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 September 30, 1998
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 October 31, 1998
Common Stock, $1 par value 41,117,338
Class B Stock, $1 par value 11,203,836
----------
Total Common and Class B Stock 52,321,174
==========
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<PAGE>
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Meredith Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
September 30 June 30
Assets 1998 1998
- -------------------------------------------------------------------------------
(in thousands)
Current assets:
Cash and cash equivalents $ 5,832 $ 4,953
Receivables, net 138,082 138,036
Inventories 32,501 34,765
Subscription acquisition costs 40,442 47,070
Program rights 31,299 14,809
Other current assets 8,308 7,168
---------- -------
Total current assets 256,464 246,801
---------- --------
Property, plant and equipment 266,988 267,488
Less accumulated depreciation (120,298) (116,407)
---------- --------
Net property, plant and equipment 146,690 151,081
---------- --------
Subscription acquisition costs 35,039 36,941
Other assets 44,332 33,808
Goodwill and other intangibles (at original cost
less accumulated amortization of $102,645
on September 30 and $97,716 on June 30) 592,429 597,358
---------- ----------
Total assets $1,074,954 $1,065,989
========== ==========
See accompanying Notes to Interim Consolidated Financial Statements.
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<PAGE>
(Unaudited)
September 30 June 30
Liabilities and Stockholders' Equity 1998 1998
- -------------------------------------------------------------------------------
(in thousands except share data)
Current liabilities:
Short-term bank debt $ 3,000 $ --
Current portion of long-term debt 40,000 40,000
Current portion of long-term program rights payable 33,585 18,934
Accounts payable 47,623 63,171
Accrued taxes and expenses 86,413 82,775
Unearned subscription revenues 139,670 141,989
---------- ----------
Total current liabilities 350,291 346,869
Long-term debt 167,000 175,000
Unearned subscription revenues 95,228 95,603
Deferred income taxes 19,618 20,822
Other deferred items 69,949 49,682
---------- ----------
Total liabilities 702,086 687,976
---------- ----------
Temporary equity: Put option agreement
Common stock, 1,940,018 shares outstanding at
September 30 and 597,878 shares at June 30 62,080 28,063
---------- ----------
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 39,220,276 at September 30 and
40,996,510 at June 30 (net of treasury shares,
26,766,982 at September 30 and 26,274,767
at June 30.) 39,220 40,996
Class B stock, par value $1 per share,
convertible to common stock
Authorized 15,000,000 shares; issued and
outstanding 11,213,760 at September 30 and
11,279,881 at June 30. 11,214 11,280
Retained earnings 263,445 301,200
Accumulated other comprehensive income (971) (1,176)
Unearned compensation (2,120) (2,350)
---------- ----------
Total stockholders' equity 310,788 349,950
---------- ----------
Total liabilities and stockholders' equity $1,074,954 $1,065,989
========== ==========
See accompanying Notes to Interim Consolidated Financial Statements.
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<PAGE>
Meredith Corporation and Subsidiaries
Consolidated Statements of Earnings (Unaudited)
Three Months Ended September 30 1998 1997
- ------------------------------------------------------------------------
(in thousands except per share)
Revenues:
Advertising $142,938 $131,640
Circulation 67,501 67,172
All other 35,398 32,087
-------- --------
Total revenues 245,837 230,899
-------- --------
Operating costs and expenses:
Production, distribution and edit 106,903 96,392
Selling, general & administrative 94,987 97,986
Depreciation and amortization 10,042 8,092
-------- --------
Total operating costs and expenses 211,932 202,470
-------- --------
Income from operations 33,905 28,429
Gain from disposition 2,375 --
Interest income 38 468
Interest expense (3,811) (2,467)
-------- --------
Earnings before income taxes 32,507 26,430
Income taxes 13,696 11,339
-------- --------
Net earnings $ 18,811 $ 15,091
======== ========
Basic earnings per share $ 0.36 $ 0.29
======== ========
Basic average shares outstanding 52,518 53,115
======== ========
Diluted earnings per share $ 0.35 $ 0.27
======== ========
Diluted average shares outstanding 54,192 55,383
======== ========
Dividends paid per share $ 0.070 $ 0.065
======== ========
See accompanying Notes to Interim Consolidated Financial Statements.
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<PAGE>
Meredith Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended September 30 1998 1997
- ---------------------------------------------------------------------------
(in thousands)
Cash flows from operating activities:
Net earnings $ 18,811 $ 15,091
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 10,042 8,092
Amortization of program rights 7,048 5,828
Gain from disposition, net of taxes (1,425) --
Changes in assets and liabilities:
Accounts receivable (5,708) (23,818)
Inventories 1,910 5,614
Supplies and prepayments 514 (4,335)
Subscription acquisition costs 8,530 4,705
Accounts payable (14,371) (861)
Accruals 6,347 2,045
Unearned subscription revenues (2,694) (5,958)
Deferred income taxes (3,340) 71
Other deferred items 4,291 8,529
-------- --------
Net cash provided by operating activities 29,955 15,003
-------- --------
Cash flows from investing activities:
Redemption of marketable securities -- 50,371
Proceeds from dispositions 9,922 --
Acquisitions of businesses -- (375,000)
Additions to property, plant, and equipment (1,503) (8,395)
Changes in other assets (453) (2,062)
-------- --------
Net cash provided (used) by investing activities 7,966 (335,086)
-------- --------
Cash flows from financing activities:
Long-term debt incurred -- 270,000
Repayment of long-term debt (8,000) --
Short-term debt incurred, net 3,000 --
Payments for program rights (6,859) (6,097)
Proceeds from common stock issued 917 2,454
Purchases of company stock (22,381) (10,155)
Dividends paid (3,673) (3,452)
Other (46) 336
-------- --------
Net cash (used) provided by financing activities (37,042) 253,086
-------- --------
Net increase (decrease) in cash and cash equivalents 879 (66,997)
Cash and cash equivalents at beginning of year 4,953 74,498
-------- --------
Cash and cash equivalents at end of period $ 5,832 $ 7,501
======== ========
See accompanying Notes to Interim Consolidated Financial Statements.
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MEREDITH CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Accounting Policies
a. General
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. Readers are referred to the
company's Form 10-K for the year ended June 30, 1998 for complete financial
statements and related notes. Certain prior-year amounts have been restated to
conform with current-year presentation.
b. Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
c. Goodwill and other intangibles
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. As of September 30, 1998, the unamortized portion of these assets
primarily consisted of television Federal Communications Commission (FCC)
licenses ($262.1 million), goodwill ($168.5 million) and television network
affiliation agreements ($142.2 million). Virtually all of these assets were
acquired subsequent to October 31, 1970, and are being amortized by the
straight-line method over the following periods: 40 years for television FCC
licenses; 20 to 40 years for goodwill; and 15 to 40 years for network
affiliation agreements. The company evaluates the recoverability of its
intangible assets as current events or circumstances warrant to determine
whether adjustments are needed to carrying values. Such evaluation may be
based on projected income and cash flows on an undiscounted basis from the
underlying business or from operations of related businesses. Other economic
and market variables are also considered in any evaluation.
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<PAGE>
MEREDITH CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued
(Unaudited)
2. Comprehensive Income
Meredith adopted Statement of Financial Accounting Standards (SFAS) No. 130,
"Reporting Comprehensive Income," effective July 1, 1998. SFAS No. 130
requires companies to report comprehensive income, which includes net income
and certain items that are reported as separate components of shareholders'
equity. The company's comprehensive income includes foreign currency
translation adjustments in addition to net income. Total comprehensive income
(in thousands) for the three-month periods ended September 30, 1998 and 1997,
was $19,017 and $15,091, respectively.
3. Acquisitions and disposition
On August 24, 1998, the company announced that it had agreed to acquire WGNX-
TV, the CBS affiliate serving Atlanta. The planned acquisition involves the
purchase of KCPQ-TV, a FOX affiliate in Seattle currently owned by Kelly
Television Co., and the subsequent trade of KCPQ with Tribune Company for WGNX-
TV in Atlanta. The transactions are subject to regulatory approvals and are
expected to be completed early in calendar 1999. The net price to the company
of this resulting asset purchase is estimated to be $370 million.
Effective July 1, 1998, the company sold the net assets of the Better Homes and
Gardens Real Estate Service to GMAC Home Services, Inc., a subsidiary of GMAC
Financial. Fiscal 1999 first quarter earnings included an after-tax gain of
$1.4 million from the sale, which closed on July 27, 1998.
4. Inventories
Major components of inventories are summarized below. Of total inventory
values shown, approximately 62 percent are under the LIFO method at
September 30, 1998 and 58 percent at June 30, 1998.
(unaudited)
September 30 June 30
1998 1998
----------- --------
(in thousands)
Raw materials $25,720 $24,777
Work in process 10,414 13,286
Finished goods 5,860 5,446
------- -------
41,994 43,509
Reserve for LIFO cost valuation (9,493) (8,744)
------- -------
Total $32,501 $34,765
======= =======
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<PAGE>
MEREDITH CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued
(Unaudited)
5. Long-term debt and interest rate swap agreements
The company has a credit agreement which consists of a $210 million, 60-month
variable-rate term loan and a $150 million, 60-month revolving credit facility.
At September 30, 1998, long-term debt consisted of $185 million outstanding
under the term loan and $22 million outstanding under the revolving credit
facility. Meredith has utilized interest rate swap contracts to manage
interest cost and risk associated with possible increases in variable interest
rates. The weighted-average interest rate at September 30, 1998 was 6.75
percent. The credit agreement includes certain covenants. As of September 30,
1998, the company was in compliance with all debt covenants.
6. Earnings per share
The following table presents the calculations of earnings per share:
Three months ended September 30 1998 1997
------------------------------- ------ ------
(in thousands except per share)
Net earnings $18,811 $15,091
======= =======
Basic average shares outstanding 52,518 53,115
Dilutive effect of stock options 1,674 2,268
------- -------
Diluted average shares outstanding 54,192 55,383
======= =======
Basic earnings per share $ .36 $ .29
======= =======
Diluted earnings per share $ .35 $ .27
======= =======
Antidilutive options excluded from the above calculations totaled 457,000
options at September 30, 1998 (with a weighted average exercise price of
$41.61) and 117,000 options at September 30, 1997 (with a weighted average
exercise price of $32.54).
Options to purchase 14,400 shares were exercised during the three months
ended September 30, 1998 (129,040 options were exercised in the three months
ended September 30, 1997).
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<PAGE>
MEREDITH CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, continued
(Unaudited)
7. Segment information
Meredith adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," effective July 1, 1998.
Meredith Corporation is a diversified media company primarily focused on the
home and family marketplace. Based on products and services, the company has
two reportable segments: publishing and broadcasting. The publishing segment
includes magazine and book publishing, brand licensing, custom marketing and
other related operations. The broadcasting segment includes the operations of
11 network-affiliated television stations and syndicated television program
marketing and development. In previously-reported segment information,
syndicated television programming operations were reported as unallocated
corporate expenses. Prior-year information has been restated to conform to the
current-year presentation. Intersegment revenues are not material and
virtually all businesses operate in the United States.
Revenues, operating profit and depreciation and amortization by industry
segment are shown below:
(unaudited)
Three Months
Ended September 30
-------------------
1998 1997
-------- --------
(in thousands)
Revenues
Publishing $190,816 $180,750
Broadcasting 55,021 50,149
-------- --------
Total revenues $245,837 $230,899
======== ========
Operating profit
Publishing $ 24,819 $ 19,449
Broadcasting 13,060 14,521
Unallocated corporate expense (3,974) (5,541)
-------- --------
Income from operations 33,905 28,429
======== ========
Depreciation and amortization
Publishing $ 2,851 $ 2,379
Broadcasting 6,680 5,387
Unallocated corporate 511 326
-------- --------
Total depreciation
and amortization $10,042 $ 8,092
======== ========
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion presents the key factors that have affected the
company's business in the first quarter of fiscal 1999 and fiscal 1998 and
compares the results of such periods. This commentary should be read in
conjunction with the consolidated financial statements presented elsewhere in
this report and with the company's Form 10-K for the year ended June 30, 1998.
All per-share amounts refer to diluted earnings per share and are computed on a
post-tax basis.
This section contains certain forward-looking statements that are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those anticipated. Readers are referred to the company's Form
10-K for the year ended June 30, 1998, for a discussion of such factors.
Significant Events
Fiscal 1999
- -----------
On August 24, 1998, the company announced that it had reached an agreement to
acquire the net assets of WGNX-TV, a CBS network-affiliated television station
serving the Atlanta, Ga., market from Tribune Company. As part of this
transaction, Meredith has agreed to purchase Seattle's KCPQ-TV (FOX) from Kelly
Television Co. and trade the station to Tribune for WGNX. The net price to the
company of this resulting asset purchase is estimated to be $370 million. The
company expects this transaction to close in early calendar year 1999, subject
to regulatory approvals.
Fiscal 1998
- -----------
On July 1, 1997, Meredith purchased the net assets of three television stations
affiliated with the FOX television network from First Media Television, L.P.
(First Media) for $216 million. Those stations are: KPDX-Portland, Ore.; KFXO-
Bend, Ore. (a low power station); and WHNS-Greenville, S.C./Spartanburg,
S.C./Asheville, N.C. On September 4, 1997, Meredith acquired and then
exchanged the net assets of the fourth First Media station, WCPX-TV in Orlando,
for WFSB-TV, a CBS network-affiliated television station serving the
Hartford/New Haven, Conn. market. WFSB-TV was acquired from Post-Newsweek
Stations, Inc. through an exchange of assets plus a $60 million cash payment to
Meredith. The result was a net cost to the company of $159 million for WFSB.
- 10 -
<PAGE>
Results of Operations
Percent
Quarters ended September 30 1998 1997 Change
--------------------------- -------- -------- --------
(in thousands except per share)
Total revenues $245,837 $230,899 6 %
======== ======== =====
Income from operations $ 33,905 $ 28,429 19 %
======== ======== =====
Earnings before
nonrecurring items $ 17,386 $ 15,091 15 %
======== ======== =====
Net earnings $ 18,811 $ 15,091 25 %
======== ======== =====
Diluted earnings per share
before nonrecurring items $ 0.32 $ 0.27 19 %
======== ======== =====
Diluted earnings per share $ 0.35 $ 0.27 30 %
======== ======== =====
Fiscal 1999 first quarter net earnings were $18.8 million, or 35 cents per
share. This included a post-tax gain of $1.4 million, or 3 cents per share,
from the sale of the Better Homes and Gardens Real Estate Service. Excluding
the gain, earnings before nonrecurring items were $17.4 million, or 32 cents
per share, a 19 percent per share increase from first quarter fiscal 1998
results. The improvement was driven by strong results from the publishing
segment. The weighted average diluted number of shares outstanding declined 2
percent primarily due to company share repurchases.
First quarter revenues increased 6 percent from the prior-year first quarter to
$245.8 million. Adjusted for the timing impact of the prior-year acquisition
of WFSB-Hartford/New Haven and the sale of the real estate operations,
comparable revenues increased 7 percent. The increase reflected higher
magazine advertising revenues, as well as increased custom publishing and
consumer book revenues.
Operating costs and expenses increased 5 percent over the prior year first
quarter reflecting a full quarter of operating expenses and amortization
expense at WFSB-Hartford/New Haven in fiscal 1999, increased television news
and programming expenses and higher publishing production expenses. The
increase in publishing production expenses resulted from increased volumes and
higher average paper prices. The operating profit margin rose from 12.3
percent of revenues in the prior-year first quarter to 13.8 percent in the
current period.
Net interest expense increased to $3.8 million in the current quarter versus
$2.0 million in the prior-year first quarter due to the timing of debt incurred
for the WFSB-Hartford/New Haven acquisition.
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<PAGE>
The Company's effective tax rate was 42.1 percent compared with 42.9 percent in
the prior-year first quarter. The decline reflected the diminished impact of
nondeductible items because of an increase in projected earnings.
Publishing
- ----------
Percent
Quarters ended September 30 1998 1997 Change
--------------------------- -------- -------- --------
(in thousands)
Revenues
---------
Advertising $ 90,423 $ 84,178 7%
Circulation 67,501 67,172 1%
Other 32,892 29,400 12%
-------- -------- ---
Total revenues $190,816 $180,750 6%
======== ======== ===
Operating profit $ 24,819 $ 19,449 28%
======== ======== ===
Publishing revenues increased 6 percent due to higher magazine advertising,
custom publishing and consumer book revenues. Magazine advertising revenues
grew 7 percent as most titles reported increased ad pages and higher revenues
per page. Better Homes and Gardens and Ladies' Home Journal magazines, the
company's two largest circulation titles, both reported solid increases in ad
revenues, as did Country Home, Traditional Home, Midwest Living and Crayola
Kids and Mature Outlook magazines. Ad revenue growth at newer titles,
including MORE, Family Money and Renovation Style, also contributed. The
increase in other publishing revenues reflected higher sales volumes in the
book and custom publishing operations. These increases were partially offset
by the absence of revenues in the current-year quarter from the real estate
franchise operations due to its sale in July 1998. Excluding the impact of
that sale, total publishing revenues increased nearly 10 percent.
Publishing operating profit was up 28 percent in the current-year first
quarter. The improvement was a result of a very strong performance from
magazine publishing operations. Many titles contributed to the growth,
including Better Homes and Gardens, Crayola Kids, Renovation Style, Country
Gardens and Mature Outlook magazines, as well as the company's craft titles.
In addition, the quarter was impacted by two nonrecurring items: costs for the
closing of Country America magazine and a favorable settlement related to the
discontinuation of a direct marketing alliance. The net effect of these
transactions did not materially impact first quarter financial performance.
Total paper expenses increased approximately 10 percent due to higher average
prices and an increase in usage. Several suppliers reduced the prices of
coated groundwood paper approximately 3.5 percent on October 1, 1998.
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<PAGE>
Broadcasting
- ------------
Percent
Quarters ended September 30 1998 1997 Change
--------------------------- -------- -------- --------
(in thousands)
Revenues
---------
Advertising $ 52,515 $ 47,462 11 %
Other 2,506 2,687 (7)%
-------- -------- -----
Total revenues $ 55,021 $ 50,149 10 %
======== ======== =====
Operating profit $ 13,060 $ 14,521 (10)%
======== ======== =====
Revenues were 10 percent higher in the first quarter primarily as a result of
owning WFSB-Hartford/New Haven for the full quarter compared to less than one
month in the prior-year quarter. Excluding that impact, comparable revenues
were flat for the quarter. As with most television broadcasters, all of the
stations were affected by reduced ad spending by General Motors and local
automobile dealers due to the recent GM labor dispute, along with continued
softness in national advertising. Operating profit decreased 10 percent from
the prior-year quarter. The timing of the WFSB acquisition, which affected
revenues, had little impact on operating results. Intangible amortization
expense offset the station's operating cash flows in the seasonally slow
revenue period. In addition, investment spending, including programming and
news start-ups at WOFL-Orlando, WOGX-Ocala/Gainesville and KVVU-Las Vegas,
affected first quarter operating results.
Liquidity and Capital Resources
Quarters ended September 30 1998 1997 Change
--------------------------- -------- -------- --------
(in thousands)
Net earnings $ 18,811 $ 15,091 25%
========= ========= ====
Cash flows from operations $ 29,955 $ 15,003 100%
========= ========= ====
Cash flows from investing $ 7,966 $(335,086) nm
========= ========= ====
Cash flows from financing $ (37,042) $ 253,086 nm
========= ========= ====
Net increase (decrease) in
cash and cash equivalents $ 879 $ (66,997) nm
========= ========= ====
EBITDA $ 43,947 $ 36,521 20%
========= ========= ====
nm - not meaningful
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<PAGE>
Cash and cash equivalents increased by $0.9 million in the first quarter of
fiscal 1999 compared to a decrease in cash of $67.0 million in the prior-year
quarter. The change reflected cash invested for the acquisition of four
television stations in the prior-year quarter, net of long-term debt incurred.
Cash provided by operating activities was $30.0 million in the current quarter,
compared to $15.0 million in the prior-year quarter. Changes in working
capital items and increased operating cash flows (earnings plus depreciation
and amortization) were the primary factors in the growth. The changes in
working capital primarily related to the prior-year acquisitions of the
television stations and the timing of subscription acquisition mailings.
EBITDA is defined as earnings before interest, taxes, depreciation and
amortization. EBITDA is often used to analyze and compare companies on the
basis of operating performance and cash flow. Fiscal 1999 first-quarter EBITDA
increased 20 percent from the prior-year quarter due to improved operating
results. EBITDA is not adjusted for all noncash expenses or for working
capital changes, capital expenditures or 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.
The company has a credit agreement with a $210 million variable-rate term loan
and a $150 million variable-rate revolving credit facility. The term loan
requires the following annual principal payments on May 31 each year from 1999
through 2002, respectively: $40 million, $45 million, $50 million and $50
million. Any amounts owed under the revolving credit facility are due and
payable on May 31, 2002. At September 30, 1998, the debt consisted of $185
million outstanding under the term loan and $22 million outstanding under the
revolving credit facility. Funds for the payment of interest and principal on
the debt are expected to be provided by cash generated from future operating
activities. The credit agreement includes certain covenants. As of September
30, 1998, the company was in compliance with all debt covenants.
Meredith has utilized interest rate swap contracts to manage interest cost and
risk associated with possible increases in variable interest rates. Under these
contracts, Meredith pays fixed rates of interest while receiving floating rates
of interest based on three month LIBOR. The weighted-average interest rate at
September 30, 1998 was 6.75 percent. The company is exposed to credit-related
losses in the event of nonperformance by counterparties to financial
instruments. Management does not expect any counterparties to fail to meet
their obligations given the strong creditworthiness of the counterparties to
the agreements.
At September 30, 1998, the company also had $3.0 million in short-term
variable-rate debt outstanding under a bank line of credit agreement. The
interest rate at September 30, 1998 was approximately 6 percent.
In the first quarter of fiscal 1999, the company spent $22.4 million to
repurchase 510,000 shares of Meredith Corporation common stock at the then
current market prices. This compares with spending of $10.2 million for the
repurchase of 346,000 shares in the prior-year first quarter. The current
quarter totals include the repurchase of 270,000 shares under a put option
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<PAGE>
agreement entered into in fiscal 1998. As of September 30, 1998, the company
had put option agreements to repurchase approximately 1.9 million shares. The
market value of these shares at September 30, 1998, has been reclassified from
stockholders' equity to the temporary equity classification entitled, "Put
option agreements." At September 30, 1998, approximately 2.5 million shares
could be repurchased under existing authorizations 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, subject to market conditions.
Dividends paid in the first quarter of fiscal 1998 were $3.7 million, or 7
cents per share, compared with $3.5 million, or 6.5 cents per share, in the
prior-year period.
First quarter spending for property, plant and equipment decreased to $1.5
million from $8.4 million in the prior-year first quarter. The decrease
primarily resulted from higher prior-year spending for the construction of a
new office building and related improvements in Des Moines. The project was
completed late in fiscal 1998. Total capital expenditures for fiscal 1999 are
expected to be slightly lower than fiscal 1998. Spending will increase in
later quarters as several of the broadcasting stations begin the conversion to
digital technology and two stations prepare for the expansion of local news
programming. Funds for capital expenditures are expected to be provided by
available cash, including cash from operating activities or, if necessary,
borrowings under credit agreements.
At this time, management expects that cash on hand, internally-generated cash
flow and debt from credit agreements will provide funds for any additional
operating and recurring cash needs (e.g., working capital, cash dividends) for
foreseeable periods.
Year 2000
- ---------
The Year 2000 issue, common to most companies, concerns the inability of
information and noninformation systems to recognize and process date sensitive
information after 1999 due to the use of only the last two digits to refer to a
year. This problem could effect both information systems (software and
hardware) and other equipment that relies on microprocessors. Management
completed a company-wide evaluation of this impact on its computer systems,
applications and other date-sensitive equipment. Systems and equipment that are
not Year 2000 compliant have been identified and remediation efforts are in
process. Management estimates that nearly 25 percent of remediation efforts
were completed as of September 30, 1998. All remediation efforts and testing
of systems/equipment are expected to be completed by June 30, 1999.
The company is also in the process of monitoring the progress of material third
parties (vendors and suppliers) in their efforts to become Year 2000 compliant.
These third parties include, but are not limited to: magazine and book
printers, paper suppliers, magazine fulfillment providers, the U.S. Postal
Service, television networks, other television programming suppliers, mainframe
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<PAGE>
computer services suppliers, financial institutions and utilities. The company
has requested copies of the Year 2000 plans of these material third parties and
will monitor their performance against these plans.
Through September 30, 1998, the company has spent approximately $0.8 million to
address Year 2000 issues. Total costs to address Year 2000 issues are
currently estimated not to exceed $5 million and consist primarily of costs for
the remediation of internal systems and broadcasting equipment. Funds for
these costs are expected to be provided by the operating cash flows of the
company. The majority of the internal system remediation efforts relate to
staff costs of on-staff systems engineers and therefore, are not incremental
costs.
Meredith Corporation could be faced with severe consequences if Year 2000
issues are not identified and resolved in a timely manner by the company and
material third parties. A worst case scenario would result in the short-term
inability of the company to produce/distribute magazines or broadcast
television programming due to unresolved year 2000 issues. This would result in
lost revenues; however, the amount would be dependent on the length and nature
of the disruption, which cannot be predicted or estimated. In light of the
possible consequences, the company is devoting the resources needed to address
Year 2000 issues in a timely manner. Management has contracted with an outside
consultant to monitor the progress of Meredith's Year 2000 efforts and provide
update reports to the audit committee of the board of directors at each
quarterly meeting. While management expects a successful resolution of these
issues, there can be no guarantee that material third parties, on which
Meredith relies, will address all Year 2000 issues on a timely basis or that
their failure to successfully address all issues would not have an adverse
effect on the company.
Meredith is in the process of developing contingency plans in case business
interruptions do occur. Management expects these plans to be completed by
June 30, 1999.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The company is subject to certain market risks as a result of the use of
financial instruments. The market risk inherent in the company's financial
instruments subject to such risks is the potential market value loss arising
from adverse changes in interest rates and/or the potential effect of changes
in the market price of company common stock on the company's liquidity.
Readers are referred to the company's Form 10-K for the year ended June 30,
1998 for a more complete discussion of these risks.
The company uses interest rate swap agreements to effectively fix the interest
rate on its debt. Therefore, there is no earnings or liquidity risk associated
with changes in interest rates. The fair market value of the interest rate
swaps is the estimated amount, based on discounted cash flows, the company
would pay or receive to terminate the swap agreements. At September 30, 1998,
a 10 percent decrease in interest rates would result in a $1.8 million increase
in the current cost of $6.0 million to terminate the swap agreements.
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<PAGE>
At September 30, 1998, the company had put option agreements outstanding to
repurchase up to 1.9 million common shares. The risk to the company of an
increase in share price is from a liquidity perspective. Based on the
September 30, 1998 closing price, a 10 percent increase in share price would
cause the potential repurchase cost for these put options to increase by $6.2
million.
There has been no material change in the market risk associated with program
rights payable since June 30, 1998.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
2.1) Kelly Television Co. Agreement and Plan of Merger among Kelly
Television Co., J. S. Kelly L.L.C., G. G. Kelly L.L.C., Robert E.
Kelly, Meredith Corporation and KCPQ Acquisition Corp. dated as of
August 21, 1998.
2.2) Asset Exchange Agreement dated August 21, 1998, among Tribune
Broadcasting Company, WGNX Inc., Meredith Corporation and KCPQ
Acquisition Corp., with respect to KCPQ (TV), Seattle,
Washington and WGNX (TV), Atlanta, Georgia.
10.1) Sample Meredith Corporation Nonqualified Stock Option Award
Agreement under 1996 Stock Incentive Plan between Meredith
Corporation and named executive officers.
10.2) Statement re: Meredith Corporation Nonqualified Stock Option Award
Agreements under 1996 Stock Incentive Plan between Meredith
Corporation and named executive officers.
27) Financial Data Schedule
99) Additional financial information from the Company's first quarter
press release dated October 21, 1998.
(b) Reports on Form 8-K
The company filed a report on Form 8-K on July 20, 1998, reporting under
Item 5 that it had agreed to sell the net assets of the Better Homes and
Gardens Real Estate Service to GMAC Home Services, Inc.
The company filed a report on Form 8-K on August 26, 1998, reporting
under Item 5 that it had agreed to acquire WGNX-TV, the CBS affiliate
serving Atlanta. The planned acquisition involves the purchase of KCPQ-TV,
a FOX affiliate in Seattle currently owned by the Kelly Television Co., and
the subsequent trade of KCPQ with Tribune Company for WGNX-TV in Atlanta.
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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
(Stephen M. Lacy)
Stephen M. Lacy
Vice President - Chief Financial Officer
(Principal Financial and
Accounting Officer)
Date: November 12, 1998
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Index to Exhibits
Exhibit
Number Item
------- -----------------------------------------------------------
2.1 Kelly Television Co. Agreement and Plan of Merger among Kelly
Television Co., J. S. Kelly L.L.C., G. G. Kelly L.L.C.,
Robert E. Kelly, Meredith Corporation and KCPQ Acquisition
Corp. dated as of August 21, 1998.*
2.2 Asset Exchange Agreement dated August 21, 1998, among Tribune
Broadcasting Company, WGNX Inc., Meredith Corporation and
KCPQ Acquisition Corp., with respect to KCPQ (TV), Seattle,
Washington and WGNX (TV), Atlanta, Georgia.*
10.1 Sample Meredith Corporation Nonqualified Stock Option Award
Agreement under 1996 Stock Incentive Plan between Meredith
Corporation and named executive officers.
10.2 Statement re: Meredith Corporation Nonqualified Stock Option
Award Agreements under 1996 Stock Incentive Plan between
Meredith Corporation and named executive officers.
27 Financial Data Schedule
99 Additional financial information from the Company's first
quarter press release dated October 21, 1998.
* Supplementary Exhibits and Schedules to these Agreements, as listed on page 5
of Exhibit 2.1 and pages 4 and 5 of Exhibit 2.2 are not included in this Form
10-Q filing. Copies of any of the Exhibits and/or Schedules to these
Agreements will be furnished supplementary to the Commission upon request.
Exhibit 2.1
-----------
KELLY TELEVISION CO.
AGREEMENT AND PLAN OF MERGER
dated as of August 21, 1998
among
KELLY TELEVISION CO.,
J.S. KELLY L.L.C.,
G.G. KELLY L.L.C.,
ROBERT E. KELLY,
MEREDITH CORPORATION
and
KCPQ ACQUISITION CORP.
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<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.01. Certain Defined Terms.............................................. 6
1.02. Other Defined Terms................................................ 8
ARTICLE II
THE MERGER
2.01. The Merger......................................................... 9
2.02. Closing............................................................ 10
2.03. Effective Time..................................................... 10
2.04. Effect of the Merger............................................... 11
2.05. Articles of Incorporation; Bylaws.................................. 11
2.06. Directors and Officers of Surviving Corporation.................... 11
2.07. Merger Consideration............................................... 11
2.08. Escrow Deposit..................................................... 12
2.09. Payment of Merger Consideration.................................... 12
2.10. Working Capital Adjustments........................................ 12
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF KTC
3.01. Organization of KTC................................................ 15
3.02. Authorization, Execution and Delivery by KTC....................... 15
3.03. Partners; Partnership Interests.................................... 15
3.04. No Conflict........................................................ 15
3.05. Consents and Approvals............................................. 16
3.06. Financial Information.............................................. 16
3.07. Absence of Undisclosed Liabilities................................. 16
3.08. Absence of Certain Changes or Events............................... 16
3.09. Absence of Litigation.............................................. 18
3.10. Compliance with Laws............................................... 18
3.11. FCC Licenses and Reports and Records; Government Permits........... 18
3.12. Material Contracts................................................. 19
3.13. Real Property...................................................... 20
3.14. Employment Matters................................................. 21
3.15. Taxes.............................................................. 22
3.16. Personal Property.................................................. 22
3.17. Personal Property Leases........................................... 22
3.18. Intellectual Property.............................................. 23
3.19. Title to Assets.................................................... 23
3.20. Accounts Receivable................................................ 23
3.21. Insurance.......................................................... 23
3.22. Environmental Protection........................................... 24
3.23. Availability of Assets............................................. 24
3.24. Business of KTC.................................................... 24
3.25. Brokers............................................................ 24
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<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PARTNERS
4.01. Incorporation of such Partner; Authorization, Execution and
Delivery by Such Partner......................................... 25
4.02. No Conflict........................................................ 25
4.03. Consents and Approvals............................................. 25
4.04. Title to Partnership Interests..................................... 26
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
THE PURCHASER AND MERGER SUB
5.01. Incorporation of the Purchaser and Merger Sub...................... 26
5.02. Authorization, Execution and Delivery by the Purchaser and
Merger Sub....................................................... 26
5.03. No Conflict........................................................ 26
5.04. Consents and Approvals............................................. 27
5.05. Absence of Litigation.............................................. 27
5.06. Financing.......................................................... 27
5.07. Ownership of Merger Sub; No Prior Activities....................... 27
5.08. Qualification of Purchaser......................................... 27
5.09. Brokers............................................................ 28
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01. Conduct of Business Prior to the Effective Time.................... 28
6.02. Access to Information.............................................. 30
6.03. Confidentiality.................................................... 30
6.04. Regulatory Consents and Approvals; Third Party Consents............ 30
6.05. Investigation...................................................... 31
6.06. Change of Name of Business......................................... 31
6.07. Interim Financial Statements....................................... 31
6.08. Funds Necessary to Pay the KTC Purchase Price...................... 31
6.09. Further Action..................................................... 32
ARTICLE VII
EMPLOYEE MATTERS
7.01. Continuation of Benefits........................................... 32
7.02. Service Credit..................................................... 32
7.03. Subsequent Purchaser............................................... 32
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<PAGE>
ARTICLE VIII
TAX MATTERS
8.01. General............................................................ 32
8.02. Allocation of Tax Liabilities; Tax Indemnities..................... 32
8.03. Tax Returns........................................................ 33
8.04. Refunds and Tax Benefits........................................... 34
8.05. Contests........................................................... 35
8.06. Conveyance Taxes................................................... 36
8.07. Cooperation on Tax Matters......................................... 36
8.08. Allocation of KTC Purchase Price................................... 36
8.09. Miscellaneous...................................................... 37
ARTICLE IX
CONDITIONS TO THE MERGER
9.01. Conditions to Obligations of KTC and the Partners.................. 37
9.02. Conditions to Obligations of the Purchaser and Merger Sub.......... 38
ARTICLE X
INDEMNIFICATION
10.01. Survival of Representations and Warranties; Covenants and
Agreements...................................................... 40
10.02. Indemnification by the Indemnifying Partners...................... 40
10.03. Indemnification by the Purchaser.................................. 41
10.04. Indemnification Procedures........................................ 42
10.05. Tax Matters....................................................... 43
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
11.01. Termination....................................................... 43
11.02. Effect of Termination............................................. 44
11.03. Waiver............................................................ 44
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ARTICLE XII
GENERAL PROVISIONS
12.01. Expenses.......................................................... 44
12.02. Notices........................................................... 44
12.03. Public Announcements.............................................. 45
12.04. Headings.......................................................... 45
12.05. Severability...................................................... 45
12.06. Entire Agreement.................................................. 46
12.07. Assignment........................................................ 46
12.08. No Third-Party Beneficiaries...................................... 46
12.09. Amendment......................................................... 46
12.10. Governing Law..................................................... 46
12.11. Counterparts...................................................... 46
12.12. Board Approval.................................................... 46
Exhibits and Schedules
KTC Disclosure Schedule
Purchase Disclosure Schedule
Exhibit 2.08 Escrow Agreement
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<PAGE>
KELLY TELEVISION CO. AGREEMENT AND PLAN OF MERGER, dated as of August 21,
1998, among KELLY TELEVISION CO., a Washington limited partnership ("KTC"),
J.S. KELLY L.L.C., a Delaware limited liability company ("JSK" or the "General
Partner"), G.G. KELLY L.L.C., a Delaware limited liability company ("GGK"),
ROBERT E. KELLY (each of JSK, GGK and Robert E. Kelly being a "Partner" and,
together, the "Partners"), MEREDITH CORPORATION, an Iowa corporation (the
"Purchaser"), and KCPQ ACQUISITION CORP., a Washington corporation and wholly
owned subsidiary of the Purchaser ("Merger Sub").
W I T N E S S E T H :
---------------------
WHEREAS, KTC owns and operates the television broadcast station KCPQ-TV,
channel 13, Seattle-Tacoma, Washington (the "KCPQ Station" or the "Station");
WHEREAS, JSK is the sole general partner of KTC pursuant to the Amended
and Restated Limited Partnership Agreement of Kelly Television Co. effective as
of October 29, 1997 (the "KTC Partnership Agreement");
WHEREAS, JSK, GGK and Robert E. Kelly are all of the limited partners of
KTC pursuant to the KTC Partnership Agreement;
WHEREAS, KTC and each of the Partners have determined that it is in their
respective best interests, and the Boards of Directors of the Purchaser and
Merger Sub have each determined that it is in the best interests of their
respective shareholders, for the Purchaser to acquire KTC upon the terms and
subject to the conditions set forth herein;
WHEREAS, in furtherance of such acquisition, KTC and the Partners and the
respective Boards of Directors of the Purchaser and Merger Sub have each
approved the merger (the "Merger") of KTC with and into Merger Sub with Merger
Sub being the surviving corporation in the Merger in accordance with the
Washington Business Corporation Act (the "WBCA") and the Washington Revised
Limited Partnership Act (the "WRLPA") and upon the terms and subject to the
conditions set forth herein;
WHEREAS, KTC, the Partners, the Purchaser and Merger Sub desire to make
certain representations, warranties, covenants and agreements in connection
with the Merger and also to prescribe certain conditions to the Merger;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
agreements and covenants hereinafter set forth, and intending to be legally
bound hereby, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
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<PAGE>
"Agreement" means this Kelly Television Co. Agreement and Plan of Merger,
dated as of August [___], 1998, among KTC, the Partners, the Purchaser and
Merger Sub (including the KTC Disclosure Schedule) and all amendments hereto
made in accordance with Section 12.10.
"Business" means the business of KTC as conducted as of the date hereof.
"Business Day" means any day that is not a Saturday, a Sunday or other day
on which banks are required or authorized by law to be closed in the State of
Washington.
"Code" means the Internal Revenue Code of 1986, as amended.
"Communications Act" means the Communications Act of 1934, as amended, and
the rules and regulations thereunder.
"Contaminant" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, or any constituent of any such substance or waste, in each
case to the extent regulated by environmental, health or safety Requirements of
Law.
"Credit Agreements" means (i) the Credit Agreement dated as of October 28,
1997 among JSK and GGK as borrowers, KBC and KTC as guarantors, the financial
institutions party thereof as banks and Bank of America National Trust and
Savings Association as agent, and related interest rate swap agreements,
(ii) the Security Agreement dated as of October 28, 1997 among JSK and GGK as
borrowers, KBC and KTC as grantors, and Bank of America National Trust and
Savings Association as agent, (iii) the Copyright Security Agreement dated as
of October 28, 1997 among JSK, GGK, KBC and KTC as grantors, and Bank of
America National Trust and Savings Association as agent, and (iv) the Trademark
Security Agreement dated as of October 28, 1997 among JSK, GGK, KBC and KTC as
grantors, and Bank of America National Trust and Savings Association as agent.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"FCC" means the Federal Communications Commission or any successor entity.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations thereunder.
"KTC Disclosure Schedule" means the Disclosure Schedule dated as of the
date hereof delivered to the Purchaser by KTC and the Partners.
"knowledge of the Partners" or "Partners' knowledge" means the actual
knowledge of Jon S. Kelly and Gregory G. Kelly.
"KBC" means Kelly Broadcasting Co., a California limited partnership,
whose partners are JSK, GGK and Robert E. Kelly and which (i) owns and operates
the television broadcast station KCRA-TV, channel 3, Sacramento, California
(the "KCRA Station"), and (ii) programs and sells air time for the television
broadcast station KQCA-TV, channel 58, Sacramento, California (the "KQCA
Station") pursuant to the Time Brokerage Agreement, dated December 8, 1994,
between KBC and Channel 58, Inc. (as amended on January 1, 1997 and August 6,
1998, the "LMA").
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<PAGE>
"Material Adverse Effect" means any change in, or effect on KTC or the
Business that is or is reasonably likely to be materially adverse to the
results of operations or the financial condition of KTC or the Business, taken
as a whole, except for any such changes or effects affecting the U.S. economy
or the broadcasting industry in general.
"Release" means any release, spill, emission, leaking, pumping, injection,
deposit, disposal discharge, dispersal, leaching or migration into the indoor
or outdoor environment or into or out of any property, including the movement
of Contaminants through or in the air, soil, surface water, groundwater or
property.
"Remedial Action" means actions required to (a) clean up, remove, treat or
in any other way address Contaminants in the indoor or outdoor environment;
(b) prevent the Release or threat of Release or minimize the further Release of
Contaminants so they do not migrate or endanger or threaten to endanger public
health or welfare or the indoor or outdoor environment; or (c) perform pre-
remedial studies and investigations and post-remedial monitoring and care.
"Requirements of Law" means any foreign, federal, state or local law, rule
or regulation, Governmental Permit or other binding determination of any
governmental body.
"Return" means any return, report or form related to Taxes.
"Subsidiary" or "Subsidiaries" means any and all corporations,
partnerships, joint ventures, associations, and other entities in which the
majority of voting common stock or other equity interest is held by a party
directly or indirectly through one or more intermediaries.
"Tax" or Taxes" means all income, gross receipts, sales, use, employment,
franchise, profits, property, transfer or other taxes, fees, stamp taxes and
duties, assessments or charges of any kind whatsoever (whether payable directly
or by withholding), together with any interest and any penalties, additions to
tax or additional amounts imposed by any taxing authority with respect thereto.
SECTION 1.02. Other Defined Terms. The following terms shall have the
meanings defined for such terms in the Sections of this Agreement set forth
below:
Term Section
---- -------
Articles of Merger 2.03
Allocation 8.08
Claim 6.06
Closing 2.02
Closing Working Capital Estimate 2.10(a)
Confidentiality Agreement 6.03
Contest 8.05(c)
Effective Time 2.03
Escrow Agent 2.08
Escrow Agreement 2.08
Escrow Deposit 2.08
FCC Licenses 3.11(a)
FCC Order 9.02(d)
Fox 6.04(d)
Fox Affiliation Agreement 6.04(d)
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<PAGE>
General Partner preamble
GGK preamble
GGK KTC Partnership Interest 2.07(a)
GGK KTC Purchase Price 2.07(a)
Governmental Permits 3.11
Independent Accounting Firm 2.10(e)
IRS 3.14(a)
JSK preamble
JSK KTC Partnership Interest 2.07(b)
JSK KTC Purchase Price 2.07(b)
KTC preamble
KTC Accounting Policies 2.10(c)
KTC Benefit Plans 3.14(a)
KTC Partnership Agreement recitals
KTC Purchase Price 2.07
KTC's Accountants 2.10(c)
Loss 10.02(a)
Management Indemnified Parties 6.06
Material Contracts 3.12(a)
Merger recitals
Merger Sub preamble
Merrill Lynch 3.25
Operating Contracts 3.12(a)
Partner preamble
Post-Effective Time Tax Benefit 8.04(b)
Program Contracts 3.12(a)
Purchaser preamble
Purchaser's Accountants 2.10(a)
Reference Balance Sheet 3.07
REK KTC Partnership Interest 2.07(c)
REK KTC Purchase Price 2.07(c)
Statement of Working Capital 2.10(c)
Station recitals
Straddle Period 8.02(a)
Surviving Corporation 2.01
Target Closing Working Capital 2.10(b)
Third Party Claims 10.04
WBCA recitals
WRLPA recitals
Working Capital 2.10(i)
ARTICLE II
THE MERGER
SECTION 2.01. The Merger. Upon the terms and conditions of this
Agreement, and in accordance with the WBCA and the WRLPA, at the Effective Time
(as defined in Section 2.03) KTC shall be merged with and into Merger Sub. As
a result of the Merger, the separate existence of KTC shall cease and Merger
Sub shall continue as the surviving corporation of the Merger. Merger Sub as
the surviving corporation after the Merger is hereinafter sometimes referred to
as the "Surviving Corporation".
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<PAGE>
SECTION 2.02. Closing. (a) Subject to paragraph (b) of this Section 2.02,
the closing (the "Closing") of the Merger shall take place at 10:00 a.m., San
Francisco time, on a date that is on or after the later to occur of (i) January
1, 1999, and (ii) the third Business Day following the satisfaction or waiver
of all of the conditions to the obligations of the parties set forth in Article
IX, at the offices of Shearman & Sterling, 555 California Street, Suite 2000,
San Francisco, California, or at such other time or on such other date or at
such other place as the parties may mutually agree upon in writing.
(b) Notwithstanding anything to the contrary in paragraph (a), the
Purchaser may, by delivering to the Partners a written notice (the
"Postponement Notice"), elect to postpone the Closing to a date (the "Extended
Closing Date") no later than 60 days from the date of Closing otherwise
required to occur pursuant to paragraph (a) if, and only if, the FCC has not
issued an order or decision that grants, without material adverse condition,
all consents or approvals required under the Communications Act for the
assignment of the license of WGNX(TV) from Tribune Broadcasting Company
("Tribune") to Purchaser as contemplated in the Asset Exchange Agreement (the
"Exchange Agreement") of even date between Tribune and its affiliate and the
Purchaser and Merger Sub (the "WGNX Assignment"). For purposes of this
provision, the FCC shall not be deemed to have granted its approval to the WGNX
Assignment if a petition to deny or other material objection has been filed
with the FCC with respect to the application for approval of the WGNX
Assignment and there exists a significant risk that the FCC's approval of the
WGNX Assignment will not become final (i.e., no longer subject to
administrative or judicial review). If the Purchaser shall deliver to the
Partners the Postponement Notice, the Purchaser agrees that (i) the conditions
to Closing set forth in Section 9.02(a) (solely as such condition relates to
representations and warranties), (d), (e) and (h) shall be deemed to have been
satisfied as of the Extended Closing Date and in no event shall the Purchaser
be permitted not to close the Merger as contemplated by this Agreement by
claiming such conditions have not been satisfied and (ii) for purposes of
determining whether the Purchaser has any right to indemnification pursuant to
Section 10.02(a) for breaches of representations and warranties or whether a
matter gives rise to an Environmental Indemnity the Closing and the Effective
Time shall be deemed to have occurred on the date of the Postponement Notice
(i.e., any breaches of representations and warranties or matters giving rise to
an Environmental Indemnity occurring after the date of the Postponement Notice
shall not form the basis for the Purchaser to seek indemnification from the
Partners).
(c) At the Closing (i) the parties shall deliver the certificates and
other documents, and take such other actions, required by this Article II and
Article IX, and (ii) the General Partner and the appropriate officers of the
Purchaser and Merger Sub shall execute and acknowledge the Articles of Merger
(as defined in Section 2.03).
SECTION 2.03. Effective Time. As promptly as practicable following the
Closing, the parties hereto shall cause the Merger to be consummated by filing
articles of merger (the "Articles of Merger") with the Secretary of State of
the State of Washington, in such form as required by, and executed in
accordance with the relevant provisions of, the WBCA and the WRLPA. The Merger
shall become effective at such time as the Agreement of Merger is duly filed
with the Secretary of State of the State of Washington or at such later time as
may be agreed in writing by each of the parties hereto and specified in the
Agreement of Merger (the date and time that the Merger becomes effective being
the "Effective Time").
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<PAGE>
SECTION 2.04. Effect of the Merger. At and after the Effective Time, the
Merger shall have the effects set forth in the WBCA and the WRLPA. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time all the property, rights, privileges, powers and franchises of KTC and
Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities
and duties of KTC and Merger Sub shall become the debts, liabilities and duties
of the Surviving Corporation.
SECTION 2.05. Articles of Incorporation; Bylaws. (a) Articles of
Incorporation. At the Effective Time, the Articles of Incorporation of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation, until thereafter
amended as provided by law and such Articles of Incorporation.
(b) Bylaws. At the Effective Time, the Bylaws of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation, until thereafter amended as provided by the WBCA, the
Articles of Incorporation of the Surviving Corporation and such Bylaws.
SECTION 2.06. Directors and Officers of Surviving Corporation. (a) The
directors of Merger Sub immediately prior to the Effective Time shall be the
initial directors of the Surviving Corporation, each to hold office in
accordance with the Articles of Incorporation and Bylaws of the Surviving
Corporation until the earlier of their resignation or removal or until their
respective successors are duly elected or appointed and qualified, as the case
may be.
(b) The officers of Merger Sub immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation, each to hold office
in accordance with the Articles of Incorporation and Bylaws of the Surviving
Corporation until the earlier of their resignation or removal or until their
respective successors are duly elected or appointed and qualified, as the case
may be.
SECTION 2.07. Merger Consideration. At the Effective Time, by virtue of
the Merger and without any action on the part of Purchaser, Merger Sub, KTC or
the Partners, the partnership interests in KTC shall be canceled and converted
into the right to receive an aggregate of $380,000,000.00 in cash, subject to
adjustment as set forth in Section 2.10(b) below (as adjusted, the "KTC
Purchase Price"), which shall be allocated as follows:
(a) GGK KTC Partnership Interest. At the Effective Time, the 28.93525%
limited partnership interest in KTC held by GGK (the "GGK KTC Partnership
Interest") shall be canceled and converted into the right to receive, and the
Purchaser shall pay to GGK at the Effective Time in accordance with Section
2.09, $109,953,950.00 in cash, subject to adjustment as set forth in Section
2.10(b) below (as adjusted, the "GGK KTC Purchase Price");
(b) JSK KTC Partnership Interest. At the Effective Time, the 0.20%
general partnership interest and 65.86475% limited partnership interest in KTC
held by JSK (collectively, the "JSK KTC Partnership Interest") shall be
canceled and converted into the right to receive, and the Purchaser shall pay
to JSK at the Effective Time in accordance with Section2.09, $251,046,050.00 in
cash, subject to adjustment as set forth in Section 2.10(b) below (as adjusted,
the "JSK KTC Purchase Price"); and
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<PAGE>
(c) REK KTC Partnership Interest. At the Effective Time, the 5.0%
limited partnership interest in KTC held by Robert E. Kelly (the "REK KTC
Partnership Interest") shall be canceled and converted into the right to
receive, and the Purchaser shall pay to Robert E. Kelly at the Effective Time
in accordance with Section 2.09, $19,000,000.00 in cash, subject to adjustment
as set forth in Section 2.10(b) below (as adjusted, the "REK KTC Purchase
Price").
SECTION 2.08. Escrow Deposit. Simultaneously with the execution of the
Escrow Agreement, the Purchaser shall deliver to an escrow agent (the "Escrow
Agent") reasonably satisfactory to the parties, a good faith deposit in the
amount equal to $1,000,000 of the KTC Purchase Price (the "Escrow Deposit"),
which shall be held in escrow by the Escrow Agent pursuant to the terms of the
Escrow Agreement attached hereto as Exhibit 2.08 (the "Escrow Agreement"),
which shall be entered into by the parties promptly after the execution of this
Agreement.
SECTION 2.09. Payment of Merger Consideration. (a) Subject to the terms
and conditions of the Escrow Agreement, at the Effective Time, the Escrow Agent
shall deliver to JSK, in partial satisfaction of the JSK KTC Purchase Price,
the Escrow Deposit and accrued interest thereon, by wire transfer of
immediately available funds to an account designated by JSK in writing at or
prior to the Effective Time.
(b) At the Effective Time, the Purchaser shall deliver to JSK an amount
equal to the JSK KTC Purchase Price less the Escrow Deposit by wire transfer of
immediately available funds to an account designated by JSK in writing at or
prior to the Effective Time.
(c) At the Effective Time, the Purchaser shall deliver to GGK and Robert
E. Kelly the GGK KTC Purchase Price and the REK KTC Purchase Price,
respectively, by wire transfer of immediately available funds to an account
designated by such Partner in writing at or prior to the Effective Time.
SECTION 2.10. Working Capital Adjustments. (a) Estimated Closing Working
Capital. Not later than three Business Days prior to the date for the Closing,
the Partners shall deliver to the Purchaser their best estimate of the Working
Capital (as hereinafter defined) of KTC as of the Effective Time based on the
most recently available financial statements of KTC (the "Closing Working
Capital Estimate"). In connection with the preparation and review of the
Closing Working Capital Estimate, employees of the Purchaser and KPMG Peat
Marwick, its independent public accountants (the "Purchaser's Accountants"),
shall be entitled to review the work papers of the Partners prepared in
connection with calculating the Closing Working Capital Estimate and shall be
entitled to discuss the Closing Working Capital Estimate with the Partners
prior to the Effective Time.
(b) Closing Purchase Price Adjustments in respect of Closing Working
Capital. (i) In the event that the Closing Working Capital Estimate exceeds
$4,000,000 (the "Target Closing Working Capital"), the KTC Purchase Price shall
be increased by an amount equal to such excess, which amount shall be divided
among the Partners in proportion to the respective amounts to be received by
each such Partner pursuant to Section 2.07 hereof, and (ii) in the event that
the Closing Working Capital Estimate is less than the Target Closing Working
Capital, the KTC Purchase Price shall be decreased by an amount equal to such
deficit, which amount payable shall be divided among the Partners in proportion
to the respective amounts to be received by each such Partner pursuant to
Section 2.07 hereof.
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(c) Statement of Working Capital. As soon as practicable, but in any
event within 60 calendar days following the Effective Time, the Partners shall
prepare and deliver to the Purchaser a statement of the Working Capital of KTC
as of the Effective Time (including the balance sheet of KTC as of the
Effective Time) (the "Statement of Working Capital"), together with an agreed
upon procedures report thereon of Pricewaterhouse Coopers LLP, independent
accountants for KTC ("KTC's Accountants"), stating that the Statement of
Working Capital of KTC as of the Effective Time has been prepared in accordance
with generally accepted accounting principles as applied by KTC ("KTC
Accounting Policies") on a basis consistent with the preparation of the audited
balance sheet of KTC as at December 31, 1997.
(d) Cooperation. During the preparation of the Statement of Working
Capital by the Partners and the period of any dispute referred to in Section
2.10(e), (i) employees of the Purchaser and the Purchaser's Accountants shall
be entitled to review the work papers prepared by KTC's Accountants in
connection with the Statement of Working Capital and shall be entitled to
discuss the Statement of Working Capital with KTC's Accountants, in each case
at mutually agreeable times as work progresses during the preparation of the
Statement of Working Capital, and (ii) the Purchaser shall provide KTC's
Accountants full access to the books, records, facilities and employees of KTC
and shall cooperate fully with KTC's Accountants in the preparation of the
Statement of Working Capital and in investigating the basis for any such
dispute.
(e) Disputes.
(i) Subject to Section 2.10(e)(ii), the Statement of Working Capital
delivered by the Partners to the Purchaser and Purchaser's Accountants
shall be final, binding and conclusive on the Partners and the Purchaser.
(ii) The Purchaser may dispute any amounts reflected on the
Statement of Working Capital, but only on the basis that the Statement of
Working Capital does not present fairly the Working Capital of KTC as of
the Effective Time in accordance with KTC Accounting Policies; provided,
however, that the Purchaser shall notify the Partners in writing of each
disputed item, specifying the amount thereof in dispute and setting
forth, in reasonable detail, the basis for such dispute, within 10
Business Days after receipt from the Partners of the Statement of Working
Capital. In the event of such a dispute, the Purchaser and the Partners
shall attempt to reconcile their differences and any resolution by them
as to any disputed amounts shall be final, binding and conclusive on the
Purchaser and the Partners. If the Purchaser and the Partners are unable
to reach a resolution with such effect within 10 calendar days of
Purchaser's written notice of dispute to the Partners, the Purchaser and
the Partners shall submit the items remaining in dispute for resolution to
an independent accounting firm of national reputation mutually appointed
by the Purchaser and the Partners (the "Independent Accounting Firm"),
which shall, within 30 calendar days of such submission, determine and
report to the Purchaser and the Partners upon such remaining disputed
items and such report shall be final, binding and conclusive on the
Purchaser and the Partners. The Purchaser shall bear such proportion of
the fees and disbursements of the Independent Accounting Firm that the
aggregate amount of such remaining disputed items so submitted to the
Independent Accounting Firm that is unsuccessfully disputed by the
Purchaser (as finally determined by the Independent Accounting Firm) bears
to the total amount of such remaining disputed items so submitted (with
the Partners bearing the remainder of such fees and disbursements).
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(f) Certain Adjustments. The Statement of Working Capital shall be
deemed final for the purposes of this Section 2.10 upon the earliest of (i) the
failure of the Purchaser to notify the Partners of a dispute within 10 Business
Days of the Partners' delivery of the Statement of Working Capital to the
Purchaser, and (ii) the resolution of all disputes pursuant to Section 2.10(e).
Within three Business Days of the Statement of Working Capital being deemed
final:
(i) in the event that the Working Capital of KTC set forth on the
Statement of Working Capital is less than the Closing Working Capital
Estimate, the Partners shall pay to the Purchaser, in immediately
available funds, an aggregate amount equal to such deficiency,
which amount payable shall be divided among the Partners in proportion to
the respective amounts to be received by each such Partner pursuant to
Section 2.07 hereof; or
(ii) in the event that the Working Capital of KTC set forth on the
Statement of Working Capital exceeds the Closing Working Capital
Estimate, the Purchaser shall pay, or shall cause the Surviving
Corporation to pay, to the Partners, in immediately available funds, an
aggregate amount equal to such excess, which amount shall be divided
among the Partners in proportion to the respective amounts to be received
by each such Partner pursuant to Section 2.07 hereof.
(g) Interest. Any payment required to be made by the Purchaser or the
Partners pursuant to this Section 2.10 shall bear interest from the Effective
Time through the date of payment at the rate announced from time to time by
Bank of America as its prime rate, calculated from the Effective Time to the
date of such payment.
(h) Effect of Adjustments. All amounts paid by the Partners or the
Purchaser pursuant to this Section 2.10 shall constitute adjustments to the
consideration paid in the Merger.
(i) Working Capital. For purposes of this Section 2.10, "Working Capital"
means:
(a) all accounts receivable (excluding trade/barter receivables)
generated by KTC, less the allowance for doubtful accounts, reflected on
the balance sheet of KTC as of the Effective Time; plus
(b) the amount of inventory (exclusive of any amounts relating to
programming or broadcast rights) reflected on the balance sheet of KTC as
of the Effective Time; plus
(c) the amount of other current assets (exclusive of any amounts relating
to programming or broadcast rights) reflected on the balance sheet of KTC
as of the Effective Time; minus
(d) the amount of accounts payable (excluding trade/barter payables and
amounts relating to programming or broadcast rights) and accrued equipment
rentals of KTC reflected on the balance sheet of KTC as of the Effective
Time; minus
(e) the amount of accrued salary, payroll and wages and accrued vacation
and sick pay reflected on the balance sheet of KTC as of the Effective
Time; minus
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(f) the amount of any accrued accounting fees or expenses reflected on
the balance sheet of KTC as of the Effective Time; minus
(g) the amount of any other accrued current liabilities (exclusive of
amounts relating to programming or broadcast rights) reflected on the
balance sheet of KTC as of the Effective Time; minus
(h) the amount of any accrued Taxes reflected on the balance sheet of KTC
as of the Effective Time.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF KTC
KTC hereby represents and warrants to the Purchaser as follows:
SECTION 3.01. Organization of KTC. KTC is a limited partnership duly
formed, validly existing and in good standing under the laws of the State of
Washington and has all necessary partnership power and authority to own,
operate or lease the properties and assets now owned, operated or leased by KTC
and has all necessary partnership power and authority to enter into this
Agreement, to carry out its obligations hereunder and to consummate the
transactions contemplated hereby. KTC does not have any Subsidiaries.
SECTION 3.02. Authorization, Execution and Delivery by KTC. The
execution and delivery of this Agreement by KTC, the performance by KTC of its
obligations hereunder and the consummation by KTC of the transactions
contemplated hereby have been duly authorized by all requisite partnership
action on the part of KTC. This Agreement has been duly executed and delivered
by KTC, and (assuming due authorization, execution and delivery by the other
parties hereto) this Agreement constitutes a legal, valid and binding
obligation of KTC enforceable against KTC in accordance with its terms, subject
to the effect of any applicable bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting creditors' rights generally and subject,
as to enforceability, to the effect of general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at
law).
SECTION 3.03. Partners; Partnership Interests. As of the date of this
Agreement and as of the Closing, the sole partners of KTC are and shall be JSK
as general partner and limited partner, GGK as limited partner and Robert E.
Kelly as limited partner. The ownership interest in KTC of each Partner is as
set forth in Section 3.03 of the KTC Disclosure Schedule.
SECTION 3.04. No Conflict. Assuming all consents, approvals,
authorizations and other actions described in Section 3.05 have been obtained
and all filings and notifications listed in Section 3.05 of the KTC Disclosure
Schedule have been made, and except as may result from any facts or
circumstances relating solely to the Purchaser or as described in Section 3.04
of the KTC Disclosure Schedule, the execution, delivery and performance of this
Agreement by KTC do not and will not (a) violate or conflict with the KTC
Partnership Agreement, (b) violate or conflict with any law, rule, regulation,
order or judgment applicable to KTC or the Business or (c) result in any breach
of, or constitute a default under, or give to others any rights of termination
or amendment of, or result in the creation of any lien or other encumbrance on
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any of the assets or properties of KTC pursuant to, any contract, agreement or
license relating to such assets or properties to which KTC is a party or by
which any of such assets or properties is bound or affected, except as to
contracts that are not Material Contracts.
SECTION 3.05. Consents and Approvals. The execution and delivery of this
Agreement by KTC do not, and the performance of this Agreement by KTC will not,
require any consent, approval, authorization or other action by, or filing with
or notification to, any governmental or regulatory authority or third party
(which is a counter-party to a Material Contract), except (a) as described in
Section 3.05 of the KTC Disclosure Schedule, (b) as may be required under the
Communications Act (including in connection with the FCC Licenses relating to
the Station), (c) the notification requirements of the HSR Act and (d) as may
be necessary as a result of any facts or circumstances relating solely to the
Purchaser.
SECTION 3.06. Financial Information. Section 3.06 of the KTC Disclosure
Schedule contains (i) the audited balance sheets of KTC as of December 31, 1996
and 1997 and the related audited statements of income, cash flows and partners'
equity of KTC for the years then ended and (ii) the unaudited balance sheet of
KTC as of June 30, 1998 and the related unaudited statements of income, cash
flows and partners' equity of KTC for the six months then ended. Such balance
sheets and statements of income, cash flows and partners' equity fairly present
the financial condition and results of operations of KTC as of such dates or
for the periods covered thereby and were prepared in accordance with generally
accepted accounting principles applied on a basis consistent with the past
practices of KTC.
SECTION 3.07. Absence of Undisclosed Liabilities. To the Partners'
knowledge, there are no liabilities of KTC except liabilities (i) disclosed in
the KTC Disclosure Schedule, (ii) as, and to the extent, reflected or reserved
against in the audited balance sheet of KTC as of December 31, 1997 (the
"Reference Balance Sheet"), (iii) with respect to the matters addressed in
Section 3.15 and Article VIII (which shall be governed solely by the terms of
such Section 3.15 and Article VIII) and (iv) incurred in the ordinary course of
business after the date of the Reference Balance Sheet.
SECTION 3.08. Absence of Certain Changes or Events. (a) Since the date
of the Reference Balance Sheet to the date of this Agreement, except as
disclosed in Section 3.08 of the KTC Disclosure Schedule, the business of KTC
has been conducted in the ordinary course and consistent with past practice and
there has been no Material Adverse Effect.
(b) Since the date of the Reference Balance Sheet and except as set forth
in Section 3.08 of the KTC Disclosure Schedule or as contemplated by this
Agreement, there has not been:
(i) except for fair value in the ordinary course of business consistent
with past practice, any sale, assignment, transfer, lease or other
disposition of any of the fixed assets of KTC having an aggregate net book
value exceeding $50,000;
(ii) (A) any acquisition by KTC (by merger, consolidation, or acquisition
of stock or assets) of any corporation, partnership or other business
organization or division thereof or (B) any incurrence of any indebtedness
for borrowed money, execution of capital leases or issuance of any debt
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securities or assumption, grant, guarantee or endorsements, or other
accommodation or arrangement making KTC responsible for, the obligations
of any person, or any loans or advances except in the ordinary course of
business;
(iii) any change in any method of accounting or accounting practice used
by KTC, other than such changes required by generally accepted accounting
principles;
(iv) any acquisition or entering into of any new Program Contracts (as
defined below) or any renewal, extension or amendment of any existing
Program Contract, except for Program Contracts obligating KTC or the
Station to make payments of less than $100,000 per contract per year;
(v) any acquisition or entering into of any network affiliation
agreements, local marketing agreements or joint operating agreements;
(vi) any pledge, lien, security interest, mortgage, charge, adverse claim
of ownership or use, or other encumbrance of any kind created on any
properties or assets (whether tangible or intangible) of KTC having a
value in excess of $50,000;
(vii) any establishment of or increase in any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing,
stock option, stock purchase or other employee benefit plans, or other
increase in the compensation payable or to become payable to any officer
or key employee of KTC in excess of 10% of the level for the prior year;
(viii) any employment or severance agreement entered into with any of the
employees of KTC;
(ix) any issuance or sale of additional partnership or other equity
interests in KTC to persons other than the Partners, or securities or
other interests convertible into or exchangeable for such partnership or
other equity interests, or issuance or granting of any options, warrants,
calls, subscription rights or other rights of any kind to persons other
than the Partners to acquire additional partnership interests or other
equity interests or such securities or other interests;
(x) any cancellation without fair consideration therefor of any debts
owed to or claims held by KTC (including the settlement of any claims or
litigation) or waived any right of significant value to KTC, other than in
the ordinary course of business consistent with past practice;
(xi) any acceleration of collection of notes or accounts receivable of
significant value generated by KTC to a date prior to the date such
collection would have occurred in the ordinary course of business
consistent with past practice or any factoring of any receivable;
(xii) any material delay in payment of any account payable or other
liability of KTC beyond its due date or the date when such liability would
have been paid in the ordinary course of business consistent with past
practice;
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(xiii) any preparation or filing of any Return inconsistent with past
practice or, on any such Return, the taking of any position, the making of
any election, or the adoption of any method that is inconsistent with
positions taken, elections made or methods used in preparing or filing
similar Returns in prior periods (including, without limitation,
positions, elections or methods which would have the effect of deferring
income to periods ending after the Effective Time or accelerating
deductions to periods ending on or prior to the Effective Time);
(xiv) any contract, agreement or transaction entered into between KTC and
any of its affiliates, including the Partners; or
(xv) any agreement to take any actions specified in this Section 3.08,
except for this Agreement.
SECTION 3.09. Absence of Litigation. Except as set forth in Section 3.09
of the KTC Disclosure Schedule, there are no claims, actions, proceedings or
investigations pending against KTC or any of the assets or properties of KTC,
before any court, arbitrator or administrative, governmental or regulatory
authority or body. Except as set forth in Section 3.09 of the KTC Disclosure
Schedule, KTC and its assets and properties are not subject to any order, writ,
judgment, injunction, decree, determination or award. To the knowledge of the
Partners, there are no claims or investigations threatened against KTC or any
of the assets or properties of KTC. There is no action, suit or proceeding
pending or, to the knowledge of the Partners, threatened which questions the
legality of the transactions contemplated by this Agreement.
SECTION 3.10. Compliance with Laws. KTC is not in material violation of
any law, rule, regulation, order, judgment or decree applicable to KTC or by
which any of its properties is bound or affected, except (i) as set forth in
Section 3.10 of the KTC Disclosure Schedule and (ii) for violations the
existence of which could not reasonably be expected to have a Material Adverse
Effect.
SECTION 3.11. FCC Licenses and Reports and Records; Government Permits.
(a) KTC holds the licenses, permits and authorizations from the FCC required
for the operation of the Business set forth in Section 3.11 of the KTC
Disclosure Schedule (the "FCC Licenses"). The FCC Licenses together with the
other governmental licenses, franchises, permits, privileges, immunities,
approvals and other authorizations which are set forth in Section 3.11 of the
KTC Disclosure Schedule (together with the FCC Licenses, the "Governmental
Permits") constitute all of the licenses, permits, franchises, privileges,
immunities, approvals and authorizations that are required for the business and
operations of the KCPQ Station as presently conducted. The FCC Licenses are
valid and in full force and effect through the dates set forth in Section 3.11
of the KTC Disclosure Schedule, unimpaired by any condition which could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. Except as set forth in Section 3.11 of the KTC Disclosure
Schedule, KTC has fulfilled and performed in all material respects its
obligations under each of the Governmental Permits, and, to the knowledge of
the Partners, no event has occurred or condition or state of facts exists which
constitutes or, after notice or lapse of time or both, would constitute a
material breach or material default under any such Governmental Permit. No
written notice of cancellation, of default or of any dispute concerning any
Governmental Permit, or of any event, condition or state of facts described in
the preceding sentence has been received by KTC or the Partners. Except as set
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forth in Section 3.11 of the KTC Disclosure Schedule, to the knowledge of the
Partners, each of the Governmental Permits is valid, subsisting and in full
force and effect and, subject to receipt of the necessary consents under the
Communications Act, all such licenses material to the conduct of the Business
will be in full force and effect at the Effective Time, in each case, without
(i) the occurrence of any breach, default or forfeiture of any material rights
thereunder or (ii) the consent, approval or act of, or the making of any filing
with, any governmental body or other party (other than the FCC as required by
the Communications Act). Except as set forth in Section 3.11 of the KTC
Disclosure Schedule or as a result of the execution and delivery of this
Agreement or in connection with the transactions contemplated hereby, no
application, action or proceeding is pending for the renewal or modification of
any of the FCC Licenses, and, except for actions or proceedings affecting
television broadcast stations generally, no application, complaint, action or
proceeding is pending or, to the knowledge of the Partners, threatened that may
result in (i) the denial of an application for renewal, (ii) the revocation,
modification, non-renewal or suspension of any of the FCC Licenses, (iii) the
issuance of a cease-and-desist order, or (iv) the imposition of any
administrative or judicial sanction with respect to the KCPQ Station. To the
knowledge of the Partners, there are no facts, conditions or events relating to
KTC or the KCPQ Station that could reasonably be expected to cause the FCC to
deny the FCC consents and approvals required in connection with the
transactions contemplated by this Agreement.
(b) The Station is being operated in all material respects in accordance
with the Communications Act, the rules and regulations thereunder. (i) All
returns, reports and statements relating to the Station currently required to
be filed by KTC with the FCC have been filed and when filed were correct and
complete in all material respects, (ii) all material documents required by the
applicable rules and regulations of the FCC to be placed in the public files of
the Station by KTC have been placed and are being held in such files, (iii) all
logs and business records of every type and nature relating to the business and
operations of the Station that are required by the FCC to have been maintained
by KTC, including without limitation, political and public files, operating
logs, equipment performance measurements, licenses and other records pertaining
to the operations of the Station, have been maintained in all material respects
in accordance with the applicable rules and regulations of the FCC and are in
the possession of KTC at the Station.
(c) The operation of the Station does not cause or result in exposure of
workers or the general public to levels of radio frequency radiation in excess
of the levels specified in Section 1.1301, et seq., of the FCC's rules or the
FCC's OST/OET Bulletin No. 65, "Evaluating Compliance with FCC-Specified
Guidelines for Human Exposure to Radio Frequency Radiation," and renewal of the
FCC Licenses would not constitute a "major action" within the meaning of
Section 1.1301, et seq., of the FCC's rules.
SECTION 3.12. Material Contracts. (a) Section 3.12 of the KTC
Disclosure Schedule sets forth each of the following contracts and agreements
of KTC (such contracts and agreements being "Material Contracts"):
(i) network affiliation agreements, local marketing agreements, joint
operating agreements and national and local advertising representation
agreements for the Stations ("Operating Contracts") under the terms of
which KTC may pay or receive consideration of more than $50,000 in the
aggregate over the remaining term of the agreement;
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(ii) program licenses and contracts under which KTC is authorized to
broadcast programs on the Stations ("Program Contracts") under the terms
of which KTC may pay or receive consideration of more than $50,000 in the
aggregate over the remaining term of the agreement;
(iii) talent contracts;
(iv) contracts and agreements relating to indebtedness for borrowed money
of KTC to any Person in excess of $50,000 in the aggregate;
(v) other than time buying arrangements and barter agreements relating to
the provision of air time in exchange for programming agreements, all
contracts and agreements that require the expenditure of, or involve the
receipt of, more than $250,000 in any 12-month period after the date
hereof, other than those terminable without penalty on not more than 60
days' notice;
(vi) all real property leases;
(vii) all agreements containing any provision or covenant prohibiting or
limiting the ability of KBC to engage in any business activity or compete
with any person;
(viii) all contracts and agreements between KBC or either Station and any
Affiliate of KBC;
(ix) any contract for the purchase or sale of real property;
(x) any guarantee of the obligations of the Station's customers,
suppliers or employees or of any partner or other affiliate of KTC;
(xi) any barter agreement or other agreement with advertisers for
broadcasting or commercial time on the Station in exchange for goods and
services; and
(xii) any other contract, agreement or instrument which is material to
KTC or the Business.
(b) KTC has provided or made available to the Purchaser or its advisors
true and correct copies of all Material Contracts. Except as set forth in
Section 3.12 of the KTC Disclosure Schedule, each Material Contract is in full
force and effect and is valid and enforceable against KTC and, to the knowledge
of the Partners, each of the other parties thereto and KBC is not and, to the
knowledge of the Partners, no other party thereto is in material breach of or
default under any Material Contract.
SECTION 3.13. Real Property. (a) Each parcel of real property,
including, without limitation, those properties set forth on Sections 3.13(a)
(which lists all owned properties, showing the record title holder, legal
description and any indebtedness secured by a mortgage or other material lien
thereon) and 3.13(b) (which lists all leased properties, showing rental amount,
expiration date, renewal term and the location of the real property covered by
the lease or agreement) of the KTC Disclosure Schedule, owned or leased by KTC
is owned or leased, free and clear of all liens, security interests, claims and
other charges and encumbrances, except: (a) as disclosed in Section 3.13 of
the KTC Disclosure Schedule; (b) liens for Taxes and assessments not yet
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payable; (c) liens for Taxes, assessments and charges and other claims, the
validity of which are being contested in good faith; (d) imperfections of
title, liens, security interests, claims and other charges and encumbrances the
existence of which, individually and in the aggregate, do not materially impair
the use of any such property; (e) inchoate mechanic's and materialmen's liens
for construction in progress; and (f) workmen's, repairmen's, warehousemen's
and carrier's liens arising in the ordinary course of the Business.
(b) Neither the whole nor any material part of any real property owned by
KTC nor, to the Partners' knowledge, any property leased by KTC, is subject to
any pending suit for condemnation or other taking by any public authority and
to the knowledge of the Partners, no such condemnation or other taking is
threatened.
SECTION 3.14. Employment Matters. (a) With respect to each employee
benefit plan, program, arrangement and contract (including, without limitation,
any "employee benefit plan", as defined in Section 3(3) of ERISA), maintained
or contributed to by KTC, or with respect to which KTC could incur liability
under Section 4069, 4212(c) or 4204 of ERISA (the "KTC Benefit Plans"), KTC has
made available to the Purchaser or its advisors a true and correct copy of (i)
the most recent annual report (Form 5500) filed with the Internal Revenue
Service (the "IRS"), (ii) the plan document and the most recent summary plan
description, (iii) each trust agreement and (iv) the most recent determination
letter, if any, issued by the IRS with respect to any KTC Benefit Plan intended
to be qualified under Section 401(a) of the Internal Revenue Code.
(b) With respect to the KTC Benefit Plans, no event has occurred and, to
the knowledge of the Partners, there exists no condition or set of
circumstances, in connection with which KTC could be subject to any liability
under the terms of such KTC Benefit Plans, ERISA, the Code or any other
applicable law which could reasonably be expected to have a Material Adverse
Effect.
(c) Except as set forth in Section 3.14(c) of the KTC Disclosure
Schedule, KTC is not a party to any collective bargaining or other labor union
contract. As of the date hereof, there is, to the knowledge of the Partners,
no material labor strike, slowdown or work stoppage against KTC pending or, to
the knowledge of the Partners, threatened in writing, which may interfere in
any material respect with the business activities of KTC. As of the date
hereof, there is no charge or complaint against KTC or by the National Labor
Relations Board or any comparable state agency pending or, to the Partners'
knowledge, threatened in writing, except where such charge or complaint could
not reasonably be expected to have a Material Adverse Effect.
(d) The Partners have made available to the Purchaser or its advisors
(i) copies of all employment agreements with senior executive officers of KTC,
(ii) copies of all severance agreements, programs and policies of KTC with or
relating to its employees and (iii) copies of all plans, programs, agreements
and other arrangements of KTC with or relating to its employees which contain
change in control provisions.
(e) Except as set forth in Section 3.14(e) of the KTC Disclosure Schedule
or as otherwise required by Law, no KTC Benefit Plan provides retiree medical
or retiree life insurance benefits to any person payable after the Effective
Time.
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(f) Except as set forth in Section 3.14(f) of the KTC Disclosure
Schedule, KTC has complied in all material respects with all applicable laws,
rules and regulations which relate to wages, hours, discrimination in
employment and collective bargaining and to the operation of the Business and
is not liable for any arrears of wages or any Taxes or penalties for failure to
comply with any of the foregoing.
(g) Section 3.14(g) of the KTC Disclosure Schedule contains (i) a list of
all individuals employed by KTC as of August 12, 1998 and (ii) the then current
rate of compensation provided by KTC to each such employee.
SECTION 3.15. Taxes. Except as set forth in the audited financial
statements of KTC (including the notes thereto) or on Schedule 3.15 of the KTC
Disclosure Schedule:
(a) (i) all Returns, required to be filed by or on behalf of KTC prior to
the Effective Time have been or will be timely filed and such Returns as so
filed are or will be complete and accurate and disclose all Taxes required to
be paid for the period covered thereby and all Taxes shown to be due on such
Returns have been timely paid; (ii) no extension of time in which to file any
such Returns is in effect or has been requested; (iii) all Taxes which KTC is
required by law to withhold or to collect for payment have been duly withheld
and collected, and have been paid or will be paid to the proper governmental
body; (iv) there are no Tax liens (except for liens relating to current Taxes
not yet due) on any property of KTC and no reasonable basis exists for any such
liens; and (v) there are no outstanding agreements or waivers extending the
statute of limitations with respect to the assessment of any Tax and no such
agreements or waivers have been requested.
(b) No transaction contemplated by this Agreement is subject to
withholding under Section 1445 of the Code.
(c) KTC (and any predecessor of KTC) is and at all times has been
properly classified for United States federal, state and local income tax
purposes as a partnership and not as an association taxable as a corporation.
(d) With respect to any periods prior to the Effective Time, KTC will
make a valid election described in Section 754 of the Code.
SECTION 3.16. Personal Property. Section 3.16 of the KTC Disclosure
Schedule contains a list as of June 30, 1998 of all machinery, equipment,
vehicles, furniture and other personal property owned by KTC having an original
cost of $10,000 or more.
SECTION 3.17. Personal Property Leases. Section 3.17 of the KTC
Disclosure Schedule contains a brief description of each lease or other
agreement or right, whether written or oral (including in each case the rental,
the expiration date thereof and a brief description of the property covered),
under which KTC is lessee of, or holds or operates, any machinery, equipment,
vehicle or other tangible personal property owned by a third party which is not
terminable by KTC without penalty on 30 days' notice or less and which provides
for annual rentals in excess of $10,000.
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SECTION 3.18. Intellectual Property. Section 3.18 of the KTC Disclosure
Schedule contains a list of: (i) all trademarks, service marks, trade names
and copyrights for which registrations have been issued to KTC or applications
for registrations have been made by KTC and (ii) all licenses, agreements or
other arrangements under which KTC has the right to use any trademark, service
mark, trade name or copyright (other than such as are included in the Station
Agreements), in each case used in the operations of the Business as currently
conducted. KTC does not own, and has not applied for, any patents. To the
knowledge of the Partners, no proceedings have been instituted, are pending or
are threatened which challenge the validity of the ownership or use by KTC of
any trademarks, trade names, copyrights or patents. Except as set forth in
Section 3.18 of the KTC Disclosure Schedule, KTC has not licensed anyone to use
any trademarks, trade names or copyrights of KTC. Except as set forth in
Section 3.18 of the KTC Disclosure Schedule, and other than as are included in
the Station Agreements, KTC owns, or has the royalty-free right to use, all
trademarks, service marks, trade names, copyrights or patents used in and
material to the operation of the Business as currently conducted. Except as
set forth in Section 3.18 of the KTC Disclosure Schedule and to the knowledge
of the Partners, no trademark, service mark, trade name or copyright listed in
Section 3.18 of the KTC Disclosure Schedule is subject to any outstanding
order, judgment, decree, stipulation or agreement restricting the use thereof
by KTC or restricting the licensing thereof by KTC to any person.
SECTION 3.19. Title to Assets. Except as set forth in Section 3.19 of
the KTC Disclosure Schedule, KTC has good and marketable title to all of the
assets (other than real property) reflected on the Reference Balance Sheet as
being owned by it and all of the assets thereafter acquired by it (except to
the extent that such assets have been disposed of after the date of the
Reference Balance Sheet in the ordinary course of business consistent with past
practice), free and clear of all liens, claims, charges, security interests,
mortgages, pledges, easements, conditional sale or other title retention
agreements, defects in title, covenants or other restrictions of any kind
("Encumbrances"), except for (i) liens for Taxes, assessments or other
governmental charges which are not yet due and payable and (ii) easements,
servitudes, rights-of-way, covenants, consents, conditions, reservations,
encroachments, minor defects or irregularities in title, variations and other
restrictions affecting the use of any real property or leased real property,
which in the aggregate do not materially impair the use of such real property
for the purposes for which it is or may reasonably be expected to be held
("Permitted Encumbrances").
SECTION 3.20. Accounts Receivable. All accounts receivable of KTC have
arisen from bona fide transactions by KTC in the ordinary course of business
and, to the knowledge of the Partners, constitute only valid claims which are
not subject to counterclaims or setoffs.
SECTION 3.21. Insurance. KTC maintains in respect of the Station and the
Business policies of fire and extended coverage and casualty, liability and
other forms of insurance in such amounts and against such risks and losses as
are in the judgment of KTC prudent for the Business. All such policies are
currently in full force and effect and KTC shall keep such insurance policies
or comparable insurance policies in full force and effect through the Effective
Time.
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SECTION 3.22. Environmental Protection. (a) Except as set forth in
Section 3.22 of the KTC Disclosure Schedule, to the knowledge of the Partners,
neither KTC, the Station or the Business nor any of the present properties,
assets or operations relating thereto are subject to any written order from or
written agreement with any governmental body or private party respecting (i)
any environmental, health or safety Requirements of Law, (ii) any Remedial
Action or (iii) any liabilities and costs arising from the Release or
threatened Release of a Contaminant into the environment.
(b) Except as set forth in Section 3.22 of the KTC Disclosure Schedule,
there is not now, nor has there ever been on or in any property of KTC or, to
the knowledge of the Partners, the past properties of KTC:
(i) any Release of any Contaminant on, in, under or from such properties;
(ii) any underground storage tanks or surface impoundments;
(iii) any asbestos containing material; or
(iv) any polychlorinated biphenyls (PCB) used in hydraulic oils,
electrical transformers or other equipment.
(c) Except as set forth in Section 3.22 of the KTC Disclosure Schedule,
KTC has not received in respect of the Station or the Business any written
notice or written claim to the effect that it is or may be liable to any person
as a result of the Release or threatened Release of a Contaminant into the
environment.
(d) Except as set forth in Section 3.22 of the KTC Disclosure Schedule,
to the knowledge of Partners, none of the properties of KTC or present or past
operations of the Station is the subject of any investigation by any
governmental body evaluating whether any Remedial Action is needed to respond
to a Release or threatened Release of a Contaminant into the environment.
SECTION 3.23. Availability of Assets. The assets owned or leased by KTC
constitute all the assets used in the Business as currently conducted and are
in good condition (subject to normal wear and tear and immaterial impairments
of value and damage) and serviceable condition and are generally suitable for
the uses for which intended.
SECTION 3.24. Business of KTC. Except as set forth in Section 3.24 of
the KTC Disclosure Schedule, KTC has not, and between the date hereof and the
Effective Time will not have, incurred, directly or indirectly, any obligations
or liabilities or engaged in any business activities other than relating to the
operation of the Station.
SECTION 3.25. Brokers. Except for Merrill Lynch & Co. ("Merrill Lynch"),
no broker, finder or investment banker is entitled to any brokerage, finder's
or other fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of KTC or any
Partner. The Partners are solely responsible for the fees and expenses of
Merrill Lynch.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PARTNERS
Each Partner, severally and not jointly, represents and warrants to the
Purchaser as follows:
SECTION 4.01. Incorporation of such Partner; Authorization, Execution and
Delivery by Such Partner. In the case of JSK and GGK, such Partner is a
limited liability company duly formed, validly existing and in good standing
under the laws of the State of Delaware and has all necessary limited liability
company power and authority to enter into this Agreement, to carry out its
obligations hereunder and to consummate the transactions contemplated hereby.
In the case of JSK and GGK, the execution and delivery of this Agreement by
such Partner, the performance by such Partner of its obligations hereunder and
the consummation by such Partner of the transactions contemplated hereby have
been duly authorized by all requisite limited liability company action on the
part of such Partner. This Agreement has been duly executed and delivered by
such Partner, and (assuming due authorization, execution and delivery by the
other parties hereto) this Agreement constitutes a legal, valid and binding
obligation of such Partner enforceable against such Partner in accordance with
its terms, subject to the effect of any applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors' rights generally
and subject, as to enforceability, to the effect of general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
SECTION 4.02. No Conflict. Assuming all consents, approvals,
authorizations and other actions described in Section 3.05 have been obtained
and all filings and notifications listed in Section 3.05 of the KTC Disclosure
Schedule have been made, and except as may result from any facts or
circumstances relating solely to the Purchaser or as described in Section 3.04
of the KTC Disclosure Schedule, the execution, delivery and performance of this
Agreement by such Partner do not and will not (a) violate or conflict with the
organizational documents of such Partner (in the case of JSK and GGK),
(b) violate or conflict with any law, rule, regulation, order or judgment
applicable to such Partner, except as could not reasonably be expected to have
a Material Adverse Effect on the ability of such Partner to consummate the
transactions contemplated by this Agreement or (c) result in any breach of, or
constitute a default under, or give to others any rights of termination or
amendment of, or result in the creation of any lien or other encumbrance on
such Partner's general or limited partnership interests in KTC pursuant to, any
contract, agreement or license relating to such assets or properties to which
such Partner is a party or by which any of such KTC Partnership Interests are
bound or affected.
SECTION 4.03. Consents and Approvals. The execution and delivery of this
Agreement by such Partner do not, and the performance of this Agreement by such
Partner will not, require any consent, approval, authorization or other action
by, or filing with or notification to, any governmental or regulatory authority
or third party, except (a) as described in Section 3.05 of the KTC Disclosure
Schedule, (b) as may be required under the Communications Act (including in
connection with the FCC Licenses relating to the Stations), (c) the
notification requirements of the HSR Act and (d) as may be necessary as a
result of any facts or circumstances relating solely to the Purchaser.
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SECTION 4.04. Title to Partnership Interests. Such Partner is the lawful
owner of the partnership interests in KTC described as being owned by such
Partner in Section 3.03 of the KTC Disclosure Schedule, free and clear of all
Encumbrances, except as set forth in Section 4.04 of the KTC Disclosure
Schedule.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
THE PURCHASER AND MERGER SUB
The Purchaser and Merger Sub hereby jointly and severally represent and
warrant to KTC and the Partners as follows:
SECTION 5.01. Incorporation of the Purchaser and Merger Sub. Each of the
Purchaser and Merger Sub is a corporation duly incorporated, validly existing
and in good standing under the laws of the jurisdiction of its incorporation
and has all necessary corporate power and authority to own, operate or lease
the properties and assets now owned, operated or leased by it and has all
necessary corporate power and authority to enter into this Agreement, to carry
out its obligations hereunder and to consummate the transactions contemplated
hereby.
SECTION 5.02. Authorization, Execution and Delivery by the Purchaser and
Merger Sub. The execution and delivery of this Agreement by each of the
Purchaser and Merger Sub, the performance by each of the Purchaser and Merger
Sub of its obligations hereunder and the consummation by each of the Purchaser
and Merger Sub of the transactions contemplated hereby have been duly
authorized by all requisite corporate action on the part of the Purchaser and
Merger Sub. No vote of the holders of any class or series of capital stock of
the Purchaser is necessary to approve any of the transactions contemplated
hereby. The affirmative vote of the Purchaser is the only vote of the holders
of any class or series of Merger Sub capital stock necessary to approve any of
the transactions contemplated hereby. This Agreement has been duly executed
and delivered by each of the Purchaser and Merger Sub, and (assuming due
authorization, execution and delivery by the other parties hereto) constitutes
a legal, valid and binding obligation of each of the Purchaser and Merger Sub
enforceable against each of the Purchaser and Merger Sub in accordance with its
terms, subject to the effect of any applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors' rights generally
and subject, as to enforceability, to the effect of general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
SECTION 5.03. No Conflict. Except as may result from any facts or
circumstances relating solely to the Partners or KTC, the execution, delivery
and performance of this Agreement by each of the Purchaser and Merger Sub do
not and will not (a) violate or conflict with the Certificate of Incorporation
or By-laws (or other similar organizational documents) of either the Purchaser
or Merger Sub, (b) violate or conflict with any law, rule, regulation, order or
judgment applicable to either the Purchaser or Merger Sub (including, without
limitation, any FCC rule or regulation with respect to multiple or cross-
ownership of media properties) or (c) result in any breach of, or constitute a
default under, or give to others any rights of termination or amendment of, or
result in the creation of any lien or other encumbrance on any of the assets or
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properties of the Purchaser or Merger Sub pursuant to, any material contract,
agreement or license relating to such assets or properties to which the
Purchaser or Merger Sub or any of their subsidiaries is a party or by which any
of such assets or properties is bound or affected.
SECTION 5.04. Consents and Approvals. The execution and delivery of this
Agreement by the Purchaser and Merger Sub do not, and the performance of this
Agreement by the Purchaser and Merger Sub will not, require any consent,
approval, authorization or other action by, or filing with or notification to,
any governmental or regulatory authority, except (a) as described in a writing
delivered to KTC and the Partners by the Purchaser on the date hereof, (b) as
may be required under the Communications Act (including in connection with the
FCC Licenses relating to the Stations), (c) the notification requirements of
the HSR Act, (d) where failure to obtain such consent, approval, authorization
or action, or to make such filing or notification, would not prevent the
Purchaser or Merger Sub from performing any of its material obligations under
this Agreement and (e) as may be necessary as a result of any facts or
circumstances relating solely to the Partners or KTC.
SECTION 5.05. Absence of Litigation. There are no claims, actions,
proceedings or investigations pending against the Purchaser or Merger Sub or
any of their Subsidiaries before any court, arbitrator or administrative,
governmental or regulatory authority or body that seek to delay or prevent the
consummation of the transactions contemplated hereby or that could reasonably
be expected to materially and adversely affect or restrict the ability of
Purchaser or Merger Sub to consummate the transactions contemplated hereby.
SECTION 5.06. Financing. The Purchaser, at the Effective Time, will have
all funds necessary to consummate the transactions contemplated by this
Agreement.
SECTION 5.07. Ownership of Merger Sub; No Prior Activities. The
Purchaser owns all of the outstanding capital stock of Merger Sub. Merger Sub
was formed by the Purchaser solely for the purpose of engaging in the
transactions contemplated by this Agreement. As of the date of this Agreement
and the Effective Time, except for obligations or liabilities incurred in
connection with its incorporation or organization and this Agreement and the
transactions contemplated hereby, Merger Sub has not and will not have
incurred, directly or indirectly, through any subsidiary or affiliate, any
obligations or liabilities or engaged in any business activities of any type or
kind whatsoever or entered into any agreements or arrangements with any person.
SECTION 5.08. Qualification of Purchaser. The Purchaser is, and as of
the Effective Time will be, legally, technically, financially and otherwise
qualified under the Communications Act and all rules, regulations and policies
of the FCC to acquire and operate the Station. There are no facts or
proceedings that could reasonably be expected to disqualify the Purchaser under
the Communications Act or otherwise from acquiring or operating the Station or
that could reasonably be expected to cause the FCC not to grant the approvals
required in connection with the transactions contemplated by this Agreement.
Except as set forth in Section 5.08 of the Purchaser Disclosure Schedule, no
waiver of any FCC rule or policy is necessary to be obtained for the grant of
the applications to be filed with the FCC in connection with the transactions
contemplated by this Agreement, nor will processing pursuant to any exception
to any rule of general applicability be requested or required in connection
with the transactions contemplated by this Agreement.
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SECTION 5.09. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Purchaser.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Conduct of Business Prior to the Effective Time. (a)
Unless the Purchaser otherwise agrees in writing and except as otherwise set
forth herein or in Section 6.01 of the KTC Disclosure Schedule, between the
date of this Agreement and the Effective Time, KTC shall:
(i) conduct the Business only in the ordinary course consistent with past
practice and keep and maintain the assets of KTC in good operating
condition (wear and tear in ordinary usage excepted);
(ii) use its reasonable best efforts to preserve substantially intact the
business organization of the Business;
(iii) use its reasonable best efforts to keep available to the Purchaser
the services of the present officers and key employees of KTC;
(iv) maintain the validity of the FCC Licenses and to comply in all
material respects with the requirements of the FCC Licenses and the rules
and regulations of the FCC. KTC shall timely file with the FCC all
license renewal applications with respect to the Station as they become
due and all applications shall be true, complete and correct;
(v) use its reasonable best efforts to maintain in full force and effect
KTC's current network affiliation agreements for the Station; and
(vi) use its reasonable best efforts to preserve the current
relationships of KTC with its respective customers, suppliers,
distributors and other persons with which KTC has significant business
relationships.
(b) Except as expressly provided in this Agreement or Section 6.01 of the
KTC Disclosure Schedule, between the date of this Agreement and the Effective
Time, KTC will not do any of the following without the prior written consent of
the Purchaser:
(i) except for fair value in the ordinary course of business, sell,
assign, transfer, lease or otherwise dispose of any fixed assets of KTC
having a net book value exceeding $50,000 in the aggregate;
(ii) (A) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof or (B) incur any indebtedness for borrowed money, execute
any capital lease or issue any debt securities or assume, grant, guarantee
or endorse, or otherwise as an accommodation become responsible for, the
obligations of any person, or make loans or advances;
(iii) change any method of accounting or accounting practice used by KTC,
other than such changes as are required by generally accepted accounting
principles;
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(iv) acquire or enter into any new Program Contracts or renew, extend or
amend any existing Program Contract, except for Program Contracts
obligating KTC or the Station to make payments of less than $100,000 per
contract per year;
(v) acquire or enter into any network affiliation agreements, local
marketing agreements or joint operating agreements;
(vi) except in the ordinary course of business, grant any pledge, lien,
security interest, mortgage, charge, adverse claim of ownership or use, or
other encumbrance of any kind on any properties or assets (whether
tangible or intangible) of KTC (other than Permitted Encumbrances);
(vii) establish or increase any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, stock option, stock
purchase or other employee benefit plan, or otherwise increase the
compensation payable or to become payable to any officers or key employees
of KTC, except, in any case described above, in the ordinary course of
business consistent with past practice or as may be required by law;
(viii) enter into any collective bargaining agreements or any employment
or severance agreement with any of the employees of KTC;
(ix) issue or sell any additional partnership or other equity interests
in KTC, or securities or other interests convertible into or exchangeable
for such partnership or other equity interests, or issue or grant any
options, warrants, calls, subscription rights or other rights of any kind
to acquire additional partnership or other equity interests or such
securities or other interests; or
(x) cancel or agree to cancel without fair consideration therefor any
debts owed to or claims held by KTC (including the settlement of any
claims or litigation), other than in the ordinary course of business
consistent with past practice;
(xi) accelerate collection of any material notes or accounts receivable
generated by KTC to a date prior to the date such collection would have
occurred in the ordinary course of business consistent with past practice;
(xii) delay payment of any material account payable or other liability of
KTC beyond its due date or the date when such liability would have been
paid in the ordinary course of business consistent with past practice;
(xiii) prepare or file any Return inconsistent with past practice or, on
any such Return, take any position, make any election, or adopt any method
that is inconsistent with positions taken, elections made or methods used
in preparing or filing similar Returns in prior periods (including,
without limitation, positions, elections or methods which would have the
effect of deferring income to periods ending after the Effective Time or
accelerating deductions to periods ending on or prior to the Effective
Time);
(xiv) enter into any contract, agreement or transaction with any
affiliate of KTC, including the Partners; or
(xv) enter into an agreement to do any of the foregoing.
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SECTION 6.02. Access to Information. (a) From the date hereof until
theEffective Time, upon reasonable notice, KTC and the Partners shall, and
shall cause the officers, directors, employees, auditors and agents of KTC and
the Partners to, (i) afford the officers, employees and authorized agents and
representatives of the Purchaser reasonable access, during normal business
hours, to the offices, properties, books and records of KTC and (ii) furnish to
the officers, employees and authorized agents and representatives of the
Purchaser such additional financial and operating data and other information
regarding the assets, properties, goodwill and business of KTC as the Purchaser
may from time to time reasonably request; provided, however, that such
investigation shall not unreasonably interfere with any of the businesses or
operations of KTC or the Partners or any of their respective affiliates.
(b) In order to facilitate the resolution of any claims made against or
incurred by any of the Partners prior to the Effective Time, for a period of
seven years after the Effective Time, the Purchaser shall or shall cause any
transferee of KTC or the Station to agree to (i) retain the books and records
of KTC relating to periods prior to the Effective Time and (ii) upon reasonable
notice, afford the officers, employees and authorized agents and
representatives of the Partners reasonable access (including the right to make,
at the expense of the Partners, photocopies), during normal business hours, to
such books and records.
SECTION 6.03. Confidentiality. The terms of the letter agreement dated
as of June 12, 1998 (the "Confidentiality Agreement") between KTC and the
Purchaser are hereby incorporated herein by reference and shall continue in
full force and effect until the Effective Time, at which time such
Confidentiality Agreement and the obligations of the Purchaser under this
Section 6.03 shall terminate; provided, however, that the Confidentiality
Agreement shall terminate only in respect of that portion of the information
provided to Purchaser by KTC or the Partners exclusively relating to the
transactions contemplated by this Agreement. If this Agreement is, for any
reason, terminated prior to the Effective Time, the Confidentiality Agreement
shall continue in full force and effect.
SECTION 6.04. Regulatory Consents and Approvals; Third Party Consents.
(a) As promptly as practicable and no later than five Business Days after the
date hereof, JSK, KTC and the Purchaser shall jointly file applications for the
Station with the FCC requesting its consent to the transfer of control of the
FCC licensee for such Station from JSK to the Purchaser. JSK, KTC and the
Purchaser will diligently take, or fully cooperate in the taking of, all
necessary and proper steps, and provide any additional information reasonably
requested in order to obtain promptly the requested consents and approvals of
such applications by the FCC; provided, however, that none of the parties
hereto shall have any obligation to take any unreasonable steps to satisfy
complainants, if any, or to participate in any evidentiary hearing or to divest
any asset unless the ownership of such asset in combination with ownership of
the Station would violate the rules, regulations or policies of the FCC. All
filing fees payable to the FCC relating to the transfer applications shall be
shared equally by the Partners and the Purchaser.
(b) As promptly as practicable and no later than 20 days after the date
hereof, each of KTC and the Purchaser shall make an appropriate filing of a
Notification and Report Form pursuant to the HSR Act with respect to the
transactions contemplated hereby and shall supply promptly any additional
information and documentary material that may be requested pursuant to the HSR
Act.
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(c) Each of KTC, the Indemnifying Partners and the Purchaser shall use
its reasonable efforts to obtain all other consents and approvals of all other
federal, state and local regulatory bodies and officials that may be or become
necessary for its execution and delivery of, and the performance of its
obligations pursuant to, this Agreement and will cooperate fully with the other
party in promptly seeking to obtain all such other consents and approvals. The
parties hereto will not take any action that will have the effect of delaying,
impairing or impeding the receipt of any such required approvals.
(d) Each of KTC and the Purchaser shall use its reasonable efforts to
obtain all other consents required of third persons to consummate the
transactions contemplated by this Agreement, including, without limitation, the
consent of (i) the agent and, if necessary, requisite financial institutions,
with respect to the release of KTC under the Credit Agreements and (ii) Fox
Broadcasting Company ("Fox") in connection with the Station Affiliation
Agreement (the "Fox Affiliation Agreement") dated July 30, 1997 (executed on
May 20, 1998) between KTC and Fox.
(e) KTC shall diligently prosecute all applications for renewal of any of
the FCC Licenses, furnish all information required by the FCC in connection
therewith, attend all hearings scheduled to consider such applications,
promptly provide the Purchaser with copies of all documents filed or received
by it in connection therewith, and otherwise keep the Purchaser fully informed
with respect thereto.
SECTION 6.05. Investigation. In connection with the Purchaser's
investigation of KTC and the Business, the Purchaser has received from KTC and
the Partners certain projections and other forecasts, plans and budgets for KTC
which were prepared in good faith based on assumptions believed by them at the
time to be reasonable in the context of preparing such estimates. KTC and the
Partners make no representation or warranty with respect to any estimates,
projections, forecasts, plans or budgets referred to in this Section 6.05, or
any other representation or warranty with respect to the business, operations,
assets, liabilities or financial condition of KTC other than as specifically
set forth in this Agreement.
SECTION 6.06. Change of Name of Business. From and after the Effective
Time, no part of the Business may be conducted using the name "Kelly Television
Co." or any other name that includes, refers to, or suggests the Kelly family
name. None of the Purchaser, Merger Sub or the Surviving Corporation or any of
their respective affiliates shall use any signs, stationery, packaging,
advertising or promotional materials or like materials or supplies that state
or otherwise indicate thereon that the Business after the Effective Time is
affiliated with any of Jon S. Kelly, Gregory G. Kelly or Robert E. Kelly or any
business owned or operated by any of them.
SECTION 6.07. Interim Financial Statements. KTC shall promptly deliver
to the Purchaser copies of any monthly, quarterly or annual financial
statements of KTC that may be prepared by it during the ordinary course of
business on a basis consistent with that used in the preparation of the
unaudited financial statement of KTC as of June 30, 1998 during the period from
the date hereof through the Effective Time.
SECTION 6.08. Funds Necessary to Pay the KTC Purchase Price. The
Purchaser shall obtain all funds necessary to pay the KTC Purchase Price at the
Effective Time.
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SECTION 6.09. Further Action. Each of the parties hereto shall execute
and deliver such documents and other papers and take such further actions as
may be reasonably required to carry out the provisions hereof and give effect
to the transactions contemplated hereby.
ARTICLE VII
EMPLOYEE MATTERS
SECTION 7.01. Continuation of Benefits. Subject to Section 7.03, the
Purchaser shall permit those of its employees who were employed by KTC
immediately prior to the Effective Time to participate in the Purchaser's
employee benefit plans on the same basis as similarly situated employees of the
Purchaser, Tribune, WGNX Inc. or an affiliate thereof pursuant to the WGNX
Assignment. The Purchaser agrees to provide to any such employees whose
employment is governed by the terms of a collective bargaining agreement or
employment agreement, such health, welfare and other employee benefits as are
required by the terms of such agreement.
SECTION 7.02. Service Credit. To the extent that service is relevant for
eligibility and vesting (and, solely for purposes of holidays, sick days,
vacation benefits, benefit accruals) under any retirement plan, employee
benefit plan, program or arrangement established or maintained by the Purchaser
or any of its Subsidiaries for the benefit of the employees of KTC, such plan,
program or arrangement shall credit such employees for service on or prior to
the Effective Time with KTC or any affiliate or predecessor thereof. In
addition, the Purchaser shall waive limitations on benefits relating to any
pre-existing conditions and recognize, for purposes of annual deductible and
out-of-pocket limits under its medical and dental plans, deductible and out-of-
pocket expenses paid by employees and their dependents under the medical and
dental plans in which they participate in the calendar year in which the Merger
occurs.
SECTION 7.03. Subsequent Purchaser. In the event that the Purchaser or
any of its affiliates sells or otherwise transfers to a subsequent purchaser
any or all of the equity interest in, or assets of, KTC, the Purchaser shall
cause such subsequent purchaser to agree in writing to honor the covenants set
forth in this Article VII as if such subsequent purchaser were the Purchaser
hereunder.
ARTICLE VIII
TAX MATTERS
SECTION 8.01. General. For purposes of this Article VIII, the term
"Income Taxes" shall mean all Taxes in the nature of income taxes imposed by
the United States federal, state or local governmental authority, and the term
"Non-Income Taxes" shall mean all Taxes other than Income Taxes.
SECTION 8.02. Allocation of Tax Liabilities; Tax Indemnities. (a) The
Partners shall be responsible for all Taxes imposed on KTC with respect to any
taxable period that ends at or before the Effective Time, and in the case of
any taxable period that includes the Effective Time but does not end at the
Effective Time (a "Straddle Period"), the Partners shall be responsible for the
Taxes allocable to the portion of the taxable period that ends at the Effective
Time, as determined in (d) below.
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(b) JSK and GGK (collectively, the "Indemnifying Partners") jointly and
severally agree to indemnify the Purchaser against all Taxes imposed on KTC
with respect to any taxable period that ends at or before the Effective Time
or, in the case of any Straddle Period, the Taxes allocable to the portion of
the taxable period that ends at the Effective Time, as determined in (d) below,
in excess of the amount of Taxes taken into account in the Statement of Working
Capital.
(c) Payment by the Indemnifying Partners of any amount due under this
Section 8.02 shall be made within ten days following written notice by the
Purchaser that payment of such amounts to the appropriate tax authority is due,
provided that the Partners shall not be required to make any payment earlier
than two days before it is due to the appropriate tax authority. If the
Partners receive an assessment or other notice of Tax due with respect to KTC
for any period ending at or before the Effective Time for which the Partners
are not responsible, in whole or in part, pursuant to this Section 8.02 because
all or a part of such Tax does not exceed the amount taken into account in the
Statement of Working Capital, and the Partners pay such Tax, then the Purchaser
shall pay to the Partners, in accordance with the first sentence of this
Section 8.02(c), the amount of such Tax for which the Partners are not
responsible. In the case of a Tax that is contested in accordance with the
provisions of Section 8.04, payment of the Tax to the appropriate tax authority
will not be considered to be due earlier than the date a final determination to
such effect is made by the appropriate taxing authority or a court.
(d) For purposes of this Agreement, in the case of any Tax that is
payable for a Straddle Period, the portion of such Tax payable for the period
ending at the Effective Time shall be:
(i) in the case of Taxes that are either (x) based upon or related to
income or receipts, or (y) imposed in connection with any sale or other
transfer or assignment of property (real or personal, tangible or
intangible) (other than conveyances pursuant to this Agreement, as
provided under Section 8.05), deemed equal to the amount which would be
payable if the taxable year ended at the Effective Time (except that,
solely for purposes of determining the marginal tax rate applicable to
income or receipts during such period in a jurisdiction in which such tax
rate depends upon the level of income or receipts, annualized income or
receipts may be taken into account if appropriate for an equitable sharing
of such Taxes); and
(ii) in the case of Taxes not described in subparagraph (i) that are
imposed on a periodic basis and measured by the level of any item, deemed
to be the amount of such Taxes for the entire period (or, in the case of
such Taxes determined on an arrears basis, the amount of such Taxes for
the immediately preceding period) multiplied by a fraction the numerator
of which is the number of calendar days in the period ending at the
Effective Time and the denominator of which is the number of calendar days
in the entire period.
SECTION 8.03. Tax Returns. (a) The Partners shall prepare, or cause to
be prepared, all Income Tax Returns required to be filed with respect to the
short taxable year of KTC ending at the Effective Time.
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(b) With respect to Non-Income Taxes, the Partners shall prepare and file
or otherwise furnish to the appropriate party (or cause to be prepared and
filed or so furnished) in a timely manner all such Returns relating to KTC that
are due on or before or relate to any taxable period ending at or before, the
Effective Time (and the Purchaser shall do the same for any other Returns).
Returns of KTC not yet filed for any taxable period that begins before the
Effective Time shall be prepared, and each item thereon treated, in a manner
consistent with past practices employed with respect to KTC (except to the
extent counsel for the Purchaser, the Partners or KTC determines there is no
reasonable basis in law therefor or determines that a Return cannot be so
prepared and filed or an item so reported without being subject to penalties).
With respect to any Return required to be filed by the Purchaser or Partners
with respect to KTC and as to which an amount of Tax is allocable to the other
party under Section 8.02(d), the filing party shall provide the other party and
its authorized representatives with a copy of such completed Return and a
statement certifying the amount of Tax shown on such Return that is allocable
to such other party pursuant to Section 8.02(d), together with appropriate
supporting information and schedules at least 20 Business Days prior to the due
date (including any extension thereof) for the filing of such Return, and such
other party and its authorized representatives shall have the right to review
and comment on such Return and statement prior the filing of such Return.
SECTION 8.04. Refunds and Tax Benefits. (a) The Purchaser shall
promptly pay to the Partners any refund or credit (including any interest paid
or credited with respect thereto) received by the Purchaser or KTC of Taxes (i)
relating to taxable periods or portions thereof ending at or before the
Effective Time or (ii) attributable to an amount paid by the Partners under
Section 8.02 hereof. The Purchaser shall, if the Partners so request and at
the Partners' expense, cause the relevant entity to file for and obtain any
refund to which the Partner is entitled under this Section 8.04. The Purchaser
shall permit the Partners to control (at the Partners' expense) the prosecution
of any such refund claimed, and shall cause the relevant entity to authorize by
appropriate power of attorney such persons as the Partners shall designate to
represent such entity with respect to such refund claimed. In the event that
any refund or credit of Taxes for which a payment has been made pursuant to
this Section 8.04(a) is subsequently reduced or disallowed, the Partners shall
indemnify and hold harmless the payor for any Tax liability, including interest
and penalties, assessed against such payor by reason of the reduction or
disallowance. In no event shall the Purchaser or the Partners be entitled to a
refund or credit for any item reflected in the working capital adjustment made
pursuant to Section 2.10(f).
(b) Any amount otherwise payable by the Partners under Section 8.02 shall
be reduced by any Tax benefit to the Purchaser or KTC for a period or portion
thereof beginning after the Effective Time (a "Post-Effective Time Tax
Benefit") that arose in connection with any underlying adjustment resulting in
the obligation of the Purchaser or KTC to pay Taxes for which the Partners are
responsible under Section 8.02 (such as a timing adjustment resulting in a Tax
deduction for KTC for a period after the Effective Time) or the payment of such
Taxes. If a payment is made by the Partners in accordance with Section 8.02,
and if in a subsequent taxable year a Post-Effective Time Tax Benefit is
realized by the Purchaser or KTC (that was not previously taken into account
pursuant to the preceding sentence to reduce an amount otherwise payable by the
Partners under Section 8.02), the Purchaser or KTC shall pay to the Partners at
the time of such realization the amount of such Post-Effective Time Tax Benefit
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to the extent that the Post-Effective Time Tax Benefit would have resulted in a
reduction in the amount paid by the Partners under Section 8.02 if the Post-
Effective Time Tax Benefit had been obtained in the year of such payment. The
Partners shall pay to the Purchaser the amount of any Tax benefit to the
Partners or KTC for a period or portion thereof ending on or before the
Effective Time (a "Pre-Effective Time Tax Benefit") that arises in connection
with any underlying adjustment resulting in an increase in the Tax liability
for the Purchaser or KTC for any period or portion thereof beginning after the
Effective Time at the time such Pre-Effective Time Tax Benefit is realized. A
Post-Effective Time Tax Benefit or Pre-Effective Time Tax Benefit will be
considered to be realized for purposes of this Section 8.04 at the time that it
is reflected on a Tax Return of the Partners, the Purchaser or KTC.
SECTION 8.05. Contests. (a) After the Effective Time, the Purchaser
shall promptly notify the Partners and the Partners shall promptly notify the
Purchaser in writing of the commencement of any Tax audit or administrative or
judicial proceeding or of any demand or claim on the Partners, the Purchaser or
KTC which, if determined adversely to the taxpayer or after the lapse of time
would be grounds for indemnification under Section 8.02. Such notice shall
contain factual information (to the extent known to the Partners, the Purchaser
or KTC) describing the asserted Tax liability in reasonable detail and shall
include copies of any notice or other document received from any taxing
authority in respect of any such asserted Tax liability. If the Purchaser
fails to give the Partners prompt notice of an asserted Tax liability as
required by this Section 8.05, then (i) if the Partners are precluded by the
failure to give prompt notice from contesting the asserted Tax liability in
both the administrative and judicial forums, then the Partners shall not have
any obligation to indemnify for any loss arising out of such asserted Tax
liability, and (ii) if the Partners are not so precluded from contesting but
such failure to give prompt notice results in a detriment to the Partners, then
any amount which the Partners are otherwise required to pay the Purchaser
pursuant to Section 8.02 with respect to such liability shall be reduced by the
amount of such detriment.
(b) The Partners shall control in their sole and absolute discretion, and
the Purchaser and KTC shall cooperate with the Partners with respect to, any
audit, controversy or administrative or judicial proceeding relating to Income
Tax Returns of KTC or the Partners for any taxable period ending at or before
the Effective Time; provided, however, that the Partners shall have no rights
to represent KTC's interest in any audit or proceeding unless the Partners
shall have agreed in writing with the Purchaser that the Partners shall be
liable for any Taxes that result from such audit or proceeding.
(c) The Partners may elect to control, any audit, claim for refund and
administrative or judicial proceeding involving any asserted Non-Income Tax
liability with respect to which indemnity may be sought under Section 8.02 (any
such audit, claim for refund or proceeding relating to an asserted Tax
liability is referred to herein as a "Contest"). If the Partners elect to
direct a Contest, they shall within 30 calendar days of receipt of the notice
of asserted Tax liability notify the Purchaser of their intent to do so, and
the Purchaser shall cooperate and shall cause KTC or its successor to
cooperate, at the expense of the Partners, in each phase of such Contest;
provided, however, that the Partners shall have no rights to represent KTC's
interest in any such audit or proceeding unless the Partners shall have agreed
in writing with the Purchaser that the Partners shall be liable for any Taxes
that result from such audit or proceeding. If the Partners elect not to
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control the Contest, fail to notify the Purchaser of their election as herein
provided or contest their obligation to indemnify under Section 8.02, the
Purchaser or KTC may pay, compromise or contest, at its own expense, such
asserted liability. However, in such case, neither the Purchaser nor KTC may
settle or compromise any asserted liability over the objection of the Partners;
provided, however, that consent to settlement or compromise shall not be
unreasonably withheld. In any event, the Partners may participate, at their
own expense, in the Contest. If the Partners choose to direct the Contest, the
Purchaser shall promptly empower and shall cause KTC or its successor promptly
to empower (by power of attorney and such other documentation as may be
appropriate) such representatives of the Partners as it may designate to
represent the Purchaser or KTC or its successor in the Contest insofar as the
Contest involves an asserted Tax liability for which the Partners would be
liable under Section 8.02.
SECTION 8.06. Conveyance Taxes. One-half of all transfer, documentary,
sales, use, stamp, registration, value added and other such Taxes and fees
(including any penalties and interest) incurred or payable by the Partners or
KTC in connection with this Agreement (including any real property transfer tax
and any similar Tax, whether or not based on income) shall be borne and paid
by the Purchaser, and the Purchaser shall, at the Purchaser's expense, file all
necessary Tax returns and other documentation with respect to all such Taxes
and fees. If required by applicable law, the Purchaser will, and will cause
any entities Purchaser controls, join in the execution of such Tax Returns and
other documentation.
SECTION 8.07. Cooperation on Tax Matters. Each of the Partners and
Purchaser shall cooperate fully, as and to the extent reasonably requested by
any other party, in connection with the preparation and filing of any Tax
return, statement, report or form, any audit, litigation or other proceeding
with respect to Taxes. As provided in Section 6.02(b), such cooperation shall
include the retention and (upon the other party's request) the provision of
records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees or representatives
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder.
SECTION 8.08. Allocation of KTC Purchase Price. (a) Within 60 days
prior to the Closing, the Purchaser shall provide the Partners with a proposed
allocation of the KTC Purchase Price among the assets of KTC. Within 30 days
prior to the Closing, the Partners shall provide the Purchaser with written
notification whether they agree with such allocation, and, if the Partners do
not agree with such allocation, shall provide the Purchaser with a proposed
allocation. If the parties are unable to agree on an allocation of the KTC
Purchase Price, the allocation shall be determined by an independent appraiser,
which can be a nationally recognized accounting firm, that shall determine the
allocation of the KTC Purchase Price, and such allocation shall be binding on
the parties. The cost of any such independent appraisal shall be borne equally
by the Purchaser, on the one hand, and the Partners, on the other hand. The
final allocation as determined under this Section 8.08 shall be referred to as
the "Allocation."
(b) The Purchaser and the Partners agree to (i) be bound by the
Allocation, (ii) act in accordance with the Allocation in the preparation of
financial statements and filing of all Tax Returns (including filing Form 8594)
and in the course of any Tax audit, Tax review or Tax litigation relating
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thereto and (iii) take no position and cause their Affiliates to take no
position inconsistent with the Allocation for all Tax and accounting purposes.
(c) Not later than 30 days prior to the filing of their respective Forms
8594 relating to this transaction, each party shall deliver to the other party
a copy of its Form 8594 which shall be identical in all respects to the
Allocation except as may be manifestly required to take into account changes in
the types or values of the assets of KTC occurring subsequent to the date of
the Agreement and on or prior to the Effective Time.
SECTION 8.09. Miscellaneous. (a) The parties agree to treat all
payments made under this Article VIII or Article X as adjustments to the KTC
Purchase Price for Tax purposes.
(b) Except as expressly provided otherwise and except for the
representations contained in Section 3.15 of this Agreement, this Article VIII
shall be the sole provision governing Tax matters and indemnities therefor
under this Agreement.
(c) For purposes of this Article VIII, all references to the Purchaser,
the Partners and KTC include successors thereto.
ARTICLE IX
CONDITIONS TO THE MERGER
SECTION 9.01. Conditions to Obligations of KTC and the Partners. The
obligations of KTC and the Partners to consummate the Merger shall be subject
to the fulfillment or waiver, at or prior to the Effective Time, of each of the
following conditions:
(a) Representations and Warranties; Covenants. The representations and
warranties of the Purchaser and Merger Sub contained in this Agreement
shall be true and correct as of the Effective Time, with the same force
and effect as if made as of the Effective Time (except where the failure
to be so true and correct would not have a material adverse effect on the
ability of the Purchaser and Merger Sub to consummate the transactions
contemplated by this Agreement), other than such representations and
warranties as are made as of another date, and all covenants contained in
this Agreement to be complied with by the Purchaser and Merger Sub on or
before the Effective Time shall have been complied with in all material
respects, and the Partners shall have received a certificate of the
Purchaser and Merger Sub to such effect, in each case signed by a duly
authorized officer thereof;
(b) HSR Act. Any waiting period (and any extension thereof) under the
HSR Act applicable to the Merger shall have expired or shall have been
terminated;
(c) No Order. No United States or state governmental authority or other
agency or commission or United States or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, injunction or other order which is in
effect and has the effect of making the transactions contemplated by this
Agreement illegal or otherwise restraining or prohibiting consummation of
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such transactions; provided, however, that the parties hereto shall use
their best efforts to have any such order or injunction vacated;
(d) FCC Order. The FCC shall have issued the FCC Order and any condition
or action required to be satisfied or taken to legally effect the Merger
in compliance with the FCC Order (as hereinafter defined) shall have been
so satisfied or taken (provided, that in no event shall the foregoing
require the satisfaction of any condition or the taking of any action that
could under the terms of the FCC Order be so satisfied or taken subsequent
to consummation of the Merger);
(e) Opinion of Counsel for the Purchaser and Merger Sub. KTC shall have
received from Wiley, Rein & Fielding or other counsel reasonably
satisfactory to the Partners an opinion dated as of the Effective Time, in
form and substance reasonably satisfactory to KTC, to the effect set forth
in Exhibit 9.01; and
(f) Consents under Credit Agreements. All necessary consents required
under the Credit Agreements for the consummation of the transactions
contemplated by this Agreement shall have been obtained.
SECTION 9.02. Conditions to Obligations of the Purchaser and Merger Sub.
The obligations of the Purchaser and Merger Sub to consummate the Merger shall
be subject to the fulfillment or waiver, at or prior to the Effective Time, of
each of the following conditions:
(a) Representations and Warranties; Covenants. The representations and
warranties of KTC and the Partners contained in this Agreement shall be
true and correct as of the Effective Time, with the same force and effect
as if made as of the Effective Time (except where the failure to be so
true and correct would not have a Material Adverse Effect or a material
adverse effect on the ability of KTC to consummate the transactions
contemplated by this Agreement), other than such representations and
warranties as are made as of another date, and all covenants contained in
this Agreement to be complied with by KTC and the Partners on or before
the Effective Time shall have been complied with in all material respects,
and the Purchaser shall have received a certificate of each of the
Partners to such effect, in each case signed by a duly authorized officer
thereof;
(b) HSR Act. Any waiting period (and any extension thereof) under the
HSR Act applicable to the Merger shall have expired or shall have been
terminated;
(c) No Order. No United States or state governmental authority or other
agency or commission or United States or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, injunction or other order which is in
effect and has the effect of making the transactions contemplated by this
Agreement illegal or otherwise restraining or prohibiting consummation of
such transactions; provided, however, that the parties hereto shall use
their best efforts to have any such order or injunction vacated;
(d) FCC Order. The FCC shall have issued the FCC Order and any condition
or action required to be satisfied or taken to legally effect the Merger
in compliance with the FCC Order shall have been so satisfied or taken
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(provided, that in no event shall the foregoing require the satisfaction
of any condition or the taking of any action that could under the terms of
the FCC Order be so satisfied or taken subsequent to consummation of the
Merger); provided, that in the event that a petition to deny or other
material objection has been filed with the FCC with respect to the
application for transfer of control of the FCC Licenses to Purchaser,
Tribune, WGNX Inc. or an affiliate thereof pursuant to the WGNX Assignment
and there exists a significant risk that the FCC Order will not become
Final, the FCC Order shall have become a Final Order. As used in this
Agreement, the term "FCC Order" means an order or decision of the FCC that
grants, without material adverse condition, all consents or approvals
required under the Communications Act for the transfer of control of all
FCC Licenses held by KTC to the Purchaser, Tribune, WGNX Inc. or an
affiliate thereof and the consummation of the Merger and the other
transactions contemplated by this Agreement. For purposes of this
Agreement, the term "Final Order" shall mean that action shall have been
taken by the FCC (including action duly taken by the FCC's staff, pursuant
to delegated authority) which shall not have been reversed, stayed,
enjoined, set aside, annulled or suspended; with respect to which no
timely request for stay, petition for rehearing, appeal or certiorari or
sua sponte action of the FCC with comparable effect shall be pending; and
as to which the time for filing any such request, petition, appeal,
certiorari or for the taking of any sua sponte action by the FCC shall
have expired or otherwise terminated. The following shall be deemed not
to be material adverse conditions for purposes of the definition of FCC
Order: (i) a condition by the FCC that the Closing not occur until the
grant of applications for renewal of the FCC License for the KCPQ Station
or (ii) a condition by the FCC that the Purchaser or any affiliate of the
Purchaser divest itself of any media property at the Closing or at any
future date if ownership of which, in combination with the ownership of
the Station, violates the rules, regulations or policies of the FCC. For
purposes of this paragraph, the "FCC" shall mean the FCC or its staff;
(e) No Material Adverse Effect. Since the date of this Agreement, there
shall have been no damage, destruction, loss or claim or condemnation or
other taking which results in a Material Adverse Effect;
(f) Opinion of Counsel for the KTC and the Partners. The Purchaser and
Merger Sub shall have received from Shearman & Sterling, counsel to KTC
and the Partners, and Washington counsel reasonably satisfactory to the
Purchaser an opinion dated as of the Effective Time, in form and substance
reasonably satisfactory to the Purchaser, to the effect set forth in
Exhibit 9.02;
(g) Release of Indebtedness. KTC shall have been released from all
obligations (including all guarantees relating thereto) under the Credit
Agreements and all liens and encumbrances on assets and properties of KTC
under the Credit Agreements shall have been released;
(h) Renewal Application. The application for renewal of the FCC license
for the Station to be filed on or before October 1, 1998 shall have been
granted without material adverse condition for a full license term; and
(i) Required Consents. KTC shall have received consents, in form and
substance reasonably satisfactory to the Purchaser, to the transactions
contemplated hereby from the other parties to the contracts, leases and
agreements set forth in Section 9.02(i) of the KTC Disclosure Schedule.
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ARTICLE X
INDEMNIFICATION
SECTION 10.01. Survival of Representations and Warranties; Covenants and
Agreements. The representations and warranties of the parties contained in
this Agreement shall survive the Effective Time until twelve months after the
date of this Agreement, except that (a)the representations and warranties
contained in Sections 3.02, 3.03, 4.01, 4.04, and 5.02 shall survive the
Effective Time indefinitely and (b) the representations and warranties
contained in Section 3.15 which shall survive the Effective Time until the
expiration of all applicable statute of limitation periods. All covenants and
agreements set forth in this Agreement shall survive the Effective Time
indefinitely or for such shorter period as is specified in this Agreement.
Notwithstanding the foregoing, the representations and warranties contained in
Section 3.22 shall not survive the Effective Time.
SECTION 10.02. Indemnification by the Indemnifying Partners. (a) The
Purchaser shall be indemnified and held harmless, jointly and not severally, by
the Indemnifying Partners for any and all liabilities, damages, claims, costs
and expenses actually suffered or incurred (hereinafter a "Loss") by the
Purchaser, arising out of or resulting from (i) the breach of any
representation, warranty, covenant or agreement made by KTC or any Partner
contained in this Agreement or in the certificate delivered pursuant to Section
9.02(a) (the "Closing Certificate") or (ii) arising out of or resulting from
the occupancy, operation, use or control of any real property listed in Section
3.13(a) or 3.13(b) of the KTC Disclosure Schedule prior to the Effective Time
or the operation of the Station prior to the Effective Time, in each case
incurred or imposed as a requirement or in connection with the compliance with
any environmental, health or safety law, rule or regulation, Governmental
Permit or other binding determination of a governmental body, including,
without limitation, any Release or storage of any Contaminant on, at or from
(A) any such real property (including, without, limitation, all facilities,
improvements, structures and equipment thereon, surface water thereon or
adjacent thereto and soil or groundwater thereunder) or any conditions
whatsoever on, under or in such real property or (B) any real property or
facility owned by a third party at which Contaminants generated by the Business
were sent by KTC prior to the Effective Time (collectively, the "Environmental
Indemnity"). After the Effective Time, Purchaser agrees to undertake the
management of all liabilities related to the Release of Contaminants on such
real property arising out of or resulting from the occupancy, operation, use or
control of such real property by KTC prior to the Effective Time; provided,
that (x) Purchaser shall investigate the nature of any Release and conduct any
remedial activities only to the extent that such investigation or remedial
action is required by applicable Environmental Law or is not inconsistent with
the exercise of reasonable business judgment and (y) Purchaser shall conduct
any investigations or remedial activities required by any applicable
Environmental Law in a cost effective manner. No later than 30 days before
commencing any work to investigate or respond to a Release of Contaminants on
the real property for which Purchaser seeks payment from KTC pursuant this
Section 10.02, Purchaser shall give KTC written notice describing in reasonable
detail the nature and estimated cost of the proposed work for the purpose of
giving the KTC a reasonable opportunity to review and comment on such proposed
work.. Anything in Section 10.01 to contrary notwithstanding, no claim may be
asserted nor any action commenced against the Indemnifying Partners for breach
of any representation, warranty, covenant or agreement contained in this
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Agreement or the Closing Certificate unless written notice of such claim or
action is received by the Indemnifying Partners describing in detail the facts
and circumstances with respect to the subject matter of such claim or action on
or prior to the date (x) with respect to the Environmental Indemnity, which is
four years from the date of this Agreement and (y) for all other
indemnification obligations, on which the representation, warranty, covenant or
agreement on which such claim or action is based ceases to survive as set forth
in Section 10.01, in each case, irrespective of whether the subject matter of
such claim or action shall have occurred before or after such date.
(b) Notwithstanding anything to the contrary contained in this Agreement,
(i) the maximum aggregate amount of indemnifiable Losses which may be recovered
from all Partners (x) arising out of or resulting from the breaches of
representations and warranties contained in this Agreement or in the Closing
Certificate or (y) under Section 10.02(a)(ii) shall be $25 million and (ii) no
Indemnifying Partner shall be liable to indemnify the Purchaser for any
indemnifiable Losses otherwise payable as a result of breaches of
representations and warranties or in the Closing Certificate contained in this
Agreement until such time as all such indemnifiable Losses shall aggregate to
more than $1,000,000, and then the Indemnifying Partners shall only be liable
for such indemnifiable Losses in excess of $1,000,000. For the purposes of
this Section 10.02(b), in computing such individual or aggregate amounts of
Losses, the amount of each Loss shall be deemed to be an amount (i) net of any
Tax benefit to the Purchaser or any affiliate thereof and (ii) net of any
insurance proceeds and any indemnity, contribution or other similar payment
recoverable by the Purchaser or any affiliate from any third party with respect
thereto. Payments by the Indemnifying Partners pursuant to Section 10.02(a)
shall be limited to the amount of any Loss that remains after deducting
therefrom (i) any Tax benefit to the Purchaser or any affiliate thereof, and
(ii) any insurance proceeds and any indemnity, contribution or other similar
payment recoverable by the Purchaser or any affiliate from any third party with
respect thereto. A Tax benefit will be considered to be recognized by the
Purchaser or any affiliate for purposes of this Section 10.02 in the tax period
in which the indemnity payment occurs, and the amount of the Tax benefit shall
be determined by assuming that each of the Purchaser and any affiliate is in
the maximum applicable statutory tax bracket after any deductions or other
allowances reportable with respect to a payment hereunder. In no event shall
the Purchaser be entitled to indemnification for any item reflected in the
Working Capital Adjustment made pursuant to Section 2.10(f). The amount to
which an indemnified person shall be entitled under this Article X shall be
determined: (i) by written agreement between the Purchaser and the
Indemnifying Partners, (ii) by a final judgment or decree of any court of
competent jurisdiction or (iii) by any other means to which the Purchaser and
the Indemnifying Partners shall agree. The judgment or decree of a court shall
be deemed final when the time for appeal, if any, shall have expired and no
appeal shall have been taken or when all appeals taken have been finally
determined. The indemnified party shall have the burden of proof in
establishing the amount of the Losses suffered by it.
SECTION 10.03. Indemnification by the Purchaser. The Partners shall be
indemnified and held harmless by the Purchaser for any and all Losses of the
Partners arising out of or resulting from the breach of any representation,
warranty, covenant or agreement made by the Purchaser or Merger Sub contained
in this Agreement. JSK shall be indemnified and held harmless by the Purchaser
for all liabilities or obligations of KTC to which JSK shall become subject
because it is liable for such liabilities or obligations under the WRLPA in its
- 41 -
<PAGE>
capacity as general partner of KTC, but excluding any such liabilities or
obligations for which the Purchaser is entitled (without regard, for purposes
of this sentence only, to the limitations on the indemnification of the
Indemnifying Partners set forth in Section 10.02(b)) to be indemnified pursuant
to Section 10.02 or Article VIII of this Agreement. Anything in Section 10.01
to contrary notwithstanding, no claim may be asserted nor any action commenced
against the Purchaser for breach of any representation, warranty, covenant or
agreement contained in this Agreement unless written notice of such claim or
action is received by the Purchaser describing in detail the facts and
circumstances with respect to the subject matter of such claim or action on or
prior to the date on which the representation, warranty, covenant or agreement
on which such claim or action is based ceases to survive as set forth in
Section 10.01, irrespective of whether the subject matter of such claim or
action shall have occurred before or after such date.
SECTION 10.04. Indemnification Procedures. (a) An indemnified party
shall give the indemnifying party notice of any matter which an indemnified
party has determined has given or could give rise to a right of indemnification
under this Agreement, within 60 days of such determination, stating the amount
of the Loss, if known, and method of computation thereof, and containing a
reference to the provisions of this Agreement in respect of which such right of
indemnification is claimed or arises; provided, however, that the failure to
provide such notice shall not release the indemnifying party from any of its
obligations under this Article X except to the extent the indemnifying party is
actually prejudiced by such failure and shall not relieve the indemnifying
party from any other obligation or liability that it may have to any
indemnified party otherwise than under this Article X. The obligations and
liabilities of the indemnifying party under this Article X with respect to
Losses arising from claims of any third party which are subject to the
indemnification provided for in this Article X ("Third Party Claims") shall be
governed by and contingent upon the following additional terms and conditions:
if an indemnified party shall receive notice of any Third Party Claim, the
indemnified party shall give the indemnifying party notice of such Third Party
Claim within 30 days of the receipt by the indemnified party of such notice;
provided, however, that the failure to provide such notice shall not release
the indemnifying party from any of its obligations under this Article X except
to the extent the indemnifying party is actually prejudiced by such failure and
shall not relieve the indemnifying party from any other obligation or liability
that it may have to any indemnified party otherwise than under this Article X.
The indemnifying party shall be entitled to assume and control the defense of
such Third Party Claim at its expense and through counsel of its choice if it
gives notice of its intention to do so to the indemnified party within five
days of the receipt of such notice from the indemnified party. In the event
the indemnifying party exercises the right to undertake any such defense
against any such Third Party Claim as provided above, the indemnified party
shall cooperate with the indemnifying party in such defense and make available
to the indemnifying party, at the indemnifying party's expense, all witnesses,
pertinent records, materials and information in the indemnified party's
possession or under the indemnified party's control relating thereto as is
reasonably required by the indemnifying party. Similarly, in the event the
indemnified party is, directly or indirectly, conducting the defense against
any such Third Party Claim, the indemnifying party shall cooperate with the
indemnified Party in such defense and make available to the indemnified party,
at the indemnifying party's expense, all such witnesses, records, materials and
information in the indemnifying party's possession or under the indemnifying
- 42 -
<PAGE>
party's control relating thereto as is reasonably required by the indemnified
party. No such Third Party Claim may be settled by the indemnifying party
without the written consent of the indemnified party. To the extent a third
party seeks a non-monetary remedy in addition to monetary damages and such non-
monetary remedy is reasonably likely to affect adversely the ongoing operation
of the Station, and the Indemnifying Partners have assumed the defense of such
claim, the Purchaser may participate in the defense, at its own expense, and no
settlements or agreements relating to such non-monetary remedy may be entered
into without the prior written consent of the Purchaser.
(b) From and after the Effective Time, the exclusive remedy of the
Purchaser for breaches of representations, warranties, covenants and agreements
of the Partners contained in this Agreement and for any and all liabilities,
losses, claims, costs or damages whatsoever relating to this Agreement or the
transactions contemplated hereby shall be pursuant to the indemnification
provisions set forth in this Article X; provided, however, that each party
hereto shall retain all non-monetary equitable remedies available to it in
respect of any breach or alleged breach by any other party of any covenant or
other agreement of such other party contained in or made pursuant to this
Agreement and required to be performed after the Effective Time.
SECTION 10.05. Tax Matters. Anything in this Article X to the contrary
notwithstanding, the rights and obligations of the parties with respect to
indemnification for any and all Tax matters shall be governed by Article VIII.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
SECTION 11.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by the mutual written consent of the Purchaser, on the one hand, and
the General Partner, on the other hand;
(b) by the General Partner if the Purchaser or Merger Sub shall have
breached in any material respect any of their respective representations,
warranties, covenants or other agreements contained in this Agreement,
which breach is incapable of being cured or has not been cured within 30
days after the giving of written notice by the General Partner to the
Purchaser, except, in any case, such breaches which could reasonably be
expected to materially adversely affect the ability of the Purchaser to
complete the Merger;
(c) by the Purchaser if KTC or the Partners shall have breached in any
material respect any of their respective representations, warranties,
covenants or other agreements contained in this Agreement, which breach is
incapable of being cured or has not been cured within 30 days after the
giving of written notice by the Purchaser to the General Partner, except,
in any case, such breaches which could not reasonably be expected to have
a Material Adverse Effect or to affect adversely the ability of KTC or the
Partners to complete the Merger; or
- 43 -
<PAGE>
(d) by the Purchaser, on the one hand, or the General Partner, on the
other hand, if the Effective Time shall not have occurred prior to nine
months after the date of this Agreement; provided, however, that the right
to terminate this Agreement under this Section 11.01(d) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement shall have been the cause of, or shall have resulted in, the
failure of the Merger to occur prior to such date.
SECTION 11.02. Effect of Termination. (a) In the event of termination of
this Agreement as provided in Section 11.01, this Agreement shall forthwith
become void and there shall be no liability on the part of any party hereto (i)
except as set forth in Section 6.03 and Section 12.02 and (ii) nothing herein
shall relieve any party from liability for any breach of any covenant or
agreement contained herein or any willful breach of any representation or
warranty contained herein.
(b) The Purchaser acknowledges and agrees that the Escrow Deposit shall
serve to secure any obligations of the Purchaser resulting from its failure to
comply with the terms and conditions of this Agreement prior to the Effective
Time. In no event shall KTC's remedies in the circumstances described in this
Section 11.02(b) be limited to this Section 11.02(b).
SECTION 11.03. Waiver. At any time prior to the Effective Time, the
Purchaser, on behalf of itself and Merger Sub on the one hand, and the General
Partner on behalf of KTC and the Partners on the other hand, may (a) extend the
time for the performance of any of the obligations or other acts of the other
party, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto or (c) waive
compliance with any of the agreements or conditions contained herein. Any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party to be bound thereby.
ARTICLE XII
GENERAL PROVISIONS
SECTION 12.01. Expenses. All costs and expenses, including, without
limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses, whether or not the Merger shall have occurred.
SECTION 12.02. Notices. All notices, request, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by courier service, by cable, by telecopy, by telegram, by telex or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this
Section 12.02):
- 44 -
<PAGE>
(a) if to KTC or the Partners:
Kelly Broadcasting Co.
3 Television Circle
Sacramento, CA 95814
Attention: Jon S. Kelly
Telecopier: (916) 325-3711
with a copy to:
Shearman & Sterling
555 California Street, Suite 2000
San Francisco, CA 94104
Attention: Christopher D. Dillon, Esq.
Telecopier: (415) 616-1199
(b) if to the Purchaser or Merger Sub:
Meredith Corporation
1716 Locust Street
Des Moines, IA 50309
Attention: William T. Kerr
Telecopier: (515) 284-3548
with copies to:
Meredith Corporation
1716 Locust Street
Des Moines, IA 50309
Attention: Thomas L. Slaughter, Esq.
Telecopier: (515) 284-3933
and:
Wiley, Rein & Fielding
1776 K Street, N.W.
Washington, D.C. 20006
Attention: James R. Bayes, Esq.
Telecopier: (202) 429-7049
SECTION 12.03. Public Announcements. No party to this Agreement shall
make any public announcements in respect of this Agreement or the transactions
contemplated hereby or otherwise communicate with any news media without prior
notification to the other party, and the parties shall cooperate as to the
timing and contents of any such announcement.
SECTION 12.04. Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 12.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
- 45 -
<PAGE>
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated hereby be consummated as originally
contemplated to the greatest extent possible.
SECTION 12.06. Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and undertakings, both written and oral, other
than the Confidentiality Agreement, among KTC, the Partners, the Purchaser and
Merger Sub with respect to the subject matter hereof and except as otherwise
expressly provided herein.
SECTION 12.07. Assignment. The rights of any party under this Agreement
or any KTC Ancillary Agreement or Purchaser Ancillary Agreement, as the case
may be, shall not be assignable by such party prior to or after the Effective
Time without the written consent of the other parties hereto. Notwithstanding
the foregoing, the Partners agree that following the Effective Time, the
Purchaser may assign any of its rights hereunder to Tribune, WGNX Inc. or an
affiliate thereof and following such assignment such assignee shall have all
the rights (including the ability to enforce such rights) and such of those
obligations of Purchaser hereunder assumed by such assignee, but no such
assignment shall relieve Purchaser of its obligations hereunder.
SECTION 12.08. No Third-Party Beneficiaries. Except as provided in
Articles VII and VIII, this Agreement is for the sole benefit of the parties
hereto and their permitted assigns and nothing herein, express or implied, is
intended to or shall confer upon any other person or entity any legal or
equitable right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
SECTION 12.09. Amendment. This Agreement may not be amended or modified
except by an instrument in writing signed by the General Partner, on behalf of
itself, KTC and the other Partners, and the Purchaser, on behalf of itself and
Merger Sub.
SECTION 12.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California applicable to
contracts executed in and to be performed in that State. All actions and
proceedings arising out of or relating to this Agreement shall be heard and
determined in a California state or federal court sitting in the City of
Sacramento or San Francisco, and the parties hereto hereby irrevocable submit
to the exclusive jurisdiction of such courts in any such action or proceeding
and irrevocably waive the defense of an inconvenient forum to the maintenance
of any such action or proceeding.
SECTION 12.11. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
SECTION 12.12. Board Approval. Notwithstanding anything herein to the
contrary, the execution and delivery by Purchaser and the Merger Sub of this
Agreement is subject to the approval of this Agreement and the Exchange
Agreement by the Board of Directors of Purchaser and the approval of the
- 46 -
<PAGE>
Exchange Agreement by the Board of Directors of Tribune. If such approval is
not obtained by 5:00 p.m. Eastern Time on Monday, August 24, 1998, then
Purchaser shall deliver written notice thereof to KTC. If Purchaser delivers
such notice, then this Agreement shall thereupon terminate without liability on
the part of any party. If Purchaser does not deliver such notice on or prior
to such date, then such approval shall be deemed to have been obtained for
purposes of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
KELLY TELEVISION CO.
By: J.S. Kelly L.L.C., its General Partner
By: /s/ J. S. Kelly
--------------------------------------
Name: J. S. Kelly
Title: General Partner
J.S. KELLY L.L.C.
By: /s/ J. S. Kelly
--------------------------------------
Name: J. S. Kelly
Title:
G.G. KELLY L.L.C.
By: /s/ Gregory G. Kelly
--------------------------------------
Name: Gregory G. Kelly
Title:
/s/ Robert E. Kelly
-------------------------------------------
Robert E. Kelly
MEREDITH CORPORATION
By: /s/ John P. Loughlin
--------------------------------------
Name: John P. Loughlin
Title: President - Broadcasting Group
- 47 -
<PAGE>
KCPQ ACQUISITION CORP.
By: /s/ Stephen M. Lacy
--------------------------------------
Name: Stephen M. Lacy
Title: Vice President
- 48 -
Exhibit 2.2
-----------
ASSET EXCHANGE AGREEMENT
Dated as of August 21, 1998
Among
TRIBUNE BROADCASTING COMPANY,
WGNX INC.,
MEREDITH CORPORATION
and
KCPQ ACQUISITION CORP.
- 1 -
<PAGE>
TABLE OF CONTENTS
ARTICLE I
EXCHANGE OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . -7-
1.1. Transfer of Tribune Station Asset . . . . . . . . . . . . . . -7-
1.2. Excluded Tribune Assets . . . . . . . . . . . . . . . . . . . -8-
1.3. Transfer of Kelly Station Assets . . . . . . . . . . . . . . -9-
1.4. Excluded Meredith Assets . . . . . . . . . . . . . . . . . . -11-
1.5. Assumption of Tribune Station Liabilities . . . . . . . . . . -12-
1.6. Assumption of Kelly Station Liabilities . . . . . . . . . . . -14-
1.7. Closing Date. . . . . . . . . . . . . . . . . . . . . . . . . -14-
1.8. Calculation of Estimated Tribune Station Working
Capital Amount and Estimated Kelly Station Working
Capital Amount; Adjustment. . . . . . . . . . . . . . . . . . -15-
1.9. Closing Date Deliveries . . . . . . . . . . . . . . . . . . . -15-
1.10. Closing Date Balance Sheets; Adjustment . . . . . . . . . . . -16-
1.11. Further Assurances. . . . . . . . . . . . . . . . . . . . . . -18-
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TRIBUNE AND THE TRIBUNE SUB . . . -19-
2.1. Organization . . . . . . . . . . . . . . . . . . . . . . . . -19-
2.2. Subsidiaries and Investments. . . . . . . . . . . . . . . . . -19-
2.3. Authority of Tribune and the Tribune Sub. . . . . . . . . . . -20-
2.4. Financial Statements. . . . . . . . . . . . . . . . . . . . . -20-
2.5. Operations Since Balance Sheet Date . . . . . . . . . . . . . -21-
2.6. No Undisclosed Liabilities. . . . . . . . . . . . . . . . . . -22-
2.7. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
2.8. Availability of Assets and Legality of Use. . . . . . . . . . -22-
2.9. Governmental Permits. . . . . . . . . . . . . . . . . . . . . -22-
2.10. Real Property . . . . . . . . . . . . . . . . . . . . . . . . -23-
2.11. Real Property Leases. . . . . . . . . . . . . . . . . . . . . -24-
2.12. Condemnation. . . . . . . . . . . . . . . . . . . . . . . . . -24-
2.13. Personal Property . . . . . . . . . . . . . . . . . . . . . . -24-
2.14. Personal Property Leases. . . . . . . . . . . . . . . . . . . -24-
2.15. Intellectual Property . . . . . . . . . . . . . . . . . . . . -24-
2.16. Accounts Receivable . . . . . . . . . . . . . . . . . . . . . -25-
2.17. Title to Assets . . . . . . . . . . . . . . . . . . . . . . . -25-
2.18. Employees . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
2.19. Employee Relations. . . . . . . . . . . . . . . . . . . . . . -25-
2.20. Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
2.21. Status of Contracts . . . . . . . . . . . . . . . . . . . . . -26-
2.22. No Violation, Litigation or Regulatory Action . . . . . . . . -27-
2.23. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
2.24. Environmental Protection. . . . . . . . . . . . . . . . . . . -28-
2.25. No Finder . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
2.26. Status of Tribune and the Tribune Sub . . . . . . . . . . . . -28-
- 2 -
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MEREDITH AND THE MEREDITH SUB . . -29-
3.1. Organization . . . . . . . . . . . . . . . . . . . . . . . . -29-
3.2. Subsidiaries and Investments. . . . . . . . . . . . . . . . . -29-
3.3. Authority of the Meredith and the Meredith Subs . . . . . . . -29-
3.4. Title to Assets . . . . . . . . . . . . . . . . . . . . . . . -30-
3.5. No Finder . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
3.6. Status of Meredith and the Meredith Sub . . . . . . . . . . . -30-
ARTICLE IV
ACTION PRIOR TO THE CLOSING DATE. . . . . . . . . . . . . . . . . . -31-
4.1. Investigation of the Tribune Station Business and the Kelly
Station Business. . . . . . . . . . . . . . . . . . . . . . . -31-
4.2. Preserve Accuracy of Representations and Warranties . . . . . -31-
4.3. FCC Consent; Improvements Act Approval; Other
Consents and Approvals. . . . . . . . . . . . . . . . . . . . -32-
4.4. Operations of the Tribune Station Prior to the
Closing Date. . . . . . . . . . . . . . . . . . . . . . . . . -33-
4.5. Operations of the Kelly Station Prior to the Closing Date . . -34-
4.6. Public Announcement . . . . . . . . . . . . . . . . . . . . . -34-
4.7. Interim Financial Statements. . . . . . . . . . . . . . . . . -35-
4.8. Rights of Meredith Under Kelly Merger Agreement . . . . . . . -35-
ARTICLE V
ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . -35-
5.1. Taxes; Sales, Use and Transfer Taxes; Title Insurance . . . . -35-
5.2. Employees; Employee Benefit Plans . . . . . . . . . . . . . . -36-
5.3. Control of Operations Prior to Closing Date . . . . . . . . . -37-
5.4. Closing of Kelly Merger . . . . . . . . . . . . . . . . . . . -38-
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF TRIBUNE AND THE TRIBUNE SUB. -38-
6.1. No Misrepresentation or Breach of Covenants and Warranties. . -38-
6.2. No Restraint or Litigation. . . . . . . . . . . . . . . . . . -39-
6.3. FCC Order . . . . . . . . . . . . . . . . . . . . . . . . . . -39-
6.4. No Material Adverse Change. . . . . . . . . . . . . . . . . . -39-
6.5. Kelly Merger. . . . . . . . . . . . . . . . . . . . . . . . . -40-
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF MEREDITH AND THE MEREDITH
SUBS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
7.1. No Restraint or Litigation. . . . . . . . . . . . . . . . . . -40-
7.2. FCC Order . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
7.3. Lease Extension . . . . . . . . . . . . . . . . . . . . . . . -40-
7.4. Transmission Interruption . . . . . . . . . . . . . . . . . . -40-
7.5. Kelly Merger. . . . . . . . . . . . . . . . . . . . . . . . . -40-
- 3 -
<PAGE>
ARTICLE VIII
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
8.1. Indemnification by Tribune. . . . . . . . . . . . . . . . . . -41-
8.2. Indemnification by Meredith . . . . . . . . . . . . . . . . . -42-
8.3. Notice of Claims. . . . . . . . . . . . . . . . . . . . . . . -43-
8.4. Third Party Claims. . . . . . . . . . . . . . . . . . . . . . -44-
8.5. No Effect on Adjustment . . . . . . . . . . . . . . . . . . . -45-
8.6. Exclusive Remedy. . . . . . . . . . . . . . . . . . . . . . . -45-
ARTICLE IX
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . -46-
9.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . -46-
ARTICLE X
GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . -46-
10.1. Survival of Representations, Warranties and Obligations . . -46-
10.2. Confidential Nature of Information. . . . . . . . . . . . . -46-
10.3. Governing Law; Venue. . . . . . . . . . . . . . . . . . . . -47-
10.4. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . -47-
10.5. Successors and Assigns. . . . . . . . . . . . . . . . . . . -48-
10.6. Access to Records after Closing . . . . . . . . . . . . . . -48-
10.7. Entire Agreement; Amendments. . . . . . . . . . . . . . . . -49-
10.8. Interpretation. . . . . . . . . . . . . . . . . . . . . . . -49-
10.9. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . -49-
10.10. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . -49-
10.11. Partial Invalidity. . . . . . . . . . . . . . . . . . . . . -50-
10.12. Execution in Counterparts . . . . . . . . . . . . . . . . . -50-
10.13. Definitions . . . . . . . . . . . . . . . . . . . . . . . . -50-
10.14. Exchange Groups . . . . . . . . . . . . . . . . . . . . . . -55-
10.15. Allocation Schedule . . . . . . . . . . . . . . . . . . . . -56-
10.16. Board Approval. . . . . . . . . . . . . . . . . . . . . . . -56-
Exhibit Description
- ------- -----------
A Undertaking and Assumption Relating to the Tribune Station
B Undertaking and Assumption Relating to the Kelly Station
C Bill of Sale and Assignment Relating to the Tribune Station
D Bill of Sale and Assignment Relating to the Kelly Station
E Opinion of Counsel for Meredith and the Meredith Sub
F Opinion of Counsel for Tribune and the Tribune Subs
- 4 -
<PAGE>
Schedule Description
- -------- -----------
2.3 -- Tribune Conflicts; Consents
2.4 -- Tribune Station Financial Statements
2.5(A)(B) -- Tribune Station Changes in Operations
2.6 -- Tribune Station Undisclosed Liabilities
2.8 -- Tribune Station Unavailable Assets
2.9(A)(1),
(A)(2),(B) -- Tribune Station Governmental Permits
2.10 -- Tribune Station Real Property
2.11 -- Tribune Station Real Property Leases
2.13 -- Tribune Station Personal Property
2.14 -- Tribune Station Personal Property Leases
2.15 -- Tribune Station Intellectual Property
2.18 -- Tribune Station Employees
2.19(A)(B) -- Tribune Station Employee Relations
2.20 -- Tribune Station Contracts
2.21 -- Status of Tribune Station Contracts
2.22 -- Tribune Station Legal Proceedings
2.24 -- Tribune Station Environmental matters
3.3 -- Exchange Party Conflicts; Consents
4.4(b) -- Conduct of Tribune Station Business
-- Conduct of Exchange Station Business
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ASSET EXCHANGE AGREEMENT
ASSET EXCHANGE AGREEMENT, dated as of August 21, 1998 (this
"Agreement"), among Tribune Broadcasting Company, a Delaware corporation
("Tribune"), WGNX Inc., a Delaware corporation and a wholly-owned subsidiary of
Tribune (the "Tribune Sub"), and Meredith Corporation, an Iowa corporation
("Meredith"), and KCPQ Acquisition Corp., a Washington corporation and a
wholly-owned subsidiary of Meredith (the "Meredith Sub").
W I T N E S S E T H :
WHEREAS, the Tribune Sub is engaged in the business of owning and
operating Television Broadcast Station WGNX-TV, Channel 46, in Atlanta, Georgia
(the "Tribune Station");
WHEREAS, Meredith and Meredith Sub have entered into the Agreement
and Plan of Merger dated as of August 21, 1998 (the "Kelly Merger Agreement")
with Kelly Television Co., a Washington limited partnership ("KTC"), J.S. Kelly
L.L.C., a Delaware limited liability company, G.G. Kelly L.L.C., a Delaware
limited liability company, and Robert E. Kelly, a natural person (J.S. Kelly,
L.L.C., G.G. Kelly, L.L.C. and Robert E. Kelly being referred to collectively
herein as the "Partners");
WHEREAS, upon consummation of the merger (the "Kelly Merger") of KTC
with and into Meredith Sub pursuant to the Kelly Merger Agreement, Meredith Sub
will own and have the right to operate Television Broadcast Station KCPQ-TV,
Channel 13, in Seattle, Washington (the "Kelly Station");
WHEREAS, Tribune and Meredith desire that the Tribune Sub transfer to
the Meredith Sub substantially all of the assets, properties and business
relating to the Tribune Station in exchange for the transfer by the Meredith
Sub to the Tribune Sub of substantially all of the assets, properties and
business relating to the Kelly Station owned by the Meredith Sub, all on the
terms and subject to the conditions set forth herein; and
WHEREAS, pursuant to the like-kind exchange rules under Treasury
Regulation Section 1.1031(j)-1 covering exchanges of multiple properties,
Tribune and the Tribune Sub desire to structure the transactions contemplated
by this Agreement as like-kind exchanges and Meredith and the Meredith Sub have
agreed to cooperate therewith.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, it is hereby agreed among Tribune, the
Tribune Sub, Meredith and the Meredith Sub as follows:
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ARTICLE I
EXCHANGE OF ASSETS
1.1. Transfer of Tribune Station Assets. Upon the terms and subject
to the conditions of this Agreement, on the Closing Date, the Tribune Sub shall
transfer, assign, convey and deliver to the Meredith Sub, and the Meredith Sub
shall receive from the Tribune Sub, free and clear of all Encumbrances (except
for Permitted Encumbrances), all of the assets, properties and business
(excepting only the Excluded Tribune Assets) of every kind and description,
wherever located, real, personal or mixed, tangible or intangible, owned or
held by Tribune or the Tribune Sub relating to the Tribune Station and the
business of the Tribune Station (the "Tribune Station Business") as the same
shall exist on the Closing Date (herein collectively referred to as the
"Tribune Station Assets"), including, without limitation, all right, title and
interest of Tribune and the Tribune Sub in, to and under:
(a) All accounts receivable generated by the Tribune Station
Business for periods prior to the Closing Date;
(b) The broadcast licenses for the Tribune Station (including the
right to use the call letters "WGNX") issued by the FCC and all other
assignable Tribune Station Governmental Permits listed in Schedule 2.9(A)(1);
(c) The real property described in Schedule 2.10 and any option,
right or contract to purchase real property described in Schedule 2.10;
(d) The real property leases and leasehold improvements listed or
described in Schedule 2.11;
(e) All machinery, equipment (including computers and office
equipment), auxiliary and translator facilities, transmitting towers,
transmitters, broadcast equipment, antennae, supplies, inventory (including all
films, programs, records, tapes, recordings, compact discs, cassettes, spare
parts and equipment), advertising and promotional materials, engineering plans,
records and data, vehicles, furniture and other personal property owned by
Tribune and the Tribune Sub used in or relating to the Tribune Station,
including, without limitation, the items listed or referred to in Schedule
2.13;
(f) The personal property leases and the personal property leased
thereunder listed in Schedule 2.14;
(g) The trademarks, trade names, service marks and copyrights (and
all goodwill associated therewith), registered or unregistered, owned by
Tribune or the Tribune Sub relating solely to the Tribune Station or the
Tribune Station Business, and the applications for registration thereof and the
patents and applications therefor and the licenses relating to any of the
foregoing including, without limitation, the items listed in Schedule 2.15;
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(h) (i) All contracts for the sale of broadcast time for
advertising or other purposes made in the ordinary course of the Tribune
Station Business and consistent with past practice, (ii) the contracts,
agreements or understandings listed or described in Schedule 2.20 and
designated on such Schedule as an "Assumed Contract" and (iii) any other
contract, agreement or understanding (evidenced in writing) in respect of the
Tribune Station Business which (A) is of the general nature described in
subsection (b), (c) or (h) of Section 2.20 but which, by virtue of its specific
terms, is not required to be listed in Schedule 2.20 or (B) is entered into
after the date hereof consistent with the provisions of Section 4.4 of this
Agreement;
(i) All advertising customer lists, mailing lists, processes, trade
secrets, know-how and other proprietary or confidential information exclusively
used in or relating to the Tribune Station Business;
(j) All rights, claims or causes of action of Tribune or the Tribune
Sub against third parties arising under warranties from manufacturers, vendors
and others in connection with the Tribune Station Assets;
(k) All prepaid rentals and other prepaid expenses (except for
prepaid insurance) arising from payments made in the ordinary course of the
operation of the Tribune Station Business prior to the Closing Date for goods
or services where such goods or services have not been received at the Closing
Date;
(l) All jingles, slogans, commercials and other promotional
materials used in or relating primarily to the Tribune Station or the Tribune
Station Business;
(m) All books and records (including all computer programs used
primarily in connection with the operation of the Tribune Station Business or
the Tribune Station) of Tribune and the Tribune Sub relating to the assets,
properties, business and operations of the Tribune Station Business or the
Tribune Station including, without limitation, all files, logs, programming
information and studies, technical information and engineering data, news and
advertising studies or consulting reports and sales correspondence, but
excluding any books and records (including computer programs) relating
primarily to a business of Tribune unrelated to the Tribune Station Business or
the Tribune Station;
(n) All cash and cash equivalents (including any marketable
securities or certificates of deposit) of the Tribune Sub; and
(o) All other assets or properties not referred to above which are
reflected on the Tribune Station Closing Date Balance Sheet or the Tribune
Station Balance Sheet, except (i) any such assets or properties disposed of
after the Balance Sheet Date in the ordinary course of the Tribune Station
Business and (ii) Excluded Tribune Assets.
1.2. Excluded Tribune Assets. Notwithstanding the foregoing, the
Tribune Station Assets shall not include the following (herein referred to as
the "Excluded Tribune Assets"):
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(a) All cash and cash equivalents (including any marketable
securities or certificates of deposit) of Tribune;
(b) All claims, rights and interests of Tribune or the Tribune Sub
in and to any refunds for federal, state or local franchise, income or other
Taxes or fees of any nature whatsoever for periods prior to the Closing Date;
(c) Any rights, claims or causes of action of Tribune or the Tribune
Sub against third parties relating to the assets, properties, business or
operations of the Tribune Station Business arising out of transactions
occurring prior to the Closing Date, except to the extent and only to the
extent any such claims relate to the Tribune Station Assets;
(d) All bonds held, contracts or policies of insurance and prepaid
insurance with respect to such contracts or policies;
(e) Tribune's and the Tribune Sub's corporate seal, corporate minute
books, stock record books, corporate records relating to incorporation,
corporate Tax returns and related documents and supporting work papers and any
other records and returns relating to Taxes, assessments and similar
governmental levies (other than real and personal property Taxes, assessments
and levies imposed on the Tribune Station Assets);
(f) All records prepared in connection with the transfer of the
Tribune Station, including bids received from others and analyses relating to
the Tribune Station and the Tribune Station Assets;
(g) The contracts, agreements or understandings of Tribune and the
Tribune Sub listed in Schedule 2.20 and designated on such Schedule as a
"Contract Not Assumed";
(h) Any trade name, trademarks, service marks or logos using or
incorporating the names "Tribune", "Tribune Broadcasting", "TBC" or any
variation or derivative thereof;
(i) All records and documents relating to Excluded Tribune Assets or
to liabilities other than Assumed Tribune Station Liabilities;
(j) Tribune's employee benefit agreements, plans or arrangements
listed in Schedule 2.20;
(k) The licenses and permits issued by the FCC listed on Schedule
2.9(A)(2); and
(l) Any rights of Tribune or the Tribune Sub under or pursuant to
this Agreement or the other agreements with Meredith or the Meredith Sub
contemplated hereby.
1.3. Transfer of Kelly Station Assets. Upon the terms and subject
to the conditions of this Agreement, on the Closing Date, the Meredith Sub
shall transfer, assign, convey and deliver to the Tribune Sub, and the Tribune
Sub shall receive from the Meredith Sub, free and clear of all Encumbrances
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(except for Permitted Encumbrances), all of the assets, properties and business
(excepting only the Excluded Meredith Assets) of every kind and description,
wherever located, real, personal or mixed, tangible or intangible, owned or
held by Meredith or the Meredith Sub relating to the Kelly Station and the
business of the Kelly Station (the "Kelly Station Business") as the same shall
exist on the Closing Date (herein collectively called the "Kelly Station
Assets"), including, without limitation, any right, title and interest of
Meredith and the Meredith Sub in, to and under:
(a) All accounts receivable generated by the Kelly Station Business
for periods prior to the Closing Date;
(b) The broadcast licenses for the Kelly Station (including the
right to use the call letters "KCPQ") issued by the FCC and all other
assignable permits, licenses, franchises, privileges, immunities and other
authorizations (the "Kelly Station Governmental Permits") listed in Section
3.11 of the KTC Disclosure Schedule attached to the Kelly Merger Agreement (the
"Kelly Disclosure Schedule");
(c) The real property described in Section 3.13 of the Kelly
Disclosure Schedule and any option, right or contract to purchase real property
described in Section 3.12 of the Kelly Disclosure Schedule;
(d) The real property leases and leasehold improvements listed or
described in Section 3.13 of the Kelly Disclosure Schedule;
(e) All machinery, equipment (including computers and office
equipment), auxiliary and translator facilities, transmitting towers,
transmitters, broadcast equipment, antennae, supplies, inventory (including all
films, programs, records, tapes, recordings, compact discs, cassettes, spare
parts and equipment), advertising and promotional materials, engineering plans,
records and data, vehicles, furniture and other personal property owned by
Meredith and the Meredith Sub used in or relating to the Kelly Station,
including, without limitation, the items listed or referred to in Section 3.16
of the Kelly Disclosure Schedule;
(f) The personal property leases and the personal property leased
thereunder listed in Section 3.17 of the Kelly Disclosure Schedule;
(g) The trademarks, trade names, service marks and copyrights (and
all goodwill associated therewith), registered or unregistered, owned by the
Meredith or the Meredith Sub relating solely to the Kelly Station or the Kelly
Station Business, and the applications for registration thereof and the patents
and applications therefor and the licenses relating to any of the foregoing
including, without limitation, the items listed in Section 3.18 of the Kelly
Disclosure Schedule;
(h) (i) All contracts for the sale of broadcast time for
advertising or other purposes relating to the Kelly Station Business, (ii) the
contracts, agreements or understandings listed or described in Section 3.13 of
the Kelly Disclosure Schedule and (iii) any other contract, agreement or
understanding (evidenced in writing) in respect of the Kelly Station Business;
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(i) All advertising customer lists, mailing lists, processes, trade
secrets, know-how and other proprietary or confidential information exclusively
used in or relating to the Kelly Station Business;
(j) All rights, claims or causes of action of Meredith or the
Meredith Sub against third parties arising under warranties from manufacturers,
vendors and others in connection with the Kelly Station Assets;
(k) All prepaid rentals and other prepaid expenses (except for
prepaid insurance) arising from payments made in the ordinary course of the
operation of the Kelly Station Business prior to the Closing Date for goods or
services where such goods or services have not been received at the Closing
Date;
(l) All jingles, slogans, commercials and other promotional
materials used in or relating primarily to the Kelly Station or the Kelly
Station Business;
(m) All books and records (including all computer programs used
primarily in connection with the operation of the Kelly Station Business or the
Kelly Station) of Meredith and the Meredith Sub relating to the assets,
properties, business and operations of the Kelly Station Business or the Kelly
Station including, without limitation, all files, logs, programming information
and studies, technical information and engineering data, news and advertising
studies or consulting reports and sales correspondence, but excluding any books
and records (including computer programs) relating primarily to a business of
Meredith unrelated to the Kelly Station Business or the Kelly Station;
(n) All cash and cash equivalents (including any marketable
securities or certificates of deposit) of the Meredith Sub;
(o) All rights arising under the Kelly Merger Agreement after the
consummation of the Kelly Merger, including without limitation those rights
arising under Sections 6.02, 6.09, Article VIII, Article X and Article XI of
the Kelly Merger Agreement; and
(p) All other assets or properties not referred to above which are
reflected on the Kelly Station Closing Date Balance Sheet or the balance sheet
included in Section 3.06 of the Kelly Disclosure Schedule for the period ending
June 30, 1998 (the "Kelly Station Balance Sheet"), except (i) any such assets
or properties disposed of after the Balance Sheet Date in the ordinary course
of the Kelly Station Business and (ii) Excluded Meredith Assets.
1.4. Excluded Meredith Assets. Notwithstanding the foregoing, the
Kelly Station Assets shall not include the following (herein referred to as the
"Excluded Meredith Assets"):
(a) All cash and cash equivalents (including any marketable
securities or certificates of deposit) of Meredith;
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(b) Meredith's and the Meredith Sub's corporate seal, corporate
minute books, stock record books, corporate records relating to incorporation,
corporate Tax returns and related documents and supporting work papers and any
other records and returns relating to Taxes, assessments and similar
governmental levies (other than real and personal property Taxes, assessments
and levies imposed on the Kelly Station Assets);
(c) All records prepared in connection with the transfer of the
Kelly Station, including bids received from others and analyses relating to the
Kelly Station and the Kelly Station Assets;
(d) Any trade name, trademarks, service marks or logos using or
incorporating the name "Meredith", "Meredith Broadcasting" "Meredith
Television", "Meredith" or any variation or derivative thereof;
(e) All records and documents relating to Excluded Meredith Assets
or to liabilities other than Assumed Kelly Station Liabilities;
(f) All of Meredith's and the Meredith Sub's rights under Sections
2.08 and 2.10 of the Kelly Merger Agreement; and
(g) Any rights of Meredith or the Meredith Sub under or pursuant to
this Agreement or the other agreements with Tribune or the Tribune Sub
contemplated hereby.
1.5. Assumption of Tribune Station Liabilities. (a) On the
Closing Date, the Meredith Sub shall deliver to the Tribune Sub an undertaking
and assumption, in the forms of Exhibit A, pursuant to which the Meredith Sub
shall assume and be obligated for, and shall agree to pay, perform and
discharge in accordance with their terms, the following obligations and
liabilities of the Tribune Sub (except to the extent such obligations and
liabilities constitute Excluded Tribune Station Liabilities):
(i) All current liabilities of the Tribune Sub reflected on the
Tribune Station Closing Date Balance Sheet, including, without limitation,
accounts payable, accrued equipment rentals, accrued salary, payroll and
wages, accrued sick pay, accrued accounting fees and expenses, accrued
excise, withholding, unemployment, social security, payroll, property,
sales and use Taxes;
(ii) All liabilities of the Tribune Sub arising after the Closing
Date (other than any liability or obligation for breach or default which
occurred prior to the Closing) under (A) the Tribune Station Agreements
and (B) the leases, contracts and other agreements entered into by the
Tribune Sub with respect to the Tribune Station Business after the date
hereof consistent with the terms of Section 4.4 of this Agreement;
All of the foregoing to be assumed by the Meredith Sub hereunder are
referred to herein as the "Assumed Tribune Station Liabilities."
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(b) Meredith and the Meredith Sub shall not assume or be obligated
for any of, and Tribune and the Tribune Sub shall solely retain, pay, perform,
defend and discharge all of, their respective liabilities or obligations of any
and every kind whatsoever, direct or indirect, known or unknown, absolute or
contingent, not expressly assumed by the Meredith Sub under Section 1.5(a) and,
notwithstanding anything to the contrary in Section 1.5(a), none of the
following (herein referred to as "Excluded Tribune Station Liabilities") shall
be "Assumed Tribune Station Liabilities" for purposes of this Agreement:
(i) any foreign, federal, state, county or local income Taxes which
arise from the operation of the Tribune Station or the Tribune Station
Business or the ownership of the Tribune Station Assets prior to the
Closing Date;
(ii) any liability or obligation of the Tribune Sub in respect of
indebtedness for borrowed money or any intercompany payable of the Tribune
Sub or any of its Affiliates;
(iii) all liabilities and obligations related to, associated with or
arising out of (A) the occupancy, operation, use or control of any of the
real property listed or described in Schedule 2.10 or Schedule 2.11 prior
to the Closing Date or (B) the operation of the Tribune Station Business
prior to the Closing Date, in each case incurred or imposed as a
requirement of any environmental, health or safety Requirements of Law
existing prior to the Closing Date, including, without limitation, any
Release or storage of any Contaminants on, at or from (1) any such real
property (including, without limitation, all facilities, improvements,
structures and equipment thereon, surface water thereon or adjacent
thereto and soil or groundwater thereunder) or any conditions whatsoever
on, under or in such real property or (2) any real property or facility
owned by a third party at which Contaminants generated by the Tribune
Station Business were sent prior to the Closing Date;
(iv) any costs and expenses incurred by Tribune or the Tribune Sub
incident to their negotiation and preparation of this Agreement and their
performance and compliance with the agreements and conditions contained
herein;
(v) any liabilities or obligations, whenever arising, related to,
associated with or arising out of the employee benefit agreements, plans
or arrangements listed in Schedule 2.20;
(vi) any liabilities in respect of the claims, suits, proceedings or
investigations arising from pre-Closing operations of the Tribune Station,
including, without limitation, those described in Schedule 2.22; or
(vii) any of Tribune's or the Tribune Sub's liabilities or
obligations under this Agreement or the Tribune Ancillary Agreements.
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1.6. Assumption of Kelly Station Liabilities. (a) On the Closing
Date, the Tribune Sub shall deliver to the Meredith Sub an undertaking and
assumption, in the form of Exhibit B, pursuant to which the Tribune Sub shall
assume and be obligated for, and shall agree to pay, perform and discharge in
accordance with their terms, all obligations and liabilities of the Meredith
Sub and all liabilities and obligations of Meredith with respect to the Kelly
Station, the Kelly Station Business and, to the extent provided below, the
Kelly Merger Agreement(except to the extent such obligations and liabilities
constitute Excluded Kelly Station Liabilities) including without limitation:
(i) All current liabilities of the Meredith Sub reflected on the
Closing Date Kelly Station Balance Sheet, including, without limitation,
accounts payable, accrued equipment rentals, accrued salary, payroll and
wages, accrued sick pay, accrued accounting fees and expenses, accrued
excise, withholding, unemployment, social security, payroll, property,
sales and use Taxes; and
(ii) All obligations of Meredith and the Meredith Sub arising under
the Kelly Merger Agreement after the consummation of the Kelly Merger,
including, without limitation, those obligations arising under Sections
6.02, 6.06, 6.09, Article VII, Article VIII and Article X of the Kelly
Merger Agreement, but excluding (A) the obligations of Meredith pursuant
to Article X of the Kelly Merger Agreement to the extent such obligations
relate to the representations and warranties of Meredith and the Meredith
Sub contained in the Kelly Merger Agreement and the covenants and
agreements of Meredith and the Meredith Sub contained in the Kelly Merger
Agreement to be performed prior to the consummation of the Kelly Merger
and (B) the obligations of Meredith pursuant to Sections 2.08 and 2.10 of
the Kelly Merger Agreement.
All of the foregoing to be assumed by the Tribune hereunder are
referred to herein as the "Assumed Kelly Station Liabilities."
(b) The Tribune Sub shall not assume or be obligated for any, and
Meredith and the Meredith Sub shall solely retain, pay, perform, defend and
discharge all of the following (herein referred to as "Excluded Kelly Station
Liabilities"):
(i) any costs and expenses incurred by the Meredith or the Meredith
Sub incident to their negotiation and preparation of this Agreement and
their performance and compliance with the agreements and conditions
contained herein;
(ii) any of the Meredith's or the Meredith Sub's liabilities or
obligations under this Agreement or the Meredith Ancillary Agreements.
1.7. Closing Date. The exchange of the Tribune Station Assets and
the Kelly Station Assets provided for in Section 1.1 (the "Closing") shall be
consummated on a date, at a time and in a place agreed upon by Tribune and
Meredith, occurring within 10 days after the conditions set forth in Articles
VI and VII are satisfied or, if permissible, waived or such other date, as may
be agreed upon by Tribune and Meredith (such date and time being hereinafter
called the "Closing Date"). Notwithstanding the foregoing, it is the intention
and understanding of the parties that the Closing shall occur immediately upon
consummation of the Kelly Merger.
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1.8. Calculation of Estimated Tribune Station Working Capital Amount
and Estimated Kelly Station Working Capital Amount; Adjustment. At least three
business days prior to the Closing Date, (i) Tribune shall deliver to Meredith
a certificate executed on behalf of Tribune by its President or any Vice
President, dated the date of its delivery, setting forth Tribune's best
estimate of the Closing Date Tribune Station Working Capital Amount (the
"Estimated Closing Date Tribune Station Working Capital Amount") which Tribune
anticipates based upon the most recent available financial statements of the
Tribune Station will be reflected on the Tribune Station Closing Date Balance
Sheet prepared in the manner contemplated by Section 1.10 and (ii) Meredith
shall deliver to Tribune a certificate executed on behalf of Meredith by its
President or any Vice President, dated the date of its delivery, attaching an
estimate of the Closing Date Kelly Station Working Capital Amount (the
"Estimated Closing Date Kelly Station Working Capital Amount")(it being
understood that the Estimated Closing Date Kelly Station Working Capital Amount
shall be the Closing Working Capital Estimate (as defined and determined in
accordance with the Kelly Merger Agreement)). If either the Estimated Closing
Date Tribune Station Working Capital Amount or the Estimated Closing Date Kelly
Station Working Capital Amount is not equal to at least $4,000,000, any party
having a working capital amount of less than $4,000,000 shall pay to the other
party cash at the Closing in an amount equal to the difference between such
party's working capital amount and $4,000,000. To the extent that either party
has an Estimated Closing Tribune Station Working Capital Amount or Estimated
Closing Date Kelly Station Working Capital Amount, as the case may be, in
excess of $4,000,000, the other party shall pay such party cash at the Closing
in the amount that when added to such party's working capital amount is equal
to the first party's working capital amount; provided, that if each party has a
working capital amount in excess of $4,000,000, the party with the lessor
working capital amount shall pay to the other party cash at the Closing in the
amount that when added to such party's working capital amount is equal to the
other party's working capital amount.
1.9. Closing Date Deliveries. (a) On the Closing Date, Tribune
shall deliver or cause to be delivered to the Meredith Sub (i) a bill of sale
and assignment, in the form of Exhibit C, of all of the Tribune Station Assets
(other than the real property described in Schedule 2.10), (ii) special
warranty deeds conveying to the Meredith Subs the real property described in
Schedule 2.10, (iii) all of the documents and instruments required to be
delivered by Tribune and the Tribune Sub pursuant to Article VII, (iv) payment
by wire transfer of immediately available funds of $10,000,000, (v) a copy of
the certificate of incorporation of Tribune and the Tribune Sub certified as of
a recent date by the Secretary of State of the State of Delaware, (vi)
certificates of good standing of Tribune and the Tribune Sub issued as of a
recent date by the Secretary of State of the State of Delaware and a
certificate of good standing of the Tribune Sub issued as of a recent date by
the Secretary of State of the State of Georgia, (vii) certificates of the
secretary or assistant secretary of Tribune and the Tribune Sub as to their
respective bylaws, the resolutions of their respective boards of directors and
stockholders (if applicable) authorizing the execution and delivery of this
Agreement and the transactions contemplated hereby and the incumbency and
signatures of their respective officers executing this Agreement and any
Tribune Ancillary Agreement, (viii) an assignment, in recordable form, with
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respect to each of the leases of real estate described in Schedule 2.11, (ix)
the undertakings and assumptions described in Section 1.5(a), (x) a
certification of non-foreign status, in form and substance reasonably
satisfactory to Meredith, in accordance with Treas. Reg. Section 1.1445-2(b)
and (xi) an opinion of Sidley & Austin, counsel to Tribune and the Tribune Sub,
in form and substance reasonably satisfactory to Meredith and its counsel, to
the effect set forth in Exhibit F.
(b) On the Closing Date, Meredith shall deliver or cause to be
delivered to the Tribune Sub (i) a bill of sale and assignment, in the form of
Exhibit D, of all of the Kelly Station Assets (other than the real property
described in Section 3.13 of the Kelly Disclosure Schedule), (ii) special
warranty deeds conveying to the Tribune Subs the real property described in
Section 3.13 of the Kelly Disclosure Schedule, (iv) all of the documents and
instruments required to be delivered by Meredith and the Meredith Sub pursuant
to Article VI, (iii) a copy of the charters of Meredith and the Meredith Sub
certified as of a recent date by the secretary of state of their respective
state of incorporation, (iv) certificates of good standing of Meredith and the
Meredith Sub issued as of a recent date by the secretary of state of the state
of their respective incorporation, (v) certificates of the secretary or
assistant secretary of Meredith and the Meredith Sub as to their respective
bylaws, the resolutions of their respective boards of directors and
stockholders (if applicable) authorizing the execution and delivery of this
Agreement and the transactions contemplated hereby and the incumbency and
signatures of their respective officers executing this Agreement and any
Meredith Ancillary Agreement, (vi) an assignment, in recordable form, with
respect to each of the leases of real estate described in Section 3.13 of the
Kelly Disclosure Schedule, (vii) the undertakings and assumptions described in
Section 1.6(a), (viii) a certification of non-foreign status, in form and
substance reasonably satisfactory to Tribune, in accordance with Treas. Reg.
Section 1.1445-2(b) and (ix) an opinion of counsel to Meredith and the Meredith
Sub reasonably satisfactory to Tribune, to the effect set forth on Exhibit E.
1.10. Closing Date Balance Sheets; Adjustment. (a) Promptly after
the Closing Date and in any event within 60 days of Closing, Tribune shall
prepare a balance sheet of the Tribune Sub (the "Initial Tribune Station
Balance Sheet") and Meredith shall provide a balance sheet of the Meredith Sub
(the "Initial Kelly Station Balance Sheet") as of 12:01 a.m. on the Closing
Date (or, in the case of the Initial Kelly Station Balance Sheet, the effective
time of the Kelly Merger, if different). The Initial Tribune Station Balance
Sheet and the Initial Kelly Station Balance Sheet shall be prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with the Tribune Station Balance Sheet and the Kelly Station Balance
Sheet, respectively. Notwithstanding the foregoing, it is the understanding of
the parties that the Initial Kelly Station Balance Sheet shall be the balance
sheet supplied by the Partners to Meredith pursuant to Section 2.10(c) of the
Kelly Merger Agreement.
(b) During the preparation of such balance sheets and the period of
any dispute within the contemplation of this Section 1.10, Tribune and the
Meredith shall each (i) provide the other and the other's authorized
representatives with full access to the books, records, facilities and
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employees of the Tribune Station Business and the Kelly Station Business, as
the case may be, (ii) provide the other as promptly as practicable after the
Closing Date with normal month-end financial information for the period ending
on 12:01 a.m. of the Closing Date, and (iii) cooperate fully with the other and
the other's authorized representatives, including the provision on a timely
basis of all information necessary or useful in preparing such balance sheet.
(c) Tribune shall deliver copies of the Initial Tribune Station
Balance Sheet to Meredith promptly after they have been prepared, together with
Tribune's calculation of the Closing Date Tribune Station Working Capital
Amount based on such balance sheets. Meredith shall deliver a copy of the
Initial Kelly Station Balance Sheet to Tribune promptly after they have been
prepared, together with Meredith's calculation of the Closing Date Kelly
Station Working Capital Amount based on such balance sheets. After receipt
thereof, Tribune and Meredith shall each have 20 business days to review such
balance sheets and calculations, together with the work papers used in the
preparation thereof. Each of Tribune and Meredith and their respective
authorized representatives shall have full access to all relevant books and
records and employees of the other to the extent reasonably required to
complete such review. In the event Meredith does not object to the contents of
the Initial Tribune Station Balance Sheet and related calculation within 20
business days after its receipt thereof, such balance sheets shall become the
"Tribune Station Closing Date Balance Sheet" for all purposes of this Agreement
and shall provide the basis for the determination of the Closing Date Tribune
Station Working Capital Amount. In the event that Tribune does not object to
the contents of the Initial Kelly Station Balance Sheet and related calculation
within 10 business days after its receipt thereof, such balance sheets shall
become the "Kelly Station Closing Date Balance Sheets" for all purposes of this
Agreement and shall provide the basis for the determination of the Closing Date
Kelly Station Working Capital Amount. In the event that either Tribune or
Meredith objects to the balance sheets and calculation delivered by the other
party by written notice to the other party specifying the objections in
reasonable detail and the basis therefor, within such time period and in the
further event that the other party does not agree with such objections, Tribune
and Meredith, within 10 days following such notice of objection (the
"Resolution Period"), shall attempt to resolve their differences and any
resolution by them (evidenced in writing) as to any disputed amounts shall be
final, binding and conclusive. If at the conclusion of the Resolution Period
any amounts remain in dispute, then the amounts so in dispute shall be
submitted to a firm of nationally recognized independent public accountants
(the "Neutral Auditors") selected by Tribune and Meredith within 10 days after
the expiration of the Resolution Period. If Tribune and Meredith are unable to
agree on the Neutral Auditors, then a nationally recognized accounting firm
will be selected by lot from two names submitted by Tribune and two names
submitted by Meredith, none of which shall be employed by Tribune or the
Tribune Sub and the Meredith or the Meredith Subs or any of their respective
Affiliates. The Neutral Auditors shall act as an arbitrator to determine and
resolve, based solely on presentations by Tribune and Meredith, and not by
independent review, only those issues still in dispute. The Neutral Auditors'
determination shall be made within 30 days of their selection, shall be set
forth in a written statement delivered to Tribune and Meredith and shall be
final, binding and conclusive. The balance sheets finally determined in
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accordance with this Section shall be the "Tribune Station Closing Date Balance
Sheet" and the "Kelly Station Closing Date Balance Sheet" for all purposes of
this Agreement and shall provide the basis for the determination of the Closing
Date Tribune Station Working Capital Amount and the Closing Date Kelly Station
Working Capital Amount. Tribune and Meredith agree to execute, if requested by
the Neutral Auditors, a reasonable engagement letter. All fees and
disbursements of the Neutral Auditors shall be paid one-half by Tribune and
one-half by Meredith.
(d) If, upon the final determination thereof, the Closing Date
Tribune Station Working Capital Amount is less than the Estimated Closing Date
Tribune Station Working Capital Amount, Tribune shall pay to Meredith cash in
the amount of such deficiency and if the Closing Date Tribune Station Working
Capital Amount is greater than the Estimated Closing Date Tribune Station
Working Capital Amount, Meredith shall pay to Tribune cash in the amount of
such excess. If, upon the final determination thereof, the Closing Date Kelly
Station Working Capital Amount is less than the Estimated Closing Date Kelly
Station Working Capital Amount, Meredith shall pay to Tribune cash in the
amount of such deficiency and if the Closing Date Kelly Station Working Capital
Amount is greater than the Estimated Closing Date Kelly Station Working Capital
Amount, Tribune shall pay to Meredith cash in the amount of such excess. All
amounts due and owing pursuant to this Section 1.10(d) shall be paid within 10
days after final determination of the Closing Date Tribune Station Working
Capital Amount and the Closing Date Kelly Station Working Capital Amount, by
wire transfer of immediately available funds, plus interest on such amounts
from the Closing Date to but excluding the date of payment at a rate per annum
equal to the corporate base rate of interest announced on the Closing Date by
The First National Bank of Chicago.
1.11. Further Assurances. (a) On the Closing Date, Tribune shall
and shall cause the Tribune Sub to (i) deliver to Meredith such other bills of
sale, deeds, endorsements, assignments and other good and sufficient
instruments of conveyance and transfer as Meredith may reasonably request or as
may be otherwise reasonably necessary to vest in the Meredith Sub all the
right, title and interest of Tribune and the Tribune Sub in, to or under any or
all of the Tribune Station Assets and (ii) take all steps as may be reasonably
necessary to put the Meredith Sub in actual possession and control of all the
Tribune Station Assets. From time to time following the Closing, Tribune shall
execute and deliver, or cause to be executed and delivered, to the Meredith Sub
such other instruments of conveyance and transfer as the Meredith may
reasonably request or as may be otherwise necessary to more effectively convey
and transfer to, and vest in, the Meredith Sub and put the Meredith Sub in
possession of, any part of the Tribune Station Assets, and, in the case of
licenses, certificates, approvals, authorizations, agreements, contracts,
leases, easements and other commitments included in the Tribune Station Assets
which cannot be transferred or assigned effectively without the consent of
third parties, which consent has not been obtained prior to the Closing, to
cooperate with Meredith at its reasonable request in endeavoring to obtain such
consent. Notwithstanding anything in this Agreement to the contrary, this
Agreement shall not constitute an agreement to assign any license, certificate,
approval, authorization, agreement, contract, lease, easement or other
commitment included in the Tribune Station Assets if an attempted assignment
thereof without the consent of a third party thereto would constitute a breach
thereof.
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(b) On the Closing Date, Meredith shall and shall cause the Meredith
Sub to (i) deliver to Tribune such other bills of sale, deeds, endorsements,
assignments and other good and sufficient instruments of conveyance and
transfer as Tribune may reasonably request or as may be otherwise reasonably
necessary to vest in the Tribune Sub all the right, title and interest of the
Meredith and the Meredith Sub in, to or under any or all of the Kelly Station
Assets and (ii) take all steps as may be reasonably necessary to put the
Tribune Sub in actual possession and control of all the Kelly Station Assets.
From time to time following the Closing, Meredith shall execute and deliver, or
cause to be executed and delivered, to the Tribune Sub such other instruments
of conveyance and transfer as Tribune may reasonably request or as may be
otherwise necessary to more effectively convey and transfer to, and vest in,
the Tribune Sub and put the Tribune Sub in possession of, any part of the Kelly
Station Assets, and, in the case of licenses, certificates, approvals,
authorizations, agreements, contracts, leases, easements and other commitments
included in the Kelly Station Assets which cannot be transferred or assigned
effectively without the consent of third parties which consent has not been
obtained prior to the Closing, to cooperate with Tribune at its reasonable
request in endeavoring to obtain such consent. Notwithstanding anything in
this Agreement to the contrary, this Agreement shall not constitute an
agreement to assign any license, certificate, approval, authorization,
agreement, contract, lease, easement or other commitment included in the Kelly
Station Assets if an attempted assignment thereof without the consent of a
third party thereto would constitute a breach thereof.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TRIBUNE AND THE TRIBUNE SUB
As an inducement to Meredith and the Meredith Sub to enter into this
Agreement and to consummate the transactions contemplated hereby, Tribune the
Tribune Sub represent and warrant to Meredith and the Meredith Subs and agree
as follows:
2.1. Organization. Tribune and the Tribune Sub is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Tribune Sub has requisite corporate power and authority
to own or lease and to operate the Tribune Station, to use the Tribune Station
Assets and to carry on the Tribune Station Business as now conducted by it.
2.2. Subsidiaries and Investments. Other than the Tribune Sub,
Tribune does not, directly or indirectly (a) own, of record or beneficially,
any outstanding voting securities or other equity interests in any corporation,
partnership, joint venture or other entity which is primarily involved in or
relates primarily to the Tribune Station Business or (b)otherwise control any
such corporation, partnership, joint venture or other entity which is involved
primarily in or relates primarily to the Tribune Station Business.
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2.3. Authority of Tribune and the Tribune Sub. (a) Each of Tribune
and the Tribune Sub has requisite corporate power and authority to execute and
deliver this Agreement and all of the other agreements and instruments to be
executed and delivered by Tribune or the Tribune Sub pursuant hereto
(collectively, the "Tribune Ancillary Agreements"), to consummate the
transactions contemplated hereby and thereby and to comply with the terms,
conditions and provisions hereof and thereof.
(b) The execution, delivery and performance of this Agreement and
the Tribune Ancillary Agreements by Tribune and the Tribune Sub (to the extent
a party thereto) have been duly authorized and approved by all necessary action
of Tribune and the Tribune Sub and do not require any further authorization or
consent of Tribune or the Tribune Sub, or their respective stockholders. This
Agreement is, and each Tribune Ancillary Agreement when executed and delivered
by Tribune or the Tribune Sub and the other parties thereto will be, a legal,
valid and binding agreement of Tribune and the Tribune Sub (to the extent a
party thereto) enforceable in accordance with its respective terms, except in
each case as such enforceability may be limited by bankruptcy, moratorium,
insolvency, reorganization or other similar laws affecting or limiting the
enforcement of creditors' rights generally and except as such enforceability is
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(c) Except as set forth in Schedule2.3, neither the execution and
delivery by Tribune or the Tribune Sub of this Agreement and the Tribune
Ancillary Agreements or the consummation by Tribune and the Tribune Sub of any
of the transactions contemplated hereby or thereby nor compliance by Tribune
and the Tribune Sub with or fulfillment by Tribune and the Tribune Sub of the
terms, conditions and provisions hereof or thereof will:
(A) conflict with, result in a breach of the terms, conditions or
provisions of, or constitute a default, an event of default or an event
creating rights of acceleration, termination or cancellation or a loss of
rights under, or result in the creation or imposition of any Encumbrance upon
any of the Tribune Station Assets under, the certificate of incorporation or
bylaws of Tribune or the Tribune Sub, any Tribune Station Agreement, any
Tribune Station Governmental Permit or any judgment, order, award or decree to
which Tribune or the Tribune Sub is a party or any of the Tribune Station
Assets is subject or by which Tribune or the Tribune Sub is bound, or any
statute, other law or regulatory provision affecting Tribune or the Tribune Sub
or the Tribune Station Assets; or
(B) require the approval, consent, authorization or act of, or the
making by Tribune or the Tribune Sub of any declaration, filing or registration
with, any third party or any foreign, federal, state or local court,
governmental or regulatory authority or body, except for such of the foregoing
as are necessary pursuant to the Improvements Act or the Communications Act.
2.4. Financial Statements. Schedule 2.4 contains (a) the unaudited
balance sheets of the business of the Tribune Station as of December 29, 1996
and December 28, 1997, respectively, and the related statements of income for
the years then ended and (b) the unaudited balance sheet (the "Tribune Station
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Balance Sheet") of the business of the Tribune Station as of June 28, 1998 (the
"Balance Sheet Date") and the related statement of income for the six months
then ended. Except as set forth in Schedule 2.4, such balance sheets and
statements of income have been prepared in accordance with generally accepted
accounting principles consistently applied and present fairly the financial
position and results of operations of the Tribune Station Business in all
material respects as of their respective dates and for the respective periods
covered thereby subject to the absence of footnotes and normal year-end
adjustments.
2.5. Operations Since Balance Sheet Date. (a) Except as set forth
in Schedule 2.5(A), to the best of Tribune's knowledge, during the period from
the Balance Sheet Date to the date hereof, inclusive, there has been:
(i) no material adverse change in the financial condition or the
results of operations of the Tribune Station or its business from that
reflected on the financial statements set forth in Schedule 2.4, other
than any change or effect affecting the U.S. economy or the U.S.
broadcasting industry in general; or
(ii) no damage, destruction, loss or claim (whether or not covered
by insurance) or condemnation or other taking which materially adversely
affects the Tribune Station Assets, the Tribune Station or its business.
(b) Except as set forth in Schedule 2.5(B) hereto, since the Balance
Sheet Date the business of the Tribune Station has been conducted only in the
ordinary course and in conformity with past practice. Without limiting the
generality of the foregoing, since the Balance Sheet Date, except as set forth
in such Schedule, neither Tribune or the Tribune Sub has, in respect solely of
the Tribune Station:
(i) sold, leased, transferred or otherwise disposed of (including
any transfers to any Affiliate of Tribune), or mortgaged or pledged, or
imposed or suffered to be imposed any Encumbrance (other than Permitted
Encumbrances) on, any of the Tribune Station Assets, other than personal
property having a value, in the aggregate, of less than $50,000 sold or
otherwise disposed of for fair value in the ordinary course of the Tribune
Station Business consistent with past practice;
(ii) canceled without fair consideration therefor any debts owed to
or claims held by Tribune or the Tribune Sub relating to the Tribune
Station (including the settlement of any claims or litigation) or waived
any right of significant value to Tribune or the Tribune Sub relating to
the Tribune Station, other than in the ordinary course of the Tribune
Station Business consistent with past practice;
(iii) created, incurred, guaranteed or assumed, or agreed to create,
incur, guarantee or assume, any indebtedness for borrowed money or entered
into any capitalized leases;
(iv) accelerated collection of notes or accounts receivable
generated by the Tribune Station Business to a date prior to the date such
collection would have occurred in the ordinary course of the Tribune
Station Business;
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(v) delayed payment of any account payable or other liability of the
Tribune Station Business beyond its due date or the date when such
liability would have been paid in the ordinary course of the Tribune
Station Business consistent with past practice;
(vi) granted or instituted any increase in any rate of salary or
compensation or any profit sharing, bonus, incentive, deferred
compensation, insurance, pension, retirement, medical, hospital,
disability, welfare or other employee benefit plan other than in the
ordinary course of the Tribune Station Business consistent with past
practices; or
(vii) entered into any agreement or made any commitment to take any
action described in subparagraphs (i) through (vi) above.
2.6. No Undisclosed Liabilities. Except as set forth in Schedule
2.6, to the best of Tribune's knowledge, neither Tribune nor the Tribune Sub is
subject, with respect to the Tribune Station Business, to any liability
(including, without limitation, unasserted claims, whether known or unknown),
whether absolute, contingent, accrued or otherwise, which is not shown or
reserved for in the Tribune Station Balance Sheet, other than
liabilities of the same nature as those set forth in the Tribune Station
Balance Sheet and the notes thereto and incurred in the ordinary course of the
Tribune Station Business after the Balance Sheet Date.
2.7. Taxes. Each of Tribune and the Tribune Sub has, in respect of
the Tribune Station Business, either filed or obtained extensions for filings
pursuant to established procedures all foreign, federal, state, county or local
income, excise, property, sales, use, franchise or other Tax returns and
reports which are required to have been filed by it under applicable law on or
prior to the date of this Agreement and has paid or made provision for the
payment of all Taxes which have become due pursuant to such returns or pursuant
to any assessments which have become payable and which are not being contested
in good faith by appropriate proceedings. All monies required to be withheld
by the Tribune Sub from employees of the Tribune Station Business for income
Taxes, social security and other payroll Taxes have been collected or withheld,
and either paid to the respective Governmental Bodies, set aside in accounts
for such purpose, or accrued, reserved against and entered upon the books of
the Tribune Sub.
2.8. Availability of Assets and Legality of Use. Except as set
forth in Schedule 2.8 and except for the Excluded Tribune Assets, the Tribune
Station Assets constitute all the assets used in the conduct of the Tribune
Station Business and are in good and serviceable condition (subject to normal
wear and tear).
2.9. Governmental Permits. (a) The Tribune Sub owns, holds, or
possesses the Tribune Station FCC Authorizations and all other governmental
licenses, franchises, permits, privileges, immunities, approvals and other
authorizations which are necessary to entitle it to own or lease, operate and
use the Tribune Station Assets and the Tribune Station and to carry on and
conduct the Tribune Station Business as currently conducted (herein
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collectively referred to as "Tribune Station Governmental Permits"), except for
such Tribune Station Governmental Permits which the failure to so own, hold or
possess would not have a material adverse effect on the operations and
financial condition of the Tribune Stations, individually and taken as a whole.
Schedule 2.9(A)(1) sets forth a list and brief description of each such Tribune
Station Governmental Permit held by the Tribune Sub as of the date of this
Agreement, except for such incidental licenses, permits and other
authorizations which would be readily obtainable by any qualified applicant
without undue burden in the event of any lapse, termination, cancellation or
forfeiture thereof. Schedule 2.9(A)(2) sets forth a list of licenses and
permits issued to the Tribune Sub by the FCC that are not used in connection
with the operation of the Tribune Station.
(b) Except as set forth in Schedule 2.9(B), the Tribune Sub has
fulfilled and performed in all material respects its obligations under each of
such Tribune Station Governmental Permits, and no event has occurred or
condition or state of facts exists which constitutes or, after notice or lapse
of time or both, would constitute a material breach or material default under
any such Tribune Station Governmental Permit. No notice of cancellation, of
default or of any dispute concerning any Tribune Station Governmental Permit,
or of any event, condition or state of facts described in the preceding
sentence, has been received by Tribune. Except as set forth in Schedule
2.9(B), each of the Tribune Station Governmental Permits is valid, subsisting
and in full force and effect, and, subject to the receipt of the FCC Order, to
the best knowledge of Tribune, may be assigned and transferred to the Meredith
Sub in accordance with this Agreement and at the time of assignment to the
Meredith Sub will be in full force and effect, in each case without (a) the
occurrence of any breach, default or forfeiture of rights thereunder or (b) the
consent, approval, or act of, or the making of any filing with, any
Governmental Body or other party (other than the FCC as contemplated by Section
4.3). The Tribune Station is being operated in all material respects in
accordance with the Tribune Station FCC Authorizations and in compliance in all
material respects with the Communications Act, the rules and regulations
thereunder, and all other laws and regulations, federal, state and local,
applicable to the Tribune Station. Tribune has not received any notice of any
violations of the Tribune Station FCC Authorizations, the Communications Act
and the rules and regulations thereunder. There is no action by or before the
FCC currently pending or, to the best knowledge of Tribune, threatened to
revoke, cancel, rescind, modify or refuse to renew in the ordinary course any
of the Tribune Station FCC Authorizations.
2.10. Real Property. Schedule 2.10 contains a brief description of
each parcel of real property owned by Tribune or the Tribune Sub (exclusively
or otherwise) and used in or relating to the Tribune Station Business (showing
the record title holder, legal description, location and any indebtedness
secured by a mortgage or other lien thereon) and of each option, right or
contract to purchase held by Tribune or the Tribune Sub to acquire any real
property for use in connection with the Tribune Station Business.
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2.11. Real Property Leases. Schedule 2.11 sets forth a list and
brief description of each lease or similar agreement (showing the rental,
expiration date, renewal and the location of the real property covered by such
lease or other agreement) under which Tribune or the Tribune Sub is lessee of,
or holds or operates, any real property owned by any third party and used in or
relating to the Tribune Station Business.
2.12. Condemnation. (a) Neither the whole nor any part of any real
property owned by Tribune or the Tribune Sub nor, to Tribune's knowledge, any
property leased by Tribune or the Tribune Sub, in connection with the Tribune
Station Business is subject to any pending suit for condemnation or other
taking by any public authority and (b) to the best knowledge of Tribune, no
such condemnation or other taking is threatened.
2.13. Personal Property. Schedule 2.13 contains a list as of
December 28, 1997 of all machinery, equipment, vehicles, furniture and other
personal property owned by Tribune or the Tribune Sub having an original cost
of $10,000 or more and used in or relating to the Tribune Station Business.
2.14. Personal Property Leases. Schedule 2.14 contains a brief
description of each lease or other agreement or right, whether written or oral
(including in each case the rental, the expiration date thereof and a brief
description of the property covered), under which a Tribune Sub is lessee of,
or holds or operates, any machinery, equipment, vehicle or other tangible
personal property owned by a third party and used in or relating to the Tribune
Station Business and which is not terminable by the Tribune Sub without penalty
on 30 days' notice or less and which provides for annual rentals in excess of
$10,000.
2.15. Intellectual Property. Schedule 2.15 contains a list of: (i)
all trademarks, service marks, trade names and copyrights used solely in
connection with the Tribune Station Business for which registrations have been
issued to Tribune or the Tribune Sub or applications for registrations have
been made by Tribune or the Tribune Sub and (ii) all licenses, agreements or
other arrangements under which Tribune or the Tribune Sub, solely in connection
with the Tribune Station Business, has the right to use any trademark, service
mark, trade name or copyright (other than such as are included in the Tribune
Station Agreements). Neither, Tribune nor the Tribune Sub owns, or has applied
for, any patents, in connection with the Tribune Station Business. To the best
knowledge of Tribune, no proceedings have been instituted, are pending or are
threatened which challenge the validity of the ownership or use by Tribune or
the Tribune Sub of any trademarks, trade names, copyrights or patents related
to the Tribune Station Business. Except as set forth in Schedule2.15, neither
Tribune nor the Tribune Sub has licensed anyone to use any trademarks, trade
names or copyrights of Tribune or the Tribune Sub related to the Tribune
Station Business. Except as set forth in Schedule 2.15, and other than as are
included in the Tribune Station Agreements, the Tribune Sub owns, or has the
royalty-free right to use, all trademarks, service marks, trade names,
copyrights or patents used in the operation of the Tribune Station Business.
Except as set forth in Schedule 2.15, no trademark, service mark, trade name or
copyright listed in Schedule 2.15 is subject to any outstanding order,
judgment, decree, stipulation or agreement restricting the use thereof by the
Tribune Sub or restricting the licensing thereof by the Tribune Sub to any
person.
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2.16. Accounts Receivable. All accounts receivable of the Tribune
Sub relating to the Tribune Station Business have arisen from bona fide
transactions by the Tribune Sub in the ordinary course of the Tribune Station
Business and, to the best knowledge of Tribune, constitute only valid claims
which are not subject to counterclaims or setoffs.
2.17. Title to Assets. The Tribune Sub has good and marketable
title to all of the tangible personal properties included in the Tribune
Station Assets, free and clear of all Encumbrances, except for Permitted
Encumbrances. Upon delivery to the Meredith Sub on the Closing Date of the
documents contemplated by Section 1.9(a), the Tribune Sub will thereby transfer
to the Meredith Sub good and marketable title to the Tribune Station Assets,
subject to no Encumbrances, except for Permitted Encumbrances.
2.18. Employees. Schedule 2.18 contains: (a) a list of all
individuals employed by the Tribune Sub in connection with the Tribune Station
Business as of August 19, 1998; and (b) the then current rate of compensation
provided by the Tribune Sub to such employees.
2.19. Employee Relations. (a) Except as set forth in Schedule
2.19(A), the Tribune Sub has complied in respect of the Tribune Station
Business in all material respects with all applicable laws, rules and
regulations which relate to prices, wages, hours, discrimination in employment
and collective bargaining and to the operation of the Tribune Station Business
and is not liable for any arrears of wages or any Taxes or penalties for
failure to comply with any of the foregoing.
(b) Except as set forth in Schedule 2.19(B), as of the date of this
Agreement, there is no (i) unfair labor practice charge or complaint against
Tribune or the Tribune Sub in respect of the Tribune Station Business pending
before the National Labor Relations Board, any state labor relations board or
any court or tribunal and, to the best knowledge of Tribune, none is or has
been threatened, or (ii) strike, dispute, request for representation, slowdown
or stoppage pending against the Tribune Sub in respect of the Tribune Station
Business and, to the best knowledge of Tribune, none is or has been threatened.
2.20. Contracts. Except as set forth in Schedule 2.20 or any other
Schedule hereto, as of the date of this Agreement, neither Tribune nor the
Tribune Sub is, with respect to the Tribune Station Business, a party to or
bound by:
(a) Any contract for the purchase or sale of real property;
(b) Any contract for the purchase, rental or use of any films,
recordings, television programming or programming services which is not
terminable by Tribune or the Tribune Sub without penalty on 30 days' notice or
less or which provides for performance over a period of more than 90 days or
which involves the payment after the date hereof of more than $20,000;
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(c) Any contract for the purchase of merchandise, supplies or
personal property or for the receipt of services (other than services referred
to in clause (b) above) which is not terminable by Tribune or the Tribune Sub
on 30 days' notice or less or which provides for performance over a period of
more than 90 days or which involves the payment after the date hereof of more
than $20,000;
(d) Any contract for the sale of broadcast time for advertising or
other purposes which was not made in the ordinary course of the Tribune Station
Business and consistent with past practice;
(e) Any guarantee of the obligations of the Tribune Station's
customers, suppliers, or employees;
(f) Any sales agency, advertising representative or advertising or
public relations contract which is not terminable by Tribune or the Tribune Sub
without penalty on 30 days' notice or less or which provides for payments over
a period of more than 90 days or which involves the payment after the date
hereof of more than $20,000;
(g) Any barter agreement or other agreement with advertisers for
broadcasting or commercial time on the Tribune Station in exchange for goods or
services;
(h) Any employee collective bargaining agreement, employment
agreement (other than employment agreements terminable without premium or
penalty on notice of 30 days or less under which the only monetary obligation
is to make current wage or salary payments and provide current fringe
benefits), consulting, advisory or service agreement, deferred compensation
agreement or covenant not to compete;
(i) Any employees' pension, profit-sharing, stock option, bonus,
incentive, stock purchase, welfare, life insurance, hospital or medical benefit
plan or other employee benefit agreement or plan; or
(j) Any other contract, agreement, commitment, understanding or
instrument which is material to the Tribune Station Business.
Schedule 2.20 also indicates whether each contract, agreement or other
instrument listed therein is to be deemed an "Assumed Contract" or a "Contract
Not Assumed" for purposes of this Agreement.
2.21. Status of Contracts. Except as set forth in Schedule 2.21 or
in any other Schedule hereto, each of the leases, contracts and other
agreements listed in Schedules 2.11, 2.14, 2.15 and 2.20 (provided, in the case
of Schedule 2.20, such contract or other agreement is designated therein as an
"Assumed Contract"), but excluding the contracts and other agreements
designated in Schedule 2.20 as a "Contract Not Assumed," (the "Tribune Station
Agreements") constitutes a valid and binding obligation of Tribune or the
Tribune Sub and, to the best knowledge of Tribune, the other parties thereto
(subject to bankruptcy, insolvency, reorganization or other similar laws
relating to or affecting the enforcement of creditors' rights generally) and is
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in full force and effect (subject to bankruptcy, insolvency, reorganization or
other similar laws relating to or affecting the enforcement of creditors'
rights generally) and (except as set forth in Schedule 2.3 and except for those
Tribune Station Agreements which by their terms will expire prior to the
Closing Date or will be otherwise terminated prior to the Closing Date in
accordance with the provisions hereof) may be transferred to the Meredith Sub
pursuant to this Agreement and will be in full force and effect at the time of
such transfer, in each case without breaching the terms thereof or resulting in
the forfeiture or impairment of any rights thereunder and without the consent,
approval or act of, or the making of any filing with, any other party. Tribune
and the Tribune Sub have fulfilled and performed in all material respects their
respective obligations under each of the Tribune Station Agreements to which
they are a party, and neither Tribune nor the Tribune Sub is in, or alleged to
be in, breach or default under any of the Tribune Station Agreements and, to
the best knowledge of Tribune, no other party to any of the Tribune Station
Agreements has breached or defaulted thereunder, and no event has occurred and
no condition or state of facts exists which, with the passage of time or the
giving of notice or both, would constitute such a default or breach by the
Tribune Sub or, to the best knowledge of Tribune, by any such other party.
Complete and correct copies of each of the Tribune Station Agreements, together
with all amendments thereto, have heretofore been delivered or made available
to Meredith by Tribune.
2.22. No Violation, Litigation or Regulatory Action. Except as set
forth in Schedule 2.22 :
(a) Each of Tribune and the Tribune Sub has complied in all material
respects with all laws, regulations, rules, writs, injunctions, ordinances,
franchises, decrees or orders of any court or of any foreign, federal, state,
municipal or other Governmental Body which are applicable to the Tribune
Station Assets, the Tribune Stations or the Tribune Station Business, except
where the failure to comply would not have a material adverse effect on the
operating and financial condition of the Tribune Station Business, individually
and taken as a whole;
(b) There are no lawsuits, suits or proceedings pending or, to the
best knowledge of Tribune, threatened against Tribune or the Tribune Sub in
respect of the Tribune Station Assets, the Tribune Station or the Tribune
Station Business; and
(c) To the best knowledge of Tribune, there are no claims or
investigations pending or threatened against Tribune or the Tribune Sub in
respect of the Tribune Station Assets, the Tribune Station or the Tribune
Station Business; and
(d) There is no action, suit or proceeding pending or, to the best
knowledge of Tribune, threatened which questions the legality or propriety of
the transactions contemplated by this Agreement.
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2.23. Insurance. The Tribune Sub maintains in respect of the
Tribune Station Assets, the Tribune Station and the Tribune Station Business
policies of fire and extended coverage and casualty, liability and other forms
of insurance in such amounts and against such risks and losses as are in the
judgment of Tribune prudent for the Tribune Station Business. All such
policies are currently in full force and effect and the Tribune Sub shall keep
such insurance policies or comparable insurance policies in full force and
effect through the Closing Date.
2.24. Environmental Protection. (a) Except as set forth in
Schedule 2.24, to the best knowledge of Tribune, neither the Tribune Station or
the Tribune Station Business nor any of the present properties, assets or
operations relating thereto are subject to any order from or agreement with any
Governmental Body or private party respecting (i) any environmental, health or
safety Requirements of Law, (ii) any Remedial Action or (iii) any Liabilities
and Costs arising from the Release or threatened Release of a Contaminant into
the environment.
(b) Except as set forth in Schedule 2.24, there is not now, nor has
there ever been on or in the Tribune Station Assets or, to the knowledge of
Tribune, the past properties of the Tribune Station Business:
(i) any Release of any Contaminant on, in, under or from such
properties;
(ii) any underground storage tanks or surface impoundments;
(iii) any asbestos containing material; or
(iv) any polychlorinated biphenyls (PCB) used in hydraulic oils,
electrical transformers or other equipment.
(c) Except as set forth in Schedule 2.24, Tribune has not received
in respect of the Tribune Station Assets, the Tribune Station or the Tribune
Station Business any notice or claim to the effect that it is or may be liable
to any Person as a result of the Release or threatened Release of a Contaminant
into the environment.
(d) Except as set forth in Schedule 2.24, to the best knowledge of
Tribune, none of the Tribune Station Assets or present or past operations of
the Tribune Station is the subject of any investigation by any Governmental
Body evaluating whether any Remedial Action is needed to respond to a Release
or threatened Release of a Contaminant into the environment.
2.25. No Finder. Neither Tribune, the Tribune Sub nor any party
acting on their behalf has paid or become obligated to pay any fee or
commission to any broker, finder or intermediary, except for Merrill Lynch &
Co., for or on account of the transactions contemplated by this Agreement.
2.26. Status of Tribune and the Tribune Sub. Each of Tribune and
the Tribune Sub is, or on the Closing Date will be, legally qualified to own,
operate and control the Kelly Station pursuant to the Communications Act and
the rules, regulations and policies of the FCC.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MEREDITH AND
THE MEREDITH SUB
As an inducement to Tribune and the Tribune Sub to enter into this
Agreement and to consummate the transactions contemplated hereby, Meredith and
the Meredith Sub represent and warrant to Tribune and the Tribune Sub and agree
as follows:
3.1. Organization. Each of Meredith and the Meredith Sub is a
corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation.
3.2. Subsidiaries and Investments. Other than the Meredith Sub,
Meredith does not, directly or indirectly (a) own, of record or beneficially,
any outstanding voting securities or other equity interests in any corporation,
partnership, joint venture or other entity which is primarily involved in or
relates primarily to the Kelly Station Business or (b) otherwise control any
such corporation, partnership, joint venture or other entity which is involved
primarily in or relates primarily to the Kelly Station Business.
3.3. Authority of the Meredith and the Meredith Subs. (a) Each of
Meredith and the Meredith Sub has requisite corporate power and authority to
execute and deliver this Agreement and all of the other agreements and
instruments to be executed and delivered by Meredith or the Meredith Sub
pursuant hereto (collectively, the "Meredith Ancillary Agreements") and the
Kelly Merger Agreement, to consummate the transactions contemplated hereby and
thereby and to comply with the terms, conditions and provisions hereof and
thereof.
(b) The execution, delivery and performance of this Agreement, the
Kelly Merger Agreement and the Meredith Ancillary Agreements by Meredith and
the Meredith Sub (to the extent a party thereto) have been duly authorized and
approved by all necessary action of Meredith and the Meredith Sub and do not
require any further authorization or consent of Meredith or the Meredith Sub,
or their respective stockholders. Each of this Agreement and the Kelly Merger
Agreement is, and each Meredith Ancillary Agreement when executed and delivered
by Meredith or the Meredith Sub and the other parties thereto will be, a legal,
valid and binding agreement of Meredith and the Meredith Sub (to the extent a
party thereto) enforceable in accordance with its respective terms, except in
each case as such enforceability may be limited by bankruptcy, moratorium,
insolvency, reorganization or other similar laws affecting or limiting the
enforcement of creditors' rights generally and except as such enforceability is
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(c) Except as set forth in Schedule 3.3 and except as results from
conditions, circumstances and legal relationships, unrelated to Meredith or the
Meredith Sub, in existence prior to the consummation of the Kelly Merger,
neither the execution and delivery by Meredith or the Meredith Sub of this
Agreement, the Kelly Merger Agreement and the Meredith Ancillary Agreements or
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the consummation by Meredith and the Meredith Sub of any of the transactions
contemplated hereby or thereby nor compliance by Meredith and the Meredith Sub
with or fulfillment by Meredith and the Meredith Sub of the terms, conditions
and provisions hereof or thereof will:
(A) conflict with, result in a breach of the terms, conditions or
provisions of, or constitute a default, an event of default or an event
creating rights of acceleration, termination or cancellation or a loss of
rights under, or result in the creation or imposition of any Encumbrance upon
any of the Kelly Station Assets under, the charter or bylaws of Meredith or the
Meredith Sub, any Kelly Station Agreement, any Kelly Station Governmental
Permit or any judgment, order, award or decree (i) to which Meredith or the
Meredith Sub is a party or any of the Kelly Station Assets is subject or by
which Meredith or the Meredith Sub is bound, or any statute, other law or
regulatory provision affecting or which will, after consummation of the Kelly
Merger, affect Meredith, and the Meredith Sub or the Kelly Station Assets or
(ii) to which, upon consummation of the Kelly Merger, Meredith or the Meredith
Sub will be a party or by which Meredith or the Meredith Sub will be bound; or
(B) require the approval, consent, authorization or act of, or the
making by Meredith or the Meredith Sub of any declaration, filing or
registration with, any third party or any foreign, federal, state or local
court, governmental or regulatory authority or body, except for such of the
foregoing as are necessary pursuant to the Improvements Act, the Communications
Act or pursuant to any contract, agreement or instrument of KTC.
3.4. Title to Assets. On the Closing Date, the Meredith Sub will
have good and marketable title to all of the tangible personal properties
included in the Kelly Station Assets, free and clear of all Encumbrances,
except for Permitted Encumbrances, and subject to any Encumbrances or other
conditions in existence immediately prior to the consummation of the Kelly
Merger. Upon delivery to the Tribune Sub on the Closing Date of the documents
contemplated by Section 1.9(b), the Meredith Sub will thereby transfer to the
Tribune Sub good and marketable title to the Kelly Station Assets, subject to
no Encumbrances, except for Permitted Encumbrances, and subject to any
Encumbrance or other conditions in existence immediately prior to the
consummation of the Kelly Merger.
3.5. No Finder. Neither Meredith, the Meredith Sub nor any party
acting on their behalf has paid or become obligated to pay any fee or
commission to any broker, finder or intermediary for or on account of the
transactions contemplated by this Agreement.
3.6. Status of Meredith and the Meredith Sub. Meredith and the
Meredith Sub are legally qualified to purchase, own operate and control the
Tribune Station pursuant to the Communications Act and the rules, regulations
and policies of the FCC.
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ARTICLE IV
ACTION PRIOR TO THE CLOSING DATE
The respective parties hereto covenant and agree to take the
following actions between the date hereof and the Closing Date:
4.1. Investigation of the Tribune Station Business and the Kelly
Station Business. Upon the request of Meredith, with respect to the Tribune
Station Business, or Tribune, with respect to the Kelly Station Business (the
"Investigating Party"), the other party hereto (the "Investigated Party") shall
and shall cause its subsidiaries party hereto to afford to the officers,
employees and authorized representatives of the Investigating Party (including,
without limitation, independent public accountants, attorneys and consultants)
reasonable access during normal business hours, and upon not less than 24-hours
prior notice, to the offices, properties, employees and business and financial
records (including computer files, retrieval programs and similar
documentation) of the Tribune Station Business or the Kelly Station Business,
as the case may be, to the extent the Investigating Party shall reasonably deem
necessary or desirable and shall furnish to the Investigating Party or its
authorized representatives such additional information concerning the Tribune
Station Business or the Kelly Station Business, as the case may be, as shall be
reasonably requested; provided, however, that the Investigated Party shall not
be required to violate any obligation of confidentially to which it is subject
in discharging its obligations pursuant to this Section 4.1; and provided,
further; that during the period from the date hereof until the consummation of
the Kelly Merger Meredith's obligations pursuant to this Section 4.1 shall be
limited to using commercially reasonable efforts to cause KTC to provide
Tribune with access as provided above, provided that, in the event that KTC
does not grant Tribune access as provided in this Section 4.1, Meredith agrees
to exercise its rights under the Kelly Merger Agreement to perform such
investigation of the Kelly Station as Tribune shall reasonably request, at
Tribune's cost, and to provide Tribune with the results of such investigation.
Each Investigating Party agrees that any such investigation shall be conducted
in such a manner as not to interfere unreasonably with the operations of the
Investigated Party.
4.2. Preserve Accuracy of Representations and Warranties. Each of
the parties hereto shall refrain from taking any action which would render any
representation or warranty contained in Article II or III of this Agreement
inaccurate as of the Closing Date and Meredith shall refrain from taking any
action which would render any representation or warranty contained in the Kelly
Merger Agreement inaccurate. Each party shall promptly notify the other of any
action, suit or proceeding that shall be instituted or threatened against such
party to restrain, prohibit or otherwise challenge the legality of any
transaction contemplated by this Agreement or the Kelly Merger Agreement.
Tribune shall promptly notify Meredith, and Meredith shall promptly notify
Tribune, of any lawsuit, claim, proceeding or investigation that may be
threatened, brought, asserted or commenced which would have been listed in
Schedule 2.22 or which would constitute a breach of Section 5.05 of the Kelly
Merger Agreement, as the case may be, if such lawsuit, claim, proceeding or
investigation had arisen prior to the date hereof.
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4.3. FCC Consent; Improvements Act Approval; Other Consents and
Approvals. (a) As promptly as practicable after the date hereof but in any
event no later than 5 business days thereafter, the Tribune Sub and the
Meredith Sub shall file with the FCC applications requesting its consent to the
assignment of the Tribune Station FCC Authorizations (and any extensions or
renewals thereof) to the Meredith Sub from the Tribune Sub and its consent to
the assignment of the Kelly Station FCC Authorizations (and any extensions or
renewals thereof) to Tribune from the Meredith Sub or from KTC, as applicable.
Tribune and Meredith will cooperate in the preparation of such applications
(including the furnishing to each other of copies of such applications prior to
filing) and will diligently take, or cooperate in the taking of, all necessary,
desirable and proper steps, provide any additional information reasonably
required and otherwise use their best efforts to obtain promptly the requested
consent and approval of the FCC. Any fees assessed by the FCC incident to the
filing or grant of such applications shall be borne equally by Tribune and
Meredith, with each party responsible for one-half of any such fees so
assessed. Each of Tribune and Meredith shall make available to the other,
promptly after the filing thereof, copies of all reports filed by it or its
Affiliates on or prior to the Closing Date with the FCC in respect of the
Tribune Stations or the Kelly Stations, as the case may be.
(b) As promptly as practicable after the date hereof but in any
event no later than 20 days thereafter, Tribune and Meredith shall file with
the Federal Trade Commission and the Antitrust Division of the Department of
Justice the notifications and other information required to be filed by such
commission or department under the Improvements Act, or any rules and
regulations promulgated thereunder, with respect to the transactions
contemplated hereby. Each of Tribune and Meredith covenants to file as
promptly as practicable such additional information as may be requested to be
filed by such commission or department. Each of Tribune and the Meredith
warrants that all such filings by it will be, as of the date filed, true and
accurate in all material respects and in accordance with the requirements of
the Improvements Act and any such rules and regulations. Each of Tribune and
Meredith agrees to make available to the other such other information as may be
required by such commission or department to be filed as additional information
requested by such agencies under the Improvements Act and such rules and
regulations. Tribune and Meredith shall bear equally the cost of any filing
fees payable under the Improvements Act in connection with the notifications
and information described in this Section 4.3(b) and any such notification
filed by Meredith in connection with the Kelly Merger, with each party
responsible for one-half of any such fees.
(c) Tribune and Meredith shall each use their reasonable efforts to
obtain all consents and amendments from the parties to the Tribune Station
Agreements and the contracts and agreements included in the Kelly Station
Assets (the "Kelly Station Agreements"), respectively, and all consents,
amendments or permits from Governmental Bodies, which are required by the terms
thereof or this Agreement for the consummation of the transactions contemplated
by this Agreement; provided, however, that neither Tribune nor Meredith shall
have any obligation to offer or pay any consideration in order to obtain any
such consents or amendments.
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4.4. Operations of the Tribune Station Prior to the Closing Date.
(a) Except as approved by Meredith pursuant to Section 4.4(b) below, the
Tribune Sub shall operate and carry on the Tribune Station Business only in the
ordinary course consistent with past practices and shall continue to promote
and conduct advertising on behalf of the Tribune Station at levels
substantially consistent with past practice. Consistent with the foregoing, the
Tribune Sub shall keep and maintain the Tribune Station Assets in good
operating condition and repair (wear and tear in ordinary usage excepted) and
shall use their best efforts consistent with good business practice to retain
the Tribune Station's libraries of films and other programming, to maintain the
business organization of the Tribune Station intact and to preserve the
goodwill of the suppliers, contractors, licensors, employees, customers,
distributors and others having business relations with the Tribune Station
Business.
(b) Notwithstanding Section 4.4(a), except as expressly contemplated
by this Agreement, except as set forth in Schedule 4.4(b) or except with the
express prior written approval of Meredith, the Tribune Subs shall not, in
respect of the Tribune Station:
(i) make any material change in the Tribune Station Business or the
operations of the Tribune Station;
(ii) make any capital expenditure, or enter into any contract or
commitment therefor, in excess of $25,000 in the aggregate;
(iii) enter into any contract, agreement, undertaking or commitment
(or any extension or renewal thereof) which would have been required to be
set forth in Schedule 2.20 if in effect on the date hereof, other than
leases, contracts or other agreements that are entered into by the Tribune
Sub in the ordinary course of the Tribune Station Business and that do not
give rise to a liability in excess of $25,000 in the aggregate annually;
(iv) amend or consent to the amendment of any contract, agreement,
undertaking or commitment listed in Schedule 2.20, the effect of which is
to cause the terms of such contract, agreement, undertaking or commitment
to be materially less favorable to the Tribune Subs or Meredith and the
Meredith Sub than prior to such amendment or consent to amendment;
(v) sell, lease, transfer or otherwise dispose of or mortgage or
pledge, or impose or suffer to be imposed any Encumbrance on, any of the
Tribune Station Assets, other than (A) personal property sold or otherwise
disposed of for fair value in the ordinary course of the Tribune Station
Business consistent with past practice, (B) minor amounts of personal
property which are replaced due to defect or obsolescence with personal
property of substantially the same nature and of equal or greater quality
in the ordinary course of the Tribune Station Business consistent with
past practice and (C) Permitted Encumbrances;
(vi) create, incur, guarantee or assume, or agree to create, incur,
guarantee or assume, any indebtedness for borrowed money in respect of the
Tribune Station Business or enter into any capitalized leases;
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(vii) make any change in the compensation of the employees of the
Tribune Station Business, other than changes made in accordance with
normal compensation practices in the ordinary course of the Tribune
Station Business consistent with past practice;
(viii) make any change in the accounting policies applied in the
preparation of the financial statements contained in Schedule 2.4;
(ix) cancel or agree to cancel without fair consideration therefor
any debts owed to or claims held by the Tribune Subs in respect of the
Tribune Station Business (including the settlement of any claims or
litigation), other than in the ordinary course of the Tribune Station
Business consistent with past practice;
(x) accelerate collection of any notes or accounts receivable
generated by the Tribune Station Business to a date prior to the date such
collection would have occurred in the ordinary course of the Tribune
Station Business consistent with past practice;
(xi) delay payment of any account payable or other liability of the
Tribune Station Business beyond its due date or the date when such
liability would have been paid in the ordinary course of the Tribune
Station Business consistent with past practice;
(xii) institute any increase in any profit sharing, bonus,
incentive, deferred compensation, insurance, pension, retirement, medical,
hospital, disability, welfare or other employee benefit plan with respect
to employees of the Tribune Station Business other than (A) as required by
law and (B) changes made in the ordinary course of the Tribune Station
Business consistent with past practice; or
(xiii) agree or commit to do or authorize any of the foregoing.
4.5. Operations of the Kelly Station Prior to the Closing Date.
Meredith will use its best efforts to cause KTC to comply with its covenants
and agreements contained in Section 6.01 of the Kelly Merger Agreement,
including, upon consultation and with the written agreement of Tribune,
commencing a legal or equitable action to enforce its rights thereunder;
provided, however, that Tribune shall be responsible for all costs and expenses
incurred by Meredith in connection with its enforcement of such rights. After
the consummation of the Kelly Merger, Meredith and the Meredith Sub shall
comply with the covenants and agreements contained in Section 6.01 of the Kelly
Merger Agreement as if all references therein to KTC were references to
Meredith and the Meredith Sub.
4.6. Public Announcement. Neither Tribune nor Meredith, nor any of
their Affiliates shall, without the approval of the other, make any press
release or other public announcement concerning the transactions contemplated
by this Agreement, except as and to the extent that any such party shall be so
obligated by law or by the rules, regulations or policies of any national
securities exchange or association, in which case the other party shall be
advised and the parties shall use their best efforts to cause a mutually
agreeable release or announcement to be issued.
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4.7. Interim Financial Statements. Tribune shall promptly deliver
to Meredith copies of any monthly, quarterly or annual financial statements
relating solely to the Tribune Station Business. Such financial statements
shall fairly present the financial position and results of operations of the
Tribune Station Business as at the dates and for the periods indicated, and
shall be prepared on a basis consistent and in accordance with the basis upon
which the financial statements included in Schedule 2.4 were prepared.
Meredith shall promptly deliver to Tribune copies of any monthly, quarterly or
annual financial statements relating to the Kelly Station Business received by
it from KTC pursuant to the Kelly Merger Agreement.
4.8. Rights of Meredith Under Kelly Merger Agreement. Meredith
agrees that, from the date hereof until the Closing Date, it will use its best
efforts to enforce all rights of Meredith and Meredith Sub under the Kelly
Merger Agreement including, upon consultation with and the written agreement
of Tribune, commencing a legal or equitable action to enforce its rights
thereunder; provided, however, that Tribune shall be responsible for all costs
and expenses incurred by Meredith in connection with its enforcement of such
rights. Meredith will not waive any right or consent to any action under the
Kelly Merger Agreement without the written consent of Tribune. Meredith shall
promptly notify Tribune of any breach by KTC or the Partners of the
representations and warranties or covenants and agreements contained in the
Kelly Merger Agreement of which Meredith becomes aware. Meredith shall
promptly deliver all correspondence and other information received by Meredith
from KTC or the Partners relating to the Kelly Station Business or the Kelly
Merger Agreement. Meredith and Tribune agree that in the event that the Kelly
Merger Agreement is terminated, each party may incur damages and to the extent
that such damages arise from a breach for which KTC or the Partners are liable
pursuant to Section 11.02(a) of the Kelly Merger Agreement, Meredith shall, at
the request of Tribune, enforce its rights thereunder for the benefit of
Tribune, in addition to Meredith, with Tribune bearing the cost of such
enforcement pro rata based on the amount of damages claimed by each party.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1. Taxes; Sales, Use and Transfer Taxes; Title Insurance. (a)
Tribune shall be liable for and shall pay all Taxes (whether assessed or
unassessed) applicable to (i) the Tribune Station Business or the Tribune
Station Assets, in each case attributable to periods (or portions thereof)
ending on or prior to the Closing Date, except to the extent such Taxes are
reflected in the Closing Date Tribune Station Working Capital Amount, (ii) the
Kelly Station Business or the Kelly Station Assets(except for periods, or
portions thereof, after the consummation of the Kelly Merger and prior the
Closing Date) and (iii) Taxes reflected in the Closing Date Kelly Station
Working Capital Amount. Meredith shall be liable for and shall pay all Taxes
(whether assessed or unassessed) applicable to (i) the Kelly Station Business
or the Kelly Station Assets, in each case attributable to periods (or portions
thereof) after the consummation of the Kelly Merger ending on or prior to the
Closing Date, except to the extent that such Taxes are reflected in the Closing
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Date Kelly Station Working Capital Amount or are described in Section 8.02(a)
of the Kelly Merger Agreement, (ii) the Tribune Station Business or the Tribune
Station Assets, in each case attributable to periods (or portions thereof)
beginning after the Closing Date and (iii) Taxes reflected in the Closing Date
Tribune Station Working Capital Amount. For purposes of this Section 5.1(a),
any period beginning before and ending after the Closing Date shall be treated
as two partial periods, one ending on the Closing Date and the other beginning
after the Closing Date; provided, however, that Taxes imposed on a periodic
basis shall be allocated on a daily basis.
(b) Any sales, use or other transfer Taxes payable by reason of
transfer and conveyance of the Tribune Station Assets or the Kelly Station
Assets hereunder and any documentary stamp or transfer Taxes payable by reason
of the real estate or interests therein included in the Tribune Station Assets
or the Kelly Station Assets, including those incurred in connection with the
consummation of the Kelly Merger, shall be paid 50% by Tribune and 50% by
Meredith. All fees relating to any filing with any Governmental Body required
for transfer and conveyance of the Tribune Station Assets and the Kelly Station
Assets hereunder or in connection with the consummation of the Kelly Merger,
other than amounts (including Taxes) owing to any Governmental Body as of the
date hereof or with respect to events occurring prior to the date hereof, shall
be paid one-half by Tribune and one-half by Meredith.
(c) Tribune or Meredith, as the case may be, shall provide
reimbursement for any Tax paid by the other party all or a portion of which is
the responsibility of Tribune or Meredith, as the case may be, in accordance
with the terms of this Section 5.1. Within a reasonable time prior to the
payment of any said Tax, the party paying such Tax shall give notice to the
other party of the Tax payable and the portion which is the liability of each
party, although failure to do so will not relieve the other party from its
liability hereunder.
5.2. Employees; Employee Benefit Plans. (a) Not less than 60 days
prior to Closing, Meredith shall furnish Tribune with a schedule identifying
each employee listed on Schedule 2.18 to whom Meredith intends to extend
employment as of Closing.
(b) Notwithstanding the foregoing provisions of this Section 5.2,
nothing contained in this Agreement shall be construed to create any obligation
on the part of Tribune to retain or on the part of Meredith to employ or retain
any employees of the Kelly Station Business ("Kelly Station Employees") or the
Tribune Station Business ("Tribune Station Employees"), as the case may be, on
or after the Closing Date and any employees so employed or retained shall be so
employed or retained on an "at will" basis only, unless Tribune or Meredith, as
the case may be, shall otherwise expressly agree in writing.
(c) (i) Tribune shall not assume any obligations under any employee
benefit plan maintained, or contributed to, by Meredith, KTC or any of their
Affiliates ("Meredith Plans") or any other obligations of Meredith or any of
their Affiliates to Kelly Station Employees. Meredith shall not assume any
obligations under any employee benefit plan maintained, or contributed to, by
Tribune or any of its Affiliates ("Tribune Plans") or any other obligations of
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Tribune or any of its Affiliates to Tribune Station Employees. Without
limiting the foregoing, Tribune and the Meredith each shall provide
continuation coverage to each individual who under the terms of its respective
health plan is entitled to continuation rights pursuant to Section 4980B of the
Code or Part 6 of Subtitle I of ERISA.
(ii) Each Tribune Station Employee who becomes employed by the
Meredith Sub and each Kelly Station Employee who becomes employed by the
Tribune Sub, in either case as of the Closing Date or within four weeks
thereafter (a "Continuing Employee"), shall participate in any group medical,
dental and life insurance plans for which such employee becomes eligible on the
first day of the first month following the Closing Date, without any evidence
of insurability, and without application of any pre-existing condition
limitations. All claims arising prior to the Closing Date under Tribune Plans
shall be counted under Meredith Plans, and all claims arising prior to the
Closing Date under Meredith Plans shall be counted under Tribune Plans, for
purposes of deductibles, out-of-pocket maximums, benefit maximums, and all
other similar limitations for calendar year in which the Closing Date occurs.
Tribune shall take into account the service of Continuing Employees with the
Meredith Sub prior to the Closing Date and Meredith shall take into account the
service of Continuing Employees with the Tribune Sub prior to the Closing Date,
in each case for purposes of determining such employees' eligibility for
holidays, sick days and vacation benefits. Each Meredith Plan and Tribune Plan
that includes a qualified cash or deferred arrangement (within the meaning of
Section 401(k) of the Code) shall accept the rollover of distributions from any
Tribune Plan or Meredith Plan, as the case may be, directed by Continuing
Employees. Except as otherwise set forth herein, Tribune and Meredith, each in
its sole discretion, may modify or terminate any of its respective employee
benefit plans, programs, policies or arrangements at any time after the Closing
Date for any reason.
(iii) Tribune and Meredith each shall bear the cost and expense of
any workers' compensation claim asserted and arising out of an injury sustained
by any of its respective employees prior to the Closing Date.
(d) Notwithstanding anything in Sections 5.2(a), (b) and (c) to the
contrary, Tribune shall honor the covenants of Meredith set forth in Article
VII of the Kelly Merger Agreement, as if Tribune, rather than Meredith, were
the "Purchaser" thereunder.
5.3. Control of Operations Prior to Closing Date. Notwithstanding
anything contained herein to the contrary, the Closing shall not be consummated
prior to the grant by the FCC of the FCC Order. Tribune and Meredith
acknowledge and agree that at all times commencing on the date hereof and
ending on the Closing Date, (i) neither Meredith, the Meredith Sub nor any of
their employees, agents or representatives, directly or indirectly, shall, or
have any right to, control, direct or otherwise supervise, or attempt to
control, direct or otherwise supervise any of the management or operations of
the Tribune Stations, it being understood that the operation, management,
control and supervision of all programs, equipment, operations and other
activities of the Tribune Stations shall be the sole responsibility, and at all
times prior to the Closing Date remain within the complete control and
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discretion, of the Tribune Subs, subject to the terms of Section 4.4 of this
Agreement and (ii) neither Tribune, the Tribune Subs nor any of their
employees, agents or representatives, directly or indirectly, shall, or have
any right to, control, direct or otherwise supervise, or attempt to control,
direct or otherwise supervise any of the management or operations of the Kelly
Station, it being understood that the operation, management, control and
supervision of all programs, equipment, operations and other activities of the
Kelly Station shall be the sole responsibility, and at all times prior to the
Closing Date remain within the complete control and discretion of KTC prior to
the consummation of the Kelly Merger and the Meredith Sub, subject to the terms
of Section 6.01 of the Kelly Merger Agreement and the Meredith Sub from the
consummation of the Kelly Merger to the Closing Date.
5.4. Closing of Kelly Merger. The parties agree that if the
consummation of the Kelly Merger does not occur contemporaneously with the
Closing, Meredith, the Meredith Sub, Tribune and the Tribune Sub shall enter
into time brokerage agreements pursuant to which Meredith or the Meredith Sub
will provide programming for, and be entitled to all the revenues of, the
Tribune Station, and Tribune or the Tribune Sub will provide programming for,
and be entitled to the revenues of, the Kelly Station, such agreements each to
provide for reimbursement of reasonable operating expenses but without payment
of additional consideration, and such agreements to commence on a date
designated by Meredith after expiration or termination of any applicable
waiting period under the Improvements Act and to terminate on the earlier of
(A) the Closing hereunder or (B) any date designated by Meredith that is not
earlier than 180 days after the earlier of the consummation of the Kelly Merger
or the date Meredith delivers the Postponement Notice (as defined in the Kelly
Merger Agreement); and if such agreements are terminated by Meredith prior to
Closing hereunder, then this Agreement shall simultaneously terminate with
respect to the Tribune Station but shall continue in effect with respect to the
Kelly Station, and at Closing Tribune shall pay to Meredith in cash an amount
equal to the KTC Purchase Price (as defined in the Kelly Merger Agreement).
The closing conditions contained in Sections 6.1 and 6.4 shall not apply to any
Closing hereunder occurring after the effectiveness of the time brokerage
agreements referred to above.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF TRIBUNE AND
THE TRIBUNE SUB
The obligations of Tribune and the Tribune Sub under this Agreement
shall, at the option of Tribune and the Tribune Sub, be subject to the
satisfaction, on or prior to the Closing Date, of the following conditions:
6.1. No Misrepresentation or Breach of Covenants and Warranties.
There shall have been no material breach by Meredith or the Meredith Sub in the
performance of any of their respective covenants and agreements contained
herein; each of the representations and warranties of Meredith and the Meredith
Sub contained or referred to herein shall be true and correct in all material
respects on the Closing Date as though made on the Closing Date (except to the
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extent that they expressly speak as of a specific date or time other than the
Closing Date, in which case they need only have been true and correct in all
material respects as of such specified date or time), except for changes
therein specifically permitted by this Agreement or resulting from any
transaction expressly consented to in writing by Tribune or any transaction
explicitly permitted by this Agreement; and there shall have been delivered to
Tribune a certificate or certificates to such effect, dated as of the Closing
Date, signed on behalf of Meredith and the Meredith Sub by its President or any
Vice President.
6.2. No Restraint or Litigation. (a) Any applicable waiting period
under the Improvements Act shall have expired or have been terminated and there
shall not be in effect any order of a court of competent jurisdiction, which,
in any case, restrains or prohibits the transactions contemplated hereby.
6.3. FCC Order. The FCC shall have issued the FCC Order and any
condition or action required to be satisfied or taken to legally effect the
assignment of the Kelly Station FCC Authorizations to the Tribune Sub in
compliance with the FCC Order shall have been so satisfied or taken (provided,
that in no event shall the foregoing require the satisfaction of any condition
or the taking of any action that could under the terms of the FCC Order be so
satisfied or taken subsequent to the Closing); provided, that in the event that
a petition to deny or other material objection has been filed with the FCC with
respect to the application for transfer of control of the Kelly Station FCC
Authorizations to the Tribune Sub and there exists a significant risk that the
FCC Order will not become Final, the FCC Order shall have become Final Order.
As used in this Agreement, the term "FCC Order" means an order or decision of
the FCC that grants, without material adverse condition, all consents or
approvals required under the Communications Act for the assignment of the Kelly
Station FCC Authorizations to the Tribune Sub or the Tribune Station FCC
Authorizations to the Meredith Sub, as the case may be, and the other
transactions contemplated by this Agreement. For purposes of this Agreement,
the term "Final" shall mean that action shall have been taken by the FCC
(including action duly taken by the FCC's staff, pursuant to delegated
authority) which shall not have been reversed, stayed, enjoined, set aside,
annulled or suspended; with respect to which no timely request for stay,
petition for rehearing, appeal or certiorari or sua sponte action of the FCC
with comparable effect shall be pending; and as to which the time for filing
any such request, petition, appeal, certiorari or for the taking of any sua
sponte action by the FCC shall have expired or otherwise terminated. The
following shall be deemed not to be material adverse conditions for purposes of
the definition of FCC Order: (i) a condition by the FCC that the Closing not
occur until the grant of applications for renewal of the FCC License for the
Kelly Station or (ii) a condition by the FCC that Tribune, the Tribune Sub or
any of their Affiliates divest itself of any media property at the Closing or
at any future date if ownership of which, in combination with the ownership of
the Kelly Station, violates the rules, regulations or policies of the FCC.
6.4. No Material Adverse Change. Since the date of this Agreement,
there shall have been no damage, destruction, loss or claim (whether or not
covered by insurance) or condemnation or other taking which materially
adversely affects the Kelly Station or its business, taken as a whole.
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6.5. Kelly Merger. The acquisition by Meredith of the Kelly Station
pursuant to the Kelly Merger shall have been consummated.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF MEREDITH
AND THE MEREDITH SUBS
The obligations of Meredith and the Meredith Sub under this Agreement
shall, at the option of Meredith and the Meredith Sub, be subject to the
satisfaction on or prior to the Closing Date, of the following conditions:
7.1. No Restraint or Litigation. Any applicable waiting period
under the Improvements Act shall have expired or been terminated and there
shall not be in effect any order of a court of competent jurisdiction, which,
in any case, restrains or prohibits the transactions contemplated hereby.
7.2. FCC Order. The FCC shall have issued the FCC Order and any
condition or action required to be satisfied or taken to legally effect the
assignment of the Tribune Station FCC Authorizations to the Meredith Sub in
compliance with the FCC Order shall have been so satisfied or taken (provided,
that in no event shall the foregoing require the satisfaction of any condition
or the taking of any action that could under the terms of the FCC Order be so
satisfied or taken subsequent to the Closing); provided, that in the event that
a petition to deny or other material objection has been filed with the FCC with
respect to the application for transfer of control of the Tribune Station FCC
Authorizations to the Meredith Sub and there exists a significant risk that the
FCC Order will not become Final, the FCC Order shall have become Final Order.
The following shall be deemed not to be material adverse conditions for
purposes of the definition of FCC Order: (i) a condition by the FCC that the
Closing not occur until the grant of applications for renewal of the FCC
License for the Tribune Station or (ii) a condition by the FCC that Meredith,
the Meredith Sub or any of their Affiliates divest itself of any media property
at the Closing or at any future date if ownership of which, in combination with
the ownership of the Tribune Station, violates the rules, regulations or
policies of the FCC.
7.3. Lease Extension. The Tribune Sub shall have entered into an
extension for not less than 5 years of the lease for the main tower of the
Tribune Station containing terms and conditions (other than rental rates) that
are substantially similar to the existing lease and at market rental rates.
7.4. Transmission Interruption. There shall not have occurred any
damage or destruction of property or other circumstances causing the regular
broadcast transmission of the Tribune Station in the normal and usual manner to
be interrupted for a period that is in excess of 7 days and is continuing.
7.5. Kelly Merger. The acquisition by Meredith of the Kelly Station
pursuant to the Kelly Merger shall have been consummated.
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ARTICLE VIII
INDEMNIFICATION
8.1. Indemnification by Tribune. Tribune agrees to indemnify and
hold harmless the Meredith and the Meredith Sub from and against any and all
Loss and Expense incurred by Meredith or the Meredith Sub in connection with or
arising from:
(i) any breach by Tribune or the Tribune Sub of, or any other
failure of Tribune or the Tribune Sub to perform, any of their respective
covenants, agreements or obligations in this Agreement or in any Tribune
Ancillary Agreement;
(ii) any breach of any warranty or the inaccuracy of any
representation of Tribune or the Tribune Sub contained or referred to in
this Agreement or any certificate delivered by or on behalf of Tribune or
Tribune Sub pursuant hereto;
(iii) the failure of Tribune and the Tribune Sub to perform any
Excluded Tribune Station Liabilities;
(iv) (A) the occupancy, operation, use or control of any of the real
property listed on Schedule 2.10 or Schedule 2.11 prior to the Closing
Date or (B) the operation of the Tribune Station Business prior to the
Closing Date, in each case incurred or imposed as a requirement of or in
connection with the compliance with any environmental, health or safety
Requirements of Law, including, without limitation, any Release or storage
of any Contaminant on, at or from (1) any such real property (including,
without limitation, all facilities, improvements, structures, and
equipment thereon, surface water thereon or adjacent thereto and soil or
groundwater thereunder) or any conditions whatsoever on, under or in such
real property or (2) any real property or facility owned by a third party
at which Contaminants generated by the Tribune Station Business were sent
prior to the Closing Date; and
(v) the failure of Tribune and the Tribune Subs to perform any of
the Assumed Kelly Station Liabilities;
provided, however, that, except as set forth below, Tribune shall not be
required to indemnify and hold harmless pursuant to clause (ii) with respect to
Loss and Expense incurred by Meredith or the Meredith Sub until, and then only
to the extent that, the aggregate amount of such Loss and Expense exceeds
$1,000,000 and, provided, further, that the aggregate amount that Tribune shall
be required to indemnify and hold harmless pursuant to clause (ii) with respect
to Loss and Expense incurred by the Meredith or the Meredith Sub shall not
exceed $25,000,000. Notwithstanding the foregoing, the limitation contained in
the first proviso above shall not apply to any Loss or Expense resulting from
the failure of any representation and warranty of Tribune or the Tribune Sub
contained herein to be true and correct in all material respects as of the
Closing Date (except to the extent that they expressly speak as of a specific
date or time, in which case they need only have been true and correct as of
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such specified date or time) to the extent that Meredith gives written notice
to Tribune of such breach prior to the Closing. The indemnification provided
for in this Section 8.1 shall terminate on the twelve-month anniversary of the
Closing Date (and no claims shall be made by Meredith or the Meredith Sub under
this Section 8.1 thereafter), except that the indemnification by Tribune shall
continue in any event as to:
(A) any breach of any warranty or the inaccuracy of any
representation of Tribune or the Tribune Subs contained or referred to in
Section 2.3, 2.17 or 2.24, as to all of which no time limitation shall
apply other than the full period of any applicable statute of limitations;
(B) the covenants of Tribune or the Tribune Subs set forth in
Section 5.1, 10.2 or 10.10, as to all of which no time limitation shall
apply other than the full period of any applicable statute of limitations;
(C) any Loss or Expense incurred by Meredith or the Meredith Sub in
connection with or arising out of the failure of Tribune and the Tribune
Sub to perform any Excluded Tribune Station Liability or any Assumed Kelly
Station Liability, as to which no time limitation shall apply;
(D) any Loss or Expense incurred by Meredith or the Meredith Sub in
connection with or arising from the matters described in clause (iv) of
this Section 8.1, as to which no time limitation shall apply other than
the full period of any applicable statute of limitations; and
(E) any Loss or Expense of which Meredith or the Meredith Sub has
notified Tribune in accordance with the requirements of Section 8.3 on or
prior to the date such indemnification would otherwise terminate in
accordance with this Section 8.1, as to which the obligation of Tribune
shall continue until the liability of Tribune shall have been determined
pursuant to this Article VIII, and Tribune shall have reimbursed Meredith
or the Meredith Sub for the full amount of such Loss and Expense in
accordance with this Article VIII.
8.2. Indemnification by Meredith. Meredith agrees to indemnify and
hold harmless Tribune and the Tribune Subs from and against any and all Loss
and Expense incurred by Tribune or the Tribune Subs in connection with or
arising from:
(i) any breach by Meredith or the Meredith Sub of, or any other
failure of Meredith or the Meredith Sub to perform, any of their
respective covenants, agreements or obligations in this Agreement or in
any Meredith Ancillary Agreement;
(ii) any breach of any warranty or the inaccuracy of any representation
of Meredith or the Meredith Sub contained or referred to in this Agreement
or any certificate delivered by or on behalf of Meredith or the Meredith
Sub pursuant hereto;
(iii) the failure of Meredith and the Meredith Sub to perform any
Excluded Kelly Station Liabilities;
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(iv) the failure of Meredith and the Meredith Sub to perform any of the
Assumed Tribune Station Liabilities;
provided, however, that Meredith shall not be required to indemnify and hold
harmless pursuant to clause (ii) with respect to Loss and Expense incurred by
Tribune or the Tribune Sub until, and then only to the extent that, the
aggregate amount of such Loss and Expense exceeds $1,000,000 and, provided,
further, that the aggregate amount that Meredith shall be required to indemnify
and hold harmless pursuant to clause (ii) with respect to Loss and Expense
incurred by Tribune or the Tribune Sub shall not exceed $25,000,000. The
indemnification provided for in this Section 8.2 shall terminate on the twelve-
month anniversary of the Closing Date (and no claims shall be made by Tribune
or the Tribune Sub under this Section 8.2 thereafter), except that the
indemnification by Meredith or the Meredith Subs shall continue in any event as
to:
(A) any breach of any warranty or the inaccuracy of any
representation of Meredith or the Meredith Sub contained or referred to in
Sections 3.3 or 3.4, as to all of which no time limitation shall apply
other than the full period of any applicable statute of limitations;
(B) the covenants of the Meredith or the Meredith Sub set forth in
Section 5.1, 10.2 or 10.10, as to all of which no time limitation shall
apply other than the full period of any applicable statute of limitations;
(C) any Loss or Expense incurred by Tribune or the Tribune Sub in
connection with or arising out of the failure of Meredith and the Meredith
Sub to perform any Excluded Kelly Station Liability or any Assumed Tribune
Station Liabilities, as to which no time limitation shall apply;
(D) any Loss or Expense of which Tribune or the Tribune Subs has
notified Meredith in accordance with the requirements of Section 8.3 on or
prior to the date such indemnification would otherwise terminate in
accordance with this Section 8.1, as to which the obligation of Meredith
shall continue until the liability of Meredith shall have been determined
pursuant to this Article VIII, and Meredith shall have reimbursed Tribune
or the Tribune Sub for the full amount of such Loss and Expense in
accordance with this Article VIII.
8.3. Notice of Claims. (a) If Tribune and the Tribune Subs (the
"Tribune Entities") or Meredith and the Meredith Subs (the "Meredith Entities")
believes that they have suffered or incurred any Loss or incurred any Expense,
the Tribune Entities or the Meredith Entities shall so notify the other
promptly in writing describing such Loss or Expense, the amount thereof, if
known, and the method of computation of such Loss or Expense, all with
reasonable particularity and containing a reference to the provisions of this
Agreement or other agreement, instrument or certificate delivered pursuant
hereto in respect of which such Loss or Expense shall have occurred.
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If any action at law or suit in equity is instituted by or against a
third party with respect to which the Tribune Entities or the Meredith Entities
intend to claim any liability or expense as Loss or Expense under this Article
VIII, the Tribune Entities or the Meredith Entities, as the case may be, shall
promptly notify the indemnifying party of such action or suit. The failure of
any party to give any notice required by this Section 8.3 shall not affect any
of such party's rights under this Article VIII except to the extent such
failure is actually prejudicial to the rights or obligations of the other
party.
(b) The amount to which an indemnified person shall be entitled
under this Article VIII shall be determined: (i) by written agreement between
Tribune and Meredith, (ii) by a final judgment or decree of any court of
competent jurisdiction or (iii) by any other means to which Tribune and
Meredith shall agree. The judgment or decree of a court shall be deemed final
when the time for appeal, if any, shall have expired and no appeal shall have
been taken or when all appeals taken have been finally determined. The
indemnified party shall have the burden of proof in establishing the amount of
the Loss and Expense suffered by it.
8.4. Third Party Claims. (a) Subject to paragraph (b) of this
Section 8.4, the party to be indemnified under this Article VIII shall have the
right to conduct and control, through counsel of its choosing, any third party
claim, action or suit, and the party indemnified may compromise or settle the
same, provided that the indemnified party shall give the indemnifying party
advance notice of any proposed compromise or settlement. The indemnified party
shall permit the indemnifying party to participate in the defense of any such
action or suit through counsel chosen by it, provided that the fees and
expenses of such counsel shall be borne by the indemnifying party. Subject to
paragraph (b) of this Section 8.4, any compromise or settlement with respect to
a claim for money damages effected after the indemnifying party by notice to
the indemnified party shall have disapproved such compromise or settlement
shall discharge the indemnifying party from liability with respect to the
subject matter thereof, and no amount in respect thereof shall be claimed as
Loss or Expense under this Article VIII.
(b) If the remedy sought in any action or suit referred to in
paragraph (a) of this Section 8.4 is solely money damages and will have no
continuing effect on the business of the indemnified party, the indemnifying
party shall have 15 business days after receipt of the notice referred to in
Section 8.3(a) to notify the indemnified party that it elects to conduct and
control such action or suit. If the indemnifying party does not give the
foregoing notice, the indemnified party shall have the right to defend,
contest, settle or compromise such action or suit in the exercise of its
exclusive discretion, and the indemnifying party shall, upon request from the
indemnified party, promptly pay to the indemnified party in accordance with the
other terms of this Article VIII the amount of any Loss resulting from its
liability to the third party claimant and all related Expense. If the
indemnifying party gives the foregoing notice, the indemnifying party shall
have the right to undertake, conduct and control, through counsel of its own
choosing and at the sole expense of the indemnifying party, the conduct and
settlement of such action or suit, and the indemnified party shall cooperate
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with the indemnifying party in connection therewith; provided that (x) the
indemnifying party shall not thereby permit to exist any lien, encumbrance or
other adverse charge upon any asset of the indemnified party; (y) the
indemnifying party shall permit the indemnified party to participate in such
conduct or settlement through counsel chosen by the indemnified party, but the
fees and expenses of such counsel shall be borne by the indemnified party
except as provided in clause (z) below; and (z) the indemnifying party shall
agree promptly to reimburse to the extent required under this Article VIII the
indemnified party for the full amount of any Loss resulting from such action or
suit and all related Expense incurred by the indemnified party, except fees and
expenses of counsel for the indemnified party incurred after the assumption of
the conduct and control of such action or suit by the indemnifying party. So
long as the indemnifying party is contesting any such action or suit in good
faith, the indemnified party shall not pay or settle any such action or suit.
Notwithstanding the foregoing, the indemnified party shall have the right to
pay or settle any such action or suit, provided that in such event the
indemnified party shall waive any right to indemnity therefor by the
indemnifying party, and no amount in respect thereof shall be claimed as Loss
or Expense under this Article VIII.
8.5. No Effect on Adjustment. Nothing contained in this Article
VIII shall affect the adjustment provided for in Section 1.10 and the full
amount of the adjustment payment which Tribune or Meredith, as the case may be,
may be entitled to receive thereunder.
8.6. Exclusive Remedy. Any other provisions of this Agreement to
the contrary notwithstanding, from and after the Closing, the sole and
exclusive liability and responsibility of the Tribune Entities to the Meredith
Entities, or of the Meredith Entities to the Tribune Entities, under or in
connection with this Agreement or the transactions contemplated hereby
(including, without limitation, for any breach or inaccuracy of any
representation or warranty or for any breach of any covenants or for any other
reason), and the sole and exclusive remedy of the Tribune Entities and the
Meredith Entities vis-a-vis each other with respect to any of the foregoing,
shall be as set forth in this Article VIII; provided, however, that each party
hereto shall retain all non-monetary equitable remedies available to it in
respect of any breach or alleged breach by any other party of any covenant or
other agreement of such other party contained in or made pursuant to this
Agreement and required to be performed after the Closing Date. To the extent
that a party hereto has any Loss or Expenses for which it may assert any other
right to indemnification, contribution or recovery from the other party hereto
(whether under this Agreement, under common law or any statute or otherwise),
such party with such Loss or Expense hereby waives, releases and agrees not to
assert such right. In furtherance and not in limitation of the foregoing, the
Tribune Entities and the Meredith entities agree that their respective rights
and obligations in respect of environmental matters as provided herein shall
supersede any such rights and obligations any of them may have under existing
or future law.
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ARTICLE IX
TERMINATION
9.1. Termination. (a) Notwithstanding anything contained in this
Agreement to the contrary, this Agreement may be terminated at any time prior
to the Closing: (i) by the mutual consent of Tribune and Meredith; (ii) by
Tribune or Meredith if the Kelly Merger Agreement shall be terminated; or (iii)
by Tribune or Meredith if the Closing shall not have occurred on or before the
later of May 21, 1999 and the date that is 15 days after termination of the
time brokerage agreements referred to in Section 5.4 (or such later date as may
be mutually agreed to by Tribune and Meredith).
(b) In the event that this Agreement shall be terminated pursuant to
this Article IX, all further obligations of the parties under this Agreement
(other than Sections 10.2 and 10.10) shall be terminated without further
liability of any party to the other; provided that nothing herein shall relieve
any party from liability for its breach of this Agreement.
ARTICLE X
GENERAL PROVISIONS
10.1. Survival of Representations, Warranties and Obligations. All
representations, warranties, covenants and obligations contained in this
Agreement shall survive the consummation of the transactions contemplated by
this Agreement; provided, however, that, except as otherwise provided in
Article VIII, the representations and warranties contained in Articles II and
III of this Agreement (other than the representations and warranties contained
in Sections 2.3, 2.17, 2.24, 3.3, or 3.4) shall terminate on the twelve-month
anniversary of the Closing Date. Except as otherwise provided herein, no claim
shall be made for the breach of any representation or warranty contained in
Article II or III after the date on which such representations and warranties
terminate as set forth in this Section.
10.2. Confidential Nature of Information. Each party agrees that it
will treat in confidence all documents, materials and other information which
it shall have obtained regarding the other party during the course of the
negotiations leading to the consummation of the transactions contemplated
hereby (whether obtained before or after the date of this Agreement), the
investigation provided for herein and the preparation of this Agreement and
other related documents, and, in the event the transactions contemplated hereby
shall not be consummated, each party will return to the other party all copies
of nonpublic documents and materials which have been furnished in connection
therewith. The obligation of each party to treat such documents, materials and
other information in confidence shall not apply to any information which (a)
such party can demonstrate was already lawfully in its possession prior to the
disclosure thereof by the other party, (b) is known to the public and did not
become so known through any violation of a legal obligation, (c) became known
to the public through no fault of such party, (d) is later lawfully acquired by
such party from other sources or (e) such party is required to disclose any
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such information pursuant to judicial order or, in the opinion of counsel,
pursuant to applicable law. Without limiting the right of either party to
pursue all other legal and equitable rights available to it for violation of
this Section 10.2 by the other party, it is agreed that other remedies cannot
fully compensate the aggrieved party for such a violation of this Section 10.2
and that the aggrieved party shall be entitled to injunctive relief to prevent
a violation or continuing violation hereof.
10.3. Governing Law; Venue. This Agreement and the transactions
contemplated hereby shall be governed by and construed in accordance with the
laws of the State of Delaware without reference to its choice of law rules.
10.4. Notices. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed given or delivered
when delivered personally or by messenger or 72 hours after having been sent by
registered or certified mail or when delivered by private courier addressed as
follows:
If to Tribune or the Tribune Subs, to:
Tribune Broadcasting Company
435 North Michigan Avenue
Chicago, Illinois 60611
Attention: President
with copies to:
Tribune Company
435 North Michigan Avenue
Chicago, Illinois 60611
Attention: General Counsel
and
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Larry A. Barden
If to the Exchange Party or the Exchange Party
Subs, to:
Meredith Corporation
1716 Locust Street
Des Moines, Iowa 50309
Attention: William T. Kerr
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with copies to:
Meredith Corporation
1716 Locust Street
Des Moines, Iowa 50309
Attention: Thomas L. Slaughter
and:
Wiley, Rein & Fielding
1776 K Street, N.W.
Washington, D.C. 20006
Attention: James R. Bayes
or to such other address as such party may indicate by a notice delivered to
the other parties hereto.
10.5. Successors and Assigns. (a) The rights of any party under
this Agreement shall not be assignable by such party hereto prior to the
Closing without the written consent of the other parties hereto.
(b) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their successors and permitted assigns. Nothing in this
Agreement, expressed or implied, is intended or shall be construed to confer
upon any person other than the parties and successors and assigns permitted by
this Section 10.5 any right, remedy or claim under or by reason of this
Agreement.
10.6. Access to Records after Closing. For a period of six years
after the Closing Date (i) Tribune and its representatives shall have
reasonable access to all of the books and records of the Tribune Station
Business transferred to Meredith hereunder to the extent that such access may
reasonably be required by Tribune in connection with matters relating to or
affected by the operations of the Tribune Station Business prior to the Closing
Date and (ii) Meredith and its representatives shall have reasonable access to
all of the books and records of the Kelly Station Business transferred to the
Tribune Sub hereunder to the extent that such access may reasonably be required
by Meredith in connection with matters relating to or affected by the
operations of the Tribune Station Business prior to the Closing Date. Such
access shall be afforded by Tribune or Meredith, as the case may be, upon
receipt of reasonable advance notice and during normal business hours. Tribune
or Meredith, as the case may be, shall be solely responsible for any costs or
expenses incurred by it pursuant to this Section 10.6. If Tribune or Meredith,
as the case may be, shall desire to dispose of any of such books and records
prior to the expiration of such six-year period, it shall, prior to such
disposition, give the other party a reasonable opportunity, at the other
party's expense, to segregate and remove such books and records as the other
party may select.
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For a period of six years after the Closing Date, (i) Tribune and its
representatives shall have reasonable access to all of the books and records
relating to the Kelly Station Business which Meredith or any of its Affiliates
may retain after the Closing Date and (ii) Meredith and its representatives
shall have reasonable access to all of the books and records relating to the
Tribune Station Business which Tribune or any of its Affiliates may retain
after the Closing Date. Such access shall be afforded by Tribune or Meredith,
as the case may be, and its Affiliates upon receipt of reasonable advance
notice and during normal business hours. Tribune or Meredith, as the case may
be, shall be solely responsible for any costs and expenses incurred by it
pursuant to this Section 10.6. If Tribune or Meredith, as the case may be, or
any of its Affiliates shall desire to dispose of any of such books and records
prior to the expiration of such six-year period, Tribune or Meredith, as the
case may be, shall, prior to such disposition, give the other party a
reasonable opportunity, at the other party's expense, to segregate and remove
such books and records as the other party may select.
10.7. Entire Agreement; Amendments. This Agreement and the Exhibits
and Schedules referred to herein and the documents delivered pursuant hereto
contain the entire understanding of the parties hereto with regard to the
subject matter contained herein or therein, and supersede all prior agreements,
understandings or intents between or among any of the parties hereto. The
parties hereto, by mutual agreement in writing, may amend, modify and
supplement this Agreement.
10.8. Interpretation. Article titles and headings to sections
herein are inserted for convenience of reference only and are not intended to
be a part of or to affect the meaning or interpretation of this Agreement. The
Schedules and Exhibits referred to herein shall be construed with and as an
integral part of this Agreement to the same extent as if they were set forth
verbatim herein.
10.9. Waivers. Any term or provision of this Agreement may be
waived, or the time for its performance may be extended, by the party or
parties entitled to the benefit thereof. The failure of any party hereto to
enforce at any time any provision of this Agreement shall not be construed to
be a waiver of such provision, nor in any way to affect the validity of this
Agreement or any part hereof or the right of any party thereafter to enforce
each and every such provision. No waiver of any breach of this Agreement shall
be held to constitute a waiver of any other or subsequent breach.
10.10. Expenses. The Tribune Entities and the Meredith Entities
will each pay all of their own respective costs and expenses incident to their
negotiation and preparation of this Agreement and to their performance and
compliance with all agreements and conditions contained herein on their part to
be performed or complied with, including the fees, expenses and disbursements
of their counsel and accountants.
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10.11. Partial Invalidity. Wherever possible, each provision
hereof shall be interpreted in such manner as to be effective and valid under
applicable law, but in case any one or more of the provisions contained herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions of this Agreement, and this Agreement shall be construed as if
such invalid, illegal or unenforceable provision or provisions had never been
contained herein unless the deletion of such provision or provisions would
result in such a material change as to cause completion of the transactions
contemplated hereby to be unreasonable.
10.12. Execution in Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be considered an original
instrument, but all of which shall be considered one and the same agreement,
and shall become binding when one or more counterparts have been signed by each
of the parties and delivered to each of Tribune and Meredith.
10.13. Definitions. As used in this Agreement, the following terms
have the meanings specified or referred to in this Section 10.13:
"Affiliate" means, with respect to any person, any other person which
directly or indirectly controls, is controlled by or is under common control
with such person.
"Assumed Kelly Station Liabilities" has the meaning specified in
Section 1.6(a).
"Assumed Tribune Station Liabilities" has the meaning specified in
Section 1.5(a).
"Closing" has the meaning specified in Section 1.7.
"Closing Date" has the meaning specified in Section 1.7.
"Closing Date Kelly Station Working Capital Amount" means the
following:
(a) all cash and cash equivalents (including any marketable
securities or certificates of deposit) reflected on the Kelly Station Closing
Date Balance Sheet; plus
(b) all accounts receivable generated by the Kelly Station Business,
less the allowance for doubtful accounts, reflected on the Kelly Station
Closing Date Balance Sheet; plus
(c) the amount of inventory (exclusive of any amounts relating to
programming or broadcast rights) reflected on the Kelly Station Closing Date
Balance Sheet; plus
(d) the amount of other current assets (exclusive of any amounts
relating to programming or broadcast rights) reflected on the Kelly Station
Closing Date Balance Sheet; minus
- 50 -
<PAGE>
(e) the amount of accounts payable and accrued equipment rentals of
the Kelly Station reflected on the Kelly Station Closing Date Balance Sheet;
minus
(f) the amount of accrued salary, payroll and wages and accrued sick
pay reflected on the Kelly Station Closing Date Balance Sheet; minus
(g) the amount of any accrued accounting fees or expenses reflected
on the Kelly Station Closing Date Balance Sheet; minus
(h) the amount of any other accrued current liabilities reflected on
the Kelly Station Closing Date Balance Sheet; minus
(i) the amount of any accrued Taxes reflected on the Kelly Station
Closing Date Balance Sheet (other than federal, state and local income Taxes).
It is expressly understood and agreed that, notwithstanding the foregoing, for
purposes of calculating the Closing Date Kelly Station Working Capital Amount
there shall not be included in the assets of the Meredith Sub as of the Closing
Date any amounts in respect of Excluded Meredith Assets or amounts relating to
the programming or broadcast contracts and there shall not be included in the
liabilities of the Meredith Sub as of the Closing Date any amounts in respect
of Excluded Kelly Station Liabilities or amounts relating to programming or
broadcast contracts; provided, however, that the calculation of the Closing
Date Kelly Station Working Capital Amount shall, for all other amounts, be made
in accordance with generally accepted accounting principles consistently
applied.
"Closing Date Tribune Station Working Capital Amount" means the
following:
(a) all cash and cash equivalents (including any marketable
securities or certificates of deposit) reflected on the Tribune Station Closing
Date Balance Sheet; plus
(b) all accounts receivable generated by the Tribune Station
Business, less the allowance for doubtful accounts, reflected on the Tribune
Station Closing Date Balance Sheets; plus
(c) the amount of inventory (exclusive of any amounts relating to
programming or broadcast rights) reflected on the Tribune Station Closing Date
Balance Sheets; plus
(d) the amount of other current assets (exclusive of any amounts
relating to programming or broadcast rights) reflected on the Tribune Station
Closing Date Balance Sheets; minus
(e) the amount of accounts payable and accrued equipment rentals of
the Tribune Stations reflected on the Tribune Station Closing Date Balance
Sheets; minus
- 51 -
<PAGE>
(f) the amount of accrued salary, payroll and wages and accrued sick
pay reflected on the Tribune Station Closing Date Balance Sheets; minus
(g) the amount of any accrued accounting fees or expenses reflected
on the Tribune Station Closing Date Balance Sheets; minus
(h) the amount of any other accrued current liabilities reflected on
the Tribune Station Closing Date Balance Sheets; minus
(i) the amount of any accrued Taxes reflected on the Tribune Station
Closing Date Balance Sheets (other than federal, state and local income Taxes).
It is expressly understood and agreed that, notwithstanding the foregoing, for
purposes of calculating the Tribune Station Closing Date Working Capital Amount
there shall not be included in the assets of the Tribune Subs as of the Closing
Date any amounts in respect of Excluded Tribune Assets or amounts relating to
programming or broadcast contracts and there shall not be included in the
liabilities of the Tribune Subs as of the Closing Date any amounts in respect
of Excluded Tribune Station Liabilities or amounts relating to programming or
broadcast contracts provided; provided, however, that the calculation of the
Closing Date Tribune Station Working Capital Amount shall, for all other
amounts, be made in accordance with generally accepted accounting principles
consistently applied.
"Code" means the Internal Revenue Code of 1986, as amended.
"Communications Act" means the Communications Act of 1934, as
amended.
"Contaminant" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, or any constituent of any such substance or waste.
"Encumbrance" means any lien, claim, charge, security interest,
mortgage, pledge, easement, conditional sale or other title retention
agreement, defect in title, covenant or other restrictions of any kind.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Estimated Closing Date Kelly Station Working Capital Amount" has the
meaning specified in Section 1.8.
"Estimated Closing Date Tribune Station Working Capital Amount" has
the meaning specified in Section 1.8.
"Excluded Kelly Station Liabilities" has the meaning specified in
Section 1.6(b).
"Excluded Meredith Assets" has the meaning specified in Section 1.4.
- 52 -
<PAGE>
"Excluded Tribune Assets" has the meaning specified in Section 1.2.
"Excluded Tribune Station Liabilities" has the meaning specified in
Section 1.5(b).
"Expense" means any and all expenses incurred in connection with
investigating, defending or asserting any claim, action, suit or proceeding
incident to any matter indemnified against hereunder (including, without
limitation, court filing fees, court costs, arbitration fees or costs, witness
fees, and reasonable fees and disbursements of legal counsel, investigators,
expert witnesses, consultants, accountants and other professionals).
"FCC" means the Federal Communications Commission.
"Governmental Body" means any foreign, federal, state, local or other
governmental authority or regulatory body.
"Improvements Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Initial Kelly Station Balance Sheet" has the meaning specified in
Section 1.10(a).
"Initial Tribune Station Balance Sheets" has the meaning specified in
Section 1.10(a).
"Kelly Station" has the meaning specified in the second recital
hereof.
"Kelly Station Assets" has the meaning specified in Section 1.3.
"Kelly Station Business" has the meaning specified in Section 1.3.
"Kelly Station Closing Date Balance Sheet" has the meaning specified
in Section 1.10(c).
"Kelly Station FCC Authorizations" means those Kelly Station
Governmental Permits issued by the FCC.
"Liabilities and Costs" means all liabilities, investigations,
responsibilities, losses, damages, punitive damages, consequential damages,
treble damages, costs and expenses (including, without limitation, attorney,
expert and consulting fees and expenses, costs of investigation and feasibility
studies), fines, penalties and monetary sanctions, interest, direct or
indirect, known or unknown, absolute or contingent, past, present or future.
"Loss" means any and all losses, costs, obligations, liabilities,
settlement payments, awards, judgments, fines, penalties, damages, expenses,
deficiencies or other charges.
"Meredith" has the meaning specified in the introductory paragraph
hereof.
- 53 -
<PAGE>
"Meredith Ancillary Agreements" has the meaning specified in Section
3.3(a).
"Meredith Deposit Amount" has the meaning specified in Section 1.11.
"Meredith Deposit Breach" has the meaning specified in Section 1.11.
"Meredith Entities" has the meaning specified in Section 8.3.
"Meredith Sub" has the meaning specified in the introductory
paragraph hereof.
"Permitted Encumbrance" means (a) liens for Taxes, assessments or
other governmental charges which are not yet due and payable (b) easements,
servitudes, rights-of-way, covenants, consents, conditions, reservations,
encroachments, minor defects or irregularities in title, variations and other
restrictions affecting the use of any real property listed as included in the
Tribune Station Assets or the Kelly Station Assets, as the case may be, or the
leased real property included in the Tribune Station Assets or the Kelly
Station Assets, as the case may be, which in the aggregate do not materially
impair the use of such Tribune Station Asset or Kelly Station Asset, as the
case may be, for the purposes for which it is or may reasonably be expected to
be held and (c) the personal property leases included in the Tribune Station
Assets or the Kelly Station Assets, as the case may be, and the intellectual
property licenses included in the Tribune Station Assets or the Kelly Station
Assets, as the case may be.
"Person" means any person, employee, individual, corporation,
partnership, trust, or any other non-governmental entity or any governmental or
regulatory authority or body.
"Release" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal discharge, dispersal, leaching or migration into
the indoor or outdoor environment or into or out of any property, including the
movement of Contaminants through or in the air, soil, surface water,
groundwater or property.
"Remedial Action" means actions required to (a) clean up, remove,
treat or in any other way address Contaminants in the indoor or outdoor
environment; (b) prevent the Release or threat of Release or minimize the
further Release of Contaminants so they do not migrate or endanger or threaten
to endanger public health or welfare or the indoor or outdoor environment: or
(c) perform pre-remedial studies and investigations and post-remedial
monitoring and care.
"Requirements of Law" means any foreign, federal, state or local law,
rule or regulation, Tribune Station Governmental Permit or Kelly Station
Governmental Permit, as the case may be, or other binding determination of any
Governmental Body.
"Resolution Period" has the meaning specified in Section 1.10(c).
- 54 -
<PAGE>
"Tax" means any federal, state, local or foreign net income,
alternative or add-on minimum, gross income, gross receipts, property, sales,
use, transfer, gains, license, excise, employment, payroll, withholding or
minimum tax, or any other tax custom, duty, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest or any
penalty, addition to tax or additional amount imposed by any Governmental Body.
"Tribune" has the meaning specified in the introductory paragraph
hereof.
"Tribune Ancillary Agreements" has the meaning specified in Section
2.3.
"Tribune Deposit Amount" has the meaning specified in Section 1.11.
"Tribune Deposit Breach" has the meaning specified in Section 1.11.
"Tribune Entities" has the meaning specified in Section 8.3.
"Tribune Station" has the meaning specified in the first recital
hereof.
"Tribune Station Agreements" has the meaning specified in Section
2.21.
"Tribune Station Assets" has the meaning specified in Section 1.1.
"Tribune Station Balance Sheet" has the meaning specified in Section
2.4.
"Tribune Station Business" has the meaning specified in Section 1.1.
"Tribune Station Closing Date Balance Sheet" has the meaning
specified in Section 1.10(c).
"Tribune Station Governmental Permits" has the meaning specified in
Section 2.9(a).
"Tribune Station FCC Authorizations" means those Tribune Station
Governmental Permits issued by the FCC other than those listed on Schedule
2.9(A)(2).
"Tribune Sub" has the meaning specified in the introductory paragraph
hereof.
10.14. Exchange Groups. No earlier than 60 days prior to the
Closing Date, Tribune and Meredith shall prepare a schedule (the "Exchange
Group Schedule"), in accordance with the like-kind exchange rules covering
exchanges of multiple properties under Treas. Reg. Section 1.1031(j)-1, which
divides the Tribune Station Assets and the Kelly Station Assets, by owners,
types and estimated values of assets as of the Closing Date, into "exchange
- 55 -
<PAGE>
groups" as required by such regulation. For book and tax purposes, Tribune and
the Tribune Subs, and Meredith and the Meredith Subs, shall report the exchange
of assets pursuant to this Agreement consistently with the Exchange Group
Schedule.
10.15. Allocation Schedule. Tribune shall have the right to
coordinate Meredith's allocation of the KTC Purchase Price (as such term is
defined in the Kelly Merger Agreement) pursuant to Section 8.08 of the Kelly
Merger Agreement. In no event shall Meredith deliver the proposed allocation
or agree to a final allocation without the prior written consent of Tribune.
10.16. Board Approval. Notwithstanding anything herein to the
contrary, the execution and delivery of this Agreement by the parties hereto is
subject to the approval of this Agreement by the Board of Directors of Tribune.
Tribune hereby covenants to promptly and in any case no later than 10:00 A.M.
local time on Monday, August 24, 1998, convene a meeting of its Board of
Directors to consider this Agreement and to promptly notify Meredith of the
outcome of such meeting. In the event (i) the Board of Directors of Tribune
disapproves this Agreement prior to 4:00 p.m. Eastern Time on Monday, August
24, 1998 and Tribune so notifies Meredith or (ii) notice of an approval of this
Agreement by the Board of Directors of Tribune is not delivered to Meredith by
4:00 p.m. Eastern Time on Monday, August 24, 1998 and Meredith elects to
terminate this Agreement and delivers written notice thereof to Tribune by 5:00
p.m. Eastern Time on Monday, August 24, 1998, then in either such case this
Agreement shall thereupon terminate without liability on the part of any party
(except for breach of its obligations under this Section 10.16).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
TRIBUNE BROADCASTING COMPANY
By: /s/ Gerald W. Agema
--------------------------------
Its: Vice President
--------------------------------
WGNX INC.
By: /s/ Crane Kenney
--------------------------------
Its: Secretary
--------------------------------
- 56 -
<PAGE>
MEREDITH CORPORATION
By: /s/ John P. Loughlin
--------------------------------
Its: President, Meredith Broadcasting
--------------------------------
KCPQ ACQUISITION CORP.
By: /s/ Stephen M. Lacy
--------------------------------
Its: Vice President
--------------------------------
- 57 -
Exhibit 10.1
------------
1996 STOCK INCENTIVE PLAN AGREEMENT
NONQUALIFIED
STOCK OPTION AWARD
You have been selected to be a Participant in the Meredith Corporation
1996 Stock Incentive Plan (the "Plan"), as specified in the attached Notice of
Grant of Stock Options and Option Agreement (the "Notice"):
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 set forth in the attached Notice,
is between Meredith Corporation, an Iowa corporation (the "Company") and the
Optionee named in the Notice, 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 in the attached Notice 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. The vesting schedule for the dates on or after
which the Options may be exercised is as set forth in the attached Notice.
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 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
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 or certifying to the ownership of previously acquired Shares held
for at least six (6) months 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
- 1 -
<PAGE>
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 Participant that are not
exercisable at the date of termination shall become fully exercisable.
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 in the
attached Notice.
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 defined in the Plan), any outstanding Options granted
to Participant that are not exercisable at the date of termination shall become
fully exercisable. Optionee shall have the same right to exercise this Option
as Optionee had during his or her employment for a period ending on the Date of
Expiration set forth in the attached Notice.
6. Termination of Employment by Retirement. If, without having fully
exercised this Option, 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
Participant that are not exercisable at the date of termination shall become
fully exercisable. Optionee shall have the same right to exercise this Option
as Optionee had during his or her employment for a period ending on the Date of
Expiration set forth in the attached Notice.
7. Termination of Employment for Other Reasons. If, without having fully
exercised this Option, Optionee's employment with the Company is terminated for
reasons other than his or her death, Disability or Retirement then Optionee's
rights under this Option shall terminate. However, the Committee, in its sole
discretion, shall have the right to allow for an exercise period of up to 30
days after the date of such termination, provided that, in no event shall this
extension period continue beyond the expiration of the term of this Option. In
addition, any such extension shall be applicable only to the extent that this
Option is exercisable at the date of termination of employment.
- 2 -
<PAGE>
8. 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. Further, this Option shall be
exercisable during Optionee's lifetime only by Optionee, Optionee's legal
representative or permitted transferee. 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 notify the Company upon the completion of the
transfer.
9. 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 Optionee 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.
The term "Acquisition Consideration" shall mean the kind and amount of shares
of the surviving or new corporation, cash, securities, evidence of
indebtedness, other property or any combination thereof receivable in respect
of one share of Common Stock of the Company upon consummation of an
Acquisition.
10. 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 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
- 3 -
<PAGE>
(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.
11. 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.
12. 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.
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. 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.
- 4 -
<PAGE>
(b) 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.
(c) 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.
(d) (i) 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.
(ii) 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 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.
(e) 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.
(f) 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").
(g) 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.
(h) 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.
OPTIONEE'S INITIALS INITIALS OF MEREDITH CORPORATION'S
VICE PRESIDENT-GENERAL COUNSEL & SECRETARY
________ _________
- 5 -
Exhibit 10.2
------------
Statement re: Meredith Corporation Nonqualified Stock Option
Award Agreements with its named executive officers
Meredith Corporation has certain nonqualified stock option award agreements
with certain of its named executive officers. Such agreements are not filed
herewith pursuant to Instruction 2. to Item 601 of Regulation S-K as they are
substantially identical in all material respects, except as to the parties
thereto and the number of stock options covered under the awards, to the sample
agreement filed as Exhibit 10.1 in this Form 10-Q for the period ended
September 30, 1998. The named executive officers and the number of stock
options awarded in their respective agreements not filed with the Commission
are as follows:
Named Executive
Officer Option Grant
--------------------- -------------
Christopher M. Little 42,000 shares
John P. Loughlin 35,000 shares
Stephen M. Lacy 18,000 shares
Leo R. Armatis 17,100 shares
Thomas L. Slaughter 15,000 shares
Page 1 of 1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM the
Consolidated Balance Sheet at September 30, 1998 and the Consolidated Statement
of Earnings for the three months ended September 30, 1998 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> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> SEP-30-1998
<CASH> 5,832
<SECURITIES> 0
<RECEIVABLES> 138,082<F1>
<ALLOWANCES> 0
<INVENTORY> 32,501
<CURRENT-ASSETS> 256,464
<PP&E> 266,988
<DEPRECIATION> 120,298
<TOTAL-ASSETS> 1,074,954
<CURRENT-LIABILITIES> 350,291
<BONDS> 167,000
0
0
<COMMON> 50,434
<OTHER-SE> 260,354
<TOTAL-LIABILITY-AND-EQUITY> 1,074,954
<SALES> 245,837
<TOTAL-REVENUES> 245,837
<CGS> 106,903
<TOTAL-COSTS> 106,903
<OTHER-EXPENSES> 10,042
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,811
<INCOME-PRETAX> 32,507
<INCOME-TAX> 13,696
<INCOME-CONTINUING> 18,811
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,811
<EPS-PRIMARY> .36
<EPS-DILUTED> .35
<FN>
<F1>Net of allowances
</FN>
</TABLE>
Exhibit 99
----------
MEREDITH CORPORATION
FISCAL 1999 FIRST QUARTER
EARNINGS PER SHARE AT-A-GLANCE
(Note: All figures are adjusted for stock splits)
- -- The chart below depicts comparable quarterly and fiscal-year diluted
earnings per share (EPS) 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 .36 1.22
F1998 .27 .40 .37 .42 1.46
F1999 .32
- -- Fiscal 1999 first quarter earnings before nonrecurring items were 32 cents
per share, up from 27 cents per share in fiscal 1998.
- -- First quarter net earnings of 35 cents per share included an after-tax gain
of 3 cents per share from the sale of the net assets of the Better Homes
and Gardens Real Estate Service to GMAC Home Services, Inc.
