UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1997
Commission file number 1-5128
Meredith Corporation
(Exact name of registrant as specified in its charter)
Iowa 42-0410230
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1716 Locust Street, Des Moines, Iowa 50309-3023
(Address of principal executive offices) (ZIP Code)
515 - 284-3000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 30, 1997
Common Stock, $1 par value 41,121,462
Class B Stock, $1 par value 12,400,637
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Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Meredith Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
March 31 June 30
Assets 1997 1996
- -------------------------------------------------------------------------------
(in thousands, except share data)
Current assets:
Cash and cash equivalents $ 53,422 $ 13,801
Marketable securities 50,472 --
Receivables, net 96,432 89,448
Inventories 25,970 31,185
Supplies and prepayments 9,062 8,104
Film rental costs 10,690 10,321
Deferred income taxes 14,790 8,930
Subscription acquisition costs 56,920 48,887
---------- ----------
Total current assets 317,758 210,676
---------- ----------
Property, plant and equipment 194,612 182,855
Less accumulated depreciation (110,904) (102,856)
---------- ----------
Net property, plant and equipment 83,708 79,999
---------- ----------
Net assets of discontinued operation -- 88,051
Subscription acquisition costs 40,924 46,745
Film rental costs 6,887 6,816
Other assets 21,205 19,043
Goodwill and other intangibles
(at original cost less accumulated amortization) 274,462 282,443
---------- ----------
Total assets $ 744,944 $ 733,773
========== ==========
See accompanying Notes to Interim Consolidated Financial Statements.
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(Unaudited)
March 31 June 30
Liabilities and Stockholders' Equity 1997 1996
- -------------------------------------------------------------------------------
Current liabilities:
Current portion of long-term debt $ -- $ 15,000
Current portion of long-term film rental contracts 13,277 13,063
Accounts payable 29,760 42,085
Accrued taxes and expenses 78,698 68,958
Unearned subscription revenues 153,287 140,401
---------- ----------
Total current liabilities 275,022 279,507
---------- ----------
Long-term debt -- 35,000
Long-term film rental contracts 7,835 8,419
Unearned subscription revenues 94,666 97,811
Deferred income taxes 25,433 25,510
Other deferred items 23,915 25,962
---------- ----------
Total liabilities 426,871 472,209
---------- ----------
Stockholders' equity:
Series preferred stock, par value $1 per share
Authorized 5,000,000 shares; none issued -- --
Common stock, par value $1 per share
Authorized 80,000,000 shares; issued and
outstanding 40,906,202 at March 31 and
20,380,437 at June 30 (net of treasury shares,
25,155,096 at March 31 and 12,207,776
at June 30.) 40,906 20,380
Class B stock, par value $1 per share,
convertible to common stock
Authorized 15,000,000 shares; issued and
outstanding 12,670,586 at March 31 and
6,568,583 at June 30. 12,671 6,569
Additional paid-in capital -- --
Retained earnings 267,379 236,903
Unearned compensation (2,883) (2,288)
---------- ----------
Total stockholders' equity 318,073 261,564
---------- ----------
Total liabilities and stockholders' equity $744,944 $733,773
========== ==========
See accompanying Notes to Interim Consolidated Financial Statements.
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Meredith Corporation and Subsidiaries
Consolidated Statements of Earnings (Unaudited)
Three Months Nine Months
Ended March 31 Ended March 31
1997 1996 1997 1996
- ------------------------------------------------------------------------------
(in thousands, except per share)
Revenues (less returns and allowances):
Advertising $121,643 $118,865 $337,743 $324,238
Circulation 65,648 69,932 192,451 206,190
Consumer books 8,396 7,928 29,182 49,181
All other 27,348 22,693 72,611 62,490
-------- -------- -------- --------
Total revenues 223,035 219,418 631,987 642,099
-------- -------- -------- --------
Operating costs and expenses:
Production, distribution and edit 89,323 93,943 258,221 275,413
Selling, general and administrative 96,682 90,077 273,899 277,637
Depreciation and amortization 6,032 8,110 17,259 19,356
-------- -------- -------- --------
Total operating costs and expenses 192,037 192,130 549,379 572,406
-------- -------- -------- --------
Income from operations 30,998 27,288 82,608 69,693
Gain on dispositions -- -- -- 5,898
Interest income 1,566 454 3,120 1,575
Interest expense (63) (1,173) (1,134) (4,643)
-------- -------- -------- --------
Earnings from continuing operations
before income taxes 32,501 26,569 84,594 72,523
Income taxes 14,073 12,780 36,629 33,147
-------- -------- -------- --------
Earnings from continuing operations 18,428 13,789 47,965 39,376
Discontinued operation:
Loss from operations -- -- -- (717)
Gain on disposition -- -- 27,693 --
-------- -------- -------- --------
Net earnings $ 18,428 $ 13,789 $ 75,658 $ 38,659
======== ======== ======== ========
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Meredith Corporation and Subsidiaries
Consolidated Statements of Earnings (Unaudited) (continued)
Three Months Nine Months
Ended March 31 Ended March 31
1997 1996 1997 1996
- ------------------------------------------------------------------------------
Net earnings per share: (in thousands, except per share)
Earnings from continuing operations $0.33 $0.24 $0.86 $0.69
Discontinued operation -- -- 0.50 (0.01)
-------- -------- -------- --------
Net earnings per share $0.33 $0.24 $1.36 $0.68
======== ======== ======== ========
Dividends paid per share $ .065 $ .055 $ .175 $ .155
======== ======== ======== ========
Average shares outstanding 55,594 56,660 55,605 56,461
======== ======== ======== ========
See Accompanying Notes to Interim Consolidated Financial Statements.
Meredith Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended March 31 1997 1996
- ---------------------------------------------------------------------------
Cash flows from operating activities: (in thousands)
Net earnings $ 75,658 $ 38,659
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 17,259 19,356
Amortization of film contract rights 13,143 13,421
Gain on dispositions, net of taxes (27,693) (3,379)
Loss from discontinued operation -- 717
Changes in assets and liabilities:
Accounts receivable (3,555) (11,882)
Inventories 5,215 11,042
Supplies and prepayments (931) 7,024
Subscription acquisition costs (2,212) (133)
Accounts payable (12,325) (17,991)
Accruals (923) 864
Unearned subscription revenues 9,741 229
Deferred income taxes (2,720) 7,310
Other deferred items (2,047) 2,673
--------- ---------
Net cash provided by operating activities 68,610 67,910
--------- ---------
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Meredith Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited) (continued)
Nine Months Ended March 31 1997 1996
- ---------------------------------------------------------------------------
(in thousands)
Cash flows from investing activities:
Proceeds from dispositions 123,275 27,894
Acquisition of business -- (14,500)
Additions to property, plant, and equipment (13,020) (25,391)
Purchases of marketable securities (50,472) --
Change in other assets (2,325) 1,165
--------- ---------
Net cash provided (used) by investing activities 57,458 (10,832)
--------- ---------
Cash flows from financing activities:
Long-term debt retired (50,000) (25,000)
Payments for film rental contracts (14,081) (13,076)
Proceeds from common stock issued 4,766 3,580
Purchase of Company stock (19,705) (17,686)
Dividends paid (9,380) (8,549)
Other 1,953 1,111
--------- ---------
Net cash (used) by financing activities (86,447) (59,620)
--------- ---------
Net increase (decrease) in cash and cash equivalents 39,621 (2,542)
Cash and cash equivalents at beginning of year 13,801 11,825
--------- ---------
Cash and cash equivalents at end of period $ 53,422 $ 9,283
========= =========
See accompanying Notes to Interim Consolidated Financial Statement.
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MEREDITH CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Accounting Policies
The information included in the foregoing interim financial statements is
unaudited. In the opinion of management, all adjustments, which are of a
normal recurring nature and necessary for a fair presentation of the results of
operations for the interim periods presented have been reflected herein. The
results of operations for interim periods are not necessarily indicative of the
results to be expected for the entire year.
Goodwill and other intangibles represent the excess of the purchase price over
the estimated fair values of tangible assets acquired in the purchases of
businesses. These assets primarily consist of goodwill ($144 million) and
television FCC license ($58 million) and network affiliation agreements ($49
million), net of related amortization. Virtually all of these assets were
acquired subsequent to October 31, 1970, the effective date of APB Opinion No.
17 and as such are being carried at cost as determined by the original
appraisal, net of amortization. All of these intangibles are being amortized
using the straight-line method with goodwill being amortized over 20- to 40-
year periods and FCC license and network affiliation agreements over 40-year
periods. The carrying values of all goodwill and other intangibles are
periodically reviewed to determine whether impairment exists and adjustments to
net realizable value of the assets warranted. There have been no such
adjustments in fiscal 1997 to date.
2. Stock Split
The Board of Directors approved a two-for-one stock split, in the form of a
share dividend, payable on March 17, 1997, to shareholders of record on
February 28, 1997.
3. Discontinued Operation
On October 25, 1996, Meredith Corporation, through its cable venture,
Meredith/New Heritage Partnership (MNH Partnership), completed the sale of its
ownership interest in Meredith/New Heritage Strategic Partners, L.P. (Strategic
Partners). Strategic Partners owned and operated cable television systems with
approximately 127,000 subscribers in the Minneapolis/St. Paul area. The MNH
Partnership, of which the Company indirectly owned 96 percent, sold its 73
percent ownership interest in Strategic Partners to Continental Cablevision of
Minnesota Subsidiary Corporation (Continental), an affiliate of MNH
Partnership's minority partner, Continental Cablevision of Minnesota, Inc.
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MEREDITH CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued
(Unaudited)
The total value of the cable television systems was $262.5 million based on
estimated discounted future cash flows. Strategic Partners' debt of $84.3
million was retired. Meredith Corporation's share of the proceeds, after the
debt payment and taxes, was $116.0 million. Meredith Corporation recorded a
gain in the quarter ended December 31, 1996 of $27.7 million, or 50 cents per
share, (net of $8.9 million in taxes) from the sale.
The cable segment was classified as a discontinued operation effective
September 30, 1995. For the three months ended September 30, 1995, cable
operations reported revenues of $12.2 million, income from operations of
$721,000 and a net loss of $717,000 (including an income tax benefit of
$27,000). Cable net losses subsequent to September 30, 1995 were deferred
since the Company expected to realize a net gain from the sale. Cable
operations reported revenues of $52.9 million, income from operations of $6.0
million and a net loss of $189,000 (including income tax expense of $89,000)
for the period October 1, 1995, through the effective date of the sale.
4. Marketable Securities
At March 31, 1997, marketable securities were classified as available-for-sale
and consisted of U. S. Treasury Notes with a fair value equal to amortized
cost. These securities mature in less than one year. No marketable securities
were sold during the nine months ended March 31, 1997.
5. Inventories
Major components of inventories are summarized below. Of total inventory
values shown, approximately 80 and 67 percent respectively, are under the LIFO
method at March 31, 1997, and June 30, 1996.
(unaudited)
March 31 June 30
1997 1996
-------- --------
(in thousands)
Raw materials $16,659 $28,354
Work in process 12,387 11,907
Finished goods 7,726 4,276
-------- --------
36,772 44,537
Reserve for LIFO cost valuation (10,802) (13,352)
-------- --------
Total $25,970 $31,185
======== ========
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MEREDITH CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued
(Unaudited)
6. Revenues, operating profit and depreciation and amortization by industry
segment are shown below:
(unaudited) (unaudited)
Three Months Nine Months
Ended March 31 Ended March 31
------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------
(in thousands)
Revenues
Publishing $182,138 $179,999 $499,922 $517,998
Broadcasting 34,943 33,835 113,822 106,275
Real Estate 5,976 5,593 18,297 18,181
Less: Inter-segment revenues (22) (9) (54) (355)
-------- -------- -------- --------
Total revenues $223,035 $219,418 $631,987 $642,099
======== ======== ======== ========
Operating profit
Publishing $ 28,024 $ 22,356 $ 59,324 $ 44,959
Broadcasting 10,608 9,356 40,809 37,643
Real Estate 568 298 2,580 2,414
Unallocated corporate expense (8,202) (4,722) (20,105) (15,323)
-------- -------- -------- --------
Income from operations 30,998 27,288 82,608 69,693
Gain on disposition -- -- -- 5,898
Interest income 1,566 454 3,120 1,575
Interest expense (63) (1,173) (1,134) (4,643)
-------- -------- -------- --------
Earnings from continuing
operations before income
taxes 32,501 26,569 84,594 72,523
Income taxes 14,073 12,780 36,629 33,147
-------- -------- -------- --------
Earnings from
continuing operations* $ 18,428 $ 13,789 $ 47,965 $ 39,376
======== ======== ======== ========
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MEREDITH CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued
(Unaudited)
(unaudited) (unaudited)
Three Months Nine Months
Ended March 31 Ended March 31
------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------
(in thousands)
Depreciation and amortization
Publishing $ 2,195 $ 2,488 $ 6,574 $ 7,484
Broadcasting 3,318 2,894 9,160 8,162
Real Estate 128 138 395 372
Unallocated corporate expense 391 2,590 1,130 3,338
-------- -------- -------- --------
Total depreciation
and amortization $ 6,032 $ 8,110 $ 17,259 $ 19,356
======== ======== ======== ========
*Note: Earnings for the nine months ended March 31, 1996, include $3,379,000
(6 cents per share) in post-tax income from a gain on the disposition
of book clubs.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
(Note: All per-share amounts are computed on a post-tax basis and reflect a
two-for-one stock split effective March 18, 1997.)
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Consolidated
- ------------
Three Months Nine Months
Ended March 31 Ended March 31
1997 1996 1997 1996
-------- -------- -------- --------
(in thousands, except per share)
Total revenues $223,035 $219,418 $631,987 $642,099
======== ======== ======== ========
Income from operations $ 30,998 $ 27,288 $ 82,608 $ 69,693
======== ======== ======== ========
Operating profit margin 13.9% 12.4% 13.1% 10.9%
======== ======== ======== ========
Earnings from continuing
operations $ 18,428 $ 13,789 $ 47,965 $ 39,376
======== ======== ======== ========
Discontinued operations $ -- $ -- $ 27,693 $ (717)
======== ======== ======== ========
Net earnings $ 18,428 $ 13,789 $ 75,658 $ 38,659
======== ======== ======== ========
Per Share:
Earnings from continuing
operations $ 0.33 $ 0.24 $ 0.86 $ 0.69
Discontinued operations $ -- $ -- $ 0.50 $ (0.01)
-------- -------- -------- --------
Net earnings $ 0.33 $ 0.24 $ 1.36 $ 0.68
======== ======== ======== ========
Net earnings of $18.4 million, or 33 cents per share, were recorded in the
quarter ended March 31, 1997, compared to net earnings of $13.8 million, or 24
cents per share, in the prior-year third quarter. For the nine months ended
March 31, 1997, net earnings were $75.7 million, or $1.36 per share, compared
to net earnings of $38.7 million, or 68 cents per share, in the prior-year
period. Net earnings for the nine months ended March 31, 1997, included a
post-tax gain of $27.7 million, or 50 cents per share, from the sale of
discontinued cable operations. Net earnings in the first nine months of the
prior fiscal year included a net loss from operations of $.7 million, or 1 cent
per share, from discontinued cable operations.
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Earnings per share from continuing operations increased 38 percent in the
quarter ended March 31, 1997, compared with the prior-year quarter. Earnings
from continuing operations for the comparative nine month periods were $48.0
million, or 86 cents per share, in fiscal 1997 and $39.4 million, or 69 cents
per share, in fiscal 1996. Earnings from continuing operations in the prior-
year period included a post-tax gain of $3.4 million, or 6 cents per share,
from the December 1995 sale of three book clubs. Excluding this non-recurring
item from the prior-year period, fiscal 1997 earnings per share from continuing
operations increased 37 percent for the nine month period.
The Company's revenues increased 2 percent in the fiscal third quarter from the
prior-year period. Increases in magazine and broadcasting advertising
revenues, licensing revenues and custom publishing revenues were partially
offset by lower magazine circulation revenues. The decline in circulation
revenues resulted primarily from the fiscal 1996 closing of home garden and
Weekend Woodworking magazines, a January 1996 rate base reduction at Ladies'
Home Journal magazine and decreasing the number of issues of Country America
magazine from 10 in fiscal 1996 to 6 in fiscal 1997. Revenues for the nine-
months ended March 31, 1997, decreased 2 percent from the prior-year period.
Circulation revenues were down 7 percent for the reasons previously mentioned
and consumer book revenues declined 41 percent primarily due to the December
1995 sale of three book clubs. Partially offsetting these revenue declines
were increases in magazine and broadcasting advertising revenues, licensing
revenues and custom publishing revenues.
Operating costs and expenses were virtually flat in the quarter and were down 4
percent for the fiscal year-to-date period versus their respective prior-year
periods leading to increased operating profit margins in the current-year
quarter and year-to-date period. Lower production, distribution and editorial
(PD&E) expenses, both in total and as a percentage of revenues, were the
primary factor in the margin improvements. The decline in PD&E expenses
reflected lower paper prices in both the quarter and year-to-date period.
Downsizing in the book operations also led to the year-to-date decline in PD&E
expenses. Lower depreciation and amortization expenses also contributed to the
improved operating margins in both periods. The prior-year included a write-
down of goodwill due primarily to an adjustment to the value of goodwill
assigned to a 1988 acquisition.
Selling, general and administrative (SG&A) costs increased in the quarter due
to higher Company employee benefit costs and administrative expenses related to
the proposed acquisition of the First Media television properties. In
addition, prior-year expenses were reduced by the recovery of a fully-reserved
note receivable. In the year-to-date period, SG&A expenses declined as the
aforementioned increases in expenses were more than offset by lower costs due
to the downsizing of book operations and lower magazine subscription
acquisition costs. The decline in magazine subscription acquisition costs
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reflected the January 1996 rate base reduction at Ladies' Home Journal and the
fiscal 1996 closing of home garden and Weekend Woodworking magazines.
In January 1997, the Company announced that, pending Federal Communications
Commission approval, it will acquire all four of the television stations of
First Media Television, L.P., for $435 million. This transaction is not
expected to close until fiscal 1998.
In October 1996, the Company repaid all outstanding bank debt using a portion
of the proceeds from the sale of cable operations. The remaining cable
proceeds and other available cash have been invested in short-term marketable
securities. This has resulted in net interest income in the current quarter
and nine-month period versus net interest expense in the prior-year periods.
The Company's effective tax rate was 43.3 percent in the current quarter and
nine-month period compared with 48.1 percent in the prior-year third quarter
and 45.7 percent in the prior year-to-date period. The higher rate in the
prior-year periods reflected the write-down of goodwill, which was not tax
deductible. Also, the current-year rate reflects an increase in currently
estimated fiscal year earnings, which lessens the effect of non-deductible
items on the overall tax rate.
Publishing
- ---------- Three Months Nine Months
Ended March 31 Ended March 31
1997 1996 1997 1996
-------- -------- -------- --------
(in thousands)
Revenues
---------
Magazine advertising $ 88,662 $ 87,105 $229,723 $223,838
Magazine circulation 65,648 69,932 192,451 206,190
Consumer book 8,396 7,928 29,182 49,181
Other 19,432 15,034 48,566 38,789
-------- -------- -------- --------
Total revenues $182,138 $179,999 $499,922 $517,998
======== ======== ======== ========
Operating profit $ 28,024 $ 22,356 $ 59,324 $ 44,959
======== ======== ======== ========
Publishing revenues for the quarter increased 1 percent from the prior-year
from higher magazine advertising and other publishing revenues nearly offset by
lower circulation revenues. For the nine-month period, publishing revenues
declined by 4 percent from the prior year period due to lower consumer book and
circulation revenues, partially offset by higher magazine advertising and other
publishing revenues.
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The increase in other publishing revenues in both the quarter and year-to-date
period was due to higher licensing revenues and increased new business in the
Company's custom publishing operation. The increase in licensing revenues
included a one-time audit adjustment to revenues received from the Company's
garden licensing agreement with Wal-Mart Stores, Inc. However, excluding this
adjustment, both garden and crafts licensing revenues were higher in the
current periods due to increased sales volumes of licensed product at Wal-Mart.
Magazine circulation revenues declined 6 percent in the quarter and 7 percent
in the fiscal year-to-date due to the effect of a 10 percent advertising rate
base reduction (effective with the February 1996 issue) at Ladies' Home Journal
magazine, closing home garden and Weekend Woodworking magazines late in fiscal
1996 and a reduction in the publication frequency of Country America magazine
in fiscal 1997.
The 41 percent decline in consumer book revenues in the nine-month period
primarily reflected the December 1995 sale of the Company's book clubs.
Magazine advertising revenues grew 2 percent in the quarter and 3 percent in
the nine-month period largely due to increased ad revenues at Better Homes and
Gardens, the Company's largest circulation title. Better Homes and Gardens
magazine's ad revenue growth primarily reflected an increased number of ad
pages. Midwest Living, Country Home and Successful Farming magazines also
reported strong ad revenue growth in both periods due to a combination of
increased ad pages and higher average revenue per page. These increases in ad
revenues were partially offset by lower ad revenues at Ladies' Home Journal in
both the quarter and nine-month period. Fewer ad pages resulted in the revenue
decline at Ladies' Home Journal in the quarter, while the decline in the fiscal
year-to-date ad revenues was due to both fewer ad pages and lower average
revenue per page. The decline in average revenue per page reflected the
advertising rate base reduction in mid-fiscal 1996.
Publishing operating profit was up 25 percent in the fiscal 1997 third quarter
and 32 percent for the fiscal year-to-date. The improvements were largely a
result of increased operating profit from magazine publishing. Increased
operating profit from licensing operations also contributed. Magazine
operations benefited from higher ad revenues, lower paper prices and improved
results from custom publishing. Better Homes and Gardens, Midwest Living and
Successful Farming magazines reported strong operating profit increases for the
quarter and year-to-date period due in part to increased ad revenues. The
elimination of an operating loss from home garden magazine, which ceased
publication in the spring of 1996, also was a factor in Publishing's improved
results. Lower ad revenues at Ladies' Home Journal resulted in lower profits
for the magazine in the third quarter. However, year-to-date profit at Ladies'
Home Journal increased, in spite of lower ad revenues, due to lower production
costs (a result of favorable pricing and reduced volumes). Publishing
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operating profit in both current-year periods was reduced by a charge for the
minority interest share of operating losses from a joint publishing venture
since the date of inception. Based on recent discussions with the minority
partners, management believes these losses may not be recoverable. Book
publishing operating profit was flat for the quarter and down slightly for the
fiscal year-to-date. Start-up costs related to a new agreement with The
Solaris Group, a unit of Monsanto Company, regarding the Ortho book line held
down operating profit in both periods. Under the agreement, Meredith will
assume the creative, editorial, production and sales operations of Ortho books
and pay royalty fees to Solaris based on book sales. The Ortho book line
consists of gardening and do-it-yourself titles.
Paper is a significant expense of the Publishing segment. Paper prices, which
had been escalating in fiscal 1995 and early fiscal 1996, began to moderate in
the second half of fiscal 1996. As of March 31, 1997, the Company's average
price paid for paper was more than 15 percent lower than the price paid at June
30, 1996. Declining prices to-date have resulted in favorable LIFO inventory
reserve adjustments in the current-year periods. The price of paper is driven
by overall market conditions and, therefore, is difficult to predict. However,
at this time, management does not anticipate any increases in paper prices
until early in fiscal 1998.
Broadcasting
- ------------ Three Months Nine Months
Ended March 31 Ended March 31
1997 1996 1997 1996
-------- -------- -------- --------
(in thousands)
Revenues
---------
Advertising $ 32,981 $ 31,760 $108,020 $100,400
Other 1,962 2,075 5,802 5,875
-------- -------- -------- --------
Total revenues $ 34,943 $ 33,835 $113,822 $106,275
======== ======== ======== ========
Operating profit $ 10,608 $ 9,356 $ 40,809 $ 37,643
======== ======== ======== ========
Revenues increased 3 percent in the fiscal 1997 third quarter and 7 percent in
the nine months ended March 31, 1997, from their respective prior-year periods.
Excluding first-half revenues from WOGX-Ocala/Gainesville, acquired in January
1996, comparable fiscal year-to-date revenues increased 5 percent. All
stations, except KVVU-Las Vegas, reported higher advertising revenues in the
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<PAGE>
third quarter, primarily due to stronger local advertising. Ad revenues at
KVVU-Las Vegas were flat for the quarter. For the nine-month period, ad
revenues increased at all stations except WOFL-Orlando, where ad revenues were
flat due to weak first quarter national ad sales. The increase in year-to-date
ad revenues reflected higher local advertising and political advertising from
the fall 1996 elections. Operating profit increased 13 percent in the third
quarter and 8 percent in the nine-month period due primarily to the advertising
revenue increases. Lower programming expenses also contributed to the
improvement in the third quarter.
Real Estate
- ------------ Three Months Nine Months
Ended March 31 Ended March 31
1997 1996 1997 1996
-------- -------- -------- --------
(in thousands)
Total revenues $ 5,976 $ 5,593 $ 18,297 $ 18,181
======== ======== ======== ========
Operating profit $ 568 $ 298 $ 2,580 $ 2,414
======== ======== ======== ========
Revenues and operating profit increased in both the quarter and nine months
ended March 31, 1997, largely due to higher transaction fee revenues and
increased sales of products and services to member firms. The increase in
transaction fee revenues resulted from an increase in the number of member
firms and continued strength in existing home sales. In the year-to-date
period, these current-year improvements were partially offset by the prior-year
signing of a master franchise agreement.
Discontinued Operation
- ----------------------
The sale of the Company's ownership interest in cable television operations was
completed on October 25, 1996. The Meredith/New Heritage Partnership (MNH
Partnership), of which the Company indirectly owned 96 percent, sold its 73
percent ownership interest in Meredith/New Heritage Strategic Partners, L.P. to
Continental Cablevision of Minnesota Subsidiary Corporation, an affiliate of
MNH Partnership's minority partner, Continental Cablevision of Minnesota, Inc.
The total value of the systems was $262.5 million. Meredith Corporation
received $116.0 million in cash (net of taxes) and recorded a gain in the
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<PAGE>
fiscal second quarter of $27.7 million, or $.50 per share, from the sale. (The
gain is net of taxes and deferred cable losses from September 30, 1995, until
the effective date of the sale.) The cable segment was classified as a
discontinued operation on September 30, 1995.
Liquidity and Capital Resources
Consolidated
- ------------ Nine Months
Ended March 31
1997 1996
-------- --------
(in thousands, except per share)
Net earnings $ 75,658 $ 38,659
======== ========
Cash flows from operations $ 68,610 $ 67,910
======== ========
Cash flows from investing $ 57,458 $(10,832)
======== ========
Cash flows from financing $(86,447) $(59,620)
======== ========
Net cash flows $ 39,621 $ (2,542)
======== ========
EBITDA $ 99,867 $ 89,049
======== ========
Net cash flow for the Company was $39.6 million in the first nine months of
fiscal 1997 compared to a net cash use of $2.5 million in the prior-year
period. The change was primarily due to the sale of the discontinued cable
operation in the current period. Proceeds from the sale funded the retirement
of long-term debt and the purchase of marketable securities in the current-year
period. The purchase of the Ocala television station and higher capital
spending in the prior-year period also contributed to the change between
periods. Cash provided by operating activities increased slightly in the
current period. Increased net earnings were nearly offset by the increased use
of cash for working capital needs.
EBITDA is defined as earnings from continuing operations before interest,
taxes, depreciation and amortization. EBITDA is often used to analyze and
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<PAGE>
compare companies on the basis of operating performance and cash flow.
However, EBITDA is not adjusted for all noncash expenses or for working
capital, capital expenditures and other investment requirements. EBITDA should
not be considered in isolation or as a substitute for measures of performance
prepared in accordance with generally accepted accounting principles. For the
nine months ended March 31, 1997, EBITDA increased 12 percent versus the prior-
year period because of the increase in operating profits.
Company debt, which totaled $50 million at June 30, 1996, was repaid in its
entirety in October 1996, using a portion of the proceeds from the cable sale.
Interest expense associated with this debt totaled $909,000 (excluding $92,000
in capitalized interest) in the nine months ended March 31, 1997.
In January 1997, the Company announced that, pending Federal Communications
Commission approval, it will acquire all four of the television stations of
First Media Television, L.P. The acquisition price for the purchased assets of
First Media is $435 million. Meredith will pay through a combination of debt
and cash. One of the four First Media stations is WCPX, the CBS network
affiliate in Orlando. The Company currently owns WOFL, the FOX affiliate in
Orlando. Federal Communications Commission (FCC) regulations prohibit
ownership of two stations in one market. Therefore, Meredith is required to
submit a plan for the disposal of one of these stations before the FCC will
consider approval of the acquisition. The Company is currently pursuing
options to trade or sell either of the Orlando stations. The outcome of this
decision will determine the level of debt required. The Company is considering
several options regarding the type and term of the debt. Funds for the payment
of interest and principal on the debt are expected to be provided by cash
generated from future operating activities. It is possible that Meredith may
request to complete the acquisition of the other three First Media stations
before the Orlando situation is resolved. At this time, management expects all
of the transactions to close in the first half of fiscal 1998.
In the first nine months of fiscal 1997, the Company spent $19.7 million for
the repurchase of 842,000 shares of Meredith Corporation common stock on the
open market under an authorization by its Board of Directors. This compares
with spending of $17.7 million for 815,000 shares in the first nine months of
the prior year. As of March 31, 1997, approximately 1,700,000 shares could be
repurchased under an existing authorization by the Board of Directors. The
status of the repurchase program is reviewed at each quarterly Board of
Directors meeting. The Company expects to continue to repurchase shares in the
foreseeable future.
The Board of Directors approved a two-for-one stock split, in the form of a
share dividend, payable on March 17, 1997, to shareholders of record on
February 28, 1997.
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<PAGE>
On February 3, 1997, the Board of Directors increased the quarterly dividend by
18 percent, or 1 cent per share, to 6.5 cents per share effective with the
dividend payable on March 14, 1997. On an annual basis, this increase will
result in the payment of approximately $2.1 million in additional dividends, at
the current number of shares outstanding. Dividends paid in the first nine
months of fiscal 1997 were $9.4 million (17.5 cents per share) compared with
$8.5 million (15.5 cents per share) in the prior-year period.
Expenditures for property, plant and equipment were $13.0 million in the first
nine months of fiscal 1997 compared to $25.4 million in the prior-year period.
The decline reflected prior-year spending for leasehold and other improvements
to relocated office facilities in New York City and higher prior-year spending
for broadcasting technical equipment. Capital expenditures for fiscal 1997 are
expected to be approximately equal to fiscal 1996 capital spending of nearly
$30 million. This includes approximately $14 million in planned spending in
fiscal 1997 for the construction of a new office building and related
improvements in Des Moines. Fiscal 1996 spending for this project totaled $7
million. Total cost of the project is estimated at approximately $42 million.
The balance of the spending will occur in fiscal 1998. Funds for the new Des
Moines building and other capital expenditures are expected to be provided by
available cash, including cash from operating activities and, if needed, short-
term bank debt. Meredith Corporation has contracted to purchase new corporate
aircraft in fiscal 1999 to replace existing planes for a total of approximately
$9 million (net cost after trades). The Company has made no other material
commitments for capital expenditures.
At this time, management expects that cash on hand, internally-generated cash
flow and short-term bank debt under existing bank lines of credit will provide
funds for any additional operating and recurring cash needs (e.g., working
capital, cash dividends) for foreseeable periods. At March 31, 1997, Meredith
Corporation had unused committed and uncommitted lines of credit totaling $50
million. The Company does not expect the need for any long-term source of cash
to meet working capital requirements. As mentioned previously, the proposed
acquisition of the First Media television stations will be funded by cash and
debt.
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128, Earnings Per Share (SFAS
128). SFAS 128 replaces the presentation of primary earnings per share (EPS)
and fully diluted EPS with basic EPS and diluted EPS, respectively. Basic EPS
is computed by dividing income available to common stockholders by the
weighted-average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution that could result from the issuance of
dilutive potential shares from common stock equivalents. The Company will be
required to report both basic and diluted EPS on the face of the income
statement. Diluted EPS is not expected to be materially different than the
primary EPS currently reported by the Company. However, basic EPS will be a
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<PAGE>
new disclosure and is expected to be higher than diluted EPS due to the
Company's issuance of common stock equivalents. SFAS 128 is effective in the
second quarter of the Company's fiscal year ended June 30, 1998. Earlier
application of SFAS 128 is not permitted and when effective, all prior-period
EPS data presented will be restated.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
2) Asset Purchase Agreement by and between First Media Television,
L.P., as seller and Meredith Corporation as Buyer dated as of
January 23, 1997
10.1) 1996 Meredith Corporation Stock Incentive Plan Agreement dated
January 2, 1997, between Meredith Corporation and William T. Kerr
10.2) 1996 Meredith Corporation Stock Incentive Plan Agreement dated
January 2, 1997, between Meredith Corporation and William T. Kerr
11) Statement re computation of per share earnings
27) Financial Data Schedule
99) Additional financial information from the Company's third quarter
press release dated April 23, 1997
(b) Reports on Form 8-K
The Company filed a report on Form 8-K dated January 24, 1997, reporting
under Item 5 that it had entered into an asset purchase agreement with
First Media Television, L.P. to purchase First Media's four television
stations.
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MEREDITH CORPORATION
Registrant
(Larry D. Hartsook)
Larry D. Hartsook
Vice President - Finance
(Principal Financial and
Accounting Officer)
Date: May 14, 1997
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<PAGE>
Index to Exhibits
Exhibit
Number Item
------- -----------------------------------------------------------
2) Asset Purchase Agreement by and between First Media
Television, L.P., as seller and Meredith Corporation as
Buyer dated as of January 23, 1997*
10.1) 1996 Meredith Corporation Stock Incentive Plan Agreement
dated January 2, 1997, between Meredith Corporation and
William T. Kerr
10.2) 1996 Meredith Corporation Stock Incentive Plan Agreement
dated January 2, 1997, between Meredith Corporation and
William T. Kerr
11 Statement re computation of per share earnings
27 Financial Data Schedule
99 Additional financial information from the Company's third
quarter press release dated April 23, 1997
* Supplementary Exhibits and Schedules to this Asset Purchase Agreement, as
listed on pages 4 and 5 of Exhibit 2, are not included in this Form 10-Q
filing. Copies of any of the Exhibits and/or Schedules to this Asset
Purchase Agreement will be furnished supplementary to the Commission upon
request.
Exhibit 2
---------
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
FIRST MEDIA TELEVISION, L.P.,
AS SELLER
AND
MEREDITH CORPORATION,
AS BUYER
DATED AS OF JANUARY 23, 1997
- 1 -
<PAGE>
TABLE OF CONTENTS
-----------------
(Page numbers have been changed from original document to reflect currrent
page numbers in document filed with commission)
PAGE
----
SECTION 1. CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . . . 6
1.1 Terms Defined in this Section . . . . . . . . . . . . . . 6
1.2 Terms Defined Elsewhere in this Agreement . . . . . . . . 11
1.3 Rules of Construction . . . . . . . . . . . . . . . . . . 12
SECTION 2. PURCHASE AND SALE OF ASSETS; ASSET VALUE . . . . . . . . . 12
2.1 Purchase and Sale . . . . . . . . . . . . . . . . . . . . 12
2.2 Excluded Assets . . . . . . . . . . . . . . . . . . . . . 13
2.3 Escrow Agreement . . . . . . . . . . . . . . . . . . . . . 14
2.4 Purchase Price; Allocation . . . . . . . . . . . . . . . . 15
2.5 Prorations and Adjustments . . . . . . . . . . . . . . . . 15
2.6 Payment of Purchase Price and Prorations and Adjustments . 18
2.7 Assumption of Liabilities and Obligations . . . . . . . . 18
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . 19
3.1 Organization and Authority of Seller and License
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 19
3.2 Authorization and Binding Obligation . . . . . . . . . . . 20
3.3 Absence of Conflicting Agreements; Consents . . . . . . . 20
3.4 Governmental Licenses . . . . . . . . . . . . . . . . . . 21
3.5 Real Property . . . . . . . . . . . . . . . . . . . . . . 21
3.6 Tangible Personal Property . . . . . . . . . . . . . . . . 23
3.7 Assumed Contracts . . . . . . . . . . . . . . . . . . . . 23
3.8 Intangibles . . . . . . . . . . . . . . . . . . . . . . . 24
3.9 Financial Statements . . . . . . . . . . . . . . . . . . . 24
3.10 Taxes and Tax Returns . . . . . . . . . . . . . . . . . . 24
3.11 Insurance . . . . . . . . . . . . . . . . . . . . . . . . 24
3.12 Reports . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.13 Personnel . . . . . . . . . . . . . . . . . . . . . . . . 24
3.14 Claims and Legal Actions . . . . . . . . . . . . . . . . . 25
3.15 Compliance with Laws . . . . . . . . . . . . . . . . . . . 25
3.16 Conduct of Business in Ordinary Course . . . . . . . . . . 25
3.17 Environmental Matters . . . . . . . . . . . . . . . . . . 26
3.18 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.19 Transactions With Affiliates . . . . . . . . . . . . . . . 29
3.20 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.21 Employee Benefits . . . . . . . . . . . . . . . . . . . . 29
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<PAGE>
3.22 Ownership of Assets. . . . . . . . . . . . . . . . . . . . 30
3.23 Foreign Person . . . . . . . . . . . . . . . . . . . . . . 30
3.24 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . 30
3.25 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . 30
3.26 Ownership of License Subsidiaries . . . . . . . . . . . . 30
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . 30
4.1 Organization, Standing and Authority . . . . . . . . . . . 30
4.2 Authorization and Binding Obligation . . . . . . . . . . . 31
4.3 Absence of Conflicting Agreements and Required Consents . 31
4.4 Buyer Qualifications . . . . . . . . . . . . . . . . . . . 31
4.5 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.6 Availability of Funds . . . . . . . . . . . . . . . . . . 32
SECTION 5. OPERATIONS OF THE STATIONS PRIOR TO CLOSING . . . . . . . 32
5.1 Generally . . . . . . . . . . . . . . . . . . . . . . . . 32
5.2 Goodwill; Expenditures . . . . . . . . . . . . . . . . . . 34
5.3 Dispositions . . . . . . . . . . . . . . . . . . . . . . . 34
5.4 Encumbrances . . . . . . . . . . . . . . . . . . . . . . . 34
5.5 Access to Information . . . . . . . . . . . . . . . . . . 34
5.6 Insurance . . . . . . . . . . . . . . . . . . . . . . . . 35
5.7 [Intentionally Omitted] . . . . . . . . . . . . . . . . . 35
5.8 Financial Information . . . . . . . . . . . . . . . . . . 35
5.9 Representations and Warranties . . . . . . . . . . . . . . 35
5.10 Notice of Proceedings . . . . . . . . . . . . . . . . . . 35
5.11 Notice of Certain Developments . . . . . . . . . . . . . . 35
SECTION 6. SPECIAL COVENANTS AND AGREEMENTS . . . . . . . . . . . . . 36
6.1 FCC Consent . . . . . . . . . . . . . . . . . . . . . . . 36
6.2 Certain Leases . . . . . . . . . . . . . . . . . . . . . . 37
6.3 HSR Act Filing . . . . . . . . . . . . . . . . . . . . . . 37
6.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . 38
6.5 Cooperation . . . . . . . . . . . . . . . . . . . . . . . 39
6.6 Control of the Stations . . . . . . . . . . . . . . . . . 39
6.7 Accounts Receivable . . . . . . . . . . . . . . . . . . . 40
6.8 Access to Books and Records . . . . . . . . . . . . . . . 41
6.9 Employee Matters . . . . . . . . . . . . . . . . . . . . . 41
6.10 Cure . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.11 Cash Flow Certificates . . . . . . . . . . . . . . . . . . 44
6.12 Environmental Reports . . . . . . . . . . . . . . . . . . 44
6.13 Partial Closings . . . . . . . . . . . . . . . . . . . . . 45
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<PAGE>
SECTION 7. CONDITIONS TO OBLIGATIONS OF BUYER AND SELLER . . . . . . 50
7.1 Conditions to Obligations of Buyer . . . . . . . . . . . . 50
7.2 Conditions to Obligations of Seller . . . . . . . . . . . 51
SECTION 8. CLOSING AND CLOSING DELIVERIES . . . . . . . . . . . . . . 53
8.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.2 Deliveries by Seller . . . . . . . . . . . . . . . . . . . 54
8.3 Deliveries by Buyer . . . . . . . . . . . . . . . . . . . 56
SECTION 9. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . 57
9.1 Termination of Agreement . . . . . . . . . . . . . . . . . 57
9.2 Procedure and Effect of Termination . . . . . . . . . . . 58
9.3 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . 60
SECTION 10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION;
CERTAIN REMEDIES . . . . . . . . . . . . . . . . . . . . . 60
10.1 Survival . . . . . . . . . . . . . . . . . . . . . . . . . 60
10.2 Indemnification by Seller . . . . . . . . . . . . . . . . 60
10.3 Indemnification by Buyer . . . . . . . . . . . . . . . . . 63
10.4 Procedure for Indemnification . . . . . . . . . . . . . . 63
SECTION 11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 65
11.1 Fees and Expenses . . . . . . . . . . . . . . . . . . . . 65
11.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 65
11.3 Benefit and Binding Effect . . . . . . . . . . . . . . . . 66
11.4 Further Assurances . . . . . . . . . . . . . . . . . . . . 67
11.5 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . 67
11.6 Entire Agreement . . . . . . . . . . . . . . . . . . . . . 67
11.7 Waiver of Compliance; Consents . . . . . . . . . . . . . . 67
11.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . 68
11.9 Severability . . . . . . . . . . . . . . . . . . . . . . . 68
Exhibits
--------
Exhibit 1.1 Indemnification Fund Agreement
Exhibit 2.3 Escrow Agreement
Exhibit 6.1 WOFL/WOGX Trust Agreement
Exhibit 8.2(f) Opinion of Counsel to Seller
Exhibit 8.3(e) Opinion of Counsel to Buyer
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<PAGE>
Schedules
---------
Schedule 1.1 Cash Flow
Schedule 2.1 Interest in Television Alliance Group, Inc.
Schedule 2.2(g) Excluded Contracts
Schedule 2.2(k) Excluded Assets: Subsidiaries of Seller
Schedule 2.2(l) Excluded Assets
Schedule 3.1 Qualifications
Schedule 3.3 Absence of Conflicting Agreements; Consents
Schedule 3.4 Governmental Licenses
Schedule 3.5 Real Property
Schedule 3.6 Tangible Personal Property
Schedule 3.7 Contracts
Schedule 3.8 Intangibles
Schedule 3.9 Financial Statements
Schedule 3.10 Tax and Tax Returns
Schedule 3.11 Insurance
Schedule 3.13 Personnel
Schedule 3.14 Claims and Legal Actions
Schedule 3.16 Conduct of Business in Ordinary Course
Schedule 3.17 Environmental
Schedule 3.19 Transactions with Affiliates
Schedule 3.21 Employee Benefits
Schedule 5.1 Certain Changes
Schedule 6.2 Certain Leased Assets
- 5 -
<PAGE>
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is dated as of January 23, 1997, by and
between First Media Television, L.P., a Delaware limited partnership
("Seller"), and Meredith Corporation, an Iowa corporation ("Buyer").
R E C I T A L S:
A. Seller owns and operates Television Stations WCPX(TV), Orlando,
Florida (the "Florida Station"), KPDX(TV), Vancouver, Washington and KFXO-LP,
Bend, Oregon (together, the "Northwest Station"), WHNS(TV), Asheville, North
Carolina (the "Carolina Station"; each of the Florida Station, the Northwest
Station and the Carolina Station is hereinafter referred to as a "Station" and
collectively as the "Stations"). WCPX License Partnership, a Delaware general
partnership owns all of the FCC Licenses relating to the Florida Station; KPDX
License Partnership, a Delaware general partnership, owns all of the FCC
Licenses relating to the Northwest Station; and WHNS License Partnership, a
Delaware general partnership owns all of the FCC Licenses relating to the
Carolina Station.
B. Seller desires to sell, and Buyer desires to purchase, substantially
all of the assets of the Stations, on the terms and conditions hereinafter set
forth. Seller will cause the License Subsidiaries to assign the FCC Licenses
to Buyer at Closing in accordance with the terms and provisions of this
Agreement.
A G R E E M E N T S:
In consideration of the above recitals and of the mutual agreements and
covenants contained in this Agreement, the parties to this Agreement, intending
to be bound legally, agree as follows:
SECTION 1. CERTAIN DEFINITIONS
1.1 Terms Defined in this Section. The following terms, as used in this
Agreement, have the meanings set forth in this Section:
"Accounts Receivable" means the rights of Seller as of the Closing Date to
payment for the sale of advertising time and other goods and services by any
Station prior to the Closing Date.
"Affiliate" means, with respect to any Person any other Person that,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with such Person.
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<PAGE>
"Assets" means the assets to be transferred or otherwise conveyed by
Seller to Buyer under this Agreement, as specified in Section 2.1.
"Assumed Contracts" means (a) all Contracts listed on Schedules 3.5, 3.7
and 3.13, and all Contracts of the type described in Sections 3.5, 3.7 and 3.13
that are not required to be listed thereon pursuant to the exceptions set forth
in such Sections; (b) Contracts entered into with advertisers for the sale of
advertising time for cash or production services in the ordinary course of
business; (c) any Contracts entered into by Seller between the date of this
Agreement and the Closing Date that Buyer agrees in writing to assume, and (d)
other Contracts entered into by Seller between the date of this Agreement and
the Closing Date in compliance with Section 5.1; provided that Assumed
Contracts shall in no event include Excluded Contracts.
"Business Day" means any day excluding Saturdays, Sundays and any day that
is a legal holiday under the laws of the United States or the State of Georgia
or is a day on which the Escrow Agent or banking institutions located in the
State of Georgia are authorized or required by law or other governmental action
to close.
"Cash Flow" has the meaning set forth on Schedule 1.1.
"Closing" means the consummation of the sale and acquisition of the Assets
pursuant to this Agreement in accordance with the provisions of Section 8.
"Closing Date" means the date on which the Closing occurs, as determined
pursuant to Section 8.
"Code" means the Internal Revenue Code of 1986, as amended.
"Communications Act" means the Communications Act of 1934, as amended.
"Consents" means the consents, permits, or approvals of government
authorities and other third parties necessary to transfer the Assets to Buyer
or otherwise to consummate the transactions contemplated by this Agreement.
"Contracts" means all contracts, leases, non-governmental licenses and
other agreements (including leases for personal or real property and employment
agreements), written or oral (including any amendments and other modifications
thereto) of Seller or to which Seller is a party or that are binding upon
Seller and that relate to or affect the Assets or the business or operations of
any Station, and (a) that are in effect on the date of this Agreement or (b)
that are entered into by Seller between the date of this Agreement and the
Closing Date, but excluding any Contracts that terminate between the date of
this Agreement and the Closing Date.
- 7 -
<PAGE>
"Effective Time" means with respect to each Station, 12:01 a.m. local time
for the city to which such Station is licensed, on the Closing Date.
"Employee Plan" means any retirement, severance, medical, disability, life
insurance or any other employee benefit plan as defined in Section 3(3) of
ERISA to which either of the Seller or any entity related to Seller (under the
terms of Sections 414 (b) or (c) of the Code) contributes or which either of
the Seller or any entity related to Seller (under the terms of Sections 414 (b)
or (c)of the Code) sponsors or maintains.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Amount" means the sum of the Escrow Deposit, and all interest or
earnings accrued thereon.
"Escrow Deposit" means the sum of Twenty-One Million Seven Hundred Fifty
Thousand Dollars ($21,750,000) which is being deposited by Buyer with Union
Bank of California, N.A. (the "Escrow Agent") in immediately available funds on
the date hereof to secure the obligations of Buyer to close under this
Agreement, with such deposit being held by the Escrow Agent in accordance with
the Escrow Agreement executed among Buyer, Seller and Escrow Agent on the date
hereof.
"FCC" means the Federal Communications Commission.
"FCC Consent" means actions by the FCC granting its consent to the
assignment of the FCC Licenses by the License Subsidiaries to Buyer as
contemplated by this Agreement.
"FCC Licenses" means those Licenses issued by the FCC to Seller or any
License Subsidiary in connection with the business and operations of any
Station.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Indemnification Amount" means the sum of the current Indemnification
Deposit, and all interest or earnings accrued thereon.
"Indemnification Deposit" means on the Closing Date Twenty Million Dollars
($20,000,000) of the Purchase Price, to be deposited at Closing by Buyer, and
on the date that is nine months after the Closing Date means Ten Million
Dollars ($10,000,000) plus the sum of (I) the amount of any claims previously
paid from the Indemnification Amount and (ii) an amount sufficient to satisfy
any claims pending on such date made by Buyer with respect to indemnification
under Section 10 hereof pursuant to the Indemnification Fund Agreement.
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<PAGE>
"Indemnification Fund Agreement" means the Indemnification Fund Agreement
among Buyer, Seller and Union Bank of California, N.A. ("Indemnification Escrow
Agent") substantially in the form attached hereto as Exhibit 1.1, in accordance
with which Buyer shall, at Closing, deposit with Indemnification Escrow Agent
Twenty Million Dollars ($20,000,000), which amount shall be reduced in
accordance with the terms hereof, and shall provide a fund for the payment of
any claims for which Buyer may be entitled to indemnification as provided in
Section 10 hereof (the "Indemnification Fund").
"Intangibles" means all copyrights, trademarks, trade names, service
marks, service names, licenses, computer programs and computer license
interests to the extent owned by and transferable by Seller, patents, permits,
jingles, proprietary information, technical information and data, and other
similar intangible property rights and interests (and any goodwill associated
with any of the foregoing) applied for, issued to, or owned by Seller or under
which Seller is licensed or franchised and that are used or useful in the
business and operations of any Station, together with any additions thereto
between the date of this Agreement and the Closing Date.
"License Subsidiaries" means, collectively, the following entities (a)
with respect to Television Station WCPX(TV), Orlando, Florida, WCPX License
Partnership, a Delaware general partnership, (b) with respect to Television
Station WHNS(TV), Asheville, North Carolina, WHNS License Partnership, a
Delaware general partnership and (c) with respect to KPDX(TV), Vancouver,
Washington, and KFXO-LP, Bend, Oregon, KPDX License Partnership, a Delaware
general partnership.
"Licenses" means all licenses, permits, construction permits and other
authorizations issued by the FCC, the Federal Aviation Administration, or any
other federal, state, or local governmental authorities to Seller or any
License Subsidiary, currently in effect and used in connection with the conduct
of the business or operations of any Station, together with any additions
thereto between the date of this Agreement and the Closing Date.
"Material Adverse Change" means a material adverse change in Seller's
financial condition, taken as a whole, or of the Assets, taken as a whole
(provided that the foregoing shall not include any material adverse change
attributable to (a) factors affecting the television industry generally, (b)
general national, regional or local economic or financial conditions, (c)
governmental or legislative laws, rules or regulations, or (d) actions taken by
Buyer or any Affiliate of Buyer).
"Permitted Liens" means (a) liens for taxes not yet due and payable; (b)
landlord's liens and liens for property taxes not delinquent; (c) statutory
liens that were created in the ordinary course of business not delinquent; (d)
restrictions or rights granted to governmental authorities under applicable
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law; (e) zoning, building, or similar restrictions relating to or affecting
property; (f) all matters of record disclosed on Schedule 3.5 as "continuing",
including leasehold interests in real property owned by others and operating
leases for personal property and leased interests in property leased to others;
(g)(1) liens or encumbrances on the Real Property, currently of record
(excluding, however, any mortgage, deed to secure debt, deed of trust, security
agreement, judgment, lien or statutory claim of lien or any other title
exception or defect that is monetary in nature, Seller hereby agreeing to pay
and satisfy of record any such title defect or exception) and (2) other liens
or encumbrances on the Real Property, that do not materially affect the current
use and enjoyment thereof in the operation of the Assets and (I) the Assumed
Liabilities (as hereinafter defined).
"Person" means an individual, corporation, association, partnership, joint
venture, trust, estate, limited liability company, limited liability
partnership, or other entity or organization.
"Real Property" means (a) all fee estates in real property, and all
buildings and other improvements thereon, owned or held by Seller that are used
or useful in the business or operations of any Station; and (b) leases of any
real property under which Seller is the lessee, together with any additions
thereto between the date of this Agreement and the Closing Date.
"Required Consents" means such Consents as listed on Schedule 3.3 that are
designated with a double asterisk.
"Station's Business" means the businesses currently conducted by any of
the Stations, taken as a whole, including the Assets and operations thereof and
the Assumed Liabilities to be sold or assumed pursuant to this Agreement.
"Stations' Business" means the business currently conducted by all of the
Stations, taken as a whole, including the assets and operations thereof and the
Assumed Liabilities to be sold or assigned pursuant to this Agreement.
"Tangible Personal Property" means all machinery, equipment, tools,
vehicles, furniture, office equipment, plant, inventory, spare parts and other
tangible personal property owned or held by Seller that is used or useful in
the conduct of the business or operations of any Station, together with any
additions thereto between the date of this Agreement and the Closing Date.
"Tax" means any federal, state, local, or foreign income, gross receipts,
windfall profits, severance, property, production, sales, use, license, excise,
franchise, capital, transfer, employment, withholding, or other tax or
governmental assessment, together with any interest, additions, or penalties
with respect thereto and any interest in respect of such additions or
penalties.
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"Tax Return" means any tax return, declaration of estimated tax, tax
report or other tax statement, or any other similar filing required to be
submitted by Seller relating to the Stations to any governmental authority with
respect to any Tax.
"WOFL" means WOFL(TV), Orlando, Florida.
"WOGX" means WOGX(TV), Ocala, Florida.
"WOFL/WOGX Trust" means the trust created pursuant to the WOFL/WOGX Trust
Agreement.
"WOFL/WOGX Trust Agreement" means the trust agreement to be entered into
by and between Buyer and a trustee selected by Buyer, in substantially the form
of Exhibit 6.1.
1.2 Terms Defined Elsewhere in this Agreement. For purposes of this
Agreement, the following terms have the meanings set forth in the sections
indicated:
Term Section
- ---- -------
Applicable Environmental Laws Section 3.17(a)
Assumed Employees Section 6.9(a)
Assumed Liabilities Section 2.7
Buyer Preamble
Carolina Station Recitals
Certain Leased Assets Section 6.2
Claimant Section 10.4(a)
Collection Period Section 6.7(a)
Deeds Section 8.2(a)
DOJ Section 6.3
Employees Section 3.13
Escrow Agreement Section 2.3
Escrow Agent Section 1.1
Estimated Purchase Price Section 2.4
Excluded Contracts Section 2.2(g)
Financial Statements Section 3.9
Florida Station Recitals
FTC Section 6.3
Hazardous Substance Section 3.17(a)
Indemnification Escrow Agent Section 1.1
Indemnification Fund Section 1.1
Indemnifying Party Section 10.4(a)
Interruption Notice Section 8.1(a)(3)
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Northwest Station Recitals
Purchase Price Section 2.4
Seller Preamble
Station Recitals
Stations Recitals
1.3 Rules of Construction. Except as specifically otherwise provided in
this Agreement in a particular instance, a reference to a Section, Schedule or
Exhibit is a reference to a Section of this Agreement or a Schedule or Exhibit
hereto, and the terms "hereof," "herein," and other like terms refer to this
Agreement as a whole, including the Schedules and Exhibits to this Agreement,
and not solely to any particular part of this Agreement. The descriptive
headings in this Agreement are inserted for convenience of reference only and
are not intended to be part of or to affect the meaning or interpretation of
this Agreement.
SECTION 2. PURCHASE AND SALE OF ASSETS; ASSET VALUE
2.1 Purchase and Sale. Subject to the terms and conditions set forth in
this Agreement, Seller hereby agrees to (and in the case of the FCC Licenses,
Seller agrees to cause the License Subsidiaries to) transfer, convey, assign
and deliver to Buyer on the Closing Date, and Buyer agrees to acquire, all of
Seller's (and in the case of the FCC Licenses, the License Subsidiaries')
right, title and interest in the tangible and intangible assets used or useful
in connection with the conduct of the business or operations of any Station,
together with any additions thereto between the date of this Agreement and the
Closing Date, but excluding assets disposed of between the date of this
Agreement and the Closing Date in accordance with the provisions of this
Agreement and the assets described in Section 2.2, free and clear of any
claims, liabilities, security interests, mortgages, liens, pledges, conditions,
charges, or encumbrances of any nature whatsoever (except for Permitted Liens),
including the following:
(a) the Tangible Personal Property;
(b) the Real Property;
(c) the Licenses (other than the FCC Licenses) and the rights or
interests of the License Subsidiaries in the FCC Licenses;
(d) the Assumed Contracts and the interest set forth on Schedule 2.1
in Television Alliance Group, Inc. relating thereto;
(e) the Intangibles;
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(f) all of Seller's proprietary information, technical information
and data, maps, computer discs and tapes, FCC logs, plans, diagrams, blueprints
and schematics, including filings with the FCC, relating to the business and
operation of any Station;
(g) all books and records of Seller relating solely to the business
or operations of any Station, including executed copies of the Assumed
Contracts, and all records required by the FCC to be kept by any Station, other
than account books of original entry and such files and records that are
maintained at the corporate offices of the general partner of Seller's general
partner for tax and accounting purposes;
(h) all deposits and prepaid expenses of Seller with respect to
items that are prorated in Section 2.5 below;
(I) Certain Leased Assets, as defined below in Section 6.2 and
described in Schedule 6.2; and
(j) equipment warranties to the extent transferable by Seller.
2.2 Excluded Assets. Notwithstanding anything in this Agreement to the
contrary, the Assets shall not include the following:
(a) cash, cash equivalents and cash items of any kind whatsoever,
certificates of deposit, money market instruments, bank balances, and rights in
and to bank accounts, Treasury bills and marketable securities and other
securities of Seller;
(b) except as otherwise provided in Section 6.9, contracts of
insurance and insurance plans and the assets thereof, promissory notes, amounts
due from employees, bonds, letters of credit, certificates of deposit, or other
similar items, and any cash surrender value in regard thereto;
(c) except as otherwise provided in Section 6.9, any pension,
profit-sharing, retirement, bonus, stock purchase, savings plans and trusts,
401(k) plans, health insurance plans (including any insurance contracts or
policies related thereto), and the assets thereof and any rights thereto, and
all other plans, agreements or understandings to provide employee benefits of
any kind for employees of Seller;
(d) Accounts Receivable;
(e) tangible personal property disposed of or consumed in the
ordinary course of the business of Seller, and in compliance with this
Agreement, between the date of this Agreement and the Closing Date;
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(f) claims of Seller with respect to transactions arising prior to
the Closing Date, including, without limitation, rights and interests of Seller
in and to any claims for tax refunds (including, but not limited to, federal,
state or local franchise, income or other taxes) and causes of action and
claims of Seller under contracts and with respect to other transactions with
respect to events occurring prior to the Closing Date and all claims for other
refunds of monies paid to any governmental agency and all claims for copyright
royalties for broadcast prior to the Closing Date;
(g) Contracts that are not Assumed Contracts, including those listed
on Schedule 2.2(g) (the "Excluded Contracts");
(h) Seller's partnership records and other books and records that
pertain to internal partnership matters of Seller and Seller's account books of
original entry with respect to any Station, and any other Assets, and all
original accounts, checks, payment records, tax records (including payroll,
unemployment, real estate and other tax records) and other similar books,
records and information of Seller relating to Seller's operation of the
business of any Station and any other Assets prior to Closing;
(I) the deposits and prepaid expenses of Seller with respect to the
items that are not subject to adjustment under Section 2.5 hereof;
(j) rights to and goodwill in the name "First Media" or any logo,
variation or derivation thereof;
(k) Seller's interests in the License Subsidiaries and in the
subsidiaries of Seller described on Schedule 2.2(k); and
(l) Seller's interests in the assets described on Schedule 2.2(l).
Notwithstanding anything to the contrary set forth in this Agreement, no
representations, warranties or covenants are made with respect to the Excluded
Assets.
2.3 Escrow Agreement. The parties hereto acknowledge that pursuant to
the terms and conditions of the Escrow Agreement attached hereto as Exhibit 2.3
(the "Escrow Agreement") executed by and among Buyer, Seller and Escrow Agent:
(a) Concurrent with the execution hereof, or not later than January
24, 1997, pursuant to the terms of the Escrow Agreement, Buyer has delivered
the Escrow Deposit to the Escrow Agent to be held by the Escrow Agent to secure
Buyer's timely performance and fulfillment of its obligations under this
Agreement.
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(b) At the Closing, Buyer and Seller shall cause Escrow Agent to pay
the Escrow Amount over to Seller and the amount to be paid by Buyer to Seller
in respect of the Purchase Price shall be reduced by the Escrow Amount.
(c) In the event of a termination of this Agreement, the Escrow
Amount shall be paid in accordance with Section 9.2 hereof.
2.4 Purchase Price; Allocation. The purchase price for the Assets (the
"Purchase Price") shall be Four Hundred Thirty-Five Million Dollars
($435,000,000), which sum shall be (a) reduced by the amount of the Escrow
Amount on the Closing Date, that is delivered by Escrow Agent to Seller at the
Closing as a credit against the Purchase Price; (b) subject to upward or
downward adjustment, as the case may be, on and after the Closing Date pursuant
to Section 2.5(a) below; and (c) reduced by $20,000,000, which Buyer shall
deliver to the Indemnification Escrow Agent, by wire transfer of immediately
available funds to such account as designated in writing to Buyer by Seller or
the Indemnification Escrow Agent, to be held and disposed of by the
Indemnification Escrow Agent pursuant to the Indemnification Fund Agreement
(such adjusted Purchase Price, the "Estimated Purchase Price").
Following the Closing, Buyer shall retain, at Buyer's expense, a
recognized appraisal firm to appraise the Stations and the Assets and shall
provide Seller with a copy of such appraisal within 90 days after the Closing
Date. If the results of Buyer's appraisal are acceptable to Seller and Buyer,
Seller and Buyer agree to allocate the Purchase Price among the Stations and
the Assets for financial accounting and tax purposes in accordance with such
appraisal and to report for financial accounting and tax purposes the sale and
purchase of the Assets contemplated by this Agreement on the basis of such
allocation. If, within a reasonable period of time after delivery of the
appraisal, Buyer and Seller are unable to agree upon the appraisal, the party
that does not agree with the appraisal shall notify the other party and neither
party shall be required to report for tax purposes the sale and purchase of the
assets on the basis of such appraisal.
2.5 Prorations and Adjustments.
(a) Prorations and Adjustments. The Purchase Price shall be
increased or decreased as required to effectuate the proration of revenues and
expenses as provided for herein. All revenues and all expenses arising from
the operation of any Station, including tower rental, business and license
fees, utility charges, real and personal property taxes and assessments levied
against the Assets, property and equipment rentals, applicable copyright or
other fees, including program license payments, 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
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between Buyer and Seller in accordance with generally accepted accounting
principles and to effect the principle that Seller shall receive all revenues
and shall be responsible for all expenses, costs and liabilities allocable to
the operations of any Station for the period prior to the Effective Time, and
Buyer shall receive all revenues and shall be responsible for all expenses,
costs and obligations allocable to the operations of any Station for the period
after the Effective Time, subject to the following:
(1) There shall be no adjustment for, and Seller shall remain
solely liable with respect to, any Excluded Contracts and any other obligation
or liability not being assumed by Buyer in accordance with Section 2.7.
(2) No adjustment or proration to the Purchase Price shall be
made in favor of Seller or Buyer for the amount, if any, by which the value of
the goods or services to be received by any Station under its trade or barter
agreements as of the Effective Time for such Station exceeds, or is less than,
the value of any advertising time remaining to be run by such Station as of the
Effective Time.
(3) There shall be no adjustment or proration to the Purchase
Price for program barter. There shall be no adjustment or proration to the
Purchase Price of the payments due under the film or programming license
agreements except as expressly specified in this Section 2.5(a)(3). Except as
set herein for the month in which Closing occurs, Seller shall be responsible
for filing and paying all film or programming license fees due and payable as
of the Effective Time, and Buyer shall be responsible for filing and paying all
such fees after the Effective Time; provided that for the month in which the
Closing occurs, such obligations for such month shall be allocated on a pro-
rata basis based on the day of the month in which the Closing occurs. Deposits
for film and programming agreements shall be fully credited to the Seller;
provided, however that on the Closing Date, such credit will be reduced on a
pro-rated basis based on the length of the term that the film or program was
available to be aired on the Station prior to Closing and the total length of
the term that the film or program is available to air on the Station.
(4) There shall be no adjustment or proration for sick and
personal days, severance pay or earned vacation time accrued on or prior to the
Closing Date by any employee of Seller, all of which shall be assumed by Buyer.
(b) Manner of Determining Prorations and Adjustments. The Purchase
Price, taking into account the adjustments and prorations pursuant to Section
2.5(a), will be determined in accordance with the following procedures:
(1) Seller shall prepare and deliver to Buyer not later than
five days before the Closing Date a preliminary settlement statement which
shall set forth Seller's good faith estimate of the adjustments or prorations
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to the Purchase Price under Section 2.5(a). The preliminary settlement
statement shall contain all information reasonably necessary to determine the
adjustments or prorations to the Purchase Price under Section 2.5(a), including
appropriate supporting documentation, to the extent such adjustments or
prorations can be determined or estimated as of the date of the preliminary
settlement statement. The preliminary settlement statement shall be signed at
Closing by an officer of the general partner of Seller's general partner after
due inquiry by such officer but without personal liability to such officer.
The adjustments and prorations to the Purchase Price to be made at Closing
shall be based upon the Preliminary Settlement Statement.
(2) Not later than ninety days after the Closing Date, Buyer
will deliver to Seller a statement setting forth Buyer's determination of any
changes to the adjustments and prorations made at Closing. Buyer's statement
(A) shall contain all information reasonably necessary to determine the
adjustments and prorations to the Purchase Price under Section 2.5(a),
including appropriate supporting documentation, and such other information as
may be reasonably requested by Seller, and (B) shall be certified by Buyer to
be true and complete to Buyer's knowledge. Seller shall have the right to
visit the Stations to verify and review such documentation upon providing
reasonable notice to Buyer. If Seller disputes the adjustments and prorations
determined by Buyer, it shall deliver to Buyer within sixty days after its
receipt of Buyer's statement a statement setting forth its determination of the
adjustments and prorations. If Seller notifies Buyer of its acceptance of
Buyer's statement, or if Seller fails to deliver its statement within the
sixty-day period specified in the preceding sentence, Buyer's determination of
the adjustments and prorations shall be conclusive and binding on the parties
as of the last day of the sixty-day period.
(3) Buyer and Seller shall use good faith efforts to resolve
any dispute involving the determination of the adjustments and prorations. If
the parties are unable to resolve the dispute within fifteen days following the
delivery of Seller's statement pursuant to Section 2.5(b)(2), Buyer and Seller
shall jointly designate an independent certified public accountant, who shall
be knowledgeable and experienced in the operation of television broadcasting
stations, to resolve the dispute. If the parties are unable to agree on the
designation of an independent certified public accountant, the selection of the
accountant to resolve the dispute shall be submitted to arbitration in
accordance with the commercial arbitration rules of the American Arbitration
Association. The accountant's resolution of the dispute shall be final and
binding on the parties, and a judgment may be entered thereon in any court of
competent jurisdiction. Any fees of this accountant, and, if necessary, for
arbitration to pick such accountant, shall be split equally between the
parties.
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(4) Amounts payable to the Stations from the United States
Copyright Office or such arbitration panels as may be appointed by the United
States Copyright Office that relate to the period prior to the Effective Time
may not be determinable or paid within the period provided in this Section 2.5
for final determination of adjustments. In that event, notwithstanding the
provisions of this Section 2.5, Buyer and Seller agree to cooperate fully in
future copyright filings and to allocate any future copyright proceeds in
accordance with Section 2.5 until such time as all such proceeds with respect
to the period prior to the Effective Time are paid.
2.6 Payment of Purchase Price and Prorations and Adjustments. The
Purchase Price shall be paid by Buyer to Seller as follows:
(a) Payment of Estimated Purchase Price At Closing. At the Closing,
Buyer shall pay or cause to be paid to Seller the Estimated Purchase Price by
federal wire transfer of same-day funds pursuant to wire instructions which
instructions shall be delivered to Buyer by Seller at least two business days
prior to the Closing Date.
(b) Payments to Reflect Prorations and Adjustments.
(1) If the Purchase Price as finally determined pursuant to
Section 2.5(b) exceeds the Estimated Purchase Price, Buyer shall pay to Seller,
in immediately available funds within five business days after the date on
which the Purchase Price is determined pursuant to Section 2.5(b), the
difference between the Purchase Price and the Estimated Purchase Price.
(2) If the Purchase Price as finally determined pursuant to
Section 2.5(b) is less than the Estimated Purchase Price, Seller shall pay to
Buyer, in immediately available funds within five business days after the date
on which the Purchase Price is determined pursuant to Section 2.5(b), the
difference between the Purchase Price and the Estimated Purchase Price.
(3) If any dispute arises over the amount to be refunded or
paid, such refund or payment shall nevertheless be made to the extent any
amount is not in dispute.
2.7 Assumption of Liabilities and Obligations. As of the Closing Date,
Buyer shall assume and undertake to pay, discharge and perform (a) any
obligation or liability of Seller and the License Subsidiaries under the
Assumed Contracts, including the collective bargaining agreement referenced on
Schedule 3.13 to the extent that either (1) the obligations and liabilities
relate to the period after the Effective Time or (2) the Purchase Price was
reduced pursuant to Section 2.5(a) as a result of the proration or adjustment
of such obligations and liabilities; (b) any liability or obligation to any
former employee of Seller who has been hired by Buyer, attributable to any
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period of time on or after the Closing Date; (c) any liability or obligation
arising out of any litigation, proceeding or claim by any person or entity
relating to the business or operations of any Station or any of the Assets with
respect to any events or circumstances that occur or arise on or after the
Closing Date; (d) any severance or other liability arising out of the
termination of any employee's employment with or by Buyer on or after the
Closing Date; (e) any duty, obligation or liability relating to any pension,
401(k) or other similar plan, agreement or arrangement provided by Buyer to any
employee or former employee of Seller on or after the Closing Date and (f) all
state and local sales or use taxes (or their equivalent) and transfer taxes or
recording fees payable as a consequence of the sale of the Assets hereunder
(all of the foregoing, together with other liabilities or obligations expressly
assumed by Buyer hereunder, are referred to herein collectively as the "Assumed
Liabilities"). Buyer shall not be required to assume any of the following:
(i) any obligations or liabilities under any Excluded Contract, (ii) any
obligations or liabilities under the Assumed Contracts relating to the period
prior to the Effective Time except insofar as a proration or adjustment
therefor is made in favor of Buyer under Section 2.5(a), (iii) any liability or
obligation arising out of any litigation, proceeding or claim by any person or
entity relating to the business or operations of any Station or any of the
Assets with respect to any events or circumstances that occur or exist prior to
the Closing Date, (iv) any credit agreements, note purchase agreements,
indentures, or other financing arrangements (other than any Assumed Contracts)
of Seller, and (v) subject to Section 6.12, any liability under Applicable
Environmental Laws relating to the period prior to Closing. Buyer shall
perform all obligations arising out of the Assets (including the Assumed
Contracts and the Licenses) on or after the Closing Date. Seller shall retain
all liabilities of Seller not assumed by Buyer.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
3.1 Organization and Authority of Seller and License Subsidiaries.
Seller is a limited partnership duly formed, validly existing and in good
standing under the laws of the State of Delaware and qualified to conduct
business in the States set forth on Schedule 3.1. Seller has the requisite
partnership power and authority to own and operate the Assets owned and
operated by it, to carry on the business of the Stations now being conducted by
it, and to execute, deliver and perform this Agreement and the documents
contemplated hereby according to their respective terms. Each License
Subsidiary is a duly formed general partnership. Each License Subsidiary has
the requisite partnership power and authority to own the FCC Licenses owned by
it and to execute, deliver and perform the Assignment and Assumption of FCC
Licenses according to its terms.
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3.2 Authorization and Binding Obligation. The execution, delivery and
performance of this Agreement and the documents contemplated hereby, and the
consummation of the transactions contemplated hereby and thereby, by Seller
have been duly and validly authorized by all necessary partnership action on
the part of Seller. This Agreement has been duly executed and delivered by
Seller and constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms except as the enforceability of this
Agreement may be affected by bankruptcy, insolvency, or similar laws affecting
creditors' rights generally and by judicial discretion in the enforcement of
equitable remedies. The performance of the actions to be taken by each License
Subsidiary as contemplated under this Agreement has been duly and validly
authorized by all necessary partnership action on the part of such License
Subsidiary and constitutes the legal, valid and binding obligation of such
License Subsidiary, enforceable against it in accordance with its terms except
as the enforceability of this Agreement may be affected by bankruptcy,
insolvency, or similar laws affecting creditors' rights generally and by
judicial discretion in the enforcement of equitable remedies.
3.3 Absence of Conflicting Agreements; Consents. The execution and
delivery of this Agreement, and the performance of the transactions
contemplated herein by Seller and each License Subsidiary, will not require any
consent, approval, authorization or other action by, or filing with or
notification to, any Person or governmental authority, except as follows: (a)
filings required under the HSR Act, (b) consents to the assignment of the FCC
Licenses to Buyer by the FCC, (c) filings with respect to real estate, sales
and other transfer taxes, and (d) certain of the Assumed Contracts may be
assigned only with the consent of third parties, as specified in Schedule 3.3.
Subject to obtaining the Consents, the execution, delivery and performance by
Seller of this Agreement and the documents contemplated hereby and the
performance by each License Subsidiary of the actions contemplated hereby and
the performance by each License Subsidiary of the actions contemplated hereby
(with or without the giving of notice, the lapse of time, or both): (a) do not
require the consent of any third party; (b) do not conflict with any provision
of the Agreement of Limited Partnership of Seller or the Agreement of General
Partnership of any License Subsidiary, as applicable; (c) do not conflict in
any material respect with, result in a material breach of, or constitute a
material default under, any applicable law, judgment, order, ordinance,
injunction, decree, rule, regulation, or ruling of any court or governmental
authority applicable to Seller or any License Subsidiary, as applicable, or
result in the breach of any material contract or agreement to which Seller or
any License Subsidiary, as applicable, is a party or by which Seller or any
License Subsidiary, as applicable, may be bound; and (d) other than Permitted
Liens, will not create any claim, liability, mortgage, lien, pledge, condition,
charge or encumbrance upon any of the Assets.
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3.4 Governmental Licenses. Schedule 3.4 identifies certain FCC Licenses
used in the operation of the Stations and includes a complete list as of the
date of this Agreement of all main station, translator, microwave, low power
television and transmitting earth station licenses (collectively, "Material
Licenses") and the date on which each expires. Each Material License is in
full force and effect, and the Seller or in the case of the Material Licenses,
the applicable License Subsidiary listed on Schedule 3.4, is the authorized
legal holder thereof. Except as set forth on Schedule 3.4, the conduct of the
business and operations of each Station is in accordance with the Material
Licenses in all material respects.
Schedule 3.4 also sets forth a true and complete list as of the date of
this Agreement of any and all material pending applications filed with the FCC
by any License Subsidiaries relating to any Station, true and complete copies
of which have been delivered by Seller to Buyer. The FCC Licenses listed on
Schedule 3.4 constitute all of the licenses and authorizations required under
the Communications Act or the current rules, regulations, and policies of the
FCC for, and/or used in, the business and operation of all Stations as
currently operated, except as noted on Schedule 3.4. Except as set forth on
Schedule 3.14, and except for investigations or other proceedings affecting the
broadcasting industry generally, as of the date of this Agreement, Seller and
the License Subsidiaries have no knowledge of any pending or threatened
investigation, by or before the FCC, or any order to show cause, notice of
violation, notice of apparent liability, notice of forfeiture or complaint by,
before or with the FCC with respect to any Station that would be reasonably
expected to (a) impair or hinder the ability of Seller to perform its
obligations under this Agreement or (b) affect the business or operations of
such Station, in any material, adverse respect, nor do Seller or the License
Subsidiaries have knowledge that any of the foregoing is threatened. To
Seller's knowledge, as of the date of this Agreement, except as set forth on
Schedule 3.14 there are no facts, conditions or events relating to Seller, the
License Subsidiaries or any Station that would disqualify the License
Subsidiaries under the Communications Act or the existing rules, regulations
and policies of the FCC as assignor of the FCC Licenses as provided in this
Agreement or from consummating the transactions contemplated herein within the
times contemplated herein.
3.5 Real Property.
(a) Schedule 3.5 contains an accurate description as of the date of
this Agreement of all Real Property. Except as described on Schedule 3.5,
Seller has good and marketable fee simple title to all fee estates included in
the Real Property and good title to Seller's interests in all other Real
Property, in each case free and clear of all liens, security interests,
mortgages, pledges, encumbrances, or restrictions, except for Permitted Liens.
Seller has a valid leasehold interest in all leasehold Real Property listed as
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leased by Seller in Schedule 3.5. Schedule 3.5 lists all leases and subleases
pursuant to which any of the leasehold Real Property included in the Assets is
leased by Seller. Subject to obtaining the Consents, such leases are
assignable to Buyer. Seller is in compliance in all material respects with all
of the material provisions of such leases and subleases and is not in default
thereunder in any material respect, and to the knowledge of Seller, no other
party to any such lease or sublease is in default thereunder in any material
respect. There are no existing options or contracts to sell or assign any of
the Seller's interest in the owned Real Property or Seller's interest in the
leased Real Property, and there are no rights of first refusal outstanding with
respect to the owned Real Property or Seller's interest in the leased Real
Property.
(b) Seller has good and marketable title to all of the Real Property
owned by Seller and used in the operation of any Station, free and clear of all
liens of any nature whatsoever, except for Permitted Liens. Each of the leases
affecting the material leased Real Property is a legal, valid and binding
agreement of the Seller and, to the best of Seller's knowledge, of the other
parties thereto and is enforceable in accordance with its terms except as
limited by bankruptcy, insolvency, reorganization and similar laws affecting
the enforcement of creditors' rights or contractual obligations generally.
Seller's interest as tenant in the leased Real Property is free and clear of
all liens of any nature whatsoever, except for Permitted Liens. Seller has
made available or delivered to Buyer a true and complete copy of any surveys,
plans and maps in Seller's possession relating to the owned Real Property and
the leased Real Property. Except for Permitted Liens and as set forth in the
Schedules hereto, none of the owned Real Property or leased Real Property is
subject to any lease, sublease, license or other agreement in which Seller
grants to any other person any right to the use, occupancy or enjoyment of the
owned Real Property or the leased Real Property or any part thereof.
(c) As of the date of this Agreement, to Seller's knowledge, there
are (I) no actual, pending or threatened impositions or assessments for public
improvements with respect to any owned Real Property or leased Real Property
for which Seller would be liable, or which would be a lien on the owned Real
Property or leased Real Property, other than Permitted Liens, (ii) no
improvements constructed or planned that would be paid for by means of public
assessments upon any owned Real Property or leased Real Property for which
Seller would be liable, or which would be a lien on the owned Real Property or
leased Real Property, and (iii) no completed, pending, threatened or
contemplated condemnation proceeding affecting any owned Real Property or
leased Real Property or any part thereof or of any sale or any disposition of
any owned Real Property or any leased Real Property or any portion thereof in
lieu of condemnation.
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(d) On the Closing Date, no material asset used in any Station's
Business by Seller will be located on any real property not included in the
owned Real Property or leased Real Property, except for such portable or mobile
equipment as may be in use by, or under the control of, Station personnel at
other locations and except to the extent that removal of such asset would not
result in a material monetary liability or have a material adverse effect on
the business or operations of the Station.
(e) To Seller's knowledge, all buildings, towers and other
improvements owned by Seller included within the Real Property and any leased
Real Property are in working order for the purposes for which they are
currently used by Seller (ordinary wear and tear excepted).
(f) Each owned Real Property and each leased Real Property has
access to a public right of way or is otherwise reasonably accessible for
purposes of conducting the use of such Real Property as presently conducted.
The current use by Seller of the owned Real Property is in compliance with
applicable zoning and land-use laws, including, without limitation, the
applicable local comprehensive plan, except for noncompliance that would not
have a material adverse effect on the business or operations of any Station.
3.6 Tangible Personal Property. Schedule 3.6 lists as of the date hereof
all material items of Tangible Personal Property included in the Assets owned
by Seller. Except as described in Schedule 3.6, Seller owns and has good title
to the Tangible Personal Property listed thereon and none of the Tangible
Personal Property included in the Assets is subject to any liens, security
interests, mortgages, pledges, encumbrances, or restrictions, except for
Permitted Liens. The material tangible Assets owned by Seller necessary for
the normal operations of the Stations as presently conducted are in good
operating condition and adequate repair (given the age of such property and the
use to which such property is put and ordinary wear and tear excepted).
3.7 Assumed Contracts. Schedules 3.5, 3.7 and 3.13 include a complete
list as of the date of this Agreement of all Assumed Contracts except (a)
contracts with advertisers for production or the sale of advertising time on
any Station for cash that may be canceled by Seller on not more than ninety
days' notice, (b) oral employment contracts terminable at will, (c)
miscellaneous service contracts terminable on not more than thirty (30) days'
notice, and (d) other Contracts entered into in the ordinary course of
business, not involving liabilities exceeding Fifty Thousand Dollars ($50,000)
per contract and Three Hundred Seventy-Five Thousand Dollars ($375,000) in the
aggregate for all Stations for all such other contracts. Seller has delivered
or made available to Buyer true and complete copies of all written Assumed
Contracts and accurate descriptions of all oral Assumed Contracts listed on
Schedules 3.5, 3.7 and 3.13. Seller is not in default under any Assumed
Contract in any material respect and to the knowledge of Seller, no other party
to any such Assumed Contract is in default thereunder in any material respect.
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3.8 Intangibles. Schedule 3.8 is a complete list as of the date of this
Agreement of all material Intangibles (exclusive of Licenses listed in Schedule
3.4). Seller has provided or made available to Buyer copies of all documents
establishing or evidencing the Intangibles listed on Schedule 3.8. Other than
with respect to matters generally affecting the television broadcasting
industry and not particular to Seller, except as set forth on Schedule 3.8,
Seller has not received any notice or demand alleging that Seller is infringing
upon any trademarks, trade names, service marks, service names, copyrights or
similar intellectual property rights owned by any other Person.
3.9 Financial Statements. Seller has furnished Buyer with true and
complete copies of the audited financial statements of Seller with respect to
the Stations as at and for the fiscal year ended December 31, 1995, and an
unaudited balance sheet and statement of income with respect to the Stations as
at and for the eleven months ended November 30, 1996 (collectively, the
"Financial Statements"). Except as set forth on Schedule 3.9, the Financial
Statements have been prepared in accordance with generally accepted accounting
principles consistently applied, and present fairly in all material respects
the financial condition of Seller as at their respective dates and the results
of operations for the periods then ended, except that the unaudited financial
statements do not include footnotes or customary year-end adjustments.
3.10 Taxes and Tax Returns. Except as set forth on Schedule 3.10 and
except where the failure to file, pay or accrue any Taxes does not result in a
lien on the Assets or in the imposition of transferee or other liability on
Buyer for the payment of Taxes, (a) all Tax Returns have been filed with the
appropriate governmental agencies in all jurisdictions in which such Tax
Returns are required to be filed, and (b) all Taxes shown on such Tax Returns
have been properly accrued or paid to the extent such Taxes have become due.
There are no liens on any of the Assets in connection with any failure (or
alleged failure) to pay any Tax related to the Stations' Business.
3.11 Insurance. Schedule 3.11 is a true and complete list of all
insurance policies of Seller. All policies of insurance listed in Schedule
3.11 are in full force and effect as of the date of this Agreement.
3.12 Reports. All material returns, reports and statements that the
Stations are currently required to file with the FCC or Federal Aviation
Administration have been filed.
3.13 Personnel. Schedule 3.13 contains a true and complete list as of
the date of this Agreement of all employees of Seller engaged in the business
and operations of each Station (collectively, the "Employees"), and Seller has
provided Buyer with a description of all compensation arrangements affecting
them. Except (a) for oral employment contracts terminable at will, or (b) as
described in Schedule 3.13, Seller has no written or oral contracts of
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employment with any employee of the Stations. Except as set forth on Schedule
3.13, Seller is not a party to or subject to any collective bargaining
agreements with respect to the Stations, and no labor union or other collective
bargaining unit represents or, to Seller's knowledge, claims to represent any
of the employees of the Stations. Seller has made available to Buyer copies of
all employee handbooks and employee rules and regulations, if any. Seller has
delivered or made available to Buyer a true and complete list as of January 21,
1997, of the annual salary or wage rate and of the 1995 bonus for each employee
of Seller employed at the Stations as of such date.
3.14 Claims and Legal Actions. Except as disclosed on Schedule 3.14 and
for any FCC rulemaking proceedings generally affecting the television
broadcasting industry and not particular to Seller, as of the date hereof,
there is no claim, legal action, counterclaim, suit, arbitration, or other
legal, administrative, or tax proceeding, nor any order, decree, or judgment,
in progress or pending, or to the knowledge of Seller threatened, against
Seller, the Assets, or the business or operations of any Station which would be
reasonably expected, in any material, adverse respect, to (a) impair or hinder
the ability of Seller to perform its obligation under this Agreement or (b)
affect the business or operations of such Station.
3.15 Compliance with Laws. Seller (and in the case of the FCC Licenses
each of the License Subsidiaries) is in compliance in all material respects
with the Licenses and all federal, state and local laws, rules, regulations and
ordinances applicable or relating to the ownership and operation of each
Station, except for any noncompliance by Seller that would not have a material
adverse effect on the business or operations of such Station.
3.16 Conduct of Business in Ordinary Course. Except as set forth on
Schedule 3.16, from January 1, 1996 through the date of this Agreement, Seller
has conducted the business and operations of each Station in the ordinary
course and has not (a) made any material increase in compensation payable or to
become payable to any of the Employees of Seller other than in the ordinary
course of business and not exceeding seven percent (7%) per annum, or any
material change in personnel policies, insurance benefits or other compensation
arrangements affecting the Employees of Seller, (b) made any sale, assignment,
lease or other transfer of any of Seller's properties other than obsolete
assets no longer usable in the operation of such Station, or other assets sold
or disposed of in the normal course of business with suitable replacements
being obtained therefor, (c) incurred material loss of, or material injury to,
any of the Assets or waived any rights of substantial value, (d) mortgaged,
pledged or subjected to any lien any of its Assets, other than Permitted Liens,
(e) made any material change in any method of accounting or accounting
practice, (f) incurred any liability, except trade or business obligations or
liabilities incurred in the ordinary course of business, obligations under any
contracts or commitments made in the ordinary course of business, sales,
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income, franchise, ad valorem, severance and windfall profit taxes and
assessments accruing or becoming payable in the ordinary course of business,
and except as expressly permitted elsewhere in this Agreement; (g) entered into
any transaction other than in the ordinary course of business; (h) conducted
the business of any Station in any manner inconsistent in any material respect
with its past practices; (I) given any promise, assurance or guaranty of the
payment, discharge or fulfillment of any obligation of any other person or
entity; (j) sold or disposed of or otherwise divested themselves of the
ownership, possession, custody and control of any Station's books and records
of any material nature which, in accordance with sound business practices, are
retained for a period of time after their use, creation or receipt; or (k)
transferred to any Affiliate of Seller any right, property or interest which is
necessary or useful in the operation of any Station's Business.
3.17 Environmental Matters.
(a) For purposes of this Agreement, the following definitions shall
be applicable:
(i) "Applicable Environmental Laws" shall mean any and all laws,
statutes, regulations, and judicial interpretations thereof of the United
States, of any state in which the Assets, or any portion thereof, or the
business of any Station, are located, and of any other government or quasi-
government authority having jurisdiction, that relate to the prevention,
abatement and elimination of pollution and/or protection of the environment,
including, but not limited to, the federal Comprehensive Environmental
Response, Compensation, and Liability Act, the Resource Conservation and
Recovery Act, the Clean Water Act, the Clean Air Act, the Safe Drinking Water
Act, the Toxic Substances Control Act, and the Hazardous Materials
Transportation Act, together with all state statutes serving any similar or
related purposes, as in effect on or before the Closing Date.
(ii) "Hazardous Substance" means any substance now or hereafter
designated pursuant to Section 307(a) and 311(b)(2)(A) of the federal Clean
Water Act, 33 USCA Sections 1317(a), 1321(b)(2)(A), Section 112 of the federal
Clean Air Act, 42 USCA Section 3412, Section 3001 of the federal Resource
Conversation and Recovery Act, 42 USCA Section 6921, Section 7 of the federal
Toxic Substances Control Act, 15 USCA Section 2606, or Section 101(14) and
Section 102 of the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 USCA Sections 9601(14), 9602, as amended by the Superfund
Amendments and Reorganization Act of 1986.
(b) Seller has supplied to Buyer a copy of the report for each
environmental inspection or audit that Seller has caused to be conducted with
respect to any of the Assets as listed on Schedule 3.17.
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(c) (I) Since the date of their acquisition by Seller, the Assets
have been used by Seller for their current business operations and for no other
purposes and at no time during that period have the Assets been used by the
Seller for the manufacture, treatment, storage or disposal of Hazardous
Substances or as a landfill or other solid or hazardous waste disposal site.
Seller has no knowledge that prior to their acquisition of the Assets the
Assets were used for the manufacture, treatment, storage or disposal of
Hazardous Substances or as a landfill or other solid or hazardous waste
disposal site.
(ii) Except as set forth in Schedule 3.17, there are no
underground storage tanks on the Real Property owned by Seller and to Seller's
knowledge, on any Real Property leased by Seller, and any removal by Seller of
any underground storage tanks which existed on the owned Real Property and, to
the best of Seller's knowledge, on any leased Real Property was pursuant to and
in compliance with the Applicable Environmental Laws except for any
noncompliance that would not have a material adverse effect on the business or
operations of any Station.
(iii) Except as set forth on Schedule 3.17, to Seller's
knowledge the improvements owned or used by Seller on the owned Real Property
and on the leased Real Property do not contain any asbestos that would
constitute a violation of or noncompliance with any Applicable Environmental
law except for any violation or noncompliance that would not have a material
adverse effect on the business or operations of any Station. To Seller's
knowledge, the equipment owned or used by Seller on the owned Real Property or
any leased Real Property do not contain any polychlorinated biphenyls that
would constitute a violation of or noncompliance with any Applicable
Environmental law except for any violation or noncompliance that would not have
a material adverse effect on the business or operations of any Station.
(iv) To Seller's knowledge, no contamination caused by Seller
exists on or under the owned Real Property or on or under any leased Real
Property, or affecting any natural resources therein that would constitute a
violation of or noncompliance with any Applicable Environmental Law except for
any noncompliance that would not have a material adverse effect on the business
or operations of any Station.
(v) Seller has no knowledge of any contamination caused by
Seller on or under the owned Real Property or leased Real Property, or
affecting any natural resources therein that would constitute a violation of or
noncompliance with any Applicable Environmental law except for any violation or
noncompliance that would not have a material adverse effect on the business or
operations of any Station.
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(vi) To Seller's knowledge, the Assets and the Stations'
Businesses are in compliance with all Applicable Environmental Laws except for
any noncompliance that would not have a material adverse effect on the business
or operations of any Station.
(vii) Except as set forth on Schedule 3.17, as of the date
hereof, there are no agreements, consent orders, decrees, judgments, license or
permit conditions, or other directives of government authorities directed to
Seller that are based on or arise out of Applicable Environmental Laws and
relate to the future use of the Assets or any Station's Business or that
require any material change in the present conditions of the Assets or of any
Station's Business.
(viii) To Seller's knowledge, Seller has given to pertinent
government authorities all notices required pursuant to Applicable
Environmental Laws in connection with all Stations' Businesses. Except as
listed on Schedule 3.17, Seller has not prior to the date hereof received any
order or notice of violation or noncompliance from, or been the subject of any
regulatory audit or investigation (other than any periodic investigation or
inspection of a routine nature) by, any government authority in connection with
ownership or operation of any Station's Business.
(ix) To Seller's knowledge, no consent or approval is needed
from any government authority under any Applicable Environmental Laws for the
transfer of the Assets from Seller to Buyer. To Seller's knowledge, neither
the execution of this Agreement nor the closing of the transactions
contemplated hereby will materially violate any Applicable Environmental Laws.
(x) To Seller's knowledge, all necessary plans for material
development, applications, inspection reports, certificates and other
instruments required under Applicable Environmental Laws to be filed by Seller
in connection with the conduct of any Station's Business have been filed with
the appropriate government authority and all permits, licenses, or other
authorizations necessary for the lawful conduct of those businesses in
compliance with all Applicable Environmental Laws have been obtained, have not
been revoked, and are in full force and effect except for any noncompliance
that would not have a material adverse effect on the business or operations of
any Station.
3.18 Brokers. Except for the fees payable to Goldman, Sachs & Co., which
fees shall be paid by Seller, neither Seller nor any person or entity acting on
its behalf has incurred any liability for any finders' or brokers' fees or
commissions in connection with the transactions contemplated by this Agreement.
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3.19 Transactions With Affiliates. Except as set forth in Schedule 3.19,
Seller is not now, and since January 1, 1996, has not been a party, directly or
indirectly, to any contract, lease, arrangement or transaction which is
material to the business or operations of any Station, whether for the
purchase, lease or sale of property, for the rendition of services or
otherwise, with any affiliate of Seller, or any officer, director, employee,
proprietor, partner or shareholder of Seller and no such person has any
interest in or right to any of the Assets. The terms and conditions of the
transactions involving Seller and any affiliate of Seller which are identified
on Schedule 3.19 are described briefly therein.
3.20 Assets. Except for the Excluded Assets, the Assets include all of
the assets or property necessary for the lawful conduct of the business of the
Stations as presently operated.
3.21 Employee Benefits. Schedule 3.21 lists all Employee Plans and
except as set forth on Schedule 3.21, copies of such Employee Plans together
with any trusts related thereto have previously been made available to Buyer.
All Employee Plans are in material compliance with their terms and with all
applicable provisions of ERISA and the Code. No Employee Plan is, or within
the past six years has been, subject to Title IV of ERISA or Section 412 of the
Code. Seller has not engaged in any, and with respect to each Employee Plan
Seller has no actual knowledge of any, non-exempt prohibited transaction (as
defined in Code Section 4975 or ERISA Section 406) involving any Employee Plan
which would subject Seller to any material penalty or tax imposed under Code
Section 4975 or ERISA Section 502(i). Seller has at no time contributed to, or
been obligated to contribute to any multiemployer plan (as defined in ERISA
Section 3(37)). Seller has not engaged in any transaction described in ERISA
Section 4069 within the past five years. Seller is not aware of the existence
of any governmental audit or examination of any Employee Plan or of any facts
which would lead Seller to believe that any such audit or examination is
pending or threatened. There exists no action suit or claim (other than
routine claims for benefits) with respect to any Employee Plan pending, or to
the knowledge of Seller threatened, against any Employee Plan which is
reasonably expected to result in any material liability to Seller. Except as
required by ERISA Sections 601 et seq. and Code Section 4980B, Seller does not
sponsor, maintain or contribute to any Employee Plan which provides medical
coverage to retirees or other former employees of Seller. All contributions
and premium payments for periods prior to the Closing will have been made to
each Employee Plan on or before the Closing (or will have been accrued on the
Closing balance sheet). Each Employee Plan that is intended to be qualified
under Section 401(a) of the Internal Revenue Code has received a favorable
determination letter that it is so qualified. The closing of the transactions
contemplated by this Agreement will not result in payments to any Assumed
Employee under the First Media Television, L.P. Severance Pay Plan; provided,
however, that any such payments that are due and payable as a result of actions
taken by Buyer on or after the Closing Date shall be the sole responsibility of
Buyer.
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3.22 Ownership of Assets. As of the Closing Date, Seller will own or
lease all assets or their replacements used in or for the operation of any
Station in the manner operated by Seller on the date hereof.
3.23 Foreign Person. Seller is not a "foreign person" or a "foreign
corporation" as such terms are defined in Section 1445 of the Internal Revenue
Code of 1986, as amended.
3.24 Disclosure. No representations or warranties by Seller in this
Agreement, in the Schedules hereto or any other document referenced in the
representations and warranties of Seller hereunder as having been provided to
Buyer pursuant to such representations or warranties or delivered pursuant to
the covenants of Seller hereunder, contains or will contain any untrue or
misleading statement of material fact or omits or will omit to state any
material fact necessary to make the statements herein or therein, in light of
the circumstances under which they were made, not misleading.
3.25 Bankruptcy. No insolvency proceedings of any character, including
without limitation, bankruptcy, receivership, reorganization, composition or
arrangement with creditors, voluntary or involuntary, affecting Seller are
pending or, to Seller's knowledge, threatened, and Seller has not made any
assignment for the benefit of creditors or taken any action in contemplation
of, or which would constitute the basis for, the institution of such insolvency
proceedings.
3.26 Ownership of License Subsidiaries. Seller and First Media, L.P. are
the only partners in the License Subsidiaries. Seller owns a 99.9% general
partnership interest in each of the License Subsidiaries, and Seller's general
partner, First Media, L.P. owns a .1% general partnership interest in each of
the License Subsidiaries.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 Organization, Standing and Authority. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Iowa and, on the Closing Date, will be duly qualified to conduct business in
each jurisdiction in which such qualification is necessary for Buyer to own the
Assets and operate the Stations. Buyer has the requisite corporate power and
authority to (a) execute, deliver and perform this Agreement and the documents
contemplated hereby according to their respective terms, and (b) own the
Assets.
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4.2 Authorization and Binding Obligation. The execution, delivery and
performance of this Agreement and the documents contemplated hereby, and the
consummation of the transactions contemplated hereby and thereby, by Buyer have
been duly and validly authorized by all necessary corporate action on the part
of Buyer. This Agreement has been duly executed and delivered by Buyer and
constitutes a legal, valid and binding obligation of Buyer, enforceable against
Buyer in accordance with its terms except as the enforceability of this
Agreement may be affected by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and by judicial discretion in the enforcement of
equitable remedies.
4.3 Absence of Conflicting Agreements and Required Consents. Except for
applicable requirements of the HSR Act and subject to the receipt of the FCC
Consent, the execution, delivery and performance by Buyer of this Agreement and
the documents contemplated hereby (with or without the giving of notice, the
lapse of time, or both): (a) do not require the consent of any third party;
(b) will not conflict with the Articles of Incorporation or Bylaws of Buyer;
(c) will not conflict in any material respect with, result in a material breach
of, or constitute a material default under, any applicable law, judgment,
order, ordinance, injunction, decree, rule, regulation, or ruling of any court
or governmental authority applicable to Buyer or any material contract or
agreement to which Buyer is a party or by which Buyer may be bound.
4.4 Buyer Qualifications. Buyer is the licensee of WOFL and WOGX,
neither of which can, absent waiver, be under common ownership with the Florida
Station under 47 C.F.R. Section 73.3555. The provisions of Sections 6.1(c) and
7.2(g) apply to the disposition of such ownership interests. Except for such
ownership interests, Buyer is legally, financially and otherwise qualified to
be the licensee of, acquire, own and operate each of the Stations under the
Communications Act, and the rules, regulations and policies of the FCC. Except
as described above, Buyer knows of no fact that would, under existing law and
the existing rules, regulations, policies and procedures of the FCC (a)
disqualify Buyer as an assignee of the FCC Licenses or as the owner and
operator of any Station or (b) cause the FCC to fail to approve in a timely
fashion any of the applications for FCC Consent. Subject to the provisions of
Sections 6.1 and 7.2(g) hereof, no waiver of any FCC rule or policy is
necessary to be obtained for the grant of the applications for the assignment
of the FCC Licenses to Buyer, nor will processing pursuant to any exception to
a rule of general applicability be requested or required in connection with the
consummation of the transaction contemplated hereby.
4.5 Brokers. Neither Buyer nor any person or entity acting on its behalf
has incurred any liability for any finders' or brokers' fees or commissions in
connection with the transactions contemplated by this Agreement.
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4.6 Availability of Funds. Buyer will have available on the Closing Date
sufficient funds to enable it to consummate the transactions contemplated
hereby.
SECTION 5. OPERATIONS OF THE STATIONS PRIOR TO CLOSING
Between the date of this Agreement and the Closing Date:
5.1 Generally. Seller shall operate the Stations in all material
respects in the ordinary course of business (except where such conduct would
conflict with the following covenants or with Seller's other obligations under
this Agreement). Seller shall maintain and repair Station facilities and
equipment, maintain inventory of supplies, parts and other materials and keep
books of account, records, and files, in each case in the ordinary course of
business consistent with past practice to the extent commercially reasonable if
Seller were continuing to own and operate the Stations. Seller shall continue
to operate each Station in accordance with the terms of its FCC Licenses in all
material respects and in compliance in all material respects with all
applicable laws and FCC rules and regulations. Except where such failures
would not cause a material adverse effect on the business or operations of the
Stations, Seller will cause the License Subsidiaries to execute and file
promptly all necessary applications for renewal of the FCC Licenses, and timely
file with the FCC all required reports and pay all required annual regulatory
fees for the operation of each Station. Seller will deliver to Buyer, within
ten (10) business days after filing, copies of any reports, applications or
responses to the FCC related to any Station which are filed between the date of
this Agreement and the Closing Date.
Prior to the Closing Date, except as otherwise permitted by any provision
of this Section, Seller, or the License Subsidiaries, as applicable, will not,
without the prior written consent of Buyer, which shall not be unreasonably
withheld:
(a) except in the ordinary course of business, enter into, renew,
renegotiate, modify, amend, or terminate any time sales contracts for cash that
may be canceled on not more than ninety days' notice or production contracts
with respect to any Station or incur any receivables;
(b) enter into, renew, amend or modify any contract, license or
other agreement under which Seller is authorized to broadcast programming on
any Station unless any such contract, license or other agreement or renewal,
amendment or modification thereof, as applicable, will be and is fully
performed and satisfied by Seller prior to the Closing Date or unless Seller
delivers to Buyer its agreement that such contract, license or other agreement
or renewal, amendment or modification thereof, as applicable, will not be an
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Assumed Contract hereunder, or enter into, renew, amend or modify any program
barter transaction which requires the furnishing of advertising time on either
station or any payments at any time on or after the Closing Date for
programming broadcast before the Closing Date;
(c) apply to the FCC for any construction permit that would restrict
any Station's present operations, or make any material change in any Station's
buildings, leasehold improvements, or fixtures that is not in the ordinary
course of business;
(d) except as set forth on Schedule 5.1, enter into, renew, amend or
modify any contract, lease, license or other agreement unless any such document
requires the payment by or on behalf of any Station of consideration consisting
of no more than $10,000 individually and will be subject to termination on
thirty (30) days notice or be fully performed and satisfied prior to the one
(1) year anniversary thereof;
(e) make any assignment for the benefit of creditors or take any
action in contemplation of, or which would constitute the basis for, the
institution of insolvency proceedings of any character, including without
limitation, bankruptcy, receivership, reorganization, composition or
arrangement with creditors, voluntary or involuntary;
(f) enter into, renew, amend or modify any trade agreement that is
not to be fully performed by the Closing Date;
(g) enter into any new lease agreements for space on any Station's
broadcast tower;
(h) take or permit any entity under its control to take any actions
that would result in the Assets or the business of any Station being in
violation of any Applicable Environmental Laws, nor will Seller omit to take
any action necessary to prevent the Assets or the business of any Station from
violating the Applicable Environmental Laws, except for such actions or
omissions that would not have a material adverse effect on the business or
operations of the Stations;
(I) collect the accounts receivable in a manner inconsistent with
past practices; or
(j) except as required by law or existing contract, in which case
such agreements and contracts shall be assumed by Buyer and treated as Assumed
Liabilities hereunder, (I) hire any employee except in the ordinary course of
business, (ii) enter into, renew, amend or modify any contract of employment,
collective bargaining agreement or other labor contract or (iii) permit any
increases in the compensation of any of the employees of any Station except for
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annual salary increases not exceeding seven percent (7%) of previously paid
compensation; provided, however, that Seller may pay bonuses to any of its
employees so long as such bonuses do not create a binding obligation upon Buyer
after the Closing Date.
Whenever, pursuant to subsections (a) through (j) above, Seller shall
request the consent of Buyer, the request shall be sent in writing via
facsimile to Buyer in accordance with Section 11.2. With respect to requests
under Section 5.1(b), unless Buyer gives or denies its written consent by the
end of the fifth business day after the request for consent is transmitted to
Buyer, Buyer's written consent will be presumed to have been given as of that
deadline; and, with respect to any other requests under Section 5.1, unless
Buyer gives or denies its written consent by the end of the second business day
after the request for consent is transmitted to Buyer, Buyer's written consent
will be presumed to have been given as of that deadline.
5.2 Goodwill; Expenditures. Seller will use its commercially reasonable
efforts to preserve the goodwill of each Station and shall make expenditures
for promotion of each Station in the ordinary course of business consistent
with past practices and substantially in accordance with Schedule 5.1 to the
extent that taking such actions in connection with making such expenditures
pursuant to Schedule 5.1 is within the control of Seller and to the extent
commercially reasonable if Seller were continuing to own and operate the
Stations. Seller will negotiate and enter into retransmission consent
agreements in the ordinary course of business.
5.3 Dispositions. Seller shall not sell, assign, lease, or otherwise
transfer or dispose of any of the Assets, except where no longer used in the
business or operations of any Station or in connection with the acquisition of
replacement property of equivalent kind and use. Notwithstanding the foregoing
or anything else contained in the Agreement, the expiration by their terms of
contracts prior to the Closing shall not be deemed to be a violation of this
Agreement.
5.4 Encumbrances. Seller shall not create, assume or permit to exist any
liens, security interests, mortgages, pledges, encumbrances, or restrictions
upon any of the Assets, including, but not limited to, the Real Property and
leased Real Property, except for Permitted Liens and liens that will be
discharged prior to or on the Closing Date.
5.5 Access to Information. Seller shall give Buyer and its employees and
other authorized representatives during normal business hours and with
reasonable prior notice, access to the Assets and to all other books, records,
and documents of Seller relating to the Stations for the purpose of audit and
inspection, including for purposes of conducting title searches and/or
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environmental assessments, and will furnish or cause to be furnished to Buyer
or its authorized representatives, upon reasonable notice, all information with
respect to the business and operation of the Stations that Buyer may reasonably
request.
5.6 Insurance. Seller shall maintain the existing insurance policies on
the Assets or other policies providing substantially similar coverages.
5.7 [Intentionally Omitted].
5.8 Financial Information. Seller shall furnish Buyer (I) within three
business days after completion thereof, copies of the audited financial
statements of Seller with respect to the Stations for the fiscal year ended
December 31, 1996, and (ii) within thirty days after the end of each month
ending between the date of this Agreement and the Closing Date an unaudited
statement of income and expense for such month and such other financial
information prepared by Seller, as Buyer may reasonably request.
5.9 Representations and Warranties. Seller shall give detailed written
notice to Buyer promptly upon learning of the occurrence of any event that
would cause or constitute a material breach by Seller, or would have caused a
material breach by Seller had such event occurred or been known to Buyer prior
to the date hereof, of any representations or warranties of Seller contained in
this Agreement or in any Schedule referred to herein.
5.10 Notice of Proceedings. Seller and Buyer will promptly notify the
other in writing upon becoming aware of any order or decree or any complaint
praying for an order or decree restraining or enjoining the consummation of
this Agreement or the transactions contemplated hereunder, or upon receiving
any notice from any court or government authority of its intention to institute
an investigation into, or institute a suit or proceeding to restrain or enjoin
the consummation of this agreement or such transactions, or to nullify or
render ineffective this Agreement or such transactions if consummated. Seller
and Buyer will each use commercially reasonable efforts to contest, defend and
resolve any such suit, proceeding or injunction brought against it, and to
cause any temporary restraining order or preliminary injunction against such
consummation to be lifted, promptly, so as to permit the consummation of the
transactions contemplated hereby. Seller will notify Buyer promptly of any
material action filed or threatened against any Station or relating to any
Station's Business or the Assets.
5.11 Notice of Certain Developments. Seller shall give prompt written
notice to Buyer (a) if the Assets shall have suffered damage on account of
fire, explosion or other cause of any nature which is sufficient to prevent
operation of any Station for four (4) continuous hours or more, (b) if the
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regular broadcast transmission of any Station in the normal and usual manner in
which it heretofore has been operating is interrupted for a period of four (4)
continuous hours or more, or (c) if Seller receives notice of termination of
any material agreement affecting any leased Real Property.
SECTION 6. SPECIAL COVENANTS AND AGREEMENTS
6.1 FCC Consent.
(a) The purchase and sale of the Assets as contemplated by this
Agreement is subject to the prior consent and approval of the FCC.
(b) Seller shall (and/or Seller shall cause its License Subsidiaries
to), and Buyer shall, prepare and within ten business days after the date of
this Agreement file with the FCC appropriate applications for FCC Consent. The
parties shall thereafter prosecute each application with commercially
reasonable diligence and otherwise use their commercially reasonable efforts to
obtain the grants of the applications as expeditiously as practicable. Each
party will promptly provide to the other party a copy of any pleading, order or
other document served on them relating to such applications.
(c) Buyer will at Closing be legally, financially and otherwise
qualified to be the licensee of, acquire, own and operate each of the Stations
under the Communications Act, and the rules, regulations and policies of the
FCC. Buyer hereby agrees that it will: (1) use diligent efforts to divest the
assets of WOFL and WOGX to a qualified third party on or before the Closing
Date; and (2) on or before the date of filing the application referred to in
Section 6.1(b) with respect to the Florida Station, select a trustee for the
WOFL/WOGX Trust, negotiate a WOFL/WOGX Trust Agreement substantially in the
form attached hereto as Exhibit 6.1, without any modifications inconsistent
with applicable governmental requirements, and file an application for FCC
consent to assign the licenses of WOFL and WOGX to the proposed trustee of the
WOFL/WOGX Trust. Upon executing a definitive agreement prior to the Closing
Date to sell the assets of WOFL and WOGX to a third party, Buyer shall promptly
file an application for FCC consent to assign the licenses of WOFL and WOGX to
such third party, provided that Buyer shall continue to prosecute the
application for FCC consent with respect to the WOFL/WOGX Trust. In the event
FCC rules or procedures allow Buyer to prosecute only one of such applications,
Buyer shall prosecute the trust application. In the event Buyer has not
divested the assets of WOFL and WOGX to a third party on or before the Closing
Date, Buyer will transfer the assets of WOFL and WOGX on or before the Closing
Date to the WOFL/WOGX Trust, and thereafter Buyer will take all steps necessary
or appropriate to ensure that the trustee of the WOFL/WOGX Trust files an
application for consent to assign the licenses of WOFL and WOGX to a third
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party within six (6) months of the Closing Date. Buyer further agrees that it
will not seek a waiver of 47 C.F.R. Section 73.3555 with respect to the
proposed contour overlap between WOFL or WOGX and the Florida Station and that
it will diligently prosecute the WOFL and WOGX license renewal applications.
(d) Each party agrees to comply with any condition imposed on it by
any FCC Consent, except that no party shall be required to comply with a
condition if (1) the condition was imposed on it as the result of a
circumstance the existence of which does not constitute a breach by that party
of any of its representations, warranties or covenants hereunder, and (2)
compliance with the condition would have a material adverse effect upon it.
Notwithstanding the foregoing, Buyer agrees to accept a condition requiring
that the licenses for WOFL and WOGX be transferred to a third party or to the
WOFL/WOGX Trust as of the Closing Date and, to the extent transferred to the
WOFL/WOGX Trust, that the trustee of the WOFL/WOGX Trust must file an
application for consent to assign the licenses for WOFL and WOGX to a third
party within six (6) months of the Closing Date. Buyer and Seller shall oppose
any petitions to deny or other objections filed with respect to the application
for any FCC Consent and any requests for reconsideration or review of any FCC
Consent.
(e) If the Closing shall not have occurred for any reason within the
original effective period of any FCC Consent, and neither party shall have
terminated this Agreement under Section 9, the parties shall jointly request an
extension of the effective period of such FCC Consent. No extension of the
effective period of any FCC Consent shall limit the exercise by either party of
its right to terminate the Agreement under Section 9.
6.2 Certain Leases. Seller agrees to cause each of the leases relating
to the assets described in Schedule 6.2 to be terminated ("Certain Leased
Assets") relating thereto to be included in the Assets transferred to Buyer on
the Closing Date.
6.3 HSR Act Filing. Seller and Buyer agree to (a) file, or cause to be
filed, with the U.S. Department of Justice ("DOJ") and Federal Trade Commission
("FTC") all filings, if any, that are required in connection with the
transactions contemplated hereby under the HSR Act within ten business days of
the date of this Agreement; (b) submit to the other party, prior to filing,
their respective HSR Act filings to be made hereunder and to discuss with the
other any comments the reviewing party may have; (c) cooperate with each other
in connection with such HSR Act filings, which cooperation shall include
furnishing the other with any information or documents that may be reasonably
required in connection with such filings; (d) promptly file, after any request
by the FTC or DOJ and after appropriate negotiation with the FTC or DOJ of the
scope of such request, any information or documents requested by the FTC or
DOJ; (e) furnish each other with any correspondence from or to, and notify each
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other of any other communications with, the FTC or DOJ that relates to the
transactions contemplated hereunder, and to the extent practicable, to permit
each other to participate in any conferences with the FTC or DOJ; and (f)
consistent with Section 6.1(c), enter into reasonable stipulations, consent
orders, or other agreements reasonably requested by the FTC or DOJ to ensure
approval of the transaction.
6.4 Confidentiality.
(a) Each party will not use or disclose to third parties (except as
may be necessary for the consummation of the transactions contemplated hereby,
or as required by law, including, without limitation, in connection with legal
proceedings relating to this Agreement and the transactions contemplated
hereby, or otherwise pursuant to subpoena or the request of a governmental
authority, and then only with prior notice to the other parties hereto,
including delivery of a copy of the subpoena or request, if applicable) this
Agreement or any information (including, without limitation, financial
information and information regarding program contracts and revenue) received
from the other parties hereto or their agents in the course of investigating,
negotiating and performing the transactions contemplated by this Agreement;
provided, however, that each party may disclose such information to such
party's officers, directors, employees, lenders, advisors, attorneys and
accountants who need to know such information in connection with the
consummation of the transactions contemplated by this Agreement and who are
informed by such party of the confidential nature of such information. Nothing
shall be deemed to be confidential information that: (1) is already in such
party's possession, provided that such information is not known by such party
to be subject to another confidentiality agreement with or other obligation of
secrecy to the other party hereto or another party, or (2) becomes generally
available to the public other than as a result of a disclosure by such party or
such party's officers, directors, employees, lenders, advisors, attorneys or
accountants, or (3) becomes available to such party on a non-confidential basis
from a source other than the other party hereto or its advisors, provided that
such source is not known by such party to be bound by a confidentiality
agreement with or other obligation of secrecy to the other party hereto or
another party, or (4) is developed independently by either party without resort
to the confidential information of the other party. In the event this
Agreement is terminated and the purchase and sale contemplated hereby
abandoned, Buyer will return to Seller all copies of documents, work papers and
other written confidential material obtained by Buyer in connection with the
transactions contemplated hereby. If this Agreement is terminated, each party
will return to the other party all information (including all documents, work
papers and other written confidential material) obtained by the such party from
any other party in connection with the transactions contemplated by this
Agreement.
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(b) No party shall publish any press release or make any other
public announcement concerning this Agreement or the transactions contemplated
hereby without the prior written consent of each other party, which shall not
be withheld unreasonably; provided, however, that nothing contained in this
Agreement shall prevent any party, after notification to each other party, from
making any filings with governmental authorities that, in its judgment, may be
required or advisable in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
6.5 Cooperation.
Buyer and Seller shall cooperate fully with each other and their
respective counsel and accountants in connection with any actions required to
be taken as part of their respective obligations under this Agreement, and
Buyer and Seller shall execute such other documents as may be necessary or
desirable to obtain such Consents, desirable to the implementation and
consummation of this Agreement, and otherwise use their commercially reasonable
efforts to consummate the transaction contemplated hereby and to fulfill their
obligations under this Agreement. Seller and Buyer shall each diligently make,
and cooperate with the other in making, all commercially reasonable efforts to
obtain or cause to be obtained prior to the Closing Date (a) all Consents
without any change in the terms or conditions of any Assumed Contract or
License that could reasonably be expected to be materially less advantageous to
Buyer than those pertaining under the Assumed Contract or License as in effect
on the date of this Agreement and (b) estoppel certificates, in customary form
reasonably satisfactory to Buyer and Seller, relating to the Real Property
leased to Seller. Seller shall promptly advise Buyer of any difficulties
experienced in obtaining any of the Consents and of any conditions proposed,
considered, or requested for any of the Consents. Buyer agrees to use all
commercially reasonable efforts to assist Seller in obtaining such Consents and
such estoppel certificates, and to take all commercially reasonable actions
necessary or desirable to obtain such Consents and such estoppel certificates,
including without limitation, executing such assumption instruments and other
documents as may be required in connection with obtaining the Consents and the
estoppel certificates. Seller will cooperate with Buyer in Buyer's efforts to
obtain title policies relating to the Real Property.
6.6 Control of the Stations. Prior to Closing, Buyer shall not, directly
or indirectly, control, supervise or direct, or attempt to control, supervise
or direct, the operations of any Station; those operations, including complete
control and supervision of all of each Station's programs, employees and
policies, shall be the sole responsibility of Seller and the License
Subsidiaries.
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6.7 Accounts Receivable.
(a) At the Closing, Seller will designate Buyer as its agent solely
for the purposes of collecting the Accounts Receivable. Buyer will collect the
Accounts Receivable during the period beginning on the Closing Date and ending
on the 180th day after the Closing Date (the "Collection Period") with the same
care and diligence Buyer uses with respect to its own accounts receivable.
Buyer shall not make any referral or compromise of any of the Accounts
Receivable to a collection agency or attorney for collection and shall not
settle or adjust the amount of any of the Accounts Receivable without the
written approval of Seller. If Buyer receives monies from an account debtor of
Buyer that is also an account debtor of Seller with respect to any Accounts
Receivable, Buyer shall credit the sums received to the oldest account due,
unless there is a good faith dispute with respect to either account and the
account debtor specifically identifies the invoice being paid, in which case
any payment by such account debtor shall be applied in accordance with any
remittance advice or instructions from account debtor; provided, however, that
to the extent any amount in excess of the amount of such invoice is received,
Buyer shall credit such amounts received to the oldest account due.
(b) On or before the fifth business day after the end of each full
calendar month during the Collection Period, Buyer shall deliver to Seller a
list of the amounts collected by Buyer before the end of such month with
respect to the Accounts Receivable. On or before the fifth business day after
the end of the Collection Period, Buyer shall deliver to Seller a list of all
of the Accounts Receivable that remain uncollected.
(c) Seller shall establish and maintain during the Collection Period
(and for as long after the Collection Period as Seller deems appropriate) a
bank account at a commercial bank in Union Bank of California, N.A. for the
deposit of collections of the Accounts Receivable. Seller shall have sole
disbursement authority over each such bank account. Within five business days
after collecting any amounts with respect to any of the Accounts Receivable,
Buyer shall cause the amount collected to be deposited in the appropriate bank
account established by Seller pursuant to this Section 6.7(c).
(d) After the expiration of the Collection Period, Buyer shall have
no further obligation hereunder other than (1) so long as Seller continues to
maintain the bank account established pursuant to Section 6.7(c), to deposit in
such account any payments with respect to any of the Accounts Receivable that
Buyer subsequently receives, and (2) thereafter, to remit directly to Seller
any payments with respect to any of the Accounts Receivable that Buyer
subsequently receives.
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(e) Any Accounts Receivable remaining uncollected 180 days after the
Closing Date shall be transferred to Seller, together with all files concerning
the collection or attempt to collect such Accounts Receivable hereunder, and
Buyer shall thereafter have no further responsibility with respect thereto.
(f) Buyer shall have no right to set-off any amounts collected for
Accounts Receivable against any amounts owed to Buyer by Seller.
6.8 Access to Books and Records. Seller shall provide Buyer access and
the right to copy for a period of seven years from the Closing Date any books
and records relating to the Assets but not included in the Assets. Buyer shall
provide Seller access and the right to copy for a period of seven years after
the Closing Date any books and records relating to the Assets that are included
in the Assets.
6.9 Employee Matters. The following provisions shall act exclusively for
the benefit of the parties to this Agreement and not for the benefit of any
other person or entity:
(a) Effective as of the Closing Date, Buyer shall offer employment
to each employee of Seller who is actively employed at any Station immediately
prior to the Closing Date (collectively, the "Assumed Employees"); provided
that nothing herein shall require Buyer to continue the employment of any such
person for any period of time thereafter. Except as otherwise provided in this
Section 6.9 or as any employment agreement between Buyer and any Assumed
Employee may otherwise require, the Buyer shall offer employment to the Assumed
Employees at compensation levels that are substantially similar in the
aggregate for each such Assumed Employee to the compensation levels of Seller's
employees as of the Closing Date as described on a list to be delivered to
Buyer on or prior to the Closing Date. Buyer shall assume all contracts of
employment of the Assumed Employees listed on Schedule 3.13 and notwithstanding
anything in the foregoing to the contrary, to the extent such employment
contract or collective bargaining agreement assumed hereunder provides for
terms and conditions in addition to those referenced in the preceding sentence,
Buyer shall assume the terms thereof. Each Assumed Employee shall receive
credit for past service with the Stations, to the extent credited by the Seller
as of the Closing Date, for all purposes under Buyer's benefits plans;
provided, however, that Buyer shall not be required to provide any Assumed
Employee with credit for service with the Seller for purposes of benefit
accrual under any 401(k), defined benefit pension plan, and post-retirement
benefit plan sponsored or maintained by Buyer.
(b) Subject to the last sentence of this Section 6.9(b), Buyer shall
offer and provide and shall assume full responsibility and liability for
offering and providing health plan coverage that is substantially similar in
the aggregate to the coverage provided under the First Media Television, L.P.
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Group Health Plan as of the Closing Date for the period required under Code
Section 4980B to: (i) any "Qualified Beneficiary" who is covered by a "Group
Health Plan" sponsored or contributed to by Seller or any entity required to be
combined with Seller (within the meaning of Sections 414(b) or (c) of the Code)
who has experienced a "Qualifying Event" or is receiving "Continuation
Coverage" on or prior to the Closing Date, and (ii) the employees of Seller
(and their eligible dependents) not employed at any Station whose employment
with Seller is terminated on or before the Closing Date as a result of Seller's
entering into this Agreement. Buyer shall offer and provide such coverage
effective as of the Closing Date without regard to any limitation on Seller's
obligation to provide such coverage by reason of Seller's termination of any
Group Health Plan on or after the Closing Date, and shall provide such health
plan coverage without imposing any eligibility period or preexisting condition
limitations. Buyer shall also credit all of the payments made by the persons
described in this Section 6.9(b) who accept health plan coverage from Buyer
toward deductible and co-payment obligation limits under Seller's health care
plans for the plan year which includes the Closing Date as if such payments had
been made under the plan offered by Buyer during such plan year. "Continuation
Coverage," "Qualified Beneficiary," "Qualifying Event" and "Group Health Plan"
all shall have the meanings given such terms under Section 4980B of the Code
and Section 601 et seq. of ERISA. Notwithstanding the foregoing, Buyer shall
assume the responsibility for offering and the liability for providing the
group health plan coverage described in this Section 6.9(b) only to the extent
such coverage may be provided by Buyer in a manner which does not adversely
affect Buyer; provided that, following the date of this Agreement and prior to
the last Closing Date, Buyer shall cooperate with Seller and use commercially
reasonable efforts to assume Seller's group health plan or amend Buyer's group
health plan in a manner which will permit Buyer to provide such group health
plan coverage and which does not adversely affect Buyer.
(c) Buyer shall offer health plan coverage to all Assumed Employees
and their eligible dependents either under the terms and conditions generally
applicable to Buyer's employees as of the Closing Date or, if Buyer continues
Seller's group health plan, under terms and conditions generally applicable to
Assumed Employees and their eligible dependents on or before the Closing Date;
provided, however, that Buyer must provide notice to the Seller no less than 60
days prior to the Closing Date of its intent to assume Seller's group health
plan. In the event Buyer offers the Assumed Employees and their eligible
dependents health plan coverage under the terms of its plan, and does not
continue Seller's plan, Buyer shall waive all preexisting condition limitations
for all Assumed Employees and their eligible dependents covered by Seller's
group health plan as of the Closing Date and shall provide such health care
coverage effective as of the Closing Date without the application of any
eligibility period for coverage. In addition, Buyer shall credit all employee
or dependent payments toward deductible and co-payment obligations limits under
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Seller's health care plans for the plan year which includes the Closing Date as
if such payments had been made for similar purposes under Buyer's health care
plans during the plan year which includes the Closing Date, with respect to the
Assumed Employees and their eligible dependents.
(d) Buyer shall grant Assumed Employees credit for and shall assume
and be responsible for any liabilities with respect to accrued sick and
personal leave and earned vacation time by any Assumed Employees as of the
Closing Date.
(e) Assumed Employees shall be eligible to participate in Buyer's
401(k) plan under all applicable terms of that plan. An Assumed Employee shall
be eligible under the terms of the plan after one year of service with the
Buyer in which the Assumed Employee has worked 1,000 hours or more.
(f) Buyer agrees that Seller may inform its employees that Buyer has
agreed that the Assumed Employees will be offered employment and the terms and
conditions relating to such employment as provided in this Section 6.9;
provided, however, that Buyer shall have the right to approve any written
statement to be made by Seller in connection therewith.
(g) Buyer shall assume the First Media Television, L.P. Severance
Pay Plan and shall maintain such plan, without amendment thereto, for the
benefit of the Assumed Employees for a period of 180 days following the Closing
Date.
(h) Buyer shall assume full responsibility and liability for payment
of all claims incurred but not paid as of the Closing Date under the First
Media Television, L.P. Group Health Plan, provided Seller shall reimburse Buyer
from the Indemnification Fund for all such claims paid by Buyer through the
first anniversary of the Closing Date. Such claims shall be subject to and
paid in accordance with the terms of that plan. Buyer shall submit to Seller
at the end of each calendar month following the Closing Date documentation of
the claims actually paid by Buyer under the terms of such plan during such
month, and Seller shall within fifteen (15) business days of receipt of such
documentation reimburse Buyer for such paid claims.
(I) Buyer may request the right to assume sponsorship of and
responsibility for any Employee Plan or other compensation arrangement that
provides health, life, accident, disability or other welfare benefits, provided
Buyer gives written notice to Seller no later than 60 days prior to the Closing
Date of its intent to assume any such Employee Plan or arrangement. Seller
shall use commercially reasonable efforts to assign to Buyer any insurance
policies or service agreements underlying such Employee Plan or arrangement.
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6.10 Cure. For all purposes under this Agreement, the existence or
occurrence of any events or circumstances that constitutes or causes a breach
of a representation or warranty of Seller (including without limitation under
the information disclosed in the Schedules hereto) on the date such
representation or warranty is made shall be deemed not to constitute a breach
of such representation or warranty if such event or circumstance is cured in
all material respects on or prior to the Closing Date.
6.11 Cash Flow Certificates. At least five (5) business days prior to
the Closing Date, Seller shall deliver to Buyer a certificate of an officer of
the general partner of Seller's general partner, after due inquiry by such
officer but without personal liability, setting forth Seller's representations
as to (I) the Cash Flow for the twelve month period ending on the last day of
the calendar month immediately preceding the Closing Date and (ii) the Cash
Flow from January 1, 1996 through December 31, 1996, together with appropriate
supporting documentation. If the Closing is schedule to occur (a) on or after
the 12th business day of the month, such calculation shall be based on the
financial statements of Seller from the month immediately preceding the Closing
and (b) prior to the 12th business day of the month, such calculations shall be
based on the financial statements of Seller of the penultimate month prior to
the Closing. Seller shall provide Buyer promptly before Closing with any
additional documentation relating to the matters referred to in the preceding
sentences as Buyer may reasonably request.
6.12 Environmental Reports.
(a) Buyer at its election and cost may obtain any Phase I
environmental report for, as determined by Buyer, each owned site and for each
leased tower, office and studio site included in the Real Property. To the
extent Buyer so elects, Buyer shall use commercially reasonable efforts to
obtain, and Seller shall cooperate with Buyer in obtaining, at Buyer's expense,
as soon as is reasonably practicable after the date hereof (which Buyer shall
use its commercially reasonable efforts to be within 45 days) such Phase I
environmental reports. If the Phase I environmental report shows any potential
environmental liability, Buyer shall use reasonable efforts to obtain, and
Seller shall and will cooperate with Buyer in obtaining, at Buyer's expense, as
soon as is reasonably practicable after such potential environmental liability
becomes known to Buyer, a Phase II environmental report for each such parcel of
Real Property owned or leased by Seller with any potential environmental
liability. The Phase I and Phase II environmental reports are hereinafter
referred to as the "Assessments."
(b) Copies of each Assessment shall be delivered to Seller by Buyer
promptly after receipt by Buyer. Seller and Buyer agree that the results of
any Assessment carried out pursuant to this section shall not be disclosed to
any third party, unless such disclosure is required by law; provided, however,
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that each party may disclose such information to such party's officers,
directors, employees, lenders, advisors, attorneys and accountants who need to
know such information in connection with the consummation of the transactions
contemplated by this Agreement and who are informed by such party of the
confidential nature of such information.
(c) If any Assessment reveals any reasonable potential of liability
under any Applicable Environmental Laws ("Environmental Noncompliance"), Buyer
shall be responsible for up to the first $750,000 of the costs of remediation,
and Seller shall be responsible for the costs of remediation in excess of the
first $750,000, but not to exceed $750,000. If the cost of such remediation
exceeds $1,500,000 in the aggregate for all parcels subject to this Section
6.12, then either Buyer or Seller may terminate this Agreement as provided for
in Sections 9.1 and 9.2; provided, however, notwithstanding the foregoing, to
the extent such remediation costs exceed $1,500,000 (I) Seller may elect to pay
such remediation costs in excess of $1,500,000 and shall make arrangements
reasonably satisfactory to Buyer to pay such excess costs, and in such event
Buyer may not terminate this Agreement as a result of such remediation costs
exceeding $1,500,000; or (ii) Buyer may elect to pay such remediation costs in
excess of $1,500,000 and in such event Seller may not terminate this Agreement
as a result of such environmental costs exceeding $1,500,000. If the Closing
is not consummated hereunder, neither party shall have any obligation to
remediate hereunder.
(d) If the cost of such remediation does not exceed $750,000, then
notwithstanding any provision of this Agreement Buyer shall have no claim
against Seller for the cost of such remediation.
6.13 Partial Closings. Notwithstanding any provision of this Agreement
to the contrary, Buyer and Seller hereby agree as follows:
(a) Within two business days following the date of release by the
FCC of a public notice of its action granting the FCC Consent, if Buyer has not
completed the sale of WOFL, Buyer may, upon written notice to Seller within
such two business day period, elect to postpone the Closing of the sale of the
assets of the Florida Station for up to 60 days from the date of such notice,
on the terms and subject to the conditions set forth in this Section 6.13
(hereinafter, the "Postponement").
(b) If within the two business day period referred to in Section
6.13(a) above, Buyer does not elect Postponement, as contemplated herein, Buyer
shall have no further right to elect Postponement, this Section 6.13 shall no
longer be applicable, and the other applicable provisions of this Agreement
shall govern.
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(c) In the event of Postponement, for such Postponement to be
effective, consummation of the sale of WOFL within such 60 day period must be
reasonably likely, as certified by Buyer to Seller in writing at the time of
election of Postponement, such certification to contain reasonable detail
specifying the basis for such certification and which certification shall be
reasonably satisfactory to Seller.
(d) For purposes of this Agreement, the following terms shall apply:
(I) "Closing" or "Closings" shall mean, as appropriate in the
circumstances, the first consummation of the purchase of the assets of the
Northwest Station and the Carolina Station, the subsequent consummation of the
purchase of the assets of the Florida Station and all consummations of the
acquisition of Stations pursuant to this Agreement, collectively.
(ii) "First Closing" shall mean the consummation of the
purchase of the assets of the Northwest Station and the Carolina Station.
(iii) "Second Closing" shall mean the consummation of the
purchase of the assets of the Florida Station.
(iv) "Closing Date" or "Closing Dates" shall mean, as
appropriate in the circumstances, the date on which the First Closing takes
place, the date on which the Second Closing takes place, and all dates on which
Closings take place, collectively.
(v) "First Closing Date" shall mean the date on which the First
Closing takes place.
(vi) "Second Closing Date" shall mean the date on which the
Second Closing takes place.
(e) In the event of an effective Postponement, the following
provisions shall be applicable:
(I) Subject to satisfaction (or waiver by the parties for whose
benefit the condition is imposed) of the applicable conditions precedent to
Closing, Buyer and Seller shall, on the date specified by Buyer to Seller, on
not less than five (5) business days nor more than ten (10) business days
written notice following the date of release by the FCC of a public notice of
its action granting the FCC Consent, consummate the First Closing on the terms
and conditions set forth herein.
(ii) On a date specified by Buyer to Seller by written notice,
such notice to be given by Seller within one business day after the
consummation of the sale of WOFL and such date to be not later than two (2)
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business days after consummation of such sale, but irrespective of whether the
sale of WOFL has been consummated or any notice given, in any event not later
than 60 days after the date of the notice of Postponement given pursuant to
Section 6.13(a) above, Buyer and Seller shall consummate the Second Closing on
the terms and conditions set forth herein.
(iii) At each Closing, the certificates and other documents
contemplated by this Agreement shall be delivered in the form and substance
provided for in this Agreement, with the conveyancing documents to be delivered
under Sections 8.2(a) and 8.3(d) modified as necessary or appropriate to
reflect the provisions of this Section 6.13 and to relate only to the Stations
being sold at such Closing; provided it is understood and agreed that the
deliveries to be made by Seller under Section 8.2(f) and (h), and the
deliveries to be made by Buyer under Section 8.3(e) and (g), shall be made only
at the First Closing.
(iv) At the First Closing, each of the conditions precedent set
forth in Section 7 shall apply as if all Stations were being sold at such
Closing, but modified as necessary or appropriate to reflect the provisions of
this Section 6.13;
At the Second Closing, with respect to Seller, the conditions
precedent set forth in Section 7.2 shall only apply with respect to the Florida
Station, and with respect to Buyer, only the condition precedent set forth in
Section 7.1(f) and 7.1(g) (subject to the modification of deliveries set forth
in this Section) shall apply and all other conditions precedent to Buyer's
obligations shall not apply and shall be deemed to have been satisfied at the
First Closing; provided, however, it is understood and agreed that during the
period between the First Closing and the Second Closing, Seller shall continue
to operate the Florida Station in the ordinary course of business consistent
with past practices and subject to the limitations set forth in Sections 5 and
6 (to the extent relevant, and subject to subsection (x) below) and Seller
shall not take any intentional action or intentionally omit to take any action
that would make the representations and warranties of Seller set forth herein
untrue; provided that Buyer shall be obligated to consummate the sale of the
Florida Station unless the breach by Seller of the foregoing would result in a
Material Adverse Change;
At the Second Closing, with respect to Seller, the conditions
precedent set forth in Section 7 to Seller's obligations shall apply, modified
as necessary or appropriate to reflect the provisions of this Section 6.13.
(v) At the First Closing, the purchase price for the assets of
the Northwest Station and the Carolina Station shall be Two Hundred Sixteen
Million Dollars ($216,000,000), which sum shall be (1) subject to upward or
downward adjustment, as the case may be, on and after the First Closing Date,
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pursuant to Section 2.5(a) and as provided for in this Section, and (2) reduced
by one half of the Indemnification Deposit ($10,000,000), which Buyer shall
deliver to the Indemnification Escrow Agent. All payments of the purchase
price relating to the Northwest Station and the Carolina Station and the
applicable portion of the Indemnification Deposit shall be made in accordance
with the applicable provisions of this Agreement relating to the Purchase Price
and the Indemnification Deposit.
(vi) At the Second Closing, the Purchase Price for the assets
of the Florida Station shall be Two Hundred Nineteen Million Dollars
($219,000,000), which sum shall be (1) reduced by the amount of the Escrow
Amount on the Second Closing Date, that is delivered by Escrow Agent to Seller
on the Second Closing as a credit against the Purchase Price; (2) subject to
upward or downward adjustment, as the case may be, on and after the Second
Closing, pursuant to Section 2.5(a) and as provided for in this Section and (3)
reduced by one half of the Indemnification Deposit, which Buyer shall deliver
to the Indemnification Escrow Agent. Payments of the purchase price relating
to the Florida Station and the applicable portion of the Indemnification
Deposit shall be made in accordance with the applicable provisions of this
Agreement.
(vii) At each Closing, adjustments to the Purchase Price shall
be made only with respect to the Stations transferred at such Closing in
accordance with the provisions of Section 2.5. Adjustments after Closing shall
be made in accordance with Section 2.5, with applicable dates for providing or
delivering certificates and statements being measured from the applicable
Closing Date.
(viii) For purposes of the eighteen month survival period set
forth in Section 10.1 and the eighteen month period for which the
Indemnification Deposit is to be held pursuant to Section 10.2 and the
Indemnification Fund Agreement, such period shall be measured from the First
Closing. In the event of a Postponement, the parties shall negotiate
appropriate changes to the Indemnification Fund Agreement to reflect the
provisions of this Section 6.13(e)(viii).
(ix) For purposes of the appraisal referred to in Section 2.4,
such appraisal shall be retained only after the Second Closing (and the 90 day
period referred to therein shall run from that date) or if the Second Closing
does not take place, after termination of this Agreement with respect to the
Florida Station.
(x) For purposes of Section 6.7 and 6.9, such Sections shall
apply, to the extent applicable, at each Closing with respect to the Stations
being transferred at each Closing. Notwithstanding the foregoing, until the
Second Closing Buyer: (1)shall not be permitted to continue Seller's group
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health plan as contemplated by Section 6.9(c); (2)shall not assume
responsibility for payment of claims under such plan under Section 6.9(h); and
(3) shall not be permitted to assume any other Employee Plan under Section
6.9(I). Following the First Closing, Buyer may request to provide welfare
benefit coverage to the Assumed Employees by becoming a participating employer
in any Employee Plan sponsored by Seller, such that the Plan becomes a multiple
employer welfare arrangement under ERISA, provided (I) the Employee Plan is
insured (including a minimum premium or split-risk arrangement) and (ii) Buyer
reimburses Seller for the costs associated with providing such coverage to the
Assumed Employees and indemnifies and holds Buyer harmless from and against all
liabilities associated with the coverage provided to the Assumed Employees
under such Employee Plan following the First Closing; and Seller shall use
commercially reasonable efforts to amend the underlying insurance policies to
permit Buyer to become a participating employer under such Employee Plan.
(xi) In the event of Postponement, for purposes of the Second
Closing, the January 23, 1998 date referenced in Section 9.1 shall be extended
to March 30, 1998; and if the Second Closing has not occurred solely because
any required notice period for Closing has not lapsed, such date shall be
extended until the lapse of such period.
(xii) In the event of Postponement, the entire amount of the
Escrow Amount shall remain in escrow until the Second Closing; provided that if
the Second Closing has not occurred by the date specified in Section
6.13(e)(ii), then (1) if the Second Closing has not taken place for any reason
other than Seller's failure to make the deliveries required to be made under
this Agreement at the Second Closing or breach by Seller of its obligations set
forth in Section 6.13(e)(iv) that would result in a Material Adverse Change,
Seller shall have the right to terminate this Agreement with respect to the
Florida Station only and shall have the right to retain the Escrow Amount as
liquidated damages and as the exclusive remedy of Seller for such failure of
the Second Closing to take place, such amount being agreed to by the parties to
constitute a reasonable estimate of the damage to be suffered by Seller as a
result of such failure and does not constitute a penalty, the parties hereby
acknowledging the inconvenience and nonfeasibility of otherwise obtaining an
adequate remedy; and (2) if the Second Closing has not taken place due to a
failure or breach by Seller referred to in the preceding clause (1), Buyer
shall reserve the right to terminate this Agreement with respect to the Florida
Station only, and shall have the right to a return of the Escrow Amount and to
pursue all legal or equitable remedies for breach of contract.
(xiii) Buyer and Seller shall negotiate in good faith any other
changes to this Agreement reasonably necessary to effectuate the intent of this
Section 6.13.
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SECTION 7. CONDITIONS TO OBLIGATIONS OF BUYER AND SELLER
7.1 Conditions to Obligations of Buyer. All obligations of Buyer at the
Closing hereunder are subject at Buyer's option to the fulfillment prior to or
at the Closing Date of each of the following conditions:
(a) Representations and Warranties. All representations and
warranties of Seller contained in this Agreement shall be true and correct at
and as of the Closing Date as though made at and as of that time except (1) to
the extent any such representation or warranty is expressly stated only as of a
specified earlier date or dates, in which case such representation and warranty
shall be true and accurate as of such earlier specified date or dates (but also
subject to clause (3) of this Section 7.1(a)), (2) for changes that are
permitted or contemplated pursuant to this Agreement or (3) where the
consequence of the matter set forth in such representation and warranty having
failed to be true and accurate as of the date when made, on the Closing Date or
on such earlier specified date would not result in a Material Adverse Change.
(b) Covenants and Conditions. Seller shall have performed and
complied with all covenants, agreements and conditions required by this
Agreement to be performed or complied with by it prior to or on the Closing
Date, except to the extent that the consequence of the failure of Seller to
have so performed or complied would not result in a Material Adverse Change.
(c) Required Consents. All Required Consents shall have been
obtained and delivered to Buyer.
(d) FCC Consent. The FCC Consent shall have been granted; provided,
however, that this condition shall not be deemed satisfied if a petition to
deny or other material objection has been filed with the FCC with respect to
the application for consent to assignment of the FCC Licenses by the License
Subsidiaries to Buyer and there exists a significant risk that the FCC Consent
will not become final (i.e., no longer subject to administrative or judicial
review). In the event that as of the date scheduled for Closing,
communications counsel to the Seller and to the Buyer disagree as to the
existence of such a significant risk that the FCC Consent will not become
final, then with two (2) business days of such date, the question will be
referred to independent, outside communications counsel experienced in
communications law, mutually satisfactory to Seller's and Buyer's counsel who
shall be asked to resolve the disagreement within five (5) business days of his
or her selection; and provided further that if such independent, outside
communications counsel is not chosen within such two business day period,
either Buyer or Seller may apply to the American Arbitration Association to
appoint an independent, outside communications counsel. The parties agree that
the decision of such counsel shall be binding on the parties hereto and that no
party shall have any recourse against such counsel or his or her firm with
respect to such decision.
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(e) HSR Act. The waiting period under the HSR Act shall have
expired or terminated without adverse action by DOJ or the FTC to prevent the
Closing and there shall not be pending any action instituted by the FTC or the
DOJ under the HSR Act.
(f) Legal Proceedings. No injunction, restraining order or decree
of any nature of any court or governmental authority of competent jurisdiction
shall be in effect that restrains or prohibits Buyer from consummating the
transactions contemplated by this Agreement.
(g) Deliveries. Seller shall have made or stand willing to make all
the deliveries to Buyer described in Section 8.2.
(h) Licenses. The License Subsidiaries shall be the holder of all
Material Licenses. There shall not have been any modification of any License
that could have a material adverse effect on the business of any Station as
presently conducted. Excluding any proceeding relating to the FCC Consent or
disclosed on Schedule 3.14, no proceeding shall be pending the effect of which
could be to revoke, cancel, fail to renew, suspend or modify adversely any FCC
License and that (1) is related specifically to Seller, the License
Subsidiaries or the operation of Stations by Seller or the License
Subsidiaries, and not to the television industry generally or similarly-
situated television stations generally and not arising out of Buyer's
qualifications, conduct or ownership of other Stations in the market, (2) if
decided adversely would have a material adverse effect on the ability of Seller
to operate any Station's Business as presently conducted, and (3) has a
reasonable likelihood of being decided adversely.
(I) Cash Flow. There shall not have been a decrease greater than
six percent (6%) in the Cash Flow for the twelve month period ending on the
last day of the calendar month immediately preceding the Closing Date from the
Cash Flow from January 1, 1996 through December 31, 1996. For purposes of
making the calculations set forth in the preceding sentence, if the Closing is
scheduled to occur (a) on or after the 12th business day of the month, such
calculations shall be based on the financial statements of Seller from the
month immediately preceding the Closing and (b) prior to the 12th business day
of the month, such calculations shall be based on the financial statements of
Seller of the penultimate month prior to the Closing. Buyer shall have
received the certificate set forth in Section 6.11 hereof on or prior to the
time specified in Section 6.11.
7.2 Conditions to Obligations of Seller. All obligations of Seller at
the Closing hereunder are subject at Seller's option to the fulfillment prior
to or at the Closing Date of each of the following conditions:
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(a) Representations and Warranties. All representations and
warranties of Buyer contained in this Agreement shall be true and correct in
all material respects at and as of the Closing Date as though made at and as of
that time except to the extent (1) any such representation or warranty is
expressly stated only as of a specified earlier date or dates, in which case
such representation and warranty shall be true and accurate as of such earlier
specified date or dates or (2) changes are permitted or contemplated pursuant
to this Agreement.
(b) Covenants and Conditions. Buyer shall have performed and
complied in all material respects with all covenants, agreements and conditions
required by this Agreement to be performed or complied with by it prior to or
on the Closing Date.
(c) Required Consents. All Required Consents shall have been
obtained.
(d) FCC Consent. The FCC Consent shall have been granted; provided,
however, that this condition shall not be deemed satisfied if a petition to
deny or other material objection has been filed with the FCC with respect to
the application for consent to assignment of the FCC Licenses by the License
Subsidiaries to Buyer and there exists a significant risk that the FCC Consent
will not become final (i.e., no longer subject to administrative or judicial
review). In the event that as of the date scheduled for Closing,
communications counsel to the Seller and to the Buyer disagree as to the
existence of such a significant risk that the FCC Consent will not become
final, then within two (2) business days of such dates the question will be
referred to independent, outside communications counsel experienced in
communications law, mutually satisfactory to Seller's and Buyer's counsel who
shall be asked to resolve the disagreement within five (5) business days of his
or her selection and provided further that if such outside, independent
communications counsel is not chosen within such two business day period,
either Buyer or Seller may apply to the American Arbitration Association to
appoint such independent, outside communications counsel the parties agree that
the decision of such counsel shall be binding on the parties hereto and that no
party shall have any recourse against such counsel or his or her firm with
respect to such decision.
(e) HSR Act. The waiting period under the HSR Act shall have
expired or terminated without adverse action by DOJ or the FTC to prevent the
Closing and there shall not be pending any action instituted by the FTC or the
DOJ under the HSR Act.
(f) Legal Proceedings. No injunction, restraining order or decree
of any nature of any court or governmental authority of competent jurisdiction
shall be in effect that restrains or prohibits Seller from consummating the
transactions contemplated by this Agreement.
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(g) WOFL/WOGX. Prior to or concurrent with the Closing hereunder,
Buyer shall have either (1) transferred WOFL and WOGX into the WOFL/WOGX Trust
pursuant to the WOFL/WOGX Trust Agreement or (2) sold WOFL and WOGX to a third
party.
(h) Deliveries. Buyer shall have made or stand willing to make all
the deliveries described in Section 8.3.
SECTION 8. CLOSING AND CLOSING DELIVERIES
8.1 Closing.
(a) Closing Date.
(1) Subject to (i) the satisfaction or, to the extent
permissible by law, waiver (by the party for whose benefit the Closing
condition is imposed) on the date scheduled for Closing of the Closing
conditions described in Section 7 hereof and (ii) the provisions of Section 9
hereof, the parties hereto shall be obligated to consummate the transactions
contemplated hereby at the Closing of this Agreement, which shall take place at
10:00 a.m., Washington, D.C. time, on the date specified by Buyer to Seller on
not less than five (5) business days nor more than ten (10) business days
written notice following the date of release by the FCC of a public notice of
its action granting the FCC Consent (or, if either such date is a Saturday,
Sunday or federal holiday, on the next business day thereafter).
(2) Notwithstanding the foregoing, if on the date otherwise
scheduled for Closing pursuant to the preceding sentence, the conditions
precedent set forth in Sections 7.1(c), 7.1(e), 7.1(f), 7.2(c), 7.2(e) or
7.2(f) have not been satisfied or the parties are awaiting resolution of
communications counsel under Sections 7.1(d) or 7.2(d), as the case may be, the
party for whose benefit such conditions have been imposed may elect to postpone
the Closing, and the Closing shall thereafter take place on a date specified by
written notice from such party, which date shall be not less than five (5)
business days nor more than ten (10) business days after the satisfaction or
waiver of such conditions precedent or resolution of communications counsel, as
the case may be. The parties shall seek extensions of the FCC Consent that may
be required for any such postponement of the Closing.
(3) (I) Notwithstanding the foregoing, if, on the date
otherwise scheduled for Closing pursuant to Section 8.1(a)(1) or (2), the
condition precedent set forth in Section 7.1(a) has not been satisfied due to
loss, damage, impairment, confiscation or condemnation of Assets constituting a
Material Adverse Change, Seller shall give Buyer notice of such event. Buyer
may by written notice to Seller given within 10 days of receipt of such notice
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from Seller either (I) give Seller ninety (90) days from the date of such
notice from Buyer to repair, restore or replace such Assets with the proceeds
of any insurance policy, judgment or award with respect thereto such that Buyer
may satisfy the condition precedent set forth in Section 7.1(a), in which case
the Closing will be postponed for a period of up to ninety (90) days from such
notice from Buyer; provided that Seller shall have no obligation to make any
repairs or restoration if it concludes such repairs or restoration are not
commercially reasonable, or (II) proceed to close this Agreement and complete
the repair, restoration and replacement of such damaged Assets after the
Closing Date, in which event (A) Seller shall make all appropriate insurance
claims and either deliver to Buyer all insurance proceeds received in
connection with such damage or destruction of the Assets or assign the rights
to such proceeds to Buyer if not yet paid over to Seller; (B) there shall be no
adjustment to the Purchase Price; and (C) Seller shall have no further
liability or responsibility in connection with such repair, restoration or
replacement, or (III) terminate this Agreement, which termination shall be
deemed a termination pursuant to Section 10.1(d) in which Buyer is not in
default or breach in material respect of its obligations under this Agreement.
If the Closing is postponed pursuant to this paragraph, the date of the Closing
shall be mutually agreed to by Seller and Buyer after completion of restoration
or repair.
(ii) If before the Closing Date, due to damage or destruction
of the assets, the regular broadcast transmission of any Station in the normal
and usual manner is interrupted for a period of four (4) continuous days or
more, Seller shall give prompt written notice thereof (the "Interruption
Notice") to Buyer. Notwithstanding any provision contained in this Agreement
to the contrary, upon receipt of the Interruption Notice by Buyer, either Buyer
or Seller shall have the right, by giving prompt written notice thereof to the
other party within two (2) business days of the date of the Interruption
Notice, to postpone the Closing Date (whenever such date would otherwise be
scheduled under the other applicable provisions of this Agreement), until the
earlier of (I) not less than five (5) business days nor more than ten (10)
business days after the date on which such problem is corrected and (ii) a date
up to 90 days after the date of the Interruption Notice.
(4) In no event shall the Closing hereunder occur later than
January 23, 1998, except as provided above in Section 8.1(a)(3) and in Section
9.1.
(b) Closing Place. The Closing shall be held at the offices of Dow,
Lohnes & Albertson, 1200 New Hampshire Avenue, N.W., Suite 800, Washington,
D.C. 20036, or any other place that is agreed upon by Buyer and Seller.
8.2 Deliveries by Seller. Prior to or on the Closing Date, Seller shall
deliver to Buyer the following, in form and substance reasonably satisfactory
to Buyer and its counsel:
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(a) Conveyancing Documents. Duly executed assignments and other
conveyancing documents that are sufficient to convey and vest good and, in the
case of owned Real Property, marketable, title to the Assets to the Buyer, free
and clear of all liens, security interests, mortgages, pledges, encumbrances,
or restrictions, except for Permitted Liens. Such documents shall include, but
shall not be limited to, the following:
(I) assignment and assumption agreement;
(ii) general warranty deeds (the "Deeds") in recordable form
conveying fee simple title to all Real Property owned by Seller and used in the
business of the Stations subject to Permitted Liens and without expanding the
indemnity limitations set forth in this Agreement;
(iii) assignments of the leases for the leased Real Property;
(iv) assignment and acceptance of the FCC Licenses; and
(v) bill of sale, including an assignment of Seller's interest
set forth in Schedule 2.1 in Television Alliance Group, Inc.
(b) Officer's Certificate. A certificate, dated as of the Closing
Date, executed by an officer of the general partner of Seller's general
partner, certifying to the fulfillment of the conditions set forth in Sections
7.1(a) and 7.1(b);
(c) Secretary's Certificate. A certificate, dated as of the Closing
Date, executed by the Secretary of the general partner of Seller's general
partner, certifying that the resolutions, as attached to such certificate, were
duly adopted by the Board of Directors and shareholders (if required) of the
general partner of Seller's general partner, authorizing and approving the
execution of this Agreement and the consummation of the transactions
contemplated hereby and that such resolutions remain in full force and effect;
(d) Consents. A copy of any instrument evidencing any Consent
received;
(e) Releases. Any mortgage discharges or releases of liens that are
necessary in order for the Assets to be free and clear of all liens, mortgages
or security interests, other than the Permitted Liens or a pay-off letter from
Seller's senior lenders providing for such discharges and releases upon payment
by Seller of the obligations owed to such lenders with the proceeds of the
Estimated Purchase Price on the Closing Date;
(f) Opinion of Counsel. An opinion of Dow, Lohnes & Albertson,
dated as of the Closing Date, substantially in the form of Exhibit 8.2(f)
hereto;
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(g) Good Standing Certificates. A certificate as to the formation
and good standing of Seller issued by the Secretary of State of the State of
Delaware, dated not more than ten (10) days before the Closing Date, and
certificates issued by an appropriate governmental authority as to the
qualification of Seller to do business in Florida, Washington, Oregon, North
Carolina and South Carolina, to the extent such certificates are available to
foreign limited partnerships under applicable state law;
(h) Indemnification Fund Agreement. The Indemnification Fund
Agreement executed by Seller;
(I) Certain Real Property Documents. Standard documentation
(including a certified copy of the partnership agreement and certain affidavits
of Seller) that may be reasonably requested of Seller by Buyer in connection
with Buyer obtaining title policies relating to the Real Property and any
estoppel certificates that may have been obtained by Seller relating to the
Real Property leased to Seller;
(j) Employee Information. A list, dated no more than three (3)
business days prior to Closing, of all of the employees of the Stations and
their salaries and bonuses; and
(k) Other. Such other documents as may reasonably be requested by
Buyer.
8.3 Deliveries by Buyer. Prior to or on the Closing Date, Buyer shall
deliver to Seller the following, in form and substance reasonably satisfactory
to Seller and its counsel:
(a) Closing Payment. The payment described in Section 2.6(a);
(b) Officer's Certificate. A certificate, dated as of the Closing
Date, executed on behalf of Buyer by the President of Buyer, certifying to the
fulfillment of the conditions set forth in Sections 7.2(a), 7.2(b) and 7.2(g);
(c) Secretary's Certificate. A certificate, dated as of the Closing
Date, executed by Secretary of Buyer, certifying that the resolutions, as
attached to such certificate, were duly adopted by Board of Directors and
shareholders (if required) of the Buyer, authorizing and approving the
execution of this Agreement and the consummation of the transactions
contemplated hereby and that such resolutions remain in full force and effect;
(d) Assumption and Acceptance Agreements. Appropriate assumption
and acceptance agreements pursuant to which Buyer shall assume and undertake to
perform Seller's obligations arising after Closing under the Assumed Contracts
and accept the FCC Licenses, including the assumption and acceptance agreements
referenced in Section 8.2(a);
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(e) Opinion of Counsel. An opinion of Buyer's counsel dated as of
the Closing Date, substantially in the form of Exhibit 8.3(e) hereto;
(f) Good Standing Certificate. A certificate as to the existence
and good standing of Buyer issued by the Secretary of State of the State of
organization of Buyer, dated not more than ten (10) days before the Closing
Date, and certificates issued by the appropriate governmental authority as to
the qualification of Buyer to do business in each jurisdiction in which such
qualification is necessary for Buyer to own the Assets and operate the
Stations;
(g) Indemnification Fund Agreement. The Indemnification Fund
Agreement executed by Buyer;
(h) Evidence re WOFL and WOGX. Copies of the documentation
evidencing that prior to or concurrent with the Closing hereunder Buyer has
taken the actions set forth in Section 7.2(g); and
(I) Other. Such other documents as may be reasonably requested by
Seller.
SECTION 9. TERMINATION
9.1 Termination of Agreement. This Agreement may be terminated only as
follows:
(a) at any time by mutual written consent of Seller and Buyer;
(b) by either Buyer or Seller, if the terminating party is not in
default or breach in any material respect of its obligations under this
Agreement, if the Closing hereunder has not taken place on or before January
23, 1998, except where Closing has been postponed, but not terminated, pursuant
to the provisions of Section 8.1(a)(3), in which case the applicable date shall
be upon the expiration of the 90 day period referred to in Section 8.1(a)(3);
(c) by Seller, if Seller is not in default or breach in any material
respect of its obligations under this Agreement, if all the conditions in
Section 7.2 have not been satisfied or waived by the date scheduled for the
Closing pursuant to Section 8.1 (as such date may be postponed pursuant to
Section 8.1);
(d) by Buyer, if Buyer is not in default or breach in any material
respect of its obligations under this Agreement, if all the conditions set
forth in Section 7.1 have not been satisfied or waived by the date scheduled
for the Closing pursuant to Section 8.1 (as such date may be postponed pursuant
to Section 8.1);
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(e) by Seller, if Seller is not in default or breach in any material
respect of its obligations under this Agreement such that Buyer's conditions
precedent to Closing will not be satisfied and Buyer's other conditions
precedent to Closing set forth in Section 7.1 are otherwise satisfied or could
be satisfied at Closing by delivery of appropriate documentation, if (1) the
conditions set forth in Section 7.2(g) have not been satisfied or waived prior
to or concurrent with Closing, (2) the conditions set forth in Sections 7.1(d)
or 7.2(d) have not been satisfied due to the failure of the FCC to approve an
application for consent to assign the licenses of WOFL and WOGX either to a
third party or to the trustee of the WOFL/WOGX Trust as contemplated by Section
6.1(c) or otherwise due to Buyer's ownership of WOFL or WOGX, by January 23,
1998 (or any extended date as provided for hereunder in Section 8.1(a)(3)) or
(3) the conditions set forth in Sections 7.1(e) or 7.2(e) have not been
satisfied due to a concern relating to the assignment of the licenses of WOFL
and WOGX either to a third party or to the trustee of the WOFL/WOGX Trust or
otherwise due to Buyer's ownership of WOFL or WOGX, by January 23, 1998 (or any
extended date as provided for hereunder in Section 8.1(a)(3)); or
(f) by Buyer or Seller pursuant to Section 6.12.
Notwithstanding anything in this Section 9.1 to the contrary, if on
January 23, 1998 (or any extended date as provided for hereunder in Section
8.1(a)(3)), the Closing has not occurred solely because any required notice
period for Closing has not lapsed, such date shall be extended until the lapse
of such period.
9.2 Procedure and Effect of Termination.
(a) In the event of termination of this Agreement by either or both
of Buyer and/or Seller pursuant to Section 9.1, prompt written notice thereof
shall forthwith be given to the other party and this Agreement shall terminate
and the transactions contemplated hereby shall be abandoned without further
action by any of the parties hereto, but subject to and without limiting any of
the rights of the parties specified herein in the event a party is in default
or breach in any material respect of its obligations under this Agreement. If
this Agreement is terminated as provided herein:
(1) None of the parties hereto nor any of their respective
partners, directors, officers, shareholders, employers, agents, or Affiliates
(including any shareholder, partner, director, officer, employee, agent or
Affiliate of the general partner of the Seller or of the general partner of the
Seller's general partner) shall have any liability or further obligation to the
other party or any of their respective partners, directors, officers,
shareholders, employees, agents, or Affiliates pursuant to this Agreement with
respect to which termination has occurred, except for Seller and Buyer (but not
including Seller's or Buyer's partners, directors, officers, shareholders,
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employers, agents, or Affiliates (or any shareholder, partner, director,
officer, employee, agent or Affiliate of the general partner of the Seller or
of the general partner of Seller's general partner)) as stated in Sections
3.18, 4.5, 6.4, 9.2(b) and 11.1 hereof; and
(2) All filings, applications and other submissions relating to
the transactions contemplated hereby as to which termination has occurred
shall, to the extent practicable, be withdrawn from the agency or other person
to which made.
(b) (1) If both (x) this Agreement is terminated pursuant to
Section 9.1 (other than as set forth in subsections(3) and (4) of this Section
9.2(b)) by any party for any reason and (y)(I) Seller shall be in breach in a
material respect of any of its obligations, representations, warranties or
covenants set forth in this Agreement or (ii) neither Buyer nor Seller shall be
in breach in a material respect of any of their obligations, representations,
warranties or covenants set forth in this Agreement, then and in that event,
the Escrow Amount shall be returned to Buyer and if Seller shall be in breach
in a material respect of any of its obligations, representations, warranties or
covenants under this Agreement, Buyer shall have the right to pursue all legal
or equitable remedies for breach of contract or otherwise;
(2) If both (x) this Agreement is terminated pursuant to
Section 9.1 (other than as set forth in subsections (3) and (4) of this Section
9.2(b)) by any party for any reason and (y) Buyer shall be in breach in a
material respect of any of its obligations, representations, warranties or
covenants set forth in this Agreement, then and in that event, Seller shall
have the right to receive the Escrow Amount as liquidated damages for and as
the exclusive remedy of Seller as a consequence of Buyer's default (which
aggregate amount the parties agree is a reasonable estimate of the damages that
will be suffered by Seller and does not constitute a penalty, the parties
hereby acknowledging the inconvenience and nonfeasibility of otherwise
obtaining an adequate remedy);
(3) If this Agreement is terminated by Seller pursuant to
Section 9.1(e), then in that event, Seller shall have the right to receive the
Escrow Amount as liquidated damages for and as the exclusive remedy of Seller
as a consequence thereof (which aggregate amount the parties agree will be
suffered by Seller and does not constitute a penalty, the parties hereby
acknowledging the inconvenience and nonfeasibility of otherwise obtaining an
adequate remedy);
(4) If this Agreement is terminated pursuant to Section 9.1(f)
by any party, then in that event the Escrow Amount shall be returned to Buyer
and Buyer shall have no recourse against Seller, including no right to pursue
any legal or equitable remedy for breach of contract or otherwise; and
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(5) Without limiting the generality of the foregoing, or any
applicable law, neither Buyer, on the one hand, nor Seller, on the other hand,
may rely on the failure of any condition precedent set forth in Section 7 to be
satisfied as a ground for termination of this Agreement by such party if such
failure was caused by such party's (or parties') failure to act in good faith,
or a breach of or failure to perform its representations, warranties, covenants
or other obligations in accordance with the terms hereof.
9.3 Attorneys' Fees. In the event of a default by either party that
results in a lawsuit or other proceeding for any remedy available under this
Agreement, the prevailing party shall be entitled to reimbursement from the
other party of its reasonable legal fees and expenses (whether incurred in
arbitration, at trial, or on appeal).
SECTION 10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION; CERTAIN REMEDIES
10.1 Survival. The representations and warranties of Buyer and Seller
contained herein shall survive the Closing for a period of eighteen months
after the Closing Date and shall terminate on such date, except to the extent
that any claims for indemnification in respect of a breach of any such
representation or warranty is made on or before such date, in which case such
representation or warranty (but not any others) shall survive until the
resolution of such claim. Buyer's obligation to pay, perform or discharge the
Assumed Liabilities shall survive until such Assumed Liabilities have been
paid, performed or discharged in full. Any claim for indemnification in
respect of a covenant or agreement of Buyer or Seller hereunder to be performed
before the Closing shall be made before the expiration of the eighteen month
anniversary of the Closing Date. The covenants and agreements of Seller
contained herein and to be performed to any extent after the Closing Date shall
survive the Closing for a period of eighteen months after the Closing Date and
shall terminate on such date and any claims for indemnification in respect of a
breach of such covenants to be performed in any respect after the Closing Date
must be made on or before such date. The covenants and agreements of Buyer
contained herein to be performed in any respect after the Closing Date shall
survive the Closing Date until fully discharged and performed.
10.2 Indemnification by Seller. (a) After the Closing, Seller hereby
agrees to indemnify, defend and hold Buyer harmless against and with respect
to, and shall reimburse Buyer for:
(1) Any and all losses, liabilities or damages resulting from
any breach of any representation or warranty made pursuant to this Agreement,
or any failure by Seller to perform any covenant of Seller set forth herein or
in any certificate, document or instrument prepared by Seller and delivered to
Buyer hereunder;
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(2) Any failure by Seller to pay, perform or discharge any and
all liabilities of Seller not assumed by Buyer pursuant to the terms hereof;
(3) Any litigation, proceeding or claim by any third party
arising from the business or operations of the Assets by Seller prior to the
Closing Date, except to the extent arising from obligations or liabilities that
have been assumed by Buyer pursuant to this Agreement; and
(4) Any and all out-of-pocket costs and expenses, including
reasonable legal fees and expenses, incident to any action, suit, proceeding,
claim, demand, assessment or judgment incident to the foregoing or incurred in
investigating or attempting to avoid the same or to oppose the imposition
thereof, or in enforcing this indemnity.
For purposes of Section 10.2, such indemnity shall apply (x) regardless of
whether Buyer had knowledge at any time of any breach or failure and (y)
without giving effect to the qualifications set forth in Section 7.1(a)(3) or
any other Material Adverse Change qualification.
(b) Seller's obligation to indemnify Buyer pursuant to Section
10.2(a) shall be subject to all of the following limitations:
(1) No indemnification shall be required to be made by Seller
as the Indemnifying Party under Section 10.2(a) until the aggregate amount of
damages of Buyer as Claimant exceeds Three Hundred Seventy-Five Thousand
Dollars ($375,000) and then only with respect to the amount of such damages in
excess of $375,000; provided, however, that such limitation shall not apply to
claims made by Buyer with respect to (A) adjustments to the Purchase Price, (B)
reimbursements made by Buyer under Section 6.9(h) hereof, or (C) defaults under
any leases pursuant to which any of the leasehold Real Property included in the
Assets is leased by Seller and with respect to which estoppel certificates were
not obtained at or prior to Closing; and provided, further, that any amounts
paid by Buyer under the first sentence of Section 6.12(c) up to $375,000 shall
reduce the amount of such $375,000 deductible.
(2) Buyer shall be entitled to indemnification only for those
damages arising with respect to any claim as to which Buyer has given the
Seller written notice within the appropriate time period set forth in Section
10.1 hereof for such claim.
(3) Notwithstanding anything contained in this Agreement or
applicable law to the contrary, Buyer agrees that the payment of any claim made
by Buyer for indemnification hereunder, for whatever reason, shall be limited
to, and shall only be made from, the Indemnification Amount, as such amount may
have been reduced in accordance with the Indemnification Fund Agreement and,
except for claims against the Indemnification Amount, after Closing, Buyer
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waives and releases, and shall have no recourse against, Seller as a result of
the breach of any representation, warranty, covenant or agreement of Seller
contained herein, or otherwise arising out of or in connection with the
transactions contemplated hereby or the operations of the Stations. On the
nine month anniversary of the Closing, the Indemnification Amount shall be
reduced by $10,000,000 minus the sum of (I) the amount of any claims previously
paid from the Indemnification Amount and (ii) an amount sufficient to satisfy
any claims pending on such date made by Buyer with respect to indemnification
under this Section 10 pursuant to the Indemnification Fund Agreement. On the
eighteen month anniversary of the Closing, if no claim for indemnification is
pending, the balance then remaining of the Indemnification Amount shall be paid
by the Indemnification Escrow Agent to Seller by way of certified check or bank
check. If on the eighteen month anniversary of the Closing Buyer has any
indemnification claims pending with respect to indemnification under, an amount
sufficient to satisfy such claims shall be retained by the Indemnification
Escrow Agent and the remaining balance shall be remitted by the Indemnification
Escrow Agent to Seller.
(4) Following the Closing, the sole and exclusive remedy for
Buyer for any claim (whether such claim is framed in tort, contract or
otherwise) arising out of a breach of any representation, warranty, covenant or
other agreement herein or otherwise arising out of or in connection with the
transactions contemplated by this Agreement or the operations of the Stations
shall be a claim for indemnification pursuant to this Section 10.
(5) Anything in this Agreement or any applicable law to the
contrary notwithstanding, it is understood and agreed by Buyer that, other than
with respect to Seller (but not including any partner, director, officer,
employee, agent or Affiliate of Seller (including any shareholder, partner,
director, officer, employee, agent or Affiliate of the general partner of the
Seller or of the general partner of the Seller's general partner)) as expressly
provided for in Section 10.2(b), no partner, director, officer, employee, agent
or Affiliate of Seller (including any shareholder, partner, director, officer,
employee, agent or Affiliate of the general partner of the Seller or of the
general partner of the Seller's general partner) shall have (I) any personal
liability to Buyer as a result of the breach of any representation, warranty,
covenant or agreement of Seller contained herein or otherwise arising out of or
in connection with the transactions contemplated hereby or the operations of
the Stations or (ii) any personal obligation to indemnify Buyer for any of
Buyer's claims pursuant to Section 10.2(a) and Buyer waives and releases and
shall have no recourse against any of such parties described in this Section
10.2(b)(5) as a result of the breach of any representation, warranty, covenant
or agreement of Seller contained herein or otherwise arising out of or in
connection with the transactions contemplated hereby or the operations of the
Stations.
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10.3 Indemnification by Buyer. (a) After the Closing, Buyer hereby
agrees to indemnify, defend and hold Seller harmless against and with respect
to, and shall reimburse Seller for:
(1) Any and all losses, liabilities or damages resulting from
any material breach of any representation or warranty made pursuant to this
Agreement, or any material failure by Buyer to perform any covenant of Buyer
set forth herein or in any certificate, document or instrument delivered to
Seller under this Agreement;
(2) Any failure by Buyer to pay, perform or discharge any and
all Assumed Liabilities or any other liabilities of, or assumed by, Buyer
pursuant to this Agreement;
(3) Any litigation, proceeding or claim arising from the
business or operations of the Assets on or after the Closing Date; and
(4) Any and all out-of-pocket costs and expenses, including
reasonable legal fees and expenses, incident to any action, suit, proceeding,
claim, demand, assessment or judgment incident to the foregoing or incurred in
investigating or attempting to avoid the same or to oppose the imposition
thereof, or in enforcing this indemnity.
(b) Buyer's obligation to indemnify Seller pursuant to Section
10.3(a) shall be subject to all of the following limitations:
(1) Seller shall be entitled to indemnification only for those
damages arising with respect to any claim as to which Seller has given Buyer
written notice within the appropriate time period set forth in Section 10.1
hereof for such claim.
(2) Anything in this Agreement any applicable law to the
contrary notwithstanding, it is understood and agreed by Seller that, other
than with respect to Buyer (but not including any director, officer, employee,
agent or Affiliate of Buyer), as expressly provided for in Section 10.3(b), no
director, officer, employee, agent or Affiliate of Buyer shall have (I) any
personal liability to Seller as a result of the breach of any representation,
warranty, covenant or agreement of Buyer contained herein or otherwise or (ii)
personal obligation to indemnify Seller for any of Seller's claims pursuant to
Section 10.3(a), and Seller waives and releases and shall have no recourse
against any one of such parties described in this Section 10.3(b)(2) as the
result of the breach of any representation, warranty, covenant or agreement of
Buyer contained herein or otherwise arising out of or in connection with the
transactions contemplated hereby or the operations of the Stations.
10.4 Procedure for Indemnification. The procedure for indemnification
shall be as follows:
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(a) The party claiming indemnification (the "Claimant") shall
promptly give notice to the party from which indemnification is claimed (the
"Indemnifying Party") of any claim, whether between the parties or brought by a
third party, specifying in reasonable detail the factual basis for the claim,
the amount thereof, estimated in good faith, and the method of computation of
such claim, all with reasonable particularity and containing a reference to the
provisions of this Agreement in respect of which such indemnification claim
shall have occurred. If the claim relates to an action, suit, or proceeding
filed by a third party against Claimant, such notice shall be given by Claimant
within ten business days after written notice of such action, suit, or
proceeding was given to Claimant.
(b) With respect to claims solely between the parties, following
receipt of notice from the Claimant of a claim, the Indemnifying Party shall
have thirty days to make such investigation of the claim as the Indemnifying
Party deems necessary or desirable. For the purposes of such investigation,
the Claimant agrees to make available to the Indemnifying Party and its
authorized representatives the information relied upon by the Claimant to
substantiate the claim. If the Claimant and the Indemnifying Party agree at or
prior to the expiration of the thirty-day period (or any mutually agreed upon
extension thereof) to the validity and amount of such claim, the Indemnifying
Party shall immediately pay to the Claimant the full amount of the claim,
subject to the terms hereof (including Sections 10.2(b) and 10.3(b)) and the
terms of, and procedures set forth in, the Indemnification Fund Agreement. If
the Claimant and the Indemnifying Party do not agree within the thirty-day
period (or any mutually agreed upon extension thereof), the Claimant may seek
appropriate remedy at law or equity, as applicable, subject to the limitations
of Sections 10.2(b) and 10.3(b).
(c) With respect to any claim by a third party as to which the
Claimant is entitled to indemnification under this Agreement, the Indemnifying
Party shall have the right at its own expense, to participate in or assume
control of the defense of such claim, and the Claimant shall cooperate fully
with the Indemnifying Party, subject to reimbursement for actual out-of-pocket
expenses incurred by the Claimant as the result of a request by the
Indemnifying Party. If the Indemnifying Party elects to assume control of the
defense of any third-party claim, the Claimant shall have the right to
participate in the defense of such claim at its own expense. If the
Indemnifying Party does not elect to assume control or otherwise participate in
the defense of any third-party claim, then the Claimant may defend through
counsel of its own choosing and (so long as it gives the Indemnifying Party at
least fifteen (15) days' notice of the terms of the proposed settlement thereof
and permits the Indemnifying Party to then undertake the defense thereof)
settle such claim, action or suit, and to recover from the Indemnifying Party
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the amount of such settlement or of any judgment and the costs and expenses of
such defense. The Indemnifying Party shall not compromise or settle any third
party claim, action or suit without the prior written consent of the Claimant,
which consent will not be unreasonably withheld or delayed.
(d) If a claim, whether between the parties or by a third party,
requires immediate action, the parties will make every effort to reach a
decision with respect thereto as expeditiously as possible.
(e) Subject to the limitations set forth herein and without
expanding the total liability of Buyer or Seller hereunder, the indemnification
rights provided in Section 10.2 and Section 10.3 shall extend to the members,
partners, shareholders, officers, directors, employees, agents and Affiliates
of any Claimant although for the purpose of the procedures set forth in this
Section 10.4, any indemnification claims by such parties shall be made by and
through the Claimant.
SECTION 11. MISCELLANEOUS
11.1 Fees and Expenses. Except as otherwise provided in this Agreement,
each party shall pay its own expenses incurred in connection with the
authorization, preparation, execution, and performance of this Agreement,
including all fees and expenses of counsel, accountants, agents, and
representatives, and each party shall be responsible for all fees or
commissions payable to any finder, broker, advisor, or similar Person retained
by or on behalf of such party; provided, however, that all transfer taxes,
recordation taxes, sales taxes and document stamps in connection with the
transactions contemplated by this Agreement shall be paid by Buyer and all
other filing fees (including all FCC and HSR Act filing fees), and other
charges levied by any governmental entity in connection with the transactions
contemplated by this Agreement shall be paid one-half by Buyer and one-half by
Seller. Buyer hereby waives compliance with the provisions of any applicable
bulk transfer laws.
11.2 Notices. All notices, demands and requests required or permitted to
be given under the provisions of this Agreement shall be (I) in writing, (ii)
sent by telecopy (with receipt personally confirmed by telephone), delivered by
personal delivery, or sent by commercial delivery service or certified mail,
return receipt requested, (iii) deemed to have been given on the date
telecopied with receipt confirmed, the date of personal delivery, or the date
set forth in the records of the delivery service or on the return receipt, and
(iv) addressed as follows:
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To Buyer: Meredith Corporation
1716 Locust Street
Des Moines, Iowa 50309-3023
Attention: Mr. William T. Kerr, President and CEO
Telecopy: 515-284-3548
Telephone: 515-284-2591
with a copy Meredith Corporation
(which shall 1716 Locust Street
not constitute Des Moines, Iowa 50309-3023
notice) to: Attention: Thomas L. Slaughter, Esq., Vice President
- General Counsel and Secretary
Telecopy: 515-284-3933
Telephone: 515-284-3056
To Seller: First Media Television, L.P.
400 Perimeter Center Terrace
Suite 975
Atlanta, Georgia 30346
Attention: Mr. William A. Schwartz
Telecopy: (770) 395-1007
Telephone: (770) 395-1004
and First Media, L.P.
11400 Skipwith Lane
Potomac, Maryland 20854-1609
Attention: Ralph W. Hardy, Jr., Esq.
Telecopy: (301) 983-2425
Telephone: (301) 983-2424
with a copy Dow, Lohnes & Albertson
(which shall 1200 New Hampshire Avenue, N.W.
not constitute Suite 800
notice) to: Washington, DC 20036-6802
Attention: Ralph W. Hardy, Jr., Esq.
and John T. Byrnes, Jr., Esq.
Telecopy: (202) 776-2222
Telephone: (202) 776-2700
or to any other or additional persons and addresses as the parties may from
time to time designate in a writing delivered in accordance with this Section
11.2.
11.3 Benefit and Binding Effect. No party hereto may assign this
Agreement without the prior written consent of the other parties hereto. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
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11.4 Further Assurances. Subject to the terms and conditions of this
Agreement, from time to time prior to, at and after the Closing Date, each
party hereto will use commercially reasonable efforts to take, or cause to be
taken, all such actions and to do or cause to be done, all things, necessary,
proper or advisable under applicable laws and regulations to consummate and
make effective the purchase and sale contemplated by this Agreement and the
consummation of the other transactions contemplated hereby, including executing
and delivering such documents as the other party being advised by counsel shall
reasonably request in connection with the consummation of this Agreement and
the consummation of the other transactions contemplated hereby, including,
without limitation, the execution and delivery of any and all confirmatory and
other instruments, in addition to those to be delivered on the Closing Date.
11.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF GEORGIA (WITHOUT REGARD TO THE CHOICE
OF LAW PROVISIONS THEREOF).
11.6 Entire Agreement. This Agreement, the Schedules hereto, and all
documents, certificates and other documents to be delivered by the parties
pursuant hereto, collectively represent the entire understanding and agreement
between Buyer and Seller with respect to the subject matter of this Agreement.
This Agreement supersedes all prior negotiations between the parties and cannot
be amended, supplemented, or changed except by an agreement in writing that
makes specific reference to this Agreement and that is signed by the party
against which enforcement of any such amendment, supplement, or modification is
sought. Buyer acknowledges and agrees that Seller shall not be liable for or
bound in any manner by, and Buyer has not relied upon, any express or implied,
oral or written information (including any information circulated by Goldman,
Sachs & Co.), warranty, guaranty, promise, statement, inducement, presentation
or opinion (whether of, by or on behalf of Seller, any License Subsidiary, any
broker or finder, or any officer, employee, agent or representative of any of
the foregoing, or any other person) pertaining to the transactions contemplated
hereby, the Seller, the License Subsidiaries, the Stations, the Assets, or any
part of any of the foregoing (including, without limitation, the physical
condition of the Stations or any of the Assets, or the uses which can be made
of the same or the value thereof), except as is expressly set forth in this
Agreement and all Schedules and Exhibits hereto and the representations and
warranties in the certificate delivered by Seller pursuant to Section 8.2(b).
11.7 Waiver of Compliance; Consents. Except as otherwise provided in
this Agreement, any failure of any of the parties to comply with any
obligation, representation, warranty, covenant, agreement, or condition herein
may be waived by the party entitled to the benefits thereof only by a written
instrument signed by the party granting such waiver, but such waiver or failure
to insist upon strict compliance with such obligation, representation,
warranty, covenant, agreement, or condition shall not operate as a waiver of,
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or estoppel with respect to, any subsequent or other failure. Whenever this
Agreement requires or permits consent by or on behalf of any party hereto, such
consent shall be given in writing in a manner consistent with the requirements
for a waiver of compliance as set forth in this Section 11.7.
11.8 Counterparts. This Agreement may be signed in counterparts with the
same effect as if the signature on each counterpart were upon the same
instrument.
11.9 Severability. If any provision of this Agreement or the application
thereof to any person or circumstance shall be invalid or unenforceable to any
extent, the remainder of this Agreement and the application of such provision
to other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law 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 or unenforceable, 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 to the end
that the transactions contemplated hereby are fulfilled to the greatest extent
possible.
IN WITNESS WHEREOF, this Agreement has been executed by the duly
authorized officers of Buyer and Seller as of the date first written above.
Buyer:
MEREDITH CORPORATION
By: /s/ William T. Kerr
-------------------------
Name: William T. Kerr
Title: President and CEO
Seller:
FIRST MEDIA TELEVISION, L.P.
By: First Media, L.P., its General Partner
By: First Media Corporation,
its General Partner
By: /s/ Richard E. Marriott
---------------------------
Name: Richard E. Marriott
Title: Chairman and CEO
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Exhibit 10.1
------------
1996 MEREDITH CORPORATION
STOCK INCENTIVE PLAN AGREEMENT
NONQUALIFIED
STOCK OPTION AWARD
You have been selected to be a Participant in the 1996 Meredith
Corporation Stock Incentive Plan (the "Plan"), as specified below:
OPTIONEE: William T. Kerr
DATE OF GRANT: January 2, 1997
DATE OF EXPIRATION: January 1, 2007
NUMBER OF SHARES COVERED BY THIS AWARD: 116,700
OPTION PRICE: $52.0625
THIS DOCUMENT CONSTITUTES PART OF THE PROSPECTUS COVERING SECURITIES THAT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
THIS AGREEMENT, effective as of the Date of Grant set forth above, is
between Meredith Corporation, an Iowa corporation (the "Company") and the
Optionee named above pursuant to the provisions of the Plan. The parties
hereto agree as follows:
1. Grant of Stock Option. The Company hereby grants to Optionee the
Option to purchase the number of shares of Common Stock of the Company, $1.00
par value ("Common Stock") set forth above at the stated Option Price, which is
100% of the Fair Market Value on the Date of Grant, subject to the terms and
conditions of the Plan and this Agreement.
2. Exercise of Stock Option. As long as the vesting requirements
provided herein are met and the Option has not otherwise terminated or expired,
the Optionee may exercise in whole or in part this Option at any time six
months after the Date of Grant. All Options shall be vested and exercisable on
and after January 2, 2002.
3. Procedure for Exercise of Options. This Option may be exercised by
giving written notice to the Company at its executive offices, addressed to the
attention of its Secretary. Such notice (a) shall be signed by the Optionee,
his legal representative or a permitted transferee under this Agreement; (b)
shall specify the number of full shares then elected to be purchased with
respect to the Option; (c) unless a Registration Statement under the Securities
Act of 1933 is in effect with respect to the shares to be purchased, shall
contain a representation of Optionee that the shares of Common Stock are being
- 1 -
<PAGE>
acquired by him or her for investment and with no present intention of selling
or transferring them, and that he or she will not sell or otherwise transfer
the shares except in compliance with all applicable securities laws and
requirements of any stock exchange upon which the shares of Common Stock may
then be listed; (d) shall be accompanied by payment in full of the Option Price
of the shares to be purchased; and (e) Optionee's copy of this Agreement.
The Option Price upon exercise of this Option shall be payable to the
Company in full either (a) in cash or its equivalent (acceptable cash
equivalents shall be determined at the sole discretion of the Committee); (b)
by tendering previously acquired Shares having an aggregate Fair Market Value
at the time of exercise equal to the total price of the shares for which the
Option is being exercised; (c) by a combination of (a) and (b); (d) by delivery
of a properly executed exercise notice together with irrevocable instructions
to a broker to promptly deliver to the Company the amount of sale proceeds from
the option shares or loan proceeds to pay the exercise price and withholding
taxes due to Company; or (e) such other methods of payment as the Committee at
its discretion deems appropriate.
As promptly as practicable after receipt of such notice and payment, the
Company shall cause to be issued and delivered to the Optionee, his or her
legal representative or permitted transferee under this Agreement, as the case
may be, certificates for the shares so purchased, which may, if appropriate, be
endorsed with appropriate restrictive legends as determined by the Committee.
The Company shall maintain a record of all information pertaining to Optionee's
rights under this Agreement, including the number of shares for which this
Option is exercisable. If the Option shall have been exercised in full, this
Agreement shall be returned to the Company and canceled.
4. Termination of Employment by Death. If, without having fully
exercised this Option, Optionee's employment with the Company is terminated by
reason of death, any outstanding Options granted to Optionee that are not
exercisable at the date of termination shall become fully exercisable, except
for Options granted within six (6) months prior to the date of death, which
Options shall become fully exercisable on the next business day after the sixth
month anniversary of the Date of Grant. Optionee's beneficiary (or such
persons that have acquired Optionee's rights under the Option by will or by the
laws of descent and distribution) shall have the same right to exercise this
Option as Optionee had during his or her lifetime, for a period ending on the
Date of Expiration set forth above.
5. Termination of Employment by Disability. If, without having fully
exercised this Option, Optionee's employment with the Company is terminated by
reason of Disability (as determined pursuant to the November 11, 1996,
Employment Agreement by and between Kerr and Company, and any successor
employment agreement (the "Employment Agreement")), any outstanding Options
- 2 -
<PAGE>
granted to Optionee that are not exercisable at the date of termination shall
become fully exercisable, except for Options granted within six (6) months
prior to the date of termination, which Options shall become fully exercisable
on the next business day after the sixth month anniversary of the Date of
Grant. Optionee shall have the same right to exercise this Option as Optionee
had during his employment for a period ending on the Date of Expiration set
forth above.
6. Termination of Employment by Retirement. If Optionee's employment
with the Company is terminated by reason of Retirement (as defined under the
then established rules of the Company's tax-qualified retirement plans), any
outstanding options granted to Optionee that are not exercisable at the date of
termination shall be forfeited by Optionee and canceled by the Company. If,
without having fully exercised this Option, Optionee's employment is terminated
by reason of Retirement, Optionee shall have the same right to exercise options
that are exercisable on the date of the termination of employment as Optionee
had during his or her employment for a period ending on the Date of Expiration
set forth above.
7. Termination of Employment Voluntarily by Kerr or for Due Cause. If,
without having fully exercised this Option, Optionee's employment with the
Company is terminated by Company for "Due Cause" as defined under Section 9.3
of the Employment Agreement or by Optionee as "Employee Voluntary" as defined
under Section 9.5 of the Employment Agreement, any outstanding options granted
to Optionee under this Option that are not exercisable at the date of
termination shall be forfeited by Optionee and canceled by the Company.
Further, Optionee's rights under this Option shall terminate as of the date of
the termination of employment, provided, however, that there shall be an
exercise period for options that are exercisable at the date of employment
termination of up to 30 days after the date of such termination, but such
extension period shall not continue beyond the expiration of the term of this
Option.
8. Termination of Employment for Other Reasons. If, without having fully
exercised this Option, Optionee's employment with the Company is terminated by
Company "At Will" as defined under Section 9.4 of the Employment Agreement, or
by Company for other reasons that are treated under the Employment Agreement in
the same manner as being "At Will," including, without limitation, failure to
renew as discussed under Section 9.8 of the Employment Agreement, or by
Optionee for failure by the Company to elect him to the office of Chairman of
the Company's Board of Directors effective on or about January 1, 1998, under
Section 9.6 of the Employment Agreement, or by Optionee by reason of Optionee
not being re-elected to serve as Chief Executive Officer of the Company, a
Director of the Company or as a member of the Executive Committee of the
Company's Board of Directors under Section 9.7 of the Employment Agreement, any
outstanding Options granted to Optionee that are not exercisable at the date of
- 3 -
<PAGE>
termination shall become fully exercisable, except for Options granted within
six (6) months prior to the date of termination, which Options shall become
fully exercisable on the next business day after the sixth month anniversary of
the Date of Grant. Optionee shall have the same right to exercise this Option
as Optionee had during his employment for a period ending on the Date of
Expiration.
9. Restrictions on Transfer. This Option may not be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than by will
or by the laws of descent and distribution. Notwithstanding the foregoing,
Optionee may transfer this Option, in whole or in part, to members of
Optionee's immediate family or trusts or family partnerships for the benefit of
such persons, provided, that Optionee receive the advance written permission of
the Company to make such a transfer and to further notify the Company upon the
completion of the transfer. Further, this Option shall be exercisable during
Optionee's lifetime only by Optionee, Optionee's legal representative or
permitted transferee, as provided above.
10. Adjustments in Authorized Shares. If the Company shall at any time
change the number of issued shares of Common Stock without new consideration to
the Company (such as by stock dividends or stock splits), the number of shares
to be delivered under this Option and the price of the shares subject to this
Option shall be equitably adjusted so that the aggregate consideration payable
to the Company, if any, shall not be changed. In the case of any merger,
consolidation or combination of the Company with or into another corporation,
other than a merger, consolidation or combination in which the Company is the
continuing corporation and which does not result in the outstanding Common
Stock of the Company being converted into or exchanged for different
securities, cash or other property, or any combination thereof (an
"Acquisition"), the Option shall have the right to receive upon exercise of
this Option the Acquisition Consideration receivable upon such Acquisition by a
holder of the number of shares of Common Stock which might have been obtained
upon exercise of the Option, as the case may be, immediately prior to such
Acquisition.
11. Change in Control. Immediately upon a change in control of the
Company all outstanding Options shall become exercisable. For purposes hereof,
a change in control of the Company shall be deemed to have occurred on the
first to occur of any of the following dates:
(a) on the date the Board of Directors of the Company votes to
approve and recommends a stockholder vote to approve:
(i) any consolidation or merger of the Company in which
the Company is not the continuing or surviving corporation or
pursuant to which shares of the Common Stock and Class B Stock
- 4 -
<PAGE>
would be converted into cash, securities or other property,
other than any consolidation or merger of the Company in which
the holders of the Common Stock and Class B Stock immediately
prior to the consolidation or merger have at least a majority
of the ownership in and voting power of the surviving
corporation immediately after the consolidation or merger; or
(ii) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company; or
(iii) any plan or proposal for the liquidation or
dissolution of the Company; or
(b) on the date any person (as such term is used in Section
13(d) of the Securities Exchange Act of 1934, hereinafter the "1934
Act"), other than the Company's Savings and Investment Plan or
similar successor plan, shall become the beneficial owner (within the
meaning of Rule 13d-3 under the 1934 Act) of thirty percent (30%) or
more of the outstanding voting power of the Company except as a
result of actions beyond the control of such person, including,
without limitation, as a result of a shift in voting power of the
Company as a result of the conversion by other persons of their Class
B Stock into Common Stock; or
(c) on the date, during any period of twenty-four (24)
consecutive months on which individuals who at the beginning of such
period constitute the entire Board of Directors of the Company shall
cease for any reason to constitute a majority thereof unless the
election of each new director comprising the majority was approved by
a vote of at least a 2/3 majority of the Directors still in office
who were Directors at the beginning of the period.
Notwithstanding anything to the contrary contained herein, no change in control
shall be deemed to have occurred for the purpose of the Plan and this Agreement
by virtue of any combination or agreement among shareholders of the Company who
are descendants of E.T. Meredith, the founder of the Company, or trusts for the
benefit of such persons.
12. Rights as a Stockholder. Optionee shall have no rights as a
stockholder of the Company with respect to the shares of Common Stock subject
to this Agreement until such time as the purchase price has been paid and the
shares have been issued and delivered to him or her.
- 5 -
<PAGE>
13. Fair Market Value. For the purposes of this Agreement, Fair Market
Value shall mean the average of the high and low market prices at which a share
of the Company common stock shall have traded on the valuation date or on the
next preceding trading date if the valuation date is not a trading day as
reported in the Midwest edition of The Wall Street Journal.
14. Continuation of Employment. This Agreement shall not confer upon
Optionee any right to continuation of employment by the Company, nor shall this
Agreement interfere in any way with the Company's right to terminate his or her
employment at any time.
15. Miscellaneous.
(a) This Agreement and the rights of Optionee hereunder are subject
to all the terms and conditions (including Shareholder approval) of the
Plan, as the same may be amended from time to time, as well as to such
rules and regulations as the Committee may adopt for administration of the
Plan. The Committee shall have the right to impose such restrictions on
any shares acquired pursuant to the exercise of this Option, as it may
deem advisable, including, without limitation, restrictions under
applicable Federal securities laws, under the requirements of any stock
exchange or market upon which such shares are then listed and/or traded,
and under any blue sky or state securities laws applicable to such shares.
It is expressly understood that the Committee is authorized to
administer, construe, and make all determinations necessary or
appropriate to the administration of the Plan and this Agreement, all of
which shall be binding upon Optionee. Any inconsistency between this
Agreement and the Plan shall be resolved in favor of the Plan. All terms
used herein shall have the same meaning as in the Plan document.
(b) With the approval of the Board, the Committee may terminate,
amend, or modify the Plan; provided, however, that no such termination,
amendment, or modification of the Plan may in any way adversely affect
Optionee's rights under this Agreement.
(c) The Company shall have the authority to deduct or withhold, or
require Optionee to remit to the Company, an amount sufficient to satisfy
Federal, state, and local taxes (including Optionee's FICA obligation)
required by law to be withheld with respect to any exercise of Optionee's
rights under this Agreement without Optionee's written consent.
Optionee may elect, subject to the approval of the Committee, to
satisfy the withholding requirement, in whole or in part, with respect to
a Nonqualified Stock Option, by having the Company withhold shares of
Common Stock having an aggregate Fair Market Value, on the date the tax is
- 6 -
<PAGE>
to be determined, equal to the amount required to be withheld. All
elections shall be irrevocable and in writing, and shall be signed by
Optionee in advance of the day that the transaction becomes taxable.
(d) Optionee agrees to take all steps necessary to comply with all
applicable provisions of Federal and state securities law in exercising
Optionee's rights under this Agreement.
(e) The Plan and this Agreement are not intended to qualify for
treatment under the provisions of the Employee Retirement Income Security
Act of 1974 ("ERISA").
(f) This Agreement shall be subject to all applicable laws, rules,
and regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be required.
(g) To the extent not preempted by Federal law, this Agreement shall
be governed by, and construed in accordance with the laws of the State of
Iowa.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the Date of Grant.
MEREDITH CORPORATION
By: /s/ Thomas L. Slaughter
-----------------------------
Thomas L. Slaughter
Its: Vice President-General
Counsel and Secretary
/s/ William T. Kerr
- -------------------------------
Optionee, William T. Kerr
300 Walnut, #2405
Des Moines, IA 50309
Social Security number: ###-##-####
- 7 -
Exhibit 10.2
------------
1996 MEREDITH CORPORATION
STOCK INCENTIVE PLAN AGREEMENT
NONQUALIFIED
STOCK OPTION AWARD
You have been selected to be a Participant in the 1996 Meredith
Corporation Stock Incentive Plan (the "Plan"), as specified below:
OPTIONEE: William T. Kerr
DATE OF GRANT: January 2, 1997
DATE OF EXPIRATION: January 1, 2007
NUMBER OF SHARES COVERED BY THIS AWARD: 58,300
OPTION PRICE: $65.078
THIS DOCUMENT CONSTITUTES PART OF THE PROSPECTUS COVERING SECURITIES THAT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
THIS AGREEMENT, effective as of the Date of Grant set forth above, is
between Meredith Corporation, an Iowa corporation (the "Company") and the
Optionee named above pursuant to the provisions of the Plan. The parties
hereto agree as follows:
1. Grant of Stock Option. The Company hereby grants to Optionee the
Option to purchase the number of shares of Common Stock of the Company, $1.00
par value ("Common Stock") set forth above at the stated Option Price, which is
125% of the Fair Market Value on the Date of Grant, subject to the terms and
conditions of the Plan and this Agreement.
2. Exercise of Stock Option. As long as the vesting requirements
provided herein are met and the Option has not otherwise terminated or expired,
the Optionee may exercise in whole or in part this Option at any time six
months after the Date of Grant. All Options shall be vested and exercisable on
and after January 2, 2002.
3. Procedure for Exercise of Options. This Option may be exercised by
giving written notice to the Company at its executive offices, addressed to the
attention of its Secretary. Such notice (a) shall be signed by the Optionee,
his legal representative or a permitted transferee under this Agreement; (b)
shall specify the number of full shares then elected to be purchased with
respect to the Option; (c) unless a Registration Statement under the Securities
Act of 1933 is in effect with respect to the shares to be purchased, shall
contain a representation of Optionee that the shares of Common Stock are being
- 1 -
<PAGE>
acquired by him or her for investment and with no present intention of selling
or transferring them, and that he or she will not sell or otherwise transfer
the shares except in compliance with all applicable securities laws and
requirements of any stock exchange upon which the shares of Common Stock may
then be listed; (d) shall be accompanied by payment in full of the Option Price
of the shares to be purchased; and (e) Optionee's copy of this Agreement.
The Option Price upon exercise of this Option shall be payable to the
Company in full either (a) in cash or its equivalent (acceptable cash
equivalents shall be determined at the sole discretion of the Committee); (b)
by tendering previously acquired Shares having an aggregate Fair Market Value
at the time of exercise equal to the total price of the shares for which the
Option is being exercised; (c) by a combination of (a) and (b); (d) by delivery
of a properly executed exercise notice together with irrevocable instructions
to a broker to promptly deliver to the Company the amount of sale proceeds from
the option shares or loan proceeds to pay the exercise price and withholding
taxes due to Company; or (e) such other methods of payment as the Committee at
its discretion deems appropriate.
As promptly as practicable after receipt of such notice and payment, the
Company shall cause to be issued and delivered to the Optionee, his or her
legal representative or permitted transferee under this Agreement, as the case
may be, certificates for the shares so purchased, which may, if appropriate, be
endorsed with appropriate restrictive legends as determined by the Committee.
The Company shall maintain a record of all information pertaining to Optionee's
rights under this Agreement, including the number of shares for which this
Option is exercisable. If the Option shall have been exercised in full, this
Agreement shall be returned to the Company and canceled.
4. Termination of Employment by Death. If, without having fully
exercised this Option, Optionee's employment with the Company is terminated by
reason of death, any outstanding Options granted to Optionee that are not
exercisable at the date of termination shall become fully exercisable, except
for Options granted within six (6) months prior to the date of death, which
Options shall become fully exercisable on the next business day after the sixth
month anniversary of the Date of Grant. Optionee's beneficiary (or such
persons that have acquired Optionee's rights under the Option by will or by the
laws of descent and distribution) shall have the same right to exercise this
Option as Optionee had during his or her lifetime, for a period ending on the
Date of Expiration set forth above.
5. Termination of Employment by Disability. If, without having fully
exercised this Option, Optionee's employment with the Company is terminated by
reason of Disability (as determined pursuant to the November 11, 1996,
Employment Agreement by and between Kerr and Company, and any successor
employment agreement (the "Employment Agreement")), any outstanding Options
- 2 -
<PAGE>
granted to Optionee that are not exercisable at the date of termination shall
become fully exercisable, except for Options granted within six (6) months
prior to the date of termination, which Options shall become fully exercisable
on the next business day after the sixth month anniversary of the Date of
Grant. Optionee shall have the same right to exercise this Option as Optionee
had during his employment for a period ending on the Date of Expiration set
forth above.
6. Termination of Employment by Retirement. If Optionee's employment
with the Company is terminated by reason of Retirement (as defined under the
then established rules of the Company's tax-qualified retirement plans), any
outstanding options granted to Optionee that are not exercisable at the date of
termination shall be forfeited by Optionee and canceled by the Company. If,
without having fully exercised this Option, Optionee's employment is terminated
by reason of Retirement, Optionee shall have the same right to exercise options
that are exercisable on the date of the termination of employment as Optionee
had during his or her employment for a period ending on the Date of Expiration
set forth above.
7. Termination of Employment Voluntarily by Kerr or for Due Cause. If,
without having fully exercised this Option, Optionee's employment with the
Company is terminated by Company for "Due Cause" as defined under Section 9.3
of the Employment Agreement or by Optionee as "Employee Voluntary" as defined
under Section 9.5 of the Employment Agreement, any outstanding options granted
to Optionee under this Option that are not exercisable at the date of
termination shall be forfeited by Optionee and canceled by the Company.
Further, Optionee's rights under this Option shall terminate as of the date of
the termination of employment, provided, however, that there shall be an
exercise period for options that are exercisable at the date of employment
termination of up to 30 days after the date of such termination, but such
extension period shall not continue beyond the expiration of the term of this
Option.
8. Termination of Employment for Other Reasons. If, without having fully
exercised this Option, Optionee's employment with the Company is terminated by
Company "At Will" as defined under Section 9.4 of the Employment Agreement, or
by Company for other reasons that are treated under the Employment Agreement in
the same manner as being "At Will," including, without limitation, failure to
renew as discussed under Section 9.8 of the Employment Agreement, or by
Optionee for failure by the Company to elect him to the office of Chairman of
the Company's Board of Directors effective on or about January 1, 1998, under
Section 9.6 of the Employment Agreement or by Optionee by reason of Optionee
not being re-elected to serve as Chief Executive Officer of the Company, a
Director of the Company or as a member of the Executive Committee of the
Company's Board of Directors under Section 9.7 of the Employment Agreement, any
outstanding Options granted to Optionee that are not exercisable at the date of
- 3 -
<PAGE>
termination shall become fully exercisable, except for Options granted within
six (6) months prior to the date of termination, which Options shall become
fully exercisable on the next business day after the sixth month anniversary of
the Date of Grant. Optionee shall have the same right to exercise this Option
as Optionee had during his employment for a period ending on the Date of
Expiration.
9. Restrictions on Transfer. This Option may not be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than by will
or by the laws of descent and distribution. Notwithstanding the foregoing,
Optionee may transfer this Option, in whole or in part, to members of
Optionee's immediate family or trusts or family partnerships for the benefit of
such persons, provided, that Optionee receive the advance written permission of
the Company to make such a transfer and to further notify the Company upon the
completion of the transfer. Further, this Option shall be exercisable during
Optionee's lifetime only by Optionee, Optionee's legal representative or
permitted transferee, as provided above.
10. Adjustments in Authorized Shares. If the Company shall at any time
change the number of issued shares of Common Stock without new consideration to
the Company (such as by stock dividends or stock splits), the number of shares
to be delivered under this Option and the price of the shares subject to this
Option shall be equitably adjusted so that the aggregate consideration payable
to the Company, if any, shall not be changed. In the case of any merger,
consolidation or combination of the Company with or into another corporation,
other than a merger, consolidation or combination in which the Company is the
continuing corporation and which does not result in the outstanding Common
Stock of the Company being converted into or exchanged for different
securities, cash or other property, or any combination thereof (an
"Acquisition"), the Option shall have the right to receive upon exercise of
this Option the Acquisition Consideration receivable upon such Acquisition by a
holder of the number of shares of Common Stock which might have been obtained
upon exercise of the Option, as the case may be, immediately prior to such
Acquisition.
11. Change in Control. Immediately upon a change in control of the
Company all outstanding Options shall become exercisable. For purposes hereof,
a change in control of the Company shall be deemed to have occurred on the
first to occur of any of the following dates:
(a) on the date the Board of Directors of the Company votes to
approve and recommends a stockholder vote to approve:
(i) any consolidation or merger of the Company in which
the Company is not the continuing or surviving corporation or
pursuant to which shares of the Common Stock and Class B Stock
- 4 -
<PAGE>
would be converted into cash, securities or other property,
other than any consolidation or merger of the Company in which
the holders of the Common Stock and Class B Stock immediately
prior to the consolidation or merger have at least a majority
of the ownership in and voting power of the surviving
corporation immediately after the consolidation or merger; or
(ii) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company; or
(iii) any plan or proposal for the liquidation or
dissolution of the Company; or
(b) on the date any person (as such term is used in Section
13(d) of the Securities Exchange Act of 1934, hereinafter the "1934
Act"), other than the Company's Savings and Investment Plan or
similar successor plan, shall become the beneficial owner (within the
meaning of Rule 13d-3 under the 1934 Act) of thirty percent (30%) or
more of the outstanding voting power of the Company except as a
result of actions beyond the control of such person, including,
without limitation, as a result of a shift in voting power of the
Company as a result of the conversion by other persons of their Class
B Stock into Common Stock; or
(c) on the date, during any period of twenty-four (24)
consecutive months on which individuals who at the beginning of such
period constitute the entire Board of Directors of the Company shall
cease for any reason to constitute a majority thereof unless the
election of each new director comprising the majority was approved by
a vote of at least a 2/3 majority of the Directors still in office
who were Directors at the beginning of the period.
Notwithstanding anything to the contrary contained herein, no change in control
shall be deemed to have occurred for the purpose of the Plan and this Agreement
by virtue of any combination or agreement among shareholders of the Company who
are descendants of E. T. Meredith, the founder of the Company, or trusts for
the benefit of such persons.
12. Rights as a Stockholder. Optionee shall have no rights as a
stockholder of the Company with respect to the shares of Common Stock subject
to this Agreement until such time as the purchase price has been paid and the
shares have been issued and delivered to him or her.
- 5 -
<PAGE>
13. Fair Market Value. For the purposes of this Agreement, Fair Market
Value shall mean the average of the high and low market prices at which a share
of the Company common stock shall have traded on the valuation date or on the
next preceding trading date if the valuation date is not a trading day as
reported in the Midwest edition of The Wall Street Journal.
14. Continuation of Employment. This Agreement shall not confer upon
Optionee any right to continuation of employment by the Company, nor shall this
Agreement interfere in any way with the Company's right to terminate his or her
employment at any time.
15. Miscellaneous.
(a) This Agreement and the rights of Optionee hereunder are subject
to all the terms and conditions (including Shareholder approval) of the
Plan, as the same may be amended from time to time, as well as to such
rules and regulations as the Committee may adopt for administration of the
Plan. The Committee shall have the right to impose such restrictions on
any shares acquired pursuant to the exercise of this Option, as it may
deem advisable, including, without limitation, restrictions under
applicable Federal securities laws, under the requirements of any stock
exchange or market upon which such shares are then listed and/or traded,
and under any blue sky or state securities laws applicable to such shares.
It is expressly understood that the Committee is authorized to
administer, construe, and make all determinations necessary or appropriate
to the administration of the Plan and this Agreement, all of which shall
be binding upon Optionee. Any inconsistency between this Agreement and
the Plan shall be resolved in favor of the Plan. All terms used herein
shall have the same meaning as in the Plan document.
(b) With the approval of the Board, the Committee may terminate,
amend, or modify the Plan; provided, however, that no such termination,
amendment, or modification of the Plan may in any way adversely affect
Optionee's rights under this Agreement.
(c) The Company shall have the authority to deduct or withhold, or
require Optionee to remit to the Company, an amount sufficient to satisfy
Federal, state, and local taxes (including Optionee's FICA obligation)
required by law to be withheld with respect to any exercise of Optionee's
rights under this Agreement without Optionee's written consent.
Optionee may elect, subject to the approval of the Committee, to
satisfy the withholding requirement, in whole or in part, with respect to
a Nonqualified Stock Option, by having the Company withhold shares of
Common Stock having an aggregate Fair Market Value, on the date the tax is
- 6 -
<PAGE>
to be determined, equal to the amount required to be withheld. All
elections shall be irrevocable and in writing, and shall be signed by
Optionee in advance of the day that the transaction becomes taxable.
(d) Optionee agrees to take all steps necessary to comply with all
applicable provisions of Federal and state securities law in exercising
Optionee's rights under this Agreement.
(e) The Plan and this Agreement are not intended to qualify for
treatment under the provisions of the Employee Retirement Income Security
Act of 1974 ("ERISA").
(f) This Agreement shall be subject to all applicable laws, rules,
and regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be required.
(g) To the extent not preempted by Federal law, this Agreement shall
be governed by, and construed in accordance with the laws of the State of
Iowa.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the Date of Grant.
MEREDITH CORPORATION
By: /s/ Thomas L. Slaughter
---------------------------
Thomas L. Slaughter
Its: Vice President-General
Counsel and Secretary
/s/ William T. Kerr
- ---------------------------
Optionee, William T. Kerr
300 Walnut, #2405
Des Moines, IA 50309
Social Security number: ###-##-####
- 7 -
Exhibit 11
----------
MEREDITH CORPORATION
Computation of Primary and Fully Diluted Per
Common Share Earnings - Treasury Stock Method
For the Nine Months Ended March 31, 1997 and 1996
(Unaudited)
Weighted average number of shares
(in thousands)
1997 1996*
Fully Fully
Primary Diluted Primary Diluted
------- ------- ------- -------
Weighted average number of shares
outstanding in thousands 53,635 53,635 55,026 55,026
Dilutive effect of unexercised
stock options in thousands 1,970 1,871 1,435 1,530
------ ------ ------ ------
Total 55,605 55,506 56,461 56,556
====== ====== ====== ======
Primary and fully
diluted earnings per common share
1997 1996*
Fully Fully
Primary Diluted Primary Diluted
------- ------- ------- -------
Earnings per share from
continuing operations $ .86 $ .86 $ .69 $ .69
Discontinued operation .50 .50 ( .01) ( .01)
----- ----- ----- -----
Net earnings per share $1.36 $1.36 $ .68 $ .68
===== ===== ===== =====
*Restated to reflect the stock split effective March 17, 1997.
Note: Primary - Based on average market prices for the period.
Fully Diluted - Based on the higher of the average market price
for the period or the market price at March 31
of each year.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM the
Consolidated Balance Sheet at March 31, 1997 and the Consolidated Statement of
Earnings for the nine months ended March 31, 1997 of Meredith Corporation and
Subsidiaries AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000065011
<NAME> MEREDITH CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 53,422
<SECURITIES> 50,472
<RECEIVABLES> 96,432<F1>
<ALLOWANCES> 0
<INVENTORY> 25,970
<CURRENT-ASSETS> 317,758
<PP&E> 194,612
<DEPRECIATION> 110,904
<TOTAL-ASSETS> 744,944
<CURRENT-LIABILITIES> 275,022
<BONDS> 0
0
0
<COMMON> 53,577
<OTHER-SE> 264,496
<TOTAL-LIABILITY-AND-EQUITY> 744,944
<SALES> 631,987
<TOTAL-REVENUES> 631,987
<CGS> 258,221
<TOTAL-COSTS> 258,221
<OTHER-EXPENSES> 17,259
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,134
<INCOME-PRETAX> 84,594
<INCOME-TAX> 36,629
<INCOME-CONTINUING> 47,965
<DISCONTINUED> 27,693
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 75,658
<EPS-PRIMARY> 1.36
<EPS-DILUTED> 0
<FN>
<F1>Net of allowances
</FN>
</TABLE>
Exhibit 99
----------
MEREDITH CORPORATION
FISCAL 1997 THIRD QUARTER EARNINGS PER SHARE AT-A-GLANCE
(Note: All per-share figures reflect a 2-for-1 stock split effective
March 18, 1997)
- -- The chart below depicts comparable quarterly and fiscal-year earnings
per share before special items and discontinued operations:
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Fiscal Year
-------- -------- -------- -------- -----------
F1993 .06 .09 .10 .10 .35
F1994 .08 .13 .16 .13 .50
F1995 .14 .19 .18 .20 .71
F1996 .17 .22 .24 .28 .91
F1997 .22 .31 .33
- -- Fiscal 1997 third quarter net earnings per share were 33 cents, a 38
percent increase over the prior-year quarter. Prior-year third quarter net
earnings per share were 24 cents. There were no special items in either
period.
- -- Fiscal 1997 year-to-date earnings from continuing operations were 86 cents
per share, a 37 percent increase over prior-year-to-date comparable
earnings per share of 63 cents.
- -- Fiscal 1997 year-to-date net earnings were $1.36 per share, including a
post-tax gain in discontinued operations of 50 cents per share from the
sale of the company's remaining interests in cable television systems.
- -- In the prior year-to-date period, net earnings were 68 cents per share,
including a post-tax gain from the sale of the book clubs and a first-
quarter loss in discontinued cable operations.
