- ----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended June 28, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____to____ Commission file number 33-99622
BUSSE BROADCASTING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 38-2750516
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
141 East Michigan Avenue, Suite 300
Kalamazoo, Michigan 49007
(Address of principal executive offices)
(616) 388-8019
(Registrant's telephone number, including area code)
------------------------------
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 ---- ------
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
As of August 10, 1998, 107,700 shares of the Common Stock of Busse
Broadcasting Corporation were outstanding. None of the outstanding shares were
held by non-affiliates.
- -------------------------------------------------------------------------------
<PAGE>
2
BUSSE BROADCASTING CORPORATION
Form 10-Q Table of Contents
<TABLE>
<CAPTION>
Page
Reference
----------
<S> <C>
Part I - Financial Information
Item 1. Financial Statements.
Busse Broadcasting Corporation
Condensed Consolidated Balance Sheets as of June 28, 1998
and December 28, 1997 (Unaudited) 3
Unaudited Condensed Consolidated Statements of Operations for the
Three Months Ended June 28, 1998 and June 29, 1997 4
Unaudited Condensed Consolidated Statements of Operations for the
Six Months Ended June 28, 1998 and June 29, 1997 5
Unaudited Condensed Consolidated Statements of Cash Flows for the
Six Months Ended June 28, 1998 and June 29, 1997 6
Notes to Unaudited Condensed Consolidated Financial Statements for the
Six Months Ended June 28, 1998 7
KOLN/KGIN, Inc.
(A Wholly-Owned Subsidiary of Busse Broadcasting Corporation)
Condensed Consolidated Balance Sheets as of June 28, 1998
and December 28, 1997 (Unaudited) 13
Unaudited Condensed Consolidated Statements of Operations and Stockholder's
Equity for the Three Months Ended June 28, 1998 and June 29, 1997 14
Unaudited Condensed Consolidated Statements of Operations and Stockholder's
Equity for the Six Months Ended June 28, 1998 and June 29, 1997 15
Unaudited Condensed Consolidated Statements of Cash Flows for the
Six Months Ended June 28, 1998 and June 29, 1997 16
Notes to Unaudited Condensed Consolidated Financial Statements for the
Six Months Ended June 28, 1998 17
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. 19
Part II - Other Information
Item 1. Legal Proceedings. 26
Item 5. Other Information. 26
Item 6. Exhibits and Reports on Form 8-K. 26
SIGNATURES 28
</TABLE>
2
<PAGE>
Part I - Financial Information
Item 1. Financial Statements.
Busse Broadcasting Corporation
Condensed Consolidated Balance Sheets
Unaudited
<TABLE>
<CAPTION>
JUNE 28, DECEMBER 28,
1998 1997
----------------------------------------
<S> <C> <C>
ASSETS (Note 1)
Current assets:
Cash and cash equivalents (Note 2) $ 9,045,736 $ 8,974,699
Receivables, net 3,650,675 3,804,410
Other current assets 776,646 1,343,483
----------------------------------------
Total current assets 13,473,057 14,122,592
Property, plant and equipment, net 12,555,079 13,226,067
Deferred charges and other assets 1,503,221 1,811,809
Intangible assets and excess reorganization value 46,826,755 48,775,820
========================================
Total assets $ 74,358,112 $ 77,936,288
========================================
LIABILITIES AND STOCKHOLDERS' EQUITY (Note 1)
Current liabilities:
Accounts payable and accrued expenses $ 2,360,295 $ 4,161,712
Long-term debt (Note 2) 61,168,080 60,918,857
Stockholders' equity:
Series A cumulative convertible preferred stock (non-voting)
- $.01 par value, $1,000 per share liquidation preference;
65,524.41 shares authorized, issued and outstanding including
dividends in arrears of $11,897,150 and $9,485,924 at June 28, 1998
and December 28, 1997, respectively 29,227,810 26,816,584
Common stock (voting) - $.01 par value; 2,154,000 shares authorized,
and 107,700 shares issued and outstanding 1,077 1,077
Additional paid-in capital - common stock 9,185,772 9,185,772
Accumulated deficit (27,584,922) (23,147,714)
----------------------------------------
Total stockholders' equity 10,829,737 12,855,719
========================================
Total liabilities and stockholders' equity $ 74,358,112 $ 77,936,288
========================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
Busse Broadcasting Corporation
Condensed Consolidated Statements of Operations
Unaudited
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------
JUNE 28, 1998 JUNE 29, 1997
---------------------------------------------
<S> <C> <C>
Net revenue $ 5,488,694 $ 5,284,833
Operating costs and expenses, excluding depreciation and
amortization 2,177,559 2,180,756
Depreciation 427,494 530,269
Amortization of intangibles and excess reorganization value 960,440 977,126
---------------------------------------------
Total operating costs and expenses 3,565,493 3,688,151
Corporate expenses 407,255 387,601
---------------------------------------------
Income from operations 1,515,946 1,209,081
Other income (expense):
Interest expense (2,099,150) (2,084,508)
Interest income 126,254 90,062
Gain on disposition of assets 1,150 370
Other income (expense) 5,872 (3,916)
---------------------------------------------
Other expense (1,965,874) (1,997,992)
---------------------------------------------
Loss from operations before income taxes (449,928) (788,911)
Provision for current income taxes (Note 3) -- --
---------------------------------------------
Net loss (449,928) (788,911)
Charges to stockholders' equity for Series A preferred stock
dividends in arrears (1,205,613) (1,205,613)
=============================================
Net loss attributable to common stockholders $ (1,655,541) $ (1,994,524)
=============================================
Per common share - basic and diluted (Note 1):
Loss from operations $ (4.18) $ (7.33)
Series A preferred stock dividends in arrears (11.19) (11.19)
--------------------------------------------
Net loss attributable to common stockholders $ (15.37) $ (18.52)
=============================================
Weighted average common shares outstanding - basic and diluted 107,700 107,700
=============================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
Busse Broadcasting Corporation
Condensed Consolidated Statements of Operations
Unaudited
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------------------------------
JUNE 28, 1998 JUNE 29, 1997
---------------------------------------------
<S> <C> <C>
Net revenue $ 10,215,822 $ 9,549,775
Operating costs and expenses, excluding depreciation and
amortization 4,448,310 4,345,637
Depreciation 919,906 1,060,538
Amortization of intangibles and excess reorganization value 1,949,065 1,989,904
----------------------------------------------
Total operating costs and expenses 7,317,281 7,396,079
Corporate expenses 960,135 740,554
----------------------------------------------
Income from operations 1,938,406 1,413,142
Other income (expense):
Interest expense (4,192,307) (4,163,284)
Interest income 227,078 186,576
Gain on disposition of assets 1,161 390
Other income (expense) (320) 65,199
----------------------------------------------
Other expense (3,964,388) (3,911,119)
----------------------------------------------
Loss from operations before income taxes (2,025,982) (2,497,977)
Provision for current income taxes (Note 3) -- --
----------------------------------------------
Net loss (2,025,982) (2,497,977)
Charges to stockholders' equity for Series A preferred stock
dividends in arrears (2,411,226) (2,411,226)
==============================================
Net loss attributable to common stockholders $ (4,437,208) $ (4,909,203)
==============================================
Per common share - basic and diluted (Note 1):
Loss from operations $ (18.81) $ (23.19)
Series A preferred stock dividends in arrears (22.39) (22.39)
----------------------------------------------
Net loss attributable to common stockholders $ (41.20) $ (45.58)
==============================================
Weighted average common shares outstanding - basic and diluted 107,700 107,700
==============================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
Busse Broadcasting Corporation
Condensed Consolidated Statements of Cash Flows
Unaudited
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------------------
JUNE 28, 1998 JUNE 29, 1997
------------------------------------
<S> <C> <C>
Operating activities:
Net loss $(2,025,982) $(2,497,977)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization 2,868,971 3,050,442
Non cash interest expense 249,222 220,199
Amortization of deferred financing costs 308,703 308,703
Program payments over program amortization (4,247) (2,085)
Gain on disposition of property, plant and equipment (1,161) (390)
Deferred compensation expense 122,548 174,520
Pension expense -- 60,000
Change in current assets and liabilities:
Receivables 153,735 21,350
Other current assets 65,262 15,782
Deferred compensation payment (1,065,000) --
Accounts payable and accrued expenses (353,142) (369,718)
------------------------------------
Net cash provided by operating activities 318,909 980,826
INVESTING ACTIVITIES:
Capital expenditures (248,919) (479,099)
Proceeds from disposition of assets 1,162 390
(Increase) decrease in other assets (115) (3,367)
------------------------------------
Net cash used in investing activities (247,872) (482,076)
------------------------------------
Net cash used in financing activities -- --
------------------------------------
Net increase (decrease) in cash and cash equivalents 71,037 498,750
Cash and cash equivalents at beginning of period 8,974,699 7,989,805
====================================
Cash and cash equivalents at end of period $ 9,045,736 $ 8,488,555
====================================
Supplemental disclosure of cash flow information:
Interest paid during the period $ 3,634,382 $ 3,634,382
====================================
Income taxes paid during the period $ -- $ --
====================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
Busse Broadcasting Corporation
Notes to Condensed Consolidated Financial Statements
Unaudited
June 28, 1998
1. BASIS OF PRESENTATION
The condensed consolidated financial statements include Busse Broadcasting
Corporation and its wholly owned subsidiaries (collectively Busse or the
Company) engaged in the following businesses:
Television:
KOLN/KGIN-TV CBS Affiliate Lincoln/Grand Island, Nebraska WEAU-TV NBC
Affiliate Eau Claire/La Crosse, Wisconsin (Sold July 31, 1998 as discussed
in Note 5 "Sale of the Company's Capital Stock and Like-kind Exchange of
Assets", herein.)
All intercompany accounts and transactions have been eliminated in
consolidation.
The accompanying unaudited condensed consolidated financial statements in
conjunction with the related notes to the financial statements reflect, in the
opinion of the Company, all adjustments, consisting of only normal recurring
adjustments necessary to present fairly the Company's financial position and
results of operations for the unaudited interim periods. Results for such
interim periods are not necessarily indicative of the results for the respective
entire years.
Certain information and footnote disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. It is suggested that these condensed
consolidated financial statements be read in conjunction with the audited
financial statements and notes thereto of Busse Broadcasting Corporation
included in the Company's 1997 Annual Report on Form 10-K.
The Company and its wholly-owned subsidiary filed voluntary petitions for a
joint plan of reorganization under Chapter 11 of the United States Bankruptcy
Code (the "Plan") on March 10, 1995. On April 20, 1995 the United States
Bankruptcy Court for the district of Delaware (the "Court") confirmed the Plan,
such Plan became effective May 3, 1995 (the "Effective Date") and the respective
Chapter 11 cases were closed by the Court on September 21, 1995.
7
<PAGE>
Busse Broadcasting Corporation
Notes to Condensed Consolidated Financial Statements (continued)
Unaudited
2. DEBT
Debt is summarized as follows:
JUNE 28, DECEMBER 28,
1998 1997
================================
Senior Secured Notes, net of unamortized
original issue discount of $1,358,920 and
$1,608,143 at June 28, 1998 and December
28, 1997, respectively $ 61,168,080 $ 60,918,857
================================
On October 26, 1995 the Company issued $62,527,000 principal amount of 11 5/8%
Senior Secured Notes due October 15, 2000 ("Senior Notes") at a price of 95.96%
of the aggregate principal amount thereof. As discussed more fully in Note 5,
herein, on July 31, 1998 the Company effected a satisfaction and discharge (the
"Discharge") of the Senior Notes in accordance with the indenture pursuant to
which the Senior Notes were issued (the "Indenture"). The Senior Notes were
Discharged by the Company depositing $69,913,002, in cash, with the Indenture's
trustee and collateral agent (the "Trustee") and providing the Trustee an
irrevocable direction to redeem all of the outstanding Senior Notes on October
15, 1998 at a redemption price of 106% of the aggregate principal amount of the
Senior Notes plus accrued and unpaid interest as of the date of the redemption.
The cash deposited with the Trustee is equal to 100% of the aggregate cash
required to effect the Senior Note redemption on October 15, 1998. Such cash
deposit and irrevocable direction effected a satisfaction and discharge of the
Senior Notes pursuant to the Indenture.
8
<PAGE>
Busse Broadcasting Corporation
Notes to Condensed Consolidated Financial Statements (continued)
Unaudited
3. INCOME TAXES
As of December 28, 1997 the Company had approximately $61.4 million of federal
net operating loss carryforwards ("NOL's") which begin to expire in 2005. As a
result of the Plan (see Note 1) the Company elected treatment under Section 382
(1) (5) of the Internal Revenue Code, as amended (the "Code"). This treatment
will allow the Company to utilize, under certain restrictions, its NOL's to
offset taxable income incurred after the Effective Date. Utilization of a
portion of these NOL's are assumed in the Company's calculation of
Post-Effective Date deferred taxes.
As discussed more fully in Note 5 herein, on July 31, 1998 the Company sold the
WEAU Assets, as defined in Note 5 herein, and recognized a gain, on a tax basis,
of approximately $60 million. Such gain will be offset by and reduce the
Company's NOL's.
Also, as discussed more fully in Note 5, herein, on July 31, 1998 after
completion of the sale of the WEAU Assets, as defined in Note 5, 100% of the
Company's capital stock was acquired by Gray Communications Systems, Inc.
("Gray"), as described in Note 5; such acquisition will subject the Company's
remaining NOL's to certain limitations under section 382 of the Code.
9
<PAGE>
Busse Broadcasting Corporation
Notes to Condensed Consolidated Financial Statements (continued)
Unaudited
4. CORPORATE REORGANIZATION/SUBSIDIARY GUARANTORS
Prior to their Discharge, as discussed in Notes 2 and 5, the Senior Notes were
fully and unconditionally guaranteed, on a joint and several and senior secured
basis, by all of the Company's direct and indirect subsidiaries, each of which
is wholly-owned.
The following tables present summarized combined balance sheet and operating
statement information for (i) KOLN/KGIN, Inc. (ii) KOLN/KGIN License, Inc. and
(iii) WEAU License, Inc. Separate financial statements of KOLN/KGIN, Inc.
immediately follow these notes to condensed consolidated financial statements of
Busse Broadcasting Corporation. Separate financial statements and other
disclosures concerning KOLN/KGIN License, Inc. and WEAU License, Inc. have not
been presented because management has determined that such financial statements
would not be material to investors. On June 29, 1998 WEAU License, Inc. was
merged into WEAU License, LLC, a Delaware limited liability company solely
controlled by Busse (WEAU, LLC") with WEAU LLC being the surviving entity.
<TABLE>
<CAPTION>
JUNE 28, DECEMBER 28,
1998 1997
---------------------------------
ASSETS
<S> <C> <C>
Current assets $ 2,851,333 $ 3,377,708
Non-current assets 43,954,877 45,525,932
=================================
$46,806,210 $48,903,640
=================================
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities $ 619,465 $ 1,112,618
Non-current liabilities 6,198,320 6,373,635
Stockholder's equity 39,988,425 41,417,387
=================================
Total liabilities and stockholder's equity $46,806,210 $ 48,903,640
=================================
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------------------ ------------------------------------
JUNE 28, JUNE 29, JUNE 28, JUNE 29,
1998 1997 1998 1997
------------------------------------ ------------------------------------
<S> <C> <C> <C> <C>
Net revenue $ 3,606,773 $ 3,342,150 $ 6,835,017 $ 6,161,283
Total operating costs and expenses 2,598,299 2,600,245 5,420,756 5,215,201
Income from operations 1,008,474 741,905 1,414,261 946,082
Net loss $ (518,646) $ (605,977) $ (1,428,962) $ (1,552,868)
</TABLE>
10
<PAGE>
Busse Broadcasting Corporation
Notes to Condensed Consolidated Financial Statements (continued)
Unaudited
5. SALE OF THE WEAU ASSETS, LIKE-KIND EXCHANGE OF ASSETS AND SALE OF 100% OF THE
CAPITAL STOCK OF THE COMPANY
On July 31, 1998 Busse and WEAU LLC sold all of the assets of WEAU-TV, Eau
Claire Wisconsin, including the FCC licenses controlled by WEAU LLC,
(collectively the "WEAU Assets") to Cosmos Broadcasting Corp. ("Cosmos") for an
aggregate cash purchase price of $66 million. In accordance with the Indenture,
the Company directed the $66 million of proceeds be deposited with the Indenture
Trustee.
Also on July 31, 1998, Busse; Gray; two subsidiaries of Gray (WALB-TV, Inc. and
WALB Licensee Corp. collectively referred to herein as the "Gray Subsidiaries");
and Cosmos effected a like-kind exchange transaction (the "Like-kind Exchange")
as follows: (i) the Gray Subsidiaries sold to Cosmos substantially all of the
assets from the Gray Subsidiaries in exchange for the WEAU Assets plus an
aggregate cash payment of $12 million and (ii) Cosmos directed Busse to deliver
the respective WEAU Assets directly to the Gray Subsidiaries to complete the
Like-kind Exchange.
After consummation of the sale of the WEAU Assets and the Like-kind Exchange,
Gray acquired all of the capital stock of Busse for an aggregate net purchase
price of $57.4 million, which was paid in cash to the Company's stockholders.
The aggregate net purchase price was derived by the sum of (i) $112 million,
plus (ii) the Company's cash and cash equivalents, less (iii) the aggregate
amount of the Company's indebtedness and accrued and unpaid interest thereon,
including the accreted amount of the Company's Senior Notes, less (iv) certain
other purchase price adjustments. The value of the Company's cash, cash
equivalents, aggregate indebtedness and other purchase price adjustments were
determined as of the close of business on July 30, 1998.
Effective with the closing of the sale of the Company's capital stock, as
discussed above, Messrs. Busse and Ryan resigned as executive officers of, and
terminated their respective employment with, the Company and its affiliates.
Messrs. Busse, Beck and Cornwell resigned as directors of the Company and Mr.
Busse resigned as a director of each of the Company's affiliates.
Gray, upon acquisition of Busse's stock elected the following directors for
Busse: Messrs. Richard L. Boger, Hilton H. Howell, William E. Mayher, III,
Howell Newton, Hugh Norton, Robert S. Prather, Jr., Mrs. Harriett J. Robinson
and Mr. J. Mack Robinson. Such new directors appointed the following executive
officers of the Company: Mr. J. Mack Robinson as President and Chairman, Mr.
Frederick J. Erickson as Chief Financial Officer, Mr. Robert Beizer as
Secretary, Mr. Vance Luke as Assistant Secretary and Mr. Jackson S. Cowart, IV
as Assistant Secretary.
11
<PAGE>
After the change in control of the Busse capital stock and appointment of new
directors and officers for the Company, Busse irrecoverably directed the Trustee
to utilize certain collateral proceeds funds held by the Trustee along with
certain other cash deposited by the Company with the Trustee as an irrevocable
cash deposit aggregating $69,913,002, to redeem all of the outstanding Senior
Notes on October 15, 1998 at 106% of the aggregate principal amount thereof and
accrued and unpaid interest to the date of redemption. Such cash deposit and
irrevocable direction effected a satisfaction and discharge of the Senior Notes
pursuant to the Indenture.
12
<PAGE>
KOLN/KGIN, Inc.
(A Wholly-Owned Subsidiary of Busse Broadcasting Corporation)
Condensed Consolidated Balance Sheets
Unuaudited
<TABLE>
<CAPTION>
JUNE 28, DECEMBER 28,
1998 1997
-----------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 353,066 $ 373,716
Receivables, net 2,216,846 2,375,565
Program contract rights 126,280 441,825
Other current assets 9,138 40,600
------------ ------------
Total current assets 2,705,330 3,231,706
Property, plant and equipment, net 6,929,054 7,444,901
Due from Parent 905,707 464,096
Deferred charges and other assets 4,776 4,776
Intangible assets and excess reorganization value 31,110,555 32,404,597
------------ ------------
Total assets $ 41,655,422 $ 43,550,076
============ ============
LIABILITIES AND COMMON STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 456,408 $ 631,201
Program contracts payable 53,449 369,733
------------ ------------
Total current liabilities 509,857 1,000,934
Deferred income tax liabilities 1,693,000 1,783,000
Stockholder's equity:
Common stock (voting) - $.01 par value, 1,000 shares authorized, issued
and outstanding 10 10
Additional paid-in capital 46,568,577 46,568,577
Accumulated deficit (7,116,022) (5,802,445)
------------ ------------
Total stockholder's equity 39,452,565 40,766,142
------------ ------------
Total liabilities and stockholder's equity $ 41,655,422 $ 43,550,076
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
13
<PAGE>
KOLN/KGIN, Inc.
(A Wholly-Owned Subsidiary of Busse Broadcasting Corporation)
Condensed Consolidated Statements of Operations and Stockholder's Equity
Unaudited
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------
JUNE 28, JUNE 29,
1998 1997
------------------------------------
<S> <C> <C>
Net revenue $ 3,428,773 $ 3,164,150
Operating costs and expenses, excluding depreciation and amortization 1,341,801 1,350,136
Depreciation 269,750 274,525
Amortization of intangibles and excess reorganization value 632,928 649,614
Corporate expenses 252,431 224,582
------------------------------------
Total operating costs and expenses 2,496,910 2,498,857
------------------------------------
Income from operations 931,863 665,293
Other income (expense):
Interest income 3,146 4,981
Other expense -- (7,756)
------------------------------------
Other income (expense) 3,146 (2,775)
------------------------------------
Income before income taxes 935,009 662,518
(Provision) benefit for income taxes:
Current (1,445,000) (1,250,000)
Deferred 50,000 45,000
------------------------------------
(1,395,000) (1,205,000)
------------------------------------
Net loss (459,991) (542,482)
Stockholder's equity at beginning of period 39,912,556 42,776,726
====================================
Stockholder's equity at end of the period $ 39,452,565 $ 42,234,244
====================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
14
<PAGE>
KOLN/KGIN, Inc.
(A Wholly-Owned Subsidiary of Busse Broadcasting Corporation)
Condensed Consolidated Statements of Operations and Stockholder's Equity
Unaudited
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------------------
JUNE 28, JUNE 29,
1998 1997
------------------------------------
<S> <C> <C>
Net revenue $ 6,475,017 $ 5,801,283
Operating costs and expenses, excluding depreciation and amortization 2,767,183 2,685,051
Depreciation 539,500 549,050
Amortization of intangibles and excess reorganization value 1,294,042 1,299,228
Corporate expenses 617,254 443,443
------------------------------------
Total operating costs and expenses 5,217,979 4,976,772
------------------------------------
Income from operations 1,257,038 824,511
Other income (expense):
Interest income 6,341 9,943
Other expense (6,956) (7,756)
------------------------------------
Other income (expense) (615) 2,187
------------------------------------
Income before income taxes 1,256,423 826,698
(Provision) benefit for income taxes:
Current (2,660,000) (2,310,000)
Deferred 90,000 91,000
------------------------------------
(2,570,000) (2,219,000)
------------------------------------
Net loss (1,313,577) (1,392,302)
Stockholder's equity at beginning of period 40,766,142 43,626,546
------------------------------------
Stockholder's equity at end of the period $39,452,565 $42,234,244
====================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
15
<PAGE>
KOLN/KGIN, Inc.
(A Wholly-Owned Subsidiary of Busse Broadcasting Corporation)
Condensed Consolidated Statements of Cash Flows
Unaudited
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------------------
JUNE 28, JUNE 29,
1998 1997
------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $(1,313,577) $(1,392,302)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization 1,833,542 1,848,278
Program payments over program amortization (739) (1,042)
Deferred income taxes (90,000) (91,000)
Change in current assets and liabilities:
Receivables 158,719 (136,948)
Other current assets 31,462 (1,867)
Accounts payable and accrued expenses (174,793) (111,008)
------------------------------------
Net cash provided by operating activities 444,614 114,111
INVESTING ACTIVITIES:
Capital expenditures (23,653) (206,804)
------------------------------------
Net cash used in investing activities (23,653) (206,804)
FINANCING ACTIVITIES:
Increase in due from Parent (441,611) (71,069)
------------------------------------
Net cash used in financing activities (441,611) (71,069)
------------------------------------
Net increase (decrease) in cash and cash equivalents (20,650) (163,762)
Cash and cash equivalents at beginning of period 373,716 299,008
------------------------------------
Cash and cash equivalents at end of period $ 353,066 $ 135,246
====================================
Supplemental information
Income taxes paid $ 2,660,000 $ 2,310,000
====================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
16
<PAGE>
KOLN/KGIN, Inc.
(A Wholly-Owned Subsidiary of Busse Broadcasting Corporation)
Notes to Condensed Consolidated Financial Statements
Unaudited
June 28, 1998
1. BASIS OF PRESENTATION
The financial statements present the financial position, results of operations
and stockholder's equity, and cash flows of KOLN/KGIN, Inc., a wholly-owned
subsidiary of Busse Broadcasting Corporation (the Company or Parent). KOLN/KGIN,
Inc. owns and operates KOLN/KGIN-TV a CBS affiliate operating channels 10 and 11
in the Lincoln - Hastings - Kearney, Nebraska television market.
The accompanying financial statements include the accounts of KOLN/KGIN License,
Inc., a wholly owned subsidiary of KOLN/KGIN, Inc. All intercompany accounts and
transactions have been eliminated in consolidation.
Net intercompany balances reflected in the due from Parent account are primarily
the result of KOLN/KGIN, Inc.'s participation in the Company's central cash
management program, wherein the month-end cash balances in excess of certain
levels are remitted to the Company. Other transactions include the allocation of
corporate expenses to KOLN/KGIN, Inc. and the current income taxes that would
have been due to the Company. There are no terms of settlement or interest
related to these balances which averaged $684,901 and $272,999 due from the
Parent during the six months ended June 28, 1998 and June 29, 1997,
respectively.
The accompanying unaudited condensed consolidated financial statements in
conjunction with the related notes to the financial statements reflect, in the
opinion of KOLN/KGIN, Inc., all adjustments, consisting of only normal recurring
adjustments necessary to present fairly KOLN/KGIN, Inc.'s financial position and
results of operations for the unaudited interim periods. Results for such
interim periods are not necessarily indicative of the results for the respective
entire years.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. It is suggested that these condensed
consolidated financial statements be read in conjunction with the audited
financial statements and notes thereto of KOLN/KGIN, Inc.
17
<PAGE>
KOLN/KGIN, Inc.
(A Wholly-Owned Subsidiary of Busse Broadcasting Corporation)
Notes to Condensed Consolidated Financial Statements (continued)
Unaudited
1. BASIS OF PRESENTATION (CONTINUED)
The Company and KOLN/KGIN, Inc. (then named WWMT, Inc.) filed voluntary
petitions for a joint plan of reorganization under Chapter 11 of the United
States Bankruptcy Code (the "Plan") on March 10, 1995. On April 20, 1995 the
United States Bankruptcy Court (the "Court") for the district of Delaware
confirmed the Plan, such Plan became effective May 3, 1995 (the "Effective
Date") and the respective Chapter 11 cases were closed by the Court on September
21, 1995.
2. GUARANTEE OF PARENT'S SENIOR NOTES
On October 26, 1995 the Parent issued $62,527,000 principal amount of 11 5/8%
Senior Secured Notes due October 15, 2000 ("Senior Notes") at a price of 95.96%
of the aggregate principal amount thereof.
On July 31, 1998 the parent effected a satisfaction and discharge of the Senior
Notes. See Notes 2 and 5 of Busse Broadcasting Corporation's Notes to Condensed
Consolidated Financial Statements (unaudited) for the six months ended June 28,
1998 included herein.
3. SALE OF THE CAPITAL STOCK OF THE PARENT
On July 31, 1998 all of the capital stock of the Parent was sold to Gray
Communications Systems, Inc. ("Gray"). As a result of the acquisition of the
Parent's stock, Gray also indirectly controls KOLN/KGIN, Inc. and KOLN/KGIN
License, Inc. See Notes 2 and 5 of Busse Broadcasting Corporation's Notes to
Condensed Consolidated Financial Statements (unaudited) for the six months ended
June 28, 1998 included herein.
18
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
OVERVIEW
The following discussion and analysis of financial condition and
results of operations should be read in conjunction with the unaudited Condensed
Consolidated Financial Statements of the Company and notes thereto included at
Item 1, "Financial Statements," which provide additional information regarding
the Company's financial activities and condition. The accompanying unaudited
Condensed Consolidated Financial Statements, together with the related notes to
such financial statements, reflect, in the opinion of the Company, all
adjustments, consisting of only normal recurring adjustments, necessary to
present fairly the Company's financial position and results of operations for
the unaudited interim periods. Results of such interim periods are not
necessarily indicative of the results for the respective entire fiscal years.
The Company's fiscal year is the 52/53 week period ending on the Sunday
nearest to December 31 of each year. The Company's first three fiscal quarters
are each comprised of 13 consecutive weeks. Unless otherwise indicated,
references herein to 1998 and/or 1997 refer to the three or six month period
ended June 28, 1998 or June 29, 1997, respectively.
RESULTS OF OPERATIONS
The net revenues of KOLN/KGIN-TV and WEAU-TV (collectively, the
"Stations") are derived primarily from advertising revenues and, to a much
lesser extent, from compensation paid by the networks to the Stations for
broadcasting network programming. The Stations' primary operating expenses are
employee compensation and related benefits, programming, news gathering and
production and promotions. Substantially all of the assets of WEAU-TV were sold
on July 31, 1998; See "Sale of the WEAU Assets, Like-kind Exchange of Assets and
Sale of 100% of the Capital Stock of the Company", included herein, and Note 5
of Notes to Condensed Consolidated Financial Statements (Unaudited) included in
"Financial Statements" at Item 1.
In general, television stations receive revenues for advertising sold
for placement within and adjoining its locally originated programming and
adjoining national network programming. Advertising is sold in time increments
and is priced primarily on the basis of a program's popularity within the
demographic group an advertiser desires to reach, as measured principally by
quarterly audience surveys. In addition, advertising rates are affected by the
number of advertisers competing for the available time, the size of the
demographic make-up of the markets served by the television station and the
availability of alternate advertising media in the market areas. Rates are
highest during the most desirable viewing hours with corresponding reductions
during other hours. The ratings of local
19
<PAGE>
television stations affiliated with a national television network can be
affected by the ratings of the network programming.
Most advertising contracts are short-term and generally run for only a
few weeks. A large portion of the revenues of the Stations is generated from
local and regional advertising, which is sold primarily by the Stations' sales
staff, and the remainder of the advertising revenues represents national
advertising, which is sold by an independent national advertising sales
representative. The Stations generally pay commissions to advertising agencies
on local, regional, and national advertising, and on national advertising the
Stations also generally pay commissions to the national sales representative.
The advertising revenues of the Stations are generally highest in the
second and fourth quarters of each year, due in part to increases in consumer
advertising in the spring and retail advertising in the period leading up to and
including the holiday season. In addition, advertising revenues are generally
higher during election years due to spending by political candidates, which
spending typically is heaviest during the fourth quarter. Operating expenses of
the Company's television stations are generally consistent throughout the fiscal
year.
COMPARISON OF THE THREE MONTHS ENDED JUNE 28, 1998 AND JUNE 29, 1997
Net revenue increased $203,861, or 3.9%, to $5,488,694 from $5,284,833
for the three months ended June 28, 1998 compared to the three months ended June
29, 1997, reflecting increased net political advertising offset in part by a
decrease in demand for commercial time from national advertising clients. Net
political revenue for the Stations during the three months ended June 28, 1998
increased by approximately $444,000 to $467,000 from $23,000 between the fiscal
periods reflecting primary election campaigning in Nebraska as part of the
biannual election cycle. Net local time sales, excluding political revenues, and
network compensation for the Stations was consistent between the respective
fiscal periods.
Operating expenses, excluding depreciation and amortization expenses,
decreased $3,197, or 0.1%, to $2,177,559 for the three months ended June 28,
1998 from $2,180,756 for the comparable 1997 period.
Depreciation expenses decreased $102,775, or 19.4%, to $427,494 for the
three months ended June 28, 1998 from $530,269 for the comparable 1997 period,
reflecting the timing of estimated depreciation charges within the 1997 fiscal
year.
Amortization expenses decreased $16,686, or 1.7%, to $960,440 for the
three months ended June 28, 1998 from $977,126 for the comparable 1997 period.
Corporate expenses increased $19,654, or 5.1%, to $407,255 during the
three months ended June 28, 1998 from $387,601 for the three months ended June
29, 1997 reflecting, in part, differences in the incurrence of professional
services between the respective fiscal
20
<PAGE>
periods including professional service expenses relating to the sale of the
Company's capital stock as discussed herein.
Income from operations increased $306,865, or 25.4%, to $1,515,946 for
the three months ended June 28, 1998 from $1,209,081 for the comparable period
of 1997 primarily reflecting the increased net revenues and the decreased
expenses, both as discussed above.
Interest expense increased $14,642, or 0.7%, to $2,099,150 for the three
months ended June 28, 1998 from $2,084,508 for the comparable 1997 fiscal period
reflecting continuing accretion of original issue discount. Interest income
increased $36,192, or 40.1%, to $126,254 for the three months ended June 28,
1998 from $90,062 for the comparable 1997 fiscal period reflecting the Company's
earnings on its cash balances during the respective fiscal periods.
The Company has analyzed its current and deferred tax assets and
liabilities and has concluded that no provision for current or deferred federal
or state taxes is required for the three months ended June 28, 1998.
COMPARISON OF THE SIX MONTHS ENDED JUNE 28, 1998 AND JUNE 29, 1997
Net revenue increased $666,047, or 7.0%, to $10,215,822 from $9,549,775
for the six months ended June 28, 1998 compared to the six months ended June 29,
1997, reflecting increased net political advertising and an increase in demand
for commercial time from local clients offset in part by a decrease in demand
for commercial time from national advertising clients. Net political revenue for
the Stations during the six months ended June 28, 1998 increased by
approximately $570,000 to $626,000 from $56,000 between the fiscal periods
reflecting primary election campaigning in Nebraska as part of the biannual
election cycle. Network compensation for the Stations was consistent between the
respective fiscal periods.
Operating expenses, excluding depreciation and amortization expenses,
increased $102,673, or 2.4%, to $4,448,310 for the six months ended June 28,
1998 from $4,345,637 for the comparable 1997 period. Approximately $47,000 of
such increase relates to the cost of certain litigation only during the 1998
period; such litigation has been settled favorably by the Company.
Depreciation expenses decreased $140,632, or 13.3%, to $919,906 for the
six months ended June 28, 1998 from $1,060,538 for the comparable 1997 period,
reflecting the timing of estimated depreciation charges within the 1997 fiscal
year.
Amortization expenses decreased $40,839, or 2.0%, to $1,949,065 for the
six months ended June 28, 1998 from $1,989,904 for the comparable 1997 period.
Corporate expenses increased $219,581, or 29.7%, to $960,135 during the
six months ended June 28, 1998 from $740,554 for the six months ended June 29,
1997 reflecting, in
21
<PAGE>
part, differences in the incurrence of professional services between the
respective fiscal periods including professional service expenses relating to
the sale of the Company's capital stock as discussed herein.
Income from operations increased $525,264, or 37.2%, to $1,938,406 for
the six months ended June 28, 1998 from $1,413,142 for the comparable period of
1997 primarily reflecting the increased net revenues offset in part by the
increased expenses, both as discussed above.
Interest expense increased $29,023, or 0.7%, to $4,192,307 for the six
months ended June 28, 1998 from $4,163,284 for the comparable 1997 fiscal period
reflecting continuing accretion of original issue discount. Interest income
increased $40,502, or 21.7%, to $227,078 for the six months ended June 28, 1998
from $186,576 for the comparable 1997 fiscal period reflecting the Company's
earnings on its cash balances during the respective fiscal periods.
The Company has analyzed its current and deferred tax assets and
liabilities and has concluded that no provision for current or deferred federal
or state taxes is required for the six months ended June 28, 1998.
LIQUIDITY AND CAPITAL RESOURCES
General
The Company's cash and cash equivalents at June 28, 1998 totaled
$9,045,736 compared to $8,974,699 at December 28, 1997. The Company's cash
balances at June 28, 1998 and December 28, 1998 includes $3,444,651 and
$3,360,024, respectively, representing the net proceeds, and the interest
earnings thereon, from the sale of Winnebago during 1996. The primary changes in
the Company's cash position results from changes in certain working capital
accounts.
Satisfaction, Discharge and Redemption of the Senior Notes
On July 31, 1998 the Company utilized the net proceeds from the sale of
the WEAU Assets, as defined herein, the net proceeds, and the interest earnings
thereon, from the sale of Winnebago and cash on hand to irrevocably deposit
$69,913,002 with the Trustee, and irrevocably instructed, the Trustee to redeem
all of the outstanding Senior Notes on October 15, 1998 at a redemption price of
106% of the aggregate principal amount thereof and accrued and unpaid interest
thereon through the date of redemption. Such actions by the Company constitute a
satisfaction and discharge of the Senior Notes under the Indenture. See Notes 2
and 5 to Notes to Condensed Consolidated Financial Statements (Unaudited)
included in "Financial Statements" at Item 1.
22
<PAGE>
Capital Expenditures
The Company will require liquidity for capital expenditures and working
capital needs. For the six months ended June 28, 1998 capital expenditures
totaled $248,919.
It is anticipated that significant capital expenditures may be required
in the future to implement advanced television, "ATV" at the Stations. The FCC
has determined the technical standards, the channel assignments and a time table
for implementation of ATV. The FCC has assigned the following ATV channels to
the Company's current channels:
Station Location Current Channel ATV Channel
KOLN Lincoln, Nebraska 10 25
KGIN Grand Island, Nebraska 11 32
WEAU Eau Claire, Wisconsin 13 39
Generally, under the FCC's implementation schedule, the Company must
apply for ATV construction permits for each of its present television stations
by November 1, 1999 and then commence ATV operations by May 1, 2002. Under the
current FCC implementation schedule the Company would generally be required to
surrender to the government either the current channel or the ATV channel by
December 31, 2006 and continue its digital operations thereafter on the retained
channel. Recent legislation requires the FCC to extend the December 31, 2006
surrender date with respect to certain stations within a given television market
if (i) at least one network affiliate is not broadcasting a digital service in
the given market and has exercised "due diligence" in meeting the ATV buildout
requirements for that market or (ii) digital to analog converter technology is
not generally available in the given market or (iii) 15 percent or more of the
television households in a given market do not subscribe to a multichannel video
programming distributor that carries the digital service of each local station
and those television households do not have at least one advanced television set
or at least one digital to analog converter. The foregoing implementation
schedule is subject to review by the FCC every two years and may also be subject
to future legislation or judicial review, the effect of which cannot be
predicted by the Company.
The Company is currently studying the ATV channel assignments for the
Stations as well as the technical and capital expenditure requirements to
implement ATV at the Stations. The Company currently intends to implement ATV at
the Stations within the FCC mandated implementation period. The Company cannot
presently predict the cost of such implementation but, based upon general
industry estimates, currently believes that such costs will be material and will
require several million dollars to commence initial ATV operations.
23
<PAGE>
INCOME TAXES
As of December 28, 1997 the Company had approximately $61.4 million of
federal net operating loss carryforwards ("NOL's") which begin to expire in
2005. As a result of the Plan the Company elected treatment under Section 382
(1) (5) of the Internal Revenue Code, as amended (the "Code"). This treatment
will allow the Company to utilize, under certain restrictions, its NOL's to
offset taxable income incurred after the Effective Date. Utilization of a
portion of these NOL's are assumed in the Company's calculation of
Post-Effective Date deferred taxes.
With the Company's sale of the WEAU Assets On July 31, 1998 a gain, on
a tax basis, of approximately $60 million was recognized. Such gain will be
offset by and reduce the Company's NOL's.
After completion of the sale of the WEAU Assets, 100% of the Company's
capital stock was acquired by Gray; such acquisition will subject the Company's
remaining NOL's to certain limitations under section 382 of the Code. See Note 5
of Notes to Condensed Consolidated Financial Statements (Unaudited) included in
"Financial Statements" at Item 1.
SALE OF THE WEAU ASSETS, LIKE-KIND EXCHANGE OF ASSETS AND SALE OF 100% OF THE
CAPITAL STOCK OF THE COMPANY
On July 31, 1998 Busse and WEAU LLC sold substantially all of WEAU Assets to
Cosmos for an aggregate cash purchase price of $66 million. In accordance with
the Indenture, the Company directed the $66 million of proceeds be deposited
with the Indenture Trustee.
Also on July 31, 1998, Busse, Gray, the Gray Subsidiaries and Cosmos effected
the Like-kind Exchange as follows: (i) the Gray Subsidiaries sold to Cosmos
substantially all of the assets from the Gray Subsidiaries in exchange for the
WEAU Assets plus an aggregate cash payment of $12 million and (ii) Cosmos
directed Busse to deliver the WEAU Assets directly to the Gray Subsidiaries to
complete the Like-kind Exchange.
After consummation of the sale of the WEAU Assets and the Like-kind Exchange,
Gray acquired all of the capital stock of Busse for an aggregate net purchase
price of $57.4 million, which was paid in cash to the Company's stockholders.
The aggregate net purchase price was derived by the sum of (i) $112 million,
plus (ii) the Company's cash and cash equivalents, less (iii) the aggregate
amount of the Company's indebtedness and accrued and unpaid interest thereon,
including the accreted amount of the Company's Senior Notes, less (iv) certain
other purchase price adjustments. The value of the Company's cash, cash
equivalents, aggregate indebtedness and other purchase price adjustments were
determined as of the close of business on July 30, 1998.
Effective with the closing of the sale of the Company's capital stock, as
discussed above, Messrs. Busse and Ryan resigned as executive officers of, and
terminated their respective
24
<PAGE>
employment with, the Company and its affiliates. Messrs. Busse, Beck and
Cornwell resigned as directors of the Company and Mr. Busse resigned as a
director of each of the Company's affiliates.
Gray, upon acquisition of Busse's stock elected the following directors for
Busse: Messrs. Richard L. Boger, Hilton H. Howell, William E. Mayher, III,
Howell Newton, Hugh Norton, Robert S. Prather, Jr., Mrs. Harriett J. Robinson
and Mr. J. Mack Robinson. Such new directors appointed the following executive
officers of the Company: Mr. J. Mack Robinson as President and Chairman, Mr.
Frederick J. Erickson as Chief Financial Officer, Mr. Robert Beizer as
Secretary, Mr. Vance Luke as Assistant Secretary and Mr. Jackson S. Cowart, IV
as Assistant Secretary.
After the change in control of the Busse capital stock and appointment of new
directors and officers for the Company, Busse irrecoverably directed the Trustee
to utilize $69,913,002 of certain collateral proceeds funds held by the Trustee,
for credit to the Company, along with certain other cash deposited by the
Company with the Trustee as an irrevocable cash deposit aggregating $69,913,002,
to redeem all of the outstanding Senior Notes on October 15, 1998 at 106% of
aggregate principal amount thereof and accrued and unpaid interest to the date
of redemption. Such cash deposit and irrevocable direction effected a
satisfaction and discharge of the Senior Notes pursuant to the Indenture.
CAUTIONARY STATEMENTS FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT
This quarterly report on Form 10-Q contains "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. When used in this report, the words "believes," "expects,"
"anticipates," "estimates" and similar words and expressions are generally
intended to identify forward-looking statements. Statements that describe the
Company's future strategic plans, goals or objectives are also forward-looking
statements. Readers of this report are cautioned that any forward-looking
statements, including those regarding the intent, belief, or current
expectations of the Company or management, are not guarantees of future
performance, results or events and involve risks and uncertainties, and that
actual results and events may differ materially from those in the
forward-looking statements as a result of various factors including, but not
limited to (i) general economic conditions in the markets in which the Company
operates, (ii) competitive pressures within the industry and/or the markets in
which the Company operates, (iii) the effect of future legislation or regulatory
changes on the Company's operations and (iv) other factors described from time
to time in the Company's filings with the Securities and Exchange Commission.
The forward-looking statements included in this report are made only as of the
date hereof. The Company undertakes no obligation to update such forward-looking
statements to reflect subsequent events or circumstances.
25
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company from time to time is involved in litigation incidental to
the conduct of its business. The Company is not currently a party to any lawsuit
or proceeding which, in the opinion of the Company, could have a material
adverse effect on the Company.
Item 5. OTHER INFORMATION
On July 31, 1998, Gray Communications Systems, Inc. completed the
purchase of all of the outstanding capital stock of Busse Broadcasting
Corporation. The net purchase price was $112 million plus associated transaction
costs. The purchase price includes the assumption of Busse's indebtedness,
including its 11 5/8% Senior Secured Notes due 2000. Immediately prior to Gray's
acquisition of Busse, Cosmos Broadcasting Corporation (a subsidiary of Liberty
Corporation) acquired WEAU-TV from Busse and exchanged it for WALB-TV, Gray's
NBC affiliate in Albany, Georgia. WALB-TV was valued at $78 million in the
exchange transaction. As a result of these transactions, Gray adds the following
television stations to its existing broadcast group: KOLN-TV, the CBS affiliate
serving the Lincoln-Hastings-Kearney, Nebraska market; its satellite station
KGIN-TV, the CBS affiliate serving Grand Island, Nebraska; and WEAU-TV, an NBC
affiliate serving the Eau Claire-La Crosse, Wisconsin market.
Immediately following the acquisition of Busse, Gray exercised its right
to satisfy and discharge the Busse 11 5/8% Senior Secured Notes, effectively
prefunding the Notes at the October 15, 1998 call price of 106 plus accrued
interest.
See Note 5. Sale of the WEAU Assets, Like-kind Exchange of Assets and
Sale of 100% of the Capital Stock of the Company which is included in the Notes
to Condensed Consolidated Financial Statements (continued) Unaudited of Busse
Broadcasting Corporation included herein.
ITEM 6. EXHIBITS AND REPORTS FILED ON FORM 8-K
(a) EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBITS
10.1 - Amended and Restated Stock Purchase
Agreement by and among Busse Broadcasting
Corporation, South Street Corporate Recovery
Fund I, L.P., Greycliff Leveraged Fund 1993,
L.P., South Street Leveraged Corporate
Recovery Fund, L.P., South Street Corporate
Recovery Fund I (International), L.P. and
Gray Communications Systems, Inc. dated as
of June 22, 1998
26
<PAGE>
10.2 - Asset Purchase Agreement by and among Busse
Broadcasting Corporation, WEAU License,
Inc. and Cosmos Broadcasting Corporation,
dated as of June 22, 1998
10.3 - Exchange Agreement by and among Gray
Communications Systems, Inc., WALB-TV, Inc.,
WALB Licensee Corporation., Cosmos
Broadcasting Corporation, Busse Broadcasting
Corporation, and WEAU License, Inc. dated as
of June 22, 1998
27 Financial Data Schedule for the Six months
ended June 28, 1998
(b) REPORTS ON FORM 8-K
None
27
<PAGE>
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.
BUSSE BROADCASTING CORPORATION
(Registrant)
Dated: August 10, 1998 BY: /s/ Frederick J. Erickson
-------------------------------------
Frederick J. Erickson
Chief Financial Officer
28
AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
BY AND AMONG
BUSSE BROADCASTING CORPORATION,
SOUTH STREET CORPORATE RECOVERY FUND I, L.P.,
GREYCLIFF LEVERAGED FUND 1993, L.P.,
SOUTH STREET LEVERAGED CORPORATE RECOVERY FUND, L.P.,
SOUTH STREET CORPORATE RECOVERY FUND I (INTERNATIONAL), L.P.
AND
GRAY COMMUNICATIONS SYSTEMS, INC.
DATED AS OF JUNE 22, 1998
<PAGE>
CONTENTS
Background ................................................................ 1
Agreement ................................................................. 1
ARTICLE I
SALE OF NEW STOCK
1.01 Purchase of Shares by Purchaser ...................................... 1
1.02 Purchase Price for the Stock ......................................... 2
1.03 Letter of Credit ..................................................... 2
1.04 Effectiveness of Closing; Deliveries ................................. 2
ARTICLE II
REPRESENTATIONS AND WARRANTIES BY THE STOCKHOLDERS AND THE COMPANY
2.01 Title to Stock; Other Rights ........................................ 3
2.02 Capacity and Validity ............................................... 3
2.03 Organization ........................................................ 3
2.04 Capitalization ...................................................... 4
2.05 No Conflict ......................................................... 4
2.06 Subsidiaries ........................................................ 5
2.07 Financial Statements ................................................ 5
2.08 Absence of Undisclosed Liability .................................... 5
2.09 Absence of Changes .................................................. 5
2.10 Tax Matters ......................................................... 6
2.11 Title to Assets; Encumbrances; Condition ............................ 7
2.12 Real Property ....................................................... 8
2.13 Personal Property ................................................... 9
2.14 Intellectual Property ............................................... 9
2.15 Computer Software and Databases ..................................... 10
2.16 Accounts Receivable ................................................. 10
2.17 Insurance ........................................................... 10
2.18 Bonds, Letters of Credit and Guarantees ............................. 11
2.19 Compliance with Law ................................................. 11
2.20 Environmental ....................................................... 12
2.21 Litigation and Claims ............................................... 14
2.22 Benefit Plans ....................................................... 15
2.23 Contracts ........................................................... 17
2.24 Suppliers and Customers ............................................. 19
2.25 Labor Matters ....................................................... 19
2.26 Brokers and Finders ................................................. 20
2.27 Interested Transactions ............................................. 20
2.28 Officers, Directors and Bank Accounts ............................... 21
2.29 Reports and Financial Statements .................................... 21
2.30 Statements True and Correct ......................................... 21
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.01 Organization ........................................................ 21
3.02 Capacity and Validity ............................................... 21
3.03 No Conflict ......................................................... 22
-i-
<PAGE>
3.04 Brokers and Finders ................................................. 22
3.05 Investment Representation ........................................... 22
3.06 Qualification of Purchaser .......................................... 22
3.07 Financing ........................................................... 22
3.08 Statements True and Correct ......................................... 22
ARTICLE IV
COVENANTS AND ADDITIONAL AGREEMENTS OF THE COMPANY, THE STOCKHOLDERS AND
PURCHASER
4.01 Conduct of Business ................................................. 22
4.02 Right of Inspection; Access ......................................... 23
4.03 Other Offers and Exclusive Dealing .................................. 24
4.04 Confidentiality ..................................................... 24
4.05 Consents and Approvals .............................................. 25
4.06 Supplying of Financial Statements ................................... 25
4.07 Qualification and Corporate Existence ............................... 25
4.08 Public Announcements ................................................ 25
4.09 Closing Conditions .................................................. 25
4.10 Supplements to Schedules ............................................ 26
4.11 Certain Tax Matters ................................................. 26
4.12 Expenses ............................................................ 27
4.13 Further Assurances .................................................. 27
4.14 Delivery of Books and Records ....................................... 27
4.15 FCC Matters ......................................................... 28
4.16 Cooperation To Effect Station Exchange .............................. 28
4.17 Name Change ......................................................... 28
4.18 Severance and Incentive Payments .................................... 28
4.19 HSR Filings ......................................................... 28
4.20 Further Actions ..................................................... 29
ARTICLE V NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES ......... 29
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
6.01 Representations True and Covenants Performed at Closing ............. 29
6.02 Incumbency Certificate .............................................. 29
6.03 Certified Copies of Resolutions ..................................... 30
6.04 Opinions of Counsel ................................................. 30
6.05 No Material Adverse Change .......................................... 30
6.06 No Injunction, Etc .................................................. 30
6.07 Resignations ........................................................ 30
6.08 Approval of Legal Matters ........................................... 30
6.09 FCC Approvals ....................................................... 30
6.10 Hart-Scott Approval ................................................. 31
6.11 Environmental Report ................................................ 31
6.12 Sales and Use Taxes ................................................. 31
6.13 Title Documents ..................................................... 31
-ii-
<PAGE>
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
AND STOCKHOLDERS
7.01 Representations True and Covenants Performed at Closing ............. 32
7.02 Incumbency Certificate .............................................. 32
7.03 Certified Copies of Resolutions ..................................... 32
7.04 No Injunction, Etc .................................................. 32
7.05 Hart-Scott Act Approval ............................................. 33
7.06 Approval of Legal Matters ........................................... 33
7.07 FCC Approvals ....................................................... 33
7.08 Opinions of Counsel ................................................. 33
ARTICLE VIII
TERMINATION
8.01 Cause for Termination ............................................... 33
8.02 Notice of Termination ............................................... 33
8.03 Effect of Termination ............................................... 33
8.04 Risk of Loss ........................................................ 34
ARTICLE IX
DEFINITIONS
Accounts Receivable ....................................................... 34
Affiliate ................................................................. 35
Agreement ................................................................. 35
Balance Sheet ............................................................. 35
Balance Sheet Date ........................................................ 35
Board of Directors ........................................................ 35
Business .................................................................. 35
Business Day .............................................................. 35
Certificate of Incorporation .............................................. 35
Closing ................................................................... 35
Closing Date .............................................................. 35
Code ...................................................................... 35
Commitments ............................................................... 35
Common Stock .............................................................. 35
Computer Software ......................................................... 36
Contract .................................................................. 36
Databases ................................................................. 36
Default ................................................................... 36
Employee Benefit Plan ..................................................... 36
Environmental Laws ........................................................ 37
Environmental Litigation .................................................. 37
Environmental Matter ...................................................... 37
Environmental Report ...................................................... 37
ERISA ..................................................................... 37
ERISA Plan ................................................................ 37
FCC ....................................................................... 37
Financial Statements ...................................................... 37
GAAP ...................................................................... 37
-iii-
<PAGE>
Governmental Authority .................................................... 38
Hart-Scott Act ............................................................ 38
Hazardous Substance ....................................................... 38
Improvements .............................................................. 38
Intellectual Property ..................................................... 38
Inventory ................................................................. 38
IRS ....................................................................... 38
Knowledge ................................................................. 38
Law ....................................................................... 38
Leased Personal Property .................................................. 38
Leased Real Property ...................................................... 38
Liability ................................................................. 38
License ................................................................... 39
Lien ...................................................................... 39
Litigation ................................................................ 39
Loss ...................................................................... 39
Material or Materially .................................................... 39
Material Adverse Change or Material Adverse Effect ........................ 39
Option Property ........................................................... 40
Order ..................................................................... 40
Other Agreements .......................................................... 40
Owned Real Property ....................................................... 40
Permitted Liens ........................................................... 40
Person .................................................................... 40
Personal Property ......................................................... 40
Preferred Stock ........................................................... 40
PUC Laws .................................................................. 40
Purchase Price ............................................................ 40
Real Property ............................................................. 40
Registration Rights Agreement ............................................. 41
Related Person ............................................................ 41
Stock ..................................................................... 41
Subsidiary ................................................................ 41
Tax or Taxes .............................................................. 41
Tax Returns ............................................................... 41
Third Party or Third Parties .............................................. 41
Undisclosed Liabilities ................................................... 41
ARTICLE X
MISCELLANEOUS
10.01 Notices ............................................................ 41
10.02 Entire Agreement ................................................... 43
10.03 Modifications, Amendments and Waivers .............................. 43
10.04 Successors and Assigns ............................................. 43
10.05 Table of Contents; Captions; References ............................ 44
10.06 Governing Law ...................................................... 44
10.07 Pronouns ........................................................... 44
10.08 Severability ....................................................... 44
10.09 Remedies Not Exclusive ............................................. 44
10.10 Counterparts ....................................................... 44
-iv-
<PAGE>
10.11 Interpretations .................................................... 44
10.12 Exclusive Remedy ................................................... 45
-v-
<PAGE>
EXHIBITS AND SCHEDULES
Exhibit 1.02 -- Purchase Price Allocation Among Stockholders
Exhibit 2.01 -- Stockholders' Ownership
Exhibit 6.04(i) -- Form of Opinion of Cadwalader, Wickersham & Taft
Exhibit 6.04(ii) -- Form of Opinion of Pepper & Corazzini L.L.P.
Exhibit IX -- Key Employees of the Company and the Subsidiaries
Exhibit X -- Option Property
Schedule 2.03 -- Organization, Standing & Foreign Qualification
Schedule 2.05 -- Conflicts
Schedule 2.06 -- Subsidiaries
Schedule 2.07 -- Financial Statements
Schedule 2.08 -- Absence of Undisclosed Liability
Schedule 2.09 -- Absence of Changes
Schedule 2.10 -- Tax Matters
Schedule 2.11 -- Title to Assets; Encumbrances
Schedule 2.12 -- Real Property
Schedule 2.13 -- Personal Property
Schedule 2.14 -- Intellectual Property
Schedule 2.15 -- Computer Software and Databases
Schedule 2.17 -- Insurance
Schedule 2.18 -- Bonds, Letters of Credit and Guarantees
Schedule 2.19 -- Compliance With Law
Schedule 2.20 -- Environmental
Schedule 2.21 -- Litigation and Claims
Schedule 2.22 -- Benefit Plans
Schedule 2.23(a)(i) -- Real Property Contracts
Schedule 2.23(a)(ii) -- Personal Property Contracts
Schedule 2.23(a)(iii) -- Purchase Orders--Non-Capital Assets
Schedule 2.23(a)(iv) -- Purchase Orders--Capital Assets
Schedule 2.23(a)(v) -- Sales Contracts
Schedule 2.23(a)(vi) -- Employment; Other Affiliate Contracts
Schedule 2.23(a)(vii) -- Sales Representatives Contracts
Schedule 2.23(a)(viii) -- Powers of Attorney
Schedule 2.23(a)(ix) -- Programming and Network Affiliation Agreements
Schedule 2.23(a)(x) -- Barter & Trade Agreements
Schedule 2.23(a)(xi) -- Any Other Contracts
Schedule 2.24 -- Suppliers and Customers
Schedule 2.25 -- Labor Matters
Schedule 2.26 -- Brokers and Finders
Schedule 2.27 -- Interested Transactions
Schedule 2.28 -- Officers, Directors and Bank Accounts
Schedule 3.03 -- Purchaser -- Conflicts
Schedule 3.04 -- Purchaser -- Brokers and Finders
-vi-
<PAGE>
AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
THIS AMENDED AND RESTATED STOCK PURCHASE AGREEMENT (this "Agreement") dated
as of the 22nd day of June, 1998, is made and entered into by and among BUSSE
BROADCASTING CORPORATION, a Delaware corporation (the "Company"), SOUTH STREET
CORPORATE RECOVERY FUND I, L.P., GREYCLIFF LEVERAGED FUND 1993, L.P., and SOUTH
STREET LEVERAGED CORPORATE RECOVERY FUND, L.P., all of which are Delaware
limited partnerships, and SOUTH STREET CORPORATE RECOVERY FUND I
(INTERNATIONAL), L.P., a Cayman Islands exempted limited partnership
(individually, a "Stockholder" and collectively, the "Stockholders"), and GRAY
COMMUNICATIONS SYSTEMS, INC., a Georgia corporation ("Purchaser").
BACKGROUND:
The Stockholders collectively own, beneficially and of record, 107,700
shares of the Common Stock of the Company, representing 100% of the outstanding
shares of the Common Stock and 65,524.41 shares of the Preferred Stock of the
Company, representing 100% of the outstanding shares of the Preferred Stock.
The Company is the parent corporation of WEAU License, Inc. ("WEAU")
and of KOLN/KGIN, Inc. ("KOLN/KGIN"). KOLN/KGIN is the parent corporation of
KOLN/KGIN License, Inc. ("KOLN/KGIN License" and together with KOLN/KGIN and
WEAU, sometimes collectively referred to herein as the "Subsidiaries" or
individually as a "Subsidiary"). The Company, directly or indirectly, owns and
operates three network-affiliated very high frequency television stations,
KOLN-TV, serving Lincoln, Nebraska, KGIN-TV, serving Grand Island, Nebraska and
WEAU-TV, serving Eau Claire and LaCrosse, Wisconsin (collectively, the
"Stations" and individually, a "Station").
Certain terms used in this Agreement are defined in Article IX hereof.
AGREEMENT:
In consideration of the foregoing, the mutual agreements, covenants,
representations and warranties contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
subject to the terms and conditions hereinafter set forth, the parties hereto
agree as follows:
ARTICLE I
SALE OF STOCK
1.01 PURCHASE OF STOCK BY PURCHASER. At the Closing, and subject to the terms
and conditions of this Agreement, the Stockholders shall sell, convey, assign,
transfer and deliver to Purchaser, and Purchaser shall purchase and accept from
the Stockholders, all of the issued and outstanding Common Stock and all of the
issued and outstanding Preferred Stock, in each case free and clear of any and
all Liens other than those created hereunder or by Purchaser.
<PAGE>
1.02 PURCHASE PRICE FOR THE STOCK. The total purchase price for the Stock
shall be equal to (i) One Hundred Twelve Million Dollars ($112,000,000) LESS
(ii) an amount equal to the balance, as of the Closing Date, of (x) the
aggregate accreted value of the Company's 11-5/8% Senior Secured Notes due 2000
(issued under that certain Indenture, dated as of October 26, 1995, by and among
the Company, certain guarantors and Shawmut Bank Connecticut, National
Association) and (y) the outstanding aggregate principal balance of indebtedness
for borrowed money (excluding any intercompany indebtedness) that is evidenced
by a note, bond, debenture or similar instrument of the Company or its
Subsidiaries, taken as whole, LESS (iii) accrued interest on the indebtedness
referred to in the foregoing clause (ii), PLUS (iv) an amount equal to the sum,
as of the Closing Date, of all cash, cash equivalents, marketable securities,
bank accounts, certificates of deposit and short term investments (other than
Accounts Receivable) of the Company and the Subsidiaries OTHER THAN the amount,
if any, received by the Company pursuant to that certain Asset Purchase
Agreement of even date herewith by and among the Company, WEAU License, Inc. and
Cosmos Broadcasting Corp. (the "WEAU Agreement"), LESS (v) an amount equal to
the net book value (calculated in accordance with GAAP) of the Option Property
at the end of the month prior to the transfer of such Option Property by the
Company, LESS (vi) an amount equal to the aggregate unpaid obligations, if any,
of the Company to any Person (including without limitation any current or former
employee, officer, director, consultant, agent, advisor or representative of the
Company) with respect to or on account of any severance agreement, severance
plan, severance policy, incentive compensation, bonus arrangement, employment
agreement, severance benefit agreement, compensation plan, consulting agreement
or personal service contract (including without limitation the Company's Long
Term Incentive Plan, the Company's Incentive Fee Plan, the Amended and Restated
Employment Agreement with Lawrence A. Busse and the Amended and Restated
Employment Agreement with James C. Ryan) other than any such obligation that
relates solely to a termination of employment by the Company after the Closing
(or any such termination done at the request of Purchaser prior to the Closing)
of any employee of, or any consultant or independent contractor to, the Company
other than Lawrence A. Busse or James C. Ryan. Each of the foregoing components
of the Purchase Price shall be calculated by the Company in a manner reasonably
satisfactory to Purchaser and (a) according to GAAP, (b) in a manner consistent
with the Company's publicly available financial statements and (c) as of the
close of business on the Business Day immediately preceding the Closing Date. At
the Closing, Purchaser shall pay the Purchase Price to the Stockholders, against
delivery to Purchaser of a certificate or certificates, registered in its name
or the name of its designees, representing the Stock. At the Closing, the
Purchase Price shall be paid in cash by wire transfers of immediately available
funds, or in such other form and manner as may be mutually satisfactory, to an
account designated in writing by each of the Stockholders at least three (3)
days prior to the Closing. The amount of the Purchase Price due to each
Stockholder shall be in the respective percentages set forth on Exhibit 1.02 and
all payments shall be in such percentages.
1.03 LETTER OF CREDIT. Simultaneously with the execution of the Stock
Purchase Agreement dated as of February 13, 1998, Purchaser deposited with SSP,
Inc., on behalf of and for the benefit of the Stockholders, a standby letter of
credit in the amount of Five Million Eight Hundred Fifty Thousand Dollars
($5,850,000) (the "LC") to be applied as provided herein. In the event of a
termination of this Agreement, the LC will be paid to the Stockholders or
Purchaser as provided in Section 8.03 below. At the Closing, the LC shall be
returned to Purchaser.
1.04 CLOSING; EFFECTIVENESS OF CLOSING; DELIVERIES. The Closing shall occur
at 10:00 a.m. local time on the Closing Date at the offices of Cadwalader,
Wickersham & Taft in New York, New York or at such other time and place as the
parties may agree. The Closing shall be effective as of the close of business on
the Closing Date. All deliveries, payments and other transactions and documents
relating to the Closing (i) shall be interdependent and none shall be effective
unless and until all are effective (except to the extent that the party entitled
to the benefit thereof has waived satisfaction or
-2-
<PAGE>
performance thereof as a condition precedent to Closing), and (ii) shall be
deemed to be consummated in the order set forth in this Agreement and, to the
extent the order is not specified, shall be deemed to be consummated
simultaneously.
ARTICLE II
REPRESENTATIONS AND WARRANTIES BY THE STOCKHOLDERS AND THE COMPANY
Each of the Stockholders and the Company, jointly and severally, hereby
represent and warrant to Purchaser as follows:
2.01 TITLE TO STOCK; OTHER RIGHTS. Each of the Stockholders is the owner of
all right, title and interest (legal and beneficial) in and to that number of
shares of Common Stock and shares of Preferred Stock set forth next to its name
on Exhibit 2.01, free and clear of all Liens. Collectively, the Stockholders own
all right, title and interest (legal and beneficial) in and to all of the issued
and outstanding shares of the Stock. Except as specifically contemplated by this
Agreement, no Person has any Contract or option or any right or privilege
(whether pre-emptive or contractual) capable of becoming a Contract or option
for the purchase from the Stockholders of any shares of Common Stock or
Preferred Stock or for the purchase, subscription or issuance of any securities
of the Company.
2.02 CAPACITY AND VALIDITY. Each of the Stockholders has the full power and
authority necessary to enter into and perform its obligations under this
Agreement and the Other Agreements to which it is a party and to consummate the
transactions contemplated hereby and thereby. The Company has the full corporate
power, capacity and authority necessary to enter into and perform its
obligations under this Agreement and the Other Agreements to which it is a party
and to consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance of this Agreement and the Other Agreements
have been approved by all necessary action of (i) the Board of Directors and
stockholders of the Company and (ii) the partners of each of the Stockholders,
including the Board of Directors of each corporate partner. This Agreement has
been, and the Other Agreements to which the Company or any of the Stockholders
are parties will be when executed and delivered, duly executed and delivered by
duly authorized officers of the Company and duly authorized partners or agents
of each Stockholder, including duly authorized officers of corporate partners,
and the Agreement and each of the Other Agreements constitutes, or will
constitute when executed and delivered, the legal, valid and binding obligation
of the Company and each of the Stockholders, as the case may be, enforceable
against the Company and each of the Stockholders, as the case may be, in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally or
general equitable principles (regardless of whether considered in a proceeding
in equity or at law) or by an implied covenant of good faith and fair dealing.
2.03 ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to own, lease and operate its assets
and to carry on its Business as presently conducted. Each of the Subsidiaries is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to own, lease and operate its respective assets and to carry on its
respective business as presently conducted. Each of the Stockholders is a
limited partnership duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization and has all requisite power and
authority to own, operate and lease its respective assets and to conduct its
respective business as presently conducted. The Company and each of
-3-
<PAGE>
the Subsidiaries are duly qualified or licensed to transact business as a
foreign corporation in good standing in the jurisdictions listed in Schedule
2.03, and the character of their respective assets or the nature of their
respective businesses do not require such qualification or licensing in any
other jurisdiction except where the failure to so qualify or be so licensed
would not have a Material Adverse Effect on the Company or any such Subsidiary,
as the case may be. Complete and correct copies of the Certificate of
Incorporation of the Company and each of the Subsidiaries, and all amendments
thereto (certified by the Secretary of State of the State of Delaware) and
complete and correct copies of the By-Laws of the Company and each of the
Subsidiaries, and all amendments thereto, previously have been delivered to
Purchaser. Except as may be set forth in Schedule 2.03, copies of all records of
the proceedings of incorporators, stockholders and directors of each of the
Company and each of the Subsidiaries, which are set forth in the Company's and
each of the Subsidiaries' respective minute books (collectively, the "Minute
Books"), are correct and complete in all Material respects and accurately
reflect in all Material respects all proceedings of each of the Company's and
each of the Subsidiaries' respective incorporators, stockholders and Board of
Directors and all committees thereof. Except as may be set forth in Schedule
2.03, the stock record books of each of the Company and each of the Subsidiaries
(collectively, the "Stock Record Books") are correct and complete and accurately
reflect the stock ownership of their respective stockholders. The Minute Books
and the Stock Record Books have been made available to Purchaser for review.
2.04 CAPITALIZATION. The authorized capital stock of the Company consists of
2,154,000 shares of Common Stock, of which 107,700 are issued and outstanding,
and 65,524.41 shares of Preferred Stock, all of which are issued and
outstanding. All of such Stock is duly and validly issued and outstanding, is
fully paid and nonassessable and was issued pursuant to a valid exemption from
registration under the Securities Act of 1933, as amended, and all applicable
state securities laws. Except for shares of Common Stock issuable upon
conversion of the Preferred Stock, no Stock is reserved for issuance. Except as
contemplated by the conversion rights applicable to the Preferred Stock, the
Company has no obligation to issue any additional Stock or securities
convertible or exchangeable for Stock, or options or warrants for the purchase
of (a) any Stock or (b) any securities convertible into or exchangeable for any
Stock. Excepted as contemplated by the Registration Rights Agreement, there are
no outstanding rights to either demand registration of any Stock under the
Securities Act of 1933, as amended, or to sell any Stock in connection with such
a registration of Stock.
2.05 NO CONFLICT. Except as disclosed on Schedule 2.05 or as contemplated in
the WEAU Agreement and assuming compliance with the Hart-Scott Act and the
receipt of all necessary FCC approvals, neither the execution, delivery and
performance of this Agreement or the Other Agreements to which it is a party by
either the Company or any of the Stockholders nor the consummation by the
Company or any of the Stockholders of the transactions contemplated hereby or
thereby will (i) conflict with or result in a violation, contravention or breach
of any of the terms, conditions or provisions of the Certificate of
Incorporation, as amended, or the By-Laws, as amended, of the Company or any of
the Subsidiaries, (ii) conflict with or result in a violation, contravention or
breach of any of the terms, conditions or provisions of the partnership
agreement, certificate of limited partnership or other governing document or
agreement of any of the Stockholders, (iii) result in a Default under, or
require the consent or approval of any party to, any Contract or License of the
Company or any of the Subsidiaries required to be set forth on one or more of
the Schedules contemplated by Section 2.23 hereof or any Contract or License of
any of the Stockholders (which, in the case of the Stockholders, would (a)
affect the ability of the Stockholders to consummate the transactions
contemplated hereby or (b) result in any Liability to Purchaser), (iv) result in
the violation of any Law or Order applicable to the Company, any of the
Subsidiaries or any of the Stockholders (which, in the case of the Stockholders,
would (a) affect the ability of the Stockholders to consummate the transactions
contemplated hereby or (b) result in any Liability to
-4-
<PAGE>
Purchaser) or (v) result in the creation or imposition of any Lien applicable to
the Stock, the Company or any of the Subsidiaries, except in each case as would
not have a Material Adverse Effect.
2.06 SUBSIDIARIES. Except as set forth on Schedule 2.06 and except for the
Subsidiaries, neither the Company nor any of the Subsidiaries has in the past
three (3) years had, and none of them currently has, a direct or indirect
majority or controlling interest in any entity. Except as disclosed on Schedule
2.06, neither the Company nor any of the Subsidiaries has in the past three (3)
years owned and none of them owns, directly or indirectly, more than 1% of any
capital stock or other equity, ownership, proprietary or voting interest in any
Person. The Company owns, directly or indirectly, 100% of the issued and
outstanding capital stock of each of the Subsidiaries. None of the Subsidiaries
has any obligation to issue any additional capital stock or other securities or
securities convertible or exchangeable for capital stock or other securities, or
options or warrants for the purchase of (a) any capital stock or other
securities or (b) any securities convertible into or exchangeable for any
capital stock or other securities.
2.07 FINANCIAL STATEMENTS. The Financial Statements (of the type provided for
in clauses (i) and (ii) of the definition thereof), correct and complete copies
of which are included in Schedule 2.07, (i) are in accordance with the books and
records of the Company and each of the Subsidiaries, which are correct and
complete in all Material respects and which have been maintained in accordance
with good business practices; (ii) present fairly in all Material respects the
financial position of the Company and each of the Subsidiaries as of the dates
indicated and the results of each of their operations and their respective cash
flows for the periods then ended; and (iii) have been prepared in accordance
with GAAP, subject, in the case of interim financial statements, to the
condensing of the Financial Statements or the absence of footnotes. The
Financial Statements contain all adjustments, which are solely of a normal
recurring nature, necessary to present fairly in all Material respects the
consolidated financial condition and the consolidated results of operations,
changes in stockholders' equity and changes in financial position or cash flows
of the Company and each of the Subsidiaries as of the dates and for the periods
indicated.
2.08 ABSENCE OF UNDISCLOSED LIABILITY. Except as set forth in Schedule 2.08,
neither the Company nor any of the Subsidiaries has any Undisclosed Liabilities
nor does there exist any Known basis for or threat of an assertion against the
Company or any of the Subsidiaries, their respective businesses or their
respective assets of any Undisclosed Liability, except for Liabilities incurred
since the Balance Sheet Date in the ordinary course of business consistent with
past practice, none of which are Material.
2.09 ABSENCE OF CHANGES. Except as disclosed in Schedule 2.09 and other than
as may be contemplated in the WEAU Agreement, since the Balance Sheet Date, (i)
the Business has been carried on only in the ordinary course consistent with
past practice, (ii) there has been no Material Adverse Change, and there has
been no event or circumstance that reasonably is anticipated to result in a
Material Adverse Change with respect to the Company or any of the Subsidiaries,
their respective assets or businesses or the Business, (iii) the Company has not
directly or indirectly declared, paid or authorized any dividends or other
distributions or payments in respect of its Stock or other equity securities, if
any, (iv) neither the Company nor any of the Subsidiaries has made any change in
any method of accounting or accounting practice, and (v) except in the ordinary
course of business consistent with past practice, neither the Company nor any of
the Subsidiaries has canceled, modified or waived, without receiving payment or
performance in full, any (a) Liability owed to the Company or any of the
Subsidiaries, as the case may be, including without limitation, any receivable
of the Company from any Affiliate (other than a Subsidiary) or any Related
Person to an Affiliate, (b) Litigation the Company or any of the Subsidiaries
may have against other Persons, or (c) other rights of the Company or any of the
Subsidiaries, as the case may be
-5-
<PAGE>
2.10 TAX MATTERS. Except as set forth on Schedule 2.10:
(a) The Company and each of the Subsidiaries have timely filed with the
appropriate Governmental Authorities all required Tax Returns in all
jurisdictions in which Tax Returns are required to be filed. Neither the Company
nor any of the Subsidiaries is presently the beneficiary of any extension of
time within which to file any Tax Return. All Taxes (whether or not shown on any
Tax Return) for all periods ending on or before the Balance Sheet Date, have
been fully paid or appropriate deposits or adequate accruals have been made
therefor on the Balance Sheet.
(b) Since the Balance Sheet Date, neither the Company nor any of the
Subsidiaries has incurred any Liability for Taxes other than in the ordinary
course of business and no such Tax Liability so incurred (other than any
Liability incurred by the Company or the Subsidiaries in connection with their
cooperation under Section 4.16 hereof) is Material. Neither the Company nor any
of the Subsidiaries is currently delinquent in the payment of any Tax,
assessment, deposit or other charge by any Governmental Authority for which any
Liability is pending or has been assessed, asserted or threatened (in writing,
or otherwise to the Knowledge of the Company, any of the Subsidiaries or any of
the Stockholders) against the Company, any of the Subsidiaries or any of their
respective assets in connection with any Tax and there is no basis for any such
Liability. Neither the Company nor any of the Subsidiaries has received any
notice of assessment or proposed assessment in connection with any Tax Returns
and there are no pending Tax examinations of or Tax claims asserted (in writing,
or otherwise to the Knowledge of the Company, any of the Subsidiaries or any of
the Stockholders) against the Company, any of the Subsidiaries or any of their
respective assets, including without limitation, any claim by any Governmental
Authority in any jurisdiction where the Company or any of the Subsidiaries did
not file Tax Returns that the Company or any of the Subsidiaries, respectively,
is or may be subject to or liable for Taxes imposed by that Governmental
Authority or jurisdiction. There are no Liens for any Taxes (other than any Lien
for current real property or ad valorem Taxes not yet due and payable) on any of
the Company's or any of the Subsidiaries' assets.
(c) None of the Company's or any of the Subsidiaries' Tax Returns have
ever been audited by the IRS or any other Governmental Authority and the neither
the Company nor any of the Subsidiaries has waived any statute of limitations in
respect of Taxes or agreed to a Tax assessment or deficiency. Neither the
Company nor any of the Subsidiaries has filed any consent under Section 341(f)
of the Code relating to collapsible corporations. No Tax is required to be
withheld pursuant to Section l445 of the Code as a result of any of the
transfers contemplated by this Agreement and the Company, each of the
Subsidiaries and each of the Stockholders will provide any certificate
reasonably requested by Purchaser at Closing with respect thereto.
(d) The Company and each of the Subsidiaries have withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder, or other
Third Party.
(e) Neither the Company nor any of the Subsidiaries is a party to any
agreement, contract, arrangement or plan that has resulted or would result,
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code or any similar
provision of foreign, state or local Law.
(f) Neither the Company nor any of the Subsidiaries has agreed, nor is it
required to make, any adjustment under Section 481(a) of the Code by reason of a
change in accounting method or otherwise.
-6-
<PAGE>
(g) Neither the Company nor any of the Subsidiaries is a party to or bound
by (nor will the Company or the Subsidiaries, prior to the Closing, become a
party to or be bound by) any Tax indemnity, Tax sharing or Tax allocation
agreement or arrangement.
(h) Except for the group of which the Company and the Subsidiaries are
presently members, none of the Company or any of the Subsidiaries has been a
member of an affiliated group filing a consolidated federal income Tax Return
(other than a group the common parent of which was the Company) or has any
Liability for Taxes of any Person (other than the Company or any of the
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of the state, local, or foreign Law), as a transferee or successor, by
contract, or otherwise.
(i) Neither the Company nor any of the Subsidiaries is a party to any
joint venture, partnership, or other arrangement or Contract which is treated as
a partnership for federal income Tax purposes.
(j) Neither the Company nor any of the Subsidiaries has issued or assumed
any corporate acquisition indebtedness, within the meaning of Section 279(b) of
the Code, or any obligation described in Section 279(a)(2) of the Code.
(k) Neither the Company nor any Subsidiary has any excess loss account (as
defined in Treasury Regulation Section 1.1502-19) with respect to the stock of
any Subsidiary.
(l) Schedule 2.10 contains Materially complete and accurate descriptions
of the following information with respect to the Company and its Subsidiaries
(or, in the case of clause (B) below, with respect to each of the Subsidiaries)
as of the most recent practicable date: (A) the basis of the Company or the
Subsidiary in its assets; (B) the basis of each shareholder in each Subsidiary's
stock; and (C) the amount of any deferred gain or loss allocable to the Company
or Subsidiary arising out of any deferred intercompany transaction.
(m) The net operating loss and other carryovers reported by the Company
and each of the Subsidiaries as of the Balance Sheet Date are as set forth in
Schedule 2.10; as of the Closing Date and immediately prior to the consummation
of any of the transactions contemplated hereby the ability of the Company and
each of the Subsidiaries to use such reported carryovers will not have been
affected by Sections 382, 383 or 384 of the Code or by the SRLY or CRCO
limitations of Treasury Regulation Sections 1.1502-21 or 1.1502-22. Except as
set forth in this clause (m) and notwithstanding anything in this Agreement to
the contrary, the Stockholders and the Company make no representation or
warranty as to the extent, availability or use of the net operating loss and
other carryover items reported by the Company and its Subsidiaries.
2.11 TITLE TO ASSETS; ENCUMBRANCES; CONDITION.
(a) Each of the Company and each of the Subsidiaries has good, valid and
marketable (and, in the case of the Owned Real Property, insurable) title to all
of its respective assets free and clear of any and all Liens, except Permitted
Liens and as contemplated in the WEAU Agreement. Schedule 2.11 contains true and
complete copies (in all Material respects) of (i) Commitments to issue owner's
title insurance policies for all of the Owned Real Property in the amounts
indicated in each such Commitment, except for the Owned Real Property located in
York County, Nebraska, a copy of which will
-7-
<PAGE>
be delivered to Purchaser prior to Closing, and (ii) all existing owner's title
insurance policies. A survey of each parcel of the Owned Real Property has been
delivered to Purchaser prior to the date hereof, except for the Owned Real
Property located in York County, Nebraska, a copy of which will be delivered to
Purchaser prior to Closing. Copies of all documents evidencing the Liens upon
the Company's and each of the Subsidiaries' respective assets are either
contained in Schedule 2.11 or previously have been delivered to Purchaser.
(b) Except as set forth in Schedule 2.11, each of the Material
Improvements and each item of Material Personal Property is in good condition
and repair, reasonable wear and tear excepted, and is usable in the ordinary
course of business consistent with past practices. Each Material Improvement and
each item of Material Personal Property is adequate for its present and intended
uses and operation and neither the Company nor any of the Subsidiaries has any
intention to use or operate any Material Improvement or any item of Material
Personal Property other than as presently used or operated. The Company's and
each of the Subsidiaries' respective assets (including the Company's and each of
the Subsidiaries' respective interest in all leased assets) include all Material
assets required to operate the Business as presently conducted.
2.12 REAL PROPERTY.
(a) Schedule 2.12 contains a correct and complete list of all of the Real
Property, including, without limitation, a legal description for all of the
Owned Real Property. To the Knowledge of the Company, any of the Subsidiaries or
any of the Stockholders, no facts or circumstances exist which do, or
potentially may, adversely affect any of the access to and from the Real
Property, from and to the existing public highways and roads, and, to the
Knowledge of the Company, any of the Subsidiaries or any of the Stockholders,
there is no pending or threatened denial, revocation, modification or
restriction of such access. The primary tower, transmitter and Real Property on
which such tower and transmitter are located are all owned by the Company or one
of the Subsidiaries in fee simple title, except for the 2000 foot television
tower located on a permanent easement which is located in Eau Claire County
(Fairchild Township), Wisconsin.
(b) The Real Property is served by utilities as required for its current
operation.
(c) No zoning or similar land use restrictions are presently in effect or
proposed by any Governmental Authority that would impair in any Material respect
the operation of the Business as presently conducted by the Company and each of
the Subsidiaries or which would prevent the use of any of the Real Property as
currently operated. All of the Real Property is in compliance in all Material
aspects with all applicable zoning laws and recorded covenants. Neither the
Company nor any of the Subsidiaries has received any notice from any
Governmental Authority or other Third Party with regard to encroachments on or
off the Real Property, violations of building codes, zoning, subdivision or
other similar Laws or other material defects in the Improvements or in the good,
valid, marketable and insurable title of said Real Property.
(d) As of the Closing Date, there will be no Persons in possession of the
Real Property or any part thereof other than the Company or one or more of the
Subsidiaries or their lessees pursuant to Contracts that are Permitted Liens.
(e) No condemnation proceedings are pending or to the Knowledge of the
Company, any of the Subsidiaries or any of the Stockholders, threatened with
regard to the Owned Real Property.
-8-
<PAGE>
(f) With respect to each parcel of Leased Real Property, (i) the lessor
was the owner of the premises leased to the lessee at the time of the execution
and delivery of the lease, (ii) the Company is the owner and holder of the
interest of the lessee in the lease, (iii) all buildings and towers constructed
by the lessee of each lease are located within the boundaries of the leased
premises, (iv) each lease contains an adequate description of the leased
premises, (v) each lease is enforceable by the lessee, (vi) all payments of rent
are current under each lease and no default exists under any lease and (vii)
except as set forth on Schedule 2.21, there are no disputes with or adverse
claims asserted by any lessor of a lease. Each of the Contracts of the Company
or any of the Subsidiaries relating to such Leased Real Property (other than the
WEAU Agreement) is fully and accurately identified, and the expiration date and
current rent are described, in Schedule 2.23(a)(i) and each such Contract is in
full force and effect. Except as disclosed on Schedule 2.12, neither the Leased
Real Property nor any of the Company's or any of the Subsidiaries' right, title
or interest therein is affected by any Lien (other than as contemplated in the
WEAU Agreement), prior interests or superior interests of any nature whatsoever
that will, or could reasonably be expected to, terminate or otherwise adversely
affect such Leased Real Property or any of the Company's or any of the
Subsidiaries' right, title and interest therein.
2.13 PERSONAL PROPERTY.
(a) Schedule 2.13 contains a correct and complete list of each item of
Personal Property, other than Inventory and the Option Property (excluding
office furniture, equipment, supplies and miscellaneous items of personal
property with an individual cost of less than $2,500).
(b) Schedule 2.13 contains a correct and complete description of all
Material Leased Personal Property. Each of the Contracts of the Company or any
of the Subsidiaries relating to such Leased Personal Property is identified on
Schedule 2.13 and each such Contract is in full force and effect.
2.14 INTELLECTUAL PROPERTY.
(a) Schedule 2.14 contains a correct and complete list of all of the
Company's and each of the Subsidiaries' respective Material Intellectual
Property, including all Material license agreements relating thereto. Neither
the Company nor any of the Subsidiaries (or any goods or services sold by any of
them) has violated, infringed upon or unlawfully or wrongfully used the
Intellectual Property of others and none of the Company's or any of the
Subsidiaries' Intellectual Property or any related rights or any customer lists,
supplier lists or mailing lists, as used in the Business or in the other
businesses now or heretofore conducted by the Company or any of the
Subsidiaries, Materially infringes upon or otherwise Materially violates the
rights of others, nor has any Person asserted a claim of such infringement or
misuse, which infringement or violation is likely to result in a cost to the
Company in excess of $20,000. Each of the Company and the Subsidiaries has taken
all reasonable measures to enforce, maintain and protect its interests and, to
the extent applicable, the rights of Third Parties, in and to the Company's and
each of the Subsidiaries' Material Intellectual Property. The Company and each
of the Subsidiaries have all right, title and interest in the Intellectual
Property identified on Schedule 2.14 (other than as contemplated in the WEAU
Agreement). The consummation of the transactions contemplated by this Agreement
will not alter or impair any Material Intellectual Property rights of the
Company or any of the Subsidiaries. Except as set forth in Schedule 2.14,
neither the Company nor any of the Subsidiaries is obligated nor has the Company
or any of the Subsidiaries incurred any Liability to make any Material payments
for royalties, fees or otherwise to any Person in connection with any of the
Company's or any of the Subsidiaries' Intellectual Property. All patents,
trademarks, trade names, service marks, assumed names, and copyrights
-9-
<PAGE>
and all registrations thereof included in or related to the Company's or any of
the Subsidiaries' Intellectual Property are valid, subsisting and in full force
and effect. The Company is unaware of any Material infringement of the Company's
or any of the Subsidiaries' Material Intellectual Property, and there are no
pending infringement actions against another for infringement of the Company's
or any of the Subsidiaries' Intellectual Property or theft of the Company's
trade secrets.
(b) No present or former officer, director, partner or employee of the
Company or any of the Subsidiaries owns or has any proprietary, financial or
other interest, direct or indirect, in any of the Company's or any of the
Subsidiaries' Material Intellectual Property, except as described on Schedule
2.14. Except as set forth on Schedule 2.14, no officer, director, partner or
employee of the Company or any of the Subsidiaries has entered into any Contract
(i) that requires such officer, director, partner or employee to (A) assign any
interest to inventions or other Material Intellectual Property, or (B) keep
confidential any Material trade secrets, proprietary data, customer lists or
other business information or (ii) that restricts or prohibits such officer,
director, partner or employee from engaging in competitive activities with or
soliciting customers to or from any competitor of the Company or any of the
Subsidiaries.
2.15 COMPUTER SOFTWARE AND DATABASES. Schedule 2.15 identifies all Material
Computer Software and Databases owned, licensed, leased, internally developed or
otherwise used in connection with the Business. The Company and each of the
Subsidiaries have use of or the ability to freely acquire, without substantial
costs to the Company or any of the Subsidiaries for such acquisition, all
Computer Software and Databases that are necessary to conduct the Business as
presently conducted by the Company and each of the Subsidiaries and all
documentation relating to all such Material Computer Software and Databases.
Such Computer Software and Databases perform in all Material respects in
accordance with the documentation related thereto or used in connection
therewith and are free of Material defects in programming and operation. The
Company has previously delivered to Purchaser complete and accurate copies of
all documents (other than the WEAU Agreement) relating to the sale, license,
lease or other transfer or grant of Material Computer Software and Databases by
the Company or any of its Subsidiaries since January 1, 1996.
2.16 ACCOUNTS RECEIVABLE. The Accounts Receivable are (i) validly existing,
(ii) enforceable by the Company or the Subsidiaries in accordance with the terms
of the instruments or documents creating them, and (iii) collectible in the
ordinary course of business consistent with past practice at the full recorded
amount thereof less an allowance for collection losses disclosed in the Balance
Sheet, or in the case of Accounts Receivable arising after the Balance Sheet
Date, an allowance for collection losses accrued on the books of the Company or
any of the Subsidiaries in the ordinary course of business consistent with past
practices and in accordance with GAAP. The allowance for collection losses on
the Balance Sheet was established in the ordinary course of business consistent
with past practices and in accordance with GAAP. The Accounts Receivable
represent monies due for, and have arisen solely out of, bona fide sales and
deliveries of goods, performance of services and other business transactions in
the ordinary course of business consistent with past practices. None of the
Accounts Receivable represent monies due for goods either sold on consignment or
sold on approval. There are no refunds, discounts or other adjustments payable
with respect to any such Accounts Receivable, and there are no defenses, rights
of set-off, counterclaims, assignments, restrictions, encumbrances, or
conditions enforceable by Third Parties on or affecting any Account Receivable,
except, in each case, for terms arising in the ordinary course of business
consistent with past practice.
2.17 INSURANCE. All of the assets and the operations of the Company, each of
the Subsidiaries and the Business of an insurable nature and of a character
usually insured by companies of
-10-
<PAGE>
similar size and in similar businesses are insured by the Company or any of the
Subsidiaries in such amounts and against such losses, casualties or risks as is
(i) usual in such companies and for such assets, operations and businesses, (ii)
required by any Law applicable to the Company, any of the Subsidiaries or the
Business, or (iii) required by any Contract of the Company or any of the
Subsidiaries. Schedule 2.17 contains a complete and accurate list of all
Material insurance policies now in force and held or owned by the Company or any
of the Subsidiaries and such Schedule indicates the name of the insurer, the
type of policy, the risks covered thereby, the amount of the premiums, the term
of each policy, the policy number and the amounts of coverage and deductible in
each case and all outstanding claims thereunder. Correct and complete copies or
summaries of all such policies have been delivered to Purchaser by the Company
or will be delivered to Purchaser by the Company as soon as such policies are
available to the Company after the date hereof. All such policies are in full
force and effect and enforceable in accordance with their terms. Neither the
Company nor any of the Subsidiaries is now in Material Default regarding the
provisions of any such policy, including, without limitation, failure to make
timely payment of any premiums due thereon, and neither the Company nor any of
the Subsidiaries has failed to give any Material notice or present any Material
claim thereunder in due and timely fashion. Neither the Company nor any of the
Subsidiaries has been refused or denied renewal of, any Material insurance
coverage in connection with the Company, any of the Subsidiaries, the ownership
or use of the Company's or any of the Subsidiaries' respective assets or the
operation of the Business. In addition to the deductibles set forth on Schedule
2.17, such Schedule discloses all Material risks that are self-insured by the
Company and each of the Subsidiaries that in the ordinary course of business
could be insured.
2.18 BONDS, LETTERS OF CREDIT AND GUARANTEES. Schedule 2.18 contains a
complete and accurate list of all bonds (whether denominated bid, litigation,
performance, fidelity, or otherwise), letters of credit, and guarantees (other
than instruments that are guaranteed in the ordinary course) issued by the
Company, any of the Subsidiaries, the Stockholders or others for the benefit of
the Company or any of the Subsidiaries and now in force or outstanding. Correct
and complete copies of each such Material bond, letter of credit and guarantee
have been delivered to Purchaser by the Company on or before the date of this
Agreement. The bonds, letters of credit and guarantees listed in Schedule 2.18
satisfy all Material requirements for bonds, letters of credit or guarantees set
forth in (i) any Law applicable to the Company, any of the Subsidiaries or the
Business and (ii) any Contracts of the Company or any of the Subsidiaries. All
such bonds, letters of credit and guarantees are in full force and effect and
enforceable in accordance with their terms. Neither the Company nor any of the
Subsidiaries is in Material Default regarding the provisions of any such bond,
letter of credit or guarantee, including, without limitation, the failure to
make timely payment of all premiums and fees due thereon, and neither the
Company nor any of the Subsidiaries has failed to give any notice or present any
claim thereunder in due and timely fashion.
2.19 COMPLIANCE WITH LAW.
(a) The Company and each of the Subsidiaries have complied with and are in
compliance with all Laws, Licenses and Orders applicable to, required of or
binding on the Company or any of the Subsidiaries, respectively, their
respective assets or the Business, including without limitation, the FCC
Licenses, the Communications Act of 1934, and PUC Laws, and none of the Company,
any of the Subsidiaries, or any of the Stockholders has Knowledge of any basis
for any claim of current or past non-compliance with any such Law, License or
Order, in each case where such non-compliance would be Material to the business,
operations, assets, Liabilities, financial condition, or results of operations
of the Company and the Subsidiaries, taken as a whole, including, without
limitation, the value of the Company and the Subsidiaries, taken as a whole. No
notices from any Governmental Authority with respect to any failure or alleged
failure of the Company, any of the Subsidiaries, their respective assets or the
Business to comply with any such Law, License or Order have been received by the
Company, any of the Subsidiaries
-11-
<PAGE>
or any of the Stockholders, nor, to the Knowledge of the Company, any of the
Subsidiaries or any of the Stockholders, are any such notices proposed or
threatened. Schedule 2.19 contains a complete and correct list of all Material
Licenses and Orders applicable to, required of or binding on the Company, any of
the Subsidiaries, their respective assets or the Business, true and complete
copies of which (other than the FCC Licenses) previously have been delivered to
the Purchaser.
(b) The Company and each of the Subsidiaries hold the FCC Licenses and all
other Material Licenses necessary for or used in the operations of the Business,
and each of the FCC Licenses is, and all such other Material Licenses are, in
full force and effect. Schedule 2.19 contains a true and complete list of the
FCC Licenses currently in effect and all such other Material Licenses (showing,
in each case, the expiration date). Except as set forth in Schedule 2.19, no
application, action or proceeding is pending for the renewal or modification of
any of the FCC Licenses or any of such other Material Licenses, and no
application, action or proceeding is pending or, to the Company's, any of the
Subsidiaries' or any of the Stockholder's Knowledge, threatened that may result
in the denial of the application for renewal, the revocation, modification,
nonrenewal or suspension of any of the FCC Licenses or any of such other
Material Licenses, the issuance of a cease-and-desist order, or the imposition
of any administrative or judicial sanction with respect to the Business that may
Materially and adversely affect the rights of Purchaser, the Company or any of
the Subsidiaries under any such FCC Licenses or other Material Licenses. All
Material returns, reports and statements required to be filed by the Company or
any of the Subsidiaries with the FCC relating to the Business have been filed
and complied with and are complete and correct in all Material respects as
filed.
(c) Except as described in Schedule 2.19, there are no Material capital
expenditures that the Company, any of the Subsidiaries or any of the
Stockholders anticipates will be required to be made in connection with the
Company's or any of the Subsidiaries' respective assets or the Business as now
conducted in order to comply with any Law applicable to the Company, any of the
Subsidiaries, their respective assets or the Business as now conducted.
2.20 ENVIRONMENTAL. Except as set forth in Schedule 2.20 or the Environmental
Report:
(a) There is no Environmental Litigation (or any Litigation against any
Person whose Liability, or any portion thereof, for Environmental Matters or
under any Environmental Laws the Company or any of the Subsidiaries has or, to
the Knowledge of the Company, any of the Subsidiaries or any of the
Stockholders, may have retained or assumed contractually or by operation of Law)
pending or, to the Knowledge of the Company, any of the Subsidiaries or any of
the Stockholders, threatened with respect to (i) the ownership, use, condition
or operation of the Business, the Real Property or any other asset of the
Company or any of the Subsidiaries or any asset formerly held for use or sale by
the Company or any of the Subsidiaries or any of their respective predecessors
or any of their respective current or former subsidiaries, or (ii) any violation
or alleged violation of or Liability or alleged Liability under any
Environmental Law or any Order related to Environmental Matters. To the
Knowledge of the Company, any of the Subsidiaries or any of the Stockholders,
there have been and there are no existing violations of (i) any Environmental
Law, or (ii) any Order related to Environmental Matters, with respect to the
ownership, use, condition or operation of the Business, the Real Property or any
other asset of the Company or any of the Subsidiaries or any asset formerly held
for use or sale by the Company or any of the Subsidiaries or any of their
respective predecessors or any of their respective current or former
subsidiaries. To the Knowledge of the Company, any of the Subsidiaries or any of
the Stockholders, there are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without limitation,
any Environmental Matter, that could reasonably be expected to form the basis of
(i) any Environmental Litigation against the Company or any of the Subsidiaries,
or (ii) any Litigation against any
-12-
<PAGE>
Person whose Liability (or any portion thereof) for Environmental Matters or
under any Environmental Laws the Company or any of the Subsidiaries has or may
have retained or assumed contractually or by operation of Law. To the Knowledge
of the Company, any of the Subsidiaries or any of the Stockholders, none of the
Company, any of the Subsidiaries or any of their respective predecessors or any
of their respective current or former subsidiaries nor anyone Known to the
Company, any of the Subsidiaries or any of the Stockholders has used any assets
or premises of the Company or any of the Subsidiaries or any of their respective
predecessors or any of their respective current or former subsidiaries or any
part thereof for the handling, treatment, storage, or disposal of any Hazardous
Substances except in Material compliance with applicable Environmental Laws. The
disclosure of facts set forth in Schedule 2.20 shall not relieve the Company,
any of the Subsidiaries or any of the Stockholders of any of their respective
obligations under this Agreement.
(b) To the Knowledge of the Company, any of the Subsidiaries or any of the
Stockholders, no release, discharge, spillage or disposal of any Hazardous
Substances has occurred or is occurring at any assets owned, leased, operated or
managed by the Company or any of the Subsidiaries or any of their respective
predecessors or any of their respective current or former subsidiaries or any
part thereof while or before such assets were owned, leased, operated or managed
by the Company or any of the Subsidiaries.
(c) To the Knowledge of the Company, any of the Subsidiaries or any of the
Stockholders, no soil or water in, under or adjacent to any assets owned,
leased, operated or managed, directly or indirectly, by the Company or any of
the Subsidiaries or assets formerly held for use or sale by the Company or any
of the Subsidiaries or, in either case, any of their respective predecessors or
any of their respective current or former subsidiaries has been contaminated by
any Hazardous Substance while or before such assets were owned, leased, operated
or managed by the Company or any of the Subsidiaries or any of their respective
predecessors or any of their respective current or former subsidiaries.
(d) To the Knowledge of the Company, any of the Subsidiaries or any of the
Stockholders, all waste containing any Hazardous Substances generated, used,
handled, stored, treated or disposed of (directly or indirectly) by the Company
or any of the Subsidiaries or any of their respective predecessors or any of
their respective current or former subsidiaries has been released or disposed of
in compliance with all applicable reporting requirements under any Environmental
Laws and there is no Environmental Litigation with respect to any such release
or disposal.
(e) To the Knowledge of the Company, any of the Subsidiaries or any of the
Stockholders, all underground tanks and other underground storage facilities
presently or previously located at any Real Property owned, leased, operated or
managed by the Company or any of the Subsidiaries or any of their respective
predecessors or any of their respective current or former subsidiaries or any
such tanks or facilities located at any Real Property while such Real Property
was owned, leased, operated, or managed by the Company or any of the
Subsidiaries or any of their respective predecessors or any of their respective
current or former subsidiaries are listed together with the capacity and
contents (former and current) of each such tank or facility in Schedule 2.20. To
the Knowledge of the Company, any of the Subsidiaries or any of the
Stockholders, none of such underground tanks or facilities is leaking or has
ever leaked, and none of the Company, any of the Subsidiaries or any of their
respective current or former subsidiaries holds any responsibility or Liability
for any underground tanks or underground facilities at any other location.
(f) To the Knowledge of the Company, any of the Subsidiaries or any of the
Stockholders, all hazardous waste has been removed from all Real Property of the
Company and each of
-13-
<PAGE>
the Subsidiaries and each of their respective predecessors and each of their
respective current and former subsidiaries in Material compliance with
applicable Environmental Laws.
(g) To the Knowledge of the Company, any of the Subsidiaries or any of the
Stockholders, the Company, each of the Subsidiaries and each of their respective
predecessors or any of their respective current or former subsidiaries has
complied with all applicable reporting requirements under all Environmental Laws
concerning the disposal or release of Hazardous Substances and none of the
Company, any of the Subsidiaries or any of their respective predecessors or any
of their respective current or former subsidiaries has made any such reports
concerning any Real Property of the Company or any of the Subsidiaries or
concerning the operations or activities of the Company, any of the Subsidiaries
or any of their respective predecessors or any of their respective current or
former subsidiaries.
(h) To the Knowledge of the Company, any of the Subsidiaries or any of the
Stockholders, no building or other Improvement or any Real Property owned,
leased, operated or managed by the Company or any of the Subsidiaries contains
any asbestos-containing materials.
(i) To the Knowledge of the Company, any of the Subsidiaries or any of the
Stockholders, without limiting the generality of any of the foregoing, (i) all
on-site and off-site locations where the Company, any of the Subsidiaries or any
of their respective predecessors or any of their respective current or former
subsidiaries has disposed or arranged for the disposal of Hazardous Substances
are identified in Schedule 2.20, (ii) none of the on-site or off-site locations
identified in Schedule 2.20 is listed on any federal, state or local government
lists of abandoned disposal sites or sites where Hazardous Substances have or
may have occurred, and (iii) no polychlorinated biphenyls ("PCB's") are used or
stored on or in any real property owned, leased, operated or managed by the
Company, any of the subsidiaries or any of their respective predecessors or any
of their respective current or former Subsidiaries, except in Material
compliance with applicable Environmental Laws.
(j) Schedule 2.20 contains a correct and complete list of all
environmental site assessments and other studies relating to the investigation
of the possibility of the presence or existence of any Environmental Matter with
respect to the Company, any of the Subsidiaries, the Business, any assets owned,
leased, operated or managed by the Company, any of the Subsidiaries or any of
their respective predecessors or any of their respective current or former
subsidiaries, and the Company has previously delivered to Purchaser a correct
and complete copy of each such assessment and study.
2.21 LITIGATION AND CLAIMS. Except as disclosed on Schedule 2.21:
(a) There is no Litigation pending or, to the Knowledge of the Company,
any of the Subsidiaries or any of the Stockholders, threatened and none of the
Company, any of the Subsidiaries or any of the Stockholders has any Knowledge of
any basis for any such Litigation or any facts or the occurrence of any event
which might give rise to any Litigation;
(b) No Litigation has been pending during the three (3) years prior to the
date hereof that, individually or in the aggregate resulted in an uninsured Loss
in excess of $150,000 or granted any injunctive relief against the Company or
any of the Subsidiaries; and
(c) Neither the Company nor any of the Subsidiaries has been advised by
any attorney representing it that there are any "loss contingencies" (as defined
in Statement of Financial Accounting Standards No. 5 issued by the Financial
Accounting Standards Board in March 1975 ("FASB
-14-
<PAGE>
5"), which would be required by FASB 5 to be disclosed or accrued in financial
statements of the Company or any of the Subsidiaries, were such financial
statements prepared as of the date hereof.
2.22 BENEFIT PLANS.
(a) Schedule 2.22 lists every Employee Benefit Plan of the Company and
each of the Subsidiaries. On or after September 26, 1980, none of the Company,
any of the Subsidiaries or any entity aggregated with the Company or any of the
Subsidiaries under Code Section 414 (for purposes of this Section, an "ERISA
Affiliate") has had an "obligation to contribute" (as defined in ERISA Section
4212) to a "multiemployer plan" (as defined in ERISA Sections 4001(a)(3) and
(3)(37)(A)). No Employee Benefit Plan is or has been a multiemployer plan within
the meaning of Section 3(37) of ERISA.
(b) The Employee Benefit Plans listed in Schedule 2.22 have been or will
be made available to Purchaser for review, including correct and complete copies
of: (i) all trust agreements or other funding arrangements for such Employee
Benefit Plans (including insurance contracts), and all amendments thereto, (ii)
with respect to any such Employee Benefit Plans or amendments, all determination
letters, rulings, opinion letters, information letters, or advisory opinions
issued by the United States Internal Revenue Service, the United States
Department of Labor, or the Pension Benefit Guaranty Corporation after December
31, 1974, (iii) annual reports or returns, audited or unaudited Financial
Statements, actuarial valuations and reports, and summary annual reports
prepared for any Employee Benefit Plan with respect to the most recent three
plan years, and (iv) the most recent summary plan descriptions and any material
modifications thereto.
(c) Except as disclosed in Schedule 2.22, all the Employee Benefit Plans
and the related trusts subject to ERISA comply in all Material respects with and
have been administered in compliance in all Materials respects with, (i) the
applicable provisions of ERISA, (ii) all applicable provisions of the Code
relating to qualification and Tax exemption under Code Sections 401(a) and
501(a) or otherwise applicable to secure intended Tax consequences, (iii) all
applicable state or federal securities Laws, and (iv) all other applicable Laws
and collective bargaining agreements, and neither the Company nor any of the
Subsidiaries has received any notice from any Governmental Authority questioning
or challenging such compliance. All available determination letters and required
registrations under federal and state securities Laws ("Permits") for the
Employee Benefit Plans have been obtained, including, but not limited to, timely
determination letters on the qualification of the ERISA Plans and Tax exemption
of related trusts, as applicable under the Code, and all such Permits continue
in full force and effect. No event has occurred which will or could reasonably
be expected to give rise to disqualification of any such plan or loss of
intended Tax consequences under the Code or to any Tax under Section 511 of the
Code.
(d) Except as disclosed in Schedule 2.22, no oral or written
representation or communication with respect to any aspect of the Employee
Benefit Plans has been made to employees of the Company or any of the
Subsidiaries prior to the date hereof that is not in accordance with the written
or otherwise preexisting terms and provisions of such plans. None of the
Company, any of the Subsidiaries or any administrator or fiduciary of any
Employee Benefit Plan (or any agent of any of the foregoing) has engaged in any
transaction, or acted or failed to act in any manner that could subject the
Company, any of the Subsidiaries or Purchaser to any direct or indirect Material
Liability (by indemnity or otherwise) for breach of any fiduciary, co-fiduciary
or other duty under ERISA. There are no unresolved claims or disputes under the
terms of, or in connection with, the Employee Benefit Plans other than claims
for benefits which are payable in the ordinary course and no Litigation has been
commenced with respect to any Employee Benefit Plan.
-15-
<PAGE>
(e) Except as disclosed in Schedule 2.22, all Employee Benefit Plan
documents and annual reports or returns, audited or unaudited financial
statements, actuarial valuations, summary annual reports, and summary plan
descriptions issued with respect to the Employee Benefit Plans are correct and
complete in all Material respects, have been timely filed with the IRS and the
United States Department of Labor, have been timely distributed to participants
in the Employee Benefit Plans, and there have been no changes in the information
set forth therein.
(f) No "party in interest" (as defined in Section 3(14) of ERISA) or
"disqualified person" (as defined in Code Section 4975) of any Employee Benefit
Plan has engaged in any Material nonexempt "prohibited transaction" (described
in Code Section 4975 or ERISA Section 406). Except as disclosed in Schedule
2.22, there has been no (i) "reportable event" (as defined in Section 4043 of
ERISA), or event described in Sections 4041, 4042, 4062 (including ERISA Section
4062(e)), 4064, 4069 or 4063 of ERISA, or (ii) termination or partial
termination, withdrawal or partial withdrawal with respect to any of the ERISA
Plans which the Company or any of the Subsidiaries maintains or contributes to
or has maintained or contributed to. Except as disclosed in Schedule 2.22,
neither the Company nor any of the Subsidiaries has incurred any liability under
Title IV of ERISA, including any Liability that could arise under Title IV of
ERISA as a result of the Company's or any of the Subsidiaries' membership in a
"controlled group" as defined in ERISA ss.ss. 4001(a)(14) and 4001(b)(1).
(g) Except as disclosed in Schedule 2.22, for any ERISA Plan that is an
employee pension benefit plan as defined in ERISA ss. 3(2) ("ERISA Pension
Plan"), the fair market value of such Plan's assets equals or exceeds the
present value of all benefits (whether vested or not) accrued to date by all
present or former participants in such ERISA Pension Plan. For this purpose the
assumptions prescribed by the Pension Benefit Guaranty Corporation for valuing
plan assets or liabilities upon plan termination shall be applied and the term
"benefits" shall include the value of all benefits, rights and features
protected under Code ss. 411(d)(6) or its successors and any ancillary benefits
(including disability, shutdown, early retirement and welfare benefits) provided
under any such employee pension benefit plan and all "benefit liabilities" as
defined in ERISA Section 4001(a)(16). Since the date of the most recent
actuarial valuation, there has been (i) no Material change in the financial
position of an ERISA Pension Plan, (ii) no change in the actuarial assumptions
with respect to any ERISA Pension Plan, and (iii) no increase in benefits under
any ERISA Pension Plan as a result of ERISA Pension Plan amendments or changes
in any applicable regulation which is reasonably likely to have, individually or
in the aggregate, a Material effect on the funding status of such ERISA Pension
Plan. All contributions with respect to an Employee Benefit Plan of the Company
or of an ERISA Affiliate that is subject to Code Section 412 or ERISA Section
302 have been, or will be, timely made and there is no Lien or expected to be a
Lien under Code Section 412(n) or ERISA Section 302(f) or Tax under Code Section
4971. No ERISA Pension Plan of the Company or any of the Subsidiaries or of an
ERISA Affiliate has a "liquidity shortfall" as defined in Code Section
412(m)(5). No event described in Code Section 401(a)(29) has occurred or can
reasonably be expected to occur with respect to the Company or its ERISA
Affiliates. All premiums required to be paid under ERISA Section 4006 have been
paid by the Company and each of the Subsidiaries and by any Person aggregated
with the Company or any of the Subsidiaries under ERISA Sections 4001(a)(14) and
4001(b)(1).
(h) Neither the Company nor any of the Subsidiaries has, or maintains, an
Employee Benefit Plan providing welfare benefits (as defined in ERISA Section
3(1)) to employees after retirement or other separation of service except to the
extent required under Part 6 of Title I of ERISA or Code Section 4980B or their
successors. No Material Tax under Code Sections 4980B or 5000 has been incurred
with respect to any Employee Benefit Plan and no circumstances exist which could
reasonably be expected to give rise to such Taxes.
-16-
<PAGE>
(i) Except as disclosed on Schedule 2.22, neither the execution or
delivery of this Agreement or the Other Agreements nor the consummation of the
transactions contemplated by this Agreement will (1) entitle any current or
former employee of the Company or any of the Subsidiaries to severance pay,
unemployment compensation or any payment contingent upon a change in control or
ownership of the Company or any of the Subsidiaries, or (2) accelerate the time
of payment or vesting, or increase the amount, of any compensation due to any
such employee or former employee.
(j) Except as disclosed on Schedule 2.22, all individuals participating in
(or eligible to participate in) any Employee Benefit Plan maintained (or
contributed to) by the Company or any of the Subsidiaries are common-law
employees.
2.23 CONTRACTS.
(a) Description.
(i) Real Property. Schedule 2.23(a)(i) is a list or brief description
of all Material Contracts affecting or relating to the Real Property, including,
without limitation, Contracts evidencing Material Liens (including those
referred to in Schedule 2.11).
(ii) Personal Property. Schedule 2.23(a)(ii) is a list of all Contracts
affecting or relating to the Personal Property, including, without limitation,
Contracts evidencing Liens (including those referred to in Schedule 2.11) (other
than Contracts affecting rights in the Personal Property each of which does not
involve the payment by the Company or any of the Subsidiaries of more than
$25,000 per year).
(iii) Purchase Orders -- Non-Capital Assets. Schedule 2.23(a)(iii) is a
list of all outstanding Contracts of the Company or any of the Subsidiaries or
that relate to the Business, for the acquisition or sale of goods, assets or
services (other than purchase orders or other commitments for the acquisition of
capital assets), all of which were executed in the ordinary course of business
consistent with past practice of the Company or any of the Subsidiaries (other
than purchase orders and other commitments which do not exceed $25,000 each).
(iv) Purchase Orders -- Capital Assets. Schedule 2.23(a)(iv) is a list
of all outstanding Contracts of the Company or any of the Subsidiaries or that
relate to the Business, for the acquisition of capital assets and that were
executed in the ordinary course of business consistent with past practice of the
Company or any of the Subsidiaries (other than purchase orders and other
commitments which do not exceed $25,000 each).
(v) Sales. Schedule 2.23(a)(v) is a list or brief description of all
Contracts of the Company or any of the Subsidiaries or that relate to the
Business, for the sale of products or the performance of services by the Company
or any of the Subsidiaries and which exceed $5,000 each.
(vi) Employment; Other Affiliate Contracts. Schedule 2.23(a)(vi)
contains a list of all Material Contracts of the Company or any of the
Subsidiaries or that relate to the Business, with any employee, officer, agent,
consultant, distributor, dealer or Affiliate of the Company or any of the
Subsidiaries (other than those entered into in the ordinary course of business
consistent with past practice that are immediately terminable at will by the
Company or any of the Subsidiaries, as the case may be, without any Liability).
-17-
<PAGE>
(vii) Sales Representatives. Schedule 2.23(a)(vii) is a list of all
Material Contracts of the Company or any of the Subsidiaries or that relate to
the Business, with any agent, broker, sales representative of, or any Person in
a similar representative capacity for, the Company or any of the Subsidiaries
(other than those entered into in the ordinary course of business consistent
with past practice that are terminable within sixty (60) days by the Company or
any of the Subsidiaries, as the case may be, without Liability).
(viii) Powers of Attorney. Schedule 2.23(a)(viii) is a list of all
powers of attorney given by the Company or any of the Subsidiaries, whether
limited or general, to any Person continuing in effect.
(ix) Programming, Network Affiliation, Operating and Cable
Retransmission Agreements. Schedule 2.23(a)(ix) is a list of all network
affiliation agreements, operating agreements, cable retransmission agreements
and all programming agreements of the Company or that relate to the Business
(correct and complete copies of which previously have been delivered to
Purchaser), including for each of those agreements the amounts and availability
dates of programming and the dollar amount and schedule of payments thereunder.
(x) Barter and Trade Agreements. Schedule 2.23(a)(x) is a list of all
"barter" and "trade" agreements of the Company or any of the Subsidiaries or
that relate to the Business (correct and complete copies of which previously
have been delivered to Purchaser) and includes an estimate of the positive or
negative trade balances associated with each such agreement.
(xi) Any Other Contracts. Schedule 2.23(a)(xi) is a list or brief
description of any other Contracts of the Company or any of the Subsidiaries or
that relate to the Business and that: (A) payments provided for or actually made
thereunder by or to the Company or any of the Subsidiaries in any calendar year
exceed $25,000, (B) require performance by the Company or any of the
Subsidiaries of any obligation for a period of time extending beyond six (6)
months from the Closing Date or which is not terminable by the Company or any of
the Subsidiaries without penalty upon sixty (60) days or less notice, (C)
evidence, create, guarantee or service indebtedness of the Company or any of the
Subsidiaries, (D) establish or provide for any joint venture, partnership or
similar arrangement involving any of the Stockholders, the Company or any of the
Subsidiaries, or (E) guarantee or endorse the Liabilities of any other Person.
The lists in all Schedules referred to above are correct and complete as of
the date hereof unless otherwise noted thereon.
(b) Copies. Correct and complete copies of all the written Contracts, and
correct and complete descriptions of all oral Contracts, referred to in Section
2.23(a) have been delivered to Purchaser on or before the date hereof.
(c) No Default. None of the Company, any of the Subsidiaries or, to the
Knowledge of the Company, any of the Subsidiaries or any of the Stockholders,
any other party is in Default under any of the Contracts or any Liens referred
to in Section 2.23(a) and, to the Knowledge of the Company, any of the
Subsidiaries or any of the Stockholders, there is no basis for any claim of
Material Default under any of the foregoing.
-18-
<PAGE>
(d) Assurances. Each of the Contracts referred to in this Section 2.23 is
in full force and effect and constitutes a valid, legal and binding agreement of
the Company or the Subsidiaries party thereto and, to the Knowledge of the
Company, any of the Subsidiaries or any of the Stockholders, the other parties
thereto, enforceable in accordance with its terms except for bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other Laws
affecting creditors' rights generally, or general equitable principles
(regardless of whether considered in a proceeding in equity or at law) or by an
implied covenant of good faith and fair dealing, and as otherwise set forth in
Schedule 2.23 . Neither the Company nor any of the Subsidiaries is a party to or
bound by any Contract or Contracts that, either separately or in the aggregate
has or will have a Material Adverse Effect with respect to the Company, any of
the Subsidiaries, their respective assets, or the Business. The continuation,
validity and effectiveness of each of the Contracts referred to in this Section
2.23 will not be affected in any way by the consummation of the transactions
contemplated by this Agreement.
2.24 SUPPLIERS AND CUSTOMERS. Schedule 2.24 sets forth each supplier to whom
payments were made that equaled or exceeded five percent (5%) of the Company's
and each of the Subsidiaries' aggregate operating expenses for the fiscal year
ended December 28, 1997 (the "Large Suppliers"). Schedule 2.24 sets forth each
customer or group of related customers from whom payments were received that
equaled or exceeded five percent (5%) of the Company's and each of the
Subsidiaries' aggregate gross sales for the fiscal year ended December 28, 1997
(the "Large Customers"). Except as reflected in Schedule 2.24, no Large Supplier
is a sole source of supply of any good or service to the Company or any of the
Subsidiaries. To the Knowledge of the Company, any of the Subsidiaries or any of
the Stockholders, the relationships of the Company and each of the Subsidiaries
with its Large Suppliers and Large Customers are good commercial working
relationships and, except as set forth on Schedule 2.24, neither (i) any of the
Large Suppliers or any of the Large Customers, nor (ii) any Large Supplier who
at any time during 1997 was or now is the sole source of supply of any good or
service, has terminated, or, to the Knowledge of the Company, any of the
Subsidiaries or any of the Stockholders, made any threat reasonably likely to be
acted upon to terminate, its relationship with the Company or any of the
Subsidiaries or has during the last twelve (12) months Materially decreased or
Materially limited, or, to the Knowledge of the Company, any of the Subsidiaries
or any of the Stockholders, made any threat reasonably likely to be acted upon
to Materially decrease or Materially limit, its services, supplies or materials
to the Company or any of the Subsidiaries or its usage or purchase of the goods
or services of the Company or any of the Subsidiaries, as the case may be. None
of the Company, any of the Subsidiaries or any of the Stockholders has any
Knowledge and belief that any of the Large Suppliers or any of the Large
Customers intends to terminate or otherwise modify adversely to the Company or
any of the Subsidiaries its relationship with the Company or any of the
Subsidiaries or to decrease or limit its services, supplies or materials to the
Company or any of the Subsidiaries or its usage or purchase of the goods or
services of the Company or any of the Subsidiaries, as the case may be, and the
acquisition of the Stock by Purchaser will not, to the Knowledge of the Company,
any of the Subsidiaries or any of the Stockholders adversely affect the
relationship of the Business or of the Company or any of the Subsidiaries with
any of the Large Suppliers or any of the Large Customers.
2.25 LABOR MATTERS. Schedule 2.25 contains a correct and complete list of all
employees of the Company and each of the Subsidiaries whose direct annual
compensation exceeds $50,000. Except as disclosed on Schedule 2.25, the
employment of all employees of the Company and each of the Subsidiaries is
terminable at will by the Company and each of the Subsidiaries, respectively,
without any penalty or severance obligation incurred by the Company or any of
the Subsidiaries. Except as set forth on Schedule 2.25 and other than in the
ordinary course of business consistent with past practices, neither the Company
nor any of the Subsidiaries will owe any amounts to any of its employees as of
the Closing Date, including, without limitation, any amounts incurred for wages,
bonuses, vacation pay, sick
-19-
<PAGE>
leave or any severance obligations other than amounts owed with respect to the
then current pay period. Except as and to the extent set forth in Schedule 2.25,
(i) neither the Company nor any of the Subsidiaries is a party to any union
agreement or collective bargaining agreement or work rules or practices agreed
to with any labor organization or employee association applicable to any
employees of the Company or any of the Subsidiaries and, to the Knowledge of the
Company, any of the Subsidiaries or any of the Stockholders, no attempt to
organize any of the employees of the Business has been made, proposed or
threatened in the past three years, (ii) neither the Company nor any of the
Subsidiaries is, or within the past three years has been, subject to any Equal
Employment Opportunity Commission charges or other claims of employment
discrimination made against it, (iii) no Wage and Hour Department investigations
have been made in the past 3 years of the Company or any of the Subsidiaries,
(iv) no labor strike, dispute, slowdown, stoppage or lockout is pending or, to
the Knowledge of the Company, any of the Subsidiaries or any of the
Stockholders, threatened against or affecting the Company, any of the
Subsidiaries, their respective assets or the Business and during the past five
(5) years there has not been any such action, (v) no unfair labor practice
charge or complaint against the Company or any of the Subsidiaries is pending
or, to the Knowledge of the Company, any of the Subsidiaries or any of the
Stockholders, threatened before the National Labor Relations Board or any
similar Governmental Authority, and (vi) neither the Company nor any of the
Subsidiaries has received any formal notice (other than as set forth in Section
6.07 hereof) that any of the employees listed on Schedule 2.25 will terminate or
contemplates terminating his or her employment currently or at any time within
sixty (60) days after the Closing Date or will otherwise not be available to the
Company or any of the Subsidiaries. Since the enactment of the Worker Adjustment
and Retraining Notification Act (the "WARN Act"), neither the Company nor any of
the Subsidiaries has effectuated (a) a "plant closing" (as defined in the WARN
Act) affecting any site of employment or one or more facilities or operating
units within any site of employment or facility of the Company or any of the
Subsidiaries; or (b) a "mass layoff" (as defined in the WARN Act) affecting any
site of employment or facility of the Company or any of the Subsidiaries; nor
has either the Company or any of the Subsidiaries been affected by any
transaction or engaged in layoffs or employment terminations sufficient in
number to trigger application of any similar state or local Law. Except as set
forth in Schedule 2.25, none of the Company's or any of the Subsidiaries'
employees has suffered an "employment loss" (as defined in the WARN Act) since
six (6) months prior to the date hereof.
2.26 BROKERS AND FINDERS. Except as set forth on Schedule 2.26, no finder or
any agent, broker or other Person acting pursuant to authority of the Company,
any of the Subsidiaries or any of the Stockholders is entitled to any commission
or finder's fee in connection with the transactions contemplated by this
Agreement.
2.27 INTERESTED TRANSACTIONS. Except as set forth in Schedule 2.27, neither
the Company nor any of the Subsidiaries is a party to any Contract or other
transaction with any Affiliate of the Company or any of the Subsidiaries, any
Related Party of any Affiliate of the Company or any of the Subsidiaries (other
than as a stockholder or employee of the Company or any of the Subsidiaries), or
any Person in which any of the foregoing (individually or in the aggregate)
beneficially or legally owns, directly or indirectly, five percent (5%) or more
of the equity or voting interests (other than, in each case, Contracts or
transactions between or among the Company and its Subsidiaries). Each of such
Contracts and other transactions described in the preceding sentence was
negotiated on an arm's length basis, contains pricing terms that reflected fair
market value at the time entered into and otherwise contains terms and
conditions comparable to those customarily contained in similar transactions
between unrelated parties. Except as described in Schedule 2.27 and other than
the Stockholders and their Affiliates, none of the Persons described in the
first sentence of this Section 2.27 owns, or during the last three (3) years has
owned, directly or indirectly, beneficially or legally, (individually or in the
aggregate) five percent (5%) or more of
-20-
<PAGE>
the equity or voting interests of any Person that competes with the Company, any
of the Subsidiaries or the Business.
2.28 OFFICERS, DIRECTORS AND BANK ACCOUNTS. Schedule 2.28 lists (i) the names
of all officers and directors of the Company and each of the Subsidiaries and
(ii) the name and location of each bank or other institution in which the
Company or any of the Subsidiaries has any deposit account or safe deposit box
in which the Company or any of the Subsidiaries has any interest or access, all
account numbers and names of all Persons authorized to draw thereon or to have
access thereto.
2.29 REPORTS AND FINANCIAL STATEMENTS. The Company has filed all reports
required to be filed with the Securities and Exchange Commission since January
1, 1997 (collectively, the "SEC Reports"). None of such SEC Reports, as of their
respective dates or as of the date of any amendment or supplement thereto,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading . Each
of the financial statements (including the related notes) included in the SEC
Reports presents fairly, in all Material respects, the consolidated financial
position and consolidated results of operations and cash flows of the Company
and its subsidiaries as of the respective dates or for the respective periods
set forth therein, all in conformity with GAAP consistently applied during the
periods involved, except as otherwise noted therein, and subject, in the case of
the unaudited interim financial statements, to normal year-end adjustments and
any other adjustments described therein. All of such SEC Reports, as of their
respective dates, complied in all material respects with the requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
2.30 STATEMENTS TRUE AND CORRECT. No representation or warranty made by the
Company or the Stockholders, nor any statement, certificate or instrument
furnished or to be furnished to Purchaser pursuant to this Agreement, the Other
Agreements or any other document, agreement or instrument referred to herein or
therein, including, without limitation, the Financial Statements, contains or
will contain any untrue statement of fact or omits or will omit to state a
Material fact necessary to make the statements contained therein not misleading
in light of the circumstances under which they were made.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Company and the Stockholders
that:
3.01 ORGANIZATION. Purchaser is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Georgia, with the
corporate power and authority to carry on its business and to own, lease and
operate its assets.
3.02 CAPACITY AND VALIDITY. Purchaser has the full corporate power and
authority necessary to enter into and perform its obligations under this
Agreement and the Other Agreements to which it is a party and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement and the Other Agreements will have been approved
by all necessary action of the Board of Directors and stockholders of Purchaser
on or before Closing. This Agreement has been, and the Other Agreements will be
when executed and delivered, duly executed and delivered by duly authorized
officers of Purchaser, and the Agreement and each of the Other Agreements
constitutes, or will constitute when executed and delivered, the legal, valid
and binding obligation of
-21-
<PAGE>
Purchaser, enforceable against Purchaser in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or general equitable principles (regardless of
whether considered in a proceeding in equity or at law) or by an implied
covenant of good faith and fair dealing.
3.03 NO CONFLICT. Except as disclosed on Schedule 3.03, neither the
execution, delivery and performance of this Agreement and the Other Agreements
to which it is a party by Purchaser nor the consummation of the transactions
contemplated hereby or thereby, will (i) conflict with or result in a violation,
contravention or breach of any of the terms, conditions or provisions of the
Articles of Incorporation, as amended, or By-laws, as amended, of Purchaser,
(ii) result in a Default under, or require the consent or approval of any party
to, Contract or License of Purchaser, (iii) result in the violation of any Law
or Order, or (iv) result in the creation or imposition of any Lien.
3.04 BROKERS AND FINDERS. Except as set forth in Schedule 3.04, no finder or
any agent, broker or other Person acting pursuant to authority of Purchaser is
entitled to any commission or finder's fee in connection with the transactions
contemplated by this Agreement.
3.05 INVESTMENT REPRESENTATION. Purchaser is purchasing the Stock for
investment and is not acquiring the Stock with a view to or for sale in
connection with any distribution thereof within the meaning of the Securities
Act of 1933, as amended.
3.06 QUALIFICATION OF PURCHASER. Purchaser is fully qualified to assume
control and operation of the Stations and, to the best of Purchaser's knowledge
and belief, there exists no reason for the FCC to refuse to consent to the
assignment of the broadcast Licenses to Purchaser.
3.07 FINANCING. Purchaser has all necessary financial resources or has
secured a binding commitment for all financing necessary for Purchaser to
consummate the transactions contemplated by this Agreement.
3.08 STATEMENTS TRUE AND CORRECT. No representation or warranty made by
Purchaser, nor any statement, certificate or instrument furnished or to be
furnished to the Company or the Stockholders pursuant to this Agreement, the
Other Agreements or any other document, agreement or instrument referred to
herein or therein, contains or will contain any untrue statement of fact or
omits or will omit to state a fact necessary to make the statements contained
therein not misleading.
ARTICLE IV
COVENANTS AND ADDITIONAL AGREEMENTS OF THE COMPANY, THE STOCKHOLDERS AND
PURCHASER
4.01 CONDUCT OF BUSINESS. Prior to the Closing Date, except with the prior
written consent of Purchaser and except as necessary to effect the transactions
contemplated in this Agreement, the Company shall, and the Stockholders shall
cause the Company and each of the Subsidiaries to:
(a) other than in connection with the WEAU Agreement, conduct the Business
in substantially the same manner as presently being conducted, and refrain from
entering into any transaction or Contract other than in the ordinary course of
business consistent with past practice, except as otherwise contemplated by this
Agreement;
-22-
<PAGE>
(b) confer on a regular and frequent basis with Purchaser to report
Material operational matters and to report the general status of ongoing
operations;
(c) notify Purchaser of any unexpected emergency or other change in the
normal course of the Business or the operation of the assets of the Company or
any of the Subsidiaries, and of any Litigation (or communications indicating
that the same may be contemplated), affecting the Company, any of the
Subsidiaries, the Business or any Material assets, and keep Purchaser fully
informed of such events and permit its representatives prompt access to all
materials prepared in connection therewith in each case where such emergency,
change, Litigation or other event could cause a Material Adverse Effect;
(d) except in the ordinary course of business consistent with past
practice, not make any Material capital expenditure;
(e) other than in connection with the WEAU Agreement, not take any action,
or omit to take any action, that would cause the representations and warranties
contained in Article II hereof to be incorrect or incomplete in any Material
respect;
(f) promptly notify Purchaser in writing of any Material Adverse Change
with respect to the Company, the Business or any of the Subsidiaries, or any
condition or event which threatens to result in a Material Adverse Change with
respect to the Company, the Business or any of the Subsidiaries;
(g) notwithstanding the $1,000,000 threshold contained in the definition
of Material Adverse Change in Article IX, use all reasonable efforts to promptly
remedy any adverse change, condition or event that causes or is reasonably
likely to cause any of the Stations to be or go off the air; and
(h) not make any agreement or commitment which will result in or cause to
occur a Default of any of the items contained in paragraphs (a) through (g)
above.
Notwithstanding any of the foregoing provisions of this Section 4.01, prior to
the Closing, control of the operation of the Stations shall remain exclusively
with the Company, any of the Subsidiaries and the Stockholders.
4.02 RIGHT OF INSPECTION; ACCESS. In order to allow Purchaser to conduct its
due diligence investigation, including, without limitation, environmental due
diligence, the Company shall give to Purchaser and its designees, during normal
working hours, full and free access to all of its and each of the Subsidiaries'
respective assets, Contracts, reports and other records and shall furnish to
Purchaser and its designees all additional financial, legal and other
information with respect to the Company, any of the Subsidiaries, their
respective assets and the Business that Purchaser may reasonably request. The
Company shall also allow and arrange for Purchaser and its designees free and
full access and opportunity, during normal business hours, to consult and meet
with the officers, directors, employees, attorneys, accountants and other agents
of the Company and each of the Subsidiaries. The Company shall instruct such
individuals to cooperate fully with Purchaser and its designees. Purchaser and
its designees shall have the right to make copies of any of the records referred
to above. In addition to the foregoing, the Company and the Stockholders shall
provide to Purchaser such evidence as Purchaser reasonably requires to verify
the accuracy of the representation and warranty contained in paragraph (m) of
Section 2.10. Within thirty (30) days after the date of this Agreement, the
Stockholders shall provide to Purchaser a letter from Arthur Andersen in form
and substance reasonably satisfactory to Purchaser and its counsel that verifies
that since
-23-
<PAGE>
April 20, 1995 there has not been an ownership change (within the meaning of
Section 382 of the Code) with respect to the Company. Further, at Closing, the
Stockholders shall provide to Purchaser an updated letter from Arthur Andersen
bringing current to the Closing Date the letter provided pursuant to the
foregoing sentence. Purchaser agrees to indemnify against and hold the Company,
the Subsidiaries and the Stockholders harmless from any claim for Liability,
costs, expenses (including reasonable attorneys' fees actually incurred),
damages or injuries arising out of or resulting from the inspection of the
Company by Purchaser or its agents.
4.03 OTHER OFFERS AND EXCLUSIVE DEALING. Unless and until this Agreement is
terminated prior to Closing pursuant to Section 8.01 and other than in
connecetion with the WEAU Agreement, the Company and each of the Stockholders
shall, and shall cause each of the Subsidiaries to, deal exclusively with
Purchaser with respect to the sale of the Stock or any assets or properties of
the Company or any of the Subsidiaries. In addition, unless and until this
Agreement is terminated prior to Closing pursuant to Section 8.01 and other than
in connection with the WEAU Agreement, neither the Company nor any of the
Stockholders, acting in any capacity, shall, and the Company and the
Stockholders shall direct each of the Subsidiaries and the officers, directors,
limited partners, general partners (as applicable), financial advisors,
accountants and counsel of the Company, any of the Subsidiaries and the
Stockholders not to, either directly or indirectly, through the Company, any of
the Subsidiaries, any officer, director, employee, agent or otherwise, (a)
solicit, initiate or encourage submission of proposals or offers from any Person
relating to any purchase of the Stock, or any merger, sale of substantial
assets, or purchase of securities or similar transaction involving the Company
or any of the Subsidiaries, (b) participate in any discussions or negotiations
regarding, or, except as required by a legal or judicial process, furnish to any
other Person any information with respect to, or otherwise cooperate in any way
with, or assist or participate in, facilitate or encourage, any effort or
attempt by any other Person to purchase the assets of the Company or any of the
Subsidiaries, or engage in a merger, purchase of substantial assets or purchase
of stock or similar transaction involving the Company or any of the
Subsidiaries, or (c) approve or undertake any such transaction. If,
notwithstanding the foregoing, the Company, the Stockholders or any of their
respective shareholders, directors, partners, officers, employees or agents
shall receive any written proposal or inquiry regarding any such transaction,
the Company and the Stockholders shall, and shall cause any of the Subsidiaries
to, promptly communicate to Purchaser the terms of any such proposal or offer
upon Knowledge or receipt of such written proposal or offer.
4.04 CONFIDENTIALITY. For a period of one (1) year from and after the date
hereof and other than in connection with the WEAU Agreement, each of Purchaser,
the Company and the Stockholders agrees that it will not, and will use
reasonable efforts to ensure that none of its representatives or Affiliates
will, use in the conduct of its business (except as contemplated by this
Agreement), or disclose to or file with any other Person (other than financing
sources, financial advisors, accountants and attorneys for the foregoing who
will be informed of the confidential nature of such information and who have a
need to know such information), (a) any confidential or non-public information
relating to the other parties to this Agreement or (b) the existence of this
Agreement or the fact of the transactions contemplated hereby, except (i) for a
disclosure that is required by Law or by a Governmental Authority or is
reasonably believed to be so required, including, without limitation,
disclosures to the FCC and the Department of Justice for purposes of obtaining
consents to the transactions contemplated hereby and disclosures to the
Securities and Exchange Commission and related public disclosures (in connection
with public offerings or otherwise); (ii) information that is ascertainable or
obtained from public or published information; (iii) information received from a
Third Party not known to the disclosing party to be under an obligation to keep
such information confidential; (iv) information independently developed by the
disclosing party; or (v) information disclosed to or filed with any Persons
necessary to obtaining the consents or the equity and debt financing relating to
the transactions contemplated by this Agreement. Notwithstanding the foregoing,
(i)
-24-
<PAGE>
neither Purchaser nor its assignees, in the course of any investigation it shall
deem necessary and desirable in connection with the transactions contemplated by
this Agreement, shall be prohibited from discussing the Company, any of the
Subsidiaries, their respective assets and the Business with others having
business dealings with the Company or any of the Subsidiaries, and (ii) the
foregoing provisions of this Section 4.04 shall not apply to Purchaser or any of
its representatives or Affiliates after consummation of the transactions
contemplated hereby at the Closing with respect to information relating to the
Company or its Subsidiaries. If the transaction contemplated by this Agreement
is not consummated, each party will return or destroy as much of such written
information as the party furnishing such information may reasonably request.
4.05 CONSENTS AND APPROVALS. The Company and the Stockholders shall obtain
the waiver, consent and approval of all Persons whose waiver, consent or
approval (i) is required in order to consummate the transactions contemplated by
this Agreement, or (ii) is required by any Material Contract, Order, Law or
License to which the Company, any of the Subsidiaries or any of the Stockholders
is a party or subject on the Closing Date, and Purchaser shall cooperate with
the Company and the Stockholders in connection therewith. All written waivers,
consents and approvals obtained by the Company and the Stockholders shall be
produced at Closing in form and content reasonably satisfactory to Purchaser.
4.06 SUPPLYING OF FINANCIAL STATEMENTS. The Stockholders shall cause the
Company and each of the Subsidiaries to deliver to Purchaser within twenty (20)
days following the end of each month true and complete copies of all unaudited
monthly financial statements of the Company and each of the Subsidiaries for
each calendar month ending subsequent to the date hereof and prior to the
Closing Date in the format historically utilized internally by the Company and
each of the Subsidiaries. In addition, the Stockholders shall cause the Company
and each of the Subsidiaries to deliver to Purchaser as soon as practicable
consolidated audited financial statements as of December 28, 1997 and for the
year then ended.
4.07 QUALIFICATION AND CORPORATE EXISTENCE. The Company shall deliver to
Purchaser (i) certificates of the Secretary of State of the State of Delaware,
dated within ten (10) days prior to the Closing Date, stating that the Company
and each of the Subsidiaries are corporations in good standing under the laws of
the State of Delaware, and have paid all applicable franchise and other fees and
Taxes due to such state and (ii) certificates of the appropriate officials of
the states and foreign jurisdictions listed on Schedule 2.03, each dated not
more than ten (10) days prior to the Closing Date, stating that each of the
Company and each of the Subsidiaries is duly qualified and in good standing to
transact business as a foreign corporation as stated in Section 2.03 in each
such state and foreign jurisdiction and has paid all applicable franchise and
other fees and Taxes due to each such state and foreign jurisdiction.
4.08 PUBLIC ANNOUNCEMENTS. Upon execution of this Agreement, Purchaser and
the Company shall each issue a press release and public announcement regarding
this Agreement and the transactions contemplated hereby, each of which press
releases shall be reasonably satisfactory to the other party. Except as
permitted by the foregoing sentence or Section 4.04, none of Purchaser, the
Company, or the Stockholders, nor any of their representatives or Affiliates,
shall make any public announcement with respect to this Agreement or the
transactions contemplated hereby without the prior consent of the other parties
hereto unless required by Law or judicial process, in which case notification
shall be given to the other parties hereto prior to such disclosure.
4.09 CLOSING CONDITIONS. Subject to the terms and conditions herein provided,
each of the parties hereto agrees to take, or cause to be taken, all
commercially reasonable actions to consummate the transactions contemplated by
this Agreement and to satisfy the conditions precedent to Closing set forth in
Article VI and Article VII of this Agreement.
-25-
<PAGE>
4.10 SUPPLEMENTS TO SCHEDULES. The Company and the Stockholders shall from
time to time after the date hereof, supplement or amend the Schedules referred
to in Article II with respect to any matter arising after the date hereof which,
if existing or occurring at the date hereof, would have been required to be set
forth or described in such Schedules. Purchaser may unilaterally extend the
Closing Date if necessary to allow Purchaser five (5) business days to review
such supplements to the Schedules prior to the Closing Date. If, in Purchaser's
reasonable determination, any such supplements to the Schedules reveal any
Material Adverse Change with respect to the Company, any of the Subsidiaries or
the Business, or any condition or event which threatens to result in a Material
Adverse Change with respect to the Company, any of the Subsidiaries or the
Business, Purchaser may, subject to the Stockholder's right to cure any such
Material Adverse Change or reduce the Purchase Price in the manner contemplated
herein, terminate this Agreement pursuant to Section 8.01.
4.11 CERTAIN TAX MATTERS.
(a) Purchaser, on the one hand, and the Company and the Stockholders, on
the other hand, shall provide the other parties to this Agreement, at the
expense of the requesting party, with such assistance as may reasonably be
requested by any of them in connection with the preparation of any Tax Return,
any audit or other examination by any Governmental Authority, or any judicial or
administrative proceedings relating to any Liability for Taxes, and each will
retain and provide the requesting party with any records or information that may
be relevant to any of the foregoing.
(b) The Stockholders shall cause the Company to prepare and file on or
before the due date therefor (including any extensions thereof) all Tax Returns
and amendments thereto required to be filed by the Company on or before the
Closing Date, and shall cause the Company to pay, or cause to be paid, all Taxes
(including estimated taxes) due on such Tax Return or which are otherwise
required to be paid at any time prior to or during such period. Such Tax Returns
shall be prepared in accordance with the most recent Tax practices as to
elections and accounting method. Purchaser shall have a reasonable opportunity
to review all Material Tax Returns and amendments thereto prior to their filing.
(c) The Stockholders shall not, without the prior written consent of
Purchaser, file or cause to be filed, any amended Tax Return or claim for Tax
Refund with respect to the Company or any Subsidiary for any period ending on or
before the Closing Date, to the extent that any such filing may affect the Tax
Liability of Purchaser, any of its Affiliates, the Company or any Subsidiary for
any period ending after the Closing Date (including, but not limited to, the
imposition of 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).
(d) To the extent the Company, any of the Subsidiaries or any of the
Stockholders have Knowledge of the commencement or scheduling of any Tax audit,
the assessment of any Tax, the issuance of any notice of Tax due or any bill for
collection of any Tax, or the commencement or scheduling of any other
administrative or judicial proceeding with respect to the determination,
assessment or collection of any Tax of the Company or any of the Subsidiaries,
the Company, the Subsidiaries or the Stockholders shall provide prompt notice to
Purchaser of such matter, setting forth information (to the extent Known)
describing any asserted Tax Liability in reasonable detail and including copies
of any notice or other documentation received from the applicable Tax authority
with respect to such matter.
-26-
<PAGE>
(e) The Stockholders shall furnish Purchaser on or before the Closing Date
an affidavit, stating, under penalty of perjury, the transferor's United States
taxpayer identification number and that the transferor is not a foreign person,
pursuant to Section 1445(b)(2) of the Code.
(f) The Stockholders shall not agree to settle any Tax Liability or
compromise any claim with respect to Taxes which settlement or compromise may
affect the Liability for Taxes hereunder (or right to Tax benefit hereunder) of
the Company or Purchaser without Purchaser's prior written consent.
4.12 EXPENSES.
(a) Except as provided below, regardless of whether the transactions
contemplated by this Agreement are consummated, the Company shall be responsible
for all expenses and fees incurred by it and by the Stockholders in connection
with the transactions contemplated hereby and Purchaser shall be responsible for
all expenses and costs incurred by it in connection with the transactions
contemplated hereby.
(b) At the Closing the Stockholders shall pay out of the Purchase Price
all Taxes, if any, relating to the transfer of the Stock to Purchaser. The
Stockholders shall file all necessary documentation and Tax Returns required to
be filed by them with respect to such Taxes.
(c) The Company and Purchaser each shall pay one-half of the costs and
fees relating to the environmental report or reports required by Section 6.11.
(d) The Company and Purchaser shall each pay one-half of the initial
$45,000 filing fee associated with the pre-merger notifications and reports
required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
(e) The Company shall bear the costs and expenses associated with delivery
of the title documents described in Section 6.13.
(f) The Company and Purchaser shall each pay one-half of the processing
fees incident to the filing of the transfer of control applications with the
FCC; provided that none of the Company or any Stockholder shall have any
obligation to pay any such processing fees arising out of the transactions
contemplated by Section 4.16.
4.13 FURTHER ASSURANCES. At any time and from time to time after the Closing,
the Company and the Stockholders shall, at the request of Purchaser, take any
and all actions necessary to fulfill their respective obligations hereunder, to
put Purchaser in actual possession and control of the Stock and execute and
deliver such further instruments of conveyance, sale, transfer and assignment,
and take such other actions necessary or desirable to effectuate, record or
perfect the transfer of the Stock to Purchaser free and clear of all Liens, to
confirm the title of the Stock to Purchaser, to assist Purchaser in exercising
rights relating thereto, or to otherwise effectuate or consummate any of the
transactions contemplated hereby.
4.14 DELIVERY OF BOOKS AND RECORDS. The Company and the Stockholders shall
deliver to Purchaser at the Closing all original documents, books and records
pertaining to the Company, the Business and the Stock, including without
limitation, the original minute books and stock record books. The Company and
the Stockholders may retain copies of any of the foregoing for their own use.
Without
-27-
<PAGE>
limiting the generality of the foregoing, the Company and the Stockholders shall
deliver to Purchaser at the Closing all documents and records relating to the
Intellectual Property, including without limitation, Certificates of
Registration for all letters patent, trademarks and service marks listed on
Schedule 2.14 and all such documents relating thereto.
4.15 FCC MATTERS.
(a) If not previously filed, then as promptly as practical following the
date of this Agreement, the Company and Purchaser or its assignees shall prepare
and file, and the Company shall cause each of the Subsidiaries as may be
required or necessary to prepare and file, with the FCC all necessary
applications for approval of the transactions contemplated in this Agreement. In
connection therewith, Purchaser or its assignees shall provide the information
requested by the FCC and take actions reasonably necessary to enable the FCC to
grant the applications including, but not limited to, authority for KGIN-TV to
operate as a satellite of KOLN-TV within the time periods contemplated by this
Agreement.
(b) The Company, each of the Stockholders and Purchaser further covenant
that from the date hereof until the Closing Date, without the prior written
consent of the Company or Purchaser, as the case may be, neither the Company nor
Purchaser shall take any action, and neither the Company nor any of the
Stockholders shall permit any of the Subsidiaries to take any action, that is
reasonably likely to adversely affect, or delay or interfere with, obtaining the
FCC Order or complying with or satisfying the terms thereof, including without
limitation, acquiring any new or increased attributable interest, as defined in
the FCC rules, in any media property, which property could not be held (without
the need for a waiver) in common control by the Company, any of the Subsidiaries
and Purchaser following the Closing Date.
4.16 COOPERATION TO EFFECT STATION EXCHANGE. Each of the Stockholders and the
Company shall use reasonable efforts to cooperate with Purchaser to effect a
tax-free, like-kind exchange of Purchaser's Albany station with a designated
purchaser of one or more of the Stations, provided that such exchange shall not
be likely to cause the Closing to occur subsequent to September 1, 1998.
Purchaser will bear all costs and expenses resulting from or arising out of any
such like-kind exchange. In addition, the identification of such purchaser, the
closing of such transaction or the execution of documents relating thereto shall
not be a condition to the Closing.
4.17 NAME CHANGE. Immediately following the Closing, Purchaser shall cause
the Company to take all action necessary to change its name to delete any
references to "Busse" therein.
4.18 SEVERANCE AND INCENTIVE PAYMENTS. The parties intend that either (i)
prior to the Closing, the Company will make payments to certain of its employees
or former employees pursuant to the Company's obligations to make severance or
incentive payments as a result of the transactions contemplated by this
Agreement and the WEAU Agreement, which payments include payments required under
the Company's Long Term Incentive Plan, the Company's Incentive Fee Plan, the
Amended and Restated Employment Agreement with Lawrence A. Busse and the Amended
and Restated Employment Agreement with James C. Ryan or (ii) the amount of such
obligations will be a reduction in the Purchase Price pursuant to Section 1.02.
Further, the Company and the Stockholders shall provide Purchaser with such
evidence as it shall reasonably require to verify that such payments were made
prior to the Closing or to verify the amount of such obligations for purposes of
calculating the Purchase Price.
4.19 HSR FILINGS. Purchaser, the Company and the Stockholders shall, as
promptly as practicable following the execution of this Agreement, and in
cooperation with each other, file with the
-28-
<PAGE>
Department of Justice and the Federal Trade Commission the premerger
notification forms and any other documents required under the HSR Act, and each
shall use its best efforts to obtain earliest termination of all waiting periods
under the HSR Act.
4.20 FURTHER ACTIONS. Subject to the terms and conditions of this Agreement,
the Stockholders, the Company and Purchaser each agrees to use all reasonable
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make effective
the transactions contemplated in this Agreement and to satisfy the conditions
hereto, in each case in as prompt a manner as is reasonably possible.
ARTICLE V
NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES
None of the representations or warranties made by the parties in this
Agreement and the Other Agreements shall survive the Closing hereunder.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction, on or before the Closing
Date, of each and every one of the following conditions, all or any of which may
be waived, in whole or in part, by Purchaser for purposes of consummating such
transactions, but without prejudice to any other right or remedy which Purchaser
may have hereunder as a result of any misrepresentation by, or breach of any
agreement, covenant or warranty of the Company or the Stockholders contained in
this Agreement or any Other Agreement, provided that the entering into and
consummation of the transactions contemplated by the WEAU Agreement shall not be
deemed to affect the following:
6.01 REPRESENTATIONS TRUE AND COVENANTS PERFORMED AT CLOSING. The
representations and warranties made by the Company and each of the Stockholders
shall be correct and complete in all Material respects at the close of business
on the day before the Closing Date with the same force and effect as if such
representations and warranties had been made on and as of the close of business
on the day before the Closing Date. The Company and each of the Stockholders
shall have each duly performed and complied in all Material respects with all of
the agreements, covenants, acts and undertakings to be performed or complied
with by it in all Material respects on or prior to the Closing Date. The Company
and each of the Stockholders shall have delivered to Purchaser a certificate or
certificates dated as of the Closing Date certifying as to the fulfillment of
the conditions of this Section 6.01. Notwithstanding any other provision of this
Agreement to the contrary, for purposes of this Section 6.01, all Materiality
qualifications contained in the representations and warranties made by the
Company and each of the Stockholders shall be disregarded and given no effect.
6.02 INCUMBENCY CERTIFICATE. Purchaser shall have received an appropriate
incumbency certificate or certificates, dated the Closing Date, certifying the
incumbency of all officers of the Company and the partners and agents of each
Stockholder who have executed this Agreement and the Other Agreements. The
certificate or certificates shall contain specimens of the signatures of each of
the officers, agents and partners whose incumbency is certified and shall be
executed by officers of the Company and partners of each Stockholder other than
officers and partners, respectively, whose incumbency is certified.
-29-
<PAGE>
6.03 CERTIFIED COPIES OF RESOLUTIONS. Purchaser shall have received copies,
certified by the duly qualified and acting Secretary or Assistant Secretary of
the Company and each corporate general partner of any Stockholder, of
resolutions adopted by the Board of Directors of the Company and each such
corporate partner of any Stockholder approving this Agreement and the Other
Agreements and the consummation of the transactions contemplated hereby and
thereby.
6.04 OPINIONS OF COUNSEL. Purchaser shall have received (i) a written opinion
of Cadwalader, Wickersham & Taft, counsel to the Stockholders, dated the Closing
Date and substantially in the form of Exhibit 6.04(i) attached hereto and made a
part hereof by this reference, (ii) a written opinion of Winston & Strawn,
counsel to the Company and the Subsidiaries, dated the Closing Date and
substantially in form and substance reasonably satisfactory to Purchaser and its
counsel, and (iii) a written opinion of Pepper & Corazzini L.L.P., FCC counsel
to the Company and each of the Subsidiaries, dated the Closing Date and
substantially in the form of Exhibit 6.04(ii) attached hereto and made a part
hereof by this reference.
6.05 NO MATERIAL ADVERSE CHANGE. There shall not have occurred any Material
Adverse Change, or any condition or event that is reasonably likely to cause a
Material Adverse Change, with respect to the Business, the Company, or any of
the Subsidiaries, taken as a whole, or any of their respective assets from the
Balance Sheet Date. The Company and each of the Stockholders shall have
delivered to Purchaser a certificate or certificates dated as of the Closing
Date executed by the Company and each of the Stockholders certifying the
foregoing statement.
6.06 NO INJUNCTION, ETC. No Litigation, Law, Order or legislation shall have
been instituted, threatened or proposed by a Third Party before any court or
Governmental Authority to enjoin, restrain, prohibit or obtain damages in
respect of this Agreement or the consummation of the transactions contemplated
hereby, if such Litigation, Law, Order or legislation, in the reasonable
judgment of Purchaser, would make it inadvisable to consummate the transactions
contemplated hereby.
6.07 RESIGNATIONS. Purchaser shall have received a written instrument signed
by each of the directors and officers of the Company and each of the
Subsidiaries resigning from the Board of Directors and as corporate officers of
the Company and each of the Subsidiaries, as the case may be, effective the
Closing Date.
6.08 APPROVAL OF LEGAL MATTERS. All actions, proceedings, instruments and
documents reasonably deemed necessary or appropriate by Purchaser or its
attorneys to effectuate this Agreement and to consummate the transactions
contemplated hereby shall have been approved by such attorneys in the exercise
of their reasonable discretion.
6.09 FCC APPROVALS. The FCC shall have given all requisite approvals and
consents, without any condition or qualification Materially adverse to Purchaser
or its assignee, the Company or any of the Subsidiaries or Materially adverse to
the operations of the Business, to the acquisition of control of the Company or
any of the Subsidiaries by Purchaser as provided in this Agreement (whether or
not any appeal or request for reconsideration or review is pending or the time
for filing any appeal or request for reconsideration or review, or for any sua
sponte action by the FCC with similar effect has expired), including without
limitation, any Materially Adverse Condition on Purchaser's acquisition or
operation of any of the Stations. In addition, the FCC shall have granted the
renewal of the FCC Licenses of each Station for a full eight (8) year term from
the date of the expiration of the most recent License term.
-30-
<PAGE>
6.10 HART-SCOTT APPROVAL. All waiting periods applicable to this Agreement
and the transactions contemplated hereby under the Hart-Scott Act shall have
expired or been terminated.
6.11 ENVIRONMENTAL REPORT. Prior to the Closing, the Company shall (i)
provide to Purchaser a letter from the Nebraska Department of Environmental
Quality ("DEQ") stating that no further investigation or remediation will be
required by DEQ related to the two fuel oil underground storage tanks formerly
located at KOLN-TV, Lincoln, Nebraska and noted in Section 4.7 of the
Environmental Report related to KOLN-TV (the "Former USTs"), or (ii) cause, at
its sole cost and expense, Montgomery Watson or such other environmental
consultant as shall be reasonably acceptable to Purchaser (the "Environmental
Consultant") to perform an investigation, consistent with applicable state
regulations (the "Investigation"), of the area surrounding the Former USTs to
determine if contamination from the Former USTs is present. In the event
actionable levels of contamination related to the Former USTs are detected by
such Investigation, the Stockholders may, at their sole discretion, elect to
cause the Company to remediate the identified contamination in compliance with
applicable state regulations (the "Remedial Action"). In the event the
Stockholders do not make such election or the Remedial Action is not completed
on or prior to the Closing Date, then the Purchase Price shall be reduced by the
amount determined by the Environmental Consultant to be reasonably necessary to
complete the Remedial Action. The Company shall keep the Purchaser reasonably
apprised of the status of any Investigation or Remedial Action by providing the
Purchaser with Material documents and information relating to the performance of
the Investigation and Remedial Action.
Prior to the Closing, the Company shall further cause Montgomery Watson or
the Environmental Consultant to visually observe the towers located in Beaver
Crossing and Heartwell, Nebraska and provide a letter report summarizing such
observations to Purchaser and the Company. The Environmental Consultant's costs
to conduct such visual observations shall be paid equally by the Stockholders
and Purchaser. Such letter report shall state that no condition exists with
respect to the assets currently owned, leased, operated, or controlled by the
Company or any of the Subsidiaries that has resulted in, or would reasonably be
expected to result in, any violation of an Environmental Law, any Environmental
Claim, or in any Liability relating to an Environmental Matter. Such report
shall include an estimate of the total cost of remedying any such condition
reported therein. In the event such letter report indicates that such a
condition exists, the Stockholders shall remedy such condition to Purchaser's
reasonable satisfaction within ninety (90) days after the date of the
Stockholders' receipt of the final draft of the letter report. If such condition
cannot be remedied to Purchaser's reasonable satisfaction within ninety (90)
days, the Purchase Price shall be reduced by the amount determined by Montgomery
Watson or the Environmental Consultant to be reasonably necessary to remedy such
condition.
6.12 SALES AND USE TAXES. The Company shall have used its reasonable best
efforts to obtain and deliver to Purchaser an updated certificate or
certificates from the Michigan, Nebraska and Wisconsin Departments of Revenue
(or similar Taxing authorities) and from any other state and foreign Tax
authority listed on Schedule 2.03 stating that no sales or use Taxes are due
relating to the Business or the assets or operations of the Company or any of
the Subsidiaries prior to Closing.
6.13 TITLE DOCUMENTS. Purchaser shall have received an owner's title
insurance policy (or an endorsement to an existing owner's title insurance
policy) for each parcel of the Owned Real Property bringing forward the
effective date of the policy to the Closing Date subject to no additional Liens
other than Permitted Liens and reflecting no change in ownership of the Owned
Real Property. With respect to each parcel of Leased Real Property in which the
Company or its Subsidiaries is the lessee, except for the Kalamazoo, Michigan
leased property, Purchaser shall have received a leasehold insurance policy
insuring the Company or its Subsidiary, as the case may be, subject to no Liens
other than Permitted
-31-
<PAGE>
Liens and a current updated and revised ALTA survey. Each of the title insurance
policies described in this Section 6.13 shall contain zoning endorsements in
form and substance reasonably satisfactory to Purchaser and shall be paid
equally by the Stockholders and Purchaser. The title insurance commitment for
the owner's title insurance policy for the Owned Real Property in Eau Claire
County, Wisconsin will be endorsed to remove exception No. 21 relating to a
mortgage held by Chemical Bank so that the policy when issued will contain no
special exception for the mortgage held by Chemical Bank, but will reference the
estate, right, title and interest of Americus (successor to Sage Broadcasting)
and all parties claiming by, through or under Americus.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND STOCKHOLDERS
The obligations of the Company and the Stockholders to consummate the
transactions contemplated by this Agreement shall be subject to the
satisfaction, on or before the Closing Date, of each and every one of the
following conditions, all or any of which may be waived, in whole or in part, by
the Company and the Stockholders for purposes of consummating such transactions,
but without prejudice to any other right or remedy which the Company and the
Stockholders may have hereunder as a result of any misrepresentation by, or
breach of any agreement, covenant or warranty of Purchaser contained in this
Agreement or any Other Agreement:
7.01 REPRESENTATIONS TRUE AND COVENANTS PERFORMED AT CLOSING. The
representations and warranties made by Purchaser shall be correct and complete
in all Material respects on the Closing Date with the same force and effect as
if such representations and warranties had been made on and as of the Closing
Date. Purchaser shall have duly performed and complied with all of the
agreements, covenants, acts and undertakings to be performed or complied with by
it on or prior to the Closing Date. Purchaser shall have delivered to the
Company and the Stockholders a certificate dated as of the Closing Date
certifying as to the fulfillment of the conditions of this Section 7.01.
Notwithstanding any other provision of this Agreement to the contrary, for
purposes of this Section 7.01, all Materiality qualifications contained in the
representations and warranties made by Purchaser shall be disregarded and given
no effect.
7.02 INCUMBENCY CERTIFICATE. The Company and the Stockholders shall have
received an incumbency certificate or certificates dated the Closing Date
certifying the incumbency of all officers of Purchaser who have executed this
Agreement or documents in connection with this Agreement. The certificate or
certificates shall contain specimens of the signatures of each of the officers
whose incumbency is certified and shall be executed by an officer of Purchaser
other than an officer whose incumbency is certified.
7.03 CERTIFIED COPIES OF RESOLUTIONS. The Company and the Stockholders shall
have received copies, duly certified by the duly qualified and acting Secretary
or Assistant Secretary of Purchaser of resolutions adopted by the Board of
Directors of Purchaser approving this Agreement and the consummation of the
transactions contemplated herein.
7.04 NO INJUNCTION, ETC. No Litigation, Law, Order or legislation shall have
been instituted, threatened or proposed by a Third Party before any court or
Governmental Authority to enjoin, restrain, prohibit or obtain damages in
respect of this Agreement or the consummation of the transactions contemplated
hereby, if such Litigation, Law, Order or legislation, in the reasonable
judgment of Purchaser, would make it inadvisable to consummate the transactions
contemplated hereby.
-32-
<PAGE>
7.05 HART-SCOTT ACT APPROVAL. All waiting periods applicable to this
Agreement and the transactions contemplated hereby under the Hart-Scott Act
shall have expired or been terminated.
7.06 APPROVAL OF LEGAL MATTERS. All actions, proceedings, instruments and
documents reasonably deemed necessary or appropriate by the Stockholders or
their attorneys to effectuate this Agreement and to consummate the transactions
contemplated hereby shall have been approved by such attorneys in the exercise
of their reasonable discretion.
7.07 FCC APPROVALS. The FCC shall have given all requisite approvals and
consents, without any condition or qualification Materially adverse to Purchaser
or its assignee, the Company or any of the Subsidiaries or Materially adverse to
the operations of the Business, to the acquisition of control of the Company or
any of the Subsidiaries by Purchaser as provided in this Agreement (whether or
not any appeal or request for reconsideration or review is pending or the time
for filing any appeal or request for reconsideration or review, or for any sua
sponte action by the FCC with similar effect has expired), including without
limitation, any Materially Adverse Condition on Purchaser's acquisition or
operation of any of the Stations. In addition, the FCC shall have granted the
renewal of the FCC Licenses of each Station for a full eight (8) year term from
the date of the expiration of the most recent License term.
7.08 OPINIONS OF COUNSEL. The Stockholders shall have received a written opinion
of either Heyman & Sizemore or Alston & Bird, LLP, counsel to Purchaser, dated
the Closing Date and in form and substance reasonably satisfactory to the
Stockholders and their counsel.
ARTICLE VIII
TERMINATION
8.01 CAUSES FOR TERMINATION. This Agreement and the transactions contemplated
by this Agreement may be terminated at any time prior to the Closing Date: (i)
by the mutual consent of the Stockholders and Purchaser; (ii) by Purchaser in
the event the conditions set forth in Article VI of this Agreement shall not
have been satisfied or waived by September 1, 1998; (iii) by the Stockholders in
the event that the conditions set forth in Article VII of this Agreement shall
not have been satisfied or waived by September 1, 1998; (iv) by Purchaser
pursuant to Sections 4.10 or 6.11; or (v) by Purchaser or the Stockholders at
any time if Purchaser determines in good faith that any Material Adverse Change,
or any condition or event that is reasonably likely to cause a Material Adverse
Change, with respect to the Company, any of the Subsidiaries, their respective
assets or the Business shall have occurred or been discovered since the Balance
Sheet Date.
8.02 NOTICE OF TERMINATION. Notice of termination of this Agreement as
provided for in this Article VIII shall be given by the party so terminating to
the other parties hereto in accordance with the provisions of Section 10.01.
8.03 EFFECT OF TERMINATION.
(a) In the event of a termination of this Agreement pursuant to Section
8.01 hereof, except for the confidentiality provisions of Section 4.04, which
shall remain in full force and effect, this Agreement shall become void and of
no further force and effect, and each party shall pay the costs and expenses
incurred by it in connection with this Agreement, and no party (or any of its
agents, counsel, representatives, Affiliates or assigns) shall be liable to any
other party for any Loss hereunder. Notwithstanding the foregoing sentence, if
the non-occurrence of Closing is the direct or indirect result of
-33-
<PAGE>
the Material Default by any of the Stockholders or the Company of any of their
or its respective obligations hereunder, including without limitation, any
Material inaccuracy in any representation or warranty made by such party, and
Purchaser has not Materially Defaulted on any of its obligations hereunder, such
Defaulting parties shall be fully liable to Purchaser for any such Default; and
if the non-occurrence of Closing is the direct or indirect result of the
Material Default by Purchaser of any of its obligations hereunder, and neither
the Company nor any of the Stockholders has Materially Defaulted on any of its
respective obligations hereunder, the LC shall be paid to the Stockholders as
liquidated damages to compensate the Stockholders and the Company for the
damages resulting to such parties from such Default. The parties agree that
actual damages pursuant to a breach of this Agreement prior to the Closing would
be impossible to measure. Receipt of the LC shall be the sole and exclusive
remedy that the Stockholders and the Company shall have in the event of such
Default and shall constitute a waiver of any and all other legal or equitable
rights or remedies that any of the Stockholders or the Company may otherwise
have as a result of Purchaser's Default, and that in consideration for the
receipt of the LC as liquidated damages, neither the Company nor any of the
Stockholders may obtain any further legal or equitable relief, including
specific performance, to which it may otherwise have been entitled and Purchaser
shall have no further Liability to the Company or any of the Stockholders as a
result of such Default or the non-occurrence of Closing.
(b) If the Closing does not occur due to the nonfulfillment of any of the
conditions in Article VI or for any other reason except Purchaser's Material
Default in the performance of any of its obligations under this Agreement,
neither the Company nor any of the Stockholders shall be entitled to the LC and,
promptly after the termination of this Agreement, the LC shall be returned to
Purchaser. In addition, the Company and each of the Stockholders acknowledge
that Purchaser, at its option (to be exercised in its sole and absolute
discretion), may elect to have the Agreement specifically performed by the
Company and the Stockholders in addition to receipt of the LC. The Company and
the Stockholders further acknowledge that any breach of this Agreement by either
the Company or any of the Stockholders will cause irreparable damage and injury
to Purchaser and that Purchaser will be entitled to injunctive relief in any
court of competent jurisdiction without the necessity of posting any bond.
(c) It is agreed that time is of the essence in the performance and
satisfaction of this Agreement and each of the conditions specified in Articles
VI and VII of this Agreement are Material for purposes of this Agreement.
8.04 RISK OF LOSS. The Stockholders assume all risk of condemnation,
destruction or Loss to the Company or any of the Subsidiaries due to fire or
other casualty from the date of this Agreement until the Closing.
ARTICLE IX
DEFINITIONS
The following terms (in their singular and plural forms as appropriate) as
used in this Agreement shall have the meanings set forth below unless the
context requires otherwise:
"ACCOUNTS RECEIVABLE" means, as of any applicable date, all accounts
receivable, notes receivable, and other monies due to the Company or any of the
Subsidiaries for sales and deliveries of goods, performance of services and
other business transactions (whether or not on the books of the Company or any
of the Subsidiaries).
-34-
<PAGE>
"AFFILIATE" of a Person means: (i) any Person directly, or indirectly through
one or more intermediaries, controlling, controlled by or under common control
with such Person; (ii) any officer, director, partner, employee, agent, or
representative or direct or indirect beneficial or legal owner of any 10% or
greater equity or voting interest of such Person (other than the limited
partners of the Stockholders); (iii) any entity for which a Person described in
(ii) above acts in any such capacity.
"AGREEMENT" means this Amended and Restated Stock Purchase Agreement,
including the Exhibits and Schedules delivered pursuant hereto or referred to
herein, each of which is incorporated herein by reference.
"BALANCE SHEET" means initially, the consolidated balance sheet of the
Company and each of the Subsidiaries as of September 28, 1997 and included in
the Financial Statements and, subsequently, when delivered to Purchaser pursuant
to Section 4.06, the consolidated audited balance sheet of the Company and each
of the Subsidiaries as of December 28, 1997 and included in the Financial
Statements.
"BALANCE SHEET DATE" means the date of the most recent Balance Sheet.
"BOARD OF DIRECTORS" means the Board of Directors of a Person that is a
corporation.
"BUSINESS" means the Company's business conducted through the Subsidiaries,
of owning and operating (i) the television station KOLN/TV, serving Lincoln,
Nebraska, (ii) the television station KGIN-TV, serving Grand Island, Nebraska
and (iii) the television station WEAU-TV serving Eau Claire and LaCrosse,
Wisconsin.
"BUSINESS DAY" means a day other than a Saturday, a Sunday, a day on which
banking institutions in the State of Georgia are authorized or obligated by law
or required by executive order to be closed, or a day on which the New York
Stock Exchange is closed.
"CERTIFICATE OF INCORPORATION" means the certificate of incorporation of a
Person that is a corporation.
"CLOSING" means the consummation of the transactions contemplated by this
Agreement.
"CLOSING DATE" means the fifth business day after issuance of the FCC Order
as set forth in Section 4.15 and the satisfaction (or waiver) of all of the
conditions set forth in Articles VI and VII, or such other date as the parties
may agree in writing; provided that the Closing Date may be extended to
September 1, 1998 by Purchaser as necessary to effectuate the tax-free like-kind
exchange described in Section 4.16; provided, further, that the provisions of
Section 4.16 shall continue to be in effect on the date of issuance of such FCC
Order.
"CODE" means the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder.
"COMMITMENTS" means the owner's title insurance policy commitments contained
in Schedule 2.11.
"COMMON STOCK" means the $.01 par value per share common stock of the
Company.
-35-
<PAGE>
"COMPUTER SOFTWARE" means all computer programs, materials, tapes, source and
object codes, and all prior and proposed versions, releases, modifications,
updates, upgrades and enhancements thereto, as well as all documentation and
listings related thereto used in the Business.
"CONTRACT" means any written or oral contract, agreement, understanding,
lease, usufruct, license, plan, instrument, commitment, restriction,
arrangement, obligation, undertaking, practice or authorization of any kind or
character or other document to which any Person is a party or that is binding on
any Person or its securities, assets or business.
"DATABASES" means databases in all forms, versions and media, together with
prior and proposed updates, modifications and enhancements thereto, as well as
all documentation and listings therefor used in the Business, other than
Licenses.
"DEFAULT" means (1) a breach of, default under, or misrepresentation in or
with respect to any Contract or License, (2) the occurrence of an event that
with the passage of time or the giving of notice or both would constitute a
breach of, default under, or misrepresentation in any Contract or License, or
(3) the occurrence of an event that with or without the passage of time or the
giving of notice or both would give rise to a right to terminate, change the
terms of or renegotiate any Contract or License or to accelerate, increase, or
impose any Liability under any Contract or License.
"EMPLOYEE BENEFIT PLAN" means collectively, each pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus or other incentive plan, any other written or
unwritten employee program, arrangement, agreement or understanding, whether
arrived at through collective bargaining or otherwise, any medical, vision,
dental or other health plan, any life insurance plan, or any other employee
benefit plan or fringe benefit plan, including, without limitation, any
"employee benefit plan," as that term is defined in Section 3(3) of ERISA
currently or previously adopted, maintained by, sponsored in whole or in part
by, or contributed to by the Company, any of the Subsidiaries or any other ERISA
Affiliate thereof or under which the Company, any of the Subsidiaries, any other
ERISA Affiliate thereof has any Liability for the benefit of employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries and under which employees, retirees, dependents, spouses,
directors, independent contractors or other beneficiaries are eligible to
participate. "Employee Benefit Plans" also means any plans, programs,
agreements, arrangements or understandings previously maintained by, sponsored
in whole or in part by, or contributed to by the Company, any of the
Subsidiaries, or any other ERISA Affiliate thereof that could result in a
Material Liability to the Company or any of the Subsidiaries, including but not
limited to, any plan covered by or subject to Title IV of ERISA. Employee
Benefit Plans include (but are not limited to) "employee benefit plans" as
defined in Section 3(3) of ERISA and any other plan, fund, policy, program,
practice, custom, understanding or arrangement providing compensation or other
benefits to any current or former officer or employee or director or independent
contractor of the Company, any of the Subsidiaries or any dependent or
beneficiary thereof, maintained by the Company or any of the Subsidiaries or
under which the Company or any of the Subsidiaries has any obligation or
Liability, whether or not they are or are intended to be (i) covered or
qualified under the Code, ERISA or any other applicable Law, (ii) written or
oral, (iii) funding or unfunded, (iv) actual or contingent, or (v) generally
available to any or all employees (or former employees) of the Company or any of
the Subsidiaries (or their beneficiaries or dependents), including, without
limitation, all incentive, bonus, deferred compensation, flexible spending
accounts, cafeteria plans, vacation, holiday, medical, disability, share
purchase or other similar plans, policies, programs, practices or arrangements.
-36-
<PAGE>
"ENVIRONMENTAL LAWS" means all Laws relating to pollution or protection of
the environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata), including, without limitation,
the Comprehensive Environmental Response Compensation and Liability Act, as
amended, 42 U.S.C. 9601 et seq. ("CERCLA"), the Resource Conservation and
Recovery Act, as amended, 42 U.S.C. 6901 et seq. ("RCRA"), and other Laws
relating to emissions, discharges, releases or threatened releases of any
Hazardous Substance, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of any
Hazardous Substance.
"ENVIRONMENTAL LITIGATION" means any Litigation against the Company, any of
the Subsidiaries, or the Business or the assets of the Company, or any of the
Subsidiaries (including, without limitation, written notice or other written
communication by any Person alleging potential Liability for investigatory
costs, cleanup costs, private or governmental response or remedial costs,
natural resources damages, property damages, personal injuries, or penalties)
arising out of, based upon, or resulting from (i) any Environmental Matter or
(ii) any circumstances or state of facts forming the basis of any Liability or
alleged Liability under, or violation or alleged violation of, any Environmental
Law.
"ENVIRONMENTAL MATTER" means any matter or circumstances related in any
manner whatsoever to (i) the emission, discharge, disposal, release or
threatened release of any Hazardous Substance into the environment, or (ii) the
transportation, treatment, storage, recycling or other handling of any Hazardous
Substance or (iii) the placement of structures or materials into waters of the
United States, by, in each case, the Company, any of the Subsidiaries or any of
their respective predecessors or (iv) the presence of any Hazardous Substance,
including, but not limited to, asbestos, in any building, structure or workplace
or on any of the Real Property.
"ENVIRONMENTAL REPORT" means collectively, the three independent Phase I
environmental site assessment reports of the Company's and its Subsidiaries'
properties and operations prepared for the Company and Purchaser by Montgomery
Watson, each dated February, 1998.
"ERISA" means Employee Retirement Income Security Act of 1974, as amended.
"ERISA PLAN" means any Employee Benefit Plan which is an "employee pension
benefit plan," as that term is defined in Section 3(2) of ERISA, or an "employee
welfare benefit plan" as that term is defined in Section 3(1) of ERISA.
"FCC" means the Federal Communications Commission.
"FINANCIAL STATEMENTS" means (i) the consolidated audited balance sheets of
the Company and each of the Subsidiaries as of December 29, 1996 and December
31, 1995 and, when delivered to Purchaser pursuant to Section 4.06, December 28,
1997 and the related statements of income and cash flows for the periods then
ended and (ii) the consolidated unaudited balance sheets of the Company and each
of the Subsidiaries as of the end of each fiscal quarter from December 30, 1996
through December 28, 1997 and the related statements of income for the months
then ended, and (iii) the monthly financial statements provided to Purchaser
pursuant to Section 4.06.
"GAAP" means generally accepted accounting principles as in effect in the
United States consistently applied.
-37-
<PAGE>
"GOVERNMENTAL AUTHORITY" means any federal, state, county, local, foreign or
other governmental or public agency, instrumentality, commission, authority,
board or body.
"HART-SCOTT ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, 15 U.S.C.A. ss. 18(a), as amended, and all Laws promulgated thereunder.
"HAZARDOUS SUBSTANCE" means (i) any hazardous substance, hazardous material,
hazardous waste pollutants, contaminants, or toxic substance (as those terms are
defined by any applicable Environmental Laws) and (ii) any petroleum, petroleum
products, or oil.
"IMPROVEMENTS" means all buildings, structures, fixtures and other
improvements included in the Real Property.
"INTELLECTUAL PROPERTY" means, with the exception of the Option Property, (i)
patents and pending patent applications together with any and all continuations,
divisions, reissues, extensions and renewals thereof, (ii) trade secrets,
know-how, inventions, formulae and processes, whether trade secrets or not,
(iii) trade names, trademarks, service marks, logos, assumed names, brand names
and all registrations and applications therefor together with the goodwill of
the business symbolized thereby, (iv) copyrights and any registrations and
applications therefor, (v) technology rights and licenses, and (vi) Computer
Software and all other intellectual property owned by, registered in the name
of, or used in the business of a Person or in which a Person or its business has
any interest.
"INVENTORY" means all inventories of raw materials, supplies, products,
advertising materials, and other inventories.
"IRS" means the Internal Revenue Service of the United States of America.
"KNOWLEDGE" or "KNOWN" with respect to the Company, any of the Subsidiaries
or any of the Stockholders, means collectively those facts that any of the
Company, any of the Subsidiaries, any of its officers and employees listed on
Exhibit IX hereto or Alfred C. Eckert, III, after due inquiry, knew or
reasonably should have known.
"LAW" means any code, law, order, ordinance, regulation, rule, or statute of
any Governmental Authority.
"LEASED PERSONAL PROPERTY" means all Personal Property that is not owned by
the Company or any of the Subsidiaries that the Company or any of the
Subsidiaries either uses or has the right to use.
"LEASED REAL PROPERTY" means all Real Property that is not owned in fee
simple by the Company or any of the Subsidiaries that the Company or any of the
Subsidiaries either occupies or uses or has the right to occupy or use.
"LIABILITY" means any direct or indirect, primary or secondary, liability,
indebtedness, obligation, penalty, expense (including, without limitation, costs
of investigation, collection and defense), claim, deficiency, guaranty or
endorsement of or by any Person (other than endorsements of notes, bills and
checks presented to banks for collection or deposit in the ordinary course of
business) of any type, whether accrued, absolute, contingent, liquidated,
unliquidated, matured, unmatured or otherwise.
-38-
<PAGE>
"LICENSE" means any license, franchise, notice, permit, easement, right,
certificate, authorization, approval or filing with any Governmental Authority
or court to which any Person is a party or that is or may be binding on any
Person or its securities, property or business.
"LIEN" means any mortgage, lien, security interest, pledge, hypothecation,
encumbrance, restriction, reservation, encroachment, infringement, easement,
conditional sale agreement, title retention, lease, right of occupancy or other
security arrangement, defect of title, adverse right or interest, charge or
claim of any nature whatsoever of, on, or with respect to any property or
property interest.
"LITIGATION" means any action, administrative or other proceeding,
arbitration, cause of action, claim, complaint, criminal prosecution, inquiry,
hearing, investigation (governmental or otherwise), litigation, notice (written
or oral) before any Governmental Authority or arbitration, mediation or similar
tribunal by any Person alleging potential Liability or requesting information
relating to or affecting the Company or any of the Subsidiaries, their
respective assets (including, without limitation, Contracts relating to the
Company or any of the Subsidiaries), the Business or the transactions
contemplated by this Agreement.
"LOSS" means any and all direct or indirect demands, claims, payments,
obligations, recoveries, deficiencies, fines, penalties, interest, assessments,
actions, causes of action, suits, losses, diminution in the value of assets,
damages, punitive, exemplary or consequential damages (including, but not
limited to, lost income and profits and interruptions of business), liabilities,
costs, expenses (including without limitation, (i) interest, penalties and
reasonable attorneys' fees and expenses, (ii) attorneys' fees and expenses
necessary to enforce rights to indemnification hereunder, and (iii) consultants'
fees and other costs of defense or investigation), and interest on any amount
payable to a Third Party as a result of the foregoing, whether accrued,
absolute, contingent, known, unknown, or otherwise as of the Closing Date or
thereafter.
"MATERIAL" or "MATERIALLY" shall be determined in light of the facts and
circumstances of the matter in question; provided, however, that any specific
monetary amount cited in this Agreement shall be deemed to determine materiality
in that instance.
"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means any Material
adverse change in or effect on (i) the business, operations, assets,
Liabilities, financial condition or results of operations of such Person,
including, without limitation, any Material adverse change in the value of the
Company or its Subsidiaries, taken as a whole, (ii) the ability of such party to
consummate the transactions contemplated by this Agreement or any of the Other
Agreements to which it is or will be a party, or (iii) the ability of such party
to perform any of its obligations under this Agreement or any of the Other
Agreements to which it is or will be a party, if such change or effect
Materially impairs the ability of such party to perform its obligations
hereunder or thereunder, taken as a whole. If any change, condition or event
shall have an adverse effect or a reasonably likely adverse effect of less than
$1,000,000, no Material Adverse Change or Material Adverse Effect will be deemed
to have occurred. If any change, condition or event shall have an adverse effect
or a reasonably likely adverse effect of $1,000,000 or more but less than
$7,500,000, no Material Adverse Effect will be deemed to have occurred and the
Stockholders shall have the option to either (i) cure such change, condition or
event or (ii) reduce the Purchase Price by the amount of the adverse effect
caused by such change, condition or event. If any change, condition or event
shall have an adverse effect or a reasonably likely adverse effect of $7,500,000
or more, either Purchaser or the Stockholders may terminate this Agreement at
their discretion. Neither a Material Adverse Change nor a
-39-
<PAGE>
Material Adverse Effect shall be deemed to result from an adverse change in
general economic conditions, industry conditions or general conditions in the
markets in which the Company operates. Further, notwithstanding the $1,000,000
threshold contained in the third sentence of this definition, the Stockholders
shall cause the Company to use all reasonable efforts to promptly remedy any
adverse change, condition or event that causes or is reasonably likely to cause
any of the Company's stations to be or go off the air.
"OPTION PROPERTY" means all of the Personal Property subject to Lawrence A.
Busse's option to purchase under that certain letter agreement dated the date
hereof, 1998 between Mr. Busse and the Company, a correct and complete list of
each item of Option Property is contained on Exhibit X.
"ORDER" means any decree, injunction, judgment, order, ruling, writ, quasi-
judicial decision or award or administrative decision or award of any federal,
state, local, foreign or other court, arbitrator, mediator, tribunal,
administrative agency or Governmental Authority to which any Person is a party
or that is or may be binding on any Person or its securities, assets or business
(including, in the case of the FCC, a public notice or other written
authorization).
"OTHER AGREEMENTS" means the agreements, documents, assignments and
instruments to be executed and delivered by the Company or the Stockholders
pursuant to this Agreement.
"OWNED REAL PROPERTY" means all Real Property other than Leased Real
Property.
"PERMITTED LIENS" means (i) Liens for current real property Taxes not yet due
and payable, (ii) non-monetary Liens that do not affect the value or use of any
parcel of Real Property, (iii) Liens related to the Company's 11-5/8% Senior
Secured Notes due 2000 referred to in Section 1.02 and (iv) all Special
Exceptions (but not General Exceptions) to title contained in the Commitments.
"PERSON" means a natural person or any legal, commercial or governmental
entity, such as, but not limited to, a business association, corporation,
general partnership, joint venture, limited partnership, limited liability
company, trust, or any person acting in a representative capacity.
"PERSONAL PROPERTY" means collectively and with the exception of the Option
Property all of the personal property or interests therein owned, leased, used
or controlled by the Company or any of the Subsidiaries including, without
limitation, machinery, tools, equipment (including office equipment and
supplies), furniture, furnishings, fixtures (including trade fixtures),
vehicles, leasehold improvements, all other tangible personal property other
than Inventory (which is specifically excluded from the Personal Property).
"PREFERRED STOCK" means the $.01 par value per share Series A preferred stock
of the Company.
"PUC LAWS" means public utility commission laws, rules and regulations.
"PURCHASE PRICE" means the total consideration to be paid to the Stockholders
by Purchaser for the purchase of the Stock pursuant to this Agreement and which
shall be paid in accordance with Section 1.02 of this Agreement.
"REAL PROPERTY" means collectively all the real property or interests therein
owned, leased, occupied, or used by the Company or any of the Subsidiaries as of
the date of this Agreement, together
-40-
<PAGE>
with (i) all rights, easements, tenements, hereditaments, appurtenances,
privileges, immunities, mineral rights and other benefits belonging or
appertaining thereto which run with said real property and (ii) all right, title
and interest, if any, of the Company or any of the Subsidiaries in and to (A)
any land lying in the bed of any street, road, avenue, open or proposed,
adjoining said real property, (B) any award made or to be made in lieu of the
land described in the preceding clause (A), (C) any unpaid award for damage to
said real property, and (D) all strips and rights-of-way abutting or adjoining
said real property, if any. The Real Property includes, without limitation, all
buildings, structures, fixtures and other improvements located on the land
described in the preceding sentence.
"REGISTRATION RIGHTS AGREEMENT" means that certain Registration Rights
Agreement dated May 3, 1995 entered into by the Company and KOLN/KGIN, Inc., as
amended.
"RELATED PERSON" means, with regard to any natural Person, its spouse,
parent, sibling, child, aunt, uncle, niece, nephew, in-law, grandparent and
grandchild (including by adoption) and any trustees or other fiduciaries for the
benefit of such relatives.
"STOCK" means the Common Stock and the Preferred Stock.
"SUBSIDIARY" means any of WEAU License, Inc., a Delaware corporation, or its
successor; KOLN/KGIN, Inc., a Delaware corporation, and KOLN/KGIN License, Inc.,
a Delaware corporation.
"TAX" or "TAXES" means any federal, state, county, local, foreign and other
taxes, assessments, charges, fees, and impositions, including interest and
penalties thereon or with respect thereto, whether disputed or not, and
including Liabilities relating to unclaimed property.
"TAX RETURNS" means all returns, reports, filings, declarations and
statements relating to Taxes that are required to be filed, recorded, or
deposited with any Governmental Authority, including any attachment thereto or
amendment thereof.
"THIRD PARTY" or "THIRD PARTIES" means any Person that is not Purchaser, the
Company, the Stockholders, the Subsidiaries or an Affiliate of any of the
foregoing.
"UNDISCLOSED LIABILITIES" means any Liability that is not fully reflected or
reserved against in the Financial Statements or fully disclosed in a Schedule to
this Agreement.
ARTICLE X
MISCELLANEOUS
10.01 NOTICES.
(a) All notices, requests, demands and other communications hereunder
shall be (i) delivered by hand, (ii) mailed by registered or certified mail,
return receipt requested, first class postage prepaid and properly addressed,
(iii) sent by national overnight courier service, or (iv) sent by facsimile,
graphic scanning or other telegraphic communications equipment to the parties or
their assignees, addressed as follows:
-41-
<PAGE>
To the Company: Busse Broadcasting Corporation
141 East Michigan Avenue
Suite 300
Kalamazoo, Michigan 49007
Attention: Mr. Lawrence A. Busse
Telephone: (616) 388-8019
Facsimile: (616) 388-6089
with copies to: Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601-9703
Attention: Steven J. Gavin, Esquire
Telephone: (312) 558-5600
Facsimile: (312) 558-5700
To the Stockholders: SSP, Inc.
c/o Greenwich Street Capital Partners, Inc.
388 Greenwich Street -- 36th Floor
New York, New York 10013
Attention: Mr. Alfred C. Eckert, III
Telephone: (212) 816-9506
Facsimile: (212) 816-0166
with copies to: Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attn: Jonathan M. Wainwright, Esquire
Telephone: (212) 504-6122
Facsimile: (212) 504-6666
and to: Morgan, Stanley & Co. Incorporated
1585 Broadway -- 35th Floor
New York, New York 10036
Attention: Mr. Michael F. Wyatt
Telephone: (212) 761-4000
Facsimile: (212) 761-0501
-42-
<PAGE>
To Purchaser: Gray Communications Systems, Inc.
4370 Peachtree Road, N.E.
Atlanta, Georgia 30319-3099
Attention: Mr. Robert S. Prather, Jr.
Telephone: (404) 266-8333
Facsimile: (404) 261-9607
with copies to: Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attention: Stephen A. Opler, Esquire
Telephone: (404) 881-7693
Facsimile: (404) 881-4777
(b) All notices, requests, instructions or documents given to any party in
accordance with this Section 10.01 shall be deemed to have been given (i) on the
date of receipt if delivered by hand, overnight courier service or if sent by
facsimile, graphic scanning or other telegraphic communications equipment or
(ii) on the date three (3) business days after depositing with the United States
Postal Service if mailed by United States registered or certified mail, return
receipt requested, first class postage prepaid and properly addressed.
(c) Any party hereto may change its address specified for notices herein
by designating a new address by notice in accordance with this Section 10.01.
10.02 ENTIRE AGREEMENT. This Agreement, the Schedules, the Exhibits and the
Other Agreements constitute the entire agreement between the parties relating to
the subject matter hereof and thereof and supersede all prior oral and written,
and all contemporaneous oral, negotiations, discussions, writings and agreements
relating to the subject matter of this Agreement, including without limitation
that certain Stock Purchase Agreement dated February 13, 1998 by and among Busse
Broadcasting Corporation, South Street Corporate Recovery Fund I, L.P.,
Greycliff Leveraged Fund 1993, L.P., South Street Leveraged Corporate Recovery
Fund, L.P., South Street Corporate Recovery Fund I (International), L.P. and
Gray Communications Systems, Inc.
10.03 MODIFICATIONS, AMENDMENTS AND WAIVERS. The failure or delay of any
party at any time or times to require performance of any provision of this
Agreement shall in no manner affect its right to enforce that provision. No
single or partial waiver by any party of any condition of this Agreement, or the
breach of any term, agreement or covenant or the inaccuracy of any
representation or warranty of this Agreement, whether by conduct or otherwise,
in any one or more instances shall be construed or deemed to be a further or
continuing waiver of any such condition, breach or inaccuracy or a waiver of any
other condition, breach or inaccuracy.
10.04 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall
inure to the benefit of and be enforceable by the parties hereto, and their
respective estates, successors, legal or personal representatives, heirs,
distributees, designees and assigns, but no assignment shall relieve any party
of the obligations hereunder. This Agreement or any portion thereof cannot be
assigned by any party without the prior written consent of the other parties
hereto; provided, however, that Purchaser may assign this Agreement with the
prior written consent of the Company and the Stockholders, to an Affiliate of
Purchaser; provided, further, such assignment shall not relieve Purchaser of its
obligations hereunder.
-43-
<PAGE>
With respect to such assignments, all representations, warranties, covenants and
indemnification rights shall be binding upon, and inure to the benefit of, the
assignee or assignees as if such representations, warranties, covenants and
indemnification rights were made directly between the original parties to this
Agreement.
10.05 TABLE OF CONTENTS; CAPTIONS; REFERENCES. The table of contents and the
captions and other headings contained in this Agreement as to the contents of
particular articles, sections, paragraphs or other subdivisions contained herein
are inserted for convenience of reference only and are in no way to be construed
as part of this Agreement or as limitations on the scope of the particular
articles, sections, paragraphs or other subdivisions to which they refer and
shall not affect the interpretation or meaning of this Agreement. All references
in this Agreement to "Section" or "Article" shall be deemed to be references to
a Section or Article of this Agreement.
10.06 GOVERNING LAW. This Agreement shall be controlled, construed and
enforced in accordance with the substantive Laws of the State of New York,
without respect to the Laws related to choice or conflicts of Laws.
10.07 PRONOUNS. All pronouns used herein shall be deemed to refer to the
masculine, feminine or neuter gender as the context requires.
10.08 SEVERABILITY. Should any one or more of the provisions of this
Agreement be determined to be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions hereof
shall not in any way be affected or impaired thereby. The parties shall endeavor
in good faith to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as practicable to
that of the invalid, illegal or unenforceable provisions.
10.09 REMEDIES NOT EXCLUSIVE. Except for the liquidated damages provided for
in Section 8.03(a), no remedy conferred by any of the specific provisions of
this Agreement is intended to be, nor shall be, exclusive of any other remedy
available at law, in equity or otherwise.
10.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original; but all of such counterparts
shall together constitute one and the same instrument.
10.11 INTERPRETATIONS. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against Purchaser, the Company,
or the Stockholders whether under any rule of construction or otherwise. No
party to this Agreement shall be considered the draftsman. On the contrary, this
Agreement has been reviewed, negotiated and accepted by all parties and their
attorneys and shall be construed and interpreted according to the ordinary
meaning of the words used so as fairly to accomplish the purposes and intentions
of all parties hereto.
-44-
<PAGE>
10.12 EXCLUSIVE REMEDY.. The parties acknowledge and agree that this
Agreement shall provide the exclusive remedies of Purchaser, the Stockholders,
the Company and the Subsidiaries with respect to the transactions contemplated
by this Agreement. Without limiting the generality of the foregoing, on and
after the Closing, Purchaser, the Stockholders, the Company and the Subsidiaries
hereby waive any statutory, equitable or common law rights or remedies relating
to any environmental health and safety matters, including without limitation,
any such matters arising under any Environmental , Health and Safety
Requirements, the Comprehensive Environmental Response, Compensation and
Liability Act or any analogous state law.
[SIGNATURES ON FOLLOWING PAGES]
-45-
<PAGE>
IN WITNESS WHEREOF, the Company, each of the Stockholders and Purchaser have
duly executed this Agreement under seal as of the date first above written.
THE COMPANY
BUSSE BROADCASTING CORPORATION
By: /s/ James C. Ryan
-------------------
Name: James C. Ryan
Title: Treasurer
THE STOCKHOLDERS
SOUTH STREET CORPORATE RECOVERY FUND I, L.P.
By: SSP Advisors, L.P., its general partner
By: SSP, Inc., its general partner
By: /s/ Alfred C. Eckert III
------------------------
Name: Alfred C. Eckert III
Title: President
GREYCLIFF LEVERAGED FUND 1993, L.P.
By: SSP Partners, L.P., its general partner
By: SSP, Inc., its general partner
By: /s/ Alfred C. Eckert III
------------------------
Name: Alfred C. Eckert III
Title: President
SOUTH STREET LEVERAGED CORPORATE RECOVERY
FUND, L.P.
By: SSP Partners, L.P., its general partner
By: SSP, Inc., its general partner
By: /s/ Alfred C. Eckert III
------------------------
Name: Alfred C. Eckert III
Title: President
<PAGE>
SOUTH STREET CORPORATE RECOVERY FUND I
(INTERNATIONAL) L.P.
By: /s/ Alfred C. Eckert III
--------------------------
Alfred C. Eckert III, as Director of SSP (International),
Inc., as General Partner of SSP (International) Partners,
L.P., as General Partner of South Street Corporate
Recovery Fund I (International), L.P.
PURCHASER
GRAY COMMUNICATIONS SYSTEMS, INC.
By: /s/ Robert A. Beizer
--------------------
Name: Robert A. Beizer
Title: Secretary
ASSET PURCHASE AGREEMENT
BY AND AMONG
BUSSE BROADCASTING CORPORATION,
WEAU LICENSE, INC.
AND
COSMOS BROADCASTING CORPORATION
DATED AS OF JUNE 22, 1998
<PAGE>
CONTENTS
Background ................................................................ 1
Agreement ................................................................. 1
ARTICLE I
SALE OF ASSETS
1.01 Purchase of Assets by Purchaser ..................................... 1
1.02 Purchase Price for the Assets ....................................... 2
1.03 Closing; Effectiveness of Closing; Deliveries ....................... 2
ARTICLE II
ASSUMPTION OF LIABILITIES AND CONTRACTUAL OBLIGATIONS
2.01 General ............................................................. 2
2.02 Assumption of the Liabilities of the Business ....................... 3
2.03 No Intention to Benefit Third Parties ............................... 3
ARTICLE III
REPRESENTATIONS AND WARRANTIES BY THE SELLERS
3.01 Capacity and Validity ............................................... 3
3.02 Organization ........................................................ 3
3.03 No Conflict ......................................................... 4
3.04 Financial Statements ................................................ 4
3.05 Absence of Undisclosed Liability .................................... 4
3.06 Absence of Changes .................................................. 4
3.07 Tax Matters ......................................................... 5
3.08 Title to Assets; Encumbrances; Condition ............................ 6
3.09 Real Property ....................................................... 7
3.10 Personal Property ................................................... 8
3.11 Intellectual Property ............................................... 8
3.12 Computer Software and Databases ..................................... 8
3.13 Insurance ........................................................... 9
3.14 Bonds, Letters of Credit and Guarantees ............................. 9
3.15 Compliance with Law ................................................. 9
3.16 Environmental ....................................................... 10
3.17 Litigation and Claims ............................................... 12
3.18 Benefit Plans ....................................................... 12
3.19 Contracts ........................................................... 14
3.20 Suppliers and Customers ............................................. 16
3.21 Labor Matters ....................................................... 17
3.22 Brokers and Finders ................................................. 17
3.23 Interested Transactions ............................................. 17
3.24 Officers, Directors and Bank Accounts ............................... 18
3.25 Statements True and Correct ......................................... 18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
4.01 Organization ........................................................ 18
4.02 Capacity and Validity ............................................... 18
4.03 No Conflict ......................................................... 18
-i-
<PAGE>
4.04 Brokers and Finders ................................................. 19
4.05 Qualification of Purchaser .......................................... 19
4.06 Financing ........................................................... 19
4.07 Statements True and Correct ......................................... 19
ARTICLE V
COVENANTS AND ADDITIONAL AGREEMENTS OF THE SELLERS AND PURCHASER
5.01 Conduct of Business ................................................. 19
5.02 Right of Inspection; Access ......................................... 20
5.03 Other Offers and Exclusive Dealing .................................. 20
5.04 Confidentiality ..................................................... 20
5.05 Consents and Approvals .............................................. 21
5.06 Supplying of Financial Statements ................................... 21
5.07 Qualification and Corporate Existence ............................... 21
5.08 Public Announcements ................................................ 21
5.09 Closing Conditions .................................................. 22
5.10 Supplements to Schedules ............................................ 22
5.11 Certain Tax Matters ................................................. 22
5.12 Expenses ............................................................ 22
5.13 Further Assurances .................................................. 23
5.14 Delivery of Books and Records ....................................... 23
5.15 FCC Matters ......................................................... 23
5.16 Third Party Designation ............................................. 23
5.17 HSR Filings ......................................................... 23
5.18 Further Actions ..................................................... 23
ARTICLE VI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION
6.01 Survival of Representations and Warranties; Acknowledgment of
Purchaser Reliance .................................................. 24
6.02 Indemnification by Sellers .......................................... 24
6.03 Indemnification by Purchaser ........................................ 24
6.04 Indemnification Payments ............................................ 25
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
7.01 Representations True and Covenants Performed at Closing ............. 25
7.02 Incumbency Certificate .............................................. 25
7.03 Certified Copies of Resolutions ..................................... 26
7.04 Opinions of Counsel ................................................. 26
7.05 No Material Adverse Change .......................................... 26
7.06 No Injunction, Etc .................................................. 26
7.07 Approval of Legal Matters ........................................... 26
7.08 FCC Approvals ....................................................... 26
7.09 Hart-Scott Approval ................................................. 26
7.10 Sales and Use Taxes ................................................. 26
7.11 Title Documents ..................................................... 27
7.12 Title Documents ..................................................... 27
-ii-
<PAGE>
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS
8.01 Representations True and Covenants Performed at Closing ............. 27
8.02 Incumbency Certificate .............................................. 27
8.03 Certified Copies of Resolutions ..................................... 27
8.04 No Injunction, Etc .................................................. 28
8.05 Hart-Scott Act Approval ............................................. 28
8.06 Approval of Legal Matters ........................................... 28
8.07 FCC Approvals ....................................................... 28
ARTICLE IX
TERMINATION
9.01 Cause for Termination ............................................... 28
9.02 Notice of Termination ............................................... 28
9.03 Effect of Termination ............................................... 29
9.04 Risk of Loss ........................................................ 29
ARTICLE X
DEFINITIONS
Affiliate ................................................................. 29
Agreement ................................................................. 29
Assets .................................................................... 29
Assumed Liabilities ....................................................... 30
Balance Sheet ............................................................. 30
Balance Sheet Date ........................................................ 30
Board of Directors ........................................................ 30
Business .................................................................. 30
Business Day .............................................................. 30
Certificate of Incorporation .............................................. 30
Closing ................................................................... 30
Closing Date .............................................................. 30
Code ...................................................................... 30
Commitments ............................................................... 30
Computer Software ......................................................... 31
Contract .................................................................. 31
Databases ................................................................. 31
Default ................................................................... 31
Employee Benefit Plan ..................................................... 31
Environmental Laws ........................................................ 31
Environmental Litigation .................................................. 32
Environmental Matter ...................................................... 32
Environmental Report ...................................................... 32
ERISA ..................................................................... 32
ERISA Plan ................................................................ 32
Exchange Agreement ........................................................ 32
FCC ....................................................................... 32
Financial Statements ...................................................... 32
GAAP ...................................................................... 32
Governmental Authority .................................................... 33
-iii-
<PAGE>
Hart-Scott Act ............................................................ 33
Hazardous Substance ....................................................... 33
Improvements .............................................................. 33
Intellectual Property ..................................................... 33
IRS ....................................................................... 33
Knowledge ................................................................. 33
Law ....................................................................... 33
Leased Personal Property .................................................. 33
Leased Real Property ...................................................... 33
Liability ................................................................. 33
License ................................................................... 33
Lien ...................................................................... 33
Litigation ................................................................ 34
Loss ...................................................................... 34
Material or Materially .................................................... 34
Material Adverse Change or Material Adverse Effect ........................ 34
Order ..................................................................... 34
Other Agreements .......................................................... 35
Owned Real Property ....................................................... 35
Permitted Liens ........................................................... 35
Person .................................................................... 35
Personal Property ......................................................... 35
PUC Laws .................................................................. 35
Purchase Price ............................................................ 35
Purchaser ................................................................. 35
Real Property ............................................................. 35
Related Person ............................................................ 36
Retained Assets ........................................................... 36
Retained Liabilities ...................................................... 36
Subsidiary ................................................................ 37
Tax or Taxes .............................................................. 37
Tax Returns ............................................................... 37
Third Party or Third Parties .............................................. 37
Undisclosed Liabilities ................................................... 37
ARTICLE XI
MISCELLANEOUS
11.01 Notices ............................................................. 37
11.02 Entire Agreement .................................................... 38
11.03 Modifications, Amendments and Waivers ............................... 38
11.04 Successors and Assigns .............................................. 39
11.05 Table of Contents; Captions; References ............................. 39
11.06 Governing Law ....................................................... 39
11.07 Pronouns ............................................................ 39
11.08 Severability ........................................................ 39
11.09 Remedies Not Exclusive .............................................. 39
11.10 Counterparts ........................................................ 39
11.11 Interpretations ..................................................... 39
11.12 Exclusive Remedy .................................................... 40
-iv-
<PAGE>
EXHIBITS AND SCHEDULES
Exhibit 1.02(b) -- Allocation of Purchase Price
Exhibit 7.04(ii) -- Form of Opinion of Pepper & Corazzini L.L.P.
Exhibit X -- Key Employees of the Sellers
Schedule 3.02 -- Organization, Standing & Foreign Qualification
Schedule 3.03 -- Conflicts
Schedule 3.04 -- Financial Statements
Schedule 3.05 -- Absence of Undisclosed Liability
Schedule 3.06 -- Absence of Changes
Schedule 3.07 -- Tax Matters
Schedule 3.08 -- Title to Assets; Encumbrances
Schedule 3.09 -- Real Property
Schedule 3.10 -- Personal Property
Schedule 3.11 -- Intellectual Property
Schedule 3.12 -- Computer Software and Databases
Schedule 3.13 -- Insurance
Schedule 3.14 -- Bonds, Letters of Credit and Guarantees
Schedule 3.15 -- Compliance With Law
Schedule 3.16 -- Environmental
Schedule 3.17 -- Litigation and Claims
Schedule 3.18 -- Benefit Plans
Schedule 3.19(a)(i) -- Real Property Contracts
Schedule 3.19(a)(ii) -- Personal Property Contracts
Schedule 3.19(a)(iii) -- Purchase Orders--Non-Capital Assets
Schedule 3.19(a)(iv) -- Purchase Orders--Capital Assets
Schedule 3.19(a)(v) -- Sales Contracts
Schedule 3.19(a)(vi) -- Employment; Other Affiliate Contracts
Schedule 3.19(a)(vii) -- Sales Representatives Contracts
Schedule 3.19(a)(viii)-- Powers of Attorney
Schedule 3.19(a)(ix) -- Programming and Network Affiliation Agreements
Schedule 3.19(a)(x) -- Barter & Trade Agreements
Schedule 3.19(a)(xi) -- Any Other Contracts
Schedule 3.20 -- Suppliers and Customers
Schedule 3.21 -- Labor Matters
Schedule 3.22 -- Brokers and Finders
Schedule 3.23 -- Interested Transactions
Schedule 3.24 -- Officers, Directors and Bank Accounts
Schedule 4.03 -- Purchaser -- Conflicts
Schedule 4.04 -- Purchaser -- Brokers and Finders
-v-
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") dated as of the 22nd day of
June, 1998, is made and entered into by and among BUSSE BROADCASTING
CORPORATION, a Delaware corporation (the "Company"), WEAU LICENSE, INC., a
Delaware corporation and a wholly-owned subsidiary of the Company (the
"Subsidiary" and together with the Company, the "Sellers"), and COSMOS
BROADCASTING CORPORATION, a South Carolina corporation ("the Purchaser").
BACKGROUND:
The Company owns and operates the network-affiliated very high
frequency television station, WEAU-TV, serving Eau Claire and LaCrosse,
Wisconsin (the "Station"). The Subsidiary holds the FCC license to operate the
Station.
This Agreement sets forth the terms and conditions upon which Sellers shall
sell to Purchaser, and upon which Purchaser shall purchase, certain of Sellers'
Assets associated with the business of the Station.
Certain terms used in this Agreement are defined in Article X hereof.
AGREEMENT:
In consideration of the foregoing, the mutual agreements, covenants,
representations and warranties contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
subject to the terms and conditions hereinafter set forth, the parties hereto
agree as follows:
ARTICLE I
SALE OF ASSETS
1.01 PURCHASE OF ASSETS BY PURCHASER.
(a) At the Closing, and subject to the terms and conditions of this
Agreement, Purchaser shall purchase and accept from Sellers and Sellers shall
sell, convey, transfer, assign and deliver to Purchaser for the purchase price
set forth in Section 1.02 below, all of the Assets, free and clear of any and
all Liens other than the Permitted Liens.
(b) None of the Retained Assets are being purchased by Purchaser pursuant
to this Agreement.
<PAGE>
1.02 PURCHASE PRICE FOR THE ASSETS.
(a) The total purchase price for the Assets shall be equal to Sixty-Six
Million Dollars ($66,000,000).
(b) The Purchase Price has been allocated among the Assets in accordance
with an exhibit mutually prepared by Sellers and Purchaser and attached hereto
as Exhibit 1.02(b). If Purchaser or Sellers undertake to change such exhibit,
such party must obtain the approval of Sellers or Purchaser, as the case may be,
which will not be unreasonably withheld. The allocation and undertaking pursuant
to this Section 1.02(b), and the following undertaking with respect to Tax
reporting, have been specifically negotiated by Purchaser, on the one hand, and
Sellers, on the other, at arms' length and are a part of the basis of this
Agreement. Each of Purchaser and Sellers shall prepare its Tax Returns after the
Closing employing the allocation made pursuant to this Section 1.02(b) and shall
not take a position in any Tax proceeding, Tax audit or otherwise that is
inconsistent with such allocation; provided, however, that nothing contained
herein shall require Purchaser or Sellers to contest beyond or otherwise than by
the exhaustion of administrative remedies before any Taxing authority or agency
or to litigate before any court, including, without limitation, the United
States Tax Court, any proposed deficiency or adjustment by any Taxing authority
or agency which challenges such allocation. Each of Purchaser and Sellers shall
give prompt notice to each other of the commencement of any Tax audit or the
assertion of any proposed deficiency or adjustment by any Taxing authority or
agency which challenges such allocation.
1.03 CLOSING; EFFECTIVENESS OF CLOSING; DELIVERIES. The Closing shall occur
at 10:00 a.m. local time on the Closing Date at the offices of Cadwalader,
Wickersham & Taft in New York, New York or at such other time and place as the
parties may agree. The Closing shall be effective as of such time as agreed to
by the parties hereto. All deliveries, payments and other transactions and
documents relating to the Closing (i) shall be interdependent and none shall be
effective unless and until all are effective (except to the extent that the
party entitled to the benefit thereof has waived satisfaction or performance
thereof as a condition precedent to Closing), and (ii) shall be deemed to be
consummated in the order set forth in this Agreement and, to the extent the
order is not specified, shall be deemed to be consummated simultaneously.
ARTICLE II
ASSUMPTION OF LIABILITIES AND CONTRACTUAL OBLIGATIONS
2.01 GENERAL.
(a) Purchaser is not assuming and shall not be liable for or with respect
to any Retained Liability.
(b) Notwithstanding anything in this Agreement to the contrary, in no event
shall any Liability due to any Affiliate of the Sellers be assumed by Purchaser.
(c) Nothing contained in this Section 2.01 or in any instrument of
assumption executed by Purchaser at the Closing shall be deemed to release or
relieve the Sellers from their respective representations, warranties, covenants
and agreements contained in this Agreement or any of the Other Agreements.
Further, Sellers shall pay, satisfy and perform all of the Retained Liabilities
and no disclosures made or exceptions noted with respect to the representations,
warranties, covenants and
-2-
<PAGE>
agreements of the Sellers contained in this Agreement or any of the Other
Agreements shall affect Sellers' obligation to pay, satisfy and perform all of
the Retained Liabilities.
2.02 ASSUMPTION OF THE LIABILITIES OF THE BUSINESS.
(a) Purchaser shall assume the Assumed Liabilities on the terms provided in
subsection 2.02(b).
(b) Purchaser expressly agrees, effective on the Closing Date, to assume
the Assumed Liabilities and thereafter to pay, perform and discharge in full, in
accordance with their terms where applicable, the Assumed Liabilities. Nothing
contained in this Agreement shall require Purchaser to pay, perform or discharge
any of the Assumed Liabilities so long as Purchaser shall in good faith contest
or cause to be contested the amount or validity thereof or shall in good faith
assert any defense or offset thereto, and the Sellers shall provide reasonable
assistance to Purchaser in so contesting and defending such claims.
Notwithstanding anything contained in this Agreement to the contrary, Purchaser
shall not assume, pay, satisfy or discharge any of the Assumed Liabilities to
the extent that such Liabilities are insured against (or but for the transfer of
the Assets and assignment and assumption of the Assumed Liabilities pursuant to
this Agreement, would have been insured against) by a Third Party under policies
of insurance which the Sellers are unable to assign to Purchaser and which are
maintained by the Sellers.
2.03 NO INTENTION TO BENEFIT THIRD PARTIES. This Agreement is not intended
to, and shall not, benefit any person or entity other than the Sellers and
Purchaser or create any Third Party beneficiary right in any person.
ARTICLE III
REPRESENTATIONS AND WARRANTIES BY THE SELLERS
Each of the Sellers, jointly and severally, hereby represent and warrant to
Purchaser as follows:
3.01 CAPACITY AND VALIDITY. Each of the Sellers has the full corporate
power, capacity and authority necessary to enter into and perform its
obligations under this Agreement and the Other Agreements to which it is a party
and to consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance of this Agreement and the Other Agreements
have been approved by all necessary action of the Board of Directors of the
Sellers. This Agreement has been, and the Other Agreements to which each of the
Sellers is a party will be when executed and delivered, duly executed and
delivered by duly authorized officers of each of the Sellers, and this Agreement
and each of the Other Agreements constitutes, or will constitute when executed
and delivered, the legal, valid and binding obligation of each of the Sellers,
enforceable against each of the Sellers, as the case may be, in accordance with
its terms, except as enforceability may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws relating
to or affecting creditors' rights generally or general equitable principles
(regardless of whether considered in a proceeding in equity or at law) or by an
implied covenant of good faith and fair dealing.
3.02 ORGANIZATION. Each of the Sellers is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to own, lease and operate
its assets and to carry on its Business as presently conducted. Each of
-3-
<PAGE>
the Sellers is duly qualified or licensed to transact business as a foreign
corporation in good standing in the jurisdictions listed in Schedule 3.02, and
the character of their respective assets or the nature of their respective
businesses do not require such qualification or licensing in any other
jurisdiction except where the failure to so qualify or be so licensed would not
have a Material Adverse Effect on the Sellers. Complete and correct copies of
the Certificate of Incorporation of each of the Sellers, and all amendments
thereto (certified by the Secretary of State of the State of Delaware) and
complete and correct copies of the By-Laws of each of the Sellers, and all
amendments thereto, previously have been made available to Purchaser. Except as
may be set forth in Schedule 3.02, copies of all records of the proceedings of
incorporators, stockholders and directors of each of the Sellers, which are set
forth in the Sellers' respective minute books (collectively, the "Minute
Books"), are correct and complete in all Material respects and accurately
reflect in all Material respects all proceedings of each of the Sellers'
respective incorporators, stockholders and Board of Directors and all committees
thereof. Except as may be set forth in Schedule 3.02, the stock record books of
each of the Sellers (collectively, the "Stock Record Books") are correct and
complete and accurately reflect the stock ownership of their respective
stockholders. The Minute Books and the Stock Record Books have been made
available to Purchaser for review.
3.03 NO CONFLICT. Except as disclosed on Schedule 3.03 and assuming
compliance with the Hart-Scott Act and the receipt of all necessary FCC
approvals, neither the execution, delivery and performance of this Agreement or
the Other Agreements to which it is a party by each of the Sellers nor the
consummation by each of the Sellers of the transactions contemplated hereby or
thereby will (i) conflict with or result in a violation, contravention or breach
of any of the terms, conditions or provisions of the Certificate of
Incorporation, as amended, or the By-Laws, as amended, of each of the Sellers;
(ii) result in a Default under, or require the consent or approval of any party
to, any Contract or License of the Sellers required to be set forth on one or
more of the Schedules contemplated by Section 3.19 hereof; (iii) result in the
violation of any Law or Order applicable to either of the Sellers or (iv) result
in the creation or imposition of any Lien applicable to either of the Sellers,
except in each case as would not have a Material Adverse Effect.
3.04 FINANCIAL STATEMENTS. The Financial Statements (of the type provided
for in clauses (i) and (ii) of the definition thereof), correct and complete
copies of which are included in Schedule 3.04, (i) are in accordance with the
books and records of each of the Sellers, which are correct and complete in all
Material respects and which have been maintained in accordance with good
business practices; (ii) present fairly in all Material respects the financial
position of each of the Sellers as of the dates indicated and the results of
each of their operations and their respective cash flows for the periods then
ended; and (iii) have been prepared in accordance with GAAP, subject, in the
case of interim financial statements, to the condensing of the Financial
Statements or the absence of footnotes. The Financial Statements contain all
adjustments, which are solely of a normal recurring nature, necessary to present
fairly in all Material respects the consolidated financial condition and the
consolidated results of operations, changes in stockholders' equity and changes
in financial position or cash flows of each of the Sellers as of the dates and
for the periods indicated.
3.05 ABSENCE OF UNDISCLOSED LIABILITY. Except as set forth in Schedule
3.05, neither of the Sellers has any Undisclosed Liabilities nor does there
exist any Known basis for or threat of an assertion against either of the
Sellers, their respective businesses or their respective Assets of any
Undisclosed Liability, except for Liabilities incurred since the Balance Sheet
Date in the ordinary course of business consistent with past practice, none of
which are Material.
3.06 ABSENCE OF CHANGES. Except as disclosed in Schedule 3.06 and with
respect to the Business, since the Balance Sheet Date, (i) the Business has been
carried on only in the ordinary
-4-
<PAGE>
course consistent with past practice, (ii) there has been no Material Adverse
Change, and there has been no event or circumstance that reasonably is
anticipated to result in a Material Adverse Change with respect to either of the
Sellers, their respective Assets or businesses, or the Business, (iii) neither
of the Sellers has made any change in any method of accounting or accounting
practice, and (iv) except in the ordinary course of business consistent with
past practice, neither of the Sellers has canceled, modified or waived, without
receiving payment or performance in full, any (a) Liability owed to either of
the Sellers, including without limitation, any receivable of the Sellers from
any Affiliate (other than the Subsidiary) or any Related Person to an Affiliate,
(b) Litigation either of the Sellers may have against other Persons, or (c)
other rights of the Sellers.
3.07 TAX MATTERS. Except as set forth in Schedule 3.07 and with respect to
the Business:
(a) Each of the Sellers has timely filed with the appropriate Governmental
Authorities all required Tax Returns in all jurisdictions in which Tax Returns
are required to be filed. Neither of the Sellers is presently the beneficiary of
any extension of time within which to file any Tax Return. All Taxes (whether or
not shown on any Tax Return) for all periods ending on or before the Balance
Sheet Date, have been fully paid or appropriate deposits or adequate accruals
have been made therefor on the Balance Sheet.
(b) Since the Balance Sheet Date, neither of the Sellers has incurred any
Liability for Taxes other than in the ordinary course of business and no such
Tax Liability so incurred (other than any Liability incurred by the Sellers in
connection with their cooperation under Section 5.16 hereof) is Material.
Neither of the Sellers is currently delinquent in the payment of any Tax,
assessment, deposit or other charge by any Governmental Authority for which any
Liability is pending or has been assessed, asserted or threatened (in writing,
or otherwise to the Knowledge of either of the Sellers) against the Sellers or
any of their respective Assets in connection with any Tax and there is no basis
for any such Liability. Neither of the Sellers has received any notice of
assessment or proposed assessment in connection with any Tax Returns and there
are no pending Tax examinations of or Tax claims asserted (in writing, or
otherwise to the Knowledge of either of the Sellers) against either of the
Sellers or any of their respective Assets, including without limitation, any
claim by any Governmental Authority in any jurisdiction where either of the
Sellers did not file Tax Returns that either of the Sellers is or may be subject
to or liable for Taxes imposed by that Governmental Authority or jurisdiction.
There are no Liens for any Taxes (other than any Lien for current real property
or ad valorem Taxes not yet due and payable) on any of the Sellers' Assets.
(c) None of the Sellers' Tax Returns have ever been audited by the IRS or
any other Governmental Authority and neither of the Sellers has waived any
statute of limitations in respect of Taxes or agreed to a Tax assessment or
deficiency. Neither of the Sellers has filed any consent under Section 341(f) of
the Code relating to collapsible corporations. No Tax is required to be withheld
pursuant to Section l445 of the Code as a result of any of the transfers
contemplated by this Agreement and the Sellers or their stockholders will
provide any certificate reasonably requested by Purchaser at Closing with
respect thereto.
(d) Each of the Sellers has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other Third Party.
-5-
<PAGE>
(e) Neither of the Sellers is a party to any agreement, contract,
arrangement or plan that has resulted or would result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the meaning
of Section 280G of the Code or any similar provision of foreign, state or local
Law.
(f) Neither of the Sellers has agreed, nor is it required to make, any
adjustment under Section 481(a) of the Code by reason of a change in accounting
method or otherwise.
(g) Neither of the Sellers is a party to or bound by (nor will the Sellers,
prior to the Closing, become a party to or be bound by) any Tax indemnity, Tax
sharing or Tax allocation agreement or arrangement.
(h) Except for the group of which the Sellers are presently members,
neither of the Sellers has been a member of an affiliated group filing a
consolidated federal income Tax Return (other than a group the common parent of
which was the Company) or has any Liability for Taxes of any Person (other than
the Sellers) under Treasury Regulation Section 1.1502-6 (or any similar
provision of the state, local, or foreign Law), as a transferee or successor, by
contract, or otherwise.
(i) Neither of the Sellers is a party to any joint venture, partnership, or
other arrangement or Contract which is treated as a partnership for federal
income Tax purposes.
(j) Neither of the Sellers has issued or assumed any corporate acquisition
indebtedness, within the meaning of Section 279(b) of the Code, or any
obligation described in Section 279(a)(2) of the Code.
(k) The Company does not have any excess loss account (as defined in
Treasury Regulation Section 1.1502-19) with respect to the stock of the
Subsidiary.
3.08 TITLE TO ASSETS; ENCUMBRANCES; CONDITION.
(a) Each of the Sellers has good, valid and marketable (and, in the case of
the Owned Real Property, insurable) title to all of its respective Assets free
and clear of any and all Liens, except Permitted Liens. Schedule 3.08 contains
true and complete copies (in all Material respects) of (i) Commitments to issue
owner's title insurance policies for all of the Owned Real Property in the
amounts indicated in each such Commitment, and (ii) all existing owner's title
insurance policies. A survey of each parcel of the Owned Real Property has been
delivered to Purchaser prior to the date hereof. Copies of all documents
evidencing the Liens upon each of the Sellers' respective Assets are either
contained in Schedule 3.08 or previously have been delivered to Purchaser.
(b) Except as set forth in Schedule 3.08, each of the Material Improvements
and each item of Material Personal Property is in good condition and repair,
reasonable wear and tear excepted, and is usable in the ordinary course of
business consistent with past practices. Each Material Improvement and each item
of Material Personal Property is adequate for its present and intended uses and
operation and neither of the Sellers has any intention to use or operate any
Material Improvement or any item of Material Personal Property other than as
presently used or operated. Each of the Sellers' respective Assets (including
each of the Sellers' respective interest in all leased Assets) include all
Material Assets required to operate the Business as presently conducted.
-6-
<PAGE>
3.09 REAL PROPERTY.
(a) Schedule 3.09 contains a correct and complete list of all of the Real
Property, including, without limitation, a legal description for all of the
Owned Real Property. To the Knowledge of either of the Sellers, no facts or
circumstances exist which do, or potentially may, adversely affect any of the
access to and from the Real Property, from and to the existing public highways
and roads, and, to the Knowledge of either of the Sellers, there is no pending
or threatened denial, revocation, modification or restriction of such access.
The primary tower, transmitter and Real Property on which such tower and
transmitter are located are all owned by either of the Sellers in fee simple
title, except for the 2000 foot television tower located on a permanent easement
which is located in Eau Claire County (Fairchild Township), Wisconsin.
(b) The Real Property is served by utilities as required for its current
operation.
(c) No zoning or similar land use restrictions are presently in effect or
proposed by any Governmental Authority that would impair in any Material respect
the operation of the Business as presently conducted by the Sellers or which
would prevent the use of any of the Real Property as currently operated. All of
the Real Property is in compliance in all Material aspects with all applicable
zoning laws and recorded covenants. Neither of the Sellers has received any
notice from any Governmental Authority or other Third Party with regard to
encroachments on or off the Real Property, violations of building codes, zoning,
subdivision or other similar Laws or other material defects in the Improvements
or in the good, valid, marketable and insurable title of said Real Property.
(d) As of the Closing Date, there will be no Persons in possession of the
Real Property or any part thereof other than the Sellers or their lessees
pursuant to Contracts that are Permitted Liens.
(e) No condemnation proceedings are pending or to the Knowledge of either
of the Sellers, threatened with regard to the Owned Real Property.
(f) With respect to each parcel of Leased Real Property, (i) the lessor was
the owner of the premises leased to the lessee at the time of the execution and
delivery of the lease, (ii) either of the Sellers is the owner and holder of the
interest of the lessee in the lease, (iii) all buildings and towers constructed
by the lessee of each lease are located within the boundaries of the leased
premises, (iv) each lease contains an adequate description of the leased
premises, (v) each lease is enforceable by the lessee, (vi) all payments of rent
are current under each lease and no default exists under any lease and (vii)
except as set forth on Schedule 3.17, there are no disputes with or adverse
claims asserted by any lessor of a lease. Each of the Contracts of the Sellers
relating to such Leased Real Property is fully and accurately identified, and
the expiration date and current rent are described, in Schedule 3.19(a)(i) and
each such Contract is in full force and effect. Except as disclosed on Schedule
3.08, neither the Leased Real Property nor any of the Sellers' right, title or
interest therein is affected by any Lien, prior interests or superior interests
of any nature whatsoever that will, or could reasonably be expected to,
terminate or otherwise adversely affect such Leased Real Property or any of the
Sellers' right, title and interest therein.
-7-
<PAGE>
3.10 PERSONAL PROPERTY.
(a) Schedule 3.10 contains a correct and complete list of each item of
Personal Property, other than inventory (excluding office furniture, equipment,
supplies and miscellaneous items of personal property with an individual cost of
less than $2,500).
(b) Schedule 3.10 contains a correct and complete description of all
Material Leased Personal Property. Each of the Contracts of the Sellers relating
to such Leased Personal Property is identified on Schedule 3.10 and each such
Contract is in full force and effect.
3.11 INTELLECTUAL PROPERTY.
(a) Schedule 3.11 contains a correct and complete list of all of the
Sellers' respective Material Intellectual Property, including all Material
license agreements relating thereto. Neither of the Sellers (or any goods or
services sold by either of them) has violated, infringed upon or unlawfully or
wrongfully used the Intellectual Property of others, and none of the Sellers'
Intellectual Property or any related rights or any customer lists, supplier
lists or mailing lists, as used in the Business or in the other businesses now
or heretofore conducted by either of the Sellers, Materially infringes upon or
otherwise Materially violates the rights of others, nor has any Person asserted
a claim of such infringement or misuse, which infringement or violation is
likely to result in a cost to the Sellers in excess of $20,000. Each of the
Sellers has taken all reasonable measures to enforce, maintain and protect its
interests and, to the extent applicable, the rights of Third Parties, in and to
the Sellers' Material Intellectual Property. Each of the Sellers have all right,
title and interest in the Intellectual Property identified on Schedule 3.11. The
consummation of the transactions contemplated by this Agreement will not alter
or impair any Material Intellectual Property rights of either of the Sellers.
Except as set forth in Schedule 3.11, neither of the Sellers is obligated nor
has either of the Sellers incurred any Liability to make any Material payments
for royalties, fees or otherwise to any Person in connection with any of the
Sellers' Intellectual Property. All patents, trademarks, trade names, service
marks, assumed names, and copyrights and all registrations thereof included in
or related to the Sellers' Intellectual Property are valid, subsisting and in
full force and effect. Each of the Sellers is unaware of any Material
infringement of the Sellers' Material Intellectual Property, and there are no
pending infringement actions against another for infringement of the Sellers'
Intellectual Property or theft of the Sellers' trade secrets.
(b) No present or former officer, director, partner or employee of either
of the Sellers owns or has any proprietary, financial or other interest, direct
or indirect, in any of the Sellers' Material Intellectual Property, except as
described on Schedule 3.11. Except as set forth on Schedule 3.11, no officer,
director, partner or employee of either of the Sellers has entered into any
Contract (i) that requires such officer, director, partner or employee to (A)
assign any interest to inventions or other Material Intellectual Property, or
(B) keep confidential any Material trade secrets, proprietary data, customer
lists or other business information, or (ii) that restricts or prohibits such
officer, director, partner or employee from engaging in competitive activities
with or soliciting customers to or from any competitor of the Sellers.
3.12 COMPUTER SOFTWARE AND DATABASES. Schedule 3.12 identifies all Material
Computer Software and Databases owned, licensed, leased, internally developed or
otherwise used in connection with the Business. Each of the Sellers has use of
or the ability to freely acquire, without substantial costs to the Sellers for
such acquisition, all Computer Software and Databases that are necessary to
conduct the Business as presently conducted by the Sellers and all documentation
relating to all such Material Computer Software and Databases. Such Computer
Software and Databases perform in
-8-
<PAGE>
all Material respects in accordance with the documentation related thereto or
used in connection therewith and are free of Material defects in programming
and operation. Each of the Sellers has previously delivered to Purchaser
complete and accurate copies of all documents relating to the sale, license,
lease or other transfer or grant of Material Computer Software and Databases by
the Sellers since January 1, 1996.
3.13 INSURANCE. All of the Assets and the operations of each of the Sellers
and the Business of an insurable nature and of a character usually insured by
companies of similar size and in similar businesses are insured by the Sellers
in such amounts and against such losses, casualties or risks as is (i) usual in
such companies and for such assets, operations and businesses, (ii) required by
any Law applicable to the Sellers or the Business, or (iii) required by any
Contract of the Sellers. Schedule 3.13 contains a complete and accurate list of
all Material insurance policies now in force and held or owned by the Sellers
and such Schedule indicates the name of the insurer, the type of policy, the
risks covered thereby, the amount of the premiums, the term of each policy, the
policy number and the amounts of coverage and deductible in each case and all
outstanding claims thereunder. All such policies are in full force and effect
and enforceable in accordance with their terms. Neither of the Sellers is now in
Material Default regarding the provisions of any such policy, including, without
limitation, failure to make timely payment of any premiums due thereon, and
neither of the Sellers has failed to give any Material notice or present any
Material claim thereunder in due and timely fashion. Neither of the Sellers has
been refused or denied renewal of any Material insurance coverage in connection
with the Sellers, the ownership or use of their respective Assets or the
operation of the Business. In addition to the deductibles set forth on Schedule
3.13, such Schedule discloses all Material risks that are self-insured by the
Sellers that in the ordinary course of business could be insured.
3.14 BONDS, LETTERS OF CREDIT AND GUARANTEES. Schedule 3.14 contains a
complete and accurate list of all bonds (whether denominated bid, litigation,
performance, fidelity, or otherwise), letters of credit, and guarantees (other
than instruments that are guaranteed in the ordinary course) issued by the
Sellers or others for the benefit of the Sellers and now in force or
outstanding. Correct and complete copies of each such Material bond, letter of
credit and guarantee have been made available to Purchaser by the Sellers on or
before the date of this Agreement. The bonds, letters of credit and guarantees
listed in Schedule 3.14 satisfy all Material requirements for bonds, letters of
credit or guarantees set forth in (i) any Law applicable to the Sellers or the
Business and (ii) any Contracts of the Sellers. All such bonds, letters of
credit and guarantees are in full force and effect and enforceable in accordance
with their terms. Neither of the Sellers is in Material Default regarding the
provisions of any such bond, letter of credit or guarantee, including, without
limitation, the failure to make timely payment of all premiums and fees due
thereon, and neither of the Sellers has failed to give any notice or present any
claim thereunder in due and timely fashion.
3.15 COMPLIANCE WITH LAW.
(a) Each of the Sellers has complied with and is in compliance with all
Laws, Licenses and Orders applicable to, required of or binding on the Business,
or on the Sellers or their respective Assets with respect to the Business,
including without limitation, the FCC License, the Communications Act of 1934,
and PUC Laws, and neither of the Sellers has Knowledge of any basis for any
claim of current or past non-compliance with any such Law, License or Order, in
each case where such non-compliance would be Material to the Business,
operations, Assets, Liabilities, financial condition, or results of operations
of the Sellers, taken as a whole, including, without limitation, the value of
the Sellers, taken as a whole. No notices from any Governmental Authority with
respect to any failure or alleged failure of either of the Sellers, their
respective Assets or the Business to comply with any such Law, License or Order
have been received by either of the Sellers, nor, to the Knowledge either of the
Sellers, are
-9-
<PAGE>
any such notices proposed or threatened. Schedule 3.15 contains a
complete and correct list of all Material Licenses and Orders applicable to,
required of or binding on the Sellers, their respective Assets or the Business,
true and complete copies of which (other than the FCC License) previously have
been made available to the Purchaser.
(b) The Subsidiary holds the FCC License and all other Material Licenses
necessary for or used in the operations of the Business, and the FCC License is,
and all such other Material Licenses are, in full force and effect. Schedule
3.15 contains a true and complete list of the FCC License currently in effect
and all such other Material Licenses (showing, in each case, the expiration
date). Except as set forth on Schedule 3.15, no application, action or
proceeding is pending for the renewal or modification of the FCC License or any
of such other Material Licenses, and no application, action or proceeding is
pending or, to either of the Sellers' Knowledge, threatened that may result in
the denial of the application for renewal, the revocation, modification,
nonrenewal or suspension of the FCC License or any of such other Material
Licenses, the issuance of a cease-and-desist order, or the imposition of any
administrative or judicial sanction with respect to the Business that may
Materially and adversely affect the rights of Purchaser or the Sellers under any
such FCC License or other Material Licenses. All Material returns, reports and
statements required to be filed by the Sellers with the FCC relating to the
Business have been filed and complied with and are complete and correct in all
Material respects as filed.
(c) Except as described in Schedule 3.15, there are no Material capital
expenditures that the Sellers anticipate will be required to be made in
connection with the Sellers' respective Assets or the Business as now conducted
in order to comply with any Law applicable to either of the Sellers, their
respective Assets or the Business as now conducted.
3.16 ENVIRONMENTAL. Except as set forth in Schedule 3.16 or the
Environmental Report and with respect to the Business:
(a) There is no Environmental Litigation (or any Litigation against any
Person whose Liability, or any portion thereof, for Environmental Matters or
under any Environmental Laws either of the Sellers has or, to the Knowledge of
either of the Sellers, may have retained or assumed contractually or by
operation of Law) pending or, to the Knowledge of either of the Sellers,
threatened with respect to (i) the ownership, use, condition or operation of the
Business, the Real Property or any other Asset of either of the Sellers or any
Asset formerly held for use or sale by either of the Sellers or any of their
respective predecessors or any of their respective current or former
subsidiaries, or (ii) any violation or alleged violation of or Liability or
alleged Liability under any Environmental Law or any Order related to
Environmental Matters. To the Knowledge of either of the Sellers, there have not
been any, and there are no, existing violations of (i) any Environmental Law, or
(ii) any Order related to Environmental Matters, with respect to the ownership,
use, condition or operation of the Business, the Real Property or any other
Asset of the Sellers or any Asset formerly held for use or sale by the Sellers
or any of their respective predecessors or any of their respective current or
former subsidiaries. To the Knowledge of either of the Sellers, there are no
past or present actions, activities, circumstances, conditions, events or
incidents, including, without limitation, any Environmental Matter, that could
reasonably be expected to form the basis of (i) any Environmental Litigation
against the Sellers, or (ii) any Litigation against any Person whose Liability
(or any portion thereof) for Environmental Matters or under any Environmental
Laws the Sellers have or may have retained or assumed contractually or by
operation of Law. To the Knowledge of either of the Sellers, neither of the
Sellers or any of their respective predecessors or any of their respective
current or former subsidiaries nor anyone Known to either of the Sellers has
used any Assets or premises of the Sellers or any of their respective
predecessors or any of their respective current or former subsidiaries or any
part thereof for the handling, treatment, storage, or disposal of any Hazardous
Substances except in
-10-
<PAGE>
Material compliance with applicable Environmental Laws. The
disclosure of facts set forth in Schedule 3.16 shall not relieve either of the
Sellers of any of their respective obligations under this Agreement.
(b) To the Knowledge of either of the Sellers, no release, discharge,
spillage or disposal of any Hazardous Substances has occurred or is occurring at
any Assets owned, leased, operated or managed by the Sellers or any of their
respective predecessors or any of their respective current or former
subsidiaries or any part thereof while or before such Assets were owned, leased,
operated or managed by the Sellers.
(c) To the Knowledge of either of the Sellers, no soil or water in, under
or adjacent to any Assets owned, leased, operated or managed, directly or
indirectly, by the Sellers or Assets formerly held for use or sale by the
Sellers or, in either case, any of their respective predecessors or any of their
respective current or former subsidiaries has been contaminated by any Hazardous
Substance while or before such Assets were owned, leased, operated or managed by
the Sellers or any of their respective predecessors or any of their respective
current or former subsidiaries.
(d) To the Knowledge of either of the Sellers, all waste containing any
Hazardous Substances generated, used, handled, stored, treated or disposed of
(directly or indirectly) by the Sellers or any of their respective predecessors
or any of their respective current or former subsidiaries has been released or
disposed of in compliance with all applicable reporting requirements under any
Environmental Laws and there is no Environmental Litigation with respect to any
such release or disposal.
(e) To the Knowledge of either of the Sellers, all underground tanks and
other underground storage facilities presently or previously located at any Real
Property owned, leased, operated or managed by the Sellers or any of their
respective predecessors or any of their respective current or former
subsidiaries or any such tanks or facilities located at any Real Property while
such Real Property was owned, leased, operated, or managed by the Sellers or any
of their respective predecessors or any of their respective current or former
subsidiaries are listed together with the capacity and contents (former and
current) of each such tank or facility in Schedule 3.16. To the Knowledge of
either of the Sellers, none of such underground tanks or facilities is leaking
or has ever leaked, and neither of the Sellers or any of their respective
current or former subsidiaries holds any responsibility or Liability for any
underground tanks or underground facilities at any other location.
(f) To the Knowledge of either of the Sellers, all hazardous waste has been
removed from all Real Property of the Sellers and each of their respective
predecessors and each of their respective current and former subsidiaries in
Material compliance with applicable Environmental Laws.
(g) To the Knowledge of either of the Sellers, the Sellers and each of
their respective predecessors or any of their respective current or former
subsidiaries have complied with all applicable reporting requirements under all
Environmental Laws concerning the disposal or release of Hazardous Substances
and neither of the Sellers or any of their respective predecessors or any of
their respective current or former subsidiaries has made any such reports
concerning any Real Property of the Sellers or concerning the operations or
activities of the Sellers or any of their respective predecessors or any of
their respective current or former subsidiaries.
(h) To the Knowledge of either of the Sellers, no building or other
Improvement or any Real Property owned, leased, operated or managed by the
Sellers contains any asbestos-containing materials.
-11-
<PAGE>
(i) To the Knowledge of either of the Sellers, without limiting the
generality of any of the foregoing, (i) all on-site and off-site locations where
the Sellers or any of their respective predecessors or any of their respective
current or former subsidiaries has disposed or arranged for the disposal of
Hazardous Substances are identified in Schedule 3.16, (ii) none of the on-site
or off-site locations identified in Schedule 3.16 is listed on any federal,
state or local government lists of abandoned disposal sites or sites where
Hazardous Substances have or may have occurred, and (iii) no polychlorinated
biphenyls ("PCB's") are used or stored on or in any real property owned, leased,
operated or managed by the Sellers or any of their respective predecessors or
any of their respective current or former subsidiaries, except in Material
compliance with applicable Environmental Laws.
(j) Schedule 3.16 contains a correct and complete list of all environmental
site assessments and other studies relating to the investigation of the
possibility of the presence or existence of any Environmental Matter with
respect to the Sellers, the Business, any Assets owned, leased, operated or
managed by either of the Sellers or any of their respective predecessors or any
of their respective current or former subsidiaries, and the Sellers have
previously delivered to Purchaser a correct and complete copy of each such
assessment and study.
3.17 LITIGATION AND CLAIMS. Except as disclosed on Schedule 3.17:
(a) There is no Litigation pending or, to the Knowledge of either of the
Sellers, threatened and neither of the Sellers has any Knowledge of any basis
for any such Litigation or any facts or the occurrence of any event which might
give rise to any Litigation;
(b) No Litigation has been pending during the three (3) years prior to the
date hereof that, individually or in the aggregate resulted in an uninsured Loss
in excess of $150,000 or granted any injunctive relief against the Sellers; and
(c) Neither of the Sellers has been advised by any attorney representing it
that there are any "loss contingencies" (as defined in Statement of Financial
Accounting Standards No. 5 issued by the Financial Accounting Standards Board in
March 1975 ("FASB 5")), which would be required by FASB 5 to be disclosed or
accrued in financial statements of the Sellers, were such financial statements
prepared as of the date hereof.
3.18 BENEFIT PLANS.
(a) Schedule 3.18 lists every Employee Benefit Plan of the Sellers. On or
after September 26, 1980, neither of the Sellers or any entity aggregated with
the Sellers under Code Section 414 (for purposes of this Section, an "ERISA
Affiliate") has had an "obligation to contribute" (as defined in ERISA Section
4212) to a "multiemployer plan" (as defined in ERISA Sections 4001(a)(3) and
(3)(37)(A)). No Employee Benefit Plan is or has been a multiemployer plan within
the meaning of Section 3(37) of ERISA.
(b) The Employee Benefit Plans listed in Schedule 3.18 have been or will be
made available to Purchaser for review, including correct and complete copies
of: (i) all trust agreements or other funding arrangements for such Employee
Benefit Plans (including insurance contracts), and all amendments thereto, (ii)
with respect to any such Employee Benefit Plans or amendments, all determination
letters, rulings, opinion letters, information letters, or advisory opinions
issued by the United States Internal Revenue Service, the United States
Department of Labor, or the Pension Benefit Guaranty Corporation after December
31, 1974, (iii) annual reports or returns, audited or unaudited Financial
Statements,
-12-
<PAGE>
actuarial valuations and reports, and summary annual reports
prepared for any Employee Benefit Plan with respect to the most recent three
plan years, and (iv) the most recent summary plan descriptions and any material
modifications thereto.
(c) Except as disclosed in Schedule 3.18, all the Employee Benefit Plans
and the related trusts subject to ERISA comply in all Material respects with and
have been administered in compliance in all Materials respects with, (i) the
applicable provisions of ERISA, (ii) all applicable provisions of the Code
relating to qualification and Tax exemption under Code Sections 401(a) and
501(a) or otherwise applicable to secure intended Tax consequences, (iii) all
applicable state or federal securities Laws, and (iv) all other applicable Laws
and collective bargaining agreements, and neither of the Sellers has received
any notice from any Governmental Authority questioning or challenging such
compliance. All available determination letters and required registrations under
federal and state securities Laws ("Permits") for the Employee Benefit Plans
have been obtained, including, but not limited to, timely determination letters
on the qualification of the ERISA Plans and Tax exemption of related trusts, as
applicable under the Code, and all such Permits continue in full force and
effect. No event has occurred which will or could reasonably be expected to give
rise to disqualification of any such plan or loss of intended Tax consequences
under the Code or to any Tax under Section 511 of the Code.
(d) Except as disclosed in Schedule 3.18, no oral or written representation
or communication with respect to any aspect of the Employee Benefit Plans has
been made to employees of the Sellers prior to the date hereof that is not in
accordance with the written or otherwise preexisting terms and provisions of
such plans. Neither of the Sellers or any administrator or fiduciary of any
Employee Benefit Plan (or any agent of any of the foregoing) has engaged in any
transaction, or acted or failed to act in any manner that could subject the
Sellers or Purchaser to any direct or indirect Material Liability (by indemnity
or otherwise) for breach of any fiduciary, co-fiduciary or other duty under
ERISA. There are no unresolved claims or disputes under the terms of, or in
connection with, the Employee Benefit Plans other than claims for benefits which
are payable in the ordinary course and no Litigation has been commenced with
respect to any Employee Benefit Plan.
(e) Except as disclosed in Schedule 3.18, all Employee Benefit Plan
documents and annual reports or returns, audited or unaudited financial
statements, actuarial valuations, summary annual reports, and summary plan
descriptions issued with respect to the Employee Benefit Plans are correct and
complete in all Material respects, have been timely filed with the IRS and the
United States Department of Labor, have been timely distributed to participants
in the Employee Benefit Plans, and there have been no changes in the information
set forth therein.
(f) No "party in interest" (as defined in Section 3(14) of ERISA) or
"disqualified person" (as defined in Code Section 4975) of any Employee Benefit
Plan has engaged in any Material nonexempt "prohibited transaction" (described
in Code Section 4975 or ERISA Section 406). Except as disclosed in Schedule
3.18, there has been no (i) "reportable event" (as defined in Section 4043 of
ERISA), or event described in Sections 4041, 4042, 4062 (including ERISA Section
4062(e)), 4064, 4069 or 4063 of ERISA, or (ii) termination or partial
termination, withdrawal or partial withdrawal with respect to any of the ERISA
Plans which the Sellers maintain or contribute to or have maintained or
contributed to. Except as disclosed in Schedule 3.18, neither of the Sellers has
incurred any liability under Title IV of ERISA, including any Liability that
could arise under Title IV of ERISA as a result of the Sellers' membership in a
"controlled group" as defined in ERISA ss.ss. 4001(a)(14) and 4001(b)(1).
(g) Except as disclosed in Schedule 3.18, for any ERISA Plan that is an
employee pension benefit plan as defined in ERISA ss. 3(2) ("ERISA Pension
Plan"), the fair market value
-13-
<PAGE>
of such Plan's assets equals or exceeds the present value of all benefits
(whether vested or not) accrued to date by all present or former participants in
such ERISA Pension Plan. For this purpose the assumptions prescribed by the
Pension Benefit Guaranty Corporation for valuing plan assets or liabilities upon
plan termination shall be applied and the term "benefits" shall include the
value of all benefits, rights and features protected under Code ss. 411(d)(6) or
its successors and any ancillary benefits (including disability, shutdown, early
retirement and welfare benefits) provided under any such employee pension
benefit plan and all "benefit liabilities" as defined in ERISA Section
4001(a)(16). Since the date of the most recent actuarial valuation, there has
been (i) no Material change in the financial position of an ERISA Pension Plan,
(ii) no change in the actuarial assumptions with respect to any ERISA Pension
Plan, and (iii) no increase in benefits under any ERISA Pension Plan as a result
of ERISA Pension Plan amendments or changes in any applicable regulation which
is reasonably likely to have, individually or in the aggregate, a Material
effect on the funding status of such ERISA Pension Plan. All contributions with
respect to an Employee Benefit Plan of the Sellers or of an ERISA Affiliate that
is subject to Code Section 412 or ERISA Section 302 have been, or will be,
timely made and there is no Lien or expected to be a Lien under Code Section
412(n) or ERISA Section 302(f) or Tax under Code Section 4971. No ERISA Pension
Plan of either of the Sellers or of an ERISA Affiliate has a "liquidity
shortfall" as defined in Code Section 412(m)(5). No event described in Code
Section 401(a)(29) has occurred or can reasonably be expected to occur with
respect to either of the Sellers ERISA Affiliates. All premiums required to be
paid under ERISA Section 4006 have been paid by the Sellers and by any Person
aggregated with the Sellers under ERISA Sections 4001(a)(14) and 4001(b)(1).
(h) Neither of the Sellers has, or maintains, an Employee Benefit Plan
providing welfare benefits (as defined in ERISA Section 3(1)) to employees after
retirement or other separation of service except to the extent required under
Part 6 of Title I of ERISA or Code Section 4980B or their successors. No
Material Tax under Code Sections 4980B or 5000 has been incurred with respect to
any Employee Benefit Plan and no circumstances exist which could reasonably be
expected to give rise to such Taxes.
(i) Except as disclosed in Schedule 3.18, neither the execution or delivery
of this Agreement or the Other Agreements nor the consummation of the
transactions contemplated by this Agreement will (1) entitle any current or
former employee of the Sellers to severance pay, unemployment compensation or
any payment contingent upon a change in control or ownership of the Station, or
(2) accelerate the time of payment or vesting, or increase the amount, of any
compensation due to any such employee or former employee.
(j) Except as disclosed in Schedule 3.18, all individuals participating in
(or eligible to participate in) any Employee Benefit Plan maintained (or
contributed to) by the Sellers are common-law employees.
3.19 CONTRACTS.
(a) Description.
(i) Real Property. Schedule 3.19(a)(i) is a list or brief description
of all Material Contracts affecting or relating to the Real Property, including,
without limitation, Contracts evidencing Material Liens (including those
referred to in Schedule 3.08).
(ii) Personal Property. Schedule 3.19(a)(ii) is a list of all Contracts
affecting or relating to the Personal Property, including, without limitation,
Contracts evidencing Liens
-14-
<PAGE>
(including those referred to in Schedule 3.08) (other than Contracts
affecting rights in the Personal Property each of which does not involve the
payment by the Sellers of more than $25,000 per year).
(iii) Purchase Orders -- Non-Capital Assets. Schedule 3.19(a)(iii) is a
list of all outstanding Contracts of the Sellers relating to the Business, for
the acquisition or sale of goods, assets or services (other than purchase orders
or other commitments for the acquisition of capital assets), all of which were
executed in the ordinary course of business consistent with past practice of the
Sellers (other than purchase orders and other commitments which do not exceed
$25,000 each).
(iv) Purchase Orders -- Capital Assets. Schedule 3.19(a)(iv) is a list
of all outstanding Contracts of the Sellers relating to the Business, for the
acquisition of capital assets and that were executed in the ordinary course of
business consistent with past practice of the Sellers (other than purchase
orders and other commitments which do not exceed $25,000 each).
(v) Sales. Schedule 3.19(a)(v) is a list or brief description of all
Contracts of the Sellers relating to the Business, for the sale of products or
the performance of services by the Sellers and which exceed $5,000 each.
(vi) Employment; Other Affiliate Contracts. Schedule 3.19(a)(vi)
contains a list of all Material Contracts of the Sellers relating to the
Business, with any employee, officer, agent, consultant, distributor, dealer or
Affiliate of the Sellers (other than those entered into in the ordinary course
of business consistent with past practice that are immediately terminable at
will by the Sellers, as the case may be, without any Liability).
(vii) Sales Representatives. Schedule 3.19(a)(vii) is a list of all
Material Contracts of the Sellers relating to the Business, with any agent,
broker, sales representative of, or any Person in a similar representative
capacity for, the Sellers (other than those entered into in the ordinary course
of business consistent with past practice that are terminable within sixty (60)
days by the Sellers, without Liability).
(viii) Powers of Attorney. Schedule 3.19(a)(viii) is a list of all
powers of attorney given by the Sellers with respect to the Business, whether
limited or general, to any Person continuing in effect.
(ix) Programming, Network Affiliation, Operating and Cable
Retransmission Agreements. Schedule 3.19(a)(ix) is a list of all network
affiliation agreements, operating agreements, cable retransmission agreements
and all programming agreements of the Sellers relating to the Business (correct
and complete copies of which previously have been delivered to Purchaser),
including for each of those agreements the amounts and availability dates of
programming and the dollar amount and schedule of payments thereunder.
(x) Barter and Trade Agreements. Schedule 3.19(a)(x) is a list of all
"barter" and "trade" agreements of the Sellers relating to the Business (correct
and complete copies of which previously have been delivered to Purchaser) and
includes an estimate of the positive or negative trade balances associated with
each such agreement.
(xi) Any Other Contracts. Schedule 3.19(a)(xi) is a list or brief
description of any other Contracts of the Sellers relating to the Business and
that: (A) payments provided for or actually made thereunder by or to the Sellers
in any calendar year exceed $25,000, (B) require performance
-15-
<PAGE>
by the Sellers of any obligation for a period of time extending beyond six
(6) months from the Closing Date or which is not terminable by the Sellers
without penalty upon sixty (60) days or less notice, (C) evidence, create,
guarantee or service indebtedness of the Sellers, (D) establish or provide for
any joint venture, partnership or similar arrangement involving either of the
Sellers, or (E) guarantee or endorse the Liabilities of any other Person.
The lists in all Schedules referred to above are correct and complete as of
the date hereof unless otherwise noted thereon.
(b) Copies. Correct and complete copies of all the written Contracts, and
correct and complete descriptions of all oral Contracts, referred to in Section
3.19(a) have been made available to Purchaser or its designee on or before the
date hereof.
(c) No Default. Neither of the Sellers or, to the Knowledge of either of
the Sellers, any other party is in Default under any of the Contracts or any
Liens referred to in Section 3.19(a) and, to the Knowledge of either of the
Sellers, there is no basis for any claim of Material Default under any of the
foregoing.
(d) Assurances. Each of the Contracts referred to in this Section 3.19 is
in full force and effect and constitutes a valid, legal and binding agreement of
the Seller party thereto and, to the Knowledge of either of the Sellers, the
other parties thereto, enforceable in accordance with its terms except for
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other Laws affecting creditors' rights generally, or general equitable
principles (regardless of whether considered in a proceeding in equity or at
law) or by an implied covenant of good faith and fair dealing, and as otherwise
set forth in Schedule 3.19. Neither of the Sellers is a party to or bound by any
Contract or Contracts that, either separately or in the aggregate has or will
have a Material Adverse Effect with respect to either of the Sellers, their
respective Assets, or the Business. The continuation, validity and effectiveness
of each of the Contracts referred to in this Section 3.19 will not be affected
in any way by the consummation of the transactions contemplated by this
Agreement.
3.20 SUPPLIERS AND CUSTOMERS. Schedule 3.20 sets forth each supplier to
whom payments were made that equaled or exceeded five percent (5%) of either of
the Sellers' aggregate operating expenses with respect to the Business for the
fiscal year ended December 28, 1997 (the "Large Suppliers"). Schedule 3.20 sets
forth each customer or group of related customers from whom payments were
received that equaled or exceeded five percent (5%) of either of the Sellers'
aggregate gross sales with respect to the Business for the fiscal year ended
December 28, 1997 (the "Large Customers"). Except as reflected in Schedule 3.20,
no Large Supplier is a sole source of supply of any good or service to the
Sellers with respect to the Business. To the Knowledge of either of the Sellers,
the relationships of each of the Sellers with its Large Suppliers and Large
Customers are good commercial working relationships and, except as set forth on
Schedule 3.20, neither (i) any of the Large Suppliers or any of the Large
Customers, nor (ii) any Large Supplier who at any time during 1997 was or now is
the sole source of supply of any good or service, has terminated, or, to the
Knowledge of either of the Sellers, made any threat reasonably likely to be
acted upon to terminate, its relationship with the Sellers or has during the
last twelve (12) months Materially decreased or Materially limited, or, to the
Knowledge of either of the Sellers, made any threat reasonably likely to be
acted upon to Materially decrease or Materially limit, its services, supplies or
materials to either of the Sellers or its usage or purchase of the goods or
-16-
<PAGE>
services of the Sellers. Neither of the Sellers has any Knowledge or belief that
any of the Large Suppliers or any of the Large Customers intends to terminate or
otherwise modify adversely to the Sellers its relationship with the Sellers or
to decrease or limit its services, supplies or materials to the Sellers or its
usage or purchase of the goods or services of the Sellers, and the acquisition
of the Assets by Purchaser will not, to the Knowledge of either of the Sellers,
adversely affect the relationship of the Business or of the Sellers with any of
the Large Suppliers or any of the Large Customers.
3.21 LABOR MATTERS. Schedule 3.21 contains a correct and complete list of
all employees of the Sellers with respect to the Business whose direct annual
compensation exceeds $50,000. Except as disclosed on Schedule 3.21, the
employment of all employees of the Sellers is terminable at will by the Sellers,
without any penalty or severance obligation incurred by the Sellers. Except as
set forth on Schedule 3.21 and other than in the ordinary course of business
consistent with past practices, neither of the Sellers will owe any amounts to
any of its employees as of the Closing Date, including, without limitation, any
amounts incurred for wages, bonuses, vacation pay, sick leave or any severance
obligations other than amounts owed with respect to the then current pay period.
Except as and to the extent set forth in Schedule 3.21, (i) neither of the
Sellers is a party to any union agreement or collective bargaining agreement or
work rules or practices agreed to with any labor organization or employee
association applicable to any employees of the Sellers and, to the Knowledge of
either of the Sellers, no attempt to organize any of the employees of the
Business has been made, proposed or threatened in the past three years, (ii)
neither of the Sellers is, or within the past three years has been, subject to
any Equal Employment Opportunity Commission charges or other claims of
employment discrimination made against it, (iii) no Wage and Hour Department
investigations have been made in the past 3 years of the Sellers, (iv) no labor
strike, dispute, slowdown, stoppage or lockout is pending or, to the Knowledge
of either of the Sellers, threatened against or affecting the Sellers, their
respective Assets or the Business and during the past five (5) years there has
not been any such action, (v) no unfair labor practice charge or complaint
against either of the Sellers is pending or, to the Knowledge of either of the
Sellers, threatened before the National Labor Relations Board or any similar
Governmental Authority, and (vi) neither of the Sellers has received any formal
notice that any of the employees listed on Schedule 2.21 will terminate or
contemplates terminating his or her employment currently or at any time within
sixty (60) days after the Closing Date or will otherwise not be available to the
Sellers. Since the enactment of the Worker Adjustment and Retraining
Notification Act (the "WARN Act"), neither of the Sellers has effectuated (a) a
"plant closing" (as defined in the WARN Act) affecting any site of employment or
one or more facilities or operating units within any site of employment or
facility of the Sellers; or (b) a "mass layoff" (as defined in the WARN Act)
affecting any site of employment or facility of the Sellers; nor has either of
the Sellers been affected by any transaction or engaged in layoffs or employment
terminations sufficient in number to trigger application of any similar state or
local Law. Except as set forth in Schedule 3.21, none of the Sellers' employees
has suffered an "employment loss" (as defined in the WARN Act) since six (6)
months prior to the date hereof.
3.22 BROKERS AND FINDERS. Except as set forth on Schedule 3.22, no finder
or any agent, broker or other Person acting pursuant to authority of either of
the Sellers is entitled to any commission or finder's fee in connection with the
transactions contemplated by this Agreement.
3.23 INTERESTED TRANSACTIONS. Except as set forth in Schedule 3.23, neither
of the Sellers is a party to any Contract or other transaction with any
Affiliate of the Sellers, any Related Party of any Affiliate of the Sellers
(other than as a stockholder or employee of either of the Sellers), or any
Person in which any of the foregoing (individually or in the aggregate)
beneficially or legally owns, directly or indirectly, five percent (5%) or more
of the equity or voting interests (other than, in each case, Contracts or
transactions between the Sellers). Each of such Contracts and other transactions
described in the preceding sentence was negotiated on an arm's length basis,
contains pricing terms that reflected fair market value at the time entered into
and otherwise contains terms and conditions comparable to those customarily
contained in similar transactions between unrelated parties. Except as described
in Schedule 3.23, none of
-17-
<PAGE>
the Persons described in the first sentence of this Section 3.23 owns, or
during the last three (3) years has owned, directly or indirectly, beneficially
or legally, (individually or in the aggregate) five percent (5%) or more of the
equity or voting interests of any Person that competes with either of the
Sellers or the Business.
3.24 OFFICERS, DIRECTORS AND BANK ACCOUNTS. Schedule 3.24 lists (i) the
names of all officers and directors of each of the Sellers and (ii) the name and
location of each bank or other institution in which either of the Sellers has
any deposit account or safe deposit box in which either of the Sellers has any
interest or access, all account numbers and names of all Persons authorized to
draw thereon or to have access thereto.
3.25 STATEMENTS TRUE AND CORRECT. No representation or warranty made by
either of the Sellers, nor any statement, certificate or instrument furnished or
to be furnished to Purchaser pursuant to this Agreement, the Other Agreements or
any other document, agreement or instrument referred to herein or therein,
including, without limitation, the Financial Statements, contains or will
contain any untrue statement of fact or omits or will omit to state a Material
fact necessary to make the statements contained therein not misleading in light
of the circumstances under which they were made.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Sellers that:
4.01 ORGANIZATION. Purchaser is a corporation duly organized, validly
existing, and in good standing under the laws of the State of South Carolina,
with the corporate power and authority to enter into the transactions
contemplated hereunder and under the Other Agreements.
4.02 CAPACITY AND VALIDITY. Purchaser has the full corporate power and
authority necessary to enter into and perform its obligations under this
Agreement and the Other Agreements to which it is a party and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement and the Other Agreements will have been approved
by all necessary action of the Board of Directors of Purchaser on or before
Closing. This Agreement has been, and the Other Agreements will be when executed
and delivered, duly executed and delivered by duly authorized officers of
Purchaser, and the Agreement and each of the Other Agreements constitutes, or
will constitute when executed and delivered, the legal, valid and binding
obligation of Purchaser, enforceable against Purchaser in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws relating
to or affecting creditors' rights generally or general equitable principles
(regardless of whether considered in a proceeding in equity or at law) or by an
implied covenant of good faith and fair dealing.
4.03 NO CONFLICT. Except as disclosed on Schedule 4.03 and assuming
compliance with the Hart-Scott Act and the receipt of all necessary FCC
approvals, neither the execution, delivery and performance of this Agreement and
the Other Agreements to which it is a party by Purchaser nor the consummation of
the transactions contemplated hereby or thereby, will (i) conflict with or
result in a violation, contravention or breach of any of the terms, conditions
or provisions of the Articles of Incorporation, as amended, or By-laws, as
amended, of Purchaser, (ii) result in a Default under, or require the consent or
approval of any party to, Contract or License of Purchaser, (iii) result in the
violation of any Law or Order applicable to Purchaser, or (iv) result in the
creation or imposition of any Lien applicable to Purchaser, except in each case
as would not have a Material Adverse Effect.
-18-
<PAGE>
4.04 BROKERS AND FINDERS. Except as set forth in Schedule 4.04, no finder
or any agent, broker or other Person acting pursuant to authority of Purchaser
is entitled to any commission or finder's fee in connection with the
transactions contemplated by this Agreement.
4.05 QUALIFICATION OF PURCHASER. Purchaser is fully qualified under the
Communications Act of 1934, as amended, and the rules, regulations and written
policies of the FCC to assume control and operation of the Station and, to
Purchaser's commercially reasonable knowledge and belief, there exists no reason
for the FCC to refuse to consent to the assignment of the broadcast License to
Purchaser.
4.06 FINANCING. Purchaser has all necessary financial resources or has
secured a binding commitment for all financing necessary for Purchaser to
consummate the transactions contemplated by this Agreement.
4.07 STATEMENTS TRUE AND CORRECT. No representation or warranty made by
Purchaser, nor any statement, certificate or instrument furnished or to be
furnished to the Sellers pursuant to this Agreement, the Other Agreements or any
other document, agreement or instrument referred to herein or therein, contains
or will contain any untrue statement of fact or omits or will omit to state a
Material fact necessary to make the statements contained therein not misleading
in light of the circumstances under which they were made.
ARTICLE V
COVENANTS AND ADDITIONAL AGREEMENTS OF THE SELLERS AND PURCHASER
5.01 CONDUCT OF BUSINESS. Prior to the Closing Date, except with the prior
written consent of Purchaser and except as necessary to effect the transactions
contemplated in this Agreement, each of the Sellers shall, with respect to the
Business:
(a) conduct the Business in substantially the same manner as presently
being conducted, and refrain from entering into any transaction or Contract
other than in the ordinary course of business consistent with past practice,
except as otherwise contemplated by this Agreement;
(b) confer on a regular and frequent basis with Purchaser to report
Material operational matters and to report the general status of ongoing
operations;
(c) notify Purchaser of any unexpected emergency or other change in
the normal course of the Business or the operation of the Assets, and of any
Litigation (or communications indicating that the same may be contemplated),
affecting the Business or any Material Assets, and keep Purchaser fully informed
of such events and permit its representatives prompt access to all materials
prepared in connection therewith in each case where such emergency, change,
Litigation or other event could cause a Material Adverse Effect;
(d) except in the ordinary course of business consistent with past
practice, not make any Material capital expenditure;
(e) not take any action, or omit to take any action, that would cause
the representations and warranties contained in Article III hereof to be
incorrect or incomplete in any Material respect;
-19-
<PAGE>
(f) promptly notify Purchaser in writing of any Material Adverse
Change with respect to the Sellers or the Business, or any condition or event
which threatens to result in a Material Adverse Change with respect to the
Sellers or the Business;
(g) notwithstanding the $1,000,000 threshold contained in the
definition of Material Adverse Change in Article X, use all reasonable efforts
to promptly remedy any adverse change, condition or event that causes or is
reasonably likely to cause the Station to be or go off the air; and
(h) not make any agreement or commitment which will result in or cause
to occur a Default of any of the items contained in paragraphs (a) through (g)
above.
Notwithstanding any of the foregoing provisions of this Section 5.01, prior to
the Closing, control of the operation of the Station shall remain exclusively
with the Sellers, and the Subsidiary shall be permitted to merge with and into a
limited liability company, the sole member of which shall be the Company.
5.02 RIGHT OF INSPECTION; ACCESS. In order to allow Purchaser to conduct
its due diligence investigation, including, without limitation, environmental
due diligence, the Sellers shall give to Purchaser and its designee, during
normal working hours, full and free access to all of their respective Assets,
Contracts, reports and other records and shall furnish to Purchaser and its
designee all additional financial, legal and other information with respect to
the Assets and the Business that Purchaser may reasonably request. Each of the
Sellers shall also allow and arrange for Purchaser and its designee free and
full access and opportunity, during normal business hours, to consult and meet
with the officers, directors, employees, attorneys, accountants and other agents
of the Sellers. Each of the Sellers shall instruct such individuals to cooperate
fully with Purchaser and its designee. Purchaser and its designee shall have the
right to make copies of any of the records referred to above. Purchaser agrees
to indemnify against and hold the Sellers harmless from any claim for Liability,
costs, expenses (including reasonable attorneys' fees actually incurred),
damages or injuries arising out of or resulting from the inspection of the
Sellers by Purchaser or its agents.
5.03 OTHER OFFERS AND EXCLUSIVE DEALING. Unless and until this Agreement is
terminated prior to Closing pursuant to Section 9.01 and except for the
transactions contemplated in that certain Amended and Restated Stock Purchase
Agreement dated as of June 22, 1998 by and among Busse Broadcasting Corporation,
South Street Corporate Recovery Fund I, L.P., Greycliff Leveraged Fund 1993,
L.P., South Street Leveraged Corporate Recovery Fund, L.P., South Street
Corporate Recovery Fund I (International), L.P. and Gray Communications Systems,
Inc., (the "Amended and Restated Stock Purchase Agreement") and all agreements
related thereto, the Sellers shall deal exclusively with Purchaser with respect
to the sale of the Assets or properties of the Sellers relating to the Business.
In addition, unless and until this Agreement is terminated prior to Closing
pursuant to Section 9.01, neither of the Sellers, acting in any capacity, shall,
and the Sellers shall direct their officers, directors, limited partners,
general partners (as applicable), financial advisors, accountants and counsel
not to, either directly or indirectly, through the Sellers, any officer,
director, employee, agent or otherwise, (a) solicit, initiate or encourage
submission of proposals or offers from any Person relating to any purchase of
the Assets relating to the Business, or (b) approve or undertake any such
transaction. If, notwithstanding the foregoing, the Sellers or any of their
respective stockholders, directors, partners, officers, employees or agents
shall receive any written proposal or inquiry regarding any such transaction,
the Sellers shall promptly communicate to Purchaser the terms of any such
proposal or offer upon Knowledge or receipt of such written proposal or offer.
5.04 CONFIDENTIALITY. For a period of one (1) year from and after the date
hereof and except for the transactions contemplated in the Amended and Restated
Stock Purchase Agreement and all
-20-
<PAGE>
agreements relating thereto, each of Purchaser and Sellers agree that it will
not, and will use reasonable efforts to ensure that none of its
representatives or Affiliates will, use in the conduct of its business (except
as contemplated by this Agreement), or disclose to or file with any other Person
(other than financing sources, financial advisors, accountants and attorneys for
the foregoing who will be informed of the confidential nature of such
information and who have a need to know such information), (a) any confidential
or non-public information relating to the other parties to this Agreement or (b)
the existence of this Agreement or the fact of the transactions contemplated
hereby, except (i) for a disclosure that is required by Law or by a Governmental
Authority or is reasonably believed to be so required, including, without
limitation, disclosures to the FCC and the Department of Justice for purposes of
obtaining consents to the transactions contemplated hereby and disclosures to
the Securities and Exchange Commission and related public disclosures (in
connection with public offerings or otherwise); (ii) information that is
ascertainable or obtained from public or published information; (iii)
information received from a Third Party not known to the disclosing party to be
under an obligation to keep such information confidential; (iv) information
independently developed by the disclosing party; or (v) information disclosed to
or filed with any Persons necessary to obtaining the consents or the equity and
debt financing relating to the transactions contemplated by this Agreement.
Notwithstanding the foregoing, (i) neither Purchaser nor its designee, in the
course of any investigation it shall deem necessary and desirable in connection
with the transactions contemplated by this Agreement, shall be prohibited from
discussing the Sellers, their respective Assets and the Business with others
having business dealings with the Sellers, and (ii) the foregoing provisions of
this Section 5.04 shall not apply to Purchaser or any of its representatives or
Affiliates after consummation of the transactions contemplated hereby at the
Closing with respect to information relating to the Sellers. If the transaction
contemplated by this Agreement is not consummated, each party will return or
destroy as much of such written information as the party furnishing such
information may reasonably request.
5.05 CONSENTS AND APPROVALS. Each of the Sellers shall obtain the waiver,
consent and approval of all Persons whose waiver, consent or approval (i) is
required in order to consummate the transactions contemplated by this Agreement,
or (ii) is required by any Material Contract, Order, Law or License to which
either of the Sellers is a party or subject on the Closing Date and that relates
to the Business, and Purchaser shall cooperate with the Sellers in connection
therewith. All written waivers, consents and approvals obtained by the Sellers
shall be produced at Closing in form and content reasonably satisfactory to
Purchaser.
5.06 SUPPLYING OF FINANCIAL STATEMENTS. The Sellers shall make available to
Purchaser within twenty (20) days following the end of each month true and
complete copies of all unaudited monthly financial statements of each of the
Sellers for each calendar month ending subsequent to the date hereof and prior
to the Closing Date in the format historically utilized internally by the
Sellers.
5.07 QUALIFICATION AND CORPORATE EXISTENCE. Each of the Sellers shall
deliver to Purchaser (i) certificates of the Secretary of State of the State of
Delaware, dated within ten (10) days prior to the Closing Date, stating that
each of the Sellers is a corporation in good standing under the laws of the
State of Delaware, and has paid all applicable franchise and other fees and
Taxes due to such state and (ii) certificates of the appropriate officials of
the states and foreign jurisdictions listed on Schedule 3.02, each dated not
more than ten (10) days prior to the Closing Date, stating that each of the
Sellers is duly qualified and in good standing to transact business as a foreign
corporation as stated in Section 3.02 in each such state and foreign
jurisdiction and has paid all applicable franchise and other fees and Taxes due
to each such state and foreign jurisdiction.
5.08 PUBLIC ANNOUNCEMENTS. Upon execution of this Agreement, the Sellers
shall issue a press release and public announcement regarding this Agreement and
the transactions contemplated
-21-
<PAGE>
hereby, such press release to be reasonably satisfactory to Purchaser. Except as
permitted by the foregoing sentence or Section 5.04, neither Purchaser or
Sellers, nor any of their representatives or Affiliates, shall make any public
announcement with respect to this Agreement or the transactions contemplated
hereby without the prior consent of the other parties hereto unless required by
Law or judicial process, in which case notification shall be given to the other
parties hereto prior to such disclosure.
5.09 CLOSING CONDITIONS. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to take, or cause to be taken, all
commercially reasonable actions to consummate the transactions contemplated by
this Agreement and to satisfy the conditions precedent to Closing set forth in
Article VII and Article VIII of this Agreement.
5.10 SUPPLEMENTS TO SCHEDULES. The Sellers shall from time to time after
the date hereof, supplement or amend the Schedules referred to in Article III
with respect to any matter arising after the date hereof which, if existing or
occurring at the date hereof, would have been required to be set forth or
described in such Schedules. Purchaser may unilaterally extend the Closing Date
if necessary to allow Purchaser five (5) business days to review such
supplements to the Schedules prior to the Closing Date. If, in Purchaser's
reasonable determination, any such supplements to the Schedules reveal any
Material Adverse Change with respect to the Sellers or the Business, or any
condition or event which threatens to result in a Material Adverse Change with
respect to the Sellers or the Business, Purchaser may, subject to the Sellers'
right to cure any such Material Adverse Change, terminate this Agreement
pursuant to Section 9.01.
5.11 CERTAIN TAX MATTERS.
(a) Purchaser, on the one hand, and the Sellers, on the other hand,
shall provide the other parties to this Agreement, at the expense of the
requesting party, with such assistance as may reasonably be requested by any of
them in connection with the preparation of any Tax Return, any audit or other
examination by any Governmental Authority, or any judicial or administrative
proceedings relating to any Liability for Taxes, and each will retain and
provide the requesting party with any records or information that may be
relevant to any of the foregoing.
(b) The Sellers shall prepare and file on or before the due date
therefor (including any extensions thereof) all Tax Returns and amendments
thereto required to be filed by the Sellers on or before the Closing Date, and
each of the Sellers shall pay, or cause to be paid, all Taxes (including
estimated taxes) due on such Tax Return or which are otherwise required to be
paid at any time prior to or during such period. Such Tax Returns shall be
prepared in accordance with the most recent Tax practices as to elections and
accounting method.
5.12 EXPENSES.
(a) Except as provided below, regardless of whether the transactions
contemplated by this Agreement are consummated, the Sellers shall be responsible
for all expenses and fees incurred by them in connection with the transactions
contemplated hereby and Purchaser shall be responsible for all expenses and
costs incurred by it in connection with the transactions contemplated hereby. In
no event shall any of the Assets be utilized for or reduced by the payment of
any such fees or expenses.
-22-
<PAGE>
(b) At the Closing the Sellers shall pay out of the Purchase Price all
Taxes, if any, relating to the transfer of the Assets to Purchaser. The Sellers
shall file all necessary documentation and Tax Returns required to be filed by
them with respect to such Taxes.
(c) The Sellers shall bear the costs and expenses associated with
delivery of the title documents described in Section 7.11.
5.13 FURTHER ASSURANCES. At any time and from time to time after the
Closing, the Sellers shall, at the request of Purchaser, take any and all
actions necessary to fulfill their respective obligations hereunder, to put
Purchaser in actual possession and control of the Assets and execute and deliver
such further instruments of conveyance, sale, transfer and assignment, and take
such other actions necessary or desirable to effectuate, record or perfect the
transfer of the Assets to Purchaser free and clear of all Liens, to confirm the
title of the Assets to Purchaser, to assist Purchaser in exercising rights
relating thereto, or to otherwise effectuate or consummate any of the
transactions contemplated hereby.
5.14 DELIVERY OF BOOKS AND RECORDS. The Sellers shall deliver to Purchaser
at the Closing all original documents, books and records pertaining to the
Assets. The Sellers may retain copies of any of the foregoing for their own use.
Without limiting the generality of the foregoing, the Sellers shall deliver to
Purchaser at the Closing all documents and records relating to the Intellectual
Property, including without limitation, Certificates of Registration for all
letters patent, trademarks and service marks listed on Schedule 3.11 and all
such documents relating thereto.
5.15 FCC MATTERS. Prior to the execution hereof, the Sellers and
Purchaser's designee have filed with the FCC applications requesting the FCC's
written consent to the transactions contemplated by this Agreement. Purchaser
shall reasonably cooperate with the Sellers and Purchaser or Purchaser's
designee in prosecuting such FCC applications and shall not take any action that
is reasonably likely to adversely affect, delay or interfere with obtaining FCC
approval.
5.16 THIRD PARTY DESIGNATION. At the request of Purchaser, the Sellers
agree to convey the Assets and any documents relating thereto to any third party
designated in writing by Purchaser and approved by Sellers; it being recognized,
acknowledged and agreed that Gray Communications Systems, Inc. or its subsidiary
is an acceptable designee.
5.17 HSR FILINGS. Purchaser or Purchaser's designee and Sellers shall, as
promptly as practicable following the execution of this Agreement, and in
cooperation with each other, file with the Department of Justice and the Federal
Trade Commission the premerger notification forms and any other documents
required under the HSR Act, and each shall use its best efforts to obtain
earliest termination of all waiting periods under the HSR Act.
5.18 FURTHER ACTIONS. Subject to the terms and conditions of this
Agreement, the Sellers and Purchaser each agrees to use all reasonable efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective the
transactions contemplated in this Agreement and to satisfy the conditions
hereto, in each case in as prompt a manner as is reasonably possible.
-23-
<PAGE>
ARTICLE VI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION
6.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ACKNOWLEDGMENT OF
PURCHASER RELIANCE. All of Sellers' and Purchaser's representations, warranties,
covenants, and agreements as set forth in this Agreement shall survive the date
hereof for a period of one (1) year. Sellers and Purchaser acknowledge and agree
that Purchaser has had an opportunity to perform an investigation of the
Business and the Assets; however, no investigation by Purchaser will diminish or
obviate any of the representations, warranties, covenants, indemnities or
agreements made or to be performed by either Seller pursuant to this Agreement
or Purchaser's right to fully rely upon such representations, warranties,
covenants, indemnities and agreements.
6.02 INDEMNIFICATION BY SELLERS. Each Seller, jointly and severally, agrees
to indemnify, defend, and hold harmless Purchaser (and each of its directors,
officers, shareholders, employees, affiliates and assigns) from and against any
and all Losses asserted against, imposed upon or incurred by any of the
foregoing by reason of, resulting from, arising out of, based upon or otherwise
in respect of the following notwithstanding any actual or alleged negligence of
any of the Persons indemnified hereunder:
(a) any inaccuracy in any representation or warranty made by either
Seller pursuant to this Agreement;
(b) any breach of any covenant or agreement made or to be performed
by either Seller pursuant to this Agreement;
(c) any Undisclosed Liability;
(d) any Liability for any Taxes of either Seller that either accrued
on or before the date hereof or arose out of or relate to either Seller or the
operations of the Business on or before the date hereof; and
(e) any Retained Liability.
Sellers, acting collectively, shall have the right at their own cost and expense
to undertake to defend against any claim or cause of action under the hold
harmless and indemnity provisions of this Section 6.02. Purchaser agrees to
provide written notice of any Third Party claims which may arise under this
Section 6.02 promptly after Purchaser's receipt of notice of any such claim from
any Third Party. Failure to provide such written notice within the time
specified shall not constitute a waiver of the provisions of this Section by
Purchaser, except to the extent that such failure shall have prejudiced either
Seller's rights and abilities to defend a lawsuit that is the basis of such a
claim.
6.03. INDEMNIFICATION BY PURCHASER. Purchaser agrees to indemnify, defend
and hold harmless each Seller (and its respective directors, officers,
employees, affiliates and assigns) from and against all Losses asserted against,
imposed upon or incurred by any of the foregoing by reason of, resulting from,
arising out of, based upon or otherwise in respect of the following
notwithstanding any actual or alleged negligence of any of the Persons
indemnified hereunder:
-24-
<PAGE>
(a) any inaccuracy in any representation or warranty made by
Purchaser pursuant to this Agreement;
(b) any breach of any covenant or agreement made or to be performed
by Purchaser pursuant to this Agreement; and
(c) any Assumed Liability.
Purchaser shall have the right at its own cost and expense to undertake to
defend against any claim or cause of action under the hold harmless and
indemnity provisions of this Section 6.03. Each Seller agrees to provide written
notice of any Third Party claims that may arise under this Section 6.03 promptly
after Sellers' receipt of notice of any such claim from any Third Party. Failure
to provide such written notice within the time specified shall not constitute a
waiver of the provisions of this Section by Sellers, except to the extent that
such failure shall have prejudiced Purchaser's rights and abilities to defend a
lawsuit that is the basis of such a claim.
6.04 INDEMNIFICATION PAYMENTS. Subject to the terms hereof, a party
obligated to make indemnification payments pursuant to this Agreement shall pay
to the indemnified party the full amount of any and all Losses (other than
Losses resulting from a Third Party claim) within ten (10) days of receipt of
the notice thereof and the full amount of any Loss resulting from a Third Party
claim within ten (10) days of the date such Litigation is terminated or the date
a final judgment or award is rendered and no appeal is taken, and thereafter the
amount of such Loss shall bear interest at a rate equal to the lesser of two
percent (2%) per month or the maximum amount permitted by Law.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction, on or before the Closing
Date, of each and every one of the following conditions, all or any of which may
be waived, in whole or in part, by Purchaser for purposes of consummating such
transactions, but without prejudice to any other right or remedy which Purchaser
may have hereunder as a result of any misrepresentation by, or breach of any
agreement, covenant or warranty of the Sellers contained in this Agreement or
any Other Agreement:
7.01 REPRESENTATIONS TRUE AND COVENANTS PERFORMED AT CLOSING. The
representations and warranties made by the Sellers shall be correct and complete
in all Material respects on the Closing Date with the same force and effect as
if such representations and warranties had been made on and as of the Closing
Date. Each of the Sellers shall have duly performed and complied in all Material
respects with all of the agreements, covenants, acts and undertakings to be
performed or complied with by it in all Material respects on or prior to the
Closing Date. Each of the Sellers shall have delivered to Purchaser a
certificate or certificates dated as of the Closing Date certifying as to the
fulfillment of the conditions of this Section 7.01. Notwithstanding any other
provision of this Agreement to the contrary, for purposes of this Section 7.01,
all Materiality qualifications contained in the representations and warranties
made by the Sellers shall be disregarded and given no effect.
7.02 INCUMBENCY CERTIFICATE. Purchaser shall have received an appropriate
incumbency certificate or certificates, dated the Closing Date, certifying the
incumbency of all officers of the Sellers.
-25-
<PAGE>
The certificate or certificates shall contain specimens of the signatures of the
officers whose incumbency is certified and shall be executed by officers of the
Sellers other than officers whose incumbency is certified.
7.03 CERTIFIED COPIES OF RESOLUTIONS. Purchaser shall have received copies,
certified by the duly qualified and acting Secretary or Assistant Secretary of
the Sellers, of resolutions adopted by the Board of Directors of the Sellers.
7.04 OPINIONS OF COUNSEL. Purchaser shall have received (i) a written
opinion of Winston & Strawn, counsel to the Sellers, dated the Closing Date and
substantially in form and substance reasonably satisfactory to Purchaser and its
counsel, and (ii) a written opinion of Pepper & Corazzini L.L.P., FCC counsel to
the Sellers, dated the Closing Date and substantially in the form of Exhibit
7.04(ii) attached hereto and made a part hereof by this reference.
7.05 NO MATERIAL ADVERSE CHANGE. There shall not have occurred any Material
Adverse Change, or any condition or event that is reasonably likely to cause a
Material Adverse Change, with respect to the Assets or the Business, or either
of the Sellers with respect to the Business, from the Balance Sheet Date. Each
of the Sellers shall have delivered to Purchaser a certificate or certificates
dated as of the Closing Date executed by the Sellers certifying the foregoing
statement.
7.06 NO INJUNCTION, ETC. No Litigation, Law, Order or legislation shall
have been instituted, threatened or proposed by a Third Party before any court
or Governmental Authority to enjoin, restrain, prohibit or obtain damages in
respect of this Agreement or the consummation of the transactions contemplated
hereby, if such Litigation, Law, Order or legislation, in the reasonable
judgment of Purchaser, would make it inadvisable to consummate the transactions
contemplated hereby.
7.07 APPROVAL OF LEGAL MATTERS. All actions, proceedings, instruments and
documents reasonably deemed necessary or appropriate by Purchaser or its
attorneys to effectuate this Agreement and to consummate the transactions
contemplated hereby shall have been approved by such attorneys in the exercise
of their reasonable discretion.
7.08 FCC APPROVALS. The FCC shall have given all requisite approvals and
consents, without any condition or qualification Materially adverse to
Purchaser, Purchaser's designee, or the Sellers or Materially adverse to the
operations of the Business, to the assignment of the FCC License to Purchaser or
Purchaser's designee as provided in this Agreement (whether or not any appeal or
request for reconsideration or review is pending or the time for filing any
appeal or request for reconsideration or review, or for any sua sponte action by
the FCC with similar effect has expired), including without limitation, any
Materially Adverse Condition on the acquisition or operation of the Station by
Purchaser or Purchaser's designee.
7.09 HART-SCOTT APPROVAL. All waiting periods applicable to this Agreement
and the transactions contemplated hereby under the Hart-Scott Act shall have
expired or been terminated.
7.10 SALES AND USE TAXES. The Sellers shall have used their reasonable best
efforts to obtain and deliver to Purchaser an updated certificate or
certificates or letter of good standing from the Michigan and Wisconsin
Departments of Revenue (or similar Taxing authorities) and from any other state
and foreign Tax authority listed on Schedule 3.02 stating that no sales or use
Taxes are due relating to the Business or the Assets or operations of the
Station prior to Closing.
-26-
<PAGE>
7.11 TITLE DOCUMENTS. Purchaser shall have received an owner's title
insurance policy (or an endorsement to an existing owner's title insurance
policy) for each parcel of the Owned Real Property bringing forward the
effective date of the policy to the Closing Date subject to no additional Liens
other than Permitted Liens and reflecting no change in ownership of the Owned
Real Property. With respect to each parcel of Leased Real Property in which
either of the Sellers is the lessee, Purchaser shall have received a leasehold
insurance policy insuring either of the Sellers, as the case may be, subject to
no Liens other than Permitted Liens and a current updated and revised ALTA
survey. Each of the title insurance policies described in this Section 7.11
shall contain zoning endorsements in form and substance reasonably satisfactory
to Purchaser and shall be paid equally by the Sellers and Purchaser. The title
insurance commitment for the owner's title insurance policy for the Owned Real
Property in Eau Claire County, Wisconsin will be endorsed to remove exception
No. 21 relating to a mortgage held by Chemical Bank so that the policy when
issued will contain no special exception for the mortgage held by Chemical Bank,
but will reference the estate, right, title and interest of Americus (successor
to Sage Broadcasting) and all parties claiming by, through or under Americus.
7.12 CLOSING OF WALB AGREEMENT. At the time of Closing, all parties to that
certain Asset Purchase Agreement by and among Cosmos Broadcasting Corporation,
WALB-TV, Inc. and WALB Licensee Corp. dated as of June 22, 1998 (the "WALB
Agreement") shall be ready, willing and able to consummate the transactions
contemplated by the WALB Agreement.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS
The obligations of the Sellers to consummate the transactions contemplated
by this Agreement shall be subject to the satisfaction, on or before the Closing
Date, of each and every one of the following conditions, all or any of which may
be waived, in whole or in part, by the Sellers for purposes of consummating such
transactions, but without prejudice to any other right or remedy which the
Sellers may have hereunder as a result of any misrepresentation by, or breach of
any agreement, covenant or warranty of Purchaser contained in this Agreement or
any Other Agreement:
8.01 REPRESENTATIONS TRUE AND COVENANTS PERFORMED AT CLOSING. The
representations and warranties made by Purchaser shall be correct and complete
in all Material respects on the Closing Date with the same force and effect as
if such representations and warranties had been made on and as of the Closing
Date. Purchaser shall have duly performed and complied with all of the
agreements, covenants, acts and undertakings to be performed or complied with by
it on or prior to the Closing Date. Purchaser shall have delivered to the
Sellers a certificate dated as of the Closing Date certifying as to the
fulfillment of the conditions of this Section 8.01. Notwithstanding any other
provision of this Agreement to the contrary, for purposes of this Section 8.01,
all Materiality qualifications contained in the representations and warranties
made by Purchaser shall be disregarded and given no effect.
8.02 INCUMBENCY CERTIFICATE. The Sellers shall have received an incumbency
certificate or certificates dated the Closing Date certifying the incumbency of
all officers of Purchaser who have executed this Agreement or documents in
connection with this Agreement. The certificate or certificates shall contain
specimens of the signatures of each of the officers whose incumbency is
certified and shall be executed by an officer of Purchaser other than an officer
whose incumbency is certified.
8.03 CERTIFIED COPIES OF RESOLUTIONS. The Sellers shall have received copies,
duly certified by the duly qualified and acting Secretary or Assistant Secretary
of Purchaser, of resolutions
-27-
<PAGE>
adopted by the Board of Directors of Purchaser approving this Agreement and the
consummation of the transactions contemplated herein.
8.04 NO INJUNCTION, ETC. No Litigation, Law, Order or legislation shall
have been instituted, threatened or proposed by a Third Party before any court
or Governmental Authority to enjoin, restrain, prohibit or obtain damages in
respect of this Agreement or the consummation of the transactions contemplated
hereby, if such Litigation, Law, Order or legislation, in the reasonable
judgment of Purchaser, would make it inadvisable to consummate the transactions
contemplated hereby.
8.05 HART-SCOTT ACT APPROVAL. All waiting periods applicable to this
Agreement and the transactions contemplated hereby under the Hart-Scott Act
shall have expired or been terminated.
8.06 APPROVAL OF LEGAL MATTERS. All actions, proceedings, instruments and
documents reasonably deemed necessary or appropriate by the Sellers or their
attorneys to effectuate this Agreement and to consummate the transactions
contemplated hereby shall have been approved by such attorneys in the exercise
of their reasonable discretion.
8.07 FCC APPROVALS. The FCC shall have given all requisite approvals and
consents, without any condition or qualification Materially adverse to
Purchaser, Purchaser's designee, or the Sellers or Materially adverse to the
operations of the Business or to the assignment of the FCC License to Purchaser
or Purchaser's designee as provided in this Agreement (whether or not any appeal
or request for reconsideration or review is pending or the time for filing any
appeal or request for reconsideration or review, or for any sua sponte action by
the FCC with similar effect has expired), including without limitation, any
Materially Adverse Condition on the acquisition or operation of the Station by
Purchaser or Purchaser's designee.
ARTICLE IX
TERMINATION
9.01 CAUSES FOR TERMINATION. This Agreement and the transactions contemplated
by this Agreement may be terminated at any time prior to the Closing Date: (i)
by the mutual consent of the Sellers and Purchaser; (ii) by Purchaser in the
event the conditions set forth in Article VII of this Agreement shall not have
been satisfied or waived by September 1, 1998; (iii) by the Sellers in the event
that the conditions set forth in Article VIII of this Agreement shall not have
been satisfied or waived by September 1, 1998; (iv) by Purchaser pursuant to
Sections 5.10; (v) by Purchaser or the Sellers at any time if Purchaser
determines in good faith that any Material Adverse Change, or any condition or
event that is reasonably likely to cause a Material Adverse Change, with respect
to the Business or the Assets, or the Sellers with respect to the Business,
shall have occurred or been discovered since the Balance Sheet Date; (vi) by
Purchaser or the Sellers if the transactions contemplated under the WALB
Agreement are not consummated or all parties to the WALB Agreement are not
ready, willing and able to consummate the transactions contemplated by the WALB
Agreement on the Closing Date; or (vii) by Purchaser or Sellers upon the
termination of the Exchange Agreement.
9.02 NOTICE OF TERMINATION. Notice of termination of this Agreement as
provided for in this Article IX shall be given by the party so terminating to
the other parties hereto in accordance with the provisions of Section 11.01.
-28-
<PAGE>
9.03 EFFECT OF TERMINATION.
(a) In the event of a termination of this Agreement pursuant to
Section 9.01 hereof, except for the confidentiality provisions of Section 5.04,
which shall remain in full force and effect, this Agreement shall become void
and of no further force and effect, and each party shall pay the costs and
expenses incurred by it in connection with this Agreement, and no party (or any
of its agents, counsel, representatives, Affiliates or assigns) shall be liable
to any other party for any Loss hereunder; provided, however, if non-occurrence
of Closing is the direct or indirect result of the Default of any party of its
obligations hereunder, including, without limitation, any Material inaccuracy in
any representation or warranty made by such party, such defaulting party shall
be fully liable to the other parties hereto for any such Default.
(b) It is agreed that time is of the essence in the performance and
satisfaction of this Agreement and each of the conditions specified in Articles
VII and VIII of this Agreement are Material for purposes of this Agreement.
9.04 RISK OF LOSS. The Sellers assume all risk of condemnation, destruction
or Loss due to fire or other casualty from the date of this Agreement until the
Closing.
ARTICLE X
DEFINITIONS
The following terms (in their singular and plural forms as appropriate) as
used in this Agreement shall have the meanings set forth below unless the
context requires otherwise:
"AFFILIATE" of a Person means: (i) any Person directly, or indirectly
through one or more intermediaries, controlling, controlled by or under common
control with such Person; (ii) any officer, director, partner, employee, agent,
or representative or direct or indirect beneficial or legal owner of any 10% or
greater equity or voting interest of such Person; or (iii) any entity for which
a Person described in (ii) above acts in any such capacity.
"AGREEMENT" means this Asset Purchase Agreement, including the Exhibits and
Schedules delivered pursuant hereto or referred to herein, each of which is
incorporated herein by reference.
"ASSETS" means all of the following assets, properties and rights of the
Sellers of every kind, nature, character and description, whether real, personal
or mixed, whether tangible or intangible, whether accrued, contingent or
otherwise (other than the Retained Assets) relating to or utilized in the
Business, directly or indirectly, in whole or in part, in existence on the date
hereof whether or not carried on the books and records of the Sellers, and
whether or not owned in the name of Sellers or any Affiliate of Sellers and
wherever located, including but not limited to the following:
(i) FCC License held by the Subsidiary;
(ii) the Real Property;
(iii)the Personal Property;
(iv) all rights, choses in action and claims, known or unknown,
matured or unmatured, accrued or contingent, against Third Parties; and
(v) any other tangible assets used in the Business and owned by
either of the Sellers (other than the Retained Assets, which includes accounts
receivables).
-29-
<PAGE>
"ASSUMED LIABILITIES" means the following specific Liabilities of the
Sellers:
(i) Liabilities first to be paid or performed after the Closing
Date under or pursuant to Contracts of Sellers assigned to Purchaser pursuant to
this Agreement (including, without limitation, outstanding purchase orders and
sales commitments of Sellers); provided, however, such Liabilities shall not
include any Liabilities resulting from or arising out of any Default by Sellers
prior to the Closing Date under or with respect to any of such Contracts; and
(ii) the License Agreement between the Company and the Subsidiary
dated as of October 20, 1995 pursuant to which the Company was granted a license
to use the FCC license of the Subsidiary.
"BALANCE SHEET" means the unaudited balance sheets of the
Sellers' Business as of December 28, 1997 and included in the Financial
Statements.
"BALANCE SHEET DATE" means the date of the most recent Balance
Sheet.
"BOARD OF DIRECTORS" means the Board of Directors of a Person
that is a corporation.
"BUSINESS" means the Sellers' business conducted by the Company
and through the Subsidiary, of owning and operating the television station
WEAU-TV serving Eau Claire and LaCrosse, Wisconsin.
"BUSINESS DAY" means a day other than a Saturday, a Sunday, a day
on which banking institutions in the State of Georgia are authorized or
obligated by law or required by executive order to be closed, or a day on which
the New York Stock Exchange is closed.
"CERTIFICATE OF INCORPORATION" means the certificate of
incorporation of a Person that is a corporation.
"CLOSING" means the consummation of the transactions contemplated
by this Agreement.
"CLOSING DATE" means the fifth business day after issuance of the
FCC approval as set forth in Section 5.15 and the satisfaction (or waiver) of
all of the conditions set forth in Articles VII and VIII, or such other date as
the parties may agree in writing; provided that the Closing Date may be extended
to September 1, 1998 by Purchaser as necessary to effectuate the tax-free
like-kind exchange described in the Exchange Agreement; provided, further, that
the provisions of the Exchange Agreement shall continue to be in effect on the
date of issuance of such FCC approval.
"CODE" means the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"COMMITMENTS" means the owner's title insurance policy
commitments contained in Schedule 3.09.
-30-
<PAGE>
"COMPUTER SOFTWARE" means, with respect to the Business, all
computer programs, materials, tapes, source and object codes, and all prior and
proposed versions, releases, modifications, updates, upgrades and enhancements
thereto, as well as all documentation and listings related thereto.
"CONTRACT" means, with respect to the Business, any written or
oral contract, agreement, understanding, lease, usufruct, license, plan,
instrument, commitment, restriction, arrangement, obligation, undertaking,
practice or authorization of any kind or character or other document to which
any Person is a party or that is binding on any Person or its securities, assets
or business.
"DATABASES" means databases in all forms, versions and media,
together with prior and proposed updates, modifications and enhancements
thereto, as well as all documentation and listings therefor used in the
Business, other than Licenses.
"DEFAULT" means (1) a breach of, default under, or
misrepresentation in or with respect to any Contract or License, (2) the
occurrence of an event that with the passage of time or the giving of notice or
both would constitute a breach of, default under, or misrepresentation in any
Contract or License, or (3) the occurrence of an event that with or without the
passage of time or the giving of notice or both would give rise to a right to
terminate, change the terms of or renegotiate any Contract or License or to
accelerate, increase, or impose any Liability under any Contract or License.
"EMPLOYEE BENEFIT PLAN" means, collectively, each pension,
retirement, profit-sharing, deferred compensation, stock option, employee stock
ownership, severance pay, vacation, bonus or other incentive plan, any other
written or unwritten employee program, arrangement, agreement or understanding,
whether arrived at through collective bargaining or otherwise, any medical,
vision, dental or other health plan, any life insurance plan, or any other
employee benefit plan or fringe benefit plan, including, without limitation, any
"employee benefit plan," as that term is defined in Section 3(3) of ERISA
currently or previously adopted, maintained by, sponsored in whole or in part
by, or contributed to by either of the Sellers or any other ERISA Affiliate
thereof or under which either of the Sellers or any other ERISA Affiliate
thereof has any Liability for the benefit of employees, retirees, dependents,
spouses, directors, independent contractors, or other beneficiaries and under
which employees, retirees, dependents, spouses, directors, independent
contractors or other beneficiaries are eligible to participate. "Employee
Benefit Plans" also means any plans, programs, agreements, arrangements or
understandings previously maintained by, sponsored in whole or in part by, or
contributed to by either of the Sellers, or any other ERISA Affiliate thereof
that could result in a Material Liability to the Sellers, including but not
limited to, any plan covered by or subject to Title IV of ERISA. Employee
Benefit Plans include (but are not limited to) "employee benefit plans" as
defined in Section 3(3) of ERISA and any other plan, fund, policy, program,
practice, custom, understanding or arrangement providing compensation or other
benefits to any current or former officer or employee or director or independent
contractor of either of the Sellers or any dependent or beneficiary thereof,
maintained by the Sellers or under which the Sellers have any obligation or
Liability, whether or not they are or are intended to be (i) covered or
qualified under the Code, ERISA or any other applicable Law, (ii) written or
oral, (iii) funding or unfunded, (iv) actual or contingent, or (v) generally
available to any or all employees (or former employees) of the Sellers (or their
beneficiaries or dependents), including, without limitation, all incentive,
bonus, deferred compensation, flexible spending accounts, cafeteria plans,
vacation, holiday, medical, disability, share purchase or other similar plans,
policies, programs, practices or arrangements.
"ENVIRONMENTAL LAWS" means all Laws relating to pollution or
protection of the environment (including, without limitation, ambient air,
surface water, ground water, land surface or
-31-
<PAGE>
subsurface strata), including, without limitation, the Comprehensive
Environmental Response Compensation and Liability Act, as amended, 42 U.S.C.
9601 et seq. ("CERCLA"), the Resource Conservation and Recovery Act, as amended,
42 U.S.C. 6901 et seq. ("RCRA"), and other Laws relating to emissions,
discharges, releases or threatened releases of any Hazardous Substance, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of any Hazardous Substance.
"ENVIRONMENTAL LITIGATION" means any Litigation against the
Sellers with respect to the Business or the Assets of either of the Sellers
(including, without limitation, written notice or other written communication by
any Person alleging potential Liability for investigatory costs, cleanup costs,
private or governmental response or remedial costs, natural resources damages,
property damages, personal injuries, or penalties) arising out of, based upon,
or resulting from (i) any Environmental Matter or (ii) any circumstances or
state of facts forming the basis of any Liability or alleged Liability under, or
violation or alleged violation of, any Environmental Law.
"ENVIRONMENTAL MATTER" means any matter or circumstances related
in any manner whatsoever to (i) the emission, discharge, disposal, release or
threatened release of any Hazardous Substance into the environment, or (ii) the
transportation, treatment, storage, recycling or other handling of any Hazardous
Substance or (iii) the placement of structures or materials into waters of the
United States, by, in each case, either of the Sellers or any of their
respective predecessors or (iv) the presence of any Hazardous Substance,
including, but not limited to, asbestos, in any building, structure or workplace
or on any of the Real Property.
"ENVIRONMENTAL REPORT" means, with respect to the Business, the
independent Phase I environmental site assessment report of the Sellers'
properties and operations prepared for the Sellers and Purchaser by Montgomery
Watson, dated February, 1998.
"ERISA" means Employee Retirement Income Security Act of 1974, as
amended.
"ERISA PLAN" means any Employee Benefit Plan which is an
"employee pension benefit plan," as that term is defined in Section 3(2) of
ERISA, or an "employee welfare benefit plan" as that term is defined in Section
3(1) of ERISA.
"EXCHANGE AGREEMENT" means that certain agreement dated of even
date herewith by and among Gray Communications Systems, Inc., WALB-TV, Inc.,
WALB Licensee Corp., Purchaser and Sellers.
"FCC" means the Federal Communications Commission.
"FINANCIAL STATEMENTS" means (i) the unaudited balance sheets of the Sellers
as of December 28, 1997 and the related statements of income for the periods
then ended and (ii) the unaudited balance sheets of the Sellers as of the end of
each fiscal quarter from December 30, 1996 through December 28, 1997 and the
related statements of income for the months then ended, and (iii) the monthly
financial statements related to the Business provided to Purchaser pursuant to
Section 5.06.
"GAAP" means generally accepted accounting principles as in effect in the
United States consistently applied.
-32-
<PAGE>
"GOVERNMENTAL AUTHORITY" means any federal, state, county, local, foreign or
other governmental or public agency, instrumentality, commission, authority,
board or body.
"HART-SCOTT ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, 15 U.S.C.A. ss. 18(a), as amended, and all Laws promulgated thereunder.
"HAZARDOUS SUBSTANCE" means (i) any hazardous substance, hazardous material,
hazardous waste pollutants, contaminants, or toxic substance (as those terms are
defined by any applicable Environmental Laws) and (ii) any petroleum, petroleum
products, or oil.
"IMPROVEMENTS" means all buildings, structures, fixtures and other
improvements included in the Real Property.
"INTELLECTUAL PROPERTY" means, with respect to the Business, (i) patents and
pending patent applications together with any and all continuations, divisions,
reissues, extensions and renewals thereof, (ii) trade secrets, know-how,
inventions, formulae and processes, whether trade secrets or not, (iii) trade
names, trademarks, service marks, logos, assumed names, brand names and all
registrations and applications therefor, (iv) copyrights and any registrations
and applications therefor, (v) technology rights and licenses, and (vi) Computer
Software and all other intellectual property owned by, registered in the name
of, or used in the business of a Person or in which a Person or its business has
any interest.
"IRS" means the Internal Revenue Service of the United States of America.
"KNOWLEDGE" or "KNOWN" with respect to the Sellers, means collectively those
facts that either of the Sellers, any of its officers and employees listed on
EXHIBIT X hereto or Alfred C. Eckert, III, after due inquiry, knew or reasonably
should have known.
"LAW" means any code, law, order, ordinance, regulation, rule, or statute of
any Governmental Authority.
"LEASED PERSONAL PROPERTY" means all Personal Property that is not owned by
the Sellers that the Sellers either use or have the right to use.
"LEASED REAL PROPERTY" means all Real Property that is not owned in fee
simple by the Sellers that the Sellers either occupy or use or have the right to
occupy or use.
"LIABILITY" means any direct or indirect, primary or secondary, liability,
indebtedness, obligation, penalty, expense (including, without limitation, costs
of investigation, collection and defense), claim, deficiency, guaranty or
endorsement of or by any Person (other than endorsements of notes, bills and
checks presented to banks for collection or deposit in the ordinary course of
business) of any type, whether accrued, absolute, contingent, liquidated,
unliquidated, matured, unmatured or otherwise.
"LICENSE" means any license, franchise, notice, permit, easement, right,
certificate, authorization, approval or filing with any Governmental Authority
or court to which any Person is a party or that is or may be binding on any
Person or its securities, property or business.
"LIEN" means any mortgage, lien, security interest, pledge, hypothecation,
encumbrance, restriction, reservation, encroachment, infringement, easement,
conditional sale agreement, title retention,
-33-
<PAGE>
lease, right of occupancy or other security arrangement, defect of title,
adverse right or interest, charge or claim of any nature whatsoever of, on, or
with respect to any property or property interest.
"LITIGATION" means any action, administrative or other proceeding,
arbitration, cause of action, claim, complaint, criminal prosecution, inquiry,
hearing, investigation (governmental or otherwise), litigation, notice (written
or oral) before any Governmental Authority or arbitration, mediation or similar
tribunal by any Person alleging potential Liability or requesting information
relating to or affecting the Sellers with respect to the Business or the Assets,
the Business or the transactions contemplated by this Agreement.
"LOSS" means any and all direct or indirect demands, claims, payments,
obligations, recoveries, deficiencies, fines, penalties, interest, assessments,
actions, causes of action, suits, losses, diminution in the value of assets,
damages, punitive, exemplary or consequential damages (including, but not
limited to, lost income and profits and interruptions of business), liabilities,
costs, expenses (including without limitation, (i) interest, penalties and
reasonable attorneys' fees and expenses, (ii) attorneys' fees and expenses
necessary to enforce rights to indemnification hereunder, and (iii) consultants'
fees and other costs of defense or investigation), and interest on any amount
payable to a Third Party as a result of the foregoing, whether accrued,
absolute, contingent, known, unknown, or otherwise as of the Closing Date or
thereafter.
"MATERIAL" or "MATERIALLY" shall be determined in light of the facts and
circumstances of the matter in question; provided, however, that any specific
monetary amount cited in this Agreement shall be deemed to determine materiality
in that instance.
"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means any Material
adverse change in or effect on (i) the Business, operations, Assets,
Liabilities, financial condition or results of operations of such Person,
including, without limitation, any Material adverse change in the value of the
Sellers, taken as a whole, (ii) the ability of such party to consummate the
transactions contemplated by this Agreement or any of the Other Agreements to
which it is or will be a party, or (iii) the ability of such party to perform
any of its obligations under this Agreement or any of the Other Agreements to
which it is or will be a party, if such change or effect Materially impairs the
ability of such party to perform its obligations hereunder or thereunder, taken
as a whole. If any change, condition or event shall have an adverse effect or a
reasonably likely adverse effect of less than $1,000,000, no Material Adverse
Change or Material Adverse Effect will be deemed to have occurred. If any
change, condition or event shall have an adverse effect or a reasonably likely
adverse effect of $1,000,000 or more but less than $7,500,000, no Material
Adverse Effect will be deemed to have occurred and the Sellers shall have the
option to either (i) cure such change, condition or event or (ii) reduce the
Purchase Price by the amount of the adverse effect caused by such change,
condition or event. If any change, condition or event shall have an adverse
effect or a reasonably likely adverse effect of $7,500,000 or more, either
Purchaser or the Sellers may terminate this Agreement at their discretion.
Neither a Material Adverse Change nor a Material Adverse Effect shall be deemed
to result from an adverse change in general economic conditions, industry
conditions or general conditions in the markets in which the Sellers operate.
Further, notwithstanding the $1,000,000 threshold contained in the third
sentence of this definition, the Sellers shall use all reasonable efforts to
promptly remedy any adverse change, condition or event that causes or is
reasonably likely to cause the Station to be or go off the air.
"ORDER" means any decree, injunction, judgment, order, ruling, writ, quasi-
judicial decision or award or administrative decision or award of any federal,
state, local, foreign or other court, arbitrator, mediator, tribunal,
administrative agency or Governmental Authority to which any Person is a party
or that
-34-
<PAGE>
is or may be binding on any Person or its securities, assets or business
(including, in the case of the FCC, a public notice or other written
authorization).
"OTHER AGREEMENTS" means the agreements, documents, assignments and
instruments to be executed and delivered by the Sellers pursuant to this
Agreement, including but not limited to that certain Exchange Agreement dated of
even date herewith by and among Gray Communications Systems, Inc., WALB-TV,
Inc., WALB Licensee Corp., the Purchaser and the Sellers.
"OWNED REAL PROPERTY" means all Real Property other than Leased Real
Property.
"PERMITTED LIENS" means (i) Liens for current real property Taxes not yet due
and payable, (ii) non-monetary Liens that do not affect the value or use of any
parcel of Real Property and (iii) all Special Exceptions (but not General
Exceptions) to title contained in the Commitments.
"PERSON" means a natural person or any legal, commercial or governmental
entity, such as, but not limited to, a business association, corporation,
general partnership, joint venture, limited partnership, limited liability
company, trust, or any person acting in a representative capacity.
"PERSONAL PROPERTY" means collectively all of the personal property or
interests therein owned, leased, used or controlled by the Sellers with respect
to the Business including, without limitation, inventory; the Intellectual
Property of each Seller; the Contracts of each Seller; the Licenses of each
Seller; the Computer Software; the Databases; the customer lists, mailing lists,
customer files, supplier files, sales agent and manufacturers' representative
files, credit files, and credit data relating to the Assets and the Assumed
Liabilities, all other files, records, drawings, catalogues, stationary,
advertising materials and other documents (or copies thereof) related to the
Assets or Business, and the use of any telephone numbers used in the operation
of the Business; the deposits, prepaid sums, fees and expenses (including
without limitation, Taxes, insurance premiums, rental fees, utility charges and
service charges), trust funds, retainages, escrows, monies and assets held by
Third Parties, and deferred charges, as the same shall exist as of the Closing
Date; machinery, tools, equipment (including office equipment and supplies),
furniture, furnishings, fixtures (including trade fixtures), vehicles, leasehold
improvements and all other tangible personal property.
"PUC LAWS" means public utility commission laws, rules and regulations.
"PURCHASE PRICE" means the total consideration to be paid to the Sellers by
Purchaser for the purchase of the Assets pursuant to this Agreement and which
shall be paid in accordance with Section 1.02 of this Agreement.
"PURCHASER" means Cosmos Broadcasting Corporation or its designee.
"REAL PROPERTY" means collectively all the real property or interests therein
owned, leased, occupied, or used by the Sellers in the Business as of the date
of this Agreement, together with (i) all rights, easements, tenements,
hereditaments, appurtenances, privileges, immunities, mineral rights and other
benefits belonging or appertaining thereto which run with said real property and
(ii) all right, title and interest, if any, of the Sellers in and to (A) any
land lying in the bed of any street, road, avenue, open or proposed, adjoining
said real property, (B) any award made or to be made in lieu of the land
described in the preceding clause (A), (C) any unpaid award for damage to said
real property, and (D) all strips and rights-of-way abutting or adjoining said
real property, if any. The Real Property includes, without
-35-
<PAGE>
limitation, all buildings, structures, fixtures and other improvements located
on the land described in the preceding sentence.
"RELATED PERSON" means, with regard to any natural Person, its spouse,
parent, sibling, child, aunt, uncle, niece, nephew, in-law, grandparent and
grandchild (including by adoption) and any trustees or other fiduciaries for the
benefit of such relatives.
"RETAINED ASSETS" means the following assets, none of which are being
purchased by Purchaser pursuant to this Agreement:
(i) all Sellers' cash or cash equivalents, Tax refunds, and Sellers'
goodwill;
(ii) records and reports maintained by Seller pertaining exclusively
to other Retained Assets or Retained Liabilities;
(iii) any asset of Sellers relating to any Employee Benefit Plan;
and
(iv) all accounts receivable.
"RETAINED LIABILITIES" means any Liability of Sellers that is not an Assumed
Liability, including, without limitation, the following:
(i) any Liabilities for any Taxes of Sellers that arise prior to the
Closing Date;
(ii) all accounts payable;
(iii) any Liabilities relating to current or former assets of
Sellers not being acquired by Purchaser pursuant to this Agreement;
(iv) any Contract of Sellers not validly assigned to Purchaser;
(v) any Liability incurred by Sellers as a result of any Default by
Sellers under any provision of this Agreement or the Other Agreements;
(vi) any Liability of Sellers for severance payments or other
severance obligations relating to any Person employed by Sellers on or before
the Closing Date;
(vii) any Liability of Sellers for continuation of coverage under
any group health plan maintained by Sellers required under the provisions of
Code ss.4980B or Sections 601-608 of ERISA with respect to any Person
employed by Sellers who experiences a "qualifying event" (as defined in the
Code and ERISA) on or before the Closing Date;
(viii) any Liability of Sellers to pay bonuses or other compensation
to Affiliates of Sellers on account of the transactions contemplated by this
Agreement;
(ix) any Undisclosed Liability;
(x) any Liability of Sellers, of any nature whatsoever, to any
current or former shareholder or Affiliate of Sellers;
(xi) any Liability (including without limitation, any Liability
relating to any Litigation) relating to, based upon, or arising out of (A)
the conduct of the Business or the ownership of the Assets prior to the
Closing Date or (B) any act, omission, transaction, circumstance, sale of
goods or services, state of facts or other condition which occurred or
existed prior to the Closing Date, whether or not then known, due or payable
and whether or not disclosed in this Agreement or the Other Agreements;
(xii) any Liability that Purchaser may incur in connection with any
Litigation brought against Purchaser under the Worker Adjustment and
Retraining Notification Act or any similar Law that relates to actions taken
by Seller with regard to any employees or any site employment;
(xiii) any of the events, circumstances, or conditions described in
Schedule 3.16, or any Environmental Claim, or Liability arising from any
Environmental Matter;
-36-
<PAGE>
(xiv) any Liability of Seller under or relating to any Employee
Benefit Plan;
(xv) any Liability to or Lien of any Third Party pursuant to the
bulk sales of any jurisdiction that may be asserted against any of the Assets
(whether asserted against Sellers, the Assets or Purchaser); or
(xvi) any claim by any broker, finder or other Person employed or
allegedly employed by Sellers in connection with the transactions
contemplated by this Agreement.
"SUBSIDIARY" means WEAU License, Inc. or its successor.
"TAX" or "TAXES" means any federal, state, county, local, foreign and other
taxes, assessments, charges, fees, and impositions, including interest and
penalties thereon or with respect thereto, whether disputed or not, and
including Liabilities relating to unclaimed property.
"TAX RETURNS" means all returns, reports, filings, declarations and
statements relating to Taxes that are required to be filed, recorded, or
deposited with any Governmental Authority, including any attachment thereto or
amendment thereof.
"THIRD PARTY" or "THIRD PARTIES" means any Person that is not Purchaser, the
Sellers or an Affiliate of any of the foregoing.
"UNDISCLOSED LIABILITIES" means any Liability that is not fully reflected or
reserved against in the Financial Statements or fully disclosed in a Schedule to
this Agreement.
ARTICLE XI
MISCELLANEOUS
11.01 NOTICES.
(a) All notices, requests, demands and other communications hereunder
shall be (i) delivered by hand, (ii) mailed by registered or certified mail,
return receipt requested, first class postage prepaid and properly addressed,
(iii) sent by national overnight courier service, or (iv) sent by facsimile,
graphic scanning or other telegraphic communications equipment to the parties or
their designee, addressed as follows:
To the Sellers: Busse Broadcasting Corporation
141 East Michigan Avenue
Suite 300
Kalamazoo, Michigan 49007
Attention: Mr. Lawrence A. Busse
Telephone: (616) 388-8019
Facsimile: (616) 388-6089
with copies to: Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601-9703
Attention: Steven J. Gavin, Esquire
Telephone: (312) 558-5600
Facsimile: (312) 558-5700
-37-
<PAGE>
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attention: Jonathan M. Wainwright, Esquire
Telephone: (212) 504-6122
Facsimile: (212) 504-6666
To Purchaser: Cosmos Broadcasting Corporation
The Liberty Corporation
2000 Wade Hampton Boulevard
Greenville, South Carolina 29615
Attention: Martha G. Williams, Esquire
Telephone: (864) 609-4264
Facsimile: (864) 609-3176
with copies to: Dow, Lohnes & Albertson
1200 New Hampshire Avenue, NW
Suite 800
Washington, D.C. 20036
Attention: Michael Hines, Esquire
Telephone: (202) 776-2519
Facsimile: (202) 776-2222
(b) All notices, requests, instructions or documents given to any party in
accordance with this Section 11.01 shall be deemed to have been given (i) on the
date of receipt if delivered by hand, overnight courier service or if sent by
facsimile, graphic scanning or other telegraphic communications equipment or
(ii) on the date three (3) business days after depositing with the United States
Postal Service if mailed by United States registered or certified mail, return
receipt requested, first class postage prepaid and properly addressed.
(c) Any party hereto may change its address specified for notices herein
by designating a new address by notice in accordance with this Section 11.01.
11.02 ENTIRE AGREEMENT. This Agreement, the Schedules, the Exhibits and the
Other Agreements constitute the entire agreement between the parties relating to
the subject matter hereof and thereof and supersede all prior oral and written,
and all contemporaneous oral negotiations, discussions, writings and agreements
relating to the subject matter of this Agreement.
11.03 MODIFICATIONS, AMENDMENTS AND WAIVERS. The failure or delay of any
party at any time or times to require performance of any provision of this
Agreement shall in no manner affect its right to enforce that provision. No
single or partial waiver by any party of any condition of this Agreement, or the
breach of any term, agreement or covenant or the inaccuracy of any
representation or warranty of this Agreement, whether by conduct or otherwise,
in any one or more instances shall be construed or deemed to be a further or
continuing waiver of any such condition, breach or inaccuracy or a waiver of any
other condition, breach or inaccuracy.
-38-
<PAGE>
11.04 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall
inure to the benefit of and be enforceable by the parties hereto, and their
respective estates, successors, legal or personal representatives, heirs,
distributees, designees and assigns, but no assignment shall relieve any party
of the obligations hereunder. Except as permitted by Section 5.16 and under the
Exchange Agreement, this Agreement or any portion thereof cannot be assigned by
any party without the prior written consent of the other parties hereto. With
respect to such assignments, all representations, warranties, covenants and
indemnification rights shall be binding upon, and inure to the benefit of, the
assignee or assignees as if such representations, warranties, covenants and
indemnification rights were made directly between the original parties to this
Agreement. If the Subsidiary should be merged with and into a limited liability
company owned by the Company, all references to stockholders, directors,
Certificate of Incorporation and By-laws of the Subsidiary shall refer to
members, managers, articles of organization and the operating agreement,
respectively.
11.05 TABLE OF CONTENTS; CAPTIONS; REFERENCES. The table of contents and the
captions and other headings contained in this Agreement as to the contents of
particular articles, sections, paragraphs or other subdivisions contained herein
are inserted for convenience of reference only and are in no way to be construed
as part of this Agreement or as limitations on the scope of the particular
articles, sections, paragraphs or other subdivisions to which they refer and
shall not affect the interpretation or meaning of this Agreement. All references
in this Agreement to "Section" or "Article" shall be deemed to be references to
a Section or Article of this Agreement.
11.06 GOVERNING LAW. This Agreement shall be controlled, construed and
enforced in accordance with the substantive Laws of the State of New York,
without respect to the Laws related to choice or conflicts of Laws.
11.07 PRONOUNS. All pronouns used herein shall be deemed to refer to the
masculine, feminine or neuter gender as the context requires.
11.08 SEVERABILITY. Should any one or more of the provisions of this
Agreement be determined to be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions hereof
shall not in any way be affected or impaired thereby. The parties shall endeavor
in good faith to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as practicable to
that of the invalid, illegal or unenforceable provisions.
11.09 REMEDIES NOT EXCLUSIVE. No remedy conferred by any of the specific
provisions of this Agreement is intended to be, nor shall be, exclusive of any
other remedy available at law, in equity or otherwise.
11.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original; but all of such counterparts
shall together constitute one and the same instrument.
11.11 INTERPRETATIONS. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against Purchaser or Sellers,
whether under any rule of construction or otherwise. No party to this Agreement
shall be considered the draftsman. On the contrary, this Agreement has been
reviewed, negotiated and accepted by all parties and their attorneys and shall
be construed and
-39-
<PAGE>
interpreted according to the ordinary meaning of the words used so as fairly to
accomplish the purposes and intentions of all parties hereto.
11.12 EXCLUSIVE REMEDY.. The parties acknowledge and agree that this
Agreement and the Exchange Agreement shall provide the exclusive remedies of
Purchaser and Sellers with respect to the transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, on and after the
Closing, Purchaser and Sellers hereby waive any statutory, equitable or common
law rights or remedies relating to any environmental health and safety matters,
including without limitation, any such matters arising under any Environmental,
Health and Safety Requirements, the Comprehensive Environmental Response,
Compensation and Liability Act or any analogous state law.
[SIGNATURES ON FOLLOWING PAGES]
-40-
<PAGE>
IN WITNESS WHEREOF, the Company, the Subsidiary and Purchaser have duly
executed this Agreement under seal as of the date first above written.
THE COMPANY
BUSSE BROADCASTING CORPORATION
By: /s/ James C. Ryan
-------------------
Name: James C. Ryan
Title: Treasurer
THE SUBSIDIARY
WEAU LICENSE, INC.
By: /s/ James C. Ryan
-------------------
Name: James C. Ryan
Title: Vice President
PURCHASER
COSMOS BROADCASTING CORPORATION
By: /s/ James M. Keelor
-------------------
Name James M. Keelor
Title: President
EXHIBIT 10.3
EXCHANGE AGREEMENT
This EXCHANGE AGREEMENT (the "Agreement") is made as of this 22nd
day of June, 1998, by and among Gray Communications Systems, Inc. ("Gray"),
WALB-TV, Inc. ("WALB"), WALB Licensee Corp. ("WALB Licensee"), Cosmos
Broadcasting Corporation ("Cosmos"), Busse Broadcasting Corporation ("Busse")
and WEAU License, Inc., or its successor ("WEAU").
WITNESSETH:
WHEREAS, WALB and WALB Licensee each respectively desires to
exchange for other property of like-kind and qualifying use within the meaning
of Section 1031 of the Internal Revenue Code of 1986, as amended (the "Code")
and the Regulations promulgated thereunder, ownership in and title to (a) the
non-license assets as described in the WALB Asset Purchase Agreement (as defined
below), referred to herein as the "WALB Assets" (with respect to WALB) and (b)
the license assets as described in the WALB Asset Purchase Agreement referred to
herein as the "WALB License" (with respect to WALB Licensee);
WHEREAS, WALB and WALB Licensee have entered into an asset purchase
agreement, dated as of June 22, 1998, with Cosmos whereby WALB and WALB Licensee
agree to sell and Cosmos agrees to purchase the WALB Assets and the WALB License
(the "WALB Asset Purchase Agreement");
WHEREAS, Cosmos has agreed to acquire the WALB Assets and the WALB
License in exchange for ownership in and title to (a) the non-license assets of
like-kind and qualifying use within the meaning of Section 1031 of the Code and
the Regulations promulgated thereunder, as identified by WALB and WALB Licensee
and as described in the WEAU Asset Purchase Agreement (as defined below),
referred to herein as the "WEAU Assets" (with respect to Busse) and (b) the
license assets as described in the WEAU Asset Purchase Agreement, referred to
herein as the "WEAU License" (with respect to WEAU), plus cash as herein
provided;
WHEREAS, in connection with the acquisition of the WEAU Assets,
Cosmos has entered into an asset purchase agreement, dated as of June 22, 1998,
with Busse and WEAU whereby Busse and WEAU agree to sell and Cosmos agrees to
purchase the WEAU Assets and the WEAU License (the "WEAU Asset Purchase
Agreement");
WHEREAS, Gray, WALB and WALB Licensee have requested that Cosmos
enter into the WEAU Asset Purchase Agreement in order to effect the exchange
contemplated herein;
WHEREAS, Cosmos is not willing to enter into the WEAU Asset Purchase
Agreement, this Agreement or the documents relating thereto or hereto unless,
Gray, WALB
<PAGE>
and WALB Licensee provide Cosmos with a full and complete indemnity against any
and all claims arising from, or relating to, the execution, delivery and
performance by Cosmos (other than Cosmos' obligation to pay the cash purchase
price to Busse and WEAU) of the WEAU Asset Purchase Agreement; and
WHEREAS, it is the intention of the parties hereto that Cosmos shall
direct Busse and WEAU to directly transfer and convey all right, title and
interest in the WEAU Assets and the WEAU License to WALB and WALB Licensee,
respectively, as set forth herein.
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties hereto agree as follows:
ARTICLE I
1.1 WEAU Asset Purchase Agreement. Cosmos hereby agrees, pursuant to
the WEAU Asset Purchase Agreement, to direct Busse and WEAU to transfer and
convey all right, title and interest in the WEAU Assets and the WEAU License to
WALB and WALB Licensee, respectively, in exchange for the aggregate cash
payments of $66 million made by Cosmos to Busse and WEAU, as provided for in the
WEAU Asset Purchase Agreement. In addition to the cash payments to Busse and
WEAU, which payments will be equal to the value of the transferred WEAU Assets
and the WEAU License, respectively, and total $66 million, (a) Cosmos agrees to
pay to WALB a cash payment equal to the amount of the excess of the value of the
WALB Assets over the value of the WEAU Assets, each as determined pursuant to
Section 2.3 below, and (b) Cosmos agrees to pay to WALB Licensee a cash payment
equal to the amount of the excess of the value of the WALB License over the
value of the WEAU License, each as determined pursuant to Section 2.3 below;
provided that the net aggregate cash payments made by Cosmos to WALB and WALB
Licensee shall be equal to $12 million and the net aggregate cash payments made
by Cosmos to all parties hereto shall be equal to $78 million, each as adjusted
pursuant to Section 1.04 of the WALB Asset Purchase Agreement. Each of WALB and
WALB Licensee hereby agrees to exchange the WALB Assets and the WALB License,
respectively, for the WEAU Assets and the WEAU License, respectively, and to
receive the cash payments pursuant to the terms and conditions of this
Agreement.
ARTICLE II
2.1 Exchange Consideration. The consideration for the transfer of
the WALB Assets and the WALB License to Cosmos shall be the exchange by Cosmos
of the WEAU Assets to WALB and the WEAU License to WALB Licensee, plus the net
aggregate cash payments of $12 million referred to in Section 1.1.
2.2 Closing. (a) Cosmos' obligation to close under the WEAU Asset
Purchase Agreement is subject to the simultaneous consummation of the closing
under the WALB Asset Purchase Agreement, and the parties acknowledge and agree
that Cosmos shall
-2-
<PAGE>
not be deemed to be in violation of the WEAU Asset Purchase Agreement to the
extent that any of Gray, WALB or WALB Licensee fails to perform any of its
obligations contemplated pursuant to the terms of this Agreement. At the closing
under the WEAU Asset Purchase Agreement, Cosmos shall assign, and Gray, WALB and
WALB Licensee shall accept, all of Cosmos' remaining rights, liabilities and
obligations under the WEAU Asset Purchase Agreement. Upon the earlier of (i) the
consummation of the closing under the WEAU Asset Purchase Agreement, (ii) the
termination of the WEAU Asset Purchase Agreement pursuant to Article IX thereof,
or (iii) the termination of the WALB Asset Purchase Agreement pursuant to
Article IX thereof, all of the parties hereto acknowledge and agree that Cosmos
shall be fully released from any and all liabilities and obligations under the
WEAU Asset Purchase Agreement and the documents relating thereto.
(b) The closing shall occur and shall be effective at such time as
agreed to by the parties (the "Closing Date") and shall take place at the
offices of Cadwalader, Wickersham & Taft in New York or at such other time and
place as the parties may agree. On the Closing Date, Cosmos will pay (a) a cash
amount equal to the fair market value of the WEAU Assets, as determined pursuant
to Section 2.3 below, to Busse, or to the Indenture Trustee for and at the
written request of Busse and (b) a cash amount equal to the fair market value of
the WEAU License, as determined pursuant to Section 2.3 below, to WEAU, or the
Indenture Trustee for and at the written request of Busse, by wiring federal or
other immediately available funds to the appropriate bank accounts as instructed
by Busse or the Indenture Trustee. Upon consummation of the exchanges
contemplated herein, Cosmos shall make the cash payments that are part of the
exchange consideration, as set forth in Section 2.1 above, by wiring federal or
other immediately available funds to the appropriate bank accounts as instructed
by the party, or parties to receive the cash payments; provided, however, that
the aggregate net cash payments made by Cosmos to all parties hereto shall be
equal to $78 million, as adjusted pursuant to Section 1.04 of the WALB Asset
Purchase Agreement; and provided further that such cash payments made by Cosmos
shall be reduced by any cash payments deposited into an escrow account as set
forth in the WALB Asset Purchase Agreement to the extent paid to WALB or WALB
Licensee. Prior to the consummation of the exchanges contemplated hereby and
receipt of the WEAU Assets and WEAU License by WALB and WALB Licensee, no cash
consideration shall be received, pledged, borrowed by, or otherwise made
available to or for the benefit of WALB, WALB Licensee or Gray unless this
Exchange Agreement shall have been terminated in accordance with Article V
hereof.
2.3 Asset Valuation and Exchange Groups. The values of the various
WEAU Assets, the WEAU License, the WALB Assets and the WALB License have been
allocated among the assets in accordance with a schedule mutually prepared by
the parties and attached hereto as Schedule 2.3. If any party undertakes to
change such schedule, such party must obtain the consent of the other parties,
which will not be unreasonably withheld.
2.4 Direct Deeding. For purposes of this Agreement, Busse agrees to
deliver and convey the WEAU Assets directly to WALB and WEAU agrees to deliver
the WEAU License directly to WALB Licensee, at the direction of Cosmos.
-3-
<PAGE>
ARTICLE III
3.1 Indemnification. (a) Gray, WALB and WALB Licensee hereby jointly
and severally indemnify, defend and hold harmless Cosmos and its respective
officers, directors, shareholders, employees, agents and affiliates from,
against and with respect to any and all losses, damages, claims, judgments,
obligations, liabilities, costs and expenses (including, without limitation,
reasonable attorneys' fees and costs and expenses incurred in investigating,
preparing, defending against or prosecuting any litigation, claim, proceeding or
demand), of any kind or character, including environmental or tax liabilities or
claims, arising out of or in connection with the entering into and performance
of the WEAU Asset Purchase Agreement and this Agreement and any documents made
pursuant thereto or hereto and the transactions contemplated thereunder and
hereunder. This indemnity will survive the closing of the exchanges contemplated
herein and any termination of this Agreement pursuant to Section 5.1; provided,
however, that this indemnification shall not apply to Cosmos' obligation to
deliver the cash payment purchase price to Busse and WEAU and to perform its
obligations under this Agreement. Notwithstanding anything to the contrary in
the foregoing, Gray, WALB, WALB Licensee and Cosmos hereby agree that this
Article III has no application to the entering into or the performance of the
WALB Asset Purchase Agreement or the documents made pursuant thereto and that
the indemnification obligations (and limitations thereto) under the WALB Asset
Purchase Agreement have no application to this Agreement.
(b) Gray hereby indemnifies, defends and holds harmless Busse, WEAU
and their respective officers, directors, shareholders, employees, agents and
affiliates from, against and with respect to any and all losses, damages,
claims, judgments, obligations, liabilities, costs and expenses (including,
without limitation, reasonable attorneys' fees and costs and expenses incurred
in investigating, preparing, defending against or prosecuting any litigation,
claim, proceeding or demand), of any kind or character, including environmental
or tax liabilities or claims, arising out of or in connection with the entering
into and performance of the WEAU Asset Purchase Agreement and this Agreement and
any documents made pursuant thereto or hereto and the transactions contemplated
thereunder and hereunder. This indemnity will survive the closing of the
exchanges contemplated herein and any termination of this Agreement pursuant to
Section 5.1; provided, however, that this indemnification shall not apply to (i)
Busse's failure to perform its obligation under the Amended and Restated Stock
Purchase Agreement, dated as of June 22, 1998, among Busse, Gray and the Busse
stockholders and (ii) Busse's and WEAU's failure to perform their respective
obligations under the WEAU Asset Purchase Agreement and under this Agreement.
ARTICLE IV
4.1. Expenses. (a) Except as provided below, regardless of whether
the transactions contemplated by this Agreement are consummated, Gray shall be
responsible for all of the expenses and fees incurred by each of Gray and Busse,
or their affiliates, in connection with the transactions contemplated hereby.
-4-
<PAGE>
(b) Gray and Busse shall each pay one-half of the costs and filing
fees associated with the pre-merger notification and reports required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR"),
pursuant to the Amended and Restated Stock Purchase Agreement.
(c) On the Closing Date under the WALB Asset Purchase Agreement,
Gray shall pay $20,000 to Cosmos as reimbursement for certain expenses and fees
incurred by Cosmos. Upon such payment, the indemnification obligations under
Article III hereof exclude any indemnification by Gray, WALB or WALB Licensee
for any expenses incurred by Cosmos in connection with the review, preparation
and negotiation of the WEAU Asset Purchase Agreement, this Agreement and the
documents made pursuant thereto and hereto and in connection with participating
in and facilitating the closing contemplated by the WEAU Asset Purchase
Agreement and this Agreement.
ARTICLE V
5.1 Causes for Termination. This Agreement and the transactions
contemplated by this Agreement may be terminated at any time prior to the
Closing Date: (i) by the mutual written consent of the parties hereto, or (ii)
by either Gray or Cosmos in the event that either the WEAU Asset Purchase
Agreement or the WALB Asset Purchase Agreement shall have been terminated;
provided, however, that it is understood and agreed that the WALB Asset Purchase
Agreement may not be terminated except as specifically provided therein.
Furthermore, notwithstanding anything herein to the contrary, upon the
termination of this Agreement either Busse or Cosmos may terminate the WEAU
Asset Purchase Agreement whereupon such WEAU Asset Purchase Agreement shall be
void and of no further force and effect.
5.2 Notice of Termination. Notice of termination of this Agreement
as provided for in this Article V shall be given by the party so terminating to
the other parties hereto in accordance with the provisions of Section 6.1.
5.3 Effect of Termination. (a) In the event of a termination of this
Agreement pursuant to Section 5.1 hereof, this Agreement shall become void and
of no further force and effect, and Gray shall pay the costs and expenses
incurred by the parties, as set forth in Article IV above, unless such
termination was caused by a default by Cosmos of its obligations under the WALB
Asset Purchase Agreement or the WEAU Asset Purchase Agreement, in which case
Cosmos shall be responsible for its own expenses and costs relating to the
transactions contemplated herein. In addition, Gray shall remain responsible to
pay any costs arising under Article III above.
(b) It is agreed that time is of the essence and the performance and
satisfaction of the WEAU Asset Purchase Agreement and the WALB Asset Purchase
Agreement and each of the conditions set forth therein are material for purposes
of this Agreement.
-5-
<PAGE>
ARTICLE VI
6.1 Notices. Any and all notices, consents, approvals or other
communications required or permitted to be given pursuant to the provisions of
this Agreement shall be given in writing and shall be sent certified or
registered mail (return receipt requested), overnight courier, or telecopier to
the parties hereto as follows:
If to Gray, WALB or WALB Licensee:
Gray Communications Systems, Inc.
1201 New York Avenue, NW
Suite 1000
Washington, DC 20005-3917
Telecopier: (202) 962-8300
Attention: Robert A. Beizer, Esq.
With a copy to:
The Ward Quaal Company
401 N. Michigan Avenue
Suite 3140
Chicago, IL 60611
Telecopier: (312) 644-3733
Attention: Mr. Ward L. Quaal
and a copy to:
Alston & Bird
1201 West Peachtree Street
Atlanta, GA 30309-3424
Telecopier: (404) 881-4777
Attention: Stephen A. Opler, Esq.
If to Cosmos:
Cosmos Broadcasting Corporation
The Liberty Corporation
2000 Wade Hampton Boulevard
Greenville, SC 29615
Telecopier: (864) 609-3176
Attention: Martha G. Williams, Esq.
-6-
<PAGE>
With a copy to:
Dow, Lohnes & Alberston
1200 New Hampshire Avenue, NW
Suite 800
Washington, DC 20036
Telecopier: (202) 776-2222
Attention: Michael Hines, Esq.
If to Busse or WEAU:
Busse Broadcasting Corporation
141 East Michigan Avenue
Suite 300
Kalamazoo, MI 49007
Telecopier: (616) 388-6089
Attention: Mr. James. C. Ryan
With a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, IL 60601-9703
Telecopier: (312) 558-5700
Attention: Steven J. Gavin, Esq.
and a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Telecopier: (212) 504-6666
Attention: Jonathan M. Wainwright, Esq.
6.2 Governing Law. This Agreement shall be governed by and construed
under the laws of New York, without regard to conflict of law principles
thereof.
6.3 Further Assurances. Each of the parties hereto shall hereafter
execute and deliver such further instruments and do such further acts as may be
required or necessary to carry out the intent and purposes of this Agreement and
which are not otherwise inconsistent with the terms of this Agreement.
6.4 Third Party Beneficiary. None of the provisions of this
Agreement shall be for the benefit of or enforceable by any creditor of the
parties hereto or for the benefit of or enforceable by any third party.
-7-
<PAGE>
6.5 Superseding Effect. In the event of a conflict between the terms
of this Agreement, the WEAU Asset Purchase Agreement and/or the WALB Asset
Purchase Agreement, unless otherwise specifically addressed, the terms of this
Agreement shall govern.
6.6 Gray Guaranty. Gray hereby unconditionally guarantees the
performance of WALB and WALB Licensee of their obligations hereunder and under
documents relating hereto.
6.7 Counterparts. This Agreement may be executed in two or more
identical counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same instrument.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hand as of the
date first above written.
GRAY COMMUNICATIONS SYSTEMS, INC.
By: /s/ Robert A. Beizer
Robert A. Beizer
Vice President
WALB-TV, INC.
By:/s/ Ward Quaal
Ward Quaal
President
WALB LICENSEE CORP.
By:/s/ Ward Quaal
Ward Quaal
President
COSMOS BROADCASTING CORPORATION
By:/s/ James M. Keelor
Name: James M. Keelor
Title: President
BUSSE BROADCASTING CORPORATION
By:/s/ James C. Ryan
James C. Ryan
Treasurer
WEAU LICENSE, INC.
By:/s/ James C. Ryan
James C. Ryan
Vice President
-9-
<PAGE>
SCHEDULE 2.3
[ALLOCATION OF VALUATION OF WEAU AND WALB ASSETS]
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Busse Broadcasting Corporation Condensed Consolidated Financial Statements
(Unaudited) for the six months ended June 28, 1998.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Jan-03-1999
<PERIOD-START> Dec-29-1997
<PERIOD-END> Jun-28-1998
<EXCHANGE-RATE> 1
<CASH> 9,045,736
<SECURITIES> 0
<RECEIVABLES> 3,713,289
<ALLOWANCES> 62,614
<INVENTORY> 0
<CURRENT-ASSETS> 13,473,057
<PP&E> 18,321,960
<DEPRECIATION> 5,766,881
<TOTAL-ASSETS> 74,358,112
<CURRENT-LIABILITIES> 2,360,295
<BONDS> 61,168,080
0
29,227,810
<COMMON> 1,077
<OTHER-SE> (18,399,150)
<TOTAL-LIABILITY-AND-EQUITY> 74,358,112
<SALES> 10,215,822
<TOTAL-REVENUES> 10,215,822
<CGS> 0
<TOTAL-COSTS> 8,277,416
<OTHER-EXPENSES> (227,919)
<LOSS-PROVISION> 20,600
<INTEREST-EXPENSE> 4,192,307
<INCOME-PRETAX> (2,025,982)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,025,982)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,025,982)
<EPS-PRIMARY> (41.20)
<EPS-DILUTED> (41.20)
</TABLE>
