
existing base cash compensation), subject to the terms of any collective
bargaining agreement assumed by Purchaser under Section 5.2(e) and any
employment agreements with specific Business Employees, and shall assume
responsibility for all inactive employees of the Stations, subject to the terms
of this Section 5.2 and the collective bargaining agreements assumed by
Purchaser under Section 5.2(e); provided, however, that any employee of the
Stations who is not actively employed on the Transfer Date shall be offered
employment by Purchaser following the end of any inactive period (whether on
account of leave, layoff, injury or disability) but only to the extent that the
Company would have been obligated to offer active employment to such person upon
the end of such inactive period under the Gannett Purchase Agreement.
Notwithstanding the foregoing, Purchaser shall not have any obligation to offer
employment to any employees of the Corporate Office ("CORPORATE OFFICE
EMPLOYEES"), as described in Section 5.2(b) of the Disclosure Schedule. Nothing
in this Section 5.2(b) is intended to limit the ability of Purchaser to
terminate the employment of any employee after the Transfer Date.
(c) Subject to applicable law and the terms of any collective
bargaining agreement assumed pursuant to this Agreement, if any, Purchaser shall
establish and maintain for a period of one (1) year after the Transfer Date or
the term of their employment by Purchaser, whichever is less, for employees of
the Stations as of the Transfer Date, benefits that, in the aggregate, are no
less favorable than the benefits maintained by the Purchaser for similarly
situated employees of Purchaser, provided that the foregoing will not prohibit
or in any manner restrict Purchaser from terminating or changing the individual
terms of employment of any Business Employee or require Purchaser to maintain
any specific benefits or Employee Benefit Plans. Purchaser shall give employees
of the Stations as of the Transfer Date and former and inactive Business
Employees credit for their service with the Company and Gannett or any of their
Subsidiaries prior to the Transfer Date, to the same extent that such service
would have been credited by Purchaser (if they had been employed by Purchaser
for such period of service), for all purposes under all employee benefit plans
or arrangements maintained by Purchaser for current, former and inactive
Business Employees (including any waiting periods). In addition, Purchaser
shall, if applicable, (i) cause any pre-existing condition limitation to be
waived and (ii) give effect, in determining any deductible and maximum
out-of-pocket limitations, to claims incurred and amounts paid by, and amounts
reimbursed to current, former and inactive Business Employees with respect to
similar plans maintained by the Company or Gannett prior to the Transfer Date.
(d) Purchaser will assume and indemnify and hold harmless the
Company Indemnified Parties against all Liabilities with respect to severance
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benefits arising in connection with or following the Transfer Date pursuant to
the agreements set forth in Sections 3.14.1 and 3.14.2 of the Disclosure
Schedule (subject to the right of recovery set forth in Section 5.9), or
pursuant to any collective bargaining agreement or other agreements with
Business Employees assumed either pursuant to this Agreement or by operation of
law. With respect to all current and inactive Business Employees immediately
prior to the Transfer Date not covered by the agreements referenced in the
immediately preceding sentence, (i) for a period ending not less than one year
after the Transfer Date, Purchaser will provide such Business Employees with the
same severance benefits as Purchaser provides for similarly situated employees
of Purchaser (which benefits, as of the date hereof, are described in Section
5.2(d) of the Disclosure Schedule) and (ii) Purchaser will assume and indemnify
and hold harmless the Company Indemnified Parties against all Liabilities with
respect to severance benefits of Purchaser arising in connection with or
following the Transfer Date.
(e) From and after the Transfer Date, Purchaser shall assume all of
the collective bargaining agreements and labor union contracts described in
Section 5.2(e) of the Disclosure Schedule (including, without limitation,
pursuant to the specified provisions of the collective bargaining agreements set
forth in Section 5.2(e) of the Disclosure Schedule) with respect to any Business
Employees existing immediately prior to the Transfer Date.
(f) From and after the Transfer Date, Purchaser shall assume
responsibilities of all Employee Benefits Plans described in Section 5.2(f) of
the Disclosure Schedule that provide post-retirement life insurance or health,
or short-term or long-term disability benefits and be responsible for any
benefits under such Employee Benefit Plans (i) to which any current, former or
inactive Business Employee, or a beneficiary or dependent of any current, former
or inactive Business Employee ("BENEFICIARY"), has already become entitled, or
(ii) to which any current, former or inactive Business Employee has already
become qualified by reason of age and years of service as of the Transfer Date,
to the extent such persons are identified in Section 5.2(f) of the Disclosure
Schedule (which section shall be updated, if necessary, at the Non-License
Transfer or the Closing, as applicable). From and after the Transfer Date,
Purchaser shall also pay to the Business Employees listed in Section 5.2(f) of
the Disclosure Schedule the supplemental retirement benefits provided under the
applicable Gannett supplemental retirement plan.
(g) From and after the Transfer Date, Purchaser shall assume and be
responsible for any workers' compensation benefits payable to a Business
Employee, Beneficiary or dependent of a Business Employee on or after the
Transfer Date, including any such benefits that are attributable to any injury
or
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illness that occurred or existed prior to the Transfer Date to the extent not
covered by the Company's workers' compensation insurance policy.
(h) For a period of ninety (90) days after the Transfer Date,
Purchaser shall not implement any employment terminations, layoffs or hours
reductions or take any other action which could result in a "plant closing" or
"mass layoff", as those terms are defined in the Worker Adjustment and
Retraining Notification Act of 1988 ("WARN") or similar events under applicable
state law, affecting in whole or in part any facility, site of employment or
operating unit, or any employee employed by the Stations, or which could require
either Purchaser or the Company to give notice or take any other action required
by WARN or applicable state law.
(i) From and after the Transfer Date, Purchaser shall assume the
Company's and Gannett's obligations and liabilities with respect to COBRA
continuation coverage under Section 4980B of the Code and Section 601 of ERISA
("CONTINUATION COVERAGE") with respect to Business Employees and shall provide
Continuation Coverage to the Business Employees under Purchaser's health and
medical plans (A) with respect to any Business Employees who remain employed
with either the Company or Gannett through the Transfer Date, for a period of
eighteen (18) months after the Transfer Date or, if earlier, until becoming
eligible for comparable coverage from another employer and (B) with respect to
any Business Employees whose employment shall have terminated prior to the
Transfer Date, for remainder of the period with respect to which Continuation
Coverage would otherwise have been available to them had the Company or Gannett,
as the case may be, continued to maintain a group health plan; provided, that
consistent with the Continuation Coverage, Purchaser shall have the right to
charge each Business Employee for such Business Employee's portion of any
Continuation Coverage.
5.3 COOPERATION.
Following the execution of this Agreement, Purchaser and the
Company agree as follows:
(a) The parties and their Affiliates shall each use their
reasonable efforts, and shall cooperate fully with each other in preparing,
filing, prosecuting, and taking any other actions with respect to, any filings
(other than filings with the FCC, which are provided for in clause (b) below),
applications, requests, or actions which are or may be necessary to obtain the
consents, approvals, authorizations or other orders of any Governmental
Authority which are or may be necessary in order to accomplish the transactions
contemplated by this Agreement; and, without limiting the generality of the
foregoing, the parties and their Affiliates shall use
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their respective reasonable efforts to prepare and file as promptly as
practicable, but in any event no later than five (5) Business Days after the
date hereof (unless the Company designates in writing that the filing shall be
delayed to a date no later than the first (1st) Business Day after the Diligence
Termination Deadline), all of the information called for in the Notification and
Report Form required under the HSR Act and to prepare and file any supplemental
information, also in a timely fashion, which may be required by the United
States Department of Justice or the Federal Trade Commission pursuant to such
Notification and Report Form Filings, and otherwise to use their respective
reasonable efforts to obtain the requisite clearances.
(b) The parties and their Affiliates shall cooperate fully
with each other in preparing, filing, prosecuting, and taking any other actions
with respect to filings with the FCC related to the transactions contemplated by
this Agreement, including, without limitation, preparation of an application for
the assignment of all of the FCC Licenses to Purchaser and any filings by
Purchaser requesting temporary waivers for no more than nine (9) months of the
FCC's applicable ownership rules necessary to permit the parties to consummate
the transactions contemplated by this Agreement. As promptly as practicable, but
in any event not later than ten (10) Business Days after the Diligence
Termination Deadline, the Company and Purchaser shall jointly file the
application with the FCC requesting the FCC Consent, including, without
limitation, requesting, consenting to, and taking and otherwise seeking any
action in connection with a conditional waiver of the FCC's Duopoly Rule. The
Company and Purchaser shall use their respective reasonable best efforts,
diligently take all necessary and proper actions and provide any additional
information requested by the FCC in order to obtain promptly the FCC Consent.
Notwithstanding the foregoing or any other provision of this Agreement, neither
Purchaser nor its officers, directors or Affiliates shall request a permanent
waiver of the FCC's applicable ownership rules or request, consent to, take or
otherwise seek or pursue any action that is inconsistent with the transactions
contemplated by this Agreement or that reasonably could be expected to
materially impede or materially delay the FCC Consent or otherwise materially
impede or materially delay the consummation of the transactions contemplated by
this Agreement; and the receipt of any permanent waiver of the foregoing FCC
rules shall not be a condition to the obligation of Purchaser to consummate the
transactions contemplated hereby. Neither Purchaser nor any of its officers,
directors or Affiliates will take any action that would result in any change in
the matters set forth in Section 4.7 hereof that would reasonably be expected to
materially delay or otherwise materially impair Purchaser's ability to
consummate the transactions contemplated hereby. After the date hereof,
Purchaser or its Affiliates may enter into transactions that implicate the FCC
multiple ownership
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rules so long as such transactions would not reasonably be expected to
materially impede or materially delay the Closing
(c) (i) If Purchaser (or its Affiliates) or the Company receives an
administrative or other order or notification relating to any violation or
claimed violation of the rules and regulations of the FCC, or of any
Governmental Authority, that could affect Purchaser's or the Company's ability
to consummate the transactions contemplated hereby, or (ii) should Purchaser (or
its Affiliates) become aware of any fact (including any change in law or
regulations (or any interpretation thereof by the FCC)) relating to the
qualifications of Purchaser (and its controlling persons) that reasonably could
be expected to cause the FCC to withhold the FCC Consent, Purchaser (in the case
of clauses (i) and (ii)) or the Company (in the case of clause (i)) shall
promptly notify the other party or parties thereof and shall use its reasonable
best efforts to take such steps as may be necessary to remove any such
impediment to the transactions contemplated by this Agreement; and no such
notification shall affect the representations or warranties of the parties or
the conditions to their respective obligations hereunder.
(d) The parties shall each use their reasonable best efforts to
obtain as promptly as reasonably practical all consents that may be required in
connection with the assignment to the Purchaser at the Non-License Transfer and
the Closing, as applicable, of all the Company's right, title and interest in
and to all Material Contracts as such are acquired by the Company pursuant to
the Gannett Purchase Agreement and all other agreements of the Business to which
the Company or Gannett is a party, provided that (i) neither the Company nor
Purchaser shall be required to make any payment to any party to any such
Material Contract or other agreement in order to obtain any such consent (except
the Company agrees to pay any amounts outstanding as of the Transfer Date under
any such Material Program Contracts as provided for in Section 5.1(a)(v).
(e) To the extent that there are third-party insurance policies
maintained by Gannett covering any Claims or Damages relating to the assets,
business, operations, conduct and employees (including, without limitation,
former employees) of the Business arising out of or relating to occurrences
prior to the Transfer Date, the Company shall use all reasonable efforts to
cause Purchaser to be named as an additional insured with respect to such
policies.
(f) Subject to the terms and conditions of this Agreement, each of
the parties agrees to use its reasonable efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the Non-License Transfer and the
Closing and the other transactions contemplated hereby as soon as practicable.
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5.4 CONFIDENTIALITY.
(a) The terms of the Confidentiality Agreement by and between
Purchaser and the Company are herewith incorporated by reference and shall
continue in full force and effect as between Purchaser and the Company at all
times prior to the Transfer Date, and shall remain in effect as between
Purchaser and the Company in accordance with its terms even if this Agreement is
terminated.
(b) Before and after the Transfer Date, each of the parties shall
maintain the confidentiality of the financial and tax information of the Persons
other than the Company in the possession of the Company under terms similar to
those set forth in the Confidentiality Agreement by and between Purchaser and
the Company with respect to "Evaluation Material" as though such terms continued
after the Transfer Date.
5.5 PUBLIC ANNOUNCEMENTS.
Except as otherwise required by law or the rules of any stock
exchange, the form and substance of the initial public announcement of this
Agreement and the transactions contemplated hereby, and the time of such
announcement, shall be approved in advance by the parties and the parties shall
not issue any other report, statement or press release or otherwise make any
public announcement with respect to this Agreement and the transactions
contemplated hereby without prior consultation in good faith with the other
party hereto.
5.6 NO SOLICITATION.
The Company shall not, and shall cause its officers, directors,
representatives, affiliates and associates not to, (a) initiate contact with,
solicit, encourage or respond to any inquiries or proposals by, or (b) enter
into any discussions or negotiations with, or disclose, directly or indirectly,
any information concerning, the Business, the Assets or the Stations, or afford
any access to the Company's or Gannett's properties, books and records to any
Person in connection with any possible proposal for the acquisition (directly or
indirectly, whether by purchase, merger, consolidation or otherwise) of all or
substantially all of the Business, the Assets or the Stations. The Company
agrees to terminate immediately any such discussions or negotiations.
5.7 EMPLOYEES.
From and after the date hereof to the first anniversary of the
Transfer Date, neither the Company, nor any of its Affiliates shall solicit or
offer employment to or hire or employ or otherwise compensate any employee or
former employee
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(who is an employee of a Station as of the date hereof) of the Stations
(including any individual who may become employed during the one (1) year period
following the Transfer Date) at any other location; provided, however, that the
foregoing shall not apply to the Excluded Employees, or to any employee of a
Station who is terminated by Purchaser without cause after the Transfer Date.
5.8 NO ADDITIONAL REPRESENTATIONS.
Purchaser acknowledges that it and its representatives have been
permitted access to books and records, facilities, equipment, tax returns,
contracts and agreements, insurance policies (or summaries thereof), and other
properties and assets of the Stations and that they and their representatives
have had an opportunity to meet with the officers and employees of the Company
to discuss the Stations and the Business, properties and assets. PURCHASER
ACKNOWLEDGES THAT NEITHER THE COMPANY NOR ANY OTHER PERSON HAS MADE ANY
REPRESENTATION OR WARRANTY, EXPRESSED OR IMPLIED, AS TO THE ACCURACY OR
COMPLETENESS OF ANY INFORMATION REGARDING THE STATION OR THE BUSINESS FURNISHED
OR MADE AVAILABLE TO PURCHASER AND ITS REPRESENTATIVES EXCEPT AS EXPRESSLY SET
FORTH IN THIS AGREEMENT.
5.9 CERTAIN PAYMENTS.
(a) Pursuant to the terms of the Gannett Purchase Agreement, the
Company has certain rights and obligations with respect to the Severance
Agreements listed in Sections 3.14.1 and 3.14.2 of the Disclosure Schedule of
the Gannett Purchase Agreement, which Severance Agreements include those listed
in Sections 3.14.1 and 3.14.2 of the Disclosure Schedule hereto (the "STC
SCHEDULED SEVERANCE AGREEMENTS"). Promptly, but in no event later than five (5)
Business Days prior to any payment due under the STC Scheduled Severance
Agreements to any employee of the Stations terminated by Purchaser prior to
ninety (90) days after the closing date under the Gannett Purchase Agreement,
Purchaser shall notify the Company of the amount to be paid to such employee,
and the Company shall make the payment to such terminated employee as provided
by the STC Scheduled Severance Agreements (a "STC SEVERANCE PAYMENT"); provided
that the maximum amount that the Company shall be required to pay for all
Business Employees as defined hereunder pursuant to this Section 5.9, after
reimbursement from the Purchaser in the succeeding sentence, shall be the
greater of (i) Two Hundred Twenty Two Thousand Ninety-Seven Dollars
($222,097.00), or (ii) Eight Hundred Fifty Thousand Dollars ($850,000.00) minus
all amounts reimbursed by Gannett to the Company pursuant to Section 5.8(a) of
the Gannett Purchase Agreement for all the Gannett Television Stations other
than the Stations. Within five (5) Business Days after the Company makes an STC
Severance Payment,
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Purchaser shall reimburse the Company for fifty percent (50%) of the amount of
such payment. In addition to any reimbursement by Purchaser under this Section
5.9, to the extent provided by Section 5.8(a) of the Gannett Purchase Agreement,
the Company will be entitled to reimbursement as provided by the Gannett
Purchase Agreement, and nothing in this Agreement or the Gannett Purchase
Agreement shall be construed to give Purchaser any right of recovery to
Purchaser pursuant to Section 5.8(a) of the Gannett Purchase Agreement.
(b) Pursuant to Section 5.8(b) of the Gannett Purchase Agreement,
Gannett will cease operations and vacate the Gannett Corporate Offices, and the
Company has agreed that it will pay, indemnify, and hold harmless Gannett from
and against fifty percent (50%) of all Claims and Damages (including, without
limitation, all rent or other payments made under the Corporate Office Lease
arising out of or relating to the Corporate Office Lease) to the extent such
Claims and Damages arise out of or relate to (x) the termination of the
Corporate Office Lease or (y) the post-closing period after the date in which
the Corporate Office Employees cease using the Corporate Office. Such payments
by the Company thereunder are required under the Gannett Purchase Agreement to
be made by the Company as the related Claims and Damages are incurred. To the
extent the Company is required to make any such payments, Purchaser shall
reimburse and pay over to the Company 26.13% of all such payments made by the
Company (up to the maximum amount of $52,258). Purchaser acknowledges and agrees
that Gannett may terminate the Corporate Office Lease on such terms as Gannett
shall determine and otherwise take such action as Gannett determines in
connection with Gannett vacating the Corporate Office.
5.10 BULK SALES LAWS.
The parties agree to waive compliance with the provisions of the
bulk sales law of any jurisdiction. The Company will indemnify and hold harmless
Purchaser from and against any and all Liabilities which may be asserted by
third parties against Purchaser as a result of such noncompliance.
5.11 CONTROL OF THE STATIONS.
Prior to the Closing Date, control of the Stations (including,
without limitation, control over their finances, personnel and programming)
shall remain with the Company or Gannett, as the case may be. The Company and
Purchaser acknowledge and agree that neither Purchaser nor any of its employees,
agents or representatives, directly or indirectly, shall, or shall have any
right to, control, direct or otherwise supervise the Stations, it being
understood that supervision of all programs, equipment, operations and other
activities of the Stations shall be the sole responsibility of, and at all times
prior to the Closing Date remain under the
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complete control and direction of, the Company or, if prior to the closing under
the Gannett Purchase Agreement, Gannett.
5.12 USE OF CERTAIN NAMES.
After the Transfer Date, neither Purchaser nor any of its
Affiliates shall use "Sinclair", "Sinclair Broadcast", "Sinclair Television",
"Sinclair Communications", "Guy Gannett", "Gannett", or any name or term
confusingly similar to the "Sinclair" names in any corporate name or in
connection with the operation of any business.
5.13 NEWS SHARING ARRANGEMENTS.
(a) The Company and Purchaser shall use commercially reasonable and
good faith efforts to enter into a news sharing agreement with Purchaser for
sharing of news operations between television station WEYI-TV, Flint, Michigan,
and WSMH-TV, Flint, Michigan in a form of agreement to be mutually agreed upon
by Purchaser and the Company prior to the Diligence Termination Deadline and
consistent with Section 5.13 of the Disclosure Schedule. If prior to the
Diligence Termination Deadline the parties cannot agree on a form of a mutually
acceptable news share agreement for WSMH-TV, (i) the Company shall be entitled,
in the Company's sole and absolute discretion, to terminate this Agreement
pursuant to Section 10.1(a)(iii), and (ii) the Purchaser shall be entitled, in
the Purchaser's sole and absolute discretion, to terminate, upon written notice
to the Company, the Purchaser's obligations under this Section 5.13 (a) or
otherwise to provide news sharing arrangements for WSMH-TV as provided herein.
(b) The Company and Purchaser shall use commercially reasonable and
good faith efforts to enter into a mutually acceptable news sharing agreement
for sharing of news operations between WUHF-TV, Rochester, New York, and
WROC-TV, Rochester, New York, in a form of agreement to be mutually agreed upon
by Purchaser and the Company prior to the Diligence Termination Deadline and
consistent with Section 5.13 of the Disclosure Schedule. If prior to the
Diligence Termination Deadline the parties cannot agree on a form of a mutually
acceptable news share agreement for WUHF-TV, (i) the Company shall be entitled,
in the Company's sole and absolute discretion, to terminate this Agreement
pursuant to Section 10.1(a)(iii), and (ii) the Purchaser shall be entitled, in
the Purchaser's sole and absolute discretion, to terminate, upon written notice
to the Company, the Purchaser's obligations under this Section 5.13 (b) or
otherwise to provide news sharing arrangements for WUHF-TV as provided herein.
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5.14 RIGHTS UNDER THE GANNETT PURCHASE AGREEMENT.
The Company covenants and agrees with Purchaser as follows with
respect to the Company's rights and obligations under the Gannett Purchase
Agreement:
(a) The Company shall enforce all of the Company's rights under the
Gannett Purchase Agreement or any opinions of counsel delivered pursuant thereto
at Purchaser's request as such rights pertain to the Stations and the Assets,
including, without limitation, causing Gannett to act in conformity with the
Gannett Purchase Agreement and requiring Gannett to conduct the business of the
Stations in the ordinary course of business in accordance with the terms of the
Gannett Purchase Agreement (including, without limitation, the provisions of
Section 5.1 of the Gannett Purchase Agreement), and to the extent consistent
with the foregoing, in the same manner in which the same have heretofore been
conducted with the intent of preserving the ongoing operations and business of
the Stations. This covenant shall survive the Non-License Transfer and the
Closing for the period that the Company has any rights under the Gannett
Purchase Agreement or any opinions of counsel delivered pursuant thereto.
(b) The Company shall use the Company's reasonable best efforts to
close the transactions contemplated by the Gannett Purchase Agreement as they
pertain to the Stations in a timely fashion consistent with the terms of such
agreement and shall notify Purchaser in writing of the date, time and place of
the closing under the Gannett Purchase Agreement at least ten (10) days prior to
the date of such closing; provided, however, that the Company shall not waive
any of its rights or conditions under the Gannett Purchase Agreement as they
pertain to any of the Stations (including, without limitation, any conditions to
the obligations of the Company to consummate the transactions under the Gannett
Purchase Agreement), or enter into any amendment or modification to any
provisions of the Gannett Purchase Agreement that affects the Company's rights
or conditions thereunder with respect to any of the Stations. The Company shall
enforce the Company's rights to the fullest extent possible under the Gannett
Purchase Agreement as such rights pertain to the Stations, unless otherwise
directed by Purchaser.
(c) To the extent that the Company receives notifications or
information from Gannett with respect to the Stations under the Gannett Purchase
Agreement or otherwise becomes aware of any breach of any representation,
warranty, covenant or agreement in the Gannett Purchase Agreement, in each case
with respect to the Stations, the Company shall promptly notify Purchaser and
provide such information to Purchaser, and thereafter use reasonable best
efforts to enforce, perform or waive any provision of the Gannett Purchase
Agreement
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pertaining to the Stations as may reasonably be requested by Purchaser;
provided, that the Company shall not be obligated to take any action at
Purchaser's request inconsistent with its rights and obligations under the
Gannett Purchase Agreement.
(d) Any proceeds received by the Company from the exercise of the
Company's rights which relate to the Stations against Gannett and its respective
Affiliates shall be paid over to Purchaser within five (5) Business Days of
receipt by the Company, less any reasonable costs and expenses of enforcement
incurred by the Company in such exercise.
(e) Subject to the provisions of the Time Brokerage Agreement, the
Company shall cooperate with Purchaser in connection with the Company's review,
analysis and monitoring of the Assets, the Business and the operations of the
Stations to the end that an efficient transfer of the Assets and the Business
may be made at the Non-License Transfer and the Closing and the operations and
the business of the Stations may continue on an uninterrupted basis. The Company
shall obtain Purchaser's consent prior to the exercise of the Company's rights
under the Gannett Purchase Agreement as such rights pertain to the Stations
(other than the right to consummate the acquisition of the Stations upon
satisfaction of all conditions thereto). In addition to providing information
required hereunder or reasonably requested, the Company agrees to promptly
notify Purchaser of any material problems or developments of which the Company
becomes aware with respect to any Assets or the Business.
ARTICLE 6. CONDITIONS TO OBLIGATIONS OF PURCHASER.
The obligations of Purchaser to consummate the transactions
contemplated by this Agreement to occur at the Non-License Transfer and the
Closing are, at its option, subject to satisfaction of each of the following
conditions:
6.1 REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company contained herein
shall be true and correct at and as of the Non-License Transfer Date or the
Closing Date, as applicable, as though each such representation and warranty
were made at and as of such time, other than such representations and warranties
as are made as of a specific date, in each case except for changes that are
expressly contemplated by this Agreement and except for such failures to be true
and correct that would not reasonably be expected to have a Material Adverse
Effect.
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6.2 PERFORMANCE BY THE COMPANY.
All of the covenants and agreements to be complied with and
performed by the Company on or before the Non-License Transfer Date or the
Closing Date, as applicable, shall have been complied with or performed, except
for such failures to comply with or perform that would not reasonably be
expected to have a Material Adverse Effect.
6.3 CERTIFICATES.
The Company shall have delivered to Purchaser (a) a certificate,
dated as of the Non-License Transfer Date or the Closing Date, as applicable,
executed on behalf of the Company by its duly authorized officers to the effect
of Sections 6.1, 6.2 and 6.12; and (b) a certificate, dated as of the
Non-License Transfer Date or the Closing Date, as applicable, executed on behalf
of the Company by its duly authorized officers that (i) the Company has not
waived any of the Company's rights or any conditions under the Gannett Purchase
Agreement, (ii) the Company has not breached the Gannett Purchase Agreement in
any material respect and, to the Company's knowledge, Gannett has not breached
the Gannett Purchase Agreement in any material respect, and (iii) the
acquisition of the Stations by the Company from Gannett has been consummated in
accordance with the terms and conditions of the Gannett Purchase Agreement.
6.4 CONSENTS; NO OBJECTIONS.
(a) The applicable waiting periods under the HSR Act shall have
expired or been terminated;
(b) The parties shall have received all the authorizations,
consents, orders and approvals from Governmental Authorities and consents from
third parties, in each case listed or described in Section 6.4 of the Disclosure
Schedule (which Section includes all of the real estate leases for the towers,
transmitters and television broadcasting studios of the Stations and all of the
network affiliation agreements of the Stations); and
(c) The parties shall have received all authorizations, consents,
orders and approvals from Governmental Authorities necessary to transfer the
material Permits relating to the operation of the towers, transmitters and
television broadcasting studios of the Stations, as such facilities are
operating on the date hereof, except in each case where the failure to receive
such authorizations, consents, orders or approvals would not reasonably be
expected to materially adversely affect the operations of such facilities, or
where such authorizations,
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consents, orders or approvals are customarily obtained after the closing of a
transaction of this nature.
6.5 NO PROCEEDINGS OR LITIGATION.
No preliminary or permanent injunction or other order or decree
issued by any United States federal or state Governmental Authority, nor any Law
promulgated or enacted by any United States federal or state Governmental
Authority, that restrains, enjoins or otherwise prohibits the transactions
contemplated hereby or limits the ability in any material respect of the rights
of the Company or Purchaser to hold the Assets (excluding the FCC Licenses) and
conduct the Business as it is being conducted as of the Non-License Transfer
Date or the Closing Date, as applicable, or imposes civil or criminal penalties
on any stockholder, director or officer of Purchaser if such transactions are
consummated, shall be in effect.
6.6 FCC CONSENT.
The FCC Consent shall have been issued with respect to the Stations
without any conditions that are materially adverse to Purchaser and such FCC
Consent shall have become a Final Order; provided, however, that there shall be
no requirement that the FCC Order shall have been issued as of the Non-License
Transfer Date.
6.7 NO MATERIAL ADVERSE CHANGE.
Since the date of the Gannett Purchase Agreement through the
Non-License Transfer Date or the Closing Date, as applicable, there shall not
have occurred any Material Adverse Effect.
6.8 OPINIONS OF COUNSEL.
Purchaser shall have received an opinion of Fisher, Wayland,
Cooper, Leader & Zaragoza L.L.P., dated the Non-License Transfer Date or the
Closing Date, as applicable, substantially in the form of Exhibit E hereto.
6.9 CERTAIN CERTIFIED MATTERS.
Purchaser shall have received a copy of (i) the resolutions of the
board of directors of the Company, certified as being correct and complete and
then in full force and effect, authorizing the execution, delivery and
performance of this Agreement and the other the documents, instruments and
writings to be delivered by the Company at or prior to Closing Date or the
Non-License Transfer Date, as applicable, and the consummation of the
transactions contemplated hereby and
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thereby and (ii) a copy of the Certificate of Incorporation and Bylaws of the
Company, certified by a duly authorized officer of the Company as being true,
correct and complete as of the Closing Date.
6.10 GOOD STANDING CERTIFICATE.
Purchaser shall have received a certificate as to the formation and
good standing of the Company issued by the Secretary of State of Maryland, dated
not more than five (5) days before the Non-License Transfer Date or the Closing
Date, as applicable, and for the states of Illinois and Iowa, a certificate as
to the good standing of the Person transferring the Stations to Purchaser as of
such date, issued by the Secretary of State of such jurisdiction, dated not more
than five (5) days before the Non-License Transfer Date or the Closing Date, as
applicable.
6.11 NO TRANSMISSION DEFECTS.
There shall not exist any loss or damage at any Station which has
resulted in the regular broadcast transmission of such Station (including such
Station's effective radiated power) to be diminished in any material respect;
provided, that if any such loss or damage does exist, then either or both of the
Company and Purchaser shall be entitled, by written notice to the other, to
postpone the Non-License Transfer Date or the Closing Date, as applicable, for a
period of up to sixty (60) days to resume such Station's broadcast transmission.
6.12 CLOSING ON THE GANNETT PURCHASE AGREEMENT.
The closing, as defined in the Gannett Purchase Agreement, with
respect to all of the Gannett Television Stations shall have occurred or occur
simultaneously with the Non-License Transfer, in accordance with the terms and
conditions of the Gannett Purchase Agreement; and the representations and
warranties of the Company set forth in Section 3.20 hereof shall be true and
correct in all respects at and as of the Non-License Transfer Date or the
Closing Date, as applicable, as though each such representation and warranty
were made at and as of such time (except for representations and warranties that
speak of a specific date or time other than the Non-License Transfer Date or the
Closing Date, as applicable, which need only be true and correct in all material
respects as of such date or time).
6.13 DELIVERIES.
The Company (or Gannett, if applicable) shall have delivered to the
Purchaser all contracts, agreements, instruments and documents required to be
delivered by the Company to Purchaser pursuant to Section 1.5.
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ARTICLE 7. CONDITIONS TO OBLIGATIONS OF THE COMPANY.
The obligations of the Company to consummate the transactions
contemplated by this Agreement to occur at the Non-License Transfer or the
Closing are, at its option, subject to satisfaction of each of the following
conditions:
7.1 REPRESENTATIONS AND WARRANTIES.
The representations and warranties of Purchaser contained herein
shall be true and correct in all material respects at and as of the Non-License
Transfer Date or the Closing Date, as applicable, as though each such
representation and warranty were made at and as of such time, other than such
representations and warranties as are made as of a specific date, in each case
except for changes that are expressly contemplated by this Agreement.
7.2 PERFORMANCE BY PURCHASER.
All of the covenants and agreements to be complied with and
performed by Purchaser on or prior to the Non-License Transfer Date or the
Closing Date, as applicable, shall have been complied with or performed, in all
material respects, except for such failures to comply with or perform that would
not, individually or in the aggregate, reasonably be expected to be materially
adverse to the Company.
7.3 CERTIFICATE.
Purchaser shall have delivered to the Company a certificate, dated
as of the Non-License Transfer Date or the Closing Date, as applicable, executed
on behalf of Purchaser by its duly authorized officers or representatives to the
effect of Sections 7.1 and 7.2.
7.4 CONSENTS; NO OBJECTIONS.
(a) The applicable waiting periods under the HSR Act shall have
expired or been terminated; and
(b) The parties shall have received all the authorizations,
consents, orders and approvals from Governmental Authorities and consents from
third parties, in each case listed or described on Section 7.4 to the Disclosure
Schedule.
7.5 NO PROCEEDINGS OR LITIGATION.
No preliminary or permanent injunction or other order or
decree issued by any United States federal or state Governmental Authority, nor
any Law
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promulgated or enacted by any United States federal or state Governmental
Authority, that restrains, enjoins or otherwise prohibits the transactions
contemplated hereby, or imposes civil or criminal penalties on any stockholder,
director or officer of the Company if such transactions are consummated, shall
be in effect.
7.6 FCC CONSENT.
The FCC Consent shall have been issued with respect to the
Stations, notwithstanding that it may not have yet become a Final Order;
provided, however, that there shall be no requirement that the FCC Order shall
have been issued as of the Non-License Transfer Date..
7.7 CERTAIN CERTIFIED MATTERS.
The Company shall have received a copy of (i) the resolutions of
the board of directors of Purchaser, certified as being correct and complete and
then in full force and effect, authorizing the execution, delivery and
performance of this Agreement and the other the documents, instruments and
writings to be delivered by Purchaser at or prior to Closing Date or the
Non-License Transfer Date, as applicable, and the consummation of the
transactions contemplated hereby and thereby and (ii) a copy of the Certificate
of Incorporation and Bylaws of Purchaser, certified by a duly authorized officer
of Purchaser as being true, correct and complete as of the Closing Date.
7.8 GOOD STANDING CERTIFICATE.
The Company shall have received a certificate as to the formation
and good standing of Purchaser issued by the Secretary of State of Delaware,
dated not more than five (5) days before the Non-License Transfer Date or the
Closing Date, as applicable, and for the states of Illinois and Iowa as to the
good standing of Purchaser issued by the Secretary of State of such
jurisdiction, dated not more than five (5) days before the Non-License Transfer
Date or the Closing Date, as applicable.
7.9. CLOSING ON GANNETT PURCHASE AGREEMENT.
The closing, as defined in the Gannett Purchase Agreement, shall
have occurred or occur simultaneously with the Non-License Transfer or the
Closing, as applicable, hereunder.
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7.10 DELIVERIES.
The Purchaser shall have delivered to the Company all contracts,
agreements, instruments and documents required to be delivered by the Purchaser
to the Company pursuant to Section 1.5.
ARTICLE 8. INDEMNIFICATION.
8.1 INDEMNIFICATION BY THE COMPANY.
Subject in all respects to the provisions of this Article 8, the
Company hereby agrees to indemnify and hold harmless on and after the Transfer
Date, Purchaser and its stockholders and Affiliates and their respective
officers, directors, employees and agents, and their respective and successors
and permitted assigns (the "PURCHASER INDEMNIFIED PARTIES") from and against any
Claims and Damages asserted against or incurred by them, directly or indirectly,
in connection with, arising out of or relating to (a) any breach on the part of
the Company of any representation or warranty made by the Company in this
Agreement or any Transaction Document or in any certificate delivered pursuant
to this Agreement, (b) any breach on the part of Gannett of any representation
or warranty made by Gannett in the Gannett Purchase Agreement with respect to
the Stations or the Assets, (c) any breach on the part of the Company of any
covenant or agreement made by the Company in this Agreement or any Transaction
Document, (d) any breach on the part of Gannett of any covenant or agreement
made by Gannett in the Gannett Purchase Agreement with respect to the Stations
or the Assets, or (e) any Retained Liabilities.
8.2 INDEMNIFICATION BY PURCHASER.
Subject in all respects to the provisions of this Article 8,
Purchaser hereby agrees to indemnify and hold harmless on and after the Transfer
Date, the Company and its stockholders and Affiliates and their respective
officers, directors, employees and agents, and their respective successors and
permitted assigns (collectively the "COMPANY INDEMNIFIED PARTIES"), from and
against any Claims and Damages asserted against or incurred by them, directly or
indirectly, in connection with, arising out of or relating to (a) any breach on
the part of Purchaser of any representation or warranty made by Purchaser in
this Agreement or any Transaction Document or in any certificate delivered
pursuant to this Agreement, (b) any breach on the part of Purchaser of any
covenant or agreement made by the Purchaser in this Agreement or any Transaction
Document, or (c) any Assumed Liabilities. The parties acknowledge and agree that
none of Gannett, any of its stockholders or Affiliates, or any of their
respective officers, directors, employees,
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agents, successors or assigns shall be "Company Indemnified Parties" or
"Beneficiaries" for any purposes of this Agreement or any other Transaction
Document.
8.3 LIMITATIONS ON INDEMNIFICATION CLAIMS AND LIABILITY; TERMINATION OF
INDEMNIFICATION.
(a) The obligations to indemnify and hold harmless a Person
pursuant to Sections 8.1(a), (b), (c) and (d) and Sections 8.2(a) and 8.2(b)
shall terminate when the applicable representation, warranty, covenant or
agreement terminates pursuant to Section 10.12; provided, however, that the
obligation to indemnify and hold harmless under such Sections shall not
terminate with respect to any claim as to which the Person to be indemnified
shall have, before the termination of the applicable representation, warranty,
covenant or agreement, previously made a claim for indemnification by delivering
a notice to the indemnifying party in accordance with Section 8.5. The
obligations to indemnify and hold harmless a Person pursuant to Section 8.1(e)
and Section 8.2(c) shall not terminate.
(b) The Company shall not be obligated to indemnify or hold
harmless any Purchaser Indemnified Party under Section 8.1(a), (b), (c) and (d),
unless and until all Claims and Damages exceed in the aggregate Two Hundred
Thousand Dollars ($200,000) (the "BASKET AMOUNT"), in which case the Company
will (subject to the other provisions of this Article 8) only be obligated to
indemnify and hold harmless the Purchaser Indemnified Parties for all of such
Claims or Damages under Section 8.1(a), (b), (c) or (d) in the aggregate in
excess of One Hundred Thousand Dollars ($100,000); provided that the provisions
of this Section 8.3(b) will not apply to any breach of any Post-Closing
Agreements; provided further that the Basket Amount shall not be applicable to
any amounts owed in connection with the determination of the Actual Net
Financial Assets pursuant to Section 2.4, to the payment and reimbursement
obligations set forth in Section 5.9 or to the indemnities set forth in Section
8.1(e).
(c) The maximum aggregate liability of the Company with respect to
all claims for indemnification under Section 8.1(a), (b), (c) or (d) will be
limited to the amount of Three Million Dollars ($3,000,000).
(d) Notwithstanding anything to the contrary in this Agreement and
except for fraud, the indemnifications in Sections 8.1 and 8.2 hereof will be
the sole and exclusive remedies available to Purchaser and the Company and their
respective stockholders and Affiliates and all of their respective officers,
directors, employees, agents, successors and assigns, after the Transfer Date
for any claims arising out of or relating to any breaches of any representations
or warranties or
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any covenants or agreements contained in this Agreement, or any certificate
delivered pursuant to this Agreement or otherwise in connection with this
Agreement. Any claim for indemnification must be made as provided in Sections
8.5 and 8.6 hereof.
8.4 COMPUTATION OF CLAIMS AND DAMAGES.
Whenever the Indemnitor is required to indemnify and hold harmless
the Indemnitee from and against and hold the Indemnitee harmless from, or to
reimburse the Indemnitee for, any item of Claim or Damage, the Indemnitor will,
subject to the provisions of this Article 8, pay the Indemnitee the amount of
the Claim or Damage (a) reduced by any amounts to which the Indemnitee is
entitled from third parties in connection with such Claim or Damage
("Reimbursements"), (b) reduced by the Net Proceeds of any insurance policy
payable to the Indemnitee with respect to such Claim or Damage and (c) reduced
appropriately to take into account any Tax Benefit to the Indemnitee with
respect to such Claim or Damage through and including the tax year in which the
indemnification payment is made, net of all income Taxes resulting or that will
result from the indemnification payment. For purposes of this Section 8.4, (i)
"NET PROCEEDS" shall mean the insurance proceeds payable, less any deductibles,
co-payments, premium increases, retroactive premiums or other payment
obligations (including attorneys' fees and other costs of collection) that
relates to or arises from the making of the claim for indemnification and (ii)
"TAX BENEFIT" shall mean any benefit to be recognized by the Indemnitee in
connection with the Claim or Damage based upon the highest blended (federal,
state, local and foreign) marginal income Tax rate applicable to the Indemnitee
during the taxable year for which a return was most recently filed with the
Internal Revenue Service (based on the date of the claim for indemnification).
The Indemnitor shall use commercially reasonable efforts (the expenses of which
shall be considered Claims and Damages for purposes of the relevant indemnity
claim) to pursue Reimbursements or Net Proceeds that may reduce or eliminate
Claims and Damages. If any Indemnitee receives any Reimbursement, Tax Benefit or
Net Proceeds after an indemnification payment is made which relates thereto or
if any Indemnitee receives a Tax Benefit arising after the tax year in which an
indemnification payment is made which relates thereto, the Indemnitee shall
promptly repay to the Indemnitor such amount of the indemnification payment as
would not have been paid had the Reimbursement, Tax Benefit or Net Proceeds
reduced the original payment (any such repayment shall be a credit against any
applicable indemnification threshold or limitation set forth in Section 8.3(b)
hereof) at such time or times as and to the extent that such Reimbursement, Tax
Benefit or Net Proceeds is actually received.
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8.5 NOTICE OF CLAIMS.
Upon obtaining knowledge of any Claim or Damage which has given
rise to, or could reasonably give rise to, a claim for indemnification
hereunder, the Person seeking indemnification (the "INDEMNITEE") shall, as
promptly as reasonably practicable (but in no event later than thirty (30) days)
following the date the Indemnitee has obtained such knowledge, give written
notice (a "NOTICE OF CLAIM") of such claim to the other party (the
"INDEMNITOR"). The Indemnitee shall furnish to the Indemnitor in good faith and
in reasonable detail such information as the Indemnitee may have with respect to
such indemnification claim (including copies of any summons, complaint or other
pleading which may have been served on it and any written claim, demand,
invoice, billing or other document evidencing or asserting the same). No failure
or delay by the Indemnitee in the performance of the foregoing shall reduce or
otherwise affect the obligation of the Indemnitor to indemnify and hold the
Indemnitee harmless, except to the extent that such failure or delay shall have
adversely affected the Indemnitor's ability to defend against, settle or satisfy
any liability, damage, loss, claim or demand for which such Indemnitee is
entitled to indemnification hereunder. For purposes of this Section 8.5, a
Notice of Claim given in good faith must include a good faith estimate of the
amount of the claim to the extent it is reasonably practicable to determine such
estimate.
8.6 DEFENSE OF THIRD PARTY CLAIMS.
If any claim set forth in the Notice of Claim given by an
Indemnitee pursuant to Section 8.5 hereof is a claim asserted by a third party,
the Indemnitor shall have thirty (30) days after the date that the Notice of
Claim is given by the Indemnitee to notify the Indemnitee in writing of the
Indemnitor's election to defend such third party claim on behalf of the
Indemnitee. If the Indemnitor elects to defend such third party claim, the
Indemnitee shall make available to the Indemnitor and its agents and
representatives all witnesses, pertinent records, materials and information in
the Indemnitee's possession or under the Indemnitee's control as is reasonably
required by the Indemnitor and shall otherwise cooperate with and assist the
Indemnitor in the defense of such third party claim, and so long as the
Indemnitor is defending such third party claim in good faith, the Indemnitee
shall not pay, settle or compromise such third party claim. If the Indemnitor
elects to defend such third party claim, the Indemnitee shall have the right to
participate in the defense of such third party claim, at the Indemnitee's own
expense. In the event, however, that the Indemnitee reasonably determines that
representation by counsel to the Indemnitor of both the Indemnitor and the
Indemnitee may present such counsel with a conflict of interest, then such
Indemnitee may employ separate counsel to represent or defend it in any such
action or proceeding and the
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Indemnitor will, subject to the provisions of this Article 8, pay the reasonable
fees and disbursements of such counsel. If the Indemnitor does not elect to
defend such third party claim or does not defend such third party claim in good
faith, the Indemnitee shall have the right, in addition to any other right or
remedy it may have hereunder, at the Indemnitor's expense, to defend such third
party claim; provided, however, that such Indemnitee's defense of or its
participation in the defense of any such third party claim shall not in any way
diminish or lessen the indemnification obligations of the Indemnitor under this
Article 8. If the Indemnitor shall assume the defense of a third party claim, it
shall not settle such claim without the prior written consent of the Indemnitee
(a) unless such settlement includes as an unconditional term thereof the giving
by the claimant of a release of the Indemnitee from all Liability with respect
to such claim or (b) if such settlement involves the imposition of equitable
remedies or the imposition of any obligations on such Indemnitee other than
financial obligations for which such Indemnitee will be indemnified hereunder.
If the Indemnitee is defending a third party claim it will not settle such claim
without prior written consent of the Indemnitor, which will not be unreasonably
withheld or delayed.
8.7 THIRD PARTY BENEFICIARIES.
Each of the Purchaser Indemnified Parties and the Company
Indemnified Parties shall be third party beneficiaries and entitled to enforce
the provisions of this Article 8; provided, however, that none of the Business
Employees shall be third party beneficiaries of any provision of this Agreement
or any other Transaction Document, including, without limitation, the provisions
of Section 5.2 of this Agreement.
ARTICLE 9. DEFINITIONS.
Unless otherwise stated in this Agreement, the following capitalized
terms have the following meanings:
Accounting Firm has the meaning set forth in Section 2.4(a).
Accounting Firm Determination has the meaning set forth in Section
2.4(a).
Action means any action, suit, claim, arbitration, or proceeding or
investigation (of which the Company has knowledge) commenced by or pending
before any Governmental Authority.
Actual Net Financial Assets has the meaning set forth in Section 2.4(a)
hereof.
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Affiliate means, with respect to any specified Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with such specified Person.
Agreement or this Agreement means this Purchase Agreement dated as of
the date first above written (including the Exhibits hereto and the Disclosure
Schedule) and all amendments hereto made in accordance with the provisions of
Section 10.8 hereof.
Allocation has the meaning set forth in Section 2.5 hereof.
Assets has the meaning set forth in Section 1.1 hereof.
Assignment of FCC Licenses has the meaning set forth in Section
1.5(a)(ii) hereof.
Assumed Liabilities means the Liabilities assumed by Purchaser pursuant
to Sections 1.3(a) and (b) hereof.
Base Purchase Price has the meaning set forth in Section 2.2(a).
Basket Amount has the meaning set forth in Section 8.3(b).
Beneficiary has the meaning set forth in Section 5.2(f) hereof.
Bill of Sale, Assignment and Assumption Agreement has the meaning set
forth in Section 1.5(a)(i) hereof.
Business means all of the Company's business, operations and activities
of the Stations acquired by the Company from Gannett pursuant to the Gannett
Purchase Agreement or otherwise used by the Company in the business, operations
and activities of the Stations.
Business Day means any day that is not a Saturday, a Sunday or other
day on which banks are required or authorized by law to be closed in the City of
New York.
Business Employees means all current, former and inactive employees of
the Stations. For the avoidance of doubt, Corporate Office Employees will not be
considered Business Employees.
Call Letters has the meaning set forth in Section 3.16 hereof.
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CERCLA means the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended.
Claims and Damages means, after taking into account amounts received by
Purchaser under Section 5.14(d) hereof, any and all losses, claims, demands,
liabilities, obligations, actions, suits, orders, statutory or regulatory
compliance requirements, or proceedings asserted by any Person (including,
without limitation, Governmental Authorities), and all damages, costs, expenses,
assessments, judgments, recoveries and deficiencies, including interest,
penalties, investigatory expenses, consultants' fees, and reasonable attorneys'
fees and costs (including, without limitation, costs incurred in enforcing the
applicable indemnity), of every kind and description, contingent or otherwise,
incurred by or awarded against a party, provided that "Claims and Damages" shall
not include any indirect, consequential, incidental, exemplary or punitive
damages or other special damages or lost profits (except to the extent payable
to a third party as a result of a third party claim).
Closing has the meaning set forth in Section 1.4(b) hereof.
Closing Date has the meaning set forth in Section 1.4(b) hereof.
Closing Statement has the meaning set forth in Section 2.4(a) hereof.
Code means the Internal Revenue Code of 1986, as amended.
Communications Act means the Communications Act of 1934, as amended.
Company has the meaning specified in the introductory paragraph to this
Agreement.
Company Indemnified Parties shall have the meaning set forth in Section
8.2.
Company Permitted Assignee has the meaning set forth in Section 10.5(a)
hereof.
Continuation Coverage has the meaning set forth in Section 5.2(i)
hereof.
Control (including the terms "controlled by" and "under common control
with"), with respect to the relationship between or among two or more Persons,
means the possession, directly or indirectly, of the power to direct or to cause
the direction of the affairs or management of a Person, whether through the
ownership of voting securities, by contract or otherwise, including, without
limitation, the
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ownership, directly or indirectly, of securities having the power to elect a
majority of the board of directors or similar body governing the affairs of such
Person.
Corporate Office means the corporate office of Gannett located at One
City Center, Portland, Maine, that provides certain support to the Business and
the Maine Media Business.
Corporate Office Employees has the meaning set forth in Section 5.2(b).
Corporate Office Lease means the Lease dated as of February 16, 1989,
between Gannett and One City Center Associates, and all addenda and amendments
thereto and memoranda relating thereto.
Deposit Escrow Agent means United Bank, 1667 K Street, N.W.,
Washington, D.C. 20006.
Deposit Escrow Agreement has the meaning set forth in Section 2.1
Diligence Termination Deadline has the meaning set forth in Section
1.6.
Disclosure Schedule means the Disclosure Schedule, dated as of the date
hereof, delivered to Purchaser by the Company in connection with this Agreement.
Employee Benefit Plans means all "employee benefit plans" within the
meaning of Section 3(3) of ERISA, all bonus, stock option, stock purchase,
incentive, deferred compensation, supplemental retirement, severance and other
employee benefit plans, programs, policies or arrangements, employment
agreements, severance agreements, severance pay policies, plant closing
benefits, executive compensation arrangements, sick leave, vacation pay, salary
continuation for disability, consulting, or other compensation arrangements,
worker's compensation, hospitalization, medical insurance, life insurance,
tuition reimbursement or scholarship programs, employee discounts, employee
loans, employee banking privileges, any plans subject to Section 125 of the
Code, and any plans providing benefits or payments in the event of a change of
control, change in ownership, or sale of a substantial portion (including all or
substantially all) of the assets of any business or portion thereof, in each
case with respect to any present or former employees, directors, or agents and
without regard to whether the plan or arrangement was previously terminated (if
potential liabilities remain) or compensation agreements, in each case for the
benefit of, or relating to, any current employee or former employee of the
Business.
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Encumbrance means any security interest, pledge, mortgage, lien
(including, without limitation, tax liens), charge, encumbrance, easement,
adverse claim, preferential arrangement, restriction or defect in title.
Environmental Claims means any and all actions, suits, demands, demand
letters, claims, liens, notices of non-compliance or violation, investigations,
proceedings, consent orders or consent agreements relating in any way to any
Environmental Law, any Environmental Permit, Hazardous Materials or arising from
alleged injury or threat of injury to health, safety or the environment,
including, without limitation (a) by Governmental Authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages and (b) by any
Person for damages, contributions, indemnification, cost recovery, compensation
or injunctive relief.
Environmental Law means any Law relating to the environment, health,
safety or Hazardous Materials, in force and effect on the date hereof or, in the
case of the Company's certificate to be delivered in accordance with the
provisions of Section 6.3 hereof, on the Closing Date (exclusive of any
amendments or changes to such Law or any regulations promulgated thereunder or
orders, decrees or judgments issued pursuant thereto which are enacted,
promulgated or issued after the date hereof, or in the case of such certificate,
on or after the Closing Date), including but not limited to CERCLA; the Resource
Conservation and Recovery Act of 1986 and Hazardous and Solid Waste Amendments
of 1984, 42 U.S.C. Sections 6901 et seq.; the Hazardous Materials
Transportation Act, 49 U.S.C. Sections 6901 et seq.; the Clean Water Act,
33 U.S.C. Sections 1251 et seq.; the Toxic Substances Control Act of 1976,
15 U.S.C. Sections 2601 et seq.; the Clean Air Act of 1966, as amended, 42
U.S.C. Sections 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C.
Sections 300f et seq.; the Atomic Energy Act, 42 U.S.C. Sections 2011
et seq.; the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C.
Sections 136 et seq.; and the Emergency Planning and Community
Right-to-Know Act of 1986, 42 U.S.C. Sections 1101 et seq.
Environmental Permits means all permits, approvals, identification
numbers, licenses and other authorizations required under any applicable
Environmental Law.
Equipment means all of the tangible personal property, machinery,
equipment, vehicles, rolling stock, furniture, and fixtures of every kind and
description in which the Company has an interest or which the Company acquires
from Gannett pursuant to the Gannett Purchase Agreement by ownership or lease,
and used or useful in connection with the Business, together with any
replacements thereof or additions thereto, made in the ordinary course of
business between the date of the Gannett Purchase Agreement and the Transfer
Date.
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ERISA means the Employee Retirement Income Security Act of 1974, as
amended.
ERISA affiliate has the meaning set forth in Section 3.14.
Escrow Deposit has the meaning set forth in Section 2.1.
Estimated Net Financial Assets has the meaning set forth in Section
2.2(b) hereof.
Excluded Assets has the meaning set forth in Section 1.2 hereof.
FCC means the Federal Communications Commission.
FCC Consent means a public notice of the FCC, or of the Chief, Mass
Media Bureau or Video Services Division, acting under delegated authority,
consenting to the assignment of the FCC Licenses to Purchaser.
FCC Licenses means all licenses, permits and other authorizations
issued by the FCC to the Company used for or in connection with the Stations,
and all applications therefor, together with any renewals, extensions or
modifications thereof and additions thereto between the date of the Gannett
Purchase Agreement and the Closing.
Final Order means the FCC Consent as to which the time for filing a
request for administrative or judicial review, or for instituting administrative
review sua sponte, shall have expired without any such filing having been made
or notice of such review having been issued; or, in the event of such filing or
review sua sponte, as to which such filing or review shall have been disposed of
favorably to the grantee and the time for seeking further relief with respect
thereto shall have expired without any request for such further relief having
been filed.
First Year Anniversary Date has the meaning set forth in Section 2.3(b)
GAAP means United States generally accepted accounting principles and
practices as in effect from time to time and applied consistently throughout the
periods involved.
Gannett has the meaning set forth in the recitals to this Agreement.
Gannett Corporate Office means the corporate office of Gannett located
at One City Center, Portland, Maine, that provides certain support to Gannett
and its business.
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Gannett FCC Licenses means all licenses, permits and other
authorizations issued by the FCC to Gannett used for or in connection with the
Gannett Television Stations and all applications therefor, together with any
renewals, extensions, or modifications thereof and additions thereto between the
date of the Gannett Purchase Agreement and the Closing.
Gannett Maine Media Business means the newspaper publishing business
which publishes the Portland Press Herald and Maine Sunday Telegram, the
Kennebec Journal and the Central Maine Morning Sentinel, and certain related
businesses in Maine (including, without limitation, the "New Media Development
Group", an Internet-based media business; "Voice Information Services", a
telephone information and marketing service; "Guy Gannett Direct", a direct
marketing operation; a telephone directory business; an integrated marketing
group; and the Coastal Journal, a controlled circulation weekly), and all
assets, liabilities, operations and activities of, and all rights of, Gannett in
the operations of such businesses.
Gannett Purchase Agreement shall have the meaning set forth in the
Recitals.
Gannett Television Stations means the following television broadcasting
station properties: WOKR-TV, Rochester, New York; WICS-TV, Springfield,
Illinois; WICD-TV, Champaign, Illinois; WGGB-TV, Springfield, Massachusetts;
WGME-TV, Portland, Maine; KGAN-TV, Cedar Rapids, Iowa; WTWC-TV, Portland, Maine;
and WTWC-TV, Tallahassee, Florida.
Governmental Authority means any United States federal, state or local
government or any foreign government, any governmental, regulatory, legislative,
executive or administrative authority, agency or commission or any court,
tribunal, or judicial body.
Governmental Order means any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority. Governmental Orders shall not include Permits.
Group Contract has the meaning set forth in Section 1.3(a) hereof.
Hazardous Materials means wastes, substances, materials (whether
solids, liquids or gases), petroleum and petroleum products, byproducts or
breakdown products, radioactive materials, and any other chemicals that are
deemed hazardous, toxic, pollutants or contaminants, or substances designated,
classified or regulated as being "hazardous" or "toxic", or words of similar
import, under any Environmental Law.
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HSR Act means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
Indebtedness means obligations with regard to borrowed money and shall
expressly not include either accounts payable or accrued liabilities that are
incurred in the ordinary course of business or obligations under operating
leases regardless of how such leases may be classified or accounted for on
financial statements.
Indemnitee has the meaning set forth in Section 8.5 hereof.
Indemnitor has the meaning set forth in Section 8.5 hereof.
Intellectual Property means all patents, trademarks, trade names,
domain names, service marks, copyrights and other similar intangible assets, and
applications, registrations, extensions and renewals for any of the foregoing,
and other intellectual property owned, leased or used by the Company in the
operation of the Stations or acquired by the Company from Gannett under the
Gannett Purchase Agreement and used in the Business, including, without
limitation, Call Letters, computer software and programs, of the Company used in
the Business or acquired by the Company from Gannett under the Gannett Purchase
Agreement and used in the Business, whether owned or used by, or licensed to,
the Company or acquired by the Company from Gannett under the Gannett Purchase
Agreement.
Knowledge with respect to the Company means the actual knowledge of the
officers and employees of the Company regarding (a) information relating to the
Stations disclosed by Gannett to the Company in the Gannett Purchase Agreement
or any Schedule, Exhibit or documents delivered to the Company in connection
therewith, and (b) information relating to the Stations that the Company has
been made aware of since September 4, 1998.
Law means any federal, state, local or foreign statute, law, ordinance,
regulation, rule, code, order or other requirement or rule of law including,
without limitation zoning laws and housing, building, safety or fire ordinances
or codes.
Leased Property means all real property of every kind and description
leased by the Company or rights to such leases or leased property acquired by
the Company from Gannett pursuant to the Gannett Purchase Agreement and used in
connection with the Business, together (to the extent leased by the Company or
obtained from Gannett pursuant to the Gannett Purchase Agreement) with all
buildings and other structures, towers, antennae, facilities or improvements
currently or hereafter located thereon, all fixtures, systems, equipment and
items of personal property of the Company or acquired by the Company from
Gannett pursuant to the Gannett Purchase Agreement attached or appurtenant
thereto and
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all easements, licenses, rights and appurtenances relating to the foregoing,
including, without limitation, the leased property referred to in Section 1.1(d)
of the Disclosure Schedule.
Letter of Credit has the meaning set forth in Section 2.1.
Liabilities means as to any Person all debts, adverse claims,
liabilities and obligations, whether accrued or fixed, absolute or contingent,
matured or unmatured, determined or determinable, known or unknown, including,
without limitation, those arising under any federal, state, local or foreign
statute, law, ordinance, regulation, rule, code, order, writ, stipulation or
other governmental requirement (including, without limitation, any environmental
law), action, suit, arbitration, proceeding or investigation or governmental
permit, license, authorization, certificate or approval and those arising under
any contract, agreement, arrangement, commitment or undertaking.
License Assets has the meaning set forth in Section 1.4 hereof.
Material Adverse Effect means any circumstance, change in, or effect on
the Company or the Stations that has a material adverse effect on the business,
results of operations or financial condition of the Stations, taken as a whole;
provided, however, that Material Adverse Effect shall not include adverse
effects resulting from (or, in the case of effects that have not yet occurred,
reasonably likely to result from) (i) general economic or industry conditions
that have a similar effect on other participants in the industry, (ii) regional
economic or industry conditions that have a similar effect on other participants
in the industry in such region, (iii) the fact that the Purchaser unreasonably
withheld Purchaser's consent with respect to any Program Contract pursuant to
Section 5.1 of the Agreement, or (iv) any act of Purchaser.
Material Contracts means the written agreements (including, without
limitation, amendments thereto), contracts, policies, plans, mortgages,
understandings, arrangements or commitments relating to the Business, to which
Gannett or the Company is a party or by which its assets are bound as described
below:
(i) any agreement or contract providing for payments to any Person in
excess of Fifty Thousand Dollars ($50,000) per year or Two Hundred Fifty
Thousand Dollars ($250,000) in the aggregate over the five (5) year period
commencing on the date hereof;
(ii) all time brokerage agreements and affiliation agreements with
television networks;
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(iii) any license or contract pursuant to which Gannett or the Company
is authorized to broadcast film or taped programming supplied by others in
excess of Ten Thousand Dollars ($10,000) or having a term of more than one (1)
year;
(iv) any employment agreement, consulting agreement or similar contract
providing for payments to any individual in excess of Fifty Thousand Dollars
($50,000) per year or One Hundred Thousand Dollars ($100,000) in the aggregate
over the five (5) year period commencing on the date hereof;
(v) any retention or severance agreement or contract with respect to
any Person who is to be employed by Purchaser following the Closing;
(vi) all collective bargaining agreements or other union contracts;
(vii) (A) any lease of Equipment or license with respect to
Intellectual Property (other than licenses granted in connection with the
purchase of equipment or other assets) by Gannett or the Company from another
Person providing for payments to another Person in excess of Twenty-Five
Thousand Dollars ($25,000) per year or Seventy-Five Thousand Dollars ($75,000)
in the aggregate over the five (5) year period commencing on the date hereof; or
(B) any lease of Real Property by Gannett or the Company from another Person;
(viii) any lease of Equipment or Real Property or license with respect
to Intellectual Property (other than licenses granted in connection with the
purchase of equipment or other assets) by Gannett or the Company to another
Person providing for payments to Gannett or the Company in excess of Twenty
Thousand Dollars ($20,000) per year or Fifty Thousand Dollars ($50,000) in the
aggregate over the five (5) year period commencing on the date hereof;
(ix) any joint venture, partnership or similar agreement or contract;
(x) any agreement or contract under which Gannett or the Company has
loaned any money in excess of One Million Dollars ($1,000,000) or issued or
received any note, bond, indenture or other evidence of indebtedness in excess
of One Million Dollars ($1,000,000);
(xi) any agreement or contract under which Gannett or the Company has
directly or indirectly guaranteed Indebtedness in an amount in excess of One
Million Dollars ($1,000,000);
(xii) any agreement or contract under which Gannett or the Company has
directly or indirectly guaranteed liabilities or obligations of others which do
not constitute Indebtedness;
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(xiii) any covenant not to compete or contract or agreement,
understanding, arrangement or any restriction whatsoever limiting in any respect
the ability of the Company to compete in any line of business or with any Person
or in any area; and
(xiv) any agreement or contract between Gannett or the Company and any
officer, director, stockholder or employee of the Business or any of their
family members providing for payments in excess of Five Thousand Dollars
($5,000) (other than agreements covered in clause iv) (or that would have been
covered in clause (iv) but for the monetary limits thereunder) or agreements or
contracts containing terms substantially similar to terms available to employees
generally).
Material Contracts shall not include any and all (w) contracts,
purchase orders, purchase commitments, leases and agreements entered into in the
ordinary course of business and relating to the Company (other than those
described in clauses (v), (vii), (viii) or (ix) above) that (A) are terminable
at will without payment of premium or penalty by the Company or (B) are
terminable on not more than sixty (60) days' written notice without payment of
premium or penalty and do not involve the obligation of the Company to make
payments in excess of Ten Thousand Dollars ($10,000) during the sixty (60) day
period commencing on the Closing; (x) contracts with respect to time sales (or
other promotion or sponsorship sales) to advertisers or advertising agencies
(including, without limitation, "trade" or "barter" agreements), sales agency or
advertising representation contracts, and barter obligations or commitments to
suppliers of programming; and (y) contracts with respect to the sale of
production time and/or production services relating to advertising or with
respect to other services.
Net Financial Assets means the result of (i) the aggregate amount of
current assets of the Business to be assigned to Purchaser under this Agreement,
excluding for purposes of this calculation, the current portion of rights under
Program Contracts (except as provided otherwise herein), less (ii) the aggregate
amount of current liabilities of the Business to be assumed by Purchaser under
this Agreement, excluding for purposes of this calculation the current portion
of obligations under Program Contracts (except as provided otherwise herein),
less (iii) the aggregate amount of the Company's liability for supplemental
retirement and deferred compensation under the Employee Benefit Plans relating
to the Business Employees set forth in Section 9 of the Disclosure Schedule to
the extent not paid by Gannett prior to the Transfer Date and excluding the
current portion of such liability, if any, to the extent such portion is
included as a current liability in clause (ii), in each case as of the relevant
date of calculation and calculated (except as otherwise provided in Section 9 of
the Disclosure Schedule) in conformity with GAAP. Net Financial Assets expressly
shall not include, as either assets or liabilities, the rights and obligations
under Program Contracts; provided, however,
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that notwithstanding any prior practice or lack thereof relating thereto, (x)
any programming downpayments made in advance of customary payment terms, to the
extent not amortized as of the relevant date of calculation as more fully
described in the example set forth in Section 9 of the Disclosure Schedule,
shall be expressly included in the current assets, (y) any regularly scheduled
payments due and unpaid as of the day immediately preceding the Transfer Date
under Program Contracts in accordance with their terms as in effect on the date
hereof (with respect to Program Contracts existing on the date hereof) or on the
date originally entered into (with respect to Program Contracts entered into
after the date hereof) shall be expressly included in the current liabilities
and (z) any prepayments of regularly scheduled amounts due on or after the
Transfer Date, but made prior to the Transfer Date under Program Contracts shall
be expressly included in the current assets. Without limiting the generality of
the foregoing and subject to the immediately preceding sentence, for purposes of
determining the amount of Net Financial Assets, all revenues and all expenses
arising from the operation of the Stations, including, without limitation, tower
rental, business and license fees, utility charges, real and personal property
taxes and assessments levied against the Assets, property and equipment rentals,
applicable copyright or other fees, sales and service charges, Taxes (except for
Taxes arising from the transfer of the Assets under this Agreement which shall
be apportioned between Purchaser and the Company pursuant to Section 10.10
hereof), employee compensation, including wages, salaries, commissions, music
license fees and similar prepaid and deferred items, shall be prorated as of the
relevant date of calculation in accordance with GAAP.
Net Proceeds has the meaning set forth in Section 8.4 hereof.
Non-License Assets means the Assets, other than the License Assets.
Non-License Transfer has the meaning set forth in Section 1.4(a).
Non-License Transfer Date has the meaning set forth in Section 1.4(a).
Notice of Claim has the meaning set forth in Section 8.5 hereof.
Permits has the meaning set forth in Section 3.11(a) hereof.
Permitted Exceptions means each of the following:
(i) liens for taxes, assessments and governmental charges or levies not
yet due and payable or the validity of which is being contested in good faith by
appropriate proceedings;
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(ii) Encumbrances imposed by law, such as materialmen's, mechanics',
carriers', workmen's and repairmen's liens and other similar liens, arising in
the ordinary course of business;
(iii) pledges or deposits to secure obligations under workers'
compensation laws or similar legislation or to secure public or statutory
obligations;
(iv) survey exceptions, rights of way, easements, reciprocal easement
agreements and other Encumbrances on title to real property set forth in Section
1.1(d) of the Disclosure Schedule or that do not, individually or in the
aggregate, materially adversely affect the use of such property in the conduct
of the Company's business as it is being conducted prior to the Transfer Date;
(v) zoning laws and other land use restrictions that do not in any
material respect (a) detract from or impair the value or the use of the property
subject thereto, or (b) impair the operation of the Stations as it is being
conducted prior to the Closing in accordance with the provisions of the Gannett
Purchase Agreement;
(vi) security interests in favor of suppliers of goods for which
payment has not been made in the ordinary course of business consistent with
past practice;
(vii) Encumbrances on the interests of the lessors of properties used
by the Stations in which the Company or Gannett holds a leasehold interest; and
(viii) any and all other Encumbrances that do not materially detract
from or materially impair the value or the use of the property subject thereto
for the purposes currently utilized in the operation of the Stations.
Person means any individual, partnership, firm, corporation, limited
liability company, association, trust, unincorporated organization or other
entity, as well as any syndicate or group that would be deemed to be a person
under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.
Post-Closing Agreements means those covenants and agreements required
by this Agreement to be performed after the Non-License Transfer or the Closing,
as applicable.
Program Contracts has the meaning set forth in Section 1.1(f) hereof.
Purchase Price has the meaning set forth in Section 2.2(a).
Purchaser has the meaning specified in the introductory paragraph to
this Agreement.
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Purchaser Indemnified Parties has the meaning set forth in Section 8.1
hereof.
Purchaser Permitted Assignee has the meaning set forth in Section
10.5(b) hereof.
Real Property means all real property of every kind and description and
related mineral rights owned by the Company or acquired by the Company from
Gannett pursuant to the Gannett Purchase Agreement and used in connection with
the Business, together with all buildings and other structures, towers,
antennae, facilities or improvements currently or hereafter located thereon, all
fixtures, systems, equipment and items of personal property of the Company or
acquired by the Company from Gannett pursuant to the Gannett Purchase Agreement
attached or appurtenant thereto and all easements, licenses, rights and
appurtenances relating to the foregoing, including, without limitation, the
owned property set forth in Section 1.1(d) of the Disclosure Schedule.
Reimbursements has the meaning set forth in Section 8.4 hereof.
Release means disposing, discharging, injecting, spilling, leaking,
leaching, dumping, emitting, escaping, emptying, seeping, placing and the like
into or upon any land or water or air or otherwise entering into the
environment.
Second Year Anniversary Date has the meaning set forth in Section
2.3(c).
Stations shall have the meaning set forth in the Recitals.
STC Scheduled Severance Agreements has the meaning set forth in Section
5.9(a).
STC Severance Payment has the meaning set forth in Section 5.9(a).
Subsidiary of any Person means (i) any corporation more than fifty
percent (50%) of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
is owned by such Person directly or indirectly, through Subsidiaries and (ii)
any partnership, limited partnership, limited liability company, associates,
joint venture or other entity in which such Person directly or indirectly
through Subsidiaries has more than a fifty percent (50%) equity interest.
Tax or Taxes means any and all taxes, fees, withholdings, levies,
duties, tariffs, imposts, and other charges of any kind (together with any and
all interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any government or taxing authority, including,
without limitation,
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taxes or other charges on or with respect to income, franchises, windfall or
other profits, gross receipts, property, sales, use, capital stock, payroll,
employment, social security, workers' compensation, unemployment compensation,
or net worth, taxes or other charges in the nature of excise, withholding, ad
valorem, stamp, transfer, value added or gains taxes, license, registration and
documentation fees, and customs duties, tariffs and similar charges.
Tax Benefit has the meaning set forth in Section 8.4 hereof.
Tax Return means any report, return, document, declaration or other
information or filing required to be supplied to any Tax authority or
jurisdiction (foreign or domestic) with respect to Taxes, including, without
limitation, information returns, any documents with respect to or accompanying
payments of estimated Taxes, or with respect to or accompanying requests for the
extension of time in which to file any such report, return, document,
declaration or other information.
Termination Date has the meaning set forth in Section 10.1(a)(iv)
hereof.
Third Party Sale has the meaning set forth in Section 1.4(d).
Time Brokerage Agreement has the meaning set forth in Section
1.5(a)(ix).
Transaction Documents mean this Agreement; the Bill of Sale, Assignment
and Assumption Agreement; the Assignment of FCC Licenses; the Time Brokerage
Agreement; and the Deposit Escrow Agreement.
Transfer Date means the earlier of the Non-License Transfer and the
Closing Date.
Unaudited Financial Statements has the meaning set forth in Section
3.5(a) hereof.
WARN has the meaning set forth in Section 5.2(h).
ARTICLE 10. MISCELLANEOUS PROVISIONS.
10.1 TERMINATION RIGHTS.
(a) This Agreement may be terminated:
(i) by mutual consent of the parties;
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(ii) by Purchaser by written notice of termination delivered to
the Company pursuant to Section 1.6 prior to the Diligence Termination Deadline;
(iii) by the Company by written notice of termination delivered
to Purchaser prior to the Diligence Termination Deadline, if the parties hereto
cannot agree on the forms of news share agreement as provided for in Section
5.13.
(iv) by either the Company or Purchaser, provided such party is
not then in material default hereunder, upon written notice to the other party,
if the Transfer Date has not occurred on or before the date that is one (1) year
after the date of this Agreement (the "TERMINATION DATE");
(v) by (A) the Company prior to the Transfer Date, or (B)
Purchaser at any time, upon written notice to the other party, if any
Governmental Authority shall have issued a statute, rule, regulation, order,
decree or injunction or taken any other action permanently restraining,
enjoining or otherwise prohibiting the Closing hereunder or the closing under
the Gannett Purchase Agreement and such statute, rule, regulation, order, decree
or injunction or other action shall have become final and nonappealable,
provided that this clause (v) will not be applicable to actions of the FCC
subject to clause (vi) below;
(vi) by (A) the Company prior to the Transfer Date, or (B)
Purchaser at any time, upon written notice to the other party, if (i) the FCC,
or the Chief, Mass Media Bureau of the FCC, acting under delegated authority,
shall have denied the application for assignment of the Gannett FCC Licenses to
the Company, (ii) the FCC, or the Chief, Mass Media Bureau of the FCC, acting
under delegated authority, shall have denied the application for assignment of
the FCC Licenses to Purchaser, (iii) the parties' request for administrative or
judicial review, or the FCC's administrative review sua sponte, shall not have
been disposed of favorably to the parties and (iv) the parties have no further
relief available to them;
(vii) by Purchaser, by written notice to the Company, if there
has been a material breach by the Company of any representation, warranty,
covenant or agreement set forth in this Agreement such that the conditions
precedent set forth in Section 6.1 or 6.2 hereof would not be satisfied, which
breach has not been cured within twenty (20) Business Days following receipt by
the Company of written notice of such breach from Purchaser;
(viii) prior to the Transfer Date, by the Company, by written
notice to Purchaser if there has been a material breach by Purchaser of any
representation, warranty, covenant or agreement set forth in this Agreement such
that the conditions precedent set forth in Section 7.1 or 7.2 hereof would not
be
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satisfied, which breach has not been cured within twenty (20) Business Days
following receipt by Purchaser of written notice of such breach from the
Company;
(ix) by Purchaser by written notice to the Company, if the FCC
has revoked the Company's or Gannett's FCC License for the Stations; or
(x) automatically prior to the Transfer Date without further
action by the parties upon the termination of the Gannett Purchase Agreement in
accordance with its terms.
(b) If this Agreement is terminated pursuant to Section 10.1(a)(i),
(iv), (v), (vi), (vii), (ix) or (x) hereof, Purchaser shall receive the
immediate return of the Letter of Credit.
(c) If this Agreement is terminated pursuant to Section 10.1(a)(i),
(ii), (iii), (iv), (v), (vi), (vii), (ix) or (x) hereof this Agreement shall
thereupon become void and of no further effect whatsoever, and the parties shall
be released and discharged of all obligations under this Agreement, except (i)
to the extent of a party's liability for willful material breaches of this
Agreement prior to the time of such termination, and (ii) the obligations of
each party for its own expenses incurred in connection with the transactions
contemplated by this Agreement as provided herein.
(d) If this Agreement is terminated pursuant to Section
10.1(a)(viii) hereof, the Company's sole and exclusive remedy under this
Agreement shall be to receive the Escrow Deposit by drawing down on the Letter
of Credit (without setoff deduction or counterclaim) as liquidated damages, and
upon such payment, Purchaser shall be discharged from all further liability
under this Agreement.
10.2 LITIGATION COSTS.
If any litigation with respect to the obligations of the parties
under this Agreement results in a final nonappealable order of a court of
competent jurisdiction that results in a final disposition of such litigation,
the prevailing party, as determined by the court ordering such disposition,
shall be entitled to reasonable attorneys' fees as shall be determined by such
court. Contingent or other percentage compensation arrangements shall not be
considered reasonable attorneys' fees.
10.3 EXPENSES.
Except as otherwise specifically provided in this Agreement, all
costs and expenses, including, without limitation, fees and disbursements of
counsel,
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financial advisors and accountants, incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such costs and expenses, whether or not the Non-License Transfer or the Closing
shall have occurred, provided that the Company and Purchaser shall each be
responsible and pay fifty percent (50%) of the HSR Act filing fee (unless this
Agreement is terminated by Purchaser prior to the Diligence Termination Deadline
whereupon the Company shall be responsible for the entire HSR Act filing fee)
and the filing fees payable to the FCC in connection with the filing of the
application for assignment of the FCC Licenses.
10.4 NOTICES.
Any notice, demand, claim, notice of claim, request or
communication required or permitted to be given under the provisions of this
Agreement shall be in writing and shall be deemed to have been duly given (i)
upon delivery if delivered in person, (ii) on the next Business Day after the
date of mailing if mailed by registered or certified mail, postage prepaid and
return receipt requested, (iii) on the next Business Day after the date of
delivery to a national overnight courier service, or (iv) upon transmission by
facsimile (if such transmission is confirmed by the answerback of the facsimile
machine of the addressee) if delivered through such services to the following
addresses, or to such other address as any party may request by notifying in
writing all of the other parties to this Agreement in accordance with this
Section 10.4.
If to Purchaser:
STC Broadcasting, Inc.
3839 4th Street North
Suite 420
St. Petersburg, Florida 33703
Attn: David Fitz
Fax: (727) 821-8092
with copies to:
Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court
Suite 1600
Dallas, Texas 75201
Attn: Lawrence D. Stuart, Jr., Esq.
Fax: (214) 740-7355
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and
Hogan & Hartson L.L.P.
8300 Greensboro Drive
Suite 1100
McLean, Virginia 22102
Attn: Richard T. Horan, Jr., Esq.
Fax: (703) 610-6200
If to Company:
Sinclair Communications, Inc.
2000 West 41st Street
Baltimore, Maryland 21211-1420
Attn: President
Fax: (410) 467-5043
with copy to:
Sinclair Communications, Inc.
2000 West 41st Street
Baltimore, Maryland 21211-1420
Attn: General Counsel
Fax: (410) 662-4707
and
Thomas & Libowitz, P.A.
100 Light Street
Suite 1100
Baltimore, Maryland 21202-1053
Attn: Steven A. Thomas, Esq.
Fax: (410) 752-2046
Any such notice shall be deemed to have been received on the date
of personal delivery, the date set forth on the Postal Service return receipt,
or the date of delivery shown on the records of the overnight courier, as
applicable.
10.5 BENEFIT AND ASSIGNMENT.
(a) The Company shall not assign this Agreement, in whole or in
part, whether by operation of law or otherwise, without the prior written
consent of
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Purchaser and any purported assignment contrary to the terms hereof shall be
null, void and of no force and effect; provided, however, the Company shall be
entitled, without the consent of Purchaser, to assign the Company's rights
hereunder to any direct or indirect wholly-owned subsidiaries of the Company to
which the Company shall have assigned the rights of the Company to the Assets of
the Stations under the Gannett Purchase Agreement in accordance with the terms
of the Gannett Purchase Agreement (each a "COMPANY PERMITTED ASSIGNEE");
provided, that the Company gives Purchaser written notice thereof and any such
Company Permitted Assignee shall be responsible for all representations,
covenants and agreements of the Company hereunder as if such Company Permitted
Assignee was a party hereto, and any such assignment shall not relieve the
Company of any of its Liabilities hereunder (including, without limitation, any
obligation pursuant to Article 8 hereof).
(b) Purchaser shall not assign this Agreement, in whole or in part,
whether by operation of law or otherwise, without the prior written consent of
the Company and any purported assignment contrary to the terms hereof shall be
null, void and of no force and effect; provided, however, Purchaser shall be
entitled, without the consent of the Company, to assign Purchaser's rights and
interests hereunder (in whole or in part as to any Station) (i) prior to the
Transfer Date, to any Affiliate of Purchaser (each a "PURCHASER PERMITTED
ASSIGNEE"); provided, that Purchaser gives the Company written notice thereof
and such Purchaser Permitted Assignee shall be responsible for all
representations, covenants and agreements of Purchaser hereunder as if such
assignee was a party hereto, and any such assignment shall not relieve Purchaser
of any of its Liabilities hereunder (including, without limitation, any
obligation pursuant to Article 8 hereof), and (ii) from and after the Transfer
Date, to any Person.
(c) This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns as
permitted hereunder. Except as set forth in Section 8.7, no Person, other than
the parties hereto and their respective successors and assigns as permitted
hereunder, is or shall be entitled to bring any action to enforce any provision
of this Agreement against any of the parties hereto. Except as set forth in
Section 8.7, the covenants and agreements set forth in this Agreement shall be
solely for the benefit of, and shall be enforceable only by, the parties hereto
or their respective successors and assigns as permitted hereunder.
10.6 WAIVER.
Any party to this Agreement may (a) extend the time for the
performance of any of the obligations or other acts of any other party, (b)
waive any inaccuracies in the representations and warranties of any other party
contained
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herein or in any document delivered by any other party pursuant hereto
or (c) waive compliance with any of the agreements or conditions of any other
party contained herein. Any such extension or waiver shall be valid only if set
forth in an instrument in writing signed by the party to be bound thereby. Any
waiver of any term or condition shall not be construed as a waiver of any
subsequent breach or a subsequent waiver of the same term or condition, or a
waiver of any other term or condition, of this Agreement. The failure of any
party to assert any of its rights hereunder shall not constitute a waiver of any
such rights.
10.7 SEVERABILITY.
If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any Law or public policy, all other
terms and provisions of this Agreement shall nevertheless remain in full force
and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible.
10.8 AMENDMENT.
This Agreement may not be amended or modified except (a) by an
instrument in writing signed by, or on behalf of, the Company and Purchaser or
(b) by a waiver in accordance with Section 10.6 hereof.
10.9 EFFECT AND CONSTRUCTION OF THIS AGREEMENT.
This Agreement embodies the entire agreement and understanding of
the parties with respect to the subject matter hereof and supersedes any and all
prior agreements, arrangements and understandings, whether written or oral,
relating to matters provided for herein. The language used in this Agreement
shall be deemed to be the language chosen by the parties hereto to express their
mutual agreement, and this Agreement shall not be deemed to have been prepared
by any single party hereto. Disclosure of any fact or item in the Disclosure
Schedule referenced by a particular paragraph or section in this Agreement
shall, should the existence of the fact or item or its contents be relevant to
any other paragraph or section, be deemed to be disclosed with respect to that
other paragraph or section whether or not a specific cross reference appears, if
the disclosure in respect of the one paragraph or section is reasonably
sufficient to inform the reader of the information required to be disclosed in
respect such other paragraph or section.
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Disclosure of any fact or item in the Disclosure Schedule shall not necessarily
mean that such item or fact, individually or in the aggregate, is material to
the business, results of operations or financial condition of the Stations. Time
shall be of the essence in enforcing and applying the covenants and conditions
set forth in this Agreement. The headings of the sections and subsections of
this Agreement are inserted as a matter of convenience and for reference
purposes only and in no respect define, limit or describe the scope of this
Agreement or the intent of any section or subsection. This Agreement may be
executed in one or more counterparts and by the different parties hereto in
separate counterparts, each of which when executed shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement. This Agreement and the rights and duties of the parties hereunder
shall be governed by, and construed in accordance with, the laws of the State of
New York, without giving effect to the conflicts of law principles thereof
(other than Section 5-1401 of the New York General Obligations Law).
10.10 TRANSFER AND CONVEYANCE TAXES.
Purchaser and the Company shall each be liable for and shall pay
one-half of all applicable sales, transfer, recording, deed, stamp and other
similar non-income taxes, imposed in connection with transfers and conveyances
of the Assets, including, without limitation, any real property transfer or
gains taxes (if any), resulting from the consummation of the transactions
contemplated by this Agreement.
10.11 SPECIFIC PERFORMANCE.
Each of the parties hereto acknowledges and agrees that in the
event of any breach of this Agreement, each non-breaching party would be
irreparably and immediately harmed and could not be made whole by monetary
damages. It is accordingly agreed that the parties hereto (a) waive, in any
action for specific performance, the defense of adequacy of a remedy at law and
(b) shall be entitled, in addition to any other remedy to which they may be
entitled at law or in equity, to compel specific performance of this Agreement
in any action instituted in any state or federal court having jurisdiction
thereover.
10.12 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
The respective representations, warranties, covenants and
agreements of the Company and Purchaser contained herein or in any certificate
and any and all covenants and agreements herein or therein shall survive the
Non-License Transfer Date or the Closing Date, as applicable, and shall remain
in full force and effect to the following extent: (a) representations and
warranties with respect to
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the Non-License Assets shall survive for a period of twelve (12) months after
the Non-License Transfer Date; (b) representations and warranties with respect
to the License Assets shall survive for a period of twelve (12) months after the
Closing Date; (c) the covenants and agreements with respect to the Non-License
Assets which by their terms survive the Non-License Transfer Date shall continue
in full force and effect until fully discharged; (d) the covenants and
agreements with respect to the License Assets which by their terms survive the
Closing Date shall continue in full force and effect until fully discharged; (e)
the Company's obligations with respect to all obligations and liabilities not
assumed by Purchaser shall survive until such obligations and liabilities have
been paid, performed or discharged in full; (f) Purchaser's obligations with
respect to all obligations and liabilities assumed by Purchaser hereunder shall
survive until such obligations and liabilities have been paid, performed or
discharged in full; (g) the covenants and agreements in Article 8 shall continue
in full force and effect until fully discharged; and (h) any representation,
warranty, covenant or agreement that is the subject of a claim which is asserted
prior to the expiration of the survival period set forth in this Section 10.12,
shall survive with respect to such claim or dispute until the final resolution
thereof; provided, however, that unless Purchaser shall notify the Company of
any Claim or Damages at least ten (10) days prior to the expiration of the
survival period set forth in clause (a) or (b) above, the Company shall have no
obligation to indemnify Purchaser under Section 8.1(a) with respect to such
Claim or Damages.
ARTICLE 11. NO PERSONAL LIABILITY FOR REPRESENTATIVES, STOCKHOLDERS, DIRECTORS
OR OFFICERS.
(a) Purchaser understands, acknowledges and agrees that the directors
and officers and consultants of the Company and Gannett and the trustees under
the Employee Benefit Plans have performed, or may perform, certain acts required
or permitted under this Agreement on behalf of the Company or Gannett to
facilitate the transactions among the parties to this Agreement contemplated
herein. Notwithstanding anything to the contrary contained herein, no
stockholder, director or officer of the Company or Gannett, any such consultant,
or any such trustee (or any Affiliate of the foregoing) shall, under any
circumstances, have, and the Purchaser hereby absolves all such Persons from,
any personal liability to the Purchaser (and each of their Affiliates) for such
acts to the extent deemed to be actions by or on behalf of the Company or
Gannett.
(b) The Company understands, acknowledges and agrees that the directors
and officers and consultants of Purchaser have performed, or may perform,
certain acts required or permitted under this Agreement on behalf of Purchaser
to facilitate the transactions among the parties to this Agreement contemplated
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herein. Notwithstanding anything to the contrary contained herein, no
stockholder, director or officer of Purchaser or any such consultant (or any
Affiliate of the foregoing) shall, under any circumstances, have, and the
Company hereby absolves all such Persons from, any personal liability to the
Company (and each of their Affiliates) for such acts to the extent deemed to be
actions by or on behalf of Purchaser.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Purchase
Agreement as of the day and year first above written.
SINCLAIR COMMUNICATIONS, INC.
By: /s/ David B. Amy
-------------------------
Name: David B. Amy
Title: Chief Financial Officer
STC BROADCASTING, INC.
By: /s/ David A. Fitz
-------------------------
Name: David A. Fitz
Title: Chief Financial Officer
<PAGE> 1
EXHIBIT 10.25
Second Amendment, dated as of January 29, 1999 (this "Second
Amendment") to the Amended and Restated Credit Agreement, dated as of July 2,
1998 (as amended by the First Amendment and Assignment and Acceptance, dated as
of July 27, 1998 and as may be further amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"), among (i) SUNRISE
TELEVISION CORP. ("Holdings"); (ii) STC BROADCASTING, INC. (the "Borrower");
(iii) the several banks and other financial institutions from time to time
parties thereto, (individually, a "Lender," and collectively, the "Lenders");
(iv) NATIONSBANK, N.A. ("Nations"), as documentation agent (in such capacity,
the "Documentation Agent"); (v) SALOMON BROTHERS HOLDING COMPANY INC ("SB"), as
syndication agent (in such capacity, the "Syndication Agent") and (vi) THE
CHASE MANHATTAN BANK, as administrative agent for the Lenders thereunder (in
such capacity, the "Administrative Agent").
WITNESSETH:
WHEREAS, pursuant to the Credit Agreement the Lenders have agreed to
make, and have made, certain Loans to the Borrower;
WHEREAS, Holdings and the Borrower have requested that the Lenders
amend, and the Lenders have agreed to amend, certain of the provisions of the
Credit Agreement upon the terms and subject to the conditions set forth below;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Defined Terms. Capitalized terms used herein and not otherwise
defined are used herein as defined in the Credit Agreement.
2. Amendment to Definitions. (a) The definition of the term "Permitted
Acquisition" is hereby amended by inserting immediately after the reference to
"subsection 7.1" in the fifteenth line thereof the following: "(including, if
any Acquisition Debt Securities or Acquisition Preferred Stock are issued,
projections demonstrating compliance with such covenants through the final
maturity of the Loans after giving effect to any such issuance)"; and
(b) The definition of the term "Permitted Issuance" contained in
subsection 1.1 of the Credit Agreement is hereby amended by (a) deleting the
word "and" in the nineteenth line and substituting in lieu thereof a comma and
(b) inserting at the end thereof and prior to the period the following:
"and (i) the issuance by the Borrower or Holdings of any
Acquisition Preferred Stock, the proceeds of which are used to
finance any Permitted Acquisition or to redeem the Preferred
Stock, any other Acquisition Preferred Stock or any Acquisition
Debt Securities; provided, that the aggregate amount of
Acquisition Preferred Stock, when combined with the aggregate
amount of any Acquisition Debt Securities, shall not exceed
$200,000,000 at any one time outstanding"
1
<PAGE> 2
3. Addition of Definitions. Subsection 1.1 of the Credit Agreement is
hereby amended by adding thereto the following new defined terms in appropriate
alphabetical order:
"Acquisition Debt Securities": (i) any unsecured, subordinated
notes of the Borrower, which shall have a maturity of no earlier
than the maturity of the Senior Subordinated Notes, which shall be
subordinated to the Obligations at least to the same extent as the
Senior Subordinated Notes and which shall be issued on other terms
and conditions satisfactory to the Administrative Agent or (ii)
any unsecured, discount notes of Holdings, which shall provide
that interest thereon will be payable only in kind prior to at
least the third anniversary of the issuance thereof, which shall
have a maturity of no earlier than the maturity of the Senior
Subordinated Notes and which shall be issued on other terms and
conditions satisfactory to the Administrative Agent.
"Acquisition Preferred Stock": any preferred stock of the Borrower
or Holdings, which shall have no voting rights, which shall
provide that dividends with respect thereto shall be payable only
out of the proceeds of the issuance thereof or only in kind prior
to at least the third anniversary of the issuance thereof, which
shall be redeemable only out of the proceeds of the issuance of
any Acquisition Debt Securities, any other Acquisition Preferred
Stock or any common stock of the Borrower or Holdings, as the case
may be, and which shall be issued on other terms and conditions
satisfactory to the Administrative Agent.
"Second Amendment": the Second Amendment, dated as of January 29,
1999, to this Agreement.
4. Amendment to Subsection 2.9(b). Subsection 2.9(b) of the Credit
Agreement is hereby amended by inserting immediately after the words "Recovery
Event" in the second line thereof the following: "(other than any Net Cash
Proceeds from the sale of the Rochester Station)".
5. Amendment to Subsection 4.16. Subsection 4.16 of the Credit
Agreement is hereby amended by deleting such subsection in its entirety and
substituting in lieu thereof the following new subsection 4.16:
"4.16 Use of Proceeds. The proceeds of the Term Loans, the
Revolving Credit Loans and the Letters of Credit shall be used for
the purposes specified in the recitals to this Agreement and for
working capital and general corporate purposes (including
Permitted Acquisitions). The proceeds of the Incremental Loans
shall be used to finance Permitted Acquisitions, including
repaying or redeeming Revolving Credit Loans, Acquisition Debt
Securities or Acquisition Preferred Stock which were used to
finance Permitted Acquisitions."
6. Amendment to Subsection 7.2. Subsection 7.2 of the Credit Agreement
is hereby amended by (a) deleting the word "and" at the end of paragraph (l)
thereof, (b) relettering paragraph (m) as paragraph (n) and (c) inserting the
following new paragraph (m):
"(m) Indebtedness of the Borrower or Holdings in respect of
Acquisition Debt Securities (including the increase in the
principal amount thereof in connection with the payment in kind of
interest thereon in accordance with their terms), the proceeds of
which are used to finance any
2
<PAGE> 3
Permitted Acquisition or to redeem the Preferred Stock, any
Acquisition Preferred Stock or any other Acquisition Debt
Securities; provided, that the aggregate amount of Acquisition
Debt Securities, when combined with the aggregate amount of any
Acquisition Preferred Stock, shall not exceed $200,000,000 at any
one time outstanding; and"
7. Amendment to Subsection 7.6. Subsection 7.6 of the Credit Agreement
is hereby amended by (a) deleting the word "and" at the end of paragraph
(a)(iii) thereof, (b) deleting the period at the end of paragraph (a)(iv) and
substituting in lieu thereof the following: "; and", (c) adding thereto the
following new paragraph (a)(v):
"(v) the proceeds of which are used by Holdings to pay dividends
on any Acquisition Preferred Stock issued by Holdings or to make
interest payments on any Acquisition Debt Securities issued by
Holdings, in each case, in accordance with the terms and the
definitions thereof.",
(d) deleting the word "and" at the end of paragraph (b), (e)
deleting the period at the end of paragraph (c) and substituting
in lieu thereof the following: "; and" and (f) inserting the
following new paragraph (d):
"(d) so long as no Default or Event of Default shall have occurred
and be continuing, the Borrower may pay cash dividends or
dividends payable in kind on any Acquisition Preferred Stock in
accordance with the terms and the definition thereof."
8. Amendment to Section 8(j). Section 8(j) of the Credit Agreement is
hereby amended by inserting immediately after the word "Borrower" in the second
line thereof the following: "(other than the Preferred Stock and any
Acquisition Preferred Stock issued by the Borrower)".
9. Amendment to Section 8(p). Section 8(p) of the Credit Agreement is
hereby amended by inserting immediately after the word "Borrower" in the fifth
line thereof the following: "(other than the Preferred Stock and any
Acquisition Preferred Stock issued by the Borrower)".
10. Effectiveness. This Second Amendment shall become effective on the
date on which the following conditions precedent shall have been satisfied
(such date, the "Effective Date"):
(a) the Administrative Agent shall have received counterparts of
this Second Amendment, duly executed and delivered by Holdings,
the Borrower and the Required Lenders; and
(b) all corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the
transactions contemplated by this Second Amendment shall be
satisfactory in form and substance to the Administrative Agent.
11. Representations and Warranties. On and as of the date hereof after
giving effect to this Second Amendment, each of Holdings and the Borrower
hereby represents and warrants to the Lenders that:
3
<PAGE> 4
(a) Each of its representations and warranties contained in
Section 4 of the Credit Agreement or in any certificate, document
or financial or other statement furnished at any time under or in
connection therewith are true and correct in all material respects
on and as of such date as if made on and as of such date, except
to the extent that such representations and warranties
specifically relate to an earlier date, in which case such
representations and warranties shall be true and correct in all
material respects as of such earlier date; provided that the
references to the Credit Agreement therein shall be deemed to
include this Second Amendment; and
(b) No Default or Event of Default has occurred and is continuing.
12. Continuing Effect; No Other Amendments. Except as expressly
amended or waived hereby, all of the terms and provisions of the Credit
Agreement and the other Loan Documents are and shall remain in full force and
effect. The amendments and waivers contained herein shall not constitute an
amendment or waiver of any other provision of the Credit Agreement or the other
Loan Documents or for any purpose except as expressly set forth herein.
13. GOVERNING LAW; Counterparts. (a) THIS SECOND AMENDMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.
(b) This Second Amendment may be executed in any number of
counterparts, all of which counterparts, taken together, shall
constitute one and the same instrument. This Second Amendment may
be delivered by facsimile transmission of the relevant signature
pages hereof.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties have caused this Second Amendment to
be duly executed and delivered by their respective proper and duly authorized
officers as of the day and year first above written.
SUNRISE TELEVISION CORP.
By: /s/ David A. Fitz
---------------------------------------
Name: David A. Fitz
Title: CFO
STC BROADCASTING, INC.
By: /s/ David A. Fitz
---------------------------------------
Name: David A. Fitz
Title: CFO
THE CHASE MANHATTAN BANK, as
Administrative Agent and as a Lender
By: /s/ Tracey Navin Ewing
---------------------------------------
Name: Tracey Navin Ewing
Title: Vice President
NATIONSBANK, N.A., as Documentation Agent
and as a Lender
By: /s/ Jennifer Zydney
---------------------------------------
Name: Jennifer Zydney
Title: Vice President
SALOMON BROTHERS HOLDING COMPANY INC,
as Syndication Agent and as a Lender
By: /s/ Timothy L. Freeman
---------------------------------------
Name: Timothy L. Freeman
Title: Attorney-In-Fact
5
<PAGE> 6
FINOVA CAPITAL CORPORATION,
as a Lender
By: /s/ Andrew J. Pluta
---------------------------------------
Name: Andrew J. Pluta
Title: Vice President
THE CIT GROUP/EQUIPMENT FINANCING, INC.,
as a Lender
By: /s/ Eric M. Moore
---------------------------------------
Name: Eric M. Moore
Title: Assistant Vice President
PARIBAS, as a Lender
By: /s/ William B. Schink
---------------------------------------
Name: William B. Schink
Title: Director
By: /s/ Salo Aizenberg
---------------------------------------
Name: Salo Aizenberg
Title: Vice President
NATEXIS BANQUE BFCE, as a Lender
By: /s/ Evan S. Kraus
---------------------------------------
Name: Evan S. Kraus
Title: Assistant Vice President
By: /s/ Cynthia E. Sachs
---------------------------------------
Name: Cynthia E. Sachs
Title: VP, Group Manager
GENERAL ELECTRIC CAPITAL CORPORATION,
as a Lender
By: /s/ Thomas P. Waters
---------------------------------------
Name: Thomas P. Waters
Title: Senior Vice President
6
<PAGE> 7
SUMMIT BANK, as a Lender
By: /s/ Catherine A. O'Brien
---------------------------------------
Name: Catherine A. O'Brien
Title: Assistant Vice President
CREDIT LYONNAIS, as a Lender
By: /s/ Mark N. Thorsheim
---------------------------------------
Name: Mark N. Thorsheim
Title: Vice President
BANK OF HAWAII, as a Lender
By: /s/ Bernadine M. Havertine
---------------------------------------
Name: Bernadine M. Havertine
Title: Corporate Banking Officer
THE LONG-TERM CREDIT BANK OF JAPAN, LTD.
NEW YORK BRANCH, as a Lender
By: /s/ Ken Yoshizaki
---------------------------------------
Name: Ken Yoshizaki
Title: Deputy General Manager
SUNTRUST BANK, as a Lender
By: /s/ Cynthia D. Egger
---------------------------------------
Name: Cynthia D. Egger
Title: Vice President
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A.,
"RABOBANK NEDERLAND",
NEW YORK BRANCH, as a Lender
By: /s/ Michael V.M. Van Der Voort
---------------------------------------
Name: Michael V.M. Van Der Voort
Title: Vice President
By: /s/ W. Pieter C. Kodde
---------------------------------------
Name: W. Pieter C. Kodde
Title: Vice President
7
<PAGE> 8
THE FUJI BANK, LIMITED,
NEW YORK BRANCH,
as a Lender
By: /s/ Teiji Teramoto
---------------------------------------
Name: Teiji Teramoto
Title: Vice President & Manager
FIRST HAWAIIAN BANK, as a Lender
By: /s/ James C. Polk
---------------------------------------
Name: James C. Polk
Title: Assistant Vice President
BHF-BANK AKTIENGESELLSCHAFT,
as a Lender
By: /s/ Hans J. Scholz
---------------------------------------
Name: Hans J. Scholz
Title: Assistant Vice President
By: /s/ Thomas Scifo
---------------------------------------
Name: Thomas Scifo
Title: Assistance Vice President
8
<PAGE> 1
Exhibit 10.26
SECURITIES PURCHASE AGREEMENT
BY AND AMONG
STC BROADCASTING, INC.
AND
THE CHASE MANHATTAN CORPORATION,
CREDIT SUISSE FIRST BOSTON CORPORATION
AND
SALOMON BROTHERS HOLDING COMPANY INC.
AS PURCHASERS
AND
CHASE SECURITIES, INC.,
AS ARRANGER
DATED AS OF FEBRUARY 5, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
DEFINITIONS AND INTERPRETATION
<S> <C> <C>
Section 1.01. Definitions................................................................................1
Section 1.02. Interpretation............................................................................13
Section 1.03. Business Day Adjustment...................................................................13
ARTICLE II
USE OF PROCEEDS
Section 2.01. Use of Proceeds...........................................................................13
ARTICLE III
ISSUE OF SECURITIES; PURCHASE AND SALE OF
SECURITIES; RIGHTS OF HOLDERS OF SECURITIES
Section 3.01. Issue of Preferred Stock, Series B........................................................14
Section 3.02. Purchase and Sale of the Preferred Stock, Series B........................................14
Section 3.03. Closing Fee...............................................................................14
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01. Representations, Warranties and Agreements of the Company.................................15
Section 4.02. Representations and Warranties of the Purchasers..........................................20
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
Section 5.01. Conditions Precedent to the Initial Closing of the Purchasers.............................21
Section 5.02. Conditions Precedent to the Subsequent Closing of the Purchasers..........................23
Section 5.03. Conditions Precedent to Obligations of the Company........................................24
ARTICLE VI
COVENANTS
Section 6.01. Notices of Material Events................................................................25
Section 6.02. Compliance with Laws......................................................................25
Section 6.03. Use of Proceeds...........................................................................25
Section 6.04. Limitation on Restricted Payments.........................................................25
Section 6.05. Corporate Existence.......................................................................28
Section 6.06. Payment of Taxes and Other Claims.........................................................28
Section 6.07. Maintenance of Properties and Insurance...................................................29
Section 6.08. Compliance with Laws......................................................................29
Section 6.09. Reports...................................................................................29
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 6.10. Limitations on Transactions with Affiliates...............................................29
Section 6.11. Limitation on Incurrence of Additional Indebtedness and
Issuance of Disqualified Capital Stock.................................................30
Section 6.12. Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries.................................................................30
Section 6.13. Limitation on Asset Sales.................................................................31
Section 6.14. Limitation on Asset Swaps.................................................................31
Section 6.15. FCC Compliance............................................................................31
Section 6.16. Merger, Consolidation and Sale of Assets..................................................31
Section 6.17. Successor Corporation Substituted.........................................................32
Section 6.18. Interest Rate Agreements..................................................................32
Section 6.19. Preferred Stock, Series B.................................................................32
ARTICLE VII
EVENTS OF DEFAULTS
Section 7.01. Actions after Default.....................................................................33
Section 7.02. Events of Default.........................................................................33
Section 7.03. Notice of Events..........................................................................33
ARTICLE VIII
INDEMNITY
Section 8.01. Indemnity.................................................................................34
Section 8.02. Contribution..............................................................................35
ARTICLE IX
MISCELLANEOUS
Section 9.01. Notices...................................................................................35
Section 9.02. Expenses..................................................................................36
Section 9.03. Governing Law; Submission to Jurisdiction: Venue..........................................36
Section 9.04. Judgment..................................................................................37
Section 9.05. Benefit of Agreement......................................................................37
Section 9.06 Assignments...............................................................................37
Section 9.07. Amendment.................................................................................38
Section 9.08. Counterparts; Integration.................................................................38
Section 9.09. Remedies and Waivers......................................................................38
Section 9.10. Severability..............................................................................38
Section 9.11. WAIVER OF JURY TRIAL......................................................................38
</TABLE>
<PAGE> 4
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT, dated as of February 5, 1999
(the "Agreement"), by and among STC BROADCASTING, INC., a Delaware corporation
("STC" or the "Company"), THE CHASE MANHATTAN CORPORATION, a Delaware
corporation, CREDIT SUISSE FIRST BOSTON CORPORATION and SALOMON BROTHERS
HOLDING COMPANY INC. (collectively, the "Purchasers" and individually, each a
"Purchaser") and CHASE SECURITIES, INC., as Arranger (in such capacity, the
"Arranger").
In consideration of the mutual covenants and agreements set
forth herein and for good and valuable consideration, the receipt of which is
hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.01. Definitions. Wherever used in this Agreement,
unless the context otherwise requires, the following terms have the meanings
indicated (such meanings to be equally applicable to both the singular and the
plural form of the terms defined):
"Acquired Indebtedness" means Indebtedness of a Person or any
of its Subsidiaries existing at the time such Person becomes a
Subsidiary of the Company or at the time it merges or consolidates
with the Company or any of its Subsidiaries or assumed in connection
with the acquisition of assets from such Person and not incurred by
such Person in connection with, or in anticipation or contemplation
of, such Person becoming a Subsidiary of the Company or such
acquisition, merger or consolidation.
"Acquisition Agreements" means, collectively, the Elcom
Acquisition Agreement and the Sinclair Acquisition Agreement.
"Affiliate" means a Person who, directly or indirectly,
through one or more intermediaries, controls, or is controlled by, or
is under common control with, the Company. The term "control" means
the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or
otherwise.
"Affiliate Transaction" has the meaning provided therefor in
Section 6.10.
"Asset Acquisition" means (i) an Investment by the Company or
any Subsidiary of the Company in any other Person pursuant to which
such Person shall become a Subsidiary of the Company or shall be
consolidated or merged with the Company or any Subsidiary of the
Company or (ii) the acquisition by the Company or any Subsidiary of
the Company of assets of any Person comprising a division or line of
business of such Person.
"Asset Sale" means any direct or indirect sale, issuance,
conveyance, transfer, lease (other than operating leases entered into
in the ordinary course of business), assignment or other transfer for
value by the Company or any of its Subsidiaries (excluding any Sale
and Leaseback Transaction or any pledge of assets or stock by the
Company or any of its Subsidiaries) to any Person other than the
Company or a Wholly Owned Subsidiary of the Company of (i) any Capital
Stock of any
1
<PAGE> 5
Subsidiary of the Company or (ii) any other property or assets of the
Company or any Subsidiary of the Company other than in the ordinary
course of business; provided, however, that for purposes of Section
6.13, Asset Sales shall not include (a) a transaction or series of
related transactions in which the Company or its Subsidiaries receive
aggregate consideration of less than $500,000, (b) transactions
permitted under Section 6.14 or (c) transactions covered by Section
6.16.
"Asset Swap" means the execution of a definitive agreement,
subject only to FCC approval, if applicable, and other customary
closing conditions, that the Company in good faith believes will be
satisfied, for a substantially concurrent purchase and sale, or
exchange, of Productive Assets between the Company or any of its
Subsidiaries and another Person or group of affiliated Persons;
provided that any amendment to or waiver of any closing condition that
individually or in the aggregate is material to the Asset Swap shall
be deemed to be a new Asset Swap.
"Basic Documents" means this Agreement, the Escrow Agreement
and the Put and Call Agreement and the Acquisition Agreements.
"Board of Directors" means, with respect to any Person, the
Board of Directors (or any other equivalent governing body) of such
Person or any committee of the Board of Directors of such Person duly
authorized, with respect to any particular matter, to exercise the
power of the Board of Directors of such Person.
"Board Resolution" means, with respect to any Person, a duly
adopted resolution of the Board of Directors of such Person.
"Business Day" means a day when banks are open for business
in New York, New York.
"Capital Stock" means (i) with respect to any Person that is
a corporation, any and all shares, interests, participations or other
equivalents (however designated) of capital stock of such Person and
(ii) with respect to any Person that is not a corporation, any and all
partnership or other equity interests of such Person.
"Capitalized Lease Obligation" means, as to any Person, the
obligation of such Person to pay rent or other amounts under a lease
to which such Person is a party that is required to be classified and
accounted for as a capital lease obligation under GAAP, and for
purposes of this definition, the amount of such obligation at any date
shall be the capitalized amount of such obligation at such date,
determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations
issued by, or unconditionally guaranteed by, the United States
Government or issued by any agency thereof and backed by the full
faith and credit of the United States, in each case maturing within
one year from the date of acquisition thereof; (ii) marketable direct
obligations issued by any state of the United States of America or any
political subdivision of any such state or any public instrumentality
thereof maturing within one year from the date of acquisition thereof
and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation or Moody's
Investors Service, Inc.; (iii) commercial paper maturing no more than
one year from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-1 from Standard & Poor's
Corporation or at least P-1 from Moody's Investors Service, Inc.; (iv)
certificates of deposit or bankers' acceptances maturing within one
year from the date of acquisition thereof issued by any commercial
bank organized under the laws of the United States of America or any
state thereof or the District of Columbia or any U.S. branch of a
foreign bank having at the date of
2
<PAGE> 6
acquisition thereof combined capital and surplus of not less than
$200,000,000; (v) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clause
(i) above entered into with any bank meeting the qualifications
specified in clause (iv) above; and (vi) investments in money market
funds that invest substantially all their assets in securities of the
types described in clauses (i) through (v) above.
"Certificate of Designation" means the Certificate of
Designation duly adopted by the Board of Directors of the Company
setting forth the rights, preferences and priorities of the Preferred
Stock, Series B and filed with, and accepted for filing, so as to be
effective, by the Secretary of State of the State of Delaware prior to
the Initial Closing hereunder and which is in the form of Exhibit A
hereto.
"Change of Control" means the occurrence of one or more of
the following events: (i) any sale, lease, exchange or other transfer
(in one transaction or a series of related transactions) of all or
substantially all of the assets of the Company to any Person or group
of related Persons for purposes of Section 13(d) of the Exchange Act
(a "Group") (whether or not otherwise in compliance with the
provisions of this Agreement), other than to Hicks Muse, any of its
Affiliates, officers and directors or Robert N. Smith or any of his
Affiliates (the "Permitted Holders"); or (ii) a majority of the board
of directors of the Company or Holdings shall consist of Persons who
are not Continuing Directors; or (iii) the acquisition by any Person
or Group (other than the Permitted Holders or any direct or indirect
Subsidiary of any Permitted Holder, including without limitation
Holdings) of the power, directly or indirectly, to vote or direct the
voting of securities having more than 50% of the ordinary voting power
for the election of directors of the Company or Holdings.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Commission" or "SEC" means the Securities and Exchange
Commission.
"Commodity Agreement" means any commodity futures contract,
commodity option or other similar agreement or arrangement entered
into by the Company or any of its Subsidiaries designed to protect the
Company or any of its Subsidiaries against fluctuations in the price
of commodities actually used in the ordinary course of business of the
Company and its Subsidiaries.
"Communications Act" has the meaning provided therefor in
Section 4.01(g).
"Consolidated Cash Flow" means, with respect to any Person,
for any period, the sum (without duplication) of (i) Consolidated Net
Income and (ii) to the extent Consolidated Net Income has been reduced
thereby, (A) all income taxes of such Person and its Subsidiaries paid
or accrued in accordance with GAAP for such period (other than income
taxes attributable to extraordinary or non-recurring gains or losses),
(B) Consolidated Interest Expense and (C) Consolidated Non-Cash
Charges, all as determined on a consolidated basis for such Person and
its Subsidiaries in conformity with GAAP.
"Consolidated Interest Expense" means, with respect to any
Person for any period, without duplication, the sum of (i) the
interest expense of such Person and its Subsidiaries for such period
as determined on a consolidated basis in accordance with GAAP,
including, without limitation, (a) any amortization of debt discount,
(b) the net cost under Interest Swap Obligations (including any
amortization of discounts), (c) the interest portion of any deferred
payment obligation, (d) all commissions, discounts and other fees and
charges owed with respect to letters of credit, bankers' acceptance
financing or similar facilities, and (e) all accrued interest and (ii)
the interest component
3
<PAGE> 7
of Capitalized Lease Obligations paid or accrued by such Person and
its Subsidiaries during such period as determined on a consolidated
basis in accordance with GAAP.
"Consolidated Net Income" of any Person means, for any
period, the aggregate net income (or loss) of such Person and its
Subsidiaries for such period on a consolidated basis, determined in
accordance with GAAP; provided, however, that there shall be excluded
therefrom, without duplication, (a) gains and losses from Asset Sales
(without regard to the $500,000 limitation set forth in the definition
thereof) or abandonments or reserves relating thereto and the related
tax effects, (b) items classified as extraordinary or non-recurring
gains and losses, and the related tax effects according to GAAP, (c)
the net income (or loss) of any Person acquired in a pooling of
interests transaction accrued prior to the date it becomes a
Subsidiary of such first-referred-to Person or is merged or
consolidated with it or any of its Subsidiaries, (d) the net income of
any Subsidiary to the extent that the declaration of dividends or
similar distributions by that Subsidiary of that income is restricted
by contract, operation of law or otherwise, and (e) the net income of
any Person, other than a Subsidiary, except to the extent of the
lesser of (x) dividends or distributions paid to such
first-referred-to Person or its Subsidiary by such Person and (y) the
net income of such Person (but in no event less than zero), and the
net loss of such Person shall be included only to the extent of the
aggregate Investment of the first-referred-to Person or a consolidated
Subsidiary of such Person and any non-cash expenses attributable to
grants or exercises of employee stock options.
"Consolidated Non-Cash Charges" means, with respect to any
Person for any period, the aggregate depreciation, amortization and
other non-cash expenses of such Person and its Subsidiaries (excluding
any such charges constituting an extraordinary or non-recurring item)
reducing Consolidated Net Income of such Person and its Subsidiaries
for such period, determined on a consolidated basis in accordance with
GAAP.
"Continuing Director" means, as of the date of determination,
any Person who (i) was a member of the Board of Directors of the
Company or Holdings on the Initial Closing Date, (ii) was nominated
for election or elected to the board of directors of the Company or
Holdings, as the case may be, with the affirmative vote of a majority
of the Continuing Directors who were members of such board of
directors at the time of such nomination or election or (iii) is a
representative of a Permitted Holder.
"Credit Agreement" means the Amended and Restated Credit
Agreement, dated as of July 2, 1998, among the Company, The Chase
Manhattan Bank, as administrative agent, NationsBank of Texas, N.A.,
as documentation agent, Salomon Brothers Holding Company Inc., as
syndication agent, and any other financial institutions from time to
time party thereto, together with the related documents thereto
(including, without limitation, any guarantee agreements and security
documents), in each case as such agreements may be amended (including
any amendment and restatement thereof), supplemented or otherwise
modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring
(including by way of adding Subsidiaries of the Company as additional
borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement
agreement and whether by the same or any other agent, lender or group
of lenders (or other institutions).
"Currency Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement
designed to protect the Company or any of its Subsidiaries against
fluctuations in currency values.
4
<PAGE> 8
"Default" means an event or condition that would constitute
an Event of Default but for the requirement that notice be given or
time elapse or both.
"Disqualified Capital Stock" means any Capital Stock that, by
its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of
any event, matures (excluding any maturity as the result of an
optional redemption by the issuer thereof) or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is
redeemable at the sole option of the holder thereof (except, in each
case, upon the occurrence of a Change of Control), in whole or in
part, on or prior to the final maturity date of the Senior
Subordinated Notes.
"DOJ" has the meaning provided therefor in Section 4.01(g).
"Dollars" and the sign "$" means the lawful currency of the
United States of America.
"Elcom" means Elcom of Ohio, Inc., a Delaware corporation.
"Elcom Acquisition" means the purchase by STC and its
Subsidiaries of substantially all the assets of Elcom constituting
television station WUPW-TV, Toledo, Ohio, pursuant to the terms of the
Elcom Acquisition Agreement.
"Elcom Acquisition Agreement" means that certain Asset
Purchase Agreement, dated as of July 24, 1998, by and between the
Company and Raycom America, Inc., successor-in-interest to Elcom, as
amended, in respect of the Elcom Acquisition.
"Engagement Letter" means the Engagement Letter dated as of
February 5, 1999 from the Arranger, Credit Suisse First Boston
Corporation and Salomon Smith Barney Inc. to STC and Holdings which is
in the form attached hereto as Exhibit D.
"Escrow Agreement" means the certain Escrow Agreement dated
as of February 5, 1999, between STC and The Chase Manhattan Bank, a
New York banking corporation. and which is in the form attached hereto
as Exhibit C.
"Event of Default" means any one of the events specified in
Section 7.02.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the Commission
thereunder.
"FCC" means the United States Federal Communications
Commission or any similar agency having jurisdiction over the
purchase, sale and operation of broadcast licenses and related assets.
"Financial Monitoring and Oversight Agreements" means,
collectively, the Monitoring and Oversight Agreement among the
Company, Holdings and Hicks Muse Partners, as in effect on the Senior
Subordinated Notes Issue Date, and the Financial Advisory Agreement
among the Company, Holdings and Hicks Muse Partners, as in effect on
the Senior Subordinated Notes Issue Date.
"FTC" has the meaning set forth in Section 4.01(g).
5
<PAGE> 9
"GAAP" means generally accepted accounting principles as in
effect in the United States of America as of the Senior Subordinated
Notes Issue Date.
"Governmental Authority" means the government of the United
States of America, any other nation or any political subdivision
thereof, whether state or local, and any agency, authority,
instrumentality, regulatory body, court, central bank or other entity
exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government.
"Hicks Muse" means Hicks, Muse, Tate & Furst Incorporated, a
Delaware corporation.
"Hicks Muse Partners" means Hicks, Muse & Co. Partners, L.P.,
a Texas limited partnership.
"HMTF" means Hicks, Muse, Tate & Furst Equity Fund III, L.P.,
a Delaware limited partnership.
"Holdings" means Sunrise Television Corporation, a Delaware
corporation.
"Indebtedness" means with respect to any Person, without
duplication, any liability of such Person (i) for borrowed money, (ii)
evidenced by bonds, debentures, notes or other similar instruments,
(iii) constituting Capitalized Lease Obligations, (iv) incurred or
assumed as the deferred purchase price of property, or pursuant to
conditional sale obligations and title retention agreements (but
excluding trade accounts payable arising in the ordinary course of
business), (v) for the reimbursement of any obligor on any letter of
credit, banker's acceptance or similar credit transaction, (vi) for
Indebtedness of others guaranteed by such Person, (vii) for Interest
Swap Obligations, Commodity Agreements and Currency Agreements and
(viii) for Indebtedness of any other Person of the type referred to in
clauses (i) through (vii) which is secured by any Lien on any property
or asset of such first-referred-to Person, the amount of such
Indebtedness being deemed to be the lesser of the value of such
property or asset or the amount of the Indebtedness so secured. The
amount of Indebtedness of any Person at any date shall be the
outstanding principal amount of all unconditional obligations
described above, as such amount would be reflected on a balance sheet
prepared in accordance with GAAP, and the maximum liability at such
date of such Person for any contingent obligations described above.
"Indenture" means the Indenture in respect of the Senior
Subordinated Notes, dated as of March 25, 1997, as in effect on the
date hereof, between STC, on the one hand, and the Trustee, on the
other hand.
"Initial Closing" has the meaning provided therefor in
Section 3.02.
"Initial Closing Date" means February 5, 1999
"Interest Rate Agreement" means any interest rate swap
agreement, interest rate cap agreement, interest rate collar
agreement, interest rate futures contract, interest rate option
contract or other similar arrangement or agreement to which the
Company is party, designed to protect the Purchasers against
fluctuations in interest rates.
"Interest Swap Obligations" means the obligations of any
Person under any Interest Rate Agreement.
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"Investment" means (i) any transfer or delivery of cash,
stock or other property of value in exchange for Indebtedness, stock
or other security or ownership interest in any Person by way of loan,
advance, capital contribution, guarantee or otherwise and (ii) an
investment deemed to have been made by the Company at the time any
entity which was a Subsidiary of the Company ceases to be such a
Subsidiary in an amount equal to the value of the loans and advances
made to, and any remaining ownership interest in, such entity
immediately following such entity ceasing to be a Subsidiary of the
Company. The amount of any non-cash Investment shall be the fair
market value of such Investment, as determined conclusively in good
faith by management of the Company unless the fair market value of
such Investment exceeds $1,000,000, in which case the fair market
value shall be determined conclusively in good faith by the Board of
Directors of the Company at the time such Investment is made.
"Investment Company Act" has the meaning provided therefor in
Section 4.01(n).
"Leverage Ratio" shall mean, as to any Person, the ratio of
(i) the aggregate outstanding amount of Indebtedness of the Company
and its Subsidiaries as of the date of calculation on a consolidated
basis in accordance with GAAP plus the aggregate liquidation
preference of all outstanding Disqualified Capital Stock of the
Company and of all outstanding Preferred Stock of Subsidiaries of the
Company to (ii) the Consolidated Cash Flow of the Company for the four
full fiscal quarters (the "Four Quarter Period") ending on or prior to
the date of determination.
For purposes of this definition, the aggregate outstanding
principal amount of Indebtedness of the Person and its Subsidiaries
for which such calculation is made shall be determined on a pro forma
basis as if the Indebtedness giving rise to the need to perform such
calculation had been incurred and the proceeds therefrom had been
applied, and all other transactions in respect of which such
Indebtedness is being incurred had occurred, on the last day of the
Four Quarter Period. In addition to the foregoing, for purposes of
this definition, "Consolidated Cash Flow" shall be calculated on a pro
forma basis after giving effect to (i) the incurrence of the
Indebtedness of such Person and its Subsidiaries (and the application
of the proceeds therefrom) giving rise to the need to make such
calculation and any incurrence (and the application of the proceeds
therefrom) or repayment of other Indebtedness, other than the
incurrence or repayment of Indebtedness pursuant to working capital
facilities, at any time subsequent to the beginning of the Four
Quarter Period and on or prior to the date of determination, as if
such incurrence (and the application of the proceeds thereof), or the
repayment, as the case may be, occurred on the first day of the Four
Quarter Period, (ii) any Asset Sales or Asset Acquisitions (including,
without limitation, any Asset Acquisition giving rise to the need to
make such calculation as a result of such Person or one of its
Subsidiaries (including any Person that becomes a Subsidiary as a
result of such Asset Acquisition) incurring, assuming or otherwise
becoming liable for Indebtedness) at any time on or subsequent to the
first day of the Four Quarter Period and on or prior to the date of
determination, as if such Asset Sale or Asset Acquisition (including
the incurrence, assumption or liability for any such Indebtedness and
also including any Consolidated Cash Flow associated with such Asset
Acquisition) occurred on the first day of the Four Quarter Period and
(iii) cost savings resulting from employee terminations, facilities
consolidations and closings, standardization of employee benefits and
compensation practices, consolidation of property, casualty and other
insurance coverage and policies, standardization of sales
representation commissions and other contract rates, and reductions in
taxes other than income taxes (collectively, "Cost Savings Measures"),
which cost savings the Company reasonably believes in good faith could
have been achieved during the Four Quarter Period as a result of such
Asset Acquisition (regardless of whether such cost savings could then
be reflected in pro forma financial statements under GAAP, Regulation
S-X promulgated by the Commission or any other regulation or policy of
the Commission), less the amount of any additional
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<PAGE> 11
expenses that the Company reasonably estimates would result from
anticipated replacements of any items constituting Cost Savings
Measures in connection with such Asset Acquisition; provided, however,
that both (A) such cost savings and Cost Savings Measures were
identified and such cost savings were quantified in an officer's
certificate delivered to the Arranger at the time of the consummation
of the Asset Acquisition and (B) with respect to each Asset
Acquisition completed prior to the 90th day preceding such date of
determination, actions were commenced or initiated by the Company
within 90 days of such Asset Acquisition to effect the Cost Savings
Measures identified in such officer's certificate (regardless,
however, of whether the corresponding cost savings have been
achieved). Furthermore, in calculating "Consolidated Interest Expense"
for purposes of the calculation of "Consolidated Cash Flow," (i)
interest on Indebtedness determined on a fluctuating basis as of the
date of determination (including Indebtedness actually incurred on the
date of the transaction giving rise to the need to calculate the
Leverage Ratio) and which will continue to be so determined thereafter
shall be deemed to have accrued at a fixed rate per annum equal to the
rate of interest on such Indebtedness as in effect on the date of
determination and (ii) notwithstanding (i) above, interest determined
on a fluctuating basis, to the extent such interest is covered by
Interest Swap Obligations, shall be deemed to accrue at the rate per
annum resulting after giving effect to the operation of such
agreements.
"Lien" means any lien, mortgage, deed of trust, pledge,
security interest, charge or encumbrance of any kind (including any
conditional sale or other title retention agreement, any lease in the
nature thereof and any agreement to give any security interest).
"License" has the meaning provided therefor in Section
4.01(m).
"Market Effect" has the meaning provided therefor in Section
5.01(l).
"Material Adverse Change" has the meaning provided therefor
in Section 5.01(m).
"Material Adverse Effect" has the meaning provided therefor
in Section 4.01(a).
"Net Cash Proceeds" means, with respect to any Asset Sale,
the proceeds in the form of cash or Cash Equivalents (including
payments in respect of deferred payment obligations when received in
the form of cash or Cash Equivalents) received by the Company or any
of its Subsidiaries from such Asset Sale net of (i) reasonable
out-of-pocket expenses and fees relating to such Asset Sale
(including, without limitation, legal, accounting and investment
banking fees and sales commissions, recording fees, title insurance
premiums, appraiser's fees and costs reasonably incurred in
preparation of any asset or property for sale), (ii) taxes paid or
reasonably estimated to be payable (calculated based on the combined
state, federal and foreign statutory tax rates applicable to the
Company or the Subsidiary engaged in such Asset Sale) and (iii)
repayment of Indebtedness secured by assets subject to such Asset
Sale; provided, however, that if the instrument or agreement governing
such Asset Sale requires the transferor to maintain a portion of the
purchase price in escrow (whether as a reserve for adjustment of the
purchase price or otherwise) or to indemnify the transferee for
specified liabilities in a maximum specified amount, the portion of
the cash or Cash Equivalents that is actually placed in escrow or
segregated and set aside by the transferor for such indemnification
obligation shall not be deemed to be Net Cash Proceeds until the
escrow terminates or the transferor ceases to segregate and set aside
such funds, in whole or in part, and then only to the extent of the
proceeds released from escrow to the transferor or that are no longer
segregated and set aside by the transferor.
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<PAGE> 12
"Permitted Holder" has the meaning provided therefor in the
definition of "Change of Control."
"Permitted Indebtedness" means, without duplication, (i)
Indebtedness outstanding on the Initial Closing Date; (ii)
Indebtedness of the Company or a Subsidiary incurred under the Credit
Agreement in an aggregate principal amount at any time outstanding not
to exceed the sum of the aggregate commitments pursuant to the Credit
Agreement as in effect on the Senior Subordinated Notes Issue Date;
(iii) Indebtedness evidenced by or arising under the Senior
Subordinated Notes and the Indenture; (iv) Interest Swap Obligations;
provided, however, that such Interest Swap Obligations are entered
into to protect the Company from fluctuations in interest rates of its
Indebtedness; (v) additional Indebtedness of the Company or any of its
Subsidiaries not to exceed $10,000,000 in principal amount outstanding
at any time (which amount may, but need not, be incurred under the
Credit Agreement); (vi) Refinancing Indebtedness; (vii) Indebtedness
owed by the Company to any Wholly Owned Subsidiary of the Company or
by any Subsidiary of the Company to the Company or any Wholly Owned
Subsidiary of the Company; (viii) guarantees by Subsidiaries of any
Indebtedness permitted to be incurred pursuant to the Indenture; (ix)
Indebtedness in respect of performance bonds, bankers' acceptances and
surety or appeal bonds provided by the Company or any of its
Subsidiaries to their customers in the ordinary course of their
business; (x) Indebtedness arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations,
or from guarantees or letters of credit, surety bonds or performance
bonds securing any obligations of the Company or any of its
Subsidiaries pursuant to such agreements, in each case incurred in
connection with the disposition of any business assets or Subsidiaries
of the Company (other than guarantees of Indebtedness or other
obligations incurred by any Person acquiring all or any portion of
such business assets or Subsidiaries of the Company for the purpose of
financing such acquisition) in a principal amount not to exceed the
gross proceeds actually received by the Company or any of its
Subsidiaries in connection with such disposition; provided, however,
that the principal amount of any Indebtedness incurred pursuant to
this clause (x), when taken together with all Indebtedness incurred
pursuant to this clause (x) and then outstanding, shall not exceed
$7,500,000; and (xi) Indebtedness represented by Capitalized Lease
Obligations, mortgage financings or purchase money obligations, in
each case incurred for the purpose of financing all or any part of the
purchase price or cost of construction or improvement of property used
in a related business or incurred to refinance any such purchase price
or cost of construction or improvement, in each case incurred no later
than 365 days after the date of such acquisition or the date of
completion of such construction or improvement; provided, however,
that the principal amount of any Indebtedness incurred pursuant to
this clause (xi) shall not exceed $3,000,000 at any time outstanding.
"Permitted Investments" means (i) Investments by the Company
or any Subsidiary of the Company to acquire the stock or assets of any
Person (or Acquired Indebtedness acquired in connection with a
transaction in which such Person becomes a Subsidiary of the Company)
engaged in the broadcast business or businesses reasonably related
thereto; provided, however, that if any such Investment or series of
related Investments involves an Investment by the Company in excess of
$5,000,000, the Company is able, at the time of such investment and
immediately after giving effect thereto, to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) in
compliance with Section 6.11), (ii) Investments received by the
Company or its Subsidiaries as consideration for a sale of assets,
(iii) Investments by the Company or any Wholly Owned Subsidiary of the
Company in any Wholly Owned Subsidiary of the Company (whether
existing on the Senior Subordinated Notes Issue Date or created
thereafter) or any Person that after such Investments, and as a result
thereof, becomes a Wholly Owned Subsidiary of the Company and
Investments in the Company by any Wholly Owned Subsidiary of the
Company, (iv) Investments in
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<PAGE> 13
cash and Cash Equivalents, (v) Investments in securities of trade
creditors, wholesalers or customers received pursuant to any plan of
reorganization or similar arrangement, (vi) loans or advances to
employees of the Company or any Subsidiary thereof for purposes of
purchasing the Company's Capital Stock and other loans and advances to
employees made in the ordinary course of business consistent with past
practices of the Company or such Subsidiary, and (vii) additional
Investments in an aggregate amount not to exceed $1,000,000 at any
time outstanding.
"Person" means shall mean any individual, corporation,
company, limited liability company, voluntary association,
partnership, joint venture, trust, unincorporated organization or
government or any agency, instrumentality or political subdivision
thereof, or any other form of entity.
"Preferred Stock" of any Person means any Capital Stock of
such Person that has preferential rights to any other Capital Stock of
such Person with respect to dividends or redemptions or upon
liquidation.
"Preferred Stock, Series A" means the 14% Redeemable
Preferred Stock of the Company, par value $.01.
"Preferred Stock, Series B" means the Preferred Stock, Series
B of the Company, par value $.01.
"Productive Assets" means assets of a kind used or usable by
the Company and its Subsidiaries in broadcast businesses or businesses
reasonably related thereto, and specifically includes assets acquired
through Asset Acquisitions.
"Pro forma" means, unless otherwise provided herein, with
respect to any calculation made or required to be made pursuant to the
terms of this Agreement, a calculation in accordance with Article 11
of Regulation S-X promulgated under the Securities Act.
"Public Equity Offering" means an underwritten public
offering of Capital Stock (other than Disqualified Capital Stock) of
the Company or Holdings (to the extent, in the case of Holdings, that
the net cash proceeds thereof are contributed to the common or
non-redeemable preferred equity capital of the Company), pursuant to
an effective registration statement filed with the Commission in
accordance with the Securities Act.
"Put and Call Agreement" means the Put and Call Agreement
dated as of February 5, 1999, among the Arranger, the Purchasers, HMTF
and, with respect to Sections 14 and 15 thereof, HM3/GP Partners,
L.P., Hicks, Muse GP Partners III, L.P. and Hicks, Muse Fund III
Incorporated and which is in the form of Exhibit B hereto.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Refinancing Indebtedness" means any refinancing by the
Company of Indebtedness of the Company or any of its Subsidiaries
incurred in accordance with Section 6.11 (other than pursuant to
clause (iii) or (iv) of the definition of "Permitted Indebtedness")
that does not (i) result in an increase in the aggregate principal
amount of Indebtedness (such principal amount to include, for purposes
of this definition, any premiums, penalties or accrued interest paid
with the proceeds of the Refinancing Indebtedness) of such Person or
(ii) create Indebtedness with (A) a Weighted Average Life to Maturity
that is less than the Weighted Average Life to Maturity of the
Indebtedness
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<PAGE> 14
being refinanced or (B) a final maturity earlier than the final
maturity of the Indebtedness being refinanced.
"Regulation D" has the meaning provided therefor in Section
4.01(x).
"Regulation S" has the meaning provided therefor in Section
4.01(z).
"Restricted Payment" means (i) the declaration or payment of
any dividend or the making of any other distribution (other than
dividends or distributions payable in Qualified Capital Stock or in
options, rights or warrants to acquire Qualified Capital Stock) on
shares of the Company's Capital Stock, (ii) the purchase, redemption,
retirement or other acquisition for value of any Capital Stock of the
Company, or any warrants, rights or options to acquire shares of
Capital Stock of the Company, other than through the exchange of such
Capital Stock or any warrants, rights or options to acquire shares of
any class of such Capital Stock for Qualified Capital Stock or
warrants, rights or options to acquire Qualified Capital Stock, (iii)
the making of any principal payment on, or the purchase, defeasance,
redemption, prepayment, decrease or other acquisition or retirement
for value, prior to any scheduled final maturity, scheduled repayment
or scheduled sinking fund payment, of, any Indebtedness of the Company
or its Subsidiaries that is subordinated or junior in right of payment
to the Senior Subordinated Notes or (iv) the making of any Investment
(other than a Permitted Investment).
"SAC" means Smith Acquisition Company, a Delaware
corporation.
"Sale/Leaseback Transaction" means an arrangement relating to
property now owned or hereafter acquired whereby the Company or a
Subsidiary transfers such property to a Person and the Company or a
Subsidiary leases it from such Person.
"Secured Indebtedness" means any Indebtedness of the Company
or a Subsidiary secured by a Lien.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder.
"Senior Subordinated Indebtedness" means the Senior
Subordinated Notes and any other Indebtedness of the Company that
specifically provides that such Indebtedness is to rank pari passu
with the Senior Subordinated Notes in right of payment and is not
subordinated by its terms in right of payment to any Indebtedness or
other obligation of the Company which is not Senior Indebtedness.
"Senior Subordinated Notes" means the Company's 11% Senior
Subordinated Notes due 2007.
"Senior Subordinated Notes Issue Date" means March 25, 1997.
"Significant Subsidiary" means for any Person each Subsidiary
of such Person which (i) for the most recent fiscal year of such
Person accounted for more than 5% of the consolidated net income of
such Person or (ii) as at the end of such fiscal year, was the owner
of more than 5% of the consolidated assets of such Person.
"Sinclair" means Sinclair Communications, Inc.
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"Sinclair Acquisition" means the acquisition from Sinclair of
the assets of television stations WICS-TV, Springfield, Illinois,
WICD-TV, Champaign, Illinois, KGAN-TV, Cedar Rapids, Iowa, and
WTWC-TV, Tallahassee, Florida.
"Sinclair Acquisition Agreement" means the documentation to
be negotiated and executed between the Company and Sinclair in respect
of the Sinclair Acquisition.
"Subsequent Closing" has the meaning provided therefor in
Section 3.02.
"Subsequent Closing Date" means the date of the Subsequent
Closing.
"Subsidiary," with respect to any Person, means (i) any
corporation of which the outstanding Capital Stock having at least a
majority of the votes entitled to be cast in the election of directors
under ordinary circumstances shall at the time be owned, directly or
indirectly, through one or more intermediaries, by such Person or (ii)
any other Person of which at least a majority of the voting interest
under ordinary circumstances is at the time, directly or indirectly,
through one or more intermediaries, owned by such Person; provided,
however, that notwithstanding the foregoing, SAC shall be deemed to be
a "Subsidiary" of the Company. Notwithstanding anything in this
Agreement to the contrary, all references to the Company and its
consolidated Subsidiaries or to financial information prepared on a
consolidated basis in accordance with GAAP shall be deemed to include
the Company and its Subsidiaries as to which financial statements are
prepared on a combined basis in accordance with GAAP and to financial
information prepared on such a combined basis. Notwithstanding
anything in this Agreement to the contrary, an Unrestricted Subsidiary
shall not be deemed to be a Subsidiary for purposes of this Agreement.
"Trustee" means U.S. Trust Company of Texas, N.A., as trustee
under the Indenture, or its successor.
"Unrestricted Subsidiary" means a Subsidiary of the Company
created after the Senior Subordinated Notes Issue Date and so
designated by a resolution adopted by the Board of Directors of the
Company; provided, however, that (a) neither the Company nor any of
its other Subsidiaries (other than Unrestricted Subsidiaries) (1)
provides any credit support for any Indebtedness of such Subsidiary
(including any undertaking, agreement or instrument evidencing such
Indebtedness) or (2) is directly or indirectly liable for any
Indebtedness of such Subsidiary and (b) at the time of designation of
such Subsidiary, such Subsidiary has no property or assets (other than
de minimis assets resulting from the initial capitalization of such
Subsidiary). The Board of Directors may designate any Unrestricted
Subsidiary to be a Subsidiary; provided, however, that immediately
after giving effect to such designation (x) the Company could incur
$1.00 of additional Indebtedness (other than Permitted Indebtedness)
in compliance with Section 6.11 hereof and (y) no Default or Event of
Default shall have occurred and be continuing. Any designation
pursuant to this definition by the Board of Directors of the Company
shall be evidenced to the Arranger by the filing with the Arranger of
a certified copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions.
"Weighted Average Life to Maturity" means, when applied to
any Indebtedness at any date, the number of years obtained by dividing
(a) the then outstanding aggregate principal amount of such
Indebtedness into (b) the total of the product obtained by multiplying
(i) the amount of each then remaining installment, sinking fund,
serial maturity or other required payment of principal,
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<PAGE> 16
including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will
elapse between such date and the making of such payment.
"Wholly Owned Subsidiary" of any Person means any Subsidiary
of such Person of which all the outstanding voting securities (other
than directors' qualifying shares) which normally have the right to
vote in the election of directors are owned by such Person or any
Wholly Owned Subsidiary of such Person; provided, however, that
"Wholly Owned Subsidiary" shall also include any Subsidiary of which
in excess of 95% of the common equity securities are owned by the
Company or another Wholly Owned Subsidiary and which is organized for
the purpose of facilitating the acquisition of any broadcasting
business that, but for the formation of such Person, the Company and
its Restricted Subsidiaries could not acquire under applicable laws
related to the ownership of broadcast businesses.
Section 1.02. Interpretation. In this Agreement, unless the
context otherwise requires:
(a) headings and underlinings are for convenience only and do
not affect the interpretation of this Agreement;
(b) words importing the singular include the plural and vice
versa;
(c) an expression importing a natural person includes any
company, partnership, trust, joint venture, association, corporation
or other body corporate and any governmental authority or agency;
(d) a reference to a Section, party, Exhibit, Annex or
Schedule is a reference to that Section of, or that party, Exhibit,
Annex or Schedule to, this Agreement;
(e) a reference to a document includes an amendment or
supplement to, or replacement or novation of, that document but
disregarding any amendment, supplement, replacement or novation made
in breach of this Agreement; and
(f) a reference to a party to any document includes that
party's successors and permitted assigns.
Section 1.03. Business Day Adjustment. Where the day on or by
which a payment is due to be made is not a Business Day, that payment shall be
done on or by the next succeeding Business Day.
ARTICLE II
USE OF PROCEEDS
Section 2.01. Use of Proceeds. The proceeds of the sale of
the Preferred Stock, Series B to the Purchasers shall be used (and STC agrees
that it shall use such proceeds) only to support STC's required purchase price
payments under the Acquisition Agreements, payment of fees and expenses in
connection with such Acquisition Agreements and this Agreement, for the payment
of dividends on the Preferred Stock, Series B and for general corporate
purposes (with such amounts to be used for the payment of dividends and for
general corporate purposes to be placed in an escrow account pursuant to the
terms of the Escrow Agreement).
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ARTICLE III
ISSUE OF SECURITIES; PURCHASE AND SALE OF
SECURITIES; RIGHTS OF HOLDERS OF SECURITIES
Section 3.01. Issue of Preferred Stock, Series B. The Company
has authorized the issuance of up to $90,000,000 aggregate liquidation value of
the Preferred Stock, Series B. The Preferred Stock, Series B will have the
rights and preferences set forth in the Certificate of Designation. The
liquidation value of the Preferred Stock, Series B will increase to the extent
of accrued dividends paid in additional shares of Preferred Stock, Series B.
The Preferred Stock, Series B will be offered and sold to the
Purchasers without being registered under the Securities Act, in reliance on
exemptions therefrom.
Section 3.02. Purchase and Sale of the Preferred Stock,
Series B. Subject to the terms and conditions herein set forth, the Company
agrees that it will sell to each of the Purchasers, severally and not jointly,
and each of the Purchasers, severally and not jointly, agrees that it will
purchase from the Company at the Initial Closing and at the Subsequent Closing,
the number of shares of Preferred Stock, Series B set forth opposite the name
of such Purchaser on Schedule I hereto; provided, however, that all such
issuances of shares of Preferred Stock, Series B shall not result in issued
Preferred Stock, Series B with an aggregate liquidation value of more than
$90,000,000.
The initial purchase and sale of an aggregate 37,500 shares
of Preferred Stock, Series B pursuant to this Agreement will take place at a
closing (the "Initial Closing") at the offices of Cahill Gordon & Reindel, New
York, New York, at 10:00 a.m., New York time, on February 5, 1999. The
subsequent purchase and sale of an aggregate 52,500 shares of Preferred Stock,
Series B pursuant to this Agreement will take place at a closing (the
"Subsequent Closing") at the offices of Cahill Gordon & Reindel, New York, New
York, at 10:00 a.m., New York time on a date subsequent to the satisfaction of
each condition contained in Section 5.02.
Delivery of the Preferred Stock, Series B to be purchased by
the Purchasers pursuant to this Agreement shall be made at the Initial Closing
or at the Subsequent Closing, as the case may be, by the Company delivering
certificates representing the Preferred Stock, Series B to the Purchasers.
The Company will bear all expenses of shipping the Preferred
Stock, Series B (including, without limitation, insurance expenses) from New
York City to such other places within the United States of America or Canada as
the Arranger shall specify. Any tax on the issuance of the Preferred Stock,
Series B will be paid by the Company on the Initial Closing Date or on the
Subsequent Closing Date, as applicable.
Section 3.03. Closing Fee. In addition to all other amounts
due hereunder, the Company shall also pay to the Arranger, at the Initial
Closing, a fee of $225,000. The Company also agrees to pay the reasonable fees
and expenses of Cahill Gordon & Reindel, counsel to the Purchasers, which shall
be paid on the Initial Closing Date.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01. Representations, Warranties and Agreements of
the Company. The Company represents and warrants to, and agrees with, the
several Purchasers and the Arranger that (before and after giving effect to the
Elcom Acquisition and the Sinclair Acquisition):
(a) The Company and each of its Subsidiaries have been
duly incorporated and are validly existing as corporations in good
standing under the laws of their respective jurisdictions of
incorporation, are duly qualified to do business and are in good
standing, as foreign corporations in each jurisdiction in which their
respective ownership or lease of property or the conduct of their
respective businesses requires such qualification, and have all power
and authority necessary to own or hold their respective properties and
to conduct the businesses in which they are engaged, except where the
failure to so qualify or have such power or authority would not,
singularly or in the aggregate, have a material adverse effect on the
condition (financial or otherwise), results of operations, business or
prospects of the Company and its Subsidiaries taken as a whole (a
"Material Adverse Effect").
(b) The authorized capital stock of the Company consists
of (i) 1,000,000 shares of preferred stock, par value $0.01 per share,
of which 100,000 shares have been designated Preferred Stock, Series B
and, as of the date hereof, 300,000 shares of Preferred Stock, Series
A are issued and outstanding, and (ii) 1,000 shares of common stock,
$0.01 par value per share, of which 1,000 shares are issued and
outstanding; all of the outstanding shares of capital stock of the
Company are duly and validly authorized and issued and fully paid and
non-assessable. All of the outstanding shares of capital stock of each
Subsidiary of the Company (and, in the case of SAC, 100% of the
nonvoting stock) have been duly and validly authorized and issued, are
fully paid and non-assessable and are owned directly or indirectly by
the Company, free and clear of any lien, charge, encumbrance, security
interest, restriction upon voting (except for SAC) or transfer or any
other claim of any third party (other than liens and security
interests created pursuant to the Credit Agreement, the Indenture or
applicable law) and restrictions on transfer imposed by the FCC
requirements.
(c) The Company has all requisite corporate power and
authority to execute and deliver this Agreement and the other Basic
Documents and to perform its obligations hereunder and thereunder.
(d) The Basic Documents have been duly authorized,
executed and delivered by the Company and upon and after the Initial
Closing constitute valid and legally binding agreements of the
Company, enforceable against the Company in accordance with their
respective terms, except (i) to the extent that such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting creditors' rights
generally and by general equitable principles (whether considered in a
proceeding in equity or at law) and (ii) to the extent that the
enforceability of rights to indemnification and contribution
thereunder may be limited by federal or state securities laws or
regulations or the public policy underlying such laws or regulations.
(e) The Preferred Stock, Series B has been duly and
validly authorized for issuance by the Company and, when issued and
delivered and paid for as provided herein, will be validly issued,
fully paid and non-assessable and entitled to the rights, preferences
and priorities set forth in
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<PAGE> 19
the Certificate of Designation, and the issuance of the Preferred
Stock, Series B will not be not subject to preemptive or other similar
rights.
(f) The Certificate of Designation has been duly
authorized by the Company, its board of directors and all required
stockholder action and when executed and delivered by the Company and
filed with the Secretary of State of the State of Delaware will
constitute a valid and legally binding obligation of the Company,
enforceable against it in accordance with its terms except that the
enforcement thereof may be subject to bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or similar laws now
or hereafter in effect relating to creditors' rights and remedies
generally and general principles of equity and the discretion of the
court before which any proceeding therefor may be brought. The
Certificate of Designation sets forth the rights, preferences and
priorities of the Preferred Stock, Series B.
(g) The execution, delivery and performance by the
Company of each of the Basic Documents, the issuance, sale and
delivery of the Preferred Stock, Series B by the Company and
compliance by the Company with the terms thereof and the consummation
by the Company and its Subsidiaries of the transactions contemplated
by the Basic Documents do not and will not conflict with or result in
a breach or violation of any of the terms or provisions of, or
constitute a default under, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the
Company or any of its Subsidiaries pursuant to, any material
indenture, mortgage, deed of trust, loan agreement or other material
agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound or to which any of the property or assets of the
Company or any of its Subsidiaries is subject, except for any such
conflict, breach, violation, default, lien, charge or encumbrance that
could not, singly or in the aggregate, reasonably be expected to have
a Material Adverse Effect; nor will such actions result in any
violation of the provisions of the charter or by-laws of the Company
or any of its Subsidiaries; or any statute or any order, rule or
regulation (including, without limitation, the Communications Act of
1934, as amended (the "Communications Act"), and the rules and
regulations of the FCC thereunder) of any court or arbitrator or
governmental agency or body (including, without limitation, the FCC)
having jurisdiction over the Company or any of its Subsidiaries or any
of their properties or assets, except for any such conflict, breach,
violation, default, lien, charge or encumbrance that could not, singly
or in the aggregate, reasonably be expected to have a Material Adverse
Effect; and no consent, approval, authorization or order of, or filing
or registration with, any such court or arbitrator or governmental
agency or body (including, without limitation, the FCC, the Federal
Trade Commission (the "FTC") and the Department of Justice (the
"DOJ")) is required for the execution, delivery and performance by the
Company of each of the Basic Documents, the issuance, sale and
delivery of the Preferred Stock, Series B and compliance by the
Company with the terms thereof and the consummation of the
transactions contemplated by the Basic Documents, except for such
consents, approvals, authorizations, filings, registrations or
qualifications (i) that have been obtained or made prior to the
Initial Closing Date, and (ii) that from time to time, the Company or
its Subsidiaries may be required to obtain from or make with the FCC
in the ordinary course of business.
(h) The network affiliation agreements between each of the
broadcast television stations of the Company and all necessary network
affiliates, including FOX Entertainment Group, Inc., CBS Inc., ABC
Inc. and National Broadcasting Company, Inc., as applicable, have been
duly authorized, executed and delivered by the Company and constitute
valid and legally binding agreements of the respective parties
thereto.
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<PAGE> 20
(i) Arthur Andersen LLP are independent public
accountants with respect to the Company and its Subsidiaries within
the meaning of Rule 101 of the Code of Professional Conduct of the
American Institute of Certified Public Accountants and its
interpretations and rulings thereunder and (ii) the audited financial
statements (including the related notes) for the year ended December
31, 1997 and the unaudited financial statements for the year ended
December 31, 1998 previously delivered to the Purchasers have been
prepared in conformity with generally accepted accounting principles
consistently applied throughout the periods covered thereby and fairly
present in all material respects the financial condition and the
results of operations and cash flows of the entities purported to be
covered thereby for the respective periods indicated except as
otherwise disclosed therein.
(j) There are no legal or governmental proceedings
(including, without limitation, before or by the FCC, the FTC or the
DOJ) pending to which the Company or any of its Subsidiaries is a
party or of which any property or assets of the Company or any of its
Subsidiaries or affiliates is the subject which, singularly or in the
aggregate, if determined adversely to the Company or any of its
Subsidiaries or affiliates, could reasonably be expected to have a
Material Adverse Effect; and to the best knowledge of the Company, no
such proceedings are threatened or contemplated by governmental
authorities or threatened by others.
(k) No injunction, restraining order or order of any
nature by any federal or state court of competent jurisdiction has
been issued with respect to the Company or any of its Subsidiaries
which would prevent or suspend the issuance or sale of the Preferred
Stock, Series B; no action, suit or proceeding is pending against or,
to the best knowledge of the Company, threatened against or affecting
the Company or any of its Subsidiaries before any court or arbitrator
or any governmental agency, body or official, domestic or foreign,
which could reasonably be expected to interfere with or adversely
affect the issuance of the Preferred Stock, Series B or in any manner
draw into question the validity or enforceability of any of the Basic
Documents or any action taken or to be taken pursuant thereto.
(l) Neither the Company nor any of its Subsidiaries is
(i) in violation of its charter or by-laws, (ii) in default in any
material respect, and no event has occurred which, with notice or
lapse of time or both, would constitute such a default, in the due
performance or observance of any term, covenant or condition contained
in any material indenture, mortgage, deed of trust, loan agreement or
other material agreement or instrument to which it is a party or by
which it is bound or to which any of its property or assets is subject
or (iii) in violation in any material respect of any applicable law,
ordinance, court decree, governmental rule or regulation (including,
without limitation, the Communications Act and the rules and
regulations of the FCC thereunder) to which it or its property or
assets may be subject.
(m) The Company and each of its Subsidiaries possess all
material licenses, orders, certificates, authorizations, approvals and
permits issued by, and have made all declarations and filings with,
the appropriate federal, state or foreign regulatory agencies or
bodies (including, without limitation, the FCC, the FTC and the DOJ)
that are necessary or desirable for the ownership of their respective
properties or the conduct of their respective businesses, except where
the failure to possess or make the same would not, singularly or in
the aggregate, have a Material Adverse Effect, and neither the Company
nor any of its Subsidiaries has received notification of any
revocation or modification of any such license, certificate,
authorization or permit that is generally renewable in the ordinary
course or has any reason to believe that any such license,
certificate, authorization or permit will not be renewed in the
ordinary course. The licenses issued with respect to the Company's
television broadcast stations by the FCC (the "Licenses") are validly
issued
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<PAGE> 21
and in full force and effect with no restrictions or qualifications
(other than standard restrictions or qualifications usually on similar
licenses) that would, singly or in the aggregate, have a Material
Adverse Effect. No event has occurred that permits, or with notice or
lapse of time or both would permit, and no legal governmental
proceeding has been instituted or threatened that could cause, the
revocation or termination of any of the Licenses or that might result
in any other impairment or modification of the rights of the Company
or any Subsidiary thereof that in any such case would, singly or in
the aggregate, have a Material Adverse Effect. The Company has no
reason to believe that any License issued by the FCC will not be
renewed in the ordinary course.
(n) Neither the Company nor any of its Subsidiaries is
an "investment company" within the meaning of the Investment Company
Act of 1940, as amended (the "Investment Company Act"), and the rules
and regulations thereunder.
(o) The Company and each of its Subsidiaries maintain a
system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences.
(p) The Company and each of its Subsidiaries have
insurance covering their respective properties, operations, personnel
and businesses, which insurance is in amounts and insures against such
losses and risks as are in the Company's opinion adequate to protect
the Company and its Subsidiaries and their respective businesses.
Neither the Company nor any of its Subsidiaries has received notice
from any insurer or agent of such insurer that capital improvements or
other expenditures are required or necessary to be made in order to
continue such insurance.
(q) The Company and each of its Subsidiaries own or
possess adequate rights to use all material patents, patent
applications, trademarks, service marks, trade names, trademark
registrations, service mark registrations, copyrights, licenses and
know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures) necessary for the conduct of their respective businesses;
and the conduct of their respective businesses does not conflict in
any material respect with, and the Company and its Subsidiaries have
not received any notice of any claim of conflict with, any such rights
of others.
(r) The Company and each of its Subsidiaries have good
and marketable title in fee simple to, or have valid rights to lease
or otherwise use, all items of real and personal property which are
material to the business of the Company and its Subsidiaries, taken as
a whole, in each case free and clear of all liens, encumbrances and
defects other than (i) liens and encumbrances granted pursuant to the
Credit Agreement and (ii) liens, encumbrances and defects that do not
materially interfere with the use made and proposed to be made of such
property by the Company and its Subsidiaries or could not reasonably
be expected to have a Material Adverse Effect.
(s) No labor disturbance by or dispute with the
employees of the Company or any of its Subsidiaries exists or, to the
best knowledge of the Company, is imminent, which could reasonably be
expected to have a Material Adverse Effect.
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<PAGE> 22
(t) There has been no storage, generation,
transportation, handling, treatment, disposal, discharge, emission or
other release or threatened release of any kind of toxic or other
wastes or other hazardous substances by, due to or caused by the
Company or any of its Subsidiaries (or, to the best knowledge of the
Company, any other entity (including any predecessor) for whose acts
or omissions the Company or any of its Subsidiaries is or could
reasonably be expected to be liable) upon any property now or
previously owned or leased by the Company or any of its Subsidiaries,
or upon any other property, in violation of any statute or any
ordinance, rule, regulation, order, judgment, decree or permit or
which would, under any statute or any ordinance, rule (including rule
of common law), regulation, order, judgment, decree or permit, give
rise to any liability except for any violation or liability which
would not have, singularly or in the aggregate with all such
violations and liabilities, a Material Adverse Effect; and there has
been no disposal, discharge, emission or other release of any kind
onto such property or into the environment surrounding such property
of any toxic or other wastes or other hazardous substances with
respect to which the Company has knowledge, except for any such
disposal, discharge, emission or other release of any kind which would
not have, singularly or in the aggregate with all such disposal,
discharge, emission and other release, a Material Adverse Effect.
(u) On the Initial Closing Date and the Subsequent
Closing Date, the Company and its Subsidiaries, taken as a whole
(after giving effect to the issuance of the Preferred Stock, Series
B), will be Solvent. As used in this paragraph, the term "Solvent"
means, with respect to a particular date, that on such date (i) the
aggregate fair value (or present fair saleable value) of the assets of
the Company and its Subsidiaries, taken as a whole, is not less than
their total existing debts and liabilities (including contingent
liabilities) as they become absolute and matured in the normal course
of business and (ii) the Company and its Subsidiaries, taken as a
whole, do not have an unreasonably small amount of capital with which
to conduct their businesses. In computing the amount of such
contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount that, in the light of all
the facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or matured
liability.
(v) Except as described in Schedule 4.01(v) hereto,
there are no outstanding subscriptions, rights, warrants, calls or
options to acquire, or instruments convertible into or exchangeable
for, or agreements or understandings with respect to the sale or
issuance of, any shares of capital stock of or other equity or other
ownership interest in the Company.
(w) None of the proceeds of the sale of the Preferred
Stock, Series B will be used, directly or indirectly, for the purpose
of purchasing or carrying any margin security, for the purpose of
reducing or retiring any indebtedness which was originally incurred to
purchase or carry any margin security or for any other purpose which
might cause any of the Preferred Stock, Series B to be considered a
"purpose credit" within the meanings of Regulation G, T, U or X of the
Board of Governors of the Federal Reserve System.
(x) Neither the Company nor any Affiliate (as defined in
Rule 501(b) of Regulation D under the Securities Act ("Regulation D"))
has directly, or through any agent (provided that no representation is
made as to the Purchasers or any Person acting on their behalf) (i)
sold, offered for sale, solicited offers to buy or otherwise
negotiated in respect of, any "security" (as defined in the Securities
Act) which is or will be integrated with the sale of the Preferred
Stock, Series B in a manner that would require the registration under
the Securities Act of the Preferred Stock, Series B or (ii) engaged in
any form of general solicitation or general advertising (as those
terms are used in Regulation D) in connection with the offering of the
Preferred Stock, Series B.
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<PAGE> 23
(y) When the Preferred Stock, Series B is delivered
pursuant to this Agreement, none of the Preferred Stock, Series B will
be of the same class (within the meaning of Rule 144A under the
Securities Act) as securities of the Company or any Subsidiary of the
Company that are listed on a national securities exchange registered
under Section 6 of the Exchange Act or that are quoted in a United
States automated inter-dealer quotation system.
(z) None of the Company, any of its Subsidiaries, any of
their respective Affiliates (as defined in Rule 501(b) of Regulation
D) or any person acting on any of their behalf (other than the
Purchasers) has engaged in any directed selling efforts (as that term
is defined in Regulation S under the Securities Act ("Regulation S"))
with respect to the Preferred Stock, Series B; the Company and its
Affiliates and any person acting on any of its behalf (other than the
Purchasers) have complied with the offering restrictions requirement
of Regulation S.
(aa) Since December 31, 1998, (i) there has been no
material adverse change or any development involving a prospective
material adverse change in the condition, financial or otherwise, or
in the earnings, business affairs, management or business prospects of
the Company, whether or not arising in the ordinary course of
business, (ii) neither the Company nor any of its Subsidiaries has
incurred any liability or obligation, direct or contingent, other than
in the ordinary course of business, which would, singly or in the
aggregate, have a Material Adverse Effect, (iii) neither the Company
nor any of its Subsidiaries has entered into any material transaction
other than in the ordinary course of business and (iv) there has not
been any change in the capital stock or long-term debt of the Company,
or any dividend or distribution of any kind declared, paid or made by
the Company on any class of its capital stock (other than dividends
declared in respect of Preferred Stock, Series A).
Section 4.02. Representations and Warranties of the
Purchasers. Each of the Purchasers represents and warrants to, and covenants
and agrees with, the Company that: (1) the Preferred Stock, Series B to be
acquired by it hereunder is being acquired for its own account and has no
intention of distributing or reselling such Preferred Stock, Series B or any
part thereof in any transaction which would be in violation of the securities
laws of the United States of America or any state; (2) it is an "Accredited
Investor" within the meaning of Regulation D promulgated under the Securities
Act; (3) it acknowledges that the Preferred Stock, Series B has not been or
will not be registered under the Securities Act and that none of the Preferred
Stock, Series B may be offered or sold within the United States or to, or for
the account or benefit of, U.S. persons except as set forth below; (4) it shall
not resell or otherwise transfer any of such Preferred Stock, Series B within
two years after the original issuance of the Preferred Stock, Series B except
(A) to the Company or any of its Subsidiaries, (B) inside the United States to
a "qualified institutional buyer" as defined in Rule 144A of the Securities Act
("QIB") in compliance with Rule 144A, (C) inside the United States to an
"Accredited Investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of the
Securities Act) that, prior to such transfer, furnishes (or has furnished on
its behalf by U.S. broker-dealer) to the Company a signed letter containing
certain representations and agreements relating to the restrictions on transfer
of the Preferred Stock, Series B, (D) outside the United States in compliance
with Rule 904 under the Securities Act, (E) pursuant to any other exemption
from registration provided under the Securities Act (if available) including
Rule 144 thereunder or (F) pursuant to an effective registration statement
under the Securities Act; and (5) it will give to each person to whom it
transfers the Preferred Stock, Series B notice of any restrictions on transfer
of such Preferred Stock, Series B and subject, nevertheless, to the disposition
of such Purchaser's property being at all times within its control. If any
Purchaser should in the future decide to dispose of any of the Preferred Stock,
Series B, such Purchaser understands and agrees that it may do so only in
compliance with the Securities Act, as then in effect, and that stop-transfer
instructions to that effect will be in effect with respect to the Preferred
Stock, Series B.
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<PAGE> 24
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
Section 5.01. Conditions Precedent to the Initial Closing.
The obligation of the Purchasers to purchase the Preferred Stock, Series B to
be purchased by them hereunder on the Initial Closing Date is subject to the
satisfaction of the following conditions:
(a) The Purchasers shall have received an opinion,
addressed to them in form and substance reasonably satisfactory to the
Arranger and dated the Initial Closing Date, of Weil, Gotshal & Manges
LLP, counsel to the Company, substantially in the form of Exhibit E
hereto.
(b) The Purchasers shall have received an opinion,
addressed to them in form and substance reasonably satisfactory to the
Arranger and dated the Initial Closing Date, of Hogan & Hartson,
L.L.P., special FCC counsel to the Company, substantially in the form
of Exhibit F hereto.
(c) The representations and warranties made by the
Company herein shall be true and correct in all material respects on
and as of the Initial Closing Date, with the same effect as though the
representations and warranties had been made on and as of the Initial
Closing, the Company shall have complied in all material respects with
all agreements as set forth in or contemplated hereunder and in the
other Basic Documents, required to be performed by it at or prior to
the Initial Closing.
(d) As of the Initial Closing Date, and after giving
effect to the consummation of the transactions contemplated by this
Agreement, the Elcom Acquisition Agreement and the other Basic
Documents, there shall exist no Default or Event of Default.
(e) As to the Purchasers, the purchase of and payment
for the Preferred Stock, Series B by the Purchasers hereunder (i)
shall not be prohibited or enjoined (temporarily or permanently) by
any applicable law or governmental regulation (including, without
limitation, Regulation G, T, U or X of the Board of Governors of the
Federal Reserve System), (ii) shall not subject the Purchasers to any
penalty, or in the Arranger's reasonable judgment, other onerous
condition under or pursuant to any applicable law or governmental
regulation (provided, however, that such regulation, law or onerous
condition was not in effect at the date of this Agreement), and (iii)
shall be permitted by the laws and regulations of the jurisdictions to
which they are subject.
(f) At the Initial Closing, the Purchasers shall have
received a certificate, dated the Initial Closing Date, from the
Company stating that the conditions specified in Sections 5.01(c), (d)
and (e) have been satisfied or duly waived as of the Initial Closing
Date.
(g) Each of the Basic Documents, except for this
Agreement and the Acquisition Agreements, shall be substantially in
the form attached hereto and the Basic Documents shall have been
executed and delivered by all the respective parties thereto and shall
be in full force and effect.
(h) All proceedings taken in connection with the
issuance of the Preferred Stock, Series B and the transactions
contemplated by this Agreement, the other Basic Documents and all
documents and papers relating thereto shall be reasonably satisfactory
to the Purchasers and their counsel. The Purchasers and their counsel
shall have received copies of such papers and documents
21
<PAGE> 25
as they may reasonably request in connection therewith, all in form
and substance reasonably satisfactory to them.
(i) All costs and any delay fees due and owing and
expenses (including, without limitation, reasonable legal fees and
expenses) required to be paid to or on behalf of the Purchasers on or
prior to the Initial Closing Date, pursuant to this Agreement and all
fees and expenses payable to the Purchasers' counsel shall have been
paid.
(j) The Certificate of Designation shall have been duly
filed with the Secretary of State of the State of Delaware.
(k) On or before the Initial Closing Date, the
Purchasers and their counsel shall have received such further
documents, opinions, certificates and schedules or other instruments
relating to the business, corporate, legal and financial affairs of
the Company and its Subsidiaries as they may reasonably request.
(l) There shall not have occurred (i) any general
suspension of, or limitation on times or prices for, trading in
securities on the New York Stock Exchange or American Stock Exchange
or in the over-the-counter market in the United States or the
establishment of minimum or maximum prices on any such exchange; (ii)
a declaration of a banking moratorium or any suspension of payments in
respect of the banks in the United States or the State of New York; or
(iii) either (A) an outbreak or escalation of hostilities between the
United States and any foreign power, (B) an outbreak or escalation of
any insurrection or other armed conflict involving the United States
or any other national or international calamity or emergency, or (C)
any material disruption of or material adverse change in financial,
banking or capital market (including, without limitation, high-yield
market) conditions (collectively, a "Market Effect").
(m) There shall not have occurred a material adverse
change or any development involving a prospective material adverse
change in the condition, financial or otherwise, or in the earnings,
business affairs, management or business prospects of the Company and
its Subsidiaries taken as a whole, whether or not arising in the
ordinary course of business (collectively, a "Material Adverse
Change").
(n) The Company shall have amended the Credit Agreement
to permit the issuance of certain Preferred Stock to finance
acquisitions which, when combined with certain debt securities of the
Company, shall not exceed an aggregate amount of $200 million, and the
Arranger shall have received a copy of such amendment duly executed by
all necessary parties thereto, which such amendment shall be in form
and substance satisfactory to the Arranger.
(o) (i) Full, complete and accurate copies of the Elcom
Acquisition Agreement shall have been provided to the Arranger. The
Elcom Acquisition Agreement and any amendments thereto shall be in
form and substance reasonably satisfactory to the Arranger, shall have
been duly authorized, executed and delivered by each of the parties
thereto and shall be in full force and effect. No term or provision of
the Elcom Acquisition Agreement shall have been modified, and no
condition to the consummation of the Elcom Acquisition shall have been
waived, in either case in a manner detrimental to any party hereto, by
any of the parties thereto. The Company and any of its Affiliates
shall have in all material respects done and performed such acts and
observed such covenants which each is required to do or perform under
the Elcom Acquisition Agreement and in order to consummate the Elcom
Acquisition on or prior to the Initial Closing Date.
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<PAGE> 26
(ii) The Company shall have provided evidence
reasonably satisfactory in form and substance to the Arranger that the
Elcom Acquisition has been consummated.
(p) The Company and Holdings shall have entered into the
Engagement Letter in form and substance reasonably satisfactory to the
Arranger.
(q) Pursuant to the Escrow Agreement, $2,500,000 shall
have been placed in an escrow account (or will be placed in an escrow
account simultaneous with the Initial Closing) for the payment of
dividends on the Preferred Stock, Series B and for general corporate
purposes.
(r) The Purchasers shall have completed their financial,
legal, tax, accounting and environmental due diligence investigation
of the Company and Elcom, which such investigation shall be to the
reasonable satisfaction of the Purchasers.
Section 5.02. Conditions Precedent to the Subsequent Closing
of the Purchasers. The obligation of the Purchasers to purchase the Preferred
Stock, Series B to be purchased by them hereunder on the Subsequent Closing
Date is subject to the satisfaction of the following conditions:
(a) The Purchasers shall have received an opinion, in
form and substance reasonably satisfactory to the Arranger and dated
the Subsequent Closing Date, of Hogan & Hartson, L.L.P., special FCC
counsel to the Company.
(b) The representations and warranties made by the
Company herein shall be true and correct in all material respects on
and as of the Subsequent Closing Date, with the same effect as though
the representations and warranties had been made on and as of the
Subsequent Closing Date, the Company shall have complied in all
material respects with all agreements as set forth in or contemplated
hereunder and in the other Basic Documents, required to be performed
by it at or prior to the Subsequent Closing.
(c) As of the Subsequent Closing Date, and after giving
effect to the consummation of the transactions contemplated by this
Agreement, the Elcom Acquisition Agreement, the Sinclair Acquisition
Agreement and the other Basic Documents, there shall exist no Default
or Event of Default.
(d) As to the Purchasers, the purchase of and payment
for the Preferred Stock, Series B by the Purchasers hereunder (i)
shall not be prohibited or enjoined (temporarily or permanently) by
any applicable law or governmental regulation (including, without
limitation, Regulation G, T, U or X of the Board of Governors of the
Federal Reserve System), (ii) shall not subject the Purchasers to any
penalty or, in the Arranger's reasonable judgment, other onerous
condition under or pursuant to any applicable law or governmental
regulation (provided, however, that such regulation, law or onerous
condition was not in effect at the date of this Agreement), and (iii)
shall be permitted by the laws and regulations of the jurisdictions to
which they are subject.
(e) At the Subsequent Closing, the Purchasers shall have
received a certificate, dated the Subsequent Closing Date, from the
Company stating that the conditions specified in Sections 5.02(b), (c)
and (d) have been satisfied or duly waived as of the Subsequent
Closing Date.
(f) On or before the Subsequent Closing Date, the
Purchasers and their counsel shall have received such further
documents, opinions, certificates and schedules or other instruments
23
<PAGE> 27
relating to the business, corporate, legal and financial affairs of
the Company and its Subsidiaries as they may reasonably request.
(g) There shall not have occurred and be continuing any
Market Effect.
(h) There shall not have occurred any Material Adverse
Change.
(i) The Company shall have received $75.0 million in
additional loans under the Credit Agreement on terms and conditions
reasonably satisfactory to the Arranger.
(j) (i) Full, complete and accurate copies of the
Sinclair Acquisition Agreement shall have been provided to the
Arranger. The Sinclair Acquisition Agreement and any amendments
thereto shall be in form and substance reasonably satisfactory to the
Arranger, and the Sinclair Acquisition Agreement shall have been duly
authorized, executed and delivered by each of the parties thereto and
shall be in full force and effect. No term or provision of the
Sinclair Acquisition Agreement shall have been modified, and no
condition to the consummation of the Sinclair Acquisition shall have
been waived, in either case in a manner detrimental to any party
hereto, by any of the parties thereto. The Company and any of its
Affiliates shall have in all material respects done and performed such
acts and observed such covenants which each is required to do or
perform under the Sinclair Acquisition Agreement and in order to
consummate the Sinclair Acquisition on or prior to the Subsequent
Closing Date.
(ii) The Company shall have provided evidence
reasonably satisfactory in form and substance to the Arranger that the
Sinclair Acquisition has been consummated or shall be consummated
contemporaneously with the Subsequent Closing.
(k) Pursuant to the Escrow Agreement, $2,500,000 shall
have been placed in an escrow account (or will be placed in an escrow
account simultaneous with the Subsequent Closing) for the payment of
dividends on the Preferred Stock, Series B and for general corporate
purposes.
(l) The Purchasers shall have completed their financial,
legal, tax, accounting and environmental due diligence investigation
of Sinclair, which such investigation shall be to the reasonable
satisfaction of the Purchasers.
Section 5.03. Conditions Precedent to Obligations of the
Company. The obligations of the Company to issue and sell the Preferred Stock,
Series B pursuant to this Agreement are subject, at the Initial Closing and at
the Subsequent Closing, as the case may be, to the satisfaction of the
following conditions:
(a) The representations and warranties made by the
Purchasers herein shall be true and correct in all material respects
at and as of the Initial Closing Date and at the Subsequent Closing
Date, as the case may be, with the same effect as though such
representations and warranties had been made on and as of the Initial
Closing Date or the Subsequent Closing Date, as the case may be.
(b) The issuance or sale of the Preferred Stock, Series
B by the Company shall not be enjoined under the laws of any
jurisdiction to which the Company is subject (temporarily or
permanently) at the Initial Closing and at the Subsequent Closing, as
the case may be.
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ARTICLE VI
COVENANTS
STC covenants and agrees with the Purchasers that:
Section 6.01. Notices of Material Events. The Company
will furnish to the Purchasers prompt written notice of the following:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or
proceeding by or before any arbitrator or Governmental Authority
against or affecting the Company that, if adversely determined, could
reasonably be expected to result in a Material Adverse Effect; and
(c) any other development that results in, or could
reasonably be expected to result in, a Material Adverse Effect.
Section 6.02. Compliance with Laws. The Company will comply
with all laws, rules, regulations and orders of any Governmental Authority
applicable to it or its property, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.
Section 6.03. Use of Proceeds. The proceeds of the sale of
the Preferred Stock, Series B will be used only for the purposes contemplated
in Section 2.01. No part of the proceeds of the sale of the Preferred Stock,
Series B will be used, whether directly or indirectly, for any purpose that
entails a violation of any of the Regulations of the Board of Governors of the
Federal Reserve System of the United States, including Regulations G, T, U
and X.
Section 6.04. Limitation on Restricted Payments. (a) Neither
the Company nor any of its Subsidiaries will, directly or indirectly, make any
Restricted Payment if at the time of such Restricted Payment and immediately
after giving effect thereto:
(i) a Default or Event of Default shall have occurred
and be continuing at the time of or after giving effect to such Restricted
Payment; or
(ii) the Company is not able to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with Section
6.11 hereof; or
(iii) the aggregate amount of Restricted Payments made
subsequent to the Senior Subordinated Notes Issue Date (the amount expended for
such purposes, if other than in cash, being the fair market value of such
property as determined by the Board of Directors of the Company in good faith)
exceeds the sum of
(A) (x) 100% of the aggregate Consolidated Cash
Flow of the Company (or, in the event such Consolidated Cash
Flow shall be a deficit, minus 100% of such deficit) accrued
subsequent to the Senior Subordinated Notes Issue Date to the
most recent date for which financial information is available
to the Company, taken as one accounting period, less (y) 1.4
times Consolidated Interest Expense for the same period, plus
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(B) 100% of the aggregate net proceeds,
including the fair market value of property other than cash
as determined by the Board of Directors of the Company in
good faith, received subsequent to the Senior Subordinated
Notes Issue Date by the Company from any Person (other than a
Subsidiary of the Company) from the issuance and sale
subsequent to the Senior Subordinated Notes Issue Date of
Qualified Capital Stock of the Company (excluding (i) any net
proceeds from issuances and sales financed directly or
indirectly using funds borrowed from the Company or any
Subsidiary of the Company, until and to the extent such
borrowing is repaid, but including the proceeds from the
issuance and sale of any securities convertible into or
exchangeable for Qualified Capital Stock to the extent such
securities are so converted or exchanged and including any
additional proceeds received by the Company upon such
conversion or exchange and (ii) any net proceeds received
from issuances and sales that are used to consummate a
transaction described in clauses (2) and (3) of paragraph (b)
below), plus
(C) without duplication of any amount included
in clause (iii)(B) above, 100% of the aggregate net proceeds,
including the fair market value of property other than cash
(valued as provided in clause (iii)(B) above), received by
the Company as a capital contribution subsequent to the
Senior Subordinated Notes Issue Date, plus
(D) the amount equal to the net reduction in
Investments (other than Permitted Investments) made by the
Company or any of its Subsidiaries in any Person resulting
from (i) repurchases or redemptions of such Investments by
such Person, proceeds realized upon the sale of such
Investments to an unaffiliated purchaser and repayments of
loans or advances or other transfers of assets by such Person
to the Company or any Subsidiary of the Company or (ii) the
redesignation of Unrestricted Subsidiaries as Subsidiaries
(valued in each case as provided in the definition of
"Investment") not to exceed, in the case of any Subsidiary,
the amount of Investments previously made by the Company or
any Subsidiary in such Unrestricted Subsidiary, which amount
was included in the calculation of Restricted Payments;
provided, however, that no amount shall be included under
this clause (D) to the extent it is already included in
Consolidated Cash Flow, plus
(E) the aggregate net cash proceeds received by
a Person in consideration for the issuance of such Person's
Capital Stock (other than Disqualified Capital Stock) that
are held by such Person at the time such Person is merged
with and into the Company in accordance with Section 6.16
hereof subsequent to the Senior Subordinated Notes Issue
Date; provided, however, that concurrently with or
immediately following such merger the Company uses an amount
equal to such net cash proceeds to redeem or repurchase the
Company's Capital Stock, plus
(F) $2,500,000.
(b) Notwithstanding the foregoing, these provisions will
not prohibit:
(1) the payment of any dividend or the making of any
distribution within 60 days after the date of its declaration if such
dividend or distribution would have been permitted on the date of
declaration;
(2) the purchase, redemption or other acquisition or
retirement of any Capital Stock of the Company or any warrants,
options or other rights to acquire shares of any class of such Capital
Stock either (x) solely in exchange for shares of Qualified Capital
Stock or other rights to acquire
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Qualified Capital Stock or (y) through the application of the net
proceeds of a substantially concurrent sale for cash (other than to a
Subsidiary of the Company) of shares of Qualified Capital Stock or
warrants, options or other rights to acquire Qualified Capital Stock
or (z) in the case of Disqualified Capital Stock, solely in exchange
for, or through the application of the net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of the Company)
of, Disqualified Capital Stock that has a redemption date no earlier
than, and requires the payment of current dividends or distributions
in cash no earlier than, in each case, the Disqualified Capital Stock
being purchased, redeemed or otherwise acquired or retired;
(3) the acquisition of Indebtedness of the Company that
is subordinate or junior in right of payment to the Senior
Subordinated Notes either (x) solely in exchange for shares of
Qualified Capital Stock (or warrants, options or other rights to
acquire Qualified Capital Stock), for shares of Disqualified Capital
Stock that have a redemption date no earlier than, and require the
payment of current dividends or distributions in cash no earlier than,
in each case, the maturity date and interest payments dates,
respectively, of the Indebtedness being acquired, or for Indebtedness
of the Company that is subordinate or junior in right of payment to
the Senior Subordinated Notes at least to the extent that the
Indebtedness being acquired is subordinated to the Senior Subordinated
Notes and has a Weighted Average Life to Maturity no less than that of
the Indebtedness being acquired or (y) through the application of the
net proceeds of a substantially concurrent sale for cash (other than
to a Subsidiary of the Company) of shares of Qualified Capital Stock
(or warrants, options or other rights to acquire Qualified Capital
Stock), shares of Disqualified Capital Stock that have a redemption
date no earlier than, and require the payment of current dividends or
distributions in cash no earlier than, in each case, the maturity date
and interest payments dates, respectively, of the Indebtedness being
refinanced, or Indebtedness of the Company that is subordinate or
junior in right of payment to the Senior Subordinated Notes at least
to the extent that the Indebtedness being acquired is subordinated to
the Senior Subordinated Notes and has a Weighted Average Life to
Maturity no less than that of the Indebtedness being refinanced;
(4) payments by the Company to repurchase, or to enable
Holdings to repurchase, Capital Stock or other securities from
employees of the Company or Holdings in an aggregate amount not to
exceed $2,000,000;
(5) payments to enable Holdings to redeem or repurchase
stock purchase or similar rights granted by Holdings with respect to
its Capital Stock in an aggregate amount not to exceed $500,000;
(6) payments, not to exceed $100,000 in the aggregate,
to enable Holdings to make cash payments to holders of its Capital
Stock in lieu of the issuance of fractional shares of its Capital
Stock;
(7) payments made pursuant to any merger, consolidation
or sale of assets effected in accordance with Section 6.16 hereof;
provided, however, that no such payment may be made pursuant to this
clause (7) unless, after giving effect to such transaction (and the
incurrence of any Indebtedness in connection therewith and the use of
the proceeds thereof), the Company would be able to incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) in
compliance with Section 6.11 such that after incurring that $1.00 of
additional Indebtedness, the Leverage Ratio would be less than 6.0 to
1;
(8) payments to enable Holdings or the Company to pay
dividends on its Capital Stock (other than Disqualified Capital Stock)
after the first Public Equity Offering in an annual
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amount not to exceed 6.0% of the gross proceeds (before deducting
underwriting discounts and commissions and other fees and expenses of
the offering) received from shares of Capital Stock (other than
Disqualified Capital Stock) sold for the account of the issuer thereof
(and not for the account of any stockholder) in such initial Public
Equity Offering;
(9) payments by the Company to fund the payment by any
direct or indirect holding company thereof of audit, accounting, legal
or other similar expenses, to pay franchise or other similar taxes and
to pay other corporate overhead expenses, so long as such dividends
are paid as and when needed by its respective direct or indirect
holding company and so long as the aggregate amount of payments
pursuant to this clause (9) does not exceed $500,000 in any calendar
year;
(10) payments by the Company to fund taxes of Holdings
for a given taxable year in an amount equal to the lesser of (x) the
Company's "separate return liability" and (y) the portion of the tax
liability of the "affiliated group" (within the meaning of Section
1504(a)(I) of the Code (as defined)) of which the Company is a member
in accordance with the method described in Treasury Regulations
Section 1.1552-1(a)(I); pursuant to (x) or (y) of this clause (10) to
the extent that the Company files a combined or consolidated income
tax return with Holdings under any state or local income tax law for a
taxable year, the payment by the Company to Holdings to fund such tax
liability for such taxable year shall be provided for in a manner as
similar as possible to that provided for United States federal income
taxes (for purposes of this clause (10) "separate return liability"
for a given taxable year shall mean the hypothetical United States tax
liability of the Company defined as if the Company had filed its own
U.S. federal tax return for such taxable year);
(11) on and after May 31, 2002, the payment of cash
dividends in respect of the Company's 14% Redeemable Preferred Stock,
par value $.01; and
(12) cash dividends in respect of the Preferred Stock,
Series B;
provided, however, that in the case of clauses (3), (4), (5), (6), (7), (8),
(11) and (12), no Event of Default shall have occurred and be continuing at the
time of such payment or as a result thereof. In determining the aggregate
amount of Restricted Payments made subsequent to the Senior Subordinated Notes
Issue Date, amounts expended pursuant to clauses (1), (4), (5), (6), (7), (8)
and (11) shall be included in such calculation.
Section 6.05. Corporate Existence. The Company shall do or
cause to be done all things reasonably necessary to preserve and keep in full
force and effect its corporate or other existence and the corporate or other
existence of each of its Significant Subsidiaries in accordance with the
respective organizational documents of each such Significant Subsidiary and the
material rights (charter and statutory) and franchises of the Company and each
such Significant Subsidiary; provided, however, that the Company shall not be
required to preserve, with respect to itself, any material right or franchise
and, with respect to any of its Significant Subsidiaries, any such existence,
material right or franchise, if the Board of Directors of the Company or such
Significant Subsidiary, as the case may be, shall determine that the
preservation thereof is no longer reasonably necessary or desirable in the
conduct of the business of the Company or any such Significant Subsidiary.
Section 6.06. Payment of Taxes and Other Claims. The Company
shall pay or discharge or cause to be paid or discharged, before the same shall
become delinquent, (i) all material taxes, assessments and governmental charges
(including withholding taxes and any penalties, interest and additions to
taxes) levied or imposed upon it or any of its Subsidiaries or properties of it
or any of its Subsidiaries and (ii) all material lawful claims for labor,
materials, supplies and services that, if unpaid, might by law become
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a Lien upon the property of it or any of its Subsidiaries; provided, however,
that there shall not be required to be paid or discharged any such tax,
assessment or charge, the amount, applicability or validity of which is being
contested in good faith by appropriate proceedings and for which adequate
provision has been made or where the failure to effect such payment or
discharge is not adverse in any material respect to the holders of Preferred
Stock, Series B.
Section 6.07. Maintenance of Properties and Insurance. (a)
The Company shall, and shall cause each of its Subsidiaries to, maintain its
material properties in normal condition (subject to ordinary wear and tear) and
make all reasonably necessary repairs, renewals or replacements thereto as in
the judgment of the Company may be reasonably necessary to the conduct of the
business of the Company and its Subsidiaries; provided, however, that nothing
in this Section 6.07 shall prevent the Company or any of its Subsidiaries from
discontinuing the operation and maintenance of any of its properties, if such
properties are, in the reasonable and good faith judgment of the Board of
Directors of the Company or the Subsidiary, as the case may be, no longer
reasonably necessary in the conduct of their respective businesses.
(b) The Company shall provide or cause to be provided,
for itself and each of its Subsidiaries, insurance (including appropriate
self-insurance) against loss or damage of the kinds that, in the reasonable,
good faith opinion of the Company, are reasonably adequate and appropriate for
the conduct of the business of the Company and such Subsidiaries.
Section 6.08. Compliance with Laws. The Company shall comply,
and shall cause each of its Subsidiaries to comply, with all applicable
statutes, rules, regulations, orders and restrictions of the United States of
America, all states and municipalities thereof, and of any governmental
department, commission, board, regulatory authority, bureau, agency and
instrumentality of the foregoing, in respect of the conduct of their respective
businesses and the ownership of their respective properties, except for such
noncompliances as are not in the aggregate reasonably likely to have a material
adverse effect on the financial condition or results of operations of the
Company and its Subsidiaries taken as a whole.
Section 6.09. Reports. So long as any of the Preferred Stock,
Series B is outstanding, the Company will provide to the holders of Preferred
Stock, Series B, copies of the annual reports and of the information, documents
and other reports that the Company would have been required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act regardless of
whether the Company is then obligated to file such reports.
Section 6.10. Limitations on Transactions with Affiliates.
Neither the Company nor any of its Subsidiaries will, directly or indirectly,
enter into or permit to exist any transaction (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service) with or for the benefit of any of its Affiliates (other than
transactions between the Company and a Wholly Owned Subsidiary of the Company
or among Wholly Owned Subsidiaries of the Company) (an "Affiliate
Transaction"), other than Affiliate Transactions on terms that are no less
favorable than those that might reasonably have been obtained in a comparable
transaction on an arm's-length basis from a person that is not an Affiliate;
provided, however, that for a transaction or series of related transactions
involving value of $1,000,000 or more, such determination will be made in good
faith by a majority of members of the Board of Directors of the Company and by
a majority of the disinterested members of the Board of Directors of the
Company, if any; provided, further, that for a transaction or series of related
transactions involving value of $5,000,000 or more, the Board of Directors of
the Company has received an opinion from a nationally recognized investment
banking firm that such Affiliate Transaction is fair, from a financial point of
view, to the Company or such Subsidiary. The foregoing restrictions will not
apply to (1) reasonable and customary directors' fees, indemnification and
similar arrangements and payments thereunder, (2) any obligations of the
Company under the Financial Monitoring and Oversight Agreements or any
employment
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agreement, noncompetition or confidentiality agreement with any officer of the
Company (provided that each amendment of any of the foregoing agreements shall
be subject to the limitations of this covenant), (3) reasonable and customary
investment banking, financial advisory, commercial banking and similar fees and
expenses paid to any of the Purchasers and their Affiliates, (4) any Restricted
Payment permitted to be made pursuant to the covenant described under Section
6.04, (5) any issuance of securities or other payments, awards or grants in
cash, securities or otherwise pursuant to, or the funding of, employment
arrangements, stock options and stock ownership plans approved by the board of
directors of the Company, (6) loans or advances to employees in the ordinary
course of business of the Company or any of its Subsidiaries consistent with
past practices, (7) fees to Hicks Muse, as described in the Note Offering
Memorandum of the Company dated March 19, 1997 relating to the Senior
Subordinated Notes and (8) the issuance of Capital Stock of the Company (other
than Disqualified Stock).
Section 6.11. Limitation on Incurrence of Additional
Indebtedness and Issuance of Disqualified Capital Stock. The Company will not,
and will not permit any of its Subsidiaries to, directly or indirectly, create,
incur, assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur"), any
Indebtedness (other than Permitted Indebtedness) and the Company will not issue
any Disqualified Capital Stock, and its Subsidiaries will not issue any
Preferred Stock; provided, however, that the Company and its Subsidiaries may
incur Indebtedness or issue shares of such Capital Stock if, in either case,
the Company's Leverage Ratio at the time of incurrence of such Indebtedness or
the issuance of such Capital Stock, as the case may be, after giving pro forma
effect to such incurrence or issuance as of such date and to the use of
proceeds therefrom is less than 7.0 to 1.
Section 6.12. Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries. Neither the Company nor any of its
Subsidiaries will, directly or indirectly, create or otherwise cause to permit
to exist or become effective, by operation of the charter of such Subsidiary or
by reason of any agreement, instrument, judgment, decree, rule, order, statute
or governmental regulation, any encumbrance or restriction on the ability of
any Subsidiary to (a) pay dividends or make any other distributions on its
Capital Stock; (b) make loans or advances or pay any Indebtedness or other
obligation owed to the Company or any of its Subsidiaries; or (c) transfer any
of its property or assets to the Company, except for such encumbrances or
restrictions existing under or by reason of: (1) applicable law; (2) the
Indenture; (3) customary non-assignment provisions of any lease governing a
leasehold interest of the Company or any Subsidiary; (4) any instrument
governing Acquired Indebtedness, which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so acquired; (5)
agreements existing on the Senior Subordinated Notes Issue Date (including the
Credit Agreement) as such agreements are from time to time in effect; provided,
however, that any amendments or modifications of such agreements that affect
the encumbrances or restrictions of the types subject to this covenant shall
not result in such encumbrances or restrictions being less favorable to the
Company in any material respect, as determined in good faith by the Board of
Directors of the Company, than the provisions as in effect before giving effect
to the respective amendment or modification; (6) any restriction with respect
to such a Subsidiary imposed pursuant to an agreement entered into for the sale
or disposition of all or substantially all the Capital Stock or assets of such
Subsidiary pending the closing of such sale or disposition; (7) an agreement
effecting a refinancing, replacement or substitution of Indebtedness issued,
assumed or incurred pursuant to an agreement referred to in clause (2), (4) or
(5) above or any other agreement evidencing Indebtedness permitted under the
Indenture; provided, however, that the provisions relating to such encumbrance
or restriction contained in any such refinancing, replacement or substitution
agreement or any such other agreement are no less favorable to the Company in
any material respect as determined in good faith by the Board of Directors of
the Company than the provisions relating to such encumbrance or restriction
contained in agreements referred to in such clause (2), (4) or (5); (8)
restrictions on the transfer of the assets subject to any Lien imposed by the
holder of such Lien; or (9) a
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licensing agreement to the extent such restrictions or encumbrances limit the
transfer of property subject to such licensing agreement.
Section 6.13. Limitation on Asset Sales. Neither the Company
nor any of its Subsidiaries will consummate an Asset Sale unless (i) the
Company or the applicable Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value of the assets sold or otherwise disposed of (as determined in good faith
by management of the Company or, if such Asset Sale involves consideration in
excess of $2,500,000, by the Board of Directors of the Company, as evidenced by
a Board Resolution), (ii) at least 75% of the consideration received by the
Company or such Subsidiary, as the case may be, from such Asset Sale is in the
form of cash or Cash Equivalents (other than to the extent that the Company is
exchanging all or substantially all the assets of one or more broadcast
businesses operated by the Company (including by way of the transfer of capital
stock) for all or substantially all the assets (including by way of the
transfer of capital stock) constituting one or more broadcast businesses
operated by another Person, in which event, to such extent, the foregoing
requirement with respect to the receipt of cash or Cash Equivalents shall not
apply) and is received at the time of such disposition and (iii) upon the
consummation of an Asset Sale, the Company applies, or causes such Subsidiary
to apply, such Net Cash Proceeds within 180 days of receipt thereof either (A)
to repay any Indebtedness of the Company or any Indebtedness of a Subsidiary of
the Company (and, to the extent such Indebtedness relates to principal under a
revolving credit or similar facility, to obtain a corresponding reduction in
the commitments thereunder), (B) to reinvest, or to be contractually committed
to reinvest pursuant to a binding agreement, in Productive Assets and, in the
latter case, to have so reinvested within 360 days of the date of receipt of
such Net Cash Proceeds, or (C) to redeem the Preferred Stock, Series A and
Preferred Stock, Series B, on a pro rata basis.
Section 6.14. Limitation on Asset Swaps. The Company will
not, and will not permit any Subsidiary to, engage in any Asset Swaps, unless:
(i) at the time of entering into such Asset Swap, and immediately after giving
effect to such Asset Swap, no Default or Event of Default shall have occurred
and be continuing or would occur as a consequence thereof; (ii) in the event
such Asset Swap involves an aggregate amount in excess of $1,000,000, the terms
of such Asset Swap have been approved by a majority of the members of the Board
of Directors of the Company; and (iii) in the event such Asset Swap involves an
aggregate amount in excess of $5,000,000, the Company has received a written
opinion from an independent investment banking firm of nationally recognized
standing that such Asset Swap is fair to the Company or such Subsidiary, as the
case may be, from a financial point of view.
Section 6.15. FCC Compliance. Notwithstanding anything in
this Agreement to the contrary, the Company shall not be required to take any
action hereunder that (i) constitutes or would represent a transfer of control
to the Company of SAC or any Subsidiary of SAC without first obtaining the
consent of the FCC to such transfer of control or (ii) constitutes a violation
of the Communications Act or the rules or regulations promulgated thereunder.
Section 6.16. Merger, Consolidation and Sale of Assets. (a)
The Company may not, in a single transaction or a series of related
transactions, consolidate with or merge with or into, or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
assets to, another Person or adopt a plan of liquidation unless:
(1) either (A) the Company is the surviving or
continuing Person or (B) the Person (if other than the Company) formed
by such consolidation or into which the Company is merged or the
Person that acquires by conveyance, transfer or lease the properties
and assets of the Company substantially as an entirety or in the case
of a plan of liquidation, the Person to which assets of the
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Company have been transferred shall be a corporation, partnership or
trust organized and existing under the laws of the United States or
any State thereof or the District of Columbia;
(2) such surviving Person shall assume all of the
obligations of the Company under this Agreement pursuant to an
assignment and acceptance in a form reasonably satisfactory to the
Arranger;
(3) immediately after giving effect to such transaction
and the use of the proceeds therefrom (on a pro forma basis, including
giving effect to any Indebtedness incurred or anticipated to be
incurred in connection with such transaction), the Company (in the
case of clause (A) of the foregoing clause (1)) or such Person (in the
case of clause (B) of the foregoing clause (1)) shall be able to incur
$1.00 of additional Indebtedness (other than Permitted Indebtedness)
in compliance with Section 6.12; and
(4) immediately after giving effect to such transactions,
no Default or Event of Default shall have occurred and be continuing.
(b) For purposes of this Section 6.16, the transfer (by
lease, assignment, sale or otherwise, in a single transaction or series of
related transactions) of all or substantially all of the properties and assets
of one or more Subsidiaries, the Capital Stock of which constitutes all or
substantially all of the properties or assets of the Company, will be deemed to
be the transfer of all or substantially all of the properties and assets of the
Company.
(c) Notwithstanding the foregoing clauses (a)(2) and (3),
subject to applicable FCC requirements, if any, (i) any Subsidiary of the
Company may consolidate with, merge into or transfer all or part of its
properties and assets to the Company and (ii) the Company may merge with a
corporate Affiliate thereof incorporated solely for the purpose of
reincorporating the Company in another jurisdiction in the U.S. to realize tax
or other benefits.
Section 6.17. Successor Corporation Substituted. Upon any
consolidation or merger, or any transfer of assets in accordance with Section
6.16, the successor Person formed by such consolidation or into which the
Company is merged or to which such transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Agreement with the same effect as if such successor Person had been named
as the Company herein. When a successor corporation assumes all of the
obligations of the Company hereunder and agrees to be bound hereby, the
predecessor shall be released from such obligations.
Section 6.18. Interest Rate Agreements. The Company shall, no
later than 60 days after the Initial Closing Date and in respect of not less
than 100% of the Preferred Stock, Series B outstanding at any time, enter into
Interest Rate Agreements reasonably acceptable to the Arranger for such period
as any Preferred Stock, Series B is outstanding.
Section 6.19. Preferred Stock, Series B. The Company shall
declare and pay cash dividends on the Preferred Stock, Series B each month as
provided under the terms of the Preferred Stock, Series B during the six-month
period after the Initial Closing Date.
32
<PAGE> 36
ARTICLE VII
EVENTS OF DEFAULTS
Section 7.01. Actions after Default. If any Event of Default
occurs and is continuing (whether it is voluntary or involuntary, or results
from operation of law or otherwise), the Purchasers may exercise any of their
rights by operation of law or otherwise including their rights under the Put
and Call Agreement and/or the Certificate of Designation of the Preferred
Stock, Series B.
Section 7.02. Events of Default. It is an Event of Default
if:
(a) an Event of Default shall have occurred and be continuing
under the Indenture; or
(b) an Event of Default shall have occurred and be continuing
under the Credit Agreement; or
(c) a Market Effect shall have occurred and be continuing; or
(d) any representation or warranty made or deemed made by or
on behalf of STC in this Agreement, any report, certificate, financial
statement or other document furnished pursuant to or in connection
with this Agreement shall prove to have been incorrect in any material
respect when made or deemed made; or
(e) a Material Adverse Change shall have occurred and be
continuing; or
(f) STC shall fail to observe or perform any covenant,
condition or agreement contained in this Agreement and such breach
continues for 30 days after notice thereof from the Arranger to STC;
or
(g) the Put and Call Agreement or any provision thereof shall
cease to be in full force or effect as to any party thereto, if any
party thereto shall deny or disaffirm their obligations under the Put
and Call Agreement, or any party thereto (other than the Arranger)
shall default in the due performance or observance of any term,
covenant or agreement on its part to be performed or observed pursuant
to the Put and Call Agreement or any representation or warranty made
or deemed made in the Put and Call Agreement by any party thereto
(other than the Arranger), any report, certificate, financial
statement or other document furnished pursuant to or in connection
with the Put and Call Agreement, shall prove to have been incorrect in
any material respect when made or deemed made; or
(h) a Change of Control shall have occurred; or
(i) cash dividends shall not have been paid on the Preferred
Stock, Series B for any month during the six months after the Initial
Closing Date and such dividends have not been paid within 5 business
days of the date on which such dividends were scheduled to be paid.
Section 7.03. Notice of Events. If any Event of Default
happens, STC shall promptly notify the Arranger by facsimile specifying the
nature of such Event of Default and any steps STC is taking to remedy it.
33
<PAGE> 37
ARTICLE VIII
INDEMNITY
Section 8.01. Indemnity.
(a) Indemnification by the Company. The Company agrees and
covenants to hold harmless and indemnify the Purchasers and each Person, if
any, who controls any of the Purchasers within the meaning of Section 20 of the
Exchange Act from and against any losses, claims, damages, liabilities and
expenses (including expenses of investigation) to which the Purchasers or such
controlling Person may become subject (i) arising out of or based upon any
untrue statement or alleged untrue statement of any material fact contained in
this Agreement or (ii) arising out of, based upon or in any way related or
attributed to claims, actions or proceedings relating to this Agreement or the
subject matter of this Agreement or (iii) arising in any manner out of or in
connection with such Person being a Purchaser of the Preferred Stock, Series B
and relating to any action taken or omitted to be taken by the Company;
provided, however, that the Company shall not be liable under this paragraph
(a) for any amounts paid in settlement of claims without their written consent,
which consent shall not be unreasonably withheld, or to the extent that it is
finally judicially determined that such losses, claims, damages or liabilities
arose primarily out of the gross negligence, willful misconduct or bad faith of
the Purchasers. The Company further agrees to reimburse the Purchasers for any
reasonable legal and other expenses as they are incurred by it in connection
with investigating, preparing to defend or defending any lawsuits, claims or
other proceedings or investigations arising in any manner out of or in
connection with such Person being a Purchaser; provided that if the Company
reimburses the Purchasers hereunder for any expenses incurred in connection
with a lawsuit, claim or other proceeding for which indemnification is sought,
the Purchasers hereby agree to refund such reimbursement of expenses to the
extent it is finally judicially determined that the losses, claims, damages or
liabilities arising out of or in connection with such lawsuit, claim or other
proceedings arose primarily out of the gross negligence, willful misconduct or
bad faith of the Purchasers or from a violation by the Purchasers of legal
requirements applicable to the Purchasers solely because of their character as
a particular type of regulated institution. The Company further agrees that the
indemnification, contribution and reimbursement commitments set forth in this
Article VIII shall apply whether or not the Purchasers are a formal party to
any such lawsuits, claims or other proceedings. Notwithstanding the foregoing,
the Company shall not be liable to a party seeking indemnification under the
foregoing provisions of this paragraph (a) to the extent that any such losses,
claims, damages, liabilities or expenses arise out of or are based upon an
untrue statement or omission made in any of the documents referred to in this
paragraph (a) in reliance upon and in conformity with the information relating
to the party seeking indemnification furnished in writing by such party for
inclusion therein. The indemnity, contribution and expense reimbursement
obligations of the Company under this Article VIII shall be in addition to any
liability the Company may otherwise have.
(b) Procedure. If any Person shall be entitled to indemnity
hereunder (the "Indemnified Parties"), such Indemnified Party shall give prompt
notice confirmed in writing to the party or parties from which such indemnity
is sought (the "Indemnifying Parties") of the commencement of any proceeding (a
"Proceeding") with respect to which such Indemnified Party seeks
indemnification or contribution pursuant hereto; provided, however, that the
failure so to notify the Indemnifying Parties shall not relieve the
Indemnifying Parties from any obligation or liability except to the extent that
the Indemnifying Parties have been prejudiced materially by such failure. The
Indemnifying Parties shall have the right, exercisable by giving written notice
to an Indemnified Party promptly after the receipt of written notice from such
Indemnified Party of such Proceeding, to assume, at the Indemnifying Parties'
expense, the defense of any such Proceeding, with counsel reasonably
satisfactory to such Indemnified Party; provided, however, that an Indemnified
Party or parties (if more than one such Indemnified Party is named in any
Proceeding) shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof,
34
<PAGE> 38
but the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or parties unless: (1) the Indemnifying Parties agree to pay
such fees and expenses; or (2) the Indemnifying Parties fail promptly to assume
the defense of such Proceeding or fail to employ counsel reasonably
satisfactory to such Indemnified Party or parties; or (3) the named parties to
any such Proceeding (including any impleaded parties) include both such
Indemnified Party or Parties and the Indemnifying Party or an Affiliate of the
Indemnifying Party and such Indemnified Parties, and the Indemnifying Parties
shall have been advised in writing by counsel that a conflict or potential
conflict exists between such Indemnified Party or Parties and the Indemnifying
Parties, in which case, if such Indemnified Party or Parties notify the
Indemnifying Parties in writing that they elect to employ separate counsel at
the expense of the Indemnifying Parties, the Indemnifying Parties shall not
have the right to assume the defense thereof and such counsel shall be at the
expense of the Indemnifying Parties, it being understood, however, that, unless
there exists a conflict among Indemnified Parties, the Indemnifying Parties
shall not, in connection with any one such Proceeding or separate but
substantially similar or related Proceedings in the same jurisdiction, arising
out of the same general allegations or circumstances, be liable for the fees
and expenses of more than one separate firm of attorneys (together with
appropriate local counsel, if any) at any time for such Indemnified Party or
Parties, or for fees and expenses that are not reasonable. No Indemnified Party
or Parties will settle any Proceedings without the written consent of the
Indemnifying Party or Parties (but such consent will not be unreasonably
withheld).
Section 8.02. Contribution. If for any reason the
indemnification provided for in Section 8.01 of this Agreement is unavailable
to an Indemnified Party, or insufficient to hold it harmless, in respect of any
losses, claims, damages, liabilities or expenses referred to therein, then each
applicable Indemnifying Party, in lieu of indemnifying such Indemnified Party,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect not only the relative benefits received by the
Indemnifying Party on the one hand and the Indemnified Party on the other, but
also the relative fault of the Indemnifying and Indemnified Parties in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of the Indemnifying and Indemnified Parties
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Indemnifying or
Indemnified Parties and each such party's relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims,
damages and liabilities referred to above shall be deemed to include any
reasonable legal or other fees or expenses incurred by such party in connection
with investigating or defending any such claim.
The Company and the Purchasers agree that it would not be
just and equitable if contribution pursuant to the immediately preceding
paragraph were determined by any method of allocation which does not take into
account the equitable considerations referred to in such paragraph. No Person
guilty of fraudulent misrepresentation shall be entitled to contribution from
any Person.
ARTICLE IX
MISCELLANEOUS
Section 9.01. Notices. Any notice, request or other
communication to be given or made under this Agreement shall be in writing.
Subject to Section 7.03, the notice, request or other communication may be
delivered by hand or facsimile, to the party's address specified below or at
such other address as such party notifies to the other party from time to time
and will be effective upon receipt.
35
<PAGE> 39
For STC:
STC Broadcasting, Inc.
3839-4th Street North
St. Petersburg, Florida 33703
Attention: David A. Fitz, Chief Financial Officer
Telephone: (727) 821-7900
Telefax: (727) 821-8097
with a copy to:
Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Attention: Lawrence D. Stuart, Jr.
Telephone: (214) 740-7365
Telefax: (214) 740-7313
For the Purchasers:
The Chase Manhattan Bank
One Chase Manhattan Plaza, 8th Floor
New York, New York 10081
Attention: Gloria Javier
Telephone: (212) 552-7440
Telefax: (212) 552-5700
Section 9.02. Expenses. STC agrees promptly to pay (i) all
the actual and reasonable costs and expenses of preparation of the Basic
Documents; (ii) the reasonable fees, expenses and disbursements of Cahill
Gordon & Reindel in connection with the negotiation, preparation, execution and
administration of the Basic Documents and the sale of the Preferred Stock,
Series B hereunder, and any amendments, modifications and waivers hereto or
thereto and consents to departures from the terms hereof and thereof; and (iii)
after the occurrence and during the continuance of an Event of Default, all
reasonable costs and expenses (including reasonable attorneys fees of one
counsel to all the Purchasers and the Arranger) in enforcing any obligations of
or in collecting any payments due from STC hereunder or under the Preferred
Stock, Series B by reason of such Event of Default.
Section 9.03. Governing Law; Submission to Jurisdiction:
Venue. (a) This Agreement is governed by, and shall be construed in accordance
with, the law of the State of New York.
(b) Any legal action or proceeding with respect to this
Agreement may be brought in the courts of the State of New York or of the
United States for the Southern District of New York and, by execution and
delivery of this Agreement, STC hereby irrevocably accepts for itself and in
respect of its property, generally and unconditionally, the jurisdiction of the
aforesaid courts. STC hereby irrevocably designates, appoints and empowers
HMTF, with offices at 1325 Avenue of the Americas, 25th Floor, New York, NY
10019, as its designee, appointee and agent to receive, accept and acknowledge
for and on its behalf, and in respect of its property, service of any and all
legal process, summons, notices and documents which may be served in any such
action or proceeding. If for any reason such designee, appointee and agent
shall lease to be available to act as such, STC agrees to designate a new
designee, appointee and
36
<PAGE> 40
agent in New York City on the terms and for the purposes of this provision
satisfactory to the Arranger. STC further irrevocably consents to the service
of process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to STC at its address set forth in Section 9.01 above, such
service to become effective 10 days after such mailing. Nothing herein shall
affect the right of the Lender to serve process in any other manner permitted
by law or to commence legal proceedings or otherwise proceed against STC in any
other jurisdiction.
(c) STC hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement will affect the right of any party
to this Agreement to serve process in any other manner permitted by law.
Section 9.04. Judgment. (a) If for the purposes of obtaining
judgment in any court it is necessary to convert a sum due hereunder in Dollars
into another currency, the parties hereto agree, to the fullest extent that
they may effectively do so, that the rate of exchange used shall be that at
which in accordance with normal banking procedures the Arranger could purchase
Dollars with such other currency at the Arranger's principal office in New York
City at 11:00 A.M. (New York City time) on the Business Day preceding that on
which final judgment is given.
(b) The obligation of STC in respect of any sum due from it
to the Purchasers hereunder held by the Purchasers shall, notwithstanding any
judgment in a currency other than Dollars, be discharged only to the extent
that on the Business Day following receipt by the Purchasers of any sum
adjudged to be so due in such other currency, the Purchasers may in accordance
with normal banking procedures purchase Dollars with such other currency; if
the Dollars so purchased are less than such sum due to the Purchasers in
Dollars, STC agrees, as a separate obligation and notwithstanding any such
judgment, to indemnify the Purchasers against such loss, and the Dollars so
purchased exceed such sum due to the Purchasers in Dollars, the Purchasers
agree to remit to STC such excess.
Section 9.05. Benefit of Agreement. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto, all future holders of the Preferred Stock, Series B, and their
respective successors and assigns.
Section 9.06. Assignments. The Company may not assign or
delegate any of its interests or obligations under this Agreement. Other than
in connection with the Put and Call Agreement, with the written consent of the
Arranger, which shall not unreasonably be withheld, (a) each Purchaser
hereunder and each Person who after the date hereof is an assignee pursuant to
this clause (a) may assign pursuant to an Assignment and Assumption Agreement
substantially in the form of Exhibit G hereto all or a portion of its right to
purchase Preferred Stock, Series B hereunder to any person in compliance with
the restriction contained in Section 4.02(4) and who is reasonably satisfactory
to the Company, and (b) each holder of Preferred Stock, Series B, may sell or
transfer all or a portion of its Preferred Stock, Series B to any person who is
reasonably satisfactory to the Company; provided with respect to clause (b)
such sale or transfer complies with Section 4.02 and each transferee of such
Preferred Stock, Series B executes and delivers to each party hereto a joinder
agreement in form and substance reasonably satisfactory to the Arranger and the
Fund. Any assignment pursuant to Section 9.06(a) will become effective upon the
Arranger's receipt of an Assignment and Assumption Agreement duly executed by
all necessary parties thereto. Upon the effectiveness of any assignment in
accordance with Section 9.06(a), the assignee will become a "signator" for all
purposes of this Agreement and, to the extent of such assignment, the assignor
shall be relieved of its obligations hereunder with respect to obligations
being assigned. Notwithstanding the foregoing, (i) each Purchaser hereunder and
each Person who is an assignee pursuant to clause (a) above may assign all or a
portion of its right to purchase Preferred Stock, Series B hereunder, and (ii)
each
37
<PAGE> 41
holder of Preferred Stock, Series B, may sell or transfer all or a portion
of its Preferred Stock, Series B, in each case, to any of its Affiliates,
without the consent of the Company.
Section 9.07. Amendment. Neither this Agreement nor any terms
hereof may be changed, waived or discharged or terminated unless such change,
waiver, discharge or termination is in writing signed by the Company, the
Arranger and a majority of the holders of Preferred Stock, Series B.
Section 9.08. Counterparts; Integration. This Agreement may
be executed in several counterparts, each of which is an original, but all of
which together constitute one and the same agreement. This Agreement, together
with the other Basic Documents , constitutes the entire contract among the
parties relating to the subject matter hereof and supersede any and all
previous agreements and understandings, and as written, relating to the subject
matter hereof. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
Section 9.09. Remedies and Waivers. No failure or delay by
the Purchasers in exercising any power, remedy, discretion, authority or other
rights under this Agreement shall waive or impair that or any other right of
the Purchasers. No single or partial exercise of such a right shall preclude
its additional or future exercise. No such waiver shall waive any other right
under this Agreement. All waivers or consents given under this Agreement shall
be in writing.
Section 9.10. Severability. Any provision of this Agreement
held to be invalid, illegal or unenforceable in any Jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such invalidity, illegality
or unenforceability without affecting the validity, legality and enforceability
of the remaining provisions hereof, and the invalidity of a particular
provision in a particular jurisdiction shall not invalidate such provision in
any other jurisdiction.
Section 9.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVER AND CERTIFICATIONS IN THIS SECTION.
38
<PAGE> 42
IN WITNESS WHEREOF, the parties have caused this Agreement to
be signed in their respective names as of the date first above written.
STC BROADCASTING, INC.
By: /s/ David A. Fitz
----------------------------------
Name: David A. Fitz
Title: Secretary
39
<PAGE> 43
CHASE SECURITIES, INC., as Arranger
By: /s/ James P. Casey
----------------------------------
Name: James P. Casey
Title: Managing Director
THE CHASE MANHATTAN CORPORATION
By: /s/ Louis M. Morrell
----------------------------------
Name: Louis M. Morrell
Title: Managing Director
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ Joseph D. Carrabino, Jr.
----------------------------------
Name: Joseph D. Carrabino, Jr.
Title: Managing Director
SALOMON BROTHERS HOLDING COMPANY INC.
By: /s/ Timothy L. Freeman
-----------------------------------
Name: Timothy L. Freeman
Title: Attorney-In-Fact
40
<PAGE> 44
Schedule I
<TABLE>
<CAPTION>
Number of Shares Number of Shares
Preferred Stock, Preferred Stock,
Series B, Series B,
Purchaser Purchased at Initial Closing Purchased as Subsequent Closing
- -------------------------- ----------------------------- -------------------------------
<S> <C> <C>
The Chase Manhattan 18,750 26,250
Corporation
Credit Suisse First Boston 9,375 13,125
Corporation
Salomon Brothers Holding 9,375 13,125
Company Inc.
</TABLE>
<PAGE> 45
EXHIBIT G
FORM OF
ASSIGNMENT AND ASSUMPTION AGREEMENT
Reference is made to the Securities Purchase Agreement dated
as of February 5, 1999 (as restated, amended, modified, supplemented and in
effect from time to time, the "Securities Purchase Agreement"), among [ ]
("STC") and [ ]. Capitalized terms used herein and not otherwise defined shall
have the meanings assigned to such terms in the Securities Purchase Agreement.
This Assignment and Assumption Agreement between [ ], as assignor (the
"Assignor"), and [ ], as assignee (the "Assignee"), is dated as of
____________, ____________ (the "Effective Date.").
1. The Assignor hereby irrevocably sells and assigns to
the Assignee without recourse to the Assignor, and the Assignee hereby
irrevocably purchases and assumes from the Assignor without recourse to the
Assignor, as of the Effective Date, all the Assignor's rights and obligations
under the Securities Purchase Agreement with respect to the right to purchase
[ ] shares of Preferred Stock, Series B (the "Assigned Obligations").
2. The Assignor (i) represents and warrants that it
owns the Assigned Obligations free and clear from any lien or adverse claim
made by the Assignor; (ii) other than the representation and warranty set forth
in clause (i) above, makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Securities Purchase Agreement or any other
instrument, document or agreement delivered in connection therewith, or the
execution, legality, validity, enforceability, genuineness, sufficiency or
value of the Securities Purchase Agreement, or any other instrument or document
furnished pursuant thereto, other than that it is the legal and beneficial
owner of the interest being assigned by it hereunder and that such interest is
free and clear of any adverse claim; and (iii) makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of STC or the performance or observance by STC of any of its obligations under
the Securities Purchase Agreement, or any other instrument or document
furnished pursuant thereto.
3. The Assignee (i) represents and warrants that it is
legally authorized to enter into this Assignment and Assumption Agreement; (ii)
agrees that it will, independently and without reliance upon Assignor and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Securities Purchase Agreement; and (iii) agrees that it will be bound by
the provisions of the Securities Purchase Agreement and will perform in
accordance with its terms all the obligations which by the terms of the
Securities Purchase Agreement are required to be performed by it as the
Purchaser.
4. From and after the Effective Date, to the extent,
and only to the extent, of the Assigned Obligations, (i) the Assignee shall be
a party to the Securities Purchase Agreement and have the rights and
obligations of a Purchaser thereunder, and (ii) the Assignor shall relinquish
its rights and be released from its obligations under the Securities Purchase
Agreement with respect to the Assigned Obligations.
5. THIS ASSIGNMENT AND ASSUMPTION AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.
<PAGE> 46
IN WITNESS WHEREOF, the parties hereto have caused this
Assignment and Assumption Agreement to be executed by their respective duly
authorized officers on Schedule I hereto.
[ ], as Assignor
By:
------------------------------------
Name:
Title:
[ ]
as Assignee
By:
------------------------------------
Name:
Title:
ACCEPTED:
STC BROADCASTING, INC.
By:
----------------------------------
Name:
Title:
ARRANGER
By:
----------------------------------
Name:
Title:
<PAGE> 1
Exhibit 10.27
STC BROADCASTING, INC.
CERTIFICATE OF DESIGNATION OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS OF
PREFERRED STOCK, SERIES B
AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
-----------------------------------------------------------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
- -----------------------------------------------------------------------------
STC Broadcasting, Inc. (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, does hereby certify that, pursuant to authority conferred upon the
board of directors of the Corporation (the "Board of Directors") by its
Certificate of Incorporation, as amended (hereinafter referred to as the
"Certificate of Incorporation"), and pursuant to the provisions of Section 151
of the General Corporation Law of the State of Delaware, said Board of
Directors, by unanimous written consent dated February [ ], 1999, duly approved
and adopted the following resolution (the "Resolution"):
RESOLVED, that, pursuant to the authority vested in the Board
of Directors by its Certificate of Incorporation, the Board of
Directors does hereby create, authorize and provide for the issuance
of Preferred Stock, Series B, par value $0.01 per share, with a
liquidation preference of $1,000.00 per share, consisting initially of
100,000 shares, having the designations, preferences, relative,
participating, optional and other special rights and the
qualifications, limitations and restrictions thereof that are set
forth in the Certificate of Incorporation and in this Resolution as
follows:
(a) Designation. There is hereby created out of the
authorized and unissued shares of Preferred Stock of the Corporation a class of
Preferred Stock designated as "Preferred Stock, Series B". The number of shares
constituting such class shall be no more than 100,000. Shares may only be
issued after the date of the above-referenced resolution pursuant to (i) the
Securities Purchase Agreement or (ii) dividends paid on the Preferred Stock,
Series B "in-kind" in accordance with Section (c) hereof. The initial
liquidation preference of the Preferred Stock, Series B shall be $1,000.00 per
share.
(b) Rank. The Preferred Stock, Series B shall, with respect
to dividends and distributions upon the liquidation, winding-up and dissolution
of the Corporation, rank senior to all classes of common stock of the
Corporation, and each other class of Capital Stock or series of Preferred Stock
hereafter created which does not expressly provide that it ranks senior to or
on a parity with, the Preferred Stock, Series B as to dividends and
distributions upon the liquidation, winding-up and dissolution of the
Corporation ("Junior Stock"). The Preferred Stock, Series B shall, with respect
to dividends and distributions upon the liquidation, winding-up and dissolution
of the Corporation, rank on a parity with the 14% Redeemable Preferred Stock,
designated pursuant to the Certificate of Designation of the Corporation dated
February 27, 1997, as amended (the "14% Preferred Stock"), and any class of
Capital Stock or series of Preferred Stock hereafter created which expressly
provides that it ranks on a parity with the Preferred Stock, Series B as to
dividends and distributions upon the liquidation, winding-up and dissolution of
the Corporation ("Parity Stock"), provided that any such Parity Stock that was
not approved by the Holders in accordance with paragraph (f)(ii)(A) hereof
shall be deemed to be Junior Stock and not Parity Stock. The Preferred Stock,
Series B shall, with respect
<PAGE> 2
to dividends and distributions upon the liquidation, winding-up and dissolution
of the Corporation, rank junior to each class of Capital Stock or series of
Preferred Stock hereafter created which has been approved by the Holders in
accordance with paragraph (f)(ii)(B) and which expressly provides that it ranks
senior to the Preferred Stock, Series B as to dividends or distributions upon
the liquidation, winding-up and dissolution of the Corporation ("Senior
Stock").
(c) Dividends.
(i) Beginning on the applicable Issue Date, the Holders of
the outstanding shares of Preferred Stock, Series B being issued on
such Issue Date shall be entitled to receive, when, as and if declared
by the Board of Directors, out of funds legally available therefor,
distributions in the form of cash dividends on each share of Preferred
Stock, Series B, at the rate (the "Dividend Rate") of (i) LIBOR for
the applicable Dividend Period plus 125 basis points (the "LIBOR
Rate") or (ii) the ABR for the applicable Dividend Period (the "ABR
Rate"), each multiplied by the liquidation preference per share of the
Preferred Stock, Series B. The Corporation shall initially pay
dividends at the ABR Rate. The Corporation may, at its sole option,
convert to the LIBOR Rate from the ABR Rate at any time and may
convert back to the ABR Rate from the LIBOR Rate at the end of any
period applicable to such LIBOR Rate; provided, however, that if the
Corporation, at any time any shares of Preferred Stock, Series B are
outstanding, chooses to convert from the LIBOR Rate to the ABR Rate or
from the ABR Rate to the LIBOR Rate, it will give irrevocable written
notice thereof to the Holders (as the Holders appear in the stock
books of the Corporation) three days prior to the date of such
conversion. Additional dividends, at the then effective Dividend Rate,
shall accrue in respect of, and compound on, any dividends which are
in arrears. All dividends shall be cumulative, whether or not earned
or declared, from the date of issuance of the Preferred Stock, Series
B and shall compound to the extent not paid on the next succeeding
Dividend Payment Date, and shall be payable in arrears on each
Dividend Payment Date, commencing on the first Dividend Payment Date
after the applicable Issue Date. At the option of the Corporation, any
dividend payable on any Dividend Payment Date after August 5, 1999,
may be paid in additional whole shares of Preferred Stock, Series B
(calculated by dividing (x) the amount of the cash dividend payable to
each holder of record of the Preferred Stock, Series B on the basis of
all shares held of record by such holder, whether evidenced by one or
more certificates, by (y) $1,000.00, with amounts in respect of any
partial shares to be paid in cash by the Corporation) on such Dividend
Payment Date; provided, the Corporation shall not have such option if
with respect to any concurrent or substantially concurrent dividend on
any Parity Stock or Junior Stock, a dividend on such Parity Stock or
Junior Stock is or will be paid in cash (excluding cash dividends
payable in respect of fractional shares). Each dividend shall be
payable to Holders of record as they appear on the stock books of the
Corporation on the Dividend Record Date immediately preceding the
related Dividend Payment Date.
(ii) All dividends paid with respect to shares of the
Preferred Stock, Series B pursuant to paragraph (c)(i) shall be paid
pro rata to the Holders entitled thereto. The Corporation shall not
pay any dividend on the Preferred Stock, Series B "in-kind" pursuant
to the provisions of Section (c)(i) unless it declares a similar and
pro rata dividend in kind on all then outstanding shares of Preferred
Stock, Series B.
(iii) Dividends on account of arrears for any past Dividend
Period (including any dividends compounding thereon) and dividends in
connection with any optional redemption pursuant to paragraph (e)(i)
may be declared and paid at any time, without reference to any regular
Dividend Payment Date, to Holders of record on such date, not more
than forty-five (45)
<PAGE> 3
days prior to the payment thereof, as may be fixed by the Board of
Directors of the Corporation.
(iv) No full dividends shall be declared by the Board of
Directors or paid or set apart for payment by the Corporation on any
Parity Stock for any period unless full cumulative dividends have been
or contemporaneously are declared and paid in full, or declared and,
if payable in cash, a sum in cash set apart sufficient for such
payment on the Preferred Stock, Series B for all Dividend Periods
terminating on or prior to the date of payment of such full dividends
on such Parity Stock. If any dividends are not so paid, all dividends
declared upon shares of the Preferred Stock, Series B and any other
Parity Stock shall be declared pro rata so that the amount of
dividends declared per share on the Preferred Stock, Series B and such
Parity Stock shall in all cases bear to each other the same ratio that
accrued dividends per share on the Preferred Stock, Series B and such
Parity Stock bear to each other.
(v) (A) Holders of shares of the Preferred Stock, Series B
shall be entitled to receive the dividends provided for in paragraph
(c)(i) hereof in preference to and in priority over any dividends upon
any of the Junior Stock.
(B) So long as any share of the Preferred Stock, Series
B is outstanding, the Corporation shall not declare, pay or set apart
for payment any dividend on any of the Junior Stock or make any
payment on account of, or set apart for payment money for a sinking or
other similar fund for, the purchase, redemption or other retirement
of, any of the Junior Stock or any warrants, rights, calls or options
exercisable for or convertible into any of the Junior Stock whether in
cash, obligations or shares of the Corporation or other property
(other than dividends in Junior Stock to the holders of Junior Stock),
and shall not permit any corporation or other entity directly or
indirectly controlled by the Corporation to purchase or redeem any of
the Junior Stock or any such warrants, rights, calls or options unless
full cumulative dividends determined in accordance herewith on the
Preferred Stock, Series B have been paid in full.
(C) So long as any share of the Preferred Stock, Series
B is outstanding, the Corporation shall not make any payment on
account of, or set apart for payment money for a sinking or other
similar fund for, the purchase, redemption or other retirement of, any
of the Parity Stock (including, without limitation, the 14% Preferred
Stock) or any warrants, rights, calls or options exercisable for or
convertible into any of the Parity Stock, and shall not permit any
corporation or other entity directly or indirectly controlled by the
Corporation to purchase or redeem any of the Parity Stock or any such
warrants, rights, calls or options unless full cumulative dividends
determined in accordance herewith on the Preferred Stock, Series B
have been paid in full. For the avoidance of doubt, this paragraph
shall not restrict transactions pursuant to the Put and Call Agreement
(the "Put and Call Agreement") dated as of February 5, 1999, among
certain affiliates of the Corporation and the Arranger, on behalf of
the Holders, from time to time, of the Preferred Stock, Series B.
(vi) Dividends payable on the Preferred Stock, Series B for
any period less than a year shall be computed on the basis of a
360-day year of twelve 30-day months and the actual number of days
elapsed in the period for which payable.
(vii) The Corporation has deposited cash hereof in an escrow
account for the purpose of paying cash dividends on the Preferred
Stock, Series B.
(d) Liquidation Preference.
(i) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, the
Holders of shares of Preferred Stock, Series B then outstanding shall
be entitled
<PAGE> 4
to be paid out of the assets of the Corporation available for
distribution to its stockholders an amount in cash equal to the
liquidation preference for each share outstanding, plus, without
duplication, an amount in cash equal to accumulated and unpaid
dividends thereon (including any compounded dividends and breakage
fees) to the date fixed for liquidation, dissolution or winding up
(including an amount equal to a prorated dividend for the period from
the last Dividend Payment Date to the date fixed for liquidation,
dissolution or winding up) before any payment shall be made or any
assets distributed to the holders of any of the Junior Stock
including, without limitation, common stock of the Corporation. Except
as provided in the preceding sentence, Holders of Preferred Stock,
Series B shall not be entitled to any distribution in the event of any
liquidation, dissolution or winding up of the affairs of the
Corporation. If the assets of the Corporation are not sufficient to
pay in full the liquidation payments payable to the Holders of
outstanding shares of the Preferred Stock, Series B and all Parity
Stock, then the holders of all such shares shall share equally and
ratably in such distribution of assets in proportion to the full
liquidation preference, including, without duplication, all accrued
and unpaid dividends to which each is entitled.
(ii) For the purposes of this paragraph (d), neither the
sale, conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all of the
property or assets of the Corporation nor the consolidation or merger
of the Corporation with or into one or more entities shall be deemed
to be a liquidation, dissolution or winding up of the affairs of the
Corporation.
(e) Redemption.
(i) Optional Redemption. (A) The Corporation may, at the
option of the Board of Directors, upon three business days' written
notice to the Holders, redeem at any time, subject to contractual and
other restrictions with respect thereto and from any source of funds
legally available therefor, in whole or in part, in the manner
provided in paragraph (e)(iii) hereof, any or all of the shares of the
Preferred Stock, Series B, at a redemption price equal to 100% of the
then liquidation preference per share plus, without duplication, an
amount in cash equal to all accumulated and unpaid dividends per share
(including any compounded dividends and breakage fees, if any)
(including an amount in cash equal to a prorated dividend for the
period from the Dividend Payment Date immediately prior to the
Redemption Date to the Redemption Date) (the "Redemption Price").
(B) In the event of a redemption pursuant to paragraph
(e)(i)(A) hereof of only a portion of the then outstanding shares of
the Preferred Stock, Series B, the Corporation shall effect such
redemption pro rata according to the number of shares held by each
Holder of the Preferred Stock, Series B.
(ii) Mandatory Redemption. (A) On December 31, 2008, the
Corporation shall redeem, to the extent of funds legally available
therefor, in the manner provided in paragraph (e)(iii) hereof, all of
the shares of the Preferred Stock, Series B then outstanding at the
Redemption Price.
(B) Concurrently with the consummation of any offering
(including any public or Rule 144A (as such rule is defined in the
Securities Act) offering) of any debt or equity securities of the
Corporation or Holding (or the receipt of proceeds by the Corporation,
as a capital contribution or otherwise, from any such offering by
Holding), the Corporation shall use the net cash proceeds thereof to
redeem all of the Preferred Stock, Series B at the Redemption Price.
(C) In the event of any redemption pursuant to Section
(e)(ii)(B) hereof, if the Corporation does not have sufficient funds
to redeem all of the outstanding Preferred Stock, Series B, the
Corporation shall effect such redemption pro rata according to the
number of shares held by each Holder of the Preferred Stock, Series B.
<PAGE> 5
(iii) Procedures for Redemption. (A) No less than ten (10)
days prior to the date fixed or anticipated for any redemption of the
Preferred Stock, Series B, written notice (the "Redemption Notice")
shall be given by the Corporation via first class mail, postage
prepaid, to each Holder of record on the record date fixed for such
redemption of the Preferred Stock, Series B at such Holder's address
as the same appears on the stock books of the Corporation, provided
that no failure to give such notice nor any deficiency therein shall
affect the validity of the procedure for the redemption of any shares
of Preferred Stock, Series B to be redeemed except as to the Holder or
Holders to whom the Corporation has failed to give said notice or
except as to the Holder or Holders whose notice was defective. Any
such notice shall be irrevocable, except that a notice may be stated
to be revocable with respect to a redemption pursuant to paragraph
(e)(ii)(B) or (C) but only to the extent that the contemplated
offering has not been consummated. The Redemption Notice shall state:
(1) whether the redemption is pursuant to paragraph
(e)(i)(A), (e)(ii)(A), (e)(ii)(B) or (e)(ii)(C), or hereof;
(2) the Redemption Price,
(3) whether all or less than all the outstanding shares
of the Preferred Stock, Series B redeemable are to be
redeemed and the total number of shares of the Preferred
Stock, Series B being redeemed;
(4) the date fixed for redemption;
(5) that the Holder is to surrender to the Corporation,
at the place or places where certificates for shares of
Preferred Stock, Series B are to be surrendered for
redemption, in the manner and at the price designated, his
certificate or certificates representing the shares of
Preferred Stock, Series B to be redeemed; and
(6) that dividends on the shares of the Preferred
Stock, Series B to be redeemed shall cease to accumulate on
such Redemption Date unless the corporation defaults in the
payment of the Redemption Price.
(B) Each Holder of Preferred Stock, Series B shall
surrender the certificate or certificates representing such shares of
Preferred Stock, Series B to the Corporation, duly endorsed (or
otherwise in proper form for transfer, as determined by the
Corporation), in the manner and at the place designated in the
Redemption Notice, and on the Redemption Date the Redemption Price may
be, for such shares shall be payable in cash to the person whose name
appears on such certificate or certificates as the owner thereof, and
each surrendered shall be canceled and retired. In the event that less
than all of the shares represented by any such certificate are
redeemed, a new certificate shall be issued representing the
unredeemed shares.
(C) On and after the Redemption Date, unless the
Corporation defaults in the payment in full of the applicable
redemption price, dividends on the Preferred Stock, Series B called
for redemption shall cease to accumulate on the Redemption Date, and
all rights of the Holders of redeemed shares shall terminate with
respect thereto on the Redemption Date, other than the right to
receive the Redemption Price without interest; provided, however, that
if a notice of redemption shall have been given as provided in
paragraph (e)(iii)(A) above and the funds necessary for redemption
(including an amount in respect of all dividends that will accrue to
the Redemption Date) shall have been irrevocably deposited in trust
for the equal and ratable benefit for the Holders of the shares to be
redeemed, then, at the close of business on the day on which such
funds are segregated and set aside, the Holders of the shares to be
redeemed shall cease to be stockholders of the Corporation and shall
be entitled only to receive the Redemption Price without interest.
<PAGE> 6
(f) Voting Rights. (i) The Holders of Preferred Stock, Series
B, except as required under Delaware law or as set forth in paragraphs (ii),
(iii) and (iv) below, shall not be entitled or permitted to vote on any matter
required or permitted to be voted upon by the stockholders of the Corporation.
(ii) (A) So long as any shares of the Preferred Stock, Series
B are outstanding, the Corporation shall not authorize any class of
Parity Stock without the affirmative vote or consent of Holders of at
least a majority of the then outstanding shares of Preferred Stock,
Series B, voting or consenting, as the case may be, as one class,
given in person or by proxy, either in writing or by resolution
adopted at an annual or special meeting.
(B) So long as any shares of the Preferred Stock,
Series B are outstanding, the Corporation shall not authorize any
class of Senior Stock without the affirmative vote or consent of
Holders of at least a majority of the outstanding shares of Preferred
Stock, Series B, voting or consenting, as the case may be, as one
class, given in person or by proxy, either in writing or by resolution
adopted at an annual or special meeting.
(C) So long as any shares of Preferred Stock, Series B
are outstanding, the Corporation shall not amend this Certificate of
Designation so as to affect adversely the specified rights,
preferences, privileges or voting rights of the shares of Preferred
Stock, Series B or to authorize the issuance of any additional shares
of Preferred Stock, Series B without the affirmative vote or consent
of Holders of at least a majority of the issued and outstanding shares
of Preferred Stock, Series B, voting or consenting, as the case may
be, as one class, given in person or by proxy, either in writing or by
resolution adopted at an annual or special meeting.
(D) Except as set forth in paragraph (f)(ii)(A),
(f)(ii)(B) and (f)(ii)(C) above, (x) the creation, authorization or
issuance of any shares of any Junior Stock, Parity Stock or Senior
Stock, including the designation thereof within the existing class of
Preferred Stock, Series B or (y) the increase or decrease in the
amount of authorized Capital Stock of any class, including Preferred
Stock, shall not require the consent of Holders of Preferred Stock,
Series B and shall not be deemed to affect adversely the rights,
preferences, privileges or voting rights of Holders of Preferred
Stock, Series B.
(iii) If (x) dividends on the Preferred Stock, Series B are
in arrears and unpaid for (i) one or more Dividend Periods (whether or
not consecutive) from February 5, 1999 to August 5, 1999 or (ii) after
August 5, 1999, six or more Dividend Periods (and in the case of cash
dividends only, whether or not consecutive) (a "Dividend Default");
(y) the Corporation fails to redeem all of the then outstanding shares
of Preferred Stock, Series B under the redemption provisions of
Section (e)(i) hereof (after notice has been given) or under the
circumstances required by Section (e)(ii) (a "Redemption Default"); or
(z) an "Event of Default" has occurred under the Securities Purchase
Agreement (the "Securities Purchase Agreement") dated as of February
5, 1999 by and among the Corporation, the Purchasers named therein and
Chase Securities, Inc. ("Purchase Agreement Default"), then (in
addition to, and not in limitation of, any rights or remedies the
Holders may have under any other provision hereof or any other
agreement, including the Securities Purchase Agreement, or at law or
in equity) the number of directors constituting the Board of Directors
shall be adjusted by the number, if any, necessary to permit the
Holders of the Preferred Stock, Series B and the holders of any Parity
Stock then having the right to elect directors, voting as one class,
to elect the lesser of two directors or 25% of the members of the
Board of Directors. Holders of a majority of the issued and
outstanding shares of Preferred Stock, Series B, together with the
holders of any Parity Stock then having the right to elect directors,
voting as one class, shall have the exclusive right to elect the
lesser of two directors
<PAGE> 7
or 25% of the members of the Board of Directors at a meeting therefor
called upon occurrence of such Dividend Default, Redemption Default or
Purchase Agreement Default, as the case may be, and at every
subsequent meeting at which the terms of office of the directors so
elected expire (other than as described in (f)(iv) below). Each such
event described in clauses (x), (y) and (z) is a "Voting Rights
Triggering Event."
(A) The right of the Holders of Preferred Stock, Series
B to elect members of the Board of Directors as set forth in
subparagraph (f)(iii)(A) above shall continue until such time as (x)
in the event such right arises due to a Dividend Default, all accrued
dividends that are in arrears on the Preferred Stock, Series B are
paid in full in cash (to the extent such dividends were required to be
paid in cash) or in additional shares of Preferred Stock, Series B (to
the extent such dividends were permitted to be paid in additional
shares of Preferred Stock, Series B); and (y) in all other cases, the
failure, breach or default giving rise to such Voting Rights
Triggering Event is remedied or is waived by the holders of at least a
majority of the shares of Preferred Stock, Series B then outstanding
and entitled to vote thereon, at which time (I) the special right of
the Holders of Preferred Stock, Series B so to vote for the election
of directors and (II) the term of office of the directors elected by
the Holders of the Preferred Stock, Series B shall terminate (except
that any directors elected by holders of Parity Stock will remain in
office if the default as to such Parity Stock which granted the right
to such holders of Parity Stock to elect such directors is continuing)
and the directors elected by the holders of common stock of the
Corporation shall constitute the entire Board of Directors. At any
time after voting power to elect directors shall have become vested
and be continuing in the Holders of Preferred Stock, Series B pursuant
to paragraph (f)(iv) hereof, or if vacancies shall exist in the
offices of directors elected by the Holders of Preferred Stock, Series
B, and, if applicable, holders of Parity Stock, a proper officer of
the Corporation may, and upon the written request of the Holders of
record of at least twenty-five percent (25%) of the shares of
Preferred Stock, Series B and, if applicable, holders of Parity Stock,
then outstanding addressed to the secretary of the Corporation shall,
call a special meeting of the Holders of Preferred Stock, Series B,
and, if applicable, holders of Parity Stock, for the purpose of
electing the directors which such Holders are entitled to elect. If
such meeting shall not be called by a proper officer of the
Corporation within twenty (20) days after personal service of said
written request upon the secretary of the Corporation, or within
twenty (20) days after mailing the same within the United States by
certified mail, addressed to the secretary of the Corporation at its
principal executive offices, then the Holders of record of at least
twenty-five percent (25%) of the outstanding shares of Preferred
Stock, Series B may designate in writing one of their number to call
such meeting at the expense of the Corporation, and such meeting may
be called by the Person so designated upon the notice required for the
annual meetings of stockholders of the Corporation and shall be held
at the place for holding the annual meetings of stockholders of the
Corporation. Any Holder of Preferred Stock, Series B so designated
shall have, and the Corporation shall provide, access to the lists of
stockholders to be called pursuant to the provisions hereof.
(B) At any meeting held for the purpose of electing
directors at which the Holders of Preferred Stock, Series B shall have
the right to elect directors as aforesaid, the presence in person or
by proxy of the Holders of at least a majority of the outstanding
shares of Preferred Stock, Series B shall be required to constitute a
quorum of such Preferred Stock, Series B.
(C) Any vacancy occurring in the office of a director
elected by the Holders of Preferred Stock, Series B and, if
applicable, holders of
<PAGE> 8
Parity Stock, may be filled by the remaining directors elected by the
Holders of Preferred Stock, Series B and, if applicable, holders of
Parity Stock, unless and until such vacancy shall be filled by the
Holders of Preferred Stock, Series B.
(iv) In any case in which the Holders of Preferred Stock,
Series B shall be entitled to vote pursuant to this paragraph (f) or
pursuant to Delaware law, each Holder of Preferred Stock, Series B
entitled to vote with respect to such matter shall be entitled to one
vote for each share of Preferred Stock, Series B held.
(g) Reissuance of Preferred Stock, Series B. Shares of
Preferred Stock, Series B that have been issued and reacquired in any manner,
including shares purchased or redeemed, shall (upon compliance with any
applicable provisions of the laws of Delaware) have the status of authorized
and unissued shares of Preferred Stock undesignated as to series and may be
redesignated and reissued as part of any series of Preferred Stock, provided
that any issuance of such shares as Preferred Stock, Series B must be in
compliance with the terms hereof.
(h) Business Day. If any payment, redemption or exchange
shall be required by the terms hereof to be made on a day that is not a
Business Day, such payment, redemption or exchange shall be made on the
immediately succeeding Business Day.
(i) Breakage. With respect to any redemption within 180 days
of the Issue Date pursuant to clause (e)(i) hereof or payment pursuant to the
Put and Call Agreement, that, in any case, occurs on a date other than a
Dividend Payment Date, the Corporation shall also pay as an additional
dividend, in cash "break-funding" expenses to each Holder the amount required
to compensate such Holder for any losses, costs or expenses which it may
reasonably incur as a result of such failure, payment or acceleration,
including, without limitation, any loss (including loss of anticipated
profits), cost or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by such Holder to fund or maintain its
purchase of or holding of Preferred Stock, Series B ("Breakage Costs").
(j) Definitions. As used in this Certificate of Designation,
the following terms shall have the following meanings (with terms defined in
the singular having comparable meanings when used in the plural and vice
versa), unless the context otherwise requires:
"ABR" means, for any Dividend Period, a rate per annum
(rounded upwards, if necessary, to the next 1/16 of 1%) equal to the
greatest of (a) the Prime Rate in effect on such day, (b) the Base CD
Rate in effect on the second Business Day before the first day of such
Dividend Period plus 1% and (c) the Federal Funds Effective Rate in
effect on the second Business Day before the first day of such
Dividend Period plus 1/2 of 1%. For purposes hereof: "Prime Rate"
shall mean the rate of interest per annum publicly announced from time
to time by The Chase Manhattan Bank ("Chase") as its prime rate in
effect at its principal office in New York City (the Prime Rate not
being intended to be the lowest rate of interest charged by Chase in
connection with extensions of credit or debtors); "Base CD Rate" shall
mean the sum of (a) the product of (i) the Three-Month Secondary CD
Rate and (ii) a fraction, the numerator of which is one and the
denominator of which is one and the denominator of which is one minus
the C/D Reserve Percentage and (b) the C/D Assessment Rate;
"Three-Month Secondary CD Rate" shall mean, for any Dividend Period,
the secondary market rate for three-month certificates of deposit
reported as being in effect on the second Business Day before the
first day of such Dividend Period (or, if such day shall not be a
Business Day, the next preceding Business Day) by the Board through
the public information telephone line of the Federal Reserve Bank of
New York (which rate will, under the current practices of the Board,
be published in Federal Reserve Statistical Release H.15(519) during
the week following such day), or, if such rate shall not be so
reported on the second Business Day before the first day of such
Dividend Period or such next preceding Business Day,
<PAGE> 9
the average of the secondary market quotations for three-month
certificates of deposit of major money center banks in New York City
received at approximately 10:00 A.M., New York City time, on such day
(or, if such day shall not be a Business Day, on the next preceding
Business Day) by Chase from three New York City negotiable certificate
of deposit dealers of recognized standing selected by it; and "Federal
Funds Effective Rate" shall mean, for any Dividend Period, the
weighted average of the rates on overnight federal funds transactions
with members of the Federal Reserve System arranged by federal funds
brokers, as published on the second Business Day before the first day
of such Dividend Period by the Federal Reserve Bank of New York, or,
if such rate is not so published for any day which is a Business Day,
the average of the quotations for the day of such transactions
received by Chase from three federal funds brokers of recognized
standing selected by it. Any change in the ABR due to a change in the
Prime Rate, the Base CD Rate or the Federal Funds Effective Rate shall
be effective as of the opening of business on the effective day of
such change in the Prime Rate, the Base CD Rate or the Federal Funds
Effective Rate, respectively.
"ABR Rate" shall have the meaning ascribed to such term in
paragraph (c)(i) hereof.
"Board of Directors" shall have the meaning ascribed to it in
the first paragraph of this Resolution.
"Business Day" means any day except a Saturday, a Sunday, or
any day on which banking institutions in New York, New York are
required or authorized by law or other governmental action to be
closed or any day in which banks are not open for dealings in dollar
deposits in the London interbank market.
"Capital Stock" means (i) with respect to any Person that is
a corporation, any and all shares, interests, participations or other
equivalents (however designated) of capital stock of such Person and
(ii) with respect to any Person that is not a corporation, any and all
partnership or other equity interests of such Person.
"Commission" means the Securities and Exchange Commission.
"Corporation" means STC Broadcasting, Inc., a Delaware
corporation.
"Dividend Payment Date" means the last day of each Dividend
Period commencing with the first to occur after the initial Issue
Date.
"Dividend Period" means one calendar month for the period
ending on July 31, 1999 (i.e., February 28, 1999; March 31, 1999,
etc.) and a quarterly period of three months thereafter (i.e., August
1, 1999 to October 31, 1999, etc.).
"Dividend Rate" shall have the meaning ascribed to such term
in paragraph (c)(i) hereof.
"Dividend Record Date" means the fifteenth day of the month
in which the relevant Dividend Payment Date occurs.
"14% Preferred Stock" means the series of preferred stock of
the Corporation designated pursuant to the Certificate of Designation
dated February 27, 1997, as amended.
"Holder" means a holder of shares of Preferred Stock, Series
B as reflected in the stock books of the Corporation.
"Holding" means Sunrise Television Corp., a Delaware
corporation, and its successors.
"Issue Date" means the date of original issuance of the
applicable shares of Preferred Stock, Series B.
"Junior Stock" shall have the meaning ascribed to it in
paragraph (b) hereof.
"LIBOR" means the rate determined on the basis of the offered
rates for deposits in U.S. Dollars for the applicable Dividend Period
which appear on the Reuters Screen LIBO Page as of 11:00 a.m., London
time, two Business Days before the first day of such Dividend Period.
If at least two rates appear on the Reuters Screen LIBO Page, the rate
for such Dividend Period will be the arithmetic mean of such rates
rounded upwards, if
<PAGE> 10
necessary, to the nearest 1/16 of 1%. If fewer than two rates appear
on the Reuters Screen LIBO Page, then such rate shall equal the
arithmetic mean (rounded upward to the nearest 1/16 of 1%) of the
interest rates per annum at which deposits in U.S. Dollars for the
applicable Dividend Period at approximately 11:00 a.m., London time,
two Business Days before the first day of such Dividend Period by
first class banks in the London interbank market.
"LIBOR Rate" has the meaning ascribed to such term in
paragraph (c)(i) hereof.
"Parity Stock" shall have the meaning ascribed to it in
paragraph (b) hereof.
"Person" means an individual, partnership, corporation,
limited liability company, unincorporated organization, trust or joint
venture, or a governmental agency or political subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of
such Person that has preferential rights over any other Capital Stock
of such Person with respect to dividends or redemptions or upon
liquidation.
"Preferred Stock, Series B" shall have the meaning ascribed
to it in paragraph (a) hereof.
"Redemption Date," with respect to any shares of Preferred
Stock, Series B, means the date on which such shares of Preferred
Stock, Series B are redeemed by the Corporation.
"Redemption Notice" shall have the meaning ascribed to it in
paragraph (e) hereof.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Securities Purchase Agreement" means the Securities Purchase
Agreement dated as of February 5, 1999 by and among the Corporation,
Chase Securities, Inc, as Arranger and certain purchasers party
thereto.
"Senior Stock" shall have the meaning ascribed to it in
paragraph (b) hereof.
"Voting Rights Triggering Event" shall have the meaning
ascribed to it in paragraph (f)(iv) hereof.
IN WITNESS WHEREOF, STC Broadcasting, Inc. has caused this
Certificate to be signed by the undersigned, its Chief Financial
Officer, this 5th day of February, 1999.
STC BROADCASTING, INC.
By: /s/ David A. Fitz
------------------------------------
Name: David A. Fitz
Title: Chief Financial Officer
<PAGE> 1
Exhibit 10.28
PUT AND CALL AGREEMENT
PUT AND CALL AGREEMENT dated as of February 5, 1999 (this
"Agreement") among (i) HICKS, MUSE, TATE & FURST EQUITY FUND III, L.P. (the
"Fund"); (ii) (with respect to Sections 14 and 15 hereof) by HM3/GP PARTNERS,
L.P., HICKS, MUSE GP PARTNERS III, L.P. and HICKS, MUSE FUND III INCORPORATED
(such three entities being collectively referred to hereinafter as the "General
Partner"), (iii) THE CHASE MANHATTAN CORPORATION, CREDIT SUISSE FIRST BOSTON
CORPORATION and SALOMON BROTHERS HOLDING COMPANY INC. (each, a "Purchaser" and
collectively, the "Purchasers") and (iv) CHASE SECURITIES, INC., as arranger
(the "Arranger") with respect to the Securities Purchase Agreement referred to
below and the transactions contemplated hereby.
RECITALS:
WHEREAS, STC Broadcasting, Inc., a Delaware corporation
("STC"), the Purchasers and the Arranger are parties to a Securities Purchase
Agreement dated as of the date hereof providing for the commitment (the
"Commitment") by the Purchasers or their assignees to purchase up to $90.0
million of Preferred Stock, Series B, of STC (the "Securities Purchase
Agreement"; except as otherwise defined herein, terms defined in the Securities
Purchase Agreement are used herein as therein defined); and
WHEREAS, it is a condition to the Purchasers' obligation to
purchase Preferred Stock, Series B, under the Securities Purchase Agreement
that the Fund and the General Partner shall have executed and delivered this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
other benefits accruing to the Fund and the General Partner, on the one hand,
and the Purchasers, on the other hand, the receipt and sufficiency of which arc
hereby acknowledged, each of the Fund and the General Partner (with respect to
Sections 14 and 15 hereof) hereby makes the following representations and
warranties to the Purchasers and the Arranger and the Fund, and the General
Partner (with respect to Sections 14 and 15 hereof) hereby covenants and agrees
with the Purchasers and the Arranger as follows:
Section 1. Definitions. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined).
"Enforcement Costs" has the meaning provided in Section 9 of
this Agreement.
"Purchase Price" means an amount in cash equal to the sum of
(i) the full face amount of all shares of Preferred Stock, Series B then
outstanding, plus (ii) all accrued unpaid dividends thereon through the
applicable purchase date, plus (iii) any breakage costs, in each case
determined in accordance with the Preferred Stock, Series B.
"Trigger Event" means the earliest to occur of (i) the
occurrence of an Event of Default under (x) the Indenture dated as of March 25,
1997, as in effect on the date hereof, between STC, on the one hand, and U.S.
Trust Company of Texas, as trustee, on the other hand, (y) the Amended and
Restated Credit Agreement, dated as of July 2, 1998, among the Company, The
Chase Manhattan Bank, as administrative agent, NationsBank, N.A., as
documentation agent, Salomon Brothers Holding Company Inc., as
<PAGE> 2
syndication agent, and any other financial institutions from time to time party
thereto, together with the related documents thereto (including, without
limitation, any guarantee agreements and security documents), in each case as
such agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including any
agreement extending the maturity of, refinancing, replacing or otherwise
restructuring (including by way of adding Subsidiaries of the Company as
additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement and
whether by the same or any other agent, lender or group of lenders (or other
institutions) or (z) the Securities Purchase Agreement; (ii) a failure to
comply (within 5 Business Days after receipt of notice from the Arranger) with
any of the terms of the Certificate of Designation with respect to the
Preferred Stock, Series B or (iii) August 5, 1999.
Section 2. Put Rights and Obligations. At any time and from
time to time after a Trigger Event, any Purchaser may, on behalf of itself and
the then holders of Preferred Stock, Series B, (A) upon written notice to the
Fund, require the Fund (x) to purchase all then outstanding shares of Preferred
Stock, Series B, in cash in an amount equal to the Purchase Price, together
with any other obligations under the Securities Purchase Agreement or
Engagement Letter then due and payable to Purchasers or the Arranger, as the
case may be, or any of their respective affiliates, or payable on their behalf,
including any costs and expenses with respect to the exercise of such put and,
(y) assume (with full release of all obligations of the Arranger and each
Purchaser or any assignee thereof) any remaining Commitment and, (B) each
holder of Preferred Stock, Series B agrees to sell its Preferred Stock, Series
B to the Fund in connection with a sale pursuant to this Section 2. Each such
purchase and assumption shall be made on the Business Day specified in the
written notice to the Fund delivered pursuant to this Section 2, provided that
the date specified shall not be sooner than 15 Business Days after the delivery
of the written notice to the Fund.
Section 3. Call Rights and Obligations. At any time and from
time to time prior to the satisfaction and release of this Agreement pursuant
to Section 22 of this Agreement, the Fund may upon at least 5 Business Days'
prior written notice to Arranger, purchase all outstanding shares of Preferred
Stock, Series B, by paying to the Arranger on behalf of the holders of
Preferred Stock, Series B, in cash in an amount equal to the Purchase Price,
together with all other obligations under the Securities Purchase Agreement or
Engagement Letter then due and payable to any of the Purchasers or the
Arranger, as the case may be, or any of their respective affiliates, or payable
on their behalf, including any costs and expenses with respect to the exercise
of such call (including any breakage costs with respect to any payment made on
a date other than a dividend payment date). The delivery of any such notice by
the Fund shall be deemed to be an immediate assumption with full release of all
Obligations of the Purchasers of any remaining Commitment. Upon the delivery of
any notice pursuant to this Section 3, the obligation of the Fund to make such
purchase described in this Section 3 shall be absolute and irrevocable.
Section 4. Determination of Obligations and Purchase Price
Therefor. Notwithstanding anything to the contrary contained elsewhere in this
Agreement, the Securities Purchase Agreement or the Assignment and Acceptance,
for purposes of determining the purchase price payable from time to time
pursuant to the provisions of this Agreement, accrued dividends shall include,
without limitation, all dividends accruing on the Preferred Stock, Series B,
subsequent to the filing of a petition of bankruptcy at the stated dividend
rate, whether or not such dividends are an allowed claim under applicable law,
shall be calculated without regard to any invalidity, irregularity or
unenforceability of all or any part of an obligation of STC under the
Securities Purchase Agreement or the Preferred Stock, Series B, and shall be
calculated without giving effect to any setoff, counterclaim or other similar
provision.
Section 5. Nature of Purchases, etc. (a) The Fund irrevocably
acknowledges and agrees that all purchases of shares of Preferred Stock, Series
B, by it and any assignment to it of the Commitment (in accordance with Exhibit
1 hereto), in each case pursuant to this Agreement shall be without recourse
to, or representation or warranty by, the Arranger or any Purchaser except as
expressly provided in the Assignment
<PAGE> 3
and Acceptance. In connection with purchases and assignments pursuant to this
Agreement, the respective parties may enter into an Assignment and Acceptance
in substantially the form contemplated by Section 8.06 of the Securities
Purchase Agreement, but the failure so to enter into any such Assignment and
Acceptance shall in no way affect the validity of the assignment, purchase
and/or assumption hereunder.
(b) Any amendments, modifications and waivers to the
Securities Purchase Agreement, the Certificate of Designation with respect to
the Preferred Stock, Series B and/or the Engagement Letter that require the
consent of the Arranger or any other party thereto (other than STC) shall also
require the consent of the Fund.
Section 6. Remedies. (a) In the event that the Fund fails to
perform its obligations pursuant to Section 2 or following its giving of the
notice provided in Section 3, any of the Purchasers may bring any action,
proceeding or court action seeking (i) specific performance of the obligations
of the Fund and the General Partner hereunder, including, without limitation,
the obligations of the Fund and the General Partner under Section 15, which the
parties hereto agree shall be available to the maximum extent permitted by
applicable law, (ii) damages as a result of any such failure to perform
pursuant to this Agreement, with the parties hereto agreeing that all damages
(including without limitation the full unpaid amount due hereunder and
consequential damages) to the Purchasers arising as a result of any breach by
the Fund of its obligations hereunder shall be recoverable by them in any such
action and/or (iii) any other remedy available under applicable law, including,
without limitation specific performance or injunctive relief with respect
thereto. Without limiting the foregoing, following any failure by the Fund to
perform any of its obligations pursuant to Sections 2 and/or 3, the Purchasers
shall be permitted (but not obligated) to dispose of the Preferred Stock,
Series B and/or any Commitment, in any commercially reasonable fashion and, in
the event of an such disposition of Preferred Stock, Series B, the Fund shall
be liable to the Purchasers for the amount, if any, by which (x) the amount
which would be required to be paid by the Fund hereunder if the Preferred
Stock, Series B, were purchased by it on the date of the respective disposition
pursuant to Section 2 hereof exceeds (y) the cash amount actually received by
the Purchasers from the disposition of the Preferred Stock, Series B.
(b) To the maximum extent permitted by applicable law, all of
the remedies set forth herein or in the Securities Purchase Agreement or at law
or in equity shall be equally available to the Purchasers and the Arrangers and
the choice by any of the Purchasers or the Arranger, as the case may be, of one
such alternative over another shall not be subject to question or challenge by
the Fund, the General Partner or any other Person, nor shall any such choice be
asserted as a defense, setoff or failure to mitigate damages in any action,
proceeding, or court action by the Purchasers or the Arranger, as the case may
be, to recover or seeking any other remedy under this Agreement, nor shall any
such choice preclude the Arranger from subsequently electing to exercise a
different remedy.
Section 7. Waiver. The Fund and the General Partner hereby
irrevocably waive (i) notice of acceptance of this Agreement by the Purchasers
and the Arranger and, except as otherwise expressly required by Section 2
hereof, any and all notices and demands of every kind which may be required to
be given by any statute, rule or law, (ii) any defense, right of set-off or
other claim which the Fund or General Partner may have against STC, or which
the Fund, the General Partner or STC may have against the Purchasers or the
Arranger and (iii) any failure by the Purchasers or the Arranger to inform the
Fund or General Partner of any facts the Purchasers or the Arranger may now or
hereafter know about STC, the Fund, the General Partner, or the transactions
contemplated by the Securities Purchase Agreement, it being understood and
agreed that the neither Arranger nor the Purchasers have any duty to so inform
and that the Fund and the General Partner are fully responsible for being and
remaining informed of all circumstances bearing on the existence or creation or
the risk of nonperformance by STC under the Securities Purchase
<PAGE> 4
Agreement or the Preferred Stock, Series B. Neither the Purchasers nor the
Arranger shall have an obligation to disclose or discuss with the Fund their
assessment of the financial condition of STC. The Fund and the General Partner
acknowledge that no representations of any kind whatsoever have been, or will
be, made by the Purchasers or the Arranger to the Fund or General Partner,
except as expressly provided in the Assignment and Acceptance when delivered by
the Arranger to the Fund. No modification or waiver of any of the provisions
of this Agreement shall be binding upon the Purchasers and the Arranger except
as expressly set forth in a writing duly signed and delivered by the Purchasers
and the Arranger. The Fund and the General Partner further agree that any
exculpatory or exoneration language contained in any document evidencing the
Preferred Stock, Series B, or any Commitment shall in no event apply to this
Agreement, and will not prevent the Purchasers or the Arranger from proceeding
against the Fund to enforce this Agreement.
Section 8. Nature of Liability; Independent Obligation. (a)
Each of the Fund and the General Partner agrees this Agreement may be enforced
by any of the Purchasers or the Arranger without the necessity at any time of
resorting to or exhausting any proceedings or actions under the Securities
Purchase Agreement the Preferred Stock, Series B, or otherwise, or resorting to
any other guaranties or attempting first to collect thereunder (or to enforce
the performance thereof) by STC. The Fund and the General Partner hereby waive
the right to require any Purchaser or the Arranger to join STC in any action
brought hereunder or to commence any action against or obtain any judgment
against STC or to pursue any other remedy or enforce any other right. To the
extent permitted by applicable law, the Fund and the General Partner further
agree that nothing contained herein or otherwise shall prevent any Purchaser or
the Arranger from pursuing concurrently or successively all rights and remedies
available to the Arranger at law and/or in equity or under the Securities
Purchase Agreement, and the exercise of any of its rights or the completion of
any of its remedies shall not constitute a discharge of any of the Fund's
obligations hereunder, it being the purpose and intent of the Fund and the
General Partner that its obligations hereunder shall be absolute, independent
and unconditional under any and all circumstances whatsoever without regard to
the validity, regularity or enforceability of the Securities Purchase
Agreement. Neither the obligations of the Fund nor the General Partner under
this Agreement nor any remedy for the enforcement thereof shall be impaired,
modified, changed or released in any manner whatsoever by any impairment
modification, change, release or limitation of the liability of STC under the
Securities Purchase Agreement or by reason of the Fund's, the General Partner's
or STC's bankruptcy or by reason of any creditor or bankruptcy proceeding
instituted by or against the Fund or STC.
(b) Subject to applicable law, this Agreement shall continue
to be effective, or be reinstated, as the case may be, if at any time payment
on or with respect to the Preferred Stock, Series B, or any part thereof in
cash in an amount equal to the Purchase Price, together with any other
obligations under the Securities Purchase agreement or Engagement Letter then
due and payable to any Purchaser or the Arranger, as the case may be, or any of
their respective affiliates, or payable on their behalf, including any costs
and expenses with respect tot he exercise of such put, is rescinded or must
otherwise be restored or returned by any Purchaser or the Arranger, as the case
may be, upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Fund, the General Partner or STC, or upon or as result of
the appointment of a receiver, intervenor, custodian or conservator of, or
trustee or similar officer for, the Fund or STC or any substantial part of any
such person's property, or otherwise, all as though such payments had not been
made regardless of whether any Purchaser or the Arranger contested the order
requiring the return of such payment.
Section 9. Enforcement Costs. If: (i) this Agreement is
placed with an attorney or law firm for enforcement or is enforced through any
legal proceeding; (ii) an attorney or law firm is retained to represent the
Arranger or any Purchaser in any bankruptcy, reorganization, receivership, or
other proceedings initiated by or against the Fund affecting creditors' rights
and involving a claim under this Agreement;
<PAGE> 5
or (iii) an attorney or law firm is retained to represent the Arranger or any
Purchaser in any other proceedings whatsoever in connection with the
enforcement of this Agreement or to provide advice or other representation with
respect to the enforcement of this Agreement, then the Fund agrees to pay to
the Arranger or any Purchaser, as applicable, upon demand all costs and
expenses, including, without limitation, court costs, filing fees, and all
other reasonable costs and expenses incurred in connection therewith,
including, without limitation, reasonable attorneys' fees and expenses (all of
which costs, expenses, and fees are referred to herein as "Enforcement Costs"),
in addition to all other amounts due hereunder. regardless of whether all or a
portion of such Enforcement Costs are incurred in a single proceeding brought
to enforce this Agreement.
Section 10. Severability. If any provisions of this Agreement
are found by a court of law to be in violation of any applicable local, state
or federal ordinance, statute, law, administrative or judicial decision, or
public policy and if such court should declare any provisions of this Agreement
to be illegal, invalid. unlawful, void or unenforceable as written, then it is
the intent of the parties that such provisions shall be given force to the
fullest possible extent that they are legal, valid and enforceable, that the
remainder of this Agreement shall be construed as if such illegal, invalid,
unlawful, void or unenforceable provisions were not contained therein, and that
the rights, obligations and interest of the Arranger and the Purchasers under
the remainder of this Agreement shall continue in full force and effect.
Section 11. Execution of Assignment and Acceptance. Upon the
exercise by any Purchaser on behalf of all the Purchasers of its rights under
Section 2 hereof or the exercise by the Fund of its rights under Section 3
hereof (but before the fulfillment by the Purchasers of all of their
Commitments under the Securities Purchase Agreement), the Arranger and the Fund
agree promptly to execute and deliver an Assignment and Acceptance as set forth
in Exhibit 1 hereto.
Section 12. Liability Absolute. The liability of the Fund and
the General Partner to the Purchasers and the Arranger under this Agreement
shall be fixed and absolute, and it shall not constitute a defense,
counterclaim, setoff, or recoupment thereto that any of the Purchasers or the
Arranger has not made any demand or protest or instituted any action or
proceeding against STC or against any other Person who may be liable or
otherwise responsible for all or any of the Preferred Stock, Series B, nor
shall any Purchaser or the Arranger be required to perform any of the above
acts against STC as a condition of enforcing any of their respective rights
against the Fund in accordance with the terms of this Agreement.
Section 13. Notices. Except as otherwise specified herein,
all notices, requests, demands or other communications to or upon the Fund, the
General Partner or any of the Purchasers or the Arranger shall be deemed to
have been duly given or made when received by the party to which such notice,
request demand or other communication is required or permitted to be given or
made under this Agreement, addressed as follows:
(a) if to the Fund or the General Partner, at:
c/o Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court
Suite 1600
Dallas, Texas 75201
Attention: Lawrence D. Stuart, Jr.
Telephone: (214) 740-7365
Facsimile: (214) 740-7313
<PAGE> 6
with copies to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, TX 75201
Attention: Glenn D. West, Esq.
Telephone: (214) 746-7700
Facsimile: (214) 746-7777
or
(b) if to the Arranger or any Purchaser, as provided in the
Securities Purchase Agreement; with a copy to:
Cahill Gordon & Reindel,
80 Pine Street
New York, NY 10005
Attention: Michael A. Becker, Esq.
Telephone: (212) 701-3000
Facsimile: (212) 269-5420
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
Section 14. Representations. In order to induce the Arranger
and the Purchasers to enter into the Securities Purchase Agreement and to
purchase the Preferred Stock, Series B, as provided therein, the Fund (as to
itself) and the General Partner (as to the Fund and itself) make the following
representations, warranties and agreements, all of which shall survive the
execution and delivery of this Agreement and the purchase of the Preferred
Stock, Series B.
(1) Partnership Status. The Fund and each General Partner (i)
is a duty organized and validly existing partnership or corporation,
as the case may be, in good standing under the laws of the
jurisdiction of its organization, (ii) has the partnership or
corporate, as the case may be, power and authority to own its property
and assets and to transact the business in which it is engaged and
presently proposes to engage and (iii) is duly qualified and is
authorized to do business and is in good standing in each jurisdiction
where the ownership, leasing or operation of its property or the
conduct of its business requires such qualifications.
(2) Power and Authority. The Fund and each General Partner
has the partnership or corporate, as the case may be, power and
authority to execute, deliver and perform the terms and provisions of
this Agreement and has taken all necessary action to authorize the
execution, delivery and performance by it of this Agreement. The Fund
and each General Partner has duly executed and delivered this
Agreement, and this Agreement constitutes its legal, valid and binding
obligation enforceable in accordance with its terms.
(3) No Violation. Neither the execution, delivery or
performance by the Fund or any General Partner of this Agreement, nor
compliance by it with the terms and provisions hereof, (i) will
contravene any provision of any law, statute, rule or regulation or
any order, writ, injunction or decree of any court or governmental
instrumentality, (ii) will conflict with or result in any breach of
any of the terms, covenants, conditions or provisions of or constitute
a default under, or result in the creation or imposition of (or the
obligation to create or impose) any lien upon any of the property or
assets of the Fund or any General Partner pursuant to the terms of any
indenture,
<PAGE> 7
mortgage, deed of trust, Securities Purchase Agreement or any other
agreement, contract or instrument, to which the Fund is a party or by
which it or any of its property or assets is bound or to which it may
be subject or (iii) will violate any provision of the partnership
agreement of the Fund or the partnership agreement or charter or by
laws of any General Partner.
(4) Governmental Approvals. No order, consent, approval,
license, authorization or validation of, or filing, recording or
registration with, or exemption by, any governmental or public body or
authority, or any subdivision thereof, is required to authorize, or is
required in connection with, (i) the execution, delivery and
performance of this Agreement or (ii) the legality, validity, binding
effect or enforceability of this Agreement.
(5) Litigation. There are no actions, suits or proceedings
pending or, to the best knowledge of the Fund or any General Partner
threatened (i) with respect to this Agreement, or (ii) that could
reasonably be expected to materially and adversely affect the
business, operations, property, assets, liabilities, condition
(financial or otherwise) or prospects of the Fund or any General
Partner or their ability to fully and timely perform their obligations
hereunder.
(6) Compliance with Statutes, etc. The Fund and each General
Partner is in compliance in all material respects with all applicable
statutes, regulations and orders of, and all applicable restrictions
imposed by, all governmental bodies, domestic or foreign, in respect
of the conduct of its business and the ownership of its property
(including applicable statutes, regulations, orders and restrictions
relating to environmental standards and controls).
(7) Capital Contributions. The General Partner has the sole
and unilateral right under the partnership agreement of the Fund to
call cash capital contributions from the partners to the Fund and to
make any capital contributions to STC and Sunrise Television Corp., a
Delaware corporation and the parent of STC ("Holdco"), which
contributions may be used to fund the Fund's obligations hereunder.
The aggregate amount of unfunded capital commitments of the partners
to the Fund (after subtracting therefrom the sum of (x) the
commitments of any partner who has defaulted in any of its obligations
to the Fund and (y) the maximum amount of "Other Obligations") are in
an amount at least equal to $124.3 million. Other Obligations shall
mean the amount of all other obligations of the Fund with respect to
the payment of money, including, without limitation, with respect to
contractual or other obligations to purchase securities, including
under any letters of intent, other put/call agreements or other
agreements similar to this Agreement, any agreement to guaranty or
otherwise provide financial support with respect to any other
obligations and any other capital commitments made by or on behalf of
the Fund.
(8) Financial Statements. The (i) unaudited balance sheet of
the Fund for the nine-month period ended September 30, 1998 and the
related statements of income and cash flows and (ii) the audited
balance sheet of the Fund for the year ended December 31, 1997 and the
related statements of income and cash flows provided to the Arranger,
fairly present the financial condition, changes in net assets and
receipts and disbursements of the Fund at the dates and for the period
to which they relate and have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a
consistent basis (except as otherwise stated therein and except that
they do not contain full footnote disclosures in accordance with
GAAP). All of the financial statements referred to in clause (i) above
have been prepared on a basis substantially consistent with that of
the audited financial statements referred to in clause (ii) above
(except as otherwise stated therein). All such financial statements
and information are complete and correct and have been previously
delivered to the Arranger prior to the execution and delivery of this
Agreement. The aggregate amount of unfunded capital commitments of the
Fund, excluding the commitments of any partner who has defaulted in
any of its obligations to the Fund, available to be called for
investment, including with respect to the Fund's obligations
hereunder, as of the date hereof, is $222,250,850.
<PAGE> 8
(9) The Fund and the General Partner represent and warrant
that, as of the date hereof, the Fund owns no less than 75% of the
economic interest in Holdco on a fully diluted basis.
Section 15. Covenants. (a) Each of the Fund and the General
Partner agree to take all action as may be necessary so that, at all times
prior to the satisfaction and release of all obligations of the Fund under this
Agreement pursuant to Section 22 of this Agreement, the General Partner shall
have the right to call cash capital contributions from the limited partners of
the Fund in amounts, and at times, sufficient to fund in a timely manner all
obligations of the Fund under this Agreement. Without limitation of the
foregoing, each of the Fund and the General Partner shall perform and observe
all the terms and provisions of the partnership agreement of the Fund to be
performed or observed by it in respect of such cash capital contribution;
maintain such partnership agreement in full force and effect; enforce such
partnership agreement in respect of such cash capital contributions in
accordance with its terms; give notice to the limited partners to make payments
of their cash capital contributions in such aggregate amount, and at such
times, as shall be necessary to pay in full the obligations of the Fund under
this Agreement when due; and take such action as may be necessary to collect or
otherwise enforce the payment of such cash capital contributions, in each case
to the extent necessary for the Fund to comply in a timely manner with its
obligations under this Agreement.
(b) Until all Obligations of the Fund and the General Partner
shall have been satisfied and discharged pursuant to Section 22 hereof, each of
the Fund and the General Partner hereby covenant that: (i) the Fund (or one or
more of its affiliates) shall, at all times, own, both legally and
beneficially, 100% of the voting stock of Holdco, (ii) the Fund will not
Transfer any of its interests in Holdco in any way which would reduce its
economic interest in Holdco below the percentage set forth in Section 14(9)
hereof, and (iii) the Fund will cause Holdco to own all of the outstanding
common equity securities of STC. "Transfer" means the direct or indirect offer,
sale, donation, assignment (as collateral or otherwise) pledge, hypothecation,
encumbrance, transfer, bequest or disposition of or solicitation of an offer to
buy or purchase any of the legal, economic or beneficial rights of, or
interests in, any equity securities.
(c) The Fund shall at all times maintain compliance with
Section 14(7) so that such representation and warranty will be accurate at all
times. The General Partner will cause the Fund to be in compliance with the
first sentence of this Section 15(d).
(d) Until all Obligations of the Fund and the General Partner
shall have been satisfied and discharged pursuant to Section 22 hereof, each of
the Fund and the General Partner hereby covenant that (i) it will comply with
Section 5.12 of the Second Amended and Restated Partnership Agreement of Hicks,
Muse, Tate & Furst Equity Fund III, L.P. as in effect on the date hereof and
(ii) maintain net assets (valued at the lesser of book value or fair value), at
least equal to the sum of (x) $124.3 million, plus (y) the maximum amount of
Other Obligations (as defined in Section 14(7) hereof).
Section 16. Indemnity. The Fund hereby agrees to indemnify
and hold the Arranger and each Purchaser free and harmless from and against all
loss, cost, damage, and expense, including attorney's fees and costs, which the
Arranger or any Purchaser shall at any time have actually sustained by reason
of the inaccuracy or breach of any of the foregoing representations and
warranties as of the date of the foregoing representations and warranties are
made or are deemed remade.
Section 17. Receipt of Credit Documents. The Fund by its
execution hereof acknowledges receipt of true copies of the Securities Purchase
Agreement.
Section 18. Successors; Assigns. This Agreement shall be
binding upon the Fund and its successors and assigns.
<PAGE> 9
Section 19. Reliance on Requests for Advances. The Arranger
shall be entitled to honor any request for purchase of Preferred Stock, Series
B, made by STC under the Securities Purchase Agreement and shall have no
obligation to see to the proper disposition of the proceeds of any such
purchase or the drawings thereunder. The Fund agrees that its obligations
hereunder shall not be released or affected by reason of (x) the failure to
satisfy any conditions precedent to any such purchase and the issuance of the
Preferred Stock, Series B at the time of the making thereof or (y) any improper
disposition by STC of the proceeds of any such purchase.
Section 20. Appointment as Agent for STC. The Fund, at its
office in New York City hereby accepts its appointment by STC as agent for
service of process and agrees to promptly forward any and all process received
by the Fund in respect of STC and/or its property to STC via facsimile,
followed by overnight courier, to STC's address as follows:
c/o Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Attention: Lawrence D. Stuart. Jr.
Telephone: (214) 740-7365
Telefax: (214) 740-7313
Section 21. Third-Party Beneficiaries. This Agreement shall
be for the benefit of the Purchasers, the Arranger and their respective
successors and assigns. The holders, from time to time, of the Preferred Stock,
Series B, and the persons making the Commitment shall be express third party
beneficiaries hereof.
Section 22. Satisfaction and Release of this Agreement. Upon
the occurrence of (i) the purchase of all shares of Preferred Stock, Series B,
in accordance with Sections 2 and/or 3 and the expiration or termination or
assignment of the Commitment or (ii) the indefeasible redemption in full in
cash or cash equivalents of all outstanding shares of Preferred Stock, Series
B, under the Securities Purchase Agreement and the expiration or termination of
the Commitment, then, subject to the provisions of Section 8(b), all
obligations of the Fund under this Agreement shall be deemed satisfied and
discharged and this Agreement shall be released.
Section 23. Counterparts. This Agreement may be executed in
several counterparts, each of which is an original, but all of which together
constitute one and the same agreement Delivery of an executed counterpart of a
signature page to this Agreement by telecopier shall be effective as delivery
of a manually executed counterpart of this Agreement.
SECTION 24. GOVERNING LAW; SUBMISSION TO JURISDICTION: VENUE;
WAIVER OF JURY TRIAL. (1) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
LAW OF THE STATE OF NEW YORK. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE
UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, THE FUND AND EACH GENERAL PARTNER HEREBY
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE FUND AND EACH
GENERAL PARTNER HEREBY IRREVOCABLY AGREES TO ACCEPT AT ITS OFFICE AT 1325
AVENUE OF THE AMERICAS, 25TH FLOOR, NEW YORK, NEW YORK 10019 SERVICE OF
<PAGE> 10
ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS WHICH MAY BE SERVED
IN ANY SUCH ACTION OR PROCEEDING. IF FOR ANY REASON SUCH OFFICE SHALL CEASE TO
BE AVAILABLE TO ACT AS SUCH IN NEW YORK, NEW YORK, THE FUND AND EACH GENERAL
PARTNER AGREES TO DESIGNATE A NEW AGENT FOR SERVICE OF PROCESS IN NEW YORK, NEW
YORK ON THE TERMS AND FOR THE PURPOSES OF THIS PROVISION SATISFACTORY TO THE
ARRANGER. THE FUND AND EACH GENERAL PARTNER FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION
OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE FUND AND EACH GENERAL PARTNER AT ITS ADDRESS SET FORTH
IN SECTION 13 ABOVE, SUCH SERVICE TO BECOME EFFECTIVE 10 DAYS AFTER SUCH
MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ARRANGER TO SERVE PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST THE FUND AND EACH GENERAL PARTNER IN ANY OTHER
JURISDICTION.
(2) THE FUND AND EACH GENERAL PARTNER HEREBY IRREVOCABLY
WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE
OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION
WITH THIS AGREEMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (1) ABOVE AND
HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH
COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
(3) EACH OF THE FUND AND EACH GENERAL PARTNER, THE PURCHASERS
AND THE ARRANGER HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE).
<PAGE> 11
IN WITNESS WHEREOF, the fund has executed this Agreement as
of the date first above written.
HICKS, MUSE, TATE & FURST EQUITY
FUND III, L.P., as Assignee
By: HM3/GP PARTNERS, L.P.,
a Texas limited partnership,
its General Partner
By: HICKS, MUSE GP PARTNERS III, L.P.,
a Texas limited partnership,
its General Partner
By: HICKS, MUSE FUND III
INCORPORATED,
a Texas corporation,
its General Partner
By: /s/ Daniel S. Dross
-----------------------------------
Name: Daniel S. Dross, Vice President
(as to Sections 14 and 15 only)
HM3/GP PARTNERS, L.P.,
a Texas limited partnership,
its General Partner
By: HICKS, MUSE GP PARTNERS III, L.P.,
a Texas limited partnership,
its General Partner
By: HICKS, MUSE FUND III
INCORPORATED,
a Texas corporation,
its General Partner
By: /s/ Daniel S. Dross
--------------------------------------
Name: Daniel S. Dross, Vice President
(as to Sections 14 and 15 only)
HICKS, MUSE GP PARTNERS III, L.P.,
a Texas limited partnership, its
General Partner
<PAGE> 12
By: HICKS, MUSE FUND III
INCORPORATED,
a Texas corporation,
its General Partner
By: /s/ Daniel S. Dross
--------------------------------------
Name: Daniel S. Dross, Vice President
(as to Sections 14 and 15 only)
HICKS, MUSE FUND III
INCORPORATED,
a Texas corporation,
its General Partner
By: /s/ Daniel S. Dross
--------------------------------------
Name: Daniel S. Dross, Vice President
<PAGE> 13
Accepted and Agreed to
as of the date first above written:
CHASE SECURITIES INC., as Arranger
By: /s/ James P. Casey
--------------------------------
Name: James P. Casey
Title: Managing Director
THE CHASE MANHATTAN CORPORATION
By: /s/ Louis M. Morrell
--------------------------------
Name: Louis M. Morrell
Title: Managing Director
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ Joseph D. Carrabino, Jr.
--------------------------------
Name: Joseph D. Carrabino, Jr.
Title: Managing Director
SALOMON BROTHERS HOLDING COMPANY INC.
By: /s/ Timothy L. Freeman
--------------------------------
Name: Timothy L. Freeman
Title: Attorney-In-Fact
<PAGE> 14
STC hereby acknowledges that the Arranger and each Purchaser, and any of their
Assignees of the Commitment (as defined above) shall be fully and irrevocably
released from its Commitment to purchase shares of Preferred Stock, Series B,
upon the exercise of any put right under Section 2 of this Agreement.
STC BROADCASTING INC.
By: /s/ Peter Brodsky
--------------------------------
Name: Peter Brodsky
Title: Assistant Secretary
<PAGE> 15
EXHIBIT 1 TO PUT/CALL AGREEMENT
FORM OF
ASSIGNMENT AND ASSUMPTION AGREEMENT
Dated: ___________, 199__
Reference is made to the Put and Call Agreement dated as of
February 5, 1999 (as restated, amended, modified, supplemented and in effect
from time to time, the "Put and Call Agreement"), among Hicks, Muse, Tate &
Furst Equity Fund III, L.P. (the "Fund"), Chase Securities, Inc., as advisor
and arranger (the "Arranger") and certain other persons named therein.
Capitalized terms used herein and not otherwise defined shall have the meanings
assigned to such terms in the Securities Purchase Agreement dated as of
February 5, 1999 by and among the Chase Manhattan Bank, STC Broadcasting, a
Delaware Corporation and Chase Securities, Inc. and certain other persons named
therein This Assignment and Assumption Agreement between [ ], as assignor on
behalf of itself and the other persons indicated on the signature page hereto
(the "Assignor"), and [ ], as assignee (the "Assignee"), is dated as of the
Effective Date (as set forth on Schedule I hereto and made a part hereof).
1. The Assignor hereby irrevocably sells and assigns to the
Assignee without recourse to the Assignor, and the Assignee hereby irrevocably
purchases and assumes from the Assignor without recourse to the Assignor, as of
the Effective Date, (x) all the Assignor's rights and obligations under the
Securities Purchase Agreement with respect to the [ ] shares of Preferred
Stock, Series B and (y) all of the Assignor's obligations under the Securities
Purchase Agreement to purchase additional shares of Preferred Stock (the
"Assigned Obligations").
2. The Assignor (i) represents and warrants that it owns the
Assigned Obligations free and clear from any lien or adverse claim made by the
Assignor; (ii) other than the representation and warranty set forth in clause
(i) above, makes no representation or warranty and assumes no responsibility
with respect to any statements, warranties or representations made in or in
connection with the Securities Purchase Agreement or any other instrument,
document or agreement delivered in connection therewith, or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of the
Securities Purchase Agreement, or any other instrument or document furnished
pursuant thereto, other than that it is the legal and beneficial owner of the
interest being assigned by it hereunder and that such interest is free and
clear of any adverse claim; and (iii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of STC or the
performance or observance by STC of any of its obligations under the Securities
Purchase Agreement, or any other instrument or document furnished pursuant
thereto.
3. The Assignee (i) represents and warrants that it is
legally authorized to enter into this Assignment and Assumption Agreement; (ii)
agrees that it will, independently and without reliance upon Assignor and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Securities Purchase Agreement; and (iii) agrees that it will be bound by
the provisions of the Securities Purchase Agreement and will perform in
accordance with its terms all the obligations which by the terms of the
Securities Purchase Agreement are required to be performed by it as the
Purchaser.
4. After the Effective Date, all payments under the
Securities Purchase Agreement in respect of the Assigned Obligations
(including, without limitation, all payments of principal, interest and
<PAGE> 16
fees with respect thereto) for the period from and after the Effective Date
shall be made to the Assignee. The Assignor and the Assignee hereby agree that
if the Assignor receives any of the payments referred to in the preceding
sentence which should have been made to the Assignee, such payments shall
promptly be paid by the Assignor to the Assignee in full. The Assignee hereby
agrees to indemnify Assignor with respect to the Assigned Obligations.
5. From and after the Effective Date, to the extent, and only
to the extent, of the Assigned Obligations, (i) the Assignee shall be a party
to the Securities Purchase Agreement and have the rights and obligations of the
Purchaser thereunder, and (ii) the Assignor shall relinquish its rights and be
released from its obligations under the Securities Purchase Agreement.
6. THIS ASSIGNMENT AND ASSUMPTION AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have caused this
Assignment and Assumption Agreement to be executed by their respective duly
authorized officers on Schedule I hereto.
[ ], as Assignor
By:
--------------------------------------
Name:
Title:
on behalf of:
Holder Number of Shares of
Preferred Stock Outstanding:
[ ], as Assignee
By:
--------------------------------------
Name:
Title:
ACCEPTED:
ARRANGER
By:
----------------------------
Name:
Title:
<PAGE> 1
Exhibit 10.29
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made and entered into as
of February 5, 1999, by and between STC Broadcasting, Inc., a Delaware
corporation (the "Company"), and The Chase Manhattan Bank, a New York banking
corporation, as escrow agent ("Escrow Agent"), with reference to the following
recitals:
RECITALS
A. The Company, Chase Securities, Inc., as Arranger and certain
purchasers party thereto (collectively, the "Purchasers") have entered into a
Securities Purchase Agreement (the "Purchase Agreement") dated as of the date
hereof, pursuant to which the Company has agreed to sell and the Purchasers
have agreed to buy 37,500 shares of the Company's Preferred Stock, Series B,
par value $.01 per share, liquidation preference $1,000.00 per share (the
"Preferred Stock, Series B") on the date hereof (the "Initial Closing" under
the Purchase Agreement) and 52,500 shares of the Preferred Stock, Series B on
the date of the "Subsequent Closing" under the Purchase Agreement, on the terms
and subject to the conditions contained in the Purchase Agreement.
B. In connection with the transactions contemplated by the Purchase
Agreement, the Company has agreed to deliver to Escrow Agent a total of
$5,000,000, which represents a portion of the net proceeds to the Company from
its issuance of the Preferred Stock, Series B, which funds are to be used for
the payment of dividends on the Preferred Stock, Series B and for general
corporate purposes.
C. Escrow Agent has agreed to accept such delivery and perform certain
other functions, in accordance with the terms and subject to the provisions of
this Agreement.
D. This Agreement is the Escrow Agreement referred to in the Purchase
Agreement.
NOW, THEREFORE, in reliance on the foregoing recitals, and in
consideration of the mutual covenants, agreements, representations and
warranties contained in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto hereby agree as follows:
TERMS AND CONDITIONS
1. Appointment of Escrow Agent. The Company hereby designates and
appoints Escrow Agent as escrow agent, and Escrow Agent hereby accepts such
appointment, on the terms and subject to the conditions of this Agreement.
2. Deposits and Deliveries into Escrow. The Company shall deliver to
the Escrow Agent $2,500,000 on the date hereof and $2,500,000 on the date of
the Subsequent Closing under the Purchase Agreement (the "Escrowed Funds") in
immediately available funds by wire transfer into a separate account
established by Escrow Agent (the "Escrow Account") upon instructions designated
by Escrow Agent to the Company in writing on the date hereof. The Escrowed
Funds will be held by Escrow Agent and distributed in accordance with the terms
of this Agreement.
Escrow Agent hereby accepts said funds.
3. Investment of Funds by Escrow Agent. Funds deposited with the
Escrow Agent shall be invested and reinvested only upon the following terms and
conditions:
(a) Acceptable Investments. All funds deposited or held by the Escrow
Agent at any time shall be invested by the Escrow Agent in shares of a
<PAGE> 2
wholly U.S. Treasury backed, liquid mutual fund (the "Mutual Fund Shares")
which the Company shall designate in writing to the Escrow Agent within three
days of the execution of this Agreement, in amounts that the Company reasonably
determines will mature sufficiently to and/or generate interest income
sufficiently to, when added to the balance of funds held in the Escrow Account,
provide for the payment of dividends when due on each Dividend Payment Date (as
such term is defined in the Certificate of Designation governing the Preferred
Stock, Series B (the "Certificate")). All Mutual Fund Shares shall be assigned
to and held in the possession of, or, in the case of Mutual Fund Shares
maintained in book-entry form, transferred to a book entry account in the name
of, the Escrow Agent, for the benefit of the holders of the Preferred Stock,
Series B (the "Holders"), with such guarantees as are customary.
(b) Dividends. All proceeds earned on funds invested in Mutual Fund
Shares shall be deposited in the Escrow Account and shall be reinvested in
accordance with the terms of the preceding paragraph; provided, however, that
all proceeds earned on Mutual Fund Shares held in the Escrow Account shall be
deposited in the Escrow Account until released in accordance with the terms of
this Agreement.
4. Disbursements from Escrow Account.
(a) Company Request. The Company shall, at least five business days
before each Dividend Payment Date, submit to the Escrow Agent a completed
Payment Notice and Disbursement Request substantially in the form of Exhibit A
hereto.
(b) Disbursement. As soon as reasonably practicable on the applicable
Dividend Payment Date, the Escrow Agent shall disburse the funds requested in
such Payment Notice and Disbursement Request by wire transfer of immediately
available funds to the account(s) of the Holders, as such accounts have been
designated by the Company and communicated to the Escrow Agent in the Payment
Notice and Disbursement Request.
5. Escrow Agent.
(a) Responsibility. (1) The Escrow Agent's responsibility and
liability under this Agreement shall be limited as follows: (i) the Escrow
Agent does not represent, warrant or guaranty to the Holders from time to time
the performance of the Company; (ii) the Escrow Agent shall have no
responsibility to the Company or the Holders from time to time as a consequence
of performance or non-performance by the Escrow Agent hereunder, except for any
gross negligence or willful misconduct of the Escrow Agent; (iii) the Company
shall remain solely responsible for all aspects of the Company's business and
conduct; and (iv) the Escrow Agent is not obligated to supervise, inspect or
inform the Company or any third party of any matter referred to above.
(2) No implied covenants or obligations shall be inferred from this
Agreement against the Escrow Agent, nor shall the Escrow Agent be bound by the
provisions of any agreement beyond the specific terms hereof. Specifically and
without limiting the foregoing, the Escrow Agent shall in no event have any
liability in connection with its investment, reinvestment or liquidation, in
good faith and in accordance with the terms hereof, of any funds or Mutual Fund
Shares held by it hereunder, including without limitation any liability for any
delay not resulting from gross negligence or willful misconduct in such
investment, reinvestment or liquidation, or for any loss of principal or income
incident to any such delay.
(3) The Escrow Agent shall be entitled to rely upon any judicial order
or judgment, upon any written opinion of counsel or upon any certification,
instruction, notice, or other writing delivered to it by the Company in
compliance with the provisions of this Agreement without being required to
determine the authenticity or the correctness of any fact stated therein or the
propriety or validity of service thereof. The Escrow Agent may act in reliance
upon any instrument comporting with the provisions of this Agreement or
signature believed by it to be genuine and may assume that any person
purporting to give notice or receipt or advice or make any statement or execute
any document in connection with the provisions hereof has been duly authorized
to do so.
<PAGE> 3
(4) At any time the Escrow Agent may request in writing an instruction
in writing from the Company, and may at its own option include in such request
the course of action it proposes to take and the date on which it proposes to
act, regarding any matter arising in connection with its duties and obligations
hereunder; provided, however, that the Escrow Agent shall state in such request
that it believes in good faith that such proposed course of action is
consistent with another identified provision of this Agreement. The Escrow
Agent shall not be liable to the Company for acting without the Company's
consent in accordance with such a proposal, to the extent such action is
consistent with its duties and responsibilities under this Agreement, on or
after the date specified therein if (i) the specified date is at least five
business days after the Company receives the Escrow Agent's request for
instructions and its proposed course of action, and (ii) prior to so acting,
the Escrow Agent has not received the written instructions requested from the
Company.
In the event funds transfer instructions are given (other than in
writing at the time of the execution of this Agreement), whether in writing, by
facsimile or otherwise, the Escrow Agent is authorized to seek confirmation of
such instructions by telephone call-back to the person or persons designated on
Schedule 5(a)(4) hereto, and the Escrow Agent may rely upon the confirmations
of anyone purporting to be the person or persons so designated. The persons and
telephone numbers for call-backs may be changed only in a writing actually
received and acknowledged by the Escrow Agent. The parties to this Agreement
acknowledge that such security procedure is commercially reasonable.
It is understood that the Escrow Agent and the beneficiary's bank in
any funds transfer may rely solely upon any account numbers or similar
identifying numbers provided by either of the other parties hereto to identify
(i) the beneficiary, (ii) the beneficiary's bank or (iii) an intermediary bank.
The Escrow Agent may apply any of the Escrowed Funds for any payment order it
executes using any such identifying number, even where its use may result in a
person other than the beneficiary being paid, or the transfer of funds to a
bank other than the beneficiary's bank or an intermediary bank designated by
such beneficiary.
(5) The Escrow Agent may act pursuant to the written advice of counsel
chosen by it with respect to any matter relating to this Agreement and (subject
to clause (ii) of the first paragraph of this Section 5) shall not be liable
for any action taken or omitted in accordance with such advice.
(6) The Escrow Agent shall not be called upon to advise any party as
to selling or retaining, or taking or refraining from taking any action with
respect to, any securities or other property deposited hereunder.
(7) In the event of any ambiguity in the provisions of this Agreement
with respect to any funds or property deposited hereunder, the Escrow Agent
shall be entitled to refuse to comply with any and all claims, demands or
instructions with respect to such funds or property, and the Escrow Agent shall
not be or become liable for its failure or refusal to comply with conflicting
claims, demands or instructions. The Escrow Agent shall be entitled to refuse
to act until either any conflicting or adverse claims or demands shall have
been finally determined by a court of competent jurisdiction or settled by
agreement between the conflicting claimants as evidenced in a writing,
reasonably satisfactory to the Escrow Agent, or the Escrow Agent shall have
received security or an indemnity reasonably satisfactory to the Escrow Agent
sufficient to save the Escrow Agent harmless from and against any and all loss,
liability or expense which the Escrow Agent may incur by reason of its acting.
The Escrow Agent may in addition elect in its sole option to commence an
interpleader action or seek other judicial relief or orders as the Escrow Agent
may deem necessary.
(8) No provision of this Agreement shall require the Escrow Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder.
(b) Compensation of Escrow Agent. The Company agrees to pay Escrow
Agent fees for the services provided by Escrow Agent hereunder in the amount of
$7,500, which fee is payable by the Company upon execution of this
<PAGE> 4
Agreement. The Company hereby agrees to pay or reimburse the Escrow Agent upon
request for all expenses, disbursements and advances, including reasonable
attorney's fees, incurred or made by it in connection with the preparation,
execution, performance, delivery, modification or termination of this
Agreement. The parties hereby grant the Escrow Agent a lien, right of set-off
and security interest to the account for the payment of any claim for
compensation, expenses and amounts due hereunder.
(c) Escrow Account Statement. Each month, the Escrow Agent shall
deliver to the Company a statement setting forth in reasonable detail the
balance of funds then in the Escrow Account and the manner in which such funds
are invested. The parties hereto irrevocably instruct the Escrow Agent that on
the first date that the Escrow Account (including the holdings all U.S.
Treasury Securities) is reduced to zero, the Escrow Agent shall deliver, on
such date, to the Company a notice that the balance in the Escrow Account has
been reduced to zero.
(d) Resignation of Escrow Agent. The Escrow Agent (and any successor
escrow agent) may resign by giving no less than 30 days' prior written notice
to the Company. Such resignation shall take effect upon the latter to occur of
(i) the delivery of all funds and Mutual Fund Shares maintained by the Escrow
Agent hereunder and copies of all books, records, plans and other documents in
the Escrow Agent's possession relating to such funds or Mutual Fund Shares or
this Agreement to a successor escrow agent approved by the Company (which
approval shall not be unreasonably withheld or delayed) and (ii) the Company
and such successor escrow agent entering into this Agreement or any written
successor agreement no less favorable to the interests of the Holders than this
Agreement; and the Escrow Agent shall thereupon be discharged of all
obligations under this Agreement and shall have no further duties, obligations
or responsibilities in connection herewith, except as set forth herein. If a
successor escrow agent has not been appointed or has not accepted such
appointment within 30 days after notice of resignation is given to the Company,
the Escrow Agent may apply to a court of competent jurisdiction for the
appointment of a successor escrow agent.
(e) Taxpayer Identification Number. The Company shall undertake to
provide to the Escrow Agent, within ten days of the execution of this
Agreement, the Taxpayer Identification Numbers as assigned by the Internal
Revenue Service of each of the Company and the Holders. All dividends shall be
allocated and paid as provided herein and reported by the recipient to the
Internal Revenue Service as having been so allocated and paid.
(f) Merger and Consolidation. Any corporation into which the Escrow
Agent in its individual capacity may be merged or converted or with which it
may be consolidated, or any corporation resulting from any merger, conversion
or consolidation to which the Escrow Agent in its individual capacity shall be
a party, or any corporation to which substantially all the corporate trust
business of the Escrow Agent in its individual capacity may be transferred,
shall be the Escrow Agent under this Agreement without any further action.
(g) Liquidation of Funds. The Escrow Agent shall have the right to
liquidate any Mutual Fund Shares, in order to provide funds necessary to make
required payments under this Agreement. The Escrow Agent in its capacity as
escrow agent hereunder shall not have any liability for any loss sustained as a
result of any investment made pursuant to the instructions of the Company or as
a result of any liquidation of any Mutual Fund Shares prior to their maturity
or for the failure of the Company to give the Escrow Agent instructions to
invest or reinvest the Escrowed Funds or any earnings thereon.
(h) Indemnity. The Company shall indemnify, hold harmless and defend
the Escrow Agent and each of its directors, officers, agents, employees and
controlling persons, from and against any and all claims, actions, obligations,
liabilities and expenses, including defense costs, investigative fees and
costs, legal fees, and claims for damages, arising from the Escrow Agent's
performance
<PAGE> 5
under this Agreement, except to the extent that such liability, expense or
claim is directly attributable to the gross negligence or willful misconduct of
any of the foregoing persons. The provisions of this Section shall survive any
termination, satisfaction or discharge of this Agreement as well as the
resignation or removal of the Escrow Agent. Notwithstanding anything to the
contrary in this Agreement, in no event shall the Escrow Agent be liable for
any special, indirect or consequential losses or damages of any kind whatsoever
(including but not limited to lost profits), even if the Escrow Agent has been
advised of the likelihood of such losses or damages regardless of the nature of
the action.
6. Termination of Agreement. This Agreement shall terminate
automatically following the earlier of (i) the redemption by the Company of all
of the outstanding shares of the Preferred Stock, Series B held by the Holders
(including through the exercise of the "put" or "call" under the Put and Call
Agreement (as such agreement in defined in the Purchase Agreement)) and (ii)
August 5, 1999; provided, that the obligations of the Company under Section
5(h) hereunder shall survive the termination of this Agreement or the
resignation of the Escrow Agent and that the Company will cause this Agreement
(or any permitted successor agreement) to remain in effect and will cause there
to be an escrow agent acting hereunder (or any such permitted successor
agreement). Any Escrowed Funds (including Mutual Fund Shares) remaining in the
Escrow Account at the time of the termination of the Agreement shall be
returned to the Company, and the Company may use such funds for general
corporate purposes.
7. General Provisions.
7.1 Construction. All matters with respect to this Agreement,
including matters of validity, construction, effect and performance, shall be
governed by the laws of the State of New York, without giving effect to choice
of law provisions of any state.
7.2 Notices. All notices, requests, demands and other communications
called for or contemplated under this Agreement shall be in writing and shall
be deemed to have been duly given when personally delivered, on the date of
transmission if sent by telecopier or telegraph, or on the third day after
mailing if mailed to the party to whom notice is to be given, by first class
mail, postage prepaid, and properly addressed as follows:
To the Company: STC BROADCASTING, INC.
3839 4th Street North
Suite 420
St. Petersburg, Florida 33703
Attn: David A. Fitz
Tel: (727) 821-7900
Fax: (727) 821-8097
with a copy to:
Sunrise Television Corporation
c/o Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Attn: Lawrence D. Stuart, Jr.
Tel: (214) 740-7365
Fax: (214) 740-7313
<PAGE> 6
To the Escrow Agent: THE CHASE MANHATTAN BANK
450 West 33rd Street,
10th Floor
New York, NY 10001
Attn: Rola Tseng
Tel.: (212) 946-7521
Fax: (212) 946-8156
or to such other addresses as shall be furnished in writing by one party to the
other from time to time.
7.3 Assignment. This Agreement shall be binding on, and shall inure to
the benefit of, the parties to it and their respective heirs, legal
representatives, successors and permitted assigns. No party hereto shall
voluntarily or by operation of law assign this Agreement or any of its rights
or benefits hereunder or delegate any of its obligations or duties hereunder
without the prior written consent of the other party hereto.
7.4 No Third Party Beneficiaries. Except as may be otherwise
specifically provided for herein, the terms and provisions of this Agreement
are intended solely for the benefit of each party hereto and their respective
successors or permitted assigns. Except as may be specifically provided for
herein, it is not the intention of the parties hereto to confer any third party
beneficiary rights upon any other person by virtue of any provision of this
Agreement.
7.5 Exhibits. All exhibits to this Agreement are made a part hereof
for all purposes, the same as if set forth herein verbatim.
7.6 Entire Agreement. This Agreement and any attachments hereto and
any other documents or agreements delivered in connection with this Agreement
represent the entire agreement of the parties hereto with respect to the
subject matter hereof, and supersede all prior letters of understanding,
agreements, understandings, discussions, negotiations and commitments of any
kind relating to the subject matter hereof.
7.7 Waiver. No waiver of any of the provisions of this Agreement shall
be deemed, or shall constitute, a waiver of any other provision, whether or not
similar, nor shall any waiver constitute a continuing waiver. No waiver shall
be binding unless executed in writing by the party making the waiver.
7.8 Section Headings. The section headings in this Agreement are
included for convenience only, are not a part of this Agreement and shall not
be used in construing it.
7.9 Gender and Number. As used in this Agreement, the masculine,
feminine or neuter gender, and the singular or plural number, shall each
include the others whenever the context so indicates.
7.10 Severability. In the event that any provision or any part of any
provision of this Agreement is held to be illegal, invalid or unenforceable,
such illegality, invalidity or unenforceability shall not affect the validity
or enforceability of any other provision or part hereof.
7.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
7.12 Interpretation. In this Agreement, unless the context otherwise
requires:
(a) references to this Agreement are references to this Agreement and
to the schedules and exhibits attached hereto;
(b) references to Articles and Sections are references to articles and
sections of this Agreement;
(c) references to any party to this Agreement shall include references
to its respective successors and permitted assigns;
<PAGE> 7
(d) references to a "person" shall mean to any individual, company,
corporation, association, partnership, limited liability company, firm, joint
venture, trust and governmental agency;
(e) the terms "hereof," "herein," "hereby," and any derivative or
similar words will refer to this entire Agreement;
(f) references to any document (including this Agreement) are
references to that document as amended, consolidated, supplemented, novated or
replaced by the parties from time to time.
(g) references to any law are references to that law as of the date
hereof and the Escrow Release Date, as applicable, unless clearly indicated
otherwise, and shall also refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise;
(h) the word "including" shall mean including without limitation; and
(i) references to time are references to Eastern Standard or Daylight
time (as in effect on the applicable day) unless otherwise specified herein.
<PAGE> 8
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
STC BROADCASTING, INC.
By: /s/ David A. Fitz
---------------------------------------
Name: David A. Fitz
Title: Secretary
THE CHASE MANHATTAN BANK
By: /s/ Saverio Lunetta
---------------------------------------
Name: Saverio Lunetta
Title: Vice President
<PAGE> 9
EXHIBIT A
Form of Payment Notice and Disbursement Request
[Letterhead of Company]
THE CHASE MANHATTAN BANK
450 West 33rd Street,
10th Floor
New York, NY 10001
Ladies and Gentlemen:
Reference is hereby made to the Escrow Agreement, dated as of February
5, 1999 (the "Escrow Agreement") by and between the undersigned and you, as
Escrow Agent. Capitalized terms used herein shall have the meanings ascribed to
such terms in the Escrow Agreement.
This letter constitutes a Payment Notice and Disbursement Request
under the Escrow Agreement.
[choose one of the following, as applicable]
[The undersigned hereby notifies you, as Escrow Agent, that a
scheduled dividend payment in the amount of $[ ] is due and payable on ______,
and requests a disbursement of funds contained in the Escrow Account in such
amount to the Holders. The account number(s) of the Holder(s) is/are ______.]
[The undersigned hereby notifies you, as Escrow Agent, that all
outstanding shares of the Preferred Stock, Series B, have been redeemed and
hereby authorizes you to release all remaining funds held in the Escrow Account
to the Company.]
[Add wire instructions]
The Escrow Agent is entitled to rely on the foregoing in disbursing
funds relating to this Payment Notice and Disbursement Request.
STC BROADCASTING, INC.
By:
--------------------------------------
Name:
Title:
<PAGE> 10
SCHEDULE 5(a)(4)
TELEPHONE NUMBER(S) FOR CALL-BACKS AND
PERSON(S) DESIGNATED TO CONFIRM FUNDS TRANSFER INSTRUCTIONS
If to the Company:
Name Telephone Number
---- ----------------
1. David A. Fitz (727) 821-7900
2. Nancy Klein (727) 821-7900
3. Catherine James (727) 821-7900
If to Holders' Banks:
Name Telephone Number
---- ----------------
1.
------------------------ ------------------------
2.
------------------------ ------------------------
3.
------------------------ ------------------------
<PAGE> 1
Exhibit 10.30
CHASE SECURITIES INC.
CREDIT SUISSE FIRST BOSTON CORPORATION
SALOMON SMITH BARNEY INC.
c/o Chase Securities, Inc.
270 Park Avenue
New York, New York 10017
February 5, 1999
Sunrise Television Corp.
3839 4th Street North
Suite 420
St. Petersburg, Florida 33703
STC Broadcasting, Inc.
3839 4th Street North
Suite 420
St. Petersburg, Florida 33703
Engagement Letter
Ladies and Gentlemen:
You have advised Chase Securities, Inc. ("CSI"), Credit Suisse First
Boston Corporation ("CSFB") and Salomon Smith Barney Inc. ("SSBI", and
collectively with CSI and CSFB, the "Underwriters") that Sunrise Television
Corp. a Delaware corporation ("Holdings") and/or STC Broadcasting, Inc., a
wholly owned subsidiary of Holdings ("STC"), intends to refinance (the
"Refinancing") (x) its Preferred Stock, Series B (the "Preferred Stock, Series
B") which is to be issued to finance certain acquisitions by STC (the "Proposed
Acquisitions"), plus (y) certain of its bank borrowings.
In connection with the Refinancing, you have advised us that it is
currently contemplated that Holdings would issue its discount notes generating
gross proceeds sufficient to, in addition to the sale of certain assets of STC
and the contribution of additional equity to Holdings, consummate the
Refinancing, including any accrued but unpaid dividends on the Preferred Stock,
Series B and any reduction in bank borrowings (the "Securities") in a public
offering or in a Rule 144A offering or other private placement, which
Securities (it is contemplated) would not pay
<PAGE> 2
cash interest for a period of not less than three years from the date of
original issuance.
Accordingly, the parties hereto agree as follows:
1. Engagement of the Underwriters; Financing Holdings Zero Notes. You
hereby engage the Underwriters on an exclusive basis to provide to Holdings and
STC and their affiliates such capital markets and other financial advisory
services in connection with the Refinancing, as you may reasonably request and
you each hereby engage (i) CSI to be the lead underwriter of, or lead placement
agent for, or lead initial purchaser of, and (ii) each of CSFB and SSBI to be a
underwriter of, or placement agent for or initial purchaser of, any public or
private offering of the Securities (in each case CSI, CSFB and SSBI being
allocated 50%, 25% and 25%, respectively, of the commitment to underwrite,
place or purchase the Securities, as the case may be) in connection with the
Refinancing (any such offering being a "Securities Offering"). Without in any
way limiting the exclusivity provisions of the preceding sentence you will not
appoint any other underwriter, agent or advisor with respect to any Securities
Offering, or pay any other fees or commissions in connection therewith, without
our prior written consent. Any Securities Offering shall include, but not be
limited to the contemplated issuance by Holdings of the Securities (which shall
have standard market terms comparable to similar offerings being made at the
time, and as shall be agreed between Holdings and the Underwriters) (the
"Proposed Financing of Securities," which phrase shall include any securities
of Holdings or STC issued to effect the Refinancing in lieu of an equivalent
amount of the Securities. The Underwriters reserve the right not to participate
in any Securities Offering, and the foregoing is not an agreement by the
Underwriters to underwrite, place or purchase any Securities or otherwise
provide any financing. In connection with any Securities Offering in which the
Underwriters elect to participate, the relevant issuer shall enter into an
underwriting agreement, placement agency agreement or purchase agreement, as
applicable, with the Underwriters, which agreement shall be consistent with
this letter agreement and otherwise in a mutually acceptable form.
You agree that you will commence promptly the preparation of a
Registration Statement or a Rule 144A Offering Memorandum relating to the
Proposed Financing of Securities, and will provide to the Underwriters a
complete draft of such Registration Statement or Rule 144A Offering Memorandum
no later than the date which is the earlier of (i) 15 days after receipt by STC
of audited financial statements relating to the Proposed Acquisitions and (ii)
March 31, 1999. You also agree to assist the Underwriters in any road show or
other meetings with investors and promptly cooperate with any requests made by
us in connection therewith.
<PAGE> 3
2. Matters Relating to Engagement. You acknowledge that the
Underwriters have been retained solely to provide the services set forth in
this letter agreement. In rendering such services, the Underwriters shall act
as independent contractors, and any duties of the Underwriters arising out of
their engagement hereunder shall be owed solely to you.
You agree that the Registration Statement or Rule 144A Offering
Memorandum shall show that, on a pro forma basis giving effect to the
Securities Offering and the other transactions occurring simultaneously with
the consummation of the Securities Offering, the Leverage Ratio of STC and
Holdings shall be no greater than 9.0 to 1.0. Such Leverage Ratio shall be
calculated in accordance with the terms of the Indenture, dated March 25, 1997
between the Company and U.S. Trust Company of Texas, N.A., relating to STC's
Senior Subordinated Notes, except that all preferred stock of STC and Holdings
will be deemed to be Disqualified Capital Stock and such ratio shall be
calculated for the twelve-month period ending on the most recent date for which
quarterly financial statements are set forth in such Registration Statement or
Rule 144A Offering Memorandum. You will provide us with support for such
calculation from your independent public accountants.
During the course of this engagement, you agree to furnish us (or
cause us to be furnished) with such information about you as we reasonably
request, including information to be included in a private placement
memorandum, registration statement or other disclosure document relating to the
issue and sale of Securities (collectively "Company Information"). You
represent and warrant to us that all Company Information will be accurate and
complete in all material respects at the time it is furnished and will not
contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein not misleading in light
of the circumstances under which such statements are made, and agree to advise
us during the course of this engagement of all developments materially
affecting you and the Company or the accuracy of Company Information previously
furnished to us or prospective purchasers of the Securities. You recognize and
confirm that we (i) will be relying solely on such information and other
information available from generally recognized public sources in performing
the services contemplated hereunder, (ii) will not independently verify the
accuracy or completeness of such information, (iii) do not assume
responsibility for the accuracy or completeness thereof and (iv) will make
appropriate disclaimers consistent with the foregoing. You will fully and
actively cooperate and actively assist with the issuance, sale and marketing of
the Securities, including, without limitation, attending "roadshows" and other
similar meetings.
You acknowledge that each of the Underwriters is a securities firm
that is engaged in securities trading and brokerage
<PAGE> 4
activities, as well as providing investment banking and financial advisory
services. In the ordinary course of trading and brokerage activities, the
Underwriters and their respective affiliates may at any time hold long or short
positions, and may trade or otherwise effect transactions, for their own
account or the accounts of customers, in debt or equity securities of entities
that may be involved in the transactions contemplated hereby. You acknowledge
that the Underwriters and their respective affiliates may be providing debt
financing, equity capital or other services (including financial advisory
services) to other companies in respect of which you or your affiliates may
have conflicting interests. None of the Underwriters or any of their respective
affiliates will use confidential information obtained from you by virtue of the
transactions contemplated by this letter or other relationships with you for
any other purpose than that outlined in this letter, including, without
limitation, in connection with the engagement of the Underwriters or their
respective affiliates by other companies, and none of the Underwriters or any
of their respective affiliates will furnish any such information to such other
companies. You also acknowledge that none of the Underwriters or any of their
respective affiliates have any obligation to use in connection with the
transactions contemplated by this letter, or to furnish to you or any of your
affiliates, confidential information obtained from other companies. Each of the
Underwriters recognizes its responsibility for compliance with the United
States federal securities laws in connection with its activities.
3. Termination. This letter agreement may be terminated by each
Underwriter with respect to such Underwriter at any time upon 10 days' prior
written notice to you. This letter agreement shall also terminate upon (x) the
exercise of the put in accordance with the terms of the Put and Call Agreement
dated as of February 5, 1999 (the "Put and Call Agreement") by and among The
Chase Manhattan Corporation, CSI, CSFB, Salomon Brothers Holding Company Inc.,
Hicks, Muse, Tate & Furst Equity Fund III, L.P. and certain other persons and
(y) the exercise of the call in accordance with the terms of the Put and Call
Agreement (but, as to the exercise of the call, in no event earlier than six
months after the execution hereof). This letter agreement may be terminated by
you upon ten days' prior written notice to the Underwriters after the earlier
of (i) the day that is the day after the first anniversary of the date of first
issuance of the Preferred Stock, Series B (such day after such first
anniversary being the "Payment Date") and (ii) receipt by Holdings of aggregate
gross proceeds from the sale of Securities of not less than the full amount of
the Preferred Stock, Series B, provided, in such case, that the fees described
in Section 5(b) shall have been paid to us. Upon any termination of this letter
agreement, the obligations of the parties hereunder shall terminate, except for
their obligations under paragraphs 4, 5(b), 5(c), 5(d) and 7 below (except that
5(b) shall not so survive if this letter agreement is terminated pursuant to
the first sentence of this paragraph).
<PAGE> 5
4. Indemnification. In consideration of the engagement hereunder,
each of you (each, an "Indemnifying Party") shall jointly and severally
indemnify and hold harmless the Underwriters to the extent set forth in Annex A
hereto, which provisions are incorporated by reference herein and constitute a
part hereof. This indemnity shall in no way limit any such person's rights to
indemnification contained in another agreement or as a matter of law.
5. Fees and Expenses. (a) In any Securities Offering that is
consummated prior to termination of this engagement letter and in which CSI
acts as lead underwriter, lead placement agent or lead initial purchaser, and
CSFB and SSBI act as underwriters, placement agents or initial purchasers, you
will cause the applicable issuer to pay aggregate underwriters' or initial
purchasers' discounts, or placement agency fees, as applicable, equal to 3.50%
of the gross proceeds of each such offering, payable at the closing of such
offering out of the proceeds thereof.
(b) If the Proposed Financing of Securities shall not have been
consummated prior to the Payment Date (and neither the "put" nor the "call"
have been exercised in accordance with the terms of the Put and Call
Agreement), you shall pay to the Underwriters on the Payment Date for their
services hereunder, an additional funding fee equal to a total of 3.50% of the
aggregate amount of the Preferred Stock, Series B then outstanding (including
any such shares held by any of our or your affiliates or by you). Your
obligation to pay such fee shall be absolute and unconditional and shall not be
subject to reduction by way of set-off or counterclaim.
(c) You shall be entitled to a partial refund of, and each Underwriter
shall refund to you, any fee actually paid to such Underwriter pursuant to
paragraph (b), above, in an amount equal to the product of (i) the gross spread
(i.e. underwriter's or initial purchaser's discount) or placement agency fees
received by such Underwriter after the Payment Date in connection with each
Securities Offering in which CSI acts as lead underwriter, lead placement agent
or lead initial purchaser, as applicable, or CSFB or SSBI act as underwriters,
placement agents or initial purchasers, and that is consummated during the
period specified in Column A below following the Payment Date times (ii) the
percentage set forth opposite such period in Column B below.
Column A (Time Period) Column B (Percentage)
---------------------- ---------------------
0-90 days 100.0%
91-180 days 75.0%
181-270 days 50.0%
271-360 days 25.0%
<PAGE> 6
In no event shall any Underwriter be required to refund to Holdings or STC
pursuant to this paragraph 5(c) more than the amount of the fee actually paid
to such Underwriter pursuant to paragraph (b), above.
(d) In addition, whether or not the Refinancing is consummated, you
will reimburse the Underwriters promptly upon request for all of their
reasonable out-of-pocket costs and expenses (including, without limitation,
reasonable fees, disbursements and other charges of Cahill Gordon & Reindel,
our legal counsel) incurred in connection with the preparation of this letter
agreement or any of the transactions contemplated hereby, whether or not any
Securities are issued, offered or sold, provided that, to the extent provided
in CSI's standard underwriting or purchase agreement, there shall be no
obligation to reimburse any such costs and expenses (including the
Underwriters' roadshow costs and fees and expenses of the Underwriters'
counsel) incurred in connection with any Securities Offering in which the
Underwriters participate. You shall be responsible for all printing costs,
filing fees and "blue-sky" fees and expenses.
6. Disclosure. In connection with their engagement hereunder, the
Underwriters shall assist you in preparing a prospectus, offering circular,
private placement memorandum or other document to be used in connection with
each offering in which the Underwriters participate (the "Offering Document").
You shall furnish the Underwriters with all financial and other information
concerning Holdings, STC, the Proposed Acquisitions and related matters (the
"Information") which the Underwriters may reasonably request for inclusion in
any Offering Document or otherwise. The Underwriters may rely, without
independent verification, upon the accuracy and completeness of the Information
and any Offering Document, and the Underwriters do not assume any
responsibility therefor.
The Underwriters may (subject to paragraph 7(a) below) share any
Offering Document, the Information and any other information or matters
relating to you, or the transactions contemplated hereby with their respective
affiliates and such affiliates may likewise share information relating to you
or such transaction with the Underwriters. The Underwriters shall be
responsible for their respective affiliate's compliance herewith and with
paragraph 7(a) below.
7. Confidentiality. The Underwriters shall use all information
provided to them by or on behalf of you or Holdings solely for the purpose of
providing the services that are the subject of this letter agreement and shall
treat confidentially all such information specifically indicated as
confidential, provided that nothing herein shall prevent the Underwriters from
disclosing
<PAGE> 7
any such information (with a request for confidential treatment in the case of
clause (i) or (ii), if available or (v)) (i) pursuant to the order of any court
or administrative agency or in any pending legal or administrative proceeding,
(ii) upon the request or demand of any regulatory authority having jurisdiction
over the Underwriters or any of their respective affiliates; provided, that the
Underwriters or such affiliates shall notify you or Holdings, as the case may
be, of such request or demand within a reasonable period of time after receipt
of notice of such request or demand, (iii) to the extent that such information
becomes publicly available other than by reason of disclosure by the
Underwriters, (iv) to the Underwriters' employees, legal counsel, independent
auditors and other experts or agents who need to know such information and are
informed of the confidential nature of such information (v) in connection with
a Securities Offering (with your consent, which will not be unreasonably
withheld) or (vi) to any of their affiliates as set forth in paragraph 6 above
who are advised of its confidential nature. You agree that you will not
disclose this letter agreement, the contents hereof or the activities of the
Underwriters pursuant hereto to any person without the prior written approval
of the Underwriters (which approval shall not unreasonably be withheld), except
that you may disclose this letter agreement and the contents hereof (i) to you
and your affiliates, officers, employees, partners, principals, accountants,
attorneys and other advisors directly involved in the consideration of the
matter on a confidential basis, and (ii) as required by applicable law or
compulsory legal process or in the prosecution of any proceeding initiated by
you. The provisions contained in this paragraph 7 shall remain in full force
and effect notwithstanding the termination of this letter agreement.
8. Governing Law and Submission to Jurisdiction. This letter agreement
shall be governed by and construed in accordance with the laws of the State of
New York, without giving effect to the conflicts of laws principles thereof.
HOLDINGS, STC AND CSI IRREVOCABLY AGREE TO WAIVE TRIAL BY JURY IN ANY ACTION,
PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY OR ON BEHALF OF ANY PARTY RELATED
TO OR ARISING OUT OF THIS LETTER AGREEMENT OR THE PERFORMANCE OF SERVICES
HEREUNDER.
You irrevocably and unconditionally submit to the exclusive
jurisdiction of any state or federal court sitting in the City of New York over
any suit, action or proceeding arising out of or relating to this letter
agreement. Service of any process, summons, notice or document by registered
mail addressed to you shall be effective service of process against such person
for any suit, action or proceeding brought in any such court. You irrevocably
and unconditionally waive any objection to the laying of venue of any such
suit, action or proceeding brought in any such court and any claim that any
such suit, action or proceeding
<PAGE> 8
has been brought in any such court and any claim that any such suit, action or
proceeding has been brought in an inconvenient forum. A final judgment in any
such suit, action or proceeding brought in any such court may be enforced in
any other courts to whose jurisdiction you are or may be subject, by suit upon
judgment.
9. Miscellaneous. This letter agreement contains the entire agreement
between the parties relating to the subject matter hereof and supersedes all
oral statements and prior writings with respect thereto. This letter agreement
may not be amended or modified except by a writing executed by each of the
parties hereto. Paragraph headings herein are for convenience only and are not
a part of this letter agreement. This letter agreement is solely for the
benefit of the parties hereto, and no other person (except for Indemnified
Persons, to the extent set forth in Annex A hereto) shall acquire or have any
rights under or by virtue of this letter agreement. This letter agreement may
not be assigned by you without each Underwriter's prior written consent.
If any term, provision, covenant or restriction contained in this
letter agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable or against public policy, the remainder of the terms,
provisions, covenants and restrictions contained herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated. The
parties hereto shall endeavor in good faith negotiations to replace the
invalid, void or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the invalid, void or
unenforceable provisions.
This letter agreement may be executed in counterparts, each of which
will be deemed an original, but all of which taken together will constitute one
and the same instrument.
<PAGE> 9
If the foregoing correctly sets forth our understanding, please
indicate your acceptance of the terms hereof by signing in the appropriate
space below and returning to us the enclosed duplicate originals hereof,
whereupon this letter shall become a binding agreement between us.
Very truly yours,
CHASE SECURITIES, INC.
By: /s/ James P. Casey
--------------------------------------
Name: James P. Casey
Title: Managing Director
CREDIT SUISSE FIRST BOSTON
CORPORATION
By: /s/ Joseph D. Carrabino, Jr.
--------------------------------------
Name: Joseph D. Carrabino., Jr.
Title: Managing Director
SALOMON SMITH BARNEY INC.
By: /s/ Timothy L. Freeman
--------------------------------------
Name: Timothy L. Freeman
Title: Attorney-In-Fact
Accepted and agreed to as of the
date first written above:
SUNRISE TELEVISION CORP.
By: /s/ David A. Fitz
--------------------------------
Name: David A. Fitz
Title: Secretary
STC BROADCASTING, INC.
By: /s/ David A. Fitz
--------------------------------
Name: David A. Fitz
Title: Secretary
<PAGE> 10
The Indemnifying Party shall indemnify and hold harmless each
Underwriter, their respective affiliates and their respective officers,
directors, employees, agents and controlling persons (each an "Indemnified
Person") from and against any and all losses, claims, damages, liabilities and
reasonable expenses, joint or several, to which any such Indemnified Person may
become subject arising out of or in connection with the transactions
contemplated by the letter agreement to which this Annex A is attached, or any
claim, litigation, investigation or proceedings relating to the foregoing
("Proceedings") regardless of whether any of such Indemnified Persons is a party
thereto, and to reimburse such Indemnified Persons for any legal or other
reasonable out-of-pocket expenses as they are incurred in connection with
investigating or defending any of the foregoing (it being understood that any
settlement of claims for monetary damages involving the Indemnified Persons
shall be by mutual agreement (not, in each case, to be unreasonably withheld)
between the Indemnified Persons and the Indemnifying Party), provided that the
foregoing indemnification will not, as to any Indemnified Person, apply to
losses, claims, damages, liabilities or expenses to the extent that they are
found by a final decision of a court of competent jurisdiction to have resulted
from the gross negligence of, willful misconduct of, or material breach of this
Engagement Letter by such Indemnified Person. If for any reason, other than as a
result of the proviso in the preceding sentence, the foregoing indemnification
is unavailable to any Indemnified Person or insufficient to hold it harmless,
then the Indemnifying Party shall contribute to the amount paid or payable to
such Indemnified Person as a result of such loss, claim, damage, liability or
expense in such proportion as is appropriate to reflect the relative benefits
received by Holdings or STC, on the one hand, and such Indemnified Person, on
the other hand, or, if such allocation is judicially determined to be
unavailable, in such proportion as is appropriate to reflect other equitable
considerations such as the relative fault of Holdings or STC, on the one hand,
and such Indemnified Person, on the other hand. It is hereby agreed that the
relative benefits to Holdings or STC, on the one hand, and all Indemnified
Persons, on the other hand, shall be deemed to be in the same proportion as (i)
the total value received or proposed to be received by Holdings or STC or the
applicable issuer pursuant to any sale of Securities (whether or not
consummated) bears to (ii) the fee paid or proposed to be paid to the
Underwriter in connection with such sale. The indemnity, reimbursement and
contribution obligations of the Indemnifying Party under this Annex A shall be
in addition to any liability which the Indemnifying Party may otherwise have to
an Indemnified Person and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Indemnifying
Party and any Indemnified Person.
<PAGE> 11
Promptly after receipt by an Indemnified Person of notice of the
commencement of any Proceedings, such Indemnified Person will, if a claim in
respect thereof is to be made against the Indemnifying Party, notify the
Indemnifying Party in writing of the commencement thereof; provided that the
omission so to notify the Indemnifying Party will not relieve it from any
liability which it may have hereunder except to the extent it has been
materially prejudiced by such failure. In case any such Proceedings are brought
against any Indemnified Person and it notifies the Indemnifying Party of the
commencement thereof, the Indemnifying Party will be entitled to participate
therein, and, to the extent that it may elect by written notice delivered to
such Indemnified Person, to assume the defense thereof, with counsel reasonably
satisfactory to such Indemnified Person, provided that if a conflict or
potential conflict exists (based upon advice of counsel to the Indemnified
Party) between the Indemnified Person and the Indemnifying Party, such
Indemnified Person shall have the right to select separate counsel (at the
expense of the Indemnifying Party) and to otherwise participate in the defense
of such Proceedings on behalf of such Indemnified Person. No Indemnified Person
shall be liable for any indirect or consequential damages in connection with
its activities related hereto or the transactions contemplated hereby. Upon
receipt of notice from the Indemnifying Party to such Indemnified Person of its
election so to assume the defense of such Proceedings and approval by such
Indemnified Person of counsel, the Indemnifying Party shall not be liable to
such Indemnified Person for expenses incurred by such Indemnified Person in
connection with the defense thereof (other than reasonable costs of
investigation) unless (i) such Indemnified Person shall have employed separate
counsel in accordance with the proviso to the next preceding sentence, it being
understood, however, that the Indemnifying Party shall not be liable for the
reasonable expenses of more than one separate counsel (plus not more than one
separate local counsel in any jurisdiction), approved by the Underwriters,
representing all the Indemnified Persons who are parties to such Proceedings),
(ii) the Indemnifying Party shall not have employed counsel reasonably
satisfactory to such Indemnified Person to represent such Indemnified Person
within a reasonable time after notice of commencement of the Proceedings, (iii)
the Indemnifying Party shall have authorized in writing the employment of
counsel for such Indemnified Person or (iv) the use of counsel chosen by the
Indemnifying Party to represent such Indemnified Person would present such
counsel with a conflict of interest; and except that, if clause (i) or (iii) is
applicable, such liability shall be only in respect of the counsel referred to
in such clause (i) or (iii).
Capitalized terms used but not defined in this Annex A have the
meanings assigned to such terms in the letter agreement to which this Annex A
is attached.
<PAGE> 12
This Annex A shall not apply to any losses, claims, damages,
liabilities and expenses, or any claim, litigation, investigation or proceeding
relating to the foregoing, arising out of any Securities Offering in which CSI
is not the lead underwriter, lead placement agent or lead initial purchaser, as
applicable and CSFB and SSBI are not the underwriters, placement agents or
initial purchasers, as applicable.
<PAGE> 1
Exhibit 10.31
FOX BROADCASTING COMPANY
STATION AFFILIATION AGREEMENT
February 1, 1999
STC License Company
WUPW-TV
3839 Fourth Street North, Suite 420
St. Petersburg, FL 33703
Attention: David Fitz, Chief Financial Officer
This sets forth the terms and conditions of the agreement between Fox
Broadcasting Company ("Fox"), on behalf of itself, Fox Children's Network, Inc.
("FCN") and Fox News Network, Inc. ("FNN"), and STC License Company
("Licensee"), for the carriage of programming over the facilities of Licensee's
television station WUPW ("Station"). As used in this Agreement, the terms
"program," "programming," and "Fox programming," and any derivations thereof
shall mean, unless specifically indicated otherwise, the programming of Fox and
the programming of FCN, and all terms of this Agreement shall apply to both.
1. Fox Programming : Fox will deliver to the Station for free over-the-air
television broadcasting, programming which Fox and FCN make available to Station
for broadcasting in the community to which Station is presently licensed by the
FCC, which is Toledo, OH. The selection, scheduling, substitution and withdrawal
of any program OR portion thereof shall at all times remain within Fox's sole
discretion and control. Licensee shall not and shall not authorize others to
broadcast or otherwise use any program (or part thereof) or other material
supplied by Fox except as specified in this Agreement and without limiting the
foregoing, Station may broadcast Fox programming only: (i) as scheduled by Fox,
(ii) over Station's facilities in the Community specified above in this
Paragraph 1 ("Station's Community"), and (iii) by free over-the-air television
broadcasting.
2. Delivery: Fox will transmit the programming hereunder by satellite and shall
keep Licensee apprised of both the satellite and transponder being used for that
transmission. Any and all costs of whatever kind that Station incurs to pickup
the programming from the satellite and rebroadcast it shall be the sole
responsibility of Licensee.
3. Carriage & Preemption:
(a) Licensee agrees to broadcast over Station's facilities, in the form
transmitted by Fox, all Fox programs in their entirety, including, but not
limited to, all commercial announcements, Fox i.d.'s, Fox promos and credits,
without interruption, deletion, addition, squeezing, alteration, or other
changes (except for adding Licensee's commercial announcements as provided in
this Agreement) on the dates and at the times the programs are scheduled by Fox.
(b) Fox commits to supply sufficient programming throughout the term of this
Agreement for the hours presently programmed by it (the "Programmed Time
Periods"), which Programmed Time Periods are as follows (for programming other
than FCN and Daytime programming, the specified times apply for the Eastern or
Pacific Time Zones, and the Mountain and Central Time Zones are
<PAGE> 2
one hour earlier; for FCN and Daytime programming, the specified times apply to
all Time Zones, unless Fox agrees otherwise):
Prime Time 7-10 P.M. Sunday
8-10 P.M. Monday thru Saturday
Late Night: 11 P.M.-12:00 A.M. Monday thru Saturday
FCN: 7:00 A.M.-8:00 A.M. Monday thru Friday
3:00 P.M.- 5:00 P.M. Monday thru Friday
8:00 A.M.-12:00 Noon Saturday
Weekend, Allstar &
Post Season Sports.- As scheduled for
Station by Fox, including pre-game
and post-game shows.
Subject only to the preemption rights in Paragraph 11 below, Licensee shall
broadcast over Station for the term of this Agreement, during the Programmed
Time Periods, all Fox programming specified by Fox, except to the extent that
Licensee is broadcasting programming pursuant to (and within the specific limits
of) a commitment expressly set forth on Exhibit A (for non-sports programming)
or Exhibit B (for sports programming) to this Agreement (but not including any
extension or renewal of such commitment by option extension or otherwise). If
any Fox programming is not broadcast in its Programmed Time Period due to any
such commitment Licensee shall broadcast that Fox programming in the "make good"
time period specified in Exhibit A or B, as applicable.
(c) Without limiting subparagraph (b) above, each time that Licensee for any
reason fails to (or advises Fox it will not) telecast any Fox programming as
provided for in this Agreement, then upon Fox's request, Licensee shall telecast
that programming (or replacement programming selected by Fox) and the commercial
announcements contained in it, in a substitute time period that is within the
same A.C. Nielsen broadcast ratings week as, and that is of a quality and rating
value as nearly as possible equal to that of, the time period during which the
programming was not telecast. Licensee shall give Fox at least 72 hours advance
notice that it intends not to broadcast any Fox programming and in such notice
shall identify the substitute time period that Licensee selects, which time
period shall be subject to Fox's prior approval. If Licensee does not fully
comply with the foregoing, then, without limitation to any other rights of Fox
under this Agreement or otherwise, Fox shall have the right to license the
broadcast rights to the applicable omitted programming (or replacement
programming) to another television station located in Station's Community. In
addition to the foregoing, with respect to programming for broadcast within the
New Programmed Time Periods (as defined in subparagraph 3(e) below), Fox will
provide Licensee with a minimum of six months notice for each program addition,
and Licensee shall be required to advise Fox within ten days of receiving
notification if Licensee does not wish to televise said programming as scheduled
by Fox. If Licensee refuses to broadcast any program within a New Programmed
Time Period for any reason other than (I) a program conflict specified in
subparagraph 3(e) below, or (ii) those specified in Paragraph 11 below, then Fox
shall have the right to terminate this Agreement upon six months prior notice to
Licensee.
(d) Under this Agreement, an "Approved Preemption" shall mean: any failure to
broadcast due to force majeure under Paragraph 7 below, any preemption permitted
by Exhibit A or B hereto that is "made good" in accordance therewith and any
preemption permitted by Paragraph 11 below. Any other preemption or failure to
broadcast any Fox programming is an "Unauthorized Preemption" and without
limiting any other rights of Fox under this Agreement
<PAGE> 3
or otherwise, if within any 12-month period during the term of this Agreement,
Station makes three (3) or more Unauthorized Preemptions of any Fox programming
(or Licensee or Station states, either in general or specific terms, that
Station intends to make such Unauthorized Preemptions or Fox reasonably
concludes, based upon Licensee's or Station's actions or otherwise, that such
Unauthorized Preemptions will occur), Fox may, upon 30 days prior written notice
to Licensee, elect to either: (1) terminate Station's right to broadcast any one
or more series or other Fox programs, as Fox shall elect, and, to the extent and
for the period(s) that Fox elects, thereafter license the broadcast rights to
the applicable series or other Fox programs to any other television station or
stations located in Station's Community, or (2) terminate this Agreement.
(e) Licensee shall broadcast over Station's facilities all Fox programming to be
offered during time periods not presently programmed by Fox ("New Programmed
Time Periods"), subject to Fox providing to Licensee at least six months notice
prior to delivering any additional programming within these time periods.
Furthermore, if Licensee has entered into any agreement(s) prior to an
announcement by Fox to program a specific time period and the agreement(s) is
(are) for barter programming that Licensee is required by the terms of the
agreement(s) to broadcast during a New Programmed Time Period, then Licensee
shall not be required to broadcast the new Fox programming within the same time
period, and the provisions of subparagraph 3(c) of this Agreement shall govern;
provided, however, in any such instance(s) Licensee agrees not to renew or
otherwise extend its rights to broadcast such conflicting programming within a
New Programmed Time Period.
4. Promotion:
(a) Fox will provide Licensee with on-air promotional announcements, which may
be for any Fox programming ("Fox Promos"), including without limitation, any FCN
programming, for broadcast in Station's non-Fox programming. Licensee shall use
its good faith, best efforts to provide an on-air promotional schedule
consistent with Fox's recommendations and in coordination with Fox, and to
budget Station's annual advertising funds so as to enable Station to
participate, on a year-round basis, in Fox's "co-op" advertising plan. Without
limitation to the foregoing, in each instance, if any, that Fox determines that
Station's "Sweeps Rating" (as defined below) is below the average Sweeps Rating
for all Fox affiliated stations, then Station shall be deemed to be "Performing
Below Average" and shall, within 15 days of Fox giving Licensee written notice
thereof, commence full compliance with the following: (1) Station shall not
broadcast, during each one-half hour of all periods that Station is not
broadcasting Fox programming (the "Non-Fox Time Periods"), less than one
(1)thirty (30) second promotional announcement (or promotional announcements
aggregating 30 seconds, to the extent Fox so elects) for Station's local,
syndicated or Fox programming, and (2) during all Non-Fox Time Periods, Licensee
shall broadcast Fox Promos for not less than 45% of 100% (the "Applicable
Percentage") of the total, aggregate "gross ratings points" for all the
promotional announcements broadcast by Licensee ("Aggregate Promotional GRP's")
within the Non-Fox Time Periods (the specific Fox Promos broadcast by Licensee
and number of broadcasts of each Fox Promo shall be, to the extent Fox elects,
as specified by Fox, and the broadcasts of the Fox Promos shall be made so that
the GRP's allocated thereto are distributed fairly and reasonably across the
Non-Fox Time Periods); provided, however, that if Station's Sweeps Rating ranks
Station within the bottom 50% (ranked highest to lowest) of those Fox affiliated
stations that are Performing Below Average, then the Applicable Percentage for
Station shall be not less than 55% of 100% of said Aggregate Promotional GRP's.
Licensee's full compliance with the immediately foregoing sentence shall
continue until Licensee is no longer Performing Below Average, as determined by
the most recent Sweeps Rating. For purposes hereof, the "Sweeps Rating" shall
mean for
<PAGE> 4
each station the average A.C. Nielsen rating for the most-current completed
"sweeps" period for Adults 18-49 for all prime time hours programmed by Fox.
Licensee agrees to maintain complete and accurate records of all promotional
announcements broadcast as provided herein. Within two (2) weeks following each
request by Fox therefor, Licensee will submit copies of all such records to Fox.
Notwithstanding anything to the contrary in (and without limitation to the above
provisions of) this subparagraph 4(a), and as a material term of this Agreement,
Licensee shall, in coordination with Fox, cause Station to broadcast in all of
Station's prime-time access periods, not less than one (1) 30 promotional
announcement for Fox programming provided by Fox hereunder.
(b) In addition to providing the promotion announcements referred to above, Fox
shall make available to Licensee, at reasonable costs, such other promotional
and sales materials as Fox and Licensee may mutually consider appropriate.
Licensee shall not delete any copyright, trademark, logo or other notice, or any
credit, included in any materials delivered pursuant to this paragraph or
otherwise, and Licensee shall not exhibit, display, distribute or otherwise use
any trademark, logo or other material or item delivered pursuant to this
paragraph or otherwise, except as instructed by Fox at the time.
(c) Licensee shall make annually, in accordance with each A.C. Nielsen "Sweeps"
co-op plan determined by Fox during the term of this Agreement, not less than an
amount determined by Fox in its sole discretion (the "Co-Op Commitment") in
local cash expenditures to promote Fox on Station. Subject to Licensee's full
performance of its obligations under this Paragraph 4, Fox will reimburse
Licensee for 50% of such cash expenditures as are made in accordance with Fox's
co-op plan, up to a maximum annual Fox contribution equal to 50% of the Co-Op
Commitment.
5. Commercial Announcements:
(a) Licensee may include in each individual Fox program the same number and
length of commercial announcements (including station breaks) as Fox provides
generally in that program for its affiliates on a national basis.
(b) Fox shall determine the placement, timing and format of Fox's and Licensee's
commercial announcement. Fox shall have the right to include Commercial
announcements in all of the commercial time available in each hour of the
programming other than that expressly allocated to Licensee in this Agreement.
(c) Licensee's broadcast over the Station of all commercial announcements
included by Fox in Fox Programming is of the essence of this Agreement, and
nothing contained in Paragraph 3 above or elsewhere in this Agreement (other
than Paragraph 11 below) shall limit Fox's rights or remedies at law or
otherwise relating to failure to so broadcast said commercial announcements.
Licensee agrees to maintain complete and accurate records of all commercial
announcements broadcast as provided in this Agreement. Within two (2) weeks
following each request by Fox therefor, Licensee will submit copies of all such
records to Fox.
6. Supplemental Agreements: Each of the 1998 FKW Supplemental Agreement and 1998
NFL Supplemental Agreement (collectively "Supplemental Agreements"), between
Elcom of Ohio, Inc. and Fox, are in full force and effect, and this Agreement is
now deemed the applicable Station Affiliation Agreement referenced in those
Supplemental Agreements.
7. Force Majeure: Neither Fox nor FCN shall be liable to Licensee for failure to
supply any programming or any part thereof, nor shall Licensee he
<PAGE> 5
liable to Fox or FCN for failure to broadcast any such programming or any part
thereof, by reason of any act of God, labor dispute, non-delivery by program
suppliers or others, failure or breakdown of satellite or other facilities,
legal enactment, governmental order or regulation or any other similar or
dissimilar cause beyond their respective control ("force majeure event"). If,
due to any force majeure event(s) Fox substantially fails to provide the
programming to be delivered to Licensee under Paragraph 1 above, or Licensee
substantially fails to broadcast such programming as scheduled by Fox, for 4
consecutive weeks, or for 6 weeks in the aggregate during any 12-month period,
then the other party hereto (the "unaffected party") may terminate this
Agreement upon thirty (30) days prior written notice to the party so failing,
which notice may be given at any time prior to the expiration of 7 days after
the unaffected party's receipt of actual notice that the force majeure event(s)
has ended.
8. Assignment: This Agreement shall not be assigned by Licensee without the
prior written consent of Fox, and any permitted assignment shall not relieve
Licensee of its obligations hereunder. Any purported assignment by Licensee
without such consent shall be null and void and not enforceable against Fox,
Licensee also agrees that if any application is made to the Federal
Communications Commission pertaining to an assignment or a transfer of control
of Licensee's license for the Station, or any interest therein, Licensee shall
immediately notify Fox in writing of the filing of such application. Except as
to "short form" assignments or transfers of control made pursuant to Section
73.3540(f) of the Rules and Regulations of the Federal Communications
Commission, Fox shall have the right to terminate this Agreement effective upon
thirty (30) days notice to Licensee and the transferee or assignee of such
termination, which notice may be given at any time within ninety (90) days after
the later occurring of: (a) the date on which Fox learns that such assignment or
transfer has become effective, or (b) the date on which Fox receives written
notice of such assignment or transfer, or (c) the effective date of this
Agreement (the foregoing termination provision shall apply to any assignments or
transfers of control that become effective at any time on or after the beginning
of the sixth month prior to the effective date of this Agreement). Licensee
agrees, that upon Fox's request, Licensee shall procure and deliver to Fox, in
form satisfactory to Fox, the agreement of the proposed assignee or transferee
that, upon consummation of the assignment or transfer of control of the
Station's authorization, the assignee or transferee will assume and perform this
Agreement in its entirety without limitation of any kind. If Licensee fails to
notify Fox of the proposed assignment or transfer of control of said Station's
authorization, or fails to procure the agreement of the proposed assignee or
transferee in accordance with this Paragraph, then such failure shall be deemed
a material breach of this Agreement.
9. Unauthorized Copying: Licensee shall not, and shall not authorize others to,
record, copy or duplicate any programming or other material furnished by fox
hereunder, in whole or in part, and shall take all reasonable precautions to
prevent any such recordings, copying or duplicating. Notwithstanding the
foregoing, if Station is located in the Mountain Time Zone, Licensee may
pre-record programming from the satellite feed for later telecast at the times
scheduled by Fox. Licensee shall erase all such pre-recorded programming
promptly after its scheduled telecast.
10. Term: The term of this Agreement shall commence on the date that Licensee
has purchased and obtained the FCC license for ownership and control of Station
and shall continue until October 11, 2001 (the "initial period"). Any presently
existing Station Affiliation Agreements between Fox and Licensee with respect to
the Station and FCN and Licensee with respect to the Station shall be deemed
terminated as of the commencement of this Agreement; provided, however, that the
following, between Fox and Licensee, shall remain
<PAGE> 6
in full effect: (1) any presently existing Network Non-Duplication Amendment to
any such existing Station Affiliation Agreement (which shall be deemed a part of
this Agreement and is incorporated herein by this reference), (2) any existing
Agreement and Amendment to Station Affiliation Agreement with respect to the
retransmission arrangements (the "Retransmission Agreement") and (3) the
provisions of any existing NFL Amendment that relate to the Retransmission
Agreement. Notwithstanding anything to the contrary contained in this Agreement,
upon the termination or expiration of the term of this Agreement, all of
Licensee's and Station's rights to broadcast or otherwise use any Fox program or
any trademark, logo or other material or item hereunder shall immediately cease
and neither Licensee nor Station shall have any further rights whatsoever with
respect to any such program, material or item.
11. Applicable Law: The obligations of Licensee and Fox under this Agreement are
subject to all applicable federal, state, and local laws, rules and regulations
(including, but not limited to, the Communications Act of 1934, as amended, and
the rules and regulations of the Federal Communications Commission) and this
Agreement shall be deemed to have been negotiated and entered into, and this
Agreement and all matters or issues collateral thereto shall be governed by, the
law of the State of California applicable to contracts negotiated, executed and
performed entirely within that state. With respect to programs offered or
already contracted for pursuant to this Agreement nothing in any other Paragraph
hereof shall be construed to prevent or hinder Licensee from (a) rejecting or
refusing Fox programs which Licensee reasonably believes to be unsatisfactory,
unsuitable or contrary to the public interest, or (b) substituting a program
which, in Licensee's opinion, is of greater local or national importance;
provided, however, Licensee shall give Fox written notice of each such rejection
or substitution, and the justification therefor at least 72 hours in advance of
the scheduled broadcast, or as soon thereafter as possible (including an
explanation of the cause for any lesser notice). Programming will be deemed to
be unsatisfactory or unsuitable only if it (i) is delivered in a form which does
not meet accepted standards of good engineering practice; (ii) does not comply
with the rules and regulations of the FCC; or (iii) is programming which
Licensee reasonably believes would not meet prevailing contemporary standards of
good taste in its community of license. In view of the limited nature of the Fox
programming within each daypart as specified in subparagraph 3(b) above,
Licensee does not foresee any need to substitute programming of greater local or
national importance for Fox programming except to present locally originated,
non-entertainment, non-religious timely public interest programming, such as
election coverage, live coverage of fast-breaking news events, political
debates, town hall-type meetings and telethons that serve the public interest
and that are approved by Fox, which approval shall not be unreasonably withheld.
Notwithstanding anything to the contrary expressed or implied herein, the
parties acknowledge that Station has the ultimate responsibility to determine
the suitability of the subject matter of program content, including commercial,
promotional or public service announcements.
12. Station Acquisition by Fox: If Fox or any of Fox's parent affiliated,
subsidiary or related companies or other entities enters into any agreement to
acquire any significant ownership and/or controlling interest in any television
broadcast station licensed to any community within Station's television market,
then Fox shall have the right at any time after that agreement is made, to
terminate this Agreement upon not less than sixty (60) days notice to Licensee.
Said termination shall be effective as of such date as Fox shall designate in
said notice.
13. Change in Operations: If at any time Station's transmitter location, power,
frequency, programming format, hours of operation, technical quality of
transmissions or any other material aspect of Station's operations is such
<PAGE> 7
that Fox determines in its reasonable judgement that Station is of less value to
Fox as a broadcaster of Fox programming than at the date of this Agreement then
Fox shall have the right to terminate this Agreement upon thirty (30) days prior
written notice to Licensee.
14. Non-Liabilitv of Board Members: To the extent the Fox Broadcasting Company
Affiliates' Association Board of Governors (the "Board") and its members are
acting in their capacity as such, then the Board and each such member so acting
shall not have any obligation or legal or other liability whatsoever to Licensee
in connection with this Agreement, including without limitation, with respect to
the Board's or such member's approval or non-approval of any matter, exercise or
non-exercise of any right or taking of or failing to take any other action in
connection therewith.
15. Warranties and Indemnities:
(a) Fox represents and warrants that Station's broadcast, in accordance with
this Agreement of any Fox programming provided by Fox to Station shall not
violate or infringe upon the trade name, trademark, copyright, literary or
dramatic right, or right of privacy or publicity of any party, or constitute a
libel or slander of any party; provided, however, that the foregoing
representations and warranties shall not apply: (1) to public performance rights
in music, (2) to any material furnished or added by any party other than Fox
after delivery of the programming to Station or (3) to the extent such
programming is changed or otherwise affected by deletion of any material by any
party other than Fox after delivery of the programming to Station. Fox agrees to
indemnify and hold harmless Station and its parents, affiliates, subsidiaries,
successors and assigns, and the respective owners, officers directors, agents
and employees of each, from and against all liability, actions, claims, demands,
losses, damages or expenses (including reasonable attorneys' fees, but excluding
Licensee's or Station's lost profits or consequential damages, if any) caused by
or arising out of Fox's breach of the representations and warranties set forth
in the foregoing sentence. Fox makes no representations, warranties or
indemnities, express or implied, except as expressly set forth in this
subparagraph (a).
(b) Without limitation to any of Licensee's other obligations and agreements
under this Agreement, Licensee agrees to indemnify and hold harmless Fox and its
parents, affiliates, subsidiaries, successors and assigns, and the respective
owners, officers, directors, agents and employees of each, from and against all
liability, actions, claims, demands, losses, damages or expenses (including
reasonable attorneys' fees, but excluding Fox's lost profits or Fox's
consequential damages, if any) caused by or arising out of any matters excluded
from Fox's representations and warranties by subparagraphs (a)(1), (2) or (3)
above, or any breach of any of Licensee's representations, warranties or
agreements hereunder or any programming broadcast by Station other than that
provided by Fox hereunder.
(c) The indemnitor may assume, and if the indemnitee requests in writing shall
assume, the defense of any claim, demand or action covered by indemnity
hereunder, and upon the written request of the indemnitee, shall allow the
indemnitee to cooperate in the defense at the indemnitee's sole cost and
expense. The indemnitee shall give the indemnitor prompt written notice of any
claim, demand or action covered by indemnity hereunder. If the indemnitee
settles any claim, demand or action without the prior written consent of the
indemnitor, the indemnitor shall be released from the indemnity in that
instance.
16. Notices: All notices to each party required or permitted hereunder to be in
writing shall be deemed given when personally delivered (including, without
limitation, upon delivery by overnight courier or other messenger or
<PAGE> 8
upon receipt of facsimile copy), upon the date of mailing postage prepaid or
when delivered charges prepaid to the telegraph office for transmission,
addressed as specified below, or addressed to such other address as such party
may hereafter specify in a written notice given as provided herein. Such notices
to Licensee shall be to the address set forth for Licensee on page 1 of this
Agreement. Such notices to Fox shall be to: Fox Broadcasting Company, 10201 West
Pico Boulevard, Los Angeles, CA 90035, Attn: Network Distributions; with a copy
to: Fox Broadcasting Company, 10201 West Pico Boulevard, Los Angeles, CA 90035,
Attn: Legal Affairs.
17. Retransmission Consent: Without Fox's prior written approval, Licensee shall
not grant its consent to the transmission or retransmission, by any cable
system, other multichannel video programming distributor, telephone system,
microwave carrier, wireless cable system, satellite or other technology wherever
located, of Stations broadcast of any Fox programming In connection with the
foregoing, Fox hereby consents as follows:
With respect to any person or entity that (i) provides or intends to provide
retransmission of video programming to subscribers (whether on a common carrier
basis or otherwise by means of a radio-based system, an integrated cable system,
a certified open video system or any other means) and (ii) has not previously
been given retransmission consent pursuant to any prior Fox Affiliation
Agreement for Station, as amended (a "New Operator") Fox hereby authorizes
Licensee to grant the New Operator consent, to retransmit the Fox programming
Station carries, for any period of time ending on or before May 31, 1999. To
protect the integrity of Fox's locally based distribution system, this consent
remains subject to the existing restriction that no Fox affiliate may commence
negotiations with respect to, or enter into, any retransmission consent
agreement with any New Operator until the Home ADI Fox affiliate has executed
its retransmission agreement with the New Operator. "Home ADI" shall have the
same definition as the local commercial television stations' "Market" as
specified in Section 76.55(e) of the FCC's rules, and if the New Operator
requesting retransmission consent is distributing (or seeks consent to
distribute) programming to more than one ADI, then Fox shall determine which Fox
affiliate(s) is (are) the Home ADI Fox Affiliate(s) with respect thereto and the
order in which the applicable Fox affiliates shall have the right to enter into
retransmission consent agreements with that New Operator. Neither this Agreement
nor any grant by Licensee of retransmission consent conveys any license or
sublicense in or to the copyrights of Fox programming, and Fox shall in no way
be a party to or incur any duty or other obligation in connection with any
retransmission consent granted by Licensee.
18. Change In Fox Operations: Notwithstanding anything to the contrary in this
Agreement and without limitation to any of Fox's rights, Fox reserves the right
to make changes in its operations (and/or terms of doing business) that will be
applicable to its affiliates generally. Fox shall notify Licensee in writing
that Fox has made such change and the effective date thereof, and as of said
effective date, this Agreement will be deemed amended to reflect such change,
unless within 10 days of Fox's notification to Licensee of such change, Licensee
notifies Fox in writing that Licensee rejects such change. If Licensee does so
reject said change, then Fox shall have the right for a period of six months
from Fox's receipt of Licensee's rejection notice to terminate this Agreement by
providing not less than ninety (90) days' written notice to Licensee.
19. Miscellaneous:
(a) Nothing contained in this Agreement shall create any partnership
association, joint venture, fiduciary or agency relationship between Fox and
Licensee.
<PAGE> 9
(b) No waiver of any failure of any condition or of the breach of any obligation
hereunder shall be deemed to be a waiver of any preceding or succeeding failure
of the same or any other condition, or a waiver of any preceding or succeeding
breach of the same or any other obligation.
(c) In connection with Fox programming, Station shall at all times permit Fox,
without charge, to place, maintain and use on Station's premises, at Fox's
expense, such reasonable amounts of devices and equipment as Fox shall require,
in such location and manner, as to allow Fox to economically, efficiently and
accurately achieve the purposes of such equipment. Station shall operate such
equipment for Fox, to the extent Fox reasonably requests, and no fee shall be
charged by Station therefor.
(d) This Agreement constitutes the entire understanding between Fox and Licensee
concerning the subject matter hereof and shall not be amended, modified,
changed,renewed, extended or discharged except by an instrument in writing
signed by Fox and Licensee or as otherwise expressly provided herein. Fox and
Licensee each hereby acknowledges that neither is entering into this Agreement
in reliance upon any term, condition, representation or warranty not stated
herein, and that this Agreement replaces any and all prior and contemporaneous
agreements, whether oral or written, pertaining to the subject matter hereof.
All actions, proceedings or litigation brought against Fox by Licensee shall be
instituted and prosecuted solely within the County of Los Angeles, California.
Licensee hereby consents to the jurisdiction of the state courts of California
and the federal courts located in the Central District of California as to any
matter arising out of, or related to this Agreement.
(e) Each and all of the several rights and remedies of each party hereto under
or contained in or by reason of this Agreement shall be cumulative, and the
exercise of one or more of said rights or remedies shall not preclude the
exercise of any other right or remedy under this Agreement, at law, or in
equity. Notwithstanding anything to the contrary contained in this Agreement, in
no event shall either party hereto be entitled to or recover any lost profits or
consequential damages because of a breach or failure by the other party, and
except as expressly provided in this Agreement to the contrary, neither Fox nor
Licensee shall have any right against the other with respect to claims by any
third person or other third entity.
(f) It is understood that FCN is indemnifying Fox in connection with all costs,
expenses, liabilities and other matters relating to the FCN programming covered
hereunder,
(g) Paragraph headings are inserted for convenience only and shall not be used
to interpret this Agreement or any of the provisions hereof or given any legal
or other effect whatsoever.
(h) Licensee acknowledges that Station's rights contained in this Agreement are
subject to and must be exercised consistent with the rights conveyed to Fox by
the NFL, the NHL or any other licensor of programming delivered under this
Agreement and any limitations and restrictions thereon.
20. News Agreement:
(a) As material terms of this Agreement: (i) whether or not Licensee broadcasts
a local newscast program on Station, Licensee shall continue to pay to Fox News
Network L.L.C. ("FNN"), throughout the term of this Agreement, any and all
license fees provided under the News Service Agreement dated January 20, 1999,
between Licensee and FNN (the "News Agreement") attached hereto as Exhibit E and
incorporated herein by this reference, and
<PAGE> 10
(ii) Licensee shall provide FNN with local breaking news footage, on a timely
basis, in accordance with the terms and conditions of the News Agreement.
(b) Licensee shall simultaneously with the execution of this Agreement execute
and return with this Agreement four (4) copies of the News Agreement.
(c) If, as provided for under Paragraph 5 of the News Agreement, Licensee
rejects any "New Formula" (relating to a licensee fee or otherwise) that FNN
proposes will be in effect at any time on or after March 31, 2001, Fox shall
have the right, at any time after that rejection, to terminate this Agreement
upon not less than 60 days prior notice to Licensee. Without limitation to any
provision of this Agreement or of the News Agreement any breach by Licensee of
the News Agreement will be a breach of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.
Fox Broadcasting Company STC License Company
("Fox") ("Licensee")
By: /s/ Dana Corbi By: /s/ David A. Fitz
------------------ ---------------------
Title: President Title: CFO
Network Distributor
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Exhibit 10.32
AMERICAN FEDERATION OF TELEVISION AND
RADIO ARTISTS (AFTRA)
and
WTOV-TV
January 29, 1999
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TABLE OF CONTENTS
<TABLE>
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AFTRA/WTOV-TV MINIMUM BASIC AGREEMENT FOR NEWSROOM EMPLOYEE - 1999-2002......................1
1. BARGAINING UNIT............................................................1
(a) Unit:.............................................................1
(b) Temporary Employees:..............................................1
(c) Probationary Period:..............................................2
2. REPRESENTATION.............................................................2
3. UNION SHOP.................................................................2
4. ADMISSION TO PREMISES......................................................2
5. MINIMUM TERMS: WAIVERS.....................................................3
6. DISCRIMINATION.............................................................3
7. MANAGEMENT RIGHTS/RULES REGULATIONS........................................3
Individual Agreements......................................................4
8. ARBITRATION................................................................5
9. NO STRIKE CLAUSE...........................................................6
10. SECONDARY STRIKE...........................................................6
11. GOVERNMENTAL REGULATIONS...................................................6
12. TERM OF AGREEMENT..........................................................7
13. TITLE OF AGREEMENT.........................................................7
14. WORK WEEK..................................................................7
15. OVERTIME...................................................................8
16. MEAL PERIOD................................................................8
17. REST BETWEEN STAFF STRETCHES..............................................8
18. STAFF DUTIES...............................................................9
Reporter:..................................................................9
Videographer:.............................................................10
Anchor/Reporter/Producer..................................................10
Weather and Sports Anchors:...............................................11
Producers.................................................................11
19. HAZARDOUS WORK AND ASSIGNMENTS............................................12
20. TRAVELING TIME AND EXPENSE................................................12
21. VACATIONS AND HOLIDAYS....................................................12
A. Vacations:.......................................................12
B. Holidays:........................................................13
22. TERMINATION OF EMPLOYMENT.................................................14
23. LAYOFFS...................................................................15
24. LEAVE OF ABSENCE..........................................................15
25. FAMILY AND MEDICAL LEAVE..................................................15
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<TABLE>
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26. RE-EMPLOYMENT AFTER MILITARY SERVICE......................................16
27. OUTSIDE EMPLOYMENT........................................................16
28. SICK LEAVE AND FUNERAL LEAVE..............................................16
29. JURY DUTY.................................................................17
30. HEALTH BENEFITS...........................................................17
31. DEFERRED INCOME PLAN......................................................18
32. SALARIES..................................................................18
MINIMUM WEEKLY ENTRY LEVEL SALARIES FOR NEW
EMPLOYEES (HIRED AFTER JANUARY 29, 1996)................................18
STORY FEES................................................................19
33. PART-TIME NEWSPERSONS.....................................................19
34. NOTIFICATION TO AFTRA.....................................................20
35. PERFORMANCE BY NONBARGAINING UNIT PERSONNEL...............................20
36. CHECK-OFF.................................................................20
37. TRANSFER OF OWNERSHIP.....................................................20
38. COMPLETE AGREEMENT........................................................21
39. LAWS OF OHIO..............................................................21
40. RATIFICATION..............................................................21
</TABLE>
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AFTRA/WTOV-TV MINIMUM BASIC AGREEMENT
FOR NEWSROOM EMPLOYEE - 1999-2002
AGREEMENT made as of January 29, 1999, between AMERICAN FEDERATION OF
TELEVISION AND RADIO ARTISTS, and its PITTSBURGH LOCAL, a voluntary association
organized and existing under the State of New York and having its principal
offices at 260 Madison Avenue, New York, New York 10016 (hereinafter called
"AFTRA"), and STC BROADCASTING CO. , owner of WTOV-TV, located in Steubenville,
Ohio (hereinafter called "COMPANY" or WTOV-TV).
In consideration of the covenants and agreements herein contained. it
is agreed as follows:
1. BARGAINING UNIT
(A) UNIT:
This Agreement applies to all full-time and regular part-time
newsroom employees now and hereinafter employed by the
Company at WTOV-TV (herein called "newspersons") excluding
all office clerical employees, interns, the assistant news
director/executive producer, the assignment editor/executive
producer, non-news professional employees, supervisors as
defined in the Labor Management Act, as amended, and all
other non-news employees. The Company warrants it is the sole
owner and operator of station WTOV-TV.
(B) TEMPORARY EMPLOYEES:
A temporary employee is one hired by the Company to
accommodate temporary openings resulting from promotions,
terminations, vacations, leaves of absence, extended
illnesses or significant or unexpected fluctuations in the
work load not to exceed ninety (90) days unless extended by
mutual agreement which consent shall not be reasonably
withheld. Temporary employees hired by the Company, who
subsequently are hired as regular employees within thirty
(30) days beyond the ninety (90) days shall accrue seniority
as of temporary hire. Temporary employees shall be covered by
all terms of this Agreement except for protection relating to
just cause for discipline or discharge, "fringe benefits",
i.e., medical insurance, sick-leave, vacation, etc. and shall
not be covered by the union shop provision until they become
employees. Temporary employees shall not be hired to
permanently replace regular full or part-time bargaining unit
employees and shall be laid-off before any regular seniority
employees in the same classification can be laid off.
Overtime will be offered to regular full-time and part-time
employees in the same classification before any temporaries.
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(C) PROBATIONARY PERIOD:
New employees shall work under the provision of this
Agreement but shall be employed on a trial basis for ninety
(90) days. This period may be extended by the mutual
agreement of the Company, AFTRA and the individual employee.
During the probationary period, the employee may be
terminated with or without cause and without recourse to the
grievance and arbitration machinery.
2. REPRESENTATION
AFTRA warrants, represents and agrees that it represents for
collective bargaining purposes, a majority of the newspersons employed
by the Company at WTOV-TV. Upon such warranties, representations and
agreements by AFTRA, the Company hereby recognizes AFTRA as the
exclusive collective bargaining agency.
3. UNION SHOP
(A) It is agreed that during the term of this Agreement, the
Company will employ and maintain in its employment, only such
newspersons covered by this Agreement as are members of AFTRA
in good standing or as shall make application for membership
not later than thirty (30) days after the date of hiring as
such, or the effective date of this Agreement, whichever is
later.
(B) The provisions of this paragraph shall be subject to the
Labor Management Relations Act, as amended.
(C) AFTRA agrees that it is and will continue to be an open union
and that it will keep its membership rolls open and will
admit to membership all eligible newspersons engaged by the
Company. AFTRA agrees not to impose unreasonable entrance
fees or dues upon its members.
(D) The union shop provision of this Section and other terms of
this Agreement shall not apply to interns who are college
students working at the station as part of a credit-bearing
course provided that such interns shall not be used to
permanently replace any bargaining unit member or position
and provided further that no more than five (5) interns may
be engaged at any one time.
4. ADMISSION TO PREMISES
(A) Any duly authorized and accredited representative of AFTRA
shall be admitted to the premises of the Company at
reasonable times to check the performance by the Company of
this Agreement; but such checking shall be done so as not to
interfere with the conduct of the Company's business and
after making an
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appointment with the Station's Management for this purpose.
No more than two such representatives shall be admitted for
this purpose.
(B) The Company agrees that only the following persons and no
others shall be recognized to represent AFTRA for purposes of
administering this Agreement or for any other purpose:
National Executive Secretary, Pittsburgh Local Executive
Secretary, National Representative and such other person as
AFTRA may designate hereafter by written notice to the
Company. The Company agrees that AFTRA shall have no
liability by reason of or responsibility for the actions of
any other than those herein designated.
5. MINIMUM TERMS: WAIVERS
The Company agrees that the minimum terms and conditions governing the
employment of newspersons by the Company are those contained in this
Agreement and the Company agrees that, except as permitted by this
Agreement, it will not enter into any contract with, or employ any
newsperson upon terms and conditions less favorable to the newsperson
than those set forth herein. The parties further agree that nothing in
this Agreement shall be deemed to prevent any newsperson from
negotiating for or obtaining better terms than the minimum terms
provided for herein. The Company agrees not to reduce such terms and
conditions during the course of the newsperson's personal service
agreement. The Company agrees not to require any newsperson to do any
act that would violate any internal rule of AFTRA, as long as such
rule of AFTRA is not inconsistent with or violative of any term or
provision of this Agreement.
6. DISCRIMINATION
Both the Company and the Union subscribe to the principle that there
should be no discrimination against any person because of race, creed,
color, national origin, religion, sex, age, veteran status or
disability, to the extent prohibited by applicable federal, state or
local law.
7. MANAGEMENT RIGHTS/RULES REGULATIONS
The Company, except as they clearly and explicitly abridged by any
provision of this Agreement, reserves and retains exclusively all of
its normal and inherent rights with respect to the management of the
business, whether exercised or not, including, but not limited to, its
rights to determine, and from time to time redetermine, the number,
location and types of its operations and locations, and the methods,
processes, and materials to be employed, to introduce new and improved
methods; to discontinue conduct of its business or operations in whole
or in part; to select and direct the working forces in accordance with
the requirements determined by management to be necessary to the
orderly, efficient and economical operation of the business, such
measures to be administered without discrimination against any
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Employee; management reserves the right to maintain and require
methods of record keeping, provided exercise of such rights shall not
be in violation of other articles contained within this Agreement. The
Company's right to terminate employment or otherwise discipline for
just cause shall include, but not to be limited to, the right to
terminate or discipline employees for possession or use of alcohol or
illegal drugs on Company premises or working under their influence or
refusing to submit to a blood or urine test to determine such
influence if the Company has reasonable cause to believe that the
employee has reported to work or is working under their influence. (In
the testing procedure, the parties shall designate a testing
laboratory and the employee shall be permitted to submit a split
sample. Employees who test positive on the first incident shall be
entitled to enroll in a rehabilitation program on a leave of absence
instead of discharge.)
INDIVIDUAL AGREEMENTS
The Employer shall have the right to bargain, and execute individual
employment agreements, with covered newspersons. Such agreements shall
not provide for wages and benefits less favorable than those provided
for in this Agreement, but such agreements may provide for restrictive
covenants, i.e. non-compete clauses, expiration dates, and such other
terms and conditions acceptable to the individual newsperson and the
Company.
As of July 1, 1998, and continuing thereafter, if the Station chooses
to enter into a personal service contract with an employee covered by
the Collective Bargaining Agreement providing a base salary of $25,000
or more per year, such personal service contract will provide that the
employee will be eligible for compensation for services beyond 40
hours per week, but may also provide that the parties to the personal
service contract expressly agree, on an annual basis, to credit
against such claims of overtime any, or all, of the following items
which may be separately negotiated in the personal service contract:
a. Any annual incentive bonus which is actually paid to
the employee.
b. Any signing bonus (prorated for the number of years
covered by the signing bonus as it relates to the
term of the contact).
c. Any special airfare, transportation or other such
special financial "perks" which have value as
compensation.
d. Any additional paid vacation or personal leave days
allowed and used under such personal service
contract which are greater in number than the amount
the employee would have received under the AFTRA
Agreement.
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Any, all or none of the above items can be used as credit (on a
dollar-for-dollar basis) against overtime payments based on the
agreement of the parties. Such personal service contract must provide
for the above provisions, in writing, in order for the Station to
apply such credits against any claims of overtime.
In the event that the Station enters into a personal service contract
with an employee covered by the AFTRA Agreement, and such personal
service contract provides for a salary of an amount less than $25,000
per year, such personal service contract shall provide for the payment
of overtime for such excess hours actually worked. Any other extra
compensation items such as those noted above, which may be contained
in the separately negotiated personal service agreement shall not be
allowed as a credit against overtime payments.
8. ARBITRATION
In the event there should be any controversy or dispute arising with
respect to the interpretation or breach of this contract between AFTRA
and the Company, AFTRA and the Company agree promptly and in good
faith, to attempt to settle such dispute amicably. In the event that
they are unable to do so, any such controversy or dispute shall be
submitted in writing specifying the specific provision of the
Agreement allegedly breached and the relief sought. If the controversy
or dispute continues it shall be settled by arbitration, each party
bearing half the expense of the arbitrator, the hearing room and
transcript when requested by both parties. Enforcement of the award
may be obtained in the federal court having jurisdiction.
In referring the matter to arbitration, the aggrieved party shall be
required within thirty (30) days after the acts or conduct that gave
rise to the dispute, to request under the then current Voluntary Labor
Arbitration Rules of the Federal Mediation and Conciliation Services
(Pittsburgh Office) a list of available arbitrators, and if possible,
the parties shall select a mutually agreeable arbitrator from this
list using the mutual strike-off procedure with the Union proceeding
first. A final decision of the arbitrator shall be made speedily,
shall be transmitted in writing by registered mail to the parties,
such decision shall be binding upon both parties and each of them will
promptly comply. AFTRA will aid the enforcement of any awards against
its members by appropriate disciplinary action. The powers of the
arbitrator are specifically limited to a determination of the meaning
or the application of this Agreement including the arbitration clause
and he shall have no power to modify or amend this Agreement nor to
render a decision finding a violation of this Agreement unless it is
based on a specific provision of this Agreement, nor to rule on the
merits of any dispute which is not submitted in the format and time
limits specified herein.
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Nothing herein contained shall prohibit the Company and newsperson
from resolving their dispute on an individual basis so long as it does
not create a precedent binding on AFTRA or other employees before any
grievance is filed
9. NO STRIKE CLAUSE
(A) AFTRA agrees that during the term of this contract and any
extension thereto and unless the Company is refusing to
comply with a final arbitration award rendered hereunder,
newspersons will perform their obligations hereunder and will
not strike against, picket, refuse to cross a picket line,
boycott nor withhold any services from the Company.
(B) The Company agrees there will be no lock-out of newspersons
during the term of this Agreement and any extension thereto.
10. SECONDARY STRIKE
In no case shall newspersons strike against, picket or boycott nor
withhold any services from the Company by reason of the reception,
broadcast and transmission by the Company of programs which persons
are used who are employed by others than the Company, irrespective of
whether such programs originate at a point at which AFTRA or others
are striking, or are broadcast over the Company's facilities on behalf
of a sponsor or agency against whom AFTRA or others are striking.
The Company agrees that in the event AFTRA is striking on behalf of
members (not limited provided in Paragraph 1 hereof), performing
duties at any radio or television station, the Company will not,
without the consent of AFTRA, require its newspersons to render
services in programs excess of the number of programs that are
normally made available to such station, where such excess
broadcasting involves the services of newspersons is designed to
replace broadcasts which would, in the absence of such strike, be of
local origination at the station where such strike exists.
The Company further agrees that newspersons shall not be required to
go to any other Company station where an authorized strike is in
progress.
11. GOVERNMENTAL REGULATIONS
This Agreement and all of its provisions are subject to the rules,
regulations and orders of the Federal Communications Commission or any
other governmental body having jurisdiction over the Company's
broadcasting license for Station WTOV-TV.
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12. TERM OF AGREEMENT
This Agreement extends to January 28, 2002, and from year to year
thereafter unless notice of termination is given by either party at
least sixty (60) days prior to expiration.
13. TITLE OF AGREEMENT
This Agreement shall be known as the AFTRA/WTOV-TV Minimum Basic
Agreement for Newspersons, 1999-2002.
The Company agrees that the following are the minimum terms and
conditions which govern employment of newspersons now or hereafter
employed by the Company at Station WTOV-TV.
14. WORK WEEK
(A) The work week of a newsperson shall consist of 40 hours in
consecutive days within a seven-day period. The Company, at
its discretion, may assign newspersons to work on a flexible
scheduling basis so as to provide any combination of days and
hours worked per day as long as such scheduling results in
the employee having at least two consecutive full days off in
each week and the required rest between staff stretches. For
example, the Company may schedule newspersons for a work
schedule of five 8-hour days, four 10-hour days, or a
combination of two 12-hour work days with two 8-hour work
days. The Company may require the rendition of services for
more than 40 hours or more than 5 days in any seven-day
period, subject to the payment of overtime as hereinafter
provided.
Except as noted in Section 7 above, overtime shall be paid
for hours worked in excess of 40 in one week or on a daily
basis in instances where the newsperson's regularly scheduled
work day (i.e., eight hours, ten hours or twelve hours for
the individual employee) is exceeded by that employee.
Modifications in such flexible scheduling for newspersons
shall be in accord with requirements noted in Subjection (e)
below and subject to the ten-day advance posting requirement.
(B) Adequate "prep" time shall be scheduled before on-the-air
work.
(C) The Company agrees to schedule the work week of each
newsperson so that his/her two consecutive days off in each
week shall permit him/her to be continuously absent from
employment not less than fifty-eight (58) hours.
(D) For payroll purposes only a "week" shall consist of seven (7)
consecutive days beginning with the commencement of
broadcasting on Monday at 4:30 a.m. Pay day shall be every
other Friday.
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(E) All work schedules shall be posted ten (10) days in advance.
Unless forty-eight (48) hour notice is received, any employee
whose schedule is changed shall receive a penalty payment of
five dollars ($5) for the first day changed except for
instances of sickness, jury duty, funeral or emergency leave
of the employee or other employees, or reasons beyond the
control of the Company not known prior to the schedule change
cut-off time for prior notification. Mutual agreement of the
employee and the Company is excepted.
15. OVERTIME
(A) Hours worked by any newsperson in any seven (7) consecutive
days starting with the first consecutive day scheduled for
the employee in excess of forty (40) hours shall be overtime.
Overtime will also be paid on a daily basis for hours worked
by employees in excess of their scheduled work day. Overtime
shall be paid for at the hourly rate of one and one-half
times 1/40 of the respective newsperson's weekly salary.
(B) The minimum assignment for a newsperson to perform duties on
his/her scheduled day off or on a regular work day not
contiguous to the regular schedule shall be not less than
four (4) hours.
16. MEAL PERIOD
The Company shall assign employees a 1/2 hour unpaid meal period in
addition to the eight hours worked each day. If the employee is unable
to take a 1/2 hour break because of the requirements of the assignment
on a particular day, such employee shall be paid for 1/2 hour
additional compensation, and will be permitted to eat while on duty.
17. REST BETWEEN STAFF STRETCHES
The first staff assignment of any newspersons shall begin not sooner
than eleven (11) hours after the conclusion of his/her last staff
assignment on the preceding day; except as a result of a change of
hours requested by the newsperson, or in the case where a newsperson
is scheduled temporarily by reason of the absence (except for
vacation) of another staff newsperson, or by reason of an occurrence
beyond the control of the Company. In all other cases, an amount
computed at the rate of one-half times 1/40th of the newsperson's
weekly salary shall, in addition to any other compensation, be paid to
the newsperson for all hours worked within the period which ends
eleven (11) hours after the conclusion of the last assignment of the
preceding day.
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18. STAFF DUTIES
A. For their weekly salary and within the regularly scheduled staff
stretch, the following are generally descriptive of the types of
duties of each employee category. The listing of these duties should
not be interpreted as creating a requirement that all the duties shall
be performed during a single staff stretch. Employees shall be given a
reasonable amount of time to perform their duties consistent with
delivery of a quality product and the efficient operation of the
station. Employees in each category may be assigned to perform duties
in other categories when needed by the Employer as long as they
possess the necessary qualifications and skills to perform such work.
REPORTER:
1. Initiating, researching, writing and/or reporting of stories,
updates, commentaries, special reports, series, documentaries
on tape or live.
2. Establishing and maintaining familiarity with at least the
local market and statewide issues, as well as individual
and/or best contracts and sources.
3. Interviewing persons connected with news and public service
programs.
4. Working with other news department employees when in pursuit
of and/or editing of news and public service programs.
5. Rewriting and editing material from outside sources such as
wire and network services, satellite feeds, newspapers,
public relations material and other agencies or institutions.
6. Assist the producer and/or photographer in developing ideas
for graphics and video effects.
7. Duties normally associated with desk assistance or assignment
editor, including but not limited to assigning stories,
gathering, writing and preparation of news material for use
by themselves or others.
8. Record, log and preview newsfeeds from network satellite
services and other incoming material on equipment provided
the Employer.
9. Duties normally associated with announcing, including but not
limited to, station identifications, promotion and public
service announcements in accordance with past practice.
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10. Putting news tapes in, order and deliver to control and
answering telephone, and operating teleprompter when those
who normally perform those tasks are unavailable.
VIDEOGRAPHER:
1. Photograph all news related material, live or on tape, edit
news related material record, edit and shoot "bumps" and
headlines or any other video that appears in news and public
service programs.
2. Working with other news department employees when in pursuit
of and/or editing of news and public service programs.
3. Assist the producer and/or reporter in developing graphics
and video effects.
4. Record, log and preview newsfeeds from network satellite
services and other incoming material on equipment provided by
the employer.
5. Oversee and monitor quality control with all news equipment
and news vehicles.
6. Performance of such other duties as news and program
requirements of Employer may necessitate including but not
limited to, putting news tapes in order and deliver to
control, answering telephone, operating teleprompter and
other newsroom tasks when those normally assigned to perform
such tasks are unavailable.
7. AFTRA's Jurisdiction over photographing live news outside of
the Steubenville studio shall not apply when the switching of
cameras is required.
ANCHOR/REPORTER/PRODUCER
1. Anchor live or taped newscasts and other news and public
service programs.
2. Produce newscasts, oversee the newsroom in the absence of
News Director, Assistant News Director or Executive
Producer/Assignment Editor when assigned.
3. Assignments related to the development and preparation of
newscasts, public service, elections and other local
programs, updates, cut-ins or bulletins.
4. Substitute for a sports or weather anchor/reporter when
regular coverage is not available provided that Company has
made a good faith effort to obtain a replacement.
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5. Perform all duties described for reporters when regular
coverage is not available.
6. Attend promotional events on behalf of the Station up to six
(6) per contract year.
WEATHER AND SPORTS ANCHORS:
1. Handle assignments normally covered by reporter,
anchor/reporter/producer.
2. May be assigned to any weather and/or sports related programs
or events as deemed necessary by the employer.
3. Perform all duties described for reporters, anchors or
producers when regular coverage is not available.
4. Attend promotional events on behalf of the Station up to six
(6) per contract year.
PRODUCERS
1. Coordinate newsroom, reassign late breaking stories, write
and edit all material for news and public service programs or
related programs, prepare all rundowns and other material
related to news programs.
2. Perform all duties described for reporters and
anchor/reporter/producer when regular coverage is not
available.
B. A newsperson who on certain days performs the duties of a lower paid
category shall not suffer a reduction in his/her rate of pay.
Additionally, a newsperson who performs the duties of a higher paid
category for ten consecutive work days shall thereafter receive the
higher category rate of pay for such additional days in which he or
she performs such work in that assignment.
C. Any news anchor required to Produce as well as appear on a program
will begin his/her shift at least three (3) hours prior to the
program.
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19. HAZARDOUS WORK AND ASSIGNMENTS
Without his/her consent, no newsperson shall be required to work under
conditions where there exists immediate imminent danger of bodily
harm. If such a condition exists, the newsperson shall call management
to discuss the situation as soon as they are out of such imminent,
immediate danger.
20. TRAVELING TIME AND EXPENSE
A proper allowance shall be included in the elapsed time for necessary
traveling time to and from remote points on location assignments, and
time spent at remote points to which a newsperson may be assigned by
the Company, it being understood and agreed that not less than eight
(8) elapsed hours shall be credited to such newsperson for each day
spent in transit and/or at such remote points on such assignment. No
other payment shall be required for time spent in traveling when
sleeping accommodations are furnished at remote points. The Company
will pay all reasonable, ordinary and necessary out-of-town traveling
expenses actually incurred as authorized and upon proper vouchers as
required by the Company. The Company will provide coach air
transportation on all flights. When the newsperson with the consent of
the Company uses his/her own car, he/she shall be paid the WTOV
mileage rate (to be increased if the Company's rate increases),
parking expenses and tolls. Those newspersons assigned to Wheeling
shall receive payment for parking his/her own car, provided they have
obtained management's approval as to price and location.
21. VACATIONS AND HOLIDAYS
A. VACATIONS:
1. Newspersons in the bargaining unit will be able to earn and
utilize vacation leave in the same year.
2. Newspersons will receive the vacation allotments as provided
below:
1 - 5 years of employment as of January 1 2 weeks
6-15 years of employment as of January 1 3 weeks
More than 15 years of employment as of January 1 4 weeks
Additionally, newspersons who are eligible to receive four
(4) weeks vacation may elect to take 3 weeks of and be paid
an additional week's pay on an agreed upon "sell-back
reimbursement basis."
3. New bargaining unit full-time employees hired after the
commencement of the contract shall be entitled to vacation,
sick leave and personal day usage based upon schedules which
will take
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into account the new employee's commencement of employment
and pro-rated leave benefits. This schedule shall be
determined by the parties' representatives.
4. The Employer shall have the right to adjust and deduct from a
departing employee's final paycheck(s) any amounts
representing such leave taken during the year when the
departure date is such that the employee has already exceeded
the pro-rata paid leave time allowed. (For example, an
employee is entitled to four weeks vacation leave and takes
all vacation prior to departure of June 30 in a calendar
year. In such case, since the employee had completed less
than 1/2 year of service but had taken a full year's worth of
vacation credits, the employer may withhold two weeks salary
from the employee's final paycheck(s).
5. Newsperson shall advise the Company of their vacation period
preference no later than March 7 of each year. Vacation weeks
shall coincide with the normal work week (i.e., five (5) work
days plus the regular two (2) days off) and shall be
scheduled and taken at any time of the year, subject to
management's right to place limitations on vacations during
rating periods. Newspersons shall have the choice of vacation
periods in order of their seniority in the newsroom during
non-rating periods. Vacation must be used during the year it
is earned.
6. Part-time newspersons shall receive vacation pro rated based
on their normal work schedules.
B. HOLIDAYS:
1. Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
Christmas Day, and New Year's Day shall be paid holidays. In
addition, each full-time Employee who has satisfied his
probationary period shall be entitled to one (1) personal
holiday each contract year. Effective January 29, 2000, such
employees will receive one (1) additional personal holiday
(for a total of two (2) personal holidays) for each year of
this Agreement. The Employee shall be required to give at
least two (2) weeks' advance notice of his intention to take
such a holiday and it shall be subject to operating
requirements as determined by the Company. Any newsperson who
is required to work on such holidays, full-time or part-time,
will be paid at double time for the hours worked or by mutual
agreement, can receive another day off with pay. Any
newsperson who is on vacation when such holiday falls on one
of his/her normally scheduled work days will be given one (1)
additional day of vacation. Any employee not scheduled to
work on a holiday listed above shall be paid an extra day's
pay in lieu of the holiday or be given a day off with pay, at
management's option.
Any newsperson, full-time or part-time, performing work on
the above holidays outside his/her basic work week will be
paid at double time for the hours worked.
13
<PAGE> 17
Each newsperson may elect to forego the holiday pay for
working on the holidays named above and to substitute days
off with pay for each day so selected at another time, said
day(s) off to be mutually agreeable to the Company and the
newsperson, with the newsperson required to give fifteen (1
5) days notice for any such day(s), whether single days or
collective days. The Company shall approve or reject such
requests within seven (7) days.
2. Part time newspersons shall receive holidays pro rated based
on their normal work schedules.
22. TERMINATION OF EMPLOYMENT
(A) No permanent employee covered by this Agreement shall be
suspended, demoted or dismissed without just and sufficient
cause. Newspersons employed under personal services contracts
may be subject to other written provisions relating to
separation from employment and/or discharge. Except where
employment is terminated for just cause, resignation or
retirement, the Company shall give any newsperson who has
completed his or her probationary period notice of layoff of
at least two weeks or pay in lieu thereof and one week of
severance pay for each complete year of service, up to a
maximum of 12 weeks.
(B) A newsperson employed under an individual agreement providing
for compensation in excess of the minimum they would receive
under this Agreement may be discharged at the termination of
the individual agreement upon the Company releasing him/her
from any non-compete provision that may exist in the
individual agreement and payment of notice and severance pay
as described above. The Company may offer continued
employment with compensation less favorable than the expired
personal agreement, but in that event the newsperson could
opt to decline such an offer and the newsperson would be
considered to be discharged.
(C) The severance formula noted above in Section (a) shall not
apply to employees working under personal services contracts
which have more favorable provisions for severance
compensation and notice regarding expiration and non-renewal.
(D) The Company will pay any newsperson for unused vacation and
accrued holiday time at the time of termination provided the
newsperson has given the Company two weeks notice of his/her
resignation, if the termination occurs as a result of the
newsperson's resignation.
(E) The Company agrees not to discriminate against any newsperson
because of any claim made by him/her or submitted by him/her
to AFTRA respecting this Agreement by the Company.
14
<PAGE> 18
23. LAYOFFS
Should it become necessary due to economic reasons to lay off a
newsperson, seniority shall be considered first, provided that
qualifications, ability, suitability and past work record may also be
taken into consideration. This provision shall not be used to
undermine the principle that terminations shall be for just cause,
unless caused by economic reasons. Such laid off employee shall be
entitled to all benefits of the termination clause herein. If
thereafter for a period of six (6) months, a vacancy occurs in his/her
job classification, the Company shall notify the newsperson laid off
and such newsperson will be re-employed according to his/her seniority
status at the time of layoff, provided he/she responds to the layoff
notice within two (2) weeks. However, if an employee is recalled, he
shall begin a new severance pay accrual from the date of recall.
24. LEAVE OF ABSENCE
Any employee with one (1) or more years of service shall, for valid
health reasons, be granted a leave of absence not to exceed six (6)
months, provided such leave of absence is approved by the Company. An
approved copy of such leave of absence shall be furnished the employee
by the Company. Upon the return of an employee from a leave of
absence, he/she shall be re-employed in the position held immediately
preceding such leave, provided such still exists; otherwise he/she
shall be re-employed in a position as nearly the same as practicable,
or if no such position is available, shall be laid off and be eligible
for recall for the following six (6) months. In computing the
employee's seniority, except as it pertains to wages and vacation
accrual, such leave of absence shall be credited the employee as time
worked. The employee will not be permitted to perform outside work or
receive wages or remuneration during the time of leave of absence.
25. FAMILY AND MEDICAL LEAVE
(A) An employee who is pregnant may work so long as her physician
certifies that she is fully able to perform her normal
duties. Periods of disability associated with pregnancy and
childbirth shall be treated in the same fashion as illness.
(B) Child rearing leave and other leave required by the Family
and Medical Leave Act shall be granted in accordance with the
provision of that ACT.
(C) In the event a newsperson has utilized unpaid family illness
leave (or has used accumulated vacation leave for such a
purpose) in excess of five consecutive work days, he or she
may thereafter utilize up to a maximum of five days of his or
her accrued paid sick leave for such continuing family
illness leave.
15
<PAGE> 19
26. RE-EMPLOYMENT AFTER MILITARY SERVICE
Any newsperson who enlists or is drafted into active military service
of the United States shall be granted a leave of absence for the
period of such military service (but not to exceed the period required
by draft or one enlistment). Such newsperson who thereafter (1)
receives a certificate or other evidence of honorable discharge under
the laws of the United States and (2) is, at time of discharge or
completion of such military service, qualified to perform the duties
of the position of employment which he/she left, and (3) makes
application for re-employment within ninety (90) days, after he/she is
relieved from such military service, shall be restored by the Company
to the position which he/she left or to a position which is of like
seniority status and pay within the bargaining unit covered by this
Agreement at Television Station WTOV-TV where he/she had been employed
and with the seniority accumulated during service unless the Company's
circumstances have so changed as to make it impossible or unreasonable
to do so.
27. OUTSIDE EMPLOYMENT
Newspersons shall be permitted to engage in outside employment and
activities which do not interfere with the performance of their duties
or obligations to the Company so long as they notify the Company in
advance, and so long as they are not employed by radio, television,
cable or other communication companies that compete with the Company.
Newspersons serving under personal services contracts may be subject
to limitations or restrictions regarding outside employment or
off-premises activities as contained therein consistent with the
above.
28. SICK LEAVE AND FUNERAL LEAVE
A. New employees hired during the calendar year shall, upon
completion of their probationary period, be entitled to
pro-rata sick leave for the remainder of their first calendar
year of employment. Thereafter, such employees shall be
entitled to eight (8) days sick leave credit on an annual
basis.
All other full-time employees who have completed their
probationary period will receive eight (8) days sick leave
credit per calendar year. Sick leave earned but not utilized
will accumulate from year to year, up to a maximum of twenty
(20) days.
B. Pay allowance will be paid for sickness of employees
incapacitating them for work. Upon the Company's request, a
doctor's certificate must be presented before pay will be
allowed.
16
<PAGE> 20
C. Pay allowance will be paid up to three (3) days for death and
funerals in the immediate family. This includes brother,
sister, father, mother, son, wife, husband provided the
Employee attends the funeral.
D. Pay allowance will be paid for one (1) day for attending a
funeral for mother-in-law, father-in-law, sister-in-law,
brother-in-law, grandmother or grandfather.
E. Pay allowance will be paid only for 3 days missed that are
regular scheduled workdays for the Employee.
29. JURY DUTY
Any newsperson with one or more years of service called for jury duty
or subpoenaed to appear as a witness at a trial, shall be granted time
off to attend to such responsibilities. The Company shall pay the
difference between any jury pay or witness fee received and the
newsperson's regular salary, up to maximum of five (5) days per year.
30. HEALTH BENEFITS
The Company shall continue to provide for existing full-time
newspersons and their dependents such hospitalization coverage, major
medical coverage, life, vision, dental coverage, short-term and
long-term disability insurance as is provided through the Smith Health
Insurance Plan also known as the STC or Sunrise Health Plan. The
Company shall pay 75% and the employee shall pay 25% of such increases
in the costs for individual or dependent coverage. The Employer shall
be free to change carriers and alter, amend or discontinue such plans
so long as it does not discriminate between the newspersons and the
non-bargaining employees with regard to such benefits.
Existing full-time newspersons employed prior to January 3,
1996, shall have the option to continue their enrollments in such HMO
plans as were in force and which remain available at the employee
contribution rate of $26.50 per pay period for dependent coverage; and
$4.15 per pay period for single coverage. Future cost increases shall
be divided in the same manner as with the Smith Plan (75% Company, 25%
Employee), except that in no event shall the dollar amount of the
Company's share of such increase in the HMO cost exceed the Company's
share of dollars paid for the increase in the above described Sunrise
Plan in any year.
Additionally, should employees elect to continue
participation in such HMO's, the employer will provide a special life
insurance plan to supplement the HMO plan wherein the employee will
receive term life insurance coverage with a death benefit computed at
the rate of one and one-half times his or her annual salary, to a
17
<PAGE> 21
maximum of $200,000. The total cost of such additional life insurance
protection shall be borne by the employer.
Employees hired after January 3, 1996, who qualify as
full-time newspersons shall receive the health insurance plans noted
above and will be eligible for the HMO option. Such employees hired
after January 3, 1996, shall pay the same employee contribution rate
of $96.35 per pay period for dependent coverage and $17.97 per pay
period by single coverage . If an existing employee returns, for the
purpose of enrollment, to the Smith plan after leaving, he or she
shall be responsible for the employee contribution rate as determined
for new employees entering the Smith Sunrise Plan.
31. DEFERRED INCOME PLAN
The parties acknowledge that they have negotiated concerning
retirement and deferred income plans and have agreed to modify that
participation in a Section 401(k) plan offered by the Company will be
made available in accordance with the following contribution schedule:
Employees may contribute in accordance with Plan rules and
regulations. The employer agrees to provide matching contributions in
the total amount of 3% annually during the term of this Agreement for
employees who choose to contribute.
32. SALARIES
The minimum weekly salary for newspersons in the categories listed
shall be as follows:
MINIMUM WEEKLY ENTRY
LEVEL SALARIES FOR NEW EMPLOYEES
(HIRED AFTER JANUARY 29, 1999)
<TABLE>
<CAPTION>
CLASSIFICATION EFF. 1/29/99 EFF. 1/29/2000 EFF. 1/29/2001
- ------------------------------------ ------------ -------------- --------------
<S> <C> <C> <C>
ANCHOR/PRODUCER 365 378 391
WEEKEND NEWS, SPORTS, WEATHER ANCHOR 300 311 322
REPORTER/PRODUCER 290 300 311
VIDEOGRAPHERS 280 290 300
</TABLE>
EXISTING EMPLOYEES
Existing employees shall receive compensation increases as noted below.
18
<PAGE> 22
EFFECTIVE UPON RATIFICATION
If an employee, as of January 28, 1999, was earning less than
$7.00 per hour, such employee shall receive the greater of an
increase to $7.00 per hour plus four percent (4%) added to
his or her wage rate. Except as noted below or as set forth
in a signed memorandum supplementing this Agreement, all
other employees shall receive a four percent (4%) increase.
EFFECTIVE JANUARY 29, 2000
All employees shall receive a three and one-half percent
(3.5%) increase.
EFFECTIVE JANUARY 29, 2001
All employees shall receive a three and one-half percent
(3.5%) increase.
The Station may hire or promote newspersons based upon combinations of
duties of positions.
STORY FEES
The Reporter and Photographer responsible for a story that is sold by
the station shall receive in the aggregate one-half (1/2) of the fee
received by the station. The employee's portion of the story fee will
be paid after each calendar quarter newsperson provided he was
actively employed by WTOV-TV at the last day of the quarter.
33. PART-TIME NEWSPERSONS
(A) Part-time newspersons shall be compensated at one-fortieth
(1/40th) of the weekly salary for each hour worked.
(B) A part-time newsperson shall be paid for a minimum four (4)
hours for any day he/she is called to work.
(C) In the event a part-time newsperson works more than forty
(40) hours in any workweek or more than eight (8) hours per
day, he/she shall be paid overtime for all such excess hours.
Payment shall be computed in not less than ten (10) minute
units.
(D) Termination of employment benefits of a part-time newsperson
shall be based on a proportionate basis of that payable to a
full-time newsperson.
(E) The Company may employ one part-timer for three full-timers.
19
<PAGE> 23
(F) Regular part time employees who are regularly scheduled for
32 or more hours per week will be eligible for health and
insurance benefits on the same basis as full-time employees.
(G) Part-time newspersons regularly scheduled to work thirty (30)
hours or less per week shall receive pro-rated vacation leave
and shall also receive pro-rated sick leave up to a maximum
of five (5) days per year.
34. NOTIFICATION TO AFTRA
The Company will furnish AFTRA with the names and addresses of all
newspersons within fifteen (15) days of hire or termination.
35. PERFORMANCE BY NONBARGAINING UNIT PERSONNEL
The Company and AFTRA agree on the principle that persons not covered
by this Agreement shall not perform any duties listed of their working
time except that interns working at the station, temporary employees
for up to ninety (90) days of employment by the station or such period
as may be agreed upon pursuant to 1(b) , and the News Director and
either the Asst. News Director/Executive Producer or the Assignment
Editor/Executive Producer shall be subject to no limitation provided
that their performance of such duties is consistent with past practice
except that either the Asst. News Director/Executive Producer or the
Assignment Editor/Executive Producer shall be permitted to report up
to five stories per week.
36. CHECK-OFF
The Company agrees to deduct from the wages of employees initiation
fees and dues required by the union upon notification from the union
of the amounts due, provided the Company receives from each such
employee on whose account such deductions are to be made, an
individually signed check-off authorization form lawful under the
Labor Management Relations Act, as amended. Such check-off forms shall
be irrevocable during the term of this Agreement or for one year,
whichever occurs sooner. Such deductions shall be made from the first
payday each month and forwarded promptly to AFTRA-Pittsburgh, 625
Stanwix Street, Pittsburgh, PA 15222.
37. TRANSFER OF OWNERSHIP
The parties agree that if the Company should transfer or assign the
operation of the station to any third party or parties during the term
of this Agreement as a result of any action of any governmental agency
immediately affecting the Company's operation of WTOV-TV or because of
involuntary transfer or assignment, the Company need not require the
transferee or assignee to assume the obligations of this Agreement,
and if the transferee does not assume such obligations, the Union and
its members shall be free of all obligations hereunder; but all other
cases of
20
<PAGE> 24
transfer or assignment of WTOV-TV shall require the transferee or
assignee to assume, for the benefit of the Union and its members, the
obligations of this Agreement, and the Company shall be required to
pay Employees for any vacation earned, but not taken under this
Agreement, and any other compensation due.
38. COMPLETE AGREEMENT
The parties hereto acknowledge that during the negotiations which
resulted in this Agreement, each had the unlimited right and
opportunity to make demands and proposals with respect to any subject
or matter not removed by law from the area of collective bargaining.
Thus, the understandings and agreements arrived at by the parties
after the exercise of such rights and opportunities are set forth in
this Agreement, which document constitutes the entire Agreement
between the parties and concludes collective bargaining for its term.
Therefore, except as provided in this Agreement, the Company and the
Union for the life of this Agreement each voluntarily and
unqualifiedly waives the right, and agrees that the other shall not be
obliged to bargain collectively with respect to any subject or matter
referred to or covered in this Agreement or with respect to any
subject or matter not specifically referred to or covered in this
Agreement, even though such subject or matter may not have been within
the knowledge or contemplation of either or both parties at the time
that they negotiated or signed this Agreement.
It is further understood by both parties that this Agreement
supersedes any and all prior agreements, past practices, or
understandings, either written or verbal, that are inconsistent with
or in conflict with the terms of this Agreement.
Should any part of provision of this Agreement be rendered or declared
illegal or invalid by any decree of a court of competent jurisdiction
or by decision of any authorized government agency, the remaining,
unaffected part(s) or provision(s) of this Agreement shall not be
affected thereby and shall remain in full force and effect. However,
in such a contingency, the parties shall meet promptly and negotiate
with respect to substitute provisions for those part(s) or
provision(s) rendered or declared illegal or invalid.
39. LAWS OF OHIO
This Agreement, made, executed and delivered in the City of
Steubenville, Ohio, shall be governed by the laws of the State of
Ohio.
40. RATIFICATION
This Agreement is subject to ratification by the AFTRA National Board
and the President of STC Broadcasting Co., and shall not become
effective or binding upon the parties until so ratified and
countersigned by the National Executive Secretary of AFTRA, and the
President of Smith Broadcasting Group, Inc.
21
<PAGE> 25
ACCEPTED AND AGREED TO: ACCEPTED AND AGREED TO:
AMERICAN FEDERATION OF STC BROADCASTING CO.
TELEVISION & RADIO ARTISTS, WTOV-TV
PITTSBURGH LOCAL
By: /s/ Mark Wirick By: /s/ Timothy S. McCoy
---------------------------------- ----------------------------------
Local Executive Secretary Station Manager
APPROVED AND RATIFIED: APPROVED AND RATIFIED:
By: /s/ Bruce A. York By: /s/ David A. Fitz
---------------------------------- ----------------------------------
AFTRA National Executive STC Broadcasting Co.
Dated: 3/9/99 Dated: March 23,1999
------------------------------- -------------------------------
22
<PAGE> 1
EXHIBIT 12
STC BROADCASTING, INC. AND SUBSIDIARIES
STATEMENT OF FIXED CHARGE RATIO
FOR THE YEAR ENDED DECEMBER 31, 1998
FOR THE TEN MONTHS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
1997 1998
-------------- -------------
<S> <C> <C>
Net loss applicable to common stockholder $ (11,582,652) $ (6,899,862)
Fixed charges 14,044,242 24,486,041
Income tax (benefit) provision (299,000) 97,000
-------------- -------------
Earnings: $ 2,162,590 $ 17,683,179
============== =============
Fixed charges:
Preferred stock dividends and accretion $ 3,763,225 $ 5,100,454
Interest expense 9,502,041 16,300,523
Amortization of deferred financing charges 778,976 663,588
Write off of deferred financing costs -- 2,421,476
Rental expense -- --
-------------- -------------
$ 14,044,242 $ 24,486,041
============== =============
Deficiency of earnings to fixed charges $ (11,881,652) $ (6,802,862)
============== =============
</TABLE>
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF STC BROADCASTING, INC.
<TABLE>
<CAPTION>
State of
Name Incorporation Doing Business As:
- ------------------------------- ------------- ------------------
<S> <C> <C>
Smith Acquisition Company Delaware WTOV-TV and WNAC-TV
Smith Acquisition License Company Delaware WTOV-TV and WNAC-TV
WJAC, Incorporated Delaware WJAC-TV
Web Works, Inc. Pennsylvania Inactive
STC Broadcasting of Abilene, Inc. Texas KRBC-TV/KACB-TV
STC Broadcasting of Vermont, Inc. Delaware Inactive
STC Broadcasting of Vermont Subsidiary, Inc. Delaware Inactive
STC License Company Inc. Delaware Same as STC Broadcasting, Inc.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF STC BROADCASTING FOR THE 12 MONTHS ENDED DECEMBER 31,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 5,347,000
<SECURITIES> 0
<RECEIVABLES> 16,702,000
<ALLOWANCES> 504,000
<INVENTORY> 0
<CURRENT-ASSETS> 30,506,000
<PP&E> 92,048,000
<DEPRECIATION> 9,869,000
<TOTAL-ASSETS> 384,512,000
<CURRENT-LIABILITIES> 22,742,000
<BONDS> 209,500,000
37,364,000
0
<COMMON> 10
<OTHER-SE> 97,212,000
<TOTAL-LIABILITY-AND-EQUITY> 384,512,000
<SALES> 67,123,000
<TOTAL-REVENUES> 67,123,000
<CGS> 38,058,000
<TOTAL-COSTS> 65,439,000
<OTHER-EXPENSES> (42,000)
<LOSS-PROVISION> 342,000
<INTEREST-EXPENSE> 16,301,000
<INCOME-PRETAX> 2,884,000
<INCOME-TAX> 1,823,000
<INCOME-CONTINUING> 1,061,000
<DISCONTINUED> 0
<EXTRAORDINARY> 2,860,000
<CHANGES> 0
<NET-INCOME> (6,900,000)
<EPS-PRIMARY> (6,900)
<EPS-DILUTED> (6,900)
</TABLE>
