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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1995
Commission File Number 0-16099
TELEMUNDO GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3348686
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2290 WEST 8TH AVENUE
HIALEAH, FLORIDA 33010
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (305) 884-8200
Indicate by check mark whether the registrant (1) has filed all reports to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
---- ----
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes x No
---- ----
As of November 10, 1995, 10,000,124 shares of Common Stock of Telemundo
Group, Inc. were outstanding.
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This statement is amended by including the documents listed below as
exhibits:
(1) The Purchase Agreement, dated November 8, 1995, by and among the
Stockholders of Harriscope of Chicago, Inc. (the "Stockholders"),
National Subscription Television of Chicago Inc. ("NST"), and
Telemundo of Chicago, Inc. ("Telemundo"), whereby Telemundo agrees to
purchase and the Stockholders and NST agree to sell NST's 24.5%
interest in Video 44 and 100% of the capital stock of Harriscope of
Chicago, Inc. ("Harriscope"), giving Telemundo a 74.5% interest in
Video 44.
(2) The form of the Partnership Agreement, dated November 8, 1995, by and
among Essaness Theatres Corporation ("Essaness"), Telemundo and
Harriscope (the "Partnership Agreement"), which sets forth the terms
and conditions of the Video 44 partnership.
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Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
10.1 Purchase Agreement
10.2 Form of Partnership Agreement
(b) REPORTS ON FORM 8-K
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TELEMUNDO GROUP, INC.
(Registrant)
/s/ Peter J. Housman II
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Date: November 27, 1995 Peter J. Housman II
(Authorized Officer and Chief Financial Officer)
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AGREEMENT TO PURCHASE NST VENTURE INTEREST
AND CAPITAL STOCK
BY AND AMONG
THE STOCKHOLDERS OF HARRISCOPE OF CHICAGO, INC. AND
NATIONAL SUBSCRIPTION TELEVISION OF CHICAGO INC.,
AS THE SELLERS
AND
TELEMUNDO OF CHICAGO, INC.,
AS BUYER
DATED AS OF NOVEMBER 8, 1995
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AGREEMENT TO PURCHASE NST VENTURE INTEREST
AND CAPITAL STOCK
AGREEMENT TO PURCHASE NST VENTURE INTEREST AND CAPITAL STOCK (this
"AGREEMENT") dated as of November 8, 1995, by and among all the stockholders of
Harriscope of Chicago, Inc., an Illinois corporation ("HARRISCOPE"), whose names
appear on the signature page of this Agreement (the "STOCKHOLDERS"), and
NATIONAL SUBSCRIPTION TELEVISION OF CHICAGO INC., an Illinois corporation
("NST") (each of the Stockholders and NST may hereinafter be referred to
individually as a "SELLER", and collectively as the "SELLERS"; the Stockholder
other than NST herein is referred to as the "HARRIS GROUP"), and TELEMUNDO OF
CHICAGO, INC., a Delaware corporation (the "BUYER").
RECITALS
Harriscope, NST, and ESSANESS THEATRES CORPORATION, a Delaware
corporation ("ESSANESS"), currently comprise all of the members of the joint
venture (the "JOINT VENTURE") (created under that certain Amended and Restated
Joint Venture Agreement (Video 44), dated May 16, 1980 (the "JOINT VENTURE
AGREEMENT")). The Joint Venture owns, leases or has a right to use all of the
assets, both tangible and intangible, of or used by television broadcast station
WSNS-TV, Channel 44, Chicago, Illinois, together with certain auxiliary
facilities and properties (the "STATION"). NST holds a twenty-four and one-half
percent (24.5%) interest (the "NST VENTURE INTEREST") in the profits, losses,
assets and capital of the Joint Venture under the Joint Venture Agreement. The
Stockholders own one hundred percent (100%) of the outstanding capital stock
(the "SHARES") of Harriscope, which holds a fifty percent (50%) interest (the
"Harriscope Interest") in the profit, losses, assets and capital of the Joint
Venture. Buyer desires to purchase from the Sellers, and the Sellers desire to
sell to Buyer, the NST Venture Interest and the Shares, all in accordance with
the terms and conditions set forth in this Agreement.
In consideration of the mutual promises set forth in this Agreement
and other good and valuable consideration, the receipt and sufficiency of which
is acknowledged, the parties agree as follows:
1. PURCHASE AND SALE; PURCHASE PRICE; PAYMENT AND CLOSING
1.1 PURCHASE AND SALE
Subject to the terms and conditions of this Agreement, at the
Closing, Buyer shall purchase:
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(a) the NST Venture Interest from NST; and
(b) the Shares from the Stockholders.
1.2 PURCHASE PRICE
(a) The purchase price for the NST Venture Interest shall
be Fourteen Million Seven Hundred Thousand Dollars ($14,700,000.00), subject to
adjustment as set forth herein (the "NST PURCHASE PRICE").
(b) The purchase price for the Shares shall be Thirty
Million Dollars ($30,000,000.00), divided among the Stockholders as set forth in
SCHEDULE 1.2, subject to adjustment as set forth herein (the "HARRISCOPE
PURCHASE PRICE").
The NST Purchase Price and the Harriscope Purchase Price
shall be referred to collectively in this Agreement as the "PURCHASE PRICE."
(c) The amount of the Purchase Price shall be reduced by
seventy four and one half percent (74.5%) of the unpaid principal and unpaid
accrued interest outstanding, if any, as of the Closing Date (as defined below)
on that certain promissory note dated May 27, 1993 from the Joint Venture as
payor to Marc A. Neuerman, as Trustee or payee in the original principal amount
of $10 million (the "HARRIS NOTE"). The Purchase Price shall be reduced
proportionately among NST and the Stockholders as set forth in SCHEDULE 1.2.
(d) Within one business day of the date of this Agreement,
Buyer will deposit One Million Five Hundred Thousand Dollars ($1,500,000.00)
(the "DEPOSIT") in escrow with The First National Bank of Chicago (such escrow
agent, or any successor person or entity acting as the escrow agent under this
Agreement, the "ESCROW AGENT") to be held and disbursed pursuant to the terms of
this Agreement and the escrow agreement being executed contemporaneously with
this Agreement (the "ESCROW AGREEMENT").
(e) NST and Buyer agree that the NST Purchase Price shall
be allocated among the assets of the Joint Venture as may be reasonably agreed
by NST and Buyer.
1.3 PAYMENT OF PURCHASE PRICE AND CLOSING
Buyer shall pay the Purchase Price to the Sellers at the
Closing by wire transfer of immediately available funds pursuant to the Sellers'
written instructions, provided that Buyer shall be required to send only one
wire to NST and only one wire to the Harris Group. Buyer may offset against the
Purchase Price due
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to the Sellers at the Closing by delivery to the Sellers of the Deposit at the
Closing pursuant to the Escrow Agreement. The closing of the purchase of the NST
Venture Interest and the Shares by Buyer (the "CLOSING") shall take place at
the offices of Akin Gump Strauss Hauer & Feld, L.L.P., New York, New York (the
"CLOSING LOCATION") and shall be held within ten (10) business days after all
conditions to the Closing set forth in this Agreement have been satisfied (the
"CLOSING DATE"); PROVIDED that, to the extent practicable, it is the parties'
intention to close on the last day of a month.
1.4 WORKING CAPITAL ADJUSTMENTS
In addition to the Purchase Price and in further
consideration of the purchases and sales hereunder, the following payments or
adjustments shall be made:
(a) The Joint Venture and Harriscope shall prepare closing
statements as of the last day of the month immediately preceding the Closing
Date, indicating, among other items, each of their respective current assets and
liabilities (which are or should be reflected on the Joint Venture or
Harriscope's balance sheets in accordance with generally accepted accounting
principles), which statements shall be prepared in accordance with generally
accepted accounting principles consistently applied (the "CLOSING STATEMENTS").
In making such calculations, neither Harriscope's interest in the Joint Venture
nor any asset or liability of the Joint Venture shall be included in the current
assets or liabilities of Harriscope. In determining Adjusted Positive Working
Capital (as defined below) and Adjusted Negative Working Capital (as defined
below), the monthly average of the previous four months' cash flow (calculated
after any distributions to any Partners) shall be added to the cash balance in
such calculation (the "Closing Month Adjustment"). The following payments or
adjustments shall be made on the Closing Date:
(i) To the extent that the current assets (excluding
account receivables) plus the Closing Month Adjustment (as contemplated above)
are greater than liabilities (excluding the BMI liability described to Buyer),
(the "ADJUSTED POSITIVE WORKING CAPITAL") of the Joint Venture as shown on its
Closing Statement, Buyer shall pay to (A) NST, 24.5% of the Adjusted Positive
Working Capital and (B) the Stockholders (pro rata based upon their
proportionate interests in Harriscope as set forth in SCHEDULE 1.2), 50% of the
Adjusted Positive Working Capital; and
(ii) To the extent that current assets (excluding
account receivables) plus the Closing Month Adjustment (as contemplated above)
are less than such liabilities (the "ADJUSTED NEGATIVE WORKING CAPITAL") of the
Joint Venture as shown on its Closing Statement, 74.5% of the Adjusted Negative
Working Capital shall be deducted from the proceeds payable to the Sellers from
Joint Venture Account Receivables (as defined below) (prior to remitting any
amounts received from
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Joint Venture Account Receivables to Sellers) (proportionally based on their
ownership of the Joint Venture), PROVIDED, that to the extent the Adjusted
Negative Working Capital is greater than $1 million, 74.5% of such amount above
$1 million shall be deducted from the proceeds payable to the Sellers at the
Closing. In addition, Sellers shall remit to Buyer at the end of the 120 day
period determined in Section 1.4(c), 74.5% of the Adjusted Negative Working
Capital balance for the Joint Venture remaining after giving effect to the net
proceeds received from Joint Venture Account Receivables. Furthermore, Sellers
shall remit to Buyer at the end of the 120 day period determined in Section
1.4(d) 100% of the Adjusted Negative Working Capital balance for Harriscope
after giving effect to the net proceeds received from Harriscope Account
Receivables and any remaining Harriscope Account Receivables.
In addition to and notwithstanding the above, the parties
further agree to similarly adjust the amount payable by Buyer to Stockholders at
the Closing to reflect the Adjusted Positive Working Capital or the Adjusted
Negative Working Capital of Harriscope based on the above principles without
duplication of any item in such calculation that was otherwise included in the
calculation for the Joint Venture as contemplated by the preceding paragraphs
and with the understanding that the Stockholders shall receive 100% of the
Adjusted Positive Working Capital of Harriscope.
(b) Within forty-five business days after the Closing Date,
Buyer shall furnish to NST and the Harris Group Representative closing
statements as of the Closing Date prepared in the same format as the Closing
Statements ("Actual Closing Statements"). Within 45 days after delivery to NST
and the Harris Group Representative of the Actual Closing Statements, NST and
the Harris Group Representative shall furnish to Buyer a statement showing any
objections they have to the Actual Closing Statements. Any disputes regarding
the Actual Closing Statements or any adjustments in connection therewith not
resolved by the parties within 30 days after the receipt by Buyer's, NST's and
the Harris Group Representative's objections shall be resolved by a "big six"
accounting firm mutually acceptable to the parties. The determination of any
accounting firm so selected shall be conclusive and binding upon the parties.
The fees and expenses of such accounting firm acting under this Agreement shall
be shared equally among the Buyer, NST and the Harris Group. Upon the agreement
or final determination of any Adjusted Positive Working Capital or Adjusted
Negative Working Capital different from those determined pursuant to the Actual
Closing Statements, Buyer shall make appropriate payments, or Sellers shall make
appropriate refunds, within five business days after such agreement or final
determination.
(c) From and after the Closing, Buyer shall use its
reasonable best efforts to collect and receive and liquidate into cash all
account receivables of the Joint Venture as of the Closing Date (the "JOINT
VENTURE ACCOUNT RECEIVABLES"), in the ordinary course of the Joint Venture's
business and consistent
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with past practice. TGI will pay its receivables due or accrued as of the
Closing Date to the Joint Venture promptly when due, in accordance with past
practice. From the amounts actually collected or received with respect to the
Joint Venture Account Receivables, net of reasonable out-of-pocket collection
costs paid to any non-affiliated third party, Buyer shall remit to (i) NST its
proportionate 24.5% share and (ii) to the Stockholders in proportion to their
interest in Harriscope as set forth in SCHEDULE 1.2, Harriscope's proportionate
50.0% share, of any future liquidated Joint Venture Account Receivables
collected or received by the Joint Venture or the Buyer, net of reasonable out-
of-pocket collection costs paid to any non-affiliated third party, on a monthly
basis, by the 15th day of the following calendar month. Buyer will exercise
reasonable best efforts and diligence to collect such Joint Venture Account
Receivables, but will not be required to institute collection or any other court
proceedings. NST and the Harris Group agree that during the Collection Period
(as defined herein), the Buyer shall be solely responsible for seeking
collection of Joint Venture Account Receivables, and during the Collection
Period, NST and the Harris Group shall not correspond with or seek payment from
any such Joint Venture Account Receivables' debtors. In the event that any of
the Joint Venture Account Receivables have not been collected within 120 days
after the Closing Date (the "Collection Period"), Buyer shall, upon the request
of NST and the Harris Group, assign such receivable to the NST and the Harris
Group or any entity they may designate, who shall remit to Joint Venture (for
the account of Essaness) 25.5% of any net amount collected with respect to such
receivable.
(d) From and after the Closing, Buyer shall use its
reasonable best efforts to collect and receive and liquidate into cash all
account receivables of Harriscope as of the Closing Date (the "HARRISCOPE
ACCOUNT RECEIVABLES"), in the ordinary course of the Harriscope's business and
consistent with past practice. From the amounts actually collected or received
with respect to the Harriscope Account Receivables, net of reasonable out-of-
pocket collection costs paid to any non-affiliated third party, Buyer shall
remit to the Stockholders their respective proportionate share of any future
liquidated Harriscope Account Receivables collected or received by Buyer, net of
reasonable out-of-pocket collection costs paid to any non-affiliated third
party, on a monthly basis, by the 15th day of the following calendar month.
Buyer will exercise reasonable best efforts and diligence to collect such future
liquidated Harriscope Account Receivables, but will not be required to institute
collection or other court proceedings. The Stockholders agree that during the
Collection Period the Buyer shall be solely responsible for seeking collection
of Harriscope Account Receivables, and during the Collection Period the
Stockholders shall not correspond with or seek payment from any Harriscope
Account Receivables' debtors. Notwithstanding the foregoing, no amount of
Harriscope Account Receivables shall be counted for purposes of this Section
1.4(d) to the extent already counted as Joint Venture Account Receivables for
purposes of Section 1.4(c). In the event that any of the Harriscope Account
Receivables have not been collected within
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120 days after the Closing Date, Buyer shall, upon the request of the
Stockholders, assign such receivable to the Stockholders or any entity they may
designate.
(e) In determining the gross amount received from an
account receivables debtor with respect to the Joint Venture Account Receivables
or the Harriscope Account Receivables, unless the account debtor disputes an
invoice or invoices in writing, such amount received shall be applied to all
accounts receivables owed by such party such that the oldest receivable is paid
off first.
1.5 STOCKHOLDERS' REPRESENTATIVE
(a) In order to administer efficiently the waiver of any
condition to the obligations of the Harris Group to consummate the transactions
contemplated hereby, the defense and/or settlement of any claims for which the
Harris Group may be required to indemnify the Buyer pursuant to the indemnity
provisions of this agreement, any amendment to this Agreement (or any related
agreements) or the execution and delivery of any closing document, and any other
actions required to be taken by the Harris Group, the Harris Group hereby
designates and appoints Burt I. Harris, or any successor or assign, as their
representative and attorney-in-fact (in such capacity, the "HARRIS GROUP
REPRESENTATIVE").
(b) By its execution of this Agreement, the Harris Group
agrees that:
(i) the Buyer and NST shall be able to rely
conclusively without further inquiry on the instructions and decisions of the
Harris Group Representative acting in such capacity as to the settlement of any
claims for indemnification by the Buyer hereunder and as to any other action
taken by the Harris Group Representative hereunder, and no party hereunder shall
have any cause of action against the Buyer or NST for any action taken by the
Buyer in reliance upon the instructions or decisions of the Harris Group
Representative; and
(ii) all actions, decisions and instructions of the
Harris Group Representative shall be conclusive and binding upon all of the
Harris Group.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Notwithstanding anything else contained in this Section 2 to the
contrary, each of the following representations and warranties:
(i) made as to matters relating solely to NST, either
in its capacity as a Joint Venture partner or a Stockholder, or the NST Venture
Interest or NST's Shares, shall be made by NST to Buyer by NST, for itself only;
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(ii) made as to matters relating solely to the
Stockholders, or their respective Shares, shall be made to Buyer by each of NST
and the Harris Group severally, for itself only and not jointly;
(iii) made as to matters relating solely to
Harriscope, shall be made to Buyer by each of NST and the Harris Group
severally, for itself only and not jointly;
(iv) made as to other matters, including as relates to
the Joint Venture (including, but not limited to, the business, operations and
financial condition of the Station), shall be made to Buyer by each of NST and
the Harris Group severally (except as expressly set forth otherwise, in which
case such representation and warranty shall nonetheless be made severally, and
not jointly, by each party making the same), for itself only and not jointly;
and
(v) made as to matters relating to the Harris Group,
shall be made to the Buyer by the Harris Group, for itself only.
2.1 ORGANIZATION AND AUTHORITY OF THE JOINT VENTURE
The Joint Venture (a) was formed under the laws of the State
of Illinois, (b) is conducting business in and is located in the City of
Chicago, State of Illinois, and (c) has the full and unrestricted power and
authority to own, lease and otherwise to use, hold and operate the Assets (as
hereinafter defined), and to carry on its business as now being conducted. A
copy of the Joint Venture Agreement as in effect on the date hereof, certified
by NST and the Harris Group Representative, has been delivered to the Buyer, is
complete and correct, and no amendments have been made thereto or have been
authorized since the date thereof. The Joint Venture does not own any capital
stock of or other equity interest in any corporation, partnership or other
entity and is not obligated to make an investment in or contribution to any such
entity. The Joint Venture's sole business is to own and operate the Station.
2.2 ORGANIZATION AND AUTHORITY OF HARRISCOPE
Harriscope is a corporation duly organized, validly existing
and in good standing under the laws of the State of Illinois, and has the full
and unrestricted power and authority to own, lease or otherwise hold its
properties and to carry on its business as now being conducted. Certified
copies of the Articles of Incorporation and Bylaws of Harriscope, each as
amended to date, have been previously delivered to Buyer, are complete and
correct, and no amendments have been made thereto or have been authorized since
the date thereof. Harriscope does not own any capital stock, partnership
interest or other equity or ownership interest in any corporation, partnership
or other entity other than the Harriscope Interest and
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is not obligated to make an investment in or contribution to any such entity.
Harriscope's sole business is to own an interest in the Joint Venture.
2.3 AUTHORIZATION OF NST AND THE HARRIS GROUP
(a) This Agreement and the Escrow Agreement have been, and
the other agreements contemplated by the transactions to be consummated hereby
to which NST is a party, will be at the time of execution by NST, duly
authorized, executed and delivered by NST. Assuming due authorization, execution
and delivery by the other parties hereto and thereto, this Agreement and all
such other agreements and written obligations entered into and undertaken in
connection with the transactions contemplated hereby to which NST is a party or
by which it is bound constitute (or will constitute at the time of execution)
the valid and legally binding obligations of NST enforceable against it in
accordance with their respective terms, except to the extent limited by
applicable bankruptcy, insolvency, moratorium and other similar laws of general
application relating to or affecting the enforcement of creditors' rights and
general equity principles. The execution, delivery and performance of this
Agreement and the agreements contemplated by the transactions to be consummated
hereby to which NST is a party, and the consummation by NST of the transactions
contemplated hereby and thereby, will not, with or without the giving of notice
or the passage of time or both, (i) violate the provisions of any law, rule or
regulation applicable to NST, Harriscope or the Joint Venture (assuming
compliance with the requirements of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR ACT"), the Communications Act of 1934, as
amended (the "FCC Act") and the Federal Communications Commission (the "FCC"));
(ii) violate the provisions of NST's or Harriscope's Articles of Incorporation
or Bylaws; (iii) violate any judgment, decree, order or award of any court,
governmental body or arbitrator applicable to NST, Harriscope or the Joint
Venture; (iv) conflict with or result in the breach or termination of any term
or provision of, or constitute a default under, or cause any acceleration under,
or cause the creation of any Encumbrance (as defined in Section 2.5) upon the
properties or assets of NST or Harriscope pursuant to, any contract, indenture,
mortgage, deed of trust or other agreement or instrument to which NST or
Harriscope is a party, or by which NST, Harriscope or NST's properties being
transferred to the Buyer hereunder or Harriscope's properties are or may be
bound; or (v) conflict with or result in the breach or termination of any
material term or provision of, or constitute a default under, or cause any
acceleration under, or cause the creation of any Encumbrance upon the material
properties or assets of the Joint Venture pursuant to, any contract, indenture,
mortgage, deed of trust or other agreement or instrument to which the Joint
Venture is a party, or by which the Joint Venture or the Joint Venture's
properties (other than the Drake Property (as defined)) are or may be bound.
(b) This Agreement and the Escrow Agreement have been, and
the other agreements contemplated by the transactions to be consummated
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hereby to which the Harris Group is a party, will be at the time of execution by
the Harris Group duly authorized, executed and delivered by the Harris Group.
Assuming due authorization, execution and delivery by the other parties hereto
and thereto, this Agreement and all such other agreements and written
obligations entered into and undertaken in connection with the transactions
contemplated hereby to which the Harris Group are parties or by which they are
bound constitute (or will constitute at the time of execution) the valid and
legally binding obligations of the Harris Group enforceable against them in
accordance with their respective terms, except to the extent limited by
applicable bankruptcy, insolvency, moratorium and other similar laws of general
application relating to or affecting the enforcement of creditors' rights and
general equity principles. The execution, delivery and performance of this
Agreement and the agreements provided for herein to which the Harris Group is a
party, and the consummation by the Harris Group of the transactions contemplated
hereby and thereby, will not, with or without the giving of notice or the
passage of time or both, (i) violate the provisions of any law, rule or
regulation applicable to the Harris Group or Harriscope (assuming compliance
with the requirements of the HSR Act, the FCC Act and the FCC); (ii) violate the
provisions of any trust agreement to which the Harris Group is a party or
Harriscope's Articles of Incorporation or Bylaws; (iii) violate any judgment,
decree, order or award of any court, governmental body or arbitrator applicable
to the Harris Group, the Joint Venture or Harriscope; (iv) conflict with or
result in the breach or termination of any term or provision of, or constitute a
default under, or cause any acceleration under, or cause the creation of any
Encumbrance upon the properties or assets of the Harris Group or Harriscope
pursuant to, any contract, indenture, mortgage, deed of trust or other agreement
or instrument to which the Harris Group or Harriscope are parties or by which
the Harris Group, or Harriscope or the Shares being transferred by the Harris
Group, or Harriscope's properties are or may be bound; or (v) conflict with or
result in the breach or termination of any material term or provision of, or
constitute a default under, or cause any acceleration under, or cause the
creation of any Encumbrance upon the material properties or assets of the Joint
Venture pursuant to, any contract, indenture, mortgage, deed of trust or other
agreement or instrument to which the Joint Venture is a party, or by which the
Joint Venture's properties being transferred to Buyer hereunder or the Joint
Venture's properties (other than the Drake Property) are or may be bound. The
Harris Group Representative is the voting trustee ("Voting Trustee") pursuant to
the Voting Trust Agreement Number Two, dated as of October 31, 1989 as amended
by the amendment dated October 2, 1995 (the "Voting Trust") a complete and
correct copy of which (as in effect on the date hereof) has been delivered to
Buyer, and no amendments have been made thereto or have been authorized since
the date thereof. Any right of the beneficiaries of the Voting Trust (each of
which is specified on SCHEDULE 2.4) to remove any Shares from the Voting Trust
has been waived or has expired.
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2.4 OWNERSHIP OF JOINT VENTURE AND HARRISCOPE
(a) Harriscope is the record and beneficial owner of a
fifty percent (50%) interest in the Joint Venture. NST is the record and
beneficial owner of a twenty-four and one-half percent (24.5%) interest in the
Joint Venture. NST and the Harris Group are the record and/or beneficial owners
of one hundred percent (100%) of the outstanding capital stock of Harriscope in
the proportions set forth on SCHEDULE 1.2 (except that the beneficial owners of
the Harriscope Interest are set forth on SCHEDULE 2.4). Except as provided in
the Voting Trust, the Joint Venture Agreement, the Agreement Respecting Purchase
and Sale of Interests and Options Related Thereto, dated May 16, 1980, among
Irving B. Harris, Oak Communications, Inc., Harriscope, Essaness and Riverdale
Drive-In, Inc. and the Shareholders Agreement dated May 1, 1980 among Irving B.
Harris, the other shareholders of Harriscope and Irving B. Harris as trustee
(collectively, the "PARTNERSHIP AGREEMENTS"), (i) no person or entity has any
claim, option or interest in or with respect to the venture interest owned by
Harriscope, the NST Venture Interest or the Shares, and (ii) no person or entity
has or may have any right or options to become a stockholder of Harriscope or to
obtain or acquire any beneficial or legal interest in the NST Venture Interest,
Harriscope or the Shares, (iii) to the best knowledge of NST and the Harris
Group, no person or entity has or may have any right or options to become a
member of the Joint Venture or to obtain or acquire any beneficial or legal
interest in the Joint Venture, and (iv) there are no agreements or
understandings by or among the members of the Joint Venture or by or among the
Stockholders relating to their ownership and operation of Harriscope or the
Joint Venture.
(b) The Shares constitute the only outstanding capital
stock of any class of Harriscope, and 6,506 shares of capital stock are held in
its treasury. All of the Shares have been validly issued, are fully paid and
non-assessable and have not been issued in violation of the preemptive rights of
any person or entity and no personal liability attaches to the ownership of the
Shares. Harriscope has no subsidiaries other than the Joint Venture.
2.5 OWNERSHIP OF THE ASSETS OF THE STATION
The Joint Venture and Harriscope have good and marketable
title to all of the material real, personal and mixed assets, rights, benefits
and privileges, both tangible and intangible wherever located, owned, leased,
used, held for use or otherwise held by the Joint Venture in connection with its
business and the business and operations of the Station (collectively, the
"Business") and owned, leased, used, held for use or otherwise held by
Harriscope in connection with its business (collectively, the "ASSETS"), free
and clear of any mortgages, pledges, liens, adverse claims, charges, security
interests, conditional sales agreements or other encumbrances or restrictions of
any kind (collectively, "ENCUMBRANCES"), except for (A) encumbrances set forth
on SCHEDULE 2.5 and (B) subject only to (i) liens for taxes,
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assessments and other government charges not yet due or being contested in good
faith, (ii) carriers', warehousemen's, mechanics', materialmen's, repairmen's or
other like liens arising in the ordinary course of business, (iii) pledges and
deposits made in the ordinary course of business in compliance with workmen's
compensation, unemployment insurance and other social security laws or
regulations, (iv) zoning restrictions, easements, rights of way restrictions on
use of real property and other similar encumbrances incurred in the ordinary
course of business which, in the aggregate, are not substantial in amount and do
not materially detract from the value of the property subject thereto, (v)
purchase money security interests arising in the ordinary course, (vi) deposits
to secure the performance of bids, trade contacts, leases, statutory obligations
and other obligations of a like nature incurred in the ordinary course of
business and (vii) encumbrances set forth in any title policy delivered with
respect to any of the Real Properties ("PERMITTED LIENS"). To the knowledge of
NST and the Harris Group, the Assets are sufficient to operate the Station as
presently being conducted.
2.6 OWNERSHIP OF THE NST VENTURE INTEREST AND SHARES
(a) NST (i) owns the entire right, title and interest in
and to the NST Venture Interest, (ii) has good and marketable title in and to
the NST Venture Interest, (iii) has the full right, power, capacity and
authority to validly sell, assign, convey and transfer the NST Venture Interest
and, assuming Buyer's payment of the Purchase Price as contemplated hereby, as a
result of such sale and transfer of the NST Venture Interest to Buyer (as
contemplated by this Agreement), Buyer will have good and marketable title in
and to the NST Venture Interest free and clear of all Encumbrances, (iv) other
than the Partnership Agreements and pursuant to the letter of intent dated
September 14, 1995 among Telemundo Group, Inc. ("TGI"), NST and certain other
shareholders of Harriscope (the "LOI"), is not a party to any agreement,
executed or executory, to sell, encumber, hypothecate or otherwise dispose of
the NST Venture Interest, (v) has not sold, encumbered, hypothecated or
otherwise disposed of the NST Venture Interest, and (vi) owns the NST Venture
Interest free and clear of all Encumbrances. The NST Venture Interest to be
sold to the Buyer under this Agreement may be sold by NST by NST's sole act and
deed, and no consent on the part of any other person is necessary to validate
the sale of the NST Venture Interest to Buyer, or to consummate the transactions
contemplated by this Agreement except for the approval by the Board of Directors
of Oak Industries, Inc. of the Guaranty described in Section 7.6(c) hereof,
Essaness, which has been obtained, and the FCC and the expiration of the waiting
period under the HSR Act contemplated by Section 6.1.
(b) Each Stockholder (i) owns the entire right, title and
interest in and to its respective Shares, (ii) has good and marketable title in
and to its respective Shares, (iii) has the full right, power, capacity and
authority to validly sell, assign, convey and transfer its respective Shares and
assuming Buyer's payment of
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the Purchase Price as contemplated hereby, as a result of such sale and transfer
of the Shares to Buyer (as set forth in this Agreement) Buyer will have good and
marketable title in and to the Shares free and clear of all Encumbrances,
(iv) except for the Partnership Agreement and the LOI, is not a party to any
agreement, executed or executory, to sell, encumber, hypothecate or otherwise
dispose of its respective Shares, (v) has not sold, encumbered, hypothecated or
otherwise disposed of its respective Shares, and (vi) owns its respective Shares
free and clear of all Encumbrances. The respective Shares of each Stockholder
to be sold to Buyer under this Agreement may be sold by such Stockholder by such
Stockholder's sole act and deed, and no consent on the part of any other person
is necessary to validate the sale of such Shares to Buyer, or to consummate the
transactions contemplated by this Agreement except for the approval of Essaness,
which has been obtained, and the FCC and the expiration of the waiting period
under the HSR Act contemplated by Section 6.1.
2.7 FINANCIAL STATEMENTS
(a) Attached as SCHEDULE 2.7(a) are the audited balance
sheets for the Joint Venture at December 31, 1993 and 1994 and the related
statements of operations and cash flow and statements of capital accounts
(deficiency) for the years ended December 31, 1993 and 1994 (collectively, the
"JOINT VENTURE YEAR END FINANCIAL STATEMENTS"), and an unaudited balance sheet
for the Joint Venture at September 30, 1995 and the related statements of
operations and cash flow and statements of capital accounts (deficiency) for the
period then ended (the "JOINT VENTURE CURRENT FINANCIAL STATEMENTS"). All such
financial statements have been prepared in accordance with the books and records
of the Joint Venture and with generally accepted accounting principles applied
on a consistent basis throughout the periods involved, subject to an absence of
footnotes in the case of the Joint Venture Current Financial Statements, and
present fairly the financial position and results of operations of the Joint
Venture as of the dates and for the periods indicated; and each and every
financial statement prepared for each month commencing with January 1995, and
for each calendar year commencing with 1995, and until the Closing (to be
delivered to Buyer pursuant to Section 5.4(i)) will be prepared by the Joint
Venture in accordance with its books and records and with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved, and as compared with prior periods set forth above, and, subject to
year-end adjustments where applicable and an absence of footnotes in the case of
interim statements, and will be true, correct and complete in all material
respects, and will present fairly the financial position and results of
operations of the Joint Venture as of the dates and for the periods indicated.
The Joint Venture Year End Financial Statements have been certified by the
certified public accountants who examine the financial statements of the Joint
Venture (who are now and will continue until Closing to be a nationally
recognized accounting firm).
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(b) Attached as SCHEDULE 2.7(b) are the unaudited balance
sheets for Harriscope at December 31, 1993 and 1994 and the related statements
of income and cash flows and statements of changes in stockholder's equity
(deficit) for the years ended December 31, 1993 and 1994 (collectively, the
"HARRISCOPE YEAR END FINANCIAL STATEMENTS"), and an unaudited balance sheet for
Harriscope at June 30, 1995 and the related statements of income and cash flow
and statements of changes in stockholders' equity (deficit) for the period then
ended (the "HARRISCOPE CURRENT FINANCIAL STATEMENTS"). The treasurer of
Harriscope will certify that all such financial statements have been prepared in
accordance with the books and records of Harriscope and with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved, and present fairly the financial position and results of operations of
Harriscope as of the dates and for the periods indicated, subject to an absence
of footnotes; and each and every financial statement prepared for each quarter
commencing with January 1995, and for each calendar year commencing with 1995,
and until the Closing (to be delivered to Buyer pursuant to Section 5.4(i)) will
be prepared by Harriscope as being in accordance with its books and records and
with generally accepted accounting principles applied on a consistent basis
throughout the periods involved and as compared with prior periods set forth
above, and, subject to year-end adjustments where applicable and an absence of
footnotes, will be true, correct and complete in all material respects, and will
present fairly the financial position and results of operations of Harriscope as
of the dates and for the periods indicated, all as certified by Harriscope's
treasurer. The Joint Venture Year-End Financial Statements and the Harriscope
Year-End Financial Statements are referred to in this Agreement as the "YEAR-END
FINANCIAL STATEMENTS"; the Joint Venture Current Financial Statements and the
Harriscope Current Financial Statements are referred to in this Agreement as the
"CURRENT FINANCIAL STATEMENTS"; and the Year-End Financial Statements and the
Current Financial Statements are referred to collectively in this Agreement as
the "FINANCIAL STATEMENTS."
(c) SCHEDULE 2.7(c) sets forth a list of all indebtedness
of the Joint Venture or Harriscope of any kind, including without limitation
with respect to: (i) borrowed money, (ii) obligations evidenced by bonds,
debentures, notes or other similar instruments, (iii) obligations as lessee
under leases which have been or should be, in accordance with generally accepted
accounting principles, recorded as capital leases, and (iv) obligations under
direct or indirect guaranties in respect of, and obligations (contingent or
otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor
against loss in respect of, indebtedness or obligations of others of the kinds
referred to in clauses (i) through (iii) above (collectively, the
"INDEBTEDNESS").
2.8 ABSENCE OF UNDISCLOSED LIABILITIES
Except as and to the extent (a) reflected and reserved
against in the Current Financial Statements (or reflected in the notes thereto),
(b) set forth on SCHEDULE 2.8 or (c) incurred in the ordinary course of business
and consistent
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with past business practices and which are immaterial in amount, after the date
of the Current Financial Statements, neither the Joint Venture nor Harriscope
has entered into or become obligated under any material contract, agreement or
commitment, or incurred any material obligation or liability, secured or
unsecured relating to the Joint Venture, Harriscope or the Station, and there
has not been (i) any material loss or material injury to the Assets or the
Station, (ii) any material adverse change in the Assets or in the condition
(financial or otherwise) of the Joint Venture, Harriscope or the Station (other
than may be directly attributable to a decline in ratings or revenues due to
programming at the station provided by TGI or competition from Univision
(assuming compliance with the covenant in Section 6.11(b)), or (iii) to the
knowledge of NST and the Harris Group, any event, development, act or omission
that is likely to give rise to a material obligation or liability of the Joint
Venture, Harriscope or the Station or a material adverse change in the Assets or
the condition (financial or otherwise) of the Joint Venture, Harriscope or the
Station other than events or developments affecting the television industry or
the Chicago television market generally or other than maybe directly
attributable to a decline in ratings or revenues due to programming at the
Station provided by TGI or competition from Univision (assuming compliance with
the covenant in Section 6.11(b)).
2.9 FCC LICENSES AND REPORTS
(a) The Joint Venture is the sole owner and holder of all
of the licenses, permits and other authorizations issued by the FCC for the
ownership of the Assets or operation of the Station (the "LICENSES"), as set
forth on SCHEDULE 2.9. The Licenses constitute all of the licenses, permits and
other authorizations from the FCC that are necessary or required for or used in
the business and operation of the Station as presently conducted. The Licenses
are valid and in full force and effect, unimpaired by any condition specific to
the Station which could have any material adverse effect on the operation of the
Station. No application, action or proceeding is pending for the renewal or
modification of any of the Licenses, and, except for actions or proceedings
affecting the broadcasting industry generally, no application, action or
proceeding is pending or to the knowledge of NST and the Harris Group,
threatened that may result in the denial of an application for renewal, the
revocation, modification, nonrenewal or suspension of any of the Licenses, the
issuance of a cease-and-desist order, or the imposition of any administrative or
judicial sanction with respect to the Station.
(b) The Joint Venture has the sole right to the use of the
call letters "WSNS-TV" and the sole right to the use of channel 44 in the
Chicago Dominant Market Area (as defined by A.C. Nielsen Co.) pursuant to the
rules and regulations of the FCC.
(c) Except for actions or proceedings affecting the
broadcasting industry generally, there is not now pending or outstanding or, to
the
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knowledge of NST and the Harris Group, threatened, any investigation,
proceeding, notice of violation or complaint against the Joint Venture or
Harriscope at the FCC or any other Governmental Authorities. To the knowledge
of NST and the Harris Group, there is no person who has manifested an intention
to contest the renewal of the Licenses.
(d) 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 "Radio Frequency Protection Guides" recommended in
"American National Standard Safety Levels with Respect to Human Exposure to
Radio Frequency Electromagnetic Fields 300 kHz to 100 gHz" (ANSI C95.1-1982),
issued by the American National Standards Institute, and renewal of the Licenses
would not constitute a "major action" within the meaning of Section 1.1301, ET
SEQ., of the FCC's rules. The Station is being operated in compliance in all
material respects with the Licenses and the parameters set forth therein and
consistent with any proofs of performance and there are no pending or, to the
knowledge of NST and the Harris Group, threatened proceedings before the FCC
with respect to objectionable interference relating to the Station within the
meaning of the rules or policies of the FCC.
2.10 LITIGATION
Except as set forth on SCHEDULE 2.10, there is no litigation
or proceeding of any kind pending or, to the best knowledge of NST or the Harris
Group, threatened against the Joint Venture, Harriscope, the Station, the Assets
or any of the Sellers (as relates to the Sellers, relating to the Shares or NST
Venture Interest owned by them, or which would prevent or delay the transactions
contemplated by this Agreement). None of Harriscope, NST nor the Harris Group
(with respect to their ownership of their respective NST Venture Interest or
Shares) nor, to the knowledge of NST or the Harris Group, the Joint Venture is
in violation of or in default of any judgment, order, writ, injunction, decree,
regulation or rule of any Governmental Authority, which violation or default
would have a material adverse effect on the business, operations, assets or
financial condition of the Joint Venture or Harriscope (a "MATERIAL ADVERSE
EFFECT").
2.11 INSURANCE
SCHEDULE 2.11 sets forth a list, true, correct and complete
in all material respects of all insurance policies insuring the Joint Venture,
Harriscope, the Assets or the business of the Station and of all life and other
insurance policies maintained by the Joint Venture, Harriscope or the Station
for any of its employees, specifying the type of coverage, the amount of
coverage, the premium, the insurer and the expiration date of each such policy
(collectively, the "INSURANCE POLICIES").
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All premiums due on the Insurance Policies or renewals thereof have been paid,
and there is no material default under any of the Insurance Policies.
2.12 REGULATORY APPROVALS
All governmental and regulatory consents, approvals,
authorizations and other requirements prescribed by any law, rule or regulation
which must be obtained or satisfied by the Sellers, the Joint Venture or
Harriscope and which are necessary and material for the execution, delivery and
performance by the Sellers of this Agreement and the documents to be executed
and delivered by the Sellers in connection herewith are set forth on SCHEDULE
2.12.
2.13 TANGIBLE PERSONAL PROPERTY
(a) All of the furniture, fixtures, furnishings, equipment,
machinery, supplies, tools, parts, antenna installations and other tangible
personal property owned, leased, held or used by the Joint Venture or Harriscope
(the "TANGIBLE PERSONAL PROPERTY") is in a suitable condition for the purposes
for which it is intended or is being used, and is in sufficient working order.
SCHEDULE 2.13(a) sets forth a true, correct and complete list of all of the
Tangible Personal Property with a book value per item as of the date of this
Agreement of more than $5,000, including a description and the book value of
such Tangible Personal Property. To the knowledge of NST and the Harris Group,
the Tangible Personal Property set forth on SCHEDULE 2.13(a) is sufficient for
the conduct of the Joint Venture's and Harriscope's business and the operation
of the Station by the Joint Venture. The Sellers have made available to Buyer
all logs maintained by the Station. Sellers shall within 30 days of the date of
this Agreement provide a detailed true, correct and complete list of each
separate item of Tangible Personal Property with a book value per item as of the
date of this Agreement of more than $5,000, including a description and the best
reasonable estimate of book value of each such item of Tangible Personal
Property.
(b) SCHEDULE 2.13(b) sets forth a list of each material
lease, permit, right, authorization or other agreement (including capital
leases) under which the Joint Venture, Harriscope or the Station leases or has,
or on the Closing Date will have, rights to use any Tangible Personal Property
(the "PERSONAL PROPERTY LEASES"). The Joint Venture and Harriscope have
delivered to Buyer true and complete copies of the Personal Property Leases.
There are no amendments or modifications to any of the Personal Property Leases,
except as set forth on SCHEDULE 2.13(b). No event has occurred under any of the
Personal Property Leases that, with the lapse of time or the giving of notice or
both, would constitute a default by Harriscope or, to the knowledge of NST and
the Harris Group, the Joint Venture or any other party thereunder and there are
no offsets asserted by Harriscope or to the knowledge of NST and the Harris
Group, the Joint Venture or any other party thereto. Harriscope and, to the
knowledge of NST and the Harris Group, the Joint Venture are in
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compliance in all material respects with each of the Personal Property Leases,
and the representations and warranties of Harriscope and, to the knowledge of
NST and the Harris Group, the Joint Venture with respect to each of the Personal
Property Leases are true and correct in all material respects. Each of NST and
the Harris Group is not aware of any circumstance that would give the other
parties to any Personal Property Lease the right to terminate such lease, and
none of NST, the Harris Group nor the Joint Venture have been informed in
writing by the lessor under any Personal Property Lease that it intends to
terminate, modify (except pursuant to its terms) or not renew such lease. No
consents are required under the Personal Property Leases in connection with the
consummation of the transactions contemplated hereunder, and the consummation of
the transactions contemplated by this Agreement will not result in a default
under or give the lessor a right to terminate any Personal Property Lease or
modify in any material respect any Personal Property Lease.
2.14 REAL PROPERTIES
(a) Except for the Drake Avenue Property (the "DRAKE
PROPERTY") as to which the parties hereto agree that the Drake Property,
including all assets and liabilities directly related thereto shall not be
transferred to the Buyer or retained by the Joint Venture or Harriscope after
Closing, SCHEDULE 2.14 sets forth (i) a list and legal description of all real
properties or interests in real property owned by the Joint Venture or
Harriscope directly or through an Illinois land trust or used in the operation
of the Station (individually, a "REAL PROPERTY" and collectively, the "REAL
PROPERTIES"), and (ii) each material lease, permit, right, authorization or
other agreement (including any easements) under which the Joint Venture,
Harriscope or the Station leases, occupies or has, or on the Closing Date will
have, rights in any real property, including without limitation any transmitter
tower leases (the "REAL PROPERTY LEASES"). Except as set forth on SCHEDULE
2.14, neither the Joint Venture nor Harriscope owns, leases, uses or holds any
real property or any option to acquire any real property or interest therein.
The Joint Venture and Harriscope have delivered to Buyer true and complete
copies of the Real Property Leases. There are no amendments or modifications to
any of the Real Property Leases, except as set forth on SCHEDULE 2.14. No
Assets of the Joint Venture (other than the physical real property comprising
the Drake Property) are attached to or will be transferred as part of the Drake
Property.
(b) The Joint Venture or Harriscope have good and
marketable title to all of their respective Real Properties and have a valid
and subsisting good and marketable leasehold interest in all the real property
which is the subject of each of their respective Real Property Leases
(individually a "LEASED PROPERTY" and collectively, the "LEASED PROPERTIES")
free and clear of all Encumbrances of any nature whatsoever, except for (i)
Encumbrances set forth on SCHEDULE 2.5, (ii) the Permitted Liens and (iii) as to
the Real Property Leases, subject to inchoate landlord's liens and Encumbrances
of record. Each of the Real Property Leases is a legal, valid and
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binding agreement of the Joint Venture or Harriscope and is in all material
respects enforceable in accordance with its terms except to the extent limited
by applicable bankruptcy, insolvency, moratorium and other similar laws of
general application relating to or affecting the enforcement of creditors'
rights and general equity principles. SCHEDULE 2.14 to this Agreement contains
a list of any policies insuring the Joint Venture's or Harriscope's title or
leasehold interest in their respective Real Properties or Leased Properties, as
applicable, including the amounts thereof. The Joint Venture or Harriscope has
delivered to Buyer true and complete copies of all currently available title
policies insuring the Joint Venture's or Harriscope's title or leasehold
interest in the Real Properties, and all existing surveys, plans and maps in the
Joint Venture's or Harriscope's possession relating to the Real Properties.
Neither the Joint Venture nor Harriscope has granted to any other person any
right to the use, occupancy or enjoyment of the Real Properties or the Leased
Properties or any part thereof.
(c) No event has occurred under any of the Real Property
Leases that, with the lapse of time or the giving of notice or both, would
constitute a default by the Joint Venture or Harriscope or to the knowledge of
NST and the Harris Group any other party thereunder and there are no offsets by
the Joint Venture or Harriscope or any other party thereto. The Joint Venture
and Harriscope are in compliance with each of the Real Property Leases other
than immaterial non-compliance that has no adverse effect of any nature on the
Joint Venture or Harriscope, and the representations and warranties of the Joint
Venture and Harriscope with respect to each of the Real Property Leases are true
and correct in all material respects. Each of NST, the Harris Group and, to the
knowledge of NST and the Harris Group, the Joint Venture is not aware of any
circumstance that would give the other parties to any Real Property Lease the
right to terminate or modify such lease, and none of NST, the Harris Group nor
the Joint Venture has been informed in writing by the lessor under any Real
Property Lease that it intends to terminate or not renew such lease or modify
such lease.
(d) No consents are required under the Real Property Leases
in connection with the consummation of the transactions contemplated hereunder,
and the consummation of the transactions contemplated by this Agreement will not
result in a default under or give the lessor a right to terminate or modify any
Real Property Lease. Neither the Joint Venture nor Harriscope is obligated to
pay any leasing or brokerage commission relating to any Real Property Lease or
any renewal thereof.
(e) To the knowledge of NST and the Harris Group, the Real
Properties and all structures and appurtenances thereto owned, leased or used by
the Joint Venture or Harriscope have been owned and operated in all material
respects in compliance with all material applicable laws, ordinances,
regulations, rules, orders, restrictions or other requirements of all
Governmental Authorities (including
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without limitation building, zoning and use ordinances and regulations), and no
written notice of violation of any such laws, rules, regulations, orders,
restrictions or other requirements has been received by either NST, the Harris
Group, the Joint Venture or Harriscope.
(f) There are no and, except as disclosed to Buyer in
writing, on the Closing Date there will not be (i) actual or pending impositions
or assessments for public or private improvements with respect to any Real
Property or Leased Property for which the Joint Venture or Harriscope would be
liable, or (ii) improvements constructed or planned that would be paid for by
means of public or private assessments upon any Real Property or Leased Property
for which the Joint Venture or Harriscope would be liable. Neither NST nor the
Harris Group has received any actual notice and, to the knowledge of NST and the
Harris Group, there is no pending, threatened or contemplated condemnation
proceeding affecting any Real Property or Leased Property or any part thereof or
of any sale or any disposition of any Real Property or any Leased Property or
any portion thereof in lieu of condemnation.
(g) On the Closing Date, no material assets used or useful
in the business and operations of the Station by the Joint Venture or Harriscope
will be located on any real property not included in the Real Properties or
leased by the Joint Venture or Harriscope under the Real Property Leases. There
is no real property other than as set forth on SCHEDULE 2.14 which is necessary
for the conduct of the Joint Venture's or Harriscope's business or the operation
of the Station by the Joint Venture or Harriscope.
(h) All buildings and improvements owned by the Joint
Venture or Harriscope included within the Real Property and any premises leased
by the Joint Venture or Harriscope pursuant to a Real Property Lease have been
maintained in a suitable condition and in sufficient working order, for the
purposes for which it is intended or being used. All water, gas, electrical,
utility, telecommunication, sanitary and storm sewage lines and systems and
other similar systems located on the Real Properties or servicing the premises
leased pursuant to the Real Property Leases have been operating and have been
sufficient to enable the Real Properties and Leased Properties to be used and
operated in the manner currently being used and operated by the Joint Venture or
Harriscope .
(i) Neither the Joint Venture nor Harriscope is a "foreign
person" or a "foreign corporation" as such terms are defined in Section 1445 of
the Internal Revenue Code of 1986, as amended.
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2.15 TAX MATTERS
(a) The Joint Venture and Harriscope have filed in a timely
manner (taking into account all extension of due dates) all tax returns, reports
and forms required to be filed, including, without limitation, income tax
returns, withholding tax returns, declarations, of estimated tax and tax reports
required to be filed with respect to each of the Joint Venture or Harriscope or
any of their income, properties or operations, and have paid in full (except for
those Taxes (as defined below) being contested in good faith and set forth on
SCHEDULE 2.15(a)) any taxes, charges, fees, levies, penalties, interest or other
assessments, including without limitation, income, sales and use, excise,
withholding, employment related taxes, property, sales and franchise taxes,
estimated taxes, penalties, interest, assessments and deficiencies imposed by
any Governmental Authority ("TAXES") that have become due and payable for, or
with respect to, the NST Venture Interest, the Shares, the Joint Venture or
Harriscope or their respective operations as of the date hereof. All
information provided in such returns, declarations and reports is true, correct
and complete. The Joint Venture and Harriscope have withheld all amounts
required by law from their respective employees for all periods in full and
complete compliance with the tax, social security and unemployment withholding
provisions of applicable federal and state law. No Taxes are payable with
respect to the Joint Venture or Harriscope or their respective operations for
the periods covered by such returns and forms except as shown on such returns
and forms, and any such Taxes shown as due and payable on such returns and forms
have been paid. Neither the Joint Venture nor Harriscope is a party to any
pending action or proceeding, and, to the knowledge of each Seller, there is no
action or proceeding threatened by any Governmental Authority against the Joint
Venture or Harriscope for audit, assessment or collection of Taxes, and to the
best knowledge of the Sellers there is no basis for any such action or
proceeding. For purposes of this Agreement, "GOVERNMENTAL AUTHORITY" shall mean
any agency, board, bureau, court, commission, department, subdivision, district,
instrumentality or administration of the United States government, any state
government or any local or other governmental body in a state, territory or
possession of the United States or the District of Columbia, or any foreign
government or instrumentality.
(b) Each Seller has filed all tax returns (taking into
account any applicable extensions) and forms required to be filed and has paid
in full any Taxes which have become due and payable for, or with respect to,
Harriscope, the NST Venture Interest or the Shares. No Taxes are payable with
respect to such Seller or its operations for the periods covered by such returns
and forms except as shown on such returns and forms, and any such Taxes shown as
due and payable on such returns and forms have been paid. Each Seller is not a
party to any pending action or proceeding and to such Seller's knowledge, there
is no action or proceeding threatened by any Governmental Authority against
Harriscope for audit, assessment
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or collection of Taxes and to the best knowledge of Sellers there is no basis
for any such action or proceedings.
(c) Adequate provisions in accordance with generally
accepted accounting principles in the United States appropriately and
consistently applied to each of the Joint Venture and Harriscope have been made
in the financial statements of the Joint Venture and Harriscope, respectively,
for the payment of all Taxes for which each of the Joint Venture and Harriscope
may be liable for the periods covered thereby that were not yet due and payable
as of the date thereof, regardless of whether the liability for such Taxes is
disputed.
(d) No consent has been filed relating to Harriscope
pursuant to Section 341(f) of the Internal Revenue Code of 1986, as amended (the
"CODE").
(e) No Tax is required to be withheld pursuant to Section
1445 of the Code as a result of the transfers contemplated by this Agreement.
(f) The Sellers have made available to Buyer complete and
accurate copies of the income and franchise tax returns (including federal
income tax returns and reports), and any amendments thereto, filed by or on
behalf of Harriscope or the Joint Venture for the taxable years ending December
31, 1992, 1993, and 1994.
(g) There is no claim or assessment pending or, to the
knowledge of Sellers, Harriscope or the Joint Venture threatened against any of
the Sellers, Harriscope or the Joint Venture for any alleged deficiency in Taxes
attributable to the Joint Venture or Harriscope, and neither the Sellers,
Harriscope, or the Joint Venture knows of any audit or investigation with
respect to any liability of the Sellers (and any of their affiliates),
Harriscope or the Joint Venture. There are no agreements in effect to extend
the period of limitations for the assessment or collection of any Taxes for
which Harriscope or the Joint Venture (or any members of the Joint Venture) may
be liable.
(h) Other than as described in SCHEDULE 2.15(h), Harriscope
has not taken any positions, with respect to the treatment of any items, that
lack "substantial authority" (pursuant to Code Section 6662(d)(2)(B)) such that
there could be a "substantial understatement" of income tax (pursuant to Code
Section 6662(d)(1)) for any taxable year of Harriscope.
(i) At no time during its existence has Harriscope been a
member of an affiliated group of corporations as defined in Code Section 1504.
2.16 BOOKS AND RECORDS
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The books and records of Harriscope and, to the knowledge of
the Sellers, the Joint Venture, are complete and correct in all material
respects and accurately reflect all material transactions of the Joint Venture
and Harriscope during the periods covered by such books and records. The minute
books of Harriscope as previously made available to Buyer contain records
accurate in all material respects of all meetings and actions by consent and
reflect the corporate action taken by the stockholders and Board of Directors of
Harriscope in such meeting or by such consents accurately in all material
respects. All material applications, returns, reports and statements required
to have been filed by Harriscope and, to the knowledge of the Sellers, the Joint
Venture and the Station with any Governmental Authority have been filed and are
true, correct and complete in all material respects. Neither NST nor the Harris
Group has received written notice from the FCC of any failure to make any
applicable filings or comply with any material compliance matters, nor has NST
or the Harris Group received any written complaint or notice that the public
file of the Station is incomplete in any respect.
2.17 CONTRACTS AND COMMITMENTS
(a) SCHEDULE 2.17 contains a true, complete and correct
list and description of all written, and, to the knowledge of NST and the Harris
Group, oral, contracts, agreements, understandings, obligations and commitments
of the Joint Venture or Harriscope of any kind or nature (including all Program
Contracts), other than (i) miscellaneous service or other contracts or
commitments which do not require payments of more than $10,000 each or $100,000
in the aggregate, (ii) contracts for sale of advertising for cash payments and
(iii) unfulfilled trade-out agreements, or similar contracts, commitments or
understandings to provide broadcast time (collectively, "TRADE AGREEMENTS") of
less than $5,000 each or $25,000 in the aggregate.
(b) (i) Each of the agreements set forth on SCHEDULE 2.17
hereto (a "SPECIFIED CONTRACT") is a valid and binding agreement of the Joint
Venture or Harriscope, as the case may be, enforceable against the Joint Venture
or Harriscope in accordance with its terms except to the extent limited by
applicable bankruptcy, insolvency, moratorium and other similar laws of general
application relating to or affecting the enforcement of creditors' rights and
general equity principles.
(ii) Harriscope and, to the knowledge of the Sellers,
the Joint Venture have fulfilled all material obligations required pursuant to
the Specified Contracts to have been performed by the Joint Venture or
Harriscope on their part prior to the date hereof (other than payments of
accounts payable after the due date thereof in accordance with past practices of
the Joint Venture or Harriscope); and
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(iii) Harriscope and, to the knowledge of the
Sellers, the Joint Venture are not in material breach of or in default under any
material Specified Contract, and no occurrence, event or development has
occurred which with the passage of time or giving of notice or both would
constitute such a default by the Joint Venture or Harriscope, result in a loss
of material rights or result in the creation of any Encumbrance thereunder or
pursuant thereto.
(c) Except as set forth on SCHEDULE 2.17, the continuation,
validity and effectiveness of each Specified Contract will not be affected by
the transactions contemplated herein.
(d) True, correct and complete copies of all written
Specified Contracts have been delivered or made available by the Sellers to
Buyer.
(e) Except as set forth on SCHEDULE 2.17, the Joint Venture
and Harriscope are in compliance in all material respects with all of their
respective obligations with respect to the payment of licensing fees for all
video and audio programming broadcast by the Station, including having made
reserves which are reasonably believed to be adequate to cover any and all
payments which may be due for past periods with respect to such rights,
including but not limited to payments to ASCAP and BMI.
(f) Each film or program license or contract under which
the Joint Venture or Harriscope is authorized to broadcast film product or
programs on the Station, including, without limitation, all cash and non-cash
(barter) program contracts are set forth on SCHEDULE 2.17, other than contracts
requiring payments by the Joint Venture less than $10,000 each or $100,000 in
the aggregate (collectively, the "PROGRAM CONTRACTS").
2.18 PERMITS
The Joint Venture and Harriscope each have all requisite
licenses, permits, certificates and other authorizations, including any
applicable environmental, health and safety permits, from Governmental
Authorities necessary and material to conduct their respective businesses and to
own and operate the Assets and in the case of the Joint Venture, the Station
(collectively, the "PERMITS"). SCHEDULE 2.18 sets forth a list, true, correct
and complete in all material respects, of all such Permits, copies of which have
previously been delivered or made available by the Sellers to the Buyer. Each
of the Joint Venture and Harriscope has operated and continues to operate the
Station in accordance with, and is presently in compliance in all material
respects with, applicable statutes and regulations of the United States of
America, the State of Illinois and each municipality and authority having
jurisdiction over the Station.
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2.19 EMPLOYEE RELATIONS, ERISA AND EMPLOYEES
(a) To the knowledge of NST and the Joint Venture, each of
the Joint Venture and Harriscope is in compliance in all material respects with
all laws, rules, regulations, and interpretations of any Governmental Authority
respecting employment and employment practices (including anti-discrimination
laws, rules and regulations), terms and conditions of employment, and wages and
hours, and there are no arrears in the payment of wages, unemployment
compensation, worker's compensation or social security taxes or underfunding of
workers' compensation insurance premiums. Neither NST nor the Harris Group has
received notice of any non-compliance (which remains uncured) by the Joint
Venture of any material law, rule, regulation or interpretation of any
Governmental Authority respecting employment and employment practices (including
anti-discrimination laws, rules and regulations), terms and conditions of
employment and wages and hours. To the knowledge of NST and the Harris Group,
there are no arrears in the payment of wages, unemployment compensation,
worker's compensation or social security taxes or underfunding of workers'
compensation insurance premiums with respect to the Joint Venture.
(b) SCHEDULE 2.19 sets forth a list of all pension,
retirement, profit-sharing, deferred compensation, and group insurance benefit
plans that are employee pension benefit or employee welfare benefit plans as
defined in Sections 3(1) and 3(2) of the Employee Retirement Income Security Act
of 1974 as amended ("ERISA") of which the Joint Venture or Harriscope is plan
sponsor or administrator (collectively, the "BENEFIT PLANS"). To the knowledge
of Sellers, all of the Benefit Plans are in material compliance with all
applicable law.
(c) None of the Benefit Plans is subject to Title IV of
ERISA. Harriscope has no, and, to the knowledge of NST and the Harris Group,
the Joint Venture has no, liability arising under Title IV of ERISA.
(d) Except as disclosed in SCHEDULE 2.19(d), with respect
to each Benefit Plan, (i) there is no material accrued liability for any Benefit
Plan that is not reflected in the Financial Statements; (ii) each plan intended
to qualify under Section 401(a) of the Code (A) has been determined by the
Internal Revenue Service to so qualify and (B) with respect to all periods for
which a favorable determination does not yet exist, has been timely and properly
submitted to the Internal Revenue Service for a determination of its qualified
status retroactive to all periods of its existence for which another favorable
determination letter is not in effect as to the entire plan; (iii) to the best
knowledge of NST and the Harris Group, no act or omission of the Joint Venture
or Harriscope has occurred which could cause the loss of such qualification for
any time period, and, to the knowledge of Sellers, no Benefit Plan has been
operated in a manner that may be reasonably likely to cause it to be
disqualified in operation under the Code or ERISA; and (iv) the Joint Venture,
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Harriscope and any plan administrator designated by the Joint Venture or
Harriscope has complied in all material respects with all applicable reporting
and disclosure requirements under Title I of ERISA.
(e) Except as set forth on SCHEDULE 2.19, no collective
bargaining agreement or other contract, agreement or understanding of any kind,
written or oral, with any trade or labor union, employees' association or
similar organization is in effect or due to take effect with respect to any
employee of the Joint Venture or Harriscope.
(f) Except as set forth on SCHEDULE 2.19, (i) there are no
strikes, work stoppages, lockouts, slow downs, labor disputes, grievance
proceedings or other controversies pending or to the knowledge of any Seller
threatened in writing between the Joint Venture or Harriscope and any employees,
trade or labor union, employees' association or similar organization. Neither
Harriscope nor, to the knowledge of NST and the Harris Group, the Joint Venture
has committed or engaged in any unfair labor practices in connection with the
operation of the business of the Joint Venture or Harriscope and, to the
knowledge of NST and the Harris Group, there is no pending or threatened charge
or complaint against the Joint Venture by or with the National Labor Relations
Board or any comparable state agency.
(g) SCHEDULE 2.19 sets forth a list of all employees of the
Joint Venture and Harriscope and certain related information. Any contracts and
agreements for employment, whether oral or written, with the Joint Venture or
Harriscope are listed in SCHEDULE 2.19. The transactions contemplated by this
Agreement will not result in or give rise to any severance payment, "golden
parachute" payment, or other compensation under any contracts, agreements,
plans, policies or other arrangements.
2.20 ENVIRONMENTAL MATTERS
(a) To the knowledge of each Seller, there are no pending
or threatened actions, suits, claims, legal proceedings or any other
administrative proceedings based on the Environmental Laws or the use, storage
or discharge of Hazardous Materials relating to the Real Properties or the
Leased Properties (collectively, the "PROPERTIES") or any part thereof, or
otherwise arising from the Joint Venture's or Harriscope's activities at the
Properties involving Hazardous Materials.
(b) To the knowledge of each Seller, there are no known
conditions, procedures or any other facts or circumstances which may be
reasonably likely to give rise to claims, expenses, losses, liabilities, or
governmental action against the Joint Venture or Harriscope in connection with
any Hazardous Materials present at or disposed of from the Properties, including
without limitation the following conditions arising out of, resulting from, or
attributable to, the Assets,
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business, or operations of the Joint Venture or Harriscope at the Properties:
(i) the presence of any Hazardous Materials on the Properties or the release or
threatened release of any Hazardous Materials into the environment from the
Properties; (ii) the off-site disposal of Hazardous Materials originating on or
from the Properties or the business or operations of the Joint Venture or
Harriscope; (iii) the release or threatened release of any Hazardous Materials
into any storm drain, sewer, septic system or publicly owned treatment works;
(iv) any noncompliance with any material requirements of any Governmental
Authority governing occupational safety and health, or presence or release in
the air and water supply systems of the Properties of any substances that pose a
hazard to human health or an impediment to working conditions; or (v) any
facility operations, procedures or designs, which do not materially conform to
the material statutory or regulatory requirements of any Environmental Laws.
(c) Neither friable asbestos-containing materials nor, to
the knowledge of each Seller, polychlorinated biphenyls, are present on or in
the Properties in violation of any Environmental Laws. To the knowledge of NST
and the Harris Group, any such materials that have been removed have been so
removed in full compliance with all applicable laws, rules and regulations
regarding the removal of such substances.
(d) To the knowledge of NST and the Harris Group, the
Properties contain no underground storage tanks, or underground piping
associated with tanks, used currently or in the past for the storage or
transmission of Hazardous Materials, provided that the properties may contain
two underground storage tanks which will not violate Environmental Laws or
require remediation.
(e) For purposes of this section, "HAZARDOUS MATERIALS"
means any wastes, substances, or materials, whether solids, liquids or gases,
that are deemed hazardous, toxic, pollutants, or contaminants, including but not
limited to substances defined as "hazardous wastes," "hazardous substances,"
"toxic substances," "radioactive materials," or other similar designations in,
or otherwise subject to regulation under, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"), as amended by the
Superfund Amendments and Reauthorization Act of 1986 ("SARA"), 42 U.S.C. Section
9601 ET SEQ.; the Toxic Substance Control Act ("TSCA"), 15 U.S.C. Section 2601
ET SEQ.; the Hazardous Materials Transportation Act, 49 U.S.C. Section 1802
ET SEQ.; the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section
6901 ET SEQ.; the Clean Water Act ("CWA"), 33 U.S.C. Section 1251 ET SEQ.; the
Safe Drinking Water Act, 42 U.S.C. Section 300f ET SEQ.; the Clean Air Act
("CAA"), 42 U.S.C. Section 7401 ET SEQ.; or other applicable laws of any
Governmental Authority, including any rules, regulations, orders, or ordinances
adopted, or other criteria and guidelines promulgated pursuant to the preceding
laws or other similar laws, regulations, rules, orders, or ordinances now or
hereafter in effect relating to the protection of human health and the
environment (collectively
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"ENVIRONMENTAL LAWS"). "Hazardous Materials" includes but is not limited to
polychlorinated biphenyls (PCBs) and asbestos.
2.21 ABSENCE OF CERTAIN CHANGES OR EVENTS
As of the date of this Agreement, except as set forth on
SCHEDULE 2.21 and except for the transactions contemplated by this Agreement,
since the date of the Current Financial Statements, neither the Joint Venture
nor Harriscope has entered into any transaction which is not in the usual and
ordinary course of business and consistent with past practices, and, without
limiting the generality of the foregoing, neither the Joint Venture nor
Harriscope has other than in the usual and ordinary course of business:
(a) except for scheduled payments under the Harris Note,
repaid or incurred any intercompany borrowings or advances from any affiliate of
the Joint Venture or Harriscope;
(b) subjected the NST Venture Interest or the Shares to any
Encumbrance;
(c) subjected any of the Assets to any Encumbrances except
for Permitted Liens;
(d) sold, assigned or transferred any of its material
Assets;
(e) made any material amendment to or termination of or
waived any material rights under any Real Property Lease, Personal Property
Lease or Specified Contract or done any act or omitted to do any act which may
be reasonably likely to cause a material breach or default of any Real Property
Lease, Personal Property Lease or Specified Contract (other than late payments
in accordance with past practice);
(f) suffered any losses or incurred any liabilities or
obligations or suffered any Claim, in excess of $250,000 in the aggregate for
insured matters and $25,000 in the aggregate for uninsured matters;
(g) made any changes in compensation payable by the Joint
Venture or Harriscope to its officers, directors or employees;
(h) declared, set aside or paid any dividend or
distribution in respect of, or purchased, redeemed or otherwise acquired any of
its capital stock of Harriscope or NST Venture Interest, but only to the extent
that such dividend, distribution, purchase, redemption or acquisition is not to
be paid prior to the Closing.
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(i) changed or agreed to change any accounting principle,
practice or method.
2.22 TRADE NAMES AND OTHER INTANGIBLE PROPERTY
(a) SCHEDULE 2.22 sets forth a true, correct and complete
list and, where appropriate, a description of, all material intangible property
rights, including but not limited to the Joint Venture's rights to the call
letters for the Station, United States and foreign, patents, patent
applications, trade names, trademarks, trademark registrations, applications for
trademark registrations, service marks, service mark applications or
registrations, copyright applications or registrations, owned, licensed or used
by the Joint Venture, Harriscope or the Station and all licenses and other
agreements to which the Joint Venture or Harriscope is a party (as licensor or
licensee) or by which the Joint Venture or Harriscope is bound relating to any
of the foregoing kinds of property or rights (collectively, the "INTANGIBLE
PROPERTY"). True, correct and complete copies of all material applications,
registrations, licenses and other agreements and instruments relating to the
Intangible Property have been previously delivered or made available by the
Joint Venture and Harriscope to Buyer.
(b) Except (i) as otherwise disclosed in SCHEDULE 2.22, and
(ii) as to programming licensed to the Joint Venture or Harriscope from third
parties, the Joint Venture or Harriscope is the sole and exclusive owner of all
material Intangible Property owned by it. The Intangible Property owned,
licensed or used by the Joint Venture or Harriscope is sufficient to conduct the
Station's business as presently conducted. Neither the Joint Venture nor
Harriscope has received written notice of, or has knowledge of, a claim against
the Joint Venture or the Station that any of their operations, activities,
products or publications infringes on any patent, trademark, trade name,
copyright or other intangible property right of a third party, or that the Joint
Venture is illegally or otherwise using the trade secrets, formulae or any
intangible property rights of others. Neither the Joint Venture nor Harriscope
has material disputes with or claims against any third party for infringement by
such third party of any trade name or the Intangible Property of the Joint
Venture or Harriscope. The Joint Venture and Harriscope have taken all steps
reasonably necessary to protect their respective right, title and interest in
and to the Intangible Property.
2.23 NO SHARED ASSETS OR OPERATIONS
Except as set forth on SCHEDULE 2.23, neither the Sellers,
the Joint Venture nor Harriscope share, exchange or mutually use any assets or
personnel (or any costs or expenses associated therewith) used in connection
with the business and operations of the Station with any Seller or any entity
controlling, controlled by or under common control with any Seller. Except
(a) as set forth on SCHEDULE 2.23, (b) management fees paid to Harriscope,
(c) payments under the Harris Note, and (d) distributions of cash to be made to
NST, Harriscope or the
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Stockholders, as the case may be, prior to the Closing Date, neither the Joint
Venture nor Harriscope has any contractual relationships with, or is required to
make any payments to, any Seller or any entity controlling, controlled by or
under common control with any Seller.
2.24 DISCLOSURE
No representation or warranty by any Seller in this
Agreement or any ancillary agreement, certificate, exhibit or schedule to be
delivered pursuant to the provisions of this Agreement contains or shall contain
any untrue statement of a material fact by such Seller or omits or shall omit to
state any material fact necessary to make the statements contained herein or
therein by such Seller not misleading.
3. REPRESENTATIONS OF BUYER
Buyer represents and warrants to the Sellers as follows:
3.1 ORGANIZATION AND AUTHORITY OF BUYER
Buyer is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, and has the full and
unrestricted power and authority to own its properties and to carry on its
business as now being conducted. Buyer has full power to execute and deliver
this Agreement and the agreements contemplated by this Agreement and to
consummate the transactions contemplated hereby. Copies of the Certificate of
Incorporation and Bylaws of Buyer, each as amended to date and certified by the
Secretary of Buyer will be delivered to Sellers within 10 days of the date of
this Agreement.
3.2 AUTHORIZATION
This Agreement has been, and the other agreements
contemplated by the transaction to be consummated hereby to which Buyer is a
party, will be at or prior to the Closing, duly authorized, executed and
delivered by Buyer. Assuming due authorization, execution and delivery by the
other parties hereto and thereto, this Agreement and all such other agreements
and written obligations entered into and undertaken in connection with the
transactions contemplated hereby will when executed, constitute the valid and
legally binding obligations of Buyer, enforceable against it in accordance with
their respective terms except to the extent limited by applicable bankruptcy,
insolvency, moratorium and other similar laws of general application relating to
or affecting the enforcement of creditors' rights and general equity principles.
Except as set forth on SCHEDULE 3.2, the execution, delivery and performance of
this Agreement and the other agreements contemplated by this Agreement to which
the Buyer is a party, and the consummation by Buyer of the
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transactions contemplated hereby and thereby, will not, with or without the
giving of notice or the passage of time or both, (a) violate the provisions of
any law, rule or regulation applicable to Buyer; (b) violate the provisions of
Buyer's Certificate of Incorporation or Bylaws; (c) violate any judgment,
decree, order or award of any court, governmental body or arbitrator applicable
to Buyer; or (d) conflict with or result in the breach or termination of any
term or provision of, or constitute a default under, or cause any acceleration
under, or cause the creation of any lien, charge or encumbrance upon the
properties or assets of Buyer pursuant to, any contract, indenture, mortgage,
deed of trust or other agreement or instrument to which it is a party or by
which Buyer or its properties is or may be bound.
3.3 LITIGATION
As of the date of this Agreement, there is no litigation,
proceeding or investigation pending or, to the best knowledge of Buyer,
threatened, against Buyer or any of its respective assets or properties which
questions the validity of any action taken or to be taken pursuant to or in
connection with this Agreement or might otherwise affect the ability of Buyer to
perform the various terms and conditions of this Agreement or of any agreements
contemplated herein or to consummate the transactions contemplated hereby.
3.4 COMPLIANCE WITH LAWS; REGULATORY APPROVALS
Buyer is not in violation of any provision of any law,
judgment, award, rule, regulation, order, decree, writ or injunction of any
Governmental Authority having jurisdiction over Buyer, which violation would
materially and adversely affect the ability of Buyer to carry out its
obligations hereunder. Except for all consents, approvals and authorizations of
the FCC which are necessary for the transfer by the Sellers of the NST Venture
Interest and the Shares to Buyer and the expiration of the waiting period under
the HSR Act contemplated by Section 6.1, all other governmental and regulatory
consents, approvals, authorization and other requirements prescribed by any law,
rule or regulation which must be obtained or satisfied by Buyer and which are
necessary and material for the execution, delivery and performance by Buyer of
this Agreement have been obtained.
3.5 FCC APPROVALS
To the best of Buyer's knowledge, (i) it and TGI is legally
and financially qualified to be the transferee of the FCC License, and (ii) it
or TGI has not engaged in any proceeding before the FCC which would prevent or
delay the transfer of the FCC licenses as contemplated hereunder, nor is it
aware of any claim which would result in such proceeding. The Buyer reasonably
believes it is in a position to obtain all FCC consents and FCC approvals
necessary to consummate the purchase of the Shares and the NST Interest.
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3.6 INVESTMENT REPRESENTATION
Buyer is acquiring the Shares from the Stockholders and the NST
Venture Interest from NST for its own account for investment and not with a view
to, or for sale in connection with, any distribution thereof in violation of
applicable federal or state securities laws.
3.7 INFORMATION REPRESENTATION
Neither Essaness nor Alan Silverman has told Buyer in writing or
orally that any of the Sellers' representations and warranties contained herein
are incorrect. Except for information previously disclosed to Sellers or their
attorneys, Buyer has no actual knowledge that any of the representations or
warranties made by Sellers herein are incorrect in any material respect as of
the date such representation or warranty was made. It is agreed among the
parties that for purposes of this representation, and without otherwise limiting
the breadth or scope of the second sentence hereof, Buyer shall be deemed to
have disclosed all (i) information contained in written due diligence materials
obtained by Buyer, its attorneys or its representatives which have been or will
be, prior to Closing, delivered to Sellers or their attorneys and (ii) written
and oral information relating to certain tax and environmental matters which
have been, or may prior to Closing be, discussed between or among the Sellers or
their attorneys or representatives. It is explicitly agreed among the parties
that the burden of establishing that this representation is not true (including
each element thereof, including that Buyer had such actual knowledge referred to
above and that information relating thereto had not been disclosed to Sellers)
shall be that of the Sellers. The parties acknowledge that Buyer has, as
contemplated by the second sentence hereof, disclosed information relating to
Tax matters and environmental matters; and, in clarification of the parties
rights and obligations hereunder, the parties agree that Sellers may not claim a
breach of this representation by Buyer relating to Tax matters or environmental
matters.
4. CONFIDENTIALITY; PUBLIC ANNOUNCEMENTS
4.1 CONFIDENTIALITY
The Sellers have furnished and will continue to furnish to
Buyer and its officers, directors, employees, agents or representatives,
including, without limitation, its attorneys, accountants and potential
financing sources for the transactions herein contemplated (the
"REPRESENTATIVES") certain non-public, confidential or proprietary information
in connection with the transactions contemplated by this Agreement. Buyer
agrees to maintain the confidentiality of such information (subject to any
disclosures required by applicable law), to use such information solely in
connection with the consummation of the transactions
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contemplated hereby, and to transmit such information only to those
Representatives of Buyer on a "need to know" basis and who owe to Buyer a duty
of confidentiality with respect to such information.
4.2 PUBLIC ANNOUNCEMENTS
No party hereto shall make any announcement regarding the
Transactions contemplated by this Agreement to the public prior to the Closing
Date without the mutual consent of all of the parties hereto; provided that Oak
Industries Inc. ("OAK") or TGI may make such disclosure as may be required or
advisable under applicable law, and provided further that in the event that
either Oak or TGI has determined that such disclosure is required or advisable,
such party shall, to the extent reasonably practicable, provide the other
parties hereto (or their representative, as the case may be) with prior notice
of such disclosure and an opportunity to review the contents thereof.
5. COVENANTS OF THE SELLERS
Each Seller severally covenants and agrees that from and
after the date of this Agreement through the Closing Date as relates to it, it
will comply, and as relates to the Joint Venture or Harriscope, it will cause
the Joint Venture or Harriscope, as the case may be, to comply, with the
following provisions.
It is expressly understood by the parties hereto that
Essaness is not selling its interest in the Joint Venture to Buyer and is not a
party to this Agreement. Accordingly, Buyer understands and agrees that (i) to
the extent any information or other disclosure shall be required to be made
specifically as to Essaness either directly or indirectly pursuant to any term
or provision herein, to the extent such information or disclosure is not known
by Seller, such Seller shall have no obligation or liability if such information
or disclosure is not given, and (ii) to the extent that any covenant herein
shall require the consent of Essaness, to the extent that such Seller uses
reasonable best efforts to seek such consent of Essaness, no such Seller
hereunder has or shall have any obligation or liability with respect to the
failure to comply with such covenant (other than liability, if any, for Taxes
for which indemnification is contemplated by Section 9.1), although Buyer's
rights to terminate this Agreement if such failures shall cause a condition to
Buyer's obligation to close to not be satisfied shall remain unaffected.
5.1 ABSENCE OF MATERIAL CHANGES
Except as permitted by the prior written consent of Buyer,
Sellers shall cause each of the Joint Venture and Harriscope to not violate the
following provisions applicable to them. Notwithstanding the previous sentence,
no Seller shall have any liability (other than liability, if any, for Taxes for
which
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indemnification is contemplated by Section 9.1) to Buyer (though Buyer's rights
to terminate this Agreement if such failures cause a condition to Buyer's
obligation to close to not be satisfied shall remain unaffected) if such
violation occurs as a result of the action or inaction of Essaness and such
Seller does not approve the occurrence of any of the following and uses its
reasonable best efforts to prevent the occurrence of any of the following:
(a) (i) purchase or redeem any of its NST Venture Interest
or capital stock, (ii) convey, pledge or otherwise encumber or transfer any NST
Venture Interest or capital stock, or (iii) issue or authorize any additional
interests in the Joint Venture or capital stock in Harriscope;
(b) merge or consolidate with or into any partnership,
corporation or other entity;
(c) dissolve, liquidate or wind up the affairs of the Joint
Venture or Harriscope or enter into any agreement relating thereto;
(d) make, accrue or become liable for any bonus, profit
sharing or incentive payment, except for accruals and payments under existing
plans or agreements, if any, or increase the rate of compensation payable or to
become payable by it to any of its officers, directors or employees other than
in the usual and ordinary course of business other than the payment of one-time
cash bonuses to employees payable and paid immediately prior to the Closing,
which amounts shall be treated as a liability for purposes of Section 1.4;
(e) make any election or give any consent under the Code or
the Tax statutes of any state or other jurisdiction or make any termination,
revocation or cancellation of any such election or any consent or compromise or
settle any claim for past or present Tax due, in each case to the extent such
action would adversely affect the tax treatment of Buyer or the transactions
contemplated hereby;
(f) fail to operate its business and maintain its books,
accounts and records in the customary manner and in the ordinary course of
business consistent with past practices;
(g) cancel, renew, extend, materially amend, waive or
otherwise change in any material respect any Specified Contract, Personal
Property Lease or Real Property Lease or any provision thereof or enter into any
new Specified Contract, Personal Property Lease or Real Property Lease or take
or authorize any act or omission constituting a material breach or default under
any Specified Contract, Personal Property Lease or Real Property Lease;
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(h) other than the transfer of the Drake Property
contemplated herein, sell, assign, lease or otherwise transfer or dispose of any
of the Assets, or acquire any amount of material assets, or enter into any
material agreements relating thereto, except in the ordinary course of business
consistent with past practices;
(i) enter into Trade Agreements, except those which are (i)
in the ordinary course of business and consistent with the Station's past
business practices, (ii) recorded in the Financial Statements in accordance with
generally accepted accounting principles consistently applied, and (iii) under
which the Station's obligations under any such Trade Agreement shall be
fulfilled in reasonable relation to the amount and timing of consideration
therefor received by the Station;
(j) enter into any broadcast time sales agreement,
contract, commitment or understanding, except those which are in the ordinary
course of business and consistent with the Station's past business practices;
(k) create or permit to be incurred any Encumbrance on any
of the Assets other than Permitted Liens;
(l) incur any indebtedness of any kind in excess of the
amount of Indebtedness as of the date hereof other than in the usual and
ordinary course of business;
(m) engage in any transaction with any affiliate other than
on terms no less favorable than would be obtained in an arms-length transaction
or other than expressly disclosed pursuant to the terms of this Agreement;
(n) change or modify any of the Joint Venture's or
Harriscope's accounting principles or practices or any method of applying such
principles or practices (other than modifying the depreciation lives in a manner
than remains consistent with GAAP);
(o) amend or modify the Joint Venture Agreement or the
Articles of Incorporation or Bylaws of Harriscope;
(p) incur any material obligation, liability, or commitment
secured or unsecured (whether accrued, absolute, contingent, unasserted or
otherwise), with respect to the Station, the Joint Venture or Harriscope, except
those which are in the usual and ordinary course of business and consistent with
past practices or are immaterial in amount;
(q) make any (i) non-cash distributions on its NST Venture
Interest
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or capital stock or (ii) make any cash distributions on its NST Venture Interest
or capital stock that is not paid prior to the Closing or (iii) make any cash
distributions on or after the first day of the calendar month immediately prior
to the month in which the Closing occurs that would cause the cash balance of
the Joint Venture on the Closing Statement to go below the Closing Month
Adjustment except that such distributions otherwise restricted under (iii) above
may be made to the extent that the Sellers recontribute to the Joint Venture
74.5% of the amount that would cause such cash balance to again equal the
Closing Month Adjustment;
(r) reclassify or recapitalize its capital structure;
(s) except for repayments of the Harris Note, repay or
incur any intercompany borrowings or advances from any affiliate of the Joint
Venture or Harriscope;
(t) subject the NST Venture Interest or the Shares to any
Encumbrance;
(u) suffer any loss or incur any liabilities or obligations
or suffer any Claim, in excess of $500,000 in the aggregate for Insured matters
and $250,000 in the aggregate for uninsured matters; or
(v) commit or agree to do any of the foregoing in the
future.
5.2 TAXES
(a) PRE-CLOSING TAX LIABILITIES. On or prior to the
Closing Date, the Joint Venture, Harriscope and each Seller will, on a timely
basis (taking into account any applicable extensions), file or cause to be filed
all tax returns for and pay in full in a timely manner any and all Taxes which
shall become due or payable on account of the operation of the business of the
Joint Venture and Harriscope, the ownership of the Assets or the ownership of
the NST Venture Interest or Shares to the Closing Date.
(b) POST-CLOSING TAX LIABILITIES IN RESPECT OF PRE-CLOSING
PERIODS. The Stockholders shall prepare a calculation of any Taxes of
Harriscope that have accrued but not been paid prior to the Closing Date, for
all taxable periods that end, with respect to Harriscope, on or before the
Closing Date (including any short period ending on the Closing Date) and shall
duly prepare in a manner reasonably acceptable to Buyer any Tax returns or other
Tax filings relating to such taxable periods and shall deliver any such return
or filing to Buyer at a reasonable amount of time prior to the due date for such
return or filing (taking into account any applicable extensions) or the due date
for the payment of any Tax shown on such return or filing. The Sellers, Buyer
and Harriscope shall cooperate fully, as and to the extent
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reasonably requested by the other parties, in connection with the preparation
and filing of such tax returns to Buyer. All Taxes shown and not paid on the
calculation shall be included as a liability of Harriscope for purposes of
Section 1.4. The Stockholders and NST shall prepare a calculation of any Taxes
of the Joint Venture that have accrued but not been paid prior to the Closing
Date, for all taxable periods that end, with respect to the Joint Venture, on or
before the Closing Date (including any short period ending on the Closing Date)
and shall duly prepare in a manner reasonably acceptable to Buyer any Tax
returns or other Tax filings relating to such taxable periods and shall deliver
any such return or filing to Buyer at a reasonable amount of time prior to the
due date for such return or filing (taking into account any applicable
extensions) or the due date for the payment of any Tax shown on such return or
filing. The Sellers, Buyer and Harriscope shall cooperate fully, as and to the
extent reasonably requested by the other parties, in connection with the
preparation and filing of such tax returns. All Taxes shown and not paid on the
calculation shall be included as a liability of the Joint Venture for purposes
of Section 1.4. Sellers shall promptly indemnify Buyer pursuant to Section 9.1
to the extent the amount shown on the calculation is less than the amount of Tax
ultimately determined to be due in respect of the periods covered by the
calculation.
(c) TAX LIABILITIES IN RESPECT OF PERIODS THAT STRADDLE THE
CLOSING DATE. For any tax periods beginning before the Closing Date and ending
after the Closing Date, Buyer shall prepare or cause to be prepared all tax
returns or filings for the Joint Venture or Harriscope that are filed after the
Closing Date. The Sellers, Buyer and Harriscope shall cooperate and consult
fully in good faith, as and to the extent reasonably requested by the other
parties, in connection with the preparation and filing of tax returns pursuant
to this section. However, all decisions concerning the preparation or filing of
any returns, and the payment of any tax, on behalf of Harriscope or the Joint
Venture, in respect of periods beginning before the Closing Date and ending
after the Closing Date shall be in the reasonable discretion of Buyer (subject
to applicable law and the obligation to cooperate and consult in good faith with
Sellers).
Buyer and Sellers agree for all tax reporting and other
purposes that profit and loss of the Joint Venture for any taxable period that
includes the Closing Date shall be allocated among the partners of the Joint
Venture as if the Closing Date were the last day of the such taxable period.
Accordingly, income and loss of the Joint Venture (calculated in accordance with
applicable tax rules and regulations) for periods up to and including the
Closing Date shall be allocated among the persons who were partners of the Joint
Venture up to the Closing Date, and income and loss of the Joint Venture for
periods after the Closing Date shall be allocated among the partners of the
Joint Venture as of and following the Closing Date. For purposes of determining
Sellers' indemnity obligations under Section 9.1, income Taxes imposed on
Harriscope in respect of any period within which the Closing Date occurs shall
be allocated to the portion of such period ending on the
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Closing Date by treating the Closing Date as if it were the last day of a
taxable period.
5.3 COMPLIANCE WITH LAWS, SPECIFIED CONTRACTS AND LEASES
The Joint Venture, Harriscope and each Seller will comply in
all material respects with all material laws, rules and regulations which are
applicable to them and the Joint Venture, Harriscope, and each Seller will
comply in all material respects with all material laws, rules and regulations
applicable to their ownership of the Assets or the NST Venture Interest or the
Shares, as the case may be, or to the conduct of their business, and will
perform and comply in all material respects with all Specified Contracts,
Personal Property Leases and Real Property Leases. All such applications,
reports, returns and statements contemplated by Section 2.16 shall continue to
be filed on a current basis until the Closing Date, and will be true, correct,
and complete in all material respects.
5.4 AFFIRMATIVE COVENANTS
(a) The Joint Venture and Harriscope shall carry on their
respective businesses and the business of the Station substantially in the same
manner as heretofore conducted;
(b) The Tangible Personal Property shall be maintained in a
suitable condition and in sufficient working order for the purposes for which
they are used and currently intended to be used, consistent with past practices;
(c) The Joint Venture and Harriscope shall take such action
as reasonably necessary to contest any challenge to any Permit or License and
any efforts at the FCC which would adversely affect the broadcast license of the
Station (it being agreed that actions relating directly to the consummation of
the transactions contemplated by this Agreement are not intended to be covered
by this subsection, but rather are covered by Section 6.1 hereof);
(d) The Joint Venture and Harriscope shall maintain in full
force and effect existing insurance coverage on the Assets;
(e) The Station shall be operated in conformity with the
Permits and the Licenses, with the Communications Act of 1934, as amended, with
the rules and regulations of the FCC and with those rules and regulations of any
other Governmental Authority with jurisdiction over the Joint Venture,
Harriscope or the Station. The Permits and Licenses for the Station shall at
all times remain in full force and effect, and the Joint Venture and Harriscope
shall take all actions necessary to maintain them as such;
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(f) The Joint Venture shall remove, or pay the cost of the
cost of removing, the cause of any violation, breach or default of the Permits
or Licenses, the Communications Act of 1934, as amended, and the rules and
regulations of the FCC and of any other Governmental Authority which occurs
prior to the Closing Date, including the payment of any fines that may be
asserted for any such violation (other than those being contested diligently and
in good faith; provided that the Sellers shall be obligated to remove or pay
only 74.5% of the cost of removing such violation, breach or default upon a
final determination of liability post-Closing);
(g) The Joint Venture and Harriscope shall not change the
call letters or channel position of the Station or change the channel position
of the Station on any cable system;
(h) The Joint Venture and Harriscope shall not accelerate,
discount, sell or assign any accounts receivable or substantially alter its
policies regarding the cash or credit sales of advertising time except in
accordance with the Station's previous policies and practices;
(i) The Sellers shall cause the Joint Venture and
Harriscope to furnish to Buyer as soon as available, and in any event within 40
days following the end of each month commencing with September, 1995, unaudited
balance sheets of the Joint Venture and Harriscope as of such month (in the case
of the Joint Venture) or quarter (in the case of Harriscope) together with the
related statements of income or operations, cash flows and changes in capital
accounts or stockholders' equity, for the month (in the case of the Joint
Venture) or quarter (in the case of Harriscope) and the fiscal year to date then
ended, which financial statements will be prepared from the books and records of
the Joint Venture and Harriscope in accordance with past practices, generally
accepted accounting principles consistently applied;
(j) The Joint Venture and Harriscope shall promptly provide
or make available to Buyer copies of all correspondence, applications, returns,
reports and statements filed with the FCC or placed in the Station's public file
in connection with the operation of the Station;
(k) The Joint Venture and Harriscope shall, consistent with
the needs of the Station, maintain in all material respects film usage schedules
and amortization schedules consistent with past practice, and shall pay all
obligations and liabilities that are due and payable under the Specified
Contracts, the Personal Property Leases and the Real Property Leases in a timely
manner. If reasonably requested by Buyer, the Sellers shall provide evidence
reasonably satisfactory to Buyer of the payment of such obligations and
liabilities;
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(l) Except for the members of the management board of the
Joint Venture, no Seller nor Harriscope shall require or cause the full-time
employees of the Joint Venture or Harriscope to perform duties that are not
directly related to the business and operations of the Station;
(m) Each Seller shall preserve its existence and shall take
all corporate or joint venture action required under the laws of any state
having jurisdiction over the Joint Venture or Harriscope to effectuate the
transactions contemplated by this Agreement;
(n) Except for maintenance, acts of "force majeure" and
past practice in compliance with applicable law, the Joint Venture shall
continuously operate the Station at not less than 80% of its authorized power.
To the extent that any of the Sellers becomes aware of such event, such Seller
shall promptly notify Buyer in writing if the Station broadcasts at less than
its authorized power for more than thirty (30) consecutive minutes; and
(o) Sellers shall use their reasonable best efforts to
cause the Joint Venture and Harriscope to have its financial statements for the
year ending December 31, 1995 prepared on or before February 15, 1996 (which
statements, in the case of the Joint Venture, shall be audited).
5.5 LABOR MATTERS
Sellers will advise Buyer of the status of collective
bargaining negotiations relating to the employees of the Joint Venture and, at
Buyer's request, use reasonable best efforts (including obtaining any required
consent of any union) to permit Buyer or its representatives to observe all
bargaining sessions. The Joint Venture may agree to the terms and conditions of
any collective bargaining agreement relating to the employees of the Joint
Venture and may enter into any collective bargaining agreement relating to the
employees of the Joint Venture (and it is agreed, may be required to do so under
applicable law), and it is agreed that if the Joint Venture agrees to any such
terms and conditions of any collective bargaining agreement or enters into such
collective bargaining agreement without Buyer's written consent, it shall be
deemed a breach of this sentence of this covenant, giving rise to all rights and
remedies of Buyer applicable to a breach of a covenant made under Section 5 of
this Agreement.
Notwithstanding the provisions of this Section 5, no Seller
shall have any liability (other than liability, if any, for Taxes for which
indemnification is contemplated by Section 9.1) to Buyer (though Buyer's rights
to terminate this Agreement if such failures cause a condition to Buyer's
obligation to close to not be satisfied shall remain unaffected) if such
violation occurs as a result of the action or
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inaction of Essaness and such Seller does not approve the occurrence of any of
the preceding and uses its reasonable best efforts to prevent the occurrence of
any action or inaction that would cause a breach of such provision.
6. FURTHER COVENANTS AND AGREEMENTS
Each Seller severally covenants and agrees that from and after
the date of this Agreement through the Closing Date as relates to it, it will
comply, and as relates to the Joint Venture or Harriscope, it will cause the
Joint Venture or Harriscope, as the case may be, to comply, with the following
provisions.
6.1 APPLICATION FOR FCC CONSENT; HSR ACT NOTIFICATION
(a) As promptly as practicable and no later than ten (10)
business days following execution of this Agreement, the Sellers and Buyer shall
file an application with the FCC requesting the FCC's consent to the transfer of
the NST Venture Interest and the Shares to Buyer (the "FCC APPLICATION"). The
parties will use their reasonable best efforts to prosecute the FCC Application
diligently and expeditiously to a favorable conclusion (provided that the
parties shall not be obligated to participate in any evidentiary hearing at the
FCC or to make any payments to the FCC in connection with this transaction other
than filing fees). The Sellers and Buyer mutually agree to provide (and each
Seller agrees to cause Harriscope and the Joint Venture to provide) whatever
additional information the FCC may request in processing the FCC Application,
and to furnish such information within the time established by the FCC in its
request and any reasonable and necessary extension thereof, and otherwise to
cooperate in the filing and processing of the FCC Application.
(b) As promptly as practicable and no later than fifteen
(15) days following execution of this Agreement, the Sellers and Buyer shall
file all required notifications and documentation (other than information
required pursuant to any "second request", which will be filed promptly if
required) required by the HSR Act (the "HSR NOTIFICATIONS"). The parties will
use their respective reasonable best efforts to prosecute the HSR Notifications
diligently and expeditiously to a favorable conclusion. The Sellers and Buyer
mutually agree to provide (and each Seller agrees to cause Harriscope and the
Joint Venture to provide) timely whatever additional information the appropriate
regulatory authorities may request in processing the HSR Notifications, and
otherwise to cooperate in the filing and processing of the HSR Notifications.
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6.2 INSPECTION OF THE STATION; ENGINEERING INSPECTION
Upon reasonable advance notice, Buyer and Buyer's
representatives may make, during normal business hours, such investigation of
the Joint Venture's and Harriscope's properties, books, records, contracts,
commitments, facilities, premises and Assets, including the Station, as they
deem necessary or advisable to familiarize themselves with such matters. All
requests made by Buyer's representatives in connection with any such
investigation shall be made to a single representative designated by the
Sellers. Buyer's representatives shall have reasonable access during normal
business hours to the properties, documents, books, contracts, commitments,
facilities, premises and records of the Sellers in the Sellers' possession and
the Sellers shall cause the employees of the Station to furnish Buyer or its
representatives with such available information with respect to such matters as
Buyer shall from time to time reasonably request and otherwise to cooperate with
Buyer in the conduct of any investigations that Buyer wishes to conduct. Prior
to the Closing, Buyer and Buyer's consulting engineers and other representatives
of Buyer may, at Buyer's expense, conduct engineering and other tests and
inspections of the Station and the Assets.
6.3 ENVIRONMENTAL INVESTIGATION
Upon reasonable advance notice, Buyer and Buyer's
representatives may enter, inspect and investigate the Properties, such
inspection to be completed prior to Closing. In order to complete such
investigation, Buyer or its representative shall have the right but not the
obligation: (a) to conduct tests (including a "Phase I" and/or "Phase II"
environmental study) of the structures, soil, surface or subsurface waters, and
air quality at, in, on, beneath or about the Properties, in a manner consistent
with good engineering practice; (b) to inspect all records, reports, permits,
applications, monitoring results, studies, correspondence, data and any other
information or documents relevant to Hazardous Materials or other environmental
conditions; and (c) to inspect all buildings and Tangible Personal Property at
the Properties for friable asbestos-containing materials or other Hazardous
Materials. The Sellers agree to permit Buyer reasonable access to all portions
of the Properties, during regular business hours; provided, however, that any
inspection pursuant to this provision shall be commenced by Buyer within thirty
(30) days of the execution of this Agreement, and provided further that within
fifteen (15) days after the receipt by Buyer of any third-party report relating
to such investigation, Buyer shall inform Sellers of any issues it believes are
relevant to the provisions of this Agreement. Buyer shall have the right to
terminate its obligations under this Agreement without penalty upon written
notice to Sellers in the event that Buyer's environmental investigation
discloses any violation of or any remedial work required by any applicable laws
to the Joint Venture or Harriscope which would cost in excess of $250,000 in the
aggregate to cure and remediate; PROVIDED, HOWEVER, that the Sellers shall have
the right either to take or cause to be taken remedial action as is
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necessary to eliminate such violation(s) and complete such remedial work so as
to eliminate any liability which could arise therefrom, and, in the event of
such curative and remediative action, Buyer shall not be entitled to terminate
this Agreement pursuant to this sentence. Buyer agrees to keep and hold
confidential any and all reports, summaries, studies or results that are the
product of its pre-Closing investigations of the Properties, to provide copies
of such reports to Sellers within five business days of receipt of any request
therefrom, and not to disclose such reports without the written consent of the
Sellers or unless required to do so by applicable law or in connection with any
legal action. Buyer agrees to notify Sellers prior to initiating a Phase II
environmental study. In addition, Buyer shall obtain insurance of at least $1
million as relates to the conduct of the Phase I and/or Phase II environmental
study prior to conducting any such study, naming as additional insureds such
entities as Sellers shall reasonably request and providing Sellers with a copy
of the certificate of insurance relating thereto.
6.4 RESTRICTIONS ON TRANSFER OF NST VENTURE INTEREST AND SHARES
(a) From the date of this Agreement until the Closing, no
Seller shall directly or indirectly, voluntarily or involuntarily, by operation
of law or otherwise, (i) assign, sell, mortgage, pledge, hypothecate or
otherwise dispose of or encumber, or permit or suffer to exist any Encumbrance
on, all or any portion of its respective NST Venture Interest or Shares or the
Assets (other than Permitted Liens on the Assets) or such Seller's direct or
indirect, legal or beneficial interest in the Joint Venture or Harriscope or
such Seller's rights and obligations under either the Joint Venture Agreement or
this Agreement or change such Seller's ownership percentage in the Joint Venture
or the Shares or (ii) admit new or additional members or stockholders to the
Joint Venture or Harriscope or (iii) transfer any rights or obligations
hereunder without the prior written consent of Buyer, which may be withheld in
Buyer's sole and absolute discretion or (iv) enter or continue negotiations or
enter into any contract, agreement or understanding of any kind with respect to
the matters described in (i), (ii) and (iii).
6.5 CONTROL OF THE STATION
Prior to Closing, Buyer shall not, directly or indirectly,
control, supervise or direct the operations of the Station; such operation,
including complete control and supervision of all of the Station's programs,
employees, and policies, shall be the sole responsibility of the Joint Venture.
The provision of services by TGI to the Joint Venture as contemplated by the
Network Affiliation and Representation Agreement between the Joint Venture and
Telemundo Group, Inc. shall not be construed as constituting such control or
supervision. On and after the Closing, the Sellers shall not, directly or
indirectly, control, supervise or direct the operation of the Station.
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6.6 CONSENT TO TRANSACTION
Each Seller waives any rights such Seller may have under the
Joint Venture Agreement, the Shareholders Agreement pertaining to Harriscope
dated May 1, 1980 (the "SHAREHOLDERS AGREEMENT"), or otherwise to object to or
otherwise restrict the transfer of the NST Venture Interest or the Shares
contemplated by this Agreement or to purchase the NST Venture Interest or the
Shares as contemplated by this Agreement and consents to the transactions
contemplated herein.
6.7 NOTICES
The Sellers shall promptly notify Buyer in writing of, and
furnish to Buyer any information that the Buyer may reasonably request with
respect to, the occurrence of any event or the existence of any state of facts
that would result in the Sellers' representations and warranties not being true
in any material respect as of the Closing Date or which as of the Closing Date
would substantially impair the Sellers' ability to perform their obligations
under this Agreement. No notification pursuant to this Section shall in any
manner constitute a waiver by Buyer of any of the conditions precedent to the
Closing hereunder.
6.8 SUPPLEMENT TO DISCLOSURES
Sellers shall update the schedules to this Agreement from
time to time prior to Closing to reflect matters or circumstances that, if known
or existing at the time the Agreement was executed, would have been included on
such schedules. Notwithstanding the preceding sentence, for purposes of
determining the parties rights and obligations under this Agreement, the
schedules delivered by the Sellers shall be deemed to include only that
information contained therein on the date of this Agreement.
6.9 REPRESENTATIONS, ETC.
Disclosure of any matter set forth in any one schedule (or
in this Agreement) shall, if reasonably described, be deemed to be set forth on
any other schedule for which such matter is applicable.
6.10 DRAKE PROPERTY
Prior to the Closing, Sellers shall have caused the Joint
Venture to have sold, transferred or distributed to its partners the Drake
Avenue Property (as previously described to Buyer), including all liabilities
related thereto (and shall be done in a manner that will not create any Tax
liability to the Joint Venture or
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Harriscope, other than liabilities which are fully indemnified under the terms
of this Agreement).
6.11 OTHER COVENANTS
(a) Sellers shall cause the Harris Note to be repaid in
full and the security interest relating thereto to be released prior to Closing.
(b) The Joint Venture shall maintain substantially the same
type of, and substantially the same expenditures on, advertising, community
affairs and promotion as it has supplied for comparable previous periods.
(c) Sellers shall be responsible for satisfying (on or
after Closing) the BMI liability described to Buyer which is in existence on the
Closing Date.
(d) On or prior to Closing, Sellers will provide the tax
basis for U.S. federal income tax purposes in each of the material Assets of the
Joint Venture as set forth in the Joint Venture's books and records as of the
Closing Date, and will provide a statement as to the tax basis for U.S. federal
income tax purposes of Harriscope as of the Closing Date in the Harriscope
Interest.
7. CONDITIONS TO OBLIGATIONS OF BUYER PRIOR TO THE CLOSING
The obligations of Buyer under this Agreement to consummate the
Closing are subject to the fulfillment, on or before the Closing Date, of the
following conditions precedent, each of which may be waived in writing in the
sole discretion of Buyer.
7.1 CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF THE
SELLERS; COMPLIANCE WITH COVENANTS AND OBLIGATIONS
The representations and warranties of the Sellers shall be
true on and as of the Closing Date in all material respects as though such
representations and warranties were made on and as of such date, except for any
changes consented to in writing by the Buyer or except for representations and
warranties which refer to a specified date (which shall be true in all material
respects on such specified date). The Sellers shall have performed and complied
in all material respects with all terms, conditions, covenants, obligations,
agreements and restrictions required by this Agreement to be performed or
complied with by each Seller, prior to or at the Closing Date.
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7.2 CORPORATE AND OTHER PROCEEDINGS
All corporate and other similar proceedings required to be
taken on the part of each Seller and Harriscope to authorize or carry out this
Agreement shall have been taken.
7.3 GOVERNMENTAL APPROVALS
(a) An FCC Order approving the transfer of the NST Venture
Interest and the Shares to Buyer shall have become a Final Order. For purposes
of this Section 7.3, (a) an "FCC ORDER" means an order of the FCC, or of the
Mass Media Bureau acting under delegated authority, approving the transfer of
the NST Venture Interest and the Shares to Buyer in accordance with this
Agreement, as proposed in the FCC Application filed pursuant to Section 6.1 of
this Agreement, without conditions (other than existing License conditions as of
the date hereof) that (i) are materially adverse to Buyer (or TGI) or (ii) in
any way materially diminish the Buyer's operating rights with respect to the
Station, except any such condition expressly accepted by Buyer in writing, and
(b) a "FINAL ORDER" means an FCC Order that is no longer subject to judicial,
administrative or any other review; provided that, at Buyer's sole option and
subject to paragraph (b), upon at least ten (10) business days' notice to the
Sellers, the Closing may take place after December 31, 1995 following the
issuance of an FCC Order approving the transfer of the NST Venture Interest and
the Shares to Buyer but before a Final Order.
(b) In the event that the Closing occurs prior to a Final
Order as contemplated by the proviso set forth above, the Buyer acknowledges
that it is assuming the risk of Closing prior to the FCC Order becoming a Final
Order and agrees to indemnify the Sellers for all reasonable costs and expenses
incurred by Sellers in connection with such early Closing after issuance of the
FCC Order including but not limited to those costs and expenses arising from
Sellers appearing before, or making filings with, the FCC with respect to the
FCC Order; provided, that this provision shall not apply to the extent any
challenge to the FCC Order relates to a fact which would have constituted a
misrepresentation or breach of Sellers' representations and warranties or
obligations under this Agreement.
(c) All other consents, approvals and authorizations of any
other Governmental Authorities which are necessary for the transfer by the
Sellers of the NST Venture Interest and the Shares shall have been obtained and
shall no longer be subject to judicial, administrative or other review. The
waiting period (and any extensions thereof) as prescribed by the regulations
promulgated under the HSR Act shall have expired or shall have been terminated.
7.4 ADVERSE PROCEEDINGS
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No preliminary or permanent injunction or temporary
restraining order of any federal or state court, and no order or any
governmental authority, which prevents or prohibits the consummation of the
transactions contemplated by this Agreement, shall be issued and remain in
effect.
7.5 OPINION OF COUNSEL
Buyer shall have received an opinion of Fischel & Kahn,
Ltd., counsel to the Sellers, and other attorneys acceptable to Buyer, dated as
of the Closing Date, in form and substance as shall be reasonably satisfactory
to Buyer's counsel.
7.6 CLOSING DELIVERIES
Buyer shall have received at or prior to the Closing each of
the following documents:
(a) an assignment of the NST Venture Interest, executed by
NST, in form and substance satisfactory to Buyer and its counsel, and
certificates representing all of the Shares, in the name of Buyer or its
designee;
(b) a guaranty, executed by a person or entity reasonably
acceptable to Buyer (the "Harris Group Guarantor"), and in form and substance
reasonably acceptable to Buyer, dated as of the Closing Date pursuant to which
the Harris Group Guarantor guarantees the prompt and complete payment and
performance of the obligations of the Harris Group under Section 9.1 of this
Agreement; it being agreed that the guaranty will be primary (but total
liability cannot exceed the limits contemplated by Section 9) and will have a
term of six years (subject to extension in the event a Claim or threatened Claim
is pending at the end of the six year period which is not resolved prior to the
end of such six year period), and will provide that the Harris Group Guarantor
will maintain a minimum net worth during the period of the guaranty of $20
million.
(c) a guaranty, executed by Oak Industries, Inc. ("Oak"), a
publicly traded corporation and the ultimate corporate parent of NST (the "OAK
GUARANTOR"), and in form and substance reasonably acceptable to Buyer, dated as
of the Closing Date, pursuant to which the Oak Guarantor guarantees the prompt
and complete payment and performance of the obligations of NST under Section 9.1
of this Agreement it being agreed that, the guaranty will be primary (but total
liability cannot exceed the limits contemplated by Section 9) and will have a
term of six years (subject to extension in the event a Claim or threatened Claim
is pending at the end of the six year period which is not resolved prior to the
end of such six year period).
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(d) a certificate executed by each Seller evidencing
satisfaction by each Seller of the conditions specified in this Section 7;
(e) a certificate of the Secretary of State of the state of
incorporation or formation of each Seller that is a corporation (each, a
"CORPORATE SELLER"), and Harriscope as to the legal existence and good standing
of each Corporate Seller, and Harriscope, as of a date no more than five
business days prior to the Closing;
(f) certificates of the Secretary of each Corporate Seller
attesting to the incumbency of each Corporate Seller's officers, and the
authenticity of the resolutions authorizing the transactions contemplated by
this Agreement;
(g) existing title insurance commitments and currently
available surveys with respect to the Real Properties;
(h) the minute books of Harriscope not previously delivered
to Buyer under this Agreement;
(i) "FIRPTA" certificates executed by each of the Sellers
in a form reasonably acceptable to Buyer. If such certificates are not
delivered to Buyer by a Seller, Buyer shall be entitled to withhold 10% of the
portion of the Purchase Price payable to such Seller;
(j) Resignations of all officers and directors of the Joint
Venture and Harriscope who are representatives of the Harris Group or NST, as
Buyer may request.
(k) Certification by an officer of the Joint Venture or the
Sellers that the Harris Note has been repaid in full and the security interest
relating thereto has been released.
(l) Such other documents, instruments or certificates as
the Buyer's counsel may reasonably request to fulfill the terms and conditions
of this Agreement.
7.7 ABSENCE OF MATERIAL CHANGE
There shall have been no material adverse changes since the
date of the Current Financial Statements in the business, operations, condition
(financial or otherwise), properties, assets or liabilities of either the Joint
Venture, Harriscope or of the Station (other than those affecting the television
broadcast industry or the Chicago television market generally or as may be
directly attributable to programming provided by TGI or competition from
Univision (assuming compliance
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with the covenant in Section 6.11(b))), except changes contemplated by this
Agreement.
7.8 CONSENTS OF LENDERS, LESSORS AND OTHER THIRD PARTIES
Sellers shall have received all requisite consents and
approvals of all lenders, lessors and other third parties whose consent or
approval is required in order for Sellers to consummate the transactions
contemplated by this Agreement.
8. CONDITIONS TO OBLIGATIONS OF THE SELLERS
The obligations of the Sellers under this Agreement to consummate
the Closing hereunder are subject to the fulfillment, on or before the Closing
Date, of the following conditions precedent, each of which may be waived in
writing in the sole discretion of the Sellers.
8.1 CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF BUYER
The representations and warranties of Buyer in this
Agreement shall be true on and as of the Closing Date in all material respects
as though such representations and warranties were made on and as of such date,
except for any changes consented to in writing by the Sellers or except for
representations or warranties which refer to a specified date (which shall be
true in all material respects on such specified date). Buyer shall have
performed and complied in all material respects with all terms, conditions,
obligations, agreements and restrictions required by this Agreement to be
performed or complied with by it prior to or at the Closing.
8.2 CORPORATE PROCEEDINGS
All corporate proceedings required to be taken on the part
of Buyer to authorize or carry out this Agreement shall have been taken.
8.3 GOVERNMENTAL APPROVALS
Subject to Buyer's right under Section 7.3 to proceed to a
Closing upon the issuance of an FCC Order, all consents, approvals and
authorizations of the FCC and other Governmental Authorities, if any, that are
necessary for the consummation by Buyer of the transactions contemplated by this
Agreement shall have been obtained. The waiting period (and any extensions
thereof) as prescribed by the regulations, promulgated under the HSR Act shall
have expired or shall have been terminated.
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8.4 ADVERSE PROCEEDINGS
No preliminary or permanent injunction or temporary
restraining order of any federal or state court, and no order or any
governmental authority, which prevents or prohibits the consummation of the
transactions contemplated by this Agreement, shall be issued and remain in
effect.
8.5 OPINION OF COUNSEL
The Sellers shall have received an opinion of Akin Gump
Strauss Hauer & Feld, LLP, counsel to Buyer and other attorneys acceptable to
Sellers, dated as of the Closing Date, in form and substance as shall be
reasonably satisfactory to Sellers' counsel.
8.6 CLOSING DELIVERIES
The Sellers shall have received at or prior to Closing each
of the following:
(a) the Purchase Price, subject to Buyer's right to offset
the amount thereof by delivery of the Deposit on the Closing Date to the Sellers
pursuant to the Escrow Agreement;
(b) a guaranty, executed by TGI, and in form and substance
reasonably acceptable to Seller, dated as of the Closing Date, pursuant to which
TGI guarantees the prompt and complete payment and performance of the
obligations of Buyer under Section 9.3 of this Agreement, it being agreed by the
parties that the guaranty will be primary (but total liability cannot exceed the
limits contemplated by Section 9) and will have a term of six years (subject to
extension in the event a Claim or threatened Claim is pending at the end of the
six year period which is not resolved prior to the end of such six year period);
(c) a certificate of the President and Chief Financial
Officer of Buyer evidencing satisfaction of the conditions specified in this
Section 8;
(d) a certificate of the Secretary of State of the State of
Delaware as to legal existence and good standing of Buyer as of a date not more
than five business days prior to the Closing;
(e) a certificate of the Secretary of Buyer attesting to
the incumbency of Buyer's officers, the authenticity of the resolutions
authorizing the transactions contemplated by this Agreement, and the
authenticity and continuing validity of the charter documents delivered pursuant
to Section 3.1; and
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(f) such other documents, instruments or certificates as
the Sellers' counsel may reasonably request to fulfill the terms and conditions
of the Agreement.
9. INDEMNIFICATION
9.1 INDEMNIFICATION BY THE SELLERS
(a) From and after the Closing, each of NST and the Harris
Group, severally, and not jointly, shall indemnify and hold Buyer and Harriscope
harmless from and against any and all Claims (as defined below) arising out of
or accruing from (i) any misrepresentation or breach of the representations or
warranties made by NST or the Harris Group relating solely to NST, Harriscope,
the Stockholders, the Shares or the NST Venture Interest (the "Seller Matters")
set forth in this Agreement or in any certificate delivered by NST or the Harris
Group or in any schedule or exhibit furnished to Buyer pursuant to this
Agreement at or before the Closing and relating to the Seller Matters, and (ii)
any non-compliance by NST or the Harris Group of any covenants, agreements or
undertakings made by such party contained in or made pursuant to this Agreement
relating to the Seller Matters.
(b) From and after the Closing, each of NST and the Harris
Group, shall indemnify and hold Buyer and Harriscope harmless from and against
any and all liabilities, damages, losses, costs and expenses, including
reasonable attorney's fees (collectively, "CLAIMS"), arising out of or accruing
from (i) any misrepresentation or breach of the representations and warranties
of NST or the Harris Group set forth in this Agreement relating other than to
Seller Matters or in any certificate delivered by NST or the Harris Group or in
any schedule or exhibit furnished to Buyer pursuant to this Agreement at or
before the Closing relating other than to Seller Matters; (ii) except as
explicitly provided in Section 5, any non-compliance by NST or the Harris Group
with any covenants, agreements or undertakings of the Sellers, the Joint Venture
or Harriscope contained in or made pursuant to this Agreement relating other
than to Seller Matters; (iii) any and all Taxes (including any Taxes imposed on
Harriscope, the Joint Venture, Buyer, or any affiliated group of which Buyer is
or will be a member) relating to the income, business, property or operations of
the Joint Venture or Harriscope or the Assets or any other Taxes (including any
Taxes arising as a result of the several tax liability of members of an
affiliated group under U.S. Treasury Regulations Section 1.1502-6) for which the
Joint Venture or Harriscope may be liable (A) in respect of any taxable period
ending on or prior to the Closing Date, or, in the case of any taxable period
that includes, but does not end on the Closing Date, the portion of such period
ending on the Closing Date (a "PRE-CLOSING PERIOD") or (B) in respect of any
period (or portion thereof) beginning on or after the Closing Date to the extent
such Taxes are attributable to events, occurrences, transactions, sales,
services or rentals occurring or performed on or prior to the Closing Date and
(iv) any and all Taxes relating to NST's ownership of its NST
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Venture Interest or Harriscope's ownership of its interest in the Joint Venture,
including Harriscope's and NST's proportionate share of any and all Taxes
(including any real property taxes, personal property taxes or similar ad
valorem obligations) levied or imposed upon, or in connection with, the Assets
of the Joint Venture or Harriscope or the conduct or operation of the business
of the Joint Venture on or before the Closing Date and (v) (A) the BMI liability
described to Buyer in existence on the Closing Date (and any breach of the
covenant set forth in Section 6.11(c), (B) the Drake Property or any breach of
the representation set forth in Section 2.14 relating to the Drake Property or a
breach of the covenant in Section 6.10), (C) matters relating to the general
manager of the Joint Venture (including as relates to his employment or any
statements, promises or agreements entered into, if any) prior to Closing or (D)
the John Decorah, WGBO and Chicago Communications Service as WSNS TV, Channel 44
claims referred to in Schedule 2.10 as relates to action or inaction occurring
prior to Closing ((A), (B), (C) and (D) collectively, the "Subsection V
Matters"). The obligation of Sellers to indemnify Buyer pursuant to clauses
(iii) and (iv) in the preceding sentence shall exist regardless of whether the
liability for any Taxes described in such clauses is reflected in the Current
Financial Statements or has been disclosed to Buyer in any manner. The parties
hereto agree that all real property taxes, use taxes, personal property taxes
and similar AD VALOREM obligations that are levied on Harriscope or the Joint
Venture or with respect to the Assets or the Business, or with respect to the
assets or business of Harriscope, for assessment periods within which the
Closing Date occurs shall be apportioned between pre- and post-closing periods
based on the number of days in any such period falling on or before the Closing
Date, on the one hand, and after the Closing Date, on the other hand. The
parties hereto also agree that income or similar taxes levied for an assessment
period within which the Closing Date occurs should be allocated between pre- and
post-closing periods by treating the Closing Date as if it were the last day of
a short taxable period. The parties hereto agree that nothing contained in this
Section 9.2 shall be interpreted as providing Buyer or Harriscope with the right
to receive an indemnity payment for Taxes on any gain recognized by Harriscope
arising solely as a consequence of (i) any sale or disposition after the Closing
by Harriscope of all or a portion of the Harriscope Interest (including any sale
or disposition of the Harriscope Interest resulting from the termination of the
Joint Venture pursuant to Section 708 of the Internal Revenue Code of 1986, as
amended (the "Code")) or (ii) any sale or disposition by Harriscope on or after
the Closing resulting from Buyer causing Harriscope to make an election under
Section 338 of the Code.
(c) All amounts paid pursuant to Section 9 of this
Agreement by one party to another party (other than interest payments) shall be
treated by such parties as an adjustment to either the NST Purchase Price or the
Harriscope Purchase Price, as applicable. If contrary to the intent of the
parties any payment made pursuant to Section 9 of this Agreement is treated as
taxable income of the recipient, then the payor shall indemnify and hold
harmless the recipient from any actual net liability for Taxes attributable to
the receipt of such payment.
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9.2 LIMITATIONS ON INDEMNIFICATION BY THE SELLERS
Buyer's right to indemnification pursuant to Section 9.1 is
subject to the following specific limitations:
(a) Buyer shall not be entitled to assert any right of
indemnification hereunder for any Claims pursuant to Section 9.1 after eighteen
(18) months from the Closing Date, except that with respect to Claims arising
out of a breach of any representations or warranties set forth in (i) Sections
2.15(a), (b) and (e), 5.2 and 9.1(b)(iii) and (iv), Buyer's right to
indemnification shall expire after the expiration of the applicable tax statute
of limitations, (ii) Section 2.20, Buyer's right to indemnification shall expire
after 3 years from the Closing Date and (iii) Sections 2.4, 2.6 and 2.9(a), (b)
and (c), Buyer's right to indemnification shall expire after 5 years from the
Closing Date, and (iv) Subsection V Matters, Buyer's right to indemnification
shall expire after 6 years from the Closing Date, and except that if there shall
be pending any Claim or threatened Claim under this Agreement for which Sellers
have been given notice on or before the end of the applicable expiration period
hereunder at the time Buyer's right to indemnification would otherwise expire,
Buyer shall continue to have the right to be indemnified with respect to such
Claim or threatened Claim.
(b) Buyer shall not be entitled to indemnification for any
Claims (except for such breaches as may have been effected willfully and
knowingly) until the aggregate Claims suffered by Buyer exceeds $250,000,
whereupon Buyer shall be entitled to indemnification for all Claims suffered by
Buyer (including the first $250,000 in Claims). In no event shall (i) NST be
liable for indemnification Claims in excess of (A) $29,562,000 for Claims
against it arising under Sections 2.4, 2.6, 2.9(a), (b) and (c), 2.15(a), (b)
and (e), 5.2, Subsection V Matters, or 9.1(b)(iii) and (iv) and (B) $3,000,000
for all other indemnification Claims and (ii) the Harris Group be liable for
indemnification Claims in excess of (A) $15,138,000 for Claims arising under
Section 2.4, 2.6(b), 2.9(a), (b) and (c), 2.15(a), (b) and (e), 5.2, Subsection
V Matters, or 9.1(b)(iii) and (iv) and (B) $1,500,000 for all other
indemnification Claims.
In the event that Buyer seeks indemnification pursuant to
the provisions of this Agreement for more than one Claim, the aggregate
liability of NST hereunder for all Claims shall not exceed $29,562,000 and the
aggregate liability of the Harris Group hereunder shall not exceed $15,138,000.
The liability of the Harris Group pursuant to Section 9.1(b)
for any individual Claim by Buyer in connection with any matter relating solely
to the Joint Venture (including, but not limited to, the business, operations
and financial condition of the Station), shall be limited to 25.23% of the
aggregate amount of such Claim. The liability of NST pursuant to Section 9.1(b)
for any individual Claim by Buyer in connection with any matter relating solely
to the Joint Venture (including, but
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not limited to the business, operations and financial condition of the Station)
shall be limited to 49.27% of the aggregate amount of such Claim.
Notwithstanding the above, Buyer shall be indemnified for
the following Claims even if aggregate Claims suffered by Buyer have not
exceeded $250,000 (and such Claims shall not be treated as Claims counting
toward satisfying such $250,000 "basket"): any Subsection V Matters and Claims
for which indemnification is sought pursuant to Section 9.1(b)(iii) and (iv)
which relate to any taxable periods beginning after December 31, 1994.
(c) Buyer shall be prohibited from bringing any Claim
against (i) NST relating to the Harris Group's ownership of its Shares being
sold hereunder or any breach by the Harris Group of any representation or
covenant relating to the Seller Matters, and (ii) the Harris Group relating to
NST's ownership of the NST Venture Interest or NST's ownership of its Shares
being sold hereunder or any breach by NST of any representation or covenant
relating to the Seller Matters.
(d) Following the Closing, the indemnification afforded by
this Section 9 shall be the sole and exclusive remedy against Sellers for any
losses of the Buyer in respect of the matters covered by such indemnification
provision.
9.3 INDEMNIFICATION BY BUYER
(a) From and after the Closing, Buyer shall indemnify and
hold the Sellers harmless from and against any and all Claims arising out of or
accruing from (i) any misrepresentation or breach of the representations and
warranties of Buyer set forth in this Agreement or in any certificate delivered
by Sellers or in any schedule or exhibit furnished to the Sellers pursuant to
this Agreement at or before the Closing; (ii) any non-compliance by Buyer with
any covenants, agreements or undertakings of Buyer contained in or made pursuant
to this Agreement; (iii) any physical damage to the tangible property of the
Joint Venture arising directly out of Buyer's investigations pursuant to Section
6.3 hereof (provided that such indemnification shall be available from the
execution of this Agreement), (iv) any and all Taxes relating to income accruing
on and after the Closing Date other than any Taxes attributable to events,
occurrences, transactions, sales, services or rentals occurring or performed on
or prior to the Closing Date, (v) any and all non-compliance on or after the
Closing Date, by the Joint Venture with any contracts, leases, liabilities or
other obligations of the Joint Venture (except to the extent such non-compliance
relates to or results in whole or part from any action or inaction or
misrepresentation of Sellers, Harriscope or the Joint Venture on or prior to
Closing) and (vi) indemnification contemplated by Section 7.3(b) (provided that
such indemnification shall be available from the execution of this Agreement).
Sellers' right to indemnification hereunder with respect to (i) and (ii) above
shall expire, and Sellers shall not be entitled to assert any right of
indemnification hereunder for claims after
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eighteen (18) months from the Closing Date and Sellers right to indemnification
hereunder with respect to (iv) above shall expire after the expiration of the
applicable tax statute of limitations and except that if there shall be pending
any Claim or threatened Claim under this Agreement for which Buyer has been
given notice on or before the end of the applicable expiration period hereunder
at the time Sellers' right to indemnification would otherwise expire, Sellers
shall continue to have the right to be indemnified with respect to such Claim or
threatened Claim.
(b) The aggregate liability of Buyer for indemnification of
Claims (including pursuant to Section 7.3) shall not exceed $4,500,000.
(c) Following the Closing, the indemnification afforded by
this Section 9 shall be the sole and exclusive remedy against Buyer for any
losses of the Sellers in respect of the matters covered by such indemnification
provision.
9.4 CLAIMS FOR INDEMNIFICATION
Subject to the provisions of Section 9.7 hereof, whenever
any Claim shall arise for indemnification hereunder, the party seeking
indemnification (the "INDEMNIFIED PARTY"), shall promptly notify the party from
whom indemnification is sought (the "INDEMNIFYING PARTY") in writing of the
Claim and, when known, a summary of the facts constituting the basis for such
Claim. If any such Claim for indemnification hereunder results from or is in
connection with any Claim or legal proceedings by a third party, the notice to
the Indemnifying Party shall specify, if known, the amount or an estimate of the
amount of the liability arising therefrom. The Indemnified Party shall not
settle or compromise for the payment of money any Claim by a third party for
which it is entitled to indemnification hereunder without the prior written
consent of the Indemnifying Party, which shall not be unreasonably withheld,
unless suit shall have been instituted against it and the Indemnifying Party
shall not have taken control of such suit after notification thereof as provided
in Section 9.5 of this Agreement.
9.5 DEFENSE BY INDEMNIFYING PARTY
Subject to the provisions of Section 9.7 hereof, in
connection with any Claim giving rise to indemnity hereunder resulting from or
arising out of any Claim or legal proceeding by a person who is not a party to
this Agreement, the Indemnifying Party at its sole cost and expense shall, upon
written notice from the Indemnified Party, assume the defense of any such Claim
or legal proceeding. The Indemnified Party shall be entitled to participate in
(but not control) the defense of any such action, with its counsel and at its
own expense. If the Indemnifying Party does not assume the defense of any such
Claim or litigation resulting therefrom within 30 days after the date such Claim
is made and notice is
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received requesting indemnification, (a) the Indemnified Party may defend
against such Claim or proceeding, in such manner as it may deem appropriate,
including, but not limited to, settling such Claim or proceeding, after giving
notice of the same to the Indemnifying Party, on such terms as the Indemnified
Party may deem appropriate, for the account and at the risk of the Indemnifying
Party, and (b) the Indemnifying Party shall be entitled to participate in (but
not control) the defense of such action, with its counsel and at its own
expense. If the Indemnifying Party thereafter seeks to question the manner in
which the Indemnified Party defended such third party Claim or the amount or
nature of any such settlement, the Indemnifying Party shall have the burden to
prove by a preponderance of the evidence that the Indemnified Party did not
defend or settle such third party Claim in a reasonably prudent manner.
9.6 SURVIVAL OF REPRESENTATIONS
Subject to Section 9.2, all representations and warranties
made by the parties herein or in any schedule, certificate or exhibit furnished
in connection herewith shall survive the Closing, and shall also survive and
shall be unaffected by (and shall not be deemed waived by) any investigation,
audit, appraisal, or inspection at any time made by or on behalf of any party
hereto.
9.7 TAX CLAIMS
(a) Claims Against Seller -- Notice and Consent.
Notwithstanding anything to the contrary in Section 9.4 hereof, if any claim for
Tax relating in any way to Harriscope or the Joint Venture in respect of any
Pre-Closing Periods is asserted by any taxing authority against any Seller, such
Seller shall promptly notify Buyer in writing of such fact. Buyer or its duly
appointed representative shall be allowed to attend all meetings between Seller
and the taxing authority in question and shall be provided with copies of all
correspondence and documents relating to such claim. Seller and its duly
appointed representatives shall have the sole right to negotiate, resolve,
settle or contest any such claim for Tax; provided, however, that Seller shall
not settle, compromise or abandon without Buyer's prior written consent any
claim for Tax which would adversely affect the tax liability of Harriscope, the
Joint Venture, or Buyer in any Post-Closing Period to any extent (including, but
not limited to, the imposition of income tax deficiencies, the reduction of
asset basis or cost adjustments, the lengthening of any amortization or
depreciation periods, the denial of amortization or depreciation deductions, or
the reduction of loss or credit carryforwards). Such consent shall not be
unreasonably withheld, and shall not be necessary to the extent Seller has fully
indemnified Harriscope, the Joint Venture, or Buyer against the effects of any
such settlement.
(b) Claims Against Buyer, Harriscope or the Joint Venture.
Notwithstanding anything to the contrary in Sections 9.4 and 9.5 hereof, if any
Claim for Tax is asserted by any taxing authority against Buyer, the Joint
Venture, or
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Harriscope (whether in its own capacity or as successor in interest to a
predecessor corporation) that, if successful, would result in the
indemnification of Buyer or Harriscope, the parties hereto agree to abide by the
following procedures in handling any such Claim:
(i) NOTICE OF CLAIM. Buyer or Harriscope shall
promptly notify the relevant Sellers in writing of such assertion of a Claim for
Taxes. In the event that such notice of any Claim is not given to such Sellers
within a sufficient period of time or in reasonable detail to apprise Sellers of
the nature of the Claim (in each instance taking into account the facts and
circumstances with respect to such Claim), Sellers shall not be liable to Buyer
or Harriscope under this Agreement for such
Claim to the extent, if any, that the rights of Sellers with respect to such
Claim are actually prejudiced.
(ii) CONTESTS. Subject to the provisions of the
proceeding paragraph, Buyer, Harriscope, or the Joint Venture shall take such
action in connection with contesting such Claim as the relevant Sellers shall
reasonably request in writing from time to time; provided that (i) within 30
days (or such earlier date that any payment of Taxes is due by Buyer,
Harriscope, or the Joint Venture) after the notice described in subsection
9.7(b)(i) has been delivered to Sellers, Sellers request that such Claim be
contested; (ii) prior to taking such action, Sellers have furnished to Buyer or
Harriscope, as the case may be, an opinion of Sellers' independent tax counsel,
which counsel shall be reasonably acceptable to Buyer, to the effect that a
reasonable basis exists for such contest (or appeal, in the case of an appeal
prosecuted pursuant to the proceeding paragraph); (iii) Sellers shall have
agreed to pay to Buyer or Harriscope on demand all costs and expenses which
Buyer or Harriscope may incur in connection with contesting such Claim (or
appeal), including, without limitation, reasonable attorneys' and accountants'
fees and disbursements; and (iv) if Buyer or Harriscope is requested or shall
determine to pay the Tax claimed and sue for a refund, Sellers shall have
advanced to Buyer or Harriscope, on an interest-free basis, the amount of such
Claim. In the case of any such Claim referred to above, Buyer or Harriscope, as
the case may be, shall not make payment of such Claim for at least 30 days (or
such shorter period as may be required by applicable law) after the giving of
such notice, shall give to Sellers any information reasonably requested by
Sellers relating to such Claim and otherwise shall cooperate with Sellers in
good faith in order to contest effectively any such Claim, and to the extent not
inconsistent with Buyer's or Harriscope's control over any proceedings (as
described below) insofar as they relate to issues other than those subject to
this indemnity, shall permit Sellers to participate in such proceedings relating
to such claim (or appeal).
With respect to contests against Buyer, the Joint Venture or
Harriscope, Buyer or Harriscope shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego any
and all
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administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such Claim and may, at its sole option, either pay the
Tax claimed and sue for a refund where applicable law permits such refund suits
or contest the Claim in any permissible manner; PROVIDED, HOWEVER, that Buyer or
Harriscope, as the case may be, shall (subject to the provisions of the
preceding paragraph) consider in good faith (A) any request Sellers may make
concerning the most appropriate manner in which to proceed, and (B) the manner
in which it would proceed if it were not indemnified hereunder.
9.8 TAX BENEFIT PROVISION
In the event that any Sellers shall have made sufficient payments
to Buyer or Harriscope so as to indemnify Buyer or Harriscope in full for the
amount of any Claim pursuant to Section 9.1(b)(iii) and (iv) hereof, Buyer or
Harriscope shall pay to such Sellers the amount of any Tax Benefits (as defined
below) actually received or realized by Buyer or Harriscope that have arisen
solely as a result of a timing adjustment (including without limitation any
changes to the basis of an asset, changes in connection with the capitalization
or deduction of expenses, changes in the amortization or depreciation of assets,
or changes in the timing of the inclusion of any item of income, deduction or
loss) that gave rise to such Claim. Payments of a Tax Benefit by Harriscope or
Buyer to a Seller shall be made at a reasonable period of time following the
later of (i) the filing of the applicable Tax return that evidences such Tax
Benefit, or (ii) the payment of the tax due, if any, in respect of such Tax
return referred to in clause (i). The existence and amount of any Tax Benefit
payable by Harriscope or Buyer to a Seller shall be determined by Harriscope or
Buyer (as applicable) in its reasonable discretion. Tax Benefits shall mean the
decrease, if any, in the Tax liability of, or refunds of Taxes paid by, Buyer or
Harriscope (or affiliates filing a consolidated or combined Tax return) with
respect to any Tax period ending prior to December 31, 2001 as the result of a
timing adjustment giving rise to a Claim. The amount of any such Tax Benefits
actually received or realized with respect to any Tax period shall be the
difference between the total amount of actual Tax liability (or refund claim)
for the period taking such adjustment into account, and the total amount of Tax
liability (or refund claim) if such adjustments were not taken into account;
under both calculations, Harriscope and Buyer shall be entitled to take into
account any and all past, existing, and future Tax attributes (including without
limitation net operating loss carryforwards) available to Harriscope or Buyer
(or any affiliates filing a consolidated or combined Tax Return with Buyer
and/or Harriscope) as Harriscope or Buyer deems appropriate in its reasonable
discretion.
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10. TERMINATION AND REMEDIES
10.1 TERMINATION BY AGREEMENT OF THE PARTIES
This Agreement may be terminated by the mutual written
agreement of the parties hereto. In the event of such termination by agreement,
Buyer shall have no further obligation or liability to the Sellers under this
Agreement, and the Sellers shall have no further obligation or liability to
Buyer under this Agreement.
10.2 TERMINATION BY REASON OF FAILURE TO OBTAIN FINAL ORDER
If (a) an FCC Order has not become a Final Order or the
Closing has not occurred on or before the date which is six (6) months after the
FCC Application has been filed with the FCC, (b) the FCC designates the FCC
Application for an evidentiary hearing, or (c) the FCC denies transfer of the
NST Venture Interest and the Shares contemplated by the FCC Application or
issues a Final Order in connection with such FCC Application with conditions
(other than existing License conditions as of the date hereof) that (i) are
materially adverse to Buyer (or TGI) or (ii) in any way materially diminish the
Buyer's operating rights with respect to the Station (except any such condition
expressly accepted by Buyer in writing), then in any such event Buyer or, in the
event of (a) or (b) above, any of Buyer, NST or the Harris Group may, upon
written notice to the other parties hereto, terminate this Agreement, provided,
that such notice of termination is given prior to the date on which such FCC
Order shall have become a Final Order; and provided, further, that the party
seeking to terminate this Agreement under this Section shall not be in material
breach under this Agreement. Upon termination of this Agreement in accordance
with this Section 10.2, this Agreement shall be deemed null, void, and of no
further force and effect (except for Sections 4.1 and 12, which shall survive
such termination).
10.3 REMEDIES UPON DEFAULT BY BUYER
(a) If Buyer shall default in the performance of its
obligations under this Agreement in any material respect, or if, as a result of
such default, the conditions precedent to the Buyer's or Sellers' obligation to
close specified in Sections 7 and 8 respectively, are not satisfied, or if, as a
result of any action or inaction of Buyer not otherwise permitted by this
Agreement, the conditions set forth in such Sections shall not be satisfied or
the Buyer shall be unable to secure adequate financing to consummate the
purchase of Shares and the NST Venture Interest, and, as a result, the
transactions contemplated by this Agreement are not consummated, and provided
that the Sellers shall not then be in default in any material respect in the
performance of the Sellers' obligations hereunder, the Sellers shall be
entitled, by written notice to Buyer, to terminate this Agreement and the
Sellers shall be entitled to the Deposit in accordance with the Escrow
Agreement.
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Sellers right to acquire the Deposit shall require, in addition to complying
with the provisions specified in the Escrow Agreement, that Mr. Burt Harris and
Mr. William Antle (or, if either one is no longer living, or, with respect to
Bill Antle only, if he is no longer associated with Oak, another person from
such individual's organization with familiarity with the subject matter hereof)
certify, after consulting with Buyer regarding the issue, that they each in good
faith believes that Sellers are entitled to the Deposit in accordance with the
provisions hereof and in the Escrow Agreement. The right of Sellers to acquire
the Deposit as contemplated by and under the circumstances set forth in this
Section shall be the sole remedy available to Sellers if the transactions
contemplated by this Agreement shall fail to close (other than a claim for
indemnification under Section 9.3(iii)). If after acquiring the Deposit it is
determined that Sellers were not entitled to the Deposit, Sellers shall return
the Deposit to Buyer and pay all reasonable legal fees incurred by Buyer with
respect to the return of the Deposit and interest from the date Sellers acquired
the Deposit at the prime rate specified by Citibank N.A., on such date plus 200
basis points, until the Deposit is delivered to Buyer and Buyer shall retain all
rights provided under this Agreement. Notwithstanding and not limiting the
foregoing, Sellers shall not be entitled to the Deposit if the Agreement is
terminated solely pursuant to Section 10.2 above, entirely for reasons not
attributable or related, directly or indirectly, to Buyer being in default in
the performance of its obligations under this Agreement in any respect or
Buyer's failure to secure adequate financing to consummate the purchase of
Shares and the NST Venture Interest.
10.4 REMEDIES UPON DEFAULT BY THE SELLERS
If Sellers shall default in the performance of any of their
respective obligations under this Agreement in any material respect, as a result
of such default, the conditions precedent to Buyer's or Sellers' obligation to
close specified in Sections 7 and 8 respectively, are not satisfied, or if, as a
result of the action or inaction of Sellers not otherwise permitted by this
Agreement the conditions set forth in such Sections shall not be satisfied and,
as a result, the transactions contemplated by this Agreement are not
consummated, and provided that Buyer shall not then be in default in any
material respect in the performance of Buyer's obligations hereunder (such
circumstances, the "Default Circumstances"), Buyer shall be entitled, at Buyer's
sole option: (i) to require the Sellers to consummate and specifically perform
the sale of the NST Venture Interest and the Shares in accordance with the terms
of this Agreement (including the curing of any defaults), if necessary through
injunction or other court order or process; and/or (ii) by written notice to the
Sellers, to terminate this Agreement. In the event of occurrence of the Default
Circumstances, as set forth above, Buyer shall have all rights and remedies
available at law or in equity in respect thereof (including the right to seek
specific performance as contemplated by (i) above); provided, that the maximum
amount recoverable from Sellers in respect of damages sustained as a result of
the occurrence of such Default Circumstances ("Damages") shall be $1.5 million
(which Damages shall include all
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<PAGE>
reasonable expenses, reasonable legal and other fees and out of pocket costs
associated with this Agreement, an action under this Section and the
transactions contemplated hereby); provided, that in the event of such Default
Circumstances, if prior to the date that is the earlier of (A) six (6) months
from the date of the commencement of any legal action in connection with (i)
above, (B) six (6) months from the date of written notice by any party of
termination of this Agreement as permitted under this Agreement, and (C) ten
(10) months from the date the FCC Application is filed, any Sellers or
Harriscope or any beneficial owner thereof shall enter into any agreement with
any person or entity with respect to the sale or transfer of any part or all of
the NST Venture Interests, the Harriscope Interests or the Shares or any
interests therein, Seller shall remit to Buyer an amount equal to the greater of
(x) Damages determined as in a legal action as contemplated above (which shall
not exceed $1.5 million) and (y) the difference between the amount to be paid
for such interests or shares and $44.7 million (based upon the sale of a 74.5%
interest in the Joint Venture).
10.5 SPECIFIC PERFORMANCE
The Sellers acknowledge that the NST Venture Interest
and the Shares to be sold and delivered to Buyer pursuant to this Agreement are
unique, that Buyer will suffer irreparable injury for which the Buyer has no
adequate remedy at law if the Sellers fail to perform any of their obligations
under this Agreement, and that Buyer's right to specific performance is
essential to protect the rights and interests of Buyer. Accordingly, the
Sellers hereby agree that Buyer shall have the right to have all obligations,
undertakings, agreements and other provisions of this Agreement specifically
performed by the Sellers, and that Buyer shall have the right to obtain an order
or decree of such specific performance in any of the courts of the United States
or of any state or other political subdivision thereof (in which case this
Agreement shall not be terminated and the amounts payable under Sections 10.3
and/or 10.4 shall not be paid).
11. TRANSFER AND SALES TAX
Notwithstanding any provisions of law imposing the burden of such
taxes on the Sellers or Buyer, as the case may be, the Sellers shall be
responsible for and shall pay (a) all sales, use and transfer taxes, and (b) all
governmental charges, if any, upon the sale or transfer of any of the NST
Venture Interest or the Shares; provided that Buyer shall be responsible for and
shall pay (i) any real estate transfer taxes (the "City Transfer Tax") imposed,
if any, by the City of Chicago under the City Real Estate Transfer Tax law due
to the purchase of the NST Venture Interests or the Shares or (ii) any sales,
use or transfer Tax arising as consequence of any termination of the Joint
Venture upon or after the Closing pursuant to Section 708 of the Code. If the
Sellers shall fail to pay such amounts (other than the City Transfer Tax or any
sale, use or transfer tax arising as a consequence of any termination of the
Joint
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Venture after the Closing pursuant to Section 708 of the Code) on a timely
basis, Buyer may pay such amounts to the appropriate Governmental Authority and
the Sellers shall promptly reimburse Buyer for any amounts so paid by Buyer upon
presentation of satisfactory evidence of such payment to the Sellers.
12. NO BROKERS
The Sellers represent to Buyer that the Sellers have not engaged,
or incurred any unpaid liability for any brokerage fees, finders' fees,
commissions or otherwise to, any broker, finder or agent in connection with the
transactions contemplated by this Agreement. Buyer represents to the Sellers
that Buyer has not engaged, or incurred any unpaid liability for any brokerage
fees, finders' fees, commissions or otherwise to, any broker, finder or agent in
connection with the transactions contemplated by this Agreement. The Sellers
agree to indemnify Buyer, and Buyer agrees to indemnify the Sellers, against any
claims asserted against the other parties for any such fees or commissions by
any person purporting to act or to have acted for or on behalf of the
indemnifying party (and this indemnification provision shall not be subject to
the time or monetary limitations set forth in Section 9). Notwithstanding any
other provision of this Agreement, this representation and warranty shall
survive the Closing without limitation.
13. NOTICES
Any notices, demands, consents, agreements, requests or other
communications which may be or are required to be given, served or sent by any
party to any other party or obtained from any party pursuant to this Agreement
must be in writing and must be (i) mailed by first-class United States mail,
registered or certified, return receipt requested, postage prepaid, (ii) hand
delivered personally by independent courier, or (iii) transmitted by telecopier
addressed as follows:
To the Buyer: Telemundo of Chicago, Inc.
c/o Telemundo Group, Inc.
2290 West 8th Avenue
Hialeah, FL 33010
Attention: Chief Financial Officer
Telecopier No.: (305) 889-7997
With a copy to: Akin Gump Strauss Hauer & Feld, LLP
(which shall not 399 Park Avenue
constitute notice) New York, NY 10022
Attention: Patrick J. Dooley, Esq.
Telecopier No.: (212) 872-1002
To NST or the Harriscope of Chicago, Inc.
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Stockholders: 10960 Wilshire Boulevard
Los Angeles, CA 90024
Attention: Burt I. Harris
(as the Harris Group Representative)
Telecopier No.: (310) 477-9646
and
NST
c/o Oak Industries Inc.
1000 Winter Street
Waltham, MA 02151
Attention: General Counsel
Telecopier No.: (617) 890-8585
With a copy to: Oak Industries, Inc.
(which shall not 1000 Winter Street
constitute notice) Waltham, MA 02151
Attention: General Counsel
Telecopier No.: (617) 890-8585
and
Fischel & Kahn, Ltd.
Quaker Tower
321 North Clark Street, Suite 2850
Chicago, Illinois 60610-4714
Attention: Morris G. Dyner, Esq.
Telecopier No.: (312) 527-1448
Unless otherwise specified herein, such notices or other
communications shall be deemed received (a) on the date delivered, if delivered
personally or by telecopier (with receipt confirmed); or (b) three (3) business
days after being sent, if sent by registered or certified mail.
14. SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns. The rights and
obligations of the parties under this Agreement may not be assigned or delegated
without the prior written consent of the other parties. Any assignment or
delegation in contravention of this Agreement shall be void. Notwithstanding
the foregoing, Buyer may assign all or any portion of its rights and interests
herein to one or more entities
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controlling, controlled by, or under common control with TGI, unless such
assignment would materially delay the processing of the FCC Application or HSR
Notification.
15. NO THIRD PARTY BENEFICIARIES
This Agreement and the obligations of the parties hereunder shall
operate exclusively for the benefit of the parties to this Agreement (and their
permitted assigns) and not for the benefit of any other person or entity,
including, without limitation, Essaness or any creditor, employee or former
employee of any party hereto.
16. ENTIRE AGREEMENT; AMENDMENTS; ATTACHMENTS
(a) This Agreement, all schedules and exhibits hereto, and all
agreements, certificates and instruments to be delivered by the parties pursuant
hereto represent the entire understanding and agreement between the parties
hereto with respect to the subject matter hereof and supersede all prior oral
and written, and all contemporaneous oral, negotiations, commitments and
understandings between such parties. Buyer and the Sellers may amend or modify
this Agreement, in such manner as may be agreed upon, only by a written
instrument executed by Buyer, NST and the Harris Group Representative.
(b) If the provisions of any schedule or exhibit to this
Agreement are inconsistent with the provisions of this Agreement, the provisions
of the Agreement shall prevail. The exhibits and schedules attached hereto or
to be attached hereafter are hereby incorporated as integral parts of this
Agreement.
17. EXPENSES
Except as otherwise expressly provided herein, each of Buyer and
the Sellers shall pay their own expenses in connection with this Agreement and
the consummation of the transactions contemplated hereby; provided, however,
that the Sellers and Buyer shall share equally the cost of any FCC filing fees,
but each party shall bear its own legal fees and expenses in connection
therewith.
18. FURTHER ASSURANCES
At any time and from time to time after the Closing, without
further consideration, Harriscope, the Sellers and Buyer promptly shall execute
and deliver such instruments of purchase, sale, transfer, conveyance, assignment
and confirmation, and take such other action, as reasonably necessary to
effectively transfer, convey and assign to the Buyer, and to confirm the Buyer's
interest in, the NST Venture Interest and the Shares, and to carry out the
purpose and intent of this Agreement. After the Closing, Buyer shall cooperate
and provide the Sellers or their
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representatives with access, at reasonable business times and under reasonable
circumstances, to the records and other materials of the Joint Venture and
Harriscope for the period prior to Closing necessary for the Sellers to comply
with their tax, financial or other legal obligations (including access to such
books and records that relate to any Joint Venture Account Receivables or
Harriscope Account Receivables which remain uncollected after the Collection
Period); provided that Sellers shall pay any out-of-pocket expenses incurred by
Buyer with respect to such access.
19. GOVERNING LAW
This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without regard to its conflict of laws
principles.
20. SECTION HEADINGS
The section headings are for the convenience of the parties and
in no way alter, modify, amend, limit, or restrict the contractual obligations
of the parties.
21. SEVERABILITY
The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
22. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original, but all of which shall be one and
the same document.
23. NAME CHANGE
The Buyer as stockholders shall cause Harriscope to change its
name no later than 30 days after the Closing Date. Each of the Buyer and
Harriscope agrees that after the Closing Date it shall not (except for the delay
in the name change permitted by the preceding sentence) use or employ in any
manner directly or indirectly the name "Harriscope" or any variation thereof.
24. ALTERNATE CLOSING ARRANGEMENTS
(a) If the condition set forth in Section 7.6(b) shall not be
satisfied as of the time set for Closing, Buyer may elect to close and if the
Closing shall occur, may in lieu of delivering the Harriscope Purchase Price
deliverable to the Harris Group to the Harris Group, instead deliver such
portion of the Purchase Price
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to the Escrow Agent (or another escrow agent reasonably suggested by Buyer), who
shall hold it (and make it available to satisfy indemnification claims pursuant
to Section 9.1) until the earlier of the date the Harris Group Guaranty would
have terminated as contemplated by Section 7.6(b) and the date the Harris Group
Guaranty is executed.
(b) If the condition set forth in Section 7.6(c) shall not be
satisfied as of the time set for Closing, Buyer may elect to close and if the
Closing shall occur, may in lieu of delivering the NST Purchase Price and
Harriscope Purchase Price deliverable to or for the account of NST to NST,
instead deliver such portion of the Purchase Price to the Escrow Agent (or
another escrow agent reasonably suggested by Buyer), who shall hold it (and make
it available to satisfy indemnification claims pursuant to Section 9.1) until
the earlier of the date the Oak Guaranty would have terminated as contemplated
by Section 7.6(c) and the date the Oak Guaranty is executed.
25. INTERPRETATION REGARDING RIGHTS AND OBLIGATIONS
(a) Notwithstanding anything to the contrary contained in this
Agreement, for purposes of determining the rights and obligations of the parties
hereunder (including for purposes of determining if the closing condition set
forth in Section 7.1 is satisfied and for purposes of determining whether a
representation or warranty is true for purposes of Section 9.1), the references
"to the knowledge of" any or all of the Sellers, NST, the Harris Group or the
Harris Group Representative, or words of similar import, contained in Article 2
of this Agreement, shall be given effect except for the qualifiers contained in
the provisions specified below (in which case such qualifier shall not be given
effect; i.e. the representation shall be deemed to be made without the "to the
knowledge of" (or words of similar import) qualifier): the last sentence of
2.10, the third sentence of 2.16, 2.17(b)(iii), the second sentence of 2.20(c),
and 2.20(d).
(b) The parties hereto agree that except for Sellers'
indemnification obligations pursuant to Section 9.1(b)(v)(C), any dispute
relating to amounts owed as employment compensation to the current general
manager shall not affect the other obligations of the parties hereunder.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
Purchase NST Venture Interest and Capital Stock to be duly executed as of the
date first written above.
NST:
---
NATIONAL SUBSCRIPTION TELEVISION OF
CHICAGO, INC.
By: /s/ WILLIAM E. SCHAFER
-------------------------------------
Name: William E. Schafer
-----------------------------------
Title: Chairman, President and Secretary
----------------------------------
THE STOCKHOLDERS:
----------------
NATIONAL SUBSCRIPTION TELEVISION OF
CHICAGO, INC.
By: /s/ WILLIAM E. SCHAFER
--------------------------------------
Name: William E. Schafer
------------------------------------
Title: Chairman, President and Secretary
-----------------------------------
/s/ BURT HARRIS, Voting Trustee
------------------------------------
Burt I. Harris, Voting Trustee of Harriscope of
Chicago, Inc., Voting Trust Agreement Number Two
BUYER:
TELEMUNDO OF CHICAGO, INC.
By: /s/ PETER J. HOUSMAN
---------------------------------
Name: Peter J. Housman II
Title: Chief Financial Officer
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<PAGE>
AMENDED AND RESTATED
PARTNERSHIP AGREEMENT
OF
VIDEO 44
AN ILLINOIS GENERAL PARTNERSHIP
<PAGE>
AMENDED AND RESTATED
PARTNERSHIP AGREEMENT
OF
VIDEO 44
AN ILLINOIS GENERAL PARTNERSHIP
This Amended and Restated Partnership Agreement ("Agreement") is made and
entered into as of this ___ day of _________, 199_, by and between Essaness
Theatres Corporation, a Delaware corporation ("ESSANESS"), Harriscope of
Chicago, Inc., an Illinois corporation (collectively with any wholly-owned
subsidiary, "HARRISCOPE"), and Telemundo of Chicago, Inc., a Delaware
corporation ("TELEMUNDO"). Essaness, Harriscope and Telemundo are each a
"PARTY" and a "PARTNER" and together they are the "PARTIES" or the "PARTNERS".
RECITALS
Essaness and Harriscope are parties to a joint venture agreement (the
"JOINT VENTURE AGREEMENT") among Essaness, Harriscope and National Subscription
Television of Chicago, Inc. ("NST") establishing a joint venture (the "JOINT
VENTURE") to own and operate television station WSNS-TV/Channel 44, Chicago,
Illinois (the "STATION").
Essaness holds a 25.5% interest in the Joint Venture, Harriscope holds a
50% interest in the Joint Venture and NST holds a 24.5% interest in the Joint
Venture. Immediately prior to entering into this Agreement, Telemundo has
purchased the interest of NST in the Joint Venture and all of the outstanding
capital stock of Harriscope, which has resulted in Telemundo holding, directly
or indirectly, an aggregate 74.5% interest in the Joint Venture.
Essaness, Harriscope and Telemundo are entering into this Agreement to set
forth the terms and conditions of their Joint Venture from and after the
acquisition by Telemundo of its direct and indirect interest in the Joint
Venture.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals and the terms
and conditions contained herein, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereto hereby agree as follows:
1. DEFINITIONS
Certain terms used in this Agreement shall have the meaning set forth below
for each such term. In addition, certain other terms shall have the meaning for
each such term set forth elsewhere in this Agreement.
1.1 ACTUAL ESSANESS DISTRIBUTION. The amount obtained by multiplying the
Fractional Interest of Essaness by
<PAGE>
Distributable Cash, subject to adjustment as follows: (a) if the amount of the
Minimum Essaness Distribution in any fiscal year exceeds the Actual Essaness
Distribution for such fiscal year (the cumulative amount of such excess, an
"OVERPAYMENT"), the Overpayment shall reduce Actual Essaness Distributions in
any subsequent year (or years) in which the Actual Essaness Distribution in such
fiscal year exceeds the Minimum Essaness Distribution in such fiscal year (the
cumulative amount of such excess, an "EXCESS"), but only to the extent of the
Excess in such fiscal year, provided that any then-existing Overpayment shall
not be considered a liability of Essaness to the Partnership or be deducted from
any purchase price for the Partnership Interest of Essaness pursuant to this
Agreement or upon liquidation of the Partnership; and (b) solely for purposes of
calculating any Overpayment, the guaranteed network compensation under the
Affiliation Agreement (as defined in Section 4.4) shall be deemed to have
increased by five percent (5%) per year (calculated as if the first year started
on the first day of the calendar month first succeeding the date hereof) in
arriving at Operating Income in the definition of Distributable Cash for such
year.
1.2 AFFILIATE. Any Person that directly, or through one or more
intermediaries, controls or is controlled by or is under common control with a
Partner; any Person that is an officer, director, partner, member or trustee of
or serves in a similar capacity with respect to a Partner; any partnership
(whether general or limited) or other entity (such as a joint venture,
corporation, limited liability company or trust) in which a Partner, directly or
indirectly, through one or more intermediaries, is a partner, principal,
shareholder, beneficiary, member or otherwise an owner, or with which a Partner
may merge or consolidate; or any Person acquiring all or substantially all
(which for purposes hereof shall be deemed to be at least sixty percent (60%))
of the assets of a Partner.
1.3 AND/OR. "AND/OR" means one or the other or both, or any one or more
or all, of the things or Persons in connection with which the conjunction is
used.
1.4 CAPITAL ACCOUNT. The capital account established and maintained for
each Partner under Section 3.1(c).
1.5 CAPITAL CONTRIBUTIONS. The cash and/or fair market value of property,
valued as of the date of contribution pursuant to the provisions of Section
1.704-1(b)(2)(iv)(d) of the Regulations, or any successor provision, contributed
to the capital of the Partnership by each Partner.
1.6 CODE. The Internal Revenue Code of 1986, as amended, or corresponding
provisions of subsequent, superseding federal revenue laws.
2
<PAGE>
1.7 COMPETITOR. A Person shall be a "competitor" if a non- de minimis
portion of such Person's business is involved in Spanish language television
broadcasting.
1.8 DEPRECIATION. For each fiscal year or other period, an amount equal
to the depreciation, amortization, or other cost recovery deduction allowable
with respect to an asset for such year or other period, except that if the Gross
Asset Value of an asset differs from its adjusted basis for Federal income tax
purposes at the beginning of such year or other period, Depreciation shall be an
amount which bears the same ratio to such beginning Gross Asset Value as the
Federal income tax depreciation, amortization, or other cost recovery deduction
for such year or other period bears to such beginning adjusted tax basis.
1.9 DESIGNATED REPRESENTATIVE OF ESSANESS. Alan Silverman and Jack
Silverman shall each be a Designated Representative of Essaness to act with
respect to the matters specified in Section 4.3. In the event Alan Silverman or
Jack Silverman is unable or unwilling to act, Essaness shall appoint another
person to be a Designated Representative of Essaness. If both Designated
Representatives are unavailable, Telemundo and Harriscope may notify and receive
consent from another person that Essaness designates in writing to the other
Partners.
1.10 DISTRIBUTABLE CASH. Distributable Cash for a fiscal year of the
Partnership shall mean: (i) Operating Income for such year; MINUS (ii) the
amount of capital expenditures for such year; PLUS or MINUS (iii) actual working
capital provided by or used during such fiscal year (including a cash reserve of
no more than $25,000); PLUS or MINUS (iv) actual other income or expense for
such fiscal year; provided, however, that no source or use of funds shall be
included or deducted more than once. In determining Distributable Cash for the
first fiscal year, the Partnership shall be deemed to have commenced on the date
hereof. Unless otherwise specified, all financial terms used herein shall be
used as defined in GAAP, consistently applied.
1.11 FRACTIONAL INTEREST. "FRACTIONAL INTEREST" is the interest of each
Partner in the Partnership as set forth in Section 3.1(a), subject to adjustment
as provided in Section 3.1(b).
1.12 GROSS ASSET VALUE. With respect to any asset, the asset's adjusted
basis for Federal income tax purposes, except as follows:
a. The initial Gross Asset Value of any asset contributed by a Partner to
the Partnership shall be the gross fair market value of such asset, as
determined jointly by the contributing Partner and the Partnership;
3
<PAGE>
b. The Gross Asset Values of all Partnership Property shall be adjusted
to equal their respective gross fair market values, as determined by
the Partners, as of the following times: (a) the acquisition of an
additional interest in the Partnership by any new or existing Partner
in exchange for more than a DE MINIMIS Capital Contribution; (b) the
distribution by the Partnership to a Partner of more than a DE MINIMIS
amount of Partnership Property including money, unless all Partners
receive simultaneous distributions of undivided interests in the
distributed Property in proportion to their interests in the
Partnership; and (c) the termination of the Partnership for Federal
income tax purposes pursuant to Code Section 708(b)(1)(B); and
c. If the Gross Asset Value of an asset has been determined or adjusted
pursuant to paragraph (a) or (b) hereof, such Gross Asset Value shall
thereafter be adjusted by the Depreciation taken into account with
respect to such asset for purposes of computing Profits and Losses.
1.13 MAJOR DECISIONS. Any decision or actions, specified in Section 4.3
that requires the approval of a Designated Representative of Essaness pursuant
to such Section.
1.14 MINIMUM ESSANESS DISTRIBUTION. The Minimum Essaness Distribution for
a fiscal year of the Partnership shall be $2.55 million (such $2.55 million
increasing by ten percent (10%) for each fiscal year (compounding annually)
subsequent to the 1996 fiscal year, and such $2.55 million pro rated for the
period from the time from the date of this Agreement until the end of the 1996
fiscal year) MINUS 25.5% of budgeted capital expenditures for such year. For
purposes of the preceding sentence, budgeted capital expenditures will equal
$300,000 during the 1996 fiscal year (pro rated for the period of time from the
date of this Agreement until the end of the 1996 fiscal year), and will equal
$300,000 increased by 10% per year (compounding annually) for each subsequent
fiscal year after the 1996 fiscal year.
1.15 OPERATING INCOME. Operating Income for a fiscal year shall mean the
net revenue attributable to the operations of the Station less all operating and
other expenses of the Station other than income taxes, depreciation and
amortization, all calculated in accordance with generally accepted accounting
principles consistently applied.
1.16 PARTNERSHIP. Video 44, formed as a general partnership under the laws
of the State.
1.17 PARTNERSHIP INTEREST. The entire ownership interest of any Partner in
any profits, losses or other rights and
4
<PAGE>
obligations of such Partner under the terms and provisions of this Agreement,
including, but not limited to, the Fractional Interests of the Partners.
1.18 PARTNERSHIP PROPERTY. All properties and other Partnership assets,
whether real, personal or intangible, or any interest therein, owned or acquired
by the Partnership.
1.19 PERMITTED TRANSFEREES. Those Persons to whom transfer of a
Partnership Interest is allowed without consent as provided in Section 6.2.
1.20 PERSON OR PERSONS. Individuals, partnerships, firms, associations,
limited liability companies, corporations, trusts, governmental agencies,
administrative tribunals or any other form of business or legal entity.
1.21 PROFITS AND LOSSES. For each fiscal year or other period, an amount
equal to the Partnership's taxable income or loss for such year or period,
determined in accordance with Code Section 703(a) (for this purpose, all items
of income, gain, loss, or deduction required to be stated separately pursuant to
Code Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
a. Any income of the Partnership that is exempt from Federal income tax
and not otherwise taken into account in computing Profits or Losses
pursuant to this definition shall be added to such taxable income or
loss;
b. Any expenditures of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Regulation Section 1.704-1(b)(2)(iv)(i), and not otherwise
taken into account in computing Profits or Losses pursuant to this
definition shall be subtracted from such taxable income or loss;
c. Gain or loss resulting from any disposition of Partnership Property
with respect to which gain or loss is recognized for Federal income
tax purposes shall be computed by reference to the Gross Asset Value
of the property disposed of, notwithstanding that the adjusted tax
basis of such property differs from its Gross Asset Value; and
d. Notwithstanding any other provision of this Section 1.21, any items
which are specifically allocated pursuant to Section 5.9.b. or 5.9.c.
hereof shall not be taken into account in computing Profits or Losses.
The amounts of the items of Partnership income, gain, or deduction
available to be specially allocated pursuant to Section 5.9.b. or
5.9.c. hereof shall be determined by applying rules
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analogous to those set forth in Sections 1.21.a. through 1.21.c above.
1.22 STATE. The State of Illinois or such other state as may be designated
by Telemundo from time to time.
1.23 STATION. Television station WSNS-TV/Channel 44 which broadcasts in
the Chicago Dominant Market Area and all assets related thereto.
1.24 TGI. Telemundo Group, Inc., a Delaware corporation, its Affiliates
and any successors thereto.
1.25 TRANSFEROR. Any Partner desiring to make a transfer or encumbrance of
its Partnership Interest other than to an Affiliate or another Partner.
1.26 THIRD PARTY. Any person who is neither an Affiliate of a Partner nor
a Partner.
2. FORMATION; NAME; PURPOSES; PRINCIPAL PLACE OF BUSINESS; TERM
2.1 FORMATION AND NAME.
a. The Parties adopt this Amended and Restated Partnership Agreement and
agree to continue and operate the Partnership as a partnership for the
limited purposes and scope set forth in this Agreement. The
Partnership shall be governed by the Uniform Partnership Act of the
State, as from time to time amended (the "ACT"), except as expressly
provided herein to the contrary.
b. The name of the Partnership is Video 44, an Illinois general
partnership, and the business of the Partnership shall be conducted
solely under such name, and all assets of the Partnership shall be
held under such name.
c. The Partnership and the Partners shall promptly execute, file, record
and/or obtain all licenses, permits, certificates and authorizations
required in connection with the lawful existence of the Partnership as
a general partnership under the laws of the State and under the laws
of any other applicable jurisdiction.
2.2 PURPOSES AND SCOPE OF THE PARTNERSHIP. The sole and only purposes of
the Partnership are to (a) own and maintain, develop, manage, finance, and
operate the Station or any part thereof or interest therein, (b) to sell or
otherwise transfer or dispose of or mortgage or encumber the Station or any part
thereof or interest therein, when and to the extent expressly
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permitted by this Agreement or as otherwise agreed, (c) to develop the value of
the bandwidth licensed to the Partnership, and (d) engage in such other
activities as are reasonably incidental to the foregoing with respect to the
Station.
2.3 SCOPE OF PARTNERS' AUTHORITY. Except as otherwise expressly and
specifically provided in this Agreement, no Partner shall have any authority to
bind or act for, or assume any obligations or responsibility on behalf of, the
other Partners or the Partnership, and neither the Partnership nor any Partners
shall be responsible or liable for any indebtedness or obligation of the other
Partners or otherwise relating to the Station incurred or arising either before
or after the execution of this Agreement. This Agreement shall not be deemed to
create a general partnership between the Partners with respect to any activities
whatsoever other than activities within the scope of the business purposes of
the Partnership specified in Section 2.2.
2.4 PRINCIPAL PLACE OF BUSINESS. The principal place of business of the
Partnership shall be located at 430 W. Grant Place, Chicago, Il 60614.
2.5 TERM. The term of the Partnership shall be, unless sooner terminated
in accordance with other provisions of this Agreement, for so long as the
Partnership holds any interest in or has any obligations relating to the Station
or the proceeds derived therefrom, or until the Partners agree to its
termination; provided, however, that the Partnership shall, if not sooner
terminated, terminate on December 31, 2040 unless otherwise extended by mutual
written agreement of all Partners.
3. CAPITAL ACCOUNTS
3.1 PARTNERSHIP INTERESTS AND CAPITAL ACCOUNTS.
a. The Partners shall have the following initial undivided Fractional
Interests:
Harriscope 50.0%
Telemundo 24.5%
Essaness 25.5%
b. Unless otherwise agreed by all Partners or as otherwise provided for
in this Agreement, no adjustment to the Fractional Interest of any
Partner shall be made except as a result of a transfer of a Partner's
Partnership Interest.
c. Capital Accounts shall be maintained for each Partner and shall be
subject to adjustment as provided in Section 3.2. The Partners hereby
agree that the
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Partners' Capital Account balance as of the date hereof are:
Harriscope $30 million
Telemundo $14.7 million
Essaness $15.3 million
3.2 CAPITAL ACCOUNTS.
a. The Capital Accounts of each Partner shall from time to time be:
(1) increased by:
(i) additional Capital Contributions of such Partner (subject
to Section 8.2.e.); and
(ii) such Partner's share, pursuant to Section 5.9, of the
Profits of the Partnership; and
(iii) the amount of any Partnership liabilities assumed by such
Partner or which are secured by any property distributed
to such Partner.
(2) decreased by:
(i) all distributions to or for the account of such Partner;
(ii) such Partner's share of Losses of the Partnership during
the fiscal year, determined as provided in Section 5.9;
and
(iii) the amount of any liabilities of such Partner assumed by
the Partnership or which are secured by any property
contributed by such Partner to the Partnership.
In the event all or a portion of an interest in the Partnership is
transferred in accordance with the terms of this Agreement, the
transferee shall succeed to the Capital Account of the transferor to
the extent it relates to the transferred interest.
b. All Capital Accounts shall be maintained in accordance with Section
704(b) of the Code and Regulations thereunder, as may be amended from
time to time.
3.3 ADDITIONAL CAPITAL CONTRIBUTIONS. Except as otherwise provided in
this Agreement or pursuant to unanimous agreement of the Partners, no Partner
shall be obligated to
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make any Capital Contributions or advance any funds or provide any guarantees to
or on behalf of the Partnership. However, Telemundo and Harriscope shall be
entitled to make any additional Capital Contributions to the Joint Venture that
Telemundo or Harriscope deem necessary in their sole discretion but shall not
unless otherwise agreed to between the Partners have an effect on the Partners'
Fractional Interests. Any additional Capital Contributions made by Telemundo or
Harriscope pursuant to the preceding sentence shall be reflected in Harriscope's
or Telemundo's Capital Accounts pursuant to the provisions of Section
3.2.a.(1)(i) hereto. Telemundo and Harriscope's right to make additional
Capital Contributions to the Joint Venture for any fiscal year of the Joint
Venture shall in no way be limited by the fact that Telemundo or Harriscope
receive all or a portion of any distributions they are entitled to receive in
respect of such fiscal year (or any prior fiscal year) pursuant to Section
3.5.b.(2), Section 3.5.b.(4) or Section 3.5.b.(6) hereof. Unless otherwise
specified herein, no contribution of any Partner shall be deemed to constitute a
loan unless all of the Partners agree.
3.4 NO INTEREST ON CAPITAL. Interest earned on Partnership funds shall
inure solely to the benefit of the Partnership. No interest shall be paid upon
any Capital Contributions to the Partnership nor upon any undistributed or
reinvested income or profits of the Partnership.
3.5 DISTRIBUTIONS TO PARTNERS.
a. PRIORITY RETURN DISTRIBUTIONS.
(1) In respect of each month of each fiscal year of the
Partnership, the Partnership shall distribute to Essaness
1/12 of the Minimum Essaness Distribution for such year on
the first day of each month of such year, beginning on the
date hereof.
(2) If 25.5% of the budgeted capital expenditure used in
calculating the Minimum Essaness Distribution is greater
than the 25.5% of the actual capital expenditures for such
year, then the Partnership shall distribute to Essaness by
the fifteenth (15th) day after the receipt by the
Partnership of its audited financial statements cash equal
to such difference.
(3) To the extent that the Minimum Essaness Distribution for
the fiscal year exceeds the Actual Essaness Distribution
for such fiscal year (calculated for this purpose without
making any adjustments
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in respect of any current or past Overpayment), such
excess is intended to constitute a guaranteed payment
within the meaning of Code Section 707(c) and shall not be
treated as a distribution for purposes of computing
Essaness's Capital Accounts pursuant to Section 3.2.a.(2).
In the event that the Partnership is unable to make any
payments required to be made pursuant to Sections
3.5.a.(1) or 3.5.a.(2), Telemundo or Harriscope shall
promptly make additional Capital Contributions to the
Partnership sufficient to enable the Partnership to make
such payments on a timely basis.
b. DISTRIBUTIONS OF DISTRIBUTABLE CASH. Distributable Cash shall at
the following times and, in the following order of priority, be
distributed by the Partnership:
(1) First, in respect of each month of each fiscal year of the
Partnership, to make on the first day of such month, the
distributions required pursuant to Section 3.5.a.(1)
hereof.
(2) Second, in respect of each of the first eleven (11) months
of each fiscal year of the Partnership, to Telemundo and
Harriscope collectively, an amount of cash up to 2.922
multiplied by the distribution made to Essaness for such
month pursuant to Section 3.5.b.(1) (such amount to be
determined in the sole discretion of Telemundo) to be
distributed to Telemundo and Harriscope by the fifteenth
(15th) day after the end of each such month (such time of
such distribution to be determined in the sole discretion
of Telemundo). Any amounts that could have been
distributed to Telemundo and Harriscope pursuant to this
Section 3.5.b.(2) but which were not so distributed (due
to the exercise by Telemundo of its discretion or
otherwise) shall be distributed to Telemundo and
Harriscope pursuant to Section 3.5.b.(5) hereto.
(3) Third, in respect of each fiscal year of the Partnership,
to make (by the fifteenth (15th) day after the receipt by
the Partnership of its audited
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financial statements for the fiscal year) the
distributions required pursuant to Section 3.5.a.(2)
hereof.
(4) Fourth, in respect of each fiscal year of the Partnership,
to make (by the fifteenth (15th) day after the receipt by
the Partnership of its audited financial statements for
the fiscal year) to Telemundo and Harriscope,
collectively, an amount of up to the following amount: the
sum of (A) 2.922 multiplied by the aggregate amount
distributed to Essaness pursuant to Section 3.5.b.(3), and
(B) the aggregate amount of Overpayments for all past
fiscal years (reduced by the aggregate amount of
distributions made with respect to Overpayments pursuant
to this Section 3.5.b.(4)(B) for all prior fiscal years),
less the amount distributed to Telemundo and Harriscope
pursuant to Section 3.5.b.(2) for the fiscal year.
(5) Fifth, in respect of each fiscal year of the Partnership,
to make (by the fifteenth (15th) day after the receipt by
the Partnership of its audited financial statements for
the fiscal year) to Telemundo and Harriscope a
distribution of an amount up to the aggregate amount
distributable (whether or not actually paid to Harriscope
and Telemundo) to Telemundo and Harriscope pursuant to
Sections 3.5.b.(2) and 3.5.b.(4) (for the current and all
past fiscal years), less the aggregate amount actually
distributed (for the current and all past fiscal years) to
Telemundo and Harriscope pursuant to Section 3.5.b.(2),
Section 3.5.b.(4) and this Section 3.5.b.(5).
(6) Sixth, in respect of each fiscal year of the Partnership,
to pay, by the fifteenth (15th) day after the receipt by
the Partnership of its audited financial statements for
the fiscal year, Telemundo and Harriscope, an amount equal
to the excess, if any, of (A) the aggregate additional
Capital Contributions of Telemundo and Harriscope,
respectively, pursuant to Section 3.3 and Section
3.5.a.(3)
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hereof, over (B) the sum of all prior distributions to
Telemundo and Harriscope pursuant to this Section
3.5.b.(6).
(7) Seventh, the balance of Distributable Cash (the
"Balance"), if any, in respect of each fiscal year of the
Partnership, to be paid by the fifteenth (15th) day after
the receipt by the Partnership of its audited financial
statements for the fiscal year:
(A) to Essaness in an amount equal to the Balance
multiplied by the Fractional Interest of Essaness,
provided that the amount distributable to Essaness
pursuant to this Section 3.5.b.(7) for the fiscal year
shall not exceed 25.5 percent multiplied by Distributable
Cash for the fiscal year, less the sum of (A) the amount
of distributions for the fiscal year made with respect to
Overpayments pursuant to Section 3.5.b.(4)(B) hereto, and
(B) any amounts distributed to Essaness pursuant to
Section 3.5.b.(1) and Section 3.5.b.(3) for the fiscal
year, and
(B) to Telemundo and Harriscope any amounts of
Distributable Cash remaining after the distribution to
Essaness pursuant to Section 3.5.b.(7)(A). For purposes
of clarification, the Parties agree that the amount
distributable to Telemundo and Harriscope pursuant to this
Section 3.5.b.(7) for the fiscal year should not exceed
the sum of (i) 74.5 percent multiplied by Distributable
Cash for the fiscal year, (ii) the aggregate amount of
Overpayments for all past fiscal years (reduced by the
aggregate amount of distributions made with respect to
Overpayments pursuant to Section 3.5.b.(4)(B) hereto for
all prior fiscal years), and (iii) the aggregate amount
distributable to Telemundo and Harriscope pursuant to
Sections 3.5.b.(5) and Sections 3.5.b.(6) for the fiscal
year, less the aggregate amount actually distributed to
Telemundo and Harriscope for the fiscal year pursuant to
Sections 3.5.b.(2), 3.5.b.(4), 3.5.b.(5), and 3.5.b.(6).
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Notwithstanding anything to the contrary in this Section
3.5.b., if Essaness' Partnership Interest is transferred to any
person or entity pursuant to Section 6 other than to a Permitted
Transferee pursuant to Section 6.2, for purposes of applying the
provisions of this Section 3.5.b., the Partnership fiscal year
shall be deemed to end immediately prior to such Transfer and the
distributions contemplated in this Section 3.5.b. (including
distributions pursuant to Section 3.5.b.(3), (4), (5), (6), and
(7)) shall be made in respect of such fiscal year) to Essaness,
Harriscope, and Telemundo, as applicable (such distributions to
be made irregardless of whether there exists any audited
financial statements in respect of such fiscal year). For
purposes of applying Section 3.5.b., the fiscal year deemed to
end immediately prior to such transfer shall be treated as a
fiscal year for all purposes, including for purposes of
calculating Distributable Cash and Actual Essaness Distribution;
PROVIDED, HOWEVER, that all amounts and percentages used in
calculating Minimum Essaness Distribution shall generally be pro
rated to take into account the fact that the fiscal year in
question may be a short fiscal year.
c. DEFAULT INTEREST. If the Partnership fails to make any
distribution to Essaness pursuant to Section 3.5.b.(1) or
3.5.b.(3) within five (5) business days of receipt of written
notice of default from Essaness to the Partnership and Telemundo,
(i) the amount of the unpaid distributions shall bear interest at
an annual rate of 600 basis points above the prime rate of
interest described in the Wall Street Journal on each date during
the default period, compounded daily, but in no event more than
the maximum amount of interest permitted by law and (ii)
Telemundo and Harriscope shall indemnify Essaness and its
shareholders for any interest, penalties, attorney's fees or
other costs incurred as a consequence of the failure to meet
current tax liability in respect of amounts payable to Essaness
under Section 3.5.b.(1) or 3.5.b.(3) that the Partnership fails
to distribute to Essaness. If Essaness brings an action for
collection of any distributions, the prevailing party shall be
entitled to reasonable costs associated with enforcement,
including reasonable attorneys'
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and paralegal fees and court costs, including on appeal.
3.6 REDUCTION OF CAPITAL ACCOUNTS. Unless otherwise provided herein,
distributions to a Partner shall reduce the amount of such Partner's Capital
Account in accordance with Section 3.2, but no adjustment in the Fractional
Interest of any Partner shall be made on account of any such distribution.
3.7 WIRE TRANSFERS. The Partnership shall make all payments and
distributions pursuant to Sections 3.5 and 4.1.b. by wire transfer of
immediately available funds to an account specified in writing by the Partner
entitled to such payment or distribution.
4. MANAGEMENT; COMPENSATION; INDEMNIFICATION
4.1 MANAGEMENT OF THE PARTNERSHIP.
a. The overall management and control of the business and affairs of the
Partnership shall be vested exclusively in Telemundo; provided,
however, that the Major Decisions described in Section 4.3 shall
require the approval of one Designated Representative of Essaness.
All Major Decisions that are approved by Telemundo and a Designated
Representative of Essaness shall be binding on the Partnership and
each of the Partners.
b. So long as Essaness, together with its Permitted Transferees, holds a
Fractional Interest in the Partnership of at least 25.5%, Alan
Silverman shall be paid $10,000 per month in consideration for his
efforts as an independent consultant on behalf of the Partnership,
provided that such payments shall cease upon the death of Alan
Silverman. Alan Silverman shall only perform such services for the
Partnership as directed by the Partnership, and shall not be an
employee or agent of the Partnership. Alan Silverman shall have no
power to bind the Partnership, unless specifically authorized in
writing by Telemundo. Alan Silverman shall also be entitled to
reimbursement for reasonable travel and out-of-pocket expenses
incurred in connection with his services or duties to the Partnership,
upon presentation to the Partnership of proper vouchers evidencing
such expenses and detailing the purposes for which such expenses were
incurred, all in accordance with such procedures as the Partnership
shall specify. The Partnership may withhold from any such payments
all federal, state, city or other taxes as may be required pursuant to
any law or governmental regulation or ruling.
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c. Neither Telemundo nor Harriscope shall be entitled to a management or
other fee for services or duties to the Partnership, provided that
Telemundo and Harriscope shall be entitled to reimbursement for out-
of-pocket expenses incurred to third parties on behalf of the
Partnership.
4.2 DAY-TO-DAY MANAGEMENT. The day-to-day operations and business affairs
of the Station shall be managed by Telemundo. Certain duties may be delegated
by Telemundo to the general manager of the Station who shall be appointed
according to Section 4.3. If, and only if, after the filing of a voluntary
bankruptcy petition by TGI, Telemundo or Harriscope or the filing of an
involuntary bankruptcy petition that remains undismissed for sixty (60) days or
an assignment by TGI, Telemundo or Harriscope for the benefit of creditors,
Telemundo fails to pay the Minimum Essaness Distribution when due in accordance
with the provisions herein, subject to Telemundo's ability to cure such failure
within five (5) days, then, notwithstanding any other provisions of this
Agreement, Essaness shall have the right to manage the day-to-day operation of
the Station and Essaness shall succeed to the rights of Telemundo with respect
to management of the Partnership.
4.3 MAJOR DECISIONS. The following actions may not be undertaken, unless
and until the same has been approved by one Designated Representative of
Essaness (such approval will be deemed given if Designated Representatives shall
not have responded by the tenth (10) day after receipt of a written request for
approval has been sent to each of them; provided, that if a Major Decision with
respect to Section 4.3.c. is to be made, the Designated Representatives shall
have thirty (30) days to respond):
a. Employment of the person who shall serve as the general manager of the
Station; provided, that the Designated Representatives of Essaness
shall have the right collectively to disapprove only two candidates
for each proposed hiring of a general manager of the Station and
provided further that Telemundo shall have the right to set the terms
and conditions of employment of the general manager and to discharge
the incumbent general manager of the Station at any time on any terms
in its sole discretion;
b. Entering into any new collective bargaining agreement;
c. Selling all or substantially all of the assets of the Partnership;
d. Borrowing money, making loans or guarantees other than to the Partners
or their Affiliates, or
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encumbering the assets of the Partnership other than in the ordinary
course of business or as otherwise specifically permitted by the terms
of this Agreement. In the event the Partnership desires to make any
loans or guarantees to any Partner or an Affiliate of any Partner,
such matter shall be submitted to the Affiliate Transaction Approval
Board (which shall be formed promptly after the execution of this
Agreement and shall consist of two (2) representatives appointed by
each Partner), and shall require the approval of a majority of those
members of the Affiliate Transaction Approval Board who have no direct
or indirect interest or affiliation with the proposed recipient of the
loan or the guarantee. Notwithstanding the foregoing, Telemundo may,
in connection with its direct or indirect acquisition of the interests
in the Joint Venture and all of the capital stock of Harriscope,
secure, or the Partnership may secure any or all of the indebtedness
for such acquisition with assets of the Partnership; provided that
such financing is obtained within one year of the effective date of
this Agreement, and provided that the principal amount of such
indebtedness so secured from time to time is not greater than
$22,500,000. The first lien shall provide (i) that Essaness shall be
given notice of any default under the obligations secured by such
first lien, and (ii) in the event of a default under the obligations
secured by such first lien, Essaness shall have the option to buy-out
the first lien-holder's interests for all amounts then due. At the
time of such secured financing, Telemundo (or the Partnership) shall
grant Essaness a second lien on such assets, subordinated to the
rights of first lienholders. If Telemundo or the Partnership grants a
security interest in the assets of the Station as permitted by this
Section, then upon (a) a foreclosure of the security interest, or (b)
the bankruptcy of Telemundo, Essaness shall have such rights and
remedies as may be available under law to foreclose upon Telemundo's
and Harriscope's interest in the Partnership;
e. Filing by the Partnership of a petition under any applicable federal
or state bankruptcy laws or the making an assignment for the benefit
of the Partnership's creditors; or
f. Any transaction or allocation of charge between the Partnership and
TGI except for (i) charges which do not exceed $10,000 in the
aggregate in any fiscal year, (ii) allocation of charges attributable
to operating the Station (such as insurance costs, but not production
costs) which shall be allocated to the Station in substantially the
same manner as TGI
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allocates such charges to its owned and operated stations, (iii)
transactions permitted or contemplated by the Affiliation Agreement
and (iv) transactions and charges contemplated by this Agreement;
provided that Essaness shall be required to promptly cause to be given
its consent to any transaction or charge if the terms thereof are no
less favorable to the Partnership than would be available in a
comparable transaction in arms' length dealings with an unaffiliated
third party ("FAIR MARKET VALUE"). If Essaness disagrees that a
transaction or charge is at Fair Market Value, Essaness and Telemundo
shall negotiate in good faith for a reasonable period of time not
exceeding thirty (30) days to resolve their disagreement; if Essaness
and Telemundo cannot resolve their disagreement, the determination of
whether such transaction or charge is at Fair Market Value will be
submitted to an independent third party mutually agreed to by Essaness
and Telemundo, and the costs of such determination shall be paid for
by the Partnership. If Essaness and Telemundo cannot agree on an
independent third party, each of Essaness and Telemundo shall choose
an independent third party, and the two independent third parties so
chosen shall choose a third independent third party, to whom the
disagreement will be submitted. The determination of Fair Market
Value by the independent third party shall be final and binding on the
parties;
4.4 AFFILIATION AGREEMENT. The existing Network Affiliation and
Representation Agreement between the Joint Venture and TGI (the "AFFILIATION
AGREEMENT") with respect to the Station shall be extended for so long as
Essaness' Fractional Interest in the Partnership is 25.5% or more;
[Certain information has been omitted herein pursuant to a request for
confidential treatment pursuant to Rule 24b-2.]
Notwithstanding the foregoing, if Telemundo's and Harriscope's interests in the
Partnership are sold as permitted by Sections 6 or 7, TGI shall have the option
to (i) continue the Affiliation Agreement in accordance with its terms for a
period of one (1) year from the date of transfer, or (ii) terminate the
Affiliation Agreement immediately upon the effective date of the transfer.
4.5 REIMBURSEMENT OF PARTNERS. Except as provided in Section 4.1, or
permitted or approved pursuant to Section 4.3(f), no payment will be made by the
Partnership to any Partner or its Affiliates for the services provided by such
Partner or its Affiliates.
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4.6 TIME DEVOTED TO PARTNERSHIP. The Partners shall each devote such time
to the Partnership as is reasonably necessary to carry out the provisions of
this Agreement.
4.7 OTHER BUSINESS ACTIVITIES; DISCLOSURE, WAIVER. Each of the Partners
understands that the other Partner or its Affiliates may be interested, directly
or indirectly, in various other businesses not included in the Partnership. The
Partners hereby agree that the continuation of the Partnership and the
assumption by each of the Partners of their duties hereunder shall be without
prejudice to their rights (or the rights of their Affiliates) to have such other
interests and activities and to receive and enjoy profits or compensation
therefrom; and each Partner waives any rights it might otherwise have to share
or participate in such other interests or activities of the other Partner or its
Affiliates. The Partners agree that their interests in other businesses and
activities and their rights to receive profits or compensation therefrom will
not be a breach of this Agreement or a violation of any fiduciary or other
obligations any Partner may owe to its other Partners or the Partnership. The
Partners and/or their Affiliates may engage in or possess any interest in any
other business of any nature or description independently or with others,
including, but not limited to, the ownership, financing, operation or management
of other television stations, and neither the Partnership nor the other Partner
shall have any right by virtue of this Agreement in and to such other businesses
or the income or profits derived therefrom. Each Partner shall give notice to
the other Partner of its interest, or the interest of any of its Affiliates, in
any other business or undertaking which proposes to enter into any business
transactions with the Partnership and no such business transactions shall be
entered into without the express written consent of the other Partners except as
set forth in Sections 4.1, 4.3 and 4.4.
4.8 SCOPE OF AUTHORITY. Essaness shall not, without the written consent of
the other Partners, take any action on behalf of or in the name of the
Partnership, or enter into any commitment or obligation binding upon the
Partnership.
4.9 INDEMNITY; CONTRIBUTION.
a. The Partnership shall indemnify, defend and hold the Partners and
Affiliates of each of them, harmless from any and all claims, causes
of action, losses, damages, liabilities, costs or expenses (including,
without limitation, reasonable attorneys' fees) incurred by any or all
of them at any time by reason of or arising out of any act performed
by any or all of them on behalf of the Partnership, or in furtherance
of its interests, and reasonably believed by the indemnified Partner
or Affiliate to be within the scope of authority specifically
conferred on such Partner by this Agreement, if any,
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and not contrary to its terms. Except as otherwise specified herein,
the satisfaction of any indemnification hereunder shall be from and
limited to Partnership assets and no Partner shall have any personal
liability on account thereof. A Partner indemnified hereunder shall
notify the Partnership and the other Partners promptly of any claim,
demand, action or right of action made against it which is subject to
indemnification hereunder and provide the Partnership reasonable
opportunity to participate in the defense thereof in conformity with
the indemnity herein contained.
b. Each Partner shall indemnify, defend and hold the other Partner and
its Affiliates and the Partnership harmless from any and all claims,
causes of action, losses, damages, liabilities, costs or expenses
(including, but not limited to, reasonable attorneys' fees), incurred
by the other Partner, its Affiliates or the Partnership at any time by
reason of or arising out of any act of the indemnifying Partner
(whether taken by such Partner or on its behalf by its Affiliates),
which such Partner could not reasonably have believed to be within the
scope of the authority specifically conferred on such indemnifying
Partner by this Agreement, if any, or arising directly or indirectly
out of any breach of this Agreement by, or the gross negligence,
willful misconduct or fraud of, the indemnifying Partner. The
preceding sentence notwithstanding, no Partner shall be obligated to
indemnify the other Partners or the Partnership for any claims, causes
of action, losses, damages, liabilities, costs or expenses incurred by
the other Partners or the Partnership as a result of acts or omissions
of the other Partners which constitute gross negligence, willful
misconduct, or fraud.
c. The rights and obligations of the Partners and the Affiliates under
this Section 4.9 shall survive the termination of the Partnership. The
indemnities in favor of a Partner or an Affiliate contained in this
Section 4.9 shall extend to and benefit each representative of a
Partner or an Affiliate. An indemnified party may not settle any
action, proceeding or claim without the written consent of the
indemnifying party.
4.10 MEETINGS. The Partners may meet to discuss Partnership matters as and
when agreed to by all of them; provided, that at the request of any Partner, a
representative of Telemundo and a representative of Essaness shall meet
quarterly (it is agreed by the Partners that there is no obligation to meet more
than once a quarter). Meetings shall be held in Miami, Chicago or Los Angeles.
Telemundo shall
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have the right to designate the place of the two meetings that the president or
other senior officer attends, and Essaness shall have the right to designate the
two other quarterly meetings. The president of TGI shall be the Telemundo
representative at a minimum (as determined by Telemundo) of two meetings per
fiscal year (if such meetings are held) or, if there is no Person holding the
title of President, then the most senior officer of TGI knowledgeable with the
Partnership business shall attend such two meetings.
5. ACCOUNTING AND TAXES
5.1 BOOKS AND RECORDS.
a. At all times during the term hereof, the Partnership shall cause
accurate books and records of account to be maintained in which shall
be entered all matters relating to the Partnership, including all
income, expenditures, assets and liabilities thereof.
b. Such books and records of account shall be maintained (on a consistent
basis starting as of the date hereof) in accordance with customary
accounting practices maintained for businesses similar to that of the
Partnership.
5.2 LOCATION AND RIGHTS OF INSPECTION. The Partnership's books and records
of account shall be kept and maintained at such place as Telemundo shall
designate; PROVIDED, that copies of such books and records shall be kept at the
Station. Each Partner and its authorized representatives shall have (i) full
and complete access to all information and personnel of the Station which shall
be provided to the requesting Partner on a timely basis and (ii) the right to
inspect, examine and copy the books, records, files and other documents and
information of the Partnership.
5.3 FISCAL YEAR. The fiscal year of the Partnership shall end on December
31 of each year.
5.4 FINANCIAL STATEMENTS. Each Partner shall receive (a) within 45 days of
the end of each month, monthly operating statements, and (b) within 60 days of
the end of each calendar quarter, quarterly operating statements, including
unaudited statements of operations, Partners' equity and cash flow for such
month and for the period from the beginning of such fiscal year to the end of
such month and an unaudited balance sheet of the Partnership, as of the close of
such month as prepared by management of the Partnership in the regular course of
business consistent with Telemundo's form for such statements. Each Partner
shall have full and complete access to all information and personnel of the
Station which shall be provided on a timely basis. Within 60 days after the end
of each of the first three quarters of each Fiscal Year,
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Telemundo shall cause the Partnership to send to each Partner unaudited
statements of operations, Partners' equity and cash flows for such fiscal
quarter and for the period from the beginning of such Fiscal year to the end of
such fiscal quarter (including allocations to each Partner of its respective
portion of the Partnership's taxable income for such fiscal quarter as would be
reflected on the annual income tax returns of the Partnership and the financial
statements set forth in this Section), and an unaudited balance sheet (including
a breakdown of each Partner's Capital Account) as of the close of such fiscal
quarter. In addition, without limitation to the foregoing, Essaness shall be
entitled to receive all of the types of reports in respect of the Partnership
that Essaness had been receiving as of November 1, 1995, in such format as
regularly prepared by Telemundo for its owned and operated stations. As soon as
practicable after the end of each Fiscal Year ending on or after the date
hereof, but not later than April 1 in the following Fiscal Year, Telemundo shall
cause the Partnership to provide to each Partner audited statements of
operations, Partner's equity and cash flows, for such ended Fiscal Year, and an
audited balance sheet (including a breakdown of each Partner's Capital Account)
as of the close of such ended Fiscal Year, including appropriate notes to such
financial statements, audited by the Accountants, all of which shall be prepared
in accordance with GAAP. Subject to applicable securities and other laws, the
Parties agree to keep all information regarding the Partnership and the Station
confidential, and without limiting the foregoing, Essaness agrees to keep
confidential any non-public information regarding TGI that Essaness may become
aware through its association with TGI under the Partnership. The obligations
in the preceding sentence shall survive the termination of this Partnership
Agreement. Notwithstanding the foregoing, a party may disclose information
relating to the Partnership or the Station for legitimate reasons related to its
business, including disclosure to Lending institutions.
5.5 ACCOUNTANTS. The Partnership shall engage as independent auditors for
the Partnership a firm of independent certified public accountants approved by
Telemundo.
5.6 BANK ACCOUNTS. Funds of the Partnership shall be deposited in an
account or accounts in the Partnership's name in a bank or banks approved by
Telemundo.
5.7 TAX AND ACCOUNTING DECISIONS. All tax and accounting decisions for
the Partnership (other than those specifically provided for in this Agreement)
shall be determined by Telemundo; provided, however, if the Partners, based on
advice of their respective tax counsel or accountants, differ as to the
treatment or reporting of material items on the Partnership's income tax return,
the Partnership shall retain a third firm of tax counsel or accountants selected
jointly by the Partners to render its opinion regarding such items provided that
the final
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determination of the treatment of such items shall be made by Telemundo;
provided further, one Designated Representative of Essaness shall have the right
to approve the election or adoption of a method of reporting or treatment of an
item (other than those specifically provided for in this Agreement and other
than as required by GAAP) that results in a tax benefit to Telemundo without a
corresponding tax benefit to Essaness, unless Telemundo reimburses Essaness for
any resulting increase in tax liability to Essaness (taking into account the
effect of delayed tax liability) than would result from a different position
proposed by Essaness. Telemundo shall, if such election is not already in
effect, cause the Partnership to make an election under Section 754 of the Code
(or any similar provision of any successor statute), on the first federal tax
return of the Partnership (which return shall be filed on a timely basis) after
Telemundo's admission as a Partner. Telemundo shall also make an election under
Section 754 of the Code (or any similar provision of any successor statute) on
any subsequent tax return of the Partnership in the event any prior Section 754
election becomes ineffective (as a consequence of a termination of the
Partnership pursuant to Section 708 of the Code or otherwise). In the future,
upon the request of any Partner, Telemundo shall, if such election is not
already in effect, cause the partnership to make an election under Section 754
to permit an adjustment of the income tax basis of such Partner's interest in
the Partnership's assets.
5.8 PREPARATION OF TAX RETURNS. Telemundo shall cause all required
Federal, state and local income tax returns of the Partnership to be prepared
on behalf of the Partnership.
5.9 ALLOCATION OF PROFITS AND LOSSES.
a. Except as otherwise provided in Section 5.9.b. and 5.9.c. below, the
Profits and Losses of the Partnership shall be allocated as follows:
(i) In a fiscal year in which Profits exceed Distributable
Cash, Profits shall (1) first be allocated to the extent
of and in proportion to the distributions of or rights to
Distributable Cash created under Section 3.5.b. for such
fiscal year (excluding any amounts treated as guaranteed
payments pursuant to Section 3.5.a.(3) or as a return of
additional Capital Contributions pursuant to Section
3.5.b.(6)) and (2) then be allocated to the Partners in
proportion to the Partners' Fractional Interests;
(ii) In a fiscal year in which Distributable Cash exceeds
Profits, Profits shall be allocated in proportion to the
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distributions of or rights to Distributable Cash created
under Section 3.5.b. for such fiscal year (excluding any
amounts treated as guaranteed payments pursuant to Section
3.5.a.(3) or as a return of additional Capital
Contributions pursuant to Section 3.5.b.(6));
(iii) In a Fiscal Year in which there are Losses, the Losses
shall be allocated to the Partners in proportion to the
Partners' Fractional Interests.
b. Notwithstanding any other provisions of this Agreement, items of
Partnership income and gain, and Partnership profits (or items
thereof) shall be allocated to each Partner so as to satisfy the
"qualified income offset" and "minimum gain chargeback" requirements
contained in U.S. Treasury Regulations.
c. Solely for federal, state, and local income tax purposes and not for
book or Capital Account purposes, except to the extent required by
Regulations, depreciation, amortization, gain, or loss with respect to
property that is properly reflected on the Partnership's books at a
value that differs from its adjusted basis for federal income tax
purposes shall be allocated in accordance with the principles and
requirements of Code Section 704(c) and the Regulations promulgated
thereunder, and in accordance with the requirements of the relevant
provisions of the Regulations issued under Code Section 704(b). For
Capital Account purposes, depreciation, amortization, gain, or loss
with respect to property that is properly reflected on the
Partnership's books at a value that differs from its adjusted basis
for tax purposes shall be determined in accordance with the rules of
Regulation Section 1.704-1(b)(2)(iv)(g). The Parties agree that the
rules described above should apply so as to specially allocate to
Telemundo any additional depreciation, amortization and loss
attributable to a step-up in basis in Joint Venture assets arising as
a consequence of Telemundo's acquisition of its interest in the Joint
Venture.
5.10 ALLOCATIONS FOR PRE-CLOSING PERIOD. Profit and Loss for the
Partnership fiscal year that includes the date hereof shall be allocated among
the partners of the Joint Venture as if the date hereof were the last day of the
Joint Venture's fiscal year. Accordingly, Profit and Loss of the Joint Venture
for periods up to and including the date hereof shall be allocated among the
persons who were partners in the Joint
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Venture prior to the date hereof and Profit and Loss of the Partnership for
periods after the date hereof shall be allocated among the Partners pursuant to
Section 5.9.
5.11 DEFINITIONS RELATED TO TAX MATTERS. For purposes of this Agreement,
the following terms are defined as set forth below:
a. "ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to any Partner,
the deficit balance, if any, in such Partner's Capital Account as of
the end of the relevant fiscal year, after giving effect to the
following adjustments:
(1) Such Capital Account is increased by any amounts which such
Partner is obligated to restore (pursuant to the terms of such
Partner's promissory note or otherwise) or is deemed to be
obligated to restore pursuant to the penultimate sentence of
Regulations Section 1.704-1(b)(4)(iv)(f) or would be deemed
obligated to restore if partner loan nonrecourse deductions were
treated as nonrecourse deductions; and
(2) Such Capital Account is decreased by the items described in
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and
1.704-1(b)(2)(ii)(d)(6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Section 1.704-1(b)(2)(ii)(d)
of the Regulations and shall be interpreted consistently therewith.
b. "REGULATIONS" shall mean the Treasury Regulations promulgated under
the Code, as such Treasury Regulations shall be in effect from time to
time.
5.12 TAX MATTERS PARTNER. Telemundo shall act as the Tax Matters Partner,
as defined in Code Sections 6221 ET SEQ. of the Partnership for all purposes set
forth in the Tax Equity and Fiscal Responsibility Act of 1982 for which a tax
matter is designated. Prompt notice shall be given to each Partner upon
receipt of advice that the Internal Revenue Service intends to examine
Partnership income tax returns for any year.
6. SALE, TRANSFER OR MORTGAGE
6.1 GENERAL. Except as expressly permitted herein, no Partner shall
(directly or indirectly) sell, assign, transfer, mortgage, charge or otherwise
encumber, or suffer any third party to sell, assign, transfer, mortgage, charge
or otherwise
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encumber, or contract to or permit any of the foregoing, whether voluntarily or
by operation of law (herein sometimes collectively called a "TRANSFER"), any
part or all of its Partnership Interest (including, without limitation, any
economic rights held by a Partner by virtue of being a Partner) without the
written approval of the other Partners, which approval may be withheld in the
sole discretion of the other Partners, and any attempt to transfer shall be
void, excluding only such transfers as permitted in Section 6.2, provided that
each of Telemundo and Harriscope may mortgage, charge or encumber their
Partnership Interests in a bona fide financing or similar transaction entered
into by TGI. Notwithstanding anything else contained herein to the contrary,
the definition of Transfer does not include any Transfer of the capital stock
of, or change of control in, the ownership of TGI. The giving of such consent
in any one or more instances shall not limit or waive the need for such consent
in any other or subsequent instances.
6.2 PERMITTED TRANSFERS. Subject to the conditions and restrictions set
forth in Section 6.3, a Partner may at any time Transfer all but not less than
all of such Partners' Interests to (a) any other Partner, (b) any member of the
transferor's Family, (c) the transferor's executor, administrator, trustee, or
personal representative to whom such Interests are transferred at death or
involuntarily by operation of law, or (d) TGI (any such Transfer described in
clauses (a) through (d) being a "PERMITTED TRANSFER" and the transferee being a
"PERMITTED TRANSFEREE"). For purposes hereof, an Partner's "FAMILY" shall
include only such Partner's spouse, blood-related siblings, natural or adoptive
lineal ancestors or descendants, and trusts for his or their exclusive benefit.
Permitted Transferees of Essaness may only Transfer Partnership Interests to
Persons who would be Permitted Transferees if Essaness were making the Transfer.
Essaness may transfer all of its Interests to another Person all of whose
economic and beneficial interests are owned by the current owners of Essaness
(or their Permitted Transferees).
6.3 CONDITIONS TO PERMITTED TRANSFERS. All Transfers are subject to the
following conditions:
a. If pursuant to the provisions of this Section 6, any Partner (a
"TRANSFEROR") shall Transfer its Partnership Interest or any portion
thereof to any Person (a "TRANSFEREE"), no such Transfer shall be made
or shall be effective to make such Transferee a Partner or entitle
such Transferee to any benefits or rights hereunder until the proposed
Transferee agrees in writing to (i) assume and be bound by all of the
terms and provisions of this Agreement and all of the obligations of
the Transferor, and (ii) be subject to all the restrictions to which
the Transferor is subject under the terms of this
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Agreement and any further agreements with respect to the Partnership
property or as contemplated by this Agreement to which the Transferor
is then subject or is then required to be a party.
b. The Transferor and Transferee shall furnish the Partnership with the
Transferee's taxpayer identification number, sufficient information to
determine the Transferee's initial tax basis in the Interests
transferred, and any other information reasonably necessary to permit
the Partnership to file all required federal and state tax returns and
other legally required information statements
or returns. Without limiting the generality of the foregoing, the
Partnership shall not be required to make any distribution otherwise
provided for in this Agreement with respect to any transferred
Interests until it has received such information.
c. Except in accordance with a Transfer in accordance with Section 7,
neither any direct or indirect interest in Essaness nor Essaness'
Partnership Interest shall be Transferred (directly or indirectly) to
any Person who is a Competitor of TGI.
6.4 ADVANCE NOTICE OF PERMITTED TRANSFER. Notwithstanding any provision
hereof permitting the Transfer of all or any portion of a Partner's interest in
the Partnership, no such Transfer shall be made unless the Partner proposing to
make such Transfer gives notice thereof to each other Partner at least ten (10)
Business Days prior to the effective date of such proposed Transfer. For
purposes hereof, a notice shall be in writing, shall state the identity of the
proposed Transferee, shall describe with particularity the nature of the
proposed Transfer and the terms thereof, and shall identify the provision of
this Agreement under which such Partner believes that the proposed Transfer is
permitted.
6.5 RIGHT OF FIRST REFUSAL. In addition to the other limitations and
restrictions set forth in this Section, except for Permitted Transfers pursuant
to Section 6.2 and as permitted by Section 7 hereof, no Transferor shall
Transfer such Partner's Partnership Interest (including all interests
transferred to Permitted Transferees) (the "OFFERED INTEREST") unless the
Transferor first offers to sell the Offered Interest pursuant to the terms of
this Section 6.5. Except for Permitted Transfers, Partners may only Transfer
all of their Partnership Interest.
a. No Transfer may be made under this Section unless the Transferor has
received a bona fide written offer (the "PURCHASE OFFER") from a
person (the "PURCHASER") to purchase the Offered Interest for a
purchase price (the "OFFER PRICE") denominated and
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payable in United States dollars at closing or according to specified
terms, with or without interest, which offer shall be in writing
signed by the Purchaser and shall be irrevocable for a period ending
no sooner than the day following the end of the Offer Period, as
hereinafter defined.
b. Prior to making any Transfer that is subject to the terms of this
Section, the Transferor shall give to the Partnership and each
Partner, written notice (the "OFFER NOTICE") which shall include the
following: (1) the identity of the Purchaser; (2) a copy of the
Purchase Offer; (3) a statement signed by the Purchaser to the effect
that, upon purchase of the Offered Interest, the Purchaser agrees to
become a Partner, to be bound by all of the terms and conditions of
this Agreement as a Partner with respect to the Offered Interest, and
to execute such documents and instruments as the remaining Partners
deem necessary or appropriate to confirm such agreements; and (4) an
offer (the "FIRM OFFER") to sell the Offered Interest to the other
Partners (the "OFFEREES") for the Offer Price, payable according to
the same terms as (or more favorable terms than) those contained in
the Purchase Offer.
c. The Firm Offer shall be irrevocable for a period (the "OFFER PERIOD")
ending at 11:59 P.M., local time at the Partnership's principal place
of business, on the sixtieth (60th) day following the day of the Offer
Notice.
d. At any time during the Offer Period, any Offeree may accept the Firm
Offer as to all or any portion of the Offered Interest by giving
written notice of such acceptance to the Transferor and each other
Offeree (an "ACCEPTANCE") which notice shall indicate the maximum
portion of the Offered Interest that such Offeree is willing to
purchase. If Offerees ("ACCEPTING OFFEREES"), in the aggregate,
accept the Firm Offer with respect to all, or more than all, of the
Offered Interest during the Offer Period, the Firm Offer shall be
deemed to be accepted. If the Accepting Offerees accept the Firm
Offer with respect to more than all of the Offered Interest, each
Accepting Offeree shall be deemed to have accepted the Firm Offer with
respect to that portion of the Offered Interest that corresponds to
the ratio of the Offered Interests that such Accepting Offeree
indicated a willingness to purchase to the aggregate Offered Interests
that all Accepting Offerees indicated a willingness to purchase. If
Offerees do not accept the Firm Offer as to all, or more than all, of
the Offered
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Interests during the Offer Period, the Firm Offer shall be deemed to
be rejected in its entirety.
e. If the Firm Offer is accepted, the closing of the sale of the Offered
Interest shall take place within ten (10) Business Days from the
effective date on which an FCC Order of the Federal Communications
Commission ("FCC") approving the transfer of the Offered Interests to
the Accepting Offerees becomes a Final Order (the "CLOSING DATE").
For purposes of this Agreement, (a) an "FCC ORDER" means an order of
the FCC, or of the Mass Media Bureau acting under delegated authority,
approving the transfer of the Offered Interests to the Accepting
Offerees in accordance with this Agreement, without conditions that in
the Accepting Offerees' judgment (i) are materially adverse to the
Accepting Offerees, (ii) in any way materially diminish the Accepting
Offerees operating rights with respect to the Station, or (iii)
materially diminish the value of the Station to the Accepting
Offerees, except any such condition expressly accepted by the
Accepting Offerees in writing, and (b) a "FINAL ORDER" means an FCC
Order that is no longer subject to judicial, administrative or any
other review; provided that, at the Accepting Offerees sole option,
the Closing may take place following the issuance of an FCC Order
approving the transfer of the Offered Interests to the Accepting
Offerees but before a Final Order. The Accepting Offerees acceptance
of a Transferors' Firm Offer shall only be effective if in the
aggregate the Accepting Offerees pay the Transferor five (5) percent
of the Offer Price (the "Deposit") within the Offer Period. The
Deposit shall be retained by such Party if for any reason the closing
fails to occur other than due to circumstances outside the control of
the Accepting Offerees. If the closing of the purchase by the
Accepting Offerees of the Transferor's interest does occur, the
Deposit shall be applied in parties payment of the Offer Price. The
Transferor and all Accepting Offerees shall execute such documents and
instruments as may be necessary or appropriate to effect the sale of
the Offered Interest pursuant to the terms of the Firm Offer and this
Section.
f. If the Firm Offer is not accepted in the manner hereinabove provided,
the Transferor may sell the Offered Interest to the Purchaser at any
time after the last day of the Offer Period, provided that such sale
(i) shall be made on terms no more favorable to the Purchaser than the
terms contained in the Purchase Offer and provided further that such
sale complies with the other terms, conditions, and restrictions of
this Agreement that are applicable
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to sales of Interests and are not expressly made inapplicable to sales
occurring under this Section, and (ii) must be completed within one
hundred twenty (120) days after the last day of the Offer Period. In
the event that the Offered Interest is not sold in accordance with the
terms of the preceding sentence, the Offered Interest shall again
become subject to all of the conditions and restrictions of this
Section.
6.6 WITHDRAWAL. Any provision of the laws of the State notwithstanding,
each Partner hereby covenants and agrees that all the Partners will continue as
Partners and carry out the duties and obligations undertaken by them hereunder
and that, except as otherwise expressly required or permitted hereby, no Partner
shall withdraw or retire from the Partnership, be entitled to demand or receive
a return of such Partner's contributions or profits (or a bond or other security
for the return of such contributions or profits), or exercise any power under
the Act to dissolve the Partnership other than pursuant to the terms of this
Agreement.
6.7 TRANSFERS IN VIOLATION OF THE AGREEMENT. Any Transfer or purported
Transfer of any Partnership Interest or the interests in Essaness (directly or
indirectly other than to Permitted Transferees) shall be null and void for all
purposes if made in violation of this Agreement. Subject to the proviso
contained in the first sentence of Section 6.1 with respect to bona fide
financing and subject to the second sentence of Section 6.1, Transfers of the
interests in Telemundo and Harriscope shall be null and void for all purposes if
made in violation of this Agreement.
6.8 REMEDIES. If any Partner shall at any time Transfer or attempt to
Transfer its Partnership Interest in violation of the provisions of this
Agreement and any rights hereby granted then the other Partner shall, in
addition to the rights and remedies at law and in equity, be entitled to a
decree or order restraining and enjoining such Transfer, and the offering
Partner shall not plead in defense thereto that there would be an adequate
remedy at law; it being hereby expressly acknowledged and agreed that the non-
transferring Partners will suffer irreparable injury for which there is no
adequate remedy at law for a breach or threatened breach or violation of the
provisions concerning Transfers set forth in this Agreement.
6.9 TERMINATION OF CERTAIN RIGHTS. If Essaness' Partnership Interest is
transferred to any person or entity pursuant to this Section 6 other than to a
Permitted Transferee pursuant to Section 6.2., the provisions of Sections 3.5,
4.1.b., 4.3.a., 4.3.b., 4.4., the second to last sentence of Section 5.4, and
the last proviso of the first sentence of Section 5.7 shall terminate effective
upon such Transfer, except that the right of Telemundo and Harriscope to
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receive distributions of prior capital contributions pursuant to Section
3.5.b.(6) shall survive the Transfer such that Telemundo will receive such
distributions as a priority distribution over payments to any transferee of
Essaness' Partnership Interest.
7. BUY-SELL PROVISIONS
7.1 TELEMUNDO BUY-SELL.
a. OFFER NOTICE. Beginning at any time on or after the date fifty four
(54) months after the effective date of this Agreement, Telemundo or
its nominee shall have the right to notify Essaness or its Permitted
Transferees in writing (the "OFFER NOTICE") that Telemundo desires to
purchase all, but not less than all, of the Partnership Interest owned
by Essaness and its Permitted Transferees (the "ESSANESS INTERESTS")
for cash at such price and on such other terms as Telemundo may set
forth in such Offer Notice. Upon Telemundo issuing an Offer Notice,
the parties shall engage in good faith negotiations for a reasonable
period of time for a purchase of the Essaness Interests by Telemundo
in accordance with the terms of the offer notice.
b. TELEMUNDO BUY-SELL RIGHT. If the parties in good faith cannot reach
agreement on a negotiated sale of the Essaness Interests within such
reasonable period, Telemundo shall have the right, exercisable on or
after the date that is fifty-eight (58) months after the effective
date of this Agreement, to make a formal written offer (the "FORMAL
OFFER") to purchase all but not less than all of the Essaness
Interests, which Formal Offer shall set forth the price (including the
total valuation of the Partnership upon which the purchase price is
based) and the other material terms of the proposed purchase.
c. ESSANESS OPTION. Upon receipt of a Formal Offer from Telemundo,
Essaness shall have until the later of (a) sixty (60) days from the
date of receipt of the Formal Offer and (b) one hundred eighty days
(180) from the date of receipt of the Offer Notice to either (i)
accept Telemundo's Formal Offer in accordance with its terms, or (ii)
present in writing a bona fide counteroffer from a Third Party (in
which Essaness may have a minority interest and which may be a
Competitor) (the "COUNTEROFFER") to purchase all but not less than all
of the Partnership Interest owned by Telemundo and Harriscope and
their Permitted Transferees (the "TELEMUNDO INTERESTS"). The terms of
the
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Counteroffer must be no less favorable to the seller than the Formal
Offer and must include a purchase price based on a total valuation of
the Partnership that is greater than the valuation contained in the
Formal Offer.
d. TELEMUNDO OPTION. If Essaness presents a timely Counteroffer,
Telemundo will have ten (10) calendar days to respond to the
Counteroffer in writing by either (a) accepting the Counteroffer in
accordance with its terms, or (b) notifying Essaness in writing that
Telemundo will purchase the Essaness Interests at a price based on the
total valuation of the Partnership set forth in the Counteroffer, and
on economic terms no less favorable to Essaness than the terms
contained in the Counteroffer, in which case Essaness shall sell the
Essaness Interest to Telemundo at such price and on such terms.
Telemundo will be deemed to have accepted the Counteroffer if it does
not respond to the Counteroffer within the ten (10) calendar days set
forth above.
7.2 ESSANESS BUY-SELL.
a. OFFER NOTICE. Beginning at any time on or after the date seventy two
(72) months after the effective date of this Agreement, Essaness or
its nominee shall have the right to send an Offer Notice to Telemundo
or its Permitted Transferees that Essaness desires to purchase all,
but not less than all, of the Partnership Interest owned by Telemundo
and Harriscope or their Permitted Transferees (the "TELEMUNDO
INTERESTS") for cash at such price and on such other terms as Essaness
may set forth in such Offer Notice. Upon Essaness issuing an Offer
Notice, the parties shall engage in good faith negotiations for a
reasonable period of time (not to be less than 30 days) for a purchase
of the Telemundo Interests by Essaness in accordance with the terms of
the offer notice.
b. ESSANESS BUY-SELL RIGHT. If the parties in good faith cannot reach
agreement on a negotiated sale of the Telemundo Interests within such
reasonable period, Essaness shall have the right, exercisable on or
after the date that is seventy-six (76) months after the effective
date of this Agreement, to make a Formal Offer to purchase all but not
less than all of the Telemundo Interests, which Formal Offer shall set
forth the price (including the total valuation of the Partnership upon
which the purchase price is based) and the other material terms of the
proposed purchase.
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c. TELEMUNDO OPTION. Upon receipt of a Formal Offer from Essaness,
Telemundo shall have until the later of (a) sixty (60) days from the
date of receipt of the Formal Offer and (b) one hundred eighty days
(180) from the date of receipt of the Offer Notice to either (i)
accept Essaness' Formal Offer in accordance with its terms, or (ii)
present in writing a bona fide counteroffer to purchase all but not
less than all of the Essaness Interests. The terms of the
Counteroffer must be no less favorable to the seller than the Formal
Offer and must include a purchase price based on a total valuation of
the Partnership that is greater than the valuation contained in the
Formal Offer. If Telemundo presents a counteroffer, Essaness shall
sell all of the Essaness Interests to Telemundo or its designee
pursuant to the terms of 7.3.
7.3 CLOSING. The closing of the purchase and sale of Interests pursuant
to this Section 7 shall take place within ten (10) Business Days after an FCC
Order approving the transfer of the Essaness Interests or the Telemundo
Interests, as appropriate, becomes a Final Order.
8. DISSOLUTION AND LIQUIDATION
8.1 CAUSES OF DISSOLUTION. The Partnership shall be dissolved only upon
the happening of any of the following events:
a. The Partners mutually agree to terminate the Partnership; or
b. The bankruptcy of Telemundo.
c. The Partnership ceases to maintain an interest (which term shall
include but not be limited to a security interest) in the Station and
the proceeds derived therefrom; or
d. The Partnership by its terms, as set forth in this Agreement, is
terminated.
8.2 PROCEDURE IN DISSOLUTION AND LIQUIDATION.
a. Upon dissolution of the Partnership pursuant to Section 8.1, the
Partnership shall immediately commence to wind up its affairs, and the
Partners shall proceed with reasonable promptness to liquidate the
business of the Partnership.
b. During the period of the winding up of the affairs of the Partnership,
the rights and obligations of
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the Partners set forth herein with respect to the management of the
Partnership shall continue.
c. The assets of the Partnership shall be applied or distributed in
liquidation in the following order or priority; provided, however,
that, except for the indemnities set forth in Section 4.10, no Partner
shall be liable to the other for any negative balance in its Capital
Account:
(1) In payment of other debts and obligations of the Partnership owed
to Third Parties;
(2) In payment of debts and obligations of the Partnership to any
Partner;
(3) To Telemundo and Harriscope until the aggregate distributions to
Telemundo and Harriscope pursuant to this Section 8.2 and Section
3.5.b.(6) hereof are equal to the aggregate additional Capital
Contributions of Telemundo and Harriscope pursuant to Section 3.3
hereto.
(4) To the Partners in proportion to their Positive Capital Accounts
as of the date of such distribution, after giving effect to all
contributions, distributions and allocations for all periods; and
(5) To the Partners in accordance with Section 3.1.a.
d. Every reasonable effort shall be made to dispose of the assets of the
Partnership so that the distribution may be made to the Partners in
cash. Any distribution of property in kind shall be considered cash in
an amount equal to its fair market value, net of liabilities
encumbering the same, at the time of its distribution.
e. If Telemundo or Harriscope makes Capital Contributions to the
Partnership pursuant to Section 3.3 hereto for purposes OTHER THAN to
fund capital expenditures related to the operation of the Station
(capital expenditures include, but are not limited to equipment
replacement), Partnership operations, or meeting the Minimum
Distribution requirements (herein "Excess Capital Contributions"),
then, UNLESS ESSANESS APPROVES in writing of such Excess Capital
Contributions, such amounts will not be considered Capital
Contributions for purposes of this Agreement; provided, such
unapproved Excess Capital Contributions will be considered Capital
Contributions for purposes of these liquidation provisions only. The
Parties hereby confirm that
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any additional Capital Contributions not approved by Essaness will not
be included in the Capital Accounts of the Partners in the event of a
sale between Essaness (or any Affiliate of Essaness) and TGI of their
interests in the Partnership (i.e., for example, the amount of such
unapproved additional Capital Contributions may not be deducted by
Telemundo from any purchase price it would otherwise pay to Essaness
in the event of a buy-out).
8.3 DISPOSITION OF DOCUMENTS AND RECORDS. All documents and records of
the Partnership, including, without limitation, all financial records, vouchers,
canceled checks and bank statements, shall be delivered to Telemundo upon
termination of the Partnership. Telemundo shall retain such documents and
records for a period of not less than seven (7) years and shall make such
documents and records available during normal business hours to the other
Partner for inspection and copying at the other Partner's cost and expense.
9. GENERAL PROVISIONS
9.1 ENTIRE AGREEMENT. This Agreement supersedes all oral and prior
written agreements, representations, warranties, statements, promises and
understandings with respect to the subject matter hereof, and none of the
parties hereto shall be bound by nor charged with any oral or prior written
agreements, representations, warranties, statements, promises or understandings
not specifically set forth in this Agreement or the exhibits hereto. This
Agreement may not be amended, altered or modified except by a writing signed by
all the Partners.
9.2 NOTICES.
a. All notices under this Agreement shall be in writing and shall be sent
by facsimile, hand delivered by recognized courier service or mailed
by certified registered U.S. first class mail, postage prepaid, return
receipt requested, to the Partners at the addresses herein set forth
or changed pursuant to Section 9.2.c and to the Partnership at its
principal place of business.
The addresses for notices are as follows:
To the Partnership:
Video 44
an Illinois General Partnership
430 West Grant Place
Chicago, Illinois 60614
Attn: General Manager
Facsimile No.: (312) 929-8153
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With a copy to:
Alan Silverman
38045 Via Fortuna
Palm Springs, CA 92264
Facsimile No.: (619) 320-5901
Telemundo Group, Inc.
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Chief Financial Officer
Facsimile No.: (305) 889-7997
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
399 Park Avenue
New York, New York 10022
Attn: Patrick J. Dooley, Esq.
Facsimile No.: (212) 872-1002
To Essaness:
Essaness Theatres Corporation
c/o Alan Silverman
38045 Via Fortuna
Palm Springs, CA 92264
Facsimile No.: (619) 320-5901
With a copy to:
Jeffrey A. Schumacher
Sachnoff & Weaver, Ltd.
30 S. Wacker
29th Floor
Chicago, IL 60606
Facsimile No.: (312) 207-6400
Susan Silverman
22842 South Harlem
Frankfort, Illinois 60426
Facsimile No.: (708) 720 - 9456
To Telemundo or Harriscope:
Telemundo Group, Inc.
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Chief Financial Officer
Facsimile No.: (305) 889-7997
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With a copy to:
Telemundo Group, Inc.
2290 West 8th Avenue
Hialeah, Florida 33010
Attn: Legal Department
Facsimile No.: (305) 889-7997
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
399 Park Avenue
New York, New York 10022
Attn: Patrick J. Dooley, Esq.
Facsimile No.: (212) 872-1002
To Alan Silverman:
Alan Silverman
38045 Via Fortuna
Palm Springs, CA 92264
Facsimile No.: (619) 320-5901
To Jack Silverman:
612 West Francis
Aspen, Colorado 81611
Facsimile No.: (303) 925-3522
b. All notices, demands, and requests shall be deemed received and
effective upon delivery in the case of facsimile or hand delivery and
three (3) Business Days after mailing in the case of delivery by mail.
However, rejection or other refusal to accept or the inability to
deliver because of changed address of which no notice was given as
provided in Section 9.2.c. shall be deemed to be effective upon
receipt of the notice, demand or request.
c. By giving to the other parties at least ten (10) days written notice
thereof, the parties hereto and their respective permitted successors
and assigns shall have the right from time to time and at any time
during the term of this Agreement to change their respective addresses
for notices, and each shall have the right to specify as its or his
address for notices any other address within the United States of
America.
9.3 ATTORNEYS' FEES. Should any litigation or other adversarial
proceeding be commenced between the parties hereto or their representatives, or
should any party institute any proceeding in a bankruptcy or similar court which
has jurisdiction over any other party hereto or any or all of his or its
property or assets concerning any provision of this Agreement or the rights and
duties of any person or entity in relation thereto, the party or parties
prevailing in such
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litigation or proceeding shall be entitled, in addition to such other relief as
may be granted, to a reasonable sum as and for its or their attorneys' and
paralegal fees and court costs in such litigation or proceeding which shall be
determined by the court in such litigation or proceeding or in a separate action
brought for that purpose.
9.4 VALIDITY. In the event that any provision of this Agreement shall be
held to be invalid or unenforceable, the same shall not affect in any respect
whatsoever the validity or enforceability of the remainder of this Agreement.
9.5 SURVIVAL OF RIGHTS. Except as provided herein to the contrary, this
Agreement shall be binding upon and inure to the benefit of the parties
signatory hereto, their respective heirs, executors, legal representatives and
permitted successors and assigns.
9.6 NO STRICT CONSTRUCTION. The parties hereto jointly participated in
the negotiation and drafting of this Agreement and the other agreements
contemplated hereby. The language used in this Agreement will be deemed to be
the language chosen by the Parties hereto to express their collective mutual
intent. This Agreement shall be construed as if drafted jointly by the Parties
hereto, and no rule of strict construction will be applied against any person.
9.7 GOVERNING LAW. This Agreement has been entered into in the State, and
all questions with respect to this Agreement and the rights and liabilities of
the parties hereto shall be governed by the laws of the State.
9.8 NO PARTITION. No Partner shall have the right and each Partner hereby
agrees not to withdraw from the Partnership, bring any action to partition the
Partnership's property, nor to dissolve, terminate or liquidate, or to petition
a court for the dissolution, termination, or liquidation of the Partnership,
except as provided in this Agreement, and no Partner at any time shall have the
right to petition or to take any action to subject the Partnership's property or
any part thereof or the Partnership assets or any part thereof to the authority
of any court of bankruptcy, insolvency, receivership or similar proceeding,
unless there is unanimous consent of the Partners.
9.9 WAIVER. No consent or waiver, express or implied, by a Partner to or
of any breach or default by any other Partners in the performance by such other
Partners of its obligations hereunder shall be deemed or construed to be a
consent or waiver to or of any other breach or default in the performance by
such other Partners of the same or any other obligations of such other Partners
hereunder. Failure on the part of a Partner to complain of any act or failure to
act of any other Partners or to declare any other Partners in default,
irrespective of how long such failure continues,
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shall not constitute a waiver by such Partner in any one instance and shall not
limit or waive the necessity to obtain such Partner's consent in any further
instance.
9.10 REMEDIES IN EQUITY. The rights and remedies of any of the Partners
hereunder shall not be mutually exclusive, I.E., the exercise of one or more of
the provisions hereof shall not preclude the exercise of any other provisions
hereof. Each of the Partners confirms that irreparable injury will occur for
which there is not an adequate remedy at law for a breach or threatened breach
of this Agreement and agree that, in the event of a breach or threatened breach
of any provisions hereof, the respective rights and obligations hereunder shall
be enforceable by specific performance, injunction or other equitable remedy,
but nothing herein contained is intended to, nor shall it, limit or affect any
rights at law or by statute or otherwise of any party aggrieved as against the
other for a breach or threatened breach of any provision hereof, it being the
intention by this Section to make clear the agreement of the Partners that the
respective rights and obligations of the Partners hereunder shall be enforceable
in equity as well as at law or otherwise.
9.11 TERMINOLOGY. All personal pronouns used in this Agreement, whether
used in the masculine, feminine or neuter gender, shall include all other
genders; and the singular shall include the plural and vice versa. Titles of
Sections and Subsections are for convenience only, and neither limit nor amplify
the provisions of this Agreement itself. References to Sections or Subsections
shall refer to Sections or Subsections of this Agreement. Any exhibits referred
to herein are those attached hereto and shall be deemed incorporated as a part
of this Agreement. The use herein of the word "including", when following any
general statement, term or matter, shall not be construed to limit such
statement, term or matter to the specific items or matters set forth immediately
following such word or to similar items or matters, whether or not nonlimiting
language (such as "without limitation," or "but not limited to", rather shall be
deemed to refer to all other items or matters that could reasonably fall within
the broadest possible scope of such general statement, term or matter.
9.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same agreement.
9.13 FURTHER ASSURANCES. Each Party hereto agrees to do all acts and things
and to make, execute and deliver such written instruments, as shall from time to
time be reasonably required to carry out the terms and provisions of this
Agreement.
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9.14 ARBITRATION. Except where a Partner is seeking an injunction or
specific performance hereunder, the Partners agree that any controversy between
the Partners involving the construction or application of any term, covenants,
or condition of this Agreement shall be submitted to arbitration on the request
of any Partner, and the arbitration will comply with and be governed by the
rules and procedures of the American Arbitration Association.
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the day
and year first above set forth.
TELEMUNDO OF CHICAGO, INC.
By:___________________________________
Name:
Title:
HARRISCOPE OF CHICAGO, INC.
By:____________________________________
Name:
Title:
ESSANESS THEATRES CORPORATION
OF ILLINOIS
By:____________________________________
Name:
Title:
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