SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported) September 4, 1997
THE E. W. SCRIPPS COMPANY
(Exact name of registrant as specified in its charter)
Ohio 33-43989 31-1223339
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification Number)
312 Walnut Street
Cincinnati, Ohio 45202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (513) 977-3000
Not Applicable
(Former name, former address and former fiscal year, if
changed since last report.)
<PAGE>
THE E. W. SCRIPPS COMPANY
INDEX TO CURRENT REPORT ON FORM 8-K DATED SEPTEMBER 4, 1997
Item No. Page
2. Acquisition or Disposition of Assets 3
7. Financial Statements and Exhibits
(A) Financial Statements of Businesses Acquired 4
(B) Pro Forma Financial Information 4
(C) Exhibits 4
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On May 16, 1997, The E. W. Scripps Company ("Company")
agreed to acquire the newspaper and broadcast operations of
Harte-Hanks Communications ("Harte-Hanks") for $775 million, plus
working capital, in cash. The Harte-Hanks newspaper and broadcast
operations include daily newspapers in Abilene, Corpus Christi, Plano,
San Angelo and Wichita Falls, Texas, a daily newspaper in
Anderson, South Carolina (collectively the "HHC Newspaper
Operations"), and a television and radio station in San
Antonio, Texas (the "HHC Broadcast Operations"). The acquisition
of the HHC Newspaper Operations will increase the Company's separate
newspaper markets to 21 and its total circulation to approximately
1.5 million daily and 1.6 million Sunday. The Company
expects to complete the acquisition in October 1997.
On September 4, 1997, the Company agreed to sell the HHC
Broadcast Operations to certain subsidiaries of A.H. Belo Corporation
("Belo"). The Company will receive $75 million in cash and Belo's
approximate 58% controlling interest in The Television Food
Network, G.P. ("TVFN," a 24-hour cable television network).
The amount of cash the Company will receive will be adjusted
based upon the positive or negative working capital of TVFN
and the HHC Broadcast Operations at the closing date. Immediately
after the Company closes the purchase of the HHC Newspaper and
Broadcast Operations, Belo will pay the Company $37.5
million and will transfer its interest in TVFN to the
Company. Belo will operate the HHC Broadcast Operations
under a Local Marketing Agreement until the Federal
Communications Commission ("FCC") approves the transfer of
the HHC Broadcast Operations' FCC licenses to Belo, at which
time the sale of the HHC Broadcast Operations will be
completed and Belo will pay the Company the balance of the
purchase price. Based on information provided to the Company,
TVFN had approximately 26.5 million subscribers at June 30, 1997.
The Company expects to complete the sale of the HHC Broadcast Operations
by the end of 1997.
The Company expects to finance the acquisitions through
existing cash and short-term investments, issuing $100
million of five-year and $100 million of ten-year notes,
and additional borrowings under or supported by Competitive
Advance and Revolving Credit Facility Agreements ("Variable Rate
Credit Facilities"). The total amount and mix of the five-year
and ten-year notes may be adjusted based upon market conditions.
The Variable Rate Credit Facilities will collectively permit
aggregate borrowings up to $800 million. The Variable Rate Credit
Facilities will be comprised of two unsecured lines, one limited to
$400 million principal amount maturing in one year,
and the other limited to $400 million principal amount maturing
in five years. Borrowings under the Variable Rate Credit
Facilities will be available on a committed revolving credit
basis at any of three short-term rates (including the prime
rate) or through an auction procedure at the time of each
borrowing allowing banks to offer lower rates. The Varaible
Rate Credit Facilities may also be used by the Company in whole
or in part, in lieu of direct borrowings, as credit support
for a commercial paper program to be established by the Company.
The acquisition of the HHC Newspaper and Broadcast
Operations, the subsequent sale of the HHC Broadcast
Operations to Belo, the acquisition of Belo's controlling
interest in TVFN and the related borrowings are
collectively referred to as the "Transactions."
The Transactions are expected to result in 10% to 15%
percent dilution to the Company's net income during the
first year of ownership.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(A) Financial Statements of Businesses Acquired
The financial statements required by this item appear
at page F-1 of this Current Report on Form 8-K.
(B) Pro Forma Financial Information
The pro forma financial information required by this
item appears at page P-1 of this Current Report on
Form 8-K.
(C) Exhibits
The information required by this item appears at page
E-1 of this Current Report on Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly
authorized.
THE E. W. SCRIPPS COMPANY
Dated: September 25, 1997 By: /s/ D. J. Castellini
D. J. Castellini
Senior Vice President,
Finance & Administration
<PAGE>
THE E. W. SCRIPPS COMPANY
INDEX TO FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
Harte-Hanks Newspapers
Financial Statements as of December 31, 1996, and for the
Three Years Then Ended F-2
Financial Statements as of June 30, 1997, and for the Six
Months Then Ended F-15
Harte-Hanks Television
Financial Statements as of December 31, 1996, and for the
Three Years Then Ended F-20
Financial Statements as of June 30, 1997, and for the Six
Months Then Ended F-32
Television Food Network, G.P.
Financial Statements as of December 31, 1996, and for the
Three Years Then Ended, and as of June 30, 1997, and for
the Six Months Ended June 30, 1997, and June 30, 1996 F-37
<PAGE>
HARTE-HANKS NEWSPAPERS
Financial Statements as of December 31, 1996, and for the
Three Years Then Ended
Balance Sheets F-3
Statements of Operations F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6
Independent Auditors' Report F-14
<PAGE>
<TABLE>
HARTE-HANKS NEWSPAPERS
BALANCE SHEETS
<CAPTION>
December 31,
In thousands 1996 1995
<S> <C> <C>
ASSETS
Current assets
Cash $ 2,498 $ 1,257
Accounts receivable (less allowance for doubtful
accounts of $808 in 1996 and $776 in 1995) 14,903 13,679
Inventory 4,679 8,698
Prepaid expense 852 628
Other current assets 1,391 1,402
Total current assets 24,323 25,664
Property, plant and equipment
Land 4,381 4,381
Buildings and improvements 18,640 18,341
Equipment and furniture 51,496 52,124
74,517 74,846
Less accumulated depreciation 41,664 40,728
32,853 34,118
Construction and equipment installations in progress 170 243
Net property, plant and equipment 33,023 34,361
Intangible and other assets
Goodwill (less accumulated amortization
of $58,746 in 1996 and $54,109 in 1995) 128,661 133,298
Receivable from Harte-Hanks Communications, Inc. 122,980 99,204
Other assets 79 56
Total intangible and other assets 251,720 232,558
Total assets $309,066 $292,583
LIABILITIES AND EQUITY
Accounts payable $ 2,532 $ 2,861
Accrued payroll and related expenses 3,590 3,456
Customer deposits 3,567 3,667
Other current liabilities 1,874 1,760
Total current liabilities 11,563 11,744
Deferred income tax liability 5,546 5,315
Other long term liabilities 1,083 931
Total liabilities 18,192 17,990
Equity 290,874 274,593
Total liabilities and equity $309,066 $292,583
</TABLE>
<PAGE>
<TABLE>
HARTE-HANKS NEWSPAPERS
STATEMENTS OF OPERATIONS
<CAPTION>
Year Ended December 31,
In thousands 1996 1995 1994
<S> <C> <C> <C>
Revenues $ 124,313 $ 117,744 $ 110,949
Operating expenses
Payroll 41,023 40,547 40,800
Production and distribution 32,170 29,091 24,852
Advertising, selling, general
and administrative 13,302 12,684 12,520
Depreciation 3,927 3,735 3,438
Goodwill amortization 4,637 4,637 4,637
95,059 90,694 86,247
Operating income 29,254 27,050 24,702
Other expenses (income) (32) 116 192
Income before income taxes 29,286 26,934 24,510
Income tax expense 13,005 12,091 11,160
Net income $ 16,281 $ 14,843 $ 13,350
</TABLE>
<PAGE>
<TABLE>
HARTE-HANKS NEWSPAPERS
STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended December 31,
In thousands 1996 1995 1994
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income $ 16,281 $ 14,843 $ 13,350
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 3,927 3,735 3,438
Goodwill amortization 4,637 4,637 4,637
Amortization of option related
compensation 217 274 315
Deferred income taxes 211 346 (201)
Other, net (55) 116 192
Changes in operating assets and liabilities:
Increase in accounts receivable, net (1,224) (473) (1,177)
Decrease (increase) in inventory 4,019 (2,908) (3,155)
Decrease (increase) in prepaid expenses
and other current assets (173) (149) 222
Increase (decrease) in accounts payable (330) (44) 446
Increase in other accrued expenses and
other liabilities 128 643 589
Other, net (65) (341) (158)
Net cash provided by operating activities 27,573 20,679 18,498
Cash Flows from Investing Activities
Purchases of property, plant and
equipment (2,826) (3,544) (4,258)
Proceeds from the sale of property,
plant and equipment 270 187 193
Net cash (used in) investing activities (2,556) (3,357) (4,065)
Cash Flows from Financing Activities
Distributions to Harte-Hanks
Communications, Inc., including
payments for income taxes (23,776) (17,007) (14,308)
Net increase in cash 1,241 315 125
Cash at beginning of period 1,257 942 817
Cash at end of period $ 2,498 $ 1,257 $ 942
</TABLE>
<PAGE>
Note A - Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The accompanying financial statements present the financial
position of Harte-Hanks Newspapers (the "Company"). The
financial statements exclude all assets, liabilities,
revenues and expenses of Harte-Hanks Communications, Inc.
and its subsidiaries other than assets, liabilities,
revenues and expenses of its newspapers business.
The financial statements have been prepared as if the
newspapers business had operated as an independent, stand
alone entity for all periods presented. Except as described
below, such financial statements have been prepared using
the historical basis of accounting and include the assets,
liabilities, revenues, expenses and income taxes of Harte-
Hanks' newspapers business.
In March 1995, Harte-Hanks Communications, Inc. sold its
suburban Boston community newspapers. As these newspapers
ceased to be a part of Harte-Hanks Newspapers in 1995, their
assets, liabilities, revenues and expenses have been
excluded from these financial statements. In addition, all
related gain on divestiture as well as tax
assets/liabilities which resulted from this transaction,
have been excluded from these financial statements for all
years presented.
These financial statements do not include any liabilities or
disclosure related to the Company's employee benefit plans
other than as disclosed in note C. However, the cost of all
employee benefit plans which relate to employees of Harte-
Hanks Newspapers is included in these financial statements.
Intercompany balances and transactions have been eliminated.
Direct expenses incurred by Harte-Hanks Communications, Inc.
on behalf of the Company are identified and allocated to the
Company based on the actual costs incurred. Any remaining
indirect expenses incurred by Harte-Hanks Communications,
Inc. have not been allocated to the Company because they
have been insignificant. Management believes that this
method of allocation is reasonable and that such costs would
not be materially different if they had been incurred with
unaffiliated third parties.
Certain prior year amounts have been reclassified for
comparative purposes.
Inventory
Inventory, consisting primarily of newsprint and other
operating supplies, is stated at the lower of cost (first-
in, first-out method) or market.
Property, Plant and Equipment
Property, plant and equipment are stated on the basis of
cost. Depreciation of buildings and equipment is computed
generally on the straight-line method at rates calculated to
amortize the cost of the assets over their useful lives. The
general ranges of estimated useful lives are:
Buildings and improvements 10 to 40 years
Equipment and furniture 4 to 20 years
<PAGE>
Goodwill
Goodwill is stated on the basis of cost, adjusted as
discussed below, and is amortized on a straight-line basis
over 40-year periods.
For each of its investments, the Company assesses the
recoverability of its goodwill by determining whether the
amortization of the goodwill balance over its remaining life
can be recovered through projected undiscounted future cash
flows over the remaining amortization period. If projected
undiscounted future cash flows indicate that unamortized
goodwill and the net book value of long-lived assets will
not be recovered, net goodwill is adjusted to an amount
consistent with projected discounted future cash flows. Cash
flow projections are based on trends of historical
performance and management's estimate of future performance,
giving consideration to existing and anticipated competitive
and economic conditions.
Income Taxes
Income taxes are calculated using the asset and liability
method required by Statement of Financial Accounting
Standards ("SFAS") No. 109. Deferred income taxes are
recognized for the tax consequences resulting from
"temporary differences" by applying enacted statutory tax
rates applicable to future years. These "temporary
differences" are associated with differences between the
financial and the tax basis of existing assets and
liabilities. Under SFAS No. 109, a statutory change in tax
rates will be recognized immediately in deferred taxes and
income.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
Note B - Income Taxes
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
In thousands 1996 1995 1994
<S> <C> <C> <C>
Current
Federal $ 11,254 $ 10,324 $ 10,003
State and local 1,540 1,421 1,357
Total current $ 12,794 $ 11,745 $ 11,360
Deferred
Federal $ 188 $ 307 $ (178)
State and local 23 39 (22)
Total deferred $ 211 $ 346 $ (200)
</TABLE>
<PAGE>
The differences between total income tax expense and the
amount computed by applying the statutory Federal income tax
rate to income before income taxes were as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
In thousands 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Computed expected income tax expense $10,251 35% $ 9,427 35% $ 8,579 35%
Effect of goodwill amortization 1,622 6% 1,622 6% 1,622 7%
Net effect of state income taxes 1,016 3% 949 4% 867 4%
Other, net 116 - 93 - 92 -
Income tax expense for the period $13,005 44% $12,091 45% $11,160 46%
</TABLE>
The tax effects of temporary differences that gave rise to
significant portions of the deferred tax assets and deferred
tax liabilities were as follows:
<TABLE>
<CAPTION>
December 31,
In thousands 1996 1995
<S> <C> <C>
Deferred tax assets:
Accrued vacation pay $ 472 $ 503
Accrued stock option liability 371 326
Accounts receivable, net 283 272
Other, net 18 9
Total gross deferred tax assets 1,144 1,110
Deferred tax liabilities:
State income tax (352) (337)
Property, plant and equipment (5,546) (5,315)
Total gross deferred tax liabilities (5,898) (5,652)
Net deferred tax liability $(4,754) $(4,542)
</TABLE>
The net deferred tax liability is recorded both as a current
deferred income tax benefit and as other long term
liabilities based upon the classification of the related
temporary difference. In assessing the reliability of
deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those
temporary differences become deductible. Management
considers the scheduled reversal of deferred tax
liabilities, recoverable taxes paid, projected future
taxable income and tax planning strategies in making this
assessment. Based on the level of historical taxable income,
the reversal of existing deferred tax liabilities and
projections for future taxable income over the periods which
the deferred tax assets are deductible at December 31, 1996,
management believes it is more likely than not the Company
will realize the benefits of these deductible differences.
<PAGE>
Note C - Employee Benefit Plans
Harte-Hanks Communications, Inc. maintains a defined benefit
pension plan for which most of Harte-Hanks Newspapers
employees are eligible. Benefits are based on years of
service and the employee's compensation for the five highest
consecutive years of salary during the last ten years of
service. Benefits vest to the participants upon completion
of five years of service or upon reaching age 65, whichever
is earlier. Harte-Hanks' policy is to accrue as expense an
amount computed by its actuary and to fund at least the
minimum amount required by ERISA.
In 1994, the Harte-Hanks Communications, Inc. adopted a non-
qualified, supplemental pension plan covering certain Harte-
Hanks Newspapers employees, which provides for incremental
pension payments so that total pension payments equal
amounts that would have been payable from the principal
pension plan if it were not for limitations imposed by
income tax regulation.
In determining the 1996, 1995 and 1994 actuarial present
value of benefit obligations, discount rates of 7 3/4%, 7 1/4%
and 8% were used, respectively. The assumed annual rate of
increase in future compensation levels was 4%, and the
expected long term rate of return on plan assets was 10%.
Pension expense for the years ended December 31, 1996, 1995
and 1994 was $828, $823 and $789, respectively.
Harte-Hanks Communications, Inc. also sponsors a 401(k) plan
which provides employees of Harte-Hanks Newspapers with
additional income upon retirement. The Company matches a
portion of employees' voluntary before-tax contributions.
Employees are fully vested in their own contributions and
vest in the Company's matching contributions upon three
years of service. Contributions made during the years ended
December 31, 1996, 1995 and 1994 were $199, $205 and $167,
respectively.
The 1994 Harte-Hanks Communications, Inc. Employee Stock
Purchase Plan provides for a total of 450,000 shares to be
sold to participating employees at all Harte-Hanks
subsidiaries at 85% of the fair market value at specified
quarterly investment dates. At December 31, 1996, 1995 and
1994, Harte-Hanks Newspapers had $71, $71 and $69,
respectively recorded as a liability for amounts withheld by
the Company to be used for the purchase of Harte-Hanks
Communications, Inc. shares in the subsequent January.
All costs related to the above described plans are recorded
in the Harte-Hanks Newspapers financial statements to the
extent that these costs relate to the employees of Harte-
Hanks Newspapers.
Note D - Equity
A summary of changes in equity is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Beginning balance $ 274,593 $ 259,750 $ 246,400
Net earnings. 16,281 14,843 13,350
Ending balance $ 290,874 $ 274,593 $ 259,750
</TABLE>
<PAGE>
Note E - Stock Option Plans
1984 Plan
In 1984, Harte-Hanks Communications, Inc. adopted a Stock
Option Plan ("1984 Plan") pursuant to which it issued to
officers and key employees options to purchase shares of
common stock at prices equal to the market price on the
grant date. Market price was determined by the Board of
Directors for purposes of granting stock options and making
repurchase offers. Options granted under the 1984 Plan
become exercisable five years after date of grant. At
December 31, 1996, 1995 and 1994, options held by employees
of Harte-Hanks Newspapers to purchase 96,800 shares, 107,400
shares and 149,400 shares, respectively, were outstanding
under the 1984 Plan, with exercise prices ranging from $3.33
to $6.67 per share. No additional options will be granted
under the 1984 Plan.
1991 Plan
Harte-Hanks Communications, Inc. adopted the 1991 Stock
Option Plan ("1991 Plan") pursuant to which it may issue to
officers and key employees options to purchase up to
3,000,000 shares of common stock. Options have been granted
to certain employees of the Company at prices equal to the
market price on the grant date ("market price options") and
at prices below market price ("performance options"). As of
December 31, 1996, 1995 and 1994, market price options held
by employees of Harte-Hanks Newspapers to purchase 302,075
shares, 258,675 shares and 235,200 shares, respectively,
were outstanding with exercise prices ranging from $6.67 to
$25.38 per share. Market price options become exercisable
after the fifth anniversary of their date of grant.
At December 31, 1996, 1995 and 1994 performance options to
purchase 110,300 shares, 107,100 shares and 116,850 shares,
respectively, were outstanding with exercise prices ranging
from $0.67 to $2.00 per share. The performance options
become exercisable after the third anniversary of their date
of grant, and the extent to which they become exercisable at
that time depends upon the extent to which Harte-Hanks
Communications, Inc. achieves certain goals which are
established at the time the options are granted. That
portion of the performance options which does not become
exercisable on the third anniversary of the date of grant
becomes exercisable after the ninth anniversary of the date
of grant. Compensation expense of $217, $274 and $315 was
recognized by Harte-Hanks Newspapers for the performance
options held by employees of Harte-Hanks Newspapers for the
years ended December 31, 1996, 1995 and 1994, respectively.
<PAGE>
The following summarizes stock option plans activity:
<TABLE>
<CAPTION>
Number Weighted Average
of Shares Option Price
<S> <C> <C>
Options outstanding
at January 1, 1994 507,000 $ 4.95
Granted 34,950 7.92
Exercised (40,500) 3.04
Options outstanding
at December 31, 1994 501,450 5.30
Granted 59,100 10.34
Exercised (60,750) 4.28
Cancelled (26,625) 7.47
Options outstanding
at December 31, 1995 473,175 5.94
Granted 67,450 18.40
Exercised (18,100) 4.19
Cancelled (13,350) 11.93
Options outstanding at
December 31, 1996 509,175 7.51
Exercisable at
December 31, 1996 207,050 4.18
</TABLE>
The Company has adopted the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation." Accordingly, no
compensation expense has been recognized for options granted
where the exercise price is equal to the market price of the
underlying stock at the date of grant. The Company does
recognize compensation expense for options whose market
price of the underlying stock exceeds the exercise price on
the date of grant under the provisions of Accounting
Principles Board (APB) Opinion No. 25, "Accounting for Stock
Issued to Employees," as permitted under SFAS No. 123.
<PAGE>
Had compensation expense for the Company's options been
determined based on the fair value at the grant date for
awards in 1996 and 1995, the Company's net income would have
been reduced to the proforma amounts indicated below.
<TABLE>
<CAPTION>
Year Ended December 31,
In thousands, except per share amounts 1996 1995
<S> <C> <C>
Net income - as reported $ 16,281 $ 14,843
Net income - proforma 16,190 14,816
</TABLE>
The fair value of each option grant is estimated on the date
of grant using the Black-Scholes option pricing model with
the following weighted-average assumptions used for grants
in 1996 and 1995:
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995
<S> <C> <C>
Expected dividends yield 0.3% 0.3%
Expected stock price volatility 22.1% 21.3%
Risk-free interest rate 6.4% 6.4%
Expected life of options 3-10 years 3-10 years
</TABLE>
The weighted-average fair value of market price options
granted during 1996 and 1995 was $7.64 and $5.52,
respectively. The weighted-average fair value and exercise
price of performance options was $15.01 and $1.25 in 1996,
and $12.15 and $0.67 in 1995, respectively.
Note F - Fair Value of Financial Instruments
Because of their maturities and/or interest rates, the
Company's financial instruments have a fair value
approximating their carrying value. These instruments
include accounts receivable, trade payables, and
miscellaneous notes receivable and payable.
Note G - Commitments and Contingencies
The Company has pending claims incurred in the normal course
of business which, in the opinion of management, and legal
counsel, can be disposed of without material effect on the
accompanying financial statements.
<PAGE>
Note H - Leases
The Company leases certain real estate and equipment under
various operating leases. Most of the leases contain renewal
options for varying periods of time. The total rent expense
under all operating leases was $1,054, $994 and $806 for the
years ended December 31, 1996, 1995 and 1994, respectively.
The future minimum rental commitments for all non-
cancellable operating leases with terms in excess of one
year as of December 31, 1996 are as follows:
In thousands
1997 $ 812
1998 726
1999 556
2000 409
2001 244
After 2001 207
Total $ 2,954
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Harte-Hanks Communications, Inc.:
We have audited the accompanying balance sheets of Harte-
Hanks Newspapers as of December 31, 1996 and 1995, and the
related statements of operations and cash flows for each of
the years in the three-year period ended December 31, 1996.
These financial statements are the responsibility of Harte-
Hanks Communications, Inc.'s management. Our responsibility
is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation
of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
The accompanying financial statements were prepared on the
basis of presentation described in note A, and include the
assets, liabilities, revenues and expenses of Harte-Hanks
Newspapers.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Harte-Hanks Newspapers as of December 31, 1996
and 1995, and the results of their operations and their cash
flows for each of the years in the three-year period ended
December 31, 1996, pursuant to the basis of presentation
described in note A, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
San Antonio, Texas
April 14, 1997
<PAGE>
HARTE-HANKS NEWSPAPERS
Financial Statements as of June 30, 1997, and for the Six
Months Then Ended
Balance Sheets F-16
Statements of Operations F-17
Statements of Cash Flows F-18
Notes to Financial Statements F-19
<PAGE>
<TABLE>
HARTE-HANKS NEWSPAPERS
BALANCE SHEETS
<CAPTION>
June 30,
In Thousands 1997 1996
<S> <C> <C>
ASSETS
Current assets
Cash $ 1,669 $ 1,707
Accounts receivable (less allowance for doubtful
accounts of $746 in 1997 and $830 in 1996) 12,926 13,002
Inventory 4,203 7,981
Prepaid expenses 559 338
Other current assets 1,390 1,380
Total current assets 20,747 24,408
Property, plant and equipment
Land 4,381 4,381
Buildings and improvements 18,770 18,560
Equipment and furniture 52,012 52,887
75,163 75,828
Less accumulated depreciation 43,174 42,584
31,989 33,244
Construction and equipment installations in progress 963 691
Net property, plant and equipment 32,952 33,935
Intangible and other assets
Goodwill (less accumulated amortization of
$61,064 in 1997 and $56,427 in 1996) 126,343 130,980
Receivable from Harte-Hanks Communications, Inc. 135,377 108,157
Other assets 77 76
Total intangible and other assets 261,797 239,213
Total assets $ 315,496 $ 297,556
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable $ 2,137 $ 2,502
Accrued payroll and related expenses 3,168 2,959
Customer deposits 3,703 3,731
Other current liabilities 1,553 1,379
Total current liabilities 10,561 10,571
Deferred income tax liability 5,403 5,313
Other long term liabilities 20 23
Total liabilities 15,984 15,907
Equity 299,512 281,649
Total liabilities and equity $ 315,496 $ 297,556
</TABLE>
<PAGE>
<TABLE>
HARTE-HANKS NEWSPAPERS
STATEMENTS OF OPERATIONS
<CAPTION>
For the Six Months Ended June 30,
In Thousands 1997 1996
<S> <C> <C>
Operating revenues $ 62,517 $ 60,139
Operating expenses
Payroll 21,407 20,420
Production and distribution 14,453 15,953
Advertising, selling, general and administrative 6,635 6,522
Depreciation 2,025 1,958
Goodwill amortization 2,318 2,318
46,838 47,171
Operating income 15,679 12,968
Other expenses (income) 26 (51)
Income before income tax expense 15,653 13,019
Income tax expense 7,015 5,963
Net income $ 8,638 $ 7,056
</TABLE>
<PAGE>
<TABLE>
HARTE-HANKS NEWSPAPERS
STATEMENTS OF CASH FLOWS
<CAPTION>
For the Six Months Ended June 30,
In Thousands 1997 1996
<S> <C> <C>
Operating Activities
Net income $ 8,638 $ 7,056
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,025 1,958
Goodwill amortization 2,318 2,318
Deferred income taxes (134) (2)
Other, net 137 74
Changes in operating assets and liabilities
Decrease in accounts receivable, net 1,977 677
Decrease in inventory 476 717
Decrease in prepaid expenses and other current assets 285 312
Increase (decrease) in accounts payable (395) (359)
Increase (decrease) in other accrued expenses
and other liabilities (607) (814)
Other, net (150) (57)
Net cash provided by operating activities 14,570 11,880
Investing Activities:
Purchases of property, plant and equipment (1,846) (1,510)
Proceeds from the sale of property, plant and equipment 15 90
Net cash used in investing activities (1,831) (1,420)
Financing Activities:
Distributions to Harte-Hanks Communications, Inc.
including payments for income taxes (13,568) (10,010)
Net increase (decrease) in cash (829) 450
Cash at beginning period 2,498 1,257
Cash at end of period $ 1,669 $ 1,707
</TABLE>
<PAGE>
Note A - Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The financial statements have been prepared in accordance
with generally accepted accounting principles for interim
financial information. The information disclosed in the
notes to financial statements for the year ended December
31, 1996 has not changed materially. In management's
opinion all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation of the interim
periods have been made.
Results of operations are not necessarily indicative of the
results that may be expected for future interim periods or
for the full year.
<PAGE>
HARTE-HANKS TELEVISION
Financial Statements as of December 31, 1996, and for the
Three Years Then Ended
Balance Sheets F-21
Statements of Operations F-22
Statements of Cash Flows F-23
Notes to Financial Statements F-24
Independent Auditors' Report F-31
<PAGE>
<TABLE>
HARTE-HANKS TELEVISION
BALANCE SHEETS
<CAPTION>
December 31,
In thousands 1996 1995
<S> <C> <C>
ASSETS
Current assets
Cash $ 228 $ 338
Accounts receivable (less allowance for doubtful
accounts of $67 in 1996 and $47 in 1995) 5,146 5,208
Inventory 29 30
Prepaid expense 261 237
Film contracts 1,517 1,203
Other current assets 188 191
Total current assets 7,369 7,207
Property, plant and equipment
Land 354 354
Buildings and improvements 6,169 6,169
Equipment and furniture 11,701 10,939
18,224 17,462
Less accumulated depreciation 10,621 9,537
7,603 7,925
Construction and equipment installations in progress 67 0
Net property, plant and equipment 7,670 7,925
Intangible and other assets
Goodwill (less accumulated amortization
of $21,481 in 1996 and $19,733 in 1995) 48,575 50,323
Receivable from Harte-Hanks Communications, Inc. 34,251 27,665
Film contracts 2,187 1,275
Other assets 232 176
Total intangible and other assets 85,245 79,439
Total assets $100,284 $ 94,571
LIABILITIES AND EQUITY
Current liabilities
Accounts payable $ 685 $ 632
Accrued payroll and related expenses 727 653
Film contract payable 1,581 1,145
Other current liabilities 37 369
Total current liabilities 3,030 2,799
Film contract payable 1,488 985
Deferred income tax liability 1,841 1,780
Other long term liabilities 489 532
Total liabilities 6,848 6,096
Equity 93,436 88,475
Total liabilities and equity $100,284 $ 94,571
</TABLE>
<PAGE>
<TABLE>
HARTE-HANKS TELEVISION
STATEMENTS OF OPERATIONS
<CAPTION>
Year Ended December 31,
In thousands 1996 1995 1994
<S> <C> <C> <C>
Revenues $ 26,100 $ 25,132 $ 28,629
Operating expenses
Payroll 8,361 8,008 8,624
Production and distribution 1,739 2,040 2,864
Advertising, selling, general
and administrative 2,880 2,848 2,800
Depreciation 1,044 1,066 1,041
Film amortization 1,347 2,224 2,746
Goodwill amortization 1,748 1,748 1,748
17,119 17,934 19,823
Operating income 8,981 7,198 8,806
Other expenses (income)
Interest expense 20 26 26
Other, net - (85) -
20 (59) 26
Income before income taxes 8,961 7,257 8,780
Income tax expense 4,000 3,366 3,954
Net income $ 4,961 $ 3,891 $ 4,826
</TABLE>
<PAGE>
<TABLE>
HARTE-HANKS TELEVISION
STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended December 31,
In thousands 1996 1995 1994
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income $ 4,961 $ 3,891 $ 4,826
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 1,044 1,066 1,041
Goodwill amortization 1,748 1,748 1,748
Amortization of option related
compensation 93 163 131
Film amortization 1,347 2,224 2,746
Deferred income taxes 37 42 (10)
Other, net - (85) -
Changes in operating assets and liabilities:
Decrease in accounts receivable, net 62 677 52
Decrease (increase) in inventory 1 6 (6)
Decrease (increase) in prepaid expenses
and other current assets 61 (59) 99
Increase (decrease) in accounts payable 53 (324) 329
(Decrease) in other accrued expenses
and other liabilities (312) (291) (100)
Other, net (258) (114) 15
Net cash provided by operating activities 8,837 8,944 10,871
Cash Flows from Investing Activities
Purchases of property, plant and
equipment (789) (1,060) (883)
Proceeds from the sale of property,
plant and equipment - 123 142
Payments on film contracts (1,572) (1,817) (2,123)
Net cash (used in) investing activities (2,361) (2,754) (2,864)
Cash Flows from Financing Activities
Distributions to Harte-Hanks Communications,
Inc. including payments for income taxes (6,586) (6,406) (7,874)
Net increase (decrease) in cash (110) (216) 133
Cash at beginning of period 338 554 421
Cash at end of period $ 228 $ 338 $ 554
</TABLE>
<PAGE>
Note A - Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The accompanying financial statements present the financial
position of Harte-Hanks Television (the "Company"). The
financial statements exclude all assets, liabilities,
revenues and expenses of Harte-Hanks Communications, Inc.
and its subsidiaries other than assets, liabilities,
revenues and expenses of its television business.
The financial statements have been prepared as if the
television business had operated as an independent, stand
alone entity for all periods presented. Except as described
below, such financial statements have been prepared using
the historical basis of accounting and include the assets,
liabilities, revenues, expenses and income taxes of Harte-
Hanks' television business. These financial statements do
not include any liabilities or disclosure related to the
Company's employee benefit plans other than as disclosed in
note C. However, the cost of all employee benefit plans
which relate to employees of Harte-Hanks Television is
included in these financial statements. Direct expenses
incurred by Harte-Hanks Communications, Inc. on behalf of
the Company are identified and allocated to the Company
based on the actual costs incurred. Any remaining indirect
expenses incurred by Harte-Hanks Communications, Inc. have
not been allocated to the Company because they have been
insignificant. Management believes that this method of
allocation is reasonable and that such costs would not be
materially different if they had been incurred with
unaffiliated third parties.
Certain prior year amounts have been reclassified for
comparative purposes.
Television Revenues
Television revenues are presented net of advertising agency
commissions.
Inventory
Inventory, consisting primarily of film and television
tubes, is stated at the lower of cost (first-in, first-out
method) or market.
Property, Plant and Equipment
Property, plant and equipment are stated on the basis of
cost. Depreciation of buildings and equipment is computed
generally on the straight-line method at rates calculated to
amortize the cost of the assets over their useful lives.
The general ranges of estimated useful lives are:
Buildings and improvements 10 to 40 years
Equipment and furniture 4 to 20 years
Goodwill
Goodwill is stated on the basis of cost, adjusted as
discussed below, and is amortized on a straight-line basis
over 40-year periods.
The Company assesses the recoverability of its goodwill by
determining whether the amortization of the goodwill balance
over its remaining life can be recovered through projected
undiscounted future cash flows over the remaining
amortization period. If projected undiscounted future cash
flows indicate that unamortized goodwill and the net book
value of long-lived assets will not be recovered, net
goodwill is adjusted to an amount consistent with projected
discounted future cash flows. Cash flow projections are
based on trends of historical performance and management's
estimate of future performance, giving consideration to
existing and anticipated competitive and economic
conditions.
<PAGE>
Film Contracts
Film contract rights represent agreements with film
syndicators for television program material. The
capitalized costs of film rights and related liabilities are
recorded when the licensed period begins and the film rights
are available for use. The cost is amortized over the
expected number of telecasts. The portions of the cost to
be amortized within one year and after one year are
reflected in the consolidated balance sheets as current and
noncurrent assets, respectively. The payments under these
contracts due within one year and after one year are
classified as current and noncurrent liabilities.
Income Taxes
Income taxes are calculated using the asset and liability
method required by Statement of Financial Accounting
Standards ("SFAS") No. 109. Deferred income taxes are
recognized for the tax consequences resulting from
"temporary differences" by applying enacted statutory tax
rates applicable to future years. These "temporary
differences" are associated with differences between the
financial and the tax basis of existing assets and
liabilities. Under SFAS No. 109, a statutory change in tax
rates will be recognized immediately in deferred taxes and
income.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
Note B - Income Taxes
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
In thousands 1996 1995 1994
<S> <C> <C> <C>
Current
Federal $ 3,607 $ 3,025 $ 3,580
State and local 356 299 384
Total current $ 3,963 $ 3,324 $ 3,964
Deferred
Federal $ 33 $ 37 $ (9)
State and local 4 5 (1)
Total deferred $ 37 $ 42 $ (10)
</TABLE>
<PAGE>
The differences between total income tax expense and the
amount computed by applying the statutory Federal income tax
rate to income before income taxes were as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
In thousands 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Computed expected income tax expense $3,136 35% $2,540 35% $3,073 35%
Effect of goodwill amortization 605 7% 605 8% 605 7%
Net effect of state income taxes 234 3% 198 3% 249 3%
Other, net 25 - 23 - 27 -
Income tax expense for the period $4,000 45% $3,366 46% $3,954 45%
</TABLE>
The tax effects of temporary differences that gave rise to
significant portions of the deferred tax assets and deferred
tax liabilities were as follows:
<TABLE>
<CAPTION>
December 31,
In thousands 1996 1995
<S> <C> <C>
Deferred tax assets:
Accrued vacation pay $ 109 $ 99
Accrued stock option liability 167 157
Accounts receivable, net 23 16
Total gross deferred tax assets 299 272
Deferred tax liabilities:
Property, plant and equipment (1,805) (1,756)
State income tax (123) (120)
Other, net (36) (24)
Total gross deferred tax liabilities (1,964) (1,900)
Net deferred tax liability $(1,665) $(1,628)
</TABLE>
The net deferred tax liability is recorded both as a current
deferred income tax benefit and as other long term
liabilities based upon the classification of the related
temporary difference. In assessing the reliability of
deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those
temporary differences become deductible. Management
considers the scheduled reversal of deferred tax
liabilities, recoverable taxes paid, projected future
taxable income and tax planning strategies in making this
assessment. Based on the level of historical taxable
income, the reversal of existing deferred tax liabilities
and projections for future taxable income over the periods
which the deferred tax assets are deductible at December 31,
1996, management believes it is more likely than not the
Company will realize the benefits of these deductible
differences.
<PAGE>
Note C - Employee Benefit Plans
Harte-Hanks Communications, Inc. maintains a defined benefit
pension plan for which most of Harte-Hanks Television
employees are eligible. Benefits are based on years of
service and the employee's compensation for the five highest
consecutive years of salary during the last ten years of
service. Benefits vest to the participants upon completion
of five years of service or upon reaching age 65, whichever
is earlier. Harte-Hanks' policy is to accrue as expense an
amount computed by its actuary and to fund at least the
minimum amount required by ERISA.
In 1994, the Harte-Hanks Communications, Inc. adopted a non-
qualified, supplemental pension plan covering certain Harte-
Hanks Television employees, which provides for incremental
pension payments so that total pension payments equal
amounts that would have been payable from the principal
pension plan if it were not for limitations imposed by
income tax regulation.
In determining the 1996, 1995 and 1994 actuarial present
value of benefit obligations, discount rates of 7 3/4%, 7 1/4%
and 8% were used, respectively. The assumed annual rate of
increase in future compensation levels was 4%, and the
expected long term rate of return on plan assets was 10%.
Pension expense for the years ended December 31, 1996, 1995
and 1994 was $183, $176 and $201, respectively.
Harte-Hanks Communications, Inc. also sponsors a 401(k) plan
which provides employees of Harte-Hanks Television with
additional income upon retirement. The Company matches a
portion of employees' voluntary before-tax contributions.
Employees are fully vested in their own contributions and
vest in the Company's matching contributions upon three
years of service. Contributions made during the years ended
December 31, 1996, 1995 and 1994 were $36, $40 and $42,
respectively.
The 1994 Harte-Hanks Communications, Inc. Employee Stock
Purchase Plan provides for a total of 450,000 shares to be
sold to participating employees at all Harte-Hanks
subsidiaries at 85% of the fair market value at specified
quarterly investment dates. At December 31, 1996, 1995 and
1994, Harte-Hanks Television had $21, $18 and $17,
respectively recorded as a liability for amounts withheld by
the Company to be used for the purchase of Harte-Hanks
Communications, Inc. shares in the subsequent January.
All costs related to the above described plans are recorded
in the Harte-Hanks Television financial statements to the
extent that these costs relate to the employees of Harte-
Hanks Television.
Note D - Equity
A summary of changes in equity is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Beginning balance $ 88,475 $ 84,584 $ 79,758
Net earnings 4,961 3,891 4,826
Ending balance $ 93,436 $ 88,475 $ 84,584
</TABLE>
<PAGE>
Note E - Stock Option Plans
1984 Plan
In 1984, Harte-Hanks Communications, Inc. adopted a Stock
Option Plan ("1984 Plan") pursuant to which it issued to
officers and key employees options to purchase shares of
common stock at prices equal to the market price on the
grant date. Market price was determined by the Board of
Directors for purposes of granting stock options and making
repurchase offers. Options granted under the 1984 Plan
become exercisable five years after date of grant. At
December 31, 1996, 1995 and 1994, options held by employees
of Harte-Hanks Television to purchase 37,500 shares, 37,500
shares and 52,500 shares, respectively, were outstanding
under the 1984 Plan, with exercise prices ranging from $3.33
to $6.67 per share. No additional options will be granted
under the 1984 Plan.
1991 Plan
Harte-Hanks Communications, Inc. adopted the 1991 Stock
Option Plan ("1991 Plan") pursuant to which it may issue to
officers and key employees options to purchase up to
3,000,000 shares of common stock. Options have been granted
to certain employees of the Company at prices equal to the
market price on the grant date ("market price options") and
at prices below market price ("performance options"). As of
December 31, 1996, 1995 and 1994, market price options, held
by employees of Harte-Hanks Television, to purchase 175,000
shares, 159,750 shares and 132,750 shares, respectively,
were outstanding with exercise prices ranging from $6.67 to
$20.50 per share. Market price options become exercisable
after the fifth anniversary of their date of grant.
At December 31, 1996, 1995 and 1994 performance options held
by employees of Harte-Hanks Television to purchase 49,200
shares, 52,200 shares and 45,450 shares, respectively, were
outstanding with exercise prices ranging from $0.67 to $2.00
per share. The performance options become exercisable after
the third anniversary of their date of grant, and the extent
to which they become exercisable at that time depends upon
the extent to which Harte-Hanks Communications, Inc.
achieves certain goals which are established at the time the
options are granted. That portion of the performance
options which does not become exercisable on the third
anniversary of the date of grant becomes exercisable after
the ninth anniversary of the date of grant. Compensation
expense of $93, $163 and $131 was recognized by Harte-Hanks
Television for the performance options held by employees of
Harte-Hanks Television for the years ended December 31,
1996, 1995 and 1994, respectively.
<PAGE>
The following summarizes stock option plans activity:
<TABLE>
<CAPTION>
Number Weighted Average
of Shares Option Price
<S> <C> <C>
Options outstanding
at January 1, 1994 236,250 $ 5.24
Granted 23,700 9.91
Exercised (29,250) 4.49
Options outstanding
at December 31, 1994 230,700 5.82
Granted 33,750 10.40
Exercised (15,000) 5.00
Options outstanding
at December 31, 1995 249,450 6.49
Granted 22,500 18.03
Exercised (5,250) 0.67
Cancelled (5,000) 11.78
Options outstanding at
December 31, 1996 261,700 7.50
Exercisable at
December 31, 1996 102,000 4.55
</TABLE>
The Company has adopted the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123,
"Accounting For Stock-Based Compensation." Accordingly, no
compensation expense has been recognized for options granted
where the exercise price is equal to the market price of the
underlying stock at the date of grant. The Company does
recognize compensation expense for options whose market
price of the underlying stock exceeds the exercise price on
the date of grant under the provisions of Accounting
Principles Board (APB) Opinion No. 25, "Accounting for Stock
Issued to Employees," as permitted under SFAS No. 123.
Had compensation expense for the Company's options been
determined based on the fair value at the grant date for
awards in 1996 and 1995, the Company's net income and
earnings per share would have been reduced to the proforma
amounts indicated below.
<TABLE>
<CAPTION>
Year Ended December 31,
In thousands, except per share amounts 1996 1995
<S> <C> <C>
Net income - as reported $ 4,961 $ 3,891
Net income - proforma 4,925 3,877
</TABLE>
<PAGE>
The fair value of each option grant is estimated on the date
of grant using the Black-Scholes option pricing model with
the following weighted-average assumptions used for grants
in 1996 and 1995:
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995
<S> <C> <C>
Expected dividends yield 0.3% 0.3%
Expected stock price volatility 22.1% 21.3%
Risk-free interest rate 6.4% 6.4%
Expected life of options 3-10 years 3-10 years
</TABLE>
The weighted-average fair value of market price options
granted during 1996 and 1995 was $7.00 and $5.52,
respectively. The weighted-average fair value and exercise
price of performance options was $14.35 and $1.11 in 1996,
and $12.15 and $0.67 in 1995, respectively.
Note F - Fair Value of Financial Instruments
Because of their maturities and/or interest rates, the
Company's financial instruments have a fair value
approximating their carrying value. These instruments
include accounts receivable, trade and film payables, and
miscellaneous notes receivable and payable.
Note G - Commitments and Contingencies
The Company has pending claims incurred in the normal course
of business which, in the opinion of management, and legal
counsel, can be disposed of without material effect on the
accompanying financial statements.
Note H - Leases
The Company leases certain real estate and equipment under
various operating leases. Most of the leases contain renewal
options for varying periods of time. The total rent expense
under all operating leases was $320, $307 and $302 for the
years ended December 31, 1996, 1995 and 1994, respectively.
The future minimum rental commitments for all non-cancelable
operating leases with terms in excess of one year as of
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
In thousands
<S> <C>
1997 $ 140
1998 78
1999 26
2000 6
Total $ 250
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Harte-Hanks Communications, Inc.:
We have audited the accompanying balance sheets of Harte-
Hanks Television as of December 31, 1996 and 1995, and the
related statements of operations and cash flows for each of
the years in the three-year period ended December 31, 1996.
These financial statements are the responsibility of Harte-
Hanks Communications, Inc.'s management. Our responsibility
is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation
of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
The accompanying financial statements were prepared on the
basis of presentation described in note A, and include the
assets, liabilities, revenues and expenses of Harte-Hanks
Television.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Harte-Hanks Television as of December 31, 1996
and 1995, and the results of its operations and its cash
flows for each of the years in the three-year period ended
December 31, 1996, pursuant to the basis of presentation
described in note A, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
San Antonio, Texas
April 14, 1997
<PAGE>
HARTE-HANKS TELEVISION
Financial Statements as of June 30, 1997, and for the Six
Months Then Ended
Balance Sheets F-33
Statements of Operations F-34
Statements of Cash Flows F-35
Notes to Financial Statements F-36
<PAGE>
<TABLE>
HARTE-HANKS TELEVISION
BALANCE SHEETS
<CAPTION>
June 30,
In Thousands 1997 1996
<S> <C> <C>
ASSETS
Current assets
Cash $ 615 $ 578
Accounts receivable (less allowance for doubtful
accounts of $50 in 1997 and $60 in 1996) 5,542 5,037
Inventory 21 32
Prepaid expenses 308 225
Film contracts 1,172 974
Other current assets 177 183
Total current assets 7,835 7,029
Property, plant and equipment
Land 354 354
Buildings and improvements 6,184 6,169
Equipment and furniture 11,737 11,123
18,275 17,646
Less accumulated depreciation 11,120 10,056
7,155 7,590
Construction and equipment installations in progress 457 190
Net property, plant and equipment 7,612 7,780
Intangible and other assets
Goodwill (less accumulated amortization of
$22,355 in 1997 and $20,607 in 1996) 47,701 49,449
Receivable from Harte-Hanks Communications, Inc. 36,637 30,406
Film contracts 1,692 1,037
Other assets 190 147
Total intangible and other assets 86,220 81,039
Total assets $ 101,667 $ 95,848
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable $ 691 $ 682
Accrued payroll and related expenses 764 574
Film contract payable 1,124 997
Other current liabilities 123 425
Total current liabilities 2,702 2,678
Film contract payable 1,041 644
Deferred income tax liability 1,826 1,785
Other long term liabilities 10 38
Total liabilities 5,579 5,145
Equity 96,088 90,703
Total liabilities and equity $ 101,667 $ 95,848
</TABLE>
<PAGE>
<TABLE>
HARTE-HANKS TELEVISION
STATEMENTS OF OPERATIONS
<CAPTION>
For the Six Months Ended June 30,
In Thousands 1997 1996
<S> <C> <C>
Operating revenues $ 13,512 $ 12,597
Operating expenses
Payroll 4,291 4,158
Production and distribution 1,645 1,575
Advertising, selling, general and administrative 1,440 1,504
Depreciation 500 518
Goodwill amortization 874 874
8,750 8,629
Operating income 4,762 3,968
Other expenses (income) 13
Income before income tax expense 4,762 3,955
Income tax expense 2,110 1,727
Net income $ 2,652 $ 2,228
</TABLE>
<PAGE>
<TABLE>
HARTE-HANKS TELEVISION
STATEMENTS OF CASH FLOWS
<CAPTION>
For the Six Months Ended June 30,
In Thousands 1997 1996
<S> <C> <C>
Operating Activities
Net income $ 2,652 $ 2,228
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 500 518
Goodwill amortization 874 874
Film amortization 863 694
Deferred income taxes (12) 5
Other, net 50 54
Changes in operating assets and liabilities
Decrease (increase) in accounts receivable, net (396) 171
Decrease (increase) in inventory 8 (2)
Decrease (increase) in prepaid expenses and
other current assets (39) 53
Increase in accounts payable 6 50
Increase (decrease) in other accrued expenses
and other liabilities 123 (154)
Other, net 33 20
Net cash provided by operating activities 4,662 4,511
Investing Activities:
Purchases of property, plant and equipment (442) (374)
Payments on film contracts (919) (654)
Net cash used in investing activities (1,361) (1,028)
Financing Activities:
Distributions to Harte-Hanks Communications, Inc.
including payments for income taxes (2,914) (3,243)
Net increase in cash 387 240
Cash at beginning period 228 338
Cash at end of period $ 615 $ 578
</TABLE>
<PAGE>
Note A -- Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information. The
information disclosed in the notes to financial statements for the year
ended December 31, 1996 has not changed materially. In management's
opinion all adjustments (consisting of normal recurring accruals) necessary
for a fair presentation of the interim periods have been made.
Results of operations are not necessarily indicative of the results
that may be expected for future interim periods or for the full year.
<PAGE>
TELEVISION FOOD NETWORK, G.P.
Financial Statements as of December 31, 1996, and for the
Three Years Then Ended and as of June 30, 1997, and for the Six
Months Ended June 30, 1997, and June 30, 1996
Independent Auditors' Report F-38
Consolidated Balance Sheets F-39
Consolidated Statements of Operations F-40
Consolidated Statements of Partners' Capital F-41
Consolidated Statements of Cash Flows F-42
Notes to Consolidated Financial Statements F-44
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of
Television Food Network, G.P.:
We have audited the accompanying consolidated balance sheets
of Television Food Network, G.P. and subsidiary (the
"Partnership") as of December 31, 1995 and 1996 and the
related consolidated statements of operations, partners'
capital, and cash flows for each of the years in three year
period ended December 31, 1996. These consolidated
financial statements are the responsibility of the
Partnership's management. Our responsibility is to express
an opinion on these consolidated financial statements based
on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects,
the financial position of Television Food Network, G.P. and
subsidiary at December 31, 1995 and 1996, and the results of
their operations and their cash flows for each of the years
in the three year period ended December 31, 1996, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Providence, Rhode Island
February 28, 1997
<PAGE>
<TABLE>
TELEVISION FOOD NETWORK, G.P.
AND SUBSIDIARY
Consolidated Balance Sheets
<CAPTION>
(Unaudited)
December 31, June 30,
Assets 1995 1996 1997
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 533,182 $ 432,805 $ 9,361,977
Investment securities held to maturity, stated
at cost which approximates fair value 3,738,959 3,348,966 3,417,637
Trade accounts receivable, net of allowance
for doubtful accounts of approximately $15,000,
$79,000 and $97,000 at December 31, 1995 and 1996,
and June 30, 1997 (unaudited), respectively 1,857,598 3,287,717 3,167,529
Television program assets, net 2,894,442 3,192,729 4,034,547
Inventory - 116,887 97,976
Prepaid expenses 262,783 270,815 166,239
Launch incentives 135,346 719,117 3,637,941
Other assets 406,952 399,623 495,020
Total current assets 9,829,262 11,768,659 24,378,866
Property and equipment, net (note 4) 4,730,111 4,145,143 4,033,636
Television program assets, net 1,996,483 2,070,073 2,308,174
Intangible assets, net (note 5) 4,550,208 3,954,956 3,616,360
Launch incentives, net 611,213 2,971,630 8,628,597
$ 21,717,277 24,910,461 42,965,633
Liabilities and Partners' Capital
Current liabilities:
Accounts payable $ 1,483,712 1,780,521 2,128,411
Launch incentives payable 1,177,981 2,323,759 10,571,918
Accrued expenses (note 7) 161,494 1,557,838 823,394
Deferred income 431,747 771,357 841,331
Must carry rights payable (note 5) 500,000 425,000 425,000
Television program rights payable 100,976 70,000 84,000
Note payable to related party (note 6c) - 1,500,000 -
Total current liabilities 3,855,910 8,428,475 14,874,054
Must carry rights payable (note 5) 2,550,000 2,125,000 2,125,000
Television program rights payable 86,529 62,500 62,500
Total liabilities 6,492,439 10,615,975 17,061,554
Minority interest (note 9) - 5,370 -
Partners' capital 15,224,838 14,289,116 25,904,079
Commitments (note 10)
$ 21,717,277 24,910,461 42,965,633
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
TELEVISION FOOD NETWORK, G.P.
AND SUBSIDIARY
Consolidated Statements of Operations
<CAPTION>
(Unaudited)
Six months ended
Years ended December 31, June 30,
1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C>
Revenues $ 1,960,665 $ 6,657,207 $ 13,404,763 $ 6,333,541 $ 9,479,684
Operating expenses:
Programming 8,778,621 10,302,151 11,354,300 5,381,746 6,070,669
General and administrative 6,207,789 4,549,792 5,926,393 2,437,149 3,009,667
Marketing and selling 5,449,688 11,417,851 13,214,115 6,722,365 9,828,586
Depreciation and amortization 1,058,150 1,535,035 2,158,401 1,001,897 1,091,495
Total operating expenses 21,494,248 27,804,829 32,653,209 15,543,157 20,000,417
Loss from operations (19,533,583) (21,147,622) (19,248,446) (9,209,616) (10,520,733)
Other income (expense):
Interest income, net 291,291 262,160 273,649 74,633 126,597
Interest expense - - - - (255,821)
Total other income (expense) 291,291 262,160 273,649 74,633 (129,224)
Minority interest - - 39,075 - 5,370
Net loss $ (19,242,292) $ (20,885,462) $ (18,935,722) $ (9,134,983) $ (10,644,587)
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
TELEVISION FOOD NETWORK, G.P.
AND SUBSIDIARY
Consolidated Statements of Partners' Capital
for the years ended December 31, 1994, 1995, and 1996
and the six months ended June 30, 1997 (unaudited)
<CAPTION>
Managing Class A Class B
Partner Partners Partners Total
<S> <C> <C> <C> <C>
Partners' capital at December 31, 1993 $ 1,000 $ 18,351,592 - $ 18,352,592
Contributions - 12,500,000 - 12,500,000
Net loss - (19,242,292) - (19,242,292)
Partners' capital at December 31, 1994 1,000 11,609,300 - 11,610,300
Contributions - 24,500,000 - 24,500,000
Net loss - (20,885,462) - (20,885,462)
Partners' capital at December 31, 1995 1,000 15,223,838 - 15,224,838
Contributions - 18,000,000 - 18,000,000
Net loss - (18,935,722) - (18,935,722)
Partners' capital at December 31, 1996 1,000 14,288,116 - 14,289,116
Contributions (unaudited) - 22,259,550 - 22,259,550
Net loss (unaudited) - (10,644,587) - (10,644,587)
Partners' capital at
June 30, 1997 (unaudited) $ 1,000 $ 25,903,079 - $ 25,904,079
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TELEVISION FOOD NETWORK, G.P.
AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
Six months ended
Years ended December 31, June 30,
1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C>
Operating activities:
Net loss $ (19,242,292) $ (20,885,462) $ (18,935,722) $ (9,134,983) $(10,644,587)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Minority interest - - (39,075) - (5,370)
Depreciation and amortization 1,058,150 1,535,035 2,158,401 1,001,897 1,091,495
Amortization of television
program assets 1,435,275 2,864,775 4,281,470 1,966,158 2,427,007
Amortization of launch incentives - 1,910,621 556,656 24,985 1,178,238
Payments for production of
television programming (3,029,238) (3,267,299) (4,403,347) (2,068,314) (3,435,926)
Payments for launch incentives - (1,479,199) (2,355,066) (1,709,745) (1,505,870)
Changes in current assets
and liabilities:
Accounts receivable (1,175,908) (668,782) (1,430,119) (408,229) 120,188
Inventory - - (116,887) (81,434) 18,911
Prepaid expenses (135,943) (79,868) (8,032) 69,856 104,576
Other assets 437,703 (381,379) 7,329 256,358 (95,397)
Accounts payable (93,053) 1,006,916 296,809 (1,846) 347,890
Accrued expenses 32,801 57,009 1,396,344 86,183 (734,444)
Deferred income - 431,747 339,610 3,804 69,974
Net cash used in
operating activities (20,712,505) (18,955,886) (18,251,629) (9,995,310) (11,063,315)
Investing activities:
Additions to property and equipment (5,000,609) (652,746) (736,859) (233,096) (641,392)
Additions to intangible assets (141,325) - (196,877) - -
Purchases of securities
available for sale (11,500,000) - - - -
Proceeds from securities
available for sale 26,059,230 - - - -
Purchases of securities
held to maturity (2,203,993) (4,511,709) (4,589,342) (740,710) (2,708,207)
Maturity of securities
held to maturity 2,250,000 1,500,000 4,979,335 730,928 2,639,536
Net cash provided by (used in)
investing activities 9,463,303 (3,664,455) (543,743) (242,878) (710,063)
</TABLE>
<PAGE>
<TABLE>
TELEVISION FOOD NETWORK, G.P.
AND SUBSIDIARY
Consolidated Statements of Cash Flows
<CAPTION>
(Unaudited)
Six months ended
Years ended December 31, June 30,
1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C>
Financing activities:
Capital contributions 12,500,000 24,500,000 18,000,000 10,000,000 22,259,550
Payments for television
program rights (531,544) (1,401,628) (305,005) (105,000) (57,000)
Payments for must carry rights - (1,250,000) (500,000) - -
Proceeds from notes
payable to related party - - 1,500,000 - 8,500,000
Repayments of notes payable to
related party - - - - (10,000,000)
Net cash provided by
financing activities 11,968,456 21,848,372 18,694,995 9,895,000 20,702,550
Net increase (decrease) in
cash and cash equivalents 719,254 (771,969) (100,377) (343,188) 8,929,172
Cash and cash equivalents:
At beginning of period 585,897 1,305,151 533,182 533,182 432,805
At end of period $ 1,305,151 $ 533,182 $ 432,805 $ 189,994 $ 9,361,977
Supplemental disclosure of non-cash transaction:
Obligations incurred for acquisition
of television program rights $ - $ 1,463,228 $ 250,000 $ 250,000 $ 3,506,926
Obligations incurred for acquisition
of must carry rights - 3,050,000 - - -
Obligations incurred for
launch incentives - 2,657,180 3,500,844 437,128 9,754,029
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
TELEVISION FOOD NETWORK, G.P.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1995 and 1996
(1) Description of Business, Partnership and Basis of
Accounting
Television Food Network, G.P. (the "Partnership") was
formed in 1993 to own and operate the Television Food
Network channel ("TVFN"). TVFN is a 24-hour advertising
supported network service that provides television
programming related to the preparation, enjoyment and
consumption of food, as well as programs focusing on
nutrition and topical news areas. TVFN is distributed
predominantly to cable television systems throughout the
United States. The partnership agreement extends through
December 31, 2012.
TVFN is managed by its managing general partner, Cable
Program Management Co. ("CPMCO"). CPMCO is co-owned by a
wholly-owned subsidiary of The Providence Journal Company
(Colony Cable Networks, Inc.) and Pacesetter
Communications, Inc. ("PCI"). CPMCO contributed $1,000
to the Partnership in exchange for a 10% partnership
interest. CPMCO's partnership interest entitles it to
distributions only after all other Partners have
recovered their capital contributions.
In addition to the managing general partner, there are
Class A and Class B partners. Each Class A partner is
entitled to one vote on the Management Committee of the
Partnership. The managing general partner and the Class
B partners are non-voting partners except that in certain
circumstances the managing general partner will be
allowed a vote in the case of a Management Committee
deadlock.
Under the partnership agreement, each of the original
five Class A partners were required to contribute
$9,000,000 in cash to the capital of the Partnership in
exchange for one partnership unit each. Each Class A
partnership unit represents a 12% interest in the
Partnership. As a result of such purchases, the Class A
partners hold an aggregate of 5 partnership units
representing 60% of the total Partnership interest.
Class B partners are not required to make any cash
contributions.
The remaining 30% partnership interest is allocated among
Class A and Class B partners based upon subscriber
commitments. In general, each Class A and Class B partner
was to provide carriage of the TVFN channel to its subscribers
and received a two percent partnership interest per one million
subscribers. Subscriber interests will continue to be adjusted
annually during a four year period at which time partnership interests
for subscriber commitments will become fixed.
In May 1996, The Providence Journal Company ("PJC") (co-
managing general partner and Class A partner) acquired
the Class A equity partnership interests held by Landmark
Programming, Inc. and Scripps Howard Publishing, Inc.
This increased PJC's total ownership interest in TVFN to
46% and allowed it to hold 3 of the 5 partnership units.
On January 6, 1997, PJC purchased the 9.5% Class A equity
partnership interests held by Continental Programming
Partners I, Inc. (Continental). In connection with this
purchase, PJC agreed to transfer a 1.4% equity interest
in the Partnership to Continental. This 1.4% interest
was given to PJC in 1993 in exchange for PJC's agreement
to carry TVFN on its former cable systems. These
transactions increased PJC's total ownership interest in
TVFN to 55.5% and allowed it to hold 4 of the 5
partnership units.
<PAGE>
The following is a summary of the Partnership interests at
December 31, 1996:
<TABLE>
<CAPTION>
General
Partner Class A Class B Total
<S> <C> <C> <C> <C>
Colony Cable Networks 7.75% 38.33% 1.40% 47.48%
Tribune Cable Ventures, Inc. - 12.18 22.49 34.67
Continental Programming
Partners I, Inc. - 9.49 2.45 11.94
PCI 2.25 - - 2.25
Adelphia Communications
Corporation - - 1.47 1.47
The Sullivan Group, Inc. - - 1.10 1.10
Times Mirror Cable - - .83 .83
C-Tec Cable System - - .26 .26
Total 10.00% 60.00% 30.00% 100.00%
</TABLE>
Partnership profits are allocated first to offset
previously allocated losses, and then to each partner in
proportion to their relative partnership interests.
Partnership losses are allocated first to offset
previously allocated profits; second, to the extent of
cumulative capital contributions; and finally, to Class A
partners in proportion to their relative partnership
interests. Class B partners are not entitled to any
distributions (other than tax distributions as provided
for in the partnership agreement) until the Class A
partners have recovered their capital contributions.
On September 26, 1996, PJC signed a definitive merger
agreement with A.H. Belo Corporation ("A.H. Belo") under
which PJC would be merged into A.H. Belo. On February
19, 1997, shareholders approved the transaction and on
February 28, 1997, the merger was completed. Pursuant to
this merger, A.H. Belo replaced PJC as the significant
partner of the Partnership as PJC is now a subsidiary of
A.H. Belo. See Note 11.
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts
of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Certain 1994 and 1995 amounts have been reclassified to
conform to the 1996 presentation.
(2) Summary of Significant Accounting Policies
(a) Principles of Consolidation
The consolidated financial statements include the
accounts of the Partnership and its majority-owned
subsidiary, Chef Events, LLC (see note 8). Intercompany
balances and transactions have been eliminated.
(b) Cash and Cash Equivalents
Cash equivalents consist of overnight repurchase
agreements and money market instruments. For purposes
of the statement of cash flows, the Partnership
considers all highly liquid debt instruments with
original maturities of three months or less to be cash
equivalents.
At December 31, 1995 and 1996, the funds held in
various operating accounts exceeded Federal Depository
Insurance limits by $386,556 and $803,772, respectively.
However, management believes the financial institutions
utilized by the Partnership have satisfactory credit
ratings and the credit risk associated with these
deposits is minimal.
<PAGE>
(c) Investment Securities
Investments made by the Partnership are generally
limited to government securities, with maturities of one
year or less.
Held-to-maturity securities are recorded at amortized
cost, adjusted for amortization or accretion of premiums
or discounts. A decline in the market value of any held-
to-maturity security below cost that is deemed other
than temporary results in an adjustment to the cost
basis of the security and is charged to the statement of
operations. At December 31, 1995 and 1996, all
investment securities were considered to be held-to-
maturity and mature within one year.
Premiums are amortized over the life of the related
held-to-maturity security as an adjustment to yield
using the straight line method. Discounts are accreted
using the constant-yield method. Dividend and interest
income are recognized when earned.
At December 31, 1995 and 1996, all investment
securities were pledged to secure the Partnership's
payment of must carry right and letters of credit as
discussed in notes 5 and 7.
(d) Inventories
Inventories, principally comprising books and
merchandise held for sale, are stated at the lower cost
or market. Cost is determined on a first-in, first-out
basis.
(e) Television Program Assets
Television program costs consist of costs to acquire
program rights, and production costs associated with
developed programming. Production costs consist
primarily of subcontracted production services, salaries
and costs of talent. Capitalized production costs are
amortized using an accelerated method over three years.
Television program rights acquired under license agreements
are recorded as assets at the gross value of the related
liabilities upon execution of the contract. The rights are
amortized using accelerated methods over the lesser of
three years or the term of the applicable contract.
Television program costs are evaluated periodically and
written down to net realizable value when there is an
indication that the carrying value is impaired.
Program costs classified as current assets represent
the total amount estimated to be amortized within a
year. Program rights liabilities due to licensers are
classified as current or long-term in accordance with
the payment terms.
Accumulated amortization of television program assets
totaled $4,551,447 and $7,720,357 at December 31, 1995
and 1996. Amortization expense of television program
assets is included with programming expenses and totaled
$2,864,775 and $4,281,470 for 1995 and 1996,
respectively.
(f) Launch Incentive Fees
Launch incentive fees are paid to cable affiliates in
connection with their carriage of the Television Food
Network. The incentives are amortized over the term of
the affiliate agreements. The related amortization is
included in marketing and selling costs in the
statements of operations.
The Partnership has commitments for payments in 1997 to
certain cable affiliates for launch incentive fees of
approximately $8,400,000 for systems that are expected
to launch during 1997. See note 11.
<PAGE>
(g) Property and Equipment
Property and equipment are stated at cost.
Expenditures for maintenance and repairs are charged to
expense as incurred. The Partnership provides for
depreciation using the straight-line method over the
following estimated useful lives:
Leasehold improvements 4 years
Furniture and fixtures 3 - 10 years
Broadcast equipment 5 - 15 years
(h) Intangible Assets
Intangible assets consist of purchased must carry
rights, network identification costs, and organization
costs which are stated at cost. The Partnership
provides for amortization, using the straight-line
method over thirty six to ninety six months.
(i) Long-Lived Assets
The Company reviews its long-lived assets for
impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable. If it is determined that the carrying
amount of an asset cannot be fully recovered, an
impairment loss is recognized.
(j) Deferred Income
Deferred income consists of under-delivered advertising
which is recorded as income as the Partnership re-runs
or otherwise "makes good" on the delivery of the
advertising to the customer.
(k) Income Taxes
In accordance with Internal Revenue Service
regulations, the Partnership's profits and losses become
those of the individual partners and, accordingly, no
income taxes or tax benefit are reflected in the
Partnership's financial statements.
(l) Financial Instruments
Financial instruments of the Partnership consist of
cash and cash equivalents, investment securities held to
maturity, accounts receivable, accounts payable and a
note payable to a related party. The carrying amounts
of these financial instruments approximate their fair
value.
(m) Advertising Costs
The Partnership expenses media advertising and
advertising promotion expense as incurred. For the
years ended December 31, 1994, 1995, and 1996 the
Company incurred advertising expense of approximately
$1,200,000, $1,600,000, and $2,600,000, respectively.
(n) Unaudited Interim Consolidated Financial Statements
The consolidated financial statements as of and for the
six months ended June 30, 1996 and 1997 are unaudited;
however, they include all adjustments (consisting of
normal recurring adjustments) considered necessary by
management for a fair presentation of the financial
position and results of operations for these periods.
The results of operations for interim periods are not
necessarily indicative of the results that may be
expected for the entire year.
<PAGE>
(3) Funding of Future Operations
The Partnership has incurred significant operating losses
from its inception through December 31, 1996 and
Management believes that operating losses will continue
to be significant during 1997 and 1998. As such, the
Partnership has relied on Class A Partners capital
contributions to fund its operations and is dependent
upon the continuing commitment of its partners to provide
necessary capital.
Management's plans to fund future operations consist of
drawing on the resources and commitments of its current
Class A partners, primarily A.H. Belo Corporation as the
acquirer of PJC, to make additional capital contributions
sufficient to provide adequate working capital until such
time as working capital is derived entirely from
operations. See note 11.
(4) Property and Equipment
Property and equipment consists of the following at
December 31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Equipment $ 3,644,988 $ 4,107,471
Furniture and fixtures 1,572,143 1,943,769
Leasehold improvements 1,784,341 1,731,536
7,001,472 7,782,776
Less accumulated depreciation
and amortization 2,271,361 3,637,633
$ 4,730,111 $ 4,145,143
</TABLE>
Depreciation expense on property and equipment totaled
$981,270, $1,283,345, and $1,366,272 for the years ended
December 31, 1994, 1995 and 1996, respectively.
(5) Intangible Assets
Intangible assets consist of the following at December
31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Organization costs $ 370,327 $ 370,327
Network identification costs 243,912 196,877
Purchased must carry rights 4,300,000 4,300,000
4,914,239 4,867,204
Less accumulated amortization 364,031 912,248
$ 4,550,208 $ 3,954,956
</TABLE>
Amortization of intangible assets charged to operations
totaled $76,880, $251,690 and $792,129 in 1994, 1995, and
1996, respectively.
During 1995, the Partnership committed to pay $4,300,000
to a New Jersey television station to waive their right
to be carried on a cable system in New York City, thus,
opening a channel on this cable system for the carriage
of TVFN. The total commitment of $4,300,000 has been
recorded as an intangible asset. In 1996, $500,000 was
paid toward this commitment and the remaining $2,550,000
is to be paid in annual installments of $425,000 over the
next six years.
<PAGE>
(6) Related Party Transactions
(a) Transactions with Partners
As discussed in note 1, certain partners have agreed to
provide carriage of the TVFN channel to their
subscribers in exchange for partnership interests. As
of December 31, 1996, carriage was being provided to
approximately 13,700,000 subscribers under these
arrangements. Each partner has also entered into
noncompetition agreements with the Partnership whereby
they have agreed not to participate in any business
venture related to, or competitive with, the business of
the Partnership.
(b) Pacesetter Communications, Inc. (PCI)
The Partnership has agreed to pay an amount up to
$950,000 per year to PCI for management personnel
expenses, including benefits, which expenses are
incurred in connection with the management of the
Partnership. Such amount is subject to annual
percentage increases as approved by the Management
Committee. Amounts incurred by the Partnership under
this arrangement for the period ended December 31, 1994
and 1995, totaled approximately $906,000 and $911,000,
respectively. There were no transactions with PCI
during 1996 and there were no amounts owed at December
31, 1995 and 1996.
(c) The Providence Journal Company
During the year ended December 31, 1994, 1995 and
1996, the Partnership paid The Providence Journal
Company $150,000, $85,000 and $85,000, respectively, for
administrative and accounting services. Certain
employees of The Providence Journal Company, through
CPMCO, assist in managing operations of the Partnership.
The Partnership does not reimburse The Providence
Journal Company for any related salaries. Amounts owed
to The Providence Journal Company for administrative and
accounting services totaled $7,083 at December 31, 1995
and 1996.
The Partnership entered into a sub-lease agreement
with The Providence Journal Company for the use of one C-
band primary transponder. The lease is effective from
March 1994 through March 1999 and calls for monthly
lease payments which decrease as The Providence Journal
Company adds additional leasees. Rental expense under
this lease totaled $1,700,000, $1,090,000 and $960,000
in 1994, 1995, and 1996, respectively. Lease payments
owed to The Providence Journal Company totaled $180,000
and $160,000 at December 31, 1995 and 1996,
respectively.
On December 20, 1996, the Partnership signed a
demand note payable to The Providence Journal Company
for up to $5,000,000. Under the terms of the Note, the
Partnership can borrow up to $5,000,000 from The
Providence Journal Company. Interest on the outstanding
balance of the Note is payable monthly at prime,
commencing January 31, 1997. As of December 31, 1996,
$1,500,000 was outstanding and through February 1997, the
Partnership borrowed an additional $2,500,000.
(d) "Lets Make Sure Everybody Eats Foundation, Inc."
On April 15, 1994, the Partnership entered into a
trust agreement with a member of management and an
employee of The Providence Journal Company for the
formation of "Lets Make Sure Everybody Eats Foundation,
Inc." The Partnership's capacity in this trust is that
of a donor.
The Partnership entered into a related agreement
with several charitable organizations to produce an
annual Lets Make Sure Everybody Eats Telethon
(Telethon). The Partnership has the option, in any
given year, to cancel production of the Telethon.
During 1994 and 1995, the Partnership incurred costs of
approximately $555,000 and $825,000, respectively, in
conjunction with the Telethon. These costs have been
included in operating expenses in the accompanying
statement of operations. No Telethon was produced in
1996.
<PAGE>
(7) Accrued Expenses
Accrued expenses consist of the following at December
31,1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Salaries and wages $ 140,011 $ 605,672
Employee benefits and payroll taxes 21,483 282,213
Sales taxes - 443,953
Other - 226,000
$ 161,494 $1,557,838
</TABLE>
(8) Operating Leases
The Partnership has certain noncancelable operating
leases with renewal options for studio and office space
and equipment. Future minimum lease payments under
noncancelable operating leases, including leases with
related parties (see note 6), are due in the following
years:
1997 $1,934,543
1998 1,142,213
1999 343,290
2000 101,212
2001 and thereafter 226,110
Rental expense for the years ended December 31, 1994,
1995 and 1996 was approximately $2,087,000, $1,877,000
and $1,929,000, respectively. At December 31, 1994, 1995
and 1996, the Partnership has a letter of credit
commitment in an amount of $750,000 in support of leased
studio space.
(9) Investment
On November 18, 1996, the Partnership and EMG Worldwide,
Inc. ("EMG") entered into an operating agreement
resulting in the formation of Chef Events LLC ("Chef
Events"). Chef Events is 90% owned by the Partnership
and 10% owned by EMG and was initially capitalized with a
$400,000 cash contribution by the Partnership and a
$45,000 property contribution by EMG. The Partnership
subsequently contributed an additional $300,000 to cover
sign-on bonuses to the management of Chef Events. The
results of Chef Events' operations have been consolidated
with the Partnership and the 10% owned by EMG is
reflected in these consolidated financial statements as
minority interest.
(10) Commitments
The Partnership has agreements with one of its employees
and one of its contracted celebrity representatives
pursuant to which they may receive future cash payments
through the year 2001 based on the attainment of future
goals or increases in the value of the Partnership. At
December 31, 1996, approximately $200,000 was payable
pursuant to these agreements; however, the amounts
ultimately payable may increase through the year 2001.
(11) Subsequent Event (unaudited)
On September 4, 1997, A. H. Belo agreed to sell its
interest in TVFN to The E. W. Scripps Co. ("Scripps").
Pursuant to this merger, Scripps will replace A. H. Belo
as the significant partner of the Partnership. Management's
plans to fund the operations of the Partnership will be
unaffected as Scripps will replace A. H. Belo as the
Partnership's primary source of operating capital.
On March 28, 1997, TVFN was launched on DIRECTV. TVFN accrued
$7,600,000 related to launch incentive and advertising fees,
which is included in launch incentives payable at June 30, 1997.
Launch incentive costs have been capitalized and are being
amortized over the five year term of the carriage agreement.
<PAGE>
THE E. W. SCRIPPS COMPANY
INDEX TO PRO FORMA FINANCIAL INFORMATION
Pro Forma Balance Sheet as of June 30, 1997 P-2
Pro Forma Statement of Income for the Six
Months Ended June 30, 1997 P-3
Pro Forma Statement of Income for the Year
Ended December 31, 1996 P-4
Notes to Pro Forma Financial Information P-5
<PAGE>
<TABLE>
PRO FORMA BALANCE SHEET (UNAUDITED)
AS OF JUNE 30, 1997
<CAPTION>
( in thousands )
----- As Reported ------- Pro Pro
Harte-Hanks Forma Forma as
Scripps Newspapers Television Adjustments Adjusted
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 13,794 $ 1,669 $ 615 $ 16,078
Short-term investments 33,389 $ (33,389) D
Accounts and notes receivable 176,484 12,926 5,542 194,952
Program rights and production costs 29,979 1,172 31,151
Inventories 12,705 4,203 21 16,929
Subscriber acquisition costs 9,731 9,731
Deferred income taxes 25,134 783 173 (956) E 25,134
Miscellaneous 33,303 1,166 312 34,781
Total current assets 334,519 20,747 7,835 (34,345) 328,756
Investments 66,067 66,067
Property, Plant and Equipment 426,267 32,952 7,612 18,700 C 485,531
Goodwill and Other Intangible Assets 581,170 126,343 47,701 541,756 C 1,296,970
Other Assets:
Program rights and production costs 25,330 1,692 27,022
Subscriber acquisition costs 49,046 49,046
Receivable from Harte-Hanks 135,377 36,637 (172,014) B
Miscellaneous 19,961 77 190 20,228
Total other assets 94,337 135,454 38,519 (172,014) 96,296
TOTAL ASSETS $ 1,502,360 $ 315,496 $ 101,667 $ 354,097 $ 2,273,620
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 90,040 $ 156,926 D $ 246,966
Accounts payable 53,860 $ 2,137 $ 1,815 57,812
Customer deposits and unearned revenue 33,905 3,703 37,608
Accrued liabilities:
Employee compensation and benefits 32,764 3,168 764 36,696
Subscriber acquisition costs 40,357 40,357
Miscellaneous 45,298 1,553 123 46,974
Total current liabilities 296,224 10,561 2,702 156,926 466,413
Deferred Income Taxes 69,998 5,403 1,826 (7,229) E 69,998
Long-Term Debt 31,819 600,000 D 631,819
Other Long-Term Obligations and Minority Interests 102,105 20 1,051 103,176
Stockholders' Equity 1,002,214 299,512 96,088 (395,600) 1,002,214
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,502,360 $ 315,496 $ 101,667 $ 354,097 $ 2,273,620
See notes to pro forma financial information.
</TABLE>
<TABLE>
PRO FORMA BALANCE SHEET (UNAUDITED)
AS OF JUNE 30, 1997
<CAPTION>
( in thousands )
Pro Sale of TV Food Pro Pro
Forma as Harte-Hanks Network Forma Forma as
Adjusted Television As Reported Adjustments Adjusted
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 16,078 $ 70,997 $ 9,362 $ (71,681) D $ 24,825
Short-term investments 3,417 3,417
Accounts and notes receivable 194,952 (5,542) 3,168 192,578
Program rights and production costs 31,151 (1,172) 4,035 34,014
Inventories 16,929 (21) 98 17,006
Subscriber acquisition costs 9,731 3,638 (3,638) C 9,731
Deferred income taxes 25,134 25,134
Miscellaneous 34,781 (312) 661 35,130
Total current assets 328,756 64,019 24,379 (75,319) 341,835
Investments 66,067 133,231 (133,231) C 66,067
Property, Plant and Equipment 485,531 (11,321) 4,034 3,651 C 481,895
Goodwill and Other Intangible Assets 1,296,970 (187,800) 3,616 117,671 C 1,230,457
Other Assets:
Program rights and production costs 27,022 (1,692) 2,308 27,638
Subscriber acquisition costs 49,046 8,629 (8,629) C 49,046
Receivable from Harte-Hanks
Miscellaneous 20,228 (190) 20,038
Total other assets 96,296 (1,882) 10,937 (8,629) 96,722
TOTAL ASSETS $2,273,620 $ (3,753) $ 42,966 $ (95,857) $ 2,216,976
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 246,966 $ (71,681) D $ 175,285
Accounts payable 57,812 $ (1,815) $ 2,213 58,210
Customer deposits and unearned revenue 37,608 841 38,449
Accrued liabilities:
Employee compensation and benefits 36,696 (764) 534 36,466
Subscriber acquisition costs 40,357 10,997 51,354
Miscellaneous 46,974 (123) 290 47,141
Total current liabilities 466,413 (2,702) 14,875 (71,681) 406,905
Deferred Income Taxes 69,998 69,998
Long-Term Debt 631,819 631,819
Other Long-Term Obligations and 103,176 (1,051) 2,187 1,728 C,F 106,040
Minority Interests
Stockholders' Equity 1,002,214 25,904 (25,904) 1,002,214
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,273,620 $ (3,753) $ 42,966 $ (95,857) $ 2,216,976
See notes to pro forma financial information.
</TABLE>
<PAGE>
<TABLE>
PRO FORMA INCOME STATEMENT (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1997
<CAPTION>
( in thousands )
------- As Reported --------- Pro Pro
Harte-Hanks Forma Forma as
Scripps Newspapers Television Adjustments Adjusted
<S> <C> <C> <C> <C> <C>
Operating Revenues $ 596,222 $ 62,517 $ 13,512 $ 672,251
Operating Expenses:
Employee compensation and benefits 191,186 21,407 4,291 $ (161) B 216,723
Newsprint and ink 57,767 8,209 65,976
Program, production and copyright costs 42,815 863 43,678
Other operating expenses 142,680 12,879 2,222 157,781
Depreciation 25,894 2,025 500 850 C 29,269
Amortization of intangible assets 9,668 2,318 874 5,831 C 18,691
Total operating expenses 470,010 46,838 8,750 6,520 532,118
Operating Income 126,212 15,679 4,762 (6,520) 140,133
Other Credits (Charges):
Interest expense (5,050) (22,512) D (27,562)
Miscellaneous, net 481 (26) (630) D (175)
Net other credits (charges) (4,569) (26) (23,142) (27,737)
Income Before Taxes and Minority Interests 121,643 15,653 4,762 (29,662) 112,396
Provision for Income Taxes 51,205 7,015 2,110 (11,347) E 48,983
Income Before Minority Interests 70,438 8,638 2,652 (18,315) 63,413
Minority Interests 1,836 1,836
Net Income $ 68,602 $ 8,638 $ 2,652 $ (18,315) $ 61,577
Weighted-average shares outstanding 80,937 80,937
Net income per share of common stock $.85 $.76
See notes to pro forma financial information.
</TABLE>
<TABLE>
PRO FORMA INCOME STATEMENT (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1997
<CAPTION>
( in thousands )
Pro Sale of TV Food Pro Pro
Forma as Harte-Hanks Network Forma Forma as
Adjusted Television As Reported Adjustments Adjusted
<S> <C> <C> <C> <C> <C>
Operating Revenues $ 672,251 $ (13,512) $ 9,480 $ 668,219
Operating Expenses:
Employee compensation and benefits 216,723 (4,241) 7,349 219,831
Newsprint and ink 65,976 65,976
Program, production and copyright costs 43,678 (863) 2,427 45,242
Other operating expenses 157,781 (2,222) 9,134 164,693
Depreciation 29,269 (681) 752 228 C 29,568
Amortization of intangible assets 18,691 (2,348) 339 2,142 C 18,824
Total operating expenses 532,118 (10,355) 20,001 2,370 544,134
Operating Income 140,133 (3,157) (10,521) (2,370) 124,085
Other Credits (Charges):
Interest expense (27,562) (256) 2,124 D (25,694)
Miscellaneous, net (175) 127 (48)
Net other credits (charges) (27,737) (129) 2,124 (25,742)
Income Before Taxes and Minority Interests 112,396 (3,157) (10,650) (246) 98,343
Provision for Income Taxes 48,983 (1,496) (3,844) E 43,643
Income Before Minority Interests 63,413 (1,661) (10,650) 3,598 54,700
Minority Interests 1,836 (5) (846) F 985
Net Income $ 61,577 $ (1,661) $ (10,645) $ 4,444 $ 53,715
Weighted-average shares outstanding 80,937 80,937
Net income per share of common stock $.76 $.66
See notes to pro forma financial information.
</TABLE>
<PAGE>
<TABLE>
PRO FORMA INCOME STATEMENT (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1996
<CAPTION>
( in thousands )
---- As Reported ---------- Pro Pro
Harte-Hanks Forma Forma as
Scripps Newspapers Television Adjustments Adjusted
<S> <C> <C> <C> <C> <C>
Operating Revenues $ 1,121,858 $ 124,313 $ 26,100 $ 1,272,271
Operating Expenses:
Employee compensation and benefits 360,697 41,023 8,361 $ (310) B 409,771
Newsprint and ink 123,390 19,957 143,347
Program, production and copyright costs 88,990 1,347 90,337
Other operating expenses 273,553 25,515 4,619 303,687
Depreciation 49,528 3,927 1,044 1,780 C 56,279
Amortization of intangible assets 19,849 4,637 1,748 11,660 C 37,894
Total operating expenses 916,007 95,059 17,119 13,130 1,041,315
Operating Income 205,851 29,254 8,981 (13,130) 230,956
Other Credits (Charges):
Interest expense (9,629) (20) (44,945) D (54,594)
Net gains and unusual items 21,531 21,531
Miscellaneous, net 1,834 32 (123) D 1,743
Net other credits (charges) 13,736 32 (20) (45,068) (31,320)
Income from Continuing Operations
Before Taxes and Minority Interests 219,587 29,286 8,961 (58,198) 199,636
Provision for Income Taxes 86,011 13,005 4,000 (22,260) E 80,756
Income from Continuing Operations
Before Minority Interests 133,576 16,281 4,961 (35,938) 118,880
Minority Interests 3,436 3,436
Income From Continuing Operations 130,140 16,281 4,961 (35,938) 115,444
Income From Discontinued Operation - Cable Television 27,263 27,263
Net Income $ 157,403 $ 16,281 $ 4,961 $ (35,938) $ 142,707
Weighted-average shares outstanding 80,401 80,401
Per Share of Common Stock:
Income from continuing operations $1.62 $1.44
Net income $1.96 $1.77
See notes to pro forma financial information.
</TABLE>
<TABLE>
PRO FORMA INCOME STATEMENT (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1996
<CAPTION>
( in thousands )
Pro Sale of TV Food Pro Pro
Forma as Harte-Hanks Network Forma Forma as
Adjusted Television As Reported Adjustments Adjusted
<S> <C> <C> <C> <C> <C>
Operating Revenues $ 1,272,271 $ (26,100) $ 13,405 $ 1,259,576
Operating Expenses:
Employee compensation and benefits 409,771 (8,268) 12,475 413,978
Newsprint and ink 143,347 143,347
Program, production and copyright costs 90,337 (1,347) 4,281 93,271
Other operating expenses 303,687 (4,619) 13,739 312,807
Depreciation 56,279 (1,363) 1,366 $ 456 C 56,738
Amortization of intangible assets 37,894 (4,695) 792 3,945 C 37,936
Total operating expenses 1,041,315 (20,292) 32,653 4,401 1,058,077
Operating Income 230,956 (5,808) (19,248) (4,401) 201,499
Other Credits (Charges):
Interest expense (54,594) 20 3,486 D (51,088)
Net gains and unusual items 21,531 21,531
Miscellaneous, net 1,743 273 2,016
Net other credits (charges) (31,320) 20 273 3,486 (27,541)
Income from Continuing Operations
Before Taxes and Minority Interests 199,636 (5,788) (18,975) (915) 173,958
Provision for Income Taxes 80,756 (2,787) (7,031) E 70,938
Income from Continuing Operations
Before Minority Interests 118,880 (3,001) (18,975) 6,116 103,020
Minority Interests 3,436 (39) (1,504) F 1,893
Income From Continuing Operations 115,444 (3,001) (18,936) 7,620 101,127
Income From Discontinued Operation - 27,263 27,263
Cable Television
Net Income $ 142,707 $ (3,001) $ (18,936) $ 7,620 $ 128,390
Weighted-average shares outstanding 80,401 80,401
Per Share of Common Stock:
Income from continuing operations $1.44 $1.26
Net income $1.77 $1.60
See notes to pro forma financial information.
</TABLE>
<PAGE>
NOTES TO PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
A. Basis of Presentation
The unaudited pro forma financial information presented herein gives
effect to The E. W. Scripps Company's (the "Company") acquisition of
the newspaper and broadcast operations of Harte-Hanks Communications
(the "HHC Newspaper and HHC Broadcast Operations," respectively), the
subsequent sale of the HHC Broadcast Operations to certain subsidiaries
of A.H. Belo Corporation ("Belo") for $75 million in cash and Belo's
approximate 58% controlling interest in The Television Food
Network ("TVFN," a 24-hour cable television network), and additional
borrowings incurred by the Company in connection with such
transactions (collectively referred to hereinafter as the
"Transactions"). The Pro Forma Income Statements for the
six months ended June 30, 1997, and for the year ended December 31, 1996,
reflect adjustments as if the Transactions had occurred at the
beginning of the periods. The Pro Forma Balance Sheet as of
June 30, 1997, reflects adjustments as if the Transactions had
occurred as of that date.
The acquisition of the HHC Newspaper Operations and TVFN will be
accounted for using the purchase method of accounting. Accordingly,
assets acquired and liabilities assumed will be recorded at their
estimated fair values. The estimated fair values presented in the
accompanying pro forma financial information are based upon
preliminary estimates, and are subject to further adjustment based on
appraisals and other analyses. Management does not expect that the
final allocation of the purchase price will differ materially from the
allocations set forth in the pro forma financial information presented
herein.
The pro forma adjustments are based upon available information and
assumptions that management believes are reasonable. The Pro Forma
Balance Sheet and Income Statements do not purport to present the
financial position or results of operations of the Company had the
Transactions occurred on the dates specified, nor are they necessarily
indicative of the results of operations that may be achieved in
the future. The Pro Forma Income Statements do not reflect any
adjustments for synergies or cost savings that management expects to
realize. No assurances can be made as to the amount of cost savings
or revenue enhancement, if any, that actually will be realized.
The pro forma financial information should be read in conjunction with
the consolidated financial statements and related notes included in
the Company's Annual Report on Form 10-K for the year ended December
31, 1996, and Quarterly Report on Form 10-Q for the period ended June
30, 1997, and the financial statements and notes thereto of the HHC
Newspaper Operations, the HHC Broadcast Operations, and TVFN included
in this Current Report on Form 8-K. Certain amounts in the HHC
Newspaper Operations, HHC Broadcast Operations and TVFN financial
statements have been reclassified to conform to the Company's
classifications.
B. Assets Not Acquired and Liabilities Not Assumed
The HHC Newspaper and Broadcast Operations' intercompany receivables
will not be acquired by the Company, and the Company will not
assume obligations related to the HHC Newspaper and Broadcast
Operations' stock option plans. Therefore, the Pro Forma Balance
Sheet and Pro Forma Income Statements have been adjusted to remove
these amounts from the historical financial position and results of
operations of the HHC Newspaper and Broadcast Operations.
<PAGE>
C. Description of Consideration and Fair Value Adjustments
The pro forma cost of the Transactions has been allocated to assets
acquired and liabilities assumed at their estimated fair values as
follows:
<TABLE>
<CAPTION>
( in thousands ) Net
Sale of Pro Forma
Harte-Hanks Harte-Hanks Harte-Hanks TV Cost of
Newspapers Television Total Television Food Transactions
<S> <C> <C> <C> <C> <C> <C>
Purchase price $ 575,000 $ 200,000 $ 775,000 $ (200,000) $ 125,000 $ 700,000
Estimated working capital adjustment 9,403 4,912 14,315 (4,912) 7,300 16,703
Estimated fees and expenses 1,000 1,000 1,000 2,000
Pro forma cost of the acquisition 585,403 204,912 790,315 (204,912) 133,300 718,703
Net tangible book value of assets acquired 173,169 48,387 221,556 (48,387) 10,832 184,001
Intercompany balances not acquired (135,377) (36,637) (172,014) 36,637 (135,377)
Book value of net tangible assets 37,792 11,750 49,542 (11,750) 10,832 48,624
Estimated fair value adjustments 21,611 5,362 26,973 (5,362) 23,958 45,569
Estimated fair value of net tangible and
identifiable intangible assets acquired 59,403 17,112 76,515 (17,112) 34,790 94,193
Excess of cost over fair value of net assets $ 526,000 $ 187,800 $ 713,800 $ (187,800) $ 98,510 $ 624,510
acquired
</TABLE>
The estimated fair value adjustments consist of the following:
<TABLE>
<CAPTION>
( in thousands ) Sale of Net Pro Forma
Harte-Hanks Harte-Hanks Harte-Hanks TV Cost of
Newspapers Television Total Television Food Transactions
<S> <C> <C> <C> <C> <C> <C>
Step-up of property, plant and equipment to $ 14,991 $ 3,709 $ 18,700 $ (3,709) $ 3,651 $ 18,642
fair value
Customer lists and carriage contracts 2,000 2,000 19,976 21,976
Reduce long-term obligations to fair value 331 331
Deferred income tax adjustment 4,620 1,653 6,273 (1,653) 4,620
Total estimated fair value adjustments $ 21,611 $ 5,362 $ 26,973 $ (5,362) $ 23,958 $ 45,569
</TABLE>
Property, plant and equipment will be depreciated on a straight-line
basis over lives averaging approximately eight years. Newspaper
customer lists will be amortized on a straight-line basis over lives
averaging approximately 10 years. TVFN carriage contracts will be
amortized based on the percentage of the current period's subscriber
revenue to estimated total subscriber revenue over the terms of the
contracts, or for contracts which do not require payment of subscriber
fees, on a straight-line basis over the lives of the contracts, which
average approximately 4 years.
The excess of cost over the fair value of the net tangible and
identifiable intangible assets acquired will be allocated to goodwill.
Goodwill will be amortized on a straight-line basis over 40 years.
The Pro Forma Income Statements give effect to the periodic
depreciation and amortization that would have resulted during the
periods presented.
<PAGE>
D. Borrowings and Interest Expense
In connection with the Transactions the Company expects to issue
$100 million of five-year and $100 million of ten-year notes.
The amount and mix of the five-year and ten-year notes may be
adjusted based upon market conditions. The Company also expects
to replace its existing $50 million variable rate credit facilities
with Competitive Advance and Revolving Credit Facility
Agreements (the "Variable Rate Credit Facilities") which
collectively will permit aggregate borrowings up to $800 million.
The Variable Rate Credit Facilities will be comprised of two
unsecured lines, one limited to $400 million principal amount
maturing in one year, and the other limited to $400 million
principal amount maturing in five years. Borrowings under
the Variable Rate Credit Facilities will be available on a
committed revolving credit basis at any of three short-term
rates (including the prime rate) or through an auction procedure
at the time of each borrowing allowing banks to offer lower rates.
The Variable Rate Credit Facilities may also be used by the Company
in whole or in part, in lieu of direct borrowings, as credit support
for a commercial paper program to be established by the Company.
Cash received in the sale of the HHC Broadcast Operations will be
used to reduce outstanding borrowings. The Transactions will also
be funded in part with the Company's existing cash and short-term
investments. Based upon the pro forma cost of the Transactions,
the Company would have borrowed approximately $485 million under
the Variable Rate Credit Facilities if the acquisition had been
completed as of June 30, 1997. Pro forma borrowings at June 30,
1997, are as follows:
<TABLE>
<CAPTION>
( in thousands )
<S> <C>
Variable Rate Credit Facilities $ 485,314
Five-year and ten-year notes to be sold 200,000
6.17% note, due in 1997 90,000
7.375% notes, due in 1998 29,706
Other notes 2,153
Total pro forma borrowings $ 807,173
</TABLE>
The Pro Forma Income Statements give effect to the interest charges
that would have been incurred during the periods presented, assuming a
weighted average interest rate of 6.5% on the notes and a weighted average
borrowing rate of approximately 5.65% on the Variable Rate Credit
Facilities. The Pro Forma Income Statements also give effect to the
lower investment income that would have been earned during the periods
presented, based upon the Company's actual yields on its cash balances
and investment portfolio during those periods.
E. Income Taxes
The Pro Forma Income Statements have been adjusted to reflect the
amount of income taxes that would have been incurred had the
Transactions been completed at the beginning of the periods presented.
In accordance with Internal Revenue Service regulations, TVFN losses
are reported on the tax returns of the partners. Therefore, the
income tax adjustment does not include tax benefits for TVFN losses
that would be reported on the tax returns of minority partners.
The estimated fair value of the assets acquired and liabilities
assumed for financial reporting purposes will not differ materially
from their respective tax bases. Therefore, the Pro Forma Balance
Sheet has been adjusted to remove the deferred income tax assets and
liabilities from the historical financial position of the HHC
Newspaper and Broadcast Operations.
F. Minority Interest
The Pro Forma Income Statements and Pro Forma Balance Sheet have
been adjusted to reflect the minority share of TVFN results of
operations and the minority interest in the net assets of TVFN.
<PAGE>
THE E. W. SCRIPPS COMPANY
INDEX TO EXHIBITS
Acquisition Agreement, Dated as of May 16, 1997 by and
between The E. W. Scripps Company and Harte-Hanks
Communications, Inc. E-2
Exchange Agreement, Dated as of September 4, 1997, By and
Among Belo Holdings Inc., Colony Cable Networks, Inc.,
PJ Programming, Inc., BHI Sub, Inc. and
The E. W. Scripps Company. E-34
<PAGE>
ACQUISITION AGREEMENT
Dated as of May 16, 1997
By and Between
THE E. W. SCRIPPS COMPANY
and
HARTE-HANKS COMMUNICATIONS, INC.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Purchase and Sale of Shares
Section 1.1 Sale of Acquired Business E-6
Section 1.2 Purchase Price E-6
Section 1.3 Purchase Price Adjustment E-7
Section 1.4 Purchase Price Allocation E-8
ARTICLE II
Closing
Section 2.1 Time and Place E-8
Section 2.2 Delivery by Seller E-8
Section 2.3 Delivery by Buyer E-8
ARTICLE III
Representations and Warranties of Seller
Section 3.1 Organization E-9
Section 3.2 Capitalization E-9
Section 3.3 Authority E-9
Section 3.4 Consents and Approvals; No Violations E-10
Section 3.5 Acquired Business Financial Statements E-10
Section 3.6 Litigation E-10
Section 3.7 Employee Benefits E-11
Section 3.8 Absence of Certain Changes or Events E-11
Section 3.9 No Violation of Law E-12
Section 3.10 Taxes E-12
Section 3.11 Environmental Matters E-13
Section 3.12 Material Contracts E-14
Section 3.13 Brokers or Finders E-14
Section 3.14 Title to Assets E-14
Section 3.15 Condition of Assets E-14
Section 3.16 Employees E-14
Section 3.17 Insurance E-14
Section 3.18 FCC Licenses E-15
<PAGE>
ARTICLE IV
Representations and Warranties of Buyer
Section 4.1 Organization E-15
Section 4.2 Authority E-15
Section 4.3 Consents and Approvals; No Violations E-16
Section 4.4 Litigation E-16
Section 4.5 No Violation of Law E-16
Section 4.6 Sufficient Funds E-16
Section 4.7 Purchase for Investment E-16
Section 4.8 Brokers or Finders E-17
Section 4.9 Investigations E-17
ARTICLE V
Covenants Pending the Closing
Section 5.1 Covenants of Seller with Respect to
the Acquired Business E-17
Section 5.2 Covenants of Seller E-19
Section 5.3 Covenants of Buyer E-19
Section 5.4 Control of the Seller Stations E-19
ARTICLE VI
Additional Agreements
Section 6.1 Reasonable Efforts E-20
Section 6.2 Access to Information E-20
Section 6.3 Legal Conditions to Purchase E-20
Section 6.4 Use of Names E-20
Section 6.5 Intercompany Balances E-20
Section 6.6 Employee Matters; Seller Stock Plans E-20
Section 6.7 Defense and Payment of Certain Claims E-22
Section 6.8 Insurance E-23
Section 6.9 Fees and Expenses E-23
Section 6.10 Taxes E-23
Section 6.11 Sales and Transfer Taxes E-26
Section 6.12 Assignment of Contracts and Permits E-26
Section 6.13 Notification E-26
Section 6.14 Indemnity Relating to Certain Litigation;
and Certain Benefits Liabilities E-26
ARTICLE VII
Conditions
Section 7.1 Conditions to Each Party's Obligation to
Effect the Closing E-28
Section 7.2 Conditions of Obligations of Buyer E-28
Section 7.3 Conditions of Obligations of Seller E-29
<PAGE>
ARTICLE VIII
Termination and Amendment
Section 8.1 Termination E-29
Section 8.2 Effect of Termination E-30
Section 8.3 Amendment E-30
Section 8.4 Extension; Waiver E-30
ARTICLE IX
Miscellaneous
Section 9.1 Nonsurvival of Representations and
Warranties E-30
Section 9.2 Notices E-31
Section 9.3 Interpretation E-32
Section 9.4 Counterparts E-32
Section 9.5 Entire Agreement; No Third-Party
Beneficiaries E-32
Section 9.6 Governing Law E-32
Section 9.7 Specific Performance E-32
Section 9.8 Publicity E-32
Section 9.9 Assignment E-32
Section 9.10 Further Assurances E-32
Schedules and Exhibits
Seller Disclosure Schedule
Exhibit A - Noncompetition Agreement
Exhibit B - Television Financial Statements
Exhibit C - Newspaper Financial Statements
<PAGE>
ACQUISITION AGREEMENT
ACQUISITION AGREEMENT (this "Agreement"), dated as of
May 16, 1997, by and between THE E. W. SCRIPPS COMPANY, an
Ohio corporation ("Buyer"), and HARTE-HANKS COMMUNICATIONS,
INC., a Delaware corporation ("Seller").
WHEREAS, Buyer and Seller have entered into an
Agreement and Plan of Reorganization dated as of May 16,
1997 (the "Merger Agreement") providing for the merger (the
"Merger") of Seller into Buyer after Seller shall have
effected the Distribution (as defined in the Merger
Agreement);
WHEREAS, in the event that the Merger Agreement is
terminated, Buyer desires to purchase, and Seller desires to
sell, substantially all of Seller's newspaper, television
and radio operations, on the terms and subject to the
conditions contained in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and
the respective representations, warranties, covenants and
agreements set forth herein, the parties hereto agree as
follows:
ARTICLE I
Purchase and Sale of Business
Section 1.1 Sale of Acquired Business. Upon the
terms and subject to the conditions hereof, at the closing
of the transactions contemplated hereby (the "Closing"),
Seller will sell and assign to Buyer, and Buyer will
purchase and acquire from Seller, the Acquired Business.
The "Acquired Business" means and includes the assets,
liabilities, capital stock and interests reflected on the
Acquired Business Balance Sheet (as defined in Section 3.5),
as such assets and liabilities may have changed since the
date of the Acquired Business Balance Sheet, but in any
event shall include all of Seller's direct and indirect
right, title and interest in the assets used primarily in,
and all of Seller's liabilities and obligations (accrued,
absolute, contingent, undisclosed or otherwise) which are
primarily related to or have arisen or will arise from
Seller's newspaper, television and radio businesses,
including the ownership and operation of the newspapers
listed in Section 1.1 of the Seller Disclosure Schedule,
KENS-TV and KENS-AM. The Acquired Business shall include
the following Subsidiaries of Seller (individually, a
"Acquired Subsidiary" and collectively, the "Acquired
Subsidiaries"): Independent Publishing Company, a South
Carolina corporation ("IPC"), Harte-Hanks Community
Newspapers, Inc., a Texas corporation ("Community
Newspapers"), and Harte-Hanks Television, Inc., a Delaware
corporation ("HHTV"). As used in this Agreement, the word
"Subsidiary" means, with respect to any party, any
corporation or other organization, whether incorporated or
unincorporated, of which (i) such party or any other
Subsidiary of such party is a general partner (excluding
partnerships the general partnership interests of which held
by such party and any Subsidiary of such party do not have a
majority of the voting interest in such partnership) or (ii)
securities or other interests having by their terms a
majority of the outstanding voting power with respect to
such corporation or other organization are directly or
indirectly owned or controlled by such party or by any one
or more of its Subsidiaries, or by such party and one or
more of its Subsidiaries.
Section 1.2 Purchase Price. The total consideration
(the "Purchase Price") for the Acquired Business will be the
sum of $775 million, plus or minus the positive or negative
amount of net working capital (current assets less current
liabilities) of the Acquired Business estimated by the chief
financial officer of Seller as the net working capital as of
the Closing Date pursuant to Section 7.2(c) (the "Cash
Payment"), plus Buyer's assumption of Seller's liabilities
included in the Acquired Business, plus or minus the
adjustment amount calculated pursuant to Section 1.3. At
the Closing, Buyer will pay the Cash Payment to Seller by
wire transfer of immediately available funds.
<PAGE>
Section 1.3 Purchase Price Adjustment.
(a) No later than 45 days after the Closing Date,
Seller shall deliver to Buyer a balance sheet of the
Acquired Business at the Closing Date (the "Closing Balance
Sheet"). The Closing Balance Sheet shall be prepared in
accordance with generally accepted accounting principles on
a basis consistent with the Acquired Business Financial
Statements (as defined below), except that the Closing
Balance Sheet will not include (i) any liabilities or
reserves in respect of Continuing Claims (as defined below),
(ii) will reflect all film contracts as long term assets and
all film contract payables as long term liabilities and
(iii) will not reflect as current liabilities the severance
obligations for Employees referenced in Section 6.6(a)
below. To the extent that the net working capital (current
assets less current liabilities) of the Acquired Business as
shown on the Closing Balance Sheet is more or less than the
amount estimated by the chief financial officer of Seller as
the net working capital as of the Closing Date pursuant to
Section 7.2(c), Buyer shall pay to Seller, or Seller shall
pay to Buyer, the amount of such excess or shortfall,
respectively, by wire transfer of immediately available
funds within five days of the earlier to occur of
(i) acceptance by Buyer or (ii) the Neutral Auditors'
determination.
(b) After receipt of the Closing Balance Sheet,
Buyer shall have 20 days to review the Closing Balance
Sheet, together with the workpapers used in the preparation
thereof. Representatives of Buyer and Seller shall be given
access to all work papers, books, records and other
information related to the preparation of the Closing
Balance Sheet to the extent required to complete their
review of the Closing Balance Sheet. Buyer may dispute
items reflected on the Closing Date Balance Sheet only on
the basis that such amounts were not arrived at in
accordance with the consistent application of accounting
principles used in the preparation of the Acquired Business
Financial Statements. Unless Buyer delivers written notice
to Seller on or prior to the 20th day after Buyer's receipt
of the Closing Balance Sheet specifying in reasonable detail
all disputed items and the basis therefor, Buyer shall be
deemed to have accepted and agreed to the Closing Balance
Sheet. If Buyer so notifies Seller of its objection to the
Closing Balance Sheet, Buyer and Seller shall, within 30
days following such notice (the "Resolution Period"),
attempt to resolve their differences and any resolution by
them as to any disputed amounts shall be final, binding and
conclusive.
(c) If at the conclusion of the Resolution Period
there remain amounts in dispute pursuant to paragraph (b) of
this Section 1.3, then all amounts remaining in dispute
shall be submitted to a firm of nationally recognized
independent public accountants who shall not have had a
material relationship with Buyer or Seller within the past
two years (the "Neutral Auditors") and who shall be selected
by mutual agreement of Buyer and Seller within 10 days after
the expiration of the Resolution Period. Each party agrees
to execute, if requested by the Neutral Auditors, a
reasonable engagement letter. All fees and expenses
relating to the work, if any, to be performed by the Neutral
Auditors shall be borne equally by Buyer and Seller. The
Neutral Auditors shall act as an arbitrator to determine,
based solely on presentations by Buyer and Seller, and not
by independent review or audit, only those issues still in
dispute. The Neutral Auditors' determination shall be made
within 30 days of their selection, shall be set forth in a
written statement delivered to Buyer and Seller and shall be
final, binding and conclusive.
(d) "Continuing Claims" means all suits, claims,
actions, arbitrations, inquiries, proceedings or
investigations by or before any court, arbitral tribunal,
administrative agency or commission or other governmental,
regulatory or administrative agency or commission against
Seller or any of the Acquired Subsidiaries that arise from
facts or events occurring prior to the Closing Date relating
to bodily injury, property damage or worker's compensation
and that would fall under Seller's automobile, general
liability, or worker's compensation coverage.
<PAGE>
Section 1.4 Purchase Price Allocation. The Purchase
Price will be allocated among the Shares and assets of
Seller constituting the remainder of the Acquired Business
as agreed by Seller and Buyer on or prior to Closing.
Except as otherwise provided in Section 6.10(b) in the event
a Section 338(h)(10) election is made, Buyer and Seller
will, not later than 90 days after the Closing, execute and
cause to be filed Forms 8594 under Internal Revenue Code of
1986, as amended (the "Code") reflecting such allocation.
Upon any adjustment to the Purchase Price under Section 1.3,
Buyer and Seller will each execute additional Forms 8594, if
necessary.
ARTICLE II
Closing
Section 2.1 Time and Place. On the terms and
subject to the conditions of this Agreement, the Closing
will take place at the offices of Seller's outside counsel,
Hughes & Luce, L.L.P., located at 1717 Main Street, Suite
2800, Dallas, Texas 75201 at 10:00 a.m. local time on the
third business day following the date on which the last
remaining condition set forth in Article VII has been
satisfied or waived, or at such other time and place as the
parties hereto agree upon in writing (the "Closing Date").
Section 2.2 Delivery by Seller. At the Closing,
Seller will deliver to Buyer the following:
(a) Certificates representing all of the issued
and outstanding shares of capital stock in IPC,
Community Newspapers and HHTV (collectively, the
"Shares"), endorsed in blank or together with duly
executed stock transfer powers in favor of Buyer;
(b) A receipt for the Cash Payment;
(c) A bill of sale and assignment, in form
reasonably acceptable to Buyer, conveying to Buyer all
of the assets included in the Acquired Business that
are owned by Seller, together with certificates of
title with respect to motor vehicles;
(d) Instruments of assignment, in form reasonably
acceptable to Buyer, assigning to Buyer all of Seller's
rights under the Contracts (as defined below) to which
Seller is a party, and Seller shall have obtained all
necessary consents to such assignments other than
consents which the failure to obtain will not have a
material adverse effect on the Acquired Business taken
as a whole;
(e) A good and sufficient deed, in form
reasonably acceptable to Buyer, conveying a good and
clear record and marketable title to all of the real
property owned by Seller and included in the Acquired
Business;
(f) the Noncompetition Agreement in the form
attached hereto as Exhibit A; and
(g) Each of the other documents and instruments
required to be delivered under the terms of this
Agreement.
Section 2.3 Delivery by Buyer. At the Closing,
Buyer will deliver to Seller the following:
(a) The Cash Payment, in the manner required in
Section 1.2;
(b) A receipt for the delivery of the Shares;
(c) An instrument of assumption of liabilities,
in form reasonably acceptable to Seller, covering those
liabilities of Seller included in the Acquired
Business;
(d) the Noncompetition Agreement in the form
attached hereto as Exhibit A; and
(e) Each of the other documents and instruments
required to be delivered under the terms of this
Agreement.
<PAGE>
ARTICLE III
Representations and Warranties of Seller
Seller represents and warrants to Buyer as follows:
Section 3.1 Organization. Each of Seller and the
Acquired Subsidiaries is duly organized, validly existing
and in good standing under the laws of the jurisdiction of
its incorporation and Seller and each Acquired Subsidiary
has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its
business as now being conducted, except where the failure to
be so organized, existing and in good standing or to have
such power and authority would not have a material adverse
effect on the Acquired Business taken as a whole. Seller
and the Acquired Subsidiaries are each duly qualified or
licensed to do business and in good standing in each
jurisdiction in which the property owned, leased or operated
by them or the nature of the business conducted by them
makes such qualification or licensing necessary, except
where the failure to be so qualified or licensed and in good
standing would not in the aggregate have a material adverse
effect on the Acquired Business taken as a whole or on the
ability of Seller to consummate the transactions
contemplated hereby. True, accurate and complete copies of
the charters and bylaws, including all amendments thereto,
of the Acquired Subsidiaries have heretofore been delivered
to Buyer. As used in this Agreement, any reference to any
event, change or effect having a material adverse effect on
or with respect to the Acquired Business taken as a whole or
an entity (or group of entities taken as a whole) means that
such event, change or effect is materially adverse to the
business, properties, assets, results of operations or
financial condition of the Acquired Business or such entity
(or, if with respect thereto, of such group of entities
taken as a whole).
Section 3.2 Capitalization. The authorized capital
stock of IPC consists of 150 shares of common stock, $100.00
par value per share, all of which shares are issued and
outstanding and owned by Seller. The authorized capital
stock of Community Newspapers consists of 6,000 shares of
common stock, no par value per share, all of which shares
are issued and outstanding and owned by Seller. The
authorized capital stock of HHTV consists of 1,000 shares of
common stock, $1.00 par value per share, all of which shares
are issued and outstanding and owned by Seller. All the
Shares are duly authorized, validly issued, fully paid and
non-assessable and free of any preemptive rights in respect
thereof. There are no existing options, warrants, calls,
subscriptions or other rights or other agreements,
commitments, understandings or restrictions of any character
binding on any of the Acquired Subsidiaries with respect to
the issued or unissued capital stock of any of the Acquired
Subsidiaries. There are no outstanding contractual
obligations of any of the Acquired Subsidiaries to
repurchase, redeem or otherwise acquire any shares of
capital stock of any of the Acquired Subsidiaries. Upon the
sale of the Shares to Buyer at the Closing, Buyer will
acquire the entire legal and beneficial ownership in all of
the Shares, free and clear of any liens, claims, security
interests or encumbrances.
Section 3.3 Authority. Seller has the requisite
corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this
Agreement by Seller and the consummation by Seller of the
transactions contemplated hereby have been duly authorized
by Seller's Board of Directors, and no other corporate
proceedings on the part of Seller are necessary to authorize
this Agreement or for Seller to consummate the transactions
so contemplated hereby. This Agreement has been duly
executed and delivered by Seller and, assuming this
Agreement constitutes a valid and binding obligation of
Buyer, constitutes a valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms.
<PAGE>
Section 3.4 Consents and Approvals; No Violations.
Except (a) as set forth in Section 3.4 of the Seller
Disclosure Schedule, (b) for filings, permits,
authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and the Communications Act of 1934,
as amended (the "FCC Act"), and (c) as may be necessary as a
result of any facts or circumstances relating solely to
Buyer or any of its Subsidiaries, none of the execution,
delivery or performance of this Agreement by Seller or the
consummation by Seller of the transactions contemplated
hereby and compliance by Seller with any of the provisions
hereof will (i) conflict with or result in any breach of any
provisions of the charters or bylaws of Seller or of any of
the Acquired Subsidiaries, (ii) require any filing by Seller
or any of the Acquired Subsidiaries with, or any permit,
authorization, consent or approval to be obtained by Seller
or any of the Acquired Subsidiaries of, any court, arbitral
tribunal, administrative agency or commission or other
governmental or other regulatory authority or agency (a
"Governmental Entity"), (iii) result in a violation or
breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right
of termination, amendment, cancellation or acceleration)
under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument, obligation or commitment to
which Seller or any of the Acquired Subsidiaries is a party
or by which any of them or any of their properties or assets
may be bound ("Contracts") or result in the creation of any
lien upon any of the property or assets of the Acquired
Business, or (iv) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Seller or
any of the Acquired Subsidiaries, except, in the case of
clause (ii), (iii) or (iv), for failures to file or obtain,
violations, breaches, defaults or liens which would not have
a material adverse effect on the Acquired Business taken as
a whole or the ability of Seller to consummate the
transactions contemplated hereby. The Seller has no
knowledge of any facts or circumstances relating to the
Seller or any of its Acquired Subsidiaries that,
individually or in the aggregate, would prevent any
necessary approval of the transactions contemplated by this
Agreement under the FCC Act.
Section 3.5 Acquired Business Financial Statements.
Attached hereto as Exhibits B and C are the audited balance
sheets (the "Acquired Business Balance Sheets") of the
Acquired Business as of December 31, 1996 ( the "Balance
Sheet Date") and December 31, 1995, and the related
statement of operations and cash flows for the three years
ended December 31, 1996 and the accompanying notes for the
Seller's television and radio operations and newspaper
operations, respectively (together with the Acquired
Business Balance Sheets, the "Acquired Business Financial
Statements"). The Acquired Business Financial Statements
have been prepared in accordance with generally accepted
accounting principles consistently applied, and, except as
set forth in Section 3.5 of the Seller Disclosure Schedule,
fairly present in all material respects the financial
position of the Acquired Business as at the dates thereof,
and the results of its operations for the periods then
ended. After the Closing, except as otherwise contemplated
by this Agreement, neither Seller nor any of its other
Subsidiaries will own or have rights to use any of the
assets or property, whether tangible, intangible or mixed,
which are necessary for the conduct of the Acquired Business
as conducted on the date hereof.
Section 3.6 Litigation. Except as disclosed in the
Acquired Business Financial Statements or as set forth in
Section 3.6 of the Seller Disclosure Schedule, there is no
suit, action, proceeding or investigation relating to the
Acquired Business pending or, to the knowledge of Seller,
threatened, against Seller or any of the Acquired
Subsidiaries before any Governmental Entity which,
individually or in the aggregate, is reasonably likely to
have a material adverse effect on the Acquired Business
taken as a whole or the ability of Seller to consummate the
transactions contemplated hereby. Except as set forth in
Section 3.6 of the Seller Disclosure Schedule, neither
Seller nor any of the Acquired Subsidiaries is subject to
any outstanding order, writ, injunction or decree relating
to the Acquired Business which, individually or in the
aggregate, is reasonably likely to have a material adverse
effect on the Acquired Business taken as a whole or a
material adverse effect on the ability of Seller to
consummate the transactions contemplated hereby.
<PAGE>
Section 3.7 Employee Benefits.
(a) Section 3.7 of the Seller Disclosure Schedule
contains a list of all "employee benefit plans" within the
meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and all other
material benefit plans, programs, agreements and
arrangements (the "Benefit Plans"), which cover employees or
former employees of Seller and the Acquired Subsidiaries who
are or were employed in the Acquired Business (the
"Employees"). True and complete copies of all Benefit
Plans, any trust instruments and/or insurance contracts, if
any, forming a part of any such plans, and all amendments
thereto; current summary plan descriptions; where
applicable, the most current determination letter received
from the Internal Revenue Service (the "Service"); and where
applicable, annual reports, financial statements and
actuarial reports for the last plan year, which fairly and
accurately reflect the financial condition of the plans have
been made available to Buyer.
(b) All Benefit Plans are in compliance with
ERISA, the Code, and all other applicable laws in all
material respects. Each Benefit Plan which is an "employee
pension benefit plan" within the meaning of Section 3(2) of
ERISA (a "Pension Plan") and which is intended to be
qualified under Section 401(a) of the Code has received a
favorable determination letter from the Service, and Seller
is not aware of any circumstances likely to result in
revocation of any such favorable determination letter.
Neither Seller, the Acquired Subsidiaries nor any ERISA
Affiliate (as defined below) has contributed or been
required to contribute to any Multiemployer Plan (as defined
in ERISA) with respect to any Employees.
(c) No liability under Subtitle C or D of Title
IV of ERISA has been incurred by Seller or any of the
Acquired Subsidiaries with respect to any ongoing, frozen or
terminated Pension Plan, currently or formerly maintained by
any of them, or the Pension Plan of any entity which is or
has been considered one employer with Seller or any of the
Acquired Subsidiaries, as the case may be, under Section
4001 of ERISA or Section 414 of the Code (an "ERISA
Affiliate") which would have a material adverse effect on
the Acquired Business taken as a whole.
(d) All contributions required to be made or
accrued as of the Balance Sheet Date under the terms of any
Benefit Plan for which Seller or any of the Acquired
Subsidiaries may have liability have been timely made or
have been reflected on the Acquired Business Balance Sheet.
Neither any Pension Plan nor any single-employer plan of an
ERISA Affiliate has incurred an "accumulated funding
deficiency" (whether or not waived) within the meaning of
Section 412 of the Code or Section 302 of ERISA in an amount
which would have a material adverse effect on the Acquired
Business taken as a whole. Neither Seller nor any of the
Acquired Subsidiaries has provided, or is required to
provide, security to any Pension Plan pursuant to Section
401(a)(29) of the Code.
(e) Neither Seller nor any of the Acquired
Subsidiaries has any obligations for retiree health and life
benefits for Employees or former Employees under any Benefit
Plan, except as set forth in Section 3.7 of the Seller
Disclosure Schedule or as required by Part 6 of Title I of
ERISA.
Section 3.8 Absence of Certain Changes or Events.
Except as set forth in Section 3.8 of the Seller Disclosure
Schedule, since the Balance Sheet Date, the Acquired
Business has been conducted only in the ordinary course
consistent with past practice, and there has not been any
change or development, or combination of changes or
developments (other than changes relating to or arising from
legislative or regulatory changes, developments generally
affecting the newspaper or broadcasting industries or
general economic conditions in the United States), which
individually or in the aggregate have had or are reasonably
likely to have a material adverse effect on the Acquired
Business taken as a whole.
<PAGE>
Section 3.9 No Violation of Law. Except as disclosed in
the Acquired Business Financial Statements or as set forth
in Section 3.9 of the Seller Disclosure Schedule, neither
Seller nor any of the Acquired Subsidiaries is in violation
of, or, to the knowledge of Seller, under investigation with
respect to or has been given notice or been charged by any
Governmental Entity with any violation of, any law, statute,
order, rule, regulation or judgment of any Governmental
Entity, except for violations which, in the aggregate, would
not have a material adverse effect on the Acquired Business
taken as a whole. Seller and the Acquired Subsidiaries have
all permits, licenses, franchises and other governmental
authorizations, consents and approvals necessary to conduct
the Acquired Business as presently conducted, except for any
such permits, licenses, franchises or other governmental
authorizations, consents and approvals the failure of which
to have would not have a material adverse effect on the
Acquired Business taken as a whole.
Section 3.10 Taxes.
(a) Except as disclosed in the Acquired Business
Financial Statements or as set forth in Section 3.10 of the
Seller Disclosure Schedule:
(i) Seller, the Acquired Subsidiaries and
the consolidated group (the "Group") of which Seller
and/or the Acquired Subsidiaries are members, have (A)
duly filed with the appropriate governmental
authorities all Tax Returns (as hereinafter defined)
required to be filed by them on or prior to the Closing
Date, other than those Tax Returns the failure of which
to file would not have a material adverse effect on the
entity required to file such Tax Return, and such Tax
Returns are true, correct and complete in all material
respects, and (B) duly paid in full or made provision
in accordance with generally accepted accounting
principles for the payment of all Taxes (as hereinafter
defined) due with respect to periods ending on or prior
to the Closing Date;
(ii) all monies which Seller, the Acquired
Subsidiaries or any member of the Group has been
required by law to withhold from employees or other
contractors with respect to payments made or periods
ending on or before the Closing Date have been withheld
and timely paid to the appropriate governmental
authority;
(iii) as of the date hereof, the Tax
Returns for Seller, the Acquired Subsidiaries and/or
any member of the Group are not currently the subject
of any audit, investigation or proceeding by the
Service or, to Seller's, any Acquired Subsidiary's or
the Group's knowledge, any state or local taxing
authority, and Seller, the Acquired Subsidiaries and/or
any member of the Group have not received any written
notice of deficiency or assessment from any taxing
authority with respect to liabilities for material
Taxes of Seller, the Acquired Subsidiaries and/or any
member of the Group which have not been paid or finally
settled, other than audits, deficiencies or assessments
disclosed in Section 3.10 of the Seller Disclosure
Schedule which are being contested in good faith
through appropriate proceedings; and
(iv) the consolidated federal income tax
return of the Group has been audited through December
31, 1990 and no waiver of any statute of limitations in
respect of Taxes or any extension of time with respect
to a Tax assessment or deficiency granted by Seller,
any of the Acquired Subsidiaries and/or any member of
the Group is currently in effect.
<PAGE>
(b) "Taxes" means all taxes, charges, fees,
levies, imposts, duties or other assessments, including,
without limitation, income, gross receipts, estimated taxes,
excise, personal property, real property, sales, ad valorem,
value-added, leasing, withholding, social security, workers
compensation, unemployment insurance, occupation, use,
service, service use, license, stamp, payroll, employment,
windfall profit, environmental, alternative or add-on
minimum tax, franchise, transfer and recording taxes, fees
and charges, imposed by the United States or any state,
local, or foreign governmental authority whether computed on
a separate, consolidated, unitary, combined or any other
basis; and such term shall include any interest, fines,
penalties or additional amounts attributable or imposed on
or with respect to any such taxes, charges, fees, levies,
imposts, duties or other assessments. "Tax Return" means
any return, report or other document or information required
to be supplied to a taxing authority in connection with
Taxes.
(c) Except as provided in Section 3.10 of the
Seller Disclosure Schedule, neither Seller, any Acquired
Subsidiary, nor any member of the Group (i) has filed a
consent pursuant to Section 341(f) of the Code nor agreed to
have Section 341(f)(2) apply to any disposition of a
subsection (f) asset (as such term is defined in Section
341(f) of the Code) owned by a member of the Group, (ii) has
agreed, or is required, to make any adjustment under Section
481(a) of the Code by reason of a change in accounting
method or otherwise that will affect the liability of the
Group for Taxes, (iii) has made an election, or is required,
to treat any asset of the Group as owned by another person
pursuant to the provisions of former Section 168(f)(8) of
the Code, (iv) is now or has ever been a party to any
agreement, contract, arrangement, or plan that would result,
separately or in the aggregate, in the payment of any
"excess parachute payments" within the meaning of Section
280G of the Code, (v) has participated in an international
boycott as defined in Section 999 of the Code, (vi) is now
or has ever been a "foreign person" within the meaning of
Section 1445(b)(2) of the Code, or (vii) has made any of the
foregoing elections or is required to apply any of the
foregoing rules under any comparable state or local tax
provision. After the date hereof, no election with respect
to Taxes or extension of the period of limitation will be
made without the written consent of Buyer.
Section 3.11 Environmental Matters.
(a) Except as disclosed in the Acquired Business
Financial Statements or as set forth in Section 3.11 of the
Seller Disclosure Schedule and except for such matters that,
individually or in the aggregate, would not have a material
adverse effect on the Acquired Business taken as a whole,
(i) to the knowledge of Seller, the Acquired Business is in
compliance in all material respects with all applicable
Environmental Laws (as hereinafter defined); (ii) to the
knowledge of Seller, the properties included in the Acquired
Business and presently owned or operated by Seller or the
Acquired Subsidiaries (the "Acquired Properties") do not
contain any Hazardous Substance (as hereinafter defined)
other than as permitted under applicable Environmental Laws;
(iii) neither Seller nor any of the Acquired Subsidiaries
has since December 31, 1994 received any claims, notices,
demand letters, lawsuits or requests for information from
any Governmental Entity or any private third party alleging
that the Acquired Business is in violation of, or liable
under, any Environmental Laws; and (iv) none of Seller, the
Acquired Subsidiaries or the Acquired Properties is subject
to any court order, administrative order or decree relating
to the Acquired Business arising under any Environmental
Law.
(b) "Environmental Law" means any applicable
Federal, state or local law, regulation, permit, judgment or
agreement with any Governmental Entity, relating to (x) the
protection, preservation or restoration of the environment
or to human health or safety, or (y) the exposure to, or the
use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production,
release or disposal of Hazardous Substances. "Hazardous
Substance" means any substance presently listed, defined,
designated or classified as hazardous, toxic, radioactive or
dangerous, or otherwise regulated, under any Environmental
Law.
<PAGE>
Section 3.12 Material Contracts. Section 3.12 of the
Seller Disclosure Schedule identifies any Contract included
in the Acquired Business to which Seller or any of the
Acquired Subsidiaries is a party or by which any of its
assets or operations may be bound as of the date of this
Agreement that is (i) a loan or similar agreement or
indebtedness evidenced by a note or other instrument, or any
direct or indirect guarantee of indebtedness of any other
person, in excess of $1,000,000; (ii) any Contract that
expressly limits the right to terminate the Contract without
penalty upon less than one year's notice and such Contract
provides for future payments in excess of $250,000 within
the next twelve (12) months from the date hereof; (iii) a
network affiliation agreement; (iv) an employment or
severance agreement providing for payments in excess of
$100,000 to any Employee; and (v) any Contract related to
capital expenditures, which provides for future payments in
excess of $500,000 within the next twelve (12) months from
the date hereof. Except as set forth in Section 3.12 of the
Seller Disclosure Schedule (i) each of the Contracts set
forth on Section 3.12 of the Seller Disclosure Schedule is
in full force and effect, except where the failure to be in
full force and effect would not have a material adverse
effect on the Acquired Business taken as a whole and (ii)
there are no existing defaults by Seller or any Acquired
Subsidiary thereunder which default would result in a
material adverse effect on the Acquired Business taken as a
whole.
Section 3.13 Brokers or Finders. Neither Seller nor
any of the Acquired Subsidiaries has any liability to any
agent, broker, investment banker, financial advisor or other
firm or person for any broker's or finder's fee or any other
commission or similar fee in connection with any of the
transactions contemplated by this Agreement except
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"),
whose fees and expenses, as previously disclosed to Buyer,
will be paid by Seller in accordance with Seller's agreement
with such firm.
Section 3.14 Title to Assets. Except as set forth in
Section 3.14 of the Seller Disclosure Schedule, Seller and
the Acquired Subsidiaries own all of the material assets of
the Acquired Business free and clear of any liens, claims,
security interests or encumbrances that, individually or in
the aggregate, are reasonably likely to have a material
adverse effect on the Acquired Business taken as a whole.
Section 3.15 Condition of Assets. All
of the material assets of the Acquired Business are in good
operating condition and repair, ordinary wear and tear
excepted.
Section 3.16 Employees. With respect to the Acquired
Business, neither Seller nor any Acquired Subsidiary is a
party to, or is bound by, any collective bargaining
agreement or other contract with a labor union, nor is
Seller or any of the Acquired Subsidiaries the subject of
any proceeding or organizing activity seeking to compel it
to bargain with any labor union as to wages and conditions
of employment, nor is there any strike, labor dispute, slow
down or stoppage involving Seller or any of the Acquired
Subsidiaries pending or, to the knowledge of Seller,
threatened that, individually or in the aggregate, are
reasonably likely to have a material adverse effect on the
Acquired Business taken as a whole.
Section 3.17 Insurance. Set forth in Section 3.17 of
the Seller Disclosure Schedule is a schedule of the
insurance coverage (including policy limits, coverage
layers, and named insureds) maintained by Seller on the
assets, properties, premises, operations and personnel of
the Acquired Business.
<PAGE>
Section 3.18 FCC Licenses. The Seller has provided
Buyer with a complete list of the FCC Licenses held or
controlled by the Seller, Tall Tower, Inc. or any of the
Acquired Subsidiaries. Except as does not materially
jeopardize the operation by the Seller or the applicable
Acquired Subsidiary of any of the Seller Stations to which
the FCC Licenses apply or as set forth in Section 3.18 of
the Seller Disclosure Schedule: (i) the Seller and those of
its Acquired Subsidiaries that are required to hold FCC
Licenses, or that control FCC Licenses, are qualified to
hold such FCC Licenses or to control such FCC Licenses, as
the case may be; (ii) the Seller and those of its Acquired
Subsidiaries that are required to hold FCC Licenses hold
such FCC Licenses; (iii) the Seller is not aware of any
facts or circumstances relating to the Seller or any of its
Acquired Subsidiaries that would prevent the FCC's granting
the requisite consent to the FCC Form 315 Transfer of
Control Application to be filed (the "FCC Application"),
except that the Seller has filed a renewal application with
the FCC relating to KENS-AM, which renewal application may
delay the granting of the FCC Application; (iv) each Seller
Station is in material compliance with all FCC Licenses held
by it; and (v) there is not pending or, to the knowledge of
the Seller, threatened any application, petition, objection
or other pleading with the FCC or other Governmental Entity
which challenges the validity of, or any rights of the
holder under, any FCC License held by the Seller or one of
its Acquired Subsidiaries, except for rule making or similar
proceedings of general applicability to persons engaged in
substantially the same business conducted by the Seller
Stations. As used herein, the term "Seller Station" shall
mean KENS-TV and KENS-AM and the term "FCC License" shall
mean any permit, license, waiver or authorization that a
person is required by the FCC to hold in connection with the
operation of its business.
ARTICLE IV
Representations and Warranties of Buyer
Buyer represents and warrants to Seller as follows:
Section 4.1 Organization. Buyer is a corporation
duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation and has
all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as
now being conducted except where the failure to be so
organized, existing and in good standing or to have such
power and authority would not have a material adverse effect
on the ability of Buyer to consummate the transactions
contemplated hereby. Buyer is duly qualified or licensed to
do business and in good standing in each jurisdiction in
which the property owned, leased or operated by it or the
nature of the business conducted by it makes such
qualification or licensing necessary, except where the
failure to be so duly qualified or licensed and in good
standing would not in the aggregate have a material adverse
effect on the ability of Buyer to consummate the
transactions contemplated hereby.
Section 4.2 Authority. Buyer have the requisite
corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this
Agreement by Buyer and the consummation by Buyer of the
purchase of the Shares and of the other transactions
contemplated hereby have been duly authorized by the Board
of Directors of Buyer, and no other corporate proceedings on
the part of Buyer is necessary to authorize this Agreement
or to consummate the transactions so contemplated. This
Agreement has been duly executed and delivered by Buyer and,
assuming this Agreement constitutes a valid and binding
obligation of Seller, constitutes a valid and binding
obligation of Buyer, enforceable against Buyer in accordance
with its terms.
<PAGE>
Section 4.3 Consents and Approvals; No Violations.
Except for filings, permits, authorizations, consents and
approvals as may be required under, and other applicable
requirements of the Exchange Act, the HSR Act and the FCC
Act, and as may be necessary as a result of any facts or
circumstances relating solely to Seller and its
Subsidiaries, neither the execution, delivery or performance
of this Agreement by Buyer nor the consummation by Buyer of
the transactions contemplated hereby nor compliance by Buyer
with any of the provisions hereof will (i) conflict with or
result in any breach of any provision of the respective
charter or bylaws of Buyer, (ii) require any filing by Buyer
or its Subsidiaries with, or permit, authorization, consent
or approval to be obtained by Buyer or its Subsidiaries of,
any Governmental Entity, (iii) result in a violation or
breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right
of termination, cancellation or acceleration) under, any of
the terms, conditions or provisions of any Contract to which
Buyer or any of its Subsidiaries is a party or by which any
of them or any of their properties or assets may be bound or
(iv) violate any order, writ, injunction, decree, statute,
ordinance, rule or regulation applicable to Buyer or any of
its Subsidiaries, except, in the case of clause (ii), (iii)
or (iv), for failures to file or obtain, violations,
breaches or defaults which would not, individually or in the
aggregate, have a material adverse effect on the ability of
Buyer to consummate the transactions contemplated hereby.
Section 4.4 Litigation. There is no suit, action,
proceeding or investigation pending or, to the knowledge of
Buyer, threatened, against Buyer or any of its Subsidiaries
before any Governmental Entity which, individually or in the
aggregate, might reasonably be expected to have a material
adverse effect on the ability of Buyer to consummate the
transactions contemplated by this Agreement. Neither Buyer
nor any of its Subsidiaries is subject to any outstanding
order, writ, injunction or decree which, individually or in
the aggregate, might reasonably be expected to have a
material adverse effect on the ability of Buyer to
consummate the transactions contemplated hereby. Buyer has
no knowledge of any facts or circumstances relating to Buyer
or any of its Subsidiaries, that, individually or in the
aggregate, would prevent any necessary approval of the
transactions contemplated by this Agreement under the FCC
Act. Buyer is legally and financially qualified and, to
Buyer's knowledge, otherwise qualified to hold, or control
the entities which hold or will hold, the FCC Licenses
currently held or controlled by the Seller or to be held by
Buyer, or any person under their control after the Closing
Date, and are not aware of any facts or circumstances that
might prevent or delay prompt consent to or waivers for the
FCC Application.
Section 4.5 No Violation of Law. Neither Buyer nor
any of its Subsidiaries is in violation of, or, to the
knowledge of Buyer, is under investigation with respect to
or has been given notice or been charged by any Governmental
Entity with any violation of, any law, statute, order, rule,
regulation or judgment of any Governmental Entity, except
for violations which, in the aggregate, do not have a
material adverse effect on the ability of Buyer to
consummate the transactions contemplated hereby. Buyer and
its Subsidiaries have all permits, licenses, franchises and
other governmental authorizations, consents and approvals
necessary to conduct their businesses as presently
conducted, except for any such permits, licenses, franchises
or other governmental authorizations, consents and approvals
the failure of which to have would not have a material
adverse effect on the ability of Buyer to consummate the
transactions contemplated hereby.
Section 4.6 Sufficient Funds. Buyer has, on the
date hereof, the financial capability to purchase the
Acquired Business on the terms and subject to the conditions
set forth in this Agreement, and will have such capability
on the Closing Date.
Section 4.7 Purchase for Investment. Buyer is
acquiring the Shares for its own account for investment
purposes and not with a view to or for resale in connection
with any distribution thereof within the meaning of the
Securities Act of 1933, as amended. Buyer will refrain from
transferring or otherwise disposing of the Shares, or any
interest therein, in such a manner as to violate any
securities laws.
<PAGE>
Section 4.8 Brokers or Finders. Neither Buyer nor
any of its Subsidiaries has any liability to any agent,
broker, investment banker, financial advisor or other firm
or person for any broker's or finder's fee or any other
commission or similar fee in connection with any of the
transactions contemplated by this Agreement.
Section 4.9 Investigations. Buyer is an informed
and sophisticated participant in the transactions
contemplated by this Agreement and has been advised by
persons experienced in the evaluation and purchase of
enterprises such as the Acquired Business, and along with
such persons has undertaken such investigation, and has been
provided with and have evaluated such documents and
information, as Buyer and its advisors have deemed necessary
to enable them to make an informed and intelligent decision
with respect to the execution, delivery and performance of
this Agreement. Anything herein to the contrary
notwithstanding, Buyer acknowledges that Buyer is acquiring
the Acquired Business without any representation or
warranty, express or implied, by Seller or any of its
affiliates except as expressly set forth herein. In
furtherance of the foregoing, and not in limitation thereof,
Buyer acknowledges that neither Seller nor any of its
advisors, including, without limitation, DLJ, nor any of
their respective affiliates or representatives have made any
representation or warranty (express or implied) with respect
to, and Buyer is not relying upon, (i) the information set
forth in the Confidential Memorandum provided to Buyer
relating to the Acquired Business, (ii) any other
information provided to Buyer pursuant to the
Confidentiality Agreement (as defined below), or (iii) any
financial projection or forecast delivered to Buyer with
respect to the revenues, profitability, cash flow, capital
expenditures, or other financial or operating aspect that
may arise from the operation of the Acquired Business either
before or after the Closing Date. With respect to any
projection or forecast delivered by or on behalf of the
Seller to Buyer, Buyer acknowledges that (i) there are
uncertainties inherent in attempting to make such
projections and forecasts, (ii) Buyer is familiar with such
uncertainties, (iii) Buyer is taking full responsibility for
making its own evaluation of the adequacy and accuracy of
all such projections and forecasts furnished to Buyer and
(iv) Buyer will not have a claim against either Seller or
any of its advisors including, without limitation, DLJ, or
any of their respective affiliates with respect to such
projections or forecasts or with respect to any related
matter.
ARTICLE V
Covenants Pending the Closing
Section 5.1 Covenants of Seller with Respect to the
Acquired Business. During the period from the date of this
Agreement and continuing until the Closing Date, Seller
agrees that, except (i) as contemplated or permitted by this
Agreement, (ii) as set forth in Section 5.1 of the Seller
Disclosure Schedule, or (iii) to the extent that Buyer shall
otherwise consent in writing (which consent will not be
unreasonably withheld or delayed):
(a) Ordinary Course. Seller and the Acquired
Subsidiaries shall carry on the Acquired Business in the
usual, regular and ordinary course consistent with past
practice and use all reasonable efforts to preserve intact
the present business organization, keep available,
consistent with past practice, the services of the present
officers and employees and preserve the relationships with
customers, suppliers and others having business dealings
with the Acquired Business, it being understood, however,
that the failure of any Employees to remain employees of the
Acquired Business or become employees of Buyer or any
Subsidiary of Buyer shall not constitute a breach of this
covenant.
(b) Changes in Stock. Seller will not permit the
Acquired Subsidiaries to split (including a reverse stock
split), combine or reclassify any of their capital stock or
issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for
shares of their capital stock.
<PAGE>
(c) Issuance of Securities. Seller shall not
permit any of the Acquired Subsidiaries to, issue, transfer
or sell, or authorize or propose or agree to the issuance,
transfer or sale of, any shares of their capital stock of
any class, any other equity interests or any securities
convertible into, or any rights, warrants, calls,
subscriptions, options or other rights or agreements,
commitments or understandings to acquire, any such shares,
equity interests or convertible securities, other than
issuances by a wholly owned Subsidiary of its capital stock
to its parent.
(d) Governing Documents. None of the Acquired
Subsidiaries will amend their charters or bylaws in a manner
adverse to Buyer or otherwise inconsistent with the
transactions contemplated hereby.
(e) Indebtedness. Seller shall not permit any of
the Acquired Subsidiaries to incur any indebtedness for
borrowed money or guarantee any such indebtedness or issue
or sell any debt securities or warrants or rights to acquire
any debt securities of any of the Acquired Subsidiaries or
guarantee any such obligations of others other than in the
ordinary course of business consistent with past practice.
(f) Changes to Benefit Plans. Except as would
not materially increase the costs of the Acquired Business
and except for changes required to comply with applicable
law, Seller shall not, nor shall it permit any of the
Acquired Subsidiaries to, (i) enter into, adopt, amend
(except as may be required by law and except for immaterial
amendments) or terminate any Benefit Plan or any agreement,
arrangement, plan or policy between Seller or any such
Acquired Subsidiary and one or more of its directors,
officers or Employees or (ii) except for normal increases in
the ordinary course of business consistent with past
practice and the payment of bonuses and other consideration
to Employees in the aggregate not to exceed the amount set
forth in Section 5.1 of the Seller Disclosure Schedule,
increase in any manner the compensation or fringe benefits
of any director, officer or Employee or pay any benefit to
any director, officer or Employee not required by any plan
or arrangement as in effect as of the date hereof or enter
into any contract, agreement, commitment or arrangement to
do any of the foregoing; provided that the foregoing shall
not prohibit Seller or the Acquired Subsidiaries from hiring
and paying new employees in the ordinary course of business
consistent with past practice.
(g) Filings. Seller shall promptly provide Buyer
(or its counsel) copies of all filings (other than those
portions of filings under the HSR Act which Buyer has no
reasonable interest in obtaining in connection with the
acquisition of the Acquired Business) made by Seller with
any Federal, state or foreign Governmental Entity in
connection with this Agreement and the transactions
contemplated hereby.
(h) Accounting Policies and Procedures. Seller
will not and will not permit any of the Acquired
Subsidiaries to change any of its accounting principles,
policies or procedures with regard to the Acquired Business,
except as may be required by generally accepted accounting
principles.
(i) Sale of Assets. Seller will not and will not
permit any of the Acquired Subsidiaries to sell, lease,
exchange, mortgage, pledge, transfer or otherwise dispose
of, or agree to sell, lease, exchange, mortgage, pledge,
transfer or otherwise dispose of, any of the assets included
in the Acquired Business, except for dispositions of
inventories and equipment in the ordinary course of business
and consistent with past practice.
<PAGE>
Section 5.2 Covenants of Seller. During the period
from the date of this Agreement and continuing to the
Closing Date, Seller agrees that Seller will not and will
not permit the Acquired Subsidiaries to take any action that
would or is reasonably likely to result in any of the
conditions to the Closing set forth in Article VII not being
satisfied or that would materially impair the ability of
Seller to consummate the transactions contemplated herein in
accordance with the terms hereof or would materially delay
such consummation, and Seller shall promptly advise Buyer
orally and in writing of any change in, or event with
respect to, the business or operations of Seller having, or
which insofar as can reasonably be foreseen, could have, a
material adverse effect on the ability of Seller to
consummate the transactions contemplated hereby.
Section 5.3 Covenants of Buyer. During the period
from the date of this Agreement and continuing until the
Closing Date, Buyer agrees that except (i) as contemplated
or permitted by this Agreement or (ii) to the extent that
Seller shall otherwise consent in writing (which consent
will not be unreasonably withheld or delayed):
(a) Filings. Buyer shall promptly provide Seller
(or its counsel) copies of all filings (other than those
portions of filings under the HSR Act which Seller has no
reasonable interest in obtaining in connection with the
acquisition of the Acquired Business) made by Buyer with any
Federal, state or foreign Governmental Entity in connection
with this Agreement and the transactions contemplated
hereby.
(b) Cooperation. Buyer shall not take any action
that would or is reasonably likely to result in any of the
conditions to the Closing set forth in Article VII not being
satisfied or that would materially impair the ability of
Buyer to consummate the transactions contemplated herein in
accordance with the terms hereof or materially delay such
consummation, and Buyer shall promptly advise Seller orally
and in writing of any change in, or event with respect to,
the business or operations of Buyer having, or which,
insofar as can reasonably be foreseen, could have, a
material adverse effect on the ability of Buyer to
consummate the transactions contemplated hereby.
Section 5.4 Control of the Seller Stations. Prior
to the Closing Date, control of the Seller's television and
radio broadcasting operations, along with all of the
Seller's other operations, shall remain with Seller. Seller
and Buyer acknowledge and agree that neither Buyer nor any
of its employees, agents or representatives, directly or
indirectly, shall, or have any right to, control, direct or
otherwise supervise, or attempt to control, direct or
otherwise supervise, such broadcast and other operations, it
being understood that supervision of all programs,
equipment, operations and other activities of such broadcast
and other operations shall be the sole responsibility, and
at all times prior to the Closing Date remain within the
complete control and discretion, of the Seller, subject to
the terms of Sections 5.1 and 5.2.
ARTICLE VI
Additional Agreements
Section 6.1 Reasonable Efforts. Subject to the
terms and conditions of this Agreement, each of the parties
hereto agrees to use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement
including, without limitation, (i) the prompt preparation
and filing of all necessary documents under the HSR Act and
the FCC Act including (but not limited to) any required
waiver of the FCC one-to-a-market rule, and (ii) such
actions as may be required to have the applicable waiting
period under the HSR Act expire or terminate as promptly as
practicable, including by consulting with each other as to,
and responding promptly to any comments or requests for
information with respect thereto. Each party shall promptly
consult with the other and provide any necessary information
with respect to all filings made by such party with any
Governmental Entity in connection with this Agreement and
the transactions contemplated hereby.
<PAGE>
Section 6.2 Access to Information. Upon reasonable
notice, Seller shall (and shall cause each of the Acquired
Subsidiaries to) afford to the officers, employees,
accountants, counsel and other representatives of Buyer,
access, during normal business hours during the period prior
to the Closing Date, to all of the properties, books,
contracts, commitments and records relating to the Acquired
Business, and, during such period, Seller shall (and shall
cause the Acquired Subsidiaries to) furnish promptly to
Buyer all other information concerning the business,
properties and personnel of the Acquired Business as Buyer
may reasonably request. After the Closing Date, upon
reasonable notice, Buyer shall cause the Acquired
Subsidiaries to afford to the officers, employees,
accountants, counsel and other representatives of Seller
access, during normal business hours, to the Acquired
Subsidiaries' books and records which Seller may reasonably
request in order to complete tax filings or for other
legitimate business purposes. Unless otherwise required by
law, the parties will hold any information made available
pursuant to this Section 6.2 which is nonpublic in
confidence in accordance with the confidentiality agreement,
dated March 11, 1997 (the "Confidentiality Agreement"),
between Buyer and Seller.
Section 6.3 Legal Conditions to Purchase. Each of
Seller and Buyer will use all reasonable efforts to comply
promptly with all legal requirements which may be imposed on
it or its respective Subsidiaries with respect to the
purchase of the Acquired Business by Buyer (which actions
shall include, without limitation, furnishing all
information required under the HSR Act and the FCC Act and
will promptly cooperate with and furnish information to each
other in connection with any such requirements imposed upon
any of them or any of their respective Subsidiaries in
connection with the purchase of the Acquired Business by
Buyer). Subject to the terms and conditions hereof, each of
Seller and Buyer will, and will cause its respective
Subsidiaries to, promptly use all reasonable efforts to
obtain (and will consult and cooperate with each other in
obtaining) any consent, authorization, order or approval of,
or any exemption by, any Governmental Entity or other public
or private third party, required to be obtained or made by
such party in connection with the purchase of the Acquired
Business by Buyer or the taking of any action contemplated
by this Agreement.
Section 6.4 Use of Names. (a) Following the
Closing Date, Seller shall have the sole and exclusive
ownership of and right to use, as between Buyer and the
Acquired Subsidiaries on the one hand, and the Seller on the
other hand, each of the names, trademarks, trade names and
other proprietary rights set forth in Section 6.4 of the
Seller Disclosure Schedule (the "Acquired Proprietary Name
Rights"). The Acquired Proprietary Name Rights include,
without limitation, the name "Harte-Hanks" and derivatives
thereof.
(b) Following the Closing Date, Buyer shall, and
shall cause the Acquired Subsidiaries and other affiliates
to, take all action necessary to cease using, and change as
promptly as practicable (including by amending any charter
documents), any corporate or other names which are the same
as or confusing similar to any of the Acquired Proprietary
Name Rights.
Section 6.5 Intercompany Balances. All amounts
owing between the Acquired Subsidiaries, on the one hand,
and Seller and its other Subsidiaries, on the other hand,
other than amounts arising in the ordinary course of
business for the purchase of goods or services in commercial
transactions, shall be eliminated in full (without any
payment to either party) at or prior to the Closing Date.
Section 6.6 Employee Matters; Seller Stock Plans.
(a) Buyer and the Acquired Subsidiaries shall
assume and retain, with respect to the Employees, any and
all severance obligations that arise due to (i) the purchase
of the Acquired Business by Buyer being deemed a "Change of
Control" under the severance agreements for Employees
specified in Section 6.6 of the Seller Disclosure Schedule,
(ii) events or actions occurring as a result of the
transactions consummated on the Closing Date, subject to the
provisions of Section 6.14 below, and (iii) events or
actions occurring after the Closing Date.
<PAGE>
(b) Seller and Buyer agree that Buyer will,
immediately after the Closing Date and for at least one year
thereafter, permit the Employees (i) to participate in a
group health plan of Buyer, or one of its Subsidiaries in
which similarly situated employees of Buyer participate, in
accordance with the terms of the plan and, to waive any pre-
existing condition clause or waiting period requirement in
such group health plan and to give credit for deductible
amounts paid by an Employee during the current deductible
year of such group health plan while employed by Seller or
any of the Acquired Subsidiaries; provided, however, that
Buyer will be in compliance with this clause (i) regarding
Employees employed by Seller or the Acquired Subsidiaries if
it assumes the current group health contracts of Seller or
the Acquired Subsidiaries relating to the Employees; (ii) to
participate in and receive credit, for vesting and
eligibility purposes, under tax qualified retirement plans
of Buyer or any of its Subsidiaries in which similarly
situated employees of Buyer participate, for which they are
otherwise eligible, for their service with Seller or any of
the Acquired Subsidiaries, to the extent permitted by
applicable tax-qualification requirements; (iii) to
participate in other benefit plans of Buyer which are
offered to similarly situated employees and (iv) to
participate in stock option programs and stock purchase
programs of Buyer which are offered to similarly situated
employees.
(c) Effective as of the Closing Date, the
Employees shall cease to be eligible to participate in the
Benefit Plans, shall no longer accrue benefits under the
Benefit Plans, and shall not be eligible under the Benefit
Plans for payment of claims incurred thereafter, except to
the extent Buyer has assumed and continued any such Benefit
Plan with the consent of Seller.
(d) Notwithstanding any contrary provisions of
this Agreement, (i) Seller shall remain liable for any and
all obligations arising under or relating to the Benefit
Plans (except as otherwise provided in Schedule 6.6 of the
Seller Disclosure Schedule), and (ii) with respect to
Employees who as of the Closing Date are former employees of
the Acquired Business, or are not actively at work, the
Buyer shall assume liability only for (1) any leave
entitlements, reemployment obligations, reinstatement
rights, or related rights, under applicable law, including,
without limitation, the Family and Medical Leave Act of
1993, the Uniformed Services Employment and Reemployment
Rights Act of 1994, workers' compensation laws, or similar
laws, and (2) any rights, benefits or entitlements under the
Acquired Welfare Plans listed on Schedule 6.6, including,
without limitation, health care continuation pursuant to
Part 6 of Title I of ERISA.
(e) Each outstanding option (a "Seller Option")
to purchase shares of Seller's common stock held by an
Employee under any stock option plan of Seller, whether
vested or unvested, exercisable or unexerciseable, shall
remain the responsibility of Seller; and Buyer shall have no
obligation or responsibility whatsoever with respect to any
Seller Options.
(f) All of the Employees of the Acquired Business
will become Employees of Buyer as of the Closing Date;
however, nothing in this Agreement shall be construed to
require Buyer or the Acquired Subsidiaries to continue the
employment of any Employee for any period of time, or,
except as required by Section 6.6(b) above, to offer any
particular type or level of benefits to any employee.
Nothing in this Agreement shall prevent Buyer or the
Acquired Subsidiaries from disciplining or terminating any
Employee or from amending or terminating any benefit plans
at any time.
<PAGE>
Section 6.7 Defense and Payment of Certain Claims.
(a) The parties hereto undertake and agree that, after the
Closing Date, and in the name and on behalf of Buyer and the
Acquired Subsidiaries, Seller will assume all of the
Continuing Claims and, in connection therewith, will (i)
conduct, or cause to be conducted, the administration and
defense of the Continuing Claims, and (iii) pay or cause to
be paid, as may be necessary and appropriate, all
liabilities to third parties, cost and expenses resulting
from the Continuing Claims that are not paid to or for the
account of claimants or Buyer or the Acquired Subsidiaries
by insurance or by any third party ("Continuing Claims
Costs"). In connection with the foregoing, Seller hereby
agrees to indemnify and hold Buyer and its directors,
officers, employees, agents and affiliates harmless from all
liability to third parties asserting Continuing Claims.
(b) In consideration for the undertaking and
agreement of Seller set forth in this Section 6.7 and the
other consideration provided for in this Agreement, Buyer
agrees, that:
(i) subject to the obligations of Seller and
Buyer after the Closing Date under this Section 6.7, at all
times after the Closing Date, Seller will have the sole and
exclusive right to conduct, or cause to be conducted, and,
whether through insurance carriers or otherwise, the
administration and defense of all Continuing Claims as
provided above; provided, however, that (i) Buyer will be
entitled to monitor, at its own expense, and with any
counsel selected by it, the administration and defense of
all material Continuing Claims by Seller and (ii) Buyer may,
in its sole and absolute discretion, at any time and from
time to time in respect of any Continuing Claim, elect to
terminate Seller's rights to conduct or cause to be
conducted the administration and defense thereof by giving
notice in writing to Seller of such election, whereupon such
rights by Seller will automatically terminate and Seller
will automatically be deemed released from any further
liability or obligation under this Section 6.7 in respect of
the Continuing Claims as to which Buyer has terminated
Seller's rights and obligations (a "Discontinued Claim").
Notwithstanding any provision of this Agreement to the
contrary, any liabilities, costs or expenses resulting from
or in connection with a Discontinued Claim that are incurred
or paid subsequent to Seller's receipt of Buyer's election
to terminate Seller's rights and obligations with respect
thereto will not thereafter be deemed or treated as
Continuing Claims Costs for purposes of this Section 6.7.
If Buyer terminates Seller's rights with respect to the
administration and defense of a Discontinued Claim, Seller
will make commercially reasonable efforts to change counsel
of record and otherwise fully vest in Buyer or the
appropriate Acquired Subsidiary the full and sole right and
power to conduct the administration and defense of such
Discontinued Claim;
(ii) at all times after the Closing Date,
Buyer will give notice, within five business days, to Seller
of the assertion or commencement of any action which would
be a Continuing Claim, but no failure to give such notice
will relieve Seller from its obligations provided above
(except to the extent that Seller has suffered actual
prejudice thereby). Further, Seller will have a period of
30 days from the receipt of notice of any such action which
to investigate such action and to determine whether to
execute an acknowledgment of claim; provided, however, in
the event that Buyer or any of the Acquired Subsidiaries
take any action believed to be reasonable with respect to
such action before the end of such 30-day period, such
action will not relieve Seller from its obligations provided
above; and provided, further that Buyer has provided Seller
with prior written notification of such action to the extent
practicable;
(iii) Buyer and the Acquired Subsidiaries
will provide or make available to Seller and its
representatives, all records, materials and personnel of the
Acquired Business reasonably required by Seller or its
representatives for use in the conduct of the administration
and defense of the Continuing Claims and, further, Buyer and
the Acquired Subsidiaries will cooperate fully with Seller
and its representatives in the conduct of the administration
and defense of the Continuing Claims;
(iv) Buyer and the Acquired Subsidiaries will
maintain all books, records, materials and files of the
Acquired Business existing as of the Closing Date and
relating to any of the Continuing Claims for a period of ten
years following the Closing Date;
<PAGE>
(v) Neither Buyer nor any of the Acquired
Subsidiaries will take any action that would impair or
invalidate the insurance under which any of the Continuing
Claims are or may be covered that are in existence at the
Closing Date. For purposes of this Section 6.7, all
references to the representatives of Seller will include the
attorneys and insurance carriers of Seller and its
affiliates as well as the personnel of Seller and its
affiliates; and
(vi) Seller will retain, and Buyer, on behalf
of the Acquired Subsidiaries, agrees to assign to Seller,
any and all insurance claims, insurance receivables and all
other benefits (including premium refunds) arising under any
and all insurance policies covering the Continuing Claims
for which Seller is liable or obligated under this Section
6.7. With respect to the Continuing Claims, Buyer will not
have any obligation to make a claim under any insurance
policy procured by Buyer after the Closing Date; any such
insurance policy will expressly negate or waive any right of
subrogation with respect to any contractual rights against
Seller or any affiliate of Seller or any insurance carrier
of Seller relating to the Continuing Claims.
Section 6.8 Insurance. Buyer agrees and
acknowledges that the insurance policies listed on Section
3.16 of the Seller Disclosure Schedule are maintained by
Seller and that immediately after the Closing, the Acquired
Subsidiaries will no longer be designated insureds
thereunder and, except to benefit Seller with respect to
Continuing Claims assumed by Seller, such insurance policies
will cease to insure any of the business, operations,
assets, or affairs of the Acquired Business.
Section 6.9 Fees and Expenses. Whether or not the
transactions contemplated herein are consummated and except
as otherwise provided herein, all fees, costs and expenses
incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party
incurring such expenses; provided, however, that Seller and
Buyer shall each pay one-half of (i) the filing fee required
under the HSR Act and (ii) any filing fee required by the
FCC to file FCC applications.
Section 6.10 Taxes.
(a) Apportionment of Taxes Between Pre-Closing
and Post-Closing Tax Periods. In order to apportion
appropriately any Taxes relating to any taxable year or any
other period that is treated as a taxable year (a "Tax
Period") that includes (but that would not, but for this
Section 6.10, close on) the Closing Date, the parties hereto
will, unless specifically prohibited by applicable law,
elect with the relevant taxing authority to treat for all
purposes the Closing Date as the last day of a taxable
period of the Acquired Subsidiaries, and such Tax Period
will be treated as a Short Tax Period and a Pre-Closing Tax
Period for purposes of this Agreement. In any case in which
applicable law specifically prohibits any of the Acquired
Subsidiaries from treating the Closing Date as the last day
of a Short Tax Period, then for purposes of this Agreement,
the portion of such Taxes that is attributable to the
operations of such Acquired Subsidiary for such Interim Tax
Period will be the Income Tax that would be due with respect
to the Interim Tax Period if such Interim Tax Period were a
Short Tax Period. "Short Tax Period" means any Tax Period
ending on the Closing Date. "Interim Tax Period" means,
with respect to any Taxes imposed on the Acquired
Subsidiaries on a periodic basis for which the Closing Date
is not the last day of a Short Tax Period, the period of
time beginning on the first day of the actual Tax Period
that includes (but does not end on) the Closing Date and
ending on the Closing Date. "Pre-Closing Tax Period" means
any Tax Period, Short Tax Period or Interim Tax Period
ending on or before the Closing Date.
<PAGE>
(b) Section 338 Election. At Buyer's option,
Seller will join with Buyer (or any of its wholly-owned
subsidiaries) in making an election (or elections) under
Section 338(h)(10) and Treasury Regulation Section
1.338(h)(10)-1 of the Code, and any corresponding elections
permitted under state, local or foreign law, with respect to
the purchase and sale of the Shares. The Purchase Price
will be allocated among the assets of the Acquired
Subsidiaries as agreed to by Seller and Buyer prior to the
Closing. Seller and Buyer will exchange completed copies of
Internal Revenue Service Form 8023-A, required schedules
thereto, and any similar state, local or foreign forms or
schedules, executed by the Seller, as soon as practicable
after the Closing Date. Seller and Buyer agree that as a
result of the election under Section 338(h)(10), the deemed
asset sale resulting from the Section 338(h)(10) election
must be included in the final Short Tax Period. In any case
where applicable law specifically prohibits any of the
Acquired Subsidiaries from treating the Closing Date as the
last day of a Short Tax Period, then for purposes of this
Agreement, the portion of such Tax that is attributable to
the operations of such Acquired Subsidiaries for such
Interim Tax Period will be the Tax that would be due with
respect to the Interim Tax Period if such Interim Tax Period
were a Short Tax Period. The Seller will not, and will not
permit any of the Acquired Subsidiaries to, take, cause or
permit to be taken any action that would disqualify the sale
of the Shares as a deemed asset sale under Section
338(h)(10) and Treasury Regulation Section 1.338(h)-(10)(a).
(c) Preparation and Filing of Income Tax Returns.
Seller will be responsible, at its expense, for the
preparation and filing of all Tax Returns for all Tax
periods ending prior to the Closing Date and for any Short
Tax Period. Seller will prepare such Tax Returns in a
manner consistent with prior years and will, in respect of
such Tax Returns, determine the income, gain, expenses,
losses, deductions and credits of the Acquired Subsidiaries
in a manner consistent with prior practice. The results of
operations of the Acquired Subsidiaries from the first day
of the taxable year through the Closing Date will be
included in Seller's consolidated federal income Tax Return
and in any consolidated, combined or unitary income Tax
Returns required to be filed by Seller after the Closing
Date. The results of operations of the Acquired
Subsidiaries from the first day of the taxable year through
the Closing Date will be included in any separate Tax
Returns filed by the Acquired Subsidiaries after the Closing
Date; provided, however, that Seller will prepare (without
cost to Buyer or the Acquired Subsidiaries) all such
separate Tax Returns for any Short Tax Period (but not for
any Tax Period which includes or ends after the Closing
Date) and submit them to Buyer, and Buyer will have all such
separate Tax Returns appropriately executed and filed on a
timely basis. With respect to any Tax Return to be prepared
by Seller, Buyer will, and will cause the Acquired
Subsidiaries to, provide to Seller information in a manner
consistent with past practice for use in preparation of such
Tax Returns, in each case, no later than 60 days after the
relevant Tax Period ends. Notwithstanding the foregoing,
Buyer will be responsible for preparing and filing all Tax
Returns of the Acquired Subsidiaries for Tax Periods not
ending on or before the Closing Date, even if such Tax
Returns cover Tax Periods prior to the Closing Date.
(d) Cooperation. Seller, on the one hand, and
Buyer, on the other hand, will, and will cause the Acquired
Subsidiaries to, provide each other with such assistance as
may reasonably be requested by them in connection with the
preparation of any Tax Return, any Tax audit or other
examination by any Governmental Entity, or any judicial or
administrative proceedings related to liability for Taxes.
Seller, on the one hand, and Buyer, on the other hand, will,
and will cause the Acquired Subsidiaries to, retain and
provide each other with any records or information which may
be relevant to such preparation, audit, examination,
proceeding or determination. Such assistance will include
making employees available on a mutually convenient basis to
provide and explain such records and information and will
include providing copies of any relevant Tax Returns and
supporting work schedules. The party requesting assistance
hereunder will reimburse the other for reasonable out-of-
pocket expenses incurred in providing such assistance.
<PAGE>
(e) Refund Claims. Seller will provide Buyer and
the Acquired Subsidiaries with such assistance as they may
reasonably request to prepare any refund claim attributable
to the carryback of any tax losses or tax credits incurred
by Buyer or the Acquired Subsidiaries in any Post-Closing
Tax Period to any consolidated, combined or unitary income
Tax Return of Seller or to any separate Tax Return of any of
the Acquired Subsidiaries for any Pre-Closing Tax Period,
and Seller will receive and retain the amount of any
resulting refunds together with any interest thereon upon
receipt by any party hereto. "Post-Closing Tax Period"
means any Tax Period that begins after the Closing Date and,
with respect to any Tax Period beginning before and ending
after the Closing Date, the portion of such Tax Period
commencing on the day following the Closing Date.
(f) Tax Sharing Agreements. Any and all Tax (or
similar) agreements, arrangements or undertaking among
Seller and the Acquired Subsidiaries or the Group or any
member of the Group and the Company that relate to any
liability of the Acquired Subsidiaries for the Taxes of
Seller, the Group or any member of the Group will terminate
as of the Closing Date and any rights or obligations
resulting from such agreements will be eliminated as of the
Closing Date.
(g) Notice of Audit. If, in connection with any
examination, investigation, audit or other proceeding
concerning any Tax Return covering the operations of any of
the Acquired Subsidiaries on or before the Closing Date,
Seller, on the one hand, or Buyer or such Acquired
Subsidiary, on the other hand, receives from any
Governmental Entity a notice of deficiency, a proposed
adjustment, an assertion of claim or a demand concerning the
Tax Period covered by such Tax Return, Seller will notify
Buyer and such Acquired Subsidiary (if received by Seller)
and Buyer will notify Seller (if received by Buyer or such
Acquired Subsidiary), as the case may be, in writing
promptly (and in any case within 20 days) (i) of its receipt
of same and (ii) upon learning of any examination,
investigation, audit or other proceeding relating to same.
(h) Audits Controlled by Seller. Seller will, at
its own expense, have the sole and exclusive right, power
and authority to negotiate, resolve, settle or contest any
such notice of deficiency, proposed adjustment or assertion
of claim or demand, and to represent and act for and on
behalf of the Acquired Subsidiaries in connection with any
such examination, investigation, audit or other proceeding
related thereto, including refund claims relating to any Tax
Return of the Acquired Subsidiaries, for Tax Periods ending
on or before the Closing Date. Seller will keep Buyer
informed of the progress thereof and consult with Buyer in
good faith in connection therewith. Notwithstanding the
first sentence of this Section 6.10(h), Seller agrees that
it will not, and that it will not permit its Acquired
Subsidiaries to, resolve, settle, compromise or abandon any
issue or claim without the prior written consent of Buyer if
such action would materially and adversely affect the Taxes
of Buyer or the Acquired Subsidiaries with respect to any
Post-Closing Tax Period. Such consent will not be
unreasonably withheld.
(i) Audits Controlled by Buyer. Buyer will, at
its own expense, have the sole and exclusive right, power
and authority to negotiate, resolve, settle or contest any
such notice of deficiency, proposed adjustment or assertion
of claim or demand, and to represent and act for and on
behalf of the Acquired Subsidiaries in connection with any
such examination, investigation, audit or other proceeding
of any Tax Return of Buyer or the Acquired Subsidiaries for
Tax Periods ending after the Closing Date. In the event
that any such examination, investigation, audit or other
proceeding could affect Tax Returns of the Acquired
Subsidiaries for Tax Periods ending on or before the Closing
Date, Buyer will keep, and will cause the Acquired
Subsidiaries to keep, Seller informed of the progress of any
such proceedings and will consult, and will cause the
Acquired Subsidiaries to consult, with Seller in good faith
in connection therewith. Notwithstanding the first sentence
of this Section 6.10(i), to the extent that Seller has
indemnified Buyer and the Acquired Subsidiaries with respect
to any such notice of deficiency, proposed adjustment or
assertion or claim or demand herein, Buyer will not, and
will not permit the Acquired Subsidiaries to, resolve,
settle, compromise, or abandon any issue or claim without
the prior written consent of Seller if such action would
materially and adversely affect the Taxes of Seller for any
Tax Period. Such consent will not be unreasonably withheld,
and will not be necessary to the extent that Buyer notifies
Seller that Buyer will forego any obligation of Seller to
indemnify Buyer against the effects of any such settlement.
<PAGE>
Section 6.11 Sales and Transfer Taxes. Buyer will be
responsible for and pay all sales and use Taxes, duties, and
transfer fees applicable to the transactions contemplated
herein.
Section 6.12 Assignment of Contracts and Permits.
Notwithstanding any other provision hereof, in connection
with any Contract identified on Section 3.12 of the Seller
Disclosure Schedule or any permit, approval, license or
authorization issued by a Governmental Entity (each a
"Governmental Authorization") held by Seller or the Acquired
Subsidiaries which relates exclusively to the Acquired
Business and which, as a matter of law or by its terms, is
(i) not assignable, or (ii) not assignable without the prior
approval or consent of the issuer thereof or the other party
or parties thereto (collectively "Non-Assignable Rights"),
Seller shall:
(a) apply for and use all reasonable efforts to
obtain all consents or approvals contemplated by the
Contracts or Governmental Authorizations, in form and
substance satisfactory to Buyer;
(b) cooperate with Buyer in any reasonable and
lawful arrangements designed to provide the benefits and
burdens of such Non-Assignable Rights to Buyer, including
holding any such Non-Assignable Rights in trust for Buyer or
acting as agent for Buyer;
(c) enforce any rights of Seller arising from
such Non-Assignable Rights against the issuer thereof or the
other party or parties thereto;
(d) take all such actions and do, or cause to be
done, all such things at the request of Buyer as shall
reasonably be necessary and proper in order that the value
of any Non-Assignable Rights shall be preserved and shall
inure to the benefit of Buyer; and
(e) pay over to Buyer all monies or other assets
collected by or paid to Seller in respect of such Non-
Assignable Rights.
Buyer shall reimburse Seller for all reasonably
incurred payments, costs and expenses made, incurred or
suffered in performing Seller's obligations as requested by
Buyer under this Section 6.12. If Seller is unable to
lawfully provide the benefit of any Governmental
Authorization to Buyer, it shall not, at any time, use such
Governmental Authorization for its own purposes or assign or
provide the benefit of such Governmental Authorization to
any other party.
6.13 Notification. Each party hereto shall, in the
event of, or promptly after obtaining knowledge of, the
occurrence or threatened occurrence of any fact or
circumstance that would cause or constitute a material
breach of any of its representations and warranties set
forth herein, give notice thereof to the other party and
shall use its reasonable efforts to prevent or remedy such
breach.
6.14 Indemnity Relating to Certain Litigation and
Certain Benefits Liabilities. (a) Seller shall indemnify
from and after the Closing Date (i) Buyer and its
subsidiaries against all losses in connection with any suit,
action, proceeding or investigation pending at or arising
after the Closing Date that relates to the Company or any of
its subsidiaries prior to the Closing Date ("Indemnifiable
Claim") and (ii) any person who was an officer, director,
partner or employee of the Company or any of its
subsidiaries against all losses in connection with any
Indemnifiable Claim.
(b) If a party entitled to be indemnified
hereunder (an "Indemnified Party") shall receive notice of
the assertion by a person who is not a party to this
Agreement of an Indemnifiable Claim, such Indemnified Party
shall give Seller prompt notice thereof after becoming aware
of such Indemnifiable Claim; provided, however, that the
failure of the Indemnified Party to give notice as provided
in this Section 6.14(b) shall not relieve Seller of its
obligations under Section 6.14(a), except to the extent that
Seller is actually prejudiced by such failure to give
notice. Such notice shall describe the Indemnifiable Claim
in reasonable detail, and, if practicable, shall indicate
the estimated amount of the loss sustained by Indemnified
Party.
<PAGE>
(c) Seller may elect to defend, at its own
expense and by its own counsel, any Indemnifiable Claim. If
Seller elects to defend an Indemnifiable Claim, it shall,
within 30 days of notice of such Indemnifiable Claim (or
sooner, if the nature of such Indemnifiable Claim so
requires), notify the related Indemnified Party of its
intent to do so and acknowledge its liability therefor, and
such Indemnified Party shall cooperate in the defense of
such Indemnifiable Claim. After notice from Seller to an
Indemnified Party of its election to assume the defense of
an Indemnifiable Claim, Seller shall not be liable to such
Indemnified Party under this Section 6.14 for any legal or
other expenses subsequently incurred by such Indemnified
Party in connection with the defense thereof; provided,
however, that if, under applicable standards of professional
conduct (as advised by counsel to Seller), a conflict on any
significant issue between such Indemnified Party and Seller
or between any two or more Indemnified Parties may exist in
respect of such claim, then Seller shall pay the reasonable
fees and expenses of one such additional counsel as may be
required to be Acquired in light of such conflict. If
Seller elects not to defend against an Indemnifiable Claim,
or fails to notify an Indemnified Party of its election as
provided in this Section 6.14 within the time period
specified, such Indemnified Party may defend, compromise and
settle such Indemnifiable Claim. Notwithstanding the
foregoing, (i) neither Seller nor an Indemnified Party, as
the party controlling the defense of an Indemnifiable Claim,
may compromise or settle any claim or consent to the entry
of any judgment for other than monetary damages without the
prior written consent of the other; provided that (upon
reasonable notice thereof) consent to compromise or
settlement or the entry of a judgment shall not be
unreasonably withheld or delayed, and (ii) Seller shall not
consent to the entry of any judgment or enter into any
compromise or settlement which does not include as an
unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party and all other
Indemnified Parties, as the case may be, subject to such
Indemnifiable Claim of a full and final release from all
liability in respect of such claim or litigation.
(d) Notwithstanding any other provision of this
Agreement to the contrary, and except with respect to Tax
Losses (as defined below): (i) Seller will not be liable to
any Indemnified Party for any Losses pursuant to this
Section 6.14 or otherwise except to the extent that the
aggregate amount of Losses indemnified thereunder exceeds
$2,500,000; (ii) the total aggregate liability of Seller
Losses that may arise under this Section 6.14 or otherwise
will not exceed $50,000,000; and (iii) any claims for Losses
pursuant to this Section 6.14 or otherwise can only be made
in respect of Indemnifiable Claims actually filed or
commenced on or prior to eighteen months after the Closing
Date. Notwithstanding any other provision of this Agreement
to the contrary, Seller's liability for Losses relating to
Indemnifiable Claims for Taxes ("Tax Losses") shall be
without limit in dollar amount (although still subject to
Section 6.14(d)(i)) and claims for Tax Losses pursuant
hereto may be made at any time.
(e) Notwithstanding the foregoing provisions,
Seller shall indemnify, from and after the Closing Date,
Buyer or any of its Subsidiaries against any Indemnifiable
Claim resulting directly from (i) claims by Employees under
the Acquired Welfare Plans that were incurred but unpaid
prior to the Closing Date, but only to the extent such
claims exceed (A) the insurance coverage and trust assets
available to cover such claims, plus (B) the amounts
reserved on the Closing Balance Sheet with respect to such
claims; and (ii) any claims by Employees resulting solely
from (A) the failure of Seller to accelerate the
exercisability of such Employees' outstanding options under
the Company Stock Plans (as defined in the Merger Agreement)
or (B) the lapse or cancellation of such options.
<PAGE>
ARTICLE VII
Conditions
Section 7.1 Conditions to Each Party's Obligation to
Effect the Closing. The respective obligations of the
parties to effect the transactions contemplated herein are
subject to the satisfaction, on or prior to the Closing
Date, of the following conditions:
(a) Approvals. All authorizations, consents,
orders or approvals of, or declarations or filings with, or
expirations of waiting periods imposed by, any Governmental
Entity or other public or private third party, the failure
of which to obtain would have a material adverse effect on
the Acquired Business as a whole or the ability of Buyer to
own the Shares or the assets included in the Acquired
Business or to operate the Acquired Business, shall have
been filed, occurred or been obtained.
(b) No Injunctions or Restraints. No temporary
restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or
other legal restraint or prohibition preventing the
consummation of the transactions contemplated herein shall
be in effect (each party agreeing to use all reasonable
efforts to have any such order reversed or injunction
lifted).
(c) HSR and FCC Approvals. Any applicable
waiting period under the HSR Act shall have expired or been
terminated and the FCC Application shall have been approved
by the FCC. As used herein, "FCC Approval" means action by
the FCC or its staff granting consent to the transfer of
control of the FCC Licenses to Buyer which, except as may be
waived in writing by Buyer in its sole discretion, has not
been reserved, stayed, enjoined, set aside, annulled or
suspended; with respect to which no timely request for stay,
petition for reconsideration or appeal of sua sponte action
of the FCC with comparable effect is pending; and as to
which the time for filing any such request, petition or
appeal or for the taking of any such sua sponte action by
the FCC has expired; provided further that, the FCC Approval
shall include grant of a waiver of Section 73.3555(c) of the
rules, the one-to-a-market rule (if necessary under the
rules then in effect), permitting common ownership of
Station KENS-TV and KENS-AM.
(d) Termination of Merger Agreement. The Merger
Agreement shall have been terminated in accordance with its
terms.
Section 7.2 Conditions of Obligations of Buyer. The
obligations of Buyer to effect the transactions contemplated
herein are subject to the satisfaction, on or prior to the
Closing Date, of the following conditions unless waived by
Buyer:
(a) Representations and Warranties. The
representations and warranties of Seller contained herein
shall be true and correct in all material respects as of the
Closing Date as though made on and as of the Closing Date,
except to the extent such representations and warranties
speak as of an earlier date (in which case, such
representations and warranties shall be true and correct in
all material respects as of such earlier date) and except as
otherwise contemplated by this Agreement, and Buyer shall
have received a certificate signed on behalf of Seller by
the chief executive officer or the chief financial officer
of Seller to such effect.
(b) Performance of Obligations of Seller. Seller
shall have performed in all material respects all
obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and Buyer shall
have received a certificate signed on behalf of Seller by
the chief executive officer or the chief financial officer
of Seller to such effect.
(c) Working Capital at Closing. Buyer shall have
received a certificate signed on behalf of Seller by the
chief financial officer of Seller setting forth the
estimated net working capital of the Acquired Business
(which shall be calculated on a basis consistent with the
provisions of Section 1.3) as of the Closing Date.
<PAGE>
Section 7.3 Conditions of Obligations of Seller.
The obligation of Seller to effect the transactions
contemplated herein is subject to the satisfaction of the
following conditions, on or prior to the Closing Date,
unless waived by Seller:
(a) Representations and Warranties. The
representations and warranties of Buyer contained in this
Agreement shall be true and correct in all material respects
as of the Closing Date as though made on and as of the
Closing Date, except to the extent such representations and
warranties speak as of an earlier date (in which case, such
representations and warranties shall be true and correct in
all material respects as of such earlier date) and except as
otherwise contemplated by this Agreement, and Seller shall
have received a certificate signed on behalf of Buyer by the
chief executive officer or the chief financial officer of
Buyer to such effect.
(b) Performance of Obligations of Buyer. Buyer
shall have performed in all material respects all
obligations required to be performed by them under this
Agreement at or prior to the Closing Date, and Seller shall
have received a certificate signed on behalf of Buyer by the
chief executive officer or the chief financial officer of
Buyer to such effect.
ARTICLE VIII
Termination and Amendment
Section 8.1 Termination. This Agreement may be
terminated at any time prior to the Closing Date:
(a) by mutual consent of Buyer and Seller, it
being understood that without limiting the generality of the
foregoing, the consummation of the Merger shall constitute
the mutual consent of Buyer and Seller to the termination of
this Agreement;
(b) by either Buyer or Seller if the Closing
shall not have been consummated before April 30, 1998
(unless the failure to so consummate the Closing by such
date shall be due to the action or failure to act of the
party seeking to terminate this Agreement);
(c) by Buyer, upon a material breach of any
representation, warranty, covenant or agreement on the part
of Seller set forth in this Agreement, or if any
representation or warranty of Seller shall have become
untrue in any material respect, in either case such that the
conditions set forth in Section 7.2(a) or Section 7.2(b) of
this Agreement, as the case may be, would be incapable of
being satisfied by April 30, 1998; provided, that in any
case, a willful breach shall be deemed to cause such
conditions to be incapable of being satisfied for purposes
of this Section 8.1(c) if such willful breach shall not have
been remedied within ten (10) days after receipt by Seller
of written notice from Buyer specifying the nature of such
willful breach and requesting that it be remedied;
(d) by Seller, upon a material breach of any
representation, warranty, covenant or agreement on the part
of Buyer set forth in this Agreement, or if any
representation or warranty of Buyer shall have become untrue
in any material respect, in either case such that the
conditions set forth in Section 7.3(a) or Section 7.3(b) of
this Agreement, as the case may be, would be incapable of
being satisfied by April 30, 1998; or provided, that in any
case, a willful breach shall be deemed to cause such
conditions to be incapable of being satisfied for purposes
of this Section 8.1(d) if such willful breach shall not have
been remedied within ten (10) days after receipt by Buyer of
written notice from Seller, specifying the nature of such
willful breach and requesting that it be remedied; or
(e) automatically, without any action by either
Buyer or Seller, at 12:01 a.m. Eastern Time on January 1,
1998, so long as the Merger Agreement has not been
terminated.
<PAGE>
Section 8.2 Effect of Termination. In the event of
a termination of this Agreement by either Seller or Buyer as
provided in Section 8.1, this Agreement shall forthwith
become void and there shall be no liability or obligation on
the part of Buyer or Seller or their affiliates or
respective officers or directors; provided, however, that
any such termination shall not relieve any party from
liability for willful breach of this Agreement or from its
obligations under the Confidentiality Agreement.
Section 8.3 Amendment. This Agreement may not be
amended except by an instrument in writing signed on behalf
of each of the parties hereto.
Section 8.4 Extension; Waiver. At any time prior to
the Closing Date, the parties hereto, by action taken or
authorized by the respective Boards of Directors, may, to
the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the
other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any
document delivered pursuant hereto, and (iii) waive
compliance with any of the agreements or conditions
contained here. Any agreement on the part of a party hereto
to any such extension or waiver shall be valid only if set
forth in a written instrument signed on behalf of such
party.
ARTICLE IX
Miscellaneous
Section 9.1 Nonsurvival of Representations and
Warranties. None of the representations or warranties in
this Agreement or in any instrument delivered pursuant to
this Agreement shall survive the Closing Date. This Section
9.1 shall not limit any other covenant or agreement of the
parties set forth in this Agreement or in any instrument
delivered pursuant to the terms hereof.
<PAGE>
Section 9.2 Notices. All notices and other
communications hereunder shall be in writing and shall be
deemed given on the date delivered if delivered personally
(including by reputable overnight courier), on the date
transmitted if sent by facsimile (which is confirmed) or
mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at
such other address for a party as shall be specified by like
notice):
(a) if to Buyer, to
The E. W. Scripps Company
312 Walnut Street, 28th Floor
Cincinnati, Ohio 45202
Attn: M. Denise Kuprionis, Secretary
Facsimile:
Confirmation:
with a copy to
Baker & Hostetler LLP
3200 National City Center
1900 East 9th Street
Cleveland, Ohio 44114
Attn: William Appleton, Esq.
Facsimile:
Confirmation:
Attn:
Facsimile:
Confirmation:
and
(b) if to Seller, to
Harte-Hanks Communications, Inc.
200 Concord Plaza Drive
San Antonio, Texas 78216
Attn: Donald R. Crews
Facsimile: 210/829-9403
Confirmation: 210/829-9000
with a copy to
Hughes & Luce, L.L.P.
1717 Main Street, Suite 2800
Dallas, Texas 75201
Attn: Alan J. Bogdanow
Facsimile: 214/939-6100
Confirmation: 214/939-5500
<PAGE>
Section 9.3 Interpretation. When a reference is
made in this Agreement to Sections, such reference shall be
to a Section of this Agreement unless otherwise indicated.
The table of contents and headings contained in this
Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement they shall be deemed
to be followed by the words "without limitation." The
phrase "made available" in this Agreement shall mean that
the information referred to has been made available if
requested by the party to whom such information is to be
made available.
Section 9.4 Counterparts. This Agreement may be
executed in counterparts, all of which shall be considered
one and the same agreement and shall become effective when a
counterpart has been signed by each of the parties and
delivered to each of the other parties, it being understood
that all parties need not sign the same counterpart.
Section 9.5 Entire Agreement; No Third-Party
Beneficiaries. This Agreement (including the documents and
the instruments referred to herein) and the Confidentiality
Agreement (a) constitute the entire agreement and supersede
all prior agreements and understandings, both written and
oral, among the parties with respect to the subject matter
hereof and thereof, and (b) except as provided in Section
6.6, are not intended to confer upon any person other than
the parties hereto and thereto any rights or remedies
hereunder or thereunder.
Section 9.6 Governing Law. This Agreement shall be
governed and construed in accordance with the laws of the
State of Texas without regard to any applicable conflicts-of-
law principles.
Section 9.7 Specific Performance. The parties
hereto agree that if any of the provisions of this Agreement
were not performed in accordance with their specific terms
or were otherwise breached, irreparable damage would occur,
no adequate remedy at law would exist and damages would be
difficult to determine, and that the parties shall be
entitled to specific performance of the terms hereof, in
addition to any other remedy at law or equity.
Section 9.8 Publicity. Except as otherwise required
by law or the rules of the New York Stock Exchange, Inc.,
for so long as this Agreement is in effect and then with as
much advance notice to the other party as is practicable
under the circumstances, neither Seller nor Buyer shall, or
shall permit any of its Subsidiaries to, issue or cause the
publication of any press release or other public
announcement with respect to the transactions contemplated
by this Agreement without the consent of the other party,
which consent shall not be unreasonably withheld or delayed.
Section 9.9 Assignment. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall
be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written
consent of the other parties, except that Buyer may assign,
in its sole discretion, any or all of its rights hereunder
to any direct or indirect wholly owned Subsidiary of Buyer.
Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
Section 9.10 Further Assurances. Subject to the
terms and conditions hereof, Seller and Buyer will, and will
cause their respective Subsidiaries to, do such additional
things as are necessary or proper to carry out and
effectuate the intent of this Agreement or any part hereof
or the transactions contemplated hereby.
<PAGE>
IN WITNESS WHEREOF, Buyer and Seller have caused this
Acquisition Agreement to be signed by their respective
officers thereunto duly authorized as of the date first
written above.
THE E. W. SCRIPPS COMPANY
By:
Name:
Title:
HARTE-HANKS COMMUNICATIONS, INC.
By:
Name:
Title:
<PAGE>
EXCHANGE AGREEMENT
Dated as of September 4, 1997
By and Among
BELO HOLDINGS, INC.,
COLONY CABLE NETWORKS, INC., PJ PROGRAMMING, INC.,
BHI SUB, INC.
and
THE E. W. SCRIPPS COMPANY
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I - Purchase, Sale and Exchange of
Properties and Assets E-39
1.1 TVFN Interests E-39
1.2 KENS; First Closing Date E-39
1.3 KENS; Second Closing Date E-40
1.4 Assumption of Certain Liabilities E-40
1.5 The Closings E-41
1.6 Exchange Consideration E-41
1.7 KENS Purchase Price Adjustments E-41
1.8 TVFN Adjustments E-42
1.9 Purchase Price Allocation E-43
ARTICLE II - Representations and Warranties of the
Belo Entities E-44
2.1 Organization E-44
2.2 Capitalization; Subsidiaries E-44
2.3 Authority E-44
2.4 Consents and Approvals; No Violations E-46
2.5 CPMCO and TVFN Financial Statements E-46
2.6 Litigation E-46
2.7 Employee Benefits. E-47
2.8 Absence of Certain Changes or Events E-47
2.9 No Violation of Law E-48
2.10 Taxes. E-48
2.11 Environmental Matters. E-49
2.12 Material Contracts E-49
2.13 Brokers or Finders E-50
2.14 Title to Assets E-50
2.15 Condition of Assets. E-50
2.16 Employees. E-50
2.17 Insurance. E-50
2.18 Affiliation Agreements E-51
2.19 Belo Interests E-51
2.20 Related Party Agreements E-51
2.21 Network Intangible Rights E-51
2.22 Trade Secrets E-52
2.23 Transponder Subleases E-53
2.24 Investigations E-53
<PAGE>
ARTICLE III - Representations and Warranties of
Scripps E-54
3.1 Organization E-54
3.2 Authority E-54
3.3 Consents and Approvals; No Violations E-54
3.4 KENS Financial Statements E-55
3.5 Litigation E-55
3.6 Employee Benefits. E-55
3.7 Absence of Certain Changes or Events E-56
3.8 No Violation of Law E-56
3.9 Taxes. E-56
3.10 Environmental Matters. E-57
3.11 Material Contracts E-57
3.12 Brokers or Finders E-57
3.13 Title to Assets E-57
3.14 Condition of Assets. E-58
3.15 Employees. E-58
3.16 Insurance. E-58
3.17 FCC Licenses. E-58
3.18 KENS Intangible Rights E-58
3.19 KENS Trade Secrets E-59
3.20 Investigations E-59
ARTICLE IV - Covenants of the Belo Entities
Pending the First Closing E-60
4.1 Covenants with Respect to CPMCO and
TVFN E-60
4.2 Covenants of the Belo Entities E-62
ARTICLE V - Covenants of Scripps Pending the
Closings E-62
5.1 Covenants with Respect to the KENS
Assets E-62
5.2 Covenants of Scripps E-64
ARTICLE VI - Additional Agreements E-64
6.1 Reasonable Efforts E-64
6.2 Access to Information E-65
6.3 Legal Conditions to Purchase E-65
6.4 Use of Names E-65
6.5 Intercompany Balances E-66
6.6 KENS Employee Matters; Harte-Hanks
Stock Plans E-66
6.7 TVFN Employee Matters E-67
6.8 Fees and Expenses E-67
6.9 Transfer Taxes E-67
6.10 Employment Taxes E-67
6.11 Scripps Assignment of Contracts
and Permits E-67
6.12 Belo Assignment of Contracts and
Permits E-68
6.13 Schedules E-69
6.14 Notification E-69
6.15 Additional Agreements Related to
FCC Licenses E-69
6.16 Resignations E-69
6.17 LMA Agreement E-69
6.18 Notice to Other Partners E-70
6.19 Transponder Agreement E-70
<PAGE>
ARTICLE VII - Conditions to the Obligations of the Belo
Entities E-70
7.1 Representations, Warranties,
Covenants E-70
7.2 Proceedings E-71
7.3 Damage to the Assets E-71
7.4 Certain Consents E-71
7.5 Hart-Scott-Rodino E-71
7.6 Deliveries E-71
7.7 Closing of the Acquisition Agreement E-71
7.8 LMA E-71
7.9 Affiliation Agreement E-71
7.10 FCC Authorizations E-71
7.11 FCC Approval E-71
ARTICLE VIII - Conditions to the Obligations of
Scripps E-72
8.1 Representations, Warranties,
Covenants E-72
8.2 Proceedings E-72
8.3 Certain Consents E-72
8.4 Hart-Scott-Rodino E-72
8.5 Deliveries E-72
8.6 Closing of the Acquisition Agreement E-72
8.7 LMA E-72
8.8 FCC Approval E-72
ARTICLE IX - Items to be Delivered at the Closings E-73
9.1 Deliveries by Scripps E-73
9.2 Deliveries by the Belo Entities E-74
ARTICLE X - Nonsurvival of Representations,
Warranties and Covenants;
Indemnification E-75
10.1 Nonsurvival of Representations
and Warranties E-75
10.2 Indemnification E-75
ARTICLE XI - Miscellaneous E-77
11.1 Termination of Agreement E-77
11.2 KENS Option E-78
11.3 Liabilities Upon Termination E-79
11.4 Assignments E-79
11.5 Further Assurances E-79
11.6 Public Announcement E-79
11.7 Notices E-80
11.8 Captions E-80
11.9 Law Governing E-80
11.10 Waiver of Provisions E-81
11.11 Counterparts E-81
11.12 Entire Agreement E-81
11.13 Confidentiality E-81
11.14 Brokers or Finders E-81
11.15 Specific Performance E-81
11.16 No Third Party Beneficiaries E-81
11.17 Waiver E-81
11.18 Certain Definitions E-82
<PAGE>
EXCHANGE AGREEMENT
EXCHANGE AGREEMENT (this "Agreement"), dated as of
September 4, 1997, by and among BELO HOLDINGS, INC., a
Delaware corporation ("Belo Holdings"), COLONY CABLE
NETWORKS, INC., a Rhode Island corporation ("Colony"), PJ
PROGRAMMING, INC., a Rhode Island corporation ("PJPI" ), BHI
SUB, INC., a Delaware corporation ("Belo Sub" and, with Belo
Holdings, Colony and PJPI, sometimes hereinafter referred to
as the "Belo Entities"), and THE E.W. SCRIPPS COMPANY, an
Ohio corporation ("Scripps").
W I T N E S S E T H
WHEREAS, PJPI owns a general partner interest in Cable
Program Management Co., G.P., a Delaware general partnership
("CPMCO") (the "PJPI Interest");
WHEREAS, Colony owns a general partner interest in
Television Food Network, G.P., a Delaware general
partnership ("TVFN") (the "Colony Interest" and, with the
PJPI Interest, sometimes hereinafter referred to as the
"TVFN Interests");
WHEREAS, Scripps, or an entity to be formed and wholly
owned by Scripps (the "KENS Entity"), will own on the First
Closing Date (as defined herein) all of the right, title and
interest in the assets used primarily in (the "KENS
Assets"), and all liabilities and obligations (accrued,
absolute, contingent, undisclosed or otherwise) which are
primarily related to or have arisen or will arise from (the
"Assumed Liabilities"), the television station KENS-TV and
the radio station KENS(AM) (collectively, "KENS"), pursuant
to that certain Acquisition Agreement, dated as of May 16,
1997, as amended on or about the date hereof (the
"Acquisition Agreement"), by and between Scripps and Harte-
Hanks Communications, Inc., a Delaware corporation ("Harte-
Hanks");
WHEREAS, the Belo Entities desire to sell the TVFN
Interests and to purchase KENS, all pursuant to the terms of
this Agreement; and
WHEREAS, Scripps desires to sell KENS and to purchase
the TVFN Interests, all pursuant to the terms of this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and
of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties
agree as follows:
<PAGE>
ARTICLE I
Purchase, Sale and Exchange of Properties and Assets
I.1 TVFN Interests. Subject to the terms and
conditions set forth herein, on the First Closing Date (as
defined herein), PJPI and Colony agree to sell and assign to
Scripps, and Scripps agrees to purchase and acquire from
PJPI and Colony, all of the TVFN Interests.
I.2 KENS; First Closing Date. Subject to the terms
and conditions set forth herein, Scripps agrees to sell and
assign to Belo Sub, and Belo Sub agrees to purchase and
acquire from Scripps, the KENS Assets. On the First Closing
Date, Scripps shall deliver all of the KENS Assets to Belo
Sub (as the assignee of PJPI and Colony) pursuant to the
terms of this Agreement, except for:
(a) Licenses and Authorizations. All Scripps'
rights associated with any Federal Communications Commission
("FCC") licenses, permits, waivers and authorizations ("FCC
Licenses," which, for purposes of the Second Closing Date
(as defined herein) shall be deemed to include any renewals,
extensions or modifications thereof and additions thereto
and any pending applications thereto, as well as any
additions, improvements, replacements and alterations
thereto made as permitted by the terms of this Agreement
between the date of this Agreement and the Second Closing
Date) that are held by Scripps as of the closing of the
transactions contemplated by the Acquisition Agreement (the
"Acquisition Closing Date") and used, held for use or
necessary in connection with the business or operation of
KENS, including, without limitation, those Licenses listed
on Schedule 1.2(a) to this Agreement.
(b) Tangible Personal Property. All physical
assets, equipment, vehicles, furniture, fixtures, office
materials and supplies, spare parts, and other tangible
personal property of every kind and description owned,
leased or licensed by Scripps as of the Acquisition Closing
Date and used, held for use or necessary in connection with
the business and operations of KENS, including, without
limitation, those shown on Schedule 1.2(b) to this
Agreement.
(c) Real Property. All land and leaseholds, and
other estates in real property and appurtenances thereto,
and all easements, privileges, rights-of-way, riparian and
other water rights, lands underlying any adjacent streets or
roads, appurtenances, licenses, permits and other rights
pertaining to or accruing to the benefit of such real
property and leasehold interests and estates in real
property, buildings, towers, transmitters and antennae, and
fixtures and improvements thereon owned, leased or licensed
by Scripps as of the Acquisition Closing Date and used, held
for use or necessary in connection with the business and
operations of KENS, including, without limitation, those
shown on Schedule 1.2(c) to this Agreement ("Real
Property").
(d) Agreements for Sale of Time. All orders,
arrangements, contracts, understandings and agreements
existing as of the Acquisition Closing Date for the sale of
advertising time on KENS, except those which on the
applicable Closing Date have already been filled or have
expired.
<PAGE>
(e) Other Contracts; Programming and Copyrights.
All Scripps Contracts (as defined herein) entered into in
connection with the business and operations of KENS as of
the Acquisition Closing Date, including, without limitation,
those listed on Schedule 1.2(e) to this Agreement, other
than (i) the network affiliation agreement between KENS-TV
and CBS, Inc. (the "KENS Affiliation Agreement") and (ii)
all rights to programs and programming materials and
elements of whatever form or nature owned by Scripps as of
the Acquisition Closing Date and used, held for use or
necessary in connection with the business and operations of
KENS, whether recorded on film, tape or any other medium or
intended for live performance, television broadcast or other
medium and whether completed or in production, and all
related common law and statutory Intangible Rights (as
defined herein) owned, leased or licensed by Scripps and
used in connection with the business and operations of KENS;
provided, however, that in the event that Scripps is unable
to deliver the assets referred to in clauses (i) and (ii)
above at the First Closing, Scripps shall provide the
economic benefit of such assets to Belo Sub from the First
Closing Date to the date such assets are delivered pursuant
to the terms of this Agreement.
(f) Trademarks, etc. All trademarks, service
marks, franchises, patents, trade names, jingles, slogans,
and logotypes, copyrights, rights to the call letters "KENS-
TV" and "KENS-AM" and other intangible rights, owned, leased
or licensed by Scripps as of the Acquisition Closing Date
and used, held for use or necessary in connection with the
business and operations of KENS (the "Intangible Rights"),
including, without limitation, those shown on Schedule
1.2(f) to this Agreement.
(g) FCC Records. All FCC logs and other records
that relate to KENS or its operations.
(h) Files and Records. All files, records, books
of account, computer programs, tapes, electronic data
processing software, customer lists and other records of
Scripps relating to the business and operations of KENS
(other than files, records, books of account, computer
programs, tapes, electronic data processing software,
customer lists and other records that exclusively refer to
operations of Scripps other than KENS).
(i) Prepaid Expenses and Receivables; Other
Current Assets. All prepaid expenses (other than prepaid
taxes) and notes and accounts receivable and any other
current assets arising in connection with the business and
operations of KENS.
(j) Trade Agreements. All goods, assets, rights
and services due to Scripps under all trade agreements and
used, held for use or necessary in connection with the
business and operations of KENS.
(k) Goodwill. All Scripps' goodwill in, and
going concern value of, KENS.
I.3 KENS; Second Closing Date. Subject to the terms
and conditions set forth herein, on the Second Closing Date,
Scripps shall deliver all of the KENS Assets not delivered
on the First Closing Date, including any and all additions,
improvements, replacements and alterations to any of them
made as permitted by the terms of this Agreement between the
date of this Agreement and the Second Closing Date (all of
which shall be deemed to be part of the KENS Assets for
purposes of this Agreement).
I.4 Assumption of Certain Liabilities.
(a) Upon the terms and subject to the conditions
of this Agreement, Belo Sub hereby assumes, (i) effective as
of the First Closing Date, and agrees to pay, perform and
discharge when due, and indemnify Scripps and hold it
harmless from the Assumed Liabilities related to those KENS
Assets transferred and delivered to Belo Sub at the First
Closing and (ii) effective as of the Second Closing Date,
and agrees to pay, perform and discharge when due, and
indemnify Scripps and hold it harmless from the Assumed
Liabilities remaining as of the Second Closing Date.
<PAGE>
(b) Belo Sub shall in no event assume, nor shall
it be liable for, any obligations or liabilities of Scripps
of any nature whatsoever (whether express or implied, fixed
or contingent, known or unknown) other than the Assumed
Liabilities. Scripps agrees to pay, perform and discharge,
and indemnify against and hold the Belo Entities harmless
from, all obligations and liabilities, if any, relating to
the KENS Assets, except the Assumed Labilities.
I.5 The Closings. The consummation of all
transactions provided for in this Agreement, other than the
transfer of those KENS Assets referred to in Section 1.2(a)
through (k), (the "First Closing") shall take place at the
offices of Jenkens & Gilchrist, a Professional Corporation,
1445 Ross Avenue, Suite 3200, Dallas, Texas 75202 at 2:00
p.m. on the Acquisition Closing Date, subject to the
satisfaction or waiver of the last of the applicable
conditions required to be satisfied or waived pursuant to
Article VII or VIII hereof, and the closing of the transfer
of those KENS Assets referred to in Section 1.3 shall take
place at such offices, at such time and on such date, which
is mutually agreed to by Scripps and the Belo Entities and
which is not less than five or more than ten business days
after the satisfaction or waiver of the last of the
applicable conditions required to be satisfied or waived
pursuant to Articles VII or VIII hereof; or at such other
place, time or date as the parties shall agree upon in
writing (the "Second Closing Date"). The dates on which the
First Closing and the Second Closing are to occur are
referred to herein as the "First and Second Closing Dates".
I.6 Exchange Consideration. Subject to the
adjustments described in Section 1.7 hereof, (a) Scripps
shall pay for the TVFN Interests through the sale,
conveyance and transfer of the KENS Assets to Belo Sub (as
assignee of PJPI and Colony) pursuant to the terms of this
Agreement (the "Scripps Consideration") and (b) Belo
Holdings shall pay for the KENS Assets through (i) the sale,
conveyance and transfer of the TVFN Interests to Scripps
pursuant to the terms of this Agreement (the "Belo TVFN
Consideration"), (ii) the assumption of the Assumed
Liabilities, and (iii) the payment of Seventy Five Million
Dollars ($75,000,000) (the "Belo Cash Consideration" and,
with the Belo TVFN Consideration and the Assumed
Liabilities, the "Belo Consideration"). The Belo Cash
Consideration shall be paid at the applicable Closing by
wire transfer in immediately available funds to an account
specified by Scripps.
I.7 KENS Purchase Price Adjustments.
(a) No later than 45 days after the First Closing
Date, Scripps shall deliver to Belo Holdings a balance sheet
of KENS at the First Closing Date (the "KENS Closing Balance
Sheet"). The KENS Closing Balance Sheet shall be prepared
in accordance with generally accepted accounting principles
on a basis consistent with the KENS Financial Statements (as
defined herein), except that the KENS Closing Balance Sheet
(i) will not include any liabilities or reserves in respect
of Continuing Claims (as defined in the Acquisition
Agreement), (ii) will reflect all film contracts as long
term assets and all film contract payables as long term
liabilities and (iii) will not reflect as current
liabilities the severance obligations for Employees (as
defined in the Acquisition Agreement) of KENS referenced in
Section 6.6(a) of the Acquisition Agreement. To the extent
that the net working capital (current assets less current
liabilities) of KENS as shown on the KENS Closing Balance
Sheet is more or less than zero, Belo Holdings shall pay to
Scripps, or Scripps shall pay to Belo Holdings, the amount
of such excess or shortfall, respectively, by wire transfer
of immediately available funds within five days of the
earlier to occur of (A) acceptance by Belo Holdings of the
KENS Closing Balance Sheet or (B) the Neutral Auditors' (as
defined herein) determination.
<PAGE>
(b) After receipt of the KENS Closing Balance
Sheet, Belo Holdings shall have 20 days to review the KENS
Closing Balance Sheet, together with the workpapers used in
the preparation thereof. Representatives of Belo Holdings
shall be given access to all work papers, books, records and
other information related to the preparation of the KENS
Closing Balance Sheet to the extent required to complete
their review of the KENS Closing Balance Sheet. Belo
Holdings may dispute items reflected on the KENS Closing
Balance Sheet only on the basis that such amounts were not
arrived at in accordance with the consistent application of
accounting principles used in the preparation of the KENS
Financial Statements. Unless Belo Holdings delivers written
notice to Scripps on or prior to the 20th day after Belo
Holdings's receipt of the KENS Closing Balance Sheet
specifying in reasonable detail all disputed items and the
basis therefor, Belo Holdings shall be deemed to have
accepted and agreed to the KENS Closing Balance Sheet. If
Belo Holdings so notifies Scripps of its objection to the
KENS Closing Balance Sheet, Belo Holdings and Scripps shall,
within 30 days following such notice (the "KENS Resolution
Period"), attempt to resolve their differences and any
resolution by them as to any disputed amounts shall be
final, binding and conclusive.
(c) If, at the conclusion of the KENS Resolution
Period, there remain amounts in dispute pursuant to
paragraph (b) of this Section 1.7, then all amounts
remaining in dispute shall be submitted to a firm of
nationally recognized independent public accountants who
shall not have had a material relationship with A. H. Belo
Corporation or Scripps within the past two years (the
"Neutral Auditors") and who shall be selected by mutual
agreement of Belo Holdings and Scripps within 10 days after
the expiration of the KENS Resolution Period. Each party
agrees to execute, if requested by the Neutral Auditors, a
reasonable engagement letter. All fees and expenses
relating to the work, if any, to be performed by the Neutral
Auditors shall be borne equally by Belo Holdings and
Scripps. The Neutral Auditors shall act as an arbitrator to
determine, based solely on presentations by Belo Holdings
and Scripps, and not by independent review or audit, only
those issues still in dispute. The Neutral Auditors'
determination shall be made within 30 days of their
selection, shall be set forth in a written statement
delivered to Belo Holdings and Scripps and shall be final,
binding and conclusive.
(d) Notwithstanding anything else contained
herein to the contrary, the Belo Cash Consideration shall be
reduced by an amount equal to the sum of (i) any unpaid
indebtedness of CPMCO or TVFN owing to any of the Belo
Entities as of the First Closing Date and that arose with
Scripps' consent after September 30, 1997, and (ii) any
capital or other equity contributions made with Scripps'
consent by any of the Belo Entities to or on behalf of CPMCO
or TVFN after September 30, 1997 up to the First Closing
Date.
I.8 TVFN Adjustments.
(a) No later than 45 days after the First Closing
Date, Belo Holdings shall deliver to Scripps a balance sheet
of TVFN at the First Closing Date (the "TVFN Closing Balance
Sheet"). The TVFN Closing Balance Sheet shall be prepared
in accordance with generally accepted accounting principles
on a basis consistent with the TVFN Financial Statements (as
defined herein) except that the TVFN Closing Balance Sheet
(i) will not include any capital or other equity
contributions made by any of the Belo Entities to CPMCO or
TVFN after September 30, 1997 and (ii) will reflect all
television program rights and launch incentive assets as
long term assets and all television program rights and
launch incentives liabilities as long term liabilities. To
the extent that the net working capital (current assets less
current liabilities) of TVFN as shown on the TVFN Closing
Balance Sheet is more or less than zero, Scripps shall pay
Belo Holdings, or Belo Holdings shall pay Scrips, an amount
equal to 56% of such excess or 56% of such shortfall,
respectively, by wire transfer of immediately available
funds within five days of the earlier to occur of (A)
acceptance by Scripps of the TVFN Closing Balance Sheet or
(B) the Neutral Auditors' determination.
<PAGE>
(b) After receipt of the TVFN Closing
Balance Sheet, Scripps shall have 20 days to review the TVFN
Closing Balance Sheet, together with the workpapers used in
the preparation thereof. Representatives of Scripps shall
be given access to all work papers, books, records and other
information related to the preparation of the TVFN Closing
Balance Sheet to the extent required to complete their
review of the TVFN Closing Balance Sheet. Scripps may
dispute items reflected on the TVFN Closing Balance Sheet
only on the basis that such amounts were not arrived at in
accordance with the consistent application of accounting
principles used in the preparation of the TVFN Financial
Statements. Unless Scripps delivers written notice to Belo
Holdings on or prior to the 20th day after Scripps's receipt
of the TVFN Closing Balance Sheet specifying in reasonable
detail all disputed items and the basis therefor, Scripps
shall be deemed to have accepted and agreed to the TVFN
Closing Balance Sheet. If Scripps so notifies Belo Holdings
of its objection to the TVFN Closing Balance Sheet, Scripps
and Belo Holdings shall, within 30 days following such
notice (the "TVFN Resolution Period"), attempt to resolve
their differences and any resolution by them as to any
disputed amounts shall be final, binding and conclusive.
(c) If, at the conclusion of the TVFN Resolution
Period, there remain amounts in dispute pursuant to
paragraph (b) of this Section 1.8, then all amounts
remaining in dispute shall be submitted to the Neutral
Auditors who shall be selected by mutual agreement of Belo
Holdings and Scripps within 10 days after the expiration of
the TVFN Resolution Period. Each party agrees to execute,
if requested by the Neutral Auditors, a reasonable
engagement letter. All fees and expenses relating to the
work, if any, to be performed by the Neutral Auditors shall
be borne equally by Belo Holdings and Scripps. The Neutral
Auditors shall act as an arbitrator to determine, based
solely on presentations by Belo Holdings and Scripps, and
not by independent review or audit, only those issues still
in dispute. The Neutral Auditors' determination shall be
made within 30 days of their selection, shall be set forth
in a written statement delivered to Belo Holdings and
Scripps and shall be final, binding and conclusive.
I.9 Purchase Price Allocation. The parties agree that
the value of the Belo TVFN Consideration and the amount of
the Belo Cash Consideration (as reduced pursuant to Section
1.7(d) hereof) and the Assumed Liabilities shall be
allocated for federal income tax purposes among the KENS
Assets in accordance with the agreement to be reached by
Scripps and Harte-Hanks pursuant to the Acquisition
Agreement (the "Allocation"). Scripps hereby agrees with
the Belo Entities to keep the Belo Entities informed on a
current basis of the substance of any discussions with Harte-
Hanks regarding the Allocation, to allow the Belo Entities
to participate directly with Scripps and Harte-Hanks in any
such discussions if they so desire and to take into account
the comments of the Belo Entities in reaching an agreement
with Harte-Hanks on the Allocation. Subject to the
requirements of applicable law, the Allocation shall be
binding upon the parties for the purposes of filing any
return, report or schedule regarding Taxes (as defined
herein) arising from or in connection with the acquisition
of the KENS Assets from Scripps. In the event of any
purchase price adjustment hereunder, including, without
limitation, under Section 1.7(a), (b) or (c) hereof, the
Belo Entities and Scripps agree to adjust the Allocation to
reflect such adjustment as Harte-Hanks and Scripps have
agreed to under the Acquisition Agreement, and, in each
case, the Belo Entities and Scripps agree to file
consistently any Tax Return (as defined herein) and reports
required as a result of such adjustment.
<PAGE>
ARTICLE II
Representations and Warranties of the Belo Entities
Each of the Belo Entities, jointly and severally,
represents and warrants to Scripps as follows:
II.1 Organization. Each of the Belo Entities, CPMCO
and TVFN is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its
incorporation or formation and each of the Belo Entities,
CPMCO and TVFN have all requisite corporate or partnership
power and authority to own, lease and operate its properties
and to carry on its business as now being conducted, except
where the failure to be so organized, existing and in good
standing or to have such power and authority would not have
a material adverse effect on CPMCO and TVFN, taken as a
whole. Each of the Belo Entities, CPMCO and TVFN are duly
qualified or licensed to do business and in good standing in
each jurisdiction in which the property owned, leased or
operated by them or the nature of the business conducted by
them makes such qualification or licensing necessary, except
where the failure to be so qualified or licensed and in good
standing would not have a material adverse effect on CPMCO
and TVFN, taken as a whole or on the ability of the Belo
Entities to consummate the transactions contemplated hereby.
True, accurate and complete copies of the partnership
agreements, including all amendments thereto, of CPMCO and
TVFN, have heretofore been delivered to Scripps. As used in
this Agreement, any reference to any event, change or effect
having a material adverse effect on or with respect to CPMCO
and TVFN, taken as a whole, or an entity (or group of
entities taken as a whole) means that such event, change or
effect is materially adverse to the business, properties,
assets, results of operations or financial condition of
CPMCO and TVFN, taken as a whole, or such entity (or, if
with respect thereto, of such group of entities taken as a
whole).
II.2 Capitalization; Subsidiaries.
(a) The ownership (including the identity of
each owner and the number of units owned by each owner) of
the general partnership interests of CPMCO and of TVFN is as
set forth on Section 2.2 of the Belo Disclosure Schedule.
Except for those that have been waived, arise pursuant to
the terms of the Partnership Agreements (as defined herein)
or which are set forth on Section 2.2 of the Belo Disclosure
Schedule, (i) there are no existing options, warrants,
calls, subscriptions or other rights or other agreements,
commitments, understandings or restrictions of any character
binding on CPMCO or TVFN with respect to general partnership
interests therein or with respect to the TVFN Interests, and
(ii) there are no outstanding contractual obligations of
either CPMCO or TVFN to issue or sell or repurchase, redeem
or otherwise acquire any partnership interests of either of
them. Upon the sale of the TVFN Interests to Scripps at the
First Closing, Scripps will acquire the entire legal and
beneficial ownership in all of the TVFN Interests, free and
clear of any liens, claims, security interests or
encumbrances other than those that arise after the First
Closing Date pursuant to the terms of the Partnership
Agreements.
(b) Section 2.2 of the Belo Disclosure Schedule
sets forth (i) all agreements, contracts, understandings or
arrangements relating to TVFN or CPMCO to which Reese
Schonfeld or any entity affiliated with him (the "Schonfeld
Parties") is a party, (ii) the general partnership interests
in CPMCO and TVFN owned by the Schonfeld Parties as of the
date hereof, and (iii) the general partnership interests in
CPMCO and TVFN that the Schonfeld Parties have the right to
acquire from the Belo Entities or, to the knowledge of the
Belo Entities, from any of the other general partners of
CPMCO or TVFN.
<PAGE>
(c) Section 2.2 of the Belo Disclosure Schedule
sets forth, to the best of the Belo Entities' knowledge, a
true and correct list of each Subsidiary (as defined herein)
of CPMCO and TVFN which identifies the owners of all equity
securities and partnership or other interests therein,
including the amounts owned by such persons or entities, in
each case as of the date hereof. All of the equity
securities and partnership or other interests in the
Subsidiaries of CPMCO and TVFN shown as being owned by CPMCO
and TVFN are owned entirely by CPMCO or TVFN, as the case
may be, as of the date hereof, free and clear of all liens,
claims, security interests, restrictions or encumbrances of
any kind, except for those that arise under the
organizational documents of such Subsidiaries, restrictions
on transfer imposed by state or federal securities laws or
those which are set forth on Section 2.2 of the Belo
Disclosure Schedule. All such equity securities and
partnership and other interests have been duly authorized
and validly issued and are fully paid and nonassessable.
There are no agreements, understandings or undertakings
governing the rights and duties of CPMCO, TVFN or any of
their Subsidiaries as a stockholder of any Subsidiary (other
than a Subsidiary wholly owned by CPMCO or TVFN or by a
direct or indirect wholly owned Subsidiary of CPMCO or TVFN)
under which CPMCO, TVFN or any of their Subsidiaries is or
may become obligated, directly or indirectly, to acquire or
dispose of any equity interest in, make any capital
contribution or extend credit to, or act as guarantor,
surety or indemnitor for any liability of any Subsidiary
(other than a Subsidiary wholly owned by CPMCO or TVFN or by
a direct or indirect wholly owned Subsidiary of CPMCO or
TVFN). Other than Subsidiaries of CPMCO or TVFN, neither
CPMCO nor TVFN has any interest in any corporation, joint
venture, limited liability company, limited liability
partnership, or other business enterprise of any nature,
other than investments in marketable securities acquired in
the ordinary course of business or those which are set forth
on Section 2.2 of the Belo Disclosure Schedule.
(d) Each Subsidiary of CPMCO and TVFN is a
corporation or other legal entity duly organized, validly
existing and in good standing under the laws of the
jurisdiction of its incorporation or formation and each such
Subsidiary has all requisite corporate, partnership or other
similar power and authority to own, lease and operate its
properties and assets and to carry on its business as now
being conducted, except where the failure to be so
organized, existing and in good standing or to have such
power and authority would not have a material adverse effect
on CPMCO and TVFN, taken as a whole.
(e) Each Subsidiary of CPMCO and TVFN is duly
qualified and licensed to do business and in good standing
in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except
where the failure to be so qualified or licensed and in good
standing would not have material adverse effect on CPMCO and
TVFN, taken as a whole.
(f) As of the date hereof, each Subsidiary of
CPMCO and TVFN has obtained from any requisite Governmental
Entity (as defined herein) all approvals, permits and
licenses necessary for the conduct of its businesses and
operations, as currently conducted, which approvals, permits
and licenses are, as of the date hereof, valid and in full
force and effect, except where the failure to have obtained
such approvals, permits and licenses would not have a
material adverse effect on CPMCO and TVFN, taken as a whole.
II.3 Authority. Each of the Belo Entities has the
requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and
performance of this Agreement by the Belo Entities and the
consummation by the Belo Entities of the transactions
contemplated hereby have been duly authorized by each of
their respective Boards of Directors, and no other corporate
proceedings on the part of any of the Belo Entities are
necessary to authorize this Agreement or for the Belo
Entities to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by each
of the Belo Entities and, assuming this Agreement
constitutes a valid and binding obligation of Scripps,
constitutes a valid and binding obligation of each of the
Belo Entities, enforceable against the Belo Entities in
accordance with its terms.
<PAGE>
II.4 Consents and Approvals; No Violations. Except (a)
as set forth in Section 2.4 of the Belo Disclosure Schedule,
(b) for filings, permits, authorizations, consents and
approvals as may be required under, and other applicable
requirements of, the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and the Communications Act of 1934, as amended (the
"FCC Act"), and (c) as may be necessary as a result of any
facts or circumstances relating solely to Scripps or any of
its Subsidiaries (as defined herein), none of the execution,
delivery or performance of this Agreement by the Belo
Entities or the consummation by the Belo Entities of the
transactions contemplated hereby and compliance with any of
the provisions hereof will (i) conflict with or result in
any breach of any provisions of the charters or bylaws of
the Belo Entities or any provisions of the Partnership
Agreements, (ii) require any filing by the Belo Entities
with, or any permit, authorization, consent or approval to
be obtained by the Belo Entities of, any court, arbitral
tribunal, administrative agency or commission or other
governmental or other regulatory authority or agency (a
"Governmental Entity"), (iii) result in a violation or
breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right
of termination, amendment, cancellation or acceleration)
under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument, obligation or commitment
(collectively, "Contracts") to which CPMCO or TVFN is a
party or by which either of them or any of their properties
or assets may be bound ("Belo Contracts"), any Contract to
which any Belo Entity is a party or under the Partnership
Agreements, including, without limitation, Article IX
thereof, or result in the creation of any lien upon any of
the property or assets of CPMCO or TVFN or upon the TVFN
Interests, or (iv) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Belo
Entities, CPMCO or TVFN, except, in the case of clause (ii),
(iii) or (iv), for failures to file or obtain, violations,
breaches, defaults or liens which would not have a material
adverse effect on CPMCO and TVFN, taken as a whole, or the
ability of the Belo Entities to consummate the transactions
contemplated hereby. None of the Belo Entities have any
knowledge of any facts or circumstances relating to the Belo
Entities, CPMCO or TVFN that, individually or in the
aggregate, would prevent any necessary approval of the
transactions contemplated by this Agreement under the FCC
Act; provided, however, the parties hereto recognize the
necessity for a waiver of the FCC's one-to-a-market rule.
II.5 CPMCO and TVFN Financial Statements. Attached
hereto as Exhibits A and A-1 are the unaudited balance
sheets of CPMCO, and attached hereto as Exhibits B and B-1
are the audited balance sheets of TVFN (collectively, the
"TVFN Balance Sheets"), as of December 31, 1996 (the
"Balance Sheet Date") and December 31, 1995, and the related
statements of operations and cash flows for the three years
ended December 31, 1996 and the accompanying notes thereto
(together with the TVFN Balance Sheets, the "TVFN Financial
Statements"). The TVFN Financial Statements have been
prepared in accordance with generally accepted accounting
principles consistently applied, and, except as set forth in
Section 2.5 of the Belo Disclosure Schedule, fairly present
in all material respects the financial position of CPMCO and
TVFN at the dates thereof, and the results of their
operations for the periods then ended. After the First
Closing, except as otherwise contemplated by this Agreement,
none of the Belo Entities nor any of their other
Subsidiaries will own or have rights to use any of the
assets or property, whether tangible, intangible or mixed,
which are necessary for the conduct of the business of CPMCO
or TVFN as conducted on the date hereof.
II.6 Litigation. Except as disclosed in the TVFN
Financial Statements or as set forth in Section 2.6 of the
Belo Disclosure Schedule, there is no suit, action,
proceeding or investigation relating to CPMCO or TVFN
pending or, to the knowledge of the Belo Entities,
threatened, against the Belo Entities, CPMCO or TVFN before
any Governmental Entity which, individually or in the
aggregate, is reasonably likely to have a material adverse
effect on CPMCO and TVFN, taken as a whole, or on the
ability of the Belo Entities to consummate the transactions
contemplated hereby. Except as set forth in Section 2.6 of
the Belo Disclosure Schedule, none of the Belo Entities,
CPMCO or TVFN is subject to or in default under any
outstanding order, writ, injunction or decree relating to
CPMCO or TVFN which, individually or in the aggregate, is
reasonably likely to have a material adverse effect on CPMCO
and TVFN, taken as a whole, or a material adverse effect on
the ability of the Belo Entities to consummate the
transactions contemplated hereby.
<PAGE>
II.7 Employee Benefits.
(a) Section 2.7 of the Belo Disclosure Schedule
contains a list of all "employee benefit plans" within the
meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and all other
material benefit plans, programs, agreements and
arrangements (the "TVFN Benefit Plans"), which cover
employees or former employees of CPMCO or TVFN (the "TVFN
Employees"). True and complete copies of all TVFN Benefit
Plans, any trust instruments and/or insurance contracts, if
any, forming a part of any such plans, and all amendments
thereto; current summary plan descriptions; where
applicable, the most current determination letter received
from the Internal Revenue Service (the "Service"); and where
applicable, annual reports, financial statements and
actuarial reports for the last plan year, which fairly and
accurately reflect the financial condition of the plans,
have been made available to Scripps.
(b) All TVFN Benefit Plans are in compliance with
ERISA, the Code (as defined herein), and all other
applicable laws in all material respects. Each TVFN Benefit
Plan which is an "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA (a "TVFN Pension Plan") and
which is intended to be qualified under Section 401(a) of
the Code has received a favorable determination letter from
the Service, and none of the Belo Entities, CPMCO or TVFN is
aware of any circumstances likely to result in revocation of
any such favorable determination letter. Neither the Belo
Entities, CPMCO or TVFN nor any Belo ERISA Affiliate (as
defined herein) has contributed or been required to
contribute to any Multiemployer Plan (as defined in ERISA)
with respect to any TVFN Employees.
(c) No liability under Subtitle C or D of Title
IV of ERISA has been incurred by the Belo Entities, CPMCO or
TVFN with respect to any ongoing, frozen or terminated TVFN
Pension Plan, currently or formerly maintained by any of
them, or the pension plan of any entity which is or has been
considered one employer with the Belo Entities, CPMCO or
TVFN, as the case may be, under Section 4001 of ERISA or
Section 414 of the Code (a "Belo ERISA Affiliate") which
would have a material adverse effect on CPMCO and TVFN,
taken as a whole.
(d) All contributions required to be made or
accrued as of the Balance Sheet Date under the terms of any
TVFN Benefit Plan for which the Belo Entities, CPMCO or TVFN
may have liability have been timely made or have been
reflected on the TVFN Balance Sheets. Neither any TVFN
Pension Plan nor any pension plan of any Belo Entity or Belo
ERISA Affiliate has incurred an "accumulated funding
deficiency" (whether or not waived) within the meaning of
Section 412 of the Code or Section 302 of ERISA in an amount
which would have a material adverse effect on CPMCO and
TVFN, taken as a whole. None of the Belo Entities, CPMCO or
TVFN, has provided, or is required to provide, security to
any TVFN Pension Plan pursuant to Section 401(a)(29) of the
Code.
(e) None of the Belo Entities, CPMCO and TVFN,
has any obligations for retiree health and life benefits for
TVFN Employees or former TVFN Employees under any TVFN
Benefit Plan, except as set forth in Section 2.7 of the Belo
Disclosure Schedule or as required by Part 6 of Title I of
ERISA.
II.8 Absence of Certain Changes or Events. Except as
set forth in Section 2.8 of the Belo Disclosure Schedule,
since the Balance Sheet Date, CPMCO and TVFN have conducted
business only in the ordinary course consistent with past
practice, and there has not been any change or development,
or combination of changes or developments (other than
changes relating to or arising from legislative or
regulatory changes, developments generally affecting the
broadcasting industry or general economic conditions in the
United States), which individually or in the aggregate have
had or are reasonably likely to have a material adverse
effect on CPMCO and TVFN, taken as a whole.
<PAGE>
II.9 No Violation of Law. Except as disclosed in the
TVFN Financial Statements or as set forth in Section 2.9 of
the Belo Disclosure Schedule, none of the Belo Entities,
CPMCO or TVFN is in violation of, or, to the knowledge of
the Belo Entities, under investigation with respect to or
has been given notice or been charged by any Governmental
Entity with any violation of, any law, statute, order, rule,
regulation or judgment of any Governmental Entity, except
for violations which, in the aggregate, would not have a
material adverse effect on CPMCO and TVFN, taken as a whole.
The Belo Entities, CPMCO and TVFN have all permits,
licenses, franchises and other governmental authorizations,
consents and approvals necessary to conduct the business of
CPMCO and TVFN as presently conducted, except for any such
permits, licenses, franchises or other governmental
authorizations, consents and approvals the failure of which
to have would not have a material adverse effect on CPMCO
and TVFN, taken as a whole.
II.10 Taxes.
(a) Except as disclosed in the TVFN Financial
Statements or as set forth in Section 2.10 of the Belo
Disclosure Schedule:
(i) Colony, PJPI, CPMCO and TVFN have (A)
duly filed with the appropriate governmental
authorities all Tax Returns required to be filed by
them on or prior to the First Closing Date, other than
those Tax Returns the failure of which to file would
not have a material adverse effect on the entity
required to file such Tax Return, and such Tax Returns
are true, correct and complete in all material
respects, and (B) duly paid in full or made provision
in accordance with generally accepted accounting
principles for the payment of all Taxes (as defined
herein) due with respect to periods ending on or prior
to the First Closing Date;
(ii) all monies which Colony, PJPI,
CPMCO and TVFN have been required by law to withhold
from employees or other contractors with respect to
payments made or periods ending on or before the First
Closing Date have been withheld and timely paid to the
appropriate governmental authority;
(iii) as of the date hereof, the Tax
Returns for Colony, PJPI, CPMCO and TVFN are not
currently the subject of any audit, investigation or
proceeding by the Service or, to the Belo Entities'
knowledge, any state or local taxing authority, and
none of Colony, PJPI, CPMCO or TVFN has received any
written notice of deficiency or assessment from any
taxing authority with respect to liabilities for
material Taxes of Colony, PJPI, CPMCO or TVFN which
have not been paid or finally settled, other than
audits, deficiencies or assessments disclosed in
Section 2.10 of the Belo Disclosure Schedule which are
being contested in good faith through appropriate
proceedings; and
(iv) no federal income tax audit of the
affiliated group of which the predecessor of Belo
Holdings was the common parent is underway, and no
federal income tax audit of the affiliated group of
which Belo Holdings is currently a member is underway
for any year during which Colony and PJPI were members
of such group.
(b) "Taxes" means all taxes, charges, fees, levies,
imposts, duties or other assessments, including, without
limitation, income, gross receipts, estimated taxes, excise,
personal property, real property, sales, ad valorem, value-
added, leasing, withholding, social security, workers
compensation, unemployment insurance, occupation, use,
service, service use, license, stamp, payroll, employment,
windfall profit, environmental, alternative or add-on
minimum tax, franchise, transfer and recording taxes, fees
and charges, imposed by the United States or any state,
local, or foreign governmental authority whether computed on
a separate, consolidated, unitary, combined or any other
basis; and such term shall include any interest, fines,
penalties or additional amounts attributable or imposed on
or with respect to any such taxes, charges, fees, levies,
imposts, duties or other assessments. "Tax Return" means
any return, report or other document or information required
to be supplied to a taxing authority in connection with
Taxes.
<PAGE>
(c) Neither Colony nor PJPI is a "foreign
person" within the meaning of Section 1445(b)(2) of the
Code.
II.11 Environmental Matters.
(a) Except as disclosed in the TVFN Financial
Statements or as set forth in Section 2.11 of the Belo
Disclosure Schedule and except for such matters that,
individually or in the aggregate, would not have a material
adverse effect on CPMCO and TVFN, taken as a whole, (i) to
the knowledge of the Belo Entities, CPMCO and TVFN are in
compliance in all material respects with all applicable
Environmental Laws (as defined herein); (ii) to the
knowledge of the Belo Entities, the properties presently
owned or operated by CPMCO and TVFN, the ("TVFN Acquired
Properties") do not contain any Hazardous Substance (as
defined herein) other than as permitted under applicable
Environmental Laws; (iii) none of the Belo Entities, CPMCO
or TVFN has since December 31, 1994 received any claims,
notices, demand letters, lawsuits or requests for
information from any Governmental Entity or any private
third party alleging that CPMCO or TVFN is in violation of,
or liable under, any Environmental Laws; and (iv) none of
the Belo Entities, CPMCO or TVFN or the TVFN Acquired
Properties is subject to any court order, administrative
order or decree relating to the TVFN Acquired Properties
arising under any Environmental Law.
(b) "Environmental Law" means any applicable
Federal, state or local law, regulation, permit, judgment or
agreement with any Governmental Entity, relating to (i) the
protection, preservation or restoration of the environment
or to human health or safety, or (ii) the exposure to, or
the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production,
release or disposal of Hazardous Substances. "Hazardous
Substance" means any substance presently listed, defined,
designated or classified as hazardous, toxic, radioactive or
dangerous, or otherwise regulated, under any Environmental
Law.
II.12 Material Contracts. Section 2.12 of the Belo
Disclosure Schedule identifies any Belo Contract to which
CPMCO or TVFN is a party or by which any of their assets or
operations may be bound as of the date of this Agreement
that is: (a) a loan or similar agreement or indebtedness
evidenced by a note or other instrument, or any direct or
indirect guarantee of indebtedness of any other person, in
excess of $1,000,000; (b) any Belo Contract that expressly
limits the right to terminate such Belo Contract without
penalty upon less than one year's notice and such Belo
Contract provides for future payments in excess of $250,000
within the next twelve (12) months from the date hereof; (c)
an employment or severance agreement providing for payments
in excess of $100,000 to any TVFN Employee; (d) any Belo
Contract related to capital expenditures, which provides for
future payments in excess of $500,000 within the next twelve
(12) months from the date hereof; (e) notwithstanding the
foregoing, a talent or programming agreement; (f) a
noncompete agreement; (g) a lease, sublease or similar
agreement with any person under which any of CPMCO, TVFN or
any of their Subsidiaries is a lessor or sublessor of, or
makes available for use to any person, (A) any real property
of CPMCO, TVFN or any of their Subsidiaries or (B) any
portion of the premises otherwise occupied by any of CPMCO,
TVFN or any of their Subsidiaries, in any such case which
has an aggregate future liability or receivable, as the case
may be, in excess of $100,000 and is not terminable by one
of CPMCO, TVFN or any of their Subsidiaries by notice of not
more than 60 days for a cost of less than $100,000; (h) a
lease, sublease or similar agreement with any person under
which (A) CPMCO, TVFN or any of their Subsidiaries is a
lessee of, or holds or uses, any machinery, equipment,
vehicle or other tangible personal property owned by any
person or (B) CPMCO, TVFN or any of their Subsidiaries is a
lessor or sublessor of, or makes available for use by any
person, any tangible personal property owned or leased by
any of CPMCO, TVFN or their Subsidiaries, in any such case
which has an aggregate future liability or receivable, as
the case may be, in excess of $100,000 and is not terminable
by one of CPMCO, TVFN or any of their Subsidiaries by notice
of not more than 60 days for a cost of less than $100,000;
(i) (A) a continuing contract for the future purchase of
materials, supples or equipment, (B) a management, service,
consulting or other similar type of contract or (C) orders,
arrangements, contracts, understandings and agreements for
the sale of advertising time on the Television Food Network
(the "Network"), in any such case which has an aggregate
future liability to any person in excess of $100,000 and is
not terminable by any of CPMCO, TVFN or their Subsidiaries by
<PAGE>
notice of not more than 60 days for a cost of less than
$100,000; and (j) a material license, option or other
contract relating in whole or in part to any computer
software used primarily in connection with the business of
CPMCO, TVFN or any of their Subsidiaries as currently
conducted (other than licenses for the use of readily
available, off-the-shelf software). Except as set forth in
Section 2.12 of the Belo Disclosure Schedule (i) each of the
Belo Contracts set forth on Section 2.12 of the Belo
Disclosure Schedule is in full force and effect, except
where the failure to be in full force and effect would not
have a material adverse effect on CPMCO and TVFN, taken as a
whole, and (ii) there are no existing defaults by CPMCO or
TVFN thereunder which default would result in a material
adverse effect on CPMCO and TVFN, taken as a whole.
II.13 Brokers or Finders. None of the Belo
Entities, CPMCO or TVFN has any liability to any agent,
broker, investment banker, financial advisor or other firm
or person for any broker's or finder's fee or any other
commission or similar fee in connection with any of the
transactions contemplated by this Agreement except Furman
Selz, LLC ("Furman"), whose fees and expenses, as previously
disclosed to Scripps, will be paid by Belo Holdings in
accordance with Belo Holdings' agreement with such firm.
II.14 Title to Assets. Except as set forth in
Section 2.14 of the Belo Disclosure Schedule, to the best of
the Belo Entities' knowledge, CPMCO and TVFN own all of
their respective assets free and clear of any liens, claims,
security interests, restrictions or encumbrances that,
individually or in the aggregate, are reasonably likely to
have a material adverse effect on CPMCO and TVFN, taken as a
whole. Except as set forth in Section 2.14 of the Belo
Disclosure Schedule, none of CPMCO, TVFN or their
Subsidiaries owns in fee any real property or interests in
real property. Section 2.12 of the Belo Disclosure Schedule
sets forth a complete list of all leases of real property or
interests in real property to which any of CPMCO, TVFN and
their Subsidiaries is a party and identifies any material
base leases and reciprocal easement or operating agreements
relating thereto. To the best of the Belo Entities'
knowledge, CPMCO, TVFN and their Subsidiaries have good and
valid title to their leased assets, in each case free and
clear of all liens, claims, security interests or
encumbrances that, individually or in the aggregate, are
reasonably likely to have a material adverse effect on CPMCO
and TVFN, taken as a whole.
II.15 Condition of Assets. All of the material
assets of CPMCO and TVFN are in good operating condition and
repair, ordinary wear and tear excepted.
II.16 Employees. With respect to CPMCO or TVFN,
none of the Belo Entities, CPMCO or TVFN is a party to, or
is bound by, any collective bargaining agreement or other
contract with a labor union, nor are the Belo Entities,
CPMCO or TVFN the subject of any proceeding or organizing
activity seeking to compel it to bargain with any labor
union as to wages and conditions of employment, nor is there
any strike, labor dispute, slow down or stoppage involving
the Belo Entities, CPMCO or TVFN pending or, to the
knowledge of the Belo Entities, threatened that,
individually or in the aggregate, are reasonably likely to
have a material adverse effect on CPMCO and TVFN, taken as a
whole.
II.17 Insurance. Set forth in Section 2.17 of the
Belo Disclosure Schedule is a schedule of the insurance
coverage (including policy limits, coverage layers, and
named insureds) maintained by the Belo Entities, CPMCO or
TVFN on the assets, properties, premises, operations and
personnel of CPMCO or TVFN.
<PAGE>
II.18 Affiliation Agreements. Section 2.18 of the
Belo Disclosure Schedule sets forth a true and complete
list, as of the date hereof, of the contracts between TVFN
and the largest 15 cable operators relating to carriage of
the Network (as determined by the number of basic cable
television subscribers served by such cable operators) (the
"TVFN Affiliation Agreements"). At the date hereof, to the
knowledge of the Belo Entities, neither CPMCO nor TVFN has
received any notice that any such cable carrier (a) has
canceled or terminated, or has a specific intention to
cancel or terminate, any TVFN Affiliation Agreement, which
cancellations or terminations would be reasonably likely to
involve, in the aggregate, the loss of more than 100,000
subscribers, or (b) has a specific intention to effect a
planned reduction in the number of subscribers covered by
such TVFN Affiliation Agreement, other than reductions which
would not reasonably be expected to have a material adverse
effect on TVFN and its Subsidiaries, taken as a whole.
Except as set forth in Section 2.18 of the Belo Disclosure
Schedule and subject to obtaining the applicable consents
set forth in Sections 2.4 and 2.18 of the Belo Disclosure
Schedule, all TVFN Affiliation Agreements are valid, binding
and in full force and effect and are enforceable by TVFN
(and, at the First Closing Date, will be enforceable in
accordance with their terms). Except as set forth in
Section 2.18 of the Belo Disclosure Schedule, TVFN has
performed all obligations required to be performed by it to
date under the TVFN Affiliation Agreements and it is not
(with or without the lapse of time or the giving of notice,
or both) in breach or default in any respect thereunder and,
to the knowledge of the Belo Entities, no other party to any
of the TVFN Affiliation Agreements is (with or without the
lapse of time or the giving of notice, or both) in breach or
default in any respect thereunder, in each case other than
failures to perform, breaches or defaults which would not
result in a material adverse effect on CPMCO and TVFN, taken
as a whole.
II.19 Belo Interests. Except as disclosed in
Section 2.19 of the Belo Disclosure Schedule, none of the
Belo Entities or its Subsidiaries or affiliates uses in the
conduct of any of its businesses or owns or has rights to
use any assets or property, whether tangible or intangible,
which are also used in the conduct of the business of CPMCO,
TVFN or their Subsidiaries. Except as disclosed in Section
2.19 of the Belo Disclosure Schedule, none of CPMCO, TVFN
and their Subsidiaries will have any liability or obligation
of any nature (whether accrued, absolute, contingent or
otherwise) in any way relating to the business, operations,
indebtedness, assets or liabilities of any of the Belo
Entities as of the First Closing Date.
II.20 Related Party Agreements. Other than as set
forth in Section 2.20 of the Belo Disclosure Schedule, as of
the date hereof, none of the officers, directors or managers
of the Belo Entities or their respective Subsidiaries and
affiliates (other than CPMCO and TVFN and their
Subsidiaries) is a party to any agreement with CPMCO, TVFN
or any of their Subsidiaries providing for the payment of an
amount or amounts in excess of $100,000 singly or in the
aggregate, or has any interest in any property (real,
personal or mixed, tangible or intangible) used in or
pertaining to the business of CPMCO, TVFN or any of their
Subsidiaries which is material to CPMCO, TVFN or any of
their Subsidiaries, taken as a whole.
II.21 Network Intangible Rights. Except as
disclosed in Section 2.21 of the Belo Disclosure Schedule or
which would not result in a material adverse effect on CPMCO
and TVFN, taken as a whole, (a) neither the execution and
delivery of this Agreement nor the consummation by the Belo
Entities of the transactions contemplated hereby nor
compliance by the Belo Entities with any of the provisions
hereof will result in the creation or imposition of any
encumbrance upon, or give to any other party or parties any
claim, interest, or right, including rights of termination
or cancellation in or with respect to, (i) any domestic or
foreign patents, patent applications, written invention
disclosures to be filed or awaiting filing determinations,
trademark and service mark applications, registered
trademarks, registered service marks (including the service
mark TELEVISION FOOD NETWORK), franchises, patents, trade
names, jingles, slogans, logotypes, copyrights, or other
intangible rights owned, leased, or licensed that are used,
held for use, or necessary in connection with the business
and operations of the Network (the "Network Intangible
Rights"), or (ii) any rights, releases, clearances and
licenses with respect to (A) programs, programming
materials, promotional materials, including interstitial
promotional materials, and elements of whatever form or
nature, that are used, held for use, or necessary in
connection with the business and operations of the Network,
and (B) all persons appearing on or performing services in
connection with the operation of
<PAGE>
the Network and exhibition and syndication of its programming and
promotional materials, including, without limitation, in the case of
either clause (A) or (B), all literary, artistic, trademark,
copyright, music performing, master use, synchronization and
other similar intellectual property rights and all
publicity, privacy and publishing rights whether such
programs, materials, elements, appearances or performances
are live or recorded on film, tape, or any other medium or
broadcast on television or exhibited on any other medium,
and whether completed or in production, and all related
common law and statutory Network Intangible Rights (the
"Program Rights"); (b) other than in the ordinary course of
business, none of the Belo Entities nor any shareholder or
director or officer or employee or agent of the Belo
Entities has done anything, by contract or otherwise, which
could reasonably be expected to impair the rights of CPMCO
and TVFN in the Network Intangible Rights and Program
Rights; (c) CPMCO, TVFN or their Subsidiaries, as the case
may be, are the owners of the Network Intangible Rights and
Program Rights, and the Network Intangible Rights and
Program Rights are in full force and effect and not subject
to cancellation for any reason; (d) there are no
registrations for the Network Intangible Rights or Program
Rights in any country outside the United States; (e) none of
the Belo Entities has done or will do prior to the First
Closing Date (or will cause or permit to be done prior to
the First Closing Date) anything or authorize other parties
to do anything in conflict with TVFN's ownership of the
Network Intangible Rights or Program Rights; and (f) none of
the Belo Entities, CPMCO, TVFN or their Subsidiaries is a
party to or bound under any and there is no pending,
proposed, or threatened certificate, claim, mortgage, lien,
lease, agreement, contract, instrument, order, judgment, or
decree, or any similar restriction, which adversely affects,
or reasonably could be expected to adversely affect, the
Network Intangible Rights and Program Rights or the rights
of TVFN with respect to the Network Intangible Rights or
Program Rights following the consummation of the
transactions contemplated by this Agreement.
II.22 Trade Secrets. Except as set forth in
Section 2.22 of the Belo Disclosure Schedule, CPMCO, TVFN
and their Subsidiaries own or have the right to use, and as
of the First Closing Date they will own or have the right to
use, worldwide, all trade secrets, inventions, know-how,
formulae, processes, procedures, research records, computer
software (other than any licensed third party software),
records of inventions, test information, market surveys,
marketing know-how and unregistered copyrights
("Technology") used in connection with the business of
CPMCO, TVFN and their Subsidiaries as currently conducted.
To the Belo Entities' knowledge, CPMCO, TVFN and their
Subsidiaries have used commercially reasonable measures to
protect the secrecy, confidentiality and value of any
Technology used in connection with the business of CPMCO,
TVFN and their Subsidiaries. To the Belo Entities'
knowledge, no Technology used in connection with the
business of CPMCO, TVFN and their Subsidiaries has been
used, divulged or appropriated for the benefit of any person
other than CPMCO, TVFN and their Subsidiaries, except where
such use, divulgence or appropriation would not individually
or in the aggregate have a material adverse effect on CPMCO,
TVFN and their Subsidiaries, taken as a whole. Except as
set forth in Section 2.22 of the Belo Disclosure Schedule,
as of the date hereof, none of CPMCO, TVFN or their
Subsidiaries has made any pending claim in writing of a
violation, infringement, misuse or misappropriation by
others of rights of CPMCO, TVFN and their Subsidiaries to or
in connection with any Technology used in connection with
the business of CPMCO, TVFN or their Subsidiaries.
<PAGE>
II.23 Transponder Subleases. Section 2.23 of the
Belo Disclosure Schedule sets forth the schedule of payments
for the sublease of the transponder signal described in the
Sublease Agreement, a list of all third parties to whom the
Belo Entities or any affiliate thereof has subleased
additional signals pursuant to paragraph 4 of the Sublease
Agreement, and a description of any ongoing discussions the
Belo Entities or any affiliate thereof is conducting with
any third parties that may sublease additional transponder
signals pursuant to paragraph 4 of the Sublease Agreement.
Except as set forth on Section 2.23 of the Belo Disclosure
Schedule, (a) the Transponder Lease Agreement and the
Sublease Agreement are in full force and effect, (b) the
transponder leased by Providence Journal Company pursuant to
the Transponder Lease Agreement meets the transponder
performance specifications described in the Transponder
Lease Agreement and (c) the Belo Entities are not aware of
any facts or circumstances relating to the condition of the
Galaxy IR and Galaxy backup satellites described in the
Transponder Lease Agreement that would preclude the
continued use of the transponder leased by Providence
Journal Company and the signal subleased by TVFN pursuant to
the Sublease Agreement through the termination of the
Transponder Lease Agreement.
II.24 Investigations. The Belo Entities are
informed and sophisticated participants in the transactions
contemplated by this Agreement and have been advised by
persons experienced in the evaluation and purchase of assets
such as the KENS Assets, and along with such persons have
undertaken such investigation, and have been provided with
and have evaluated such documents and information, as the
Belo Entities and their advisors have deemed necessary to
enable them to make an informed and intelligent decision
with respect to the execution, delivery and performance of
this Agreement. Anything herein to the contrary
notwithstanding, the Belo Entities acknowledge that Belo Sub
is acquiring the KENS Assets without any representation or
warranty, express or implied, by Scripps or any of its
affiliates except as expressly set forth herein. In
furtherance of the foregoing, and not in limitation thereof,
the Belo Entities acknowledge that neither Scripps nor any
of its advisors, nor any of their respective affiliates or
representatives have made any representation or warranty
(express or implied) with respect to, and the Belo Entities
are not relying upon, any financial projection or forecast
delivered to the Belo Entities with respect to the revenues,
profitability, cash flow, capital expenditures, or other
financial or operating aspect that may arise from the
operation of the KENS Assets either before or after the
Second Closing Date. With respect to any projection or
forecast delivered by or on behalf of Scripps to the Belo
Entities, the Belo Entities acknowledge that (a) there are
uncertainties inherent in attempting to make such
projections and forecasts, (b) the Belo Entities are
familiar with such uncertainties, (c) the Belo Entities are
taking full responsibility for making their own evaluation
of the adequacy and accuracy of all such projections and
forecasts furnished to the Belo Entities and (d) the Belo
Entities will not have a claim against either Scripps or any
of its advisors, or any of their respective affiliates with
respect to such projections or forecasts or with respect to
any related matter.
<PAGE>
ARTICLE III
Representations and Warranties of Scripps
Scripps represents and warrants to the Belo Entities as
follows:
III.1 Organization. Scripps is duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation and Scripps has all
requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now
being conducted, except where the failure to be so
organized, existing and in good standing or to have such
power and authority would not have a material adverse effect
on the KENS Assets, taken as a whole. Scripps is duly
qualified or licensed to do business and in good standing in
each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except
where the failure to be so qualified or licensed and in good
standing would not in the aggregate have a material adverse
effect on the KENS Assets, taken as a whole, or on the
ability of Scripps to consummate the transactions
contemplated hereby. As used in this Agreement, any
reference to any event, change or effect having a material
adverse effect on or with respect to the KENS Assets, taken
as a whole, or an entity (or group of entities taken as a
whole) means that such event, change or effect is materially
adverse to the business, properties, assets, results of
operations or financial condition of the KENS Assets, taken
as a whole, or such entity (or, if with respect thereto, of
such group of entities taken as a whole).
III.2 Authority. Scripps has the requisite
corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this
Agreement by Scripps and the consummation by Scripps of the
transactions contemplated hereby have been duly authorized
by Scripps' Board of Directors, and no other corporate
proceedings on the part of Scripps are necessary to
authorize this Agreement or for Scripps to consummate the
transactions contemplated hereby. This Agreement has been
duly executed and delivered by Scripps and, assuming this
Agreement constitutes a valid and binding obligation of the
Belo Entities, constitutes a valid and binding obligation of
Scripps, enforceable against Scripps in accordance with its
terms.
III.3 Consents and Approvals; No Violations.
Except (a) as set forth in Section 3.3 of the Scripps
Disclosure Schedule, (b) for filings, permits,
authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange
Act, the HSR Act, and the FCC Act, and (c) as may be
necessary as a result of any facts or circumstances relating
solely to the Belo Entities or any of their Subsidiaries,
none of the execution, delivery or performance of this
Agreement by Scripps or the consummation by Scripps of the
transactions contemplated hereby and compliance by Scripps
with any of the provisions hereof will (i) conflict with or
result in any breach of any provisions of the charter or
bylaws of Scripps, (ii) require any filing by Scripps with,
or any permit, authorization, consent or approval to be
obtained by Scripps of, any Governmental Entity, (iii)
result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment,
cancellation or acceleration) under, any of the terms,
conditions or provisions of any Contracts to which Scripps
is a party or by which it or any of its properties or assets
may be bound ("Scripps Contracts") or result in the creation
of any lien upon any of the KENS Assets, or (iv) violate any
order, writ, injunction, decree, statute, rule or regulation
applicable to Scripps, except, in the case of clause (ii),
(iii) or (iv), for failures to file or obtain, violations,
breaches, defaults or liens which would not have a material
adverse effect on the KENS Assets, taken as a whole, or the
ability of Scripps to consummate the transactions
contemplated hereby. Scripps does not have any knowledge of
any facts or circumstances relating to the KENS Assets that,
individually or in the aggregate, would prevent any
necessary approval of the transactions contemplated by this
Agreement under the FCC Act; provided, however, the parties
hereto recognize the necessity for a waiver of the FCC's one-
to-a-market rule.
<PAGE>
III.4 KENS Financial Statements. Attached hereto
as Exhibits C and D are the audited balance sheets (the
"KENS Balance Sheets") of KENS as of the Balance Sheet Date
and December 31, 1995, and the related statements of
operations and cash flows for the three years ended December
31, 1996 and the accompanying notes thereto (together with
the KENS Balance Sheets, the "KENS Financial Statements").
The KENS Financial Statements have been prepared in
accordance with generally accepted accounting principles
consistently applied, and, except as set forth in Section
3.5 of the Scripps Disclosure Schedule, fairly present in
all material respects the financial position of KENS at the
dates thereof, and the results of its operations for the
periods then ended. After the Second Closing, except as
otherwise contemplated by this Agreement, neither Scripps
nor any of its other Subsidiaries will own or have rights to
use any of the assets or property, whether tangible,
intangible or mixed, which are necessary for the conduct of
the KENS Assets as conducted on the date hereof.
III.5 Litigation. Except as disclosed in the KENS
Financial Statements or as set forth in Section 3.5 of the
Scripps Disclosure Schedule, there is no suit, action,
proceeding or investigation relating to Scripps or the KENS
Assets pending or, to the knowledge of Scripps, threatened,
against Scripps or the KENS Assets before any Governmental
Entity which, individually or in the aggregate, is
reasonably likely to have a material adverse effect on the
KENS Assets, taken as a whole, or on the ability of Scripps
to consummate the transactions contemplated hereby. Except
as set forth in Section 3.5 of the Scripps Disclosure
Schedule, neither Scripps nor the KENS Assets are subject to
or in default under any outstanding order, writ, injunction
or decree relating to the KENS Assets which, individually or
in the aggregate, is reasonably likely to have a material
adverse effect on the KENS Assets, taken as a whole, or a
material adverse effect on the ability of Scripps to
consummate the transactions contemplated hereby.
III.6 Employee Benefits.
(a) Section 3.6 of the Scripps Disclosure
Schedule contains a list of all "employee benefit plans"
within the meaning of Section 3(3) of ERISA, and all other
material benefit plans, programs, agreements and
arrangements (the "Harte-Hanks Benefit Plans"), which cover
employees or former employees of KENS (the "KENS
Employees"). True and complete copies of all Harte-Hanks
Benefit Plans, any trust instruments and/or insurance
contracts, if any, forming a part of any such plans, and all
amendments thereto; current summary plan descriptions; where
applicable, the most current determination letter received
from the Service; and where applicable, annual reports,
financial statements and actuarial reports for the last plan
year, which fairly and accurately reflect the financial
condition of the plans have been made available to the Belo
Entities.
(b) All Harte-Hanks Benefit Plans are in
compliance with ERISA, the Code, and all other applicable
laws in all material respects. Each Harte-Hanks Benefit
Plan which is an "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA (a "KENS Pension Plan") and
which is intended to be qualified under Section 401(a) of
the Code has received a favorable determination letter from
the Service, and Scripps is not aware of any circumstances
likely to result in revocation of any such favorable
determination letter. Neither Harte-Hanks nor any Harte-
Hanks ERISA Affiliate (as defined herein) has contributed or
been required to contribute to any Multiemployer Plan (as
defined in ERISA) with respect to any KENS Employees.
(c) No liability under Subtitle C or D of Title
IV of ERISA has been incurred by Scripps with respect to any
ongoing, frozen or terminated Harte-Hanks Pension Plan,
currently or formerly maintained by Harte-Hanks, or the
pension plan of any entity which is or has been considered
one employer with Harte-Hanks, under Section 4001 of ERISA
or Section 414 of the Code (a "Harte-Hanks ERISA Affiliate")
which would have a material adverse effect on the KENS
Assets, taken as a whole.
<PAGE>
(d) All contributions required to be made or
accrued as of the Balance Sheet Date under the terms of any
Harte-Hanks Benefit Plan for which Harte-Hanks may have
liability have been timely made or have been reflected on
the KENS Balance Sheet. Neither any Harte-Hanks Pension
Plan nor any pension plan of Harte-Hanks or a Harte-Hanks
ERISA Affiliate has incurred an "accumulated funding
deficiency" (whether or not waived) within the meaning of
Section 412 of the Code or Section 302 of ERISA in an amount
which would have a material adverse effect on the KENS
Assets, taken as a whole. Harte-Hanks has not provided, nor
is required to provide, security to any Harte-Hanks Pension
Plan pursuant to Section 401(a)(29) of the Code.
(e) Harte-Hanks does not have any obligations for
retiree health and life benefits for KENS Employees or
former KENS Employees under any Harte-Hanks Benefit Plan,
except as set forth in Section 3.6 of the Scripps Disclosure
Schedule or as required by Part 6 of Title I of ERISA.
III.7 Absence of Certain Changes or Events. Except
as set forth in Section 3.7 of the Scripps Disclosure
Schedule, since the Balance Sheet Date, the business of KENS
has been conducted only in the ordinary course consistent
with past practice, and there has not been any change or
development, or combination of changes or developments
(other than changes relating to or arising from legislative
or regulatory changes, developments generally affecting the
broadcasting industry or general economic conditions in the
United States), which individually or in the aggregate have
had or are reasonably likely to have a material adverse
effect on the KENS Assets, taken as a whole.
III.8 No Violation of Law. Except as disclosed in
the KENS Financial Statements or as set forth in Section 3.8
of the Scripps Disclosure Schedule, neither Scripps, the
KENS Entity, nor, to the best of Scripps' knowledge Harte-
Hanks is in violation of, or, to the knowledge of Scripps,
under investigation with respect to or has been given notice
or been charged by any Governmental Entity with any
violation of, any law, statute, order, rule, regulation or
judgment of any Governmental Entity, except for violations
which, in the aggregate, would not have a material adverse
effect on the KENS Assets, taken as a whole. Scripps has or
will acquire pursuant to the Acquisition Agreement all
permits, licenses, franchises and other governmental
authorizations, consents and approvals necessary to conduct
the business of KENS as presently conducted, except for any
such permits, licenses, franchises or other governmental
authorizations, consents and approvals the failure of which
to have would not have a material adverse effect on the KENS
Assets, taken as a whole.
III.9 Taxes.
(a) Except as disclosed in the KENS Financial
Statements or as set forth in Section 3.9 of the Scripps
Disclosure Schedule:
(i) the KENS Entity has (A) duly filed with
the appropriate governmental authorities all Tax
Returns required to be filed by it on or prior to the
First and Second Closing Dates, other than those Tax
Returns the failure of which to file would not have a
material adverse effect on the entity required to file
such Tax Return, and such Tax Returns are true, correct
and complete in all material respects, and (B) duly
paid in full or made provision in accordance with
generally accepted accounting principles for the
payment of all Taxes due with respect to periods ending
on or prior to the First and Second Closing Dates;
(ii) all monies which the KENS Entity has
been required by law to withhold from employees or
other contractors with respect to payments made or
periods ending on or before the First and Second
Closing Dates have been withheld and timely paid to the
appropriate governmental authority;
<PAGE>
(iii) as of the date hereof, the Tax
Returns for the KENS Entity are not currently the
subject of any audit, investigation or proceeding by
the Service or, to Scripps' knowledge, any state or
local taxing authority, and neither Scripps nor the
KENS Entity have received any written notice of
deficiency or assessment from any taxing authority with
respect to liabilities for material Taxes of the KENS
Entity which have not been paid or finally settled,
other than audits, deficiencies or assessments
disclosed in Section 3.9 of the Scripps Disclosure
schedule which are being contested in good faith
through appropriate proceedings; and
(iv) No federal income tax audit of any
affiliated group of which the KENS Entity is or was a
member is underway for any year in which the KENS
Entity was a member of such group.
(b) The KENS Entity is not "foreign person"
within the meaning of Section 1445(b)(2) of the Code.
III.10 Environmental Matters. Except as disclosed
in the KENS Financial Statements or as set forth in Section
3.10 of the Scripps Disclosure Schedule and except for such
matters that, individually or in the aggregate, would not
have a material adverse effect on the KENS Assets, taken as
a whole, (a) to the knowledge of Scripps, the KENS Assets
are in compliance in all material respects with all
applicable Environmental Laws; (b) to the knowledge of
Scripps, the properties included in the KENS Assets, the
("KENS Acquired Properties") do not contain any Hazardous
Substance, other than as permitted under applicable
Environmental Laws; (c) Scripps has not since December 31,
1994 received any claims, notices, demand letters, lawsuits
or requests for information from any Governmental Entity or
any private third party alleging that the KENS Assets are in
violation of, or result in liability under, any
Environmental Laws; and (d) neither Scripps or, to the best
knowledge of Scripps, the KENS Acquired Properties is
subject to any court order, administrative order or decree
relating to the KENS Acquired Properties arising under any
Environmental Law.
III.11 Material Contracts. Section 3.11 of the
Scripps Disclosure Schedule identifies any Scripps Contract
to which Scripps is or will be as of the Acquisition Closing
Date a party, related to the KENS Assets or by which the
KENS Assets may be bound as of the date of this Agreement or
the Acquisition Closing Date that is (a) a loan or similar
agreement or indebtedness evidenced by a note or other
instrument, or any direct or indirect guarantee of
indebtedness of any other person, in excess of $1,000,000;
(b) any Scripps Contract that expressly limits the right to
terminate such Scripps Contract without penalty upon less
than one year's notice and such Scripps Contract provides
for future payments in excess of $250,000 within the next
twelve (12) months from the date hereof; (c) a network
affiliation agreement; (d) an employment or severance
agreement providing for payments in excess of $100,000 to
any KENS Employee; and (e) any Scripps Contract related to
capital expenditures, which provides for future payments in
excess of $500,000 within the next twelve (12) months from
the date hereof. Except as set forth in Section 3.11 of the
Scripps Disclosure Schedule (i) each of the Scripps
Contracts set forth on Section 3.11 of the Scripps
Disclosure Schedule is in full force and effect, except
where the failure to be in full force and effect would not
have a material adverse effect on the KENS Assets, taken as
a whole and (ii) there are no existing defaults by Scripps
or any of its Subsidiaries thereunder which default would
result in a material adverse effect on the KENS Assets,
taken as a whole.
III.12 Brokers or Finders. Scripps does not have any
liability to any agent, broker, investment banker, financial
advisor or other firm or person for any broker's or finder's
fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement
except Bear Stearns, whose fees and expenses, as previously
disclosed to Belo Holdings, will be paid by Scripps in
accordance with Scripps' agreement with such firm.
III.13 Title to Assets. Except as set forth in
Section 3.13 of the Scripps Disclosure Schedule, to the best
of Scripps' knowledge, as of the Acquisition Closing Date
the KENS Assets will be free and clear of any liens, claims,
security interests, restrictions or encumbrances that,
individually or in the aggregate, are reasonably likely to
have a material adverse effect on the KENS Assets, taken as
a whole.
<PAGE>
III.14 Condition of Assets. All of the material
KENS Assets are in good operating condition and repair,
ordinary wear and tear excepted.
III.15 Employees. With respect to the KENS Assets,
neither Scripps nor any of its Subsidiaries is now or will
be a party to as of the Acquisition Closing Date, or is or
will be bound by, any collective bargaining agreement or
other contract with a labor union, nor is Scripps the
subject of any proceeding or organizing activity seeking to
compel it to bargain with any labor union as to wages and
conditions of employment, nor is there any strike, labor
dispute, slow down or stoppage involving Scripps pending or,
to the knowledge of Scripps, threatened that, individually
or in the aggregate, are reasonably likely to have a
material adverse effect on the KENS Assets, taken as a
whole.
III.16 Insurance. Set forth in Section 3.16 of the
Scripps Disclosure Schedule is a schedule of the insurance
coverage (including policy limits, coverage layers, and
named insureds) maintained or to be maintained as of the
Acquisition Closing Date by Scripps and its Subsidiaries on
the assets, properties, premises, operations and personnel
related to the KENS Assets.
III.17 FCC Licenses. Scripps has provided Belo
Holdings with a complete list of the FCC Licenses included
in the KENS Assets. Except as does not materially
jeopardize the business related to the KENS Assets or as set
forth in Section 3.17 of the Scripps Disclosure Schedule:
(a) Scripps is qualified to hold such FCC Licenses or to
control such FCC Licenses, as the case may be; (b) Scripps,
upon the Acquisition Closing Date, will hold such FCC
Licenses; (c) Scripps is not aware of any facts or
circumstances relating to Scripps or the KENS Assets that
would prevent the FCC's granting the requisite consent to
the FCC Form 314 Application for Consent to Assignment of
License to be filed by Belo Sub (the "FCC Application"); (d)
to the knowledge of Scripps, Harte-Hanks is in material
compliance with all FCC Licenses held by it and included in
the KENS Assets; and (e) there is not pending or, to the
knowledge of Scripps, threatened any application, petition,
objection or other pleading with the FCC or other
Governmental Entity which challenges the validity of, or any
rights of the holder under, any FCC License held or to be
held by Scripps, its Subsidiaries or, to the knowledge of
Scripps, Harte-Hanks and related to the KENS Assets, except
for rule making or similar proceedings of general
applicability to persons engaged in the broadcasting
industry generally. As used herein, the term "FCC License"
shall mean any permit, license, waiver or authorization that
a person is required by the FCC to hold in connection with
the operation of its business.
III.18 KENS Intangible Rights. Except as disclosed
in Section 3.18 of the Scripps Disclosure Schedule or which
would not result in a material adverse effect on the KENS
Assets, to the best knowledge of Scripps, (a) neither the
execution and delivery of this Agreement nor the
consummation by Scripps of the transactions contemplated
hereby nor compliance by Scripps with any of the provisions
hereof will result in the creation or imposition of any
encumbrance upon, or give to any other party or parties any
claim, interest, or right, including rights of termination
or cancellation in or with respect to, (i) any domestic or
foreign patents, patent applications, written invention
disclosures to be filed or awaiting filing determinations,
trademark and service mark applications, registered
trademarks, registered service marks, franchises, patents,
trade names, jingles, slogans, logotypes, copyrights, or
other intangible rights owned, leased, or licensed that are
used, held for use, or necessary in connection with the
business and operations of the KENS Assets (the "KENS
Intangible Rights"), or (ii) any rights, releases,
clearances and licenses with respect to (A) programs,
programming materials, promotional materials, including
interstitial promotional materials, and elements of whatever
form or nature, that are used, held for use, or necessary in
connection with the business and operations of the KENS
Assets, and (B) all persons appearing on or performing
services in connection with the operation of the KENS Assets
and exhibition and syndication of its programming and
promotional materials, including, without limitation, in the
case of either clause (A) or (B), all literary, artistic,
trademark, copyright, music performing, master use,
synchronization and other similar intellectual property
rights and all publicity, privacy and publishing rights
whether such programs, materials, elements, appearances or
performances are live or recorded on film, tape, or any
other medium or broadcast on television or exhibited on any
other medium, and whether completed or in production, and
all related common law and statutory KENS Intangible Rights
(the "KENS Program Rights"); (b) other than in the ordinary
course of business, neither Harte-Hanks, Scripps
<PAGE>
nor any shareholder or director or officer or employee or agent of
either has done anything, by contract or otherwise, which
could reasonably be expected to impair the rights of KENS in
the KENS Intangible Rights and KENS Program Rights; (c)
Harte-Hanks or its Subsidiaries, as the case may be, are the
owners of the KENS Intangible Rights and KENS Program
Rights, and the KENS Intangible Rights and KENS Program
Rights are in full force and effect and not subject to
cancellation for any reason; (d) there are no registrations
for the KENS Intangible Rights or KENS Program Rights in any
country outside the United States; (e) none of Harte-Hanks
or Scripps has done or will do prior to the First Closing
Date (or will cause or permit to be done prior to the First
Closing Date) anything or authorize other parties to do
anything in conflict with Harte-Hanks's ownership of the
KENS Intangible Rights or KENS Program Rights; and (f) none
of Harte-Hanks or Scripps or their Subsidiaries is a party
to or bound under any and there is no pending, proposed, or
threatened certificate, claim, mortgage, lien, lease,
agreement, contract, instrument, order, judgment, or decree,
or any similar restriction, which adversely affects, or
reasonably could be expected to adversely affect, the KENS
Intangible Rights and KENS Program Rights or the rights of
Belo Sub with respect to the KENS Intangible Rights or KENS
Program Rights following the consummation of the
transactions contemplated by this Agreement.
III.19 KENS Trade Secrets. Except as set forth in
Section 3.19 of the Scripps Disclosure Schedule, to the best
knowledge of Scripps, Harte-Hanks and its Subsidiaries own
or have the right to use, and as of the First Closing Date
Scripps and its Subsidiaries will own or have the right to
use, worldwide, all trade secrets, inventions, know-how,
formulae, processes, procedures, research records, computer
software (other than any licensed third party software),
records of inventions, test information, market surveys,
marketing know-how and unregistered copyrights ("KENS
Technology") used in connection with the business of the
KENS Assets as currently conducted, to the best knowledge of
Scripps, Harte-Hanks and its Subsidiaries have used
commercially reasonable measures to protect the secrecy,
confidentiality and value of any KENS Technology used in
connection with the business of Harte-Hanks, to the best
knowledge of Scripps no Technology used in connection with
the business of the KENS Assets has been used, divulged or
appropriated for the benefit of any person other than Harte-
Hanks and its Subsidiaries, except where such use,
divulgence or appropriation would not individually or in the
aggregate have a material adverse effect on the KENS Assets.
Except as set forth in Section 3.19 of the Scripps
Disclosure Schedule, to the best knowledge of Scripps, as of
the date hereof, none of Harte-Hanks or its Subsidiaries has
made any pending claim in writing of a violation,
infringement, misuse or misappropriation by others of rights
of Harte-Hanks and its Subsidiaries to or in connection with
any KENS Technology used in connection with the business of
the KENS Assets.
III.20 Investigations. Scripps is an informed and
sophisticated participant in the transactions contemplated
by this Agreement and has been advised by persons
experienced in the evaluation and purchase of enterprises
such as those conducted by CPMCO and TVFN, and along with
such persons has undertaken such investigation, and has been
provided with and has evaluated such documents and
information, as Scripps and its advisors have deemed
necessary to enable them to make an informed and intelligent
decision with respect to the execution, delivery and
performance of this Agreement. Anything herein to the
contrary notwithstanding, Scripps acknowledges that Scripps
is acquiring the TVFN Interests without any representation
or warranty, express or implied, by the Belo Entities or any
of their affiliates except as expressly set forth herein.
In furtherance of the foregoing, and not in limitation
thereof, Scripps acknowledges that neither the Belo Entities
nor any of their advisors, including, without limitation,
Furman, nor any of their respective affiliates or
representatives have made any representation or warranty
(express or implied) with respect to, and Scripps is not
relying upon, (a) the information set forth in the
Confidential Memorandum provided to Scripps relating to the
TVFN Interests, (b) any other information provided to
Scripps pursuant to the Scripps Confidentiality Agreement
(as defined herein), or (c) any financial projection or
forecast delivered to Scripps with respect to the revenues,
profitability, cash flow, capital expenditures, or other
financial or operating aspects that may arise from the
operation of CPMCO or TVFN either before or after the Second
Closing Date. With respect to any projection or forecast
delivered by or on behalf of the Belo Entities to Scripps,
Scripps acknowledges that (i) there are uncertainties
inherent in attempting to make such projections and
forecasts, (ii) Scripps is familiar with such uncertainties,
(iii) Scripps is taking full responsibility for making its
own evaluation of the adequacy and accuracy of all such
projections and forecasts furnished to Scripps and (iv)
Scripps will not have a
<PAGE>
claim against any of the Belo Entities, or any of their advisors including,
without limitation, Furman, or any of their respective affiliates
with respect to such projections or forecasts or with
respect to any related matter.
ARTICLE IV
Covenants of the Belo Entities Pending the First Closing
The Belo Entities covenant and agree that from the date
hereof until the First Closing:
IV.1 Covenants with Respect to CPMCO and TVFN. During
the period from the date of this Agreement and continuing
until the First Closing Date, the Belo Entities agree that,
except (i) as contemplated or permitted by this Agreement,
(ii) as set forth in Section 4.1 of the Belo Disclosure
Schedule, or (iii) to the extent that Scripps shall
otherwise consent in writing (which consent will not be
unreasonably withheld or delayed):
(a) Ordinary Course. The Belo Entities, CPMCO
and TVFN shall carry on the business of CPMCO and TVFN in
the usual, regular and ordinary course consistent with past
practice and use all reasonable efforts to preserve intact
the present business organization, keep available,
consistent with past practice, the services of the present
officers and employees and preserve the relationships with
customers, suppliers and others having business dealings
with CPMCO and TVFN, it being understood, however, that the
failure of any TVFN Employees to remain employees of CPMCO
or TVFN or become employees of Scripps or any Subsidiary of
Scripps shall not constitute a breach of this covenant.
(b) Changes in Partnership Interests. The Belo
Entities will not permit CPMCO or TVFN to split (including a
reverse split), combine or reclassify any partnership
interests therein or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of
or in substitution for such partnership interests.
(c) Issuance of Partnership Interests. The Belo
Entities will not permit CPMCO or TVFN to issue, transfer or
sell, or authorize or propose or agree to the issuance,
transfer or sale of, any partnership interests in CPMCO or
TVFN, or, any other equity interests or any securities
convertible into, or any rights, warrants, calls,
subscriptions, options or other rights or agreements,
commitments or understandings to acquire, any such
partnership interests, equity interests or convertible
securities, except for issuances of partnership interests to
Belo Holdings or its Subsidiaries pursuant to the terms of
the Partnership Agreements (which interests, if any, shall
be included in the TVFN Interests sold hereunder).
(d) Governing Documents. The Belo Entities will
not permit CPMCO or TVFN to amend the Partnership Agreements
in a manner adverse to Scripps or otherwise inconsistent
with the transactions contemplated hereby.
(e) Indebtedness. The Belo Entities will not
permit CPMCO or TVFN to incur any indebtedness or guarantee
any such indebtedness or issue or sell any debt securities
or warrants or rights to acquire any debt securities of
CPMCO or TVFN or guarantee any such obligations of others
other than in the ordinary course of business consistent
with past practice, except for (i) indebtedness incurred to
Belo Holdings or its Subsidiaries, with Scripps' consent,
(ii) indebtedness that would be included in the calculation
of TVFN's net working capital pursuant to Section 1.8, and
(iii) indebtedness associated with the acquisition of
programming as permitted hereunder.
<PAGE>
(f) Changes to Benefit Plans. Except
as would not materially increase the costs of CPMCO or TVFN
and except for changes required to comply with applicable
law, the Belo Entities shall not permit CPMCO or TVFN to,
(i) enter into, adopt, amend (except as may be required by
law and except for immaterial amendments) or terminate any
TVFN Benefit Plan or any agreement, arrangement, plan or
policy between the Belo Entities, CPMCO or TVFN and one or
more of their directors, officers or TVFN Employees or (ii)
except for normal increases in the ordinary course of
business consistent with past practice and the payment of
bonuses and other consideration to TVFN Employees in the
aggregate not to exceed the amount set forth in Section
4.1(f) to the Belo Disclosure Schedule and which, if paid or
committed to be paid by CPMCO or TVFN on or prior to the
First Closing Date, shall be included as a current liability
on the TVFN Closing Balance Sheet, increase in any manner
the compensation or fringe benefits of any director, officer
or TVFN Employee or pay any benefit to any director, officer
or TVFN Employee not required by any plan or arrangement as
in effect as of the date hereof or enter into any contract,
agreement, commitment or arrangement to do any of the
foregoing; provided that the foregoing shall not prohibit
CPMCO or TVFN from hiring and paying new employees in the
ordinary course of business consistent with past practice.
(g) Filings. The Belo Entities shall promptly
provide Scripps (or its counsel) copies of all filings
(other than those portions of filings under the HSR Act
which Scripps has no reasonable interest in obtaining in
connection with the acquisition of the TVFN Interests) made
by the Belo Entities with any Federal, state or foreign
Governmental Entity in connection with this Agreement and
the transactions contemplated hereby.
(h) Accounting Policies and Procedures. The Belo
Entities will not permit CPMCO or TVFN to change any of
their accounting principles, policies or procedures, except
as may be required by generally accepted accounting
principles.
(i) Sale of Assets. The Belo Entities will not
permit CPMCO or TVFN to sell, lease, exchange, mortgage,
pledge, transfer or otherwise dispose of, or agree to sell,
lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, any of their assets, except for dispositions of
inventories and equipment in the ordinary course of business
and consistent with past practice.
(j) Capital Expenditures. The Belo Entities will
not cause or permit CPMCO or TVFN or any of their
Subsidiaries to authorize any capital expenditures or the
purchase of any fixed assets other than (i) expenditures or
purchases which are included in the capital budget of CPMCO
or TVFN, as the case may be, previously delivered to Scripps
or, (ii) if not included in such capital budget, those which
do not exceed $10,000 individually or in the aggregate.
(k) Programming Expenditures. The Belo Entities
shall not cause or permit CPMCO, TVFN or their Subsidiaries
to incur obligations related to the purchase of television
or motion picture productions or programming, other than (i)
purchases which are included in the programming budget of
TVFN previously delivered by the Belo Entities to Scripps
or, (ii) if not included in such programming budget, those
which do not exceed $10,000 individually.
(l) Programming Rights. The Belo Entities shall
not cause or permit CPMCO, TVFN or any of their Subsidiaries
to enter into any agreement with any person other than
Scripps or its Subsidiaries granting such other person the
right to program any block of time on the Network other than
arrangements which are terminable by TVFN on not more than
30 days notice without any payment with respect thereto
other than reimbursement of any advance payments.
(m) TVFN Affiliation Agreements. The Belo
Entities shall not cause or permit CPMCO, TVFN or any of
their Subsidiaries to cancel, revoke or fail to renew any of
the TVFN Affiliation Agreements or take any action with the
intent and knowledge that such action would cause a material
breach or violation of any TVFN Affiliation Agreement.
<PAGE>
IV.2 Covenants of the Belo Entities. During the period
from the date of this Agreement and continuing to the First
Closing Date, the Belo Entities agree that the Belo Entities
will not and will not permit CPMCO or TVFN to take any
action that would or is reasonably likely to result in any
of the conditions to the First Closing set forth in Article
VII not being satisfied or that would materially impair the
ability of the Belo Entities to consummate the transactions
contemplated herein in accordance with the terms hereof or
would materially delay such consummation, and the Belo
Entities shall promptly advise Scripps orally and in writing
of any change in, or event with respect to, the business or
operations of the Belo Entities, CPMCO or TVFN having, or
which insofar as can reasonably be foreseen, could have, a
material adverse effect on the ability of the Belo Entities
to consummate the transactions contemplated hereby.
ARTICLE V
Covenants of Scripps Pending the Closings
Scripps covenants and agrees that from the date hereof
until the completion of the Second Closing Date:
V.1 Covenants with Respect to the KENS Assets. During
the period from the date of this Agreement and continuing
until the Closing Dates, Scripps agrees that, except (i) as
contemplated or permitted by this Agreement or the
Acquisition Agreement, (ii) as set forth in Section 5.1 of
the Scripps Disclosure Schedule, (iii) to the extent that
the Belo Entities shall otherwise consent in writing (which
consent will not be unreasonably withheld or delayed), or
(iv) as set forth in the Local Marketing Agreement to be
entered into between the parties hereto (the "LMA"):
(a) Ordinary Course. Subject to the LMA, Scripps
shall cause the business related to the KENS Assets to be
conducted in the usual, regular and ordinary course
consistent with past practice and use all reasonable efforts
to preserve intact the present business organization, keep
available, consistent with past practice, the services of
the present officers and employees and preserve the
relationships with customers, suppliers and others having
business dealings related to the KENS Assets, it being
understood, however, that the failure of any KENS Employees
to remain employees of Scripps or become employees of Belo
Holdings or any Subsidiary of Belo Holdings shall not
constitute a breach of this covenant.
(b) Indebtedness. From the date of this
Agreement until the First Closing Date, Scripps shall use
its commercially reasonable best efforts to cause Harte-
Hanks to not encumber the KENS Assets with any indebtedness
for borrowed money or other liens or encumbrances. From the
First Closing Date until the Second Closing Date, Scripps
shall not encumber the KENS Assets with any indebtedness for
borrowed money or other liens or encumbrances.
(c) Changes to Benefit Plans. From the date of
this Agreement until the First Closing Date, except as would
not materially increase the costs of the business related to
the KENS Assets and except for changes required to comply
with applicable law, Scripps shall use its commercially
reasonable best efforts to cause Harte-Hanks to not (i)
enter into, adopt, amend (except as may be required by law
and except for immaterial amendments) or terminate any Harte-
Hanks Benefit Plan or any other agreement, arrangement, plan
or policy for directors, officers or KENS Employees or (ii)
except for normal increases in the ordinary course of
business consistent with past practice and the payment of
bonuses and other consideration to KENS Employees in the
aggregate not to exceed the amount set forth in Schedule 5.1
to the Acquisition Agreement and which, if paid or committed
to be paid on or prior to the First Closing Date, shall be
included as a current liability on the KENS Closing Balance
Sheet, increase in any manner the compensation or fringe
benefits of any director, officer or KENS Employee or pay
any benefit to any director, officer or KENS Employee not
required by any plan or arrangement as in effect as of the
date hereof or enter into any contract, agreement,
commitment or arrangement to do any of the foregoing;
provided that the foregoing shall not prohibit Scripps or
Harte-Hanks or any of their
<PAGE>
respective Subsidiaries from hiring and paying new employees
in the ordinary course of business consistent with past practice.
(d) Filings. Scripps shall promptly provide Belo
Holdings (or its counsel) copies of all filings (other than
those portions of filings under the HSR Act which Belo
Holdings has no reasonable interest in obtaining in
connection with the acquisition of the KENS Assets) made by
Scripps with any Federal, state or foreign Governmental
Entity in connection with this Agreement and the
transactions contemplated hereby.
(e) Accounting Policies and Procedures. From the
date of this Agreement until the First Closing Date, Scripps
will use its commercially reasonable best efforts to cause
Harte-Hanks to not, and from the First Closing Date until
the Second Closing Date, Scripps will not and will not
permit any of its Subsidiaries to, change any of its
accounting principles, policies or procedures as they relate
to the KENS Assets, except as may be required by generally
accepted accounting principles.
(f) Sale of Assets. From the date of this
Agreement until the First Closing Date, Scripps will use its
commercially reasonable best efforts to cause Harte-Hanks to
not, and from the First Closing Date until the Second
Closing Date, Scripps shall not and shall not permit any of
its Subsidiaries to, sell, lease, exchange, mortgage,
pledge, transfer or otherwise dispose of, or agree to sell,
lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, any of the KENS Assets, except for dispositions
of inventories and equipment in the ordinary course of
business and consistent with past practice.
(g) Capital Expenditures. From the date of this
Agreement until the First Closing Date, Scripps will use its
commercially reasonable best efforts to cause Harte-Hanks to
not, and from the First Closing Date until the Second
Closing Date, Scripps shall not and shall not permit any of
its Subsidiaries to, cause or permit the KENS Entity or any
of its Subsidiaries to authorize any capital expenditures or
the purchase of any fixed assets other than (i) expenditures
or purchases which are included in the capital budget
related to the KENS Assets previously delivered to Belo
Holdings or, (ii) if not included in such capital budget,
those which do not exceed $10,000 individually or in the
aggregate.
(h) Programming Expenditures. From the date of
this Agreement until the First Closing Date, Scripps shall
use its commercially reasonable best efforts to cause Harte-
Hanks to not, and from the First Closing Date until the
Second Closing Date, Scripps shall not and shall not permit
any of its Subsidiaries to, cause or permit the KENS Entity
or its Subsidiaries to, incur obligations related to the
purchase of television or motion picture productions or
programming other than (i) purchases which are included in
the programming budget related to the KENS Assets previously
delivered to Belo Holdings or, (ii) if not included in such
programming budget, those which do not exceed $10,000
individually.
(i) Programming Rights. From the date of this
Agreement until the First Closing Date, Scripps shall use
its commercially reasonable best efforts to cause Harte-
Hanks to not, and from the First Closing Date until the
Second Closing Date, Scripps shall not and shall not permit
any of its Subsidiaries to, cause or permit the KENS Entity
or any of its Subsidiaries to, enter into any agreement with
any person other than Belo Holdings or Scripps' Subsidiaries
granting such other person the right to program any block of
time on KENS-TV or KENS(AM), other than arrangements which
are terminable by Harte-Hanks, Scripps, or the KENS Entity,
as the case may be, on not more than 30 days notice without
any payment with respect thereto other than reimbursement of
any advance payments.
(j) KENS Affiliation Agreement. From the date
of this Agreement until the First Closing Date, Scripps will
use its commercially reasonable best efforts to cause Harte-
Hanks to not, and from the First Closing Date until the
Second Closing Date, Scripps shall not and shall not permit
any of its Subsidiaries to, cause or permit the KENS Entity
or any of Scripps' Subsidiaries to, cancel, revoke or fail
to renew the KENS Affiliation Agreement or take any action
with the intent and knowledge that such action would cause a
material breach or violation of such affiliation agreement.
<PAGE>
V.2 Covenants of Scripps.
(a) During the period from the date of this
Agreement and continuing to the Second Closing Date, Scripps
agrees that Scripps will not and will not permit any of its
Subsidiaries to take any action that would or is reasonably
likely to result in any of the conditions to the Closings
set forth in Article VIII not being satisfied or that would
materially impair the ability of Scripps to consummate the
transactions contemplated herein in accordance with the
terms hereof or would materially delay such consummation,
and Scripps shall promptly advise Belo Holdings orally and
in writing of any change in, or event with respect to, the
business or operations of Scripps having, or which insofar
as can reasonably be foreseen, could have, a material
adverse effect on the ability of Scripps to consummate the
transactions contemplated hereby.
(b) During the period from the date of this
Agreement and continuing to the First Closing Date, Scripps
shall use its reasonable best efforts to cause Harte-Hanks
to comply in all material respects with the covenants of
Harte-Hanks set forth in Sections 5.1, 5.2 and Article VI of
the Acquisition Agreement. Scripps shall not amend or waive
any provision in the Acquisition Agreement without the
written consent of the Belo Entities (such consent not to be
unreasonably withheld) if such amendment or waiver affects
the KENS Assets or affects the ability of Scripps to
consummate the transactions contemplated by the Acquisition
Agreement or this Agreement.
(c) During the period from the date of this
Agreement and continuing to the Second Closing Date, Scripps
shall use its reasonable best efforts to secure the
cooperation of Harte-Hanks for the purpose of consummating
the transactions contemplated herein, including, without
limitation, the reasonable cooperation of Harte-Hanks with
respect to any matters related to the FCC Application.
ARTICLE VI
Additional Agreements
VI.1 Reasonable Efforts. Subject to the terms and
conditions of this Agreement, each of the parties hereto
agrees to use all reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws
and regulations to consummate and make effective the
transactions contemplated by this Agreement including,
without limitation, (a) the prompt preparation, filing and
prosecution of all necessary documents under the HSR Act and
the FCC Act, including, but not limited to, the FCC
Application and accompanying request for waiver of the FCC
one-to-a-market rule, and (b) such actions as may be
required to have the applicable waiting period under the HSR
Act expire or terminate as promptly as practicable,
including by consulting with each other as to, and
responding promptly to any comments or requests for
information with respect thereto. Each party shall promptly
consult with the other and provide any necessary information
with respect to all filings made by such party with any
Governmental Entity in connection with this Agreement and
the transactions contemplated hereby.
<PAGE>
VI.2 Access to Information.
(a) Upon reasonable notice, the Belo Entities
shall (and shall cause each of CPMCO and TVFN to) afford to
the officers, employees, accountants, counsel and other
representatives of Scripps, access, during normal business
hours during the period prior to the First Closing Date, to
all of the properties, books, contracts, commitments and
records relating to CPMCO and TVFN, and, during such period,
the Belo Entities shall (and shall cause CPMCO and TVFN to)
furnish promptly to Scripps all other information concerning
the business, properties and personnel of CPMCO and TVFN as
Scripps may reasonably request. After the First Closing
Date, upon reasonable notice, Scripps shall cause CPMCO and
TVFN to afford to the officers, employees, accountants,
counsel and other representatives of the Belo Entities
access, during normal business hours, to CPMCO's and TVFN's
books and records which the Belo Entities may reasonably
request in order to complete tax filings or for other
legitimate business purposes. Unless otherwise required by
law, the parties will hold any information made available
pursuant to this Section 6.2(a) which is nonpublic in
confidence in accordance with the confidentiality agreement,
dated June 18, 1997 (the "Scripps Confidentiality
Agreement"), between A. H. Belo Corporation and Scripps.
(b) Upon reasonable notice, Scripps shall use its
reasonable best efforts to cause Harte-Hanks to prior to the
First Closing Date, and Scripps shall (and shall cause each
of its Subsidiaries to), subsequent to the First Closing
Date and prior to the Second Closing Date, afford to the
officers, employees, accountants, counsel and other
representatives of the Belo Entities access, during normal
business hours, to all of the properties, books, contracts,
commitments and records relating to the KENS Assets, and,
Scripps shall use its reasonable best efforts to cause Harte-
Hanks to prior to the First Closing Date, and Scripps shall
(and shall cause each of its Subsidiaries to), subsequent to
the First Closing Date and prior to the Second Closing Date,
furnish promptly to the Belo Entities all other information
concerning the business, properties and personnel of the
KENS Assets as the Belo Entities may reasonably request.
After the Second Closing Date, upon reasonable notice, the
Belo Entities shall afford the officers, employees,
accountants, counsel and other representatives of Scripps
and Harte-Hanks access, during normal business hours, to the
Belo Entities' books and records related to the KENS Assets
which Scripps and Harte-Hanks may reasonably request in
order to complete tax filings or for other legitimate
business purposes. Unless otherwise required by law, the
parties will hold any information made available pursuant to
this Section 6.2(b) which is nonpublic in confidence in
accordance with the confidentiality agreement dated March
11, 1997, entered into by Scripps with Harte-Hanks related
to the KENS Assets (the "Harte-Hanks Confidentiality
Agreement" and, with the Scripps Confidentiality Agreement,
the "Confidentiality Agreements").
VI.3 Legal Conditions to Purchase. Each of the Belo
Entities and Scripps will use all reasonable efforts to
comply promptly with all legal requirements which may be
imposed on it or its respective Subsidiaries with respect to
the transactions contemplated herein (which actions shall
include, without limitation, furnishing all information
required under the HSR Act and the FCC Act) and will
promptly cooperate with and furnish information to each
other in connection with any such requirements imposed upon
any of them or any of their respective Subsidiaries in
connection with the transactions contemplated herein.
Subject to the terms and conditions hereof, each of the
parties hereto will, and will cause its respective
Subsidiaries to, promptly use all reasonable efforts to
obtain (and will consult and cooperate with each other in
obtaining) any consent, authorization, order or approval of,
or any exemption by, any Governmental Entity or other public
or private third party, required to be obtained or made by
such party in connection with the transactions contemplated
herein or the taking of any action contemplated by this
Agreement.
VI.4 Use of Names. Following the Second Closing Date,
Belo Sub or its affiliates shall have the sole and exclusive
ownership of and right to use, as between Belo Sub or its
affiliates on the one hand, and Scripps on the other hand,
each of the names, trademarks, trade names and other
proprietary rights set forth in Section 6.4 of the Scripps
Disclosure Schedule (the "Acquired Proprietary Name
Rights"). The Acquired Proprietary Name Rights include,
without limitation, the name "KENS" and derivatives thereof.
<PAGE>
VI.5 Intercompany Balances. All amounts owing between
CPMCO and TVFN, on the one hand, and Belo Holdings and its
other Subsidiaries, on the other hand, other than amounts
arising in the ordinary course of business for the purchase
of goods or services in commercial transactions, shall be
paid in full or eliminated at or prior to the First Closing
Date.
VI.6 KENS Employee Matters; Harte-Hanks Stock Plans.
(a) Belo Sub shall assume and retain, with
respect to the KENS Employees, any and all severance
obligations that arise due to (i) the purchase of the KENS
Assets by the Belo Entities or Scripps being deemed a
"Change of Control" under the severance agreements for KENS
Employees specified in Section 6.6 of the Scripps Disclosure
Schedule, (ii) events or actions occurring as a result of
the transactions consummated on the First Closing Date,
subject to the provisions of Section 10.2 below, and (iii)
events or actions occurring after the First Closing Date.
(b) Scripps and the Belo Entities agree that the
Belo Entities will, immediately after the First Closing Date
and for at least one year thereafter, permit the KENS
Employees (other than those set forth on Section 6.6 of the
Scripps Disclosure Schedule, to which this section (b) shall
only apply immediately after the Second Closing Date) (i) to
participate in a group health plan of the Belo Entities in
which similarly situated employees of the Belo Entities
participate, in accordance with the terms of the plan, and
to waive any pre-existing condition clause or waiting period
requirement in such group health plan and to give credit for
deductible amounts paid by a KENS Employee during the
current deductible year of such group health plan while
employed by Harte-Hanks; provided, however, that the Belo
Entities will be in compliance with this clause (i)
regarding KENS Employees employed by the Belo Entities if
they assume the current group health contracts of Harte-
Hanks relating to the KENS Employees; (ii) to participate in
and receive credit, for vesting and eligibility purposes,
under tax qualified retirement plans of the Belo Entities in
which similarly situated employees of the Belo Entities
participate, for which they are otherwise eligible, for
their service with Harte-Hanks to the extent permitted by
applicable tax-qualification requirements; (iii) to
participate in other benefit plans of the Belo Entities
which are offered to similarly situated employees; and (iv)
to participate in stock option programs and stock purchase
programs of the Belo Entities which are offered to similarly
situated employees.
(c) Effective as of the First Closing Date, the
KENS Employees shall cease to be eligible to participate in
the Harte-Hanks Benefit Plans, shall no longer accrue
benefits under the Harte-Hanks Benefit Plans, and shall not
be eligible under the Harte-Hanks Benefit Plans for payment
of claims incurred thereafter, except to the extent the Belo
Entities have assumed and continued any such Harte-Hanks
Benefit Plan with the consent of Scripps.
(d) Notwithstanding any contrary provisions of
this Agreement, (i) Harte-Hanks shall remain liable for any
and all obligations arising under or relating to the Harte-
Hanks Benefit Plans (except as otherwise provided in Section
6.6 of the Scripps Disclosure Schedule), and (ii) with
respect to KENS Employees who as of the First Closing Date
are former employees of KENS or are not actively at work,
the Belo Entities shall assume liability, including, without
limitation, liability for (i) any leave entitlements,
reemployment obligations, reinstatement rights, or related
rights, under applicable law, including, without limitation,
the Family and Medical Leave Act of 1993, the Uniformed
Services Employment and Reemployment Rights Act of 1994,
workers' compensation laws, or similar laws, and (ii) any
rights, benefits or entitlements under the Harte-Hanks
Benefit Plans listed on Section 6.6, including, without
limitation, health care continuation pursuant to Part 6 of
Title I of ERISA.
(e) Each outstanding option (a "KENS Option") to
purchase shares of Harte-Hanks common stock held by a KENS
Employee under any stock option plan of Harte-Hanks, whether
vested or unvested, exercisable or unexerciseable, shall
remain the responsibility of Harte-Hanks, and the Belo
Entities shall have no obligation or responsibility
whatsoever with respect to any KENS Options.
<PAGE>
(f) All of the KENS Employees will become Belo
Employees as of the First Closing Date, except as set forth
on Section 6.6 of the Scripps Disclosure Schedule, which
such employees shall become Belo Employees as of the Second
Closing Date; provided, however, nothing in this Agreement
shall be construed to require the Belo Entities to continue
the employment of any KENS Employee for any period of time,
or, except as required by Section 6.6(b) above, to offer any
particular type or level of benefits to any employee.
Nothing in this Agreement shall prevent the Belo Entities
from disciplining or terminating any KENS Employee or from
amending or terminating any benefit plans at any time.
VI.7 TVFN Employee Matters.
(a) TVFN shall retain, with respect to the TVFN
Employees, any and all severance obligations that arise (i)
under any severance agreements for TVFN Employees specified
in Section 6.7 of the Belo Disclosure Schedule, (ii) due to
events or actions occurring as a result of the transactions
consummated on the First Closing Date, subject to the
provisions of Section 10.2 below, and (iii) due to events or
actions occurring after the First Closing Date.
(b) Effective as of the First Closing Date, the
TVFN Employees shall not be eligible to participate in any
benefits plans sponsored by Belo or Scripps or their
Subsidiaries other than TVFN ("Belo or Scripps Benefits
Plans"), shall not accrue benefits under any Belo or Scripps
Benefit Plans, and shall not be eligible under any Belo or
Scripps Benefit Plans for payment of claims.
(c) All of the TVFN Employees will continue as
TVFN Employees after the First Closing Date and will have no
relationship with Belo or its affiliates thereafter.
Nothing in this Agreement shall be construed to require TVFN
to continue the employment of any TVFN Employee for any
period of time, or to offer any particular type or level of
benefits to any employee. Nothing in this Agreement shall
prevent TVFN from disciplining or terminating any TVFN
Employee or from amending or terminating any benefit plans
at any time.
VI.8 Fees and Expenses. Whether or not the
transactions contemplated herein are consummated and except
as otherwise provided herein, all fees, costs and expenses
incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party
incurring such expenses; provided, however, that Scripps and
Belo Holdings shall each pay one-half of (a) the filing fee
required under the HSR Act and (b) any filing fee required
by the FCC to file the FCC Application.
VI.9 Transfer Taxes. The Belo Entities will be
responsible for and pay all sales and use taxes, duties, and
transfer fees applicable to the transactions contemplated
herein with respect to the sale of the KENS Assets. Scripps
will be responsible for and pay all sales and use taxes,
duties, and transfer fees applicable to transactions
contemplated herein with respect to the sale of the TVFN
Interests. The parties hereto agree to cooperate in
connection with the preparation and filing of any Tax
Returns relating to the New York State Real Property
Transfer Tax and New York City Real Property Transfer Tax,
incurred in connection with the transactions contemplated
hereby.
VI.10 Employment Taxes. Scripps agrees to use its
commercially reasonable best efforts to obtain the consent
of Harte-Hanks to the use of the "Alternative Procedure" set
forth in Section 5 of the Rev. Proc. 96-60 with respect to
issuing forms W-2 to KENS Employees, including the execution
of an agreement with Belo Sub regarding the use of such
procedure.
VI.11 Scripps Assignment of Contracts and Permits.
Notwithstanding any other provision hereof, in connection
with any Scripps Contract identified on Section 3.11 of the
Scripps Disclosure Schedule or any permit, approval, license
or authorization issued by a Governmental Entity (each a
"Governmental Authorization") held or to be held by Scripps
which relates to the KENS Assets and which, as a matter of
law or by its terms, is (a) not assignable, or (b) not
assignable without the prior approval or consent of the
issuer thereof or the other party or parties thereto
(collectively, "Non-Assignable Rights"), Scripps shall:
<PAGE>
(i) apply for and use all reasonable efforts
to obtain all consents or approvals contemplated by the
Scripps Contracts or Governmental Authorizations, in
form and substance satisfactory to Belo Sub;
(ii) cooperate with Belo Sub in any
reasonable and lawful arrangements designed to provide
the benefits and burdens of such Non-Assignable Rights
to Belo Sub, including holding any such Non-Assignable
Rights in trust for Belo Sub or acting as agent for
Belo Sub;
(iii) enforce any rights of Scripps
arising from such Non-Assignable Rights against the
issuer thereof or the other party or parties thereto;
(iv) take all such actions and do, or cause
to be done, all such things at the request of Belo Sub
as shall reasonably be necessary and proper in order
that the value of any Non-Assignable Rights shall be
preserved and shall inure to the benefit of Belo Sub;
and
(v) pay over to Belo Sub all monies or other
assets collected by or paid to Scripps or any of its
Subsidiaries in respect of such Non-Assignable Rights.
Belo Sub shall reimburse Scripps for all reasonably
incurred payments, costs and expenses made, incurred or
suffered in performing Scripps' obligations as requested by
Belo Sub under this Section 6.11. If Scripps is unable to
lawfully provide the benefit of any Governmental
Authorization to Belo Sub, it shall not, at any time, use
such Governmental Authorization for its own purposes or
assign or provide the benefit of such Governmental
Authorization to any other party.
VI.12 Belo Assignment of Contracts and Permits.
Notwithstanding any other provision hereof, in connection
with any Belo Contract identified on Section 2.12 of the
Belo Disclosure Schedule or any Governmental Authorization
held or to be held by CPMCO or TVFN and which, as a matter
of law or by its terms, requires the consent of the issuer
thereof or the other party or parties thereto upon a change
of control (collectively, the "TVFN Non-Assignable Rights")
the Belo Entities shall:
(i) apply for and use all reasonable efforts
to obtain all consents or approvals contemplated by the
Belo Contracts or Governmental Authorizations, in form
and substance satisfactory to Scripps;
(ii) cooperate with Scripps in any reasonable
and lawful arrangements designed to provide the
benefits and burdens of such TVFN Non-Assignable Rights
to TVFN, including holding any such TVFN Non-Assignable
Rights in trust for TVFN or acting as agent for TVFN;
(iii) enforce any rights of TVFN arising
from such TVFN Non-Assignable Rights against the issuer
thereof or the other party or parties thereto;
(iv) take all such actions and do, or cause
to be done, all such things at the request of Scripps
as shall reasonably be necessary and proper in order
that the value of any TVFN Non-Assignable Rights shall
be preserved and shall inure to the benefit of TVFN;
and
(v) pay over to TVFN all monies or other
assets collected by or paid to TVFN or any of its
Subsidiaries in respect of such TVFN Non-Assignable
Rights.
Scripps shall reimburse the Belo Entities for all
reasonably incurred payments, costs and expenses made,
incurred or suffered in performing the Belo Entities'
obligations as requested by Scripps under this Section 6.12.
If the Belo Entities are unable to lawfully provide the
benefit of any Governmental Authorization to TVFN, it shall
not, at any time, use such Governmental Authorization for
its own purposes or assign or provide the benefit of such
Governmental Authorization to any other party.
<PAGE>
VI.13 Schedules.
(a) Notwithstanding anything to the contrary
contained herein if Scripps has not, as of the date hereof
(the "Signing Date"), completed and/or delivered one or more
of the Schedules referred to in this Agreement and required
to be delivered by Scripps pursuant hereto or has not
delivered one or more of the documents required to be
delivered by it pursuant to this Agreement, then Scripps
shall be permitted to complete and deliver such Schedules or
deliver such documents to the Belo Entities after the
Signing Date, but in no event later than September 22, 1997.
The Belo Entities shall be deemed to have accepted any such
revised or newly delivered Schedules and/or documents unless
within three (3) business days after receipt thereof they
shall have delivered to Scripps a notice terminating this
Agreement together with a certificate from an executive
officer of Belo Holdings to the effect that such revised or
newly delivered Schedules and/or documents in the aggregate
reflect matters that would have a material adverse effect on
the KENS Assets as of the Signing Date. If the Belo
Entities's approval of such revised or newly delivered
Schedules and/or documents is granted or is deemed granted,
any Schedules attached hereto as of the Signing Date and
delivered by Scripps which have subsequently been revised
shall be deemed to be amended in accordance with such
revised Schedules as of the Signing Date and such late-
delivered Schedules and/or documents shall be deemed
delivered by Scripps as of the Signing Date. Scripps shall
not have the right to deliver any revised or new Schedules
or documents under this Section 6.13 after September 22,
1997.
(b) Notwithstanding anything to the contrary
contained herein, if the Belo Entities have not, as of the
Signing Date, completed and/or delivered one or more of the
Schedules referred to in his Agreement and required to be
delivered by them pursuant hereto or have not delivered one
or more of the documents required to be delivered by them
pursuant to this Agreement, then they shall be permitted to
complete and deliver such Schedules or deliver such
documents to Scripps after the Signing Date, but in no event
later than September 22, 1997. Scripps shall be deemed to
have accepted any such revised or newly delivered Schedules
and/or documents unless within three (3) business days after
receipt thereof it shall have delivered to the Belo Entities
a notice terminating this Agreement together with a
certificate from an executive officer of Scripps to the
effect that such revised or newly delivered Schedules and/or
documents in the aggregate reflect maters that would have a
material adverse effect on TVFN and CPMCO, taken as a whole,
as of the Signing Date. If Scripps's approval of such
revised or newly delivered Schedules and/or documents is
granted or is deemed granted, any Schedules attached hereto
as of the Signing Date and delivered by the Belo Entities
which have subsequently been revised shall be deemed to be
amended in accordance with such revised Schedules as of the
Signing Date and such late-delivered Schedules and/or
documents shall be deemed delivered by the Belo Entities as
of the Signing Date. The Belo Entities shall not have the
right to deliver any revised or new Schedules or documents
under this Section 6.13 after September 22, 1997.
VI.14 Notification. Each party hereto shall, in
the event of, or promptly after obtaining knowledge of, the
occurrence or threatened occurrence of any fact or
circumstance that would cause or constitute a material
breach of any of its representations and warranties set
forth herein, give notice thereof to the other party and
shall use its reasonable efforts to prevent or remedy such
breach.
VI.15 Additional Agreements Related to FCC
Licenses. The parties hereto shall use commercially
reasonable best efforts to obtain the expedient transfer of
all FCC licenses related to the KENS Assets to Belo Sub,
including, without limitation, (a) the substitution of Belo
Sub on any current FCC transfer application, and/or (b) such
other measures as the parties hereto deem necessary.
VI.16 Resignations. Effective as of the First
Closing Date, PJPI will resign as the managing general
partner and a general partner in CPMCO, and Colony will
resign as a general partner in TVFN.
VI.17 LMA Agreement. Upon the First Closing Date,
the parties hereto shall enter into the LMA in substantially
the same form attached hereto as Exhibit E, subject to
receipt of any necessary FCC approvals.
<PAGE>
VI.18 Notice to Other Partners. The parties
covenant and agree that the First Closing shall comply with
Section 9.03 of the TVFN Partnership Agreement. Scripps
hereby agrees to deliver at the time of the First Closing to
the partners of TVFN (other than any Belo Entities) of TVFN
in accordance with Section 9.06 of the TVFN Partnership
Agreement a copy of its agreement to comply with the TVFN
Partnership Agreement.
VI.19 Transponder Agreement. On the First Closing
Date the Belo Entities shall (a) in consideration of the
payment to Belo Holdings of $7,100,000 by Scripps, cause to
be assigned to Scripps, and Scripps shall assume, all of
Belo Holdings' right, title and interest in, to and under
(i) the Transponder Lease Agreement, (ii) the Sublease
Agreement and (iii) any other sublease agreements between
Belo Holdings and/or any of its Subsidiaries and any third
party (other than TVFN) with respect to the Transponder
Lease Agreement, in such form as the parties agree (the
"Transponder Assignments") or (b) if all necessary third
party consents to such Transponder Assignments cannot
reasonably be obtained through the exercise of best efforts
by the Belo Entities and Scripps does not elect to waive the
receipt of such consents as of the First Closing Date, then
the Belo Entities shall ensure that prior to the First
Closing the Sublease Term described in Paragraph 2 of the
Sublease Agreement is amended to provide Scripps the
unilateral option to continue the Sublease Term in effect
under the same terms and conditions until the termination of
the Transponder Lease Agreement. Scripps shall be required
to exercise this option to extend the Sublease Agreement no
later than 60-days in advance of the current termination
date of the Sublease Agreement, March 8, 1999. The Belo
Entities shall also ensure that the Sublease Agreement is
amended to state that Providence Journal Company will not
amend the Transponder Lease Agreement without the prior
written consent of Scripps (such consent not to be
unreasonably withheld).
ARTICLE VII
Conditions to the Obligations of the Belo Entities
The obligations of the Belo Entities under this
Agreement are, at the Belo Entities' option, subject to the
fulfillment of the conditions set forth in Section 7.1
through 7.8 prior to or at the First Closing Date, and the
fulfillment of the conditions set forth in Sections 7.2,
7.6, and 7.9 through 7.11 prior to or at the Second Closing
Date:
VII.1 Representations, Warranties, Covenants.
(a) Each of the representations and warranties of
Scripps contained in this Agreement that are qualified as to
materiality shall be true and correct, and the
representations and warranties that are not so qualified
shall be true and correct in all material respects, in each
case as of the date when made and shall be deemed to be made
again on and as of the First or Second Closing Dates, as
applicable, and shall then, if qualified as to materiality,
be true and correct, and if not so qualified, be true and
correct in all material respects, except to the extent
changes are specifically permitted or contemplated pursuant
to this Agreement;
(b) Scripps shall have performed and complied in
all material respects with each and every covenant and
agreement required by this Agreement to be performed or
complied with by it prior to or at the First or Second
Closing Dates, as applicable; and
(c) Scripps shall have furnished the Belo
Entities with certificates dated the First and Second
Closing Dates, as applicable, and duly executed by the
President or a Vice President of Scripps authorized on
behalf of Scripps to give such a certificate, to the effect
that the conditions set forth in subparagraphs (a) and (b)
of this Section 7.1 have been satisfied as of the date of
such certificates.
<PAGE>
VII.2 Proceedings. Neither the Belo Entities nor
Scripps shall (a) be subject to any restraining order or
injunction restraining or prohibiting the consummation of
the transactions contemplated hereby or (b) have received
written notice from any Governmental Entity of its intention
to institute any action or proceeding seeking to restrain,
enjoin or nullify this Agreement or the transactions
contemplated hereby.
VII.3 Damage to the Assets. The KENS Assets shall
not have suffered damage on account of fire, explosion or
other cause of any nature that prevented operation of the
KENS Assets for a period of at least seven (7) consecutive
days and which shall not have been repaired as of the First
and Second Closing Dates, respectively; provided, however,
that if the Belo Entities elect to waive the condition set
forth in this Section 7.3 and consummate the Closings, then
the Belo Entities' sole and exclusive remedy against Scripps
with respect to such damage shall be that the Belo Entities
may collect and receive the proceeds of any insurance
payable to Scripps on account of such damages which have not
been applied under the supervision of the Belo Entities to
the repair thereof plus the amount of any deductible
consumed with respect to such damage under Scripps'
insurance policy (which at the Belo Entities' option may be
taken in the form of a cash payment from Scripps or as an
adjustment to the Belo Cash Consideration).
VII.4 Certain Consents. The Belo Entities shall
have obtained each of the consents and approvals and
completed each of the actions required to (a) transfer the
TVFN Interests to Scripps pursuant to the Partnership
Agreements and (b) substitute Scripps as a general partner
of each of CPMCO and TVFN and the managing general partner
of CPMCO in accordance with the Partnership Agreements.
VII.5 Hart-Scott-Rodino. The applicable waiting
period imposed by the HSR Act shall have expired or shall
have been subject to early termination.
VII.6 Deliveries. Scripps shall have complied with
each and every one of its obligations set forth in Section
9.1.
VII.7 Closing of the Acquisition Agreement. The
transactions contemplated by the Acquisition Agreement with
respect to KENS shall have been consummated on substantially
the same terms and conditions as contained therein on the
date hereof, unless modified or amended pursuant to the
terms of the Acquisition Agreement and this Agreement.
VII.8 LMA. The parties shall have entered into the
LMA, effective as of the First Closing Date.
VII.9 Affiliation Agreement. Unless transferred at
the First Closing, the KENS Affiliation Agreement shall have
been transferred to Belo Sub on substantially the same terms
and conditions as are currently contained in such agreement.
VII.10 FCC Authorizations. The FCC Application
shall have been approved without any condition materially
adverse to Belo Sub and shall have become Final. For
purposes of this Agreement, "Final" shall mean action by the
FCC (including action duly taken by the FCC's staff,
pursuant to delegated authority), which shall not have been
reversed, stayed, enjoined, set aside, annulled or
suspended; with respect to which no timely request for stay,
petition for reconsideration or review, or appeal or sua
sponte action of the FCC with comparable effect shall be
pending; and as to which the time for filing any such
request, petition or appeal, or for the taking of any such
sua sponte action by the FCC, shall have expired. The FCC
approvals shall include grant of a waiver of Section
73.3555(c) of the rules, the one-to-a-market rule (if
necessary under the rules then in effect), permitting common
ownership by Belo Sub of station KENS-TV and KENS-AM.
VII.11 FCC Approval. The FCC Application (as set
forth in the Acquisition Agreement) shall have received FCC
Approval (as defined in the Acquisition Agreement).
<PAGE>
ARTICLE VIII
Conditions to the Obligations of Scripps
The obligations of Scripps under this Agreement are, at
its option, subject to the fulfillment of the conditions set
forth in Sections 8.1 through 8.7 prior to or at the First
Closing Date, and the fulfillment of the conditions set
forth in Sections 8.2, 8.5 and 8.8 prior to or at the Second
Closing Date:
VIII.1 Representations, Warranties, Covenants.
(a) Each of the representations and warranties of
the Belo Entities contained in this Agreement that are
qualified as to materiality shall be true and correct, and
the representations and warranties that are not so qualified
shall be true and correct in all material respects, in each
case, as of the date when made and shall be deemed to be
made again on and as of the First or Second Closing Dates,
as applicable, and shall then, if qualified as to
materiality, be true and correct, and if not so qualified,
be true and correct in all material respects, except to the
extent changes are specifically permitted pursuant to this
Agreement;
(b) The Belo Entities shall have performed and
complied in all material respects with each and every
covenant and agreement required by this Agreement to be
performed or complied with by them prior to or at the First
or Second Closing Dates, as applicable; and
(c) The Belo Entities shall have furnished
Scripps with certificates, dated the First and Second
Closing Dates, as applicable, and duly executed by a
President or a Vice President of the Belo Entities
authorized on behalf of the Belo Entities to give such a
certificate, to the effect that the conditions set forth in
subparagraphs (a) and (b) of this Section 8.1 have been
satisfied as of the date of such certificates.
VIII.2 Proceedings. Neither Scripps nor the Belo
Entities shall (a) be subject to any restraining order or
injunction restraining or prohibiting the consummation of
the transactions contemplated hereby or (b) have received
written notice from any Governmental Entity of its intention
to institute any action or proceeding seeking to restrain,
enjoin or nullify this Agreement or the transactions
contemplated hereby.
VIII.3 Certain Consents. The Belo Entities shall
have obtained each of the consents and approvals and
completed each of the actions required to (a) transfer the
TVFN Interests to Scripps pursuant to the Partnership
Agreements and (b) substitute Scripps as a general partner
of each of CPMCO and TVFN and the managing general partner
of CPMCO in accordance with the Partnership Agreements.
VIII.4 Hart-Scott-Rodino. The applicable waiting
period imposed by the HSR Act shall have expired or shall
have been subject to early termination.
VIII.5 Deliveries. The Belo Entities shall have
complied with each and every one of their obligations set
forth in Section 9.2
VIII.6 Closing of the Acquisition Agreement. The
transactions contemplated by the Acquisition Agreement with
respect to KENS shall have been consummated on substantially
the same terms and conditions as contained therein on the
date hereof, unless modified or amended pursuant to the
terms of the Acquisition Agreement and this Agreement.
VIII.7 LMA. The parties shall have entered the
LMA, effective as of the First Closing Date.
VIII.8 FCC Approval. The FCC Application (as set
forth in the Acquisition Agreement) shall have received FCC
Approval (as defined in the Acquisition Agreement).
<PAGE>
ARTICLE IX
Items to be Delivered at the Closings
IX.1 Deliveries by Scripps.
(a) At the First Closing, Scripps shall deliver
to the Belo Entities:
(i) Bills of sale, endorsements, assignments
and other good and sufficient instruments of sale, transfer
and assignment (which may contain disclaimers of warranty of
condition and suitability consistent with the provisions of
this Agreement) in form and substance reasonably
satisfactory to the Belo Entities sufficient to sell,
transfer and assign to Belo Sub all right, title and
interest of Scripps in and good title to the KENS Assets to
be transferred at the First Closing;
(ii) Certified copies of resolutions, duly
adopted by the Board of Directors of Scripps, which shall be
in full force and effect at the time of the First Closing,
authorizing the execution, delivery and performance by
Scripps of this Agreement and the consummation of the
transactions contemplated hereby;
(iii) The certificate referred to in
Section 7.1(c);
(iv) A certificate, satisfying the
requirements of Treas. Reg. 1.1445-2(b)(2), to the effect
that the KENS Entity is not a foreign person;
(v) The LMA;
(vi) The Transponder Assignments or the
Transponder Extension, as the case may be; and
(vii) Such other documents or payments as
the Belo Entities or their counsel may reasonably request to
demonstrate satisfaction of the conditions and compliance
with the agreements set forth in this Agreement.
(b) At the Second Closing, Scripps shall deliver
to the Belo Entities:
(i) Bills of sale, endorsements, assignments
and other good and sufficient instruments of sale, transfer
and assignment (which may contain disclaimers of warranty of
condition and suitability consistent with the provisions of
this Agreement) in form and substance reasonably
satisfactory to the Belo Entities sufficient to sell,
transfer and assign to Belo Sub all right, title and
interest of Scripps in and good title to the KENS Assets to
be transferred at the Second Closing;
(ii) A special warranty deed with covenant
against grantor's acts with respect to all Real Property
owned by Scripps and included within the KENS Assets;
(iii) Certified copies of resolutions,
duly adopted by the Board of Directors of Scripps, which
shall be in full force and effect at the time of the Second
Closing, authorizing the execution, delivery and performance
by Scripps of this Agreement and the consummation of the
transactions contemplated hereby;
(iv) The certificate referred to in Section
7.1(c); and
<PAGE>
(v) Such other documents or payments as the
Belo Entities or their counsel may reasonably request (A) to
demonstrate satisfaction of the conditions and compliance
with the agreements set forth in this Agreement and (B) for
purposes of the issuance of Belo Sub's owners title
insurance policy (the cost of which Belo Sub shall bear)
without deletion of the standard exceptions to title.
IX.2 Deliveries by the Belo Entities.
(a) At the First Closing, the Belo Entities shall
deliver to Scripps:
(i) Bills of sale, endorsements, assignments
and other good and sufficient instruments of sale, transfer
and assignment (which may contain disclaimers of warranty of
condition and suitability consistent with the provisions of
this Agreement) in form and substance reasonably
satisfactory to Scripps sufficient to sell, transfer and
assign to Scripps all right, title and interest of Colony
and PJPI in and good title to the TVFN Interests;
(ii) A portion of the Belo Cash
Consideration, in the amount of $37,500,000, which shall be
paid in the manner specified in Section 1.6 hereof;
(iii) Certified copies of resolutions,
duly adopted by the Belo Entities' Boards of Directors,
which shall be in full force and effect at the time of the
First Closing, authorizing the execution, delivery and
performance by the Belo Entities of this Agreement and the
consummation of the transactions contemplated hereby;
(iv) The certificate referred to in Section
8.1(c);
(v) Certificates from each of PJPI and
Colony satisfying the requirements of Treas. Reg. 1.1445-
2(b)(2), to the effect that neither of them is a foreign
person;
(vi) The LMA;
(vii) The Transponder Assignments or the
Transponder Extension, as the case may be; and
(viii) Such other documents or payments as
Scripps or its counsel may reasonably request to demonstrate
satisfaction of the conditions and compliance with the
agreements set forth in this Agreement.
(b) At the Second Closing, the Belo Entities
shall deliver to Scripps:
(i) The remainder of the Belo Cash
Consideration not previously paid, which shall be paid in
the manner specified in Section 1.6 hereof;
(ii) Certified copies of resolutions, duly
adopted by the Belo Entities' Boards of Directors which
shall be in full force and effect at the time of the Second
Closing, authorizing the execution, delivery and performance
by the Belo Entities of this Agreement and the consummation
of the transactions contemplated hereby;
(iii) The certificate referred to in
Section 8.1(c);
(iv) An instrument or instruments of
assumption of the Assumed Liabilities, in form and substance
reasonably satisfactory to Scripps; and
<PAGE>
(v) Such other documents or payments as
Scripps or its counsel may reasonably request to demonstrate
satisfaction of the conditions and compliance with the
agreements set forth in this Agreement.
ARTICLE X
Nonsurvival of Representations,
Warranties and Covenants; Indemnification
X.1 Nonsurvival of Representations and Warranties.
None of the representations or warranties in this Agreement
or in any instrument delivered pursuant to this Agreement
shall survive the First Closing Date. This Section 10.1
shall not limit any other covenant or agreement of the
parties set forth in this Agreement or in any instrument
delivered pursuant to the terms hereof.
X.2 Indemnification. The parties shall indemnify each
other as set forth below.
(a) Scripps hereby agrees to indemnify and hold
harmless the Belo Entities and their directors, officers,
employees and all persons which directly or indirectly,
through one or more intermediaries, control, are controlled
by, or are under common control with the Belo Entities from,
and to reimburse the Belo Entities and their directors,
officers, stockholders, employees and all persons which
directly or indirectly, through one or more intermediaries,
control, are controlled by, or are under common control
with, the Belo Entities for any and all losses, damages,
liabilities and claims, and all fees, costs and expenses of
any kind related thereto (including, without limitation, any
and all legal expenses), arising out of, in connection with,
based upon or resulting from any litigation or proceeding
initiated by a third party to the extent related to the
business or operations of the KENS Assets on or before the
First Closing Date. Scripps shall not have any liability
under this Section 10.2(a) to the extent the liability or
obligation arises as a result of any action taken or omitted
to be taken by the Belo Entities or any of their affiliates.
Notwithstanding anything to the contrary contained herein,
the indemnification obligations set forth above shall be
absolute and unconditional, and shall be enforceable without
regard to the existence or accuracy of any representation or
warranties given by Scripps.
(b) The Belo Entities hereby agree to indemnify
and hold harmless Scripps and its directors, officers,
employees and all persons which directly or indirectly,
through one or more intermediaries, control, are controlled
by, or are under common control with, Scripps from, and to
reimburse Scripps and its directors, officers, employees and
all persons which directly or indirectly, through one or
more intermediaries, control, are controlled by, or are
under common control with, Scripps for any and all losses,
damages, liabilities and claims and all fees, costs and
expenses of any kind related thereto (including, without
limitation, any and all legal expenses), arising out of, in
connection with, based upon or resulting from any litigation
or proceeding initiated by any third party to the extent
related to the TVFN Interests on or before the First Closing
Date. The Belo Entities shall not have any liability under
this Section 10.2(b) to the extent the liability or
obligation arises as a result of any action taken or omitted
to be taken by Scripps or any of its affiliates.
Notwithstanding anything to the contrary contained herein,
the indemnification obligations set forth above shall be
absolute and unconditional, and shall be enforceable without
regard to the existence or accuracy of any representation or
warranties given by the Belo Entities.
(c) Notwithstanding any other provision of this
Agreement to the contrary: (i) no party hereto will be
liable to any other party hereto pursuant to this Section
10.2 or otherwise except to the extent that the aggregate
amount of losses indemnified thereunder exceeds $2,500,000;
(ii) the total aggregate liability of the Belo Entities, on
the one hand, and Scripps, on the other hand, for losses
that may arise under this Section 10.2 or otherwise will not
exceed $25,000,000; and (iii) any claims for losses pursuant
to this Section 10.2 or otherwise can only be made in
respect of indemnifiable claims actually filed or commenced
on or prior to eighteen months after the First Closing Date.
Notwithstanding any other provision of this Agreement to the
contrary, each party's liability for losses relating to
indemnifiable
<PAGE>
claims for Taxes ("Tax Losses") shall be
without limit in dollar amount (although still subject to
Section 10.2(c)(i)) and claims for Tax Losses pursuant
hereto may be made at any time.
(d) As promptly as practicable but in any event
within 60 calendar days of the receipt by any party hereto
of any notice of the commencement of any action, suit or
proceedings, the assertion of any claim, or notice of any
event or the incurrence of any loss or damage for which any
party hereto asserts that indemnification is provided for by
this Section 10.2, the party seeking indemnification (an
"indemnified party") shall give written notice to any party
from which indemnification is sought (an "indemnifying
party") describing in reasonable detail the basis of such
claim for indemnification. If the indemnified party does
not so notify the indemnifying party within 60 calendar days
of the date of such notice, assertion or incurrence, the
indemnifying party shall not be relieved of liability
hereunder in respect of such claim except if and only to the
extent that the indemnifying party suffers prejudice or
damage by reason of such failure to give timely notice.
Thereafter, the indemnified party shall deliver to the
indemnifying party, within five business days' time after
the indemnified party's receipt thereof, copies of all
notices and documents (including court papers) received by
the indemnified party relating to such claim. If such claim
involves the claim of any third party, the indemnifying
party shall be entitled to participate in, and assume sole
control over, the defense or settlement of such claim;
provided, however, that:
(i) the indemnified party shall be entitled
to participate in (but not control) the defense of such
claim and to employ counsel at its own expense to
assist in the handling of such claim;
(ii) the indemnifying party shall obtain the
prior written approval of the indemnified party, which
shall not be unreasonably withheld or delayed, before
entering into any settlement of such claim or ceasing
to defend against such claim, if pursuant to or as a
result of such settlement or cessation, injunctive or
other equitable relief would be imposed against the
indemnified party; and
(iii) the indemnifying party admits in
writing that it is liable to indemnify the other party
to this Agreement for all costs and expenses related to
the third party claim.
After written notice by the indemnifying party to the
indemnified party of its election to assume control of the
defense of any such action, the indemnifying party shall not
be liable to such indemnified party hereunder for any legal
fees or expenses subsequently incurred by such indemnified
party in connection with the defense thereof other than
reasonable costs of investigation. If the indemnifying
party does not assume sole control over the defense or
settlement of such claim as provided in this Section
10.2(d), the indemnified party shall have the right to
defend and settle the claim in such manner as it may deem
appropriate at the cost and expense of the indemnifying
party, and the indemnifying party shall reimburse the
indemnified party therefor in accordance with this Section
10.2.
(e) In any event involving the claim of any third
party, the indemnified party shall cooperate fully with the
indemnifying party in the defense of any such claim under
this Section 10.2. Without limiting the generality of the
foregoing, the indemnified party shall furnish the
indemnifying party with such documentary or other evidence
as is then in its possession as may reasonably be requested
by the indemnifying party for the purpose of defending
against any such claim.
(f) In the event that the indemnifying party
shall be obligated to indemnify the indemnified party
pursuant to this Section 10.2, the indemnifying party shall,
upon payment of such indemnity, be subrogated to all rights
of the indemnified party with respect to claims to which
such indemnification relates.
<PAGE>
ARTICLE XI
Miscellaneous
XI.1 Termination of Agreement.
(a) This Agreement may be terminated by the Belo
Entities or Scripps at any time on or prior to the First
Closing Date:
(i) by the mutual consent of the parties
hereto;
(ii) by any party hereto if the FCC has
denied the approvals contemplated by this Agreement in
an order which has become Final;
(iii) by the Belo Entities if any of the
conditions set forth in Article VII to be satisfied by
the First Closing Date shall not have been met on or
prior to February 28, 1998, and by Scripps if any of
the conditions set forth in Article VIII to be
satisfied by the First Closing Date shall not have been
met on or prior to February 28, 1998, and shall not
have been waived by the Belo Entities or Scripps,
respectively, by such date, and the terminating party
is not in breach of any of its representations,
warranties, covenants or agreements contained in this
Agreement in any material respect;
(iv) by any party hereto if the TVFN
Interests, or any part thereof, are transferred to any
party pursuant to the provisions of Article IX of the
TVFN Partnership Agreement; or
(v) by any party hereto if the First Closing
has not occurred by February 28, 1998, and the party
seeking to terminate this Agreement is not in default
in any material way in the performance of its
obligations under this Agreement.
(b) This Agreement may be terminated by the Belo
Entities or Scripps at any time after the First Closing Date
and prior to the Second Closing Date;
(i) by the mutual consent of the parties
hereto;
(ii) by the Belo Entities if any of the
conditions set forth in Article VII to be satisfied by the
Second Closing Date shall not have been met on or prior to
April 30, 1998, and by Scripps if any of the conditions set
forth in Article VIII to be satisfied by the Second Closing
Date shall not have been met on or prior to April 30, 1998,
and shall not have been waived by the Belo Entities or
Scripps, respectively, by such date, and the terminating
party is not in breach of any of its representations,
warranties, covenants or agreements contained in this
Agreement in any material respect; provided, however, that
if the Belo Entities terminate this Agreement pursuant to
the provisions of this Section 11.1(b)(ii) as a result of
the failure of the condition set forth in Section 7.10 or
Section 7.11 or Scripps terminates this Agreement pursuant
to the provisions of this Section 11.1(b)(ii) as a result of
the failure of the condition set forth in Section 8.8, then,
in any event, (A) Scripps shall purchase the TVFN Interests
for $125,000,000 pursuant to the applicable terms of this
Agreement, (B) Belo Sub shall promptly transfer back to
Scripps those KENS Assets previously transferred to Belo Sub
(as assignee of PJPI and Colony), (C) Scripps shall promptly
transfer back to the Belo Entities the amount of the Belo
Cash Consideration previously paid to Scripps and (D) the
LMA shall terminate in accordance with its terms; and
<PAGE>
(iii) by any party hereto if the Second
Closing has not occurred by April 30, 1998, and the party
seeking to terminate this Agreement is not in default in any
material way in the performance of its obligations under
this Agreement; provided, however, that if the Belo Entities
terminate this Agreement pursuant to the provisions of this
Section 11.1(b)(iii), then, in any event, (A) Scripps shall
purchase the TVFN Interests for $125,000,000 pursuant to the
applicable terms of this Agreement, (B) Belo Sub shall
promptly transfer back to Scripps those KENS Assets
previously transferred to Belo Sub (as assignee of PJPI and
Colony), (C) Scripps shall promptly transfer back to the
Belo Entities the amount of the Belo Cash Consideration
previously paid to Scripps and (D) the LMA shall terminate
in accordance with its terms.
A termination pursuant to this Section 11.1 shall not
relieve any party of liability it would otherwise have for a
breach of this Agreement.
XI.2 KENS Option. Notwithstanding anything else herein
to the contrary, the parties hereto agree as follows with
respect to the KENS Assets:
(a) If Scripps or any affiliate of Scripps
acquires any of the TVFN Interests at any time during the
period ending on September 30, 1998 (the "Option Period"),
directly or indirectly from whomsoever owns or possesses
such interests at such time, and such interests were
transferred by PJPI and/or Colony as a result of the
exercise of rights of refusal by a partner or partners in
either CPMCO or TVFN pursuant to the Partnership Agreements,
then the Belo Entities shall have the right to acquire the
KENS Assets from Scripps for (i) cash consideration of
$200,000,000, plus (ii) the assumption of all liabilities
and obligations (accrued, absolute, contingent, undisclosed
or otherwise) which are primarily related to or have arisen
or will arise from the KENS Assets as of the date of the
closing of such transaction, plus or minus, as the case may
be, (iii) the net working capital related to the KENS Assets
as of the date of the closing of such transaction
(determined in accordance with Section 1.7) (the "KENS
Option").
(b) Scripps shall promptly deliver to Belo
Holdings written notice of its acquisition of the TVFN
Interests during the Option Period. Belo Holdings shall be
required to deliver written notice of its exercise of the
KENS Option within 60 days of its receipt of such notice
from Scripps. Failure of Belo Holdings to deliver such
notice within such 60 days shall result in the expiration of
the KENS Option.
(c) The closing of the exercise of the KENS
Option shall occur not less than five nor more than ten
business days after the satisfaction or waiver of the last
of the conditions required to be satisfied or waived
pursuant to this Section 11.2. The closing shall occur at
such time and place as is mutually agreed upon between the
parties. The Belo Entities obligations to close such
transaction shall be subject to the fulfillment of the
conditions contemplated by Sections 7.2, 7.3, 7.5, 7.6, 7.7,
7.9, 7.10 and 7.11 of this Agreement on or prior to the date
of such closing, which such conditions shall be deemed to
survive the termination of this Agreement solely for the
purposes of effectuating the exercise of the KENS Option.
Scripps obligations to close such transaction shall be
subject to the fulfillment of the conditions contemplated by
Sections 8.2, 8.4, 8.5, 8.6 and 8.8 of this Agreement on or
prior to the date of such closing, which such conditions
shall be deemed to survive the termination of this Agreement
solely for the purposes of effectuating the exercise of the
KENS Option. The Belo Entities obligations to close such
transaction shall also be subject to the condition that each
of the representations and warranties of Scripps contained
in this Agreement shall be true and correct in all material
respects as of the date of the closing of such transaction.
(d) Each party agrees to be bound by the
provisions of Sections 6.1, 6.2, 6.3, 6.4, 6.6, 6.8, 6.9,
6.10, 6.11, and 6.15 of this Agreement, which shall survive
the termination of this Agreement solely for the purposes of
effectuating the exercise of the KENS Option.
<PAGE>
(e) During the Option Period, Scripps shall use
its commercially reasonable best efforts to (i) cause the
business related to the KENS Assets to be conducted in the
usual, regular and ordinary course consistent with its
practices at its other television and radio stations, (ii)
preserve intact in all material respects the present
business organization related to the KENS Assets, and (iii)
keep available, consistent with the practices at its other
television and radio stations, the services of the officers
and key employees and preserve in all material respects the
relationships with customers, suppliers and others having
business dealings related to the KENS Assets, it being
understood, however, that the failure of any KENS Employees
to remain employees of Scripps or become employees of Belo
Holdings or any Subsidiary of Belo Holdings shall not
constitute a breach of this covenant.
The provisions of this Section 11.2 shall survive the
termination of this Agreement pursuant to Section
11.1(a)(iv).
XI.3 Liabilities Upon Termination. Except for the
obligations contained in Sections 11.1(c), 11.2, 11.6, 11.13
and 11.15 hereof which shall survive any termination of this
Agreement, upon the termination of this Agreement pursuant
to Section 11.1 hereof, this Agreement shall forthwith
become null and void, and no party hereto or any of its
officers, directors, employees, agents, consultants or
stockholders, shall have any rights, liabilities or
obligations hereunder or with respect hereto; provided,
however, that nothing contained herein shall relieve any
party from liability for any breach or inaccuracy of any
representation or warranty contained herein or any failure
to comply with any covenant or agreement contained herein.
XI.4 Assignments. No party hereto may assign or
delegate any of its duties hereunder without the written
consent of the other parties, and any such attempted
assignment or delegation without such consent shall be void,
except that (a) the Belo Entities may, without the consent
of Scripps, assign their rights under this Agreement to an
entity controlled by A.H. Belo Corporation and (b) Scripps
may, without the consent of the Belo Entities, assign its
rights under this Agreement to an entity controlled by
Scripps.
XI.5 Further Assurances. From time to time prior to,
at and after the Closing Dates, each party hereto will
execute all such instruments and take all such actions as
any other party shall reasonably request in connection with
carrying out and effectuating the intent and purpose hereof
and all transactions and things contemplated by this
Agreement, including, without limitation, the execution and
delivery of any and all confirmatory and other instruments
in addition to those to be delivered on the Closing Dates,
and any and all actions which may reasonably be necessary or
desirable to complete the transactions contemplated hereby.
XI.6 Public Announcement. Prior to either Closing
Date, no party shall, without the approval of the others,
make any press release or other public announcement
concerning the transactions contemplated by this Agreement,
except as and to the extent that such party shall be so
obligated by law, in which case such party shall give
advance notice to the other parties and the parties shall
use all reasonable efforts to cause a mutually agreeable
release or announcement to be issued.
<PAGE>
XI.7 Notices. Notices and other communications
provided for herein shall be in writing (which shall include
notice by telex or facsimile transmission) and shall be
delivered or mailed (or if by telex, graphic scanning or
other facsimile communications equipment of the sending
party hereto, delivered by such equipment), addressed as
follows:
If to Belo:
Belo Holdings, Inc.
400 South Record Street
Dallas, Texas 75202
Telecopy No.: (214) 977-8209
Attention: General Counsel
with a copy to:
Jenkens & Gilchrist, a Professional Corporation
1445 Ross Avenue, Suite 3200
Dallas, Texas 75202-2799
Telecopy No.: (214) 855-4300
Attention: Gregory J. Schmitt, Esq.
If to Scripps:
The E. W. Scripps Company
312 Walnut Street, 28th Floor
Cincinnati, Ohio 45202
Telecopy No. (513) 977-3024
Attn: M. Denise Kuprionis, Secretary
with a copy to
Baker & Hostetler LLP
312 Walnut Street, Suite 2650
Cincinnati, Ohio 45202
Telecopy No. 513-929-0303
Attn: William Appleton, Esq.
or to such other address as a party may from time to time
designate in writing in accordance with this Section. All
notices and other communications given to any party hereto
in accordance with the provisions of this Agreement shall be
deemed to have been given on the date of receipt.
XI.8 Captions. The captions of Articles and Sections
of this Agreement are for convenience only and shall not
control or affect the meaning or construction of any of the
provisions of this Agreement.
XI.9 Law Governing. This Agreement shall be governed
by, construed, and enforced in accordance with the laws of
the State of Texas without regard to its conflicts of laws
principles.
<PAGE>
XI.10 Waiver of Provisions. The terms, covenants,
representations, warranties and conditions of this Agreement
may be amended, modified or waived only by a written
instrument executed by the party sought to be bound thereby.
The failure of any party at any time or times to require
performance of any provision of this Agreement shall in no
manner affect the right of such party at a later date to
enforce the same. No waiver by any party of any condition
or the breach of any provision, term, covenant,
representation or warranty contained in this Agreement,
whether by conduct or otherwise, in any one or more
instances shall be deemed to be or construed as a further or
continuing waiver of any such condition or of the breach of
any other provision, term, covenant, representation or
warranty of this Agreement.
XI.11 Counterparts. This Agreement may be executed
in several counterparts, and all counterparts so executed
shall constitute one agreement, binding on the parties
hereto, notwithstanding that the parties are not signatory
to the same counterpart.
XI.12 Entire Agreement. This Agreement, including
the Schedules and Exhibits hereto, constitutes the entire
Agreement between the parties and supersedes and cancels any
and all prior agreement between them relating to the subject
matter hereof.
XI.13 Confidentiality. All information provided to
any party hereto or its representatives by or on behalf of
any party hereto or its affiliates before or after the date
of this Agreement and prior to the First or Second Closing
Date, as the case may be, concerning the business, assets,
liabilities and operations of KENS, CPMCO or TVFN shall be
governed by the Confidentiality Agreements, heretofore
executed by certain of the parties hereto.
XI.14 Brokers or Finders. Each party agrees to
indemnify and hold the other harmless from and against any
and all claims, liabilities or obligations with respect to
any fees, commissions or expenses asserted by any person on
the basis of any act or statement alleged to have been made
by the other party or its affiliates.
XI.15 Specific Performance. In addition to other
remedies provided herein, if a party defaults in the
performance of its obligations under this Agreement and
fails to complete the transactions contemplated hereby, as
and when herein set forth, and the other party shall not be
in material default, such party shall be entitled to apply
for and obtain specific performance, which shall be in
addition to any and all other rights and remedies available
to such party at law or in equity. Each party hereby
acknowledges that monetary damages alone would not be an
adequate compensation to the other party, and agrees that if
any action is brought seeking specific performance, each
party shall waive the defense that there is an adequate
remedy at law.
XI.16 No Third Party Beneficiaries. This Agreement
is not intended to confer upon any person other than the
parties hereto and their respective successors and assigns
any rights or remedies hereunder.
XI.17 Waiver. The Belo Entities shall cause CPMCO
and TVFN to waive all rights that each of such partnerships
has under Article IX of the TVFN Partnership Agreement with
respect to the transactions contemplated hereby.
<PAGE>
XI.18 Certain Definitions.
(a) "Code" means the Internal Revenue Code of
1986, as amended.
(b) "Partnership Agreements" shall mean,
collectively, the Cable Program Management Co., G.P. Amended
and Restated Agreement of General Partnership, dated as of
February 18, 1994, and the Agreement of General Partnership
of Television Food Network, G.P., dated as of August 16,
1993, both as amended.
(c) "Sublease Agreement" shall mean that certain
Sublease Agreement, dated as of March 1, 1994 between Belo
Holdings, Inc. and Television Food Network, G.P.
(d) "Subsidiary" shall mean, with respect to any
party, any corporation or other organization, whether
incorporated or unincorporated, of which (i) such party or
any other Subsidiary of such partner is a general partner
(excluding partnerships the general partnership interests of
which held by such party and any Subsidiary of such party do
not have a majority of the voting interest in such
partnership) or (ii) securities or other interests having by
their terms a majority of the outstanding voting power with
respect to such corporation or other organization are
directly or indirectly owned or controlled by such party or
by any one or more of its Subsidiaries, or by such party and
one or more of its Subsidiaries.
(e) "Transponder Lease Agreement" shall mean that
certain Transponder Lease Agreement, dated as of January 7,
1994, between Hughes Communications Galaxy, Inc. and
Providence Journal Company.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed by their duly authorized
officers, all as of the day and year first above written.
BELO HOLDINGS, INC.
By:
Name:
Title:
COLONY CABLE NETWORKS, INC.
By:
Name:
Title:
PJ PROGRAMMING, INC.
By:
Name:
Title:
BHI SUB, INC.
By:
Name:
Title:
THE E.W. SCRIPPS COMPANY
By:
Name:
Title:
