<PAGE>
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 10-Q
QUARTERLY REPORT
UNDER
SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
_______________
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13D OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended September 30, 1998
OR
[ ] 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 1-10321
THE ACKERLEY GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 91-1043807
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1301 FIFTH AVENUE
SUITE 4000
SEATTLE, WASHINGTON 98101
(206) 624-2888
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
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 periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Title of Class Outstanding at November 1, 1998
-------------- -------------------------------
Common Stock, $.01 par value 20,575,690 shares
Class B Common Stock, $.01 par value 11,051,230 shares
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
----
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 AND DECEMBER 31, 1997........................... 1
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE AND NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1998 AND 1997........................................ 2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND 1997............... 3
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS............... 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS...................... 6
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................... 17
SIGNATURES......................................................... 17
i
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
THE ACKERLEY GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
_______________
ASSETS
<TABLE>
(Unaudited)
September 30, December 31,
1998 1997
------------------- --------------------
(In thousands)
<CAPTION>
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,460 $ 3,656
Accounts receivable, net 44,199 52,923
Current portion of broadcast rights 8,772 7,349
Prepaid expenses 12,056 12,360
Deferred tax assets 6,608 11,499
Other current assets 4,135 4,734
-------- --------
Total current assets 79,230 92,521
Property and equipment, net 108,124 94,968
Intangibles, net 80,278 42,318
Other assets 40,608 36,578
-------- --------
Total assets $308,240 $266,385
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable $ 4,295 $ 9,103
Accrued interest 6,764 3,995
Other accrued liabilities 14,235 19,071
Deferred revenue 28,332 23,857
Current portion of broadcasting obligations 9,616 8,346
Current portion of long-term debt 23,367 16,130
-------- --------
Total current liabilities 86,609 80,502
Long-term debt, net of current portion 227,318 213,294
Litigation accrual 8,023 8,072
Other long-term liabilities 8,016 9,426
-------- --------
Total liabilities 329,966 311,294
Stockholders' deficiency:
Common stock, par value $.01 per share--authorized 50,000,000 shares;
issued 21,950,636 shares at September 30, 1998 and 21,855,398 shares
at December 31, 1997; and outstanding 20,575,690 shares at September
30, 1998 and 20,480,452 shares at December 31, 1997 219 218
Class B common stock, par value $.01 per share--authorized 11,406,510
shares; and issued and outstanding 11,051,230 shares at September 30,
1998 and 11,053,510 shares at December 31, 1997 111 111
Capital in excess of par value 10,325 9,816
Deficit (22,292) (44,965)
Less common stock in treasury, at cost (10,089) (10,089)
-------- --------
Total stockholders' deficiency (21,726) (44,909)
-------- --------
Total liabilities and stockholders' deficiency $308,240 $266,385
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
1
<PAGE>
THE ACKERLEY GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
_______________
<TABLE>
<CAPTION>
For the Three Month For the Nine Month
Periods Ended September 30, Periods Ended September 30,
1998 1997 1998 1997
-------------- -------------- -------------- --------------
(In thousands, except (In thousands, except
per share amounts) per share amounts)
<S> <C> <C> <C> <C>
Revenue $56,315 $60,818 $231,742 $217,372
Less agency commissions and discounts (8,228) (8,213) (26,772) (25,106)
------- ------- -------- --------
Net revenue 48,087 52,605 204,970 192,266
Expenses (other income):
Operating expenses 37,184 42,423 168,470 151,154
Depreciation and amortization expense 3,704 3,336 10,771 9,858
Interest expense 6,600 6,722 20,238 19,131
Stock compensation expense 15 4,743 437 4,743
(Gain) loss on disposition of assets 210 --- (32,770) ---
Litigation expense adjustment --- (5,000) --- (5,000)
------- ------- -------- --------
Total expenses and other income 47,713 52,224 167,146 179,886
Income before income taxes 374 381 37,824 12,380
Income tax benefit (expense) (145) 559 (14,389) 2,223
------- ------- -------- --------
Net income $ 229 $ 940 $ 23,435 $ 14,603
======= ======= ======== ========
Net income per common share $ 0.01 $ 0.03 $ 0.74 $ 0.47
======= ======= ======== ========
Net income per common share, assuming
dilution $ 0.01 $ 0.03 $ 0.74 $ 0.46
======= ======= ======== ========
Dividends per common share $ -- $ -- $ 0.02 $ 0.02
======= ======= ======== ========
Dividends per common share, assuming
dilution $ -- $ -- $ 0.02 $ 0.02
======= ======= ======== ========
Weighted average number of common shares 31,603 31,252 31,603 31,252
Weighted average number of common
shares, assuming dilution 31,857 31,536 31,857 31,536
</TABLE>
See Notes to Condensed Consolidated Financial Statements
2
<PAGE>
THE ACKERLEY GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
_______________
<TABLE>
For the Nine Month
Periods Ended September 30,
1998 1997
-------------- ---------------
(In thousands)
<CAPTION>
<S> <C> <C>
Net cash provided by operating activities: $ 6,326 $ 21,590
Cash flows from investing activities:
Proceeds from sale of property 40,762 275
Capital expenditures (24,207) (13,219)
Payments for acquisitions (42,115) ---
Other, net (513) ---
--------- --------
Net cash used in investing activities (26,073) (12,944)
Cash flows from financing activities:
Borrowings under credit agreements 220,744 13,192
Payments under credit agreements (199,749) (19,440)
Payments under capital lease obligations (547) (609)
Dividends paid (633) (623)
Proceeds from stock issuance 72 177
Other, net (336) (256)
--------- --------
Net cash provided by (used in) financing activities 19,551 (7,559)
--------- --------
Net increase (decrease) in cash and cash equivalents (196) 1,087
Cash and cash equivalents at beginning of period 3,656 2,910
--------- --------
Cash and cash equivalents at end of period $ 3,460 $ 3,997
========= ========
Supplemental disclosure of noncash transactions:
Broadcast rights acquired and broadcast
obligations assumed $ 7,892 $ 11,031
Property and equipment acquired through barter $ 963 $ 785
</TABLE>
See Notes to Condensed Consolidated Financial Statements
3
<PAGE>
THE ACKERLEY GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. The balance sheet at December 31, 1997 has been derived
from the audited consolidated financial statements at that date. The
accompanying condensed consolidated financial statements do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
normal and recurring adjustments necessary for a fair presentation of the
financial position and the results of operations for such periods have been
included. These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997.
The results of operations for any interim period are not necessarily
indicative of anticipated results for the full year. The Company's results of
operations may vary from quarter to quarter due in part to the timing of
acquisitions and to seasonal variations in the operations of the broadcasting
and sports & entertainment segments. In particular, the Company's net revenue
and net income historically have been affected positively during the NBA
basketball season (the first, second, and fourth quarters) and by increased
advertising activity in the second and fourth quarters.
Certain prior year's amounts have been reclassified to conform to the 1998
presentation.
NOTE 2. DEBT
In January 1998, the Company replaced its 1996 Credit Agreement with a new
credit agreement (the "Credit Agreement"). Total borrowings under the Credit
Agreement consisted of a revolving credit facility (the "Revolver") and were
limited to $77.5 million due to restrictions related to the Company's 10 3/4%
Senior Secured Notes (the "Senior Notes').
In October 1998, the Company redeemed the Senior Notes with the proceeds of
a $120.0 million term loan facility under the Credit Agreement (the "Term
Loan"). This resulted in a charge of $4.2 million, net of applicable income
taxes, consisting of prepayment fees and the write-off of deferred financing
costs. In addition, the Company replaced the $35.0 million credit agreement of
New Century Seattle Partners, LP (the "Partnership") with proceeds from the
Revolver. Through its subsidiaries, the Company holds a 100% ownership interest
in the Partnership, which owns radio stations KJR(AM), KHHO(AM), KJR-FM, and
KUBE(FM). As a result of these transactions, the Credit Agreement permits
borrowings of $120.0 million under the Term Loan and up to $180.0 million under
the Revolver, which includes up to $10.0 million in standby letters of credit.
The current and noncurrent portions of long-term debt reflect these transactions
as if they occurred on September 30, 1998.
The Company can choose to have interest calculated under the Credit
Agreement at rates based on either a Base Rate or LIBOR plus defined margins.
The margins and the fees on the letter of credit facility vary based on the
Company's total leverage ratio. Principal repayments under the Revolver are due
quarterly beginning from March 2000 through June 2005. Principal repayments
under the Term Loan are due quarterly beginning from March 1999 through June
2005.
4
<PAGE>
NOTE 3. INCOME TAXES
The Company has no significant current income tax liabilities primarily as
a result of operating losses incurred in prior years. However, the Company will
continue to pay federal income taxes under the alternative minimum tax until the
operating loss carryforwards are substantially reduced. In addition, the Company
will incur state income tax expense in certain states in which it operates.
During the first nine months of 1997, the Company reduced the valuation
allowance for deferred tax assets which resulted in the recording of a deferred
tax asset of $9.5 million. The recognized deferred tax asset was based on the
Company's expected utilization of net operating loss carryforwards and reversal
of certain temporary differences between financial statement carrying amounts
and the tax bases of existing assets and liabilities.
NOTE 4. DISPOSITION OF ASSETS
On June 30, 1998, the Company sold substantially all the assets of its
wholly-owned subsidiary, Ackerley Airport Advertising, Inc. for a base cash
price of $40.0 million, subject to a possible post-closing increase of up to
$4.0 million under certain circumstances. The Company recorded a gain from this
transaction of $20.4 million net of taxes, or $0.64 per share.
NOTE 5. ACQUISITIONS
On February 17, 1998, the Partnership redeemed the limited partnership
interests and satisfied certain other obligations of the former limited partners
for $18.0 million. Effective April 30, 1998, the Partnership redeemed all the
interests of Century Management, Inc., its general partner, for approximately
$17.8 million following receipt of the required approval of the FCC. Upon
closing, KJR Radio, Inc., a wholly-owned subsidiary of the Company, became the
Partnership's sole general partner and licensee of the radio stations held by
the Partnership and AK Media Group, Inc., the Company's principal operating
subsidiary, became the Partnership's nominal and sole limited partner.
On July 15, 1998, the Company entered into an agreement to purchase the
assets of KVIQ(TV), a CBS affiliate licensed to Eureka, California, for $5.5
million. In conjunction with the transaction, the Company entered into a time
brokerage agreement to operate the station pending FCC approval of the purchase.
On August 4, 1998, the Company entered into an agreement to purchase the
assets of KTVF-TV, a NBC affiliate, for $7.2 million, and two radio stations,
KXLR-FM and KCBF-AM, for $0.8 million. All three stations are licensed to
Fairbanks, Alaska. The transaction is currently pending FCC approval, which must
be obtained separately for the television and radio stations. The purchase of
the radio stations is contingent on the purchase of the television station. In
conjunction with this agreement, on August 5, 1998, the Company granted an
option to a third party (the "Optionee") for $0.5 million to purchase from the
Company the assets of KTVF-TV for $6.7 million and the two radio stations for
$0.8 million, plus a 15% annual return based on the actual purchase price for
the Company's acquisition of the stations. The option may be exercised at any
time starting on the third anniversary of the Company's acquisition of the
stations through the seventh anniversary of such acquisition. The option may
terminate earlier if the FCC makes certain changes to certain of its ownership
rules. In addition, the Optionee may require the Company to repurchase the
option for $0.5 million under certain circumstances.
On August 31, 1998, the Company exercised its option to purchase the assets
of WIVT-TV, an ABC affiliate licensed to Binghamton, New York, for $9.0 million.
The Company previously operated the station under a time brokerage agreement.
5
<PAGE>
On September 4, 1998, the Company purchased substantially all of the assets
of an out-of-home advertising company in Miami, Florida, for approximately $2.4
million.
On September 25, 1998, the Company entered into an agreement to purchase
the assets of WOKR-TV, an ABC affiliate licensed to Rochester, New York, for
$125.0 million. The transaction is currently pending FCC approval.
On November 2, 1998, the Company entered into an agreement to sell
substantially all of the assets of television station KCBA, a Fox affiliate
licensed to Salinas, California, for $11.0 million. The Company also entered
into an agreement with the purchaser to operate the station under a time
brokerage agreement. The transaction is currently pending FCC approval.
Also on November 2, 1998, the Company exercised its option to purchase
substantially all of the assets of television station KION, a CBS affiliate
licensed to Monterey, California, which it currently operates under a time
brokerage agreement. The purchase price is approximately $7.7 million, subject
to certain reductions at closing, and is contingent on the closing of the
Company's sale of KCBA described above. The transaction is currently pending FCC
approval.
NOTE 6. NBA LOCKOUT
On March 23, 1998 the Board of Governors of the NBA voted to reopen the
NBA's collective bargaining agreement with the National Basketball Players
Association. As a result, the collective bargaining agreement expired on June
30, 1998 and the players were locked out. Preseason and regular season games
scheduled through approximately the middle of December 1998 have been cancelled.
While the Company believes that it is the desire of the NBA Board of Governors
to reach a new agreement as soon as possible, there can be no assurance that the
parties will do so.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company reported net income of $23.4 million for the first nine months
of 1998, an $8.8 million, or 60%, increase from the first nine months of 1997.
Net revenues for the first nine months of 1998 increased over the same period
last year by $12.7 million, or 7%, while the Company's Operating Cash Flow (as
defined below) decreased $4.6 million, or 11%.
On April 15, 1998, the Company paid a $.02 per share dividend.
Refinancing. In October 1998, the Company redeemed the Senior Notes with
the proceeds of a $120.0 million term loan facility under the Credit Agreement
(the "Term Loan"). This resulted in a charge of $4.2 million, net of applicable
income taxes, consisting of prepayment fees and the write-off of deferred
financing costs. In addition, the Company replaced the $35.0 million Partnership
Credit Agreement with proceeds from the revolving credit facility under the
Credit Agreement (the "Revolver").
Acquisitions and Time Brokerage Agreements. The Company has acquired or
entered into agreements to acquire several television and radio stations or
operate the stations under time brokerage agreements. These transactions are
more fully described in note 5 to the condensed consolidated financial
statements. The following is a summary of these transactions:
. On July 15, 1998, the Company entered into an agreement to purchase
substantially all the assets of KVIQ(TV), a CBS affiliate licensed to
Eureka, California, for $5.5 million.
6
<PAGE>
The Company is currently operating the station under a time brokerage
agreement pending FCC approval of the purchase.
. On August 4, 1998, the Company entered into an agreement to purchase the
assets of KTVF-TV, a NBC affiliate, for $7.2 million, and two radio
stations, KXLR-FM and KCBF-AM, for $0.8 million. All three stations are
licensed to Fairbanks, Alaska.
. On August 31, 1998, the Company exercised its option to purchase the
assets of WIVT-TV, an ABC affiliate licensed to Binghamton, New York,
for $9.0 million. The Company previously operated the station under a
time brokerage agreement.
. On September 25, 1998, the Company entered into an agreement to purchase
the assets of WOKR-TV, an ABC affiliate licensed to Rochester, New York,
for $125.0 million.
. On November 2, 1998, the Company entered into an agreement to sell
substantially all of the assets of television station KCBA, a Fox
affiliate licensed to Salinas, California, for $11.0 million. The
Company also entered into an agreement to operate the station under a
time brokerage agreement.
. Also on November 2, 1998, the Company exercised its option to purchase
substantially all of the assets of television station KION, a CBS
affiliate licensed to Monterey, California, which it currently operates
under a time brokerage agreement. The purchase price is approximately
$7.7 million, subject to certain reductions at closing, and is
contingent on the closing of the Company's sale of KCBA described above.
As with many media companies that have grown through acquisitions, the
Company's acquisitions and dispositions of television and radio stations have
resulted in significant non-cash and non-recurring charges to income. For this
reason, in addition to net income, management believes that Operating Cash Flow
(defined as net revenue less operating expenses before amortization,
depreciation, and interest expenses) is an appropriate measure of the Company's
financial performance. Similarly, management believes that Segment Operating
Cash Flow (defined as Operating Cash Flow before corporate overhead) is an
appropriate measure of the financial performance of the Company's segments.
These measures exclude certain expenses that management does not consider to be
costs of ongoing operations. The Company uses Operating Cash Flow to pay
interest and principal on its long-term debt as well as to finance capital
expenditures. Operating Cash Flow and Segment Operating Cash Flow, however, are
not to be considered alternatives to net income as an indicator of the Company's
operating performance or to cash flows as a measure of the Company's liquidity.
7
<PAGE>
RESULTS OF OPERATIONS
The following tables set forth certain historical financial and operating
data for the three and nine-month periods ended September 30, 1998 and 1997,
including net revenue, operating expenses, and Operating Cash Flow information
by segment:
<TABLE>
THREE MONTH PERIODS ENDED SEPTEMBER 30,
---------------------------------------------------------------
1998 1997
---------------------------- -----------------------------
(DOLLARS IN THOUSANDS)
AS % OF AS % OF
AMOUNT NET REVENUE AMOUNT NET REVENUE
------------ -------------- ------------- --------------
<CAPTION>
<S> <C> <C> <C> <C>
Net revenue............................ $48,087 100.0% $52,605 100.0%
Segment operating expenses............. 33,923 70.5 39,809 75.7
Corporate overhead............... 3,261 6.8 2,614 5.0
------- -------
Total operating expenses..... 37,184 77.3 42,423 80.6
-------- -------
Operating Cash Flow.................... 10,903 22.7 10,182 19.4
Other expenses and (income):
Depreciation and amortization...... 3,704 7.7 3,336 6.3
Interest expense................... 6,600 13.7 6,722 12.8
Stock compensation expense......... 15 --- 4,743 9.0
Loss on disposition of assets.... 210 0.4 --- ---
Litigation expense adjustment...... --- --- (5,000) (9.5)
-------- -------
Total other expenses and
(income).................... 10,529 21.9 9,801 18.6
Income before income taxes............. 374 0.8 381 0.7
Income tax benefit (expense)........... (145) (0.3) 559 1.1
-------- ------
Net income............................. $229 0.5% $940 1.8%
======== ======
</TABLE>
<TABLE>
NINE MONTH PERIODS ENDED SEPTEMBER 30,
---------------------------------------------------------------
1998 1997
---------------------------- -----------------------------
(DOLLARS IN THOUSANDS)
AS % OF AS % OF
AMOUNT NET REVENUE AMOUNT NET REVENUE
------------- -------------- -------------- --------------
<CAPTION>
<S> <C> <C> <C> <C>
Net revenue............................ $204,970 100.0% $192,266 100.0%
Segment operating expenses............. 157,526 76.9 143,469 74.6
Corporate overhead..................... 10,944 5.3 7,685 4.0
-------- --------
Total operating expenses........ 168,470 82.2 151,154 78.6
Operating Cash Flow.................... 36,500 17.8 41,112 21.4
Other expenses and (income):
Depreciation and amortization...... 10,771 5.3 9,858 5.1
Interest expense................... 20,238 9.9 19,131 10.0
Stock compensation expense......... 437 0.2 4,743 2.5
Gain on disposition of assets...... (32,770) (16.0) --- ---
Litigation expense adjustment...... --- --- (5,000) (2.6)
--------- --------
Total other expenses and
(income)....................... (1,324) (0.6) 28,732 14.9
Income before income taxes............ 37,824 18.5 12,380 6.4
Income tax benefit (expense)........... (14,389) (7.0) 2,223 1.2
--------- ---------
Net income............................. $ 23,435 11.4% $ 14,603 7.6%
========= =========
</TABLE>
8
<PAGE>
<TABLE>
THREE MONTH PERIODS ENDED NINE MONTH PERIODS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------------------------------------------------------
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)
<CAPTION>
<S> <C> <C> <C> <C>
Net revenue:
Out-of-home media........................... $ 24,603 $ 29,138 $ 84,426 $ 83,071
Broadcasting................................ 22,383 21,358 75,758 66,759
Sports & entertainment...................... 1,101 2,109 44,786 42,436
-------- -------- -------- --------
Total net revenue.......................... $ 48,087 $ 52,605 $204,970 $192,266
======== ======== ======== ========
Segment operating expenses:
Out-of-home media........................... $ 13,220 $ 18,303 $ 52,667 $ 53,271
Broadcasting................................ 17,007 15,759 51,920 44,173
Sports & entertainment...................... 3,696 5,747 52,939 46,025
-------- -------- -------- --------
Total segment operating expenses........... $ 33,923 $ 39,809 $157,526 $143,469
======== ======== ======== ========
Operating Cash Flow:
Out-of-home media........................... $ 11,383 $ 10,835 $ 31,759 $ 29,800
Broadcasting................................ 5,376 5,599 23,838 22,586
Sports & entertainment...................... (2,595) (3,638) (8,153) (3,589)
-------- -------- -------- --------
Total Segment Operating Cash Flow.......... 14,164 12,796 47,444 48,797
Corporate overhead.......................... (3,261) (2,614) (10,944) (7,685)
-------- -------- -------- --------
Total Operating Cash Flow.................. $ 10,903 $ 10,182 $ 36,500 $ 41,112
======== ======== ======== ========
Change in net revenue from prior periods:
Out-of-home media........................... (15.6)% 10.3% 1.6% 12.1%
Broadcasting................................ 4.8% 16.8% 13.5% 12.0%
Sports & entertainment...................... (47.8)% 85.7% 5.5% (2.0)%
Change in total net revenue................ (8.6)% 14.8% 6.6% 8.6%
Segment operating expenses as a % of segment
net revenue:
Out-of-home media........................... 53.7% 62.8% 62.4% 64.1%
Broadcasting................................ 76.0% 73.8% 68.5% 66.2%
Sports & entertainment...................... 335.7% 272.5% 118.2% 108.5%
Total segment operating expenses as a %
of total net revenue...................... 70.5% 75.7% 76.9% 74.6%
Operating Cash Flow as a % of segment net
revenue:
Out-of-home media........................... 46.3% 37.2% 37.6% 35.9%
Broadcasting................................ 24.0% 26.2% 31.5% 33.8%
Sports & entertainment...................... (235.7)% (172.5)% (18.2)% (8.5)%
Total Operating Cash Flow as a % of
total net revenue......................... 22.7% 19.4% 17.8% 21.4%
</TABLE>
9
<PAGE>
THREE MONTH PERIOD ENDED SEPTEMBER 30, 1998 COMPARED WITH THREE MONTH PERIOD
ENDED SEPTEMBER 30, 1997
Net Revenue. Net revenue for the quarter ended September 30, 1998 decreased
$4.5 million, or 9%, to $48.1 million from $52.6 million for the third quarter
of 1997. Changes in net revenues were as follows:
. Out-of-Home Media. For the third quarter of 1998, the Company's out-of-
home media segment's net revenue decreased $4.5 million, or 15%,
compared to the third quarter of 1997. This decrease was mainly due to
the sale on June 30, 1998 of the Company's airport advertising
operations, partially offset by increased national advertising sales.
. Broadcasting. The Company's broadcasting segment showed an increase of
$1.0 million in net revenue, or 5%, for the quarter ended September 30,
1998 compared to the corresponding period in the prior fiscal year. This
increase resulted primarily from the addition of television station KVIQ
in July 1998, as well as higher national and local sales at the
Company's television and radio stations.
. Sports & Entertainment. The sports & entertainment segment's net
revenue decreased $1.0 million, or 48%, for the third quarter of 1998
compared to the third quarter of 1997, primarily due to decreased NBA
league related revenue and the lack of indoor soccer operations in 1998.
Segment Operating Expenses (Excluding Corporate Overhead). Segment operating
expenses (excluding corporate overhead) for the third quarter of 1998 were $33.9
million, a decrease of $5.9 million, or 15%, over segment operating expenses
(excluding corporate overhead) of $39.8 million for the third quarter of 1997.
Changes in segment operating expenses (excluding corporate overhead) were as
follows:
. Out-of-Home Media. Operating expenses for the Company's out-of-home
media segment for the quarter ended September 30, 1998 were $13.2
million, a decrease of $5.1 million, or 28%, over the third quarter of
1997. This decrease was due mainly to the sale on June 30, 1998 of the
Company's airport advertising operations.
. Broadcasting. Operating expenses for the Company's broadcasting segment
for the third quarter of 1998 were $17.0 million, an increase of $1.2
million, or 8%, over the third quarter of 1997. This increase was mainly
due to the addition of television station KVIQ in July 1998, and higher
program, promotion and production expenses in conjunction with the
expansion of local news programming.
. Sports & Entertainment. Operating expenses from the Company's sports &
entertainment segment for the third quarter of 1998 were $3.7 million, a
decrease of $2.0 million, or 35%, compared to the third quarter of 1997.
This decrease was mainly attributable to decreased basketball operating
expenses and the lack of indoor soccer operations in 1998.
Corporate Overhead. Corporate overhead for the quarter ended September 30,
1998 increased by $0.7 million, or 27%, to $3.3 million, mainly due to personnel
costs, travel and entertainment, insurance and the utilization of outside
services, primarily for public relations.
Operating Cash Flow. As a result of the above, Operating Cash Flow
increased $0.7 million, or 7%, for the three months ended September 30, 1998
from the same period in 1997. The $0.6 million
10
<PAGE>
increase in the out-of-home media segment's Operating Cash Flow and the $1.0
million increase in the sports & entertainment segment's Operating Cash Flow was
offset by a $0.2 million decrease in the broadcasting segment's Operating Cash
Flow and the $0.7 million increase in corporate overhead for the 1998 quarter.
Operating Cash Flow as a percentage of net revenue increased to 23% for the
three months ended September 30, 1998 from 19% for the comparable period in
1997.
Depreciation and Amortization Expense. Depreciation and amortization
expenses increased $0.4 million, or 12%, to $3.7 million in the third quarter of
1998 as compared to $3.3 million in the third quarter of 1997.
Interest Expense. Interest expense for the quarter ended September 30,
1998 decreased $0.1 million, or 1%, to $6.6 million from $6.7 million in the
third quarter of 1997.
Stock Compensation Expense. In 1997, the Company recorded stock
compensation expense of $4.7 million due to the conversion of incentive stock
options into nonqualified stock options. There was no such transaction in 1998.
Litigation Expense Adjustment. In 1997, the Company reduced an accrual for
litigation expense by $5.0 million. No such adjustment was made in 1998.
Income Tax Expense. For the third quarter of 1998, the Company incurred a
$0.1 million income tax expense compared to an income tax benefit of $0.6
million for the third quarter of 1997. The benefit resulted from the recognition
of a $0.9 million deferred tax asset during the third quarter of 1997.
Net Income. Net income was $0.2 million, for the three months ended
September 30, 1998, a decrease of $0.7 million, or 78%, from $0.9 million for
the comparable period in 1997. Net income as a percentage of net revenue was 1%
for the third quarter of 1998, compared to 2% for the third quarter of 1997.
This is due primarily to the changes in Operating Cash Flow described above and
the recognition of the stock compensation expense, litigation expense
adjustment, and deferred tax asset in 1997.
NINE MONTH PERIOD ENDED SEPTEMBER 30, 1998 COMPARED WITH NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1997
Net Revenue. Net revenue for the nine months ended September 30, 1998
increased $12.7 million, or 7%, to $205.0 million from $192.3 million for the
nine months ended September 30, 1997. Changes in net revenues were as follows:
. Out-of-Home Media. For the first nine months of 1998, the Company's
out-of-home media segment's net revenue increased $1.3 million, or 2%,
compared to the first nine months of 1997. This increase was mainly due
to increased national advertising sales, partially offset by the lack of
airport advertising revenue in the third quarter of 1998.
. Broadcasting. The Company's broadcasting segment showed an increase of
$9.0 million in net revenue, or 13%, for the first nine months of 1998
compared to the corresponding period in the prior fiscal year. This
increase resulted primarily from the addition of television station KVIQ
in July 1998, as well as higher national and local sales at the
Company's television and radio stations.
. Sports & Entertainment. The sports & entertainment segment's net revenue
increased $2.4 million, or 6%, for the first nine months of 1998
compared to the first nine months of 1997, primarily due to increased
ticket and Seattle Supersonics team sponsorship sales, partially offset
by the lack of indoor soccer operations in 1998.
11
<PAGE>
Segment Operating Expenses (Excluding Corporate Overhead). Segment operating
expenses (excluding corporate overhead) for the first nine months of 1998 were
$157.5 million, an increase of $14.0 million, or 10%, over segment operating
expenses (excluding corporate overhead) of $143.5 million for the first nine
months of 1997. Changes in segment operating expenses (excluding corporate
overhead) were as follows:
. Out-of-Home Media. Operating expenses for the Company's out-of-home
media segment for the first nine months of 1998 were $52.7 million, a
decrease of $0.6 million, or 1%, over the first nine months of 1997.
This decrease was due mainly to the lack of airport advertising
operations in the third quarter of 1998.
. Broadcasting. Operating expenses for the Company's broadcasting segment
for the first nine months of 1998 were $51.9 million, an increase of
$7.7 million, or 17%, over the first nine months of 1997. This increase
was mainly due to the addition of television station KVIQ in July 1998,
and higher program, promotion and production expenses in conjunction
with the expansion of local news programming.
. Sports & Entertainment. Operating expenses from the Company's sports &
entertainment segment for the first nine months of 1998 were $52.9
million, an increase of $6.9 million, or 15%, compared to the first nine
months of 1997. This increase was mainly attributable to increased
basketball operating expenses related to team costs, partially offset by
the lack of indoor soccer operations in 1998.
Corporate Overhead. Corporate overhead for the quarter ended September 30,
1998 increased by $3.2 million, or 42%, to $10.9 million, mainly due to
personnel costs, travel and entertainment, insurance and the utilization of
outside services, primarily for public relations.
Operating Cash Flow. As a result of the above, Operating Cash Flow
decreased $4.6 million, or 11%, for the nine months ended September 30, 1998
from the same period in 1997. The $2.0 million increase in the out-of-home media
segment's Operating Cash Flow and the $1.2 million increase in the broadcasting
segment's Operating Cash Flow was offset by a $4.6 million decrease in the
sports & entertainment segment's Operating Cash Flow and the $3.2 million
increase in corporate overhead for the first nine months of 1998. Operating Cash
Flow as a percentage of net revenue decreased to 18% for the nine months ended
September 30, 1998 from 21% for the comparable period in 1997.
Depreciation and Amortization Expense. Depreciation and amortization
expenses increased $0.9 million, or 9%, to $10.8 million in the first nine
months of 1998 as compared to $9.9 million in the first nine months of 1997.
Interest Expense. Interest expense for the nine months ended September 30,
1998 increased $1.1 million, or 6%, to $20.2 million from $19.1 million in the
first nine months of 1997, mainly due to higher average debt balances during the
first nine months of 1998 compared to the same period in 1997.
Stock Compensation Expense. In 1998, the Company recorded stock
compensation of $0.4 million, primarily due to the amendments of certain stock
option agreements. In 1997, the Company recorded stock compensation expense of
$4.7 million due to the conversion of incentive stock options into nonqualified
stock options.
Litigation Expense Adjustment. In 1997, the Company reduced an accrual for
litigation expense by $5.0 million. No such adjustment was made in 1998.
Income Tax Expense. For the first nine months of 1998, the Company
incurred a $14.4 million income tax expense compared to an income tax benefit of
$2.2 million for the first nine months of 1997.
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<PAGE>
The expense for 1998 resulted primarily from income tax expense on the gain on
sale of substantially all of the assets of Airport. The benefit resulted from
the recognition of a $7.2 million deferred tax asset during the first nine
months of 1997.
Net Income. Net income was $23.4 million, including the $20.4 million gain
on the sale of Airport, net of taxes, for the nine months ended September 30,
1998, an increase of $8.8 million, or 60%, from $14.6 million for the comparable
period in 1997. Net income as a percentage of net revenue was 11% for the first
nine months of 1998, compared to 8% for the first nine months of 1997. Excluding
the sale of the Company's airport advertising operations, net income was $3.0
million, a decrease of $11.6 million from the first nine months of 1997. This is
due primarily to the 1998 decrease in the Sports & Entertainment segment's
Operating Cash Flow described above and the recognition of the stock
compensation expense, litigation expense adjustment, and deferred tax asset in
1997.
LIQUIDITY AND CAPITAL RESOURCES
In January 1998, the Company replaced its 1996 Credit Agreement with a new
credit agreement (the "Credit Agreement"). Total borrowings under the Credit
Agreement consisted of a revolving credit facility (the "Revolver") and were
limited to $77.5 million due to restrictions related to the Company's 10 3/4%
Senior Secured Notes (the "Senior Notes').
In October 1998, the Company redeemed the Senior Notes with the proceeds of
a $120.0 million term loan facility under the Credit Agreement (the "Term
Loan"). This resulted in a charge of $4.2 million, net of applicable income
taxes, consisting of prepayment fees and the write-off of deferred financing
costs. In addition, the Company replaced the $35.0 million credit agreement (the
"Partnership Credit Agreement") of New Century Seattle Partners, LP (the
"Partnership") with proceeds from the Revolver. Through its subsidiaries, the
Company holds a 100% ownership interest in the Partnership, which owns radio
station KJR(AM), KHHO(AM), KJR-FM, and KUBE(FM). As a result of these
transactions, the Credit Agreement permits borrowings of $120.0 million under
the Term Loan and up to $180.0 million under the Revolver which includes up to
$10.0 million in standby letters of credit.
As of September 30, 1998, the Company had outstanding borrowings of $42.5
million under the Revolver and $35.0 million under the Partnership Credit
Agreement and $31.4 million available for future borrowings thereunder. The
Company will be required to repay outstanding borrowings under the Revolver in
quarterly installments from March 2000 through June 2005. Under the Term Loan
the Company will be required to repay outstanding borrowings in quarterly
installments from March 1999 through June 2005.
The Company can choose to have interest calculated under the Credit
Agreement at a Base Rate or LIBOR plus defined margins. As of September 30,
1998, the annual interest rate of borrowings outstanding under the Credit
Agreement was approximately 7.5% and under the Partnership Credit Agreement was
approximately 9.5%.
The Company had $32.5 million aggregate principal amount of 11.20% Senior
Subordinated Notes, Series B, due December 15, 1998 and 10.48% Senior
Subordinated Notes due December 15, 2000 (collectively, the "Subordinated
Notes") outstanding at September 30, 1998. The Subordinated Notes require
principal repayments of $12.5 million, $10.0 million, and $10.0 million in 1998,
1999, and 2000, respectively.
The Company has pledged the stock and partnership interests of all of its
subsidiaries to secure its obligations under the Credit Agreement and the
indenture related to the Senior Notes (the "Indenture").
13
<PAGE>
In addition, the Credit Agreement, the Indenture, and the note agreements
related to the Subordinated Notes restrict, among other things, the Company's
ability to assume or issue new debt, declare and pay dividends, repurchase
shares of Common Stock and Class B Common Stock, and dispose of assets. They
also contain restrictive covenants requiring the Company to maintain certain
financial ratios. As of September 30, 1998, the Company was in compliance with
all such ratios and covenants.
The Company's working capital decreased to a deficiency of $7.4 million at
September 30, 1998 from $12.0 million at December 31, 1997 primarily due to the
redemption of the Senior Notes with the proceeds from the Term Loan and the
reduction of current deferred tax assets from the gain on the sale of
substantially all of the assets of the Company's airport advertising operations.
The Company expended $24.2 million for capital expenditures in the first
nine months of 1998, compared to $13.2 million in the corresponding period in
1997. Capital expenditures in the first nine months of 1998 were primarily for a
new aircraft for the Seattle SuperSonics, broadcasting equipment, and
advertising signs and displays.
For the periods presented, the Company has financed its working capital
needs primarily from cash provided by operating activities. Over that period,
long-term liquidity needs, including for acquisitions, have been financed
primarily through additions to long-term debt, principally through bank
borrowings. Capital expenditures for new property and equipment have been
financed with both cash provided by operating activities and long-term debt.
Cash provided by operating activities for the first nine months of 1998 was $6.3
million, a decrease from cash provided by operating activities of $21.6 million
for the first nine months of 1997.
On April 15, 1998, the Company paid its shareholders a cash dividend of
$.02 per share.
YEAR 2000
Many computer systems were originally designed to recognize calendar years
by the last two digits in the date code field. Beginning in the year 2000, these
date code fields will need to accept four-digit entries to distinguish twenty-
first century dates from twentieth century dates. The issue is not limited to
computer systems. Year 2000 issues may affect any system or equipment that has
an embedded microchip that processes date sensitive information.
State of Readiness
The Company is committed to addressing the Year 2000 issue in a prompt and
responsible manner, and has dedicated the resources to do so. Management has
completed an assessment of its automated systems and has implemented a program
to complete all steps necessary to resolve identified issues. The Company's
compliance program has several phases, including (1) project management; (2)
assessment; (3) testing; and (4) remediation and implementation.
Project Management: The Company formed a Year 2000 compliance team in
December 1997. The team meets generally on a monthly basis to discuss project
status, assign tasks, determine priorities, and monitor progress. The team also
reports to senior management on a regular basis.
Assessment: All of the Company's mission-critical software programs have
been identified. This phase is essentially complete. The Company's primary
software vendors and business partners were also assessed during this phase, and
vendors/business partners who provide mission-critical software have been
contacted. In most cases, the vendors/business partners that are not already
compliant have planned new Year 2000 compliant releases to be available early in
1999. The Company will continue to
14
<PAGE>
monitor and work with vendors and business partners to ensure that appropriate
upgrades and/or testing is completed.
Testing: Updating and testing of the Company's automated systems is
currently underway and the Company anticipates that testing will be complete by
April 30, 1999. Upon completion, the Company will be able to identify any in-
house developed computer systems that remain non-compliant.
Remediation and Implementation: This phase involves obtaining and
implementing renovated Year 2000 compliant software applications provided by our
vendors and performing the necessary programming to render in-house developed
systems Year 2000 compliant. This process also involves replacing non-compliant
hardware. The remediation and implementation process will continue through 1999.
Costs
The total financial impact that Year 2000 issues will have on the Company
cannot be predicted with certainty at this time. In fact, in spite of all
efforts being made to rectify these issues, the success of the Company's efforts
will not be known for sure until the year 2000 actually arrives. However, based
on its assessment to date, the Company does not believe that expenses related to
meeting Year 2000 challenges will exceed $750,000.
Risks Related to Year 2000 Issues
The year 2000 poses certain risks to the Company and its operations. Some
of these risks are present because the Company purchases technology and
information systems applications from other parties who face Year 2000
challenges. Other risks are present simply because the Company transacts
business with organizations who also face Year 2000 challenges. Although it is
impossible to identify all possible risks that the Company may face moving into
the next millennium, management has identified the following significant
potential risks:
The functions performed by the Company's mission-critical software that are
primarily at risk from Year 2000 challenges generally involve the scheduling of
advertising and programming in its broadcasting and sports & entertainment
segments, the scheduling of advertising in its out-of-home segment, and the
scheduling of events in its sports & entertainment segment. In all of these
cases, Year 2000 challenges could impact the ability of the Company to deliver
its product with the same efficiency as it does now. However, the Company
believes these functions can be performed manually or by other alternative
means, as necessary, for an indefinite period of time. In fact, the Company has
had to perform these functions using alternative means in the past due to
natural disasters, such as a tornadoes and hurricanes. In these instances, the
Company was able to recover such that there were no material adverse effects on
its operations.
The Company's operations, like those of many other organizations, can be
adversely affected by Year 2000 triggered failures of other companies upon whom
the Company depends for the functioning of its mission-critical automated
systems. As described above, the Company has identified its mission-critical
vendors and is monitoring their Year 2000 compliance programs.
Contingency Plans
The Company has not yet developed specific contingency plans related to
Year 2000 issues, other than those described above. As the Company continues the
testing phase, and based on future ongoing assessment of the readiness of
vendors and service providers, the Company will develop appropriate contingency
plans. It is possible that certain circumstances may occur for which there are
no completely satisfactory contingency plans.
15
<PAGE>
NBA LOCKOUT
On March 23, 1998 the Board of Governors of the NBA voted to reopen the
NBA's collective bargaining agreement with the National Basketball Players
Association. As a result, the collective bargaining agreement expired on June
30, 1998 and the players were locked out. Preseason and regular season games
scheduled through approximately the middle of December have been cancelled.
Management estimates that if all games scheduled through the end of December
1998 are cancelled, the impact on the Company would be a reduction of Operating
Cash Flow of approximately $6.0 million. While the Company believes that it is
the desire of the NBA Board of Governors to reach a new agreement as soon as
possible, there can be no assurance that the parties will do so.
FORWARD LOOKING STATEMENTS
The discussions above regarding the Company's Year 2000 issues and the NBA
Lockout include certain "forward looking statements" regarding its future
operations. The Company desires to take advantage of the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995 as they apply
to forward looking statements. This statement is for the express purpose of
availing the Company of the protections of such safe harbor with respect to all
"forward looking statements." Management's ability to predict results of the
effect of future plans is inherently uncertain, and is subject to factors that
may cause actual results to differ materially from those projected. Factors
related to Year 2000 issues that could affect the actual results include the
Company's success in identifying systems and programs that are not Year 2000
compliant; the possibility that systems modifications will not operate as
intended; unexpected costs associated with remediation, including labor and
consulting costs; the nature and amount of programming required to upgrade or
replace the affected systems; the uncertainty associated with the impact of the
year 2000 on the Company's customers, vendors and third-party service providers;
and the economy in general. Factors related to the NBA Lockout that could affect
the actual results include the ability of the NBA Board of Governors and the NBA
Players Association to reach a new agreement; the length of time before such an
agreement is reached; and the specific terms and conditions of any such
agreement.
16
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PART II - OTHER INFORMATION
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
<TABLE>
Exhibit No. Exhibit
----------- -------
<CAPTION>
<S> <C>
10 Asset Purchase Agreement between Sinclair Communications, Inc. and The Ackerley Group, Inc., dated
as of September 25, 1998.
27 Financial Data Schedule for the three-month period ending September 30, 1998, and the nine-month
period ending September 30, 1998.
</TABLE>
(b) Reports on Form 8-K:
The Company filed a Current Report on Form 8-K on July 15, 1998. The
Current Report disclosed under Item 2 the sale of substantially all of the
assets of the Company's airport advertising operations, and set forth under
item 7(a) certain pro forma consolidated financial information.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE ACKERLEY GROUP, INC.
DATED: November 13, 1998 BY: DENIS M. CURLEY
---------------
Denis M. Curley
Co-President and Chief Financial Officer,
Treasurer and Secretary
(Principal Financial Officer)
17
<PAGE>
EXHIBIT 10
PURCHASE AGREEMENT
by and between
SINCLAIR COMMUNICATIONS, INC.
and
THE ACKERLEY GROUP, INC.
Dated as of September 25, 1998
<PAGE>
TABLE OF CONTENTS
Page
Article 1. Sale of Assets; Assumption of Liabilities....................... 1
1.1 Assets to Be Acquired............................................ 1
1.2 Excluded Assets.................................................. 3
1.3 Assumption of Liabilities........................................ 3
1.4 Closing and Closing Date......................................... 4
1.5 Additional Closing Deliveries.................................... 4
Article 2. Purchase Price.................................................. 5
2.1 Escrow Deposit................................................... 5
2.2 Purchase Price; Payment.......................................... 5
2.3 Post-Closing Adjustment.......................................... 6
2.4 Security Escrow.................................................. 8
2.6 Investment of Escrow Amounts..................................... 8
2.7 Allocation of the Purchase Price................................. 9
Article 3. Representations and Warranties Relating to the Company.......... 10
3.1 Organization and Standing........................................ 10
3.2 Binding Agreement................................................ 10
3.3 Absence of Conflicting Agreements or Required Consents........... 10
3.4 Equity Investments............................................... 10
3.5 Financial Statements............................................. 11
3.6 Title to Assets; Related Matters................................. 11
3.7 Absence of Certain Changes, Events and Conditions................ 11
3.8 Litigation....................................................... 12
3.9 Insurance........................................................ 12
3.10 Material Contracts............................................... 13
3.11 Permits and Licenses; Compliance with Law........................ 13
3.12 FCC Licenses..................................................... 13
3.13 Environmental Matters............................................ 14
3.14 Employee Benefit Matters......................................... 14
3.15 Labor Relations.................................................. 15
3.16 Intellectual Property............................................ 16
3.17 Taxes............................................................ 16
3.18 Commissions...................................................... 17
3.19 Affiliate Transactions........................................... 17
3.20 Accuracy and Completeness of Representations and
Warranties...................................................... 17
-i-
<PAGE>
Page
Article 4. Representations and Warranties of Purchaser..................... 17
4.1 Organization and Standing........................................ 17
4.2 Binding Agreement................................................ 17
4.3 Absence of Conflicting Agreements or Required Consents........... 18
4.4 Litigation....................................................... 18
4.5 Commissions...................................................... 18
4.6 Financing........................................................ 18
4.7 Purchaser's Qualification........................................ 19
4.8 Accuracy and Completeness of Representations and Warranties...... 19
Article 5. Covenants and Agreements........................................ 19
5.1 Conduct of the Business Prior to Closing; Access................. 19
5.2 Post-Closing Covenants and Agreement, and Other Employee
Benefit Matters................................................. 22
5.3 Cooperation...................................................... 24
5.4 Confidentiality.................................................. 26
5.5 Public Announcements............................................. 26
5.6 No Solicitation.................................................. 26
5.7 No Additional Representations.................................... 26
5.8 Certain Payments................................................. 27
5.9 Bulk Sales Laws.................................................. 27
5.10 Control of the Stations.......................................... 27
5.11 Use of Certain Names............................................. 28
Article 6. Conditions to Obligations of Purchaser.......................... 28
6.1 Representations and Warranties................................... 28
6.2 Performance by the Company....................................... 28
6.3 Certificate...................................................... 28
6.4 Consents; No Objections.......................................... 28
6.5 No Proceedings or Litigation..................................... 29
6.6 [Intentionally omitted].......................................... 29
6.7 FCC Consent...................................................... 29
6.8 No Material Adverse Change....................................... 29
6.9 Opinions of Counsel.............................................. 29
6.10 Good Standing Certificate........................................ 29
6.11 No Transmission Defects.......................................... 29
6.12 Closing on the Gannett Purchase Agreement........................ 29
Article 7. Conditions to Obligations of the Company........................ 30
7.1 Representations and Warranties................................... 30
7.2 Performance by Purchaser......................................... 30
7.3 Certificate...................................................... 30
7.4 Consents; No Objections.......................................... 30
7.5 No Proceedings or Litigation..................................... 30
-ii-
<PAGE>
Page
7.6 FCC Consent...................................................... 30
7.7 Opinion of Counsel............................................... 30
7.8 Good Standing Certificate........................................ 30
7.9. Closing on Gannett Purchase Agreement............................ 31
Article 8. Indemnification................................................. 31
8.1 Indemnification by the Company................................... 31
8.2 Indemnification by Purchaser..................................... 31
8.3 Limitations on Indemnification Claims and Liability;
Termination of Indemnification.................................. 31
8.4 Computation of Claims and Damages................................ 32
8.5 Notice of Claims................................................. 33
8.6 Defense of Third Party Claims.................................... 33
8.7 Third Party Beneficiaries........................................ 34
Article 9. Definitions..................................................... 34
Article 10. Miscellaneous Provisions....................................... 46
10.1 Termination Rights............................................... 46
10.2 Litigation Costs................................................. 47
10.3 Expenses......................................................... 47
10.4 Notices.......................................................... 48
10.5 Benefit and Assignment........................................... 49
10.6 Waiver........................................................... 49
10.7 Severability..................................................... 49
10.8 Amendment........................................................ 49
10.9 Effect and Construction of this Agreement........................ 49
10.10 Transfer and Conveyance Taxes.................................... 50
10.11 Specific Performance............................................. 50
10.12 Survival of Representations, Warranties and Covenants............ 50
Article 11. No Personal Liability for Representatives, Stockholders,
Directors or Officers......................................... 50
-iii-
<PAGE>
Exhibits
Exhibit A Bill of Sale, Assignment and Assumption Agreement
Exhibit B Deposit Escrow Agreement
Exhibit C Adjustment Escrow Agreement
Exhibit D Security Escrow Agreement
Exhibit E-1 Opinion of Thomas & Libowitz, P.A.
Exhibit E-2 Opinion of Fisher, Wayland, Cooper, Leader & Zaragoza L.L.P.
-iv-
<PAGE>
Schedules
Section 1.1(d) Real Property
Section 1.2. Excluded Assets
Section 3.3. Absence of Conflicting Agreements or Required Consents
Section 3.3.1. Consents Required
Consents Required - Employment Agreement
Consents Required - Barter Programming
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 3.9.1. Insurance Policies
Section 3.10. Material Contracts
Section 3.10.1. Material Contracts - Broadcasting
Section 3.10.2. Affiliation Agreement
Section 3.10.3. Program Licenses
Section 3.10.4. Employment Agreements
Section 3.10.6. Collective Bargaining Agreement
Section 3.10.7.A. Real Property Leases
Section 3.10.7.B. Equipment Leases and Intellectual Property
Section 3.10.8. Income Leases
Section 3.10.10. Loan Agreement
Section 3.11 Permits
Section 3.12 FCC
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 3.14.3 Employee Benefit Plans/Contracts
Section 3.15 Labor Relations
Section 3.16 Intellectual Property
Section 3.16.1 Call Letters
Section 3.17 Taxes
Section 3.19 Affiliate Transactions
Section 4.3 Absence of Conflicting Agreements or Required Consents
Section 4.4 Litigation
Section 5.1 Covenants and Agreements
Section 5.2 Post-Closing Covenants and Agreements
Section 5.2.1 List of Names of Current Corporate Office Employees
Section 5.2.2 Fiduciary Liability Coverage Summary
-v-
<PAGE>
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 Seller's
Obligation to Close
Section 9 Closing Statement Differences and Inconsistencies with GAAP
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<PAGE>
PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of this
25th day of September, 1998, by and among SINCLAIR COMMUNICATIONS, INC., a
Maryland corporation (the "Company"), THE ACKERLEY GROUP, INC., a Delaware
corporation ("Purchaser").
WHEREAS, the Company and Guy Gannett Communications ("Gannett") entered
into that certain Asset Purchase Agreement dated September 4, 1998 (the "Gannett
Purchase Agreement"), pursuant to which the Company agreed to purchase
substantially all of the assets of the Gannett Television Stations, one of which
is WOKR-TV, Channel 13, Rochester, New York (the "Station"); and
WHEREAS, the Company desires to sell, assign and transfer to Purchaser
the assets and business of the Station as described below, and Purchaser desires
to purchase and acquire the assets and business of the Business 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, at the Closing, the Company
shall sell, convey, assign, transfer and deliver to Purchaser, and Purchaser
shall purchase, acquire, accept and pay for, all of the Company's right, title
and interest 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 on the
Closing Date in connection with the Business (collectively, the "Assets")
consisting of all of the Assets relating to the Station acquired by the Company
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, acquired by the Company from Gannett
pursuant to the Gannett Purchase Agreement and useful in connection with
the Business;
<PAGE>
(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
Station 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 Station for any property or services in lieu of or
in addition to cash, and any other orders and agreements relating to the
Station and entered into (other than in violation of this Agreement)
between the date of the Gannett Purchase Agreement and the Closing 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 Station ("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 Station and entered into (other than in violation
of this Agreement) between the date of the Gannett Purchase Agreement and
the Closing 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 Station, 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
Station and entered into (other than in violation of this Agreement)
between the date of the Gannett Purchase Agreement and the Closing Date;
(h) the Intellectual Property, including, without limitation, the
Call Letters;
(i) all programs and programming materials acquired by the Company
from Gannett pursuant to the Gannett Purchase Agreement and 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 acquired by the Company from Gannett pursuant to the Gannett
Purchase Agreement and used in connection with the Business;
(j) all FCC logs and other records that relate to the operation of
the Station as acquired by the Company from Gannett pursuant to the Gannett
Purchase Agreement;
(k) except as set forth in Section 1.2(a) hereof, all files, books
and other records acquired by the Company pursuant to the Gannett Purchase
Agreement 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
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accounting purposes;
(l) all of the Company's goodwill in, and "going concern" value of,
the Business;
(m) all accounts, notes and accounts receivable of the Business
relating to or arising out of the business and operations of the Station
immediately preceding the Closing;
(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 License) in any jurisdiction that had
issued or granted such items to the Company or the Company has acquired
from Gannett pursuant to the Gannett Purchase Agreement, or that the
Company otherwise owns or uses or the Company has acquired from Gannett
pursuant to the Gannett Purchase Agreement, in each case relating to the
Business, and all pending applications therefor;
(p) except as set forth in Section 1.2(h) hereof, all insurance
proceeds claims arising out of or related to 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 Closing Date; and
(q) to the extent assignable, the Company's rights to enforce any
non-competition provisions relating to the Business, the Business Employees
or the Station contained in any other written agreement with a Corporate
Office Employee, but only to the extent the Company acquires such rights
from Gannett pursuant to the Gannett Purchase Agreement.
1.2 Excluded Assets. Notwithstanding anything to the contrary
herein, all of the assets listed on Schedule 1.2 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. On and after the Closing Date,
Purchaser will assume and agree to perform and fully discharge when due all
Liabilities of the Company or Gannett (i) solely related to or solely arising
from or in connection with the Assets or the Business and (ii) in the case of
any Liabilities related to or arising partly from or in connection with the
Assets or the Business and partly from any other assets or business of the
Company, to the extent such Liabilities relate to or arise from or in connection
with the Assets or the Business (in each case including, without limitation, any
Claims and Damages arising from the assignment to Purchaser of any contract or
other agreement pursuant to the terms of this Agreement), whether such
Liabilities specified in clause (i) or (ii) 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 (collectively, the "Assumed Liabilities"). Except as set
forth in this Section 1.3 and except as otherwise expressly provided
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in this Agreement, Purchaser will assume no other Liabilities of any kind of
description of the Company or any of the liabilities defined in the Gannett
Purchase Agreement as Retained Liabilities.
1.4 Closing and Closing Date. 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 not later than ten 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; provided, however, that the Company
and Purchaser shall take such reasonable actions as may be necessary to hold the
Closing simultaneously with the Closing of the Gannett Purchase Agreement (such
time and date being referred to herein as the "Closing Date"), at the offices of
Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New York, or at such
other place as the Company and Purchaser shall agree. 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.
1.5 Additional Closing Deliveries. At the Closing:
(a) 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) instruments of assignment with respect to all of the
Company's rights and interests in real property leases 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") in
recordable form sufficient to convey to Purchaser all of the Company's
rights and interests or rights and interest in the Real Property
acquired by the Company from Gannett pursuant to the Gannett Purchase
Agreement;
(iii) a duly executed counterpart of the Adjustment Escrow
Agreement and the Security Escrow Agreement;
(iv) all other instruments of conveyance and transfer sufficient
to convey the Assets to Purchaser; and
(v) all other documents, instruments and writings consistent
with the terms of this Agreement and required to be delivered by the
Company at or prior to the Closing Date pursuant to this Agreement.
(b) Purchaser shall deliver to Company:
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(i) the Purchase Price in accordance with Section 2.1 hereof;
(ii) a duly executed counterpart of the Bill of Sale, Assignment
and Assumption Agreement; and
(iii) all other documents, instruments and writings required to
be delivered by Purchaser at or prior to the Closing Date pursuant to
this Agreement.
Article 2. Purchase Price.
2.1 Escrow Deposit. For and in partial consideration of the
execution and delivery of this Agreement and simultaneously with the execution
hereof, Buyers shall deposit with an escrow agent ("Escrow Agent") by wire
transfer in immediately available funds TWELVE MILLION FIVE HUNDRED THOUSAND
DOLLARS ($12,500,000.00) (the "Escrow Deposit"), such Escrow Deposit to be dealt
with in accordance with the terms and provisions of the Deposit Escrow Agreement
attached hereto as Exhibit B.
2.2 Purchase Price; Payment. (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 (x) $125,000,000, plus (if greater than or equal to
zero) or minus (if less than zero), as the case may be, (y) the amount of the
Net Financial Assets as of 11:59 p.m., New York City time, on the day
immediately preceding the Closing Date, subject to adjustment pursuant to
Section 2.3 hereof (the "Purchase Price") and (ii) assume the Assumed
Liabilities.
(b) On or before three Business Days prior to the Closing, the
Company shall deliver to Purchaser (i) 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 Closing Date (the "Estimated Net Financial Assets") and (ii) a
notice designating the accounts or accounts to which the payment to or on behalf
of the Company pursuant to clause (i) of Section 2.2(c) is to be made.
(c) At the Closing, Purchaser shall deliver
(i) the sum of (x) $120,564,800 plus (if the Estimated Net
Financial Assets is greater than or equal to zero) or minus (if the
Estimated Net Financial Assets is less than zero), as the case may be,
(y) the Estimated Net Financial Assets, by wire transfer in
immediately available funds to the account or accounts designated by
the Company in accordance with Section 2.2(b);
(ii) $1,209,600 (the "Adjustment Escrow") by wire transfer in
immediately available funds to the Adjustment Escrow Agent pursuant to
the Adjustment Escrow Agreement; and
(iii) $3,225,600 by wire transfer in immediately available funds
to the Security Escrow Agent pursuant to the Security Escrow
Agreement.
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2.3 Post-Closing Adjustment.
(a) The parties agree that no later than 75 days after the Closing
(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, of the day immediately preceding the Closing 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 and (ii) a determination (the "Proposed Adjustment") of
the amount by which the actual Net Financial Assets is less than or greater
than the Estimated Net Financial Assets (the amount of such excess or
shortfall is referred to herein as the "Adjustment"). 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 Business's books as of the Closing, 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 25-day period following the delivery by the Company of
the Closing Statement and the Proposed Adjustment referred to in the first
sentence of this Section 2.3(a), Purchaser and its independent accountants
will be permitted to review the working papers of Gannett and its
independent accountants relating to the preparation of the Closing
Statement and the Proposed Adjustment 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 25 days after delivery by the
Company of the Closing Statement and the Proposed Adjustment, Purchaser
notifies the Company that it disagrees with the Closing Statement and the
Proposed Adjustment, the Company shall attempt to resolve the disagreement
with Gannett. In the event the Company, Gannett and Purchaser cannot agree
with respect to the Closing Statement and the Proposed Adjustment within
five days of the notice of disagreement provided by Purchaser to the
Company (a "WOKR Dispute"), then the Company shall seek an Accounting Firm
Determination as defined in the Gannett Purchase Agreement. In the event
that (whether expressly or by failure of Purchaser to provide notice of any
disagreement within the applicable period) the Purchaser agrees to the
amount of the Adjustment without submitting the matter for an Accounting
Firm Determination (an "Adjustment Agreement"), the parties shall deliver a
joint certificate to the Adjustment Escrow Agent setting forth the amount
of the Adjustment Escrow to be paid to each of the Purchaser and the
Company pursuant to this Section 2.3. In the event of an Accounting Firm
Determination of a WOKR Dispute, the parties shall deliver a certificate to
the Adjustment Escrow Agent setting forth the amount (if any) by which the
Actual Net Financial Assets (as defined below) exceeds or is less than the
Estimated 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 2.3(a) is
referred to herein as the "Actual Net Financial Assets."
(b) At the Closing, the Company, Purchaser and such financial
institution as shall have been agreed by the parties prior to the Closing
Date (together with any successor jointly appointed by the Company and the
Purchaser, the "Adjustment Escrow Agent")
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shall execute and deliver an escrow agreement substantially in the form set
forth in Exhibit C to the Gannett Purchase Agreement, with such adjustments
and revisions necessary to reflect the provisions of this Agreement (the
"Adjustment Escrow Agreement'). From and after the Closing, the Adjustment
Escrow Agent shall act as escrow agent, pursuant to the Adjustment Escrow
Agreement, in effecting the payment of the amounts held in the Adjustment
Escrow as set forth herein.
(c) As soon as practicable after the earlier of an Adjustment
Agreement or an Accounting Firm Determination (but in any event within two
Business Days after the Adjustment Agreement or the Accounting Firm
Determination):
(i) if the Actual Net Financial Assets is equal to or greater than
the Estimated Net Financial Assets, then:
(A) the Adjustment Escrow Agent shall pay to the Company from
the Adjustment Escrow the full amount of the Adjustment Escrow, and
(B) Purchaser shall pay to the Company the amount by which the
Actual Net Financial Assets exceeds the Estimated Net Financial
Assets;
(ii) if the Actual Net Financial Assets is less than the Estimated
Net Financial Assets but the amount of such shortfall does not exceed $3
million, when aggregated with any such shortfall under the Gannett Purchase
Agreement, then
(A) the Adjustment Escrow Agent shall pay to Purchaser from the
Adjustment Escrow an amount equal to the amount by which the Estimated
Net Financial Assets exceeded the Actual Net Financial Assets, and
(B) the Adjustment Escrow Agent shall pay to the Company from
the Adjustment Escrow the remaining amount of the Adjustment Escrow
(after giving effect to clause (A) above); and
(iii) if the Actual Net Financial Assets is less than the Estimated
Net Financial Assets and the amount of such shortfall exceeds $3 million,
when aggregated with any such shortfall under the Gannett Purchase
Agreement, then
(A) the Adjustment Escrow Agent shall pay to Purchaser from the
Adjustment Escrow the full amount of the Adjustment Escrow, and
(B) the Security Escrow Agent shall pay to the Purchaser from
the Security Escrow an amount equal to the amount by which (x) the
Estimated Net Financial Assets exceeds (y) the Actual Net Financial
Assets plus $1,209,600.
Each of Purchaser and the Company shall timely give all necessary
instructions to the Adjustment Escrow Agent and the Security Agent so that
the Adjustment Escrow and (if applicable) the Security Escrow are paid and
distributed in accordance with this
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Section 2.3(c). All payments pursuant to this Section 2.3(c) shall be by
wire transfer in immediately available funds to the account or accounts
designated by the Company and/or Purchaser, as the case may be, no later
than two Business Days prior to such payment.
(d) Any interest or other investment income earned for the period
from the time that any portion of the Purchaser Price is delivered to the
Adjustment Escrow Agent pursuant to this Agreement until all amounts held
in the Adjustment Escrow have been distributed in accordance with the
Adjustment Escrow Agreement while held by the Adjustment Escrow Agent shall
be paid to the Company in addition to, and at the same time as, payment of
the Adjustment Escrow in accordance with the terms of this Agreement;
provided, however, that, to the extent that any portion of the Adjustment
Escrow is paid to Purchaser pursuant to Section 2.3(c) hereof, a pro rata
portion of such interest or other investment income (determined on the
basis of the relative portions of the Adjustment Escrow to be paid to
Purchaser and the Company, respectively, pursuant to Section 2.3(c) hereof)
shall be instead paid to Purchaser. Any such interest or other investment
income shall be deemed not to constitute Adjustment Escrow.
(e) The Company and Purchaser shall each be responsible for one-half
of the fees and expenses of the Adjustment Escrow Agent.
2.4 Security Escrow.
(a) At the Closing, the Company, Purchaser and such financial
institution as shall have been agreed by the parties prior to the Closing
Date (together with any successor jointly appointed by the Company and
Purchaser, the "Security Escrow Agent") shall execute and deliver an escrow
agreement substantially in the form set forth in Exhibit D to the Gannett
Purchase Agreement, with such adjustments and revisions necessary to
reflect the provision of this Agreement (the "Security Escrow Agreement").
From and after the Closing, the Security Escrow Agent shall act as escrow
agent, pursuant to the Security Escrow Agreement, in effecting the payment
of the amounts held in the escrow account (the "Security Escrow") under the
Security Escrow Agreement.
(b) Any interest or other investment income earned for the period
from the time that any portion of the Purchase Price is delivered to the
Security Escrow Agent pursuant to this Agreement until all amounts held in
the Security Escrow have been distributed in accordance with the Security
Escrow Agreement while held by the Security Escrow Agent shall be paid
(beginning after the payment of any amount required to be paid out of the
Security Escrow pursuant to Section 2.3(c)(iii)(B) hereof) monthly to the
Company; provided, however, that the extent that any portion of the
Security Escrow is paid to Purchaser pursuant to Section 2.3(c)(iii)(B)
hereof, a pro rata portion of such interest or other investment income
earned through the date of such payment (determined on the basis of the
relative portions of the Security Escrow so paid and that not so paid)
shall be instead paid to Purchaser. Any interest or other investment income
earned on amounts held in the Security Escrow shall be deemed not to
constitute Security Escrow.
(c) The Company and Purchaser shall each be responsible for one-half
of the fees and expenses of the Security Escrow Agent.
2.5 Investment of Escrow Amounts. The Adjustment Escrow Agent and
the
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Security Escrow Agent shall each be authorized to invest the portion of the
Purchase Price held by it, on receipt of instructions from the Company, in:
(i) Commercial paper of any corporation rated at least A-1 by
S&P and P-1 by Moody's;
(ii) Negotiable certificates of deposit of United States banks
having (A) a long-term senior debt rating of at least A by S&P and
Moody's, (B) deposits in excess of $2,000,000,000 and (C) commercial
paper rating designations of at least A-1 by S&P and P-1 by Moody's;
(iii) Repurchase agreements with any United States bank which
are fully collateralized by direct obligations of the United States or
obligations of agencies or sponsored agencies of the United States
government, excluding in all cases collateralized mortgage obligations
of any kind; and
(iv) Money market instruments rated at least A-1 by S&P and P-1
by Moody's that are restricted to investments described in clause
(iii);
provided that in no event shall any investment of the types described in clause
(i), (ii) or (iv) exceed ten percent of the net assets of the issuer thereof and
provided further that all investments shall have maturity dates on or before the
anticipated dates of the relevant payments hereunder.
The Adjustment Escrow Agent and the Security Escrow Agent shall each
be authorized to register securities held by it in its name or in the name of a
nominee or in bearer form and may deposit any securities or other property in a
depository or a clearing corporation.
2.7 Allocation of the Purchase Price. Pursuant to the Gannett
Purchase Agreement, the Company shall engage a nationally recognized appraiser
to determine the proper allocation of the Purchase Price allocated to, and the
Assumed Liabilities relating to the Assets of the Station, in each case 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 appraiser
engaged in connection with the Allocation as to the Assets of the Station shall
be paid by Purchaser.
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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 has all
requisite corporate power and authority to own, lease and operate their
respective properties and assets and to conduct its 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.
3.2 Binding Agreement. The Company has all requisite corporate power
and authority to enter into this Agreement, to execute and deliver this
Agreement, the Bill of Sale, Assignment and Assumption Agreement, to carry out
its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement,
the Bill of Sale, Assignment and Assumption Agreement 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 Closing
Date the Bill of Sale, Assignment and Assumption Agreement 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, the Bill of Sale, Assignment
and Assumption Agreement 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 by-laws 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, (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.
3.4 Equity Investments. The Assets do not include any capital stock
of any corporation or any equity interest in any Person.
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3.5 Financial Statements. The Company has furnished to Purchaser
statements of operations for the Station for the year ended December 31, 1997,
the six (6) months ended June 30, 1998, the seven (7) months ended July 1, 1998,
and August 31, 1998, which were supplied to the Company by Gannett.
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 (i) 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), (ii) 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 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, (iii) 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, (iv) 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, (v) 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 (vi) 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. On the Closing Date, the Company shall sell,
convey, assign, transfer and deliver to Purchaser all of the Company's right,
title and interest in and to all of the Assets, free and clear of all
Encumbrances other than Permitted Exceptions, Encumbrances disclosed in Section
3.6 of the Disclosure Schedule and Encumbrances arising from Purchaser's acts.
Schedule 1.1(d) contains a true and correct list of all Real Property owned by
Gannett used in the Business (other than the Excluded Assets), which is to be
acquired by the Company pursuant to the Gannett Purchase Agreement.
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 have granted any increase,
or announced
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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, 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 have made any material change in
any method of accounting or accounting practice or policy used by Gannett
or the Company with respect to the Station, other than changes required by
law or under GAAP;
(d) neither the Company nor Gannett have 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 have 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 have 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 have 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, (i) 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, (ii) 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 (iii) there is no Action pending or,
to the Company's Knowledge, threatened to be brought before any Governmental
Authority, that seeks to 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, (i) 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
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therefor) are in full force and effect and, to the Company's Knowledge, all
premiums due have been paid and are not in default, (ii) 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 (iii) to the Company's Knowledge, neither the Company nor
Gannett have 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 Station, 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 Material Contracts 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, (1) 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, (2) 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 (3) 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.
3.11 Permits and Licenses; Compliance with Law. 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
Closing) 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.
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 Closing, 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 Station, 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, (i) to the Company's Knowledge, Gannett holds, and
immediately prior to the Closing
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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; (ii) 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; (iii) 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 Station as currently operated; (iv) 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 revoke, suspend, cancel, rescind, modify, or refuse to renew in the
ordinary course any of the FCC Licenses; (v) to the Company's Knowledge, the
Station is 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 (vi) 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, (i) Hazardous Materials
have not been Released on any Real Property except in material compliance with
applicable Law; (ii) 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; (iii) the Business, the Real Property and
the Leased Property is now, and for the past five 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; (iv) 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 (v) 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 Station), 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 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
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such noncompliance, nonperformance, default or violation would, individually or
in the aggregate, be reasonably expected to result in liability in excess of
$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 $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 $25,000, each Employee Benefit Plan relating to
the Station 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 Station, 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 $25,000 for Gannett, the 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 Station, 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 $25,000. The $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
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employees of the Business. Complete and accurate copies of all collective
bargaining agreements and other labor union contracts relating to employees of
the Station and any such labor organizations (to the extent provided to the
Company by Gannett) have been delivered or made available to Purchaser. Except
as disclosed in Section 3.15 of the Disclosure Schedule, (i) the Company is not
and, to the Company's Knowledge, Gannett is not party to any collective
bargaining agreement or other labor union contract applicable to employees of
the Business, (ii) 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 years, in each case,
as of the date of the Gannett Purchase Agreement, (iii) 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 and (iv) 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, 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, (v) 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 (vi) 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
Station (the "Call Letters"). Except as disclosed in Section 3.16 of the
Disclosure Schedule, to the Company's Knowledge, (i) the rights of Gannett, and
immediately prior to the Closing, 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, (ii) 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, (iii) 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 (iv) 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
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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 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 Station 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 Station has been proposed in writing by any Tax
authority and remains unresolved; (d) there are, and immediately prior to the
Closing 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 Station with any Affiliates
that will continue in effect after the Closing for the Purchaser that are not
immediately terminable by the Purchaser without payment of any penalty or
premium.
3.20 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 Bill of Sale, Assignment and Assumption Agreement, 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 Bill of Sale, Assignment and Assumption Agreement by
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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
Closing Date, the Bill of Sale, Assignment and Assumption Agreement 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. Except
as set forth in Section 4.3 of the Disclosure Schedule, the execution, delivery
and performance by Purchaser of this Agreement and the Bill of Sale, Assignment
and Assumption Agreement 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 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, any Action
threatened to be brought by or before any Governmental Authority, against
Purchaser or any of its Affiliates that (i) seeks to question, delay or prevent
the consummation of the transactions contemplated hereby or (ii) 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.
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 Closing have sufficient funds to
pay the Purchase Price pursuant to this Agreement and otherwise to satisfy its
obligations hereunder.
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4.7 Purchaser's Qualification. Except as set forth in Section 4.7 of
the Disclosure Schedule, (i) 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 (ii) except for
the FCC's Duopoly Rule, a waiver of which will be requested by Purchaser,
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 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:
(a) Prior to Closing, the Company will not 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 Closing;
(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 by the Company 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 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
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(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
Station through the Closing in amounts at least equal to those in
effect on the date hereof;
(vii) make any capital expenditures relating to the Station in
excess of $500,000 in the aggregate that are not contemplated in the
capital improvements budgeted for 1998;
(viii) (A) amend the payment terms of any Program Contract to
provide that payments that would otherwise be made prior to the
Closing are made after the Closing or (B) acquire, enter into, modify,
change or extend the term of (x) any Program Contract providing for
payments in excess of $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 $200,000;
(ix) acquire, enter into, modify, change or extend the term of
any Material Contract, provided that this clause (ix) will not apply
to the acquisition or entering into of any new Material Contract not
otherwise subject to clauses (i) to (viii) or clauses (x) to (xvi)
hereof with respect to which all Liabilities of the Company thereunder
relating to the Station will be fully satisfied, discharged and
performed prior to the Closing with no adverse effect on Purchaser;
(x) 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 Station;
(xi) 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 Station after the Closing;
(xii) apply to the FCC for any construction permit that would
adversely affect the Station's present operations, or make any
material change in the Station's buildings, leasehold improvements, or
fixtures;
(xiii) except with respect to promotion during ratings sweep
periods (which shall not be subject to this clause (xiii)), enter into
any trade, barter or similar agreements (other than Program Contracts)
for the sale of advertising time that would be binding on the Station
after 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 $10,000 in any individual agreement or
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$200,000 in the aggregate;
(xiv) 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;
(xv) enter into or renew any time sales agreement except in the
ordinary course of business for a term not exceeding 12 months; or
(xvi) enter into any agreement, contract, commitment or
arrangement to do any of the foregoing.
(b) Pending the Closing, the Company shall:
(1) To the extent allowed by Gannett under the Gannett Purchase
Agreement, 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 Station
and, to the extent available from, or allowed by, Gannett pursuant to
the Gannett Purchase Agreement, furnish Purchaser and its
representatives with such information concerning the Station 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 Station, 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 Station);
(2) To the extent provided by Gannett pursuant to the Gannett
Purchase Agreement, furnish to Purchaser within 20 days after the end
of each month ending between the date of this Agreement and the
Closing an unaudited statement of income and expense and a balance
sheet for the Station for the month just ended; and
(3) To the extent provided by Gannett pursuant to the Gannett
Purchase Agreement, from time to time, furnish to Purchaser such
additional information (financial or otherwise) concerning the Station
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
Station).
(c) The Company will deliver to Purchaser, within ten Business Days
after delivery or receipt, copies of any reports, applications or
communications to or from the FCC or its staff related to the Station which
are delivered or received between the date of the Gannett Purchase
Agreement and the Closing Date.
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5.2 Post-Closing Covenants and Agreement, and Other Employee Benefit
Matters. (a) Purchaser shall at all reasonable times after reasonable
notice to Purchaser from and after the Closing, 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). 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 Closing. 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 Closing, 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 of the
Disclosure Schedule, the books and records of such Employee Benefit Plan
and the books and records of the Business relating thereto.
(b) Effective as of the Closing, Purchaser shall offer employment to
all then employees of the Business, on such terms and conditions as
Purchaser shall 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 Business,
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 Business who is not actively employed on the day
of the Closing 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 Closing.
(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 year after the Closing
Date or the term of their employment by Purchaser, whichever is less, for
employees of the Business as of the Closing 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 Business as of the
Closing Date and former and inactive Business Employees credit for their
service with the Company and Gannett or any of their Subsidiaries prior to
the Closing, 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
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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 Closing.
(d) Purchaser will assume and indemnify and hold harmless the Company
Indemnified Parties against all Liabilities with respect to severance benefits
arising in connection with or following the Closing 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 5.8(a)), 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 Closing
not covered by the agreements referenced in the immediately preceding sentence,
(x) for a period ending not less than one year after the Closing, 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
(y) Purchaser will assume and indemnify and hold harmless the Company
Indemnified Parties against all Liabilities with respect to severance benefits
arising in connection with or following the Closing.
(e) From and after the Closing, Purchaser shall assume all of the
collective bargaining agreements (including, without limitation, pursuant to the
specified provisions of the collective bargaining agreements set forth in
Section 5.2 of the Disclosure Schedule) and other labor contracts with respect
to any Business Employees existing immediately prior to the Closing.
(f) From and after the Closing, Purchaser shall assume sponsorship of
the WOKR-TV Partners 401(k) Plan, and assume responsibilities of all Employee
Benefits Plans 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, (ii)
which commenced or (iii) to which any current, former or inactive Business
Employee has already become qualified by reason of age and years of service as
of the Closing, to the extent such persons are identified in Section 5.2(f) of
the Disclosure Schedule (which section shall be updated, if necessary, at
Closing). From and after the Closing, Purchaser shall also pay to the Business
Employees and Corporate Office 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 Closing, 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
Closing, including any such benefits that are attributable to any injury or
illness that occurred or existed prior to the Closing to the extent not covered
by the Company's workers' compensation insurance policy.
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(h) For a period of 90 days after the Closing, 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 Business, 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 Closing, 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 (x) with respect to any Business
Employees who remain employed with either the Company or Gannett through
the Closing Date, for a period of eighteen months after the Closing or, if
earlier, until becoming eligible for comparable coverage from another
employer and (y) with respect to any Business Employees whose employment
shall have terminated prior to the Closing, 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.
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
their respective reasonable efforts to prepare and file as promptly as
practicable, but in any event no later than 15 Business Days after the date
hereof, 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
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 September 25,
1998, the Company and Purchaser shall jointly file the application with the
FCC requesting the FCC Consent,
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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 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 Closing 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 is a party, provided that 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.
(e) To the extent that there are third-party insurance policies
maintained by the Company 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 Closing, the Company shall use all
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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 Closing and the
other transactions contemplated hereby as soon as practicable.
5.4 Confidentiality.
(a) Prior to the Closing. The terms of the Confidentiality Agreement
by and between Purchaser and Gannett are herewith incorporated by reference
and shall continue in full force and effect as between Purchaser and
Gannett until the Closing and shall remain in effect as between Purchaser
and Gannett in accordance with its terms even if this Agreement is
terminated.
(b) Financial and Tax Information. Before and after the Closing,
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 Gannett with respect to "Evaluation
Material" as though such terms continued after the Closing.
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 to, or
afford any access to the Company'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 Company agrees to terminate immediately
any such discussions or negotiations.
5.7 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 Station and that
they and their representatives have had an opportunity to meet with the officers
and employees of the Company and Gannett to discuss the Station 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
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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.
5.8. 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 "WOKR Scheduled Severance Agreements"). Promptly, but in no
event later than five Business Days prior to any payment due under the WOKR
Scheduled Severance Agreements to any employee of the Station terminated by
Purchaser prior to 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 WOKR Scheduled Severance Agreements (a "WOKR Severance
Payment"); provided that the maximum amount that the Company shall be required
to pay pursuant to this Section 5.8(a) shall be $342,720, in the aggregate, for
all Business Employees as defined hereunder. Within five (5) Business Days after
the Company makes a WOKR Severance Payment, Purchaser shall reimburse the
Company for 50% of the amount of such payment. In addition to any reimbursement
by Purchaser under this Section 5.8(a), 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.
(a) 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 the
Company Indemnified Parties from and against 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, provided that the maximum amount that Purchaser shall
be liable for under this Section 5.8(b) is $80,640. Such payments by the
Company thereunder shall be made as the related Claims and Damages are
incurred. To the extent the Company is required to make such payment,
Purchaser shall reimburse and pay over to the Company 40.32% of all such
payments made by the Company. Purchaser acknowledges and agrees that the
Company may terminate the Corporate Office Lease on such terms as the
Company shall determine and otherwise take such action as the Company
determines in connection with its vacating the Corporate Office.
5.9 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.
5.10 Control of the Stations. Prior to the Closing, control of the
Station (including, without limitation, control over their finances, personnel
and programming) shall
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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 Station, it being
understood that supervision of all programs, equipment, operations and other
activities of the Station shall be the sole responsibility of, and at all times
prior to the Closing remain under the complete control and direction of, the
Company or, if prior to the Closing under the Gannett Purchase Agreement,
Gannett.
5.11 Use of Certain Names. After the Closing, 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.
Article 6. Conditions to Obligations of Purchaser.
The obligations of Purchaser to consummate the transactions
contemplated by this Agreement to occur at the Closing are, at their 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 Closing Date 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.
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 Closing Date
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 Certificate. The Company shall have delivered to Purchaser a
certificate, dated as of the Closing Date, executed on behalf of the Company by
its duly authorized officers or representatives to the effect of Sections 6.1
and 6.2.
6.4 Consents; No Objections. (i) The applicable waiting periods
under the HSR Act shall have expired or been terminated; and
(ii) 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.
(iii) 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
Station's tower, transmitter and television broadcasting studio 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
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adversely affect the operations of such facilities, or where such
authorizations, 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 to hold the Assets (excluding the
FCC Licenses) and conduct the Business as it is being conducted as of the
Closing Date, 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 [Intentionally omitted]
6.7 FCC Consent. The FCC Consent shall have been issued with respect
to the Station without any conditions that are materially adverse to Purchaser
notwithstanding that it may not have yet become a Final Order, provided that, if
one or more pre-grant objections shall have been filed with respect to the
applications required by Section 5.3(b) hereof, it shall be a condition
precedent that the FCC Consent shall have become a Final Order.
6.8 No Material Adverse Change. Since the date of this Agreement
through the Closing Date, there shall not have occurred any Material Adverse
Effect.
6.9 Opinions of Counsel. Purchaser shall have received (a) an
opinion of Thomas & Libowitz, P.A., dated the Closing Date, substantially in the
form of Exhibit E-1 hereto, and (b) an opinion of Fisher, Wayland, Cooper,
Leader & Zaragoza L.L.P., dated the Closing Date, substantially in the form of
Exhibit E-2 hereto.
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 days before the Closing
Date.
6.11 No Transmission Defects. There shall not exist any loss or
damage at the Station which has resulted in the regular broadcast transmission
of the Station (including its 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 Closing Date for a period of up to 60 days to
resume the Station's broadcast transmission.
6.12 Closing on the Gannett Purchase Agreement. The closing, as
defined in the Gannett Purchase Agreement, shall have occurred or occur
simultaneously with the Closing hereunder.
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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 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 Closing Date 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 Closing Date
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 Closing Date, 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. (i) The applicable waiting periods
under the HSR Act shall have expired or been terminated; and
(ii) 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 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 that, if one or more pre-grant objections shall have been filed with
respect to the applications required by Section 5.3(b) hereof, it shall be a
condition precedent that the FCC Consent shall have become a Final Order.
7.7 Opinion of Counsel. The Company shall have received an opinion
of Rubin, Winston, Diercks, Harris & Cooke, L.L.P., dated the Closing Date,
covering the same matters covered by the opinions delivered by the Company to
Gannett under the Gannett Purchase Agreement and in form and substance
reasonably satisfactory to the Company.
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,
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dated not more than five days before the Closing Date.
7.9. Closing on Gannett Purchase Agreement. The closing, as defined
in the Gannett Purchase Agreement, shall have occurred or occur simultaneously
with the Closing hereunder.
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 Closing 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 (i) any breach on the part of the Company of any representation
or warranty made by the Company in Article 3 hereof or in any certificate
delivered pursuant to Section 6.3 of this Agreement, and (ii) any breach on the
part of the Company of any covenant or agreement made by the Company in this
Agreement.
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 Closing 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 (i) any breach on the part of Purchaser of any representation or
warranty made by Purchaser in Article 4 hereof or in any certificate delivered
pursuant to Section 7.3 of this Agreement, (ii) any breach on the part of
Purchaser of any covenant or agreement made by the Purchaser in this Agreement
or (iii) any Assumed Liabilities.
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(i) or 8.1(ii) shall terminate when the
applicable representation, warranty, covenant or agreement terminates pursuant
to Section 10.12, and the obligations to indemnify and hold harmless a Person
pursuant to Section 8.2(iii) shall not terminate; provided, however, that as to
clause (i) above the obligation to indemnify and hold harmless 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.
(b) The Company shall not be obligated to indemnify or hold harmless
any Purchaser Indemnified Party under Sections 8.1(i) or 8.1(ii), unless
and until all Claims and Damages when aggregated with the Claims and
Damages under the Gannet Purchase Agreement, exceed in the aggregate
$550,000, 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
Sections 8.1(i) or 8.1(ii) in the aggregate in excess of $275,000 (or such
pro rata portion of $275,000 as is applicable when the
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Claims and Damages of the Company under the Gannett Purchase Agreement are
taken into account), provided that the provisions of this Section 8.3(b)
will not apply to any breach of any Post-Closing Agreements.
(c) Notwithstanding anything to the contrary in this Agreement and
except for fraud, the sole and exclusive recourse, remedy and source of
funds available to satisfy any claims for indemnification by the Purchaser
Indemnified Parties pursuant to Sections 8.1(i) or 8.1(ii) shall be the
amount of the Security Escrow then held on deposit with the Security Escrow
Agent subject to the terms and conditions of the Security Escrow Agreement,
and the Purchaser Indemnified Parties will have no recourse against the
assets of the Company (other than the Security Escrow then held on deposit
with the Security Escrow Agent) in respect of any such claim. Without
limiting the foregoing, the maximum aggregate liability of the Company with
respect to all claims for indemnification under Sections 8.1(i) or 8.1(ii)
will be limited to the amount of the Security Escrow held on deposit from
time to time with the Security Escrow Agent.
(d) Notwithstanding anything to the contrary in this Agreement, 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
Closing for any claims arising out of or relating to any breaches of any
representations or warranties or 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 (i) reduced by any
amounts to which the Indemnitee is entitled from third parties in connection
with such Claim or Damage ("Reimbursements"), (ii) reduced by the Net Proceeds
of any insurance policy payable to the Indemnitee with respect to such Claim or
Damage and (iii) 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, (x) "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 (y) "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
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payment is made which relates thereto, the Indemnitee shall promptly repay to
the Indemnitor (or to the Security Escrow if such repayment is made by a
Purchaser Indemnified Party prior to the termination of the Security Escrow)
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.
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 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 (and, if it is not practicable to determine such estimate and the claim
is made by a Purchaser Indemnified Party, the amount of the Security Escrow
proposed in good faith to be reserved with respect to such claim).
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 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 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
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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 (i) 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 (ii) 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.
(a) 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.
Article 9. Definitions.
Unless otherwise stated in this Agreement, the following capitalized
terms have the following meanings:
Accounting Firm Determination has the meaning set forth in Section 2.2
of the Gannett Purchase Agreement.
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 2.3.
Adjustment has the meaning set forth in Section 2.3 hereof.
Adjustment Escrow has the meaning set forth in Section 2.2(ii) hereof.
Adjustment Escrow Agent has the meaning set forth in Section 2.3
hereof.
Adjustment Escrow Agreement has the meaning set forth in Section 2.3
hereof.
Adjustment Agreement has the meaning set forth in Section 2.3 hereof.
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
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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.
Assumed Liabilities has the meaning set forth in Section 1.3 hereof.
Audited Financial Statements has the meaning set forth in Section 3.5
hereof.
Beneficiary has the meaning set forth in Section 5.2 hereof.
Bill of Sale, Assignment and Assumption Agreement has the meaning set
forth in Section 1.7 hereof.
Business means all of the Company's business, operations and
activities of television broadcast station WOKR-TV, Channel 13, Rochester,
New York, acquired by the Company from Gannett pursuant to the Gannett
Purchase Agreement.
Business Employees means all current, former and inactive employees of
the Business. For the avoidance of doubt, Corporate Office Employees will
not be considered Business Employees.
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.
Call Letters has the meaning set forth in Section 3.16 hereof.
CERCLA means the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended.
Claims and Damages means 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 1.6 hereof.
Closing Date has the meaning set forth in Section 1.6 hereof.
Closing Statement has the meaning set forth in Section 2.2 hereof.
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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.
Continuation Coverage has the meaning set forth in Section 5.2 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 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 Employees has the meaning set forth in Section 5.2.
Corporate Office Lease means the Lease dated as of February 16, 1989
between the Company and One City Center Associates, and all addenda and
amendments thereto and memoranda relating thereto.
Defined Contribution Plan has the meaning set forth in Section 5.2
hereof.
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.
Encumbrance means any security interest, pledge, mortgage, lien
(including,
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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. (S)(S)6901 et seq.; the
Hazardous Materials Transportation Act, 49 U.S.C. (S)(S)6901 et seq.; the
Clean Water Act, 33 U.S.C. (S)(S)1251 et seq.; the Toxic Substances Control
Act of 1976, 15 U.S.C. (S)(S)2601 et seq.; the Clean Air Act of 1966, as
amended, 42 U.S.C. (S)(S)7401 et seq.; the Safe Drinking Water Act, 42
U.S.C. (S)(S)300f et seq.; the Atomic Energy Act, 42 U.S.C. (S)(S)2011 et
seq.; the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C.
(S)(S)136 et seq.; and the Emergency Planning and Community Right-to-Know
Act of 1986, 42 U.S.C. (S)(S)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 Closing Date.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended.
Estimated Net Financial Assets has the meaning set forth in Section
2.2(b).
Excluded Assets has the meaning set forth in Section 1.2 hereof.
Excluded Names has the meaning set forth in Section 5.11 hereof.
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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
Station, 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.
Financial Statements has the meaning set forth in Section 3.5 hereof.
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 Corporate Office means the corporate office of Gannett located
at One City Center, Portland, Maine, that provides certain support to
Gannett and its business.
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, the Company in the operations of such businesses
that are to be contributed to, or assumed by, Newco, all as more
particularly described in the Contribution Agreement. Notwithstanding
anything to the contrary in this Agreement, the Maine Media Business does
not include the WGME-TV television broadcasting station licensed to
Portland, Maine ("WGME") or rights to WGME's news and information content
provided via online or audiotext applications of the New Media Development
Group or Voice
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Information Services.
Gannett Purchase Agreement shall have the meaning set forth in the
Recitals.
Gannett Television Stations means the following television
broadcasting station properties of the Company: 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; and WTWC TV, Portland, Maine; KGAN TV, Cedar Rapids, Iowa;
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.
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.
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.
Initial Transfer Amount has the meaning set forth in Section 5.2
hereof.
Initial Transfer Date has the meaning set forth in Section 5.2 hereof.
Intellectual Property means all patents, trademarks, trade 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 Station 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
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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 information relating to
the Station disclosed by Gannett to the Company in the Gannett Purchase
Agreement or any Schedule, Exhibit or documents delivered to the Company in
connection therewith.
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 all easements, licenses,
rights and appurtenances relating to the foregoing, including, without
limitation, the leased property referred to in Section 1.1(c) of the
Disclosure Schedule.
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.
Material Adverse Effect means any circumstance, change in, or effect
on the Company that has a material adverse effect on the business, results
of operations or financial condition of the Station; 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 failure of Purchaser
to give any requested consent pursuant to Section 5.1(a) 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 is a party or by which its assets are bound as described
below:
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(i) any agreement or contract providing for payments to any
Person in excess of $50,000 per year or $250,000 in the aggregate over
the five-year period commencing on the date hereof;
(ii) all time brokerage agreements and affiliation agreements
with television networks;
(iii) any license or contract pursuant to which Gannett is
authorized to broadcast film or taped programming supplied by others
in excess of $10,000 or having a term of more than one year;
(iv) any employment agreement, consulting agreement or similar
contract providing for payments to any individual in excess of $50,000
per year or $100,000 in the aggregate over the five-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 Real Property or (B) 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 the Company from another Person providing for payments to
another Person in excess of $25,000 per year or $75,000 in the
aggregate over the five-year period commencing on the date hereof;
(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
to another Person providing for payments to Gannett in excess of
$20,000 per year or $50,000 in the aggregate over the five-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 has loaned any
money in excess of $1,000,000 or issued or received any note, bond,
indenture or other evidence of indebtedness in excess of $1,000,000 or
directly or indirectly guaranteed indebtedness, liabilities or
obligations of others in an amount in excess of $1,000,000;
(xi) 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
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or in any area; and
(xii) any agreement or contract between the Company and any
officer, director, stockholder or employee of the Business or any of
their family members providing for payments in excess of $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 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 $10,000 during the 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 program rights, 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 program obligations,
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 Closing 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
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. Net
Financial Assets expressly shall not include television program and film
contract rights of the Business as either assets or liabilities; provided,
however, that notwithstanding any prior practice or lack thereof relating
thereto, the programming downpayments related to certain television
programs made in advance of customary payment terms under television
program rights contracts shall be expressly included in prepaid assets 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 of the Gannett Purchase Agreement. 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 Station,
including, without limitation, tower rental, business and license fees,
utility charges, real and
42
<PAGE>
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), 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.
Notice of Claim has the meaning set forth in Section 8.5 hereof.
Permits has the meaning set forth in Section 3.11 hereof.
Permitted Exceptions means each of the following:
(i) mortgages, security interests or other Encumbrances
described in Section 4.10 of the Disclosure Schedule;
(ii) 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;
(iii) 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;
(iv) pledges or deposits to secure obligations under workers'
compensation laws or similar legislation or to secure public or
statutory obligations;
(v) survey exceptions, rights of way, easements, reciprocal
easement agreements and other Encumbrances on title to real property
shown in the title insurance commitment dated May 21, 1998 (for the
property referred to as parcels 90 and 91 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 Closing;
(vi) 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
Station as it is being conducted prior to the Closing in accordance
with the provisions of the Gannett Purchase Agreement;
(vii) 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;
43
<PAGE>
(viii) Encumbrances on the interests of the lessors of
properties used by the Station in which the Company or Gannett holds a
leasehold interest; and
(ix) 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 Station.
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 Closing.
Program Contracts has the meaning set forth in Section 1.1 hereof.
Proposed NFA Adjustment has the meaning set forth in Section 2.2
hereof.
Purchaser has the meaning specified in the introductory paragraph to
this Agreement.
Purchaser Indemnified Parties has the meaning set forth in Section 8.1
hereof.
Purchase Price has the meaning set forth in Section 2.2.
Purchaser Savings Plan has the meaning set forth in Section 5.2
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.
Regulations means the Treasury Regulations (including Temporary
Regulations) promulgated by the United States Department of Treasury with
respect to the Code or other federal tax statutes.
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.
44
<PAGE>
Resolution has the meaning set forth in Section 2.3(a) hereof.
Security Escrow has the meaning set forth in Section 2.4 hereof.
Security Escrow Agent has the meaning set forth in Section 2.4 hereof.
Security Escrow Agreement has the meaning set forth in Section 2.4
hereof.
Station shall have the meaning set forth in the Recitals.
Subsidiary of any Person means (i) any corporation more than 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 50% equity interest.
Survival Date shall have the meaning set forth in Section 10.12.
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, 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 hereof.
True-Up Amount has the meaning set forth in Section 5.2 hereof.
True-Up Date has the meaning set forth in Section 5.2 hereof.
Trust has the meaning set forth in Section 5.2 hereof.
Unaudited Financial Statements has the meaning set forth in Section
3.5 hereof.
45
<PAGE>
WOKR Dispute has the meaning set forth in Section 2.3(a).
WOKR Severance Payment has the meaning set forth in Section 5.8(a).
WOKR Scheduled Severance Agreement has the meaning set forth in
Section 5.8(a).
Article 10. Miscellaneous Provisions.
10.1 Termination Rights. (a) Grounds for Termination. This
Agreement may be terminated:
(i) by mutual consent of the parties;
(ii) 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 Closing hereunder has not occurred on or before
September 4, 1999 (the "Termination Date"), provided that if the FCC
Consent is obtained during the 15 days prior to September 4, 1999, the
Termination Date will not occur until the 15th day after receipt of
the FCC Consent, provided further that if either or both of the
Company and Purchaser shall have postponed the Closing Date pursuant
to Section 6.11 hereof, the Termination Date will occur no earlier
than the end of the period of such postponement, and provided further
that if the Closing hereunder has not occurred on or before September
4, 1999 due to a publicly announced federal governmental shutdown
affecting, or any other publicly announced freeze on the processing of
applications to transfer station licenses by, the FCC (collectively, a
"FCC Shutdown"), the Termination Date will be extended by a period of
time equal to the duration of the FCC Shutdown, but in no event shall
the Termination Date be extended to a date any later than the earlier
of (x) 60 days after the end of the FCC Shutdown or (y) December 4,
1999.
(iii) by either the Company or Purchaser, 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 (iii) will not be applicable
to actions of the FCC subject to clause (iv) below;
(iv) by either the Company or Purchaser, 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
46
<PAGE>
to the parties and (iv) the parties have no further relief available
to them;
(v) 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
condition precedent set forth in Section 6.1 or 6.2 hereof would not
be satisfied, which breach has not been cured within 20 Business Days
following receipt by the breaching party of written notice of such
breach; or
(vi) 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
condition precedent set forth in Section 7.1 or 7.2 hereof would not
be satisfied, which breach has not been cured within 20 Business Days
following receipt by the breaching party of written notice of such
breach;
(vii) by Purchaser by written notice to the Company, if the FCC
has revoked the Company's or Gannett's FCC License for the Station; or
(viii) automatically without further action by the parties upon
the termination of the Gannett Purchase Agreement in accordance with
its terms.
(b) Post-Termination Liability. If this Agreement is terminated
pursuant to Subsection 10.1(a)(i), (ii), (iii), (iv), (v), (vii) or (viii)
hereof, Purchaser shall receive the immediate return of the Escrow Deposit,
and 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.
(c) If this Agreement is terminated pursuant to Subsection 10.1(a)(vi)
hereof, the Company's sole and exclusive remedy under this Agreement shall
be to receive, and the Purchaser shall pay to the Company, the Escrow
Deposit (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, 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 Closing
shall have occurred, provided that the Company and Purchaser shall each be
responsible and pay 50% of the HSR Act filing fee and the filing fees payable to
the FCC in
47
<PAGE>
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 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:
The Ackerley Group, Inc.
1301 Fifth Avenue, Suite 4000
Seattle, Washington 98101
Attn: Denis M. Curley,
Co-President and CFO
Fax: (206) 623-7853
with a copy to:
Rubin, Winston, Diercks, Harris & Cooke, L.L.P.
1333 New Hampshire Avenue, N.W., 10th Floor
Washington, D.C. 20036
Attn: Eric M. Rubin, Esquire
Fax: (202) 429-0657
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
48
<PAGE>
Thomas & Libowitz, P.A.
100 Light Street, Suite 1100
Baltimore, Maryland 21202-1053
Attn: Steven A. Thomas, Esquire
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. This Agreement will be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. Except as provided in Section 8.7, there shall be no
assignment of any interest under this Agreement by any party except that
Purchaser may assign its rights hereunder to any wholly owned subsidiary of
Purchaser; provided, however, that no such assignment shall relieve the assignor
of its obligations under this Agreement. Except as expressly otherwise provided
in Article 8 hereof, nothing herein, express or implied, is intended to or shall
confer upon any other Person any legal or equitable right, benefit or remedy of
any nature whatsoever under or by reason of this Agreement.
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 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
49
<PAGE>
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. 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 Station. 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.
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 (i) waive, in
any action for specific performance, the defense of adequacy of a remedy at law
and (ii) 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 and warranties of the Company and Purchaser contained
herein or in any certificate and any and all covenants and agreements herein or
therein (other than those covenants and agreements required by this Agreement to
be performed after the Closing) shall expire with, and be terminated and
extinguished one (1) calendar year after the Closing Date (the "Survival Date");
; provided, however, that unless Purchaser shall notify the Company of any Claim
or Damages ten (10) days prior to the Survival Date, the Company shall have no
obligation to indemnify Purchaser hereunder.
Article 11. No Personal Liability for Representatives, Stockholders,
Directors or Officers. Purchaser understands, acknowledges and agrees that the
directors and officers and
50
<PAGE>
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, 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 its Affiliates) for such acts to the extent deemed
to be actions by or on behalf of the Company.
[REST OF PAGE LEFT INTENTIONALLY BLANK]
51
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
SINCLAIR COMMUNICATIONS, INC.
THE ACKERLEY GROUP, INC.
52
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<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> JUL-01-1998 JAN-01-1998
<PERIOD-END> SEP-30-1998 SEP-30-1998
<CASH> 3,460 3,460
<SECURITIES> 0 0
<RECEIVABLES> 45,527 45,527
<ALLOWANCES> 1,408 1,408
<INVENTORY> 0 0
<CURRENT-ASSETS> 79,230 79,230
<PP&E> 245,551 245,551
<DEPRECIATION> 137,427 137,427
<TOTAL-ASSETS> 308,240 308,240
<CURRENT-LIABILITIES> 86,609 86,609
<BONDS> 0 0
0 0
0 0
<COMMON> 330 330
<OTHER-SE> (22,056) (22,056)
<TOTAL-LIABILITY-AND-EQUITY> 308,240 308,240
<SALES> 0 0
<TOTAL-REVENUES> 48,087 204,970
<CGS> 0 0
<TOTAL-COSTS> 37,184 168,470
<OTHER-EXPENSES> 3,929 (21,562)
<LOSS-PROVISION> 524 (112)
<INTEREST-EXPENSE> 6,600 20,238
<INCOME-PRETAX> 374 37,824
<INCOME-TAX> 145 14,389
<INCOME-CONTINUING> 229 23,435
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 229 23,435
<EPS-PRIMARY> 0.01 0.74
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